United States Court of Appeals For the First Circuit
Nos. 24-1494, 24-1500, 24-1586
ZIPBY USA LLC; TMA GROUP OF COMPANIES LIMITED; TMA CAPITAL AUSTRALIA PTY LTD,
Plaintiffs, Appellees/Cross-Appellants,
v.
GREGORY PARZYCH,
Defendant, Appellant/Cross-Appellee.
APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Indira Talwani, U.S. District Judge]
Before
Montecalvo, Kayatta, and Aframe, Circuit Judges.
Kenneth N. Thayer, with whom Daniel Walsh-Rogalski and Conn Kavanaugh Rosenthal Peisch & Ford, LLP were on brief, for appellant/cross-appellee.
John J. Cotter, with whom Brandon R. Dillman, Joshua N. Andrews, and K&L Gates LLP were on brief, for appellees/cross- appellants.
March 19, 2026 KAYATTA, Circuit Judge. Gregory Parzych was serving as
president of a parking technology company called ZipBy USA, LLC,
("ZipBy") when he learned of an opportunity for the company to
acquire his former business, a company called TCS. Parzych
advised ZipBy's owner to turn down the opportunity, and ZipBy's
owner did so. Parzych then attempted to acquire TCS for himself.
When ZipBy and its affiliates1 found out what Parzych was up to,
they fired him. ZipBy also sued Parzych, asserting fiduciary-
duty, contract, trade-secret, trademark-infringement, and false-
designation claims and seeking compensatory and injunctive relief.
After a six-day trial, the jury returned a verdict against Parzych
on all counts. The district court subsequently found that the
evidence could not support the verdict against Parzych on the
trade-secret claims. It otherwise rejected Parzych's challenges
to the verdict, entered a permanent injunction barring Parzych
from acquiring TCS, and awarded ZipBy a portion of its attorneys'
fees incurred in the litigation. Parzych now appeals, and ZipBy
cross appeals the set-aside of its verdict on its trade-secret
claims.
For the reasons explained below, we affirm the judgment
of the district court.
1 Those affiliates are TMA Group of Companies Limited and TMA Capital Australia PTY LTD.
- 2 - I.
We begin with the facts. ZipBy hired Parzych as its
president in 2016. Parzych was no stranger to the world of parking
technology: He previously founded parking company TCS, then sold
it to another company, Q-Free International ("Q-Free"), in 2012.
Over the course of his employment, Parzych entered into three
agreements with Zipby. The first, the Employee Agreement,
included a restrictive covenant under which Parzych agreed not to
"undertake any outside activity . . . that could reasonably give
rise to a conflict of interest or interfere with his duties and
obligations to [ZipBy]," nor to divert business from ZipBy or
interfere with its relationships with any service or product-
providers. The second agreement, the Employee Handbook, required
Parzych to "prevent revealing or divulging" trade secrets or
protected confidential information regarding ZipBy's business
except as "necessary . . . in the performance of [his] duties or
as required by law."
The third agreement, the IP Agreement, forbade Parzych
from using or disclosing "trade secrets, proprietary data and
confidential information" while in ZipBy's employ and thereafter.
The IP Agreement stated that while employed by ZipBy, Parzych was
"expected to devote his energy and skills to the promotion of the
best interests of the Company." It further required Parzych to
safeguard "Confidential Information" that he acquired and
- 3 - prevented him from "us[ing] such Confidential Information in any
way or in any capacity other than as an employee of the Company
and to further the interests of the Company and Related Companies."
It provided that, should Parzych breach or threaten to breach its
provisions, ZipBy could bring suit for injunctive relief and that
"the substantial and irreparable harm" from any such breach was
"impossible to ascertain in advance," but "monetary damages . . .
would be wholly inadequate" as a remedy. Finally, it contained a
fee-shifting provision, which we describe below.
In January 2020, Parzych learned that Q-Free was
considering selling TCS. Parzych informed Anthony Karam, ZipBy's
owner, and Karam asked Parzych to investigate the opportunity.
