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

Filing 920101217

Opinion

Case: 10-30040 Document: 00511323931 Page: 1 Date Filed: 12/16/2010

IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
December 16, 2010 N o . 10-30040 Lyle W. Cayce Clerk

U N IO N PUMP CO., formerly known as David Brown Union Pumps Co., P la in t iff ­ Appellant v. C E N T R I F U G A L TECHNOLOGY INCORPORATED; DANIEL CLEVELAND; C H A R L E S GOODRICH, D e fe n d a n t s ­ Appellees

c o n s o lid a t e d with N o . 10-30072

U N IO N PUMP CO., formerly known as David Brown Union Pumps Co., P la in t iff ­ Appellee v. C E N T R I F U G A L TECHNOLOGY INCORPORATED; DANIEL CLEVELAND; C H A R L E S GOODRICH, D e fe n d a n t s ­ Appellants

A p p e a l from the United States District Court for the Western District of Louisiana N o . 5:05-CV-0287

Case: 10-30040 Document: 00511323931 Page: 2 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 B e fo r e KING, GARWOOD, and DAVIS, Circuit Judges. P E R CURIAM:* P la in t iff, Union Pump Company, sued three of its former employees after t h e former employees formed a competing business. Union Pump alleged that t h e defendants misappropriated its trade secrets and engaged in unfair c o m p e t it io n because the defendants were using Union Pump's proprietary d r a w in g s to operate their competing business. Union Pump also alleged that the d e fe n d a n t s spoliated evidence by deleting and destroying electronically stored in fo r m a t io n . Following a two-week trial, the jury returned a verdict in Union P u m p 's favor. Union Pump appeals the district court's refusal to award

a t t o r n e y 's fees as a sanction for the defendants' spoliation of evidence. The d e fe n d a n t s also appeal, arguing that they are entitled to a new trial because the d is t r ic t court made several evidentiary errors and there was insufficient e v id e n c e to sustain the amount of the damages award. r e a s o n s , we affirm the district court's judgment. I . FACTUAL AND PROCEDURAL BACKGROUND P la in t iff, Union Pump Company, is in the business of designing, m a n u fa c t u r in g , and servicing industrial pumps. In 1995, Union Pump's For the following

p r e d e c e s s o r , David Brown Pumps, Inc.,1 purchased American Pump Company
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. The plaintiff in this case has gone through several name changes during the relevant time period. David Brown Pumps, Inc. was an American subsidiary of a British company. Its name was later changed to David Brown Union Pumps Company after it acquired Union Pump, headquartered in Battle Creek, Michigan. Thereafter, Textron Innovations, Inc., originally a plaintiff in this suit, acquired David Brown Union Pumps Company. Following
1 *

2

Case: 10-30040 Document: 00511323931 Page: 3 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 lo c a t e d in Shreveport, Louisiana. All of American Pump's intellectual property w a s included in the sale, including the design and fabrication drawings for all o f the American Pump pumps and component parts. At the time of the sale,

A m e r ic a n Pump was partially owned by two of the individual defendants, Daniel C le v e la n d and Jerry Don Elmore. The third individual defendant, Charles G o o d r ic h , was an employee of American Pump. Following the sale, Union Pump c o n t in u e d to manufacture and service the American Pump line of pumps, and t h e three individual defendants continued to work in the Shreveport plant. O n December 2, 2002, Union Pump announced that it would close the S h r e v e p o r t plant and relocate plant functions to various other locations in the U n ite d States. Despite the closure of the Shreveport plant, Union Pump The

in t e n d e d to continue servicing pumps in the American Pump line.

e m p lo y e e s responsible for winding down operations at the Shreveport plant, in c lu d in g Goodrich, Cleveland, and Elmore, were instructed to send all of the A m e r ic a n Pump design and fabrication drawings to another location. In April 2003, immediately following the closure, Goodrich, Cleveland, and E lm o r e formed a competing company, Centrifugal Technology, Inc. (CTI). In S e p t e m b e r 2003, Union Pump was unable to locate a drawing for a heat e x c h a n g e r component part for a pump in the American Pump line. A Union P u m p employee contacted Cleveland, asking whether Cleveland still possessed a n y materials belonging to Union Pump. According to Cleveland, he found the

yet another merger, the company was rebranded as Union Pump Company. Union Pump presented evidence at trial that the intellectual property at issue was properly transferred during all of the mergers and name changes. For clarity, we refer to the plaintiff simply as Union Pump, regardless of its actual name at the time of the event discussed.

