Advanced Fluid Systems Inc v. Kevin Huber

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

Nos. 19-1722 and 19-1752

_____________

ADVANCED FLUID SYSTEMS, INC.

v.

KEVIN HUBER; INSYSMA (Integrated Systems and

Machinery, LLC);

LIVINGSTON & HAVEN LLC; CLIFTON B. VANN, IV;

THOMAS AUFIERO

Livingston & Haven, LLC; Clifton B. Vann, IV; Thomas

Aufiero,

Appellants in No.

19-1722

Kevin Huber; INSYSMA,

Appellants in No.

19-1752

_______________

On Appeal from the United States District Court

for the Middle District of Pennsylvania

(D.C. No. 1-13-cv-03087)

District Judge: Hon. Christopher C. Conner

_______________

Argued

January 15, 2020

Before: JORDAN, GREENAWAY, JR., and KRAUSE,

Circuit Judges.

(Filed: April 30, 2020)

_______________

Ronald L. Hicks, Jr. [ARGUED]

Carolyn B. McGee

Porter Wright Morris & Arthur

6 PPG Place – 3rd Fl.

Pittsburgh, PA 15222

Counsel for Appellants Livingston & Haven, LLC;

Clifton B. Vann, IV; Thomas Aufiero

Jonathan Z. Cohen

Conrad O’Brien

1500 Market Street

West Tower, Ste. 3900

Philadelphia, PA 19102

Counsel for Appellants Kevin Huber and

INSYSMA (Integrated Systems and Machinery, LLC)

David G. Concannon

200 Eagle Road – Ste. 116

Wayne, PA 19087

2

Zahra R. Dean

Robert J. LaRocca [ARGUED]

Kohn Swift & Graf

1600 Market Street – Ste. 2500

Philadelphia, PA 19103

Counsel for Appellee

______________

OPINION OF THE COURT

_______________

JORDAN, Circuit Judge.

This sorry story of disloyalty and deception piled upon

deception resulted in verdicts against the wrongdoers. They’re

not happy about that, but, when the tale is told, it’s clear that

the result is entirely justified. In brief summary, Kevin Huber

stole confidential information from his employer Advanced

Fluid Systems, Inc. (“AFS”), first for the benefit of an AFS

competitor, Livingston & Haven, LLC (“Livingston”), with

whom Huber wanted to ingratiate himself, and then, in another

twist of deceit, for a company he created, Integrated Systems

and Machinery, LLC (“INSYSMA”; together with Huber, the

“Huber Parties”), to compete against both AFS and Livingston.

When the facts began to come to light, AFS brought suit

against the Huber Parties and Livingston, as well as Livingston

employees Clifton B. Vann IV and Thomas Aufiero (together

with Livingston, the “Livingston Parties”), alleging various

claims under federal and state law, including principally trade

secret misappropriation claims under the Pennsylvania

Uniform Trade Secrets Act (the “Trade Secrets Act” or the

“Act”). There was one other defendant, Orbital Sciences

Corporation (“Orbital”), the company from which AFS,

3

Livingston, and INSYSMA were all trying to get business.

AFS settled with Orbital before trial, and it is not one of the

Appellants here. All of the other defendants are.

On summary judgment, the District Court held as a

matter of law that the Huber Parties were liable under the Trade

Secrets Act for misappropriating AFS’s trade secrets. Then,

following a bench trial, the Court held the Livingston Parties

jointly and severally liable with the Huber Parties for that

misappropriation, and it held all Appellants except Aufiero and

INSYSMA liable for breach of fiduciary duty or aiding and

abetting that breach. As remedies for the tortious conduct, the

Court awarded compensatory damages from all Appellants,

exemplary damages under the Act from Huber, and, based on

the breach of fiduciary duty, punitive damages from all

Appellants except INSYSMA and Aufiero. 1

1

The terms “exemplary damages” and “punitive

damages” are synonymous, see Damages, Black’s Law

Dictionary (11th ed. 2019) (noting punitive damages are

“[a]lso termed exemplary damages”), but the Trade Secrets Act

uses the former term while common law causes of action tend

to invoke the latter. See 12 Pa. Const. Stat. § 5304(b)

(permitting court to award “exemplary damages” if “willful

and malicious misappropriation exists”); Hutchison ex rel.

Hutchison v. Luddy, 870 A.2d 766, 773 (Pa. 2005) (“This Court

found that an award of punitive damages was proper for claims

sounding in breach of fiduciary duty, as well as intentional

withholding of information and fraudulent

misrepresentation.”).

4

Appellants bring a host of issues to us. Their central

argument, however, is that AFS’s claim for trade secrets

misappropriation must fail because AFS does not “own” the

purported trade secrets at issue. Beyond their core grievance,

Appellants also attack the District Court’s rulings that the

claimed trade secrets are actually protectable under the Trade

Secrets Act, that the Livingston Parties were not prejudiced by

their counsel’s conduct at and following the trial, and that the

damages awards were warranted. In a thorough opinion, the

District Court properly rejected Appellants’ ownership

argument on the ground that the Act only requires that a

plaintiff lawfully possess the trade secrets it wishes to

vindicate. In similarly persuasive decisions, the Court

dismissed Appellants’ various remaining challenges as

inconsistent with the record, untimely, legally deficient, or

some combination thereof. We agree with all of those

conclusions and will affirm the Court’s rulings and judgment

in their entirety.

I. BACKGROUND 2

A. Factual Background

“AFS distributes, manufactures, and installs hydraulic

components and hydraulic systems” that use pressurized fluids

2

We derive this factual summary primarily from the

District Court’s post-trial findings of fact and conclusions of

law. See Fed. R. Civ. P. 52(a)(6) (“Findings of fact, whether

based on oral or other evidence, must not be set aside unless

clearly erroneous ….”); Newark Branch, N.A.A.C.P. v. City of

Bayonne, 134 F.3d 113, 119 (3d Cir. 1998) (“In a bench trial,

the court shall find the facts and state separately its conclusions

5

to move heavy machinery for complex operations and

engineering projects. Advanced Fluid Sys., Inc. v. Huber, 295

F. Supp. 3d 467, 470 (M.D. Pa. 2018) (hereinafter, “Post-Trial

Op.”). Huber was employed at AFS as a full-time sales

engineer between November 2006 and October 2012.

Livingston is a competitor of AFS’s and designs, assembles,

and installs hydraulic fluid systems. Vann is the chief

executive officer of Livingston’s holding company and

Livingston’s president. Aufiero worked at AFS from 1989

through January 2011, when he left to become a regional sales

manager at Livingston.

In September 2009, AFS entered into a three-year

contract with the Virginia Commonwealth Space Flight

Authority (the “Space Flight Authority” or the “Authority”) to

build, install, and maintain a hydraulic system for the NASA

rocket launch facility on Wallops Island, Virginia. From that

of law thereon and those [f]indings of fact ... shall not be set

aside unless clearly erroneous.”) (internal quotation marks

omitted and alteration in original). With respect to the facts

pertinent to the District Court’s decision on summary

judgment, we view them in the light most favorable to the non-

moving parties, see Lawrence v. City of Philadelphia, 527 F.3d

299, 310 (3d Cir. 2008) (“It is well established that [on

summary judgment] the court must view all evidence and draw

all inferences in the light most favorable to the non-moving

party .… The rule is no different where there are cross-motions

for summary judgment.”), though that is still highly

unflattering for Appellants. Our summary of the procedural

history draws from the entire record, including the District

Court’s memorandum resolving the parties’ post-judgment

requests for relief.

