®ric-onala. the backgrounds of glenn j. myatt, wayne p. johnson, and paul e. blower, jr. 1. glenn...
TRANSCRIPT
®RIC-oNAL
IN THE SUPREME COURT OF OHIO
THI; AMERICAN CHEMICAL SOCIETY,
Appellant,
vs.
LEADSCOPE, INC., et al.,
Appellees.
Case No. 2010-1335
ON APPEAL FROM THEFRANKLIN COUNTY COURT OFAPPEALS, TENTH APPELLATEDISTRICT
Court of AppealsCase No: 08AP-1026
MERIT BRIEF AND APPENDIX OF APPELLEES-GLENN J. MYATT,WAYNE P. JOHNSON AND PAUL E. BLOWER, JR.
Michael G. Long (0011079)(COUNSEL OF RECORD)Kimberly Weber HerlihyVorys, Sater, Seymour and Pease LLP52 East Gay StreetColumbus, Ohio 43216-1008(614) 464-6297 (Telephone)(614) 719-4829 (Facsimile)[email protected]
David W. DeBruinMatthew S. HellmanLindsay C. HarrisonMatthew E. PriceJenner & Block LLP1099 New York Avenue NWWashington, DC 20001(201)639-6000 jTelephone)
Counsel forAppellant,The American Chemical Society
April 19,2011
Alan L. Briggs (0019247)(COUNSEL OF RECORD)Aneca E. Lasley (0072366)Christopher F. Haas (0079293)Squire, Sanders & Dempsey (US) LLP2000 Huntington Center41 South High StreetColumbus, Ohio 43215(614) 365-2700 (Telephone)(614) 365-2499 (Facsimile)[email protected]
Pierre H. Bergeron (0071402)Colter Paulson (0081903)Squire, Sanders & Dempsey (US) LLP221 East Fourth Street, Suite 2900Cincinnati, Ohio 45202(513)_361-1200 (Telephone)(513) 361-1210 (Facsimile)
sel for Appellees, Paul E. Blower, Jr.,Wa e P. Johnson and Glenn J. Myatt
OLERK OF COURTSU^REM^ ^pURT OF OHIO
TABLE OF CONTENTS
Pase
TABLE OF AUTHORITIES ........................................................................................................ iv
INTRODUCTION ......................................................................................................................... 1
STATEMENT OF FACTS ............................................................................................................ 2
A. The Backgrounds of Glenn J. Myatt, Wayne P. Johnson, and Paul E.Blower, Jr ............................................................................................................... 2
1. Glenn J. Myatt ........................................................................................... 2
2. Wayne P. Johnson ...................................................................................... 4
3. Paul E. Blower, Jr ...................................................................................... 5
B. The Three Scientists Left ACS And Started Their Own Business ... ..................... 6
C. In 2001, Leadscope Turns The Corner Towards Success ...................................... 6
D. The Claims Of Unfair Competition And Defamation . .......................................... 8
1. ACS Unfairly Competed Against Dr. Blower, Dr. Myatt, AndMr. Johnson By (1) Circulating False Statements And RumorsAbout Them, Disparaging Them, And By (2) Maliciously FilingTwo Lawsuits Against Them ..................................................................... 8
a. Introduction .................................................................................... 8
b. In January 2001, ACS Began Spreading False Statementsand Rumors About Dr. Blower, Dr. Myatt, And Mr.Johnson .......................................................................................... 9.
c. In February 2002, ACS Continued To Spread FalseStatements and Rumors About Drs. Blowers And MyattAnd Mr. Johnson . ........................................................................ 10
d. In Apri12002, ACS Continued Its Campaign ofDisparagement, False Statements, And Rumors .......................... 12
e. ACS Maliciously Filed Two Separate Lawsuits AgainstDr. Blower, Dr. Myatt, And Mr. Johnson .................................... 13
2. ACS Defamed The Individual Defendants In Publications TargetedTo Create The Biggest Impact On Their Reputations .... ......................... 14
a. ACS Defamed The Individual Defendants To TheirFriends, Colleagues, Associates, And Fellow ScientistsAround The World ....................................................................... 14
b. ACS Defamed The Individual Defendants hi The LocalBusiness Community ................................................................... 15
E. ACS's Tortious Actions Caused Immense Personal and ProfessionalDamages To Each Defendant :............................................................................. 16
i
TABLE OF CONTENTS
Page
1. Dr. Myatt Suffered Great Harm As A Result of ACS's TortiousConduct .................................................................................................... 15
2. Mr. Johnson Suffered Great Harm As A Result of ACS's TortiousConduct .................................................................................................... 17
3. Dr. Blower Suffered Great Harm As A Result of ACS's TortiousConduct .................................................................................................... 19
ARGUMENT ............................................................................................................................... 20
1. INTRODUCTION ................:.......................................................................................... 20
II. ACS HAS WAIVED THE CONSTITUTIONAL ARGUMENT IT MAKES INPROPOSITION OF LAW NUMBER 1 BECAUSE ACS DID NOT RAISE THISISSUE UNTIL ITS POST-TRIAL JNOV MOTION ...................................................... 22
A. The Issue Regarding Waiver ............................................................................... 22
B. Basics of the Noerr-Pennington Doctrine ............................................................ 22
C. Ohio Law Is Fully In Accord That Affirmative Defenses Must Be PleadedIn The Answer Or They Are Waived .................................................................. 23
D. Application Of The Noerr-Pennington Doctrine And Waiver To This Case ...... 24
E. Federal And State Courts Hold That First Raising The Noerr-PenningtonDoctrine In A Post-Trial Motion After Losing A Trial Is Too Late .................... 25
F. Ohio Law Is Fully In Accord That ACS Waived A Noerr-PenningtonDefense Because It Did Not Raise It At Trial ..................................................... 27
1. Ohio Law Regarding Waiver ................................................................... 27
a. Legal Arguments Not Raised At Trial Cannot Be RaisedOn Appeal .................................................................................... 27
b. Rule 51 Of The Ohio Rules Of Civil Procedure Precludes AParty From Raising On Appeal Any Objection To A JuryInstruction Unless A Specific Objection Was Made At TheTime ............................................................................................. 28
c. Facts Regarding Waiver .............................................................. 29
2. ACS Made No Objection In Its Rule 50 Argument That TheUnited States Constitution Or The Ohio Constitution Had AnObjective Baselessness Requirement That ACS Thought Applied
-Here :.................................................................................. ____ ....... ...... 29
3. ACS Made No Objection In The Jury Instruction Phase In WhichIt Directly Or Indirectly Even Suggested That Under The UnitedStates Constitution Or The Ohio Constitution Required ObjectiveBaselessness ............................................................................................. 31
ii
TABLE OF CONTENTS
Page
4. The Case Law ACS Cites Provides No Support That It PreservedA Constitutional Objection It Never Made .............................................. 33
5. Waiver Is Required By The Law Of Ohio And This Result Is FairAnd Just And Proper ................................................................................ 35
III. ACS PRESENTED NO CREDIBLE EVIDENCE TO SUPPORT ITS CLAIMSOF TRADE SECRET MISAPPROPRIATION .............................................................. 36
IV. ACS WAIVED ANY CLAIM THAT THE MAY 1, 2002 ALL STAFF MEMOIS SUBJECT TO AN ABSOLUTE PRIVILEGE ........................................................... 40
V. ACS'S DEFAMATORY STATEMENTS INJURED DRS. BLOWER ANDMYATT AND MR. JOHNSON ...................................................................................... 43
A. Introduction ....................................................................................................:..... 43
B. ACS's Statements Forever Tarnished The Reputations Of Drs. BlowerAnd Myatt And Mr. Johnson And Damaged Their Careers And Lives .............. 44
CONCLUS ION ............................................................................................................................ 46
CERTIFICATE OF SERVICE .................................................................................................... 47
APPENDIX App. Page
Relevant Judgments, Opiriions, and Other Materials
Notice of Appeal of Appellant, Am. Chem. Soc. v. Leadscope, Inc.,No. 10-1335 (Ohio July 30, 2010) .......................................................................................1
Judgment Entry, Am. Chem. Soc. v. Leadscope, Inc. (10th Dist. June 15, 2010),No. 08AP-1026 .................................................................................................................... 3
Decision, Am. Chem. Soc. v. Leadscope, Inc. (10th Dist. June 15, 2010)No. 08AP-1026 ....................................................................................................................4
Final Judgment Entry, Am. Chem. Soc. v. Leadscope, Inc. (Apr. 10, 2008),Franklin C.P. No. 02CVC-07-7653 ...................................................................................49
Decision, Am. Chem. Soc. v. Leadscope, Inc. (Oct. 21, 2008),Franklin C.P. No. 02CVG07-7653 ...................................................................................53
Constitutional Provisions, Statutes, and Rules
R.C. 1331.61 et seq ...................................................................................................................... 127
iii
TABLE OF AUTHORITIES
Pa es
CASES
Bayou Fleet, Inc. v. Alexander(C.A.5 2000), 234 F.3d 852 .....................................................................................................23
Blatnik v. Dennison(2002), 148 Ohio App.3d 494 ......................................................................................41, 42, 45
Chilton v. Ctr. for Biological Diversity, Inc.(Ariz. App. 2006), 214 Ariz. 47 ......................................................................................... 25-27
Confederated Tribes of Siletz Indians of Or. v. Weyerhauser Co.(D. Or. July 5, 2003), 2003 U.S. Dist. LEXIS 27214 ..................................................26, 27, 36
Fawcett v. G.C. Murphy & Co.(1976), 46 Ohio St.2d 245 .......................................................................................................41
Gibson v. Meadow Gold Dairy(2000), 88 Ohio St.3d 201 .......................................................................................................28
Hahn v. Kotten(1975), 43 Ohio St.2d 237 .................................................................................................41, 42
Knology, Inc. v. Insight Communs. Co., L.L.P.(C.A.6 2004), 393 F.3d 656 .....................................................................................................23
Krischbaum v. Dillon(1991), 58 Ohio St.3d 58 .........................................................................................................34
Leber v. Smith(1994), 70 Ohio St.3d 548 .......................................................................................................29
Nationwide Ins. Enterprise v. Progressive Specialty Ins. Co.(10th Dist. June 20, 2002) No. 2002 1AP-1223, 2002 WL 1338791 ......................................34
Pinotti v. Pinotti(6th Dist.), 2003 Ohio 3104 .....................................................................................................24
Presley v. Norwood(1973), 36 Ohio St.2d 29 .........................................................................................................34
Professional Real Estate Investors v. Columbia Pictures Indus.(1993), 508 U.S. 49 .................................................................................................................. 22
R.C. Olmstead, Inc. v. GBS Corp.(7th Dist.), 2009 Ohio 6808 .....................................................................................................33
R.H. Macy & Co. v. Otis Elevator Co.(1990), 51 Ohio St.3d 108 ....................................................................................................:..33
Rigsby v. Ohio Power Co.(9th Dist. 1989), No. 2423, 1989 Ohio App. LEXIS 3037 ......................................................29
State v. Awan(1986), 22 Ohio St.3d 120 .................................................................................................28, 29
iv
TABLE OF AUTHORITIES
Pa es
Water Management, Inc. v. Stayanchi(1984), 15 Ohio St.3d 83 ...........................................................................................................8
STATUTES
R.C. 1333.61 et seq .............................................................................................:..........................37
OTHER AUTHORITIES
C iv. R. 8 ......................................................................................................................................... 24
Civ. R. 12 .......................................................................................................................................24
Civ. R. 51 ....................:................................................................................................28, 29, 33, 35
Ohio R. Prof. Conduct 1.2(e) .........................................................................................................16
v
INTRODUCTION
There are four Defendants in this lawsuit: (1) Leadscope, Inc.; (2) Glenn J. Myatt;
(3) Wayne P. Johnson; and (4) Paul E. Blower, Jr. This brief is submitted on behalf of Messers.
Myatt, Johnson, and Blower. To read the brief of the American Chemical Society ("ACS"),
these three barely exist. But they do. They are the three scientists who ACS publicly and
privately branded as thieves. As a result, they lost their reputations, their jobs, and their careers.
On March 27, 2008, six years after ACS inflicted these devastating injuries on them, a
Franklin County juryl vindicated them of any wrongdoing and returned a verdict for Glenn
Myatt of $4,312,500, for Wayne Johnson of $3,812,500, and for Paul Blower of $3,312,500.2
Now, nine years after ACS inflicted these injuries on these three and tore their professional and
personal lives apart, their lives remain in shambles and they still have not collected one penny.
Dr. Blower, who is sixty-eight years old, is fully retired; Mr. Johnson, who is fifty-seven, and as
a result of ACS's actions was forced to move from Ohio, struggles; and Dr. Myatt, who was just
twenty-five years old when he started with ACS in 1995, is now forty-one, and also struggles.
ACS took from each of these three scientists their reputations, their jobs, and their careers.
Each of these three was a victim of ACS's tortious actions, each was personally sued by
ACS, each personally counterclaimed against ACS, and each suffered his own separate and
independent injuries. The facts as to these three scientists are presented in this one brief, rather
than in three separate briefs, for the Court's convenience. The fact remains that each individual
suffered his own injuries and each recovered his own judgment.
ACS refers to the verdict as being decided by a "non-unanimous" jury. Seven of the eight
^urors found for the Defendants.While ACS characterizes it as one judgment for $26.5 million, the jury awarded separate
damages for each claim for each of the four Defendants as depicted on page 1 of this brief.
1
hi order to understand the facts as to the three individuals, it is necessary to discuss (1)
the personal and professional backgrounds of the scientists before they were employed at ACS's
for-profit division, Chemical Abstracts Service ("CAS"), in Columbus, Ohio; (2) their individual
decisions to leave CAS at the end of October, 1997; (3) their decision to form Leadscope and the
four and a half years they spent developing their revolutionary software; (4) the tortious actions
of ACS that destroyed their careers and forever changed their lives; and (5) the damages each has
suffered as a result.
STATEMENT OF FACTS
A. The Backgrounds of Glenn J. Myatt, Wayne P. Johnson, and Paul E.Blower, Jr.
1. Glenn J. Myatt
Dr. Myatt was born and raised in the north of England. (Tr.2517, Supp.1545).3 He did
his undergraduate work at Oxford-Brooks University near London graduating in 1990 with First
Class honors in "combined studies, computer studies, and microelectronic systems." (D937,
Supp.1344). He also received a Masters degree in Knowledge-Based Systems from Herriot-Watt
University in Edinburgh, Scotland in 1991. (D938, Supp.1345).
Dr. Myatt continued his graduate work studying the application of "computing and
knowledge-based systems ... to problems in the pharmaceutical industry" and received his Ph.D.
in chemoinformatics (the application of computers to chemistry) in 1995 from the University of
Leeds in England. (Tr.2521-22, Supp.1546-47). While at Leeds, he published a thesis called
"Computer-Aided Estimation of Synthetic Accessibility." (Tr.2522, Supp.1547; see also D134,
3 References to "Tr." are to the continuously paginated trial transcript. References to "D_" and"P " are citations to Defendants' and Plaintiffs trial exhibits, respectively, and include theexhibit number. Materials included in the Appendix attached to this brief are cited as "App.Materials included in the separate Supplement filed with the brief are cited as "Supp._."
2
Supp.1061). Dr. Myatt acquired significant skills working on his thesis that he later used at CAS
and Leadscope.
After graduation, Dr. Myatt began working for ACS, accepting a position with CAS in
Columbus, Ohio as a visiting research scientist starting in January 1995 at a salary of $42,000.
(Tr.2535, Supp.1548 ("One of the things I had always wanted to do is to, you know, to get a job
in America.")).
Dr. Myatt's work at CAS went quite well. His supervisor at CAS described his first year
as follows:
Glenn has exceeded expectations. He has made major contributions to CASduring his first year. As a result, his Visiting Research Scientist position has beenextended through the end of December, 1996. Glenn's most importantcontributions have been in the area of functional groups and combinatorial
chemistry.
(D946, Supp.1364 at 1365).
Dr. Myatt's career was off to a great start. His position was extended another year in
1996, but he knew his position with CAS was temporary and there was no permanent position
available. In early 1997, he began having discussions with Dr. Blower and Mr. Johnson, both of
whom he had gotten to know at CAS, about the possibility of starting a business. (Tr.2613,
Supp.1599). Despite understanding that a new venture would constitute a lot of work for no
initial salary, Dr. Myatt looked forward to the opportunity. Dr. Myatt "always dreamed of
starting a company." (Tr.2613-14, Supp.1599-1600).
Dr. Myatt left ACS on October 31, 1997. His final evaluation was just as complimentary
as his first:
Glenn has exceeded expectation for the Visiting Research Scientist position (apost-doc temporary appointment). He has demonstrated good leadership, strongtechnical skills, and strong diligence in conducting research, defining features,and building prototypes for a potential combinatorial chemistry product.
3
(P89, Supp.1390 at 1391).
2. Wayne P. Johnson
Mr. Johnson, the son of Christian missionaries, grew up in hidia and the United States.
(Tr.3195, Supp.1643). He completed high school in Michigan and received a bachelor's degree
in math with honors from the University of Illinois in 1977. (Tr.3195-96, Supp.1643-44).
Following graduation, he worked in the computer industry for companies such as IBM and
AT&T Bell Labs. (Tr.3196-99, Supp.1644-47). While working for Bell Labs, Mr. Johnson
obtained a master's degree in computer science and artificial intelligence from New York
University. (Tr.3199-3200, Supp.1647-48). Mr. Johnson consulted at Ford Motor Company
until taking a position with ACS at CAS in 1989 as a Research Scientist. (Tr.3200-02,
Supp.1648; Tr.3205, Supp.1651). Mr. Johnson earned $76,500 per year from ACS in 1997.
(P87, Supp.1387).
In 1997, Mr. Johnson became frustrated with the "corporate culture" at ACS and seized
the opportunity to start a new business with two colleagues. (Tr.3212, Supp.1652). He testified:
"I like to build; I like to create; and, I have that sort of entrepreneurial spirit, and this was an
opportunity that I wanted to take hold of." (Id.) Mr. Johnson left stable employment at ACS,
despite having a wife and five children, because "the risks seemed small to me and the
opportunity was large." (Tr.3212-13, Supp.l652-53). Like Dr. Myatt, Mr. Johnson received a
very favorable final evaluation:
Wayne Johnson has had technical and group leader responsibilities in theResearch Department. He has performed all aspects of his responsibility in acompletely satisfactory manner. Wayne has good insights into the informaYionenvironment and strong computer science knowledge. Combining these skillsmade Wayne a strong member of the Research Department.
(D132, Supp.1058 at 1059). Mr. Johnson also left ACS on October 31, 1997.
4
3. Paul E. Blower, Jr.
Dr. Blower graduated from the University of Michigan with a bachelor's degree in
chemistry in 1964. (Tr.3774, Supp.1692). After spending a year studying chemistry in Germany,
Dr. Blower studied chemistry at the University of Wisconsin until 1967, when he enlisted in the
Army and served in Vietnam. (Tr.3775-76, Supp.1693-94). Dr. Blower was wounded in
Vietnam, losing two fmgers and a thumb, and, after rehabilitation, he retired from the Army in
1969. He returned to graduate school in Wisconsin, where he received a Ph.D. in chemistry in
1975. (Tr.3776-77, Supp.1695-96). He then accepted a post-doctorate position at Carnegie-
Mellon University. (Tr.3784-85, Supp. 1696-97).
Dr. Blower began working at ACS for CAS in 1977. (Tr.3785, Supp.1697). He worked
at ACS for twenty years, until retiring in 1997. At that time, he earned $76,650 per year and
qualified for a pension of $13,000 a year. (Tr.3817-18, Supp.1698-99; P86, Supp.1384). Like
Dr. Myatt and Mr. Johnson, Dr. Blower received a very complimentary final evaluation from his
supervisor at CAS:
Paul Blower has met expectations for a Senior Research Scientist. He has taken astrong technical leadership role in the Athena and chemical reaction projects.Paul has consistently provided a deep understanding of computational chemistryand an attitude to pitch-in and do whatever needs to be done. His contributionsare recognized and appreciated.
(P86, Supp.1384 at 1385).
Retirement was possible for Dr. Blower as he was receiving two small pensions (one
from ACS and one from the Army arising from his disability), and his wife was still working and
their children were away at college. (Tr.3818, Supp.1699). Witn just his pensions, Dr. Blnwer
joined Dr. Myatt and Mr. Johnson to start a new company, which he believed would offer a
"chance to work with a small group of people" and "be creative." (Tr.3817, Supp.1698).
5
There was nothing to prevent the individuals from starting their own business. They did
not have non-competition agreements (covenants not to compete). Still, leaving stable
employment and starting their own business was a major change for each individual.
B. The Three Scientists Left ACS And Started Their Own Business
On November 1, 1997, the three scientists began their venture working together and
conceptualizing their product in Dr. Blower's basement. (Tr.2615, Supp.1601). Dr. Myatt
testified: "We had kind of an interesting group of skills. I had a background in chemical analysis.
Wayne had the background in information, visualization and architecting systems. Paul was an
extremely well-respected chemist with - with a chemoinformatics background." (Id.) The
scientists worked tirelessly because "the sooner we were able to get something to the market, the
sooner we would be able to make a living." (Tr.2516, Supp.1544). They worked night and day
for fifteen months without pay. (Tr.2631-32, Supp.1603-04; see also Tr.2727, Supp.1615 (Dr.
Myatt testifying that he lived on $15,000 to $30,000 in savings during this time)). They worked
"very long hours ... late, early in the morning, late, seven days a week," but they "loved doing
this work; it was exciting.°" (Tr.2632, Supp.1614). After eighteen months, their work paid off,
and the three of them created the Leadscope product. At that point, "it was an awful lot of work
we put into that, but we were finally seeing things happening. It was really going great."
(Tr.2726, Supp.1615).
C. In 2001, Leadscope Turns The Corner Towards Success
The Leadscope product achieved great success in 2001 and 2002. The three scientists
also applied for a patent for the inventions they created while developing the Leadscope software.
On November 27, 2001, the United States Patent and Trademark Office issued the patent. They
achieved another milestone in the fall of 2001 when Leadscope launched its flagship product:
Leadscope Enterprise, a server-based, multi-user version of its earlier Leadscope software.
6
(Tr.2725-26, Supp.1613-14). The Leadscope business "was going very - very well. We had
released this product, and we started to sign up customers, and we started signing them up in
2001." (Id.) This was a triumph for Leadscope and each of the individuals.
The three founders paid their dues between 1997 and 2002, and were now beginning to
enjoy financial success. Leadscope also began to receive acclaim in the business community as
an up-and-coming Central Ohio technology company. As Dr. Myatt testified:
Well, when we first formed the company, nobody knew about us .... But as wedeveloped the business - as for example, we signed the Pfizer contract, and westarted to get customers, and we had a plan, we were moving forward, we raisedventure capital money, we got more and more, I guess, respect from the localcompanies. And we were - I think we were viewed as the - kind of the posterchild for the high-tech community in Columbus, Ohio.
(Tr.2728, Supp.1616). In fact, then-Governor Bob Taft mentioned Leadscope in his 2002 State
of the State Address, and then visited Leadscope in early February 2002 to promote Leadscope.
(Tr.3605-06, Supp.1676-77).
ACS struck in Apri12002, ruining the lives and careers of Dr. Blower, Dr. Myatt, and Mr.
Johnson forever. Unbeknownst to them, ACS had been making false statements about them for a
year and a half, claiming they stole trade secrets from ACS to start Leadscope. ACS finally went
public with its accusations in April 2002, accusing them of stealing trade secrets and using those
trade secrets to start Leadscope. The accusations were absolutely false.
But it did not matter. ACS made these false and malicious accusations (1) to competitors
of Leadscope, (2) to approximately 1,900 chemists, scientists, and other employees of ACS
around the world, (3) to the press in Columbus, Ohio where Dr. Blower, Dr. Myatt, and Mr.
Johnson and their families lived and worked (these false accusations were immortalized around
the world on the internet), and (4) in a lawsuit filed May 1, 2002 in federal court in Columbus,
7
Ohio. ACS's actions destroyed the lives, careers, reputations, and jobs of Dr. Blower, Dr. Myatt,
and Mr. Johnson. The injuries persist to this day, nine years later.
After six long years and an eight week jury trial, a Columbus jury found that ACS had
engaged in tortious acts of unfair competition and defamation against these three scientists. The
jury rendered verdicts to each individual to help right the wrongs inflicted by ACS. The trial
judge upheld this verdict in a 73-page opinion denying the post-trial motions of ACS. And the
Franklin County Court of Appeals unanimously affirmed the judgment in a 45-page opinion.
ACS's challenges to the jury's unfair competition and defamation verdicts are baseless.
D. The Claims Of Unfair Competition And Defamation
1. ACS Unfairly Competed Against Dr. Blower, Dr. Myatt, And
Mr. Johnson By (1) Circulating False Statements And RumorsAbout Them, Disparaging Them, And By (2) Maliciously FilingTwo Lawsuits Against Them
a. Introduction
ACS misleads this Court by repeatedly claiming that all of the counterclaims were based
on ACS filing a lawsuit. ACS does this to give the impression that it is being punished because
it exercised its "constitutional" right to file a lawsuit. Such statements are absolutely false. ACS
was sued by these three scientists for unfair competition and defamation. The law in Ohio
clearly holds a competitor legally responsible for "unfair commercial practices such as malicious
litigation, circulation of false rumors, or publication of statement all designed to harm the
business of another." Water Management, Inc. v. Stayanchi (1984), 15 Ohio St.3d 83, 84. ACS
did far more than just file a lawsuit. The evidence at trial proved ACS began its tortious conduct
at least a year and a half before this lawsuit was filed and that it continued for years thereafter.
Malicious litigation was only one part of the unfair competition claim. The jury
answered the following special interrogatory directed to unfair competition:
8
4
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^"sni[icaRe on whiah Q€th<r follow'uig givtuidsyonhave fniitid
i:amuiitted unCair;+^pettiit'xam
Ahulic€aiusl,itts.atiim:
CieculxiYitiYt[,#'tat§e 5uat'e m ztzkd kZ.'tsnle¢rs.AI^csut ^^Oedants
(Supp.473). This interrogatory answer demonstrates that ACS's claim that the unfair competition
verdict was only about its lawsuit is simply not true. The jury held ACS responsible for many
types of reprehensible conduct that occurred ovef several years.
b. In January 2001, ACS Began Spreading False Statementsand Rumors About Dr. Blower, Dr. Myatt, And Mr. Johnson
In January 2001, ACS received the full patent application for which Drs. Blower and
Myatt and Mr. Johnson were the inventors. ACS called Spotfire, a competitor of Leadscope,
forwarded the application and represented that the three scientists obtained the knowledge for
this patent from their work at ACS. This representation was absolutely false, and ACS knew it.
Evidence at trial confirmed that ACS spread false statements and rumors to Spotfire.
ACS told Spotfire it was angry that the three scientists had taken intellectual property from CAS
and used that intellectual property to start Leadscope. Spotfire's President, Mr. Alberg, clearly
testified on this point:
9
Q. Okay. And how did - you said you knew they were angry about theguys having done this. Having done what?
A. Having - so let's see. So say that in the correct way. Having - I thinkwhat Chemical Abstracts Services thought that they had done was to leave CASand take IP along with them.
Q. And what's the basis for your knowledge that that's what CAS thought
they had done?A. Having heard it from CAS people.Q. Who specifically?A. Don't remember.Q. And anything more specific than that in terms of what they took with
them?A. Nothing but the inference that what they started that company around
would be that knowledge.
(Tr.3729-30, Supp.1684-85).
Spotfire was in the same industry as Leadscope and was working with ACS on several
projects (D160, Supp.1305; D279, Supp.1333). Spotfire responded to ACS by stating, in
January 2001, "we'll completely kill this." (D5, Supp.940). ACS continued to enlist the aid of
Spotfire through December 2001 by advising it that the Leadscope patent had issued. (D145,
Supp.1295).
c. In February 2002, ACS Continued To Spread False
Statements and Rumors About Drs. Blowers And Myatt And
Mr. Johnson
ACS continued its secret attacks on Drs. Blower and Myatt and Mr. Johnson in February
2002. The lead article in the Columbus Sunday Dispatch on February 3, 2002, featured
Governor Taft's upcoming State of the State speech and announced that he would be visiting
Leadscope as part of a high tech economic initiative. The next day, at a meeting of the Senior
ACS Executi_ves, CAS President Robert Massie expressed his concern. Mr. Swann, the next in
command at CAS under Mr. Massie, testified to what Mr. Massie said at this meeting.
Q. And at that particular Monday morning meeting where Mr. Massiereferenced the governor's visit to Leadscope, in fact, Mr. Massie said, well, I'mgoing to call the governor on this, he shouldn't be involved with something like
this, didn't he?
10
A. That's how I remember it, yes.
(Tr.3761, Supp.1689). And that is precisely what Mr. Massie did.
On February 5, 2002, Mr. Massie sent an email to the Governor, stating:
I am travelling today, out of state. I realize that it is a very busy day, yet wantedthe Govemor's office to have this information. Perhaps you could kindly pass
this note on to Brian Hicks?
We learned only yesterday that the Governor plans to visit Leadscope today, aColumbus technology startup company. It was founded by forrner CAS employees.I am not suggesting that the visit not take place, but, on reflection, I thought itimportant that your office have some additional background information.
1. CAS is about to challenge Leadscope's patent on the ground that is based insignificant part on "prior art" technology, much of it developed at CAS or inexistence already in CAS products or elsewhere.
2. There are questions about what the CAS researchers did or did not removefrom CAS in terms of code, work product, plans, etc. While I am not at this timesuggesting that anything illegal was done, CAS is reserving its rights to challengeany aspect of Leadscope's product suite or business activities on these grounds.
3. Leadscope depends on capital at this point in its development. The Governor'sremarks and any endorsement would be important to them (unlike CAS, which isviable and never raises capital). That is not in itself inappropriate, but the otherpoints in this note may provide perspective on how far in their camp the Governorwishes to be perceived.
4. It is not clear that other science advisors or tech advocates in Columbus wouldbe aware of these points, and they are trying to associate themselves with aperceived success story and CAS has been discreet about its concerns and position.
Michael Dennis, of my office, can provide more information if needed.
I hope that this information is useful.
Kind regards
Bob Massie.
(Emphasis added.) (D30, Supp.1027). CAS' Chief Executive Officer thus told the Governor of
the State of Ohio that Leadscope was started by former CAS employees and that there were
questions about what they "did or did not remove from CAS in terms of code, work product,
11
plans, etc." This was a false statement and rumor, as ACS knew they had not stolen anything. In
fact, Massie testified at trial in response to a question from his counsel as follows:
Q. Let's go to the - back to the three individuals in this case. Do youhave any knowledge of any of these three individuals actually taking any tangibleitem belonging to Chemical Abstracts or the ACS when they left theiremployment?
A. No, sir, I don't.
(Tr.248-49, Supp.1476-77).
d. In April 2002, ACS Continued Its Campaign ofDisparagement, False Statements, And Rumors
In April 2002, ACS continued to make false statements, spread rumors, and disparage
these three scientists. On or about April 10, 2002, Mr. Michael Dennis, the senior lawyer at CAS,
received a call from Curtis Crocker, a venture capitalist with Columbus-based Battelle
Technology Fund ("Battelle"), asking questions about the terms on which Drs. Blower and Myatt
and Mr. Johnson left CAS. (Tr.4523-24, Supp.1738-39)., Rather than reference the true terms on
which they left-evidenced by the outstanding evaluations discussed above-Mr. Dennis chose
to disparage them and spread more rumors. Mr. Dennis instead claimed there were "legal" or
"lingering" issues surrounding Leadscope's intellectual property. (Tr.4527-28, Supp.1740-41;
Tr.4537-38, Supp.1744-45; D99, Supp.1055). Mr. Dennis refused to meet with Mr. Crocker to
discuss these concerns. (Tr.4544, Supp.1747).
Mr. Dennis then repeated these false statements, rumors, and disparaging statements to
Michael Conley, the Chief Financial Officer at Leadscope. (Tr.4214-16, Supp.1724-26). Mr.
Dennis accused the individual defendants of crimes. (Tr.4209-10, Supp.1721-22). ACS thus
falsely accused the individual defendants of taking intellectual property from CAS, of starting
Leadscope with intellectual property wrongfully taken from CAS, and of engaging in criminal
conduct.
12
All of this happened well before ACS filed the two malicious lawsuits.
e. ACS Maliciously Filed Two Separate Lawsuits AgainstDr. Blower, Dr. Myatt, And Mr. Johnson
On May 1, 2002, ACS sued Leadscope and Drs. Blower and Myatt and Mr. Johnson in
federal court in Columbus. There were six separate claims asserted against these three scientists:
(1) breach of contract; (2) misappropriation of trade secrets; (3) unfair competition; (4) breach of
fiduciary duty and the duty of loyalty; (5) conversion; and (6) implied license under shop right.
The suit alleged that Drs. Blower and Myatt and Mr. Johnson stole trade secrets from CAS and
used those trade secrets to build the Leadscope software and to obtain the Leadscope patent.
Those allegations were unequivocally false and baseless. The evidence at trial was clear:
ACS filed these claims in bad faith to drive Leadscope and the Individual Defendants out of
business. For all intents and purposes ACS succeeded in accomplishing its objective.
The jury was specifically asked to decide whether ACS brought its trade secret claims in
bad faith:
If you find that Plaintiff did not prove that Defendants misappropriated its tradesecrets, you must also determine if Plaintiff's claim of misappropriation was madein bad faith. For purposes of this instruction, bad faith means that Plaintiff'sclaim lacked merit and that Plaintiff brought the claim despite knowing that theclaim lacked merit.... You must find by clear and convincing evidence thatPlaintiff's claim of misappropriation was made in bad faith.
(Tr.5871, Supp.1847). The jury specifically found that ACS had brought its claims of trade
secret misappropriation in bad faith. That fmding is especially significant given the severity of
the instruction and the clear and convincing evidentiary standard necessary to warrant such a
finding.
The trial court's 73-page decision denying ACS's post trial motions summarized some of
the evidence showing that ACS brought the case in bad faith as unfair competition:
13
Defendants presented testimony pertaining to, among other things, 1.) the timingof the litigation in light of Defendants' repeated exhibitions of their products tothe greater scientific and chemoinformatics community, including thepresentation of their products directly to Plaintiff's representatives; 2.) Massie'se-mail to the Governor in an attempt to interfere with the Governor's publicendorsement of Leadscope and thereby interfere with its ability to secure much-needed financing; 3.) the Apri12002 "settlement negotiations" that were describedby Defendants as "extortion," where they were threatened by Dennis with thefiling of a complaint that included civil and criminal allegations and werethreatened with "fast and furious publicity;" 4.) Dennis' statements to Crockerthat there were "lingering issues" regarding Leadscope and his subsequentunwillingness to meet with Crocker to address those "issues," which was followedby Crocker's failure to invest in Leadscope; and 5.) Plaintiff's dismissal of theconversion claim, upon which claim insurance coverage was based, right after theappellate court held Defendants were entitled to defense coverage. In light of theforegoing, the court finds reasonable jurors could fmd, when reviewing the samein a light most favorable to Defendants, that Plaintiff ... engaged in maliciouslitigation in an attempt to unfairly compete with Defendants. Furthermore,reasonable minds could conclude that this course of conduct caused the harm
testified to.
(App.53 at 98-99).
2. ACS Defamed The Individual Defendants In Publications TargetedTo Create The Biggest Impact On Their Reputations
a. ACS Defamed The Individual Defendants To Their Friends,Colleagues, Associates, And Fellow Scientists Around TheWorld
ACS's first act of defamation was in the May 1, 2002 "All Staff Memo," in which ACS
states that the Individual Defendants "received a patent for technology indistinguishable from a
project on which they worked while employees." (Emphasis added.) (D42, Supp.1051). This
statement is false. (Tr.2763, Supp.1620; Tr.3269, Supp.1655; Tr.3856, Supp.1702). ACS
published this statement to every employee at CAS, and perhaps to every ACS employee.
(TrA -36-37, Supp.1488-89). CAS employs approximately 1,300 individuals, and ACS employs a
total of approximately 1,900 individuals. (Id.) These employees span the globe: ACS has
chemists and other scientists in London, Germany, Hong Kong, and throughout the United States.
(Tr.3518-19, Supp.1668-69). The statement was read by the three scientists' "friends, associates,
14
and colleagues," (Tr.3856, Supp.1702; see also Tr.2763, Supp.1620), and to other professional
associates that had been completely unaware of the situation. (Tr.2024-25, Supp.1528-29
(testifying that potential witness interviewees never worked on PathFinder); Tr.4692, Supp.1752
(human resources representative unaware of the situation); Tr.4706-07, Supp.1753-54 (same)).
b. ACS Defamed The Individual Defendants In The LocalBusiness Community
ACS also defamed the Individual Defendants in the local business media. In an ACS-
authorized statement, ACS's attorney stated in an article published in Business First: "Our
motivation in filing suit is to acquire back the protected information that they took ffom us."
(Emphasis added.) (D161, Supp.1332; Tr.453-54, Supp.1490-91 (discussing Mr. Ferguson's
authorization)). This statement is also false. (Tr.2764, Supp.1621; Tr.3269, Supp.1655;
Tr.3856-57, Supp.1702-03).
The Individual Defendants' friends and advisors read these defamatory statements in
Business First when they were published. For example, Mr. Ora Smith, a former president of the
Columbus-based technology initiative called SciTech, read the defamatory statement when it
"first appeared." (Tr.3612, Supp.1679). Mr. Smith had previously served as an advisor to the
Individual Defendants and helped them establish Leadscope as a business. (Tr.3588, Supp.1674
("I tried to be helpful, as much as I could.")). This defamatory publication was memorialized on
the internet and still exists nine years later.
E. ACS's Tortious Actions Caused Immense Personal and ProfessionalDamages To Each Defendant
1. Dr. Myatt Suffered Great Harm As A Hesuit of ACS's Tortious
Conduct
Dr. Myatt suffered tremendous damages from ACS's wrongfal conduct. Dr. Myatt felt
like the victim of "extortion" when ACS's attorney threatened to file civil and criminal charges
15
against the Individual Defendants. (Tr.2742, Supp.1617; Tr.2754, Supp.1618). He felt
"extremely anxious because [Mr. Dennis] was threatening jail time." (Id.) Dr. Myatt's anxiety
was well founded; such hostile actions are specifically forbidden under Ohio law. See Ohio R.
