facts at hand and explains the compensatory and punitive damages
This Court issued a permanent injunction against both
Defendants and awarded damages resulting from the unauthorized
use and disclosure by Defendants' of Roll-Kraft's trade secrets.
Id. at 879-81. This remedy fits within the remedies proscribed
by the ITSA sections three and four. ITSA § 4 provides, "in
addition to the relief provided in Section 3 [injunctive
relief], a person is entitled to recover damages for
misappropriation. . . ." 765 ILCS 1065/4. The issuance of an
injunction and the award of royalty damages is an appropriate
remedy and was approved under other states' versions of the
Uniform Trade Secrets Act. See e.g. Sonoco Products Co. v.
Johnson, 23 P.3d 1287, 1290 (Colo.Ct.App. 2001) (affirming
issuance of injunction and award of royalties "based on the
development costs of the information misappropriated by
defendants" under the Colorado Uniform Trade Secrets Act, which
is similar to the ITSA).
This Court awarded a permanent injunction and a reasonable
royalty based on Defendants' use of the misappropriated
information prior to the issuance of the injunction.
Defendants contention of a double recovery is therefore
misplaced. Defendants' rely on Home Pride Foods, Inc. v.
Johnson, 262 Neb. 701, 634 N.W.2d 774, 784 (2001) and Robert
L. Cloud & Assoc., Inc. v. Walter R. Mikesell, Jr.,
69 Cal.App.4th 1141, 1150-51, 82 Cal.Rptr.2d 143 (1999) which ruled
it is impermissible double recovery for a court to award damages
for future use and, at the same time, issue a permanent
injunction barring such use. These cases are distinguishable
from the case at hand because this Court did not award any
damages for future use of the misappropriated information, but
rather only awarded damages for the use and disclosure of
Roll-Kraft's trade secrets for the period before the injunction
issued. RKI, Inc., 177 F. Supp.2d at 880.
Defendants also claim Roll-Kraft offered no evidence or a
basis for a reasonable royalty. Contrary to Defendants' belief,
Roll-Kraft's counsel did claim damages in his closing argument
and stated because Roll-Kraft obtained a TRO relatively quickly
after Grimes went to work for Chicago Roll, Defendants "did not
have much of an opportunity to misuse that information." Tr.
This Court stands by its ruling that Roll-Kraft did suffer
damages and further substantiates its Opinion with the following
information. RKI, Inc., 177 F. Supp.2d at 865-71, 873-77. The
ITSA often recognizes in trade secrets cases, the plaintiff
cannot prove its damages by showing lost profits. Because of
that difficulty, section four of the ITSA provides in pertinent
part "If neither damages nor unjust enrichment caused by the
misappropriation are proved by a preponderance of the evidence,
the court may award damages caused by misappropriation measured
in terms of a reasonable royalty for a misappropriator's
unauthorized disclosure or use of a trade secret." 765 ILCS
A reasonable royalty is "simply that amount which the trier of
facts estimates a person desiring to use a patent right would be
willing to pay for its use and a patent owner desiring to
license the patent would be willing to accept." Perdue Farms
Inc. v. Hook, 777 So.2d 1047, 1051-52 (Fla.Dist.Ct.App. 2001)
(applying patent calculation of reasonable royalty to trade
secret claims under Florida Uniform Trade Secrets Act,
containing a damages provision worded identically to ITSA).
Therefore, this Court assessed a reasonable royalty of $100,000
based upon the development costs and value of the trade secrets
covering the period from Defendants' disclosure and use of the
secrets to the issuance of the temporary
restraining order. This method of calculating a reasonable
royalty was also approved by the court in Sonoco. 23 P.3d at
1290 (affirming reasonable royalty award based on development
costs of the information misappropriated by the defendants under
Colorado Uniform Trade Secrets Act, containing similar wording
to the ITSA).
Roll-Kraft's President testified it took Roll-Kraft many years
to develop the confidential information contained in the ACT,
BAM, and NPI systems. Tr. 80-84, 100-01, 104. And furthermore,
discussed why a competitor would gain an advantage over
Roll-Kraft if the competitor had access to ACT, BAM, or NPI. Tr.
