11-3518-cv (L) Faiveley Transport v. Wabtec Corp.



### UNITED STATES COURT OF APPEALS
**FOR THE SECOND CIRCUIT**



## SUMMARY ORDER

**R ULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT**  **. C** **ITATION TO A SUMMARY ORDER FILED**
**ON OR AFTER J** **ANUARY 1,**  **2007, IS PERMITTED AND IS GOVERNED BY**  **F EDERAL**  **R ULE OF**  **A PPELLATE**  **P ROCEDURE**  **32.1 AND THIS COURT**  **’ S**  **L OCAL**  **R ULE**  **32.1.1. W**  **HEN CITING A SUMMARY ORDER IN A**
**DOCUMENT FILED WITH THIS COURT ,**  **A PARTY MUST CITE EITHER THE F** **EDERAL A** **PPENDIX 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 .** 
**At a stated term of the United States Court of Appeals** 1 **for the Second Circuit, held at the Thurgood Marshall United** 2 **States Courthouse, 40 Foley Square, in the City of New York,** 3 **on the 6 th** **day of February, two thousand thirteen.** 4 5 **PRESENT: DENNIS JACOBS,** 6 **Chief Judge ,**  7 **ROSEMARY S. POOLER,** 8 **DENNY CHIN,** 9 **Circuit Judges**

**.** 10 11
- - - - - - - - - - - - - - - - - - - -X 12 **FAIVELEY TRANSPORT USA, INC.,** 13 **FAIVELEY TRANSPORT NORDIC AB,** 14 **FAIVELEY TRANSPORT AMIENS S.A.S.,** 15 **ELLCON NATIONAL, INC.,** 16 **Plaintiffs-Appellees/Cross** 17 **Appellants ,**  18 19 **-v.- 11-3518-cv (Lead)** 20 **11-3629-cv (XAP)** 21 22 **WABTEC CORPORATION,** 23 **Defendant-Appellant/Cross** 24 **Appellee**

**.** 25

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1**FOR APPELLANT/CROSS-APPELLEE:** JAMES C. MARTIN (Colin 1 E. Wrabley, Paige H. 2 Forester, on the 3 brief ), Reed Smith LLP, 4 Pittsburgh, PA. 5 6 **FOR APPELLEES/CROSS-APPELLANTS:** ANDREW JOHN PINCUS (A. 7 John Peter Mancini, 8 Mayer Brown LLP, New 9 York, NY on the brief ), 10 Mayer Brown LLP, 11 Washington, DC. 12 13 Appeal from a judgment of the United States District 14 Court for the Southern District of New York (Rakoff, J. ). 15 16 **UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED** 17
**AND DECREED**that the judgment awarding damages is **VACATED** 18 and **REMANDED** to the district court for a new trial limited 19 to the issue of damages unless Faiveley agrees to a 20 remittitur reducing the amount of damages to $15 million 21 ($4.5 million in past damages, and $10.5 million in future 22 damages), plus interest. In all other respects, the 23 judgment is **AFFIRMED**

. 24 25 Wabtec Corporation appeals from the judgment of the 26 United States District Court for the Southern District of 27 New York (Rakoff, J. ), denying its motion for a judgment as 28 a matter of law, or alternatively, a new trial. The 29 Faiveley plaintiffs cross-appeal from the court’s dismissal 30 of their claim for punitive damages. We assume the parties’ 31 familiarity with the underlying facts, the procedural 32 history, and the issues presented for review. 33 Wabtec argues that the Faiveley plaintiffs lack 34 standing to bring their claims because they had no express 35 exclusive license to the trade secrets. “We review 36 questions of standing de novo .” Carver v. City of New York

, 37 621 F.3d 221, 225 (2d Cir. 2010). Wabtec ignores the 38 requirements for a successful misappropriation claim, which 39 we defined in an earlier iteration of this very case: “(1) 40 that [Faiveley] possessed a trade secret, and (2) that 41 [Wabtec] used that trade secret in breach of an agreement, 42 confidential relationship or duty, or as a result of 43 discovery by improper means.” Faiveley Transport Malmo AB 44 v. Wabtec Corp. , 559 F.3d 110, 117 (2d Cir. 2009) (citation 45 omitted and emphasis added). That definition is law of the 46 case, and does not include the word “exclusive.” The 47

