Opinion
No. 2014-CV-00604
11-29-2016
Vention Medical Advanced Components, Inc. d/b/a Advanced Polymers, a Vention Medical Company v. Nikolaos D. Pappas and Ascend Medical, Inc.
***SEALED ORDER***
Vention Medical Advanced Components, Inc. d/b/a Advanced Polymers, a Vention Medical Company ("Vention") brought an action against Nikolaos D. Pappas and Ascend Medical, Inc. ("collectively "Pappas") alleging violation of its trade secrets and seeking injunctive relief. By Order dated September 7, 2016, this Court granted Vention injunctive relief, but denied its request for attorney's fees. Vention moves to reconsider, and the parties have filed a number of post-verdict motions. For the reasons stated in this Order, the Court DENIES Vention's Motion to Reconsider the Court's Denial of its Request for Attorney's Fees; GRANTS Vention's Motion to Dissolve Bond; GRANTS IN PART AND DENIES IN PART Pappas Motion to Stay; GRANTS IN PART AND DENIES IN PART Vention's Motion for Taxation of Costs; and DENIES Vention's Motion to Attach.
1. Vention's Motion to Reconsider
Vention seeks to have the Court reconsider its denial of attorney's fees, arguing that in the Court's Order dated September 7, 2016, the Court found that Pappas "willfully and intentionally copied [Redacted] that Vention created and was the linchpin to its [Redacted] " Order, September 7, 2016, at 38. Vention argues that the Uniform Trade Secret Act, RSA 350-B:4 ("UTSA") provides that a court may award reasonable attorney's fees to the prevailing party when "willful and malicious misappropriation exists." It notes that although the statute does not define "willful and malicious" numerous courts have held that intentional misappropriation is willful and malicious. See, e.g. Mangren Research & Dev. Corp. v. Nat'l Chem. Co., 87 F.3d 937, 946 (7th Cir. 1996) (holding that under the UTSA, willful and malicious "surely must include an intentional misappropriation"). However, it is important to note that the UTSA provides that the court may award attorney's fees, but does not state that the court shall award attorney's fees, where willful and malicious misappropriation exists. While the use of the word "shall" is generally regarded as a command, the use of the word "may" allows a court discretion. See generally McCarthy v. Wheeler, 152 N.H. 643, 645 (2005).
In Mangren, upon which Vention principally relies, the court considered the definition of willful and malicious misappropriation under the UTSA to be the equivalent to "the conscious disregard of the rights of another," the standard used under Illinois law to impose punitive damages. Mangren Research and Development Corp. v. National Chemical Co., 87 F.3d at 946-47. But other courts have held that that a fee award is not appropriate under the UTSA where an infringer should have known he was acquiring trade secret information because "doing something that one "should have known" not to do is not quite the same thing as doing something that one has been specifically told he cannot do." Chemetall GMBH v. ZR Energy, et al, 2002 WL 23826, at *4 (N.D.Ill., Jan. 8, 2002).
Here, Pappas consulted with an attorney before he proceeded. He, perhaps unreasonably, believed [Redacted] was in the public domain. But most importantly, as pointed out in Pappas's Objection, it is quite likely that Pappas believed that Vention did not intend to [Redacted] and, for that reason, he believed that it would be permissible for him to do so. Objection, p. 3 citing Saab testimony at 1704. Vention has raised no points of law or fact that the Court has misapprehended and its Motion to Reconsider must therefore be DENIED. N.H. Super. Ct. R. 12(e).
2. Vention's Motion to Dissolve Bond
After granting preliminary injunctive relief, the Court required Vention to post a bond in the amount of $350,000 to protect Pappas from the consequences of a wrongful injunction. During the course of the litigation the bond was increased, ultimately to $850,000 on April 5, 2016. Now that the Court has found that Pappas engaged in intentional misappropriation of Vention's intellectual property and ordered a perpetual injunction, Vention seeks to have the bond discharged.
Pappas has filed a limited objection, stating that even if the discharge were to be granted, then the order of discharge should be without prejudice to Defendant's right to pursue the bond in the event of reversal on appeal. Pappas cites no New Hampshire authority for this proposition, but instead relies upon an 11th Circuit case, Piambino v. Bailey, 757 F.2d 1112, 1142-1143 (11th Cir. 1985). This case is inapposite.
