Weins v. Sporleder, 20858.

• Decision Date: 26 January 2000
• Docket Number: No. 20858.,20858.
• Citation: 2000 SD 10,605 N.W.2d 488
• Parties: Jim WEINS and Mac Meyer, Plaintiffs and Appellees, v. Robert A. SPORLEDER, Defendant, and Merle Van Liere, and En-R-G Max, Inc., Defendants and Appellants.
• Court: South Dakota Supreme Court

605 N.W.2d 488

2000 SD 10

Jim WEINS and Mac Meyer, Plaintiffs and Appellees, v. Robert A. SPORLEDER, Defendant, and Merle Van Liere, and En-R-G Max, Inc., Defendants and Appellants.

No. 20858.

Supreme Court of South Dakota.

Considered on Briefs September 15, 1999.

Decided January 26, 2000.

Rehearing Granted March 6, 2000.

David V. Vrooman, Sioux Falls, Rick Johnson of Johnson, Eklund, Nicholson, Peterson & Fox, Gregory, for plaintiffs and appellees.

Cheryle Wiedmeier Gering of Davenport, Evans, Hurwitz & Smith, L.L.P., Sioux Falls, for defendants appellants.

LEE D. ANDERSON, Circuit Judge.

[¶ 1.] Merle Van Liere (Van Liere) and En-R-G Max, Inc. (En-R-G Max) appeal the trial court's amended judgment reinstating an award of $440,000 in general damages, $200,000 in punitive damages, and costs to Jim Weins (Weins) and Mac Meyer (Meyer). We reverse and direct the trial court to enter judgment in favor of Van Liere and En-R-G Max.

FACTS

[¶ 2.] The underlying facts of this case are set forth in Weins v. Sporleder, 1997 SD 111, 569 N.W.2d 16. In 1991 Weins and Meyer asserted claims for violation of a trade secret law against Robert Sporleder (Sporleder), Van Liere, and En-R-G Max as well as a claim for breach of contract against Sporleder. Weins, 1997 SD 111 at ¶ 11, 569 N.W.2d at 19. After a twelve-day trial the trial court submitted the following claims to the jury on behalf of Weins and Meyer: a breach of contract claim against Sporleder, and claims for misappropriation of a trade secret, breach of fiduciary duty, and fraud and deceit against Sporleder, Van Liere, and En-R-G Max. The jury found against Sporleder on all counts. The jury found that Van Liere and En-R-G Max had not breached any fiduciary duty, but did find against them on the trade secret and fraud and deceit claims. Weins, 1997 SD 111 at ¶ 12, 569 N.W.2d at 19.

[¶ 3.] The jury awarded compensatory damages to Weins and Meyer for $440,000 apportioned as follows: 50% Sporleder, 25% Van Liere, and 25% En-R-G Max. In addition, the jury awarded punitive damages against Sporleder in the amount of $100,000, against Van Liere for $50,000, and against En-R-G Max for $50,000. Weins, 1997 SD 111 at ¶ 13, 569 N.W.2d at 19.

[¶ 4.] After trial, Weins and Meyer filed motions seeking prejudgment interest and punitive damages. The trial court denied both requests. The trial court held that the tort claims asserted by Weins and Meyer were displaced by the Uniform Trade Secrets Act, SDCL 37-29-7.¹ It struck the punitive damages awarded by the jury on the tort claims. It also determined that punitive damages were not warranted under the Uniform Trade Secrets Act (SDCL 37-29-3(b)), because there had been no showing of willful and malicious misappropriation. The trial court entered judgment in favor of Weins and Meyer for $440,000.00 in compensatory damages, plus costs of $3,875.72.

[¶ 5.] Van Liere and En-R-G Max, Inc. moved for a new trial, or, alternatively, for judgment notwithstanding the verdict. The trial court denied these motions, resulting in the first appeal to this Court. There we held that no trade secret existed under the facts of the case and that even if a trade secret was involved, there was no misappropriation. We concluded, "the trial court erred when it denied the motions for directed verdict and/or judgment notwithstanding the verdict." Weins, 1997 SD 111 at ¶ 29, 569 N.W.2d at 23. After concluding as a matter of law that Weins and Meyer did not have a trade secret, we stated "Due to our holding on the trade secret issue, we need not address the remaining issues in this case. We reverse and direct a judgment consistent with this opinion." Weins, 1997 SD 111 at ¶ 32, 569 N.W.2d at 24.

[¶ 6.] After remand to the trial court Weins and Meyer filed a motion to amend judgment. Van Liere and En-R-G Max sought dismissal of this motion claiming no proceedings were held within one year of this Court's decision, SDCL 15-30-16, making the motion untimely. The trial court denied the motion to dismiss. In addition, the trial court examined the Uniform Trade Secrets Act, SDCL 37-29-7. It concluded that since this Court found there was no trade secret, the jury's verdict based on the tort claims, including the fraud and deceit claims against Van Liere and En-R-G Max, should be reinstated.² The trial court entered an amended judgment reinstating the jury's original verdict.

