Barranco v. 3D Systems Corporation et al

Filing 300

ORDER DENYING PLAINTIFF'S ORAL MOTION FOR JUDGMENT AS A MATTER OF LAW. Signed by JUDGE LESLIE E. KOBAYASHI on 05/09/2017. - - Plaintiff Ronald Barranco's oral motion for judgment as a matter of law, made on May 23, 20 16, is HEREBY DENIED as to Defendants 3D Systems Corp. and 3D Systems, Inc.'s counterclaim for breach of the non-compete agreement. The parties are HEREBY DIRECTED to submit letter briefs by May 30, 2017, and a status conference will be schedule d thereafter. (eps, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
)
)
Plaintiff,
)
)
vs.
)
)
)
3D SYSTEMS CORPORATION, a
Delaware corporation, 3D
)
)
SYSTEMS, INC., a California
corporation, ABRAHAM
)
)
REICHENTAL, DAMON GREGOIRE,
)
)
Defendants.
_____________________________ )
RONALD BARRANCO,

CIVIL NO. 13-00412 LEK-RLP

ORDER DENYING PLAINTIFF’S ORAL
MOTION FOR JUDGMENT AS A MATTER OF LAW
On May 23, 2016, Plaintiff Ronald Barranco
(“Plaintiff”) made an oral motion for judgment as a matter of law
on Defendants 3D Systems Corp. and 3D Systems, Inc.’s
(collectively “Defendants”) counterclaims (“Plaintiff’s Rule
50(a) Motion”).

[Minutes, filed 5/23/16 (dkt. no. 263).]

The

Court heard oral argument on the motion, and permitted the
parties to submit written briefs on the matter.

[Id.]

On

May 24, 2016, Plaintiff filed a Supplemental Brief in Support of
His Motion for Judgment as a Matter of Law Re: “Accounting”
(“Plaintiff’s Supplemental Brief”).

[Dkt. no. 267.]

The same

day, Defendants filed a memorandum in opposition to Plaintiff’s
Rule 50(a) Motion (“Defendants’ Supplemental Brief”).
269.]

[Dkt. no.

In an Entering Order filed on June 22, 2016 (“6/22/16

EO”), the Court granted Plaintiff’s Rule 50(a) Motion as to

Defendant’s counterclaim for failure to convey the website
lasersintering.com (“LSCOM”).

[Dkt. no. 287.]

After careful

consideration of the remaining arguments in the motion,
supporting and opposing memoranda, and the relevant legal
authority, Plaintiff’s Rule 50(a) Motion is HEREBY DENIED as to
Defendants’ counterclaim for breach of the non-compete agreement
for the reasons set forth below.
BACKGROUND
Plaintiff filed his Complaint on August 23, 2013, and
Defendants filed their Amended Counterclaims Against Plaintiff on
November 5, 2014 (“Amended Counterclaims”).

[Dkt. nos. 1, 118.]

Jury selection took place on May 17, 2017, and trial commenced
the same day.

[Minutes, filed 5/17/17 (dkt. no. 251).]

trial proceeded on:

The

Plaintiff’s claims for (1) breach of

contract (“Count I”), (2) breach of the covenant of good faith
and fair dealing (“Count III”), and (3) unjust enrichment
(“Count VI”); and Defendants’ counterclaims for (1) failure to
convey LSCOM (“Counterclaim Count I”) and (2) breach of the noncompete agreement (“Counterclaim Count II”).1

On May 20, 2016,

Plaintiff rested his case, and Defendants made an oral motion for
judgment as a matter of law (“Defendants’ Rule 50(a) Motion”).
[Minutes, filed 5/20/16 (dkt. no. 259).]

1

In an Entering Order

The Court notes that the Amended Counterclaims included a
claim for injunctive relief (“Counterclaim Count III”). However,
at oral argument, Defendants conceded that this claim is moot.
2

filed on May 23, 2016, the Court granted Defendant’s Rule 50(a)
Motion as to Count VI, and reserved ruling on the remainder of
the motion.

