Advanced Fluid Systems, Inc. v. Huber et al
MEMORANDUM (Order to follow as separate docket entry) re: 70 Amended Complaint filed by Advanced Fluid Systems, Inc. (See order for complete details.) Signed by Chief Judge Christopher C. Conner on 3/06/18. (ki)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
ADVANCED FLUID SYSTEMS, INC., :
KEVIN HUBER, INSYSMA
(INTEGRATED SYSTEMS AND
MACHINERY, LLC), LIVINGSTON & :
HAVEN, LLC, CLIFTON B. VANN IV, :
and THOMAS AUFIERO,
CIVIL ACTION NO. 1:13-CV-3087
(Chief Judge Conner)
Plaintiff Advanced Fluid Systems, Inc. (“AFS”) commenced this action
alleging that the collective defendants—a former employee and several of AFS‟s
competitors—colluded to deprive AFS of its trade secrets and valuable business
opportunities. Following more than four years of litigation and several rounds of
dispositive motion practice, the court on September 18, 2017 convened a bench trial
to address AFS‟s remaining claims for misappropriation of trade secrets, breach of
fiduciary duty, and aiding and abetting said breach, and to hear evidence on AFS‟s
request for compensatory, exemplary, and punitive damages. Pursuant to Federal
Rule of Civil Procedure 52(a), we set forth our findings of fact and conclusions of
Findings of Fact and Procedural History1
The Parties & Their Relationships
AFS distributes, manufactures, and installs hydraulic components and
hydraulic systems. (See Doc. 236 at 2; see also 9/20/17 Tr. 146:24-147:1; 9/25/17 Tr.
10:17-11:19). The company is headquartered in York, Pennsylvania. (See Doc. 236
at 2, 4). Dan Vaughn (“Vaughn”) serves as AFS‟s vice president and engineering
manager. (9/18/17 Tr. 72:21-22). Vaughn oversees “large engineering projects” and
directs AFS‟s sales and engineering teams. (Id. at 73:5-9). His father, Jim Vaughn,
is founder and president of the firm. (Id. at 101:9-10, 117:7-9; 9/22/17 Tr. 130:17-20).
In November 2006, AFS hired defendant Kevin Huber (“Huber”). (See 9/18/17 Tr.
99:14-16; 9/21/17 Tr. 14:4-6; 9/25/17 Tr. 10:3-5; see also AFS Ex. 6 at 1). Huber was
employed by AFS continuously through his resignation on October 26, 2012. (See
9/18/17 Tr. 37:15-19).
Defendant Livingston & Haven, LLC (“Livingston”) designs, assembles,
and installs hydraulic fluid systems and is headquartered in North Carolina. (See
Doc. 236 at 5). Defendant Clifton B. Vann IV (“Vann”) is the chief executive officer
of Livingston‟s holding company. (See 9/19/17 Tr. 137:21-138:1, 140:2-22). He was
president of Livingston at all times relevant herein. (AFS Ex. 42 at 2). Defendant
Thomas Aufiero (“Aufiero”) was employed first as sales engineer and eventually as
The above narrative represents the court‟s findings of fact as derived
from the record. Citations thereto include the transcript of the six-day bench trial
convened from September 18 through September 25, 2017, (“[Date] Tr.”), as well as
exhibits introduced by AFS, (“AFS Ex.,” “Brainard Ex.,” and “VCSFA Ex.”), the
Livingston defendants (“L&H Ex.”), and Huber and Integrated Systems (“Huber
Ex.”). We cite to our Rule 56 memorandum opinion (Doc. 236) for undisputed
contextual background. (See Doc. 243 ¶ 3).
sales manager at AFS from 1989 through January 2011, when he left to work for
Livingston as regional sales manager. (9/21/17 Tr. 11:10-12:16, 21:6-8). Huber too
forged a relationship with the Livingston defendants beginning in January 2012, in
hopes of pursuing business opportunities of mutual interest. (See id. at 28:7-29:18,
37:1-17). Huber left his position at AFS after incorporating his own firm, Integrated
Systems and Machinery, LLC (“Integrated Systems”), in October 2012. (9/25/17 Tr.
8:17-9:21). This litigation has its genesis in Huber‟s concurrent affiliations with
AFS, Livingston, and Integrated Systems. (See generally Docs. 70, 236).
Huber’s Employment with AFS
Huber joined AFS as a full-time sales engineer in November 2006. (See
9/18/17 Tr. 99:14-16; 9/21/17 Tr. 14:4-6; 9/25/17 Tr. 10:3-5). He was employed with
AFS consistently until his abrupt resignation in October 2012. (9/18/17 Tr. 37:1522; 9/20/17 Tr. 14:4-11). At some point after Huber‟s departure, AFS learned that,
for a three-month period in 2008, Huber worked contemporaneously for both AFS
and another equipment manufacturer, Dayton T. Brown. (See 9/21/17 Tr. 14:1616:4; 9/25/17 Tr. 159:24-163:4). Huber received compensation from both employers
during this time, (see 9/25/17 Tr. 160:8-162:4), but never informed either AFS or
Dayton T. Brown of the dual-employment arrangement, (see 9/21/17 Tr. 14:16-23,
15:25-16:19; 9/25/17 Tr. 161:6-12, 163:2-4).
Shortly after beginning employment with AFS, Huber gave AFS the “lead”
on a hydraulics project at Wallops Island, Virginia. (See 9/18/17 Tr. 99:17-18; 9/21/17
Tr. 78:11-22). A college friend of Huber‟s, Keith Fava (“Fava”), was employed by
Orbital Sciences Corporation (“Orbital”) and advised Huber that Orbital and the
Virginia Commonwealth Space Flight Authority (“the Authority”) were seeking a
hydraulics supplier to design a system to launch Orbital‟s “Antares” rocket from
NASA‟s facility on Wallops Island. (See 9/21/17 Tr. 78:11-22). The Antares rocket
services and supplies the International Space Station. (See Doc. 236 at 3; see also
9/20/17 Tr. 63:21-64:1). AFS contracted with the Authority in September 2009 to
build, install, and maintain the system. (See AFS Ex. 15).
The resulting installation—the Teleporter/Erector/Launcher Hydraulic
System (“Hydraulic System”)—is comprised of several constituent parts, depicted
and labeled below:
(AFS Ex. 272A). The “TEL” or “strongback” component is a platform which carries
the rocket in a horizontal position to the launch pad. (See AFS Ex. 16; 9/18/17 Tr.
75:1-9, 77:3-5). A pair of “gripper arms” secure the rocket to the strongback. (AFS
Ex. 16; 9/18/17 Tr. 77:6-8). The strongback “mates” to the cylinder assemblies, at
which point the system is prepared for the launch sequence. (AFS Ex. 16; 9/18/17
Tr. 75:10-16). The Hydraulic System lifts the rocket into a vertical position over a
30-minute period. (See AFS Ex. 16; 9/18/17 Tr. 75:10-16). After liftoff, the system‟s
unique “rapid retract” feature pulls the strongback away in a matter of seconds.
(See 9/18/17 Tr. 76:3-12). AFS designed the cylinder assemblies together with
Maritime Hydraulic, with whom it subcontracted to manufacture the hydraulic
cylinders themselves. (See id. at 87:4-9).
AFS developed and supplied the Authority with a comprehensive package of
engineering drawings generated during the system‟s design and installation. (See
AFS Ex. 20; see also 9/18/17 Tr. 92:5-93:3). All drawings delivered by AFS included
an AFS title block declaring:
This drawing discloses propriety and confidential data of
Advanced Fluid Systems, Inc., and may not be used disclosed
or released, in whole or in part, for any purpose outside the
authorized recipient, without signed authorization, and must
be returned upon request.
(E.g., AFS Exs. 67, 69-81; see also AFS Ex. 20; 9/18/17 Tr. 92:25-93:10, 125:12-22).
These materials were accessible through a password-protected online repository by
a limited number of employees of the Authority, Orbital, and Martinez & Turek, a
manufacturer subcontracted to design the system‟s gripper arms. (See 9/20/17 Tr.
AFS employee Guy Baum (“Baum”) served initially as a full-time project
manager for the Hydraulic System. (9/20/17 Tr. 67:12-22). Baum retired in June
2011, at which point Huber unofficially assumed Baum‟s responsibilities and served
as the de facto project manager for the remainder of the AFS-Orbital relationship.
(Id. at 67:25-68:2; see 9/18/17 Tr. 99:23-24; 9/20/17 Tr. 68:17-69:2, 173:8-174:1; 9/21/17
Tr. 27:4-6). Key members of the Hydraulic System teams from both the Authority
and Orbital agreed that, with few and minor exceptions, they were satisfied with
AFS‟s work. (See, e.g., AFS Ex. 274, Reed and Nash Dep. 24:7-26:15, Mar. 30, 2016
(“Reed/Nash Dep.”); 9/20/17 Tr. 65:17-70:25; VCSFA Ex. 5). According to Orbital‟s
lead engineer, Michael Brainard (“Brainard”), the system worked “flawlessly” at
its first launch and “performed very well” on subsequent launches. (9/20/17 Tr.
66:2-67:2; AFS Ex. 18). Brainard‟s principal criticism was with Baum, with whom
Brainard did not get along with and whose project management services Brainard
found to be lacking. (See 9/20/17 Tr. 67:10-24, 68:10-16). Brainard agreed that his
minor customer service complaints were remediable and likely could have been
resolved by AFS‟s hiring of a new project manager dedicated to Orbital. (Id. at
Huber’s Courtship with Livingston
Aufiero resigned from AFS in January 2011, (9/18/17 Tr. 106:2-3; 9/21/17 Tr.
21:6-8), and joined Livingston as regional sales manager and industrial hydraulic
project manager. (9/21/17 Tr. 26:1-19). Aufiero began to recruit Huber to join
Livingston shortly after his own departure. (Id. at 22:6-16). He kept in close touch
with Huber and remained interested in AFS‟s work on the Hydraulic System. (Id.
at 22:23-23:6). Aufiero asked Huber to send him photographs of the recentlycompleted cylinder assemblies on January 30, 2011, and Huber complied. (AFS Ex.
28; AFS Ex. 29 at 1-2; 9/20/17 Tr. 23:7-16). In November 2011, Huber shared videos
and photographs with Aufiero of milestone testing of the Hydraulic System‟s rapid
retract function. (AFS Exs. 30, 30A, 30B, 31-32, Ex. 32-wmv; 9/18/17 Tr. 107:4108:25). Huber thereafter asked Aufiero to shift communications to Huber‟s
personal Gmail address. (AFS Ex. 9).
Huber began collaborating with Livingston on business opportunities as
early as December 2011. Their discussions initiated with a Navy test stand project;
Huber advised Aufiero that AFS lacked capacity to bid on this project. (See 9/21/17
Tr. 31:2-25). Huber visited Livingston‟s headquarters for the first time on January
8, 2012 to discuss the Navy project. (Id. at 28:18-29:3). At least four “high level”
Livingston employees—Vann, Aufiero, Craig Hill (“Hill”), and Wayne Hawkins
(“Hawkins”)—attended this meeting. (Id. at 28:24-29:18). Each knew that Huber
was employed by their competitor, and each knew that Huber was attempting to
steer valuable business their way. (Id. at 30:16-31:4). Over the coming months,
Huber directed two other opportunities—an Air Force test stand and a Passaic
Valley Sewerage Commissioners‟ project—to Livingston. (See AFS Exs. 45-47,
218). Huber never presented these opportunities to AFS. (9/25/17 Tr. 6:13-7:16).
