WAYMAN FIRE PROTECTION, INC., § Plaintiff. § § v. § PREMIUM FIRE & SECURITY, LLC, § ROBERT WEITZEL, and ROBERT § WHITE, and PREMIUM POWER § SERVICES, LLC, § Defendants. § C.A. No. 7866-VCP
WAYMAN FIRE PROTECTION, INC., § Plaintiff. § § v. § PREMIUM FIRE & SECURITY, LLC, § ROBERT WEITZEL, and ROBERT § WHITE, and PREMIUM POWER § SERVICES, LLC, § Defendants. §
C.A. No. 7866-VCP
COURT OF CHANCERY OF DELAWARE
2014 Del. Ch. LEXIS 33
March 5, 2014, Decided
Decision text below is the first available text from the court; it has not been editorially reviewed by LexisNexis. Publisher's editorial review, including Headnotes, Case Summary, Shepard's analysis or any amendments will be added in accordance with LexisNexis editorial guidelines.
Submitted: October 17, 2013
Decided: March 5, 2014
William D. Johnston, Esq., Curtis J. Crowther, Esq., Margaret M. DiBianca, Esq., YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware;
Attorneys for Plaintiff.
A. Richard Winchester, Esq., Christopher A. Selzer, Esq., McCARTER & ENGLISH, LLP, Wilmington, Delaware; Peggy L. Ableman, Esq., Of Counsel, McCARTER & ENGLISH, LLP, Wilmington, Delaware; Attorneys for Defendants.
PARSONS, Vice Chancellor.
This action arises from the alleged possession and misuse of a fire alarm and fire protection system company's proprietary information by certain of its former employees.
When the plaintiff company terminated one of its longtime employees, that former employee, a defendant in this action, began working for a local entrepreneur and an entity in the power generation business owned by the entrepreneur. Shortly thereafter, the entrepreneur created a new entity for the
purpose of starting a fire alarm and fire protection system business that would be run by the former employee. In getting the new business off the ground, the former employee hired several individuals he had worked with while he was employed by the plaintiff.
The [*2] plaintiff alleges that the individuals hired by the former employee, also defendants in this case, without authorization, deleted files from the plaintiff company's computers, and copied the company's proprietary information and trade secrets for the purpose of bringing that information to
the new fire alarm and fire protection system business. The plaintiff also alleges that the defendants have, in fact, used that information to compete with it. According to the plaintiff, both the new fire alarm and fire protection system business and the power generation entity were aware of and sanctioned the alleged misappropriation of its information. As a result of this alleged wrongdoing, the plaintiff company has sued the former employee, the individuals he hired, the new fire alarm and fire protection system business, and the power generation entity, asserting various claims for both monetary and equitable relief.
This Memorandum Opinion constitutes my post-trial findings of fact and conclusions of law on the plaintiff's claims. For the reasons that follow, I conclude that
1 the plaintiff has failed to prove its claims for tortious interference and for misappropriation of trade secrets and has [*3] not established any basis for liability on the part of the defendant power company. I also find, however, that the plaintiff has proved its statutory computer misuse claim, as well as its claims for conversion, conspiracy, and breach of the duty of loyalty against certain defendants. Therefore, the plaintiff is entitled to the monetary and equitable remedies set out in Section III infra.
In addition, the plaintiff has proven that certain defendants repeatedly violated this Court's order granting the plaintiff a preliminary injunction. Therefore, I hold certain defendants in contempt, order them to pay the plaintiff's reasonable attorneys' fees and expenses it incurred in proving the defendants' failure to comply with the injunction, and impose a fine of $10,000 payable to the State of Delaware.
A. The Parties
Plaintiff, Wayman Fire Protection, Inc. (-Wayman[#x2016]), is a corporation engaged in the business of providing sales, service, design, installation, and maintenance of fire alarm and fire protection systems.
Defendant Premium Fire & Security LLC (-Premium Fire[#x2016]) [*4] is an entity engaged in the same line of business as Wayman. Jeff Donnelly is the owner and CEO of Premium Fire.
1 Unless otherwise noted, this background is drawn from the stipulated facts section of the parties' Joint Pre-Trial Stipulation and Order (June 5, 2013).
Docket Item (-D.I.[#x2016]) 298.
2 Defendant Robert Weitzel was employed by Wayman from 2001 until he was terminated on August 18, 2011. At the time of his termination, Weitzel held the position of Vice President of Operations and Business Development at Wayman. Weitzel became President of Premium Fire on December 5, 2011, and has held that position continuously since that time.
Defendant Robert White was employed as a technician by Wayman from 2001 until his resignation in November 2011. White began work as a technician for Premium Fire on December 1, 2011, and has held that position continuously since that time.
Defendant Premium Power Services, LLC (-Premium Power[#x2016] and, together with
Premium Fire, Weitzel, and White, -Defendants[#x2016]) is an entity engaged in the business of providing power generation services. Donnelly also is the owner and founder of Premium Power.
Former defendant Craig Fox was employed as a salesman by Wayman until [*5] his employment was terminated on January 26, 2012. Fox worked in a sales capacity at Premium Fire from February 6, 2012 through February 15, 2013. Before trial, Wayman and Fox settled all of Wayman's claims against Fox.
Former defendant Ryan Williams was employed as a salesman by Wayman from 2010 until he resigned on December 9, 2011. Williams worked as a salesman for Premium Fire from December 12, 2011 until February 18, 2013, when he was terminated. As with Fox, Wayman and Williams reached a settlement before trial as to all of Wayman's claims againstWilliams.
3 B. Facts
1. Wayman terminates Weitzel
On August 18, 2011, Wayman abruptly terminated Weitzel's employment. In connection with his termination, Weitzel and Wayman negotiated a severance agreement. Pursuant to that agreement, Weitzel received $30,000 in exchange for releasing Wayman from any claims he may have had against it for, among other things, wrongful termination or age discrimination.2 The severance agreement did not contain either a noncompetition or a nonsolicitation provision.3
After a brief period of networking, Weitzel was introduced to Donnelly, who hired him to work in a business development role across Donnelly's [*6] various businesses.
4 When an anticipated opportunity in the security camera market failed to materialize, Donnelly and Weitzel decided instead to develop a fire and security business.5 Although the record is unclear as to the exact timing, at some point Donnelly established Premium
2 JX 35.
3 Id. See also JX 53 (email from Wayman Vice President Alisha Bryson to Weitzel stating that -[t]he struck section [of the severance agreement] pertains only to disparagement. This does not preclude your ability to continue working in the industry.[#x2016]).
4 Donnelly Dep. 48.
5 Tr. 781-82 (Weitzel). References in this form are to the trial transcript. Where the identity of the testifying witness is not clear from the text, it is indicated parenthetically after the page citation. See also Donnelly Dep. 47-48.
4 Fire as a standalone legal entity.6 He installed Weitzel as its President on
December 5, 2011.7
2. White agrees to join Premium Fire
Shortly after Weitzel left Wayman, White reached out to Weitzel and asked to be kept in mind if Weitzel became aware of any new job opportunities.8 After some discussions with Weitzel, on October 8, 2011, White accepted a job with Premium Fire.9
White, however, continued to [*7] work at Wayman and did not give notice of his intent to leave the company until November 16, 2011.10 White left Wayman's employ two weeks later on November 30. The following day, December 1, White started working for Premium Fire.
Upon his departure from Wayman, White turned in all four company-issued laptops that he had in his possession.11 White maintained possession, however, of at least one flash drive that he had used to back up the files on his Wayman-issued computers.12
Although White was in possession of the laptops, he was not the only Wayman employee
6 It appears that Premium Fire was established no later than the time that White agreed to join Premium Fire on October 8, 2011. JX 75.
7 Tr. 665-66 (Weitzel).
8 Tr. 858 (White).
9 Tr. 668 (Weitzel); 858 (White).
10 Tr. 858 (White).
11 Tr. 860-61 (White).
12 Tr. 849-50. White's flash drives also may have contained files from Honeywell, the company he worked for before joining Wayman. Tr. 850. 5 with access to them.13 The evidence shows that on November 27 and 28, 2011, one of White's Wayman-issued laptops was used to access a Dropbox account.14 The user who accessed the Dropbox account downloaded multiple files from the account onto a flash drive. [*8] In addition, two days later, on White's last day of employmentat Wayman, 390 SDU files15 were deleted from that same Wayman-issued laptop. For reasons discussed in greater detail infra, I find that Defendant White was responsible for copying and deleting the files from the Wayman laptop on those dates.
When White began working for Premium Fire, he uploaded all of the files he had stored on a flash drive, which included files from Wayman, onto his Premium Fire laptop.16 He did so for the purpose of having the files on any of his flash drives available to him during the course of his job.17
13 Tr. 859-60 (White).
14 See JX 667 (-Dropbox is an Internet-based storage service, which allows files to be stored online and remotely shared, copied, and synchronized with other devices.[#x2016]).
15 For purposes of this Memorandum Opinion, SDU refers to a certain type of electronic computer file used to program fire control systems. Although the parties also referred to these as XDU files during the course of the litigation, for purposes of simplicity, I refer to all such files as SDU files.
16 Tr. 838-39 (White).
17 Id. White viewed the flash drive as his -tool kit,[#x2016] because it contained items heneeded to [*9] do his job, including SDU files, manuals, technical bulletins, switch card templates, and other needed computer programs. 6 contract.23 Fire became a strategic partner with Edwards System Technology (-EST[#x2016]),18
3. Premium Fire becomes a strategic partner with Edwards System Technology In an attempt to bolster its business opportunities, on January 4, 2012, Premium a manufacturer of fire alarm equipment.19 As an EST strategic partner, PremiumFire is a non-exclusive representative for EST products in a specifiedgeographic area.20 Although Premium Fire had applied to become a strategic partner in EST areas PA4 and PA5, EST granted Premium Fire strategic partnerstatus only in PA5.21 Notably, Wayman is an EST strategic partner in PA4.22
The strategic partnership between Premium Fire and EST is governed by Premium Fire's main point of contact with EST regarding its strategic partner status and its obligations under its agreement is Brian Boyle, an ESTRegional Manager.
Pursuant to its contract, Premium Fire agreed not to -solicit orders for or sell, install or service [EST] Products[#x2016] outside of PA5 without prior written authorization (-OOT authorization[#x2016]) from EST.24 The only parties to the [*10] contract are Premium Fire and EST.
18 JX 106; Tr. 798-99 (Weitzel). 19 Tr. 359 (Celino). 20 Id. 21 Tr. 798-99 (Weitzel).
22 Tr. 304 (Duane Wayman); 362 (Celino). At all times relevant to this case, Wayman has been one of at least six EST strategic partners in PA4. Tr. 380 (Celino). 23 JX 136. 24 Id. 7 EST's other strategic partners in PA5 and elsewhere, including Wayman, are not parties to Premium Fire's agreement with EST, and that contract contains no language indicating that a non-party may enforce the agreement or exercise any rights specified therein.25
4. The Doylestown Hospital upgrade project
a. Wayman's relationship with Doylestown Hospital
Wayman's first contact with Doylestown Hospital (-Doylestown[#x2016]) came through Weitzel sometime in 2008. Weitzel was introduced to Thomas Smith,Doylestown's Manager of Environmental Care,26 through John Geffre, a longtime friend of Weitzel's.27
The development of Smith's relationship with Weitzel led to Doylestown hiring Wayman to install a fire control system in the hospital's new addition and to manage the hospital's existing fire control system.28
At the time the fire control system was being installed in Doylestown's new addition, the -old building[#x2016] at [*11] Doylestown used IRC3 fire controltechnology. The IRC3 25 Id. See also Boyle Dep. 217-19 (-Q: Are the rights in this agreement between [EST] and Premium Fire rights between [EST] and Premium Fire? A: I would say yes. Q: Is it EST's position that any other [strategic] partner can intervene into the contract between [EST] and Premium Fire? A: I would say no. Q: Is it
EST's position that Premium Fire can interject in between any contract between [EST] and another channel partner? A: I would say no.[#x2016])
26 Smith Dep. 6.
27 Tr. 790-91 (Weitzel). Geffre's company, a former EST strategic partner, had managed Doylestown's fire alarm system until the company was acquired by Siemens, a direct competitor of EST. Because Geffre's company no longer could honor its contractual commitments to service EST customers after it was acquiredby Siemens, Geffre attempted to facilitate the transfer of several of his company's
EST relationships, including Doylestown, to his friend Weitzel. Id.
28 Smith Dep. 7. 8 system in the old building was approximately 30 years old, and Smith wanted to ensure that whatever system was installed in the new addition could be expanded to include upgrading the old building.29 Thus, [*12] when Wayman installed EST3 technology in the new addition in 2010, it appears to have been understood that soon thereafter Doylestown would be looking to upgrade the old building's fire control system from IRC3 to something compatible with EST3 technology.
While he was employed at Wayman, Weitzel believed that the company would be awarded at least the first -phase[#x2016] of the Doylestown upgrade if Waymanpursued it.30
Even after he was terminated, on at least two separate occasions, Weitzel reached out to Trippe Wayman, a Wayman Vice President, to encourage him to follow through with Smith to ensure that Wayman secured any upgrade work at Doylestown.31 The record is unclear as to what, if any, steps Wayman took to capitalize on the opportunity that
29 Smith Dep. 10 (-We knew it was a 30-year-old system in the old building, and the plans were that, again, addition sometime in the future for when the E.R. opened in 2010, that we would want to expand it over and replace the existing system.[#x2016])
30 JX 23; JX 33; JX 34.
31 See JX 43 (-Trippe, [r]egardless of what you might think, Tom Smith is expecting to sit down with Perry any day to go over the first phase of the upgrade. At that time he will be releasing [*13] Wayman on a P.O. to spend his 2012 budget money, either $200k or $300k. . . . Please put Perry on it if you want to make the most of this opportunity. . . . P.S. Next to me Chris Goodwin has the best relationship with Tom Smith, keep him involved.[#x2016]); JX 422 (-Trippe, I have two things I wanted to mention to you as follows: 1. Godwin told me in a meeting with you he and Carmen Doylestown Hospital was mentioned and you laughed and said do you really believe Weitzel sold that upgrade for $300K. I want you to know it is very real and you need to put someone on it. I have been nurturing this customer for two years. . . . I have Wayman in a position to be sole sourced all of the work. . . .
They are ready to go![#x2016]).
Weitzel claimed existed. As discussed infra, however, by the time Doylestown
officially requested bids for the upgrade project in March 2012, the scope of
the project that Doylestown was bidding out appears to have changed from what Weitzel had told Wayman in July and August 2011.
b. Weitzel's solicitation of Doylestown on behalf of Premium Fire
Within a few days of his termination on August 18, 2011, Wietzel emailed
Smith to inform him that he no longer was employed by Wayman.32 [*14] Weitzel
spoke with Smith again on October 5, 201133 and met with Smith in person on
December 13, 2011.34
Although Weitzel -didn't have any products[#x2016] to sell at the time, Weitzel used the December 2011 meeting to inform Smith that he would be heading up a new fire and alarm venture named Premium Fire.35
On January 26, 2012, Weitzel emailed Smith and Werner on behalf of Premium Power to express an interest in applying to become a bidder for Doylestown's power
32 Tr. 725 (Weitzel); Smith Dep. 11.
33 JX 74.
34 JX 115. Also in attendance were Geffre, White, and Ernie Werner, another
Doylestown representative. JX 119.
35 Tr. 725-29 (Weitzel). See also JX 117 (-We appreciate having the
opportunity to tell you a little about our new company and will follow up with a
product/service line card, describing all of our products and services. I just
wanted to reiterate, we are in no way trying to interfere in any contractual
relationships you have in place with your current vendors/suppliers. However, we
did want you to be aware that we have started a new fire and security
integration company and we would like you to consider us should anything change
with any of your vendors/suppliers.[#x2016]).