[Dkt. no. 262.]

On May 23, 2016, Defendants rested

their case and renewed their Rule 50(a) motion.
5/23/16 (dkt. no. 263).]

[Minutes, filed

As previously noted, the Court

considered Plaintiff’s Rule 50(a) Motion the same day, and
determined that, with regard to Counterclaim Count I, Defendants
had failed to present any evidence of damages and that Plaintiff
was entitled to judgment as a matter of law.

See 6/22/16 EO.

On

May 26, 2016, the parties presented closing arguments, and the
jury began deliberations immediately thereafter.
5/26/16 (dkt. no. 278).]

[Minutes, filed

On May 27, 2016, the jury reached a

verdict, and found in favor of Defendants on all remaining
counts.

See Special Verdict Form, filed 5/27/16 (dkt. no. 282).
The 6/22/16 EO, the Court reiterated that it had

granted Plaintiff’s Rule 50(a) Motion as to Counterclaim Count I.
[Dkt. no. 287.]

Moreover, pursuant to the Defendants’ oral

agreement at the status conference held on June 21, 2016, the
Court denied Defendants’ Rule 50(a) Motion as moot.2

[6/22/16 EO

at 2.]

2

The Court notes that it delayed ruling on the instant
motion for some time due to active settlement discussions.
3

STANDARD
Fed. R. Civ. P. 50 provides, in relevant part:
(a)

Judgment as a Matter of Law.
(1)

In General. If a party has been fully
heard on an issue during a jury trial
and the court finds that a reasonable
jury would not have a legally sufficient
evidentiary basis to find for the party
on that issue, the court may:
(A)
(B)

(2)

resolve the issue against the
party; and
grant a motion for judgment as a
matter of law against the party on
a claim or defense that, under the
controlling law, can be maintained
or defeated only with a favorable
finding on that issue.

Motion. A motion for judgment as a
matter of law may be made at any time
before the case is submitted to the
jury. The motion must specify the
judgment sought and the law and facts
that entitle the movant to the judgment.

(b) Renewing the Motion After Trial; Alternative
Motion for a New Trial. If the court does not
grant a motion for judgment as a matter of law
made under Rule 50(a), the court is considered to
have submitted the action to the jury subject to
the court’s later deciding the legal questions
raised by the motion. No later than 28 days after
the entry of judgment – or if the motion addresses
a jury issue not decided by a verdict, no later
than 28 days after the jury was discharged – the
movant may file a renewed motion for judgment as a
matter of law and may include an alternative or
joint request for a new trial under [Fed. R. Civ.
P.] 59. In ruling on the renewed motion, the
court may:
(1)

allow judgment on the verdict, if the
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jury returned a verdict;
(2)

order a new trial; or

(3)

direct the entry of judgment as a matter
of law.

This Court has stated:
The standard for judgment as a matter of law
mirrors that for granting summary judgment.
Reeves v. Sanderson Plumbing Prods., Inc., 530
U.S. 133, 149-50 (2000). “[I]n entertaining a
motion for judgment as a matter of law, the court
. . . may not make credibility determinations or
weight the evidence.” Id. at 149. Rather, the
court “must view the evidence in the light most
favorable to the nonmoving party . . . and draw
all reasonable inferences in that party’s favor.”
Josephs v. Pac. Bell, 443 F.3d 1050, 1062 (9th
Cir. 2006). Where there is sufficient conflicting
evidence, or if reasonable minds could differ over
the verdict, judgment as a matter of law is
improper. Pierson v. Ford Motor Co., No. C 066503 PJH, 2009 WL 3458702, at *1 (N.D. Cal.
Oct. 23, 2009); see generally Kern v. Levolor
Lorentzen, Inc., 899 F.2d 772, 775 (9th Cir.
1990).
Sunrise Helicopters, Inc. v. Alexair, Inc., Civil No. 10-00346
LEK-BMK, 2012 WL 1946960, at *4 (D. Hawai`i May 29, 2012)
(alterations in Sunrise Helicopters).
DISCUSSION
The only issue to be decided in the instant Order is
Plaintiff’s Rule 50(a) Motion as to Counterclaim Count II.

