Ingram v. Cantwell-Cleary Co.
Date Filed2023-12-22
Docket0421/22
JudgeLeahy
Cited0 times
StatusPublished
Full Opinion (html_with_citations)
Timothy Ingram, et al. v. Cantwell-Cleary Co., Inc. No. 421, Sept. Term 2022 Opinion by Leahy, J. Antitrust and Trade Regulation > Trade Secrets and Proprietary Information > In General > Statutory provisions Because the Maryland Uniform Trade Secrets Act, (or âMUTSAâ), codified at Maryland Code (1975, 2013 Repl. Vol.), Commercial Law Article (âCLâ), Sections 11-1201â1209, explicitly directs that a breach of contract claimâregardless of whether said claim is âbased upon misappropriation of a trade secretââmay be brought alongside a statutory claim for misappropriation of trade secrets, it is clear that the existence of an agreement that imposes liquidated damages for a breach of a confidentiality clause or other conduct that is similar to the misappropriation of trade secrets does not necessarily foreclose the availability of monetary relief under MUTSA. CL § 11-1207(b)(1)(i). Antitrust and Trade Regulation > Trade Secrets and Proprietary Information > In General > Customer lists, vendor, and pricing information Based on the evidence presented, the trial court did not err in determining the plaintiffâs confidential customer lists, vendor pricing, profit margins, and other pricing information constituted trade secrets under MUTSA, CL § 11-1201(e)(1), because that information derived independent economic value after having been developed by the plaintiff over time, and because it was not generally known to competitors in a highly competitive industry. Antitrust and Trade Regulation > Trade Secrets and Proprietary Information > In General > Vigilance in protecting secret Trial court did not err in finding the plaintiff took reasonable steps under the circumstances to maintain the secrecy of its trade secrets, including internal customer and pricing information, as required by MUTSA, CL § 11-1201(e)(2), where the plaintiff restricted access to the information on a company database; an employee handbook prohibited employees from removing sensitive categories of information, which encompassed the trade secrets; and employees were required to sign a Non-Compete agreement under which they acknowledged a duty to keep the information confidential. Antitrust and Trade Regulation > Trade Secrets and Proprietary Information > Derived From or Through Another Person The evidence was sufficient to support a finding that Appellants misappropriated trade secrets that were âderived from or throughâ another person in violation of CL § 11- 1201(c)(2)(ii)(1) and (3). In other words, the evidence showed that Appellants used Cantwell-Clearyâs trade secrets and that they âknew or had reason to knowâ that another person, such as Vince Jr. or Ms. McCannon, either âutilized improper means to acquireâ the trade secrets they used, or âowed a duty to the person seeking relief to maintain its secrecy[.]â CL § 11-1201(c)(2)(ii)(1) and (3). Antitrust and Trade Regulation > Trade Secrets and Proprietary Information > Actions > Relief > Damages The durational period for measuring damages under MUTSA, CL § 11-1203, is limited to âthe period of time that the information would have remained unavailable to the defendant in the absence of the appropriation[,]â as measured by âthe time it would have taken the defendant to obtain the information by proper means such as reverse engineering or independent development.â RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 45 cmt. h (AM. L. INST. 1995). Antitrust and Trade Regulation > Trade Secrets and Proprietary Information > Actions > Defenses in general The unauthorized use of a trade secret by a former employee who has committed it to memory can amount to the misappropriation of a trade secret. See Brightview Grp., LP v. Teeters,441 F. Supp. 3d 115
, 140 (D. Md. 2020).
Antitrust and Trade Regulation > Trade Secrets and Proprietary Information >
Actions > Relief > Damages
Plaintiffâs expert, in calculating the actual loss caused by the misappropriation under
MUTSA, CL § 11-1203(b)(1), swept in lost sales to former customers who did not follow
defendants to the new packaging business without proving those losses were caused by the
misappropriation, thereby veering astray of the fundamental principle that any claimed loss
must be âattributable to the appropriation of the trade secret.â RESTATEMENT (THIRD) OF
UNFAIR COMPETITION § 45 cmt. b (AM. L. INST. 1995).
Antitrust and Trade Regulation > Trade Secrets and Proprietary Information >
Actions > Costs and attorney fees
Under the plain terms of MUTSA, CL § 11-1204, although a trial court is ultimately
imbued with discretion to fashion or not fashion a fee award, the court must make a
factual finding of willful and malicious misappropriation as a predicate to exercising that
discretion.
Circuit Court for Anne Arundel County
Case No. C-02-CV-18-002875
REPORTED
IN THE APPELLATE COURT
OF MARYLAND
No. 421
September Term, 2022
______________________________________
TIMOTHY INGRAM, ET AL.
v.
CANTWELL-CLEARY CO., INC.
______________________________________
Leahy,
Reed,
Battaglia, Lynne A.
(Senior Judge, Specially Assigned),
JJ.
______________________________________
Opinion by Leahy, J.
______________________________________
Filed: December 22, 2023
A group of key employees of Cantwell-Cleary Co., Inc. (âCantwell-Clearyâ or
âAppelleeâ) abandoned their jobs one July afternoon in 2018 to take positions with Cleary
Packaging, LLC, a rival company formed weeks earlier by Cantwell-Clearyâs erstwhile
President, Vince Cleary Jr. (âVince Jr.â). 1 Leading the way was Kevin Barstow, who,
together with Timothy Ingram (âAppellantsâ), brought many of their former clients with
them to Cleary Packaging and sold those clients the same shipping and packaging products
that they had purchased in the past from Cantwell-Cleary. Suddenly, Cantwell-Cleary
experienced a sharp decline in revenue.
Cantwell-Cleary brought two lawsuits in the Circuit Court for Anne Arundel
County, Maryland. The first, against Mr. Barstow, asserted claims for breach of contract
and injunctive relief for violating the companyâs standard âDuty of Confidentiality and
Covenant Not to Competeâ agreement (âNon-Competeâ or âAgreementâ), along with a
claim for misappropriation of trade secrets in violation of the Maryland Uniform Trade
Secrets Act, (or âMUTSAâ), codified at Maryland Code (1975, 2013 Repl. Vol.),
Commercial Law Article (âCLâ), sections 11-1201 to 1209. Similarly, the second lawsuit,
against Mr. Ingram and Dennis Ibbott 2 (another former Cantwell-Cleary salesperson),
included claims for breach of contract and injunctive relief against each for violating the
Non-Compete and for misappropriation of trade secrets in violations of MUTSA. The First
We refer to the members of the Cleary family by their first names for clarity and
1
we mean no disrespect thereby.
2
Mr. Ibbott is not a party to this appeal.
Amended Complaint against Ingram and Ibbott included claims for conspiracy and breach
of their duties of loyalty. The two actions were consolidated for trial.
Following an eight-day bench trial, the court delivered an oral ruling on September
2, 2021. The court found Mr. Barstow liable for breach of contract and misappropriation
of trade secrets in violation of MUTSA. The judge also found Mr. Ingram and Mr. Ibbott
liable on all counts, including breach of duty of loyalty and civil conspiracy. On September
24, 2021, the court entered a corresponding written judgment setting forth its findings as
to liability and ordering Mr. Barstow, Mr. Ingram, and Mr. Ibbott to pay damages in the
amount of $780,757.32, $867,335.44, and $273,004.72, respectively, for the
misappropriation of Cantwell-Clearyâs trade secrets. The court also entered injunction
orders against the three former employees which required, among other things, that they
return to Cantwell-Cleary any records relating to the companyâs business operations, and
prohibited them from competing with Cantwell-Cleary in the sale of packaging products
within a 75-mile radius of the companyâs primary facility for a period of one year from the
date of the order. 3
On February 14, 2022, after a tangled series of post-judgment motions relating to a
collateral bankruptcy proceeding and stay, the circuit court struck the September 24, 2021,
judgment and re-entered the judgment and injunctions in the same form and based upon
the same findings of liability. The court specified, however, that the clerk âshall enter the
monetary judgments on the docket against the [Appellants], but shall not issue Notices of
3
Appellants do not challenge the injunction orders in this appeal.
2
Judgment as to the monetary judgment without further order of the United States
Bankruptcy Court[.]â In a separate order entered on the same date, the court denied
Cantwell-Clearyâs petition for attorneysâ fees after finding no malice by Appellants.
Cantwell-Cleary filed a motion requesting clarification of the courtâs order denying
attorneysâ fees, and Appellants filed a motion to alter or amend the February 14 Judgment.
On April 13, 2022, the court denied Appellantsâ motion to alter or amend the
February 14 Judgment and entered a separate order clarifying its ruling on attorneysâ fees
and stating that, although Appellants had engaged in malicious conduct that caused a
deliberate and intentional injury to Cantwell-Cleary in violation of MUTSA, that malicious
conduct did not apply to Cantwell-Clearyâs request for attorneysâ fees.
Appellants noted a timely appeal and present four questions for our review, which
we have re-ordered and re-cast as follows:
I. Did the trial court err in not enforcing the liquidated damages provision of
Appellantsâ Non-Compete Agreements with Cantwell-Cleary?
II. Did the trial court err by concluding that customer lists and pricing
information constituted trade secrets under the Maryland Uniform Trade
Secrets Act?
III. Was the trial courtâs award of damages for misappropriation of trade secrets
based upon a speculative methodology for approximating Cantwell-Clearyâs
lost profits?
IV. Did the trial judge abuse his discretion in clarifying his factual findings in
support of his ruling denying Cantwell-Clearyâs motion for attorneysâ fees?
We hold that the court did not err in declining to enforce the liquidated damages
provisions contained in Appellantsâ Non-Compete Agreements because they did not bar
Cantwell-Cleary from recovering damages under its separate claims for misappropriation
3
of trade secrets under MUTSA. We also hold that the court did not err in finding that
Cantwell-Clearyâs confidential customer lists and pricing information constituted trade
secrets and that Appellants had misappropriated that information. Regarding the third
issue, however, we conclude that the court erred in relying on Cantwell-Clearyâs expertâs
damages calculations because, among other things, those calculations impermissibly
included lost sales that were not proven to have flowed from the acts of misappropriation.
Finally, we hold that the court abused its discretion in deciding, without explanation, that
Appellants engaged in conduct that amounted to malice in regard to their misappropriation
of trade secrets, but not for purposes of awarding attorneysâ fees under MUTSA.
In line with these holdings, we vacate the February 14 Judgment as it pertains to
damages and the April 13 Order clarifying attorneysâ fees. Proceedings on remand shall
be limited to: (1) re-calculating Cantwell-Clearyâs damages for lost profits, and (2)
specifying the grounds for any finding of malice against Appellants. In all other respects,
we affirm the judgments of the trial court.
BACKGROUND
Because of the segmented nature of the issues presented, we present a brief
background to provide context for our discussion. The following account draws from the
evidence presented at the bench trial that began on August 23 and concluded on September
2, 2021. More details relevant to the issues on appeal are included in the discussion.
The Family Business
Since the 1960s, Cantwell-Cleary has operated as a family business based in
Howard County, Maryland. The company sells packaging materials, paper products,
4
janitorial and sanitation supplies, and office supplies. Among other services, the company
provides clients with custom-made packaging for their products that is designed and
manufactured by third-party vendors to protect the products in transit. Cantwell-Cleary is
owned by Shirley Cleary, the matriarch of the Cleary family who ran the business alongside
her late husband, Vincent Cleary Sr. All of the Cleary childrenâVince Jr., Mary-Anne,
Billy, Therese, Shirley, and Kathleenâhave been involved in running the family business
at various times.
After Vincent Cleary Sr. passed away, Vince Jr. took control of the day-to-day
operations of the company. Vince Jr.âs relationship with his mother then began to fray.
Specifically, Shirley claimed that Vince Jr. prevented her from coming into the office and
inspecting the companyâs records, and that he threatened to âfineâ her $10,000 for
interfering with operations. In May 2018, at Shirleyâs direction, outside counsel drafted
and sent a term sheet to Vince Jr. in an effort to settle the companyâs succession plan and
ease tensions. Vince Jr. refused to respond, and Shirley terminated his employment in June
2018 after she purportedly heard that he was preparing to start a competing business. As
Shirley foresaw, on June 22, 2018, Vince Jr. incorporated Cleary Packaging, LLC, as a
competing operation and then entered into a commercial lease on July 13, 2018.
Non-Compete Agreements
Bruce Canham, a longtime employee at Cantwell-Cleary, testified that the company
had used the same standard Non-Compete agreement with new sales employees throughout
his tenure. The Non-Compete contained very specific covenants and instructions, pursuant
to which employees agreed, among other things: 1) not to compete with Cantwell-Cleary,
5
as an employee or in any other capacity, in the business of selling packaging, paper, and
related products within a 75-mile radius of any office of Cantwell-Cleary for one year
following termination of employment for any reason; and 2) to keep confidential
information that was important to the companyâs ability to compete, including all customer
lists, prices charged for products, names of vendors and suppliers, and the contents of
marketing, sales, and other business plans. Under the terms of the standard Non-Compete,
which was admitted into evidence at trial, employees agreed to pay Cantwell-Cleary
$50,000 âas and for liquidated damages, and not as a penalty,â in the event they breached
their duty of confidentiality or any covenants not to compete. The stated consideration for
employees who signed the Non-Compete was âcompensated services as a Cantwell-Cleary
employeeâ and a $50 check. Therese Cleary testified that records showed the company
issued $50 checks to Appellants. Moreover, Therese disclosed that she conducted an audit
of Cantwell-Clearyâs files containing signed Non-Compete agreements at the behest of
Vince Jr., and that those files revealed that Appellants had each executed a Non-Compete
when they joined the company. At trial, Appellants maintained that they did not recall
signing any Non-Compete agreement.
July 2018 Mass Exodus
Appellants, both salespersons for Cantwell-Cleary, left the company in July 2018 to
work for Cleary Packaging. At trial, Cantwell-Cleary produced voluminous testimony and
corroborating documents verifying that Appellants resigned as part of a coordinated effort
to join Vince Jr.âs fledgling operation. In particular, cell phone records admitted at trial
indicated that Appellants engaged in extensive conversations with Vince Jr. during the days
6
surrounding their resignations from Cantwell-Cleary. Much of the testimony at trial also
concerned the disappearance of the physical and digital copies of the Non-Compete
agreements between the company and several of its key employees, including Appellants.
In the days following Vince Jr.âs termination, he met with several Cantwell-Cleary
employees at a local hotel. He also engaged in approximately 213 telephone calls with
various Cantwell-Cleary employees between the date of his termination and July 16, 2018.
Notably, Vince Jr. participated in 105 telephone calls totaling 34.18 hours with Appellant
Barstow during this timeframe.
A group of employees, led by Mr. Barstow, presented the company with a demand
letter ârequiring, per their rights, copies of any and allâ Non-Compete agreements between
themselves and Cantwell-Cleary. The employees stated â[i]f no copies are supplied to the
below individuals by 11:00 am Thursday, July 5th 2018[,] then those individuals will
understand there are no such contracts of any kind[.]â In response to the demand letter,
Therese and Kathleen Cleary discovered that the Non-Compete agreements for the
undersigned employees were missing from the companyâs files. Therese looked for the
documents in the companyâs cloud system, where she recalled placing scanned copies, and
discovered that âall of [the Non-Compete agreements] were gone exceptâ for that of a
single salesperson, who remained with the company. A different salesperson reported that,
around this time, Appellants told employees that âif they donât have the non-competes to
show, they canât prove that you signed them.â A third salesperson related that Mr. Barstow
told him that the Agreements had âbeen taken care of[.]â
Events reached an inflection point at approximately 3:00 p.m. on July 16, 2018,
7
when a cadre of Cantwell-Clearyâs top employees resigned and walked out of the facility.
Records showed that Mr. Ingram had several short telephone calls with Vince Jr. during
the walkout, followed by a 7-minute call at 3:26 p.m., and more extensive calls during the
evening. In the days leading up to this mass exodus, several of the participating employees,
including Mary McCannonâthe companyâs executive administratorâand Kevin
DeGregoryâthe companyâs top salespersonâwent on vacation. Therese noticed that
nearly all of Ms. McCannonâs files containing proprietary customer, vendor, and pricing
information had been removed from her office.
Ms. McCannon, Mr. Barstow, and other key employees started working at Cleary
Packaging the day after they walked out of Cantwell-Cleary. Appellant Ingram stayed on
with the company until July 30, and then joined Cleary Packaging the next day, taking his
list of open orders detailing Cantwell-Clearyâs pricing information, costs, and profits.
At Cleary Packaging, Appellants began selling the same packaging products to
many of their former customers. According to William Cleary, the effect of this
competition, along with the departure of other salespersons, was disastrous. He explained
that Cantwell-Clearyâs gross sales declined nearly 40% in the months immediately
following the July 16 mass exodus. Ultimately, that decline persisted, and the companyâs
total gross sales slumped from $26.5 million in 2017 to $14.6 million in 2020.
