Case: 11-20816 Document: 00512502053 Page: 1 Date Filed: 01/15/2014
REVISED January 15, 2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
May 15, 2013
No. 11-20816
Lyle W. Cayce
Clerk
WELLOGIX, INC.,
Plaintiff-Appellee,
v.
ACCENTURE, L.L.P.,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Texas
Before DeMOSS, SOUTHWICK, and HIGGINSON, Circuit Judges.
HIGGINSON, Circuit Judge:
Plaintiff-Appellee Wellogix, Inc. alleged that Defendant-Appellant
Accenture, L.L.P, misappropriated its trade secrets. After a nine-day trial, a
jury returned a unanimous verdict against Accenture, awarding Wellogix
compensatory and punitive damages. After a careful review of the record, we
find that there was sufficient evidence to support the jury’s verdict, and the
resulting damages awards. See Lavender v. Kurn, 327 U.S. 645, 653 (1946)
(“Only when there is a complete absence of probative facts to support the
conclusion reached does a reversible error appear.”). Had we sat in the jury box,
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we may have decided otherwise. “But juries are not bound by what seems
inescapable logic to judges.” Morissette v. United States, 342 U.S. 246, 276
(1952). Guided by this deference, we AFFIRM.
I. Facts and Proceedings
The oil and gas industry spends “billions of dollars” each year to construct
oil wells. Yet, traditionally, oil companies planned such projects over “coffee and
doughnuts,” using paper records to track and pay costs. And, to the extent that
they employed computer software, they relied on “basic tools” such as Excel.
Due, in part, to this “paper process,” oil companies struggled to estimate certain
well construction costs—known as “complex services.” Even modest
improvements in how companies estimated such costs could save “[h]undreds of
millions of dollars.”
Wellogix, Inc.—motto: “[m]aking the complex simple”—sought to
modernize this process. Wellogix developed software that allowed oil companies
to “plan, procure, and pay for complex services”—all online. The software
featured: “dynamic templates” that adjusted cost and supply estimates based on
“intelligence built into” the underlying source code;1 a “workflow navigator” that
provided a framework for planning and procuring services; and “electronic field
tickets” that allowed suppliers to record information about orders.
Wellogix was, according to its CEO, the only company offering complex
services software from 2000 to 2005. However, Wellogix’s software was not a
stand-alone solution. Wellogix instead relied on other companies’ software to
perform core accounting functions.
To fill this technology gap, Wellogix entered into an agreement in 2005
with the software company SAP. The agreement allowed Wellogix to integrate
1
Source code is the set of instructions that computer programmers write in specialized
computer language to cause a software program to function.
2
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its complex services software with SAP’s accounting software. As part of the
agreement, Wellogix provided its source code to SAP.
To promote its software, Wellogix entered into six marketing agreements
with the consulting firm Accenture, L.L.P. Wellogix also participated in pilot
projects with oil companies. Wellogix shared source code and access to its
technology with both Accenture and the oil companies, subject to confidentiality
agreements.
Some of the pilot projects involved Accenture. For example, Wellogix and
Accenture worked together in 2000 on an “eServices” pilot that provided BP
America, Inc. (“BP”) with access to the “dynamic template” and “workflow
navigator” features. Others did not. For example, Wellogix worked with a
different consultant on a 2004 “eTrans” pilot for BP.
As part of “eTrans,” BP implemented Wellogix software at two well sites.
BP also hosted a confidential online portal that allowed Wellogix to share files
and information with BP employees. Although a BP manager considered the
pilot a success, BP discontinued the project in 2005 “due to cost and internal
integration issues.”
After “eTrans,” BP sought to implement global software that “was not just
for complex services, but was for [its] entire . . . system.” To that end, BP
sponsored a new pilot, known as “Purchase-to-Pay,” or “P2P.” BP instructed
Accenture to select a software provider.
SAP and Wellogix pitched their integrated software to Accenture in May
2005. As part of the pitch, Wellogix described the software’s dynamic templates.
Without notifying Wellogix, Accenture and SAP began developing the
complex services component of the global software for BP.2 As they developed
2
Accenture and SAP worked together in 2004 to develop an application with a complex
services component, known as “xIEP.” Accenture and SAP intended to integrate Wellogix’s
software into xIEP, but ended the project before developing the complex services feature.
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the component, Accenture and SAP apparently accessed Wellogix technology
—including flow diagrams, design specifications, and source code critical to
Wellogix’s software—that had been uploaded to the confidential eTrans portal.
Wellogix sued BP, Accenture and SAP in district court in 2008, alleging
that they had stolen and misappropriated Wellogix trade secrets. District Judge
Keith Ellison dismissed SAP from the lawsuit for lack of venue.
Wellogix and BP agreed to arbitrate. Judge Ellison, acting as the
arbitrator, found that Wellogix’s source code was a trade secret, but that BP did
not use the code. However, Judge Ellison found that BP breached its
confidentiality agreement with Wellogix by making Wellogix’s confidential
information accessible to Accenture and SAP.
Wellogix’s suit against Accenture proceeded to trial. The jury returned a
verdict for Wellogix, awarding $26.2 million in compensatory damages and $68.2
million in punitive damages. Accenture renewed its motion for judgment as a
matter of law, and also filed a motion for a new trial. Judge Ellison denied both
motions except to suggest a remittitur of the punitive damages award to $18.2
million—the amount Wellogix sought at trial. Wellogix accepted the remittitur,
and the district court entered final judgment. Accenture appeals.
II. Accenture’s Motion for Judgment as a Matter of Law
“Although we review denial of a motion for judgment as a matter of law de
novo . . . ‘our standard of review with respect to a jury verdict is especially
deferential.’” SMI Owen Steel Co. v. Marsh USA, Inc, 520 F.3d 432, 437 (5th Cir.
