Union Pump Co. v. Centrifugal Technology, Inc., et

Case: 10-30040 Document: 00511323931 Page: 1 Date Filed: 12/16/2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
December 16, 2010
No. 10-30040 Lyle W. Cayce
Clerk
UNION PUMP CO., formerly known as David Brown Union Pumps Co.,
Plaintiff – Appellant
v.
CENTRIFUGAL TECHNOLOGY INCORPORATED; DANIEL CLEVELAND;
CHARLES GOODRICH,
Defendants – Appellees
consolidated with
No. 10-30072
UNION PUMP CO., formerly known as David Brown Union Pumps Co.,
Plaintiff – Appellee
v.
CENTRIFUGAL TECHNOLOGY INCORPORATED; DANIEL CLEVELAND;
CHARLES GOODRICH,
Defendants – Appellants
Appeal from the United States District Court
for the Western District of Louisiana
No. 5:05-CV-0287
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No. 10-30072
Before KING, GARWOOD, and DAVIS, Circuit Judges.
PER CURIAM:*
Plaintiff, Union Pump Company, sued three of its former employees after
the former employees formed a competing business. Union Pump alleged that
the defendants misappropriated its trade secrets and engaged in unfair
competition because the defendants were using Union Pump’s proprietary
drawings to operate their competing business. Union Pump also alleged that the
defendants spoliated evidence by deleting and destroying electronically stored
information. Following a two-week trial, the jury returned a verdict in Union
Pump’s favor. Union Pump appeals the district court’s refusal to award
attorney’s fees as a sanction for the defendants’ spoliation of evidence. The
defendants also appeal, arguing that they are entitled to a new trial because the
district court made several evidentiary errors and there was insufficient
evidence to sustain the amount of the damages award. For the following
reasons, we affirm the district court’s judgment.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff, Union Pump Company, is in the business of designing,
manufacturing, and servicing industrial pumps. In 1995, Union Pump’s
predecessor, David Brown Pumps, Inc.,1 purchased American Pump Company
*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
1
The plaintiff in this case has gone through several name changes during the relevant
time period. David Brown Pumps, Inc. was an American subsidiary of a British company. Its
name was later changed to David Brown Union Pumps Company after it acquired Union
Pump, headquartered in Battle Creek, Michigan. Thereafter, Textron Innovations, Inc.,
originally a plaintiff in this suit, acquired David Brown Union Pumps Company. Following
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located in Shreveport, Louisiana. All of American Pump’s intellectual property
was included in the sale, including the design and fabrication drawings for all
of the American Pump pumps and component parts. At the time of the sale,
American Pump was partially owned by two of the individual defendants, Daniel
Cleveland and Jerry Don Elmore. The third individual defendant, Charles
Goodrich, was an employee of American Pump. Following the sale, Union Pump
continued to manufacture and service the American Pump line of pumps, and
the three individual defendants continued to work in the Shreveport plant.
On December 2, 2002, Union Pump announced that it would close the
Shreveport plant and relocate plant functions to various other locations in the
United States. Despite the closure of the Shreveport plant, Union Pump
intended to continue servicing pumps in the American Pump line. The
employees responsible for winding down operations at the Shreveport plant,
including Goodrich, Cleveland, and Elmore, were instructed to send all of the
American Pump design and fabrication drawings to another location.
In April 2003, immediately following the closure, Goodrich, Cleveland, and
Elmore formed a competing company, Centrifugal Technology, Inc. (CTI). In
September 2003, Union Pump was unable to locate a drawing for a heat
exchanger component part for a pump in the American Pump line. A Union
Pump employee contacted Cleveland, asking whether Cleveland still possessed
any materials belonging to Union Pump. According to Cleveland, he found the
yet another merger, the company was rebranded as Union Pump Company. Union Pump
presented evidence at trial that the intellectual property at issue was properly transferred
during all of the mergers and name changes. For clarity, we refer to the plaintiff simply as
Union Pump, regardless of its actual name at the time of the event discussed.
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drawing on a computer disk in a box of miscellaneous items. Cleveland
forwarded the drawing to the Union Pump employee.
