Dresser-Rand Co. v. Virtual Automation Inc.
| Decision Date | 23 February 2004 |
| Docket Number | No. 02-20834.,No. 03-20417.,02-20834.,03-20417. |
| Citation | 361 F.3d 831 |
| Parties | DRESSER-RAND COMPANY, Plaintiff-Appellee-Cross-Appellant, v. VIRTUAL AUTOMATION INC., etc., et al., Defendants, Apix, Inc., a Florida Corporation; Dennis C. Mezzatesta, Individual; Chris Tsipouras, Individual, Defendants-Appellants-Cross-Appellees. Dresser-Rand Company, Plaintiff-Appellant, v. Virtual Automation Inc., a Texas Corporation, et al., Defendants, Dennis C. Mezzatesta, Individual, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Laurie Webb Daniel (argued), Harold T. Daniel, Jr., Sara L. Doyle, Holland & Knight, Atlanta, GA, for Dresser-Rand Co.
Kenneth David Hughes (argued), Glickman & Hughes, Houston, TX, for Apix Inc. and Tsipouras.
Johnie Joe Patterson, II, Walker & Patterson, Houston, TX, for Mezzatesta.
Appeals from the United States District Court for the Southern District of Texas.
Before DeMOSS, DENNIS and PRADO, Circuit Judges.
Dennis Mezzatesta, Apix, Inc., Chris Tsipouras and others were found by a jury to have acted fraudulently, breached contracts, and misappropriated confidential information relating to industrial control systems developed by Dresser-Rand. All of the parties filed various post-trial motions, each of which were denied by the district court. Apix appeals the denial of its motion for judgment as a matter of law or for a new trial on Dresser-Rand's misappropriation claim. Tsipouras appeals the denial of his motion for judgment as a matter of law or for a new trial on Dresser-Rand's fraud claim. Mezzatesta appeals the denial of his motion for judgment as a matter of law or for a new trial on Dresser-Rand's fraud and breach of contract claims. Finally, Dresser Rand cross appeals: 1) the district court's denial of its motion for judgment as a matter of law on its breach of contract claim against Apix; and 2) the district court's denial of its motion for injunctive relief against Apix and Mezzatesta.
Dresser-Rand supplies industrial control products and services worldwide. Specifically, Dresser-Rand manufactures compressors and turbines for large industrial applications such as oil and gas operations. Dresser-Rand also makes its own control products that regulate the turbines, compressors, and other machinery it sells. In 1996, Dresser-Rand hired Dennis Mezzatesta to join its controls business. At the time Mezzatesta was hired by Dresser-Rand, most industrial operations had two types of control systems: one for the machinery and another to control the balance of the plant's operations. Although Dresser-Rand had previously only sold machinery control systems, it planned to enter the plant or "process" control market. Dresser-Rand and Mezzatesta set out to develop a new type of control system, through the "Trax" project, that could perform both the machinery and plant control functions. To protect the confidential information related to Trax, Dresser-Rand required its employees to sign confidentiality agreements. In particular, Mezzatesta was required to sign a "Code of Conduct," pledging to protect the company's confidential information and avoid conflicts of interest.
Mezzatesta was responsible for overseeing the Trax project, including the negotiation of supply agreements for the hardware and software components that were to make up the control system. Mezzatesta recommended to Dresser-Rand that Apix, Inc., was the best hardware supplier for the project. Subsequently, in January 1999, Dresser-Rand entered into a supply and distribution contract with Apix to create a hardware component that would meet the Trax product specifications. The contract granted Dresser-Rand the exclusive right to sell products containing the Apix hardware in a defined "Area of Application," which involved primarily new machinery control systems.1 Apix also gave Dresser-Rand the non-exclusive right to sell control products using the Apix hardware in all other markets worldwide.
Because Apix would have access to the Trax specifications developed by Dresser-Rand and other proprietary information, the contract contained provisions intended to impose a confidential relationship between the parties.2 Chris Tsipouras, acting in his capacity as an officer of Apix, signed the contract acknowledging that Dresser-Rand was entrusting Apix with trade secrets and other confidential information.
Unknown to Dresser-Rand, on the same day that Apix signed the contract with Dresser-Rand, Apix signed another contract with Virtual Automation, a company that had been formed by Mezzatesta and another associate for the purpose of marketing a controls product that could simultaneously perform machinery and process controls. Formed while Mezzatesta was still working for Dresser-Rand, Virtual Automation was to use hardware that was substantially the same as the hardware Apix sold to Dresser-Rand.