During the January 8, 2012 meeting, Huber and the Livingston team also
discussed the Hydraulic System on Wallops Island. (9/19/17 Tr. 157:4-10). Huber
told attendees that “the relationship between AFS and [Orbital] was souring, and at
some point the customer was going to do something different and did [Livingston]
want to participate.” (Id. at 157:11-17). That same day, Hill invited Huber to his
commercial Dropbox folder, allowing Huber and Livingston employees to share
documents electronically. (9/22/17 Tr. 34:6-18). Vann knew about the Dropbox
arrangement by February 2012 but never questioned it. (9/20/17 Tr. 21:24-22:5).
Livingston also installed a virtual private network (“VPN”) on Huber‟s AFS laptop
and provided him with a Livingston email address. (See AFS Ex. 42 at 2). Huber‟s
signature line on his Livingston email account identified him as Livingston‟s
“Program Manager.” (See, e.g., AFS Ex. 43 at 2; see also AFS Ex. 211 at 4).
Defendants‟ collaboration accelerated in earnest after the January meeting.
Huber obtained a confidential list of spare parts and component pricing for the
Hydraulic System from AFS on March 6, 2012 and forwarded it directly to Aufiero.
(AFS Ex. 48; AFS Ex. 49 at 1; 9/18/17 Tr. 109:6-112:24).2 On March 9, 2012, Huber
introduced Livingston to Orbital as a potential alternate vendor, stating by email to
Brainard: “I have this other company that is willing to come up and speak to you . . .
about long term support” for the Hydraulic System. (AFS Ex. 52). Huber knew by
this point that contract opportunities for “enhancements to the TEL and TEL
Hydraulic System” were “coming” in the near future. (See AFS Ex. 49). He
shared this information with Livingston, (see id.), but not with AFS, (see 9/18/17 Tr.
Huber coordinated a visit to Wallops Island on March 21, 2012, for Aufiero,
Hill, and another Livingston employee to meet Orbital staff and become acquainted
During his testimony at trial, Vann admitted that this transmission was
inappropriate. (9/19/17 Tr. 182:23-184:9).
with the Hydraulic System. (AFS Ex. 55). Vann was aware of this trip. (See 9/21/17
Tr. 59:12-22). The group met briefly with Fava during this visit, and he explained
Orbital‟s plan to upgrade the gripper arms and the cylinders, as well as the need for
a “spares” supplier. (See 9/21/17 Tr. 59:23-61:18, 167:12-14). They also toured the
rocket assembly and launch areas of the facility. (See id. at 62:7-63:13, 167:19-168:6).
Huber took Hill to the area below the launch pad to view the cylinder assemblies
themselves. (Id. at 62:19-63:13, 168:2-6). While there, Huber and Hill encountered
AFS‟s on-site engineer, Tom Reiker (“Reiker”). (9/21/17 Tr. 64:19-65:2). Aufiero
expressed concerned that Reiker might report the encounter to AFS management.
(See id. at 65:18-66:12; see also AFS Ex. 57). He memorialized these concerns in an
email exchange two days later:
Kevin, I thought about it more and I am thinking Tom
[Reiker] might have sent an email to Dan [Vaughn]. Dan
[Vaughn] would tell Jim [Vaughn] right away.
Craig [Hill] definitely was not too smooth in there. I wanted
to shoot myself when he told Tom [Reiker] who he was.
We should have had a plan before he went in. . . .
(AFS Ex. 57). In the same email exchange, Huber shared video of AFS‟s most
recent rapid retract testing milestones at Wallops Island. (See id.; AFS Ex. 56wmv). Brainard was unable to attend the March 21 meeting, but Huber sent a
follow-up email to him on March 23, making his intentions regarding Livingston
clear: “What I am going to do is create a „road map‟ of how to phase out AFS and
incorporate another company (that you select) like [Livingston] to partner with you
on the TEL Enhancement and Long Term Maintenance and Support.” (AFS Ex.
Huber coordinated a second visit to Wallops Island for April 12, 2012, this
time inviting Vann in attempt to impress Orbital. (See AFS Exs. 90-91; 9/10/17 Tr.
42:24-43:6). In the interim, Huber shared dozens of AFS documents with members
of the Livingston team to prepare them for the meeting. Huber emailed Aufiero
eleven pages of hydraulic and electrical spares for the system. (See AFS Ex. 60).
These spreadsheets provided a comprehensive look at the system‟s component
parts. (9/18/17 Tr. 123:15-16). On April 2, 2012, Huber downloaded many of AFS‟s
engineering drawings and its bills of materials to an external hard drive and then
uploaded them to the Livingston Dropbox, noting that the upload included “[t]he
majority of the hydraulic schematics.” (AFS Exs. 62-63; 9/18/17 Tr. 124:3-134:20).
Each drawing featured AFS‟s proprietary stamp. (AFS Exs. 67, 69-81; see 9/18/17
Tr. 125:19-22). These documents were valuable to Livingston and provided a
baseline understanding of the system‟s infrastructure in advance of their meeting
with Orbital. (9/21/17 Tr. 50:14-51:8). This file drop included what Huber described
as “top level drawings and hydraulic schematics” for the entire Hydraulic System.
(AFS Ex. 56). Huber also shared the original system specifications provided by
Orbital to AFS in 2010 for the initial Hydraulic System design. (See AFS Ex. 88).
Hill agreed that this document helped him to prepare for the second Orbital
meeting. (9/22/17 Tr. 28:13-16).
Huber corresponded directly with Vann in advance of the April 12, 2012
meeting with Orbital. Huber told Vann in an April 4 email that he was “working
diligently” to give Livingston an edge with Orbital. (AFS Ex. 86). Despite Vann‟s
present claim that he was “alarmed” that an AFS employee was working on his
company‟s behalf, (see 9/20/17 Tr. 51:6-9), he nonetheless followed up with Huber,
speaking to him about the opportunity by phone for nearly an hour the following
day, (see id. at 54:19-55:15; 9/25/17 Tr. 138:10-139:4).
Vann, Aufiero, Hill, and Huber had dinner together the night before the
Orbital meeting. (9/19/17 Tr. 174:19-175:1; 9/21/17 Tr. 41:15-23; 9/25/17 Tr. 142:25143:8). During the meeting, Vann told Huber that “he would have to leave AFS to
continue a relationship with Livingston.” (9/21/17 Tr. 43:19-44:1; see 9/19/17 Tr.
174:13-175:1; 9/20/17 Tr. 19:16-20:13; 9/21/17 Tr. 41:22-44:1). Vann and Aufiero each
separately recalled this conversation. (9/19/17 Tr. 174:13-175:1; 9/20/17 Tr. 19:1620:13; 9/21/17 Tr. 41:22-44:1). When asked whether he ever followed up with Huber
about this issue, Vann explained that he assumed it was Huber‟s responsibility to
resolve the conflict: “Well, as I recall it just seemed to drag and I didn‟t obviously
call Kevin Huber every day and ask are you still employed at your company, but
we anticipated that he would leave at any time, and he just seemed to stay there.”
(9/20/17 Tr. 25:13-17). Vann never enforced or followed up on his directive. (Id.
at 25:18-26:3; 9/21/17 Tr. 70:21-25, 71:17 72:2). Ostensibly, Livingston‟s employees
were equally concerned with the risk Huber posed to Livingston itself, with Hill
postulating that if Huber was this willing to disclose AFS‟s confidential information,
he might also “share [Livingston‟s] information or he would use [Livingston‟s]
information to get stuff.” (See 9/22/17 Tr. 61:4-16).
On April 12, 2012, Huber, Vann, Aufiero, and Hill met with Fava on Wallops
Island to discuss Orbital‟s upgrade plans for the Hydraulic System. (AFS Ex. 240).
Fava explained to Vann, Aufiero, and Hill that Orbital was competitively bidding
the upgrades because Orbital had experienced issues with AFS‟s customer service
and desired a dedicated project manager for the system. (See id. at 2). Among
other things, the group discussed the alternatives Orbital was considering for the
upgrade—a “new” cylinder option and a “modified” cylinder option. (Id. at 1-2).
Fava indicated in a subsequent email to Brainard that although Orbital would bid
the contract competitively, Livingston would have a “leg up” if it retained Huber to
manage the project. (Id.) Huber thereafter acquired Livingston‟s labor rates from
Aufiero and increased AFS‟s labor rates above Livingston‟s to, in Huber‟s words,
“justify LnH taking over!!!” (AFS Exs. 96-97; 9/18/17 Tr. 119:2-21). Huber did not
share Orbital‟s upgrade plans with AFS until three months later. (See 9/18/17 Tr.
Livingston offered Huber a compensation package on May 25, 2012. (See
AFS Ex. 209). Vice President Tim Gillig (“Gillig”) summarized the compensation
agreement in an email to Huber, copying Vann, Aufiero, and Hawkins:
1. [Livingston] will pay you 5.5% of the overall sales for
the project we are sending you today. Note: This is
regardless of how profitable the project is. In other
words, [Livingston] is guaranteeing you this figure.
2. [Livingston] would like to propose you be the the [sic]
project manager on this project. This figure is within
our quote and will be pulled out for your eyes only.
3. [Livingston] will pay you once we get paid per each
4. There will be milestones involved and once these are
met the customer will be obligated to pay [Livingston].
If we receive 20% of the overall sale price of the job we
will pay you 20% of your portion of the project. This
will continue until the entire project is complete.
5. Any additional engineering changes will be paid in the
Wayne Hawkins will be sending our proposal to you this
afternoon. If you have any questions please feel free to
contact Tom [Aufiero], Wayne, or myself. I hope this
meets your expectation and I look forward to the huge
success this could be to really kick off our relationship
Vice president of Sales
Livingston & Haven
(Id.) Gillig confirmed that the “project” referenced in his email “related to the
[H]ydraulic [S]ystem down on Wallops Island.” (AFS Ex. 277, Gillig Dep. 18:19-19:7,
21:16-22:1, Mar. 3, 2016 (“Gillig Dep.”)). Gillig knew Huber was an AFS employee at
the time he offered the compensation package to him. (See id. at 14:14-15:3). Vann
approved the compensation agreement. (Id. at 16:5-17:1; 9/19/17 Tr. 168:23-169:10).
Vann, like Gillig, knew Huber remained an AFS employee, (9/19/17 Tr. 169:11-14),
yet the package did not include a requirement that Huber leave AFS before joining
Livingston‟s team, (Gillig Dep. 18:7-18). The purpose of the compensation package
was “to pay . . . Huber for business that he steered toward or participated in with
Livingston.” (9/19/17 Tr. 169:7-10).
Gripper Arms Contract
Orbital sought bids from both AFS and Livingston for replacement of the
Hydraulic System‟s gripper arms. (9/20/17 Tr. 75:15-18; see AFS Ex. 102; AFS Ex.
238 at 5). Huber asked AFS‟s engineers to develop technical recommendations for
the gripper arms project, (see AFS Ex. 104), while simultaneously corresponding
with Livingston employees about their design, (AFS Ex. 105). Huber “provide[d] a
lot of . . . ideas” and “technical support” to Livingston regarding the gripper arms
“because [he] knew the application.” (9/25/17 Tr. 103:12-21). On August 10, 2012,
Huber submitted a rough order of magnitude (an industry term for preliminary
proposal) on AFS‟s behalf totaling $277,000. (AFS Ex. 106). Livingston submitted
its firm fixed price in the amount of $320,500 on September 7, 2012. (AFS Ex. 107).