3

Case: 10-30040 Document: 00511323931 Page: 4 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 d r a w in g on a computer disk in a box of miscellaneous items. fo r w a r d e d the drawing to the Union Pump employee. T h e r e a fte r , Union Pump discovered that it was missing a large number of d e s ig n and fabrication drawings for the American Pump line. Based on Cleveland

C le v e la n d 's possession of at least one drawing, and the defendants' formation of a competing business, Union Pump determined that the defendants were likely in possession of more American Pump drawings. Union Pump filed this action in September 2004, alleging that Cleveland, Goodrich, and Elmore, along with C T I , had tortiously converted Union Pump's intellectual property, engaged in u n fa ir trade practices, and violated the Louisiana Uniform Trade Secrets Act (L U T S A ), La. Rev. Stat. §§ 51:1431­39. Union Pump sought damages for the u n a u t h o r iz e d use of its drawings, return of the drawings themselves, and an in ju n c t io n preventing CTI from using the drawings in the future. U n io n Pump immediately sought discovery of all electronically stored in fo r m a t io n in the defendants' possession that might relate to the litigation. The d is t r ic t court appointed a special master to oversee discovery in the case and a p p o in te d a computer expert to analyze the defendants' computers. Each of the p a r tie s also retained its own computer expert. In addition, the district court e n te r e d a protective order in December 2004 that prohibited the defendants from " t a k in g any action to destroy, erase, eradicate, secret, conceal, dispose of or o t h e r w is e render unavailable for inspection by plaintiffs, any and all design d r a w in g s , AutoCAD drawings, schematics, computer data, [or] computer files." The court-appointed computer expert took forensic images of the defendants' c o m p u te r hard drives in April and May of 2005 and copies of those images were g iv e n to the computer experts retained by the parties. 4

Case: 10-30040 Document: 00511323931 Page: 5 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 A ft e r inspecting the defendants' hard drives, Union Pump learned that the d e fe n d a n t s had spoliated much of the evidence relevant to the litigation by d e le t in g or destroying the electronic information contained on the hard drives. Specifically, Union Pump's computer expert, Andrew Rosen, discovered that m o s t of the data on the hard drives of at least three of the defendants' computers h a d been deleted using memory wiping software designed specifically for that p u r p o s e . Rosen found that the software was used in the most invasive "deep c le a n " mode, and that it was used between March and May 2005, after the d is t r ic t court had entered the protective order and before the court-appointed e x p e r t was able to access the hard drives. Goodrich had used the disk-wiping s o ft w a r e on his hard drive just days before the hard drive was to be imaged by t h e court-appointed expert in May 2004. Rosen also found evidence that

G o o d r ic h had performed internet searches on computer forensics and diskw ip in g . In addition, the court-appointed expert discovered that the tapes

d e s ig n e d to back up CTI's hard drives were blank. The tapes had supposedly b e e n rotated every night and on a bi-weekly basis, but the only way the backup t a p e s could be blank is if they were erased or had never been used. U n io n Pump also learned that the defendants had disposed of several r e le v a n t items. During his deposition, Cleveland admitted that he had been in p ossession of at least three computer disks containing American Pump drawings. Cleveland admitted to discussing the disks with Goodrich after Union Pump had c o n t a c t e d him for the drawings, and that he and Goodrich had decided to destroy t h e disks instead of returning them to Union Pump. CTI had also disposed of a c o m p u te r just prior to the filing of the complaint.

5

Case: 10-30040 Document: 00511323931 Page: 6 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 U p o n learning this information, Union Pump amended its complaint to a d d a cause of action for spoliation of evidence. Union Pump also filed a series o f motions related to the spoliation. It first filed a motion for sanctions, asking t h a t the district court sanction the defendants under Federal Rule of Civil P r o c e d u r e 37(b) for violation of the court's discovery orders and under the court's in h e r e n t power to sanction misconduct. Union Pump averred that a variety of s a n c t io n s were appropriate, including entry of default judgment, an adverse in fe r e n c e instruction, and attorney's fees. Several months later, Union Pump m o v e d for summary judgment with respect to its spoliation claims and again a s k e d the court to enter default judgment against the defendants and award a t t o r n e y 's fees to Union Pump. The district court declined to rule on either m o t io n . Instead, the court decided that "[e]vidence regarding spoliation can be p r e s e n t e d to, and the issue will be decided by, the jury. The issue of sanctions s h a ll be addressed by the Court after the jury returns its verdict." B e fo r e trial, Union Pump requested that the court provide an adverse in fe r e n c e instruction to the jury. Specifically, Union Pump asked the court to in s t r u c t the jury that the defendants improperly possessed and intentionally d e s t r o y e d Union Pump's proprietary property. The court did not give the

