Barranco v. 3D Sys. Corp.

• Decision Date: 30 March 2018
• Docket Number: CIVIL NO. 13–00412 LEK–RLP
• Citation: 307 F.Supp.3d 1075
• Parties: Ronald BARRANCO, Plaintiff, v. 3D SYSTEMS CORPORATION, a Delaware corporation, 3D Systems, Inc., a California corporation, Abraham Reichental, Damon Gregoire, Defendants.
• Court: U.S. District Court — District of Hawaii

307 F.Supp.3d 1075

Ronald BARRANCO, Plaintiff,

v.3D SYSTEMS CORPORATION, a Delaware corporation, 3D Systems, Inc., a California corporation, Abraham Reichental, Damon Gregoire, Defendants.

CIVIL NO. 13–00412 LEK–RLP

United States District Court, D. Hawai'i.

Signed March 30, 2018

Mark Poe, Pro Hac Vice, Randolph Gaw, Gaw Poe LLP, San Francisco, CA, Patrick K. Shea, Sullivan Meheula Lee, LLLP, Vernon Y.T. Woo, Honolulu, HI, for Plaintiff.

Christopher C. Lam, Bradley Arant Boult Cummings LLP, Charlotte, NC, Marguerite S. Willis, Nikole S. Mergo, Nexsen Pruet, LLC, Columbia, SC, Thomas Benedict, Dawn T. Sugihara, Goodsill Anderson Quinn & Stifel LLLP, Honolulu, HI, for Defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW AND ORDER

Leslie E. Kobayashi, United States District Judge

Following a jury trial, this matter came on for a one-day bench trial on the issue of equitable accounting on November 20, 2017. Plaintiff/Counterclaim Defendant Ronald Barranco ("Plaintiff" or "Barranco") was represented by Mark Poe, Esq., and Patrick Shea, Esq. Defendants/Counterclaimants 3D Systems Corporation and 3D Systems, Inc. ("Defendants" or "3D Systems"), were represented by Thomas Benedict, Esq., Dawn T. Sugihara, Esq., and Nikole Setzler Mergo, Esq. The Court, having considered the declarations and evidence admitted into evidence, the testimony at trial, and the arguments of counsel, makes the following Findings of Fact and Conclusions of Law and Decision pursuant to Fed. R. Civ. P. 52. Any finding of fact that should more properly be deemed a conclusion of law and any conclusion of law that should more properly be deemed a finding of fact shall be so construed.

BACKGROUND

Plaintiff originally filed his Complaint on August 23, 2013, asserting diversity jurisdictionpursuant to 28 U.S.C. § 1332 and venue pursuant to 28 U.S.C. § 1391(b). [Dkt. no. 1.] Plaintiff alleged claims against 3D Systems for breach of contract ("Count I"), breach of employment agreement ("Count II"), breach of the implied covenant of good faith and fair dealing ("Count III"), fraud ("Count IV"), negligent misrepresentation ("Count V"), unjust enrichment ("Count VI"), and rescission ("Count VII"). Plaintiff's claims arose from a Purchase and Sale Agreement ("PSA") regarding certain web domains.¹ [Id. ]

On August 19, 2014, Defendants filed counterclaims, and on September 8, 2014, filed amended counterclaims. [Dkt. nos. 89, 101.] On November 5, 2014, Defendants filed their Amended Counterclaims Against Plaintiff ("Second Amended Counterclaims"). [Dkt. no. 118.] In the PSA, Barranco agreed not to compete with 3D Systems for a five-year period ("Non–Compete Provision"). [PSA at § 6.] Defendants' Second Amended Counterclaims alleged breach of contract for violation of the Non–Compete ("Non–Compete Counterclaim") and for failure to completely convey all of the assets purchased under the PSA ("Failure to Convey Counterclaim").

On March 17, 2014, Plaintiff's Count II was dismissed. [Order Denying Defs.' Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(2) or, in the Alternative, to Transfer Pursuant to 28 U.S.C. § 1404 ("3/17/14 Order"), dkt. no. 37.² ] On January 30, 2015, Counts IV, V, and VII were dismissed. Plaintiff's remaining claims were Counts I, III, and VI. [Order Granting in Part and Denying in Part Defs.' Motion for Summary Judgment on All Claims Against Them ("1/30/15 Order"), dkt. no. 140.³ ]

On May 17, 2016, a jury trial commenced. [Minutes, dkt. no. 250.] On May 26, 2016, the case went to the jury. [Minutes, dkt. no. 278.] On May 27, 2016, the jury reached a verdict in favor of Defendants on all claims brought by Plaintiff. [Special Verdict Form, dkt. no. 282.] The jury found for Defendants on their Non–Compete Counterclaim against Plaintiff. [Id. ] Specifically, the jury answered "yes" to the following question: "Did Barranco breach his promise not to engage in competition with 3D Systems for five years after signing the PSA?" [Id. at 6.] The jury also found 3D Systems did not "promise to invest substantial resources into the Primary Domains."⁴ [Id. at 2.]

Plaintiff was granted judgment as a matter of law on the Failure to Convey Counterclaim after Defendants conceded they had not offered sufficient evidence of actual damages. [EO: Court Ruling Regarding the Remaining Issues in this Case, filed 6/22/16 (dkt. no. 287) ("6/22/16 EO Ruling").] On May 9, 2017, this Court denied Plaintiff's oral motion for judgment as a matter of law on Defendants' Non–Compete Counterclaim. [Order Denying Pltf.'s Oral Motion for Judgment as a Matter of Law ("5/9/17 Order"), dkt. no. 300.⁵ ] The 5/9/17 Order concluded the jury's verdict was supported by evidence showing Barranco violated the Non–Compete Provision.