In

his oral argument on Counterclaim Count II, Plaintiff alleged
that:

(1) any breach of the non-compete agreement was not a

material breach; (2) there is no evidence of damages; (3) the
non-compete clause at issue in the instant matter is
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unenforceable under Hawai`i law because of the period during
which it applies, as well as its territorial scope; and
(4) Defendants were the first to breach, thus negating any breach
by Plaintiff.

In addition, Plaintiff’s Supplemental Memorandum

argues that an equitable accounting is only available if there is
no remedy at law.

[Pltf.’s Suppl. Mem. at 3-5.]

In particular,

Plaintiff alleges that the counterclaims “are valid legal
claims,” but that Defendants are “left with no adequate remedy at
law . . . because there is a failure of proof on a crucial
element of the claims.”

[Id. at 5 (emphasis in original).]

The Purchase and Sale Agreement (“PSA”) states:
Covenant Not to Compete. To secure for 3D Systems
the benefit of the transactions contemplated by
this agreement, Mr. Barranco agrees for the
benefit of 3D Systems and its affiliates that,
subject to the time limitation noted below, for a
period of five (5) years after the Effective Date
hereof, he will not, directly or indirectly or
otherwise:
(i)

engage in any Competition in any
Restricted Territory;[3] or

(ii) be or become an employee, agent or
consultant of, or acquire or have any
proprietary or other equity interest in,
or otherwise participate or assist in
the business of, any person, firm or
business that engages in any Competition

3

The PSA defines “Competition” as “the development, design,
offering, marketing, sale or provision of services and products
that have been developed, designed, offered, marketed, sold or
otherwise provided by the Domains prior to the Effective Date.”
[PSA at ¶ 6(a)(i).] The PSA defines “Restricted Territory” as
“the world.” [Id. at ¶ 6(a)(ii).]
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in any Restricted territory[.]
[Tr. Exh. 20 (PSA) at ¶ 6(b).]

In addition, the PSA provides:

Specific Performance. Mr. Barranco acknowledges
for the benefit of 3D Systems and its affiliates
that, in view of the nature of the Acquired
Assets, Mr. Barranco’[s] past association with
such business, the business objectives of 3D
Systems in acquiring the Acquired Assets, and the
consideration exchanged with 3D Systems in
acquiring the Acquired Assets, and the
consideration exchanged with 3D Systems therefor,
the restrictions contained in this Agreement are
reasonably necessary to protect the legitimate
business interests of 3D Systems and that any
violation of such restrictions will result in
irreparable injury to 3D Systems for which damages
will not be an adequate remedy. Mr. Barranco
therefore acknowledges that if he violates any
such restrictions, 3D Systems shall be entitled to
preliminary and injunctive relief as well as to an
equitable accounting of earnings, profits and
other benefits arising from such violation. It is
expressly recognized and agreed that such
injunctive relief may be entered pending final
determination of the merits of any controversy
between the parties.
[Id. at ¶ 6(f).]
The Hawai`i Supreme Court has stated that “[a] material
default or breach does not result simply because a party to a
contract violates one of the agreement’s provisions.”

Aickin v.

Ocean View Invs. Co., 84 Hawai`i 447, 460, 935 P.2d 992, 1005
(1997) (emphasis in Aickin).

