Myriad Dev., Inc. v. Alltech, Inc.

• Decision Date: 28 March 2011
• Docket Number: Cause No. 1:08–CV–0253–JRN.
• Citation: 817 F.Supp.2d 946
• Parties: MYRIAD DEVELOPMENT, INC., Plaintiff, v. ALLTECH, INC., Defendant.
• Court: U.S. District Court — Western District of Texas

817 F.Supp.2d 946

MYRIAD DEVELOPMENT, INC., Plaintiff,

v.ALLTECH, INC., Defendant.

Cause No. 1:08–CV–0253–JRN.

United States District Court,W.D. Texas,Austin Division.

March 28, 2011.

Adam D. Nugent, John H. Fleming, Patricia B. Cunningham, Sutherland Asbill & Brennan, LLP, Atlanta, GA, David E. Weslow, Wiley Rein LLP, Washington, DC, J. Stephen Ravel, Kelly Hart & Hallman LLP, Austin, TX, for Plaintiff.

Fran M. Jacobs, Duane Morris LLP, New York, NY, Gregory Matthew Luck, R. Brandon Bundren, Thomas W. Sankey, Wesley W. Yuan, Duane Morris LLP, Houston, TX, Joseph J. Aronica, Robert H. Dietrick, Duane Morris LLP, Washington, DC, Katherine Fergus, Duane Morris, LLP, Boston, MA, for Defendant.

FINAL JUDGMENT

JAMES R. NOWLIN, District Judge.

Before the Court in the above-entitled and styled case of action are the following cross-motions for post-verdict relief: (1) Myriad Development, Inc.'s Motion For Judgment (Dkt. No. 433), filed March 13, 2010; (2) Alltech, Inc.'s Opposition To Plaintiff's Motion For Judgment And Defendant's Motion To Enter Judgment To Conform The Verdict To The Evidence (Dkt. No. 449), filed April 2, 2010; (3) Myriad Development, Inc.'s Reply In Support Of Motion For Judgment And In Opposition To Defendant's Motion To Conform The Verdict To The Evidence (Dkt. No. 464), filed April 26, 2010; (4) Alltech, Inc.'s Sur–Reply In Further Opposition To Plaintiff's Motion For Entry Of Judgment And In Further Support Of Defendant's Motion To Conform The Verdict To The Evidence (Dkt. No. 466), filed May 3, 2010; (5) Myriad Development, Inc.'s Sur–Reply In Support Of Motion For Judgment And In Opposition To Defendant's Motion To Enter Judgment To Conform The Verdict To The Evidence (Dkt. No. 485), filed June 1, 2010; (6) Alltech, Inc.'s Court–Ordered Brief (Dkt. No. 507), filed February 14, 2011; (7) Myriad Development, Inc.'s Court–Ordered Brief (Dkt. No. 511), filed February 15, 2011; (8) Alltech, Inc.'s Response To Plaintiff's Court–Ordered Brief (Dkt. No. 513), filed February 23, 2011; and (9) Myriad Development, Inc.'s Reply In Support of Its Court–Ordered Brief (Dkt. No. 516), filed March 1, 2011.

After an exhaustive review of the applicable law and the evidence presented at trial, the Court concludes that Myriad Development, Inc.'s motion must be GRANTED IN PART AND DENIED IN PART. Likewise, Alltech, Inc.'s motion must be GRANTED IN PART AND DENIED IN PART. In summary of the Court's holdings, Plaintiff/Counter–Defendant Myriad Development, Inc. (“Myriad”) may only recover the following damages: (1) $21,263.00 for unpaid amounts under the APPRISE Agreement; (2) $198,110.00 for unpaid amounts under the Subcontract for Labor; and (3) $250,000.00 in reasonable royalty fees for trade secret misappropriation. Defendant/Counter–Plaintiff Alltech, Inc. (“Alltech”) is not entitled to recover any damages.

I. STANDARD OF REVIEW

Alltech's Response and concomitant motion is, as far as the Court can discern, a renewed motion for judgment as a matter of law under Rule 50(b) of the Federal Rules Of Civil Procedure.¹ “A motion for judgment as a matter of law (previously, motion for directed verdict or J.N.O.V.) in an action tried by jury is a challenge to the legal sufficiency of the evidence supporting the jury's verdict.” ² In considering Alltech's motion, the Court must consider all the evidence before the jury.³ When reviewing all of the evidence, the Court must draw all reasonable inferences in favor of the nonmovant, and the Court cannot weigh the evidence or make credibility determinations.⁴ Additionally, “the court must be ‘especially deferential’ to the jury's findings.” ⁵ Therefore, a “jury verdict must stand unless there is lack of substantial evidence, viewed in the light most favorable to the successful party, to support the jury's factual findings, or the legal conclusions implied from the jury's verdict cannot, in law, be supported by those findings.” ⁶

II. FACTUAL AND PROCEDURAL BACKGROUND

Myriad is a technology company that traditionally provided software and other services to insurance companies in order to assist in the management of property inspections. In particular, Myriad licenses its proprietary inspection management system under the name “Risk Manager” system (formerly known as the “Apprise” system). Myriad created the Risk Manager system in 2001 in order to streamline and automate an insurance company's inspection process. Risk Manager is a client/server system. The server side of the system allows a company to dictate and manage the information inspectors collect in the field. The client side of the system is a laptop computer or handheld tablet the inspector uses to collect the data and to send the data back to the server. In essence, Risk Manager guides an inspector through the inspection process.