Parzych requested and received financial information from Q-Free
about TCS. From there, the parties' accounts diverge: ZipBy
claims that Parzych advised Karam not to acquire TCS, while Parzych
claims that he and Karam "both expressed concerns" about the
acquisition. Given the verdict, we must presume that the jury
sided with ZipBy's account. ZipBy's board then voted not to move
forward with the acquisition. Two weeks later, unaware of the
ZipBy board's decision, Q-Free sent Parzych a proposed
nondisclosure agreement between ZipBy and Q-Free in connection
with the possible sale of TCS. Rather than executing the agreement
for ZipBy, Parzych executed it on behalf of a separate shell
company that he owned, MJP Global Technologies. With the
- 4 - financial data previously disclosed by Q-Free in hand, Parzych
began considering whether to re-acquire TCS on his own.
When ZipBy discovered that Parzych was attempting to
purchase TCS himself, it fired him. ZipBy then sued Parzych,
seeking damages and an injunction preventing Parzych from
acquiring TCS for himself.
After a five-day trial, the jury returned a verdict in
ZipBy's favor. It awarded ZipBy $1.5 million in compensatory
damages on claims of breach of fiduciary duty, breach of contract,
and misappropriation of trade secrets, and $1 million in exemplary
damages for misappropriation of trade secrets. Unhappy with this
outcome, Parzych moved for a new trial under Federal Rule of Civil
Procedure 59, a new trial on damages, and judgment as a matter of
law under Federal Rule of Civil Procedure 50(b).
The district court granted Parzych's motion for judgment
as a matter of law in part, holding that the evidence did not
support a finding that Parzych misappropriated trade secrets. The
court struck the $1 million in exemplary damages on that basis.2
Otherwise, it rejected Parzych's challenges.
2 The court left the compensatory damages intact, however, because it found that "evidence as to damages from Parzych's breach of contract and breach of fiduciary duty [was] entirely contiguous with any damages from the alleged trade secrets misappropriation." Parzych does not challenge this determination on appeal.
- 5 - Parzych now appeals, while ZipBy cross appeals,
contending that the district court was wrong to vacate the jury's
verdict that Parzych misappropriated ZipBy's trade secrets.
II.
We begin with Parzych's evidentiary challenges. We
review a district court's decision to admit or exclude evidence
for abuse of discretion. Gen. Elec. Co. v. Joiner, 522 U.S. 136,
141 (1997).
A.
Parzych first contends that the district court erred by
permitting ZipBy's expert witness, William Scally, to testify
about the profits ZipBy lost by not acquiring TCS. Scally's
testimony was unreliable, Parzych argues, because it was the
product of flawed financial projections. And its admission
constituted an error of law, he claims, because lost profits are
not the proper measure of damages for a misappropriated corporate
opportunity. We assess these arguments in turn.
1.
To admit expert witness testimony, a district court must
find that "it is more likely than not that" the proposed testimony
meets the admissibility requirements of Federal Rule of
Evidence 702. Fed. R. Evid. 702. An expert must be "qualified"
in terms of "knowledge, skill, experience, training, or
education," and must possess "specialized knowledge" that "will
- 6 - help the trier of fact to understand the evidence or to determine
a fact in issue." Id. The expert's opinion must be "based on
sufficient facts or data," and it must be "the product of reliable
principles and methods." Id.
In Daubert v. Merrell Dow Pharmaceuticals, Inc., the
Supreme Court held that scientific testimony must be both
"relevant" and "reliable" to be admissible. 509 U.S. 579, 589
(1993). The Court later clarified that these requirements are not
limited to scientific evidence; instead, they "appl[y] to all
expert testimony." Kumho Tire Co. v. Carmichael, 526 U.S. 137,
147 (1999). Trial courts thus operate as "gatekeeper[s],"
ensuring that proffered expert testimony is more likely than not
both "relevant" and "reliable." Lawes v. CSA Architects & Eng'rs
LLP, 963 F.3d 72, 97 (1st Cir. 2020). This gatekeeping function
"is essential because just as jurors may be unable, due to lack of
specialized knowledge, to evaluate meaningfully the reliability of
scientific and other methods underlying expert opinion, jurors may
also lack the specialized knowledge to determine" or to assess
"whether the conclusions of an expert go beyond what the expert's
basis and methodology may reliably support." Fed. R. Evid. 702
advisory committee's note to 2023 amendments. That being said,
"Daubert does not require that a party who proffers expert
testimony carry the burden of proving to the judge that the
expert's assessment of the situation is correct." Lawes, 963 F.3d
- 7 - at 99 (quoting Milward v. Acuity Specialty Prods. Grp., 639 F.3d
11, 15 (1st Cir. 2011)). What matters instead is that the party
offering the expert testimony "demonstrate[] to the court that it
is more likely than not that" the Rule 702 requirements are
satisfied. Fed. R. Evid. 702.
