Walmart Inc. v. Cuker Interactive, LLC, 021220 FED8, 18-1959

Docket Nº:18-1959, 18-2081
Opinion Judge:ERICKSON, CIRCUIT JUDGE.
Party Name:Walmart Inc., a Delaware corporation Plaintiff- Appellee v. Cuker Interactive, LLC, a California limited liability company Defendant-Appellant Walmart Inc., a Delaware corporation Plaintiff- Appellant v. Cuker Interactive, LLC, a California limited liability company Defendant-Appellee
Judge Panel:Before SMITH, Chief Judge, BEAM and ERICKSON, Circuit Judges.
Case Date:February 12, 2020
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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Walmart Inc., a Delaware corporation Plaintiff- Appellee

v.

Cuker Interactive, LLC, a California limited liability company Defendant-Appellant

Walmart Inc., a Delaware corporation Plaintiff- Appellant

v.

Cuker Interactive, LLC, a California limited liability company Defendant-Appellee

Nos. 18-1959, 18-2081

United States Court of Appeals, Eighth Circuit

February 12, 2020

Submitted: September 25, 2019

Appeals from United States District Court for the Western District of Arkansas - Fayetteville

Before SMITH, Chief Judge, BEAM and ERICKSON, Circuit Judges.

ERICKSON, CIRCUIT JUDGE.

Walmart, Inc. ("Walmart") and Cuker Interactive, LLC ("Cuker") signed a contract under which Walmart agreed to pay Cuker a fixed fee to make the website for Walmart's "ASDA Groceries business" accessible from desktop computers and mobile devices. Shortly after the project launched, the parties experienced fundamental disagreements over the terms of the contract that ultimately led to protracted litigation. The jury returned a verdict in favor of Cuker on its claims against Walmart for breach of contract, unjust enrichment, and misappropriation of trade secrets. Pursuant to the contract's limitation-of-liability clause, the district court1 reduced the amount of damages awarded by the jury and entered judgment in favor of Cuker. After the filing of extensive post-trial motions, the court further reduced the damages awarded to Cuker on the ground that Cuker presented insufficient evidence to demonstrate it undertook reasonable efforts to maintain the secrecy of three of the four alleged trade secrets. The district court found in favor of Cuker on all other issues. Both parties appeal. We affirm.

I. Background

Walmart's UK subsidiary, ASDA Groceries, had an e-commerce website accessible from desktop computers and another one accessible from mobile phones. Walmart understood that if it could make its desktop website "responsive" (accessible from any device), it could eliminate the mobile-phone website. In January 2014, a Walmart senior executive approached Cuker's Chief Creative Officer and CEO about making ASDA Groceries' website responsive. Around the same time, Walmart was also exploring opportunities to make its United States grocery website, Walmart2Go, responsive.

On January 30, 2014, Walmart and Cuker signed a consulting agreement accompanied by a document entitled statement of work ("contract") under which Walmart agreed to pay Cuker a fixed fee of $577, 719 in exchange for responsive layouts for the ASDA website. Under the contract, Cuker was to design and build thirteen templates for access by desktops, tablets, and smartphones, including a homepage template, a top navigation template, a bottom navigation template, and ten templates to be chosen by Walmart. Because of Walmart's tight internal deadlines for completion of the project, the contract was negotiated and signed in a matter of weeks. Accordingly, the parties considered the contract a "working version" that could be "refined" along the way.

The project launched almost immediately in early February 2014. But, by the end of the month, the parties disagreed over basic terms of the contract, including whether various milestones for performance were strict deadlines or simply aspirational, when interim fee payments were due, how many rounds of revisions Walmart could require Cuker to make to its deliverables, and whether particular demands by Walmart were outside of the scope of work that Cuker had contracted to perform. These disputes caused payment and delivery delays.

Walmart won the initial race to the courthouse when it filed a breach-of-contract lawsuit against Cuker in Arkansas state court in July 2014. Cuker removed the action and filed counterclaims for breach of contract, unjust enrichment, and misappropriation of four technologies it considered trade secrets. Following a two-week trial in April 2017, the jury awarded Cuker damages totaling $12, 438, 665. The award consisted of $30, 629 for breach of contract; $400, 000 for unjust enrichment; and a combined amount of $12, 008, 036 for misappropriation of the four alleged trade secrets. The jury found that Walmart's misappropriation of Cuker's trade secrets was "willful and malicious," except with respect to a trade secret identified as the "CMS Tweak Development Tool."

Following return of the verdict, the court ordered the parties to brief two issues: (1) what impact the underlying contract's limitation-of-liability clause had on the jury's award with respect to the CMS Tweak Development Tool, and (2) what permanent injunctive relief, if any, Cuker was entitled to in light of the jury's verdict. The parties stipulated to the limitation-of-liability issue, reducing the award of $2, 788, 690 for the CMS Tweak Development Tool to $547, 090. They were unable to reach an agreement on the issue of injunctive relief. The court determined that although the contract did not entitle Cuker to injunctive relief, Ark. Code Ann. § 4-75-604(a) gave the court discretion to authorize enjoinment of "[a]ctual or threatened misappropriation" of trade secrets. Exercising its discretion, the court found the evidence presented at trial established that Walmart had saved itself roughly six months of development time by misappropriating Cuker's trade secrets, and that Cuker had satisfied its burden of showing it was entitled to injunctive relief against Walmart.

In summary, the court-ordered injunction (1) prohibited Walmart from utilizing specific codes, files, and programmatic references from all websites, code platforms, code repositories, and file repositories within its control, and required Walmart to delete permanently these items; (2) mandated that Walmart provide written notice instructing all third parties to whom it may have given any of Cuker's trade secrets to cease and desist from using Cuker's trade secrets and to destroy any copies of them; and (3) compelled Walmart to file an affidavit signed by a corporate officer attesting to compliance with the court's order.

After the court entered judgment in favor of Cuker, Walmart "marshaled an enormous number of arguments" in support of its motion for judgment as a matter of law under Fed.R.Civ.P. 50(b) and, in the alternative, for a new trial. The court found that many of Walmart's arguments did not need to be addressed because of the evidence supporting the jury's findings on Cuker's breach of contract, unjust enrichment, and trade secret claims.

Evidence presented at trial established a rapid deterioration of the parties' contractual relationship. Less than two weeks after the contract was signed, Walmart began demanding additional work outside the scope of the contract and then threatened to withhold approvals and thereby payments for completed within-scope work. Cuker protested early and often. Walmart never provided a workable development environment, as required under the contract, forcing Cuker to take on this additional responsibility in order to perform the contracted work. The court found that the evidence supported a finding that Cuker was compelled to choose between two unacceptable options: (1) perform an enormous amount of extra work that it never agreed to perform under the fixed-price contract and risk being unable to meet the "milestone" dates set out in the contract for the work it was obligated to do, or (2) refuse to do the additional work at the risk of not being paid for work it...

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