BCE Emergis Corp. v. Community Health Solutions of America, Inc.

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT August 9, 2005

_______________________ Charles R. Fulbruge III
Clerk
No. 04-50367
_______________________

BCE EMERGIS CORPORATION,

Plaintiff-Appellant,

versus

COMMUNITY HEALTH SOLUTIONS OF AMERICA, INC.;
BENCOMP NATIONAL CORP; GARY S. SIMMONS; MICHAEL R. MASTERS;
BARBARA FREEMAN; RICHARD K. DANKWORTH; SCOTT BARNES;
CLARENDON NATIONAL INSURANCE COMPANY,

Defendants-Appellees.

Appeal from the United States District Court
for the Western District of Texas
1:02-CV-741-LY

Before JOLLY, JONES, and DEMOSS, Circuit Judges.

EDITH H. JONES, Circuit Judge:*

Plaintiff-Appellant BCE Emergis Corporation (“BCE”)

appeals the jury verdict exonerating Defendant-Appellees Community

Health Solutions of America (“CHS”), numerous individuals

(collectively, “CHS,” “Appellees”), and Clarendon National

Insurance Company (“Clarendon”) from its claims for, inter alia,

breach of contract, breach of fiduciary duty, and misappropriation

of trade secrets. BCE challenges the district court’s denial of

BCE’s motion for judgment as a matter of law, its motion for new

*
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opinion should not be published and is not precedent except under the limited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.
trial, the content of the verdict forms and jury instructions, and

various evidentiary rulings. Having reviewed the record, and

finding no significant error in this carefully tried case, we

affirm.

I. BACKGROUND

BCE developed and maintains a nationwide network of

healthcare providers, through which it offers access to discounted

healthcare services. NHS, located in Louisville, Kentucky, is a

wholly-owned subsidiary of BCE, which offers utilization review and

case management services. NHS was incorporated in 1984 and became

BCE’s subsidiary in February 2000. NHS’s four primary products

include medical review, management, disease management, and a

24-hour nurse/triage help line. NHS employees four hundred people,

eighty percent of whom are nurses. NHS uses numerous written

policies and procedures, as well as a management software program

called CareReview, in operating its business. NHS is accredited by

the Utilization Review Accreditation Commission (“URAC”), and

frequently shares its policies and procedures with other healthcare

service providers. On contracts for government-sponsored insurance

programs, such policies and procedures must satisfy certain

requirements.

Appellee Clarendon National Insurance Co. (“Clarendon”)

hired NHS to provide medical management services for contracts

Clarendon had with the states of Texas and Florida. In Texas,

2
Services were performed in Texas for the Texas Children’s Health

Insurance Program (“CHIP”), and in Florida for the Florida Healthy

Kids Program (“Healthy Kids”). The CHIP contract was for an

initial three-year term starting in May 2000, with two automatic

one-year terms of renewal. The Healthy Kids contract was

negotiated and acted upon, but never memorialized. The NHS

executive staff based in Louisville and responsible for these

subcontracts included Appellees Barbara Freeman (“Freeman”),

President and Chief Medical Officer from the 1990's to July 2002;

Richard Dankworth (“Dankworth”), Executive Vice President until

June 2002; and Scott Barnes (“Barnes”), Vice President for

Information Systems until March 2002. Barnes was responsible for

the development and upkeep of the CareReview program. CHS was

incorporated in February 2002 by its two principals, Appellees

Michael Masters (“Masters”) and Gary Simmons.

A. BCE’s Case to the Jury

The Parties continue to disagree as to what the evidence

showed. Thus, we present the arguments of each side sequentially.

Masters developed the concept of an “exclusive provider

organization” (“EPO”) model for the delivery of rural healthcare

services. Under an EPO, one company would provide services in

Texas and Florida; however, operating the EPO would require the

operational capability of NHS, and CHS lacked this capacity at the

relevant time. Thus, BCE alleged Appellees accomplished this goal

3
by pilfering NHS’s proprietary information and employees. In

spring 2001, Masters developed an EPO proposal for Clarendon, which

he also secretly sent to Freeman and Dankworth for advice even

though the proposal did not concern business with NHS. Then

several “offline” discussions took place between Masters and both

Freeman and Dankworth to determine whether each was interested in

business opportunities with CHS. By late 2001, Masters had enticed

Dankworth with employment opportunities at his startup; Dankworth

expressed interest for himself and on behalf of his fiancée Patty

Callen (“Callen”),1 the NHS manager who oversaw the nursing staff

that directly served CHIP.

Further, in early 2002 Masters and Simmons met secretly

with Dankworth and Barnes at a Louisville hotel to continue

employment discussions. Barnes brought along four of his computer

department subordinates. In February 2002, Dankworth wrote to

Masters and Simmons, outlining proposed terms of employment for

himself and Callen, including an ownership interest in the new

company. Simmons emailed Barnes’s proposed offer letters for his

four subordinates, requesting Barnes to review them. Barnes and

his subordinates left NHS for CHS in March 2002.

On March 19, 2002, Masters proposed to Clarendon’s Senior

Vice President Dominic Hagger that CHS become Clarendon’s EPO for

rural healthcare services. Although this occurred months before

1
Dankworth and Callen are now married.

4
either Dankworth or Freeman quit NHS, both were identified as CHS

executives in the organizational chart accompanying the proposal,

and their resumes appeared on CHS letterhead. The proposal

described a medical management system that did not exist at CHS in

March 2002 and included both CHIP and Healthy Kids.

