BARRETTE OUTDOOR LIVING INC v. INTEGRITY COMPOSITES LLC

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

BARRETTE OUTDOOR )

LIVING, INC., )

)

Plaintiff, )

)

v. )

)

INTEGRITY COMPOSITES, )

LLC, et al., )

)

Defendants. )

____________________________________) 2:20-cv-00213-JDL

)

INTEGRITY COMPOSITES, )

LLC, et al., )

)

Third-Party Plaintiffs, )

)

v. )

)

EATON PEABODY, P.A. et al., )

)

Third-Party Defendants. )

ORDER ON MOTION FOR SUMMARY JUDGMENT AND MOTION IN

LIMINE

Plaintiff Barrette Outdoor Living, Inc. (“Barrette”) filed this action on June 17,

2020, against Integrity Composites, LLC (“Integrity Composites”), Integrity

Holdings, LLC (“Integrity Holdings”), and Jeffrey True, the Manager of Integrity

Holdings and President of Integrity Composites.1 In its Complaint, Barrette asserts

claims for breach of contract, intentional misrepresentation, and negligent

1 Except where it is necessary to refer to one of these Defendants individually, I refer to Integrity

Composites, Integrity Holdings, and Jeffrey True collectively as “Integrity.”

misrepresentation arising out of a transaction in which Barrette purchased Integrity

Composites’ intellectual property assets (ECF No. 1).

Integrity has brought a Third-Party Complaint against Eaton Peabody, P.A.

and Alfred C. Frawley III, Esq. (ECF No. 12).2 Integrity alleges that at the time it

conveyed its intellectual property assets to Barrette, it hired Frawley and reasonably

relied on him to oversee the intellectual property aspects of the deal with Barrette.

Integrity contends that had it known that Frawley had misrepresented the status of

two patent applications that were included in the transaction, it would not have

included inaccurate information about the applications in the Asset Purchase

Agreement. Integrity’s Third-Party Complaint asserts claims for legal malpractice,

negligent misrepresentation, and breach of fiduciary duty, and seeks (1)

indemnification for any damages that Barrette may be awarded against Integrity, (2)

an award of all fees and costs incurred in defending against Barrette’s action, (3) an

award of its fees and costs associated with bringing its Third-Party Complaint, (4) an

award of its fees and costs associated with opposing this motion, and (5) an award of

punitive damages.

Eaton Peabody has filed a Motion for Summary Judgment (ECF No. 95) on all

counts of Barrette’s Complaint, arguing that it is entitled to summary judgment

because Barrette will be unable to sustain its burden of proof as to damages. Eaton

Peabody also moves for summary judgment on Integrity’s Third-Party Complaint,

conceding that Integrity may be able to recover fees and costs reasonably expended

2 I refer to the Third-Party Defendants, Eaton Peabody and Frawley, together as “Eaton Peabody,”

except where it is necessary to refer specifically to these parties individually.

as a result of defending against Barrette’s action, but arguing that Integrity is not

entitled to additional attorney fees, costs, or punitive damages related to its Third-

Party Complaint. Eaton Peabody also concedes liability for Frawley’s misconduct and

requests that the Court grant summary judgment against it as to liability on all

Counts of Integrity’s Third-Party Complaint.

Eaton Peabody has also filed a Motion in Limine (ECF No. 79), which seeks to

exclude the testimony of Barrette’s President Jean desAutels, arguing that he should

not be permitted to offer lay opinions as to the value of the patent applications

because he is not an expert and because his opinions are conjectural and speculative.

Oral argument on the Motion for Summary Judgment and Motion in Limine was held

on January 19, 2023 (ECF No. 111).

I. FACTUAL BACKGROUND

The parties have submitted stipulated facts to the Court (ECF No. 93), as well

as separate supporting statements of material facts (ECF Nos. 95-2, 100-2, 101-1,

107-1, 108-1).3 The following undisputed facts are drawn from these documents.

Barrette is a corporation that manufactures, assembles, and sells various types

of fencing, railing products, decking, and “other outdoor products.” ECF No. 93 at 2,

¶ 1. Jean desAutels has been the President of Barrette since 2010. Integrity

3 In its Response (ECF No. 107-1) to Barrette’s Statement of Additional Material Facts, Eaton

Peabody includes a “Reply Statement of Material Facts,” consisting of twelve additional statements of

fact that it contends are undisputed. I decline to consider these for the purpose of summary judgment

because, in keeping with District of Maine Local Rule 56(d), a party may not include additional facts

in a reply to an opposition to summary judgment without leave of the Court. See Currier Builders,

Inc. v. Town of York, No. 01-68-PC, 2002 WL 1146773, at *5 (D. Me. May 30, 2002) (“[N]umerous

decisions of this court have held that new factual assertions submitted with a reply to the opposition

to a motion for summary judgment in the absence of a request for leave to do so will be disregarded by

the court.”).

Composites is a limited liability company that manufactures and sells decking

products under the brand name “DuraLife.” Integrity Holdings is a limited liability

company that invests in a variety of businesses, including operating companies, real

estate, and timberland holdings. Jeffrey True is the Manager of Integrity Holdings

and the President of Integrity Composites. Eaton Peabody is a Maine law firm

organized as a professional association, and Frawley was employed and affiliated

with Eaton Peabody as an attorney between 2012 and 2021.

In November 2017, Integrity began to manufacture and sell a component of a

deck installation system known as the “DuraLife Step-Clip,” which was advertised as

patent-pending. ECF No. 101-1 at 10, ¶ 3. Integrity also owned a “Competitor Step-

Clip” product, which was functionally similar to the DuraLife Step-Clip but also

worked on competitors’ deck installation systems. Integrity had not taken steps to

produce or sell the Competitor-Step Clip product.

A. Frawley’s Preparation and Filing of Integrity’s Patent Applications

Eaton Peabody, in or around 2016, represented to the public on its website that

it was capable of preparing and prosecuting patent applications for clients and listed

Frawley as a “[r]elated professional” on that page. ECF No. 100-2 at 11-12, ¶ 1. None

of the professionals listed, including Frawley, were registered to prosecute patent

applications before the U.S. Patent and Trademark Office (“USPTO”), and Frawley

was never a member of the patent bar. Historically, Frawley would refer utility

patent work to counsel at another law firm, and prior to the patent applications at

issue in this case, Frawley had never prepared or filed a patent application with the

USPTO.

In late 2016, Integrity asked Frawley—who regularly worked with the

company on intellectual property matters—to file a patent application for the

DuraLife Step-Clip (the “D206 patent application”) with the USPTO. Although

Frawley had not previously prepared or filed patent applications, Frawley advised

True in November 2016 that Integrity should file for a design patent, rather than a

utility patent, on the company’s DuraLife step-clip technology and stated that “we

[Frawley] are preparing a design patent.” ECF No. 100-2 at 14, ¶ 15 (alteration in

original). Frawley did not consult with any other practitioners prior to preparing or

filing the application, and he hired someone from the Internet to prepare the

drawings for the application. Frawley attempted to file the first application on April

20, 2017, by registering as a guest user on the USPTO Electronic Filing System. After

doing so, Frawley did not take any steps to follow-up on the status of the application.

The USPTO subsequently sent two notices addressed to Frawley at his office, the first

on April 21, 2017, the second on June 13, 2017, indicating that the application had

not been given a filing date because it was incomplete. On August 18, 2017, the

USPTO sent a third notice to Frawley, indicating that the proceedings for the

application had been terminated. Frawley testified that he never received any

communication from the USPTO concerning the D206 application, and he specifically

denied ever receiving the June 13th and August 18th notices.

In June and July of 2017, Frawley communicated with True and another

Integrity employee about the possibility of filing a second patent application that

would apply to a new step-clip technology design “for use by competitors” that would

“block competitors from getting around the first patent [application]” that was filed.

ECF No. 100-2 at 17, ¶¶ 33, 36. On July 18, 2017, Frawley received an email from

the Integrity employee, which he understood to be an instruction to begin preparing

the second patent design application. On August 8, 2017, Frawley sent an email to

True confirming that he had filed two design patent applications.4 ECF No. 100-2 at

17, ¶ 39. However, when Frawley represented to True that he had filed a second

design patent application for the Competitor Step-Clip, he had not filed that

application. In May of 2018, Frawley again represented to Integrity that he had filed

two design patent applications the previous year, one in April and one in June. He

also told True that the DuraLife Step-Clip design patent application had a one-year

shelf life, even though he did not believe or know that that was true.

In early 2018, Frawley learned that True was considering selling some of

Integrity Composites’ assets. At Integrity’s request, Frawley prepared an Intellectual

Property Agreement Schedule, an Asset Purchase Agreement, and a Purchase Price

Allocation Agreement. Frawley was also responsible for communicating with

4 Eaton Peabody qualifies this statement, noting that the Court should refer to the cited document

for its full context. I conclude that Integrity’s record citations support an inference that Frawley

represented that he had filed two design applications. Frawley wrote in an email that he had included

designs for the Competitor Step-Clip in the “last design patent application,” which indicates that there

was more than one application, and he listed the filing dates of the DuraLife Step-Clip application and

the Competitor Step-Clip application as May 2017 and June 2017, respectively. ECF No. 94-5 at 264.

Accordingly, I treat Integrity’s statement as admitted. See D. Me. Loc. R. 56(f).

Barrette’s counsel, Attorney Deborah McGowan, about intellectual-property-related

matters during the negotiations.5

B. Negotiations Between Barrette and Integrity

In the fall of 2017, Barrette learned from a private capital investment firm,

NextGen Capital, that Integrity Composites was open to being acquired. By early

April 2018, desAutels and True were involved in negotiations regarding Barrette’s

potential acquisition of Integrity Composites.6 In May 2018, Barrette sent a Letter

of Intent to Integrity indicating that it was interested in purchasing “all or

substantially all” of Integrity Composites’ assets. ECF No. 101-1 at 11, ¶ 9. The

Letter of Intent provided that Barrette would acquire all of Integrity Composites’

intellectual property, including the design patent application for the DuraLife Step-

Clip, but it did not reference a second pending patent application for the Competitor

Step-Clip.

