U.S. Court of Appeals for the Ninth Circuit, BladeRoom Group Ltd. v. Emerson Electric Co., Docket No. 19-16583

 

Future Profits

Lost Profits

Lost Profits Based on a Future Contract

California Law

 

(…) In addition, “lost anticipated profits cannot be recovered if it is uncertain whether any profit would have been derived at all from the proposed undertaking.” Food Safety Net Svcs. v. Eco Safe Sys. USA, Inc., 209 Cal. App. 4th 1118, 1132 (2012) (citation and alteration omitted). More specifically, “lost profits based on a future contract cannot be recovered when the contract is uncertain or speculative.” Id. (citation omitted). Consequently, BladeRoom will not be entitled to future profits absent definitive evidence of a future contract that was lost due to Emerson’s misappropriation of Bladeroom’s trade secret. See Sargon Enters., Inc. v. Univ. of S. Calif., 55 Cal. 4th 747, 775 (2012) (explaining that there is no recovery for “claimed lost profits” that are “uncertain, hypothetical and entirely speculative”) (citation and internal quotation marks omitted). If the asserted loss profit testimony is not based on “objective evidence of past volume of business or any other provable data” the testimony should be excluded. Id. at 778 (citation and internal quotation marks omitted). At bottom, there must be “a substantial similarity between the facts forming the basis of the project projections and the business opportunity that was destroyed.” Id. (citation and internal quotation marks omitted).

 

(U.S. Court of Appeals for the Ninth Circuit, August 30, 2021, BladeRoom Group Ltd. v. Emerson Electric Co., Docket No. 19-16583, For Publication)

U.S. Court of Appeals for the Fifth Circuit, WICKFIRE, L.L.C. v. WOODRUFF, Docket No. 17-50340

 

Contract Law

Tortious Interference with Contractual Relations

Tortious Interference with Prospective Business Relations

Civil Conspiracy Claim

Lost Profits

Texas Law

 

 

Appeal from the United States District Court for the Western District of Texas USDC No. 1:14-CV-34.

 

(…) The case at bar presents a different situation than that addressed in Dastar. WickFire has alleged that TriMax created false advertisements appearing to have originated with WickFire in order to, inter alia, harm WickFire’s reputational interests in this industry. WickFire is not alleging TriMax wrongfully incorporated WickFire’s ideas or concepts into TriMax’s advertisements. That is, WickFire is not concerned with protecting an original idea or its creative thought, as Fox was attempting to do in Dastar. Instead, WickFire is interested in protecting the genuineness of its brand. We cannot say, based on Dastar, that WickFire’s claim is frivolous.

 

Gensler v. Strabala, 764 F.3d 735, 737 (7th Cir. 2014) (“Dastar held that a copyright can’t be extended by using the Lanham Act.”).

 

Gen. Universal Sys., Inc., 379 F.3d at 149 (concluding Dastar foreclosed the plaintiff’s Lanham Act claim because the plaintiff was alleging the defendant had “copied the ideas, concepts, structures, and sequences embodied in the plaintiff’s copyrighted work”).

 

To prevail at trial on its tortious interference with contractual relations claim, WickFire needed to present sufficient proof of the following: “(1) an existing contract subject to interference, (2) a willful and intentional act of interference with the contract, (3) that proximately caused the plaintiff’s injury, and (4) caused actual damages or loss.”44

 

44 Prudential Ins. Co. of Am. v. Fin. Rev. Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000) (citing ACS Invs, Inc. v. McLaughlin, 943 S.W.2d 426, 430 (Tex. 1997)).

 

Our review of Texas law46 indicates that to prevail on an interference claim, the plaintiff must “present evidence that some obligatory provision of a contract was breached.”47 Intermediate appellate courts in Texas have, on occasion, suggested an actual breach is not required. Relying on those decisions, our own court in Cuba v. Pylant noted the following: “Although it does not appear that an actual breach must occur, the defendant must have intended to induce a breach (even if unsuccessful), thereby making performance more difficult in some way that injured the plaintiff.”48

 

But since Cuba was issued, the Supreme Court of Texas appears to have clarified the law in this area. In El Paso Healthcare System, Ltd. v. Murphy, the Supreme Court of Texas stated the following: “To prevail on a claim for tortious interference with an existing contract, the plaintiff must present evidence that the defendant induced the plaintiff’s cocontracting party to ‘breach the contract,’ and thus interfered with the plaintiff’s ‘legal rights under the . . . contract.’”49 This unequivocal language leaves little doubt that a breach must result from the defendant’s conduct in order for the plaintiff to prevail. To induce commonly connotes not merely attempts at interference, but

46 See El Paso Healthcare Sys., Ltd. v. Murphy, 518 S.W.3d 412, 421-22 (Tex. 2017).

47 Walker v. Beaumont Indep. Sch. Dist., 938 F.3d 724, 749 (5th Cir. 2019) (quoting Better Bus. Bureau of Metro. Houston, Inc. v. John Moore Servs., Inc., 441 S.W.3d 345, 361 (Tex. App.—Houston [1st Dist.] 2013, pet. denied)).

