Systrends, Inc. v. Group 8760, LLC

• Decision Date: 13 October 2006
• Docket Number: 1050058.,1041548.,1041930.,1041569.,1041795.
• Citation: 959 So.2d 1052
• Parties: SYSTRENDS, INC. v. GROUP 8760, LLC. Richard J. Brooks v. Group 8760, LLC. Group 8760, LLC v. Richard J. Brooks and Systrends, Inc.
• Court: Alabama Supreme Court

959 So.2d 1052

SYSTRENDS, INC. v. GROUP 8760, LLC.

Richard J. Brooks v. Group 8760, LLC.

Group 8760, LLC v. Richard J. Brooks and Systrends, Inc.

1041548.

1041795.

1041569.

1041930.

1050058.

Supreme Court of Alabama.

October 13, 2006.

Rehearing Applications Denied December 15, 2006.

Steven A. Benefield and Deborah Alley Smith of Christian & Small, LLP, Birmingham, for Systrends, Inc.

J. Paul Zimmerman, Helena, for Richard J. Brooks.

Patrick C. Cooper and M. Lee Huffaker of Maynard, Cooper & Gale, P.C., Birmingham, for Group 8760, LLC.

HARWOOD, Justice.

These five consolidated appeals involve two filed by the defendant Systrends, Inc., two filed by the defendant Richard Brooks, and one filed by the plaintiff Group 8760, LLC ("Group 8760" or "8760").

The posttrial events giving rise to these appeals are accurately summarized by Brooks and Systrends in their respective but identical explanations of those events in their briefs, as follows:

"The trial court entered judgment on a jury verdict on February 10, 2005. Systrends and Brooks timely filed post-judgment motions on March 11, 2005. Group 8760 filed a motion for permanent injunction and a motion for attorneys' fees. By order signed on May 31, 2005, and entered on June 1, 2005, the trial court granted a new trial on the claims against Systrends and Brooks for misappropriation of trade secrets, denied Brooks' motion for new trial on the breach of fiduciary duty claim, conditioned upon 8760's refusal of a remittitur, and denied defendants' post-judgment motions in all other respects. This ruling effectively denied or rendered moot 8760's motion for a permanent injunction and motion for attorneys fees, both of which were premised upon the alleged misappropriation of trade secrets.

"On June 1, 2005, 8760 filed a motion to alter, amend or vacate the order granting a new trial. Group 8760 also filed a Consent to Remittitur consenting to the remittitur of the punitive damages on the breach of fiduciary duty claim and purporting to consent to a remittitur (that had not been ordered) of punitive damages on the trade secrets claim. By order entered July 5, 2005, the court granted 8760's motion, vacated the portion of its prior order granting a new trial on the trade secrets claim and ordered a remittitur of the punitive damages on the trade secrets claim.

"On July 7th and 8th respectively, Systrends and Brooks filed motions to alter, amend or vacate the court's order entered on July 5, 2005. Systrends and Brooks timely filed their initial notices of appeal on July 8, 2005 (Case Nos. 1041548 and 1041569 respectively), within 42 days of the entry of the initial order on their post-judgment motions and the order on 8760's subsequent motion, and advised the Clerk of Court that the appeal should be held in abeyance pending disposition on their July 7th and 8th motions.

"On August 3, 2005, the trial court denied Systrends' and Brooks' July 7th and 8th motions. Pursuant to Rule 4, Ala. R.App. P., the judgment became final upon the disposition of these motions, and the notice of appeal became effective.

"By order dated August 11, 2005, however, the trial court purported to re-enter judgment in accordance with the jury's verdicts, as remitted. This order also included [Rule] 54(b)[, Ala. R. Civ. P.,] final judgment language. On August 23, 2005, and September 15, 2005, respectively, Systrends and Brooks timely filed notices of appeal from the August 11, 2005, judgment (Case Nos. 1041795 and 1041930).

"[The defendants believe] that the February 10, 2005, judgment became final after the court disposed of Systrends' and Brooks' July 7th and 8th motions to alter, amend or vacate the order entered on July 5, 2005, which was the last pending post-judgment motion. Group 8760's request for attorneys fees and an injunction were denied or rendered moot by the granting of a new trial on the trade secrets claim, and those motions were not renewed after the new trial order was set aside and the judgment effectively reinstated. However, if the February 10, 2005, judgment was not a final judgment, the order entered on August 11, 2005, which included 54(b) language, was final and appealable. In either case, this Court has jurisdiction over Systrends' and Brooks' appeals pursuant to Ala.Code 1975, § 12-22-2."

(Systrends' principal brief, pp. v-viii; Brooks's principal brief, pp. vi-ix.)

