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Babcock Power Inc. v. Kapsalis

United States District Court, W.D. Kentucky, Louisville

April 5, 2019

BABCOCK POWER, INC., and VOGT POWER INTERNATIONAL., INC., PLAINTIFFS
v.
Stephen T. KAPSALIS, and EXPRESS GROUP HOLDINGS, LLC, DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          Charles R. Simpson III, Senior Judge United States District Court

         I. Introduction

         This case is before the Court on Defendant Stephen Kapsalis's motion to alter or amend the final trial order and judgment entered in this case. DN 622. Plaintiffs Babcock Power, Inc. and Vogt Power International, Inc. responded. DN 628. Kapsalis replied. DN 632. Therefore, this matter is ripe for review. Finding that the evidence at trial failed to demonstrate that Plaintiffs experienced damage flowing from Kapsalis's breach of contract, the Court will grant the motion and amend the trial order and judgment to award only nominal damages on the Plaintiffs' breach of contract claim.

         II. Legal Standard

         The Federal Rules of Civil Procedure permit litigants subject to an adverse judgment to move the Court to alter or amend the judgment. Fed.R.Civ.P. 59(e).[1] This rule does not, however, “allow a defeated litigant a second chance to present new explanations, legal theories, or proof.” Melton v. Litteral, No. 1:17-CV-120-GNS, 2018 WL 5258626, at *2 (W.D. Ky. Oct. 22, 2018) (citation omitted). Instead, “Rule 59(e) motions give district courts an opportunity to fix their own errors, ‘sparing the parties and appellate courts the burden of unnecessary appellate proceedings.'” Id. (quoting Howard v. United States, 533 F.3d 472, 475 (6th Cir. 2015)). Granting a Rule 59(e) motion is appropriate when there is: “(1) a clear error of law; (2) newly discovered evidence; (3) an intervening change in controlling law; or (4) a need to prevent manifest injustice.” Id. (quoting Schlaud v. Snyder, 785 F.3d 1119, 1124 (6th Cir. 2015)). Rule 59(e) motions are “extraordinary and sparingly granted.” Id. (citation omitted). The burden of showing entitlement to Rule 59(e) relief is on the moving party. Id. (citation omitted). While undertaking this analysis, the Court views the facts in the light most favorable to the jury's verdict. See e.g. Adams v. City of Chicago, 798 F.3d 539, 543 (6th Cir. 2015).

         III. Factual and Procedural Background

         Kapsalis was hired by Babcock as Chief Operating Officer in 2009. Shortly thereafter, Kapsalis was transferred to the position of Chief Executive Officer of Vogt, a wholly owned subsidiary of Babcock. In 2013, Kapsalis left Vogt to become President and CEO at Express Group Holdings, LLC, a competitor of Plaintiffs. Plaintiffs sued, alleging that Kapsalis took various items of trade secret information with him when he left. After a trial, the jury concluded that Kapsalis misappropriated Plaintiffs' trade secret information consisting of Schematic and Mechanical Drawings and Strategic Plans. The jury also found that Kapsalis breached his Employee Non-Disclosure, Non-Solicitation, Non-Competition and Assignment Agreement with Plaintiffs regarding their CAD Standards, Calculation Sheets, Customer/Contacts Lists, Schematic and Mechanical Drawings, and Strategic Plans. The jury awarded $175, 672.00 on the trade secret misappropriation claims and $202, 865.00 on the breach of contract claims. The subsequent trial order and judgment (DN 620) gives rise to Kapsalis's motion.

         IV. Discussion

         Kapsalis argues inter alia that the Court made an error of law-from which manifest injustice will result-in permitting Plaintiffs to recover more than nominal damages on their breach of contract claim. This is so, he argues, because Plaintiffs failed to produce evidence of damages at trial sufficient to support a claim for breach of contract. Ultimately, the Court agrees and will grant the motion to alter or amend.

         To prevail on a breach of contract claim in Kentucky, a plaintiff must demonstrate by a preponderance of the evidence that (1) a contract existed, (2) the contract was breached, and (3) plaintiff suffered loss/damages flowing from the breach. Sudamax Industria e Comercio de Cigarros, Ltda. v. Buttes & Ashes, Inc., 516 F.Supp.2d 841, 845 (W.D. Ky. 2007). However, in a case where a plaintiff cannot demonstrate “actual damages, ” Kentucky permits recovery of nominal damages. Harness v. Ky. Fluor Spar Co., 147 S.W. 934, 940 (Ky. 1912) (citation omitted). “This is true even though proof of damages is a required element of a breach of contract claim.” United Parcel Service Co. v. DNJ Logistic Group, Inc., No. 3:16-CV-609-GNS, 2017 WL 3097531, at *3 (W.D. Ky. July 19, 2017) (citation omitted).

         “Actual damages” sufficient to support a compensatory damages award may be demonstrated through a showing of lost profits, unjust enrichment, or some other use or disclosure of information protected by a confidentiality or non-disclosure agreement. See e.g. Vitro Corp. of Am. v. Hall Chemical Co., 292 F.2d 678, 682 (6th Cir. 1961) (requiring “a plain injury” to recover compensatory damages); DNJ Logistics, 2017 WL 3097531, at *3 (“actual damages” exist when shipments were returned, resulting in service failures and additional costs in completing outstanding contracts); Structural Dynamics Research Corp. v. Eng'g Mechs. Research Corp., 401 F.Supp. 1102, 1119 (E.D. Mich. 1975) (compensatory damages available where “defendants misused confidential information” even though “defendants have not made a profit” and plaintiff did not lose profits).

         In arguing that damages were not proved, Kapsalis directs the Court to the cross-examination of Tony Thompson, the Director of Engineering for Babcock. There, counsel for Kapsalis elicited repeated admissions that Plaintiffs did not experience damage and that Plaintiffs had no evidence that Kapsalis had used or disclosed their alleged trade secret information. Ultimately, Kapsalis was able to obtain such testimony regarding the CAD Standards, DN 581 at 6:7-7:1 (sealed), Calculation Sheets, Id. at 9:23-10:6, Schematic and Mechanical Drawings, Id. at 10:20-11:9, DN 582 at 20:7-21:7 (sealed), and Strategic Plans, DN 581 at 11:10-13:9 (sealed).[2] The entire encounter was summed up in one question and answer:

Q. And with respect to [the CAD standards, calculation sheets, schematic drawings, and strategic plans], just to make sure that we're clear for the record, both personally and as the corporate representative for Vogt and BPI, you're not aware of any evidence that Steve Kapsalis or Express used any of these, disclosed them, ...

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