2Faiveley plaintiffs were the only entities in possession of 1 the brake trade secrets in the United States. That is 2 enough for standing to sue. 3 Wabtec invokes res judicata to argue that the Tribunal 4 foreclosed any Faiveley damages on the merits. “We review 5 de novothe district court's application of the principles 6 of res judicata .” O'Connor v. Pierson , 568 F.3d 64, 69 (2d 7 Cir. 2009). The Tribunal expressly held that Malmo could 8 “only claim damages suffered by itself,” i.e. , not on behalf 9 of the Faiveley plaintiffs. The Tribunal explicitly did not 10 pass judgment on the Faiveley damages, in part because the 11 Faiveley plaintiffs would potentially “still [have been] 12 entitled to claim damages against [Wabtec] before another 13 jurisdiction.” That statement can only mean that the 14 Tribunal’s disposition was not made on the merits. The 15 Tribunal’s decision notto consider Faiveley damages on the 16 merits is not res judicata to their claims here because 17 “[i]n ordinary circumstances a second action on the same 18 claim is not precluded by dismissal of a first action for 19 prematurity or failure to satisfy a precondition to suit.” 20 18A Charles Alan Wright & Arthur R. Miller, Fed. Prac. & 21
Proc. § 4437 (2d ed. 2012). 22 Wabtec also takes issue with the jury’s award of 23 damages. “Where the district court has decided whether 24 and/or to what extent the jury's verdict was excessive, its 25 decision is reviewable only for abuse of discretion.” 26 Rangolan v. County of Nassau , 370 F.3d 239, 245 (2d Cir. 27 2004). First, Wabtec argues that the Faiveley plaintiffs 28 should not be entitled to any “future” damages. However, 29 considering that the Tribunal itself awarded future damages 30 (through 2011) and also predicted that the Faiveley damages 31 would be substantially greater than those it awarded to 32 Malmo in the arbitration, the award of future damages here 33 is appropriate. The district court did not abuse its 34 discretion in affirming the jury’s future damages award of 35 $10.5 million. 36 Wabtec’s argument regarding damages for past conduct is 37 more compelling. The company contends that in calculating 38 the amount of Wabtec’s unjust enrichment, the jury did not 39 properly deduct the $4.1 million arbitration award that 40 Wabtec paid to Malmo (a $3.9 million royalty award with 41 $200,000 in interest). Faiveley’s damages expert conceded 42 on cross-examination that his calculation of $7.6 million in 43 ill-gotten Wabtec profits excluded any consideration of that 44 payment, demurring that the decision of whether to subtract 45 the arbitration royalty was “a legal question.” The jury 46 subsequently calculated Faiveley’s past damages as $7.6 47

3million in unjust enrichment, or $4.5 million in lost 1 profits. Thus, it appears that the jury accepted the 2 expert’s $7.6 million recommendation without any adjustment 3 whatsoever, an oversight that is significant and 4 quantifiable. 5
Remittitur is appropriate when “the court can identify 6 an error that caused the jury to include in the verdict a 7 quantifiable amount that should be stricken.” Trademark 8 Research Corp. v. Maxwell Online, Inc. , 995 F.2d 326, 337 9 (2d Cir. 1993) (citation omitted) . Since Wabtec effectively 10 paid a $3.9 million royalty fee for its use of the brake 11 trade secrets, this expense directly decreased the extent to 12 which Wabtec was unjustly enriched, and should have been 13 discounted from its profits. Subtracting the $3.9 million 14 amount from the $7.6 million award leaves $3.7 million. 15 However, the jury also alternatively calculated Faiveley’s 16 lost profits to be $4.5 million, a higher figure which was 17 not tainted by the oversight on the arbitration payment 18 (since the Faiveley plaintiffs’ compensatory damages were 19 expressly not addressed by the Tribunal). The Faiveley 20 plaintiffs should therefore be given the choice of either 21 [i] a remittitur, decreasing their past damages award by 22 $3.1 million to the higher compensatory amount of $4.5 23 million, or [ii] a new damages trial. See11 Wright & 24 Miller at § 2815 (“[T]he court may condition a denial of the 25 motion for a new trial upon the filing by the plaintiff of a 26 remittitur in a stated amount. In this way the plaintiff is 27 given the option of either submitting to a new trial or of 28 accepting the amount of damages that the court considers 29 justified.”). 30 Wabtec also asserts that the district court improperly 31 excluded the testimony of one of its three expert witnesses, 32 Dr. Aly Badawy , emphasizing that the district court did not 33 sufficiently explain its decision. The district court’s 34 decision regarding the admissibility of expert testimony 35 “must be sustained unless manifestly erroneous.” Trademark 36 Research Corp. , 995 F.2d at 338. There was no manifest 37 error here. Expert testimony may be excluded if it is based 38 upon unreliable, speculative assumptions. See, e.g.

, 39 Boucher v. U.S. Suzuki Motor Corp. , 73 F.3d 18, 21 (2d Cir. 40 1996). Dr. Badawy’s expert testimony included sweeping 41 statements that were detached from the actual evidence. 42 While Wabtec may have understandably desired a fuller 43 explanation, the district court did not abuse its discretion 44 by excluding Dr. Badawy’s testimony in a summary ruling. 45 See, e.g. , United States v. Locascio , 6 F.3d 924, 939 (2d 46 Cir. 1993) (“[W]e assume that the district court 47

4consistently and continually performed a trustworthiness 1 analysis sub silentioof all evidence introduced at trial. 2 We will not, however, circumscribe this discretion by 3 burdening the court with the necessity of making an explicit 4 determination for all expert testimony.”). 5 Finally, the Faiveley plaintiffs cross-claim, arguing 6 that the district court should have permitted the jury to 7 consider whether to award them punitive damages. “The 8 district court's determination that punitive damages are 9 unwarranted as a matter of law is reviewed de novo .” New 10 Windsor Volunteer Ambulance Corps, Inc. v. Meyers , 442 F.3d 11 101, 121 (2d Cir. 2006). The Tribunal did not characterize 12 Wabtec’s behavior in an extreme light, and expressly 13 permitted Wabtec to “continue to use its reverse engineered 14 drawings” after making its royalty damages payment. Under 15 these circumstances, the district court’s decision on 16 punitive damages is appropriate. 17 Finding no merit in the parties’ remaining arguments, 18

we **VACATE**the judgment awarding damages and **REMAND** to the 19 district court for a new trial limited to the issue of 20 damages unless Faiveley agrees to a remittitur reducing the 21 amount of damages to $15 million ($4.5 million in past 22 damages, and $10.5 million in future damages), plus 23 interest. In all other respects, the judgment is **AFFIRMED**

. 24 25 26 FOR THE COURT: 27 CATHERINE O’HAGAN WOLFE, CLERK 28 29

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