Steves & Sons, Inc. v. Jeld-Wen, Inc.
| Decision Date | 10 May 2018 |
| Docket Number | Civil Action No. 3:16-cv-545 |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | STEVES AND SONS, INC., Plaintiff, v. JELD-WEN, INC., Defendant. |
PUBLIC REDACTED VERSION
This matter is before the Court on PLAINTIFF STEVES AND SONS, INC.'S MOTION FOR SUMMARY JUDGMENT ON JELD-WEN COUNTERCLAIMS (ECF No. 885), to the extent that Steves and Sons, Inc. ("Steves") seeks summary judgment on JELD-WEN, Inc.'s ("JELD-WEN") federal and Texas trade secret misappropriation damages claims. The motion was denied as to those arguments made by Steves in its original briefing, but the Court ordered supplemental briefing as to Steves' request for summary judgment on the basis that JELD-WEN's damages expert failed to apportion damages between specific trade secrets. See ECF No. 1290. For the reasons set forth below, the motion was also denied on the grounds raised in the supplemental briefs. See ECF No. 1536.
The background underlying this dispute is described at length in the Court's recent opinion concerning summary judgment on other aspects of JELD-WEN's counterclaims. See Summary Judgment Op. (ECF No. 1424) at 2-16. However, some additional procedural details are relevant to this motion.
JELD-WEN retained a damages expert, John Jarosz ("Jarosz"), in connection with its counterclaims. JELD-WEN served Jaros'z opening report ("the Jarosz Report") on November 3, 2017. See ECF No. 1124-2 (Under Seal). The Report's calculations were based on JELD-WEN's then-operative statement of trade secrets to be asserted at trial, id. at 62 n.310, which had been filed on November 2, Summary Judgment Op. at 12. On November 29, JELD-WEN filed an amended statement of trade secrets to be asserted at trial ("the Amended Trial Statement"), which added two rows of information. Id. at 12-13. On December 22, JELD-WEN served Jarosz's rebuttal report ("the Jarosz Rebuttal Report"), which responded to the opinions expressed by Steves' damages expert, Michael Wallace ("Wallace"). See Jarosz Rebuttal Report (ECF No. 1124-3) (Under Seal). The Rebuttal Report relied on the information contained in the Amended Trial Statement.1 Id. ¶ 13 n.10. Jarosz was then deposed about the substance of his reports on January 12, 2018, while the Amended Trial Statement was still in effect. Jarosz Dep. (ECF No. 884-18) (Under Seal) at 1.
On March 21, 2018, in response to the Court's order, JELD-WEN filed an updated statement of trade secrets to be asserted at trial ("the Second Amended Trial Statement"), which separated the rows of information from the Amended Trial Statement into sixty-seven individual trade secrets. Summary Judgment Op. at 15. A redlined version of the Second Amended Trial Statement, provided by JELD-WEN at the Court's request, showed that information constituting approximately sixteen trade secrets that were in the Amended Trial Statement had been removed in the Second Amended Trial Statement.2 See ECF No. 1304-3 (Under Seal). As a result, the trade secrets for which JELD-WEN will seek damages at trial are different than those underlying Jarosz's reports and testimony.
Under Fed. R. Civ. P. 56, a court "shall grant summary judgment if the movant shows that there is no genuine dispute asto any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Rule 56 requires the entry of summary judgment "after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). For a court to enter summary judgment, "there can be no genuine issue as to any material fact, since a complete failure of proof concerning an. essential element of the nonmoving party's case renders all other facts immaterial." Id. at 323 (internal quotations omitted).
When reviewing a motion for summary judgment, a court must interpret the facts and any inferences drawn therefrom in the light most favorable to the nonmoving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Lee v. Town of Seaboard, 863 F.3d 323, 327 (4th Cir. 2017). To successfully oppose a motion for summary judgment, the nonmoving party must demonstrate to the court that there are specific facts that would create a genuine issue for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). However, "'[c]onclusory or speculative allegations do not suffice' to oppose a properly supported motion for summary judgment, 'nor does a mere scintilla of evidence.'" Matherly v.Andrews, 859 F.3d 264, 280 (4th Cir. 2017) (quoting Thompson v. Potomac Elec. Power Co., 312 F.3d 645, 649 (4th Cir. 2002)). "Where . . . the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, disposition by summary judgment is appropriate." United States v. Lee, 943 F.2d 366, 368 (4th Cir. 1991).
