This case involved a dispute between Tankmax, Inc. (Tankmax) and its former employee, Wayne Duran, as well as Duran’s new company, American Gas Services LLC (AGS). Tankmax sued Duran and AGS for violations of trade secret laws, computer fraud, tortious interference, unjust enrichment, breach of fiduciary duties and conversion.Wayne Duran was employed by Tankmax and its predecessor, Pacific Meter & Equipment, from 2003 until January 3, 2022. Subsequently, Duran went on his own venture under American Gas Services LLC, which currently competes with Tankmax. The Plaintiff claims that the Defendant unlawfully appropriated trade secrets, specifically customer lists and scheduling calendars. Additionally, the Plaintiff asserts that Duran either stole or neglected to return parts and equipment owned by Tankmax.
The facts, considered in favor of the Plaintiff, reveal that Tankmax, a Washington corporation based in Spokane, hired Wayne Duran in 2003. In March 2021, Pacific Meter & Equipment Inc. (PME), Duran’s former employer, merged with Tankmax. The merger was formalized through a Stock Purchase Agreement, involving the acquisition of PME for around $2 million. As part of this acquisition, all of PME’s assets, encompassing goodwill, phones, customer lists, and related information, were successfully purchased by the Plaintiff.
Following the merger, the Plaintiff initiated a mobile-based operation at PME, introducing a new position known as the Mobile Proving Service Manager. On March 29, 2021, Defendant Duran was promoted to this role. His responsibilities encompassed traveling to customer locations in Washington, Oregon, and Idaho to conduct tests, calibrations, and repairs on propane equipment. He was also tasked with managing company test schedules for specific locations and ensuring compliance with Department of Transportation (DOT) standards by testing and inspecting cargo tanks. Subsequent to the promotion, Defendant spent the majority of his working hours outside the shop.
The Plaintiff equipped Defendant with essential tools for his role, providing an iPhone, a laptop computer, and a tablet computer. Access to these devices required passwords. Defendant chose his own password for the iPhone, while for the laptop computer, he utilized the password designated by the Plaintiff.
During the final years of Defendant’s employment with PME, the company covered the costs of his monthly cell service bill, although it did not buy the phone itself. In the summer of 2021, Plaintiff purchased a new iPhone for Defendant after his original phone was damaged. Despite Plaintiff instructing Defendant to set up an Apple ID using his Tankmax email address, Plaintiff used his personal email for this purpose. Consequently, all the data from Defendant’s previous PME phone was transferred to the iPhone purchased by Plaintiff. Defendant utilized this information, including customer contacts, while scheduling on behalf of Plaintiff.
The iPhone also contained Defendant’s personal data, such as banking information, contacts for friends and family, and photos taken by him. Before terminating his employment with Plaintiff, Defendant acquired a new iPhone for AGS and configured it using the same Apple ID used for the phone provided by Plaintiff. This allowed him to transfer all the data to his new AGS iPhone.
Due to Defendant Duran’s aversion to computers, he maintained customer and tank inspection records on index cards, including customer names, unit numbers, and inspection dates. These cards lacked phone numbers and were exclusively used by Defendant. Customer contact information for scheduling services and testing of truck-mounted propane tanks was stored on Defendant’s iPhone, purchased by Plaintiff. The card file was kept at the shop when Defendant worked there, but upon becoming a mobile prover, he stored it at his house, where it remains. Defendant also used a day planner for scheduling work with customers, and this information was never transferred to any electronic format.
Defendant resigned from Plaintiff’s employment on January 3, 2022, and immediately commenced servicing Plaintiff’s customers the following day. Subsequently, Defendants hired Adam Wright, a former employee of Plaintiff, in May 2022.
Defendant allegedly took various steps while still employed to compete with Plaintiff, including registering his business, American Gas Services, using his work iPhone for competitive purposes, intentionally neglecting to schedule work for Plaintiff after his resignation, ordering equipment for customers to serve under AGS, withholding customer needs from colleagues, resetting his iPhone without authorization, deleting emails, failing to return Plaintiff’s property, returning a non-working mobile prover, providing incorrect information to Ferrellgas, and copying decals, forms, pricing, and the mobile operation concept from Plaintiff.
During the Discovery process, Defendants requested Tankmax to provide evidence supporting the allegations of theft and the value of the stolen parts and equipment. In response, Tankmax submitted 26 pages of ledgers and receipts. The production comprised four documents:
1. An accounting of Tankmax’s Kent shop as of October 1, 2021 (pages 1-14).
2. An accounting of Tankmax’s Kent shop as of July 27, 2022 (pages 15-22).
3. An inventory dated January 20, 2022, detailing parts and supplies Tankmax purchased to replenish what went missing from the truck utilized by Duran (page 26).
4. An inventory dated May 16, 2022, outlining parts and supplies Tankmax purchased to replenish what was missing from the truck utilized by Adam Wright (page 25).
To substantiate its damages claim, Tankmax engaged economist Erick West, who published a report evaluating the purported lost income stream. West also offered an opinion on the damages related to tools, equipment, and inventory that Tankmax accused Mr. Duran of stealing.
In addressing the equipment loss, economist West dedicated three paragraphs in his expert report. According to Tankmax’s claims, it was asserted that Duran failed to return certain tools, equipment, service parts, and gas bottles upon the termination of his employment. Howard, in response to RFP No. 18, provided a QuickBooks report comparing the inventory valuation of the Kent shop on October 21, 2021, to July 27, 2022. This report indicated a missing inventory worth $61,023, attributed to items allegedly taken by Duran before January 3, 2021.
