Advanced Recovery Systems v. American Agencies et al

Filing 498

MEMORANDUM DECISION AND ORDER granting in part and denying in part 492 Defendants' Motion for Offset of Damages Based on Settlement. The court offsets $400,000 of the Sajax Settlement against the damages awarded on the Interference with Contract claim and $5,000 of the Sajax Settlement against the damages awarded on the Copyright Infringement claim. The court requests that AA submit a Final Judgment to the court within 5 days of the date of this Order incorporating the setoffs granted in this Order. Signed by Judge Dale A. Kimball on 10/26/2017. (eat)

______________________________________________________________________________
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION

ADVANCED RECOVERY SYSTEMS,
LLC,
MEMORANDUM DECISION
AND ORDER

Plaintiff,
vs.

Case No. 2:13CV283DAK

AMERICAN AGENCIES, LLC, ET AL.,

Judge Dale A. Kimball

Defendants.

This matter is before the court on Advanced Recovery Systems, LLC (“ARS”), Kinum,
Inc., Scott Mitchell, Blake Reynolds, and Brent Sloan’s (collectively, “Defendants”)1 Motion for
Offset Damages Based on Settlement. The parties have fully briefed the motion. The court
concludes that a hearing would not significantly aid in its determination of the motion.
Accordingly, the court issues the following Memorandum Decision and Order based on the
memoranda submitted by the parties, as well as the law and facts relevant to the motion.
DISCUSSION
Defendants’ Motion for Offset of Damages Based on Settlement
Defendants ask the court to offset the judgment against them by the amount Sajax paid
AA to settle the claims AA brought against Sajax. In seeking offset, Defendants rely on the “one
satisfaction rule.” “[U]nder the ‘one satisfaction rule,’ when the conduct of multiple defendants

1

Because only counterclaims proceeded to trial, the parties agreed to switch the original
plaintiff/defendant designations in this case.