AFS authorized Huber to submit a final price of $277,828.80. (See AFS Ex.
108; 9/18/17 Tr. 139:21-140:15; 9/21/17 Tr. 117:2-23). The engineering department
built a profit margin of 30 to 40 percent into its final authorized price. (9/18/17 Tr.
140:5-9). Huber nonetheless inflated AFS‟s final firm fixed price to ensure that the
Livingston bid was more competitive. (See AFS Ex. 109). On September 17, 2012,
he submitted a firm fixed price on AFS‟s behalf in the amount of $410,383—more
than $130,000 higher than the amount authorized by AFS‟s engineering team. (Id.;
see also AFS Ex. 108). Huber concealed this bid from everyone at AFS except its
newest sales manager, Dwylan Lefever (“Lefever”). (See 9/18/17 Tr. 143:10-144:10;
see also 9/19/17 Tr. 81:8-17). Huber assured Lefever that he “went extremely high
on the quote for a reason.” (AFS Ex. 110). Copies of Huber‟s inflated firm fixed
price and AFS‟s gripper arms drawings were found in Livingston‟s files and in its
Dropbox account during discovery. (See AFS Ex. 111; AFS Ex. 204 at 2; AFS Ex.
206; AFS Ex. 267 at 11).
Orbital awarded the gripper arms contract to Livingston. (AFS Ex. 238 at 32,
34; 9/20/17 Tr. 76:8-9, 80:20-21). In contemporaneous notes throughout the bidding
process, Fava observed that the choice “will likely come down to price, with a slight
nudge towardAFS due to their experience with the current system.” (AFS Ex. 238
at 22, 26). Fava later confirmed that the award to Livingston was “[b]ased on price.”
(9/20/17 Tr. 76:8-11, 80:17-20, 175:12-20). Brainard agreed that the “high price [was]
the principal reason why AFS lost this contract.” (Id. at 80:17-20).
Huber continued assisting Livingston with its gripper arms design
throughout the fall as the team prepared for a November 7, 2012 “kick off” meeting
with Orbital. (See AFS Ex. 149). At Aufiero‟s request, Huber shared AFS‟s gripper
arms schematics with Livingston engineer Sumpter Smith (“Smith”). (AFS Ex. 162
at 1-3; AFS Ex. 164; 9/21/17 Tr. 146:15-17). Huber also shared a gripper arms bill of
materials with Aufiero, Hill, Hawkins, and Smith that was “virtually identical” to
the one prepared by AFS‟s engineers. (9/18/17 Tr. 150:16-151:10; AFS Ex. 165 at 1,
4-6). Huber participated in a conference call with this same group a few days later
during which they discussed AFS‟s gripper arms drawing. (See AFS Exs. 166-67;
9/21/17 Tr. 153:18-154:19). Afterward, Livingston altered its design to borrow three
of AFS‟s features: counterbalance valves, isolation logic valves with pilot control,
and pressure transducers. (See 9/18/17 Tr. 146:16-149:16; 9/21/17 Tr. 147:22-150:13,
155:16-156:20; see also AFS Ex. 168 at 7; AFS Ex. 69 at 7; AFS Ex. 170).
Orbital and Livingston agreed on a design and a final contract price of
$285,685 in December 2012. (AFS Ex. 178). Livingston subsequently received an
installation contract for the gripper arms valued at $157,967 and a refurbishment
contract following an on-site explosion valued at $219,776. (See AFS Ex. 265 at 7;
AFS Ex. 266 at 7-8). Brainard confirmed that AFS likely would have received these
contracts had it been selected for the gripper arms upgrade. (See 9/20/17 Tr. 81:1315). Livingston paid Huber $41,322.15 for securing the gripper arms contract. (AFS
Ex. 180 at 2; see also AFS Ex. 113; 9/22/17 Tr. 63:19-64:4).
Cylinder Upgrade Contract
In 2012, Orbital also began exploring two options for upgrading the
Hydraulic System‟s cylinders: the new cylinder option, which contemplated
installation of new cylinders and cylinder assemblies, and the modified cylinder
option, which would replace the cylinders‟ component parts but not the cylinders
themselves. (See AFS Ex. 240; 9/18/17 Tr. 152:24-153:12). Orbital hoped to increase
the cylinders‟ capacity by 250,000 pounds to allow the Antares rocket to carry a
heavier payload. (9/18/17 Tr. 152:17-29; 9/20/17 Tr. 81:16-24). AFS initially had an
“advantage” for the contract as the incumbent vendor on Wallops Island. (9/20/17
Tr. 74:9-17). Orbital wanted the same vendor to perform the gripper arms and the
cylinder upgrades. (Id. at 122:11-123:4, 194:5-22).
Huber and Livingston knew of Orbital‟s intent to bid both cylinder options
by their April 12, 2012 meeting with Fava. (See AFS Ex. 240 at 1; 9/20/17 Tr. 182:1012). Orbital‟s engineers wanted AFS to bid on both options, and expressed as much
to Huber. (9/20/17 Tr. 83:13-23, 189:10-190:15). Fava advised Huber that “Orbital
was interested in having AFS submit proposals on both options.” (See id. at 189:90190:15). Yet Huber never presented the new cylinder option to AFS, (9/18/17 Tr.
153:10-20), and he concealed the modified cylinder option from AFS until July 2012,
(id. at 113:22-114:2).
April through May 2012
In the weeks after the April 12 meeting on Wallops Island, Huber put
Livingston in touch with AFS‟s cylinder subcontractor, Maritime Hydraulic, and
provided Livingston with confidential pricing information that AFS received from
Maritime Hydraulic in 2011 for the original system build. (See AFS Exs. 118-20;
9/18/17 Tr. 162:20-164:20). No one but AFS and Maritime Hydraulic previously had
access to this information. (See 9/18/17 Tr. 164:21-165:3). Huber also shared AFS‟s
2011 selling prices with Aufiero, who later supplied them to Hill. (AFS Exs. 121-22).
Orbital eventually executed a nondisclosure agreement with Livingston on May
16, 2012, authorizing document sharing between Orbital and Livingston as they
explored Orbital‟s options. (See L&H Ex. 75). Shortly after the agreement was
executed, Orbital engineer Kris Edwards (“Edwards”) shared a limited set of three
engineering drawings with Livingston. (See L&H Ex. 73 at 18-51). Neither Huber
nor AFS are party to the nondisclosure agreement. (L&H Ex. 75). No member of
the Orbital team authorized Livingston to accept AFS‟s documents from Huber,
and no member of the team authorized Huber to provide AFS‟s documents to
Livingston. (Reed/Nash Dep. 87:6-20; 9/20/17 Tr. 89:12-90:7, 183:23-184:8, 201:8-17).
June through September 2012
Huber eventually presented the cylinder modification option to AFS in July
2012. (9/18/17 Tr. 113:22-114:2, 152:8-10). AFS sought and received a formal request
for quote for the modification option on September 5, 2012. (9/18/17 Tr. 152:20-23;
AFS Ex. 129). The AFS team was concerned that the cylinder modification option
was not feasible—its engineers did not believe the existing assembly could support
an increased payload, and they agreed that the system could not be modified on
Orbital‟s tight deadline. (See 9/18/17 Tr. 154:8-12, 155:11-156:25; 9/19/17 Tr. 125:1129:14). Huber proposed a feasibility study to Orbital, but Brainard responded that
AFS must first provide a rough order. (AFS Exs. 131-32; see also 9/18/17 Tr. 155:1925). Huber urged AFS not to bid the cylinder modification, stating in an email that
he did not think the project was “good business for AFS at this time” and that he
had “trepidation in moving ahead.” (AFS Ex. 131). AFS obliged Huber‟s guidance
and discontinued its pursuit of the project. (See 9/19/17 Tr. 76:16-78:25, 125:1-128:5).
Vaughn testified at trial that AFS would have been interested in the new cylinder
option, describing it as the “much cleaner way to proceed.” (9/18/17 Tr. 158:1-5).
Huber continued his campaign to disparage AFS throughout this time
period. In an email to Fava on September 11, 2012, he stated:
I can‟t get anything done over here. Larry & Dave are the
only guys doing their part efficiently.
This Gripper Arm thing is 90% there…all I need is for
Dan to get his Manufacturing numbers firm and fixed and
it‟s stalling. I had it layed [sic] up on a tee and I‟m getting
the most ridiculous response.
Forget about the Cylinders.
My advise [sic] is to go with an alternative vendor and
then I‟ll jump ship. . . .
Sorry for the hassle.
(AFS Ex. 133). Huber had already received the gripper arms bill of materials from
AFS‟s engineering team at the time of this message. (9/18/17 Tr. 160:25-161:11). Not
long after this email, Orbital stopped seriously considering AFS as a contender for
the cylinder upgrade. (See 9/20/17 Tr. 194:14-195:5). According to Fava, once AFS
lost the gripper arms contract in late September, it was at a “huge disadvantage”
for the cylinder contract. (Id. at 194:14-19).
Huber encouraged Livingston from the outset to pursue Orbital‟s preferred
new cylinder option and to “no quote” the modification option that he confined
AFS to. (AFS Ex. 118). Orbital sent a formal request for quote to Livingston for the
new cylinder option on July 10, 2012. (AFS Ex. 125). Huber worked in earnest with
Livingston to prepare its quote. He emailed photos to Aufiero and Hill depicting
construction, assembly, and testing of the original cylinders at AFS‟s headquarters.
(See AFS Ex. 135; 9/18/17 Tr. 165:22-167:2). He participated in regular and lengthy
phone calls with Livingston‟s engineers to discuss their joint proposal for the new
cylinders. (See AFS Ex. 8 at 4-7). And he participated in a meeting with Hill and
Aufiero at Livingston‟s headquarters on September 27, 2012. (See AFS Ex. 137;
AFS Ex. 278, Aufiero Dep. 137:8-23, Feb. 12, 2016 (“Aufiero Dep.”); 9/21/17 Tr. 96:9-
97:2). The Livingston team “looked at everything” in developing a rough order for
the cylinders, including AFS‟s top-level hydraulic schematics and other engineering
drawings provided by Huber over the preceding six months. (See Aufiero Dep.
139:12-141:15; 9/21/17 Tr. 97:3-17).
October through December 2012
Huber registered a domain name and established an email address for his
new company, Integrated Systems, on October 6, 2012. (See AFS Exs. 139-40). At
the same time, he continued communicating with Livingston concerning its rough
order for the new cylinder upgrade. (See AFS Ex. 8 at 7; see, e.g., AFS Ex. 143 at 13; AFS Ex. 159). Unbeknownst to Livingston, Huber was secretly preparing to
submit his own competing bid for the cylinder upgrade on behalf of Integrated
Systems. (See Brainard Ex. 27 at 2-3).
Beginning at approximately 6:00 p.m. on October 8, 2012 and continuing
through the evening, Huber used his AFS laptop to copy nearly 98 gigabytes of
data to an external hard drive. (AFS Ex. 267 at 3; see AFS Ex. 142; 9/18/17 Tr. 49:451:8). Huber downloaded “all of the design drawings, all the documents that had
been prepared [by AFS] and approved by NASA, all the test procedures, all the
bill of materials, everything associated with the entire [Hydraulic System] project.”
(9/18/17 Tr. 170:11-15; see AFS Ex. 267 at 3). He also took documents specific to
AFS‟s gripper arms quote, as well as “all AFS engineering projects with pending
customer quotes” and “all AFS files on completed AFS projects going back to 1993.”
