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Bimbo Bakeries USA, Inc. v. Sycamore

United States District Court, D. Utah, Central Division

September 23, 2017

BIMBO BAKERIES USA, INC., Plaintiff,
v.
LELAND SYCAMORE, TYLER SYCAMORE, WILD GRAINS BAKERY, LLC, AND UNITED STATES BAKERY, INC., Defendants.

         MEMORANDUM DECISION AND ORDER RULING ON STANDARD OF EVIDENCE JURY INSTRUCTIONS; AND SUSTAINING [396] UNITED STATES BAKERY, INC.'S OBJECTIONS TO PRELIMINARY INSTRUCTIONS AND [399] TYLER SYCAMORE'S AND WILD GRAIN BAKERY LLC'S OBJECTIONS TO PRELIMINARY INSTRUCTIONS

          DAVID NUFFER UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         Plaintiff Bimbo Bakeries USA, Inc. (“Bimbo Bakeries”) asserts a claim of trade secret misappropriation against Defendants Leland Sycamore, Tyler Sycamore, Wild Grains Bakery, LLC, and United States Bakery, Inc. (together, “Defendants”). Under Utah's Uniform Trade Secrets Act (the “UTSA”), if “willful and malicious misappropriation exists, ” the court may award exemplary damages in an amount up to twice compensatory damages.[1] The parties dispute the standard of evidence for proving willful and malicious misappropriation. Bimbo Bakeries argues for the preponderance of the evidence standard, while Defendants advocate use of the more demanding clear and convincing evidence standard.

         The parties submitted proposed jury instructions as directed under the Trial Order.[2]Bimbo Bakeries submitted proposed instructions, [3] including instructions on the standard of evidence at No. 3 and willful trade secret misappropriation at No. 34.[4] Defendants, with the exception of Leland Sycamore, jointly filed proposed instructions, [5] which included an instruction on willful trade secret misappropriation at No. 34 requiring willfulness to be proved by clear and convincing evidence.[6] Those defendants also requested a preliminary jury instruction on the clear and convincing evidence standard in the instruction on standards of evidence.[7] At the final pretrial conference, further briefing was ordered on the appropriate standard of proof to justify exemplary damages under the UTSA.[8] Memoranda on the standard of evidence necessary to prove willful and malicious trade secret misappropriation were submitted by Bimbo Bakeries, [9] U.S. Bakery, [10] and Wild Grains and Tyler Sycamore.[11]

         In light of these submissions from the parties and careful consideration of the applicable legal standards, the jury will be instructed on the clear and convincing evidence standard. Bimbo Bakeries will be eligible for exemplary damages only on a jury finding of willful and malicious trade secret misappropriation by clear and convincing evidence. However, Bimbo Bakeries will be eligible for attorneys' fees on a jury finding of willful and malicious trade secret misappropriation by the preponderance of the evidence. While the jury will make findings as to the standard of proof achieved by Bimbo Bakeries, the jury will not be informed of the effect of those findings.

         DISCUSSION

         Bimbo Bakeries' trade secret claim derives from the UTSA, a provision of the Utah Code.[12] For claims brought under Utah law, the evidentiary standard for punitive damages is prescribed by statute:

Except as otherwise provided by statute, punitive damages may be awarded only if compensatory or general damages are awarded and it is established by clear and convincing evidence that the acts or omissions of the tortfeasor are the result of willful and malicious or intentionally fraudulent conduct, or conduct that manifests a knowing and reckless indifference toward, and a disregard of, the rights of others.[13]

         A party seeking punitive damages on a Utah state law claim must prove entitlement by clear and convincing evidence unless a separate statute provides otherwise.[14]

         The UTSA includes a provision on exemplary damages: “If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding [compensatory damages].”[15] However, this provision does not address the standard of evidence required for an award of exemplary damages on a trade secret claim. Some Utah statutes specifically refer to the standard of evidence, [16] and in those instances, the clear and convincing evidence standard has been supplanted. The Utah legislature has not, for a trade secret claim, expressly deviated from the standard for evidence set forth in § 78B-8-201(1)(a), and no such deviation will be inferred.

         Bimbo Bakeries urges the court to follow precedent from federal patent law, which applies the preponderance of the evidence standard when assessing enhanced damages.[17] Bimbo Bakeries cites to The Tenth Circuit's decision in ClearOne Communications v. Biamp Systems, which recognizes that the Uniform Trade Secret Act follows patent law in allowing the judge to determine whether attorneys' fees should be awarded even if there is a jury.[18] The Uniform Trade Secret Act also follows federal patent law in leaving discretionary trebling to the judge even though there may be a jury.[19] The court's discretion in awarding attorneys' fees and punitive damages notwithstanding the presence of a jury is a separate issue from the standard of evidence. Nothing in the ClearOne case or the comments to the Uniform Trade Secret Act suggest that trade secret damages were intended to follow patent damages in all respects, and no such intent will be inferred.

         Bimbo Bakeries cites Ninth Circuit and Minnesota Court of Appeals decisions applying the preponderance of the evidence standard to determine willful and malicious misappropriation under the Uniform Trade Secrets Act .[20] However, the weight of persuasive authority, as cited by the Defendants, [21] follows the conclusion reached here that punitive damages in a trade secret case require a finding of willful and malicious misappropriation by clear and convincing evidence.[22]

         This ruling resolves the parties' dispute about the standard of evidence for willful and malicious trade secret misappropriation as it pertains to punitive damages. However, the UTSA further also requires a finding of willful and malicious misappropriation to award reasonable attorneys' fees to a prevailing plaintiff.[23] A jury finding of willful and malicious trade secret misappropriation need only be by the preponderance of the ...


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