Later, Hagger signed a separate proposal submitted by CHS

for Florida Medicaid work, which, BCE claims, repeated the same

misrepresentations about Freeman, Dankworth, and CHS’s medical

management capabilities. BCE also contends this proposal appended

confidential medical policies and procedures that Dankworth

purloined from NHS and falsely claimed belonged to CHS. According

to BCE, Dankworth, the negotiator of the Texas CHIP contract with

Clarendon, was familiar with BCE’s confidentiality restrictions.

BCE claims Dankworth asked a subordinate NHS employee, Patty

Russell, to put the policies and procedures on a computer disk.

Dankworth allegedly took the disk home and asked Callen to reformat

the policies and procedures, such that references to NHS became

references to CHS. Dankworth then sent the reformatted policies to

the then-CHS president, who passed them along to a CHS employee,

who confirmed they were the policies included with the Florida

Medicaid proposal.1 BCE alleges that the Hagger’s and Dankworth’s

testimony shows these policies could only have come from the NHS

policies used in the CHIP contract.

1
As will be discussed infra, Dankworth and Callen provided a very
different account of these events at trial.

5
 B. Appellees’ Case to the Jury

Appellees presented evidence that after BCE’s acquisition

of NHS, BCE instituted multiple dramatic changes in corporate

practice at NHS. BCE transferred significant decisionmaking power

out of Louisville, instituted rigid cost-cutting, and increased the

bureaucracy of the workplace, as well as the workload. NHS

required more approval to authorize expenditures by NHS personnel.

Appellees testified that these changes ultimately affected client

services. In particular, as NHS moved departments around, the IT

department and all the computer hardware was moved from its base in

Louisville to BCE’s offices in Maryland and Canada. This proved a

controversial issue, as many IT employees feared for their jobs.

Barnes, in fact, approached NHS Vice President Christie Spencer and

advised her that some of his subordinates were going to quit

because of the deteriorating conditions. Around October or

November 2001, the situation became more intense when NHS employees

learned BCE had a non-compete agreement “in the works” that they

would be required to sign. Upon learning this, Barnes and

Dankworth began aggressively seeking other employment. In February

2002, BCE circulated an annual acknowledgment of BCE’s ethics-

related policies and made signing it a condition of employment;

several employees objected to signing it.

Without signing the agreement, Dankworth submitted his

written resignation to NHS on May 27, 2002. Prior to his

6
resignation, Dankworth had discussed his dealings with CHS only in

passing with BCE general counsel Joseph Mott; he did not discuss

the departure of any other BCE employees. Freeman informed NHS of

her possible job offer in June 2002 and left for CHS soon

thereafter. Barnes and several members of his department left in

March 2002 and were hired by Appellee Bencorp National Corp.

(“Bencorp”), a startup company, to develop claims payment software.

Barnes, et al., developed Care Management, which BCE alleges is

remarkably similar to CareReview. Callen left in June 2002 for

CHS, and Russell did likewise in September 2002. Clarendon then

notified NHS that it was moving its CHIP and Healthy Kids medical

management work to CHS. Clarendon gave the one-hundred-eighty-day

notice required by the CHIP contract; however, because BCE (through

its agent, Dankworth) had never finalized the Healthy Kids

contract, Clarendon said it only needed to provide thirty to sixty

days’ notice to terminate that deal.

Appellees’ evidence presents a different picture of the

Healthy Kids agreement. As background, Appellees contend the State

of Florida had been running the program, but the program did not

reach rural areas of Florida. In 1997, Masters created a non-HMO,

alternative product to cover children in rural areas. Masters

recruited Clarendon to be the program writer and underwriter.

Other companies were subcontracted to provide various services,

including medical management. Appellees contend Masters brought

together all the necessary constituent parts for the program, then

7
Clarendon entered into a contract with Florida to underwrite the

program, and Clarendon in turn entered into subcontracts with other

companies that Masters recruited to perform the actual services.

Masters, first through his company Community Health Systems of

America, Inc. (“CHS-Systems”) and then through CHS, remained as the

program manager of Healthy Kids. Initially, one of the

subcontracts (for medical management) was with IntraCorp, but NHS

was eventually chosen as its replacement. In September 2000,

Dankworth sent a draft contract to Clarendon. Although no

Clarendon executive signed the contract, in January 2001, NHS

started working as the medical management subcontractor for Healthy

Kids. The contract was to expire in April 2003.

Appellees present a similar background for CHIP.

Masters, while putting together the Florida plan in 1999 for

CHS-Systems, was also working with Texas officials regarding a

similar program in Texas. These discussions eventually led to

Clarendon’s being awarded the CHIP contract, with the three-year

plus renewal and one-hundred-eighty-day notice terms discussed

above. Clarendon subcontracted with NHS to perform medical

management. Just as with Healthy Kids, CHS-Systems was the program

manager for CHIP. Appellees contend CHIP was met with numerous

concerns from the Texas Health and Human Services Commission (the

“Commission”). In essence, the Commission demanded fewer sub-

contractors, better communication, and better integration. Masters

also met with then-President and CEO of Clarendon, Detlef Steiner,

8
who also criticized CHIP’s structure.

Masters considered ways to address these concerns. He

eventually discussed them with Simmons, an officer from Cadent

Underwriters, Inc. (“Cadent”), the claims processor for Healthy

Kids. Both conceived of a virtual company that would operate under

one name and coordinate all subcontractors. They abandoned this

idea, and instead decided that perhaps CHS-Systems and BCE (and

thus NHS) could enter into a joint venture and create one entity to

perform the government health insurance contracts. Between summer

and fall 2001, Masters proposed this idea to the CEO of BCE, Faye

Baggiano. Baggiano initially supported the concept, but she

eventually decided in October 2001 that BCE would instead compete

with CHS-Systems for CHIP contracts.

