Silicon Knights, Inc. v. Epic Games, Inc.
ORDER granting 611 Motion to Bifurcate and granting in part and denying in part 630 Motion to Seal Document. Signed by Chief US District Judge James C. Dever III on 10/31/2011. (Sawyer, D.)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
SILICON KNIGHTS, INC.,
EPIC GAMES, INC.,
On July 8, 2011, Epic Games, Inc. ("Epic" or "defendant") filed a motion to bifurcate the
trial on the issue ofpunitive damages pursuant to Federal Rule of Civil Procedure 42(b) [D.E. 611].
On July 15, 2011, Silicon Knights, Inc. ("SK" or "plaintiff') responded in opposition to the motion
to bifurcate [D.E. 629] and filed a motion to seal the response in opposition [D.E. 630]. On July 22,
2011, Epic replied [D.E. 656]. As explained below, to the extent described in this order, the court
grants Epic's motion to bifurcate the trial on the issue of punitive damages, and grants in part and
denies in part plaintiffs motion to seal.
Federal Rule of Civil Procedure 42(b) provides, in pertinent part, that "to avoid prejudice,
... the court may order a separate trial of one or more separate issues ... /' Fed. R. Civ. P. 42(b);
see Mattison v. Dallas Carrier Com., 947 F.2d 95, 110 (4th Cir. 1991). The decision to bifurcate a
trial under Rule 42(b) is committed to the sound discretion of the trial court.
Hutchinson, 5 F.3d 750, 758 (4th Cir. 1993); Dixon v. Transp.. Inc., 990 F.2d 1440, 1443, 1445
(4th Cir. 1993). "A trial must remain fair to both parties, and ... considerations ofconvenience may
not prevail where the inevitable consequence to another party is harmful and serious prejudice."
Dixon, 990 F.2d at 1445 (quotation omitted). Therefore, ''when it is determined that the evidence
relevant to the appropriate amount ofpunitive damages will be prejudicial to thejury's consideration
of liability or compensatory damages, bifurcation of the trial under [Rule] 42(b) [is] an available
solution." Mattison, 947 F.2d at 110.
Here, Epic argues that the court should bifurcate SK' s request for punitive damages because
SK intends to offer evidence regarding Epic's revenues and net worth to establish Epic's ability to
pay punitive damages. See Mem. Supp. Mot. Bifurcate 2-4. Epic argues that evidence of its
revenues or net worth will unfairly prejudice the jury's determination ofits liability for compensatory
damages and the amount ofcompensatory damages. See id. at 3. Additionally, Epic notes that SK's
state law claims are governed by N.C. Gen. Stat. § 1D-30, which provides:
Upon the motion ofa defendant, the issues ofliability for compensatory damages and
the amount ofcompensatory damages, ifany, shall be tried separately from the issues
of liability for punitive damages and the amount of punitive damages, if any.
Evidence relating solely to punitive damages shall not be admissible until the trier
offact has determined that the defendant is liable for compensatory damages and has
determined the amount of compensatory damages. The same trier of fact that tried
the issues relating to compensatory damages shall try the issues relating to punitive
N.C. Gen. Stat. § 1D-30. SK responds that Epic's financial information also is relevant to
establishing Epic's liability for compensatory damages and the amount of compensatory damage,
and argues that bifurcation would be both inconvenient and unnecessary. See Mem. Opp'n Mot.
Bifurcate 4-9, 11-12.
North Carolina law permits a plaintiff to recover punitive damages "to punish a defendant
for egregiously wrongful acts and to deter the defendant and others from committing similar
wrongful acts." N.C. Gen. Stat. § ID-l. As a result, a plaintiff is permitted to offer certain evidence
that might otherwise be inadmissible. See id. § ID-35.
Evidence related solely to SK's request for punitive damages claim poses an unacceptable
risk of unfair prejudice to Epic and will confuse the issues, mislead the jury, and waste time. See
Fed. R. Evid. 403. Thus, evidence solely related to SK's request for punitive damages, including
Epic's revenues or net worth, creates a significant risk of unfair prejudice to Epic and will confuse
the issues, mislead the jury, and waste time. See Mattiso!!, 947 F.2d at 110. Thejury first will hear
evidence on, and resolve issues of liability for compensatory damages and the amount of
compensatory damages. See N.C. Gen. Stat. § ID-30. After the jury detennines these issues, the
court will detennine whether to submit the issue ofpunitive damages to the jury. See id. If the court
does submit the issue of punitive damages, the court will permit the jury to hear evidence solely
related to the issue of punitive damages and instruct the jury on the issue of punitive damages.
In sum, to the extent described in this order, the court GRANTS Epic's motion to bifurcate
the trial on the issue ofpunitive damages [D.E. 611]. The court also DENIES in part and GRANTS
in part plaintiff's motion to seal the response in opposition [D.E. 630]. Section II.A.2, II.A.3, and
II.B ofplaintiff's response are properly sealed. The balance of the response is not.
SO ORDERED. This M day of October 2011.
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