Alabama Case Law
SYSTRENDS, INC. v. GROUP 8760, 1041548 (Ala. 10-13-2006)
Systrends, Inc. v. Group 8760, LLC. Richard J. Brooks v.
Group 8760, LLC. Group 8760, LLC v. Richard J. Brooks and
Systrends, Inc. 1041548 and 1041795, 1041569 and 1041930,
1050058. Supreme Court of Alabama. Decided October 13,
2006.
Appeals from Jefferson Circuit Court (CV-02-777).
HARWOOD, Justice.
These five consolidated appeals involve two filed by the
defendant Systrends, Inc., two filed by the defendant
Richard Brooks, and one filed by the plaintiff Group 8760,
LLC (“Group 8760” or “8760”).
The posttrial events giving rise to these appeals are
accurately summarized by Brooks and Systrends in their
respective but identical explanations of those events in
their briefs, as follows:
“The trial court entered judgment on a jury verdict on
February 10, 2005. (C. 3321-22).[fn1] Systrends and Brooks
timely filed post-judgment motions on March 11, 2005. (C.
3360-76, 3377-90). Group 8760 filed a motion for permanent
injunction and a motion for attorneys’ fees. (C. 3323-27,
3328-31). By order signed on May 31, 2005, and entered on
June 1, 2005, the trial court granted a new trial on the
claims against Systrends and Brooks for misappropriation
of trade secrets, denied Brooks’ motion for new trial on
the breach of fiduciary duty claim, conditioned upon
8760’s refusal of a remittitur, and denied defendants’
post-judgment motions in all other respects. (C. 3533-44).
This ruling effectively denied or rendered moot 8760’s
motion for a permanent injunction and motion for attorneys
fees, both of which were premised upon the alleged
misappropriation of trade secrets.
“On June 1, 2005, 8760 filed a motion to alter, amend or
vacate the order granting a new trial. (C. 3531-32). Group
8760 also filed a Consent to Remittitur consenting to the
remittitur of the punitive damages on the breach of
fiduciary duty claim and purporting to consent to a
remittitur (that had not been ordered) of punitive damages
on the trade secrets claim. (C. 3694-95). By order
entered July 5, 2005, the court granted 8760’s motion,
vacated the portion of its prior order granting a new
trial on the trade secrets claim and ordered a remittitur
of the punitive damages on the trade secrets claim. (C.
3789).
“On July 7th and 8th respectively, Systrends and Brooks
filed motions to alter, amend or vacate the court’s order
entered on July 5, 2005. (C. 37919-8). Systrends and
Brooks timely filed their initial notices of appeal on
July 8, 2005 (Case Nos. 1041548 and 1041569 respectively),
within 42 days of the entry of the initial order on their
post-judgment motions and the order on 8760’s subsequent
motion, and advised the Clerk of Court that the appeal
should be held in abeyance pending disposition on their
July 7th and 8th motions. (C. 3860, 3866).
“On August 3, 2005, the trial court denied Systrends’ and
Brooks’ July 7th and 8th motions. (C. 3806). Pursuant to
Rule 4, Ala. R. App. P., the judgment became final upon
the disposition of these motions, and the notice of appeal
became effective.
“By order dated August 11, 2005, however, the trial court
purported to re-enter judgment in accordance with the
jury’s verdicts, as remitted. This order also included
[Rule] 54(b)[, Ala. R. Civ. P.,] final judgment language.
(C. 3807-08). On August 23, 2005, and September 15, 2005,
respectively, Systrends and Brooks timely filed notices of
appeal from the August 11, 2005, judgment (Case Nos.
1041795 and 1041930). (C. 3878, 3884).
“[The defendants believe] that the February 10, 2005,
judgment became final after the court disposed of
Systrends’ and Brooks’ July 7th and 8th motions to alter,
amend or vacate the order entered on July 5, 2005, which
was the last pending post-judgment motion. Group 8760’s
request for attorneys fees and an injunction were denied
or rendered moot by the granting of a new trial on the
trade secrets claim, and those motions were not renewed
after the new trial order was set aside and the judgment
effectively reinstated. However, if the February 10, 2005,
judgment was not a final judgment, the order entered on
August 11, 2005, which included 54(b) language, was final
and appealable. In either case, this Court has
jurisdiction over Systrends’ and Brooks’ appeals pursuant
to Ala. Code 1975, § 12-22-2.”
(Systrends’ principal brief, pp. v-viii; Brooks’s principal
brief, pp. vi-ix.)
None of the parties has discussed further which appeal out
of the pair of appeals each defendant has taken should be
recognized as the appropriate one, but we agree with the
defendants that, in any event, this Court has jurisdiction
of a properly perfected appeal by each defendant.
Therefore, we will simply refer to, and dispose of,
“Systrends’ appeal” and “Brooks’s appeal,” without
attempting to determine which appeal in each pair is the
procedurally appropriate one.
