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Perdue Farms v. Natl Union Fire PA, 04-1176 (2005)

Court: Court of Appeals for the Fourth Circuit Number: 04-1176 Visitors: 8
Filed: Jun. 02, 2005
Latest Update: Mar. 28, 2017
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 04-1176 PERDUE FARMS, INCORPORATED, Plaintiff - Appellant, versus NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA; THE FEDERAL INSURANCE COMPANY, Defendants - Appellees, and AMERICAN NATIONAL INSURANCE COMPANY, Defendant. - COMPLEX INSURANCE CLAIMS LITIGATION ASSOCIATION, Amicus Supporting Appellees. Appeal from the United States District Court for the District of Maryland, at Baltimore. Benson Everett Legg,
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                              UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT


                              No. 04-1176



PERDUE FARMS, INCORPORATED,

                                              Plaintiff - Appellant,


           versus

NATIONAL UNION FIRE INSURANCE COMPANY OF
PITTSBURGH,    PENNSYLVANIA; THE  FEDERAL
INSURANCE COMPANY,

                                             Defendants - Appellees,


           and

AMERICAN NATIONAL INSURANCE COMPANY,

                                                          Defendant.

--------------------

COMPLEX    INSURANCE       CLAIMS    LITIGATION
ASSOCIATION,

                                        Amicus Supporting Appellees.


Appeal from the United States District Court for the District of
Maryland, at Baltimore. Benson Everett Legg, Chief District Judge.
(CA-99-2818-L)


Argued:   March 16, 2005                     Decided:   June 2, 2005


Before MICHAEL and KING, Circuit Judges, and James R. SPENCER,
Chief United States District Judge for the Eastern District of
Virginia, sitting by designation.
Affirmed by unpublished per curiam opinion.


ARGUED: Stephen Richard Mysliwiec, DLA PIPER RUDNICK GRAY CARY US,
L.L.P., Washington, D.C., for Appellant. M. Elizabeth Medaglia,
JACKSON & CAMPBELL, P.C., Washington, D.C.; Jeffrey Roger
Schmieler, SAUNDERS & SCHMIELER, Silver Spring, Maryland, for
Appellees. ON BRIEF: Glen K. Allen, DLA PIPER RUDNICK GRAY CARY
US, L.L.P., Baltimore, Maryland, for Appellant.     Barbara M. R.
Marvin, JACKSON & CAMPBELL, P.C., Washington, D.C., for Appellee
National Union Fire Insurance Company of Pittsburgh, Pa.; Alan B.
Neurick, William E. Hutchings, Jr., SAUNDERS & SCHMIELER, P.C.,
Silver Spring, Maryland, for Appellee Federal Insurance Company.
Laura A. Foggan, John C. Yang, Paul J. Haase, WILEY, REIN &
FIELDING, L.L.P., Washington, D.C., for Amicus Curiae, Complex
Insurance Claims Litigation Association, Supporting Appellees.


Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).




                                2
PER CURIAM:

     After a Florida appellate court affirmed awards for actual

damages and for unjust enrichment against it, Perdue Farms Inc.

(“Perdue”) brought suit in the District Court of Maryland against

National Union Fire Insurance Co. of Pittsburgh, PA (“National

Union”), Federal Insurance Company and American National Fire

Insurance Company seeking indemnification under the advertising

liability provisions of the insurance policies at issue.1                The

parties agreed to present the question of coverage to the District

Court on cross-motions for summary judgment.             The District Court

concluded that no reasonable jury could find Perdue’s damages

covered by the advertising liability provision and awarded summary

judgment to National Union. For the reasons that follow, we affirm

the grant of summary judgment in favor of the insurance companies.



                                    I.

     In   1991,   Dennis   Hook   (“Hook”)   and   his    business   partner

approached Pizza Hut with a unique process for cooking chicken

which would allow a fast-service restaurant to prepare and serve a

chicken product with the appearance of rotisserie chicken in less


     1
      The insurance companies are collectively referred to as
“National Union” or “the insurer.”        National Union’s policy
provided $15 million in commercial liability coverage with Federal
Insurance Company covering damages in excess of National Union’s
limit. Federal’s liability is capped at $25 million. Federal’s
policy is referred to as a “follow form” policy because it provides
the same coverage as the National Union policy.

                                     3
than 10 minutes.   The Hook process involved placing pre-seasoned

pieces of chicken in a vacuum-sealed bag, refrigerating the chicken

after cooking and reheating the chicken by using a microwave in

combination with a conventional or pizza impinging oven.   In 1992,

Pizza Hut and Hook entered into a development agreement with the

potential to pay Hook $20 million in royalties.