Originally, of the two patent applications, Barrette only intended to purchase

the DuraLife application, but in June 2018, Integrity offered to add the Competitor

Step-Clip application to the deal. Because the parties were considering including the

Competitor Step-Clip application in the sale, on June 14, 2018, True requested that

Frawley revise the Intellectual Property Assignment Agreement to include the

Competitor Step-Clip application.

5 Integrity refers to Attorney “McGovern,” however, I refer to her as Attorney McGowan based on

other filings in the case.

6 Barrette and Eaton Peabody dispute whether representations were made as to the purported value

of the two step-clip patent applications compared to the overall value of the DuraLife brand. Because

this dispute is not material to the ultimate question of whether Barrette can meet its burden of proof

on damages, I do not address it further.

Also on June 14, 2018, Attorney McGowan requested copies of the DuraLife

Step-Clip application and the filing number for the Competitor Step-Clip patent

application. At this time, Frawley realized that he had never filed the Competitor

Step-Clip application in 2017. However, Frawley did not inform True or Barrette of

his failure to file the second application, but he instead immediately filed an

incomplete application on June 15, 2018, (the “D482 application”). He did not check

on the status of the second patent application after filing it. When True confirmed to

Frawley on June 18, 2018, that the Competitor Step-Clip application would be

included in the sale, Frawley revised the Intellectual Property Assignment Schedule

to include both patent applications and listed their filing dates as April 20, 2017, and

June 15, 2017—even though the first application had not been filed successfully and

the actual filing date of the second application was June 15, 2018.7

When the Competitor Step-Clip application was added to the deal, the parties

added $200,000 to the purchase price, although they dispute whether this amount

represented the value of the Competitor Step-Clip application or whether it was

intended to cover Integrity’s working capital shortfall. I address this dispute further

below. See infra, p. 24.

On June 29, 2018, the Asset Purchase Agreement between Barrette and

Integrity, brokered by NextGen Capital and its managing director, was finalized. The

7 Eaton Peabody denies Integrity’s Statement of Material Fact 62, which relates to Frawley’s revision

of the Intellectual Property Assignment, for lack of record support. However, Eaton Peabody admits

Integrity’s Statement of Material Fact 63, which provides that Frawley listed the filing date of the

Competitor Clip application as June 15, 2017, and that the actual filing date was June 15, 2018.

Statement 62 is therefore deemed admitted because Eaton Peabody failed to properly controvert it.

See D. Me. Loc. R. 56(f).

final Purchase Price Allocation Schedule included the sale of both patent

applications; although the final schedule did not include a specific line item for these

assets, there was a line item entitled “Goodwill” in the amount of $3.623 million. The

Asset Purchase Agreement “warranted that there had been ‘no abandonment or lapse

of or failure to maintain in full force and effect any Intellectual Property

Registration.’” ECF No. 101-1 at 15, ¶ 39 (quoting ECF No. 101-5 at 51). Barrette

paid approximately $10.8 million.

C. Barrette’s Attempts to Obtain Copies of the Patent Applications

After the purchase agreement had been signed, and throughout the remainder

of 2018 and during 2019, Barrette and its counsel, Attorney McGowan, repeatedly

asked Frawley for copies of the two patent applications, screenshots from the Patent

Application Information Retrieval system, and the USPTO prosecution history.

Frawley either did not respond to these requests or he excused his delayed responses

by falsely stating that he was “‘responding to an inquiry from the patent office’ and

that he would ‘send [the applications] once they are in order,’” but otherwise did not

provide Barrette with the requested information.8 ECF No. 100-2 at 22, ¶ 72 (quoting

ECF No. 94-5 at 37-38, Tr:148:15-149:5). After repeated requests, the only documents

that Frawley provided to Barrette were the patent application receipts from the

USPTO website, which he sent on November 2, 2018. He never attempted to check

8 Eaton Peabody qualifies this statement, claiming that the record citation does not support the fact

that Frawley “falsely claim[ed]” this. ECF No. 108-1 at 15, ¶ 64. Viewed in the light most favorable

to Integrity, Frawley asserted that he was awaiting correspondence from the USPTO when in fact he

had not made any attempts to follow-up on the applications and was not communicating with the

USPTO. This reasonably constitutes a “false claim” or excuse, and Integrity’s statement is deemed

admitted.

the status of either application on the USPTO website or the Patent Application

Information Retrieval system.

Barrette learned in June 2019 that both applications had been terminated. It

was discovered that Frawley had filed a “partially completed application package for

the D206” patent around April 2017 and a “partially completed application package

for the D482” patent around June 2018. ECF No. 101-1 at 2, ¶¶ 4-5. The USPTO did

not issue filing dates for either application because they were incomplete, and “were

missing the specification, a claim, the statutory basic filing fee, the application search

fee, the application examination fee, and a properly executed inventor’s oath or

declaration.”9 ECF No. 100-2 at 3, ¶ 7. Both applications were “terminated as

abandoned” on August 18, 2017, and September 20, 2018, respectively. ECF No. 100-

2 at 4, ¶¶ 8-9.

Barrette hired patent prosecution Attorney John Maldjian who attempted to

revive the terminated patent applications, but his attempts were ultimately

unsuccessful. Maldjian subsequently filed several design and utility patent

applications with the USPTO on Barrette’s behalf, and between 2019 and the present,

three have matured into utility patents.

9 Barrette and Eaton Peabody dispute how likely it was that the patent applications would have been

approved but-for Frawley’s conduct. Eaton Peabody asserts that “[i]t is uncertain that, had the

[applications] been filed correctly by Frawley, they would have ultimately issued into U.S. Patents.”

ECF No. 95-2 at 3, ¶ 11. Barrette in turn argues that Maldjian’s testimony reflected “only that the

chances of a patent application being granted are never ‘100 percent,’ which does not equate with

saying their ultimate issuance was ‘uncertain.’” ECF No. 101-1 at 4, ¶ 11. Viewed in the light most

favorable to Barrette, I treat as admitted that the chances of a patent application being approved are

never 100% guaranteed.

Neither Barrette nor Integrity have designated an expert witness to testify in

this litigation as to the purported value of the two terminated patent applications.

Although Barrette designated Maldjian as an expert witness, he was designated to

testify regarding patent issues, rather than the specific value of the D206 and D482

applications.

II. LEGAL ANALYSIS

A. Standard of Review

Summary judgment is appropriate only if “the movant shows that there is no

genuine dispute as to any material fact and the movant is entitled to judgment as a

matter of law.” Fed. R. Civ. P. 56(a). “An issue is ‘genuine’ if it can ‘be resolved in

favor of either party,’ and a fact is ‘material’ if it ‘has the potential of affecting the

outcome of the case.’” Feliciano-Muñoz v. Rebarber-Ocasio, 970 F.3d 53, 62 (1st Cir.

2020) (quoting Xiaoyan Tang v. Citizens Bank, N.A., 821 F.3d 206, 215 (1st Cir.

2016)); United States v. P.R. Indus. Dev. Co., 18 F.4th 370, 377 (1st Cir. 2021) (“A

fact is material if ‘it possesses the capacity, if determined as the nonmovant wishes,

to alter the outcome of the lawsuit under the applicable legal tenets.’” (quoting

Finamore v. Miglionico, 15 F.4th 52, 58 (1st Cir. 2021))).

To prevail, the moving party “must ‘affirmatively produce evidence that

negates an essential element of the non-moving party’s claim,’ or, using ‘evidentiary

materials already on file . . . demonstrate that the non-moving party will be unable

to carry its burden of persuasion at trial.’” Ocasio-Hernández v. Fortuño-Burset, 777

F.3d 1, 4-5 (1st Cir. 2015) (alteration in original) (quoting Carmona v. Toledo, 215

F.3d 124, 132 (1st Cir. 2000)). The test is whether, as to each essential element, there

is “sufficient evidence favoring the nonmoving party for a jury to return a verdict for

that party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). A court views

the evidence in the light most favorable to the non-moving party and draws all

reasonable inferences in their favor when determining whether summary judgment

should be granted. Taite v. Bridgewater State Univ., Bd. of Trs., 999 F.3d 86, 92 (1st

Cir. 2021).

B. Summary Judgment as to Barrette’s Complaint

1. The Parties’ Arguments

Eaton Peabody concedes that (1) “Frawley did not exercise appropriate skill,

prudence, and diligence” in prosecuting the patent applications; (2) Frawley

negligently misrepresented the status of the patent applications; (3) Eaton Peabody

is vicariously liable for Frawley’s acts and omissions; and (4) Eaton Peabody and

Frawley breached their fiduciary duties.10 ECF No. 95-2 at 4, ¶ 17. However, Eaton

Peabody argues that summary judgment should be granted in its favor on all of

Barrette’s claims because Barrette cannot sustain its burden of proof on damages. It

contends that (1) Barrette’s evidence of the value of the two patent applications is

speculative, and an expert witness has not been designated to testify to their value;

and (2) Barrette has not demonstrated evidence of lost sales or reputation damages

10 Integrity qualifies these statements on the grounds that they set forth legal propositions and

should be stricken. Although legal conclusions in statements of material facts are not appropriate,

Integrity’s requests to strike do not comply with District of Maine Local Rule 56(c) and (f), which

require an opposition to summary judgment to consist of short and concise statements properly

supported by record citations. Moreover, Integrity’s requests are excessively argumentative.

resulting from the terminated patent applications. Eaton Peabody avers that a party

seeking the benefit of its bargain under a breach-of-contract theory of damages must

show the fair market value of the patent applications at the time the breach occurred,

which Barrette has not done. Eaton Peabody also argues that Barrette successfully

mitigated its alleged damages by hiring Maldjian and obtaining new patents, and

that “Barrette cannot recover the benefit of its bargain if it has successfully made

itself whole by acquiring new patents—such would effectively be double recovery.”

ECF No. 107 at 9 (quotations omitted).

Barrette counters that this is “a straightforward breach of contract case”

because “[Integrity] sold to Barrette property it never received[,]” and Barrette

alleges that it has put forth sufficient record support regarding damages to survive

summary judgment. ECF No. 101 at 8. Barrette characterizes its estimate of

damages in various ways, for example, arguing that it “has been deprived of the

essential benefits of the [Asset Purchase Agreement], namely, the value of the Patent

Applications it thought it was buying,” ECF No. 1 at 8, ¶ 59, and that it “is not seeking

lost profits, but rather the difference between what it paid for the assets of Integrity

versus what it would have paid without the patent applications,” ECF No. 101 at 2.

