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Wrong punitive damages cap applied in $9.5M Summit Cty trade secrets case
TRACEY BLAIR
Legal News Reporter
Published: July 26, 2018
A Summit County trial court applied the wrong punitive damages cap in a claim for conspiracy to maliciously misappropriate trade secrets when awarding an Akron company more than $9.5 million, according to the 9th District Court of Appeals.
Case summary shows Patrick Duffy is the sole owner of Jack Duffy and Associates, an Akron sales agency for Acuity Brands Lighting Inc. Duffy created Phoenix to buy Lighting Sales Inc., which operated in Cleveland, but the two companies were operated separately.
Phoenix had 10 employees, including Guy Day and Jason Brown. In early 2008, Brown and Day began negotiating to buy Phoenix from Duffy. Brown and Day also considered starting their own lighting sales agency representing products manufactured by DCO, a competitor of Acuity.
After Duffy learned of the discussions with DCO, he asked Brown and Day to sign a non-compete agreement. They declined, and resigned.
Brown and Day then started their own lighting sales agency called Intelligent Information. Although they returned Phoenix’s confidential information they received from Duffy during negotiations, Brown and Day hired a number of Phoenix’s key employees.
In 2009, Phoenix Lighting Group LLC filed a complaint against Day, Brown and DCO business entity, alleging various business-related torts.
After a four-week jury trial in May 2014, Phoenix entered into a confidential settlement agreement with Brown and Day and the judge dismissed them from the case. The jury returned a verdict in favor of Phoenix and against DCO, finding DCO had tortuously interfered with Phoenix’s business relationships, misappropriated Phoenix’s trade secrets and participated in a civil conspiracy to tortuously interfere with Phoenix’s business relationships.
The jury awarded $1.6 million in compensatory damages, and an additional $7 million for tortuous interference and civil conspiracy. However, the trial court reduced the punitive damages award to $2.7 million pursuant to R.C. 2315.21(D). The trial court also awarded treble damages on the direct misappropriation of trade secrets claim, plus $3.9 million in attorney fees, litigation expenses, costs and prejudgment interest.
The trial court awarded Phoenix a total of $9.5 million, plus costs.
On appeal, DCO claimed the trial court erred by applying the R.C. 2315.21 punitive damage cap instead of the R.C. 1333.63(B) punitive damages cap to the jury’s award for conspiracy to maliciously misappropriate trade secrets, which improperly capped off $203,000 of the jury’s punitive damages award.
The appellate court agreed and remanded for the trial court to apply R.C. 1333.63.
“R.C. 1333.67(A) states that Ohio’s Uniform Trade Secrets Act `displaces conflicting tort, restitutionary and other laws of this state providing civil remedies for misappropriation of a trade secret,’ ” 9th District Judge Julie A. Schafer stated in her 2-1 opinion. “… The statute should be broadly interpreted so as to abolish all other causes of action for theft, misuse or misappropriation of any confidential or secret information.”
Appellate Judge Lynne Callahan concurred.
Ninth District Judge Donna Carr dissented from the majority, stating she would remand for a new trial on another assignment of error.
“In the first assignment of error, DCO has argued that the trial court erred in excluding expert evidence related to the consolidation of Phoenix/LSI into JDA,” Judge Carr wrote in her dissenting opinion. “Prior to DCO’s expert’s testimony, the trial court specifically instructed the expert about the areas of permitted and prohibited testimony.”
The trial court ordered DCO not to discuss how much money the combined offices made and how that compared to how much Phoenix earned earlier.
Therefore, DCO’s expert was prohibited from testifying about most of the contents of his report, including evidence that the consolidation was planned.
“This trial was not a simple, straightforward matter,” Judge Carr argued. “… Therefore, I cannot conclude that the exclusion of that evidence was harmless.”
The case is cited Phoenix Lighting Group, LLC v. Genlyte Thomas Group, LLC, 2018-Ohio-2393.