6

island, Orbital launches its Antares rocket, employing the

hydraulic system designed and installed by AFS. The Antares

rocket services and supplies the International Space Station.

Huber was intimately involved in the development of the

Wallops Island hydraulic system, eventually becoming its “de

facto project manager[.]” Id. at 473.

AFS supplied the Space Flight Authority with a

comprehensive package of engineering drawings generated

during the design and installation of the hydraulic system.

Pursuant to the contract (the “Agreement”) between AFS and

the Authority, all materials generated during performance of

the Agreement were to be deemed “work for hire” and the

“exclusive property” of the Authority. Advanced Fluid Sys.,

Inc. v. Huber, No. 1:13-CV-3087, 2017 WL 2445303, at *2

(M.D. Pa. June 6, 2017) (hereinafter, “Summary Judgment

Op.”). All drawings that AFS delivered to the Authority

pursuant to the Agreement included an AFS title block with a

confidentiality stamp. In tension with the ownership

stipulation in the Agreement, the confidentiality stamp read:

“This drawing discloses propriety and confidential data of

Advanced Fluid Systems, Inc., and may not be used disclosed

or released, in whole or in part, for any purpose outside the

authorized recipient, without signed authorization, and must be

returned upon request.” Post-Trial Op., 295 F. Supp. 3d at 484.

In September of 2012, the Space Flight Authority

experienced financial difficulty. As a result, Orbital acquired

control of the launch system, including the hydraulic system

that AFS had designed and manufactured. AFS did not execute

a non-disclosure agreement with Orbital, but Orbital

maintained a practice of only disclosing AFS’s drawings on a

need-to-know basis.

7

Around this same time, Huber, while still working for

AFS, began communicating with the Livingston Parties about

the Wallops Island hydraulic system. He claimed that Orbital

was unhappy with AFS and was seeking new vendors to

service the system. He also took affirmative steps to help the

Livingston Parties familiarize themselves with the system and,

more generally, with Orbital’s operations on Wallops Island.

He arranged tours and began sending the Livingston Parties

various confidential AFS internal documents and engineering

drawings. To communicate with Huber, the Livingston Parties

created a commercial Dropbox folder, installed a virtual

private network on Huber’s AFS laptop, and provided him with

a Livingston email address.

Orbital did eventually seek bids with respect to two

aspects of the hydraulic system: a “gripper arms replacement”

project and a “cylinder upgrade” project. Regarding the

gripper arms contract, Huber, while still employed by AFS,

worked closely with the Livingston Parties to prepare a bid. At

the same time, he was also playing a key role in the bid

presented by AFS, which he succeeded in inflating by over

$130,000 to ensure that Livingston’s bid was more

competitive. Not surprisingly, Livingston was awarded the

gripper arms contract. During the ensuing design process,

Livingston’s team relied extensively on confidential

engineering drawings that AFS had created and Huber stole.

As to the cylinder upgrade project, Huber again stacked

the deck against AFS by failing to disclose key information

about what Orbital was looking for, encouraging AFS to

submit a bid only for Orbital’s non-preferred option, and by

working with the Livingston Parties to develop a proposal

8

based on confidential AFS documents that, again, he had

provided.

In October 2012, Huber’s penchant for deceit led to

another twist. Unbeknownst to Livingston or AFS, he formed

his own business entity, INSYSMA, intending to submit a

competing bid for the cylinder upgrade contract. That same

month, he downloaded nearly 98 gigabytes of AFS’s

proprietary files to an external hard drive, including its

engineering drawings, bills of materials, and other documents

for the hydraulic system, documents pertaining to AFS’s

gripper arms quote, and all of its pending and past project files

dating back to 1993. He then tendered his notice of resignation

to AFS.

Following his resignation, Huber continued to work

with Livingston on its gripper arms design and its cylinder

assembly bids, sharing with the Livingston team many of the

files he had taken from AFS. Livingston’s preparatory efforts

and eventual bids relied heavily on drawings generated by AFS

in the design of the Wallops Island hydraulic system, as well

as other insider knowledge gathered from Huber. Eventually,

and to the Livingston Parties’ great surprise, Orbital awarded

the cylinder contract to neither AFS nor Livingston but to

INSYSMA.

B. Procedural History

“AFS commenced this action on December 24, 2013,

initially naming Huber, [INSYSMA], Livingston, Vann,

Aufiero, and Orbital as defendants.” Advanced Fluid Sys., Inc.

v. Huber, 381 F. Supp. 3d 362, 370 (M.D. Pa. 2019)

(hereinafter, “Post-Judgment Op.”). AFS and Orbital reached

9

a settlement agreement pursuant to which AFS dismissed

Orbital from the lawsuit in exchange for Orbital’s agreement

to grant AFS a subcontract for certain work on the hydraulic

system. The settlement agreement, which does not identify

Orbital as a joint-tortfeasor with Appellants, explicitly states

that “no money is being paid” by Orbital pertaining to items of

damages asserted by AFS against Appellants in this case.

(App. at 2222.)

The claims that AFS asserted under federal law were

either all dismissed or abandoned through motions practice and

amended pleadings. Ruling on motions to dismiss, the District

Court determined that AFS had standing 3 to assert trade secret

misappropriation claims under Pennsylvania law against

Appellants because AFS had adequately alleged lawful

possession of the relevant trade secrets and “that ownership, in

the traditional sense, is not prerequisite to a trade secret

misappropriation claim.” Advanced Fluid Sys., Inc. v. Huber,

28 F. Supp. 3d 306, 323 (M.D. Pa. 2014) (hereinafter, “MTD

Op.”). Later, on summary judgment, the Court concluded as a

matter of law that the information at issue qualified as trade

3

The District Court recognized that the standing issue

here is one of statutory standing, which requires

“determin[ing], using traditional tools of statutory

interpretation, whether a legislatively conferred cause of action

encompasses a particular plaintiff’s claim.” Lexmark Int’l, Inc.

v. Static Control Components, Inc., 572 U.S. 118, 127 (2014);

cf. Commw. of Pa. v. Janssen Pharma., 8 A.3d 267, 275 (Pa.

2010). Here, the question is whether ownership of the trade

secret is an element of a claim for misappropriation under the

Act.

10

secrets and that the Huber Parties were liable under the Trade

Secrets Act for misappropriating it.