With that response from BCE (and thus NHS), Masters and

Simmons approached another medical care company in south Florida

regarding the formation or purchase of a joint venture; neither

event occurred. In December 2001, Masters and Dankworth met over

drinks at an airport bar while waiting for their flights following

a meeting. Masters mentioned to Dankworth that he was either going

to buy or start a medical management company. Masters indicated

Dankworth was surprised at first but then appeared to express

interest in being hired, along with other NHS personnel. Masters

was delighted and immediately called Simmons. That same month,

Barnes contacted Simmons, with whom he had worked before, to see

whether Simmons had any job openings. Barnes told Simmons about

9
the possible phase-out of the IT department at NHS and that he and

others were looking for work. Simmons and Masters discussed

Barnes’s situation and experience; they decided he would be a

desirable hire, as would other NHS IT personnel.

Barnes continued telephonic discussions with Simmons into

January 2002. Appellees admit the Louisville meeting took place;

Simmons had told Barnes he would soon be in Louisville. Appellees

also admit that Barnes discussed his potential arrangement with NHS

with his subordinates over lunch at a Wendy’s fast food restaurant.

Masters followed up with Dankworth in January 2002 and

asked whether he and others from NHS were under employment

contracts and might consider working for another company.

Dankworth said he would consider it, due to the hostile environment

at BCE. Masters told Dankworth he would be passing through

Louisville. Masters left Freeman a message about his discussions

with Dankworth and essentially offered her a job.

At the Louisville meeting, Masters and Simmons discussed

with Dankworth and Barnes their plan for consolidating services

into one entity, CHS. They also described Simmons’s new software

company, Bencorp, which would be writing medical management

programs similar to CareReview. Simmons specifically told Barnes

that if he and others came to work for Bencorp, they would be

creating their programs from scratch and they should not even bring

a paper clip belonging to NHS.

In February 2002, after discussing the possible job moves

10
with Callen, Dankworth faxed his and Callen’s employment criteria

to Masters and Simmons. Around this time, Dankworth told Freeman,

NHS General Counsel Joseph Mott, and Russell that he was

considering working for Masters. Dankworth claimed he had

conflicting feelings about the possible move and agonized over it.

Freeman avoided Masters’ calls because she felt

uncomfortable talking to him while she worked for NHS; she advised

both Baggiano and Mott that Masters had offered her a job.

That same month, Masters continued his discussions with

Clarendon about streamlining the CHIP administrative processes.

Also, Masters and Simmons started CHS. In March 2002, Masters

submitted a proposal on behalf of CHS to Clarendon to serve as its

general agent for EPO services.

Clarendon was already considering removing its business

from NHS. Additionally, CHS received an invitation to bid on a

Florida Medicaid contract, and CHS approached Clarendon for

permission to put together a bid. Clarendon gave such permission;

Clarendon would be the program’s insurance company, while CHS would

serve as administrator. CHS needed to provide some sample policies

and procedures, so Joyce Dove (then-president of CHS) asked

Dankworth for some samples of the Clarendon policies and procedures

for CHIP; Dankworth asked Patty Russell to provide copies of

certain NHS policies on a disk. None of the documents was marked

as confidential or proprietary. Callen then reformatted the

samples with no substantive changes, only name and logo changes.

11
Hagger signed the proposal, which was submitted in April 2002.

In June 2002 Clarendon, BCE, CHS, and Bencomp represen-

tatives met at Clarendon’s New York offices to discuss Clarendon’s

decision not to renew NHS’s subcontract and the transition from NHS

to CHS. Masters offered to purchase the remainder of NHS’s

subcontract for $500,000 and to offer jobs to any NHS employee

working on the CHIP contract. NHS refused the offer.

NHS complained that CHS launched its operations using

software pilfered, and only slightly altered, from NHS; specifi-

cally, NHS claims the outgoing employees stole the CareReview

program. At trial, Appellees insisted that Barnes and the others

at CHS began working on a “bare-bones” medical management software

program called Care Management. They developed the architecture of

the database system from scratch, using flip charts and Post-It

notes. They also relied on model guidelines from similar govern-

ment programs and URAC documentation obtained from public Internet

sites. They used a code-writing tool called Progress to create the

software’s source code. CareReview was not copied; although there

are similarities, the programs are not functional equivalents.

Around this time, Callen and then Dankworth resigned from NHS,

although Dankworth stayed on for a while (at NHS’s request), and

helped procure a project for NHS. Freeman left shortly after

Dankworth.

Clarendon informed NHS that effective April 30, 2003, the

parties’ medical management contract for CHIP would not be renewed.

12
The same day, Clarendon notified NHS that its services would no

longer be needed for Healthy Kids. Clarendon informed NHS that it

wanted to centralize the services under these programs, and it had

agreed for CHS to do that. This centralization through CHS yielded

Clarendon administrative savings in CHIP of $3.5 million annually.

The start-up and other attendant costs, however, yielded no

immediate profit for CHS. Additionally, most of the former NHS

employees moving to CHS experienced a reduction in salary and

benefits.

C. Litigation Commences

On November 19, 2002, BCE filed a six-count complaint

asserting claims for, inter alia, tortious interference with

contractual relations, tortious interference with prospective

business relations, civil conspiracy, misappropriation of trade

secrets, breach of fiduciary duty, and commercial disparagement,

against all Appellees except Clarendon, seeking injunctive relief

and damages. BCE also filed for and was granted a temporary

restraining order (“TRO”), extended through January 6, 2003. An

agreed order for expedited discovery was entered. BCE later

amended its complaint to add Clarendon as a defendant, alleging

misappropriation of trade secrets and commercial disparagement.2

The district court denied all motions for summary judgment. Trial

began on February 9 and continued through February 23, 2004. The

2
BCE later dropped the commercial disparagement claims.

13
court entered judgment on the jury’s verdict in favor of Appellees

on February 24, 2004. BCE moved for judgment as a matter of law or

for a new trial, which motion the court denied on March 18, 2004.