As last amended, Group 8760’s complaint asserted that
Brooks, its former employee, had breached the restrictive
covenant of his employment contract with Group 8760, had
breached his fiduciary duty to Group 8760, and had
misappropriated trade secrets of Group 8760 in violation of
the Alabama Trade Secrets Act, §§ 8-27-1
through 8-27-6, Ala. Code 1975 (hereinafter sometimes “the
ATSA”). Group 8760 claimed that Systrends, as Brooks
subsequent employer, had interfered with Group 8760’s
employment contract with Brooks and had also violated the
ATSA.
On the eve of the setting of the first trial in this case,
Brooks filed a voluntary petition in bankruptcy, thus
occasioning under the United States Bankruptcy Code an
automatic stay of the case. (R. 9-12, 1074-81, defendants’
exhibit 7.) After the bankruptcy court lifted that stay,
the case proceeded to jury trial on January 24, 2005.
Midway through the trial the bankruptcy court entered an
order “discharging” Brooks’s debts. (C. 3375-76.) The jury
returned verdicts on February 9, 2005, finding in favor of
Group 8760 and against the defendants on all claims and
awarding damages as follows: against Systrends for
misappropriation of trade secrets, $5,900,000 in
compensatory damages and $9,400,000 in punitive damages;
and for intentional interference with contractual
relations, $1,000,000 in compensatory damages and
$3,200,000 in punitive damages, for a total award against
Systrends of $19,500,000 (C. 3319); against Brooks for
breach of contract, $150,000 in compensatory damages; for
breach of fiduciary duty, $252,500 in compensatory damages
and $1,400,000 in punitive damages; and for misappropriation
of trade secrets, $1,750,000 in compensatory damages and
$4,000,000 in punitive damages, for a total award against
Brooks of $7,552,500.
Standard of Review
In reviewing the denial of a motion for a judgment as a
matter of law or the denial of a motion for a new trail, we
consider the evidence in a light most favorable to the
prevailing party, resolving all factual disputes in its
favor. Alabama Power Co. v. Aldridge, 854 So. 2d 554 (Ala.
2002); Alabama Great Southern R.R. v. Johnson, 874 So. 2d
517 (Ala. 2003). Viewed under that standard, the facts
pertinent to these appeals are as follows.
Facts
Brooks, a computer programmer, began creating software in
the early 1990s for conducting commercial transactions over
the Internet. By 1996, he was developing software that
could be used to conduct such transactions within the
energy industry. This software, as used in that industry,
is referred to as “GISB EDM” software.
GISB is an acronym for the Gas Industry Standards
Board,[fn2] a consortium of entities and individuals that
promulgates standards by which companies in the energy
industry engage in commercial trades and transactions
involving both natural gas and electricity. EDM is an
acronym for electronic delivery mechanism, which is the
specific technology used to accomplish those transactions.
GISB EDM software, then, is software that is capable of
conducting commercial business electronically under the
standards promulgated by GISB. The Federal Energy
Regulatory Commission requires that entities use GISB
EDM-compliant software to conduct transactions involving
certain interstate natural-gas pipelines. 18 C.F.R. §
284.12. Brooks became so proficient with those standards
that in 1998 he was elected co-chair of the GISB committee
charged with drafting and revising the EDM standards, and,
as co-chair, he largely wrote the EDM standards.
In 1996, Brooks cofounded Group 8760, which was
headquartered in Birmingham, and entered into an employment
agreement with the company to serve as its chief technical
officer. Another cofounder, John Williams, was to serve as
president and chief executive officer. Brooks’s work at
Group 8760 focused upon developing, maintaining, and
intermittently upgrading a version of GISB EDM software for
use by utilities. After approximately four years of work
dedicated to that end, Group 8760 placed on the market its
product, originally named GISBAgent, and later, during the
time relevant to this appeal, InsideAgent. As of 2001,
InsideAgent was one of five commercially marketed versions
of GISB EDM software; at the time of trial, four such
software packages were sold commercially.
Brooks’s employment agreement with Group 8760 contained a
section entitled “Non-competition Agreement and Partial
Restraint of Trade.” (Plaintiff’s ex. no. 2; C. 793-800.)
That section provided that “during the term of his
employment and for one (1) year following such employment,
. . . [Brooks] shall not, without the prior consent of
[Group 8760], directly or indirectly, engage in any similar
or related business in competition with [Group 8760]” and
described “the territory within which [Group 8760’s]
business is performed” as “the entire world.” That section
further provided that for the same one-year period Brooks
would not
“directly or indirectly, solicit or divert business from,
or attempt to convert to other methods of using the same
or similar services provided by [Group 8760] to any of
[Group 8760’s] clients, either for his own benefit or for
the benefit of any other person, partnership, corporation
or other entity whatsoever.”
Additionally, that section provided:
“[A]s a result of his employment with [Group 8760],
[Brooks] has acquired, made use of and added to
confidential information of a special and unique nature
and value set forth in, or relating to such matters as
[Group 8760’s] systems, compilations, files, computer
software, lists, books, literature, devices, methods,
techniques, processes, procedures, manuals, confidential
reports, customer lists or records, price schedules,
videotapes, audio recordings, marketing materials of any
type, products and other materials or records
(collectively, `Proprietary Information’).”