48 814 F.3d 701, 717 (5th Cir. 2016) (citing Fluor Enters., Inc. v. Conex Int’l Corp., 273 S.W.3d 426, 443 (Tex. App.—Beaumont 2008, pet. denied)).

49 518 S.W.3d at 421-22 (first quoting Holloway v. Skinner, 898 S.W.2d 793, 794-95 (Tex. 1995); and then quoting Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 288 (Tex. 1998)).

 

actual interference.50 Accordingly, without sufficient proof that the defendant’s conduct resulted in “some obligatory provision of a contract having been breached,” the plaintiff’s tortious interference claim is infirm as a matter of law.51

 

50 See Induce, MERRIAM–WEBSTER, https://www.merriam-webster.com /dictionary/induce (last visited Feb. 24, 2021) (defining induce to mean either “to move by persuasion or influence” or “to call forth or bring about by influence or stimulation”).

51 Walker, 938 F.3d at 749 (quoting Better Bus. Bureau, 441 S.W.3d at 361); see Duncan v. Hindy, 590 S.W.3d 713, 726-28, 729 (Tex. App.—Eastland 2019, pet. denied) (affirming summary judgment as to a tortious interference claim because the plaintiff offered insufficient proof that a breach resulted from the defendant’s conduct); see also Duradril, L.L.C. v. Dynomax Drilling Tools, Inc., 516 S.W.3d 147, 168 (Tex. App.—Houston [14th Dist.] 2017, no pet.) (“To establish the element of a willful and intentional act of interference, the plaintiff must produce evidence that the defendant was a more-than-willing participant and knowingly induced one of the contracting parties to breach its obligations under the contract. To do so, the plaintiff must present evidence that an obligatory provision of the contract was breached.” (emphasis added) (internal citations omitted)).

 

Next, we consider the evidence offered in support of WickFire’s tortious interference with prospective business relations claim. This claim required proof of the following five elements:

(1) there was a reasonable probability that the plaintiff would have entered into a business relationship with a third party; (2) the defendant either acted with a conscious desire to prevent the relationship from occurring or knew the interference was certain or substantially certain to occur as a result of the conduct; (3) the defendant’s conduct was independently tortious or unlawful; (4) the interference proximately caused the plaintiff injury; and (5) the plaintiff suffered actual damage or loss as a result.66

66 Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909, 923 (Tex. 2013) (first citing Wal–Mart Stores, Inc. v. Sturges, 52 S.W.3d 711, 726 (Tex. 2001); and then citing Bradford v. Vento, 48 S.W.3d 749, 757 (Tex. 2001)).

To recover lost profits under Texas law, a party “must do more than show that it suffered some lost profits”—it must show the amount of profits lost “by competent evidence with reasonable certainty.” “What constitutes reasonably certain evidence of lost profits is a fact intensive determination.” “At a minimum, opinions or estimates of lost profits must be based on objective facts, figures, or data from which the amount of lost profits may be ascertained.” However, “it is not necessary to produce in court the documents supporting the opinions or estimates.” Although there are a number of valid methods for measuring lost profits, “once a party has chosen a particular method for measuring its lost profits, the party must provide a complete calculation.” “Uncertainty as to the fact of legal damages is fatal to recovery, but uncertainty as to the amount will not defeat recovery.”73

73 Phillips v. Carlton Energy Grp., LLC, 475 S.W.3d 265, 280 (Tex. 2015) (quoting Sw. Battery Corp. v. Owen, 115 S.W.2d 1097, 1099 (Tex. 1938)).

(74 ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867, 877 (Tex. 2010) (concluding that the plaintiff did not provide sufficient evidence to support “the amount of damages awarded by the trial court” but did proffer adequate evidence to prove a lesser amount).)

 

 

We turn now to the civil conspiracy claim. The elements of a civil conspiracy under Texas law are as follows:

(1) a combination of two or more persons; (2) the persons seek to accomplish an object or course of action; (3) the persons reach a meeting of the minds on the object or course of action; (4) one or more unlawful, overt acts are taken in pursuance of the object or course of action; and (5) damages occur as a proximate result.

