Court Opinion

ID: 9514405
Source: CourtListenerOpinion
Date Created: 2023-08-06 22:49:14.552368+00
Date Added: 2024-06-11T09:06:17.098473
License: Public Domain

SABERS, Justice
(dissenting).
THERE IS SUBSTANTIAL EVIDENCE TO SUPPORT THE JURY’S CONCLUSION THAT THE FORMULA CONSTITUTED A TRADE SECRET.
[¶ 35] The Uniform Trade Secret Act (UTSA) is codified at SDCL ch 37-29. Whether something is a “trade secret” hinges on SDCL 37-29-1(4), which provides:
(4) “Trade secret,” [is defined as] information, including a formula, pattern, compilation, program, device, method, technique or process, that:
(i) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
(ii) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
As noted by the majority opinion, this statute requires a two-part analysis, one legal and one factual.
*25[¶ 36] The legal question, whether the information in question constitutes a trade secret as “a formula, pattern, compilation, program, device, method, technique or process,” presents a question of law for the trial court. See Economy Roofing & Insulating v. Zumaris, 538 N.W.2d 641, 648 (Iowa 1995); see also US West Communications v. Office of Consumer Advocate, 498 N.W.2d 711, 714 (Iowa 1993):
Trade secrets can range from customer information, to financial information, to information about manufacturing processes to the composition of products. There is virtually no category of information that cannot, as long as the information is protected from disclosure to the public, constitute a trade secret.
(Quoting Thomas J. Collin, Determining Whether Information is a Trade Secret Under Ohio Law, 19 UTolLRev 543, 545 (1988)) (emphasis added). The majority opinion concludes, as a matter of law, that no trade secret existed because “there was never a clear assertion as to what exactly was claimed to be the trade secret.” Supra ¶ 18.14 On the contrary, it is obvious that the product at issue is a certain livestock feed mixture. For example, Weins asserted in his brief that the product in question was
a feed that could be used anywhere, (not subject to freezing like the Anderson product), that took advantage of the fermenting process using a yeast and sugar process and that would be self limiting. [Unlike Anderson’s product,] Weins, Meyer and Sporleder developed a dry product.
[¶ 37] The fact part of the question arises from the remaining portion of the definition in subdivisions (i) and (ii). Economy Roofing, 538 N.W.2d at 648-49 (construing identical statute); see also Gold Messenger, Inc. v. McGuay, 937 P.2d 907, 911 (Colo.Ct.App.1997) (‘What constitutes a trade secret is a question of faet[.]”) (citation omitted). I submit that the majority opinion is relitigating facts which were properly presented to and decided by the jury.
We interpret the facts on a basis most favorable to upholding the jury’s verdict.
Our standard of review of the circuit court’s denial of a directed verdict and of the jury’s determination in favor of [the] plaintiff is well established. We must examine the evidence in the light most favorable to the non-moving party and give [her] the benefit of all reasonable inferences. Robinson v. Mudlin, 273 N.W.2d 753, 755 (S.D.1979). The moving party is entitled to evidentiary consideration only where its evidence is un-contradicted or tends to amplify, clarify or explain the evidence in support of the verdict of the jury for the prevailing party. Nugent v. Quam, 82 S.D. 583, 152 N.W.2d 371, 374 (1967).
In such a context, it becomes our task to review the record and determine whether there is any substantial evidence to allow reasonable minds to differ. Haggar v. Olfert, 387 N.W.2d 45 (S.D.1986). This court does not weigh the evidence and substitute its judgment for that of the jury. Robinson, supra; Berg v. Sukup Mfg., 355 N.W.2d 833, 835 (S.D.1984).
Landstrom v. Shaver, 1997 SD 25, ¶ 72, 561 N.W.2d 1, 16 (quoting Westover v. East River Elec. Power Coop., 488 N.W.2d 892, 896 (S.D.1992)) (emphasis added); “This court does not decide factual issues de novo.” In re A.R.P., 519 N.W.2d 56, 61 (S.D.1994) (citations omitted).
It is the jury, not the court, which is the fact-finding body. It weighs the contradictory evidence and inferences, judges the credibility of witnesses, receives expert instructions, and draws the ultimate conclusion as to the facts. The very essence of its function is to select from among conflicting inferences and conclusions that which it considers most reasonable.
Fajardo v. Cammack, 322 N.W.2d 873, 878 (S.D.1982) (Wollman, C.J., concurring specially) (citations omitted); see also Overholt Crop Ins. Serv. Co. v. Travis, 941 F.2d 1361, *261369 (8th Cir.1991) (construing SDCL 37-29-1(4) and noting that the jury was properly-instructed regarding subdivision (ii)).
[¶ 38] The jury was properly instructed regarding trade secrets. Instruction 19 was taken verbatim from SDCL 37-29-1(4), and the jury decided the question based on that instruction.
Jurors are deemed to be reasonably intelligent. Allen v. McLain, 75 S.D. 520, 69 N.W.2d 390 (1955). It is also presumed that a jury understands and follows the court’s instructions. Giltner v. Stark, 219 N.W.2d 700 (Iowa 1974). In addition, a jury verdict may be read in light of the pleadings in the case, the issues presented by the evidence, and the charge made to the jury. NEDA Const. Co., Inc. v. Jenkins, 137 Ga.App. 344, 223 S.E.2d 732 (1976).
