FILED
NOT FOR PUBLICATION FEB 11 2015
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNIVERSAL ENGRAVING, INC., Nos. 12-17351 & 13-15743
Plaintiff - Appellant, D.C. No. 2:08-cv-01944-GMS
v.
MEMORANDUM*
METAL MAGIC, INC., an Arizona
corporation; CHARLES R. BROWN,
an individual,
Defendants - Appellees.
Appeal from the United States District Court
for the District of Arizona
G. Murray Snow, District Judge, Presiding
Argued and Submitted January 14, 2015
San Francisco California
Before: O’SCANNLAIN and CLIFTON, Circuit Judges, and RAKOFF, Senior
District Judge.**
Universal Engraving, Inc. (“UEI”) appeals both a judgment entered against
it based on a jury verdict following trial on its claims against defendants and an
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The Honorable Jed S. Rakoff, Senior District Judge for the U.S.
District Court for the Southern District of New York, sitting by designation.
award of attorneys’ fees and costs entered by the district court following entry of
that judgment. We affirm the judgment but vacate the award of fees and costs and
remand that matter for further proceedings.
The district court dismissed UEI’s claims, other than the claim under the
Arizona Uniform Trade Secrets Act (“AUTSA”), on the ground that those claims
were precluded by Ariz. Rev. Stat § 44-407. At the time of the dismissal, the court
did not have the benefit of the subsequent decision of the Arizona Supreme Court
in Orca Communications Unlimited, LLC v. Norder, 337 P.3d 545, 547-49 (Ariz.
2014) (holding that Ariz. Rev. Stat. § 44-407 applies to preclude claims based on
trade secrets only and not a claim based on confidential information that does not
rise to the level of a trade secret). As this is a matter of Arizona law, the Orca
decision is binding and applies to this case.
Nonetheless, it does not appear to us that the dismissal of the other claims
was erroneous or prejudicial to UEI. The district court gave UEI an opportunity to
make an offer of proof that its other tort claims were based on something other
than misappropriation. UEI acknowledged that its claims for damages, however the
cause of action was characterized, were all the same. Orca held that the statute did
not displace “any cause of action other than one for misappropriation of trade
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secret.” Id. at 547. That decision indicated, however, that a claim that was
encompassed by a claim for misappropriation of trade secrets would still be
displaced even if it could be given a different label. Specifically, the Orca court
noted that it did not “decide today what aspects, if any, of the confidential
information alleged in Orca’s unfair-competition claim might fall within AUTSA’s
broad definition of ‘trade secret’ and therefore be displaced.” Id. at 549. The
inference to be drawn from that comment is that a claim for misappropriation of
confidential information, though a separate tort cause of action, would be displaced
to the extent that it fell within the trade secrets claims.
In general, even if there was error, we will not reverse the district court’s
decision if the error was harmless. Fed. R. Civ. P. 61. Ultimately, all of the other
claims presented by UEI appeared to fall within its claim for misappropriation of
trade secrets. Although UEI alleged that defendants committed various other torts,
UEI acknowledged that it suffered no separate injury and had no separate claim for
damages. The record did not suggest anything to the contrary. Indeed, the district
court itself, in a discussion with UEI’s counsel, recognized that the other claims
were merely repackaged misappropriation of trade secrets claims. It also appears
that the jury concluded that UEI had not proven that it was injured or suffered
damages, and that finding would preclude UEI’s other claims as well.
3
The district court did not err in declining to hold defendants bound to the
results of the Kansas proceeding. Contrary to UEI’s argument, in denying UEI’s
motion for summary judgment, the district court did not hold as a matter of law
that the defendants in this case were not in privity with the defendant in the Kansas
case. Instead, it found that there was a genuine issue of fact on that issue. UEI
dropped the issue thereafter, advising the court that it would not argue that
defendants were collaterally estopped by the Kansas judgment. Having failed to
develop the necessary facts when afforded the opportunity, there is nothing for UEI
to appeal. The district court was not wrong, in any event, in concluding that there
was a genuine issue of fact that precluded summary judgment.
The district court did not err in denying a second amendment to the Rule 16
scheduling order. The proposed amendment required good cause, an inquiry which
focuses on “the diligence of the party seeking the amendment.” Johnson v.
Mammoth Recreations, Inc., 975 F.2d 604, 608-09 (9th Cir. 1992). The district
court did not abuse its discretion when it concluded that UEI failed to show
diligence and that both parties were responsible for discovery failures.