(AFS Ex. 267 at 3; see also 9/18/17 Tr. 49:4-21). Huber tendered his resignation
notice to AFS the next day, setting a projected resignation date of November 9,
2012. (See 9/18/17 Tr. 37:15-22). Huber was in contact with Aufiero over the course
of this two-day period. (See AFS Ex. 8 at 7). Huber later accelerated his resignation
date to October 26, 2012. (See 9/18/17 Tr. 37:23-38:1). When Huber returned his
laptop to AFS, staff discovered it to have been wiped of emails, documents, and a
drawing program. (Id. at 38:16-21; AFS Ex. 267 at 1-2).
Huber and the Livingston team doubled down on their preparatory efforts
in late October 2012 after receiving notice of the November 7 gripper arms “kick
off” meeting. (See AFS Ex. 149). In his scheduling email, Fava advised that Orbital
would need Livingston‟s rough order for the cylinders by November 2 to be able to
discuss that contract at the November 7 meeting. (Id.) Huber thereafter emailed to
Aufiero, Hill, and Hawkins many of the files he downloaded earlier in the month.
(AFS Exs. 150, 158). These files included weld maps and weld history reports, (AFS
Exs. 151-54), a Non-Destructive Evaluation Plan, (AFS Exs. 155-56), and tubing
assembly diagrams, (AFS Exs. 157-58). To conceal his theft, Huber postdated the
files and substituted “Integrated Systems” for “Advanced Fluid Systems, Inc.” as
the author and owner. (See AFS Exs. 153-58). Huber participated in a second,
daylong meeting at Livingston‟s offices on October 29. (See AFS Ex. 159; 9/25/17
Tr. 52:22-24; see also 9/21/17 Tr. 187:17-188:14, 189:9-190:3). Livingston submitted
its rough order of magnitude for the cylinder upgrade on November 2, 2012.3 (AFS
The draft proposal developed by Huber included a finder‟s fee and project
management compensation for Integrated Systems. (AFS Ex. 143 at 3; AFS Ex. 280,
Hawkins Dep. 27:22-24, 28:15-29:3, Mar. 3, 2016). The finalized rough order does not
explicitly reference the finder‟s fee or project management compensation, but
Integrated Systems is identified as the project manager. (See AFS Ex. 173 at 2).
Ex. 173). Orbital and Livingston representatives discussed the proposal in detail
during the November 7 “kick off” meeting. (See AFS Ex. 177 at 5). Livingston‟s
rough order relied on drawings generated by AFS and insider knowledge revealed
by Huber. (See 9/18/17 Tr. 186:4-187:18; 9/22/17 Tr. 5:10-14; see also AFS Ex. 173 at
2; AFS Ex. 135).
January through March 2013
Orbital ultimately awarded the cylinder contract to Integrated Systems,
to the “complete surprise” of the Livingston team. (See 9/22/17 Tr. 117:15-118:4).
According to Aufiero, Vann was “stunned” and “certainly not happy” with the
development. (Id. at 120:12-121:10). Integrated Systems submitted a firm fixed
price of $1,495,890 for the cylinder modification option and $1,768,998 for the new
cylinder option. (AFS Ex. 183 at 10). Orbital asked Integrated Systems to submit a
best and final offer for the new cylinder option alone. (AFS Ex. 189). On March 5,
2013, Integrated Systems submitted its best and final offer with a price of $1,974,966.
(AFS Ex. 191 at 14). Integrated Systems‟ firm fixed price and best and final offer
cited directly to, incorporated, and relied on AFS‟s documents. (See AFS Ex. 183
at 1, 3, 11; AFS Ex. 191 at 1-2).
On March 20, 2013, Orbital awarded the cylinder contract to Integrated
Systems. (AFS Ex. 192). Orbital and Integrated Systems later agreed to a final,
modified contract price of $2,028,966. (AFS Ex. 193 at 2). In a post-selection risk
assessment analysis, Fava cited Huber‟s familiarity with the hydraulic system
and the cost savings of working directly with Integrated Systems in justifying its
decision. (L&H Ex. 15 at 3-4). Brainard later intimated that Orbital would not have
awarded the cylinder contract to Integrated Systems had it known of Huber‟s
conduct. (See 9/20/17 Tr. 90:12-23).
Vaughn arrived at AFS‟s lost profits figure together with Dr. Jonathan A.
Cunitz (“Dr. Cunitz”), who was qualified at trial as an expert in damages calculation
and analysis. (9/19/17 Tr. 110:17-18, 111:17-19). Vaughn and Dr. Cunitz calculated
lost profits as follows:
Gripper Arms Subcontract
Less AFS Hardware Costs:
Less AFS Labor Costs:
AFS Lost Profit:
Gripper Arms Installation
Less AFS Hardware Costs:
Less AFS In-House Labor Costs:
Less AFS Miscellaneous Costs:
Less AFS On-Site Labor/Travel Costs:
AFS Lost Profit:
Gripper Arms Refurbishment
Less AFS Hardware Costs:
Less AFS Labor Costs:
Less AFS On-Site Labor/Travel Costs:
AFS Lost Profit:
Subcontract Final Price:
Less AFS Hardware Costs:
Less AFS Labor Costs:
AFS Lost Profit:
(AFS Ex. 265 at 9-13; AFS Ex. 266 at 10-14). Vaughn calculated AFS‟s estimated
costs by consulting with AFS engineers and relying on his familiarity with AFS
labor rates and its engineering, project management, and administrative capacity
for such projects. (See AFS Ex. 265 at 3-4).
Hill submitted a defense expert report and offered comments in response to
AFS‟s calculations. (See L&H Ex. 44). Hill remonstrated broadly that Vaughn‟s
and Dr. Cunitz‟s damages calculations were too high. (See id.) The value of Hill‟s
report and testimony is seriously undermined by several inconsistencies in his own
calculations which he was unable to explain at trial. (See, e.g., 9/22/17 Tr. 53:9-13;
compare L&H Ex. 44 ¶¶ 8-9, 16-19 with AFS Exs. 160, 273).
This Litigation & The Dropbox Discovery
AFS commenced this action on December 24, 2013. (Doc. 1). In its initial
complaint, AFS named Huber, Integrated Systems, Livingston, Vann, Aufiero, and
Orbital as defendants. (Id.) AFS asserted misappropriation, tortious interference
with contract and prospective contractual relations, unjust enrichment, commonlaw unfair competition, conversion, common law conspiracy, and Computer Fraud
and Abuse Act claims against all defendants, and Lanham Act claims against all
defendants but Orbital. (Id. at 28-34). AFS also charged Huber with breach of
fiduciary duty and the other defendants with aiding and abetting Huber‟s breach.
(Id. at 34-35). AFS thereafter voluntarily dismissed Orbital from the lawsuit. (See
Doc. 57). After Rule 12 motion practice winnowed the claims, AFS filed a second
amended complaint on July 7, 2014, (Doc. 70), and all defendants filed answers on
August 4, 2014, (Docs. 77-80).
During discovery, AFS subpoenaed Drobox for access to any accounts
associated with Huber‟s personal and business email addresses. (AFS Ex. 244 at 56). Dropbox reported that Huber had created two accounts: one affiliated with his
personal Gmail address, and another affiliated with his AFS email address. (Id. at 1,
9-10). Forensic examination revealed that, shortly after AFS served its subpoena,
Huber deleted a number of files and folders from his personal Dropbox account.
(AFS Ex. 268 at 2, 4; AFS Ex. 244 at 2, 4, 16). Dropbox restored portions of the
folders at counsel‟s request. Analysis of the restored folders showed that Huber
deleted AFS‟s gripper arms schematics, his inflated firm fixed price for the gripper
arms, circuit drawings for AFS‟s gripper arms design, the hydraulic system enditem data package delivered by AFS to the Authority following completion of the
system in 2011, and his consulting contract with Livingston for the gripper arms
work. (See AFS Ex. 268 at 4; AFS Exs. 204-08). The parties thereafter proceeded
Following Rule 56 motion practice, (see Doc. 236), the court convened a
bench trial over the course of six days from September 18 through September 25,
2017. (See Docs. 303-08). The court set an initial deadline of November 29, 2017 for
all parties to submit proposed findings of fact and conclusions of law. (Doc. 299). At
the Livingston defendants‟ request, the court extended the deadline to December 4,
2017. (See Doc. 316, 319). AFS submitted its proposed findings and conclusions on
November 16, 2017, (see Doc. 312), and Huber and Integrated Systems followed suit
on December 4, 2017, (see Doc. 323). To date, the Livingston defendants have not
complied with the court‟s order. Accordingly, the Livingston defendants have
waived any opportunity to present their factual and legal position to the court.
Conclusions of Law
Several issues of liability are settled at this juncture. We held at the Rule
56 stage that unequivocal record evidence established that Huber and Integrated
Systems had misappropriated AFS‟s trade secrets under the Pennsylvania Uniform
Trade Secrets Act (“PUTSA”), 12 PA. CONS. STAT. § 5301 et seq. (Doc. 236 at 28-31).
We found that AFS had proven two of the requisite elements of its common law tort
claim for breach of fiduciary duty against Huber, but resolved that genuine disputes
of fact precluded disposition of the third and final element. (Id. at 37-39). We also
determined that AFS had failed to show tortious conduct by Integrated Systems,
necessitating summary judgment in Integrated Systems‟ favor, and that manifold
factual disputes precluded summary judgment on AFS‟s aiding and abetting claim
against Livingston, Vann, and Aufiero. (Id. at 42-44).
Three inquiries remain. First, whether Livingston, Vann, or Aufiero
are liable for misappropriation of trade secrets under Pennsylvania law. Second,
whether Huber is liable for breaching his fiduciary duty to AFS, and whether the
Livingston defendants are liable for aiding and abetting said breach. And third,
whether and to what extent compensatory, exemplary, and punitive damages are
warranted. We address these issues seriatim.
Misappropriation of Trade Secrets by Livingston, Vann, and
Pennsylvania law divides “misappropriation” into three distinct categories:
“acquisition,” “use,” and “disclosure.” 12 PA. CONS. STAT. § 5302. AFS advances
its misappropriation claim under the first theory, contending that the Livingston
defendants “misappropriated AFS‟[s] trade secrets through improper „acquisition.‟”
(Doc. 312 at 94 ¶ 5). PUTSA defines the offense of misappropriation by acquisition
as the “acquisition of a trade secret of another by a person who knows or has reason
to know that the trade secret was acquired by improper means.” 12 PA. CONS. STAT.
§ 5302. “Improper means” include, inter alia, “theft, bribery, misrepresentation,
breach or inducement of a breach of a duty to maintain secrecy or espionage
through electronic or other means.” Id.
There is no dispute that the Livingston defendants acquired trade secrets
belonging to AFS. (Doc. 236 at 32-34). The record is rife with proof that, beginning
in March 2012, the Livingston defendants eagerly accepted from Huber copious
AFS documents relating to the cylinder upgrade. The information shared included
an 11-page Hydraulic System spares spreadsheet, 88 pages of engineering drawings,
37 pages of system specifications, and price and cost data for the system‟s cylinder
assemblies. During the gripper arms bidding process, Huber also shared AFS‟s
firm fixed price with Livingston via Dropbox, in addition to AFS‟s gripper arms
drawings and other documents in October 2012 and January 2013. Each of these
documents contained AFS‟s trade secrets as defined by Pennsylvania law. (Doc.
