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Play It Again And Again (Sam): Meanwhile No Injunction, No Fees – Trade Secrets



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In its third opportunity to review the district court’s
decision in this trade secret case involving flooring, the US Court
of Appeals for the Eleventh Circuit again reversed, this time
vacating a permanent injunction and an award of attorneys’
fees. The Eleventh Circuit noted that the district court failed to
make the findings required to support an injunction and abused its
discretion in awarding full fees notwithstanding prior reversal of
relief awarded. AcryliCon USA, LLC v. Silikal GmbH,
Case No. 21-12853 (11th Cir. Aug. 29, 2022)
(Newsom, Marcus, JJ.; Middlebrooks, Distr.
J.)

In an
earlier appeal in this case
, the Eleventh Circuit reversed a
ruling on trade secret misappropriation rendered by the district
court in favor of AcryliCon USA (AC-USA) and vacated the damages
award. An aspect of the Court’s ruling was that the
“permanent” injunction entered by the district court was
only preliminary in nature (not permanent) and was, as a matter of
law, dissolved because the district court did not include it in the
original final judgment. On remand, the district court was ordered
to determine the appropriate amount of attorneys’ fees the
prevailing party should receive. However, the district court just
entered the same amount of attorneys’ fees it had originally
awarded and again entered a “permanent” injunction
barring the use of the trade secret at issue, concluding that it
was obliged to do so by the Eleventh Circuit’s ruling in the
first appeal.

In the second appeal, the Eleventh Circuit held that AC-USA
failed, as a matter of law, to prove its misappropriation claim and
reversed the judgment entered in favor of AC-USA on that count. The
Court also reversed the district court’s judgment that its $1.5
million damages award could be sustained on the basis of the
contract claim once the misappropriation claim was reversed. The
Court ruled that, as a matter of law, since AC-USA had failed to
prove actual damages on its consequential damages theory, it could
only recover nominal damages based on its breach of contract claim.
Finally, the Court concluded that AC-USA was entitled to
attorneys’ fees only on its breach of contract claim because,
under Georgia law, even a nominal damages award would still
materially alter the legal relationship between the parties.

In the second remand, the district court awarded essentially the
same amount of attorneys’ fees ($1.3 million) to AC-USA but
acknowledged that, since Silikal prevailed in vacating the award of
compensatory and punitive damages, Silikal “was the prevailing
party on the appeal under the terms of the [agreement]” and
was entitled to almost $500,000 in attorneys’ fees for its
successful appeal. The district court also awarded $100 in nominal
damages to AC-USA for its successful appeal on the breach of
contract claim. The district court then entered a permanent
injunction enjoining Silikal “from disclosing or using in any
way, directly or indirectly, the [ . . . resin . . . ] to anyone
other than Plaintiff.”

Both parties appealed. AC-USA appealed the award of appellate
attorneys’ fees to Silikal, and Silikal appealed the entry of a
permanent injunction and the amount of attorneys’ fees awarded
to AC-USA. Silikal also requested reassignment of the case to a
different judge.

The Eleventh Circuit explained that notwithstanding some
district court confusion on this point, based on the first appeal
it was the law of the case that no permanent injunction against
Silikal had ever been entered by the district court.
Notwithstanding, in the second remand, AC-USA asked the district
court to “reaffirm its permanent injunction” and the
district court agreed. The Eleventh Circuit therefore again
reversed, noting that it had made it “crystal clear that no
permanent injunction had been entered once the district court
entered its final judgment” and vacated the permanent
injunction.

To hammer home the point, the Eleventh Circuit noted that even
if the district court had not made a mistake of law (in terms of
law of the case), it failed to make the requisite findings under
Federal Rules of Civil Procedure 60 and 65. As the Court explained,
if the district court wanted to enter a permanent injunction in the
second remand—five years after it entered the preliminary
injunction—it needed to amend its original final judgment.
Since no motion to do so was made before the district court, the
Court did not address the point except to reject Silikal’s
claim that a newly entered permanent injunction was barred by the
Court’s holding in the second appeal that the mandate rule
“does not and could not extend to issues the appellate court
never addressed, and thus, the district court is free to address,
as a matter of first impression, those issues not disposed of on
appeal.”

The Eleventh Circuit also noted that by including a permanent
injunction in the second remand, the district court further erred
in failing to comply with Rule 65, which is

. . . unambiguous in prescribing that “[e]very order
granting an injunction” must “(A) state the reasons why
it issued; (B) state its terms specifically; and (C) describe in
reasonable detail—and not by referring to the complaint or
other document—the act or acts restrained or required.”
. . . In considering whether to grant a permanent injunction, a
court must address whether the plaintiff has demonstrated the
following: (1) [the plaintiff] has suffered an irreparable injury;
(2) remedies available at law, such as monetary damages, are
inadequate to compensate for that injury; (3) considering the
balance of hardships between the plaintiff and defendant, a remedy
in equity is warranted; and (4) the public interest would not be
disserved by a permanent injunction.

As for attorneys’ fees, the Eleventh Circuit held that
because “the district court failed on remand to separate out
what portion of the attorney’s fees were fairly attributable to
each claim, it committed legal error under Georgia law and abused
its discretion.” The Court also held that “[u]nder the
‘well settled law’ of Georgia, ‘a lump sum recovery for
fees associated with claims on which a litigant does not prevail is
not authorized.'” The Court faulted the district court for
failing to include any analysis “about how much of the
approximately $1.3 million fee award was attributable to
counsel’s work on the breach of contract claim (for which
AC-USA only recovered nominal damages), and how much of
AC-USA’s work was attributable to the misappropriation claim,
which it lost.” The Eleventh Circuit instructed the district
court, on this third remand, to “apportion the attorney’s
fees between the two claims based on AC-USA’s specific and
detailed billing records or conclude—based on the
evidence—that it would be impracticable in whole or in part
to separate the legal work performed on the various
claims.”

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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