ORDER GRANTING IN PART AND DENYING IN PART MGA ENTERTAINMENT, INC.’s APPLICATION FOR EXEMPLARY DAMAGES, ATTORNEYS’ FEES AND COSTS
Before the Court is MGA Entertainment, Inc. (“MGA”)’s Application for Exemplary Damages, Attorneys’ Fees, and Costs. MGA requests the imposition of exemplary damages equal to double the compensatory damage award on MGA’s successful counterclaim-in-reply for trade secret misappropriation. The jury found that Mattel had misappropriated 26 categories of trade secret information and that the misappropriation was willful and malicious. After considering the moving, opposing, and replying papers, the evidence in the record, as well as the parties’ oral argument, the Court GRANTS IN PART AND DENIES IN PART the Application.
A. Introduction
The California Uniform Trade Secrets Act (CUTSA) proscribes the misappropriation of information that has independent economic value from not being generally known and is the subject of reasonable efforts to maintain secrecy. Cal.Civ.Code § 3426.1. The remedy for misappropriation is the greater of (1) the victim’s actual damages or (2) the misappropriator’s unjust enrichment.
Id.,
§ 3426.3. “If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice” the compensatory award.
Id.
Though the existence of willful and malicious misappropriation is ordinarily considered a fact that a jury must find by clear and convincing evidence, the court calculates the amount of exemplary damages.
02 Micro Int’l Ltd. v. Monolithic Power Sys., Inc.,
Any award of exemplary damages is constrained by the Constitution’s prohibition against “ ‘grossly excessive’ punishment on a tortfeasor.”
BMW of North Am., Inc. v. Gore,
CUTSA restrains the potential for “irrational and arbitrary deprivations of property,”
see, e.g., id.
(exemplary damages award equal to 500 times the compensatory award), by limiting exemplary damages to twice the compensatory award. Cal. Civ.Code § 3426.3(c). To determine the proper measure of exemplary damages within CUTSA’s statutory range, California courts consider common law factors traditionally used to determine both whether and to what extent exemplary damages are warranted.
Cloud & Associates, Inc. v. Mikesell,
B. Discussion
1. Nature of the Misconduct
The jury found, by clear and convincing evidence, that Mattel willfully and maliciously misappropriated MGA’s trade secret information. Some courts treat a finding of willful and malicious misappropriation as support for the “maximum possible amount in exemplary damages.”
02 Micro. Intern.,
The largest exemplary awards are reserved for the most reprehensible acts.
See State Farm Mut. Auto. Ins. Co. v. Campbell,
Because parties do not ordinarily expect that misdeeds that cause purely economic loss may expose them to severe exemplary penalties, economic misconduct is not generally reprehensible enough to support a large award of exemplary damages.
See Gore,
Mattel’s conduct fell far short of basic ethical standards. For years, the company’s senior management encouraged employees to use false pretenses to access competitors’ private displays at international toy fairs and improperly acquire competitive information, including price lists, advertising plans, and unreleased product attributes. Mattel disseminated the improperly acquired information through internal memoranda,
see, e.g.,
TX 9275, and company-wide presentations,
see
Trial Tr., dated March 22, 2011, Vol. I, at 31:2-7; praised the employees that committed the wrongdoing,
see
TX 27464-158; used MGA’s trade secret information to preempt MGA’s unreleased products,
see, e.g.,
TX 8751, and reaped $85 million in unjust enrichment. These “market intelligence” tactics were intentional, pervasive, long-standing and egregious; indeed, Mattel’s hierarchy admitted at trial that the information had value,
see
Trial Tr., dated March 18, 2011, Vol. I, at 114:21-22, and that its acquisition was wrongful,
see
Trial
*955
Tr., dated March 30, 2011, Vol. I, at 43:24-44:8,
2
while making unfulfilled pronouncements about future corrective action against the attorneys, executives and employees that encouraged or concealed the misconduct,
see
Trial Tr., dated April 1, 2011, Vol. I, at 50-52. Faced with competition and innovation that it “didn’t relish,”
Mattel, Inc. v. MGA Entertainment, Inc.,
Society has an interest in deterring reprehensible conduct of this kind. But that interest in deterrence is not at its strongest here, since other members of the close-knit toy industry have been alerted to Mattel’s misconduct as a result of this litigation and are likely to cast a wary eye towards their competitor in the future. Nor does Mattel’s use of cheap fake business cards, silly nicknames, and amateurish tactics in a futile effort to stave off legitimate competition evoke a strong desire to punish. That one of California’s largest companies abandoned innovation and resourcefulness for bumbling fraud evokes disappointment instead.