236 at 20-28). The only extant determination is whether the Livingston defendants
knew or should have known that Huber acquired these trade secrets by improper
means. See 12 PA. CONS. STAT. § 5302.
Each Livingston defendant at minimum had constructive knowledge that
Huber obtained AFS‟s trade secrets by improper means before transmitting them
to Livingston employees. Vann, Aufiero, Hill, Hawkins, and Smith each received
confidential AFS documents from Huber throughout 2012. With the exception
of documents altered by Huber to include Integrated Systems‟ title block, most
documents transmitted to the Livingston team contained AFS‟s propriety stamp,
This drawing discloses propriety and confidential data of
Advanced Fluid Systems, Inc., and may not be used disclosed
or released, in whole or in part, for any purpose outside the
authorized recipient, without signed authorization, and must
be returned upon request.
No defendant was able to offer a credible explanation for wholly disregarding
AFS‟s proprietary stamp. Moreover, Vann, Aufiero, Hill and Hawkins were aware
that Huber was an AFS employee the entire time. They were aware of it when they
granted him access to Livingston‟s commercial Dropbox, when they installed a VPN
on Huber‟s AFS laptop, and when they provided him a Livingston email address.
And they were aware of it each time they accepted a confidential drawing from him.
Huber confirmed that his employment with AFS was no secret to Livingston. Yet
the Livingston defendants eagerly accepted AFS‟s confidential documents from
Huber for nearly a year.
The Livingston defendants offer two justifications for their conduct.4 First,
they suggest that Orbital employees intimated to Vann, Aufiero, and others that
Orbital legally owned all drawings and other materials produced by AFS pursuant
to the 2009 contract. (See 9/18/17 Tr. 27:12-28:8; see also Doc. 175-2 at 11-12). At
trial, counsel averred that Orbital, “from day one,” represented to Livingston that
Orbital owned the Hydraulic System drawings. (See 9/18/17 Tr. 28:3-5). Counsel
also alleged that Edwards, Orbital‟s then-ground systems engineer, shared certain
documents with Livingston pursuant to the nondisclosure agreement. (Id. at 27:2328:3). It follows, counsel posited, that the Livingston defendants were justified in
believing that Huber could also share AFS‟s materials with them. (Id. at 27:16-28:8).
The chronology established at trial belies this contention. The Livingston
defendants began their collaboration with Huber in early January 2012, granting
him access to Livingston‟s Dropbox, establishing a Livingston VPN on his AFSissued laptop, and providing him with a Livingston email address. These actions
enabled Huber to share AFS‟s confidential documents with Livingston, which he
did as early as March 2012. On March 27, 2012, for example, Huber emailed a
spreadsheet containing spare part requirements and pricing for the Hydraulic
System to Aufiero. On April 2, 2012, he transmitted a batch of AFS engineering
drawings to Aufiero via Dropbox, including a “majority of the hydraulic
schematics,” to provide Livingston with a leg-up during its April 11, 2012 meeting
As noted supra, the Livingston defendants failed to comply with the court‟s
orders directing the parties to file proposed findings of fact and conclusions of law
by December 4, 2017. (See Docs. 299, 319). As a result, the court is constrained to
extrapolate the Livingston defendants‟ arguments from their position at summary
judgment and counsel‟s opening statement at trial.
with Orbital. And on April 4, 2012, Huber provided Hill with the 37-page
specifications on which AFS‟s system design was based.
The nondisclosure agreement heralded by defendants as authorizing
their acceptance and use of these documents was not executed until May 16, 2012—
nearly two months after Huber‟s first transmissions. And it was not until June 2012
that Edwards shared with Livingston a limited set of AFS drawings pursuant to the
nondisclosure agreement. The Livingston defendants could not have been relying
on Orbital‟s conduct at the time they accepted AFS documents from Huber in
March and April.
Nor does the nondisclosure agreement or Orbital‟s conduct absolve the
Livingston defendants for their actions after May 16, 2012. The only reasonable
inference to be drawn from the nondisclosure agreement and Edwards‟ disclosure
of documents is that Orbital believed it was authorized to share documents with
Livingston. The record offers no support for the Livingston defendants‟ claimed
belief that Huber was authorized to share AFS‟s engineering drawings. Per contra,
Orbital‟s employees and the Authority‟s employees testified uniformly that neither
entity authorized Huber to share AFS‟s drawings with Livingston, nor did either
authorize Livingston to accept the documents from Huber. Both entities confirmed
that to do so would contravene their internal policies. We cannot credit the
Livingston defendants‟ post hoc rationalization of their conduct.
Second, the Livingston defendants intimate that industry practice
countenances their conduct. Livingston‟s counsel adjured during opening
statements that it is “common practice in the engineering field” for customers
shopping new engineering firms to share schematics developed by an incumbent in
the course of soliciting quotes. (See 9/18/17 Tr. 24:23-25:7). Whether this practice
exists is irrelevant to the claims sub judice. AFS does not assert that the Livingston
defendants violated the law by accepting a limited batch of drawings from Orbital.
It contends they did so by acquiring those documents from Huber—a known
employee of a firm against which Livingston was actively competing.
Several additional points bear emphasis. The Livingston defendants were
not merely passive recipients of AFS documents. Livingston employees used the
documents provided by Huber to prepare for meetings with Orbital and, on at least
one occasion, solicited specific documents from him. Regarding documents Huber
transferred to Aufiero in advance of Livingston‟s April 2012 meeting with Orbital,
Aufiero admitted at trial that he “absolutely” reviewed the documents to gather an
“understanding” of the Wallops Island project. Hill concurred that the documents
helped the Livingston team prepare for the meeting. Later, when bidding for the
cylinder upgrade was in full swing, Aufiero explicitly asked Huber to forward the
hydraulic schematic for both the cylinders and the gripper arms. Vann conceded
that he was aware as early as February 2012 of the document sharing between his
employees and Huber.
Finally, the evidence establishes that the Livingston defendants knew
Huber‟s conduct was wrong. Hill voiced concern to Aufiero about trusting Huber,
postulating that if Huber‟s ethics did not impede him from sharing AFS documents,
he might likely do the same to Livingston. Vann testified with respect to receipt of
AFS‟s internal pricing information that had he “known that [his] . . . high-level
employees were getting internal pricing from another company,” he would have
directed them to reject it. (9/19/17 Tr. 184:6-9). Aufiero testified that he did not take
AFS‟s documents with him when he left the firm and agreed to do so is “wrong.”
(9/21/17 Tr. 77:4-18). He further testified that he knew AFS management would not
“have been happy about” what Huber was doing. (Id. at 75:15-18). Yet each of
these individuals persisted in their collusion with Huber.
AFS has proven by a preponderance of the evidence that Vann and Aufiero
acquired AFS‟s trade secrets from Huber knowing that Huber had obtained same
through “improper means.” See 12 PA. CONS. STAT. § 5302. Vann‟s and Aufiero‟s
stated beliefs that their conduct was aboveboard are untenable against the weight
of the record, in particular the chronology of events and circumambient indicia of
awareness of Huber‟s wrongdoing. These defendants knew that their conduct was
inappropriate and resolved that the risk was worth the reward.
AFS has also proven by a preponderance of the evidence that Livingston
is vicariously liable for the acts of Vann and Aufiero. No court has yet addressed
whether PUTSA allows for vicarious trade secret liability. The near unanimous
consensus of federal and state courts holds that the Uniform Trade Secrets Act—on
which the Pennsylvania statute is based—does contemplate vicarious liability when
state law otherwise provides the cause of action.5 Pennsylvania law recognizes
respondeat superior liability for intentional and even criminal acts of an employee.
Brezenski v. World Truck Transfer, Inc., 755 A.2d 36, 39 (Pa. Super. Ct. 2000) (citing
Fitzgerald v. McCutcheon, 410 A.2d 1270, 1271-72 (Pa. Super. Ct. 1979)). We join the
majority of federal and state courts and hold that PUTSA authorizes vicarious trade
Under Pennsylvania law, an employer may be vicariously liable for its
employee‟s intentional acts if the conduct (1) is similar in kind to that which the
employee is hired to perform, (2) occurs “substantially within” the temporal and
spatial scope of employment, and (3) is “actuated,” at least in part, in service of the
employer. See PNC Mortg. v. Superior Mortg. Corp., No. 09-5084, 2012 WL 628000,
See Manitowoc Cranes LLC v. Sany Am. Inc., No. 13-C-677, 2017 WL
6327551, at *4-5 (E.D. Wisc. Dec. 11, 2017) (Wisconsin Uniform Trade Secret Act);
Deluxe Fin. Servs., LLC v. Shaw, No. 16-3065, 2017 WL 3327570, at *4-5 (D. Minn.
Aug. 3, 2017) (Ohio Uniform Trade Secrets Act); Enhanced Recovery Co., LLC
v. Frady, No. 3:13-CV-1262, 2015 WL 1470839, at *11-12 (M.D. Fla. Jan. 20, 2015)
(Florida Uniform Trade Secrets Act), rejected in part on other grounds by 2015 WL
1470852 (M.D. Fla. Mar. 31, 2015); Extreme Reach, Inc. v. Spotgenie Partners, LLC,
No. 13-7563, 2013 WL 12081182, at *6-7 (C.D. Cal. Nov. 22, 2013) (California Uniform
Trade Secrets Act); Language Line Servs., Inc. v. Language Servs. Assocs., Inc.,
944 F. Supp. 2d 775, 783 (N.D. Cal. 2013) (same); Newport News Indus. v. Dynamic
Testing, Inc., 130 F. Supp. 2d 745, 750-51 (E.D. Va. 2001) (Virginia Uniform Trade
Secrets Act); Thola v. Henschell, 164 P.3d 524, 528-29 (Wash. Ct. App. 2007)
(Washington Uniform Trade Secret Act). These courts hold that the Uniform
Trade Secret Act‟s preemption clause—which is identical in all material respects
to PUTSA‟s preemption clause, 12 PA. CONS. STAT. § 5308—does not preclude
vicarious liability because same is a theory of liability rather than an independent
tort, claim, or remedy. See Newport News Indus., 130 F. Supp. 2d at 751; but see
Infinity Prods., Inc. v. Quandt, 810 N.E.2d 1028, 1033-34 (Ind. 2004) (holding that
Indiana‟s more stringent preemption clause, evincing state legislature‟s rejection
of uniform act language, precludes vicarious liability). We agree with the ratio
decidendi of this robust majority.
at *30 (E.D. Pa. Feb. 27, 2012) (citing Bro-Tech Corp. v. Thermax, Inc., 651 F. Supp.
2d 378, 419-20 (E.D. Pa. 2009); Costa v. Roxborough Mem. Hosp., 708 A.2d 490, 493
(Pa. Super. Ct. 1998)). Vann‟s and Aufiero‟s actions (as well as the actions of Hill,
Hawkins, and Smith) related directly to their job duties, occurred fully within the
temporal and spatial scope of their work, and were motivated, at least in part, by a
desire to serve Livingston. The court finds that Livingston is vicariously liable for
its employees‟ misappropriative acts.
Breach of Fiduciary Duty by Huber
Under Pennsylvania law, employees owe a duty of loyalty to their
employer. Synthes, Inc. v. Emerge Med., Inc., 25 F. Supp. 3d 617, 667 (E.D. Pa.
