Atlas Biologicals v. Kutrubes ( 2022 )

Appellate Case: 19-1404 Document: 010110714227 Date Filed: 07/21/2022 Page: 1
FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT July 21, 2022
_________________________________
Christopher M. Wolpert
Clerk of Court
ATLAS BIOLOGICALS, INC.,
Plaintiff - Appellee,
v. No. 19-1404
(D.C. No. 1:15-CV-00355-CMA-KMT)
THOMAS JAMES KUTRUBES, an (D. Colo.)
individual; PEAK SERUM, INC., a
Colorado corporation; PEAK SERUM,
LLC, a dissolved Colorado limited liability
company,
Defendants - Appellants.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before BACHARACH, BRISCOE, and EID, Circuit Judges.
_________________________________
Thomas James Kutrubes sold bovine serum products for Atlas Biologicals
until he left to form a competitor, Peak Serum. Before departing, Kutrubes took
confidential customer information from Atlas and emailed several Atlas customers to
solicit business for Peak Serum, falsely claiming that Peak Serum was related to
Atlas. Peak Serum and Kutrubes (collectively, “Peak”) then sold mislabeled serum.
Atlas sued. After a bench trial, the district court awarded Atlas its losses, Peak’s
*
This order and judgment is not binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
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profits, and attorneys’ fees. Peak appeals, arguing that its conduct did not cause
Atlas the damages it recovered below. Exercising jurisdiction under 28 U.S.C.
§ 1291, we affirm because the district court did not clearly err in finding Peak liable.
I.
a.
The following background is largely derived from the district court’s findings
of fact. Plaintiff-Appellee Atlas Biologicals, Inc., is based in Fort Collins, Colorado.
The company specializes in products involving bovine serum, a fluid derived from
cow blood leftover by the commercial beef industry. Fetal bovine serum (“FBS”) is
used for cell culture and other research in the medical, veterinary, and biological
sciences. A lucrative commodity, a single bottle of FBS costs hundreds of dollars,
and customers like academic laboratories and biotech companies will often purchase
dozens or even hundreds of bottles at a time to ensure consistency. Atlas sells pure
FBS, but it also develops and offers less expensive proprietary products and blends—
such as EquaFETAL, Fetal Select, and Fetal Plus. Atlas’s proprietary products
“meet[] the specifications” for FBS, but are “purportedly more traceable, consistent
in quality, and stable in pricing.” Aplt. App’x Vol. XVII at 3362–63. During the
period relevant here, Atlas’s primary owners were the company president Richard
Paniccia and Brent Bearden, while Michelle Cheever worked as Director of Quality
Assurance. Defendant-Appellant Thomas James Kutrubes was also on the payroll.
Kutrubes started interning for Atlas in 2005, became a sales manager in 2006,
and was promoted to National Sales Manager in 2012. By 2013, Kutrubes was on the
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company’s board and held a seven-percent stake. By late 2014, however, while still
employed by Atlas, Kutrubes had surreptitiously developed a business plan to
compete with the company. Kutrubes envisioned a new entity, Defendant-Appellant
Peak Serum, that would—just like Atlas—focus on selling serum products to
institutions worldwide. After registering Peak Serum as an LLC in October 2014,
Kutrubes dissolved that entity and incorporated Peak Serum in Colorado in December
2014.
Around this time, Kutrubes sent numerous company documents from his Atlas
email account to his personal account. The documents included Atlas’s customer
contact lists, a supplier agreement, its quality manual, its organizational chart, a
contract manufacturing statement, proofs of labels, a marketing brochure, and emails
concerning products. Some of the information came from Atlas’s secured,
competitively advantageous database of nonpublic customer information. The
database cost over a million dollars to develop, and Atlas employees put thousands of
hours into it annually. Kutrubes did not have Atlas’s permission to take information
from the database and was aware of Atlas’s confidentiality policies. Atlas employees
did not work from home, so the district court did not credit Kutrubes’s testimony that
he emailed himself the documents to work remotely. Besides, Kutrubes conceded
“that he had the development of Peak Serum in mind when he emailed Atlas’s
customer information to his personal account.” Id. at 3401.
