Proofpoint, Inc. v. Vade USA, Inc.

• Court: Court of Appeals for the Ninth Circuit
• Decided: August 30, 2024
• Docket: 23-16085
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS AUG 30 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

PROOFPOINT, INC.; CLOUDMARK, LLC, No. 23-16085

Plaintiffs-Appellants, D.C. No. 3:19-cv-04238-MMC

v. MEMORANDUM* VADE USA, INC.; et al.,

Defendants-Appellees.

PROOFPOINT, INC.; CLOUDMARK, LLC, No. 23-16175

v.

VADE USA, INC.; VADE FRANCE, SAS,

Defendants-Appellees,

and

OLIVIER LEMARIÉ,

Defendant.

Appeal from the United States District Court for the Northern District of California Maxine M. Chesney, District Judge, Presiding

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Argued and Submitted August 12, 2024 San Francisco, California

Before: GRABER, CALLAHAN, and KOH, Circuit Judges.

Plaintiffs Proofpoint, Inc. and Cloudmark LLC, which are affiliated

cybersecurity companies, brought this action under the Defend Trade Secrets Act,

18 U.S.C. § 1836 et seq., against Vade, a rival company, and Vade’s former Chief

Technology Officer, Oliver Lemarié. A jury found that Vade and Lemarié had

misappropriated Plaintiffs’ trade secrets and that Vade’s misappropriation was

willful and malicious. The jury awarded Plaintiffs approximately $13.5 million in

damages for unjust enrichment but zero dollars for actual loss. In these timely

appeals, Plaintiffs challenge the district court’s denials of their requests for a jury

trial on exemplary damages, an adverse-inference instruction, injunctive relief, and

attorney’s fees. We affirm.

1. The district court recognized that 18 U.S.C. § 1836(b)(3) is ambiguous

because it begins by stating that “a court may” grant a list of remedies, some of

which (such as an award of attorney’s fees) are clearly for the court alone and some

of which (such as damages for actual loss) are for the jury. The court then ruled as

a matter of law that, for purposes of § 1836(b)(3)(C), which allows an award for

exemplary damages, “court” means only the judge and not the jury. The court

decided to award no exemplary damages.

2 Plaintiffs argue that “court” means only the jury in that paragraph or, if the

statute is ambiguous, that the Seventh Amendment requires a jury trial for

exemplary damages. We need not resolve the questions whether such damages are

always for the judge or the jury under the statute or, if so, whether the statute

would be constitutionally infirm. Assuming, without deciding, that the Seventh

Amendment always requires a jury trial for exemplary damages that enhance an

award for actual loss, the jury in this case found no actual loss. Where, as here, an

award for unjust enrichment rests on disgorgement of the defendant’s profits, it is

an equitable remedy. See Liu v. SEC, 591 U.S. 71, 80 (2020) (“Decisions from

this Court confirm that a remedy tethered to a wrongdoer’s net unlawful profits,

whatever the name, has been a mainstay of equity courts.”). As the Supreme Court

recently noted, the Seventh Amendment embraces all suits that are not in equity or

admiralty jurisdiction. SEC v. Jarkesy, 144 S. Ct. 2117, 2128 (2024). Thus the

Seventh Amendment extends to a statutory claim only if that particular claim is

legal in nature, id., which disgorgement is not. Accordingly, any error by the

district court is harmless.

2. Because we do not remand the case for a jury trial on exemplary

damages, we need not reach Plaintiffs’ argument regarding an adverse-inference

instruction.

3 3. The district court did not abuse its discretion in denying Plaintiffs’ motion

for a permanent injunction. See Theme Promotions, Inc. v. News Am. Mktg. FSI,

546 F.3d 991, 1000 (9th Cir. 2008) (stating standard of review). The court

reasonably concluded that Plaintiffs failed to demonstrate an irreparable injury.

4. The district court did not abuse its discretion in denying Plaintiffs’ motion

for attorney’s fees. See Jones v. Riot Hosp. Grp. LLC, 95 F.4th 730, 738 (9th Cir.

2024) (stating standard of review). The court permissibly concluded that Vade’s

misappropriation of trade secrets, though willful and malicious, was insufficient to

require an award of fees.

AFFIRMED.