NOT PRECEDENTIAL 

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 17-2604

LEXPATH TECHNOLOGIES HOLDINGS, INC.,

Appellant

v.

BRIAN WELCH; WELCH TECHNOLOGY SERVICES, LLC

On Appeal from the United States District Court 

for the District of New Jersey

(District Court No.: 3-13-cv-05379)

District Judge: Honorable Peter G. Sheridan

Submitted under Third Circuit L.A.R. 34.1(a) 

on April 17, 2018

Before: GREENAWAY, JR., RENDELL, and FUENTES, Circuit Judges

(Opinion filed: July 30, 2018)

O P I N I O N*

RENDELL, Circuit Judge: 

 

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 

does not constitute binding precedent.
2

Defendant-Appellee, Brian Welch, left his employment as a network engineer with 

Lexpath Holdings, Inc. (“Lexpath”) to form his own company, Welch Technology 

Services, LLC (“WTS”). Lexpath sued Welch and WTS contending that, among other 

things, Welch misappropriated trade secrets and confidential information. The jury found 

for Welch and WTS on all counts. On appeal, Lexpath raises a plethora of issues, 

challenging several of the District Court’s evidentiary rulings and denial of summary 

judgment in its favor, as well as the jury’s verdict. For the following reasons, we will 

affirm. 

I. BACKGROUND

A. Facts

Welch worked for Lexpath as a network engineer. He did not sign a non-compete 

or non-disclosure agreement with Lexpath. During his employment there, Welch 

serviced three primary clients: Liberty Transportation Group (“Liberty”), EIMC, LLC 

(“EIMC”), and Mental Health Association of New Jersey (“MHANJ”). 

Welch left Lexpath on August 2, 2013. However, before resigning, he took 

several steps to establish his new business, WTS. Welch officially formed WTS on June 

21, 2013. On July 24, 2013, Welch spoke to his business contacts at Liberty, informing 

them of his intentions to leave Lexpath and form WTS. Liberty requested a rate sheet 

from Welch, which he provided on July 31, 2013. Moreover, on August 1, 2013, Welch 

spoke with his contact at EIMC about leaving Lexpath and forming WTS. However, all 

of Welch’s other contact with EIMC was done after he left Lexpath. Finally, in his last 

week of employment with Lexpath, Welch informed an administrative assistant at 
3

MHANJ, Katie Koskie, of his intention to leave Lexpath. On August 2, 2013, Welch told 

one of Lexpath’s principals, Martin Tuohy, that he was resigning and starting WTS. 

Welch told Tuohy that he solicited business from Liberty and EIMC, and he thought they 

would likely leave Lexpath for WTS. Within a few days of Welch’s resignation, Liberty 

and EIMC moved their business to WTS. 

After Welch’s resignation on August 2, 2013, he kept his work laptop, which he 

had also used for personal use. Welch used the laptop after his resignation, but the 

parties dispute whether he had permission to do so. On August 6, 2013, Lexpath’s 

counsel sent Welch a letter outlining the claims that Lexpath was considering bringing 

against Welch and WTS. Shortly thereafter, on August 13, 2013, Lexpath’s counsel

contacted Welch to inform him that Lexpath intended to initiate litigation, and to request 

the return of the laptop. Welch returned the laptop, through counsel, about seven months 

later. 

For litigation support, Lexpath retained the services of Digital4NX to investigate 

whether there was misappropriation of trade secrets and other confidential information. 

On August 13, 2013, the same day that Lexpath told Welch it would sue, Welch ran a 

program called CCleaner on the laptop to permanently delete files. Upon examining the 

laptop, Digital4NX discovered that approximately 54,000 files had been deleted. 

However, the forensic expert testified that he could not determine what types of data had 

been deleted from the laptop. 