2. Compensatory Award
The second factor identified by the Supreme Court in
Gore,
as well the California Supreme Court in
Neal,
refers to the relationship between the compensatory damages award and the proposed exemplary award. Mattel argues that awards of exemplary damages and compensatory damages share an inverse relationship. To the contrary, the California Supreme Court has made clear that compensatory damages and exemplary damages should share a direct relationship,
Neal,
The jury awarded MGA $88.5 million in compensatory damages, an amount this Court has since remitted to $85 million. Both parties agree that the award was large. The Court is aware of no precedent that prohibits the doubling of this amount and, in fact, the case law suggests that a quadrupling meets constitutional scrutiny even if the “behavior is not particularly egregious.”
Planned, Parenthood,
3. Mattel’s Net Worth
“[D]eterrence will not be served if the wealth of the defendant allows him to
absorb [an exemplary damages] award with little or no discomfort.”
Neal,
k. Disposition as to Exemplary Damages
In many other cases, the maximum statutory award of exemplary damages would be warranted, since all of the factors identified by the United States Supreme Court and California Supreme Court appear to have been satisfied. The jury found Mattel’s conduct reprehensible and the evidence confirmed that Mattel encouraged its employees to consistently violate the California Uniform Trade Secrets Act. Mattel’s employees admitted that the company benefitted from the misappropriated information and the jury concluded that Mattel’s conduct resulted in tens of millions of dollars in harm. Finally, Mattel’s high net worth suggests that a high award of exemplary damages is necessary to deter future misconduct, and trade secrets laws adopted by states across the country provide for exemplary damages equal to twice the compensatory award.
However, Mattel’s conduct does not represent the most reprehensible form of trade secret misappropriation imaginable. It was silly, not evil, and it diminished in 2005. The need for deterrence is absent because the outcome of this litigation and other toy companies’ knowledge about Mattel’s pattern of misappropriation will preclude Mattel, or other any toy manufacturer, from engaging in this type of conduct again. Even recognizing its maliciousness, the conduct should not be punished by the largest exemplary damage award available. The Court instead awards MGA $85 million in exemplary damages — an amount equal to the remitted compensatory damage award.
5. Recovery of Reasonable Attorneys’ Fees
MGA is also entitled to recover the reasonable attorneys’ fees and costs it incurred to prosecute Mattel’s willful and malicious misappropriation of trade secrets. Cal.Civ.Code § 3426.4. Those costs include “a reasonable sum to cover the services of expert witnesses, who are not regular employees of any party.”
Id.
Though the award of fees is not automatic,
see 02 Micro Intern.,
Mattel does not contest the reasonableness of MGA’s attorneys’ hourly rates or time allocation, but instead argues that MGA is not entitled to recover fees and costs incurred prior to the filing of its claim. However, there is nothing in Cal.Civ.Code § 3426.4 that “limits fee awards to work performed after the complaint is filed in court,”
cf. Webb v. Bd. of Educ. of Dyer County, Tenn.,
Contrary to MGA’s argument, most of the time spent on its affirmative claims between 2004 and 2010 did not advance its successful claim for trade secret misappropriation. MGA’s allegations about Mattel’s unfair competitive practices had nothing to do with its claim for trade secret misappropriation; those claims instead alleged Mattel’s manipulation of retailers, licensees, and other industry groups that did business with MGA. MGA’s allegations about trade dress infringement by Mattel also bore little relationship with the claim for trade secret misappropriation, since the legal theories underlying those claims are distinct from trade secrets law. Nevertheless, some of the factual investigation performed by MGA’s attorneys between 2007 and 2010 helped lay the foundation for its claim that Mattel mimicked unreleased MGA products through the use of misappropriated information.
Early in this litigation, MGA informed its attorneys that several Mattel products bore an uncanny resemblance to recently released MGA products. MGA’s outside counsel duly investigated that claim, though they could not discover the underlying reasons. Nevertheless, at least some of the factual research conducted during that time period, especially the product comparisons, helped substantiate MGA’s claim at trial that Mattel caused over $85 million in harm through misappropriation. See Trial Tr., dated March 24, 2011, Vol. II, at 117:5-131:10 (testifying about similarities between MGA’s unreleased products and Mattel products); see also id. at 112:19-131:25 (testifying about the damage to MGA from Mattel’s misappropriation of trade secret information).
