United States Court of Appeals For the First Circuit
No. 22-1339
NUVASIVE, INC.,
Plaintiff, Appellee,
v.
TIMOTHY DAY,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Denise J. Casper, U.S. District Judge]
Before
Barron, Chief Judge, Lipez and Howard, Circuit Judges.
Bryan E. Busch, with whom Stephen D. Weatherhead was on brief, for appellant.
Mary Taylor Gallagher, with whom Holly M. Polglase, Michael S. Batson, Hermes, Netburn, O'Connor & Spearing, P.C., Christopher W. Cardwell, M. Thomas McFarland, and Gullett, Sanford, Robinson & Martin, PLLC were on brief, for appellee.
August 9, 2023 LIPEZ, Circuit Judge. In this appeal, Timothy Day
challenges district court orders requiring him to pay his former
employer more than $1.7 million in damages and attorney's fees for
his contractual breaches and spoliation of evidence. These
assessments arose from Day's business interactions with customers
of his former employer, appellee NuVasive, Inc., on behalf of his
new employer, Alphatec Spine, Inc., in violation of noncompetition
and nonsolicitation obligations in Day's contract with NuVasive.
The details of those violations are fully reported in the district
court's multiple decisions. See NuVasive, Inc. v. Day, No. 19-
cv-10800, 2022 WL 899244 (D. Mass. Mar. 28, 2022); NuVasive, Inc.
v. Day, No. 19-cv-10800, 2021 WL 1087982 (D. Mass. Feb. 18, 2021);
NuVasive, Inc. v. Day, No. 19-cv-10800, 2019 WL 2287709 (D. Mass.
May 29, 2019); see also NuVasive, Inc. v. Day, 954 F.3d 439 (1st
Cir. 2020) (resolving a choice-of-law issue). We thus assume
familiarity with the background facts and limit our discussion to
the damages and fees issues. After careful review of the record
and applicable law, we affirm the district court's rulings.
I. The Damages Award
Under Delaware law, which applies in this diversity
action, a plaintiff seeking to recover damages for breach of
contract must prove "with reasonable certainty" that the damages
claimed were caused by the defendant's breach. SIGA Techs., Inc.
v. PharmAthene, Inc., 132 A.3d 1108, 1111 (Del. 2015); see also
- 2 - Tanner v. Exxon Corp., No. 79C-JA-5, 1981 WL 191389, at *1 (Del.
Super. Ct. July 23, 1981) ("It is axiomatic that a plaintiff
. . . must demonstrate with reasonable certainty that defendant's
breach caused the loss." (emphasis omitted)); Chemipal Ltd. v.
Slim-Fast Nutritional Foods Int'l, Inc., 350 F. Supp. 2d 582, 596-
97 (D. Del. 2004) (quoting Tanner, 1981 WL 191389, at *1).
Although that standard requires a connection between the
plaintiff's harm and the defendant's breach, the evidence merely
needs to be sufficient to take "the fact of damages . . . out of
the area of speculation." Tanner, 1981 WL 191389, at *1; see also
SIGA Techs., 132 A.3d at 1111. We review the district court's
factfinding on causation for clear error. See Moore v. Elec. Boat
Corp., 25 F.4th 30, 34 (1st Cir. 2022); VICI Racing, LLC v. T-
Mobile USA, Inc., 763 F.3d 273, 293 (3d Cir. 2014).
Day asserts that the district court erred in finding the
requisite causal nexus between his improper solicitations and the
decisions of Drs. Paul Glazer, Brian Kwon, and John Shin to switch
from NuVasive to Alphatec as their primary supplier of spine-
related surgical products. Day argues that NuVasive failed to
establish the required connection between specific improper
conduct on his part and specific damages to the company. Instead,
he claims, the district court assumed a connection between his
actions and NuVasive's reduced business from the three surgeons
that the record does not support.