Having obtained Atlas’s customers’ information, Kutrubes started emailing
various Atlas customers, using Atlas’s trademarks and trade names, to solicit
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business for Peak Serum. Kutrubes falsely stated that Atlas and Peak Serum were
related companies, that Atlas was no longer selling FBS or conducting international
sales, and that Peak Serum would be taking over Atlas’s international accounts. In
these emails, Kutrubes used a signature block that included Atlas’s information and
logo, and that identified him as Atlas’s National Sales Manager. Kutrubes also tried
to obtain inventory for Peak Serum by contacting Atlas’s suppliers, contract
manufacturers, and business partners.
In mid-December 2014, Kutrubes submitted his resignation from Atlas as both
employee and director. He told Paniccia and Bearden that he was departing to sell
FBS on his own. Before his resignation took effect, Atlas discovered the many
emails appropriating its documents and attempting to appropriate its business. Atlas
refused Kutrubes’s resignation and terminated him for cause. Kutrubes admits to
breaching his duty of loyalty to Atlas between October 2014 and December 2014.
In the aftermath of Kutrubes’s departure, and “as a result of the confusion
caused by Kutrubes’s use of Atlas’s marks and names in emails promoting Peak
Serum,” Atlas “lost a large block of business.” Id. at 3377. But the overlap between
Atlas and Peak Serum was not limited to Kutrubes’s emails. For example, Kutrubes
created an online profile for Peak Serum that used Atlas’s marks and information. In
early 2015, searching for Atlas Biologicals on the internet would yield customer
reviews linked to the Peak Serum name that actually referenced Atlas and Atlas
products like EquaFETAL. According to Cheever—and as Kutrubes conceded—this
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confused Atlas’s customers. Atlas often had to explain to its customers that it was
unrelated to Peak.
Early in Peak’s operations, the company mislabeled several hundred bottles of
FBS. In accord with “industry best practices” favoring consistency, shared lot
numbers assure consumers that multiple bottles of serum comprise “a uniform batch
of product” produced by a single manufacturer in a single day. Id. at 3385. In
December 2014, Peak bought 246 bottles of FBS from Rocky Mountain Biologicals,
Inc. (“RMBIO”), a contract manufacturer. RMBIO identified that shipment of serum
as Lot 20140331FS. In March 2015, Peak submitted an affidavit to the United States
Department of Agriculture (USDA) stating that Peak Serum Lot 31C141 was
“derived entirely” from RMBIO’s Lot 20140331FS. The affidavit was part of Peak’s
ultimately successful effort to export serum to South Korea, which Cheever testified
has “stringent” import requirements. Aplt. App’x Vol. II at 354. Peak sold over one
thousand bottles of FBS under the lot number 31C141 to former Atlas customers.
Six hundred of those bottles went to Daemyung, a South Korean entity and former
Atlas customer. Aside from the fact that Peak sold far more 31C141 serum than it
purchased from RMBIO and represented to the USDA was in existence, chemical
analyses of serum samples from Lot 31C141 indicated that Peak labeled what should
have been different lots with the same lot number. At trial, Kutrubes admitted that
Peak inaccurately labeled its serum.
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b.
Atlas sued Peak in February 2015 in the District of Colorado and obtained a
temporary restraining order. The parties stipulated to the bulk of a preliminary
injunction but disagreed about whether Peak could contact Atlas customers. The
court held that, “in the absence of a non-solicitation and non-compete agreement
between Atlas and Kutrubes, it did not have the authority to enjoin Kutrubes and
Peak Serum from contacting all customers and potential customers in Atlas’s
customer database.” Aplt. App’x Vol. XVII at 3368.
In November 2016, Atlas filed an amended complaint alleging claims for
trademark infringement under the Lanham Act; false association1 under the Lanham
Act; trademark and trade name infringement under Colorado law; misappropriation
of trade secrets under the Colorado Uniform Trade Secrets Act (CUTSA); conversion
and civil theft under Colorado law; deceptive trade practices under the Colorado
Consumer Protection Act; breach of fiduciary duty; and breach of contract.2 Atlas
also sought attorneys’ fees.
