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QUESTIONS: The purpose of these questions are to better understand the case. Please make sure you answer all these questions in your case analysis.
- Write a brief summary of the facts as the court found them to be. Eliminate facts that are not relevant to the court’s analysis. For example, a business’s street address is probably not relevant to the court’s decision of the issue of whether the business that sold a defective product is liable for the resulting injuries to the plaintiff. However, suppose a customer who was assaulted as she left its store is suing the business. The customer claims that her injuries were the reasonably foreseeable result of the business’s failure to provide security patrols. If the business is located in an upscale neighborhood, then perhaps it could argue that its failure to provide security patrols is reasonable. If the business is located in a crime-ridden area, then perhaps the customer is right. Instead of including the street address in the case brief, you may want to simply describe the type of neighborhood in which it is located.
- What is the question presented to the court in this case? Usually, only one issue will be discussed, but sometimes there will be more. What are the parties fighting about, and what are they asking the court to decide?For example, in the case of the assaulted customer, the issue for a trial court to decide might be whether the business had a duty to the customer to provide security patrols. The answer to the question will help to ultimately determine whether the business is liable for negligently failing to provide security patrols: whether the defendant owed plaintiff a duty of care, and what that duty of care is, are key issues in negligence claims. Your answer should be in the form of a question and is usually a sentence or two.
- Determine what the relevant rules of law are that the court uses to make its decision. These rules will be identified and discussed by the court. For example, in the case of the assaulted customer, the relevant rule of law is that a property owner’s duty to prevent harm to invitees is determined by balancing the foreseeability of the harm against the burden of preventive measures. There may be more than one relevant rule of law to a case: for example, in a negligence case in which the defendant argues that the plaintiff assumed the risk of harm, the relevant rules of law could be the elements of negligence, and the definition of “assumption of risk” as a defense. Don’t just simply list the cause of action, such as “negligence” as a rule of law: What rule must the court apply to the facts to determine the outcome?
- The court will have examined the facts in light of the rule, and probably considered all “sides” and arguments presented to it. How did the court apply the rule to the facts and analyze the case? What does the court consider to be a relevant fact given the rule of law?Your answer should show how the court interpreted the rule: for example, does the court consider monetary costs of providing security patrols in weighing the burden of preventive measures? Does the court imply that if a business is in a dangerous area, then it should be willing to bear a higher cost for security? Resist the temptation to merely repeat what the court said in analyzing the facts: what does it mean to you? Summarize the court’s rationale in your own words. If you encounter a word that you do not know, use a dictionary to find its meaning.
What was the final outcome of the case? State the court’s ultimate finding. For example, the business did not owe the assaulted customer a duty to provide security patrols.
Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
BUL5300: BUSINESS LAW
INSTRUCTIONS: Below you will find the full case brief of Hallmark Cards, Inc. v. Monitor Clipper
Partners. Please read the brief and analyze the case. You will find related questions at the end
of the case brief. Please make sure to answer all questions in your case analysis.
HALLMARK CARDS INCORPORATED v. II LP RPG
LLC LLP PC LLP
United States Court of Appeals, Eighth Circuit.
HALLMARK CARDS, INCORPORATED, Plaintiff–Appellee v. MONITOR CLIPPER PARTNERS, LLC,
Defendant–Appellant Monitor Clipper Equity Partners, II, LP; Monitor CompanyGroup Limited
Partnership; Mark Pocharski; Robert Lurie; Adam Doctoroff; Steven Levin; Annica Blake; Robert
Samuelson; RPG Investment Holdings, LLC; Charles Yoon; William Young; Mark Thomas; Sullivan
& Worcester, LLP; Laura Steinberg; Rouse Hendricks German May, PC; Stinson Morrison Hecker,
LLP, Defendants.
No. 13–1905.
Decided: July 15, 2014
Before WOLLMAN, BYE, and SHEPHERD, Circuit Judges. John C. Aisenbrey, Kansas City, MO,
(Charles W. German, George Verschelden, Daniel E. Blegen, Jeremy Suhr, Christina D. Arnone,
Kansas City, MO, on the brief), for Plaintiff–Appellee. Linda T. Coberly, Chicago, IL, (David Field
Oliver, Stacey R. Gilman, Laura K. Brooks, Kansas City, MO, Steven L. Manchel, Newton, MA,
Brook R. Long, Michael David Bess, Chicago, IL, on the brief), for Defendant–Appellant.
Hallmark Cards, Inc. (Hallmark), hired Monitor Company Group, L.P. (Monitor), to compile
research on the greeting cards market. Monitor transmitted confidential market research it had
prepared for Hallmark to a private equity firm called Monitor Clipper Partners, LLC (Clipper), the
defendant in this litigation. Clipper used this information to purchase and subsequently manage
a competitor of Hallmark’s called Recycled Paper Greetings, Inc. (RPG). Hallmark sued Monitor
for breaching its contractual obligations and Clipper for misappropriating Hallmark’s trade
secrets in violation of the Missouri Uniform Trade Secrets Act, Mo.Rev.Stat. § 417.450 et seq.
(MUTSA). Hallmark settled with Monitor for $16.6 million; its case against Clipper proceeded to
trial, where a jury awarded Hallmark $21.3 million in compensatory damages and $10 million in
punitive damages. After the verdict, Clipper moved for judgment as a matter of law and
alternatively to alter or amend the judgment, asserting (1) that the evidence did not support
the verdict, (2) that the jury award gave Hallmark a double recovery because Hallmark had
already settled with Monitor for the same injury, and (3) that the assessment of punitive
damages against Clipper violated Missouri law and the Due Process Clause of the Constitution.
The district court1 denied these motions, and we affirm.
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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I.
Hallmark is a manufacturer of greeting cards headquartered in Kansas City, Missouri. In
December 2001, Hallmark retained Monitor, a Boston-based consulting firm, to research
consumer behavior in the greeting cards market. Monitor created a “case team” of consultants
dedicated to the project, and the team set itself to the task and created a series of PowerPoint
presentations containing its findings. Hallmark and Monitor signed several confidentiality
agreements preventing Monitor from sharing these findings with anyone else.
Monitor was closely affiliated with Clipper, a private equity firm founded by two of Monitor’s
original partners and headquartered in Monitor’s building.2A team of Monitor consultants
served Clipper exclusively, and Clipper’s investing strategy was explicitly predicated on
harnessing Monitor’s network of consulting clients. Clipper referred to Monitor as its
“consulting arm” and attracted investors by touting its “privileged access to the proprietary
resources of [Monitor]” and its “substantial number of potential investments through Monitor’s
business relationships and through initiatives and target industries where Monitor has
significant knowledge and expertise.”
Perhaps not coincidentally, shortly after Hallmark hired Monitor, Clipper became interested in
acquiring RPG, a greeting cards manufacturer that was up for auction. Clipper asked several
Monitor consultants on the Hallmark case team to provide research on the greeting cards
market that the team had compiled during its work for Hallmark. These consultants provided
Clipper with five PowerPoint presentations that Monitor had prepared for Hallmark. Clipper
used the information contained in these presentations to price its bid for RPG and then to
obtain financing for its bid, telling potential investors that “through [Monitor’s] unparalleled
experience in the greeting cards industry including the work they have done with Hallmark,
[Clipper] can derive growth and produce high cash flow from RPG that others cannot.” Clipper
ultimately won the auction for RPG.
After Clipper announced its purchase, Hallmark began to suspect that Monitor had disclosed
some of Hallmark’s proprietary research to Clipper. Both Monitor and Clipper denied any
wrongdoing. Hallmark nevertheless asked both companies to institute litigation holds on all
materials related to Clipper’s acquisition of RPG. Instead of complying with this request,
Monitor and Clipper began systematically to destroy evidence documenting their transactions,
erasing hard drives containing Hallmark’s proprietary information while continuing to represent
to Hallmark that Clipper had never possessed this information.
