T hi s or derand j udgm enti s notbi ndi ng pr ece dentexce ptundert he * doctr i nes of l aw of the ca s e, r es j udi cat a, and col l at er al es t oppel . I tm aybe ci t ed, h o w e v e r, fo r its p e rsu a siv e v a lu e c o n sis ten t w ith F e d . R . A p p . P . 3 2 .1 a n d 1 0 th C i r . R . 32. 1. FI LED Unite d St at e s C ourt o f Appe als

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### S e p t e m b e r 18, 2007 Elisab eth A. Shumaker Clerk of Court UNI TED S TATES CO URT O F AP PEALS

T E N T H C IR C U IT C A R T E L A S S E T M A N A G E M E N T , a C ol or ado corpor at i on,

P lain tiff - A p p e llan tC r os s - A ppel l ee, v. OC WEN F I NANC I AL C O R PO R A T I O N , a Fl or i da c o rp o r a t i o n ; OC WEN T E CH NOL OGY X C H A N G E , a di vi s i on of O cw en Fi n a n c i a l Corp o r a t i o n ; OC W EN F E D E R A L B A N K F S B , a su b sidiary of O cw en Fi nanci al C orpor at i on,

D efen dan t s - A pp el l eesC ross -A pp el l ants . N os . 04- 1502 & 04- 1517 D . C ol o. (D . C . N o . 0 1 -F -16 4 4 (C B S ))

ORDE R AND J UDGM EN T * B efor e M UR P HY , AN DE RS ON , and O’ BRI EN , C i rcui tJudg es.

C art el A ssetM anag em ent ( “C art el ”) fi l ed suitagainstt hree O cw en en t i t i es, O cw en Fi nanci al C orpor at i on ( “O cw en Fi nanci al ) , O cw en Feder al B ank FSB ( t heC ar t el al s o cl ai m ed unj us tenr i chmentbutt hi s cl ai m w as di s m i s s ed byt he 1 di s t r i ctcourtatt r i al . T he courtdet erm i ned the damages forunj us tenr i chment w e re d u p lic a tiv e o f

th e d a m a g e s s o u g h t fo r m is a p p ro p ri a tio n o f tr a d e s e c re ts . C a rte l d o e s n o t ch a llen g e th e d ism iss a l o f its u nju st e n ric h m e n t cla im o n a p p e a l. -2- “B ank”) , and O cw en Technol ogyE xchange , I nc. ( “O cw en Technol ogy ”) . C ar t el al l eged each e nti t ym i sapprop ri at ed tr ade secret s and O cw en T echn ologyal so fr audul ent l yi nduced Car t el t o ent eri nt o a contr actand then br eac hed the contr act . A ft era s even- dayt r i al , t he j uryr etur ned a ve r di ctforC ar t el on the

1 m i s appr opr i at i on cl ai m agai ns tt he B ank and a ver di ctagai ns tO cw en Technol ogy forbr eac h of contr actand fr audul enti nducement . O n the mi s appr opr i at i on of tra d e se c re ts c laim , the ju ryd e ter m in e d C a rte l’s a c tu a l d a m a g e s a m o u n ted to $ 4 , 9 0 0 , 0 0 0 an d aw ard ed p u n it ive d am ag es in the a m o u n t of $ 3 , 9 0 0 , 0 0 0 . T h e jury concl uded O cw en Technol ogyow ed C ar t el onl y$1 i n nom i nal damages for br eac h of contr act , butaw ar ded ac tual damages of $260, 000 and puni t i ve damages o f $ 2 6 0 ,0 0 0 o n C a rt e l’ s f ra u d u le n t in d u c e m e n t c la im . Post - t r i al , t he di s t r i ctcourtdet erm i ned i ts houl d have s tr i cken the t es t i m onyof C art el ’ s damages expertbeca us e the t es t i m onyw as bas ed on s pecul at i on. A s a r es ul t , t he tr i al courtor der ed a ne w t r i al on the i s s ue of damages foral l cl ai m s and or der ed the part i es t o s ubm i tbr i efs , pr i ort o a s chedul i ng confe r ence , di s cus s i ng anyevi dence t hatm ays uppor tan al t ernat i ve damages aw ar d. B efor e the dat e of the s chedul i ng confe r ence , how ever , t he tr i al cour ti s s ued an O r derO n Pendi ng M ot i ons . T he courtr ej ect ed pos t - tr i al m ot i ons-3-

byt he B ank and O cw en Technol ogycl ai m i ng a new tr i al s houl d al s o i ncl ude l i abi l i t yi s s ues . I tfur t herdeni ed C ar t el ’ s m ot i on forr econs i der at i on of the or der gr ant i ng a new t r i al on damages . I ns t ead, bas ed on the al t ernat i ve damages t heor i es and the evi dence pr es ent ed bythe part i es , the tr i al cour tr ei ns t at ed the br eac h of contr actand fr audul enti nducementdamages butdet erm i ned the admi s s i bl e evi dence di d nots uppor tthe pr opos ed damages theoryfor m is a p p ro p ri a tio n o f

tr a d e s e c re ts . A s a re s u lt, th e c o u rt , su a sp o n te , or der ed C ar t el t o r ece i ve onl ynom i nal actual damages of $1 and puni t i ve damages of $1 o n it s m isap p rop ri ati o n claim . G iven thes e ru li n g s, the tri al co u rtco n clud ed there w a s n o b a sis fo r a n e w trial. T h e c o u rt a lso o rd e re d th e B a n k to p a yC a rte l’s c o sts a n d $ 1 7 0 ,0 0 0 in a tto rn e y s’ fe e s o n th e m isa p p ro p ria tio n c laim a n d o rd e re d O c w e n T e c h n o lo g yto p a yC a rt e l’ s c o s ts a s to its b re a c h o f c o n tr a c t a n d f

ra u d u le n t in d u c e m e n t c la im s . H ow ever , t he courtor der ed C art el t o payO cw en Fi nanci al ’ s cos t s i n defe ndi ng C artel’ s u n su cc essf

u l cl aim o f m isap p rop ri ati o n o f trad e se cre ts. T h e c o u rt ent er ed a f

i nal amended j udgm enti ncorpor at i ng i t s det erm i nat i ons on N ovember 4, 2004. O n appea l , C art el chal l enges the di s tr i ctcour t ’ s r educt i on of the tr ade s ecr etm i s appr opr i at i on aw ar d. Fi r s t , C ar t el cont ends the abs ence of an oppor tuni t yfora new t r i al on damages cons t i tut es a for ced r emi t t i turi n vi ol at i on of i t s Seventh A m endmentr i ghtt o a j ur ytr i al . C ar t el al s o m ai nt ai ns the damagesA B P O is a lso k n o w n a s a “ c o m p a ra tiv e m a rk e t an a ly sis ” (C M A ). (R . V o l. 2 8 a t 2 8 7 3 .) A n o n p e rfo rm in g lo a n is a lo a n th a t is d e lin q u e n t in p a ym e n t fo r n in e ty 3 d a y s o r m o re . T h e g o a l is to tu rn th e lo a n in to a p e rfo rm in g lo a n . H o w e v e r, if t hi s effor ti s uns ucce s s ful , t he l oan goes i nt o for ecl os ur e and be comes a “r eal e sta te o w n e d ” (R E O ) lo a n . (R . V o l. 8 a t 2 8 7 2 .) A t th a t ti m e , an o th e r B P O is -4- aw ar d form i s appr opr i at i on of tr ade s ecr et s w as s uppor t ed bys ubs t ant i al evi dence , i ncl udi ng t he t es t i m onyof i t s expert . T he B ank and O cw en Technol ogy fi l ed a cross- app eal , chall eng i ng the tr i al cou rt ’s aw ard of att orney s’ fees against t he B ank and the entr yof j udgm enti n favorof C ar t el on i t s fr audul ent i n d u c e me n tc l a i m. I . BA CKGROUND A. The P ar t i es 1. C art el A s s etM anage m ent C ar t el s peci al i zes i n pr ovi di ng “br okerpr i ce opi ni ons ” ( B PO ) and 2 appr ai s al val uat i ons of r eal pr operty , pr i m ar i l yr es i dent i al , forl ender s t hr oughout th e c o u n try . A B P O is a p ro p e rtyv a lu a tio n p e rfo rm e d b ya re a l es tate p r o fe s s i o n a l , e i t h e ra b r o k e ro ra n a g e n t . T h e a g e n td r i v e s b y th e p r o p e r ty, p h o to g ra p h s it, ex a m in e s p u b lic re c o rd d a ta, id e n tifie s v a lu e s o f c o m p a ra b le r es i dent i al pr oper t y , and pr ovi des a w r i t t en es t i m at e of va l ue fort he s ubj ect p ro p e rt y . C ar t el w as form ed i n 1993 i n r es pons e t o the s al e of l ar ge “pool s ” or p o r t fo l i o s o f

n o n p e r fo r mi n g a n d fo r e c l o s e d l o a n s a ta u c t i o n , r a n g i n g f r o m 6 3r equi r ed and the age ntper form i ng the R E O pr opertyeval uat i on i s l i kel yt o gett he

l i s t i n g o n t h e p r o p e r t y. -5- l oans t o 700 l oans i n a pool . ( R . V ol . 8 at2620- 21. ) B eca us e of the age of the loan s an d ch an g ing loca l eco n o m ic en v ir o n m en ts, the o ri g inal loan v alue s w ere n o t nec essa ri lyrelated to the p rese n t valu e o f th e p o o l pro p erty . P o tential b idd ers r equi r ed curr entpr opert yval uat i ons t o det erm i ne an a ppr opr i at e cos tforthe l oans in th e p o o l. D u e to th e sh o rt tim e p e rio d b e tw e e n th e a n n o u n c e m e n t o f th e sa le and the dat e of the l oan pool auct i ons , pot ent i al bi dder s neede d thes e curr ent val uat i ons qui ckl y . T o m eett hi s need, overthe per i od of fi ve ors i x y ear s , C ar t el d e v e l o p e d a n a t i o n a l l i s to f r e a l e s t a t e a g e n t s a n d b r o k e r s wi l l i n g t o p e r fo r m a B PO w i t hi n a s t at ed amountof t i m e fora ce r t ai n fee . Pot ent i al bi dder s , s uch as banks , w oul d s end C art el t he i dent i t i es of the pr opert i es t o be val uat ed. C ar t el w oul d t hen cont acta l ocal br okeri n the ar ea of eac h pr opertyt o per form the B P O . T h e r e a l t o rw o u l d r e tu r n t h e B P O t o C a r t e l , a n d a f t e ra r e v i e w fo rq u a l i t y, C a rte l w o u ld se n d th e c o m p lete d B P O to th e p o ten tial b id d e r. A c c o rd in g to W a lter C o a ts, th e C E O a n d P re sid e n t o f C a rte l, C a rte l p a id th e lo c a l ag e n ts appr oxi m at el y$50 t o pr ovi de the B PO and cha r ged mostof i t s cl i ent s $95 t o $105 p e rBP O. 2. T he O cw en Ent i t i es a. O cw en Fi nanci al C orpor at i on O c w e n F in a n c ial C o rp o ra tio n is a h o ld in g c o m p a n yb a se d in F lo rid a . It i s-6-

t he par entcompanyt o t he tw o ot herdefe ndant s i n thi s cas e, the B ank and O cw en T echnol ogy . T he O cw en ent i t i es ar e pr i m ar i l yoper at ed bybr other s W i l l i am and J ohn E rbey . W i l l i am E rbeyw as chi ef e xecut i ve off i cerand cha i r m an of the B ank a t all re lev a n t ti m e s. T h e B a n k ’s v a lu a tio n d e p a rtm e n t p u rc h a se d lo a n p o o ls r equi r i ng updat ed B PO s . T he bul k of i t s B PO s w er e pur chas ed thr ough nat i onal vendor s , s uch as C art el , fr om 1993 thr ough 1999. I n 1995, the B ank cr eat ed a comput ers y s t em cal l ed O r derT r acki ng, i n w hi ch i tkeptnames of i t s vendor s and foll ow ed the progress of it s order s. In m id-1 9 9 9 , the B an k cre ated a n ew d ivisi o n , O cw en R ea ltyA d v isors (O c w e n A d v iso rs) . B ill K ru e g e r, fo rm e rlyw ith th e B a n k ’s v a lu a tio n d e p a rtm e n t, w as appoi nt ed the D i r ect orof O cw en A dvi s or s and w as t as ked w i th r eor gani zi ng th e d e p a rtm e n t. T h e g o a l w a s to tra n sitio n th e v a lu a tio n d e p a rtm e n t f ro m its sta tu s a s a h isto ric a l co st c e n ter , p ro v id in g su p p o rt to its a c q u isitio n d e p a rtm e n t, t o a di vi s i on pr ovi di ng s ervi ces t o cl i ent s fora fe e.

b. O cw en Technol ogy O cw en Technol ogyw as form ed t o devel op and i m pl ementan e- comm er ce p lat fo rm , R E A L T ran s, to allow sea m less fin an cial tran sac ti o n s b etw ee n cu stom ers an d v en d o rs. A s ex p lai n ed b yo n e n ati o n al pro v ider, “R E A L T ran s is l ike a n elec tr o n ic pip e. . . . [O ]n o n e sid e w ere v en d o rs l ike m y self, B P O p rov iders, m an yd iffe ren t typ es o f v en d o rs in re s id e n tia l r e a l e s ta te s e rv ic e s , flo o d c o m p a n ie s , ta x c o m p a n ie s . . . . O n th e o th e r s id e o f th e p ip e a re a ll th e b a n k s , th e le n d e rs . . . . R E A L T r ans ’ s funct i on w as t o hel p fac i l i t at e comm uni cat i ons-7-

b e tw e e n b a n k s w h o w o u ld se n d o rd e rs, a n d v e n d o rs w h o w o u ld compl et e them. A nd R E A L T r ans w oul d t ake a fee form aki ng that t r ans act i on happen. ” (R . V o l. 7 at 22 7 2 . ) R E A L T ran s w as a n n o u n ce d to the B an k ’s na ti o n al ve n d o rs in late 19 9 8 an d im p lem en ted in 1 9 9 9 . W il li am E rbe yw as c h airm an o f th e b o ard o f O cw en T ec h n o log y ; Joh n E rbe yw as th e c h ief e x ec u ti v e o fficer. B . H i s t ory of