results in a single injury with common damages, and one of the defendants settles with the
plaintiff, the amount of the settlement is credited against the amount that may be recovered from
the non-settling defendants.” Friedland v. TIC-THE Industrial Co., 566 F.3d 1203, 1209 (10th
Cir. 2009). The one satisfaction rule “is directed at the victim’s injury, and not at the causes of
action that may arise from that injury.” U.S. Indus., Inc. v. Touche Ross & Co., 854 F.2d 1223,
1261 (10th Cir. 1988). “Where a single injury gives rise to more than one claim for relief, a
plaintiff may recover his damages under any claim, but he may recover them only once.” Id. at
1261-62.
“[A]s a general rule, a party seeking credit for an amount received in settlement bears the
burden of proving ‘that the damages assessed against him have in fact and in actuality been
previously covered in a prior settlement.’” Id. (citation omitted). But “where a plaintiff settles
with some defendants, and the non-settling defendants are not parties to the settlement
agreements, the non-settling defendants need show only that the plaintiff settled claims with
other parties on which the non-settling defendants were found liable at trial.” Id. at 1262. “If the
defendants make this showing, the burden then shifts to the plaintiff to prove that, under the
terms of its agreement with the settling defendants, the settlement did not represent common
damages with the jury award.” Id.
Therefore, if AA’s injury and the damages it alleges in this lawsuit are the same as those
addressed by the Sajax settlement, “then the defendants are entitled to a full credit in the amount
of the settlements.” See Friedland, 566 F.3d at 1029. AA’s claims against Sajax and Defendants
were not the same. AA alleged a violation of Utah’s Unfair Competition Act (“UCA”) against
Sajax, but not against the other Defendants. The court must determine then whether that claim
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encompassed the same injury as the other claims. In prior motions in this case, this court
specifically determined that AA’s UCA claim was based on malicious cyberactivity and not
duplicative of AA’s trade secrets claim. In addition, malicious cyberactivity is distinct from the
breach of contract issues relating to a right of first refusal or software license violations.
Accordingly, as in United States v. Burlington Northern R.R., 200 F.3d 679 (10th Cir. 1999), the
harm is divisible and not common to both defendants. Id. at 698. The Sajax Settlement
Agreement did not specifically allocate amounts between the several causes of action, however, a
portion of the Sajax settlement cannot be credited to the other Defendants because of the separate
and divisible claim for unfair competition which was brought only against Sajax.
Although Defendants contend that the other claims AA settled with Sajax were based on
the same injuries for which the jury awarded AA damages at trial, not all of the claims are based
on the same injury. For example, Sajax’s use of AA’s trade secrets was distinct from the other
parties’ use of AA’s trade secrets. AA did not allege that there was only one use of its trade
secrets and all the Defendants participated. AA alleged several different uses of its trade secrets
and the court asked the jury to award damages as to each person or entities’ use of AA’s trade
secrets. The jury verdict did not merely state that AA was damaged in the amount of
$304,942.00 for Defendants’ misappropriation of AA’s trade secrets. The jury instructions
explained to the jury that each Defendant’s actions had to be considered separately for each cause
of action and the verdict form asked the jury to determine the damages amount each individual
Defendant owed AA for misappropriation of trade secrets. The jury found that Kinum owed AA
$101,891, ARS owed AA nothing, Sloan owed AA $52,831, Mitchell owed AA $66,239, and
Reynolds owed AA $82,981. Similarly, the jury found specific amounts for each individual
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Defendant on the unjust enrichment claim based on the amount of benefit, if any, that individual
Defendant unjustly retained. The jury found that Kinum unjustly retained $275,676, Sloan
unjustly retained $161,494, Mitchell unjustly retained $78,656, and Reynolds unjustly retained
$138,002. These amounts are tied to the evidence pertaining to each specific Defendant. Based
on this type of jury verdict, there is no basis for the court to determine that the conduct of
multiple defendants resulted in a single injury with common damages. Accordingly, an offset in
relation to the misappropriation of trade secrets and unjust enrichment claims would be
inappropriate on these several and independent claims.
With respect to the remaining claims on the verdict, the implied covenant of good faith
and fair dealing claim is only against ARS and the interference with business relations claim
allocates damages for each individual Defendant like the trade secrets and unjust enrichment
claims. The interference with business relations claim relied on findings that the Defendants were
recklessly indifferent to AA’s relationships with its customers when they interfered with those
relationships to their own advantage. The damages awarded in relation to each Defendant would
represent that Defendant’s liability. There is no indication that those damages relate in any way
to Sajax’s liability or that those damages would be a common damage based on the same injury
or conduct.
The only claims for which the jury did not allocate separate individual damages against
each Defendant were the interference with contract claim and copyright infringement claim. The
jury awarded $10,000 on the copyright infringement claim against all of the Defendants jointly.
And, on the interference with contract claim, the court determined prior to trial that the damages
against any Defendant found liable on the claim would be AA’s pecuniary loss for ARS’ breach
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of contract which the court awarded AA on summary judgment, $1,549,595.40. The Defendants
who went to trial on this claim are jointly and severally liable for the amount because the jury
found a civil conspiracy to interfere with AA’s contractual rights in the AA/ARS Agreement.
The court concludes that Sajax’s settlement on these claims represent a single injury and
common damages. However, these claims are only two of the many claims AA brought against
Sajax. Therefore, the court cannot appropriately offset the entire amount of Sajax’s settlement
on these claims. Because the damages for the interference with contract claim was
approximately equal to the damages awarded by the jury on the other claims, the court offsets
$400,000 of the Sajax settlement against the interference with contract claim. The court also
offsets $5,000 of the Sajax settlement against the copyright claim. See TBG, Inc. v. Bendis, 36
F.3d 916, 923 (10th Cir. 1994) (although McDermott, Inc. v. AmClyde, 511 U.S. 202, 204 (1994)
is only binding on admiralty cases, courts should apply its proportional fault credit when they are
free to choose).
AA argues that Defendants are not entitled to any setoff because they should have sought
an allocation of fault on the verdict form under Utah’s comparative negligence scheme.
However, the court ruled on a motion in limine prior to trial that the measure of damages on the
intentional interference with contract claim was contractual damages, not tort damages, and
denied Defendant’s request to have each Defendant’s fault allocated.2 The court cannot deny
2

The court previously ruled on the parties’ motions in limine as follows: “Based on
Graves, Defendants claim that the court must allow the jury to allocate fault to each of the
Defendants. But the TruGreen court explained that ‘the plaintiff’s losses is the appropriate
method of measuring damages in cases of tortious interference with contractual and economic
relations.’ 2008 UT 81 ¶ 22. And, in a case involving only pecuniary losses, the losses are
measured by the same standard as a breach of contract. Id. ¶ 24. For such cases, the TruGreen
court rejected the argument that ‘a tort measure’ of damages should be used. Id. at ¶ 25. Each
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Defendants the ability to seek allocation on the claim and then find against them because there
was no allocation of fault.
CONCLUSION
Based on the above reasoning, Defendants’ Motion for Offset of Damages Based on
Settlement is GRANTED IN PART AND DENIED IN PART. The court offsets $400,000 of the
Sajax Settlement against the damages awarded on the Interference with Contract claim and
$5,000 of the Sajax Settlement against the damages awarded on the Copyright Infringement
claim. The court requests that AA submit a Final Judgment to the court within five days of the
date of this Order incorporating the setoffs granted in this Order.
DATED this 26th day of October, 2017.
BY THE COURT:

_________________________________________
DALE A. KIMBALL,
United States District Judge

Defendant, based on his or its actions, may be liable for intentional interference with contract. If
that Defendant is liable for tortious interference, then that Defendant is liable for AA’s losses,
which are measured by the same standard as a breach of contract, not a tort measure. AA’s
losses have already been calculated by Defendants’ expert and adopted by this court. Moreover,
Defendants agreed that their expert witness Tatos will not be testifying as to his calculations.
The court, therefore, does not believe that application of those damages to any Defendant found
liable for tortious interference with contract is contrary to Graves’ scheme of allocation.”
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