(…) But the Supreme Court of Texas has repeatedly emphasized that “civil conspiracy is a ‘derivative tort,’ meaning it depends on some underlying tort or other illegal act.” The court’s “use of the word ‘derivative’ in this context means a civil conspiracy claim is connected to the underlying tort and survives or fails alongside it.”

 

 

(U.S. Court of Appeals for the Fifth Circuit, February 26, 2021, WICKFIRE, L.L.C. v. WOODRUFF, Docket No. 17-50340)

 

U.S. Court of Appeals for the Eleventh Circuit, Acrylicon USA, LLC v. Silikal GmbH, Docket No. 17-15737

 

Distribution Agreement

 

Licensing Agreement

 

Trade Secret

 

Contract Drafting

 

Remedies:

 

Money Recovery for Both Unjust Enrichment and Actual Damages

 

Direct and Consequential Damages

 

Lost Profits

 

Liquidated Damages

 

Nominal Damages

 

Georgia Law

 

Evidence: Videotaped Depositions

 

 

 

The agreement provided that AC-USA and its affiliate, AcryliCon International, Ltd. (“AC-International”), would be Silikal’s exclusive distributors of 1061 SW and that Silikal would not sell the resin without AcryliCon’s written permission.

 

According to AC-USA, Silikal breached the agreement by selling 1061 SW without its written permission, so it sued Silikal under common law for breach of contract (“Contract” claim) and under the Georgia Trade Secrets Act of 1990 (“GTSA”) for misappropriation of the shared trade secret (“Misappropriation” claim).

 

In 2008, AC-USA was incorporated. That same year, AC-USA entered into a licensing agreement with two affiliates of AC-International—Raliz AG and AcryliCon Distribution Est.—that gave AC-USA the right to import, market, and sell « AcryliCon Systems » in the United States, including the 1061 SW resin. AC-USA was not permitted to sell AcryliCon Systems outside of the United States without permission from AC-International.

 

AC-USA’s Contract claim is based on Paragraph 5 of the GSA Contract, titled “Confidentiality and Use of 1061 SW.” Paragraph 5 provides in full:

Silikal represents and warrants that it has not disclosed the formula for 1061 SW resin or sold or distributed 1061 SW resin, directly or indirectly, to anyone other than AcryliCon during the pendency of the Silikal/AcryliCon relationship. Silikal hereby covenants and agrees that it will preserve the secrecy of the formula for the 1061 SW resin. Silikal will not disclose or use in any way, directly or indirectly, the 1061 SW resin or formula for the 1061 SW resin. Silikal further covenants and agrees NOT to sell or distribute 1061 SW resin to anyone other than AcryliCon, or as expressly permitted in writing by AcryliCon. Within 10 days of this Settlement Agreement, Silikal shall ship by DHL to Bjorn Hegstad . . . all laboratory records and other available documents regarding the formulation and development of the 1061 SW resin.

 

(…) AC-USA presented the testimony of seven witnesses via videotaped depositions.

 

To prove a claim for misappropriation of trade secrets under the GTSA, a plaintiff must show that “(1) it had a trade secret and (2) the opposing party misappropriated the trade secret.” Penalty Kick Mgmt. Ltd. v. Coca Cola Co., 318 F.3d 1284, 1290–91 (11th Cir. 2003).

O.C.G.A. § 10–1–761(2) reads in full: (2) “Misappropriation” means:

(A) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(B) Disclosure or use of a trade secret of another without express or implied consent by a person who:

(i) Used improper means to acquire knowledge of a trade secret;

(ii) At the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was:

(I) Derived from or through a person who had utilized improper means to acquire it;

(II) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

(III) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or

(iii) Before a material change of position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

 

(…) Silikal’s violation of the duties created by the GSA Contract gave AC-USA a claim for breach of contract, not for misappropriation of a trade secret.

 

(…) Silikal argues in its supplemental brief that the District Court erred in entering the revised judgment for AC-USA on its Contract claim because AC-USA failed to prove actual damages from Silikal’s breach. We agree, and hold that AC-USA is instead entitled only to an award of nominal damages.

 

(…) Actual damages for breach of contract, by contrast, “are given as compensation for the injury sustained as a result of the breach of a contract.” O.C.G.A. § 13–6–1 (emphasis added). The fundamental difference between restitution and actual damages, therefore, is that the former is measured by the defendant’s gain, while the latter is measured by the plaintiff’s loss. Dan B. Dobbs, Law of Remedies § 4.1(1), at 555 (2d ed. 1993).