     Pizza Hut and Hook then contacted Perdue as a possible source

of chicken for the project.   In 1993, Pizza Hut and Perdue signed

a confidentiality agreement regarding Hook’s process.   The parties

recognized that the disclosing party, Pizza Hut, possessed certain

secret information and the receiving party, Perdue, acknowledged

that Pizza Hut intended to develop that secret information but that

Pizza Hut would disclose the information to Perdue “for the purpose

of development, improvement, and/or possible manufacturing thereof

for the sole and exclusive ownership and use by [Pizza Hut].”

Furthermore, the parties agreed that Pizza Hut would disclose its

secret information for the purpose of “seasoning, process, and

product development work related to the development of oven roasted

chicken.”   In exchange, Perdue agreed not to use the secret

information for its own account or purposes or for the purposes of

any other party.   With the Agreements in place, Hook divulged the

secrets of his process to Perdue.2   After a testing period, Pizza

Hut decided not to pursue the project and terminated its agreement



     2
      The Florida jury hearing Hook’s case against Perdue would
later determine that Hook was a third party beneficiary of the
confidentiality agreements.

                                 4
with Hook.     Unknown to Hook, about six months after his visit to

the Perdue plant where he shared the secrets of his process, Perdue

began to develop a product, using the same preparation techniques,

that it would eventually sell under the name “TenderReady.”

     Not until October 1996, while attending a trade show in

Europe, did Hook discover Perdue’s efforts to market and sell a

pre-marinated, fully-cooked roasted chicken product using Hook’s

process.     Hook read the sales brochures and other literature and

realized that Perdue’s marketing materials described the essential,

previously confidential nature of his process. When Hook’s demands

on Pizza Hut to enforce their confidentiality agreement with Perdue

went unheaded, Hook brought suit against Perdue in Florida circuit

court to enforce the confidentiality agreements and collect damages

for the misappropriation of his trade secret.

     In Count I, Hook alleged that Perdue misappropriated his trade

secret in violation of the Florida Uniform Trade Secrets Act

(“FUTSA”). Hook claimed that the “use of the Process without [his]

express or implied consent constitute[d] a misappropriation of the

Process    because:   (1)   Perdue       acquired   the   Process   under

circumstances giving rise to a duty to maintain its secrecy and

limit its use, and (2) Perdue derived the Process from or through

Pizza Hut, and therefore owed a duty to plaintiffs to maintain its

secrecy and limit its use.”   Hook charged Perdue with gaining both

a commercial advantage      and causing “the actual loss of the

independent economic value of the Process.”



                                     5
     Counts III and IV charged Perdue with breach of the two

confidentiality    agreements    “by    misappropriating,       using   and

disclosing   the   Process   without   written   or   implied   consent.”3

Notably, in Count IV, Hook asserted that Perdue “breached its duty

under the Perdue Confidentiality Agreement by misappropriating and

using the Process without express or implied consent.”

     In the wake of a three week trial, the jury found Hook’s

process to be a trade secret and that Perdue misappropriated that

secret.   The Verdict Form specifically asked the jury to find

whether “plaintiffs proved by the greater weight of the evidence

that their method or process of preparing, storing and serving

fresh roasted chicken in a commercial setting is a trade secret?”

The next question on the form asked whether “plaintiffs proved by

the greater weight of the evidence that defendant misappropriated

plaintiff’s trade secret?”

     The jury also determined Hook to be a third party beneficiary

of the two confidentiality agreements and found Perdue in breach.

The jury awarded Hook $25 million in actual damages together with

$2 million in damages for unjust enrichment which Hook presented as

the development costs Perdue saved by co-opting his process.            In

post-trial proceedings, the trial court awarded Hook $6.75 million

in punitive damages based on the jury’s finding that Perdue acted


     3
      The district court referred to these Counts as Counts II and
III, however Count II charged only Pizza Hut with breach of
contract.

                                   6
willfully and maliciously in misappropriating Hook’s trade secret

and assessed pre-judgment interest in the amount of $14,896,602.74

based on the jury’s determination that Hook’s damages accrued on

October   29,   1993,   the   date       Perdue    began   to   develop   its

“TenderReady” product.

     Perdue appealed the decision to the Florida Second District

Court of Appeal.     The appellate court affirmed the $25 million

damage award as well as the $2 million award for unjust enrichment.

