Court Opinion

ID: 9676949
Source: CourtListenerOpinion
Date Created: 2023-08-24 05:39:25.503339+00
Date Added: 2024-06-11T18:16:52.568288
License: Public Domain

Ray Thornton, Justice, dissenting. The trial court found that Tyson Food's nutrient profile was a trade secret belonging to Tyson Foods and that David Purtle, Senior Vice-President in charge of Retail Poultry at Tyson, misappropriated the secret formula when he left the company. A few days after Mr. Purtle left Tyson, the former senior vice-president delivered the secret formula to Tyson’s competitor, ConAgra, of which company he had just been named President of Retail Sales. Mr. Purtle gave the confidential profile to Dr. Dorr, the nutritionist for ConAgra, and told him to “implement this,” and Dr. Dorr immediately took steps to implement the Tyson nutrient formula at ConAgra. The question of damages to Tyson by ConAgra’s use of the nutrition formula was fixed by the jury at more than twenty million dollars, and ConAgra sought a remittitur to reduce the judgment to the 1.3 million dollars, which was the amount that ConAgra testified they saved by using Tyson’s nutrient profile. Notwithstanding its findings of fact and the verdict of the jury, the trial court granted ConAgra’s motion for a JNOV based upon a misinterpretation of our holding in Conagra, Inc. v. Tyson Foods, Inc., 342 Ark. 672, 30 S.W.3d 725 (2000), (hereinafter Tyson I). The trial court erroneously concluded that an action for damages for the misappropriation of a trade secret could not be maintained unless the company had implemented written post-employment, non-competition agreements. The trial court reaffirmed all its findings as to the existence of a trade secret and its misappropriation but set aside the jury verdict and consequent damages on the sole ground that our decision in Tyson I required that extraordinary action. I agree with the majority’s conclusion that a JNOV was not required by our decision in Tyson I and that the trial court erred in setting aside the verdict on the basis of its erroneous interpretation of our Tyson I decision. The conclusion by the majority that a JNOV was not required should have the effect of reinstating the earlier findings by the trial court and the verdict by the trial court and the jury unless, in our de novo review we determined that the earlier findings by the trial court were clearly erroneous. These earlier findings were specifically repeated when the trial court erroneously reversed itself based on its misinterpretation of the legal principals articulated in our Tyson I opinion. We do not reverse a finding of fact by the chancery court unless it is clearly erroneous. Weigh Systems South v. Mark’s Scales & Equipment, Inc., 347 Ark. 868, 68 S.W.3d 299 (2001). A finding of fact by the chancery court is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed. Id. While I agree with the majority that the trial court erred in its application of Tyson I, I believe the effect of that conclusion necessitates the reinstatement of the trial court’s earlier findings and the jury verdict. However, I disagree with the majority’s conclusion that a review of the evidence supporting the findings made by the trial court reflect that those findings were clearly erroneous, and I respectfully dissent. I believe that each of the trial court’s findings was based upon convincing evidence and that the trial court’s findings were not clearly erroneous. In my analysis of the issues before the trial court, I will first address whether the trial court’s finding that the nutrient profile was a trade secret was clearly erroneous. Next, I will consider whether the trial court’s finding that the trade secret was misappropriated and that damages resulted from the misappropriation was clearly erroneous. Finally, I will consider whether the jury’s determination that Tyson suffered damages as a result of the misappropriation and conversion of its nutrient formula was clearly erroneous. Was the trial court clearly erroneous in finding that the nutrient profile formula is a trade secret? I. Saforo Analysis In Tyson I, this court listed the six factors from Saforo & Assoc. Inc., v. Porocel Corp., 337 Ark. 553, (1999) to be used to determine whether company information qualifies as a “trade secret”: (1) the extent to which the information is known outside the business; (2) the extent to which the information is known by employees and others involved in the business; (3) the extent of measures taken by the company to guard the secrecy of the information; (4) the value of the information to the company and to its competitors; (5) the amount of effort or money expended by the appellee in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Id. See, Ark. Code Ann. § A-75-601(A).1  In interpreting this statute we have listed six factors to be considered. Saforo, supra. I will examine each of the six criteria presented in Soforo, Id. The first factor is the extent to which the information is known outside the business. There was no evidence that the Tyson nutrient profile was known by anyone outside of Tyson until David Purtle took a copy of the profile from his desk at Tyson and shared that copy with ConAgra. Mr. Purtle testified that as an officer of Tyson, he instructed the nutritionists of Tyson to develop the formula and to keep it confidential because it gave Tyson a competitive advantage in the cost of feeding chickens. The testimony of Dr. Brister, the Tyson nutritionist who led the development of the formula, was that there were only five hard copies of the nutrition formula, and that they were treated as confidential by the five nutritionists who used them in developing appropriate feed