BCE timely appealed.

II. DISCUSSION

A. Denial of BCE’s Motions For Judgment As a Matter of Law
and For New Trial

This court reviews a denial of a motion for judgment as

a matter of law (“j.m.l.”) de novo. Arguello v. Conoco, Inc., 330

F.3d 355, 357 (5th Cir. 2003). “[A] motion for j.m.l. in a jury

case is a challenge to the sufficiency of the evidence supporting

the verdict.” Id. A Rule 50 motion is properly granted where the

facts and inferences involved point so overwhelmingly and strongly

in favor of one party that the court believes reasonable persons

could not arrive at the opposite verdict. Info. Communication

Corp. v. Unisys Corp., 181 F.3d 629, 633 (5th Cir. 1999). We con-

sider all evidence in the light most favorable to the nonmovant,

drawing all reasonable inferences therein in favor of that party.

Id. To defeat a motion for j.m.l., the nonmovant must point to a

conflict in substantial evidence. Casarez v. Burlington N./Sante

Fe Co., 193 F.3d 334, 336 (5th Cir. 1999). “Substantial evidence

is evidence of such quality and weight that reasonable and fair-

minded men in the exercise of impartial judgment might reach

different conclusions.” Id. (internal quotation marks and citation

omitted).

14
 We review the denial of a motion for new trial for abuse

of discretion. Rivera v. Union Pacific R. Co., 378 F.3d 502, 506

(5th Cir. 2004). The “denial will be affirmed unless there is a

clear showing of an absolute absence of evidence to support the

jury’s verdict.” Id. (partially quoting Lane v. R.A. Sims, 241

F.3d 439, 444 (5th Cir.2001)).

BCE argues that the district court should have granted

its motions (for j.m.l. and new trial) based on the overwhelming

evidence that Dankworth, Freeman, and Barnes breached their

fiduciary duties to BCE through their conduct in establishing and

passing information to BCE’s eventual competitor, CHS. Addition-

ally, BCE contends it was entitled to j.m.l. on its claim against

Dankworth for pilfering BCE proprietary information, and against

Masters, Simmons, CHS, and Clarendon for aiding and abetting these

fiduciary violations. Additionally, BCE claims the district court

should have awarded it j.m.l., or ordered a new trial, on its

breach of contract claim against Clarendon for Clarendon’s

violation of BCE’s non-disclosure policies in turning over

proprietary information.

As Kentucky law controls the breach of fiduciary duty

claims, we first consider that state’s fiduciary duty requirements.

An employee-fiduciary must be loyal and faithful to the interests

of the employer-principal. DSG Corp. v. Anderson, 754 F.2d 678,

682 (6th Cir. 1985). This duty “includes the obligation not to act

against the employer’s interests, not to establish a competing

15
enterprise until after the employment relationship is terminated,

and, finally, requires the employee-fiduciary to disclose to the

employer any information which could damage the company.” Id.

(citations omitted). An individual “cannot, while still a

corporate fiduciary, set up a competitive enterprise, or resign and

take with him the key personnel of the corporation for the purpose

of operating his own competitive enterprise.” Aero Drapery of

Kentucky, Inc. v. Engdahl, 507 S.W.2d 166, 169 (Ky. Ct. App. 1974).

Additionally, “an employee may not speculate for his gain in the

subject matter of his employment by using information acquired in

the course of employment against his employer’s interests.” DSG

Corp., 754 F.2d at 682 (internal citations and quotations omitted).

Kentucky fiduciaries further have a duty to disclose any

information that could be harmful to the corporation. Id.

Additionally, Kentucky law holds aiders and abetters of fiduciary

violators of their corporate duties jointly and severally liable

for any profits that accrue from such a breach. Steelvest, 807

S.W.2d at 485; DSG Corp., 754 F.2d at 683 n.7.

We evaluate this law in light of the jury’s verdict, and

review the record to determine, first, whether the verdict against

BCE on each of these claims was in the face of overwhelming

evidence to the contrary (the j.m.l. standard, which we review de

novo); and second, whether BCE can demonstrate the district court

abused its discretion in rejecting its motion for a new trial. BCE

argues it produced undisputed evidence at trial that Dankworth,

16
Freeman, and Barnes each owed NHS a fiduciary duty. They breached

such duty first by engaging for months in undisclosed negotiations

with Masters and Simmons, who sought to create a competitor to NHS.

BCE points to the covert discussions and the Louisville hotel

meeting; Appellees had knowledge of the competitive consequences of

the formation of CHS and their leaving NHS to work for CHS. BCE

argues the proposals submitted by CHS to Clarendon falsely

represented that Dankworth and Freeman, and also Callen and

Russell, were, long before they resigned, already executives with

CHS. Dankworth did not inform NHS officials of his plan to depart

until he resigned; Freeman only did a year after the offline

discussions had commenced.