The Lawsuits
Cantwell-Cleary initiated a lawsuit against Mr. Barstow on July 25, 2018, and a
separate lawsuit against Mr. Ingram and Mr. Ibbott on September 19, 2018. The operating
Second Amended Complaint against Mr. Barstow stated a claim for breach of contract
8
under Count I, alleging Mr. Barstow breached the Non-Compete by accepting a sales
position with a competing business within seven miles from Cantwell-Clearyâs business
office and then directly soliciting the customers of Cantwell-Cleary. Count II for
preliminary and permanent injunction requested that Mr. Barstow be enjoined from
competing with Cantwell-Cleary for a period of one year from the date of judgment, and
that he be ordered to return Cantwell-Clearyâs proprietary information. Count III for
misappropriation of trade secrets alleged that Mr. Barstow misappropriated proprietary
information as defined under MUTSA Section 11-1201(c), and then âdisclosed and/or
transferred the Proprietary Information to Cleary Packaging[.]â The complaint further
stated that Mr. Barstowâs misappropriation of the proprietary information, in conjunction
with the conduct of Vince Jr., and other former employees of Cantwell-Cleary, âconstitutes
a critical component of a conspiracy whereby [Appellant Barstow] and these persons have
sought to destroy the business of Cantwell-Cleary through wrongful meansâ thereby
entitling Cantwell-Cleary to reasonable attorneysâ fees under MUTSA Section 11-
1203(d). 4
The operating First Amended Complaint against Mr. Ibbott and Mr. Ingram stated
separate claims for breach of contract under Counts I and II, respectively, alleging that they
breached the Non-Compete. More specifically, these counts alleged that Ibbott and Ingram
breached the Non-Compete by taking positions with Cleary Packaging less than seven
miles from Cantwell-Clearyâs business office, directly soliciting Cantwell-Clearyâs
Cantwell-Cleary later filed a motion for leave to amend its complaint against Mr.
4
Barstow, again, to add a claim of civil conspiracy. That motion was denied as untimely.
9
customers, and soliciting other Cantwell-Cleary employees to resign and take new jobs
with Cleary Packaging. Counts III and IV stated claims for misappropriation of trade
secrets against Ibbott and Ingram, respectively; the allegations contained therein generally
mirrored the allegations made in Count III of the Second Amended Complaint against Mr.
Barstow. Counts V and VI for breach of duty of loyalty alleged that Ibbott and Ingram
breached their fiduciary duty of loyalty to Cantwell-Cleary by organizing the mass exodus
and by participating in a civil conspiracy. In turn, Count VII for civil conspiracy generally
alleged that both Ibbott and Ingram, together with Vince Jr. and others, agreed to
wrongfully use proprietary information taken from Cantwell-Cleary to start a competing
business and, in so doing, âdestroy the business operationsâ of Cantwell-Cleary. The First
Amended Complaint further stated that, in addition to their use of Cantwell-Clearyâs
propriety information, Ibbott and Ingram furthered the conspiracy by breaching their Non-
Compete agreements and inducing other Cantwell-Cleary employees to do the same.
Counts VIII and IX for preliminary and permanent injunction requested that the court
enjoin Ibbott and Ingram from competing with Cantwell-Cleary for a period of one year
from the date of judgment, that they be ordered to return Cantwell-Clearyâs proprietary
information, and that the court award Cantwell-Cleary attorneysâ fees under CL § 11-1204.
Trial Courtâs Ruling
The trial courtâs comprehensive ruling from the bench spans nearly 40 pages of
transcript. In summarizing the evidence presented, the judge emphasized that he âlooked
closely at witness behavior on the stand and their way of testifying.â Based largely on the
10
testimony of Therese Cleary, the judge concluded that Appellants had signed the Non-
Compete agreements:
The court considered the testimony of Therese Cleary. The court does find
her credible and does find that she saw the non-competes in question, that
she scanned them with Cindy Wood into the Cloud pursuant to an order from
Vince, Jr. That the non-competes exist and that theyâre now gone.
The judge noted that he did not find defense witnesses credible on this pointâhe
did not believe Ms. McCannonâs and Ms. Woodâs testimony that they never saw or scanned
the Non-Competes into Cantwell-Clearyâs cloud system. Regarding Ms. McCannon, the
court declared:
I am convinced she made copies and I am convinced that she destroyed them.
And I am convinced that she scanned them into the Cloud and I am convinced
that she got rid of them. And it was just so convenient she planned her
vacation a week prior.
The judge did not credit Appellantsâ testimony that they didnât âknow that [their]
non-competes exist[,]â and found that they had, in fact, assured other employees that the
Non-Compete agreements could not be proven or produced. Thus, on the breach of
contract claims, the court determined that:
Kevin Barstow[,] his employment jacket was checked off, [Exhibit] 34[,] he
got a $50 check. [Exhibit] 35 or 37[,] he got a $50 ADI printout. [Exhibit]
50, heâs on a non-compete checklist . . . Timothy Ingram, non-compete
memo, got a $50 check from Bruce Canham and heâs on a non-compete
checklist.
* * *
The non-competes exist. There is no question about that. 100 percent
convinced they exist.
The court finds for the [Cantwell-Cleary] on Count I[,] breach of contract[,]
because each [Appellant] violated the contract by engaging in the [sale] of
paper and packaging products directly or indirectly and competing with
Cantwell[-]Cleary.
11
As a result, the court will grant a one year injunction with a 75 mile radius
per the non-competes. The court finds that for a company that goes from
Landover to Richmond and up to Pennsylvania there is absolutely nothing
improper about a non-compete agreement which has that territory. It is
clearly tied into the employeeâs duties. The time period of one year is not
unreasonably long. I had Kevin DeGregory tell me making half a million
dollars a year, he decided to comply with it.
The geographic area has a reasonable relationship to the geographic area
which the employee worked. The business activity has a reasonable
relationship to the duties. And thereâs nothing to indicate the employee was
coerced or compelled to enter into the agreement.
Next, the court was persuaded by the testimony of William Cleary and former
customers in deciding that Appellants had misappropriated trade secrets. The court
stressed that it found âthat these matters of pricingââi.e., Cantwell-Clearyâs account-
specific customer and pricing information built up over many yearsââindicate trade
secrets . . . [i]f I know the margins I can make money.â Appellants used Cantwell-Clearyâs
pricing data to their advantage, the court found, based on the testimony of customers who
followed them to Cleary Packaging. The court explained that they were charged âthe same
prices . . . . Why is that important? Because you couldnât get that account if you didnât
know what the prices were.â The court expounded on Appellantsâ misappropriation of
Cantwell-Clearyâs confidential customer and pricing information:
And the customer list, the vendor pricing, the profit margins, the pricing to
customers, the receivables, the good will of the salesmen these were all used
[sic] and the court finds them to be trade secrets. And they were all used to
cause unjust enrichment and actual loss by their misappropriation.
Go back to what [a former and current customer of Mr. Ingram] told us on
July 30th. When Mr. Ingram called, yep, he sold me exactly pretty much what
I had before. If I know what to price it for, and I know how to cut my
competitor, I can make a whole lot of money, because weâre talking pennies
12
on the dollar here. And when weâre talking thousands and thousands of
items, it all adds up. Thatâs been proven.
Turning to address the civil conspiracy claim against Mr. Ibbott and Appellant
Ingram, the judge acknowledged that he must consider whether âthere was an agreement
between at least two persons to accomplish an unlawful act or use unlawful means to
accomplish an act not in itself illegal.â The judge resolved that there were âa whole lot
more than two people that were involvedâ in the conspiracy, including Ibbott and Ingram.
The evidence âconvincedâ the court that Vince Cleary was determined âto destroy
Cantwell[-]Cleary and all civil conspirators are jointly and severally liable for the harm
caused . . . by the conspiracy[.]â
The court then proceeded to award money damages for the Appellantsâ
misappropriation of trade secrets, relying on the calculations provided by Cantwell-
Clearyâs expert, Jeffrey Coleman. Despite expressing some reservations regarding Mr.
Colemanâs approach, the court awarded damages based on Mr. Colemanâs calculations up
to the date of judgment:
Now, hereâs where Iâm, Iâll be candid, uncomfortable. I have to assess
damages. And actual loss is a damage for violation of the Trade Secrets Act,
as well as attorney fees, which I am reserving on. And the actual loss that I
have, based upon the testimony from the plaintiffâs witness, Mr. Coleman, is
that Kevin Barstow caused $780,757.32 in los[t] profit for the breach of the
trade secrets [of] Cantwell[-]Cleary.
. . . . Timothy Ingram caused $867,335.44. As I said, I wouldâve liked to
have known overhead and net profit, but those are [the] gross profits that
were presented to me, and there was no evidence to dispute that.
Based on the evidence that I have, I will assess damages against Mr. Barstow
for $780,757.32, which is the actual loss from August 1st, 2018 to September
2nd, 2021. . . . And Mr. Ingram in the amount of $867,335.44.
13
On September 24, 2021, the court entered a corresponding written order granting
Cantwell-Cleary injunctive relief and damages against Appellants and Mr. Ibbott. The
judgment order specified that Mr. Barstow was found liable for breach of contract and
misappropriation of trade secrets and awarded damages against him in the amount of
$780,757.32. The judgment order also found Mr. Ingram liable for breach of contract,
misappropriation of trade secrets, breach of fiduciary duty, and civil conspiracy, and
imposed damages against him in the amount of $867,335.44. Attached as exhibits to the
judgment were separate orders enjoining Appellants from competing with Cantwell-Cleary
in the sale of paper and packaging products within a 75-mile radius, soliciting Cantwell-
Clearyâs customers, or obtaining any ownership interest in a competing business for one
year from the date of the order (i.e., from September 24, 2021, to September 24, 2022).
Post-Judgment Motions and Appeal
On September 15, 2021âafter the court delivered its oral ruling but prior to entry
of the courtâs written orderâAppellants each filed a âSuggestion of Stayâ advising the
circuit court that they had filed for bankruptcy in the United States Bankruptcy Court for
the District of Maryland (the âBankruptcy Courtâ) and that âpursuant to 11 U.S.C. § 362(a),
the commencement or continuation of any actions against [Appellants] is stayed.â 5
5
Under the United States Bankruptcy Code, 11 U.S.C. § 362(a) ensures that
potentially conflicting litigation is stayed pending the resolution of bankruptcy
proceedings. The statute provides, in relevant part that:
(a) Except as provided in subsection (b) of this section a petition filed under
section 301, 302, or 303 of this title, or an application filed under section
[Footnote continued]
14
Consequently, Appellants moved to âstrike and nullifyâ the September 24, 2021 judgment
as entered in violation of the automatic stay of proceedings following the initiation of
bankruptcy proceedings. The circuit court stayed the case by written order entered October
1, 2021, âuntil the Court receives further instructions from the Bankruptcy Court.â
On November 1, 2021, the Bankruptcy Court entered separate orders in Appellantsâ
respective bankruptcy cases modifying the automatic stay to permit the circuit court to (1)
vacate the judgment and injunctions entered on September 24, 2021, and (2) enter a new
judgment and injunctions âin the same form and substanceâ but to refrain from entering
any notice of recordation of money judgment.
The circuit court held a hearing on February 9, 2022, to address the outstanding
motions and untangle the procedural morass that had developed since its oral ruling on
September 2, 2021. Several days later, on February 14, 2022, the court entered a new
judgment, after striking the previous judgment and injunction orders as âvoidâ and in
violation of the bankruptcy stay, and, based upon the same findings of liability, ordered
5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay,
applicable to all entities, ofâ
(1) the commencement or continuation, including the issuance or
employment of process, of a judicial, administrative, or other action
or proceeding against the debtor that was or could have been
commenced before the commencement of the case under this title, or
to recover a claim against the debtor that arose before the
commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the
estate, of a judgment obtained before the commencement of the case
under this title[.]
11 U.S.C. § 362(a).
15
Appellants to pay the damages previously ordered. The clerk of the circuit court was
instructed to enter the monetary judgments on the docket but not to issue notices of
judgment as to the monetary judgments without further order of the Bankruptcy Court. The
injunction orders specified that the new one-year injunctions against each Appellant were
set to run from the date of the entry of the ordersâthat is, until February 14, 2023. On that
same day, the court entered a written order denying Cantwell-Clearyâs motion for
attorneysâ fees.
Appellants filed a timely motion for new trial or to alter or amend the February 14
Judgment under Maryland Rules 2-533 and 2-534. Cantwell-Cleary, in turn, filed its own
motion to alter or amend, under Maryland Rules 2-534 and 2-535, requesting that the court
clarify its factual findings supporting the denial of Cantwell-Clearyâs motion for attorneysâ
fees. 6 On April 13, 2022, the court entered two orders: one denying Appellantsâ motion
for a new trial or to alter or amend; and the second granting Cantwell-Clearyâs motion to
clarify. In the second order, the judge stated that, although Appellants had engaged in
âwillful and malicious conductâ that caused a deliberate and intentional injury to Cantwell-
Cleary in violation of MUTSA, that malicious conduct did not apply to Cantwell-Clearyâs
6
Cantwell-Clearyâs motion was filed on February 25, 2022, eleven days following
the courtâs February 14 Attorneysâ Fees Order. Because the motion was filed eleven days
after the February 14 Attorneysâ Fees Order, it is treated as a motion to revise the judgment
under Maryland Rule 2-535(a), which provides that âOn motion of any party filed within
30 days after entry of judgment, the court may exercise revisory power and control over
the judgment and, if the action was tried before the court, may take any action that it could
have taken under Rule 2-534.â Md. Rule 2-535(a). Thus, although not a timely Rule 2-
534 motion (which would have had to have been filed within ten days of the February 14
order), Cantwell-Clearyâs motion was timely under Rule 2-535(a).
16
request for attorneysâ fees. Appellants noted a timely appeal on May 5, 2022.
DISCUSSION
I.
STANDARD OF REVIEW
In Braude v. Robb, 255 Md. App. 383 (2022), we recently explained the standard of
review applicable to a circuit courtâs decision in a case tried to the court:
When reviewing a bench trial decision, we will not set aside a trial courtâs
judgment on the evidence unless it is clearly erroneous, giving âdue regard
to the opportunity of the trial court to judge the credibility of the witnesses.â
Md. Rule 8-131(c). We view the evidence in the light most favorable to the
party who prevailed at trial. Brault Graham, LLC v. Law Offices of Peter G.
Angelos, P.C., 211 Md. App. 638, 660 (2013). If a trial court does not make
findings of fact, no presumption as to them arises merely from the decision.
Burroughs Intâl Co. v. Datronics Engârs, Inc., 254 Md. 327, 338 (1969). In
contrast to factual findings, we review a trial courtâs legal findings de novo.
MBC Realty, LLC v. Mayor & City Council of Baltimore, 192 Md. App. 218,
233 (2010).
Braude, 255 Md. App. at 397-98.
The first issue, whether the trial court properly awarded damages under MUTSA
instead of the partiesâ Non-Compete, is a legal question that we review without deference
to the trial court. See Impac Mortg. Holdings, Inc. v. Timm, 474 Md. 495, 533(2021) (âThe interpretation of a contract . . . is a question of law.â) (citation omitted); Minh-Vu Hoang v. Lowery,469 Md. 95, 104
(2020) (âThe Court reviews issues of statutory interpretation
de novo.â) (citation omitted).
Next, we review both the trial courtâs factual determinations and application of the
law in determining whether the court correctly found, based on a preponderance of the
evidence, that Appellants misappropriated trade secrets in violation of MUTSA. Initially,
17
the court must determine whether the information that was allegedly misappropriated
qualifies as a trade secret as defined under CL § 11-1201(e), and then the court must decide
whether the Appellants actually misappropriated the trade secret in violation of CL § 11-
1201(c).
The third issueâwhether the trial court erred by determining, without any
explanation, that it was more appropriate to use past figures to measure the sales improperly
diverted from Cantwell-Cleary than the actual sales figures for the period of
misappropriation in the courtâs calculation of damages under CL § 11-1203(b)(1), and
whether the court erred by sweeping in lost sales to former customers of Appellants that
did not provide any business to Cleary Packagingâpresents questions of law that we
review without deference.
Finally, we must consider whether the trial court abused its discretion when, in its
written order in response to Cantwell-Clearyâs motion requesting clarification of the
courtâs order denying attorneysâ fees, the court determined that Appellants had engaged in
malicious conduct without providing its reasoning for reversing its initial position on the
record. See, e.g., Maddox v. Stone, 174 Md. App. 489, 502 (2006).
II.
Liquidated Damages
A. Partiesâ Contentions
Appellants assert in their opening brief that â[n]either Appellants nor Appellee
challenge the lower courtâs ruling that the non-compete agreements are enforceable.â
Appellants assign error to the courtâs failure to enforce each Agreementâs liquidated
18
damages clauses which fixed damages in the amount of $50,000 for any breach of the Non-
Compete. Appellants observe that Cantwell-Cleary âargued for, and received, a judgment
for âactual damagesâ flowing from a misappropriation of trade secrets[,]â a form of relief
ânot mentioned in the non-compete agreement or bargained for at the time of contract
formation.â Appellants assert â[n]either party could have known if the breach could
implicate MUTSA.â In their view, damages were impossible to calculate at the time of
contract formation because â[n]either party could know which customers might leave
Appellee . . . or know what the sales volume for a given customer might be decades into
the future.â Therefore, Appellants press, a liquidated damages award of $50,000 was
reasonable and Cantwell-Cleary should be held to its bargain. 7
Cantwell-Cleary responds that the liquidated damages provisions contained within
the Non-Compete agreements at issue are unenforceable because âthe only evidence in the
record is that the $50,000.00 figure was designed to scare a newly hired employee.â
Pointing our attention to Willard Packaging Co. v. Javier, 169 Md. App. 109 (2006),
Cantwell-Cleary asserts that we declared an identical liquidated damages provision in that
case to be unenforceable because there was no evidence that the employer suffered any
actual damages. Here, Cantwell-Cleary insists, the liquidated damages provision at issue
is unenforceable due to a lack of effort in estimating potential damages at the time of
contract formation. Then, citing to out-of-state law, Cantwell-Cleary posits that evidence
7
We note that Cantwell-Clearyâs complaints against Appellants only alleged
violations of the covenant not to compete and did not include allegations of any violations
of the duty of confidentiality provisions of the Agreements.