The District Court convened a six-day bench trial on

AFS’s remaining claims, specifically the claims for trade secret

misappropriation against the Livingston Parties, and the claims

for breach of fiduciary duty and aiding and abetting breach of

fiduciary duty. At trial, the Livingston Parties were

represented by Philip J. Morin, Esquire, of the law firm Florio

Perrucci Steinhardt & Fader, LLC. Morin and his firm were

chosen by Livingston’s insurer. During the trial, Morin

informed the Court, on the record at a side bar, that he was not

admitted to practice before it. He also disclosed his

disciplinary history, including a public reprimand in New

Jersey and a reciprocal suspension imposed by New York in

2015. In response to the Court’s question of whether he was

then “credentialed and fully admitted in both jurisdictions,”

Morin stated that he “was authorized to practice in New Jersey

but that New York required him to file a motion for

reinstatement, which was pending.” Post-Judgment Op., 381

F. Supp. 3d at 371. The Court instructed Morin to file the

appropriate paperwork and permitted him to continue to

represent the Livingston Parties at trial without further

discussion.

After the trial, the Court issued an order directing the

parties to file proposed findings of fact and conclusions of law

within 30 days of receiving the official transcript, which

deadline the parties later extended by stipulation, with the

Court’s approval. AFS and the Huber Parties timely filed their

respective post-trial submissions, but the Livingston Parties

never filed any, nor did they request an extension of time to do

11

so. Morin did not disclose to the Livingston Parties that he had

missed the filing deadline.

In its post-trial findings of fact and conclusions of law,

the Court found that the Livingston Parties were liable for

misappropriating AFS’s trade secrets, that Huber had breached

a duty of loyalty to AFS, and that Livingston and Vann, but not

Aufiero, aided and abetted that breach. The Court awarded

AFS compensatory damages from all Appellants, based on lost

profits, exemplary damages under the Act against Huber alone

for his trade secret theft, and punitive damages against Huber,

Livingston, and Vann, jointly and severally, stemming from

Huber’s breach of fiduciary duty.

Appellants then filed scattershot post-trial motions

invoking subsections of Federal Rules of Civil Procedure 52,

59, and 60, claiming, among other objections, that: (i) the

Livingston Parties were entitled to a new trial because of the

misconduct and negligence of their insurer-retained counsel;

(ii) the evidence did not support a punitive damages award

against the Livingston Parties; (iii) the District Court

incorrectly failed to reduce its compensatory damages award

by the amount of AFS’s settlement with Orbital; and (iv)

certain additional costs were improperly excluded from the

District Court’s lost-profits analysis. After thorough analysis,

the Court denied the post-trial motions in their entirety. This

timely appeal followed.

12

II. DISCUSSION 4

A. AFS’s Trade Secret Misappropriation

Claims 5

The first and predominant issue in this appeal is whether

AFS, by virtue of its Agreement with the Space Flight

Authority – a contract that explicitly designates the

confidential information at issue in this case as the Authority’s

“exclusive property” – can maintain a trade secret

misappropriation claim under Pennsylvania law. Appellants

argue that AFS cannot, for three reasons: first, AFS does not

“own” the claimed trade secrets; second, even if the Trade

Secrets Act does not require ownership as a prerequisite for

standing to sue, AFS still lacks standing because it did not

“lawfully possess” the trade secrets; and, third, what AFS

argues are trade secrets cannot properly be designated as such

because inadequate measures were taken to ensure their

continued secrecy. None of those positions is persuasive.

4

The District Court had jurisdiction pursuant to 28

U.S.C. §§ 1331 and 1332. We have jurisdiction under 28

U.S.C. § 1291.

5

We exercise de novo review over the District Court’s

legal determinations that fee simple ownership of a trade secret

is not a prerequisite to a misappropriation claim under the

Trade Secrets Act and that AFS had protectable trade secrets

as a matter of law. See Simpson v. Att’y Gen., 913 F.3d 110,

113 (3d Cir. 2019) (summary judgment); Blunt v. Lower

Merion Sch. Dist., 767 F.3d 247, 266 (3d Cir. 2014) (standing).

13

In a closely reasoned opinion, the District Court

considered what interest a plaintiff must have in a trade secret

to have standing under the Trade Secrets Act to bring an action

for misappropriation. After examining the text of the Act and

surveying cases from other jurisdictions that have adopted

some version of the Uniform Trade Secrets Act, the District

Court explained why it is appropriate to follow the reasoning

set forth in DTM Research, L.L.C. v. AT & T Corp., 245 F.3d

327 (4th Cir. 2001).

In DTM, the United States Court of Appeals for the

Fourth Circuit held that a party asserting a misappropriation

claim under Maryland’s Uniform Trade Secrets Act need only

demonstrate lawful possession of a trade secret, and not

“ownership in its traditional sense[,]” to maintain such a claim.

DTM, 245 F.3d at 333. That holding was based on the premise

that “[t]he proprietary aspect of a trade secret flows, not from

the knowledge itself, but from its secrecy[,]” because “[i]t is

the secret aspect of the knowledge that provides value to the

person having the knowledge. … While the information

forming the basis of a trade secret can be transferred, as with

personal property, its continuing secrecy provides the value,

and any general disclosure destroys the value.” Id. at 332

(internal quotation marks omitted).

In other words, while ownership of the sort traditionally

associated with real or personal property is sufficient to

maintain a trade secret misappropriation claim because the

complete bundle of rights related to trade secrets includes the

right to enjoy the value of the information’s secrecy, it is not a

necessary condition. A per se ownership requirement for

misappropriation claims is flawed since it takes account neither

of the substantial interest that lawful possessors of the secrets

14

have in the value of that secrecy, nor of the statutory language

that creates the protection for trade secrets while saying

nothing of ownership as an element of a claim for

misappropriation.

Although DTM involved Maryland’s version of the

Uniform Trade Secrets Act, we, like the District Court, agree

with the Fourth Circuit’s cogent explanation of why lawful

possession of a trade secret can, under circumstances like this,

be sufficient to maintain a misappropriation claim, even absent

ownership. The relevant language of the Act, which on its face

lacks any ownership requirement, is functionally identical to

that of its Maryland counterpart. 6 And, while DTM’s rationale

rejects the notion that trade secrets are just like tangible

property, it still rests on the premise that trade secrets are a

species of property, a view entirely consistent with

Pennsylvania’s common law prior to the enactment of its

version of the uniform act. See Heraeus Med. GmbH v.

Esschem, Inc., 927 F.3d 727, 738 (3d Cir. 2019)

(“Pennsylvania courts have adopted the ‘property’ view of

trade secrets, under which the basis of a claim for trade secret

6

In addition, as the District Court correctly recognized,

“[n]either the commentary to the uniform law nor [the Trade

Secrets Act]’s legislative history include[s] any specific

reference to legal ownership of the trade secrets as a

prerequisite to a cause of action.” MTD Op., 28 F. Supp. 3d at

318. On the contrary, as a leading treatise recognizes, “because

the gravamen of [a Uniform Trade Secrets Act]

misappropriation action is wrongful acquisition or improper

use of information gained from a plaintiff, possession, as

opposed to ownership, suffices.” 4 Roger M. Milgrim & Eric

E. Bensen, Milgrim on Trade Secrets § 15.01 (2020).

15

misappropriation is the violation of a property right[.]”).

Again, the point is not that ownership is irrelevant. The point

is that it is not the sole kind of interest that is relevant and

subject to protection. Appellants’ briefing is devoid of any

serious challenge to DTM’s reasoning. 7 Their argument, such

as it is, lacks merit, and we reject it.