2014) (citing Crown Coal & Coke Co. v. Compass Point Res., LLC, No. 07-1208, 2009
WL 891869, at *5 (W.D. Pa. Mar. 31, 2009)). This duty obliges employees to refrain
from competing with their employer or assisting its competitors and from using
protected information to a competitor‟s advantage. See id. (citing RESTATEMENT
(THIRD) OF AGENCY § 8.04-.05 (AM. LAW INST. 2006)). To sustain its claim for breach
of fiduciary duty, AFS must demonstrate that: (1) Huber failed to act in good faith
and for AFS‟s sole benefit in the course of his employment; (2) AFS suffered an
injury; and (3) Huber‟s failure to act solely for AFS‟s benefit was “a real factor in
bring[ing] about” that injury. See id. (alteration in original) (quoting McDermott
v. Party City Corp., 11 F. Supp. 2d 612, 626 n.18 (E.D. Pa. 1998)). The court held at
the summary judgment stage that AFS has proven the first two elements of this
claim. (Doc. 236 at 37-38).
No Pennsylvania court has defined the term “real factor,” nor has any
federal court interpreted the phrase. The Pennsylvania Suggested Standard Civil
Jury Instructions define “real factor” as akin to “factual cause,” to wit:
Breach of Fiduciary Duty—Factual Cause
The defendant agent or fiduciary is legally responsible
for the damages suffered by the plaintiff if the defendant‟s
. . . intentional misconduct was a factual cause of those
If the damages in question would have been sustained
even if the agent or fiduciary had not . . . acted wrongfully,
then the defendant‟s conduct would not be a factual cause
in causing the plaintiff‟s damages. On the other hand,
the defendant‟s . . . intentional misconduct was a factual
cause in causing the plaintiff‟s damages if those damages
would not have been sustained had the defendant not
acted as [he] [she] did.
PA. SUGGESTED STANDARD CIVIL JURY INSTRUCTIONS § 6.230 (2003). Huber agrees
that this definition controls. (Doc. 323 ¶¶ 165-66).
The full scope of Huber‟s efforts to undermine AFS and support Livingston
was illuminated at trial. Huber did not deny the majority of the conduct supporting
AFS‟s breach of fiduciary duty claim. Indeed, Huber admitted:
that he twice organized site visits to Wallops Island for
the Livingston team to meet with Orbital engineers,
(see 9/25/17 Tr. 122:14-23, 132:11-133:4);
that he met with the Livingston team in advance of
those meetings to prepare and better position them,
(see id. at 123:25-124:17);
that part of that preparation included disclosure and
use of AFS confidential documents, (see id. at 126:1219);
that in April of 2012, he was “working diligently in
positioning [Livingston] in a favorable position” with
Orbital, (id. at 124:18-126:4);
that he inflated AFS‟s gripper arms bid without
authorization from engineering, (see id. at 48:23-49:9);
that he instructed a new sales manager to conceal the
inflated bid from engineering, (see id. at 47:13-49:9).
The record establishes that Orbital asked Huber to secure quotes from AFS for both
cylinder options—its preferred option of building new cylinders and the alternative
of modifying the current cylinders—and that Huber never shared the new cylinder
request with AFS. He did, however, assist Livingston in bidding the new cylinder
contract. Eventually, Huber secured the new cylinder contract for himself and his
new firm, Integrated Systems.
We find that Huber was the direct cause of AFS losing the gripper arms
contracts. Indeed, the record reflects textbook causation. Huber inflated the
gripper arms quote prepared by AFS‟s engineering department by more than
$130,000. Orbital cited this inflation in explaining why it chose Livingston over
AFS. Fava and Brainard testified that Orbital‟s decision was “[b]ased on price.”
Brainard left no room for doubt, confirming that “high price” was “the principal
reason why AFS lost this contract.” Both agreed that, prior to Huber‟s interference,
AFS had a clear advantage over Livingston for the gripper arms contract. This
testimony wholly refutes Huber‟s suggestion that Orbital had written AFS off as a
vendor due to past customer service issues.
We reject Huber‟s claim that he had good reason to submit the selfdescribed “extremely high” gripper arms bid on AFS‟s behalf. (See Doc. 323 ¶ 70).
Huber invokes a host of retrospective justifications for his conduct—claiming that
the AFS engineering team failed to account for installation costs, discounts yet to be
negotiated by Orbital, and Huber‟s own desired commission margin. (See id.) To
the extent these concerns actually animated Huber‟s conduct, we can conceive of
no legitimate basis for his failure to raise them with AFS‟s engineers at the time.
We simply cannot credit Huber‟s ex post facto justification or his specious claim that
he did in fact “want AFS to get the gripper arms contract.” (9/25/17 Tr. 47:10-11).
Huber inflated AFS‟s gripper arms bid and concealed his conduct in an effort to
price AFS out of contention. He succeeded and, in doing so, deprived AFS of the
gripper arms contract.
Huber was also a real factor in denying AFS an opportunity to pursue
the preferred cylinder upgrade option. Orbital wanted a single vendor to handle
both of the 2012 contracts, and AFS‟s loss of the gripper arms contract placed it
at a “huge disadvantage” for the cylinder upgrade. Orbital relied exclusively on
Huber to communicate to AFS that Orbital was seeking quotes for both a cylinder
modification option and a new cylinder option. Orbital‟s lead engineers described
AFS as a “a legitimate contender” for either of the contracts and confirmed that
AFS in fact had an “advantage” as Orbital‟s incumbent vendor. Orbital engineers
eventually discovered that modification of the cylinders was not feasible with their
launch schedules and that the only workable option was to manufacture and install
new cylinders. Huber knew all of this, and he knew that AFS was interested in a
new cylinder option. Yet he concealed the new cylinder opportunity, deliberately
limiting AFS to the risky cylinder modification option. He openly encouraged
Livingston to pursue the favored new cylinder option. And he pressured Orbital
to abandon AFS for Livingston.6
More direct evidence of causation is difficult to fathom. Huber‟s subterfuge
resulted in Orbital rejecting AFS‟s gripper arms bid and prevented AFS from ever
competing for the new cylinder contract. What is more: Huber intended this result.
Uncontradicted evidence reflects that Huber endeavored to have Livingston replace
AFS as the vendor on Wallops Island. At trial, he never once expressed concern for
AFS‟s interests. He instead testified that his goal was “to help the customer,” that
Orbital “needed somebody to stand by them,” and that he “definitely . . . had a
loyalty to” Orbital. (9/25/17 Tr. 96:12--97:13; see id. at 159:7-14). Tellingly, Huber
also conceded: “and of course I wanted to help myself.” (Id. at 97:6-8). Huber
adhered to a perceived duty of loyalty to everyone but his own employer. Huber
is liable to AFS for breach of fiduciary duty. A more compelling case for such a
breach is difficult to conjure.
Huber‟s claim that he never received a “formal” request for quote from
Orbital for the new cylinder upgrade is of no moment. (See Doc. 323 ¶ 168). This
assertion ignores the essentia of AFS‟s claim: Huber knew Orbital was weighing
both upgrade options, and he knew Orbital wanted AFS to bid both options, yet
he deliberately concealed the preferable option from AFS.
Aiding and Abetting Breach of Fiduciary Duty by Livingston, Vann,
To prevail on a claim for aiding and abetting a fiduciary‟s breach, AFS must
establish (1) that Huber breached his fiduciary duty to AFS, (2) that the Livingston
defendants knew of Huber‟s breach, and (3) that the Livingston defendants offered
“substantial assistance or encouragement” to Huber in effecting his breach. See
Synthes, 25 F. Supp. 3d at 674-75 (quoting Reis v. Barley, Snyder, Senft & Cohen,
667 F. Supp. 2d 471, 491 (E.D. Pa. 2009)). In other words, the Livingston defendants
must have known that Huber‟s activities constituted a breach of fiduciary duty and
nevertheless assisted or encouraged that breach. See id. at 675 (quoting Bd. of Trs.
of Teamsters Local 862 Pension Fund v. Foodtown, Inc., 296 F.3d 164, 174 (3d Cir.
2002)); Bair v. Purcell, 500 F. Supp. 2d 468, 496 (M.D. Pa. 2007) (same). We held
supra that Huber knowingly breached his fiduciary duty to AFS. Hence, the
remaining inquiries are whether the Livingston defendants knew of that breach
and either substantially assisted or encouraged same. See Synthes, 25 F. Supp. 3d
Vann and Aufiero knew Huber was breaching his fiduciary duty by working
contemporaneously for both Livingston and AFS. Vann admitted at trial that he
knew Huber was employed by AFS “for the majority of 2012” and that Livingston
knowingly “accepted things from a competitor from one of their employees for
nearly a year.” Although Vann initially voiced concerns about the arrangement,
he never revisited the issue or directed his employees to stop working with their
competitor‟s employee. Aufiero likewise confirmed that he knew Huber was
employed by AFS throughout 2012 and that he worked with him anyway. This
knowledge is imputed to Livingston. See PNC Mortg., 2012 WL 628000, at *30
(citing Bro-Tech Corp., 651 F. Supp. 2d at 419-20; Costa, 708 A.2d at 493). The
second element resolves in AFS‟s favor as to all defendants.
AFS must also prove that each defendant provided substantial assistance
or encouragement to Huber in committing the fiduciary breach. See Synthes, 25
F. Supp. 3d at 677; Bair, 500 F. Supp. 2d at 496. Pennsylvania courts have adopted
the Restatement (Second) of Torts in developing a standard for aiding and abetting
breach of fiduciary duty claims. See Koken v. Steinberg, 825 A.2d 723, 731-33 (Pa.
Commw. Ct. 2003). The Restatement enumerates five factors for measuring the
degree of assistance or encouragement provided, to wit: “the nature of the act
encouraged, the amount of assistance given by the defendant, his presence or
absence at the time of the tort, his relation to the other [tortfeasor,] and his state of
mind.” Synthes, 25 F. Supp. 3d at 677 (quoting RESTATEMENT (SECOND) OF TORTS
§ 876 (AM. LAW. INST. 1965)). Courts often consider duration of assistance to be a
sixth relevant factor. See Bair, 500 F. Supp. 2d at 496 (citing Doe v. Liberatore, 478
F. Supp. 2d 742, 759 (M.D. Pa. 2007)).
AFS relies on eleven specific instances of conduct to support its claim against
the Livingston defendants. AFS emphasizes that, while knowing Huber was
employed by AFS, Livingston: (1) installed VPN software on Huber‟s AFS laptop;
(2) provided Huber with a Livingston email address; (3) provided Huber with
Livingston letterhead; (4) provided Huber with access to Livingston‟s Dropbox
account; (5) provided Huber with accommodations at its corporate condominium
in North Carolina; (6) made its employees and headquarters available to Huber;
(7) sent Vann to Wallops Island with Huber to “impress” Orbital; (8) agreed to
compensate Huber for projects “steered” to Livingston; (9) accepted a contract to
pay Huber for his gripper arms work; (10) sent Huber its labor rates to justify
Livingston taking over the Orbital relationship; and (11) participated in over 300
phone calls with Huber. (Doc. 312 at 132 ¶ 88).
All of this conduct occurred under Vann‟s watch during his tenure as
Livingston‟s president. At trial, Vann expressly confirmed his understanding of an
employee‟s duty of loyalty to their employers. (See 9/19/17 Tr. 144:1-3). Yet he met
with Huber as early as January 2012—knowing Huber was then employed by a
competitor—to discuss Livingston becoming involved at Wallops Island. He knew
Livingston employees met with Huber for a visit to Wallops Island on March. He
attended the second visit in April himself. Vann also knew as early as February
that Livingston employees were sharing documents on Dropbox and collaborating
with Huber. He approved a compensation package for Huber in May, to reward
him for “business steered toward or participated in with Livingston.” And he
knew Huber was employed by a competitor the entire time. Astonishingly, Vann
suggested that it was Orbital‟s duty to patrol ethical boundaries and “tell [us] not to
come” if doing so would be inappropriate. (9/20/17 Tr. 46:22-47:5).