19
of actual damages is admissible where a liquidated damages clause is unenforceable.
Appellants counter that Cantwell-Cleary never argued in the circuit court that any
aspect of the Non-Compete, including the liquidated damages provision, was
unenforceable. As Appellants point out in their brief, when the trial court asked Cantwell-
Cleary if it was asking for liquidated damages under the Non-Compete, counsel for
Cantwell-Cleary responded that it wasnât because âitâd be duplicate of damages if you
awarded it.â Accordingly, Appellants invoke the doctrine of judicial estoppel, insisting
that Cantwell-Cleary persuaded the trial court that the non-compete was valid, and, quoting
New Hampshire v. Maine, 532 U.S. 742, 750 (2001), urge that Cantwell-Cleary âshould
not be permitted to lead a court to find a fact one way and then contend in another judicial
proceeding that the same fact should be found otherwise.â
We agree with Appellants that Cantwell-Clearyâs wayward argument is not
preserved. Regardless, both partiesâ arguments fall wide of the mark because Cantwell-
Cleary sought and was awarded damages under its separate statutory claims for
misappropriation of trade secrets. Before we recite the applicable decisional law, we
review some additional facts.
B. Background
At trial, substantial evidence was produced indicating that Appellants had each
signed a copy of the companyâs standard Non-Compete before those copies were lost or
destroyed, leading the circuit court to find that the non-competes existed âand that theyâre
now gone.â Appellants no longer challenge that finding on appeal and concede that the
Agreements exist and are enforceable.
20
Cantwell-Clearyâs standard Non-Compete agreement begins as follows:
I understand that Cantwell-Cleary Co., Inc. has worked hard over the years
to develop client lists, marketing plans, pricing strategies and vendor
relationships which are integral to the Companyâs present and future success.
In consideration for my compensated services as a Cantwell-Cleary
employee and $50, the receipt of which is acknowledged[,] . . . .
In the succeeding terms, the Agreement contains two sub-parts, each with its own
liquidated damages clause. The first sub-part pertains to the employeeâs duty of
confidentiality and provides, in relevant part, as follows:
I agree to keep confidential during the tenure of my employment information
which is important to the Companyâs ability to compete, specifically the
following information:
1. All customers of Cantwell-Cleary;
2. The prices charged any customer for products purchased from
Cantwell-Cleary;
3. The names of Cantwell-Clearyâs vendors and suppliers;
4. The prices charged Cantwell-Cleary by any of its vendors or
suppliers; and
5. The contents of any marketing, sales, business or promotional plans
used by the Company.
I understand and agree that the Company will be injured if I disclose
any of the above information to a third-party without authorization and
that the extent of such damage will be irreparable and substantial. I also
realize that litigation in court is expensive and time consuming.
Therefore, I agree to pay unto Cantwell-Cleary Co., Inc. the sum of
$50,000, as and for liquidated damages, and not as a penalty, in the event
that I breach this duty of confidentiality. I agree that such a sum is a fair
and reasonable sum . . . .
The obligation to pay such liquidated damage does not preclude
Cantwell-Cleary Co., Inc.âs other rights it may have against me for such
a breach, including as an example, only, the right to seek injunctive
relief, which other rights the Company specifically reserves.
21
(Emphasis added). The second sub-part contains the employeeâs Non-Compete agreement:
I agree that for the one-year period immediately following my termination of
employment for any reason or for the period of time which I would receive
royalty compensations from Cantwell-Cleary Co., Inc., I will:
(1) Not compete, directly or indirectly, either individually or as an officer
agent, director, employee, partner, salesperson, or representative, or in any
other capacity, in the business of selling packaging or paper products, or
other related products within a 75-mile radius of the headquarters of
Cantwell-Cleary Co., Inc., in Landover, Maryland. The term âcompeteâ in
this agreement shall include, but not be limited to, selling, consulting,
brokering, or assisting in the sale, consultation, or brokerage, of such
products.
(2) Not obtain any ownership interest, either directly or indirectly, in any
company or entity which competes with Cantwell-Cleary Co., Inc., within a
75-mile radius of its corporate headquarters.
(3) Not compete with Cantwell-Cleary Co., Inc. or engage, either directly or
indirectly, in the sale, or solicitation for sale, of packaging or paper products
or other related products sold by Cantwell-Cleary Co., Inc. with any
customers of Cantwell-Cleary Co., Inc., whether as a result of my solicitation
or otherwise. The term âcustomerâ in this agreement shall mean any person
or entity who has ever had an account with Cantwell-Cleary Co., Inc. up to
and including the date of my termination. . . .
I agree that (a) the above covenants not to compete do not preclude me from
engaging in gainful employment or from making a living, and (b) such
covenants not to compete are reasonable in duration, area, extent, and in all
other regards.
I understand if I breach this covenant not to compete, the injury to
Cantwell-Cleary will be irreparable and substantial. I also realize that
litigation in court is expensive and time consuming. Therefore, I agree
to pay unto Cantwell-Cleary Co., Inc. the sum of $50,000 as and for
liquidated damages, and not as a penalty, in the event I breach any of
the above covenants not to compete. I agree that such a sum is a fair and
reasonable sum to pay . . . .
The obligation to pay such liquidated damages does not preclude
Cantwell-Cleary Co., Inc.âs other rights it may have against me for such
22
a breach, including as an example, only, the right to seek injunctive
relief, which other rights the Company specifically reserves.
(Emphasis added). At trial, the parties touched on the issue of liquidated damages during
closing arguments. Specifically, the trial judge inquired:
THE COURT: Before I forget. You said the liquidated damages clause
[applies] if I find the non-competes exist for the recovery, but they all have
this language, the application to pay such liquidated damages does not
preclude Cantwell[-]Clearyâs other rights it may have against me for such a
breach including as an example only the right to seek injunctive relief, which
other rights the company specifically reserves.
So I understand thereâs the liquidated damages [clause], but thereâs also
language in Mr. Ibbottâs non-compete, Mr. DeGregoryâs non-compete, Mr.
William Clearyâs non-compete that they can seek other damages[.] And Iâm
going to follow up with [Cantwell-Clearyâs counsel]. Is it your position the
liquidated damages clause is the sole relief other than injunctive?
[APPELLANTSâ COUNSEL]: That is my position, Your Honor.
* * *
THE COURT: Did you contract away your rights as to other damages in the
non-compete agreement as it relates to the civil conspiracy, your alleged
negligence count and your trade secrets count [against Appellants], or would
that be the other rights they may have?
[CANTWELL-CLEARYâS COUNSEL]: Yeah. So, Your Honor, this
comes up quite a bit in these kind of cases as youâve probably seen over the
years . . . . Plaintiffs in these cases have a choice, and I would submit the
direct answer is Cantwell[-]Cleary did not contract away its rights to be
limited to liquidated damages.
But plaintiffs in these kinds of cases, Your Honor, have a choice. They can
pursue liquidated damages and they need to make an election of that, or they
can pursue actual damages. And what we see here, Your Honor, is from the
inception of this case the plaintiff [has] always, always without fail sought
actual damages. And thatâs consistent with the non-compete language, Your
Honor, that youâre referring to for Defendant Mr. Ibbott and the other co-
conspirators.
23
The court proceeded to award injunctive relief against Appellants on Cantwell-
Clearyâs breach of contract claims based on their violation of the Non-Compete. Then,
after finding that Appellants misappropriated trade secrets in violation of MUTSA, the
court awarded money damages under CL § 11-1203 against Mr. Barstow in the amount of
$780,757.32 and Mr. Ingram in the amount of $867,335.44.
C. Analysis
Appellants challenge the damage awards against them as violations of the liquidated
damages clauses in their Non-Compete agreements, and Cantwell-Cleary responds by
challenging the enforceability of the liquidated damages clauses. As noted earlier, we
consider those arguments largely beside the point. At the outset, we observe that at no
point did Cantwell-Cleary make the argument before the trial court, as it does now, that the
liquidated damages provisions functioned as unenforceable penalties. Therefore, the issue
of the enforceability of the liquidated damages clauses is not preserved for our review. Md.
Rule 8-131(a). Rather, the record is clear that, at trial, the parties argued over the
applicability of the liquidated damages clauses and whether they effectively precluded
Cantwell-Cleary from seeking monetary relief under its separate claims for
misappropriation of trade secrets.
In arguing that Cantwell-Cleary was precluded from seeking monetary damages in
excess of $50,000 as provided in the liquidated damages clauses, Appellants elide the exact
rulings of the trial court, collapsing all of the separate claims under Cantwell-Clearyâs
claims for breach of contract. It seems both parties on appeal fail to understand the discrete
nature of the relief awarded by the trial court. As reflected in the record, the trial court
24
awarded only injunctive relief against Appellants under Cantwell-Clearyâs claims for
breach of contractâviolations of the Non-Compete. The Agreements expressly reserved
Cantwell-Clearyâs rights to seek injunctive relief for any breach of the covenants not to
compete, and no damages were awarded under those claims. The court awarded damages
against Appellants solely under Cantwell-Clearyâs statutory claims for misappropriation
of trade secrets. Considering that those claims arose under MUTSA, as opposed to the
Non-Compete agreements, Appellants fail to explain exactly how the liquidated damages
clauses even enter the equation. It is of course true that a valid liquidated damages clause
normally provides the sole relief for a breach of the agreement, which âmay not be altered
to correspond to actual damages determined after the fact.â Barrie School v. Patch, 401
Md. 497, 514(2007) (quoting Bd. Educ. Talbot Cnty. v. Heister,392 Md. 140, 156
(2006)).
Here, the liquidated damages provision specified that Cantwell-Cleary was not precluded
from pursuing âother rights it may have against [Appellants] for [] a breach.â Even setting
that language aside, Appellants offer no support for their contention that a liquidated
damages clause for breach of contract bars monetary relief under an entirely separate
statutory cause of action.
We recognize that there are some instances in which the existence of a contract
between the parties can bar separate claims arising out of the same subject matter. For
instance, a quasi-contractual claim, such as detrimental reliance, is ordinarily unavailable
when an express contract exists between the parties. Ver Brycke v. Ver Brycke, 379 Md.
669, 693 n.9 (2004). Similarly, Marylandâs economic loss doctrine prohibits a plaintiff
from recovering tort damages premised on ânegligence that causes purely economic harm
25
in the absence of privity, physical injury, or risk of physical injury,â Bel Air Carpet, Inc.
v. Korey Homes Bldg. Grp., LLC, 249 Md. App. 109, 128 (2021) (quotation omitted).
Advocating, it seems, for a similar rule, Appellants strenuously assert that Cantwell-Cleary
should not be allowed to âhave its cake and eat it tooâ and must be limited to the contractual
remedy of liquidated damages, even with respect to their statutory misappropriation of
trade secrets claims. We do not agree.
It bears repeating that Cantwell-Cleary, wisely, pled its claims for breach of contract
against Appellants solely based on breaches of the non-compete covenants of their
respective Agreements. The non-compete covenants proscribe a broader range of conduct
that is distinct from the misappropriation of trade secrets. For instance, had Appellants left
Cantwell-Cleary to work for a competitor within the geographic area covered by their
Agreements, they would have still been in breach of their contractual duties even if they
took no proprietary information from the company. Of course, it is true that Appellantsâ
solicitation of former clients was also prohibited under the Non-Competes, but it was the
additional act of using and/or disclosing confidential customer and pricing information to
assist in soliciting those customers that rendered Appellants liable for misappropriation of
trade secrets. 8
8
On the other hand, the issue would be a closer call under the confidentiality
portions of Appellantsâ Agreements. We note that throughout the course of this litigation,
neither Cantwell-Cleary nor Appellants have ever claimed that the confidentiality
provisions barred Cantwell-Cleary from seeking actual damages for misappropriation of
trade secrets. To the contrary, at oral argument, Appellantsâ counsel reaffirmed several
times that Appellants grounded their arguments solely on the premise that Cantwell-Cleary
was prohibited from seeking damages beyond those provided under the non-compete
portions of the Agreements.
26
We turn, therefore, to consult the statute governing Cantwell-Clearyâs trade secrets
claims. The Maryland Uniform Trade Secrets Act provides statutory remedies for
businesses alleging misappropriation of trade secrets, and expressly provides as follows:
(a) Except as provided in subsection (b) of this section, this subtitle displaces
conflicting tort, restitutionary, and other law of this State providing civil
remedies for misappropriation of a trade secret.
(b)(1) This subtitle does not affect:
(i) Contractual remedies, whether or not based upon
misappropriation of a trade secret;
CL § 11-1207 (emphasis added). Contrary to the statuteâs hardline prohibition on pursuing
additional tort or restitutionary remedies, MUTSA contemplates that a claim for
misappropriation of trade secrets and a claim for breach of contractâeven one âbased upon
misappropriation of a trade secretââmay coexist. Id. The commentary to the parallel
provision of the Uniform Trade Secrets Act, which is identical to CL § 11-1207(b)(1),
likewise explains that the Act does not apply to âa duty voluntarily assumed through an
express or an implied-in-fact contractâ because â[t]he enforceability of covenants not to
disclose trade secrets and covenants not to compete that are intended to protect trade
secrets, for example, is governed by other law.â UNIF. TRADE SECRETS ACT § 7 cmt.
(UNIF. L. COMMâN 1985).
Because MUTSA explicitly directs that a breach of contract claimâregardless of
whether said claim is âbased upon misappropriation of a trade secretââmay be brought
alongside a statutory claim for misappropriation of trade secrets, it is clear that the
existence of an agreement that imposes liquidated damages for a breach of a confidentiality
clause or other conduct that is similar to the misappropriation of trade secrets does not
27
necessarily foreclose the availability of monetary relief under MUTSA. CL § 11-
1207(b)(1)(i). We observe that claims for misappropriation of trade secrets under MUTSA
and breach of contract claims arising out of the breach of a related non-compete or non-
disclosure agreement are commonly brought together. See, e.g., Padco Advisors, Inc. v.
Omdahl, 179 F. Supp. 2d 600(D. Md. 2002) (breach of contract claim for violation of covenants not to compete and MUTSA claim for misappropriation of trade secrets brought together); NaturaLawn of Am., Inc. v. West Grp., LLC,484 F. Supp. 2d 392
(D. Md. 2007) (same); Waypoint Mgmt. Consulting, LLC v. Krone, No. ELH-19-2988,2022 WL 2528465
(D. Md. July 6, 2022) (same); Philips N. Am. LLC v. Hayes, No. ELH-20-1409,2020 WL 5407796
(D. Md. Sept. 9, 2020) (same); Albert S. Smyth Co. v. Motes, CCB-17-677,2018 WL 3635024
(D. Md. July 31, 2018) (same); MCS Servs., Inc. v. Jones, No. WMN-10- 1042,2010 WL 3895380
(D. Md. Oct. 1, 2010) (same).
In sum, we hold that, regardless of whether the liquidated damages provisions
contained within Appellantsâ Non-Compete agreements were enforceable, Cantwell-
Cleary was not foreclosed from obtaining damages for misappropriation of trade secrets
under MUTSA. CL § 11-1207(b)(1)(i). By its own terms, the liquidated damages
provision did not preclude Cantwell-Cleary from pursuing âother rights it may have against
[Appellants] for [] a breach.â Cantwell-Cleary did not seek damages for breaches of its
contracts, but rather, it sought damages under separate statutory claims for
misappropriation of trade secrets. Cantwell-Cleary sought only injunctive relief under its
claims for the breaches of the covenants not to compete, as it was expressly permitted to
do under the Agreements. Thus, we perceive no error on the part of the trial court in
28
distinguishing between the available remedies under these independent causes of action.
III.
Trade Secrets
A. Partiesâ Contentions
Appellants assert that the circuit courtâs findings of liability for misappropriation of
trade secrets were âconclusory and unsupported by the proper six-factor balancing test[,]â
described in Bond v. PolyCycle, Inc., 127 Md. App. 365, 372 (1999), for determining what
constitutes a trade secret. They contend that Cantwell-Clearyâs customer lists and pricing
information do not qualify as trade secrets under MUTSA and they claim that the evidence
did not establish that Appellants actually misappropriated any such information
themselves. More specifically, Appellants argue that the customer lists and pricing
information at issue could not have constituted trade secrets because âthere [was] no unique
formula or pattern or methodology other than hard work and providing good serviceâ
necessary to develop the information, which could be generated simply by cold calling
businesses with packaging needs.