Barrette seeks $1.2 million in damages, which desAutels estimates to be reasonable

based on his professional knowledge of Barrette’s prior dealings and acquisitions, and

which Barrette characterizes as “the amount it overpaid for Integrity Composites

compared to previous comparable acquisitions.” ECF No. 101-1 at 7, ¶ 22. Barrette

also alleges that it has incurred legal fees and costs while enforcing its

indemnification rights under the Asset Purchase Agreement, arguing that it “has

been forced to expend additional financial resources to attempt to revive the failed

applications and subsequently file new ones with the USPTO, which have since

become issued patents.” ECF No. 101 at 16.

For the reasons set forth below, I conclude that Barrette cannot meet its

burden of proof as to compensatory damages because (1) Barrette has not offered

sufficient, non-speculative evidence of the value of the two terminated patent

applications, and (2) even if Barrette’s evidence of the applications’ value was

sufficient, Barrette successfully mitigated its damages and has not shown that it was

unable to recover the purported value of the two applications and has not offered

evidence of any other losses that it was unable to mitigate. Accordingly, because

Barrette cannot meet its burden of proof, Eaton Peabody is entitled to summary

judgment on the issue of compensatory damages. Eaton Peabody is also entitled to

summary judgment on the issue of consequential damages arising from any lost

profits or reputation damage. However, because Barrette has produced competent

evidence of its mitigation expenses, Eaton Peabody is not entitled to summary

judgment on the issue of consequential damages that Barrette incurred as a result of

its mitigation efforts.

2. Barrette’s Evidence of Damages

To survive summary judgment, a non-moving party must produce prima facie

evidence for each element of its claim. Packgen v. Berry Plastics Corp., 113 F. Supp.

3d 371, 389 (D. Me. 2015) (“[T]he plain language of Rule 56(c) mandates the entry of

judgment . . . against a party who fails to make a showing sufficient to establish the

existence of an element essential to that party’s case . . . .” (alterations in original)

(quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986))). Accordingly, Barrette

must raise a triable issue of fact as to damages, an essential element of each of its

claims against Integrity. See Tobin v. Barter, 2014 ME 51 ¶ 10, 89 A.3d 1088

(damages as an element of a breach of contract claim); Chapman v. Rideout, 568 A.2d

829, 830 (Me. 1990) (damages as an element of a negligent misrepresentation claim);

see Cianchette v. Cianchette, 2019 ME 87, ¶¶ 20, 23, 209 A.3d 745 (damages as an

element of a fraudulent misrepresentation claim).

“[B]reach of contract damages, as a general proposition, should be based on the

injured party’s ‘expectation interest,’ defined as its ‘interest in having the benefit of

[its] bargain by being put in as good a position as [it] would have been in had the

contract been performed . . . .’” Deering Ice Cream Corp. v. Colombo, Inc., 598 A.2d

454, 456-57 (Me. 1991) (second, third, and fourth alterations in original) (quoting

Restatement (Second) of Conts. § 344 (Am. L. Inst. 1981)); see McCarthy v. U.S.I.

Corp., 678 A.2d 48, 54 (Me. 1996) (“The overriding purpose of an award of

compensatory damages for a breach of contract is to place the nonbreaching party in

as good a position as she would have been in had there been no breach.”). “The

measure of damages in tort for misrepresentation . . . is the same as the measure of

damages for breach of contract.” Tetra Tech Constr. Inc. v. Summit Nat. Gas of Me.

Inc., No. 1:14-cv-00298-GZS, 2016 WL 3881056, at *2 (D. Me. July 13, 2016), report

and recommendation adopted, No. 1:14-CV-00298-GZS, 2016 WL 4133503, at *1 (D.

Me. Aug. 3, 2016); see, e.g., Veilleux v. Nat’l Broad. Co., 206 F.3d 92, 123-24 (1st Cir.

2000) (“Under Maine law, the proper measure of damages for a misrepresentation

claim is plaintiff’s lost bargain.” (citing Wildes v. Pens Unlimited Co., 389 A.2d 837,

841 (Me. 1978))).

A party’s estimate of damages “must not be uncertain or speculative but must

be grounded on facts in evidence.” King v. King, 507 A.2d 1057, 1059 (Me. 1986). “A

monetary award based on a judgmental approximation is proper, provided the

evidence establishes facts from which the amount of damages may be determined to

a probability.” Merrill Tr. Co. v. State, 417 A.2d 435, 440–41 (Me. 1980). Thus, to

recover damages it suffered as a result of Integrity’s alleged breach of contract and

misrepresentations, Barrette must offer sufficient evidence, grounded in facts in the

record, that would allow a factfinder to calculate those damages with “reasonable

certainty.” Id. However, Barrette can only recover its lost bargain and other

pecuniary damages if it took reasonable steps to mitigate its damages and offers

sufficient evidence of losses that it was unable to avoid. See In re Hannaford Bros.

Co. Customer Data Sec. Breach Litig., 2010 ME 93, ¶ 12, 4 A.3d 492.

(a) Motion in Limine

As a preliminary matter, I first address Eaton Peabody’s Motion in Limine

(ECF No. 79) which seeks to exclude desAutels’s opinion testimony concerning

Barrette’s alleged damages, “particularly any opinion [d]esAutels may give on the

value of any patent application at issue in this case.” ECF No. 79 at 1. Eaton Peabody

argues that only expert testimony is admissible to establish the value of intellectual

property—including patent applications—and contends that desAutels cannot

provide lay opinions as to his belief about the patent applications’ values. Eaton

Peabody argues that even as a lay witness testifying pursuant to Fed. R. Evid. 701,

desAutels may not testify “to the value of unissued patent applications, or other

intangible or uncertain assets,” ECF No. 109 at 5, and that his opinion would

impermissibly be based on “his status as the alleged owner of the intellectual property

at issue, as well as his personal experience in negotiating the acquisition of Integrity

assets.” ECF No. 79 at 5. Eaton Peabody avers that even if desAutels’s lay opinion

could be offered, his testimony on the patents’ value would be “at best conclusory; at

worst rank speculation.” ECF No. 79 at 6.

Barrette concedes that desAutels is not an expert witness but argues that he

intends to offer lay opinion testimony under Fed. R. Evid. 701 (ECF No. 102).

Barrette asserts that desAutels’s testimony “is a classic example of ‘lay expertise a

witness personally acquires through experience, often on the job,’ which is rationally

based on his particularized knowledge relating to his position in the business.” ECF

No. 102 at 8 (citing Fed. R. Evid. 701 advisory committee’s note to 2000 amendment).

Barrette argues that “the owner or officer of a business may testify as to the value or

profits of a business” and that a jury would be able to draw reasonable conclusions

from his testimony without speculating. ECF No. 102 at 6. Barrette also contends

that beyond the value of the patent applications, desAutels’s anticipated testimony

relates to Barrette’s damages that include legal fees for (1) “corrective patent work”

and (2) enforcing Integrity’s intellectual property warranty under the Asset Purchase

Agreement. ECF No. 102 at 4.

Federal Rule of Evidence 701 permits a witness to testify to his or her opinion

to the extent it is “rationally based on the witness’s perception,” “helpful to clearly

understanding [their] testimony or to determining a fact in issue,” and “not based on

scientific, technical, or other specialized knowledge within the scope of Rule 702.” See

Swajian v. Gen. Motors Corp., 916 F.2d 31, 36 (1st Cir. 1990) (“For opinion testimony

of a layman to be admissible[,] three elements must be present. First, the witness

must have personal knowledge of the facts from which the opinion is to be derived.

Second, there must be a rational connection between the opinion and the facts upon

which it is based. Third, the opinion must be helpful in understanding the testimony

or determining a fact in issue.”).

As a principal participant in the transaction, desAutels may testify to relevant,

admissible facts regarding the transaction based on his personal knowledge. As the

President of Barrette, desAutels also has personal knowledge of Barrette’s prior

business acquisitions and Barrette’s sales projections for the DuraLife products,

which may, of course, provide a basis for lay opinion testimony. Nat’l Starch & Chem.

Trading Co. v. M/V STAR INVENTANA, No. 05-91-P-S, 2006 WL 1876996, at *3 (D.

Me. July 5, 2006) (“A witness may testify under Rule 701 about ‘inferences that he

could draw from his perception’ of a business’s records, or ‘facts or data perceived’ by

him in his corporate capacity.” (quoting Teen–Ed, Inc. v. Kimball Int’l, Inc., 620 F.2d

399, 403-04 (3d Cir. 1980))). The extent to which he may offer opinions or inferences

as to the value of the patent applications based on this personal knowledge depends

on whether the opinions are rationally based on his perceptions. Fed. R. Evid. 701;

Downeast Ventures, Ltd. v. Washington Cnty., 450 F. Supp. 2d 106, 109 (D. Me. 2006)

(“Under the Federal Rules of Evidence, the primary limitation on the valuation

testimony of a corporate employee is foundational; Rule 701 permits a witness to

testify to his opinion to the extent it is ‘rationally based’ on his perceptions . . . .”

(quoting Fed. R. Evid. 701)).

Barrette contends that “desAutels’s years of experience and close involvement

with the acquisition of Integrity’s assets, as well as other acquisitions, qualifies him

to testify as to why Barrette paid $10.8 million dollars for Integrity’s assets in this

case.” ECF No. 102 at 8. But Barrette otherwise fails to provide any concrete

information regarding the basis for desAutels’s opinion. Although desAutels testified

at his deposition that he believed $1.2 million dollars was a “fair offer” for the two

pending patent applications, ECF No. 94-4 at 139:6, and mentioned several earlier

transactions he had participated in, he otherwise offered no details regarding those

transactions, such as the extent to which they involved the valuation of intellectual

property or, more specifically, the valuation of patent applications.11 Barrette’s

11 DesAutels testified as follows regarding the other acquisitions he relied on to arrive at a combined

value of $1.2 million for the two patent applications:

Q: What comparable acquisitions are you referring to?

A: I would compare this acquisition to Alumi-Guard, as an example. And, again,

just to specify, the $1.2 million, I thought it was a fair offer; but I would say we

would have paid a lot less than this in our previous acquisition.