B. Procedural History
4

On September 9, 2013, Lexpath filed suit against Welch and WTS. In its 

complaint, Lexpath stated the following nine claims: (1) violation of the Computer Fraud 

and Abuse Act (“CFAA) (18 U.S.C. § 1030); (2) breach of duty of loyalty; (3) 

misappropriation of trade secrets; (4) unfair competition; (5) breach of the duty of 

implied covenant of good faith and fair dealing; (6) tortious interference with prospective 

economic advantage; (7) disparagement; (8) violation of New Jersey Trade Secrets Act 

(N.J. Stat. Ann. §§ 56:15-1 to -9 (West 2012)); and (9) violation of the New Jersey 

Computer Related Offenses Act (“CROA”) (N.J. Stat. Ann. § 2A:38A-1 (West 2010)). 

Welch and WTS then counterclaimed seeking an award of damages for attorneys’ fees 

and costs incurred in defending against the trade secrets claim, arguing it was made in 

bad faith. 

Following the completion of discovery, Lexpath moved for summary judgment 

and spoliation sanctions in connection with Welch’s handling of the laptop. In support of 

its motion, Lexpath submitted affidavits from Peter Reganato and Alan Feldman 

repeating statements made by Liberty’s president, Donald Lusardi, that Welch had made 

negative remarks to him about Lexpath.

1

 The District Court granted Welch’s motion to 

exclude Reganato and Feldman’s testimony as inadmissible double hearsay. The Court

also entered an order (“Spoliation Order”) granting Lexpath’s motion for spoliation, 

holding that it would “instruct the jury that they may presume that the lost information

was unfavorable to Defendants.” A. 1724.11 (emphasis added).

 

1 The District Court later denied Lexpath’s motion for reconsideration of this ruling. 
5

Lexpath renewed its motion for summary judgment on the basis of “new facts 

adduced at the spoliation hearing.” A. 2786. The District Court denied the motion, 

noting the overwhelming number of material facts at issue. Moreover, it noted that any 

factual determinations made in the Spoliation Order were solely for the purpose of 

spoliation sanctions and were not binding on the jury, nor did they take any issues away 

from the jury. 

Before trial, Lexpath moved for the District Court to direct the jury to accept the 

findings of the Spoliation Order as conclusive. For their part, Welch and WTS moved for 

the Court to exclude the testimony of Koskie, the MHANJ employee. The Court denied 

Lexpath’s motion, stating that it chose the least severe sanction by crafting an instruction 

would tell the jury a “paragraph or two about spoliation” and instruct that the jury may 

consider the lost information unfavorable to Welch. A. 3353. However, the Court

granted Welch’s motion, explaining that Koskie’s testimony was irrelevant and would 

confuse the jury because Lexpath had not alleged any damages with regard to MHANJ. 

At trial, during Lexpath’s opening argument, counsel told the jury that “Mr. Welch 

destroyed evidence in the form of 53,000 computer files that were on a Lexpath laptop . . 

. . His Honor has already ruled on that and will instruct you that you may presume that 

the evidence he deleted would have been unfavorable to him.” A. 3389. After opening 

arguments, the Court told the parties that it was “worried” that “the jury could have been 

left with the impression that the Court had made a decision on the facts” and that 

Lexpath’s statement “gave the inference to the jury that . . . they should take this fact as 

being true.” A. 3411–12. 
6

The Court then issued a corrective instruction that:

While the Court issued an order on spoliation, I did not make any final 

decisions about the facts, I just said that the information could be admitted 

into evidence. So, it’s your job during the course of this trial to determine 

the weight and credibility of that testimony that you’ll hear, and those types 

of issues are within your province to decide. So whatever you heard, I 

made a decision on admission of evidence . . . .

A. 3420.

Later on at trial, Lexpath called its forensic expert to testify about the laptop, the 

deleted files, and the CCleaner program. Before closing arguments, the Court told 

counsel that it “had doubts as to whether or not a presumption was warranted” after 

hearing the evidence, and that it would charge spoliation but not a presumption in 

Lexpath’s favor. A. 4078–79. After some discussion, Lexpath’s counsel requested that 

the Court “take the spoliation charge out of the instructions,” A. 4081, which the Court 

did. 