In [*15] response, Smith wrote to Weitzel -I assume you [also] would be interested in discussing the fire system upgrade of old building?? Just need to know right now.[#x2016]37 Weitzel immediately confirmed Premium Fire's interest in the Doylestown upgrade project.38 On February 3, 2012, Weitzel, White, Smith, and Werner met in person to discuss the upgrade project.39 Approximately three weeks later, on February 24, Premium Fire received OOT authorization from Boyle to pursue the upgrade at Doylestown,40 which is located in EST territory PA4.41 Premium Fire
and Doylestown met and discussed the upgrade project actively until Premium Fire submitted its bid for the project approximately one month later.
c. Wayman's interactions with Doylestown after Weitzel's termination
When Smith learned that Weitzel was no longer employed at Wayman, he was
-concerned[#x2016] both because he had -an excellent relationship[#x2016]
with Weitzel and because he was -uncomfortable[#x2016] dealing with
-unknown[#x2016] people at Wayman who he had never seen
before, and in whose performance he did not have confidence.42 Fairly soon
Weitzel's termination from Wayman, Smith became dissatisfied with Wayman's
Tr. [*16] 813-14 (Weitzel).
Smith Dep. 11-12.
service,43 but by October 2011 Smith had decided to give Wayman a -second
From Smith's perspective, however, serious issues arose from Wayman's
December 2011 in conjunction with Doylestown's annual fire system
Smith continued to have problems with Wayman after the annual inspection was
completed. For example, Smith did not receive Wayman's annual inspection
mid-March 2012, even though he expected to receive it within four to five
weeks of Wayman completing the inspection in late December 2011, and inquired
persistently when the report was not delivered in that time frame.46 When Smith
actually received the report, he noticed that it contained deficiencies that
needed to be addressed.47 Smith advised Wayman, but was not satisfied with its
43 Tr. 282 (Trippe Wayman).
44 JX 82 (-Carmen has won over Tom Smith and he has committed to giving us a
45 Smith Dep. 12-14 (-Well, again, I think that the biggest factor stands out
in me was the performance during that annual in December. Number one, as I said,
[Wayman showed up without any prior notice and] we had to escort them around
[*17] [over a three week period], which cost me labor time. Number two, they
were unprepared with equipment.[#x2016]).
46 Id. at 14-15.
47 Id. at 27-28.
48 Id. at 28 (-I then informed [Wayman] that you must follow up with a
point-by-point repair solution to the deficiency. What [Wayman] provided me at
the very end was they e-mailed me a blanket letter stating that all deficiencies
were repaired. It's not acceptable under the standard practices of what the
inspectors look at. They want to see a point-for-point repair, not a blanket
letter. I was not happy with that.[#x2016]).
d. Premium Fire is awarded the Doylestown upgrade project
In the end, only two vendors, Wayman and Premium Fire, bid for the Doylestown
upgrade project. Before submitting their respective bids, both companies sent
employees to walk through the building to get an understanding of its layout and
where various relevant devices were located. Whereas Wayman did two walkthroughs
at Doylestown, Premium Fire was onsite -more often taking a look around,[#x2016]
and conducted five or six walkthroughs.49 In addition, during these
walkthroughs, Smith and Premium Fire had
-several discussions on concepts of panel layouts and so forth,[#x2016]
[*18] discussions that Smith
and Doylestown -didn't get from Wayman.[#x2016]50
The bids that Premium Fire and Wayman eventually submitted to Doylestown
differed significantly in scope and cost. Premium Fire's bid -included the
system, the crossover, the main panel, the remote panels, complete rewiring,
complete component change,[#x2016] while Wayman's bid consisted only of the
-main panel, satellite panels, using existing wiring and existing
components.[#x2016]51 According to Smith,
Premium Fire's bid was consistent with Doylestown's request for proposal for
Wayman's bid was not.53 Premium's bid, at approximately
49 Id. at 21-22.
50 Id. at 22.
51 Id. at 24-25.
52 Id. at 24.
53 Id. at 25 (Q: And in what way [was Wayman's bid nonconforming]? A:
Wealready knew that, number one, the existing components were not supported and
they did not communicate properly with the new system.[#x2016]). Celino
$619,000,54 also was materially higher than Wayman's bid of approximately
In addition, as part of its bid, Premium Fire sent Smith a document known as
Annex E, which every EST vendor is required to provide to potential new
clients regardless of whether that client is in the vendor's [*19] designated
EST area, provides a customer notice that if they begin working with an EST
strategic partner that did not install the original system (such as Premium
Fire), they may incur additional costs if the new strategic partner has to
reprogram the system because it cannot obtain access to the
the Wayman and Premium Fire bids were fundamentally different. See Tr. 470
(-So you can't-- in my opinion, you can't compare the two bids because they
are materially different. Q: And Tom Smith compared them and he selected
Premium's; is that right? A: I don't believe -- there is no way to compare
it. I mean, this is the proverbial apples-to-oranges situation.[#x2016]).
According to Celino,
Wayman believed that the upgrade project consisted of several phases and that
Wayman's bid was supposed to represent only the -first phase pricing.[#x2016]
Although Celino claims that such belief was based on conversations with
Smith, it appears that Celino and Wayman misunderstood what Smith was looking
for in the bids. See Smith Dep, 26-27 (-Q: Did you envision the upgrade being a
two-phase project? A: I don't understand the question. Q: Well, did you envision
that the Doylestown Hospital upgrade as put out [*20] for bid would be
completed over a number of steps? A: No, I envisioned that to be an ongoing
seamless process, not in steps.[#x2016]);see also Smith Dep. 20-21 (-We laid the
ground rules for all thevendors in reference to bringing the new system over and
incorporating it again into the old system, make one seamless. We were
well-aware that the fact that a lot of the older components, number one, as I
said, not supported, number two, the fact that they did not communicate with the
new products, and we knew that, number one, it had to be a replacement of some
of the detection devices so it would communicate with the new IRC system, and at
the same time too, a lot of the wiring in the old building was now approaching
30 years old, and we knew several of those areas needed replacement wiring. So
the concept was laid to both Wayman and Premium what our expectations were with
any bids, the scope of the project.[#x2016]) (emphasis added).
original program file.56 On March 14, 2012, slightly more than a week before
Premium Fire submitted its bid to Doylestown, Weitzel told Smith he was sending
Annex E as a formality, and that there would be no additional charges for
reprogramming the Doylestown [*21] system.57
After considering the bids, Smith awarded the upgrade project to Premium
Fire. Smith said he chose Premium Fire because he was not comfortable with
Wayman after its performance on the December 2011 annual fire inspection or with
the logistics of the bid that Wayman had presented.58
5. Fox uploads files from Wayman onto his Premium Fire laptop
In early February 2012, Fox, another former Wayman employee, began working
for Premium Fire.59 While he was employed at Wayman, Fox used an external hard
drive to back up the files on his Wayman laptop.60 Although Fox was instructed
by Donnelly not to bring any information from Wayman with him to Premium Fire,61
within a week of starting at Premium Fire, Fox uploaded the contents of the
external hard drive onto his
56 Tr. 365-66 (Celino).
57 JX 664 at 97.
58 Smith Dep. 25.
59 Tr. 534 (Fox).
60 Tr. 533 (Fox). In that regard, the record shows that it was common
practice among Wayman salespeople and technicians to backup files on their
computers onto external devices, such as hard drives and thumb drives. See, e.g.
, Tr. 512-13 (Williams).
61 Tr. 588 (Fox). Donnelly gave similar instructions to Williams. Tr. 524
Premium Fire laptop.62 [*22] Williams actually witnessed the upload,63 but
he was unaware of
what Fox was uploading.64 Shortly after the upload was complete, Weitzel
cubicle. Fox had placed the uploaded information in a folder labeled
-Wayman[#x2016] on his
computer's desktop.65 While it is unclear if Weitzel noticed the folder on
Fox's computer screen, Fox also claims that he told Weitzel what he had just
done, and that in response, Weitzel asked him if he had any documents related to
Pitcairn,66 a Wayman client for which Premium Fire was preparing an inspection
bid. Although neither Williams67 nor Weitzel68 had any recollection of that
exchange, I found this aspect of Fox's testimony credible.
Of the approximately 17,000 documents that Fox copied while at Wayman and
uploaded onto his Premium Fire laptop, two are of particular importance to this
case: (1) a contacts report and (2) a sales opportunity report, both of which
were generated by
Salesforce.com (-Salesforce[#x2016]). Salesforce is a -customer relations
that Wayman uses to store data such as contact information, sales
62 Tr. 534 (Fox). Although Fox denied that he uploaded the Wayman documents
onto Premium Fire's server (Tr. [*23] 579), I did not find his testimony on
this point to be reliable.
63 Tr. 565 (Fox).
64 Tr. 529-31 (Williams).
65 Tr. 565-66 (Fox).
66 Tr. 566.
67 Tr. 528-29.
68 Tr. 830.
proposal information for each of its customers.69 Wayman pays approximately
$15,000 per year to use Salesforce and, in addition, has spent thousands of
dollars customizing the database to meet its specific needs.70 Trippe Wayman
determines how the company's seventeen Salesforce licenses are allocated.71
Although the record is not entirely clear, I infer from the facts available that
the number of Salesforce licenses corresponds roughly to what Wayman is entitled
to as part of its $15,000 annual fee for the software.
Access to Salesforce is password protected, and Wayman Salesforce users are
required to change their password every 30-60 days.72 These security measures
are a part of the Salesforce service itself and were not implemented
specifically by Wayman.73
It does not appear that Wayman takes any additional steps to protect the
information it inputs into Salesforce beyond the security that is built into the
software. Moreover, there is no evidence that Wayman monitors its authorized
employees' use of Salesforce or restricts [*24] those employees' abilities to
download, export, or otherwise transmit Wayman's
It is undisputed that Fox, who was authorized to access Salesforce, uploaded
Salesforce reports onto his Premium Fire laptop. According to Fox's unrefuted
69 Tr. 189-90 (Trippe Wayman); Tr. 260-61 (Trippe Wayman).
70 Tr. 189-90.
71 At the time of trial, the licenses were allocated to all of Wayman's
salespeople and to select Wayman managers, including Trippe Wayman. Tr. 190.
72 Tr. 190-91 (Trippe Wayman).
testimony, however, no one at Premium Fire ever asked him for the information
contained in the reports or was aware that he possessed them.74 There is no
evidence in the record that Fox or anyone else at Premium Fire ever used the
opportunities report. While Fox did admit to using some of the Wayman files he
uploaded onto his Premium Laptop to get in touch with old clients,75 he
expressly denied ever using either of the Salesforce reports during the course
of his employment at Premium Fire.76
C. Procedural History
After Premium Fire was awarded the Doylestown upgrade project, Wayman began
to suspect that Premium Fire was in possession of, and using, Wayman's SDU
files. As a result, [*25] Wayman retained a forensic computer expert to
determine if its former
employees had copied files from Wayman's computers that they could have
them to Premium Fire. Based on the results of the investigation, on September
14, 2012, Wayman commenced this action by filing a complaint against Premium
Fire and other defendants accusing them of tortious interference, misuse of
computer system information, civil conspiracy, and conversion, among other
things. Concurrent with filing its original complaint, Wayman moved, unopposed,
to have this case expedited. On October 9, 2012, I granted Wayman's motion to
74 Tr. 573-74.
75 Tr. 536 (-Q: And tell me under what circumstances did you use the files?
A: Well, it was ten years' worth of my industry contacts.[#x2016]).
76 Tr. 572-73.
The next day, on October 10, Wayman moved for a preliminary injunction
against Defendants. After conducting limited discovery, the parties agreed to a
consensual preliminary injunction order (the -Preliminary Injunction[#x2016]),
which I granted on November 19, 2012.
In January 2013, Defendants sought leave to file a counterclaim in this
action. After obtaining such leave, Defendants filed their counterclaim on
January [*26] 25, 2013. Wayman then moved both to dismiss the counterclaim and
for summary judgment on it. On May 6, 2013, I dismissed Defendants' counterclaim
pursuant to a joint stipulation of the parties.
Between January and May 2013, Wayman filed both an amended complaint and a
second amended complaint, the latter of which constitutes the operative
complaint in this action. From June 18 through June 21, 2013, I presided over a
three-and-a-half-day trial. Based on the facts developed at trial and certain
assurances made by Defendants, on August 2, 2013, I vacated the Preliminary
Injunction. After extensive post-trial briefing, counsel presented their final
arguments on October 17, 2013. This Memorandum Opinion constitutes my post-trial
findings of fact and conclusions of law in this matter.
D. Parties' Contentions
In post-trial briefing, Wayman narrowed to six the number of claims it is
pursuing against various combinations of Defendants. Wayman's first claim
accuses all Defendants of tortious interference with Wayman's prospective
business relationship regarding the Doylestown upgrade project. Second, Wayman
argues that Premium Fire and Premium Power misappropriated the Salesforce
reports that [*27] Fox uploaded onto his
computer in violation of Delaware's Uniform Trade Secrets Act. In its third
Wayman contends that all Defendants are liable for computer misuse under the
Misuse of Computer System Information Act based on, at a minimum, White's and
uploads of Wayman computer files onto their Premium Fire laptops. In its next
claim, Wayman alleges that White breached his duty of loyalty to the company by
misappropriating Wayman's computer files for the purpose of using them, as an
employee of Premium Fire, to compete with Wayman. Fifth, Wayman avers that
Defendants are liable for White's conversion of its computer files. Wayman
also alleges that Premium Fire and Premium Power are liable for conversion of
the files Fox uploaded to his Premium Fire laptop because they maintained
possession of that laptop and did not return the files to Wayman. Finally,
Wayman asserts that all Defendants conspired with White to steal computer files
from Wayman and to retain and use improperly those files for the purpose of
engaging in unfair competition with Wayman. In addition, although it is not a
separate claim per se, Wayman renewed its efforts to have Defendants held in
contempt [*28] based on their repeated violations of the Preliminary
In response, Defendants argue that Wayman has failed to prove its tortious
interference claim because Wayman had no reasonable expectancy of being awarded
the upgrade project based on its poor performance at Doylestown, and that
regardless, Premium Fire had not used any improper means to compete with Wayman
in securing that contract. As to the second claim, according to Defendants, the
information in the
Salesforce reports does not meet the statutory definition of a -trade
secret,[#x2016] and even if it did, Wayman has not proved any use or disclosure
of Wayman's purported trade secret
information. Next, Defendants acknowledge that they were in possession of
Wayman's information in violation of the Delaware Misuse of Computer System
Information Act. Nevertheless, they assert that Wayman has not proved that
Defendants used that information or that Wayman has been harmed by Premium
Fire's possession of its files, and, therefore, any damages for this claim
should be minimal. Fourth, Defendants assert that White was not a Wayman
corporate fiduciary, and, thus, he did not owe the company any fiduciary duties.
Moreover, Defendants [*29] contend that even if he had such a duty, the
computer files White is alleged to have copied were neither confidential nor
Wayman's property. Defendants also deny any liability for conversion because
Wayman never demanded that its property be returned and, in any event, Wayman
retained its own copy of the electronic files that White and Fox copied.
Finally, regarding Wayman's claim for civil conspiracy, Defendants argue that
there is no evidence of an agreement among
Defendants to steal or use Wayman's computer files.
Separate from their arguments with respect to Wayman's claims, Defendants
also devoted a significant portion of their post-trial briefing to their view
that Wayman should be required to reimburse Defendants for the attorneys' fees
and expenses they have incurred in this action. In that regard, Defendants base
their contention on Wayman's failure to comply with the verification requirement
of Court of Chancery Rule 3(aa) and on Wayman's alleged bad faith conduct in
relation to this litigation.
With that framework in mind, I turn to my analysis of the issues presented in
Before discussing the substance of Wayman's claims, I address first the
liability [*30] of
Defendant Premium Power for the various causes of action that Wayman has
asserted against it in this case. As stated previously, although Premium Power
and Premium Fire share a common owner, they are distinct legal entities. It is
undisputed that the different companies share an office and some administrative
personnel. The evidence also shows
that Premium Fire employees at times attempt to -cross-sell[#x2016] Premium
to potential customers,77 and that one Premium Power employee, Jeff Lucas,
occasionally performed work for Premium Fire.78 None of this, however, warrants
holding Premium Power liable for the claims Wayman is asserting in this case. To
the extent Wayman argues that the distinct corporate forms of Premium Power and
Premium Fire should be disregarded, it has not offered any evidence whatsoever
that would support a veil-piercing or alter-ego type theory. Nor has Wayman
presented evidence that any of the individual Defendants were acting as
employees of Premium Power when they committed their alleged wrongdoing.