Appellants also maintain that the trial court only found âthat Mary McCannon,
Cindy Wood and Vincent, Jr., were responsible for downloading and removing
information[,]â and then âbroad brushed culpability upon Appellants without identifying
the specific trade secret or that they âstoleâ it themselves.â
In response, Cantwell-Cleary contends that the six-factor balancing test has been
preempted by the definition of âtrade secretâ as codified in MUTSA under CL § 11-
1201(e). That definition delineates a two-part test which Cantwell-Cleary claims it met.
29
Under the first part, which concerns the economic value of the information, Cantwell-
Cleary says the evidence established that their salespeople adjusted pricing and packaging
information for each individual account, thereby developing a ârecipe on how do you price
and compete against that account.â Because of the competitive nature of bidding in the
industry, Cantwell-Cleary insists that the confidentiality of its pricing information was
crucial in order to avoid being undercut by lower bids.
Turning to the second part of the testâwhich requires reasonable efforts to maintain
the secrecy of a trade secretâCantwell-Cleary emphasizes that it implemented âclearly
defined policies regarding the security of its information and an employeeâs right to utilize
that information.â For example, Appellants and other employees signed the standard Non-
Compete agreement, which included, in its first sub-part, provisions concerning the
employeeâs duty of confidentiality. In addition, Cantwell-Cleary required employees to
sign âtechnology acknowledgmentsâ that stated, among other things: that employees were
prohibited from transmitting âtrade secretsâ or âsimilar materialsâ from the companyâs
âelectronic communication systemsâ; that electronic messages âshould be treated as
confidentialâ; and that access to computers and other resources was ârestrict[ed]â to
âprotect these systems against unauthorized access.â 9 (Emphasis removed). Considering
these measures, Cantwell-Cleary contends that it âtook adequate measures to maintain the
secrecy of its information under MUTSA[.]â
9
Cantwell-Cleary explains that the company âutilizes a software program called
DDIâ to restrict the ability of employees to access sensitive information.
30
B. Background
Cantwell-Clearyâs historical account-specific pricing and customer information
were presented at trial primarily through the testimony of William Cleary. He explained
the value of this information in the following colloquy with Appellantsâ counsel on cross-
examination:
DEFENSE COUNSEL: So thereâs no pricing strategy by Cantwell[-]Cleary,
right?
MR. CLEARY: What do you mean thereâs no pricing strategy?
DEFENSE COUNSEL: Cantwell[-]Cleary doesnât have its own price list.
MR. CLEARY: Cantwell[-]Cleary allows the sales people to adjust the
pricing for each individual account. That develops a pattern for each
individual account and that really becomes a recipe on how do you price and
compete against that account. If our competitors knew our costs and pricing
and our pattern on how we priced the particular account, they could easily
come in and say, you know, hey, weâre 5 percent lower. They could over
price a customer on a product grossly and then come in and look like a hero
because, hey, Iâm going to be in the discount because they werenât giving it
to you before.
* * *
DEFENSE COUNSEL: How about this, does Cantwell[-]Cleary have any
pricing strategy that [is] written?
* * *
MR. CLEARY: No thereâs â the pricing strategy is mostly taught to the sales
people on what they â what margins they can sell each product at. And how
they can price each customer. Itâs customer specific, product specific, boxes
might be a different margin level. Floor mats might be a different margin
level.
So you have to understand what the market is and the pricing. We might
have a box and we might buy 20,000 of and we get a very good price from.
And so, Iâm sorry yeah, so we may get a very good cost from a vendor on
that, so we know we can charge a little bit more, and make a little bit more
31
money as opposed to another box we only buy a hundred of. We donât have
competitive advantage quantity, so therefore we have to adjust our pricing to
stay below market price, to get the orders.
This information was tracked and stored on the companyâs internal computer
system, DDI. According to Vince Jr., to access certain information on the DDI system,
each employee was assigned a numeric level of access. Mary McCannon had the highest
clearance; the average salesperson, however, only had an access clearance of 50, on a scale
of 1 to 99. Vince Jr. explained that although salespeople could ask management to print
off reports containing their lists of customers and pricing data, they would not have had the
ability to print that information themselves with that level of clearance. As William pointed
out, however, salespeople could view this information and would routinely receive printed
reports from management.
The court admitted into evidence a copy of Cantwell-Clearyâs employee handbook,
which instructs: â[n]o employee will remove company property from the premisesâ
including â[c]onfidential literature including cost pricing, sales, and customer
information.â All such property was to âbe returned if your employment with the company
is terminated, either voluntarily or involuntarily[,]â and all salespeople were required to
sign the Non-Compete agreements under which, as set forth above, they agreed to keep the
companyâs customer, vendor, and pricing information confidential. A separate
memorandum similarly instructed employees that âelectronic communication systems shall
not be used to send (upload) or receive (download) copyrighted materials, software
programs, trade secrets, proprietary financial information, or similar materials[.]â
The testimony at trial pointed to Vince Jr., Mary McCannon, and Kevin DeGregory
32
as the primary figures among the conspirators who actually took the companyâs proprietary
information to Cleary Packaging. 10 For instance, Mary McCannon testified that when
Vince Jr. was still with the company in 2018, he requested and received from her a
compilation of Cantwell-Clearyâs then-existing customer base. 11 Therese Cleary also
testified that Ms. McCannon removed customer, pricing, and vendor information from her
office before leaving for vacation the week prior to the walkout on July 16, 2018. Kevin
DeGregory, as confirmed in trial exhibits, acknowledged that he sent lists of his customers
showing profits and past sales to his personal email address shortly before the mass exodus.
Mr. Ingram, for his part, admitted that he copied down some useful information
before departing for Cleary Packaging. Specifically, he created a list of the types of boxes
used by his customers âwith measurements, item numbers, and quantities.â He also wrote
down a list of his open orders showing âthe material costs and how it broke down, the
merchandise, what the actual order was for, the cost and the profit and [sic] the statusâ of
each order.
William Cleary testified that he did not have any knowledge of an unauthorized
download of customer information from the companyâs DDI system by Mr. Barstow;
10
The court stated in its ruling that it âbelieve[d] [Vince Jr.] stole [information]
through the salesmen[.]â
11
For example, Mary McCannon testified that Vince Jr. asked her to send him a
âmaster list of Sheila Firestein[âs] . . . customers with their information and contact
numbers[.]â Pursuant to that request, McCannon agreed that Plaintiffâs Exhibit 23 depicted
an email that she sent Vince Jr. on May 22, 2018, with Firesteinâs âcustomer masterâ as an
attachment. The list, as attached to the email, contained contact information and other
pertinent data for thirty-three of Firesteinâs customers.
33
however, William insisted that a surreptitious printout was not necessary because
Appellants had access to the information on the DDI system:
You could have a notepad and sit there and copy the information. You could
take a screen shot, okay, of whatâs on the computer. You could have the files
of reports that your sales manager may have given you at different points
while you were there. And you could have that information in your file.
So if the day before the walk out, would they need to stop and print
everything, they may have already collected the information over time.
Ultimately, the trial court found that each Appellant had misappropriated Cantwell-
Clearyâs confidential customer and pricing information, pointing in particular to testimony
from former customers that they bought materials from Appellants at the same prices after
they transitioned to Cleary Packaging. The court expounded:
And then in terms of the trade secrets, I mean, the information had formula,
patterns, methods and techniques that derived independent economic value.
How do we price a product, how do we sell a product, how do we create the
margin so that we can generate something to sell? What vendors do we use,
how do we use them? What are the special efforts made?
And the customer list, the vendor pricing, the profit margins, the pricing to
customers, the receivables, the good will of the salesmen these were all used
[sic] and the court finds them to be trade secrets. And they were all used to
cause unjust enrichment and actual loss by their misappropriation.
Go back to what [a former and current customer of Mr. Ingram] told us on
July 30th. When Mr. Ingram called, yep, he sold me exactly pretty much what
I had before. If I know what to price it for, and I know how to cut my
competitor, I can make a whole lot of money, because weâre talking pennies
on the dollar here. And when weâre talking thousands and thousands of
items, it all adds up. Thatâs been proven.
C. What Constitutes Misappropriation of a Trade Secret?
Maryland adopted the Uniform Trade Secrets Act in 1989. See 1989 Md. Laws, ch.
598 (S.B. 667). Under the Act, misappropriation of a trade secret is the:
34
(1) Acquisition of a trade secret of another by a person who knows or has
reason to know that the trade secret was acquired by improper means; or
(2) Disclosure or use of a trade secret of another without express or implied
consent by a person who:
(i) Used improper means to acquire knowledge of the trade secret; or
(ii) At the time of disclosure or use, knew or had reason to know that
the personâs knowledge of the trade secret was:
1. Derived from or through a person who had utilized improper
means to acquire it;
2. Acquired under circumstances giving rise to a duty to
maintain its secrecy or limit its use; or
3. Derived from or through a person who owed a duty to the
person seeking relief to maintain its secrecy or limit its use; or
(iii) Before a material change of the personâs position, knew or had
reason to know that it was a trade secret and that knowledge of it had
been acquired by accident or mistake.
CL § 11-1201(c). In turn, a trade secret is defined as follows:
âTrade secretâ means information, including a formula, pattern, compilation,
program, device, method, technique, or process, that:
(1) Derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from its disclosure or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
CL § 11-1201(e).
Prior to the enactment of MUTSA, when determining whether particular
information constituted a trade secret, Maryland courts looked to the non-exhaustive list of
factors originally proposed in 1939 in comment b, § 757 of the RESTATEMENT (FIRST) OF
TORTS, which was later adopted in Maryland in Space Aero Products Co., Inc. v. R.E.
Darling Co., Inc., 238 Md. 93, 105(1965). See LeJeune v. Coin Acceptors, Inc.,381 Md. 288
, 303â04 (2004). In Optic Graphics, Inc. v. Agee, this Court explained that, even after
35
the adoption of MUTSA, the Restatement factors âstill provide helpful guidance to
determine whether the information in a given case constitutes âtrade secretsâ within the
definition of the statute[,]â because that definition âclearly âis based on the Restatement
comment[.]ââ 87 Md. App. 770, 784(1991) (quoting Peter B. Swann, Note, Maryland Uniform Trade Secrets Act,49 Md. L. Rev. 1056
, 1061 (1990)). Under the Restatement
approach, â[s]ome factorsâ that courts may examine in determining whether particular
information constitutes a trade secret include:
(1) the extent to which the information is known outside of [the plaintiffâs]
business; (2) the extent to which it is known by employees and others
involved in [the plaintiffâs] business; (3) the extent of measures taken by [the
plaintiff] to guard the secrecy of the information; (4) the value of the
information to [the plaintiff] and to [plaintiffâs] competitors; (5) the amount
of effort or money expended by [the plaintiff] in developing the information;
(6) the ease or difficulty with which the information could be properly
acquired or duplicated by others.
Id. at 783 (quoting RESTATEMENT (FIRST) OF TORTS § 757 cmt. b (AM. L. INST. 1939)).
In Optic Graphics, this Court recognized that â[p]ricing information and marketing
strategy are protectable as âtrade secretsââ so long as, tracking the two-part test under CL
§ 11-1201(e), the information, â(1) hold[s] âindependent economic valueâ because it is not
âgenerally knownâ to or readily ascertainable by others who stand to benefit economically
if they use or disclose it, and (2) [was] the subject of reasonable efforts to maintain its
secrecy.â Id. at 787. In that case, in order to perform his job as an estimator in Opticâs
printing department, Mr. Agee was provided with the companyâs âpricing, material cost,
mark-ups, profit margins, machine cost rates, production rates, and marketing strategies.â
Id. at 775. After Mr. Agee formed a competing business, Optic brought suit seeking
36
injunctive relief against Mr. Agee for allegedly retaining and using this confidential
information. Id. at 776â78. The trial court held that the information did not constitute
trade secrets and we affirmed. Id. at 780, 787â88. We explained that the trial court did
not clearly err in determining that the allegedly misappropriated pricing information would
not have had economic value to Mr. Agee because it was âpeculiar to [Optic] and that is
who can use [the information] to the best advantage.â Id. at 787. As found by the trial
court, the pricing information âwas (1) subject to change, (2) subject to market forces, [and]
(3) subject to the type of machinery used,â making it âcomposed of so many variables that
it was generally subject to change and specific to Optic.â Id. at 787â88. Moreover, the
trial court correctly found that Opticâs efforts to keep the information confidential âfell
well shortâ because of its uneven use of confidentiality agreements. Id. at 785, 788.
Conversely, in LeJeune v. Coin Acceptors, Inc., the Maryland Supreme Court held
that the customer and pricing information taken by a former salesperson did constitute trade
secrets. 381 Md. 288(2004). There, the employee, William LeJeune, worked in sales for Coin Acceptors (âCoincoâ) and developed a detailed knowledge of âCoincoâs pricing, pricing strategies, marketing and business initiatives, and selling strategies[.]âId.
at 294â 95. Before leaving for a similar position with Mars, a competitor, LeJeune âon three separate occasions, had transferred or âburnedâ digital copies of numerous documents from his Coinco laptop to a compact disc[.]âId. at 296
. Among other proprietary documents, LeJeune copied âCoincoâs Executable Budgeting Software, which includes Coincoâs manufacturing costs and profit marginsâ as well as âpricing information related to Coincoâs Specialty Markets Strategic Plan.âId.
Coinco then sought and was granted a preliminary
37
injunction prohibiting LeJeune from using or disclosing any of this information. Id.at 298â99. LeJeune noted a timely interlocutory appeal of that order and the Supreme Court of Maryland issued a writ of certiorari on its own initiative.Id. at 299
.
The Court commenced its analysis âby examining whether the alleged trade secrets
in this case qualify as such under the Maryland Uniform Trade Secrets Act.â LeJeune, 381
Md. at 306. Looking to Optic Graphics and several federal district court cases that had occasion to interpret the definition of trade secret under CL 11-1201(e), the Court concluded that Coincoâs proprietary information satisfied the MUTSA definition of trade secrets.Id.
at 306â11. In particular, the Court observed that Coinco âhad compiled in its Executable Budgeting Software, Specialty Markets Strategic Plan, and hard-copy pricing documents a vast amount of information related to its manufacturing costs and profit margins.âId. at 309
. Especially due to the highly competitive nature of the market in which Coinco operated, âCoincoâs cost and profit information, if available to Mars, could allow Mars to undercut all of Coincoâs prices, giving Mars an easy economic advantage.âId. at 310
. The Court also explained that Coinco went to great lengths to protect the secrecy of the information, including executing confidentiality agreements with its customers and directing employees to keep the information confidential in the employee handbook.Id.
at 310â11. The Court concluded that, under those circumstances, âthe pricing and cost data contained on the Specialty Markets Strategic Plan, Executable Budgeting Software, and other hard-copy pricing documents qualify as trade secrets under MUTSA.âId. at 311
.
The Court in LeJeune turned next to consider whether Coinco had established that
LeJeune actually misappropriated the trade secrets. LeJeune, 381 Md. at 311. LeJeune
38
argued that he did not acquire any information improperly because Coinco voluntarily
provided him with the documents and did not ask for their return. Id.The Court rejected this argument, stating that âCoinco did not give LeJeune permission to transfer trade secrets from the company laptop to a CD.âId. at 313
.
In Albert S. Smyth Co., Inc. v. Motes, No. CCB-17-677, 2018 WL 3635024(D. Md. July 31, 2018), the United States District Court for the District of Maryland determined, inter alia, that the plaintiffsâfive jewelry businesses collectively referred to as âSmythââ had, in their third amended complaint, sufficiently alleged that defendant John Jackson III misappropriated their trade secrets under MUTSA and its federal analogue, the Defend Trade Secrets Act (DTSA),18 U.S.C. § 1836
, and thus the court denied Jacksonâs motion
to dismiss those claims. The complaint alleged that a partner of Smyth, Mark A. Motes,
resigned from Smyth in November 2016 and âtook more than thirteen employees with
him,â including Jackson. Id. at *1. Allegedly, more than a year earlier, Jackson began
âcopying [Smythâs] business information to a Dropbox accountâ as part of a joint plan with
Motes to start a competing business. Id. at 2. Smyth asserted that this information, which
included âdecades of âcustomer records and listsâ that contain[ed] âthe buying habits of
over 69,000 customersâ and the companyâs âpricing information, vendor relationships and
business strategies[,]ââ constituted trade secrets under DTSA and MUTSA, and that
Jackson misappropriated the information by accessing it after leaving Smyth. Id. at *4.
Recognizing the substantial similarity between the DTSA and MUTSA, the district
39
court focused its analysis on the DTSA. 12 The court first found that Smyth adequately
alleged the existence of trade secrets under DTSA. Id. at *3â4. As described in the
complaint, Smyth took steps to protect its records by prohibiting employees from
disclosing âcompany information[,]â instructing employees on how to keep confidential
information safe, and warning employees that violations of its confidentiality policies may
lead to termination. Id. at *3. Moving on, the court found that the records were âvaluable
by virtue of their confidentialityâ and that:
In a competition for sales, information about potential customers and their
buying habits, a competitorâs pricing, business strategies, and vendors is
a windfall, granting the recipient a key to undercut the competitionâs
pricing, outbid their vendor contracts, and attract their customers.