Q: Other than Almi-Guard, any other particular acquisition that you were using

as a benchmark with . . .to measure against the Integrity purchase?

A: It would be Satellite Manufacturing, most of our acquisition, I would say.

Q: Satellite Manufacturing, that’s the name of the company that you acquired?

statements of material fact are even less specific as to the facts upon which

desAutels’s valuation was based, stating only that “[t]he value of the intellectual

property being sold by [Integrity] to Barrette was included in the amount allocated

to “Goodwill” in the Purchase Price Allocation Schedule.” ECF No. 101-1 at 15, ¶ 38.

Accordingly, there is little meaningful information offered by Barrette from

which to conclude that desAutels’s lay opinion of the value of the DuraLife Step-Clip

patent application is rationally based on his perception of facts known to him.

Instead, his opinion appears to be based on nothing more than his general experience

in having participated in Barrette’s prior acquisition of other unrelated businesses

that may or may not have included intellectual property. Without having provided

any specific information about those prior transactions, Barrette cannot show that

desAutels’s opinion regarding the value of the Duralife Step-Clip application has any

basis in fact. DesAutels also testified that he did not receive any professional or

A: Yes, to name a few.

Q: Any other acquisitions that you have in mind as being the specific benchmark

that you were measuring the Integrity purchase against to come up with that

number?

A: We . . . were starting to negotiate with MVP in the same timeline as well, but

I don’t think it was close, either; but we were negotiating in the same timeline.

Q: Can you tell me what the purchase price was in Alumi-Guard?

A: Alumi-Guard was . . . it’s been a while, but in $20-, $20-, $23 million, something

like this with an earnout.

Q: How about Satellite Manufacturing?

A: Very small, $1 million.

Q: And MVP?

A: Twenty.

Q: What was . . . the product line that Alumi-Guard was involved with?

A: Aluminum fence and rail.

Q: And Satellite Manufacturing?

A: Aluminum fence.

Q: And MVP?

A: Vinyl fence and vinyl rail.

ECF No. 94-4 at 139:1-140:16.

informal analysis of the patent applications and their values. In addition, the

Goodwill line item in the Asset Purchase Agreement does not itself provide a

foundation for the $1 million estimate because the line item—totaling $3.623

million—offers no indication as to what assets were included in the total amount or

the value assigned to each asset.

Although the summary judgment record contains almost no information as to

facts forming the basis for desAutels’s lay opinion regarding the value of the Duralife

Step-Clip patent application, his lay opinion as to the value of the Competitor Step-

Clip application is supported. Specifically, desAutels testified that he and True had

assigned a value of $200,000 to the Competitor Step-Clip application through their

negotiations. Although Eaton Peabody disputes this, arguing that the $200,000 was

understood by the parties to be the amount of a working capital shortfall, that

disputed fact does not detract from desAutels’s opinion and, therefore, Barrette’s

assertion that the figure was an agreed-to value for the Competitor Step-Clip

application arrived at during an arms-length negotiation.

Accordingly, Eaton Peabody’s Motion in Limine is granted in part as to

desAutels’s opinion testimony about the $1 million valuation of the DuraLife patent

application. The motion is denied in part as to desAutels’s opinion regarding the

Competitor Step-Clip patent application.

(b) Barrette’s Estimates of the Value of the Patent Applications

I now turn to Barrette’s remaining evidence of compensatory damages.

Barrette offers various estimates—most of which are based on desAutels’s

testimony—of the values of the two patent applications at the time of the

negotiations. As I explain below, most of these estimates are not “grounded on facts

in evidence,” Tang of the Sea, Inc. v. Bayley’s Quality Seafoods, Inc., 1998 ME 264, ¶

8, 721 A.2d 648 (quoting Williams v. Ubaldo, 670 A.2d 913, 917 (Me. 1996)), and

would not permit a jury to calculate damages to a reasonable certainty without

speculation and conjecture.

First, Barrette points to the Goodwill line item in the agreement—which

totaled $3.623 million—and argues that this amount reflected, among other things,

the value of the intellectual property assets, including the patent applications. Eaton

Peabody denies this, arguing that witness Michael E. High, an attorney, testified that

“goodwill is in there at a certain number. And usually the IP would be part of the

goodwill[,]” but he also confirmed “that the ‘goodwill component’ in the Asset

Purchase Agreement [in this case] does not specifically list patent applications or

issued patents.” ECF No. 107-1 at 11-12, ¶ 38 (quoting ECF No. 101-5 at 11, Tr: 38:4-

18). Eaton Peabody also argues that although “Mr. desAutel testified that goodwill

could include things like a ‘patent,’” the plain terms of the Asset Purchase Agreement

“did not contemplate patents or patent applications being valued as or considered as

‘goodwill.’” ECF No. 107-1 at 11-12, ¶ 38. The preceding evidence, viewed in the light

most favorable to Barrette, would not permit a factfinder to calculate, without

speculation or conjecture, the percentage or portion of the $3.623 million line item

that represented the value of the two patent applications.

Second, Barrette argues that both Barrette and Integrity believed that the

total purchase price, $10.8 million, included the two patent applications. Barrette

alleges that the value of these patent applications—specifically the DuraLife Step-

Clip application—was a primary motivating factor in its decision to pursue Integrity

Composites’ assets and agree to the purchase price. Barrette alleges that “[i]f

[Integrity] had not represented that . . . [they] had a patent pending on the DuraLife

Step-Clip, Barrette would not have pursued the acquisition,” and that “[a] portion of

what Barrette paid for the assets of Integrity Composites was based on the purported

existence” of the two pending patent applications.12 ECF No. 101-1 at 14, ¶¶ 32, 34.

Barrette’s and Integrity’s recognition that an unspecified portion of the total purchase

price—over $10 million—represented the value of the two patent applications, and

desAutels’s belief that the patent applications held substantial value, do not

constitute reasonably specific estimations of Barrette’s damages. Nor is desAutels’s

opinion about what motivated Barrette to pay $10.8 million for all of Integrity’s assets

helpful to determining the specific value of the patent applications at the time of the

sale.

Barrette’s most specific estimate of damages is $1.2 million, which it calculated

based on (1) the $1 million amount, which was desAutels’s “conservative” estimate of

12 Eaton Peabody disputes this statement for lack of record support and argues that desAutels was

more interested in the DuraLife brand than the pending patent application. The record reflects that

desAutels expressed interest in the Step-Clip products and technology more broadly, including the

DuraLife product that was patent-pending. He stated that DuraLife was “what really attracted my

attention to the company. I would say without this, I don’t think I would have showed up at that

location.” ECF No. 94-4 at 50:4-21. Viewing the evidence in the light most favorable to Barrette, I

deem it admitted that desAutels was largely motivated to pursue the acquisition of Integrity

Composites’ assets based on the DuraLife brand and step-clip application that would “give[] Duralife

an edge on other competitors.” ECF No. 94-4 at 50:19-20.

the value of the DuraLife Step-Clip patent application, ECF No. 101 at 13, and (2)

the $200,000 amount, which Barrette argues represents the consideration it paid in

exchange for adding the Competitor Step-Clip patent application to the transaction.

At the very least, Barrette argues, $200,000 represents sufficiently specific evidence

of the value of the Competitor Step-Clip application. Because I concluded that

desAutels’s opinion as to the value of the DuraLife Step-Clip application is an

inadmissible lay opinion, I address only the $200,000 valuation of the Competitor

Step-Clip application.

Barrette and Eaton Peabody dispute the significance of this amount. While

Barrette contends that Integrity “offered to add the Competitor Step-Clip patent

application into the deal for an additional $200,000 in consideration,” ECF No. 101-1

at 11, ¶ 11, Eaton Peabody argues that this part of the deal was “negotiated . . . to

address the shortfall in Integrity’s working capital calculation that included transfer

of the Competitor Clip patent application.” ECF No. 107-1 at 5, ¶ 11. Viewed in the

light most favorable to Barrette, the $200,000 value is competent and specific

evidence of the application’s actual value, which would permit a jury to calculate with

reasonable certainty Barrette’s damages. However, Barrette cannot recover losses—

including the value of the Competitor-Step Clip patent application—that it has

successfully mitigated. Although the $200,000 may represent the value of the

Competitor Step-Clip application, Barrette has not proffered evidence of the value of

the replacement patent applications—and ultimately issued patents—that it

obtained through its mitigation efforts. Thus, there is no basis to compare the

claimed $200,000 value of the Competitor Step-Clip application with the values of the

replacement applications, and to determine with reasonable certainty whether

Barrette effectively recovered the value of the benefit of its bargain. Accordingly, this

estimation of the value of the Competitor Step-Clip application, without more, is

insufficient proof of damages.

As to evidence of other damages, for reasons I will address, Barrette has not

offered proof of any damages that it was unable to mitigate, beyond the fees, costs,

and expenses it incurred in mitigating its damages.

(c) Consequential Damages

“[A] plaintiff has a duty to use reasonable efforts to mitigate his or her

damages.” Lindsey v. Mitchell, 544 A.2d 1298, 1301 (Me. 1988). “The doctrine of

mitigation of damages, or avoidable consequences, encourages plaintiffs to take

reasonable steps to minimize losses caused by a defendant’s negligence by prohibiting

recovery for any damages that the plaintiff could reasonably have avoided.” In re

Hannaford Bros., 2010 ME 93, ¶ 12, 4 A.3d 492. However, “[a] corollary of the

mitigation doctrine permits the plaintiff to recover for costs and harms incurred

during a reasonable effort to mitigate.” Id.

Barrette successfully mitigated its damages by hiring Maldjian to revive the

terminated patent applications filed by Frawley, and to subsequently prepare and file

similar or substantially similar patent applications. As a result of Barrette’s efforts,

new patents applications—and ultimately patents—were obtained, and, as desAutels

testified at his deposition, the products covered by these new patents are now being

produced by Barrette and sold to its customers.

Barrette and Eaton Peabody dispute two aspects of these mitigation efforts.13

First, they dispute the extent to which the designs of the D206 and D428 applications

differed from the subsequent patent applications that Barrette applied for and

ultimately obtained. Second, they dispute whether Barrette “sells products that are

substantially similar to the products that would have been covered by the [two]

applications (had they issued),” and whether the products are sold to the same

customers. ECF No. 95-2 at 3, ¶¶ 13, 14.