In addition, BCE alleges Appellees breached their

fiduciary duty by recruiting subordinates in the “secret exodus” to

CHS. Barnes involved four of his subordinates in the scheme,

meeting with them at a restaurant. Barnes also assisted in setting

up the Louisville meeting and reviewed Simmons’s offer letters to

Barnes’s subordinates. Dankworth, the conduit between Masters,

Simmons, and Callen, also discussed Freeman’s interest in CHS

employment with Masters, and held meetings at his house to discuss

CHS employment with Callen, Freeman, and Russell. Appellees also

breached their fiduciary duty to NHS by not disclosing the

conspiratorial conduct of one another. Instead, they actively

facilitated it. BCE contends Masters and Simmons aided and abetted

these fiduciary violations. Finally, BCE maintains Dankworth

17
breached his fiduciary duty by failing to finalize the Healthy Kids

contract with Clarendon for NHS and not notifying Freeman. BCE

also alleges Dankworth breached his fiduciary duty by removing

policies and procedures from NHS offices, having a subordinate

reformat them, and sending them to CHS for use in their proposals.

Viewing the evidence and drawing all inferences in favor

of Appellees, as we must, we determine the district court correctly

denied BCE’s motion for j.m.l., and later its motion for a new

trial, on BCE’s breach of fiduciary duty claims. Simply put,

Appellees put forward explanations and counter-stories to every

factual assertion made by NHS; the jury credited Appellees’

accounts of the disputed issues, and we cannot inject our own

credibility determinations and factual opinions into the case on

appeal. Specifically, Appellees testified that any discussions

they had concerning employment with Masters and Simmons were

appropriate and lawful. Appellees characterized the discussions

with NHS as traditional job interviews, not an attempt to set up a

competing organization. The allegedly conspiratorial employees all

testified that they had become unhappy with the corporate changes

instituted by BCE, particularly with being forced to sign what was

essentially a non-compete agreement. The new job opportunity

offered a way out of this unhappy situation without any resort to

breach of fiduciary duty.

As to the termination of NHS’s subcontract with

Clarendon, evidence demonstrated that this loss was due to Texas’s

18
and Clarendon’s desire to streamline the provision of services. In

fact, Appellees presented evidence at trial that Dankworth and

Freeman helped NHS retain other existing contracts and obtain new

ones, and Dankworth did so even after he had announced his decision

to leave BCE.3

Appellees also disavowed any effort to coordinate an

exodus from NHS, while BCE produced no evidence that Freeman

engaged in any pre-arranged exodus plan. Barnes explained away the

infamous “Wendy’s meeting” as a happenstance conversation with his

co-workers; the topic of low morale came up and Dankworth was asked

if he was staying at NHS. He merely told his coworkers over lunch

that he was unhappy and planned to leave NHS; there was no active

recruitment. The other IT personnel left voluntarily because of job

security concerns. Moreover, BCE failed to demonstrate how the

departure of the IT department damaged NHS; the jury could have

reasonably inferred that the IT jobs were about to be eliminated in

any event by the transfer of the hardware and the department to

Canada and Maryland.

Although some of the discussions and interactions between

Masters and Simmons and Appellees certainly could approach the

level of a breach of fiduciary duty, particularly where it seemed

3
Additionally, the jury could have (and apparently did) credit
Dankworth’s account of the improperly executed contract with Clarendon as mere
negligence, or the product of the parties’ preferred means of doing business.
In light of Dankworth’s continued loyalty to NHS after announcing his departure,
this resolution of the disputed claims is reasonable and warrants deference to
the jury’s finding.

19
obvious that Masters and Simmons represented a nascent competitor

to NHS, the jury could reasonably infer, in the absence of signed

non-compete agreements or some evidence that Appellees were not

considered at-will employees, that Appellees did not breach their

fiduciary duty by engaging in good faith searches for new

employment. Cf. Steelvest, 807 S.W.2d at 484-85 (finding jury

questions where the fiduciary allegedly spoke to banks, potential

investors, and employees and customers of the original employer

with an eye toward creating a competing enterprise while still

employed in a fiduciary position with the original employer).

Additionally, the jury could have reasonably determined

that Dankworth’s disclosure of NHS information was not a breach of

his fiduciary duty. Dankworth testified that none of the documents

he supplied to Clarendon bore confidential markings; he believed

Clarendon was entitled to see and review its own policies and

procedures from its own program with NHS and for what he reasonably

believed was a future proposed project with NHS. Dankworth also

thought if NHS’s permission was needed for distribution, he was

authorized to give it. A reasonable jury could have agreed with

his version, particularly in light of the evidence that Dankworth

was still attempting to procure contracts for NHS after his

announced departure. Moreover, Appellees argued these policies and

procedures contained no “secret” information and were available

freely on the Internet. The documents contain fairly standardized

information common to this type of program, which must conform to

20
strict guidelines to receive federal funding. The documents

produced at trial comported with this description, and Appellees

put on expert testimony to support their contentions as to all of

these claims. In light of the conflicting evidence, BCE has failed

to demonstrate error in the district court’s denial of its j.m.l.

and new trial motions on the fiduciary duty claims.

The same analysis applies to the breach of contract claim

against Clarendon. By the express terms of the CHIP contract at

issue here, Delaware law applies to this claim. The elements of a

breach of contract under Delaware law are: (1) a contractual

obligation; (2) a breach of that obligation by the defendant; and

(3) a resulting damage to the plaintiff. H.M. Wexford LLC v.

Encorp, Inc., 832 A.2d 129, 140 (Del. Ch. 2003).

The relevant contractual provision of both the CHIP and

Healthy Kids contracts states:

All confidential and proprietary information of a party,
including, but not limited to, the terms of this
Agreement, information about fees, computer software,
business procedures and manuals, data, review criteria,
contract rates, information collected and/or reports
prepared pursuant to this Agreement, and any other
information that a party identifies as confidential
and/or proprietary (“Confidential Information”), will not
be disclosed, published, disseminated or released without
the prior written consent of the party owning the
Confidential Information. Further, Confidential
Information will be disclosed only to those persons and
entities who have a need for the information in order to
carry out the terms of this Agreement. Confidential
Information will not be used in any way not specifically
allowed under this Agreement. For purposes of this
Agreement, Confidential Information will not include:
. . . information provided to the other party with the

21
 intention that it be published, disseminated, released or
distributed by the other party to the Covered Persons,
contract persons or the general public.