The district court held a five-day bench trial in March 2018 and issued written
findings of fact and conclusions of law in September 2019. As relevant to this
1
The district court referred to this claim as “false designation of origin and
federal unfair competition.” Aplt. App’x Vol. XVII at 3387. For ease of reference,
we call it false association.
2
Additional claims for unfair competition under Colorado law and copyright
infringement under federal law were later withdrawn by Atlas.
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appeal, the district court ruled in Atlas’s favor on its false association claim under the
Lanham Act, and its trade secrets misappropriation claim under CUTSA. For the
Lanham Act claim, the district court awarded Atlas $502,861.88, representing profits
lost in 2014 and 2015 due to Peak’s conduct. It also awarded Atlas Peak’s profits
from selling mislabeled FBS in Lot 31C141, trebling that award to $181,425. For the
misappropriation claim, which was based on Kutrubes taking content from Atlas’s
customer database, the district court awarded Atlas $681,946.81, representing Peak’s
profits on sales to former Atlas customers. It then awarded Atlas another
$681,946.81 in exemplary damages because Peak’s actions were “attended by
circumstances of willful and wanton disregard of Atlas’s rights.” Id. at 3401. These
damages totaled $2,048,180.50. The district court also determined that Atlas was
entitled to attorneys’ fees on the Lanham Act and CUTSA claims, but it put off
calculating the exact amount. Peak appealed. After briefing in this appeal began, the
district court determined that Atlas was entitled to $308,554.50 in attorneys’ fees.
Atlas then moved to strike Peak’s attorneys’ fees arguments and Peak opposed.
II.
Peak appeals the district court’s damages awards for Atlas’s false association
Lanham Act claim, and its trade secret misappropriation CUTSA claim. Peak also
challenges the attorneys’ fees awarded under those claims. On appeal from a bench
trial, we review factual findings for clear error and legal conclusions de novo. See
Holdeman v. Devine, 572 F.3d 1190, 1192 (10th Cir. 2009). Findings of fact are only
clearly erroneous if “unsupported in the record, or if after our review of the record
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we have the definite and firm conviction that a mistake has been made.” Id. (quoting
La Resolana Architects, PA v. Reno, Inc., 555 F.3d 1171, 1177 (10th Cir. 2009)).
On appeal, Peak’s overarching contention is that its conduct was not the
“proximate cause” of Atlas’s damages, and the district court erred by finding
otherwise. Aplt. Br. at 2.3 Proximate cause can have a legal component, but Peak’s
arguments are consistently factual. Because Peak challenges a factual finding of the
district court, we review for clear error. See Holdeman, 572 F.3d at 1192. Because
the district court’s determination that Peak injured Atlas finds support in the record,
we affirm the damages awarded under Atlas’s Lanham Act and CUTSA claims. We
also conclude that the district court did not reversibly err in trebling part of the
3
At times, Peak seems to be arguing that it was held liable under the Lanham
Act due to an errant finding of a likelihood of confusion, one of the elements of
Atlas’s claim. See 15 U.S.C. § 1125(a)(1)(A). For example, under a heading
ostensibly about proximate cause, Peak writes that, “[w]ith regard to the [likelihood
of confusion] element, the record was largely void of evidence to indicate that there
was deception,” and “considerable evidence . . . undermined Atlas’ allegations of
confusion in the market.” Aplt. Br. at 25–26. Elsewhere, however, it seems clearer
that Peak’s theory is actually that the lack of confusion evidence linked to the time
when Peak made its profits and Atlas suffered its losses means that Peak’s earlier
misrepresentations did not proximately cause injury to Atlas. See id. at 24. We think
Peak fails to develop an independent argument that the district court’s finding of a
likelihood of confusion, which supported Peak’s Lanham Act liability, was in error,
so we need not reach that issue. See Kelley v. City of Albuquerque, 542 F.3d 802,
819 (10th Cir. 2008). But even if we did, our deferential review would be for clear
error. See John Allan Co. v. Craig Allen Co. L.L.C., 540 F.3d 1133, 1138 (10th Cir.
2008) (likelihood of confusion is a factual finding). Even at a quick glance, the
record contains abundant support for the district court’s finding of a likelihood of
confusion, including Kutrubes’s misrepresentations about Atlas, Kutrubes’s use of
Atlas credentials to advertise Peak Serum, the overlap between Atlas’s and Peak
Serum’s online presences, and other evidence.