Mid-America Mktg. Corp. v. Dakota Indus., Inc., 289 N.W.2d 797, 799 (S.D.1980) (upholding jury verdict which concluded misappropriation of a trade secret occurred).
[¶ 39] The first factual element of the statute requires that the product “[derive] independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use[.]” The majority opinion substitutes its judgment for that of the jury and the trial court and concludes that “reasonable minds could not have differed as to [this] determination.” Supra ¶ 23. What this statement fails to recognize is that reasonable minds do differ on this issue, i.e., the jury and the judge reached a conclusion with which the majority opinion disagrees.
[¶ 40] The appellants focus on the fact that phosphoric acid was readily known as a potential limiting agent in livestock feed.15 However, the heart of this issue seems to concern the “Limiter One, Limiter Two, and Limiter Three” use of phosphoric acid in the product.16 Van Liere testified that his employee formed the idea for a three-stage application of this ingredient, which was incorporated into the En-R-G-Max product. Weins testified that it was his idea. Credibility questions are for the jury. Fajardo, supra. Similarly, when expert testimony conflicts, it is up to the jury to determine which testimony to accept. “It is well established ... that the jury is not obligated to accept an expert’s opinion and may disregard the testimony if it desires.” Andreson v. Black Hills Power & Light Co., 1997 SD 12, ¶ 10, 559 N.W.2d 886, 889 (1997) (citations omitted); see also LDL Cattle Co., Inc. v. Guetter, 1996 SD 22, ¶ 22, 544 N.W.2d 523, 528 (1996) (stating that the “purpose of expert testimony is to assist the jury as the trier of fact and not to supplant it.”) (citations omitted).
[¶ 41] The second factual element provides that the information must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” The majority opinion states that ‘Weins fails to demonstrate active measures were taken to maintain his product’s secrecy.” Supra ¶ 28. However, the evidence shows that none of *27the people who allowed testing on their livestock were aware of the formula of the feed. Weins may have discussed manufacturing his product with other companies, yet there was no evidence that the formula was divulged during these conversations. In fact, no one testified that Weins or Meyer ever disclosed the formula. The jury could reasonably conclude that nondisclosure of the formula during the development and testing stages constituted “efforts that are reasonable under the circumstances to maintain its secrecy,” and there is substantial, uncontra-dicted evidence to support that conclusion.
THERE IS SUBSTANTIAL EVIDENCE TO SUPPORT THE JURY’S CONCLUSION THAT SPORLEDER MISAPPROPRIATED A TRADE SECRET.
[¶ 42] Whether Sporleder misappropriated Weins’ trade secret is governed by SDCL 37-29-1(2), which provides:
(2) “Misappropriation,”
(i) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper17 means; or
(ii) Disclosure or use of a trade secret of another without express or implied consent by a person who:
(A) Used improper means to acquire knowledge of the trade secret; or
(B) At the time of disclosure or use, knew or had reason to know that such knowledge of the trade secret was:
(I) Derived from or through a person who had utilized improper means to acquire it;
(II) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
(III) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
(C)Before a material change of position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake!.]
[¶ 43] Whether Sporleder misappropriated a trade secret depends upon whether he “[acquired it] under circumstances giving rise to a duty to maintain its secrecy or limit its use.” Id. (2)(ii)(B)(II). The jury indicated on the verdict form that Sporleder breached his fiduciary relationship with Weins. The prefatory note to the UTSA indicates one of its purposes is to provide a single statute of limitations for “violation of fiduciary relationship theories of noncontractual liability utilized at common law.” 14 ULA Uniform Trade Secrets Act 433, 435 (1990). Fiduciary duties are not inherent in normal arm’s-length business relationships. Ward v. Lange, 1996 SD 113, ¶ 12, 553 N.W.2d 246, 250 (1996) (citations omitted). However, a fiduciary relationship may be created when two or more parties engage in certain other business alliances. See, e.g., Case v. Murdock, 488 N.W.2d 885, 889-90 (S.D.1992) (officers and directors of a corporation owe fiduciary duty to shareholders); Garrett v. BankWest, Inc., 459 N.W.2d 833, 838 (S.D.1990) (acknowledging there may be circumstances where a banker owes a fiduciary duty to its borrower); Rosebud Sioux Tribe v. Strain, 432 N.W.2d 259, 264 (S.D.1988) (attorney-client).18
[¶44] A fiduciary relationship is created when two or more persons engage in a “joint venture.” See 48A CJS Joint Ventures § 24, at 442-44 (1981):
Generally, the parties to a joint venture stand in a fiduciary relation, each to the other, or in a close relationship of trust and confidence, and are bound by the same standards of good conduct and square dealing as are required between partners.
(Collecting cases). The jury was properly *28instructed19 regarding joint ventures:
The elements of a joint venture are:
(1) an intent to enter into a joint venture;