The jury found in favor of Welch and WTS on all counts, and determined that 

Lexpath had asserted its misappropriation of trade secrets claim in bad faith. At no time 

did Lexpath move for judgment as a matter of law under Federal Rule of Civil Procedure 

50. This appeal followed. 

II. DISCUSSION

On appeal, Lexpath assigns numerous errors to the District Court before and at 

trial. The District Court had jurisdiction pursuant to 28 U.S.C. § 1331 & 1367, and our 
7

jurisdiction flows from 28 U.S.C. § 1291. We review each of Lexpath’s contentions in 

turn.

A. Spoliation Instruction

We review the District Court’s denial of an adverse inference instruction for abuse 

of discretion. McMunn v. Babcock & Wilcox Power Gen. Grp., Inc., 869 F.3d 246, 268 

(3d Cir. 2017). “[W]here there is evidence that one party has destroyed or altered 

evidence, the opposing party can obtain a ‘“spoliation inference,” that the destroyed 

evidence would have been unfavorable to the position of the offending party.’” Id. 

(quoting Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 78 (3d Cir. 1994)). 

Lexpath contends that the District Court abused its discretion by telling counsel it 

would not give a spoliation instruction, reversing its previous ruling that it would instruct 

the jury that “they may presume that the lost information [on Welch’s laptop] was 

unfavorable to Defendants.” A. 1724. After hearing the evidence, the Court told the 

parties that a presumption was not warranted, citing a lack of testimony as to whether 

Lexpath was actually missing any pricing documents that could have been found on the 

laptop, and Lexpath’s expert’s testimony that the deleted files could have been for 

personal use. The Court told the parties that it would “charge[] spoliation, but I don’t 

charge a presumption in favor of the plaintiff.” A. 4079.2 In response, Lexpath’s counsel 

asked the Court to “take the spoliation charge out of the instructions.” A. 4081. 

 

2 Although the details of the proposed charge are not in the record, we presume the Court 

meant that it would tell the jury that it was up to them to determine whether or not 

spoliation had occurred. 
8

We conclude that there was no abuse of discretion when the Court: repeatedly 

made clear to the parties before and at trial that “it was up to the jury to find whether 

spoliation in fact occurred,” A. 4081, denied Lexpath’s pretrial motion to direct the jury 

to accept as conclusive the facts in the Spoliation Order, and then—at Lexpath’s 

request—declined to give a spoliation instruction. 

To begin, a district court’s findings of fact in deciding a pretrial motion cannot 

foreclose a jury from making its own factual findings. Cf. Lytle v. Household Mfg., Inc., 

494 U.S. 545, 552–53 (1990); Berry v. United States, 312 U.S. 450, 453 (1941) (“[Rule 

50(b)] has not taken away from juries and given to judges any part of the exclusive power 

of juries to weigh evidence and determine contested issues of fact—a jury being the 

constitutional tribunal provided for trying facts in courts of law.” (footnote omitted)).3 

The Spoliation Order merely stated that “the Court will instruct the jury that they may 

presume that the lost information was unfavorable to Defendants.” A. 1724.11. This, the 

least-harsh form of spoliation instruction, would not have required the jury to presume 

the lost evidence was unfavorable. Nor did the Order state that the Court would instruct 

the jury that spoliation had, as a matter of law, occurred. Lexpath correctly notes that it 

did not assert, and therefore did not need to prove, a standalone tortious spoliation of 

evidence claim. But that did not absolve it of its burden to show the jury that Welch had 

control over the evidence and that he “intentionally or fraudulently lost or destroyed” it, 

 

3 We have not yet spoken to the proper “division of fact-finding” labor, Nucor Corp. v. 

Bell, 251 F.R.D. 191, 202 (D.S.C. 2008), between judges and juries when issuing a 

spoliation sanction. We need not resolve this question on this appeal, however, because 

we conclude that it was not an abuse of discretion to decline to give an adverse inference 

charge under these circumstances.
9

Gumbs v. Int’l Harvester, Inc., 718 F.2d 88, 96 (3d Cir. 1983), if it wanted to rely on 

spoliation to prove its substantive claims. Otherwise, as the Court had never indicated 

that it would instruct the jury that as a matter of law, spoliation had occurred, there would 

be no facts for the negative presumption to work on. Indeed, the Court repeatedly 

reminded the parties before trial that “the facts should be tried by the jury.” A. 3354.

