Proficio Mortgage Ventures, LLC
Filing
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ORDER denying 310 Motion for Judgment; ORDER denying 311 Motion for New Trial; ORDER granting 313 Motion for Judgment. Signed by Judge Richard F. Boulware, II on 3/30/2024. (Copies have been distributed pursuant to the NEF - MAW)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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***
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PROFICIO MORTGAGE VENTURES, LLC,
Case No. 15-cv-00510-RFB-MDC
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Plaintiff,
ORDER
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v.
THE FEDERAL SAVINGS BANK,
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Defendant.
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I.
INTRODUCTION
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Before the Court is Defendant’s Renewed Motion for Judgment as a Matter of Law and
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Motion for New Trial on Damages; and Plaintiff’s Motion for Judgment with a Finding of Willful
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and Malicious Misappropriation. ECF Nos. 310, 311, 313.
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For the reasons discussed below, the Court denies Defendant’s Motion for Judgement as a
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Matter of Law and Motion for New Trial on Damages, and grants Plaintiff’s Finding of Willful
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and Malicious Misappropriation.
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II.
PROCEDURAL BACKGROUND
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On March 20, 2015, Plaintiff Proficio Mortgage Ventures, LLC (“PMV”) filed its
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Complaint against Defendant The Federal Savings Bank (“TFSB”). ECF No. 1. An Amended
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Complaint was filed on March 17, 2016. ECF No. 51. In the Complaint, Plaintiff alleges the
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following claims: (1) misappropriation of trade secrets pursuant to Nevada Revised Statute
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(“NRS”) § 600A.010 et seq.; (2) unfair trade practices pursuant to NRS § 603.040; (3) infringement
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of trade secrets pursuant to NRS § 603.050; (4) intentional interference with prospective economic
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advantage; (5) and unjust enrichment. Plaintiff sought both monetary and injunctive relief. On
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August 22, 2017, this case was consolidated with North American Marketing, Inc. v. Federal
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Savings Bank. 1 ECF No. 110.
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This case went to trial for seven days from December 5, 2022, to December 14, 2022. The
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jury found for the Plaintiff on all five counts of the Amended Complaint, and awarded $1,526,157
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in damages. On January 11, 2023, Defendant TFSB filed a Motion for Judgment as a Matter of
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Law and a Motion for a New Trial on Damages. ECF Nos. 310, 311. On January 18, 2023, the
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PMV filed a Motion for Judgment with a Finding of Willful and Malicious Appropriation. ECF
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No. 313.
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III.
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DISCUSSION
A. Renewed Motion for Judgment as a Matter of Law
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Defendant moves to overturn the jury’s verdict and for judgment as a matter of law
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regarding Cout 1 (Misappropriation of Trade Secrets) and Count 3 (Infringement of Trade Secrets)
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of the Amended Complaint. TFSB argues that it is entitled to judgment as a matter of law because
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there is no evidence to support that the customer lead list, which identified potential customers,
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was a trade secret. The Defendant argues that the lead list could not have been a trade secret
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because it included information that was either generally known or readily ascertainable.
a. Legal Standard
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A renewed motion for judgment as a matter of law is properly granted only if the evidence,
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construed in the light most favorable to the nonmoving party, permits only one reasonable
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conclusion, and that conclusion is contrary to the jury’s verdict. Castro v. Cty. of L.A., 833 F.3d
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1060, 1066 (9th Cir. 2016) (quoting Pavao v. Pagay, 307 F.3d 915, 918 (9th Cir. 2002)) (quotations
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omitted). A jury’s verdict must be upheld if it is supported by substantial evidence, which is
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evidence adequate to support the jury’s conclusion, even if it is also possible to draw a contrary
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conclusion. Id. A Court will not disturb a verdict if it is supported by substantial evidence. Lytle
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v. Carl, 382 F.3d 978, 981 (9th Cir. 2004).
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North American Marketing, Inc. v. Federal Savings Bank, 2:17-cv-01998-RBF-VCF.
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b. Discussion
The Court finds that sufficient evidence was adduced at trial to support the jury’s verdict,
including its finding as to the existence of a trade secret.