- 3 - In asserting the inadequacy of the district court's
factfinding, Day disregards the substantial circumstantial
evidence in the record. See, e.g., Elenza, Inc. v. Alcon Lab'ys
Holding Corp., 183 A.3d 717, 725-26 (Del. 2018) (recognizing that
facts may be proven with circumstantial evidence); see also
Mirabella v. Town of Lexington, 64 F.4th 55, 59 (1st Cir. 2023)
(Lipez, J., dissenting) ("[D]irect evidence is no more valuable
than circumstantial evidence."). Contrary to Day's suggestion, in
finding a causal connection between Day's breaches and the harm to
NuVasive, the district court did not rely solely on the dramatic
surge in Glazer, Kwon, and Shin's use of Alphatec products
following Day's move to that company. Rather, in its summary
judgment and damages opinions, the court found particularly
telling the multiple instances in which Day improperly interacted
with Beth Israel Deaconess Medical Center ("BIDMC") -- and, most
significantly, with Glazer -- in the months immediately after Day's
departure from NuVasive in April 2019.1 Those interactions
1 Before Day moved to Alphatec, Glazer was the largest user of NuVasive products at BIDMC, which in turn was the largest NuVasive account in the Boston market. See NuVasive, 2022 WL 899244, at *4. The district court described the change in Glazer's usage as follows:
In 2018, Dr. Glazer used $5.4 million in NuVasive hardware and biologics at BIDMC; in 2019, that figure was $2,559,137; in 2020, that total was approximately $95,000; in 2021 (as of . . . October 2021), that number was zero.
- 4 - included: (1) Day's assistance in negotiating the pricing of
Alphatec products for use at BIDMC, see NuVasive, 2022 WL 899244,
at *62; NuVasive, 2021 WL 1087982, at *3, *8; (2) Day's involvement
in obtaining approval for use of Alphatec's "ALIF" system for
spinal fusion surgeries at BIDMC, NuVasive, 2021 WL 1087982, at
*3; (3) Day's organizing the itinerary when Alphatec's CEO traveled
to Boston to meet with surgeons including Glazer, see NuVasive,
2022 WL 899244, at *5, and (4) Day's presence "in the operating
room with Dr. Glazer when he used an Alphatec ALIF system for the
first time in May 2019," id. at *6.
Indeed, Day's interactions in April and May 2019 with
surgeons who had been on his sales roster at NuVasive prompted the
district court to issue an injunction, on May 29, 2019, requiring
Day to comply with the nonsolicitation clause in the NuVasive
Proprietary Information, Inventions Assignment, Arbitration, and
Restrictive Covenants Agreement ("PIIA"). See NuVasive, 2019 WL
2287709, at *8. In January 2020, the court specified that the
injunction would remain in effect through March 3, 2020, noting in
its ruling that the "incidents of solicitation in violation of the
PIIA in April and May 2019 were not isolated incidents." In its
Id. (footnote omitted). 2 Day admitted helping to negotiate the pricing "with some emails and such."
- 5 - summary judgment decision the following year, the district court
cited evidence that Day had served as Alphatec's "primary contact
for BIDMC" through June 9, 2019, in violation of his
nonsolicitation agreement, and also had taken actions in violation
of his noncompetition agreement. NuVasive, 2021 WL 1087982, at
*8.
Day highlights Glazer's testimony that Day had nothing
to do with his decision to switch from nearly exclusive use of
NuVasive products to primary use of Alphatec products and also
points to evidence that Glazer's move to Alphatec had been in the
works before Day's own move to the company. The district court
considered this evidence, however, see NuVasive, 2022 WL 899244,
at *5, *11, and it was free to reject Glazer's disclaimer of Day's
influence given the undisputed evidence that Day engaged
repeatedly with Glazer on behalf of Alphatec during the period in
which Day's agreement with NuVasive prohibited him from doing so.3
3We note as well that NuVasive's damages expert, Misty Decker, was questioned in a deposition in July 2020 about Dr. Glazer's statement in his declaration that Day had not "solicited, encouraged, or participated in any solicitation of [him] to use Alpha[t]ec products." When asked if she had "any reason to believe . . . that Dr. Glazer was not telling the truth when he signed this declaration," she responded: "I have to look at the totality of the evidence, not just one piece of oral testimony, and I've given you all the reasons that would not tie directly to Dr. Glazer's declaration." Earlier in her deposition, Decker stated, "I do understand Dr. Glazer has made this statement, but I do understand there is documentary evidence of things that would contradict this statement." The district court credited the expert opinion offered by NuVasive. See NuVasive, 2022 WL 899244, at *11
- 6 - Moreover, even though Glazer may have shown some
interest in Alphatec before Day joined the company, the record
indicates that, until Day became involved, Glazer did not have the
necessary custom surgical instruments to make the switch to
Alphatec's products. See NuVasive, 2022 WL 899244, at *6;
NuVasive, 2021 WL 1087982, at *4. The district court also heard
testimony on the influential role sales representatives play in
retaining the business of surgeon users of medical products.
