E.I. DuPont de Nemours & Co. v. Kolon Indus., Inc., Civil Action No. 3:09cv058.

911 F.Supp.2d 340

E.I. DUPONT DE NEMOURS AND COMPANY, Plaintiff,

v.KOLON INDUSTRIES, INC., Defendant.

Civil Action No. 3:09cv058.

United States District Court,

E.D. Virginia,

Richmond Division.

Dec. 13, 2012.

Rodney A. Satterwhite, Brian Charles Riopelle, Kristen Marie Calleja, Matthew Devane Fender, Robyn Suzanne Gray, Thomas Moultrie Beshere, III, McGuireWoods LLP, Richmond, VA, Andrew David Kaplan, David Daniel Cross, Jeffrey L. Poston, Kent Alan Gardiner, Michael Joseph Songer, Shari Ross Lahlou, Stephen Matthew Byers, Terence P. Ross, Crowell & Moring LLP, Washington, DC, for Plaintiff.

Dana Johannes Finberg, SNR Denton U.S. LLP, Brian Ankenbrandt, Jeffrey Graham Randall, Michael Christopher Hendershot, Paul Hastings Janofsky & Walker LLP, Palo Alto, CA, Carla Walworth, Daniel Bruce Goldman, Paul Hastings Janofsky & Walker LLP, New York, NY, Daniel Prince, Thomas Peter O'Brien, Paul, Hastings, Janofsky & Walker, Los Angeles, CA, Igor Victor Timofeyev, Scott Mitchell Flicker, Stephen B. Kinnaird, Paul Hastings LLP, Washington, DC, Rhodes Beahm Ritenour, LeClairRyan PC, Richmond, VA, for Defendant.

MEMORANDUM OPINION

ROBERT E. PAYNE, Senior District Judge.

This matter is before the Court on the MOTION FOR ATTORNEYS' FEES, SANCTIONS AND COSTS (Docket No. 1593)(“MOTION FOR FEES, SANCTIONS AND COSTS”) filed by E.I. DuPont de Nemours and Company (“DuPont”) against Kolon Industries, Inc. (“Kolon”). For the reasons set forth below, the MOTION FOR FEES, SANCTIONS AND COSTS will be granted in part, denied in part, and taken under advisement in part, pending further briefing.

BACKGROUND

After two years of discovery, an extensive, indeed, prolific, motions practice, and a seven-week trial, the jury, using a fifty-one page verdict form, specifically found that Kolon had willfully and maliciously misappropriated and used 149 DuPont trade secrets. (Verdict Form, Docket No. 1514.) Subsequently, under Va.Code Ann. § 59.1–338B, the Court assessed punitive damages in the amount of $350,000. (Docket Nos. 1696 & 1697.) DuPont seeks attorneys' fees from Kolon under the Virginia Uniform Trade Secrets Act, specifically Va.Code Ann. § 59.1–338.1. (MOTION FOR FEES, SANCTIONS AND COSTS at 1.) DuPont also moves for fees, costs, and expenses against Kolon and its attorneys pursuant to 28 U.S.C. § 1927 “and the Court's inherent authority as a result of the litigation tactics of Kolon and its counsel that unnecessarily multiplied these proceedings.” (MOTION FOR FEES, SANCTIONS AND COSTS at 1.)

DuPont originally sought “an award of attorneys' fees in the total amount of $22,791,958.67,” less whatever fees are awarded with DUPONT'S APPLICATION FOR ATTORNEYS' FEES AND EXPENSES RELATED TO KOLON'S SPOLIATION OF EVIDENCE (Docket No. 1512) (“APPLICATION FOR FEES AND EXPENSES”). See DuPont's Mem. Supp. at 21. DuPont also originally sought an award of “nontaxable costs in the total amount of $12,987,742.21,” less the costs awarded in connection with the APPLICATION FOR FEES AND EXPENSES. (DuPont's Mem. Supp. at 21.) The amounts sought in the initial memorandum were later amended. The most recent amounts, as of the reply memorandum, are $18,900,134.36 for fees and $10,316,534.78 for non-taxable costs.

DISCUSSION

1. The Virginia Uniform Trade Secrets Act

Because the claim on which Dupont prevailed was based on the Virginia Uniform Trade Secrets Act (“VUTSA”), Va.Code Ann. § 59.1–338.1, which authorizes an award of attorneys' fees to the prevailing party, the analysis begins with that aspect of DuPont's motion. Section 59.1–338.1 provides that: “[i]f the court determines that ... (ii) willful and malicious misappropriation exists, the court may award reasonable attorneys' fees to the prevailing party.”

(a) Willful and Malicious Misappropriation

The jury found and the Court also has held that the misappropriation was “willful and malicious.” See Jury Verdict, Sept. 14, 2011 (Docket No. 1514); Mem. Op., Nov. 22, 2011, 2011 WL 5872895 (Docket No. 1696)(“The jury, after being fully and correctly informed, held that the misappropriation of each of 149 trade secrets was malicious and willful. The evidence fully supports that finding.”); Order, Jan. 27, 2012 (Docket No. 1872) (stating that “the Court further finds that ... the misappropriation was willful and malicious”); Mem. Op., Aug. 30, 2012, 894 F.Supp.2d 691, 2012 WL 4490547 (Docket No. 2051)(“Kolon's conduct in effecting the misappropriation was egregious (the jury found it to be willful and malicious).”).