The supreme court continued:

In Golf Carts, Inc. v. Mid-Pacific Country Club,
53 Haw. 357, 493 P.2d 1338 (1972), this court
defined a material breach, albeit in a different
context:
A rescission is not warranted by a mere
breach of contract not so substantial and
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fundamental as to defeat the object of the
parties in making the agreement. Before
partial failure of performance of one party
will give the other the right of rescission,
the act failed to be performed must go to the
root of the contract or the failure to
perform the contract must be in respect of
matters which would render the performance of
the remainder a thing different in substance
from that which was contracted for.
53 Haw. at 359, 493 P.2d at 1339 . . . .
Id. (emphasis omitted).4

The plain language of the PSA reveals

4

The Hawai`i Supreme Court cited the Restatement (Second)
of Contracts to support its position:
In determining whether a failure to render or to
offer performance is material, the following
circumstances are significant:
(a) the extent to which the injured party
will be deprived of the benefit which he
reasonably expected;
(b) the extent to which the injured party can
be adequately compensated for the part of
that benefit of which he will be deprived;
(c) the extent to which the party failing to
perform or to offer to perform will suffer
forfeiture;
(d) the likelihood that the party failing to
perform or to offer to perform will cure his
failure, taking account of all the
circumstances including any reasonable
assurances;
(e) the extent to which the behavior of the
party failing to perform or to offer to
perform comports with standards of good faith
and fair dealing.
(Emphases added.)
(continued...)
8

that the non-compete provision was material to the agreement
itself.

There is also evidence in the record to support

Defendants’ position that Plaintiff developed a new quoting
system and created a website for an outside entity.

Moreover, in

arguing in support of Plaintiff’s Rule 50(a) Motion, Plaintiff
did not dispute that he made a new and more powerful price
quoting engine, but argued that he did not sell or use the new
engine for commercial gain.

The PSA, however, encompasses these

activities in prohibiting Plaintiff from “otherwise
participat[ing] or assist[ing] in the business of, any person,
firm or business that engages in any Competition in any
Restricted Territory.”

See PSA at ¶ 6(b)(ii).

Plaintiff also submits that Counterclaim Count II fails
because Defendants have not presented any evidence of damages and
they are not entitled to any equitable relief.

See Pltf.’s

Suppl. Motion at 5 (“The supposed conduct for which [Defendants]
claim[] an accounting is not ‘so complicated that only a court
can discern [it].’

In fact no one, Court or jury, could discern

an ‘accounting’ stemming from the ‘benefits of lost focus.’”
(some alterations in original)).

Further, in his oral argument

on Plaintiff’s Rule 50(a) Motion, Plaintiff’s counsel repeatedly

4

(...continued)

Aickin, 84 Hawai`i at 460 n.27, 935 P.2d at 1005 n.27 (emphases
in Aickin) (quoting Restatement (Second) of Contracts § 241
(1979)).
9

stated that it is not possible to account for Plaintiff losing
his focus.

It is clear to the Court, however, that designing a

separate and new system and website amounts to more than losing
focus.

In Dairy Queen, Inc. v. Wood, the United States Supreme

Court held:
The necessary prerequisite to the right to
maintain a suit for an equitable accounting, like
all other equitable remedies, is . . . the absence
of an adequate remedy at law. Consequently, in
order to maintain such a suit on a cause of action
cognizable at law, as this one is, the plaintiff
must be able to show that the ‘accounts between
the parties’ are of such a ‘complicated nature’
that only a court of equity can satisfactorily
unravel them. In view of the powers given to
District Courts by Federal Rule of Civil Procedure
53(b) to appoint masters to assist the jury in
those exceptional cases where the legal issues are
too complicated for the jury adequately to handle
alone, the burden of such a showing is
considerably increased and it will indeed be a
rare case in which it can be met.
369 U.S. 469, 478 (1962) (footnotes omitted).

Plaintiff argues

that “[Defendants] should not get a second bite at the apple by
now claiming that [their] legal remedy is inadequate because
there was not proof to support it.”

[Pltf.’s Suppl. Mem. at 5.]

Defendants are not getting a second opportunity to prove that
they are entitled to relief on Counterclaim Count II.

Defendants

presented evidence that Plaintiff breached the PSA, and the PSA
provides for an equitable accounting for the type of violation
alleged.