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Under Nevada law the determination of whether corporate information, such as customer
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and pricing information, is a trade secret is a question for the finder of fact. Frantz v. Johnson, 999
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P.2d 351, 358 (Nev. 2000). Nevada state law defines a trade secret as “information, including,
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without limitation, a … compilation[]” that “derives independent economic value, actual or
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potential, from not being generally known to, and not being readily ascertainable by proper means
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by the public… and [is] the subject of efforts to maintain its secrecy.” NRS § 600A.030. The
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factors to be considered include: (1) the extent to which the information is known outside of the
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business and the ease or difficulty with which the acquired information could be properly acquired
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by others; (2) whether the information was confidential or secret; (3) the extent and manner in
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which the employer guarded the secrecy of the information; and (4) the former employee’s
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knowledge of customer’s buying habits and other customer data and whether this information is
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known by the employer’s competitors. Frantz, 999 P.2d at 358-59.
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The Court rejects Defendant’s arguments for a few reasons.
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First, the Court agrees with Plaintiff that Defendant’s argument as to the insufficiency of
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evidence narrowly and improperly focuses on a few select exhibits and a few select portions of
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those exhibits from the trial. Defendant appears to focus on certain aspects or columns of the
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spreadsheets or lead lists as being publicly available and hence not trade secrets. Defendant’s
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argument ignores Nevada law which indicates that a trade secret can be a compilation that is not
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readily ascertainable and that where such a compilation is sought to be protected it can qualify as
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a trade secret. Id. To this end, at the trial the jury was presented with evidence that the customer
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list from PMV was extremely confidential, guarded, and not readily available to others in its highly
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specialized field. Testimony was provided form Scott Guild, a data analyst who worked for PMV,
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regarding how he analyzed and refined about 400,000 individual records into a manageable and
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targeted document that could be used for finding customers. This analysis included determining
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current home value, homeowner’s age, loan amount, mortgage interest rate, and accurate phone
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numbers, among other data in order to create a useful compilation of client profiles. Moreover,
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additional information was added to this profile by PMV loan officers through individual
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conversations with potential leads. From this and other evidence presented at trial, the jury could
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have concluded that trade secrets were misappropriated and infringed.
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Second, the Court also agrees with Plaintiff that the Defendant improperly assumes what
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the jury’s finding was as to what trade secrets were misappropriated and infringed. The jury was
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presented with sufficient evidence in the record and from witnesses, such as Gould, to have
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concluded that there were individual aspects of the lead lists that were trade secrets as well as the
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compilation itself.
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Third, the jury also heard testimony from multiple witnesses regarding the methods which
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PMV used to keep its information, including the lead sheet, confidential. These methods included
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multiple login accounts for separate computer and software systems, confidentiality provisions in
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all employment contracts, and a policy which did not allow employees to work outside of the
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office, on personal computers, or through a virtual network. The record is clear that PMV took
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proactive measures to keep its information out of the hands of others, namely competitors.
The Court finds that there is substantial evidence that could reasonably support the jury’s
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verdict. Accordingly, the Defendant’s motion is denied.
B. Motion for New Trial on Damages
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TFSB requests a new trial on the issue of damages. Diane Womack, a certified public
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accountant, was hired to perform a financial analysis and document review in order to determine
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the amount of lost profits suffered by the Plaintiff. She determined the company lost $1,526,157
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as a result of not making eighty-five loans that the company would have made but for the wrongful
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acts of the Defendant. TFSB argues that there is no evidence to support the award with respect to
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sixty-one of the eight-five loans. TFSB’s motion provides a list of the evidence it presented during
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trial and asks the Court to overturn the jury’s verdict based on the strength of that evidence. PMV
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responds to this motion by asserting that the jury was not required to accept TFSB’s theory of the
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case and its arguments misconstrue the standard for a new trial.
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i. Legal Standard
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Federal Rule of Civil Procedure 59 allows a district court to “grant a [party’s motion for a]
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new trial on all or some of the issues ... after a jury trial, for any reason for which a new trial has
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heretofore been granted in an action at law in federal court[.]” Fed. R. Civ. P. 59(a)(1)(A). “The
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grant of a new trial is ‘confided almost entirely to the exercise of discretion on the part of the trial
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court.’” Murphy v. City of Long Beach, 914 F.2d 183, 186 (9th Cir. 1990) (quoting Allied Chem.
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Corp. v. Daiflon, Inc., 449 U.S. 33, 36, 101 S. Ct. 188, 66 L. Ed. 2d 193 (1980)).
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Because “Rule 59 does not specify the grounds on which a motion for a new trial may be
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granted . . . . [courts] are thus bound by those grounds that have been historically recognized.”
