West v. Keil

• Decision Date: 19 March 2002
• Docket Number: No. 20000468.,20000468.
• Citation: 2002 UT 32,48 P.3d 888
• Parties: WATER & ENERGY SYSTEMS TECHNOLOGY, INC., Plaintiff, Appellee, and Cross-Appellant, v. Steven L. KEIL and Brody Chemical Company, Inc., Defendants, Appellants, and Cross-Appellees.
• Court: Utah Supreme Court

48 P.3d 888

2002 UT 32

WATER & ENERGY SYSTEMS TECHNOLOGY, INC., Plaintiff, Appellee, and Cross-Appellant, v. Steven L. KEIL and Brody Chemical Company, Inc., Defendants, Appellants, and Cross-Appellees.

No. 20000468.

Supreme Court of Utah.

March 19, 2002.

Rehearing Denied May 3, 2002.

Joseph C. Rust, Salt Lake City, for plaintiff.

John T. Caine, Ogden, for Keil.

Thomas R. Blonquist, Salt Lake City, for Brody Chemical.

RUSSON, Associate Chief Justice.

¶ 1 Steven L. Keil and Brody Chemical Company appeal from a trial court judgment awarding Water & Energy Systems Technology, Inc., $188,675 in damages for its claims of (1) intentional interference with existing and prospective business relations and (2) misappropriation of trade secrets pursuant to the Uniform Trade Secrets Act, Utah Code Ann. §§ 13-24-1 to -9 (1999). We affirm.

BACKGROUND

¶ 2 "On appeal from a jury verdict, we view the evidence and all reasonable inferences drawn therefrom in the light most favorable to that verdict." Pratt v. Prodata, Inc., 885 P.2d 786, 787 (Utah 1994); see also Kilpatrick v. Wiley, Rein & Fielding, 2001 UT 107, ¶ 2, 37 P.3d 1130.

¶ 3 Steven Keil ("Keil") began working for Water & Energy Systems Technology, Inc. ("WEST"), as a water treatment chemical sales representative in 1986. During his tenure at WEST, Keil spent the majority of his time managing and servicing certain of the company's industrial sales accounts, including those for Alliant Techsystems ("Alliant"), Cargill Flour Milling ("Cargill"), Magnesium Corporation of America ("MagCorp"), and Utah State University ("USU"). As part of his duties related to these accounts, Keil had access to the formulae WEST used to create its chemicals, as well as to WEST's confidential, customer-specific pricing lists for those chemicals.¹

¶ 4 Subsequently, in September 1997, representatives of Brody Chemical Company ("BCC") approached Keil about the possibility of his leaving WEST to work for BCC. Keil initially declined this invitation, deciding instead to stay with WEST. After further discussions, however, Keil agreed in late 1997 to begin selling for BCC water treatment chemicals similar to those he was marketing for WEST.

¶ 5 In preparation for his departure from WEST, Keil began meeting with various employees of BCC, including the company's owner, Jon Liddiard. The purpose of these meetings was to ensure that BCC carried an inventory of treatment chemicals comparable to those marketed by WEST, and to establish a pricing scheme for the chemicals that would be "competitive" with WEST's pricing. Accordingly, the discussions at Keil's meetings with BCC centered around the necessary "[f]ormulations" for the chemicals, how and "where to obtain [the] raw materials" required by the formulae, and possible "pricing" for the ultimate products. Specifically, BCC and Keil worked to create products that would be "equivalent" to WEST's but that would be sold for "ten percent less" than the confidential prices charged by WEST to each respective customer.

¶ 6 Following these preparatory meetings, on February 18, 1998, Keil drafted on BCC stationery six substantively identical letters to the various clients he had been servicing for WEST, including Alliant, Cargill, MagCorp, and USU. In the letters, Keil explained that he had begun working for BCC and that because of this change in employment, he could now offer "essentially the same" chemicals he had provided before but at "substantially lower" prices. In support of this contention, Keil's letters to Alliant, Cargill, and USU each included a table that juxtaposed the proposed prices of BCC's treatment chemicals with the prices of WEST's "corresponding" chemicals. The prices listed for BCC's chemicals represented approximately a ten percent discount from WEST's prices.

¶ 7 Shortly thereafter, on March 2, 1998, Keil voluntarily terminated his employment with WEST. The next day, Keil began delivering the letters he had written to the clients he serviced while at WEST. Within two weeks of the delivery of these letters, Alliant, Cargill, and MagCorp all ceased ordering water treatment chemicals from WEST despite the fact that WEST had serviced each company continuously for the previous four years and WEST "had every expectation" of maintaining those relationships. Moreover, two of these companies, Alliant and Cargill, immediately began purchasing their water treatment chemicals from BCC. Similarly, MagCorp reported to WEST that it was terminating their relationship based in part on "problems with [its service] representative," Keil.