2008) (quoting Flowers v. S. Reg’l Physician Servs., Inc., 247 F.3d 229, 235 (5th
Cir. 2001)). In reviewing the record, “we draw all reasonable inferences in favor
of the nonmoving party, and . . . may not make credibility determinations or
weigh the evidence.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133,
150 (2000); see Brown v. Bryan Cnty., 219 F.3d 450, 456 (5th Cir. 2000). This is
because “[c]redibility determinations, the weighing of the evidence, and the
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drawing of legitimate inferences from the facts are jury functions, not those of
a judge.” Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)).
Accordingly, we do not find that the district court erred unless “the evidence at
trial points so strongly and overwhelmingly in the movant’s favor that
reasonable jurors could not reach a contrary conclusion.” Omnitech Int’l, Inc. v.
Clorox Co., 11 F.3d 1316, 1323 (5th Cir. 1994).
1. Misappropriation
“Trade secret misappropriation under Texas law is established by showing:
(a) a trade secret existed; (b) the trade secret was acquired through a breach of
a confidential relationship or discovered by improper means; and (c) use of the
trade secret without authorization from the plaintiff.”3 Phillips v. Frey, 20 F.3d
623, 627 (5th Cir. 1994); see also Taco Cabana Int’l, Inc. v. Two Pesos, Inc., 932
F.2d 1113, 1123 (5th Cir. 1991), aff'd sub nom. Two Pesos, Inc. v. Taco Cabana,
Inc., 505 U.S. 763 (1992).
a) Existence of Trade Secret
“‘The existence of a trade secret is properly considered a question of fact
to be decided by the judge or jury as fact-finder.’” Gen. Universal Sys., Inc. v. Lee,
379 F.3d 131, 150 (5th Cir. 2004) (quoting RESTATEMENT (THIRD) UNFAIR
COMPETITION § 39 cmt. (1995)). A trade secret “is any formula, pattern, device,
or compilation of information used in one’s business, and which gives an
opportunity to obtain an advantage over competitors who do not know or use it.”
Taco Cabana, 932 F.2d at 1123; see Hyde Corp. v. Huffines, 314 S.W.2d 763, 776
(Tex. 1958). To determine whether a trade secret exists, we consider six factors,
weighed “in the context of the surrounding circumstances”:
(1) the extent to which the information is known outside of his
business; (2) the extent to which it is known by employees and
others involved in his business; (3) the extent of the measures taken
3
The parties do not dispute that Texas law applies.
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by him to guard the secrecy of the information; (4) the value of the
information to him and to his competitors; (5) the amount of effort
or money expended by him in developing the information; (6) the
ease or difficulty with which the information could be properly
acquired or duplicated by others
In re Bass, 113 S.W.3d 735, 739-40 (Tex. 2003) (quoting RESTATEMENT OF TORTS
§ 757 cmt. B. (1939)); see Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 267
(5th Cir. 2007).
Here, Wellogix presented sufficient evidence and testimony to support the
jury’s finding that Wellogix’s technology contained trade secrets. Wellogix
showed that, because it was the only company offering complex services software
from 2000 to 2005, its software—and, in particular, the underlying proprietary
source code—gave it “an opportunity to obtain an advantage over competitors.”
Taco Cabana, 932 F.2d at 1123. Wellogix also showed that the six Bass factors
weigh in its favor. For example, Wellogix introduced evidence that it “guard[ed]
the secrecy of” its technology, see Bass, 113 S.W.3d at 739, by placing its
software behind a firewall, and sharing it subject to confidentiality agreements.
Wellogix also introduced evidence that its technology had “value,” see Bass, 113
S.W.3d, because other companies partnered with Wellogix, and, as discussed
below, third-party investors valued Wellogix at more than $27 million.
Accenture argues that Wellogix’s technology was not “secret” because
Wellogix disclosed it to the public in patents and patent applications. However,
as the district court instructed the jury, a patent destroys the secrecy necessary
to maintain a trade secret only when the patent and the trade secret “both cover
the same subject matter.” Luccous v. J. C. Kinley Co., 376 S.W.2d 336, 340 (Tex.
1964); see Carbo Ceramics, Inc. v. Keefe, 166 F. App’x. 714, 719-20 (5th Cir. 2006)
(upholding the jury’s verdict on the basis that the jury “could have concluded-
and apparently did conclude-that the [plaintiff’s] patents did not reveal [its]
trade secrets”). Neither party in this case introduced Wellogix’s patents into
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evidence. In fact, Wellogix argued against introducing patent-related
documents, fearing prejudice. Although Accenture maintains that it was
Wellogix’s burden to show that the patents did not cover the same subject
matter, Accenture does not cite, nor we could we find, case law imposing such a
burden. Further, another circuit, in an unpublished opinion, held that it is for
the defendant, once a plaintiff makes a prima facie case for the existence of a
trade secret, to show that disclosure destroys the secret. See Injection Research
Specialists, Inc. v. Polaris, L.P., Nos. 97-1516, 97-1545 & 97-1557, 1998 WL
536585, at *8-9 (Fed. Cir. Aug. 13, 1998).
Accenture argues that, even if Wellogix’s patents did not disclose the trade
secrets, there was insufficient evidence that Wellogix even possessed such
secrets. Accenture contends, for example, that technical information related to
the eTrans pilot was not a trade secret because Wellogix published a document
containing the information on its public website. Accenture adds that, without
entering into confidentiality agreements, Wellogix provided other companies
with documents containing “process flow” maps of the eTrans project. However,
Wellogix software expert Kendyl Roman testified that, while some trade secrets
appeared on Wellogix’s website, others did not. In addition, the district court
instructed that the jury could not find that there was a trade secret on the basis
of the “process flow” maps. “A jury is presumed to follow its instructions[,]”
Weeks v. Angelone, 528 U.S. 225, 234 (2000), and Accenture has not overcome
this presumption.
b) Acquisition of Trade Secret
“One is liable for disclosure of trade secrets if (a) he discovers the secret
by improper means, or (b) his disclosure or use constitutes a breach of confidence
reposed in one who is in a confidential relationship with another who discloses
protected information to him.” Phillips v. Frey, 20 F.3d 623, 630 (5th Cir. 1994);
see Huffines, 314 S.W.2d at 769. “Improper means of acquiring another’s trade
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secrets include theft, fraud, unauthorized interception of communications,
inducement of or knowing participation in a breach of confidence, and other
means either wrongful in themselves or wrongful under the circumstances of the
case.” Astoria Indus. of Iowa, Inc. v. SNF, Inc., 223 S.W. 3d 616, 636 (Tex. App.