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Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020, 1035 (9th Cir. 2003). Such historical grounds
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include claims “that the verdict is against the weight of the evidence, that the damages are
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excessive, or that, for other reasons, the trial was not fair to the party moving[.]” Montgomery
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Ward & Co. v. Duncan, 311 U.S. 243, 251 (1940); see also Passantino v. Johnson & Johnson
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Consumer Prods., 212 F.3d 493, 510 n.15 (9th Cir. 2000). “[E]rroneous jury instructions, as well
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as the failure to give adequate instructions, are also bases for a new trial.” Murphy, 914 F.2d at
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187. In general, a court should grant a new trial only when the judge “is left with the definite and
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firm conviction that a mistake has been committed.” Landes Constr. Co. v. Royal Bank of Canada,
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833 F.2d 1365, 1372 (9th Cir. 1987) (quoting 11 C. Wright & A. Miller, FEDERAL PRACTICE AND
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PROCEDURE: CIVIL § 2806, at 49 (1973)).
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The damages provision of NRS §600A, or the Nevada Uniform Trade Secrets Act
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(“NUTA”) holds that damages include both loss caused by misappropriation and unjust enrichment
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caused by misappropriation that is not taken into account in computing the loss. NRS §
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600A.050(1). In lieu of damages measured by any other method, damages caused by
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misappropriation may be measured by imposition of liability for a reasonable royalty for a
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misappropriator’s unauthorized disclosure or use of a trade secret. Id.
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ii. Discussion
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The Court does not find that jury erred or made a mistake in the damages calculation.
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The Court agrees with Plaintiff that the jury was free to draw its own inferences from the
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evidence presented based upon its assessment of the evidence and the credibility of the respective
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experts. In making her determination, Womack reviewed PMV’s records, their customer lists, their
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market lists, customer files, call logs, pleadings, transcripts of depositions, documents produced
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by TFSB including its lists of loans, financial records, and invoice, among other documentation.
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Defendant takes issue with Womack’s methodology for determining damages. Defendant
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presented its arguments to the jury on damages. The jury was clearly not persuaded.
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Defendant’s arguments essentially amount to a disagreement as to the jury’s evaluation of
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the evidence. This disagreement does not create a justification for a new trial. Over the course of
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the trial, sufficient evidence was presented which could have led the jury to find in favor of PMV.
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The jury made its own determinations regarding the strength of the arguments and evidence in
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coming to its verdict. This Court will not substitute the jury’s assessment with the Defendant’s
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arguments. Upon reviewing the record, this Court does not find the verdict contrary to the clear
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weight of the evidence or based upon false or perjurious evidence, or that a new trial is needed to
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prevent a miscarriage of justice.
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Accordingly, the Defendant’s motions are denied.
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C. Willful and Malicious Misappropriation
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Plaintiff requests a finding that Defendant’s actions amounted to willful and malicious
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misappropriation in an effort to obtain attorney’s fees. PMV argues that TFSB intentionally
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solicited PMV’s information, hired PMV employees with the knowledge that those employees
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would take and use PMV’s trade secrets, and encouraged former PMV employees to continue
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using those secrets after PMV demanded the bank cease to do so. PMV argues that TFSB acted
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maliciously because the bank directed former PMV employees to take confidential information,
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solicited PMV customers, utilized PMV information to generate business, and continued to use
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PMV information after demands to stop.
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The Defendant argues that whether the misappropriation of trade secrets was willful or
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malicious was a question that should have been put to the jury, and PMV waived its right to have
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the jury decide that question. The Defendant asserts that the Court does not have the authority to
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make this determination.
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TFSB further contends that even if this Court does decide on this point, the law does not
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support placing liability on the company due to the actions of its employees. It argues that in
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predicting how the Nevada Supreme Court would rule on this matter, TFSB would likely only be
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held liable if the company’s board members or upper management were complicit in the malicious
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behavior. As there is no evidence that any of these higher-level officers were involved, TFSB
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concludes there is no basis for a finding of willful and malicious conduct.
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PMV counters that there was no waiver because the Ninth Circuit overlooks a lack of
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objection when further objection would have been unavailing. Further, TFSB cannot be allowed
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to accept an alleged error only to later attempt to use the error to its benefit. PMV requests a new
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trial on this issue if the Court disagrees.
This Court addresses each point in turn.
a. Court or Jury Determination
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Under the Erie doctrine, a federal district court sitting in diversity jurisdiction, as in this
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case, applies substantive state law and federal procedural law. See Cooper v. Tokyo Elec. Power
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Co. Holdings, 960 F.3d 549, 557 (9th Cir. 2020). “In determining whether a [rule] is substantive
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or procedural, we ask whether the [rule] is outcome determinative, that is, whether not applying
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the [rule] would significantly affect the result of the litigation.” Id. (quoting Cuprite Mine Partners
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LLC v. Anderson, 809 F.3d 548, 555 (9th Cir. 2015)) (internal quotations omitted). The Circuit
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has explained that “[a] substantive rule is one that creates rights or obligations” while a procedural
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rule “defines a form and mode of enforcing the substantive right or obligation.” Id. (quoting
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County of Orange v. U.S. District Court (In re County of Orange), 784 F.3d 520, 527 (9th Cir.