Id. at *4. Because Smyth took âreasonable steps to protect the confidentiality of [the]
business records and their value derives from their confidentiality, they constitute[d] trade
secretsâ under the DTSA. Id. at *4.
The court next considered whether, under the DTSA, the complaint adequately
alleged that Jackson actually misappropriated Smythâs trade secrets. Of particular import
was the allegation that the Dropbox âfolders were accessed [by Jackson] after [he] filed
12
See Philips N. Am. LLC v. Hayes, No. ELH-20-1409, 2020 WL 5407796, at *7 (D. Md. Sept. 9, 2020) (â[T]he majority of the elements of a misappropriation claim under the DTSA and the MUTSA are substantially the same . . . . The primary difference . . . is that the DTSA only allows for a private cause of action where the alleged trade secrets are ârelated to a product or service used in, or intended for use in, interstate or foreign commerce.ââ) (citation omitted); Md. Physicianâs Edge, LLC v. Behram, No. DKC 17- 2756,2019 WL 4573417
, at *5 (D. Md. Sept. 20, 2019) (âBoth DTSA and MUTSA require
not only the existence of a trade secret, but also âmisappropriationâ of that trade secret.
Both statutes define that term in substantially the same manner[.]â).
40
Articles of Organization for a competing jewelry business,â which âma[de] it plausibleâ
that he indeed used and therefore misappropriated the trade secrets. Albert S. Smyth Co.,
2018 WL 3635024, at *4. Accordingly, the court denied Jacksonâs motion to dismiss
Smythâs claim under the DTSA. Id. at *4.
Turning to the MUTSA, and mirroring its analysis of the DTSA claim, the court
stated that: â[b]ecause Smyth took reasonable steps to secure the secrecy of its business
records, because the value of the information is not readily ascertainable from the
marketplace and thus derives its value from its confidentiality, and because the complaint
alleges that Jackson . . . accessed [the Dropbox files] after he left Smyth and started a
competing jewelry business, this claim survives as to Jackson[.]â Id. at *6. Thus, the court
also denied Jacksonâs motion to dismiss Smythâs MUTSA claim.
More recently, in Philips North America LLC v. Hayes, the United States District
Court for the District of Maryland denied Hayesâs motion to dismiss Philipsâs complaint
for misappropriation of trade secrets after the court concluded that pricing and customer
information could constitute trade secrets under MUTSA and DTSA. No. ELH-20-1409,
2020 WL 5407796, at *8â10 (D. Md. Sept. 9, 2020). As a sales director for Philips, a manufacturer of medical equipment and technology, Hayes led much of the companyâs sales efforts and was entrusted âwith a considerable amount of secret, confidential and proprietary informationâ including âequipment manufacturing information, national product supply funnel information, business and strategic plans, marketing, account strategies, pricing, national orders and sales, and relationships with customers and clients[.]âId.
at *1â2 (internal quotation marks omitted). While still employed by Philips,
41
Hayes accepted a similar position with GE Healthcare, a direct competitor of Philips, but
neglected to inform the company for six weeks. Id. at *3. In that timeframe, a âsearch of
Hayesâs Philips-issued computer revealed that Hayes printed about 40 documentsâ which
allegedly included âlists of pending orders and sales funnels for the United States;
information regarding manufacturing status of completed sales . . . and information
regarding specific Philips customers, orders, pricing, and sales initiatives.â Id.
Philips brought suit against Hayes, alleging that, using this proprietary information,
Hayes solicited âon GE Healthcareâs behalf, a large health system customer with whom
Hayes worked while at Philips.â Philips, 2020 WL 5407796, at *4 (internal quotation marks omitted). Hayes moved to dismiss the complaint and the court denied his motion. Id. at *11. Citing Albert S. Smyth Co.,2018 WL 3635024
, at *4, the court reasoned that
the documents printed and taken by Hayes could qualify as trade secrets under MUTSA.
Id. at *8. Citing LeJeune v. Coin Acceptors, Inc., 381 Md. at 309â10, the court observed
that âMaryland courts have repeatedly found that business plans, pricing and cost
information, and customers lists for companies operating in competitive sales industries
derive independent economic value from their confidentiality.â Id. (citations omitted).
Likening the case to LeJeune, the court reasoned that the documents printed by Hayes
generated independent economic value because they contained âinformation that was
difficult, costly, and time-consuming to develop.â Id. at *9. Due to the highly competitive
market in which Philips and GE Healthcare competed, the âpricing and customer
information, if available to a competitor such as GE Healthcare, could allow GE Healthcare
to undercut Philipsâ pricing and gain an economic advantage.â Id. Accordingly, because
42
Philips took reasonable steps to ensure the confidentiality of this informationâincluding
limiting technology access and requiring employees to sign non-disclosure agreementsâ
the documents could qualify as trade secrets under MUTSA. Id. at *9â10. Furthermore,
the court determined that Philipsâs allegations were âreadily sufficientâ to constitute
misappropriation under the DTSA and MUTSA. Id. at *10 (citations omitted).
D. Analysis
Returning to the present case, we focus our analysis on two central questions. First,
did Cantwell-Clearyâs internal customer and pricing information qualify as trade secrets
under MUTSA? Second, precisely what trade secrets did Cantwell-Cleary prove
Appellants misappropriated through use or disclosure?
1. Trade Secrets
Our first issue is further partitioned by the two-part test contained in MUTSAâs
definition of trade secret, set out above and again here, as:
information, including a formula, pattern, compilation, program, device,
method, technique, or process, that:
(1) Derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from its disclosure or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
CL § 11-1201(e). Applying the definition, as well as the foregoing cases that have
interpreted its provisions, we hold that Cantwell-Clearyâs internal database stored
confidential account-specific information for each customerâs purchasing history that
43
qualified as information constituting trade secrets under section 11-1201(e) of MUTSA. 13
First, as summarized in Philips, customer information often derives independent
economic value in a competitive sales industry because âinformation about potential
customers and their buying habits, a competitorâs pricing, business strategies, and vendors
is a windfall, granting the recipient a key to undercut the competitionâs pricing, outbid their
vendor contracts, and attract their customers.â Philips, 2020 WL 5407796, at *8 (quoting Albert S. Smyth Co.,2018 WL 3635024
, at *4). Here, William Cleary similarly explained
the value of Cantwell-Clearyâs account-specific pricing information, noting that:
Cantwell[-]Cleary allows the sales people to adjust the pricing for each
individual account. That develops a pattern for each individual account and
that really becomes a recipe on how do you price and compete against that
account. If our competitors knew our costs and pricing and our pattern on
how we priced the particular account, they could easily come in and say, you
know, hey, weâre 5 percent lower. They could over price a customer on a
product grossly and then come in and look like a hero because, hey, Iâm going
to be in the discount because they werenât giving it to you before.
We hold that the trial court did not err in determining that Cantwell-Clearyâs
confidential customer lists, vendor pricing, profit margins, and âpricing to customersâ
13
Applying the Restatement Factors we arrive at the same conclusion. See
RESTATEMENT (FIRST) OF TORTS § 757 cmt. b (AM. L. INST. 1939). Specifically: (1) the
trade secrets, comprising Cantwell-Clearyâs confidential customer lists and related data,
were not available to individuals outside of Cantwell-Clearyâs business; (2) Cantwell-
Clearyâs staff, including its sales staff, had access to and routinely used the trade secrets to
advance Cantwell-Clearyâs business; (3) Cantwell-Cleary took reasonable steps under the
circumstances to maintain the secrecy of the trade secrets; (4) the trade secrets had
independent economic value in a competitive sales industry; (5) Cantwell-Clearyâs use of
DDI, the Non-Compete agreements, and policies requiring that the internal customer and
pricing information remain confidential are evidence that Cantwell-Cleary undertook
substantial efforts to in-fact keep the information secret; and (6) a competing business
would ordinarily need to expend significant time and effort to independently acquire or
duplicate Cantwell-Clearyâs internal customer and pricing information.
44
constituted trade secrets because that information derived independent economic value
after having been developed by the company over time, and because it was not generally
known to competitors in a highly competitive industry.
Second, as in LeJeune, Cantwell-Cleary took several reasonable steps to protect the
information on its internal database. For example, the company restricted access to
information on the database, assigning numeric levels of access clearance with the average
salesperson having a clearance level of 50. As Vince Jr. explained, that level of clearance
prevented salespersons from being able to print off account-specific information without
managerial approval. Moreover, in the companyâs employee handbook, employees are
told that â[n]o employee will remove company property from the premisesâ including
â[c]onfidential literature including cost pricing, sales, and customer information[,]â which
was to âbe returned if your employment with the company is terminated, either voluntarily
or involuntarily.â Finally, as noted earlier, all salespersons were required to sign the Non-
Compete agreements under which they acknowledged their duty to keep the companyâs
customer, vendor, and pricing information confidential. In light of these considerable
efforts, we agree with the trial court that Cantwell-Cleary took reasonable steps under the
circumstances to maintain the secrecy of its internal customer and pricing information.
2. Misappropriation
Turning to the second inquiry, we examine whether the trial court correctly decided
that Appellants misappropriated Cantwell-Clearyâs trade secrets under CL § 11-1201(c).
We note that CL § 11-1201 provides six alternative and equally sufficient ways for a
plaintiff to demonstrate that a defendant misappropriated a trade secret. CL § 11-1201(c).
45
Appellants press that the trial court âbroad brushed culpability upon [them] without
identifying the specific trade secret or that they âstoleâ it themselves.â We do not accept
Appellantsâ constrained reading of the law.
To prevail on a claim for misappropriation of trade secrets under MUTSA, a
plaintiff may, but need not necessarily, prove that a defendant personally took some
tangible trade secret. This is because MUTSA defines misappropriation to include the
â[d]isclosure or use of a trade secret of another without express or implied consent by a
person who . . . [a]t the time of disclosure or use, knew or had reason to know that the
personâs knowledge of the trade secret wasâ:
1. Derived from or through a person who had utilized improper means to
acquire it;
2. Acquired under circumstances giving rise to a duty to maintain its
secrecy or limit its use; or
3. Derived from or through a person who owed a duty to the person
seeking relief to maintain its secrecy or limit its use[.]
CL § 11-1201(c)(2)(ii)(1)â(3) (emphasis added). These provisions of the statute are aimed
at Appellantsâ disclosure or use of a trade secret without permission. As we detail below,
there was sufficient evidence in this case to support a finding that Appellants directly
misappropriated trade secrets under CL § 11-1201(c)(2)(ii)(2) because, among other
things, customers testified that they received the same packaging and pricing from
Appellants at Cleary Packaging that they received at Cantwell-Cleary. Appellants were
long exposed to Cantwell-Clearyâs trade secrets, and even if they had not memorized them
all, they could have easily written them down. A trade secret, such as the ingredients in
46
Coca-ColaÂŽ, 14 can be memorized and then unlawfully disclosed or used by a person who
âacquired [it] under circumstances giving rise to a duty to maintain its secrecyââsuch as
the Appellants in this case.
The evidence was also sufficient to support a finding that Appellants
misappropriated trade secrets that were âderived from or throughâ another person in
violation of CL § 11-1201(c)(2)(ii)(1) and (3). In other words, the evidence showed that
Appellants used Cantwell-Clearyâs trade secrets and that they âknew or had reason to
knowâ that another person, such as Vince Jr. or Ms. McCannon, either âutilized improper
means to acquireâ the trade secrets they used, or âowed a duty to the person seeking relief
to maintain its secrecy[.]â CL § 11-1201(c)(2)(ii)(1) and (3). The Maryland State appellate
opinions surveyed earlier, including LeJeune and Optic Graphics, did not concern multiple
actors who were involved in the misappropriationâa circumstance that sets this case apart.
Here, the trial court found that there were âa whole lot more than two people that were
involved in this conspiracy.â
We are not aware of any Maryland appellate opinions that have addressed
circumstances governed by CL § 11-1201(c)(2)(ii)(1) and (3). Therefore, we once again
turn to those federal cases that are instructive for their application of the corresponding
provisions under the federal trade secrets statutes.
14
See Brightview Grp., LP v. Teeters, 441 F. Supp. 3d 115, 134 (D. Md. 2020)
(stating that a defendantâs âmemorization ability [was] immaterialâ in the context of a
claim for misappropriation of trade secrets under DTSA and MUTSA and stating that, by
analogy, â[i]f a person leaves the CocaCola Company after having memorized the formula
for Coca-ColaÂŽ, that does not give him license to transmit the prized soft drinkâs recipe to
PepsiCoâ).
47
In Ahern Rentals, Inc. v. EquipmentShare.com, Inc., the Eighth Circuit Court of
Appeals considered, inter alia, whether the district court erred by dismissing Ahern
Rentals, Inc.âs claims for misappropriation of trade secretsâunder both DTSA and the
Missouri Uniform Trade Secrets Actâagainst EZ Equipment Zone, LLC. 59 F.4th 948
(2023). The pertinent facts were as follows:
Ahern is one of the largest independently owned equipment rental companies
in the United States. Ahern provides heavy equipment rental and repair
services and sells new and used equipment. . . . To protect its sensitive data,
Ahern requires its employees to sign non-disclosure, non-solicitation, and
non-competition agreements. Ahernâs employee handbook also explicitly
requires employees to safeguard the companyâs confidential information,
which includes customer and vendor lists, pricing and marketing data, sales
systems, training materials and personnel data.
EquipmentShare is a relative newcomer in the equipment rental industry. . .
. As it has grown, EquipmentShare has hired many former Ahern employees.
In 2019, Ahern sued EquipmentShare and several of Ahernâs former
employees in both federal and state courts. Several of the federal lawsuits
have been consolidated as a multidistrict litigation (MDL) . . . . These
lawsuits are all premised on the same general allegation: EquipmentShare . .
. engaged in a wide-ranging and unlawful conspiracy to increase its market
share at Ahernâs expense. Specifically, Ahern alleges that . . .
EquipmentShare . . . recruit[ed] Ahernâs employees to steal Ahernâs trade
secrets before leaving . . . to work for EquipmentShare [and that]
EquipmentShare then used Ahernâs trade secrets to develop its telematics
systems[.] . . .
In November 2020, Ahern brought this lawsuit against EquipmentShare and
included EZ . . . . Like EquipmentShare, EZ is a newcomer in the equipment
rental industry . . . . Importantly, it is undisputed that EZ and
EquipmentShare have a business relationship. . . . EZ serves its users through
software that is owned, operated, and managed by EquipmentShare. For
example, EZ requires its users to utilize EquipmentShareâs âES Trackâ and
âES Serviceâ programs to monitor and maintain their rental equipment,
respectively.
48
. . . Ahern alleges . . . that EZ is using the âcustomer lists, rental information,
pricing information, and marketing strategiesâ that EquipmentShare illegally
obtained from Ahern to monitor, service, and place its usersâ equipment.
Further, Ahern alleges that EZ has âknowledgeâ that this information âwas
illegally obtained by EquipmentShare from Ahern.â All told, this lawsuit is
different from the others in the MDL in that it alleges a conspiracy between
EquipmentShare and EZ to misappropriate Ahernâs stolen trade secrets[.]
Ahern Rentals, 59 F.4th at 951â52. The district court dismissed EZ from the lawsuit after
finding, among other things, that âAhernâs complaint did not allege facts plausibly
demonstrating EZâs involvement in EquipmentShareâs alleged misappropriation of trade
secrets[.]â Id. at 952. The Eighth Circuit disagreed, and held that the district court erred
in dismissing Ahernâs claims under DTSA and the Missouri Uniform Trade Secrets Act.
Id. at 956. 15 First, the Eighth Circuit found that Ahern had adequately alleged that the
purportedly misappropriated information qualified as trade secrets. See id. at 955. The
court then addressed whether Ahern also adequately alleged that the trade secrets were
âmisappropriatedâ:
The closer question is whether Ahern plausibly alleges that EZ has
âmisappropriatedâ th[e] trade secrets. . . .
. . . Ahernâs complaint provides sufficient factual material to allow us to
âdraw the reasonable inferenceâ that misappropriation occurred. . . . The
complaint details . . . that EZ and EquipmentShare have a close business
relationship. For example[] . . . EZ requires its users to use
EquipmentShareâs programs, including ES Track and ES Service, to service
their equipment and maximize rental rates. . . . According to Ahern,
EquipmentShare developed these programs by exploiting Ahernâs trade
secrets. Ahern also alleges that the market information used by EZ to
develop profitable utilization and rental rates is based on Ahernâs trade
secrets illegally obtained by EquipmentShare. . . . Ahern pleads enough facts
15
The Eighth Circuit stated that it could consider Ahernâs claims under DTSA and
the Missouri Trade Secrets Act together â[b]ecause these statutes are essentially
identical[.]â Ahern Rentals, 59 F.4th at 955.
49
to make it entirely plausible that EZ is at least using systems developed by
EquipmentShare through the exploitation of Ahernâs trade secrets.