Hallmark remained unconvinced. It initiated an arbitration proceeding against Monitor in 2006,
alleging that Monitor had transmitted Hallmark’s trade secrets to Clipper in violation of both
Monitor’s confidentiality agreements and MUTSA. Because Monitor and Clipper had so
thoroughly erased the evidence of their transactions, Hallmark had scant evidence to support
its claims. The arbitrator ultimately ruled for Hallmark on its breach-of-contract claim and
against Hallmark on its MUTSA claim. In particular, the arbitrator found that Monitor had used
Hallmark’s information “carelessly, although without bad motive” by disseminating Hallmark’s
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
BUL5300: BUSINESS LAW
information widely within Monitor, including to employees who were not on the Hallmark case
team, but that Monitor had never intentionally disclosed Hallmark’s PowerPoint presentations
to anyone outside the company. The arbitrator further concluded that any compromise of
Hallmark’s proprietary information had been limited to one PowerPoint presentation, the
“Greetings” project. The arbitrator awarded Hallmark $4.1 million in damages, which consisted
of the $3.2 million fee Hallmark had paid Monitor for the Greetings project and $900,000 to
account for the possibility that Hallmark’s other trade secrets might be compromised in the
future as a result of Monitor’s breach. The arbitrator also instructed Monitor to retain an
independent forensic investigator to search its computer logs for any of Hallmark’s proprietary
information, report any such information to Monitor and Hallmark, and then delete that
information.
In 2008, this search turned up two e-mails containing a total of five PowerPoint presentations
that Monitor had originally prepared for Hallmark. These e-mails had been sent from Monitor
consultants on the Hallmark case team to their counterparts on the Clipper case team, and they
established that Monitor had willfully provided Hallmark’s proprietary research to Clipper at
Clipper’s request. Hallmark petitioned the district court to reopen the arbitration proceeding,
and the district court granted the petition, leaving the arbitrator’s original $4.1 million award
intact pending further arbitration. Hallmark and Monitor eventually settled the reopened
dispute for an additional $12.5 million, for a total of $16.6 million. The settlement stated that it
was “attributable to damages related to the breach of contract claims asserted in the
ReOpened Arbitration and to interest, expenses, and attorney’s fees.”
Hallmark then sued Clipper in federal court, alleging that Clipper had misappropriated
Hallmark’s trade secrets to acquire and manage RPG in violation of MUTSA. A jury agreed with
Hallmark and awarded it $21.3 million in compensatory damages and $10 million in punitive
damages. After the verdict, Clipper moved for judgment as a matter of law, asserting that the
jury lacked sufficient evidence from which to conclude that Hallmark’s PowerPoint
presentations constituted trade secrets under MUTSA, that the verdict gave Hallmark a second
recovery for a single injury, and that the punitive damages assessed against Clipper were
inconsistent with Missouri law and due process. After the court denied that motion, Clipper
moved to alter or amend the judgment under Federal Rule of Civil Procedure 59(e), asserting
that under Missouri’s settlement offset statute, see Mo.Rev.Stat. § 537.060, the jury verdict
should be offset by the amount of Hallmark’s settlement with Monitor. The district court
denied that motion as well, and Clipper appealed both post-verdict rulings.
II.
The parties present three issues on appeal: first, whether the jury correctly found that
Hallmark’s PowerPoint presentations constituted trade secrets under MUTSA; second, whether
the jury verdict gave Hallmark a double recovery; and third, whether the imposition of punitive
damages against Clipper is permissible under Missouri law and the Due Process Clause.
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
BUL5300: BUSINESS LAW
A.
We begin with Clipper’s argument that the jury lacked sufficient evidence to conclude that
Hallmark’s PowerPoint presentations constituted “trade secrets” under MUTSA. In assessing a
challenge to the sufficiency of evidence submitted to a jury, we “must affirm the jury’s verdict
unless, after viewing the evidence in the light most favorable to [Hallmark], we conclude that
no reasonable jury could have found in [its] favor.” Heaton v. The Weitz Co., 534 F.3d 882, 887
(8th Cir.2008) (quoting Moysis v. DTG Datanet, 278 F.3d 819, 824 (8th Cir.2002)).
MUTSA defines a trade secret as:
[I]nformation, including but not limited to, technical or nontechnical data, a formula, pattern,
compilation, program, device, method, technique, or process, that:
(a) Derives independent economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by 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.
Mo.Rev.Stat. § 417.453(4). Clipper asserts that Hallmark’s PowerPoint presentations fail both
prongs of this definition. First, Clipper argues that the presentations were not “the subject of
efforts ․ to maintain [their] secrecy” because Hallmark published the central conclusions of the
presentations before Clipper acquired them. Second, Clipper asserts that the information
contained in the presentations had grown “stale” in the four years between Monitor’s creation
of the presentations and Clipper’s acquisition of them, which is another way of saying that the
presentations no longer “[d]erive [d] independent economic value ․ from not being generally
known to” the public. See UTStarcom, Inc. v. Starent Networks, Corp., 675 F.Supp.2d 854, 871
(N.D.Ill.2009); Carboline Co. v. Lebeck, 990 F.Supp. 762, 767 (E.D.Mo.1997).
We find neither argument persuasive. Hallmark did publish some general conclusions about the
greeting cards market based on information contained in its PowerPoint presentations, but
these conclusions never went beyond broad generalities. At a meeting of the Greeting Card
Association in the early 2000s, for instance, Hallmark disclosed that women over forty-five were
turning to “alternative forms of communication” to express sentiments that they had once
expressed through cards. But Hallmark did not publish any of the evidence supporting the
conclusion or explain how it had reached this conclusion. This unpublished evidence might have
led another company to reach a different conclusion about women over forty-five, or perhaps
that company would have used that evidence to answer a different question entirely. The value
of this evidence, therefore, depends on far more than the broad conclusions that Hallmark
drew from the data. See AvidAir Helicopter Supply, Inc. v. Rolls–Royce Corp., 663 F.3d 966, 972
(8th Cir.2011) (“Th[e] value [of a trade secret] is not dependent on how much of the
information is otherwise unavailable because ‘the effort of compiling useful information is, of
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
BUL5300: BUSINESS LAW
itself, entitled to protection even if the information is otherwise generally known.’ “ (quoting N.
Elec. Co. v. Torma, 918 N.E.2d 417, 426 (Ill.Ct.App.2004))).
Nor did the passage of four years deprive the PowerPoint presentations of their economic
value. The record discloses that Clipper found information about the greeting cards market to
be “sparse” in 2005, when it acquired the presentations. While the economic value of the
presentations may have diminished in the four years prior to Clipper’s misappropriation, the
paucity of other information available meant that the presentations still provided a valuable
source of knowledge about the greeting cards market.
We thus conclude that the jury had sufficient evidence before it to find that Hallmark’s
PowerPoint presentations constituted trade secrets under MUTSA.
B.
Clipper next contends that the jury verdict gave Hallmark a second recovery for a single injury,
because Hallmark had already settled a similar claim against Monitor. Clipper asserts that this
double recovery requires either that we set aside the entire jury verdict or that we reduce the
verdict by the amount of Hallmark’s settlement with Monitor, see Mo.Rev.Stat. § 537.060. We
conclude that Hallmark’s settlement with Monitor and its jury verdict against Clipper
compensated Hallmark for independent injuries and that no reduction of the jury award is
necessary.
