STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT
11-248
SIEMENS WATER TECHNOLOGIES CORP.
VERSUS
REVO WATER SYSTEMS, LLC, ET AL.
**********
APPEAL FROM THE FIFTEENTH JUDICIAL DISTRICT COURT PARISH OF LAFAYETTE, NO. C-20087316 HONORABLE GLENNON P. EVERETT, DISTRICT JUDGE
SHANNON J. GREMILLION JUDGE
Court composed of Elizabeth A. Pickett, Billy Howard Ezell, and Shannon J. Gremillion, Judges.
AFFIRMED AS AMENDED.
Alan K. Breaud Breaud & Meyers P. O. Drawer 3448 Lafayette, LA 70502 (337) 266-2200 Counsel for Plaintiff/Appellee: Siemens Water Technologies Corp.
Russell Joseph Stutes Jr. Stutes & Lavergne, LLC 600 Broad Street Lake Charles, LA 70601 (337) 433-0022 Counsel for Defendants/Appellants: Revo Water Systems, LLC Jacob J. David Shawn A. Carter Durio, McGoffin, Stagg & Ackerman P. O. Box 51308 Lafayette, LA 70505 (337) 233-0300 Counsel for Defendants/Appellants: Revo Water Systems, LLC Jacob J. David GREMILLION, Judge.
The defendants/appellants, Jacob J. David and Revo Water Systems, L.L.C.
appeal a jury verdict in favor of Siemens Water Technologies Corp. (Siemens)
awarding Siemens monetary damages and injunctive relief. For the reasons that
follow, we affirm as amended.
FACTS
David was employed by Pure Water Solutions. In 2004, Pure Water
Solutions was acquired by another business, Monosep Corporation. In 2004,
David signed a confidentiality agreement with Monosep, which provided:
(b) The term "Confidential Information" shall mean all information (whether or not specifically labeled or identified as confidential), in any form or medium, that is disclosed to, or developed or learned by, Employee in the performance of duties for the Company and that related to the present or planned business, trade secrets, products, services, customers and customers list, employees, price and cost information, marketing information, financial plans, research, research programs, apparatus, processes, techniques, technologies or developments of the Company or its subsidiaries or affiliates, or of third parties (i) with whom the Company or its subsidiaries or affiliates does business, or is preparing to do business, or (ii) from whom the Company or its subsidiaries or affiliates receives or has received information.
David was Monosep’s representative for selling or leasing of portable reverse
osmosis water desalination units (RO units) used on offshore facilities to produce
potable water. In December 2005, Monosep was acquired by Siemens, then doing
business as U.S. Filter Siemens.
The design of the RO unit was developed in the late 90s by Jason Badeaux,
an employee of Pure Water Systems. In June 2006, David asked Badeaux if he
could observe and assist in the construction of a unit. David’s stated reason for
wanting to observe and help was that greater knowledge of the unit would make
him a better salesman. David was allowed to assist in the fabrication of a unit being prepared for Shell Oil Company, one of David’s customers. David
submitted his resignation to Siemens in September 2006. Revo Water Systems
was formed in December 2006 and entered the RO unit market in March 2007.
In mid-2008, Michael Robicheaux, the former owner of Monosep and under
contract to Siemens, noticed that the RO unit business was slowing. He requested
a market analysis be performed, but left Siemens before the results were reported.
In July 2008, Badeaux was contacted about a problem with a RO unit at a location
he was certain no Siemens unit had been leased to. He dispatched a Siemens
technician to the location. That technician verified that the unit was not built by
Siemens, but by a company known as Revo Water Systems. Further investigation
by Badeaux convinced him that the Revo unit was a copy of the Siemens units.
Siemens instituted suit against Revo and David for breach of the
confidentiality agreement, violation of the Uniform Trade Secrets Act (La.R.S.
51:1341, et seq), and “trade dress” infringement. The suit sought monetary
damages and a permanent injunction. During the course of discovery, Siemens
discovered that schematics of the electrical components of its unit were in David’s
possession, and that in March 2006, David had forwarded these diagrams to
Presley Turner, with whom he founded Revo. However, it appears from the
evidence that Turner was unable to print the schematics. They were nonetheless
printed at some point. According to several witnesses, the wiring of the Revo unit
was copied from the Siemens unit.
The matter went to trial before a jury in June 2010. The jury returned a
verdict in favor of Siemens and against Revo and David. The jury found that
Siemens held trade secret information regarding the RO unit; that Revo and David
improperly, willfully, and maliciously took those trade secrets; and that Revo and
2 David engaged in unfair trade practices. Siemens was awarded $1,482,000 in
damages. It is from this judgment that Revo and David appeal.