7

The Huber Parties merely note that the District Court

was the first Pennsylvania court, state or federal, to follow

DTM and that a district court in the Western District of

Pennsylvania had held that a non-owner could not pursue a

trade secret claim under Pennsylvania law. Huber Parties’

Opening Br. at 24 (citing Transp. Compliance Assocs. Inc. v.

Hammond, No. 2:11-CV-1602, 2012 WL 1435445, at *3

(W.D. Pa. Apr. 25, 2012), modified on reconsideration, 2012

WL 8017416 (W.D. Pa. May 3, 2012)). We are not troubled

that the District Court was the first to follow DTM, particularly

since it appears to be the first Pennsylvania court to actually

analyze whether Pennsylvania law includes an “ownership”

requirement. For example, and as the District Court observed,

Hammond “cursorily adopts an ownership approach without

any discussion of the nature of trade secrets or the source of

their value[,]” and, in support of that approach, relies entirely

on a case that “did not turn on an ownership inquiry[.]” MTD

Op., 28 F. Supp. 3d at 322 n.8. Other cases Appellants have

relied on and that appear to adopt an ownership requirement

were decided before adoption of the Trade Secrets Act and

similarly lack any meaningful analysis of the ownership issue.

More significantly, they address the issue of whether the party

claiming misappropriation owned a trade secret, not the

distinct question of whether other interests, such as lawful

possession, can be sufficient to sustain a claim. See, e.g.,

Gruenwald v. Advanced Comput. Applications, Inc., 730 A.2d

16

Appellants’ second contention, that AFS did not

lawfully possess the information it claims as trade secrets, is

similarly unavailing. The gist of this argument is that the

transfer of rights to the trade secrets effectuated by the

Agreement included the transfer of any right to possess those

trade secrets, thereby foreclosing AFS from lawfully

possessing them. But that ignores the uncontroverted record

that AFS not only physically retained possession of the

drawings and other information constituting the trade secrets;

it also was required to use, and in fact did use, those trade

secrets to fulfill its obligations under the Agreement and in

contracts that AFS and Orbital entered into after the

Agreement. Moreover, despite necessarily being aware that

AFS physically retained and was using the trade secrets to

fulfill its contractual obligations, the “owner” 8 of those secrets

never once objected to, or even so much as questioned, AFS’s

retention or use of those secrets. It did not even push back

when AFS affixed to documents containing the secrets a

1004, 1012–13 (Pa. Super. Ct. 1999) (analyzing whether

former employee retained “ownership” of technologies he

created during scope of employment with former employer);

Varo, Inc. v. Corbin Mfg. Co., 50 F.R.D. 376, 378 (E.D. Pa.

1970) (noting “[m]ere possession is insufficient to establish the

fact of ownership” where “Plaintiff’s sole position is that the

defendant corporation is not the owner of the trade secrets”).

8

Because AFS states in its brief that it “conveyed legal

title to its work product to the [Authority],” Appellee’s Br. at

47, we need not opine on any residual ownership interest it

might otherwise claim and will treat the Authority as the

owner.

17

confidentiality notice asserting that AFS had an ownership

interest in them.

Ownership of a trade secret – or any intellectual

property for that matter – undoubtedly imbues the owner with

the authority to give others lawful possession, including by

merely consenting to that possession. Such possessory rights

were given to AFS, even if a full ownership interest was not.

The course of conduct evident in the record shows that AFS

clearly had permission to hold and use the secrets. True, had

the Agreement contained an explicit license for AFS’s benefit,

any dispute about lawful possession could have been avoided.

See Metso Minerals Indus. v. FLSmidth-Excel LLC, 733 F.

Supp. 2d 969, 971–72 & n.4 (E.D. Wis. 2010) (holding non-

exclusive license to use trade secrets at issue constituted

“lawful possession” of that information). But Appellants cite

no authority for the proposition that one who retains and uses

a trade secret owned by another for that owner’s benefit, with

that owner’s knowledge, and, at a minimum, with that owner’s

implied consent, does not lawfully possess that trade secret. 9

We decline to adopt such a counter-intuitive rule of law.

9

In that regard, the District Court correctly

distinguished BlueEarth Biofuels, LLC v. Hawaiian Elec. Co.,

No. CIV. 09-00181 DAE-KSC, 2011 WL 2116989 (D. Haw.

May 25, 2011), aff’d, 531 F. App’x 784 (9th Cir. 2013). In that

case, the court held that the plaintiff could not sustain a

misappropriation claim because it had “transferred, without

reservation, all of the relevant confidential information and

trade secrets” pursuant to an agreement. Id. at *21. Unlike the

plaintiff in BlueEarth, however, AFS “remains in possession

of and continues to use the trade secrets.” MTD Op., 28 F.

Supp. 3d at 323.

18

Finally, Appellants urge that the District Court erred in

holding as a matter of law that the claimed trade secrets are

protectable under the Trade Secrets Act. They say that, at a

minimum, there was a genuine dispute of material fact

regarding the reasonableness of the measures taken to ensure

the secrecy of the information at issue. More particularly,

Appellants point to the fact that the information was provided

by AFS to the Space Flight Authority, a public entity subject

to a state open-records law, without a formal non-disclosure or

confidentiality agreement. On the summary judgment record

before us, however, we are not persuaded that a reasonable trier

of fact could find that AFS’s interactions with the Authority,

or with Orbital, extinguished AFS’s protectable interest in the

trade secrets.

Consistent with its approach throughout this lengthy

litigation, the District Court fully explained its rationale for

concluding that AFS could claim trade secret protection as a

matter of law, applying the six-part framework that

Pennsylvania courts adopted from the Restatement First of

Torts § 757. 10 See Bimbo Bakeries USA, Inc. v. Botticella, 613

F.3d 102, 109 (3d Cir. 2010) (citing Crum v.

Bridgestone/Firestone N. Am. Tire, LLC, 907 A.2d 578, 585

10

As we noted in Bimbo Bakeries, although [the Act]

“displaced Pennsylvania’s common law tort for

misappropriation of trade secrets, [] there is no indication that

the statute effected a substantive shift in the definition of trade

secret.” 613 F.3d at 109 n.7 (internal quotation marks and

citation omitted).

19

(Pa. Super. Ct. 2006)). 11 As part of its analysis, the Court

explained that the Space Flight Authority “honored AFS’s

proprietary designation and did not disclose its information

except as needed for operation of the [Wallops Island]

Hydraulic System.” Summary Judgment Op., 2017 WL

2445303, at *11.

Based on our own review of the record, we agree with

that assessment. The record shows that, even if the Authority

did not contractually bind itself to do so, it nevertheless

believed it had an obligation to preserve the confidentiality of

AFS’s designs, and at all relevant times it conducted itself in a

manner consistent with that belief.

Appellants’ assertions regarding the Authority’s

theoretical freedom to disclose AFS’s trade secrets, pursuant

to Virginia’s open records law or otherwise, are entirely

speculative. They cite no evidence that the Authority failed to

take reasonable steps to ensure the confidentiality of the trade

secrets, or that it ever did disclose those secrets to anyone to

whom disclosure was not essential for the development or

maintenance of the Antares launch system at Wallops Island.