We find that Vann knowingly provided substantial assistance and
encouragement to Huber. Vann offered a financial incentive to draw Huber
from AFS and to encourage his ongoing duplicity. Vann‟s actions confirmed to
Huber that his disloyal conduct was and would continue to be fully supported by
Livingston. At trial, Vann agreed that “the buck stops” with him. (9/20/17 Tr. 6:1718). As president of Livingston, Vann had the authority ether to shut down or to
sanction his employees‟ complicity in Huber‟s conduct. Vann chose the latter. As a
consequence, Vann is liable—and Livingston is vicariously liable—for aiding and
abetting Huber‟s breach of fiduciary duty. See Brezenski, 755 A.2d at 39; Bro-Tech
Corp., 651 F. Supp. 2d at 419-20.
We reach a different result for Aufiero. In stark contrast to Vann, Aufiero
was unable to incentivize Huber‟s double-dealing in any meaningful way. Aufiero
lacked the authority to hire Huber or to determine Huber‟s compensation. AFS has
not adduced any record evidence indicating that Aufiero had the ability to arrange
for or approve any of the principal acts of assistance identified in its submissions.7
Nor is there evidence that Aufiero had supervisory authority to order Livingston‟s
employees to cease engaging with Huber—or that he could have done so even if
authorized, given that his own supervisor, Vann, was encouraging their conduct
himself. Aufiero did engage in regular telephonic and email correspondence with
AFS contends that Livingston “[sent] Huber the Livingston labor rates
so Huber could „justify Livingston taking over.‟” (Doc. 312 at 132 ¶ 88). Aufiero did
send Livingston‟s rates to Huber at Huber‟s request. (AFS Exs. 96-97). But he did
so believing Huber would use them “[t]o justify AFS rates.” (See AFS Ex. 97 at 1).
It was Huber, not Aufiero, who thereafter stated he would use the rates to justify
Livingston “taking over.” (Id.)
Huber, and he and several other Livingston employees did work with Huber to
draft the gripper arms and cylinder proposals. But only Vann had the power to
substantially assist and encourage Huber‟s conduct. On this record, we cannot
conclude that Aufiero aided and abetted Huber‟s breach of fiduciary duty.
Damages & Attorneys’ Fees
AFS seeks compensatory damages for lost profits under PUTSA rather than
common law. (Doc. 312 at 109 ¶ 36). Relying on the damages report and testimony
presented by Vaughn and Dr. Cunitz, AFS requests total damages of $1,096,009 as
compensation for lost profits flowing from defendants‟ misappropriation. (Id. ¶¶ 36,
Courts measure damages for misappropriation of trade secrets in one of
two ways: plaintiff‟s losses, or defendant‟s gain. See 12 PA. CONS. STAT. § 5304(a);
Fishkin v. Susquehanna Partners, G.P., No. 03-3766, 2007 WL 853769, at *1 (E.D. Pa.
Mar. 19, 2007) (citing Rohm & Haas Co. v. Adco Chem. Co., 689 F.2d 424, 433-34 (3d
Cir. 1982); Comput. Print Sys., Inc. v. Lewis, 422 A.2d 148, 157 (Pa. Super. Ct. 1980)).
AFS proceeds on the first theory. (Doc. 312 at 109 ¶ 36). Under Pennsylvania law, a
plaintiff must prove damages with “reasonable certainty.” HealthCare Advocates v.
Affordable Healthcare Options, No. 09-5839, 2010 WL 4665956, at *2 (E.D. Pa. Nov.
18, 2010) (citing ATACS Corp. v. Trans World Commc‟n, Inc., 155 F.3d 659, 669 (3d
Cir. 1998)). This standard does not require “mathematical certainty.” Delahanty
v. First Pa. Bank N.A., 464 A.2d 1243, 1257-58 (Pa. 1984). Although damages may
not be grounded in “conjecture or guesswork,” a factfinder may make a “just and
reasonable estimate” based on “probable, inferential, as well as direct and positive
proof.” Advanced Research Sys., Inc. v. Coldedge Techs., Inc., 56 A.3d 402, 417-18
(Pa. Super. Ct. 2012) (quoting Liss & Marion, P.C. v. Recordex Acquisition Corp.,
937 A.2d 503, 516 (Pa. Super. Ct. 2007), aff‟d, 983 A.2d 652 (Pa. 2009)).
The court finds Vaughn‟s and Dr. Cunitz‟s damages calculations to be well
supported by record evidence. Regarding the cylinder contract, Vaughn and Dr.
Cunitz collaborate to arrive at a total lost profit figure of $841,025. (See AFS Ex. 265
at 8; AFS Ex. 266 at 8). That assessment is based on Vaughn‟s experience with the
initial hydraulic system design, manufacture, and installation, and the following
reasonable assumptions: that AFS would have again subcontracted with Maritime
Hydraulic, as Integrated Systems did, for new cylinder design and manufacture,
and at the same amount paid by Integrated Systems; and that Orbital would have
paid AFS the same amount that it paid to Integrated Systems. (AFS Ex. 265 at 2-5,
9; AFS Ex. 266 at 2-5, 10). Vaughn estimates AFS‟s anticipated costs on the cylinder
upgrade to be $1,114,986. (See AFS Ex. 265 at 3-5, 9; see also AFS Ex. 266 at 5, 10).
Subtracting this amount from the contract price, Vaughn and Dr. Cunitz arrive at a
lost profit of $841,025 for the cylinder upgrade. (AFS Ex. 265 at 3, 8; AFS Ex. 266 at
Vaughn and Dr. Cunitz employ similar methodology to calculate lost profits
for the gripper arms contracts. Vaughn and Dr. Cunitz each fairly assume that
Orbital would have paid AFS the same amount it paid Livingston—$285,685 for
design and manufacture and $157,967 for installation, site commission, and travel—
and that, as the incumbent on the project, AFS also would have received a $219,776
contract for refurbishment of the gripper arms following damage thereto in 2015.
(See Doc. 265 at 5-8; Doc. 266 at 6-8). Vaughn estimates AFS‟s costs on the three
gripper arms contracts to be $179,650, $85,764, and $143,030, respectively. (Doc. 265
at 6-8, 10-12; see also Doc. 266 at 6-8, 11-13). Deducting total costs of $408,444 from a
total contracts price of $663,428, Vaughn and Dr. Cunitz calculate AFS‟s lost profit
on the trio of gripper arms contracts to be $254,984. (AFS Ex. 265 at 6, 8; AFS Ex.
266 at 7-8).
Defendants‟ attempts to oppugn AFS‟s damages calculations are ineffectual.
Hill, Livingston‟s damages witness, states in his responsive report that AFS‟s
expected profit margin of 43 percent on the cylinder contract is too high and that
industry average on such a project would be 25 to 30 percent. (See L&H Ex. 44 ¶¶
16-17, 19). He claims that Livingston‟s rough order of magnitude projected a profit
margin in line with this purported industry average. (Id. ¶ 18). This report is in
direct conflict with Livingston‟s actual rough order of magnitude calculations,
which identifies an anticipated margin of 40.3 percent. (See AFS Ex. 160).
Regarding the gripper arms project, Hill avers that Livingston‟s actual
profit was $85,520.33, more than $20,000 less than AFS‟s anticipated profit, and that
AFS simply could not “have realized so much more in the way of profit than did
[Livingston].” (L&H Ex. 44 ¶¶ 8-9). Hill had no response when presented with
evidence that AFS‟s estimated margin—37 percent—is well below Livingston‟s
estimated margin of 44 percent and actual margin of 48 percent, (see AFS Ex. 273),
and that Livingston actually received more than $137,000 in gross profit on the
gripper arms project. (9/22/17 Tr. 45:23-53:13). When pressed at trial, Hill could not
explain the patent inconsistency: “[H]ow the discrepancy is there I can‟t, I don‟t
know the answer to that.” (Id. at 53:9-13).
Huber also attempts to attack AFS‟s damages calculation.8 He contends that
Vaughn underestimated the labor costs for the cylinder upgrade contract and that
Vaughn discounted the amount of design work necessary to complete the upgrade.
(Doc. 323 ¶ 125). Ample record evidence reflects that it was Maritime Hydraulic,
not Integrated Systems, that completed most of the design work for the cylinder
upgrade. (See 9/18/17 Tr. 192:24-193:7, 195:9-196:22; 9/19/17 Tr. 124:15-22). Huber
also suggests that Vaughn‟s estimates failed to account for the fact that Integrated
Systems was tasked with performing a “component swap,” (Doc. 323 ¶ 125), but
Brainard testified on Orbital‟s behalf that no such swap work was performed by
Integrated Systems, (9/20/17 Tr. 90:24-92:7).
AFS is entitled to compensatory damages under PUTSA. Its lost profits
on the gripper arms and cylinder upgrade contracts flow directly from defendants‟
Huber and Integrated Systems first counter AFS‟s damages request by
raising many of the same causation defenses asserted with respect to liability, to
wit: that AFS caused its own injury by providing substandard services to Orbital
and failing to pursue the cylinder contract, and that AFS‟s own employee concealed
Huber‟s inflated gripper arms bid. (Doc. 323 ¶¶ 142, 145-48). These assertions fail
for the reasons identified supra.
collusive misappropriation and collaborative use of AFS‟s trade secrets in proposals
presented to Orbital. But for defendants‟ acquisition of AFS‟s trade secrets, there
is a “reasonable certainty” that AFS would have received the gripper arms and
cylinder upgrade contracts. See HealthCare Advocates, 2010 WL 4665956, at *2.
The court will award damages of $1,096,009, jointly and severally, against Huber,
Integrated Systems, Livingston, Vann, and Aufiero. See Fishkin, 2007 WL 853769,
AFS seeks exemplary damages against Huber, Integrated Systems,
Livingston, Vann, and Aufiero. PUTSA authorizes exemplary damages in an
amount not more than double compensatory damages in cases of “willful and
malicious” misappropriation. 12 PA. CONS. STAT. § 5304(b). Willful and malicious
misappropriation is defined by statute to include
[s]uch intentional acts or gross neglect of duty as to evince
a reckless indifference of the rights of others on the part
of the wrongdoer, and an entire want of care so as to raise
the presumption that the person at fault is conscious of
the consequences of his carelessness.
Id. § 5302. In determining whether to award exemplary damages, courts have
considered, as proof of willfulness and malice, the duration of misappropriative
conduct, the defendant‟s consciousness of resulting injury, and any efforts to cover
up malfeasance. See, e.g., B.B. Microscopes v. Armogida, 532 F. Supp. 2d 744, 756-
57 (W.D. Pa. 2007); Advanced Research Sys., Inc. v. Coldedge Techs., Inc., No. 2317
EDA 2015, 2016 WL 5210561, at *2 (Pa. Super. Ct. 2016) (mem.).9
Huber suggests that he at worst committed “barebones” misappropriation
undeserving of enhanced damages. (Doc. 323 ¶ 156 (citation omitted)). We have a
different view entirely. Huber siphoned AFS‟s trade secrets to Livingston
continuously for almost an entire year. He worked tirelessly to divert valuable
Orbital contracts from AFS—his own employer—to a known competitor, and he
used AFS‟s trade secrets to accomplish that objective. He was conscious of his
wrongdoing, as evidenced by his alteration of title blocks to obscure ownership and
authorship of crucial engineering drawings. And he was conscious that his actions
would cause financial and reputational harm to AFS. See 12 PA. CONS. STAT. § 5302.