“It is a well-settled rule in Missouri that a party cannot be compensated for the same injury
twice.” Norber v. Marcotte, 134 S.W.3d 651, 661 (Mo.Ct.App.2004). Clipper asserts that the
two wrongful acts involved in the transaction between Monitor and Clipper—Monitor’s
transmission of Hallmark’s trade secrets to Clipper, and Clipper’s receipt of those same trade
secrets—gave rise to a single injury. As Clipper points out, we held in Kforce, Inc. v. Surrex
Solutions Corp., 436 F.3d 981, 984 (8th Cir.2006), that the transmission of trade secrets
between two potential defendants creates a single injury, and a plaintiff may not seek damages
both for the dissemination of its trade secrets and for the concomitant acquisition of those
trade secrets in the same transaction.
But Hallmark’s injuries were not limited to a single transaction; rather, as we explain below,
Hallmark’s settlement with Monitor compensated Hallmark for the transmission of its trade
secrets from Monitor to Clipper, while Hallmark’s jury verdict against Clipper compensated
Hallmark for Clipper’s subsequent use of those trade secrets to acquire and manage RPG. These
two acts caused two distinct injuries, and Hallmark is entitled to compensation for both.
1.
The first of these injuries arose when Monitor transmitted Hallmark’s trade secrets to Clipper.
Hallmark recovered a total of $16.6 million for this injury from Monitor—$4.1 million from an
arbitration award and $12.5 million from a settlement after Hallmark discovered Monitor’s
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
BUL5300: BUSINESS LAW
fraud and the court re-opened the arbitration. Both of these awards were, by their very terms,
attributable exclusively to Monitor’s breach of its confidentiality agreement: the arbitrator
explicitly ruled against Hallmark on every claim except for breach of contract, and the
settlement stated that it was attributable “to damages related to the breach of contract claims
asserted in the Re–Opened Arbitration and to interest, expenses, and attorney’s fees.”
A defendant that breaches a contract is, of course, normally liable for the natural consequences
of that breach, Cason v. King, 327 S.W.3d 543, 553 (Mo.Ct.App.2010), and Clipper’s use of
Hallmark’s trade secrets was arguably a natural consequence of Monitor’s transmission of
Hallmark’s trade secrets. But neither the arbitration award nor the settlement could have
compensated Hallmark for Clipper’s use of Hallmark’s trade secrets, because Hallmark and
Monitor specified in their contracts that “[n]either Monitor nor Hallmark shall in any
circumstances be liable to the other for any incidental, consequential, special, multiple, or
punitive damages.” Because both the settlement and the arbitration award were based on this
contract, and the contract expressly disclaimed consequential damages, neither the settlement
nor the arbitration award is fairly attributable to the indirect consequences of Monitor’s
breach, including Clipper’s use of Hallmark’s trade secrets.
2.
By contrast, Hallmark’s jury verdict against Clipper compensated Hallmark only for Clipper’s use
of its trade secrets, not for Clipper’s acquisition of those trade secrets from Monitor. Hallmark
brought its lawsuit under MUTSA, which defines misappropriation as
(a) Acquisition of a trade secret of a person by another person who knows or has reason to
know that the trade secret was acquired by improper means; or
(b) Disclosure or use of a trade secret of a person without express or implied consent by
another person who:
a. Used improper means to acquire knowledge of the trade secret; or
b. Before a material change of position, knew or had reason to know that it was a trade secret
and that knowledge of it had been acquired by accident or mistake; or
c. At the time of disclosure or use, knew or had reason to know that knowledge of the trade
secret was ․ [d]erived from or through a person who owed a duty to the person seeking relief
to maintain its secrecy or limit its use[.]
Mo.Rev.Stat. § 417.453. This definition encompasses both the acquisition of a trade secret and
the subsequent use of that trade secret by the acquirer. Whether a lawsuit seeks recovery for
one injury or the other, therefore, is a question that must be answered by looking at the
posture of each specific case.
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
BUL5300: BUSINESS LAW
As the record makes clear, Clipper’s liability was predicated exclusively on its use of Hallmark’s
trade secrets, not on its acquisition of those secrets. Jury Instruction No. 20, the only jury
instruction that relates to liability, instructs the jury to find for Hallmark only if:
1. The defendant used any of the plaintiff’s trade secrets you found to exist under Instruction
No. 19 and, before materially changing his or its position, the defendant had reason to know
a. The information was plaintiff’s trade secret, and
b. The trade secret had been acquired by accident or mistake; or
2. The defendant used any of the plaintiff’s trade secrets you found to exist under Instruction
No. 19 and knew or had reason to know that the information had been acquired from another
person or entity who owed a duty to the plaintiff to maintain secrecy.
Instruction No. 20 makes liability contingent solely on Clipper’s use of Hallmark’s trade secrets;
Clipper’s acquisition of these secrets, standing alone, does not itself give rise to liability. This
instruction also explicitly parallels the second section of MUTSA’s definition of
misappropriation, which makes it a tort to “[d]isclos[e] or use” a trade secret. Because liability
in Hallmark’s lawsuit against Clipper was predicated entirely on Clipper’s use of Hallmark’s trade
secrets, Hallmark’s recovery in the lawsuit is attributable to nothing else.
The damages in this case also depended exclusively on Clipper’s use of Hallmark’s trade secrets.
The court presented the jury with two damage calculations, one based on unjust enrichment
and the other based on a reasonable royalty.3 The unjust enrichment calculation measured the
actual amount of money that Clipper had saved by using Hallmark’s proprietary information
instead of commissioning its own research, and the reasonable royalty measured the amount
that Clipper would have likely paid Hallmark for the use of Hallmark’s proprietary information.
The royalty was calculated using a discounted cash flow analysis, which estimated the profits
that Clipper expected to earn from acquiring, managing, and ultimately selling RPG. Both of
these calculations depend on Clipper’s actual use of Hallmark’s trade secrets: had Clipper
merely acquired Hallmark’s trade secrets for its own edification, both of the above damage
calculations would have fallen to zero.
Thus, both the determination of liability and the assessment of damages in this case depend
crucially on Clipper’s use of Hallmark’s trade secrets. Clipper’s acquisition of those trade
secrets, while antecedent to Clipper’s use of Hallmark’s trade secrets, did not account for any
portion of Hallmark’s recovery.
This is not to say that Clipper’s acquisition of Hallmark’s trade secrets was wholly irrelevant at
trial. Clipper’s deceit in acquiring the trade secrets supported the jury’s award of punitive
damages4 and was part of the narrative that Hallmark sought to tell the jury. Just as a
prosecutor might explain to a jury how a criminal defendant arrived at the scene of a crime,
Hallmark was within its rights to describe to the court and to the jury exactly how Clipper came
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
BUL5300: BUSINESS LAW
to be in possession of its trade secrets. Such a description may be relevant, even if it does not
itself give rise to liability, as long as it “forms an integral and natural part of an account of the
[tort], or is necessary to complete the story of the [tort] for the jury.” United States v. Troya,
733 F.3d 1125, 1131 (11th Cir.2013) (quoting United States v. Edouard, 485 F.3d 1324, 1344
(11th Cir.2007)); see also United States v. Ruiz–Chavez, 612 F.3d 983, 988 (8th Cir.2010).
Hallmark’s references to Clipper’s acquisition of its trade secrets in the pleadings and at trial,
therefore, do not establish that Hallmark sought or received compensation for Clipper’s
acquisition of its trade secrets; indeed, both the jury instructions and damage calculations
indicate that it received no such compensation.
C.
Finally, Clipper asserts that the assessment of punitive damages against it violated Missouri law
and the Due Process Clause. We review for abuse of discretion the district court’s conclusion
that the jury’s award of punitive damages comported with state law, Parsons v. First Investors
Corp., 122 F.3d 525, 529 (8th Cir.1997), and we review the constitutionality of that award de
novo. MacGregor v. Mallinckrodt, Inc., 373 F.3d 923, 932 (8th Cir.2004). We conclude that
punitive damages were appropriate under both standards.