Thereafter, Union Pump discovered that it was missing a large number of
design and fabrication drawings for the American Pump line. Based on
Cleveland’s possession of at least one drawing, and the defendants’ formation of
a competing business, Union Pump determined that the defendants were likely
in possession of more American Pump drawings. Union Pump filed this action
in September 2004, alleging that Cleveland, Goodrich, and Elmore, along with
CTI, had tortiously converted Union Pump’s intellectual property, engaged in
unfair trade practices, and violated the Louisiana Uniform Trade Secrets Act
(LUTSA), La. Rev. Stat. §§ 51:1431–39. Union Pump sought damages for the
unauthorized use of its drawings, return of the drawings themselves, and an
injunction preventing CTI from using the drawings in the future.
Union Pump immediately sought discovery of all electronically stored
information in the defendants’ possession that might relate to the litigation. The
district court appointed a special master to oversee discovery in the case and
appointed a computer expert to analyze the defendants’ computers. Each of the
parties also retained its own computer expert. In addition, the district court
entered a protective order in December 2004 that prohibited the defendants from
“taking any action to destroy, erase, eradicate, secret, conceal, dispose of or
otherwise render unavailable for inspection by plaintiffs, any and all design
drawings, AutoCAD drawings, schematics, computer data, [or] computer files.”
The court-appointed computer expert took forensic images of the defendants’
computer hard drives in April and May of 2005 and copies of those images were
given to the computer experts retained by the parties.
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After inspecting the defendants’ hard drives, Union Pump learned that the
defendants had spoliated much of the evidence relevant to the litigation by
deleting or destroying the electronic information contained on the hard drives.
Specifically, Union Pump’s computer expert, Andrew Rosen, discovered that
most of the data on the hard drives of at least three of the defendants’ computers
had been deleted using memory wiping software designed specifically for that
purpose. Rosen found that the software was used in the most invasive “deep
clean” mode, and that it was used between March and May 2005, after the
district court had entered the protective order and before the court-appointed
expert was able to access the hard drives. Goodrich had used the disk-wiping
software on his hard drive just days before the hard drive was to be imaged by
the court-appointed expert in May 2004. Rosen also found evidence that
Goodrich had performed internet searches on computer forensics and disk-
wiping. In addition, the court-appointed expert discovered that the tapes
designed to back up CTI’s hard drives were blank. The tapes had supposedly
been rotated every night and on a bi-weekly basis, but the only way the backup
tapes could be blank is if they were erased or had never been used.
Union Pump also learned that the defendants had disposed of several
relevant items. During his deposition, Cleveland admitted that he had been in
possession of at least three computer disks containing American Pump drawings.
Cleveland admitted to discussing the disks with Goodrich after Union Pump had
contacted him for the drawings, and that he and Goodrich had decided to destroy
the disks instead of returning them to Union Pump. CTI had also disposed of a
computer just prior to the filing of the complaint.
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Upon learning this information, Union Pump amended its complaint to
add a cause of action for spoliation of evidence. Union Pump also filed a series
of motions related to the spoliation. It first filed a motion for sanctions, asking
that the district court sanction the defendants under Federal Rule of Civil
Procedure 37(b) for violation of the court’s discovery orders and under the court’s
inherent power to sanction misconduct. Union Pump averred that a variety of
sanctions were appropriate, including entry of default judgment, an adverse
inference instruction, and attorney’s fees. Several months later, Union Pump
moved for summary judgment with respect to its spoliation claims and again
asked the court to enter default judgment against the defendants and award
attorney’s fees to Union Pump. The district court declined to rule on either
motion. Instead, the court decided that “[e]vidence regarding spoliation can be
presented to, and the issue will be decided by, the jury. The issue of sanctions
shall be addressed by the Court after the jury returns its verdict.”
Before trial, Union Pump requested that the court provide an adverse
inference instruction to the jury. Specifically, Union Pump asked the court to
instruct the jury that the defendants improperly possessed and intentionally
destroyed Union Pump’s proprietary property. The court did not give the
adverse inference instruction requested by Union Pump. Instead, the district
court instructed the jury that it “may infer that the evidence destroyed would
have been unfavorable to Defendants” if it determined that the evidence was in
the control of the defendants, that they had an obligation to preserve it, that the
destroyed evidence was relevant to the litigation, and that the evidence was
destroyed intentionally and in bad faith.
At trial, the only direct evidence that the defendants ever possessed
information belonging to Union Pump was Cleveland’s testimony regarding his
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possession and later destruction of at least three disks containing drawings
belonging to Union Pump. Union Pump also presented considerable
circumstantial evidence that the defendants used Union Pump’s design
drawings, including the fact that CTI was able to bid competitively with Union
Pump for jobs that would have required drawings from the American Pump line.