Finally, Brooks acknowledged in that agreement that this
proprietary information “constitute[d] `trade secrets’ under
the Alabama Trade Secrets Act of 1987,” that those trade
secrets belonged to Group 8760, and that Brooks would not
use for his benefit or divulge, or allow others to use or
divulge, “any such Proprietary Information, confidential
information, or trade secrets.”
The employment agreement stipulated that the invalidity or
unenforceability of any particular provision would not
affect the enforceability of other provisions and,
specifically, that in the event any provision relating to
“geographical areas of restriction shall be declared by a
court of competent jurisdiction to exceed the maximum . . .
geographical areas such court deems reasonable and
enforceable, the . . . geographical areas of restriction
deemed reasonable and enforceable by the court shall become
and be the maximum . . . geographical area.” The agreement
also contained a “severability” clause.
In the spring of 2001, following several years of
substantial losses, Group 8760 stepped up its efforts to
attract venture-capital investments and began searching for
companies that might be interested in buying Group 8760,
enlisting the services of Legacy Capital, a company
specializing in marketing technology companies. (R.
1394-97, 1532, 1738.) Because of Brooks’s “confrontational”
management style, Williams had removed him from “day-to-day
responsibilities” in late 2000, and later proposed that
Brooks simply resign. (R. 555-58, 1391-94, 1522-24.) The
terms of Brooks’s resignation could not be agreed upon, and
Williams finally told him “just continue on the way you
are” until the company could be sold, “working on the
standards groups” and following up on certain prospects as
buyers of the company. (R. 1395, 1526, 1532.) Group 8760
had compiled a list of almost 100 companies as potential
buyers, but the technology industry was experiencing
problems in 2001, when what Williams characterized at trial
as “the big tech wreck on the stock market” occurred. (R.
1532-35.) In March or April 2001, Brooks asked Williams if
Brooks could approach Sterling Commerce (“Sterling”) about
acquiring Group 8760. Williams ranked Sterling as one of
the top five prospects for acquiring Group 8760. (R. 1527,
1539.) Williams agreed that Brooks could contact Sterling,
and Brooks obtained a copy of the “offering memorandum”
that Legacy Capital had prepared for submission to
acquisition prospects, but Williams never heard anything
more from Brooks about the idea. (R. 1397.) In connection
with their discussions about Brooks’s possible resignation
from Group 8760, Williams had told him that Sterling was a
company he was prohibited under the employment agreement
from going to work for after resigning. (R. 15242-7, 1539.)
In August 2001, Williams found out that in May Brooks had
gone to Ohio to meet with various representatives of
Sterling for a job interview. (R. 1398.) Brooks had routed
all of his communications with Sterling through his
personal e-mail address, so that no record would appear on
Group 8760’s e-mail server. (R. 578, 1398.) In advance of
his job interview with the Sterling officials, Brooks sent
them his resum?© and otherwise touted the contributions he
could make to their company. (Plaintiff’s ex. nos. 142,
143; R. 571-98.) When he made the trip to Ohio, Brooks told
Williams simply that he was taking a couple of days of
vacation time, without disclosing his destination. (R.
586-87.) Not only did Williams not know until August that
Brooks had interviewed for a job with Sterling, but he also
did not know that Brooks had met with Sterling at all. When
Williams confronted Brooks and asked him what he had talked
to Sterling about, Brooks refused to tell him what had been
discussed, claiming that he had signed a nondisclosure
agreement with Sterling. (R. 1400-01.)
Williams testified that he was shocked that a co-owner and
the chief technical officer of Group 8760, knowing that
they were trying to sell the company to Sterling, among
other prospects, would sign a nondisclosure agreement and
interview for a job with Sterling. “That would just wreck
any possible acquisition by Sterling. Why would they buy
us, if they could hire the chief technical officer.” (R.
1400.) Williams insisted to Brooks that he should reveal
what he had discussed with Sterling, arguing that Brooks
had a fiduciary responsibility to Group 8760 first and
foremost and that it was a breach of that responsibility to
sign confidentiality agreements with other companies. (R.
1400-01.) Brooks nonetheless refused to discuss the matter.
On August 24, 2001, Group 8760 terminated Brooks’s
employment “for cause.” (Plaintiff’s ex. no. 16; R. 611-12,
1011-14.)
After Brooks’s employment was terminated, he discontinued
using his Group 8760 e-mail address; that change was
noticed by Dave Darnell, president of Systrends, who
inquired of Brooks about it. (R. 902-03, 1258.) When Brooks
advised that he was no longer employed with Group 8760,
Darnell explored the possibility of Brooks’s coming to work
with Systrends as project manager for a project it had
undertaken for the Electric Reliability Council of Texas
(“ERCOT”). (R. 903-06, 955-957, 1097-1100, 1258-62.) Brooks
was agreeable to the employment, and Darnell hired him as
the project manager for the ERCOT job; Darnell testified
that Brooks started on that job in mid-September but an
e-mail from Darnell to his lawyer on September 27 stated
that Brooks “is an hourly consultant now, but we have made
plans to add him as an employee very soon. He has been
working for me since September 6th at ERCOT in Texas.” (R.
