Gognat v. Ellsworth

• Decision Date: 17 September 2009
• Docket Number: No. 08CA1745.,No. 08CA1158.,08CA1158.,08CA1745.
• Citation: 224 P.3d 1039
• Parties: Timothy A. GOGNAT, Plaintiff-Appellant, v. Chet J. ELLSWORTH, Joanne Ellsworth, MSD Energy, Inc., and Stephen Smith, Defendants-Appellees.
• Court: Colorado Court of Appeals

224 P.3d 1039

Timothy A. GOGNAT, Plaintiff-Appellant, v. Chet J. ELLSWORTH, Joanne Ellsworth, MSD Energy, Inc., and Stephen Smith, Defendants-Appellees.

No. 08CA1158.

No. 08CA1745.

Colorado Court of Appeals, Div. VII.

September 17, 2009.

Rehearing Denied October 15, 2009.

Irwin & Boesen, P.C., Bradley R. Irwin, Christopher L. Ingold, Denver, Colorado, for Plaintiff-Appellant.

David L. McCarl, Denver, Colorado; John P. Lange, Denver, Colorado, for Defendants-Appellees Chet J. Ellsworth, Joanne Ellsworth, and MSD Energy, Inc.

Hall & Evans, L.L.C., Bruce A. Menk, Michael W. Jones, Alan Epstein, Denver, Colorado, for Defendant-Appellee Stephen Smith.

Opinion by Judge J. JONES.

Plaintiff, Timothy A. Gognat, appeals the district court's summary judgment in favor of defendant Stephen Smith, dismissal of his complaint against defendants Chet J. Ellsworth, Joanne Ellsworth, and MSD Energy, Inc. (collectively, the nonresident defendants), and award of attorney fees to the nonresident defendants. We conclude that the district court properly entered summary judgment for Mr. Smith because the statute of limitations on Mr. Gognat's claims expired before he commenced this action. We also conclude that the district court lacked personal jurisdiction over Ms. Ellsworth and MSD, and therefore the district court properly dismissed Mr. Gognat's claims against them. However, we conclude that Mr. Gognat established a prima facie case of the court's personal jurisdiction over Mr. Ellsworth. Nonetheless, because he too would be entitled to summary judgment due to the expiration of the statute of limitations, we ultimately affirm the judgment in his favor. We vacate the award of attorney fees and remand the case to the district court for a redetermination of Ms. Ellsworth's and MSD's motion for attorney fees and a determination of their reasonable attorney fees incurred on appeal.

I. Background

Mr. Gognat alleged that in 1997 he shared trade secrets with Mr. Ellsworth (whom he had met through Mr. Smith) that would allow them to identify and develop reserves of producible oil and natural gas in western Kentucky. Mr. Gognat subsequently became concerned that Mr. Ellsworth and Mr. Smith were misappropriating his trade secrets by acquiring leases in western Kentucky without paying him compensation. In February 2002, Mr. Gognat threatened to sue Mr. Ellsworth and Mr. Smith for their alleged misappropriation of trade secrets pertaining to a twenty-five square mile area he refers to as the "first area" or the "Farmersville Dome" area, located in Caldwell County, Kentucky. Mr. Gognat decided, however, not to pursue a lawsuit against them at that time.

More than three years later, on December 19, 2005, Mr. Gognat filed a complaint against defendants, asserting numerous claims, all of which are based on defendants' alleged misappropriation of his trade secrets regarding the identification and development of producible oil and natural gas reserves in western Kentucky. Therein, he specifically alleged that he became aware in the summer of 2005 that defendants were misappropriating his trade secrets to obtain leases for natural gas reserves in a different and larger area in western Kentucky, which he refers to as the "second area," consisting of portions of Lyon, Livingston, Crittenden, and Caldwell Counties.

When Mr. Gognat filed this suit, Mr. Smith was a Colorado resident, Mr. and Ms. Ellsworth were residents of Florida, and MSD was a Wyoming corporation doing business in Kentucky. Mr. Gognat did not serve any of the nonresident defendants in Colorado.

The nonresident defendants filed a C.R.C.P. 12(b)(2) motion with supporting affidavits to dismiss for lack of personal jurisdiction. The district court granted that motion, finding that it had neither general nor specific personal jurisdiction over the nonresident defendants. The court subsequently awarded attorney fees to the nonresident defendants pursuant to section 13-17-201, C.R.S. 2008, because the action (which sounded in tort) had been dismissed under C.R.C.P. 12(b) before trial.