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Lanham Act damages and awarding exemplary CUTSA damages. Because we affirm
the underlying damages, we have no basis for disturbing the award of attorneys’ fees.
a.
We start with the district court’s award of $502,861.88, representing Atlas’s
losses in 2014 and 2015, on Atlas’s false association claim. Under the Lanham Act,
a prevailing plaintiff is “entitled, . . . subject to the principles of equity, to recover
(1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs
of the action.” 15 U.S.C. § 1117(a). But Peak’s arguments do not concern the scope
of § 1117(a)—indeed, Peak does not cite § 1117(a) in either of its briefs. Nor does
Peak contest the specifics of the district court’s method of calculating damages.
Rather, Peak appears to categorically dispute its underlying liability for damages by
challenging the district court’s finding that Peak’s misconduct proximately caused
any compensable injury to Atlas. See Aplt. Br. at 1 (framing first issue as whether
the district court “erred by awarding damages” for Atlas’s Lanham Act claim); see
also id. at 43. As the Supreme Court has explained, Lanham Act liability requires a
showing of proximate cause. See Lexmark Int’l, Inc. v. Static Control Components,
Inc., 572 U.S. 118, 132–34 (2014). Specifically, “a plaintiff suing under § 1125(a)
ordinarily must show economic or reputational injury flowing directly from the
deception wrought by the defendant’s” conduct, which “occurs when deception of
consumers causes them to withhold trade from the plaintiff.” Id. at 133.
Here, the district court found that “Atlas was damaged by . . . Kutrubes’s
misleading emails to Atlas’s customers and prospective customers . . . [which] caused
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confusion in the market, which had a deleterious effect on Atlas’s sales.” Aplt.
App’x Vol. XVII at 3388. The court further found that “Atlas ha[d] proven both
causation and [the] amount of its actual damages.” Id. at 3389. On clear error
review, what matters is whether the record contains adequate support for the district
court’s conclusion that Peak caused Atlas’s damages. It does. The district court
received extensive evidence that Peak’s misrepresentations about Atlas and Peak
would and did confuse customers, and it heard expert testimony that confusion can
cause anticompetitive harms, even in the absence of sales by a competitor. Trial
testimony indicated that the serum industry “is a small industry and word gets out,”
Aplt. App’x Vol. III at 551, and that Kutrubes’s misrepresentations would “sour[]”
customers’ relationships with Atlas. Aplt. App’x Vol. IV at 694. Moreover, the
record suggests that, in 2014 and 2015, Atlas lost many former customers, and its
sales suffered as Peak’s soared. Multiple witnesses testified that Kutrubes’s conduct
was the cause. Far from a “post hoc fallacy,” Aplt. Br. at 49, there was a reasonable
basis in the record for the district court’s finding that Peak caused Atlas recoverable
damages. See Lexmark Int’l, Inc., 572 U.S. at 133 (Lanham Act injury “occurs when
deception of consumers causes them to withhold trade from the plaintiff”).
Nonetheless, Peak challenges the district court’s decision to hold it liable, arguing
that Atlas’s supposed losses were insufficiently connected to Peak’s conduct. We
reject Peak’s arguments and affirm the district court’s damages award because it was
not clear error to hold Peak responsible for Atlas’s downturn following Peak’s
misrepresentations.
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First, Peak argues that Atlas was not “primarily” in the FBS business—as it
focused on selling proprietary alternatives like EquaFETAL—so Peak could not have
harmed Atlas when it sold FBS to Atlas customers that had not been purchasing
Atlas’s FBS. Aplt. Br. at 26. Atlas responds that FBS made up a sizable chunk of its
business and, more importantly, Atlas “competed for the same set of customers as
Peak Serum.” Aple. Br. at 24. The record supports the district court’s rejection of
Peak’s position for the reasons Atlas submits. Kutrubes did not leave Atlas and
switch industries; rather, he left Atlas to sell FBS to Atlas’s customers. Meanwhile,
Atlas continued trying to sell FBS or FBS substitutes to these customers.