Moreover, Wayman has not pointed to anything in the record that indicates that
anyone actually employed by Premium Power ever possessed Wayman's computer
[*31] files, let alone used them.79 In sum, based on the record
77 JX 190; JX 193; JX 202.
78 Tr. 500-01, 519 (White).
79 Wayman also has offered no persuasive explanation as to how Premium Power,
which operates in a completely different industry from Premium Fire and Wayman,
could make use of Wayman's proprietary computer files or purported trade
in this case, Wayman has failed to satisfy its burden of proving its claims
against Premium Power by a preponderance of the evidence. Therefore, I find in
favor of Premium Power on each of the claims that Wayman has asserted against it
in this action, and will dismiss those claims with prejudice.80
A. Tortious Interference81
1. Legal standard
Wayman's tortious interference claim is predicated on an expectancy, rather
the existence, of a contractual relationship with Doylestown regarding the
upgrade project. Under Delaware law, an action for tortious interference with
prospective contractual relations requires: (1) a reasonable probability of a
business opportunity or prospective contractual relationship; (2) intentional
interference by a defendant with that opportunity; (3) proximate cause; and (4)
damages.82Furthermore, all of these [*32] requirements must be considered in
light of a defendant's privilege to compete or protect
80 Because Premium Power faces no liability in this case, all subsequent
references to -Defendants[#x2016] in this Memorandum Opinion refer only to
White, Weitzel, and
Premium Fire, collectively.
81 In Count I of Wayman's Second Amended Complaint, Wayman alleged that
Premium Fire tortiously interfered with both Wayman's service contract with
Doylestown and with Wayman's expectancy of being awarded the Doylestown upgrade
project. Plaintiff, however, only provided post-trial briefing with respect to
its interference with an expectancy claim. Therefore, to the extent Wayman has
not done so already voluntarily, I find that Wayman has waived its claim for
tortious interference with its contractual relationship with Doylestown, as well
as any other claim that appears in the Second Amended Complaint that Wayman also
has not briefed.
82 DeBonaventura v. Nationwide Mut. Ins. Co., 428 A.2d 1151, 1153 (Del. 1981)
his business interests in a lawful manner.83 I reject Wayman's claim for
tortious interference, because I find that Wayman has failed to prove either:
(1) that it had a reasonable probability of a business [*33] opportunity or
prospective contractual relationship; or (2) the existence of proximate cause.
2. Reasonable probability of a business opportunity or prospective
Wayman avers that it had a reasonable expectancy of being awarded the
Doylestown upgrade based on Weitzel's representations to Wayman that they
would be engaged for the project and Smith's deposition testimony that he
allowed Wayman to bid for the project. Neither of these arguments is sufficient
to meet Wayman's burden of proof regarding a reasonable expectancy.
Before his termination by Wayman, Weitzel emailed his colleagues at Wayman on
more than one occasion to express his confidence that Wayman would be hired to
conduct the first phase of Doylestown's upgrade.84 In the month following his
firing, Weitzel continued to communicate to Trippe Wayman that Wayman had an
excellent opportunity to secure the $200,000-$300,000 first phase of the
Doylestown upgrade project if he followed through with Smith.85 All of Weitzel's
emails on this subject were sent between June and September 2011. Until March
2012, however, Smith apparently had to focus his efforts on addressing Wayman's
failure to provide him with [*34] an annual
JX 23; JX 33; JX 34. JX 43; JX 422.
report for the hospital's fire system, and, therefore, he was unable to get
into -the real nitty-gritties of the upgrade[#x2016] until that time.86 Thus,
Weitzel's representationsfrom June to September of 2011 do not provide a
reliable indication of Wayman's probability of
procuring the Doylestown upgrade nearly six months later in March 2012.
Weitzel's representations also fail to persuade me that Wayman had a
expectation of being awarded the Doylestown upgrade for the separate reason
that the project he was claiming Wayman was likely to win was not the upgrade
Doylestown actually bid out and awarded. Each of Weitzel's emails
Wayman being given a contract to complete an initial or preliminary phase of
upgrading Doylestown for between $200,000 and $300,000. That, however, was not
consistent with the scope of the bids that Smith instructed both Wayman and
Premium Fire to submit in March 2012. Regardless of whether Weitzel
misunderstood the nature of the Doylestown upgrade while he was at Wayman or
Smith elected to change the scope of the project at some point after he had
talked with Weitzel in the summer [*35] of 2011, the contract that
Weitzel's 2011 emails expressed confidence that Wayman would be awarded never
actually came to fruition.87 Therefore, Weitzel's emails and beliefs88 in
mid-2011 are not
86 Smith Dep. 39-40.
87 It is puzzling that the bid Wayman submitted to Doylestown in March 2012
was consistent with how Weitzel explained the scope of the Doylestown upgrade in
his 2011 emails, rather than the broader scope Smith actually invited. One
reasonable inference from this is that Wayman may have relied, to its detriment,
on Weitzel's months-old representations that the company would win the
Doylestown project if it bid between $200,000 and $300,000 for the -first
phase[#x2016] of a hospital-wide upgrade.
persuasive evidence that Wayman had a reasonable expectancy of winning the
Doylestown upgrade project in March 2012.
Smith's deposition testimony about Wayman being permitted to bid on the
upgrade project is not sufficient to show the existence of such an expectancy
Despite its missteps with Doylestown's 2011 annual inspection, Smith had not
Wayman entirely from consideration for the upgrade project.89 The facts that
Wayman was permitted to bid and that its bid was considered, [*36] however, did
not, in and of themselves, give Wayman a reasonable expectancy of securing the
upgrade contract. Based on my review of the evidence submitted at trial,
including Smith's deposition
testimony, I find that Wayman's chances of procuring the Doylestown upgrade
significantly below 50%, even though it was only one of two bidders for the
project. The record shows that Smith, consistent with several other former
Wayman customers, had become disenchanted with Wayman as a result of its poor
performance.90Although Smith did not foreclose the possibility of continuing to
work with Wayman, I find that by the time Wayman and Premium Fire submitted
their bids in March 2012, Wayman's odds
88 See generally Tr. 719-23 (Weitzel).
89 Smith Dep. 43 (-Q: Okay. And did you voice your opinion about having both
of those entities [Wayman and Premium Fire] be able to bid? A: Yes. Yes, it was
allowed for both of them to bid, correct. . . . Q: And Wayman's bid was
considered; is that right? A: Both were considered, correct.[#x2016])
90 See, e.g., Boyle Dep. 202-03 (-Through my conversations with Tom, Tom
Smith at Doylestown, it was clear to him that he was not happy with Wayman's
performance, that they [*37] weren't getting the maintenance and testing done
He felt as if things were deteriorating over there and he was hesitant to
want to move forward on any projects on the upgrade project.[#x2016]).
of being awarded the upgrade project were diminished materially by its poor
in the aftermath of Weitzel's departure from the company. Thus, while Wayman
shown that its chances of securing the upgrade contract were something
greater than zero, it has not met its burden of demonstrating that those chances
were high enough such that it reasonably could expect that Doylestown would
select its bid.
Finally, Wayman has offered no persuasive explanation as to how it could have
expected reasonably to be awarded the Doylestown upgrade when its bid failed to
conform to the requirements that Smith had specified. Wayman has not produced
any evidence that Smith or anyone else at Doylestown has ever given a contract
of the scope of the upgrade project to a bidder who submitted a nonconforming
bid. In the absence of
any such evidence, I find that Wayman's inability to meet the project's most
requirement (i.e., demonstrating an adequate understanding of the scope of
work being sought) is [*38] fatal to its assertion that its expectation of
procuring the upgrade project was reasonable. Because Wayman has not established
the first element of its tortious interference claim, that claim must fail.
3. Proximate Causation
I also am convinced that Wayman's tortious interference claim would fail for
a separate and independent reason even if I assumed that Wayman had a reasonable
expectancy in the Doylestown upgrade project and that Premium Fire used
means[#x2016] in competing with Wayman. The reason is that Wayman has not
Premium Fire's use of improper means was the proximate cause of Wayman's
secure the Doylestown contract.
Wayman avers that Premium Fire competed improperly with it for the Doylestown
upgrade in two ways. First, Wayman alleges that Premium Fire's communications
EST to obtain OOT authorization for Doylestown contained material
misrepresentations and omissions. Wayman asserts that had Premium Fire not
solicited Doylestown in violation of Premium Fire's agreement with EST and been
truthful about its solicitation of Doylestown in its communications with EST,
Premium Fire never would have received OOT authorization for Doylestown.
Moreover, [*39] in that case, Wayman would have remained Doylestown's sole fire
control vendor. Second, Wayman accuses Premium Fire of impermissibly using for
Doylestown the program file that Wayman had created through its previous work at
the hospital. This, according to Wayman, allowed Premium Fire to submit a
substantially lower bid than it otherwise would have been able to if it had
incurred the costs of reprogramming Doylestown's fire control system from
Initially, I note that Smith specified two reasons for not accepting Wayman's
bid: its poor performance during the 2011 annual inspection, and its failure to
deliver a bid that conformed to the requirements he had conveyed to them. Both
of these factors were completely within Wayman's control. Thus, regardless of
any improper actions Premium Fire may have taken, the record shows that Wayman
itself bears the ultimate responsibility for Wayman's inability to win the
In that regard, I emphasize that neither of Smith's reasons for rejecting
Wayman's bid had anything to do with Premium Fire's purported use of improper
means to compete. First, Wayman failed to prove, for example, that Premium Fire
was awarded the upgrade
project [*40] because it was the cheaper or more cost-effective option. To
Premium Fire's bid was approximately $400,000 higher than Wayman's bid.
even assuming that without Wayman's Doylestown program file Premium Fire
have had to reprogram the entire Doylestown system, and Premium Fire would
have passed the entirety of that cost onto Doylestown,91 there is no evidence to
Wayman's suggestion that this would have made Premium Fire's bid
At trial, Steve Bender, a technical service manager at Wayman, testified that
Wayman was in Premium Fire's position and did not have the necessary program
file for Doylestown, Wayman would have had to submit a higher priced bid to
account for an increase of approximately 15% in certain of its costs relating to
the purchase and installation of equipment associated with reprogramming
Doylestown's fire control system.92 Nothing in the record suggests that Premium
Fire's additional costs would be significantly more than this 15% figure. There
also is no evidence as to what
Doylestown's budget for the upgrade project was, nor is there any evidence
that Smith had any concerns about the cost of Premium Fire's bid [*41] or would
have been unwilling to accept it if it was 15% higher. Thus, even assuming
Premium Fire impermissibly used
Wayman's program file and that its bid would have been 15% higher had it not
91 Based on Weitzel's testimony that Premium Fire would not pass on any such
cost and Premium Fire's interest in -getting its foot in the door[#x2016] at
Doylestown, I consider this unlikely.
92 Tr. 927-29.
access to that file, Wayman has not met its burden of showing that Smith's
decision to award the upgrade project to Premium Fire would have been different
if its bid had been that much higher.
Moreover, that is not the only respect in which the evidence does not support
Wayman's assertions regarding proximate cause. According to Wayman, but for
Premium Fire having solicited Doylestown improperly and received OOT
authorization from EST through unfair means, Wayman would have secured the
As discussed previously, Smith was unhappy with Wayman's performance during
the 2011 annual inspection and he took Wayman's poor performance seriously.
Wayman has not offered any evidence that Smith, notwithstanding his concerns
about Wayman's performance, was going to permit Wayman to be the only [*42]
bidder for the upgrade, a sizeable endeavor, if Premium Fire had not expressed
an interest in the project.
Nor does the record show that Doylestown had no choice but to use Wayman for
the upgrade if Premium Fire did not emerge as a bidder. In February or March
2012, Smith spoke with representatives at SimplexGrinell, an EST competitor,
about using their products to upgrade the hospital.93 I find, therefore, that
Doylestown would have pursued these discussions if no other EST vendor besides
Wayman expressed an interest in bidding on the project.94 Moreover, Smith told
EST's Boyle explicitly that he was not
93 Smith Dep. 39-40.
94 See JX 267 (email from Smith to Boyle stating: -DH will choose the vendor
and product without restraints to territorial boundaries set by some other
company or corporation. If you want to work with us, fine. If not, I will move
to another manufacturer. There is a major, long term project which is well
going to allow EST to dictate which EST strategic partners he could and could
Based on these facts, I find that Wayman has not shown either that it would
have been the
only bidder for the Doylestown upgrade but for Premium Fire's contravention
[*43] of its
agreement with EST or that Wayman would have been awarded the upgrade project
Premium Fire not bid on it. Therefore, because Wayman has not met its burden
the reasonable expectancy or proximate cause elements of its tortious
I find in favor of Defendants on Count I of the Second Amended Complaint.
B. Delaware Uniform Trade Secrets Act
As previously noted, Wayman accuses Defendants of misappropriating the
Salesforce reports that Fox uploaded to his Premium Fire computer. I turn now
I am moving forward with or without EST. After you explained your company's
restrictions Wednesday, I have started contacts with other manufacturers. As I
stated above we are moving on, I have time issues and your territories are not
95 Smith Dep. 22-23 (-The contents of that meeting is, Mr. Boyle came out,
and I was here with Ernie Werner, and we were discussing vendors. My content on
that meeting was not based on I want a particular vendor to bid. My content with
Mr. Boyle, if he is going to dictate to me what vendors I can and cannot use,
then I either had to make a decision to go with EST or I made it clear to him
that if we weren't satisfied [*44] with his restrictions, we would look into a
totally different company.[#x2016]); JX 224 (email from Smith to Weitzel stating
-I will choose who I want in here and don't care about [Boyle's] company's
1. Legal standard
Under Delaware law, an employer's trade secrets are a protectable interest.96
pertinent part, the Delaware Uniform Trade Secrets Act (-DUTSA[#x2016])97
defines a -trade secret[#x2016] as follows:
(4) -Trade secret[#x2016] shall mean information, including 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.98
Information must meet all the requirements of Section 2001(4) to qualify for
secret[#x2016] status.99 Additionally, DUTSA defines misappropriation, in
relevant part, as the
-[a]cquisition of a trade secret of another by a person who knows or has
reason to know
that the trade secret was acquired by improper means.[#x2016]100
96 See Nucar Consulting, Inc. v. Doyle, 2005 WL 820706, at *5 (Del. Ch. Apr.
5, 2005), [*45] aff'd, 913 A.2d 569 (Del. 2006).
97 6 Del. C. §§ 2001-2009.
98 See id. § 2001(4).
99 Dionisi v. DeCampli, 1995 WL 398536, at *11 (Del. Ch. June 28, 1995),
amended by 1996 WL 39680 (Del. Ch. Jan. 23, 1996).
100 6 Del. C. § 2001(2).
The plaintiff bears the burden of proving the existence and misappropriation
of a trade secret.101 Specifically, under DUTSA, the plaintiff affirmatively
must prove the following: first, that a trade secret exists, i.e., that the
statutory elements-commercial utility or value arising from secrecy and
reasonable steps to maintain secrecy-have been shown; second, that the plaintiff
communicated the trade secret; third, that such communication was made pursuant
to an express or implied understanding that the secrecy of the matter would be
respected; and fourth, that the trade secret has been used or disclosed
improperly to the plaintiff's detriment.102
2. Are the Salesforce documents trade secrets?
At trial, Wayman adduced evidence that Fox was in possession of two
Salesforce documents, and that he uploaded those documents onto his Premium
Fire-issued laptop. Wayman contends those two documents, which consist of a
-contacts report[#x2016] and an -opportunities report,[#x2016] [*46] are its
trade secrets. The -contacts report[#x2016] contains the names, addresses, and
phone numbers for Wayman's -point person[#x2016] at each of its clients.103 For
some of those individuals, the contacts report also lists their position with
the client and
their email address.104 The -opportunities report[#x2016] contains, as its
101 Miles Inc. v. Cookson Am., Inc., 1994 WL 676761, at *9 (Del. Ch. Nov. 15,
1994); Marsico v. Cole, 1995 WL 523586, at *4 (Del. Ch. Aug. 15, 1995).
102 Dionisi, 1995 WL 398536, at *11 (citingWilm. Trust Co. v. Consistent
Asset Mgmt. Co., 1987 WL 8459, at *3 (Del. Ch. Mar. 25, 1987).
103 JX 102.
information regarding Wayman's potential business prospects, including the
location and nature of the job and Wayman's assessment of how likely it is to
secure the project.105
The first question is whether either of these reports -derive[d] independent
economic value[#x2016] by virtue of the information -not being generally known
to[#x2016] and -not being readily ascertainable by proper means by[#x2016]
others. In large measure, a trade secret -derives actual or potential
independent economic value if a competitor cannot produce a comparable product
without a similar expenditure of time [*47] and money.[#x2016]106 Having
considered the evidence presented, I find that Wayman has established that
-opportunities report[#x2016] satisfies this criterion, but the -contact
list[#x2016] does not.
