Hallmark Cards, Inc. v. Murley

• Decision Date: 15 January 2013
• Docket Number: No. 11–2855.,11–2855.
• Parties: HALLMARK CARDS, INCORPORATED, Plaintiff–Appellee v. Janet L. MURLEY, Defendant–Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

703 F.3d 456

HALLMARK CARDS, INCORPORATED, Plaintiff–Appellee

v.Janet L. MURLEY, Defendant–Appellant.

No. 11–2855.

United States Court of Appeals,

Eighth Circuit.

Submitted: Sept. 20, 2012.

Filed: Jan. 15, 2013.

Susan Ford Robertson, argued, Teresa A. Woody, on the brief, Kansas City, MO, for appellant.

John C. Aisenbrey, argued, George F. Verschelden, Charles W. German, Daniel E. Blegen, on the brief, Kansas City, MO, for appellee.

Before BYE, GRUENDER, and SHEPHERD, Circuit Judges.

BYE, Circuit Judge.

Hallmark Cards, Inc. (“Hallmark”) sued its former employee, Janet Murley, for a breach of the parties' separation agreement and won a $860,000 jury verdict on its breach of contract claim. The district court ¹ denied Murley's motion for a new trial. Murley now appeals, arguing the district court erred in delivering an adverse inference instruction to the jury and the award on Hallmark's breach of contract claim was excessive. We modify and affirm the decision of the district court.

I

Murley served as Hallmark's group vice-president of marketing from 1999 to 2002. In this capacity, she was responsible for product and business development, advertising, and research, and had access to confidential information including Hallmark's business plans, market research, and financial information. In 2002, Hallmark eliminated Murley's position as part of a corporate restructuring. Murley and Hallmark entered into a negotiated separation agreement which laid out the terms of Murley's departure. Pursuant to the agreement, Murley agreed not to work in the greeting card or gift industry for a period of eighteen months, solicit Hallmark employees, disclose or use any proprietary or confidential information, or retain any business records or documents relating to Hallmark. She also agreed to release Hallmark from any claims arising from her termination. In exchange, Hallmark offered Murley a $735,000 severance payment, eighteen months of paid COBRA benefits, executive outplacement services, and paid tax preparation for two years.

In 2006, after the expiration of her non-compete agreement, Murley accepted a consulting assignment with Recycled Paper Greetings (“RPG”) for $125,000. Murley admits that in the course of that assignment, she disclosed to RPG confidential Hallmark information including slides from Hallmark's business model redesign, information regarding Hallmark's consumer buying process, and long-term industry analysis gathered from Hallmark's market research. Hallmark was unaware of Murley's disclosures until 2009, when RPG was purchased by American Greetings. Prior to the closing of that sale, American Greetings contacted Hallmark to arrange a third-party review of RPG's records to ensure none of Hallmark's confidential information was contained therein. The third-party reviewer uncovered a number of Hallmark's documents in the records and alerted Hallmark to its findings.

On May 14, 2009, Hallmark filed suit against Murley, alleging breach of contract, misappropriation of trade secrets, conversion of Hallmark's confidential information, and unjust enrichment. During discovery, Hallmark learned that in 2007, RPG's investor Monitor Clipper had arranged for a forensic computer company called LuciData to make a copy of Murley's hard drive. LuciData forwarded that copy to Hallmark's computer expert in June 2010. At trial, Hallmark's computer expert testified that in the two days leading up to LuciData's review, sixty-seven documents had been deleted from Murley's computer, eight of which plus one folder related to Hallmark. Consequently, Hallmark sought an adverse inference instruction allowing the jury to infer that Murley had deliberately destroyed those documents to conceal their contents. Murley objected to the instruction absent a prior finding by the court that she had acted in bad faith and that Hallmark had been prejudiced by the deletion of those files. After a jury instruction conference, the district court denied Murley's objection and gave the following instruction to the jury at the close of evidence:

If you should find that a party willfully destroyed evidence in order to prevent its being presented in this trial, you may consider such destruction in determining what inferences to draw from the evidence or facts in this case. You may, but are not required to, assume that the contents of the files destroyed would have been adverse, or detrimental to the Defendant.

Instr. No. 12, Appellant's App. 0145.