Prof. Conduct 1.2(e) ("Unless otherwise required by law, a lawyer shall not present, participate
in presenting, or threaten to present criminal charges or professional misconduct allegations
solely to obtain an advantage in a civil matter."). Dr. Myatt testified:
I was totally shocked by this letter. We took nothing. We took absolutelynothing; and they were demanding our patent, they were telling us to stop sellingour products, and, you know, pay them a million dollars.
(Tr.2846, Supp.1622).
The hardship ACS inflicted on Leadscope directly caused Dr. Myatt additional suffering.
For instance, after Leadscope laid off approximately two-thirds of its staff, Dr. Myatt increased
his responsibilities by working more hours and traveling more. (Tr.2861-62, Supp.1624-25).
Unsurprisingly, the baseless charges gave Dr. Myatt "constant concern "(Id.) When Leadscope
could not meet its payroll obligations, Dr. Myatt took a 25% salary deferral for two months,
followed by a 100% deferral for the next 15 months. (Tr.2863-67, Supp.1626-27). Because of
these deferrals, Dr. Myatt could not pay his mortgage, and he was forced to sell his German
Village home at a $45,000 loss. (Tr.2879-80, Supp.1631-32). The increased travel took a toll on
him, and then heath problems compelled him to resign from active employment with Leadscope.
(Tr.2880-81, Supp.1632-33).
Dr. Myatt testified to his reputational damages: "Based on the publication of this lawsuit,
it's been widely disseminated in the local media, you know, in newspapers in Columbus, it's in
journals. It's widely known across the country that this lawsuit - these allegations have been
made against me." (Tr.2902, Supp.1636). He explained, "my own professional society is
accusing me of violating employment agreements and, you know, misappropriating proprietary
16
information, so such - having such a prestigious organization level these allegations against me
is very damaging." (Tr.2903, Supp.1637). These damages are long-lasting. Indeed, the
Business First article is among the first three "hits" in a Google search of "Glenn Myatt
Leadscope." (Tr.2906, Supp.1638). Given the proliferation of the defamatory statements, Dr.
Myatt did not believe that he could "pursue a career in chemoinfonnatics," his chosen field,
because anyone "who does a Google search, does any kind of background check on me," will
learn of the lawsuit. (Tr.2909, Supp.1638; Tr.2913, Supp.1640). Expert testimony by one of
Ohio's most experienced economists established that Dr. Myatt suffered damages up to
$2,158,000 in diminished earning capacity alone. (Tr.4626, Supp.1751).
ACS's tortious actions also caused severe emotional harm to Dr. Myatt. He testified to
thinking about the lawsuit "every day":
Well, it's caused, you know, an enormous amount of anxiety, ever since theallegations were alleged against myself. You know, we were going through, youknow, running a business, trying to - you know, the fact that it was jeopardizingour business, these, you know, criminal charges that Michael Denniscommunicated, you know, I was very concerned when I heard those chargesleveled against me. And it's just been weighing on my mind the whole time overthese last six years, I've had these nebulous allegations, and I don't know whatthey are, but there's something that's been stolen - something from the AmericanChemical Society, and those have just weighed on me this whole, you know, for
the last six years.
(Tr.2914, Supp.1641). Dr. Blower added that ACS's lawsuit caused Dr. Myatt to become "very
withdrawn." (Tr.3870-71, Supp.1704-05).
2. Mr. Johnson Suffered Great Harm As A Result of ACS's Tortious
Conduct
ACS also caused tremendous damage to Mr. Johnson, forcing him to make enormous
changes in his life. In 2003, he was "very worried about the viability of Leadscope and very
concemed about the impact that would have to [him] personally and to [his] family should there
be a business failure." (Tr.3280, Supp.1659). He was also "concerned that with the litigation
17
hanging over [his] head," he might have to "face personal bankruptcy and financial ruin," so his
wife decided to "reenter the workforce.°" (Tr.3281, Supp.1660). When Mrs. Johnson, an
Episcopal priest, found work in Georgia, she moved there with two of their five children in 2004.
(Id.) Mr. Johnson followed in October 2005, reducing his employment to 50%, when he was
forced to choose between his business and his "family in crisis." (Tr.3282, Supp.1661). By the
end of 2006, he was working at just 5% so he could be his household's primary caregiver.
(Tr.3283-84, Supp.1662).
Even before this family crisis, the economic woes ACS inflicted on Leadscope had
required Mr. Johnson to defer 25% of his salary between December 2002 and October 2005.
(Tr.3277-79, Supp.1656-58). Leadscope still owes Mr. Johnson nearly $100,000 in back pay.
(Tr.3278, Supp.1657).
Like Dr. Myatt, Mr. Johnson knew his chances of pursuing traditional, full-time
employment in his chosen field were limited after ACS's repeated accusations of theft: "I just
didn't feel, with this litigation and the allegations that were hanging over my head about having
stolen intellectual property, that I was in a very competitive position to look for full-time
employment for a challenging position." (Tr.3284, Supp.1663). Mr. Johnson further explained:
Because it was very easy to find the Business First review article of the litigationon a Google search, which I had tried to do, and those allegations create in my -in my perception, they create doubt about my character, my honesty andintegrity.... And going into an employment interview, all other factors beingequal, my belief is the shadow of a doubt of having stolen intellectual propertywould put me at a significant disadvantage.
(Ti.3286-87, Supp.1664-65). Similar to Dr. Myatt, a Google search of Mr. Johnson's name
returned the Business First article on the first page of results. (Tr.3288, Supp.1666). Dr. Myatt
explained the effect ACS's meritless accusations had on Mr. Johnson's reputation: "It's been
published in the local media. It's been publish[ed], you know, in prestigious scientific journals.
18
I know he's had to explain it to, you know, friends, family. And that's affected his reputation."
(Tr.2901-02, Supp.1635-36). Expert economic testimony established that Mr. Johnson suffered
$2,630,000 in diminished earning capacity alone. (Tr.4626, Supp.1751).
ACS's conduct led to other negative effects. The lawsuit prevented Mr. Johnson from
obtaining a mortgage in his own name. (Tr.3288-89, Supp.1666-67). Mrs. Johnson had to
disclose the lawsuit to her supervisor and her parish. (Tr.3289, Supp.1667). And Mr. Johnson
lost his valuable stock options in Leadscope when he could not afford to exercise them. (Tr.3279,
Supp.1658). He also suffered serious emotional damages as a result of ACS's false statements.
Dr. Blower testified that, after Apri12002, Mr. Johnson was the "most stressed individual [he's]
ever known. He was very distracted, and he became forgetful of things that he never would have
forgotten in the past." (Tr.3870, Supp.1704).
3. Dr. Blower Suffered Great Harm As A Result of ACS's TortiousConduct
Dr. Blower also suffered terribly from ACS's tortious conduct. His Leadscope stock
diminished in value when the Apri12002 financing fell through because of the timing of ACS's
lawsuit. (Tr.3871-72, Supp.1705-06). He also took a 25% reduction in pay at the end of 2002.
(Tr.3874, Supp.1707). Like Mr. Johnson, Dr. Blower lost stock options he could not afford to
exercise when he, too, dropped to 5% employment in 2005. (Tr.3878, Supp.1712). Dr. Blower
left Leadscope to participate in research at The Ohio State University that "Leadscope decided
not to pursue" because the project "was triaged" when Leadscope had to cut costs and "reduce[]
staff." (Tr.3879, Supp.1709). Expert economic testimony established that Dr. Blower suffered
$1,073,672 in lost earning capacity alone. (Tr.4625, Supp.1751).
Dr. Blower also presented evidence of emotional and mental distress. At Ohio State, Dr.
Blower was compelled to disclose the litigation to his chairman and collaborator. (Tr.3979-80,
19
Supp.1713-14). Searches of his name on Google displayed the defamatory Business First article.
(Tr.3881, Supp.1710). He testified that this "damaged [his] reputation" and hurt his chances of
obtaining "either consulting or contract work" in his chosen field of chemistry. (Tr.3882,
Supp.1711). Dr. Blower testified that he suffered "humiliation" and "mental distress" as a result
of ACS's tortious actions. (Id.; see also Tr.2899, Supp.1634 (testifying that Dr. Blower has been
"distracted" by the lawsuit)). Specifically, Dr. Blower stated:
I think it's caused a great deal of mental distress. I'm worried about my future.I'm too old to start over again. It occupies my mind a great deal of time. I worryabout the loss of my life savings, also my house, the effect it has on my family,
things like that.
(Tr.3882-83, Supp.1711-12). Dr. Blower suffered additional distress and humiliation because his
own professional society, ACS, brought these baseless claims against him. He described ACS as
a "very prestigious society," and noted that he primarily works with other ACS members.
(Tr.3883, Supp.1712). Dr. Myatt corroborated this sentiment and noted that the accusations are
"widely known throughout the scientific community." (Tr.2901, Supp.1635).
ARGUMENT
1. INTRODUCTION
These three Defendants adopt the legal arguments set forth in Leadscope's Merit Brief.
However, as to certain issues that particularly impact these three, they provide the additional
comments which follow.
First, a review of the jury verdict and how the jury awarded damages is important.
20
UNFAIR COMPETITION
Compensatorv Punitive
Leadscope $750,000 $1,000,000
Glenn J. Myatt $1,500,000 $1,000,000
Wayne P. Johnson $1,250,000 $1,000,000
Paul E. Blower, Jr. $1,000,000 $1,000,000
DEFAMATION
Compensatory Punitive
Leadscope $10,000,000 $312,500
Glenn J. Myatt $1,500,000 $312,500
Wayne P. Johnson $1,250,000 $312,500
Paul E. Blower, Jr. $1,000,000 $312,500
TORTIOUS INTERFERENCE
Compensatory Punitive
Leadscope $750,000 $2,250,000
The verdicts demonstrate that the jury treated each of the Defendants separately and
independently. The jury differentiated not only between each Defendant, but between each
claim and between compensatory and punitive damages for each claim. For compensatory
damages, the jury awarded Dr. Myatt the most, Mr. Johnson next, and Dr. Blower next. This
allocation is in line with their remaining work lives and the expert economist's testimony for
each. One also has to note that the jury awarded greater punitive damages for the unfair
competition than it did for the defamation. Additionally, it found the unfair competition did
greater damage to the individuals and the defamation did greater damage to Leadscope. Again,
these findings are in line with the expert testimony. In short, the jury took its work very
seriously and did just what the judge instructed it to do.
21
II. ACS I3AS WAIVED THE CONSTITUTIONAL ARGUMENT IT MAKES INPROPOSITION OF LAW NUMBER 1 BECAUSE ACS DID NOT RAISE THISISSUE UNTIL ITS POST-TRIAL JNOV MOTION
A. The Issue Regarding Waiver
In its first proposition of law, ACS claims that the trial court erred at two separate points:
1. ACS claims the trial court should have granted its Rule 50 Motion for a directedverdict on all of the unfair competition claim because its lawsuit was not"objectively baseless" and, therefore, the constitution immunizes it from any
liability; and
2. ACS claims that the trial court should have instructed the jury that ACS could notbe liable for the "malicious litigation" component of unfair competition, unlessACS filed an "objectively baseless" lawsuit.
ACS, however, never raised these objections during the trial (or any other time in the five and a
half years leading up to trial). ACS therefore waived these objections.
The very first time ACS raised these objections in any way, shape or form, directly or
indirectly, was in its April 24, 2008 JNOV motion two months after trial. At that time ACS
claimed it "has a constitutional right to seek redress of grievances" citing to Professional Real
Estate Investors v. Columbia Pictures Indus. (1993), 508 U.S. 49, for what has been known for
the last fifty years as the "Noerr-Pennington doctrine." ACS then argued:
Because this "Noerr-Pennington doctrine" protects broad First Amendmentinterests, it has been expanded to apply in all contexts, not just antitrust suits.
(Supp.488 at 516). This JNOV Motion was the first time ACS raised this constitutional issue.
B. Basics of the Noerr-Pennington Doctrine
ACS claims it is immune from liability based on the right to petition clause in the First
Amendment to the United States Constitution. This is an affirmative defense known as the
"Noerr-Pennington doctrine" and has been well recognized and much litigated for the last fifty
years. The doctrine can be summarized as follows:
22
The Noerr-Pennington doctrine allows businesses to combine and lobby toinfluence the legislative, executive, or judicial branches of government oradministrative agencies . . . because the First Amendment's right of petitionprotects such activities.
Knology, Inc. v. Insight Communs. Co., L.L.P. (C.A.6 2004), 393 F.3d 656, 658. This doctrine
has a much litigated "sham litigation" exception that limits the application of this immunity:
Those circumstances exist where parties use the petitioning process, rather thanthe outcome of that process, as an anticompetitive weapon.... Such a"`sham'situation involves a defendant whose activities are not genuinely aimed atprocuring favorable government action at all, not one who genuinely seeks toachieve his governmental result, but does so through improper means."
Id. (citation omitted).
It is well-established that the Noerr-Pennington doctrine is an affirmative defense and
must be pleaded as an affirmative defense. It must be raised in an answer or it is waived:
[T]he Noerr-Pennington doctrine should be raised as an affirmative defense.Generally, a party's failure to raise an affirmative defense in its first responsivepleading results in waiver. "However, where `the matter is raised by the trialcourt [or the litigants] that does not result in unfair surprise, technical failure tocomply precisely with Rule 8(c) is not fatal,' and in such a situation a court mayhold that the defense is not waived." An affirmative defense is not waived if it israised at a "pragmatically sufficient time, and the plaintiff was not prejudiced inits ability to respond." We therefore look to the record to ascertain whether thetrial court raised Noerr-Pennington at a pragmatically sufficient time and whetherBayou Fleet was prejudiced by the delay in raising the defense.
Bayou Fleet, Inc. v. Alexander (C.A.5 2000), 234 F.3d 852, 860 (internal citations omitted). In
Bayou the defendant raised the issue a year before trial and the court exercised its discretion to
find that the delay was reasonable. ACS did not properly or timely raise this defense by waiting
to raise it after the trial was over.
C. Ohio Law Is Fully In Accord That Affirmative Defenses Must Be Pteaded InThe Answer Or They Are Waived
Ohio law is fully consistent with federal law on asserting affirmative defenses.
Specifically, Rule 8(C) of the Ohio Rules of Civil Procedure provides "in pleading to a preceding
23
pleading, a party shall set forth affirmatively . . . any other matter constituting an avoidance or
affirmative defense." Rule 12(B) provides the same. Failure to do so constitutes a waiver.
Pinotti v. Pinotti (6th Dist.), 2003 Ohio 3104. ACS has waived the defense under any standard.
D. Application Of The Noerr-Pennington Doctrine And Waiver To This Case
Defendants filed their counterclaim alleging unfair competition by malicious litigation on
August 14, 2002. (Supp.1). On December 13, 2006, ACS filed its Reply to that counterclaim.
(Supp.70). While ACS asserted nine affirmative defenses, it did not assert the Noerr-Pennington
doctrine either specifically or generally. Accordingly, ACS waived this potential defense.
While some federal courts have allowed a defendant to raise the Noerr-Pennington
doctrine at a "pragmatically sufficient time, [if] the plaintiff was not prejudiced in its ability to
respond," and while Ohio law would likely also show some reasonable flexibility, this exception
does not apply to ACS. ACS did not raise the Noerr-Pennington doctrine during discovery,
during its motion for summary judgment, or at any point in time in the eight weeks of trial in
February and March 2008.
Only on April 24, 2008, nearly two months after the jury returned its verdict and after
final judgment had been entered, did ACS raise the Noerr-Pennington doctrine for the very first
time and claim it applied to state law torts. (Supp.488 at 516 ("Because this "Noerr-Pennington
doctrine" protects broad First Amendment interests, it has been expanded to apply in all contexts,
not just antitrust suits.")).
On May 28, 2008, the Defendants filed their memo contra ACS's JNOV Motion and had
a lengthy section setting forth the case law regarding waiver. (Supp.567 at 609 ("ACS waived
all of its Noerr-Pennington arguments by raising them here for the first time.")). The trial court
properly denied the JNOV Motion.
24
At the Tenth District Court of Appeals, ACS again raised the Noerr-Pennington doctrine,
but in a different way. Rather than making an argument under the First Amendment, ACS
claimed that the Noerr-Pennington doctrine was part of the Ohio law on unfair competition.
(See ACS C.A. Br., Supp.782 at 825). Defendants again responded that ACS had waived the
Noerr-Pennington doctrine. (Leadscope C.A. Br., Supp.850 at 900-01 ("ACS waived that
potential defense by not raising it prior to or during trial.")). The Court of Appeals held the
Noerr-Pennington doctrine was not part of Ohio law on unfair competition.
ACS raises this same argument before this Court, but refuses to call it the Noerr-
Pennington doctrine, apparently in an attempt to try to avoid the abundance of clear law that the
Noerr-Pennington doctrine is an affirmative defense and is waived if not raised prior to trial.
Presumably ACS thinks that by calling it a "constitutional issue" rather than the "Noerr-
Pennington doctrine" as it did in its JNOV Motion and at the court of appeals that it can ignore
this overwhelming body of law. However, just as "a rose by any other name is still a rose," the
Noerr-Pennington doctrine by any other name is still the Noerr-Pennington doctrine.
E. Federal And State Courts Hold That First Raising The Noerr-PenningtonDoctrine In A Post-Trial Motion After Losing A Trial Is Too Late
ACS is not the first litigant who has lost at trial and thereafter at the JNOV stage or on
appeal first raised the Noerr-Pennington doctrine. In Chilton v. Ctr. for Biological Diversity, Inc.
(Ariz. App. 2006), 214 Ariz. 47, a jury found the plaintiffs liable for defamation and awarded
damages of $600,000. Thereafter, the defendant filed a motion for JNOV arguing the Noerr-
Pennington doctrine. The court of appeals, in affirming the trial court's waiver finding, held:
The trial court found CBD had waived this argument, stating the Noerr-
Pennington doctrine had not been "raised in pre-trial motions, at trial, or at the
time of the request for judgment as a matter of law during trial."
25
Because "[t]he concept of waiver is based on two factors; fair notice and judicialefficiency," ... we find the record supports the trial court's conclusion that CBDhas not preserved this argument.
In the affirmative defenses section of its answer, CBD simply stated, "Defendantsstate ... first amendment protection." In its portion of the joint pretrial statement,CBD contended "the News Advisory ...[is] protected by the First Amendmentright to free speech and to petition the federal government for a redress ofgrievances." CBD also proposed a jury instruction it now asserts had squarely
raised the Noerr-Pennington doctrine claim. However, the instruction in no wayfairly raised such a claim, and the issue it raises here was never briefed or arguedto the trial court until the post-trial motion. histead, CBD argued in its summaryjudgment motion that it was protected by a "legislative proceeding privilege.......CBD never raised or discussed the Noerr-Pennington doctrine in its directedverdict motion,... on the next to last day of the trial. Without any briefing orsubstantive discussion of the issue until after the trial had been completed, thetrial court did not err in determining CBD had waived the issue.
Id. at 51.
The court in Confederated Tribes of Siletz Indians of Or. v. Weyerhauser Co. (D. Or. July
5, 2003), 2003 U.S. Dist. LEXIS 27214, reached precisely the same result. Again, the defendant
lost a jury trial and then raised the Noerr-Pennington doctrine in its motion for JNOV. The court
held the objection was waived:
Throughout this case, Defendant was represented by very experienced antitrustcounsel who are intimately familiar with Noerr-Pennington and know how to
raise that issue if inclined to do so. That never happened.
Although the Noerr-Pennington doctrine arises in part from the First Amendment,"even constitutional rights can be waived if not timely asserted." ... I find thatsuch a waiver occurred here.
Id. at * 19-20. The court then explained its reasons as to why waiver was proper:
I further find that it would be extremely prejudicial to let Defendant assert thisargument for the first time at such a late date. As Defendant implicitlyacknowledges by asserting t'nis argument only in the context of its new t<ialmotion, this is not a situation in which the Defendant would have been entitled tojudgment as a matter of law. Plaintiff pled and offered evidence of other anti-competitive conduct by the Defendant. Had Defendant timely asserted the Noerr-
Pennington doctrine as to some allegations and events, Plaintiff could havelimited its claims and evidence, if necessary, and the court could have given thejury any required limiting instructions. By waiting until over a month after the
26
end of a two-week trial to raise this issue for the first time, Defendant deniedPlaintiff - and the court - the opportunity to avoid the alleged errors about which
Defendant now complains.
Id. The court then held that to not apply waiver would be unfair:
To set aside the verdict, and order a new trial, would be unfair to the Plaintiff andrepresent a manifest waste of resources by both the parties and the court. It alsowould be disrespectful of the time and efforts of the jurors who devoted twoweeks to this trial, and the many witnesses who traveled to Portland to givetestimony. To the extent the Defendant has allegedly sustained any harm because
its Noerr-Pennington defense was not considered, that wound was entirely self-
inflicted.
Id. at *21-22.
Everything said by the Arizona Court in Chilton and the Oregon Court in Confederated
Tribes applies to ACS. ACS was represented by experienced counsel, who had six years to raise
this issue, but chose to wait until after the trial to do so. That is too late and it would be unfair
not to apply waiver.
F. Ohio Law Is Fully In Accord That ACS Waived A Noerr-Pennington DefenseBecause It Did Not Raise It At Trial
As previously indicated, federal case law and case law from other states consistently hold
that waiting until post-trial motions to raise the Noerr-Pennington constitutional arguments
constitutes a waiver. Those holdings fully comport with existing Ohio law.
1. Ohio Law Regarding Waiver
The law of Ohio clearly and unequivocally holds that a party cannot allege on appeal any
legal argument it did not assert at the trial court nor can it object on appeal to any jury instruction
unless it made a specific objection on that point to the court at the time.
a. Legal Arguments Not Raised At Trial Cannot Be Raised OnAppeal
This Court has made it clear that arguments not raised in the trial court will not be
considered on appeal. See Gibson v. Meadow Gold Dairy (2000), 88 Ohio St.3d 201. The
27
appellant in Gibson argued that a statute requiring certain workers-compensation settlement
agreements to be in writing was unconstitutional. This Court held "Meadow Gold failed to raise
these constitutional arguments in the trial court, so those arguments are waived and we thus do
not address them here." Id. at 204.
Likewise in State v. Awan (1986), 22 Ohio St.3d 120, this Court held:
The general rule is that "an appellate court will not consider any error whichcounsel for a party complaining of the trial court's judgment could have called butdid not call to the trial court's attention at a time when such error could have beenavoided or corrected by the trial court."
Id. at 122 (citation omitted). Courts throughout Ohio have relied on these holdings in
precluding parties from arguing on appeal constitutional issues they did not raise at the trial
court.
b. Rule 51 Of The Ohio Rules Of Civil Procedure Precludes AParty From Raising On Appeal Any Objection To A JuryInstruction Unless A Specific Objection Was Made At TheTime
Ohio law is equally clear that objections to jury instructions are waived unless they are
made before the instructions are actually given:
On appeal, a party may not assign as error the giving or the failure to give anyinstruction unless the party objects before the jury retires to consider its verdict,stating specifically the matter objected to and the grounds of the objection.
Civ.R. 51.
An objection to a jury instruction must state both "the matter objected to and the grounds
of the objection." Id. A party cannot voice one objection to a jury instruction at trial and on
appeal claim error based on an entireIy d-ifferenfissue. heber v. Smith(1994); 70 OhioSt 3u 5-48
("Because Buckeye Union's reason for objecting to the jury instruction is not the same as its
reason for objecting at trial, Buckeye Union was precluded from arguing on appeal that this
instruction was improper ...:'). Ohio courts are just as clear that this basic rule of law applies
28
to the failure to raise alleged constitutional issues at the trial court. For example, in Rigsby v.
Ohio Power Co. (9th Dist. 1989), No. 2423, 1989 Ohio App. LEXIS 3037, the Court relied on
State v. Awan, supra and held:
Rigsby made no representation to the trial court, when voicing her objection to thejury instructions, that she challenged the constitutionality of the statute uponwhich the trial court based the instruction in question. Rather, her first assertion asto the constitutionality of R.C. 4563.10 came in the form of a post-trial motion,and in her brief to this court. Under the law as set forth in Awan, supra, Rigsby
thus waived this issue, and this court is therefore not obligated to entertain it uponappeal.
Id. at *7-8.
c. Facts Regarding Waiver
ACS never ever at any point in the five and a half years leading up to trial, in the eight
weeks of trial, at any of the three jury instruction conferences (one of which was almost all day),
or in its 69 pages of written objections to the jury instructions made the objection that the United
States Constitution or the Ohio Constitution requires a finding that the malicious litigation was
objectively baseless. The first time ACS raised this objection was in its motion for JNOV filed
almost two months after the trial was over. Under the law of Ohio this is a clear and unequivocal
waiver.
2. ACS Made No Objection In Its Rule 50 Argument That The UnitedStates Constitution Or The Ohio Constitution Had An ObjectiveBaselessness Requirement That ACS Thought Applied Here
ACS orally moved under Rule 50 on March 18, 2008. Nowhere in its argument,
spanning 22 pages of the transcript, does ACS ever mention "objective baselessness" or any
constitutional ohjection. (Tr.-5326-48, Snpp.i782-i804): i3ere is what counsel for ACS ac`iualiy
stated to the Court:
As you know from looking at the materials the defendants have presentedyou, there are only a handful of those malicious litigation cases, and they start
29
with a 1920s case, Court of Appeals case, the Henry Gehring case. They havepresented that to you, and I'm sure the Court has looked at those.
Those unfair competition cases are in the context of malicious litigation;and the question is, is there a tort of that? And those cases say yes; there is a legal
claim, there is a tort for that purpose.
All of these unfair competition cases in Ohio - and, again, there's only afew of them - say the same thing. They say that a tort, a legal claim, exists - andI'm going to quote - "where it appears that the litigation was not founded upongood faith but was instituted with the intent and purpose of harassing and injuringa rival producing and selling the same commodity."
THE COURT: How do you show a lack of good faith?
MR. LONG: Okay. That's my second grounds for this motion.
The second basis, and I'll just - I'll go to that right now. The second basisfor my motion is the requirement that the defendants must prove by apreponderance of the evidence that the ACS litigation was not founded upon good
faith. That comes straight out of these -
THE COURT: I understand. How do you prove it?
MR. LONG: Well, what does that mean? I think the Court has to look atthose words and say, "What does those words mean?" And the exact words are:"Not founded upon good faith." That's the rest of those unfair competition cases.What does that mean? Well, there's only one thing it can mean, I'm going tosuggest to the Court, there's only one thing it can mean, and that is that the ACShas not evidentiary support for its claims, one; two, they know they have noevidentiary support for their claims.
THE COURT: Okay.
MR. LONG: That's the only thing it can mean.
THE COURT: Okay.
(Tr.5330-33, Supp.1786-89).
30
Not only did ACS not object and say the United States Constitution or the Ohio
Constitution required what ACS's counsel now claims, but ACS's counsel actually confirmed
that Ohio law on unfair competition is exactly as the Court instructed the jury.
3. ACS Made No Objection In The Jury Instruction Phase In Which ItDirectly Or Indirectly Even Suggested That Under The United StatesConstitution Or The Ohio Constitution Required ObjectiveBaselessness
Although the parties held several conferences with the trial court regarding jury
instructions and ACS submitted voluminous objections to the court's instructions, ACS did not
claim at any time that the United States Constitution or the Ohio Constitution imposed a
requirement that the claims of ACS must be "objectively baseless."
In advance of the first conference, ACS and Defendants submitted their respective
requested instructions to the court, including a proposed instruction on unfair competition.
These proposed instructions were discussed throughout the conferences, and each counsel
subsequently filed their proposed instructions on Friday, March 21, 2008. (Supp.82-401).
The first jury instruction conference was held on March 19, 2008. It went all day and
was devoted to a discussion of legal motions and jury instructions. Each party discussed its
views on the proposed unfair competition instruction, and the judge said he would draft an
instruction for unfair competition. (Tr.5526-32, Supp.1812-18). ACS did not in its written
proposed instruction or in its oral discussion suggest in any way, shape or form that the United
States Constitution or the Ohio Constitution required the jury to be instructed that it must find the
cla_ims-af_A-CSvv_ere "objectively baseless."
The second jury instruction conference was on Thursday, March 20, 2008. (Tr.5576-
5600, Supp.1819-43). Judge Reece read to all counsel the jury instruction he drafted for unfair
competition. (Id.) Counsel for ACS had a few objections, and the Judge made some changes
31
based on those objections. (Id.) Again ACS made absolutely no objections based on the notion
that the United States Constitution or the Ohio Constitution had an "objective baselessness"
requirement. (Id.)
On Friday, March 21, 2008, Judge Reece made available to all counsel a hard copy of all
his proposed instructions so counsel could study them over the weekend and prepare for closing
arguments on Monday, March 24, 2008.
Then on Monday, March 24, 2008 at 8:06 a.m., ACS filed 69 pages of written objections
to the proposed instructions. (Supp.402-70). Nowhere in those 69 pages of written objections
did ACS suggest to the court that the United States Constitution or the Ohio Constitution had an
"objective baselessness" requirement. (Id.) That morning when trial began, Ms. Herlihy,
counsel for ACS, indicated that she had filed written objections. (Tr.5612-13, Supp.1844-45)
But in response to Judge Reece's question whether there was "anything new in here?" Ms
Herlihy did not suggest there was any constitutional objection for an "objection baselessness"
requirement and, in fact, there was no such objection. (Id.) The parties then proceeded to make
their closing arguments.
The next day, the judge instructed the jury as to the law. Pursuant to Rule 51 of the Ohio
Rules of Civil Procedure, the judge asked all counsel "with the exception of the matters that we
previously discussed, . . . any new objections?" ACS responded it had none. (Tr.5905-06,
Supp.1855). It is therefore clear that at no time in the jury instruction phase did ACS object
based on the constitutional objections it is now making.
Even ACS has not suggested that it raised the Noerr-Pennington doctrine's "objective
baselessness" standard at the instruction phase. Specifically, after ACS filed its JNOV Motion in
which it first raised the Noerr-Pennington doctrine, Defendants filed their memo contra and cited
32
all the law that said it was waived. (Supp.488). ACS replied with a 58-page brief and devoted
seven pages of its reply to Noerr-Pennington. (Supp.646). Not once in those seven pages did
ACS even suggest it had raised Noerr-Pennington at trial. ACS knew it had not raised it at trial
and knew it could not represent that it had done so.
However, just to make it absolutely clear that ACS never raised the Noerr-Pennington
doctrine or anything remotely similar to it at trial, Defendants have included in their Joint
Supplement all of ACS's oral argument on its motion for directed verdict on unfair competition,
(Tr.5326-48, Supp. 1782-1804), all of the jury instruction conferences on the unfair competition
claims, (Tr.5526-31, Supp.1812-17; Tr.5595-5600, Supp.1838-43; Tr.5612-13, Supp.1844-45;
Tr.5904-06, Supp.1853-55), ACS's proposed instruction on unfair competition, (Supp.82 at 160-
63), and ACS's written objections to the instruction on unfair competition. (Supp.402 at 447-50).
A review of those makes it absolutely clear that ACS never raised the Noerr-Pennington doctrine
or made any "objective baselessness" argument at any time prior to or during the trial.
4. The Case Law ACS Cites Provides No Support That It Preserved AConstitutional Objection It Never Made
In an attempt to preemptively address its waiver of the Noerr-Pennington doctrine, ACS
cites to Presley v. Norwood (1973), 36 Ohio St.2d 29, R.H. Macy & Co. v. Otis Elevator Co.
(1990), 51 Ohio St.3d 108, Krischbaum v. Dillon (1991), 58 Ohio St.3d 58, and R.C. Olmstead,
Inc. v. GBS Corp. (7thDist.), 2009 Ohio 6808. These four cases stand for the same proposition
that a "formal" objection is not required after the jury instructions are given so long as the
specificobjections and thegrounds for it were previously made clear to the judge. That principle
does not apply here.
In Presley, this Court held that "where the record affirmatively shows that a trial court
has been fully apprised of the correct law governing a material issue in dispute and that the
33
complaining party has unsuccessfully requested the inclusion of that law in the trial court's
charge to the jury, such party does not waive his objections to the court's charge by failing to
formally object thereto." Presley, 36 Ohio St.3d at syllabus 11. ACS never mentioned its
constitutional arguments in any form and thus Presley is inapposite.
In ACS's first proposed instructions on unfair competition filed on March 21, 2008,
there was absolutely nothing regarding the "objective baselessness" requirement that ACS now
argues. Rather, ACS claims that "[t]he litigation filed by ACS against defendants was not
malicious unless ACS had no reasonable basis for believing that it was entitled to legal relief
when it filed suit." For its authority for this proposition, ACS cited to Nationwide Ins.
Enterprise v. Progressive Specialty Ins. Co. (10th Dist. June 20, 2002) No. 2002 1AP-1223,
2002 WL 1338791, which discusses only the civil tort of malicious prosecution.
The objections and new proposed instructions that ACS filed on March 24, 2008 included
a sentence on the unfair competition counterclaim that stated: "(3) That ACS filed its lawsuit in
bad faith and without probable cause, meaning that ACS's lawsuit had no basis and ACS knew it
had no basis." ACS submitted no legal authority for this new instruction and when Judge Reece,
who did not yet have a copy of ACS's filing, specifically asked counsel for ACS whether or not
there was anything new in this instruction, counsel indicated no.
Very simply, ACS never, ever, at any time before the jury retired, advised the Court that
it believed the United States Constitution and/or the Ohio Constitution required that the jury be
instructed it must find that ACS's claims were "objectively baseless" or anything remotely like
that. Accordingly, ACS waived this objection.
34
5. Waiver Is Required By The Law Of Ohio And This Result Is FairAnd Just And Proper
The Honorable Guy F. Reece, II, presided over this case. He gave the parties eight weeks
of trial to present their evidence and make arguments. He met with counsel early in the morning
during trial and heard motions. He read mountains of motions filed by each party and patiently
listened to all arguments. He held jury instruction conferences over three days and gave counsel
every chance they wanted to make any objections orally or in writing. He then drafted his
proposed jury instructions, gave them in writing to counsel, and gave counsel another several
days to review them and again make any objections orally or in writing that they wanted. Judge
Reece wanted to get the instructions right and did everything possible to make that happen. The
purpose of Rule 51 is to allow the judge a chance to correct any potential mistakes. ACS failed
to make any constitutional objection until post-trial motions. That is too late. It is perfectly just
and proper for this Court to rule that ACS waived any constitutional objections.
Allowing ACS to annul instructions without a proper objection would also be unfair to
Defendants and the jury. If ACS believed there was any United States or Ohio constitutional
provision that required anything, Defendants had a right to know at trial. Defendants made every
effort to get it right, as did the Judge. ACS cannot sandbag an issue and then after the trial come
in and say "Gotcha!" Waiver is the only fair result to the parties, the judicial system, the judge,
the jury, and all involved. See Confederated Tribes of Siletz Indians of Or., supra.
ACS was defended at trial by three law firms: Vorys, Sater, Seymour & Pease, LLP, (a
thzee _hundred__plus lawyer firm _predom_inately in Columbus), Paul Hastings, LLP, (an
international law firm of well over a thousand lawyers), and Harris & Mazza, LLP (a trial law
firm local to Columbus, Ohio). In short, ACS was defended at trial by some of the best and
brightest and most experienced lawyers. If ACS chose not to object at trial on any particular
35
point, constitutional or not, it was not an accident. Bringing in new counsel for an appeal or
obtaining arnici for support does not revive objections that have been knowingly and intelligently
waived. As such, the constitutional issues ACS now alleges as error in Proposition of Law Nos.
1 and 2 were clearly and unequivocally waived.
III. ACS PRESENTED NO CREDIBLE EVIDENCE TO SUPPORT ITS CLAIMS OFTRADE SECRET MISAPPROPRIATION
ACS repeatedly claims it had a basis to file the lawsuit: "There has never been any
serious consideration that ACS's claims were baseless or frivolous." (ACS Brief at 1; see also id.
at 3 ("ACS's claims, presented over the course of 14 Trial days, were strong enough that the trial
court denied Appellees' Motion for a directed verdict ...."); id. at 20 ("ACS then presented
substantial evidence in support of its claims over the course of 14 trial days for its case-in-
chief."); id. at 21 ("Appellees have never contended that ACS's claims were objectively baseless
or lacked probable cause:'); id. at 30 ("Appellees made no attempt to prove that ACS's claims
were objectively baseless or lacked probable cause.")). These statements are completely false.
The plain and simple fact is that ACS had absolutely no basis to bring the lawsuit and had
no credible evidence in support of its claims. First, however, it must be noted that the jury
decided this issue. The jury specifically found that ACS brought its trade secret
misappropriation claim in bad faith. The jury answered the following:
e. In response to the question of whether or riot the plaintiff's claim of trade
secret misappropriation was pursued in bad faith by the plaintiff we find as follows:
X__ _ YES_-_plaintiff _pursued its claim in bad faith
-OR-
NO - plaintiff did not pursue its claim in badfaith
36
(Supp.471 at 480). The trade secret misappropriation instruction defined bad faith as requiring a
finding "that Plaintiffs claim lacked merit and that Plaintiff brought the claim despite knowing
that the claim lacked merit." (Tr.5776, Supp.1846). The jury thus found that ACS brought its
lawsuit knowing that its claims were meritless.
ACS appealed this finding by the jury to the court of appeals. The court of appeals
specifically affirmed the finding. ACS has not appealed the bad faith finding to this Court.'
ACS is therefore barred from arguing its claims were credible. In any case, a brief review of the
evidence demonstrates that ACS had no credible evidence to support its claims.
In Ohio, trade secret misappropriation is a statutory tort. See R.C. 1333.61 et seq
(App.127). ACS only needed to prove three simple elements to prevail on this tort: (1) that ACS
owns a trade secret; (2) that the Defendants misappropriated that trade secret by improper means;
and (3) that ACS suffered damages proximately caused by the Defendants' wrongful acts.
When Drs. Blower and Myatt worked at CAS they worked on a software program called
"Pathfinder." Mr. Johnson had some peripheral involvement with it. ACS's theory was that
after the three of them left ACS, they used trade secrets from Pathfinder to develop the
Leadscope software product and to obtain the patent. (See ACS Compl., Supp.49).
