U.S. Marine, Inc. v. United States

• Decision Date: 15 July 2013
• Docket Number: No. 2012–1678.,2012–1678.
• Citation: 722 F.3d 1360
• Parties: UNITED STATES MARINE, INC., Plaintiff–Appellant, v. UNITED STATES, Defendant/Third Party Plaintiff–Appellee, v. VT Halter Marine, Inc., Third Party Defendant/Counterclaimant.
• Court: U.S. Court of Appeals — Federal Circuit

722 F.3d 1360

UNITED STATES MARINE, INC., Plaintiff–Appellant,

v.UNITED STATES, Defendant/Third Party Plaintiff–Appellee,

v.VT Halter Marine, Inc., Third Party Defendant/Counterclaimant.

No. 2012–1678.

United States Court of Appeals,Federal Circuit.

July 15, 2013.

Charles L. Egan, Slater & Zeien, L.L.P., of Washington, DC, argued for plaintiff-appellant. With him on the brief were Marcus B. Slater, Jr. and Jennifer J. Zeien.

Domenique G. Kirchner, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant/third party plaintiff-appellee. With her on the brief were Stuart F. Delery, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, and Steven J. Gillingham, Assistant Director.

Before LOURIE, PLAGER, and TARANTO, Circuit Judges.

TARANTO, Circuit Judge.

United States Marine, Inc. (USM) sued the United States in the United States District Court for the Eastern District of Louisiana under the Federal Tort Claims Act (FTCA), 28 U.S.C. §§ 1346(b), 2674. USM alleged that the United States misappropriated USM's trade secrets. Specifically, USM claimed that the United States Navy, which had lawfully obtained USM's proprietary technical drawings under a contract (to which USM was not a party), owed USM a duty of secrecy that it breached by disclosing those drawings to a rival private firm for use in designing military boats for the government.

After the district court found the United States liable for trade-secret misappropriation and awarded USM damages, the United States Court of Appeals for the Fifth Circuit held that the district court lacked jurisdiction over USM's claims under the FTCA. The Fifth Circuit reasoned that (a) the Navy's liability and USM's recovery depended on the interpretation of a federal-government contract and (b) therefore the matter lay exclusively within the jurisdiction of the Court of Federal Claims under the Tucker Act, 28 U.S.C. § 1491(a)(1). The Fifth Circuit vacated the district court's judgment and remanded for transfer of the case to the Claims Court under 28 U.S.C. § 1631. We review the district court's subsequent transfer order under 28 U.S.C. § 1292(d)(4)(A).

Given the decision of the transfer question in this case by the Fifth Circuit, we do not decide the question afresh. We ask only whether the Fifth Circuit decision was clearly in error. Unable to say that it was, we affirm.

Background

USM is a Louisiana corporation that builds military boats. Sometime before mid–1993, working with VT Halter Marine, Inc., which was a subsidiary of Trinity Marine Group and also a shipbuilder, USM developed a design for a special-operations craft with a hull made out of composite materials. The companies developed the design—now called the “Mark V,” a name covering several versions—for VT Halter to use in competing for the “MK V Special Operations Craft and Transporter System Contract” with the United States Navy. Before VT Halter submitted a bid to the Navy, USM and VT Halter built a prototype of the special-operations craft, an operational “parent craft” that they could modify to meet the Navy's requirements if VT Halter secured the contract. The district court in this case found that the design and development of the craft did not rely on government funds. VT Halter also designed a version of the craft with an aluminum hull. Although the working relationship between USM and VT Halter initially was informal, a letter from Trinity Marine Group to USM in 1995 stated that the companies shared ownership of the Mark V design, which was confirmed in a later agreement reached after corporate changes, bankruptcy, and other proceedings.

As part of its bid for two development contracts with the Navy in 1993, VT Halter submitted technical drawings of both the aluminum and composite versions of the Mark V design. VT Halter stamped the drawings with a “Limited Rights Legend” that invoked a specific provision of the Defense Federal Acquisition Regulations Supplement (DFARS), namely, Section 252.227–7013(a)(15), which states limitations on the government's use and outside disclosure of certain information. VT Halter's proposal also stated that, if it were awarded the contracts, any design data would be furnished subject to restrictions on the government's use and disclosure as provided for in the contracts.