Hallmark sought damages of $860,000, consisting of the $735,000 severance payment it made to Hurley under the parties' 2002 agreement and the $125,000 Murley received from RPG in exchange for her consulting services. With respect to the amount of damages, the district court instructed the jury to award Hallmark “such sum as you believe will fairly and justly compensate [Hallmark] for any damages you believe [Hallmark] sustained as a direct result of [Murley's] conduct.” The jury returned a verdict in Hallmark's favor and awarded it exactly $860,000 in damages.

Murley filed a post-trial motion seeking judgment as a matter of law or, in the alternative, a new trial on the grounds that the district court's adverse inference instruction had been improperly given and the jury verdict was excessive and a result of the jury's passion or prejudice. With respect to the adverse inference instruction, Murley argued the district court had not issued the requisite findings that Murley had destroyed the documents in bad faith and that Hallmark had been prejudiced by their nonproduction at trial. The district court denied Murley's motion, concluding (1) Hallmark had presented “sufficient evidence that a reasonable jury could have found for [Hallmark],” (2) Murley had failed to identify any manifest errors of law or fact, and (3) the jury's verdict was not excessive and did not indicate passion or prejudice. Jt. App. 285. This appeal followed.

II

A. The Adverse Inference Instruction

We first consider Murley's argument that the district court's improper delivery of an adverse inference instruction entitles her to a new trial. We review a district court's decision to give particular instructions for an abuse of discretion. See Slathar v. Sather Trucking Corp., 78 F.3d 415, 419 (8th Cir.1996). We consider whether the jury instructions, “taken as a whole and viewed in light of the evidence and applicable law, ‘fairly and adequately submitted the issues in the case to the jury.’ ” Grain Land Coop v. Kar Kim Farms, Inc., 199 F.3d 983, 995 (8th Cir.1999) (quoting White v. Honeywell, Inc., 141 F.3d 1270, 1278 (8th Cir.1998)). Because many errors are harmless, we will not reverse the judgment unless the alleged error was prejudicial. See Wolfe v. Gilmour Mfg. Co., 143 F.3d 1122, 1124 (8th Cir.1998). We will order a new trial only if the error “misled the jury or had a probable effect on its verdict.” See E.I. du Pont de Nemours & Co. v. Berkley & Co., Inc., 620 F.2d 1247, 1257 (8th Cir.1980).

Our Court made clear in Stevenson v. Union Pacific R.R. Co. that in a case involving the alleged spoliation of evidence, a district court is required to make two findings before an adverse inference instruction is warranted: (1) “there must be a finding of intentional destruction indicating a desire to suppress the truth,” and (2) “[t]here must be a finding of prejudice to the opposing party.” 354 F.3d 739, 746, 748 (8th Cir.2004). At the close of trial, over Murley's renewed objection, the district court instructed the jury that if it found Murley had intentionally destroyed the Hallmark-related documents, it could infer the contents of those documents would have been adverse or detrimental to her. Instr. No. 12, Appellant's App. 0145. Murley contends the instruction was improper because it was given absent the requisite findings by the court that she destroyed the electronic evidence in bad faith and that Hallmark suffered any prejudice as a result of its nonproduction at trial.

Murley first raised the issue of the required bad faith and prejudice findings prior to trial, when she objected to Hallmark's request for an adverse inference instruction and requested an evidentiary hearing regarding her alleged deletion of Hallmark's documents. The district court denied Murley's request, choosing instead to render its decision based upon the evidence presented at trial. At the close of the evidence, Murley renewed her objection to the adverse inference instruction on the grounds that the district court had not yet issued findings regarding bad faith and prejudice. The court overruled her objection and submitted the adverse inference instruction to the jury. Murley raised the issue a third time in a post-trial motion for judgment as a matter of law or, alternatively, a new trial, which the court denied.

In light of Murley's repeated efforts to elicit the requisite findings, we presume the court below was aware of our requirement that a district court must find bad faith and prejudice prior to giving an adverse inference instruction. The evidence presented at trial strongly suggests both were present. Murley's desire to suppress the contents of the electronic evidence at issue is reasonably suggested by the fact that she retained Hallmark-related documents five years past her termination but deleted them in the forty-eight hours prior to an inspection of her private computer. That the non-production of those documents would disadvantage Hallmark in a case hinging on Murley's retention and disclosure of Hallmark's confidential information is a given. Accordingly, Murley's contention that the district court failed to make any finding of bad faith and prejudice before submitting the adverse inference instruction to the jury is unpersuasive.

Under the circumstances, we may infer the district court made the requisite findings from the fact that it gave the adverse inference instruction over Murley's multiple objections and from its denial...