However, one thing that was made absolutely clear at trial was that the only "trade
secret" in Pathfinder was its source code. CAS had voluntarily made everything else about
Pathfinder public by over twenty customer demonstrations without non-disclosure agreements,
multiple articles and public presentations at international scientific conferences-each of which
4 ACS included a single-sentence footnote in its brief stating that "ACS disputes, as a matter oflaw, that it can be found to have brought its claim in `bad faith' ...:' (ACS Br. at 23 n. 8.)ACS did not include any substantive discussion of this issue and ACS's Memorandum InSupport Of Jurisdiction did not in any way even remotely appeal the bad faith finding. As such,the Court should ignore ACS's attempt to bootstrap the bad faith issue into this appeal.
37
was fully vetted and authorized by CAS in advance, and each of which fully disclosed all of
Pathfinder (except its source code) to the world. (Tr.528-30, Supp.1492-94; Tr.2555-74,
Supp.1549-68; Tr.2583-2612, Supp.1569-98; D14, Supp.941; D15, Supp.947; D17, Supp.970).
So the only real question at trial was "did the Defendants take Pathfinder source code and use it
in the source code for Leadscope?"
The primary factual witness called by ACS was Robert Massie. Just prior to filing the
lawsuit Mr. Massie wrote to the Governor of Ohio and stated: "There are questions about what
the CAS researchers did or did not remove from CAS in terms of code, work product, plans,
etc." (D30, Supp.1027). Shortly thereafter, ACS filed the lawsuit accusing the three scientists of
misappropriation of trade secrets. Based on Mr. Massie's statements to the Governor of Ohio,
ACS was apparently going to prove this "misappropriation" by proving that the three scientists
removed "code, work product or plans" relating to Pathfinder from CAS. Yet Mr. Massie
testified at trial that he had no evidence that the Individual Defendants had taken anything from
CAS:
Q. Do you have any knowledge of any of these three individuals actually takingany tangible item belonging to Chemical Abstracts or the ACS when they left
their employment?A. No, sir, I don't.
(Tr.248, Supp.1476). Amazingly, Mr. Massie affirmed that the Individual Defendants had not
taken the source code while at the same time testifying that "the entire problem" was about "the
source code"-"who created this product "(Tr.381, Supp.1480).
Fxpert _testixnonv ftom both sidesconfirmed that the Leadscope product did not contain
any source code from ACS. ACS asked only one expert, Dr. Sudhakar Yalamanchili, a computer
expert from the University of Georgia, to compare the Leadscope source code with the
38
Pathfinder source code. Dr. Yalamanchili did the comparison and was asked whether he found
any evidence of copying:
Q. Were you able to form an opinion to a reasonable degree of scientific certaintyas to whether or not any source code was copied verbatim from PathFinder and
used in Leadscope?A. I did not find any.
(Tr.1696-97, Supp.1518-19). Mr. Yalamanchili then testified that he had no evidence that the
Defendants had misappropriated the source code:
Q. Do you have any evidence that any source code in Leadscope was obtained bystarting with source code from PathFinder and editing the PathFinder source code
to obtain the Leadscope source code?A. No.
(Tr.1698, Supp.1520).
Defendants' expert witness, Dr. Martin Rinard, PhD, a computer expert from M.I.T.,
testified he "looked at every line of source code and both source code bases," (Tr.4011,
Supp.1716), but found no evidence of copying:
Q. Based on your examination of the source code, do you have an opinion to areasonable degree of scientific certainty as to whether or not the Leadscope sourcecode was copied from the PathFinder source code?
A. Yes.Q. What is your opinion?A. It wasn't copied.Q. And based on your analysis and your background, do you have an opinion to areasonable degree of scientific certainty as to whether or not the Leadscope sourcecode and the PathFinder source code share a common origin?
A. I have an opinion.Q. And what is your opinion?A. They don't.
^ld ^ Dr,R:nard+her explai*!edat lengththe_reasons_for his opinion. All of the evidence at trial,
therefore, was that Drs. Myatt and Blower and Mr. Johnson did not use PathFinder's source code
in Leadscope. This evidence was undisputed.
39
The jury specifically found that ACS brought its claim of misappropriation in bad faith,
which required it to find that "Plaintiff's claim lacked merit" In denying ACS's post trial
motions for relief from the judgment, the trial judge in his 73-page opinion specifically held:
The Court finds it properly instructed the jury on the issue of bad faith andsufficient evidence was presented from which reasonable minds could find thatPlaintiff's trade secret misappropriation claim lacked merit, that Plaintiff broughtthe claim despite knowing it had no merit, and that Plaintiff pursued the claimvexatiously, wantonly or for oppressive reasons. A few examples of suchevidence include testimony about: 1.) the disclosure of the PathFinder features in1996; 2.) Defendants' multiple presentations of its Leadscope technology to thecommunity, including Plaintiff's representatives; 3.) both sides' expert testimonyregarding the source codes of PathFinder and the Leadscope products; 4.) thetiming of the allegations relative to Leadscope's financing needs; 5.) Plaintiff'sconduct related to this litigation, including the inclusion of allegations ofviolations of a criminal statute and the dismissal of the conversion claim; 6.) theallegations being based on Massie's "conjectures;" and 7.) testimony fromPlaintiff's representatives that Massie took the litigation personally and was"avid" about the allegations. The Court is also not persuaded by Plaintiff'sargument that the denial of a defensive motion seeking summary judgment ormotion for a directed verdict automatically precludes a finding of bad faith on thepart of the plaintiff. In light of the foregoing, the Court finds Plaintiffs request fora JNOV with respect to the jury's finding of bad faith is not well taken.
(App.53 at 113).
Given the testimony of its only expert who looked at the source code, the trial court's
clear explanation above, and the jury's finding that ACS's claim was without merit, for ACS to
argue to this Court that "there has never been any serious consideration that ACS' claims were
baseless or frivolous" is nothing short of preposterous.
IV. ACS WAIVED ANY CLAIM THAT THE MAY 1, 2002 ALL STAFF MEMO ISSUBJECT TO AN ABSOLUTE PRIVILEGE
A_CS_spe_n_ds manv pages arguing that its May 1, 2002 All Staff Memo to approximately
nineteen hundred employees should be subject to an absolute privilege. But at the trial court,
40
ACS never asked that the All Staff Memo be accorded an absolute privilege.5 Rather, ACS only
argued that Ohio's well established common-interest qualified privilege should be applied.
The controlling precedent as to the common-interest privilege is this Court's decision in
Hahn v. Kotten (1975), 43 Ohio St.2d 237. In Hahn, this Court held:
A qualified or conditionally privileged communication is one made in good faithon any subject matter in which the person communicating has an interest, or inreference to which he has a right or duty, if made to a person having acorresponding interest or duty on a privileged occasion and in a manner and undercircumstances fairly warranted by the occasion and duty, right or interest. The
essential elements thereof are good faith, an interest to be upheld, a statementlimited in its scope to this purpose, a proper occasion, and publication in a
proper manner and to proper parties only.
(Emphasis sic.) Id. at 244. Since Hahn, courts throughout Ohio have applied the qualified
privilege to conununications from employer to employee. Fawcett v. G. C. Murphy & Co. (1976),
46 Ohio St.2d 245. For example, in Blatnik v. Dennison (2002), 148 Ohio App.3d 494, a jury
found the plaintiff was defamed by his former employer and held:
In the instant matter, the trial court found that the statements made by appellantsduring the communication meetings with the specialty tape division employees
were defamatory per se. Despite this determination, appellants invoked thedefense of qualified privilege. Under the qualified privilege doctrine, adefamation action is barred when the communication is made in good faith on amatter of common interest between an employer and an employee conceming the
conduct of a former employee.
Id. at 507.
ACS repeatedly-and successfully-argued for the trial court to apply the qualified
privilege in Hahn to the All Staff Memo. During arguments on ACS's Rule 50 motions, counsel
for ACS advised the Court of the applicable privilege:
5 ACS filed a motion for sunnnary judgment claiming absolute immunity for four specificstatements. Those four did not include the All Staff Memo. (See Supp.1426). The trial courtdenied the motion as to the four statements, and ACS never argued at trial for an absoluteprivilege for the All Staff Memo. The trial court therefore never addressed this issue at trial.
41
"[T]he applicable qualified privilege is set forth at page four of our bench memofrom the Hahn case, 43 Ohio State 2d at 246."
(Tr.5404, Supp.1808). Thereafter ACS's counsel advised the Court that this qualified privilege
applies to the All Staff Memo:
The May 1, 2002 memo that was sent to CAS staff also falls within this qualifiedprivilege doctrine, we believe. That is clearly communication by someone havingan interest. That is the CAS internal communications department to others withinCAS about something that's going to happen to CAS or might happen, they mightget calls from the media, and they are told what they should say, which is nothing,you can't speak on behalf of CAS. We filed this lawsuit, and we want you toknow about that. That's clearly something that's within the business interests of
the CAS communications department.
(Id.)
In addition, ACS submitted a proposed jury instruction for a qualified privilege that again
cited to Hahn v. Kotten. (See Supp.82 at 178-88). Defendants responded by arguing that the
qualified privilege in Hahn was inapplicable to the All Staff Memo because "[t]he statements
that are made, exceeds the proper scope for which they are trying to attach to this memo :"
(Tr.5412, Supp.1811). Nonetheless, the trial court granted ACS's request and gave the exact
jury instruction ACS requested. (Tr.5872-74, Supp.1848-50).
The jury was therefore instructed that, to find defamation based on the All Staff Memo, it
had to find by clear and convincing evidence that ACS's statements were false and that ACS
published them with actual malice. The court defined "actual malice" as follows:
"Actual malice" occurs when the Plaintiff makes a false statement either withknowledge that it is false or with reckless disregard of whether it is false or not.
Reckless Disregard.
"Reckless disregard" means that the Plaintiff acted while actually aware of theprobable falsity of the statement(s), or the Plaintiff entertained serious doubts asto the truth of the statement(s). The Plaintiffs failure to investigate may beconsidered evidence that the Plaintiff acted with reckless disregard to thestatement's truth or falsity, but only if you find from the facts and circumstancesthat the Plaintiff has serious doubts about the truth of the statement(s).
42
(Tr.5874-75, Supp.1850-51). Based on the instruction ACS specifically requested, the jury
found ACS defamed the Defendants in the All Staff Memo.
It was only in ACS's April 24, 2008 JNOV Motion, that ACS for the very first time
claimed the All Staff Memo was subject to an absolute privilege. (Supp.488 at 504-06).
Because ACS did not assert its claim that the All Staff Memo was subject to an absolute
privilege until its JNOV Motion, the trial court properly concluded that ACS has waived this
claim. (App.53 at 96). ACS did not appeal the trial court's waiver decision to the court of
appeals. Accordingly, the trial court's October 24, 2008 judgment that ACS waived any right to
claim absolute privilege for the All Staff Memo is final and binding.
V. ACS'S DEFAMATORY STATEMENTS INJURED DRS. BLOWER AND MYATT
AND MR. JOHNSON
A. Introduction
This Court should absolutely reject the attempts by ACS and certain of the amici to
minimize the defamatory statements that publicly and professionally accused the individual
defendants of stealing trade secrets from their employer. The jury (as well as the trial court and
the court of appeals) rejected ACS's attempts to undermine the severity of its statements. Yet in
its brief, ACS again spins them as being "utterly innocuous," (ACS Br. at 1), stating that "in all
of reported defamation law, it is difficult to find two statements less defamatory than these" (id.
at 7), and that "ACS is not aware of any case in which it has ever been claimed that such a
statement was defamatory, so it is difficult finding precedent holding that it is not "(Id. at 32;
see also OhioStateBar Assoc. Br. at 2). The Ohio State Bar Association further characterizes
the statements as "a minor schoolyard tussle compared to the all-consuming war of the Enron
bankruptcy," "routine statements," and "innocuous statements: '(OSBA Br. at 22-23.)
43
The hidividual Defendants take great umbrage at these statements. These three scientists
studied for many years to obtain their advanced professional degrees. They honorably practiced
their professions for many years and wanted to continue doing so. It is insulting and offensive
for ACS and the amici to whitewash the words that trashed their reputations and careers calling
them victims of a "schoolyard tussle :' To compare them to Enron executives borders on the
unprofessional. The court of appeals had no trouble finding the jury could fairly conclude that
ACS's statements "unambiguously accused co-defendants of criminal behavior and are libelous
per se :" (App.4 at 28-29, 9[58.)
In this case on March 26, 2008, the second full day of jury deliberations, the jury came
back with a question:
Question #2
Are we allowed to require a party to publish an apology, or have thechoice of publishing an apology as opposed to a certain % of monetary
damages?
(Tr.5920, Supp.1856). It appears ACS still does not understand what this trial was all about, and
ACS still does not hear what the jury had to say.
B. ACS's Statements Forever Tarnished The Reputations Of Drs. Blower And
Myatt And Mr. Johnson And Damaged Their Careers And Lives
ACS argues in its fourth proposition of law that its defamatory statements were
innocuous and did not cause any harm to the founders. This is patently incorrect.
The accusation in the All Staff Memo is similar to that in Blatnik v. Dennison (2002), 148
Ohio App.3d 494. There an employer falsely announced to its employees that a former factory
supervisor sexually harassed a female employee, and the former supervisor received a verdict of
$600,000. The court of appeals affirmed, holding:
One who is rightfully or wrongfully accused of such activities can essentially saygood-bye to their career. In either event they have become damaged goods in the
44
workplace. That is precisely why the law is clear, that, if you show recklessdisregard for the truth, you are liable to the person harmed by your reckless
conduct.
(Id. at 507.) Like Mr. Blatnik, who said "good-bye" to his career in the factory, Dr. Blower, Dr.
Myatt, and Mr. Johnson also said "good-bye" to their careers as chemists and scientists. They
are now "damaged goods" to their professional colleagues and potential employers.
The three founders introduced voluminous evidence that ACS's statements tarnished their
reputations. Dr. Blower testified that he suffered "humiliation" and "mental distress" as a result
of ACS's false accusations, which "damaged [his] reputation." (Tr.3882, Supp.1661). Mr.
Johnson similarly testified that ACS's statements in Business First "create doubt about my
character, my honesty and integrity," and evidence showed that ACS's statements "in the local
media" "affected his reputation." (Tr.3286-87, Supp.1664-65). Dr. Myatt also testified that
having "such a prestigious organization level these allegations against me is very damaging."
(Tr.2903, Supp.1637). The jury was well within its discretion to award general damages for the
hann to the founders' reputations in amounts that fully support the four defamation verdicts.
Leadscope was founded by the three scientists, but their ownership was reduced to 1.48%
each as of 2005. (Tr.4309, Supp.1737; D1050, Supp.1423). The three founders also presented
substantial evidence of their economic damages through one of Ohio's most experienced
economists, Dr. Harvey Rosen. Dr. Rosen testified to the lost earning capacity of $1,073,672 for
Dr. Blower, $2,158,000 for Dr. Myatt, and $2,630,000 for Mr. Johnson. (Tr.4625-26,
Supp.1751-52). Dr. Rosen furthermore testified that lost earning capacity can be caused by the
"stigma effect" of defamation, including "rnmors" and "allegations" of wrongdoing. (Tr.4592-
93, Supp.1748). This stigma effect was the precise result of ACS's defamatory statements, and
the trial testimony made it perfectly clear that Defendants were specifically addressing the harm
caused by ACS's defamatory statements. (Tr.3218, Supp.1654 ("Q. And you are complaining
45
about comments made by ACS's counsel in response to Business First's questions, correct? A.
Yes."); Tr.2763, Supp.1620 ("Q. `Who sought and received a patent for technology
indistinguishable from a project on which they worked while employees of the Society's
Chemical Abstracts Service in the mid-90's.' Is that statement accurate? A. No."); Tr.2903,
Supp.1637 (stating that ACS's status as an otherwise "very prestigious society" in the individual
Defendants' field of work compounded the harm caused by its accusations)).
For ACS to try to tum a blind eye to the harm it has caused-and that it intended to cause
-through its "fast and furious publicity" is yet another layer of insult to add to the Defendants'
already substantial injuries. The jury's assessments of damages were factually proper and legally
just and should absolutely be affirmed in their entirety.
CONCLUSION
Over ten years ago, ACS felt threatened by the competition it saw in three scientists who
used to work at CAS and the small company they started. Accordingly, ACS formed an "action
plan" to drive out the competition. Without any factual basis at all, ACS circulated false rumors
about these three scientists, disparaged them, filed malicious litigation against them, and finally
defamed them. The plan worked. Drs. Myatt and Blower and Mr. Johnson lost their reputations,
their jobs, and the ability to practice their professions. For all intents and purposes, their careers
as respected scientists were ended.
After hearing all the witnesses for eight weeks, a jury in Franklin County returned
verdicts exonerating these three scientists and their company from all allegations of wrongdoing
and awarding each of them money damages. The trial judge who presided over the years of this
lawsuit and the eight weeks of trial in a 73-page opinion confirmed the actions of the jury and
denied all post-trial motions of ACS. A unanimous Franklin County Court of Appeals, in a 45-
46
page decision written by the Hon. Peggy Bryant, affirmed this judgment in all respects. It is
respectfully requested that the Ohio Supreme Court now do the same.
Alan L. Briggs (0019 .(COUNSEL OF RECORD)Aneca E. Lasley (0072366)Christopher F. Haas (0079293)Squire, Sanders & Dempsey (US) LLP2000 Huntington Center41 South High StreetColumbus, Ohio 43215(614) 365-2700 (Telephone)(614) 365-2499 (Facsimile)[email protected]
47
Pierre H. Bergeron (0071402)Colter Paulson (0081903)Squire, Sanders & Dempsey (US) LLP221 East Fourth Street, Suite 2900Cincinnati, Ohio 45202(513) 361-1200 (Telephone)(513) 361-1210 (Facsimile)
COUNSEL FOR APPELLEES, PAUL E.BLOWER, JR., WAYNE P. JOHNSON,AND GLENN J. MYATT
CERTIFICATE OF SERVICE
I certify that a copy of this Merit Brief and Appendix of Appellees Glenn J. Myatt,
Wayne P. Johnson, and Paul E. Blower, Jr. was sent by personal service to counsel for appellant,
Michael G. Long, Vorys, Sater, Seymour and Pease LLP, 52 E. Gay Street, Columbus, Ohio
43216-1088 this 19th day of April, 2011.
1.4- ^,
Aneca E. Lasley
48
IN THE SUPREME COURT OF OHIO
The American Chemical Society,
Appellant,
V.
Leadscope, Inc. et al.,
Appellees.
ol ^F4Ly --
U 3 2U10
A.E.L.
On Appeal from theFranklin County Court
of Appeals, TenthAppellate District
Court of AppealsCase No. O8AP-1026
NOTICE OF APPEAL OF APPELLANTTHE AMERICAN CHEMICAL SOCIETY
Michael G. Long (0011079) (COUNSEL OF RECORD)
Vorys, Sater, Seymour and Pease LLP
52 East Gay StreetColumbus, Ohio 43216-1008(614) 464-6297 (telephone)(614) 719-4829 ( facsimile)[email protected]
COUNSEL FOR APPELLANT,THE AMERICAN CHEMICAL SOCIETY
Alan L. Briggs (0019247) (COUNSEL OF RECORD)
Squire, Sanders & Dempsey L.L.P.
1300 Huntington Center41 South High StreetColumbus, Ohio 43215(614) 365-2700 (telephone)(614) 365-2499 ( facsimile)[email protected]
COUNSEL FOR APPELLEES, LEADSCOPE, INC.,PAUL E. BLOWER, JR., WAYNE P. JOHNSON,AND GLENN J. MYATT
App. 0001
Notice of Aooeal of Anvellant The American Chemical Societv
Appellant The American Chemical Society hereby gives notice of appeal to the Supreme
Court of Ohio from the judgment of the Franklin County Court of Appeals, Tenth Appellate
District, entered in Court of Appeals case No. 08AP-1026 on June 15, 2010.
This case raises two substantial constitutional questions and is one of public or great
general interest.
Respectfully submitted,Michael G. Long, Counsel of Record
Michael on^^^^I^r'^^
T T T
COUNSEL FOR APPELLANT,THE AMERICAN CHEMICAL SOCIETY
Certificate of Service
I certify that a copy of this Notice of Appeal was sent by ordinary U.S. mail to counsel
for appellees, Alan L. Briggs, Squire, Sanders & Dempsey L.L.P., 1300 Huntington Center, 41
South High Street, Columbus, Ohio 43215 on July 30, 2010.
Michael G. ong
COUNSEL FOR APPELLANT,THE AMERICAN CHEMICAL SOCIETY
App.0002
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
The Amedcan Chemiaal Society,
PfaintHlrAppellantlCross-Appellee,
V.
Leadscope, lna et al.,
Defendants-AppelteesfCross-Appellanta
':n rr?'J;;•P:A!
U^l.:?iirQ
l",u: JIJti 15 PH 2: 36
CLERK OF COURTS
No. oBAt'-1026(C.P.C. No. 02GUC-07'7663)
(REGUEAR CALENDAR)
.nJDGMENT ENTRY
For the reasona stated in the decision of this court rendered hen3in on
June 16, 2010, having denied dafendants' mo4fon for reconsideration, and having
overruled plaintifRs six assignments of error, rendering moot defendanYs single
assignment of error, it is the judgment and order of this Court that the judgment of the
Franklin County Court of Ccmmon Plias Is afBrrned. Costs assessed to Plaintfff.
BRYANT, J., TYACK, P.J., & FRENCH, J.
App.0003
iCite as Am. Chnn. Soc. v. Leadscope, 2010-OAlo-2925.)
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
The American Chemical Society,
Plaintiff-AppeilantlCross-Appeiiee,
No. 08AP-1026
V . (C.P.C. No. 02CVC-07-7853)
Leadscope, Inc. et al., (REGULAR CALENDAR)
Defendants-Appeiiees/Cross-Appellants.
D E C I S i O N
Rendered on June 15, 2010
Vorys, Sater, Seymour and Pease LLP, Michael G. Long andKimberly Weber Herlihy, Jenner & Block LLP, David A.Handzo, David W. DeBruin, Matthew S. Hellman andNicholas O. Stephanopoulos, pro hac vice, for The AmericanChemical Society.
Squire, Sanders & Dempsey, L.L.P., Pierre H. Bergeron,Alan L. Briggs, Keith Shumate, Aneca E. Lasfey, Aaron T.Brogdon, Kristen M. Blankley and Christopher F. Haas, forLeadscope, Inc.
APPEAL from the Franklin County Court of Common Pleas.
BRYANT, J.
^g! }-- -Plaintiff-apoellant/crossappei^ The American Chemical Society ("ACS"),
appeals from a judgment, pursuant to jury verdict, of the Franklin County Court of
App. 0004
No. OSAP-10262
Common Pleas in favor of defendants-appellees/cross-appeilants, Leadscope, Inc.,
Paul E. Blower, Jr., Wayne P. Johnson, and Glenn J, Myatt (collectively, "defendants").
Because the trial court did not err (1) in denying ACS's motion for judgment
notwithstanding the jurys verdict finding ACS liable to Leadscope, Blower, Johnson and
Myatt, on their counterclaims for unfair competition, defamation, and tordous interference
with business relations, (2) In not reducing the jury's award of compensatory and punitive
damages, and (3) in awarding attomey fees, we affirm.
1. Procedural History
{12} The civil action subject of this appeal arises from an intellectual property
dispute between ACS and three of its former employees, Blower, Johnson, and Myatt
(cofiectivefy, "individual defendants"). The individual defendants left ACS in 1997 to start
their own business venture, which eventually became Leadscope, Inc., a provider of
specialized research software.
{13} ACS is a non-profit organization that provides information services to
chemists, chemical engineers, and related professions. ACS's largest division, the
Chemical Abstracts Service ("Chemical Abstracts"), accounts for 60 percent of ACS's
gross revenue and Is based in Columbus, Ohio. Robert Massie is president of Chemical
Abstracts and reports to the executive director of ACS, who operates from Washington,
D.C.
{14} Broadly described, Chemical Abstracts provides a service afiowing
scientists and researchers to access and research databases of chemical compounds
and chemical reactions. During their employment with ACS, Blower and Myatt worked to
develop a software tool named "PathFinder" that was intended to improve the ability of
App.0005
No. 08AP-1026 3
researchers to access and organize chemical information available in ACS's databases.
Johnson did not participate directly in creating the ACS PathFinder software, but late in
the project he became involved in an effort that typified the scope of the PathFinder
project: to pursue usability studies, marketing research, and investigation of possible
technical collaboration with related firms and hardware product. To that end, Johnson
cooperated with the electronics firm Toshiba to explore the possibility of adapting
PathFinder to Toshiba's new "tabiet" computer hardware.
{1[5} Chemical Abstracts suspended the PathFinder project in 1997, to the
disappointment of Blower and Myatt who felt the software product had untapped potential.
Blower, Myatt, and Johnson soon resigned from Chemical Abstracts with the express
intent of developing and marketing a software product that would provide the same
capabilities as PathFinder. In slightly less than two years, the individual defendants
created Leadscope and developed its software product; in 1999 they began public
presentations and publication of peer-reviewed articles unveiling and discussing the
software. ACS, which had not entireiy abandoned hope of someday commercializing its
comparable PathFinder product, continued to monitor Leadscope's efforts to market its
product. Because the Leadscope principals worked on comparable products at ACS,
Chemical Abstracts president Robert Massie personally expressed concem to his
colleagues that the individuai defendants may have appropriated some software code or
other intellectual property developed during their employment with ACS. ACS, however,
took no concrete action on Massie's concems until Leadscope received a patent for its
software on November 27, 2001.
App.0006
No. 08AP-1026 4
{16} Michael Dennis, whom the parties refer to as ACS's chief legal counsel,
contacted Leadscope by telephone in April 2002 to express his concerns about the
possible misappropriation of intellectual property from Chemical Abstracts. In particular,
he directed his comments to the software code and conceptual lines of development
Blower and Myatt created during their employment with ACS. Dennis followed up with a
fetter to Leadscope's chief financial officer, Michael Conley, to state ACS's demands and
to present Leadscope with a copy of a draft complaint that would be fifed if the parties
could not resolve the matter without litigation.
{17) In discussions that lasted approximately two weeks, ACS Initially
demanded a large cash payment and total ownership of the Leadscope patent. In ensuing
discussions, ACS also suggested arbitration proceedings where the similarity of
Leadscope's product to ACS's PathFinder software could be independently determined.
In response, Leadscope indicated throughout negotiations that it was prepared to
respond to ACS-initiated litigation with its own litigation based on various theories. The
discussions did not lead to agreement.
{¶8} ACS initially filed suit in the Federal District Court for the Southem District of
Ohio. Leadscope and the individual defendants moved to dismiss the complaint for lack of
diversity jurisdiction, prompting ACS to voluntarily dismiss the case and re-file it In the
Franklin County Court of Common Pleas. ACS's common pleas complaint included
claims for misappropriation of trade secrets, breach of employment agreements, unfair
competition, breach of fiduciary duty, conversion, and violation of implied license under
shop rights. Leadscope and the individual defendants responded to the complaint with
counterclaims for defamation, tortious interference with business relations, unfair
App. 0007
No. 08AP-10265
competition, violations of the Ohio Deceptive Practices Act, and violations of the Ohio
Pattem of Corrupt Activities statute.
{19} Litigation began with a lengthy stay of the underiying action, during which
Leadscope and the individuai defendants litigated with their own insurer to establish the
insurer's duty to advance defense costs in ACS's action against them and to provide
coverage should ACS prevail. Once the insurance issues were resolved, the underlying
litigation went through extensive motion practice during which many evidentiary issues
were resolved and the parties' ciaims were sifted and narrowed.
1110} After an eight-week jury trial, the jury retumed verdicts against ACS on its
remaining claims for breach of contract and misappropriation of trade secrets. The jury
retumed verdicts in favor of Leadscope, Biower, Johnson, and Myatt on their
counterclaims for defamation, tortious interference, and unfair competition, awarding
Leadscope and the individual defendants a total of $26.5 million in compensatory and
punifrve damages.
{111} The triai court overruled ACS's post-verdict motions for judgment
notwithstanding the verdict, for new trial, and for remittitur. Pursuant to motion, the trial
court then awarded Leadscope and the individual defendants their attomey fees and
costs of appro(imateiy $7.9 million.
Ii. Assignments of Error
1112) ACS assigns the following errors on appeal:
I. The trial court erred in failing to enter judgmentnotwit,ystanding the verdict,orin the_aitemative in failin^ toorder a new trial, on Defendants' counterclaim for
defamation.
App.0008
No. 08AP-1026
II. The trial court erred in failing to enter judgmentnotwithstanding the verdict, or in the aitemative in failing toorder a new trial, on Defendants' unfair competitioncounterclaim.
III. The trial court erred in failing to enter judgmentnotwithstanding the verdict, or in the aitematlve in failing toorder a new trial, on Defendants' tortious interferencecounterclaim.
IV. The trial court erred in failing to enter judgmentnotwithstanding the verdict, or in the aitemative in failing toorder a new trial or remittitur, with respect to the jury'scompensatory and punitive damages awards.
V. The triai court erred in awarding attomeys' fees toDefendants.
VI. The trial court erred in failing to order a new trial on allclaims.
6
{113} Leadscope and the individual defendants filed a conditlonai cross-appeal
and assign the following assignment of error on cross-appeal:
The trial court erred in its January 25, 2008 Decision andEntry Denying Plaintiff's November 15, 2007 Motion forSummary Judgment by holding that the following statementswere absolutely privileged: (1) a complaint ACS filed infederal court on May 1, 2002; (2) a letter ACS sent to theDefendants on April 15, 2002; with the attached (3) draftcomplaint prepared by ACS; and (4) statements made byACS during meetings between the parties in April 2002.
Ill. Pending Motion Addressing Notice of Appeal
{114} Before discussing the merits of the appeal, we first address a motion
Leadscope and the Individual defendants filed that asks us to reconsider and vacate our
order aiiowing ACS to amend its notice of appeal. We deny the motion.
{115} ACS initiated this appeal by filing on November 20, 2008 a notice of appeal
from the trial courCs October 21, 2008 judgment denying ACS's motion for judgment
App.0009
No. O8AP-10267
notwithstanding the verdict. Because Leadscope's motion for attomeys fees was stiil
pending before the trial court at that time, we lacked a final appealable order. We,
however, considered ACS's November 20, 2008 filing to be a premature notice of appeal
that, pursuant to App.R. 4(C), would become effective when the triai court rendered its
final appealable order in the case. The appeal remained on our docket under the present
case number.
{116} The trial court addressed defendants' request for fees and costs and
entered its final judgment on February 6, 2009. Without seeking leave from this court,
ACS on March 6, 2009 filed an amended notice, which included the trial court's final
judgment, under the same appellate case number. On April 29, 2009, ACS filed a motion
for leave to amend Its notice of appeal not only to reflect the March 6 amended notice but
to supplement the record with the transcripts and filings relating to the fee hearing and
decision. We granted ACS's motion on May 1, 2009. Leadscope responded with a motion
to vacate our May 1 order and to preclude our considering on appeal matters not
contained in the trial court's initial October 21, 2009 decision.
{117} In support of its motion, defendants argue ACS failed to perfect an appeal
from the trial court's February 6, 2009 final judgment, or at least from those aspects of the
February 6 judgment that do not incorporate determinations already expressed in the
October 21, 2008 judgment and prior orders of the court. Defendants reason that ACS's
initial, premature notice of appeal did not, and could not, name the subsequent final order
as the order being appealed. Defendants further point out the March 6 amended notice of
appeal was filed without seeking leave of court. Finally, although defendants
acknowledge ACS's subsequent motion seeking leave to amend, defendants note it was
App.0010
No.08AP-10268
filed more than 30 days after entry of the triai court's final judgment and is therefore out of
rule. With those observations, defendants assert that we lack jurisdiction to address the
new issues, principally attomey's fees and costs, resolved in the trial court's final
February 6, 2009 order, because no timely notice of appeal specifies the February 6
order as the order being appealed.
(118} Defendants essentiafiy articulate a multi-stage argument founded on four
independent procedural postulates. Initially, defendants argue a premature notice of
appeal under App.R.4(C) does not grant appellate jurisdiction over the trial court's
eventual final order but only over the issues resolved in the interlocutory order, or prior
orders subsumed in it, from which the appeai was prematurely taken. Secondly,
defendants assert that in order to invoke appellate jurisdiction over the eventual final
order, ACS was required to amend the premature notice of appeal under App.R. 3(F) to
specifically designate, as App.R. 4(D) requires, the final judgment as the order being
appealed. Thirdly, defendants contend ACS's amendment must be made within 30 days
of the final order or the jurisdictionai requirement of App.R. 4(A) is not met. Lastly,
defendants maintain not only that ACS needed to seek and obtain leave from this court to
amend ACS's notice of appeal, but that we lack the discreCGon to allow such amendment
unless leave first is sought. The first three premises are, at the least, debatable under
Ohio iaw, which is not settled on these questions. Our disagreement with the last-listed
premise is itself determinative.
{119} Some courts have applied a restrictive view on the requisites for amending
a notice of appeal. See State v. West (Jan. 19, 2001), 2d Dist. No. 2000CA56, 2001 WL
43110, at '3 (stating that "[p)ursuant to App.R. 3(F), the notice of appeal may be
App. 0011
No.08AP-1026 9
amended to include other orders or judgments subsequently rendered by the trial court in
the same proceeding;' but "the amendment must be made within thirty days after the
order or judgment invoived"); see also TJX Cos., Inc. v. Hall, 183 Ohio App.3d 236, 2009-
Ohio-3372 (holding the notice of appeal must specifically identify the lower court judgment
from which the appeal is taken); Rickard v. Tnrm6ull Twp. Zoning Bd., 11th Dist. No.
2008-A-0024, 2009-Ohio-2619 (noting an aftempt to add party via amended notice of
appeal must be struck as untimefy because "App.R. 3(F) does not allow for the relation
back of amendments" filed more than 30 days after order being appealed). This court on
occasion, but not always, has adopted the stricter view. See Mamum v. Colonial Ins. Co.
of Wisconsin, 10th Dist. No. 02AP-917, 2003-Ohio-4369 (holding an amended notice of
appeal filed more than 30 days after the order appealed from, in order to add a case
number, did not give the court jurisdiction to consider the issues in the added case
because the notice of appeal must state the case appealed from and be filed within 30
days).
{120} Other cases, however, take a more lenient view. See Natl. Mut. Ins. Co. v.
Papenhagen (1987), 30 Ohio St.3d 14 (holding a failure to file separate notices of appeal
for each of two cases consolidated before the trial court, even where local appellate rule
requires separate notices, is not a jurisdictional defect); Transamerica Ins. Co. v. Nolan
(1995), 72 Ohio St.3d 320, syllabus (conduding that, "[p]ursuant to App.R. 3(A), the only
jurisdictionai requirement for a valid appeal is the timeiy filing of a notice of appeal,"
Ieaving the court of appeals with discretion to determine whether sanctions, including
dismissal, are warranted when presented with other defects in the notice of appeal);
interstate Gas Supply, Inc. v. Calex Corp., 10th Dist. No. 04AP-980, 2006-Ohio-638
App. 0012
No.08AP-1026 10
(considering all assigned errors in an appeal even where the notice of appeal did not
mention a third-party defendant who was the object of part of the trial court's judgment); In
re Guardianship of Love (1969), 19 Ohio St.2d 111, 115 and Maritime Mfrs., Inc. v. Hi-
Skipper Marina (1982), 70 Ohio St.2d 257, 258-59 (both observing the rules of appellate
procedure should be construed liberally to protect the right of appeal and reach the merits
of the case).
{121} ACS's appeal ultimately does not require that we reconcile these dissonant
authorities. We need not consider whether we would have jurisdiction over the final order
in the absence of any amendment to the premature notice of appeal or whether we could
have allowed the amendment after 30 days had passed. Rather, the question is whether
we have discretion to allow ACS to amend its premature notice of appeal to include
issues raised in the triai court's final order when ACS's initiai attempt to amend the notice
of appeal was made within 30 days of the final order but without an express motion for
leave to amend.
{922} App.R. 3(F) does not explicitly require that a party seek and obtain leave of
court to amend a notice of appeal, but some courts have viewed the rule as "impiicitiy" so
mandating. See, e.g., Cox v. Cox (Dec. 7, 1994), 2d Dist. No. 14446; State v.
Southedand (Dec. 30, 1999), 12th Dist. No. CA99-01-013. Cf. Williams v. Global Constr.
Co. (1985), 26 Ohio App.3d 119. We disagree with Cox and Southerland on this point
because, in the absence of an express requirement under the rule, we have discretion to
accept or deny amendment of the notice of appeal within 30 days of the order appealed
from, with or without a motion seeking explicit leave to do so.
App.0013
No. 08AP-1026 11
{123} To curtail our discretion to allow an amended notice of appeal by implying,
outside of any express condition imposed under rule or statute, a mandatory requirement
that the appellant seek leave would not be consistent with the liberal construction of the
appellate rules Love and Maritime Mfrs., supra, prescribe. Moreover, under the
circumstances here, any denial of leave to amend arguably would constitute an abuse of
discretion, as ACS could have achieved the same end through the more cumbersome
route of timely filing a new and separate notice of appeal from the trial court's final order
and docketing it under a new appellate case number that necessarily would be
consolidated with the original notice of appeal.
{124} Our May 1, 2009 order granting ACS's motion to amend its notice of appeal
and supplement the record stated that the "March 6, 2009 Amended Notlce of Appeal is
the properly-docketed and operative notice of appeal in this case." The March 6 amended
notice of appeal was filed within 30 days of the trial court's final order and specifies that
judgment as the order subject of ACS's appeal. Because not only was the amended
notice of appeal timely filed, but the lack of a contemporaneous motion for leave to file the
amended notice does not impair our discretion to allow the amendment, we deny
defendants' motion for reconsideration.
IV. First, Second, Third and Fourth Assignments of Error-JudgmentNotwithstanding the Verdict
{125} ACS's first four assignments of error, which we address out of order for
ease of discussion, assert the trial court erred when it failed to grant ACS's motion for
judgmenC n-to-withs"rarrdirrg-me jury verd'ir:i finding-74CS^-liable--to-Leadscopa--and-the
individual defendants. In reviewing a decision denying a motion for judgment
App. 0014
No. 08AP-1026 12
notwithstanding the verdict, an appellate court applies the same test It applies in
reviewing a motion for a directed verdict. Texler v. D.O. Summers Cleaners & Shirt
Laundry Co. (1998), 81 Ohio St.3d 677, 679.
{126} When considering a motion for a directed verdict, a court must construe the
evidence most strongly in favor of the party against whom the motion is directed. Civ.R.
