Advanced Fluid Systems, Inc. v. Huber

• Decision Date: 05 March 2019
• Docket Number: CIVIL ACTION NO. 1:13-CV-3087
• Citation: 381 F.Supp.3d 362
• Parties: ADVANCED FLUID SYSTEMS, INC., Plaintiff v. Kevin HUBER, INSYSMA (Integrated Systems and Machinery, LLC), Livingston & Haven, LLC, Clifton B. Vann IV, and Thomas Aufiero, Defendants
• Court: U.S. District Court — Middle District of Pennsylvania

381 F.Supp.3d 362

ADVANCED FLUID SYSTEMS, INC., Plaintiff

v.Kevin HUBER, INSYSMA (Integrated Systems and Machinery, LLC), Livingston & Haven, LLC, Clifton B. Vann IV, and Thomas Aufiero, Defendants

CIVIL ACTION NO. 1:13-CV-3087

United States District Court, M.D. Pennsylvania.

Signed March 5, 2019

David G. Concannon, Law Offices of David G. Concannon, Wayne, PA, Robert J. LaRocca, Kohn Swift & Graf PC, Philadelphia, PA, for Plaintiff.

Jonathan Zachary Cohen, Conrad O'Brien PC, Philadelphia, PA, for Defendants Kevin Huber Integrated Systems & Machinery, LLC 170 Fort Path Road Suite 21 Madison, CT 06443 646-581-1341, INSYSMA.

Ronald L. Hicks, Jr., Andrew L. Noble, Pro Hac Vice, Ashley L. Wilkinson, Pro Hac Vice, Meyer Unkovic & Scott LLP, Pittsburgh, PA, for Defendants Livingston & Haven, LLC, Clifton B. Vann, IV, Thomas Aufiero.

MEMORANDUM

Christopher C. Conner, Chief Judge

Plaintiff Advanced Fluid Systems, Inc. ("AFS"), commenced this civil action alleging that the collective defendants—a former employee and several of AFS's competitors—colluded to misappropriate AFS's trade secrets and deprive AFS of valuable business opportunities. All parties have zealously litigated this case, proceeding through multi-faceted Rule 12 motion practice, substantial discovery, and thorough summary judgment presentations. The case culminated in a six-day bench trial in September 2017, after which the court issued a 54-page memorandum opinion and awarded $ 3,096,009 in compensatory, exemplary, and punitive damages to AFS. All parties now seek post-trial relief pursuant to various Federal Rules of Civil Procedure.

I. Factual Background and Procedural History ¹

The key players in this case are by now familiar. AFS manufactures, distributes, and installs hydraulic components and hydraulic systems. Advanced Fluid Systems, Inc. v. Huber, 295 F.Supp.3d 467, 470 (M.D. Pa. 2018). Dan Vaughn is AFS's vice president and engineering manager, and his father, Jim Vaughn, is founder and president of the firm. Id. Defendant Kevin Huber ("Huber") was employed by AFS as a full-time sales engineer from November 2006 through his resignation on October 26, 2012, when Huber left to create his own firm, defendant Integrated Systems and Machinery, LLC ("Integrated Systems"). Id. at 470-71. Defendant Livingston & Haven, LLC ("Livingston"), designs, assembles, and installs hydraulic fluid systems. Id. at 471. Defendant Clifton B. Vann IV ("Vann") was Livingston's president at all relevant times. Id. Defendant Thomas Aufiero ("Aufiero") was employed by AFS as a sales engineer and later as a sales manager from 1989 until January 2011, when he left to work for Livingston. Id.

Shortly after beginning employment with AFS, Huber gave AFS the "lead" on a hydraulics project at Wallops Island, Virginia. Id. A college friend of Huber's, Keith Fava ("Fava"), was employed by Orbital Sciences Corporation ("Orbital") and advised that the Virginia Commonwealth Space Flight Authority ("the Authority") was seeking a hydraulics supplier to design a system to launch Orbital's "Antares" rocket from NASA's facility at Wallops Island. Id. The Antares rocket services and supplies the International Space Station. Id. AFS contracted with the Authority in September 2009 to build, install, and maintain the system. Id.

The resulting installation—the Teleporter/Erector/Launcher Hydraulic System ("Hydraulic System")—includes multiple constituent parts, including a "TEL" or "strongback" component which carries the rocket to the launch pad; a pair of "gripper arms" which secure the rocket to the strongback; and the hydraulic cylinder assemblies, which lift the rocket and strongback from horizontal to vertical position for launch. Id. at 471-72. During design and installation of the system, AFS generated a comprehensive package of engineering drawings which it delivered to the Authority. Id. at 472. Each drawing included an AFS title block declaring that the material was proprietary and confidential. Id. Testimony at trial indicated that, with limited exceptions, Orbital and the Authority were satisfied with AFS's work. Id. at 473. Orbital's lead engineer, Michael Brainard ("Brainard"), testified that the system performed "flawlessly" at its first launch and "very well" thereafter, and that his minor customer service complaints were remediable. See id.