Parzych argues that Scally's lost-profits testimony was
based on unreliable and insufficient information. In estimating
the profits ZipBy might have gained had it acquired TCS, Scally
relied in part on financial projections prepared in 2019 by David
Radford, Q-Free's Executive Vice President. But those financial
projections predated the COVID-19 pandemic. Post-COVID, TCS's
actual financial results fell far short of those that Radford had
earlier projected, which became clear well before trial; indeed,
Radford testified in a pre-trial deposition that his projections
ceased to be accurate shortly after they were prepared.
Nevertheless, Scally used those 2019 projections in
calculating the profits ZipBy supposedly lost by not acquiring
TCS. In so doing, he concluded that, had the acquisition gone
forward, TCS would have contributed more to ZipBy's business than
either TCS's actual performance, or even its 2019 projection,
reflected. Parzych contends that the district court erred by
permitting Scally to offer this opinion.
We are not persuaded that the district court abused its
discretion by permitting Scally's testimony. To begin, there is
- 8 - no logical reason why TCS's financial contribution to ZipBy, if
ZipBy had acquired it, would have equaled only TCS's actual
performance as a standalone company. After all, the record
indicates that one reason for the acquisition would have been to
exploit synergies between TCS and ZipBy and thereby "dominate" the
market. Scally's decision to rely upon projections rather than
TCS's actual performance therefore does not render his opinion
inadmissible for lack of a sufficient factual basis. Furthermore,
Scally's calculations did account in some measure for the effects
of the pandemic: He explained that he assumed, based on
pandemic-related industry changes, a "20 percent dec[rease] . . .
as COVID hit," but that was tempered by a balance sheet that, in
2020, reflected more than $500,000 in accounts receivable and a
backlog of $3 million in booked business, together with (he opined)
an "extraordinarily strong" list of new business opportunities.
This is not to say that we would find Scally's testimony
convincing were we the factfinder. His report and direct
testimony suggested several potential weaknesses to be probed on
cross-examination -- some of which Parzych's counsel tried to
explore, albeit without the benefit of any defense expert to
challenge Scally. See Lawes, 963 F.3d at 99 ("Vigorous cross
examination, presentation of contrary evidence, and careful
instruction on the burden of proof are the traditional and
appropriate means of attacking shaky but admissible evidence."
- 9 - (quoting Daubert, 509 U.S. at 596)). Rather, we simply think that
the district court did not abuse its discretion in finding that
Scally was qualified to testify and that his opinion was based on
sufficient factual information. Nor was there anything about the
reliability of the principles and methods he employed -- or the
data as he used it -- that calls into question the court's decision
to permit his testimony. At bottom, Scally and Radford disagreed
as to whether Radford's projections would have borne out had ZipBy
bought TCS. Scally offered a sufficiently cogent reason for why
he projected "would-have-been" earnings that were greater than
TCS's actual earnings. Importantly, too, this was the type of
expert testimony that most jurors could readily understand and
evaluate, if challenged appropriately. It was obvious that Scally
projected stronger "but for" performance for TCS than its actual
performance; it was clear why he did so, and why one might view
the matter otherwise. Indeed, the jurors pared down Scally's
compensatory damage estimate by over one third, even though Parzych
presented no opposing expert testimony. Daubert makes no "demand"
that expert testimony be "unassailable." United States v. Mooney,
315 F.3d 54, 63 (1st Cir. 2002); cf. Crowe v. Marchland, 506 F.3d
13, 18 (1st Cir. 2007) (observing that objections to the "factual
underpinnings of an expert's investigation" tend to "go to the
weight of the proffered testimony, not to its admissibility"). We
therefore hold that the court did not abuse its discretion in
- 10 - finding that Scally's testimony satisfied the Rule 702
admissibility requirements because it was based on "sufficient
facts or data" to which an undisputedly qualified expert applied
"reliable principles and methods." Crowe, 506 F.3d at 17 (quoting
Fed. R. Evid. 702).
