TGC CORP. v. HTM SPORTS, BV

• Decision Date: 25 April 1995
• Docket Number: No. 1:92-cv-593.,1:92-cv-593.
• Citation: 896 F. Supp. 751
• Parties: TGC CORPORATION, Plaintiff, v. HTM SPORTS, B.V., a Netherlands Corporation, d/b/a Head Golf, Division of HTM Sports, B.V., and Head Sports, Inc., a Delaware Corporation, d/b/a Head Golf, Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

896 F. Supp. 751

TGC CORPORATION, Plaintiff, v. HTM SPORTS, B.V., a Netherlands Corporation, d/b/a Head Golf, Division of HTM Sports, B.V., and Head Sports, Inc., a Delaware Corporation, d/b/a Head Golf, Defendants.

No. 1:92-cv-593.

United States District Court, E.D. Tennessee.

April 25, 1995.

COPYRIGHT MATERIAL OMITTED

Andy D. Lewis, Chattanooga, TN, for plaintiff.

Shelby R. Grubbs, C. Crews Townsend, Chattanooga, TN, for defendants.

MEMORANDUM

EDGAR, District Judge.

I.

This case went to trial on two causes of action. The first cause of action is the claim of plaintiff TGC Corporation ("TGC") that defendants Head Sports, Inc. and HTM Sports, B.V. ("Head") breached a letter agreement between the parties dated November 8, 1990. The second cause of action is TGC's state tort claim that Head misappropriated trade secrets. Both claims were tried together.

The contract cause of action was reserved for decision by the Court without a jury. The Court's decision on this claim is embodied in a memorandum opinion filed on March 22, 1995, resulting in a judgment against Head in the amount of $222,647.85 on the contract claim. The trade secrets misappropriation claim, however, was tried to a jury with the result being a verdict against Head for $475,000 in compensatory damages, $24,938 in prejudgment interest, and $1,230,000 in punitive damages, a total of $1,729,938. The Court's decision on TGC's contract claim and the jury's verdict are both embodied in a judgment entered on March 22, 1995, in the total amount of $1,952,585.85.

This case is now before the Court on Head's motion for judgment as a matter of law pursuant to Fed.R.Civ.P. 50 on TGC's trade secrets misappropriation claim and to amend the judgment pursuant to Fed. R.Civ.P. 52 on TGC's breach of contract claim. In the alternative, Head moves for a new trial under Fed.R.Civ.P. 59. (Court File No. 128).

II.

The standard for considering a motion for judgment as a matter of law under Fed.R.Civ.P. 50 in diversity cases is the state standard for a directed verdict. Arms v. State Farm Fire and Casualty Co., 731 F.2d 1245, 1248 (6th Cir.1984). That standard in Tennessee requires the trial court to:

Take the strongest legitimate view of the evidence in favor of the opponent of the motion, allow all reasonable inferences in his or her favor, discard all countervailing evidence, and deny the motion where there is any doubt as to the conclusions to be draw sic from the whole evidence. A verdict should not be directed during, or after, trial except where a reasonable mind could draw but one conclusion.

Id. (quoting Holmes v. Wilson, 551 S.W.2d 682, 685 (Tenn.1977)).

Fed.R.Civ.P. 52 governs the procedures relating to claims tried without a jury or with an advisory jury. Under Rule 52(b), a party may move the Court to amend its findings or make additional findings and to amend the judgment accordingly. A motion to amend under Rule 52(b) may be made along with a motion for a new trial pursuant to Fed. R.Civ.P. 59. Id.

The standard for considering a Fed.R.Civ.P. 59 motion for a new trial in diversity cases is a federal standard. Davis v. Jellico Community Hosp. Inc., 912 F.2d 129, 137 (6th Cir.1990); Arms, 731 F.2d at 1248 n. 2. With respect to claims tried before a jury, the Court may grant a new trial where it is convinced that the verdict is against the clear weight of the evidence. Bruner v. Dunaway, 684 F.2d 422, 425 (6th Cir.1982), cert. denied, 459 U.S. 1171, 103 S.Ct. 816, 74 L.Ed.2d 1014 (1983). With respect to claims tried before the Court, the Court may grant a new trial where it concludes that it has made a "`manifest error of law or mistake of fact'" and that "`substantial reasons'" exist for setting aside the judgment. Hager v. Paul Revere Life Ins. Co., 489 F.Supp. 317, 321 (E.D.Tenn.1977) (quoting CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 2804, at 37 (1973)).

III.

The procedural history of this case is important. TGC filed this case on December 18, 1992, as strictly a contract suit against Head on the November 8, 1990 licensing agreement. On January 12, 1994, TGC was permitted to amend its complaint to add additional causes of action. These included (insofar as the Court was able to decipher them) (1) unfair competition by "misappropriation of trade secrets"; (2) fraud and deceit in the misappropriation of trade secrets; and (3) unfair competition and "trademark infringement by marking and/or styling unlicensed products in such a manner as to create confusion or the likelihood thereof in the minds of consumers." The Court has considered this third claim as one asserting that Head infringed TGC's trademark and "trade dress." On December 8, 1994, the complaint was again amended to seek injunctive relief.

