Aeroflex Wichita, Inc. v. Filardo
| Docket Number | 119,563 |
| Decision Date | 21 July 2023 |
| Parties | Aeroflex Wichita, Inc., Appellee/Cross-Appellant, v. Kenneth W. Filardo, Chris Allen, and Tel-Instrument Electronics, Corp., Appellants/Cross-Appellees. |
| Court | Kansas Court of Appeals |
SYLLABUS BY THE COURT
1. Kansas courts use a two-part test when determining standing. To show standing, a party must show a cognizable injury and establish a causal connection between the injury and the challenged conduct. To show a cognizable injury, the injury must affect the party in a personal and individual way. A party must assert its own legal rights and interests and not base its claim for relief on the legal rights or interests of third parties.
2. A substantial injury is an actionable injury. The statute of limitations starts to run when both the act and the resulting injury are reasonably ascertainable by the injured party. The injured party need not have knowledge of the full extent of the injury. But the injured party must have a sufficient ascertainable injury to justify an action for damages. When the evidence is disputed concerning when the injury became reasonably ascertainable, the trier of fact decides.
3. Special verdict findings on essential issues must be certain and definite and not be conflicting or inconsistent. In determining whether jury findings are inconsistent, they are construed in the light of the circumstances and in connection with the pleadings, instructions, and issues submitted. When there is a view of the case that makes the findings consistent, they then must be resolved that way.
4. Special verdict findings are to be liberally construed on appeal and interpreted in the light of the testimony with a view toward ascertaining their intended meaning. If a careful reading of the verdict form, coupled with the instructions clearly establishes the intent of the jury and resolves a verdict's ambiguity, the verdict will be upheld on appellate review.
Appeal from Sedgwick District Court; WILLIAM S. WOOLLEY, judge.
F James Robinson Jr., of Hite, Fanning & Honeyman, LLP, of Wichita, for appellant/cross-appellee Tel-Instrument Electronics, Corp.
Robert J. Bjerg, of Law Office of Robert J. Bjerg, P.A., of Kansas City, Missouri, for appellants/cross-appellees Kenneth Filardo and Chris Allen.
Holly A. Dyer, Jay F. Fowler, and Amy S. Lemley, of Foulston Siefkin LLP, of Wichita, for appellee/cross-appellant Aeroflex Wichita, Inc.
Before HILL, P.J., BRUNS and WARNER, JJ.
The nations of our world have not yet beaten their swords into plowshares. In fact, the competition to manufacture the machines of war is more intense now than ever before. The technologically advanced nations seek engines of destruction with more speed, more stealth and more power. Aircraft now approach each other at supersonic speeds-closing on each other at speeds of many kilometers per minute. A pilot needs to know if a friend or foe is approaching-any delay in finding out could be deadly-because the ancient law of the quick and the dead still rules in warfare.
For those who supply the tools of war, the competition between manufacturers seeking government contracts is fierce. Prove to the government that what you produce is faster, stealthier, and more powerful than the product of your competitors and any possible enemies, and your company will win that contract to produce your wares for deployment to our forces. Workable innovations in products or techniques of manufacture are at a premium-sought by both companies and governments. The fact remains, what is old is known and can eventually be defended against. What is new is unknown and old defenses are useless against it. Nations prepare to win, not to lose.
So, companies need to develop new products to satisfy this very real and very vital demand. They can develop those products themselves or hire people away from their competitors who can develop those products. That is what happened in this case.
Aeroflex Wichita, Inc. and Tel-Instrument Electronics, Corp. were competitors for a multimillion-dollar Army contract for the development of Identification-Friend-or-Foe technology test systems. In 2006, the Army gave notice that it was going to award Aeroflex a sole-source contract to upgrade its TS-4530 test set to Mode 5. Tel-Instrument protested the award, claiming it could compete with Aeroflex. Tel-Instrument recruited and hired two Aeroflex employees who were involved in the development of the TS-4530 for Aeroflex and Aeroflex's Mode 5 upgrade proposal: Chris Allen and Kenneth Filardo. Both had signed nondisclosure agreements with Aeroflex. In January 2009, the Army declared Tel-Instrument won the contract.