2.
Parzych also argues that admitting Scally's testimony
amounted to an error of law because he testified to ZipBy's lost
profits, but -- Parzych argues -- lost profits were not a proper
measure of damages here. This is so, he claims, because in a case
of stolen corporate opportunity, Massachusetts law only permits
restitution of any ill-gotten gains; lost-profit damages are too
speculative.3
Parzych correctly observes that Massachusetts courts
have permitted plaintiffs to recover restitution damages in
similar cases. See Demoulas v. Demoulas Super Mkts., Inc., 677
N.E.2d 159, 195 (Mass. 1997) (stating that when a corporate
3Parzych argues both that lost profits are too "inherently speculative" to serve as an appropriate measure of damages in lost corporate opportunity cases, and that in this particular case lost profit damages were inappropriate because Scally's opinion was too speculative and no "non-speculative evidence to support ZipBy's purported lost profits" was introduced. Our holding above that Scally's opinion met Rule 702's requirements, including that it was based on sufficient facts and reliable methods, disposes of the latter argument, and so we address here Parzych's remaining claim that lost profits are always an inappropriate measure of damages in this type of case.
- 11 - fiduciary profits by violating the duty of loyalty, a court "may
properly order restitution" (emphasis added)); see also Hanover
Ins. Co. v. Sutton, 705 N.E.2d 279, 293 (Mass. App. Ct. 1999)
(affirming restitution award). But Parzych points to no caselaw
holding that restitution is the only permissible measure of damages
for a lost corporate opportunity. Indeed, in the analogous
context of misappropriation of trade secrets, Massachusetts's
highest court has ruled that a plaintiff can recover either
restitution for a defendant's unjust enrichment or the actual loss
caused by the misappropriation. Jet Spray Cooler, Inc. v.
Crampton, 385 N.E.2d 1349, 1356 (Mass. 1979). We see no reason
why a plaintiff claiming a lost corporate opportunity would not
have a similar choice under Massachusetts law.
B.
Parzych's next evidentiary argument contends that the
district court erred by excluding from evidence TCS's tax returns
from the years 2021 and 2022, which showed the company's actual
profits and losses. During the final pretrial conference,
Parzych's counsel informed the district court -- apparently for
the first time -- that she was in the process of subpoenaing those
tax returns to use them at trial, in order to discredit Scally's
lost-profit testimony and inform the jury's assessment of damages.
The court rejected this effort, ruling that it was "too late" for
those records to come in and reminding Parzych's counsel the court
- 12 - would not "play[] surprise." Parzych contends that this exclusion
constituted an improper discovery sanction.
We review a district court's decision to impose a
discovery sanction for abuse of discretion. Gomez v. Rivera
Rodriguez, 344 F.3d 103, 112 (1st Cir. 2003). Federal Rule of
Civil Procedure 26 mandates that "[u]nless the court orders
otherwise," a party must disclose, at least 30 days before trial,
"an identification of each document" that it may present at trial
other than those solely for impeachment. Fed. R. Civ.
P. 26(a)(3)(A)(iii). If a party fails to comply with these
obligations, Rule 37 instructs that the party is "not allowed to
use that [undisclosed] information . . . at a trial, unless the
failure was substantially justified or is harmless." Fed. R. Civ.
P. 37(c)(1). To determine whether a district court abused its
discretion by precluding evidence under Rule 37, this court
considers "an array of factors," including (as relevant here) "the
sanctioned party's justification for the late disclosure; the
opponent-party's ability to overcome its adverse effects (i.e.,
harmlessness); the history of the litigation; the late
disclosure's impact on the district court's docket; and the
sanctioned party's need for the precluded evidence." Harriman v.
Hancock Cnty., 627 F.3d 22, 30 (1st Cir. 2010).
Parzych does not dispute that he first raised the issue
of the TCS tax records two years after the conclusion of fact
- 13 - discovery and only seven days before trial. See Fed. R. Civ.