However, the court reversed the punitive damage award, finding that

Perdue’s conduct fell below the level of egregiousness necessary to

support such an award.   As to the prejudgment interest amount, the

court found the award “grossly inequitable” and determined that the

underlying damage award of $25 million could not be liquidated to

a date certain.    The court held that the jury’s verdict liquidated

the amount of Hook’s damages and awarded prejudgment interest from

April 9, 1999 through May 3, 1999, the date of the final judgment.

     Before the appeals court entered its decision, Hook and Perdue

signed a “high-low” settlement agreement which guaranteed Hook a

minimum of $10 million regardless of the court’s decision and

capped Perdue’s liability at $30 million.           Perdue eventually paid

Hook $30 million.    Perdue then looked to its insurance companies

for indemnity and they denied coverage.           Perdue sued the insurance

companies claiming that coverage existed under the Advertising

Liability provision of the insurance policy.           Perdue claimed that


                                     7
its    brochures      and     other   advertising     literature      created     its

liability to Hook by disclosing, i.e. misappropriating, the details

of the Hook “re-thermalization” process.

       The contract of insurance provided coverage for liability

incurred because of (i) personal injury, (ii) property damage, or

(iii) advertising liability.            Advertising Liability is defined as

liability for damage because of: (a) unintentional libel, slander

or defamation of character; (b) infringement of copyright or title

or     of   slogan;     (c)    piracy    or    unfair    competition        or   idea

misappropriation under an implied contract; or (d) invasion of the

rights of privacy, arising out of Perdue’s advertising activities.

However, coverage is limited by the exclusion provision which

disclaims coverage under advertising liability for claims made

against Perdue due to its “failure of performance of contract.”

       Before    the    district      court,    the     insurers      argued     that

advertising liability is not triggered simply because the insured

advertises a product developed using misappropriated trade secrets.

They    argued   that    their    liability    only     arises   if   the    offense

occurred within the four corners of the advertisement itself.

National Union asserted that the jury held Perdue liable because

Hook presented evidence that Perdue misappropriated his process by

developing and marketing TenderReady in 1993 and not by disclosing

the process in its 1995 advertisements. Additionally, the insurers

relied on the “failure of performance of contract” exclusion.                     The


                                          8
insurers argued that this exclusion is applicable because Perdue’s

liability grew out of its breach of the confidentiality agreement;

in    other       words,    Perdue’s      failure     to    perform      its    contractual

obligations.

       The parties asked the District Court of Maryland to “examine

the    Florida          record,    including       Hook’s    Complaint,         the    [trial]

transcript, and the decision of the Florida Appellate Court” to

determine whether the underlying judgment captured conduct within

the policy’s coverage.              Specifically, the parties requested that

the Court determine what the jury necessarily decided because the

jury       did    not    specify    the   basis     for     its    finding      that    Perdue

misappropriated Hook’s trade secret.

       The district court held for the insurance companies and denied

coverage. Judge Legg thoroughly reviewed the record and determined

that it admitted only one conclusion – “the jury found that Perdue

misappropriated the Hook process by developing and marketing the

TenderReady line of chicken.”                Perdue Farms Inc. v. Nat’l. Union

Fire Ins. Co., 
197 F. Supp. 2d 370
, 375 (D. Md. 2002) (hereinafter

“Perdue          Farms    I”).4     The    court     found        that   Hook    pursued     a

“preemption” theory of damages throughout his litigation and that

Hook based Perdue’s liability on the fact that Perdue’s product


       4
      Judge Legg issued two opinions in this case. In the second
opinion, Perdue Farms, Inc. v. National Union Fire Insurance Co. of
Pittsburgh, P.A., Civil No. L-99-2818 (D. Md., Sept. 10, 2003), the
district court found that National Union had a duty to defend
Perdue in the underlying Hook lawsuit.

                                               9
prevented, i.e. preempted, him from licensing his process because

restaurants would not license the proprietary process if they could

simply purchase the end result from Perdue.

     The district court cited three specific instances in the

record    which    demonstrated     the    jury’s     acceptance   of   Hook’s

preemption theory:

     (i) Perdue’s appellate brief before the Florida Court of
     Appeals stated that, “Hook’s theory of actual damages was
     that the availability of Perdue’s TenderReady product
     deprived Hook of the ability to earn royalties on his
     process.”

     (ii) The Florida Court of Appeals concluded that, “Hook’s
     theory of liability was that Perdue’s TenderReady product
     destroyed his ability to market his process.”

