Patriot Rail Corp. v. Sierra R.R. Co.

• Decision Date: 22 October 2014
• Docket Number: No. 2:09-cv-0009-TLN-AC,2:09-cv-0009-TLN-AC
• Court: U.S. District Court — Eastern District of California
• Parties: PATRIOT RAIL CORP., Plaintiff, v. SIERRA RAILROAD CO., Defendant. AND RELATED COUNTERCLAIMS

PATRIOT RAIL CORP., Plaintiff, v. SIERRA RAILROAD CO., Defendant.AND RELATED COUNTERCLAIMS

No. 2:09-cv-0009-TLN-AC

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

October 22, 2014

ORDER

On July 9, 2014, this Court held a hearing on numerous pending motions before the Court including: Plaintiffs and Counter-defendants Patriot Rail Corp./Company LLC¹ and Patriot Rail LLC/ Pacific Rail LLC's² (hereinafter collectively referred to as "Patriot")³ Motion for Judgment on Unfair Competition Claim (ECF No. 496); Defendant and Cross-claimant Sierra Railroad Company's ("Sierra") Motion for Prejudgment Interest (ECF No. 497); Sierra's Opening Brief in Support of its Unfair Competition Claim (ECF No. 498); Sierra's Opening Brief in Support ofExemplary Damages (ECF No. 499); Patriot's Motion to Strike Evidence Used in Support of Sierra's Opening Briefs on Post-Verdict Claims (ECF No. 505); and Patriot's Motion to Strike Declarations of Forrest Vickery and Michael Hart (ECF No. 516). At the hearing the Court granted Patriot's Motion for Judgment on Sierra's Unfair Competition Claim. (Mins. for Mot. Hrn'g, ECF No. 517.) The Court submitted the rest of the outstanding matters and thus decides those matters as follows.

I. Sierra's Motion for Prejudgment Interest

On March 28, 2014, a jury awarded Sierra compensatory damages in the amount of $22,282,000 for breaching a non-disclosure agreement (the "NDA") between the parties. (Jury Verdict, ECF No. 447.) Sierra has moved this Court to award prejudgment interest in the amount of $1,638,228. (ECF No. 497-1 at 2.) Prejudgment interest is mandatory where a party is entitled to damages that were "certain, or capable of being made certain by calculation." Cal. Civ. Code § 3287(a). However, where, as here, the contract damages are "unliquidated" in the sense of being subject to dispute as to their amount, Cal. Civil Code Section 3287 allows courts to use their discretion in deciding whether to award prejudgment interest. Faigin v. Signature Grp. Holdings, Inc., 211 Cal. App. 4th 726, 751 (2012). The statute states:

Every person who is entitled under any judgment to receive damages based upon a cause of action in contract where the claim was unliquidated, may also recover interest thereon from a date prior to the entry of judgment as the court may, in its discretion, fix, but in no event earlier than the date the action was filed.

Cal. Civ. Code § 3287(b) (emphasis added). "An award of prejudgment interest is not automatic." Lewis C. Nelson & Sons, Inc. v. Clovis Unified Sch. Dist., 90 Cal. App. 4th 64, 69 (2001) (citing N. Oakland Med.Clinic v. Rogers, 65 Cal. App. 4th 824, 829 (1998)). Instead, § 3287(b) allows the trial court to award such interest in situations where concerns for fairness to the debtor dictate such an award. Id.

In exercising its discretion, the Court hereby declines to award Sierra prejudgment interest. Due to the procedural posture of this case, granting Sierra's request would entail awarding close to six years of interest. This matter was originally filed on December 31, 2008. In March of 2009, the Court set the case for trial in February 2011. (ECF No. 20.) Patriotcorrectly points out that at the time this case was filed, the median time interval for disposition of a civil case by trial was 27.4 months. (See Patriot's Opp'n, ECF No. 501 at 3 (citing U.S. District Courts—Median Time Intervals from Filing to Disposition of Civil Cases Terminated, by District and Method of Disposition, During the 12-Month Period Ending March 31, 2009, table C-5 at 62).) The Court originally gave this case a trial date that was twenty-six months from date of filing, which is below the median time. The case was reset multiple times, beginning with a reset from February 2011 to March 2012. (ECF No. 37.) The Court then, sua sponte, continued trial first to July 2012 (ECF No. 185), then to February 2013 (ECF No. 224), and later to July 1, 2013 (ECF No. 245). The July 2013 trial setting was again vacated when Judge England transferred this matter to the undersigned on April 3, 2013 (ECF No. 273), and trial was reset by agreement of the parties to March 10, 2014. Most of the delays in this matter were due to the Court's case load and thus are not attributable to either of the parties.⁴ Accordingly, the Court declines to invoke its discretion to award Sierra prejudgment interest.⁵

