CHILDREN'S BROADCASTING CORP. v. WALT DISNEY CO., 357 F.3d 860 (Fed. 8th Cir. 1/26/2004)

• Decision Date: 26 January 2004
• Docket Number: No. 02-3161.,No. 02-3310.,02-3161.,02-3310.
• Citation: 357 F.3d 860
• Parties: CHILDREN'S BROADCASTING CORPORATION, a Minnesota corporation, Appellee/Cross-Appellant v. THE WALT DISNEY COMPANY, a Delaware corporation; ABC Radio Networks, Inc., a Delaware corporation, Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

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357 F.3d 860

CHILDREN'S BROADCASTING CORPORATION, a Minnesota corporation, Appellee/Cross-Appellant v. THE WALT DISNEY COMPANY, a Delaware corporation; ABC Radio Networks, Inc., a Delaware corporation, Appellants/Cross-Appellees.

No. 02-3161.

No. 02-3310.

United States Court of Appeals, Eighth Circuit.

Submitted: June 12, 2003.

Petition for partial rehearing is denied March 4, 2004.

Filed: January 26, 2004.

The petition for partial rehearing by the panel filed by the appellants/cross-appellees is denied.

Counsel who presented argument on behalf of the appellant was Paul B. Klass of Minneapolis, MN. Steven J. Wells and Christopher T. Shaheen of Minneapolis, MN appeared on the brief.

Counsel who presented argument on behalf of the appellee was Thomas F. Cullen, Jr. of Washington, D.C. Adrian Wager-Zito and Kevin C. Maclay of D.C. appeared on the brief. Michael L. Meyer of Minneapolis, MN also appeared on the brief.

Before LOKEN, Chief Judge, HEANEY and RILEY, Circuit Judges.

RILEY, Circuit Judge.

Children's Broadcasting Company (Children's) sued ABC Radio Networks, Inc. (ABC Radio) and The Walt Disney Company (Disney) for breach of contractual duties to sell advertising and to maintain confidentiality and for misappropriation of a trade secret. The case was tried to a jury, which awarded Children's $1.5 million for breach of contract, and $8 million for breach of the contractual duty of confidentiality and misappropriation of the trade secret. ABC Radio and Disney appeal (1) the district court's¹ denial of their motion for judgment as a matter of law or, alternatively, for new trial; and (2) the award of prejudgment interest to Children's. Children's cross appeals, claiming the district court erred (1) in narrowing the scope of Children's confidentiality claim solely to the misappropriated trade secret; and (2) by not awarding Children's exemplary damages and attorney fees. We affirm.

I. BACKGROUND

This case, involving a letter agreement between Children's and ABC Radio (ABC Radio was later acquired by Disney), is before our court for a second time. In the previous appeal, our court held the district court erred in granting judgment as a matter of law in favor of ABC Radio and Disney on the issue of causation. Children's Broad. Corp. v. The Walt Disney Co., 245 F.3d 1008, 1013, 1016 (8th Cir. 2001). We determined the evidence was sufficient to support the jury's finding that the breach of contract and the misappropriation of an advertiser list caused harm to Children's. Id. at 1016. We also ruled evidence was presented from which the jury could approximate Children's damages. Id. at 1017. We affirmed the district court's conditional grant of a new trial, because the district court did not abuse its discretion in finding the testimony of one of Children's experts should have been excluded. Id. at 1018-19. We remanded the case for a new trial on the limited issue of damages. Id. at 1022.

Our previous decision thoroughly discusses the underlying facts of this case, and we refer our reader to that decision for the details. Hereafter, we discuss only the facts most pertinent to this second appeal.

At the retrial on damages, Children's presented evidence ABC Radio and Disney had "accelerated" their entry into the children's radio market by using information about advertising and marketing they obtained from Children's and its children's radio network, Radio AAHS. The jury awarded Children's (1) $1.5 million on the breach of contract claim for ABC Radio's failure to make reasonable efforts to sell advertising and to develop affiliates for Children's radio network, i.e., Radio AAHS; and (2) $8 million for breach of the contractual duty of confidentiality and the misappropriation of information about Children's advertisers and potential advertisers contained in a document identified as PX217. The district court denied ABC Radio's and Disney's motion for judgment as a matter of law on the $8 million award or, alternatively, for a new trial. Children's moved for entry of judgment to include prejudgment interest and exemplary damages. The district court awarded Children's prejudgment interest totaling $2,567,082.19, and denied Children's request for exemplary damages and attorney fees. The district court entered a $9.5 million judgment for Children's with $2,567,082.19 in interest.

