11-3518-cv (L)

Faiveley Transport v. Wabtec Corp.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED

ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE

PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A

DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN

ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST

SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

1 At a stated term of the United States Court of Appeals

2 for the Second Circuit, held at the Thurgood Marshall United

3 States Courthouse, 40 Foley Square, in the City of New York,

on the 6th 4 day of February, two thousand thirteen.

5

6 PRESENT: DENNIS JACOBS,

7 Chief Judge,

8 ROSEMARY S. POOLER,

9 DENNY CHIN,

10 Circuit Judges.

11

12 - - - - - - - - - - - - - - - - - - - -X

13 FAIVELEY TRANSPORT USA, INC.,

14 FAIVELEY TRANSPORT NORDIC AB,

15 FAIVELEY TRANSPORT AMIENS S.A.S.,

16 ELLCON NATIONAL, INC., 

17 Plaintiffs-Appellees/Cross18 Appellants,

19

20 -v.- 11-3518-cv (Lead)

21 11-3629-cv (XAP)

22

23 WABTEC CORPORATION, 

24 Defendant-Appellant/Cross25 Appellee. 

26 - - - - - - - - - - - - - - - - - - - -

27

1
1 FOR APPELLANT/CROSS-APPELLEE: JAMES C. MARTIN (Colin

2 E. Wrabley, Paige H.

3 Forester, on the

4 brief), Reed Smith LLP,

5 Pittsburgh, PA.

6

7 FOR APPELLEES/CROSS-APPELLANTS: ANDREW JOHN PINCUS (A.

8 John Peter Mancini,

9 Mayer Brown LLP, New

10 York, NY on the brief),

11 Mayer Brown LLP,

12 Washington, DC.

13

14 Appeal from a judgment of the United States District

15 Court for the Southern District of New York (Rakoff, J.).

16

17 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED

18 AND DECREED that the judgment awarding damages is VACATED

19 and REMANDED to the district court for a new trial limited

20 to the issue of damages unless Faiveley agrees to a

21 remittitur reducing the amount of damages to $15 million

22 ($4.5 million in past damages, and $10.5 million in future

23 damages), plus interest. In all other respects, the

24 judgment is AFFIRMED. 

25

26 Wabtec Corporation appeals from the judgment of the

27 United States District Court for the Southern District of

28 New York (Rakoff, J.), denying its motion for a judgment as

29 a matter of law, or alternatively, a new trial. The

30 Faiveley plaintiffs cross-appeal from the court’s dismissal

31 of their claim for punitive damages. We assume the parties’

32 familiarity with the underlying facts, the procedural

33 history, and the issues presented for review.

34 Wabtec argues that the Faiveley plaintiffs lack

35 standing to bring their claims because they had no express

36 exclusive license to the trade secrets. “We review

37 questions of standing de novo.” Carver v. City of New York,

38 621 F.3d 221, 225 (2d Cir. 2010). Wabtec ignores the

39 requirements for a successful misappropriation claim, which

40 we defined in an earlier iteration of this very case: “(1)

41 that [Faiveley] possessed a trade secret, and (2) that

42 [Wabtec] used that trade secret in breach of an agreement,

43 confidential relationship or duty, or as a result of

44 discovery by improper means.” Faiveley Transport Malmo AB

45 v. Wabtec Corp., 559 F.3d 110, 117 (2d Cir. 2009) (citation

46 omitted and emphasis added). That definition is law of the

47 case, and does not include the word “exclusive.” The

2
1 Faiveley plaintiffs were the only entities in possession of

2 the brake trade secrets in the United States. That is

3 enough for standing to sue. 

4 Wabtec invokes res judicata to argue that the Tribunal

5 foreclosed any Faiveley damages on the merits. “We review

6 de novo the district court's application of the principles

7 of res judicata.” O'Connor v. Pierson, 568 F.3d 64, 69 (2d

8 Cir. 2009). The Tribunal expressly held that Malmo could

9 “only claim damages suffered by itself,” i.e., not on behalf

10 of the Faiveley plaintiffs. The Tribunal explicitly did not

11 pass judgment on the Faiveley damages, in part because the

12 Faiveley plaintiffs would potentially “still [have been]

13 entitled to claim damages against [Wabtec] before another

14 jurisdiction.” That statement can only mean that the

15 Tribunal’s disposition was not made on the merits. The

16 Tribunal’s decision not to consider Faiveley damages on the

17 merits is not res judicata to their claims here because

18 “[i]n ordinary circumstances a second action on the same

19 claim is not precluded by dismissal of a first action for

20 prematurity or failure to satisfy a precondition to suit.” 

21 18A Charles Alan Wright & Arthur R. Miller, Fed. Prac. &

22 Proc. § 4437 (2d ed. 2012). 

23 Wabtec also takes issue with the jury’s award of

24 damages. “Where the district court has decided whether

25 and/or to what extent the jury's verdict was excessive, its

26 decision is reviewable only for abuse of discretion.” 