In the -opportunities report,[#x2016] Wayman identifies both the company's
business opportunities as well as projects that the company has secured. The
report includes valuable information beyond just the names of the opportunities,
such as how much Wayman has bid on certain projects and how Wayman became aware
of the opportunity. The vast majority of the opportunities appear to have been
Wayman's attention by some combination of cold calling, customer referrals,
business from existing customers. Therefore, it does not appear that these
opportunities are -generally known.[#x2016] It also is unlikely that a potential
competitor to Wayman could produce the same list of opportunities without
spending significant time and money to develop an existing customer base and
solicit new business. Consequently, Wayman has
105 JX 101.
106 Del. Express Shuttle, Inc. v. Older, 2002 WL 31458243, at *18 (Del. Ch.
Oct. 23, 2002).
shown that the -opportunities report[#x2016] satisfies the first criterion of
a trade [*48] secret under
The same cannot be said, however, for the -contacts report.[#x2016] With
determining whether a client or contact list is a trade secret, this Court
has held that:
The market of the product or service involved is the main factor in
determining whether a client list constitutes a compilation deriving independent
economic value from not being generally known by other persons who can obtain
economic value from its disclosure or use. If the buyers are easily identified,
it is unlikely that their identities will hold independent economic value even
when the identities are considered confidential.107
The focus of this inquiry is on whether Wayman -would lose value and market
Premium Fire could thus -enter the market without substantial development
Wayman has not carried its burden of proving that the identities of its
customers cannot be easily determined. Wayman is in the commercial fire control
industry. The majority of Wayman's clients, such as hospitals, commercial
buildings, hotels, and multi-family
residential structures, are obvious potential clients to a competitor in that
industry.109 Many, if not all, of Wayman's clients probably are required
[*49] by law to have
107 Dionisi v. DeCampli, 1995 WL 398536, at *11 (Del. Ch. June 28, 1995),
amended by 1996 WL 39680 (Del. Ch. Jan. 23, 1996) (citations omitted).
108 Great Am. Opportunities, Inc. v. Cherrydale Fundraising, LLC, 2010 WL
338219, at *16 (Del. Ch. Jan. 29, 2010) (quoting Del. Express Shuttle, Inc.,
2002 WL 31458243, at *18).
109 See Dionisi, 1995 WL 398536, at *11 (finding Rolodex from a graphic
design business with clients' names and addresses did not constitute a trade
secret because the clients were -well known in the community,[#x2016] and -the
majority of the
commercial fire control systems, which further underscores that Wayman's
can be identified easily, even if Wayman does not identify all of its clients
Furthermore, in this particular case, the record supports the conclusion that
Weitzel, White, and other former Wayman employees who joined Premium Fire had a
good understanding of the commercial fire control industry, both from their work
with Wayman and earlier employers. Yet, none of those persons were subject to a
noncompetition, nonsolicitation, or confidentiality agreement with Wayman.
Weitzel and Premium Fire's other employees may not [*50] have known each and
Wayman customer, Wayman cites no authority for the proposition that such
absolute knowledge is necessary. Furthermore, based on the knowledge that
Weitzel and the
others had, they could have replicated Wayman's contact list in all material
through proper means, with a minimal expenditure of time and money.
Wayman's argument that the contact list qualifies as a trade secret because
it also contains the names of some of the -decision makers[#x2016] at its
various clients is similarly unavailing. Wayman has offered no evidence that its
clients' phone numbers are not publicly available or that learning the identity
of the -decision makers[#x2016] would require anything more than using that
publicly available information to contact the client.111 I
names on the Rolodex were generally known throughout the graphic arts
services market as purchasers or suppliers of graphic arts services.[#x2016]).
110 Tr. 315 (Duane Wayman).
111 See Del. Express Shuttle, Inc., 2002 WL 31458243, at *19 (-The
Plaintiffcontends that the identities of certain internal contact people were
not available publicly and, thus, constitute proprietary information. Yet, the
Plaintiff failed to
find, therefore, [*51] that the -contacts report[#x2016] does not meet the
first criterion of 6 Del. C.
§2001(4), and that it is not a protectable trade secret under DUTSA.
Even if, however, the contacts report does have independent economic value,
neither the contacts report nor the opportunities report constitutes a
protectable trade secret under DUTSA because Wayman has not shown that the
reports were the -subject
of efforts that are reasonable under the circumstances to maintain [their]
evidence that it took reasonable steps to preserve the secrecy of the
documents, Wayman points to the facts that access to the Salesforce documents
password protected, only a limited number of employees were given Salesforce
passwords, and those with passwords were required to change their passwords
In prior trade secrets cases, this Court has recognized confidentiality
employment contracts, employee handbooks, and letters sent to employees
their termination as evidence of reasonable efforts to maintain the
confidentiality of trade
prove that this information was not available publicly; for example, could
not one simply call the number of the company and discover the [*52] names of
these contact people without significant burden or expense? Because the data on
the list can be duplicated from publicly available sources, the list does not
carry independent economic value, and as such fails to qualify as a protectable
trade secret.[#x2016]);Total Care Physicians, P.A. v. O'Hara, 798 A.2d 1043,
1054 (Del. Super. 2001) (noting that a Rolodex that contained -only the names of
insurance companies, HMO's and contacts within these organizations[#x2016] was
not a trade secret because the plaintiff -ha[d] not indicated how this
information is not available elsewhere, e.g., a telephone call (from a number
obtained in the phone book or directory assistance) to the carriers or HMO's
secret information.112 This Court also has found that reasonable efforts were
taken to preserve confidentiality when a company had implemented specific
policies to prevent disclosure of information to outsiders113 or the company was
in an industry where custom dictated that certain information be kept
confidential.114 Wayman has not shown that, in terms of the Salesforce
documents, it has used any of the measures that this Court has recognized as
reasonable to protect the confidentiality [*53] of such documents in a
meaningful way, except for password protecting the Salesforce portal.115
112 See Great Am. Opportunities, Inc. v. Cherrydale Fundraising, LLC, 2010 WL
338219, at *19 (Del. Ch. Jan. 29, 2010) (-KB took steps to protect the
confidentiality of its customer lists by, among other things, including
provisions in its Employment Contract, its Handbook, and letters it sent its
employees following termination that notified sales reps and other KB employees
of the sensitive and proprietary nature of that information and prohibited them
from disclosing such information while employed with and after leaving
KB.[#x2016]) (citations omitted).
113 See Miles, Inc. v. Cookson Am., Inc., 1994 WL 676761, at *12 (Del. Ch.
1994) (finding a process subject to reasonable efforts to maintain secrecy where
access to the company plant was restricted, and employees signed confidentiality
agreements and were not permitted to remove documents from the plant).
114 See Beard Research, Inc. v. Kates, 8 A.3d 573, 596 (Del. Ch. 2010)
(finding that reasonable efforts were made to preserve confidentiality when,
among other things, the evidence showed that -throughout the industry it was
generally considered [*54] inappropriate to use experimentals anywhere outside
of the lab in which they were created.[#x2016]).
115 Although not referred to in Wayman's briefing or at trial, a copy of a
2008 Wayman employee handbook is in the record. JX 2. Wayman cites to no
evidence that Weitzel, White, or Fox, who began working at Wayman well before
2008, had ever seen a copy of this or any other Wayman employee handbook. In
addition, the confidentiality language in the 2008 handbook is geared more
towards protecting Wayman's client's confidential information than it is towards
protecting Wayman's confidential information. I am not convinced that the
language in the handbook would lead a Wayman employee to believe that either the
contacts report or the opportunities report was confidential information.
I am not persuaded that merely password protecting the Salesforce information
at issue here constitutes reasonable efforts to protect the confidentiality of
that information. Wayman has not presented evidence that it conveyed to those to
whom it gave passwords to access Salesforce that the Salesforce information was
highly confidential or secret. As previously discussed, it is not inherently
obvious that the names [*55] and phone numbers of
Wayman's clients was confidential proprietary information. If Wayman believed
that information was proprietary, I find that they should have done something
more to impress that fact upon those with access to Salesforce. That is not to
say that a company always must do more than password protect information to
comply with DUTSA's
-reasonable efforts[#x2016] requirement. In this case, however, based on the
nature of the
information at issue, I find that in simply relying on the security features
that came with
Salesforce, primarily a password requirement, Wayman failed to make efforts
reasonable under the circumstance to maintain secrecy of either of the
documents.116 Thus, Wayman has not met its burden of establishing that either
report is a
protectable trade secret under DUTSA.
Therefore, the employee handbook in this case is not persuasive evidence that
Wayman took reasonable steps to protect the confidentiality of the Salesforce
116 At the end of both Salesforce reports, in small print, it says
-Confidential information - Do Not Distribute.[#x2016] JX 101; JX 102. There is
no evidence that Fox or any other Wayman Salesforce user was cognizant of that
easy-to-overlook [*56] language, or that Wayman ever brought that concept to
its employees' attention.
3. Wayman also has failed to prove misappropriation or disclosure of the
Another disputed issue on Wayman's misappropriation of trade secrets claim is
whether Premium Fire actually misappropriated the information in question. I
analysis of that issue on Premium Fire and the actions of Fox.
DUTSA defines -misappropriation,[#x2016] in relevant part, as:
a. acquisition of a trade secret of another by a 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 another without express or implied
consent by a person who:
1. Used improper means to acquire knowledge of the trade secret;
2. At the time of disclosure or use, knew or had reason to know that his or
her knowledge of the trade [secret] was:
A. Derived from or through a person who had utilized improper means to
B. Acquired under circumstances giving rise to a duty to maintain its secrecy
or limit its use; or
C. Derived from or through a person who owed a duty to the person seeking
to maintain its secrecy or limit its use
. . . .117
-[#x2017]Misappropriation [*57] of trade secrets may be proven by
and more often than not, [#x2017]plaintiffs must construct a web of perhaps
117 6 Del. C. § 2001(2).
circumstantial evidence from which the trier of fact may draw inferences
which convince him that it is more probable than not that what plaintiffs allege
happened did in fact take
Wayman argues that because Fox kept the Salesforce documents after his
employment with Wayman ended, he acquired them by improper means. The evidence
does not support this theory. -Improper means[#x2016] is defined by the
statute as -theft,
bribery, misrepresentation, breach or inducement of a breach of a duty to
maintain secrecy, or espionage through electronic or other means.[#x2016]119 Fox
acquired the Salesforce documents through proper means: he downloaded them, as
he was permitted to do, in the course of his employment at Wayman. Moreover,
there is no evidence that Fox downloaded the Salesforce documents for the
purpose of taking them with him to Premium Fire. The contacts report contains a
date stamp which appears to indicate that Fox downloaded it on November 18,
2011.120 Fox also testified that he downloaded the contacts report and the
opportunities [*58] report on the same day.121 Fox did not start working for
Premium Fire until February 2012, and there is no evidence that Fox was talking
118 Merck & Co. v. Smithkline Beecham Pharm. Co., 1999 WL 669354, at *20
(Del. Ch. Aug. 5, 1999) (quoting Miles, 1994 WL 676761, at *13, and Greenberg v.
Croydon Plastics Co., 378 F. Supp. 806, 814 (E.D. Pa. 1974)).
119 6 Del. C. § 2001(1).
120 JX 102.
121 Tr. 539-40.
Premium Fire about a job there in November 2011.122 Based on the evidence,
therefore, I am not persuaded that Fox downloaded the Salesforce documents for
the purpose of bringing them to Premium Fire. Rather, I find that Fox downloaded
the reports in the normal course of his employment at Wayman and backed them up
on his external hard drive as part of his usual practice, and not for the
purpose of appropriating them.
It is still possible, however, that Fox and, through him, Premium Fire,
misappropriated the Salesforce documents within the meaning of 6 Del. C. §
2001(2). Assuming for purposes of argument, and contrary to my finding in
Section II.B.2. supra, that Wayman had shown that the Salesforce documents are
trade secrets, there could be misappropriation under Section 2001(2)(b)(2)(B).
[*59] That is, Fox, in his capacity as an employee of Premium Fire, may have
-[d]isclos[ed] or use[d] a trade secret of another
[i.e., Wayman] without [Wayman's] express or implied consent[#x2016] and
-[a]t the time of disclosure or use, [Fox may have known] or had reason to know
that his . . . knowledge of the trade [secret] was: . . . . [a]cquired under
circumstances giving rise to a duty to
maintain its secrecy or limit its use . . . .[#x2016] The record on several
of the factual predicates
for this argument is less than clear and the subject of dispute between the
parties. Because I have found that Wayman failed to prove that either of the
122 In fact, Fox did not resign from Wayman for the purpose of accepting a
Premium Fire. Wayman fired Fox. Tr. 571-72 (Fox). See also Tr. 807-08
(Weitzel) (-Q: And behind that page is a letter dated February 14th to Mr.
Fox. How did Mr. Fox come to work for Premium? A: He was terminated and got in
touch with me and asked me if I had any openings. And I said, [#x2017]Yeah.
We're starting up. It's probably pretty good timing for you. Come on
documents are trade secrets, however, I need not resolve the issue of whether
those documents were misappropriated, [*60] even indirectly, by Premium Fire.
Even if Wayman had succeeded in proving a misappropriation of one of its
trade secrets, however, I am convinced that any such misappropriation would not
have been willful and malicious within the meaning of 6 Del. C. § 2003. There is
no evidence that Fox deliberately brought the Salesforce documents to Premium
Fire, that anyone at Premium Fire asked Fox to bring the Salesforce documents
with him, or that anyone at Premium Fire actually knew that Fox's laptop
contained the Salesforce documents.
Therefore, I find no basis in the record to hold that Premium Fire acted
willfully or maliciously with regard to the Saleforce reports. Consequently,
even if a misappropriation of trade secrets by Premium Fire had been shown,
Wayman has failed to prove a basis for any award of enhanced damages or
attorneys' fees to Wayman under Section 2003 or 2004 of DUTSA.
In addition, there is no evidence that Fox or anyone else at Premium Fire
used any information from the opportunities report for Premium Fire's benefit.
Thus, I conclude that Wayman has not demonstrated use by Fox or Premium Fire of
the opportunity report. Moreover, even if Wayman had been able to establish
[*61] use of the contacts report, that use would not have been material, because
the contact report is not a protectable trade secret for the reasons discussed
C. Delaware Misuse of Computer System Information Act
Under 11 Del. C. § 935, a person is liable for misuse of computer system
(1) As a result of accessing or causing to be accessed a computer system, the
person intentionally makes or causes to be made an unauthorized display, use,
disclosure or copy, in any form, of data residing in, communicated by or
produced by a computer system;
(2) That person intentionally or recklessly and without authorization:
a. Alters, deletes, tampers with, damages, destroys, or takes data intended
for use by a computer system; or
b. Interrupts or adds data to data residing within a computer system;
(3) That person knowingly receives or retains data obtained in violation of
paragraph (1) or (2) of this section; or
(4) That person uses or discloses any data which that person knows or
believes was obtained in violation of paragraph (1) or (2) of this section.
Defendants concede their liability under this statute, and instead focus
argument on the damages that Wayman should be [*62] awarded.123 For purposes
determining the appropriate remedy, however, it is useful to review briefly
on which each Defendant is liable.
1. Defendant White
Based on the evidence presented at trial, White is liable for computer misuse
Section 935(1), (2)(a), and (4). With respect to Section 935(1), it is
White was in possession of unauthorized copies of certain of Wayman's files
123 Defs.' Post-Trial Reply Br. 38-39.
resigned from the company.124 White intentionally copied files from Wayman's
computer system, and uploaded those files onto his Premium Fire laptop. Wayman
never authorized White to make copies of its files for such use. Thus, White is
liable for computer misuse under Section 935(1).
Although White expressly denied doing so at trial, I find from the evidence
that it was White who deleted the 390 files from the Wayman laptop he used on
his last day of employment on November 30, 2011. Even after trial, the factual
record is unclear as to exactly what was contained in these files, whether
someone other than White used the laptop on November 30, and what, if any, steps
Wayman took to preserve the integrity of the laptop between the time [*63]
White surrendered the laptop to his supervisor and when
Wayman's expert analyzed it. Wayman's computer expert Louis Cinquanto,
however, credibly testified that many of the files that were deleted from the
Wayman laptop also were found on White's Premium Fire laptop and White's flash
drives. Based on Cinquanto's testimony that White was in possession of many of
the files that were deleted, I find it is more likely than not that White
deleted those files from the Wayman laptop, without authorization, in
contravention of Section 935(2)(a).