In the first place, Piambino was decided pursuant to Fed. R. Civ. P. 65(c), which requires a party obtaining an injunction to post a bond. The New Hampshire Superior Court rules provide that a court has discretion to waive a bond for good cause shown. N.H. Super. Ct. R. 48(c). There is ample evidence in the record which establishes that Vention has substantial assets; the Court is satisfied that if it is determined that the injunction issued in this case is wrongful, Pappas would be able to recover damages from Vention. Accordingly, the Motion to Discharge Bond is GRANTED. 3. Defendant's Motion for Partial Stay of Paragraph 5 of Court's Order Issued September 2, 2016
This Court's order granting injunctive relief in favor of Vention provided in relevant part:
4. The Defendants are ordered to destroy all their equipment, designs, and testing within 30 days of this Court's order and provide certification of such destruction. To the extent the records are retained because of this lawsuit or any other legal reason, such records shall be maintained by defense counsel and notice to the Plaintiff of any such retention shall be provided; andOrder, September 7, 2016, at 37-38.
5. The parties shall comply with the requirements for return and destruction of materials as provided for in the Protective Order in this matter.
Pappas objects to that portion of the Order which orders destruction of the property, reasoning that Defendant's equipment should be preserved pending final resolution of this matter, whether by appeal or otherwise for the same reason that the records need to be preserved.
It appears that the parties have negotiated regarding this matter, but have not been able to enter into an agreement. Vention apparently recognizes that it would, be unreasonable to simply destroy all of Pappas's property, since there will be an appeal, but has proposed conditions that Pappas finds unacceptable. Defendants note that after the Court's Order of September 7, 2016, Mr. Pappas disabled his machine by removing [Redacted] to its counsel. Defendants' counsel has represented that he has retained those mechanisms and will not provide Mr. Pappas with access to them pending further Order of the Court. Reply, ¶ 6. Mr. Pappas counsel also verifies that Defendants have complied with the Court's Order by turning over the small number of documents in their possession to counsel, and have deleted all electronic copies of design and testing information from Nikolaos Pappas's computer. In light of these representations, the Court orders as follows:
1. Complete compliance with paragraph 5 of this Court's September 7, 2016 Order is hereby stayed until after that Order or a subsequent Order is no longer subject to appeal to the New Hampshire Supreme Court provided that:
a. Defendant shall file and. serve a written description of all items covered by paragraph 5 of the Court's September 7, 2016 Order within 20 calendar days of the date of the Clerk's notice of this Order on Vention;
b. All equipment used in the manufacture of heat shrink tubing by Pappas shall be stored at a location to be agreed upon by the parties at the expense of the Defendants. If the parties cannot agree, a hearing shall be held.
c. The Defendants shall provide written certification to Plaintiff that they have fully complied with the terms of this Order.
Apparently the parties have disagreed over storing the equipment at location owned by a third party, Luis Pedroso. The Court suggests that the parties consider whether dispute could be awarded by having Mr. Pedroso agree to be bound by the provisions of the September 7, 2016 Order forbidding design or [Redacted]
4. Vention's Motion for Taxation of Costs
Superior Court Rule 45, which is identical to prior Superior Court Rule 87, governs taxation of costs. Certain costs are mandatory; Rule 45(a)(1) provides that upon written request, the Clerk shall tax costs for fees of the court in fees for service of process which are documented in the Court's file. The party claiming other costs must file a motion to allow costs together with an itemized verified bill of costs to be ruled upon by the Court. Rule 45(b) provides:
Allowable Costs. The following costs shall be allowed to the prevailing party: fees of the court, fees for service of process, witness fees, expense of view, costs of transcripts, and such other costs as may be provided by law. The court, in its discretion, may allow the stenographic cost of the original transcript of the deposition plus one copy, including the cost of videotaping, and may allow other costs including, but not limited to, actual costs of expert witnesses if the costs were reasonably necessary to the litigation.
Plaintiff seeks costs in the amount of $91,133.06. Defendant objects to some, but not all of the costs. First, Pappas claims that Vention's request for costs is procedurally defective because it is not verified as required by the Rule. However, in its reply, Vention has provided verification from Attorney Albert. The Court will not exalt form over substance. Accordingly, the Court finds that verification by Attorney Albert is sufficient to satisfy the rule.