1.
Under Missouri law, “[p]unitive damages may be awarded for conduct that is outrageous,
because of the defendant’s evil motive or reckless indifference to the rights of others.” Burnett
v. Griffith, 769 S.W.2d 780, 789 (Mo.1989) (en banc) (quoting Restatement (Second) of Torts §
908(2)). As the Missouri Court of Appeals recently explained in Drury v. Missouri Youth Soccer
Association,
The necessary mental state is found when a person intentionally does a wrongful act without
just cause or excuse. When someone intentionally commits a wrong and knew that it was
wrong at the time, an evil motive and wanton behavior is exhibited. An evil intent may also be
inferred where a person recklessly disregards the rights and interests of another person.
259 S.W.3d 558, 573 (Mo.Ct.App.2008) (citations omitted). The plaintiff must establish by clear
and convincing evidence that the defendant possessed such a mental state. Id.
The district court did not abuse its discretion in concluding that Hallmark had met this burden,
for the record discloses Clipper’s numerous attempts to conceal its misappropriation of the
Hallmark’s trade secrets. Clipper ignored numerous litigation holds, destroyed records, erased
computers, and generally sought to avoid liability for its wrongdoing in whatever way it could.
This massive cover-up demonstrates, at the very least, that Clipper acted in reckless disregard
of the rights of Hallmark, which suffices under Missouri law to support an award of punitive
damages.
2.
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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Nor do we find the amount of punitive damages in this case “grossly excessive” such that their
assessment violates due process. Cooper Indus., Inc. v. Leatherman Tool Grp., Inc., 532 U.S.
424, 434 (2001). “[P]unitive damages are grossly excessive if they ‘shock the conscience of this
court or ․ demonstrate passion or prejudice on the part of the trier of fact.’ “ Ondrisek v.
Hoffman, 698 F.3d 1020, 1028 (8th Cir.2012) (quoting Stogsdill v. Healthmark Partners, L.L.C.,
377 F.3d 827, 832 (8th Cir.2004)) (alteration in original). In determining whether a punitive
damages award comports with due process, we consider “the degree of reprehensibility of the
[the defendant’s conduct]; the disparity between the harm or potential harm suffered by [the
plaintiff] and his punitive damages award; and the difference between this remedy and the civil
penalties authorized or imposed in comparable cases.” BMW of N. Am., Inc. v. Gore, 517 U.S.
559, 575 (1996).
The district court observed that “the reprehensibility [of Clipper’s conduct] is not as high as
might exist in other cases.” See D. Ct. Order of Mar. 20, 2013, at 11. In assessing
reprehensibility, we consider (1) whether the harm caused was physical as opposed to
economic; (2) whether the tortious conduct evinced an indifference to or a reckless disregard of
the health or safety of others; (3) whether the target of the conduct was financially vulnerable;
(4) whether the conduct involved repeated actions or was an isolated incident; and (5) whether
the harm was the result of intentional malice, trickery, or deceit, or mere accident. State Farm
Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419 (2003).
Only the last two factors are implicated here: Clipper’s actions did not endanger anyone’s
physical health or safety, and Hallmark is not financially vulnerable. But Clipper’s conduct did
involve repeated attempts to conceal its tortious conduct, and the harm that befell Hallmark
resulted from malice, trickery, and deceit. We have previously held that evidence of such deceit
by itself can support a punitive damages award, as long as that award remains proportionate to
the reprehensibility of the defendant’s conduct. See Trickey v. Kaman Indus. Tech. Corp., 705
F.3d 788, 803 (8th Cir.2013). Considering the extensive measures Clipper took to conceal its
wrongdoing from both Hallmark and the court, we conclude that Clipper’s conduct was
sufficiently reprehensible to support at least a modest award of punitive damages.
The second two Gore guideposts—the magnitude of punitive damages relative to the plaintiff’s
harm, and the magnitude of punitive damages awards imposed in similar cases—establish that
the award in this case was modest enough to comport with due process. The punitive damages
award was roughly half of Hallmark’s compensatory damages award, and the compensatory
damages might have been far higher (and the relative size of the punitive damages award far
lower) had Clipper succeeded in turning RPG into a legitimate competitor of Hallmark’s
(instead, RPG filed for bankruptcy in 2009). See TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S.
443, 460 (1993) (“It is appropriate to consider the magnitude of the potential harm that the
defendant’s conduct would have caused to its intended victim if the wrongful plan had
succeeded, as well as the possible harm to other victims that might have resulted if similar
future behavior were not deterred.”). The Supreme Court has “repeatedly intimated that a
four-to-one ratio [of punitive damages to compensatory damages] is likely to survive any due
process challenges given the historic use of double, treble, and quadruple damages,” Wallace v.
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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DTG Operations, Inc., 563 F.3d 357, 363 (8th Cir.2009) (citing Pac. Mut. Life Ins. Co. v. Haslip,
499 U.S. 1, 23–24 (1991)), and comparable cases from our circuit have involved punitive
damage awards that are double the compensatory damage award. See, e.g., Conseco Fin.
Servicing Corp. v. N. Am. Mort. Co., 381 F.3d 811, 824–25 (8th Cir.2004). Given the relatively
small size of the punitive damages award in this case, we conclude that the award was not
grossly excessive under the Due Process Clause.
III.
The judgment is affirmed.
FOOTNOTES
1. The Honorable Ortrie D. Smith, United States District Judge for the Western District of
Missouri.
2. We use the past tense here because Monitor filed for bankruptcy in 2012 and was purchased
by Deloitte Touche Tohmatsu, Ltd., in January of 2013.
3. The jury calculated damages under both rubrics, and Hallmark elected to recover the larger
of the two amounts.
4. Punitive damages could only have been assessed against Clipper, since Monitor and
Hallmark disclaimed punitive damages in their contracts. Because Hallmark could have
recovered punitive damages from only one defendant, we need not be concerned that the
award gave Hallmark a double recovery on that aspect of its claim against Clipper.
WOLLMAN, Circuit Judge.
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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QUESTIONS: The purpose of these questions are to better understand the case. Please make
sure you answer all these questions in your case analysis.
1. Write a brief summary of the facts as the court found them to be.
a. Eliminate facts that are not relevant to the court’s analysis.
b. For example, a business’s street address is probably not relevant to the court’s
decision of the issue of whether the business that sold a defective product is
liable for the resulting injuries to the plaintiff. However, suppose a customer
who was assaulted as she left its store is suing the business. The customer claims
that her injuries were the reasonably foreseeable result of the business’s failure
to provide security patrols. If the business is located in an upscale neighborhood,
then perhaps it could argue that its failure to provide security patrols is
reasonable. If the business is located in a crime-ridden area, then perhaps the
customer is right. Instead of including the street address in the case brief, you
may want to simply describe the type of neighborhood in which it is located.
2. What is the question presented to the court in this case?
a. Usually, only one issue will be discussed, but sometimes there will be more.
b. What are the parties fighting about, and what are they asking the court to
decide?
i. For example, in the case of the assaulted customer, the issue for a trial
court to decide might be whether the business had a duty to the
customer to provide security patrols.
ii. The answer to the question will help to ultimately determine whether the
business is liable for negligently failing to provide security patrols:
whether the defendant owed plaintiff a duty of care, and what that duty
of care is, are key issues in negligence claims.
c. Your answer should be in the form of a question and is usually a sentence or
two.