Notwithstanding these findings and Kolon's necessitous concession that the jury found that the misappropriation was willful and malicious, Kolon opposes an award of attorneys' fees on the meritless notion that “there was no willful or malicious misappropriation,” a position that Kolon grounds on the contention that there was no evidence of malice.

At bottom, the predicate for Kolon's position is that DuPont “essentially conceded that it lacked evidence of malice when it [DuPont] dismissed its claims of statutory conspiracy under [the Virginia Business Conspiracy Act (“VBCA”) ] Va.Code Ann. § 18.2–499 et seq. during trial.” (Kolon's Opp'n at 6.) Kolon bases that assertion on comments made during argument on Kolon's Judgment as a Matter of Law (“JMOL”) motion on DuPont's business conspiracy claim. In that argument, DuPont did acknowledge that there was not direct evidence of the kind of malice required by the VBCA. ( Id. at 7 n. 5 (citing Trial Tr., Aug. 18, 2011, at 3047.)) However, DuPont took the view in the JMOL argument that there was circumstantial evidence of that species of malice, as to which the Court observed, “I can't see that the purpose was to injure [DuPont] in their reputation, trade, business or profession. That wasn't the purpose. The purpose was to get the information and to help [Kolon] sufficiently.” (Trial Tr. 3051:1–4.) Thereafter, on August 23, 2011, DuPont moved voluntarily to dismiss the statutory conspiracy claim. (Trial Tr., Aug. 23, 2011, at 3199; Order, Aug. 25, 2011 (Docket No. 1393).) In Kolon's view, DuPont's concession, the Court's observation, and DuPont's voluntary dismissal of the VBCA claim add up to an absence of malice that forecloses a finding of malicious misappropriation under the VUTSA.

Kolon's argument is without merit because it relies, not on the standard for willful and malicious misappropriation under the VUTSA, but on an entirely different species of malice that is required to establish a violation of the VBCA. The language of the VBCA clearly requires an intent to injure—that there be “two or more persons who combine ... for the purpose of (i) willfully and maliciously injuring another in his reputation, trade, business or profession....” Va.Code Ann. § 18.2–499 (emphasis added).¹ The discussion held in the JMOL argument with regard to malice related only to the species of malice that is required under the VBCA. When the VUTSA was addressed during that discussion, neither counsel nor the Court addressed the standard for willful and malicious misappropriation under the VUTSA, but the statute, Va.Code Ann. § 59.1–338.1, shows that the VUTSA contains no requirement of an intent to injure. (Trial Tr., Aug. 18, 2011, at 3044.) ²

Kolon actually recognized as much in its proposed jury instruction which defined “maliciously” for purposes of the “willful and malicious misappropriation” element in the VUTSA claim without proposing an “intent to injure” requirement. That instruction read: “An act is done ‘maliciously’ if prompted or accompanied by such gross indifference to the rights of others as will amount to a willful act without just cause or excuse.” (Docket No. 1047–2.) Thereafter, the parties agreed to that proposed jury instruction in a joint submission to the Court. (Docket No. 1508 at 43.) The Court then adopted the instruction without change, and Kolon did not object at the charge conference, when the instruction was given to the jury, or at any time before the jury returned its verdict. (Trial Tr. 5242:15–17; 5553:2–5.) Thus, Kolon has waived its right to assert, at this stage, the “intent to injure” standard. Fed.R.Civ.P. 51(a) & (c). In any event, as explained above, that standard does not apply to the VUTSA.

For the foregoing reasons, Kolon's contention that DuPont did not prove willful and malicious misappropriation under the VUTSA must be rejected. The record shows clearly that the misappropriation was willful and malicious within the meaning of the VUTSA.³

(b) Prevailing Party

The VUTSA permits a discretionary award of attorneys' fees to the prevailing party in two circumstances: (1) if the court determines that “a claim of misappropriation is made in bad faith;” or (2) if the court determines that “willful and malicious misappropriation exists.” ⁴ According to the comment to the Uniform Trade Secrets Act (“Uniform Act”), the award of reasonable fees to a prevailing party serves “as a deterrent to” bad faith claims of misappropriation and to the willful and malicious misappropriation of trade secrets. Uniform Act § 4 Attorney's Fees, Comment.

Neither the VUTSA, the Uniform Act, nor the comments to the Uniform Act provides any rule, or, for that matter, any guidance respecting how a court is to exercise the discretion conferred upon it. However, the comment to § 4 of the Uniform Act provides, rather tersely, that “patent law is followed in allowing the judge to determine whether attorney's fees should be awarded, even if there is a jury, compare35 U.S.C. § 285 (1976).”

It is not clear from the Uniform Act or its comments why the drafters of the Uniform Act considered it appropriate to use principles of patent jurisprudence to provide the framework for determining whether to award attorneys' fees in cases of trade secret misappropriation. However, the limited information that is available shows that the genesis of the Uniform Act was a study by the Patent Section of the American Bar Association that was prompted by the...