Perdue Farms, Inc. v. Hook

• Decision Date: 05 January 2001
• Docket Number: No. 2D99-2310.,2D99-2310.
• Citation: 777 So.2d 1047
• Parties: PERDUE FARMS INCORPORATED, a foreign corporation, Appellant, v. Dennis P. HOOK, an individual, and H & N Foods, Inc., a Florida corporation, Appellees.
• Court: Florida District Court of Appeals

777 So.2d 1047

PERDUE FARMS INCORPORATED, a foreign corporation, Appellant, v. Dennis P. HOOK, an individual, and H & N Foods, Inc., a Florida corporation, Appellees.

No. 2D99-2310.

District Court of Appeal of Florida, Second District.

January 5, 2001.

Stephen H. Grimes, Stacy D. Blank, and Joseph H. Varner of Holland & Knight LLP, Tampa, and, Broughton M. Earnest and Quincy M. Crawford of Piper Marbury Rudnick & Wolfe LLP, Baltimore, MD, for Appellant.

Stuart C. Markman and Katherine Earle Yanes of Kynes, Markman & Felman, P.A., Tampa, and Mahlon H. Barlow, III, and Paul D. Watson of Bush, Ross, Gardner, Warren & Rudy, P.A., Tampa, for Appellees.

PATTERSON, Chief Judge.

Perdue Farms, Inc., appeals from a $48,646,602.75 final judgment in favor of Dennis Hook and H & N Foods, Inc. (Hook). Hook, the sole officer and shareholder of H & N Foods, Inc., was awarded damages under the Florida Uniform Trade Secrets Act (FUTSA), chapter 688, Florida Statutes (1993), for Perdue's wrongful use and disclosure of Hook's process for preparing chicken. We affirm in part and reverse in part.

Hook developed a unique process for cooking chicken which involved placing specially seasoned pieces of chicken in a vacuum-sealed bag (commonly referred to in the industry as "sous vide"), refrigerating the chicken after cooking, and then reheating the chicken using a microwave in combination with one of four other types of ovens: a pizza oven, a deep fryer, a convection oven, or a conventional broiler oven. The principal advantage of this process was that a restaurant could prepare and serve a chicken product with the appearance of rotisserie chicken in less than ten minutes.

In 1991 Hook, in concert with George Rice, a consultant in the food service industry, approached Pizza Hut, Inc., with the idea of marketing his product. Pizza Hut showed interest and on April 20, 1992, entered into a letter agreement (Project Feathers) with Hook, Rice, and their corporations to explore the possibility of selling the product in Pizza Hut Stores. The agreement contained a confidentiality provision.

Pizza Hut and Hook then contacted Perdue as a company which could process and supply sufficient quantities of chicken to Pizza Hut if Project Feathers went forward. On March 30, 1993, Pizza Hut and Perdue entered into a confidentiality agreement pertaining to Hook's process. The agreement related to Pizza Hut's "Proprietary Information," including "without limitation, certain specifications and formulations for the purpose of Seasoning, process, and product development work related to the development of oven roasted chicken." The agreement specifically excluded information in the public domain, information already known to Perdue, or information that Perdue obtained from a third party. Hook claimed to be a third-party beneficiary of this agreement. In April 1993, Hook went to Perdue's plant in Bridgewater, Virginia, where he orally described the process. Perdue was never given a written description of the process and claims that the only information Hook described as confidential was the seasoning formula. In testing, Perdue was not able to reheat the cooked chicken in less than ten minutes using Hook's rethermalization methods. Perdue so informed Pizza Hut. In January 1994, Pizza Hut conducted a test market of the product and determined that the sale of pizza was more profitable than the sale of chicken. Thereafter, Pizza Hut terminated the agreement with Hook.

In January 1995, Hook executed an agreement with Pepsico Restaurants International (PRI), wherein Hook granted PRI the exclusive right to use his process in any of its restaurants outside the United States through March 1996, and the nonexclusive right to use the process thereafter anywhere in the world, all subject to the payment of royalties. In return for this agreement, Hook was to receive $300,000 in consulting fees through March 1996. PRI never used Hook's product in its restaurants, paid Hook no royalties, and elected not to continue the exclusive use portion of the agreement beyond March 1996. PRI paid Hook the consulting fees.

Hook attempted, unsuccessfully, to market his product through other companies within the United States. Shortly after March 1996, Hook entered into an agreement with the Doux Company, a company in the business of processing and supplying chicken in France. The agreement gave Doux the exclusive right to use Hook's process in Europe, Russia, the Middle East, and South Africa. Doux paid Hook between $50,000 and $100,000 in fees and then bought the process outright for $85,000.