Despite these disputes, however, Barrette has not shown actual losses

resulting from any purported difference in the patent applications or the covered

products. Specifically, whether the subsequent patent applications were subtly or

substantially different in design, Barrette has not provided a reasonable estimate of

the difference between the purported value of the original patent applications, and

the value of the replacement patent applications obtained by Maldjian. Barrette

argues that because Maldjian’s patent applications were ultimately issued by the

USPTO, “this points to the conclusion that the Patent Applications that were

allegedly sold to Barrette could and would have received USPTO approval and were

patentable.” ECF No. 101 at 16. This misses the mark. If in fact the applications

13 Integrity moved to strike Eaton Peabody’s Statements of Material Fact 11, 12, and 13 on the

grounds that the statements constitute “opinion[s] of an expert, not a material fact.” ECF No. 100-2

at 4. Local Rule 56(e) does not allow for “motions to strike” in an opposition to summary judgment.

Rather, a party must include as part of its response that the statement of fact “should be stricken.” D.

Me. Loc. R. 56(e). The party must also admit, deny, or qualify the statement. D. Me. Loc. R. 56(e).

Accordingly, in keeping with the Local Rule, I do not consider Integrity’s requests.

were virtually equivalent to the patents that ultimately issued, then the patents

obtained through mitigation efforts—and the products covered by those patents—

have fully restored Barrette to the position it would have been in but-for the alleged

breach of contract and misrepresentations. Likewise, even if the customer base for

the products protected by the replacement patents differs from the customer base

that Barrette expected to attract with the original applications, there is no indication

that Barrette has suffered any losses as a result of this difference. Furthermore,

Barrette has not offered any evidence that the delay in obtaining replacement patent

applications caused it to incur any losses. Thus, the question becomes whether

Barrette has suffered any additional consequential damages, including its mitigation

expenses..

Barrette alleges that it “has incurred various forms of consequential damages,

including, but not limited to, the professional and other costs it has incurred in

attempting to salvage patent protection for the Step-Clip technology.” ECF No. 102-

1 at 6. Eaton Peabody concedes this, stating that “to the extent there is any question

of fact remaining on the issue of Barrette’s damages, it remains only as to what

Barrette has paid in total to acquire the new patents.”14 ECF No. 107 at 9. However,

14 Barrette alleges that it “has incurred legal fees to its litigation counsel in the present action, which

are still ongoing, in order to enforce its indemnification rights under the [Asset Purchase Agreement]

arising out of the invalidity of the D206 and D482 Applications.” ECF No. 101-1 at 15, ¶ 41. Eaton

Peabody denies this, stating that “Barrette has incurred legal fees for more than simply ‘enforcing its[]

indemnification rights under the [Asset Purchase Agreement] . . . .’. Barrette has brought claims in

tort, including intentional and negligent misrepresentations made by [Integrity], as well.” ECF No.

107-1 at 12 (second alteration in original). Viewed in the light most favorable to Barrette, I treat as

admitted that Barrette’s legal fees incurred in the present action arise, in part, from its efforts to

enforce its indemnification rights. To the extent that these fees constitute consequential damages, I

address them further below, see infra, p. 31.

Eaton Peabody contends that Barrette has not shown evidence of lost sales or damage

to its reputation, while Barrette argues that desAutels’s deposition testimony

constitutes proof of damages regarding “a decline in . . . sales of DuraLife products in

2019 versus projections” and damage to Barrette’s reputation. ECF No. 101-1 at 4-5.

I first address Barrette’s evidence of lost sales and damage to its reputation, and then

turn to Barrette’s evidence of mitigation expenses.

(i) Evidence of Lost Sales and Reputation Damage

A party may be entitled to recover consequential damages in the form of lost

sales, future income, or damage to its reputation arising from a breach of contract or

tortious conduct. See, e.g., Marquis v. Farm Fam. Mut. Ins. Co., 628 A.2d 644, 650

(Me. 1993) (“Damages for loss of ‘[p]rospective profits are allowable only if they can

be estimated with reasonable certainty.’” (quoting Ginn v. Penobscot Co., 334 A.2d

874, 887 (Me. 1975))). To recover such damages, the party “must establish: (1) [t]he

amount of [his or her] damages to a reasonable, as distinguished from a

mathematical, certainty, and (2) [t]hat the damages for which [he or she] seeks

compensation were reasonably within the contemplation of the contracting parties

when the agreement was made.” Forbes v. Wells Beach Casino, Inc., 409 A.2d 646,

654-55 (Me. 1979) (internal citation omitted) (citing McDougal v. Hunt, 146 Me. 10,

14, 76 A.2d 857, 860 (1950)); Snow v. Villacci, 2000 ME 127, ¶ 13, 754 A.2d 360)

(“When the evidence offered to show prospective damages is in the nature of ‘mere

guesswork and conjecture,’ the factfinder will be unable to determine the plaintiff's

loss ‘with reasonable certainty.’” (quoting Ginn, 334 A.2d at 887)). For reasons I will

explain, there is insufficient evidence in the record to permit a reasonable factfinder

to conclude that Barrette suffered lost sales or reputational damage as a result of the

alleged breach of contract and misrepresentations.

DesAutels testified, without providing details, that the actual sales of the

DuraLife product in “2019 was a disaster compared to projections.” ECF No. 94-4 at

131:13-14. He confirmed that the sales projections for DuraLife products over a

three-year period, including 2019—projected in the range of $17 million—was

ultimately accurate, but he stated that “the business was very different. We had to

revive something to get to that number.” ECF No. 94-4 at 131:25, 132:1. He explained

that the successful sales of DuraLife in 2020 resulted from the replacement patent

applications and sales to a new customer, Home Depot, and had “nothing to do with

what we bought” from Integrity. ECF No. 94-4 at 132:3-7. Apart from this deposition

testimony, Barrette has not offered any evidence that explains the degree to which

the company suffered lost sales or profits attributable to the conduct of Integrity or

Eaton Peabody. The fact that the sales of DuraLife products in 2019 did not meet

expectations does not itself establish a causal link between the terminated patent

applications and pecuniary damages to Barrette, nor does it provide an estimate of

any losses with reasonable certainty. Accordingly, because a jury would be unable to

calculate with reasonable certainty Barrette’s damages arising from lost sales, and

there is no other evidence in the record for these losses, Barrette cannot meet its

burden of proof.

Eaton Peabody also argues that Barrette has not identified any damage to its

business reputation as a result of the terminated patent applications. ECF No. 95-2

at 3, ¶ 16. Barrette disputes this and argues that Eaton Peabody relies on a record

citation that “refers only to one customer (Lowe’s), and Mr. desAutels disagreed with

the proposition that Barrette’s reputation had not been affected.” ECF No. 101-1 at

5. Barrette’s argument is unpersuasive. DesAutels did not confirm that Barrette’s

reputation had been harmed because of the “nonexistent patent applications,” but

stated only that economic harm resulting from the harm to its reputation “doesn’t

show, but times will tell.” ECF No 94-4 at 122:3, 16. When asked whether Barrette

lost its deal with Lowe’s as a result of a misrepresentation about the nonexistent

patent applications, desAutels stated: “We were never told that it was a

misrepresentation about a patent application, but we lost the business and we didn’t

win the decking business. We were told this was a branding decision. . . . I don’t think

we didn’t win the [decking] business because of the patent pending

misrepresentation.” ECF No. 94-4 at 122:22-25, 123:1, 7-9. DesAutels also testified

that he did not believe that Barrette ever had to change its website advertising

DuraLife products to remove reference to “patent pending” because they filed new

patent applications “immediately at the same time.” ECF No. 94-4 at 123:19. He

further testified that he did not think that Barrette ever had to remove “patent

pending” from its marketing materials.

Accordingly, Barrette has not offered sufficient evidence that would permit a

jury to find that Integrity’s conduct caused Barrette to suffer lost sales or reputational

damage, nor would a jury be able to calculate those damages with reasonable

certainty. Because Barrette cannot meet its burden of proof, Eaton Peabody is

entitled to summary judgment as to the issue of consequential damages arising from

lost sales and damage to reputation.

(ii) Evidence of Mitigation Expenses

Barrette also alleges that it has incurred fees, costs, and expenses—including

hiring Maldjian—in its efforts to revive the patent applications and file new

applications. Eaton Peabody alleges that Barrette “paid Maldjian approximately

$46,860.54 for his work in trying to revive the D206 and D482 applications and in

obtaining the [subsequent] patents.” ECF No. 95-2 at 5, ¶ 27. Although Barrette

admits that it paid Maldjian for his work to revive the two patent applications and

obtain new patents, Barrette argues that Maldjian “testified that the [$46,860.54 in]

fees included on [Deposition] Exhibit 11 did not include fees related to his efforts to

revive the D206 and D482 applications or other relevant fees incurred since May 20,

2021.”15 ECF No. 101-1 at 8, ¶ 27. Drawing all reasonable inferences in Barrette’s

favor, it appears that Barrette paid Maldjian at least $46,860.54, and has also

incurred additional fees and expenses related to reviving the original patent

applications. Although the total amount paid cannot be determined from the

15 At Maldjian’s deposition, he was asked to look at an invoice to Barrette in the amount of

$46,860.54. He confirmed that the total included costs, fees, and attorney’ fees for patent applications

filed by Barrette, but that it did not include fees incurred in the present litigation against Integrity.

This total also does not appear to include fees and costs that Barrette paid to Maldjian when he was

originally hired to revive the D206 and D482 patents.

summary judgment record, the amount is susceptible to being calculated based on

invoices and other business records.

Accordingly, Eaton Peabody is entitled to summary judgment on Barrette’s

claims for compensatory damages arising from Integrity’s alleged contractual breach

and misrepresentations, and on the issue of consequential damages in the form of lost

sales and damage to reputation. However, summary judgment is denied on the issue

of consequential damages in the form of mitigation expenses because Barrette has

put forth reasonably certain and non-speculative evidence of fees, costs, and expenses

it incurred while attempting to mitigate avoidable damages arising from Integrity’s

conduct, and a genuine dispute of material fact exists as to the amount and extent of

those damages.

