183 F.Supp.3d 1245
S.D. Fla.2016Background
- XTec sued Hembree Consulting Services, Inc. (HCSI) and Larry Hembree alleging misappropriation of trade secrets (FUTSA), FDUTPA violations, defamation, and trade libel based on development of Enabler 3.0 from XTec’s AuthentX/Enabler 1.0.
- Trial followed a related earlier suit against CardSmart; XTec claimed Defendants aided/allowed CardSmart access to Navy servers containing AuthentX, and concealed the purpose of that access.
- After a 17-day jury trial, the jury found for XTec on all claims and awarded: $4,000,000 unjust enrichment, $1,000,000 actual damages (FUTSA), $0 FDUTPA monetary damages (but liability), and $250,000 nominal damages for defamation; Defendants’ defamation counterclaim lost.
- Defendants moved post-trial for JMOL and a new trial arguing insufficient evidence on misappropriation, trade-secret identity, causation/damages, FDUTPA preemption and lack of deception, and truth/opinion for defamation; they alternatively sought reduction of nominal defamation damages.
- The Court denied JMOL and most new-trial relief but reduced the jury’s nominal defamation award from $250,000 to $1.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. FUTSA misappropriation—evidence Defendants caused or knew of CardSmart’s copying | XTec: evidence showed Hembree arranged access to Pensacola server, concealed purpose, and bankrolled development; jury could disbelieve Hembree. | Defs: they lacked knowledge of Wiley’s copying and cannot be held for CardSmart’s acts; insufficiency of evidence. | Court: Denied JMOL; CardSmart theory is closely related to trial motions and record supported a reasonable jury verdict. |
| 2. Willful & malicious misappropriation/ exemplary damages (raised post-trial) | XTec: presented evidence of egregious conduct supporting punitive measure. | Defs: XTec did not meet higher standard and did not preserve argument at trial. | Court: Declined to consider willfulness/malice on Rule 50(b) because not raised in Rule 50(a); refused JMOL on this ground. |
| 3. Substantial portion / identification of trade secrets | XTec: identified AuthentX as a protectable software compilation and provided source-code evidence. | Defs: <1% copying, trade-secret description too broad/moving target, flawed server imaging. | Court: Denied JMOL; jury instructions allowed liability via disclosure (not only substantial portion) and XTec adequately identified its trade secrets. |
| 4. Actual damages, unjust enrichment, causation | XTec: misappropriation led to Enabler 3.0 replacing Enabler 1.0, causing lost sales and unjust enrichment. | Defs: Navy would have required JGS 2.0 irrespective of Defs; lost sales speculative; unjust enrichment overstated. | Court: Denied JMOL; sufficient evidence supported causation, lost-profit theory, and unjust enrichment award. |
| 5. FDUTPA—preemption, deception, and damages | XTec: FDUTPA distinct because it alleges deception in how access was obtained; sought injunctive relief and monetary damages. | Defs: FDUTPA duplicative of FUTSA and lacked proof of deception or actual FDUTPA damages. | Court: Denied JMOL; FDUTPA was not preempted, record supported deception theory, and lack of monetary damages did not defeat injunctive-relief theory. |
| 6. Defamation/trade libel and nominal damages | XTec: Defendants made false statements that injured reputation/business. | Defs: statements true/substantially true or pure opinion; trade libel lacked special damages; $250k nominal award excessive. | Court: Denied JMOL on defamation/trade libel (jury credibility choices upheld); found the jury’s $250,000 nominal award legally excessive and reduced it to $1. |
Key Cases Cited
- Pickett v. Tyson Fresh Meats, Inc., 420 F.3d 1272 (11th Cir.) (standard for JMOL and viewing evidence favorably to nonmoving party)
- Penalty Kick Mgmt. Ltd. v. Coca-Cola Co., 318 F.3d 1284 (11th Cir.) (misappropriation via disclosure or use of a substantial portion of trade secret)
- Doe v. Celebrity Cruises, Inc., 394 F.3d 891 (11th Cir.) (Rule 50(b) renewal must be based on grounds raised in Rule 50(a), but ‘closely related’ exceptions)
- Campbell v. Rainbow City, Ala., 434 F.3d 1306 (11th Cir.) (nonmovant must show more than a scintilla of evidence to defeat JMOL)
- Ard v. Sw. Forest Indus., 849 F.2d 517 (11th Cir.) (new trial standard: verdict must be against the great weight of the evidence)
- Montgomery Ward & Co. v. Duncan, 311 U.S. 243 (U.S.) (grounds for new trial include verdict against weight of evidence or unfair trial)
- Corpus v. Bennett, 430 F.3d 912 (8th Cir.) (district court may and should correct nominal damages to conform with law)