B us i nes s D eal i ngs W hen C art el w as form ed i n 1993, the nat i onal s al e of BP O s w as a fl edgl i ng i ndus t r y . C oat s , al ong w i t h t w o othernat i onal B PO pr ovi der s , expl ai ned thatt he devel opm entof a da t abas e of br oker s and age nt s s uffi ci entt o pr ovi de a na t i onal s ervi ce w as a t i m e- cons um i ng and expe ns i ve pr oces s . Pr i ort o the adve ntof ext ens i ve i nt ernetl i s t i ngs , a nat i onal agentl i s tw as gener at ed thr ough r evi ew of t el ephone books and i ndus tr yl i s t i ngs . E ven w i th the ava i l abl e r es our ces on the i nt erneti n 2001 t o 2003, fi ndi ng the name of an a gentorbr okerw as onl ypartof th e p ro c e ss . F u rth e r ste p s in th e p ro c e ss re q u ire d c a lls to th e in d iv id u a l re a lty p ro fe ss io n a ls to d e ter m in e th e ir w ill in g n e ss to p e rfo rm th e se rv ice a t a c e rta in pr i ce, eventual us e of the i ndi vi dual r eal t or , and fi nal l y , a r evi ew and r at i ng of the t i m i ng and qual i t yof the r eal t or ’ s w or k. I f the age ntw as t i m el yand ac cur at e, t he agentw as des i gnat ed as “us e. ” I f the age nt ’ s w or k w as nots at i s fac t or y , the des i gnat i on w as “pr eventus e. ” ( R . V ol . 9 at2984- 85. ) A s des cr i bed byone nat i onal pr ovi der , once de vel oped, the age ntl i s t“i s the l i febl ood of [the] b u s in e s s .” (R . V o l. 7 a t 2 3 0 8 .)T hr oughoutt r i al , how ever , t he B ank w i tnes s es cont ended the B ank 4 uncondi t i onal l ypur chas ed notonl yt he B PO val uat i on, butt he br okeri nform at i on a s w e ll. A “r et ai l ” B PO pr ovi deri s an age ntorbr okercont act ed di r ect l ybyt he 5 B ank t o per form a B PO as an i ni t i al s ervi ce a nd t o be the l i s t i ng agenti n the eventof a for ecl os ur e s al e. -8- C a rte l b e g a n d o in g b u sin e ss w ith th e B a n k ’s v a lu a tio n d e p a rtm e n t sh o rtly a f ter C a rte l’s in c e p tio n . A s th e p u rc h a se r o f lo a n p o o ls, th e B a n k e v e n tu a lly or der ed thous ands of B PO s fr om C ar t el and othernat i onal pr ovi der s , s uppl y i ng the n ati o n al ve n d o rs w ith it s o w n fo rm s fo r co m p let ion o f th e B P O s. T h e fo rm inclu d ed a sp ac e ide n ti fy ing the re alt o r co m p let ing the B P O , the re alt o r’s t el ephone numbert o be us ed i n t he eve ntthe B ank nee ded t o cl ar i fyany i nform at i on on t he form , and the r eal t or ’ s pr ofes s i onal l i cens e number . Sever al w i t nes s es t es t i fi ed the under s t andi ng betw een Car t el and the B ank w as thatthe names of Car t el ’ s br oker s and age nt s w er e C ar t el ’ s pr opr i et aryi nform at i on. 4 U p o n th e re tu rn o f

th e B P O s to th e B a n k , the B a n k ’s te a m o f re v iew e rs w o u ld anal y ze the B PO s and otheri nform at i on t o det erm i ne a va l ue on the l oan pool or por t fol i o. C om m enci ng i n 1995, t he B ank’ s O r derT r acki ng s y s t em cont ai ned the names of i t s nat i onal B PO vendor s and i t s r et ai l B PO pr ovi der s us ed pr i m ar i l yfor B ank- ow ned R E O pr opert i es . B y1997, t he B ank or der ed appr oxi m at el y94% of 5 its re sid e n tial B P O s f ro m n a tio n a l p ro v id e rs. T h e se o rd e rs w o u ld b e id e n tifie d in t he O r derT r acki ng s y s t em undert he vendor ’ s name. A tt hatpoi nt , C ar t elD ue t o t he vol um e, C art el ’ s pr i ci ng w as on the l ow end of the r ange 6 t hr ough t he y ear2000. I tchar ged the B ank $75 perB PO , w hi l e mostnat i onal vendor s ’ char ge perB PO w as betw een $75 a nd $100. -9- re c e iv e d th e lio n ’s s h a re o f th e B a n k ’s B P O b u sin e ss , ap p ro x im a tely3 5 % o f a ll nat i onal B PO or der s . Forexampl e, i n the fourth quar t erof 1998, t he B ank 6 or der ed 16, 285 B PO s . O nl y417 w er e or der ed fr om r et ai l pr ovi der s , w hi l e 15, 868 w e r e or de r e d f

r om na t i on a l pr ov i de r s . Car t e l r e c e i ve d 7 , 04 2 o f the Bank ’ s BPO o rde rs i n that q u arter. (R . V o l. 1 0 at 35 7 3 , 3 5 8 9 . ) I n l at e 1998, O cw en Technol ogyw as pr epar i ng t o debuti t s R E A L T r ans s y s t em. T he pr oductw as t he founda t i on forO cw en’ s over al l corpor at e obj ect i ve t o i ncr eas e pr ofi t s t hr ough t he us e of e - comm er ce. Pr i ort o R E A L T r ans , t he B ank c o m m u n ica ted w ith its v e n d o rs b ye -m a il, tele p h o n e a n d fa x . T h e p lan w a s to i nt egr at e the B ank’ s O r derT r acki ng s y s t em and O cw en Technol ogy ’ s R E A L T r ans pr ogr am, eventual l yal l ow i ng t he B ank t o cr eat e an or deri n O r derT r acki ng, as s i gn a vendorand, w i t h t he pr es s of a butt on, engage t he R E A L T r ans capa bi l i t i es . A tt he otherend, t he vendorw oul d l og on t o R E A L T r ans t o r ece i ve a n a ss ig n m e n t id e n tify in g th e p ro d u c t, pr ice a n d d e a d lin e s. A c c o rd in g ly , in la te 1998 and ea r l y1999, t he B ank and O cw en Technol ogygather ed the nat i onal providers t o ex plai n the process and en cou rage theirpart i ci pati on . B ecause R E A L T r ans w as a des kt op s y s t em (i tl at erbeca m e a w eb appl i cat i on) , t he B ank as ked the nat i onal pr ovi der s t o have thei ragent s s i gn up on t he new pr oduct ; t hey w o u ld tr a in th e a g e n ts a n d th e a g e n ts c o u ld s e n d th e irB P O s d ir e c tly to th e B a n k .-10-

Sever al of the nat i onal pr ovi der s , i ncl udi ng C ar t el , expr es s ed conc ern that o n c e th e ir a g e n t in fo rm a tio n w a s in th e sy ste m , the B a n k a n d o th e r le n d e rs w o u ld h a v e d ire c t ac c e ss to th e ir re a lto r lists a n d p u t th e m o u t o f b u sin e ss . A t a D e c e mber19 98 mee t i ng , W i l l i a m E rbe ya s s ur e d o ne of the na t i on a l BPO pr ovi der s t hatt he B ank w as noti n the bus i nes s of pr ovi di ng B PO s orcompet i ng w ith th e n a tio n a l p ro v id e rs. A t a J a n u a ry1 9 9 9 m e e tin g , K ru e g e r a n d h is a s s i s t a nt , D a ve Babb i t t , t ol d Cart e l a nd the othe ra t t e nd i ng na t i on a l BPO pr ovi der s t hatt he B ank w oul d nott ake the age ntdat abas es beca us e theyw er e not gett i ng i nto the B P O bu si ness. C ar t el w as t he onl ynat i onal pr ovi derw i l l i ng t o j oi n O cw en’ s s y s t em. D ue to its c o n c e rn s re g a rd in g its d a tab a se , C a rte l n e g o tiate d a c o n fid e n tiality agr eementw i t h O cw en Technol ogyt o be i ncl uded i n the contr actforthe us e of R E A L T r ans . D ur i ng thes e negot i at i ons , C oat s and B abbi t tw or ked outa s y s t em w her ebyC art el ’ s agent s w oul d w or k thr ough a C ar t el por t al t o R E A L T r ans r ather t han s i gn up di r ect l yon t he O cw en Technol ogys y s t em. K ruegeral s o pr om i s ed C oat s t hati f he s i gned on t o R E A L T r ans , he w oul d eventual l yr ece i ve 100% of t he B ank’ s nat i onal B PO pr ovi derbus i nes s . T he contr actw as exec ut ed i n M ar ch 1999. A s s oon as t he agr eementw as s i gned, C ar t el began w or ki ng w i th O cw en T ecnol ogyt o i nt egr at e thei rs y s t ems. B eca us e of pr obl ems i n the R E A L T r ans connec t i ons betw een Car t el and the B ank, C ar t el s pentappr oxi m at el y$260, 000 on r et ool i ng t he R E A L T r ans pr ogr am bet w een 1999 a nd 2001.-11-

In th e m e a n tim e , the B a n k ’s b u sin e ss stra teg yw a s u n d e rg o in g a d ra stic change . A tl eas tpar tof the i m petus forthe cha nge w as the over al l corpor at e pl an t o capi t al i ze on the effi ci enci es i nher enti n the us e of the i nt ernetand the t echnol ogypr ovi ded byO cw en Technol ogy . I n addi t i on, the l oan ac qui s i t i on bus i nes s w as pr oduci ng di m i ni s hi ng r etur ns . D ur i ng the negot i at i ons w i th C art el t o s i gn on t o R E A L T r ans , K rueger , then managerof the B ank’ s pr opertyval uat i on d e p a rt m e n t, jo in e d w ith B a b b itt to p re s e n t a p la n to J o h n a n d W illia m E rb e y . K ru e g e r a n d B a b b itt p ro p o s e d th e B a n k d e v e lo p a n “ in -h o u s e B P O s h o p ,” e v e n tu a l l y e l i m i n a t i n g t h e n a t i o n a l p r o v i d e r s . ( R . V o l . a t3 0 4 3 . ) T h e E rb e ys appar ent l yl i ked the i dea be caus e dur i ng the fi r s tquar t erof 1999, the B ank deci ded t o t r ans i t i on outof the l oan ac qui s i t i on bus i nes s and bec om e a l oan s ervi ces pr ovi der . E ventual l y , i n A ugus t1999, the B ank r epl ace d the val uat i on depart m entw i t h a new di vi s i on, O cw en R eal tyA dvi s or s , and pl ace d K ruegerat i t s head. P rio r to th e c re a tio n o f O c w e n A d v iso rs, in Ju n e 1 9 9 9 , K ru e g e r sp o k e w ith A n n G ilb e rt w h o h a d b e e n w o rk in g a s o n e o f th e B a n k ’s c o m m e rc ial re a l es tate anal y s t s ( a l oan pool r evi ew er ) s i nce 1998. K ruegerdi s cus s ed the pos s i bi l i tyof G i l ber tm ovi ng t o a di ffe r entpos i t i on beca us e hercurr entj ob w oul d be el i m i nat ed i n t he comi ng bus i nes s tr ans i t i on. G i l bertbeca m e the “managerof v e n d o r m a n a g e m e n t” fo r O c w e n A d v iso rs. H e r jo b in v o lv e d v e n d o r re c ru itm e n t, ap p rov ing v en d o rs fo r O cw en A d v isors’ us e, an d v en d o r fil e m ainten an ce . InI n J anuary2000, G i l ber tbegan r ece i vi ng herpay chec ks fr om O cw en 7 T echnol ogy . O cw en Technol ogyw as al s o i nt ended t o s t ar tpay i ng the vendor s at t hatt i m e, butt he l ack of s ynchr oni zat i on betw een the B ank’ s and O cw en T echn ology ’s bil l i ng sy st em s prevented pay m ent fr om reachi ng t he v end ors. -12- ot herw or ds , G i l ber tw as char ged w i th the deve l opm entand gr ow th of a na t i onal re tail v e n d o r n e tw o rk to p e rfo rm B P O s d ire c tlyfo r th e B a n k — e ss e n tially cr eat i ng t he s ame r es our ce us ed bythe nat i onal vendor s — t o bypas s the cos t s of t he mi ddl eman. She began byr evi ew i ng the vendorl i s ti n the B ank’ s O r der T r acki ng s y s t em. M os tof thos e w er e r eal es t at e br oker s w ho per form ed det ai l ed p ro p e rtya n a ly sis fo r th e R E O d e p a rtm e n t. S h e c o n tac ted m a n yo f th e se a g e n ts butm os ti ndi cat ed theyw er e noti nt er es t ed i n per form i ng anys ervi ces , s uch as an i ni t i al B PO , w hi ch di d notr es ul ti n r ece i vi ng a s ubs equentr eal es t at e l i s t i ng. Pr i ort o hernew pos i t i on atO cw en A dvi s or s , G i l bertt es t i fi ed ther e had b ee n “so m e e ffo rt s” in the c o m p an yto tak e a g en t nam es o ff B P O s in the B an k ’s pos s es s i on and cont actt hos e age nt s di r ect l y , w hi ch pr act i ce c ont i nued thr ough t he t i m e s he w as w i t h O cw en A dvi s or s . She t es t i fi ed i n the ea r l yfal l of 1999, anothernat i onal vendor , M arketI nt el l i gence , w as gi ven a l ar ge or der . A ft erthe o rde rs w ere rec eive d , O cw en A d v isors “started targe ti n g M ark et Intell igen ce ’s b ro k e rs.” (R . V o l. 7 a t 2 3 8 0 -8 1 .) In e a rlyN o v e m b e r 1 9 9 9 , G ilb e rt h ire d a f u llti m e a ssist an t, K eli e M atth ew s, w h o se so le resp o n sibil ityw as to rec ruitv en d o rs t o per form B PO s . B year l y2000, M at thew s r eport ed s he had e xhaus t ed al l her m aj or aven ues of

recruitm ent, i ncludi ng the int ernet , w i tho ut m uch success. 7-13-

G i l ber tw or ked w i t h C oat s as a nat i onal vendorand s he under s t ood C ar t el eventual l yw oul d be O cw en A dvi s or s ’ l ead na t i onal vendor . I n February2000, G i l ber tappr oache d K ruegert o s ugges tthe B ank pur chas e C ar t el ’ s agentdat abas e. K ruegeragr eed s he s houl d pur s ue the i dea buti ns truct ed hernott o t el l C oat s t hat O cw en A dvi s or s w as bui l di ng i t s ow n r et ai l agentdat abas e. G i l bertcont act ed C oat s w ho expr es s ed i nt er es ti n the pr opos i t i on. A l though ther e w er e s ever al subsequ ent m eet i ng s bet w een C oats and K rueger, K rueger concluded the p urchase w oul d be t oo expens i ve. In M arc h 2 0 0 0 , K reu g er c all ed all the m an ag ers into h is office to info rm t hem he w as goi ng t o i ni t i at e a c ont es tforthe s t aff. H e pl anned t o i ns tructthe s t aff t o pul l t he B PO s pr ovi ded bynat i onal vendor s , i ncl udi ng C ar t el . T he s t aff w e re to c o p yth e n a m e s a n d tele p h o n e n u m b e rs o f th e a g e n ts, c re a te s p re a d sh e e ts and forw ar d t he s pr eads heet s t o G i l bertorM at thew s . G i l bertt es t i fi ed s he l odged a n o bjec tio n to K ru e g e r b e c a u se sh e k n e w m o st o f th e tar g e ted B P O s b e lo n g e d to C a rte l. S h e to ld K ru e g e r sh e d isa p p ro v e d o f c o p y in g th e a g e n ts’ n a m e s w h ile O c w e n A d v iso rs w e re c u rre n tlyin n e g o tiatio n s w ith C a rte l fo r th e p u rc h a se o f its dat abas e. D es pi t e G i l ber t ’ s obj ect i on, K ruegeri s s ued an e - m ai l t o every one “on the fl oor . ” ( R . V ol . 7 at2371. ) T he e- m ai l pr om i s ed a gi ftcert i fi cat e fora fr ee l unch a t a lo c a l re sta u ra n t fo r th e e m p lo y e e w ith th e lar g e st list. A f ter th e sp re a d sh e e ts w er e s entt o G i l ber tand M at t hew s , M at thew s el i m i nat ed dupl i cat e names and-14-

di vi ded the r emai nderamong t he mem ber s of G i l bert ’ s s t aff. T he s t aff then t el ephoned the age nt s t o i nqui r e w hetherthe age ntw as i nt er es t ed i n pr ovi di ng di r ectB PO s ervi ces forO cw en A dvi s or s . A ft err ece i vi ng and appr ovi ng the r es ul t i ng appl i cat i ons , t he age nt s w er e s enta vendori dent i fi cat i on and i nform at i on r egar di ng fee s . A copyof thi s i nform at i on w as s entt o O cw en T echnol ogy . T he vendor s w er e al s o i nform ed thatthe pr efe rr ed mode of comm uni cat i on w oul d be R E A L T r ans and theys houl d expec ta r epr es ent at i ve f ro m O c w e n T e c h n o lo g yto c o n tac t th e m . G ilb e rt tes tifie d th e sta ff c o n tin u e d to pul l names off