3. Determine what the relevant rules of law are that the court uses to make its decision.
These rules will be identified and discussed by the court.
a. For example, in the case of the assaulted customer, the relevant rule of law is
that a property owner’s duty to prevent harm to invitees is determined by
balancing the foreseeability of the harm against the burden of preventive
measures.
b. There may be more than one relevant rule of law to a case: for example, in a
negligence case in which the defendant argues that the plaintiff assumed the risk
of harm, the relevant rules of law could be the elements of negligence, and the
definition of “assumption of risk” as a defense.
c. Don’t just simply list the cause of action, such as “negligence” as a rule of law:
What rule must the court apply to the facts to determine the outcome?
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
BUL5300: BUSINESS LAW
4. The court will have examined the facts in light of the rule, and probably considered all
“sides” and arguments presented to it. How did the court apply the rule to the facts and
analyze the case? What does the court consider to be a relevant fact given the rule of
law?
a. Your answer should show how the court interpreted the rule: for example, does
the court consider monetary costs of providing security patrols in weighing the
burden of preventive measures?
b. Does the court imply that if a business is in a dangerous area, then it should be
willing to bear a higher cost for security?
c. Resist the temptation to merely repeat what the court said in analyzing the facts:
what does it mean to you? Summarize the court’s rationale in your own words. If
you encounter a word that you do not know, use a dictionary to find its meaning.
5. What was the final outcome of the case?
a. State the court’s ultimate finding.
b. For example, the business did not owe the assaulted customer a duty to provide
security patrols.
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
BUL5300: BUSINESS LAW
INSTRUCTIONS: Below you will find the full case brief of Hallmark Cards, Inc. v. Monitor Clipper
Partners. Please read the brief and analyze the case. You will find related questions at the end
of the case brief. Please make sure to answer all questions in your case analysis.
HALLMARK CARDS INCORPORATED v. II LP RPG
LLC LLP PC LLP
United States Court of Appeals, Eighth Circuit.
HALLMARK CARDS, INCORPORATED, Plaintiff–Appellee v. MONITOR CLIPPER PARTNERS, LLC,
Defendant–Appellant Monitor Clipper Equity Partners, II, LP; Monitor CompanyGroup Limited
Partnership; Mark Pocharski; Robert Lurie; Adam Doctoroff; Steven Levin; Annica Blake; Robert
Samuelson; RPG Investment Holdings, LLC; Charles Yoon; William Young; Mark Thomas; Sullivan
& Worcester, LLP; Laura Steinberg; Rouse Hendricks German May, PC; Stinson Morrison Hecker,
LLP, Defendants.
No. 13–1905.
Decided: July 15, 2014
Before WOLLMAN, BYE, and SHEPHERD, Circuit Judges. John C. Aisenbrey, Kansas City, MO,
(Charles W. German, George Verschelden, Daniel E. Blegen, Jeremy Suhr, Christina D. Arnone,
Kansas City, MO, on the brief), for Plaintiff–Appellee. Linda T. Coberly, Chicago, IL, (David Field
Oliver, Stacey R. Gilman, Laura K. Brooks, Kansas City, MO, Steven L. Manchel, Newton, MA,
Brook R. Long, Michael David Bess, Chicago, IL, on the brief), for Defendant–Appellant.
Hallmark Cards, Inc. (Hallmark), hired Monitor Company Group, L.P. (Monitor), to compile
research on the greeting cards market. Monitor transmitted confidential market research it had
prepared for Hallmark to a private equity firm called Monitor Clipper Partners, LLC (Clipper), the
defendant in this litigation. Clipper used this information to purchase and subsequently manage
a competitor of Hallmark’s called Recycled Paper Greetings, Inc. (RPG). Hallmark sued Monitor
for breaching its contractual obligations and Clipper for misappropriating Hallmark’s trade
secrets in violation of the Missouri Uniform Trade Secrets Act, Mo.Rev.Stat. § 417.450 et seq.
(MUTSA). Hallmark settled with Monitor for $16.6 million; its case against Clipper proceeded to
trial, where a jury awarded Hallmark $21.3 million in compensatory damages and $10 million in
punitive damages. After the verdict, Clipper moved for judgment as a matter of law and
alternatively to alter or amend the judgment, asserting (1) that the evidence did not support
the verdict, (2) that the jury award gave Hallmark a double recovery because Hallmark had
already settled with Monitor for the same injury, and (3) that the assessment of punitive
damages against Clipper violated Missouri law and the Due Process Clause of the Constitution.
The district court1 denied these motions, and we affirm.
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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I.
Hallmark is a manufacturer of greeting cards headquartered in Kansas City, Missouri. In
December 2001, Hallmark retained Monitor, a Boston-based consulting firm, to research
consumer behavior in the greeting cards market. Monitor created a “case team” of consultants
dedicated to the project, and the team set itself to the task and created a series of PowerPoint
presentations containing its findings. Hallmark and Monitor signed several confidentiality
agreements preventing Monitor from sharing these findings with anyone else.
Monitor was closely affiliated with Clipper, a private equity firm founded by two of Monitor’s
original partners and headquartered in Monitor’s building.2A team of Monitor consultants
served Clipper exclusively, and Clipper’s investing strategy was explicitly predicated on
harnessing Monitor’s network of consulting clients. Clipper referred to Monitor as its
“consulting arm” and attracted investors by touting its “privileged access to the proprietary
resources of [Monitor]” and its “substantial number of potential investments through Monitor’s
business relationships and through initiatives and target industries where Monitor has
significant knowledge and expertise.”
Perhaps not coincidentally, shortly after Hallmark hired Monitor, Clipper became interested in
acquiring RPG, a greeting cards manufacturer that was up for auction. Clipper asked several
Monitor consultants on the Hallmark case team to provide research on the greeting cards
market that the team had compiled during its work for Hallmark. These consultants provided
Clipper with five PowerPoint presentations that Monitor had prepared for Hallmark. Clipper
used the information contained in these presentations to price its bid for RPG and then to
obtain financing for its bid, telling potential investors that “through [Monitor’s] unparalleled
experience in the greeting cards industry including the work they have done with Hallmark,
[Clipper] can derive growth and produce high cash flow from RPG that others cannot.” Clipper
ultimately won the auction for RPG.
After Clipper announced its purchase, Hallmark began to suspect that Monitor had disclosed
some of Hallmark’s proprietary research to Clipper. Both Monitor and Clipper denied any
wrongdoing. Hallmark nevertheless asked both companies to institute litigation holds on all
materials related to Clipper’s acquisition of RPG. Instead of complying with this request,
Monitor and Clipper began systematically to destroy evidence documenting their transactions,
erasing hard drives containing Hallmark’s proprietary information while continuing to represent
to Hallmark that Clipper had never possessed this information.
Hallmark remained unconvinced. It initiated an arbitration proceeding against Monitor in 2006,
alleging that Monitor had transmitted Hallmark’s trade secrets to Clipper in violation of both
Monitor’s confidentiality agreements and MUTSA. Because Monitor and Clipper had so
thoroughly erased the evidence of their transactions, Hallmark had scant evidence to support
its claims. The arbitrator ultimately ruled for Hallmark on its breach-of-contract claim and
against Hallmark on its MUTSA claim. In particular, the arbitrator found that Monitor had used
Hallmark’s information “carelessly, although without bad motive” by disseminating Hallmark’s
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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information widely within Monitor, including to employees who were not on the Hallmark case
team, but that Monitor had never intentionally disclosed Hallmark’s PowerPoint presentations
to anyone outside the company. The arbitrator further concluded that any compromise of
Hallmark’s proprietary information had been limited to one PowerPoint presentation, the
“Greetings” project. The arbitrator awarded Hallmark $4.1 million in damages, which consisted
of the $3.2 million fee Hallmark had paid Monitor for the Greetings project and $900,000 to
account for the possibility that Hallmark’s other trade secrets might be compromised in the
future as a result of Monitor’s breach. The arbitrator also instructed Monitor to retain an
independent forensic investigator to search its computer logs for any of Hallmark’s proprietary
information, report any such information to Monitor and Hallmark, and then delete that
information.