a d v e r s e inference instruction requested by Union Pump. Instead, the district c o u r t instructed the jury that it "may infer that the evidence destroyed would h a v e been unfavorable to Defendants" if it determined that the evidence was in t h e control of the defendants, that they had an obligation to preserve it, that the d e s t r o y e d evidence was relevant to the litigation, and that the evidence was d e s t r o y e d intentionally and in bad faith. A t trial, the only direct evidence that the defendants ever possessed in fo r m a t io n belonging to Union Pump was Cleveland's testimony regarding his 6

Case: 10-30040 Document: 00511323931 Page: 7 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 p o s s e s s io n and later destruction of at least three disks containing drawings b e l o n g in g to Union Pump. Union Pump also presented considerable

c ir c u m s t a n t i a l evidence that the defendants used Union Pump's design d r a w in g s , including the fact that CTI was able to bid competitively with Union P u m p for jobs that would have required drawings from the American Pump line. According to the Union Pump representative that testified at trial, Union Pump is able to realize very little or no value from the American Pump line of pumps a s a result of the missing drawings. At the close of Union Pump's evidence, the d is t r ic t court dismissed Elmore and CTI's insurer, leaving Goodrich, Cleveland, a n d CTI as the remaining defendants. F o llo w in g a two-week trial, the jury returned a verdict in favor of Union P u m p in the amount of $2,125,559. The jury found that the defendants had not e n g a g e d in unfair trade practices, but that the defendants were liable to Union P u m p for violating LUTSA, for conversion of Union Pump's property, and for in t e n t io n a l spoliation of evidence. The jury awarded Union Pump $1,525,559 as t h e "total amount of compensatory damages required to make [Union Pump] w h o le ." The jury also determined that CTI had been unjustly enriched in the a m o u n t of $600,000. In a separate interrogatory, the jury found that the

d e fe n d a n t s had misappropriated Union Pump's trade secrets in "bad faith." T h e district court then asked the parties to brief the issue of whether U n io n Pump was entitled to attorney's fees. Union Pump asked the district c o u r t to award it the entire amount of its attorney's fees and all of its costs, in a n amount close to $1 million. Union Pump asserted two bases for the award of a t t o r n e y 's fees: LUTSA and the court's inherent powers to sanction the

d e fe n d a n t s ' for their bad faith misappropriation of trade secrets. Union Pump d id not re-assert its request for sanctions related to the defendants' spoliation 7

Case: 10-30040 Document: 00511323931 Page: 8 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 o f evidence. The district court declined to award attorney's fees, finding that " t h e jury provided [Union Pump] adequate compensation in their award." Union Pump appeals the district court's decision not to award attorney's fe e s . CTI also appeals, arguing that the district court made several evidentiary e r r o r s and that there is insufficient evidence to sustain the amount of the d a m a g e s award. We consolidated the appeals. I I . DISCUSSION A. A t t o r n e y 's Fees U n io n Pump appeals the district court's denial of its motion for attorney's fe e s . According to Union Pump, the district court erred when it declined to use it s inherent powers to award attorney's fees in light of the jury's finding that the d e fe n d a n t s spoliated evidence.2 We review a district court's award of attorney's fe e s (or failure to do so) under its inherent powers for an abuse of discretion. Natural Gas Pipeline Co. of Am. v. Energy Gathering, Inc., 86 F.3d 464, 467 (5th C ir . 1996). U n io n Pump argues that the district court should have used its inherent p o w e r s to award attorney's fees in response to the defendants' spoliation of e v id e n c e .3
2

See Chambers v. NASCO, Inc., 501 U.S. 32, 45­46 (1991).

