Mediation Message No. 116

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 116

DEMURRERS AND JUDICIAL NOTICE

Richtek United States v. Upi Semiconductor Corp. (Ct. of Appeal, Nov. 24, 2015) case no. H035519, 2015 DJDAR 12667, 2015 Cal. App. LEXIS 1057 presents an object lesson on the use of judicial notice in ruling on demurrers to complaints.

In 2007, in Taiwan, Richtek, a Taiwanese corporation that designs, markets and sells power management integrated circuit products, sued Upi, a Taiwanese company, and eleven individuals, both civilly and criminally, alleging that Respondents misappropriated Richtek’s trade secrets. Richtek filed the present case in Santa Clara County on January 28, 2011, alleging trade secret misappropriation against Upi and some of the same individuals in the Taiwanese actions. Respondents demurred to the complaint on the ground that the claims were time-barred under Taiwan’s statute of limitations for trade secret misappropriation. After the trial court granted Respondents’ request to take judicial notice of the Taiwan Trade Secrets Act and Richtek’s 2007 criminal and civil complaints in Taiwan, it sustained the demurrer with leave to amend because the two 2007 complaints demonstrated that Richtek had knowledge of Respondents’ alleged 2007 misappropriation.

Richtek filed an amended complaint adding allegations of recent discoveries of the full scope of the continuing misappropriation of its trade secrets. Respondents demurred to the amended complaint, arguing that the claims were still barred by the Taiwan statute of limitations. The trial court sustained the demurrer without leave to amend, and ordered judgment for the Respondents, finding that Richtek’s allegations of recent discoveries of further misappropriation did not change the fact that Richtek knew of the misappropriation and the identity of the liable parties in 2007.

The appellate court reversed the judgment of dismissal, finding that the use of judicially noticed documents in ruling on a demurrer is proper only when the documents are not used to determine disputed factual issues. The court held that, while it was proper for the trial court to judicially notice the Taiwanese complaints, it was not proper to use the allegations in those complaints to resolve factual disputes for purposes of the demurrer. It reasoned, “the trial court did not take notice of the existence of the complaints; rather, it used the complaints to resolve the disputed issue of when appellants had knowledge of respondents’ misappropriation of trade secrets for purposes of the statute of limitations,” which supposed knowledge was contrary to the allegations in the amended complaint and which allegations must be accepted as true for purposes of evaluating a demurrer. In other words, “’”judicial notice of matters upon demurrer will be dispositive only in those instances where there is not or cannot be a factual dispute concerning that which is sought to be judicially noticed.’”

MDM’s observation: Demurrers are often used to test an applicable statute of limitations regarding claims for breach of contract and some torts as well as legal and professional malpractice. The effectiveness of those demurrers, when judicial notice of certain documents is requested, depends on the facts alleged in the complaints; as held in Richtek, judicial notice will be dispositive only when the facts in the documents are not in dispute with the allegations in the complaint, which must be accepted as true. If they are in dispute, the demurrer must be denied.

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, November 2015

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