Nor could Lexpath have reasonably been surprised by the Court’s ruling that it 

would not instruct the jury that Welch had deleted evidence, when the Court admonished 

Lexpath’s counsel for telling the jury in its opening statement that “Mr. Welch destroyed 

evidence . . . His honor has already ruled on that.” A. 3389. The Court immediately told 

the parties its concern that “the jury could have been left with the impression that the 

Court had made a decision on the facts,” A. 3411, and issued a corrective instruction to 

the effect that the Spoliation Order did not remove the factual issue of spoliation from the 

jury. Additionally, it was within the Court’s discretion to revisit its prior ruling upon 

hearing the evidence presented at trial. See In re Pharmacy Benefit Managers Antitrust 

Litig., 582 F.3d 432, 439 (3d Cir. 2009) (“[A] trial judge has the discretion to reconsider 

an issue and should exercise that discretion whenever it appears that a previous ruling, 

even if unambiguous, might lead to an unjust result.” (quoting Swietlowich v. Cty. of 

Bucks, 610 F.2d 1157, 1164 (3d Cir. 1979))). 

We identify no abuse of discretion in declining, at the party’s request, to 

give an instruction after so warning the parties about the jury’s province to find 

facts regarding Welch’s use of the laptop. 

B. Jury Verdict
10

Lexpath next argues that the jury’s verdict should be vacated because it was 

against the weight of the evidence and because Welch’s counsel “admitted liability” in

closing. We need not address the merits of the sufficiency of the evidence claim because 

Lexpath failed to follow the proper procedure to challenge the sufficiency of the 

evidence. A party urging a new trial on appeal must make a post-verdict Rule 50 motion. 

Unitherm Food Systems, Inc. v. Swift-Eckrich, Inc., 546 U.S. 394, 402–03 (2006). 

Moreover, “[i]t is well settled that a party who does not file a Rule 50 motion for 

judgment as a matter of law at the end of the evidence is not thereafter entitled to have 

judgment entered in its favor notwithstanding an adverse verdict on the ground that there 

is insufficient evidence to support the verdict.” Greenleaf v. Garlock, Inc., 174 F.3d 352, 

364 (3d Cir. 1999). Lexpath’s failure to make a Rule 50 motion precludes it from 

challenging the sufficiency of the evidence on appeal. 

Alternatively, Lexpath contends that Welch’s counsel admitted that Welch 

breached his duty of loyalty. At closing, his counsel stated that, by providing a rate sheet 

to Liberty two days before resigning from Lexpath, Welch did something “that he wasn’t 

supposed to do.” A. 4118. Standing alone, however, this concession does not mean that 

the jury was irrational in finding for Welch on the breach of duty of loyalty claim. See 

Lamorte Burns & Co. v. Walters, 770 A.2d 1158, 1168 (N.J. 2001) (stating that when 

deciding a breach of duty of loyalty, the jury must consider “the employee’s level of trust 

and confidence, the existence of an anti-competition contractual provision, and the 

egregiousness of the conduct”). 
11

C. Statements of Reganato and Feldman

Lexpath also assigns error to the District Court’s ruling excluding statements by 

Donald Lusardi to Peter Reganato and Allan Feldman as inadmissible “double hearsay.” 

We review a district court’s evidentiary decisions for abuse of discretion and its legal 

interpretation of the Federal Rules of Evidence de novo. United States v. Repak, 852 

F.3d 230, 240 (3d Cir. 2017). We generally review a district court’s denial of a motion 

for reconsideration for abuse of discretion, but our review is plenary “if the court’s denial 

was based upon the interpretation and application of a legal precept.” Koshatka v. Phila. 

Newspapers, Inc., 762 F.2d 329, 333 (3d Cir. 1985). Breaking down the facts into their 

most basic form, we identify no abuse of discretion where the District Court denied 

admission of testimony from two individuals that a third, non-testifying individual told 

them that a fourth individual made disparaging remarks about the plaintiff. 