[¶ 7.] Van Liere and En-R-G Max³ appeal from the amended judgment in favor of Weins and Meyer and raise the following issues:

1. Did the trial court have jurisdiction to enter the amended judgment?

2. Was the amended judgment properly allowed pursuant to SDCL 37-29-7?

3. Did the trial court properly deny the motion to dismiss pursuant to SDCL 15-30-16?

4. Did Weins and Meyer waive any right to assert argument relied upon by trial court in entering the amended judgment?

STANDARD OF REVIEW

[¶ 8.] Issues of jurisdiction may be raised by this Court sua sponte. Bohlmann v. Lindquist, 1997 SD 42, 562 N.W.2d 578. Whether the tort claims of Weins and Meyer were displaced by SDCL 37-29-7 is a conclusion of law which is reviewed de novo. State, Div. of Ins. v. Norwest Corp., 1998 SD 61, 581 N.W.2d 158.

ANALYSIS AND DECISION

[¶ 9.] The trial court had jurisdiction to enter the amended judgment.

[¶ 10.] Van Liere and En-R-G Max claim that the trial court lacked jurisdiction to enter an amended judgment. However, under SDCL § 15-30-14⁴, the trial court does have jurisdiction to enter an order in accordance with this Court's ruling. Whether the decision is consistent with the ruling of this Court is a question that must be decided anew if there is an appeal. The fact that a trial court's amended judgment is inconsistent with the ruling of a higher court does not defeat jurisdiction. Clearly, the trial court did have jurisdiction to enter an amended judgment. Whether the trial court's amended judgment was correct is the matter we take up now.

[¶ 11.] The trial court's amended judgment was not proper since Weins' and Meyer's tort claims had been displaced by the Trade Secrets Act.

[¶ 12.] Under the facts of this case, the causes of action for fraud and deceit are necessarily a part of the misappropriation of a trade secret claim. Thus, these tort remedies were displaced by the claims of Van Liere and En-R-G Max under the Uniform Trade Secrets Act, SDCL 37-29-7. The trial court recognized that these causes of action were displaced in its conclusions of law.⁵ Recognition of this displacement rule is further bolstered by the trial court's decision to strike the punitive damages found by the jury. If the fraud and deceit claims were not displaced by the trade secret claim under the facts of this case, the trial court would have sustained the jury verdict including punitive damages on the fraud and deceit claims. The trial court did not do this. The trial court concluded that because the jury found for the plaintiffs on the trade secret claim, it was the court's duty under SDCL 37-29-3 to assess exemplary damages if it found the misappropriation was willful and malicious. The court refused to assess exemplary damages under this standard.

[¶ 13.] Even assuming these tort claims were not displaced by the rulings of the trial court, these tort claims are so inextricably linked to the trade secret claim that this Court must rule that they are displaced as a matter of law. The tort claims of Weins and Meyer in their second amended complaint were based on the following allegations:

a) Appropriation of the secret as their own:

b) Lying to Jim Weins and Mac Meyer by denying they were in the process of preparing to manufacture and market the trade secret;

c) Not divulging to Jim Weins and Mac Meyer that a corporation was being formed to manufacture and distribute EN-R-G MAX [the allegedly misappropriated trade secret];

d) Fighting the patent application of Jim Weins [which set forth the alleged trade secret];

e) Appropriating from Mitchell, S.D., the product used by Jim Weins, Mac Meyer, and Robert A. Sporleder and taking it to Crooks, S.D., for the purpose of manufacturing EN-R-G-MAX.

South Dakota's adoption of the Uniform Trade Secrets Act, SDCL 37-29-7, prevents a plaintiff from merely restating their trade secret claims as separate tort claims. In analyzing claims for the purpose of applying the displacement provision, the issue is not what label the plaintiff puts on their claims. Rather, the court is to look beyond the label to the facts being asserted in support of the claims. Leucadia, Inc. v. Applied Extrusion Technologies, 755 F.Supp. 635 (D.Del.1991). A plaintiff "may not rely on acts that constitute trade secret misappropriation to support other causes of action." Ed Nowogroski Ins., Inc. v. Rucker, 88 Wash.App. 350, 944 P.2d 1093, 1097 (1997).

[¶ 14.] In examining a plaintiff's claims to determine if claims are related, numerous courts have specifically found that tort claims such as fraud, unfair competition, and breach of fiduciary duty are preempted by the Uniform Trade Secret Act. See, Leucadia, 755 F.Supp. at 636-637 (claims of unfair competition and unfair trade or business practices claim were found to be displaced); Ed Nowogroski Ins., Inc., 88 Wash.App. 350, 944 P.2d at 1097 (claims for misuse of confidential information and intentional interference were displaced by trade secrets act); Composite Marine Propellers v. Van Der Woude, 962 F.2d 1263 (7thCir.1992) (claims of unfair competition and breach of fiduciary duty were found to be displaced).

[¶ 15.] What the trial court did in amending judgment was to render SDCL 37-29-7(b)(2) meaningless. In effect, the trial court stated if a plaintiff's trade secret claim is dismissed, plaintiffs can simply pursue the same claim in the name of a tort. Courts should not construe a statute in such a way as to render the language meaningless. See, Appeal of BHLS, 1997 SD 64, 563 N.W.2d 429.

[¶ 16.] In analyzing the displacement...