Navigant Consulting, Inc. v. Wilkinson

• Decision Date: 15 November 2007
• Docket Number: No. 06-11071.,06-11071.
• Citation: 508 F.3d 277
• Parties: NAVIGANT CONSULTING, INC., Plaintiff-Appellee, v. John WILKINSON; Sharon Taulman, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

508 F.3d 277

NAVIGANT CONSULTING, INC., Plaintiff-Appellee, v. John WILKINSON; Sharon Taulman, Defendants-Appellants.

No. 06-11071.

United States Court of Appeals, Fifth Circuit.

November 15, 2007.

Michael P. Lynn (argued), Todd J. Harlow, Lynn, Tillotson & Pinker, Dallas, TX, for Plaintiff-Appellee.

James Robert Arnett, II (argued), Jamil N. Alibhai, Munck Butrus Carter, P.C., Dallas, TX, for Defendants-Appellants.

Appeal from the United States District Court for the Northern District of Texas.

Before KING, GARZA and BENAVIDES, Circuit Judges.

KING, Circuit Judge:

Navigant Consulting, Inc., brought this diversity action against former employees John Wilkinson and Sharon Taulman, alleging, inter alia, breach of fiduciary duty, breach of contract, and misappropriation of trade secrets. The case was tried to a jury, which returned a verdict in favor of Navigant on all three claims. The district court entered judgment against Wilkinson and Taulman, who now appeal. We AFFIRM, in part, and VACATE and REMAND, in part.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

John Wilkinson and Sharon Taulman were employees of Navigant Consulting, Inc. ("Navigant"), a national consulting company. Wilkinson and Taulman managed the operations of Navigant's claims administration practice in Dallas (the "Claims Practice"), which specialized in the administration of complex class-action settlements. They were responsible for staffing, budgeting, business development, client relations, and negotiating contracts on Navigant's behalf. Though they were at-will employees, Wilkinson and Taulman were bound by noncompete, nonsolicitation, and confidentiality agreements.

In April 2001, one of Navigant's competitors, First Union, called Wilkinson and expressed an interest in acquiring the Claims Practice from Navigant. In response, Wilkinson and Taulman prepared and transmitted a proposal to First Union. This proposal promised the delivery of "all, or virtually all, the existing clients; plus accompanying employees," of the Claims Practice to First Union, and set a purchase price of $22.5 million. The transaction was to be accomplished by "seek[ing] novation of [Navigant's] existing engagements into a management-owned corporation, and then simultaneously sell[ing] the capital stock to the buyer." The "management-owned corporation" was an entity, unrelated to Navigant, owned by Wilkinson and Taulman.

As part of the proposal to First Union, Wilkinson and Taulman included a variety of business information about the Claims Practice, such as revenue projections, backlog estimates (work sold but not yet performed), margin rates, descriptions of current engagements and potential engagements that Navigant was bidding on, specific information about the responsibilities and roles of a number of named senior-level employees, and more general information about the turnover, staffing rate, and profit margins on the remaining employees. Wilkinson and Taulman did not inform Navigant that First Union had expressed an interest in buying the Claims Practice, or that they had proposed to sell the Claims Practice in exchange for a payment to their own corporation.

Nothing came of the offer to First Union, but Wilkinson and Taulman continued to try to sell the Claims Practice to other competitors of Navigant, including Price-WaterhouseCoopers ("PWC"), in July 2001, LECG, LLC ("LECG"), in May 2002, and Rust Consulting ("Rust"), in June 2002.¹ In connection with these proposals Wilkinson and Taulman disclosed information about the Claims Practice similar to that contained in the proposal to First Union. They also met with representatives of competitors in Navigant's Dallas office, introduced Navigant employees to these representatives, and, in one case, traveled to Minneapolis to meet with a competitor and brought along a Navigant employee for an interview.

In May 2001, Wilkinson signed a four-year lease on Navigant's behalf for office space in Thanksgiving Tower in downtown Dallas. Wilkinson and Taulman had previously recommended the lease to Navigant's corporate office, and Wilkinson was authorized to sign it.

In June 2002, a computer technician in Navigant's Dallas office was directed to copy company data onto a portable, non-Navigant server. He was told that it was a "special project" for Wilkinson and that he should not inform Navigant's corporate office in Chicago. Worried that he was being involved in some kind of illicit activity, the technician contacted a supervisor outside of the Dallas office. His report aroused suspicions in Navigant's corporate office and prompted Navigant's general counsel and another executive to make a surprise visit to the Dallas office on August 23, 2002, where Wilkinson was instructed to discontinue the practice of transferring data to non-Navigant servers. Navigant also hired an outside law firm to look into the matter.