Aufiero resigned from Livingston in January 2011 but remained in close contact with Huber. Id. Huber began flagging potential business opportunities for Aufiero, who eventually coordinated a meeting between Huber and several of Livingston's "high level" employees, including Vann. Id. Huber indicated to the Livingston team at this initial meeting on January 8, 2012, that "the relationship between AFS and [Orbital] was souring," creating an opportunity for Livingston to step in. Id. (alteration in original). That same day, Livingston employees connected to Huber via a commercial Dropbox folder, established a virtual private network on his AFS laptop, and provided him with a Livingston email address. Id. at 473-74. Vann was cognizant of the Dropbox arrangement. Id. As early as March 6, 2012, Huber began sharing AFS documents with Livingston employees, the first of which was a confidential list of spare and component part pricing for the Hydraulic System. Id. at 474.

Huber identified Livingston to Brainard as a potential replacement for AFS and coordinated a visit to Wallops Island for March 21, 2012, for Aufiero and two other Livingston employees. Id. During that visit, the Livingston team toured the rocket assembly and launch areas, and Fava told the group that Orbital was planning to upgrade both the gripper arms and the cylinder assemblies. Id. Huber arranged another visit for April 12, 2012, this time inviting Vann. Id. In the weeks preceding the second meeting, Huber shared several confidential AFS documents with Livingston, including lists of spare parts, bills of materials, and "top-level drawings and hydraulic schematics" for the entire Hydraulic System. Id. at 474-75. The Livingston team reviewed these documents to prepare for the upcoming meeting. Id. Vann communicated with Huber directly about the trip and about Huber's efforts to give Livingston an advantage with Orbital. Id. at 475. During the April 12 meeting, attended by Huber, Vann, Aufiero, and another Livingston employee, the group again discussed Orbital's upcoming plans for the system, including both the gripper arms upgrade and two options for the cylinder assembly work—a "new" cylinder option and a "modified" cylinder option. Id. at 475-76.

That the Livingston team, including Vann, knew that Huber was an AFS employee is undisputed. Id. Although Vann, Aufiero, and other Livingston employees repeatedly expressed concern about working with Huber while he was employed by a competitor known to be doing business with Orbital, id. at 475, they continued to work with him, id. at 475-81. In May 2012, Livingston actually doubled down on the partnership, with Vann authorizing a compensation package in which Livingston agreed to pay Huber 5.5% of sales on the Hydraulic System project and proposed that Huber serve as Livingston's "project manager" for the Hydraulic System. Id. at 476.

When Orbital sought bids for the gripper arms replacement contract, Livingston and AFS were both in the running, with AFS initially having "a slight nudge" in its favor "due to their experience with the current system." Id. at 476-77. Huber worked closely with Livingston to prepare its firm fixed price of $ 320,500, which Livingston submitted on September 7, 2012. Id. Huber thereafter inflated AFS's firm fixed price—from $ 277,828.80 to $ 410,383—to ensure that Livingston's bid was more competitive. Id. at 477. Livingston was awarded the contract, and Orbital's contemporaneous notes reflect that its decision was based on price. Id. During the ensuing design process, Livingston's team relied extensively on AFS's confidential engineering drawings. Id. Livingston subsequently received contracts for gripper arms installation and refurbishment which Brainard confirmed would have gone to AFS had it received the underlying replacement contract. Id.

Orbital also considered both AFS and Livingston for its cylinder assembly project. Id. at 477-78. Huber and Livingston knew by April 2012 that Orbital was considering both a "new" and a "modified" cylinder option. Id. at 478. Orbital wanted AFS to quote both options, but Huber delayed in disclosing the modified cylinder option to AFS until July 2012 and never revealed the new cylinder option, which Huber and Livingston knew to be Orbital's strong preference. Id. Huber pushed AFS to quote a modified cylinder plan, despite AFS's misgivings about its feasibility, while encouraging Livingston to pursue the new cylinder option alone. Id. at 478-79. Huber and Livingston worked closely to develop a proposal for the new cylinders, drawing again on confidential AFS documents supplied by Huber. Id. Livingston's receipt of the gripper arms contract and AFS's pursuit (at Huber's insistence) of the less-preferable modified cylinder option effectively eliminated AFS as a contender for the cylinder contract. Id. at 479.

In October 2012, unbeknownst to Livingston or AFS, Huber created his own company, Integrated Systems, intending to submit a competing bid for the cylinder contract. Id. On October 8, 2012, Huber downloaded nearly 98 gigabytes of AFS's proprietary files, including its engineering drawings, bills of materials, and other documents for the Hydraulic System; documents pertaining to AFS's gripper arms quote; and all of its pending and past project files dating back to 1993. Id. at 479-80. Huber then tendered his resignation notice to AFS, setting a last day of November 9, 2012, and later accelerating that date to October 26, 2012. Id. at 480.

Huber continued working with Livingston on its gripper arms design and its cylinder upgrade bid, and he...