Opinion ID: 18054
Heading Depth: 2
Heading Rank: 4

Heading: DSC’s Arguments

Text: 9 We reject DSC’s argument that the denial of permanent injunctive relief was not necessary to the district court’s final judgment because the final judgment did not mention the denial of permanent injunctive relief. DSC itself has previously recognized that the final judgment did in fact deny it the permanent injunctive relief that it had requested despite the fact that the denial of injunctive relief did not appear in the final judgment. DSC characterized the judgment in its July 3, 1996 “Emergency Motion for Injunction Pending Appeal” as follows: “The judgment awards DSC’s damages only for the Defendants’ usurpation of a corporate opportunity that belonged to DSC. Although the judgment incorporates the April 10, 1996 [temporary] [i]njunction, it denies both permanent injunctive relief and adequate protection of DSC’s trade secrets pending appeal.” (Emphasis added). 22 DSC argues strenuously that collateral estoppel does not bar the Delaware Action. First, DSC argues that the facts are different in each case because, in Delaware, DSC has sued different defendants, three of whom did not exist during the First Federal Action, for a new and different tort that occurred after the First Federal Action concluded. Specifically, DSC argues that the First Federal Action was premised on Eames, Keeler, and Next Level I’s 1994 misappropriation of trade secrets, and included a claim for lost profits damages only, whereas the Delaware action is premised on the misappropriation of trade secrets that occurred after the conclusion of the First Federal Action when General Instrument II transferred DSC’s trade secrets to Next Level II in January 1998 and states an entirely different claim for relief, requesting only unjust enrichment and disgorgement damages. These distinctions, while perhaps meaningful for purposes of res judicata, are irrelevant to the application of collateral estoppel. It does not matter that the claims in each suit are different, or that the subject matter of each suit is different, so long as the issue litigated in each suit is identical. See Recoveredge, 44 F.3d at 1291 (“Collateral estoppel will apply in a second proceeding that involves separate claims if the claims involve the same issue . . . and the subject matter of the suits may be different as long as the requirements for collateral estoppel are met.”); RESTATEMENT (SECOND) OF JUDGMENTS § 27 (1982) 23 (“When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.”) (emphasis added). Nor is it significant that DSC is suing different defendants in Delaware than it sued in the First Federal Action because there need not be complete identity of parties for collateral estoppel to apply. See Meza, 908 F.2d at 1273; see also Royal Ins. Co. v. Quinn-L Capital Corp., 960 F.2d 1286, 1289, 1291, 1297 (5th Cir. 1992) (applying collateral estoppel principles in upholding injunction under relitigation exception even though parties enjoined in second action were not identical to those in first action that was deemed to have preclusive effect).10 10 In contrast to the factual circumstances of Royal Insurance, in the case at bar, the party against whom the district court has issued an injunction barring future prosecution of a state court action, DSC, is in fact a party both to the state court action to be enjoined and to the earlier action, making the application of collateral estoppel less troubling because DSC itself previously litigated the issue. Moreover, despite the fact that the Delaware defendants were not parties to the First Federal Action, DSC itself is seeking to use the district court’s judgment in the First Federal Action to collaterally estop the Delaware defendants from challenging the fact that the trade secrets at issue were stolen from DSC. In DSC’s complaint filed in Delaware court, DSC states: “The judgment in the Texas case operates as collateral estoppel (issue preclusion) not just as to the defendants in the Texas case, but also their privies and successors in interest, including the defendants in this action.” 24 Second, DSC argues that collateral estoppel is inapplicable because a different legal standard applies in Delaware: The Delaware Action will be governed by Delaware law, which includes the Uniform Trade Secrets Act, whereas Texas law, which does not include the Uniform Trade Secrets Act, governed the First Federal Action. However, that the Uniform Trade Secrets Act applies in Delaware will not change the standard necessary to determine the relevant issue in Delaware—whether DSC is entitled to relief for the January 1998 transfer of its trade secrets in addition to the damages it already recovered in the First Federal Action. Although, as DSC points out, Delaware law allows recovery for both actual loss and unjust enrichment, it only allows recovery for “unjust enrichment . . . that is not taken into account in computing actual loss.” DEL. CODE ANN. tit. 6, § 2003. Thus, like Texas law, Delaware law does not allow plaintiffs to recover twice for the same injury. If the Delaware Action is allowed to proceed, the Delaware court would have to decide whether the damages DSC requested there are duplicative of the damages DSC already recovered. This is exactly the legal standard that applied when the district court in the First Federal Action decided that DSC’s requested injunctive relief would constitute an improper double recovery. Thus, the legal standard used by the district court in the First Federal Action, in deciding that DSC was not entitled to permanent injunctive relief to prevent the transfer of DSC’s trade secrets to third parties, is the same 25 as the standard the Delaware court would have to use to determine whether DSC is entitled to damages for the January 1998 transfer of DSC’s trade secrets—namely, whether the earlier judgment provides a complete recovery or whether the January 1998 transfer would justify additional relief. This determination will hinge on an examination of the scope of the judgment, an issue already decided conclusively by the district court in the First Federal Action. DSC next argues that because, in the First Federal Action, the issue was decided in the context of a request for injunctive relief and because this court reviewed the district court’s denial of a permanent injunction only for abuse of discretion, the same legal standards will not apply in Delaware, where the trial court will have to make the determination of whether the unjust enrichment damages claimed by DSC are duplicative of the damages awarded in the First Federal Action without reference to the standards governing equitable relief or to an abuse of discretion standard. While it is true, as DSC states, that “[o]ne might . . . easily fail to obtain an injunction and yet be entitled later to recover damages at law,” Kelliher v. Stone & Webster, Inc., 75 F.2d 331, 333 (5th Cir. 1935), it was not the particular standard of review that prevented DSC from obtaining its injunction, either here or in the district court, but the district court’s conclusion, which we agreed was not in error, that the judgment already compensated DSC for the harm it sought 26 to enjoin. Although the district court decided the issue in the First Federal Action in the context of a request for a permanent injunction, the district court ultimately did not decide that DSC was not entitled to an injunction because injunctions are drastic remedies or because there were adequate legal remedies that DSC could seek elsewhere. Instead, as outlined above, the district court denied the injunction specifically because DSC had already obtained compensation for the harm DSC sought to enjoin. This court, in affirming the district court’s denial of injunctive relief, concluded that the district court had not made clearly erroneous factual findings or erroneous conclusions of law. The issue to be decided in Delaware will be the same, and thus it is irrelevant that the issue was decided in the First Federal Action in the context of a request for injunctive relief or that we reviewed the district court’s conclusions for abuse of discretion. Finally, to bolster its argument that collateral estoppel does not bar the Delaware Action, DSC points to several cases in which courts denied injunctive relief in one suit, but later allowed a second suit for monetary damages when the conduct that the plaintiffs sought to enjoin in the first suit actually transpired. See Lawlor v. National Screen Serv. Corp., 349 U.S. 322 (1955); Kelliher v. Stone & Webster, Inc., 75 F.2d 331 (5th Cir. 1935); June v. George C. Peterson Co., 155 F.2d 963 (7th Cir. 1946). These cases are all distinguishable because not one 27 involves a court’s denial of an injunction on the ground that the movant had already been compensated for the conduct the movant sought to enjoin. These cases stand for the unremarkable proposition that the failure to get an injunction in one suit does not prevent an action for damages when the conduct initially sought to be prevented happens. None of the cases involves a denial of an injunction on the ground that the damages awarded already compensated the movant for the future harm that later transpired.