### The Honorable E. Richard Webber, United Sta tes 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 th e Unit ed States District Court granting summary judgment in favor of KL M 2 Royal Dutch Airlines, Inc. (KLM). This court has jurisdiction under 2 8 U.S.C. § 1291. We affirm.

### - 2 - I.

Prior to “deregulation” of the airline industry in 1978, airline s offered few fare clas ses to patrons and all airlines charged very similar rat es for flights between the same origins and destinations. Resultin g competition arising after 1978, among airlines invited imaginativ e approaches to enhance revenues, including expand ing class fares and rates. Aconcept known as “yield management,” in the parlance of the industry , evolve d. Airlines developed yield management models, which sought t o bala nce 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 hi ghly 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 , froma flight. The models utilize computer systems and elaborat e mathematical equations, algorithms, and constant s to simulate and forecast supply and demand. T here are many mathematical “elements” in the airline industry w hich are widely used and recognized in the public domain a s significant factors in development of an effective yield management system

. A company that can mo st effectively match demand with the most profitable class fares through its yield management system is assured a competitive advantage.

Ame rican, over a period of several years, dedicated substantia l resources in the deve lopment of a unique yield management system known as DINAMO, an acronym for Dynamic Inventory and Maintenance Optimizer. DINAM O contains five specific

### The five elements are contained in the pa rties briefs which 3 

### are filed under seal. Accordingly, the Court will not reveal the elements in this opinion.
- 3 - individual elements. American main tains that its yield management system 3 is unique and is entitled to protection as a trade secret.

No rthwest Airlines Inc. (Northwest), a competitor of plaintiff, i s aligned with KLM’s re spective business operations. Disputes arising from employ ment of American personnel by Northwest resulted in a lawsui t orig inallyinitiated by Northwest against American. The suit drew a counter claimby American alleging, in part, that Northwest unlawfull y misappropriated Ameri can’s trade secrets relative to its yield management model. That suit has been delayed pending resolution of the issues in thi s
case . In a similar fashion as in the Northwest litigation, America n 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, B arry C. Smith, Vice President of Am erican Airlines Decision Technologies, a division of American wit h primaryresponsibility for American’s yield management system, testified

as an ex pert witness for American. Smith testified that the fiv e “el ements” (also referred to as concepts and factors) used by American , when c ombined in specific algorithms and formulae, comprise its yiel d
man agement system DINAMO. He testified that these five elements, whil e known at the conceptual level in the airline industry and in the publi c domain , have not been successfully mixed with algorithms and formula e except by American, a nd it is the combination and implementation of these elements by American in DINAMO that comprises a unique model which is not public lyavailable, and that therefore, American’s unique model is a proprietary business trade secret entitled to

### - 4 -

protec tion under the Minnesota Uniform Trade Secrets Act (MUTSA), Minn

. Stat. §§ 325C.01-325C.08.

Am erican alleges that Northwest gained this proprietary materia l after Northwest hired many former American emplo yees. As to the defendant in this case, KLM, American alleges that, as a result of the close busines s ties between Northwes t and KLM, this proprietary material was then passed from Northwest to KLM. However, there is no all egation, 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 claimin g misappropriations of trade secrets in violation of MUTSA. American allege d tha t KLM had received from Northwest trade secrets which had previousl y been u nlawfully obtained from American. After American deposed KL M 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 forecastin g algor ithms contained in the American documents which were allegedl y misappropriated by Northwest; that, based on information allegedly receive d from Northwest, KLM could not develop a yield ma nagement 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 o f American’s system; and that KLM changed its demand forecasting system in mid-1994, t o one based upon a Boeing model. KLM would not agree t o American’s offer of dismissal without prejudice. On May 5, 1995, KLM filed a motion f or summary judgment. Before the motio n for summary judgment was filed, Barry C. Smith had testified b y deposition as an expert for American in the Amer ican-Northwest litigation. Smith testified that American’s