Hearsay is an out-of-court statement offered for its truth. Fed. R. Evid. 801(c). At 

trial, Lexpath sought to introduce testimony from Reganato and Feldman that Lusardi 

told them that Welch made negative statements about Lexpath. His statements (repeated 

by Lusardi to Reganato and Feldman) were allegedly to the effect that Lexpath was 

incapable of handling the accounts following Welch’s departure. The District Court 

determined this was double hearsay, which could only be admitted if each statement fit 

into a hearsay exception. Fed. R. Evid. 805. The Court concluded that there was no 

relevant exception for the second layer of hearsay (Lusardi’s statements to Reganato and 

Feldman). The Court then denied Lexpath’s motion to reconsider.
12

Even assuming, as Lexpath avers, that Welch’s statements are not hearsay because 

they were not being offered to prove their truth (that Lexpath could not handle the 

accounts without Welch), but rather for the fact that Welch made the statements to 

Lusardi at all, that only takes care of the first level of hearsay. Lusardi’s statements to 

Reganato and Feldman would still need to fit under a relevant exception to be admissible. 

According to Lexpath, Lusardi’s statements show his state of mind and motive 

when he decided to move Liberty’s business—specifically, that he credited Welch’s 

negative remarks about Lexpath and thought he had no choice but to go with Welch. See 

Lexpath Br. at 32–33 (citing Fed. R. Evid. 803(3)). But the conversations were not 

contemporaneous with the decision to move Liberty’s business. Feldman said his 

conversation with Lusardi happened at least three months later, and Reganato’s 

conversation occurred at least a week later. Admitting these statements would therefore 

have run afoul of the Rule 803’s prohibition on “including a statement of memory or 

belief to prove the fact remembered or believed.” Fed. R. Evid. 803(3). Likewise,

Lexpath’s contention that the statements should have been admitted under Rule 807(a)’s 

residual exception is without merit because they lack the exceptional indicia of

trustworthiness required.

D. Summary Judgment 

Our review of the District Court’s denial of summary judgment is plenary, and we 

apply the same test as the District Court did. Koshatka, 762 F.2d at 333. Summary 

judgment is appropriate when “there is no genuine dispute as to any material fact and the 
13

movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see Shuker v. 

Smith & Nephew, PLC, 885 F.3d 760, 770 (3d Cir. 2018).

Lexpath moved for summary judgment on its CFAA and CROA claims multiple 

times. The District Court denied the motions, but did not issue a memorandum in either 

instance. On appeal, Lexpath contends the District Court “erred in failing to recognize 

that the determinations made in the Spoliation Order constituted law of the case.” 

Lexpath Br. at 36. Lexpath argues that summary judgment was appropriate because 

Welch violated both the CFAA and CROA when he knowingly ran CCleaner on the 

laptop after the end of his employment with Lexpath. For the following reasons, we

disagree. 

1. Summary Judgment on CFAA Claim

The District Court properly denied Lexpath’s motion for summary judgment with 

respect to its CFAA claim. The CFAA permits civil recovery against a defendant who, 

inter alia, “[i]ntentionally accesses a computer without authorization or exceeds

authorized access, and thereby obtains . . . information from any protected computer,” 18 

U.S.C. § 1030(a)(2), or who “knowingly causes the transmission of a program, 

information, code, or command, and as a result, intentionally causes damages without 

authorization to a protected computer,” id. § 1030(a)(5)(A).

Lexpath argues that summary judgment was appropriate because Welch violated 

the CFAA when he knowingly ran CCleaner on the laptop after the end of his 
14

employment.