1100, 1102-03.) Brooks told Darnell about the
noncompetition provision in his employment agreement with
Group 8760. (R. 905.) Although Brooks and Darnell testified
that Systrends was not then a competitor of Group 8760’s
(R. 709-10, 1118-19), Jim Mark, chief operation officer for
Group 8760 until February 2002, and Williams testified that
Systrends was a competitor of Group 8760’s. (R. 393, 424,
445, 1408, 1411, 1539, 1642.)
There was evidence presented in the form of testimony from
James Buccigross, Group 8760’s vice president of energy
practice, Mark, and Williams, and the contents of various
exhibits from which the jury could have concluded that
Systrends, with Brooks’s active participation, was working
on the development of GISB EDM solution software during the
one-year period following Brooks’s termination by Group
8760. For example, Mark testified that at a meeting of the
Texas Data Transport Working Group in late 2001 or early
2002, Brooks and Darnell told those present that “they were
developing the GISB EDM solution for ERCOT.” (R. 266-67.)
Also, Brooks acknowledged during his testimony that it was
already planned when he became the director of the ERCOT
project that ERCOT was going to have a GISB EDM solution.
(R. 704-19.)
Although Systrends never completed a GISB EDM solution for
ERCOT, it “finished up” that work for the purpose of
installing a GISB EDM solution for another company,
Dynergy, in September or October 2002. (R. 729-30, 789.)
Darnell made Brooks the project manager for the
installation of the GISB EDM solution for Dynergy, assisted
by Casey Payne. Systrends had hired Payne in January 2002
to work on the second phase of the ERCOT project. (R. 722,
965-66.) He had been a programmer at Group 8760 during
Brooks’s tenure there and was hired by Systrends on the
strong recommendation of Brooks, who promoted him to
Darnell and others as having written about 70 percent of
GISBAgent. (Plaintiff’s ex. no. 206, R. 722-26, 730-31.)
Brooks’s contention at trial was that, although he “was
building a GISB EDM solution for ERCOT,” there was no
competition with Group 8760 because Systrends had obtained
the ERCOT contract before Brooks left Group 8760. (R. 619,
735, 737-38.) Buccigross testified that in 2001 Group 8760
had a list of potential clients and customers that it was
interested in and that ERCOT was one of the customers it
was trying to pursue. (R. 280.)
After his initial designation by Systrends as a
consultant, Brooks officially became an employee of the
company, and its vice president of secured systems, on
November 12, 2001. (R. 628-629.) Although Brooks asserted
at trial that when ERCOT required the addition of a GISB
EDM solution to their software system he was removed by
Darnell as project manager for that job to prevent any
violation of the terms of his employment agreement with
Group 8760, there was substantial evidence indicating that
Brooks continued to be actively involved in the attempted
facilitation of a GISB EDM solution for ERCOT. (See, for
example, R. 634-37, 684-704, 707, 715, 722-37.) We refrain
from identifying all relevant evidence, including the
contents of various trial exhibits, given that our
determinations with respect to certain of the claims
asserted by Group 8760 will permit a new trial.
On September 27, 2001, Group 8760’s attorney sent Systrends
a letter asserting that Brooks’s employment constituted a
violation of the noncompetition provision of his employment
agreement with Group 8760; Systrends received the letter
that same day but never responded to it. (R. 10981-104.)
Extensive testimony from Buccigross, Mark, Brooks, and
Darnell and numerous exhibits were devoted to the
circumstances and implications of a contract Systrends bid
on and obtained from Potomac Electric Power Company
(“PEPCO”), the electric company operating in Washington,
D.C. (R. 267, 972.) Systrends had originally responded in
March 2001 to a “request for proposal” issued by PEPCO, but
had resubmitted and revised its bid on two occasions in
November 2001. (R. 270, 1172-74.) Group 8760 had also
submitted a bid for the PEPCO contract. (R. 268, 425, 1177,
1179-80.) Brooks testified that when he became an employee
of Systrends on November 24, 2001, he did not know who was
competing with Systrends for the PEPCO project; Group 8760,
however, introduced an internal e-mail transmitted by
Systrends on November 26 to Brooks as one of only three
recipients, noting that Systrends was “in direct
competition with Group 8760’s InsideAgent product” on the
PEPCO proposal and that PEPCO wanted to know what
advantages the system Systrends was proposing had over
Group 8760’s product. (Plaintiff’s ex. no. 162, R. 762-65.)
Brooks insisted in his testimony that his only involvement
in Systrends’ efforts to win the PEPCO contract was
participating in a single conference call with PEPCO in
late November 2001, during which he functioned solely in
his role “as the GISB EDM co-chair” in order to answer any
questions PEPCO might have concerning planned changes in
the GISB EDM standards that Brooks was helping to revise.
(R. 746, 749-50, 754, 795, 975-77.) Brooks was adamant that
he had not been involved in any other way in communicating
about, or assisting in composing and presenting, the bid.
