Workplace Techs. Research, Inc. v. Project Mgmt. Inst., Inc.

664 F.Supp.3d 1142

WORKPLACE TECHNOLOGIES RESEARCH, INC., Plaintiff/Counter-Defendant, v. PROJECT MANAGEMENT INSTITUTE, INC., Defendant/Counter-Claimant.

Case No.: 18cv1927 JO(MSB)

United States District Court, S.D. California

Signed March 28, 2023

Jose L. Patino, Justin Edwin Gray, Nicola Anthony Pisano, Regis C. Worley, Jr., Scott A. Penner, Eversheds Sutherland (US) LLP, San Diego, CA, Duane Scott Horning, California Business Law Group, PC, La Mesa, CA, for Plaintiff/Counter-Defendant.

Benita Sheung-Won Yu, Emily Horak, Eric James Bakewell, Hannah L. McMeans, Sean Patrick Hanle, Matthew J. Busch, Willkie Farr & Gallagher LLP, Los Angeles, CA, Joshua M. Rosenberg, Witt W. Chang, Venable LLP, Los Angeles, CA, for Defendant/Counter-Claimant.

ORDER:

(1) GRANTING IN PART AND DENYING IN PART WTRI'S MOTION FOR ATTORNEYS' FEES AND RELATED EXPENSES;

(2) DENYING PMI'S RENEWED MOTION FOR JUDGMENT AS A MATTER OF LAW; AND

(3) GRANTING PMI'S MOTION TO STRIKE

(ECF Nos. 415, 419, 436)

Jinsook Ohta, United States District Judge

The Court held a fifteen-day jury trial in the above-captioned case. Following a verdict in Plaintiff/Counter-Defendant Workplace Technologies Research, Inc. ("WTRI")'s favor, WTRI filed a motion for attorneys' fees and related expenses. ECF No. 415. Defendant/Counter-Claimant Project Management Institute, Inc. ("PMI") filed a renewed motion for judgment as a matter of law and a motion to strike portions of WTRI's motion for attorneys' fees. ECF Nos. 419; 436. For the reasons stated below, the Court: (1) grants in part and denies in part WTRI's motion for attorneys' fees and related expenses; (2) denies PMI's renewed motion for judgment as a matter of law; and (3) grants PMI's motion to strike.

BACKGROUND

I. Overview

The current action stems from an unsuccessful endeavor between WTRI and PMI to jointly develop a virtual world software program known as the Project Management Institute Advanced Learning ("PAL") project. ECF No. 324 at 2-3, 34. In early 2014, WTRI and PMI began discussions to co-develop a virtual world software program that would provide project management training. Id. at 3, 34. The Parties contemplated WTRI would contribute its experience in building virtual worlds, while PMI would contribute its expertise in the field of project management. Id.

To memorialize their venture, the Parties entered into the two contracts at issue in this case: the Development Agreement and the Services Agreement. ECF Nos. 158-9, Ex. 1 ("Software Technology Development and Purchase Agreement"), Ex. 5 ("Services Agreement"); 324 at 3. Under the Development Agreement, WTRI agreed to develop the PAL project with PMI's collaboration. Development Agreement at § 1.1. In exchange, PMI agreed to pay WTRI a total of $4,000,000 for WTRI's development work and the rights to the PAL project, to be paid in phases when the project reached specific milestones. Id. at § 2.5. The Development Agreement gave PMI the right to evaluate various initial "Alpha" versions of the software developed by WTRI and reject the software if it failed to meet specific requirements. Id. at §§ 2.5, 5. Under the original terms of the Development Agreement, if PMI exercised its reject option, the Parties' working relationship would end. Id. The Parties later agreed to amend the Development Agreement to allow the Parties to continue working with each other under different contractual terms—as set forth in a Services Agreement—if PMI exercised its reject option. ECF No. 324 at 35.

On December 2, 2016, PMI exercised its reject option, but chose to retain its rights to the PAL project and continue working with WTRI on its development. Id. As a result, the second phase of the Parties' relationship, governed by the Services Agreement, began. The Services Agreement required WTRI to perform certain content development, product testing, licensing, promotional, and technical assistance services relating to the PAL project. Services Agreement at § 2. These services included the recruitment of twelve companies for a pilot study. Id. at § 2.2. In exchange, PMI agreed to pay WTRI three separate payments totaling $1,137,623.00. Id. at § 4. PMI also granted WTRI a right to license copies of the completed PAL project software to WTRI's customers. ECF No. 158-9 at 86-93 ("License Agreement.").

Both agreements contained a "Limitation of Liability" provision aimed at capping the Parties' respective exposure in the event of a breach. Development Agreement at § 11; Services Agreement at § 8. These provisions capped the recovery owed to either Party to $2,137,623¹ and prohibited either Party from recovering certain categories of damages, including lost profits. Id. The Limitation of Liability provisions contained one exception—they did not apply if the breach of contract arose as the result of the "gross negligence" or "willful misconduct" of the Party accused of wrongdoing. Development Agreement at § 11; Services Agreement at § 8.