2007) (citing RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 43 (1995)).
Here, Wellogix presented sufficient evidence and testimony to support the
jury’s finding that Accenture improperly acquired Wellogix’s trade secrets.
Wellogix showed: that it entered into six confidential agreements with
Accenture; that, through the marketing agreements, Accenture had access to
Wellogix trade secrets; that Accenture also had access to Wellogix trade secrets
uploaded to the confidential eTrans portal; and that an Accenture email
referenced “harvesting IP” from Wellogix. Together, this evidence and testimony
supports the “legitimate inference[,]” Reeves, 530 U.S. at 150, that Accenture
acquired Wellogix’s trade secrets.
Accenture argues that there was no evidence, other than expert Roman’s
testimony, that Wellogix’s trade secrets were on the eTrans portal. Accenture
maintains that Roman’s testimony was not probative because Roman did not
have personal knowledge that certain trade secrets were on the portal.
However, as an expert, Roman did not need “firsthand knowledge or
observation.” Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 592 (1993).
Indeed, Roman conceded that he lacked such knowledge. Instead, Roman
testified that, in his experience in the software industry, he believed it likely
that companies working together on a pilot project would share documents
containing trade secrets on an online portal. He added that he based this belief,
in part, on a BP contractor’s deposition testimony that information resembling
Wellogix’s trade secrets was on the eTrans portal. Given that “an expert is
permitted wide latitude to offer opinions,” Daubert, 509 U.S. at 592, and that, as
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discussed below, Roman’s testimony was sufficiently “reliable” and “relevant,”
the jury was reasonable in crediting his testimony.
Accenture also argues that Wellogix CEO Ike Epley’s “vague and
unsupported” testimony does not show that Accenture acquired Wellogix’s trade
secrets. Accenture maintains that Epley’s testimony that one of Wellogix’s pilot
partners, Trade Ranger, “had access” to Wellogix source code does not “support
the inferential leap” that Accenture had such access. Accenture adds that it
could not access Wellogix’s source code because, as CEO Epley testified, the code
was behind a firewall. However, Accenture’s involvement in the Trade Ranger
pilot—Accenture “was the consultant and the implementer [of software] for
Trade Ranger”—supports the inference that Accenture could have accessed
Wellogix source code through the pilot. Further, Epley’s testimony that Wellogix
kept its source code behind a firewall for the eTrans project does not preclude a
jury from finding that Accenture otherwise had access to the code. For example,
a jury could have inferred that Accenture gained such access by entering into six
confidentiality agreements with Wellogix. Although Accenture notes that
Wellogix corporate representative John Chisholm testified that Wellogix never
gave Accenture access to its source code, we decline to assume “jury functions”
by weighing Chisholm’s credibility against Epley’s. See Reeves, 530 U.S. at 150.
c) Use of Trade Secret
As a general matter, any exploitation of the trade secret that is
likely to result in injury to the trade secret owner or enrichment to
the defendant is a “use[.]” . . . Thus, marketing goods that embody
the trade secret, employing the trade secret in manufacturing or
production, relying on the trade secret to assist or accelerate
research or development, or soliciting customers through the use of
information that is a trade secret . . . all constitute “use.”
HAL, 500 F.3d at 451 (quoting RESTATEMENT (THIRD) OF UNFAIR COMPETITION
§ 40 (1995)). “Use” can include “activities other than the actual selling of the
product.” Dresser-Rand Co. v. Virtual Automatic, Inc., 361 F.3d 831, 840 (5th
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Cir. 2004); see ForScan Corp. v. Dresser Indus., Inc., 789 S.W.2d 389, 395 (Tex.
App. 1990) (finding that attempts to market a product constituted “use”).
Indeed, an act that “lower[s] the market value” of a trade secret by “making it
less likely that [the plaintiff] would sell his invention to [the defendant’s]
competitors” could amount to “use.” Bohnsack v. Varco, L.P., 668 F.3d 262, 280
(5th Cir. 2010).
Here, Wellogix presented sufficient evidence and testimony to support the
jury’s finding that Accenture used its trade secrets. Wellogix showed: that
Accenture joined with SAP to develop a complex services component for BP’s P2P
pilot; that, around the time that Accenture and SAP partnered, they were able
to access Wellogix’s dynamic templates source code that had been uploaded to
the confidential eTrans portal; that an Accenture document referenced the
“creation of . . . complex service templates,” and then “right below” stated: “Use
Wellogix content”; that the same document provided that the templates “better
deliver similar or better functionality than Wellogix or we may have a problem”;
that other Accenture documents referenced Wellogix’s templates, and that, as
the pilot progressed, a BP employee told Wellogix that the company should: “sue
Accenture . . . [b]ecause Accenture was utilizing [Wellogix’s] confidential
information and building out [its] functionality.” Together, this evidence and
testimony supports the “legitimate inference[,]” Reeves, 530 U.S. at 150, that
Accenture used Wellogix’s trade secrets.
Accenture acknowledges that it developed complex services templates for
the P2P pilot, but argues that its templates lacked “dynamic” features, and
therefore were “nothing like Wellogix’s.” Accenture notes that Wellogix CEO
Epley recognized that “Wellogix doesn’t own the concept of templates.” However,
the standard for finding “use” is not whether Accenture’s templates contained
Wellogix trade secrets, but whether Accenture “rel[ied] on the trade secret[s] to
assist or accelerate research or development” of its templates. HAL, 500 F.3d at
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451 (quoting RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 40). A jury could
“legitimate[ly] infer[,]” Reeves, 530 U.S. at 150, on the basis of, for example, the
Accenture email suggesting that the company should “[u]se Wellogix for
content,” that Accenture “rel[ied]” on Wellogix’s templates to develop its own. See
HAL, 500 F.3d at 451.