In

During trial, Union Pump asked that it be permitted to present evidence of its attorney's fees as the damages for its spoliation claim. The district court denied the motion, stating that it would address the issue of attorney's fees after trial. Union Pump clarified during oral argument that it does not ask us to reverse this ruling and remand to allow it to submit damages to a jury for the spoliation claim. Therefore, we do not address whether the district court should have permitted Union Pump to submit its attorney's fees to the jury as an element of damages. Union Pump argued to the district court, and appeared to argue in its opening brief to this court, that it was entitled to attorney's fees under LUTSA for the defendants' misappropriation of trade secrets. During oral argument, however, Union Pump was clear that it seeks attorney's fees relative only to the defendants' conduct in spoliating evidence, which is an act separate and distinct from the misappropriation of trade secrets and for which
3

8

Case: 10-30040 Document: 00511323931 Page: 9 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 C h a m b e r s , the Supreme Court held that, in certain circumstances, "federal c o u r ts have inherent powers to assess attorney's fees." Id. at 45. These inherent p o w e r s "ought to be exercised with great caution," id. at 43 (quotation omitted), a n d are reserved for "conduct which abuses the judicial process," id. at 44­45. " T h e threshold for the use of the inherent power sanctions is high." Natural Gas P ip e lin e , 86 F.3d at 467. A court's inherent powers to sanction "may be exercised o n ly if essential to preserve the authority of the court," id., and only when the c o u r t "finds that `fraud has been practiced upon it, or that the very temple of j u s t ic e has been defiled,' " Boland Marine & Mfg. Co. v. Rihner, 41 F.3d 997, 1 0 0 5 (5th Cir. 1995) (quoting Chambers, 501 U.S. at 46). "Because of their very p o t e n c y , inherent powers must be exercised with restraint and discretion." Chambers, 501 U.S. at 44. Spoliation of evidence is among the offenses for which a court may assess s a n c t io n s using its inherent powers. See Hodge v. Wal-Mart Stores, Inc., 360 F .3 d 446, 449 (4th Cir. 2004) ("The imposition of a sanction . . . for spoliation of e v id e n c e is an inherent power of federal courts."). Union Pump complains that t h e defendants engaged in the following acts of spoliation: (1) Cleveland, after c o n fe r r in g with Goodrich, destroyed at least three computer disks containing in fo r m a t io n belonging to Union Pump; (2) the defendants disposed of a computer a lle g e d to contain information belonging to Union Pump; (3) the defendants fa i l e d to ensure that the tapes used to back up their computer server were p r o p e r ly working; (4) the defendants destroyed information on the backup tapes;

LUTSA could not serve as a basis for an award of attorney's fees. Nor does Union Pump argue to this court, as it did in its pre-trial motions to the district court, that it is entitled to attorney's fees as a sanction under Federal Rule of Civil Procedure 37(b) for the defendants' discovery violations. We therefore do not consider whether the district court abused its discretion in failing to assess sanctions under Rule 37(b).

9

Case: 10-30040 Document: 00511323931 Page: 10 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 (5 ) the defendants failed to institute a "litigation hold" to ensure that relevant e v id e n c e would not be destroyed or deleted; and (6) the defendants used diskw ip in g software to delete and destroy information on their computer hard drives a ft e r the district court's entry of a protective order, and, in the case of one c o m p u te r , the disk-wiping occurred just days before turning the computers over t o the court-appointed expert for forensic imaging. T h e r e can be no dispute that these are serious charges, which, if true, w o u ld constitute particularly deplorable conduct on the part of the defendants t h a t would justify the imposition of sanctions. See Leon v. IDX Sys. Corp., 464 F .3 d 951, 961 (9th Cir. 2006) (approving dismissal of suit and award of attorney's fe e s as a sanction for plaintiff's intentional deletion of electronic information); A r is ta Records, L.L.C. v. Tschirhart, 241 F.R.D. 462, 466 (W.D. Tex. 2006) (e n t e r in g default judgment against a defendant that used disk-wiping software t o destroy electronic information). In this case, however, the district court chose n o t to award attorney's fees as a sanction for the defendants' conduct, and we are r e lu c t a n t to disturb that ruling. A court's inherent power to sanction "is not a broad reservoir of power, r e a d y at an imperial hand, but a limited source." FDIC v. MAXXAM, Inc., 523 F .3 d 566, 591 (5th Cir. 2008) (quoting NASCO, Inc. v. Calcasieu Television & R a d io , Inc., 894 F.2d 696, 702 (5th Cir. 1990), aff'd sub nom. Chambers v. N A S C O , Inc., 501 U.S. 32 (1991)). We therefore do not believe that the district c o u r t abused its discretion in failing to award attorney's fees in this case. One o f the most powerful, and perhaps the most common, remedies for spoliation is a n adverse inference instruction given to the jury. The district court instructed t h e jury that if it found that the defendants intentionally destroyed relevant e v id e n c e in bad faith, the jury could "infer that such evidence was unfavorable 10

