Opinion
CV No. 99-1338-KI
February, 2001
Gary Roberts SCHWABE, WILLIAMSON WYATT, P.C. Portland, Oregon Attorney for Plaintiff.
Jeffrey M. Edelson MARKOWITZ, HERBOLD, GLADE MEHLHAF, P.C. Portland, Oregon Attorney for Defendant.
OPINION and ORDER
This action was commenced by plaintiff Telephone Management Corporation ("TMC") against defendant Richard R. Gillette in August 1999 and removed to this court on September 21, 1999. The Complaint states four claims against Gillette: breach of contract (implied duty of confidentiality and loyalty), breach of contract (breach of duty of good faith), misappropriation of trade secrets (through disclosure without consent) under the Oregon Uniform Trade Secrets Act ("UTSA"), and intentional interference with contract or business expectancies. In his Answer, Gillette included a counterclaim for attorney fees under the Oregon UTSA (ORS 646.467(1)) and pursuant to Or. R. Civ. P. 17 and ORS 20.105.
On August 17, 2000, TMC filed a motion to voluntarily dismiss this action. In a telephone conference on August 18, 2000, I granted the motion to voluntarily dismiss TMC's claims against Gillette, but allowed Gillette's counterclaim for attorney fees to proceed. On November 30, 2000, Gillette filed a motion for attorney fees (#30). Briefing on that motion is complete and the motion is now before the court. For the reasons set forth below, I grant Gillette's motion for attorney fees and award attorney fees to Gillette in the amount of $20,618.00.
FACTS
TMC helps business clients reduce their telephone bills through various methods. TMC is paid based upon the savings it accomplishes for its customers.
Gillette is a former employee of TMC who currently resides in Pennsylvania. Gillette was fired by TMC in 1994. Following his termination, Gillette sued TMC for wrongful discharge and the parties reached a confidential settlement in the case.
In January 1998, TMC filed a lawsuit against Goodyear Tire Rubber Co. ("Goodyear") in this court. In that suit, TMC alleged that Goodyear was liable to TMC for $2 million based principally upon an alleged contract in which Goodyear purportedly agreed to pay TMC for negotiating lower telephone rates with ATT on behalf of Goodyear. Goodyear successfully transferred the case to the Northern District of Ohio, where the court disposed of the case by summary judgment against TMC. The Sixth Circuit Court of Appeals affirmed the grant of summary judgment in February 2000.
During the discovery phase of the Goodyear case, Goodyear's attorneys contacted Gillette and convinced him to meet with them to discuss his involvement with the Goodyear account on behalf of TMC. Gillette agreed to sign an affidavit at the attorneys' request (hereinafter referred to as the "Gillette Affidavit"). Goodyear then filed the Gillette Affidavit under seal in support of Goodyear's motion for summary judgment. After the Gillette Affidavit and motion for summary judgment were filed by Goodyear, TMC did not contact Gillette or seek to take his deposition in the Goodyear case.
Before the Sixth Circuit issued its ruling in the Goodyear case, TMC filed this suit against Gillette. As noted above, TMC alleged that Gillette breached his contractual obligations to TMC (the implied duty of confidentiality and loyalty and the duty of good faith) by divulging TMC's confidential information to Goodyear so that Goodyear could use that confidential information in litigation with TMC. Complaint, ¶¶ 10, 11, 17. Likewise, TMC alleged that Gillette had violated the Oregon UTSA by disclosing TMC trade secrets to Goodyear "without the express or implied consent of TMC, and with knowledge or reason to know that he had a duty to maintain secrecy." Id., ¶ 22. Finally, TMC asserted a claim for intentional interference with contract or business expectancies on the theory that, by divulging information to Goodyear, Gillette had interfered with an actual or prospective contractual relationship between TMC and Goodyear. Upon evaluation of the Complaint, counsel for Gillette urged TMC's counsel to dismiss the case. TMC declined to dismiss the case at that juncture.
As noted above, the Sixth Circuit affirmed the district court's summary judgment against TMC in the Goodyear case. Upon receipt of the Sixth Circuit opinion, Gillette's counsel again urged TMC's counsel to dismiss this case. This occurred before any depositions were taken in this case. TMC again declined to dismiss the case.
According to TMC's attorney, after the Sixth Circuit affirmed the district court's summary judgment in the Goodyear litigation, TMC decided that it wanted to take Gillette's deposition in this case ("TMC wanted to take Mr. Gillette's deposition so that TMC knew at least what Mr. Gillette would admit he told Goodyear's attorneys." (Plaintiff's Opposition Memorandum, p. 10)). As early as March 2000, TMC's attorney made efforts to schedule Gillette's deposition. TMC eventually noticed Gillette's deposition for May 24, 2000, but it actually occurred on July 13, 2000 for the convenience of Gillette and his attorney.