ASSIGNMENTS OF ERROR
Revo and David assign the following errors:
1. The jury's findings that Plaintiff held trade secret information related to its reverse osmosis units and that Defendants willfully, maliciously, and improperly took such information were incorrect.
2. The jury erroneously found that Defendants engaged in unfair trade practices and unfair competition with respect to Siemens.
3. The jury's damage award was incorrect because it was not supported by the facts or law.
4. The trial court erred in denying Defendants' motion for directed verdict.
5. The trial court erred in denying Defendants' motion for judgment notwithstanding the verdict and/or motion for new trial.
6. The trial court erred in granting Plaintiff’s request for an injunction against Defendants.
7. The trial court erred in allowing royalties beyond the trial date to be awarded to Plaintiff.
At oral argument, the parties stipulated that the issues addressed by
assignments of error six and seven have been resolved. Further, no judgment was
ever signed by the trial court, although the trial court ruled on these issues. We
deem assignments of error six and seven abandoned.
ANALYSIS
The first two assignments of error address findings of fact on the jury’s part.
These are reviewed on appeal under the manifest error standard. In ascertaining
whether the fact finder’s determinations are manifestly erroneous, the court of
appeal will look at the record to determine whether a reasonable factual basis exists
for the finding and then determine whether the record establishes that the finding is
clearly wrong. Stobart v. State through Dept. of Transp. and Dev., 617 So.2d 880
3 (La.1993). The issue we must resolve, then, is not whether the jury was right or
wrong, but whether is conclusions were reasonable. Id. Even if we feel that our
evaluations and inferences are more reasonable than the jury’s, we must still
uphold the verdict where there are conflicting accounts in the record. Id. A
reasonable basis for findings of fact in the record precludes us from reversing those
findings. Id.
We find that a reasonable basis does exist in the record to support the jury’s
findings. The timing of David’s departure from Siemens after e-mailing the wiring
schematics to his future co-member of Revo, Turner, coupled with his expression
of interest in learning how the units are constructed shortly before he departed
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STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT
11-248
SIEMENS WATER TECHNOLOGIES CORP.
VERSUS
REVO WATER SYSTEMS, LLC, ET AL.
**********
APPEAL FROM THE FIFTEENTH JUDICIAL DISTRICT COURT PARISH OF LAFAYETTE, NO. C-20087316 HONORABLE GLENNON P. EVERETT, DISTRICT JUDGE
SHANNON J. GREMILLION JUDGE
Court composed of Elizabeth A. Pickett, Billy Howard Ezell, and Shannon J. Gremillion, Judges.
AFFIRMED AS AMENDED.
Alan K. Breaud Breaud & Meyers P. O. Drawer 3448 Lafayette, LA 70502 (337) 266-2200 Counsel for Plaintiff/Appellee: Siemens Water Technologies Corp.
Russell Joseph Stutes Jr. Stutes & Lavergne, LLC 600 Broad Street Lake Charles, LA 70601 (337) 433-0022 Counsel for Defendants/Appellants: Revo Water Systems, LLC Jacob J. David Shawn A. Carter Durio, McGoffin, Stagg & Ackerman P. O. Box 51308 Lafayette, LA 70505 (337) 233-0300 Counsel for Defendants/Appellants: Revo Water Systems, LLC Jacob J. David GREMILLION, Judge.
The defendants/appellants, Jacob J. David and Revo Water Systems, L.L.C.
appeal a jury verdict in favor of Siemens Water Technologies Corp. (Siemens)
awarding Siemens monetary damages and injunctive relief. For the reasons that
follow, we affirm as amended.
FACTS
David was employed by Pure Water Solutions. In 2004, Pure Water
Solutions was acquired by another business, Monosep Corporation. In 2004,
David signed a confidentiality agreement with Monosep, which provided:
(b) The term "Confidential Information" shall mean all information (whether or not specifically labeled or identified as confidential), in any form or medium, that is disclosed to, or developed or learned by, Employee in the performance of duties for the Company and that related to the present or planned business, trade secrets, products, services, customers and customers list, employees, price and cost information, marketing information, financial plans, research, research programs, apparatus, processes, techniques, technologies or developments of the Company or its subsidiaries or affiliates, or of third parties (i) with whom the Company or its subsidiaries or affiliates does business, or is preparing to do business, or (ii) from whom the Company or its subsidiaries or affiliates receives or has received information.
David was Monosep’s representative for selling or leasing of portable reverse
osmosis water desalination units (RO units) used on offshore facilities to produce
potable water. In December 2005, Monosep was acquired by Siemens, then doing
business as U.S. Filter Siemens.
