Mayo Clinic v. Peter L. Elkin, M.D.

United States Court of Appeals
For the Eighth Circuit
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No. 11-2959
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Mayo Clinic, Mayo Foundation for
Medical Education and Research,
and Cerner Corporation
lllllllllllllllllllll Plaintiffs - Appellees
v.
Peter L. Elkin, M.D.
lllllllllllllllllllll Defendant - Appellant
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: October 15, 2012
Filed: August 27, 2013
[Unpublished]
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Before BYE, BEAM, and SHEPHERD, Circuit Judges.
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PER CURIAM.
This case arises out of a trade secret dispute between Mayo Clinic ("Mayo")
and Dr. Peter L. Elkin. A jury returned a verdict in favor of Mayo on its claims of
trade secret misappropriation, conversion, breach of contract, interference with
existing and prospective contractual relationships, and breach of fiduciary duty. The
jury also found for Elkin on his breach-of-contract counterclaim against Mayo.
Following trial, the district court issued an injunction against Elkin, requiring him to
return the software at issue and to cease all use and possession thereof. The district
court also ordered Elkin to pay Mayo's attorneys' fees and costs in the amount of
$1,900,139.90. Elkin appeals the district court's exclusion of certain expert testimony
at trial, entrance of jury findings, issuance of an overbroad injunction, and award of
attorneys' fees. We affirm in part and reverse in part.
I
Elkin began working for Mayo in 1996 as a clinician and researcher. During
his employment with Mayo, Elkin developed a version of Natural Language
Processing (NLP) software for use with medical text. NLP allows computer users to
complete data searches using plain language rather than Boolean logic—essentially
the same technique Google employs to allow users to search the internet. During his
tenure with Mayo, Elkin created a form of this software which allows medical
practitioners to search hospital databases using ordinary language. Elkin claims
ownership over the software as a derivative of his work prior to employment with
Mayo. Mayo disagrees and argues it acquired ownership of the software pursuant to
its Intellectual Property Policy.
In 2002, Mayo licensed the software to Conceptual Health Solutions (CHS),
which commercialized and marketed it. In 2008, CHS and its software license were
acquired by Cerner, a company specializing in healthcare technology. Also in 2008,
Elkin left Mayo to begin working for Mount Sinai Hospital in New York. Upon his
departure, Elkin ordered his staff to erase certain hard drives and took with him a
stack of disks containing code for the software. Elkin contends Mayo authorized him
to take the disks; Mayo disagrees. In November of 2008, Elkin gave a presentation
at a conference of the American Medical Information Association. Representatives
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from Cerner attended the conference and viewed Elkin's presentation. Afterward, the
Cerner representatives contacted Mayo and complained Elkin had presented software
to which Cerner held an exclusive license. Mayo then contacted Elkin, asking him
to return the disks and cease presenting the software.
When Elkin did not respond, Mayo filed suit in Minnesota state court and
opted to withhold a royalty payment of $143,220.20 due Elkin under one of the
licensing agreements. Elkin removed the suit to the District of Minnesota and also
filed suit against both Mayo and Cerner in the federal district court for the Southern
District of New York. Ultimately, the suits were consolidated in the District of
Minnesota.
Prior to trial, Elkin sought leave to introduce expert testimony through himself
and Dr. Tom Love. With respect to his own testimony, Elkin argued that because he
is an expert in the field, he should be permitted to testify as an expert regarding
similarities between the current Mayo software and software he produced prior to
working for Mayo. The court denied Elkin's request on the grounds that the current
Mayo software had been edited since Elkin's departure and Elkin had not seen the
newly added code; the court reasoned Elkin should not be permitted to testify to facts
outside of his knowledge. The court also excluded Love's testimony on Daubert
grounds, finding the methods he used had not been accepted by the scientific
community.
After a five-day trial, the jury rendered a special verdict, finding Elkin had (1)
breached his employment contract with Mayo; (2) intentionally interfered with an
existing contractual relationship between Mayo and Cerner; (3) intentionally
interfered with a prospective contractual relationship between Mayo and Cerner; (4)
willfully and maliciously misappropriated one or more trade secrets belonging to
Mayo; (5) intentionally exercised control over the software or its source code contrary
to Mayo's rights; and (6) breached a fiduciary duty owed to Mayo. The jury also
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found Mayo had failed to pay Elkin the withheld royalties and awarded him
$143,222.20.
Following the trial, the court entered a final order memorializing the jury's
findings and enjoining Elkin from any use or disclosure of the software and requiring
Elkin to return all data and storage media containing any part of the software. Elkin
filed a motion to alter or amend the order, arguing it did not fully and accurately
reflect the jury's findings or delineate the parties' prospective obligations. The court
denied Elkin's motion. Based on the jury's finding that Elkin's misappropriation had
been willful and malicious, the court granted Mayo's request for attorneys' fees and
ordered Elkin to pay Mayo $1,900,139.90 for costs associated with the litigation.
Elkin subsequently filed this appeal.
II
Elkin appeals the district court's exclusion of his and Dr. Love's expert
testimony at trial, denial of his motion to alter or amend the court's order, issuance of
an overbroad injunction, and award of attorneys' fees in favor of Mayo. We review
each claim for an abuse of discretion. See Peitzmeier v. Hennessy Indus., Inc., 97
F.3d 293, 296 (8th Cir. 1996) ("Decisions concerning the admission of expert
testimony lie within the broad discretion of the trial court, and these decisions will not
be disturbed on appeal absent an abuse of that discretion."); Innovative Home Health
Care, Inc. v. P.T.-O.T. Assocs. of the Black Hills, 141 F.3d 1284, 1286 (8th Cir.
