Gsi Tech., Inc. v. United Memories, Inc.

GSI TECHNOLOGY, INC., Plaintiff, v. UNITED MEMORIES, INC., et al., Defendants.

Case No. 5:13-cv-01081-PSG

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

May 26, 2016

ORDER DENYING GSI'S MOTION FOR NEW TRIAL

(Re: Docket No. 1071)

Plaintiff GSI Technology, Inc. moves for a new trial under Fed. R. Civ. P. 59.¹ GSI's motion is DENIED.

I.

The background of this dispute is described in the accompanying order on GSI and Defendant United Memories, Inc.'s renewed motions for judgment as a matter of law.² The facts underlying each of GSI's arguments for a new trial are discussed below where relevant.

II.

This court has jurisdiction under 28 U.S.C. § 1331. The parties further consented to the jurisdiction of the undersigned under 28 U.S.C. § 636(c) and Fed. R. Civ. P. 72(a).³

Fed. R. Civ. P. 59(a)(1)(A) provides that the court may order a new trial "for any reasonfor which a new trial has heretofore been granted in an action at law in federal court." Although "Rule 59 does not specify the grounds on which a motion for a new trial may be granted," courts are "bound by those grounds that have been historically recognized."⁴ These grounds "include, but are not limited to, claims 'that 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.'"⁵ The Ninth Circuit has elaborated that "[t]he trial court may grant a new trial only if the verdict is contrary to the clear weight of the evidence, is based upon false or perjurious evidence, or to prevent a miscarriage of justice."⁶ "Therefore, in a nutshell, the district court may grant a new trial '[i]f, having given full respect to the jury's findings, the judge on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'"⁷

In making this determination, the court "is not required to view the trial evidence in the light most favorable to the verdict."⁸ "Instead, the district court can weigh the evidence and assess the credibility of the witnesses."⁹ The court may "set aside the verdict of the jury, even though supported by substantial evidence, where, in [the court's] conscientious opinion, the verdict is contrary to the clear weight of the evidence."¹⁰ However, "a district court may not grant a newtrial simply because it would have arrived at a different verdict."¹¹

III.

GSI argues that the court committed several errors that require a new trial. None of them, however, satisfies the threshold for that relief.

First, the court's decision to try ISSI's bad faith contention in the same proceeding as GSI's trade secret misappropriation claims does not merit a new trial. As a procedural note, the court addresses this argument even though GSI and ISSI have settled,¹² because GSI argues that trying the bad faith contention affected the jury's ability to fairly consider the misappropriation claims, which were against UMI as well as ISSI.¹³

By way of recap: after GSI sued UMI and ISSI for trade secret misappropriation,¹⁴ ISSI responded that GSI's misappropriation claim was raised in bad faith within the meaning of Cal. Civ. Code § 3426.4.¹⁵ GSI moved for summary judgment on the bad faith contention, but the court denied summary judgment because "a host of underlying factual issues remain[ed] in dispute."¹⁶ In its trial brief, GSI then asked the court to decide the bad faith contention after the trial, because presenting the bad faith contention to the jury would distract and bias them on an issue that GSI argued was not relevant to Defendants' liability.¹⁷ At the same time, GSI moved in limine to exclude evidence and argument about GSI's reasons for filing suit, arguing that evidence about its motivations was not relevant to any facts at issue before the jury (because the bad faithcontention should not go to the jury) and was prejudicial (because the bad faith contention, if presented to the jury, would bias the jury against GSI).¹⁸ The court ruled that the bad faith contention would be presented to the jury and denied GSI's motion in limine because the evidence might be probative of bad faith, as well as Defendants' affirmative defenses.¹⁹ At trial, the jury found that GSI owned four trade secrets, which UMI had misappropriated, and that ISSI had not misappropriated any of GSI's trade secrets.²⁰ The jury then found that GSI had not "initiate[d] and/or maintain[ed] its claim of trade secret misappropriation against ISSI in bad faith."²¹