Plaintiff’s Ex. 1, ¶5(a). At trial, Hagger confirmed that NHS

never gave Clarendon written authority to disclose any confidential

information to the state of Florida with the Florida Medicaid

proposal. Dankworth admitted that the policies he removed from NHS

and reformatted were developed by NHS staff in connection with

CHIP. BCE argues that Dankworth’s subjective belief that the

policies were Clarendon’s is not relevant to Clarendon’s breach of

contract. BCE points to the plain language of the contract as

prohibiting Clarendon from disclosing, disseminating, or releasing

“business procedures and manuals, data, [and] review criteria”

without NHS’s prior written consent. BCE also contends Hagger’s

testimony regarding his intent (he only signed the portion of the

bid proposal that did not include the attached policies) is not

relevant to Clarendon’s breach of contract.

Clarendon responds that the jury had to make a

determination based on disputed facts whether the policies and

procedures attached to the proposal were indeed considered

Confidential Information under the contracts. Moreover, the jury

had to decide whether they belonged to NHS or Clarendon. Nothing

in the contracts indicated which company owned the policies and

procedures for CHIP and Healthy Kids. Dankworth and Freeman

testified they were Clarendon’s. Even if they were NHS’s, there

was a fact question as to whether Clarendon actually disclosed

22
Confidential Information. BCE argues that the policies and

procedures submitted with the Florida Medicaid bid were business

procedures and manuals; Clarendon disagrees and instead argues they

were medical management policies and procedures that, even if

covered by anything in the contract provision, would have been

considered review criteria. Clarendon insists BCE presented no

evidence that the policies attached to the Florida Medicaid bid

were review criteria. Moreover, Clarendon argues the attached

policies were not identified as confidential or proprietary by NHS,

such that they could fall under the catchall phrase of the

provision. Clarendon also argues that there was evidence that CHS

and Bencomp would be considered “contract providers” under the

contracts, thus information released to them was not considered

Confidential Information under the provision.

In addition, Clarendon insists it raised a fact issue on

breach itself because it was Dankworth (then working for NHS) who

disclosed the policies to CHS (before he began working there),

which actually assembled the bid. Finally, Clarendon argues the

integral element of damages is entirely missing because any harm

that BCE may have suffered came from its loss of the CHIP and

Healthy Kids contracts; there is no connection at all, much less a

detrimental one, to the bid on the Florida Medicaid program.

According to Clarendon, that contract had not yet been awarded;

there was no evidence of lost profits from that bid by BCE, nor any

evidence of profits gained from that bid by Clarendon. There was

23
also no retained damages expert and no evidence by which the jury

could value the policies and procedures obtained by Clarendon. See

Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 545

(5th Cir. 1974) (noting damages can be shown through “evidence by

which the jury can value the rights the defendant has obtained”).4

We agree with Clarendon that a reasonable jury, drawing

all plausible inferences in its favor, could have found several

elements of breach of contract lacking. BCE did not present

irrefutable evidence that the policies constituted Confidential

Information; without proving this element, there was no contractual

obligation. Additionally, there were various ways the jury could

have determined who owned the policies, and which party, if any,

disseminated or distributed the policies. Thus, even if the jury

did find the element of damages met, by comparing the annual values

of the terminated CHIP and Healthy Kids contracts, the jury

reasonably may have found either no contractual obligation or no

breach. We cannot disturb the jury’s verdict on this issue.

B. Challenges To Verdict Forms and Jury Instructions

“Generally, a trial court is afforded great latitude in

the framing and structure of the instructions and special

interrogatories given to the jury.” Barton’s Disposal Serv., Inc.

v. Tiger Corp., 886 F.2d 1430, 1434 (5th Cir. 1989). This court’s

4
Moreover, the district court permitted the vague damages calculations
proffered by BCE at trial to be sufficient to take this claim to the jury in the
first place. Had the jury found in BCE’s favor, this point would be subject to
a very careful review.

24
review is for abuse of discretion. Id. “Although we afford broad

discretion in fashioning jury instructions, the trial court must

nevertheless instruct the jurors, fully and correctly, on the

applicable law of the case, and guide, direct, and assist them

toward an intelligent understanding of the legal and factual issues

involved in their search for truth.” EEOC v. Manville Sales Corp.,

27 F.3d 1089, 1096 (5th Cir. 1994) (internal quotations, ellipses,

and citations omitted). “On appeal, the charge must be considered

as a whole, and so long as the jury is not misled, prejudiced, or

confused, and the charge is comprehensive and fundamentally

accurate, it will be deemed adequate and without reversible error.”

Id. (citation omitted).

BCE does not complain that the district court incorrectly

applied Kentucky law to the trade secret misappropriation claim.

See KY. REV. STAT. ANN. §§ 365.880-365.900 (adopting and imposing the

1979 Uniform Trade Secrets Act (“USTA”)). BCE argues instead that

the court erred by requiring proof of actual damages for the jury

to issue a verdict in BCE’s favor on liability because Kentucky law

imposes no such requirement. The USTA defines liability for trade

secret misappropriation as the improper acquisition, disclosure, or

use of a trade secret. KY. REV. STAT. ANN. § 365.880. BCE contends

the plain statutory text makes no reference to, nor is a finding of

liability dependent on, the existence of any proximate cause of

damages. That is, BCE maintains that after the threshold question

of liability is determined, only then does the statute provide for

25
injunctive relief (§ 365.882), damages (§ 365.884), and attorney’s

fees (§ 365.886).