1998) ("A district court has broad discretion in determining whether to grant a [Fed.
R. Civ. P. 59(e)] motion to alter or amend judgment, and this court will not reverse
absent a clear abuse of discretion."); Smith v. Ark. Dep't of Corr., 103 F.3d 637, 644
(8th Cir. 1996) ("[W]e review the district court's grant of injunctive relief for an abuse
of discretion."); Consol. Beef Indus., Inc. v. New York Life Ins. Co., 949 F.2d 960,
966 (8th Cir. 1991) ("This court's standard of review of an order awarding or denying
attorney's fees is abuse of discretion.").
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Because each issue raised on appeal is subject to an abuse-of-discretion review,
our court's iteration of that standard bears mention:
An abuse of discretion occurs 'when a relevant factor that should have
been given significant weight is not considered; when an irrelevant or
improper factor is considered and given significant weight; and when all
proper factors, and no improper ones, are considered, but the court, in
weighing those factors, commits a clear error of judgment.'
E.E.O.C. v. Prod. Fabricators, Inc., 666 F.3d 1170, 1172 (8th Cir. 2012) (quoting
Kern v. TXO Prod. Corp., 738 F.2d 968, 970 (8th Cir. 1984)). Based on the record
before us, we find no abuse of discretion which would require reversal with respect
to Elkin's first three claims. Accordingly, we affirm the district court's evidentiary
ruling regarding Elkin's expert testimony, order memorializing the jury's findings, and
permanent injunction against Elkin. See 8th Cir. R. 47B.
We are, however, concerned by the district court's award of $1,900,139.90 in
attorneys' fees and costs to Mayo. Of the ten claims1 brought by Mayo against Elkin,
only the statutory trade secret claim supports an award of attorneys' fees. See Minn.
Stat. § 325C.04 (permitting a court to award reasonable attorneys' fees to the
prevailing party on a claim for willful and malicious trade secret misappropriation).
Yet, of $2,447,058.36 in total attorneys' fees incurred in this litigation, Mayo claims
$1,900,139.30 are attributable to its trade secret claim. We find this figure suspect,
1
Mayo's complaint against Elkin sets forth the following claims: (1) breach of
contract, (2) interference with an existing contractual relationship, (3) interference
with a prospective contractual relationship, (4) statutory trade secret
misappropriation, (5) common law trade secret misappropriation, (6) trespass to
chattels, (7) conversion, (8) breach of fiduciary duty, (9) Mayo's request for
declaratory judgment regarding ownership of the software, and (10) Cerner's request
for declaratory judgment regarding ownership of the software.
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and a review of the district court's order granting Mayo's request for attorneys' fees
does not assuage our concerns.
Under the heading of a traditional "lodestar" analysis, see Milner v. Farmers
Ins. Exch., 748 N.W.2d 608, 620 (Minn. 2008) ("We have approved the use of the
lodestar method for determining reasonable attorneys fees."), the district court
devoted considerable time to lambasting Elkin for his employment of time-consuming
litigation strategies. See, e.g., Order Granting Pls.' Req. for Att'ys Fees at 5 ("In
short, Ekin's contumacious litigation strategy significantly increased the time and
resources required to resolve the present action."). Mayo, too, emphasized Elkin's
recalcitrance in its supporting documentation. See Decl. of Peter Galindez, Jr., in
Supp. of Mayo's Req. for Att'ys Fees at 2-3 (noting Elkin's "forc[ed] Mayo to engage
in unnecessary motion practice . . . to file multiple motions to compel fact and expert
discovery . . . and to engage in Daubert motion practice").
The propriety of Elkin's litigation tactics aside, we find insufficient support in
the record for this staggering award on the basis of Mayo's trade secret claim alone.
Elkin argues the documents filed by Mayo in support of its request for attorneys' fees
fail to distinguish between work performed in furtherance of Mayo's trade secret
claim and its remaining claims. We agree. The broad, monthly summary descriptions
provided by Mayo are hardly the "detailed affidavit of attorney's fees and costs,
showing the fees broken down on an hourly basis" the district court makes them out
to be. See Order Granting Pls.' Req. for Att'ys Fees at 4 (quoting Willhite v. Collins,
459 F.3d 866, 869 (8th Cir. 2006)). Moreover, while a "common core of facts" may
lessen a district court's burden to delineate between amounts attributed to individual
claims, see Hensley v. Eckerhart, 461 U.S. 424, 435 (1983), the court is still charged
with the task of rendering a reasonable award. Without more, we cannot conclude the
district court's award here was reasonable.
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III
For the foregoing reasons, the district court's order granting Mayo's request for
attorneys' fees is vacated and remanded for further consideration consistent with this
opinion. On remand, Mayo is directed to provide more detailed documentation in
support of its request. In acknowledgment of Mayo's contention that its
documentation was provided in summary form to avoid burdening the court with over
4,000 pages of original bills, we trust Mayo can strike an appropriate balance between
the 4,000 pages in existence and the 5-page chart provided in Exhibit 2 to Adam
Steinert's declaration in support of Mayo's request for attorneys' fees.
The district court's judgments with respect to the remaining issues raised by
Elkin on appeal are affirmed.
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