C art el ’ s B PO s unt i l herempl oym entw i th O cw en A dvi s or s w as t erm i nat ed i n N ovember2000. G ilb e rt c re a ted re p o rts o f th e n u m b e r o f

re tail v e n d o rs a d d e d e a c h m o n th to th e O rd e r T ra c k in g sy ste m to k e e p K re u g e r a p p rise d o f h e r p ro g re ss . T h e re p o rts i ndi cat ed O cw en A dvi s or s added f i fty - fourvendor s i n J anuary2000 and appr oxi m at el yone hundr ed perm onth thr ough J une 2000. N onethel es s , O cw en A dvi s or s ’ dat abas e pr ovi ded i n pr e- tr i al di s coveryr efl ect ed onl yzer o t o four t een vendor s w er e adde d eac h of thos e mont hs . G i l bertt es t i fi ed the dat a coul d be s kew ed ei t herbeca us e of the B ank’ s comm on pr act i ce t o “bac k fi l l ” the names of t he new vendor s t o fi l l i n num ber s form er l yas s i gned t o vendor s w i th w hi ch they no l ongerdi d bus i nes s orbeca us e the i nform at i on had bee n i m pr oper l ypul l edT hese st at em ents w ere vi go rousl yden i ed b yt he O cw en en t i t i es’ 8 w itn e ss e s a t trial. -15- f ro m th e d a ta b a s e . (R . V o l. 7 a t 2 3 5 9 .) 8 I n 2 00 0, t w o c i r c ums t a nc e s be ga n t o a ffe c tCar t e l ’ s a bi l i tyt o r e turn BPO o rd e rs in a tim e ly fa s h io n . T h e fir s t in v o lv e d th e u s e o f th e R E A L T ra n s s y s te m . U n fo rtu n a tely , the sy n c h ro n iza tio n b e tw e e n C a rte l’s s y ste m a n d R E A L T ra n s d id notdevel op s m oot hl y . O r der s “w er e gett i ng l os ti n cyber s pace . ” ( R . V ol . 7 at 2363. ) I n addi t i on, C art el w as notperm i t t ed t o tur n dow n anyor deri s s ued th ro u g h R E A L T ra n s. S e c o n d , O c w e n A d v iso rs w a s in th e p ro c e ss o f b u ild in g its o w n re tail v e n d o r n e tw o rk . B e c a u se it w a s e a sie r to fin d a g e n ts in h ig h ly popul at ed ar eas , O cw en fi l l ed thos e or der s w i th i t s ow n agent s on R E A L T r ans w hi l e i ts entC art el few er , m or e di ffi cul tor der s . G i l bertdi s cus s ed thes e i s s ues w i t h C oats du ri ng w eeklyt el eph on e m eet i ng s. D ur i ng t he s um m erof 2000, C oat s l earned O cw en A dvi s or s m ayhave t aken a g e n ts’ n a m e s f

ro m C a rte l’s B P O s. H e re c e iv e d a c a ll fro m se v e ra l o f h is a g e n ts s t at i ng an O cw en A dvi s or s ’ r epr es ent at i ve had t el ephoned a nd as ked i f they w o u ld w o rk d ire c tlyfo r O c w e n . T h e ya sk e d if C o a ts h a d g iv e n O c w e n th e ir nam es. Indeed , C oats go ta cal l personall yfrom an O cw en A dv i sors ’ r e p r e s e n t a t i v e wh o a s k e d i f Co a t s wa n t e d t o b e o n Oc we n Ad v i s o r s ’ d a t a b a s e . He rep li ed h e w as a lr ea d yli sted as a n ati o n al pro v ider. C o ats th en co n tacted G il b ert t o i nform herhe bel i eved O cw en w as bui l di ng a r et ai l vendornetw or k and w asW i l l i am E rbeyexpl ai ned the di ffe r ence betw een the B ank’ s and O cw en 9 T echn ology ’s B P O bu si ness. H e i den t i fi ed tw o k i nd s of B P O s. O ne type is a “r evi ew ” B PO w her e appr ai s er s on s t aff eval uat e the qual i tyof the B PO . T he B ank has been i n t he bus i nes s of s el l i ng r evi ew B PO s t o W al l St r eetfi r m s s i nce m i d- 2000. A s of 2004, t he B ank w oul d payan age ntorbr okerappr oxi m at el y$45 to $ 5 0 to d o the B P O an d sell the re v iew ed B P O fo r ap p rox im ately$ 1 5 0 . In contr as t , t he othert ype of BP O i s “unr evi ew ed. ” The unr evi ew ed B PO i s t he equi val entof the C art el pr oductand s el l s forappr oxi m at el y$70. A tt r i al , E rbey w as as ked i f “a ny[O cw en Technol ogy ] ent i ty[had] been i n the bus i nes s of doi ng B P O s .” E rb e yre s p o n d e d “ y e s .” (R . V o l. 9 a t 3 2 0 3 .) -16- t ar get i ng hi s br oker s . G i l ber tr el ay ed thi s i nform at i on t o K ruegerw ho i ns truct ed h e r: “ D o n ’t tell th e m w h a t w e ’re d o in g .” (R . V o l. 7 a t 2 3 8 0 .) G ilb e rt, B a b b itt and K ruegeral l deni ed theyw er e t aki ng names off the br okerdat abas e w hen asked d i rect l ybyC oats . I n A ugus t2000, an O cw en Technol ogyempl oy ee s entC oat s a copyof the

“ c o n tes t” e -m a il i ss u e d b yK ru e g e r in M a rc h 2 0 0 0 . C o a ts te lep h o n e d G ilb e rt to pr ot es tand di r ect ed heratt ent i on t o the conf i dent i al i tyagr eementw i th O cw en T echnol ogy . A tt hatt i m e, G i l ber ti nform ed C oat s thatO cw en A dvi s or s w as bui l di ng i t s ow n dat abas e. C oat s al s o m etw i th R i t a H ol l and, an O cw en 9 T echnol ogys upervi s or , t o pr ot es tt he di r ectus e of Car t el ’ s agent s . I n addi t i on, h e sp o k e w ith K ru e g e r a n d B a b b itt . In S e p tem b e r 2 0 0 0 , K ru e g e r c o n tac ted C o a ts to se e if h e w o u ld b e in ter e ste d in se lli n g C a rte l. N e g o tiatio n s c o n tin u e d in to D ece m ber2000, atw hi ch t i m e O cw en A dvi s or s deci ded nott o pur chas e the bus i nes s . A tt hatpoi nt , C oat s s enta l et t ert o eac h E rbeybr otherand K rueger s t at i ng he bel i eved the O cw en ent i t i es had s t ol en C ar t el ’ s agentnames i n br eac hI n 1999, t he B ank or der ed an a ver age of 3, 766 B PO s fr om C ar t el per 10 quar t er . I n t he fi r s tquar t erof 2000, t he B ank or der ed 3, 365 B PO s . D ur i ng the r emai nderof 2000, t he B ank or der ed an a ver age of 1, 732 B PO s fr om C ar t el per quar t er . I n 2001, t he B ank or der ed 786 B PO s fr om C ar t el i n the fi r s tquart erand six in the sec o n d q u arter. -17- of the conf

i dent i al i t yagr eement . B ythe end of the s econd qua r t erof 2001, O c w e n A d v iso rs c o m p lete lyc e a se d o rd e rin g B P O s f ro m C a rte l. 10 C ar t el fi l ed s ui tagai ns tt he O cw en ent i t i es on A ugus t21, 2001. A ft er e x ten siv e p re -tria l d isc o v e rya n d n u m e ro u s p re -tria l m o tio n s, th e c a se w e n t to t r i al . A tt r i al , C art el i nt r oduced a compar i s on of O cw en A dvi s or s ’ dat abas e, p ro v id e d in d isc o v e ry , w ith its o w n . O c w e n ’s d a tab a se c o n tain e d a p p ro x im a tely 7 , 0 0 0 n a me s o f

b r o k e r s e n t e r e d a f

t e rM a r c h 2 0 0 0 , t h e d a t e o f t h e c o n t e s t . Of th o s e 7 ,0 0 0 , a p p ro x im a te ly 3 ,9 0 0 n a m e s w e re m a rk e d “ p re v e n t u s e .” (R . V o l. 8 at2695. ) O f the r emai ni ng 3, 100 names de s i gnat ed “us e, ” appr oxi m at el y1, 320 w e re id e n tic a l to th e C a rt e l d a ta b a s e . ( Id . ) C ar t el al s o i ntr oduced the t es t i m ony of C hr i s t i na Teahan a s C art el ’ s B PO expertand J ames TenB r ook as i t s damages ex p ert. B efo re a n d d u ri n g tr ial , the O cw en en ti ti es o bjected to the ex p ert t es t i m ony . A s t o T eaha n, O cw en cl ai m ed the j uryw as notal l ow ed t o hearher t es t i m onys i nce the magi s t r at e had rul ed s he w as unqual i fi ed t o offe rs uch opi ni ons . O cw en obj ect ed t o T enB r ook’ s t es t i m onyal l egi ng i tw as unr el i abl e and b a s e d s o le ly o n s p e c u la tio n . T h e d is tr ic t c o u rt o v e rr u le d th e s e o bje c tio n s . A s not ed ea r l i er , t he j ur yr etur ned a ve r di ctforC ar t el agai ns tt he B ank and O cw en T ec h n o log y . F o ll o w ing v igo rou s p o st- tr ial m o ti o n s, the d istri ct co u rtU ndert he A ct , “‘ t r ade s ecr et ’ m eans t he w hol e oranypor t i on orphas e of 11 anys ci ent i fi c ort echni cal i nform at i on, des i gn, pr oces s , pr ocedur e, form ul a, i m provem ent, con fi den t i al bu si ness or fi nan ci al i nfo rm at i on , l i st i ng of n am es, addr es s es , ort el ephone number s , orotheri nform at i on r el at i ng t o anybus i nes s or pr ofes s i on w hi ch i s s ecr etand of va l ue. T o be a ‘ tr ade s ecr et ’ t he ow nert her eof m u st h a v e tak e n m e a su re s to p re v e n t th e se c re t f ro m b e c o m in g a v a ilab le to per s ons ot hert han thos e s el ect ed byt he ow nert o have a cce s s t her et o forl i m i t ed purpos es . ” C olo. R ev. S t at . § 7 -74-102 (2) defines m i sapprop ri at i on i n rel evan tpartas: ( b) D i s cl os ur e orus e of a tr ade s ecr etof anotherw i thoutexpr es s or i m pl i ed cons entbya per s on w ho: -18- ul t i m at el ydet erm i ned i thad i ncorr ect l yal l ow ed TenB r ook’ s t es t i m onyand re d u c e d C a rte l’s re c o v e ryb a se d o n th e B a n k ’s m isa p p ro p ria tio n o f tra d e se c re ts t o $1 i n actual and $1 i n puni t i ve damages . C ar t el ’ s t i m el yappea l and the O cw en ent i t i es ’ t i m el ycr os s - appea l fol l ow ed.

I I . C art el ’ s D i rec t A ppeal — N o. 04- 1502 A. D am ages T he C ol or ado U ni form T r ade Sec r et s A ctpr ovi des fordamages for m i s appr opr i at i on of a tr ade s ecr etas fol l ow s : “D amages [form i s appr opr i at i on of t r ade s ecr et s ] m ayi ncl ude both the ac tual l os s caus ed bym i s appr opr i at i on and the u nju st e n ric h m e n t ca u se d b ym isa p p ro p ria tio n th a t is n o t tak e n in to a c c o u n t in co m p u ti n g ac tual loss.” C o l. R ev . S tat . § 7 -74 -10 4 (a). “T h e C o lorad o U n ifo rm T r ade Sec r et s A ctperm i t s pl ai nt i ff t o r ecove rforboth compensa t or ydamages and t he defendant ’ s pr ofi t s fr om t he mi s appr opr i at i on. ” Sonoco Products C o. v. Johns on , 2 3 P . 3 d 1 2 8 7 , 1 2 8 9 (C o lo. A p p . 2 0 0 1 ). 11( I ) U s ed i m pr operm eans t o acqui r e know l edge of the tr ade s ecr et ; or (II) A t th e tim e o f

d isc lo su re o r u se , k n e w o r h a d re a so n to kn ow t hat s uch person’s know l edg e of the t rade secr etw as: ( A ) D er i ved fr om orthr ough a per s on w ho had ut i l i zed im p ro p e r m e a n s to a c q u ire it; (B ) A c q u ire d u n d e r c irc u m sta n c e s g iv in g rise to a d u ty t o m ai nt ai n i t s s ecr ecyorl i m i ti t s us e; or (C ) D e riv e d f

ro m o r th ro u g h a p e rso n w h o o w e d a d u ty t o t he per s on s eeki ng r el i ef t o m ai nt ai n i t s s ecr ecyor lim it its u s e . . . .