Finally, White is liable under Section 935(4) for his use of the Doylestown
program file that Tom Darling, a Wayman technician and former colleague of
White's, sent to him in June 2012. As discussed infra, and contrary to
Defendants' position, I find
124 Because White regularly backed up Wayman's files onto his personal flash
drive, the statement in the text is true regardless of whether White also was
the individual who copied files from Wayman's Dropbox account on November 27 and
it is an oversimplification to say that technicians from different fire
system vendors exchange program files freely and regularly. Moreover, whether
any such exchange [*64] can be considered -authorized[#x2016] depends on the
circumstances. There is no evidence, for example, that Smith asked or directed
Wayman to share its program files with Premium Fire in connection with the
Doylestown upgrade project or that Wayman authorized Darling to provide such
files to White. Therefore, I find it is more likely than not that White had no
reasonable basis to believe that Wayman had authorized Darling to copy the
Doylestown program file and send it to him.
I also find, based on a preponderance of the evidence, that White made use of
the Doylestown file that Darling sent to him. Before Premium Fire even submitted
their bid, Weitzel assured Smith that Doylestown would not incur any
reprogramming charges if
Premium Fire was awarded the upgrade project. If Premium Fire did not use
program file, it would have incurred additional costs to reprogram the system
for the Doylestown upgrade. Because White specifically requested and received
the most updated copy of the Doylestown file from Darling, I infer that he used
it on Premium
Fire's behalf on the Doylestown job.125 In that regard, I also note that
Cinquanto testified that White was in possession of Doylestown files that [*65]
had been modified, which further supports inference of use.126
125 See W.L. Gore & Assocs., Inc. v. Long, 2011 WL 6935278, at *7 (Del. Ch.
Dec. 28, 2011) (-[O]ne's possession of a competitor's confidential data
naturally raises the question of why that person possesses that data if not to
126 Tr. 89-90. Relatedly, because I find the fact that White requested and
received updated Doylestown files from Darling, I consider it unlikely that
White used the
a. Was White's misuse wilful and malicious?
Whether an individual's computer misuse was wilful and malicious directly
affects the amount of damages to which a plaintiff is entitled under Section 935
; if both are shown, a plaintiff may recover treble damages.127 The misuse
statute does not define
-wilful[#x2016] and -malicious,[#x2016] but this Court, in the analogous
misappropriation of trade
secrets context, has defined those words, respectively, to mean -an
actual or constructive, of ones conduct and a realization of its probable
and -ill-will, hatred or intent to cause injury.[#x2016]128 Even assuming
White's misuse was
wilful, I am not persuaded that any of his conduct in this case was
malicious. As to
copying Wayman's [*66] files, White, like several other current or former
copied files and backed up his computers as a matter of habit. Furthermore,
White brought the Wayman files he had assembled over the course of his career
there to Premium Fire because he believed it would help him in his new job, not
because he harbored any ill-will or hatred towards Wayman or intended to harm
Regarding the deletion of files, Wayman has failed to adduce any probative
evidence regarding the nature or substance of those files. Without a better
Doylestown files he had copied while he was at Wayman and brought with him to
127 See 11 Del. C. §941(c) (-The aggrieved person shall recover actual
damages anddamages for unjust enrichment not taken into account in computing
damages for actual loss and treble damages where there has been a showing of
wilful and malicious conduct.[#x2016]).
128 Beard Research, Inc. v. Kates, 8 A.3d 573, 600 (Del. Ch. 2010) aff'd sub
nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010).
of what was deleted, I cannot conclude that White deleted those files with an
intent to injure Wayman, or was motivated by ill-will or hatred towards a
company [*67] he had worked for for nearly a decade and was leaving on his own
Finally, I find that White did not act maliciously in using the Doylestown
file that Darling sent him. White asked for and received that file after Premium
Fire already had been awarded the contract over Wayman. Thus, some of the
alleged harm to Wayman already had occurred before White used the file.
Furthermore, it appears more likely that White simply was trying to do his job
and did not focus much, if at all, on whether Darling was authorized to send him
the Doylestown file. Because the record does not support the conclusion that
White's conduct was motivated by ill-will, hatred, or an intent to harm Wayman,
Wayman has not established that White's actions were malicious. Therefore,
Wayman is not entitled to treble damages under the misuse statute for White's
2. Defendants Premium Fire and Weitzel
Premium Fire is liable for computer misuse under Section 935(3) and 935(4).
Both White and Fox uploaded Wayman's files onto their Premium Fire laptops.
The record shows that Weitzel, Premium Fire's President, became aware that Fox
Wayman documents onto his computer shortly after Fox began working for [*68]
Premium Fire in February 2012, and became aware that White was in possession of
129 For similar reasons, I also conclude that Wayman has failed to show that
Defendants' use of Wayman's program file to perform work at Pitcairn or
Defendants' provision of a copy of a Wayman program file to Geffre constituted
malicious conduct .
shortly after this lawsuit was commenced in September 2012. Weitzel did not
ask either Fox or White to destroy, delete, or return the Wayman files they had
brought with them.
Therefore, Premium Fire has knowingly -retained[#x2016] Wayman's files in
Premium Fire also is liable for computer misuse under Section 935(4) because,
at a minimum, its employee and agent White improperly used Wayman's
In addition, Weitzel is individually liable under the misuse statute. Wayman
argues that Weitzel is liable because he knew about Fox and White's
Wayman's property and failed to ensure it was returned to Wayman and not
used. Defendants concede that at some point Weitzel possessed, retained, or
received impermissibly, through Fox or White, some of Wayman'scomputer system
information. On the basis [*69] of that concession, I find Weitzel liable for
a. Was Premium Fire and Weitzel's misuse wilful and malicious?
Wayman claims Weitzel and Premium Fire acted with malicious intent because
Weitzel failed to take any action once he became aware that Fox and White
Wayman computer files. Although Weitzel's actions were exceptionally
careless, I do not find that they were malicious. Nothing in the record suggests
that Weitzel had much, if any, understanding of what was contained in the files
that Fox uploaded onto his
130 See Fisher v. Townsends, Inc., 695 A.2d 53, 58 (Del. 1997) (-Two general
rulesestablish the framework for determining vicarious liability. The first
general rule is that if the principal is the master of an agent who is a
servant, the fault of the agent, if acting within the scope of employment, will
be imputed to the principal by the doctrine of respondeat superior.").
Premium Fire laptop. Without having demonstrated that Weitzel knew what Fox
had brought to Premium Fire, I find that Wayman has not shown that Weitzel acted
with ill-will or an intent to harm Wayman when he failed to ensure the property
was returned to it. For similar reasons, I conclude [*70] that Weitzel did not
act maliciously by failing to take any curative actions once he learned that
White also was in possession of Wayman
property. White assured Weitzel that he had not used any of Wayman's
that he would not do so going forward. Moreover, Weitzel did not learn of
possession of Wayman's computer files until after Wayman filed this lawsuit.
thereafter, Premium Fire engaged counsel to address Wayman's allegations131
and, presumably, to instruct Defendants what to do with the files.132 Under
these circumstances, I am not persuaded that Weitzel's failure to act more
aggressively to ameliorate the situation was motivated by ill-will or an intent
to harm Wayman. Consequently, Wayman has not established that any of the
Defendants acted wilfully and
maliciously in misusing Wayman's computer files.133
131 Tr. 671 (Weitzel).
132 See Tr. 679-80 (Weitzel) (-I-- once we got our counsel involved, I'm sure
therewere further instructions, but I asked [White] not to use [Wayman's files].
We didn't need [Wayman's files] for anything.[#x2016]).
133 In post-trial briefing, Wayman argued that Weitzel -sought to destroy
Wayman[#x2016] after his termination. Wayman's Post-Trial Opening [*71] Br.
2-5. The evidence that Wayman points to in support of its assertion, considered
individually or together
(including Weitzel's emails in JX 74 and JX 315), does not show that Weitzel
ever acted maliciously towards Wayman. As Wayman itself recognizes, Weitzel was
free to compete once he was terminated. The fact that he chose to do so
vigorously by, for example, attempting to -stir things up[#x2016] at Wayman by
making sure Wayman knew that Premium Fire had secured contracts from Wayman
D. White's Duty of Loyalty
Turning to the claim that White breached his duty of loyalty to Wayman, it is
undisputed that White was not a -key managerial employee[#x2016] of Wayman
such that he
would have owed general corporate fiduciary duties to the company.
record convinces me that White was Wayman's agent.134 Thus, as an agent,
have owed duties to Wayman under principles of agency law. I address that
1. Legal standard
Under Delaware law, the relationship of agent to principal does not itself
to fiduciary duties.135 A fiduciary relationship generally requires
-confidence reposed by
customers, or soliciting potential clients in EST area PA4, where he
previously had conducted [*72] business for several years, does not amount to
malicious conduct or indicate that Weitzel had a vendetta against Wayman.
Rather, his actions are consistent with aggressive competition, which he was
permitted to engage in, and which Wayman could have avoided through a
noncompetition agreement or some other contractual arrangement.
134 See Triton Const. Co. v. E. Shore Elec. Servs., Inc., 2009 WL 1387115, at
(Del. Ch. May 18, 2009) (-Under Delaware law, the distinguishing feature of
an agent is that he represents his principal contractually to the extent that
the agent normally binds, not himself, but his principal by the contracts he
makes. The ability to so bind his principal results from the agent having been
authorized, or appearing to an unsuspecting third party to have been authorized,
to do so.[#x2016])
135 Prestancia Mgmt. Gp., Inc. v. Va. Heritage Found., II LLC, 2005 WL
1364616, at *6 (Del. Ch. May 27, 2005). Fiduciary duties will arise, however, in
the context of an agent/principal relationship when -there is an element of
confidentiality or a joint undertaking between the principal and agent. The
hallmark of this form of special principal/agent relationship [*73] is when
matters are peculiarly within the knowledge of the agent.[#x2016]Metro
Ambulance, Inc. v. E. Med. Billing, Inc., 1995 WL 409015, at *3 (Del. Ch. July
5, 1995) (citations omitted).
one side and domination and influence exercised by the
other.[#x2016]136Nevertheless, where an agent represents a principal in a matter
where the agent is provided with confidential information to be used for the
purposes of the principal, a fiduciary relationship may arise.137 For example,
if an employee in the course of his employment acquires secret information
relating to his employer's business, he occupies a position of trust and
confidence toward it and must govern his actions accordingly.138 The resulting
relationship is analogous in most respects to that of a fiduciary
relationship.139 This is true even if the confidential information disclosed to
the employee does not rise to the level of a trade secret.140
Although employees do enjoy a privilege allowing them to make preparations to
compete with their employer before their employment relationship ends, that
privilege is not without limitations. Under some circumstances, the purported
exercise of the
136 BAE Sys. N. Am. Inc. v. Lockheed Martin Corp., 2004 WL 1739522, at *8
(Del. Ch. Aug. 3, 2004) [*74] (quoting Gross v. Univ. of Chi., 302 N.E.2d 444,
453-54 (Ill. App. Ct. 1973)).
137 Ramsey v. Toelle, 2008 WL 4570580, at *6 (Del. Ch. Sept. 30, 2008).
138 Brophy v. Cities Serv. Co., 70 A.2d 5, 7 (Del. Ch. 1949).
140 See id. at 7-8 (-A fiduciary is subjectto a duty to the beneficiary not
to use on his own account information confidentially given him by the
[principal] or acquired by him during the course of or on account of the
fiduciary relation or in violation of his duties as fiduciary, in competition
with or to the injury of the beneficiary
. . . .[#x2016]). See also EDIX Media Gp., Inc. v. Mahani, 2006 WL 3742595,
at *5 (Del.
Ch. Dec. 12, 2006) (-Not all confidential information is a trade
privilege may breach the employee's fiduciary duty of loyalty.141 For
example, an employee may be denied the protection of the privilege when they
have misappropriated trade secrets, misused confidential information, solicited
the employer's customers before cessation of employment, conspired to effectuate
mass resignation of key employees, or usurped a business opportunity of the
employer.142 Ultimately, the determination of whether an employee has breached
his fiduciary duties to [*75] his employer by preparing to
engage in a competing enterprise -must be grounded upon a thoroughgoing
of the facts and circumstances of the particular case.[#x2016]143
2. Who owns the program files?
A key point of disagreement between the parties in this case is who
SDU files that White is alleged to have copied from Wayman and used during
the course of his job at Premium Fire. Wayman argues that it owns the SDU
program files that it develops for its customers to make their fire control
systems operational. This assertion is predicated on the fact that Wayman, as
the entity that expends the time and resources to create the file, has an
ownership interest in the product it creates. In response, Defendants aver that
the SDU files are owned by the customer for which they are designed. According
to Defendants, this is evidenced by, among other things, fire code regulations
that require a copy of the program file to remain on site with the customer and
141 Sci. Accessories Corp. v. Summagraphics Corp., 425 A.2d 957, 964-65 (Del.
142 Id. at 965 (citing cases).
143 Id. (citation omitted).
the fact that technicians, even among competing firms, -routinely[#x2016]
files [*76] with one another. Having reviewed the relevant portions of the
record, I conclude that Wayman has established, by a preponderance of the
evidence, that it has an ownership interest in the SDU program files at issue.
There is a credible basis for Defendants' assertion that customers have an
ownership interest in the program files created for them. Marc Heil, the
Building Services and Project Management at one of Wayman's former clients,
testified that he believed his employer, and not Wayman, owned the program file
that ran the fire control system.144 Smith of Doylestown believes that
Doylestown owned the program files that had been installed before Wayman started
servicing the hospital.145 I also note that EST, which supplies fire control
system equipment, apparently does not take a position as to whether its vendors
or their customers own site-specific SDU program files.146Finally, there is some
evidence that certain fire codes require vendors to leave copies of program
files on site with customers so that the customers can use them in the event of
a failure with the system.147
The fact that clients may have an ownership interest in the customized SDU
program files installed [*77] on their system, however, does not, without more,
144 Heil Dep. 54.
145 Smith Dep. 10-11. See also Geffre Dep. 26 (stating that it is becoming an
increasingly common requirement on projects that the -provider has to provide
the end user with the data file upon completion.[#x2016]).
146 Boyle Dep. 225.
147 Tr. 841-42 (White); Boyle Dep. 224-25.
of its ownership rights in such files. This is perhaps best exemplified by
-Annex E[#x2016] to
Premium Fire (and Wayman's)agreement with EST. The purpose of Annex E is to
inform potential customers that if the customer cannot provide a new vendor
with a copy
of its SDU program files, then the new vendor may have to reprogram the
system which could result in additional fees and expenses that should be
agreed upon before the new vendor is hired.148 Although Annex E addresses
situations in which the customer has access to the program files and can convey
them to the new vendor, there would be no reason for Annex E to exist, if, as
Defendants argue, the customer generally has exclusive ownership of the program
files or the customer generally has an absolute right to give a third party
access to the program files.
Defendants also argue that the [*78] program files belong to customers
because technicians at different vendors -routinely[#x2016] transfer and share
program files. In support of their contention, Defendants cite to thirteen joint
exhibits that purport to show email exchanges between Wayman and non-Wayman
technicians. Two of these emails are between different Wayman technicians;
therefore, they are largely irrelevant.149 Four of the emails pertain to a
customer that Wayman and Premium Fire were servicing simultaneously, and the
customer had instructed Wayman and Premium Fire to share the program files.150
Three more of the emails involve White sending a Wayman technician
148 JX 136 at 16.
149 JX 348; JX 556.
150 JX 347; JX 352; JX 358; JX 411.
files that White had copied from his time at Wayman.151 In the final three
emails,152 a Wayman technician is providing White with a copy of a program file
he requested, including Doylestown on two occasions.153
These emails fail to show that the customers have exclusive ownership
interests in the customized program files installed on their fire control
systems. Because several of the emails involve special circumstances and others
are merely episodic, they do not provide an adequate basis [*79] for a
reasonable inference that there is an -industry custom[#x2016] among vendors of
freely exchanging program files.154 Even if these emails did demonstrate the
existence of such a custom, however, it is unclear how that shows that the
program files belong to the clients. If the files were the exclusive property of
the clients, one could reasonably infer that vendors would be reluctant to share
them without express permission from the file's owner. With one possible
exception, there does not appear to be any evidence in the record that the
clients associated with the files that were
151 JX 343; JX 344; JX 391. The fact that White was in possession of Wayman
files that the company's technicians were unable to locate on their Wayman
computers further supports the inference that White was responsible for the
deletion of 390 files from a Wayman laptop on his last day of employment there.
