Keeping Tabs on the Ninth Circuit
October 16, 2020 - This Week at the Ninth

This Week at the Ninth: Mobile Billboards and Secret Systems

This Week at the Ninth: Mobile Billboards and Secret Systems

This week, we take a look at Ninth Circuit cases holding a ban on mobile billboards subject to strict scrutiny given the vehicles exempted from its scope, and addressing the standards governing summary judgment and discovery in trade-secret litigation. 

The Court holds that facially neutral ordinances exempting emergency, construction, and maintenance vehicles from a general prohibition on mobile billboard advertising were nonetheless subject to First Amendment strict scrutiny because the laws could not be justified by anything other than a content preference.

Panel: Judges Miller, Hunsaker, and Rayes (D. Ariz.), with Judge Hunsaker writing the opinion.

Highlight: “We struggle to identify a justification for allowing speech only from authorized emergency and construction, repair, or maintenance vehicles that does not rely on content, and the City offers none.”

Background: Simi Valley adopted ordinances prohibiting “mobile billboard advertising display[s] on any public street, alley or public lands in the City,” but exempting emergency vehicles and vehicles used “for construction, repair or maintenance of public or private property.” Bruce Boyer sued the city in state court, alleging the ordinances violated his First Amendment right to freedom of speech and were preempted by California law. The city removed to federal court, and the district court granted its motion to dismiss for failure to state a claim, concluding that the ordinances were content-neutral and reasonable time, place, and manner restrictions that did not violate the First Amendment. It also dismissed Boyer’s state law claims.

Result: The Ninth Circuit reversed in part and affirmed in part. The Court began by laying out the relevant First Amendment standard: “When a regulation makes speaker-based distinctions,” courts “ask whether that ‘speaker preference reflects a content preference.’” If so, strict scrutiny applies. Whether a regulation is content-based turns on whether, “on its face, it draws distinctions based on the message a speaker conveys.” Even where a regulation is facially neutral, courts must ask if “it is nevertheless a content-based regulation of speech because it cannot be justified without reference to the content of the regulated speech.”

Applying that framework to the mobile billboard ordinances, the Court concluded that both the general prohibition on mobile advertising, and the exemption for certain authorized vehicles, were facially content neutral. An officer trying to figure out whether a particular vehicle fell under the law “would need evaluate only the manner of speech (whether it is part of a mobile billboard); the place of speech (whether it is located on public property); and the speaker (whether the display is an authorized vehicle).” 

The problem, the Court held, was that it was impossible to identify any justification for the carve-out that does not itself rely on the content of the speech. The exception’s stated purpose was “to protect the health, safety, and welfare of the citizens of the City.” “But that justification makes sense only if we assume that authorized vehicles are more likely to display messages that promote public health, safety, and welfare than nonauthorized vehicles,” the Court said. While it might be prudent and reasonable to prefer speakers likely to spread messages consistent with the city’s health and safety objectives, the Court said that preference was “a content-based choice that triggers strict scrutiny.” The government speech doctrine did not dictate a contrary result, the Court added, because the exemption was not limited to vehicles bearing messages under the city’s control. Because the district court did not decide—and the parties did not brief—whether the mobile-advertising ordinances survived strict scrutiny, the Court remanded for consideration under that standard.

Finally, the Ninth Circuit affirmed the district court’s dismissal of Boyer’s state law claims. Boyer conceded that the district court correctly applied California law, but asked the Court of Appeals to reverse so his claims could be remanded to state court and he could challenge adverse precedent in California appellate courts. That didn’t fly. Because the district court had supplemental jurisdiction over Boyer’s claims, the Ninth Circuit explained, the district court had been free to dismiss them with prejudice even if it had also dismissed his federal claims.

The Court holds that the plaintiff’s electronic securities trading system may have incorporated protected trade secrets, and that the district court abused its discretion in ruling otherwise prior to the completion of discovery.

Panel: Judges Gould, Ikuta, and Ezra (D. Haw.), with Judge Gould writing the opinion.

Key Highlight: “Refining trade secret identifications through discovery makes good sense. The process acknowledges the inherent tension between a party’s desire to protect legitimate intellectual property claims and the need for intellectual property law to prevent unnecessary obstacles to useful competition. Other courts have recognized that plaintiffs in trade secret actions may have commercially valid reasons to avoid being overly specific at the outset in defining their intellectual property.”

Background: InteliClear had developed an electronic trading system to handle brokerage firm accounting and securities trades. ETC acquired a license to that system and agreed to maintain all information in confidence. Subsequently, ETC terminated its agreement with InteliClear and implemented its own electronic trading system. InteliClear investigated and determined that ETC’s new system had essentially been lifted from InteliClear’s system. InteliClear sued, invoking the federal Defend Trade Secrets Acts (DTSA) and the California Uniform Trade Secrets Act (CUTSA). Ruling before the completion of discovery, the district court granted summary judgment to ETC, concluding that InteliClear had not identified which elements of its system were trade secrets. 

Result: The Ninth Circuit reversed. The Court began by observing that both federal and California law define “trade secrets” broadly to include any “(1) information, (2) that is valuable because it is unknown to others, and (3) that the owner has attempted to keep secret.” And, the Court continued, the plaintiff must identify any alleged trade secrets with “sufficient particularity”—a plaintiff cannot simply use catchall phrases or describe general categories of information, but must provide “concrete identification” so that the defendant can prepare a rebuttal. Here, the Court held, InteliClear had met that burden: it had produced declarations illustrating various aspects of its electronic trading system, and “[a] reasonable jury could conclude that the uniquely designed tables, columns, account number structures, methods of populating table data, and combination or interrelation thereof, are protectable trade secrets.” The Court explained that the district court had erred in faulting InteliClear for leaving open whether it might later expand its identification of trade secrets. InteliClear could survive summary judgment by identifying “at least one trade secret with sufficient particularity to create a triable issue”; it need not identify all its trade secrets.

Next, the Ninth Circuit held that the district court had also erred in concluding that there was no triable issue as to whether any elements of the system were “secret.” First, InteliClear had produced evidence showing that its system was sufficiently uncommon. As the Court observed, while “[d]atabases designed to track similar information will inevitably have overlap,” InteliClear had “made it sufficiently clear that the combination and interrelation of its database components was unique.” Second, Inteliclear had taken steps to ensure that these aspects of its system remained secret, including by encrypting its source code and insisting on confidentiality agreements. Thus, the Court held, “a reasonable jury could find that portions of the InteliClear System are not ‘generally known’ or ‘readily ascertainable’ to others.”

Finally, the Ninth Circuit also concluded that the district court had abused its discretion in refusing to defer its summary judgment ruling until discovery was complete. The Court explained that in trade-secrets cases, “discovery provides an iterative process where requests between parties lead to a refined and sufficiently particularized trade secret identification.” But here, ETC had moved for summary judgment the day after discovery began, and InteliClear had submitted a declaration showing that discovery would allow it to “refine its identifications” of its trade secrets. “On these facts,” the Court concluded, “the summary judgment granted was precipitous, premature and did not fairly permit development of the issues for resolution.”