In 2008, this search turned up two e-mails containing a total of five PowerPoint presentations
that Monitor had originally prepared for Hallmark. These e-mails had been sent from Monitor
consultants on the Hallmark case team to their counterparts on the Clipper case team, and they
established that Monitor had willfully provided Hallmark’s proprietary research to Clipper at
Clipper’s request. Hallmark petitioned the district court to reopen the arbitration proceeding,
and the district court granted the petition, leaving the arbitrator’s original $4.1 million award
intact pending further arbitration. Hallmark and Monitor eventually settled the reopened
dispute for an additional $12.5 million, for a total of $16.6 million. The settlement stated that it
was “attributable to damages related to the breach of contract claims asserted in the
ReOpened Arbitration and to interest, expenses, and attorney’s fees.”
Hallmark then sued Clipper in federal court, alleging that Clipper had misappropriated
Hallmark’s trade secrets to acquire and manage RPG in violation of MUTSA. A jury agreed with
Hallmark and awarded it $21.3 million in compensatory damages and $10 million in punitive
damages. After the verdict, Clipper moved for judgment as a matter of law, asserting that the
jury lacked sufficient evidence from which to conclude that Hallmark’s PowerPoint
presentations constituted trade secrets under MUTSA, that the verdict gave Hallmark a second
recovery for a single injury, and that the punitive damages assessed against Clipper were
inconsistent with Missouri law and due process. After the court denied that motion, Clipper
moved to alter or amend the judgment under Federal Rule of Civil Procedure 59(e), asserting
that under Missouri’s settlement offset statute, see Mo.Rev.Stat. § 537.060, the jury verdict
should be offset by the amount of Hallmark’s settlement with Monitor. The district court
denied that motion as well, and Clipper appealed both post-verdict rulings.
II.
The parties present three issues on appeal: first, whether the jury correctly found that
Hallmark’s PowerPoint presentations constituted trade secrets under MUTSA; second, whether
the jury verdict gave Hallmark a double recovery; and third, whether the imposition of punitive
damages against Clipper is permissible under Missouri law and the Due Process Clause.
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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A.
We begin with Clipper’s argument that the jury lacked sufficient evidence to conclude that
Hallmark’s PowerPoint presentations constituted “trade secrets” under MUTSA. In assessing a
challenge to the sufficiency of evidence submitted to a jury, we “must affirm the jury’s verdict
unless, after viewing the evidence in the light most favorable to [Hallmark], we conclude that
no reasonable jury could have found in [its] favor.” Heaton v. The Weitz Co., 534 F.3d 882, 887
(8th Cir.2008) (quoting Moysis v. DTG Datanet, 278 F.3d 819, 824 (8th Cir.2002)).
MUTSA defines a trade secret as:
[I]nformation, including but not limited to, technical or nontechnical data, a formula, pattern,
compilation, program, device, method, technique, or process, that:
(a) Derives independent economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by 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.
Mo.Rev.Stat. § 417.453(4). Clipper asserts that Hallmark’s PowerPoint presentations fail both
prongs of this definition. First, Clipper argues that the presentations were not “the subject of
efforts ․ to maintain [their] secrecy” because Hallmark published the central conclusions of the
presentations before Clipper acquired them. Second, Clipper asserts that the information
contained in the presentations had grown “stale” in the four years between Monitor’s creation
of the presentations and Clipper’s acquisition of them, which is another way of saying that the
presentations no longer “[d]erive [d] independent economic value ․ from not being generally
known to” the public. See UTStarcom, Inc. v. Starent Networks, Corp., 675 F.Supp.2d 854, 871
(N.D.Ill.2009); Carboline Co. v. Lebeck, 990 F.Supp. 762, 767 (E.D.Mo.1997).
We find neither argument persuasive. Hallmark did publish some general conclusions about the
greeting cards market based on information contained in its PowerPoint presentations, but
these conclusions never went beyond broad generalities. At a meeting of the Greeting Card
Association in the early 2000s, for instance, Hallmark disclosed that women over forty-five were
turning to “alternative forms of communication” to express sentiments that they had once
expressed through cards. But Hallmark did not publish any of the evidence supporting the
conclusion or explain how it had reached this conclusion. This unpublished evidence might have
led another company to reach a different conclusion about women over forty-five, or perhaps
that company would have used that evidence to answer a different question entirely. The value
of this evidence, therefore, depends on far more than the broad conclusions that Hallmark
drew from the data. See AvidAir Helicopter Supply, Inc. v. Rolls–Royce Corp., 663 F.3d 966, 972
(8th Cir.2011) (“Th[e] value [of a trade secret] is not dependent on how much of the
information is otherwise unavailable because ‘the effort of compiling useful information is, of
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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itself, entitled to protection even if the information is otherwise generally known.’ “ (quoting N.
Elec. Co. v. Torma, 918 N.E.2d 417, 426 (Ill.Ct.App.2004))).
Nor did the passage of four years deprive the PowerPoint presentations of their economic
value. The record discloses that Clipper found information about the greeting cards market to
be “sparse” in 2005, when it acquired the presentations. While the economic value of the
presentations may have diminished in the four years prior to Clipper’s misappropriation, the
paucity of other information available meant that the presentations still provided a valuable
source of knowledge about the greeting cards market.
We thus conclude that the jury had sufficient evidence before it to find that Hallmark’s
PowerPoint presentations constituted trade secrets under MUTSA.
B.
Clipper next contends that the jury verdict gave Hallmark a second recovery for a single injury,
because Hallmark had already settled a similar claim against Monitor. Clipper asserts that this
double recovery requires either that we set aside the entire jury verdict or that we reduce the
verdict by the amount of Hallmark’s settlement with Monitor, see Mo.Rev.Stat. § 537.060. We
conclude that Hallmark’s settlement with Monitor and its jury verdict against Clipper
compensated Hallmark for independent injuries and that no reduction of the jury award is
necessary.
“It is a well-settled rule in Missouri that a party cannot be compensated for the same injury
twice.” Norber v. Marcotte, 134 S.W.3d 651, 661 (Mo.Ct.App.2004). Clipper asserts that the
two wrongful acts involved in the transaction between Monitor and Clipper—Monitor’s
transmission of Hallmark’s trade secrets to Clipper, and Clipper’s receipt of those same trade
secrets—gave rise to a single injury. As Clipper points out, we held in Kforce, Inc. v. Surrex
Solutions Corp., 436 F.3d 981, 984 (8th Cir.2006), that the transmission of trade secrets
between two potential defendants creates a single injury, and a plaintiff may not seek damages
both for the dissemination of its trade secrets and for the concomitant acquisition of those
trade secrets in the same transaction.
But Hallmark’s injuries were not limited to a single transaction; rather, as we explain below,
Hallmark’s settlement with Monitor compensated Hallmark for the transmission of its trade
secrets from Monitor to Clipper, while Hallmark’s jury verdict against Clipper compensated
Hallmark for Clipper’s subsequent use of those trade secrets to acquire and manage RPG. These
two acts caused two distinct injuries, and Hallmark is entitled to compensation for both.
1.
The first of these injuries arose when Monitor transmitted Hallmark’s trade secrets to Clipper.
