Saturn Sys. Inc. v. Militare

• Decision Date: 17 February 2011
• Docket Number: No. 07CA2453.,07CA2453.
• Citation: 252 P.3d 516
• Parties: SATURN SYSTEMS, INC., Plaintiff–Appellee,v.Delbert J. MILITARE, a/k/a Del J. Militare, individually and d/b/a Mil–Beau and Mil–Beau, Inc., Defendant–Appellant.
• Court: Colorado Court of Appeals

252 P.3d 516

SATURN SYSTEMS, INC., Plaintiff–Appellee,

v.Delbert J. MILITARE, a/k/a Del J. Militare, individually and d/b/a Mil–Beau and Mil–Beau, Inc., Defendant–Appellant.

No. 07CA2453.

Colorado Court of Appeals, Div. II.

Feb. 17, 2011.

Garlin Driscoll Howard, LLC, Thomas P. Howard, Kenneth R. Morris, Louisville, CO, for Plaintiff–Appellee.Godfrey & Lapuyade, P.C., Steven R. Schumacher, Englewood, CO, for Defendant–Appellant.Opinion by Judge LOEB.

Defendant, Delbert J. Militare, appeals the judgment entered after a bench trial in favor of plaintiff, Saturn Systems, Inc., on its claims of misappropriation of trade secrets and breach of contract. Militare also appeals the trial court's order awarding attorney fees and costs to Saturn. We affirm and remand with directions.

I. Background and Procedural History

Saturn is a debt collection agency that offers numerous types of debt collection services, including recovery of commercial, consumer, medical, government, and retail accounts, both domestically and abroad. According to testimony at trial, since its founding in 1997, Saturn has provided its services to over 1,600 clients, for whom it has processed and helped collect over 120,000 debts.

Evidence at trial showed that Saturn spent significant time and money to develop a proprietary website to provide its clients access to its database of client and debtor information. Thus, Saturn assigns each client a unique username and password that can be used to log in to the website and view real-time information related to that client's account. For example, a client can view a “status report” for its account, which summarizes Saturn's debt recovery to date and tells the client how many pre-purchased debt collection accounts it has available to designate to debtors in default so that Saturn can initiate collection activities. A client can also view the “debtor notes” for its debtors that have entered Saturn's “hardcore” collection phase. Saturn uses the “debtor notes” component of its website to record pending collection efforts, settlement negotiations, and all known personal information for a debtor, such as addresses, bank accounts, and employment history. Because of the confidential nature of the information that can be accessed via its website, Saturn only releases the usernames and passwords to the client and, if needed, to the sales agent assigned to that client's account.

On January 13, 2003, Saturn hired Militare for a sales agent position. The parties entered into a written sales agent agreement (Agreement) that outlined their respective roles. In that regard, Militare agreed to act as an independent contractor with the authority to sell Saturn's services, receive funds on Saturn's behalf, and make sales presentations to prospective clients. Additionally, Militare agreed to provide ongoing customer care to the clients that he signed up for Saturn's services. In return, Saturn agreed to pay Militare a commission on each sale that he made. The Agreement also included the following provisions that are pertinent to this appeal:

(12) Confidentiality: Agent agrees that any client lists, sales materials and proprietary information will be considered confidential and not revealed to outside persons with the exception of clients and prospective clients during the sales or service of Company's services and that he will not solicit Company clients on behalf of his/her self or any other entity. This provision is to last for the duration of this agreement and for 1 year following the termination of this agreement.

....

(14) Attorney Fees: In the event that it is necessary for either party to bring legal action against the other to remedy any breach of this agreement, both parties agree that the prevailing party will be entitled to reasonable, but not less than actual, attorney's fees and other costs to which that party may be entitled and that these cost [sic] will be paid by the losing party.

Although the confidentiality provision of the Agreement does not contain a specific geographic limitation, the parties agreed at trial (and the trial court found) that its geographic scope was limited to Colorado.

As a Saturn sales agent, Militare was provided access to and was taught how to use the confidential database on the Saturn website.

Saturn terminated the Agreement with Militare approximately two years later by proper written notice. The effective date of the termination was January 18, 2005. Shortly thereafter, on January 31, 2005, Militare accepted a position with CB Solutions, LLC, a Texas-based company and a direct competitor of Saturn.

In March 2005, while working for CB Solutions, Militare personally visited Premier Members Federal Credit Union, a longtime Saturn client that still had unused pre-purchased debt collection accounts available with Saturn. Militare admitted at trial that he contacted Premier on behalf of CB Solutions to win the Premier account. Although the parties disputed the details of Militare's visit, the record indicates that Premier contacted Saturn shortly after the visit to request a new password for its Saturn account.