(2) an agreement, express or implied, among members of a group;
(3) a common purpose to be carried out by the group;
(4) a joint pecuniary interest in that purpose among the members;
(5) an equal right to a voice in the direction and control of the group; and
(6) a right to share in the profits and a duty to share in any losses.
Instruction 31. As noted, the jury found that Sporleder breached his fiduciary duty to Weins. Our task is simply to determine whether there is substantial evidence to support that conclusion. Landstrom, 1997 SD 25 at ¶ 72, 561 N.W.2d at 16.
[¶ 45] Sporleder argues that he could not misappropriate the formula employing phosphoric acid as a limiter because he brought the knowledge of that chemical’s usefulness to the joint venture. Furthermore, he argues, he continued to test his product after his relationship with Weins ended. Therefore, he claims that he could not misappropriate an idea which was his own. His claim fails for several reasons.
[¶ 46] First, it is undisputed that Sporleder and Weins together developed and tested a livestock feed formula. Along the way, they certainly learned what “worked” as well as what did not. See Morton v. Rank America, Inc., 812 F.Supp. 1062, 1073 (C.D.Cal.1993) (“Certain ‘negative’ research may also result in the creation of protectable information.”) (citing Courtesy Temp. Serv. v. Camacho, 222 Cal.App.3d 1278, 272 Cal.Rptr. 352, 358 (1990)); cf. Uncle B’s Bakery, Inc. v. O’Rourke, 920 F.Supp. 1405, 1435 (N.D.Iowa 1996) (Uncle B’s I) (enjoining plaintiffs former employee from divulging trade secrets and noting that “if the disclosure allows a competitor to cut corners in the research and development process ... the competitor will attain a competing product that much sooner ... this harm [is] irreparable”) (the injunction was continued but modified in Uncle B’s Bakery, Inc. v. O’Rourke, 938 F.Supp. 1450 (N.D.Iowa 1996) (Uncle B’s II)). In effect, they became joint owners of the research and the formula. See Morton, 812 F.Supp. at 1074:
The Defendants have also failed to cite to any authority indicating that the misappropriation of a trade secret by a joint owner of that trade secret does not constitute the misappropriation of the trade secret “of another.” Indeed, [the equivalent of SDCL 37-29-1(2)(ii)(B)(II) ] appears to contemplate exactly this situation.... [I]t is reasonable to conclude that one party’s use of the trade secrets that affects the other party’s right in the [alleged trade secrets] would constitute the misappropriation of the trade secrets “of another.”
Accord B.F. Gladding & Co. v. Scientific Anglers, 245 F.2d 722, 729 (6th Cir.1957) (pre-UTSA case) (“Even without any specific mention in the contract joint trade secrets would be protected against unlawful disclosure by one of the parties.”).
[¶ 47] Second, the fact that Sporleder and Weins continued to independently test the formula, resulting in variations in the final product is no bar to a misappropriation claim. See, e.g., Richardson v. Suzuki Motor Co., Ltd., 868 F.2d 1226, 1244 (Fed.Cir.1989), cert. denied, 493 U.S. 853, 110 S.Ct. 154, 107 L.Ed.2d 112 (1989) (“Defendants cannot escape responsibility by showing that they have improved upon or modified the plaintiffs process ... minor variations are to be expected.”) (citations omitted); see also Mangren Research & Dev. Corp. v. National Chem. Co., Inc., 87 F.3d 937, 944 (7th Cir.1996) (“[I]f trade secret law were not flexible enough to encompass modified or even new products that are substantially derived from the trade secret of another, the protections that law provides would be hollow indeed.”). Subsequent improvements made by either party may constitute distinct trade secrets also protected against misappropriation.
*29[¶48] Third, Sporleder’s claim that the joint venture ended before he began to market his product is not a defense to misappropriation.
Whether a party to a joint venture has the right to withdraw from it, and what the effect of such withdrawal will be, depends upon the terms of the agreement and upon the circumstances. Generally, where the purposes of the enterprise have not been fulfilled, no party has the right to withdraw from or abandon it without the consent of coventurers. ...
Although dissension may provide a sufficient ground for dissolution of the venture by a decree of a court of equity, in the absence of such a decree, or of an agreement fixing the time of termination or a voluntary abandonment of the enterprise by one of the parties, the agreement remains in force until its purpose has been accomplished or has become impossible of fulfillment. While the agreement is in force, ordinarily one joint venturer has no right to exclude another, or to withdraw himself from he arrangement, in order to act independently in respect to the subject matter. If he does so and thereafter pursues the enterprise alone, he may be compelled to share the benefits with his former associates.
46 AmJur2d Joint Ventures § 31, at 59-60 (1994) (collecting cases) (emphasis added). Therefore, Sporleder’s claims and defenses are without merit and the jury properly rejected them.
[¶ 49] There is substantial evidence in the record to support the jury’s conclusion that Sporleder misappropriated a trade secret.
[¶ 50] In view of all of the above, I would affirm these two issues and reach the rest of the issues set forth in ¶ 14 of the majority opinion.