Hallmark recovered a total of $16.6 million for this injury from Monitor—$4.1 million from an
arbitration award and $12.5 million from a settlement after Hallmark discovered Monitor’s
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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fraud and the court re-opened the arbitration. Both of these awards were, by their very terms,
attributable exclusively to Monitor’s breach of its confidentiality agreement: the arbitrator
explicitly ruled against Hallmark on every claim except for breach of contract, and the
settlement stated that it was attributable “to damages related to the breach of contract claims
asserted in the Re–Opened Arbitration and to interest, expenses, and attorney’s fees.”
A defendant that breaches a contract is, of course, normally liable for the natural consequences
of that breach, Cason v. King, 327 S.W.3d 543, 553 (Mo.Ct.App.2010), and Clipper’s use of
Hallmark’s trade secrets was arguably a natural consequence of Monitor’s transmission of
Hallmark’s trade secrets. But neither the arbitration award nor the settlement could have
compensated Hallmark for Clipper’s use of Hallmark’s trade secrets, because Hallmark and
Monitor specified in their contracts that “[n]either Monitor nor Hallmark shall in any
circumstances be liable to the other for any incidental, consequential, special, multiple, or
punitive damages.” Because both the settlement and the arbitration award were based on this
contract, and the contract expressly disclaimed consequential damages, neither the settlement
nor the arbitration award is fairly attributable to the indirect consequences of Monitor’s
breach, including Clipper’s use of Hallmark’s trade secrets.
2.
By contrast, Hallmark’s jury verdict against Clipper compensated Hallmark only for Clipper’s use
of its trade secrets, not for Clipper’s acquisition of those trade secrets from Monitor. Hallmark
brought its lawsuit under MUTSA, which defines misappropriation as
(a) Acquisition of a trade secret of a person by another person who knows or has reason to
know that the trade secret was acquired by improper means; or
(b) Disclosure or use of a trade secret of a person without express or implied consent by
another person who:
a. Used improper means to acquire knowledge of the trade secret; or
b. Before a material change of position, knew or had reason to know that it was a trade secret
and that knowledge of it had been acquired by accident or mistake; or
c. At the time of disclosure or use, knew or had reason to know that knowledge of the trade
secret was ․ [d]erived from or through a person who owed a duty to the person seeking relief
to maintain its secrecy or limit its use[.]
Mo.Rev.Stat. § 417.453. This definition encompasses both the acquisition of a trade secret and
the subsequent use of that trade secret by the acquirer. Whether a lawsuit seeks recovery for
one injury or the other, therefore, is a question that must be answered by looking at the
posture of each specific case.
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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As the record makes clear, Clipper’s liability was predicated exclusively on its use of Hallmark’s
trade secrets, not on its acquisition of those secrets. Jury Instruction No. 20, the only jury
instruction that relates to liability, instructs the jury to find for Hallmark only if:
1. The defendant used any of the plaintiff’s trade secrets you found to exist under Instruction
No. 19 and, before materially changing his or its position, the defendant had reason to know
a. The information was plaintiff’s trade secret, and
b. The trade secret had been acquired by accident or mistake; or
2. The defendant used any of the plaintiff’s trade secrets you found to exist under Instruction
No. 19 and knew or had reason to know that the information had been acquired from another
person or entity who owed a duty to the plaintiff to maintain secrecy.
Instruction No. 20 makes liability contingent solely on Clipper’s use of Hallmark’s trade secrets;
Clipper’s acquisition of these secrets, standing alone, does not itself give rise to liability. This
instruction also explicitly parallels the second section of MUTSA’s definition of
misappropriation, which makes it a tort to “[d]isclos[e] or use” a trade secret. Because liability
in Hallmark’s lawsuit against Clipper was predicated entirely on Clipper’s use of Hallmark’s trade
secrets, Hallmark’s recovery in the lawsuit is attributable to nothing else.
The damages in this case also depended exclusively on Clipper’s use of Hallmark’s trade secrets.
The court presented the jury with two damage calculations, one based on unjust enrichment
and the other based on a reasonable royalty.3 The unjust enrichment calculation measured the
actual amount of money that Clipper had saved by using Hallmark’s proprietary information
instead of commissioning its own research, and the reasonable royalty measured the amount
that Clipper would have likely paid Hallmark for the use of Hallmark’s proprietary information.
The royalty was calculated using a discounted cash flow analysis, which estimated the profits
that Clipper expected to earn from acquiring, managing, and ultimately selling RPG. Both of
these calculations depend on Clipper’s actual use of Hallmark’s trade secrets: had Clipper
merely acquired Hallmark’s trade secrets for its own edification, both of the above damage
calculations would have fallen to zero.
Thus, both the determination of liability and the assessment of damages in this case depend
crucially on Clipper’s use of Hallmark’s trade secrets. Clipper’s acquisition of those trade
secrets, while antecedent to Clipper’s use of Hallmark’s trade secrets, did not account for any
portion of Hallmark’s recovery.
This is not to say that Clipper’s acquisition of Hallmark’s trade secrets was wholly irrelevant at
trial. Clipper’s deceit in acquiring the trade secrets supported the jury’s award of punitive
damages4 and was part of the narrative that Hallmark sought to tell the jury. Just as a
prosecutor might explain to a jury how a criminal defendant arrived at the scene of a crime,
Hallmark was within its rights to describe to the court and to the jury exactly how Clipper came
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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to be in possession of its trade secrets. Such a description may be relevant, even if it does not
itself give rise to liability, as long as it “forms an integral and natural part of an account of the
[tort], or is necessary to complete the story of the [tort] for the jury.” United States v. Troya,
733 F.3d 1125, 1131 (11th Cir.2013) (quoting United States v. Edouard, 485 F.3d 1324, 1344
(11th Cir.2007)); see also United States v. Ruiz–Chavez, 612 F.3d 983, 988 (8th Cir.2010).
Hallmark’s references to Clipper’s acquisition of its trade secrets in the pleadings and at trial,
therefore, do not establish that Hallmark sought or received compensation for Clipper’s
acquisition of its trade secrets; indeed, both the jury instructions and damage calculations
indicate that it received no such compensation.
C.
Finally, Clipper asserts that the assessment of punitive damages against it violated Missouri law
and the Due Process Clause. We review for abuse of discretion the district court’s conclusion
that the jury’s award of punitive damages comported with state law, Parsons v. First Investors
Corp., 122 F.3d 525, 529 (8th Cir.1997), and we review the constitutionality of that award de
novo. MacGregor v. Mallinckrodt, Inc., 373 F.3d 923, 932 (8th Cir.2004). We conclude that
punitive damages were appropriate under both standards.
1.
Under Missouri law, “[p]unitive damages may be awarded for conduct that is outrageous,
because of the defendant’s evil motive or reckless indifference to the rights of others.” Burnett
v. Griffith, 769 S.W.2d 780, 789 (Mo.1989) (en banc) (quoting Restatement (Second) of Torts §
908(2)). As the Missouri Court of Appeals recently explained in Drury v. Missouri Youth Soccer
Association,
The necessary mental state is found when a person intentionally does a wrongful act without
just cause or excuse. When someone intentionally commits a wrong and knew that it was
wrong at the time, an evil motive and wanton behavior is exhibited. An evil intent may also be
inferred where a person recklessly disregards the rights and interests of another person.
259 S.W.3d 558, 573 (Mo.Ct.App.2008) (citations omitted). The plaintiff must establish by clear
and convincing evidence that the defendant possessed such a mental state. Id.
The district court did not abuse its discretion in concluding that Hallmark had met this burden,
for the record discloses Clipper’s numerous attempts to conceal its misappropriation of the
Hallmark’s trade secrets. Clipper ignored numerous litigation holds, destroyed records, erased
computers, and generally sought to avoid liability for its wrongdoing in whatever way it could.
This massive cover-up demonstrates, at the very least, that Clipper acted in reckless disregard
of the rights of Hallmark, which suffices under Missouri law to support an award of punitive
damages.