Accenture argues that Roman’s testimony about the meaning of certain
terms in Accenture documents, such as “development,” was “pure conjecture,
which cannot sustain the judgment.” However, as an expert with experience in
the software industry, Roman had the requisite “experience, training, or
education” to testify as to the software industry’s understanding of such terms.
Wilson v. Woods, 163 F.3d 935, 937 (5th Cir. 1999) (quoting FED. R. EVID. 702);
see United States v. Tucker, 345 F.3d 320, 327-28 (5th Cir. 2003) (finding that
the district court’s exclusion of an expert’s proposed testimony on the technical
meaning of the term “invest” was “improper” because the testimony was
“relevant to the issue of the definition of ‘invest’”). Further, even without
Roman’s testimony, a jury could “legitimate[ly] infer[,]” Reeves, 530 U.S. at 150,
based on the plain language of the documents—for example, Accenture’s
reference to “us[ing] Wellogix for content”—that Accenture used Wellogix’s trade
secrets.
Relying on Wilmington Star Mining Co. v. Fulton, 205 U.S. 60, 78-79
(1907), and Rutherford v. Harris Cnty., 197 F.3d 173, 185 (5th Cir. 1999),
Accenture argues for the first time on appeal that, “because the evidence
supporting [Wellogix’s xIEP] theory was insufficient, and because it is impossible
to know whether the jury improperly relied on it in finding misappropriation,
Accenture is at least entitled to a new trial.” Accenture does not direct us to any
request to the district court for a special verdict, FED. R. CIV. P. 49(a), nor to a
request for answers to questions, FED. R. CIV. P. 49(b), nor to any pertinent
objection to the jury submission and charge, FED. R. CIV. P. 51, nor, later, to any
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request for verdict clarification, nor, finally, to any such contention of inherent
ambiguity in the general verdict in their new trial motion. In such
circumstances, with no objection made as to form or substance, we have
explained that a request for retrial has not been preserved. See Pan E.
Exploration Co. v. Hufo Oils, 855 F.2d 1106, 1123-25 (5th Cir. 1988) (forfeiture
from arguing only that none of the possible theories of recovery were supported
by the evidence, not that the cause should be reversed and remanded if any one
of the theories was invalid); In re A.V., 113 S.W.3d 355, 363 (Tex. 2003); McCord
v. Maguire, 873 F.2d 1271, 1274 (9th Cir. 1989).4
Because Wellogix showed that Accenture used its trade secrets for the P2P
pilot, we decline to address whether Wellogix showed that Accenture also used
Wellogix’s trade secrets for the xIEP application or SAP’s core accounting
software.
2. Compensatory Damages
4
Even if preserved, this argument applies to cases “[w]hen a district court submits two
or more alternative grounds for recovery to the jury on a single interrogatory,” Reeves v.
AcroMed Corp., 44 F.3d 300, 302 (5th Cir. 1995), yet one theory proves to be erroneous,
whereas, in this case, the evidence showing that Accenture used Wellogix trade secrets for the
P2P pilot, xIEP application, and SAP’s core accounting software supported a single, valid legal
theory: that Accenture entered into a confidential relationship with Wellogix, and then
breached that confidence by using the trade secrets for Accenture’s benefit. See Walther v.
Lone Star Gas Co., 952 F.2d 119, 126 (5th Cir. 1992) (“[W]e will not reverse a verdict simply
because the jury might have decided on a ground that was supported by insufficient evidence.
Instead we must assume that the jury considered all of the evidence in reaching its decision.”),
opinion on reh’g, 977 F.2d 161, 162 (5th Cir. 1992) (“Jurors are well equipped to analyze the
evidence and reach a decision despite the availability of a factually unsupported theory in the
jury instructions.”); Prestenbach v. Rains, 4 F.3d 358, 361 n.2 (5th Cir. 1993) (“[A] jury verdict
may be sustained even though not all the theories on which it was submitted had sufficient
evidentiary support.”); Rodriguez v. Riddell Sports, Inc., 242 F.3d 567, 577 n.8 (5th Cir. 2001);
E. Trading Co. v. Refco, Inc., 229 F.3d 617, 621-22 (7th Cir. 2000). As closing arguments
demonstrate, Wellogix’s case rested overwhelmingly on misappropriation arising from the P2P
project. See Muth v. Ford Motor Co., 461 F.3d 557, 564-65 (5th Cir. 2006) (distinguishing
Wilmington Star by observing that “this Court, as well as many others, have engrafted a sort-
of harmless error gloss onto the basic principle” that “if both theories are put to the jury, a new
trial is generally necessary when the evidence is insufficient on one”).
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“If the use of trade secrets results in economic injury to the employer, an
award of actual damages is . . . a proper remedy.” Zoecon Indus. v. Am.
Stockman Tag Co., 713 F.2d 1174, 1180 (5th Cir. 1983) (citing K & G Oil Tool &
Serv. Co. v. G & G Fishing Tool Serv., 314 S.W.2d 782, 792 (Tex. 1958)).
“Damages in misappropriation cases can take several forms: the value of
plaintiff's lost profits; the defendant’s actual profits from the use of the secret,
the value that a reasonably prudent investor would have paid for the trade
secret; the development costs the defendant avoided incurring through
misappropriation; and a ‘reasonable royalty.’” Bohnsack, 668 F.3d at 280
(internal citations omitted). “This variety of approaches demonstrates the
‘flexible’ approach used to calculate damages for claims of misappropriation of
trade secrets.” Id.; see Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d
518, 535 (5th Cir. 1974) (“The case law is thus plentiful, but the standard for
measuring damages which emerges is very flexible.”). Under this “flexible
approach,” even “[w]here the damages are uncertain . . . we do not feel that
uncertainty should preclude recovery; the plaintiff should be afforded every
opportunity to prove damages once the misappropriation is shown.” Univ.
