Frantz v. Johnson
| Decision Date | 04 May 2000 |
| Docket Number | No. 29588.,29588. |
| Citation | 999 P.2d 351,116 Nev. 455 |
| Court | Nevada Supreme Court |
| Parties | Michelle FRANTZ, Antonio Accornero, Individually, Plastic Graphics, Inc., A California Corporation, Western Badge & Trophy Co., A California Corporation, Wesley Ru, Individually and as an Officer of Western Badge & Trophy, and Action Graphics, A Nevada Partnership, Consisting of Michelle Frantz, Antonio Accornero, and Wesley Ru, Appellants, v. Charles R. JOHNSON, d/b/a Plastic Print-A-Card Co., d/b/a Johnson Business Machines, Respondent. |
Thorndal, Armstrong, Delk, Balkenbush Eisinger and Brian K. Terry, Las Vegas, for Appellants.
Bill C. Hammer, Ltd., Las Vegas, for Respondent.
BEFORE ROSE, C.J., SHEARING and BECKER, JJ.
SUMMARY
This case addresses, among other issues, Nevada's Uniform Trade Secrets Act (the "UTSA"), codified at NRS 600A.010-.100. The underlying dispute arose in 1990, when Michelle Frantz ("Frantz"), a sales manager for Johnson Business Machines ("JBM"), a Las Vegas distributor of plastic gaming cards, decided to seek employment with JBM's card manufacturer, Plastic Graphics, Inc. ("Plastic"). Plastic was owned by Wesley Ru ("Ru") and Antonio Accornero ("Accornero"); Ru and Accornero also owned a badge and button business called Western Badge & Trophy ("Western") (hereinafter collectively referred to as "appellants").
After Frantz's departure from JBM, its profits spiraled downward. Because JBM believed Frantz had stolen its "trade secrets" to assist Plastic in misappropriating JBM's customers, JBM filed suit against appellants seeking compensatory damages, punitive damages, and attorney fees and costs based on numerous causes of action.
After a bench trial, the district court awarded JBM compensatory damages, punitive damages, and attorney fees and costs. Appellants filed this timely appeal alleging several instances of error. We conclude that the district court erred in calculating compensatory damages and in failing to consider NRS 600A.050(2) before awarding punitive damages. We therefore vacate the district court's award of compensatory and punitive damages, and reverse and remand this matter for recalculation of damages.
JBM is a family-owned business founded by Charles R. Johnson ("Charles") in Las Vegas, Nevada. JBM sold printed plastic cards with personalized embossments that were purchased by casinos and used as VIP and slot machine player tracking cards.
In 1987, Charles hired Frantz as a salesperson for JBM. Frantz was an at-will employee and was not required to sign a covenant-not-to-compete contract. Charles testified that he taught Frantz everything about the plastic card business. Eventually, Frantz was promoted to sales manager of JBM. In addition to Frantz, JBM had two other employees: Charles's wife, Barbara Johnson, and machine manager Steve Larsen ("Larsen").
Throughout the years, Charles testified that he and Frantz developed a trusting relationship, and Charles gave Frantz keys to the offices, security codes to the building, and access to customer and pricing lists. Charles further testified that the aforementioned customer information and pricing lists were secured in file cabinets and protected as a trade secret. Charles's testimony was corroborated by John Luogo ("Luogo"), vice president of sales for another plastic card company, who stated in his deposition that bid and pricing information and customer lists are proprietary, confidential information in the plastic card industry.
According to Charles, another confidential aspect of JBM's business was the fact that JBM did not manufacture the plastic cards that it sold. In order to protect this confidential information, JBM required Plastic, its manufacturer, to ship the cards directly to JBM where the cards were relabeled and reboxed before being distributed to JBM's casino accounts. Additionally, Charles testified that before JBM entered into a contract with Plastic to manufacture JBM's cards, Accornero, an owner of Plastic, orally promised Charles that he would not solicit JBM's customers under any circumstances. This was an alleged promise that Accornero would eventually break.
In October 1990, Accornero hired Frantz as a salesperson and began competing against JBM in the plastic card industry. Frantz testified that after she began working for Plastic, she went to several hotels to talk to people with whom she had established a rapport. Frantz further testified that she sent out numerous letters and faxes announcing that she now worked for Plastic, the "direct representative of the manufacturer" and that she could offer "more competitive pricing and guaranteed delivery times."