Upon learning of Militare's visit to Premier, in early April 2005, Saturn retained David Travis, a computer and website specialist, to investigate suspected unauthorized access of Saturn's website by Militare. Travis's investigation confirmed Saturn's suspicions. According to Travis, Militare repeatedly accessed fifteen client accounts, including the debtor notes associated with those accounts, subsequent to his termination from Saturn. Travis found that in doing so, Militare reviewed a total of seventy-two privileged and confidential Saturn web pages.

In March and April 2005, Saturn also sent cease and desist letters to Militare demanding that he stop using its confidential data and soliciting Saturn clients, in violation of the Agreement and Colorado's trade secret laws.

On May 6, 2005, Saturn filed its complaint in this action, alleging claims of misappropriation of trade secrets and breach of contract and seeking damages and injunctive relief. The parties submitted cross-motions for summary judgment, which were denied, and the case was then tried to the court on September 11 and 12, 2007.

After the close of evidence, Militare stipulated to the injunctive relief requested by Saturn on its trade secrets claim, and the court entered a stipulated order for injunctive relief on October 1, 2007. That order is not a subject of this appeal.

On October 31, 2007, the court entered a written order of judgment in Saturn's favor, finding Militare liable for misappropriation of Saturn's trade secrets and breach of the nondisclosure and nonsolicitation clauses set forth in the confidentiality provision of the Agreement. The court awarded Saturn $525 in damages for the cost of Travis's investigation as well as attorney fees and costs under the fee-shifting provision of the Agreement. After briefing by the parties on the amount of attorney fees and costs, the court entered an order on January 3, 2008, awarding Saturn $70,619.03 in attorney fees and $2,482.04 in costs. Militare timely appealed from the court's October 31, 2007 judgment and the January 3, 2008 attorney fees order.

II. Standard of Review

In an appeal from a judgment entered after a trial to the court, our review of the court's judgment is a mixed question of fact and law. Because the credibility of the witnesses and the sufficiency, probative effect, and weight of all the evidence, plus the inferences and conclusions to be drawn therefrom, are all within the province of the trial court, we will not disturb the court's findings of fact unless they are so clearly erroneous as to find no support in the record. M.D.C./Wood, Inc. v. Mortimer, 866 P.2d 1380, 1383 (Colo.1994); Page v. Clark, 197 Colo. 306, 313, 592 P.2d 792, 796 (1979); Skyland Metro. Dist. v. Mountain W. Enter., LLC, 184 P.3d 106, 115 (Colo.App.2007); Cottonwood Hill, Inc. v. Ansay, 709 P.2d 62, 64 (Colo.App.1985). It is not our role as a reviewing court to decide the facts, and we will not substitute our judgment for that of the trier of fact. Page, 197 Colo. at 313, 592 P.2d at 796; Martinez v. Reg'l Transp. Dist., 832 P.2d 1060, 1061 (Colo.App.1992). While we review a trial court's factual findings under the clear error standard, we review its legal conclusions and application of the governing statutory standards de novo. Joseph v. Equity Edge, LLC, 192 P.3d 573, 577 (Colo.App.2008); DiCocco v. Nat'l Gen. Ins. Co., 140 P.3d 314, 316 (Colo.App.2006).

III. Misappropriation of Trade Secrets

Militare contends the trial court erred by finding that he misappropriated Saturn's trade secrets because there was insufficient evidence to show that (1) Saturn possessed valid trade secrets, and (2) Militare misappropriated Saturn's trade secrets. We reject these contentions in turn.

A. Trade Secrets Finding

First, Militare contends there is insufficient evidence to support the trial court's finding that the client and debtor information contained within Saturn's proprietary website database qualifies as trade secrets under Colorado law. We disagree.

What constitutes a trade secret is a question of fact for the trial court. Network Telecomms., Inc. v. Boor–Crepeau, 790 P.2d 901, 902 (Colo.App.1990). Accordingly, if the court's trade secret determination is supported by the record, we will not disturb it on appeal. See Page, 197 Colo. at 313, 592 P.2d at 796.

The Colorado Uniform Trade Secrets Act (UTSA), sections 7–74–101 to –110, C.R.S.2010, defines a trade secret as:

[T]he whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value.

§ 7–74–102(4), C.R.S.2010.

Colorado courts may consider several factors to...