P. 26(a)(3)(B). Nor does he dispute that the parties agreed to
produce, by July 10, 2023, "any document they may introduce or
rely on at trial that ha[d] not previously been produced." He
argues, however, that his late disclosure was justified, because
(1) the 2021 and 2022 tax returns did not yet exist in 2020, when
ZipBy served its discovery requests; and (2) TCS, not Parzych,
possessed the documents. But Rule 26(e) requires a party to
supplement his initial responses to discovery requests, and
Parzych does not explain why he could not obtain the 2021 and 2022
tax returns until November 2023. Nor, in this instance, does it
matter that the records were in TCS's possession, because Parzych
offers no justification for his decision to wait until the eve of
trial to seek documents that he knew existed.
We are similarly unpersuaded by Parzych's argument that
his late disclosure was a "harmless inconvenience." See Harriman,
627 F.3d at 31. By introducing the tax returns for the first time
at the final pretrial conference, Parzych would have deprived ZipBy
of the opportunity to conduct any additional discovery necessary
to challenge their contents or probative value. Nor are these
considerations outweighed by Parzych's need for the tax returns
because, as Parzych acknowledges, the records would merely have
"confirmed" what Radford intended to testify -- that TCS was less
profitable than Scally claimed it would have been.
- 14 - As we have previously observed, pretrial disclosure
"make[s] a trial less a game of blindman's buff and more a fair
contest with the basic issues and facts disclosed to the fullest
practical extent." Thibeault v. Square D Co., 960 F.2d 239, 244
(1st Cir. 1992) (quoting United States v. Procter & Gamble Co.,
356 U.S. 677, 682 (1958)). We see no abuse of discretion in the
district court's decision to exclude the tax returns as simply
coming too late.
III.
Having rejected Parzych's evidentiary challenges, we
turn now to his argument that the district court abused its
discretion by denying his request to continue the trial when his
lead counsel, Michelle Blair, contracted COVID-19.
Early on the fourth day of the six-day trial, Blair
informed the court that she had tested positive for COVID-19.
After some discussion, Blair and the district court agreed that
Blair would participate remotely, with Blair stating that she
didn't "want to risk losing . . . the jury." Later, however, and
before the jurors arrived, Parzych's other attorney, Robert
Dionisi, informed the court that Parzych was "very uncomfortable
going forward without Attorney Blair in the courtroom." The
district court explained that delaying the trial might mean
"los[ing] the full jury." In response, Dionisi suggested that the
- 15 - court "go forward" with the testimony planned for that day, then
continue the trial for Blair's five-day quarantine period.
With two suggestions on the table, the district court
reserved judgment, and instead polled the jury about the impact of
a continuance. The jury informed the court that it "would like
to continue working here" rather than postpone the trial.
Neither party voiced any formal objection to the
district court's subsequent decision to proceed with the trial.
Parzych did not move for a mistrial. Blair continued to
participate remotely during the last two days of the trial, and
co-counsel Dionisi participated in person. While Blair proceeded
remotely, Dionisi cross-examined plaintiffs' expert witness and
conducted the direct examination of the defense's witness. Blair
conducted the direct examination of Parzych via Zoom. Prior to
the parties' closing arguments, the court offered Blair the choice
to conduct her closing argument in person, with a mask. Blair
rejected the proposal and elected to proceed via Zoom.
After the verdict, Parzych moved for a new trial on the
grounds that the district court erred by proceeding with the trial
without the suggested hiatus. The district court denied this
motion, finding that Parzych waived this claim by failing to
formally object to the remote-participation plan and failing to
raise any formal or informal objections to Blair's remote
participation during days four, five, and six of trial. It further
- 16 - found that Parzych was "ably represented by counsel throughout the
trial."
Sidestepping the question of waiver, we affirm on the
merits. "Trial management is peculiarly within the ken of the
district court," and the district court has "broad discretion to
grant or withhold continuances." United States v. Saccoccia, 58
F.3d 754, 770 (1st Cir. 1995). For that reason, a court denying
a continuance abuses its discretion only when it shows "an
unreasoning and arbitrary insistence upon expeditiousness in the
face of a justifiable request for delay." Id. (quoting Morris v.