50(A). A motion for a directed verdict raises questions of law, not factual issues, because
it tests whether the evidence is legally sufficient to allow the case to be presented to the
jury for deliberatton. Id. at 679-80; Wagner v. Roche Laboratories (1996), 77 Ohio St.3d
116, 119. The court's disposition of the motion thus does not involve weighing the
evidence or the credibility of the witnesses. Texler at 679-80. The court must deny the
motion where any evidence of substantial probattve value favors the nonmoving party and
reasonable minds might reach different conclusions on that evidence. Id.; Strother v.
Hutchinson (1981), 67 Ohio St.2d 282, 284-85.
{127} Accordingly, when reviewing a denied motion for judgment notwithstanding
the verdict, we construe the evidence most strongly in favor of the party against whom the
motion is made, without weighing the evidence or addressing issues of credibility. Civ.R.
50(A); Faieta v. World Harvest Church, 10th Dist. No. 08AP-527, 2008-Ohio-6959, ¶7.
Our standard of review is markedly deferential to the fact-finding function of the jury at
trial. Sutphen Towers, Inc. v. PPG Industries, Inc., 10th Dist. No. 05AP-109, 2005-Ohio-
6207,¶38.
A. ACS's Second Assianment of Error - Unfair Comoetition
{128} ACS's second assignment of error asserts the trial court erred in failing to
enter judgment notwithstanding the verdict on Leadscope's unfair competition
App.0015
No. O8AP-102613
counterclaim. Leadscope asserted ACS both engaged in malicious litigation against
Leadscope and circulated false and disparaging statements about Leadscope and its
principals. The second aspect of the claim, conceming faise and disparaging statements,
is addressed In our discussion of Leadscope's defamation claims; the bad faith element
discussed in the context of the malicious litigation claims involves the same element of
bad faith that underpins our later discussion addressing the award of attomey's fees in
the case.
{129} Ohio recognizes malicious litigation as a basis for an unfair competition
claim. Water Mgt. Inc. v. Stayanchi (1984), 15 Ohio St.3d 83, 85; Henry Gehring Co. v.
McCue (1926), 23 Ohio App. 281, 283-84; Microsoft Corp. v. Action Software (N.D.Ohio
2001), 136 F.Supp.2d 735, 735-40. In response to Leadscope's claim, ACS initiaiiy cites
the Noerr-Pennington Doctrine. The doctrine provides that the First Amendment protects
the right to petition or file lawsuits for the purpose of Influencing the govemment unless
the adivity is "objectively baseless." Professional Real Estate Investors, Inc. v. Columbia
Pictures Ind., Inc. (1993), 508 U.S. 49, 56, 113 S.Ct. 1920, 1926. Relying on the Noerr-
Pennington Doctrine, ACS contends it cannot be liable on Leadscope's claims of
malicious fitigation unless ACS's civit action against Leadscope was "objectively
baseless." Ohio courts considering comparable maiicious litigation claims have not
applied the "objectively baseless" standard.
{130} Henry Gehring, the seminal Ohio case adopting malicious litigation as a
basis for the tort of unfair competition, explicitly applies a bad faith standard, concluding
"[tlhere are numerous cases of successful recoveries because of maiicious acts by way of
litigation in the courts, where it appears that the litigation was not founded upon good
App. 0016
No. 08AP-1026 14
faith, but was instituted with the Intent and purpose of harassing and injuring a rival."
Henry Gehring at 283. See also Harco Corp. v. Conpro Cos. (Oct. 29, 1986), 9th Dist. No.
1465 (simifarly suggesting, although the instruction was not specificaily reviewed on
appeal, that the standard is whether the allegedly maiicious litigation was undertaken in
bad faith).
{931} Consistent with Ohio law, we conclude the bad faith standard is better
suited to the nature of the malicious litigation claim than is an objectlvely baseless
standard. Bad faith better encompasses the elements of scope, context, timing, and intent
that may reveal the malicious character of the litigation than does the bare requirement
that at the time litigation commenced no possible combination of yet-to-be-disproved facts
could support the claims asserted. The trial court property instructed the jury that litigation
not founded in good faith, but brought for the purpose of harassing and injuring a rival
who was producing and selling the same commodities, could support Leadscope's unfair
competition claim.
{132} As to whether ACS in bad faith initiated litigation against Leadscope and the
individual defendants, the jury was presented with volumes of conflicting evidence about
the timeline and circumstances of ACS's approach to dealing with Leadscope's potentially
competing product. Much of the evidence supported Leadscope's claims that ACS's
unfair competition was rooted in its alleged desire to suppress, by any means necessary,
Leadscope as a new software competitor. To that end, Leadscope presented testimony
regarding the ill-will of Chemical Abstracts' president Massie toward the new company
and his former employees, as well as his direct and indirect actions to inhibit their
commercial potential.
App.0017
No. 06AP-102615
(133) Within that context, Leadscope's evidence, in part, emphasized the timing
of ACS's legal action. Testimony presented at triai established that ACS generally, and
Massie in particular, possessed sufficient information to be well aware that Leadscope's
delicate developmental position had it standing at the crossroads of refining its software
product and securing the financing necessary to commercially exploit a product ready to
market fully. In addition, Leadscope presented evidence describing the general tenor of
ACS's approach to dealing with Leadscope as a competitor in the chemical research
software field, including allegedly false or misleading statements and actions ACS senior
management took to impair Leadscope's reputation.
{134} Massie's approach, by his own testimony, included an "action plan" to
monitor Leadscope as soon as Leadscope announced its new product in 1999, and he
regularly discussed Leadscope with his senior management team. (Tr. 371, 396.)
According to Massie, in 2000 he spoke personally w@h Allen Richon, who as the then
president of Leadscope unequivocally assured Massie that "absolutely" no ACS-owned
intellectual property was in the Leadscope software. (Tr. 264.) Robert Swann, a former
ACS employee who worked as director of information technology for Chemical Abstracts
during the time relevant to the case, testified Massie had taken the entire situation "very
personally," so that when Leadscope obtained its patent, Massie became even more
intense about the situation. (Tr. 3751-52.) Swann recounted instances in which Massie
noted Leadscope soon would run out of money and would need to raise further venture
capital financing. (Tr. 3763.) Significantiy, Swann's testimony revealed that when Massie
inquired whether the Leadscope software infringed in any known way on ACS's
intellectual property, Swann could not say that it had. (Tr. 3749.)
App.0018
No. OBAP-1026 16
{135} In early February of 2002, before the litigation commenced, Massie ieamed
then Ohio Govemor Robert Taft intended to visit Leadscope to publicize the business
start-up as an Ohio high-tech success. In accord with his plan, Massie determined that,
based on his personal acquaintance with the govemor, he would dissuade the govemor
from giving the appearance of endorsing Leadscope through a personal visit. (Tr. 269-70,
3761.) Correspondence in the record indicates Massie actually sent an electronic mail
message to the Govemor's office to dissuade the visit. The message informed the
Govemor that some question existed as to the derivation of the Leadscope software
code. The message further questioned how the Govemor would be perceived if he
associated with a company that based its product on materials removed from ACS. (Def.
Ex. 30.) Massie, consistent with his message to the Govemor, contacted Spotfire, a
software competitor, to marshal opposition to Leadscope's commercializing its product.
(Tr: 3729-30.) According to both Swann and Chemical Abstracts' vice-president of
finance Peter Roche, Massie at about the same time indicated Blower was risking his
ACS pension due to his involvement with Leadscope. (Tr. 2301-02, 3762.)
{136} Leadscope's chief financial officer, Conley, testified that when Michael
Dennis contacted Leadscope on behalf of ACS on April 15, 2002, Dennis threatened both
civil and criminal complaints and "fast and furious publicity" if Leadscope refused to meet
with ACS immediately. (Tr. 4209-10, 4235.) Leadscope had planned an April 19, 2002
financing action to raise more capital, and the first response letter from Leadscope, dated
April 16, 2002, mentioned the plan. (Def. Ex. 41.) Noting the adamant spirit with which
ACS's proposal was made, Conley testified that ACS, in its initial written proposal to
Leadscope, demanded ownership of Leadscope's patent, $1 million in cash payment, and
App. 0019
No. 08AP-102617
Leadscope's stopping all sales efforts. (Tr. 4217-18.) ACS did not reduce its demands
during the brief period before it filed its first complaint in federal court. (Tr. 4218.)
{137} Fulfilling Dennis's threat during negotiations, ACS commenced litigation
with a quickly-abandoned complaint filed in federal court that included allegations of
breach-of-duty claims under R.C. 1333.81, which carry criminal penalties pursuant to R.C.
1333.99. After Leadscope and the individual defendants struggled to establish their
insurer's duty to advance defense costs (R. 248-51), ACS dismissed that part of its
complaint upon which coverage initiaity was predicated. (R. 371.) Leadscope asked the
jury to Infer ACS did so in order to again attempt to deprive Leadscope and the individual
defendants of defense costs through their insurer.
(138} The jury, as trier of fact, was entitled to draw permissible inferences from
the chronology, course, and scope of litigation ACS undertook and to conclude ACS's civil
action constituted malicious litigation undertaken in bad faith, regardless of whether
Leadscope fell short of proving ACS knew at the time it filed its complaint that it could
never substantiate its Intellectual property claims in any way.
{1[39} ACS also argues the verdict in favor of the individual defendants on the
unfair competition claim must be reversed because the individual defendants were
employees of Leadscope and could not be "competftors" in their individual capacities.
Initially, ACS's argument is inconsistent with ACS's position on its own claims against the
individual defendants. In those allegations, ACS stated "Blower, Johnson and Myatt have
used and continue to use ACS's confidential and proprietary information and trade
secrets to sustain Leadscope's business, to develop and offer competing products, and to
apply for patents." (ACS Amended Complaint, ¶43.) The trial court noted, and ACS does
App.0020
No. 08AP-102818
not dispute, that the three individuals are listed as inventors on the patent appiication for
the Leadscope software and as the applicants for the patent ultimately assigned to the
corporate Leadscope entity.
{140} As ACS's aiiegations tacitiy acknowledge, this is not a case in which the
individuais as shareholders improperly seek personal recovery for a wrong done to the
corporation. See, e.g., Adair v. Wozniak (1986), 23 Ohio St.3d 174. Rather, the
individuals in the present case were made defendants in ACS's lawsuit in their personal
capacfties and individually were the object of ACS's allegedly false and misleading
statements. They have seen their commercial and professional futures clouded, whether
they apply their efforts on behalf of Leadscope or another entity in the same field
competing with ACS. In the context of this case, the individual defendants have standing
as competitors of ACS to seek redress for unfair competition.
{141} With respect to the proximate causation of damages, Leadscope and the
individual defendants presented the jury with the extensive analysis of damages through
their expert, Rebekah Smith, who quantified Leadscope's projected lost profit and iost
business value at $36.6 million. Supplying in part the basis for her conclusions, the
individual defendants and Leadscope employees testified to the impact of ACS's
activities. For example, Myatt testified that although concems about Leadscope's iitigation
exposure never arose before ACS's actions against Leadscope, after Leadscope
customers were aware of ACS's lawsuit they tended to discuss the ramifications of the
lawsuit rather than the merits of the product itself. (Tr. 4760-63.) Leadscope's president,
Loftus Lucas, similarly testified that even though Leadscope iowered the price of its
product and made improvements after negative publicity from the iitigation, it nonetheless
App. 0021
No. O8AP-1026 19
failed to sell multf-year enterprise contracts (Tr. 4764), and the sales force did not meet its
goals. (Tr. 4728-29.) According to Lucas, Leadscope not only shrank from 39 to 13
employees, but was unable to take advantage of several merger or acquisition
opportunities. (Tr. 2850, 4739, 4746-47.) Lucas' testimony also idenbfied 12 customers by
name whose sales Leadscope lost because of the ongoing litigation and other ACS
activities.
{142} Conley also identified some of the financial ramifications, testifying not only
that the terms under which he eventually obtained financing for Leadscope were less
favorable because of the litigation and all that surrounded it, but that he could obtain only
equity financing rather than debt financing, causing the ownership percentage of the
existing investors and principals to shrink. (Tr. 4241, 4248.) Conley stated that, among
committed investors, he had ongoing contacts with Batteile Technology Ventures ("BTV"),
a venture capital vehicie; Columbus-based Battelle Memorial Institute, a world-renowned
private, nonprofit science and technology development firm, partially funded BTV. Conley
expected BTV to participate in the expanded financing as Leadscope ramped up for full
commercial activity. (Tr. 4191.) Corroborating Conley's testimony, Curtis Crocker, BTV's
managing partner, testified that his fund had continued interest in Leadscope and
performed due diligence on the company through the early months of 2002 in preparation
for a substantial investment. (Tr. 4463-90.)
{¶43} On March 22, 2002, Crocker sent an electronic mail message to Charles
Burdick, one of his contacts at Battelle Memorial Institute, describing his interest in
investing in Leadscope and asking about Leadscope's reputation in the technology and
science community. Burdick replied that Leadscope was very well considered in its field
App.0022
No. O8AP-1026 20
and had a good product. (Tr. 4497-4502.) Crocker anticipated closing on the financing
round for Leadscope by mid-April 2002. (Tr. 4518.) After a conversation during this time
frame with ACS's Michael Dennis, Crocker discemed that intellectual property issues
between Leadscope and ACS made Investment unwise, and he resolved to hold off until
Leadscope could assure him the issues were resoived. (Tr. 4530, 4542.) His doubts were
confirmed when Crocker read an article in a local newspaper announcing the litigation.
(Tr. 4531.)
{1144} ACS does not specificaiiy suggest any limitation in Ohio law, beyond the
required proximate causation, that constrained the Jury's ability to award damages arising
from unfair competition, once the jury determined that such unfair competition occurred.
Moreover, ACS never rebutted with specific projections and analyses the extensive
analysis Smith offered relating lost profits, lost sales, and the lost potential exit value from
merger or sale proceeds to the company and its principals arising from ACS's actions. Yet
on appeal, ACS attacks the amount of damages on the sole basis that they are merely
"specuiative." As a prediction of events that did not and could not occur, such projections
are inherently speculative, in the ordinary sense of the term. Such an acknowledgement,
however, does not mean they are insufficientiy reliable as a basis for damages.
Particuiariy in the absence of any comparably analyzed projections in rebuttal, the jury
had sufficient evidence upon which to base its conclusions on the amount of damages
arising from unfair competition.
(145) In summary, the trial court did not err in denying ACS's motion for judgment
notwithstanding the verdict on the unfair competition claim, and ACS's second
assignment of error is overruled.
App.0023
No. 08AP-1026 21
B. First Assicnment of Error - Defamation
{¶46} ACS's first assignment of error challenges the trial court's refusal to set
aside the jury verdict for Leadscope and the individual defendants on their defamation
claims. ACS argues that the trial court should have entered judgment notwithstanding the
verdict or, in the altemative, reduced pursuant to ACS's motion for remittltur the amount of
damages the jury awarded.
{147} The defamation claims in this case rest upon two relatively brief statements
made more or less contemporaneously with ACS's initiating the lawsuit against
Leadscope and the indMdual defendants; ACS officials made the first, while ACS's legal
counsel made the second. The first was a memorandum ACS sent to all its staff informing
employees that ACS filed a legal complaint against Leadscope and its founders "who
sought and received a patent for technology indistinguishable from a project on which
they worked while employees of the Society's Chemical Abstract Service in the mid-
1990s." The memorandum further advised all ACS employees to refrain from
communicating or commenting on the lawsuit, as it was ongoing. The record suggests the
memorandum would have reached as many as 1,900 ACS employees worldwide.
{148} The second statement was published in the May 10, 2002 edition of
Columbus' Business First newspaper, The article described the allegations in the
complaint and presented Leadscope's response, including both Myatt's statement that the
lawsuit was unfounded and a statement of Leadscope's counsel implying that the timing
of the lawsuit demonstrated its lack of underlying merit. Counsel for ACS provided the
foilowing quote, upon which the defamation claim rests for the article: "Our motivation in
App.0024
No. 08AP-102622
filing suit is to acquire back the protected information that they took from us." (Business
First, May 10, 2002, A7.)
(149) Defamation is the publication of a false statement "'made with some degree
of fault, reflecting injuriously on a person's reputatlon, or exposing a person to public
hatred, contempt, ridicuie, shame or disgrace, or affecting a person adversely in his or her
trade, business or profession.' " Jackson v. Columbus, 117 Ohio St.3d 328, 2008-Ohio-
1041, ¶9 (quoting A & B-Abell Elevator Co. v. Cotumbus/Cent. Ohio Bldg. & Constr.
Trades Council, 73 Ohio St.3d 1, 7, 1995-Ohio-66). Under Ohio common law, actionable
defamation falls into one of two categories: defamation per se or defamation per quod. In
order to be actionable per se, the allegedly defamatory statement must fit within one of
four classes: (1) the words import a charge of an indictable offense involving moral
turpitude or infamous punishment; (2) the words impute some offensive or contagious
disease calculated to deprive a person of society; (3) the words tend to injure a person in
his trade or occupation; and (4) the words tend to subject a person to public hatred,
ridicule, or contempt. Schoedler v. Motometer Gauge & Equip. Corp. (1938), 134 Ohio St.
78, 84; Bigelow v. Brumley (1941), 138 Ohio St. 574, 592. Defamation per se occurs if a
statement, on its face, is defamatory. Moore v. P.W. Pub. Co. (1965), 3 Ohio St.2d 183,
188-89; Becker v. Toulmin (1956), 165 Ohio St. 549, 556.
{150} On the other hand, a statement is defamatory per quod if it can reasonably
have two meanings, one innocent and one defamatory. Moore at 189; Becker at 556.
Therefore, when the words of a statement are not themselves, or per se, defamatory, but
they are susceptible to a defamatory meaning, then they are defamatory per quod. Moore
App.0025
No. 08AP-102623
at 188; Becker at 553-54. Whether an unambiguous statement constitutes defamation per
se is a question of law. Becker at 555.
{15l} When a statement is defamatory per se, a plaintiff "may maintain an action
for [defamation] and recover damages, without pleading or proving special damages."
Becker at 553. In other words, in cases of defamation per se, the law presumes the
existence of damages. Wampler v. Higgins, 93 Ohio St.3d 111, 127, fn. 8, 2001 -Ohio-
1293; Gosden v. Louis (1996), 116 Ohio App.3d 195, 208 (stating that "[a]t common law,
once a plaintiff proved that material was defamatory per se, he was entitled to recover
presumed damages," as "(plroof of the defamation itself established the existence of
some damages"). When, however, a statement is only defamatory per quod, a plaintiff
must plead and prove special damages. Becker at 557.
{1152} ACS first argues the above statements were not actionabie as a matter of
law because they were made "during and relevant to judicial proceedings" and thus are
"absolutely immune from civil suits for [defamation] " Willitzter v. McCloud (1983), 6 Ohio
St.3d 447, 448-49. ACS also asserts the statements were truthful and not actionable as a
matter of law.
{153} With respect to ACS's assertion the jury should not have considered either
the ACS intemal memorandum or statements in the newspaper article on the basis that
they were absolutely privileged, ACS is correct that under Ohio law "parties `'' are
absolutely immune from civil suits for defamatory remarks made during and relevant to
judicial proceedings." Willftzer at 448-49. This court examined the scope of such immunity
in Morrison v. Gugle (2001), 142 Ohio App.3d 244. To fall under the absolute privilege
refating to statements in connection with litigation, the statements must "be: (1) made in
App. 0026
No. 08AP-102624
the regular course of preparing for and conducting a proceeding that is contemplated in
good faith and under serious considerat(on; (2) perdnent to the release sought; and (3)
published only to those direcUy interested in the proceeding." Id. at 260.
(154) While none of the parties cites an Ohio case directly on point, and we have
found none, Leadscope and the individual defendants pinpoint several cases from other
states that have applied the distinction conceming pubiication to concemed employees
and publication to the entire workforce of an employer involved in litigation. See Hayes
Microcomputer Prod. v. Franza (2004), 268 Ga.App. 340 (concluding electronic mail sent
to all employees was not absolutely privileged because plaintiff failed to show how
communication to all employees with e-mail addresses, including foreign employees, was
pertinent information on the part of all addressees); Nutri-Metics lntemati., Inc. v.
Canfngton Labs, Inc. (C.A.9, 1992), U.S. App. Lexis 34226 at `23 (determining intemat
memorandum to all division managers was not privileged when some recipients had no
interest in the litigation).
{155} Ohio cases dealing with the issue of immunity principally address the
immunity of attomeys representing clients in iitigation, granting them absolute immunity
for statements in judicial proceedings before the court. See, e.g., Justice v. Mowery
(1980). 69 Ohio App.2d 75; Michaels v. Berliner (1997), 119 Ohio App.3d 82. Other cases
invoive communications between counsel and ciient or much more restricted distribution
lists. See Krakora v. Gold (Sept. 28, 1999), 7th Dist. No. 98CA141; Simmons v. Climaco
(1986), 30 Ohio App.3d 225. None of the Ohio cases, however, addresses the precise
issue conceming the breadth of publication for purposes of immunity.
App. 0027
No. 08AP-1026 25
{156} In the end, the relevant cases compel us to conclude the trial court properly
considered and assessed the scope and circumstances of the statements ACS or its
representatives distributed in the form of the memorandum and newspaper article when
the court determined ACS's immunity argument. The court's assessment led to the
inevitable conclusion that neither the intemal memorandum nor the Business First
statements were published to persons "directly interested" in the proceedings. Instead,
the intemal memorandum was addressed to all ACS employees, including those without
any interest In, impact on, or Involvement with the litigation and unlikely to develop any
connection with it in the future. The Business First statement, of coun.e, was available to
all readers of the article, meaning the general public. The trial court correctly concluded
neither statement was absolutely privileged.
{157) ACS next argues that the allegedly defamatory statements could not have
supported a defamation claim because they were true. ACS asserts the two statements
accurately and briefly identified ACS's pending legal claims and thus simply provided a
"accurate summary of the allegations' '' made in the lawsuit." Early v. The Toledo Blade
(1998), 130 Ohio App.3d 302, 329. The essence of the allegations in the intemal
memorandum and Business First article exceeds a mere statement that the parties
disputed ownership of the intellectual property incorporated in Leadscope's products.
Leadscope and Its principals alleged, and the jury accepted Leadscope's argument, that
the published statements branded the Leadscope principals as morally and legally
impeachable in their actions.
{158} While Leadscope also stresses that the jury rejected all of ACS's claims on
the underlying intellectual property dispute, such action alone does not dispose of the
App. 0028
No. 08AP-1026 26
defamation issue. Falsity as a question of factual veracity is distinct from the defamatory
nature of statements, which is a question of law. Gertz v. Robert Welch, Inc. (1974), 418
U.S. 323, 94 S.Ct. 2997; see also Thomas H. Maloney & Sons, Inc. v. E.W. Scripps Co.
(1974), 43 Ohio App.2d 105. Even so, Leadscope and the individual defendants urged
the jury to consider the published statements as accusing the individual defendants of
theft; if so taken, they unambiguously accused co-defendants of criminal behavior and
are libelous per se. Gosdon at 207. The evidence thus was sufficient to allow the jury to
condude the manner in which ACS characterized Leadscope's principals went beyond
the mere failure of ACS's intellectual property claim.
{159} ACS next chalienges the jury's conclusion that ACS acted with actual
malice. The trial court instructed the jury that both statements were subject to a qualified
privilege and thus were actionable only if made with actual malice, that is "with knowledge
that the statements are false or acting with reckless disregard as to their truth or falsity."
Jacobs v. Frank (1991), 60 Ohio St.3d 111, 116. Such reckless disregard can be
measured as "a high degree of awareness of probable falsity.* Garrison v. Louisiana
(1964), 379 U.S. 64, 74, 85 S.Ct. 209, 216. Altematively, it is publication when one "in fact
entertain(s] serious doubts as to the truth of his publication." St. Amant v. Thompson
(1968), 390 U.S. 727, 731, 88 S.Ct. 1323, 1325. In this context, however, actual malice
"may not be inferred from evidence of personal spite, ill will, or deliberate intent to injure,
as the defendant's motlves for publishing are irrelevant." Varanese v. Gall (1988), 35 Ohio
St.3d 78, 80. Moreover, the inquiry does not extend to information available to the parties
after publication; actual malice must be measured as of the time of publication of the
App. 0029
No. 08AF-1026 27
allegedly defamatory statement. Id. at 80. Actual malice must be proved by clear and
convincing evidence. A & B-Abel! Elevator Co. at 12.
{160} On appeal, the standard is a review of the evidence to determine "whether
a reasonable jury could find from a totality of the circumstances the existence of actual
malice with convincing clarity." Grau v. Kleinschmidt (1987), 31 Ohio St.3d 84, 91. In
applying that standard, we construe the evidence most strongly in favor of the appellee
and defer to the jury's credibility determination. Id. at 91. If reasonable minds can differ as
to the sufficiency of the evidence supporting actual malice, the appellate court should
affirm. Gray v. Allison Div., Gen. Motors Corp. (1977), 52 Ohio App.2d 348, 353-54.
{161) Here, the course of events leading up to litigation, and the alleged
defamatory statements released in connection with the beginning of that litigation, are
sufficient evidence upon which the jury could find by clear and convincing evidence that
ACS published the statements In the memorandum and the Business First articie with
actual malice. In the context of ACS's other activity, both published statements suggest
ACS's inferable intent to suppress a competitor by any means necessary. They thus both
lend substantial credence to contentions that the statements were made with reckless
disregard for their probable veracity and allow the jury to conclude the veracity of the
statements was irrelevant to ACS compared to the inferable purpose of harming
Leadscope's reputation and undermining its financing process.
{162} In addition to arguing the evidence did not support liability for defamation,
ACS asserts that, even if liability were found, the jury awarded excessive damages. Most
of the discussion with respect to monetary figures falls under ACS's fourth assignment of
error to be addressed below, but we here touch on the nature of damages under
App.0030
No. 08AP-102628
defamation law. The jury was instructed to compute damages on two theories: (1) special
damages for specific Injury, such as business injury that Includes lost profits or other
economic harm, and (2) general damages, as compensation for loss of reputation arising
from the defamatory statements.
(163) Leadscope presented detailed expert testimony at trial that computed its
economic loss from lost future saies profits as well as "exit value" from the potenfiai saie
of the new business. The individual defendants also presented their own personal
testimony regarding their personal humiliation, mental suffering, and loss of reputation
due to the wide dissemination of ACS's theft accusations through the intemai
memorandum and Business First article. Several other persons testified about the impact
of the published allegations on Leadsope and the individual defendants.
(164) "Once a plaintiff makes a prima facie case of defamation, the amount of
damages to award is a detennination for the jury." Isquick v. Dale Adams Ent., 9th Dist.
No. 20839, 2002-Ohio-3988, ¶38. The injured party is not required to provide the jury with
a precise arithmetic formuia by which to compute the damage award. Id. Here, as
Leadscope and individual defendants point out, ACS never objected to the triai court's
instruction on general damages and has waived any objections to the jury's considering
this issue. Moreover, the damages the jury awarded for both special and general
damages were properiy supported in the noted evidence. The trial court did not err in
overruiing ACS's motion for judgment notwithstanding the verdict on Leadscope's
counterclaim for defamation or in refusing to reduce the amount of damages pursuant to
ACS's motion for remittftur. ACS's first assignment of error accordingly is overruled.
App. 0031
No. 08AP-1026 29
C. Third Assianment of Error-Tortious Interference with Business Reiations
{165} ACS's third assignment of error asserts the trial court erred in failing to enter
judgment notwithstanding the verdict on Leadscope's claims for tortious interference with
business relations. "The tort of interference with a business relationship occurs when a
person, without a privilege to do so, induces or otherwise purposely causes a third person
not to enter into or continue a business relationship with another." Geo-Pro Serv., Inc. v.
Solar Testing Labordtories, Inc. (2001), 145 Ohio App.3d 514, 525 (citadons omitted).
"The elements of tortious interference with a business relationship are (1) a business
relatlonship, (2) the wrongdoer's knowledge thereof, (3) an intentional interference
causing a breach or termination of the reiationship, and (4) damages resulting therefrom."
Id. ACS argues it could not have known of any specific business relationship between
Leadscope and any third parties.
{166} Particuiarly on the question of prospective financing for Leadscope, ACS
contends it was entirely unaware of any specific contacts between Leadscope and
prospective investors. ACS asserts that, at most, it knew Leadscope generally would
require outside funding at some CGme to pursue its development. According to ACS, a
mere general awareness of the claimant's business dealings with unidentified third parties
is insufficient to support the tort of tortious interference. ACS explains that all businesses
are likely to require financing and have dealings with investors, just as all businesses are
likely to have actual and prospective customers. ACS asserts that, absent evidence from
Leadscope of a specifically identified and definable, concrete relationship with a specific
investor or customer, the elements of the tort are not met.
App.0032
No. 08AP-102630
{167} in response to ACS's arguments, Leadscope presented a persuasive line of
cases that indicates a business relationship with an identifiable class of third persons may
fulfill the requirement of a prospective business relationship for purposes of tortious
interference claims. See, e.g., Trau-Med of America, Inc. v. Allstate Ins. Co. (Tenn.,
2002), 71 S.W.3d 691, 701; Hayes v. N. Hills Gen. Hosp. (S.D.1999), 590 N.W.2d 243,
249-50; Crinkley v. Dow Jones & Co. (1978), 67 III.App.3d 869, 880; Lucas v. Monroe Co.
(C.A.6, 2000), 203 F.3d 964, 979 (concluding an ident'fiiable class of stranded motorists
likely to require tow services was sufficient to establish tortious interference with towing
compan)'s business relationship with such ciass).
{968} Leadscope, however, also presented evidence at triai that ACS's
knowledge exceeded the bounds of generalities to the point that ACS knew of
Leadscope's Immediate need for financing at such a juncture in its commercial
development and knew of potential investors. President Massie's conversations with other
senior ACS managers indicated such knowledge as a near certainty based on typical
startup business models in the high-tech field. Indeed, Leadscope's initial letter of
April 16, 2002 In response to ACS's threats explicitly stated Leadscope had a financing
plan scheduled to go forward in a matter of days and ACS's claims would impact it. In
addition, Michael Dennis of ACS in February 2002 spoke with Battelle's Crocker
regarding Battelle's potential financing for Leadscope, and Crocker divulged his
investment intents at that time; Crocker testified ACS's actions toward Leadscope
specifically blunted Battelle's Interest in investing in Leadscope.
App.0033
No. 08AP-1026 31
{169} Because sufficient evidence establishes Leadscope's tortious interference
claim and the damages proximately caused from ACS's actions, ACS's third assignment
of error is overruled.
D. Fourth Assicinment of Error-Compensatorv and Punitive Damaaes
{170) ACS's fourth assignment of error asserts the trial cowt erred in refusing to
reduce the compensatory and punitive damages the jury awarded. The total jury award
was $26.5 million, divided among the various parties and claims as follows: (1) $10 million
in compensatory damages and $312,500 in punitive damages to Leadscope on its
defamation counterclaim; (2) $1 million in compensatory damages and $312,500 In
punitive damages to each of the individual defendants on their respective defamation
counterclaims; (3) $750,000 in compensatory damages and $2.25 million in punitive
damages to Leadscope on its tortious interference counterclaim; (4) $750,000 in
compensatory damages and $1 million in punitive damages to Leadscope on its unfair
competition counterclaim; (5) $1 million in compensatory damages and $1 million in
punitive damages to Blower on his unfair competition counterclaim; (6) $1.25 million in
compensatory damages and $1 million in punitive damages to Johnson on his unfair
competition counterclaim; and (7) $1.5 million in compensatory damages and $1 million in
punitive damages to Myatt on his unfair competition counterclaim. In total, the jury
awarded Leadscope $11.5 million in compensatory damages.
(171) To support Leadscope's daims, Loftus Lucas testiried he was unable to sell
contracts, despite his own professional marketing expertise, when Leadscope's
principals, who were principaliy scientists and researchers, had been able to do so prior
to the ACS lawsuft. Simiiarly, Leadscope's landlord testified he sensed the company was
App. 0034
No. 08AP-102632
uncertain because of the "bad press," noting general business activity at the Leadscope
offices dropped signiflcantfy as Leadscope's reputation was impaired. (Tr. 3601, 3627.)
{172) More significant to the jury's award, however, was the extensive testimony
of Leadscope's expert witness, Rebekah Smith, who detailed her computations for lost
profits. Smith relied on financial statements, business plans, past sales, and sales
projections, in many instances stating she adjusted projections downward from
Leadscope's own intemai goals. (Tr. 4876.) In addition, Leadscope presented testimony
from its president, Lucas, who identified as many as 12 customers from whom he lost
sales traceable to ACS's actions. While ACS asserts testimony from past or potential
customers Is required to support such forgone sales, Ohio authority does not so require.
Rubbermaid, Inc. v. Hartford Steam Boilers and Inspection Co. (1994), 96 Ohio App.3d
406, 410-11; lsquick at 116 (affirming claims for defamaGon and tortious interference
without requiring testimony from potentfat customers).
{173} Smith also presented extensively researched and analyzed computations
regarding the lost exit value. Although Leadscope concedes no absolute formula
determines a sale price for a technological start-up firm as a going concem, ACS in
defense presented no conclusive authority that the multipiiers of sales to sale price Smith
used In her analyses were excessively optimistic. Projected sales are a valid basis when
determining injury to a business and computing damages from the injury. See, e.g.,
K.M.C. Co., lnc. v. Irving Trust Co. (C.A.6, 1985), 757 F.2d 752.
{174} ACS also contests the jury's punitive damages award. Under Ohio law, an
award of punitive damages in a tort case shall be made only upon the finding of actual
malice, fraud, oppression, or insult on the part of the defendant. R.C. 2315.21; Berge v.
App.0035
No. 08AP-102633
Columbus Comm. Cable Access (1999), 136 Ohio App.3d 281, 316. ACS's argument on
appeal is not with the triai court's detemiination that damages could be awarded but with
the actual amount awarded. ACS asserts the damages are excessive in light of the
guideposts the United States Supreme Court set forth in State Farm Mut. Auto Ins. Co. v.
Campbell (2003), 538 U.S. 408, 123 S.Ct. 1513, and BMW of N. America, Inc. v. Gore
(1996), 517 U.S. 559, 116 S.Ct. 1589. The guideposts include three factors: the
reprehensibility of the tortfeasor's conduct, the ratio of punitive damages to compensatory
damages, and civil penalties authorized in comparable cases.
{4q75} Of these three, "[pjerhaps the most important indicium of the
reasonableness of a punitive damages award Is the degree of reprehensibility of the
defendant's conduct." Gore, 517 U.S. at 575, 116 S.Ct. at 1599. With respect to this
factor, Gore enumerated the five typical indicia: (1) physical, as opposed to economic
harm; (2) tortious conduct evidenced by indifference or reckless disregard to others, (3)
financial vulnerability of the target, (4) repeated actions; and (5) harm resuiting from
intentionai malice, trickery, or deceit. State Famf, 538 U.S. at 419, 123 S.Ct. at 1521,
citing Gore, 517 U.S. at 575, 116 S.Ct. at 1599. Although the present case undisputedly
presents economic rather than physical harm, cases involving economic injury
nonetheless may warrant an award of substantiai punitive damages when the harm is
committed "intentionally through affirmative acts of misconduct or when the party is
financially vulnerable." Gore, 517 U.S. at 576, 116 S.Ct. at 1599. The evidence
supporting the extended course of tortious conduct ACS undertook, in conjunction with
the evident financial vulnerability of Leadscope at the time, falls under two of the indicia of
reprehensibility enumerated in Gore. The jury having concluded that ACS intended in
App.0036
No. 08AP-102834
various ways to harm the business prospects and reputation of Leadscope and the
individual Leadscope principais, an award of punitive damages was warranted under
Gore, State Farm, and their progeny.
{176} ACS also attacks the ratio of punitive damages to compensatory damages
in this case. The numbers on their face are not excessive, even applying the stricter
interpretation of recent United States Supreme Court cases. Ratios in the present case
range from roughiy two-and-a-half times the cumulative compensatory damages to
amounts between roughly three times to three-and-a-half times the compensatory
damages for the individuai claimants. While ACS claims State Farm established a 3-to-I
ratio of punitive to compensatory damages as an absolute Umit, State Farm itself
suggests to the contrary In language indicating no absolute multiplier exists and higher
awards may be justified on various facts. Even if, as ACS claims, State Farm established
the noted ratio as a general range, the awards in the present case cumulatively are well
within that limit, and the awards for the individual defendants on their individual claims are
either below it or exceed it only by minor figures.
{177} Lastly, ACS asserts the jury awarded dupiicative compensatory damages to
the individual defendants. Pointing out that the jury awarded for each individual precisely
the same amount on his respective defamation and unfair competition claims, ACS
asserts the inescapable inference is that each award represents recovery in the same
amount for identicai underlying damages, or double recovery for a single wrong. The jury
was not giveq interrogatories that would have broken out the basis for the damages
awarded, by different type of claim, for each of the individuai defendants.
App.0037
No. 08AP-102635
{178} The individual defendants presented testimony from an expert, Harvey
Rosen, Ph.D., to establish their personal damages, apart from the enterprise damages
demonstrated in the testimony of Leadscope's expert, Rebekah Smith. Dr. Rosen
described various classes of damages in the case and stated he would not discuss
damages Leadscope suffered as an ongoing business and the consequent loss to its
shareholders. Instead he focused on and analyzed the lost earning capacity, including
economic damages from lost income due to loss of employment and professional
opportunities, of the three individuai defendants based upon their respective ages, past
eamings history, and current employment:
• Dr. Blower: $1,073,672 in lost eaming capacity (Tr. 4625), contrasted with a
jury award of $1,000,000 on his defamation claim and $1,000,000 on his
unfair competition claim.
• Mr. Johnson: lost eaming capacity of $2,933,420 to $3,482,058 depending
on age of retirement (Def. Ex. 1129), compared with a jury award of
$1,250,000 on his defamation claim and $1,250,000 on his unfair
competition claim.
• Dr. Myatt: lost eaming capacity of $1,859,266 to $2,158,912 depending on
age of retirement (Def. Ex. 1130), compared with a jury award of
$1,500,000 on his defamation claim and $1,500,000 on his unfair
competition claim.
{179} The cumuiative economic harm Dr. Rosen computed therefore exceeded
the aggregate verdict for Johnson. Even in the case of Blower and Myatt, for whom the
aggregate jury awards exceeded the lost income Dr. Rosen projected, the jury's award is
App.0038
No. 08AP-1026 38
not necessarily duplicative, because the indMdual plaintiffs sought recovery for more than
just lost wages.