(R. 803, 977.) However, Group 8760 introduced various
internal Systrends e-mails from which the jury could have
inferred that Brooks had participated much more than he
acknowledged. For example, a November 15, 2001, internal
Systrends e-mail discussed the need to demonstrate to PEPCO
the GISB EDM solution contained within a particular piece
of Systrends software and stated that Brooks “will advise
us on the best way to handle this.” (R. 756-57.) The
aforementioned November 26 e-mail concluded with the
request that Brooks get in touch with another Systrends
official involved with the PEPCO bid as soon as Brooks
arrived in Systrends’ Arizona office, in order to identify
advantages the Systrends proposal had over Group 8760’s
InsideAgent. (Plaintiff’s ex. no. 162, R. 765.) Brooks was
a recipient of numerous other e-mails circulated within
Systrends concerning its efforts to obtain the PEPCO bid.
After Systrends won that bid, Darnell sent an e-mail on
December 20 to Brooks as one of only three Systrends’
officials, thanking them for their contributions.
(Plaintiff’s ex. no. 203, R. 808-10.) Darnell acknowledged
in testimony that he knew that company engineers were
asking Brooks “standards questions” during the PEPCO bid
process and might have asked him questions about GISBAgent,
but that it was up to Brooks to refuse to answer questions
when to do so would have violated his employment agreement
with Group 8760. (R. 1183-84.) Brooks himself acknowledged
during his testimony that if his communications with
Systrends personnel or with PEPCO representatives involved
anything other than neutral discussions of GISB standards,
those communications would have been a violation of his
employment agreement; when asked if “participating and
helping Systrends in a bid for this PEPCO work, would have
been in violation of your employment agreement,” he
answered, “Absolutely.” (R. 750.)
In both of the proposals Systrends submitted to PEPCO in
November 2001, Brooks was identified as a member of the
“management team,” and numerous attributes of his expertise
and experience were listed. (Plaintiff’s ex. nos. 328,
329.) Although Systrends introduced evidence indicating
that it won the PEPCO contract over Group 8760 (which was
its only competitor for that contract in the final
analysis) on the basis of price, Group 8760 introduced an
e-mail transmitted internally at Systrends by Brandon
Seigel, a Systrends senior consultant on the PEPCO bid,
advising that he had been told by PEPCO that Systrends won
the contract because “[o]ur people were the deciding
factor, not the product!” (Plaintiff’s ex. no. 163.)
Systrends’ Challenge to Jurisdiction
At each stage of the litigation, Systrends asserted that
the trial court lacked personal jurisdiction over it. We
recognize that
“`[t]he plaintiff bears the burden of proving the court’s
personal jurisdiction over the defendant.’ Daynard v.
Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d
42, 50 (1st Cir. 2002). See also Beasley v. Schuessler,
519 So. 2d 551, 553 (Ala.Civ.App. 1987); 5 C. Wright & A.
Miller, Federal Practice and Procedure § 1351 (2d
ed. 1990).”
Ex parte Dill, Dill, Carr, Stonbraker & Hutchings, P.C.,
866 So. 2d 519, 525 (Ala. 2003).
“`A physical presence in Alabama is not a prerequisite to
personal jurisdiction over a nonresident.’ Sieber v.
Campbell, 810 So. 2d 641, 644 (Ala. 2001). What is
required, however, is that the defendant have such
contacts with Alabama that it `”should reasonably
anticipate being haled into court [here].”‘ Dillon
Equities v. Palmer & Cay, Inc., 501 So. 2d 459, 462 (Ala.
1986) (quoting World-Wide Volkswagen Corp. v. Woodson, 444
U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)).
“Depending on the quality and quantity of the contacts,
jurisdiction may be either general or specific. Leventhal
v. Harrelson, 723 So. 2d 566, 569 (Ala. 1998). `General
jurisdiction applies where a defendant’s activities in the
forum state are “substantial” or “continuous and
systematic,” regardless of whether those activities gave
rise to the lawsuit. . . . A court has specific
jurisdiction when a defendant has had few contacts with
the forum state, but those contacts gave rise to the
lawsuit.’ Id.
“But regardless of whether jurisdiction is alleged to be
general or specific, the nexus between the defendant and
the forum state must arise out of `”an action of the
defendant [that was] purposefully directed toward the
forum State.”‘ Elliott [v. Van Kleef], 830 So. 2d [726,]
at 731 [(Ala. 2002)] (quoting Asahi Metal Indus. Co. v.
Superior Court of California, 480 U.S. 102, 112, 107 S.Ct.
1026, 94 L.Ed.2d 92 (1987)).”
Ex parte Dill, Dill, 866 So. 2d at 525-26.
Systrends appeals as to this issue from the trial court’s
denial of its postverdict motion for a judgment as a matter
of law under Rule 50 or, in the alternative, a motion for a
new trial under Rule 59. This Court reviews the ruling on
a postjudgment motion challenging personal jurisdiction,
typically asserted under Rule 60(b)(4), to determine
whether the judgment against the moving party, in this case
Systrends, was void for lack of personal jurisdiction. See
Insurance Mgmt. & Admin., Inc. v. Palomar Ins. Corp., 590
So. 2d 209, 212 (Ala. 1991) (“The standard of review on
appeal from the denial of relief under Rule 60(b)(4) is not
whether there has been an abuse of discretion. . . . If the
judgment is valid, it must stand; if it is void, it must be
set aside. A judgment is void only if the court rendering
it lacked jurisdiction of the subject matter or of the
parties, or if it acted in a manner inconsistent with due
process.”); accord Ex parte C.L.C., 897 So. 2d 234, 237
(Ala. 2004) (quoting Neal v. Neal, 856 So. 2d 766, 781
(Ala. 2002)).