 

A plaintiff who proves misappropriation of a trade secret under O.C.G.A. § 10–1–763 may recover money for both unjust enrichment and actual damages.

 

Actual damages under Georgia law may be direct or consequential. Direct damages “arise naturally and according to the usual course of things from the breach.” Denny v. Nutt, 375 S.E.2d 878, 879 (Ga. App. 1988) (quoting Quigley v. Jones, 334 S.E.2d 664, 665 (Ga. 1985)). Consequential damages, by contrast, arise “as the probable result of the breach.” Id. The key distinction between direct damages and consequential damages is that the former compensate for the value of the promised performance, while the latter compensate for additional losses incurred as a result of the breach. See Imaging Systems Int’l., Inc. v. Magnetic Resonance Plus, Inc., 490 S.E.2d 124, 127 (Ga. Ct. App. 1997) (noting that consequential damages “may include profits which might accrue collaterally as a result of the contract’s performance,” while direct damages “may include profits necessarily inherent in the contract”).

 

A plaintiff may not recover consequential damages for breach unless such damages are within the contemplation of the parties at the time the contract was made, are “capable of exact computation,” and “are independent of any collateral enterprise entered into in contemplation of the contract.” O.C.G.A. § 13–6–8.

 

Lost profits that are not part of the benefit of the bargain may be recovered as consequential damages. Imaging Systems Int’l., 490 S.E.2d at 127. However, “the profits of a commercial business are dependent on so many hazards and chances, that unless the anticipated profits are capable of ascertainment, and the loss of them traceable directly to the defendant’s wrongful act, they are too speculative to afford a basis for the computation of damages.” Johnson Cnty. School Dist. v. Greater Savannah Lawn Care, 629 S.E.2d 271, 273–74 (Ga. Ct. App. 2006). Accordingly, a plaintiff seeking lost profits must provide “information or data sufficient to enable the trier of fact to estimate the amount of the loss with reasonable certainty.” Bearoff v. Craton, 830 S.E.2d 362, 373 (Ga. Ct. App. 2019) (quoting Pounds v. Hosp. Auth. Of Gwinnett Cnty., 399 S.E.2d 92, 94 (Ga. Ct. App. 1990). “This ‘information or data’ must include evidence showing that the business claiming lost profits had ‘a proven track record of profitability.’” Id. (quoting EZ Green Associates v. Georgia-Pacific Corp., 770 S.E.2d 273, 277 (Ga. Ct. App. 2015)). “The plaintiff must also show the expected profit for the relevant time period” including “the business’s projected revenues, as well as its projected expenses, for that time frame.” Id. (quoting Johnson Cnty., 629 S.E.2d at 274).

 

(…) In line with this principle, we note that while Georgia law enforces provisions for liquidated damages, O.C.G.A. § 13–6–7, it only does so to the extent such provisions are not penal in nature, Broadcast Corp. of Ga. v. Subscription Television of Greater Atlanta, 338 S.E.2d 775, 776–77 (Ga. Ct. App. 1985). A provision for liquidated damages will be treated as an unenforceable penalty unless (1) the injury caused by the breach is difficult or impossible to accurately estimate; (2) the parties intended to provide for damages rather than a penalty; and (3) the stipulated sum is a reasonable pre-estimate of the probable loss resulting from the breach. Southeastern Land Fund v. Real Estate World, 227 S.E.2d 340, 343 (Ga. 1976). “Where a designated sum is inserted into a contract for the purpose of deterring one or both of the parties from breaching it, it is penalty.” Broadcast Corp. of Ga., 338 S.E.2d at 777 (quoting Florence Wagon Works v. Salmon, 68 S.E. 866, 866 (Ga. Ct. App. 1910)).

 

If a plaintiff proves a breach of contract but fails to prove actual damages, the plaintiff “may recover nominal damages sufficient to cover the costs of bringing the action.” O.C.G.A. § 13–6–6.

 

Georgia law permits recovery of attorney’s fees “where authorized by some statutory provision or by contract.” Smith v. Baptiste, 694 S.E.2d 83, 87 (Ga. 2010).

An award of nominal damages is sufficient to make the plaintiff a prevailing party. King v. Brock, 646 S.E.2d 206, 207 (Ga. 2007).

 

 

(U.S. Court of Appeals for the Eleventh Circuit, January 26, 2021, Acrylicon USA, LLC v. Silikal GmbH, Docket No. 17-15737, Publish)