The design of the RO unit was developed in the late 90s by Jason Badeaux,
an employee of Pure Water Systems. In June 2006, David asked Badeaux if he
could observe and assist in the construction of a unit. David’s stated reason for
wanting to observe and help was that greater knowledge of the unit would make
him a better salesman. David was allowed to assist in the fabrication of a unit being prepared for Shell Oil Company, one of David’s customers. David
submitted his resignation to Siemens in September 2006. Revo Water Systems
was formed in December 2006 and entered the RO unit market in March 2007.
In mid-2008, Michael Robicheaux, the former owner of Monosep and under
contract to Siemens, noticed that the RO unit business was slowing. He requested
a market analysis be performed, but left Siemens before the results were reported.
In July 2008, Badeaux was contacted about a problem with a RO unit at a location
he was certain no Siemens unit had been leased to. He dispatched a Siemens
technician to the location. That technician verified that the unit was not built by
Siemens, but by a company known as Revo Water Systems. Further investigation
by Badeaux convinced him that the Revo unit was a copy of the Siemens units.
Siemens instituted suit against Revo and David for breach of the
confidentiality agreement, violation of the Uniform Trade Secrets Act (La.R.S.
51:1341, et seq), and “trade dress” infringement. The suit sought monetary
damages and a permanent injunction. During the course of discovery, Siemens
discovered that schematics of the electrical components of its unit were in David’s
possession, and that in March 2006, David had forwarded these diagrams to
Presley Turner, with whom he founded Revo. However, it appears from the
evidence that Turner was unable to print the schematics. They were nonetheless
printed at some point. According to several witnesses, the wiring of the Revo unit
was copied from the Siemens unit.
The matter went to trial before a jury in June 2010. The jury returned a
verdict in favor of Siemens and against Revo and David. The jury found that
Siemens held trade secret information regarding the RO unit; that Revo and David
improperly, willfully, and maliciously took those trade secrets; and that Revo and
2 David engaged in unfair trade practices. Siemens was awarded $1,482,000 in
damages. It is from this judgment that Revo and David appeal.
ASSIGNMENTS OF ERROR
Revo and David assign the following errors:
1. The jury's findings that Plaintiff held trade secret information related to its reverse osmosis units and that Defendants willfully, maliciously, and improperly took such information were incorrect.
2. The jury erroneously found that Defendants engaged in unfair trade practices and unfair competition with respect to Siemens.
3. The jury's damage award was incorrect because it was not supported by the facts or law.
4. The trial court erred in denying Defendants' motion for directed verdict.
5. The trial court erred in denying Defendants' motion for judgment notwithstanding the verdict and/or motion for new trial.
6. The trial court erred in granting Plaintiff’s request for an injunction against Defendants.
7. The trial court erred in allowing royalties beyond the trial date to be awarded to Plaintiff.
At oral argument, the parties stipulated that the issues addressed by
assignments of error six and seven have been resolved. Further, no judgment was
ever signed by the trial court, although the trial court ruled on these issues. We
deem assignments of error six and seven abandoned.
ANALYSIS
The first two assignments of error address findings of fact on the jury’s part.
These are reviewed on appeal under the manifest error standard. In ascertaining
whether the fact finder’s determinations are manifestly erroneous, the court of
appeal will look at the record to determine whether a reasonable factual basis exists
for the finding and then determine whether the record establishes that the finding is
clearly wrong. Stobart v. State through Dept. of Transp. and Dev., 617 So.2d 880
3 (La.1993). The issue we must resolve, then, is not whether the jury was right or
wrong, but whether is conclusions were reasonable. Id. Even if we feel that our
evaluations and inferences are more reasonable than the jury’s, we must still
uphold the verdict where there are conflicting accounts in the record. Id. A
reasonable basis for findings of fact in the record precludes us from reversing those
findings. Id.
We find that a reasonable basis does exist in the record to support the jury’s
findings. The timing of David’s departure from Siemens after e-mailing the wiring
schematics to his future co-member of Revo, Turner, coupled with his expression
of interest in learning how the units are constructed shortly before he departed
Siemens, lends credence to the notion that in the months leading up to his
departure, David was preparing to enter into direct competition with Siemens using
Siemens’ own schematics and methods. The fact that David contacted an attorney
to determine whether entering into competition with Siemens by copying Siemens’
units bolsters this notion. There certainly were explanations by David for his
conduct and the actual innocence of his actions, but these were subject to the jury’s
determinations of credibility. Apparently, the jury did not believe David’s
explanations. There was no manifest error in the jury’s determinations regarding
the existence and protection of a trade secret by Siemens or regarding their
misappropriation by appellants.