152 Of the thirteen emails cited by Defendants, two are duplicates.
153 JX 342; JX 353; JX 413.
154 Testimony of John Geffre, who has installed and maintained EST and other
fire control systems, undermined the notion that technicians at competing
vendors were free to exchange program files and did so regularly. [*80]
According to Geffre, based on the liability a vendor could face if there was a
problem with the fire control system it installed, he would not share a file
with another vendor, who might make changes to the system, without having that
vendor agree in writing to indemnify him in the event something went wrong after
the file exchange. Geffre Dep. 34-35.
exchanged between Wayman and Premium Fire gave either vendor permission to do
so. Thus, rather than find that Wayman and Premium Fire wilfully sent their
client's property to one another without authorization, I find that the evidence
as a whole indicates that vendors such as Wayman and Premium Fire do have an
ownership interest in the program files that they create for their respective
clients. The customers also may have an ownership interest in those files and,
in consultation with the vendor, may direct that they be made available to other
vendors. As stated previously, however, that does not undermine the conclusion
that Wayman has an ownership interest in the program files at issue in this
I also infer from the evidence that the SDU program files are both
confidential and valuable. Although Wayman has not argued that such [*81]
property constitutes a protectable trade secret, it has demonstrated
nevertheless that the SDU program files are confidential in nature by virtue of
the fact that they are proprietary and not shared unless it is necessary to do
so, and that they derive at least some value from the fact that other vendors do
not know their contents.155 Therefore, I find that the SDU program files at
issue were the confidential property of Wayman, the vendor that created them for
155 This is true even assuming that clients also have an ownership interest
in the program files. That fact, without more, does not destroy the
confidentiality of the files from the vendor's perspective.
3. White owed Wayman a duty of loyalty
Wayman has demonstrated that it has a property interest in the SDU files at
issue in this case and that it generally kept them confidential. It is
undisputed that over the course of his tenure at Wayman, White was exposed to,
helped create, and was often responsible for, a number of such program files.
Based on these facts, White owed Wayman a duty of loyalty with respect to the
confidential information that Wayman entrusted to him.
4. White breached his duty of loyalty
From [*82] the time White accepted a job with Premium Fire in October 2011,
he enjoyed a limited privilege to make preparations to join a competing
enterprise. This limited privilege did not include, however, the right to misuse
Wayman's confidential information. Although I find it is more likely than not
that White copied files from
Wayman's Dropbox account on November 27 and 28, 2011, less than a week before
he left the company, even had he not, White continued to back up his Wayman
files on his flash drive after he accepted a position with Premium Fire and
after he gave Wayman notice that he would be resigning. Not only did White
continue to back up the files on his flash drive, but his purpose in doing so
was to have those files available to him when he began working for Premium Fire.
Therefore, White misused Wayman's confidential information, in breach of his
duty of loyalty, when he, at a minimum, backed up Wayman
files on his flash drive for the purpose of having them at his disposal when
he began to work for Premium Fire, a direct competitor of Wayman.156
In addition, I find that White actually used the confidential information he
copied near the end of his employment at Wayman while he [*83] was working for
Premium Fire. Although White may have retained any number of files in his -tool
kit[#x2016] that were not
Wayman's property, I am not persuaded that White would copy Wayman's files so
they would be available to him, yet never use them. As discussed supra, White
had sufficient familiarity with the files he had copied from Wayman to email
Wayman technicians certain files that they asked him for because they were
unable to locate them on
Wayman's computers.157 Thus, I am not persuaded that White simply possessed
Wayman's files or that he had forgotten that he had them. White may not have
Wayman's files often, and Wayman may not have incurred any direct harm as a
consequence of White's use of its files, but the fact that White more likely
than not used
Wayman's files in the course of his employment at Premium Fire leads me to
that he thereby breached his duty of loyalty to Wayman.
156 See Beard Research, Inc. v. Kates, 8 A.3d 573, 603 (Del. Ch. 2010), aff'd
sub nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010) (finding
breach of fiduciary duty based on, among other things, the fact that fiduciary
brought -a large amount of confidential information with him[#x2016] [*84] to
his new employer.[#x2016])
157 See JX 343; JX 344; JX 391.
1. Legal standard
Conversion is the -act of dominion wrongfully exerted over the property of
another, in denial of his right, or inconsistent with it.[#x2016]158 Before
bringing an action for conversion, a plaintiff must demonstrate that it made a
demand that the property be returned and the defendant refused the demand.159
This requirement is excused, however, when the alleged wrongful act amounts to a
denial of the rights of the real owner.160
2. Defendants are liable for conversion of Wayman's program files
Wayman asserts that White converted its program files by copying and deleting
files from his Wayman laptop in the last few days of his employment. In
Wayman avers that White, on Premium Fire's behalf, accessed, modified, and
used an unknown number of Wayman's program files while working for Premium Fire
in denial of Wayman's rights in those files. In response, Defendants contend
that the tort of
conversion is inapplicable to electronically stored data, and that even if it
was possible to
convert Wayman's files, they are not liable for conversion here because
asked that the files be returned. Defendants' [*85] arguments in this regard
are without merit.
158 McGowan v. Ferro, 859 A.2d 1012, 1040 (Del. Ch. 2004) (quoting Arnold v.
Soc'y for Savings Bancorp, Inc., 678 A.2d 533, 536 (Del. 1996) (quoting Drug,
Inc. v. Hunt, 168 A. 87, 93 (Del. 1933)).
159 CIT Commc'ns Fin. Corp. v. Level 3 Commc'ns, LLC, 2008 WL 2586694, at *2
(Del. Super. June 6, 2008) (quoting Drug, Inc., 168 A. at 94).
First, Defendants cite no legal authority for the proposition that the tort
of conversion is inapplicable to electronically stored information. In contrast,
this Court has held on at least one occasion that such information is
susceptible to conversion.161
Therefore, I reject Defendants' argument that Wayman's electronic computer
files could not have been converted as devoid of legal or logical support.
I also conclude that, in this case, Wayman was excused from demanding that
Premium Fire return the files that White had copied and taken with him.
According to Cinquanto, at least several of the program files White had in his
possession that appeared to match the files deleted from Wayman's computer on
November 30, 2011, were modified after White left Wayman.162 In addition, I find
that White used at least [*86] some of the program files he had copied from
Wayman and taken with him to Premium Fire during his tenure there. White's
modification and use of some of the program files at issue constitutes a denial
of Wayman's rights to utilize its files for similar purposes. This is
particularly true with respect to the modified files because they could have
Wayman's version of the file obsolete.163 Because White's actions amount to a
denial of Wayman's ownership rights in the files, Wayman was excused from
161 See Seibold v. Camulos P'rs LP, 2012 WL 4076182, at *22 (Del. Ch. Sept.
2012) (finding new employer liable for conversion of the former employer's
electronic documents and information.)
162 Tr. 31.
163 Moreover, to the extent White deleted Wayman's copy of the file before he
left Wayman and maintained only the modified copy of the file when he was with
Premium Fire, Wayman's file no longer exists and, therefore, cannot be
return before initiating this action. Furthermore, because White and his
Premium Fire wrongly -exercise[d] dominion[#x2016] over Wayman's property in
a manner that was inconsistent with Wayman's rights over the property, they are
liable [*87] for
3. Premium Fire is liable for conversion of the Wayman documents Fox
uploaded on his Premium Fire laptop
Defendants did not respond to Wayman's arguments with respect to Premium
Fire's alleged conversion ofthe information Fox uploaded on his laptop.
Although Wayman settled its claims against Fox before trial, Premium Fire is
nevertheless vicariously liable for the actions Fox took while he was a Premium
Fire employee. In copying Wayman's information, putting that information on his
Premium Fire laptop, and using some of the information during the course of his
employment at Premium Fire, Fox exercised dominion over Wayman's property in a
manner that was inconsistent with
Wayman's rights over that property. Because Fox took those actions in the
course of his employment with Premium Fire, and because Weitzel likely was aware
that Fox was in
possession of some of Wayman's property, Premium Fire is liable for the
of its employee.
F. Civil Conspiracy
Wayman also asserts that Premium Fire and Weitzel conspired with White and
Fox to steal computer files from Wayman and to retain and use those files
164 As discussed in Section II.F. infra, I find Weitzel [*88] liable for
Fox's conversion of Wayman's property on a conspiracy theory. Thus, I need not
Weitzel also is liable for conversion on an individual basis.
the purpose of competing unfairly with Wayman. Defendants deny the existence
of any agreement among themselves to engage in impermissible conduct. I next
address the merits of these respective arguments.
1. Legal standard
The elements for civil conspiracy under Delaware law are: (1) a confederation
or combination of two or more persons; (2) an unlawful act done in furtherance
of the conspiracy; and (3) damages resulting from the action of the parties to
Wayman argues that all Defendants are liable for civil conspiracy with
respect to: (1)
White's alleged theft of Wayman's program files and corresponding breach of
his duty of loyalty to Wayman; (2) White's retention and use of Wayman's files;
and (3) Fox's possession and use of Wayman's files. I conclude that Wayman has
not met its burden of proving the existence of a civil conspiracy claim based on
White's alleged wrongdoing, but that it has established a conspiracy claim with
respect to Fox's actions.
2. Confederation or combination of two or more persons
A [*89] plaintiff pursuing a claim for civil conspiracy may not rely solely
on the fact that more than one person is involved in committing an alleged
wrong. A -confederation or combination[#x2016] of people for purposes of a civil
conspiracy claim means that there is a -meeting of the minds between or among
such persons,[#x2016] and that -meeting of the minds[#x2016]
165 AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., 871 A.2d 428, 437 n.8
(Del. 2005); Nicolet, Inc. v. Nutt, 525 A.2d 146, 149-50 (Del. 1987).
relates to the allegedly improper object or course of conduct to be
Thus, to prevail on its civil conspiracy claim, Wayman must demonstrate that
reached an agreement amongst themselves to wrongfully possess or use Wayman's
a. White's alleged theft of the program files and breach of duty of loyalty
There is no evidence to support Wayman's assertion that anotherDefendant had
knowledge of White's alleged theft and deletion of Wayman's files in the days
to his leaving Wayman. Furthermore, the record is devoid of any indication
that White engaged in his alleged theft and breach of fiduciary duty pursuant to
an agreement with another Defendant or anyone else. [*90] Thus, even though I
have concluded that White converted Wayman's property andbreached his duty of
loyalty to Wayman in doing so, the absence of any indicia of an agreement among
two or more of the Defendants for
White to engage in such conduct makes Wayman's civil conspiracy claim on this
166 Microsoft Corp. v. Amphus, Inc., 2013 WL 5899003, at *15 (Del. Ch. Oct.
31, 2013). See also Hospitalists of Del., LLC v. Lutz, 2012 WL 3679219, at *15
(Del. Ch. Aug. 28, 2012) (stating that a civil conspiracy claim -focuses on the
167 Wayman's reliance onSeibold v. Camulos P'rs LP, 2012 WL 4076182 (Del. Ch.
Sept. 17, 2012) for the proposition that Premium Fire should be deemed to have
had knowledge of White's actions, because White acted for the purpose of
benefitting Premium Fire and Premium Fire benefitted from White's actions, is
misplaced. In Siebold, which involved an aiding and abetting claim, the
tortfeasor's knowledge was imputed to the defendant entity because the
tortfeasor created that entity. Id. at *22. In contrast, there is no basis in
this case to impute
White's knowledge to Premium Fire or any other Defendant.
b. White's retention and use of Wayman's [*91] files
The evidence presented at trial suggests that the first time any of
became aware of White's possession of Wayman's property was after the
complaint was filed in this action. Upon learning of the allegations that
White had stolen
Wayman's property, Weitzel discussed the matter with White.168 White admitted
to having Wayman files in his possession, but he denied that those files were
stolen. Rather, White explained that, during his eleven-year career as a
technician, he regularly backed up files onto a flash drive and kept them as his
-tool kit,[#x2016] and that he believed he was entitled to do that and keep the
files after changing jobs. Although Weitzel did not ask White to return the
files to Wayman, he did instruct White not to use any of Wayman's property. In
response, White advised Weitzel that he had not used any of Wayman's files since
he had begun working for Premium Fire, and that he would not use those files
In these circumstances, I find no evidence of any agreement among two or more
Defendants to facilitate or encourage White's use of Wayman's files. Even
White actually used Wayman's files impermissibly, the evidence does not show
[*92] that he acted pursuant to an arrangement with any other Defendant. Nor is
there evidence sufficient to establish that White's use of Wayman's files was
encouraged or sanctioned, either explicitly or tacitly, by any other Defendant.
Thus, I find that there was no
168 Tr. 670-76 (Weitzel).
-meeting of the minds[#x2016] amongst Defendants with respect to White's
alleged use of
I reach the same conclusion as to White's retention of Wayman's files during
hisemployment at Premium Fire. Defendants, and in particular Weitzel, may have
been careless in how they handled the arrival of former Wayman employees at
Premium Fire. Civil conspiracy, however, is a -scientier-based[#x2016]
doctrine.169 Wayman has not shown
that Defendants' carelessness rose to such a level that their conduct
amounted to a
knowing participation in White's wrongdoing. It was not until shortly after
they received notice that Wayman had sued them that any Defendant other than
White even became aware that he possessed files from Wayman.170 In the same
timeframe, Defendants retained counsel to address the situation. Although
Defendants conceivably might have begun to conspire with one another after this
lawsuit was filed and [*93] they retained counsel, that seems highly unlikely.
Thus, because Wayman has not carried its burden of
demonstrating that there was a -meeting of the minds[#x2016] among Defendants
with respect to
169 Allied Capital Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1043 n.59
(Del. Ch. 2006).
170 Although Weitzel told Smith that there would be no additional charge for
reprogramming Doylestown's system before Premium Fire submitted its bid, I do
not infer from that that Weitzel's knowledge of White's possession of Wayman
information before Wayman filed its complaint. Instead, I find it more likely
that Weitzel informed Smith that there would be no reprogramming costs because
either: (1) Premium Fire was willing to absorb any additional costs to win new
business; or (2) Weitzel believed he would be able to get the file from Wayman,
through permissible means, if Premium Fire obtained the bid based on his own
experience or White's assurances to that effect.
White improperly retaining Wayman's files, that allegedly unlawful conduct
cannot provide a predicate for its claim for civil conspiracy.
c. Fox's possession and use of Wayman's files
As with White, there is no evidence that any Defendant knew that [*94] Fox
was bringing Wayman files to Premium Fire or asked him to do so. I do find,
however, that it
is more likely than not that Weitzel became aware of Fox's possession of
property on the day that Fox uploaded the files onto his Premium Fire
computer, when Weitzel asked Fox if he had any Pitcairn documents. I also find
that in asking about the Pitcairn documents, Weitzel at least implicitly
expressed an interest in using the Wayman files that Fox possessed and
recognized that Fox intended to use at least some of that information. Because
Weitzel had the authority and the opportunity to prevent Fox from maintaining or
using Wayman's information, and because Weitzel knew that Fox possessed Wayman
documents and likely understood he intended to use some of them, I find that
there was a -meeting of the minds[#x2016] between Fox and Weitzel with respect
to the Wayman files Fox uploaded onto his Premium Fire laptop.
3. Unlawful act in furtherance of the conspiracy and damages
Fox acted in furtherance of the conspiracy with Weitzel by using at least
some of the Wayman files he had uploaded onto his laptop. I also find that
Wayman was harmed by Premium Fire's conversion, through Fox, of its property,
[*95] even if it has not been able to
quantify the extent of that harm. Therefore, Premium Fire and Weitzel are
liable for civil
conspiracy with respect to Fox's conversion of Wayman's computer files.171
G. Defendants' Violation of the Preliminary Injunction
On November 19, 2012, I granted the Preliminary Injunction.172 Pursuant to
order, Defendants were enjoined from soliciting Wayman's customers and
-further misappropriating, using, or disclosing[#x2016] any of Wayman's
proprietary or confidential information. To ensure that Defendants did not
solicit Wayman's clients, the partiesagreed to -confer and identify a mutually
acceptable third party to hold Plaintiff's
customer list for purposes of providing a mechanism for Defendants to
ascertain whether a specific person or entity is on [Wayman's] customer list in
order to fully comply with this Order.[#x2016] Defendants were to use the
mechanism each time they wished to engage a new client by providing the
potential client's name to thethird-party neutral. The third-party neutral would
check the name given to them by Defendants against Wayman's list of clients.