Aeroflex filed this suit, claiming that Tel-Instrument was only able to put together a technically sound, price-competitive proposal to upgrade the TS-4530 by wrongfully obtaining and using Aeroflex's confidential, proprietary, and trade secret information through Allen and Filardo. Aeroflex claimed misappropriation of trade secrets, tortious interference with prospective business advantage or relationship, breach of contract, and tortious interference with contract. The jury found in favor of the defendants on Aeroflex's claim for misappropriation of trade secrets. The jury found in favor of Aeroflex on its other claims. The defendants appeal, raising issues of standing, statute of limitations, errors concerning the verdict form, instructional errors, and evidentiary errors. Aeroflex makes a contingent cross-appeal.
Aeroflex and Tel-Instrument competed for a multimillion-dollar Army contract for the development of Identification-Friend-or-Foe technology test systems. This IFF technology helps military air traffic control and planes so equipped to tell the difference between friendly and hostile aircraft. This device broadcasts a signal to the aircraft, and the approaching aircraft's IFF transponder responds.
In the 1990s, Litton Systems, Inc. (which later was acquired by Northrop Grumman) made the 424(v)2 IFF test set. In 2001 JcAIR, Inc. received an exclusive written license from Litton to "make, use, sell, and support" an upgraded test set called the 424(v)3. In exchange, Litton received a royalty payment for each test set sold. JcAIR replaced the electronics in the 424(v)2 with JcAIR-designed electronics to create the 424(v)3.
Then, in 2002, JcAIR won a contract to supply the Army with the 424(v)3 test sets. The test set was called the TS-4530 for the Army. That contract contemplated that the TS-4530 would have to be upgraded to Mode 5. JcAIR expected that it would eventually supply the Army with the upgrade, which could make JcAIR the first IFF manufacturer to bring a Mode 5 product to the market. JcAIR began working on the upgrade. In 2005, Aeroflex bought JcAIR.
In March 2006, the Army gave notice that it was going to award Aeroflex a solesource contract to upgrade the TS-4530 to Mode 5. Tel-Instrument protested the award, claiming it could compete with Aeroflex. Tel-Instrument explained that it would replace Aeroflex's electronics with technology based on Tel-Instrument's own Mode 5 test set that it was developing for the Navy. Aeroflex believed the protest was solely to delay the contract and that Tel-Instrument had no real plan or intent to submit a competitive proposal. Aeroflex submitted a proposal to the Army in September 2006, outlining the planned modifications to the TS-4530 for the upgrade. In November 2006, the Army cancelled the sole-source contract and announced there would be a competitive bid.
Meanwhile, Tel-Instrument hired two Aeroflex employees who were involved in the development of the TS-4530 and Aeroflex's Mode 5 upgrade proposal. Chris Allen was offered and accepted a position at Tel-Instrument in January 2007. Kenneth Filardo was offered a position at Tel-Instrument in March 2007 and began work there in April 2007. Both had signed nondisclosure agreements with Aeroflex.
According to Aeroflex, "no two JcAIR/Aeroflex employees were more crucial to the development and sale of the 4530 and the plan to upgrade it to Mode 5 . . . than Chris Allen and Kenneth Filardo." Allen was responsible for marketing and sales of the TS-4530, served as the TS-4530 program manager, and was the Army's point of contact. Filardo was a director of engineering and the chief designer of the TS-4530. Filardo was responsible for the development of the Mode 5 upgrade at Aeroflex. Both were involved in Aeroflex's proposal to the Army for the Mode 5 upgrade.
According to Aeroflex, Allen and Filardo were recruited by Tel-Instrument to work on Tel-Instrument's Mode 5 upgrade proposal and to harm Aeroflex. Allen took Aeroflex's confidential and proprietary documents and disclosed them to Tel-Instrument.
In May 2008, the Army officially solicited proposals for the contract to upgrade the TS-4530 to Mode 5. In January 2009, the Army declared Tel-Instrument won the contract. According to Aeroflex, Allen and Filardo changed Tel-Instrument's early design for the upgrade to a design that matched what Aeroflex was proposing. Tel-Instrument's bid was more than $7 million lower than Aeroflex's bid.
In March 2009, Aeroflex filed this lawsuit, claiming that Tel-Instrument was only able to put together a technically sound, price-competitive proposal to upgrade the TS-4530 by wrongfully obtaining and using Aeroflex's confidential, proprietary, and trade secret information through Allen and Filardo.
Aeroflex claimed misappropriation of trade secrets, tortious interference with prospective business advantage or relationship, breach of contract, and tortious interference with contract. Aeroflex asserted actual damages in the range of $19.8 million to $30.1 million. Aeroflex also...
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