(a) Prevailing Party
Second, more substantively, Pappas argues that Vention is not entitled to all the costs it claims because it was not the prevailing party on all claims. Laramie v. Sears, Roebuck & Co., 142 N.H. 653, 661 (1998). It is true that Vention did not recover damages on its claim for intentional interference with advantageous contractual relations, because its damages were minimal in light of the injunction obtained. Similarly, it did not seek to enforce the noncompetition agreement Nikolaos Pappas signed. But the core issues in this case were whether or not Pappas misappropriated Vention's trade secrets and whether, as Pappas claimed, Vention had instituted this litigation to obtain a competitive advantage. The Court found in favor of Vention on its trade secret claim and against Pappas on his counterclaims. Therefore, Vention is the prevailing party in this case and can recover its costs. Ellis v. Royal Ins. Co., 129 N.H. 326, 340 (1987).
(b) Witness Fees
Pappas challenges the proposed cost of $1,055.20 for subpoenas in obtaining out-of-state witnesses but provides no reasonable explanation as to why witness fees should be limited to the costs awarded in cases where witnesses reside in this State. The Court will award this $1,055.20 to Vention. More persuasively, Pappas challenges $4,357.73 sought for the attendance [Redacted] a fact witness Vention paid $3,000 for 2 days attendance at the rate of $1,500 per day, even though his entire testimony consumed just slightly over one hour. Pappas claims that travel costs are allowed only for the cost of travel to the state line at $.17 per mile under RSA 516:18. The Court believes that it has authority to award the actual costs paid [Redacted] to travel to and from New Hampshire if the cost is submitted for approval. However, the Court does not believe that Vention is entitled to recover the $3,000 [Redacted] as a fact witness.
It is true that it is permissible under New Hampshire law to reimburse the out of pocket costs of a fact witness and pay a per diem fee to a fact witness. However, unless a per diem fee is reasonably related to the witness's lost time, the fee could potentially violate New Hampshire Professional Conduct Rule 3.4. New Hampshire Bar Association Ethics Committees Advisory Opinion, 1992-93/10, Reimbursement Of Litigation Consultants Attorney's Fees; see generally Caldwell v. Cablevision Sys. Corp., 20 N. Y. 3rd 365 (N. Y. 2013). Vention has not provided an adequate showing that $3,000 was necessary to [Redacted] his time. Presumably, he could have been deposed in [Redacted] and his deposition videotaped at less expense. Therefore, the Court denies all of the $4,357.73 but the actual cost [Redacted] travel to New Hampshire and the statutory witness fee.
(c) Transcript Costs
Fourth, one principal dispute in this case is the amount of costs to be awarded for transcripts. Superior Court Rule 45 provides that a trial court has discretion to award the stenographic costs of deposition plus one copy including cost of videotaping and may allow other costs including, but not limited to, actual costs of expert witnesses if the costs is reasonably necessary to the litigation.
In the circumstances of this case, a bright line rule may be established for the cost of a deposition transcript. First, if the witness did not testify, and the deposition was submitted in lieu of live testimony, then the deposition transcript is a taxable cost. If a witness testified, the deposition transcript would be useful or cross-examination of the witness, is reasonably necessary, and a taxable cost. However, if a witness did not testify, unless Vention can make a strong showing that the deposition resulted in admission or exclusion of evidence or otherwise streamlined the trial, it is not a reasonably necessary cost.
No such showing has been made here for the depositions of witnesses who had depositions taken but did not testify at trial. Therefore, the costs of deposing [Redacted] experts retained by Pappas who did not testify are not recoverable. Similarly, the depositions of Arthur Pappas and Luis Pedroso, who did not testify, are not recoverable costs. On the other hand, the cost of the transcript [Redacted] and Nikolaos Pappas' deposition is allowable, because they did testify at trial. There is no videotaped deposition that was presented in lieu of trial testimony. Under these circumstances, the cost of videotaping the deposition is not reasonably necessary; a witness cannot be effectively impeached with a videotape.
Vention also seeks $6269.50 for one half the cost of a real time trial transcript. Pursuant to the Standing Orders of the BCDD, the parties agreed to have a real-time certified stenographic reporter attend the trial and produce daily transcript. The transcript was extremely helpful to the parties and to the Court; prior to the litigation the parties agreed to split the cost of the transcript. Absent an agreement, the Court would find that this cost was reasonably necessary to the litigation and award the expense as a taxable cost. However, Vention is bound by its decision to agree to split the costs, made before either side knew who would prevail and therefore be responsible for costs. Therefore, the Court does not award Vention the $6,269.50, the half-share of real-time trial transcription costs that it specifically contracted with Pappas to split.