C. Summary Judgment as to Integrity’s Third-Party Complaint

Eaton Peabody also seeks summary judgment on Integrity’s Third-Party

Complaint in which Integrity seeks indemnification from Eaton Peabody for any

damages that may be awarded to Barrette.16 Integrity also claims that it is entitled

to recover from Eaton Peabody (1) “full attorneys’ fees and costs in defending

Barrette’s action as a matter of law,” ECF No. 100-1 at 17; (2) all attorney fees and

costs incurred as a result of Eaton Peabody’s tortious conduct—in particular, the fees

incurred in bringing the breach of fiduciary duty claim against Eaton Peabody; (3)

“[attorney] fees and costs associated in prosecuting the claims against the Third Party

16 Because Integrity has not filed a cross-motion for summary judgment on the issues of

indemnification and liability, I do not grant relief in connection with Eaton Peabody’s concession of

liability on Counts I-V of Integrity’s Third-Party Complaint.

Defendants [which] are . . . consequential damages incurred and are fully

recoverable[,]” ECF No. 100-1 at 20, and (4) attorney fees and costs under the bad

faith litigation conduct exception to the American Rule, including attorney fees

arising from its opposition to Eaton Peabody’s Motion for Summary Judgment.17

Integrity also alleges that it is entitled to punitive damages because of Frawley’s

conduct.

I first address Integrity’s claims for attorney fees incurred from defending itself

against Barrette’s action and Integrity’s claims for attorney fees incurred from

prosecuting its breach of fiduciary duty claim, and then turn to the remaining claims

for attorney fees and punitive damages.

1. Attorney Fees Incurred in Defending Against Barrette’s Action

Integrity seeks to recover the fees it incurred in defending itself against

Barrette’s claims under the “collateral litigation exception” to the American Rule.

That exception permits a plaintiff to “recover fees expended in collateral litigation

with a third party as a result of the defendant’s wrongdoing.” ECF No. 100-1 at 18.

Eaton Peabody does not dispute that it is liable for reasonable attorney fees arising

from Integrity’s defense of Barrette’s claims, noting that: “To the extent . . .

[Integrity] can prove fees reasonably expended in the defense of claims caused by

[Eaton Peabody and Frawley’s] actions . . . such fees are likely recoverable.” ECF No.

95-1 at 13.

17 Because the parties focused their briefing on the recovery of attorney fees and did not meaningfully

address the basis for recovery of costs, I limit my analysis to recoverable attorney fees and do not

address the extent to which Integrity may be statutorily entitled to recover costs under federal or

Maine law.

In support of its claim for attorney fees under this exception, Integrity cites to

Gagnon v. Turgeon, 271 A.2d 634, 635 (Me. 1970). In Gagnon, the Law Court held

that “[w]here the wrongful act of a defendant has involved the plaintiff in litigation

with others, or placed him in such relation to others as makes it necessary for him to

incur expense to protect his interests, such costs and expenses, including attorney

fees, must be treated as the legal consequence of a wrongful action and may be

recovered as damages.” 271 A.2d at 635. Although the Law Court recognized this

limited exception to the general rule that a prevailing party is responsible for its own

fees and expenses, the decision did not address or implicitly recognize the “collateral

litigation exception” to the American Rule. See id. Subsequent Law Court decisions

have also made clear that “Maine has not recognized the collateral litigation

exception to the American rule.”18 Soley v. Karll, 2004 ME 89, ¶ 11 n.3, 853 A.2d 755.

While the collateral litigation exception has not been recognized, the general rule

expressed in Gagnon applies to Integrity’s claims for attorney fees incurred as a

result of defending itself against Barrette’s claims, and Eaton Peabody does not

dispute that it is liable for these fees.

18 Integrity cites to Maine v. CPM Constructors, No. BCD-CV-14-44, 2014 Me. Bus. & Consumer

LEXIS 13, at *10 (Aug. 11, 2014), which notes that “[t]he status of the collateral litigation exception

in Maine is uncertain,” citing to both Soley v. Karll, 2004 ME 89, ¶ 11 n.3, 853 A.2d 755, which held

in 2004 that the exception has not been recognized in Maine, and to Gagnon, 271 A.2d 634, which was

“an earlier decision [where] the Law Court espoused what appears to be the collateral litigation

exception, without labeling it as such.” However, CPM Constructors goes on to specifically note the

“important limitation” on the collateral litigation exception that was explicitly recognized in Gagnon:

“the exception does not apply to attorneys’ fees incurred in litigation between the plaintiff and the

defendant or persons in privy to the contract agreement or events through which the litigation arises.”

Id. at *10. These limitations, however, do not prevent recovery of the fees that Integrity incurred in

defending against Barrette’s claims.

2. Attorney Fees Incurred in Prosecuting the Breach of Fiduciary

Duty Claim

Both Eaton Peabody and Integrity acknowledge that under the American Rule

governing the award of attorney fees, the Court has the discretion to award fees

arising from certain tortious conduct. See Murphy v. Murphy, 1997 ME 103, ¶ 15,

694 A.2d 932 (Me. 1997) (“Although a prevailing litigant generally has no right to

recover attorney fees, a court may award attorney fees for some kinds

of tortious conduct, including a breach of a fiduciary duty.” (citation omitted)). Eaton

Peabody emphasizes—but otherwise does not dispute—that an award of attorney fees

for certain tortious conduct is discretionary, and that even if the Court discretionarily

awards fees connected to Integrity’s prosecution of its breach of fiduciary duty claim

against Eaton Peabody, Integrity is only entitled to collect fees on “that claim.” ECF

No. 108 at 7 n.2 (citing Advanced Constr.. Corp. v. Pilecki, 2006 ME 84, ¶ 30, 901 A.2d

189). Because Eaton Peabody has conceded that Frawley breached the standard of

care in prosecuting the patents and breached his fiduciary duty to Integrity, and that

Eaton Peabody is vicariously liable for that breach, Integrity is entitled to a

discretionary award of attorney fees as a matter of law.

3. Attorney Fees Incurred in Prosecuting the Third-Party

Complaint

“The so-called American Rule provides that parties are responsible for their

own attorney fees absent a statutory or contractual provision stating otherwise.”

Foremost Ins. Co. v. Levesque, 2007 ME 96, ¶ 6, 926 A.2d 1185. “Maine follows

the American rule . . . .” Alternative Energy, Inc. v. St. Paul Fire & Marine Ins. Co.,

183 F. Supp. 2d 106, 107 (D. Me.), aff’d, 311 F.3d 450 (1st Cir. 2002).19 A court also

has the authority to award attorney fees under “‘certain

recognized common law authorizations[,]’” including an award of fees “‘as damages

for certain egregious conduct’” and “for some kinds of tortious conduct.” Baker v.

Manter, 2001 ME 26, ¶ 13, 765 A.2d 583 (first quoting Linscott v. Foy, 1998 ME 206,

¶ 16, 716 A.2d 1017, then quoting Murphy, 1997 ME 103, ¶ 15, 694 A.2d

932). Integrity argues that there are two relevant exceptions to the American Rule.

First, it urges the Court to find that Eaton Peabody is liable for fees that Integrity

has incurred in bringing the Third-Party Complaint—which Integrity argues

constitute “consequential damages.” ECF No. 100-1 at 19. Second, Integrity argues

that there is a “bad faith litigation” or “vexatious conduct” exception to the American

Rule that should permit it to recover all of the attorney fees that Integrity incurred

from prosecuting the Third-Party Complaint. Eaton Peabody argues that Integrity

is not entitled to attorney fees and costs incurred in bringing its Third-Party

Complaint because the American rule governing attorney fees precludes a prevailing

litigant from recovering fees and costs, and that likewise, it is not entitled to recover

attorney fees arising out of this motion practice.

19 “Federal courts sitting in diversity jurisdiction are constrained in their interpretation of state law,”

and therefore the Court must determine whether existing Maine law recognizes exceptions to the

American Rule. Caldwell Tanks, Inc. v. Haley & Ward, Inc., 471 F.3d 210, 218 (1st Cir. 2006); see also

Douglas v. York Cnty., 433 F.3d 143, 149 (1st Cir. 2005) (“As a federal court sitting in diversity, we try

to apply our best understanding of the principles Maine has adopted. It is not our role to expand

Maine law; that is left to the courts of Maine.”).

(a) Attorney Fees as Consequential Damages

Integrity argues that its fees incurred in prosecuting its Third-Party

Complaint are “consequential damages” arising from Eaton Peabody’s tortious

conduct, and that many states are “changing [their attitude to the American Rule]

with respect to a civil action arising out of an attorney’s professional negligence.”20

ECF No. 100-1 at 19. This argument is unpersuasive. The Law Court decision relied

upon by Integrity—Estate of Hoch v. Stifel, 2011 ME 24, 16 A.3d 137—did not involve

a claim for attorney malpractice, nor does it otherwise suggest that the decision was

intended to address recoverable consequential damages in attorney negligence cases.

Accordingly, Integrity is not entitled to recover fees and costs as “consequential

damages” incurred in litigating its Third-Party Complaint.

(b) “Bad Faith Litigation” Exception to the American Rule

Integrity also argues that there is a “vexatious conduct” or “bad faith conduct”

exception to the American Rule, and contends that this exception entitles it to recover

its attorney fees incurred in bringing the Third-Party Complaint. A federal district

court sitting in diversity “possesses inherent power to shift attorneys’ fees when

parties conduct litigation in bad faith,” regardless of whether such fee-shifting is

authorized by state law. Jones v. Winnepesaukee Realty, 990 F.2d 1, 4-5, 5 n.8 (1st

20 Eaton Peabody challenges Integrity’s reliance on Gagnon as it relates to Integrity’s claims for fees

incurred in bringing the Third-Party Complaint, and argues that the rule “does not apply to attorneys'

fees incurred in litigation between the plaintiff and the defendant, . . . or persons in privy to the contract

agreement or events through which the litigation arises.” ECF No. 108 at 6 (quoting Gagnon, 271 A.2d

at 635). But Integrity does not rely on Gagnon to support its claim that it is entitled to fees incurred

in bringing the Third-Party Complaint—instead, Integrity only relies on Gagnon to support its claims

for fees incurred defending itself against Barrette’s claims, see supra p. 34. Therefore, I need not

address Eaton Peabody’s argument on this point further.