The district court did not err in preventing Mr. Hutchinson from testifying
on matters outside his personal knowledge. A lay witness may only offer opinion
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testimony if it is based on personal knowledge. Fed. R. Evid. 701. While the owner
of intangible property may testify as to the value of the property without
qualification as an expert, any additional opinions not based on personal
knowledge require expert qualification. Universal Pictures Co. v. Harold Lloyd
Corp., 162 F.2d 354, 357 (9th Cir. 1947); Droeger v. Welsh Sporting Goods Corp.,
541 F.2d 790, 793 (9th Cir. 1976); Fed. R. Evid. 702. Mr. Hutchinson’s testimony
as to what he thought Metal Magic would have saved was not based on personal
knowledge. The district court did not abuse its discretion here, as Mr. Hutchinson
was not offered to testify as an expert.
As for the award of attorneys’ fees and costs, we vacate the award and
remand for further proceedings. The district court provided no explanation for
either the basis of the award or its calculation. The AUTSA allows an award of
such fees if there is bad faith in filing a claim, Ariz. Rev. Stat. § 44-404, and
defendants argue that there was bad faith here. The district court did not articulate
such a finding, however, or explain the basis for it, so the existing award cannot be
sustained. See Optyl Eyeware Fashion Intn’l Corp. v. Style Cos., Ltd., 760 F.2d
1045, 1051 (9th Cir. 1985). We vacate the award of fees and costs and remand for
5
further proceedings, including an explanation of the basis for any award and its
calculation.
Each party shall bear its own costs on appeal.
AFFIRMED IN PART; VACATED AND REMANDED IN PART.
6
FILED
Universal Engraving, Inc. v. Metal Magic, Inc., Nos. 12-17351, 13-15743 FEB 11 2015
MOLLY C. DWYER, CLERK
O’SCANNLAIN, Circuit Judge, concurring in part and dissenting in part: U.S. COURT OF APPEALS
I agree with the Court on all issues except its treatment of the post-judgment
Orca decision of the Arizona Supreme Court interpreting Ariz. Rev. Stat. § 44-407.
See Orca Commc’ns Unlimited, LLC v. Noder, 337 P.3d 545 (Ariz. 2014). In
concluding that Universal Engraving, Inc.’s (“UEI”) common law claims were
preempted by the Arizona Uniform Trade Secrets Act (“AUTSA”), the district
court explicitly relied upon an interpretation of the statute’s preemption provision
that was expressly, albeit subsequently, disavowed in Orca. I respectfully dissent
from the Court’s disposition to that extent.
I
The Orca court held that AUTSA displaces only claims for the
misappropriation of trade secrets, such that other common-law claims—including
torts based on the misappropriation of confidential information falling outside
AUTSA’s definition of a trade secret—remain viable. See id. at 548, 550. As UEI
repeatedly alleged claims based on the misappropriation of confidential
information in addition to its trade secrets claims, I am persuaded the district court
erred in preventing UEI from proceeding to trial on such claims. See id. at 548
(“[B]ecause [Plaintiff’s] unfair-competition claim, as alleged, is not limited to
trade secrets, the superior court erred in dismissing that claim on preemption
grounds.” (emphasis added)). In fairness, the district judge could not have applied
Orca since it came down after judgment here, but, as the majority notes, Orca is
nevertheless binding and applies to this case and this appeal. See Kona
Enterprises, Inc. v. Estate of Bishop, 229 F.3d 877, 886–87 (9th Cir. 2000).
II
Furthermore, I cannot conclude that the district court’s error was harmless
based on a single juror’s question whether the jury had to conclude “that UEI
suffered damages in order to vote that trade secrets were misappropriated.” I
respectfully suggest that we cannot base our decision on an inference drawn from
such a question to the court. Cf. Floyd v. Laws, 929 F.2d 1390, 1397 (9th Cir.
1991) (explaining that courts should defer only to “legitimate or viable findings of
fact”). Furthermore, even if the juror’s question established that the jury did not
believe misappropriation of trade secrets resulted in damages, it certainly does not
establish that the jury found that UEI suffered no damages whatsoever. The jury
might have found that some of the information, though confidential, was not a
trade secret, and thus could not consider whether misappropriation of such
information resulted in damages to UEI.
2
III
Because UEI was required to elect between its common-law and AUTSA
claims based on an erroneous interpretation of Ariz. Rev. Stat. § 44-407, I would
vacate both the judgment entered against UEI and the district court’s order denying
UEI’s motion for a new trial. Since we are already remanding with respect to
attorneys’ fees, I would invite the district court to reconsider the new trial motion
in light of Orca in the first instance. See Kona Enterprises, 229 F.3d at 886–87.
3