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Recreational Data Services, Inc. v. Trimble Navigation Ltd.

Supreme Court of Alaska

March 24, 2017

RECREATIONAL DATA SERVICES, INC., Appellant,
v.
TRIMBLE NAVIGATION LIMITED, a California corporation, Appellee.

         Appeal from the Superior Court of the State of Alaska, Superior Court No. 3AN-11-10519 CI Third Judicial District, Anchorage, Catherine M. Easter, Judge.

          Susan Orlansky, Reeves Amodio LLC, Gavin Kentch, Law Office of Gavin Kentch, LLC, Anchorage, Josh Fannon, Law Office of Joshua Fannon, Palmer, and Greg Parvin, Law Office of Gregory S. Parvin, Wasilla, for Appellant.

          James N. Leik and Brian P. Samuelson, Perkins Coie LLP, Anchorage, and Daniel P. Elms, Bell Nunnally & Martin, LLP, Dallas, Texas, for Appellee.

          Before: Stowers, Chief Justice, Fabe, Winfree, Maassen, and Bolger, Justices.

          OPINION

          MAASSEN, Justice.

         I. INTRODUCTION

         Recreational Data Services, Inc. (RDS) is an Alaska corporation that attempted to develop and market a smartphone that would come preloaded with outdoor-oriented software. RDS pursued a partnership to advance the project with Trimble Navigation Limited, through one of its divisions, Trimble Mobile Computing Services (Trimble Mobile), [1] and Remington Arms Company. Remington withdrew from the project after about two years of research and review. Several months later Trimble Mobile left the project too - shortly before a different Trimble division, Trimble Outdoors, launched a similar product. RDS sued Trimble for misrepresentation, breach of contract, and breach of fiduciary duty, alleging that Trimble Mobile intentionally delayed RDS's project while sharing confidential information about it with Trimble Outdoors.

         A jury agreed with RDS and awarded it $51.3 million in lost profits. The superior court, however, concluded that RDS had not proven the amount of lost profits with reasonable certainty and granted Trimble a judgment notwithstanding the verdict. RDS appeals. It argues that the superior court erroneously conflated the standards of proof for the fact of harm and the amount of damages and asks that the jury verdict be reinstated. Trimble responds that no reasonable jury could have found that RDS satisfied all elements of its claims.

         We conclude that it was error to grant a judgment notwithstanding the verdict because a reasonable juror could conclude that RDS proved all elements of its claims. We also hold, however, that the superior court was correct to conclude that RDS failed to prove any amount of lost profits to a reasonable certainty as the law requires. We therefore grant remittitur, directing the superior court to make an award of nominal damages and enter judgment for RDS.

         II. FACTS AND PROCEEDINGS[2]

         A. Facts

         In 2008 Brian Feucht and his business partner, Jim Belz, came up with an idea for a "ruggedized" smartphone with a pre-loaded suite of applications (apps) designed for outdoors enthusiasts. They formed RDS to develop the product they envisioned.

         In February 2009 RDS sent an executive summary to Trimble Outdoors introducing three suites of anticipated software: HuntZone, FishZone, and RecZone. RDS proposed that it would develop the software and Trimble would build the phone's hardware. RDS received a positive response from Chaur-Fong Chen, the Director of Strategic Business Development for Trimble Mobile, a different Trimble division, and in March 2009 Trimble Mobile and RDS signed a mutual nondisclosure agreement. The nondisclosure agreement stated the parties' purpose, defined confidential information, and restricted the disclosure of confidential information to parent companies, subsidiaries, and employees on a need-to-know basis. Trimble Mobile was the only Trimble entity to sign the nondisclosure agreement.

         RDS approached Remington about doing the marketing for the planned smartphone. In September 2009 Feucht, Belz, and Chen met with Pat Boehnen, a Remington project manager and marketing director, in Copper Center to discuss how the project would move forward. They agreed that RDS would be responsible for software, Trimble Mobile for hardware, and Remington for marketing. They also discussed research responsibilities, potential revenue, and the sharing of profits. They called the plan that emerged from this meeting the "Copper Center Project." Feucht testified that Chen and Boehnen both advised him not to launch a stand-alone app before the smartphone was complete; this would protect future hardware sales and ensure that the hardware and software were integrated.

         The parties dispute whether they had created a partnership at this point. Feucht testified that at the end of the Copper Center trip "we shook hands and we decided that we were going to be partners and we were going to push this project forward to fruition." But according to Trimble, the parties "agreed to explore a possible venture" but stopped short of forming a partnership. The parties do agree that they all understood they could leave the Copper Center Project at any time.