Similarly, Pappas asserts, and Vention does not dispute, that the parties agree to have a technical consultant to support the electronic presentation of trial evidence and agreed to split that cost; it is therefore not a taxable cost. --------
(d) Expert Witnesses
Fifth, Vention's most significant claim is its claim for the expense of the expert witnesses it hired. Pappas does not dispute that the testimony of Vention's experts Dr. Rauwendaal, Dr. Tayebi, and Mr. Berriman were reasonably necessary to the litigation. Pappas does claim that patent attorney David Brook's testimony was not reasonably necessary. Pappas argues that Brook's testimony was not relevant because it did not opine on Plaintiff's specific process and work, and did. not even examine Pappas's technology. The Court disagrees. Pappas claimed that Vention's technology was in the public domain, and was easily discernible from various patents. Brook testified to the contrary, the Court found his testimony credible, and relied upon it in the Order issued in this case.
The New Hampshire Supreme Court has defined "actual costs" of expert witnesses to be "limited to those charges directly related to the witness's appearance and testimony in court." Martinez v. Nicholson, 154 N.H. 397, 402 (2006) (quotations omitted); see also Cutter v. Farmington, 126 N.H. 836, 843 (1985). While the Court stated in Martinez that "[n]othing in our case law prohibits the award of costs for the pretrial expenses of an expert witness as long as those expenses directly related to the witness's appearance and testimony in court," New Hampshire courts have generally adhered to the traditional view that any pretrial work must be directly related to trial. Id. at 402; see, e.g., O'Callaghan v. Town of Warren, Grafton County Superior Ct., No. 2006-C-064, 2008 WL 6016239, at *2-3 (N.H. Super. Aug. 29, 2008) (Vaughan, J.) (holding that a "plaintiff is not entitled to recover fees attributable to such things as initial investigation, report preparation or preparing for deposition.") Given the prevailing law, the Court declines to award any expert costs beyond those costs incurred by Vention for the in court testimony of their expert witnesses, and the time spent immediately prior to trial and during trial preparing the expert to act as a witness.
It is not clear from the request for costs filed by Vention how much time was spent preparing each witness to act as a witness in this case. Brook and Berryman are attorneys, and their testimony was not overly technical. The Court believes that no more than three hours could be awarded as time reasonably necessary to prepare them to testify. Dr. Tayebi's testimony was technical, but narrow and principally limited to one specific claim. Moreover, he has a law degree. The Court believes that no more than four hours could be awarded as time reasonably necessary to prepare him to testify. Dr. Rauwendaal was Vention's principal expert, and his testimony was technical and complicated. He does not have a law degree, but is an experienced expert witness. The Court believes that no more than six hours could be awarded as time reasonably necessary to prepare him to testify.
5. Vention's Motion to Attach
Vention seeks to attach up to $1 million in Vention stock owned by Defendant Mr. Pappas pursuant to RSA 511-A, which authorizes prejudgment attachment. Pappas objects on the ground that RSA 511-A is only applicable to pre-judgment attachment, and this case has, or will soon go to judgment.
The Court need not decide whether or not RSA 511-A can be utilized in the circumstances of this case, because Vention has recovered no damages against Pappas. Moreover, the Court has denied Vention's Motion for Attorney's Fees, and also denied its Motion for Reconsideration; it therefore does not have a likelihood of success on the merits of recovering attorney's fees, and the costs it is likely to recover are relatively insignificant. Vention has not made an adequate showing that Mr. Pappas, if not Ascend, would not have assets adequate to satisfy the costs imposed by this Order. Even if RSA 511-A were applicable to this case, upon which the Court expresses no opinion, Vention would not be entitled to an attachment. Accordingly, the Motion to Attach is DENIED.
6. Sealing
This order has been issued under seal. It shall remain under seal for 20 days from the date on the Clerk's notice of decision. By that date, the parties shall file a redacted version of this Order to be placed in the public file, or advise the Clerk that this Order may be placed in the public file. 11/29/16
DATE
/s/_________
Richard B. McNamara,
Presiding Justice RBM/