     (iii) The jury’s determination that Hook’s damages
     accrued as of October 29, 1993, two years prior to
     Perdue’s advertising at issue.5

Perdue Farms I, 197 F. Supp. 2d at 376.              The court also examined

the individual counts in Hook’s Complaint and focused on the

relevant exclusion provision in the policy.              The court found the

exclusion to be fatal to extending coverage for Perdue’s liability

under Counts III and IV and rejected Perdue’s argument that any

meaningful distinction exists between the breach of a contract and

the failure to perform that same contract.            Moreover, the district

court    found    that   the   confidentiality      agreements   were   express


     5
      The district court relied on this finding despite the fact
that the Florida Court of Appeals subsequently vacated the
prejudgment interest award and remanded with instructions to enter
an award of prejudgment interest between the dates of the jury
verdict and the final judgment.

                                      10
contracts and therefore liability for their breach was not covered

under subsection (c) of the Advertising Liability provision.

     Finally, with regard to the Florida Uniform Trade Secrets Act,

the court found it unlikely that the jury relied upon any factor to

impose liability on Perdue other than Perdue’s breach of its

confidentiality agreements.

     This appeal followed.    In the present dispute, Perdue relies

heavily on perceived inconsistencies between the two opinions

issued by the district court to help make its argument.6        Perdue

also asserts an alternate theory of coverage that because the

evidence   was   sufficient    for     the   jury   to   find   either

misappropriation of the trade secret by use or by disclosure, the

district court should have erred on the side of extending coverage

rather than denying it.



                                 II.

     The parties dispute the standard of review on appeal, with

Perdue urging the Court to apply traditional summary judgment



     6
      In the second opinion, Perdue Farms, Inc. v. National Union
Fire Insurance Company of Pittsburgh, P.A., Civil No. L-99-2818 (D.
Md., Sept. 10, 2003) (hereinafter “Perdue Farms II”), Judge Legg
found that National Union had a duty to defend Perdue when Hook
filed his complaint. National Union did not appeal that decision.
Perdue’s reliance on the second opinion is misplaced as it simply
recognizes the long-standing position in Maryland law that the duty
to defend is broader than the duty to indemnify in that it is based
on the potentiality of coverage. See Litz v. State Farm Fire &
Cas. Co., 
346 Md. 217
, 225 (1997).

                                 11
review principles to the district court’s decision. National Union

argues that the parties requested that the district court make

factual inferences from undisputed facts and that those factual

findings should be upheld unless clearly erroneous.           Nothing about

this case requires that this Court abandon the familiar refrain

that we review the district court’s order granting summary judgment

de novo.    Smith v. Continental Cas. Co., 
369 F.3d 412
, 417 (4th

Cir. 2004).    The question before the district court was whether

Perdue was entitled to indemnification under its insurance contract

with National Union.         Such a coverage determination is a legal

question which Maryland courts resolve de novo on appeal.                    See

Fister v. Allstate Life Ins. Co., 
366 Md. 201
, 210 (Md. 2001)

(“Because the facts are undisputed, we are left to determine

whether the trial court correctly interpreted and applied the

relevant law to the uncontested facts.”).

     In analyzing this appeal, this Court stands in the same

position as the district court and will only uphold an award of

summary    judgment   “if    the   pleadings,    depositions,      answers   to

interrogatories,      and    admissions    on   file,   together    with     the

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment

as a matter of law.”        Fed. R. Civil P. 56(c).     As this matter was

presented to the District Court of Maryland sitting in diversity,

we shall apply Maryland’s substantive law in interpreting the


                                      12
insurance policy.    See Erie R. Co. v. Tompkins, 
304 U.S. 64
, 78, 
82 L. Ed. 1188
, 
58 S. Ct. 817
 (1938).



                                  III.

     In determining coverage under an insurance policy, Maryland

courts “initially focus on the terms of the insurance policy to

determine the scope and limitations of its coverage.”              Chantel

Assocs. v. Mount Vernon Fire Ins. Co., 
388 Md. 131
, 142 (1995).          In

a typical declaratory judgment action to determine coverage under

a policy, “it is the function of the court to interpret the policy

and decide whether or not there is coverage.”            Mitchell v. Md.

Cas., 
324 Md. 44
, 56 (1991).      To carry out this task, we begin as

we would with any other contract – with the terms of the policy

itself, see Cole v. State Farm Mut. Ins. Co., 
359 Md. 298
, 305

(2000), giving the terms their “customary, ordinary, and accepted

meaning.”    Mitchell, 324 Md. at 56.