-19- C art el at t em pted t o sho w dam ages i n the form of the B ank ’s unj ust e n ric h m e n t as a re su lt o f its m isa p p ro p ria tio n . O n a p p e a l, C a rte l alle g e s it s how ed the B ank bene fi t t ed fr om the mi s appr opr i at i on i n tw o w ay s . Fi r s t , by m i s appr opr i at i ng C art el ’ s t r ade s ecr et s , the B ank w as abl e t o s i de- s t ep the l engthy a n d tim e c o n su m in g p ro c e ss o f lo c a tin g b ro k e rs w h o w o u ld b e w ill in g a n d a b le to pr ovi de B PO s , t her ebygi vi ng t he B ank a he ad s t ar ti n compet i ng i n the nat i onal B P O ven do r m arket . S econ d, C art el al l eges t he B ank w as abl e t o d ecrease i t s use of n at i on al B P O ven do rs and i ncrease i t s use of indi vidual brokers. U n d er C o lorad o law , “d am ag es b ase d o n m ere sp ec u lat ion an d co njecture ar e notal l ow ed. . . . D amages ar e notr ecove r abl e forl os s es bey ond an amount t hata pl ai nt i ff c an es t abl i s h w i t h r eas onabl e ce r t ai ntybya pr eponder ance of the evi dence . T hus , t he pl ai nt i ff musts ubm i ts ubs t ant i al evi dence , w hi ch t ogether w i t h r eas onabl e i nfer ence s t o be dr aw n ther efr om pr ovi des a r eas onabl e bas i s for comput at i on of damages . ” Sonoco Pr od. C o. , 23 P. 3d at1289 ( quot at i ons-20-

o m itt e d ). A p a rty“ m u st e sta b lish w ith re a so n a b le, b u t n o t n e c e ss a rily m a th e m a tic a l, c e rt a in ty b o th th e fa c t o f th e inju ry a n d th e a m o u n t o f th e lo s s . . . . T he damages aw ar ded mustbe tr ace abl e t o and [mustbe] the di r ectr es ul tof the w r ong t o be r edr es s ed. ” L if e C a re C trs. o

f A m . , Inc . v. E a st Ha mp d en A sso c’s Lt d. P ’ s hip. , 9 0 3 P . 2 d 1 1 8 0 , 1 1 8 6 (C o lo. A p p . 1 9 9 5 ) (qu o tat ion o m itted). In ot herw or ds , C art el m us ts how t he B ank bene fi t t ed fr om the mi s appr opr i at i on of C a rte l’s in fo rm a tio n a n d a lso e sta b lish th e a m o u n t o f th e b e n e fit t o a re a so n a b le cert ai nty . T he d i stri ctcou rtdeterm i ned C art el fai l ed to prove b oth fact ors. 1. B enef

i t t i ng fr om M i s appr opr i at i on In it s p o st- tr ial d iscu ssion reg ard ing the a d m issi b il ityo f C artel’ s ex p ert w itn e s s o n d a m a g e s , th e d is tr ic t c o u rt id e n tifie d a “ fa ta l fla w ” in C a rt e l’ s c a s e . ( R . V ol . 3 at1080. ) T he tr i al courtobs erved: C ar t el s i m pl yfai l ed t o s how thatthe B ank us ed anyi dent i fy i ng b ro k e r i n fo rm a tio n , i . e. a br oker ’ s name and t el ephone number cont ai ned i n anys i ngl e B PO s uppl i ed byC ar t el , by , forexampl e, bypas s i ng C art el bycont act i ng thatbr okerand obt ai ni ng a B PO fr om hi m orherand s el l i ng i tt o a thi r d par ty , ther ebybenef i t t i ng the B ank t hr ough t hatus e of t hatpar t i cul art rade s ecr et . N eith er C artel’ s expertnoranyot herw i t nes s m ade a connec t i on betw een a ny in fo rm a tio n g lea n e d f ro m a C a rte l B P O to a su b se q u e n t co n tac t w ith a br okerbyt he B ank ora s ubs equentpur chas e of a B PO fr om any s u c h b ro k e r b yth e B a n k . ( Id . ) T he di s t r i ctcour tcont i nued: [ I]t d o e s n o t fo llo w (a s a m a tter o f law ) th a t C a rte l ca n c laim g e n e r a l l y any p e rc e n tag e o f th e B a n k ’s B P O b u sin e ss o r p ro fits unt ether ed t o t he mi s us e of i dent i fi abl e br okeri nform at i on pr ovi ded to d e fe n d a n ts b yC a rte l. W h ile th e n u m b e r o f b ro k e rs a p p e a rin g in bot h C art el ’ s and the B ank’ s dat abas es appea r s t o be as m anyas-21-

1356 ( and C art el ’ s couns el i nt i m at ed ther e w as m or e) , s uch over l ap w o u ld h a v e b e e n th e sta rtin g p o in t fo r d isc e rn in g a n yleg iti m a te b a sis fo r d a m a g e s. T h e c o n ten tio n th a t th e tak in g o f th o se tra d e se c re ts w a s s omeh ow i ns t rumen t a l i n the fo r mat i on of the Bank ’ s ne w BPO dat abas e cons i s t i ng of 62, 000 names j us t i fy i ng damages t o C ar t el of al l benef

i t s der i ved fr om t hatdat abas e l acks a pr opert i e betw een t r a d e s e c r e t s mi s a p p r o p r i a t e d a n d b e n e fi t s d e r i v e d th e r e f r o m. ( Id . a t 1 0 8 0 -8 1 .) I n i t s pos t - t r i al br i ef r es pondi ng t o the di s tr i ctcourt ’ s di s cus s i on, C ar t el poi nt ed outt hatA nn G i l ber ts peci fi cal l yt es t i fi ed names w er e t aken f r om the C ar t el dat abas e and pl ace d i nt o t he O cw en A dvi s or s ’ dat abas e. C oat s t es t i fi ed he w as per s onal l ycont act ed and s ever al of the br oker s appea r i ng on both dat abas es n o l o n g e rp e r fo r m e d w o r k t h r o u g h C a r t e l fo rth e B a n k a f t e rth e c o n t e s t . F i n a l l y, C art el add res sed t he d i stri ctcou rt ’s m i sapprehen si on that the B ank ’s database cont ai ned 62, 000 names, corr ect l yci t i ng the amountat7, 000. I tas s er t ed the o v e rla p b e tw e e n th e B a n k ’s “ u se ” b ro k e rs, (3 ,0 0 0 n a m e s), a n d th o se id e n tica l to C ar t el ’ s l i s t , ( 1, 320 names) , w as a s i gni fi cantm i s appr opr i at i on. C ar t el ar gued this ev iden ce , tog ethe r, w as su ffici en t fo r th e juryto infer the B an k u sed C artel’ s in fo rm a tio n to p u rc h a se B P O s fo r a p ro fit. T h e d istric t co u rt rejec ted th e se a rg u m e n t in its F in a l O rd e r, sta tin g it d id

“ n o t d e e m a n ylay w itn e ss tes tim o n yo r e x h ib it t o b e sig n ifica n t o r c re d ib le en o u g h to justi fyfu rth er rec o n side rati o n as to that claim . ” (R . V o l. 6 at 19 9 3 . ) A l t hough t he court ’ s pos t - t r i al di s cus s i on anal y zed TenB r ook’ s t es t i m ony p u rsua n t t o g atek ee p er ro le un d er D a u b e rt v . M e rr e ll D o w P h a rm a c e u tica ls , 509-22-

U . S. 579 ( 1993) , t he di s t r i ctcourt ’ s ul t i m at e rul i ng cons t i tut es an entryof j udgm entas a mat t erof l aw t hatC ar t el fai l ed t o pr ovi de s uffi ci entevi dence the B an k rec eive d an yg ain f rom it s m isap p rop ri ati o n . T h u s, this asp ec t of the c o u rt ’s rul i ng addr es s ed the tra c e a b ili ty of damages ( caus at i on) , notthe w hetherthe a m o u n t w a s re a s o n a b ly es ta b lis h e d b ye x p e rt te s tim o n y . W e r evi ew de novo the tr i al court ’ s det erm i nat i on C ar t el ’ s m i s appr opr i at i on d a m a g e s fa ile d a s a m a tte r o f la w . See R eeves v. Sa nd erson P l um bing P rod’s. Inc. , 5 3 0 U .S . 1 3 3 , 1 5 0 (2 0 0 0 ). O u r re v iew e n c o m p a ss e s a ll o f th e e v id e n c e in t h e r e c o r d , d r a w i n g a l l r e a s o n a b l e i n fe r e n c e s i n fa v o ro f th e n o n m o v i n g p a r ty, w ith o u t m a k in g c re d ib ility d e te rm in a tio n s o r w e ig h in g th e e v id e n c e . Id .

“ [ A ]lth o u g h th e c o u rt sh o u ld re v iew th e re c o rd a s a w h o le, it m u st d isre g a rd a ll evi dence favor abl e t o t he movi ng partythatthe j ur yi s notr equi r ed t o bel i eve. ” Id . “In d iv e rsityc a se s, th e su b sta n tiv e law o f th e fo ru m sta te g o v e rn s th e a n a ly sis of the under l y i ng cl ai m s , i ncl udi ng s peci fi cat i on of the appl i cabl e s t andar ds of pr oof, butfede r al l aw contr ol s t he ul t i m at e, pr ocedur al ques t i on w hether j udgm entas a mat t erof l aw i s appr opr i at e. ” H ab erm an v. The H art f ord Ins. G r oup , 443 F. 3d 1257, 1264 ( 10th C i r . 2006) . A ccor di ngl y , the s ubs t ant i ve l aw o f C o lo ra d o a p p lies a n d g o v e rn s a s w e re v iew th e iss u e s ra ise d o n a p p e a l. C ar t el ’ s t heoryof damages , unj us tenr i chment , i s s peci fi cal l yauthor i zed by s t atut e. C ol o. R ev. St at . § 7- 74- 104. T he ques t i on befor e us i s w hetherC ar t el p re se n ted su fficie n t ev id e n c e fo r th e ju ryto c o n c lu d e th e B a n k w a s u nju stly-23-

e n ric h e d b yits m isa p p ro p ria tio n o f n a m e s f ro m C a rte l’s list. W e m u st k e e p in m i nd, “a di r ect ed ver di ct. . . s houl d be gr ant ed onl yi n the cl ear es tof ca s es . ” P ark R i se H om eow ners A ss’ n, Inc. v. R es. C on st r. , 155 P. 3d 427, 431 ( C ol o. A pp. 2 0 0 6 ), cer t . deni ed, . deni ed , 2 0 0 7 W L 9 3 0 9 1 (20 0 7 ). T he di s t r i ctcour tdet erm i ned C ar t el ’ s damages cl ai m fai l ed bec aus e i thad sh o w n n o d ire c t ev id e n c e o f th e B a n k ’s u se o f

a n yn a m e o n C a rte l’s list to p u rc h a s e a n d re s e ll a B P O . H o w e v e r, d ir e c t e v id e n c e is n o t n e c e s s a ry. A c o n c lu sio n c o n c e rn in g c a u sa tio n m a yre su lt fro m a fa c t-fin d e r’s “ re a so n a b le i nfer ence s fr om t he ci r cumst ant i al evi dence pr es ent ed. ” A ck erm a n v. H il ton ’s M ech. M en, Inc. , 914 P. 2d 524, 527 ( C ol o. A pp. 1996) . M or eover , contr aryt o t he t r i al cour t ’ s pos t - t r i al as s es s m entof the s i gni fi canc e and c r edi bi l i tyof the tr i al t es t i m onyand exhi bi t s , i ti s t he fa ct - fi nderw ho “mustr es ol ve conf l i ct s i n the evi dence and det erm i ne the cr edi bi l i tyof w i tnes s es and the pr obat i ve val ue of the evi dence . ” Id . I f the j ur y ’ s concl us i on i s s uppor t ed bypr obat i ve evi dence w hi ch w arr ant s a r eas onabl e bel i ef i n t he exi s t ence of fa ct s s uppor t i ng a part i cul ar fin d in g , th e ju ry’s c o n c lu s io n is b in d in g o n re v ie w . Id .; s ee al s o M oral es v. G ol s t on , 1 4 1 P .3 d 9 0 1 , 9 0 6 (C o lo . A p p . 2 0 0 5 ), cer t . deni ed , 2006 W L 2467851 (2 0 0 6 ). T he di s t r i ctcour terr ed i n concl udi ng the j urydi d nothave s uffi ci ent e v id e n c e to re a so n a b lyin fe r th e B a n k u se d th e n a m e s it to o k f ro m C a rte l to pur chas e B PO s and r es el l t hem for a pr ofi t . K r eugert es t i fi ed the B ank di d not-24-

have a di r ectr et ai l vendorl i s tas of LaborD ay1999. Sever al w i tnes s es t es t i fi ed it w o u ld ta k e a s ig n ific a n t a m o u n t o f tim e to c re a te a p ro fita b le n a tio n a l d a ta b a s e . G i l ber tt es t i fi ed O cw en A dvi s or s ’ r out i ne effor t s t o bui l d a dat abas e, i ncl udi ng us e of the i nt ernet , w er e t apped outbyJ anuary2000. She fur thert es t i fi ed the n am es tak en d u ri n g the M arc h co n testw ere fro m C artel B P O s an d w ere a p p o rtio n e d b e tw e e n sta ff m e m b e rs w h o th e n c a lled to a sk th e re a l es tate pr ofes s i onal t o w or k di r ect l yforO cw en A dvi s or s / the B ank. She s t at ed the companyr ece i ved appl i cat i ons , appr oved them and added the names t o the s y s t em. T hi s pr act i ce c ont i nued thr ough atl eas tN ovember2000. A tthe t i m e the B ank’ s vendorl i s tw as pr ovi ded t o C ar t el , overone thi r d of the B ank’ s “us e” re a lto rs m a tch e d C a rte l’s list. M o re o v e r, b ym id -2 0 0 0 th e B a n k ’s o rd e rs to nat i onal vendor s decr eas ed dr as t i cal l yand or der s t o C ar t el s t opped ent i r el yby 2001. T hus , t he j ur ycoul d r eas onabl yi nferthe B ank us ed the mi s appr opr i at ed n a m e s to c o n ta c t th e a g e n ts , p u rc h a s e B P O s d ir e c tly, a n d re s e ll th e B P O s . T he di s t r i ctcour tal s o det erm i ned C ar t el had nots how n the B ank w as

“ e n ri c h e d ” f

ro m th e s a le o f

B P O s , i . e. no pr ofi tw as s how n. H ow ever , K rueger t es t i fi ed he pr opos ed the cha nge i n the B ank’ s bus i nes s pl an t o m ake the di vi s i on a pr ofi tcent err athert han a c os tcent erand t o s ave money . H e t es t i fi ed the B ank w as or der i ng 50, 000 t o 60, 000 B PO s fr om the nat i onal vendor s pery earand the gr os s s avi ngs /pr ofi t s fr om t he di r ector derand r es al e of 60, 000 B PO s w oul d be appr oxi m at el y$2, 700, 000. 00 i f the B ank pai d $50. 00 di r ect l yt o the vendorandR ule 702 p rovi des: 12 I f s ci ent i fi c, t echni cal , orothers peci al i zed know l edge w i l l as s i s tt he tr ie r o f fa c t to u n d e rs ta n d th e e v id e n c e o r d e te rm in e a fa c t in is s u e , a w i t nes s qual i fi ed as an expe r tbyknow l edge, s ki l l , exper i ence , t r ai ni ng, oreduca t i on m ayt es t i fyt her et o i n the form of opi ni on or ot herw i s e, i f ( 1) t he t es t i m onyi s bas ed upon s uffi ci entfac t s ordat a, (2) t he tes t i m on yi s the p roduct of rel i able pr i ncipl es and m et ho ds, a n d (3 ) th e w itn e ss h a s a p p lied th e p rin c ip les a n d m e th o d s re liab lyto t he fa ct s of the ca s e. -25- r es ol d t he B PO for$95. 00 t o a thi r d par ty . W i l l i am E rbeys t at ed, as of 2004, the Bank w ou l d p a ya n a ge ntorbr ok e ra pp r ox i mat e l y$4 5 t o $ 50 t o p r ov i de a BPO and then s el l t he B PO fora pr ofi t . A r evi ew ed B PO w oul d be s ol d for appr oxi m at el y $150 and an unr evi ew ed B PO forappr oxi m at el y$70. I n anycas e, t he evi dence w as s uffi ci entfort he j uryt o r eas onabl yi nfert he B ank’ s us e of the names on Car t el ’ s l i s tgener at ed ei thera s avi ngs ora pr ofi tfort he B ank, est abli shi ng t he tr aceab i l i t yof the dam ages. 2 . T h e A m o u n t o f

th e B e n e fit W e n e x t co n sid e r w h e th e r th e re w a s s u fficie n t ev id e n c e fo r th e ju ryto det erm i ne the amountof damages . T he pr i m aryw i tnes s on thi s i s s ue w as T en B roo k , C artel’ s d am ag es e x p ert. T h u s, w e m u st fir st ad d ress the tr ial co u rt ’s deci s i on t hatT enB r ook’ s t es t i m onyw as unr el i abl e and ther efor e i nadmi s s i bl e. T he admi s s i on att r i al of expe r tt es t i m onyi s governed byR ul e 702 of the Feder al R ul es of Evi dence . C hampagne M etal s v. Ken- M ac M etal s , Inc. , 458 12 F .3 d 1 0 7 3 , 1 0 7 8 (1 0 th C ir. 2 0 0 6 ). T h e ru le r e q u ire s a d istric t co u rt to e x e rc ise its-26-