Similarly, Appellants cite no evidence that the Authority was

11

The District Court found that only the second factor,

which addresses the extent to which AFS employees were

privy to its confidential information, militated against trade

secret status because AFS employees were not required to sign

confidentiality agreements. We agree with the District Court

that, under the specific facts of this case, this single factor does

not raise a genuine dispute of material fact as to whether AFS

possessed trade secrets as a matter of law because the other five

factors weigh decisively in the opposite direction.

20

ever actually subject to a records request relating to AFS’s

trade secrets, that the probability of such a request was

anything more than extremely remote, or how the Authority

may have handled such a request if one were made. Indeed,

conspicuously absent from the record is any hint as to why, if

AFS’s trade secrets were so readily obtainable from the Space

Flight Authority, Appellants felt it necessary to engage in a

coordinated, clandestine campaign of tortious conduct to

obtain them.

Therefore, we are in accord with the District Court’s

conclusion that Appellants failed to raise a genuine dispute of

material fact as to whether the confidential drawings and other

information that they had a hand in stealing were not in fact

and in law trade secrets. Appellants’ arguments opposing

AFS’s trade secrets misappropriation claims thus fail. 12

B. Conduct of Livingston Parties’ Counsel 13

The Livingston Parties take issue with the District

Court’s denial of their request for a new trial based on the

12

The Livingston Parties also argue that AFS cannot

bring a misappropriation claim because it “did not stand to

incur a loss if the trade secrets were misappropriated[.]”

Livingston Parties Reply Br. at 9. That argument, raised for

the first time in a reply brief, is forfeited. Haberle v. Borough

of Nazareth, 936 F.3d 138, 141 n.3 (3d Cir. 2019).

13

The District Court denied the Livingston Parties’

motion for a new trial made pursuant to Federal Rules of Civil

Procedure 59(a)(1)(B), 60(b)(1), 60(b)(3), and 60(b)(6). We

review that denial for abuse of discretion. See Lazaridis v.

21

conduct of their lead trial counsel, Mr. Morin. Shortly

following the entry of judgment against them, the Livingston

Parties discovered that Morin had failed to gain formal

authorization to practice before the District Court and also had

failed to submit any post-trial proposed findings of fact and

conclusions of law. According to the Livingston Parties, the

first failure amounted to a fraud on the Court and the second to

“excusable neglect,” both of which should entitle them to a

new trial. The District Court addressed those arguments in full

and properly rejected them.

First, the Livingston Parties complain that Morin

represented them at trial despite never being admitted pro hac

vice, thereby violating the District Court’s Local Rules and

engaging in the unauthorized practice of law. In so

complaining, however, they fail to address – in fact, they

simply ignore – our precedent regarding the application of

local rules.

“[A] district court can depart from the strictures of its

own local procedural rules where (1) it has a sound rationale

for doing so, and (2) so doing does not unfairly prejudice a

party who has relied on the local rule to his detriment.” United

States v. Eleven Vehicles, Their Equip. & Accessories, 200

F.3d 203, 215 (3d Cir. 2000). The District Court had a sound

Wehmer, 591 F.3d 666, 669 (3d Cir. 2010) (Rule 59); Budget

Blinds, Inc. v. White, 536 F.3d 244, 251 (3d Cir. 2008) (Rule

60). “[A] court abuses its discretion when its ruling is founded

on an error of law or a misapplication of law to the facts.”

Montrose Med. Grp. Participating Sav. Plan v. Bulger, 243

F.3d 773, 780 (3d Cir. 2001) (quotation marks and citation

omitted).

22

rationale for overlooking Morin’s technical non-compliance: it

already had sufficient information to determine whether he

should be admitted to practice pro hac vice, and it did not wish

to further delay a case that was ready for trial and had taken

four years to get to that point. Moreover, the District Court

correctly explained that the Livingston Parties could not have

relied to their detriment on the District Court’s Local Rules

regarding pro hac vice admissions because the “essential

purpose” of those rules is to assist the Court, not to “protect an

interest of the parties.” Post-Judgment Op., 381 F. Supp. 3d at

380–81.

Under the circumstances, the District Court did not

abuse its discretion by refusing the Livingston Parties’ request

to grant the extraordinary relief of a new trial, particularly since

Morin’s non-compliance with the District Court’s Local Rules

was essentially technical, not substantive, in nature. Everyone

in the case, including the Livingston Parties, knew of Morin’s

role in the litigation and accepted it. 14

Still pressing the point, however, the Livingston Parties

say that Morin perpetrated a fraud on the District Court and on

them by misleading the Court about the discipline he was

subject to in New York, by failing to advise them of his

disciplinary history and inability to practice before the Court,

14

At least through the trial, the Livingston Parties seem

to have been satisfied. They fail to identify a single thing

Morin did or failed to do during the trial itself that prejudiced

them. Cf. Post-Judgment Op., 381 F. Supp. 3d at 371–72

(noting that Morin “zealously represented” the Livingston

Parties at trial, made a “well stated” Rule 52(c) motion on their

behalf and contributed to the case being “well tried[.]”).

23

and by “using Pennsylvania licensed attorneys who were never

known by the Livingston Parties to have entered an appearance

on their behalf.” Livingston Parties Opening Br. at 28. As for

the first and third of those assertions, the record is plainly to

the contrary. The District Court pointed out that Morin had

disclosed his suspension from practicing law in New York, and

that there was a pending motion for his reinstatement in that

jurisdiction. Those disclosures were accurate in all relevant

respects and were not misleading. And it is certainly not

believable that the Livingston Parties were unaware that other

attorneys at Morin’s firm had entered appearances on their

behalf. Those other attorneys were present and assisted during

depositions, pretrial proceedings, and trial, and they had signed

the Livingston Parties’ pretrial pleadings and motions.

Regarding the Livingston Parties’ contention that Morin

defrauded them by not disclosing his disciplinary status, the

District Court did not abuse its discretion in determining that

Morin did not commit a fraud. The Court determined that his

conduct was, by all appearances, based on a “mistaken but

good faith belief that reinstatement in New York would be a

routine matter[.]” Post-Judgment Op., 381 F. Supp. 3d at 375.

Nor did the District Court abuse its discretion by declining to

grant the Livingston Parties a new trial based on their own

counsel’s purported failure to fully disclose his disciplinary

history to them. The Livingston Parties bear the responsibility

for knowing who represents them. It does not matter that

Morin was chosen by their insurer.