mixes. It is true that the existence of the confidential formula was disclosed by means of an overhead projector to other Tyson employees, all of whom had signed a confidentiality agreement. There is no evidence that the confidential nutritional formulas had been seen or discovered by anyone other than a Tyson employee until Mr. Purtle took his copy from his desk at Tyson and delivered it to ConAgra with instructions to implement it for that company’s benefit. The trial court’s finding relating to the first Saforo factor that the information was not known outside of Tyson is certainly not clearly erroneous. The second factor of the Saforo test is the extent to which the information is known by employees and others involved in the business. Here, the development of the confidential nutritional formula was accomplished by five Tyson nutritionists who were instructed to keep the formula confidential by Mr. Pur tie. Furthermore, Dr. Roy Brister, Tyson’s nutritionist, stated that Tyson has between 65,000 and 70,000 employees but that “I would say five people have a copy of this sheet [the formula].” Dr. Brister further stated, “if there is one document in the nutrition department I could protect from disclosure, it would be our nutrient profile.” The trial court was not clearly erroneous in concluding that the evidence showed that the confidential formula was closely guarded, satisfying this element of the Saforo criteria. The third factor in the Saforo analysis is to examine the extent of the measures taken by the company to guard the secrecy of the information. This third factor was given particular emphasis by this court in Tyson I, a case that related to price lists that were generally available to any purchaser. We stated: Though reasonable efforts to protect the secrecy of certain information is only one of the factors we look to in determining the status of a trade secret, it is a prominent one. To reiterate in part, § 4-75-601 (4)(B) requires that for information to qualify as a trade secret, it must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy. And in Saforo & Assoc., Inc. v. Porocel Corp., supra, we listed as a factor the extent of measures taken by the company to guard the secrecy of the information. As best we can tell, there were no efforts on Tyson’s part to restrain disclosure of [price list] information post-employment. And that distinguishes the facts in this case from the facts in Cardinal Freight. Obviously, the failure of a business to protect against the disclosure of information it considers to be secret following employment is critical to our analysis and ultimate decision regarding whether the information is in fact a trade secret. Tyson I, supra. By no means did this court hold in Tyson I that simply because there was no written post-employment agreement of confidentiality or covenant not to compete, there could be no trade secret. We considered that factor as a part of our analysis of whether or not Tyson took steps to keep price lists a secret. In the case before us, while there was no covenant not to compete, or a post-employment agreement not to divulge trade secrets, there were valid measures taken by Tyson to guard the secrecy of the nutrient profile. First, unlike the price lists involved in Tyson I, the nutrient profile was not made public. Next, the corporate code of conduct required current employees to guard the secrecy of Tyson’s confidential information. This code of conduct was a means by which Tyson instructed its employees that certain information was meant to be kept secret. Post-employment confidentiality contracts are only one way in which to indicate to employees that information should be kept confidential, and even Tyson I does not hold that post-employment contracts are necessary to support a finding that there was a trade secret. Here the court considered convincing evidence that Mr. Purtle knew the nutrition profile was confidential, instructed the nutritionists to safeguard the information, and signed the corporate code of conduct protecting confidential information. The trial court’s finding that this prong of the Saforo test was met, and that there were sufficient measures taken by Tyson to guard the secrecy of the information was not clearly erroneous. The fourth factor in determining whether the information is a trade secret is the value of the information to the company and to its competitors. The value of the nutrient profile to the company was shown by ConAgra’s reduced costs due to the implementation of the nutrient profile. ConAgra testified that it saved 1.3 million dollars by using the nutrient profile. Purtle told Dr. Dorr at ConAgra to implement the nutrient profile, and therefore the trial court was not clearly erroneous in finding that ConAgra implemented the profile because it was useful and valuable. Indeed, it is ConAgra who asks this court for a remittitur of the damages to the 1.3 million dollar amount that they admit they saved as a result of implementing the nutrient profile. However, ConAgra argues that because it no longer uses the profile, it does not remain valuable. The fact remains that ConAgra used the nutrient profile and saved substantial costs for a period of time, and that is sufficient to support the trial court’s finding that the fourth Saforo factor was satisfied as to the value of the secret. Certainly, the trial court’s finding was not clearly erroneous. The trial court next weighs the amount of effort or money expended by the appellee in developing the information to determine if there is a trade secret. With respect to the fifth Saforo factor, the testimony is not controverted that Tyson invested much time, money, and effort in