Computing, 504 F.2d at 539; see Carbo, 166 F. App’x at 724 (finding that
“plaintiffs are entitled to adapt their damages theory to fit within the particular
facts of the case”). “‘[I]t will be enough if the evidence show[s] the extent of the
damages as a matter of just and reasonable inference, although the result be
only approximate.’” DSC Commc’ns Corp. v. Next Level Communications, 107
F.3d 322, 330 (5th Cir. 1997) (quoting Terrell v. Household Goods Carriers’
Bureau, 494 F.2d 16, 24 (5th Cir. 1974)); see Downtown Realty, Inc. v. 509
Tremont Bldg., Inc., 748 S.W.2d 309, 313 (Tex. App. 1988).
Here, Wellogix presented sufficient evidence and testimony to support the
jury’s $26.2 million compensatory damages award to Wellogix. Wellogix
introduced testimony by damages expert Michael Wagner that the company was
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worth $27.8 million in 2005—the amount, apparently after deducting for
licensing fees, that the jury awarded Wellogix. Wellogix showed that Wagner
based his valuation, in part, on the decision by venture capital groups to invest
$8.5 million in Wellogix in exchange for a 31% percent equity stake. Wellogix
also showed: that an Accenture employee believed that “BP work alone could
generate annual fees . . . in excess of $20 million if Accenture controlled
Wellogix”; that other companies viewed Wellogix’s technology as valuable; that
this value derived from Wellogix’s complex services technology; that no other
company had such technology from 2000 to 2005; that, as discussed above,
Accenture misappropriated Wellogix’s trade secrets to develop complex services
technology; that this misappropriation created a competitive disadvantage; that
this disadvantage caused Wellogix’s value to drop to “zero”; and that this
disadvantage also caused Wellogix to lose out on potential deals with other oil
and gas companies.
Accenture argues that Wagner’s $27.8 million valuation was too
speculative.5 Accenture notes that Wagner based his valuation on a decision by
venture capital groups to invest in Wellogix and that, in turn, the groups based
their decision to invest on speculative projections that Wellogix “would suddenly
begin reaping huge profits.” Accenture adds that the projections relied on
information supplied by Wellogix, and not objective data, such as customer
contracts. However, Wagner testified that, before projecting Wellogix’s value,
the venture capital groups audited Wellogix’s “financials”; made phone calls “to
5
Wellogix argues that Accenture waived its challenge to the compensatory damages
award. However, in an oral motion, Accenture said: “[F]or the same reason, Your Honor, that
we moved for judgment as a matter of law at the conclusion of Plaintiff's case, we so move at
the conclusion of all the evidence. . . . We do not believe that there is any legally sufficient
evidentiary basis for a reasonable jury to find . . . damages.” The district court denied the
motion, but noted: “That’s all preserved.” Wellogix said that it had “[n]o objection to that.”
Accordingly, Accenture did not waive its challenge. See Navigant Consulting, Inc. v. Wilkinson,
508 F.3d 277, 288 (5th Cir. 2007).
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partners and customers”; “asked knowledgeable people . . . what they thought
of the software”; and “tried to find out i[f] there [was] any competition.” Wagner
also testified that “it would be very unusual” if Wellogix did not supply
information to the groups because “[t]hat is the source of most of your
information when you[ ] come in and [are] asked to value a company.” Given the
“‘flexible’ approach used to calculate damages,” Bohnsack, 668 F.3d at 280,
reasonable jurors could find that the $8.5 million investment for a 31% stake,
and the underlying projections, supported a $27.8 million valuation. See Reeves,
530 U.S. at 150.
Accenture argues that, notwithstanding Wagner’s valuation, Wellogix did
not show that the alleged misappropriation “totally or almost totally destroyed”
Wellogix’s value. Accenture maintains that Wellogix did not establish “the
market value of the business immediately before and immediately after” the
alleged misappropriation. However, Wagner testified that the investment and
projections were made “right about the time that the theft occurred.” Roman
testified that, based on his knowledge of the software industry, “the total value
of Wellogix went to zero” after the alleged misappropriation.6 Reasonable jurors
could find that this testimony established the “market value of the business
immediately before and after” the alleged misappropriation. Sawyer v. Fitts, 630
S.W.2d 872, 875 (Tex. App. 1982); see C. A. May Marine Supply Co. v. Brunswick
Corp., 649 F.2d 1049, 1053 (5th Cir. July 1981).
In sum, given the conflicting evidence and testimony, and resolving every
inference in Wellogix’s favor, see 530 U.S. at 150, reasonable jurors could find
6
For the reasons, discussed below, that Roman’s general background in computer
sciences qualified him to testify about Wellogix’s software, Roman’s software expertise allowed
him to offer his opinion as to the general effect Accenture’s misappropriation of Wellogix’s
technology would have on Wellogix’s value—particularly given that, as discussed above,
Wellogix’s value derived from this technology. See Huss v. Gayden, 571 F.3d 442, 452 (5th Cir.
2009).
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that Accenture misappropriated Wellogix’s trade secrets. Reasonable jurors also
could find, under the “‘flexible’ approach used to calculate damages,” Bohnsack,
668 F.3d at 280, that there was sufficient evidence to support a $26.2 million
compensatory damages award. As a result, the district court did not abuse its
discretion by denying Accenture’s motion for a judgment as a matter of law.
III. Accenture’s Motion for a New Trial
“This Court can overturn a decision denying a motion for a new trial only
if it finds that the district court abused its discretion.” Seidman v. Am. Airlines,
Inc., 923 F.2d 1134, 1140 (5th Cir. 1991). “The district court abuses its
discretion by denying a new trial only when there is an ‘absolute absence of
evidence to support the jury’s verdict.’” Id. (quoting Cobb v. Rowan Companies,
Inc., 919 F.2d 1089, 1090 (5th Cir. 1991)); see Smith v. Transworld Drilling Co.,
773 F.2d 610, 613 (5th Cir. 1985) (finding an abuse of discretion only if “the
verdict is against the weight of the evidence, the damages awarded are
excessive, the trial was unfair, or prejudicial error was committed in its
course.”). “In reviewing the district court’s actions, the evidence is viewed in the
light most favorable to the jury verdict.” Seidman, 923 F.2d at 1140; see Dotson
v. Clark Equip. Co., 805 F.2d 1225, 1227 (5th Cir. 1986) ( “A trial court should
not grant a new trial on evidentiary grounds unless the verdict is against the
great weight of the evidence.”).