Alltech is in the business of deploying teams of inspectors to presidentially-declared disaster areas in order to perform housing inspections on an expedited basis.⁷ Alltech has provided such disaster-related inspection services to the Federal Emergency Management Agency (FEMA) since 1995, and FEMA continues to award contracts to Alltech.

Prior to this dispute, Alltech had a five-year contract with FEMA that expired in 2005. In 2004, FEMA began requiring inspectors to provide two photographs per inspection. To meet this requirement, Alltech developed a system called “PB Photo Inspection” in 2005. In essence, “PB Photo Inspection” was software that was installed on a hand-held tablet PC computer that allowed Alltech field inspectors in the disaster areas to transmit photos from a camera onto the hand-held tablet. Once the tablet was connected to a telephone line, Alltech could then transfer the photos from the hand-held tablet to a common storage server that Alltech maintained. At the conclusion of the 2000–2005 FEMA contract, Alltech sought to update and upgrade its data collection software before it bid on any new FEMA contracts. To accomplish this task, Alltech turned to Myriad.

In 2005, Alltech and Myriad entered into the following three contracts related to Alltech's work for FEMA, which are now in dispute:

(1) the “APPRISE Agreement,” entered on June 6, 2005; (2) the “AIMS Agreement,” entered on June 30, 2005; and

(3) the “Subcontract for Labor Agreement,” entered on May 3, 2007.

At trial, Alltech claimed that it hired Myriad to increase the data storage and the data transfer capabilities of Alltech's PB Photo Inspection. On the other hand, Myriad rebutted that Alltech did not have a system called “PB Photo Inspection” in 2005, and thus, Alltech merely hired Myriad to customize Myriad's Risk Manager system for Alltech's FEMA work.

The agreement for Myriad to customize Myriad's Risk Manager system and/or Alltech's PB Photo Inspection was memorialized in the “APPRISE Agreement” on June 6, 2005. The APPRISE Agreement permitted Alltech to utilize Myriad's Risk Manager system in order to process property inspections related to the FEMA disaster response program. The first version of the system that Myriad customized for Alltech under the APPRISE Agreement was called “Photo Ace.” ⁸ In 2006, Myriad designed and developed a successor to the 2005 “Photo Ace” called “PB Ace.”

On June 30, 2005, Myriad and Alltech entered into a second agreement called the “AIMS Agreement.” The AIMS Agreement provided the terms for Myriad to develop and operate the Alltech Inspection Management System (“AIMS”) for Alltech. In essence, AIMS is software that allows Alltech to locate detailed credential and contact information for qualified FEMA inspectors residing throughout the United States.

Of great importance to the present controversy, on March 30, 2007, Alltech entered into its most recent agreement with FEMA, the “FEMA PRIME Agreement.” The FEMA Prime Agreement required Alltech to collect data and to take photographs of residential damage from hurricanes. Alltech was required to transmit those photographs to FEMA upon request. As of the trial in this case, the FEMA Prime Agreement was scheduled to last until September 30, 2010.

The parties executed the “Subcontract for Labor” on May 3, 2007—two years after the APPRISE and AIMS Agreements. The Subcontract for Labor governed certain staffing and personnel services that Myriad provided to Alltech for Alltech's performance under the FEMA PRIME Agreement.

Less than one year after Alltech and Myriad won the bid for the 2007 FEMA Prime Agreement, the current controversy arose between Myriad and Alltech. It is undisputed that on March 28, 2008, Myriad denied Alltech access to the Risk Manager system and PB Ace.⁹ Myriad maintained that it suspended Alltech's access to Risk Manager because Alltech was reviewing the features and functionalities of Risk Manager and PB Ace for the improper purpose of creating: (1) a replacement user interface system, called “Pegasus,” and (2) a replacement server storage database, called “DSD.”

According to Myriad, development of “DSD” began in 2007, and development of “Pegasus” and “Aries” began in January of 2008. The plan to actually use “Pegasus” as a replacement system was allegedly developed in March of 2008. However, in suspending access on March 28, 2008, Myriad—by letter and by telephone—informed Alltech that Myriad would restore access if Alltech confirmed that it was not misusing Myriad's proprietary information. Mr. Hugh Inglis, the principal-in-Charge of Parson Brinckerhoff's FEMA Housing Project, testified that he would not provide Myriad with the requested confirmation.

On the other hand, Alltech stated at trial that Myriad denied Alltech access to Risk Manager in order to compel contractual re-negotiations and an extension of the existing agreements. Alltech argued that it was forced to develop a replacement to the Risk Manager system and PB Ace in April 2008 so that it could continue performing under its FEMA contract after Myriad denied Alltech access to such systems. Alltech insisted at trial that...