Opinion ID: 774360
Heading Depth: 2
Heading Rank: 4

Heading: Plaintiffs' Cross-Appeal: Exemplary Damages and Attorneys' Fees

Text: 43 Plaintiffs' cross-appeal raises a question of statutory interpretation: can a court award exemplary damages under Montana's trade secrets statute if a jury has decided that punitive damages are not available? When the jury was asked, on the verdict form, whether it found, by clear and convincing evidence, that Deckers acted with actual fraud and/or actual malice, it responded No. Consistent with this response, the district court refused to award plaintiffs punitive damages under the state's general punitive damages statute, Mont. Code Ann. §§ 27-1-221. Plaintiffs then moved for exemplary damages under Montana's trade secrets statute, which provides that [i]f willful and malicious misappropriation exists, the court may award exemplary damages. Mont. Code Ann. §§ 30-14-404(2). 4 44 The district court refused to decide whether willful and malicious misappropriation existed because it felt bound by the jury's verdict on punitive damages. It said,[a]s the jury properly was instructed on the requirements of MCA§§ 27-1-221 and declined to award punitive damages, it cannot be said that `willful and malicious misappropriation exist[ed].'  We must determine whether the exemplary damages provision of the Montana Uniform Trade Secrets Act (MUTSA) is meant to do no more than incorporate Montana's general punitive damages test. 45 We ordinarily review the district court's refusal to award exemplary damages for an abuse of discretion. Browning-Ferris Indus. v. Kelco Disposal, Inc., 492 U.S. 257, 279 (1989). However, when the decision to award such damages turns on application of state law, review is de novo. Cent. Office Tel., Inc. v. Am. Tel. & Tel. Co., 108 F.3d 981, 993 (9th Cir. 1997) rev'd on other grounds, 524 U.S. 214 (1998). 46 We conclude that the Montana legislature did not incorporate the definition of punitive damages into the trade secrets act. First, under §§ 27-1-221(5), general punitive damages must be proved by clear and convincing evidence.  Nothing in the MUTSA suggests that exemplary damages and attorneys' fees need to be proved by clear and convincing evidence. By deferring to the jury, the district court implicitly imported not only the substantive definition ofactual malice, but also the heightened quantum of proof requirement. This was legal error. 47 Second, the Montana legislature has shown that it knows how to reference the punitive damages section specifically. Other Montana statutes allow for punitive damages by specifically referring to section 27-1-221, e.g., Montana Unfair Trade Practices Act §§ 33-18-242(4), or by borrowing langauge directly from 27-1-221, e.g., Montana Wrongful Discharge Act, §§ 39-2-905(2). In contrast, in the MUTSA, the legislature used the words, willful and malicious, words that are defined differently and separately from §§ 27-1-221 in the General Definitions part of Montana's statute. §§§§ 1-1-204(3), 1-1-204(5). Furthermore, the official commentary to the MUTSA establishes that the exemplary damages provision follows federal patent law in leaving discretionary trebling to the judge even though there may be a jury .. . . Mont. Code Ann. §§ 30-14-404 commissioner's notes. 48 Lastly, the Montana statute is a codification of the Uniform Trade Secrets Act, and the sentence in question is taken almost verbatim from the uniform code. Uniform Trade Secrets Act §§ 3 (UTSA). A Minnesota Court of Appeals ruled that its state legislature, by adopting the UTSA, had meant the exemplary damages provision to prevail over the general punitive damages statutory provisions. Zawels v. Edutronics, Inc., 520 N.W.2d 520, 523-24 (Minn. Ct. App. 1994). 5 The Minnesota court focused on the provision of its state's trade secret statute that explicitly provides that it displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret. Minn. Stats. Ann. §§ 325C.07. Montana's statute contains an identical provision. Mont. Code Ann. §§ 30-14-408(1). 49 We reverse the district court's refusal to consider plaintiff's motion for exemplary damages and attorney's fees and remand to allow the district court to make an independent judgment about whether Deckers' misappropriation was willful and malicious. We express no opinion as to whether the record establishes that Deckers' conduct satisfies these criteria.