None of the parties has discussed further which appeal out of the pair of appeals each defendant has taken should be recognized as the appropriate one, but we agree with the defendants that, in any event, this Court has jurisdiction of a properly perfected appeal by each defendant. Therefore, we will simply refer to, and dispose of, "Systrends' appeal" and "Brooks's appeal," without attempting to determine which appeal in each pair is the procedurally appropriate one.

As last amended, Group 8760's complaint asserted that Brooks, its former employee, had breached the restrictive covenant of his employment contract with Group 8760, had breached his fiduciary duty to Group 8760, and had misappropriated trade secrets of Group 8760 in violation of the Alabama Trade Secrets Act, §§ 8-27-1 through 8-27-6, Ala.Code 1975 (hereinafter sometimes "the ATSA"). Group 8760 claimed that Systrends, as Brooks subsequent employer, had interfered with Group 8760's employment contract with Brooks and had also violated the ATSA.

On the eve of the setting of the first trial in this case, Brooks filed a voluntary petition in bankruptcy, thus occasioning under the United States Bankruptcy Code an automatic stay of the case. After the bankruptcy court lifted that stay, the case proceeded to jury trial on January 24, 2005. Midway through the trial the bankruptcy court entered an order "discharging" Brooks's debts. The jury returned verdicts on February 9, 2005, finding in favor of Group 8760 and against the defendants on all claims and awarding damages as follows: against Systrends for misappropriation of trade secrets, $5,900,000 in compensatory damages and $9,400,000 in punitive damages; and for intentional interference with contractual relations, $1,000,000 in compensatory damages and $3,200,000 in punitive damages, for a total award against Systrends of $19,500,000; against Brooks for breach of contract, $150,000 in compensatory damages; for breach of fiduciary duty, $252,500 in compensatory damages and $1,400,000 in punitive damages; and for misappropriation of trade secrets, $1,750,000 in compensatory damages and $4,000,000 in punitive damages, for a total award against Brooks of $7,552,500.

Standard of Review

In reviewing the denial of a motion for a judgment as a matter of law or the denial of a motion for a new trail, we consider the evidence in a light most favorable to the prevailing party, resolving all factual disputes in its favor. Alabama Power Co. v. Aldridge, 854 So.2d 554 (Ala. 2002); Alabama Great Southern R.R. v. Johnson, 874 So.2d 517 (Ala.2003). Viewed under that standard, the facts pertinent to these appeals are as follows.

Facts

Brooks, a computer programmer, began creating software in the early 1990s for conducting commercial transactions over the Internet. By 1996, he was developing software that could be used to conduct such transactions within the energy industry. This software, as used in that industry, is referred to as "GISB EDM" software.

GISB is an acronym for the Gas Industry Standards Board,¹ a consortium of entities and individuals that promulgates standards by which companies in the energy industry engage in commercial trades and transactions involving both natural gas and electricity. EDM is an acronym for electronic delivery mechanism, which is the specific technology used to accomplish those transactions. GISB EDM software, then, is software that is capable of conducting commercial business electronically under the standards promulgated by GISB. The Federal Energy Regulatory Commission requires that entities use GISB EDM-compliant software to conduct transactions involving certain interstate natural-gas pipelines. 18 C.F.R. § 284.12. Brooks became so proficient with those standards that in 1998 he was elected co-chair of the GISB committee charged with drafting and revising the EDM standards, and, as co-chair, he largely wrote the EDM standards.

In 1996, Brooks cofounded Group 8760, which was headquartered in Birmingham, and entered into an employment agreement with the company to serve as its chief technical officer. Another cofounder, John Williams, was to serve as president and chief executive officer. Brooks's work at Group 8760 focused upon developing, maintaining, and intermittently upgrading a version of GISB EDM software for use by utilities. After approximately four years of work dedicated to that end, Group 8760 placed on the market its product, originally named GISBAgent, and later, during the time relevant to this appeal, InsideAgent. As of 2001, InsideAgent was one of five commercially marketed versions of GISB EDM software; at the time of trial, four such software packages were sold commercially.

Brooks's employment agreement with Group 8760 contained a section entitled "Non-competition Agreement and Partial Restraint of Trade." That section provided that "during the term of his employment and for one (1) year following such employment, . . . [Brooks] shall not, without the prior consent of [Group 8760], directly or indirectly, engage in any similar or related business in competition with [Group 8760]" and described "the territory within which [Group 8760's] business is performed" as "the entire world." That section further provided that for the same one-year period Brooks would not

"directly or indirectly, solicit or divert business from, or attempt to convert to other methods of using the same or similar services provided by [Group 8760] to any of [Group 8760's] clients, either for his own benefit or for the benefit of any other person, partnership,...