Case: 10-30040 Document: 00511323931 Page: 11 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 t o [the defendants]."4 Given that the jury ultimately found the defendants liable, w e do not fault the district court for limiting its sanction to the adverse inference in s t r u c t io n due to the requirement that the court, in remedying offensive c o n d u c t through sanctions, must "try the less restrictive measure first." Natural G a s Pipeline, 86 F.3d at 467. W e are also mindful that Union Pump failed to renew after trial its r e q u e s t for attorney's fees as a sanction for spoliation. Union Pump filed two m o t io n s before trial requesting, inter alia, attorney's fees as a sanction for the d e fe n d a n t s ' spoliation of evidence. Because it had deferred ruling on Union P u m p 's pre-trial motions for attorney's fees, the district court, immediately fo llo w in g the jury's verdict, requested that each party submit a brief "on whether o r not [Union Pump is] entitled to attorney's fees under the verdict." In its postt r ia l brief, Union Pump requested attorney's fees under LUTSA and under the c o u r t's inherent power. Union Pump's request for attorney's fees under the c o u r t's inherent power was not, however, related to the defendants' spoliation o f evidence. Rather, Union Pump argued that because the jury had found that t h e defendants had misappropriated its trade secrets in bad faith, the district c o u r t should sanction the defendants for that conduct. Union Pump did not ask t h e district court to impose sanctions for bad faith spoliation of evidence in its b r ie f. Indeed, nowhere in Union Pump's post-trial motion to set attorney's fees o r the accompanying briefs does the word "spoliation" even appear.

Union Pump argues that the district court did not give an adverse inference instruction or that the adverse inference instruction was too weak. Union Pump is correct that it did not receive the adverse inference instruction that it wanted, but the court's instruction did permit the jury to infer that the destroyed evidence was adverse to the defendants if the jury found the necessary facts. Thus, it was an adverse inference instruction.

4

11

Case: 10-30040 Document: 00511323931 Page: 12 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 W e are not blind to the egregious nature of the defendants' conduct in this c a s e . Spoliation is a serious offense and a party's intentional destruction of r e l e v a n t evidence threatens the sanctity and spirit of the judicial process. H o w e v e r , the imposition of sanctions under the court's inherent power is p o w e r fu l medicine that should be administered with great restraint. We are u n a w a r e of any case from this circuit, or any other circuit, in which an appellate c o u r t has directed the imposition of sanctions where the district court has failed t o do so. Here, the district court found that Union Pump had been made whole b y the jury's verdict and that the adverse inference in the jury instructions s u ffic ie n t ly remedied the alleged spoliation. We decline to substitute our

ju d g m e n t for that of the district. That is not to say an appellate court may never r e v e r s e a district court's refusal to award sanctions. See AHP Subsidiary

H o ld in g Co. v. Stuart Hale Co., 1 F.3d 611, 620 (7th Cir. 1993) (remanding for " a more plenary explanation" for the district court's denial of attorney's fees as a discovery sanction under Rule 37 because "the denial of sanctions with no e x p la n a t io n may constitute an abuse of discretion"). In this case, however, given t h e district court's intimate familiarity with the case and Union Pump's failure t o renew its request for sanctions related to spoliation, we do not find that the d is t r ic t court abused its discretion in refusing to award attorney's fees using its in h e r e n t powers as a sanction for the defendants' spoliation of evidence. B. E v id e n t i a r y Errors I n their appeal, the defendants contend that they are entitled to a new t r ia l because the district court made evidentiary errors with respect to several w it n e s s e s . We address each in turn. 1. B ix le r Testimony