Shortly after Frantz's departure, Larsen contacted all of JBM's customers to try to establish a business rapport and to inform them that Frantz had left JBM. Larsen testified that he had difficulties with the purchasing representatives of some casinos and that they were "negative or hostile." Larsen further testified that after Frantz left, JBM lost approximately 40% of its card sales and 30% of its machine sales to Plastic. Moreover, Larsen testified that although he did not see Frantz take any customer or pricing lists, several lists were missing after Frantz's departure.
In October 1990, Frantz received the Riverboat, Showboat, and Harrah's accounts by underbidding JBM. Thereafter, Frantz was served with notice that JBM was seeking a temporary restraining order ("TRO") to prevent her from directly soliciting JBM's customers. The TRO was granted and became effective November 7, 1990. Frantz testified that post-TRO she never contacted any of JBM's customers to solicit their business. However, Frantz further testified that she followed through on the Harrah's, Riverboat, and Showboat orders that were arranged prior to the TRO.
Despite Frantz's testimony that she complied with the TRO, JBM alleged that Frantz conspired with Ru and Accornero to avoid the court order by "referring" sales to Ru. Martha Kehn ("Kehn"), a purchasing agent for Boyd Properties, testified that sometime after Frantz left JBM, Frantz contacted her and told her that although Frantz could not take orders, Ru "would take care of anything" she needed. Additionally, Kehn testified that Frantz told her that JBM had an outside supplier of plastic cards.
JBM further alleges that Frantz's phone records indicate that she did not comply with the TRO. According to these records, Frantz made 195 calls to Western from her home and 48 calls to Promotional Graphics, another business entity owned by Ru and Accornero, between December 5, 1990, and October 17, 1991.
At the end of 1990, Frantz became an independent contractor, rather than an employee of Plastic, and continued to sell for Western and Promotional Graphics. However, Frantz's sales for Western were disappointing. Consequently, in April 1991 Plastic allegedly terminated its relationship with Frantz.
Thereafter, Frantz tried to establish her own business called Action Graphics. Frantz was unsuccessful and eventually filed for unemployment. When Frantz's unemployment claim was denied, Plastic agreed to pay her severance until she could find alternate employment. Frantz testified that, during this period of time, she was not attempting to sell cards for Plastic. Plastic, however, paid Frantz $3,000.00 per month allegedly as severance pay until August 1991 and required her to submit Action Graphics' invoices in order to receive payment. In October 1991, Frantz obtained a retail sales position and ceased working in the plastic card industry.
On May 1, 1991, JBM successfully pursued a preliminary injunction against Frantz. The district court granted the injunction finding that Frantz's conduct was unethical and violated her duties as an agent for JBM. In addition to seeking an injunction, JBM sued appellants for the following causes of action: (1) misappropriation of confidential information; (2) breach of fiduciary duty; (3) interference with prospective economic advantage; (4) fraud; (5) misrepresentation; (6) unjust enrichment; and (7) civil conspiracy.
At trial, JBM presented expert testimony on damages from its expert witness, Donald McGhie ("McGhie"). McGhie is a certified public accountant and has worked as a chief operating officer at Bally's Las Vegas. McGhie's estimation of damages was based on the number of player tracking cards that he calculated were utilized by slot machines in various casinos. MeGhie concluded that there was a 10:1 ratio, namely that ten player tracking cards were sold for each slot machine per month. McGhie used invoices from four different casinos to calculate this figure: (1) JBM's invoices from the Stardust from 1989-94; (2) Faraday's (one of JBM's competitors) invoices from the Mirage from 1992-94; (3) Plastic's invoices from the Showboat, Atlantic City from 1989-90; and (4) Plastic's invoices from the Riverboat, Reno from 1989-90.1
McGhie testified that his goal in calculating the 10:1 ratio was to find a method by which he could project the lost profit of the thirteen casino accounts that JBM claimed that it lost to Plastic. After coming up with the 10:1 ratio, McGhie used JBM's 1990 records from the Stardust to calculate a gross profit percentage for both magnetic and Hollerith plastic cards,2 totaling 18.86% and 34.68%, respectively. McGhie then calculated the losses associated with thirteen casinos that occurred between 1990-95: (1) the Golden Nugget, loss sustained from 1990-95; (2) the Showboat, loss sustained from 1990-94; (3) the Eldorado, the Riverboat, and the Mirage, losses sustained from 1990-95; (4) the Goldstrike, loss sustained from 1990-93; (5) Circus Circus, Excalibur, Slots of Fun, Luxor, Colorado Belle, and the Edgewater, losses sustained in 1993; and (6) the Silver Legacy, Reno, loss sustained in 1995,
Further, McGhie calculated JBM's losses associated with the reduced cost of Hollerith punching, loss of profit from the sale of machines, the...
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