On August 6, 1993, the Navy, through its Special Operations Command, awarded VT Halter two contracts to develop prototypes of (respectively) the aluminum- and composite-hull crafts. The development contracts incorporated by reference all of DFARS § 252.227–7013, which addresses “[r]ights in technical data and computer software.” As required, VT Halter marked its submitted design drawings and technical data with a Limited Rights Legend as prescribed by the DFARS provision.

On November 30, 1994, after testing and evaluation of the prototypes, the Navy selected the Mark V aluminum-hull craft for actual construction and awarded VT Halter a production contract. VT Halter again submitted design drawings marked with the legend required by DFARS § 252.227–7013; but for whatever reason, the production contract did not incorporate that provision. Pursuant to the production contract, VT Halter built and delivered twenty-four Mark V special-operations craft to the Navy.

In 2004, a division of the Navy awarded a research grant to the University of Maine to improve the ride and handling capabilities of the Mark V craft. Between 2004 and late 2006, the Navy provided numerous, detailed design drawings of the Mark V craft to firms that were acting as contractors for Maine Marine Manufacturing LLC, a joint venture between the University of Maine and a private shipbuilder. Although the design drawings were stamped with the DFARS Limited Rights Legend, the Navy did not obtain VT Halter's consent for the Navy's disclosure to the firms. In 2006, the Navy awarded Maine Marine Manufacturing a contract to design and construct a prototype special-operations craft, known as the Mark V.1, intended to be as similar as possible to the Mark V craft, with only a few changes to improve ride and handling.

When USM discovered that the Navy had disclosed its Mark V design information outside the government, it took pre-suit steps prescribed by the FTCA and then sued the United States for misappropriation of trade secrets in the federal district court in Louisiana. The FTCA expressly declares the United States subject to liability on certain tort claims—using relevant state law to define the torts—and vests jurisdiction over such claims exclusively in the district courts, thus waiving sovereign immunity for such claims. 28 U.S.C. §§ 1346(b)(1), 2674. In its complaint, USM alleged that the United States owed it a duty to maintain the secrecy of its Mark V design information and to limit its use because of the confidentiality provisions in the contracts and the legends stamped on the design drawings. USM requested damages in the amount of $63,550,000 for the alleged wrongful disclosure by the Navy.

The government moved to dismiss USM's claim for lack of subject matter jurisdiction. Pointing to USM's allegation that the Navy's duty to protect the Mark V design information and drawings arose from the contracts between VT Halter and the Navy, the government argued that USM's claim should be treated as a claim of tortious breach of contract, which could be heard only by the Claims Court under the Tucker Act, 28 U.S.C. § 1491(a)(1). The district court denied the government's motion, concluding that although the contract “provide[d] the underpinnings of USM[ ]'s state law trade secret claim,” the mere existence of potential non-FTCA claims did not eliminate the district court's jurisdiction over the FTCA claim that USM actually asserted.

After the district court also refused to find that VT Halter was a necessary party to the case, the government brought VT Halter into the case through a third-party complaint seeking to hold it liable for any damages the government might have to pay for the alleged trade-secret misappropriation. In response, VT Halter filed a counterclaim against the United States, adding its own FTCA-based claim for trade-secret misappropriation to USM's. The government moved to dismiss VT Halter's counterclaim on the jurisdictional ground that it already had unsuccessfully invoked against USM's suit, but the district court denied the motion. Despite arguing that jurisdiction was proper in the Claims Court in both motions to dismiss, at no point during the litigation did the government request a transfer of the case to the Claims Court.

In January 2010, the district court held a two-day bench trial on liability. On April 1, 2010, the court found that the Navy misappropriated Mark V design information by disclosing it to Maine Marine Manufacturing (and its contractors) without VT Halter's or USM's authorization. U.S. Marine, Inc. v. United States, No. 08–2571, 2010 WL 1403958, at *6 (E.D.La. Apr. 1, 2010). Regarding the source of the restriction on the government's use of the design information—a necessary element of the tort—the court determined that “[b]oth the contractual provision and limited rights legends were sufficient notification to the government that disclosure of the [Mark V] design would violate a duty to its owners.” Id. After a separate bench trial on damages, the court held that, although USM and VT Halter failed to prove actual losses or unjust enrichment, they were entitled to approximately $1.45 million in damages as a reasonable royalty for the government's use of the trade secrets.

The government appealed, challenging both the district court's jurisdiction over VT Halter's claim and the damages award. The government did not challenge the district court's jurisdiction over USM's claim. USM and VT Halter cross-appealed to challenge the damages award.

The Fifth Circuit held that the...