As noted, within a month after Brooks went to work for
Systrends, the lawyer for Group 8760 wrote Systrends to
advise it of the existence of the noncompetition provision
in Brooks’s employment agreement and to state Group 8760’s
opinion that Brooks’s relationship with Systrends violated
the terms of that noncompetition provision. In the letter,
Group 8760’s counsel stated his belief that “[Group] 8760
may have independent rights against Systrends for tortious
interference with contractual relations.” (Plaintiff’s ex.
no. 25, R. 1102.) At the very least, Systrends was on
notice from that time that its actions could affect an
existing contract, the employment agreement, between an
Alabama resident and an Alabama corporation and could
precipitate litigation by Group 8760; Systrends admitted as
much at trial. (R. 1098-1108.) After receiving the letter
and electing to persist in using Brooks’s services over the
next seven months while he continued to reside in Alabama,
Systrends “should have reasonably anticipated” that its
actions could result in its “being haled into court” in
Alabama. Dillon Equities, 501 So. 2d at 462 (quoting
World-Wide Volkswagen Corp., 444 U.S. at 297). It was
during these seven months that Brooks served as Systrends’
project manager on the ERCOT project and participated in
the PEPCO bid. Those activities are key features of Group
8760’s claims against Brooks and Systrends.
Under these circumstances, Systrends had sufficient
contacts with Alabama, contacts that gave rise to this
action, to satisfy the requirements for specific personal
jurisdiction. The judgment against Systrends was not void
for lack of personal jurisdiction, and the trial court
correctly denied Systrends’ motion for a judgment as a
matter of law on that basis.
Brooks’s Bankruptcy
On August 6, 2004, Brooks filed in Massachusetts a petition
in bankruptcy under Chapter 7 of the United States
Bankruptcy Code, listing within the “Statement of Financial
Affairs” section of his petition Group 8760’s pending
action against him. (R. 910-12, 1074-81, defendants’
exhibit 7.) The filing of the petition effected a stay of
the action. See 11 U.S.C. § 362(a)(1). Pursuant to
11 U.S.C. § 362(f), Group 8760 filed an emergency
motion seeking relief from the stay. Thereafter Group 8760
and the trustee in bankruptcy, on behalf of Brooks as the
debtor, entered into a stipulation, to be effective upon
approval by the bankruptcy court, whereby the stay would be
lifted for the purpose of allowing Group 8760 “to prosecute
the Alabama Litigation in Jefferson County through the
trial, and any appellate proceedings that may be necessary
or desirable, or to a settlement or other resolutions, so
that Group 8760 may fully adjudicate its claims in such
proceedings against Debtor, thereby liquidating its claims
against Debtor and his estate.” (C. 3371-74.) The parties
also stipulated that Group 8760 would seek to collect on
any monetary judgment it might recover against Brooks only
through the bankruptcy court. (Id.) On September 2, 2004,
the bankruptcy court entered an order approving the
stipulations and lifting the stay. (C. 3370.) On February
2, 2005, the bankruptcy court granted Brooks a discharge
pursuant to 11 U.S.C. § 727. As noted, trial of the
case underlying these appeals was then underway.
On February 7, as his last procedural act before resting
his side of the case, Brooks offered for admission into
evidence a copy of the discharge order. (R. 2136; C.
39020-3.) The trial court denied the admission of the
exhibit on the ground of relevance. (C. 3899.) Brooks made
no offer of proof concerning what relevance the discharge
order might have to the issues to be submitted to the jury.
Further, at no time did Brooks move to amend his answer to
assert as an affirmative defense his discharge in
bankruptcy. Although Brooks moved for a judgment as a
matter of law at the close of Group 8760’s case and again
at the close of all the evidence, he did not on either
occasion state as a ground for the motion the fact of his
discharge from bankruptcy. (R. 1964-70, 21474-8.) After the
trial court entered judgments on the jury verdicts, Brooks
filed his “Motion for Judgment Notwithstanding the
Verdict,”[fn3] reasserting previous grounds but also
arguing for the first time that because of his discharge by
the bankruptcy court, the entry of a judgment against him
was not permitted. (C. 3360-62.) When the trial court
subsequently denied that motion, it made no mention of the
bankruptcy-discharge issue.
On appeal Brooks states the issue as: “Whether the trial
court committed error by refusing to admit into evidence a
copy of Brooks’s discharge from bankruptcy and whether the
trial court had authority to enter judgment against Brooks
because Group 8760’s claims against him had been discharged
in bankruptcy, thereby necessitating a judgment for
Brooks.” (Brooks’s principal brief, p. 1.) Brooks goes on
to argue:
“The discharge, once granted, replaces the automatic
stay, acting as a permanent injunction against pursuing
claims that were discharged. See 11 U.S.C. §
524(a)(2); In re Shell, 312 B.R. 431 (M.D. Ala. 2004).