According to the Union Pump representative that testified at trial, Union Pump
is able to realize very little or no value from the American Pump line of pumps
as a result of the missing drawings. At the close of Union Pump’s evidence, the
district court dismissed Elmore and CTI’s insurer, leaving Goodrich, Cleveland,
and CTI as the remaining defendants.
Following a two-week trial, the jury returned a verdict in favor of Union
Pump in the amount of $2,125,559. The jury found that the defendants had not
engaged in unfair trade practices, but that the defendants were liable to Union
Pump for violating LUTSA, for conversion of Union Pump’s property, and for
intentional spoliation of evidence. The jury awarded Union Pump $1,525,559 as
the “total amount of compensatory damages required to make [Union Pump]
whole.” The jury also determined that CTI had been unjustly enriched in the
amount of $600,000. In a separate interrogatory, the jury found that the
defendants had misappropriated Union Pump’s trade secrets in “bad faith.”
The district court then asked the parties to brief the issue of whether
Union Pump was entitled to attorney’s fees. Union Pump asked the district
court to award it the entire amount of its attorney’s fees and all of its costs, in
an amount close to $1 million. Union Pump asserted two bases for the award of
attorney’s fees: LUTSA and the court’s inherent powers to sanction the
defendants’ for their bad faith misappropriation of trade secrets. Union Pump
did not re-assert its request for sanctions related to the defendants’ spoliation
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of evidence. The district court declined to award attorney’s fees, finding that
“the jury provided [Union Pump] adequate compensation in their award.”
Union Pump appeals the district court’s decision not to award attorney’s
fees. CTI also appeals, arguing that the district court made several evidentiary
errors and that there is insufficient evidence to sustain the amount of the
damages award. We consolidated the appeals.
II. DISCUSSION
A. Attorney’s Fees
Union Pump appeals the district court’s denial of its motion for attorney’s
fees. According to Union Pump, the district court erred when it declined to use
its inherent powers to award attorney’s fees in light of the jury’s finding that the
defendants spoliated evidence.2 We review a district court’s award of attorney’s
fees (or failure to do so) under its inherent powers for an abuse of discretion.
Natural Gas Pipeline Co. of Am. v. Energy Gathering, Inc., 86 F.3d 464, 467 (5th
Cir. 1996).
Union Pump argues that the district court should have used its inherent
powers to award attorney’s fees in response to the defendants’ spoliation of
evidence.3 See Chambers v. NASCO, Inc., 501 U.S. 32, 45–46 (1991). In
2
During trial, Union Pump asked that it be permitted to present evidence of its
attorney’s fees as the damages for its spoliation claim. The district court denied the motion,
stating that it would address the issue of attorney’s fees after trial. Union Pump clarified
during oral argument that it does not ask us to reverse this ruling and remand to allow it to
submit damages to a jury for the spoliation claim. Therefore, we do not address whether the
district court should have permitted Union Pump to submit its attorney’s fees to the jury as
an element of damages.
3
Union Pump argued to the district court, and appeared to argue in its opening brief
to this court, that it was entitled to attorney’s fees under LUTSA for the defendants’
misappropriation of trade secrets. During oral argument, however, Union Pump was clear
that it seeks attorney’s fees relative only to the defendants’ conduct in spoliating evidence,
which is an act separate and distinct from the misappropriation of trade secrets and for which
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Chambers, the Supreme Court held that, in certain circumstances, “federal
courts have inherent powers to assess attorney’s fees.” Id. at 45. These inherent
powers “ought to be exercised with great caution,” id. at 43 (quotation omitted),
and are reserved for “conduct which abuses the judicial process,” id. at 44–45.
“The threshold for the use of the inherent power sanctions is high.” Natural Gas
Pipeline, 86 F.3d at 467. A court’s inherent powers to sanction “may be exercised
only if essential to preserve the authority of the court,” id., and only when the
court “finds that ‘fraud has been practiced upon it, or that the very temple of
justice has been defiled,’ ” Boland Marine & Mfg. Co. v. Rihner, 41 F.3d 997,
1005 (5th Cir. 1995) (quoting Chambers, 501 U.S. at 46). “Because of their very
potency, inherent powers must be exercised with restraint and discretion.”
Chambers, 501 U.S. at 44.