Specifically, John English, who performed both legal and
distributor roles at NuVasive, testified that companies require
noncompete agreements because "when a sales rep leaves, the company
has a chance of keeping the business as long as that sales rep is
not still in the room helping the surgeon."4
Finally, when viewed alongside the evidence described
above, the magnitude of Glazer's near-simultaneous move to
Alphatec after Day's transition provides additional circumstantial
("Here, NuVasive has shown, by a reasonable degree of certainty through witness testimony, exhibits and expert opinion that the Court credits, that it suffered lost profits as to Dr. Glazer, Dr. Shin and Dr. Kwon as a result of Day's violation of the NuVasive PIIA during the Injunction Period." (emphasis added)).
4 English answered affirmatively when asked if the sales representative plays the "great[est] role in convincing a surgeon to utilize NuVasive's products." English also testified that he verified while conversing with Glazer that -- as Day previously had assured him -- "Dr. Glazer was going to use whatever product that Mr. Day recommended for him."
- 7 - evidence of a cause-and-effect relationship. See, e.g., NuVasive,
2022 WL 899244, at *5 (finding that, as of summer 2018, "BIDMC was
only giving Alphatec 'a very, very small platform to be able [to]
have some trial cases'" of an Alphatec system (alteration in
original) (quoting Alphatec's then-senior sales director for the
Northeast)); id. (finding that, as of the first quarter of 2019,
"Dr. Glazer was still only using a minimal amount of Alphatec
products"); id. at *4 (finding that "Dr. Glazer's use of NuVasive
products changed in April 2019, the same time that Day left the
company for Alphatec" (citations omitted)).5 We thus see no clear
error in the district court's finding that the shift of the bulk
of Glazer's business from NuVasive to Alphatec between April 2019
5 In its Findings of Fact in its damages opinion, the district court reported that "Dr. Glazer's revenue generated with Alphatec jumped from $34,265 in Q1 2019 to $242,852[] in Q2 2019 and increased to over $400,000 in and after Q4 2019." NuVasive, 2022 WL 899244, at *6. The court stated the following in its Conclusions of Law:
[A]lthough [Dr. Glazer] had some limited business with Alphatec before Day arrived there from NuVasive on April 1, 2019, Day's own 2019 Sales Projections for NuVasive before his departure, the subsequent decrease in NuVasive sales by more than fifty percent, ten-fold increase of Alphatec sales for Dr. Glazer from Q1 to Q4 2019, all in the wake and midst of Day's breach of the NuVasive PIIA, show that NuVasive suffered lost profits from Dr. Glazer's business as a result of Day's breach.
Id. at *11.
- 8 - and March 2020 -- the operative timeframe for Day's nonsolicitation
obligation under the PIIA -- was not a coincidence and that Day
was indeed the catalyst.
The evidence relating to Kwon and Shin was less abundant
than that for Glazer, but it was nonetheless adequate to support
the district court's finding that Day was responsible for their
switch to Alphatec products. Before Day's move to Alphatec,
neither Kwon nor Shin was doing any business with that company.
See id. at *11. Both started using some Alphatec products in early
2020, see id., and the record contains references to a "Q1 2020"
Alphatec document -- i.e., a first-quarter report -- stating that,
in addition to Glazer, Day considered Kwon and Shin among his
successes. See, e.g., id. at *6 (citing testimony of NuVasive's
damages expert).
More specifically, Day acknowledged that his email to
Kwon in May 2019 asking Kwon to meet with Alphatec's CEO was "[t]o
some extent" a solicitation, and Day specifically asked in that
communication if he could show Kwon an Alphatec "screw system."
Day also joined Alphatec CEO Pat Miles for a breakfast meeting
with Kwon in May 2019. As for Shin, NuVasive introduced testimony
that the surgeon's projected sales for 2021 would have been higher
if he had continued using NuVasive's products, as he had
historically done, rather than switching to Alphatec. Alphatec's
senior sales director for the Northeast, Chad Spear, likewise
- 9 - testified that the Q1 2020 summary referenced above included an
observation that Shin had been "super engaged" with Day.