Steves seeks summary judgment on JELD-WEN's damages claims under the federal Defend Trade Secrets Act ("DTSA") and the Texas Uniform Trade Secrets Act ("TUTSA") for two primary reasons. First, Steves asserts that Jarosz's damages scenarios are speculative and inconsistent with JELD-WEN's allegations and Steves' conduct. Second, Steves contends that the removal of numerous trade secrets in the Second Amended Trial Statement makes Jarosz's calculations unreliable because he valued damages collectively instead of allocating them between specific trade secrets.3
Damages are available under both the DTSA and the TUTSA. The DTSA permits a plaintiff to seek damages: (1) "for actual loss caused by the misappropriation," and (2) "for any unjustenrichment caused by the misappropriation . . . that is not addressed in computing damages for actual loss"; or (3) "in lieu of damages measured by [those] methods, the damages . . . measured by imposition of liability for a reasonable royalty for the misappropriator's unauthorized disclosure or use of the trade secret." 18 U.S.C. § 1836(b)(3)(B). The same damages are recoverable under the TUTSA. Tex. Civ. Prac. & Rem. Code § 134A.004(a).
As discussed, JELD-WEN initially sought damages for actual loss and/or unjust enrichment, and alternatively sought damages reflecting a reasonable royalty based on Steves' past use of the misappropriated trade secrets. However, Jarosz testified that, although JELD-WEN had suffered some actual loss, he did not have enough information to calculate those losses with a reasonable degree of certainty. Jarosz Dep. at 44:19-45:5. Accordingly, JELD-WEN now seeks damages only for Steves' unjust enrichment or, alternatively, a reasonable royalty based on Steves' use of JELD-WEN's trade secrets.
Sperry Rand Corp. v. A-T-O, Inc., 447 F.2d 1387, 1392 (4th Cir. 1971). However, Sperry Rand has been supplanted by the more elastic approach called for by the UTSA, which permits recovery of several types of damages. See Am. Sales, 862 F. Supp. at 1479; Sw. Energy Prod. Co. v. Berry-Helfand, 491 S.W.3d 699, 710-11 (Tex. 2016). This flexibility is not unlimited; one of the leading cases on damages for trade secret misappropriation, University Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518 (5th Cir. 1974), recognizes that "[t]he law governing protection of trade secrets essentially is designed to regulate unfair business competition, and is not a substitute for criminal laws against theft or other civil remedies for conversion." Id. at 539. However, University Computing also "stressed that *each case is controlled by its own peculiar facts and circumstances,' and that courts should remain 'flexible and imaginative'" when determining proper damages. Am. Sales, 862 F. Supp. at 1479(quoting Univ. Computing, 504 F.2d at 539). For that reason, even where "damages are uncertain, . . . that uncertainty should [not] preclude recovery; the plaintiff should be afforded every opportunity to prove damages once misappropriation is shown"—assuming, of course, that the plaintiff "introduces evidence by which the jury can value the rights the defendant has obtained." Univ. Computing, 504 F.2d at 539, 545.
Consistent with this framework, Jarosz computed damages under three different scenarios. First, Jarosz calculated Steves' gains in the event that it uses the trade secrets to build a doorskin manufacturing plant ("Scenario One"). In that case, Jarosz theorizes, Steves' misappropriation would allow it to "to increase the plant's profitability through a reduction in its per skin costs." See Jarosz Report ¶ 157. This increased profit would result from Steves' possession of trade secrets about important manufacturing components like wood thickness, resin, and primer, which would allow Steves to spend less on each element than it would otherwise. To realize these cost savings without the misappropriation, Steves would need to devote years of research and development to doorskin manufacturing, as JELD-WEN has. S...
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