“Said discharge, according to 11 U.S.C. § 524(a)(2):
“`Operates as an injunction against the commencement or
continuation of an action, the employment of process, or
an act, to collect, recover or offset any such debt as a
personal liability of the debtor, whether or not discharge
of such debt is waived.'”
(Brooks’s principal brief, p. 30.) Brooks argues that,
consequently,
“[t]he trial court’s refusal to admit evidence of the
discharge was reversible error, as was the trial court’s
refusal to grant Brooks’ Motion for Judgment
Notwithstanding the Verdict following trial. Accordingly,
this Court should reverse and render judgment on Brooks’
behalf on all claims because his discharge from bankruptcy
is a complete defense to 8760’s claims.”
(Brooks’s principal brief, p. 32.)
In his reply brief, Brooks asserts that he “seeks a
determination of whether a copy of the discharge order is
admissible to provide a basis for the affirmative defense
of discharge from bankruptcy, which was already granted,”
arguing that he “was entitled to prove that discharge and
the trial court’s failure to allow him to do so was
reversible error.” (Brooks’s reply brief, pp. 16, 19.)
Rule 8(c), Ala. R. Civ. P., governing affirmative
defenses, requires that a party “set forth affirmatively .
. . discharge in bankruptcy. . . .” Subject to exceptions
not shown to be here applicable, the affirmative defense of
a bankruptcy discharge is waived if not affirmatively
pleaded in accordance with Rule 8(c). Blase v. Blase, 419
So. 2d 599, 601 (Ala.Civ.App. 1982); State of Alabama ex
rel. State of Ohio v. E.B.M., 718 So. 2d 669, 670-71 (Ala.
1998). There is no error in refusing to admit evidence
relevant only to an unpleaded affirmative defense.
Moreover, so far as the record reveals, Brooks did not
attempt to enlighten the judge as to what relevance he
thought the discharge order might have in the case. Where
the relevancy of evidence is not self-evident, the
proponent of it must make an offer of proof explaining its
relevancy in order to preserve error. Kilcrease v. John
Deere Indus. Equip. Co., 663 So. 2d 900 (Ala. 1995);
Burkett v. American Gen. Fin., Inc., 607 So. 2d 138 (Ala.
1992); and Harbert v. Harbert, 721 So. 2d 224 (Ala.Civ.App.
1998). Where the evidence may be admissible for one purpose
but inadmissible for another, the offeror must so specify
in his offer in order to put the trial court in error. Town
of Eclectic v. Mays, 547 So. 2d 96 (Ala. 1989), and Ensor
v. Wilson, 519 So. 2d 1244 (Ala. 1987). Thus, also because
he did not make an offer of proof, Brooks cannot show error
in the exclusion of the proffered exhibit. See Davis v.
Davis, 474 So. 2d 654, 656 (Ala. 1985); Charles W. Gamble,
McElroy’s Alabama Evidence § 425.01(4) (5th ed.
1996).
As noted, Brooks’s second argument relating to his
discharge in bankruptcy is that the trial court erred to
reversal in refusing to grant his motion for judgment as a
matter of law filed on March 11, 2005. (C. 3360.) The
portion of that motion relating to Brooks’s discharge in
bankruptcy relied on the argument that the order of
discharge superseded the order lifting the stay and
consequently operated pursuant to 12 U.S.C. §
524(a)(2) as an injunction against further prosecution of
the claims against Brooks. In the motion, Brooks contended
that a jury verdict against Brooks was all that Group 8760
was entitled to, and the subsequent entry of judgment
against him therefore exceeded the relief authorized by the
order lifting the stay, so that “judgment cannot be
entered.” (C. 3362.) By the time Brooks’s motion for a
judgment as a matter of law was filed, however, judgment
had in fact already been entered without prior objection by
Brooks. He argued in his motion that violation of the
injunction against further prosecution of the action
following his discharge in bankruptcy could “result in
appropriate redress by Mr. Brooks before the Bankruptcy
Court pursuant to the Bankruptcy Code.” (C. 3362.) As
noted, the bankruptcy court had approved the stipulation
that Group 8760 could prosecute its action against Brooks
“through the trial, and any appellate proceeding that may
be deemed necessary or desirable,” and Brooks cites no
specific authority in support of his contention that his
discharge in bankruptcy, although presumably superseding
the automatic stay, also vitiated entirely the order
lifting the stay, including the court-approved stipulation.
Consequently, Brooks has not shown error on the part of the
trial court in denying that aspect of his motion for a
judgment as a matter of law. The bankruptcy court is the
proper forum for further consideration of the effect of
Brooks’s discharge in bankruptcy on any judgment entered
against him.
The ATSA Claims
The ATSA defines a “trade secret” as follows: “A `trade
secret’ is information that:
“a. Is used or intended for use in a trade or business;
“b. Is included or embodied in a formula, pattern,
compilation, computer software, drawing, device, method,
technique, or process;
“c. Is not publicly known and is not generally known in
the trade or business of the person asserting that it is a
trade secret;
“d. Cannot be readily ascertained or derived from
publicly available information;
“e. Is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy; and
“f. Has significant economic value.”
§ 8-27-2(1), Ala. Code 1975.
