In a stunning per curiam ruling, the Fourth Circuit Court of Appeals last week vacated a judgment of nearly $1 billion, and a 20-year non-compete injunction, entered by an Eastern District of Virginia judge in favor of the DuPont Company.  The appellate tribunal held that the lower court committed prejudicial error by granting DuPont’s pre-trial motion in limine to bar defendant Kolon Industries from offering any evidence relating to an earlier lawsuit involving DuPont.  The case was remanded for a new trial before a different judge.  E.I. DuPont De Nemours & Co. v. Kolon Industries, Inc., No. 12-1260 (4th Cir., Apr. 3, 2014).

Summary of the case.  DuPont maintained that one or more former employees, working as consultants to Kolon, misappropriated DuPont’s trade secrets relating to the manufacture and marketing of “Kevlar,” a strong, synthetic fiber used, for example, in bullet-resistant armor.  Kolon contended that what the consultants disclosed was not confidential because it was part of the public record in prior trade secret misappropriation litigation DuPont filed against a company — not Kolon — that was, at the time, DuPont’s primary competitor with respect to “Kevlar.”

Granting DuPont’s in limine motion in the Kolon case, the trial court ruled that any reference to that prior lawsuit would be confusing and prejudicial.  The Court of Appeals reversed, holding that the trial judge’s “wholesale preclusion of any mention” of the earlier litigation was arbitrary, irrational, and an abuse of discretion.

Kolon also contended that the trial judge should have recused himself because he formerly had practiced law at the firm representing DuPont in both the earlier and this litigation.  That contention was rejected on appeal — 2-1 — as untimely but, in the exercise of its “supervisory powers,” the panel unanimously directed the Chief Judge of the district court to whom the case was remanded to assign a different jurist to conduct further proceedings.

Origin of the lawsuit.  Former DuPont employee Mitchell, who had extensive knowledge concerning the manufacturing and marketing of “Kevlar,” allegedly communicated repeatedly with Kolon about the product.  In the course of an FBI investigation of Mitchell’s conduct, he agreed to cooperate.  As a result, Kolon and several of its officers were indicted for theft of trade secrets, conspiracy, and obstruction of justice.  DuPont then sued Kolon.

The erroneous pre-trial evidentiary decision.  Kolon contended, in its defense to DuPont’s misappropriation claims, that at least some of the trade secrets at issue in this case were “strikingly similar” to details of the production process described in exhibits in the court’s public files relating to DuPont’s earlier lawsuit against the different competitor.  Moreover, one of Kolon’s witnesses was an expert witness for DuPont in the previous litigation.  Mention of the prior case seemingly was inevitable at the Kolon trial.  The trial judge granted DuPont’s motion in limine to bar any reference to the earlier lawsuit on the ground that no showing had been made that a trade secret at issue in the Kolon case actually was disclosed in the earlier trial.  The appeals court held, however, that the lower court applied “too stringent a standard for admissibility.  Under the circumstances [here], a ‘strikingly similar’ standard of relevance is enough” to allow the jury to decide whether the information retained the requisite confidentiality.

Takeaways.  Although the Fourth Circuit’s opinion is designated “Unpublished” and, therefore, “not binding precedent,” it seems to include carefully drafted guidelines regarding pretrial motions.  The appeals court recognized that streamlining a trial and “fostering the orderliness of evidentiary presentations of complicated issues cannot be doubted”  but cautioned that “a court is often wise to await the unfolding of evidence before the jury before undertaking to make definitive rulings on the likely probative value of disputed evidence.”  By the same token, a party who succeeds in obtaining an in limine instruction and who prevails at the subsequent trial may find that it was an exercise in futility.  Lengthy trials — the one between DuPont and Kolon lasted seven weeks — are costly, and a retrial adds expense.  So, litigants should think carefully before seeking to exclude a large volume of evidence.

Another lesson learned in this litigation is that confidential information disclosed in the course of a misappropriation trial thereafter may cease to qualify as confidential. 

Finally, the Fourth Circuit’s plurality and partially dissenting opinions relating to Kolon’s effort to disqualify the trial judge also may be instructive in a future case.  The plurality of the per curiam court denied disqualification, but all three judges voted nevertheless to remand for further proceedings before a different judge.  So, consideration might be given to requesting, as an alternative in a federal appellate court motion seeking a recusal on remand, the exercise of “supervisory powers” with respect to assignment of another trial judge.  Both requests seek substantially the same relief.