BCE contends the verdict forms concerning trade secret

liability improperly required the jury to find proximate causation

and short circuited consideration of the unjust enrichment claims

by making those claims contingent upon earlier, unnecessary

findings. Additionally, BCE argues Verdict Form Number 9, concern-

ing fiduciary violations, was similarly defective in that it

conditioned liability on the dual predicate that the offending

conduct was “to the detriment of NHS for the benefit of himself or

any other Defendant.” BCE contends Kentucky law does not require

proof of any damage to establish a fiduciary violation. See DSG,

754 F.2d at 682 (noting employee-fiduciary may be liable for

nondisclosure “even if the employer has suffered no loss”).

BCE also complains that the legal standard regarding

unjust enrichment damages in the misappropriation instruction and

forms was incorrect. The court instructed the jury:

You may consider, in awarding such damages, one of the
following measure of damages: (1) the profit, if any,
received by a Defendant for the use of such trade secret;
(2) the loss of profit, if any, suffered by Plaintiff for
the use of such trade secret; or (3) the reasonable
royalty for the trade secret appropriated.

R. 2279. BCE argues this constituted error because the court did

not explain what “profit . . . received by a Defendant” meant and

included a confusing paragraph on unjust enrichment at the end of

the instruction. BCE contends an unsophisticated juror would not

26
have understood the relationship between profit and unjust

enrichment. BCE notes the error was compounded because of the

broad-form submission of the liability question.

We have granted the district court particularly wide

discretion in instructing juries on misappropriation claims. See,

e.g., Univ. Computing, 504 F.2d at 538 (noting every trade secrets

case “requires a flexible and imaginative approach to the problem

of damages”).5 We are aware of no controlling or persuasive

caselaw that holds it is reversible error for a trial court to

submit to the jury the broad question of liability together with

the question of damages for misappropriation of trade secrets in

one interrogatory. The Kentucky statute is silent; it does not

prohibit such submission. Moreover, in light of the claims at

issue (specifically BCE’s request for monetary damages), it made

sense for the court to submit the broad-form instruction. This

interrogatory did not foreclose other types of relief, e.g., an

injunction or attorneys’ fees, but other relief is irrelevant in

light of the failure to find liability.

Moreover, assuming arguendo the instruction forms

improperly prevented the jury from considering unjust enrichment,

the error was harmless. The applicable statute permits such

5
Appellees first contend BCE failed to object adequately to the
content of the trade secret verdict form and jury instruction, as required by
FED. R. CIV. P. 51. Thus, Appellees argue this court’s review is limited to plain
error, and BCE cannot satisfy this “stringently limited” standard. See Horstmyer
v. Black & Decker, Inc., 151 F.3d 765, 771 (5th Cir. 1998). BCE’s proffered jury
forms and instructions arguably do not preserve this error, but as we find no
abuse of discretion, we will not employ the more restrictive standard.

27
damages only if that measure “is not taken into account in

computing actual loss.” KY. REV. STAT. ANN. § 365.884. The jury did

not find any loss here, so there could be no error. Additionally,

the jury instruction included a discussion of reasonable royalty as

a possible measure of damages; this court has treated reasonable

royalty as a subspecies of restitution-based relief. See Univ.

Computing, 504 F.2d at 536-37. Additionally, the trade secret

damages instruction properly included all possible types of damages

under the statute. See KY. REV. STAT. ANN § 365.884.

As to the fiduciary duty question (Number 9), the court

sustained BCE’s objection to the joint submission of liability and

damages and separated the damages issue in Numbers 11 and 12.

Having prevailed on this argument at trial, BCE cannot show

substantial and ineradicable doubt whether the jury was properly

guided because of the “detriment” wording, much less that the jury

was confused or misguided. As with the other instructions, even if

these jury instructions were erroneous, BCE has not sufficiently

demonstrated any harmful effect the purported error had on the

outcome of the trial.

BCE further claims the instructions on damages were

confusing to the jury. Although the verdict forms’ discussion of

damages might have seemed a bit repetitive to jurors, the

instructions properly described all the various forms of damages

possible, including the concepts of reasonable royalty and unjust

enrichment referenced in the statute. There was no abuse of

28
discretion on damages.

BCE further argues the district court abused its

discretion by refusing to instruct the jury regarding the

confidentiality of medical policies submitted to the state of Texas

for licensure. BCE contends that this refusal compromised BCE’s

ability to meet its burden to show that its policies and procedures

were not generally available to the public. BCE notes that

Appellees admitted at trial that they had no proof that the Texas

licensing process resulted in any public disclosure to compromise

the confidential nature of NHS’s policies. However, Appellees

argued that because the policies had been sent to the state, there

had been “public dissemination” to deprive the policies of trade

secret status. Texas law provides:

Such written screening criteria and review procedures
shall be available for review and inspection to determine
appropriateness and compliance as deemed necessary by the
commissioner . . . provided, however, that any
information obtained or acquired under the authority of
this subsection and article is confidential and
privileged and not subject to the open records law or
subpoena except to the extent necessary for the
commissioner to enforce this article.

TEX. INS. CODE ANN. art. 21.58A, § 4(i). BCE maintains it proposed

an instruction mirroring these confidentiality requirements. BCE

argues CHS’s views on whether such policies were confidential

depended on whether they were BCE policies (not confidential) or

CHS policies (confidential). BCE contends that in this situation,

the district court’s refusal to provide the requested instruction

was contrary to law. Cf. Taco Cabana Int’l, Inc. v. Two Pesos,

29
Inc., 932 F.2d 1113, 1124 (5th Cir. 1991) (“The district court

correctly instructed the jury that ‘[f]iling of architectural plans

with a city does not make them public information within the

context of secrecy that relates to the law of trade secrets.’”)