On June 27, 1994, the Court, on Head's motion for summary judgment, dismissed what amounted to TGC's claims for trademark and trade dress infringement along with certain other claims. The trade dress claim was dismissed on the ground that the purported features of the golf and racquetball glove designed by George T. Tepley and George L. Tepley of TGC were functional and thus not entitled to trade dress protection. (Court File Nos. 69, 70); see Esercizio v. Roberts, 944 F.2d 1235, 1239 (6th Cir. 1991), cert. denied, ___ U.S. ___, 112 S.Ct. 3028, 120 L.Ed.2d 899 (1992). Remaining in the case were plaintiff's claims for (1) breach of contract, and (2) misappropriation of trade secrets.

IV.

Taking the strongest legitimate view of the evidence in favor of TGC, what follows is a chronology of the facts in this case as they relate particularly to TGC's trade secrets misappropriation claim. This factual recitation will have a different focus than the findings of fact which this Court has already made in connection with TGC's breach of contract claim, but will of necessity duplicate those findings in some respects. The Court's findings on the contract claim are set forth in the Court's memorandum opinion of March 22, 1995 (Court File No. 126).

George L. Tepley worked for many years for C.D. Genter Company ("C.D. Genter") (now GenCo), a small company in Chattanooga, Tennessee that makes, and has long made, various types of work gloves. These gloves have a "seamless palm" in that, unlike some other glove designs, there are no seams in the palm of the glove where the thumb is sewn to the palm. These work gloves have a "gunn cut," which can be observed in a seam that cuts across the palm side of the base of the middle and ring fingers. All fingers are sewn together with just one seam and two pieces of leather (front and back).

In 1988, George L. Tepley was issued U.S. Patent No. 4,751,750 for a "working-hand glove." In 1989, Mr. Tepley, along with his son, George T. Tepley, a golf enthusiast, was issued U.S. Patent No. 4,850,053, also a patent for a working-hand glove. The workinghand glove was described in the most recent patent as follows:

The glove of the invention is a particularly well-fitting working-hand glove which conforms closely to the natural shape of the hand in action, allowing the hand to be comfortably moved, without the restraint and tension found in the constricting designs of the past, and greatly reduces binding and interference from excess folds of leather. The glove fits closely, is ventilated for comfort, and provides good wear characteristics due to the designed elimination of tension when covering the hand at work—whether such effort is expended on the sports field, golf course, behind the wheel of a car, the factory floor, or any other use.

The glove is essentially the seamless-palm, gunn-cut design, which has been used to make work gloves for many years, adapted for use as a sports glove, such as a golf or racquetball glove. The feature that is seen to be the most advantageous about this glove, used as a sports glove, is that it has a seamless palm. By eliminating seams from the palm, perspiration is "wicked" away to other parts of the glove where there are seams that attract the perspiration. The palm, therefore, stays dry. This has been referred to as the "wick effect." Head was particularly attracted by this feature, and used the name "Dry 5" to market the glove.

TGC and employees of C.D. Genter worked on the design of this glove at the C.D. Genter manufacturing plant. For purposes of the Rule 50 motion, the Court must assume that the Tepleys invented the working-hand glove. There is, however, considerable evidence that the glove was in fact designed by another long-term employee of C.D. Genter, Mr. D.L. Fitzsimmons. The pattern which Mr. Fitzsimmons testified that he made (Defendants' Exhibit 113) is identical to the pattern that TGC says is used for its glove (Defendants' Exhibit 73(a)) and to the pattern that appears in TGC's Patent No. 4,850,053 (Plaintiff's Exhibit 4). In any event, whether or not Mr. Fitzsimmons designed the TGC glove it is clear that he most certainly knew how to put it together. The glove, or at least prototypes thereof, were manufactured by Fitzsimmons and C.D. Genter for TGC.

TGC also developed a computer-based system for custom fitting gloves which it patented and copyrighted (U.S. Patent No. 4,897,924 and U.S. Copyright No. TXU 355,830). TGC began a small manufacturing operation in Chattanooga where it made some golf gloves. TGC also had its golf glove made in the Phillipines by a firm called Bataan Leather. Although George Tepley¹ testified that he had confidentiality agreements with C.D. Genter and Bataan Leather, he is unable to produce any such agreements. There is no testimony by anyone else that such agreements existed. For purposes of the Rule 50 motion, the Court must consider that these agreements did exist. For purposes of the Rule 59 motion, however, any conclusion that TGC had trade secret confidentiality agreements with either of these firms is against the clear weight of the evidence.

TGC was never profitable. In fact it was losing a great deal...