A few days later, Wilkinson contacted LECG, which he and Taulman had previously provided with a proposal containing detailed information about the Claims Practice, and indicated that he wanted to "move quickly" on a deal. On September 5, 2002, Wilkinson faxed a new proposal to LECG that identified Wilkinson, Taulman, and two other individuals as the "Sellers/Employees" of the Claims Practice. Like the previous proposal, this transaction was to be routed through a corporation owned by Wilkinson and Taulman, which was to receive options on 250,000 shares of LECG stock and $1.2 million in cash. Wilkinson also sought to become the agent of LECG for the purpose of negotiating with Navigant for a "smooth and orderly transition."

On September 24, 2002, Wilkinson met with two Navigant corporate officers in Chicago. He did not inform them that he was simultaneously negotiating with LECG and had sought authority to act as LECG's agent to negotiate with Navigant. Rather, he proposed to "take the business off [Navigant's] hands" in exchange for assuming Navigant's obligation on the Thanksgiving Tower lease. Navigant rejected the offer. Two days later, on September 26, Wilkinson and Taulman submitted their resignations, effective September 30, and shortly thereafter accepted offers to join LECG.

On October 8, 2002, Navigant filed suit against Wilkinson and another Navigant employee who was subsequently dismissed.² Taulman was added as a defendant in Navigant's amended complaint, which pleaded a variety of causes of action relating to Wilkinson and Taulman's conduct while employed with Navigant. The case proceeded to trial on breach of fiduciary duty, breach of contract, and misappropriation of trade secrets claims against Wilkinson and Taulman on August 1, 2005.³

At the close of all evidence, Wilkinson and Taulman moved for judgment as a matter of law pursuant to Rule 50(a) of the Federal Rules of Civil Procedure, which was denied by the district court. The jury then found Wilkinson and Taulman liable on each cause of action, awarded damages of $1,917,880 against Wilkinson and $1,837,453 against Taulman, and awarded exemplary damages of $200,000 against Wilkinson and $200,000 against Taulman. In addition, the district court awarded attorney's fees of $574,149.60 against Taulman. Wilkinson and Taulman moved for judgment as a matter of law under Rule 50(b), and, in the alternative, for a new trial or to alter or amend the judgment under Rule 59. The district court determined that the recovery for misappropriation of trade secrets had been duplicated in Navigant's recovery for breach of fiduciary duty and reduced the recovery against Wilkinson and Taulman accordingly, but otherwise denied the Rule 50(b) and Rule 59 motions. Wilkinson and Taulman now appeal.

II. SUFFICIENCY OF THE EVIDENCE

Wilkinson and Taulman first argue that the evidence presented at trial was insufficient to support the jury's verdict against them for breach of fiduciary duty, breach of contract, and misappropriation of trade secrets, as well as the jury's award of exemplary damages. The district court denied Wilkinson and Taulman's Rule 50(b) motion as to the challenges to the sufficiency of the evidence of breach of fiduciary duty, breach of contract, and the award of exemplary damages. In light of its elimination of the damage awards for misappropriation of trade secrets, the district court declined to consider the motion on that issue.

A. Standard of Review

"A motion for judgment as a matter of law ... in an action tried by jury is a challenge to the legal sufficiency of the evidence supporting the jury's verdict." Flowers v. S. Reg'l Physician Servs., Inc., 247 F.3d 229, 235 (5th Cir.2001) (internal quotations and citations omitted) (omission in original). "We review de novo the district court's ruling on a motion for judgment as a matter of law, applying the same standard as the trial court." Id. "We consider all of the evidence, drawing all reasonable inferences and resolving all credibility determinations in the light most favorable to the non-moving party." Brown v. Bryan County, 219 F.3d 450, 456 (5th Cir.2000). Although our review is de novo, "we note that our standard of review with respect to a jury verdict is especially deferential." Id. (citing Snyder v. Trepagnier, 142 F.3d 791, 795 (5th Cir.1998)). "As such, judgment as a matter of law should not be granted unless the facts and inferences point `so strongly and overwhelmingly in the movant's favor that reasonable jurors could not reach a contrary conclusion.'" Flowers, 247 F.3d at 235 (quoting Omnitech Int'l, Inc. v. Clorox Co., 11 F.3d 1316, 1322 (5th Cir.1994)). A jury verdict must be upheld unless "a reasonable jury would not have a legally sufficient evidentiary basis to find" as the jury did. FED.R.CIV.P. 50(a)(1); see Int'l Ins Co. v. RSR Corp., 426 F.3d 281, 296-97 (5th Cir.2005).

B. Breach of Fiduciary Duty

Wilkinson and Taulman argue that the evidence was insufficient to hold them liable for breach of fiduciary duty. "The elements of a breach of...