2017 WL 1900970, at *4. Under its terms, Barranco could breach the Non–Compete Provision by developing a competing product, or assisting another entity in developing or providing a competing product. Id. Therefore, the jury's verdict did not require support from evidence showing the violation of the Non–Compete Provision caused Plaintiff to be benefitted, or Defendants to be harmed. See id. at *4–5. The Court also found the issues related to the Non–Compete Counterclaim were "complex enough to merit an equitable accounting," and an equitable accounting to determine recovery, rather than a jury finding to determine damages, was appropriate. Id. at *4–5.

The jury made no finding as to which particular conduct or incidents breached the Non–Compete Provision. At the November 20, 2017, non-jury trial, Defendants argued the jury's finding of liability on the Non–Compete Counterclaim was based on "the website that [Barranco] developed for [Christopher] Breault"; "the divulgement of the Quickparts technology"; and "the online quoting engine that Mr. Barranco developed." [Trans. of Non–Jury Trial ("11/20/17 Trans."), filed 12/5/17 (dkt. no. 386), at 131.] In closing arguments at the jury trial, Defendants identified the same three bases for finding liability on their Non–Compete Counterclaim. [Trial—Day 5 Trans. ("Day 5 Trans."), filed 10/13/17 (dkt. no. 340), at 77.]

Based on the jury's finding of a breach of the Non–Compete Provision and pursuant to the PSA, Defendants are entitled to "an equitable accounting of earnings, profits and other benefits arising from such violation." [PSA at § 6(f).] The sole issue remaining for adjudication is the recovery due Defendants because of Plaintiff's violation of the Non–Compete Provision.

For the non-jury trial, in lieu of direct testimony, Defendants presented the declarations of Michael White; Anand Parikh; Ronald Hollis, Ph.D.; and Andrew Johnson. [Dkt. nos. 373–76.] In lieu of direct testimony, Plaintiff presented his declaration and the declaration of James Ketner. [Dkt. nos. 369–70.] Plaintiff sought to present the declaration Tory Sirkin, but that declaration was stricken. [Minutes, filed 11/20/17 (dkt. no. 383).] The Court also heard live testimony from Plaintiff, Dr. Hollis, Mr. Johnson, and Mr. Ketner. Mr. White, Mr. Parikh, and Mr. Sirkin did not provide live testimony. [Id. ] All exhibits indicated by stipulation, were admitted as evidence. [Dkt. no. 380.]

Plaintiff argued Defendants' recovery should be zero because some of the conduct at issue did not violate the Non–Compete Provision, and because none of the conduct caused him to receive any earnings, profits, or other benefits. Defendants sought to recover $5,000,000 as the inherent value of the technology Plaintiff accessed, as well as disgorgement of the entirety of Plaintiff's salary and all consideration paid to Plaintiff pursuant to the PSA.

FINDINGS OF FACT

I. Testimony and Exhibits

1. 3D printing is a process whereby three-dimensional solid objects are created through a process called additive manufacturing. Both stereolithography and laser sintering are additive manufacturing processes used in three-dimensional printing. [Direct Testimony of Ron Barranco ("Barranco Decl."), filed 11/17/17 (dkt. no. 369), at ¶ 7.] 3D printing contrasts with traditional "subtractive" manufacturing processes, in which a final part is formed by subtracting from a solid block of material, through cutting, grinding, or other subtractive processes. [Id. ]

2. In 1998, Barranco launched the website domain name stereolithography.com ("SLAC"). [Id. at ¶ 3.] In 2009, Barranco launched the website domain name lasersintering.com ("LSCOM" or "LS.com"). [Id. at ¶ 4.] The purpose of SLAC and LSCOM (collectively "Primary Domains") was to allow consumers to have a 3D object created through additive manufacturing processes. Through the Primary Domains, a consumer with a design for an object can obtain a quote for the manufacturing of the item and have the object made using 3D printing techniques. [Id. at ¶¶ 3–4.]

A. The Evolution of 3D Systems' Parts Business

3. In December 2007, 3D Systems hired Michael White to create a website that would allow for the instant online quotation ("IOQ") and ordering of 3D printed parts. [Decl. of Michael White ("White Decl."), filed 11/17/17 (dkt. no. 376), at ¶ 19.] At the time, less than five (5) sites in the world were able to accomplish that task. [Id. ]

4. From December 2007 to mid–2008, Mr. White worked to build and improve the website. [Id. at ¶¶ 20–23.] 3D Systems launched the new internal quoting tool in June/July 2008. [Id. at ¶ 21.] In October 2009, 3D Systems' parts service was rebranded as 3dproparts.com. [Id. at ¶ 23.]

5. In April 2010, 3D Systems acquired a company called DPT–Fast, which was one of the first companies to quote, and take orders for, rapid prototyping parts online. [Id. at ¶ 24.]

B. Quickparts Technology

6. In 1999, Dr. Hollis founded Quickparts and served as its president and chief executive officer ("CEO"). Quickparts was the industry standard and market leader for the acquisition of custom manufactured parts in the 3D printing market. [Decl. of Ronald L. Hollis ("Hollis Decl."), filed 11/17/17 (dkt. no. 373), at ¶ 6.]

7. In 2008, Dr. Hollis...