Defendants would be permitted to solicit the potential client only if the
third-party neutral [*96] informed them that the client did not appear on
In post-trial briefing, Defendants concede that they violated the terms of
the Preliminary Injunction.173 This admission is unsurprising in light of the
evidence presented at trial. The testimony of Williams, Fox, and Weitzel,
together with the evidentiary exhibits reviewed with those witnesses,
demonstrated that Defendants
171 As Premium Fire's President, Weitzel's actions are attributable to
172 D.I. 61.
173 Defs.' Post-Trial Reply Br. 11-13.
repeatedly solicited potential clients without first checking with the
third-party neutral to ensure that those potential clients were not Wayman
Defendants aver that, although they violated the terms of the Preliminary
Injunction, there are mitigating factors that should lessen the severity of any
fine or sanction the Court might impose for their failure to comply with that
order. None of
Defendants' arguments, however, are persuasive.
First, Defendants contend that their violations of the Preliminary Injunction
were inadvertent and not wilful or malicious. Even if Defendants did not intend
to contravene this Court's authority, I consider their actions to have [*97]
been reckless, at best. Had
Defendants' violation of the Preliminary Injunction been an isolated and
discrete occurrence, I might give more weight to their plea that they did not
intend deliberately to disobey this Court's instructions. In fact, however,
Defendants repeatedly violated the Preliminary Injunction. Defendants assert
that they did not understand the scope of the Preliminary Injunction to which
they consented. Yet, Defendants made no discernable effort to have their
obligations clarified by Wayman or this Court. Instead, they chose to act in a
manner consistent with their own self-serving interpretation of the Preliminary
Injunction, regardless of whether that interpretation was accurate.174 But, it
Defendants' role to decide unilaterally what they could and could not do
under the terms of the Preliminary Injunction. Only this Court has the authority
to make such a
174 Indeed, the testimony of Fox and Williams makes clear that, in some
instances, Defendants did not even attempt to comply with the order and simply
The cumulative effect of Defendants' actions in relation to the Preliminary
Injunction was, for all intents and purposes, to render it largely [*98]
determination. To the extent clarifications might have been necessary,
have communicated with the -mutually acceptable third party,[#x2016] Wayman,
or this Court
about their questions. By failing to pursue any of those more reasonable
avenues, Defendants were at least negligent, and probably grossly so, in their
attempts to adhere to the Preliminary Injunction. Therefore, I do not find
Defendants' professed -lack of
intent[#x2016] to be a mitigating factor.
Defendants also criticize the list of customers that Wayman apparently
submitted to the third-party neutral as overbroad and including names of
companies that were not actually Wayman's clients. According to Defendants,
Wayman thereby abused the Preliminary Injunction process, and that should
militate against imposing a harsh punishment on Defendants for failing to comply
with an overly broad order. I disagree. Based on the unnecessary contentiousness
with which both sides have litigated this case, I would not be surprised if
Wayman, in fact, overreached with the customer list it provided to the
third-party neutral. Even assuming that to be true, however, if Defendants
believed that Wayman was abusing the third-party [*99] neutral process, it was
incumbent upon them to advise the Court of such and seek appropriate relief.
Defendants had no right to engage in self-help and disregard the plain language
of the Court's order, irrespective of how Wayman might have conducted itself.
Because, for the most part, Defendants simply ignored the third-party
notification process and did not seek relief from this Court, Defendants'
current attempt to rely on Wayman's actions to excuse their violations of the
Preliminary Injunction rings hollow.
Finally, Defendants aver that Wayman has not produced any evidence that their
failure to comply with the Preliminary Injunction has caused harm to Wayman. To
the extent Defendants argue that they should not be required to pay damages,
when Wayman has not shown that their contumacious conduct caused it any
consequential damages, I agree. Wayman is entitled, however, to recover the
attorneys' fees and expert expenses it incurred in connection with obtaining and
trying to enforce the Preliminary Injunction. Whether or not Wayman has suffered
consequential damages related to its business, however, is a separate issue. The
absence of consequential, competitive damages incurred [*100] by Wayman does
not preclude this Court from using its powers to enforce the orders that it
issues or from imposing meaningful sanctions by way of fine, for example, on
Defendants for violating the Preliminary Injunction.
For these reasons, I find Defendants in contempt for their repeated
violations of the Preliminary Injunction. The remedy for Defendants' contempt is
discussed in more detail in Section III.D. below.
Because Wayman has prevailed to at least some extent on its computer misuse,
conversion, duty of loyalty, and conspiracy claims, I next address the remedies
to which Wayman is entitled for each of the claims on which it has succeeded. I
also address the remedy for Defendants' violations of the Preliminary
A. Computer Misuse and Conversion
Regarding its computer misuse and conspiracy claims, Wayman seeks equitable
and monetary relief, as well as an award of attorneys' fees. Remedies available
computer misuse statute are set forth in 11 Del. C. § 941. Wayman contends it
is entitled to relief under Section 941(a), (b), (c), and (e). I address these
provisions in turn.
1. Section 941(a)
Under Section 941(a), an aggrieved party under the computer [*101] misuse
statute may seek a permanent injunction to vindicate its rights. Wayman asserts
that Defendants should be permanently enjoined from using its electronic
information. To warrant permanent injunctive relief, the plaintiff must succeed
on the merits of their case after a full hearing, demonstrate that irreparable
harm will result in the absence of an injunction, and prove that, on balance,
the equities weigh in favor of issuing the injunction.175
Wayman has succeeded on the merits of its case, and has shown that it is
exposed to a risk of irreparable harm in that Premium Fire might use Wayman's
confidential computer information to compete unfairly with Wayman. Finally, the
equities weigh in Wayman's favor as Defendants have no right to remain in
possession of property that rightfully belongs to Wayman.
Although some form of permanent injunctive relief is appropriate here, most,
if not all, of the electronic property in question will not remain valuable
indefinitely. For example, once an SDU program file is modified, the value of
previous versions is greatly diminished, if not eliminated entirely. Based on
the passage of time to date since White and Fox brought Wayman property to
[*102] Premium Fire, I find that an injunction prohibiting
Defendants from using Wayman's electronic files and the confidential
175 Harden v. Christina Sch. Dist., 924 A.2d 247, 269 (Del. Ch. 2007).
contained in them for one year is appropriate. Because the parties already
voluntarily to a process by which Wayman's electronic information was to be
from Premium Fire's computers and Defendants have returned any Wayman
property they had in their possession,176 this injunction will serve primarily
as a backstop to that process in the event, for example, Defendants later
discover computer files that should have been deleted or returned to Wayman.
2. Section 941(b)
Section 941(b) states that a court may award -such other relief as it may
appropriate[#x2016] on finding a violation of the computer misuse statute.
Wayman urges this Court to use its equitable discretion and award it $17,390 in
nominal damages for the 17,390 files it asserts were stolen and received by
Defendants. While it is unclear that each of the 17,390 files at issue were
Wayman's property, I find that Defendants should bear the burden of that
uncertainty. Had White or Fox made an effort to go through [*103] the files
that they had obtained during the course of their employment at Wayman and taken
with them only their personal files or items that clearly were not proprietary
confidential information of Wayman, this lawsuit may well have been avoided. In
choosing to copy
indiscriminately Wayman's property and bring everything they copied with them
new employer, Defendants assumed the risk that Wayman or a court would take
the position that everything they took belonged to Wayman. Because Defendants
have not proven that the files at issue in this case belonged to them or were
176 See D.I. 368.
property, I will award Wayman $1 in nominal damages for each of the 17,390
Wayman proved were taken by Defendants.
3. Section 941(c)
Section 941(c) states in relevant part that the -aggrieved person shall
actual damages and damages for unjust enrichment not taken into account in
computing damages for actual loss and treble damages where there has been a
showing of wilful and malicious conduct.[#x2016] As discussedsupra, Wayman has
not proven that any Defendant acted wilfully and maliciously in violating the
computer misuse statute. Consequently, Wayman is not entitled [*104] to treble
damages for this claim.
Regarding actual damages, Wayman asserts that it is entitled to the costs it
incurred in connection with two forensics experts it retained to investigate the
theft of its computer files by Defendants. Defendants argue that awarding Wayman
the costs of its experts in this case is unreasonable because the first expert
was working (undisclosed) for both Wayman and Premium Fire simultaneously, and
Wayman's second expert did not testify conclusively that White was responsible
for copying and deleting files from a Wayman laptop between November 27 and
November 30, 2011.
With respect to Digital Legal, the computer expert that Premium Fire later
learned had been retained by both Wayman and Premium Fire and apparently worked
on matters as to which their interests clearly were adverse, I will award Wayman
one half of its expenses in retaining and utilizing this expert. It is entirely
unacceptable that Digital Legal was working for both sides during the discovery
process without having obtained the parties informed consent in advance.
Although it is unclear when Wayman became
aware of this fact, the situation is highly problematic and raises serious
concerns about [*105] the integrity of the discovery process in this case while
Digital Legal was working for both sides at the same time without, at least,
Premium Fire's knowledge. I do not consider it either fair or reasonable,
therefore, to require Defendants to incur the entire cost of Wayman's Digital
Legal-related fees and expenses. Therefore, Wayman is entitled to an award of
only 50% of any expenses it incurred related to its interactions with Digital
Legal. As for Wayman's second expert, Cinquanto, I find that Wayman is entitled
to recover fully the reasonable expenses it incurred in connection with this
witness. Cinquanto's testimony was both credible and helpful to the Court in
terms of deciding certain of Wayman's claims, including, in particular, the
computer system information misuse claim.177 Thus, I award Wayman its reasonable
expenses related to its engagement of Cinquanto.
177 I find unpersuasive Defendants' argument that I should infer that
Cinquanto's testimony would have been proven wrong had Wayman produced the
late-discovered Wayman Dropbox account in a more timely and complete fashion.
Defendants have not shown that Wayman's failure to produce the Dropbox account
amounted to bad [*106] faith or reckless conduct. Therefore, I decline to draw
any adverse inference against Wayman based on Cinquanto's testimony in that
regard. I reach the same conclusion in terms of Wayman's similar assertion from
the opposite perspective that I should draw adverse inferences against
Defendants regarding the contents of White's flash drives because Defendants'
electronic discovery expert inadvertently corrupted the information on those
drives. While both of these examples are emblematic of the technical problems
and miscommunications that plagued both sides and their counsel during this
litigation, neither example reflects bad faith or the type of reckless conduct
that would warrant an adverse inference in either direction. See, e.g., Sears,
Roebuck & Co. v. Midcap, 893 A.2d 542, 552 (Del. 2006) (-An adverse
inferenceinstruction is appropriate where a litigant intentionally or recklessly
destroys evidence, when it knows that the item in question is relevant to a
legal dispute or it was otherwise under a legal duty to preserve the item.
Before giving such an
In addition to the expenses associated with its computer experts, Wayman
seeks an award of unjust enrichment with respect to the [*107] Doylestown
upgrade project. As discussed in Section II.A supra, I have concluded that
Premium Fire did not tortiously interfere with Wayman's expectancy in the
upgrade project. In addition, I found that Wayman failed to prove that it would
have been awarded the Doylestown contract but for
Premium Fire's use of improper means, including the use of Wayman's SDU
files, in relation to that project. Thus, Wayman is not entitled to actual
damages in the form of lost profits from the Doylestown upgrade project.
Relief under the misuse statute, however, is not limited to compensatory
damages. Section 941(c) explicitly authorizes the imposition of -damages for
unjust enrichment not
taken into account in computing damages for actual loss.[#x2016] Unjust
-the unjust retention of a benefit to the loss of another, or retention of
money or property
of another against the fundamental principles of justice or equity and good
conscience,[#x2016]178 and is proven based on the following elements: (1) an
enrichment; (2) an
impoverishment; (3) a relationship between the enrichment and the
lack of a justification; and (5) the absence of a remedy at law.179
instruction, a trial judge [*108] must, therefore, make a preliminary
finding that the evidence shows such intentional or reckless conduct. Absent
such a finding, an adverse inference instruction is not justified.[#x2016])
178 Schock v. Nash, 732 A.2d 217, 232 (Del. 1999).
179 Agilent Techs., Inc. v. Kirkland, 2010 WL 610725, at *30 (Del. Ch. Feb.
Wayman has proven all five elements of unjust enrichment regarding the
Doylestown upgrade project. Premium Fire used Wayman's SDU program file for
Doylestown, and thereby saved at least some time and reprogramming costs that
it otherwise would have had to incur to secure the Doylestown contract. As a
result, Premium Fire was able to: (1) submit a lower cost bid to Doylestown that
increased the probability it would secure that large and significant piece of
business; and (2) devote the time and resources it would otherwise have had to
spend reprogramming the Doylestown fire control system on other business
opportunities. Therefore, I conclude that Premium Fire was enriched by misusing
Wayman's SDU program files.
Wayman, on the other hand, was -impoverished[#x2016] by Premium Fire's use of
its proprietary and confidential files. The value of Wayman's SDU files depends
part [*109] on them not being known to, used, or modified by other vendors.
Fire's use and modification of Wayman's Doylestown program impoverished
that it diminished materially the value of its property.
There also is a clear relationship between the enrichment and the
in this case. Premium Fire was enriched by using impermissibly Wayman's
program files. That same action (i.e., Premium Fire's use of Wayman's program
files) was the source of Wayman's impoverishment. Nor was Premium Fire justified
Wayman's program file. While Defendants may not have acted maliciously in
procuring or using Wayman's files, those files nevertheless were Wayman's
Defendants were not authorized to use them.
Finally, there is no adequate remedy at law available for Defendants' use of
Doylestown files. Because the use of the program files was not the proximate
cause of Wayman losing, or Premium Fire winning, the bid on the Doylestown
upgrade project, Wayman has not shown any nonspeculative damages that it
incurred because of Premium
Fire's misuse of its property. Therefore, Wayman has satisfied each of the
requisite elements of unjust enrichment as to Premium [*110] Fire's use of its
Doylestown program files.
The amount of that unjust enrichment, however, is difficult to quantify. The
only evidence in the record addressing this subject is Annex E, discussed
previously, and the testimony of Bender, a Technical Services Manager at Wayman,
who was neither familiar with Premium Fire's business model nor qualified as a
damages expert. Bender testified that if Wayman was in Premium Fire's position
for the Doylestown bid and did
not have the relevant SDU program files, Wayman would have had to increase
certain costs associated with its bid by approximately 15%. He also testified
that, in general, having the necessary SDU program file would reduce certain
costs factored into a bid by 10-15%.180
180 Tr. 916-17. At trial, Defendants objected to Bender's testimony on the
grounds that he is not an expert and he was not designated during discovery as a
witness who would be providing damages-related testimony. It is undisputed that
Bender is not a -damages expert.[#x2016] He is, however, an experienced fire
system technician with an adequate basis for testifying about the effect of
having a program file on a vendor's reprogramming costs. Thus, I find that
Bender was [*111] qualified to provide the fact testimony that he did. Second,
although Bender was not designated as a witness who would discuss damages during
discovery, for the reasons I explain
below, his testimony largely corroborates the inferences supported by Annex
E. Because Annex E has been known to Defendants throughout this litigation, and
that document has clear implications in terms of the potential damages or harm
in this case, I do not believe Defendants have been prejudiced unfairly by
Although imperfect, I find that Bender's testimony offers a reasonable guide
the extent to which Premium Fire was unjustly enriched through its use of
Doylestown SDU file. As stated previously, EST vendors are required to give
Annex E to potential clients for whom they did not install the existing fire
control system. EST's insistence that its strategic partners use Annex E in
connection with situations that would require OOT authorization suggests that
reprogramming costs can increase materially the expense of a project, and,
therefore, it is important for potential clients to be aware of that fact and
come to an understanding with a potential vendor on expenses before committing
to using [*112] its services. Bender's testimony that having the program file
can reduce costs 10-15% is in line with what reasonably can be inferred from
Annex E, i.e., that reprogramming costs can alter materially the expense of a
project. Indeed, if reprogramming costs were generally below the range that
Bender provided, it is unlikely that Annex E would be necessary or relevant.
