Smartcomm v. Palmieri
1 CA-CV 16-0265
| Ariz. Ct. App. | Jan 9, 2018Background
- Smartcomm sold services preparing FCC cellular-spectrum license applications and provided marketing materials it claimed contained trade secrets to independent contractors (Maerki, Alcorn/DAPC, Palmieri).
- Contracts contained confidentiality/return provisions but no non-competes; Smartcomm terminated the contractors for breach and alleged they retained client lists and trade-secret documents to form competitor Janus Spectrum, LLC.
- Smartcomm sued for breach of contract, bad faith, trade-secret misappropriation, unfair competition, tortious interference, breach of loyalty, aiding/abetting, and conspiracy; extensive discovery disputes led to default judgment (~$28M) against the Maerki defendants (not appellants here).
- Defendants (Alcorns and Palmieri) moved for multiple partial summary judgments; the trial court granted judgment for defendants on all claims except initially the trade-secret claim, later resolving that as well; Smartcomm’s application for an order to show cause re: injunction violations was denied as moot or unsupported.
- On appeal, the Arizona Court of Appeals reviewed de novo and affirmed summary judgment and denial of the show-cause applications, and awarded fees to appellees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Smartcomm presented sufficient evidence of damages (refunds, FCC-attorney fees, disgorgement of Janus profits) | Smartcomm argued it disclosed damages via supplemental disclosures and the default judgment against Maerki proved damages | Defendants argued Smartcomm failed to produce documentary proof, calculations, or admissible evidence and relied on speculative disclosures and an irrelevant default judgment | Court held Smartcomm failed to present admissible, particularized evidence for any damages theory; summary judgment affirmed |
| Whether marketing materials constitute trade secrets | Smartcomm contended marketing/advertising package and leads databases were trade secrets maintained by confidentiality | Defendants argued mass distribution to >3,000 potential clients without NDAs destroyed secrecy | Court held mass mailing to the public without confidentiality defeated secrecy requirement under UTSA; no trade-secret protection for marketing materials |
| Whether customer and IMR lists were protected trade secrets and sufficiently identified | Smartcomm alleged defendants stole customer and IMR lists but had difficulty identifying or producing the actual lists | Defendants argued Smartcomm never identified particular documents so defendants couldn’t challenge trade-secret status | Court held Smartcomm failed to adequately disclose or particularize the lists for summary judgment purposes; claim failed |
| Whether denial of application for order to show cause re: injunction violations was improper | Smartcomm maintained the defendants violated the permanent injunction and sanctions were warranted | Defendants said allegations overlapped and trial court permissibly found no sanctionable violation proven | Court held denial was not an abuse of discretion; earlier application was moot and later application failed to show misconduct warranting sanctions |
Key Cases Cited
- Salib v. City of Mesa, 212 Ariz. 446 (App. 2006) (standard of review for summary judgment)
- Romley v. Arpaio, 202 Ariz. 47 (App. 2002) (summary judgment review principles)
- Orme Sch. v. Reeves, 166 Ariz. 301 (1990) (summary judgment and quantum of evidence required)
- Calisi v. Unified Fin. Servs., L.L.C., 232 Ariz. 103 (App. 2013) (UTSA two-part inquiry: secrecy and reasonable efforts)
- Enter. Leasing Co. of Phx. v. Ehmke, 197 Ariz. 144 (App. 1999) (limited disclosures vs. public revelation in trade-secret analysis)
- Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984) (public disclosure extinguishes trade-secret protection)