         After the Copper Center meeting, Remington conducted two large-scale market research surveys to evaluate what features the phone needed and how much consumers would be willing to pay for it. Using this data, RDS, Trimble Mobile, and Remington generated profit and loss statements predicting the phone's sales and each party's role. The parties also developed a PowerPoint presentation which identified them as partners and which was presented to potential third-party investors, including AT&T, Eklutna Corporation, Symbian, and Janney Montgomery Scott. Around September 2010 RDS approached Paul Miller, a former Remington executive, about acting as the Copper Center Project's Chief Operating Officer. Miller joined the project as an informal consultant pending a final contract between the companies.

         In October or November 2010 Remington signaled its intent to withdraw from the Copper Center Project. Also in November 2010 Chen alerted Feucht for the first time that Trimble Outdoors was working on a similar project with the retail chain Cabela's, though Chen assured Feucht the two projects did not compete. Feucht traveled to Trimble's headquarters in December and met with Chen and Steve Wolff, a Trimble Mobile employee who had joined Chen in the Copper Center Project, to discuss how they could move forward without Remington. During this meeting Wolff wrote on a whiteboard a series of valuations and projected revenues based on information Feucht provided. RDS alleges that during this meeting Trimble Mobile offered to acquire RDS, but Trimble disputes this.

         RDS and Trimble Mobile decided to investigate whether Cabela's would be willing to replace Remington as the Copper Center Project's marketing arm. Miller arranged for them to meet with Cabela's in March 2011. But Chen emailed Feucht and Miller on the day of the meeting to say that Trimble Mobile would not attend. On their way to the meeting Feucht and Miller stopped at a restaurant inside Cabela's, where they saw advertisements for Cabela's new phone apps - ReconHunt and ReconFish - which they testified were almost identical to the software suite RDS had envisioned. They went through with the Cabela's meeting but felt disheartened, and a few weeks later Cabela's declined to work with them.

         B. Proceedings

         In September 2011 RDS sued Trimble, alleging various causes of action for breach of contract, fraud, and breach of fiduciary duty.[3] A jury heard the case in September 2014. RDS sought to prove through testimony and emails between Chen and other Trimble employees that Chen regularly conferred with Trimble Outdoors in violation of the parties' nondisclosure agreement and that Chen shared confidential information that Trimble Outdoors and Cabela's used to their advantage to create the ReconHunt and ReconFish apps. RDS also alleged that Trimble Mobile delayed the release of RDS's product while it "strung RDS along through deceptive statements." Finally, RDS argued that Chen had misrepresented that the Trimble Outdoors project did not compete with the Copper Center Project. To prove damages, RDS relied on the profit and loss projections that RDS, Trimble Mobile, and Remington generated for the Copper Center Project and the whiteboard valuations Wolff created during their December 2010 meeting.

         Trimble moved for a directed verdict mid-trial and at the end of trial. The superior court denied the first motion, concluding that the issue was "very close" but that there was room for diversity of opinion among fair-minded jurors when viewing the evidence in the light most favorable to RDS. The superior court denied the later motion "[f]or the reasons previously stated."

         The jury then returned a verdict in favor of RDS on all claims, awarding it $38.5 million for intentional and negligent misrepresentation and $12.8 million for breach of contract and fiduciary duty; these numbers added up to 100% of Wolff's whiteboard valuation of the project. The jury declined to award punitive damages.

         Trimble moved for judgment notwithstanding the verdict or a new trial, arguing that RDS had failed to prove the elements of its claims and that the damage award was not supported by reasonably certain evidence of lost profits. The superior court granted Trimble's motion, concluding that "reasonable persons could not differ in their judgment that RDS, an unestablished business, did not prove any amount of lost profits with reasonable certainty." The court therefore entered judgment in favor of Trimble.

         RDS now appeals, contending that the superior court failed to view the evidence in the light most favorable to it as the non-moving party. RDS also contends that a judgment notwithstanding the verdict was inappropriate because if the amount of the award could not be calculated with reasonable certainty, then RDS was nonetheless entitled to a judgment in its favor and, at a minimum, an award of nominal damages.

         III. STANDARD OF REVIEW

         Whether there is sufficient evidence to support a jury verdict is a question of law we review de novo.[4] We assess "whether, after reviewing the full record presented to the jury in the light most favorable to the non-moving party, a reasonable juror could possibly find in that party's favor."[5]

         IV. DISCUSSION

         The superior court erred in granting a judgment notwithstanding the verdict. As discussed in Section A, a reasonable juror could find, as this jury did, that RDS proved all elements of its claims for misrepresentation, breach of contract, and breach of fiduciary duty by a preponderance of the evidence. But as explained in Section B, although it was error to conflate the fact of harm and the amount of damages in granting the judgment notwithstanding the verdict, the court correctly concluded that RDS did not prove any amount of lost profits to a reasonable certainty. Remittitur for an award of nominal damages is therefore appropriate, as discussed in Section C.