II. Sierra's Request for Exemplary Damages⁶

On March 28, 2014, a jury found that Patriot misappropriated Sierra's trade secrets. (Jury Verdict, ECF No. 447.) Sierra is seeking an exemplary damages award of $44.56 million against Patriot Rail Corp./Company LLC and $15 million against Patriot Rail LLC/ Pacific Rail LLC for Patriot's misappropriation of Sierra's trade secrets under the California Uniform Trade Secrets Act ("CUTSA"). (ECF No. 499.) Patriot opposes Sierra's request contending that the conduct Sierra seeks to punish under its trade secrets claim has already been punished by the jury's exemplary damage award as to its intentional interference claim. (Patriot's Opp' n, ECF No. 503 at 4-8.) For the reasons stated below, the Court disagrees and finds that an award for exemplarydamages is warranted.

Punitive damages are not designed to compensate the plaintiff but rather to punish the defendant and deter the defendant and others from committing similar acts. See State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416 (2003); Ferguson v. Lief, Cabraser, Heimann & Bernstein, LLP, 30 Cal. 4th 1037, 1046 (2003). When claims overlap, it is appropriate to punish a defendant's conduct only once. See Chopourian v. Catholic Healthcare W., No. CIV S-09-2972 KJM, 2012 WL 1551728, at *4 (E.D. Cal. Apr. 30, 2012). However, where the claims do not overlap, a plaintiff is entitled to the punitive damages separately assigned to those claims. Id. (finding that plaintiff was due punitive damages on both her defamation and intentional interference claim because the two claims did not overlap).

In the instant case, the elements for the two claims are different. For example, in order to find for Sierra on its intentional interference claim, the jury was required to find that:

1. Sierra and McClellan Business Park were in an economic relationship that probably would have resulted in an economic benefit to Sierra;

2. Patriot knew of the relationship;

3. Patriot engaged in wrongful conduct by making intentional and/or negligent misrepresentations to Sierra with respect to McClellan Business Park;

4. By engaging in this conduct, Patriot intended to disrupt the relationship;

5. The relationship was disrupted;

6. Sierra was harmed; and

7. Patriot's conduct was a substantial factor in causing Sierra's harm.

(Jury Instruction No. 43, ECF No. 442). In contrast, in order for the jury to find Patriot liable for misappropriation of trade secrets, the jury was required to find that:

1. Sierra owned any or all of the following information:

a) Current and potential future customer information;

b) Operational information, including performance reports and financial/income and revenue reports;

c) Service pricing information, including customer carload data, service marketing projections and plans, and profit and cost sharing information;

d) Site design information, including site specification, site plans, and expansion plans; and

e) Future strategy and planning information, including its knowledge of the McClellan Business Park operations;

2. This information was a trade secret at the time it was used by Patriot;

3. Patriot improperly acquired or used any one of these trade secrets;

4. Sierra was harmed or that Patriot was unjustly enriched; and

5. Patriot's acquisition or use was a substantial factor in causing Sierra's harm or Patriot to be unjustly enriched.

(Jury Instruction No. 32, ECF No. 442.) The two claims are based on different facts and legal elements. The fact that there is some overlap in the area of causation or harm does not suffice to make these causes of action based on "identical conduct," as Patriot claims. See Mason v. Oklahoma Tpk. Auth., 115 F.3d 1442, 1460 (10th Cir. 1997) (holding that an award of punitive damages for both a § 1983 claim and a wrongful discharge claim "may not be duplicative at all, but may instead represent the jury's proper effort to punish and deter all the improper conduct underlying the verdict [including the violation of federal law and state public policy]"), overruled on other grounds by TW Telecom Holdings Inc. v. Carolina Internet Ltd., 661 F.3d 495 (10th Cir. 2011); see also Mockler v. Multnomah Cnty., 141 F.3d 1177, at *5 (9th Cir. 1998) (unpublished)⁷ (adopting and applying the holding in Mason and thus rejecting an argument that awards were duplicative, instead finding that the jury's intent to punish the defendant for his disregard of both federal law and state policy was proper). As such, the Court finds that an award of exemplary damages for Sierra's misappropriation of trade secrets claim would not be duplicative and therefore must ascertain the appropriate amount to be awarded.

California Civil Code Section 3426.3(c) provides:

(a) A complainant may recover damages for the actual loss caused by misappropriation. A complainant also may recover for the unjust enrichment caused by misappropriation that is not taken into account in computing damages for actual loss.

(b) If neither damages nor unjust enrichment caused by misappropriation are provable, the court may order payment of a reasonable royalty for no longer than the period of time the use could have been prohibited.

(c) If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award made under subdivision (a) or (b).

To determine the proper measure of exemplary damages within CUTSA's statutory range, California courts consider common law factors traditionally used to determine both whether and to what extent exemplary damages are warranted. Cloud & Assocs., Inc. v....