     In the instant summary judgment action, the parties asked the

district court to determine whether the underlying judgment in the

Florida court triggered National Union’s duty to indemnify Perdue

under the policy.     While the duty to defend is broader than the

duty to indemnify, see Litz v. State Farm Fire & Cas. Co., 
346 Md. 217
, 225 (1997) (basing the duty to defend on the potentiality of

coverage),   the    insurer’s   duty    to   indemnify   depends   on   the

resolution of facts alleged in the complaint.            See Penn-America


                                   13
Ins. Co. v. Coffey, 
368 F.3d 409
, 413 (4th Cir. 2004); Steyer v.

Westvaco Corp., 
450 F. Supp. 384
, 389 (D. Md. 1978) (“[T]he

question whether the insurer has a duty to pay a final judgment

against the insured turns on a comparison of the ultimate findings

of   fact   concerning     the     alleged   occurrence    with    the    policy

coverage.”).

     In this case, Perdue asked the district court to find that

National Union owed a duty to indemnify Perdue based on the

Advertising Liability provision in the policy. To require National

Union to indemnify Perdue, we must determine whether Perdue’s

liability to Hook in the underlying action was because of “idea

misappropriation under an implied contract” arising out of Perdue’s

advertising activities.           We first look to see whether Perdue

demonstrated    that     its     liability   to   Hook   arose    out    of   its

advertising brochures.

     National Union’s duty to indemnify Perdue for its liability

under Counts III and IV of the Complaint are the easiest to dispose

of on summary judgment.        Whether or not we conclude that the jury

based its misappropriation finding on Perdue’s disclosure of Hook’s

process in its advertising activities, we find as a matter of law

that the exclusion for “failure of performance of contract” bars

coverage under the breach of contract claims. Hook’s Complaint and

the jury verdict make this conclusion obvious.




                                       14
     Hook     clearly      charged    Perdue    with    breaching      the     two

confidentiality agreements. Although Count III alleged that Perdue

breached its duty under the agreement “by misappropriating, using

and disclosing” the process, the evidence before the jury clearly

established that Hook’s injury occurred because Perdue used his

process contrary to the confidentiality agreements to develop a

product that would preempt him from licensing his process.                    The

jury weighed the evidence and concluded that Perdue breached both

of the agreements.

     No    matter    how   artfully    Perdue   attempts      to   construe    its

actions,    Perdue    failed   to    perform    its   obligations     under    the

confidentiality agreements. Perdue expressly agreed not to use any

proprietary    information      it    gained    under   the    confidentiality

agreement.    Whether or not Perdue used the information to develop

the process, which the jury determined to be a trade secret, or

disclosed the process in its advertisements, the jury found that

Perdue breached the agreements and therefore the coverage exclusion

applies.

     Disposition of Count I requires further discussion.                     FUTSA

defines “misappropriation,” in relevant part, as

     [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 her or his knowledge of the trade secret was ...
     acquired under circumstances giving rise to a duty to
     maintain its secrecy or limit its use.



                                       15
Fla. Stat. § 688.002.     FUTSA provides for injunctive relief, Fla.

Stat. § 688.003, and damages based on actual loss and unjust

enrichment based on the misappropriation as well as exemplary

damages up to twice the amount awarded for actual loss and unjust

enrichment, Fla. Stat. § 688.004. Under Count I, Hook alleged that

“Perdue’s use of the Process without plaintiffs’ express or implied

consent constitute[d] a misappropriation of the Process.”

     The question the Court must answer is whether the jury based

Perdue’s liability on its disclosure or use of Hook’s trade secret.

The best place to start is with the jury’s verdict.                 After

concluding that Perdue misappropriated Hook’s trade secret and

breached the two confidentiality agreements, the jury determined

that Hook was entitled to $25 million in actual damages and $2

million for unjust enrichment.        Additionally, the jury found that

Hook’s damages accrued on October 29, 1993.

     As noted by the Florida Court of Appeals, the damage award

derives factual support from the confidential development agreement

between   Hook   and   Pizza   Hut.    Titled   “Project   Feathers,”   the

agreement consisted of three phases.        During the first phase, the

parties set to developing the process and product.              Phase Two

implemented the final result of the development phase in which

Pizza Hut agreed to pay a royalty of $0.036 per pound of chicken

product sold up to $5 million.         Phase Three, labeled “earn out,”

reduced the per pound royalty and capped the payout at $15 million.