Notwithstanding the price differential between FBS and Atlas’s proprietary products,
Peak and Atlas competed for the same business from the same customers, who sought
to put their rival products to the same purpose. The record evidence supports the
conclusion that FBS and Atlas’s proprietary products are competing substitutes, and
any difference between them is no basis for holding that the district court clearly
erred by finding that Atlas’s losses followed from Peak’s misrepresentations.
Next, Peak contends that the district court’s finding of liability was error
because the court failed to consider whether customers were still confused when they
purchased Peak’s products. Peak suggests that the lengthy sales process for serum
products where customers sample serum over multiple weeks “breaks any causal
link,” and that no record evidence indicated that Peak’s customers were confused at
the time Peak was selling to them in mid-2015. Aplt. Br. at 41. Peak’s position finds
little solace in logic or law. The district court’s factual finding that Peak was
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responsible for Atlas’s losses is not necessarily undermined by Peak’s contentions
about the timing of customer confusion. Peak’s arguments seek, without legal
support, to cabin its liability to sales made while customers were confused, as
opposed to profits lost because of Peak’s confusing misrepresentations. But the law
runs against Peak, as our cases reference “initial interest confusion” under the
Lanham Act, where a seller can be held liable after hooking a consumer with a
misrepresentation, even if the confusion fades before a sale is made. See Australian
Gold, Inc. v. Hatfield, 436 F.3d 1228, 1238–39 (10th Cir. 2006). And the district
court heard expert testimony suggesting that customer confusion could damage Atlas
in the absence of sales by Peak. Finally, Kutrubes testified that not every serum
transaction features an extended sampling process. The district court did not clearly
err.
Peak also argues that it only sold to Daemyung, Atlas’s South Korean
customer, after Atlas voluntarily terminated its own business relationship with
Daemyung. Therefore, the argument goes, Peak cannot be blamed for this subset of
losses. But the record provided the district court a reasonable basis for rejecting this
contention. Atlas leadership testified at trial that the company was “leery” of
working with some of Kutrubes’s contacts because it had come to Atlas’s attention
that Kutrubes was working with Atlas customers to covertly acquire Atlas’s
proprietary products for himself. Aplt. App’x Vol. IV at 687–88. Trial evidence
indicated that Kutrubes emailed an Atlas customer to coordinate a “straw purchase”
from Atlas, where the customer would obtain EquaFETAL for Kutrubes to resell
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without revealing the customer’s allegiance to Kutrubes. The scheme fell apart when
the customer inadvertently forwarded Atlas’s quote to Kutrubes’s Atlas email
address. Relevant to the Daemyung issue, the district court heard testimony that
Kutrubes nearly succeeded in acquiring EquaFETAL through a straw purchase by an
Atlas customer, that Kutrubes had a very close relationship with Daemyung’s sales
representative, that the main reason Atlas cut off Daemyung was its concern that
Kutrubes could be working with the company, and that Atlas did so to protect itself
from Kutrubes’s deception. Peak fails to show that the district court clearly erred by
holding it liable for Atlas’s lost Daemyung business.
Finally, Peak urges that there was de minimis evidence of actual confusion,
and that the district court followed an expert report that assumed causation, so it was
clear error to find Peak liable for all of Atlas’s losses. After all, Peak suggests, it was
foreseeable that Atlas’s sales would fall after the company lost its National Sales
Manager, and it was equally foreseeable that such a person could leverage client
relationships to take business from Atlas on the merits. However, we are not
conducting de novo review. Instead, we must ask only whether the record supported
the district court’s contrary conclusion. It did. The record makes clear that Peak
deceived Atlas’s clients with respect to Atlas’s ability to work with them,
appropriating their business through misrepresentations that took advantage of their
relationships with Atlas. Whatever success Peak might have had if Kutrubes left
Atlas on better terms, the district court had ample support in the record for its finding
that Peak’s misrepresentations caused Atlas’s losses, and Peak does not suggest on
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appeal that it offered the district court any alternative measure of damages that
accounted for the situation. Cf. U-Haul Int’l, Inc. v. Jartran, Inc., 793 F.2d 1034,
1041 (9th Cir. 1986) (“He who has attempted to deceive should not complain when
required to bear the burden of rebutting a presumption that he succeeded.”). Finally,
Peak’s complaints about the district court’s reliance on an expert report go nowhere.