The morning after Gillette's deposition, TMC offered to dismiss the case against Gillette in exchange for a mutual release. Gillette declined those terms and, as noted above, TMC moved to dismiss this case on August 17, 2000. In doing so, TMC represented that its decision to dismiss was based in significant part upon the Sixth Circuit's opinion affirming the district court's summary judgment against it in the Goodyear litigation. I granted the motion and dismissed TMC's claims with prejudice, while allowing Gillette's claim for attorney fees to proceed.
DISCUSSION
Although Gillette argues that TMC did not have an adequate basis to bring any of the four claims asserted against him in this case, his primary focus is on TMC's basis for asserting that Gillette violated the Oregon UTSA by disclosing TMC's trade secrets. Under the Oregon UTSA, "[t]he court may award reasonable attorney fees to the prevailing party if . . . a claim of misappropriation is made in bad faith." ORS 646.467(1). According to the comments contained in Uniform Laws Annotated, this provision allows a court to award reasonable attorney fees to a prevailing party as a deterrent to specious claims of misappropriation. The parties are in agreement that attorney fees should only be awarded in "exceptional" cases and that such an award is in the court's discretion.
Given that the Oregon UTSA provides the only basis for an award of attorney fees to Gillette, I will focus exclusively on that statutory claim and the basis that TMC had for asserting such a claim. As such, I place no weight on TMC's lead argument that, even if the information disclosed by Gillette did not consist of "trade secrets," the disclosure of confidential information violates a common law duty. Plaintiff's Opposition Memorandum, pp. 11-14.
At the outset, I note that the portion of TMC's opposition brief entitled "Gillette Revealed Trade Secrets," fails to address any specific statements made by Gillette in the Gillette Affidavit. Even more telling, the affidavit filed in this action by TMC's Chief Executive Officer, Thomas Morency, does not take issue with any particular statements in the Gillette Affidavit. This is especially noteworthy given that the Gillette Affidavit is attached to Morency's affidavit to illustrate how Gillette had revealed TMC's trade secrets. I assume that TMC has not pointed to any particular statements by Gillette because they do not readily fit within the definition of "trade secret." At best, the Gillette Affidavit contains general and somewhat vague information about TMC's operations that lacks the specificity or detail necessary to qualify as trade secrets.
This is in sharp contrast to Morency's affidavit filed in the Goodyear litigation in which Morency is critical of specific statements in the Gillette Affidavit, primarily on the basis that they are false (rather than on the basis that they reveal proprietary or confidential information). See Defendant's Exhibit N. I note that Morency also states the following in paragraph 16 of that affidavit: "Mr. Gillette had no access to TMC's proprietary data base of tariff and contract information and was not permitted to utilize the information contained in that data base."
See ORS 646.461(4):
"Trade secret" means information, including a drawing, cost data, customer list, formula, pattern, compilation, program, device, method, technique or process that:
(a) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Based on TMC's dismissal of its trade secrets claim, and the fact that it cannot articulate a single trade secret that was disclosed by Gillette, it is clearly appropriate to consider Gillette the prevailing party under the trade secrets claim. Moreover, I find that TMC has not articulated any supportable reasons for believing at the commencement of this lawsuit that Gillette, through the statements included in the Gillette Affidavit or otherwise, had disclosed trade secrets of TMC. As such, I conclude that TMC did not have an objectively reasonable basis to assert its claim against Gillette under the Oregon UTSA. Gillette has met his burden of demonstrating that TMC made its misappropriation of trade secrets claim in bad faith and that this is an exceptional case.
Likewise, TMC did not have a reasonable basis to assert its breach of contract claims premised on the allegation of wrongful disclosure of confidential information.
I acknowledge that TMC argues that the "bad faith" inquiry should focus on its conduct after this lawsuit commenced, rather than its basis for filing the lawsuit. Such an argument is inconsistent with the plain language of ORS 646.467(1). Regardless, TMC's actions during this litigation, particularly after the Sixth Circuit had issued its opinion in the Goodyear case, do not weigh against an award of attorney fees to Gillette. Specifically, while it asserts that its decision in July 2000 to dismiss its claims in this case was based on the Sixth Circuit's opinion, that opinion was issued five months earlier. Even without this unnecessary delay, TMC's motivation in deposing Gillette ("so that TMC knew at least what Mr. Gillette would admit he told Goodyear's attorneys") makes evident its bad faith.
As of the date of Gillette's reply brief in support of his motion for attorney fees, his attorney's fees totaled $20,618.00. Although I am not persuaded that I should apply the requested multiplier to such amount to arrive at an award of fees, I am otherwise comfortable with the hours and hourly rates used to calculate the amount. Gillette shall file a proposed judgment that awards attorney fees in the amount of $20,618.00 and costs.
CONCLUSION
For the foregoing reasons, the motion for attorney fees (#30) by defendant Richard R. Gillette is GRANTED.
SO ORDERED.