Weins v. Sporleder
| Decision Date | 09 October 1997 |
| Docket Number | EN-R-G,19308,Nos. 19307,19310 and 19315,s. 19307 |
| Parties | Jim WEINS and Mac Meyer, Plaintiffs and Appellees, v. Robert SPORLEDER, Merle Van Liere andMax, Inc., Defendants and Appellants. |
| Court | South Dakota Supreme Court |
Rick Johnson of Johnson, Eklund, Nicholson, Peterson & Fox, Gregory, and David Vrooman, Sioux Falls, for plaintiffs and appellees.
Gale Fisher, Sioux Falls, for defendant and appellant.
Michael J. Schaffer and Cheryle Wiedmeier of Davenport, Evans, Hurwitz & Smith, Sioux Falls, for defendants and appellants Van Liere & EN-R-G Max.
¶1 Jim Weins and Mac Meyer (often collectively referred to as Weins) asserted a claim for misappropriation of a trade secret against Robert Sporleder (Sporleder), Merle Van Liere and En-R-G Max, Inc. (often collectively referred to as Van Liere), and a contract action against Sporleder. During the trial, Weins amended his complaint to assert various tort claims against Sporleder, Van Liere, and En-R-G Max, Inc. Each claim was submitted to the jury. A verdict was returned in favor of Weins for compensatory and punitive damages. The trial court later found that the tort claims were displaced by the Uniform Trade Secrets Act and struck the jury's award of punitive damages. 1
¶2 We reverse as to the verdict finding misappropriation of a trade secret.
¶3 This case involves the development of livestock feed supplements. Van Liere initially retailed feed supplements, later built a feed manufacturing plant and developed a soybean flaking process. Weins was employed with a feed company, TCI, which sold industrial minerals for livestock and liquid supplements for cattle. During his employment, he was involved with formulating feed programs for farmers. Sporleder earned an associate's degree in applied science in animal nutrition and soil sciences. He was also a dealer for TCI for a few years, dealing with the formulation of feed programs.
¶4 In 1983, Weins was working on a fermentation idea with yeast and sugar. He discussed the development of a tub product using this fermentation idea with Billy Talbot, an employee of TCI. When the plan never advanced beyond these general discussions, Weins began working with another company in similar employment where he also discussed the production of the tub product with other parties. In 1985, he terminated this employment and moved to Rapid City. Weins then spoke to Frank Parker about retailing and/or manufacturing a tub product, but Parker chose to remain uninvolved. In 1987, Weins first mentioned his idea to Meyer. 2 He also contacted Western Ranch Products regarding the manufacture of his product.
¶5 In September of 1988, Weins and Sporleder first met and discussed experimentations with feed products. Within a month, Weins, Meyer, and Sporleder were mixing a batch of feed in a garage. The ingredients included milo flour, En-R-G Flakes, cane molasses, sugar, urea, ethyl alcohol, enzyme and fermentation packages, metal proteinates, vitamins, and iodine. Weins incorporated his fermentation idea by adding sugar and alcohol as limiting agents in initial batches of feed. The test results indicated lack of consistency, as the cattle ate more than a desirable amount.
¶6 Other limiting agents were used unsuccessfully until Sporleder suggested the use of phosphoric acid. 3 He acquired the idea from Phil Anderson, who patented a liquid feed product in the 1950's that contained alcohol and phosphoric acid. 4 The use of phosphoric acid as a limiter was also discussed with Robert Riser. The precise results of the phosphoric acid combined in this product were unclear. Initial testing of the product indicated success, but Weins continued to test and perfect it. 5
¶7 Sporleder, Weins, and Meyer then agreed that Sporleder would set up a corporation named "Pro-Energy" and Weins and Meyer would arrange for a patent search. Weins relayed to Sporleder his lawyer's advice that they could not sell the product until they applied for a patent. Apparently, Sporleder was dissatisfied with the delay and contacted another lawyer recommended by Van Liere. Meanwhile, Weins and Meyer decided to abandon the name "Pro-Energy" and use "Ferm-Mix." Thus, Pro-Energy was never incorporated. By March of 1989, Weins and Meyer terminated their relationship with Sporleder. When they applied for a patent, Weins and Meyer were forced to exclude phosphoric acid from their formula since the idea was Sporleder's. 6 The patent application was eventually rejected due to prior art, general knowledge, and ordinary skill in the industry.
¶8 Shortly thereafter, Sporleder approached Van Liere with a proposed tub product. Sporleder claims the product was not the same as Weins', because Weins admittedly used fermentation yeast and sugar, while Sporleder used phosphoric acid. Sporleder and Mark VanderVliet tested the product at several farms, but consistency was never achieved.
