The Honorable E. Richard Webber, United States District Judge 1

for the Eastern District of Missouri, sitting by designation.

The Honorable David S. Doty, United States District Judge for 2

the District Court of Minnesota.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

_______________

No. 96-2172

_______________

American Airlines, Inc., *

 *

Plaintiff-Appellant, * Appeal from the United States

 * District Court for the

 v. * District of Minnesota

 *

KLM Royal Dutch Airlines, *

Inc., *

 *

Defendant-Appellee. *

_______________

Submitted: December 13, 1996

Filed: May 16, 1997

_______________

Before McMILLIAN and MAGILL, Circuit Judges, and WEBBER, District 1

Judge.

_______________

WEBBER, District Judge.

American Airlines, Inc. (American), appeals from the order of the

United States District Court granting summary judgment in favor of KLM

2

Royal Dutch Airlines, Inc. (KLM). This court has jurisdiction under 28

U.S.C. § 1291. We affirm.
- 2 -

I.

Prior to “deregulation” of the airline industry in 1978, airlines

offered few fare classes to patrons and all airlines charged very similar

rates for flights between the same origins and destinations. Resulting

competition arising after 1978, among airlines invited imaginative

approaches to enhance revenues, including expanding class fares and rates.

A concept known as “yield management,” in the parlance of the industry,

evolved. Airlines developed yield management models, which sought to

balance airline passenger capacity with demand for service in such a

fashion that the most profitable fare class utilization can be maximized.

These yield management models are highly sophisticated and are quite

expensive to develop. The models involve analyzing and applying financial,

logistical, and market data in an effort to maximize revenue, or yield,

from a flight. The models utilize computer systems and elaborate

mathematical equations, algorithms, and constants to simulate and forecast

supply and demand. There are many mathematical “elements” in the airline

industry which are widely used and recognized in the public domain as

significant factors in development of an effective yield management system.

A company that can most effectively match demand with the most profitable

class fares through its yield management system is assured a competitive

advantage.

American, over a period of several years, dedicated substantial

resources in the development of a unique yield management system known as

DINAMO, an acronym for Dynamic Inventory and Maintenance Optimizer. DINAMO

contains five specific 
 The five elements are contained in the parties briefs which 3

are filed under seal. Accordingly, the Court will not reveal the

elements in this opinion.

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individual elements. American maintains that its yield management system 3

is unique and is entitled to protection as a trade secret.

Northwest Airlines Inc. (Northwest), a competitor of plaintiff, is

aligned with KLM’s respective business operations. Disputes arising from

employment of American personnel by Northwest resulted in a lawsuit

originally initiated by Northwest against American. The suit drew a

counterclaim by American alleging, in part, that Northwest unlawfully

misappropriated American’s trade secrets relative to its yield management

model. That suit has been delayed pending resolution of the issues in this

case. In a similar fashion as in the Northwest litigation, American

asserts that KLM has also misappropriated American’s trade secrets by KLM’s

alleged receipt of American’s trade secrets from Northwest.

In a deposition on August 2, 1993, Barry C. Smith, Vice President of

American Airlines Decision Technologies, a division of American with

primary responsibility for American’s yield management system, testified

as an expert witness for American. Smith testified that the five

“elements” (also referred to as concepts and factors) used by American,

when combined in specific algorithms and formulae, comprise its yield

management system DINAMO. He testified that these five elements, while

known at the conceptual level in the airline industry and in the public

domain, have not been successfully mixed with algorithms and formulae

except by American, and it is the combination and implementation of these

elements by American in DINAMO that comprises a unique model which is not

publicly available, and that therefore, American’s unique model is a

proprietary business trade secret entitled to 
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protection under the Minnesota Uniform Trade Secrets Act (MUTSA), Minn.

Stat. §§ 325C.01-325C.08. 

American alleges that Northwest gained this proprietary material

after Northwest hired many former American employees. As to the defendant

in this case, KLM, American alleges that, as a result of the close business

ties between Northwest and KLM, this proprietary material was then passed

from Northwest to KLM. However, there is no allegation, nor any evidence,

that documents outlining algorithms and formulae of American passed to KLM,

nor that more than four of the five “elements” in DINAMO passed to KLM.

On November 19, 1993, American filed suit against KLM claiming

misappropriations of trade secrets in violation of MUTSA. American alleged

that KLM had received from Northwest trade secrets which had previously

been unlawfully obtained from American. After American deposed KLM

officials, KLM requested dismissal from the suit with prejudice. American,

willing to dismiss the suit against KLM without prejudice, conceded, among

other things, that KLM did not receive the detailed demand forecasting

algorithms contained in the American documents which were allegedly

misappropriated by Northwest; that, based on information allegedly received

from Northwest, KLM could not develop a yield management system similar to

American’s; that KLM had no knowledge of how American’s system worked and

had not received from Northwest any documents describing the details of

American’s system; and that KLM changed its demand forecasting system in

mid-1994, to one based upon a Boeing model. KLM would not agree to

American’s offer of dismissal without prejudice. 

On May 5, 1995, KLM filed a motion for summary judgment. Before the

motion for summary judgment was filed, Barry C. Smith had testified by

deposition as an expert for American in the American-Northwest litigation.

Smith testified that American’s 
- 5 -

trade secret was defined as the unique combination of the five “elements”

and their implementation into algorithms, formulae and equations. After

the motion for summary judgment was filed by KLM and it was known that KLM,

at most, had only four of the five elements without knowledge of the

algorithms or formulae, Smith, at a subsequent deposition, testified, “In

my opinion, four elements, not including a specific alpha value, would

constitute a trade secret.” 

