MTH Files Petition For Rehearing with Appeals Court by Erol Gurcan
Those of us following the legal proceedings in the MTH Lionel trade secrets case know that on December 14, 2006, a three judge panel of the Sixth Circuit Court of Appeals unanimously reversed the district court jury’s $40.7 million dollar verdict, and granted Lionel’s motion for a new trial, and remanded the case to the district court for that purpose.
Click on the link below to read on
The court granted Lionel’s motion for a new trial because the district court judge wrongly allowed the jury to consider expert testimony on MTH’s behalf by a Dr. Jeffery Stein, a professor of mechanical engineering at the University of Michigan. The appeals court deemed his testimony to be “unreliable” as there was no evidence his methodology as to comparing design drawings had ever been tested, been subjected to peer review, and did not enjoy general scientific acceptance in his area of expertise. The court also held that Stein’s statements as to a South Korean professor’s conclusions about the degree of copying of design drawings was hearsay and should not have been admitted at the trial. Since these two mistakes by the lower court judge concerning Dr. Stein’s testimony “likely had a substantial effect on the verdict” and were more than “harmless error” against Lionel, according to the appeals court, it ordered the case be transferred back to the district court for a new trial.
Also significant was that the appeals court vacated the jury’s $12,834,820 award against Lionel for unjust enrichment, stating at any future trial, Lionel’s unjust enrichment may not exceed MTH’s past lost profits. The court vacated the unjust enrichment award as it determined that it amounted to a double recovery (duplicative) for MTH with the past lost profits award.
Thirdly, the appeals court held that it was error for the district court to impose the $25,773, 405 award for past and future lost profits jointly and severally against all the defendants (Korea Brass and Yoo Chan Yang were also defendants at trial in addition to Lionel). Joint and several liability means that if there are two or more defendants found liable after a trial as to damages, if one is not able to pay all or part of their apportioned share, the other defendant is responsible for the balance of the verdict, even if greater than their percentage of fault. Since the court determined the joint and several liability doctrine did not apply under Michigan trade secrets law, Lionel should only have been responsible for its comparative share. The court stated if there is a new trial, that any award for past and future lost profits should be assessed severally only, in other words, against each party individually.
In MTH’s favor, the appeals court did hold their design drawings are trade secrets, even though they contain a combination of secret and non-secret information. If the court had determined that the design drawings were not trade secrets, it would have dismissed the case altogether, without the need for a new trial.
Some may be wondering why I am discussing this again when the appeals court’s decision came down three weeks ago. The reason is, on December 28, 2006, MTH’s lawyers filed a petition with the three judge appeals court panel that decided its appeal, for a rehearing of its decision, and requesting a rehearing before the court en banc. En Banc means a party is requesting that all the judges of the appeals court hear the matter, rather than only the three judge panel that originally decided the appeal. The information for this article was obtained from MTH’s petition filed with the court.
The issues that MTH has asked the court to reconsider include the matters discussed in detail above, namely 1) the court’s evidentiary rulings with regard to its expert Dr. Stein, 2) the duplication of damages between the past lost profits and Lionel’s alleged unjust enrichment, and 3) the joint and several liability issue.
With regard to the court’s evidentiary holdings as to its expert, Dr. Stein, MTH’s petition argues that Dr. Stein’s testimony should have been deemed reliable under earlier Supreme Court evidence standards as to scientific methodologies. Moreover, Lionel did not retain a mechanical engineering expert at trial and no one testified Dr. Stein’s criteria or methodology were incorrect. Lastly, MTH has advocated that the law applied by the appeals court in its December 14 opinion is contrary to Supreme Court and earlier Sixth Circuit Court of Appeals rulings as to experts.
As to the alleged duplication of damages issue between MTH’s past lost profits and Lionel’s unjust enrichment, MTH’s lawyers stated the court misunderstood the law with regard to damages. MTH’s lawyers have advocated a plaintiff can obtain both its past lost profits and defendant’s unjust enrichment under Michigan law, as long as they are non-duplicative. They cited a 2000 Fifth Circuit Court of Appeals opinion on the issue.
Concerning the joint and several liability issue, MTH’s lawyers have argued that it does apply, as was directed by district court trial judge and imposed by the jury. Specifically, they also advocated that no Michigan court has specifically addressed the issue if joint and several liability applies in the context of a trade secrets case, and that the comparative fault statute at issue is, at the very least, ambiguous. This, they argue, required the appeals court to consult the legislative history, which they did not do. Their failure to do so was error.
Lastly, MTH’s petition does not specify a court date when the matter will be heard by the appeals court. Since I do not have any experience with regard to petitions filed in federal courts, I can not state with any degree of certainty what the time frame for a decision on the petition will be. What I will do of course is, inform all interested what the outcome is, once there is a decision.
On a partially related matter, there is a conference scheduled for January 9 in the Bankruptcy Court in New York as a result of the appeals court’s decision in the trade secrets case.
Erol Gurcan
Erol B. Gurcan, an O Gauge industry legal expert, is a regular contributor to OGaugeWatch.com
Related posts:
Summary of Appeals Court Ruling in MTH v Lionel Trade Secrets Case by Erol Gurcan
More Press Coverage of MTH v Lionel Ruling
Related posts:
- Court Approves Lionel’s Bankruptcy Plan and Settlement with MTH by Erol Gurcan
- Bankruptcy Court Grants Lionel 7th Extension: MTH Motion to Extend TRO Granted by Erol Gurcan
- MTH Attempts To Collect $$$ From Korea Brass by Erol Gurcan
- Legal Explanation of Latest Coil Couplers Posts
- Current Status Of MTH, Lionel Lawsuits Settlement By Erol Gurcan
« Famed Railroad Artist Gilmore Reid Passed Away on January 2 | Main | How To Build a Train Platform »
No Responses to “MTH Files Petition For Rehearing with Appeals Court by Erol Gurcan”
There are no comments yet... Kick things off by filling out the form below.