In July 2000, Paul Fairbanks, Mezzatesta's supervisor at Dresser-Rand, discovered the existence of Virtual Automation when he picked up a piece of paper trash in the Dresser-Rand parking lot. The scrap of paper turned out to be a Virtual Automation price list for what appeared to Fairbanks to be Trax items. Fairbanks immediately initiated an investigation. After learning of Fairbank's discovery, Mezzatesta resigned, taking with him electronic data relating to the Trax project. Upon his resignation from Dresser-Rand, Mezzatesta immediately began working for Apix, where he continues to work today.
During his investigation, Fairbanks inquired as to Tsipouras's knowledge of Virtual Automation. Tsipouras denied having done any business with Virtual Automation. However, it was discovered that Tsipouras had not only signed a contract with Virtual Automation, but was also a stockholder in the company, holding a seat on Virtual Automation's board of directors.
In August 2000, Dresser-Rand filed suit in state court for injunctive relief to prevent Virtual Automation and others from cloning its product. After non-suiting the case, Dresser-Rand filed suit in October 2000 in United States District Court for the Southern District of Texas against multiple defendants, including Apix, Mezzatesta, and Tsipouras. Dresser-Rand asserted various claims against the defendants including, among others, RICO, trade secret misappropriation, common law misappropriation, fraud, and breach of contract. Apix counterclaimed that Dresser-Rand had breached its contract with Apix.
After a three and one-half week trial, the jury found for Dresser-Rand on its common law misappropriation claim against Apix, on its fraud claims against Tsipouras and Mezzatesta, and on its breach of contract and civil theft claims against Mezzatesta. The jury also found that Dresser-Rand breached its contract with Apix and awarded Apix $130,000 in damages and $100,000 in attorney's fees. The jury awarded Dresser-Rand compensatory damages on its fraud and misappropriation counts in the amount of $2.2 million, the value of its lost development costs. The jury also awarded $317,000 against Mezzatesta for breach of his employment contracts with Dresser-Rand and civil theft. In addition, the jury assessed punitive damages in the amount of $1,650,000 against Mezzatesta, $550,000 against Tsipouras, and awarded Dresser-Rand $900,000 in attorney's fees. On April 29, 2002, the district court entered judgment on the verdict.
Shortly after judgment was entered, Apix, Tsipouras, and Mezzatesta filed motions for judgment as a matter of law, to amend the judgment, or for a new trial. In addition, Dresser-Rand filed a motion seeking injunctive relief against Apix. On July 15, 2002, the district court denied all parties' pending motions. Subsequently, on July 22, 2002, Apix, Tsipouras, and Mezzatesta filed their notices of appeal. Dresser-Rand filed its notice of cross-appeal on August 5, 2002.
We review de novo a district court's ruling on a motion for judgment as a matter of law. Miss. Chem. Corp. v. Dresser-Rand Co., 287 F.3d 359, 365 (5th Cir.2002). However, when an action is tried by a jury, such a motion is a challenge to the legal sufficiency of the evidence supporting the jury's verdict. Brown v. Bryan County, OK, 219 F.3d 450, 456 (5th Cir.2000), cert. denied, 532 U.S. 1007, 121 S.Ct. 1734, 149 L.Ed.2d 658 (2001). Accordingly, we consider the evidence, "drawing all reasonable inferences and resolving all credibility determinations in the light most favorable to the non-moving party." Id. This Court grants great deference to a jury's verdict and will reverse only if, when viewing the evidence in the light most favorable to the verdict, the evidence points so strongly and overwhelmingly in favor of one party that the court believes that reasonable jurors could not arrive at any contrary conclusion. Dahlen v. Gulf Crews, Inc., 281 F.3d 487, 497 (5th Cir.2002). A motion for a new trial should not be granted unless the verdict is against the great weight of the evidence, not merely against the preponderance of the evidence. Id.
We review the denial of a motion for new trial for abuse of discretion. Miss. Chem. Corp., 287 F.3d at 365; Hidden Oaks Ltd. v. City of Austin, 138 F.3d 1036, 1049 (5th Cir.1998) ().
Finally, the denial of injunctive relief is reviewed under an abuse of discretion standard, while the legal conclusions underlying the denial are subject to de novo review. Waco Int'l, Inc. v. KHK Scaffolding Houston, Inc., 278 F.3d 523, 528-29 (5th Cir.2002).
On appeal, Apix contends that it did not misappropriate Dresser-Rand's...
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