980 F.3d 1117
7th Cir.2020Background
- Tata Consultancy Services (TCS), hired by Kaiser Permanente, obtained unauthorized access to Epic Systems’ UserWeb (via a credential improperly retained and shared by Ramesh Gajaram) and downloaded thousands of confidential documents, including trade secrets.
- TCS employees used some stolen material to produce an 11‑page “comparative analysis” comparing TCS’s Med Mantra product to Epic’s software to evaluate U.S. market entry, target Kaiser, and identify gaps to improve Med Mantra.
- Epic sued for trade‑secret misappropriation and related Wisconsin torts. The jury found for Epic and awarded $140M for the comparative analysis, $100M for other confidential uses, and $700M punitive damages.
- The district court vacated the $100M award as speculative and reduced punitive damages to $280M under Wisconsin’s statutory cap; it otherwise upheld liability and the $140M award.
- On appeal the Seventh Circuit affirmed the $140M compensatory award, affirmed vacatur of the $100M award, but held the $280M punitive award violated due process and remanded to reduce punitive damages (to at most $140M).
- The district court issued an adverse‑inference instruction against TCS for spoliation of relevant logs/evidence, which the jury could consider along with other evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Was the $140M unjust‑enrichment award for use of the comparative analysis supported by evidence? | Epic: TCS used stolen Epic data to gain a "head start"; avoided R&D costs are a proper measure; expert tied stolen modules to the spreadsheet. | TCS: Comparative analysis was a stale marketing doc; no logical link to a $140M benefit; expert misapplied Epic’s costs rather than TCS’s benefit. | Affirmed — sufficient evidence to infer use and avoided R&D is a reasonable valuation; $140M reasonable when viewed with evidence and expert adjustments. |
| 2) Was the $100M award for "other confidential information" supported? | Epic: circumstantial evidence + adverse‑inference from spoliation supports inference TCS used other downloads to improve Med Mantra. | TCS: Speculative; no concrete evidence tying other downloaded documents to any use or improvement. | Affirmed district court’s vacatur — insufficient evidence; adverse inference alone cannot supply the necessary proof. |
| 3) May punitive damages be awarded when compensatory damages are restitutionary (defendant’s gain) rather than proof of plaintiff’s actual loss? | Epic: Wisconsin law permits punitive damages so long as compensatory damages are awarded, including restitutionary awards. | TCS: Punitive damages require proof of an actual injury to plaintiff before they can be awarded. | Affirmed — punitive damages are available because compensatory damages were imposed; Wisconsin law does not require proof of a separate actual injury. |
| 4) Does the punitive award (reduced to $280M) violate due process? | Epic: TCS’s repeated, deceitful conduct justifies substantial punitive damages; statutory cap supports size. | TCS: Award is grossly excessive under Gore/State Farm guideposts; must be reduced or retried. | Vacated and remanded — $280M is constitutionally excessive given the reprehensibility factors and high compensatory award; punitive must be reduced to at most $140M (1:1 ratio). |
Key Cases Cited
- 3M Co. v. Pribyl, 259 F.3d 587 (7th Cir. 2001) (avoided R&D costs can measure benefit from misappropriated trade secrets).
- Pro‑Pac, Inc. v. WOW Logistics Co., 721 F.3d 781 (7th Cir. 2013) (punitive damages available when compensatory damages include defendant’s gain).
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003) (due‑process guideposts for reviewing punitive damages).
- BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996) (framework for assessing excessiveness of punitive awards).
- Mgmt. Comput. Servs., Inc. v. Hawkins, Ash, Baptie & Co., 557 N.W.2d 67 (Wis. 1996) (measure unjust enrichment by value of benefit conferred).
- Kronisch v. United States, 150 F.3d 112 (2d Cir. 1998) (spoliation/adverse inference alone cannot substitute for substantive proof).
- Tucker v. Marcus, 418 N.W.2d 818 (Wis. 1988) (punitive damages tied to recoverable compensatory damages).
- Trinity Evangelical Lutheran Church v. Tower Ins. Co., 661 N.W.2d 789 (Wis. 2003) (Wisconsin’s punitive‑damages factors and analysis).