“gat ekee perfunct i on t o ‘ ens ur e thatanyand al l s ci ent i fi c t es t i m onyorevi dence admi t t ed i s notonl yr el evant , butr el i abl e. ’ ” Uni t ed Stat es v. G abal don, 389 F. 3d 1 0 9 0 , 1 0 9 8 (10 th C ir . 2 0 0 4 ) ( q u o tin g D a u b e rt, 509 U . S. at589) . T he di s tr i ct co u rtm u st “asse ss the rea so n ing an d m etho d o log yu n d erly ing the e x p ert’s opi ni on, and det erm i ne w hetheri ti s both s ci ent i fi cal l yval i d and appl i cabl e t o a par t i cul ars etof fa ct s . ” D o dg e v . C o tte rC o r p ., 3 2 8 F . 3 d 1 2 1 2 , 1 2 2 1 (10 th C ir . 2 0 0 3 ). W hethert he di s t r i ctcour tappl i ed the pr operl egal t es ti n admi t t i ng an e x p e rt ’s te s tim o n yis re v ie w e d d e n o v o . Id. a t 1 2 2 3 . H o w e v e r, th e u lti m a te d ec isi o n to ad m ito r ex clud e e x p ert t esti m o n yu n d er D au berti s r evi ew ed for a b u s e o f d is c re tio n . C h a mp a g n e M e ta ls , 4 5 8 F . 3 d at 10 7 9 . T h e d istri ct co u rt ’s deci s i on w i l l be overtur ned onl yi f “i ti s arbi tr ary , capr i ci ous , w hi m s i cal or m ani fes t l yunr eas onabl e orw hen w e ar e convi nced thatthe di s tr i ctcour tm ade a cl earerr orof j udgm entorexce eded the bounds of perm i s s i bl e choi ce i n the ci r cumst ance s . ” Id. (q u o ta tio n s o m itte d ). O u rr e v i e w o f

T e n B r o o k ’ s t e s t i m o n y i s c o n tr o l l e d b y D a u b e rt v . M e rr e ll D o w P h a rm a c e u tic a ls , In c ., 509 U . S. 579 ( 1993) and K um ho Ti r e C o. , Lt d. v. C a rm ich a e l, 5 2 6 U .S . 1 3 7 (1 9 9 9 ). A s m e n tio n e d a b o v e , D au bertr equi r es a tr i al j udge t o “ens ur e thatanyand al l s ci ent i fi c t es t i m onyorevi dence admi t t ed i s not o n ly re le v a n t, b u t r e lia b le .” 5 0 9 U .S . a t 5 8 9 . K um ho i ns truct s thatthe “gat ekee pi ng” r equi r ements etfor th i n D au bert“appl i es notonl yt o t es t i m ony-27-

bas ed on ‘ s ci ent i fi c’ know l edge, butal s o t o t es t i m onybas ed on ‘ t echni cal ’ and ‘oth er sp ec ial ized ’ kn o w ledg e.” 5 2 6 U . S . at 14 1 (cit ati o n o m itted). T h e c o u rt ’s purpos e “i s t o m ake c ert ai n t hatan expe r t , w hetherbas i ng t es t i m onyupon p r o fe s s i o n a l s tu d i e s o rp e r s o n a l e x p e r i e n c e , e mp l o y s i n th e c o u r tr o o m th e s a me l evel of i nt el l ectual r i gort hatchar act er i zes the pr act i ce of an expe r ti n the r el evantfi el d. ” Id. at 15 2 . A s an ex am p le of a u sef u l fac tor i n a situ ati o n w h ere t he w i t nes s ’ expert i s e i s bas ed pur el yon exper i ence , the Supr eme C our ts ugges t ed in q u irin g “ w h e th e r [ th e e x p e rt’s] p re p a ra tio n is o f a k in d th a t o th e rs in th e field w oul d r ecogni ze a s acc ept abl e. ” Id . at151. H er e, ther e i s no doubtthe di s tr i ct cour templ oy ed the corr ectl egal t es t . C ons equent l y , the onl yques t i on i s w hether th e trial c o u rt a b u se d its d isc re tio n in d isc a rd in g T e n B ro o k ’s te stim o n ya f ter trial. C ar t el pr ocee ded t o t r i al w i th T enB r ook’ s thi r d expertr eporti n w hi ch he bas ed hi s damages cal cul at i on on a theoryof unj us tenr i chment , al s o des cr i bed as d i s g o r g e me n to ri l l - g o t t e n g a i n s . He c a l c u l a t e d 9 4 % o f th e t o t a l n u mb e ro f

BP Os pur chas ed byt he B ank foreac h y earfr om 2001 t hr ough 2004 r efl ect ed the num berw hi ch w oul d have be en pur chas ed fr om al l nat i onal vendor s dur i ng that t i m e. T he four - y eart erm w as bas ed on C oat s ’ es t i m at e of the t i m e per i od nece s s aryfort he B ank t o devel op a us abl e nat i onal B PO dat abas e. T enB r ook th e n tes tifie d th a t 3 5 % o f th e to tal n a tio n a l v e n d o r B P O s w a s a ttribu tab le to C a rte l b u t fo r th e m isa p p ro p ria ted tra d e se c re ts. H o w e v e r, in re a c h in g h is es t i m at e of Car t el ’ s damages , T enB r ook fai l ed t o appl ythe 35% r educt i on-28-

at t r i but abl e t o C art el . I ns t ead, he mul t i pl i ed the t ot al num berof nat i onal vendor BP Os b y$ 9 5 . 0 0 — t h e a mo u n th e a s s u me d r e p r e s e n t e d th e v a l u e o f th e BP Os s ol d byt he B ank t o t hi r d par t yi ns t i tut i ons . Forhi s fi nal cal cul at i on, T enB r ook m ul t i pl i ed the r es ul t i ng amount bythe netpr ofi tm ar gi n of O cw en A dvi s or s as r epor t ed i n t he SE C fi l i ngs of O cw en Fi nanci al C orpor at i on. H e conc l uded the B ank bene fi t t ed by$7, 487, 000. I n i t s O r dergr ant i ng a new tr i al on damages , the di s tr i ctcour tr ecogni zed T enB r ook’ s fai l ur e t o appl yt he 35% r educt i on coul d be ea s i l yr eca l cul at ed, and t her efor e w as notfat al t o hi s t es t i m ony . H ow ever , the di s tr i ctcour tdet erm i ned T e n B ro o k ’s te stim o n yc o n tain e d a n u m b e r o f sp e c u lativ e p re m ise s a n d in v a lid as s um pt i ons . Pr i m ar i l y , i tfound fa ul tw i th ( a) T enB r ook’ s r el i ance on O cw en A dv i sors ’ netprofi tpercentage r epo rt ed fo r the tot al i tyof all O cw en A dv i sors ’ pr oductl i nes , as oppos ed t o t he netpr ofi t abi l i tyof the B PO l i ne al one, and ( b) Ten Br oo k’ s us e of

a fo ur - y e a rt e r m forr e pl i c a t i ng a vi a bl e na t i on a l BPO dat abas e. a . A p p o rtio n m e n t o f th e B a n k ’s P ro fit T he di s t r i ctcour tfound TenB r ook’ s r el i ance on O cw en A dvi s or s ’ gener al netpr ofi tper cent age, as oppos ed t o the pr ofi t abi l i tyof i t s B PO l i ne, w as i m proper. C art el con t end s the co nsoli dated net pr ofitpercentage w as the b est evi dence avai l abl e bec aus e O cw en A dvi s or s as s er t ed i tdi d notr et ai n r ecor ds a llo c a tin g th e p ro fits w ith in its p ro d u c t li n e s. T h e re fo re , ac c o rd in g to C a rte l, i tT h e d istric t co u rt f u rth e r d e ter m in e d C a rte l d id n o t es tab lish p ro fits 13 coul d be made fr om t he s al e of BP O s beca us e i tdi d notpr es entevi dence of the pr ofi t abi l i t yof othernat i onal vendor s and C ar t el , i t s el f, l os tm oneyfr om 1999 t hr ough 2002. H ow ever , t he damages t heoryw as nott he l os s t o C ar t el , butt he benef i tt o t he B ank. T he t es t i m onyof W i l l i am E rbeyes t abl i s hed the B ank bought B P O s fo r ap p rox im ately$ 5 0 . 0 0 an d so ld the m to third p arti es fo r an yw h ere betw een $90 a nd $125. ( R . V ol . 9 at3204- 05. ) H e al s o aff i r m ed the cr eat i on of a re tail v e n d o r d a tab a se w a s a k e yp a rt o f th e stra teg yto tu rn th e n e w d iv isio n in to a p ro fit c e n te r. (Id . at 3 2 0 1 -0 2 .) B a se d o n th is te stim o n y , the ju ryc o u ld reas on ablyi nfer t he B ank m ade a n etprofi ton t he sal e of B P O s t o thi rd part i es. -29- coul d r el yon t he cons ol i dat ed i nform at i on i n O cw en A dvi s or s ’ SE C fi l i ngs and t he bur den of pr oof apport i oni ng anypr ofi tnotattr i but abl e t o m i s appr opr i at i on w as O cw en’s. 13 I n Wynn O i l C ompany v. A m er i can Way Servi ce Corporat i on , the S ix th C ir cu ith eld th e d istri ct co u rtab u sed it s d iscreti o n w h en itref u sed to aw ard d am ag es in a trad em ark ac ti o n b ec au se th e p lai n ti ff co u ld n o t pro v e d efen d an t’ s pr ofi t s w i t h s uffi ci entcert ai nt y . 943 F. 2d 595, 607 ( 6th C i r . 1991) . T he pl ai nt i ff’ s effor t s t o as cert ai n t he defendant ’ s pr ofi t s w er e frus tr at ed byt he defe ndant ’ s i ns i s t ence t hati t s pr ofi t s fr om t he i nfr i ngementw er e comm i ngl ed w ith o th e r sa les a n d flo w -th ro u g h m o n e ya n d th e re fo re c o u ld n o t b e p ro v id e d in d isco v ery . B ase d o n “c o m m o n sen se” as w ell as statuto rylang u ag e, th e c o u rt hel d t he bur den of a ppor t i oni ng pr ofi t s s houl d be pl ace d on t he defendant s once th e p la in tiff

h a s p ro v e d g a in s to th e d e fe n d a n t f ro m th e in f

ri n g e m e n t. Id . a t 6 0 6 . T h e s a m e p re m is e h a s b e e n a p p lie d in c o p yri g h t a c tio n s . D ata G en. C or p. v. G r um m an Sys . Suppor tC or p. , 36 F. 3d 1147, 1173 ( 1s tC i r . 1994) . I n D a ta-30-

G eneral , t he Fi r s tC i r cui ts t at ed: In the co ntextof [ a cop yri gh t ] i nfri ng er’ s profi t s, the p l ai nti ff m ust m e e t o n lya m in im a l b u rd e n o f p ro o f in o rd e r to trig g e r a re b u ttab le p re su m p tio n th a t th e d e fe n d a n t’s re v e n u e s a re e n tirelya ttribu tab le to th e in f rin g e m e n t; th e b u rd e n th e n sh if ts to th e d e fe n d a n t to demonstr at e w hatpor t i on of i t s r evenue s r epr es entpr ofi t s , and w hat p o rt io n o f

its p ro fits a re n o t tr a c e a b le to th e in f ri n g e m e n t. 3 6 F .3 d a t 1 1 7 3 ; s ee al s o B uckl ew v. H aw ki ns , 3 2 9 F .3 d 9 2 3 , 9 3 2 (7 th C ir . 2 0 0 3 ). D ata G eneral a lso re c o g n ize d th is p rin c ip le h a s b e e n a p p lied in tra d e se c re ts act i on s: C iti n g 1 7 U .S .C . § 5 0 4 (b ) a s p e rsu a siv e a u th o rity , the M a ss a c h u se tts Supr eme Judi ci al C our thas s etfor th the fol l ow i ng rul e for appor t i onm enti n t r ade s ecr et s cas es : O nce a pl ai nt i ff de m ons tr at es t hata defendantm ade a pr ofi tfr om the s al e of pr oduct s pr oduced by im p ro p e r u se o f

a tra d e se c re t, th e b u rd e n sh if ts to th e d e fe n d a n t to demonstr at e thos e cos t s pr oper l yt o be offs etagai ns ti t s pr ofi tand t he por t i on of i t s pr ofi tatt r i but abl e t o fac t or s otherthan the tr ade s e c re t. USM C o r

p . v . M a rs o n F a s te n e rC o r p ., 392 M as s . 334, 467 N .E .2 d 1 2 7 1 , 1 2 7 6 (1 9 8 4 ). See al s o JetSpray C ool er, Inc. v. C rampt on, 377 M as s . 159, 385 N . E . 2d 1349, 1358- 59 n. 14 ( 1979) (c itin g , in te ra lia , S h e ld o n v . M e tr o -G o ldw y n P ic tu r e s C o r p ., 106 F .2 d 4 5 , 4 8 (2 d C ir .1 9 3 9 ), af f'd, 309 U . S. 390, 60 S. C t . 681, 84 L . E d. 8 2 5 (19 4 0 )). 3 6 F .3 d a t 1 1 7 4 , n .4 8 . C o m m e n t (f ) to th e R e sta tem e n t (T h ird ) o f U n fa ir C om pet i t i on § 45 ( 1995) s et s for th a s i m i l arbur den of pr oof: T he tr adi t i onal form of r es t i tut i onaryr el i ef i n an ac t i on forthe a p p r o p r i a t i o n o f

a t r a d e s e c r e ti s a n a c c o u n t i n g o f th e d e fe n d a n t 's pr ofi t s on s al es at t r i but abl e t o the us e of the tr ade s ecr et . T he gene r al rul es governi ng acc ount i ngs of pr ofi t s ar e appl i cabl e i n tr ade s ecr et act i ons . T he pl ai nt i ff i s ent i t l ed t o r ecove rthe defendant ’ s net p r o fi t s . T h e p l a i n t i ff

h a s th e b u r d e n o f

e s t a b l i s h i n g th e d e fe n d a n t 's s al es ; t he defendanthas t he bur den of e s t abl i s hi ng anypor t i on of the s al es notatt r i but abl e t o t he tr ade s ecr etand anyexpens es t o be d e d u c te d in d e te rm in in g n e t p ro fits .-31-

O c w e n A d v iso rs d o e s n o t re f u te th a t th e b u rd e n o f p ro o f m a ysh if

t. R a th e r, it ar gues t he bur den neve rs hi ft ed bec aus e C ar t el di d notpr es ents uffi ci entevi dence of the fa cta s al e w as m ade f r om the mi s appr opr i at ed i nform at i on. A s di s cus s ed above, t he j ur yw as gi ven s uffi ci entevi dence t o r eas onabl yi nfers uch pr ofi tand t he part i es do notdi s put e the fa ctthatthe O cw en A dvi s or s di vi s i on r eport ed net pr ofi t s . T her efor e, t he di s t r i ctcourterr ed i n pl aci ng the onus on C ar t el t o pr ovi de s peci fi c netpr ofi t s fr om t he s al e of BP O s . O cw en A dvi s or s i s i n the bes tpos i t i on to ra tio n a llya p p o rtio n its n e t p ro fits b e tw e e n its p ro d u c t stre a m s a n d th e c o sts a ss o c iate d w ith its B P O b u sin e ss . B e c a u se th e a b se n c e o f e v id e n c e is d ire c tly at t r i but abl e t o O cw en’ s fai l ur e t o pr ovi de the dat a, i tw as notunr eas onabl e for T e n B ro o k to a p p ly th e s a m e p ro fit r a tio fo r a ll p ro d u c t lin e s to o n e p ro d u c t. See E l ect r o- M i ni at ur e C or p. v. Wendon C o. , 771 F. 2d 23, 27 ( 2d C i r . 1985) ( “W her e, as her e, t her e i s a cl ears how i ng of i nj urythati s nots us cept i bl e t o exac t m e a su re m e n t b e c a u se o f th e d e fe n d a n t’s c o n d u c t, th e ju ryh a s s o m e latitu d e to ‘m ak e a just an d rea so n ab le esti m ate o f d am ag es b ase d o n relev an t data.’” ( quot i ng B ig e lo w v . R K O R a d io P ic tu r e s , In c ., 3 2 7 U .S . 2 5 1 , 2 6 4 (1 9 4 6 )) ).