                                      16
Hook also entered into a separate agreement with KFC Corporation,

a Pizza Hut affiliate, for a capped royalty of $5 million.

     Although this gives a basis for the jury’s award, the unjust

enrichment award and the accrual date indicate that the jury

focused its attention on Perdue’s use of the process to develop its

own product rather than its advertising activities.             Certainly

Perdue   was   not   unjustly   enriched   because   it   co-opted   Hook’s

advertising idea and so did not have to spend its time and effort

on creating a marketing strategy.        Rather, Perdue benefitted from

Hook’s disclosure of his process and was able to forego some of the

development costs in bringing its product to market.             The jury

valued those foregone development costs at $2 million, an amount

the Florida Court of Appeals upheld without discussion.          Finally,

the jury concluded that Hook’s damages began to accrue on October

28, 1993, presumably relying on an internal Perdue memorandum

describing a request for a new product sample: eight pieces of

chicken marinated and seasoned with Perdue (and not Pizza Hut)

seasoning utilizing the cook-in-the-bag process.            Each of these

facts,7 taken together, cause us to conclude that the jury based

Perdue’s liability on its use and development of Hook’s process in

violation of the confidentiality agreements.




     7
      The jury also rejected Perdue’s argument that Hook’s process
was not a trade secret.

                                    17
       Finally, although we do not have the benefit of over 3000

pages of trial transcript from the three week jury trial, the

record does contain excerpts of Hook’s testimony in which he

describes how Perdue’s product preempted him from selling his

chicken technology.     Hook testified that when he discovered the

TenderReady product brochure at the Paris trade show, he contacted

Genevieve Friedman, with Perdue, and questioned her about the

product.     According to Hook, he inquired whether TenderReady was

“the Pizza Hut product” and Ms. Friedman affirmed that it was.

Hook next contacted his business partner and informed him that the

Pizza Hut chicken was “out on the street and its new name is

TenderReady.”

       Hook testified that he could no longer make money licensing

the technology for his process because of the Perdue product’s

presence “on the street.”     Hook also claimed that he was entitled

to a consulting fee for the time period that Perdue began selling

the product back in 1993.    Hook’s business partner testified that

Perdue’s sales of TenderReady “effectively completely pre-empts us

from   the   marketplace.”   He   explained   that   Hook   was   selling

technology and that

       [i]f we were to go to any one of these companies at any
       time, today, for example, and we were to say to them ...
       “We think that we’ve got this great idea, and we would
       like you to pay us consulting fees and rights on the
       product that would amount to a lot of money.      By the
       way, you don’t have to buy – you don’t have to do this.
       You can go to Perdue, and they will sell it to you for
       none of this.”

                                  18
Trial Transcript at 529.          The witness clearly referred to the fact

that by developing the end product, Perdue prevented Hook from

licensing        his   process.       In   addition,   Hook’s    expert   witness

testified “that the TenderReady product was copied from the Dennis

Hook process” and that Perdue essentially “stole or used the same

process from Dennis Hook to produce their product.”

       The record before us leads to the obvious conclusion that the

ultimate findings of fact from the Hook trial take the instant case

outside of the policy coverage.             Perdue’s liability did not result

from       its      advertising       activities       and,     therefore,     any

misappropriation under FUTSA resulted from Perdue’s use of Hook’s

trade      secret      to   develop    a    product    in     violation   of   the

confidentiality agreements.8



                                           IV.

       Accordingly, we hold that the Hook jury determined that Perdue

misappropriated Hook’s process by using it to develop its own

product.     Perdue’s liability did not arise out of its advertising


       8
      It does not appear that the FUTSA requires a duty external to
a contract in order to impose liability for its violation.
See Fla. Stat. § 688.008; Tender Boat Ramp Sys., Inc. v.
Hillsborough County, 
54 F. Supp. 2d 1300
, 1302 (M. D. Fla. 1999)
(discussing the two elements for a claim of misappropriation of a
trade secret under FUTSA). Although the district court noted that
the trial court in the underlying action did not “advise the jurors
that the duty of confidentiality must have arisen from a source
other than the confidentiality agreements themselves,” we need not
address this issue in deciding whether National Union owes a duty
to indemnify.

                                           19
activities or disclosure of the trade secret but even if it did,

the underlying action was premised on Perdue’s breach of the

confidentiality agreements, precluding coverage under the policy

exclusion for “failure of performance of contract.”   We therefore

affirm the order granting summary judgment to National Union.



                                                          AFFIRMED




                               20

Source:  CourtListener

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