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Appeals court vacates $919M trade secrets award

A federal appeals court has reversed a $919.9 million trade secrets award in an unpublished decision that bars the judge who tried the case from hearing it on remand.

The decision focuses on the conduct of the case by Senior U.S. District Judge Robert E. Payne.

Plaintiff DuPont sued defendant Kolon Industries in 2009 in Richmond federal court, alleging misappropriation of trade secrets under state and federal law. After a seven-week trial, a jury awarded DuPont record damages, finding that Kolon had misappropriated 149 trade secrets involving DuPont’s manufacture of Kevlar, a para-aramid fiber used in bullet-proof armaments.

In addition to damages of nearly $1 billion, Payne said Kolon could not produce para-aramid fiber for 20 years.

As part of its defense against DuPont, Kolon wanted to put on evidence to suggest that a number of the alleged trade secrets at issue involved publicly available information. The information purportedly became public through DuPont’s disclosures during litigation in the 1980s against AkzoNobel, DuPont’s primary competitor at the time.

When DuPont and Akzo were litigating the earlier case in the same federal court, DuPont was represented by the same firm it used against Kolon, McGuireWoods, where Payne was a partner at the time.

Payne became a federal trial judge in Richmond in 1992 and presided over the long-running Kolon case. He granted DuPont’s motion to exclude evidence relating to the Akzo litigation, saying Kolon failed to show that any particular trade secret, much less a trade secret at issue in the DuPont case, had come out in the Akzo case.

But the appellate panel said Kolon had offered enough specific examples of how information disclosed in the Akzo case “contained details of the Kevlar production process that were strikingly similar to aspects of several of the alleged trade secrets in this case,” according to the 4th U.S. Circuit Court of Appeals’ per curiam opinion.

The trial judge’s conclusion was “simply too stringent a standard for admissibility. Under the circumstances of this case, we think a ‘strikingly similar’ standard of relevance is enough,” the court said.

Allowing references to the Akzo case could lead to juror confusion and delay, the panel acknowledged, but wholesale exclusion of evidence from the earlier case had prejudiced Kolon.

In vacating the trial court decision, the 4th Circuit panel hastened to point out that it would not entertain Kolon’s 11th hour motion to recuse the trial judge in the case, as the defendant had known from the first few days after the case was filed about Payne’s “negligible” involvement in the Akzo case.

Nevertheless, the court said the prudent course was to direct that the case be reassigned on remand. In a separate published opinion, the panel said Payne did not abuse his discretion when he denied the recusal motion on timeliness grounds.

The panel also affirmed summary judgment for DuPont on Kolon’s antitrust claims and detailed its decision that Kolon waited too late to move for recusal under 28 U.S.C. § 455. Judge Dennis W. Shedd dissented in the published opinion, saying the majority opinion on recusal “pivots responsibility from the judges to the litigants” and did not inspire public confidence in the judiciary.

CORRECTION: This story has been corrected to show that the unpublished opinion was issued by the court per curiam.

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