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Small Summit County firm vets record jury award

Legal News Reporter

Published: November 5, 2014

A Summit County jury, in conjunction with the judge’s attorney fee award, has recently returned a $9.5 million award to a local company, the largest such award in the county’s history (a prior, larger case was overturned on appeal).

Four million of that amount, based upon the judge’s findings, went to attorney’s fees.

Based upon the best information available, the previous record for a fully litigated case in the county, the 2005 Patio Enclosures case, was for a total of $8.62 million.

The new record holder is Phoenix Lighting Group, LLC v. Genlyte Thomas Group, a trade secrets/breach of contracts case whose trial lasted over a month in front of Summit Count Common Pleas Judge Alison E. McCarty.

Jeffrey T. Witschey and Elizabeth L.B. Hartschuh, of the Fairlawn firm Witschey Witschey & Firestine, represented the plaintiff, Phoenix Lighting.

Genlyte is a subsidiary of the Dutch company Philips Electronics. The defendant, through attorney Thomas Barni, had “no comment on pending litigation” in this case. Two other defendants were dismissed by confidential agreement after the first week of the trial, said Hartschuh.

While styled as a violation of trade secrets case, this was actually more of, “a straightforward contract case,” said Jacqueline Lipton, a David L. Brennan Professor of Law at The University of Akron School of Law and director of the school’s Center for Intellectual Property Law and Technology. Lipton, an Australian native, comes to UA from the University of Houston Law Center. Prior to going to Texas, she taught at Case Western Reserve School of Law.

Lipton’s areas of expertise include trademark law, international intellectual property law and cyberlaw.

“Trade secrets can be cases involving technology, but can also be cases concerning customer lists, or about the relationships of two entities, rather than the subject matter of the secrets.”

This case, she said, seemed to have more to do with the relationships of the parties than what was specifically the trade secret. And that relationship, she said, was contractual in nature, and therefore the action was a contract action, based upon local law, rather than a federal case.

“By and large,” said Lipton, “trade secrets cases come under state law, and so the damages may vary according to the state.”

In the Phoenix Lighting case, state law and the decisions of the judge played a major part in determining the ultimate damage award.

The Phoenix Lighting company was founded by Patrick Duffy of Silver Lake and Witschey said was “a successful lighting agency, selling lighting products as a manufacturer’s representative in the construction industry.” But, he said, that success would not last.

“Two of Phoenix’s employees decided to go into competition and start their own agency,” said Witschey. In fact, he said, “they tried to take all of the employees away.”

The two contacted Genlyte, which developed a plan with the defendants to “create a mass exodus of employees away from Phoenix and to Genlyte,” said Witschey adding that Genlyte had loaned the ex-employees $600,000 to enhance the chances of the breakaway business.

Witschey said that plan eventually succeeded and “destroyed Phoenix’s business.” The lawsuit was filed in 2012. The jury trial was held in May and June of 2014, and the jury held soundly for the plaintiff.

The first jury decision awarded the plaintiffs $476,440 for tortious interference with a business relationship, $203,000 for misappropriation of trade secrets and $600,000 for breach of loyalty, good faith, and trust, for a total amount of $1,680,970 in compensatory damages.

The jury awarded plaintiff’s counsel “reasonable attorney’s fees in an amount to be determined by the court.”

In Judge McCarty’s decision enumerated the method by which reasonable attorney’s fees are determined, including the hourly rate of the lawyers, the difficulty of the questions, the skill level required, and particularly, according to Witschey and Hartschuh, the amount of time that the case took away from other potential income.

Witschey said it was evident early on in the case that he and Hartschuh were going to devote a considerable amount of unremunerated time to this case.

“We couldn’t work on anything else a large majority of the time,” said Hartschuh explaining that the client ran out of money early on in the case.

The Witschey firm has a half dozen attorneys, said Hartschuh. Genlyte was defended by firms totaling “over 400 lawyers. It was truly David versus Goliath.”

Hartschuh said that from the beginning of the litigation a primary component of the defense’s case was to “turn the paper mill on us”—to the extent that a part of the evidence the plaintiffs submitted in support of their fees was a letter written by defendant’s lawyers stating that they would essentially bury the plaintiffs in motions.

In the end, Judge McCarty awarded attorney fees of $4 million based on a rate of $240 per hour and the fact that the two lead plaintiff’s attorneys spent nearly all of their professional time on the case for two years.

Following a separate hearing on punitive damages, the jury came back with an additional award of $7 million in punitive damages, which by law was reduced by the judge to $2,761,940. In addition, because the jury awarded punitive damages, the judge tripled the compensatory damages claim to $900,000.

Akron tax attorney David Lewis of Krugliak, Wilkins, Griffiths & Dougherty was the plaintiff’s expert on punitive damages. His analysis, he said, was, “based on a balance of assets and liabilities on the balance sheets of the business between 2008 and 2010.”

What he discovered, and what he testified to, was that Philips is one of the largest electronics and lighting companies in the world- a multi-billion dollar, multinational corporation.

“They make more light bulbs than General Electric,” said Witschey.

Lewis only ran the numbers, and left the rest to the jury. “I did not make a recommendation about the appropriate amounts,” he said. “I just analyzed their balance sheet.”

But that was enough for the jury, and for the judge, Witschey and Hartschuh said, as the final award totaled $9,501,349.39, plus court costs.

Witschey and Hartschuh now wait to see if Genlyte will appeal.