But to state a claim for misappropriation, Ahern must plausibly allege that
EZ âknew or had reason to knowâ that these trade secrets were
improperly acquired by EquipmentShare. 18 U.S.C. § 1839(5)(B)(ii)(I)
(emphasis added). On this point, Ahernâs allegations are pled only on
âinformation and belief.â However, such pleadings are appropriate here.
The rest of Ahernâs detailed allegations, taken as true, make clear that
EquipmentShareâs programs were at the core of EZâs operations. Based on
these detailed allegations, it is entirely plausible to infer that EZ knew it was
using programs developed through the exploitation of trade secrets.
Id. at 956 (bold emphasis added). In other words, the Eighth Circuit found that Ahern
sufficiently stated a claim for misappropriation of trade secrets under DTSA (and the
Missouri Uniform Trade Secrets Act) based on the allegation that EZ used its trade secrets,
and that EZâs knowledge of the trade secrets was âderived from or through a person[,]â
namely EquipmentShare, âwho had used improper means to acquire the trade secret[.]â 18
U.S.C. § 1839(5)(B)(ii)(I). See also Blades of Green, Inc. v. Go Green Lawn & Pest, LLC, No. SAG-22-00176,2022 WL 326473
, at *2, 4â6 (D. Md. Feb. 3, 2022) (finding plaintiff was likely to succeed on the merits of its misappropriation claims under DTSA and MUTSA where an âunabridged CSR Playbookââwhich the court found to contain trade secretsâwas emailed by a third party to one of the co-defendants, and stating that the co- defendant who received the email was likely âaware that his alleged receipt of the document from [the third party] was improperâ (citation omitted)); Sirius Federal, LLC v. Jelen, No. 22-cv-00223-LKG,2023 WL 2213929
, at *11 (D. Md. Feb. 24, 2023) (denying
a motion to dismiss misappropriation of trade secrets claims under DTSA and MUTSA
because the plaintiff sufficiently alleged âthat the [defendants] Former Employees acquired
50
[the plaintiffâs] trade secrets by improper means and that they also used and disclosed those
trade secrets to [co-defendant] Red River[,]â that âRed River acquired its trade secrets from
the Former Employees[] while knowing that the trade secrets were acquired by improper
means[,]â and that the defendants âused [the plaintiffâs] trade secrets to gain an unfair hard
start to develop designs and prototypes for the Navyâ) (citations omitted)).
Returning to this appeal, we start by recounting what is not in dispute: Appellants
aggressively courted and sold products to many of their former customers upon departing
for Cleary Packaging. They concede that point and testified to the same at trial. Appellants
also do not appear to challenge the trial courtâs finding, as they summarize on page 34 of
their brief, that âMary McCannon, Cindy Wood and Vincent, Jr., were responsible for
downloading and removing information.â
According to Therese Clearyâs testimony, Ms. McCannon removed customer,
pricing, and vendor information from her office before leaving for vacation the week prior
to the mass exodus on July 16, 2018. Ms. McCannon admitted at trial that she provided
the companyâs master customer list to Vince Jr. in 2018 just before he departed to form
Cleary Packaging. Although there was no direct testimony that Appellants viewed or
consulted those documents to solicit their former customers, because âdirect evidence of
theft and use of trade secrets is often not available, the plaintiff can rely on circumstantial
evidence to prove misappropriation by drawing inferences from perhaps ambiguous
circumstantial evidence.â RKI, Inc. v. Grimes, 177 F. Supp. 2d 859, 876(N.D. Ill. 2001) (citation omitted); see also SI Handling Sys., Inc. v. Heisley,753 F.2d 1244
, 1261 (3d Cir.
1985) (â[i]n most cases plaintiffs must construct a web of perhaps ambiguous
51
circumstantial evidence from which the trier of fact may draw inferencesâ and â[a]gainst
this often delicate construct of circumstantial evidence there frequently must be balanced
defendants and defendantsâ witnesses who directly deny everythingâ (quoting Greenberg
v. Croydon Plastics Co., 378 F. Supp. 806, 814 (E.D. Pa. 1974))).
Back to this caseâalthough the trial judge did not explicitly name each individual
that he believed was involved in misappropriating trade secrets, he clearly indicated that
Vince Jr. was the ringleader, and that it was his goal to âdestroyâ Cantwell-Cleary. 16 Here,
the evidence presented was sufficient to allow the trial court to draw the necessary
inferences to conclude that Appellants used Cantwell-Clearyâs confidential information in
the course of their employment at Cleary Packagingâwhere they worked under Vince Jr.
and with Ms. McCannonâin direct competition with Cantwell-Cleary. In the trial courtâs
view, Appellants used Cantwell-Clearyâs confidential custom-tailored information to
compete for those accounts. Specifically, the trial court emphasized the testimony by
former Cantwell-Cleary customers demonstrating that Appellants knew exactly how to
price the products and services sold to them to undercut their competition.
There was also evidence that Appellants copied down confidential pricing and
customer information. Specifically, Mr. Ingram created a list of the types of boxes used
by approximately six of his customers âwith measurements, item numbers, and quantities.â
He also wrote down a list of his open orders for fourteen customers, showing âthe material
16
The trial court also noted, for example, how Mr. Barstow was âburning up the
phone linesâ with Vince Jr. âevery single timeâ that a major event happened, e.g., when
the demand for Cantwell-Cleary to produce the Non-Compete agreements was presented.
52
costs and how it broke down, the merchandise, what the actual order was for, the cost and
the profit and [sic] the statusâ of each order. 17
Even beyond the limited information Mr. Ingram admitted that he copied, it is clear
that Appellants had access to a more expanded trove of information on Cantwell-Clearyâs
database. As William Cleary explained, Appellants had the ability to view all information
on the database related to their customersâ accounts, which they could âcopyâ or âtake a
screen shotâ of, and Appellants were routinely given confidential sales reports by their
managers. Given their combined decades of experience at Cantwell-Cleary, Appellants
may well have memorized much of the customer and pricing information related to their
specific accountsâat least for some period of time. As the United States District Court for
the District of Maryland has recognized, the unauthorized use of a trade secret by a former
employee who has committed it to memory can amount to the misappropriation of a trade
secret. See Brightview Grp., LP v. Teeters, 441 F. Supp. 3d 115, 140 (D. Md. 2020) (âIf
[defendants] are correct that they have committed Brightview trade secrets and/or
proprietary information from the contested Brightview documents to memory, that
information remains accessible to them, despite the emailsâ deletionâ and could be used for
future misappropriation.); RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 42,
17
In his ruling, the trial judge described an instance in which Mr. Ingram plainly
used his knowledge of Cantwell-Clearyâs current inventories and the needs of its customers
for the benefit of Cleary Packaging. Specifically, the judge found that Mr. Ingram âknew
full wellâ that Cantwell-Clearyâs stock of certain coolers was running low. Nonetheless,
Ingram âdidnât orderâ more of the coolers and, indeed, he indicated that there âwas plenty
of stockâ available. But âthe first thing [Ingram] did after leaving [Cantwell-Cleary] at 9,
[and] getting hired [at Cleary Packaging] at 11, was put an order in at 12 for those same
coolers[.]â
53
Reporterâs Note to cmt. d (AM. L. INST. 1995) (âAlthough the distinction between
information retained in memory and information embodied in appropriated records can be
relevant in determining whether the information qualifies for protection, the defendantâs
reliance on memory is not a defense if the information is in fact a trade secret.â). 18
Although Appellants denied extracting any further information, it is clear that the
trial court simply did not find their testimony credible. That is by no means surprising,
especially considering Appellantsâ participation in the elaborate ruse to destroy the
physical copies of their Confidentiality and Non-Compete Agreementsâas well as their
continuing denial (during trial) of ever having signed those agreements. These are
archetypal credibility determinations that are inherently within the province of the trial
court and we are loath to disturb them on appeal. See Md. Rule 8-131(c) (providing that
in a case tried to the court, we must give âdue regard to the opportunity of the trial court to
judge the credibility of the witnesses.â).
18
Several of our sister courts that have addressed this issue have likewise concluded
that information committed to memory, if it would otherwise constitute a trade secret, may
still qualify for protection as a trade secret because the medium of information is not
relevant to that determination. See, e.g., Ed Nowogroski Ins. v. Rucker, 971 P.2d 936, 946â 48 (Wash. 1999) (en banc) (collecting cases) (âThe form of information, whether written or memorized, is immaterial under the trade secrets statute; the Uniform Trade Secrets Act makes no distinction about the form of trade secrets. Whether the information is on a CD, a blueprint, a film, a recording, a hard paper copy or memorized by the employee, the inquiry is whether it meets the definition of a trade secret under the Act and whether it was misappropriated.â); Al Minor & Assocs., Inc. v. Martin,881 N.E.2d 850
, 853â55 (Ohio
2008) (â[T]he determination of whether a client list constitutes a trade secret . . . does not
depend on whether it has been memorized by a former employee. Information that
constitutes a trade secret pursuant to [the statutory definition] does not lose its character as
a trade secret if it has been memorized. It is the information that is protected by the UTSA,
regardless of the manner, mode, or form in which it is storedâwhether on paper, in a
computer, in oneâs memory, or in any other medium.â).
54
In sum, we cannot say that the factual findings supporting the trial courtâs ultimate
determinationâthat Appellants misappropriated Cantwell-Clearyâs confidential customer
and pricing informationâare clearly erroneous. Nor do we perceive the trial courtâs
decision as resting on any error of law. In this case, there was direct evidence that Mr.
Ingram copied some of these trade secrets and took them to Cleary Packaging. There was
also ample circumstantial evidence that Appellants: (1) had access to the Cantwell-Clearyâs
secure internal database and reports for many years, creating the possibility that Appellants
copied, photographed, or committed the trade secrets to memory; (2) had a duty to maintain
the secrecy of Cantwell-Clearyâs trade secrets; (3) had access to the trade secrets that were
taken by their co-workers from Cantwell-Cleary to Cleary Packaging; and, (4) were
extremely successful in competing for and selling products to their former customers at
nearly identical prices. We affirm the trial courtâs finding that Appellants engaged in
misappropriation of trade secrets in violation of MUTSA.
IV.
Damages for Misappropriation of Trade Secrets
A. Partiesâ Contentions
Appellants contend that Cantwell-Clearyâs expert, Mr. Coleman, engaged in a
speculative methodology to calculate the companyâs lost profits damages. They insist that
the proper method for determining the actual lost profits is âto first determine [Cantwell-
Clearyâs] customers who actually left . . . and took that business to Cleary Packagingâ; then
âdetermine Cleary Packagingâs gross sales that were made to [Cantwell-Clearyâs] former
customers for a period of 12 monthsâ; and finally, âdeduct from those sales the variable
55
costs[.]â Pointing to Fowler v. Printers II, Inc., 89 Md. App. 448 (1991), Appellants
emphasize that any calculation of lost profits must engage in that exact process to arrive at
an accurate estimation of lost profits. Mr. Colemanâs analysis, in Appellantsâ view, fell
short of that standard insofar as he ârejected trying to match which customers left
[Cantwell-Cleary] for Cleary Packagingâ or account for âcustomers who might have left
[Cantwell-Cleary] and gone to other competitors.â
Cantwell-Cleary responds that our decision in Fowler stands for the broader
proposition that courts may look to the past revenue records of an âestablished businessâ
in estimating lost profits in the future. With respect to Mr. Colemanâs methodology,
Cantwell-Cleary explains that he arrived at a reliable âgross profit figure of 22.32%â by
taking Appellantsâ gross sales revenues and subtracting variable costs such as the costs of
the goods and commissions paid to Appellants. Then, accounting for the customers who
remained with Cantwell-Cleary following Appellantsâ departure and the average rate of
customer attrition, Mr. Coleman used past gross sales figures from 2017 and the profit rate
to make a projection of lost profits through 2023. This method, in the companyâs view,
was entirely proper and sufficiently supported the award of damages.
B. Background
At trial, it was undisputed that, in their time with Cleary Packaging, Mr. Barstow
and Mr. Ingram had sold significant quantities of the same products to their former
customers at Cantwell-Cleary. Referring to their responses to interrogatories, each
appellant identified all of their former customers at Cantwell-Cleary and pinpointed which
56
customers had followed them to Cleary Packaging. This information was provided to
Cantwell-Cleary, along with the gross sales to those clients through May 24, 2019.
To prove its damages attributable to lost sales, Cantwell-Cleary proffered Jeffrey
Coleman as an expert witness. Mr. Coleman examined the sales reports of Appellants both
at Cantwell-Cleary and Cleary Packaging and endeavored âto determine the amount of
profits lost due to the event that happened in July of 2018.â Specifically, Mr. Coleman
noted that he calculated gross profits and identified âfive areas that they lostâ: (1) âthe sales
from the salesmen that were no longer thereâ; (2) âsales because of the event where
customers just decided to go elsewhereâ; (3) âreferral salesâ; (4) âmanagement time and
effortâ to cover the declining revenue; and (5) âmanagement expertise that left and [sic]
lost administrative help.â
In his analysis, however, Mr. Coleman explained that he only included the first two
areas of loss in his damage calculation, excluding the latter three as too difficult to trace.
Looking to sales revenues from 2014, 2015, 2016, and 2017, Mr. Coleman calculated the
companyâs year-to-year retention rate, concluding that Cantwell-Cleary lost around 3
percent of its customers per year. He also determined that Appellantsâ and Mr. Ibbottâs
combined gross sales ultimately resulted in an average of 22.32 percent profit for Cantwell-
Cleary (what Mr. Coleman referred to as the ânet profit percentageâ), 19 based on gross
sales, cost of goods sold, and commissions data for years 2015 to 2018.
19
Although Mr. Coleman termed this number the ânet profit percentage[,]â the
exhibit containing his calculationsâas well as his testimonyâmake clear that, to arrive at
[Footnote continued]
57
With those calculations in hand, Mr. Coleman projected Cantwell-Clearyâs lost
profits for Appellants and Mr. Ibbott through 2023 under the following approach. First,
for each individual, Mr. Coleman calculated Cantwell-Clearyâs expected future sales for
each of the years 2019 to 2023, using past gross revenues from 2017 and after accounting
for the retention rate, as the base measure. Then, Mr. Coleman deducted amounts for
â[a]ctual (and projected) [s]ales [r]etainedâ by Cantwell-Cleary for Appellantsâ and Mr.
Ibbottâs respective accounts, and then applied the net profit percentage (accounting for cost
of goods and commissions). Next, to arrive at the present value of the resulting figures (for
each of the five years) Mr. Coleman applied a discount rate of 6.77 percent. To these
results, Mr. Coleman added a separate calculation of lost profits for the period of August 1
to December 31, 2018, thus resulting in a lost profit calculation for the period of August 1,
2018, to December 31, 2023. Mr. Coleman explained that these calculations produced a
relatively conservative figure because âwe never thought accounts were going to go up
which to me makes our number low because [sic] a lot of these would go up, I mean just
with inflation and everything else it wouldâve gone up.â The exact calculations performed
by Mr. Coleman, admitted as exhibits at trial, showed total claimed lost profits from the
period of August 1, 2018, to December 31, 2023, in the amounts of $1,229,283.98 for Mr.
the purported ânet profit percentage[,]â he did not deduct âthe cost of the goods sold and
all additional expenses.â Net Profit, BLACKâS LAW DICTIONARY (11th ed. 2019). Rather,
it is likely that Mr. Coleman may have meant âgross profit percentage[,]â which is also the
term that, on appeal, Appellee has used to refer to this figure.
58
Barstowâs accounts, and $1,397,530.37 for Mr. Ingramâs accounts. 20
On cross-examination, Mr. Coleman conceded that he had not taken out company
overhead expenses in arriving at his estimates and had previously calculated a âgross profit
rate of 18.44 percent.â When asked whether he excluded from his calculations the sales
attributable to former customers of Mr. Barstow and Mr. Ingram that left Cantwell-Cleary
but did not follow them to Cleary Packaging, Mr. Coleman explained as follows:
MR. COLEMAN: I did not have -- and I was given information about
customers that had gone to Cleary Packaging but letâs go back into my
testimony, I was tasked with finding out what we lost, not what somebody
else gained.
DEFENSE COUNSEL: Okay. But youâre opining as to the damages that
each of the defendants had, say a customer thatâs [buying] 500,000 a year,
goes to a competitor, you would apply those lost profits to the defendants.
MR. COLEMAN: If they --
DEFENSE COUNSEL: Right?
MR. COLEMAN: -- happened in that year, yes.
20
The trial court, however, did not award these full amounts. Instead, as explained
in Appelleeâs brief, the trial court used a subset of Mr. Colemanâs calculations as a base to
award Cantwell-Cleary damages âfrom the commencement of Mr. Colemanâs damages
timeframe on August 1, 2018 through the final date of trial[,]â namely, September 1, 2021.
As summarized by Appellee:
[The trial court used] a per diem rate from the period of January 1, 2021
through December 31, 2021 calculated from Mr. Colemanâs report to
determine the damages sustained for the 243-day period from January 1,
2021 [to the] last day of trial on September 1, 2021. Each of these 243 day
figures were then added to [Mr. Colemanâs calculated lost profits] for each
Appellant from August 1, 2018 to December 31, 2020 to come up [with the]
final damages figures for Appellants Barstow ($144,149.70 + $636,607.62 =
$780,757.32) and Ingram ($170,396.64 + $696,938.80 = $867,335.44).