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2015) (internal quotation marks omitted)).
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The Circuit has further advised that when state statutes authorize fee awards to litigants in
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a particular class of cases, the statutes are substantive for Erie purposes if there is no “direct
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collision” with the Federal Rules. CRST Van Expedited, Inc. v. Werner Enters., 479 F.3d 1099,
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1111 (9th Cir. 2007) (finding that a California statute regarding a finding of willful and malicious
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trade secret appropriation as a prerequisite for attorney’s fees was substantive).
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Nevada law dictates that if: (1) a claim of misappropriation is made in bad faith; (2) a
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motion to terminate an injunction is made or resisted in bad faith; or (3) willful and malicious
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misappropriation exists, the court may award reasonable attorney’s fees to the prevailing party.
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NRS § 600A.60.
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This Court finds that the language of the statute indicates that it is within its authority to
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determine whether there was a willful and malicious trade secret misappropriation. Similarly to
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CRST Van Expedited, Inc., the attorney’s fees provision of NUTA, is substantive law, so this
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Court looks to Nevada law.
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b. Employee Liability
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The parties disagree on how this Court should assess the actions of TFSB employees.
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Defendant contends that the NUTA does not address whether an employer may be held liable for
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attorney’s fees due to the actions of its employees. Defendant argues this is a choice-of-law
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question and the Court should predict how the Nevada Supreme Court would decide the issue. It
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reasons the Nevada Supreme Court would follow a punitive damages standard which requires the
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involvement of an officer, director or managing agent of the corporation. Plaintiff counter that the
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heightened punitive standard should not apply to this statute, and, instead, a general vicarious
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liability standard should be used.
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The NUTA provides that attorney’s fees may be awarded to the prevailing party if willful
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and malicious misappropriation exists. NRS § 600A.060(3). It provides three separate definitions
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for “misappropriation” with each definition indicating action by a “person.” NRS § 600A.030(2).
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The NUTA further defines a “person” as a “natural person, corporation, … or any other legal or
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commercial entity.” NRS 600A.030(4). The Court finds that the plain language of this statute
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creates liability for those acts committed by a corporation which can only logically act through its
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employees and officers. Id. The Court does not find that the plain language of the statute limits
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liability to actions only arising from certain officers or employees.
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The Court finds, consistent with the jury’s verdict, that the Defendant misappropriated and
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infringed trade secrets through the actions of its employees. The jury found the company to be
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liable for misappropriation of trade secrets. It did not differentiate between individual employees
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and the employer. This Court does not see a need to make any changes to the jury’s assessment.
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To the extent necessary, the Court separately concurs with the jury’s finding as to misappropriation
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and infringement for the purpose of resolving this motion.
c. Willful and Malicious Appropriation
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The Court now makes a determination as to whether there was willful and malicious
appropriation.
i.
Legal Standard
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The NUTA does not provide a definition for willful and malicious appropriation. This
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dispute requires this Court to engage in statutory interpretation to make its assessment. “‘Statutory
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interpretation is a question of law … .’” Williams v. State Department of Corrections, 402 P.3d
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1260, 1262 (Nev. 2017) (citation omitted). “The goal of statutory interpretation “‘is to give effect
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to the Legislature’s intent.’” Id. (citation omitted). “Whether a statutory term is unambiguous . . .
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does not turn solely on dictionary definitions of its component words. Rather, ‘[t]he plainness or
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ambiguity of statutory language is determined [not only] by reference to the language itself, [but
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as well by] the specific context in which that language is used, and the broader context of the
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statute as a whole.’” Yates v. United States, 574 U.S. 528 (2015) (citation omitted). Under the
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established approach to statutory interpretation, the Court relies on plain language in the first
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instance, but always look to legislative history in order to determine whether there is a clear
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indication of contrary intent. See Flores-Arellano v. INS, 5 F.3d 360. 363 (9th Cir. 1993)
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(Reinhardt, J., concurring) (citing INS v. Cardoza-Fonseca, 480 U.S. 421, 432 n.12 (1987)).
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ii.