12

Case: 10-30040 Document: 00511323931 Page: 13 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 T h e defendants first argue that they are entitled to a new trial because the d is t r ic t court permitted Union Pump's corporate representative, Mike Bixler, to t e s t ify to numerous matters that were hearsay and not within his personal k n o w le d g e . We review a district court's decision to admit or exclude evidence for a n abuse of discretion. Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 265 (5th C ir . 2007). If the district court abused its discretion,"we then apply the harmless e r r o r doctrine," and we will affirm the district court unless "a substantial right o f the complaining party was affected." Id. T h e defendants contend that Bixler was improperly permitted to testify t o facts that Union Pump learned during a series of internal investigations. Bixler did not conduct the investigations or have any role in them, no written r e p o r t s were issued as a result of the investigations, and Bixler learned of the fa c t s he testified to solely through conversations with others. Specifically, Bixler t e s t ifie d regarding three computer hard drives that were supposedly sent from t h e Shreveport plant to Union Pump's Houston location. According to Bixler, a n o t h e r employee, David Linn, discovered at some point that the hard drives w e r e missing from the computers sent to Houston. In addition, Bixler testified r e g a r d in g Union Pump's investigation into how CTI was able to competitively b id and "steal" work away from Union Pump for a specific client, Mid-Valley P ip e lin e Company. The district court overruled the defendants' objection to this t e s t i m o n y , stating that "the objection goes to the weight that [the jury] may c h o o s e or not choose to give to the witness's statements in this area." The d e fe n d a n t s argue on appeal that Bixler's testimony regarding the facts that he le a r n e d through other people at the company was improperly admitted. F e d e r a l Rule of Evidence 602 limits the scope of a witness's testimony to m a t t e r s that are within his or her personal knowledge. Union Pump argues that 13

Case: 10-30040 Document: 00511323931 Page: 14 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 B ix le r was permitted to testify to matters that, although they were not within h is own personal knowledge, were within the knowledge of the corporation b e c a u s e Bixler was designated as Union Pump's corporate representative. We d is a g r e e . Federal Rule of Civil Procedure 30(b)(6) allows corporate

r e p r e s e n t a t iv e s to testify to matters within the corporation's knowledge during d e p o s it io n , and Rule 32(a)(3) permits an adverse party to use that deposition t e s t im o n y during trial. See Brazos River Auth. v. GE Ionics, Inc., 469 F.3d 416, 4 3 4 (5th Cir. 2006). However, a corporate representative may not testify to m a t t e r s outside his own personal knowledge "to the extent that information [is] h e a r s a y not falling within one of the authorized exceptions." Id. at 435; see also D e u ts c h e Shell Tanker Gesellschaft mbH v. Placid Refining Co., 993 F.2d 466, 4 7 3 n.29 (5th Cir. 1993) (corporate representative is not permitted to repeat " r a n k hearsay"). W e hold that any error in allowing Bixler to testify to matters that may h a v e been hearsay was harmless. Bixler's testimony that David Linn discovered t h r e e missing hard drives in computers that were sent from the Shreveport plant w a s corroborated by Linn's deposition testimony, which was played for the jury. Further, Union Pump presented plenty of additional evidence that the d e fe n d a n t s had misappropriated Union Pump's trade secrets, even absent m e n tio n of the missing hard drives. And Union Pump's claims of spoliation r e la t e d to the defendants' hard drives that were turned over to the courta p p o in te d computer expert, not to the allegedly missing hard drives from the S h r e v e p o r t plant. The admission of Bixler's testimony regarding the Mid-Valley

in v e s t ig a t io n was also harmless. The investigation related to drawings that M id -V a lle y had obtained for a project that Union Pump had performed for Mid14

Case: 10-30040 Document: 00511323931 Page: 15 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 V a lle y . The substance of Bixler's testimony was that it was Union Pump's policy n e v e r to provide clients with copies of designs, but that Union Pump learned t h r o u g h its investigation that Mid-Valley had somehow obtained design d r a w in g s , which allowed CTI to outbid Union Pump. Bixler's testimony was la r g e ly repeated by one of Union Pump's salesmen, Danny Hyatt. Hyatt testified t h a t he was assigned to the Mid-Valley project, that he was familiar with the c o n t r a c t negotiations between Union Pump and Mid-Valley, and that during n e g o t ia t io n s Union Pump had repeatedly refused Mid-Valley's request for the d e s ig n drawings. Because the hearsay testimony was largely corroborated by o t h e r admissible evidence, we find no reversible error. 2. Y a r b r o u g h Testimony