developing the confidential nutritional profile. Tyson presents evidence that the effort in developing the nutrient profile involved years of private research by nutritionalists and chemists at Tyson. ConAgra argues that Tyson received this nutrient profile from its acquisition of Holly Farms, and spent no more than a few hours developing the information. Dr. Roy Brister testified that the tests had been under development since 1993. Even if ConAgra is correct in its assertion that the nutrient profile was first developed at Holly Farms, Tyson expended resources acquiring that company and its profile, and that is part of its expenditure in developing the secret formula. Again, I would not characterize the trial court’s finding on this Scforo factor as being “clearly erroneous.” The sixth element of the Saforo test is the ease or difficulty with which the information could properly be acquired or duplicated by others. Tyson argues that though the nutrient levels of a sample of feed could be ascertained from a sample, the samples of feed vary so much that it would be difficult, if not impossible to reverse engineer from a sample, as Dr. Brister testified: “My opinion is absolutely not. I say that for all the reasons we’ve talked about and because it is based on Tyson data from our thirty-one complexes, years of information . . . Looking at our history, it would take fifteen years or more [for ConAgra to develop the same nutrient profile.] Furthermore, getting the percentages of supplemental nutrients exactly right is key to saving the money that ConAgra saved. Dr. Brister testified: “A one-hundredth of a percent change in Lysine for Tyson is nearly five-million dollars. Even on these concepts, the last hundredth decimal place can be millions of dollars from Tyson’s standpoint.” Dr. Brister put it very succinctly: "Based on the variations I have discussed, it is my opinion that neither ConAgra nor another poultry company could determine Tyson’s nutrient profile by reverse engineering. Even if ConAgra or another competitor knew the amino acid levels in all of Tyson’s five feeds, they could not recreate the information on this chart.” Certainly the trial court was not clearly erroneous in concluding that this sixth Saforo factor supported the existence of a trade secret. Everyone agrees that the nutritional profile was confidential. Whether this confidential information should be treated as a trade secret should be subject to a Saforo analysis. The findings by the trial court that each of the Saforo factors was satisfied and that the nutrient profile is a trade secret are based upon convincing evidence. The trial court’s findings are not clearly erroneous. Thus, the judgement based upon those findings should be affirmed, and the granting of a JNOV on a misinterpretation of law should be reversed. Was the trial court clearly erroneous in finding that the nutrient profile formula was misappropriated? II. Misappropriation of a Trade Secret Where a trade secret is at issue, we must next determine whether ConAgra misappropriated the secret. Misappropriation of a trade secret is defined at Ark. Code Ann. § 4-75-601 as: (A) Acquisition of a trade secret of another by a person who knows or who has reason to know that the trade secret was acquired by improper means; or (B) Disclosure of use of a trade secret of another without express or implied consent by a person who: (i) used improper means to acquire knowledge of the trade secret; or (ii) at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was: (a) derived from or through a person who had utilized improper means to acquire it; (b) acquired under circumstances giving rise to a duty to maintain its secrecy or limits its use; or (c) derived from or through a person who owed a duty to. the person seeking relief to maintain its secrecy or limits its use; or (iii) Before material change of his 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. Id. ConAgra’s actions clearly constitute misappropriation of a trade secret. Purtle knew or had reason to know that giving the confidential nutrient profile to ConAgra constituted a conversion of the trade secret for ConAgra’s benefit by improper means. Fie understood the nutrient profile to be “confidential” and in limited distribution within Tyson, but still gave it to ConAgra nutritionists for use in order to reduce costs. Purtle’s misappropriation of the nutrient formula was a breach of his agreement with Tyson to keep that information confidential. His former position at Tyson as the Senior Vice-President of Retail Sales at Tyson gave him access to confidential trade secrets. He handed over those trade secrets to ConAgra immediately after being hired, a blatant misappropriation and abuse of his former position at Tyson. It seems clear to me that the trial court’s findings that the nutrient profile was a trade secret, that the trade secret was misappropriated and delivered to a competitor, and that this misappropriation of a trade secret damaged Tyson in a substantial amount are all supported by the evidence. I cannot find an instance where those findings were “clearly erroneous.” For that reason, I believe we should reverse the trial court on its erroneous interpretation of the principles of law articulated in our decision in Tyson I, and reinstate the trial court’s findings and the jury verdict. Because the majority concludes otherwise, the majority did not discuss the issue of a possible remittitur, and I will also refrain from addressing that issue. I respectfully dissent.   “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (A) 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 (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.