In short, the district court identified a pattern of
improper activity seemingly aimed at switching the affiliation of
multiple surgeons from NuVasive to Alphatec -- including a
particularly valuable customer, Glazer -- and reached the
reasonable conclusion that the campaign worked. Moreover, as
explained infra, NuVasive's damages claim was boosted by an adverse
inference imposed on Day because he had spoliated evidence --
namely, an inference that text messages he failed to preserve were
"unfavorable to him" with respect to "what damages NuVasive was
able to prove." Id. at *3, *12-13.6
Nor do we find any clear error in the amount of damages
awarded. The court held a three-day hearing devoted in large part
to the issue of damages, with both parties offering expert
testimony and written reports. In calculating "low end" and "high
6In an apparent effort to discount the strength of the circumstantial evidence on damages, Day contrasts the record here with the facts of Tanner v. Exxon Corp., where the plaintiff's former customers specifically testified that they stopped patronizing the plaintiff's service station because of the station's deteriorating condition resulting from the defendant's contractual breach. See 1981 WL 191389, at *2. As explained above, however, the plaintiff's burden of proof for breach-of- contract damages is "[r]easonable certainty," a showing that "is not equivalent to absolute certainty." Id. at *1. The record here contained an abundance of circumstantial evidence from which the district court supportably inferred the causal link between Day's breaches and NuVasive's harm.
- 10 - end" damages amounts for the conversion of Glazer's sales to
Alphatec, NuVasive's expert relied, in part, on 2019 sales
projections that Day himself had prepared while still working for
NuVasive -- finetuning the figures to Day's advantage in various
ways. NuVasive, 2022 WL 899244, at *7. For hardware sales, for
example, the expert subtracted NuVasive's "'mitigating sales,'
i.e., the sales that it actually made[;] the costs of goods sold
(that were avoided)[;] and distributor commissions that would have
been made." Id. For biologics, which are "bought in bulk for the
hospital as a whole," the expert made a "conservative[]"
calculation covering a limited period because of the possibility,
inter alia, that BIDMC would have had "inventory on hand from prior
years." Id. at *8. The district court conservatively adopted the
low-end estimate for Glazer's sales (including prejudgment
interest) calculated by NuVasive's expert ($1,552,581), see id. at
*9, *11, and it limited the damages to the period covered by its
preliminary injunction order, id. at *11.7 The expert's
calculations, adopted by the district court, were significantly
lower for the damages related to Kwon and Shin's lost sales:
$20,060 for Kwon and $29,482 for Shin. See id. at *9.
7 NuVasive had sought lost profits for periods after the end of the injunction period, but the district court "decline[d] to award any additional damages given the impact of the pandemic after that time on sales projections, the decrease in surgical needs and impact on sales revenues." NuVasive, 2022 WL 899244, at *11.
- 11 - Day attempts to discredit the testimony of NuVasive's
expert by asserting that she "assumed liability and proximate cause
in her report." It was the court, however, that made the liability
determination based on the evidence of Day's improper actions and
the three doctors' subsequent transitions to Alphatec. See id. at
*10-11; NuVasive, 2021 WL 1087982, at *8-9. As described above,
the court supportably found that Day's violations of the PIIA
caused harm to NuVasive. The expert then converted the court's
cause-and-effect finding into specific damages amounts based on
her examination of multiple factors, including historical sales
data, actual sales in the relevant period, and, as noted above,
Day's own projection of sales to Glazer anticipated for 2019. See
2022 WL 899244, at *6-9.8 The district court permissibly relied
on that analysis in determining the damages award.9
8 Moreover, the expert, Decker, explained that she drew her understanding of causation from multiple factors, including the details of Day's violations of the PIIA and Day's own claims of success with the three doctors -- in addition to "the drop in NuVasive's sales to these surgeons in Q2 2019 [and] the uptick in Alphatec's sales in the same period." NuVasive, 2022 WL 899244, at *6. Decker also stated that she had reviewed the entirety of eleven depositions taken in the case, "as well as the entire exhibit packages for those depositions."