         A. It Was Error To Grant A Judgment Notwithstanding The Verdict Because A Reasonable Juror Could Find That RDS Proved All Elements Of Each Of Its Claims By A Preponderance Of The Evidence.

         In ruling on a motion for a judgment notwithstanding the verdict, a trial court must determine "whether, after reviewing the full record presented to the jury in the light most favorable to the non-moving party, a reasonable juror could possibly find in that party's favor."[6] Thus, the fundamental question we consider here de novo is whether the evidence viewed in the light most favorable to RDS "permits room for diversity of opinion among reasonable jurors."[7]

         1. A reasonable juror could find that Trimble Mobile misrepresented that the Trimble Outdoors applications did not compete with the Copper Center Project.

         To show fraudulent misrepresentation RDS was required to prove these elements: "(1) a misrepresentation of fact or intention, (2) made fraudulently (that is, with 'scienter'), (3) for the purpose or with the expectation of inducing another to act in reliance, (4) with justifiable reliance by the recipient, (5) causing loss."[8] The elements of negligent misrepresentation are essentially the same, except that instead of scienter the plaintiff has to prove the defendant's lack of "reasonable care when making the statement."[9] Trimble challenges only whether RDS proved justifiable and actual reliance; our analysis of this element applies to both the intentional and the negligent misrepresentation claims.[10]

         a. A reasonable juror could find that RDS justifiably relied on Trimble Mobile's misrepresentations.

         A plaintiff who knows that a statement is false "cannot justifiably rely" on it.[11] Trimble argues that RDS knew that the ReconHunt and ReconFish apps developed by Trimble Outdoors competed with the Copper Center Project because Feucht emailed Chen on November 30, 2010, to say he was "very concerned" about the Trimble Outdoors project and its possible entry into the same market. Feucht ended the email by telling Chen, "I need to know we have a deal or I need another supplier."

         Feucht testified that he sent this email the same day or the day after Chen first told him Trimble Outdoors was working with Cabela's on a product that "did not compete with the Copper Center Project." Feucht admitted that Chen never answered his email, but he testified that a month later, in December 2010, he traveled to Trimble Mobile's headquarters and met with Chen and Wolff "to reassess the project and move the project forward" in light of Remington's imminent departure. Feucht testified that he was again reassured by both Chen and Wolff that Trimble Outdoors' project "was totally different. And we shouldn't worry about it." A reasonable juror could find it more likely than not that these assurances were given and that Feucht accepted them. And Trimble identifies no evidence that Feucht learned of the specifics of ReconHunt and ReconFish or of their similarity to the Copper Center Project before March 2011, when he saw advertisements for the apps at the Cabela's restaurant.

         b. A reasonable juror could find that RDS relied on Trimble Mobile's misrepresentations by acting or refraining from action.

         Trimble also argues that RDS failed to prove that it "relie[d] on [Trimble Mobile's] misrepresentation in acting or refraining from action."[12] To support this assertion Trimble cites Feucht's testimony that he realized in March 2011 that ReconHunt was "an absolute rip-off of my idea" but proceeded with the pitch to Cabela's while continuing to treat Trimble Mobile as a partner. Trimble argues that "there is no credible basis to conclude that RDS would have changed its position or done anything differently" if Trimble Mobile had admitted early on that the projects competed.

         But Trimble's argument slights the period from December 2010 to March 2011. A reasonable juror could conclude that had RDS known by December 2010 that Cabela's and Trimble Outdoors were creating a competing product, it would have used the next few months to pursue a different hardware provider, would have considered launching a separate software application, or would have taken some other action rather than waiting for its next meeting with Trimble Mobile. The fact that RDS went ahead with the Cabela's meeting in March 2011 could indicate that RDS relied on Trimble Mobile's assurances until it was too late to shift gears. A reasonable juror could thus find that RDS proved by a preponderance of the evidence that it actually relied on Trimble Mobile's misrepresentations.

         2. A reasonable juror could find that Trimble Mobile breached the nondisclosure agreement by sharing financial information with Trimble Outdoors.

         The nondisclosure agreement signed by RDS and Trimble Mobile early in their relationship prohibited either party from disclosing "Confidential Information." "Confidential Information" was defined in the agreement as "any information or material of a confidential or proprietary nature relating to the existing or prospective business ... of a Party or Others" or relating to "the terms of a prospective business relationship." The agreement also required the parties to identify confidential information in their written communications by attaching a statement "such as '[name of Party] Confidential Information' or words of like meaning."