The district court did not assume causation. It found that Peak injured Atlas and it
used the report to determine the amount of damages. That is not clear error.
Even considered cumulatively, Peak’s arguments about proximate cause do not
leave us with “the definite and firm conviction that a mistake has been made.”
Holdeman, 572 F.3d at 1192 (quoting La Resolana Architects, PA, 555 F.3d at 1177).
In contrast, our review of the record reveals that Atlas put forward sufficient
“evidence of injury proximately caused by [Peak’s] . . . misrepresentations” to
“obtain relief.” See Lexmark Int’l, Inc., 572 U.S. at 140 (emphasis omitted). We
affirm the district court because Peak has failed to demonstrate that its factual finding
that Peak caused Atlas’s losses qualifies as clear error, either in whole or in part.
b.
We now turn to the district court’s award of an additional $181,425 on Atlas’s
Lanham Act claim, representing Peak’s profits from selling mislabeled FBS, trebled.
Peak’s arguments for reversal remain premised on whether its actions caused Atlas
injury, so we focus on the district court’s finding that Peak’s mislabeling damaged
Atlas. See id. at 133. Again, we are reviewing the relevant finding of fact for clear
error. See Holdeman, 572 F.3d at 1192. We affirm the treble damages award
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because the district court received sufficient evidence to support the conclusion that
Peak was liable to Atlas under the Lanham Act for mislabeling serum.
Peak contends that it is “unclear how” any mislabeling could have harmed
Atlas. Aplt. Br. at 38. But the evidence before the district court told a reasonable
story to that effect. For example, the district court heard testimony that international
customers work within the confines of complex legal regimes for serum importation,
with South Korean customers subject to particularly strict requirements. By
mislabeling serum as Korean eligible in the affidavit that allowed Peak to supply
Daemyung, a South Korean customer, with hundreds more bottles of 31C141 serum
than were purchased from RMBIO, Peak misrepresented its ability to fill
Daemyung’s sizable order. And the same general reasoning plausibly applies to
domestic customers, as Peak’s mislabeling was a representation that Peak had more
of a certain lot than was actually available. See POM Wonderful LLC v. Coca-Cola
Co., 573 U.S. 102, 107–08 (2014) (discussing “injury as a competitor” due to
mislabeling under the Lanham Act). After all, Kutrubes testified at trial that serum
sales are far easier when all serum sold comes from the same lot; if so, customers
need not repeat the lengthy testing process before purchasing more. As a result, the
evidence supported the conclusion that Peak’s misrepresentations took serum
business that could have gone to Atlas, which was enough to give Atlas a cause of
action and supports the district court’s finding that Peak’s conduct injured Atlas. See
Lexmark Int’l, Inc., 572 U.S. at 133. Moreover, the possibility that the business Peak
obtained by mislabeling could have gone to Atlas instead was hardly theoretical.
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Fifteen former Atlas customers (including Daemyung), poached by Peak, purchased
over a thousand bottles of serum supposedly from Lot 31C141.
Peak’s statement that “no evidence [was] presented to establish any causal link
between the mislabeling of product and any damage to Atlas” is incorrect. Aplt. Br.
at 40. We affirm the district court’s award of the profits Peak gained from selling
mislabeled FBS to Atlas’s customers because the record supports the finding that
Peak’s mislabeling harmed Atlas as a competitor.4
c.
Next, we consider CUTSA. Peak’s core argument on appeal, paralleling its
Lanham Act challenge, is that proximate causation problems prevented a damages
award on Atlas’s trade secret misappropriation claim. See id. at 1 (framing second
issue as whether the district court “erred by awarding damages” for Atlas’s CUTSA
4
To the extent that Peak implicitly argues in the alternative that, even if the
award of mislabeling profits was proper, the treble damages were improper, we reject
that contention. Under the Lanham Act, a “court may enter judgment, according to
the circumstances of the case, for any sum above the amount found as actual
damages, not exceeding three times such amount.” 15 U.S.C. § 1117(a). We review
a decision granting treble damages under the Lanham Act for abuse of discretion.