9 In so concluding, we briefly note Day's inapt emphasis on an unpublished decision of the Superior Court of Delaware in which the court found that the plaintiff had not established "a causal connection between [a former employee's] alleged actions and [the company]'s purported loss in sales." OmniMax Int'l, Inc. v. Dowd, No. N16C-04-168, 2019 WL 3545848, at *3 (Del. Sup. Ct. Jul. 17, 2019). The circumstances in OmniMax differ markedly from those here. There, the court found that the plaintiff company had failed
- 12 - II. Attorney's Fees and Costs
NuVasive successfully sought sanctions against Day based
on spoliation of evidence -- specifically, as noted above, Day's
failure to preserve certain text messages relevant to his
interactions with NuVasive customers after he left the company.
Adopting the report and recommendation of the magistrate judge,
the district court concluded that NuVasive was entitled to the
adverse inference that the lost evidence was unfavorable to Day,
plus reasonable attorney's fees and costs to compensate the company
for expenses incurred as a result of the spoliation. The court
determined that NuVasive was entitled to fees covering a roughly
two-year period that began with the company's discovery in August
2019 that evidence had been spoliated. The court awarded NuVasive
$127,214.50 in attorney's fees and $2,103.85 in costs related to
to prove that its former employee breached the provision of their agreement barring customer solicitation, see id. at *3-4, and the company also offered "no expert who could perhaps correlate its losses to the conduct of" its former employee, id. at *4. Neither shortcoming identified in OmniMax applies here.
We note, in addition, that the Delaware Supreme Court has endorsed "the wrongdoer rule" for assessing expectation damages resulting from a breach of contract, holding that "[t]he breaching party cannot avoid responsibility for making the other party whole simply by arguing that expectation damages based on lost profits are speculative because they come from an uncertain world created by the wrongdoer." SIGA Techs., 132 A.3d at 1111; see also id. at 1131 n.132. Accordingly, when a party has breached a contract, "the fact" of expectation damages must be proven "with reasonable certainty," but "[t]he amount of damages can be an estimate." Id. at 1111.
- 13 - the spoliation, including recompense for the company's efforts to
recover the lost messages from other sources.
On appeal, Day argues that the district court improperly
awarded attorney's fees for work "unrelated and unnecessary to
NuVasive's motion for sanctions." He further asserts that the
court failed to "fully engag[e] in the nuanced evaluation required
under the lodestar method" used in the First Circuit for
calculating a reasonable attorney's fee. Day objects particularly
to the court's inclusion of fees for work that pre-dated NuVasive's
filing of its motions for sanctions,10 which he characterizes as
"general discovery expenses."
We review a district court's award of attorney's fees
for abuse of discretion, see, e.g., Díaz-Rivera v.
Rivera-Rodríguez, 377 F.3d 119, 124 (1st Cir. 2004), and we find
none here. The court explained in its fees order that, immediately
after learning of the spoliation in August 2019, NuVasive "took
steps to recover [the missing text messages] from other sources
(e.g., his phone service providers, Alphatec)," resulting in
"attorneys' fees and costs that predate[d] the formal filing of
the spoliation motions" but were nonetheless related to the
spoliation and covered by the court's order adopting the magistrate
10The district court denied NuVasive's initial motion for sanctions but granted its renewed motion.
- 14 - judge's recommendation. The district court thus concluded that
the appropriate timeframe for the fee award began with NuVasive's
discovery that evidence had been spoliated and extended through
NuVasive's filing of the fee petition now at issue. The court
further explained that it had reviewed the attorneys' billing
records and stated that, "[g]iven the contested nature of the
spoliation motions and litigation regarding same, the Court
concludes that 217.7 hours for same was reasonable and the time
spent attempting to retrieve evidence (258.9 hours) and much less
time (33.4 hours through November 30, 2021) spent on the fee
petition also was reasonable."
