9th Circuit Affirms Attorney Sanctions in Trade-Secrets Case

In Heller v. Cepia, Judge Jeffrey White sanctioned the plaintiff’s attorney under Rule 11 and ordered him to pay the defendant $5,000. This week, the 9th Circuit affirmed. Both the district court’s and 9th Circuit’s opinions are linked below.

The plaintiff designed a toy hamster and shared a prototype with one of the defendants. While the opinion below doesn’t discuss the facts in detail, apparently the defendants allegedly stole the plaintiff’s toy hamster design. Trade secrets come in all shapes and sizes.

The court found that two allegations in the complaint lacked a factual basis: (1) sign-in sheets produced by a defendant (The Bean) appeared to confirm that representatives of another defendant (Cepia) were at The Bean’s offices at a time when The Bean had the hamster prototype, and (2) when confronted with information suggesting Cepia was given access to the plaintiff’s trade secrets, the other defendants refused to provide information about their relationship with Cepia.

Regarding the sign-in sheets, the evidence showed that The Bean simply did not produce any sign in sheets for the week in question. Per the court, the plaintiff went too far when it alleged that the sign-in sheets confirmed Cepia’s presence: “contrary to the implication of Heller’s allegation, The Bean’s sign in sheets do not confirm anything.” (emphasis in original).

Regarding the defendants’ refusal to provide information, the court found that “there is no credible evidence to support Heller’s allegation.”

When imposing sanctions, the court found that “the nature of these unsupported allegations stem from exaggerations for which Heller’s counsel is culpable. He is the one who drafted the complaint and the allegations at issue.”

Lawyers sometimes get carried away when drafting a complaint. Obviously, everyone wants their case to sound as strong as possible. But this case shows the value of being conservative when describing the facts in a pleading.

Heller v. Cepia, N.D. Cal.

Heller v. Cepia, 9th Circuit

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