The ATSA provides for the recovery of “actual damages”
suffered as a result of a “misappropriation” of a trade
secret, as well as exemplary damages for a willful and
malicious misappropriation (§ 8-27-4); it describes
“misappropriation” as follows in § 8-27-3:
“Misappropriation.
“A person who discloses or uses the trade secret of
another, without a privilege to do so, is liable to the
other for misappropriation of the trade secret if:
“(1) That person discovered the trade secret by improper
means;
“(2) That person’s disclosure or use constitutes a breach
of confidence reposed in that person by the other;
“(3) That person learned the trade secret from a third
person, and knew or should have known that (I) the
information was a trade secret and (ii) that the trade
secret had been appropriated under circumstances which
violate the provisions of (1) or (2), above; or
“(4) That person learned the information and knew or
should have known that it was a trade secret and that its
disclosure was made to that person by mistake.”
Brooks and Systrends argue that the information Group 8760
says constituted a trade secret does not qualify as a trade
secret under § 8-27-2 and, moreover, that, even if
the information did constitute a trade secret, Group 8760
failed to prove by substantial evidence that they
misappropriated that information.
Richard Hamilton, a software expert who has been a voting
member of GISB for a number of years and who authored many
of the documents constituting the GISB standards and the
revisions of those standards, testified that the whole
purpose of GISB was to create and publish “open standards”
for ready access and use by all possible participants in
electronic commerce within the natural-gas industry. (R.
2070-74.) He stated that he had been retained by Systrends
“to examine the source code for InsideAgent, and
TransactionBridge and XMLBridge [Systrends’ forerunner to
TransactionBridge] [and] to determine the likeness,
duplication, copy, or imitation of the source code between
those two products.” He was to determine “the similarity of
function” between InsideAgent and TransactionBridge. (R.
2077-78.) Hamilton testified that the sequencing of the
codes in InsideAgent and TransactionBridge were “radically
different because the programming languages were different”
and he found no likeness in the two programs either from a
lexical standpoint (scanning for similarity of phrases and
words) or from a coding standpoint. According to Hamilton,
the programs were also radically different from a
computer-logic standpoint. (R. 2084-85.) Hamilton found no
evidence in TransactionBridge of any use of any of the
programs developed by Group 8760 during the evolution of
GISBAgent. (R. 2095.) Despite an exhaustive examination of
the two products, he found no similarities between them
other than some similarities “that were necessitated by the
GISB standards,” there being “no similarities outside of
those requirements.” (R. 2118, 2120, 2122.) It was his
opinion that “all similarities of function between
InsideAgent and TransactionBridge are by necessarily [sic]
in meeting the strict industry requirements and cannot be
avoided.” (R. 2123.) He explained that although the GISB
standards do not specify the coding techniques of a GISB
solution “because GISB did not want to dictate what
languages or what algorithms those programs used to comply
with the standards,” the standards would serve to limit the
algorithms or solutions that could be used for compliance.
(R. 2100.) The GISB standards do govern “the essential
functionality” of a GISB solution. (R. 2100.) Hamilton
found that TransactionBridge represents a unique way of
implementing the GISB standard, doing so in a manner that
Hamilton had never before seen. (R. 2109.) Nonetheless, the
GISB solutions incorporated in TransactionBridge were “kind
of what I would expect from a GISB compliant program.” (R.
2109.)
Hamilton’s testimony on these points was undisputed, and
Group 8760’s only rejoinder in its brief is that Hamilton
“simply compared the similarities and differences of the
InsideAgent and TransactionBridge software” to conclude
“that there is no copying of Group 8760’s source code in
TransactionBridge,” whereas “8760 was not required to
produce evidence that Systrends and Brooks copied
InsideAgent in order to prove a violation of the ATSA.”
(Group 8760’s brief, p. 56.)
Group 8760 undertook to identify the allegedly
misappropriated trade secrets through the testimony of
Buccigross and Williams. Buccigross estimated that it had
taken approximately two years and $2 million to develop
InsideAgent. (R. 228.) Concerning the nature of the
associated trade secret, he testified:
“It’s — if it was a building or an automobile, we’d
be talking about blueprints, but it’s almost a mental
blueprint. It’s a diagram of how things work. It’s a
process, it’s procedures, it’s how you handle the data,
and these are not obvious things.
“There may be a hundred different ways to do something,
but only one of them works, but you don’t know which one
works, until you try all 100. Then you get to 100 and 101,
or a 1000, and all of a sudden you say, here’s what works.
Now, we know how to develop and how to make this product.
“Then when you get behind that first door, there’s a
whole other series of doors that you have to work at and
maybe only 1 of those 100 will work. So it’s — as I
said, I took for the initial version, two years, if you
will, to walk through all those doors and to get in the
maze behind the door and figure out what was the right
direction. Stops and starts. That ability to know which
door to pick, which path to go down, which is the right
lever to pull, how the product interacts, how the things
work, that’s what I believe the trade secret is, the
intellectual property of 8760 is.
“It’s not the code. Anybody can write a code. It’s making
it do what you want it to do and then making it a product
that you can sell, that people can buy, that you know will
work.”
(R. 238-40.)
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