2.
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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Nor do we find the amount of punitive damages in this case “grossly excessive” such that their
assessment violates due process. Cooper Indus., Inc. v. Leatherman Tool Grp., Inc., 532 U.S.
424, 434 (2001). “[P]unitive damages are grossly excessive if they ‘shock the conscience of this
court or ․ demonstrate passion or prejudice on the part of the trier of fact.’ “ Ondrisek v.
Hoffman, 698 F.3d 1020, 1028 (8th Cir.2012) (quoting Stogsdill v. Healthmark Partners, L.L.C.,
377 F.3d 827, 832 (8th Cir.2004)) (alteration in original). In determining whether a punitive
damages award comports with due process, we consider “the degree of reprehensibility of the
[the defendant’s conduct]; the disparity between the harm or potential harm suffered by [the
plaintiff] and his punitive damages award; and the difference between this remedy and the civil
penalties authorized or imposed in comparable cases.” BMW of N. Am., Inc. v. Gore, 517 U.S.
559, 575 (1996).
The district court observed that “the reprehensibility [of Clipper’s conduct] is not as high as
might exist in other cases.” See D. Ct. Order of Mar. 20, 2013, at 11. In assessing
reprehensibility, we consider (1) whether the harm caused was physical as opposed to
economic; (2) whether the tortious conduct evinced an indifference to or a reckless disregard of
the health or safety of others; (3) whether the target of the conduct was financially vulnerable;
(4) whether the conduct involved repeated actions or was an isolated incident; and (5) whether
the harm was the result of intentional malice, trickery, or deceit, or mere accident. State Farm
Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419 (2003).
Only the last two factors are implicated here: Clipper’s actions did not endanger anyone’s
physical health or safety, and Hallmark is not financially vulnerable. But Clipper’s conduct did
involve repeated attempts to conceal its tortious conduct, and the harm that befell Hallmark
resulted from malice, trickery, and deceit. We have previously held that evidence of such deceit
by itself can support a punitive damages award, as long as that award remains proportionate to
the reprehensibility of the defendant’s conduct. See Trickey v. Kaman Indus. Tech. Corp., 705
F.3d 788, 803 (8th Cir.2013). Considering the extensive measures Clipper took to conceal its
wrongdoing from both Hallmark and the court, we conclude that Clipper’s conduct was
sufficiently reprehensible to support at least a modest award of punitive damages.
The second two Gore guideposts—the magnitude of punitive damages relative to the plaintiff’s
harm, and the magnitude of punitive damages awards imposed in similar cases—establish that
the award in this case was modest enough to comport with due process. The punitive damages
award was roughly half of Hallmark’s compensatory damages award, and the compensatory
damages might have been far higher (and the relative size of the punitive damages award far
lower) had Clipper succeeded in turning RPG into a legitimate competitor of Hallmark’s
(instead, RPG filed for bankruptcy in 2009). See TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S.
443, 460 (1993) (“It is appropriate to consider the magnitude of the potential harm that the
defendant’s conduct would have caused to its intended victim if the wrongful plan had
succeeded, as well as the possible harm to other victims that might have resulted if similar
future behavior were not deterred.”). The Supreme Court has “repeatedly intimated that a
four-to-one ratio [of punitive damages to compensatory damages] is likely to survive any due
process challenges given the historic use of double, treble, and quadruple damages,” Wallace v.
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Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
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DTG Operations, Inc., 563 F.3d 357, 363 (8th Cir.2009) (citing Pac. Mut. Life Ins. Co. v. Haslip,
499 U.S. 1, 23–24 (1991)), and comparable cases from our circuit have involved punitive
damage awards that are double the compensatory damage award. See, e.g., Conseco Fin.
Servicing Corp. v. N. Am. Mort. Co., 381 F.3d 811, 824–25 (8th Cir.2004). Given the relatively
small size of the punitive damages award in this case, we conclude that the award was not
grossly excessive under the Due Process Clause.
III.
The judgment is affirmed.
FOOTNOTES
1. The Honorable Ortrie D. Smith, United States District Judge for the Western District of
Missouri.
2. We use the past tense here because Monitor filed for bankruptcy in 2012 and was purchased
by Deloitte Touche Tohmatsu, Ltd., in January of 2013.
3. The jury calculated damages under both rubrics, and Hallmark elected to recover the larger
of the two amounts.
4. Punitive damages could only have been assessed against Clipper, since Monitor and
Hallmark disclaimed punitive damages in their contracts. Because Hallmark could have
recovered punitive damages from only one defendant, we need not be concerned that the
award gave Hallmark a double recovery on that aspect of its claim against Clipper.
WOLLMAN, Circuit Judge.
10
Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
BUL5300: BUSINESS LAW
QUESTIONS: The purpose of these questions are to better understand the case. Please make
sure you answer all these questions in your case analysis.
1. Write a brief summary of the facts as the court found them to be.
a. Eliminate facts that are not relevant to the court’s analysis.
b. For example, a business’s street address is probably not relevant to the court’s
decision of the issue of whether the business that sold a defective product is
liable for the resulting injuries to the plaintiff. However, suppose a customer
who was assaulted as she left its store is suing the business. The customer claims
that her injuries were the reasonably foreseeable result of the business’s failure
to provide security patrols. If the business is located in an upscale neighborhood,
then perhaps it could argue that its failure to provide security patrols is
reasonable. If the business is located in a crime-ridden area, then perhaps the
customer is right. Instead of including the street address in the case brief, you
may want to simply describe the type of neighborhood in which it is located.
2. What is the question presented to the court in this case?
a. Usually, only one issue will be discussed, but sometimes there will be more.
b. What are the parties fighting about, and what are they asking the court to
decide?
i. For example, in the case of the assaulted customer, the issue for a trial
court to decide might be whether the business had a duty to the
customer to provide security patrols.
ii. The answer to the question will help to ultimately determine whether the
business is liable for negligently failing to provide security patrols:
whether the defendant owed plaintiff a duty of care, and what that duty
of care is, are key issues in negligence claims.
c. Your answer should be in the form of a question and is usually a sentence or
two.
3. Determine what the relevant rules of law are that the court uses to make its decision.
These rules will be identified and discussed by the court.
a. For example, in the case of the assaulted customer, the relevant rule of law is
that a property owner’s duty to prevent harm to invitees is determined by
balancing the foreseeability of the harm against the burden of preventive
measures.
b. There may be more than one relevant rule of law to a case: for example, in a
negligence case in which the defendant argues that the plaintiff assumed the risk
of harm, the relevant rules of law could be the elements of negligence, and the
definition of “assumption of risk” as a defense.
c. Don’t just simply list the cause of action, such as “negligence” as a rule of law:
What rule must the court apply to the facts to determine the outcome?
11
Case Analysis: Hallmark Cards, Inc. v. Monitor Clipper Partners
BUL5300: BUSINESS LAW
4. The court will have examined the facts in light of the rule, and probably considered all
“sides” and arguments presented to it. How did the court apply the rule to the facts and
analyze the case? What does the court consider to be a relevant fact given the rule of
law?
a. Your answer should show how the court interpreted the rule: for example, does
the court consider monetary costs of providing security patrols in weighing the
burden of preventive measures?
b. Does the court imply that if a business is in a dangerous area, then it should be
willing to bear a higher cost for security?
c. Resist the temptation to merely repeat what the court said in analyzing the facts:
what does it mean to you? Summarize the court’s rationale in your own words. If
you encounter a word that you do not know, use a dictionary to find its meaning.
5. What was the final outcome of the case?
a. State the court’s ultimate finding.
b. For example, the business did not owe the assaulted customer a duty to provide
security patrols.
12