Spoliation of evidence is among the offenses for which a court may assess
sanctions using its inherent powers. See Hodge v. Wal-Mart Stores, Inc., 360
F.3d 446, 449 (4th Cir. 2004) (“The imposition of a sanction . . . for spoliation of
evidence is an inherent power of federal courts.”). Union Pump complains that
the defendants engaged in the following acts of spoliation: (1) Cleveland, after
conferring with Goodrich, destroyed at least three computer disks containing
information belonging to Union Pump; (2) the defendants disposed of a computer
alleged to contain information belonging to Union Pump; (3) the defendants
failed to ensure that the tapes used to back up their computer server were
properly working; (4) the defendants destroyed information on the backup tapes;
LUTSA could not serve as a basis for an award of attorney’s fees.
Nor does Union Pump argue to this court, as it did in its pre-trial motions to the district
court, that it is entitled to attorney’s fees as a sanction under Federal Rule of Civil Procedure
37(b) for the defendants’ discovery violations. We therefore do not consider whether the
district court abused its discretion in failing to assess sanctions under Rule 37(b).
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(5) the defendants failed to institute a “litigation hold” to ensure that relevant
evidence would not be destroyed or deleted; and (6) the defendants used disk-
wiping software to delete and destroy information on their computer hard drives
after the district court’s entry of a protective order, and, in the case of one
computer, the disk-wiping occurred just days before turning the computers over
to the court-appointed expert for forensic imaging.
There can be no dispute that these are serious charges, which, if true,
would constitute particularly deplorable conduct on the part of the defendants
that would justify the imposition of sanctions. See Leon v. IDX Sys. Corp., 464
F.3d 951, 961 (9th Cir. 2006) (approving dismissal of suit and award of attorney’s
fees as a sanction for plaintiff’s intentional deletion of electronic information);
Arista Records, L.L.C. v. Tschirhart, 241 F.R.D. 462, 466 (W.D. Tex. 2006)
(entering default judgment against a defendant that used disk-wiping software
to destroy electronic information). In this case, however, the district court chose
not to award attorney’s fees as a sanction for the defendants’ conduct, and we are
reluctant to disturb that ruling.
A court’s inherent power to sanction “is not a broad reservoir of power,
ready at an imperial hand, but a limited source.” FDIC v. MAXXAM, Inc., 523
F.3d 566, 591 (5th Cir. 2008) (quoting NASCO, Inc. v. Calcasieu Television &
Radio, Inc., 894 F.2d 696, 702 (5th Cir. 1990), aff’d sub nom. Chambers v.
NASCO, Inc., 501 U.S. 32 (1991)). We therefore do not believe that the district
court abused its discretion in failing to award attorney’s fees in this case. One
of the most powerful, and perhaps the most common, remedies for spoliation is
an adverse inference instruction given to the jury. The district court instructed
the jury that if it found that the defendants intentionally destroyed relevant
evidence in bad faith, the jury could “infer that such evidence was unfavorable
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to [the defendants].”4 Given that the jury ultimately found the defendants liable,
we do not fault the district court for limiting its sanction to the adverse inference
instruction due to the requirement that the court, in remedying offensive
conduct through sanctions, must “try the less restrictive measure first.” Natural
Gas Pipeline, 86 F.3d at 467.
We are also mindful that Union Pump failed to renew after trial its
request for attorney’s fees as a sanction for spoliation. Union Pump filed two
motions before trial requesting, inter alia, attorney’s fees as a sanction for the
defendants’ spoliation of evidence. Because it had deferred ruling on Union
Pump’s pre-trial motions for attorney’s fees, the district court, immediately
following the jury’s verdict, requested that each party submit a brief “on whether
or not [Union Pump is] entitled to attorney’s fees under the verdict.” In its post-
trial brief, Union Pump requested attorney’s fees under LUTSA and under the
court’s inherent power. Union Pump’s request for attorney’s fees under the
court’s inherent power was not, however, related to the defendants’ spoliation
of evidence. Rather, Union Pump argued that because the jury had found that
the defendants had misappropriated its trade secrets in bad faith, the district
court should sanction the defendants for that conduct. Union Pump did not ask
the district court to impose sanctions for bad faith spoliation of evidence in its
brief. Indeed, nowhere in Union Pump’s post-trial motion to set attorney’s fees
or the accompanying briefs does the word “spoliation” even appear.
4
Union Pump argues that the district court did not give an adverse inference
instruction or that the adverse inference instruction was too weak. Union Pump is correct
that it did not receive the adverse inference instruction that it wanted, but the court’s
instruction did permit the jury to infer that the destroyed evidence was adverse to the
defendants if the jury found the necessary facts. Thus, it was an adverse inference instruction.