59
When pressed on the matter, Mr. Coleman reiterated his position:
THE COURT: Did you match the Cleary Packaging customers to Cantwell[-
]Cleary customers, or was that not your â
MR. COLEMAN: We started to do that exactly because we received a lot of
information a month or so ago and trying to match that, and it became very
clear to us that our task was not to deal with that information and Iâm going
to repeat what I just said before. Our task was, what did we lose, not what
did they gain, because thereâs a big gap in my 50 years of experience that
when thereâs a break-up so to speak, you keep some, you keep some, and
some just fall away because they donât want to play in that game.
Iâve had it with accounting firms, law firms, and medical practices and other
commercial businesses where customers find that may be a good time to
leave and go somewhere else.
So it occurred to me when I did get that information and itâs voluminous
information and started to go through it, that that did not prove anything to
anybody. Thatâs what they got. I donât care what they got. I care what
Cantwell[-]Cleary lost.
Finally, in explaining how he arrived at his future projections, Mr. Coleman
explained that he utilized the sales numbers for Appellants provided by Cleary Packaging
to complete his calculations for 2018, but otherwise excluded them. For all the future
projections (i.e., from 2019 on), Mr. Coleman used Appellantsâ gross sales figures from
2017 and did not consult what their actual sales numbers were at Cleary Packaging.
The trial court awarded damages based on Mr. Colemanâs calculations as follows:
Mr. Coleman was an expert, he has special training and experience in
accounting, valuations, and Iâll give it the weight and value that I believe it
should have. His testimony is relevant, he is qualified, his analysis is
factually based under [Maryland Rule] 5-702. Itâs not my job to try the case,
and I will say thereâs a hole in his evidence, but I canât fill it.
He did a simple analysis where he took net profit to the company after cost
of goods sold, and commissions deducted from total sales of salesmen based
on averages in the past and future projections.
60
I know we have COVID, I know weâve had a bit of a recession, but none of
the defendants introduced any figures to show that Mr. Colemanâs
calculations may be different from what they are actually earning now. And
I still donât have the company overhead, I wish I knew the net profit and not
the gross profit, so Iâm left with the evidence I have, and Iâm left with the
assumptions that appear to be reasonable.
* * *
Mr. Coleman, I already indicated I find him credible. And while Iâm not a
hundred percent convinced with his damage analysis, I donât have to be, it
only has to be by a preponderance, I would have liked to know overhead, net
profit, et cetera, but I donât have it.
* * *
Now, hereâs where Iâm, Iâll be candid, uncomfortable. I have to assess
damages. And actual loss is a damage for violation of the Trade Secrets Act,
as well as attorney fees, which I am reserving on. And the actual loss that I
have, based upon the testimony from the plaintiffâs witness, Mr. Coleman, is
that Kevin Barstow caused $780,757.32 in loss profit for the breach of the
trade secrets [of] Cantwell[-]Cleary.
That Dennis Ibbott caused $273,004.72 and that Timothy Ingram caused
$867,335.44. As I said, I wouldâve liked to have known overhead and net
profit, but those are [the] gross profits that were presented to me, and there
was no evidence to dispute that.
Based on the evidence that I have, I will assess damages against Mr. Barstow
for $780,757.32, which is the actual loss from August 1st, 2018 to September
2nd, 2021. Against Mr. Ibbott in the amount of $273,004.72. And Mr.
Ingram in the amount of $867,335.44.
C. Actual Loss as the Measure of Damages Under MUTSA
Under MUTSA, âa complainant is entitled to recover damages for
misappropriationâ under the following measures of recovery:
(b) Items included. â Damages under this subtitle may include:
(1) The actual loss caused by misappropriation; and
(2) The unjust enrichment caused by misappropriation that is not
taken into account in computing actual loss.
61
(c) Alternative measure of damages. â In lieu of damages measured by any other
methods, the damages caused by misappropriation may be measured by imposition
of liability for a reasonable royalty for a misappropriatorâs unauthorized disclosure
or use of a trade secret.
(d) Exemplary damages. â If willful and malicious misappropriation exists, the
court may award exemplary damages in an amount not exceeding twice any award
made under subsection (a) of this section.
CL § 11-1203(b)â(d).
Although Maryland State appellate courts have not had occasion to delve into the
different measures of recovery under MUTSA, other courts have traditionally recognized,
tracking the statute, that to obtain damages a plaintiff must: (1) prove an actual loss; (2)
prove unjust enrichment; or (3) establish âa reasonable royalty for [the defendantâs]
unauthorized . . . use.â AirFacts, Inc. v. De Amezaga, No. DKC 15-1489, slip op. at 18 (D.
Md. Dec. 12, 2022) (alteration in original).
Concurrently, the RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 45 (AM. L.
INST. 1995), recognizes that the plaintiffâs loss (in contrast to the defendantâs gain) may
include âprofits lost on sales diverted from the plaintiff by the appropriation, loss of
royalties or other income that would have been earned by the plaintiff but for the
appropriation, or the value of the trade secret if it has been destroyed through a public
disclosure by the defendant.â Id. cmt. d. Most common, and of particular import here, is
the measure of lost profits, which the Restatement summarizes as follows:
A frequent element of loss resulting from the appropriation of a trade secret
is the lost profit that the plaintiff would have earned in the absence of the use
by the defendant. The plaintiff may prove lost profits by identifying specific
customers diverted to the defendant. The plaintiff may also prove lost profits
through proof of a general decline in sales or a disruption of business growth
following the commencement of use by the defendant, although the presence
62
of other market factors that may affect the plaintiffâs sales bears on the
sufficiency of the plaintiffâs proof. If the evidence justifies the conclusion
that the sales made by the defendant would have instead been made by the
plaintiff in the absence of the appropriation, the plaintiff may establish its
lost profits by applying its own profit margin to the defendantâs sales.
Id. cmt. e. 21
In this context, there are three fundamental limitations on damages for the plaintiffâs
loss. First, the alleged loss must be âattributable to the appropriation of the trade secretâ
and the plaintiff âbears the burden of proving the fact and cause of any loss for which
recovery is sought.â Id. cmt. b. Second, although the plaintiff may seek to prove both its
own lost profits as well as the defendantâs gains, the plaintiff âis permitted to recover only
the greater of the two measuresâ so as to prevent a double recovery. 22 Id. cmt. c. Finally,
the appropriate durational period for measuring damages is limited to âthe period of time
that the information would have remained unavailable to the defendant in the absence of
the appropriation[,]â as measured by âthe time it would have taken the defendant to obtain
There is no indication that, in this case, Appellee attempted to prove its lost profits
21
through proof of a âgeneral decline in sales or a disruption of business growth following
the commencement of use [of the trade secrets] by the defendant[.]â See RESTATEMENT
(THIRD) OF UNFAIR COMPETITION § 45 cmt. e (AM. L. INST. 1995). Most obviously, there
was no attempt to account for âother market factorsâ that may have affected Cantwell-
Clearyâs sales.
22
The Uniform Trade Secrets Act, upon which MUTSA is based, does permit some
simultaneous use of these measures, providing that â[d]amages can include both the actual
loss caused by misappropriation and the unjust enrichment caused by misappropriation that
is not taken into account in computing actual loss.â UNIF. TRADE SECRETS ACT § 3 (UNIF.
L. COMMâN 1985). Nonetheless, the comment to § 3 makes clear that it does not permit
âdouble countingâ and instead âadopts an express prohibition upon the counting of the
same item as both a loss to the complainant and an unjust benefit to a misappropriator.â
UNIF. TRADE SECRETS ACT § 3 cmt. (UNIF. L. COMMâN 1985).
63
the information by proper means such as reverse engineering or independent
development.â Id. cmt. h.
As mentioned, we have not yet addressed the question of how to measure lost profits
in assessing a plaintiffâs actual loss for misappropriation of trade secrets. Our sister courts
in both the state and federal systems, however, have done so and we glean insight from
their well-reasoned analyses. For example, in Jet Spray Cooler, Inc. v. Crampton, the
Supreme Judicial Court of Massachusetts reversed an award of damages in a case involving
the misappropriation of trade secrets. 385 N.E.2d 1349(1979). There, the trial court âcomputed the plaintiffsâ lost profits at $257,068â by finding (1) that âthe defendants had sold [infringing products] to over sixty of the plaintiffsâ customers . . . and it was reasonably possible that the plaintiffs would have made the sales to these same customersâ and (2) âthat the defendantsâ sales to these customers totaled $2,856,311.41, and that during the accounting period the plaintiffsâ net profits before taxes averaged nine per cent of gross sales.âId. at 1361
. The Supreme Judicial Court considered that methodology to be sound, but nonetheless reversed that award of lost profits damages due to lack of causation.Id.
at 1361â62. Specifically, the Court found that it could not âdetermine whether the plaintiffsâ lost profits in this action were âdue toâ the defendantsâ sales of products utilizing the trade secrets, or whether the plaintiffsâ lost profits were âdue toâ the plaintiffsâ own business decision to refrain from marketing productsâ which incorporated the misappropriated information.Id.
Employing a similar analysis, in Pioneer Hi-Bred International v. Holden
Foundation Seeds, Inc., the United States Court of Appeals for the Eighth Circuit, applying
64
Iowa law, affirmed a lost profits award in a trade secret case. 35 F.3d 1226, 1243 (8th Cir.
1994). There, the district court awarded â$46,703,230 in lost profitsâ after adopting the
methodology of the plaintiffâs expert, Wagner. Id. at 1244. Because the defendantâs
product was not in direct competition with plaintiffâs product, Wagner sought to quantify
the amount plaintiff would have made âbut forâ the misappropriation âby considering the
sales of âlook-alikesâ from 1979 to 1989â and assumed that absent the misappropriation,
plaintiff âwould have obtained the same percentage of these sales as its market share in all
other sales (36% average).â Id. From there, âWagner computed lost profits of
$140,109,691â and the trial court âreduced this amount by two-thirds reflecting its
determination that Pioneer would not have obtained the full 36% market penetration[.]â
Id. at 1244â45. The Eighth Circuit concluded that the district court âhad a reasonable basis
for its awardâ based on â[the defendantâs] actual sales figures, the known productive
capacity of [plaintiffâs products], [plaintiffâs] profitability history and a reasonable
estimate of [plaintiffsâ] lost share of the âlook-alikeâ market.â Id. at 1245.
The parties in this case point us to Fowler v. Printers II, Inc., in which this Court
explained the proper methods for calculating damages in the related context of enforcing a
non-solicitation covenant. 89 Md. App. 448(1991). We glean some insight from Fowler in determining the proper methodology for arriving at an accurate assessment of lost profit damages. In that case, Fowler had worked for Printers as a salesperson and later took a job with Holladay-Tyler, a competing firm, where she âbegan contacting the accounts/customers which she had serviced at Printers.âId.
at 455â56. Printers brought
suit and obtained a judgment of $360,976 jointly against Fowler and Holladay-Tyler for
65
Fowlerâs breach of the non-solicitation agreement with Printers and for Holladay-Tylerâs
tortious interference with that contract, as well as an award of $50,000 for damage to
Printersâ reputation and loss of goodwill. Id. at 458. Fowler noted an appeal to this Court
and we affirmed the trial courtâs award of damages.
First, we noted that an award of damages for Printersâ lost profits was proper âas
consequential damages from Fowler for breach of the contract, and from Holladay-Tyler
for tortious interference with the contract.â Id. at 473. In proving its damages, Printers had sought only âthe profits lost on eight specific accounts upon which Fowler had worked while at Printers and which followed her to Holladay-Tyler.âId.
After finding that five of the accounts had done business with Holladay-Tyler due to Fowlerâs solicitation in violation of the agreement, the trial court, we noted, calculated damages by âtaking the gross value of each printing job performed for these five accounts by Holladay-Tyler during the one year period covered by the restrictive covenant and subtracting the variable, but not fixed, costs which would have been incurred by Printers if it had performed the job.âId. at 474
. We considered this method to be entirely proper, especially because â[w]hen a party is suing for breach of contract . . . fixed costs âneed not be deducted from gross income to arrive at lost profit properly recoverable.ââId.
(quoting Sloane, Inc. v. House & Assocs.,311 Md. 36, 42
(1987)).
Second, we considered Printersâ cross-appealâin which it objected to the court
using Holladay-Tylerâs sales in 1990 rather than Printersâ sales in 1989 as the base measure
for calculating lost profitsâto be meritless. Id. at 476. Specifically, we explained that
although â[e]vidence of past profits in an established business furnish a reasonable basis
66
for future profits[,]â the âprofits made by others . . . in a similar business or under similar
contractâ provides an equally valid measure of recovery. Id. (quoting 11 W.
Jaeger, Williston on Contracts, § 1346A (3d ed. 1968)). We observed that the trial court
reasonably believed the latter method to be more feasible considering the âevidence that
Printersâ lack of equipment and resources might well have resulted in a decrease in its
business in 1990, even if Fowler had remained at Printers[,]â thereby rendering
âextrapolation from Printersâ previous yearâs figuresâ a potentially speculative enterprise.
Id. at 476â77 (citing Macke Co. v. Pizza of Gaithersburg, Inc., 259 Md. 479 (1970)).
Perceiving no error in the trial courtâs sound methodology, we affirmed the damages award.
D. Analysis
Returning to the case at bar, we conclude that the circuit court erred in relying on
Mr. Colemanâs calculations of Cantwell-Clearyâs actual loss, under CL § 11-1203(b)(1),
because Mr. Coleman failed to provide an adequate rationale for his decision to use
Cantwell-Clearyâs past gross sales to Appellantsâ customersârather than Cleary
Packagingâs actual sales to those customersâas a base to calculate lost profits; and
because Mr. Colemanâs damages calculations included losses attributable to customers
who left Cantwell-Cleary but did not follow Appellants to Cleary Packaging, without
proving those losses were caused by the misappropriation of the trade secrets. Separately,
we conclude that the trial court erred in awarding damages for a period of approximately
three years without explaining how the evidence established that the misappropriation of
Cantwell-Clearyâs trade secrets continued to cause losses for that entire period, given the
rate at which prevailing pricing points may change in an evolving marketplace.
67
To start, we note that Fowler has limited application in the sphere of trade secret
misappropriation. Fowler also involved the improper solicitation of former clients, but the
cause of action was for breach of a broad non-solicitation clause and we considered the
damages in Fowler to be a subset of consequential damages flowing from Fowlerâs breach
of that agreement. Id. at 461, 473. As the Supreme Court of Maryland explained in
affirming an award of lost profits based on projections which did not take âpost-breach
market evidenceâ of the 2008 recession into account, the measure of consequential
damages is affected only by circumstances within the contemplation of the parties at the
time of contracting. CR-RSC Tower I, LLC v. RSC Tower I, LLC, 429 Md. 387, 405â06, 417â24 (2012). For that reason, as we noted in Fowler, an award of lost profits as consequential damages may be calculated based on the past profits of âan established business[,]â because such a predictable figure provides âa reasonable basis for future profitsâ which would have existed at the time of contracting. Fowler,89 Md. App. at 473
,
476 (quoting 11 W. Jaeger, Williston on Contracts, § 1346A (3d ed. 1968)). But see id.
(suggesting that, where post-breach profits of defendant are available and market
conditions have changed, it is âmore feasibleâ to utilize the defendantâs gross sales than
extrapolate from plaintiffâs past sales).
In the trade secrets context, the RESTATEMENT (THIRD) OF UNFAIR COMPETITION
endorses a slightly different approach in measuring the plaintiffâs actual loss. As the
Restatement explains, âThe plaintiff may prove lost profits by identifying specific
customers diverted to the defendant. . . . If the evidence justifies the conclusion that the
sales made by the defendant would have instead been made by the plaintiff in the absence
68
of the appropriation, the plaintiff may establish its lost profits by applying its own profit
margin to the defendantâs sales.â RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 45
cmt. e (AM. L. INST. 1995) (emphasis added); see also Jet Spray, 385 N.E.2d at 1361
(arriving at lost profits calculation of $257,068 by taking defendantâs gross sales to
plaintiffâs former customers, totaling $2,856,311.41, and applying plaintiffâs net profit
margin of 9%). In other words, at least when the data is available, it makes sense to
measure the plaintiffâs lost profits from the defendantâs solicitation of the plaintiffâs former
customers by evaluating the defendantâs actual sales rather than projections from the
plaintiffâs past experience. This approach has the benefit of focusing on economic reality
(i.e., the actual sales diverted using the misappropriated information) rather than predictive
modeling.
Here, of course, Mr. Coleman did the exact opposite. Adamant that his task was to
determine âwhat did we lose, not what did they gain[,]â Mr. Coleman explained that he
utilized the sales numbers for Appellants provided by Cleary Packaging to complete his
calculations for 2018, but otherwise excluded them. For all the future projections (i.e.,
from 2019 on), Mr. Coleman used Appellantsâ gross sales figures from 2017 (their last full
year at Cantwell-Cleary) and did not consult what the actual sales numbers were at Cleary
Packaging. Given the approach that Mr. Coleman employed to prove Cantwell-Clearyâs
actual loss under CL § 11-1203(b)(1), we consider this to have been in error, at least
without any explanation as to why it was more appropriate to use past figures to measure
the sales improperly diverted from Cantwell-Cleary than the actual sales figures for the
period of misappropriation. That does not mean past gross sales can never be used as a
69
baseline measure, see, e.g., Pioneer, 35 F.3d at 1243-45 (utilizing market share to
approximate lost profits due to lack of direct competition with the infringing product), but
there must be some rationale for ignoring the actual sales numbers in favor of utilizing past
profits.