Slappy, 461 U.S. 1, 11–12 (1983)). In reviewing the decision to
deny a continuance, we "look first at the reasons contemporaneously
presented in support of the request for the continuance," and then
we may consider factors such as "the extent to which the movant
has contributed to his perceived predicament," "the probable
utility of a continuance," "the extent of inconvenience to others
(such as the court, the witnesses, and the opposing party)," and
"the likelihood of injustice or unfair prejudice." Id.
Parzych argues that this is the rare case in which the
district court abused its discretion by proceeding with the trial,
because in his view, the court arbitrarily prioritized the jury's
scheduling preference over the prejudice caused to Parzych.
Blair's remote participation could have impaired her
effectiveness. But Parzych offers no example of any such
- 17 - impairment.4 Blair herself rejected the opportunity to conduct
closing arguments in person with a mask, opting to do so via Zoom
instead. The half-hearted expression of a preference for a
continuance rather than a motion or objection, even if not a full
waiver, suggests that no one seemed to think at the time that what
the court did was unreasonable or unfair. And indeed, the district
court found that Parzych was fully and capably represented by both
an in-person advocate (Dionisi) and an advocate participating
virtually (Blair). There was no abuse of discretion here.
IV.
We turn now to ZipBy's arguments on cross appeal. ZipBy
argues that the court erred by overturning the jury's verdict
finding that Parzych misappropriated ZipBy's trade secrets under
both Massachusetts law and the Defend Trade Secrets Act ("DTSA"),
18 U.S.C. § 1836. We review de novo a district court's decision
to grant judgment as a matter of law. Sharp v. Hylas Yachts, LLC,
872 F.3d 31, 43 (1st Cir. 2017). Our review is "weighted toward
preservation of the jury verdict," and we must sustain that verdict
4 Parzych points instead to generic concerns regarding the efficacy of "trial by Zoom." But he offers no concrete examples of any particular prejudice he suffered as a result of Blair's virtual participation coupled with Dionisi's in-person participation. He argues, for example, that Blair could not observe the jury during her examination of Parzych in order to adjust her style but does not point to any moment where such an adjustment would have been necessary, nor explain why -- in the face of any such concern -- Dionisi did not conduct his direct examination instead.
- 18 - "unless the evidence was so strongly and overwhelmingly
inconsistent with the verdict[] that no reasonable jury could have
returned [it]." Crowley v. L.L. Bean, Inc., 303 F.3d 387, 393
(1st Cir. 2002) (quoting Rodowicz v. Mass. Mut. Life Ins. Co., 279
F.3d 36, 41–42 (1st Cir. 2002)). Even under this demanding
standard, we think the district court was right to strike the
jury's verdict on ZipBy's state and federal trade-secret claims.
The district court reasoned that "[t]he standard[s] for
misappropriation" under Massachusetts law and the DTSA are
"substantially similar" and treated them as such. ZipBy USA LLC
v. Parzych, No. 20-cv-10926, 2024 WL 1702116, at *4 (D. Mass.
Apr. 19, 2024) (quoting Viken Detection Corp. v. Videray Tech.
Inc., 384 F. Supp. 3d 168, 177 (D. Mass. 2019)). On appeal, the
parties do not argue that Massachusetts law might consider ZipBy's
trade-secret claims differently than federal law. Accordingly,
"our analysis will draw no distinction between the district court's
misappropriation findings under the DTSA and state common law,
affirming or reversing them in tandem." Allstate Ins. Co. v.
Fougere, 79 F.4th 172, 187–88 (1st Cir. 2023).
Under the federal standard, an entity bringing a
misappropriation suit must show that it is the "owner" of a trade
secret and that the defendant's use of that secret was without
express or implied consent. 18 U.S.C. §§ 1836(b)(1), 1839(5).
Under Massachusetts law, "a plaintiff must show that the
- 19 - information is a trade secret which 'the defendant used improper
means, in breach of a confidential relationship, to acquire and
use.'" Allstate Ins. Co., 79 F.4th at 187 (quoting Incase Inc.
v. Timex Corp., 488 F.3d 46, 52 (1st Cir. 2007)).