See PSA at ¶ 6(f).

In addition, this Court finds that

the issues related to Counterclaim Count II are complex enough to

10

merit an equitable accounting.
Next, Plaintiff orally argued that the non-compete
clause in the PSA is unenforceable because the territorial
application – “the world” – is prohibited under Hawai`i law.
PSA at ¶ 6(a)(ii).

This district court has explained:

Hawaii statutory law provides, “Every
contract . . . in restraint of trade or commerce
in the State . . . is illegal.” H.R.S. § 4804(a). The same statute further provides:
[W]ithout limiting the application of the
foregoing subsection (a) it shall be lawful
for a person to enter into any of the
following restrictive covenants or agreements
ancillary to a legitimate purpose not
violative of this chapter, unless the effect
thereof may be substantially to lessen
competition or to tend to create a monopoly
in any line of commerce in any section of the
State . . .
(4) A covenant or agreement by an employee or
agent not to use the trade secrets of the
employer or principal in competition with the
employee’s or agent’s employer or principal
. . . after the termination of employment,
within such time as may be reasonably
necessary for the protection of the employer
or principal, without imposing undue hardship
on the employee or agent.
H.R.S. § 480-4(c) (emphasis added).
Under Hawaii law interpreting H.R.S. § 480-4,
restrictive covenants should be interpreted “much
the same way that federal courts would, in Section
1 Sherman Act cases, analyze such covenants.”
Technicolor, Inc. v. Traeger, 57 Haw. 113, 121-22,
551 P.2d 163 (1976). That is, for restrictive
covenants that are not per se illegal, courts
should determine as a matter of law whether a
restrictive covenant is reasonable. Id. 57 Haw.
at 122, 551 P.2d 163. “In making this analysis,
11

See

the court must examine such factors as
geographical scope, length of time, and breadth of
the restriction placed on a given activity.” Id.
UARCO Inc. v. Lam, 18 F. Supp. 2d 1116, 1121 (D. Hawai`i 1998)
(alterations in UARCO Inc.).

Neither Plaintiff’s Rule 50(a)

Motion nor Plaintiff’s Supplemental Brief provided case law or
any additional arguments for his claim that the non-compete
agreement itself is unreasonable.

The Court therefore finds

Plaintiff’s argument unsupported and unavailing.
Finally, Plaintiff orally argued that, because
Defendants breached the agreement first, he is not liable for any
breach of the PSA.

There was evidence in the record to support

Defendants’ position that it did not make any promises to invest
substantial resources in stereolithography.com (“SLAC”) and
LSCOM.

Reading the evidence in the light most favorable to

Defendants, the Court finds that a reasonable jury could conclude
that Defendants did not make any such promise.
in this case found just that.

In fact, the jury

The Court FINDS that there is

conflicting evidence and CONCLUDES that Plaintiff is not entitled
to judgment as a matter of law on Counterclaim Count II.
The Court has denied Plaintiff’s Rule 50(a) Motion.
However, the Court still must rule on the equitable relief
requested in the Amended Counterclaims.

The Court therefore

DIRECTS the parties to submit letter briefs of no more than ten
pages by May 30, 2017, explaining how they believe the Court

12

should proceed with the remaining issues in this case.
CONCLUSION
On the basis of the foregoing, Plaintiff
Ronald Barranco’s oral motion for judgment as a matter of law,
made on May 23, 2016, is HEREBY DENIED as to Defendants 3D
Systems Corp. and 3D Systems, Inc.’s counterclaim for breach of
the non-compete agreement.

The parties are HEREBY DIRECTED to

submit letter briefs by May 30, 2017, and a status conference
will be scheduled thereafter.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, May 9, 2017.

/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge

RONALD BARRANCO VS. 3D SYSTEMS CORP., ET AL; CIVIL 13-00412 LEKRLP; ORDER DENYING PLAINTIFF’S ORAL MOTION FOR JUDGMENT AS A
MATTER OF LAW

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