Cantwell-Clearyâs problems, however, do not end there. In addition to excluding
the sales figures provided by Cleary Packaging, Mr. Coleman also declined to account for
loss attributable to customers who did not follow Appellants to Cleary Packaging.23
Indeed, in a colloquy with defense counsel, Mr. Coleman explicitly noted that âwe received
a lot of information [about the customers that followed Appellants to Cleary Packaging] .
. . and it became very clear to us that our task was not to deal with that information . . .
[o]ur task was, what did we lose, not what did they gain, because . . . when thereâs a break-
up so to speak, you keep some . . . and some just fall away because they donât want to play
in that game.â What Mr. Coleman failed to appreciate is that what Appellants gained and
what Cantwell-Cleary lost, as a result of the misappropriation of confidential customer
and pricing information, are the same thing: the sales diverted to Cleary Packaging. By
sweeping in lost sales to former customers of Appellants that did not provide any business
to Cleary Packaging, Mr. Coleman veered astray from the fundamental principle that any
23
Mr. Colemanâs protest that he was not given enough information to determine
which of Cantwell-Clearyâs customers left for other distributors is simply incorrect. Mr.
Coleman acknowledged that he was provided with information about which of Appellantsâ
former customers departed for Cleary Packaging. In his analysis, Mr. Coleman also
deducted sales attributable to customers that Cantwell-Cleary retained, presumably
meaning that he had a list of those customers as well. By process of elimination, any of
Appellantsâ former customers that did not appear on either of those lists would fall into the
category of customers who simply fell away.
70
claimed loss must be âattributable to the appropriation of the trade secret.â RESTATEMENT
(THIRD) OF UNFAIR COMPETITION § 45 cmt. b (AM. L. INST. 1995).
Although damages in the trade secrets context certainly seek to compensate the
wronged party for its actual loss, it remains the plaintiffâs burden to âprove[] the fact and
cause of any loss for which recovery is sought.â RESTATEMENT (THIRD) OF UNFAIR
COMPETITION § 45 cmt. b (AM. L. INST. 1995); see also Jet Spray, 385 N.E.2d at 1361â62
(reversing an award of lost profits damages due to lack of demonstrated causation). At
least with respect to the customers that did not follow Appellants to Cleary Packaging,
Cantwell-Cleary did not carry its burden and Mr. Coleman erroneously swept the sales
figures attributable to those customers into his analysis.
Finally, there remains the issue of the proper damages period. Although we disagree
with Appellants that Cantwell-Clearyâs damages could only flow for a period of one year,
we are troubled by the trial courtâs award of lost profits damages for a period of three years.
Damages are only appropriate âfor the period of time that the information would have
remained unavailable to the defendant in the absence of the appropriation[,]â as measured
by âthe time it would have taken the defendant to obtain the information by proper means
such as reverse engineering or independent development.â RESTATEMENT (THIRD) OF
UNFAIR COMPETITION § 45 cmt. h (AM. L. INST. 1995). Although we cannot say that a
period of three years is inherently erroneous, we remain skeptical that Appellants would
have been unable to arrive at an independent approximation of the prevailing pricing points
in the industry in a period of three years by simple trial and error. Moreover, due to the
changing nature of costs, it is far from clear that historical pricing data from several years
71
prior would even maintain any economic utility for such an extended period. Therefore,
while we cannot foreclose the propriety of an award of three years of lost profits, we must
conclude that it was necessary for the court to explain why that period was appropriate.
In sum, we hold that the trial court erred in awarding lost profits damages against
Appellants based on Mr. Colemanâs damage calculations because: (1) Mr. Coleman
utilized Cantwell-Clearyâs past gross sales as the base measure to project subsequent lost
profits without any rationale as to why it was not more appropriate or feasible to instead
use Appellantsâ actual gross sales to customers who left Cantwell-Cleary for Cleary
Packaging; (2) Mr. Coleman swept in losses from Appellantsâ former customers that did
not follow them to Cleary Packaging without demonstrating that those losses were caused
by the misappropriation of Cantwell-Clearyâs trade secrets; and (3) the court employed a
damages period of three years without an explanation as to how Appellants continued to
derive an economic advantage from potentially stale information for that entire period.
Although we do not disturb the trial courtâs conclusion as to Appellantsâ liability for
misappropriation, we shall vacate the damages portion of the February 14 Judgment against
Appellants and order a limited remand for the parties, and the court, to remedy the errors
identified in the damages calculation.
V.
Finding of Malice
A. Partiesâ Contentions
Appellants assert that the trial court abused its discretion in clarifying the factual
findings underpinning its decision to deny Cantwell-Clearyâs motion for attorneysâ fees.
72
Specifically, Appellants complain that after the court found that Appellants had not acted
maliciously in denying Cantwell-Clearyâs motion for fees, the court reversed course and
entered an order clarifying that Appellants had engaged in willful and malicious conduct.
Appellants assert that the court âfailed to place its findings and reasoning on the record for
reversing its finding regarding maliceâ and that the ruling was therefore âarbitrary and
capricious, and a complete abuse of the discretion vested in the lower court.â Accordingly,
they request that the lower courtâs âfinding of malice [] be vacated.â
Cantwell-Cleary responds that the circuit court acted properly in clarifying that its
findings ârelated narrowly to its exercise of discretion not to impose attorneyâs fees under
MUTSA[.]â The company posits that âthe [c]ircuit [c]ourt believed that it had sufficient
grounds to find malice through Appellantsâ role in [the] conspiracy, and therefore enter an
award of attorneysâ fees, but instead exercised its discretion to not do so because the
Appellants had not actually personally destroyed files[.]â (Emphasis removed).
Referencing Appellantsâ role in the alleged plot to destroy the non-compete agreements of
key employees and organize the mass exodus, Cantwell-Cleary observes the record amply
supported the circuit courtâs clarification of its ruling denying attorneysâ fees.
B. Background
After the trial courtâs September 2, 2021 ruling from the bench finding Appellants
liable for misappropriation of trade secrets, Cantwell-Cleary filed a petition for attorneysâ
fees under MUTSA. MUTSA provides that a court âmay award reasonable attorneyâs fees
to the prevailing party if: (1) [a] claim of misappropriation is made in bad faith; (2) [a]
motion to terminate an injunction is made or resisted in bad faith; or (3) [w]illful and
73
malicious misappropriation exists.â CL § 11-1204. Cantwell-Clearyâs motion focused on
the third ground and alleged that Appellants had willfully and maliciously misappropriated
its proprietary customer and pricing information.
The trial courtâs decision on that motion, however, was delayed when Appellants
each filed a âSuggestion of Stayâ advising the circuit court that they had filed for
bankruptcy. As we explained earlier, on November 1, 2021, the Bankruptcy Court entered
separate orders modifying the automatic stay to permit the litigation in the circuit court to
proceed, and the circuit court held a hearing on February 9, 2022, to address Appellantsâ
motion for fees. At the hearing, the primary issue before the court on Cantwell-Clearyâs
motion for fees was whether Appellants had engaged in willful and malicious acts of
misappropriation to permit an award of fees under CL § 11-1204(3). After hearing
argument from the parties, the court denied the motion for fees. The court first explained
that it had âno problem finding . . . willful actionâ but that the key question was âwhether
or not there was malicious appropriation.â The court did not find malicious action on the
part of Appellants, explaining its reasoning as follows:
So when I start thinking about whether or not thereâs malice, as to the
individual [d]efendants I canât make a finding that they deliberately -- that
their intent was to deliberately cause harm or injury to the company. Theyâre
just three salesmen who wanted to pay their bills and didnât trust William
Cleary, didnât trust Shirley Cleary, didnât trust [Therese] Cleary, and they
really thought the only way they were going to keep their clients, pay their
bills, and do their business was to go with Vince.
So Iâm sort of jumping ahead. Iâm not going to make a finding as to whether
the attorneysâ fees were reasonable, because Iâm going to jump ahead and
Iâm going to find that while there was willful action, the [c]ourt cannot find
as to these three individual defendants that it was malicious as required under
Bond v. [PolyCycle], and without the [c]ourt finding that each individual
74
[d]efendant acted maliciously, the [c]ourt is extremely uncomfortable
proceeding on a co-conspirator liability action to consider damages as it
relates to attorneysâ fees, not damages, attorneysâ fees.
The [c]ourt feels and the [c]ourt finds that the damages that were awarded
were appropriate, but as the award of attorneysâ fees would be discretionary
and with the [c]ourt finding that each individual did not act maliciously, the
[c]ourt would then have to impute co-conspirator liabilities to them to award
the attorneysâ fees, and the [c]ourt is just not comfortable doing that[.]
A written order denying the motion for attorneysâ fees was entered on February 14,
2022. Thereafter, Cantwell-Cleary filed a motion to alter or amend requesting that the
court clarify its factual findings supporting the denial of Cantwell-Clearyâs motion for
attorneysâ fees. In that motion, Cantwell-Cleary explained that pursuant to 11 U.S.C. §
523(a)(6), debts attributable to willful and malicious injury inflicted by the debtor are
excluded from discharge in bankruptcy. 24 Accordingly, to prevent the money judgment
entered against Appellants from being discharged, Cantwell-Cleary requested that the court
amend its ruling to clarify that its findings were limited to âexercising its discretion to deny
the Attorneys[â] Fee Motion (i.e., the deletion of trade secrets and other documents by the
defendantsâ co-conspirators), and that its ruling did not mean that the defendants[â] breach
of the non-compete agreements and violation of MUTSA was not willful and malicious.â
24
A discharge in bankruptcy has the effect of âvoid[ing] any judgment at any time
obtained, to the extent that such judgment is a determination of the personal liability of the
debtor with respect to any debt dischargedâ under the provisions of the Bankruptcy Code.
11 U.S.C. § 524(a)(1). The purpose of the discharge provisions is âto effectuate the âfresh startâ goal of bankruptcy relief.â In re Lindemann,375 B.R. 450, 464
(Bankr. N.D. Ill. 2007) (quoting Vill. of San Jose v. McWilliams,284 F.3d 785, 790
(7th Cir. 2002)). However,11 U.S.C. § 523
(a)(6) provides that âa discharge under section 727, 1141, 1192,
1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any
debtâ that is âfor willful and malicious injury by the debtor to another entity or to the
property of another entity.â
75
On April 13, 2022, the court entered an order granting Cantwell-Clearyâs motion.
In this order, the April 13 Clarification Order, the court explained that âthe [d]efendantsâ
conduct and violation of the Maryland Uniform Trade Secrets Act caused a deliberate and
intentional injury to Cantwell-Cleary Co., Inc., that was wrongful and without cause or
excuse, and constitutes willful and malicious conduct[.]â However, the court reiterated
that âthe finding of malice does not apply to [Cantwell-Clearyâs] request for attorneysâ
fees[.]â
C. Analysis
Though we acknowledge the broad discretion vested in the trial court in deciding
whether to clarify its factual findings on a motion to alter or amend, we must vacate the
courtâs reversal of its initial position without explanation.
To understand the contradictory nature of the trial courtâs order, it is necessary to
return to the language of the statutory provision under which Cantwell-Cleary premised its
motion for attorneysâ fees. Specifically, CL § 11-1204 provides that a court âmay award
reasonable attorneyâs fees to the prevailing party if: (1) [a] claim of misappropriation is
made in bad faith; (2) [a] motion to terminate an injunction is made or resisted in bad faith;
or (3) [w]illful and malicious misappropriation exists.â (Emphasis added). Under the plain
terms of CL § 11-1204, although the trial court is ultimately imbued with discretion to
fashion or not fashion a fee award (considering the inclusion of the discretionary term
âmayâ), the court must make a factual finding of willful and malicious misappropriation as
76
a predicate to exercising that discretion. 25 Here, at the February 9 hearing, the court made
a clear factual finding that âwhile there was willful action, the [c]ourt cannot find as to
these three individual defendants that it was maliciousâ particularly because Appellants
were just âsalesmen who wanted to pay their bills[.]â Yet, in its superseding April 13
Clarification Order, the court purported to clarify that Appellantsâ âconduct and violation
of the Maryland Uniform Trade Secrets Act . . . constitutes willful and malicious conductâ
except as to the motion for attorneysâ fees. The conduct underlying the primary judgment
25
Circuit courts must follow a similar two-step process in considering motions for
attorneysâ fees under Maryland Rule 1-341(a). The Rule provides that:
(a) Remedial Authority of Court. â In any civil action, if the court finds
that the conduct of any party in maintaining or defending any proceeding was
in bad faith or without substantial justification, the court, on motion by an
adverse party, may require the offending party or the attorney advising the
conduct or both of them to pay to the adverse party the costs of the
proceeding and the reasonable expenses, including reasonable attorneysâ
fees, incurred by the adverse party in opposing it.
Md. Rule 1-341(a). As we recently explained in Matter of Jacobson:
To award attorneysâ fees under Rule 1-341, the circuit court must wind its
way through a two-step process. First, the court must make a factual finding
as to whether the challenged action was brought in bad faith or without
substantial justification. Christian [v. Maternal-Fetal Medicine Assocs. of
Md., LLC, 459 Md. 1, 20â21 (2018)]. . . .
Second, the court must, within its discretion, âseparately find that the acts
committed in bad faith or without substantial justification warrant the
assessment of attorneyâs fees.â Christian, 459 Md. at 21. Nonetheless, âeven
if the circuit court determines that a party has acted in bad faith or without
substantial justification,â it can âdecline to impose sanctions, in the exercise
of its discretion.â
256 Md. App. 369, 412â13 (2022) (some internal citations omitted).
77
against Appellants for misappropriation of trade secrets, however, appears to be the same
conduct underlying the request for attorneysâ fees, which was based on Appellantsâ
allegedly âwillful and malicious misappropriation[.]â CL § 11-1204(3) (emphasis added).
Ultimately, we cannot say we necessarily disagree with Cantwell-Cleary that the
record could support a finding of willful and malicious action by the Appellants. We also
readily concede that the trial court possessed broad discretion to change its position after
reconsidering its initial reasoning on a motion to alter or amend. But the trial court must
provide its reasoning for reversing its initial position on the record and in a manner that is
internally consistent. As noted, CL § 11-1204 requires the trial court to first make a finding
that â[w]illful and malicious misappropriation existsâ before exercising its discretion to
grant or deny an award of attorneysâ fees. CL § 11-1204 (the court âmay award reasonable
attorneyâs fees to the prevailing party if . . . (3) [w]illful and malicious misappropriation
existsâ) (emphasis added). We shall, therefore, vacate the April 13, 2022, order, and
remand for the trial court to provide its reasoning for finding willful and malicious
misappropriation on the record. In doing so, we note that the trial court, if it does find
willful and malicious action, need not proceed to award to attorneysâ fees to Cantwell-
Cleary as the courtâs discretion to deny a fee award would then be acquired.
CONCLUSION
In sum, we affirm the circuit courtâs rulings that Cantwell-Cleary was not precluded
from seeking actual damages under its claims for misappropriation of trade secrets and that
Appellants had misappropriated Cantwell-Clearyâs trade secrets. However, we shall order
a limited remand pursuant to Maryland Rule 8-604(d) because the circuit court erred in
78
awarding lost profits damages against Appellants based on Mr. Colemanâs calculations
which (1) utilized Cantwell-Clearyâs past gross sales rather than the Appellantsâ actual
gross sales as the base measure for calculating damages absent a cognizable explanation
for doing so; (2) swept in losses from Appellantsâ former customers that did not follow
them to Cleary Packaging; and (3) employed a damages period of three years without an
explanation as to how Appellants continued to derive an economic advantage for that entire
period. Accordingly, we shall vacate the damages portion of the circuit courtâs February
14 Judgment. On remand, the circuit court shall conduct further proceedings consistent
with this opinion to re-calculate Cantwell-Clearyâs damages under a new damages
calculation consistent with CL § 11-1203 and this opinion for the claims for
misappropriation of trade secrets. Following those proceedings, the court shall enter an
order restating the money damages to be entered against Mr. Barstow and Mr. Ingram.
We also vacate the circuit courtâs April 13, 2022 Clarification Order pursuant to
Maryland Rule 8-604(d), and order a limited remand for the court to address the ground
for any finding of willful and malicious misappropriation under CL § 11-1204.
Because Appellants do not challenge the injunctions entered against them on appeal,
we do not disturb those orders. In all other respects, the judgment of the circuit court is
affirmed.
JUDGMENT OF THE CIRCUIT COURT
FOR ANNE ARUNDEL COUNTY
AFFIRMED IN PART AND VACATED IN
PART. CASE IS REMANDED FOR
FURTHER PROCEEDINGS CONSISTENT
WITH THIS OPINION. COSTS TO BE
SPLIT EVENLY.
79