The first subject of ZipBy's trade-secret claim is
financial information about TCS, Parzych's old company, that
Q-Free provided to Parzych. Q-Free gave that information to
Parzych so that ZipBy could consider an opportunity to acquire TCS
from Q-Free. Parzych used that information in deciding whether
and how he should try to acquire TCS for himself. As the jury
found, Parzych's use of the information -- indeed, his acquisition
attempt itself -- clearly breached various fiduciary and
contractual duties Parzych owed his employer. However, ZipBy also
wants to characterize that behavior as a misappropriation of a
trade secret. It reasons that because it was obligated to keep
the information supplied by Q-Free confidential, it was a licensee
and therefore an "owner" of the information under 18 U.S.C
§ 1839(4). Further, ZipBy contends that as an owner, it regarded
the information as a secret.
Whatever one thinks of this argument in the abstract, we
agree with the district court that it does not fly on this record.
Q-Free certainly had the right, as owner of its own information,
to decide to whom it would show that information. See Ruckelshaus
v. Monsanto Co., 467 U.S. 986, 1002 (1984) ("Because of the
- 20 - intangible nature of a trade secret, the extent of the property
right therein is defined by the extent to which the owner of the
secret protects his interest from disclosure to others."); Jet
Spray Cooler, Inc. v. Crampton, 282 N.E.2d 921, 925 (Mass. 1972)
(reasoning that "the extent of measures taken by the employer to
guard the secrecy of the information" informs the inquiry as to
whether the information alleged to be a trade secret is truly
confidential).
While Q-Free may have initially assumed that Parzych
would use the financial information for ZipBy's benefit, it was
soon obvious to Q-Free that Parzych sought to acquire TCS on his
own behalf. There is no evidence that Q-Free complained about
that use of its information. Most acquisition-welcoming targets
readily provide such information to serious suitors, as the
district court recognized in noting that it would have been easy
for Parzych to get Q-Free to show him the same documents again
independently. Indeed, upon learning of Parzych's intentions to
acquire Q-Free for himself, a Q-Free executive responded, "Fine
for us. It doesn't matter as long as we know who we deal with."
We therefore agree with the district court that any license ZipBy
may have had to use Q-Free's financial data did not entitle ZipBy
to stand in Q-Free's shoes in deciding whether Parzych could use
the data.
- 21 - ZipBy next argues that the jury could have permissibly
found that Parzych misappropriated ZipBy's "internal strategy to
forgo the TCS opportunity." But implementing that strategy meant
telling Q-Free that ZipBy was not interested in pursuing the
opportunity. And ZipBy points to no evidence suggesting that
information was to be conveyed to Q-Free in confidence.5 With
ZipBy having taken no measures at all to keep secret its forgoing
of a purchase, no jury could properly find that such a "strategy"
was a trade secret. See 18 U.S.C. § 1839(3)(A) (requiring, for
information to constitute a trade secret, that the owner have taken
"reasonable measures to keep such information secret").
In sum, we share the district court's assessment that
ZipBy's trade-secret theories try "to put in the box of trade
secret[s] something that seems ill fitting" -- a square peg in a
round hole. We affirm the district court's decision granting
judgment as a matter of law against ZipBy on its trade-secret
Finally, we consider Parzych's claim that the district
court erred by awarding ZipBy more than $2 million in attorneys'
5 ZipBy points only to evidence that its board minutes were secret, and that Parzych had access to ZipBy's "trade secret information" as a general matter.
- 22 - fees and $210,000 in expert fees, pursuant to the fee shifting
provision in the IP Agreement, which states as follows:
In the event of any breach or threatened breach of the provisions of this Agreement, the Company shall be entitled to maintain an action for injunctive relief, it being agreed by the parties hereto that the substantial and irreparable harm which the Company would sustain upon any such breach is impossible to ascertain in advance and that the award of monetary damages therefor would be wholly inadequate, and the Employee shall be responsible for the Company's costs and expenses, including without limitation, reasonable attorneys' fees and court costs incurred in enforcing any of the covenants of this Agreement.