{180) Even If the jury's consideration of compensatory damages for tortious
interference was limited to the direct economic and consequential damages proximately
flowing from it, Gray-Jones v. Jones (2000), 137 Ohio App.3d 93, 101-02, citing 4
Restatement of the Law 2d, Torts (1979) 54, Section 774A, the jury had a wider scope to
consider when addressing damages arising from other tortious conduct at issue in this
case. Ahmed v. Univ. Hospitals Health Care Sys., Inc., 8th Dist. No. 79016, 2002-Ohio-
1823. The tort of defamation per se, as the jury found in this case, gives rise to presumed
damages attributable to loss of reputation in the community, personal emotionai distress,
and humiliation, all of which could support damages awards beyond the scope of Dr.
Rosen's computations.
{181} Moreover, the amounts the jury awarded are not inconsistent with the
verdicts on each claim and the evidence heard at trial. Nor is a jury award presumed
duplicative on the sole basis that the jury awarded identical amounts on different daims.
Gentile v. County of Suffolk (C.A.2, 1991), 926 F.2d 143, 153-54. We likewise will not in
effect presume error on the part of the jury in its general verdict and in computing
damages when the evidence provides a sound basis for the amount of damages awarded
for each claim. Weighing the evidence in favor of defendants as the nonmoving party
opposing a motion for judgment notwithstanding the verdict, we conclude the award here
reflects single recovery for distinct damages attributabie to each of two claims, not double
recovery for a single injurious course of conduct.
App. 0039
No. O8AP-102637
{182) Sufficient evidence supports the verdict setting the amount of compensatory
and punitive damages. The trial court properly overruled ACS's motion for judgment
notwithstanding the verdict, and ACS's fourth assignment of error is overruled.
V. ACS's Fifth Assignment of Error
{183} ACS's fifth assignment of error asserts the trial court erred in awarding
attomeys fees in addition to the compensatory and punitive damages In the case. The
trial court awarded fees on two grounds. The trial court initially awarded fees pursuant to
R.C. 1333.64(A) for costs Leadscope and the individual defendants incurred in defending
ACS's trade secret misappropriation claims, which the jury found were made in bad faith.
Secondly, the trial court awarded fees under the common law in connection with
Leadscope's successful counterclaims for defamation, unfair competition, and tortious
interference with a business relationship.
{184} R.C. 1333.64 provides that a court "may award reasonable attomey's fees
to the prevailing party, if * * * a claim of misappropriation is made in bad faith." ACS
argues on appeal that in a misappropriation of trade secrets case, the action is brought in
bad faith only if it is "objectively specious;" citing Computer Economics, Inc. v. Gartner
Group, Inc. (Dec. 14, 1999), S.D.Cal. No. 98-CV-0312 TW, 1999 WL 33178020, at *6.
Otherwise put, ACS contends the claim either clearly must not be colorable, Contract
Materials Processing, Inc. v. Kataleuna GmbH Catalysts (D.Md., 2002), 222 F.Supp.2d
733, 744, or must be without substance and devoid of merit. Gemini Aluminum Corp. v.
Califomia Custom Shapes, Inc. (2002), 95 Cal.App.4th 1249, 1261. ACS asserts its trade
secret claim was plainly colorable on the grounds that its former employees ieft tFie-
company and two years later began marketing a product serving the same function as the
App.0040
No. 08AP-102638
software they worked on while employed at ACS. ACS further notes the trial court's
refusal to grant summary judgment to Leadscope and the individual defendants prior to
trial establishes not only that ACS had a colorable claim but that the jury's bad faith
finding cannot stand under the above authorities.
(985) We review the trial court's award of R.C. 1333.64(A) attomey's fees under
an abuse of discretion standard. Becker Equip. v. Flynn, 12th Dist. No. CA2002-12-313,
2004-Ohio-1190, ¶11. Here, the jury found ACS brought its misappropriation claim In bad
faith: Despite ACS's motion for judgment notwithstanding the verdict, the trial court
declined to disturb the jury's verdict on the issue, and we affirmed the jurys finding in
resoMng an earlier assignment of error. Ohio precedent does not support ACS's attempt
to introduce a new and more stringent standard than that set forth in the statute, and the
circumstances of this case do not call for us to inject a higher standard than the statute
provides.
{186) With respect to the common-law award of attomey's fees on Leadscope's
counterclaims, Ohio law provides that "attomey fees may be awarded as an element of
compensatory damages where the jury finds that punitive damages are warcanted °
Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552, 558, 1994-Ohio-461. ACS suggests the
award of punitive damages, if upheld, sufficiently compensates Leadscope and its
principals both for their damages and the expense of obtaining judicial redress for them.
ACS's approach in effect makes an award of punitive damages and attomey's fees
Interchangeable. The Ohio Supreme Court, however, stated that an award of punitive
damages is grounds for an award of attomey's fees; it did not state it is a subs ita-te for
such an award. Gaimish v. Cicchini, 90 Ohio St.3d 22, 35, 2000-Ohlo-7. See also
App. 0041
No. 08AP-102839
Columbus Finance, Inc. v. Howard (1975), 42 Ohio St.2d 178, 183; Digital & Analog
Design Corp. v. North Supply Co. (1992), 63 Ohio St.3d 657, W. Because the courrs
award of attomey's fees both for defending ACS's bad faith claim and prosecuting the
Leadscope defendants' prevailing counterclaims was not an abuse of discretion in
principle, we address ACS's argument that the fees awarded were excessive.
(187) The triai court held a lengthy hearing on the amount of fees and heard
evidence from the expert witnesses both parties presented. ACS at this point in the
proceedings questions neither the hours counsel for Leadscope expended nor the billable
rate applied to those hours. Instead, ACS argues solely that the triai court abused its
discretion by doubling the "kxfestar' amount for the counterclaim-related fees when It
considered two additional factors, the ex(istence of a contingency agreement goveming
attomey's fees and the outcome of the ii8gation. ACS argues those factors are included in
a typical lodestar caicuiatfon. ACS's argument does not comport with applicable Ohio law.
{988} The lodestar amount is established by determining the number of hours
reasonably expended on a case, multiplied by an hourly fee. The court then may modify
that figure by applying the factors listed in Prof.Con.R. 1.5. Bittner v. Tri-County Toyota,
Inc. (1991), 58 Ohio St.3d 143, syllabus (applying comparable predecessor rule DR2-
106(B)). Some of the factors set forth in the rule are the time and labor involved in
maintaining the litigation, the novelty, complexity, and difficulty of questions involved, the
experience, reputation and ability of the attomeys, the amounts at stake in the case and
the results obtained, and whether services are perfonned under a fixed or contingency
arrangement. Prof.Con.R. 1.5; Ariguzo v. K-Mart Corp. (Sept. 30, 1999), 10it Dist. No:
App. 0042
No. 08AP-1026 40
98AP-1268; Villelfa v. Waikem Motors, Inc. (1989), 45 Ohio St.3d 38 (both cases appiying
DR2-106(8)).
1189) The trial court here followed Biftner in enhancing the lodestar amount. The
trial court noted that the novelty and difficulty of the issues presented, the absorption of
counsels' resources to the preclusion of other employment, the result obtained, and the
contingency fee arrangement all supported an upward adjustment of the lodestar amount.
While ACS stresses the contingency arrangement alone would not support fee
enhancement, Borror v. MarineMax of Ohio, Inc., 6th Dist. No. OT-06-010, 2007-Ohio-
562, ¶56, that was not the sole basis for the trial court's fee enhancement. The record
supports the other factors the trial court cited, particularly the heavily favorable results
counsel for Leadscope obtained. The Ohio Supreme Court expressly stated in Bittner that
"the degree of success obtained by the prevailing party" is an important consideration
when determining the lodestar enhancement. Bittner at 145-46; see also Btum v. Stenson
(1984), 465 U.S. 886, 104 S.Ct. 1541.
(¶90) The trial court did not err in awarding attomey's fees in the present case,
either for those incurred in defending against ACS's claims or in prosecuting the
counterclaims; nor did the trial court err in computing the amount of fees to be awarded.
ACS's fifth assignment of error is overruled.
Vi. ACS's Sixth Assignment of Error
(191} ACS's sixth assignment of error asserts the trial court erred in failing to
order a new trial on all claims. ACS moved for a new trial under Civ.R. 59(A), alleging
"numerous and substantial irregularities in the proceedings." ACS argued that opposing
counsel "repeatedly misrepresented the evidence, mischaracterized ACS's conduct as
App.0043
No.08AP-1026 41
criminal, injected insurance considerations, and blatanty appealed directly to the
passions and prejudices of the jury:' (R. 826, at 53.) ACS's brief on appeal contends "the
trial in this case was replete with error, infecting almost every issue of signiftcance." (ACS
brief at 50.)
{992} ACS does not articulate in its appellate brief, beyond the issues addressed
in connection with the first five assignments of error, which of the trial court's evidentiary
rulings, opposing counsel's allegedly prejudicial misconduct, or other specific
circumstances would warrant a new trial. Nor does ACS propose a standard under which
a new trial would be granted. Unsupported assignments of error and undeveloped
arguments nonnally cannot form the basis for reversing a trial courPs judgment. Bank of
New York v. Barclay, 10th Dist. No. 04AP-48, 2004-Ohio-4555, ¶10. We nonetheless will
examine, based upon the relevant memoranda in the record, the arguments ACS raised
before the trial court in its motion for a new trial.
{4q93} To support a finding of passion or prejudice under Civ.R. 59(A)(4), ACS
must demonstrate that the jury's assessment of liability and damages "was so
overwhelmingly disproportionate as to shock reasonable sensibilities." Pena v. Northeast
Ohio Emergency Affiliates, Inc. (1995), 108 Ohio App.3d 96, 104. To obtain a new trial on
grounds of misconduct or irregularities at triai, ACS must establish the presence of
serious irregularities In the proceedings that deprive the party of a fair trial, such as those
that "could have a material adverse effect on the character of and public confidence in
judicial proceedings." Wright v. Suzuki Motor Co., 4th Dist. No. 03CA2, 2005-Ohio-3494,
¶114; see also Meyer v. Srivastava (2001), 141 Ohio App.3d 662; Mullins v. lnderbitzen,
6th Dist. No. L-03-1121, 2004Ohio-1658. 'The term 'Irregutarity' in the context of a
App. 0044
No. 08AP-1026 42
motion for a new trial is historicaily described as 'very comprehensive,' and a departure
from the due proceeding whereby a party, 'with no fault on his part, has been deprived of
some right or benefit otherwise available to him.' " Wright at ¶115, quoting In re
Guardianship of Pierce, 4th Dist. No. 03CA2712, 2003-Ohio-3997, ¶24.
{194} In appellate review, the trial court's decision to deny a partys motion for
new trial "is entitled to deference to the extent that the trial court exercised judicial
discretion in reaching its decision. However, to the extent that the triai court decision
being challenged did not involve the exercise of discretion, but was based on a question
of law, no deference is afforded." Wagner v. Roche Laboratories, 85 Ohio St.3d 457, 460,
1999-Ohlo-309, citing Rohde v. Farmer (1970), 23 Ohio St.2d 82, paragraphs one and
two of the syllabus. On issues left to the sound discretion of the trial court, absent a
finding that the court's decision to deny a Civ.R. 59 motion is an abuse of discretion, we
will not disturb the judgment. Poske v. Mergi (1959), 169 Ohio St. 70, 75 (noting an abuse
of discretion under such circumstances Implies an unreasonable, arbitrary or
unconscionable attitude of the court In ruling on the motion); Verbon v. Pennese (1982), 7
Ohio App,3d 182, 184.
(195) Most of the allegedly objectionable statements and mischaracterizations of
evidence in this case occurred during Leadscope's closing argument. They inciude
implications the evidence supported president Massie's knowledge that his
misappropriation claims were groundless, as well as allegations ACS's initial negotiations
were done in bad faith and were a sham whose sole purpose was extortion. ACS also
objects to opposing counsel's dramatic recitation in ciosing argument of Rudyard Kipling's
poem "if," with intertineated references to the facts of the case and delivered with such
App. 0045
No. 08AP-1026 43
heartfett passion that counsel purportedly moved himself to tears, which last point we will
take as correct since the transcript does not supply the emotional state of counsel. (Tr.
5825-26.)
{196) Counsei traditionally is afforded great latftude in closing argument. Pang v.
Mfnch (1990), 53 Ohio St.3d 186, paragraph two of the syllabus. Much of the closing
statement was doubtless delivered with spirit and conviction. The evidentiary inferences
and characterizations suggested to the jury were based on facts and testimony properly
in the record, and by definition closing argument "presents counsel with the opportunity to
comment on the evidence and the reasonable inferences to be drawn" from it.
Roetenberger v. Christ Hosp., 163 Ohio App.3d 555, 2005-Ohio-5205. Especially in view
of the often heated and personal tone of the controversy both sides adopted through and
even before litigation, the closing presented no great escalation or increased appeal to
the passion and prejudice of the jury.
{197} ACS also objects that the trial court allowed the jury to hear and consider
evidence related to several claims abandoned or dismissed during the course of trial, or
at least, to hear and consider Leadscope's references to those claims. According to ACS,
Leadscope used these no-longer-relevant claims to color the jury's perception of ACS's
conduct. The claims were (1) Leadscope's Pattem of Corrupt Activities claim, upon which
the trial court eventually granted summary judgment; (2) ACS's abandoned R.C. 1331.81
"employee breach of confidence" claim, and (3) ACS's abandoned conversion claim. The
allegations regarding the pattem of comapt activities claim are difficult to discem, since
the evidence ACS complains of was either innocuous, such as disputes over whether
ACS and Chemical Abstracts were separate entities, or also was introduced in support of,
App.0046
No. 08AP-1028 44
and was relevant to, the remaining unfair competition and tortious interference claims,
such as ACS's threatening conduct during initial settiement negotiations.
{198} The R.C. 1331.81 employee breach of confidence claim ACS brought
against Its former employees appeared in the initial complaint In federal court and was not
abandoned until well into the course of litigation in the court of common pleas. Leadscope
and the Individual defendants characterized ACS's conduct as a criminal charge fulfilling
the threat, described in Coniey's testimonial account of the initial contacts between
himself and Dennis, that ACS would file "civil and criminal" claims against Leadscope and
its principals. Since violation of R.C. 1331.81, pursuant to the associated penalty section,
R.C. 1331.99, constitutes a first-degree misdemeanor offense, the criminal aspect of the
claim is indisputable. Particuiarly because the jury was allowed to consider malicious
litigation as a basis for the unfair competition claim, the references to the abandoned R.C.
1331.81 claim were properly allowed to support the unfair competition and tortious
interference claims Leadscope made.
{1[99} Lastly, ACS challenges Leadscope's references to ACS's purportedly
strategic decision to abandon its conversion claims. After a lengthy struggle that
constituted the opening phase of the current case, Leadscope succeeded in establishing
that its Insurer owed a duty to advance defense costs. The duty, however, at first was
stated to hinge solely on ACS's conversion claim. In what Leadscope characterized as an
attempt to deny Leadscope the benefit of a defense its carrier would fund, ACS dropped
the conversion claim. Having so characterized ACS's tactics, Leadscope from that point
referred to ACS's conduct as part of ACS's pattem of malicious Iftigation and oppressive
conduct. ACS now describes its decision as an attempt to further judicial efficiency and
App.0047
No. 08AP-102645
ease the burden on the trial court by eliminating duplicative or unsubstantiated claims.
Once, however, the jury was allowed to consider a malicious litigation theory, evidence of
and reference to ACS's litigation strategy were proper, and the jury was free to consider
how Leadscope characterized these actions.
{9100} Because, for the noted reasons, the trial court did not abuse its discretion in
denying ACS's motion for a new trial, ACS's sixth assignment of error Is overruled.
VII. Leadscope's Assignment of Error on Cross-Appeal
{9101} Leadscope's sole assignment of error on cross-appeal, which addresses
unfavorable evidentiary rulings regarding privileged statements the trial court did not allow
the jury to consider for defamation purposes, is couched as conditional and is to be
considered only if the trial courPs judgment is disturbed in other respects. As our
disposition of ACS's assignments of error leaves the trial court's judgment entirely intact,
we do not address Leadscope's assignment of error.
VIII. Conclusion
{9102} In accordance with the foregoing, ACS's six assignments of error are
ovenuled, Leadscope's assignment of error is moot, and the judgment of the Franklin
County Court of Common Pleas Is affirmed in all respects.
TYACK, P.J., and FRENCH, J., concur.
Motion denied;judgment afimyed.
App.0048
IN THE COURT OF COMMON PLEAS OF FRANKLIN COUNTY, 011I0
GENERAL DIVISION
THE AMERICAN CHEMICAL SOCIETY,
Plaintiff, . Case No. 02CVC-07-7653
v
LEADSCOPE, INC., et aL,
. Judge: Guy L. Reece, Q
C-) r^
Defendants. ^ A ^ ,t
c ° '> ;,^r'+t
FINAL JUDGMENT ENTRY
.c 3
ro
c. ._. ^o
- Cd ` 7J
This case came on for jury trial on February 4, 2008. On March 18-20, 2008, this Court
ruled in accordance with Rule 41 and Rule 50 of the Ohio Rules of Civil Procedure on motions
of the parties and on March 27, 2008, the jury delivered its verdict. This Final Judgment Entry is
entered in accordance with the rulings on the Rules 41 and 50 motions and the jury verdict.
On Count I of Plaintiff the American Chemical Society's ("Plaintiff') Amended
Complaint, a claim against Defendants Paul E. Blower ("Blowec"), Wayne P. Johnson
("Johnson") and Glenn J. Myatt ("Myatt") for breach of employment agreements, in accordance
with the jury verdict, judgment is entered in favor of Defendants Blower, Johnson and Myatt and
against Plaintiff.
On Count II of PlaintifFs Amended Complaint, a claim against Defendants Leadscope,
Inc. ("Leadscope"), Blower, Johnson and Myatt for trade secret misappropriation, in accordance
--with the jury verdict, judgment is entered in favot: of Deienaa`m ieadsaope;-BIower> o ©a
and Myatt and against Plaintiff.
App. 0049
On all claims for equitable relief by Plaintiff against Defendants, judgment is entered in
favor of Defendants and against Plaintiff.
In accordance with the jury finding that Plaintiff pursued its trade secret misappropriation
claim in bad faith, Defendants may file an application seeking reasonable attomeys' fees that
Defendants incurred in the defense of this claim.
On Count I of Defendants' Amended Counterclaim for defamation, in accordance with
the verdict of the jury, judgment is entered in favor of Defendants Leadscope, Blower, Johnson
and Myatt and against Plaintiff, and damages are awarded as follows:
A. Leadscope - Compensatory Damages of $10,000,000 and Punitive
Damages of $312,500;
B. Paul Blower - Compensatory Damages of $1,000,000 and Punitive
Damages of $312,500;
C. Wayne Johnson -- Compensatory Damages of $1,250,000 and Punitive
Damages of $312,500; and
D. Glenn Myatt - Compensatory Damages of $1,500,000 and Punitive
Damages of $312,500.
On Count II of Defendants' Amended Counterclaim for tortious interference, this Court
granted the Plaintiffs Civil Rule 50 Motion as to Defendants Blower, Johnson and Myatt, and
judgment is entered accordingly.
On Count II of Defendant Leadscope's Amended Counterclaim for tortious interference,
in accordance with the verdict of the jury, judgment is entered in favor of Leadscope and against
Plaintf:f,-ar;d .L...°adscope :s-wtiurdedCompM...sar!+ryDaaaeages-af-$70;OOQ-and-Punitive-Damaee&
of $2,250,000.
02 CVC-07-7653 - 2 -
App.0050
On Count III of Defendants' Amended Counterclaim for unfair competition, in
accordance with the verdict of the jury, judgment is entered in favor of Defendants Leadscope,
Blower, Johnson and Myatt and against Plaintiff, and damages are awarded as follows:
A. Leadscope - Compensatory Damages of $750,000 and Punitive Damages
of $1,000,000;
B. Paul Blower - Compensatory Damages of $1,000,000 and Punitive
Damages of $1,000,000;
C. Wayne Johnson - Compensatory Damages of $1,250,000 and Punitive
Damages of $1,000,000; and
D. Glenn Myatt - Compensatory Damages of $1,500,000 and Punitive
Damages of $1,000,000.
On Count IV of Defendants' Amended Counterclaim, a claim for deceptive trade
practices, in accordance with the jury verdict, judgment is entered in favor of Plaintiff and
against Defendants.
On Count V of Defendants' Amended Counterclaini, a claim for a pattern or practice of
corrupt activity, this Court granted PlaintifPs motion for Civil Rule 50 judgment and judgment is
entered accordingly.
02 CVC-07-7653 - 3 -
App. 0051
Costs are awarded to Defendants and judgment is entered in favor of Defendants and
against Plaintiff for the costs. Defendants are to submit a bill of costs for the Court's approval.
Copies To:
Michael G. Long, Esq.Kimberly Weber Herlihy, Esq.Carter M. Stewart, Esq.Vorys, Sater, Seymour and Pease LLP52 East Gay Street, P.O. Box 1008Columbus, Ohio 43216-1008Counselfor Plaintiff
John P. Mazza, Esq.Lee W. Westfall, Esq.Harris & Mazza941 Chatbam Lane, Snite 201Columbus, Ohio 43221Co-Counsel for PlaintiJf
Robert M. Masters, Esq.John Shin, Esq.John J. Girgenti, Esq.Erin E. Sears, Esq.Paul, Hastinga, Janofsky &Walker, LLP 875 15th Street, N.W.Washington, D.C. 20005Of-Counsel for PlatntifJ'
Alan L. Briggs, Esq.Keith Shumate, Esq.Aneca E. Lasley, Esq.Aaron T. Brogdon, Esq.Kristen M. Blankley, Esq.Squire, Sanders & Dempsey LLP1300 Huntington Center
43_South-High-StreetColumbus, Ohio 43215Counselfor Defendants
02 CVC-07-7653 -4-
App. 0052
IN THE COURT OF COMMON PLEAS OF FRANKLIN COUNTY, OHIOGENERAL DIVISION
THE AMERICAN CHEMICAL SOCIETY,
Plaintiff, . Case No. 02CVC-07-7653
v Judge: Guy L. Reece,`I^ ox c-1
LEADSCOPE, INC., et al., C N
Defendants. • ^cz
DECISION AND ENTRYDENYING PLAINTIFF'S APRIL 24,2008
MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT ANDMOTION FOR NEW TRIAL OR, IN THE ALTERNATIVE, FOR REMITTITUR
RENDERED THIS k_ DAY OF OCTOBER 2008.
REECE, J.
After an almost eight-week-long trial in this matter, the jury returned a verdict
against Plaintiff The American Chemical Society (hereinafter "Plaintiff' or "ACS") on its
claims of breach of contract and misappropriation of trade secrets, and a verdict in favor
of Defendants Leadscope, Inc., Paul E. Blower, Jr., Wayne P. Johnson and Glenn J.
Myatt (hereinafter collectively "Defendants") on their counterclaims of defamation,
tortious interference and unfair competition. In doing so, the jury awarded Defendants a
total of $26.5 rnillion in damages, consisting of the following:
1.1 on Defendants' defamation counterclaim:
a. $10 million in compensatory damages and $312,500 in punitive
damages to Defendant Leadscope;
App. 0053
b. $1 million in compensatory damages and $312,500 in punitive
damages to Defendant Blower;
c. $1.25 million in compensatory damages and $312,500 in punitive
damages to Defendant Johnson; and
d. $1.5 million in compensatory damages and $312,500 in punitive
damages to Defendant Myatt;
2.) on Defendants' unfair competition counterclaim:
a. $750,000 in compensatory damages and $1 million in punitive
damages to Defendant Leadscope;
b. $1 million in compensatory damages and $1 million in punitive
damages to Defendant Blower;
c. $1.25 million in compensatory damages and $1 million in punitive
damages to Defendant Johnson; and
d. $1.5 nvllion in compensatory damages and $1 million in punitive
damages to Defendant Myatt; and
3.) on Defendants' tortious interference counterclaim:
a. $750,000 in compensatory damages and $2.25 million in punitive
damages to Defendant Leadscope.
PlaintiWs Post-Trial Motions
On Apri124, 2008, Plaintiff filed a 70-page "Motion for Judgment
Notwithstanding the Verdict on Defendants' Counterclaims and as to the Finding of Bad
Faith, and Motion for New Trial as to All Claims, or (in the Alternative) for Remittitur."
Therein, pursuant to Civ.R. 50(B), Plaintiff requests a judgment notwithstanding the
02 CVC-07-7653 2
App.0054
verdict (hereinafter "JNOV") as to 1.) Defendants' counterclaims for defamation, tortious
interference and unfair competition, 2.) the damages awarded, and 3.) the jury's finding
of bad faith, and further requests that the Court conditionally order a new trial on the
same pursuant to Civ.R. 59(A). Pursuant to Civ.R. 59(A), Plaintiff also requests a new
trial as to its claims of breach of contract and misappropriation of trade secrets. In the
alternative, Plaintiff seeks a "remittitur of the excessive amounts of compensatory and
punitive damages awarded by the jury." (Pltf. Motion, at 1.)
1. JNOV on Defendants' Counterclaims
Plaintiff argues that a JNOV is warranted as to Defendants' counterclaims
because: 1.) the counterclaims were based on statements that are absolutely privileged
and/or fall under the purview of the qualified privilege, yet no clear and convincing
evidence of actual malice was presented with respect to those statements in order to
defeat the qualified privilege; 2.) there was insufficient evidence to support the
counterclaims; and 3.) the jury was not properly instructed with respect to those
counterclaims. Plaintiff also argues that the verdict and damages awards on Defendants'
counterclaims were based on hearsay and speculation.
Argument: Counterclaims Based on Privileged Statements, InsufficientEvidence,and Improper Instructions
Plaintiff maintains the jury found in Defendants' favor on their defamation
counterclaim based on statements Plaintiff made to an inquiring reporter in a Business
First article about the pending litigation and statements Plaintiff made in an internal
memorandum to its own employees about the litigation. Piaintiri-ugues such a verdict
was improper because: 1.) the statements are absolutely privileged; 2.) there was
insufficient evidence from which the jury could find that the statements were false or that
02 CVC-07-7653 3
App.0055
Plaintiff acted with actual malice; and 3.) there was insufficient evidence from which the
jury could find that the statements caused harm to Defendants.
Plaintiff argues the Business First article consists of statements the reporter took
directly from PlaintifFs complaint, and those statements are therefore absolutely
privileged. Plaintiff further argues the statements in the article that came from Plaintiff s
counsel are also related to this litigation and are true statements about what had taken
place. With respect to the intemal memorandum to its employees, notifying them of this
litigation, Plaintiff argues that also contains statements that are accurate descriptions of
the allegations made in Plaintif£s complaint and the statements were made to those
directly interested in this litigation.
Plaintiff argues a JNOV with respect to the defamation counterclaim is also
wan-anted because Defendants "presented no evidence from which a jury could
reasonably find that the statements in the Business First article and the internal
memorandum were false or that ACS made the statements with `actual malice' sufficient
to overcome the protection of the qualified privilege: '(Pltf. Motion, at 14.) Plaintiff
contends all of the statements were accurate descriptions of what had been alleged or
what had taken place with respect to the litigation, and there was no need to explicitly
state that those statements were descriptions of the pleadings as opposed to independent
statements of fact, as that was "patent from the context" in which the statements were
made. Regardless, Plaintiff argues the "sting" of the statements would have been the
same with or without such explanatory language.
Even if the statements in the Business First article and the intemal memorandum
were seen as independent statements of fact, Plaintiff argues the Court should still order a
02 CVC-07-7653 4
App.0056
JNOV as Defendants did not present any evidence of actual malice, i.e., that Plaintiff
either knew the statements were false or that it recklessly disregarded substantial doubts
about the statements' truth. Plaintiff argues Defendants' reliance on the alleged ill-will
against them as Plaintiff s purported motive in filing suit is insufficient to establish actual
malice. Furthermore, Plaintiff argues Defendants failed to present any evidence that
these statements caused them harm that they otherwise would not have suffered. Plaintiff
maintains the three individual defendants testified that they did not know of anyone
outside of Leadscope who read the article and thought less of them as a result of it and
they were not aware that the internal memorandum had been seen by anyone outside of
ACS. Instead, Plaintiff argues the testimony indicated that the harm was caused by the
litigation, not by the Business First article or the internal memorandum.
Plaintiff echoes its absolute privilege and lack of actual malice arguments with
respect to Defendants' unfair competition counterclaim. It argues that, while finding that
the statements in the Business First article and the all-staff memorandum were subject to
the qualified privilege for purposes of the defamation counterclaim, the Court did not
instruct the jury that this qualified privilege also applles to the unfair competition
counterclaim. Plaintiff argues the qualified privilege is not limited to the defamation
context but "is intended to protect conduct from civil liabilitv; if its protections could be
avoided simply by assigning a different label to a cause of action, a qualified privilege
would provide no protection from liability for damages and thus would serve no
-puMqse." (Plt£ Motion, at 22.) Plaintiff argues the Court should have instructed the jury
that there could be no liability for unfair competition "upon `false' or `disparaging'
02 CVC-07-7653 5
App.0057
statements unless the jury found that ACS acted with actual malice;" according to
Plaintiff, there was "no evidence that ACS acted with actual malice." (Id., at 23.)
While Plaintiff acknowledges the existence of a second basis for liability on
Defendants' unfair competition counterclaim - malicious litigation - it nonetheless
argues Defendants did not present any evidence to indicate that this litigation was "an
objectively baseless sham" and the jury was not instructed on this issue. Plaintiff argues
it is constitutionally entitled to seek redress of its grievances in a judicial forum and
malicious litigation can give rise to liability for unfair competition only if the litigation is
"objectively baseless in the sense that no reasonable litigant could realistically expect
success on the merits" and the litigation "conceal[s] an attempt to interfere directly with
the business relationships of a competitor." (Id., at 24, quoting Professional Real Estate
Investors, Inc. v. Columbia Pictures (1993), 508 U.S. 49, 60-62.) Plaintiff argues the
Court's instructions to the jury, that it could find liability if Plaintiff "committed
malicious acts" or if the litigation was "not founded in good faith, but is for the purpose
of harassing and injuring a rival producing and selling the same commodities," did not
instruct the jurors to consider whether the litigation objectively lacked any basis.
Plaintiff argues that "[i]n this case, no reasonable and properly instructed jury could have
found that ACS's claims against defendants were `objectively baseless."' (Id., at 25.)
Plaintiff further argues that Defendants failed to provide proof that the damages sustained
were due to the filing of the lawsuit itself, as opposed to the statements made in the
pleadings.
Plaintiff also argues the Court should grant a JNOV with respect to Defendants'
unfair competition counterclaim because such a cause of action can be maintained only
02 CVC-07-7653 6
App.0058
by a competitor. Plaintiff argues Defendants did not present any evidence to establish
Plaintiff is a competitor of either the three individual defendants or of Leadscope.
Plaintiff maintains that, as Leadscope held the rights to the disputed patent and was the
only one marketing and licensing the product, the individual defendants, as employees of
Leadscope, do not have standing to bring forth an unfair competition counterclaim
against Plaintiff. Plaintiff further argues Defendants failed to bring forth any evidence to
establish that even Leadscope itself is a competitor of Plaintiff's, noting that Defendants'
expert, Rebekah Smith, did not include Plaintiff as one of Leadscope's competitors in her
damages-related report.
With respect to the tortious interference counterclaim, Plaintiff maintains this
counterclaim is based "primarily on statements in the pleadings ACS filed in this
litigation and secondarily on statements made during Dennis' telephone conversation
with Curtis Crocker." (Pltf. Motion, at 30.) With respect to the pleadings-related
statements, Plaintiff argues a JNOV is warranted as to this counterclaim based on the
absolute privilege/lack of actual malice argument that it previously raised concerning the
other counterclaims. As to the telephone statements to Curtis Crocker, Plaintiff argues
they, too, are absolutely privileged and they therefore cannot support Defendants'
tortious interference counterclaim. In addition, Plaintiff argues Defendants failed to
present sufficient evidence from which a reasonable jury could find that: 1.) third parties,
other than Crocker, broke off business relationships with Leadscope because of the
statements; and 2.) Dennis acted beyond the scope of Plaintiff's business when he made
the statements to Crocker, such that they were somehow improper or made with actual
malice. Plaintiff also questions the causation element with respect to this counterclaim,
02 CVC-07-7653 7
App.0059
arguing Crocker first learned of the lingering legal issues between the parties from
Defendants, and would also have leamed of those issues from the Business First article,
such that the subsequent statements by Dennis could not have damaged any business
relations, either with him or with potential lenders and/or customers.
Argument: Damages Awards are Duplicative, Based on Hearsay andSpeculation; Punitive Damages are Improper
Plaintiff argues the Court should also grant a JNOV as to the jury's verdict on
Defendants' counterclaims because the damages awarded rest "entirely on hearsay and
speculation." (Plt£ Motion, at 3.)
Plaintiff argues the damages awards were based on hearsay testimony with
respect to lost sales and financing opportunities, specifically citing to the testimony of
Myatt that various sales and financing deals fell through "because of the lawsuit," which
testimony Plaintiff argues could only come about due to Myatt's understanding of
another's out-of-court statements. Plaintiff argues that, as no testimony of any existing or
prospective customers or investors was presented during the trial, Defendants'
speculations as to lost sales are insufficient to support the jury's award of damages.
Plaintiff argues the objectionable hearsay and speculation also included the future
lost profits testimony of expert witness Rebekah Smith. Plaintiff maintains Smith
"simply took defendants' own optimistic predictions of spectacular success, discounted
them by a fraction, and then further assumed that Leadscope's failure to achieve those
spectacular predictions was caused solely by this litigation." (Id.) Plaintiff argues the
testimony was unreliable and therefore inadmissible as per Evid.R. 702. In addition,
Plaintiff argues Defendants failed to present any evidence of profit in the five years prior
02 CVC-07-7653 8
App.0060
to Plaintiff s alleged tortious conduct, thereby failing to satisfy the standard for recovery
of lost profits by a previously unprofitable company.
Plaintiff also argues the damages awards are duplicative, noting that the jury
awarded the three individual defendants the identical amount of compensatory damages
on the unfair competition counterclaim as they awarded them on the defamation
counterclaim. Plaintiff argues that, as Deferidants did not argue that the defamation and
unfair competition "resulted in separate and distinct injuries, it is clear that the jury's
award constitutes a double recovery for the same injury." (Id:, at 41.) Plaintiff notes that
defense counsel, when arguing against Plaintiff's proposed jury instruction on non-
duplication of damages, insisted that in the event of double recovery the Court could
remedy that issue post-trial. Plaintiff argues such a remedy is appropriate now in the
fonn of a JNOV. In support of its argument, Plaintiff cites to Cincinnati Bell Tel: Co. v.
Straley (1988), 40 Ohio St.3d 372, 377, 533 N.E.2d 764, for the well-settled maxim that
"a double recovery against a single wrongdoer for the same injury is not permitted;" as
well as to defense counsel's statements acknowledging as much on March 19, 2008. The
identical compensatory damages amounts; Plaintiff argues, show that the jury made no
distinction between the two torts or the injuries related to them, particularly in light of
Defendants' presentation of generalized damages - as opposed to specific damages -
associated with the two torts and the absence of a non-duplication instruction.
Plaintiff seeks a JNOV with respect to the punitive damages awarded as well,
_ a.rg'aing:1_ )_pur+;tivP darnages Fannotbe awarded for a_giYen claim in the absence of any
compensatory damages awarded for that claim; 2.) these punitive damages are not
appropriate regardless of the existence of compensatory damages, as Defendants failed to
02 CVC-07-7653 9
App. 0061
adduce clear and convincing evidence of actual malice so as to warrant punitive damages;
and 3.) the punitive damages violate state and federal limits and are unconstitutional,
further noting that the punitive damages awarded on the tortious interference
counterclaim are three times the amount of the compensatory damages and the alleged
conduct was not "especially reprehensible" to warrant such amounts.
2. JNOV on Jury's Finding of Bad Faith
Plaintiff also seeks a JNOV on the jury's finding that Plaintiff acted in bad faith
when it filed and pursued its trade secrets misappropriation claim, arguing that its
misappropriation claim was "not objectively specious" and was "not filed with subjective
bad faith." (Pitf. Motion, at 4.) Plaintiff argues this bad faith finding was based on
defense counsel's misleading arguments and not on the evidence presented.
Plaintiff explains that a finding of bad faith must be based on the satisfaction of a
two-prong test, whereby a party brings forth clear and convincing evidence of
1.) "objective speciousness," defined as the complete lack of evidence supporting a
plaintifi's claims; and 2.) "subjective bad faith," defined as a plaintiff's knowledge, or
recklessness in not knowing, that its claims have zero merit. Plaintiff notes that test was
set forth in Gemini Aluminum Corp. v. Cal. Custom Shapes (2002), 95 Cal. App. 4th
1249, and followed in Contract Materials Processing v. Kataleuna GmbH Catalysts (D.
Md. 2002), 222 F. Supp. 2d 733. Plaintiff argues the Court "itself rejected the notion that
ACS's claims are 'objectively specious' when it denied (1) defendants' summary
ju,dgment_and directed verdict motions with respect to defendant Johnson *** and (2)
defendants' directed verdict motion with respect to the misappropriation by all
defendants," thereby implicitly recognizing that Plaintiffs claims had sufficient
02 CVC-07-7653 10
App. 0062
evidentiary support to go to trial. (Pltf. Motion, at 47.) In addition, Plaintiff argues it
presented sufficient evidence of trade secrets, which were not generally known by others,
and evidence that the alpha test feedback was valuable, confidential, business
information, along with evidence of the misappropriation of the same by Defendants.
Plaintiff argues this evidence, along with evidence of similarities between its PathFinder
technology and Leadscope's products, all indicate that there was a non-specious basis for
its alaims and conduct. Plaintiff argues there is also substantial evidence of subjective
good faith, as evidenced by the fact that this litigation has been lengthy and hard-fought
and that Plaintiff s claims survived extensive pre-trial and trial motions.
3. New Trial
Plaintiff argues a new trial on its claims and on Defendants' counterclaims is
warranted under Civ.R. 59(A) regardless of whether or not the Court grants its request for
JNOV because the jury's verdict "resulted from defense counsel's inflammatory
arguments and the prejudicial admission of irrelevant, inflammatory evidence, and
because the verdict contradicts the great weight of the evidence and manifests improper
passion and prejudice." (Pltf. Motion, at 4.)