b. T i m e N eede d t o C r eat e N at i onal D at abas e C ar t el al s o cl ai m s t he di s t r i ctcourtabus ed i t s di s cr et i on i n excl udi ng T e n B ro o k ’s te stim o n yb a se d o n h is a ss u m p tio n th a t itw o u ld tak e fo u r y e a rs to devel op a s uffi ci entdat abas e. W e di s agr ee. T e n B ro o k tes tifie d h e u se d th e fo u r-y e a r sp a n b e c a u se it w a s h is-32-

as s um pt i on “thati tw oul d be r oughl yfoury ear s t o come up w i th . . . a mi ni m al d atab ase to d o w h at [O cw en A d v isors] w an ted to d o . ” (R . V o l. 7 at 25 8 0 . ) T enB r ook s t at ed he ba s ed thi s as s um pt i on on hi s di s cus s i ons w i th C oat s , w hi ch w a s f u rth e r su b sta n tiate d b yG ilb e rt’s te stim o n yre g a rd in g in iti a l atte m p ts to b u ild O cw en A dv i sors ’ dat abase i n 1 99 9 thr ou gh 20 00 . T hereaft er, the fo l l ow i ng cross exami nat i on t ook pl ace : Q . T o putt hi s i n cont ext , . . . i s i tnottrue y ou di dn’ tconductany i ndepende nti nves t i gat i on t o t es tthe i nform at i on y ou r ece i ved f ro m M r. C o a ts th a t itw o u ld h a v e tak e n th e O c w e n d e fe n d a n ts foury ear s t o pr oduce [ a] m i ni m al br okerdat abas e. A. Ye s , t h a t ’ s t ru e . I d i d n o tc o n d u c ta n i n d e p e n d e n tr e v i e w. Q . So y ou di d t ake the i nform at i on he gave y ou atfac e val ue? A . Y e s. A g a in , w ith th e su b sta n tiatin g th in g s I ta lk e d a b o u t. Q . B utt he i nform at i on he gave y ou w as the onl ybas i s fory our in c lu sio n o f

a fo u r-y e a r p e rio d in y o u r c a lcu latio n s, rig h t? A . Y es. Q . Y o u h a v e n o in d e p e n d e n t k n o w led g e , co rre c t, as to h o w lo n g it t akes t o devel op a mi ni m al br okerdat abas e? A . N o . (R . V o l. 7 a t 2 5 8 3 .) T e n B ro o k f

u rth e r c o n c e d e d h e d id n o t k n o w h o w m a n yn a m e s it tak e s to cr eat e a mi ni m um dat abas e, nordi d he know how l ong i tt ook C ar t el t o devel op a m in im u m d a tab a se . H e d id n o t as k C o a ts, w h o h a d sta rte d d o in g b u sin e ss w ith O cw en s hor t l yaft eropeni ng C art el ’ s door s , how he managed t o do bus i nes s pr i or-33-

to th e fo u r ye a rs h e s u g g e s te d it w o u ld ta k e to b u ild a m in im a l b ro k e r l is t. C ons equent l y , T enB r ook had no bas i s forbel i evi ng a four - y earper i od w as an a p p ro p ri a te s p a n fo r h is d a m a g e c a lc u la tio n s . C ar t el ar gues i tpr es ent ed otherevi dence t o s uppor tthi s t i m e- fr ame vi a the t es t i m onyof thr ee na t i onal vendor s ( i ncl udi ng C ar t el ) s t at i ng the bui l di ng of a n e tw o rk “ tak e s y e a rs.” (R . V o l. 7 a t 2 2 6 2 -6 3 , 2 3 0 3 -0 6 , 2 3 0 8 .) C a rte l als o p o in ts t o G i l ber t ’ s t es t i m onyr egar di ng the di ffi cul tyO cw en A dvi s or s had i n i t s i ni t i al e ffo rts. W h ile th is te stim o n ym a ye sta b lish th e d ifficu ltyo f b u ild in g a n e tw o rk , it does notpr ovi de anyi nform at i on r egar di ng w hati s nece s s aryfora mi ni m al nat i onal dat abas e ort he t i m e i tw oul d have t aken a companyi n 1999 t o devel op s u c h a d a ta b a s e . C ar t el ’ s fi nal j us t i fi cat i on i s the fa ctT enB r ook’ s anal y s i s w as compi l ed on a y ear l ybas i s forfoury ear s and, ther efor e, the j uryw as fr ee t o det erm i ne w h e th e r o n e y e a r w a s a n a p p ro p ri a te tim e s p a n a n d a w a rd d a m a g e s a c c o rd in g ly. In ste a d , the ju ryd e ter m in e d , as a fa c tu a l m a tter, fo u r y e a rs w a s a n a p p ro p ria te ti m e f ram e fo r da m ag es. T h is argu m en t m isses the p o int. A ssu m ing the ju ry coul d par s e the damages fr om one t o foury ear s , i thad no i nform at i on w i th w hi ch i tc o u l d a s c e r t a i n wh e t h e ro n e o rfo u ry e a r s wa s a p p r o p r i a t e . Th e fo u r - y e a rt i me f ra m e w a s m e re lyC o a ts’ u n su b sta n tiate d su g g e stio n c o n tain e d a n d e n d o rse d in T e n B ro o k ’s c a lc u la tio n s . T h is is in s u ffic ie n t. S e e C h a mp a g n e M e ta ls , 458 F. 3d a t 1 0 8 0 , n .4 (“ [ I]t [ is] n o t ‘m a n ife stlyu n re a so n a b le’ fo r th e d istric t co u rt to-34-

concl ude that[the expe r t ’ s ] opi ni ons l acke d foundat i on beca us e theyw er e bas ed on ‘ t he s el f- s ervi ng s t at ement s of an i nt er es t ed party . ’ ”) . C ons equent l y , w e fi nd n o ab u se o f d iscreti o n in the d istri ct co u rt ’s de term ination that T en B roo k ’s t es t i m onyw as s pecul at i ve and i nadmi s s i bl e. R emovi ng T enB r ook’ s t es t i m ony lea v e s C a rte l w ith o u t ev id e n tiary su p p o rt fo r th e ju ry ’s a w a rd o f $ 4 ,9 0 0 ,0 0 0 in actual damages and i n tur n, el i m i nat es a bas i s forthe pr operamount of puni t i ve d a m a g e s . See C ol o. R ev. St at . A nn. § 7- 74- 104( 2) ( exempl arydamages aw ar ded o n lyaf ter actu al da m ag es a sce rt aine d ) 3. R emi t t i tur T hi s br i ngs us t o C art el ’ s cl ai m the di s tr i ctcour t ’ s deci s i on vaca t i ng the m i s appr opr i at i on damages cons t i tut ed a for ced r emi t t i turof damages i n vi ol at i on of the Seventh A m endmentr i ghtt o a j urytr i al . “A r emi t t i turi s a s ubs t i tut i on of t he court ’ s j udgm entfort hatof the j ur yr egar di ng the appr opr i at e aw ar d of damages . ” Jo h a n sen v. C o m b u sti o n E n g ’g , 1 7 0 F .3 d 1 3 2 0 , 1 3 3 1 (1 1 th C ir . 1 9 9 9 ). “I n t he us ual r emi t t i turs i tuat i on, a tr i al j udge r evi ew s the j ur y ’ s ver di cti n or der t o det erm i ne i f s ubs t ant i al evi dence attr i al s uppor t ed the amountaw ar ded. I f the c o u rt fin d s th a t in su fficie n t ev id e n c e e x ists, o r fin d s th e a m o u n t o f th e v e rd ict a p ro d u c t o f

ju ryp a ss io n o r p reju d ice , the c o u rt th e n m a yd e ter m in e a re a so n a b le amount as pl ai nt i ff’ s damages and al l ow pl ai nt i ff t o r emi tthe exc es s overs uch a m o u n t.” O ’ G i l vi e v. Int ’ l P l ayt ex, Inc. , 8 2 1 F . 2 d 1 4 3 8 , 1 4 4 8 (10 th C ir . 1 9 8 7 ). T he pl ai nt i ff, how ever , m us tbe gi ven the opt i on of a ne w tr i al i n l i eu of-35-

re m ittin g a p o rt io n o f th e ju ry’s a w a rd . Id . T he U ni t ed St at es C ons t i tut i on Seventh A m endmentpr ovi des , “the r i ghtof tr i al byj ur ys hal l be pr es erved, and no fac tt r i ed bya j ur y , s hal l be otherw i s e r eexa m i ned i n anyC our tof the U ni t ed St at es , t han ac cor di ng t o t he rul es of the comm on l aw . ” Thus, “[n] o j udgm entfor a re m itt itu r m a yb e e n ter e d w ith o u t th e p lain tiff ’s c o n se n t b e c a u se th e S e v e n th A m endmentpr ohi bi t s t he courtfr om s ubs t i tut i ng i t s j udgm entforthatof the j ur y ’ s r egar di ng anyi s s ue of fact . ” Sl oan v. Stat e Farm M ut . A ut o. Ins . C o. , 360 F. 3d 1220, 1225 ( 10t h C i r . 2004) . “[I ] f the pl ai nt i ff doe s notcons entt o the r emi t t i tur , t he di s t r i ctcour thas no al t ernat i ve butt o or dera new tr i al on damages . ” Id. C ar t el ar gues t he di s t r i ctcour terr ed i n or der i ng a new tr i al on damages but t hen su a sp o n te , w i t houtaffor di ng C ar t el a new tr i al , ent er i ng a j udgm enti n an a m o u n t le s s th a n th a t a w a rd e d b yth e ju ry b a s e d o n its w e ig h in g o f th e e v id e n c e . It c laim s th e c o u rt’s d e c isio n a m o u n ted to a re m itt itu r in v io latio n o f th e S e v e n th A m endment . T he B ank count er s thatbeca us e the r educt i on i n damages w as n e c e ss itate d b yleg a l er ro r (a fa ilu re to p ro v e c a u sa tio n ), th e re d u c tio n is n o t a r emi t t i turand a ne w t r i al i s notr equi r ed. I tr el i es on the rul i ngs of ours i s t er circu it s h o lding the S ev en th A m en d m en t i s n o t i m p li ca ted w h en a d am ag es a w ard is re d u c e d a s a m a tte r o f la w . S e e C o rp u s v . B e n n e tt , 4 3 0 F . 3 d 9 1 2 , 9 1 7 (8th C ir . 2005) ( al l ow i ng a r educt i on of nom i nal damages as a mat t erof l aw fr om $75, 000 to $ 1 w ith o u t a n e w trial); Tronz o v. B i om et , 2 3 6 F . 3 d 1 3 4 2 , 1 3 5 2 (F ed . C ir .-36-

2001) ( aff

i r m i ng r educt i on of compensa t or ydamages fr om $7, 134, 000 t o $520 b ec au se th ere w as n o lega ll yco m p eten t evid en ce su p p o rt ing a larg er a w ard ); Johans en, 17 0 F . 3d at13 30 -31 (al l ow i ng reduct i on of p un i t i ve d am ages as a m att er o f law ). T h e c r i t i c a l q u e s t i o n i s wh e th e rth e d i s tr i c tc o u r t“ s u b s t i tu t e [ d ] i t s o wn eval uat i on of the evi dence r egar di ng damages forthe j ur y ’ s fac tual fi ndi ngs ” or w hethert he r educt i on of damages w as bas ed on a “ det erm i nat i on thatthe l aw does notperm i tt he aw ar d. ” C or pus , 4 3 0 F . 3 d at 91 7 . H ere , the d istri ct co u rt ’s r educt i on of damages t o $1 i n nom i nal damages r es t ed pr i m ar i l yon i t s concl us i on t hatC ar t el had demonstr at ed mi s appr opr i at i on, buthad pr es ent ed no evi dence l i n k i n g t h e mi s a p p r o p r i a t i o n t o a b e n e fi tfo rth e Ba n k . As d i s c u s s e d a b o v e , we r eac h a di ffe r entconcl us i on. T he tr i al courtal s o det erm i ned, even i f C ar t el had sh o w n su ch a li n k , the testi m o n yo f C artel’ s ex p ert w as u n reli ab le an d there fo re i nadmi s s i bl e. W hi l e TenB r ook’ s r el i ance on the B ank’ s r eport ed gene r al net pr ofi tfori t s O cw en A dvi s or s di vi s i on w as r eas onabl e i n the abs ence of any appor t i onm entbyt he B ank, hi s r el i ance on the four - y eart i m e fr ame w as uns uppor t ed byanyr el i abl e s our ce, l eavi ng the j ur yt o s pecul at e on the ext entof damages . A s a r es ul t , w e ca nnotacc om m odat e C ar t el ’ s r eques tt o r ei ns t at e the j ury ’s aw ard of co m pen sat oryand pu nit i ve d am ages. N o n e th e les s, w e d e c lin e to fin d , as a m a tter o f law , tha t C a rte l w o u ld fa il t o p r e s e n ta n y e v i d e n c e o f d a m a g e s s h o u l d th i s c a s e b e r e tr i e d . W e a r e i n fo r m e d b y-37-