Cir. 1993) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 51-53 (1991)). This inherent

power “should be used sparingly and reserved for egregious circumstances.” Id. at 5.

To justify fee-shifting under this exception, “the moving party must demonstrate that

the losing party’s actions were ‘frivolous, unreasonable, or without foundation, even

though not brought in subjective bad faith.’” Dubois v. U.S. Dep't of Agric., 270 F.3d

77, 80 (1st Cir. 2001) (quoting Loc. 285, Serv. Emps. Int’l Union v. Nonotuck Res.

Assocs., Inc., 64 F.3d 735, 737 (1st Cir. 1995)).

Maine law similarly recognizes a limited “bad faith litigation” or “egregious

conduct” exception to the American Rule. Soley, 2004 ME 89, ¶ 11, 853 A.2d 755;

Linscott, 1998 ME 206, ¶ 17, 716 A.2d 1017. Courts award attorney fees under this

exception only in the “most extraordinary circumstances” and “may not [award fees]

as a sanction in the absence of significant bad faith on the part of a litigant or his

agents.” Linscott, 1998 ME 206, ¶ 16, 716 A.2d 1017; see also Chiappetta v. LeBlond,

544 A.2d 759, 760-61 (Me. 1988). Because the parties brief this issue based on the

Court’s inherent fee-shifting authority under federal law, rather than under the

analogous state-law exception to the American Rule, I analyze the issue under federal

law.

Here, Integrity argues that Eaton Peabody’s conduct throughout this litigation

was done in bad faith, alleging that:

From the moment [Eaton Peabody] became aware of a potential

claim, [they] had all of Frawley’s emails and documents and had

access to Frawley to gain an understanding of the nature and

extent of his malpractice and subsequent coverup. Instead of

accepting liability, however, they mounted a frivolous defense,

denying material allegations in the Third-Party Complaint,

asserting unsubstantiated affirmative defenses[,] and forcing

Integrity to incur substantial attorneys’ fees to create a record of

the damning facts known to [them] all along.

ECF No. 100-1 at 23. Eaton Peabody disputes that its actions in defending the case

rise to the level of bad faith, noting that “[m]istakes were made . . . and [Integrity

was] harmed[,] [b]ut that does not entitle them to an award of discretionary fees, i.e.,

the punishment they seek.”21 ECF No. 108 at 8. Eaton Peabody contends that

Integrity has failed to plead any factual allegations that would prove bad faith, and

that summary judgment should therefore be granted on this issue. ECF No. 108 at

8.

Although Eaton Peabody has conceded liability for breaching the fiduciary

duty it owed Integrity, as well as vicarious liability for the acts and omissions of

Frawley, the record does not establish that Eaton Peabody’s conduct during this

litigation represents objective, bad faith abuse of the litigation process or of opposing

parties. Eaton Peabody’s conduct prior to the litigation—including the fact that it

knowingly represented itself as a firm with licensed patent practitioners and failed

to monitor any of Frawley’s activities between 2015-2018—may have been objectively

unreasonable. But that conduct occurred well-before this legal proceeding was

commenced. Similarly, Frawley’s misrepresentations and deceit did not occur in the

course of litigation or in anticipation of litigation.

21 Eaton Peabody alleges that “[Integrity] rejected the proposal of [Eaton Peabody] to reach a

stipulation to avoid the need for motion practice.” ECF No. 108 at 5 n.4. This potential stipulation is

not included in any statement of material fact, nor is it otherwise part of the summary judgment

record. Therefore, I decline to consider it in my analysis of Eaton Peabody’s conduct during litigation.

Integrity also argues that there is evidence of bad faith because Eaton Peabody

“intentionally withheld its concession of liability . . . until the pre-trial work of the

case was largely complete” and then “at the eleventh hour” concedes liability and

argues that Integrity and Barrette cannot prove their damages. ECF No. 100-1 at

16. Although it is true that Eaton Peabody only conceded its liability in this case

more than two years after it was initiated, Integrity has not shown that Eaton

Peabody’s Answer (ECF No. 15) to the Third-Party Complaint or subsequent legal

strategies were “frivolous, unreasonable, or without foundation,” Dubois, 270 F.3d at

80 (quoting Nonotuck Res. Assocs., Inc., 64 F.3d at 737), beyond the conclusory

allegation that Eaton Peabody “had all of Frawley’s emails and documents and had

access to Frawley.” ECF No. 100-1 at 23. Viewed in the light most favorable to

Integrity, even if Eaton Peabody had access to all of Frawley’s communications and

had the opportunity to hear Frawley’s explanations for his actions, that information

alone did not necessarily render Eaton Peabody’s conduct unreasonable. Rather, it

may be reasonable for a party in Eaton Peabody’s position, as an employer which may

be held vicariously liable for the acts of its employees, to not admit liability at the

outset and to instead engage in discovery to evaluate the strength of the claims

against it, to assess potential defenses, and to evaluate damages.

Integrity also has not offered support for its argument that Eaton Peabody’s

affirmative defenses—including comparative fault and failure to mitigate damages—

were “unsubstantiated” based on the information that Eaton Peabody possessed

when the litigation commenced. ECF No. 100-1 at 23. Nor do the parties’ statements

of material fact indicate that Eaton Peabody took other actions to impede the process

or efficiency of this litigation. A party defending against an action—including an

action it has reason to know at the outset presents a strong claim—is entitled to

engage in the litigation process in a good faith effort to assess the admissibility and

strength of the evidence against it on the issues of liability and damages, to examine

statutory and other defenses, and to preserve its right to have the dispute ultimately

decided by a jury if a settlement is not reached.

Thus, Integrity has not shown that it is entitled to recover attorney fees under

the “bad faith exception” to the American Rule or pursuant to the Court’s inherent

authority to award fees to a prevailing party based on the defending party’s bad faith.

Integrity also has not shown that the “bad faith exception” applies to its request for

attorney fees incurred in responding to the present Motion for Summary Judgment.

Although Integrity argues that Eaton Peabody’s motion practice “is further evidence

of their vexatious litigation conduct that has plagued this case from the outset[,]” as

I explained above, the record does not support a finding of bad faith conduct on the

part of Eaton Peabody in seeking summary judgment. ECF No. 100-1 at 25. Thus,

Integrity is not entitled to recover attorney fees that it incurred as a result of opposing

Eaton Peabody’s motion.

Accordingly, Eaton Peabody is entitled to summary judgment as to the issue of

Integrity’s attorney fees incurred in prosecuting the Third-Party Complaint and

Integrity’s attorney fees incurred in opposing the Motion for Summary Judgment.

4. Punitive Damages

Eaton Peabody also seeks summary judgment on Integrity’s claim for an award

of punitive damages. Common law awards of punitive damages serve “the useful

purposes of expressing society’s disapproval of intolerable conduct and deterring such

conduct where no other remedy would suffice.” Tuttle v. Raymond, 494 A.2d 1353,

1355 (Me. 1985) (quoting Jane Mallor and Barry Roberts, Punitive Damages: Toward

a Principled Approach, 31 Hastings L.J. 639, 641 (1980)). Punitive damages are

available upon a showing of actual or implied malice. Id. at 1361. Actual or express

malice exists where “the defendant’s tortious conduct is motivated by ill will toward

the plaintiff.” Id. See, e.g., Newbury v. Virgin, 2002 ME 119, ¶ 22, 802 A.2d 413

(holding that defendant’s conduct was sufficient to find actual or implied malice when

he took multiple actions to put plaintiff out of business and there was evidence of

“personal animosity toward [plaintiff] and [plaintiff’s] business practices”).

Malice may also be implied. “[W]here deliberate conduct by the defendant,

although motivated by something other than ill will toward any particular party, is

so outrageous,” malice can be implied. Tuttle, 494 A.2d at 1361. See Waxler v. Waxler,

1997 ME 190, ¶ 16, 699 A.2d 1161 (holding that the trial court’s finding of malice was

clearly erroneous because, among other things, the agent’s breach of fiduciary duty

and failure to take reasonable steps to address problems he had caused was not “so

outrageous that malice can be implied[,]” and “[t]he record is devoid of evidence that

[he] had the ability to cure the problems he had created”); Greenell Corp. v. Penobscot

Air Serv., Ltd., No. 99-31-P-C, 1999 WL 33117116, at *10 (D. Me. Aug. 19, 1999)

(finding that the defendant’s “alleged misrepresentations” involving the “‘hiding’ of

information” and “‘lead[ing] [the plaintiff] along’” did not “approach[] the necessary

level of outrageous conduct” required to sustain a claim for punitive damages (first

alteration in original)). Generally, acts of fraudulent misrepresentation do not,

without more, rise to the level of “outrageous conduct” required for malice to be

implied. See, e.g., Boivin v. Jones & Vining, Inc., 578 A.2d 187, 189 (Me. 1990)

(fraudulent misrepresentations did not constitute outrageous conduct). Similarly,

“[i]mplied malice . . . is not established ‘by the defendant’s mere reckless disregard of

the circumstances.’” St. Francis De Sales Fed. Credit Union v. Sun Ins. Co. of N.Y.,

2002 ME 127, ¶ 16, 818 A.2d 995 (quoting Tuttle, 494 A.2d at 1361); see id. ¶ 17

(finding that “[a]t best” the defendant “was reckless in drafting and issuing the

certificates [of insurance,]” which was not enough to support an implied malice

finding). Nor is grossly negligent conduct sufficient. Lehouillier v. E. Coast Steel,

Inc., 13 F. Supp. 2d 109, 110 (D. Me. 1998). See, e.g., Kelleher v. Boise Cascade Corp.,

683 F. Supp. 858, 860 & n.1 (D. Me. 1988) (finding that evidence showing that the

defendant knowingly withheld information about dangerous and unsanitary working

conditions from an employee “may indicate that [d]efendant acted recklessly,” but

that “the factfinder could not imply malice” from the defendant’s reckless conduct

alone). Implied malice requires “adequate proof that the defendant acted in a

sufficiently culpable manner,” Tuttle, 494 A.2d at 1359, which may be shown if the

defendant made sufficiently outrageous intentional misrepresentations,22 or if the

22 Compare Bratton v. McDonough, 2014 ME 64, ¶ 26, 91 A.3d 1050 (finding that the defendant

“affirmatively represented to [the plaintiffs] that there was no lead in the house when he knew that

defendant knew—or reasonably should have known—that harm would result from

his conduct (although this alone is generally not enough to find implied malice).23

Thus, in this case the fact that Frawley knew or reasonably should have known

that his conduct was likely to harm Integrity is not, standing alone, sufficient to

establish that he acted with implied malice. Additionally, even if Frawley made

deliberate misrepresentations and intentionally covered up his misconduct, evidence

of the nature and manner of this conduct must permit a reasonable factfinder to

conclude that Frawley’s conduct was not simply reckless or grossly negligent, but was

also outrageous.