Willfulness
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As noted, the NUTA does not define “willful” so the Court engages in statutory
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interpretation to determine the word’s meaning. Here, it turns to the plain language by looking to
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the word’s definition. Black’s Law Dictionary defines “willful,” in part, as “voluntary and
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intentional, but not necessarily malicious.” Willful, Black’s Law Dictionary (11th ed. 2019). This
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is consistent with the Nevada Supreme Court’s general definition of ‘willfulness.’ The Nevada
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Supreme Court has explained that “[w]illful misconduct is a term of art, not easily defined. […]
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As a general rule, the word denotes an act which is intentional, or knowing, or voluntary, rather
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than accidental.” In re Fine, 13 P.3d 400, 413 (Nev. 2000).
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The Court finds from the trial record that the Defendant engaged in willful
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misappropriation of Plaintiff’s trade secrets. TFSB intentionally solicited PMV’s information from
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Eric Naranjo, a PMV manager, and Shawn O’Brien, another PMV employee. Then, TFSB
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intentionally hired Naranjo and O’Brien, all the while knowing that they had taken and planned to
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use PMV’s trade secrets on TFSB’s behalf. Once PMV demanded that the former PMV employees
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and TFSB cease their unlawful conduct, TFSB encouraged the former PMV employees to continue
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using PMV’s information. Thus, the evidence at trial established willful misappropriation by
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Defendant.
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iii.
Maliciousness
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As noted, the NUTA does not define “malicious.” While the term malicious is undefined
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in the Nevada Uniform Trade Secrets Act, the term “malice” is defined in NRS Section 42.001(3)
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as “conduct which is intended to injure a person or despicable conduct which is engaged in with a
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conscious disregard of the rights or safety of others.” Nev. Rev. Stat. § 42.001(3). Conscious
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disregard of a person’s rights is defined as “the knowledge of the probable harmful consequences
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of a wrongful act and a willful and deliberate failure to act to avoid those consequences.”
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Countrywide Home Loans, Inc. v. Thitchener, 192 P.3d 243, 252 (Nev. 2008). Black’s Law
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Dictionary defines “malicious,” in part, as “substantially certain to cause injury.” Malicious,
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Black’s Law Dictionary (11th ed. 2019).
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The trial record supports a finding that the Defendant intentionally misappropriated
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PMV’s trade secret(s) knowing that such misappropriation would cause substantial financial harm
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to PMV. After Naranjo left PMV and became an employee of TFSB he successfully worked to
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poach PMV employees. David Pittman, a former PVM employee, testified that there was a
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significant dip in loan volume after the poaching of PMV employees. Elizabeth Young-Sikes, a
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former PVM employee, provided testimony that multiple PMV clients called in to report that their
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sensitive, personal information including dates of birth and Social Security numbers had been
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obtained by TFSB. Subsequently, those loans were being closed by TFSB. Naranjo and O’Brien
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took PMV’s confidential customer and pricing information, at TFSB’s direction. TFSB knew that
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the former PMV employees solicited PMV’s customers through case transfers, after coming on
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board at TFSB. Naranjo and his team expressed their intent to “STEAL the DEAL” and to “Get
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them ALL.” Upon receiving PMV’s demands to stop, TFSB charged ahead and directed the former
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PMV employees to continue using PMV’s leads and contacting PMV’s customers. Additionally,
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PMV had costs related to recruiting and training new loan officers, conducting an internal
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investigation, legal costs, and shutting down their branch office.
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Accordingly, this Court finds that TFSB did act in a malicious manner. Having found
TFSB’s misappropriation to be both willful and malicious, PMV’s motion is granted.
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IV.
CONCLUSION
IT IS THEREFORE ORDERED that Defendant’s [ECF No. 310] Renewed Motion for
Judgment as a Matter of Law is DENIED.
IT IS FURTHER ORDERED that Defendant’s [ECF No. 311] Motion for New Trial on
Damages is DENIED.
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IT IS FURTHER ORDRED that Plaintiff’s [ECF No. 313] Motion for Judgment with a
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Finding of Willful and Malicious Misappropriation is GRANTED. The Clerk of Court is directed
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to enter judgement for Plaintiff with damages in the amount of $1,526,157.
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IT IS FURTHER ORDERED that the Court will reserve it’s determination on the award
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of fees and costs until after Plaintiff files its motion for fees and costs. Plaintiff shall file this
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motion by April 19, 2024.
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DATED: March 30, 2024
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__________________________________
RICHARD F. BOULWARE, II
UNITED STATES DISTRICT JUDGE
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