¶ 8 On March 9, 1998, WEST sued BCC and Keil (collectively, "defendants") in the Second District Court for Davis County, alleging among other things that Keil had intentionally interfered with WEST's "existing and future business relationships for improper purposes," and had misappropriated WEST's confidential prices by sharing them with BCC in violation of the Uniform Trade Secrets Act, Utah Code Ann. §§ 13-24-1 to -9 (1999). On March 26, 1998, the district court granted WEST a preliminary injunction against BCC and Keil, which we reversed on interlocutory appeal in Water & Energy Systems Technology, Inc. v. Keil, 1999 UT 16, 974 P.2d 821 ("Keil I").

¶ 9 Following our decision in Keil I, defendants moved for summary judgment, asserting in part that Keil had not misappropriated WEST's price lists as a matter of law. The district court, however, denied the motion on this issue in an order dated September 1, 1999. The court reasoned:

There is sufficient evidence from which the trier of fact could conclude that the . . . price lists of [WEST] were confidential.... [Therefore,] [t]here remains a question of fact as to the misappropriation of [WEST]'s price lists and as to whether [WEST]'s price lists were used by [BCC and Keil] in establishing [BCC]'s prices.

Accordingly, the case proceeded to trial.

¶ 10 At trial, defendants again urged the district court to enter judgment in their favor, moving for a directed verdict at the conclusion of WEST's case in chief on a number of grounds, including (1) that insufficient evidence had been introduced to establish WEST's claim for misappropriation of its price lists, (2) that insufficient evidence had been introduced to substantiate WEST's claim for intentional interference with its business relations for improper purposes, and (3) that WEST had failed to prove Keil's actions caused the company damages in regard to its contractual relationship with USU. Concluding that the jury could reasonably find in WEST's favor on the issue of misappropriation if it "chose to believe everything. . . presented by way of [WEST]'s case"—and that a jury finding of misappropriation would satisfy the challenged "improper purpose" element of WEST's intentional interference with business relations claim—the district court denied defendants' motion on these two issues but granted the motion on WEST's claim for damages related to its USU account. The court stated, "[On] the element of damage having to do with USU[,] the Court finds that there is insufficient evidence to go to the jury ... and therefore will allow [WEST to proceed] only [on] those issues relative to the claim from Alliant, from MagCorp, [and] from Cargill."

¶ 11 At the conclusion of trial, the jury rendered a verdict in WEST's favor on both its intentional interference with business relations and misappropriation of trade secrets claims, awarding the company $188,675 of damages in lost profits and unearned salary and benefits that had been paid to Keil. Specifically, the jury found that WEST's price lists were confidential; that Keil had misappropriated WEST's price lists; that Keil intentionally interfered with WEST's business relationships with Alliant, Cargill, and MagCorp; that Keil's actions damaged WEST; and that Keil engaged in these actions as an agent of BCC. ¶ 12 Subsequently, on March 10, 2000, defendants moved for a new trial and for judgment notwithstanding the verdict, contending among other things that insufficient evidence had been introduced at trial to establish WEST's claim for misappropriation of its trade secrets, and that an incorrect standard for calculating damages had been used in the case. WEST responded, and on May 31, 2000, the trial court denied defendants' motions. Finding that sufficient evidence had been introduced at trial to prove Keil had disclosed WEST's respective price lists for Alliant, Cargill, and MagCorp in an effort to transfer that business to BCC, the court ruled that the "damages awarded by the jury were fair and reasonable." Defendants now appeal the judgment of the trial court.

ANALYSIS

¶ 13 On appeal, BCC and Keil raise two arguments: (1) that the trial court erred by failing to direct or set aside the jury verdict because, as defendants allege, WEST presented "insufficient evidence to support the jury's verdict" for its claim of misappropriation of trade secrets; and (2) that the trial court erred by refusing to set aside the damages awarded to WEST as an improper assessment of damages under the Uniform Trade Secrets Act.² In addition, WEST cross-appeals, claiming that the trial court inappropriately disallowed the company from seeking additional damages beyond those ultimately awarded by the jury. We address each issue in turn.

I. INSUFFICIENCY OF THE EVIDENCE

¶ 14 BCC and Keil first contend that the trial court erred by denying their motions for directed verdict and for judgment notwithstanding the verdict because WEST failed to present sufficient evidence to establish a misappropriation of WEST's price lists. Specifically, defendants argue that the evidence presented at trial "did not purponderate [sic]" the jury's finding of either (1) Keil's disclosure of WEST's price lists or (2) "a nexus between the any [sic] activity of Keil [and] damage to WEST."

¶ 15 When an appellant contends that the evidence presented at trial is insufficient to support a jury's...