1. Roman’s Testimony
“In rulings on the admissibility of expert opinion evidence the trial court
has broad discretion and its rulings must be sustained unless manifestly
erroneous.” Viterbo v. Dow Chem. Co., 826 F.2d 420, 422 (5th Cir. 1987); see
Watkins v. Telsmith, Inc., 121 F.3d 984, 988 (5th Cir. 1997). In making such
rulings, district courts “function as gatekeepers and permit only reliable and
relevant expert testimony to be presented to the jury.” Wilson, 163 F.3d at 937
(citing Daubert, 509 U.S. at 590-93). “District courts must be assured that the
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proffered witness is qualified to testify by virtue of his ‘knowledge, skill,
experience, training, or education.’” Wilson, 163 F.3d at 937 (quoting FED. R.
EVID. 702). “A district court should refuse to allow an expert witness to testify
if it finds that the witness is not qualified to testify in a particular field or on a
given subject.” Wilson, 163 F.3d at 937; see United States v. Cooks, 589 F.3d 173,
179 (5th Cir. 2009). “‘Vigorous cross-examination, presentation of contrary
evidence, and careful instruction on the burden of proof are the traditional and
appropriate means of attacking shaky but admissible evidence.’” Pipitone v.
Biomatrix, Inc., 288 F.3d 239, 250 (5th Cir. 2002) (quoting Daubert, 509 U.S. at
596).
Here, the district court did not abuse its discretion by allowing Wellogix
software expert Roman to testify. Roman’s experience as a software developer
and forensic analyst, and his fluency in different programming codes, qualified
him as an expert on the subject of his testimony: software programming and
source codes. See Wilson, 163 F.3d at 937. Further, by limiting his testimony to
whether Wellogix’s source code was a trade secret, and whether Wellogix’s code
matched SAP’s, Roman did not stray from this subject matter. See id.
Accenture argues that Roman’s general computer sciences background did
not qualify him to testify about “the oil-and-gas industry, complex-services
procurement, or SAP software.” However, Roman did not need particular
expertise in the oil-and-gas industry, or complex services procurement, to help
the jury understand software concepts and terms. See FED . R. EVID. 702(a).
Further, Roman had “specialized knowledge” about SAP’s software because he
“testified that he had been able to teach himself [SAP’s programming language]
language and implement the SAP software.” See id. Given that “Rule 702 does
not mandate that an expert be highly qualified in order to testify about a given
issue,” Huss, 571 F.3d at 452 (emphasis added), Roman’s background in
computer science, and knowledge about SAP’s software, sufficed.
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Accenture argues that, even if Roman was qualified, his testimony was
unreliable because he did not investigate the facts underlying his opinions.
Accenture notes that Roman twice misstated facts in his testimony. First,
Roman said that a Wellogix design specification was “an incredibly valuable
trade secret” and “would not be known publicly” even though it was available on
Wellogix’s public website. Second, Roman compared Wellogix’s source code to
the wrong software, causing the district court to wonder how “[h]ow . . .
somebody as experienced as Mr. Roman [could] be . . . that much off the point”
and make “such a rudimentary mistake.” However, Accenture had the chance
to highlight and dispute these errors through “[v]igorous cross-examination” and
the “presentation of contrary evidence.” Pipitone, 288 F.3d at 250. In the context
of Roman’s broader testimony, two misstatements do not constitute “manifest[
] erro[r].” Viterbo, 826 F.2d at 422.
Accenture renews its argument, discussed above, that Roman testified
about matters outside his personal knowledge. However, as we noted above,
Roman’s testimony about the meaning of certain terms, and the availability of
Wellogix’s source code, was within his “experience, training, or education.” See
Wilson, 163 F.3d at 937. Likewise, Roman’s testimony about Accenture’s access
to Wellogix’s trade secrets, Accenture’s breach of a confidentiality agreement
with Wellogix, and Wellogix’s post-tort value related to Wellogix’s software, and
therefore was within Roman’s expertise. See id.; FED. R. EVID. 702.
2. Patent-Related Documents
Evidence is relevant if “it has any tendency to make a fact more or less
probable than it would be without the evidence.” FED. R. EVID. 401(a). A district
court “may exclude relevant evidence if its probative value is substantially
outweighed by a danger of . . . unfair prejudice, confusing the issues, [or]
misleading the jury.” FED. R. EVID. 403; see Old Chief v. United States, 519 U.S.
172, 180 (1997). “A trial court’s ruling on admissibility under Rule 403’s
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balancing test will not be overturned on appeal absent a clear abuse of
discretion.” Ballou v. Henri Studios, Inc., 656 F.2d 1147, 1153 (5th Cir. Sept.
1981); see Old Chief, 519 U.S. at 180. “We will not reverse a district court’s
evidentiary rulings unless they are erroneous and substantial prejudice results.
The burden of proving substantial prejudice lies with the party asserting error.”
F.D.I.C. v. Mijalis, 15 F.3d 1314, 1318-19 (5th Cir. 1994); see Smith v. Wal-Mart
Stores (No. 471), 891 F.2d 1177, 1180 (5th Cir.1990).
Here, the district court did not abuse its discretion by allowing Wellogix
to introduce into evidence documents—including emails and a patent demand
letter—in which Accenture appears to acknowledge, among other things, that its
infringement of Wellogix patents created “some potential for litigation.” The
district court, as requested by Accenture, instructed that “[t]he existence of a
patent does not mean that a trade secret exists.” As discussed above, “[a] jury
is presumed to follow its instructions,” Weeks, 528 U.S. at 234, and Accenture
has not overcome this presumption in this instance. Also, noted earlier, without
the documents, Wellogix presented sufficient evidence and testimony to support
Wellogix’s misappropriation claim. In addition, as discussed below, the
documents are relevant to support other propositions, such as Accenture’s malice
to Wellogix. Although the district court observed in its order denying the motion
for a new trial that, “from these emails, the jury was entitled to draw the
inference that Accenture and BP had engaged in misappropriation of trade
secrets,” the record evidence does not support that the district court allowed the
patent-related documents into evidence for this purpose.