In moving for summary judgment, KLM maintained that no genuine issue

of material fact existed because American had manufactured the appearance

of a dispute after the filing of KLM’s motion for summary judgment by

changing its testimony regarding the content of its alleged trade secret.

KLM urged the district court to ignore Smith’s later testimony because of

the “sham exception” to the usual standards for summary judgment. The

district court agreed, and determined that American’s trade secret was

“the combination and implementation of the five demand forecasting elements

as incorporated in DINAMO through specific algorithms and formulae.” The

district court granted KLM summary judgment because the record conclusively

established that KLM had not received any detailed algorithms or formulae

describing how the five demand forecasting elements were to be

incorporated, but had only received four of the general elements at the

conceptual level without information as to how the concepts were to be

combined. American maintains that the “sham exception” was inappropriately

applied.

II. 

We review a grant of summary judgment de novo, applying the same

standard as the district court. Disesa v. St. Louis Community College.,

79 F.3d 92, 94 (8th Cir. 1996). We will affirm the district court’s

decision if we find there is no genuine issue of material fact and the

moving party is entitled to judgment as a 
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matter of law. Id. Fed.R.Civ.P. 56(c). To successfully oppose a motion

for summary judgment, the nonmoving party must present evidence of a

genuine dispute of material fact. Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 250 (1986). The nonmoving party must present admissible evidence

from which a reasonable jury could return a verdict in its favor. This

requires more than a scintilla of evidence, and there must be specific

facts set forth showing that there is a genuine issue for trial. Davis v.

Fleming Cos., Inc., 55 F.3d 1369, 1371 (8th Cir. 1995).

Parties to a motion for summary judgment cannot create sham issues

of fact in an effort to defeat summary judgment. RSBI Aerospace, Inc. v.

Affiliated FM Ins. Co., 49 F.3d 399, 402 (8th Cir. 1995). Courts must not

deprive juries from their role in deciding genuine disputes of material

fact, however, parties should not be permitted to fashion a dispute of

material fact solely to impede a lawful exercise of granting a motion for

summary judgment. Wilson v. Westinghouse Elec. Corp., 838 F.2d 286, 289

(8th Cir. 1988). 

While district courts must exercise extreme care not to take

genuine issues of fact away from juries, a party should not be

allowed to create issues of credibility by contradicting his

own earlier testimony. Ambiguities and even conflicts in a

deponent’s testimony are generally matters for the jury to sort

out, but a district court may grant summary judgment where a

party’s sudden and unexplained revision of testimony creates an

issue of fact where none existed before. Otherwise, any party

could head off a summary judgment motion by supplanting

previous depositions ad hoc with a new affidavit, and no case

would ever be appropriate for summary judgment. 

Wilson, 838 F.2d at 289 (internal citations and quotations omitted). In

Wilson, a terminated employee testified in a deposition that his supervisor

said he was being terminated. Then, after a motion for summary judgment

was filed, the employee filed an affidavit stating that he was told his

position was being 
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eliminated but he would remain on the company rolls until a new job could

be found for him. A crucial question was whether his supervisor told him

he was being terminated on a specific date, thus impacting the timeliness

of the employee’s action. In affirming that summary judgment, this Court

concluded that the employee’s revised account did not create a genuine

issue of fact on which a jury would reasonably find that the limitations

period in question was tolled because it was offered as a sham in direct

contradiction to the employee’s prior position simply as an attempt to

counter a summary judgment motion.

This Court also affirmed granting of a motion for summary judgment

upon application of the “sham exception” doctrine in Camfield Tires, Inc.

v. Michelin Tire Corp., 719 F.2d 1361 (8th Cir 1983). There a person

testified by deposition that he issued a check telling the payee not to

deposit it until a certain date. Subsequently, the same person supplied

an affidavit in which he attested that the issued check was to be returned

to his place of business for payment and was not to be presented to the

bank. This Court held that the issues injected by the subsequent affidavit

were not genuine “because the circumstances do not suggest legitimate

reasons for [the] filing of the inconsistent affidavit.” Id. at 1365.

This Court found the filing of the affidavits was “expressly for the

purpose of opposing summary judgment . . . .” Id. In Camfield, we

concluded,

The very purpose of summary judgment under Rule 56 is to

prevent the assertion of unfounded claims or the interposition

of specious denials or sham defenses. If a party who has been

examined at length on deposition could raise an issue of fact

simply by submitting an affidavit contradicting his own earlier

testimony, this would greatly diminish the utility of summary

judgment as a procedure for screening out sham issues of fact

. . . The district courts should examine such issues with

extreme care, and only in circumstances . . . where the

conflicts between the deposition and affidavit raise only 
- 8 -

sham issues should summary judgment be granted. Under these

circumstances it is incumbent upon the district court to

articulate with care its reasons in resolving such conflicts.

Id. at 1365-1366.

There is no genuine disputed issue of a material fact in the record

of this case. During sworn testimony, American’s expert testified that the

specific combination of all five elements constituted a trade secret. It

is undisputed that KLM never received all five elements. American’s

expert’s subsequent testimony, after KLM’s filing of a motion for summary

judgment, that four of those same five elements at the conceptual level

constituted a trade secret was offered solely to avoid summary judgment.

After careful examination of American’s expert’s testimony we agree with

the district court’s conclusion that American attempted to manufacture a

material issue of fact just to evade the impact of summary judgment by

inexplicably changing his testimony. Thus, the district court correctly

disregarded the subsequent manufactured contradictory testimony of American

and concluded that no factual issue for trial existed for the reason that

KLM never received any trade secret of American’s. 

The judgment of the district court is affirmed.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.