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We are not blind to the egregious nature of the defendants’ conduct in this
case. Spoliation is a serious offense and a party’s intentional destruction of
relevant evidence threatens the sanctity and spirit of the judicial process.
However, the imposition of sanctions under the court’s inherent power is
powerful medicine that should be administered with great restraint. We are
unaware of any case from this circuit, or any other circuit, in which an appellate
court has directed the imposition of sanctions where the district court has failed
to do so. Here, the district court found that Union Pump had been made whole
by the jury’s verdict and that the adverse inference in the jury instructions
sufficiently remedied the alleged spoliation. We decline to substitute our
judgment for that of the district. That is not to say an appellate court may never
reverse a district court’s refusal to award sanctions. See AHP Subsidiary
Holding Co. v. Stuart Hale Co., 1 F.3d 611, 620 (7th Cir. 1993) (remanding for
“a more plenary explanation” for the district court’s denial of attorney’s fees as
a discovery sanction under Rule 37 because “the denial of sanctions with no
explanation may constitute an abuse of discretion”). In this case, however, given
the district court’s intimate familiarity with the case and Union Pump’s failure
to renew its request for sanctions related to spoliation, we do not find that the
district court abused its discretion in refusing to award attorney’s fees using its
inherent powers as a sanction for the defendants’ spoliation of evidence.
B. Evidentiary Errors
In their appeal, the defendants contend that they are entitled to a new
trial because the district court made evidentiary errors with respect to several
witnesses. We address each in turn.
1. Bixler Testimony
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The defendants first argue that they are entitled to a new trial because the
district court permitted Union Pump’s corporate representative, Mike Bixler, to
testify to numerous matters that were hearsay and not within his personal
knowledge. We review a district court’s decision to admit or exclude evidence for
an abuse of discretion. Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 265 (5th
Cir. 2007). If the district court abused its discretion,“we then apply the harmless
error doctrine,” and we will affirm the district court unless “a substantial right
of the complaining party was affected.” Id.The defendants contend that Bixler was improperly permitted to testify
to facts that Union Pump learned during a series of internal investigations.
Bixler did not conduct the investigations or have any role in them, no written
reports were issued as a result of the investigations, and Bixler learned of the
facts he testified to solely through conversations with others. Specifically, Bixler
testified regarding three computer hard drives that were supposedly sent from
the Shreveport plant to Union Pump’s Houston location. According to Bixler,
another employee, David Linn, discovered at some point that the hard drives
were missing from the computers sent to Houston. In addition, Bixler testified
regarding Union Pump’s investigation into how CTI was able to competitively
bid and “steal” work away from Union Pump for a specific client, Mid-Valley
Pipeline Company. The district court overruled the defendants’ objection to this
testimony, stating that “the objection goes to the weight that [the jury] may
choose or not choose to give to the witness’s statements in this area.” The
defendants argue on appeal that Bixler’s testimony regarding the facts that he
learned through other people at the company was improperly admitted.
Federal Rule of Evidence 602 limits the scope of a witness’s testimony to
matters that are within his or her personal knowledge. Union Pump argues that
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Bixler was permitted to testify to matters that, although they were not within
his own personal knowledge, were within the knowledge of the corporation
because Bixler was designated as Union Pump’s corporate representative. We
disagree. Federal Rule of Civil Procedure 30(b)(6) allows corporate
representatives to testify to matters within the corporation’s knowledge during
deposition, and Rule 32(a)(3) permits an adverse party to use that deposition
testimony during trial. See Brazos River Auth. v. GE Ionics, Inc., 469 F.3d 416,
434 (5th Cir. 2006). However, a corporate representative may not testify to
matters outside his own personal knowledge “to the extent that information [is]
hearsay not falling within one of the authorized exceptions.” Id. at 435; see also
Deutsche Shell Tanker Gesellschaft mbH v. Placid Refining Co., 993 F.2d 466,
473 n.29 (5th Cir. 1993) (corporate representative is not permitted to repeat
“rank hearsay”).
We hold that any error in allowing Bixler to testify to matters that may
have been hearsay was harmless. Bixler’s testimony that David Linn discovered
three missing hard drives in computers that were sent from the Shreveport plant
was corroborated by Linn’s deposition testimony, which was played for the jury.