108-10, 115-17. Roll-Kraft's President also testified it cost
millions of dollars to develop this information in conjunction
with developing customers across the country. Tr. 162. During
closing arguments, this Court estimated to Defendants' counsel
that it probably cost Roll-Kraft millions of dollars to gather
all this information, to which Defendants' counsel readily
agreed by stating "And I don't dispute that." Tr. 640. Moreover,
Joe Frandanisa, Roll-Kraft's Director of Sales, testified "we've
even seen a loss of business from some of those companies since
his [Grimes] leaving." Tr. 545. Chicago Roll hired Grimes in a
sales position and compensated him to directly compete against
Roll-Kraft, including calling on the same customers he had just
called upon for Roll-Kraft. PX 7, 8, 11b, 11c, 11e, 11f, 11g,
11i; Tracy Dep. 11, 17, 18, 29, 42-45, 47; Tr. 543-45. All of
this information provided for a reasonable royalty of $100,000
based upon the development costs and value of the trade secrets
by Grimes and Chicago Roll.
Furthermore, the Seventh Circuit has ruled with regards to
While damages cannot be based on pure speculation or
guesswork, they also need not be proven with the
certainty of calculus. And where, as here, the
uncertainty of the damages stems from the defendants'
illegal conduct, the defendants should not benefit
from the uncertainty they created: Speculation has
its place in estimating damages, and doubts should be
resolved against the wrongdoer.
BE&K Construction Co. v. Will & Grundy Counties Building Trades
Council, AFLCIO, 156 F.3d 756, 770 (7th Cir. 1998) (internal
quotations and citations omitted). Therefore, it was reasonable
for this Court to look to development costs and the value of the
data to derive a reasonable royalty. Additionally, a defendant
whose own misconduct creates the uncertainty cannot complain the
damages are too speculative, conjectural, or cannot be measured
with exactness and precision. Mid-America Tablewares, Inc. v.
Mogi Trading Co., Ltd, 100 F.3d 1353, 1365 (7th Cir. 1996);
Bob Willow Motors, Inc. v. General Motors Corp., 872 F.2d 788,
799 (7th Cir. 1989). Thus, Defendants, as the wrongdoers, cannot
complain about the lack of certainty in the amount of damages
because their wrongdoing created the uncertainty.
This Court also stands by its ruling with regards to the award
and amount of damages against Grimes for the conversion, breach
of duty of loyalty claim, and breach of contract claim. RKI,
Inc., 177 F. Supp.2d at 879-81.
2. Punitive Damages
This Court awarded punitive damages to Roll-Kraft in the
amount of $150,000 and also awarded Roll-Kraft attorney's fees.
Id. at 880-81. This Court stands by its ruling of punitive
damages on the ITSA, conversion, breach of duty of loyalty, and
tortious interference with contract claims.
Although neither party brought this to the Court's attention,
recognizes that Illinois law does not allow punitive damages on
the breach of contract claim. Morrow v. L.A. Goldschmidt
Assoc., Inc., 112 Ill.2d 87, 96 Ill.Dec. 939, 492 N.E.2d 181,
183 (1986). Therefore, as a matter of law, Grimes is entitled to
a modification of the damages award; however, this does not
change the amount of the award because the same punitive damages
were awarded on other claims.
Chicago Roll contends Roll-Kraft is not entitled to exemplary
damages and attorney's fees. This Court awarded $150,000 in
exemplary damages to Roll-Kraft and against Defendants for their
willful and malicious misappropriation of trade secrets and
their attempted cover-up and for tortious interference with
contract. The Court also awarded attorney's fees to Roll-Kraft
based on the same standard.
The ITSA sections four and five authorize exemplary damages
and attorney's fees "if willful and malicious misappropriation
exists." 765 ILCS 1065/4-5. Willful and intentional
misappropriation includes an "intentional misappropriation as
well as a misappropriation resulting from the conscious
disregard of the rights of another." Mangren Research and
Development Corp. v. National Chemical Co., Inc., 87 F.3d 937,
946 (7th Cir. 1996). In Mangren, the Seventh Circuit affirmed
the jury's finding that defendants' corporate officer was
unconcerned about employee's indications that using
misappropriated mold release agent might be "troublesome" and
would likely prompt a lawsuit. Id. Defendants' corporate
officer, in Mangren, was also aware of his employee's previous
employment by his competitor and his exposure to the mold
release agent. Id. Therefore, the Seventh Circuit affirmed the
jury's award of exemplary damages. Id.