We review an award of attorneys' fees for abuse of
discretion. See, e.g., Small Just. LLC v. Xcentric Ventures LLC,
873 F.3d 313, 326 (1st Cir. 2017). But mistakes of law "always
constitute abuses of a court's discretion," Gay Officers Action
League v. Puerto Rico, 247 F.3d 288, 292 (1st Cir. 2001), and
insofar as the parties' dispute hinges on the correct
interpretation of a contractual provision, that is a question of
law that we review de novo, Holsum de P.R., Inc. v. ITW Food Equip.
Grp. LLC, 116 F.4th 59, 66 (1st Cir. 2024). Below, the district
court applied California law to interpret the IP Agreement in
accordance with its choice-of-law provision. On appeal, neither
party contests that California law applies. We therefore follow
their lead and apply California law to the contract-interpretation
issue before us. In re Newport Plaza Assocs., L.P., 985 F.2d 640,
- 23 - 644 (1st Cir. 1993) ("When opposing parties agree to the source of
the substantive law that controls their rights and obligations,
and no jurisdictional concerns are present, a court is at liberty
to accept such an agreement without independent inquiry.").
Parzych argues, first, that the IP Agreement's fee-
shifting provision only covered actions seeking an
injunction -- not money damages, like those ZipBy sought in this
case. But as we read the fee-shifting provision in the IP
Agreement between Parzych and ZipBy, it clearly has two relevant
effects. It authorizes injunctive relief without specific proof
of irreparable harm, and it authorizes the recovery of "reasonable
attorneys' fees" by ZipBy "incurred in enforcing any of the
covenants of the agreement." This reading disposes of Parzych's
argument that the fee-shifting provision only applies to fees
incurred by ZipBy in obtaining injunctive relief.
That leaves Parzych's second argument, contending that
the fee shifting only applies to fees incurred in enforcing the
covenants of the IP Agreement itself and that "litigation fees
were not 'incurred in enforcing' [the] Agreement" because the
Agreement did not "govern [his] ability to pursue acquiring TCS in
potential competition with ZipBy."
The basis on which this case was tried and presented to
the jury indicated otherwise. The jurors were instructed without
objection that ZipBy claimed that Parzych breached his contracts
- 24 - by, among other things, "failing to perform his duties faithfully
and exclusively for [ZipBy], in violation of . . . Section 1 of
the IP Agreement." Section 1 of the IP Agreement states in
relevant part that "[w]hile employed by the Company, the Employee
is expected to devote his energy and skills to the promotion of
the best interests of the Company" and "that it is reasonable and
necessary for the protection of the goodwill, trade secrets,
proprietary data and confidential information of the Company and
Related Companies that [the Employee] undertake the obligations
contained in this Agreement regarding his conduct during and
subsequent to his employment by the Company." Thus, Parzych's
pursuit of TCS was not only a basis for a breach of fiduciary duty
claim; it was also a breach of the IP Agreement. And the jury
returned a verdict in ZipBy's favor on the claim for breach of the
IP Agreement. Given that Parzych has not challenged that verdict,
we see no basis for his contention that the fees and costs incurred
in litigating his pursuit of TCS were not incurred in enforcing
the IP Agreement.
Nor does it matter that some of the same work undertaken
in the effort to enforce the IP Agreement also provided needed
support for ZipBy's other claims. Under California law,
"[a]ttorney's fees need not be apportioned when incurred for
representation on an issue common to both a cause of action in
- 25 - which fees are proper and one in which they are not allowed."
Reynolds Metals Co. v. Alperson, 599 P.2d 83, 86 (Cal. 1979).
This is not to say that all fees incurred by ZipBy were
incurred in litigating issues common to the breach of contract
claim. And we agree with the district court's criticism of ZipBy
for failing to produce more details in support of its fee request.
Having tried the case, however, the district court had an excellent
perspective from which to gauge what was at issue and what efforts
were expended on which claims, including the trade-secrets claim
that ZipBy lost. The district court was attuned to both the
possibility that fees could be awarded for the pursuit of common
issues and the limitation on the reach of that possibility under
California law. We thus discern no error of law. And the court's
ultimate judgment that two-thirds of ZipBy's fees and expenses
were incurred in successfully enforcing the IP Agreement seems
reasonable based on our own review of the record. So we affirm
that award as not an abuse of discretion.
VI.
For the foregoing reasons, we affirm the district
court's judgment in full.
- 26 -