We do not minimize the seriousness of Morin’s failure

to file post-trial submissions to summarize the Livingston

Parties’ legal positions. But any harm those parties suffered

from the absence of those submissions was mitigated by the

24

Court’s awareness of the arguments they say should have been

advanced. Indeed, the arguments had largely been advanced

in one form or another over the course of the drawn-out

proceedings. As the District Court noted, a detailed pretrial

submission was filed and “raised many of the arguments that

the Livingston defendants now claim, through new counsel,

that Attorney Morin failed to present to the court.” Post-

Judgment Op., 381 F. Supp. 3d at 376 n.6. And, of course, the

parties’ positions on various issues were evident through the

course of trial. The District Court expressly disclaimed that

Morin’s failure to file a post-trial submission altered the

outcome of this case, and the Court’s extensive efforts to

independently assess the merits of AFS’s claims and anticipate

and address the Livingston Parties’ well-known arguments,

despite the lack of post-trial briefing from those parties, is

apparent on the face of both the Court’s Post-Trial and Post-

Judgment Opinions. For example, rather than simply adopt

positions advocated by AFS, the Court after careful analysis

declined to find that the Livingston Parties’ involvement in

trade secret misappropriation was willful or malicious, or that

Aufiero was liable to AFS for punitive damages.

Finally, the Livingston Parties maintain that Morin’s

failure to file post-trial briefing constitutes “excusable neglect”

entitling them to a new trial. The District Court, consistent

with our precedent, faithfully balanced the four relevant factors

established by the Supreme Court in Pioneer Investment

Services Co. v. Brunswick Associates. Ltd. Partnership, 507

U.S. 380 (1993), 15 for determining whether excusable neglect

15

The four factors are: “the danger of prejudice to the

[non-movant], the length of the delay and its potential impact

on judicial proceedings, the reason for the delay, including

25

warrants setting aside a final judgment. It explained why the

balance in this case fell decidedly against doing so.

Specifically, the Court found that AFS would endure

considerable prejudice by having to retry the case, because

even a timely post-trial submission from Morin would not have

changed the outcome of the case. Moreover, a new trial would

constitute a “disruption to efficient judicial administration,”

given the substantial time and resources the Court had already

dedicated to the matter. Post-Judgment Op., 381 F. Supp. 3d

at 377. The Court also found that the failure to submit post-

trial briefing was not “excusable,” notwithstanding the

personal difficulties Morin was dealing with at the time,

because, among other reasons, the Livingston Parties had

several other attorneys listed as counsel of record, all of whom

whether it was within the reasonable control of the movant, and

whether the movant acted in good faith.” Id. at 395. As the

District Court noted, because it independently reached and

assessed the merits of this case, irrespective of the lack of post-

trial briefing from the Livingston Parties, there is an argument

to be made that Morin’s failure to file post-trial briefing does

not implicate the “excusable neglect” standard contemplated

by Federal Rule of Civil Procedure 60(b)(1). Because we agree

with the District Court that the Livingston Parties are not

entitled to relief under Rule 60(b)(1), even assuming it applies,

we do not reach the question of whether a party can claim

excusable neglect when a district court independently

adjudicates an issue on the merits, notwithstanding that party’s

failure to make a relevant filing.

26

could have and should have been aware of the post-trial

briefing deadline. 16 Id. at 377–78.

We discern no abuse of discretion in the District Court’s

analysis, all of which is well supported by the record and

consistent with governing legal principles. While problems

associated with Morin’s representation of the Livingston

Parties may give rise to claims in another tribunal, the Court

here acted well within its discretion in determining that any

flaws in the representation did not entitle the Livingston Parties

to the extraordinary relief of a new trial.

C. Punitive Damages Award Against Vann and

Livingston 17

In the next issue presented for review, Vann and

Livingston contend that the District Court erred in awarding

16

For that same reason, we reject the Livingston

Parties’ argument that they were “effectively abandoned” by

counsel. Livingston Parties’ Opening Br. at 35. There is no

support for the assertion that Morin was the only attorney

responsible for their case, or that the other attorneys who

entered an appearance on their behalf were incapable of

representing their interests.

17

“Review of the District Court’s damages calculation

is a mixed question of law and fact.” VICI Racing, LLC v. T-

Mobile USA, Inc., 763 F.3d 273, 293 (3d Cir. 2014). We accept

the District Court’s findings of fact unless clearly erroneous,

but exercise plenary review over the Court’s choice,

interpretation, or application of legal principles. Id.

27

punitive damages against them both because the record lacks

evidence that their conduct was egregious enough to justify the

imposition of such damages and because the District Court

incorrectly relied on their lack of remorse. Again, we are

unpersuaded.

It is patently incorrect to say that the record lacks

enough evidence to sustain an award of punitive damages

against Vann and Livingston. The District Court noted that

Vann approved a compensation package for Huber that

incentivized Huber to do damage to AFS, when Vann well

knew that Huber remained within AFS’s employ and that he

was “working directly against AFS’s interests” by “attempting

to steer business toward Livingston and away from AFS[.]”

Post-Judgment Op., 381 F. Supp. 3d at 387–88. Moreover, the

compensation package that Vann approved for Huber was just

one aspect of Vann’s “continued engagement and

communication with, and encouragement of, Huber,” 18 despite

Vann’s claiming to have been “alarmed” by the fact that

“Huber was working on behalf of both AFS and Livingston

contemporaneously[.]” Id. at 387. Given Vann’s actual

knowledge of Huber’s attempts to move business from AFS to

Livingston and of the wrongfulness of Huber’s actions, 19 the

18

Examples include attending in-person meetings with

Huber and Vann’s knowledge that “as early as February that

Livingston employees were sharing documents on Dropbox

and collaborating with Huber.” Post-Trial Op., 295 F. Supp.

3d at 490.

19

As an executive himself, Vann knew and “expressly

confirmed his understanding of an employee’s duty of loyalty

to their employers.” Post-Trial Op., 295 F. Supp. 3d at 490.

28

Under Pennsylvania law, employees, in addition to officers or

directors, may owe their employers fiduciary duties. See

AmQuip Crane Rental, LLC v. Crane & Rig Servs., LLC, 199

A.3d 904, 915 (Pa. Super. Ct. 2018) (salesman breached duty

of loyalty to employer by helping co-workers breach their

noncompetition agreements with employer); Reading Radio,

Inc. v. Fink, 833 A.2d 199, 211 (Pa. Super. Ct. 2003) (radio

station manager breached duty of loyalty to employer by not

enforcing noncompetition agreements); see also Solid Wood

Cabinet Co. v. Partners Home Supply, Civil Action No. 13-

3598, 2015 WL 1208182, at *6 (E.D. Pa. Mar. 13, 2015)

(“Pennsylvania law dictates that employees owe their

employers a duty of loyalty.”); Synthes, Inc. v. Emerge Med.,

Inc., 25 F. Supp. 3d 617, 667 (E.D. Pa. 2014) (same); Crown

Coal & Coke Co. v. Compass Point Res., LLC, Civil Action

No. 07-1208, 2009 WL 891869, at *5 (W.D. Pa. Mar. 31, 2009)

(“Under Pennsylvania law, an employee is an agent of his

employer and owes his employer a duty of loyalty.”).

Relatedly, confidential relationships also can give rise to

fiduciary duties under Pennsylvania law. “[T]he essence of [a

confidential] relationship is trust and reliance on one side, and

a corresponding opportunity to abuse that trust for personal

gain on the other. Accordingly, [a confidential relationship]

appears when the circumstances make it certain the parties do

not deal on equal terms, but, on the one side there is an

overmastering influence, or, on the other, weakness,

dependence or trust, justifiably reposed[.]” PTSI, Inc. v. Haley,

71 A.3d 304, 311 (Pa. Super. Ct. 2013) (quoting Weiley v.

Albert Einstein Med. Ctr., 51 A.3d 202, 218 (Pa. Super. Ct.