Integrity argues that malice should be implied from Frawley’s misconduct in

covering up his gross negligence while knowing that his clients would ultimately be

harmed by his actions. ECF No. 100-1 at 7, 24. Integrity asserts that “Frawley knew

or should have known that falsifying the Intellectual Property Assignment

Agreement and lying to Integrity and True about the status of the patent applications

would harm Integrity.” ECF No. 100-2 at 2, ¶ 2. Eaton Peabody counters that there

is no “clear and convincing evidence that express or implied malice motivated the

lead was indeed present” and concluding that “[t]he nature of this intentional misrepresentation could

be sufficient for a fact-finder to find implied malice”), with Smith v. Loyd, No. RE-01-15, 2002 WL

31360644, at *5 (Me. Super. Ct. Sept. 25, 2002) (finding punitive damages unavailable as a matter of

law where plaintiff had not alleged any facts of “intentional misrepresentation” in a malpractice claim,

and that mere “failure to conduct adequate due diligence in the [p]laintiff’s real estate transactions

does not rise to the level of intentional outrageous conduct”).

23 See, e.g., Galarneau v. Merrill Lynch, Pierce, Fenner & Smith Inc., 504 F.3d 189, 204-05 (1st Cir.

2007) (reversing district court’s denial of judgment as a matter of law on punitive damages where an

employer’s conduct, even if it knew such conduct would significantly hinder employee’s job prospects,

was not done “with the intent to deprive [the plaintiff] of a job” and thus was not so outrageous as to

imply malice).

mistakes or bad conduct.” ECF No. 108 at 8 (citing Tuttle, 494 A.2d at 1363-64).

Eaton Peabody alleges that “[n]either Frawley nor Eaton Peabody have at any time

had the desire or intent to do harm to [Barrette] or [Integrity].”24 ECF No. 95-2 at 2,

¶ 2.

For reasons I will explain, I conclude that Frawley’s conduct in its totality,

viewed in the light most favorable to Integrity, would permit a reasonable factfinder

to conclude that Frawley acted with implied malice.

Although a party must show “clear and convincing evidence” of express or

implied malice at trial, Staples v. Bangor Hydro-Elec. Co., 629 A.2d 601, 604 (Me.

1993), at the summary judgment stage, the test is whether there is a genuine dispute

of material fact as to the existence of express or implied malice, see Angelica v.

Drummond Woodsum & MacMahon, P.A., No. Civ.A. CV-02-15, 2003 WL 22250354,

at *9 (Me. Super. Ct. Sept. 9, 2003). See, e.g., Rogers v. MacAdam, No. Civ.A. CV 01-

667, 2003 WL 21026718, at *1, 4 (Me. Super. Ct. Apr. 2, 2003) (finding sufficient

dispute of fact as to whether malice could be implied from a paralegal’s conduct when

her “initial actions were mistakes, serious ones” and she engaged in “schematic

concealment of her increasingly egregious acts,” which included lying to the client,

misrepresenting the status of the client’s worker’s compensation case, forging a

consent decree, and forging a check); see also Mangan v. Rumo, 226 F. Supp. 2d 250,

24 In support of this Eaton Peabody cites to Frawley’s testimony describing his relationship with

True, in which Frawley details his long-term friendship with True and True’s family. The record

citation does not reference Frawley’s relationship with Integrity Composites or Integrity Holdings or

Barrette. Nor does it support the statement that Frawley did not have a desire or intent to do harm

to True, Integrity, or Barrette. I therefore accept Integrity’s denial of Eaton Peabody’s statement.

254 (D. Me. 2002) (addressing defendant’s counterclaim for intentional infliction of

emotional distress and punitive damages against her former attorney, who she

accused of rape, the court held that “perhaps recklessness is what [the plaintiff] is

guilty of, but the factfinder will have to hear the facts and circumstances of [his]

conduct to determine, by clear and convincing evidence, whether it reaches the

implied malice threshold”).

The record does not show that Frawley was motivated by ill will or acted with

intent to harm Integrity. Absent this evidence, the nature and manner of Frawley’s

intentional misrepresentations and his knowing coverup of his misconduct must rise

to the level of “deliberate conduct . . . [that] is so outrageous that malice . . . can be

implied.” Tuttle, 494 A.2d at 1361.

Frawley undoubtedly acted with reckless disregard for his fiduciary duties

throughout the course of his dealings with Integrity, and his conduct fell far below

the standards of professionalism required of attorneys. He knowingly submitted

incomplete patent applications in a specialized area of law for which he was not fully

licensed to practice. After filing, he did not follow-up on the applications in any

manner to determine their status. Although he claims not to have received the notice

of deficiencies, a factfinder might well conclude that he received the notice but took

no action. In addition, a factfinder could conclude that Frawley, by falsely holding

himself out to be a skilled patent professional, and then carelessly pursuing

Integrity’s patent applications, demonstrated a reckless disregard for the fiduciary

duties he owed his client. A factfinder might also conclude that Frawley knew or

reasonably should have known that his deliberate misrepresentations to Integrity

and his prolonged concealment of his misconduct were likely to result in harm to

Integrity.

Frawley’s initial conduct certainly constituted a failure to exercise due

diligence, and was arguably grossly negligent or reckless, but that alone does not

constitute outrageous conduct that would allow malice to be implied. These

circumstances also cannot be compared to those cases in which the outrageous nature

of conduct is plainly obvious due to the egregious level of risk posed to human life and

safety.25 This does not end the inquiry, however, because Frawley’s conduct must be

viewed as a whole, including the conduct related to his alleged coverup of his

misdeeds. Here, there is a genuine dispute as to the existence of implied malice based

on this aspect of Frawley’s conduct. Frawley realized in June of 2018 that he had

never filed the second patent application, yet he expressly misrepresented its status

in communications with Integrity and Barrette. He subsequently repeated that

misrepresentation by memorializing the incorrect date in the Intellectual Property

Assignment Agreement that he prepared for his client, Integrity. Although he

testified that “he does not know why he listed the filing date . . . as June 15, 2017,”

25 See e.g., Graham v. Brown, 2011 ME 93, ¶ 13, 26 A.3d 823 (upholding punitive damages award on

claim for intentional infliction of emotional distress based on a finding of outrageous conduct involving

“numerous incidents of abuse and resulting injuries” inflicted by former boyfriend of plaintiff);

Butterfield v. Saucier, No. Civ.A. CV-01-466, 2003 WL 21018866, at *3-4 (Me. Super. Ct. Mar. 20, 2003)

(finding outrageous conduct when defendant led police on a high-speed chase, crashed into a concrete

wall, and plunged his truck into a river, and subsequently misdirected rescuers while his passenger

drowned underneath the truck); Lehouillier, 13 F. Supp. 2d at 112 (holding that “a factfinder could

reasonably find by clear and convincing evidence that, rather than recklessly disregarding the

circumstances, [the defendant], by knowingly and affirmatively creating a hidden, life-threatening

situation . . . in violation of the specific terms of its permit and of the law, engaged in conduct which

can be properly characterized as outrageous”).

ECF No. 100-2 at 21 (first emphasis added), he nonetheless filed the second

application—exhibiting the same deficiencies as the first application—with the

Patent Office and knowingly listed the incorrect filing date on the final Intellectual

Property Assignment Agreement. Thus, despite Frawley’s knowledge of his error—

an error which he could reasonably assume would prove harmful to his clients if it

was not remedied—he actively concealed his misconduct for almost a year. Integrity

did not learn of Frawley’s deceit until desAutels informed True about the terminated

applications in June 2019. This delay deprived Integrity of the opportunity to rectify

Frawley’s misconduct in a timely manner.

Frawley’s effort to coverup his misdeeds, when viewed in the light most

favorable to Integrity, could permit a reasonable factfinder to conclude that his

misconduct transcended the bounds of reckless disregard for the circumstances into

the realm of outrageousness because Frawley’s initial professional negligence

escalated into a series of fraudulent misrepresentations and outright lies. Rogers,

2003 WL 21026718, at *4 (concluding that the defendant’s fraudulent

misrepresentations, lies, and concealment could “amply be described as outrageous”).

Accordingly, Eaton Peabody is not entitled to summary judgment on the issue of

punitive damages because there is sufficient record evidence to support a finding of

implied malice.

III. CONCLUSION

For the reasons set forth above, it is ORDERED that Eaton Peabody’s Motion

for Summary Judgment (ECF No. 95) is GRANTED IN PART as to:

A. Barrette’s claims for compensatory damages and claims for consequential

damages arising from any lost sales or damage to reputation (ECF No. 1);

and

B. Integrity’s claims for attorney fees incurred in prosecuting its Third-Party

Complaint and claims for attorney fees incurred in opposing the Motion for

Summary Judgment (ECF No. 12).26

The Motion for Summary Judgment is DENIED in all other respects. It is

further ORDERED that Eaton Peabody’s Motion in Limine (ECF No. 79) is

GRANTED IN PART as to desAutels’s opinion testimony as to the value of the

DuraLife Step-Clip patent application and DENIED IN PART as to desAutels’s

opinion about the Competitor Step-Clip patent application value.

The Clerk’s Office is directed to schedule a case management conference with

the parties to address all outstanding issues.

SO ORDERED.

Dated this 31st day of March 2023.

/s/ Jon D. Levy

CHIEF U.S. DISTRICT JUDGE

26 This does not include the fees that Integrity incurred in bringing its claim for breach of fiduciary

duty.