The third assignment of error addresses whether Siemens supported its claim
for damages. Siemens introduced into evidence proof of the profits generated by
Revo. It offered no proof of any loss of its own. Appellants contend that Siemens
must prove that it was damaged.
Misappropriation of trade secrets is governed by the Uniform Trade Secrets
Act. Louisiana Revised Statute 51:1433 provides that, in addition to injunctive 4 relief, a complainant under the act may recover damages for actual loss and for the
unjust enrichment caused by misappropriation. Appellants contend that Siemens is
not entitled to recovery for unjust enrichment because of limitations upon that
theory of recovery found in the Louisiana Civil Code. Article 2298 of the Civil
Code provides that the remedy for unjust enrichment is “subsidiary and shall not be
available if the law provides another remedy for the impoverishment or declares a
contrary rule.” This seems to preclude for recovery for unjust enrichment because
other remedies exist for Siemens, but for the fact that La.R.S. 51:1433 specifically
allows for it. The more specific statue controls.
One proper measure of damages for misappropriation of a trade secret is the
profit derived from the misappropriation. Profits, being susceptible of calculation,
are reviewed under the manifest error-clearly wrong standard, rather than the more
deferential abuse of discretion standard. See Raphael v. Raphael, 05-1403 (La.App.
3 Cir. 5/3/06), 929 So.2d 825. Indeed, in this matter, the profit realized by Revo
was reduced in a clearly written and understandable format. On cross-examination,
David authenticated the balance sheet of Revo, which indicated a profit of
$883,962.71. This was the only evidence presented regarding Revo’s profit.
However, several expenses claimed by Revo were argued by Siemens to be
personal expenses of David’s, including the cost of a motor home, the cost of a
duck hunting lease, fees paid to a duck hunting guide, and meals and entertainment
expenses in excess of $210,000.00 over a roughly three year period. It appears that
the jury concluded that Siemens was correct and these expenses should be
considered in determining Revo’s actual net profit. The jury apparently also
extrapolated additional profits from the April 22, 2010 end date of the balance
sheet through the June 2010 trial.
5 We are unable to ascertain from the record the method by which the jury
arrived at the figure it awarded. The record does not support the finding that any
of Revo’s expenses were not business related. For instance, David was questioned
about the company’s claim for expenses associated with the motor home. He
testified that he used the motor home to entertain clients by taking them to football
games and other recreational pursuits. He also testified that the duck lease and
guide served to entertain clients. These expenses allowed Revo to cultivate
relationships with clients, which in turn led to more business. This testimony was
uncontradicted. Only the argument of counsel suggested the illegitimacy of the
expenses. We find the jury was clearly wrong in its calculation of damages of
$1,482,000.00 when the evidence presented demonstrated a maximum profit of
$928,160.84.
Revo posted a 40-month profit of $883,962.71. This would yield a monthly
profit of $22,099.07. We agree that the jury properly extrapolated the profits from
the end date of the balance sheet through the date of trial. Accordingly, we amend
the jury’s award in favor of Siemens and against Revo to $928,160.84.
Appellants further argue that even if unjust enrichment is available to
Siemens, La.R.S. 51:1433 limits it to the time it would have taken Revo to
discover the trade secret without David’s misappropriation. They base this
argument on comment (a) of section 1433. We note, however, that the statute’s
wording does not support this interpretation. It provides, “A complainant also may
recover for the unjust enrichment caused by misappropriation that is not taken into
account in computing damages for actual loss.” Nothing in the wording of section
1433 limits the unjust enrichment element other than prohibiting double recovery.
Additionally, had the legislature intended to limit the unjust enrichment, it could
easily have done so as it limited the time during which injunctive relief may be 6 granted in such cases. See La.R.S. 51:1432. Accordingly, while it is true that, as
testified to by Mr. Larry Blanchette, an engineer with Associated Design Group, a
consulting engineer could have developed a competing design at a minimal cost, it
is equally true that Revo did not undertake such a process and instead chose to
profit from more expedient means.
This assignment of error is without merit.
Our determinations regarding the jury’s verdict on assignments of error one
through three renders assignments of error four and five moot.
CONCLUSION
The jury’s findings on the misappropriation of trade secrets and damages are
subject to review under the manifest error standard. We find that a reasonable
basis exists in the record to support the jury’s findings. The judgment is affirmed,
but we amend the jury’s award in favor of Siemens and against Revo to
$928,160.84. Costs of this appeal are taxed to appellants, Jacob David and Revo
Water Systems, L.L.C.