Further, Union Pump presented plenty of additional evidence that the
defendants had misappropriated Union Pump’s trade secrets, even absent
mention of the missing hard drives. And Union Pump’s claims of spoliation
related to the defendants’ hard drives that were turned over to the court-
appointed computer expert, not to the allegedly missing hard drives from the
Shreveport plant.
The admission of Bixler’s testimony regarding the Mid-Valley
investigation was also harmless. The investigation related to drawings that
Mid-Valley had obtained for a project that Union Pump had performed for Mid-
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Valley. The substance of Bixler’s testimony was that it was Union Pump’s policy
never to provide clients with copies of designs, but that Union Pump learned
through its investigation that Mid-Valley had somehow obtained design
drawings, which allowed CTI to outbid Union Pump. Bixler’s testimony was
largely repeated by one of Union Pump’s salesmen, Danny Hyatt. Hyatt testified
that he was assigned to the Mid-Valley project, that he was familiar with the
contract negotiations between Union Pump and Mid-Valley, and that during
negotiations Union Pump had repeatedly refused Mid-Valley’s request for the
design drawings. Because the hearsay testimony was largely corroborated by
other admissible evidence, we find no reversible error.
2. Yarbrough Testimony
The defendants next complain that the district court erred in allowing
Susan Yarbrough, a former Union Pump employee in the Shreveport plant, to
testify on behalf of Union Pump because Union Pump failed to provide the
correct address for Yarbrough in its preliminary witness lists. We find no error.
“Questions concerning both the interpretation of pretrial orders and the
exclusion of undisclosed witnesses are reviewable only for abuse of discretion.”
Keyes v. Lauga, 635 F.2d 330, 335 (5th Cir. Unit A Jan. 1981). In a series of pre-
trial scheduling orders, the district court ordered the parties to provide one
another with a list of witnesses. The list was to include each witness’s “name,
address, and a brief statement of the nature of their expected testimony.” In
response to each of these orders, the Union Pump provided the defendants with
a witness list that included Yarbrough as a “may call” witness and listed her
address as being in Shreveport, Louisiana. During the pre-trial conference, the
district court ordered the parties to change their “may call” witness lists to “will
call” lists at least two weeks before trial and to provide copies to one another and
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to the court. Union Pump provided its will call witness list to the defendants on
May 6, 2009, in compliance with the district court’s order. For the first time,
Yarbrough’s address correctly appeared as Mobile, Alabama, rather than
Shreveport, Louisiana.
The defendants argue that the district court erred in denying its motion
to strike Yarbrough as a witness because Union Pump failed to comply with the
district court’s scheduling order when it provided an incorrect address for
Yarbrough. However, the defendants have failed to demonstrate how they were
prejudiced by the incorrect address. Yarbrough was on Union Pump’s “may call”
witness list for over a year, but the defendants never made any attempt to
contact her for a deposition prior to trial. In response to the defendants’
objection regarding the discrepancy, the district court allowed the defendants to
depose Yarbrough by phone before she testified, even though the deadline for
discovery had long passed. The defendants can hardly claim that Yarbrough was
an unexpected “surprise” witness. Therefore, we hold that the district court did
not abuse its discretion in allowing Yarbrough to testify.
3. Attaway’s Testimony
Finally, the defendants argue that the district court improperly limited the
scope of the testimony offered by its expert, D. Wesley Attaway. We review a
district court’s decision to admit or exclude expert testimony for abuse of
discretion. Nunez v. Allstate Ins. Co., 604 F.3d 840, 844 (5th Cir. 2010).
A substantial issue at trial was whether the defendants had, in fact,
deleted or destroyed electronic information belonging to or related to Union
Pump. The defendants retained Attaway to examine their hard drives.
Attaway’s report detailed his findings regarding the information contained on
hard drive 9, but he did not specifically address hard drives 10 and 11. His
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report simply stated that “no data relating to plaintiffs has been wiped untimely
from defendants’ computers.”