United Phosphorus, Ltd. v. Midland Fumigant, Inc., 205 F.3d 1219, 1236 (10th Cir.
2000). Here, the district court’s decision to award treble damages, which the Lanham
Act expressly envisions, was not “arbitrary, capricious, whimsical, or manifestly
unreasonable.” Tesone v. Empire Mktg. Strategies, 942 F.3d 979, 989 (10th Cir.
2019) (quoting Bylin v. Billings, 568 F.3d 1224, 1229 (10th Cir. 2009)). Far from it,
the district court explained that it “weigh[ed] the equities” and considered an award
of treble damages appropriate because “Atlas lost sales to Peak Serum, Kutrubes and
Peak Serum benefitted from Atlas’s goodwill and reputation, and Kutrubes’s and
Peak Serum’s mislabeling of Peak Serum Lot 31C141 were more likely than not
willful.” Aplt. App’x Vol. XVII at 3391. That was not an abuse of discretion.
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claim). Under CUTSA, “[d]amages may 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.” Colo. Rev. Stat. § 7-74-104(1). Again,
Peak challenges a factual finding, so we review for clear error. See Holdeman,
572 F.3d at 1192. In evaluating Peak’s argument, we keep in mind Colorado courts’
caution that “[d]amages in trade secret appropriation cases are often difficult to
ascertain with certainty.” Sonoco Prods. Co. v. Johnson, 23 P.3d 1287, 1289 (Colo.
App. 2001); see also id. (“Under the circumstances of each case, the trial court has
the responsibility to make a reasonable finding that would provide for a fair,
equitable, and adequate award of damages.”). We affirm.
Peak raises the same arguments with respect to the CUTSA claim as the
Lanham Act claim: “(1) Atlas and Peak Serum sold different products; (2) there is a
lengthy sales process which breaks any causal link in misappropriation; (3) Atlas
terminated a key customer; (4) other Atlas customers were not recent FBS customers
of Atlas; and (5) Kutrubes had longstanding relationships with Atlas customers due
to his longevity with that company.” Reply Br. at 16. We rejected these arguments
above in the Lanham Act context and, with the standard of review and relevant
factual finding effectively unchanged, do so here as well. Just as the evidence was
sufficient to support the district court’s finding connecting Peak’s misrepresentations
and mislabeling with Atlas’s losses, the record supported the district court’s finding
that Peak’s misappropriation harmed Atlas. Trial testimony suggested that the
information in Atlas’s database was competitively advantageous because it not only
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contained contact information for institutional serum purchasers but indicated exactly
when they were likely to buy again—information that would save a prospective
competitor a lot of effort and expense. Relatedly, witnesses testified that late 2014
was a difficult time to get started in the serum business, but that it took Atlas nearly a
decade, with multiple salespeople, to reach the volume that Kutrubes reached within
a year of his 2014 start. The district court’s unjust enrichment damages followed
directly from this record-supported theory of harm, as the court limited the profits
awarded to those Peak earned from former Atlas customers. Peak fails to show on
appeal that the causal determination underlying the district court’s damages award
was clear error, either in whole or in part.
We do not mean to suggest that Peak only sold serum because of Kutrubes’s
trade secret misappropriation—or, by extension, his misrepresentation and
mislabeling. Peak is surely right that Kutrubes’s preexisting relationships and
industry expertise set Peak up for some measure of success. The departure of Atlas’s
National Sales Manager would likewise be a blow to the company’s bottom line,
regardless of the circumstances. But the fact remains that the district court received
abundant evidence that Peak misappropriated Atlas’s trade secret database content
and used it to launch Peak Serum and divert Atlas’s customers. And the fact remains
that we are conducting deferential clear error review of the district court’s factual
finding that Peak’s conduct injured Atlas. Keeping in mind the difficulty of
determining damages in misappropriation cases, Sonoco Prods. Co., 23 P.3d at 1289,
we can hardly say that it was clear error for the district court to use Peak’s profits as
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a benchmark for CUTSA recovery. Far from it, the district court’s decision found
abundant support in the record and governing law, as CUTSA expressly envisions
unjust enrichment damages. See Colo. Rev. Stat. § 7-74-104(1). We affirm the
CUTSA award because the district court did not commit clear error by ordering
disgorgement.
d.