Plaintiff maintains the jury verdict of bad faith was the result of prejudicial error.
Plaintiff explains that the error consisted of defense counsel's improper comments during
closing arguments, which misrepresented critical testimony and created false evidence of
bad faith. Specifically, Plaintiff argues defense counsel misrepresented the testimony of
Robert Swann when counsel told the jurors during closing arguments that Swann, the
"number two guy" at ACS, told Massie, the "number one guy" at ACS, that there was no
evidence to support Plaintiff's claims. In fact, Plaintiff argues, Swann testified that he
02 CVC-07-7653 11
App. 0063
did not know whether Defendants developed the Leadscope technology on their own.
Plaintiff argues defense counsel also employed inflammatory remarks that unfairly
tainted the jury's consideration of bad faith. Those remarks, Plaintiff argues, included the
following: 1.) describing Plaintiff s attempts to settle this dispute as "walk[ing] up to you
with a shotgun;" 2.) calling Massie "million dollar Massie;" and 3.) reading an
inflammatory poem during closing arguments while crying.
Also on the issue of bad faith, Plaintiff argues the Court erred in not instructing
the jury to determine bad faith as to each defendant. Plaintiff cites to two of the
questionst that the jurors asked during deliberations and argues the Court should have
instructed the jury that "it could parse out bad faith with respect to each defendant;
instead, it instructed the jury that it should base its verdict on ACS's actions." (Pltf.
Motion, at 57.) Plaintiff argues the "refusal to instruct the jury to parse out bad faith
separately as to each defendant is synonymous with refusing to submit jury
interrogatories," thereby warranting a new trial. (Id.)
Plaintifffurther argues Defendants' R.C. §2923.32-based claim, alleging a pattern
of corrupt activities (hereinafter "POCA claim"), should not have been allowed to
proceed to trial. Plaintiff argues there can be no such claim unless there is a separate
enterprise, other than an unincorporated division or branch office of the entity itself, with
which the entity then engages in activity. Plaintiff argues defense counsel's statements in
opening, that this case is about extortion and intimidation and that the pre-litigation
settlement negotiations amounted to an armed robbery, watrant a new trial in this matter.
The jurors asked a number of questions during deliberation, including the following:
1.) Are we to consider the bad faith question with all defendants at once or separately? and2.) If we feel that some but not all of the claims are pursued in bad faith, how should we rule?
(Trial Transcript, Vol. XXXV, at 6.)
02 CVC-07-7653 12
App.0064
Plaintiff notes that the Court was "somewhat troubled" by this opening statement and
should have granted a mistrial at that point. Plaintiff argues defense counsel's improper
statements continued even after the Court granted judgment in favor of Plaintiff on
Defendants' POCA counterclaim, as defense counsel argued in closing that Plaintiff had
committed extortion and engaged in witness intimidation.
In addition, Plaintiff argues Leadscope's contention that Plain6ff brought criminal
charges against its founders should have been excluded from evidence. Plaintiff
maintains Defendants' false claims that it instigated and then abandoned criminal
prosecution against them warrant a new trial, as Plaintiff did not bring criminal charges
against any defendant at any time.
Likewise, Plaintiff argues Leadscope's insurance coverage issues should have
been excluded from evidence. Plaintiff contends its request for leave to file an amended
complaint on December 4, 2006 - at which time the three-year-long stay in this action
was lifted - wis sought in order to "streamline its claims and promote judicial economy
by deleting clanns for breach of fiduciary duty and conversion." (Pltf. Motion, at 62.)
Plaintiff also notes Defendants did not oppose that request. Plaintiff argues defense
counsel used this amended pleading to assert that Plaintiff wrongfully attempted to
deprive Defendants of insurance coverage, which resulted in prejudice that calls for a
new trial. Plaintiff argues there is no tort in deciding not to sue someone and its decision
not to pursue those claims was irrelevant to any of the issues before the jury. While
acknowledging that the Court did not allow Defendants to get into the reasons why
Plaintiff amended its complaint, Plaintiff notes defense counsel argued during closing
02 CVC-07-7653 13
App.0065
argument that the only reason the complaint was amended was to cut off Defendants'
insurance coverage.
Plaintiff also argues a new trial is in order because the jury's verdict is not
supported by the weight of the evidence presented and because the damages awards were
the result of passion and prejudice. Plaintiff maintains all of its arguments pertaining to
its request for a JNOV also apply to its request for a new trial, again citing to its absolute
privilege/lack of actual malice evidence arguments, as well as its causation and "parties
not competitors" argurnents.
4. Remittitur
Finally; Plaintiff requests a remittitur of the jury's award of compensatory and
punitive damages, arguing the verdict was so extraordinary that "it merited a banner
headline in the local newspaper." (Pitf. Motion, at 5.) Plaintiff argues the amount of the
damages awarded indicates the jury "misconceived its function," and the Court should
therefore order a remittitur of the damages to an amount that is consistent with the facts
and the law. Plaintiff explains that a remittitur "is the proper remedy if the Court does
not grant a new trial on the ground that the verdict was given under the influence of
passion or prejudice and the prejudicial taint of defense counsel's conduct." In support of
that argument, Plaintiff cites to Harris v. Mt. Sinai Medical Center, 116 Ohio St.3d
139, 2007-Ohio-5587, 876 N.E.2d 1201, and Wightman v. Consol. Rail Corp. (1999), 86
Ohio St.3d 431, 715 N.E.2d 546. Plaintiff argues "[i]t would be unjust to award this
wndfall_and_place defendants in a better position than they would have been in if ACS
had never filed suit," and requests that the Court exercise its discretion to remit the
02 CVC-07-7653 14
App.0066
damage awards "if it does not grant judgment notwithstanding the verdict or a new trial
on the grounds outlined supra." (Pltf. Motion, at 67.)
Defendants' Memorandum in Ooaosition
On May 28, 2008, Defendants responded with their own 76-page "Memorandum
in Opposition to Plaintiff's Motion for Judgment Notwithstanding the Verdict on
Defendants' Counterclaims and as to the Finding of Bad Faith, and Motion for New Trial
as to All Claims, or (in the Alternative) for Remittitur." Defendants argue that none of
Plaintiff s requests - for JNOV, a new trial or a remittitur - should be granted as none of
them are warranted. While Defendants acknowledge the jury verdict was
headline-grabbing, they nonetheless argue newsworthiness alone is not a basis for a post-
trial motion. Having been previously publicly branded as thieves, Defendants maintain
their vindication was newsworthy but they argue the trial that led to their vindication,
while long and contentious, "proceeded in accordance with the law, and the jury only
considered evidence properly and appropriately before it "(Defts. Memo. Contra, at 2.)
Defendants maintain they presented overwhelming evidence that refuted
Plaintiff's claims of misappropriation of trade secrets and breach of contract and
supported a firiding of bad faith against Plaintiff. Defendants explain that the central
issue in this action was whether the Leadscope patent was the product of Defendants'
"tireless and independent labor" or whether it was the result of misappropriated trade
secrets that belonged to Plaintiff. Defendants argue the evidence they presented showed
the jury that the Leadscope technology was the product of Defendants' independent
development. In addition to the individual defendants' denial of any wrongdoing,
Defendants argue the following supports the jury's verdict and findings: 1.) the
02 CVC-07-7653 15
App.0067
notebooks each individual defendant compiled, chronicling his own independent creation
and contribution to the Leadscope technology, were not reviewed or analyzed by any of
Plaintiff s experts; only Defendants' expert, Dr. Martin Rinard, examined them and
considered them in generating his conclusions; 2.) Michael Petras, ACS employee and
member of the PathFinder team, testified that all of the novelty of the PathFinder - the
software program upon which Plaintiff alleged the Leadscope technology was based -
was disclosed in a 1996 article about PathFinder, authored by Blower, Myatt and Petras;
3.) Plaintiff s expert, Dr. Anton Hopfinger, testified that all of the key features of
PathFinder were disclosed in the 1996 article; and 4.) testimony revealed PathFinder was
also disclosed and exhibited during customer visits and alpha testing, that non-disclosure
agreements during customer visits were discretionary, and that a demonstration of
PathFinder in the absence of a non-disclosure agreement constituted a "public
disclosure."
Defendants argue Plaintiff also, in addition to failing to establish trade secrets, did
not prove misappropriation. They note that Dr. Yalamanchili, Plaintiff's only expert
qualified to examine the source codes of the two products in detail, did not do so.
Instead, Defendants argue he compared the source codes at a high level and concluded
that there were no algorithms in common, other than the "operational flow" of processing
data prior to visualizing it, which flow the expert admitted was disclosed in the 1996
article. Defendants note their own expert, Dr. Rinard, extensively reviewed the two sets
of source codes and found no copying between them. Defendants argue this evidence,
despite Plaintiff's counsel's manipulation of the screen shots of PathFinder to make them
appear more like Leadscope - which Defendants argue did not "fool" the jury - supports
02 CVC-07-7653 16
App. 0068
the jury's verdict in favor of Defendants on Plaintiffs claims, including the jury's fmding
of bad faith.
Defendants argue they also presented overwhelming evidence in support of their
counterclaims, including evidence of malice that was sufficient to support the jury's
award of punitive damages. Defendants emphasize that their evidence revealed that this
action was not about trade secrets but about eliminating a smaller competitor, which
Defendants argue Plaintiff attempted to accomplish by this litigation, particularly the
timing of it. Defendants maintain their evidence showed the jury that Plaintiff was aware
of the Leadscope technology as early as March 1999, when the product was first
demonstrated at a conference attended by PlaintifPs representatives, two of whom
received a demonstration of the product and reported their observations back to Plaintiff.
Defendants maintain their evidence revealed that Plaintiff wrote about the Leadscope
software in one of its publications in the fall of 1999, and that Defendants, in the fall of
2000, published a lengthy article about their product in one of Plaintiff's joumals,
providing details about the technology behind the product, the user interface and how the
product would be used. While an employee of the Chemical Abstracts Services reviewed
this article and e-mailed O'Kom and Swann at ACS, alleging the software utilized ideas
"similar" to those at CAS, Defendants argue the evidence showed Plaintiff took no action
against them at this time. Even when Plaintiff had full knowledge of Defendants' patent
application in January 2001, and when the patent issued in November 2001 - even
t.hough_O'Komadmittedthe_patentprovided all Plaintiff needed to understand the
Leadscope product - Defendants argue Plaintiff took no action against them.
02 CVC-07-7653 17
App. 0069
Defendants maintain the evidence revealed that Plaintiff waited until Leadscope
was most vulnerable - when sales were increasing and when it was about to close on
much-needed financing - to threaten litigation containing civil and criminal allegations
along with "fast and furious publicity" against Leadscope, to actually file an action
against Leadscope and the three individuals, and to disseminate false statements about
them in, among other things, an article in Business First magazine, in Nature magazine,
and in a memorandum that went out to 1,300 to 1,900 of Plaintiffs employees who are
spread out all over the world. Along with the evidence that indicated Plaintiff kept track
of Leadscope's fmancing needs and struck out against it at a time when there would be
maximum disruption to its financing deals, Defendants argue they presented sufficient
evidence from which the jurors could reach the verdict that they reached and from which
they could find bad faith on the part of Plaintiff. Defendants also argue they presented
sufficient evidence of the long-lasting consequences of Plaintiffs actions in terms of
damages to Defendants, including, among other things: 1.) financing on terms less
favorable to Leadscope; 2.) inability to sell multi-year subscriptions of the "Enterprise"
software after the filing of the lawsuit; 3.) customers exhibiting "negative buying signs"
and wanting to discuss the lawsuit instead of the product; and 4.) the personal damages
suffered by the individuals in terms of their names being linked to allegations of theft,
made all the more permanent by Google and "the computer age," thereby creating doubts
about their character, honesty and integrity.
1. JNOV Not Warranted
Defendants argue the jurors were presented with abundant evidence on all of the
issues, the evidence was properly before them, and the jurors were correctly instructed
02 CVC-07-7653 18
App.0070
with respect to the same. Therefore, Defendants argue the jury's verdict on their
defamation, unfair competition and tortious interference counterclaims should be upheld,
the damages associated with those counterclaims should be upheld, and the jury's finding
of bad faith should likewise be upheld.
Defamation
Defendants argue the statements that form the basis for the jury's finding in their
favor on their defamation counterclaim - the statements in the Business First article and
the all-staff memorandum - are not absolutely privileged, are false and were made with
actual malice.
Defendants argue Ohio law clearly establishes that extra-judicial statements are
only privileged, and then only qualifiedly privileged, if made to those directly interested
in the proceeding. Defendants note R.C. §2317.05 provides that reports of judicial
proceedings are afforded only a qualified privilege; therefore, the argument continues, the
statements to the press in the Business First article are not absolutely privileged.
Contrary to Plaintiffs assertions, Defendants argue such statements are not absolutely
privileged even if they simply repeat allegations in judicial proceedings, as caselaw2
establishes that the republication of a privileged statement outside the judicial proceeding
is not privileged. Defendants maintain the statements in the Business First article and the
all-staff memorandum were not made to those "directly interested" in this litigation, as
merely being a reporter or the public at large, or even the employee of a party (unless the
= in support thereof, Defendants cite to: Kennedy v. Zimmerman (Iowa 1999), 601 N.W.2d 61, 66;
Cappello v. Scott (N.1. Super.Ct. 1994), 274 N.J. Super. 282, 284; Bocherto Y. Gibson (Pa. 2004), 860 A.2d
67,69-73.
02 CVC-07-7653 19
App. 0071
employee is a potential witness3 or the suit is maintained on behalf of the employee),
does not make that person or entity someone who is "directly interested" in the litigation.
Defendants also argue the statements were false, as they alleged that Defendants
"sought and received a patent for technology indistinguishable from a project on which
they worked while employees of the Society's Chemical Abstracts Services * * * " and
that Plaintiff's motivation in filing suit was "to acquire back the protected infotmation
that [Defendants] took from [it]." Defendants maintain Plaintiff s attempt to re-write
those statements as if prefaced "by the purportedly all-absolving qualifier `In the lawsuit
we filed, we alleged... "' is unavailing for two reasons. (Defts. Memo. Contra, at
19-20.) First, Defendants maintain Plaintiff s argument that statements that are accurate
descriptions of allegations in judicial proceedings are "true" descriptions of the
allegations and therefore not actionable, regardless of any qualified privilege that may
apply to them, renders R.C. §2317.05 a nullity and transforms the absolute privilege into
a qualified privilege. Second, Defendants argue Ohio caselaw establishes that a
statement is not "true" simply because it accuratety describes or repeats a defamatory
statement. 4 Defendants contend Plaintiff misses the point that it is the truth or falsity of
the underlying allegations themselves that is central to a determination of defamation. In
any event, as the jury found that Plaintiff's motivation in filing suit was to destroy
Defendants, and as Plaintiff never alleged let alone established that Leadscope was
' In any event, Defendants argue the memorandum was sent to all staff, all over the globe, not justto tfioseemployees who may have been witnesses in this proceeding.
" In support thereof, Defendants cite to: Stresen-Reuter v. Hull (August 3, 1990), Sandusky App. No. S•89-
27, 1990 Ohio App. LEXIS 3213; Theiss v. Scherer (e Cir. 1968), 396 F.2d 646; Willrarns v. Waller (Dec.
26, 1996), Cuyahoga App. No. 69069, 1996 Ohio App. LEXIS 5830; Jackson v. City ofColumbus, 117
Ohio St.3d 328, 2008-Ohio-1041, 883 N.E.2d 1060.
02 CVC-07-7653 20
App. 0072
"indistinguishable" from PathFinder, Defendants argue the at-issue statements are not
even superficially true.
Finally, Defendants argue the statements were made with actual malice and they
presented sufficient circumstantial evidence of the same. Defendants again argue that the
timing of the statements and litigation, when compared with the amount of information
Plaintiff possessed about the Leadscope technology and the amount of time that lapsed
between its discovery of such information and its actions - particularly when correlating
the same with Defendants' fmancing needs - was sufficient for the jury to, at the very
least, reasonably infer that Plaintiff had serous doubts about the truth of its allegations.
Defendants maintain the evidence that established "ACS had no basis for its false
allegations," when coupled with the "abundant evidence of ACS' 'ill will' and `hatred,"'
was sufficient for the jury to fmd that Plaintiff "knew its defamatory statements were
false when it made them, or at least had serious doubts as to their truth." (Defts. Memo.
Contra, at 26.)
In light of the foregoing, Defendants maintain the jury properly awarded damages
on their defamation counterclaim. They argue the Court properly instructed the jurors
that they could award "damages, if any, that were proximately caused to it by ACS's
defamatory statements," and the jurors carefully determined the proper amount of
damages caused by the defamatory statements. Defendants note, however, that the at-
issue statements were defamatory per se and damages are presumed and need not be
proven_when-thestatements ate defamatory per se. Regardless, Defendants argue the
evidence established that the at-issue statements, which were targeted so as to inflict
maximum harm, impaired their reputations and caused them personal humiliation, shame
02 CVC-07-7653 21
App.0073
and mental anguish, as they were disseminated to thousands of their &iends, co-workers
and colleagues around the world. Defendants argue the jury carefully considered the
evidence associated with their defamation counterclaim, finding the statements in the
Business First article to be actionable but not those in the Nature magazine. Defendants
also note that the jurors, contrary to Plaintiff's assertions, did not award damages for all
lost profits and all other loss incurred, as Defendants established lost profits and lost exit
value for Leadscope in excess of $36 million, but the jurors awarded Leadscope only $10
million on its defamation counterclaim.
Unfair Competition
Defendants argue the jury's verdict and damages awards on their unfair
competition counterclaim should be upheld because: 1.) the jury was correctly instructed
on the Ohio standard related to unfair competition; 2.) the evidence paralleled that
standard and supported the verdict; and 3.) Plaintiffs Noerr-Pennington defense is
untimely and improper and does not alter the jury's verdict or warrant a JNOV or new
trial.
Defendants explain that their unfair competition counterclaim was based on the
evidence of "unfair commercial practices such as malicious litigation, circulation of false
rumors, or publication of statements, all designed to harm the business of another,"
referring to the Ohio Supreme Court's description of the common law concept of unfair
competition in Water Management, Inc. v. Stayanchi (1984), 15 Ohio St.3d 83, 472
N.E.2d 715, and Drake Medicine Co. v. Glessner (1903), 68 Ohio St. 337. Defendants
argue their counterclaim, contrary to Plaintiff's attempt to limit their evidence, was based
not only on the contents of the statements contained in the Business First article and the
02 CVC-07-7653 22
App.0074
all-staff memorandum but also on Plaintiff s underlying course of conduct. Therefore,
Defendants contend Plaintiff's arguments pertaining to issues of privilege are irrelevant
to their unfair competition counterclaim.5
Defendants argue they presented ample evidence of unfair competition, again
emphasizing the timing of Plaintiff's conduct as playing a key role in the jury's verdict.
Defendants maintain the evidence revealed that they "made no secret about their
technology," having made 15 presentations, published five peer-reviewed articles and
attended eight public exhibitions and conferences where they demonstrated their
technology. Despite all of that, Defendants argue the evidence established that it was not
until after Defendants obtained their patent, after the Governor mentioned Leadscope in a
speech and expressed his intention to visit, and precisely at the time when Leadscope
needed such endorsements and financing, that Plaintiff sought to unfairly compete with
Defendants and interfere with their financing deals. In addition to the e-mail to the
Governor, Defendants cite to the following as examples of evidence from which the
jurors could have inferred that Plaintiff unfairly competed with Defendants: 1.) Dennis'
statement to Crocker that there were "lingering issues" regarding Leadscope and
Crocker's subsequent failure to invest in Leadscope; 2.) the April "settlement
negotiations" described by Defendants as "extortion," where Dennis threatened to file a
complaint that included civil and criminal allegations and "fast and furious publicity;"
and 3.) Plaintiff s dismissal of the conversion claim (upon which insurance defense
° In support of their argument Defendants cite to Campetitive Technologies v. Fujitsu Ltd. (N.D. Cal.
2003), 286 F. Supp. 2d 11 I8. They note that the court in that case addressed the interplay between unfaircompetition and the qualified privilege and noted that, as in the case at bar, the unfair competition claim"was not 'based squarely on a privileged communication,' the qualified privilege did not apply and the
claimed privileged statements were 'evidence of the underlying course of conduct rather than as the actual
source of the harm[, ... and] the privilege . .. does not apply."' (Defts. Memo. Contra, at 34, quoting
Competitive Technologies, 286 F. Supp. 2d at 1154.)
02 CVC-07-7653 23
App.0075
coverage was based) immediately after Defendants prevailed in their coverage dispute
with the insurer. In addition, Defendants argue they presented ample evidence of
causation, referencing previously-discussed damages suffered by the corporation and the
individual defendants, and the expert testimony pertaining to the same.
Defendants also argue they were all competitors of Plaintiff, arguing Plaintiff s
"selective record quotations misrepresent the full extent of evidence regarding [their]
position as competitors." (Defts. Memo. Contra, at 38.) In addition to the Columbus
Molecular Software Business Plan and the testimonies of Smith and Jacobs, which
Defendants argue establish that Leadscope is Plaintiffs competitor, Defendants argue
that the individual defendants are also competitors, as PlaintifPs own expert witness
testified that patents can only be applied for by inventors, not by corporations, and the
three individuals are the ones who invented the Leadscope technology. Defendants
further note Plaintiff s position on this issue is contrary to its previous position, as
Plaintiff itself brought an unfair competition claim6 against Defendants - thereby
recognizing them as competitors - yet it now argues the individual defendants cannot
bring the same claim against it because they are not its competitors.
Finally, Defendants argue Plaintiff's Noerr-Pennington defense is meritless.
Defendants explain that Plaintiff s"improper instruction" argument in support of its
request for a JNOV specific to the unfair competition counterclaim is based on the
principles underlying the Noerr-Pennington doctrine. Defendants further explain that
"[t]heNoerr-Pennington doctrine, which otherwise shields a party from liability for filing
6 On January 24, 2008, the Court granted Defendants' motion for judgment on the pleadings with respectto this claim, finding Plaintiffs common law unfair competition claim was pre-empted by Ohio's UniformTrade Secrets Act because the claim was based on the same or substantially same facts and allegations as
those underlying Plaintiff s misappropriation of trade secrets claim.
02 CVC-07-7653 24
App.0076
a suit if there exists an objectively reasonable basis for the suit, is an afJfrmative defense
that is waived if not asserted prior to trial." (Defts. Memo. Contra, at 40.)^ As Plaintiff
did not present this affirmative defense in its pleadings, in its motion for summary
judgment, or even in its proposed jury instructions, Defendants contend Plaintiff "cannot
now object to the jury's failure to decide it," further arguing that Plaintiff s own omission
caused the alleged error, if any. (Id., at 41.) Defendants also note that the doctrine
applies under federal law and deals with potential antitrust liability. As no Ohio court has
applied the doctrine to a common law unfair competition claim, Defendants argue the
same cannot substitute Ohio's established standard for an unfair competition claim. Even
if the doctrine could have been asserted herein, Defendants argue Plaintiff's argument
regarding "sham litigation" 'is particularly unavailing given the jury's finding of ACS'
bad faith in bringing its misappropriation of trade secrets claim." (Id., at 42.)
Tortious Interference
Defendants argue the jury was also properly instructed about the tortious
interference counterclaim and they presented sufficient evidence to establish all of the
elements: an existing or prospective business relationship with an identifiable third party,
PlaintifP s knowledge of it and intent to adversely interfere with it, improper conduct, and
injury as a result thereof. Defendants maintain that, although Leadscope only needed to
identify a class of third parties with whom it expected to do business, the evidence
identified both, a class of financiers with whom Leadscope expected to do business and a
spec3. c third_pa.,+y,?,e., Curtia Crocker. Defendants argue the evidence also established
that Plaintiff knew of these existing or prospective relationships, as Massie's e-mail to the
' in support thereoi Defendants cite to: Bayou Fleet, Inc. v. Alexander (5` 0r. 2000), 234 F.3d 852, 860;
North Carolina Elec. Membership Corp. v. Carolina Power & Light Co. (41° Cir. 1981), 666 F.2d 50, 52; In
re Cardizem CD Antitrust Litig. (E.D. Mich. 1999), 90 F. Supp. 2d 819, 840.
02 CVC-07-7653 25
App.0077
Governor and other testimony throughout the trial revealed that Plaintiff was monitoring
Leadscope's financing needs and knew of the impending financing rounds. Defendants
maintain the evidence also established improper interference, arguing the interference
was not based on the content of the statements to Crocker but on PlaintifPs course of
conduct that disrupted Leadscope's business relationships. Finally, Defendants argue
sufficient evidence of causation and damages supports the jury's verdict, specifically
noting that "Mt. Crocker did not invest in Leadscope because Mr. Dennis refused to meet
with Mr. Crocker to continue discussions, leaving the 'lingering issues' unresolved," and
Leadscope was damaged by that in terms of financing that proceeded on less favorable
terms, and its inability to obtain bank loans. (Defts. Memo. Contra, at 46.)
Damages
On the issue of damages, Defendants argue the jury properly awarded
compensatory and punitive damages. Defendants take issue with Plaintiff's argument
that the jury's damages were awarded based on hearsay evidence. Defendants argue the
testimony reflected one aspect of the understanding of the hearer of the statements as to
why Leadscope lost sales after the lawsuit was filed, not that what the other person said
was true. Furthermore, Defendants argue they presented additional evidence and
testimony, which revealed that: 1.) sales dropped after the lawsuit; 2.) while before the
lawsuit "scientists" were able to sell multi-year Leadscope Enterprise deals, after the
lawsuit was filed an accomplished businessman could not do the same; 3.) the poor sales
*esultedinlossof tax cre_dits, layoffs and reduced salaries; 4.) after the lawsuit, customers
wanted to discuss the lawsuit and not the product, thereby exhibiting "negative buying
signs;"
02 CVC-07-7653 26
App. 0078
5.) investors were no longer interested in investing in Leadscope after the lawsuit; and
6.) at least seven mergers and/or acquisitions did not go through after the lawsuit. Based
on all of that, Defendants argue reasonable minds could conclude that Leadscope lost
profits and suffered damages.
In addition, Defendants argue the damages calculations presented by their expert,
Rebekah Smith, were fully supported by the evidence. Contrary to PlaintifPs assertions,
Defendants argue Smith did not simply assume that Leadscope would meet or exceed its
own projections. Instead, Defendants contend Smith "adjusted her calculations to make
them more conservative and to account for business challenges unrelated to the lawsuit,"
citing specifically to her downward adjustment of the March 2002 projections, her 35%
discount rate for other business risks, and her reduction of projected sales from $68
million to $14 million. (Defts. Memo. Contra, at 50.) Furthermore, Defendants note
Plaintiff cross-examined Smith and presented the rebuttal testimonies of three experts of
its own. In the end, Defendants argue the determination of damages is a matter within the
discretion of the jury, further noting that although Smith concluded Leadscope suffered
approximately $36.6 million in damages, the jury awarded Leadscope a significantly
lower amount of compensatory damages at $11.5 million.
Defendants also oppose Plaintiff s argument that the compensatory damages
awarded to the individual defendants on the defamation and unfair competition
counterclaims are duplicative. Defendants argue these are distinct torts with different
-elernent.aand_the awards are not duplicative simply because the jury awarded the
individual defendants the same amount of compensatory damages for both. They
maintain that, "[w]hen the actions of a party give rise to more than one cause of action,
02 CVC-07-7653 27
App.0079
the wronged party can recover for the breach of multiple duties." (Defts. Memo. Contra,
at 52.)$ Defendants argue the jury, pursuant to the Court's instructions, considered
defamation and unfair competition separately and found the conduct associated with the
unfair competition to be "more reprehensible, requiring a higher amount of punitive
damages." (Defts. Memo. Contra, at 53.) Furthermore, they argue the jury could very
well have calculated a total award amount and have divided that up among the various
torts, such that equal amounts could be associated with the individuals' compensatory
damages on the two counterclaims without those awards constituting double recovery.
Defendants also argue the jury properly awarded punitive damages, as the trial
was "replete with evidence of ACS' `hatred,' 'ill will,' 'spirit of revenge' and 'conscious
disregard,"' specifically citing to the evidence pertaining to the timing of the lawsuit, the
testimony that the lawsuit was based on Massie's "conjectures" and not on facts
supporting the allegations, that Plaintiff monitored Leadscope's financing needs and
struck at a time when it could do the most damage, and that Massie threatened Blower's
pension. (Id., at 54-55.) Defendants argue reasonable minds could come to more than
one conclusion based on that evidence, and could therefore find malice and bad faith
based on the same. Defendants also argue that the amount of the punitive damages is
proper, as the determination of that amount - meant to serve two purposes, punishment
and deterrence - is within the discretion of the jury. Defendants further note that the ratio
' Specifically, Defendants cite to the follawing text, °[o]rdinarity a double recovery against a singlewrongdoer for the same injury is not permitted, but the double recovery doctrine is not applicable where asingle act caused a breach of two duties, one in contract and one in tort," noting that Plaintiff only cited thelanguage up to the phrase "is not permitted." Cincinnati Bell Tel. Co. v. Straley (1988), 40 Ohio St.3d 372,
377, 533 N.E.2d 764, citing Midvale Coal Co. v. Cardox Corp. (1949),152 Ohio St. 437, 89 N.E.2d 673, at
paragraph four of the syllabus.
02 CVC-07-7653 28
App. 0080
of the punitive to compensatory damages is not so high as to be deemed unconstitutional
in light of applicable caselaw.9
Bad Faith
Finally, Defendants maintain the jury's finding of bad faith should be upheld, as
the jury correctly found that there was no misappropriation of trade secrets and that
Plaintiff pursued that claim in bad faith. Reaffirming the arguments discussed above,
Defendants argue Plaintiff never proved the existence of trade secrets, as the novelty of
PathFinder was disclosed in the 1996 article and in demonstrations to potential customers
who did not sign non-disclosure agreements, and Plaintiff never proved misappropriation.
Furthermore, Defendants contend they presented sufficient evidence of objective
speciousness on the part of Plaintiff in brining the misappropriation of trade secrets
claim, from which evidence reasonable minds could find bad faith. Defendants argue the
evidence also established subjective bad faith, specifically citing to Swann's testimony
that "Mr. Massie was `avid' about his claims against Defendants, taking the situation
`personally,' resulting in something that was `not a good situation' at CAS." (Defts.
Memo. Contra, at 60.) Defendants argue the timing of the lawsuit provides additional
support for the jury's finding of subjective bad faith.
2. New Trial Not Warranted
Defendants also argue that the trial proceeded in accordance with the law and the
jury's verdict was not based on improper evidence, such that no new trial is warranted.
They_maintain Plaintiff received a fair trial, without any prejudicial errors. Defendants
' Defendants cite to the punitive to compensatory damages ratios in Dardinger v. Anthem Blue Cross &
Blue Shield, 98 Ohio St.3d 77, 2002•Ohio-7113, 781 N.E.2d 121, and BMW ojNorth America v. Gore(1996), 517 U.S. 559, which were 125 to I and 500 to 1, respectively. Comparatively, Defendants arguethe 0.4 to I ratio herein (3 to 1, if considering the tortious interference award separately) is not so high as to
be considered unconstitutional.
02 CVC-07-7653 29
App. 0081
contend there were no irregularities and their counsel's closing remarks were not
inappropriate. Those remarks, the argument continues, were based on the record as a
whole and not on the selective portions identified by Plaintiff. Specifically, Defendants
maintain their counsel's closing remarks about Massie's million-dollar compensation
were based on the video testimony of his boss, Madeline Jacobs, and the remarks about
the lack of support for the allegations asserted were based on Swann's testimony that the
allegations were "simply the conjecture of Mr. Massie" and he was aware of "no facts to
fully support these allegations." Meanwhile, Defendants argue counsel's statements
during opening about the "settlement negotiations" were based on Myatt's
characterization of them as "extortion" and Johnson's deposition testimony.10 In any
event, Defendants argue counsel is afforded great latitude in the presentation of closing
arguments and the reading of a poem is not irnproper, further noting that Plaintiff waived
any objections it may have regarding counsel's remarks, having failed to make
contemporaneous objections regarding the same."
Defendants argue the Court also correctly instructed the jury on bad faith in
response to the two questions identified by Plaintiff. While Defendants note Plaintiff
objected at the time as to whether the questions related to Verdict Form 2(E), the Court
resolved the objection by assuming that the question related to that verdict form and
instructed the jurors appropriately. Furthermore, Defendants note the Court in its answer
largely adopted the language suggested by Attomey Masters and included the language
10 When asked about those settlement negotiations during his August 28, 2007 deposition, Mr. Johnsondescribed them as follows: "if I'm holding a gun to your head and you're asking me to give you somethingthat I have not stolen but is rightfully mine, is that fair negotiation?" (Johnson Depo., at 38.)
" In support thereof, Defendants cite to Messenger v. Timko, Belmont App. No. 07 BE 13, 2007-Ohio-
6914, at 9 16, citing Snyder v. Stanford (1968), 15 Ohio St.2d 31, at paragraph three of the syllabus.
02 CVC-07-7653 30
App. 0082
"in bringing the trade secrets claim." As Plaintiff did not propose or request any
additional interrogatories at that time, Defendants argue Plaintiff either waived its
objection related to the Court's answers to these two jury questions or it invited the error
of which it now complains by suggesting language the Court used in its answers. In
either event, Defendants argue the Court's instructions to the jurors in response to these
questions do not warrant a new trial.
Defendants argue the evidence presented conceming their POCA claim was
proper and counsel's reference thereto was not inapproptiate as the evidence would have
been admissible even if the POCA claim had not proceeded to trial. Defendants maintain
they presented sufficient evidence of CAS's separate existence from ACS, specifically
referencing evidence concerning their different headquarters, e-mail accounts, letterhead
and business cards, their different accounting and legal personnel, and even their different
purposes, as ACS is a non-profit academic and scientific organization while CAS's
purpose is to make money. Defendants note the determination of a separate entity for
POCA purposes is a fact-intensive examination of various factors and the issue was
properly before the jury. Defendants argue they also presented sufficient evidence of
extortion, referencing evidence pertaining to PlaintifPs threats to file civil and criminal
allegations, and Plaintiff's demand of the Leadscope patent and $1 million even though
Plaintiff knew Defendants did not have the money. Defendants also maintain they
presented sufficient evidence of witness intimidation in terms of Plaintiff monitoring
CASemployees' e-mails and telephone calls to find out if any of them were
communicating with Defendants and then calling those employees in to meet with
Human Resources personnel. In any event, Defendants argue this evidence was properly
02 CVC-07-7653 31
App. 0083
before the jury even if there was no POCA claim, as the evidence was relevant to their
ability to establish that Plaintiff acted in bad faith and to show PlaintifPs malicious
litigation efforts.
With respect to the references to the "criminal allegations," Defendants argue the
Court correctly allowed them to present evidence of the fact that: 1.) criminal allegations
against them were threatened; 2.) the threat was carried out in that the original complaint
contained allegations that Defendants violated R.C. § 1333.81, which is a criminal statute
that carries criminal penalties; and 3.) Plaintiff dismissed the count containing the
criminal allegations years later. This evidence, Defendants argue, was relevant to their
unfair competition counterclaim as it addressed unfair commercial practices such as
malicious litigation, i.e., the bringing of a claim not in good faith but for the purpose of
destroying a rival. Despite Plaintiff s arguments to the contrary, Defendants argue
R.C. § 1333.81 is a criminal statute and alleging one has violated that statute is an
allegation of criminal wrongdoing.
Defendants also argue the jury properly heard evidence about the fact that
Plaintiff amended its complaint to drop its claims of conversion and breach of the duty of
loyalty right after Defendants, having litigated the issue of insurance coverage for years,
prevailed on the coverage issue and were entitled to defense coverage on the basis of the
conversion claim. While Plaintiff had a right to amend its complaint, Defendants argue it
was not the right to amend but the consequences of the amended complaint, as well as the
t4minVthereof,that was relevant-to Defendants' unfair competition counterclaim and
Plaintifl's bad faith and malice. Defendants maintain their counsel's comments about
this evidence and the inferences that can be drawn therefrom were not improper.
02 CVC-07-7653 32
App. 0084
Defendants further argue the jury's verdict is not the result of passion or
prejudice. They maintain that substantial, credible evidence supports the jury's finding
that Defendants did not misappropriate any trade secrets and that Plaintiff pursued said
claim in bad faith. Likewise, Defendants argue substantial, credible evidence supports
their defamation, unfair competition and tortious interference counterclaims. Defendants
argue the size of an award alone does not establish the existence of passion or prejudice
and therefore does not require a new trial
3. Remittitur Not Warranted
On the issue of remittitur, Defendants argue such relief is proper only if the
following criteria are satisfied: "(1) unliquidated damages are assessed by a jury, (2) the
verdict is not influenced by passion or prejudice, (3) the award is excessive, and (4) the
[prevailing par ty] agrees to the reduction in damages.°" Dardinger v. Anthem Blue Cross
& Blue Shield, 98 Ohio St.3d 77, 2002-Ohio-7113, 781 N.E.2d 121, at 1184, citing
Chester Park Co. v. Schulte (1929), 120 Ohio St. 273, 166 N.E. 186, at paragraph three of
the syllabus. Furthermore, they note Ohio courts have acknowledged that remittitur is
proper only if the verdict is "beyond the realm of proper compensation," citing to
Shoemaker v. Crawford (1991), 78 Ohio App.3d 53, 66,603 N.E.2d 1114, and David R.
Pheils, Jr. & Assocs. v. Ok Sun Palmer (Aug. 29, 1997), Lucas App. No. L-96-176,1997
Ohio App. LEXIS 3803, at' 19-20, in support thereof. Contrary to Plaintiff's assertions,
Defendants argue the jury's compensatory damages did not place them in a better
-pos.ition than ifPlainti_ff_ had never filed suit against them, as they still suffered substantial
emotional, reputation and other non-economic damages, and they presented substantial
evidence with respect to the same. Furthennore, in light of their expert's calculation that
02 CVC-07-7653 33
App.0085
Leadscope suffered damages in excess of $36 million, Defendants maintain the jury's
award was not "beyond the realm of proper compensation." Defendants argue that the
punitive damages awarded were also not a"windfall" to them, as the purpose behind
punitive damages is to punish and deter, not to compensate a wronged party. Therefore,
Defendants argue a remittitur is not appropriate or warranted in this matter.
