Medical Educational Services, Inc. v. Health Educ. Network, L.L.C.
| Decision Date | 07 April 1998 |
| Docket Number | No. 97-1115,97-1115 |
| Citation | 581 N.W.2d 594,218 Wis.2d 831 |
| Parties | NOTICE: UNPUBLISHED OPINION. RULE 809.23(3), RULES OF CIVIL PROCEDURE, PROVIDE THAT UNPUBLISHED OPINIONS ARE OF NO PRECEDENTIAL VALUE AND MAY NOT BE CITED EXCEPT IN LIMITED INSTANCES. MEDICAL EDUCATIONAL SERVICES, INC., Plaintiff-Appellant, v. HEALTH EDUCATION NETWORK, L.L.C., Lois Postlewaite and Sylvia Kay Sandborg, Defendants-Respondents. |
| Court | Wisconsin Court of Appeals |
APPEAL from a judgment of the circuit court for Eau Claire County: PAUL J. LENZ, Judge. Reversed and cause remanded with directions.
Before CANE, P.J., and MYSE and HOOVER, JJ.
Medical Educational Services, Inc. (MEDS), appeals a judgment awarding it $11,209 damages against Lois Postlewaite, Sylvia Kay Sandborg and Health Education Network, L.L.C. (HEN). MEDS brought this action alleging conversion and alleging misappropriation of trade secrets. Because MEDS failed to supplement its answers to interrogatories with respect to damages, the court excluded MEDS's exhibit calculating certain conversion damages. It also denied MEDS's request to submit to the jury the issue of punitive damages.
The jury returned a verdict awarding MEDS $12,000 for misappropriation of trade secrets and $100,000 for conversion. At motions after verdict, the trial court ordered that it should have excluded not only MEDS's exhibit, but also all of the testimony relating to the exhibit given by MEDS's owner, Verna Pearson. As a result, it concluded that absent Pearson's testimony, the jury's damage award for conversion was excessive. It also concluded, as a matter of law, that the items taken were not trade secrets and struck all damages relating to trade secrets.
On appeal, MEDS argues that the trial court erroneously (1) struck Pearson's testimony, after trial was concluded, as a discovery sanction; (2) held that the verdict was excessive and reduced the jury's conversion damages from $100,000 to $11,209; (3) refused to submit the issue of punitive damages to the jury; and (4) struck $12,000 damages for trade secrets.
We conclude that the trial court erroneously exercised its discretion when, after trial was concluded, it struck all Pearson's testimony relating to conversion damages and reduced the verdict to $11,204. We further conclude that it erroneously refused to submit for jury consideration the issue of punitive damages and overturned the jury's award for theft of trade secrets. Therefore, we reverse the judgment and remand with directions to reinstate the jury's conversion damages and hold trial on the issue of punitive damages.
Although lengthy, we recite portions of the record to put the issues in context. 1 MEDS, a company started in 1981 by Verna Pearson, conducts continuing education seminars primarily for health care professionals. In 1992, Pearson hired Postlewaite as a program planner. Sandborg, hired in a similar capacity, eventually became Postlewaite's assistant.
In October and November of 1993, Postlewaite planned just one or two seminars, a dramatic decrease from the five to eight seminars normally scheduled. On December 27, Postlewaite informed Pearson that she was resigning from MEDS. Postlewaite advised Pearson that she did not plan to go into the seminar business. On January 17, 1994, Sandborg informed Pearson that she was going into business with Postlewaite.
Pearson testified that after Postlewaite and Sandborg left, the employees assigned to take over MEDS's programs found information and materials needed to hold seminars missing. An audit revealed large amounts of material missing from MEDS's program files. MEDS brought this action for misappropriation of trade secrets and conversion. 2 Postlewaite did not dispute that she had removed some materials from MEDS's premises that she had generated, which she believed would be useful in starting her own business. She testified, however, that she believed the materials she removed belonged to her or were worthless. Much of the testimony at trial revolved around the nature and value of the materials missing from MEDS.