At trial, Union Pump’s expert, Andrew Rosen, testified that hard drives
10 and 11 had been “wiped” using disk-wiping software. After hearing Rosen’s
testimony during trial, Attaway conducted further analysis of hard drives 10 and
11, which was not contained in any of his reports. When the defendants
attempted to question Attaway regarding his additional analysis of hard drives
10 and 11, Union Pump objected, arguing that Attaway was testifying outside
the scope of his expert report. Union Pump argued that Attaway should have
conducted his examination of hard drives 10 and 11 when he prepared his
original report because the information Rosen testified to was contained in
Rosen’s initial report. Union Pump also contended that it would be prejudiced
by the testimony due to its inability to effectively cross examine Attaway’s
testimony because Rosen had been called away from the trial and was unable to
assist Union Pump in evaluating Attaway’s testimony. The district court agreed
to allow Attaway to render an opinion regarding hard drives 10 and 11, but
limited his testimony on the subject to a single question. The question was
asked by the district court: “Mr. Attaway, were any files relevant to the plaintiff
in Hard Drives 10 or 11?” Attaway responded, “No.” On appeal, CTI argues that
the district court erred by improperly limiting the scope of Attaway’s testimony
regarding hard drives 10 and 11.
We do not find that the district court abused its discretion in limiting
Attaway’s testimony. Federal Rule of Civil Procedure 26(a)(2) provides that
parties must disclose any expert opinions they intend to offer at trial, and Rule
26(e)(2) provides parties with an ongoing duty to supplement expert reports.
Despite the defendants’ assertions to the contrary, Rosen’s report clearly
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contained opinions regarding hard drives 10 and 11, and Rosen’s testimony at
trial regarding hard drives 10 and 11 did not materially vary from or exceed his
expert report. The defendants and their expert were therefore well aware of
Rosen’s opinions regarding the hard drives, which were provided to them nearly
two years before the trial began. The defendants cannot make an end run
around the disclosure rules by claiming that Attaway’s untimely investigation
was conducted in response to Rosen’s trial testimony when Rosen testified to
exactly the information contained in his initial report.
Further, the defendants have not demonstrated that the district court’s
failure to permit Attaway’s testimony on this point was so prejudicial as to
require us to overturn the jury’s verdict. The defendants argue that Attaway
would have provided “critical” testimony that the wiped material was readily
identifiable and did not relate to Union Pump. However, the district court
allowed Attaway to relay that pertinent fact in the question that Attaway was
permitted to answer. Attaway was therefore able to convey to the jury precisely
the information that the defendants allege was improperly excluded.
C. Damages
The defendants also contest the amount of the compensatory damages
awarded by the jury.5 We “tread[] lightly upon jury verdicts, as the standard of
review is very deferential.” Vogler v. Blackmore, 352 F.3d 150, 154 (5th Cir.
2003). We will sustain the amount of damages awarded by the fact finder
“unless the amount is clearly erroneous or so gross or inadequate as to be
contrary to right reason.” Id. “If the award of damages is plausible in light of
the record, a reviewing court should not reverse the award even if it might have
5
The defendants contest only the compensatory damages awarded by the jury and
make no argument regarding the unjust enrichment portion of the damages award.
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No. 10-30072
come to a different conclusion.” Dresser-Rand Co. v. Virtual Automation, Inc.,
361 F.3d 831, 843 (5th Cir. 2004).
The damages award here was clearly substantiated by the evidence
presented at trial. The jury awarded Union Pump $1,525,559 as “the total
amount of compensatory damages required to make Plaintiff whole.” This
number was taken directly from the report submitted by one of Union Pump’s
experts, Holly Sharp. According to Sharp, the inflation-adjusted amount that
Union Pump had paid for American Pump’s goodwill was $1,525,559 as of
August 2008, when she prepared her expert report. By the time of trial, in June
2009, the inflation-adjusted value was $1,541,919. Sharp’s estimate was not an
implausible measure of Union Pump’s damages, and the jury’s use of her
estimate was not unwarranted, because a Union Pump representative testified
that the American Pump line had no remaining value to Union Pump without
the design drawings required to service and repair the pumps.
The defendants argue that there was insufficient evidence to sustain the
damage award because the jury “failed to consider [Sharp’s] explanatory
testimony.” We construe this argument as a criticism of the district court’s
decision not to send to the jury the transcript of Sharp’s testimony. During
deliberations, the jury asked to see any “financial evidence” and the “financial
reports” prepared by Sharp and Keith Bucher, Union Pump’s former controller.
Union Pump asked the district court to send the transcript of Sharp’s testimony
along with the exhibit containing Sharp’s report. The defendants did not join
this request or object when the district court denied Union Pump’s motion.
Given that the jury itself did not request the transcript and the defendants did
not preserve the issue for appeal, we find no merit in this argument. Thus, the
jury’s award of $1,525,559 is certainly plausible in light of the record.
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III. CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the district court.
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