Advanced Fluid Sys., Inc. v. Kevin Huber, Insysma (Integrated Sys. & Mach., LLC
295 F. Supp. 3d 467
M.D. Penn.2018Background
- AFS designed and installed a hydraulic launch system (Teleporter/Erector/Launcher) for Orbital at Wallops Island and provided proprietary engineering drawings and BOMs marked confidential.
- Kevin Huber, an AFS employee and project manager de facto, secretly collaborated with Livingston & Haven (competitor), sharing AFS drawings, pricing, and bids via Dropbox and other means from early 2012 through his resignation in Oct. 2012; he later formed Integrated Systems.
- Livingston employees (Vann, Aufiero, Hill, Hawkins, Smith) accepted AFS documents from Huber, gave him access to company resources (Dropbox, VPN, email), and offered/approved compensation for business he steered to Livingston.
- Huber inflated AFS’s gripper-arms bid (pricing AFS out), assisted Livingston’s gripper design using AFS materials, then copied ~98 GB of AFS files to an external drive and wiped his AFS laptop prior to resigning.
- Orbital awarded the gripper-arms work to Livingston and the cylinder upgrade to Integrated Systems; AFS lost those opportunities and calculated lost profits of $1,096,009.
- After trial, court found Huber liable for breach of fiduciary duty and misappropriation; Livingston and Vann liable for misappropriation and aiding/abetting (Aufiero not liable for aiding/abetting); damages and fees addressed below.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Misappropriation (acquisition) under PUTSA | Livingston acquired AFS trade secrets from Huber who provided drawings, BOMs and pricing obtained improperly | Livingston claimed Orbital-authorized disclosures or industry practice justified receipt; denied knowledge of impropriety | Court: Livingston, Vann, Aufiero acquired AFS trade secrets and had knowledge; Livingston vicariously liable for employees’ acquisition; liability established for Vann and Livingston (Aufiero liability as to misappropriation but not aiding/abetting) |
| Vicarious liability under PUTSA | AFS: employer liable for employees’ misappropriative acts | Defendants: argued PUTSA preemption or lack of basis for vicarious liability | Court: PUTSA permits vicarious liability; applied respondeat superior (employee acts within scope and to serve employer) and held Livingston vicariously liable |
| Breach of fiduciary duty by employee (Huber) | Huber breached duty of loyalty by assisting competitor, concealing opportunities, inflating bid, and stealing files; this caused AFS’s lost contracts | Huber claimed business justification, customer loyalty, or that AFS caused its own loss | Court: Huber breached fiduciary duty; his conduct was a "real factor" causing AFS to lose gripper and cylinder contracts; liability found |
| Aiding and abetting fiduciary breach | AFS: Livingston, Vann, Aufiero knew of Huber's breach and substantially assisted (compensation, resources, meetings, Dropbox) | Livingston/individuals downplayed role, relied on Orbital disclosures, or lacked authority to control actions | Court: Vann and Livingston knowingly provided substantial assistance and are liable; Aufiero lacked authority to provide the level of substantial assistance and is not liable for aiding/abetting |
| Damages, exemplary, punitive, and fees | AFS: lost profits $1,096,009; exemplary damages (PUTSA) and punitive damages for egregious misconduct; attorneys’ fees for willful misappropriation | Defendants challenged causation, amount and standard for exemplary/punitive proof | Held: Awarded compensatory damages $1,096,009 (joint & several); exemplary damages $1,000,000 against Huber; punitive damages $1,000,000 jointly & severally against Huber, Livingston, and Vann; AFS entitled to attorneys’ fees (to be determined by motion). |
Key Cases Cited
- Brezenski v. World Truck Transfer, Inc., 755 A.2d 36 (Pa. Super. Ct. 2000) (respondeat superior applies to intentional/criminal employee acts)
- Bro-Tech Corp. v. Thermax, Inc., 651 F. Supp. 2d 378 (E.D. Pa. 2009) (employer liability factors for vicarious wrongdoing)
- Synthes, Inc. v. Emerge Med., Inc., 25 F. Supp. 3d 617 (E.D. Pa. 2014) (elements for aiding and abetting fiduciary breach)
- Koken v. Steinberg, 825 A.2d 723 (Pa. Commw. Ct. 2003) (Pennsylvania adoption of Restatement factors for aiding and abetting breach)
- In re Lemington Home for the Aged, 777 F.3d 620 (3d Cir. 2015) (standards for punitive damages under Pennsylvania law)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (U.S. 2003) (guideposts on punitive-compensatory ratios and due process)