II. DISCUSSION

A. Judgment as a Matter of Law

1. Standard of Review

ABC Radio and Disney argue the district court erred in denying their post-trial motion for judgment as a matter of law. "We review de novo the district court's denial of [a] post-verdict motion for judgment as a matter of law." Racicky v. Farmland Indus., Inc., 328 F.3d 389, 393 (8th Cir. 2003). We are required to decide whether or not the record contains evidence sufficient to support the jury's verdict. Id. In doing so, "we must examine the sufficiency of the evidence in the light most favorable to [Children's] and view all inferences in [its] favor." Id. (citation omitted). "Judgment as a matter of law is appropriate only when all of the evidence points one way and is susceptible of no reasonable inference sustaining [Children's] position." Id. (citation omitted).

2. Evidence Supporting Verdict

ABC Radio and Disney argue the evidence Children's presented regarding damages due to misappropriation of PX217 does not support the verdict. ABC Radio and Disney contend (1) the theories of Dr. Jonathan Putnam (Dr. Putnam), the damages expert witness for Children's, were unfounded and speculative; (2) Dr. Putnam considered evidence outside PX217 in reaching his conclusions; and (3) Dr. Putnam could not identify the proper "acceleration" intervals of ABC Radio's and Disney's entry into the market. ABC Radio and Disney contend they provided the only competent evidence regarding any acceleration interval. ABC Radio and Disney argue Children's damages were improperly based upon projected profits rather than actual results. Finally, ABC Radio and Disney assert Children's did not show evidence of any actual use of PX217.

a. Dr. Putnam's Testimony

"We review under an abuse of discretion standard a district court's ruling admitting expert witness testimony under Rule 702." Bonner v. ISP Techs., Inc., 259 F.3d 924, 928 (8th Cir. 2001). "Where the district court errs in admitting evidence, we will only grant a new trial or set aside a verdict if there is a clear and prejudicial abuse of discretion." Lovett ex rel. Lovett v. Union Pac. R.R. Co., 201 F.3d 1074, 1080 (8th Cir. 2000).

Dr. Putnam offered a theory regarding ABC Radio's and Disney's accelerated entry into children's radio. The jury could have used all or some or none of Dr. Putnam's various acceleration intervals (eleven months to two years) as benchmarks to calculate the appropriate amount of damages, depending on the jury's findings regarding the amount of acceleration resulting from ABC Radio's and Disney's conduct. In calculating the various intervals, Dr. Putnam considered evidence, including two ABC Radio documents, regarding the length of time it would take to launch a children's radio network. Dr. Putnam accepted Children's testimony that Children's took about 3 years to acquire the information in PX217. Dr. Putnam relied on documents from ABC Radio and Disney saying the research and development Children's had done, though not specifically referring to the information in PX217, would avoid ABC "pumping $30 to $40 million into this business and taking 2 or 3 years of sizable start-up losses." One of the same documents also noted Children's had "built a brand and an asset in this area" and it would take ABC Radio a while to build up such research and development on its own.

Dr. Putnam provided dollar amounts to the jury of the increased value of ABC Radio and Disney based on three acceleration intervals — eleven months, twelve months, and twenty-four months — to which Dr. Putnam assigned the values of $35 million, $37 million, and $54 million. Although Dr. Putnam did not testify as to the exact length of the acceleration interval, he did state the length of the acceleration interval would be determined by the time needed to recreate the information. As to the time for recreating the information, Jane Steinberg, Vice President of Syndicated Programming and Internet Sales for ABC Radio, testified she could recreate the information on PX217 in less than a week, but Children's Marketing Manager, Rick Smith, testified it took four years to develop Radio AAHS and having the information would save a competitor a significant amount of time. An ABC Radio senior management review in January 1996 estimated ABC could "get to the same stage of development, in a reasonably short period of time (6-18 months)."

The district court stated it was satisfied with Dr. Putnam's credentials for valuing trade secrets, and Dr. Putnam used an accepted academic methodology. The court found Dr. Putnam's testimony relevant and reliable under Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141-42 (1999). The court concluded ABC Radio's and Disney's objections to Dr. Putnam's opinion were better directed to the weight of the testimony rather than admissibility. Finally, the district court found the defendants had a full opportunity to cross-examine Dr. Putnam and could have presented expert testimony to rebut Dr. Putnam's assertions.

In the prior appeal, our court upheld the causation finding based partly upon an expert's opinion that "ABC Radio and Disney were able to accelerate their entry into the market by using information, particularly information about advertising and marketing, they obtained from Children's." Children's, 245 F.3d at 1016. "As a general rule, the factual basis of an expert opinion goes to the credibility of the testimony, not the admissibility, and it is up to the opposing party to examine the factual basis for the opinion in cross-examination. Only if the expert's opinion is so fundamentally unsupported...