Accenture argues that “the verdict itself shows the jury improperly relied
on the” documents because the jury found that, by May 15, 2006—the date of the
demand letter—Wellogix should have discovered Accenture’s misappropriation.
However, as the district court concluded, the jury’s finding was proper because
Wellogix framed the demand letter as “an indicator of the date by which
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Wellogix was aware of Accenture’s wrongful conduct with respect to Wellogix’s
intellectual property.” For example, in its closing statement, Wellogix noted that
the date of discovery was “a tough one,” and that the demand letter suggested
“the date of reasonable diligence when we discovered misappropriation.” Given
that Wellogix did not represent that the documents showed that Accenture
misappropriated Wellogix trade secrets, the jury’s use of the May 15, 2006 date,
without more, does not overcome the presumption that the jury followed its
instructions. See Weeks, 528 U.S. at 234.
In sum, the district court did not abuse its discretion by allowing Roman
to testify about software because Roman’s computer sciences background
qualified him as an expert on software, and because he limited his testimony to
that subject matter. The district court also did not abuse its discretion by
allowing Wellogix to introduce into evidence patent-related documents because,
among other things, the district court cautioned the jury that “[t]he existence of
a patent does not mean that a trade secret exists.” As a result, the district court
did not abuse its discretion by denying Accenture’s motion for a new trial.
IV. The Punitive Damages Award
1. Malice
“When reviewing a district court’s refusal to set aside an award of punitive
damages, we will reverse only upon determining that ‘no legally sufficient
evidentiary basis’ exists for making such an award, the same standard applied
by the district court in the first instance.” Watson v. Johnson Mobile Homes, 284
F.3d 568, 571 (5th Cir. 2002) (quoting FED. R. CIV. P. 50(a)(1)). A legally
sufficient evidentiary basis exists if “the plaintiff proves by clear and convincing
evidence that harm resulted from ‘malice.’” Bennett v. Reynolds, 315 S.W.3d 867,
871 (Tex. 2010); see TEX. CIV. PRAC. & REM. CODE ANN. § 41.003(a)(2). “Malice”
exists if there is “‘a specific intent by the defendant to cause substantial injury
[or harm] to the claimant.’” Bennett, 315 S.W.3d at 872 (quoting TEX. CIV. PRAC.
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& REM. CODE ANN. § 41.001(7)). “[S]pecific intent,” in turn, exists if “the actor
desires to cause the consequences of his act, or he believes the consequences are
substantially certain to result from it.” Marrs & Smith P’ship v. D.K. Boyd Oil
& Gas Co., 223 S.W.3d 1, 22 (Tex. App. 2005) (citing Reed Tool Co. v. Copelin,
689 S.W.2d 404, 406 (Tex. 1985)). “Malice may be proven by direct or
circumstantial evidence.” Marrs & Smith, 223 S.W.3d at 22 (citing Mobil Oil
Corp. v. Ellender, 968 S.W.2d 917, 921 (Tex.1998)).
Here, Wellogix introduced sufficient evidence and testimony to support the
jury’s finding that Accenture acted with malice. Wellogix showed: that
Accenture stated that it could “easily replicate[ ]” and “[l]ift” Wellogix
technology; that Accenture “harvest[ed]” Wellogix technology while engaged in
confidential partnerships with Wellogix; that Accenture CEO Peggy Kostial
wrote in a May 2006 email that “[o]ne can only hope” that SAP would no long
“sponsor” Wellogix; that Accenture, in an apparent attempt to interfere with
Wellogix’s business relationship with SAP, warned Wellogix of SAP’s “bleed the
knowledge tactics”; that Accenture “acknowledge[d] its responsibility for patent
infringement caused by products created by Accenture during those previous
phases of the [P2P] project”; and that Accenture recognized that “[w]e may be at
risk if Wellogix claims that we used knowledge of their product through
involvement with eTrans to design and develop a solution for BP.” Against the
backdrop discussed above—Accenture’s decision to develop the P2P pilot without
Wellogix, and then apparently to “[u]se Wellogix content” for the “creation of .
. . complex services” templates for the pilot—this evidence and testimony was
sufficient to support the jury’s malice finding. See Marrs & Smith, 223 S.W. 3d
at 22-23 (finding that the defendant’s attempts to interfere with the plaintiff’s
business relationships supported the jury’s malice finding); Nova Consulting
Grp., Inc. v. Eng’g Consulting Servs., Ltd., 290 F. App’x 727, 741 (5th Cir. 2008)
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(finding that “vulgarity about [the plaintiff] in [the defendant’s] email . . . was
evidence a reasonable jury could consider regarding malice”).
Accenture argues that Wellogix did not show malice because Wellogix did
not introduce clear and convincing evidence that Accenture intended to cause
substantial injury to Wellogix. Accenture notes that Wellogix CEO Epley
testified that he had “many positive relationships with Accenture personnel,”
that “Accenture was helpful” to Wellogix, that Accenture tried to warn Wellogix
to protect its intellectual property from SAP, and that Accenture CEO Kostial
was a “good friend.” Accenture adds that Kostial wrote that she was
“supportive” of Wellogix in a January 2006 email. However, Accenture does not
cite, nor could we find, case law to support the proposition that a defendant’s
supportive comments about a plaintiff, or, conversely, a plaintiff’s supportive
comments about a defendant, preclude a jury’s finding of malice. Rather, the
jury was able to weigh Epley’s comments, and Kostial’s “support[ ],” against the
evidence, discussed above, that Accenture “harvested” Wellogix technology. See
Reeves, 530 U.S. at 150. “As an appellate court reviewing a cold record long after
the jury has evaluated the evidence,” Richardson v. State, 879 S.W.2d 874, 879
(Tex. Crim. App. 1993) (en banc), we decline to “reweigh th[is] evidence.” Carey
v. Apfel, 230 F.3d 131, 135 (5th Cir. 2000) (internal quotation marks omitted).