2012)) (alterations in original). Here, the record plainly shows

that Huber acted as AFS’s agent, and that they shared a

confidential relationship in that AFS trusted Huber, and was

29

record easily supports the inference that Vann and the company

he led, Livingston, appreciated that their continued

encouragement and facilitation of Huber’s misdeeds would

directly result in harm to AFS. The record also supports the

inference that their decision to nevertheless encourage and

facilitate Huber’s wrongdoing in the face of that known harm

was at the very least recklessly indifferent to AFS’s rights.

Under Pennsylvania law, such conduct can support a

punitive damages award. See, e.g., Hutchison ex rel.

Hutchison v. Luddy, 870 A.2d 766, 770 (Pa. 2005) (explaining

that punitive damages may be awarded where conduct is

“outrageous” because of “reckless indifference to the rights of

others[,]” and the conduct at issue was “intentional, reckless or

malicious”) (citations and quotation marks omitted); SHV

Coal, Inc. v. Cont’l Grain Co., 587 A.2d 702, 705 (Pa. 1991)

(upholding punitive damages award where employee

deliberately diverted contract to new employer during his last

week of employment with previous employer). Thus, Vann’s

and Livingston’s argument that the punitive damages award

entered against them lacks adequate factual support is wholly

unpersuasive. 20

dependent on him, to handle trade secret information as well as

to procure new client relationships and maintain existing ones.

Huber has not at any point contended that he did not owe AFS

a fiduciary duty of loyalty.

20

Vann and Livingston also contend that the record

does not support punitive damages because the District Court

found that they did not act with malice or intent to harm with

respect to AFS’s trade secret misappropriation claim. That

argument misses the mark because it ignores that AFS’s trade

30

We also have little difficulty rejecting Vann’s and

Livingston’s assertion that the District Court improperly

awarded punitive damages against them because of their lack

of remorse for their misconduct. To the extent the District

Court considered Vann’s and Livingston’s contrition (or, more

precisely, the total absence thereof) for their actions in

determining whether their conduct warranted the imposition of

punitive damages, it is clear that the Court did so only to the

extent it was suggestive of their state of mind at the time of

their wrongdoing. There was no error in considering Vann’s

and Livingston’s attitude for that purpose. See In re Lemington

Home for the Aged, 777 F.3d 620, 635 (3d Cir. 2015)

(upholding award of punitive damages where defendants’

“state of mind was illuminated by their own testimony at

secret misappropriation claim and its claim for aiding and

abetting a breach of fiduciary duty were separate and distinct

causes of action. The District Court correctly explained that

“AFS’s substantive claims targeted different—albeit, at times,

overlapping—conduct. In deciding whether to award enhanced

damages, and in what amount, we examined different

aggravating conduct under each claim. The distinction, in our

view, lies in defendants’ states of mind and the nature of their

actions. Defendants’ misappropriative conduct, while knowing

and unlawful under the statute, might fairly be characterized

(with limited exceptions) as passive and acquiescent. Their

tortious conduct, per contra, was active, deliberate, and

willful; it endured without pause for the better part of a year;

and the defendants to date fail to appreciate the gravity of their

wrongdoing.” Post-Judgment Op., 381 F. Supp. 3d at 391. On

appeal, Vann and Livingston fail to rebut the District Court’s

persuasive rejection of their position.

31

trial[,]” which testimony allowed “the jury to infer that they

had acted culpably and continued to avoid recognizing the

gravity of their misconduct”).

D. Set-off of Orbital Settlement 21

Next, all Appellants argue that the District Court

improperly failed to set-off the value of AFS’s settlement with

Orbital from the compensatory damages it awarded to AFS, as

purportedly mandated by the Pennsylvania Uniform

Contribution Among Tortfeasors Act (“PUCATA”).

According to Appellants, they are entitled to a set-off under

PUCATA because Orbital was a joint-tortfeasor. The District

Court held that Appellants had failed to put either AFS or the

Court on notice that a “setoff theory was fair game at trial[.]”

Post-Judgment Op., 381 F. Supp. 3d at 383. We agree.

The Huber Parties carry the ball for the Appellants on

this issue and assert that it is not forfeited, for four reasons: (i)

they were not required to file a formal pleading requesting set-

off; (ii) AFS was on notice that Appellants would seek set-off

of the Orbital settlement; (iii) Orbital’s status as a joint

tortfeasor was tried by the parties’ implied consent; and (iv)

Federal Rule of Civil Procedure 52(a)(5) permits them to, for

21

The District Court held that Appellants failed to

provide fair notice to AFS that they would be seeking setoff

with respect to the Orbital settlement. “We review a District

Court’s decision as to the waiver of an affirmative defense for

abuse of discretion.” In re Asbestos Prods. Liab. Litig. (No.

VI), 921 F.3d 98, 104 (3d Cir. 2019).

32

the first time, raise the set-off issue after judgment. 22 Those

arguments, individually and collectively, fail.

As to the first argument, whether or not Appellants were

obligated to formally plead set-off under PUCATA is beside

the point. The District Court did not hold that Appellants

forfeited their set-off argument solely because they neglected

to plead it. Rather, the Court noted the Appellants’ complete

failure to raise the issue at any point in the litigation, up to and

including trial. Appellants cite no case in which a party

seeking to set off the amount of a co-defendant’s settlement

against a damages award did not plead, attempt to plead, or

otherwise squarely raise that issue before judgment was

rendered.

As shown by cases on which Appellants themselves

rely, the party invoking PUCATA must provide some clear

indication that, even if it did not plead the set-off, it actually

raised the issue in some fashion. See Kilbride Invs. Ltd. v.

Cushman & Wakefield of Pennsylvania, Inc., Civil Action No.

13-5195, 2019 WL 3713878, *6–7 (E.D. Pa. Aug. 6, 2019)

(denying the plaintiff’s pre-trial motion to voluntarily dismiss

a defendant where co-defendant objected on the grounds that

dismissal would inhibit its ability to claim an “offset” from the

to-be-dismissed defendant where issue of joint tortfeasor status

had “been an actively debated issue for well over a year,” and

the court had previously “ordered briefing on the narrow issue

of joint tortfeasor status between the then-remaining

22

The Livingston Parties do not address in their

briefing the question of whether they forfeited this issue before

the District Court by failing to raise it before judgment was

entered.

33

defendants”); Nat’l Liberty Life Ins. Co. v. Kling P’ship, 504

A.2d 1273, 1277–78 (Pa. Super. Ct. 1986) (denying pre-trial

motion specifically raising issue of contribution and indemnity

from settling co-defendants). 23

Second, the contention that Appellants did not waive the

set-off issue because “AFS was on adequate and early notice

that [Appellants] would seek a set-off of the Orbital settlement

agreement[,]” is belied by the record and Appellants’ conduct.