4

 Lexpath relies on the facts established in the Spoliation Order to show 

that Welch was not authorized to use the laptop. However, as explained above, such 

findings do not require a court to usurp the jury’s role as the trier of fact, and Lexpath has

pointed us to no authority suggesting otherwise. Moreover, the District Court determined 

that whether Welch had permission to access and clean the laptop was ultimately an issue 

of fact for the jury. For instance, after Welch left Lexpath, Tuohy asked for his continued 

assistance regarding business matters, which arguably authorized Welch to use the 

laptop. Given that there are genuine disputes of material fact as to whether Welch’s use 

was authorized, the District Court properly denied Lexpath’s motion for summary 

judgment.

2. Summary Judgment on New Jersey Computer Related Offenses Act

Claim

The District Court properly denied Lexpath’s motion for summary judgment as to 

its claim under CROA. To recover under CROA, a plaintiff must show he was “damaged 

in business or property by the defendant’s violation of the act.” N.J. Stat. Ann. § 2A:28A3. We have said that a plaintiff must demonstrate damages under CROA to sustain a 

claim. In Re Nickelodeon Consumer Privacy Litig., 827 F.3d 262, 278 (3d Cir. 2016). 

Expert fees paid in furtherance of litigation are considered litigation costs rather than 

 

4 Lexpath also asserts that its expenditures to support litigation claims against Welch can 

qualify as “loss” under § 1030(e)(11). While we have not spoken to whether litigation 

costs are compensable losses under the statute, we need not reach that question here 

because there was ample basis for the District Court to deny Lexpath’s motion for 

summary judgment based on the genuine disputes of fact regarding other provisions of 

the CFAA.
15

damages. See Kowaleski v. Allstate Ins. Co., 569 A.2d 815, 819 n.4 (N.J. Super. Ct. App. 

Div. 1990). 

Lexpath contends that summary judgment was appropriate because Welch violated 

CROA when he knowingly ran CCleaner on the laptop after the end of his employment. 

Lexpath bears the burden to demonstrate a violation. See P.C. Yonkers, Inc. v.

Celebrations the Party & Seasonal Superstore, LLC, 428 F.3d 504, 509 (3d Cir. 2005). 

However, instead of showing that Welch copied or misappropriated confidential 

information, Lexpath asked the Court to adopt as final, for summary judgment purposes, 

its findings of fact in the Spoliation Order. Its state-law motion therefore suffers the 

same infirmity as its CFAA summary judgment motion, namely, that it asked the Court to 

rely on factual findings from the Spoliation Order and take that issue away from the jury. 

Moreover, Tuohy, in his deposition, stated that Welch gained his knowledge of 

confidential information through his employment at Lexpath, and so there was no need 

for Welch to take information from the laptop. Finally, Lexpath’s expenses were 

incurred to support its litigation claims, which are considered litigation costs rather than 

damages, and are not compensable losses under CROA. See Kowaleski, 569 A.2d at 819 

n.4. Accordingly, there is no basis to disturb the District Court’s denial of summary 

judgment.

E. Koskie Testimony

We review the District Court’s evidentiary rulings for abuse of discretion. 

McMunn, 869 F.3d at 268. Before trial, the District Court granted Welch’s motion in 

limine to exclude testimony from Katie Koskie of MHANJ, finding that it was irrelevant 
16

and would confuse the jury because MHANJ remained a client of Lexpath’s. Lexpath 

sought to call Koskie to testify to “disparaging statements made by Welch regarding 

Lexpath and its employees.” A. 2910–11. 

On appeal, Lexpath contends the exclusion was in error because Koskie’s 

testimony was relevant to whether Welch was dissatisfied with his job at Lexpath and 

whether he was beginning to compete with them. Perhaps. But, as the District Court 

recognized, it is more likely that the jury would have interpreted it as propensity evidence 

or been unduly confused by its content. This is especially so given that the testimony did 

not purport to offer relevant evidence of solicitation of MHANJ, let alone Liberty or 

EIMC. The Court appropriately exercised its discretion to exclude evidence, of limited 

relevance, on the basis that it was offered to establish a party’s propensity to commit bad 

acts. See Fed. R. Evid. 404(a).5

III. CONCLUSION

For the foregoing reasons, we will affirm the District Court’s judgment and orders.

 

5 Because we find no basis to remand, we need not address Lexpath’s recusal argument.