Peak also challenges the district court’s decision to award exemplary damages
on Atlas’s misappropriation claim. Under CUTSA, “[i]f the misappropriation is
attended by circumstances of fraud, malice, or a willful and wanton disregard of the
injured party’s right and feelings, the court or the jury may award exemplary
damages in an amount not exceeding the [base] award.” Id. § 7-74-104(2). Here, the
district court found that Peak acted willfully and wantonly—supporting an award of
$681,946.81 in exemplary damages, matching the base award—because of
“Kutrubes’s concession that he had the development of Peak Serum in mind when he
emailed Atlas’s customer information to his personal account.” Aplt. App’x Vol.
XVII at 3401. On appeal, Peak challenges the willful-and-wanton finding on two
grounds.5 First, Peak claims that Kutrubes did not “permanently deprive Atlas” of its
proprietary files. Aplt. Br. at 53. Second, Peak contends that it “engaged in a
separate business pursuit” from Atlas, and sold a different product, so it did not
5
Peak also argues that overturning the primary CUTSA award would require
overturning the exemplary damages award. Having affirmed the primary CUTSA
award, however, we do not have occasion to reach Peak’s argument.
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disregard Atlas’s rights. Id. at 54. We review Peak’s challenge to the district court’s
willful-and-wanton finding for clear error. Holdeman, 572 F.3d at 1192.
Neither of Peak’s arguments is persuasive. First, the fact that Peak’s
misappropriation did not deprive Atlas of its database content permanently does not
undermine the district court’s finding of “a willful and wanton disregard of the
injured party’s right and feelings.” Colo. Rev. Stat. § 7-74-104(2). Atlas had the
right to prevent others from using its proprietary information improperly, and it took
steps to protect its content, such as securing the database and adopting a
confidentiality policy. Critically, Peak does not challenge the district court’s finding
that Kutrubes “had the development of Peak Serum in mind when he emailed Atlas’s
customer information to his personal account.” Aplt. App’x Vol. XVII at 3401. That
finding of deliberate intent, along with the district court’s rejection of Kutrubes’s
testimony that he merely emailed himself database information to work from home,
formed the basis for the district court’s willful-and-wanton finding. Second, Peak’s
argument that it engaged in a different line of business from Atlas is meritless for the
reasons discussed above. The district court did not clearly err when it found that
Atlas acted willfully and wantonly, so we affirm the award of exemplary damages.6
6
Peak does not argue in the alternative that, even if we uphold the willful-and-
wanton finding, the district court’s discretionary decision to award exemplary
damages was an abuse of discretion. See Colo. Rev. Stat. § 7-74-104(2) (providing
that exemplary damages “may” be awarded after a finding of “fraud, malice, or a
willful and wanton disregard of the injured party’s right and feelings”).
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e.
Finally, we address Peak’s challenge to the $308,554.50 in attorneys’ fees the
district court awarded Atlas for its Lanham Act and CUTSA claims. See 11 U.S.C.
§ 1117(a); Colo. Rev. Stat. § 7-74-105. On appeal, Peak explains that its theory of
reversal with respect to the attorneys’ fees award is dependent on the Lanham Act or
CUTSA issues falling in its favor. See Aplt. Resp. Mot. Strike at 4–5 (“There is no
complex argument as to attorney’s fees. Briefly stated, [Peak’s] position is that
[Atlas] should not have prevailed on its claims for [false association] and CUTSA;
accordingly, attorney fees should not be awarded.”); see also Reply Br. at 19. Peak
makes no other independent argument for overturning the award of attorneys’ fees.
See Aplt. Resp. Mot. Strike at 3–4. We take Peak’s position as a conditional
concession of the attorneys’ fees issue. Because we affirm the district court with
respect to the Lanham Act and CUTSA damages discussed above, Peak’s concession
means we need not consider disturbing the award of attorneys’ fees to Atlas. We
deny as moot Atlas’s motion to strike or disregard the portions of Peak’s briefs
concerning the attorneys’ fees award.
III.
For the reasons above, we AFFIRM.
Entered for the Court
Allison H. Eid
Circuit Judge
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