Having reviewed the billing records submitted by MGA in connection with this Application, the Court concludes that MGA reasonably expended $2.52 million on its claim for trade secret misappropriation. Because MGA’s counsel did not “block bill” after December 2007 3 and clearly identified the amount of time spent on each task, the Court has excluded the hundreds of hours MGA’s attorneys spent investigating and prosecuting its unsuccessful claims that Mattel (1) infringed MGA’s trapezoidal packaging; (2) interfered with MGA’s business relationships; and (3) pursued a wrongful injunction. The amount awarded is limited to the time spent (1) investigating Mattel’s mimicry of unreleased products, (2) preparing a pleading containing *958 claims arising out of Mattel’s access to MGA’s trade secret information, (3) discovering evidence over the final months of 2010, (4) successfully opposing Mattel’s dispositive motions, and (5) prosecuting the trade secret misappropriation claim at trial.
MGA’s attorneys spent approximately 3,620 hours litigating the claim for trade secret misappropriation. Most of these hours cover work performed after the filing of the claims in August 2010. Before the claims were filed, MGA’s attorneys spent approximately 430 hours performing factual investigation, revising multiple drafts of the claims, and researching an assortment of legal issues. Following the claims’ filing, MGA’s attorneys performed routine tasks relating to document review, depositions of key witnesses, preparation of briefs, oral arguments, and ultimately trial. A conservative fee rate of $600 dollars per hour (MGA’s attorneys’ average hourly rate exceeded that amount) yields a total fee award of $2,172,000. The Court further concludes that MGA reasonably expended approximately $350,000 in costs for the litigation of its claim.
Finally, Mattel argues that any attorneys’ fee award must be apportioned to reflect MGA’s partial success on its trade secret misappropriation claim. MGA claimed that Mattel misappropriated 114 categories of trade secret information, but the jury only found proof of misappropriation as to 26. The billing records reveal, however, that counsel’s work was predominantly dedicated to common issues of proof for the claim, namely evidence that Mattel operated a market research department, the identity of employees that worked for the department, their activities, participation by high ranking members of Mattel’s corporate hierarchy, the measures taken by MGA to maintain the confidentiality of information at its showrooms, and the market-related consequences of Mattel’s misconduct. MGA proved all of these predicate facts at trial and, in addition, proved by clear and convincing evidence that Mattel acted willfully and maliciously.
See Hensley v. Eckerhart,
C. Disposition
The jury’s finding of willful and malicious misappropriation triggers MGA’s entitlement to exemplary damages and reasonable attorneys’ fees and costs under CUTSA. For the foregoing reasons, the Court concludes that both forms of relief are proper, because Mattel’s conduct was reprehensible and harmful. The Court accordingly awards MGA $85 million in exemplary damages, $2,172,000 in reasonable attorneys’ fees, and $350,000 in costs.
IT IS SO ORDERED.
Notes
. See also Trial Tr., dated July 23, 2008, at 5468 (arguing for deterrence); Trial Tr., dated August 20, 2008, at 8167:5-8 (arguing that malice was present in case involving purely economic loss because defendants "didn't care about injuring” plaintiff); id. at 8167:13-25 (arguing that alleged cover-up activity constituted oppressive conduct that should have been remedied by exemplary award); id. at 8168:6-11 (arguing that restricting relief in economic loss case to compensatory damages incentivizes defendant to repeat wrongdoing); id. at 8168:18-20 (arguing that defendants that cause economic injury should be taught "a lesson” and the amount of exemplary damages should be based upon "how much money they have”); id. at 8170:8-9 ("Crime doesn't pay; shouldn't pay.”).
. Mattel argues that its employees could not have been aware that the information they misappropriated from MGA’s showrooms qualified as trade secrets. The jury heard this argument and rejected it by finding that Mattel engaged in willful and malicious misappropriation.
. MGA’s attorneys attempted to log hours for affirmative and defensive claims in separate invoices but, in rare instances, the invoices overlapped. For instance, an invoice prepared by the firm of Orrick, Herrington & Sutcliffe LLP that purports to cover hours dedicated to MGA’s "defensive” case in September 2010 logs numerous entries relating to MGA's prosecution of its trade secret misappropriation counterclaim. The Court has accordingly examined all of the invoices prepared by MGA's attorneys and identified entries that expressly refer to time expended on the litigation of MGA’s successful claim.