We reject out-of-hand Day's assertion that the court
should have awarded only fees "directly related to [NuVasive's]
motion for spoliation of evidence." The court's chosen scope for
the fee award, covering NuVasive's costs in attempting to find the
spoliated text messages or locate other evidence to compensate for
their loss was eminently reasonable and certainly not an abuse of
discretion. Those efforts by NuVasive were a predictable result
of the spoliation. As to the amount of fees for that time period,
Day makes only broad-brush arguments in attempting to show that
the award was improper. Although he asserts that NuVasive included
more than $53,000 in fees by its lead counsel "for general
discovery that is entirely unrelated to NuVasive's Motions for
Sanctions," he does not identify the entries in NuVasive's listed
- 15 - hours that he claims would be improper even if we accepted -- as
we have -- the district court's determination that the relevant
period began in August 2019 and includes discovery made necessary
by Day's spoliation of evidence.11
In his briefing, Day relies heavily on yet another
unpublished decision to challenge the fees amount, highlighting
the decision of a federal district court in Massachusetts to award
fees related to a spoliation motion in an amount substantially
less than had been requested. See Hefter Impact Techs., LLC v.
Sport Maska, Inc., No. 15-13290, 2017 WL 5798642, at *3-4 (D. Mass.
Nov. 28, 2017). Hefter, however, is readily distinguishable from
this case in at least two important respects. First, the Hefter
court "ultimately found that the [defendant's] conduct was not
sanctionable." Id. at *3. It nonetheless decided to award "fees
and costs associated with the extra work plaintiff did to bring
the sanctions motion itself" because the motion, although
unsuccessful, "was a reasonable response" to the defendant's
11Day does not even provide examples of such expenditures. Rather, he supports his contention that "[t]he attorneys' fees awarded were unreasonable and excessive" by citing to the full list of hours submitted by NuVasive's primary and local law firms, with a parenthetical explaining that these lists "reflect[] entries for written discovery to Day; subpoenas to Day's new employer, subpoenas to hospitals, doctors, and credentialing companies necessary to establish any alleged breaches of the restrictive covenants, etc." However, any of those tasks could have been part of NuVasive's efforts to obtain the lost evidence or find alternative proof of Day's breach of the PIIA.
- 16 - conduct. Id. (emphases omitted). Here, by contrast, the district
court found that sanctions were warranted, and the magistrate judge
recommended an award to cover NuVasive's costs both in prosecuting
the sanctions motions and "attempt[ing] to recover the lost
evidence." Second, the fee analysis in Hefter was performed by
the trial judge. As the reviewing court, we play a different role,
"customarily defer[ring] to the trial judge, whose intimate
knowledge of the nuances of the underlying case uniquely positions
him to construct a condign award." Díaz-Rivera, 377 F.3d at 124
(quoting Gay Officers Action League v. Puerto Rico, 247 F.3d 288,
292 (1st Cir. 2001)); see also Pérez-Sosa v. Garland, 22 F.4th
312, 320 (1st Cir. 2022) ("The Supreme Court has cautioned against
'appellate micromanagement' of fee awards." (quoting Fox v. Vice,
563 U.S. 826, 838 (2011))).
The district court must be guided, of course, by the
lodestar method ordinarily used by our court to evaluate the
reasonableness of attorney's fees. See, e.g., Pérez-Sosa, 22 F.4th
at 321.12 Here, the trial judge expressly recognized the lodestar
12"The 'lodestar' . . . is calculated by multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate." Diaz v. Jiten Hotel Mgmt., Inc., 741 F.3d 170, 172 n.1 (1st Cir. 2013). Day challenges only the number of hours used for the lodestar, not the hourly rates. A court making a fee award also has the discretion to adjust the lodestar up or down based on various factors, see id. at 173 n.2, including "the amount involved and the results obtained," id. at 177 n.7 (listing the adjustment factors enumerated in Hensley v. Eckerhart, 461 U.S. 424, 430 n.3 (1983)).
- 17 - inquiry and adhered to its steps. Although the court accepted
all hours proposed by NuVasive, it stated that it had "reviewed
the billing records produced" and found the time spent on both the
spoliation-related work and the fee petition to be reasonable,
noting the litigation over the "contested" spoliation motions.
The court also "considered the factors for adjusting the lodestar
. . . upward or downward, but [found] no basis to do so."
(Citation omitted.) We thus detect no legal error in the court's
fees analysis and, as noted above, no abuse of discretion in the
amounts awarded.
Accordingly, we affirm both the award of damages in favor
of NuVasive and the sanctions-based award of attorney's fees and
costs.
So ordered.
- 18 -