27 Rangolan v. County of Nassau, 370 F.3d 239, 245 (2d Cir.

28 2004). First, Wabtec argues that the Faiveley plaintiffs

29 should not be entitled to any “future” damages. However,

30 considering that the Tribunal itself awarded future damages

31 (through 2011) and also predicted that the Faiveley damages

32 would be substantially greater than those it awarded to

33 Malmo in the arbitration, the award of future damages here

34 is appropriate. The district court did not abuse its

35 discretion in affirming the jury’s future damages award of

36 $10.5 million. 

37 Wabtec’s argument regarding damages for past conduct is

38 more compelling. The company contends that in calculating

39 the amount of Wabtec’s unjust enrichment, the jury did not

40 properly deduct the $4.1 million arbitration award that

41 Wabtec paid to Malmo (a $3.9 million royalty award with

42 $200,000 in interest). Faiveley’s damages expert conceded

43 on cross-examination that his calculation of $7.6 million in

44 ill-gotten Wabtec profits excluded any consideration of that

45 payment, demurring that the decision of whether to subtract

46 the arbitration royalty was “a legal question.” The jury

47 subsequently calculated Faiveley’s past damages as $7.6

3
1 million in unjust enrichment, or $4.5 million in lost

2 profits. Thus, it appears that the jury accepted the

3 expert’s $7.6 million recommendation without any adjustment

4 whatsoever, an oversight that is significant and

5 quantifiable.

6 Remittitur is appropriate when “the court can identify

7 an error that caused the jury to include in the verdict a

8 quantifiable amount that should be stricken.” Trademark

9 Research Corp. v. Maxwell Online, Inc., 995 F.2d 326, 337

10 (2d Cir. 1993) (citation omitted). Since Wabtec effectively

11 paid a $3.9 million royalty fee for its use of the brake

12 trade secrets, this expense directly decreased the extent to

13 which Wabtec was unjustly enriched, and should have been

14 discounted from its profits. Subtracting the $3.9 million

15 amount from the $7.6 million award leaves $3.7 million. 

16 However, the jury also alternatively calculated Faiveley’s

17 lost profits to be $4.5 million, a higher figure which was

18 not tainted by the oversight on the arbitration payment

19 (since the Faiveley plaintiffs’ compensatory damages were

20 expressly not addressed by the Tribunal). The Faiveley

21 plaintiffs should therefore be given the choice of either

22 [i] a remittitur, decreasing their past damages award by

23 $3.1 million to the higher compensatory amount of $4.5

24 million, or [ii] a new damages trial. See 11 Wright &

25 Miller at § 2815 (“[T]he court may condition a denial of the

26 motion for a new trial upon the filing by the plaintiff of a

27 remittitur in a stated amount. In this way the plaintiff is

28 given the option of either submitting to a new trial or of

29 accepting the amount of damages that the court considers

30 justified.”). 

31 Wabtec also asserts that the district court improperly

32 excluded the testimony of one of its three expert witnesses,

33 Dr. Aly Badawy, emphasizing that the district court did not

34 sufficiently explain its decision. The district court’s

35 decision regarding the admissibility of expert testimony

36 “must be sustained unless manifestly erroneous.” Trademark

37 Research Corp., 995 F.2d at 338. There was no manifest

38 error here. Expert testimony may be excluded if it is based

39 upon unreliable, speculative assumptions. See, e.g.,

40 Boucher v. U.S. Suzuki Motor Corp., 73 F.3d 18, 21 (2d Cir.

41 1996). Dr. Badawy’s expert testimony included sweeping

42 statements that were detached from the actual evidence. 

43 While Wabtec may have understandably desired a fuller

44 explanation, the district court did not abuse its discretion 

45 by excluding Dr. Badawy’s testimony in a summary ruling. 

46 See, e.g., United States v. Locascio, 6 F.3d 924, 939 (2d

47 Cir. 1993) (“[W]e assume that the district court

4
1 consistently and continually performed a trustworthiness

2 analysis sub silentio of all evidence introduced at trial.

3 We will not, however, circumscribe this discretion by

4 burdening the court with the necessity of making an explicit

5 determination for all expert testimony.”).

6 Finally, the Faiveley plaintiffs cross-claim, arguing

7 that the district court should have permitted the jury to

8 consider whether to award them punitive damages. “The

9 district court's determination that punitive damages are

10 unwarranted as a matter of law is reviewed de novo.” New

11 Windsor Volunteer Ambulance Corps, Inc. v. Meyers, 442 F.3d

12 101, 121 (2d Cir. 2006). The Tribunal did not characterize

13 Wabtec’s behavior in an extreme light, and expressly

14 permitted Wabtec to “continue to use its reverse engineered

15 drawings” after making its royalty damages payment. Under

16 these circumstances, the district court’s decision on

17 punitive damages is appropriate.

18 Finding no merit in the parties’ remaining arguments,

19 we VACATE the judgment awarding damages and REMAND to the

20 district court for a new trial limited to the issue of

21 damages unless Faiveley agrees to a remittitur reducing the

22 amount of damages to $15 million ($4.5 million in past

23 damages, and $10.5 million in future damages), plus

24 interest. In all other respects, the judgment is AFFIRMED.

25

26

27 FOR THE COURT:

28 CATHERINE O’HAGAN WOLFE, CLERK

29

5