Indeed, he plainly intended to deprive AFS of a valuable customer relationship
Huber asseverates that Pennsylvania law requires AFS to prove exemplary
damages by clear and convincing evidence. (Doc. 323 ¶ 154). As support, he cites
to a decision from the Central District of California applying California‟s Uniform
Trade Secrets Act and determining that California‟s statute requires proof of willful
and malicious conduct at a heightened standard. See Mattel, Inc. v. MGA Entm‟t,
Inc., 801 F. Supp. 2d 950, 952 (C.D. Cal. 2011). We note that the decision in Mattel is
inconsistent with the Ninth Circuit‟s determination in Yeti by Molly Ltd. v. Deckers
Outdoor Corp., 259 F.3d 1101 (9th Cir. 2001), that “nothing in [Montana‟s Uniform
Trade Secret Act],” containing an exemplary damages provision nearly identical to
California‟s, “requires exemplary damages to be proved by clear and convincing
evidence.” Id. at 1111. State and federal courts across the country are split on the
applicable standard. Compare Russo v. Ballard Med. Prods., No. 2:05-CV-59, 2007
WL 752164, at *2 (D. Utah Mar. 7, 2007) (preponderance) and Zawels v. Edutronics,
Inc., 520 N.W.2d 520, 523-24 (Minn. Ct. App. 1994) (same), with Trandes Corp. v. Guy
F. Atkinson Co., 996 F.2d 655, 666 (4th Cir. 1993) (clear and convincing) and Centrol,
Inc. v. Morrow, 489 N.W.2d 890, 896 (S.D. 1992) (same). No Pennsylvania court has
addressed this question. We need not resolve the issue—the proof adduced at trial
supports our determinations infra under either standard.
and—in his own words—assist AFS‟s competitor in “taking over!!!” (See AFS Ex.
These actions would independently support an award of exemplary damages.
But Huber‟s conduct went further. In the 24-hour period preceding his resignation
notice, Huber downloaded nearly 98 gigabytes of AFS‟s data—including, inter alia,
hydraulic system engineering drawings, gripper arms files, and materials for every
other AFS project throughout the country—to an external hard drive. Huber wiped
his AFS laptop of all evidence of wrongdoing before returning it to AFS. What is
more, Huber engaged in wholesale destruction of evidence: less than a month after
AFS served a subpoena on Dropbox seeking contents of accounts linked to Huber‟s
email addresses, Huber deleted a number of files and folders in a last-ditch effort to
scrub the account of its most damning contents. We struggle to conceive a pattern
of conduct more emblematic of willfulness and malice. Huber acted, at minimum,
with “reckless indifference” to AFS‟s rights and with a total dearth of care as to the
consequences of his conduct. See 12 PA. CONS. STAT. § 5302. We will award AFS
exemplary damages in the amount of $1,000,000 against Huber.
The role of Integrated Systems and the Livingston defendants in this
misappropriation pales in comparison. With respect to Integrated Systems, we held
at the Rule 56 stage that, under existing precedent, its “passive acquiescence” in
Huber‟s misappropriation sufficiently established its own liability. (See Doc. 236 at
31-32 (citing Fishkin v. Susquehanna Partners, G.P., 563 F. Supp. 2d 547, 588 (E.D.
Pa. 2008), aff‟d, 340 F. App‟x 110 (3d Cir. 2009))). Because Integrated Systems never
repudiated its ill-gotten contract with Orbital, we found that Integrated Systems
was liable for knowingly using misappropriated trade secrets for its own gain. (Id.
at 32). But AFS has not proven that Integrated Systems was otherwise complicit in
Huber‟s conduct. Indeed, none of the instances of alleged willfulness and malice
cited in AFS‟s submissions directly concern conduct by the company. (See Doc. 312
¶ 46). Accordingly, we cannot find that Integrated Systems engaged in willful and
Nor does the Livingston defendants‟ conduct evince willfulness or malice.
No doubt, these defendants knew their actions were wrong. Aufiero was concerned
about getting caught as early as April 2012, yet continued to accept AFS documents
for the balance of the year. He admitted that he personally knew that it was wrong
to transfer trade secrets to a competitor, and admitted further that the Livingston
team “all knew” it was wrong to engage with Huber in such conduct. Hill, too,
knew Huber should not have been sharing AFS‟s confidential documents; his
concern, however, was not with the wrong to AFS, but that Huber might turn
around and visit the same harm upon Livingston. These defendants had no
justification for their conduct. Despite their protestations to the contrary, no
Orbital employee ever authorized the Livingston defendants to receive AFS‟s
documents from Huber. Nonetheless, their motives were purely competitive,
in the interest of acquiring a valuable new customer. AFS has not proven that
exemplary damages are appropriate as to Livingston, Vann, or Aufiero.
AFS also seeks punitive damages against Huber for breach of fiduciary duty
and against Livingston and Vann for aiding and abetting that breach. Pennsylvania
law authorizes punitive damages for conduct that is “outrageous” either because
of “evil motive” or “reckless indifference to the rights of others.” In re Lemington
Home for the Aged, 777 F.3d 620, 633 (3d Cir. 2015) (quoting Feld v. Merriam, 485
A.2d 742, 747 (Pa. 1984)). State of mind is key: the action supporting an award of
punitive damages “must be intentional, reckless[,] or malicious.” Id. (quoting Feld,
485 A.2d at 748). The Third Circuit Court of Appeals has signaled that an award of
punitive damages must be grounded in more than the “same conduct” supporting
compensatory damages. Id. AFS bears the burden of proving punitive damages by
a preponderance of the evidence. See Wolfe v. McNeil-PPC, Inc., 703 F. Supp. 2d
487, 493 (E.D. Pa. 2010) (citing Martin v. Johns-Manville Corp., 494 A.2d 1088, 1096
(Pa. 1985)); Sealover v. Carey Canada, 793 F. Supp. 569, 571 & n.6 (M.D. Pa. 1992)
The record developed over six days of trial impels an award of punitive
damages against Huber. His conduct was egregious, unprincipled, deliberate,
and driven by his own avarice. He sought to divest his own employer of valuable
contracts and to reap the pecuniary benefit thereof himself. That Huber
subsequently double-crossed Livingston evinces that his disloyalty knows no
bounds. Huber‟s own testimony—“[O]f course, I wanted to help myself”—
encapsulates his breathtaking self-interest. (9/25/17 Tr. 97:6-8). Huber‟s conduct
justifies an award of punitive damages.
The same is true for Livingston and Vann. At trial, Livingston‟s witnesses
tried to lay blame for AFS‟s injury exclusively at Huber‟s feet. The events which
unfolded sub judice unquestionably originated with Huber. But AFS‟s injury
could not have been effected so swiftly without Livingston and Vann‟s complicity.
Livingston, through Vann and its employees, deliberately disregarded Huber‟s
fiduciary breach in pursuit of a profit. And they indeed profited—several times
over—on the gripper arms contract. Both defendants knowingly and willingly
facilitated the injury that Huber inflicted upon AFS. Accordingly, AFS is entitled to
punitive damages against Vann and Livingston.
In determining an appropriate amount of punitive damages, we are mindful
of their essential purpose. Punitive damages are not intended as recompense for
an injured plaintiff. See In re Lemington, 777 F.3d at 633. Their purpose is twofold:
deterrence and retribution. See State Farm Mut. Auto. Ins. Co. v. Campbell, 538
U.S. 408, 416 (2003); Taha v. Cty. of Bucks, 862 F.3d 292, 305 (3d Cir. 2017) (citing
Hutchinson ex rel. Hutchinson v. Luddy, 870 A.2d 766, 770 (Pa. 2005)).
With respect to Huber, we note that this is not the first time he was secretly
employed by two competitors at once: trial evidence revealed that, for the first few
months of his employment with AFS, Huber was also employed by a competitor,
Dayton T. Brown—information that he concealed from both Dayton T. Brown and
AFS. (See 9/25/17 Tr. 159:24-163:4). To date, Huber remains adamant that he did
no wrong by aiding a competitor to his own employer‟s detriment. It is Huber‟s
claimed belief that his only duties of loyalty are to Orbital and to himself. The
record compels us to put a finer point on it: Huber‟s only concern is his own bottom
line. As such, a considerable award of punitive damages is warranted to provide
retribution and to achieve a significant deterrent effect.
Vann and Livingston have likewise failed to acknowledge the gravity of their
conduct. At trial, Vann maintained that the company received nothing “valuable”
from AFS. (See 9/19/17 Tr. 158:10-159:1; 9/20/17 Tr. 18:8-19:1). The only Livingston
employee to intimate a sense of remorse was Aufiero, who indicated that, with the
benefit of hindsight, he could see that he had been manipulated by Huber. (9/21/17
Tr. 81:10-82:1). Neither Vann nor any of the other Livingston witnesses expressed
any semblance of regret, remorse, or consciousness of wrongdoing. Their conduct
likewise warrants a considerable award of punitive damages. The court will award
punitive damages in the amount of $1,000,000, to be paid by Huber, Livingston, and
Vann, jointly and severally.10
AFS lastly seeks attorneys‟ fees and costs. (Doc. 312 ¶¶ 57-58). Pennsylvania
law authorizes a court to award “reasonable attorney fees, expenses[,] and costs to
the prevailing party” in cases involving willful and malicious misappropriation. 12
The Livingston defendants have waived their opportunity to challenge
AFS‟s requested damages by failing to submit proposed findings and conclusions
as ordered by the court. Huber does not take issue with the amount of damages
requested; he disputes only whether damages are warranted at all. Nonetheless,
we briefly address the constitutional propriety of our damages award in the interest
of caution. An award of both exemplary and punitive damages is not duplicative,
when, as here, different conduct is punished by each: exemplary damages address
defendants‟ willful and malicious misappropriation of trade secrets, and punitive
damages address Huber‟s egregious disloyalty and the Livingston defendants‟ role
in facilitating same. The aggregate award of exemplary and punitive damages is
consistent with, and well within, the “single digit ratio” sanctioned by the United
States Supreme Court. Campbell, 538 U.S. at 424-25 (declining to impose “brightline ratio which a punitive damages award cannot exceed” but noting “in practice,
few awards exceeding a single-digit ratio between punitive and compensatory
damages, to a significant degree, will satisfy due process”).
PA. CONS. STAT. § 5305. In light of the court‟s conclusion that Huber engaged in
willful and malicious misappropriation, we find that AFS is statutorily entitled to
fees and costs. The court will entertain AFS‟s request for attorneys‟ fees and costs
by separate motion in accordance with Federal Rule of Civil Procedure 54(d)(2).
The court finds in favor of Aufiero on AFS‟s aiding and abetting breach
of fiduciary duty claim. The court otherwise finds in favor of AFS and against the
defendants on all other issues of liability. We will award compensatory damages
of $1,096,009, jointly and severally, against Huber, Integrated Systems, Livingston,
Vann, and Aufiero; exemplary damages of $1,000,000 against Huber individually;
and punitive damages of $1,000,000, jointly and severally, against Huber,
Livingston, and Vann. An appropriate order shall issue.
/S/ CHRISTOPHER C. CONNER
Christopher C. Conner, Chief Judge
United States District Court
Middle District of Pennsylvania
March 6, 2018
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