MIAMI BUSINESS LITIGATION: DAMAGES FOR WILLFUL AND MALICIOUS MISAPPROPRIATION OF TRADE SECRETS

The Defend Trade Secrets Act (DTSA), 18 U.S.C. section 1836, is the federal statute that provides a cause of action for misappropriation of trade secrets. Under DTSA, “a court may” award (1) “damages for actual loss caused by the misapropriation of the trade secret,” (2) “damages for any unjust enrichment caused by the misappropriation of the trade secret that is not addressed in computing damages for actual loss,” and (3) “if the trade secret is willfully and maliciously misappropriated, … exemplary damages in an amount not more than 2 times the amount of the damages awarded.” Although there is no clearly articulated test for determining whether, upon a finding of willful and malicious misappropriation, an award of exemplary damages is proper, federal courts have considered several factors. Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

For example, in examining whether exemplary damages are appropriate, the United States District Court for the Southern District of New York, in Syntel Sterling Best Shore Mauritius Ltd. v. TriZetto Group, Inc., 2021 WL 1553926 (S.D.N.Y. April 20, 2021), cited “the degree of reprehensibility associated with the wrongdoer’s actions.” In AgroFresh Inc. v. Essentiv LLC, 2020 WL 7024867 (D.Del. November 30, 2020), the United States District Court for the District of Delaware cited two additional factors: “the duration of misappropriative conduct” and “the defendant’s consciousness of resulting injury and any efforts to cover up malfeasance.” DiscoverOrg Data, LLC v. Vitnine Global, Inc., 2020 WL 6562333 (N.D. Cal. November 9, 2020), the federal district court considered “the need to deter similar misconduct in the future.” The U.S. District Court for the Northern District of California, in Citron USA, LLC v. RiverPay, Inc., 2020 WL 5365980 (N.D. Cal. September 8, 2020), identified two additional factors: “the amount of compensatory damages awarded” and “the wealth of the particular defendant.” All of these factors must be considered in the larger context of Supreme Court precedent concerning punitive damages in all litigation. Precedent from the United States Supreme Court in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), discussed limits on punitive damages in all cases in the context of the United States Constitution’s requirement of Due Process. The Supreme Court explained that “flagrancy of the misconduct is thought to be the primary consideration in determining the amount of punitive damages.”

Florida’s trade secret statute allows recovery of exemplary damages. Under Florida Statutes section 688.004(2), “[i]f willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award” for compensatory damages for trade secret misappropriation. In addition, Florida law (at Florida Statutes section 688.005) provides that “[i]f … willful and malicious misappropriation exists, the court may award reasonable attorney’s fees to the prevailing party.” In Fin. Techs., LLC v. iControl Sys., USA, LLC, 21 F.4th 1267 (11th Cir. 2021), the United States Court of Appeals for the Eleventh Circuit interpreted Florida’s trade secret statute to allow an award of exemplary damages when “the defendant acts willfully, or with such gross negligence as to indicate a wanton disregard for the rights of others.” In Perdue Farms Inc. v. Hook, 777 So.2d 1047 (Fla. 2d DCA 2001), Florida’s Second District Court of Appeal explained that the traditional standards for evaluating “willful and malicious” conduct in other contexts apply in the context of trade secret misappropriation under Florida law. Applying Florida law as well as the DTSA to assess exemplary damages in a trade secret misappropriation case, the United States District Court for the Northern District of Florida, in Capital City Home Loans, LLC v. Darnell, 2023 WL 4169614 (N.D. Fla. May 11, 2023), stated in pertinent part: “Here, the admitted facts show that Darnell intentionally stole trade secrets…Her conduct exhibited a complete disregard for Capital City’s trade-secret rights, and it constituted at least gross negligence. That is enough to show entitlement to exemplary damages and attorney’s fees under… [Florida’s trade secret statute] and the DTSA. I therefore find, as a matter of discretion, that Capital City is entitled to such damages.”

Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.