Trade Secret Damage Award Reduced

Following a jury verdict awarding plaintiff  $919.9 million in compensatory damages for defendant’s willful and malicious misappropriation of 149 trade secrets, the Richmond U.S. District Court awards plaintiff $350,000 in punitive damages:  Virginia’s Uniform Trade Secrets Act caps punitive damages at $350,000 and defendant waived its right to have a jury trial assess punitive damages by failing to object when jury instructions were considered.

A jury awarded plaintiff $919.9 million in compensatory damages for defendant’s willful and malicious misappropriation of 149 trade secrets.  Plaintiff moved for punitive damages totaling $52,150,000 based on an award of $350,000 for each of the 149 trade secrets misappropriated.   Defendant opposed the motion as unauthorized and requiring jury determination.

The district court agreed with defendant that the Act caps total punitive damages award at the lesser of $350,000 or compensatory damages.  No Supreme Court of Virginia decision interprets the Act’s punitive damages provision, §59.1-338B, but Al-Abood v. El-Shamari, 217 F.3d 225 (4^th Cir. 2000), interprets the general law cap in § 8.01-38.1 to apply to the action as a whole.  This interpretation is consistent with drafts of the 1990 Virginia legislation adding § 59.1-338B showing that section was drafted to be consistent with § 8.01-38.1.  The court’s obligation to predict the ruling of the Supreme Court of Virginia supports aligning § 59.1-338B with the general law cap in § 8.01-38.1.

The court rejected defendant’s argument that the jury must determine punitive damages.   The Seventh Amendment does require in federal courts that a jury decide to award punitive damages and the amount; however, like all constitutional rights, this right can be waived.  Defendant here waived its right to a jury on punitive damages by failing to object several times when the issue was presented:  (1) an agreed jury instruction that the court may award punitive damages; (2) the verdict form not inquiring about punitive damages;  (3) acquiescence to the removal of a proposed jury instruction on punitive damages during a charge conference with the court and plaintiff’s counsel.  Rule 49(b)’s lack of an express waiver provision does not change this result under White v. Celotex Corp., 878 F. 2d 144 (4^th Cir. 1988).  An award of punitive damages is appropriate in view of the record evidence supporting the jury’s finding of willful and malicious misappropriation.  The substantial compensatory award does not support otherwise.  The record evidence shows defendant inveigled plaintiff’s former employees to provide confidential information to improve defendant’s inferior product knowing plaintiff’s former employees were bound by confidentiality provisions.  This kind of willful and malicious disregard for the property rights of others should be punished through punitive damages even though the statute limits the amount.

E.I. Du Pont de Nemours and Co. v. Kolon Indus., Inc. (Payne) No. 3:09cv58, Nov. 22, 2011; USDC at Richmond, Va. VLW 011-3-641, 13 pp.