Pearson testified that after Postlewaite resigned, they met to discuss a chiropractic program MEDS had planned in Minnesota, and Postlewaite
pulled out of her briefcase the Minnesota chiropractic program file and put it on the desk and said, "I don't know how this got into my materials," and said that I had three options, I could either pay her for the file or give her a percentage or she would cancel the program, so I told her I was going to think about it. [S]he grabbed the file from me and put it in her purse and said, "I think not," and I said, "that's my file," I said, "you don't have any right to take that," and she said, "I'll cancel that program, all you need is already in the drawer" and [she] marched out of the house with the program file.
Postlewaite's new company, HEN, put on the Minnesota chiropractic seminar on the same date, using the same speakers that had originally been scheduled by MEDS. Pearson testified that she looked but was unable to find the resources that Postlewaite asserted remained at MEDS. Pearson assigned someone to reconstruct the file and resurrect the program but, after six or eight weeks, MEDS was unsuccessful. The speakers never returned telephone calls and MEDS never was able to put on the chiropractic seminar.
MEDS's expert witness, Gerry Kaye, testified that it was his opinion that "a good seminar is easily worth $50,000." He said that the sum of $50,000 represented more than just the idea, but included "all the information that goes with the idea, the mailing lists, knowing how the thing is put together who to invite, what people thought about it, all of the thought that went into developing the course content." He testified that a lot of hard work goes into planning a seminar, and that mailing list strategy, program evaluations and registrant lists were critical to profitability.
Kenneth Olson testified as HEN's expert. His seminar company has classes on mail list selection, how to get them, where to get them, how to choose them: "That's the number one question we are wondering, where are they coming from, who are these [people]." He asks his site coordinators to talk to customers to find out who they are and where they are from. He testified that he uses program evaluation summaries to determine whether he is meeting his customers' expectations, and that they were valuable because they told him how to improve his faculty. He improves profitability by developing a topic and mailing list strategy.
Olson also testified that he would not give out mailing label strategy, registrant lists or evaluation summaries to the general public or his competitors. The difference between a mailing list and a mailing list strategy is that He agreed that the strategy is very crucial and that "planners live and die with the strategy." He testified that he would not have to tell a professional planner not to make these items accessible to the general public.
At trial Pearson also testified, without objection, as follows:
Q. Can you tell me whether seminars generally become more profitable as they go through this maturing process and are put on a number of times?
A. Yes, they do. Otherwise we're not doing our job very well.
Q. Okay. Do you have anything to base that on, or is that just kind of your gut feeling?
A. Well, I've done a couple different ways of evaluating that. For instance, with Lois's [Postlewaite] programs, the start-up programs had a profit average of about $2400 per program; whereas, in the later times that she provided those seminars, it was over $5,000 per program as a profit. That's after all the expenses are paid.
Pearson testified that she increases profitability by developing the mailing lists, adding new professional categories and groups to the program, and talking to people who attend to address their specific needs in MEDS's brochures. For example, there may be as many as 80,000 nurses in a given state, and she would not mail to all of them, "it would break the bank." At the seminar sites, one would learn that pharmacists and dietitians would also be interested in a given topic, and those two professional organizations are much easier to market to than nurses. She testified that registration lists are used to see how many people and what kinds of people attended the seminars. Mailing lists are updated and refined regularly. She further testified without objection:
Q. Can you tell me whether you have looked at the productivity lapse your office suffered after the program file portions were missing?
A. I have.
Q. What did you do?
A. Well, I tried to evaluate that senior person that I gave most of those seminars to and looked to see what her productivity was for the first quarter of 1994 where she was reconstructing and reputting [sic] together these files and in the same period during 1995, and there were approximately ten fewer programs that she was able to produce in mental health programs and additional programs for other areas.
Pearson testified that the reason this experienced employee had fewer seminars "was that we had to spend a great deal of energy reconstructing those files, doing that research that we had already paid Lois [Postlewaite] and Kay [Sandborg] to do the year before." Pearson was unaware of any other variable to account for the fewer number of seminars produced in 1995. She further testified that MEDS' materials were kept in its files and not available to competitors or the general public.
When asked to assign a value to the damages MEDS suffered as a result of having to reconstruct files due to the missing materials, she asked permission to refer to her list, marked as Exhibit 25, which included a...
To continue reading
Request your trial