Contemporaneous with these events, in October 1993, Perdue began development of a product which eventually became known as TenderReady. An internal Perdue memorandum described the product as an eight-piece cut chicken "marinated & seasoned with Perdue seasoning; utilizing the cook-in-the Bag process..... to be similar to Pizza Hut or TenderSelect new formula but different so as not to jeopardize proprietary P.H. [Pizza Hut] formula." "TenderSelect" referred to a fully-cooked frozen chicken product Perdue previously marketed. The "proprietary P.H. formula" referred to Hook's seasoning. Perdue began advertising and selling the Tender-Ready chicken product in February 1995. The development and sale of this product forms the basis for this lawsuit.

In February 1997, Hook sued Perdue, asserting causes of action for violations of FUTSA, breach of the two confidentiality agreements, and an equitable accounting. Trial began on March 22, 1999. It was disputed as to whether Hook's process was previously known to Perdue in the 1980s. Perdue offered testimony that the process was not new or unique and was within the public domain of information. Hook presented testimony to the contrary. The jury found that Hook's process was a trade secret which Perdue misappropriated. The jury determined that Hook was a third-party beneficiary of the Perdue-Pizza Hut confidentiality agreement and that Perdue breached the agreement. The jury further determined that the misappropriation was "willful and malicious" and that Hook's damages "accrued" on October 29, 1993, the date Perdue began development of TenderReady. It awarded $25,000,000 in actual damages together with $2,000,000 in damages for unjust enrichment (the amount of development costs the jury determined Perdue saved by using Hook's process).

In posttrial proceedings, the trial court awarded Hook $6,750,000 in punitive damages and assessed $14,896,602.74 in pre-judgment interest.

EVIDENTIARY ERRORS

Perdue challenges eleven of the trial court's evidentiary rulings. We have examined each of these issues and, although we consider some of these rulings to be "close calls," we conclude that they do not constitute an abuse of the trial court's discretion. See Klose v. Coastal Emergency Servs. of Ft. Lauderdale, Inc., 673 So.2d 81 (Fla. 4th DCA 1996) (holding that a trial court's decision addressing the admissibility of evidence and the examination and cross-examination of witness are within the trial court's sound discretion).

ACTUAL DAMAGES

The April 20, 1992, agreement between Hook and Pizza Hut provided for the payment of royalties to Hook based on Pizza Hut's sales of his product. The agreement included three phases. In phase one, the development phase, Pizza Hut agreed to pay Hook 3.6¢ per pound of chicken it sold for up to eighteen months. During phase one, Pizza Hut could terminate the agreement by written notice. During phase two, the implementation phase, Pizza Hut would continue to pay Hook 3.6¢ per pound for two years with a cap of $5,000,000 in royalties. Phase three, the earn-out phase, was to last for three years commencing on the termination of phase two. During this phase, Pizza Hut was to pay Hook a royalty of 2.7¢ per pound for the first year, 1.8¢ for the second, and .9¢ per pound for the third and last year. The total of royalty payments for phase three was capped at $15,000,000. With Pizza Hut's permission, Hook entered into a similar companion agreement with Kentucky Fried Chicken (KFC), which was capped at $5,000,000 in royalties. Both agreements were terminated within phase one, and Hook received no royalty payment from either Pizza Hut or KFC.

These agreements provided the springboard for the testimony of Richard T. Good, Hook's expert on damages. Good is a food service marketing consultant with considerable experience in projecting the value of new food products for major food service providers. Using a percent of sales formula, he projected the value of Hook's product if sold through a number of fast food chains. He concluded that the product could generate $8,000,000 in royalties per year over a five-year life expectancy for product sales for a total royalty value of $40,000,000. He further opined that with the availability of Perdue's TenderReady product on the market that the royalty value of Hook's product would be zero. Good did not offer an opinion as to the precise value of the Hook trade secret on any given date.

Perdue presented the testimony of Sarah Palisi, an eminently qualified expert in the field of food technology and marketing. Ms. Palisi testified that Hook's process was duplicative of an existing patent, was a compound of procedures readily known in the public domain, and was not new or unique. In other words, it was not a trade secret. What was missing from Ms. Palisi's testimony was anything of consequence on the issue of value and damages. Ms. Palisi did say that she did not think that the presence of the TenderReady product in the marketplace inhibited Hook from attempting further marketing of his product. On cross-examination, she testified that she disagreed with Good's opinion of value, but that she personally could not give a value as to the process. Thus, the jury was provided with Hook's valuation of the process and was given no alternative values upon which to determine the amount of...