Mr. Smith moved for summary judgment. He argued that Mr. Gognat's claims were barred by the three-year statute of limitations applicable to claims for misappropriation of trade secrets, section 7-74-107, C.R.S. 2008. The district court initially denied that motion. However, after Mr. Gognat was deposed for a second time, Mr. Smith filed a motion for reconsideration of the district court's order denying his motion for summary judgment, citing Mr. Gognat's new deposition testimony. The district court heard argument on the motion at the trial management conference. The court concluded that Mr. Gognat's deposition testimony demonstrated that he knew about Mr. Smith's alleged misappropriation of trade secrets more than three years before he filed suit, and therefore his claims against Mr. Smith were barred by the statute of limitations.

II. Discussion

A. Statute of Limitations

Mr. Gognat contends that the district court erred in granting Mr. Smith's motion for summary judgment on statute of limitations grounds. We conclude, however, that the district court properly granted summary judgment in Mr. Smith's favor.

"Summary judgment is proper if the pleadings and supporting documentation show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Hamon Contractors, Inc. v. Carter & Burgess, Inc., ___ P.3d ___, ___, 2009 WL 1152160 (Colo.App. Nos.07CA0987, 07CA0988, 07CA2342, Apr. 30, 2009) (citing BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 71 (Colo.2004)). "A material fact is one that will affect the outcome of the case. . . . Once the movant shows the absence of a genuine issue of material fact, the burden shifts to the nonmovant to show that a dispute exists concerning a material fact." Western Innovations, Inc. v. Sonitrol Corp., 187 P.3d 1155, 1158 (Colo.App. 2008) (citation omitted).

We review a district court's order granting summary judgment de novo. Jenkins v. Panama Canal Ry. Co., 208 P.3d 238, 241 (Colo.2009); West Elk Ranch, L.L.C. v. United States, 65 P.3d 479, 481 (Colo.2002).

Mr. Gognat raises four specific challenges to the summary judgment: (1) there is a genuine issue of material fact whether he discovered Mr. Smith's misappropriation of his trade secrets more than three years before he commenced this action; (2) the law of the case doctrine precluded the district court from granting summary judgment; (3) the court should not have ruled on Mr. Smith's motion to reconsider the court's summary judgment order during the trial management conference, before the deadline to file a response to Mr. Smith's motion to reconsider had expired; and (4) there is a genuine issue of material fact whether the statute of limitations was equitably tolled. We reject each of these contentions in turn.

1. Accrual Under the Statute

Section 7-74-107, adopted from the Uniform Trade Secrets Act (UTSA), provides:

An action for misappropriation of a trade secret shall be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered. For the purposes of this section, a continuing misappropriation constitutes a single claim.

"We interpret a statute of limitations consistently with its purpose of promoting justice, avoiding unnecessary delay, and preventing the litigation of stale claims." Murry v. GuideOne Specialty Mut. Ins. Co., 194 P.3d 489, 491 (Colo.App.2008) (citing Morrison v. Goff, 91 P.3d 1050, 1052 (Colo. 2004)). "The point of accrual is usually a question of fact, but if the undisputed facts clearly show when a plaintiff discovered or should have discovered the damage or conduct, the issue may be decided as a matter of law." Id. "`The critical inquiry of when an action accrues is knowledge of the facts essential to the cause of action, not knowledge of the legal theory upon which the action may be brought.'" Olson v. State Farm Mut. Auto. Ins. Co., 174 P.3d 849, 854 (Colo. App.2007) (quoting Winkler v. Rocky Mountain Conference, 923 P.2d 152, 159 (Colo.App. 1995)).

In construing section 7-74-107, the United States Court of Appeals for the Tenth Circuit has held that "the statute of limitations on trade secret misappropriation claims begins to run not when a plaintiff can positively and directly prove misappropriation rather than independent development, but simply when the plaintiff has knowledge of sufficient facts from which a reasonable jury could infer misappropriation." Chasteen v. UNISIA JECS Corp., 216 F.3d 1212, 1218 (10th Cir.2000).¹ We agree with this construction of the statute. The question in this case, however, is how the accrual date is determined when a party alleges multiple misappropriations of one trade secret or multiple, but related trade secrets. Specifically, where a plaintiff alleges more than one misappropriation of a trade secret or related trade secrets by the same party, is there a single accrual date coinciding with the first misappropriation, or are there separate accrual dates coinciding with the dates of each misappropriation? Mr. Gognat contends that he did not discover the misappropriation of his trade secrets as to the "second area" until 2005, and therefore his filing was timely. In effect, he argues that regardless whether a claim for any misappropriation as to the "first area" is barred by the statute of limitations, his claims for misappropriation as to the "second area" did not accrue until 2005 — that is, that there are multiple accrual dates. We conclude, however, that his argument is based on an incorrect construction of section 7-74-107: we construe the statute to provide for a single accrual date for multiple misappropriations of a single trade secret or of multiple, related trade secrets, coinciding with the first date a plaintiff has knowledge of sufficient facts from which a jury could reasonably infer...