### - 5 -

trade secret was defi ned 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 mos t, had only four of the five elements without knowledge of th e algorithms or formula e, Smith, at a subsequent deposition, testified, “In myopinion, four elements, not including a specific alpha value, woul d constitute a trade secret.”
In moving for summary judgment, KLM maintained that no genuine issue of material fact exis ted because American had manufactured the appearance of a dispute after the filing of KLM’s motion for summary judgment b y changing its testimony regarding the content of its alleged trade secret. KLM urged the distric t court to ignore Smith’s later testimony because of the “ sham exception” to the usual standards for summary judgment. Th e dis trict court agreed, and determined that American’s trade secret wa s “the combination and implementation of the five demand forecasting element s
as incorporated in DINAMO through specific algorithms and formulae.” The district court granted KLM summary judgment because the record conclusivel y established that KLM had not received any detailed algorithms or formulae descri bing how the five demand forecasting elements were to b e incorporated, but had only received four of the general elements at th e conceptua l level without information as to how the concepts were to b e combined. American maintains that the “sham exception” was inappropriatel y applied.

II. We rev iew a grant of summary judgment de novo, applying the sam e 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 th e 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. , 47 7 U.S. 242, 250 (1986). The nonmoving party must present admissible evidenc e fromwh ich a reasonable jury could return a verdict in its favor. Thi s requi res more than a scintilla of evidence, and there must be specifi c 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 issue s of fact in an effort to defeat summary judgment. RSBI Aerospace, Inc. v. Affiliated FM Ins. Co. , 49 F.3d 399, 402 (8th Ci r. 1995). Courts must not dep rive juries from their role in deciding genuine disputes of materia l fact, however, parties should not be permitted to fashion a dispute o f material fact solely to impede a lawful exercise of granting a motion for summaryjudgment. Wilson v. Westinghouse Elec. Corp. , 838 F.2d 286, 289 (8th Cir. 1988).

Whi le district courts must exercise extreme care not to tak e genuine issues of fact a way from juries, a party should not be allowe d to create issues of credibility by contradicting hi s 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 supplantin g 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 superviso r said he was being terminated. Then, after a motion for summary judgment
was filed , the employee filed an affidavit stating that he was told hi s position was being

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eliminated but he wou ld 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 terminat ed on a specific date, thus impacting the timeliness of the employee’s act ion. In affirming that summary judgment, this Court concluded that the employee’s revised account did not create a genuin e 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 t o counter a summary judgment motion.

This Cou rt also affirmed granting of a motion for summary judgmen t upon application of t he “sham exception” doctrine in Camfield Tires, Inc.

v. Michel in Tire Corp. , 719 F.2d 1361 (8th Cir 1983). There a perso n testified by deposition that he issued a check telling the payee not t o deposit it until a certain date. Subsequently, the same person supplied an affidavit in which he attested that the issue d check was to be returned to hi s place of business for payment and was not to be presented to th e bank. This Court held that the issues injected by the subsequent affidavi t
were n ot genuine “because the circumstances do not suggest legitimat e
reaso ns for [the] filing of the inconsistent affidavit.” Id. at 1365

. This Court found the filing of the affidavits was “expressly for th e purpose of opposing summary judgment . . . .” Id . In Camfield , w e concluded,

The very purpose of summary judgment under Rule 56 is t o prevent the assertion of unfounded claims or the interposition of specious denials or s ham 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 wit h extre me care, and only in circumstances . . . where th e conflicts between the deposition and affidavit raise only

### - 8 - sha missues should summary judgment be granted. Under thes e ci rcumstances it is incumbent upon the district court t o 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 th e specific combination of all five elements constituted a trade secret. It is u ndisputed that KLM never received all five elements. American’ s expert’s subsequent t estimony, after KLM’s filing of a motion for summary judgment, that four of those same five elements at the conceptual leve l 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 b y inexplicablychanging his testimony. Thus, the district court correctly disregarded the subsequent manufactured contradictory testimony of America n 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.