Huber Parties Opening Br. at 40. None of the examples cherry-

picked by Appellants from the voluminous record makes any

mention of either set-off or joint-tortfeasor liability. To the

extent those examples speak to anything beyond the

undisputed fact that AFS reached a settlement with Orbital and

that Orbital was dismissed from this case, we agree with the

District Court that they suggest only that Appellants sought to

use the settlement agreement to impugn the objectivity and

credibility of testimony and other evidence provided by Orbital

sources. 24 Significantly, the Huber Parties’ briefing has no

23

Appellants’ reliance on Mazer v. Lipshutz, 360 F.2d

275 (3d Cir. 1966), is likewise misplaced. The release at issue

in that case, although not pled, nevertheless was considered on

appeal because the release had been admitted into evidence in

two different, consecutive trials involving the parties, without

objection. Id. at 277.

24

See Livingston Parties’ Statement of Facts and

Conclusions of Law (ECF 247-2) at ¶¶ 142–43 (noting that

AFS dismissed Orbital from suit after settling and arguing the

settlement consideration should not be considered evidence of

AFS’s competence to perform work); Huber Parties’ Trial

Exhibit List (ECF 295) at 7 (identifying settlement agreement

34

explanation as to why, if set-off was truly an issue before the

District Court, not a single defendant murmured a negative

word about Orbital’s dismissal from the case, despite those co-

defendants having the burden of proving that Orbital was a

joint-tortfeasor. 25 In belatedly raising the issue for the first

and release as exhibit); App. at 2221–40 (copies of the

settlement agreement and related AFS/Orbital commercial

agreement); App. at 2800–01 (trial testimony of Orbital

employee pertaining to cooperation provision in AFS/Orbital

settlement agreement); App. at 3015–16 (trial testimony of

AFS employee regarding profitability of contract with Orbital

resulting from settlement); App. at 4726 (Huber Parties’

requested finding of facts and conclusions of law highlighting

cooperating provision in AFS’s settlement agreement with

Orbital); App. at 4762 (same); App. at 5777–78 (noting that

AFS dismissed Orbital from suit after settling and emphasizing

Orbital promised in settlement agreement to cooperate with

AFS in AFS’s pursuit of its claims against the other defendants

in this case).

25

See Montgomery Cty. v. Microvote Corp., 320 F.3d

440, 450 (3d Cir. 2003) (holding defendants waived their Rule

60(b) claim to set-off plaintiff’s settlement with purported

joint-tortfeasor where, inter alia, “[defendants] did not attempt

to keep [the settling defendant] in the case in order to apportion

liability, nor did they request substitution of a settlement that

delineated [the settling defendant]’s pro-rata share of liability”

and “the settlement did not mention the non-settling

defendants’ liability”); Rocco v. Johns-Manville Corp., 754

F.2d 110, 115 (3d Cir. 1985) (“One would have expected the

nonsettling defendants to either have requested substitution of

[releases in which the plaintiff agrees to a pro rata reduction

35

time after trial and judgment, Appellants, without justification,

unreasonably deprived AFS of a fair opportunity to address it

at trial or any time prior thereto.

For largely the same reasons, the assertion that the issue

of set-off was tried by the parties’ “implied consent”

necessarily fails. “[I]mplied consent depends on three factors:

‘whether the parties recognized that the unpleaded issue

entered the case at trial, whether the evidence that supports the

unpleaded issue was introduced at trial without objection, and

whether a finding of trial by consent prejudiced the opposing

party’s opportunity to respond.’” Liberty Lincoln-Mercury,

Inc. v. Ford Motor Co., 676 F.3d 318, 327 (3d Cir. 2012)

(quoting Douglas v. Owens, 50 F.3d 1226, 1236 (3d

Cir.1995)). At a minimum, Appellants cannot satisfy the first

or third criteria because the record shows that neither AFS nor

the District Court was aware that set-off was an issue at trial,

and that lack of awareness unfairly deprived AFS of an

opportunity to present evidence on the issue of whether Orbital

and Appellants were joint-tortfeasors. See Post-Judgment Op.,

381 F. Supp. 3d at 383 (“[N]o defendant ever so much as hinted

that the isolated evidence on which they now rely–the AFS-

Orbital settlement agreement, AFS’s initial verified complaint

in this case, and an isolated passage … [of] trial testimony–was

introduced for the purpose of establishing Orbital as a joint

tortfeasor.”).

equal to the settlement amount from any judgment awarded

against nonsettling defendants] or judicial determination of

liability. The nonsettling defendants took no action, apparently

acquiescing in the settling part[y’s] absence from the trial. That

failure to act may be considered a waiver of any benefit from

the [settling defendant’s release] or the amounts paid for [it].”).

36

Finally, there is no merit in the contention that Federal

Rule of Civil Procedure 52(a)(5) somehow excuses

Appellants’ complete failure to raise the set-off issue before

judgment was entered. Rule 52(a)(5) allows a party to

“question the sufficiency of the evidence supporting” a finding

of fact that a district court actually makes. Fed. R. Civ. P.

52(a)(5). The Court did not make any relevant findings

regarding set-off, including whether Orbital was a joint-

tortfeasor. And that, undoubtedly, was because the issue was

never raised.

Rule 52(a)(5) does not, as the Huber Parties necessarily

argue, contemplate new or additional findings of fact, nor does

it sanction the injection of an entirely new and previously

unintroduced legal theory into proceedings. The Huber Parties

cite no authority that would sustain their novel construction of

Rule 52(a)(5), and we reject it, as it runs contrary both to the

plain language of the rule and to the general notions of fairness,

equity, and finality in dispute resolution that pervade the

Federal Rules of Civil Procedure. Accordingly, the District

Court did not err in excluding the Orbital settlement from its

compensatory damages calculation.

E. Lost Profit Damages Calculation 26

Finally, the Huber Parties challenge the District Court’s

calculation of the lost profits awarded to AFS as damages for

26

The Huber Parties challenge the District Court’s

factual determination that certain costs should be excluded

from its lost profits damages award. We review that factual

determination for clear error. VICI Racing, 763 F.3d at 293.

37

the trade secrets misappropriation. The Court’s damages

figure was based in part on the terms of a contract that Orbital

awarded to INSYSMA instead of AFS. The Huber Parties

contend that the Court erred as a factual matter in failing to

account for approximately $470,000 in costs contemplated by

the contract when determining AFS’s lost profits. That

argument too fails.

Although the Orbital-INSYSMA contract may have

contemplated that INSYSMA would undertake certain work

that Huber testified would have cost INSYSMA approximately

$470,000, there is ample evidence that Huber himself did not

believe the work in question was actually encompassed by and

a part of the contract. Moreover, it is undisputed that

INSYSMA never performed that work. AFS, not INSYSMA,

completed it, and that occurred only after Orbital had to sue

INSYSMA because INSYSMA initially refused to deliver the

underlying materials for the work.

The District Court’s lost profits analysis ultimately

rested on the amount INSYSMA actually was paid under the

contract for the work it actually performed. The Huber Parties

are not entitled to a reduction in damages for expenses they

never incurred and apparently were not obligated to incur.

III. CONCLUSION

For the foregoing reasons, we will affirm the rulings

and judgment of the District Court.

38