XTec, Inc. v. Hembree Consulting Servs., Inc.

• Decision Date: 28 April 2016
• Docket Number: CASE NO. 14-21029-CIV-ALTONAGA/O'Sullivan
• Citation: 183 F.Supp.3d 1245
• Parties: XTec, Inc., Plaintiff, v. Hembree Consulting Services, Inc., et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

183 F.Supp.3d 1245

XTec, Inc., Plaintiff,

v.Hembree Consulting Services, Inc., et al., Defendants.

CASE NO. 14-21029-CIV-ALTONAGA/O'Sullivan

United States District Court, S.D. Florida.

Signed April 28, 2016

Eduardo I. Rasco, Steve Michael Bimston, Rosenthal Rosenthal Rasco Kaplan, LLC, Aventura, FL, for Plaintiff.

Charles Woodward Throckmorton, V, Thomas Meeks, David Lanier Luck, Gregory Morgen Cesarano, Carlton Fields Jorden Burt, P.A., Miami, FL, for Defendants.

ORDER

CECILIA M. ALTONAGA, UNITED STATES DISTRICT JUDGE

THIS CAUSE came before the Court upon Defendants, Hembree Consulting Services, Inc. and Larry Hembree's (collectively, "Defendants[']") Renewed Motion for Judgment as a Matter of Law ("JMOL Motion") [ECF No. 352] and Alternative Motion for New Trial or Damages Reduction ("New Trial Motion") [ECF No. 353], both filed on December 16, 2015. The motions are little more than placeholders; after receiving the requested transcripts of the trial, Defendants filed accompanying memoranda for both motions on February 8, 2016. (See [ECF Nos. 385, 386] ).¹ On March 9, 2016, Plaintiff, XTec, Inc. ("XTec") filed a Response...("JMOL Response") [ECF No. 397] to the JMOL Motion, as well as a Response...("New Trial Response") [ECF No. 395] to the New Trial Motion. On March 21, 2016, Defendants filed a Reply...("JMOL Reply") [ECF No. 399] to the JMOL Motion and a Reply...("New Trial Reply") [ECF No. 401] to the New Trial Motion. The Court has carefully considered the parties' submissions, the record, and applicable law.

I. BACKGROUND

This case involves claims Defendants, Hembree Consulting Services, Inc. ("HCSI"), and its president and sole shareholder, Larry Hembree ("Hembree"), misused XTec's proprietary software and engaged in unfair business practices. (See generally Compl. [ECF No. 1-1] ). The Court assumes the reader's knowledge with the intricate facts of the case (see Order ("Summary Judgment Order") [ECF No. 220] ), but provides a brief background for the purpose of the instant Order.

Hembree worked for the United States Navy for a number of years on electronic security and enterprise access control systems, during which time he built a professional relationship with Jeff Huskey ("Huskey"), a Navy employee who later became the Chief Information Officer at Commander, Navy Installations Command ("CNIC"). (See Defendants' Amended Counterclaim [ECF No. 51] ¶¶ 6–7). In 1997, Hembree left the Navy and formed Hembree & Associates, Inc. ("H & A") to develop a smart card business, and there he met David Fisher ("Fisher"), who later created CardSmart Technologies, Inc. (See id. ¶ 8). In 2000, Hembree sold H & A to XTec. (See id. ).

XTec specializes in the security access and authentication industry and markets its own proprietary software, hardware, and firmware to its clients. (See Compl. ¶ 6). XTec named Hembree Director of Government Initiatives; Hembree owns 40,000 shares of XTec stock. (See Defs.' Am. Countercl. ¶ 8). In early 2001, XTec entered into a joint venture with CardSmart. (See Compl. ¶ 9). In 2003, Hembree resigned from XTec, and in 2004, formed HCSI. (See Defs.' Am. Countercl. ¶¶ 1, 9). The joint venture relationship between XTec and CardSmart spanned from 2002 through 2009, during which time the entities performed work for the Navy involving a product known as Enabler 1.0. (See Compl. ¶ 10).

In July 2011, XTec filed a lawsuit against CardSmart and Fisher (see Defendants' Notice of Removal [ECF No. 1] in XTec, Inc. v. CardSmart , Case No. 11–cv–22866–FAM (S.D.Fla.) (the "CardSmart Litigation")), alleging CardSmart and Fisher wrongfully copied XTec's proprietary technology from XTec software already in use by the Navy to create and sell an updated version of Enabler 1.0 to the Navy, known as Enabler 3.0 (see generally CardSmart Litigation, Complaint [ECF No. 1-2] ).² On December 12, 2013, XTec filed this lawsuit against Defendants, on substantially similar grounds. (See generally Compl.). XTec brought the following claims against Defendants: (1) violation of the Florida Uniform Trade Secrets Act, Florida Statutes section 688.01 et seq. ("FUTSA"); (2) violation of the Florida Deceptive and Unfair Trade Practices Act, Florida Statutes section 501.201 et seq. ("FDUTPA"); (3) defamation; and (4) common law trade libel. (See id. ¶¶ 37–81). On August 5, 2014, Defendants filed an Amended Counterclaim against XTec for defamation and several other violations, alleging XTec's counsel, namely Eduardo Rasco ("Rasco") and Steve Bimston ("Bimston"), sent a document called the Kennedy Report to Navy personnel in the course of their representation of XTec in the CardSmart Litigation. (See Defs.' Am. Countercl. ¶ 44). Defendants allege the Kennedy Report contained information that was confidential and defamatory to Defendants. (See id. ¶¶ 46–47).

