DHI Grp. v. Kent
| Docket Number | 21-20274 |
| Decision Date | 30 August 2022 |
| Parties | DHI Group, Incorporated; Rigzone.com, Incorporated, Plaintiffs-Appellees, v. David W. Kent, Jr.; Single Integrated Operations Portal, Incorporated, Defendants-Appellants, |
| Court | U.S. Court of Appeals — Fifth Circuit |
Appeal from the United States District Court for the Southern District of Texas USDC No. 4:16-CV-1670
Before HIGGINBOTHAM, HAYNES, and WILSON, Circuit Judges.
DHI Group, Inc. and Rigzone.com (collectively "Plaintiffs") filed this civil lawsuit against David Kent and Single Integrated Operations Portal, Inc. ("Oilpro") (collectively, "Defendants") alleging, inter alia, claims under the Texas Uniform Trade Secrets Act ("TUTSA"), Texas Theft Liability Act ("TTLA"), and Racketeer Influenced and Corrupt Organizations Act ("RICO"). The district court entered a final judgment awarding Rigzone approximately $3 million in damages. All parties appealed.
For the following reasons, we AFFIRM in part and REVERSE in part.
Kent was the creator and founder of Rigzone.com, an oil and gas recruiting and employment opportunity website. To generate income, Rigzone used its resume database to gain subscribers. Oil and gas companies, looking to recruit and hire new employees, would purchase Rigzone subscriptions to search the resume database. The resumes themselves were not sold individually; they could only be accessed by purchasing a subscription to the database.
After selling Rigzone to DHI, Kent left the company and launched Oilpro. He proceeded to illegally hack into Rigzone's database and copy hundreds of thousands of resumes between 2013 and 2015. The parties dispute Kent's intentions behind these hacks; there is some indication that his actions were done to benefit Oilpro.
Kent's hacks were eventually discovered, and he was subsequently arrested and criminally charged. He pled guilty to violating the Computer Fraud and Abuse Act ("CFAA") for his unauthorized access of Rigzone's resume collection. He was sentenced to one year and one day in prison and ordered to pay approximately $3.3 million in restitution.
While Kent's criminal case was pending, Plaintiffs filed the instant action against Kent and Oilpro, asserting various claims under the TUTSA, RICO, TTLA, and CFAA, as well as common law claims for breach of fiduciary duty and misappropriation of confidential information.[1] In response, Oilpro asserted counterclaims against Rigzone and DHI under the CFAA, as well as breach of contract and common law misappropriation. Before the jury returned a verdict, the district court granted judgment as a matter of law in favor of Oilpro as to Plaintiffs' claims because Plaintiffs did not oppose Defendants' Rule 50(a) motion as to their claims against Oilpro.
As for Kent, the jury found violations of: (1) TUTSA, awarding approximately $3 million in damages to Rigzone; and (2) Texas common law for the misappropriation of confidential information, awarding approximately $2.5 million in damages. The jury also found a (3) violation of RICO and (4) breach of a fiduciary duty but did not award damages as to either claim. As for the remaining claims, the jury found in Kent's favor as to the CFAA claim and in Plaintiffs' favor on all of Oilpro's counterclaims.
In light of the jury verdict, the parties filed additional motions. Defendants moved to (1) offset their damages with the $3.3 million paid as criminal restitution and sought relief under Federal Rules of Civil Procedure 50, 59, and 60; and (2) recover fees and costs for their successful defense of the TTLA claim. Plaintiffs moved, inter alia, for an award of attorney's fees on their RICO claim. Oilpro moved, inter alia, for costs as a prevailing party under Rule 54(d).
The district court denied the various motions in an extensive order discussing the parties' arguments. See DHI Grp., Inc. v. Kent, No. 16-CV-1670, 2021 WL 4203235, at *1-9 (S.D. Tex. Aug. 23, 2021). Specifically, the court found that "Plaintiffs have not shown they were injured in their business or property by Kent's RICO violation," and "viewing the case as a whole, Oilpro is not the prevailing party" under Rule 54. Id. at *2, *4. As to Plaintiffs' TTLA claim, the district court explicitly acknowledged that "Defendants prevailed against Plaintiffs' TTLA claim" and were "thus entitled to reasonable and necessary attorneys' fees on the TTLA claim." Id. at *5. However, the court denied Defendants' motion for fees because of insufficient segregation and Defendants' failure "to meet their burden to produce evidence sufficient to perform the lodestar calculation." See id. at *5-8.