Likewise, as discussed supra and in the Opinion paragraphs
19-21 and 28-29, Chicago Roll was aware of Grimes' employment
contract with Roll-Kraft and assigned him to the same territory
he developed for Roll-Kraft. PX 7, 8; RKI, Inc., 177 F. Supp.2d
at 867-68. Additionally, Chicago Roll and Grimes misappropriated
Roll-Kraft's trade secrets and attempted a cover-up as discussed
more fully supra and in the Opinion paragraphs 11-16, 24-32,
36-44, 62-75. Id. at 865-867, 868-871, 873-877. This type of
activity meets the test for willful and malicious
misappropriation, as it is both an intentional misappropriation
and a conscious disregard of the rights of another.
Chicago Roll also contests the award of punitive damages based
on the tortious interference with contract claim stating
evidence was lacking 1) in the areas of willful, intentional, or
malicious conduct on the part of Chicago Roll and 2) of Chicago
Roll's corporate complicity of Grimes' wrongdoing. This Court
addressed both issues in the Opinion and earlier in this opinion
and found Chicago Roll acted willfully, intentionally, and
maliciously and found corporate complicity by Chicago Roll of
Grimes' wrongdoing. Id. at 871, 878-79.
Chicago Roll also argues a lack of actual damages legally
precludes exemplary damages. Chicago Roll is correct that in
Illinois, "punitive damages may not be awarded in the absence of
compensatory damages." Kemner v. Monsanto Co.,
217 Ill. App.3d 188, 160 Ill. 192, 576 N.E.2d 1146, 1153 (1991). However,
that is not the case here. This Court awarded compensatory damages in
the amount of $100,000 against Chicago Roll for violating the
ITSA and for tortious interference with contract.
Kemner is also cited by Chicago Roll for the proposition
that exemplary damages cannot be awarded under the ITSA for
misappropriation unless the corporation ordered, participated
in, or ratified the
wrongful conduct by an employee. Id. at 203-5, 160 Ill.Dec.
192, 576 N.E.2d 1146. Confusion exists amongst the parties on
what the current state of the law in Illinois is on this issue
based on Jannotta v. Subway Sandwich Shops, Inc., 125 F.3d 503
(7th Cir. 1997); Deal v. Byford, 127 Ill.2d 192, 130 Ill.Dec.
200, 537 N.E.2d 267 (1989); and Kemner, 217 Ill. App.3d 188,
160 Ill.Dec. 192, 576 N.E.2d 1146.
In Deal, the Illinois Supreme Court held it is not necessary
for an entity to act through an officer in order to be held
liable for punitive damages. 130 Ill.Dec. 200, 537 N.E.2d at
273. Kemner acknowledged this change in law, but held the
state of the law at the time the case went to the jury, 19
months before Deal was decided, controlled its review of the
jury instructions in the case. 160 Ill.Dec. 192, 576 N.E.2d at
1158-59. Regardless, in Jannotta the court held punitive
damages can be awarded against a corporation for the acts of its
agents or employees if the employee was acting in a managerial
capacity or the corporation authorized or ratified the
employee's acts. 125 F.3d at 513.
In this case, Chicago Roll's vice president of sales, Robert
Manos, was an officer of Chicago Roll. This Court already found,
supra and in the Opinion paragraphs 42, 71-75, that Manos
viewed Roll-Kraft's trade secrets, had them on his computer, and
then covered them up, meaning, an officer of Chicago Roll
misappropriated the data and ratified or approved Grimes' taking
of the data by receiving it. RKI, Inc., 177 F. Supp.2d at 870,
875-77. Manos also sent Grimes the October 5, 2001 letter
indicating Grimes would be responsible for the same territory he
was developing while at Roll-Kraft. PX 7.
Punitive damages are intended to punish the wrongdoer and to
deter the wrongdoer and others from committing similar acts in
the future. Deal, 130 Ill.Dec. 200, 537 N.E.2d at 272.
Therefore, this Court found it necessary to discourage
Defendants from engaging in such serious misconduct and from
participating in a deliberate attempt to coverup their
wrongdoing. This Court's award of $150,000 in punitive damages
and award of attorney's fees to Roll-Kraft stands.
For the reasons set forth in this opinion, this Court denies
Defendants' Motions for New Trial or to Alter or Amend Judgment
Pursuant to Federal Rule of Civil Procedure 59 and 52(b) and,
furthermore, upholds its prior ruling in this case, except that
the Court vacates its award of punitive damages on the breach of
contract claim in count four against Steven Grimes. This does
not require a change in the Judgment Order because Grimes is
still liable for punitive damages under counts one, two, and