The defendants next complain that the district court erred in allowing S u s a n Yarbrough, a former Union Pump employee in the Shreveport plant, to t e s t ify on behalf of Union Pump because Union Pump failed to provide the c o r r e c t address for Yarbrough in its preliminary witness lists. We find no error. " Q u e s t io n s concerning both the interpretation of pretrial orders and the e x c lu s io n of undisclosed witnesses are reviewable only for abuse of discretion." Keyes v. Lauga, 635 F.2d 330, 335 (5th Cir. Unit A Jan. 1981). In a series of pret r ia l scheduling orders, the district court ordered the parties to provide one a n o t h e r with a list of witnesses. The list was to include each witness's "name, a d d r e s s , and a brief statement of the nature of their expected testimony." In r e s p o n s e to each of these orders, the Union Pump provided the defendants with a witness list that included Yarbrough as a "may call" witness and listed her a d d r e s s as being in Shreveport, Louisiana. During the pre-trial conference, the d is t r ic t court ordered the parties to change their "may call" witness lists to "will c a ll" lists at least two weeks before trial and to provide copies to one another and 15

Case: 10-30040 Document: 00511323931 Page: 16 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 t o the court. Union Pump provided its will call witness list to the defendants on M a y 6, 2009, in compliance with the district court's order. For the first time, Y a r b r o u g h 's address correctly appeared as Mobile, Alabama, rather than S h r e v e p o r t , Louisiana. The defendants argue that the district court erred in denying its motion t o strike Yarbrough as a witness because Union Pump failed to comply with the d is t r ic t court's scheduling order when it provided an incorrect address for Y a r b r o u g h . However, the defendants have failed to demonstrate how they were p r e ju d ic e d by the incorrect address. Yarbrough was on Union Pump's "may call" w it n e s s list for over a year, but the defendants never made any attempt to c o n t a c t her for a deposition prior to trial. In response to the defendants'

o b je c t io n regarding the discrepancy, the district court allowed the defendants to d e p o s e Yarbrough by phone before she testified, even though the deadline for d is c o v e r y had long passed. The defendants can hardly claim that Yarbrough was a n unexpected "surprise" witness. Therefore, we hold that the district court did n o t abuse its discretion in allowing Yarbrough to testify. 3. A tta w a y 's Testimony

F in a lly , the defendants argue that the district court improperly limited the s c o p e of the testimony offered by its expert, D. Wesley Attaway. We review a d is t r ic t court's decision to admit or exclude expert testimony for abuse of d is c r e t io n . Nunez v. Allstate Ins. Co., 604 F.3d 840, 844 (5th Cir. 2010). A substantial issue at trial was whether the defendants had, in fact, d e le t e d or destroyed electronic information belonging to or related to Union P um p. The defendants retained Attaway to examine their hard drives.

A t t a w a y 's report detailed his findings regarding the information contained on h a r d drive 9, but he did not specifically address hard drives 10 and 11. His 16

Case: 10-30040 Document: 00511323931 Page: 17 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 r e p o r t simply stated that "no data relating to plaintiffs has been wiped untimely fr o m defendants' computers." A t trial, Union Pump's expert, Andrew Rosen, testified that hard drives 1 0 and 11 had been "wiped" using disk-wiping software. After hearing Rosen's t e s t im o n y during trial, Attaway conducted further analysis of hard drives 10 and 1 1 , which was not contained in any of his reports. When the defendants

a t t e m p t e d to question Attaway regarding his additional analysis of hard drives 1 0 and 11, Union Pump objected, arguing that Attaway was testifying outside t h e scope of his expert report. Union Pump argued that Attaway should have c o n d u c t e d his examination of hard drives 10 and 11 when he prepared his o r i g i n a l report because the information Rosen testified to was contained in R o s e n 's initial report. Union Pump also contended that it would be prejudiced b y the testimony due to its inability to effectively cross examine Attaway's t e s t im o n y because Rosen had been called away from the trial and was unable to a s s is t Union Pump in evaluating Attaway's testimony. The district court agreed t o allow Attaway to render an opinion regarding hard drives 10 and 11, but lim it e d his testimony on the subject to a single question. The question was a s k e d by the district court: "Mr. Attaway, were any files relevant to the plaintiff in Hard Drives 10 or 11?" Attaway responded, "No." On appeal, CTI argues that t h e district court erred by improperly limiting the scope of Attaway's testimony r e g a r d in g hard drives 10 and 11. We do not find that the district court abused its discretion in limiting A t ta w a y 's testimony. Federal Rule of Civil Procedure 26(a)(2) provides that p a r tie s must disclose any expert opinions they intend to offer at trial, and Rule 2 6 ( e )(2 ) provides parties with an ongoing duty to supplement expert reports. Despite the defendants' assertions to the contrary, Rosen's report clearly 17