On October 30, 2015, during the jury trial, Defendants moved for judgment as a matter of law on XTec's claims, and the Court held a hearing on the motion. (See [ECF No. 308]; see also Defendants' Motion for Judgment as a Matter of Law...("Original JMOL Motion") [ECF No. 306] ). The Court denied the Original JMOL Motion on November 2, 2015, allowing Defendants to renew the motion post-judgment. (See Order [ECF No. 310] ). On November 17, 2015, after a seventeen-day trial, the jury returned a verdict in favor of XTec, and against Defendants, on all of XTec's claims and Defendants' defamation counterclaim. (See generally Verdict Form ("Jury Verdict") [ECF No. 331] ). With respect to the misappropriation of trade secrets claim, the jury found Defendants' actions were "willful and malicious," and awarded XTec $4,000,000 for unjust enrichment and $1,000,000 for actual damages. (Id. 2). Concerning the defamation claim, the jury awarded XTec $250,000 in nominal damages. (See id. 5). Regarding Defendants' defamation counterclaim, the jury found Defendants failed to prove Rasco and Bimston acted as XTec's agents in disclosing the Kennedy Report to the Navy. (See id. 6). The Court entered final judgment on November 18, 2015. (See Final Judgment [ECF No. 337] ).

In their renewed JMOL Motion and New Trial Motion, Defendants ask the Court for judgment in their favor as a matter of law on all of XTec's claims, or alternatively to grant a new trial on XTec's claims and Defendants' defamation counterclaim. (See generally JMOL Mot.; New Trial Mot.). If the Court declines to grant either of these forms of relief, Defendants request the Court reduce the jury's award of nominal defamation damages from $250,000 to $1. (See New Trial Mot. 9–10).

II. LEGAL STANDARDS

A. Judgment as a Matter of Law

Federal Rule of Civil Procedure 50(b) governs a renewed motion for judgment as a matter of law. Under this standard, a "district court should grant judgment as a matter of law when the plaintiff presents no legally sufficient evidentiary basis for a reasonable jury to find for him on a material element of his cause of action." Pickett v. Tyson Fresh Meats, Inc. , 420 F.3d 1272, 1278 (11th Cir.2005) (citation omitted). Conversely, the court should deny the motion "if the plaintiff presents enough evidence to create a substantial conflict in the evidence on an essential element of the plaintiff's case." Id. (citations omitted). "Although [the court] look[s] at the evidence in the light most favorable to the non-moving party, the non-movant must put forth more than a mere scintilla of evidence suggesting that reasonable minds could reach differing verdicts." Campbell v. Rainbow City, Ala. , 434 F.3d 1306, 1312 (11th Cir.2006) (quoting Abel v. Dubberly , 210 F.3d 1334, 1337 (11th Cir.2000) (alterations added)).

B. New Trial

Motions for a new trial are governed by Federal Rule of Civil Procedure 59(a), and may be granted "for any reason for which a new trial has heretofore been granted in an action at law in federal court." FED. R. CIV. P. 59(a)(1)(A). Although a comprehensive list of the grounds granting a new trial is elusive, the Supreme Court has held that a motion for a new trial may rest on the fact "the verdict is against the weight of the evidence, that the damages are excessive, or that, for other reasons, the trial was not fair to the party moving; and may raise questions of law arising out of alleged substantial errors in admission or rejection of evidence or instructions to the jury." Montgomery Ward & Co. v. Duncan , 311 U.S. 243, 251, 61 S.Ct. 189, 85 L.Ed. 147 (1940). "[W]hen considering a motion for new trial, the trial judge may weigh the evidence, but it is proper to grant the motion only if the verdict is against the great, not just the greater, weight of the evidence." Ard v. Sw. Forest Indus. , 849 F.2d 517, 520 (11th Cir.1988) (citing Watts v. Great Atl. & Pac. Tea Co. , 842 F.2d 307, 310 (11th Cir.1988) (alteration added)).

C. Motion to Alter or Amend a Judgment

Federal Rule of Civil Procedure 59(e) governs motions to alter or amend judgments. The Eleventh Circuit has recognized only two grounds for granting a Rule 59 motion—newly discovered evidence or manifest errors of law or fact. See Saridakis v. S. Broward Hosp. Dist. , No. 08–62005–Civ, 2010 WL 2274955, at *5 (S.D.Fla. June 7, 2010) (citing Arthur v. King , 500 F.3d 1335, 1343 (11th Cir.2007) ). "A Rule 59(e) motion cannot be used to relitigate old matters, raise argument or present evidence that could have been raised prior to the entry of judgment." Id. (citation and internal quotation marks omitted).

III. ANALYSIS

A. JMOL Motion

1. The Misappropriation Verdict

Defendants request the Court grant them judgment as a matter of law on XTec's misappropriation claim. (See JMOL Mot. 3). In support, they set forth four main arguments: (1) XTec provided insufficient evidence at trial for the jury to find Defendants misappropriated XTec's trade secrets, particularly that Defendants acted willfully and maliciously in doing so; (2) XTec failed to establish CardSmart used a substantial portion of Enabler 1.0 in creating Enabler 3.0; (3) XTec failed to...