GSI now makes three arguments that the court committed prejudicial error by not trying bad faith separately. The first is that in Cargill v. Progressive Dairy Solutions, Inc., the Ninth Circuit cautioned against trying bad faith with the plaintiff's claims.²² Cargill, however, is an unpublished, non-precedential decision.²³ Moreover, Cargill held that the district court did not abuse its discretion in submitting the bad faith contention and the plaintiff's claims to the jury at the same time, because the verdict form clearly directed the jury "to consider first the merits of Cargill's misappropriation claim and second—and only if the jury rejected the misappropriation claim on its merits—Cargill's putative bad faith in bringing this claim."²⁴ In GSI's case, the verdict form also directed the jury to consider the merits of GSI's misappropriation claims first, and to consider the bad faith contention only if it rejected the misappropriation claims.²⁵

GSI's second argument is that because the court did not try bad faith in a separate proceeding, it erroneously denied GSI's motion in limine to exclude evidence and argument of its iterative trade secret disclosures, narrowed claims or dismissed claims.²⁶ GSI argues that pretrial orders dismissing or narrowing GSI's claims should have been excluded because they were not relevant, because the jury might have given the court's rulings excessive weight and accepted them as true without doing its own fact-finding, and because UMI and ISSI selectively quoted the court's orders at trial to portray GSI in a bad light and insinuate that its claims were invalid.²⁷

The court denied GSI's motion in limine because the evidence "[might] be probative of ISSI's claim of bad faith . . . and UMI's defense of unclean hands and defenses against trade secret misappropriation."²⁸ Because the bad faith contention went to the jury, ISSI was entitled to present evidence relevant to that contention. The court's pretrial orders were relevant evidence because a plaintiff's conduct both in bringing and maintaining its trade secret claims—including claims that ultimately are dismissed—is evidence that can be considered in deciding bad faith under Cal. Civ. Code § 3426.4.²⁹ GSI cites two cases holding that evidence of dismissed claims is not relevant, but those cases are factually inapposite.³⁰ Evidence of dismissed claims may beirrelevant if no aspect of those claims is at issue—but where the plaintiff's bad faith in bringing dismissed claims to begin with is disputed, the evidence of those claims is clearly relevant.

In the face of the relevance of the evidence of the dismissed and narrowed claims, GSI's argument that the jury could have given the court's orders too much weight and failed to do its own fact-finding also flops. GSI does not cite a single case that is binding on this court or that presents similar facts for this proposition.³¹ GSI also does not present any evidence even hinting that the jury abdicated its fact-finding and analytical responsibilities. While excluding evidence of prior rulings may be appropriate in some cases,³² in this case, where the evidence was relevant to a disputed issue, GSI needed to prove that the probative value of the evidence was "substantiallyoutweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence."³³ And it did not. At best, GSI has suggested that there might have been a danger of the Rule 403 risks, but it has not shown that those risks outweighed the probative value of the evidence, let alone substantially outweighed it. GSI complains that UMI and ISSI selectively quoted bits of the court's pretrial orders and created a "circus-like trial;"³⁴ while the court strives for decorum in its proceedings, no rule of procedure or evidence bars a looser atmosphere. Moreover, GSI also took advantage of the court's motion in limine ruling to question witnesses about pretrial orders.³⁵

GSI's third argument on the bad faith contention is that the court improperly asked fact witnesses Mary Tong, a Cisco executive, and Scott Howarth, ISSI's CEO, questions seeking a legal opinion on the bad faith contention. The witness testimony was proper under Fed. R. Evid. 701, was not unfairly prejudicial and does not warrant a new trial.

Fed. R. Evid. 701 governs opinion testimony by lay witnesses. It says,

If a witness is not testifying as an expert, testimony in the form of an opinion is limited to one that is:

(a) rationally based on the witness's perception;

(b) helpful to clearly understanding the witness's testimony or to determining a fact in issue; and

(c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702.

The jury submitted a question to the court for Tong: "Do you believe GSI brought this lawsuit in good faith? If not, why not?"³⁶ GSI objected because the question asked a lay witnessto give a legal opinion and called for speculation, and because Tong did "not have all the facts."³⁷ The court proceeded with the question and asked Tong, "Do you believe that GSI brought this lawsuit in good faith?"³⁸ Tong answered,

I don't know GSI's intent of this lawsuit. I don't know the good faith of that. I just - I just don't see - Cisco does have a lot of award of business to our suppliers. If every supplier sues the suppliers and started to have a lawsuit, it is very concerning. So I can't say it's

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