2. Due Process
“[W]e review [a] constitutional challenge to the size of the punitive
damages award de novo.” Lincoln v. Case, 340 F.3d 283, 290 (5th Cir. 2003)
(citing Cooper Indus., Inc. v. Leatherman Tool Grp., Inc., 532 U.S. 424, 436
(2001)). “The Due Process Clause of the Fourteenth Amendment prohibits the
imposition of grossly excessive or arbitrary punishments on a tortfeasor.” State
Farm, 538 U.S. at 416; see TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443,
446 (1993). The Supreme Court has established “three guideposts courts should
consider in determining whether a punitive damages award is unconstitutionally
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excessive: the degree of the defendant’s reprehensibility or culpability; the
disparity between the harm or potential harm suffered by the victim and the
punitive damages award; and the sanctions authorized or imposed in other cases
for comparable misconduct.” Lincoln v. Case, 340 F.3d 283, 292 (5th Cir. 2003)
(citing BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 574-75 (1996)).
“[T]he most important indicium of the reasonableness of a punitive
damages award is the degree of reprehensibility of the defendant’s conduct.”
State Farm, 538 U.S. at 419 (quoting Gore, 517 U.S. at 575). “Reprehensibility”
factors include whether
the harm caused was physical as opposed to economic; the tortious
conduct evinced an indifference to or a reckless disregard of the
health or safety of others; the target of the conduct had financial
vulnerability; the conduct involved repeated actions or was an
isolated incident; and the harm was the result of intentional malice,
trickery, or deceit, or mere accident
State Farm, 538 U.S. at 419 (citing Gore, 517 U.S. at 576-77). “The existence of
any one of these factors weighing in favor of a plaintiff may not be sufficient to
sustain a punitive damages award; and the absence of all of them renders any
award suspect.” State Farm, 538 U.S. at 419.
“[T]he potential relevance of the ratio between compensatory and punitive
damages is indisputable, being a central feature in our due process analysis.”
Exxon Shipping Co. v. Baker, 554 U.S. 471, 507 (2008); see Gore, 517 U.S. at 580-
82 (“The principle that exemplary damages must bear a ‘reasonable relationship’
to compensatory damages has a long pedigree.”). Although “we have consistently
rejected the notion that the constitutional line is marked by a simple
mathematical formula, we have determined that few awards exceeding a
single-digit ratio between punitive and compensatory damages, to a significant
degree, will satisfy due process.” Baker, 554 U.S. at 501 (internal citations and
quotation marks omitted); see State Farm, 538 U.S. at 425 (“Single-digit
multipliers are more likely to comport with due process[.]”); Pacific Mut. Life Ins.
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Co. v. Haslip, 499 U.S. 1, 23-24 (1991) (upholding as constitutional a punitive
damages award “more than 4 times the amount of compensatory damages”).
Here, the Gore guideposts at issue in this case—reprehensibility and the
ratio between punitive and compensatory damages—do not require us to find
that the punitive damages award was grossly excessive.
The “reprehensibility” guidepost is neutral. Some factors favor Accenture.
For example, Wellogix does not dispute that “the harm caused was . . .
economic,” and that Accenture’s conduct did not “evince[ ] an indifference to or
a reckless disregard of the health or safety of others.” State Farm, 538 U.S. at
419. Other factors favors Wellogix. For example, the jury’s “malice” finding,
discussed above, supports that “the harm was the result of intentional malice.”
State Farm, 538 U.S. at 419. Other factors are ambiguous. For example, the
evidence that Wellogix’s value derived from its complex services technology, and
that this value plummeted when Accenture misappropriated the technology,
suggests that Wellogix was “financial[ly] vulnerab[le].” State Farm, 538 U.S. at
419. However, the Supreme Court neither has defined “financial vulnerability,”
nor has addressed whether a corporation can be financially vulnerable in this
context. Cf. State Farm, 528 U.S. at 433-34 (finding that an elderly couple was
“economically vulnerable”). As a result, we cannot say that the “financial
vulnerability” factor favors either party.
The “ratio” guidepost strongly favors Wellogix. The ratio of punitive to
compensatory damages in this case is $18.2 million to $26.2 million, or about
0.7:1. Although we decline to “draw a mathematical bright line between the
constitutionally acceptable and the constitutionally unacceptable.” Gore, 582,
517 U.S. at 583 (quoting TXO, 509 U.S. at 458), this 0.7:1 ratio is within the
“[s]ingle-digit [ratio] likely to comport with the due process.” State Farm, 538
U.S. at 425; see Haslip, 499 U.S. at 23-24.
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Accenture argues that “[o]ther courts have reduced punitive damages
awards to far less than 1:1 ratios because the awards were not necessary to
punish or deter.” However, the cases Accenture cites—Chi. Title Ins. Corp. v.
Magnuson, 487 F.3d 985, 990, 998-1001 (6th Cir. 2007); Inter Med. Supplies, Ltd.
v. EBI Med. Sys., Inc., 181 F.3d 446, 463-70 (3d Cir. 1990)—are distinguishable.
The punitive damages award in Magnuson was three times the amount of the
compensatory damages award, see 487 F.3d at 990; the punitive damages award
in EBI was $2 million more than the compensatory damages award, see 181 F.3d
at 450. By contrast, the punitive award in this case is $8 million less than the
compensatory award. Accenture does not identify, nor could we find, a case in
which an appellate court vacated or reduced a punitive award that was less than
the compensatory award. Given that the reprehensibility guidepost was neutral,
we decline to do so in this case.
In sum, there was sufficient evidence and testimony to support the jury’s
“malice” finding. In addition, the amount of the punitive damages award was
not grossly excessive. As a result, the district court did not err by refusing to set
aside the punitive award.
V. Conclusion
Accordingly, we AFFIRM the district court’s judgment.
25