Despite significant investment on both sides, the joint endeavor between WTRI and PMI ultimately failed. The Parties spent three years attempting to fully develop the PAL project. ECF No. 367 at 46:9-10. PMI spent an alleged $10 million on the project, while WTRI allegedly incurred $775,000 worth of additional costs. Id. at 46:3-7. Over the course of the Parties' working relationship, PMI alleges it also shared trade secrets with WTRI in order to further their joint venture. ECF Nos. 47 at ¶¶ 39-44; 324 at 10-12. Despite the amount of time and money expended, in 2018, the Parties ultimately discontinued the project; no product was ever completed or sold. Id. at 2. The instant lawsuit followed.

II. Procedural History

On August 20, 2018, WTRI filed its initial Complaint in this action. ECF No. 1. After a period of motion practice, WTRI filed a Third Amended Complaint ("TAC") on August 27, 2019. ECF No. 37. In its TAC, WTRI alleged that PMI: (1) breached the Development and Services Agreements; (2) breached the implied covenant of good faith and fair dealing inherent in the Development and Services Agreements; (3) fraudulently misrepresented its intent to perform under the Parties' agreements; and (4) tortiously interfered with WTRI's relationship with the National Science Foundation ("NSF") and other business partners. Id. at ¶¶ 163-223.

The Parties further refined the pleadings and operative claims through additional motion practice. The Court dismissed WTRI's claims for breach of the implied covenant of good faith and fair dealing inherent in the Services Agreement, fraudulent misrepresentation, and tortious interference. ECF. No. 42 at 8-9. After the close of discovery, WTRI sought to amend its complaint to reinstate its claim for fraudulent misrepresentation and add a claim for fraudulent inducement. ECF No. 97. The Court denied this request. ECF No. 111. On February 19, 2020, PMI filed its Answer and Counterclaims against WTRI. ECF Nos. 46; 47. In its Counterclaims, PMI alleged that WTRI: (1) breached the Development and Services Agreements; (2) breached the implied covenant of good faith and fair dealing inherent in the Development and Services Agreements; and (3) misappropriated PMI's trade secrets. ECF No. 47 at ¶¶ 47-80.

Both Parties moved for summary judgment in this case. ECF Nos. 188, 190. WTRI moved for summary judgment on PMI's counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and trade secret misappropriation, and on PMI's affirmative defenses. ECF No. 188. PMI moved for summary judgment on WTRI's breach of contract and breach of the implied covenant of good faith and fair dealing claims. PMI also moved for partial summary judgment of its own claims as follows: (1) that WTRI had breached the Services Agreement; and (2) that PMI met the ownership element of its trade secret claims. ECF No. 190. On October 20, 2021, the Court denied PMI's motion for summary judgment in its entirety. ECF No. 215 at 50. The Court granted WTRI's motion for summary judgment on PMI's "business judgment rule" affirmative defense, finding the California state law doctrine inapplicable to this case. Id. at 48-50. The Court denied WTRI's motion in all other respects. Id. at 50.

Trial in this matter commenced on June 3, 2022, approximately forty-five months after the filing of the lawsuit. The Court originally scheduled trial in this case for July 26, 2021. ECF No. 57 at 7. The Court extended the trial date twice, first to October 25, 2021 and then to January 10, 2022—at the Parties' request. ECF Nos. 107 at 3; 151 at 3. The Court subsequently sua sponte continued the trial date five more times: to February 22, 2022, May 16, 2022, May 18, 2022, June 2, 2022, and finally to June 3, 2022, in order to accommodate the Court's and the Parties' respective schedules, and the transfer of this case to the undersigned. ECF Nos. 231 at 7:24-13:11; 236; 243; 244; 247; 321. The trial lasted fifteen days and concluded on June 27, 2022. ECF Nos. 350, 391.

III. Trial

At the outset of trial, PMI unsuccessfully sought to exclude WTRI's claim for lost profit damages as a matter of law. To that end, on June 3, 2022, PMI filed a motion to limit damages. ECF No. 340. In its motion, PMI pointed to the Limitation of Liability provisions in the Development and Services Agreements, which only allowed for lost profit damages in the case of PMI's "gross negligence" or "willful misconduct." Id. at 11-12. PMI argued that because WTRI did not have any independent tort claims, WTRI could not recover lost profit damages because these provisions invoked a tort standard. Id. at 12-15.² On June 7, 2022, the Court denied PMI's motion, finding that WTRI's lack of independent tort claims did not foreclose WTRI from attempting to prove PMI owed it contractual damages for PMI's gross negligence or willful misconduct in breaching the agreements. ECF No. 368 at 382:2-383:5, 387:24-388:24.

At the conclusion of WTRI's case-in-chief, PMI moved for judgment...