         RDS argued at trial that Trimble Mobile breached the nondisclosure agreement by sharing confidential information with Trimble Outdoors, specifically the profit and loss statements prepared by RDS, Trimble Mobile, and Remington based on Remington's market research data. On appeal Trimble argues that the evidence at trial was insufficient to support a finding that the agreement was breached. Trimble contends (a)that Trimble Mobile did not disclose confidential information to Trimble Outdoors; (b) that RDS had not properly identified the project's profit and loss statements as confidential; and (c) that information shared by Trimble Outdoors was not covered by the nondisclosure agreement.

         a. A reasonable juror could find that Chen shared confidential information with Trimble Outdoors.

         Trimble argues that RDS failed to prove that Chen improperly shared the profit and loss statements because Chen described the documents he shared as "the fmancials . . . from Remington" but never specified which documents those were. But a reasonable juror could rely on context to conclude that the documents Chen referred to included the profit and loss statements.

         The parties' emails indicated that Chen received the profit and loss statements from Feucht on September 30, 2010; and Chen testified that on November 20 he forwarded financial data to Mark Harrington of Trimble Navigation and Rich Rudow of Trimble Outdoors. While cross-examining Chen on this subject, RDS's attorney emphasized repeatedly that he was asking about "the market research data as it applied to the financials, profits and losses." Chen confirmed his earlier deposition testimony that what he forwarded to the other Trimble employees was "the financials that we got from Remington, " but he equivocated as to whether it would have been appropriate for him to share the related profit and loss information with others in the Trimble organization. From this, a juror could reasonably conclude that the profit and loss statements from Feucht's September 30 email were included in the information that Chen forwarded to Harrington and Rudow.

         Conversations between Chen and Rudow in April and October 2009 and September and November 2010 provide additional context for a jury finding that Chen shared confidential information with Trimble Navigation and Trimble Outdoors. Chen testified at trial that he told Rudow in April 2009 that the Copper Center Project "software might be good for his business." In October 2009 Chen emailed Rudow to say he was preparing a presentation for Remington, Cabela' s, and AT&T that he would show Rudow later. In September 2010 Chen emailed Rudow to say that since Rudow had "been working on the Outdoor related market and ha[d] gained a lot of experience in user's adoption and carrier behavior, Steve [Berglund, the Trimble Navigation CEO, ] suggested that we should work together to see if we can address the concerns he has on the [Copper Center] project." As part of their meeting, Chen said he would like "to go through the current business plan and ask for your advice on various issues." In October 2010 Chen emailed Rudow to set up a meeting "to go through the plan in person [because] there [is] quite a bit of confidential stuff that right now is not the time to send it through email[]." At trial Chen testified that he, Rudow, and Harrington met in November 2010 to discuss "[p]otential overlap" between the projects. As discussed above, the evidence supported a conclusion that Chen sent Rudow and Harrington confidential information from the Copper Center Project in preparation for this meeting.

         Viewing the evidence in the light most favorable to RDS, a reasonable juror could find that it was more likely than not that Chen did disclose confidential information to Rudow and Harrington, neither of whom worked for Trimble Mobile. This was a violation of the nondisclosure agreement.

         b. Feucht's email properly designated the profit and loss statements as confidential.

         Feucht's email transmitting the profit and loss statements contained this notice: "This email and any files transmitted with it are RDS . . . property, are confidential, and are intended solely for the use of the individual or entity to whom this email is addressed." Trimble argues that "[t]he boilerplate paragraph at the end of Mr. Feucht's email did not meet [the nondisclo sure agreement's] requirements." But Trimble does not elaborate on how the language was deficient. And although Trimble describes it as "boilerplate, " there do not appear to be any other emails from Feucht in the record that contain the same or similar language.

         Whether the notice satisfied the demands of the nondisclosure agreement presents a question of law.[13] Our object in interpreting a contract "is to give effect to the reasonable expectations of the parties."[14] We do this by "look[ing] to the language of the disputed provision, the language of other provisions of the contract, relevant extrinsic evidence, and case law interpreting similar provisions."[15] We conclude that Feucht's notice did constitute "words of like meaning" under the nondisclosure agreement's provision for identifying confidential information, as the notice identified the disclosing party and explicitly stated that the emails and file were confidential.[16] And Feucht did "affix or incorporate" the notice to the profit and loss statements when he attached the statements to an email describing the "files transmitted" as "confidential." This interpretation of the nondisclosure agreement's language seems straightforward, and Trimble directs us to no extrinsic evidence that would require us to interpret it differently. We therefore conclude that the profit and loss statements were properly designated as confidential under the nondisclosure agreement.

         c. The nondisclosure agreement protected the profit and loss statements.

         Trimble contends that the "fmancials ... from Remington" are not covered by the nondisclosure agreement because the agreement says "Confidential Information shall not include any information which ... [i]s lawfully received, without obligation of confidentiality, by Recipient from Others." Trimble argues that the market research data were produced by Remington, who was not a party to the nondisclosure agreement, ...


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