. The majority opinion's reliance on Coenco, Inc. v. Coenco Sales, Inc., 940 F.2d 1176 (8th Cir.1991), is misplaced. Supra ¶ 19. The Coen-co court affirmed the grant of judgment notwithstanding the verdict, not because plaintiffs did not specify what constituted the "trade secret,” but because the plaintiff failed to prove either of the factual elements of the statute. Id. at 1179.

. But see Rivendell Forest Prod. v. Georgia-Pacific Corp., 824 F.Supp. 961, 967 (D.Colo.1993), rev'd on other grounds, 28 F.3d 1042 (10th Cir.1994), (collecting cases and noting that general, well-known concepts are not protectable as trade secrets, but specific implementation of their combination may be). Additionally, the majority opinion’s claim that rejection of the patent application reinforces the determination that Weins’ product is not a trade secret (supra ¶ 24) is without merit. "[Njovelty and invention are not requisite for a trade secret as they are for patent-ability ... The protection is merely against breach of faith and reprehensible means of learning another’s secret.” Id. at 967 (quoting Kodekey Elec., Inc. v. Mechanex Corp., 486 F.2d 449, 455 (10th Cir.1973) (emphasis omitted)).

. While the majority opinion maintains that the ingredients were readily ascertainable, no proof was offered to show that any other company was utilizing the three-stage process. See, e.g., Bestechnologies, Inc. v. Trident Envtl. Sys., Inc., 681 So.2d 1175, 1176 (Fla.Dist.Ct.App.1996) (“[T]he fact that every competitor had discovered the same process might be relevant to establish that the information was 'generally known’ and ‘readily ascertainable' to competitors.”). Furthermore, Sporleder’s expert did not testify that this feed product could be analyzed in 20 minutes or five days (supra ¶ 22). "The value of an expert’s opinion is no better than the facts upon which it is based.” LDL Cattle Co. v. Guetter, 1996 SD 22, ¶ 22, 544 N.W.2d 523, 528 (1996) (citation omitted).

. "Improper” is also defined by UTSA:
“Improper,” includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means[.]
SDCL 37-29-1(1).

. This is not intended as an exhaustive list of the relationships in which fiduciary duties may arise.

. The instruction comports with this court’s discussion of joint ventures in Ethan Dairy Products v. Austin, 448 N.W.2d 226, 228 (S.D.1989).