Applied to this case, Premium Fire's Doylestown bid included $464,775181 for
the kinds of costs Bender indicated would be relevant, such as replacing panels,
devices, and wires. 182Therefore, assuming Premium Fire would have to increase
its costs in those
Bender's testimony on this particular issue. Thus, I overrule Defendants'
objection, and find that I can consider Bender's testimony in fashioning an
appropriate remedy for unjust enrichment.
181 JX 296.
182 This figure includes both Premium Fire's actual costs, and its profit
-mark-up.[#x2016] I conclude it is appropriate to use this number as a basis for
calculating unjust enrichment because one of the ways in which Premium Fire was
unjustly enriched was that it had a higher probability of winning the Doylestown
project because of
areas by 15% if it did not have Wayman's proprietary [*113] SDU file, it
saved $69,716.25 by
using Wayman's property. This represents approximately 11% of Premium Fire's
total bid for the Doylestown upgrade ($619,775), which I consider to be a
reasonable figure in light of Bender's testimony and Annex E.Stated differently,
I find that Premium Fire received a benefit equal to approximately 11% of its
bid price by having Wayman's
Doylestown SDU program available for its use. Therefore, I award Wayman
$69,716.25 in damages for unjust enrichment based on Defendants' misuse of
4. Section 941(e)
Finally, under Section 941(e), -the Court shall award to any aggrieved person
who prevails reasonable costs and reasonable attorneys' fees.[#x2016] Wayman
argues that the
computer misuse claims were the basis for the initiation of this lawsuit, and
that all of its
claims, with the exception of its DUTSA claim, were related to the theft of
computer files. Under these circumstances, Wayman avers that it deserves an
not less that 80% of the fees and costs it incurred in prosecuting this
assert that because they admitted and accepted responsibility for accessing
possessing some of Wayman's materials well [*114] before trial, Wayman's
expenses in proving
its computer misuse claims were minimal.
the lower bid it was able to present to Smith. Consequently, Premium Fire had
an increased probability of actually realizing its expected profit margin and
that should be accounted for in determining the extent to which Premium Fire was
unjustly enriched through Defendants' conduct.
I find excessive Wayman's request for an award of 80% of its attorneys' fees
and expenses for this entire case based on its successful prosecution of its
computer misuse claim. Even though Defendants' misuse of Wayman's computer files
may underlie many of Wayman's claims, several of those claims involved other
issues unrelated to the elements of the computer misuse claim. Wayman itself
acknowledged that the misappropriation of trade secrets claim falls in that
category. The same also can be said, however, about Wayman's claims for tortious
interference with prospective business opportunities and civil conspiracy. The
tortious interference claim required, for example, proof of the existence of
business opportunities as to a number of different companies that Wayman
identified before trial. The parties engaged in substantial [*115] discovery
regarding those companies and, over the course of the litigation, Wayman
eventually dropped its tortious interference claim as to all of them, except
Doylestown. Moreover, to the extent there might have been some overlap between a
request for damages for tortious interference and for a violation of the
computer misuse statute, Wayman did not prevail on any such damages claim,
except with respect to the unjust enrichment enjoyed by Premium Fire as a result
of the Doylestown job. Similarly, Wayman's claim for civil conspiracy required,
among other things, proof of the existence of an agreement between a Defendant
and, at least, one other person. The computer misuse claim does not involve any
Moreover, extensive discovery on the broad range of issues raised in Wayman's
pleadings revealed that Wayman would be unable to prevail at trial on several of
the causes of action it originally asserted. As a result, Wayman substantially
scope of the claims that it presented at trial. After trial, Wayman narrowed
its claims even further. Based on the rather -shot-gun[#x2016] approach that
Wayman took in this litigation, and the large number of claims that needed
[*116] to be investigated as a result, I conclude that much less than 80% of its
overall attorneys' fees and expenses properly can be attributed to its success
in proving its computer misuse claims. Having considered the claims that were
raised, investigated, and actually tried in this matter, I find that, under 6
Del. C. § 941(e), Wayman is entitled to an award of 35% of the attorneys' fees
and expenses it reasonably incurred in this litigation, net of the attorneys'
fees and expenses I award to Wayman in Section III.D. infra for Defendants'
contempt as to the Preliminary Injunction order.
B. Duty of Loyalty
Wayman has not requested specific relief for White's breach of his duty of
loyalty; rather, it asks this Court to use its discretion in fashioning an
appropriate remedy. In this case, although White owed Wayman a duty of loyalty,
that duty was narrow in scope and related only to the disclosure and use of
Wayman's confidential information.
Consequently, Wayman's reliance on case law from the corporate context, in
which broad damages are appropriate for a breach of the duty of loyalty by those
who owe the entities they manage or direct general fiduciary duties, is
questionable. Because White [*117] is jointly and severally liable for the
relief I awarded Wayman for its computer misuse claim, and because the relief I
awarded Wayman on that claim addresses the same wrongdoing that serves as the
basis for Wayman's breach of loyalty claim (i.e., the unauthorized copying, use,
and disclosure of Wayman's confidential information), I hold
that Wayman is not entitled to an award of additional damages for White's
breach of his duty of loyalty.
C. Civil Conspiracy
Wayman acknowledges the duplicative nature of the relief being sought on this
claim and does not seek any damages beyond what is awarded for its computer
misuse and duty of loyalty claims. I agree with Wayman's assessment and do not
award it any separate damages for its civil conspiracy claim. The primary, if
not only, effect of
Defendants' liability for civil conspiracy is that it confirms that Premium
Fire and Weitzel are jointly and severally liable for any and all relief awarded
based on Wayman's claims of computer misuse and conversion.
D. Violation of the Preliminary Injunction
As relief for Defendants' violation of the Preliminary Injunction, Wayman
seeks an order finding all Defendants: (1) in contempt; and (2) jointly [*118]
and severally liable to Plaintiff for all attorneys' fees and expenses
associated with (a) the negotiation, preparation, and implementation of the
Preliminary Injunction, (b) the selection, engagement, and services of the
third-party neutral, and (c) opposing Defendants' Motion
183 D.I. 180. Defendants' motion was predicated on striking allegations in
the amended complaint that they claimed had not been verified adequately under
Court of Chancery Rule 3(aa). Because the Preliminary Injunction was predicated
on these allegedly faulty allegations, Defendants also moved, in essence, to
have the Preliminary Injunction vacated. I denied Defendants' motion to the
extent they sought relief from the Preliminary Injunction, but permitted them to
raise the issue of Wayman's alleged failure to verify their complaints properly
For the reasons stated supra, I find Defendants are in contempt for their
repeated violations of the Preliminary Injunction.184 In Delaware, -[s]anctions
for civil contempt may take the form of a fine to compensate the plaintiffs for
such contempt, or of imprisonment. An award of counsel fees is also a proper
Defendants repeatedly [*119] violated the letter and spirit of this Court's
Preliminary Injunction order, I grant Wayman most of the relief it seeks on this
issue. Defendants are jointly and severally liable to reimburse Wayman for the
reasonable attorneys'fees and expenses it incurred for: (1) the negotiation,
preparation, and implementation of the Preliminary Injunction; and (2) the
selection, engagement, and services of the third-party neutral. In addition,
Defendants are jointly and severally liable for 50% of the reasonable attorneys'
fees and expenses Wayman incurred opposing Defendants' Motion to Strike until
2013. This reflects the fact that Defendants' Motion to Strike was not
related entirely to
conjunction with post-trial briefing. See notes 188 and 189 infra and
184 White also is in contempt for violating the Preliminary Injunction
because the evidence, such as Cinquanto's testimony and his June 12, 2013
report, supports the inference that White continued to use Wayman's property
after theorder was put in place.
185 Miller v. Steller Enter., Inc., 1980 WL 6432, at *3 (Del. Ch. Dec. 22,
City of Wilm. v. Gen. Teamsters Local Union 326, 321 A.2d 123 (Del. 1974)).
The [*120] Teamsters Local 326 case confirmed that the Court of Chancery
possesses both common law and statutory powers to enforce its judgments. 321
A.2d at 125 (recognizing power of the Court to impose a fine or award damages
for the harm sustained as a result of failure to obey injunctive order); see
also Ct. Ch. R. 70(b) (authorizing the Court to provide relief -[f]or failure to
obey a restraining or injunctive order, or to obey or to perform any
vacating the Preliminary Injunction and that the portion of the motion that
was related to the Preliminary Injunction was decided in my June 4, 2013 order.
In addition, Defendants' disregard for the Preliminary Injunction
demonstrated an egregious lack of respect for the Court's order and appreciation
of the resultant imposition on the resources of the Court. In circumventing the
process set forth in the Preliminary Injunction through their conduct,
Defendants effectively nullified the efforts and resources expended by the Court
and Wayman to establish and maintain the third-party neutral process. Therefore,
because Defendants have abused the good offices of the Court and wasted valuable
time and judicial resources in the process, [*121] I also order Defendants to
pay a fine of $10,000 for their contempt, payable to the State of Delaware, to
the Register in Chancery.186
E. Other Fee-Shifting Arguments
Defendants dedicate a substantial portion of their opening post-trial brief
to arguing that Wayman violated the verification requirement of Court of
According to Defendants, Wayman's failure to make a good faith effort to
186 See In re Metviner, 1989 WL 226135 (Del. Aug. 22, 1989) (holding that the
Court may order a party that is liable for civil contempt to pay a fine to the
State of Delaware).
187 The rule states: -All complaints, counterclaims, cross-claims and
third-party complaints, and any amendments thereto, shall be verified by each of
the parties filing such pleading. Every pleading, except that filed by a
corporation, which is required to be verified by statute or by these Rules shall
be under oath or affirmation by the party filing such pleading that the matter
contained therein insofar as it concerns the party's act and deed is true, and
so far as relates to the act and deed of any other person, is believed by the
party to be true. Every pleading by a corporation which must be verified shall
be verified [*122] under oath or
verify the allegations in its original and amended complaints led to the
prosecution of several baseless claims, resulting in litigation that was
unnecessarily broad in scope and unreasonably expensive. Defendants pressed a
similar argument in a pre-trial Motion to Strike,188 which I addressed in a June
4, 2013 order.189 In that order, I indicated my belief that the serious flaws
Defendants had pointed out in Wayman's(and specifically Trippe
Wayman's) verifications were more likely the result of carelessness than of
bad faith, but I also undertook to reconsider Defendants' argument in
conjunction with post-trial briefing. Having carefully reviewed the parties'
post-trial briefing and the evidence
presented at trial, I remain convinced that Wayman's conduct regarding the
of its complaints and prosecution of this action did not amount to bad faith
conduct that would warrant an award of attorneys' fees to Defendants.
I do not condone, however, Wayman's half-hearted efforts to meet the
requirements of Rule 3(aa). Trippe Wayman was careless in his efforts to verify
the allegations in Wayman's complaints, and, as a result, Wayman only barely met
its obligations under [*123] the Rule. Wayman and its counsel should have done
better. Nevertheless, based on the record before me, I cannot say that Wayman
acted in bad faith in bringing the claims that it did or it failed to provide
the requisite verification.
affirmation by the chairperson or vice-chairperson of the board of directors,
by the president, by a vice-president, by a secretary, by an assistant
secretary, by the treasurer, or by an authorized agent and shall be under the
seal of the corporation.[#x2016]
Ct. Ch. R. 3(aa).
188 D.I. 180.
189 D.I. 292.
Therefore, Defendants are not entitled to any award of attorneys' fees or
other form of fee
shifting under either the American Rule190 or Rule 3(aa).191
F. Pre-and Post-Judgment Interest
In its complaint, Wayman also seeks an award of pre- and post-judgment
interest at the legal rate. Delaware courts routinely award such interest, using
the -legal rate[#x2016] as the default rate.192 Seeing no reason to depart from
this practice, I grant Wayman pre-judgment interest on its compensatory damages
from the date they accrued, compounded quarterly, at the legal rate.
Additionally, I award post-judgment interest on the full amount of the judgment,
once a judgment is entered, including [*124] that part comprised of
190 See Dover Historical Soc., Inc. v. City of Dover Planning Comm'n, 902
A.2d 1084, 1089 (Del. 2006) (-the American Rule requires that [#x2017]a litigant
must, himself, defray the cost of being represented by counsel.'[#x2016])
(quotingChrysler Corp. v. Dann, 223 A.2d 384, 386 (Del. 1966)).
191 In its post-trial briefing, Wayman seeks an award of attorneys' fees
pertaining to its defense of Defendants'voluntarily withdrawn counterclaim on
the grounds that the counterclaim was brought in bad faith. Here, too, I am
unconvinced that there has been an adequate showing of bad faith. Thus, I deny
Wayman's request for fee shifting in this regard.
192 See 6 Del. C. § 2301(a) (-Where there is no expressed contract rate, the
legal rateof interest shall be 5% over the Federal Reserve discount rate
including any surcharge as of the time from which interest is due.[#x2016]);see
also In re Sunbelt
Beverage Corp. S'holder Litig., 2010 WL 26539, at *1 (Del. Ch. Jan. 5, 2010);
Underbrink v. Warrior Energy Servs. Corp., 2008 WL 2262316, at *18-19 (Del.
Ch. May 30, 2008) (citing Citadel Hldg. Corp. v. Roven, 603 A.2d 818, 826 (Del.
1992) (-In Delaware, prejudgment interest is [*125] awarded as a matter of
right. Such interest is to be computed from the date payment is due.[#x2016]).
193 See Brandin v. Gottlieb, 2000 WL 1005954, at *30 (Del. Ch. July 13, 2000)
(noting that without compound, post-judgment interest on the full amount, a
Under Court of Chancery Rule 54(d), costs -shall be allowed as of course to
prevailing party unless the court otherwise directs.[#x2016]194 Under Rule
-prevailing[#x2016] party is a party who successfully prevails on the merits
of the main issue or the party who prevailed on most of her claims.195 Courts
interpret the term -prevailing[#x2016] to mean that a party need not be
successful on all claims, but rather must succeed on a general majority of
claims.196 Because Wayman prevailed on most of its claims, I award Wayman its
costs under Rule 54(d).
For the reasons stated above, the Court finds that Wayman has failed to prove
that Defendant Premium Power is liable as to any of its claims. In addition,
Wayman has not met its burden to prove its tortious interference and trade
secret claims by a preponderance of the evidence. Wayman has established,
however, that Defendants Weitzel, White, and Premium Fire are liable for
violating [*126] Delaware'sMisuse of Computer System Information Act and for
conversion. Wayman also has established that
judgment debtor could -chip away at the real value[#x2016] of a judgment by
194 For the purposes of Rule 54(d), costs include -expenses necessarily
incurred in the assertion of a right in court, such as court filing fees, fees
associated with service of process or costs covered by statute. . . . [I]tems
such as computerized legal research, transcripts, or photocopying are not
recoverable.[#x2016]See FGC Hldgs. Ltd. v. Teltronics, Inc., 2007 WL 241384, at
*17 (Del. Ch. Jan. 22, 2007).
195 See id; Brandin v. Gottlieb, 2000 WL 1005954, at *27.
196 See FGC Hldgs., 2007 WL 241384, at *17.
Defendants Weitzel and Premium Fire are liable for civil conspiracy and Defendant White is liable for breaching his duty of loyalty to Wayman. Based on these findings, Defendants Weitzel, White, and Premium Fire are jointly and severally liable for, in addition to the expert and attorneys' fees and expenses specified in Section III.A.4 supra, the $17,390 in nominal damages and $69,716.25 in unjust enrichment damages that I awarded Wayman on its computer misuse claim. Finally, I find Defendants Weitzel, [*127] White, and Premium Fire in contempt of this Court's Preliminary Injunction order and hold them jointly and severally liable for the reimbursement of the previously discussed fees and expenses Wayman incurred related to the Preliminary Injunction and for payment of the $10,000 fine to the State of Delaware.
Wayman shall submit, on notice, a form of final judgment and order consistent with the rulings herein within ten days of the date of this Memorandum Opinion. Wayman also shall submit evidence of its reasonable attorneys' fees and expenses within ten days of the date of this Memorandum Opinion. Defendants shall file any objections to the requested fees and expenses within ten days after service
of Plaintiff's evidence.