Plaintiff's Realv
On June 25, 2008, Plaintiff filed its "Reply Memorandum in Support of Motion
for Judgment Notwithstanding the Verdict on Defendants' Counterclaims and as to the
Finding of Bad Faith, and Motion for New Trial as to All Claims, or (in the Altemative)
for Remittitur."
With respect to its request for a JNOV on the defamation counterclaim, Plaintiff
argues that: 1.) the statements in the Business First article and the internal all-staff
memorandum are absolutely privileged; 2.) even if not absolutely privileged, the
statements are not false because they accurately recite the allegations in the pleadings;
and 3.) even if not absolutely privileged, the statements were not made with actual
malice, arguing "there is no evidence - and certainly no clear and convincing evidence -
that ACS knew its allegations about defendants were false or that it recklessly
disregarded their probably falsity." (Pltf. Reply, at 9.) Plaintiff maintains a delay in
filing suit is not indicative of actual malice, and evidence of ill will, while relevant to
common law malice, is irrelevant to a determination of actual malice.
Plaintiff alsoarguea_a JNOV is warranted on the defamation counterclaim
because Defendants did not establish "but for" causation with respect to the statements in
the Business First article and the all-staff inemorandum. As the article also contained
02 CVC-07-7653 34
App. 0086
infotmation taken directly from the pleadings, Plaintiff argues Defendants failed to show
how the inclusion of "additional, repetitive statements by ACS's cottnsel, which describe
the same allegations of the pleadings, could possibly cause any additional harm" to
Defendants. (Pltf. Reply, at 14.) Based on that logic, Plaintiff dismisses Defendants'
arguments that the statements were defamatory per se and that damages are presumed,
and dismisses the argument that a party can be liable for repeating a defamatory
statement. Instead, Plaintiff argues that the statements did not cause any additional harm
above and beyond the harm caused by the other statements in the article and
memorandum, such that Defendants did not establish the statements to be a "but for"
cause of their defamation damages. Finally, even if the statements caused some harm to
Defendants' reputation, Plaintiff argues the jury's award of $13.75 million on this
counterclaim was not justified.
With respect to its request for a JNOV on the unfair competition counterclaim,
Plaintiff notes the Court instructed the jury that liability on this counterclaim can be
based on a finding that Plaintiff pursued malicious litigation against Defendants or that
Plaintiff falsely disparaged Defendants and their products. As to the "false
disparagement" basis, Plaintiff argues the four extra-judicial statementstZ identified by
Defendants are subject to the absolute privilege and the statements were communicated to
those directly interested in the litigation. If not absolutely privileged, Plaintiff argues the
statements were qualifiedly privileged, but the Court declined to instruct the jurors on this
'Z Those statements are the statements in the Business First article and the all-staff memorandum, as wellas statements in Massie's e-mail to the Govemor and Dennis' statements to Crocker about "lingeringissues" concerning Leadscope. Plaintiff argues the Govemor was "directly interested" in the litigationbecause he was in the process of "bestowing public acclaim and grant money upon [Leadscope]" andCrocker had a "direct interest" in the litigation because he was "considering whether to provide financingto [Leadscope]P (Phf. Reply, at 19-20.) The Court is not convinced that this is the kind of"direct interest"in litigation envisioned by the cratters of the absolute privilege.
02 CVC-07-7653 35
App. 0087
issue "and the jury therefore was not asked to determine if defendants defeated the
qualified privilege as to that counterclaim with clear and convincing proof of actual
malice." (Id., at 20-21.)
As to the "malicious litigation" basis, Plaintiff argues the jury was not instructed
that Defendants had to prove the lawsuit was objectively baseless and Defendants failed
to present any evidence to support the same. Plaintiff maintains the Court instructied the
jury that it could find Plaintiff liable for unfair competition if it found Plaintiff
"committed malicious acts by way of litigation in the courts, or if you find thelitigation
was not founded upon good faith, but was instituted with the intent and purpose of
harassing and injuring a rival engaged in the same business." (Pltf. Reply, at 23, quoting
Jury Instruction C2.) Plaintiff argues the "or" makes litigation not founded on good faith
an alternadve to malicious acts by way of litigation, but the malicious acts are not clearly
defined. Plaintiff argues the instruction is not, as Defendants contend, "two ways of
saying the same thing," but instead the two are alternative disjunctive bases for liability.
Plaintiff argues the jury should have been instructed in accordance with the Noerr-
Pennington doctrine that there can be no liability for malicious prosecution unless the
underlying lawsuit was objectively baseless. Plaintiff acknowledges that the doctrine was
originally applied in antittust litigation but argues that "Ohio courts have found that the
Noerr-Pennington doctrine applies to Ohio state law tort claims," referring to Baxter
Travenol Laboratories, Inc. v. Le May (S.D. Ohio 1982), 536 F. Supp. 247, 251-252.
(nl;f. Repty, ?t 27.) Plaintif£also argnesthatsome courts have rejected the argument that
02 CVC-07-7653 36
App.0088
the Noerr-Pennington doctrine is an affirmative defense and is waived if not pleaded."
Plaintiff argues the jury instruction allowed the jurors to find liability based on malicious
intent or bad faith, even if the lawsuit was not objectively baseless, thereby violating the
Noerr-Pennington doctrine. Plaintiff argues the evidence did not establish that the
litigation was objectively baseless, arguing that the Court's denial of the defense motions
for summary judgment and directed verdict supports its argument that there was
sufficient basis for its claims. Finally, under either basis for liability, Plaintiff again
argues a JNOV is warranted because Defendants are not its competitors.
With respect to its request for a JNOV on the tortious interference counterclaim,
and as Defendants argue the counterclaim was based on the filing of this lawsuit and on
Dennis' reluctance to meet with Crocker - not on the statements made by Dennis to
Crocker about the "lingering issues" - Plaintiff acknowledges its argument about the
applicability of the absolute privilege to those statements has been mooted. Plaintiff
argues, however, that Defendants presented insufficient evidence of tortious interference
because they presented no evidence of identified third parties whose business
relationships with Defendants were disrupted and no evidence of improper conduct on the
part of Plaintiff. Plaintiff maintains the argument that Crocker chose not to invest in
Leadscope because Dennis refused to meet with him to continue discussions about the
"lingering issues" was not supported by the evidence, as Crocker testified he chose not to
invest "'based on the conversation' with Dennis, not the failure to meet farther." (Pltf.
r;eply,_at-36.) _Eurthermore Plaintiff argues Defendants did not call the financiers who
" In support thereof, Plaintiff cites to: McGuire OiI Co. v. MAPCO, Inc. (11" Cir. 1992), 958 P.2d 1552,
1559, fn.9;1GEN Int'!, Inc. v. Roche Diagnostics GMBA (4' Cir. 2003), 335 F.3d 303, 310; Bayou Fleet,
Inc. v. Alexander (5' Cir. 2000), 234 F.3d 852, 860; Band v. Cedar Rapids Television Co. (Iowa 1994), 18
N.W.2d 352, 355.
02 CVC-07-7653 37
App. 0089
provided Leadscope's April 2002 financing, albeit on less favorable terms, to testify
about the impact of the lawsuit on the financing. Plaintiff argues Dennis did not have a
duty to talk further with Crocker and the lawsuit was not improper; therefore, the two do
not constitute improper conduct.
In addition to its argument for a JNOV on the compensatory and punitive damage
awarded, Plaintiff again argues a JNOV is warranted on the jury's finding of bad faith.
Plaintiff maintains Defendants failed to present evidence of objective speciousness and
subjective bad faith. Plaintiff argues Defendants' references to manipulated screen shots,
Swarm's testimony that Plaintiff's claims were based on Massie's "conjecture," and that
Massie took the matter personally and chose to attack right before Leadscope was to
close on a round of financing, do not constitute clear and convincing evidence that could
support the jury's finding.
Plaintiff again argues that a new trial is warranted on both, its own claims and
Defendants' counterclaims, because of the cumulative effects of the "bad faith" verdict,
the POCA counterclaim, and the references to "criminal charges" and insurance matters.
Plaintiff argues the trial it received was not fair but was the result of passion and
prejudice, citiag to the amount of the compensatory and punitive damages as a sign
thereof, and again requesting that the damages be reduced to a reasonable amount.
LAW AND ANALYSIS
1. MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT
With respect to a motion for judgment notwithstanding the verdict, Civ.R. 50(B)
provides as follows: "[w]hether or not a motion to direct a verdict has been made or
overruled and not later than fourteen days after entry of judgment, a party may move to
02 CVC-07-7653 38
App. 0090
have the verdict and any judgment entered thereon set aside and to have judgment entered
in accordance with his motion * * * A motion for a new trial may be joined with this
motion, or a new trial may be prayed for in the alternative. If a verdict was retumed, the
court may allow the judgment to stand or may reopen the judgment. If the judgment is
reopened, the court shall either order a new trial or direct the entry of judgment, but no
judgment shall be rendered by the court on the ground that the verdict is against the
weight of the evidence. ***:' Civ.R. 50(B).
The standard for granting a motion for JNOV pursuant to Civ.R. 50(B) is the
same as that for granting a motion for directed verdict pursuant to Civ.R. 50(A). Hale v.
Spitzer Dodge, Inc., Franklin App. No. 04AP-1379, 2006-Ohio-3309, at ¶15, citing
Texler v. D.O. Summers Cleaners & Shirt Laundry Co. (1998), 81 Ohio St.3d 677, 679,
693 N.E.2d 271. The applicable test is whether the verdict is one which could be
reasonably reached from the evidence. Hartford Casualty Ins. Co. v. Easley (1993), 90
Ohio App.3d 525, 530, 630 N.E.2d 6. Accordingly, in determining the merits of a motion
for JNOV, a trial court "must construe the evidence most strongly in favor of the
nonmoving party and, where there is substantial evidence to support the judgment and
reasonable minds could reach differing conclusions, the motion for judgment
notwithstanding the verdict should be denied." Lee v. C.D.E. Home Inspection Co.,
Franklin App. No. OOAP-516, 2002-Ohio-4316, at ¶28, citing Posin v. A.B.C. Motor
Court Hotel (1976), 45 Ohio St.2d 271, 275, 344 N.E.2d 334.
Although while considering_the validity of a motion for JNOV a trial court must
review and consider the evidence, the Ohio Supreme Court and the Tenth Appellate
District have held that such a motion tests the legal sufficiency of the evidence and
02 CVC-07-7653 39
App.0091
"neither weight of the evidence nor the credibility of the witnesses" is to be reviewed.
Sandinsky v. EBCO Mfg. Co. (Oct. 28, 1999), Franklin App. Nos. 98AP-1642, 98AP-
1643,1999 Ohio App. LEXIS 5029, at' 15, citing Grau v. Kleinschmidt (1987), 31 Ohio
St.3d 84, 90, 509 N.E.2d 399. Furthermore, "[t]he grant of a new trial as an alternative to
judgment notwithstanding the verdict lies within the sound discretion of the trial court."
Lee, 2002-Ohio-4316, at ¶28, citing High1Teld v. Liberty Christian Academy (1987), 34
Ohio App.3d 311, 315, 518 N.E.2d 592.
For almost eight weeks, the jurors sat and listened to testimony and evidence
presented by both sides. While Plaintiff presented evidence in support of its breach of
contract and trade secret misappropriation claims, Defendants presented evidence in
support of their counterclaims, which included defamation, unfair competition and
tortious interference. Plaintiff now seeks a JNOV on the jury's verdict in favor of
Defendants on their counterclaims, a JNOV on the jury's award of damages associated
with those counterclaims, and a JNOV on the jury's finding of bad faith.
Having construed the evidence and testimony in a light most favorable to
Defendants, the Court finds reasonable minds could reach different conclusions based on
the same, such that Plaintiff s motion seeking a JNOV is not well taken. Furthermore, in
light of all of the testimony presented during this lengthy trial, the Court disagrees with
Plaintiff's argument that the jurors were not presented with any evidence to support their
verdict and damages awards with respect to Defendants' counterclaims or to support their
fmding of bad faith. The Court notes that the jurors, having listened to seven-and-a-half
weeks of testimony, expended several days reviewing the evidence and deliberating. The
verdicts they reached cannot be lightly second-guessed.
02 CVC-07-7653 40
App. 0092
A. The Jury's Verdict on Defendants' Counterclaims: Privilege, SufGciencyof Evidence, Causation
Plaintiff argues the jury's verdict on Defendants' counterclaims was: 1.) based on
statements that are absolutely privileged; 2.) if not privileged, the statements were subject
to the qualified privilege and there was insufficient evidence from which the jury could
find that the statements were false or that Plaintiff acted with actual malice so as to
overcome that privilege; and 3.) there was insufficient evidence from which the jury
could find that the statements andlor conduct caused harm to Defendants.
The Ohio Supreme Court in Jackson v. City of Columbus, 117 Ohio St.3d 328,
2008-Ohio-1041, 883 N.E.2d 1060, although in the context of a libel action brought by a
public official, summarized the caselaw applicable to defamation, privileged
communication and actual malice as follows:
"In Ohio, defamation occurs when a publication contains a false statement `madewith some degree of fault, reflecting injuriously on a person's reputation, or
exposing a person to public hatred, contempt, ridicule, shame or disgrace, oraffecting a person adversely in his or her trade, business or profession.' A & B-
Abell Elevator Co. v. Columbus/Cent. Ohio Bldg. & Const. Trades Council(1995), 73 Ohio St.3d 1, 7, 1995 Ohio 66, 651 N.E.2d 1283. See Hahn v. Kotten
(1975), 43 Ohio St.2d 237, 243, 72 0.O.2d 134, 331 N.E.2d 713. If a claimant
establishes a prima facie case of defamation, a respondent may then invoke a
conditional or qualified privilege. A & B-Abell, 73 Ohio St.3d at 7, citing Hahn,
43 Ohio St.2d at 243. In Hahn, we stated, `The essential elements of aconditionally privileged communication may accordingly be enumerated as goodfaith, an interest to be upheld, a statement 1'nnited in its scope to this purpose, aproper occasion, and publication in a proper manner and to proper parties only.'
43 Ohio St.2d at 246. See New York Times Co. v. Sullivan (1964), 376 U.S. 254,
283, 84 S.Ct. 710, 11 L.Ed.2d 686 (proof of actual malice is required when apublic official brings a defamation claim); Garrison, 379 U.S. at 77, 85 S.Ct. 209,
13 L.Ed.2d 125, (the privilege applies to'anything which might touch on anofficial's fitness for office'). A qualified privilege may be defeated only if aclaimant proves with oovmcmg canty fhit-a puiitisneracted-wiu'ractual :inalice.
Jacobs v. Frank (1991), 60 Ohio St.3d 111, 573 N.E.2d 609, paragraph two of thesyllabus. Thus, actual malice in the context of a defamation action constitutes an
`abuse of privilege.' A & B Abell, 73 Ohio St.3d at 11, 651 N.E.2d 1283.
02 CVC-07-7653 41
App. 0093
`In a qualified privilege case, "actual malice" is defined as acting with knowledgethat the statements are false or acting with reckless disregard as to their truth or
falsity.' Jacobs, 60 Ohio St.3d 111, 573 N.E.2d 609, paragraph two of thesyllabus. The phrase `reckless disregard' applies when a publisher of defamatorystatements acts with a`high degree of awareness of their probable falsity,'
Garrison, 379 U.S. at 74,85 S.Ct. 209,13 L.Ed.2d 125, or when the publisher `infact entertained serious doubts as to the truth of his publication.' St. Amant, 390U.S. at 731, 88 S.Ct. 1323, 20 L.Ed.2d 262. See Perez Y. Scripps-Howard
Broadcasting Co. (1988), 35 Ohio St.3d 215, 218, 520 N.E.2d 198."
Jackson, 2008-Ohio-1041, at 19-10.
With respect to the evidentiary requirement of the actual malice standard, the
Ohio Supreme Court in McKimm v. State Elections Commission (2000), 89 Ohio St.3d
139, 729 N.E.2d 364, noted as follows:
"We may not infer the existence of actual malice from evidence of personal spiteor ill will alone; rather, our focus is on the publisher's attitude toward the truth or
falsity of the publicatioti. Perez v. Scripps-Howard Broadcasting Co. (1988), 35Ohio St.3d 215, 520 N.E.2d 198, paragraph two of the syllabus. But evidence ofill will can be relevant: 'This standard requires a clear and convincing showing,
which may be by circumstantial evidence, of the defendant's actual state of mind-
-either subjective awareness of probable falsity or actual intent to publish falsely.'
(Emphasis added.) National Rifle Assn. v. Dayton Newspapers, Inc. (S.D. Ohio
1983), 555 F. Supp. 1299, 1304, quoting Yiamouyiannis v. Consumers Union of
United States, Inc. (C.A.2 1980), 619 F.2d 932, 940."
McKimm, 89 Ohio St.3d at 147-148.
In Water Management, Inc. v. Stayanchi (1984), 15 Ohio St.3d 83,472 N.E.2d
715, the Ohio Supreme Court noted that "[u]nfa'u competition ordinarily consists of
representations by one person, for the purpose of deceiving the public, that his goods are
those of another." Stayanchi, 15 Ohio St.3d at 85, citing Drake Medicine Co. v. Glessner
(1903), 68 Ohio St. 337; Henry Gehring Co. v. McCue (1926), 23 Ohio App. 281, 154
N.E. 171. However, the High Court also noted that "[t]he concept of ut>isir competition
may also extend to unfair commercial practices such as malicious litigation, circulation of
false rumors, or publication of statements, all designed to harm the business of another."
02 CVC-07-7653 42
App. 0094
Id. With respect to malicious litigation, the Eighth Appellate District in Henry Gehring
Co. v. McCue acknowledged that "[tJhere is well-established authority for the holding
that the pursuit of one competitor by another, either in court or out of court, for the
purpose of injuring him in his business, may result in recovery under sufficient proof.
There are numerous cases of successful recoveries because of malicious acts by way of
litigation in the courts, where it appears that the litigation was not founded upon good
faith, but was instituted with the intent and purpose of harassing and injuring a rival
producing and selling the same commodity." Henry Gehring Co., 23 Ohio App. at 283-
284.
With respect to tortious interference, the elements of such a claim consist of the
following: 1.) the existence of a contract or a business relationship; 2.) the wrongdoer's
knowledge of the contract or relationship; 3.) the wrongdoer's intentional procurement of
the contract's breach or improper action taken to prevent a contract formation or
terminate a business relationship; 4.) lack of justification; and 5.) resulting damages.
Fred Siegel Co., L.P.A. v. Arter & Hadden (1999), 85 Ohio St.3d 171, 175, 707 N.E.2d
853; Kenty v. Transamerica Premium Ins. Co. (1995), 72 Ohio St.3d 415, 650 N.E.2d
863, at paragraph two of the syllabus; A & B-Abell Elevator Co. v. Columbus/Central
Ohio Bldg. & Const. Trades Council (1995), 73 Ohio St.3d 1, 14, 651 N.E.2d 1283;
Brookside Ambulance, Inc. v. Walker Ambulance Serv. (1996), 112 Ohio App.3d 150,
155-156, 678 N.E.2d 248. In Fred Siegel Co., LPA, the Ohio Supreme Court adopted
_Section 767 oflheBeslatement and held that, "in determining whether an actor has acted
improperly in intentionally interfering with a contract or prospective contract of another,
consideration should be given to the following factors: (a) the nature of the actor's
02 CVC-07-7653 43
App. 0095
conduct, (b) the actor's motive, (c) the interests of the other with which the actor's
conduct interferes, (d) the interests sought to be advanced by the actor, (e) the social
interests in protecting the freedom of action of the actor and the contractual interests of
the other, (f) the proximity or remoteness of the actor's conduct to the interference, and
(g) the relations between the parties." Fred Siegel Co., L.P.A., 85 Ohio St.3d at 178-179.
"The weight carried by these factors may vary considerably." Comment to Restatement
2d of Torts §767.
First, the Court notes it has already addressed the bulk of Plaintiffs arguments
pertaining to the privilege and actual malice issues. On November 15, 2007, Plaintiff
filed a Motion for Summary Judgment on Defendants' Counterclaims, wherein it raised
numerous arguments about the absolute privilege and its application to various statements
at issue in this litigation. In its January 25, 2008 Decision and Entry, the Court addressed
those arguments at great length and denied PlaintifPs motion. To the extent Plaintiff s
post-trial motion raises the same arguments raised in its pre-trial motion, the Court fmds
the same have been addressed and will not be revisited at this time, as the Court stands by
its previous rulings pertaining to the applicability of the absolute privilege to the at-issue
extra-judicial statements. The Court incorporates by reference the analysis in its January
25, 2008 Decision and Entry, as pertinent to the issues raised herein. To the extent
Plaintiff's post-trial motion argues additional statements should also be deemed to be
subject to the absolute privilege, the Court fmds Plaintiff should have raised that
argumentwith respect to those statements in its pre-trial motion.
With respect to Plaintiff's arguments about the applicability of the qualified
privilege, the Court finds the qualified privilege can be overcome by a showing of actual
02 CVC-07-7653 44
App. 0096
malice and Defendants presented sufficient evidence from which reasonable minds could
have found actual malice. Jacobs, 60 Ohio St.3d at paragraph two of the syllabus;
Jackson, 2008-Ohio-1041, at ¶9-10; A & B-Abell Elevator Co., 73 Ohio St.3d at 12-13.
The qualified privilege was also previously raised by Plaintiff and the Court considered
whether the qualified privilege applied to the statements identified at that time. To the
extent Plaintiff argues statements already considered by the Court and found not to be
qualifiedly privileged should fall within the purview of the qualified privilege, the Court
finds it has already considered that argument and stands by its previous decision
regarding the same. To the extent Plaintiff argues additional statements should also be
deemed to be qualifiedly privileged, the Court finds Plaintiff should have raised that
argument with respect to those statements earlier.
With respect to the statements previously found to be qualifiedly privileged, the
Court notes its jury instructions sufficiently identified those statements for the jurors,
informing the jurors that there can be no liability for such statements absent a showing of
actual malice. In addition to testimony about, among other.things, the "conjectures of
Massie" - which jurors could have deemed probative of Plaintiff's spite or ill will, i.e.,
common law malice - Defendants also presented testimony from which the jurors could
have inferred and found actual malice, i.e., that Plaintiff either knew the statements were
false or that it recklessly disregarded substantial doubts about the statements' truth.
As Defendants note, reasonable minds could have inferred from the testimony
Y riaiy*ting-tothe_timing_of the statements and litigation - when compared with the
amount of information Plaintiff possessed about the Leadscope technology and the
amount of time that lapsed between its discovery of such information and its actions,
02 CVC-07-7653 45
App.0097
particularly when coffelating the same with Defendants' financing needs - that Plaintiff
entertained serious doubts about the truth of its allegations at the time it discovered
information about the Leadscope technology, and that it likewise entertained serious
doubts about the allegations at they time they were ultimately made. As it relates to the
statements that the Leadscope technology was "indistinguishable" from the PathFinder
technology, or that Plaintiff's motive in filing suit was "to acquire back the protected
information" that Defendants took from it, the Court finds Defendants also presented
sufficient evidence from which reasonable minds could have concluded that Plaintiff
published those statements with a "high degree of awareness of their probable falsity," or
that it published the same while entertaining serious doubts as to the truth or falsity of the
statements.
The Court is also not persuaded by Plaintiff's lack of causation argument.
Defendants presented sufficient evidence of harm caused by the statements. Specifically,
testimony from the three individual Defendants revealed that they suffered personal
humiliation, shame and mental anguish, as well as harm to their reputation due to the
dissemination of those statements to thousands of their friends, co-workers and
colleagues around the world, as well as the immortalization of the allegations through the
Intemet. As they pertain to the defamation counterclaim, the Court notes that the at-issue
statements were defamatory per se and damages are presumed and need not be proven
when the statements are defamatory per se.
Defendants also presented sufficient evidence of harm caused by Plaintiff s
conduct. Specifically, Defendants presented testimony pertaining to, among other things,
1.) the timing of the litigation in light of Defendants' repeated exhibitions of their
02 CVC-07-7653 46
App.0098
products to the greater scientific and cheminformatics community, including the
presentation of their products directly to Plaintiff's representatives; 2.) Massie's e-mail to
the Govemor in an attempt to interfere with the Govemor's public endorsement of
Leadscope and thereby interfere with its ability to secure much-needed financing; 3.) the
April 2002 "settlement negotiations" that were described by Defendants as "extortion,"
where they were threatened by Dennis with the filing of a complaint that included civil
and criminal allegations and were threatened with "fast and furious publicity;" 4.)
Dennis' statements to Crocker that there were "lingering issues" regarding Leadscope
and his subsequent unwillingness to meet with Crocker to address those "issues," which
was followed by Crocker's failure to invest in Leadscope; and 5.) Plaintiff s dismissal of
the conversion claim, upon which claim insurance coverage was based, right after the
appellate court held Defendants were entitled to defense coverage. In light of the
foregoing, the Court fmds reasonable jurors could find, when viewing the same in a light
most favorable to Defendants, that Plaintiff tortiously interfered with Defendants'
business relationships, that it disseminated disparaging statements about Defendants, and
that it engaged in malicious litigation in an attempt to unfairly compete with Defendants.
Furthermore, reasonable minds could conclude that this course of conduct caused the
harm testified to.
The Court finds that reasonable minds could have concluded, based on the
evidence presented pertaining to the statements in the Business First article and the all-
staff memorandum, that Defendants suffered harm due to those statements. The Court
further finds that reasonable minds could have concluded, based on the evidence
presented about PlaintifPs conduct and statements other than those which form the basis
02 CVC-07-7653 47
App. 0099
of Defendants' defamation counterclaim, that the same also caused harm to Defendants.
A finding of harm caused by the statements underlying Defendants' defamation
counterclaim does not mean that reasonable minds, based on the evidence and testimony
presented in this case, cannot find harm - in terms of unfair competition and tortious
interference - that was caused by something other than those statements.
In light of the foregoing, the Court finds PlaintifPs request for a JNOV as to the
jury's verdicts on Defendants' counterclaims is not well taken.
B. The Jury's Verdict on Defendanta' Unfair Competition Counterclaim:
The Noerr-Pennington Doctrine and "Competitors"
In addition to the above-cited arguments pertaining to the jury's verdict on
Defendants' counterclaims, Plaintiff also requests a JNOV specific to the unfair
competition counterclaim based on the Noerr-Pennington doctrine. The Court finds
Plaintiff s request is not well taken. The Court's instructions to the jury comport with
Ohio caselaw pertaining to unfair competition, as set forth in Water Management, Inc. v.
Stayanchi (1984), 15 Ohio St.3d 83, 472 N.E.2d 715, Henry Gehring Co. v. McCue
(1926), 23 Ohio App. 281,154 N.E. 171, and Harco Corp. v. Corrpro Cos. (Oct. 29,
1986), Medina App. No. 1465,1986 Ohio App. LEXIS 8925. Absent any Ohio authority
applying the Noerr-Pennington doctrine to an Ohio common law unfair competition
claim, the Court declines to apply the doctrine to Defendants' counterclaim herein, even
if Plaintiff is deemed not to have waived the affirmative defense by raising it for the first
time in relation to the jury instructions.
Plaintiff argues that the jurors were not pioperlyitrs4rricted on thtunfair
competition counterclaim, as they were not given instructions in accordance with the
Noerr-Pennington doctrine. Assuming, arguendo, that the Nnerr-Pennington doctrine is
02 CVC-07-7653 48
App. 0100
not an affirmative defense and was therefore not waived by Plaintiff when it failed to
raise it in its answer to Defendants' counterclaims or any of its dispositive pre-trial
motions, the Court finds PlaintifPs argument pertaining to Noerr-Pennington does not
watrant a JNOV or a new trial in this matter.
Waiver issues aside, the Court finds it appropriate to first address PlaintifPs
argument that "Ohio courts have found that the Noerr-Pennington doctrine applies to
Ohio state law tort claims," and Plaintiff s reliance on Baxter Travenol Laboratories, Inc.
v. Le May (S.D. Ohio 1982), 536 F. Supp. 247, in support thereof. The defendants in
Baxter, faced with claims of trade secret misappropriation, breach of fiduciary duty and
breach of contract, asserted various counterclaims, including Ohio law based
counterclaims of malicious prosecution and abuse of process. As the previous
proceeding had not terminated in the defendants' favor, the district court found the
malicious prosecution counterclaim was "inadequately pleaded." Baxter, 536 F. Supp at
249. Noting the distinction between malicious prosecution and abuse of process, the
district court also found that, as the defendants had not alleged any facts "to indicate that
process was improperly used after it was issued," they therefore could not bring suit for
the tort of abuse of process. Id.
The Baxter court then addressed the defendants' argument that their
counterclaims of malicious prosecution and abuse of process also sounded in unfair
competition, "a cause of action, [the defendants] argue[d], not subject to the strictures of
ttw-aforementioned torts." Id. The district court rejected that argument for two reasons,
explaining that, "[f]irst, said counterclaims do not specifically allege facts to bring their
action under any form of an 'unfair competition' theory. *** Second, Defendants do not
02 CVC-07-7653 49
App. 0101
cite for this Court any Ohio statute or case law suggesting that the acts which are alleged
would be considered `unfair competition."' Id. The Baxter court did not address the
applicability of the Noerr-Pennington doctrine to malicious prosecution, abuse of
process, or unfair competition. Instead, the district court addressed the applicability of
the Noerr-Pennington doctrine in the context of antitrust liability.
The parties in Baxter had also filed competing motions to bifiucate and sever for
trial purposes the plaintiffs' claims of trade secret misappropriation, breach of fiduciary
duty and breach of contract, from the counterclaim of one defendant, Phoenix Glove,
alleging federal and Ohio antitrust law violations, along with the counterclaim of another
party, David Wamick, for defamation against Phoenix Glove. The main dispute in the
competing motions was the sequence of the trials on the claims and counterclaims, with
the plaintiffs arguing that their claims should be tried first and Phoenix Glove arguing
that its antitrust counterclaim should be tried first. It was in this context that the district
court discussed the reasoning behind and applicability of the Noerr-Penningtan doctrine,
noting that "[t]hese arguments will require this Court to briefly address the scope of the
`sham litigation' doctrine in antitrust law, to the extent that it aids in the rulings on the
motions for separate trials." (Emphasis added.) Baxter, 536 F. Supp at 251.
The Baxter court explained that:
"[t]he `sham litigation' doctrine is an exception to the immunity from liabilityunder the antitrust laws established in a trio of Supreme Court cases: Eastern
Railroad Presidents Conf v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S. Ct.
523, 5 L. Ed. 2d 464 (1961); United Mine Workers v. Pennington, 381 U.S. 657,
85_S.Ct.814 L. Ed. 2d 626 (1965); and California Motor Transport Co. v.
Trucking Unlimited, 404 U.S. 508, 92 S. Ct. 609, 30 L. E.2d 642-(I972"j. in
Noerr, the Court held that Sherman Act liability could not be predicated on mereattempts to influence the passage or enforcement of laws by the legislature or theexecutive, even if that attempt had only an anticompetitive purpose. 365 U.S. at135-40, 81 S. Ct. at 528-31. However, the Noerr Court also held that:
02 CVC-07-7653 50
App. 0102
(t)here may be situations in which a publicity campaign, ostensiblydirected toward influencing goverrmtental action, is a mere sham to coverwhat is actually nothing more than an attempt to interfere directly with thebusiness relationships of a competitor and the application of the ShermanAct would be justified.
Id. at 144, 81 S. Ct. at 533.
In Pennington, the Court held that attempts by coal operators and unions toinfluence the Secretary of Labor fell under the Noerr doctrine, even though suchconduct was intended to eliminate competition. 381 U.S. at 669-70, 85 S. Ct. at1592-93.
Finally, in California Motor Transport, the Court applied the Noerr-Pennington
principles to efforts to influence judicial or administrative agencies, or to fileproceedings in the same. Specifically, it was alleged in that case that defendantsfiled repetitive and baseless claims for the sole purpose of discouraging others toexercise their rights of petition to administrative agencies, by forcing others todefend said claims. 404 U.S. at 512, 92 S. Ct. at 612. The Court held that theseallegations, if proven true, would fall within the `sham litigation' exception to
Noerr. Id. The allegations indicated that the `real intent' of defendants' activitieswas to interfere directly with the business relationships of a competitor. Id."
Baxter, 536 F. Supp at 251.
Essentially, the "sham litigation" exception to the Noerr-Pennington doctrine
stands for the proposition that one is not immune from antitrust liability, despite the
holdings in the trilogy of cases to the contrary, where the at-issue activity is a "mere
sham to cover what is actually nothing more than an attempt to interfere directly with the
business relationships of a competitor." Baxter, 536 F. Supp at 251, quoting Noerr, 365
U.S. at 144.
The Court finds Plaintiff s reliance on Baxter as support for its argument that
Uhio-cou.ew^+aveextendedlheapplication of the Noerr-Pennington doctrine to Ohio state
law tort claims is misplaced. After summarizing the cases underlying the doctrine, the
Baxter court retumed to the issue before it - the sequencing of the separate trials - and
02 CVC-07-7653 51
App. 0103
held that courts that have analogized the "sham litigation" exception to the tort of
malicious prosecution "have held that termination of the litigation in favor of the antitrast
plaintiff, while not a rigid requirement in all circumstances, is strong evidence, and
probably dispositive of, the issue of the allegedly `baseless' nature of the litigation."
Baxter, 536 F. Supp. at 252. Baxter, along with the cases referenced therein in support of
the previous statement, involved issues of antitrast liability, not liability for an Ohio
common law unfair competition claim. Therefore, and absent any Ohio authority that
supports the extension of the Noerr-Pennington doctrine to Ohio common law unfair
competition claims, the Court declines to extend the "sham litigation" exception of the
Noerr-Pennington doctrine to the case at bar, even if the same were deemed not to have
been waived by Plaintiff.
The Court fmds the jury was properly instructed on the elements of an Ohio
common law unfair competition claim. The Court informed the jurors that Defendants
allege Plaintiff "engaged in unfair competition by pursuing malicious litigation against
Defendants, by circulating false statements and rumors about Defendants, and by falsely
disparaging the individual Defendants, Leadscope and its products." The Court then
instructed the jurors that,
"[iJn Ohio, unfair competition may consist of malicious acts by way of litigation
in court that is not founded in good faith, but is for the purpose of harassing andinjuring a rival producing and selling the same commodities. It is the law that thepursuit of one competitor by another, either in court or out of court, for thepurpose of injuring his business, is prohibited.
_IUy9u find by the greater weight of the evidence that Plaintiff has committedmalicious acts by way of litigation in the courts, or if you fina litigatiotrwas notfounded upon good faith, but was instituted with the intent and purpose ofharassing and injuring a rival engaged in the same business, you should fmd forthe Defendants on their counterclaim of unfair competition in an amount that
would fairly compensate Defendants for the damage suffered by reason thereof."
02 CVC-07-7653 52
App.0104
The Court also properly instructed the jury that unfair competition can be founded
on an alternate basis: the circulation of false and disparaging statements. The Court's
instructions to the jury follow closely the instructions that were addressed by the Ninth
Appellate District in Harco Corp. v. Corrpro Cos.i ° The Harco court held that the
instruction pertaining to unfair competition "will not serve as a basis for reversal,"
fmding that "[t]he issue of unfair competition was properly before the jury; the record
supports a jury verdict on that issue even without considering malicious litigation."
Harco,1986 Ohio App. LEXIS 8925, at * 10.
The Court fmds Defendants presented sufficient evidence from which reasonable
minds, viewing the same in a light most favorable to Defendants, could have concluded
'° The Harco court noted that the trial court's instructions on the unfair competition claim consisted, in
part, of the following:
"`Malicious acts by way of litigation in court not founded in good faith, but tbr the purpose ofharassing and injuring a rivaFproducing and selling the same commodities, may authorize arecovery for unfair contpetitiom'
jury Instruction at 3110.
`It is the law that the pursutt of one competitor by another, either in court or out of court, for thepurpose of injuring his business, that is prohibited.
'If you find by the greatarweight of the evideqcethat Harco Corporation has committed maliciousacta by way of iitigation in the courts, or if it appears litigation was not founded upon good faith;but was instituted with the intent and purpose of harassing and injuring a rival engaged in the samebusiness, you may find for Corrpro Corporation on its counterclaim under the Doctrine of UnfairCompetition in an amount that would fairly compensate it for the damage suffered by reason
thereof.
'The concept of unfair competition also extends to unfair commercial practices such as maliciouslitigation, circulation of false rumors or publication of statements all designed to harm the businessaf-Enot.her,
'Therefore, should you fmd that Harco engaged in any of these practices with the design to harm a
defendant or defendants, you should return a verdict in favor of such claimants.'
Jury instruction at 3124-5 (emohasis added)."
Harco, 1986 Ohio App. LEXIS 8925, at *94 0.
02 CVC-07-7653 53
App. 0105
that Plaintiff unfairly competed with Defendants by way of malicious litigation that was
"not founded upon good faith, but was instituted with the intent and purpose of harassing
and injuring a rival engaged in the same business" and that it competed with Defendants
by way of circulating false and disparaging statements about Defendants and their
products.
Plaintiff argues the "or" in the portion of the jury instructions that reads: "If you
find by the greater weight of the evidence that Plaintiff has committed malicious acts by
way of litigation in the courts, or if you find litigation was not founded upon good faith,
but was instituted with the intent and purpose of harassing and injuring a rival engaged in
the same business, you should find *** " makes the statement that follows the "or" an
alternative basis for liability, thereby wartanting a JNOV on the jury's verdict on this
counterclaim. The Court disagrees. While Plaintiff is con:ect that "or" in some instances
is defined as a conjunction, that is but one of the definitions of the word, as "or" also
represents a way of rephrasing a statement, synonymous with "in other words." The
preceding paragraph of the jury instructions makes clear that "or" in this instance was
used not in the conjunctive but to further defme what malicious litigation - in other
words, malicious acts by way of litigation in court - means in the context of unfair
competition.
The Court is also not persuaded by Plaintiff's argument that the evidence failed to
establish Defendants were Plaintiff s competitors. Although the Leadscope patent was
assigned to the corporate defendant, the individual defendants were the inventors of the
Leadscope technology and were the ones who applied for the patent. Plaintiff's own
expert testified that only inventors can apply for patents. Plaintiff's "not competitors"
02 CVC-07-7653 54
App. 0106
argument is further belied by the testimony of various witnesses that Leadscope's
competitors were companies that sold to and serviced pharmaceutical companies, that
Plaintiff's C&E News publication included a section that reported on competitive
products in the pharmaceutical industry, and that said section included, often in the same
issue, PlaintifPs and Defendants' products. As Defendants point out, Plaintiff also itself
asserted an unfair competition claim against Leadscope and the individual defendants,
thereby implicitly recognizing their ability to compete with it.