M or r i s on- Knuds en v. F i r em an’ s F und Ins urance Company , 1 7 5 F .3 d 1 2 2 1 (1 0 th C i r . 1999) . O n appea l fr om a j ur yver di cton a contr actcl ai m , w e conc l uded the pl ai nt i ff offer ed no admi s s i bl e evi dence “t o s uppor ti t s cl ai m of r oughl y$1. 35 m i l l i on forat t or ney ’ s fee s , ” and i ns uffi ci entevi dence “t o s uppor ti t s cl ai m s for ro u g h ly $ 3 m illio n in e q u ita b le a dju s tm e n ts to th e c o n tr a c t” o r “ th e ro u g h ly $ 3 .7 m i l l i on i n damages i tcl ai m ed on beha l f of i t s s ub[contr act or s ] . ” Id . a t1 2 4 2 . We recogn i zed thaton rem and w e cou l d d i rectan en tryof judg m ent as t o those d a m a g e s a n d fo re c lo s e th e p la in tiff f ro m a g a in c la im in g th o s e ite m s . Id . a t 1 2 5 9 . W e al s o conce ded a fai l ur e t o do s o w oul d al l ow pl ai nt i ff “ a s econd bi t e atthe appl e. ” Id . N o n e th e les s, e q u itab le c o n c e rn s c o m p e lled u s to a llo w th e se iss u e s to p ro c e e d o n re m a n d . O u r d e c isio n w a s b a se d o n th e tim in g o f th e n o tice to p lain tiff th a t it s p ro o f

w a s d e ficie n t. A tt r i al , t he defendantt w i ce moved forj udgm entas a mat t erof l aw ( J M O L ) pur s uantt o R ul e 50 of the Feder al R ul es of C i vi l Pr ocedur e. T he di s tr i ct cour tdeni ed the mot i ons w i t houtt aki ng the mat t erunderadvi s ement . W e have s t at ed:I n t hes e ci r cumst ance s , [pl ai nt i ff] had l i t t l e occ as i on t o tryt o r emedy t he defect s i n i t s pr oof. H ad the courtnotpr om pt l yor al l ydeni ed [ d e fe n d a n t’s m o tio n s], [ p lain tiff] c o u ld h a v e m o v e d fo r le a v e to r e o p e n i t s c a s e t o p r o v i d e a d d i t i o n a l e v i d e n c e . G i v i n g a p a r ty a chanc e t o corr ectdefe ct s i n pr oof i s a pr i m arypurpos e of the pr ever di ctm ot i on forJ M O L underR ul e 50( a) , and i n par t i cul arof t he r equi r ementt hatt he mot i on s peci fythe gr ounds forgr ant i ng ju d g m e n t. Id . at1259- 60 ( ci t i ng Fed. R . C i v. P. 50( a) ( 2) , advi s orycomm i t t ee’ s not e ( 1991-38-

a m e n d .) (sta tin g th e p u rp o se o f a re q u ire m e n t fo r p re v e rd ict m o tio n fo r JM O L “ is t o a s s u r e t h e r e s p o n d i n g p a r t y a n o p p o r tu n i ty t o c u r e a n y d e fi c i e n c y i n th a tp a r t y's pr oof thatm ayhave be en over l ooked. ”) ) . W e al s o not ed, “C our t s of appe al have oft en or der ed new t r i al s r athert han J M O L w hen a pl ai nt i ff c oul d l i kel yr emedy i t s defi ci entevi dence i n a new t r i al . ” Idat1260. I n t hi s cas e, as i n M or r i s on- Knuds en , the tr i al w as compl ex and the di s tr i ct cour tr ej ect ed the B ank’ s pr e- ver di ctm ot i ons forJ M O L . G i ven ourconcl us i ons that C artel pro v ed the B an k b en efitted f rom the m isap p rop ri ati o n an d T en B roo k ’s r el i ance on m ul t i - pr oductpr ofi t s w as notan unr eas onabl e as s um pt i on, the interests of

justi ce req u ir e C artel ha v e a ch an ce to co rrect i ts ev iden ti ary s h o rt c o m in g s b e fo re re d u c in g th e ju ry’s a w a rd to o n ly $ 1 n o m in a l d a m a g e s . A ccor di ngl y , w e r emand t hi s cas e fora new tr i al on m i s appr opr i at i on and puni t i ve damages . O urr emand does not , how ever , di s turb the di s cr et i on of the d istri ct co u rtto d eterm ine th e e x tent itw o u ld b e a p p rop ri ate to re -op en the re co rd o r t o c o n s id e r m o tio n s fo r s u m m a ry ju d g m e n t. S e e C lev e la n dv . P ip e r A irc ra ft C or p. , 9 8 5 F . 2 d 1 4 3 8 , 1 4 5 0 (10 th C ir . 1 9 9 3 ) (“T h e tri al co u rtis m u ch m o re fami l i arw i t h t he conduc tof the or i gi nal tr i al , the nee ds forj udi ci al m anage m ent a n d th e re q u ire m e n ts o f b a sic fa irn e ss to th e p a rties in a n e w trial. . . . [I ]f a p a rty m akes a t i m el ym ot i on t o pr oduce ne w and mat er i al evi dence w hi ch w as not ot herw i s e r eadi l yacc es s i bl e orknow n, the courts houl d, w i thi n the exe r ci s e of dis cret i on , con si der w hetherden i al of the new evidence w ou l d creat e a m anifest-39-

injusti ce . . . . [C ]om m o n sen se sh o u ld co n tr o l. ”).

I I . O cw en E nt i t i es ’ C ros s - A ppeal — N o. 04- 1517 O n cr os s - appea l , O cw en Technol ogym ai nt ai ns t he di s tr i ctcourterr ed w hen it fa iled to g ra n t JM O L o n C a rte l’s c laim th a t itf ra u d u len tlyin d u c e d C a rte l in to e n ter in g a c o n tra c t. F o r its p a rt, th e B a n k a ss e rts th e d istric t co u rt e rre d in aw ar di ng C art el at t or neyfee s and cos t s fori t s Pyrrhi c vi ct or yon the m isa p p ro p ria tio n c laim . T h e B a n k a lso a rg u e s th a t, i f w e re m a n d fo r a n e w trial, th e n e w tr ia l s h o u ld e n c o m p a s s b o th lia b ility a n d d a m a g e s . A. F raud i n t he Inducem ent O cw en Technol ogycl ai m s t he di s tr i ctcourterr ed w hen i tdeni ed i t s m ot i on fora J M O L on C art el ’ s fr aud i n the i nducementcl ai m . I tm ai nt ai ns C ar t el di d not pr ove thatO cw en Technol ogym i s appr opr i at ed C ar t el ’ s t r ade s ecr et s and t her efor e, t he cl ai m m us tfai l as a mat t erof l aw . I n C ol or ado, t he el ement s of a fr aud i n t he i nducementcl ai m ar e: (1) A fa lse rep rese n tat ion o f a m aterial ex ist ing fa ct, o r a repr esent at i on as t o a m at eri al exis t i ng factm ade w i th a reckles s di s r egar d of i t s trut h orfal s i ty ; ora conc eal m entof a mat er i al exi s t i ng fac t , t hati n equi t yand good cons ci ence s houl d be di s cl os ed; (2 ) k n o w led g e o n th e p a rt o f th e o n e m a k in g th e re p re se n tatio n th a t it i s fal s e; orut t eri ndi ffe r ence t o i t s t ruth orfal s i ty ; orknow l edge that he i s conce al i ng a mat er i al fac tt hati n equi tyand good cons ci ence he s houl d di s cl os e; ( 3) i gnor ance on the partof the one t o w hom r epr es ent at i ons ar e made orfr om w hom s uch fa cti s conce al ed, of the fal s i t yof the r epr es ent at i on orof the exi s t ence of the fa ctconce al ed; ( 4) t he r epr es ent at i on orconce al m enti s m ade orpr act i ced w i th the i nt ent i on t hati ts hal l be ac t ed upon; and ( 5) act i on on t he re p re s e n ta tio n o r c o n c e a lm e n t r e s u ltin g in d a m a g e .T he j ur yi ns t ruct i ons s t at ed thatt o fi nd O cw en Technol ogyl i abl e for 14 fraud in the induc em ent, t he juryhad t o find (1) O cw en T echn ologym ade a fal se r epr es ent at i on of a pa s torpr es entfac tt o i nduce Car t el t o ent eri nt o the M ar ch 19, 1999 contr actw i t h an i nt entnott o compl y ; ( 2) t he fa ctw as m at er i al ; ( 3) O cw en T ec h n o log ym ad e the rep rese n tat ion k n o w ing itto b e false o r w h il e a w are t hati tdi d notknow w hethert he s t at ementw as t rue orfal s e; ( 3) O cw en T e c h n o lo g ym a d e th e re p re se n tatio n w ith th e in ten t th a t C a rte l w o u ld re lyu p o n it; ( 4) C ar t el j us t i fi abl yr el i ed upon the r epr es ent at i on; and ( 5) t he r el i ance caus ed dam ages. -40- Tri m bl e v. C i ty & C ounty of D enve r , 6 9 7 P . 2 d 7 1 6 , 7 2 4 (C o lo. 19 8 5 ) (en b an c). O cw en Technol ogycl ai m s C ar t el ’ s pl eadi ngs r es t ed i t s fr aud i n the i nducementcl ai m on O cw en Technol ogy ’ s i nt ent i onal m i s appr opr i at i on of tr ade s ecr et s . B eca us e the j ur yfound O cw en Technol ogyhad notm i s appr opr i at ed C ar t el ’ s t r ade s ecr et s , and C art el m us tbe “he l d s tr i ct l yt o the pl eadi ngs , ” the fr aud i n t he i nducementcl ai m fai l s as a mat t erof l aw . ( C r os s - A ppel l ant ’ s B r . at 56. ) W e di s agr ee. T h e juryinstruction s o n the f rau d in the ind u ce m en t cl aim d id n o t r eq u ir e t he juryt o find O cw en T echn ologym i sapprop ri at ed C art el ’s trade secr et s as a p re re q u isite to fin d in g O c w e n T e c h n o lo g yf ra u d u len tlyin d u c e d C a rte l in to e n ter in g in to th e R E A L T ra n s a g re e m e n t. O c w e n T e c h n o lo g yd id n o t o bjec t to 14 t hi s i ns t ruct i on att r i al nordoes i tnow cl ai m t hatt he i ns truct i ons ar e an e rr oneous s t at ementof the l aw . T her efor e, t hi s i s t he l aw r el evantt o the fr aud cl ai m and the ju ry’s v e rd ic t is s u p p o rt e d b yth e e v id e n c e . O cw en Technol ogyal s o as s er t s t her e w as no evi dence of any m i s r epr es ent at i on byan O cw en Technol ogyempl oy ee. R ather , i tm ai nt ai ns-41-

C artel de m o n str ated o n lythat itreli ed o n the re p rese n tat ion s o f th e B an k ’s empl oy ees and, t her efor e, t hi s cl ai m m us tfai l as a mat t erof l aw . H ow ever , the i nst ruct i on s t o the j urycom bined w i th ev i den ce add uced attri al m akes t his a di s t i nct i on w i t houta di ffe r ence . A tt he cl os e of Car t el ’ s cas e, O cw en Technol ogym oved forJ M O L on the fr aud i n t he i nducementcl ai m . I n r es pons e, C ar t el ’ s att orneys t at ed: R emem ber , al s o, t hatt he evi dence i s . . . [O cw en A dvi s or s ] w as es t abl i s hed i n connec t i on w i th an E-Com m er ce pl at form know n as R E A L T r ans . A nd t hatt he E-Com m er ce pl at form w as bei ng s pons or ed, i f y ou w i l l , by[O cw en Technol ogy . ] T he evi dence i s that [O cw en A dvi s or s ] w as act i ng hand i n gl ove forthe bene fi tof, and fo r t h e p ro m o tio n o f, [ O c w e n T e c h n o lo g y ] a n d a s a n a g e n t. (R . V o l. 8 at 29 3 2 . ) T he juryw as i nst ruct ed as fo l l ow s: I ns t ruct i on N o. 12 B efor e one c orpor at i on m aybe hel d l i abl e forthe ac t s of ano t her corporat i on , there m ustbe such a cl ose re latio n sh ip b e tw e e n th e tw o c o m p a n ies th a t o n e is, in esse n ce , an instrum en tal ityo f th e o ther. (S u p p . V o l. 2 a t 6 9 3 .) In stru c tio n N o . 1 3 f u rth e r in stru c ted o n th e fa c to rs to det erm i ne w hethera s ubs i di aryof a c orpor at i on i s an i ns trum ent al i tyof the par ent corpor at i on. N o par t yr eques t ed an i ns truct i on on fac t or s r egar di ng i ns t rum ent al i t yi n t he cont extof s i s t ercorpor at i ons nordi d anypartyr eques tanI ti s w el l - s et t l ed thata thi r d partym ayacc eptt he r epr es ent at i ons of one 15 w h o a p p e a rs to b e a u th o ri z e d to a c t fo r a n o th e r. D ani els v. Woodm ont, Inc. , 274 F. 2d 132, 138 ( 10t h C i r . 1959) . A per s on need notbe an e m pl oy ee t o be an a gent a u th o ri z e d to a c t fo r a p ri n c ip a l. G r eas e Monkey Int ’ l . v. Mont oya , 904 P. 2d 468, 4 7 3 -7 4 (C o lo . 1 9 9 5 ) ( e n b a n c ). A n a g e n t m a yh a v e a c tu a l o r a p p a re n t a u th o ri ty to a c t fo r h is p ri n c ip a l. A m . Soc’

y of Mech. E ng. , Inc. (

A MSE ) v. H ydr ol eve lC or

p. , 456 U . S. 556, 566 ( 1982) . “A ppar entauthor i t yi s t he pow ert o affectt he l egal r el at i ons of another p erso n b ytr an sac ti o n s w ith thir d p erso n s, p rofesse d lyas a g en t fo r th e o ther, arisi n g fro m an d in ac co rda n ce w ith the o ther’s m an ifestati o n s to su ch thir d per s ons . ” Id. a t 5 6 6 n .5 (q u o tin g R e s ta te m e n t ( S e c o n d ) o f A g e n c y§ 8 (1 9 5 7 )) . T h e e x is te n c e o f

s u c h a u th o ri ty is a q u e s tio n o f fa c t. G r eas e Monkey , 904 P. 2d at 4 7 6 . "U nderan appa r entauthor i tyt heory , l i abi l i tyi s bas ed upon the fa ctt hatt he agent ' s pos i t i on fac i l i t at es t he cons um m at i on of the fr aud, i n thatfr om t he poi nt of vi ew of the thi r d per s on t he tr ans act i on s eems r egul aron i t s fac e and the age nt app ears t o b e act i ng i n the ordi narycou rs e of the bu si ness con fi ded t o h i m . " A MSE , 456 U . S. at566 ( quot at i on om i t t ed) . "[ A ] pl ai nt i ff mustes t abl i s h thatt he

. . . agentw as puti n a pos i t i on w hi ch ena bl ed the age ntt o comm i tfr aud, t he agen tact ed w i t hin hi s apparent autho ri ty , and t he ag ent com m i t t ed fraud . " G r eas e Monkey , 904 P. 2d at475. -42- i ns t ruct i on r egar di ng an agenc y theory . T he part i es do notcompl ai n aboutt he 15 i ns t ruct i ons on appea l and no one c l ai m s t he i ns truct i ons w er e i nadequa t e. G i ven t he ap parentw i l l i ng ness of the part i es t o st and on t he ev i den ce of t he en t i t i es’ i nterrel at i on shi ps i n the con t ext of t hese i nst ruct i on s, t he jury ’s decis i on st and s. T h e e v iden ce d em o n str ated Jo h n an d W il li am E rbe yw ere k n o w n to b e v ery act i ve i n bot h t he B ank’ s and O cw en Technol ogy ’ s bus i nes s ventur es . B oth w er e p re se n t w h e n K ru e g e r m a d e h is p itch to tra n sfo rm th e B P O d e p a rtm e n t an d it ap p ea rs bo th m en g av e K rue g er the b lessing to g o fo rw ard . T h e tw o en ti ti es w ere s ubs t ant i al l yi nt err el at ed i n pr om ot i ng the i m pl ement at i on of O cw en T echnol ogy ’ s R E A L T r ans . I ndeed, K ruegert es t i fi ed he be l i eved he w as an-43-

e m p lo y e e o f

O c w e n T e c h n o lo g yf ro m e a rl y2 0 0 0 th ro u g h J u ly o r A u g u s t o f 2 0 0 0 . K ruegeral s o t es t i fi ed the i nt egr at i on betw een O cw en Technol ogy ’ s R E A L T r ans and the B ank’ s O r derT r acki ng w as fundament al t o hi s pl an t o r eor gani ze the B ank’ s B PO oper at i ons . W hen O cw en Technol ogy ’ s R E A L T r ans w as i ntr oduced, i tw as K ruegerand B ennettw ho gather ed the nat i onal vendor s t o expl ai n the benef i t s of the B ank’ s new w ayof doi ng bus i nes s thr ough t echnol ogy . T aken t ogether , t hi s evi dence al l ow ed the j ur yt o r eas onabl yconcl ude thatthe B ank w as act i ng as an i ns t rum ent al i t yof O cw en Technol ogyand thatK ruegerw as a u th o riz e d to a c t fo r b o th e n tit ies , es p e c iallyre g a rd in g th e p u rp o se a n d b e n e fits of R E A L T r ans . C ons equent l y , t he di s tr i ctcour tdi d noterri n deny i ng O cw en Te c h n o l o g y ’ s mo t i o n fo rJ M OL o n th i s c l a i m. B. A t t orney Fees T he B ank ar gues t he di s t r i ctcour terr ed i n aw ar di ng C ar t el att or ney s fee s o n it s m isap p rop ri ati o n o f trad e se cre ts cl aim . W e re v iew the d istri ct co u rt ’s a w a rd o f