¶9 A series of letters and phone calls between the lawyers, Weins, Meyer, Sporleder, and Van Liere ensued. Among them was an alleged call in March of 1989 between Meyer and Van Liere, in which Meyer told Van Liere and Sporleder to discontinue making their tub product. Van Liere claims he was not making a tub product at that time. Rather, he contends that he was dealing with Sporleder concerning other matters. 7
¶10 Van Liere claims he began manufacturing his own product in May of 1989, using steam-flaked corn, En-R-G Flakes, and base-mixes, along with molasses and phosphoric acid. Testing of the product was conducted and, by August of 1989, there was a marketable product.
¶11 On August 26, 1991, the first complaint was filed by Sporleder against Van Liere and En-R-G Max, Inc., claiming unjust enrichment, breach of fiduciary duty, fraud and deceit, and an implied contract claim, all arising from an alleged joint venture. A month later, on September 26, 1991, Weins and Meyer asserted a claim for violation of a trade secret law against Van Liere and En-R-G Max, Inc., as well as a contract action against Sporleder. Weins and Meyer claim the concept they developed of putting a feed supplement in a tub was a trade secret, and that Sporleder, Van Liere, and En-R-G Max, Inc. misappropriated it. All of the aforementioned causes of action were consolidated for trial.
¶12 The trial court initially directed a verdict against Sporleder on his implied contract claim and, during the trial, Weins and Meyer were allowed to amend their complaint to assert various tort claims. After a twelve-day trial, the trial court submitted the remaining claims to the jury. As to Sporleder's causes of action, the jury returned a verdict in favor of Sporleder for $320,000 in compensatory damages and $100,000 in punitive damages against Van Liere and En-R-G Max, Inc. Judgment was entered for $420,000.
¶13 As for the remaining causes of action, the jury returned a verdict in favor of Weins and Meyer for $440,000 against Sporleder (50%), Van Liere (25%), and En-R-G Max, Inc. (25%), plus punitive damages of $100,000, $50,000, and $50,000, respectively. The trial court later found that the tort claims (including the claim for punitive damages) were displaced by South Dakota's adoption of the Uniform Trade Secrets Act and struck the jury's award of punitive damages. Judgment was entered for $440,000.
¶14 Van Liere appeals, raising the following issues:
I. Whether the Weins verdict is inconsistent.
II. Whether Weins has a trade secret as a matter of law, or in the alternative, whether there is sufficient evidence of a trade secret.
III. Whether there is sufficient evidence of misappropriation.
IV. Whether the trial court improperly instructed the jury.
V. Whether the trial court made proper evidentiary rulings.
VI. Whether the damages awarded by the jury are supported by the evidence, are contrary to law, or are the result of passion and prejudice.
VII. Whether there was misconduct by counsel for Weins during the trial which requires a new trial.
VIII. Whether Weins should have been allowed to file a second amended compliant during the trial.
IX. Whether the costs should be reversed.
Sporleder also appeals as to the jury verdict against him, raising one issue different from Van Liere:
I. Whether the joint venture was terminated.
Weins and Meyer collectively filed notice of review, raising the following issues:
I. Whether the trial court erred in striking the punitive damages awarded by the jury.
II. Whether Weins is entitled to prejudgment interest on the compensatory damages awarded by the jury.
III. Whether punitive damages and attorney's fees should have been awarded on the first cause of action, misappropriation of a trade secret.
¶15 Sporleder and Van Liere contend the trial court erred in failing to grant a summary judgment, directed verdict, or judgment notwithstanding the verdict on the issue of misappropriation of a trade secret. The standard of review in such instances was identified in Olson v. Judd, 534 N.W.2d 850, 852 (S.D.1995). Since a trial court's decision regarding a motion for directed verdict is similar to judgment notwithstanding the verdict, these motions are considered together. Id. Evidence is viewed in a light most favorable to the nonmoving party and, if there is "substantial evidence to sustain the cause of action[,]" it is inappropriate to grant a directed verdict or a judgment notwithstanding the verdict. Id. (quoting Weiszhaar Farms, Inc. v. Tobin, 522 N.W.2d 484 (S.D.1994)). As to the review of a trial court's decision regarding summary judgment, we look for any basis which supports the trial court's ruling. Easson v. Wagner, 501 N.W.2d 348, 350 (S.D.1993) (quoting Waddell v. Dewey County Bank, 471 N.W.2d 591, 593 (S.D.1991)).
¶16 Van Liere and Sporleder claim Weins had no trade secret as a matter of law. The determination as to...
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