C. The Jury's Damages Awards on Defendants' Counterclaims
Plaintiff argues the Court should issue a JNOV with respect to the jury's damages
awards associated with Defendants' counterclaims because: 1.) the awards were based on
hearsay and speculation; 2.) the compensatory damages awarded to the individual
defendants on the defamation counterclaim are duplicative of the compensatory damages
awarded to them on the unfair competition counterclaim; and 3.) the punitive damages
awarded a.) are improper as there was no evidence of malice, b.) would be improper
absent compensatory damages associated with those counterclaims, and c.) are
unconstitutionally excessive.
The Court fmds Plaintiff's hearsay and speculation arguments are not well taken.
It was not erroneous to allow a witness to testify about his understanding about why
Leadscope was unable to sell its products and was experiencing losses after this litigation
commenced, even if the understanding may have been based on statements that others
made.Eurthermore,additional evidence was presented with respect to the decline in
sales, previously interested investors losing interest in Leadscope after the litigation
started, prospective clients' "negative buying signs," and potential acquisitions falling
02 CVC-07-7653 55
App. 0107
through. Reasonable minds, when viewing that evidence in a light most favorable to
Defendants, could have concluded that Defendants suffered damages as a result of
Plaintiff's statements and/or conduct. The Court finds the evidence before the jury did
not consist solely of Plaintiff's selective references to testimony in its motion but that
sufficient evidence was presented to support the jury's damages awards.
The Court further fmds the expert testimony pertaining to damages, specifically
that of Rebekah Smith, was not speculative. The Court considered Plaintiff s
"speculation" argument, along with various other evidentiary arguments, when it ruled on
the multitude of motions in limine filed by the parties prior to trial with respect to the
various expert and lay witness testimonies. Having fully addressed those arguments at
the times when they arose, the Court stands by its previous ruling with respect to the
same. At a minimum, the Court notes such arguments do not strike at the admissibility of
the evidence but at the weight of the same.
The Court also disagrees with the assertion that because the jury awarded the
individual defendants the same compensatory damages amounts on the defamation
counterclaim as it did on the unfair competition counterclaim, it therefore must have
awarded duplicative damages. As the jury interrogatories reveal, the jury based its
fmding of defamation on the statements contained in the Business First article and the
all-staff memorandum, but not on the statements in Massie's e-mail to the Governor, the
statements made by Dennis to Crocker during the April 10 or 11, 2002 telephone call, or
the statements in the_Nature article. Furthermore, the jury found unfair competition
based on malicious litigation, as well as the circulation of false statements and nunors
about Defendants and the disparagement of Defendants. With respect to the unfair
02 CVC-07-7653 56
App.0108
competition counterclaim, the jury could have determined that harm was caused by
conduct and statements other than the two that form the basis of the defamation
counterclaim. The jury could have calculated the harm associated with the same and
determined that said harm should be compensated with the amounts specified, even
though those amounts are the same as the compensatory damages amounts associated
with the harm caused by the two statements underlying Defendants' defamation
counterclaim. In other words, the jury could have found that the conduct and statements
(other than those underlying the defamation counterclaim) caused an injury different
from that caused by the defamatory statements. As Defendants note, the jurors also could
have calculated a total amount of compensatory damages and associated and awarded
one-half of that amount with the harm caused by the defamatory statements and the other
one-half with the harm caused by the unfair competition. Simply because the
compensatory damages awarded to the individual defendants are the same for both of
those counterclaims does not mean that the jurors awarded duplicative damages,
particularly in light of the'v answers pertaining to the bases for their verdicts on those two
counterclaims, along with the different compensatory damages awarded to the corporate
defendant on those two counterclaims.
Finally, the Court finds Defendants presented sufficient evidence from which
reasonable minds, when viewing the same in a light most favorable to Defendants, could
find malice so as to support an award of punitive damages. As discussed above,
r.lefenda.*etspresentesl evidence that included testimony about ill will, spite and
"conjectures," conscious disregard for the rights of others, monitoring of Leadscope's
financing needs, and timing litigation so as to cause maximum harm. Furthermore, the
02 CVC-07-7653 57
App. 0109
Court does not find that the punitive damages awarded were so excessive as to warrant a
JNOV. Plaintiff argues "[tlhe punitive damages awarded for each counterclaim are
unconstitutional because ACS's conduct was not especially reprehensible," citing to
BMW of North America v. Gore (1996), 517 U.S. 559, in support thereof. (Pltf. Mtn., at
44-45.) Plaintiff explains that "[t]his is not a question of bad faith, but rather whether the
conduct at issue here deserves special condemnation and punishment when compared to
the conduct in other bad faith cases: '(Id,, at 45.)
As the Ohio Supreme Court explained in Dardinger v. Anthem Blue Cross & Blue
Shield, 98 Ohio St.3d 77, 2002-Ohio-7113, 781 N.E.2d 121, "[tJhe determination of
whether a punitive damages award violates the federal Constitution is rooted in the Due
Process Clause," as "elementary notions of fairness 'dictate that a person receive fair
notice not only of the conduct that will subject him to punishment, but also of the severity
of the penalty that a State may impose."' Dardinger, 2002-Ohio-7113, at ¶152, quoting
BMW of North America, 517 U.S. at 574. Whether a defendant has received sufficient
notice of a possible sanction depends on the three "guideposts" enumerated in BMW of
North America: "`the degree of reprehensibility of the defendant's conduct, the disparity
between the harm suffered by the plaintiff and the amount of the punitive damages
award, and the difference between the punitive damages award and civil or criminal
penalties authorized or imposed in similar cases."' Dardinger, 2002-Ohio-7113, at ¶153,
quoting Wightman v. Cansol. Rail Corp. (1999), 86 Ohio St.3d 431, 439-440, 715 N.E.2d
546.
The Court's role when considering a motion seeking JNOV is not to second guess
the jurors or weigh the evidence presented but to determine whether reasonable minds,
02 CVC-07-7653 58
App. 0110
viewing the evidence in a light most favorable to the non-moving party, could reach such
a verdict from the evidence. In other words, the Court is to construe the evidence most
favorably to Defendants and determine whether there is substantial evidence to support
the jury's verdict. Nartford Casualty Ins. Co., 90 Ohio App.3d at 530; Lee, 2002-Ohio-
4316, at ¶28; Posin, 45 Ohio St.2d at 275. As such, and given the jury's finding of bad
faith, the Court will not question the jury's determination regarding the reprehensibility
of the at-issue conduct. The Court further finds that there is no great disparity between
the punitive damages awarded and the harm suffered. As Defendants have noted,
Rebekah Smith testified that Leadscope alone suffered approximately $36.6 million in
damages. The jury, meanwhile, awarded Leadscope and the individual defendants
punitive damages totaling $7.5 million and compensatory damages totaling $19 million.
The Court also does not fmd that there is a great difference between the punitive damages
awarded in this case and cases cited by the parties herein in support and opposition of
Plaintiff's post-trial motions. As the Court noted above, the punitive to compensatory
damages ratios in Dardinger and BMW ofNorrh America were 125 to I and 500 to 1,
respectively. The punitive to compensatory ratio in this case is 0.4 to 1, or 3 to 1, if
considering the tortious interference award separately. The Court finds the ratio is not so
high as to be considered unconstitutional.
In light of the foregoing and the testimony presented during this trial, the Court
finds the punitive damages awarded by the jury do not wan-ant a JNOV.
D The JurY's Finding_ of Bad Faith
Plaintiff argues that findings of bad faith are limited to "specific, extraordinary
abuses of our judicial system," and that a defendant, to establish bad faith, must show by
02 CVC-07-7653 59
App. 0111
clear and convincing evidence that 1.) the claims asserted were "objectively specious,"
and 2,) the claims were pursued with "subjective bad faith." That two-prong test was set
forth in Gemini Alum. Corp. v. Cal. Custom Shapes, Inc. (2002), 95 Cal. App. 4`h 1249.
Plaintiff maintains "`[o]objective speciousness' exists when there is a complete lack of
evidence supporting a plaintiff s claims," and "`[s]ubjective bad faith exists when a
plaintiff knows (or is reckless in not knowing) that its claims have zero merit "(Plt£
Mtn. at 46, citing Contract Materials Processing, Inc. v. Kataleuna GMBH Catalysts (D.
Md. 2002), 222 F. Supp. 2d 733, 744.)
According to Plaintiff's master list of proposed jury instructions and Defendants'
master list of proposed jury instructions, both of which were filed on March 21, 2008,
while Plaintiff objected to Defendants' proposed jury instructions on the issue of bad
faith, Plaintiff did not propose its own version of an appropriate instruction concerning
bad faith. The Court reviewed the proposed jury instructions, considered the parties'
respective arguments and objections, selected the jury instructions it deemed appropriate
and edited the proposed jury instructions accordingly. The Court delivered the
instructions to counsel, for review, by the end of day on March 21, 2008. According to
Plaintiff s March 24, 2008 Objections to the Court's Jury Instructions, Plaintiff did not
object to the Court's jury instruction on the issue of bad faith. On March 25, 2008, the
jurors were instructed that if they found Defendants did not misappropriate Plaintiff's
trade secrets, they were to also determine whether Plaintiff asserted its claim of
=nasappro,_riation of trade secrets in bad faith. The Court instructed the jurors that:
"[f]or purposes of this instruction, bad faith means that Plaintiff's claim lackedmerit and that Plaintiff brought the claim despite knowing that the claim lackedmerit. To find bad faith, you must find that Plaintiff pursued the claimvexatiously, wantonly or for oppressive reasons. In determining whether or not
02 CVC-07-7653 60
App. 0112
bad faith exists, you must consider the PlaintifPs subjective state of mind whendeciding to bring its claim. A subjective state of mind will rarely be susceptibleto direct evidence, so you should be prepared to infer it from circumstantialevidence. You must find by clear and convincing evidence that Plaintiff s claim
of misappropriation was made in bad faith."
While the Court's instructions did not use the exact terms and phrases as those
used in Gemini, as Defendants point out, the Court's instructions to the jury track the
Gemini elements of objective speciousness and subjective bad faith. The Court finds it
properly instructed the jury on the issue of bad faith and sufficient evidence was
presented from which reasonable minds could find that Plaintiff's trade secret
misappropriation claim lacked merit, that Plaintiff brought the claim despite knowing it
had no merit, and that Plaintiff pursued the claim vexatiously, wantonly or for oppressive
reasons. A few examples of such evidence include testimony about: 1.) the disclosure of
the PathFinder features in 1996; 2.) Defendants' multiple presentations of its Leadscope
technology to the community, including Plaintiffs representatives; 3.) both sides' expert
testimony regarding the source codes of PathFinder and the Leadscope products; 4.) the
timing of the allegations relative to Leadscope's financing needs; 5.) Plaintiff s conduct
related to this litigation, including the inclusion of allegations of violations of a criminal
statute and the dismissal of the conversion claim; 6.) the allegations being based on
Massie's "conjectures;" and 7.) testimony from Plaintift's representatives that Massie
took the litigation personally and was "avid" about the allegations. The Court is also not
persuaded by PlaintifPs argument that the denial of a defensive motion seeking summary
judgnzent_orsn9ticLn for_a directed verdict automatically precludes a finding of bad faith
on the part of the plaintiff. In light of the foregoing, the Court finds Plaintiff s request for
a JNOV with respect to the jury's finding of bad faith is not well taken.
02 CVC-07-7653 61
App. 0113
II. MOTION FOR A NEW TRIAL
Civ.R. 59(A) provides that a new trial may be granted upon any of the following
grounds: (1) Irregularity in the proceedings of the court, jury, magistrate, or prevailing
party, or any order of the court or magistrate, or abuse of discretion, by which an
aggrieved party was prevented from having a fair trial; (2) Misconduct of the jury or
prevailing party; (3) Accident or surprise which ordinary prudence could not have
guarded against; (4) Excessive or inadequate damages, appearing to have been given
under the influence of passion or prejudice; * * * (6) The judgment is not sustained by
the weight of the evidence * * * (7) The judgment is contrary to law ***:'
Plaintiff argues a new trial is warranted because: 1.) the jury's verdict of bad faith
was the result of prejudicial error, consisting of defense counsel's improper comments
and the Court's refusal to instruct the jurors in accordance with Plaintiff s proposed
answers to two of their questions; 2.) improper evidence was presented, consisting of
evidence pertaining to the POCA claim, the filing of criminal charges and the insurance
coverage issues; and 3.) the verdict and damages awarded were not supported by the
weight of the evidence but were the result of passion and prejudice.
A. Defendanta' Counsel's Closing Arguments
Plaintiff maintains it is entitled to a new trial in light of defense counsel's
improper and inflammatory comments during closing arguments, arguing the same
mischaracterized the evidence and were intended to mislead and inflame the passions of
*he-;us-y.
While it is the trial court's duty "to see that counsel's statements are confined to
proper limits and prohibit counsel from creating an atmosphere of passion and prejudice
02 CVC-07-7653 62
App. 0114
or misleading the jury," the Court notes that, " * * * counsel is generally afforded broad
latitude in closing remarks." Jackson v. Booth Memorial Hospital (1988), 47 Ohio
App.3d 176, 180, 547 N.E.2d 1203, citing Acceleration Life Assur. Co. v. Walsh (June 4,
1987), Cuyahoga App. No. 52266,1987 Ohio App. LEXIS 7307, at *12-13; Cusumano v.
Pepsi Cola Bottling Co. (1967), 9 Ohio App.2d 105,122, 223 N.E.2d 477. See, also,
Pang v. Minch (1990), 53 Ohio St.3d 186, 194, 559 N.E.2d 1313. Furthermore, while
"[r]emarks that are not supported or warranted by the evidence and which are calculated
to arouse passion or prejudice or are designed to misrepresent the evidence to the extent
that there is a substantial likelihood that the jury may be misled may constitute prejudicial
error," it is well-established that "inferences drawn from evidence in the cases are a
legitimate subject of argument." Id., citing Jones v. Macedonia-Northfreld Banking Co.
(1937), 132 Ohio St. 341, 7 N.E.2d 544, paragraph one and three of the syllabus; Durst v.
Van Gundy(1982), 8 Ohio App.3d 72, 75, 455 N.E.2d 13196; Coffey v. Shenk (1974), 39
Ohio App.2d 156,160, 316 N.E.2d 917.
The Court finds the at-issue closing argument statements in this case were
inferences based on evidence contained within the record. "Closing argument presents
counsel with the opportunity to comment on the evidence and the reasonable inferences
to be drawn from the evidence." Roetenberger v. Christ Hospital & Anesthesia
Associates of Cincinnati, 163 Ohio App.3d 555, 2005-Ohio-5205, 839 N.E.2d 441, at ¶9,
citing Wilson v. Ahn, Hamilton App. No. C-020615, 2003-Ohio-4305, 2003 Ohio App.
_L.EXIS3^10. Therefore,where there is evidence presented from which counsel can
make inferences and deductions, such inferences and deductions constitute proper closing
arguments. Id.; Cusumano, 9 Ohio App.2d at 122. Accordingly, as sufficient evidence
02 CVC-07-7653 63
App. 0115
was presented from which Defendants' counsel could make inferences and assumptions,
the Court finds defense counsel's statements during closing argument were not
impennissible, inflammatory statements not based on any evidence, and as such do not
warrant a new trial.
The Court notes that, despite the foregoing, it instructed the jurors that the
evidence consists not of what counsel tells them it was or the way counsel interprets it,
but the evidence consists of what the jurors themselves recall it to be. (Trial Transcript,
Vol. XXXIII, at 27.) The Court also instructed the jurors that "[t]he evidence does not
include the pleadings or any statement of counsel made during the trial, unless such
statement was an admission or agreement admitting certain facts. The opening
statements and the closing arguments of counsel are designed to assist you. They are not
evidence." (Trial Transcript, Vol. XXXIV, at 25.) As the Ohio Supreme Court has noted
on numerous occasions, "[a] presumption always exists that the jury has followed the
instructions given to it by the trial court. * * * Accordingly, it must be presumed that the
jury properly disregarded the closing remarks of counsel for appellees as they related to
matters not in evidence:' Pang, 53 Ohio St.3d at 195, citing State v. Fox (1938), 133
Ohio St. 154, 160, 12 N.E. 2d 413; Browning v. State (1929), 120 Ohio St. 62, 72, 165
N.E. 566. To the extent any of counsel's statements may have consisted of matters not in
evidence, the Court presumes that the jurors followed the instructions and disregarded the
same.
The Court also fmdsdefense counsel's reading of a poem during closing
arguments, given the broad latitude counsel is afforded during closing arguments, does
not warrant a new trial.
02 CVC-07-7653 64
App. 0116
B. "Bad Faith" Jury Questions
Plaintiff argues a new trial is also warranted because the Court erred in not
instructing the jurors to determine bad faith as to each defendant. Two of the questions
the jurors asked during deliberation consisted of the following: 1.) Are we to consider the
bad faith question with all defendants at once or separately? and 2.) If we feel that some
but not all of the claims are pursued in bad faith, how should we rule? Plaintiff argues
the Court should have instructed the jurors that they should "parse out bad faith with
respect to each defendant" but the Court instead instructed the jurors to determine bad
faith based on Plaintiff's actions.
In discussing the jurors' questions and the proposed answers thereto with counsel,
the Court reasoned that, assuming the first question was related to Verdict Form 2E, it did
not matter whether the actions were aimed at one defendant or another because the
critical question was did Plaintiff act in bad faith, i.e., did it pursue the trade secret
misappropriation claim in bad faith. With respect to the second question, the Court again
prefaced its answer with "[i]f your question relates to 2E," and answered that "2E only
relates to the trade secrets misappropriation claim of ACS." In answering the fust
question, the Court also incorporated language suggested by Plaintiff s counsel, Attoraey
Masters. Specifically, Mr. Masters stated "I would just propose that you would add after
that statement 'in bringing the trade secret claim.' So your answer would be your answer
-- `you should base your answer on the actions of the plaintiff in bringing the trade secret
claam.''(TriaLTranscript. _Vol. XXX_V, at 19-20.)
The Court declined PlaintifPs counsel suggestion that the Court first inquire of
the iurors whether their questions dealt with Plaintiff s trade secret misappropriation
02 CVC-07-7653 65
App. 0117
claim or whether they were somehow related to Defendants' counterclaims, because
doing so would place the Court in the precarious position of"impermissibly digging into
what they are supposed to be doing and probably inquiring of what they are doing a little
bit. * * * If I preface my -- the answer with 2E, then if that's not where they want to be,
they certainly will come back with another question and let us know if they have fiuther
questions." (Id., at 11-12.) The Court further indicated that on the back of the sheet
would be a notation "Please advise if this is not responsive." The jurors did come back
with four more questions during the remainder of their deliberation, but none of those
questions referenced back to or requested additional answers and/or explanation related
to these two questions.
The Court finds its answers to the two jury questions identified above do not
warrant a new trial.
C. POCA, Criminal Charges and Insurance Coverage
The Court also finds Plaintiffs argument that the jurors considered improper
evidence and testimony pertaining to the POCA claim, the filing of criminal charges, and
the dismissal of the conversion claim, and that the same warrants a new trial, is not well
taken.
Even without a POCA claim to determine, the jurors were not presented with improper
evidence as the evidence that may have pertained to a POCA claim, were one to still
remain, was also relevant for purposes of establishing bad faith, unfair competition and/or
tortious interference. SQecifically, the Court finds the evidence pertaining to whether
CAS was a separate entity from Plaintiff does not wan-ant a new trial. Nor does the
evidence and/or testimony about threats of "fast and furious publicity" and allegations of
02 CVC-07-7653 66
App.0118
criminal wrongdoing, or testimony pertaining to Plaintiff s demands during the April
2002 "settlement negotiations" characterized by the individual defendants as "extortion."
The Court finds said evidence is relevant to the jury's determination of whether Plaintiff
acted in bad faith in pursuing the trade secrets misappropriation claim and whether
Plaintiff engaged in malicious litigation efforts for purposes of Defendants' unfair
competition counterclaim.15
The Court finds that the references to the filing of "criminal allegations" were
also not improper. Conley's testimony revealed that Dennis threatened Defendants with
a civil and criminal complaint. Testimony further revealed that the threat was actualized
when Plaintiff filed a complaint that alleged Defendants violated R.C. § 1333.81.
Alleging one has violated R.C. § 1333.81, which carries criminal penalties, is an
allegation of criminal wrongdoing. Testimony further revealed Plaintiff amended its
complaint years after it was filed, dismissing the allegations pertaining to R.C. §1333.81.
All of this evidence was relevant to Defendants' unfair competition counterclaim, as it
was probative of whether Plaintiff engaged in unfair commercial practices such as
malicious litigation, i.e., the bringing of a claim not in good faith but for the purpose of
destroying a rival.
Finally; evidence pertaining to the conversion claim and related insurance
coverage was also not improperly before the jury. The fact that Plaintiff alleged
Defendants were guilty of conversion and breach of the duty of loyalty, that Defendants'
ir-surance-coverage was tied tothe conversion claim, that Defendants and their insurance
carrier litigated the issue of coverage and Defendants ultimately prevailed, and that
13 Testimony pertaining to the scanning of CAS employees' e-mails and the monitoring of their telephonecalls could also be probative of the issue of subjective bad faith.
02 CVC-07-7653 67
App. 0119
Plaintiff dismissed the conversion claim soon thereafter, is likewise relevant to the jury's
determination of whether Plaintiff engaged in malicious litigation efforts in an attempt to
unfairly compete with Defendants, particularly in light of Plaintiff's knowledge and
monitoring of Defendants' financial situation. As Defendants note, the issue is not
whether Plaintiff had a right to amend its complaint; rather, it is the timing of the
amendment and the consequences thereof that are relevant for purposes of their unfair
competition counterclaim and Plaintiff s bad faith in pursuing its trade secrets
misappropriation claim.
D. Verdicts and Damages: Weight of the Evidence, Passion and Prejudice
Plaintiff fatther argues the jury's judgment - as to liability and damages - is not
supported by the weight of the evidence, is contrary to law, and was the result of passion
and prejudice.
As the Ohio Supreme Court has held, "[judgments supported by some competent,
credible evidence going to all the essential elements of the case will not be reversed by a
reviewing court as being against the manifest weight of the evidence." Chemical Bank of
New York v. Neman (1990), 52 Ohio St.3d 204,207-208, 556 N.E.2d 490, citing C.E.
Morris Co. v. Foley Construction Co. (1978), 54 Ohio St.2d 279, 376 N.E. 2d 578, at
syllabus.
"Weight of the evidence has been defined as `the inclination of the greater amount
of credible evidence, offered in a trial, to support one side of the issue rather than the
other. _ it-indicates clearly_ to the jury_ that the partyhaving_ the burden of proof will be
entitled to their verdict, if, on weighing the evidence in their minds, they shall find the
greater amount of credible evidence sustains the issue which is to be established before
02 CVC-07-7653 68
App. 0120
them. Weight is not a question of mathematics, but depends on its effect in inducing
belief."' Schafer v. RMS Realty (2000), 138 Ohio App.3d 244, 257-258, 741 N.E.2d 155,
citing State v. Thompkins (1997), 78 Ohio St.3d 380, 387, 678 N.E.2d 541. However,
while in detennining whether a verdict is against the manifest weight of the evidence a
trial court must consider and weigh the evidence to see if the appropriate burden of
persuasion has been met, the court "must still defer to the trier of fact's greater ability to
assess credibility." Schafer 138 Ohio App.3d at 278, citing State v. DeHass (1967), 10
Ohio St.2d 230, 227 N.E.2d 212.
For the reasons set forth above, and having considered the weight of the evidence
presented, the Court finds that, although the evidence was not without dispute,
Defendants presented sufficient evidence with respect to their burden and the jury's
verdict was supported by the greater weight of that evidence. As the Ohio Supreme
Court has held, a trial court's consideration of the weight of the evidence is not unlimited
in a Civ.R. 59(A) situation; mther, the court's consideration of the same is in a more
restricted sense of whether it appears that manifest injustice has been done and the verdict
is against the weight of the evidence. Rohde v. Farmer (1970), 23 Ohio St.2d 82, 262
N.E.2d 685, paragraph three of the syllabus.
Having so weighed the evidence, the Court finds Defendants presented "some
competent, credible evidence going to all the essential elements of the case," upon which
the jury rendered its verdict. Specifically, the Court finds that substantial, credible
evidence_supports the inry's findinu that Defendants did not misappropriate any trade
secrets and that Plaintiff pursued said claim in bad faith. Likewise, substantial, credible
02 CVC-07-7653 69
App.0121
evidence supports the jury's verdicts and damages awards with respect to Defendants'
defamation, unfair competition and tortious interference counterclaims.
With respect to Plaintiff s "passion and prejudice" argument, the Court notes that
Civ.R. 59(A) allows for a new trial if the damages awarded are inadequate or excessive
and appear to have been given under the influence of passion or prejudice. However, it is
well-established that the assessment of damages is thoroughly within the province of the
jury and "a reviewing court is not at liberty to disturb the jury's assessment absent an
affirmative finding of passion and prejudice or a finding that the award is manifestly
excessive." Moskovitz v. Mt. Sinai Medical Center (1994), 69 Ohio St.3d 638, 655, 635
N.E.2d 331, citing Toledo, Columbus & Ohio River RR. Co. v. Miller (1923), 108 Ohio
St. 388, 402-403, 140 N.E. 617.
As the Ohio Supreme Court held in Fromson & Davis Co. v. Reider (1934), 127
Ohio St. 564, 189 N.E. 851, in order to determine whether excessive damages were
influenced by passion or prejudice on the part of the jury, "a reviewing court should
consider, not only the amount of damages returned and the disparity between the verdict
and remittitur where one has been entered, but it also becomes the duty of such court to
ascertain whether the record discloses that the excessive damages were induced by
(a) admission of incompetent evidence, (b) by misconduct on the part of the court or
counsel, or (c) by any other action occuning during the course of the trial which can
reasonably be said to have swayed the jury in their determination of the amount of
danageslhat_should be awarded." Fromson, 127 Ohio St. at paragraph three of the
syllabus, citing Loudy v. Faries (1985), 22 Ohio App.3d 17,488 N.E.2d 235.
02 CVC-07-7653 70
App. 0122
Furthermore, "[t]he mere size of a verdict does not afford proof of passion or
prejudice." Jeanne v. Hawkes Hosp. ofMt. Carmel (1991), 74 Ohio App.3d 246, 257,
598 N.E.2d 1174, citing Pearson v. Cleveland Acceptance Corp. (1969), 17 Ohio App.2d
239, 46 0.O.2d 411, 246 N.E.2d 602. Rather, the test for granting a new trial on the basis
of passion and prejudice is whether "the jury's assessment of damages was so
disproportionate as to shock reasonable sensibilities." Id., citing Spicer v. Armco Steel
Corp. (1974), 68 0.O.2d 314, 322 N.E.2d 279. See, also, Miller v. Lindsay-Green, Inc.,
Franklin App. No. 04AP-848, 2005-Ohio-6366, at ¶75, citing Berge v. Columbus
Community Cable Access (1999), 136 Ohio App.3d 281, 317, 736 N.E.2d 517, quoting
Pena v. Northeast Ohio Emergency Affiliates, Inc. (1995), 108 Ohio App.3d 96, 104, 670
N.E.2d 268.
Having reviewed the evidence presented as well as the parties' respective
arguments, the Court fmds the jury's damages awards were not induced by incompetent
evidence, misconduct by the court or counsel, or by any other "action occurring during
the course of the trial which can reasonably be said to have swayed the jury in their
determination of the arnount of damages that should be awarded." Furthermore, in light
of the evidence presented and the damages requested as per Defendants' experts'
testimonies, the Court finds the jury's damages awards are not so disproportionate as to
shock reasonable sensibilities, and therefore do not warrant a new trial.
III. MOTION FOR A REMITTITUR
As the Ohio Supreme Court has noted, "[a] court has the inherent authority to
remit an excessive award, assuming it is not tainted with passion or prejudice, to an
amount supported by the weight of the evidence." Wightman v. Consolidated Rail Corp.
02 CVC-07-7653 71
App. 0123
(1999), 86 Ohio St.3d 431, 444, 715 N.E.2d 546. However, before an award may be
remitted, the following criteria must be satisfied: "(1) unliquidated damages are assessed
by a jury, (2) the verdict is not influenced by passion or prejudice, (3) the award is
excessive, and (4) the [prevailing party] agrees to the reduction in damages." Id., citing
Chester Park v. Schulte (1929), 120 Ohio St. 273, 166 N.E. 186, paragraph three of the
syllabus.
It is well-established that "assessing damages is left to the discretion of the jury
and will not be overturned by a reviewing court. However, as a longstanding matter of
policy, [a court] may reduce the jury's award if it appears to be beyond the realm of
proper compensation *** ." Shoemaker v. Crawford (1991), 78 Ohio App.3d 53, 66, 603
N.E.2d 1114, citing Duracote Corp. v. Goodyear Tire & Rubber Co. (1983), 2 Ohio St.3d
160, 162-163, 443 N.E.2d 184.
The Court finds the damages awarded by the jury, while headline-grabbing, are
not so overwhelmingly excessive as to be "beyond the realm of proper compensation,"
particularly in light of the evidence presented and the expert testimony pertaining to
damages. As previously noted, the jury's compensatory damages awards are well below
Defendants' experts' calculations of damages, and the punitive damages awards are not
so excessive as to contravene the dual purpose of punitive damages: to punish and deter.
In light of the standards of review applicable to Plaintiff s combined post-trial
motion, Ohio law pertaining to the parties' claims and counterclaims, and the evidence
and testimonypresented during trial, the Court hereby DENIES Plaintiff's April 24, 2008
"Motion for Judgment Notwithstanding the Verdict on Defendants' Counterclaims and as
02 CVC-07-7653 72
App. 0124
to the Finding of Bad Faith, and Motion for New Trial as to All Claims, or (in the
Alternative) for Remittittu."
IT IS SO ORDERED.
Copies To:
Michael G. Long, Esq.Kimberly Weber Herlihy, Esq.Carter M. Stewart, Esq.Vorys, Sater, Seymour and Pease, LLP52 East Gay Street, P.O. Box 1008Columbus, Ohio 43216-1008Counselfor Plaintiff
John P. Mazza, Esq.Lee W. Westfall, Esq.Harris & Mazza941 Chatham Lane, Suite 201Columbus, Ohio 43221Co-Counselfor Plaintiff
Robert M. Masters, Esq.John Shin, Esq.John J. Girgenti, Esq.Erin E. Sears, Esq.Paul, Hastings, Janofsky &Walker, LLP
875 15th Street, N.W.Washington, D.C. 20005Of-Counsel for Plaintiff
Alan L. Briggs, Esq.Keith Shumate, Esq.Aneca E. Lasley, Esq.Aaron T. Brogdon, Esq.Kristen M. Blankley, Esq.
_Squiie, Sanders & Dempsey, LLP2000 Huntington Center41 South High StreetColumbus, Ohio 43215Counselfor Defendants
02 CVC-07-7653 73
App.0125
Nancy Manougian, Esq.Bailey Cavalieri, LLCOne Columbus, Suite 210010 West Broad StreetColumbus, Ohio 43215Counsel for Third-Party Defendant Lumbermans Mutual Casualty Co.
Steven G. Janik, Esq.Christopher J. Van Blargan, Esq.Janik, Dorman & Winter, LLP9200 South Hilis Blvd., Suite 300Cleveland, Ohio 44147-3521Counsel for National Union Fire Insurance Co.
02 CVC-07-7653 74
App. 0126
Lawriter - ORC - 1333.61 Uniform trade secrets act definitions. Page 1 of 1
1333.61 Uniform trade secrets act definitions.
As used In sections 1333.61 to U33.69 of the Revised Code, unless the context requires otherwise:
(A) "Improper means" Includes theft, bribery, misrepresentation, breach or inducement of a breach of
a duty to maintain secrecy, or espionage through electronic or other means.
(B) "Mlsappropriation" means any of the following:
(1) Acquisitlon 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;
(2) Disclosure or use of a trade secret of another without the express or Implied consent of the other
person by a person who did any of the following:
(a) Used improper means to acquire knowledge of the trade secret;
(b) At the time of disclosure or use, knew or had reason to know that the knowledge of the tradesecret that the person acquired was derived from or through a person who had utilized impropermeans to acquire it, was acquired under circumstances giving rise to a duty to maintain its secrecy orlimit Its use, or was derived from or through a person who owed a duty to the person seeking relief to
maintain its secrecy or limit its use;
(c) Before a material change of their position, knew or had reason to know that it was a trade secret
and that knowledge of it had been acquired by accident or mistake.
(C) "Person" has the same meaning as in division (C) of section 1.^9 of the Revised Code and Includes
governmental entities.
(D) "Trade secret" means information, including the whole or any portion or phase of any scientific ortechnical information, design, process, procedure, formula, pattem, compilation, program, device,method, technique, or improvement, or any business information or plans, financial information, orlisting of names, addresses, or telephone numbers, that satisfies both of the following:
(1) It derives independent economic value, actual or potential, from not being generally known to, andnot being readily ascertainable by proper means by, other persons who can obtain economic value
from Its disciosure or use.
(2) It is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Effective Date: 07-20-1994; 2008 HB562 (Vetoed) 06-24-2008
http://codes.ohio.gov/orc/1333.61 4/19/2011App. 0127
Lawriter - ORC - 1333.62 Injunction against misappropriation. Page 1 of 1
1333.62 Injunction against misappropriation.
(A) Actual or threatened misappropriation may be enjoined. Upon application to the court, aninjunction shall be terminated when the trade secret has ceased to exist, unless the court finds thattermination of the inJunction is likely to provide a person who committed an actual or threatenedmisappropriation with a resulting commercial advantage, in which case the Injunction shall becontinued for an addltfonai reasonable time in order to eliminate commercial advantage that otherwise
would be derived from the misappropriation.
(B) In exceptional circumstances, an injunction may condition future use upon payment of areasonable royalty for no longer than the time for which use could have been prohibited. Exceptionalcircumstances include a material and prejudicial change of position prior to acquiring knowledge orreason to know of misappropriation that renders a prohibitive injunction inequitable.
(C) In appropriate circumstances, affirmative acts to protect a trade secret may be compelled by court
order.
Effective Date: 07-20-1994
http://codes.ohio.gov/orc/1333.62 4/19/2011App.0128
Lawriter - ORC - 1333.63 Damages recoverable. Page 1 of 1
1333.63 Damages recoverable.
(A) Except to the extent that a material and prejudicial change of position prior to acquiring knowledgeor reason to know of misappropriation renders a monetary recovery inequitable, a complainant in acivil action is entitled to recover damages for misappropriation. Damages may include both the actualloss caused by misappropriation and the unjust enrichment caused by misappropriation that is nottaken into account in computing actual loss. In lieu of damages measured by any other methods, thedamages caused by misappropriation may be measured by imposition of liability for a reasonableroyalty that is equitable under the circumstances considering the loss to the complainant, the benefitto the misappropriator, or both, for a misappropriator's unauthorized disclosure or use of a trade
secret.
(B) If willful and malicious misappropriation exists, the court may award punitlve or exemplarydamages in an amount not exceeding three times any award made under division (A) of this section.
Effective Date: 07-20-1994
http://codes.ohio.gov/orc/1333.63 4/19/2011App.0129
Lawriter - ORC - 1333.64 Attorney's fees. Page 1 of I
1333.64 Attorney's fees.
The court may award reasonable attomey's fees to the prevailing party, if any of the following applies:
(A) A claim of misappropriation is made in bad faith.
(B) A motion to terminate an InJunction is made or resisted in bad faith.
(C) Willful and malicious misappropriation exists.
Effective Date: 07-20-1994
http://codes.ohio.gov/orc/1333.64 4/19/2011App.0130
Lawriter - ORC - 1333.65 Authorized means of preserving secrecy. Page 1 of I
1333.65 Authorized means of preserving secrecy.
In an action under sections 1333-.61 to 1333.69 of the Revised Code, a court shall preserve the secrecyof an alleged trade secret by reasonable means that may include granting protective orders inconnection with discovery proceedings, holding fn-camera hearings, sealing the records of the action,and ordering any person Invoived in the fitigation not to disclose an alleged trade secret without prior
court approval.
Effective Date: 07-20-1994
http://codes.ohio.gov/orc/1333.65 4/lqpp 1 6131
Lawriter - ORC - 1333.66 Time for commencing action.
1333.66 Time for commencing action.
Page 1 of I
An action for misappropriation shall be commenced within four years after the misappropriation isdiscovered or by the exercise of reasonable diligence should have been discovered. For the purposes ofthis section, a continuing misappropriation constitutes a single claim.
Effective Date: 07-20-1994
http://codes.ohio.gov/orc/1333.66 4/1 App10132
Lawriter - ORC - 1333.67 Conflicting laws displaced - remedies not affected. Page 1 of 1
1333.67 Conflicting laws displaced - remedies not
affected.
(A) Except as provided in division (B) of this section, sections 1333.61 to 1333.6 of the Revised Codedisplace conflicting tort, restitutionary, and other laws of this state providing civil remedies for
misappropriation of a trade secret.
(B) Sections 1333.6LI to 1 33. 9 of the Revised Code do not affect any of the following:
(1) Contractual remedies, whether or not based on misappropriation of a trade secret;
(2) Other civil remedies that are not based on misappropriation of a trade secret;
(3) Criminal remedies, Including those in other sections of this chapter, whether or not based on
misappropriation of a trade secret.
Effective Date: 07-20-1994
http://codes.ohio.gov/orc/1333.67 4/1^/n2p016133
Lawriter - ORC - 1333.68 Uniformity of application and construction of provisions. Page 1 of I
1333.68 Uniformity of application and construction ofprovisions.
Sections 1333.61 to _1333 B9 of the Revised Code shall be applied and construed to effectuate theirgeneral purpose to make uniform the law with respect to their subject among states enacting them.
Effective Date: 07-20-1994
http://codes.ohio.gov/orc/1333.68 4/1 p^^W b134
Lawriter - ORC - 1333.69 Title of act. Page 1 of 1
1333.69 Title of act.
Sections 133-1&1 to 1333.69 of the Revised Code may be cited as the "Uniform Trade Secrets Act."
Effective Date: 07-20-1994
http://codes.ohio.gov/orc/1333.69 4/1App 10135