Case: 10-30040 Document: 00511323931 Page: 18 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 c o n t a in e d opinions regarding hard drives 10 and 11, and Rosen's testimony at t r ia l regarding hard drives 10 and 11 did not materially vary from or exceed his e x p e r t report. The defendants and their expert were therefore well aware of R o s e n 's opinions regarding the hard drives, which were provided to them nearly t w o years before the trial began. The defendants cannot make an end run a r o u n d the disclosure rules by claiming that Attaway's untimely investigation w a s conducted in response to Rosen's trial testimony when Rosen testified to e x a c t ly the information contained in his initial report. F u r t h e r , the defendants have not demonstrated that the district court's fa ilu r e to permit Attaway's testimony on this point was so prejudicial as to r e q u ir e us to overturn the jury's verdict. The defendants argue that Attaway w o u ld have provided "critical" testimony that the wiped material was readily id e n tifia b le and did not relate to Union Pump. However, the district court a llo w e d Attaway to relay that pertinent fact in the question that Attaway was p e r m it t e d to answer. Attaway was therefore able to convey to the jury precisely t h e information that the defendants allege was improperly excluded. C. D am ages T h e defendants also contest the amount of the compensatory damages a w a r d e d by the jury.5 We "tread[] lightly upon jury verdicts, as the standard of r e v ie w is very deferential." Vogler v. Blackmore, 352 F.3d 150, 154 (5th Cir. 2 0 0 3 ). We will sustain the amount of damages awarded by the fact finder " u n le s s the amount is clearly erroneous or so gross or inadequate as to be c o n t r a r y to right reason." Id. "If the award of damages is plausible in light of t h e record, a reviewing court should not reverse the award even if it might have

The defendants contest only the compensatory damages awarded by the jury and make no argument regarding the unjust enrichment portion of the damages award.

5

18

Case: 10-30040 Document: 00511323931 Page: 19 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 c o m e to a different conclusion." Dresser-Rand Co. v. Virtual Automation, Inc., 3 6 1 F.3d 831, 843 (5th Cir. 2004). T h e damages award here was clearly substantiated by the evidence p r e s e n t e d at trial. The jury awarded Union Pump $1,525,559 as "the total a m o u n t of compensatory damages required to make Plaintiff whole." This

n u m b e r was taken directly from the report submitted by one of Union Pump's e x p e r t s , Holly Sharp. According to Sharp, the inflation-adjusted amount that U n io n Pump had paid for American Pump's goodwill was $1,525,559 as of A u g u s t 2008, when she prepared her expert report. By the time of trial, in June 2 0 0 9 , the inflation-adjusted value was $1,541,919. Sharp's estimate was not an im p la u s ib le measure of Union Pump's damages, and the jury's use of her e s t im a t e was not unwarranted, because a Union Pump representative testified t h a t the American Pump line had no remaining value to Union Pump without t h e design drawings required to service and repair the pumps. T h e defendants argue that there was insufficient evidence to sustain the d a m a g e award because the jury "failed to consider [Sharp's] explanatory t e s t im o n y ." We construe this argument as a criticism of the district court's d e c is io n not to send to the jury the transcript of Sharp's testimony. During d e lib e r a t io n s , the jury asked to see any "financial evidence" and the "financial r e p o r t s " prepared by Sharp and Keith Bucher, Union Pump's former controller. U n io n Pump asked the district court to send the transcript of Sharp's testimony a lo n g with the exhibit containing Sharp's report. The defendants did not join t h i s request or object when the district court denied Union Pump's motion. Given that the jury itself did not request the transcript and the defendants did n o t preserve the issue for appeal, we find no merit in this argument. Thus, the ju r y 's award of $1,525,559 is certainly plausible in light of the record. 19

Case: 10-30040 Document: 00511323931 Page: 20 Date Filed: 12/16/2010

No. 10-30040 N o . 10-30072 I I I . CONCLUSION F o r the foregoing reasons, we AFFIRM the judgment of the district court.

20