Later, the court denied, with no discussion, Defendants' motion for offset and relief and entered its final judgment, which: (1) awarded Plaintiff Rigzone $3,003,036.90 in damages-exactly the same amount the jury awarded on the TUTSA trade secret claim; (2) ordered that both DHI and Defendants "take nothing"; and (3) determined that the amount of prejudgment and post-judgment interest, attorney's fees, and costs would be decided at a later date. Defendants appealed, and Plaintiffs cross-appealed.
Several relevant and sometimes overlapping standards guide our review.
Regarding Plaintiffs' TUTSA claim, Defendants argue that the district court erroneously denied Kent's Rule 50(a) motion for judgment as a matter of law. We review such a denial de novo, using "the same standard as the district court." Kevin M. Ehringer Enters., Inc. v. McData Servs. Corp., 646 F.3d 321, 324 (5th Cir. 2011).[2] In ruling on this motion, "the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Id. at 325 (quotation omitted).
With respect to the jury verdict, this court's standard of review "is especially deferential." Apache Deepwater, L.L.C. v. W&T Offshore, Inc., 930 F.3d 647, 653 (5th Cir. 2019) (quotation omitted). "A party is only entitled to judgment as a matter of law on an issue where no reasonable jury would have had a legally sufficient evidentiary basis to find otherwise." Id. Therefore, we will not conclude "the district court erred unless the evidence at trial points so strongly and overwhelmingly in the movant's favor that reasonable jurors could not reach a contrary conclusion." Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867, 874 (5th Cir. 2013) (internal quotation marks and citation omitted).
We review a district court's damages award for clear error as a finding of fact, though "conclusions of law underlying the award are reviewed de novo." Jauch v. Nautical Servs., Inc., 470 F.3d 207, 213 (5th Cir. 2006) (per curiam).
We construe Defendants' motion for offset as a motion for remittitur, which seeks "[a]n order awarding a new trial, or a damages amount lower than that awarded by the jury." Remittitur, BLACK'S LAW DICTIONARY (11th ed. 2019). Generally, remittitur is only ordered when the court is "left with the perception that the verdict is clearly excessive." Thomas v. Tex. Dep't of Crim. Just., 297 F.3d 361, 368 (5th Cir. 2002) (quotation omitted). We review the denial of remittitur for abuse of discretion. Id.[3]
We review an award of costs under Rule 54(d) "for a clear abuse of discretion." United States ex rel. Long v. GSDMIdea City, L.L.C., 807 F.3d 125, 128 (5th Cir. 2015); see Pacheco v. Mineta, 448 F.3d 783, 793 (5th Cir. 2006) (). However, we review a "'prevailing party' determination" de novo. Long, 807 F.3d at 128. There is "a strong presumption that the court will award costs to the prevailing party." Salley v. E.I. DuPont de Nemours &Co., 966 F.2d 1011, 1017 (5th Cir. 1992). If "the court does not award costs to the prevailing party," the district court must "state its reasons." Id.
Generally, "[a]n award of attorney's fees is entrusted to the sound discretion of the trial court." Transverse, L.L.C. v. Iowa Wireless Servs., L.L.C., 992 F.3d 336, 343 (5th Cir. 2021) (quotation omitted).[4] The availability of attorney's fees is a question of law that we review de novo. Id. But we review a district court's decision to grant or deny attorney's fees for abuse of discretion. See id.; Davis v. Credit Bureau of the S., 908 F.3d 972, 975 (5th Cir. 2018) (per curiam).[5] An abuse of discretion occurs when the district court "bases its decision on an erroneous view of the law or on a clearly erroneous assessment of the evidence." Davis, 908 F.3d at 975 (quotation omitted). In making this determination, we "review[] the factual findings supporting the grant or denial of attorney's fees for clear error and the conclusions of law underlying the award de novo." Id. (quotation omitted).
There are several issues on appeal related to: (1) TUTSA, (2) TUTSA damages, (3) the offset of damages, (4) Rule 54 costs, (5) TTLA, and (6) RICO.[6] We discuss each issue in turn.
The parties dispute whether there is sufficient evidence of a trade secret. TUTSA defines a "trade secret" as:
all forms and types of information, including business, scientific, technical, economic, or engineering information, and any formula, design, prototype, pattern, plan, compilation, program device, program, code, device, method, technique, process, procedure, financial data, or list of actual or potential customers or suppliers, whether tangible or intangible and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing.
TEX. CIV. PRAC. &REM. CODE ANN. § 134A.002(6) (emphasis added).
The statute also requires that: (1) "the...
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