a tto rn e yfe e s fo r a n a b u s e o f d is c re tio n . H om ew ard B ound, Inc. v. H i ssom M em ’lC t r. , 963 F. 2d 1352, 1355 ( 10th C i r . 1992) . U nder l y i ng fac tual fin d in g s w ill o n ly b e s e t a s id e if c le a rl ye rr o n e o u s . Id. A d istri ct co u rt ’s s t atut or yi nt erpr et at i on orl egal anal y s i s w hi ch pr ovi des the bas i s forthe fe e a w a rd is re v ie w e d d e n o v o . Id. T he C olor ado U nifor m T rade Se cret s A ct(C U T S A ) pr ov i des: If a c laim o f

m isa p p ro p ria tio n is m a d e in b a d fa ith , a m o tio n toC U T SA pr ovi des puni t i ve damages “[i ] f the mi s appr opr i at i on i s att ended 16 byci r cumst ance s of fr aud, m al i ce, ora w i l l ful and w ant on di s r egar d of the injured p arty ’s ri g h t and fe eli n g s. ” C o lo. R ev . S tat . § 7 -74 -10 5 . T h e jury aw ar ded puni t i ve damages agai ns tO cw en B ank on the mi s appr opr i at i on of tr ade s ecr et s cl ai m . T he di s t r i ctcour tadopt ed thi s fi ndi ng forpurpos es of conc l udi ng t hatt he A ct ’ s att or ney s fee pr ovi s i on al l ow ed fe es i n thi s cas e. -44- t erm i nat e an i nj unct i on i s m ade orr es i s t ed i n bad fa i th, orw i l l ful and m a licio u s m isa p p ro p ria tio n e x ists, th e c o u rt m a ya w a rd re a so n a b le a t t o r n e y fe e s t o t h e p r e v a i l i n g p a r ty. C ol o. R ev. St at . § 7- 74- 105. H er e, the j ur yconcl uded the B ank ac t ed i n a m al i ci ous orw i l l ful and w ant on m anneri n connec t i on w i th i t s m i s appr opr i at i on of C ar t el ’ s t r ade s ecr et s . T her efor e, t he B ank conc edes t he tr i al courthad the 16 d is c re tio n u n d e r C U T S A to a w a rd re a s o n a b le a tto rn e yfe e s . T he di s t r i ctcour tr el i ed i n parton ourdeci s i on i n Nephew v. C i ty of A u r o ra , 8 3 0 F .2 d 1 5 4 7 (1 0 th C ir . 1 9 8 7 ) ( a tto rn e yfe e s u n d e r 4 2 U .S .C . § 1 9 8 8 ). W h ile Nephew w a s n o t e x p re s s ly o v e rr u le d , F ar rarv. H obby , 506 U . S. 103 ( 1992) ( at t or neyfee s under42 U . S. C . § 1988) and P hel ps v. H am i l t on , 120 F. 3d 1 1 2 6 (1 0 th C ir. 1 9 9 7 ) (s a m e ), h a v e c h a n g e d th e leg a l lan d sc a p e . W h e th e r th is is s i gni fi canti s debat abl e. I ti s l es s t han cl earw hetherC ol or ado embr ace s fede r al la w re g a rd in g a tto rn e yfe e s o th e r t h a n in c a s e s in v o lv in g fe d e ra lly d e ri v e d ri g h ts . D enn i s I. Sp encer C on t ract or, Inc. v. C i ty of Au rora , 884 P. 2d 326, 330 ( C ol o. 1994) ( concl udi ng t he C ol or ado C our tof A ppeal s err ed i n appl y i ng s t andar d for aw ar di ng fee s under42 U . S. C . § 1988 t o a non- ci vi l r i ght s act i on) . B eca us e the p a r t i e s c i t e o n l yfe d e r a l l a w o n t h e i s s u e we e x p r e s s n o o p i n i o n . S i n c e we-45-

rem an d this case to the d istri ct co u rtfo r a n ew tr ial o n d am ag es, th e d istri ct co u rt mu s tr e a s s e s s t h e q u e s t i o n o f a t t o rn e y s fe e s u n d e rCo l o r a d o l a w. C. New Tri al T h e B a n k m a in tain s a n e w trial, if o rd e re d , sh o u ld e n c o m p a ss b o th liab ili ty and damages beca us e the di s t r i ctcour terr oneous l yal l ow ed i m pr operopi ni on t es t i m onyw hi ch t ai nt ed the l i abi l i tyver di ct . “The di s tr i ctcourti s acc or ded br oad di s cr et i on i n i t s deci s i on w hethert o admi texpertt es t i m ony , w hi ch w e may r ever s e onl yforan abus e of s uch di s cr et i on. ” Q ui nt on v. F arm l and Indus . , Inc. , 928 F. 2d 335, 336 ( 10t h C i r . 1991) . T he B ank mai nt ai ns C hr i s t i na Teahan, C ar t el ’ s expertr egar di ng t he B PO i ndus try , w as al l ow ed t o t es t i fybey ond her expert i s e. T he B ank al s o cont ends the di s tr i ctcour ti m pr oper l yal l ow ed l ay w i t nes s es A nne G i l ber t , C hr i s t i ne C ar l s o and R i t a H ol l and, t o gi ve opi ni ons r e g a r d i n g c u s t o m a n d p r a c t i c e i n th e B P O i n d u s try. 1. E xp ertT est i m on yB ey on d E xp ert i se T e a h a n h a d w o rk e d a s a B P O p ro c e ss o r fo r th e B a n k . S h e lef t th e B a n k to w o rk fo r a n o th e r n a tio n a l p ro v id e r, N a tio n a l P ro p e rties A c q u isitio n C o n su ltan ts ( N PA C ) , m anagi ng t he B PO pr oces s . E ventual l y , T eaha n boughtthe bus i nes s and cont i nued t o be N PA C ’ s ow neratthe t i m e of he rt es t i m ony . Pr i ort o tr i al , the B an k an d O cw en T ec h n o log ych all en g ed T ea h an ’s ex p erti se u n d er D au bert . A hear i ng w as hel d befor e the magi s tr at e j udge. A tthe conc l us i on of the hea r i ng, t he magi s t r at e j udge rul ed Teahan c oul d t es t i fyas an expe r tr egar di ng the-46-

pr act i ces of B PO s el l er s , s uch as C ar t el , butw as notqual i fi ed t o offe ropi ni ons on t he pr act i ces of B PO pur chas er s , s uch as the B ank. N onethel es s , dur i ng tr i al T e a h a n w a s a s k e d a b o u t p ra c tic e s th a t o c c u rr e d w h ile s h e w a s w o rk in g a t O c w e n . Speci fi cal l y , s he w as as ked i f s he had “ an opi ni on as t o w hetheri tw as a p p ro p ria te [ fo r th e B a n k ] to c o n tac t th e a g e n ts w h o d id [ C a rte l’s] B P O s to p erfo rm [a ] ne w B P O . ” (R . V o l. 7 at 23 1 6 . ) S h e a n sw ere d itw as n o t th e B an k ’s

“ c u s to m a ry p ra c tic e ” to d o th a t. ( Id . ) T he B ank obj ect ed on the bas i s of the m agi s t r at e j udge’ s rul i ng, butt he di s tr i ctcourtoverrul ed the obj ect i on. T eaha n cont i nued t o expl ai n herexper i ence atthe B ank dur i ng the t i m e the companyw as cons i der i ng changi ng due t o t he i ncr eas i ng i nt er es ti n e- comm er ce. She r el at ed a conver s at i on w i t h B i l l K ruegerw her e s he s t at ed i tw oul d be i nappr opr i at e t o t ake t he names off BP O s beca us e a BP O “w as notboughtforthe age nt ’ s names. ” ( Id . at 23 1 8 . ) W e agr ee the form of the ques t i on as ki ng her“opi ni on” r egar di ng w hat i n fo r ma t i o n a BP O pur chas erb eli ev es h e is b u y ing w en t bey o n d T ea h an ’s expert i s e as a B PO pr ovi der . H ow ever , m uch of he rt es t i m onyr el at ed t o her personal experi ences at the B ank . T his t est i m on yw as properl yadm i t t ed as a b a c k g ro u n d fo r h e r a c tio n s, su c h a s h e r c o n v e rsa tio n w ith K ru e g e r. In a n ye v e n t, w e ar e convi nced the t es t i m onydi d nott ai ntthe l i abi l i tyver di ct . T he B ank had an oppor tuni t yt o ful l ycr os s - exami ne Teahan on the l i m i t s of herexpert i s e and th e re w a s p len tifu l tes tim o n yf ro m o th e r w itn e ss e s re g a rd in g th e c o n fid e n tiality-47-

exp ect at i on s of B P O pu rchaser s and p rovi ders. 2. L ayO pi ni on T es t i m ony T he B ank furt herar gues t he tr i al courtal l ow ed l ayw i tnes s es t o opi ne as ex p erts i n v iolati o n o f R u les 7 0 1 an d 7 0 2 o f th e F ed era l R u les o f E v iden ce . In es s ence , t he t es t i m onycame fr om the B ank’ s and O cw en Technol ogy ’ s empl oy ees w h o o bjected to co p y ing n am es f rom the n ati o n al pro v iders’ B P O s. G il b ert t es t i fi ed s he bel i eved the copy i ng of names w as i nappr opr i at e and t ol d K rueger h er o p inion . C h ri sti n e C arlt o n , a B P O p roc esso r fo r th e B an k w h o w en t t o w o rk forC ar t el aft erherempl oym entw as t erm i nat ed, t es t i fi ed s he bel i eved the confi dent i al i t yagr eements he s i gned w hen s he w as hi r ed atthe B ank r equi r ed her t o pr ot ectt he conf

i dent i al i t yof the br okernames on the B PO s . She t es t i fi ed s he

“ b l a c k e d o u t ” a g e n ti n fo r ma t i o n wh e n a BP O wa s s e n to u to f h e rd e p a r t me n t . ( R. V ol . 7 at2452. ) T he depos i t i on t es t i m onyof R i t a H ol l and, a form erO cw en T echnol ogyempl oy ee w ho had bee n i n char ge of ve ndorr el at i ons , w as r ead t o t he j ur y . T he B ank cl ai m s i tcont ai ned i nfl amm at oryand i m pr operl ayopi ni on, but a g a i n , t h e t e s t i mo n ys t a t e d Ho l l a n d ’ s b e l i e f th e i n fo r ma t i o n o n th e Ca r t e l BP Os w as confi dent i al and des cr i bed herconver s at i on w i th K ruegerr el at i ng thatbel i ef. C ont r aryt o t he B ank’ s as s ert i ons , thes e w i tnes s es di d nott es t i fyr egar di ng i nd ust ryst and ards. R ule 701 [ perm i t s a l ayw i tness] t o o ffer opini on t est i m on yon l yw hen i ti s: ( a) r at i onal l ybas ed on the per cept i on of the w i tnes s , ( b) hel pful t o a cl earunder s t andi ng of the w i tnes s ’ t es t i m onyorthe det erm i nat i on of-48-

a fa cti n i s s ue, and ( c) notbas ed on s ci ent i fi c, t echni cal , orother s peci al i zed know l edge w i thi n the s cope of R ul e 702. T hus , R ul e 701 perm i t s t he admi s s i on of l ayopi ni on t es t i m ony pr ovi ded thati tm eet s t w o cr i t er i a: a r at i onal bas i s i n per cept i on and hel pful nes s . “The per cept i on r equi r ements t ems fr om F. R . E . 602 w hi ch r equi r es a l ayw i t nes s t o have f i r s t - hand know l edge of the e v e n ts h e is te stif

y in g a b o u t so a s to p re se n t o n lyth e m o st a c c u ra te i nform at i on t o t he fi nderof fa ct . ” Unit ed S tates v. H off ner, 777 F. 2d 1 4 2 3 , 1 4 2 5 (1 0 th C ir . 1 9 8 5 ). G race Uni t ed M ethodi s tC hur ch v. C i ty of C heye nne , 451 F. 3d 643, 667 n. 12 ( 10t h C i r . 2006) . H er e, t he t es t i m onyof thes e w i tnes s es , l i ke Teahan’ s l ay tes tim o n y , w a s b a se d o n p e rso n a l ex p e rie n c e a n d p e rso n a l b e lief a s re late d to p e rso n a l ac tio n s. In C a rlto n ’s c a se , sh e b e liev e d th e e m p lo y e e c o n fid e n tiality agr eementr equi r ed hert o bl ack outvendornames be for e al l ow i ng a B PO t o go out s i de herdepart m ent . G i l ber t ’ s and H ol l and’ s bel i efs l ed di r ect l yt o di s cus s i ons w i t h K ruegerr egar di ng t he pr opr i etyof copy i ng vendornames fr om B PO s . T he t es t i m onyi nform s t he j ur yas t o K rueger ’ s know l edge thats ever al empl oy ees di s agr eed w i t h hi s pos i t i on t hatt he age nti nform at i on on a B PO w as not c o n fid e n tia l. See G os s et tv. O kl ahom a B d. of R egents f

orLangst on Uni v. , 245 F .3 d 1 1 7 2 , 1 1 7 9 (1 0 th C ir. 2 0 0 1 ) (“ C o u rts g e n e ra llyh o ld a d m iss ib le u n d e r R u le 701 evi dence i n t he form of l ayopi ni on t es t i m onyi n di s cr i m i nat i on cas es w hen gi ven bya per s on w hos e pos i t i on w i th the defendantent i typr ovi des the oppor tuni t yt o per s onal l yobs erve and e xper i ence the defendant ' s pol i ci es and p ra c tic e s .” ). In su m m a ry , to th e e x ten t T e a h a n ’s te stim o n yw a s o u tsid e h e r e x p e rtise , it s-49-

admi s s i on w as harm l es s and di d nott ai ntthe l i abi l i tyver di ct . T he r emai nderof th e tes tim o n yid e n tifie d b yth e B a n k w a s p ro p e rlya d m itt e d . W e se e n o re a so n to o r d e ra n e w t r i a l t o d e t e r m i n e l i a b i l i ty. I V . C oncl usi on W e REVERSE t he di s t r i ctcourt ’ s det erm i nat i on C ar t el fai l ed t o s how t he B a n k r e c e i v e d a b e n e fi tf r o m m i s a p p r o p r i a t i n g C a r t e l ’ s t r a d e s e c r e t s . We A F F I R M t h e d i s t r i c tc o u r t ’ s e x c l u s i o n o f T e n B r o o k ’ s e x p e r tt e s t i m o n y . We A F F I R M t he entr yof j udgm enti n favorof C ar t el and aga i ns tt he B ank on the i s s ue of l i abi l i t y . W e RE M AND fo r a n e w trial o n d a m a g e s c o n sis ten t w ith th is O r derand J udgm ent . A ppel l ees / C r os s - A ppel l ant s ’ M ot i on forSubst i tut i on of P artyi s DENI ED . A nyadj us t m enti n partys t atus i s bes tdet erm i ned byt he di s t r i ctcourton r emand. FOR TH E CO UR T: T err ence L . O ’ B r i en U ni t ed St at es C i r cui tJ udge