(quoting the district court opinion).

The trial court instructed the jury adequately on trade

secrets. The instruction’s discussion of “general dissemination”

and “matters in the public domain” was true and allowed the jury to

determine whether NHS’s policies were disseminated by state

representatives of CHIP. BCE never objected to references made by

NHS counsel in closing statements that NHS’s policies were not

secret because they were submitted for review by the Commission.

Moreover, BCE has failed to show that the instruction given by the

district court and the lack of the additional Texas law instruction

harmed BCE and affected the case’s outcome. BCE presented

insufficient evidence to meet its burden. For example, BCE never

provided evidence that the commissioner had reviewed NHS’s

policies. BCE did not present enough evidence to merit an

additional instruction on confidentiality under art. 21.58A.

As to spoliation of evidence, BCE argues that CHS

employee (formerly of NHS) Linda Shelburne, who started at CHS in

March 2003, admitted that when changes were made to CHS policies,

older versions were discarded and no one told her to preserve them.

In order to receive a spoliation instruction, which allows (but

does not require) the jury to draw an adverse inference against a

30
party, the party seeking the instruction must demonstrate bad faith

or bad conduct by the other party. See, e.g., United States v.

Wise, 221 F.3d 140, 156 (5th Cir. 2000). BCE failed to make the

requisite showing: The Post-It notes and flip charts used to

create Care Management were not needed and were simply discarded

after the programmers got the software into a semi-workable state

and downloaded it into the master database. Additionally, the

destruction of earlier versions of policies occurred because the

only changes related to formatting and grammar. Moreover, the

district court gave both parties the freedom to put forward

evidence about document destruction; thus, the jury was free to

consider BCE’s contentions and punish Appellees accordingly. BCE

did not show a substantial and ineradicable doubt that the jury was

improperly guided, nor that the instruction would have affected the

outcome. Any residual error was harmless. See Caparotta v.

Entergy Corp., 168 F.3d 754, 756 (5th Cir. 1999).

C. Challenges To Evidentiary Rulings

A trial court’s evidentiary rulings are reviewed for

abuse of discretion. Kelly v. Boeing Petroleum Servs., Inc., 61

F.3d 350, 356 (5th Cir. 1995). “When, as here, the district court

has conducted, on the record, a carefully detailed analysis of the

evidentiary issues and the court’s own ruling, appellate courts are

chary about finding an abuse of discretion.” Id. The district

court has wide discretion regarding expert evidentiary rulings;

31
this court reviews them for manifest error. United States v. West,

58 F.3d 133, 140 (5th Cir. 1995). “Considerable deference is to be

accorded to the district court’s evidentiary rulings and a ruling

which admits or excludes evidence does not require reversal unless

a substantial right of a party is affected.” Grizzle v. Travelers

Health Network, Inc., 14 F.3d 261, 271 (5th Cir. 1994).

BCE argues that the court, over BCE’s objections,

repeatedly allowed wholly irrelevant testimony regarding the

alleged morale at NHS, including testimony by Freeman, Dankworth,

Barnes, and others. BCE contends the morale evidence did not meet

the Rule 402 standard in that it did not tend to support or

disprove any element of any claim. BCE argues that although

tortious interference requires proof that the defendant acted

without justification, morale is not an accepted form of

justification such as competition, REST. (SECOND) OF TORTS § 768, nor

does it constitute a good faith assertion of legally protected

interest, id. § 773. BCE further contends that even if the

evidence was deemed relevant, its probative value was outweighed by

the danger of prejudice or confusion. See FED R. EVID. 403.

In response, Appellees argue all the evidence on morale

and the deteriorating conditions at NHS under BCE’s control was

probative of the employees’ state of mind and their reasons for

leaving. Appellees contend the testimony tended to rebut BCE’s

offered reasons for their leaving, conspiracy, misappropriation,

stealing contracts, and leading a mass exodus. Also, Appellees

32
note BCE asked for and received instructions on punitive damages

for its claims — whether the acts were intentional, wilful and

malicious. Appellees thus argue their testimony also rebutted

scienter.

Based upon our review of the trial transcript, the

district court properly allowed this evidence. The testimony

concerned how the employees felt and reacted to the changes in BCE

management practice; this was probative in rebutting BCE’s claims

that those employees acted improperly and with malice. In

Kentucky, “it is clear that to prevail [on tortious interference]

a party seeking recovery must show malice or some significantly

wrongful conduct.” Nat’l Collegiate Athletic Ass’n By and Through

Bellarmine Coll. v. Hornung, 754 S.W.2d 855, 859 (Ky. 1988).

“Morale” and other evidence may be probative of the question

whether Appellees’ conduct was “significantly wrongful” in this

specific context. Thus, by persisting in this cause of action, BCE

invited this exact type of testimony.

Finally, BCE argues, the court erred in prohibiting BCE’s

principal management witness, Spencer, from testifying about the

company’s profit margin on the CHIP contract. This evidentiary

ruling had been deferred from a pretrial motion in limine to trial;

Appellees objected to the evidence on the ground that BCE failed to

file a timely Rule 26(a)(1) disclosure. We find no reversible

error in this decision; BCE failed to comply with the discovery

orders and further failed to remedy the concerns repeatedly raised

33
by the district court (during discovery, at the pretrial

conference, and ultimately at trial) concerning damage calcula-

tions. The district court did not abuse its discretion in

disallowing this testimony.

III. CONCLUSION

For the reasons discussed above, we AFFIRM the judgment

of the district court.

34