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Alifax Holding SPA v. Alcor Scientific Inc.

United States District Court, D. Rhode Island

September 4, 2019




         Before the Court is Defendants' Motion for Attorney and Expert Fees and Costs as to the Breach of Confidential Relationship, Copyright Infringement and Trade Secret Causes of Action, ECF No. 307 (“Defs.' Mot.”), as well as Defendant Alcor Scientific Inc.'s Renewed Motion for Judgment as a Matter of Law, ECF No. 304 (“Mot. for JMOL”), as it relates to Count III.[1] For the reasons set forth below, the motion for fees and costs as it pertains to Count II is DENIED AS MOOT because of the Court's order granting in part Al-cor's Motion for New Trial, or in the Alternative, for Remittitur (“Mot. for New Trial”), ECF No. 303.[2] As to Counts III and IV, the Defendants motion for fees and costs is DENIED. Defendant Frappa's renewed motion for judgment as a matter of law on Count III is also DENIED.

         I. Discussion

         A. Count II: Trade Secret Misappropriation

         Defendants move for fees and costs incurred from defending against Count II's allegations pursuant to the Rhode Island Uniform Trade Secrets Act (“RIUTSA”), R.I. Gen. Laws § 6-41-1 et seq.[3] See Defs.' Mot. 11. The Court has ruled, however, that the Defendants are entitled to a new trial on both liability and damages concerning Alifax's claim that the Defendants misappropriated its secret conversion algorithm. Thus, no party has yet prevailed on Count II and the Defendants' motion is moot. Should the Defendants succeed in a new trial, they may refile their request for fees and costs without prejudice.

         B. Count III: Breach of Confidential Relationship

         At the close of the trial's liability phase, the jury returned a verdict for Alifax on Count III, finding that Frappa breached his confidential relationship with Alifax under Italian law. See Jury Verdict Phase I: Liability 7, ECF No. 292. Frappa moved for judgment as a matter of law on Count III at the close of Plaintiff's case in chief and renewed his motion at the close of the evidence. See Trial Tr., Vol. 6, 118:19-120:4, Apr. 24, 2019; Trial Tr. Vol. 9, 12:23-13:16, Apr. 29, 2019. The Court reserved ruling on those motions. Regardless, the Court held that Alifax could not argue for an award of money damages concerning Count III because it had failed to make a timely supplemental disclosure of its unjust enrichment theory. See Trial Tr., vol. 11, 28:21-29:11, May 1, 2019. The Court issued this ruling prior to the start of the damages phase. Id.

         Frappa now argues that Alifax's failure of proof with respect to money damages means that he has prevailed on Count III as a matter of law and that the Court must vacate the jury's liability verdict. See Mot. for JMOL 2 n.1. Based on the belief that Frappa is entitled to judgment in his favor, Defendants' request an award of fees and costs related to Count III under Italy's “loser pays all” statute. See Defs.' Mot. 8-9.[4]

         Before addressing the issue of fees and costs, the Court will use this opportunity to explain its rationale for prohibiting Ali-fax from making a money damages argument to the jury in phase two of the trial. Under Rule 26(a)(iii) of the Federal Rules of Civil Procedure, a party must disclose a “computation of each category of damages” it claims in the action. Here, Alcor also propounded an interrogatory that asked Alifax to state the amount and basis for damages claimed. See Pl.'s First Am. Answers to Defs.' In-terrog.'s 2, ECF No. 284-2 (“Pl.'s Answers”). Neither Alifax's Rule 26(a) disclosures nor its interrogatory responses revealed its theory of unjust enrichment with respect to Frappa and Count III. See id.; see also Pl.'s Initial Disclosures, ECF No. 284-1. Instead, Alifax explained its unjust enrichment theory and the factual bases therefore (Frappa's salary and iSED-related commission payments) for the first time during a mid-trial chambers conference on April 30, 2019. See Trial Tr. vol. 11, at 28:21-29:2.

         Rule 26(e) requires a party to supplement its discovery responses if the party learns that its response is materially incomplete or incorrect. Fed.R.Civ.P. 26(e)(1)(A). It is self-evident that Alifax's damages-related disclosures were inadequate with respect to Frappa and Count III. Thus, pursuant to Rule 37(c)'s familiar text and abundant decisional authority, the Court prohibited Alifax from arguing a surprise theory of damages at trial. See Eldredge v. Gordon Bros. Grp., LLC, 863 F.3d 66, 77 (1st Cir. 2017) (affirming exclusion of untimely damages theory); Inteum Co. LLC v. Nat'l Univ. of Sing., C17-1252-JCC, 2019 WL 1282014, at *2 (W.D. Wash. Mar, 20, 2019) (granting motion to exclude an undisclosed theory of damages); Waymo LLC v. Uber Tech's Inc., No. C. 17-00939 WHA, 2018 WL 466510, at *2 (N.D. Cal. Jan. 18, 2018) (granting motion to exclude undisclosed damages theory in a trade secret misappropriation context).

         The absence of money damages does not, however, mandate judgment for Frappa on Count III.[5] Alifax has always requested in-junctive relief as a remedy for Frappa's breach of duty. See Second Am. Compl. 16-17, ECF No. 68. The jury's verdict suggests Alifax may have suffered irreparable harm that may eventually warrant such relief.

         The District of Maine's ruling in Merrill Lynch, v. Bishop, 839 F.Supp. 68, 72 (D. Me. 1993) provides helpful guidance. In Merrill, the court ruled that a breach of confidentiality automatically warranted injunctive relief and stated:

Once confidentiality is breached, the harm is done and cannot be undone . . . and no award of money damages will change the fact that information which Plaintiff was entitled to have kept from the knowledge of third parties is no longer shielded from their gaze. Confidentiality, like pregnancy, is an all or nothing proposition; either it exists or it does not exist.

Bishop, 839 F.Supp. at 72. Here, Alifax may request permanent injunctive relief tailored to remedy Frappa's breach of duty under Count III. Thus, Frappa is not entitled to judgment ...

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