Another document produced in response to RFP No. 18, dated May 18, 2022, summarized the value of missing items amounting to $11,001 from the truck returned at the end of Adam Wright’s employment at Tankmax. Howard attributed these missing items from the truck to additional items allegedly taken and used for the financial benefit of the Defendants. In total, West included $72,024 in damages related to the equipment loss. He noted that this analysis would be updated as additional documentation became available through the ongoing discovery process.
Defendants aimed to exclude the testimony of Plaintiff’s forensic economic expert concerning the $72,024 in damages associated with equipment loss attributed to Defendants. Defendants sought to exclude this particular opinion, arguing that West’s valuation of the missing tools, equipment, and inventory was deemed entirely unreliable. His opinion on this topic fell outside his expertise, lacked foundation, and was unhelpful to the jury.
Forensic Economics Expert Witness
Erick C. West has over two decades of experience as an economics expert. He holds both bachelor’s and master’s degrees in economics from Washington State University. Over the course of his career, West has previously worked as a Financial Advisor at Merrill Lynch,and was a Senior Economist at Harper Incorporated. He currently leads West Economics, Inc. as President, specializing in areas such as business valuation, forensic financial analysis, appraisal services, and quantifying economic losses to both personal and commercial matters.
Discussions by the Court
District Courts serve as gatekeepers for expert testimony, applying Rule 702 to ensure its relevance and reliability. This obligation, established by Daubert, involves assessing if the expert’s knowledge aids the trier of fact, is based on sufficient facts, relies on reliable principles, and has been reliably applied. The proponent of the evidence bears the burden of proving adherence to Rule 702. The trial judge must balance admitting helpful testimony with excluding potentially misleading or confusing content. The relevance of expert opinion testimony hinges on its valid connection to the pertinent inquiry.
Defendants contested that the opinion presented by West, asserting that Tankmax incurred $72,024 in damages due to equipment loss attributed to Defendants, was considered beyond the scope of his training or experience. West lacked the qualifications to provide an opinion on the reasonable value of missing inventory. He was unable to identify the missing parts or equipment, nor could he determine their fair market value. The argument contended that his opinion amounted to merely endorsing a ledger printed out by Tankmax, as acknowledged in his own report.
Even if the Court were to acknowledge that West had the qualifications to express an opinion on the value of the missing inventory, the argument contended that his opinion would not be helpful to the jury. The assertion was that West’s contribution was limited to a simple computation, wherein he added two figures provided by Tankmax’s co-owner, Kelly Howard. The argument emphasized that this task did not demand advanced skill, training, or experience and could be accomplished by anyone with a basic education, even at the grade school level.
West, according to the argument, took no steps to verify any of the figures presented in the ledgers. He did not examine the invoices that formed the basis of the ledgers to ensure their accuracy in reflecting the value of the missing inventory. No inquiry was made into the procedures for inspecting, cataloging, or entering the inventories. West lacked knowledge regarding whether the ledgers underwent reconciliation because he did not inquire. Additionally, he had no information about whether the equipment or parts were new or used, and he was unaware of their reasonable market values. Furthermore, there was no adjustment made for depreciation or appreciation of the inventory in his analysis.
West was not presented with any evidence to indicate that Defendants had actually taken the purportedly missing inventory. Instead, he straightforwardly accepted Howard’s attribution that the items were taken by Defendants.
In summary, the argument asserted that there was no foundation for West’s opinion on equipment loss, and his conclusions were deemed mere speculation.
The Court determined that Defendants’ arguments pertain to the weight of West’s testimony, not its admissibility. The contention is that if the jury believes West’s testimony, it would be beneficial in calculating damages. Defendants have the opportunity to challenge the reliability of West’s damage calculations through cross-examination.
Genuine factual disputes exist regarding whether certain information qualifies as trade secrets under state and federal laws, and if Plaintiff took reasonable secrecy measures. Questions also arise about Defendant’s potential unauthorized access to his iPhone, preventing summary judgment on the Computer Fraud and Abuse Act claim. The Court refrains from granting summary judgment on remaining state law claims, as preemption and other issues require trial evidence. The unjust enrichment claim is not preempted. Overall, because a reasonable jury could rule in Plaintiff’s favor on misappropriation and related claims, Defendants are not entitled to summary judgment.
Held
The Court denied Defendant’s Motion for Summary Judgment and also denied Defendants’ Motion to Partially Exclude the Expert Testimony of Erick West. The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
Key Takeaways
Defendants filed a motion to exclude expert testimony from Plaintiff Tankmax’s forensic economic expert related to $72,024 in damages attributed to allegedly stolen equipment. Defendants argued the expert’s methodology for calculating these damages was unreliable.
The Court denied Defendants’ motion and found the expert’s testimony admissible. The judge ruled that the objections raised by Defendants did not warrant exclusion under Daubert, but rather went to the weight and reliability of the testimony – issues that could be adequately addressed through cross-examination at trial.
Specifically, the Court found that the expert’s specialized knowledge in calculating economic damages would be helpful to the jury if required to determine a damages award. Additionally, the judge ruled that the expert had applied reliable principles and methods to the available facts of the case.
Therefore, the key takeaways regarding expert testimony here are that challenges to an expert’s data and assumptions generally go to credibility rather than outright exclusion. The Court also emphasized cross-examination provides the appropriate venue for scrutinizing expert methodology. Absent particular red flags, expert opinions meeting the basic thresholds of relevance and reliability under Rule 702 warrant admission, not exclusion.
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