FINAL JUDGMENT

JAMES R. NOWLIN, District Judge.

Before the Court in the above-entitled and styled case of action are the following cross-motions for post-verdict relief: (1) Myriad Development, Inc.'s Motion For Judgment (Dkt. No. 433), filed March 13, 2010; (2) Alltech, Inc.'s Opposition To Plaintiffs Motion For Judgment And Defendant's Motion To Enter Judgment To Conform The Verdict To The Evidence (Dkt. No. 449), filed April 2, 2010; (3) Myriad Development, Inc.'s Reply In Support Of Motion For Judgment And In Opposition To Defendant's Motion To Conform The Verdict To The Evidence (Dkt. No. 464), filed April 26, 2010; (4) Alltech, Inc.'s Sur-Reply In Further Opposition To Plaintiff's Motion For Entry Of Judgment And In Further Support Of Defendant's Motion To Conform The Verdict To The Evidence (Dkt. No. 466), filed May 3, 2010; (5) Myriad Development, Inc.'s Sur-Reply In Support Of Motion For Judgment And In Opposition To Defendant's Motion To Enter Judgment To Conform The Verdict To The Evidence (Dkt. No. 485), filed June 1, 2010; (6) Alltech, Inc.'s Court-Ordered Brief (Dkt. No. 507), filed February 14, 2011; (7) Myriad Development, Inc.'s Court-Ordered Brief (Dkt. No. 511), filed February 15, 2011; (8) Alltech, Inc.'s Response To Plaintiffs Court-Ordered Brief (Dkt. No. 513), filed February 23, 2011; and (9) Myriad Development, Inc.'s Reply In Support of Its Court-Ordered Brief (Dkt. No. 516), filed March 1, 2011.

After an exhaustive review of the applicable law and the evidence presented at trial, the Court concludes that Myriad Development, Inc.'s motion must be GRANTED IN PART AND DENIED IN PART. Likewise, Alltech, Inc.'s motion must be GRANTED IN PART AND DENIED IN PART. In summary of the Court's holdings, Plaintiff/Counter-Defendant Myriad Development, Inc. ("Myriad") may only recover the following damages: (1) $21,263.00 for unpaid amounts under the APPRISE Agreement; (2) $198,110.00 for unpaid amounts under the Subcontract for Labor; and (3) $250,000.00 in reasonable royalty fees for trade secret misappropriation. Defendant/Counter-Plaintiff Alltech, Inc. ("Alltech") is not entitled to recover any damages.

I. STANDARD OF REVIEW

Alltech's Response and concomitant motion is, as far as the Court can discern, a renewed motion for judgment as a matter of law under Rule 50(b) of the Federal Rules Of Civil Procedure.1 "A motion for judgment as a matter of law (previously, motion for directed verdict or J.N.O.V.) in an action tried by jury is a challenge to the legal sufficiency of the evidence supporting the jury's verdict."2 In considering Alltech's motion, the Court must consider all the evidence before the jury.3 When reviewing all of the evidence, the Court must draw all reasonable inferences in favor of the nonmovant, and the Court cannot weigh the evidence or make credibility determinations.4 Additionally, "the court must be `especially deferential' to the jury's findings."5 Therefore, a "jury verdict must stand unless there is lack of substantial evidence, viewed in the light most favorable to the successful party, to support the jury's factual findings, or the legal conclusions implied from the jury's verdict cannot, in law, be supported by those findings."6

II. FACTUAL AND PROCEDURAL BACKGROUND

Myriad is a technology company that traditionally provided software and other services to insurance companies in order to assist in the management of property inspections. In particular, Myriad licenses its proprietary inspection management system under the name "Risk Manager" system (formerly known as the "Apprise" system). Myriad created the Risk Manager system in 2001 in order to streamline and automate an insurance company's inspection process. Risk Manager is a client/server system. The server side of the system allows a company to dictate and manage the information inspectors collect in the field. The client side of the system is a laptop computer or handheld tablet the inspector uses to collect the data and to send the data back to the server. In essence, Risk Manager guides an inspector through the inspection process.

Alltech is in the business of deploying teams of inspectors to presidentially-declared disaster areas in order to perform housing inspections on an expedited basis.7 Alltech has provided such disaster-related inspection services to the Federal Emergency Management Agency (FEMA) since 1995, and FEMA continues to award contracts to Alltech.

Prior to this dispute, Alltech had a five-year contract with FEMA that expired in 2005. In 2004, FEMA began requiring inspectors to provide two photographs per inspection. To meet this requirement, Alltech developed a system called "PB Photo Inspection" in 2005. In essence, "PB Photo Inspection" was software that was installed on a hand-held tablet PC computer that allowed Alltech field inspectors in the disaster areas to transmit photos from a camera onto the hand-held tablet. Once the tablet was connected to a telephone line, Alltech could then transfer the photos from the hand-held tablet to a common storage server that Alltech maintained. At the conclusion of the 2000-2005 FEMA contract, Alltech sought to update and upgrade its data collection software before it bid on any new FEMA contracts. To accomplish this task, Alltech turned to Myriad.

In 2005, Alltech and Myriad entered into the following three contracts related to Alltech's work for FEMA, which are now in dispute:

At trial, Alltech claimed that it hired Myriad to increase the data storage and the data transfer capabilities of Alltech's PB Photo Inspection. On the other hand, Myriad rebutted that Alltech did not have a system called "PB Photo Inspection" in 2005, and thus, Alltech merely hired Myriad to customize Myriad's Risk Manager system for Alltech's FEMA work.

The agreement for Myriad to customize Myriad's Risk Manager system and/or Alltech's PB Photo Inspection was memorialized in the "APPRISE Agreement" on June 6, 2005. The APPRISE Agreement permitted Alltech to utilize Myriad's Risk Manager system in order to process property inspections related to the FEMA disaster response program. The first version of the system that Myriad customized for Alltech under the APPRISE Agreement was called "Photo Ace."8 In 2006, Myriad designed and developed a successor to the 2005 "Photo Ace" called "PB Ace."

On June 30, 2005, Myriad and Alltech entered into a second agreement called the "AIMS Agreement." The AIMS Agreement provided the terms for Myriad to develop and operate the Alltech Inspection Management System ("AIMS") for Alltech. In essence, AIMS is software that allows Alltech to locate detailed credential and contact information for qualified FEMA inspectors residing throughout the United States.

Of great importance to the present controversy, on March 30, 2007, Alltech entered into its most recent agreement with FEMA, the "FEMA PRIME Agreement." The FEMA Prime Agreement required Alltech to collect data and to take photographs of residential damage from hurricanes. Alltech was required to transmit those photographs to FEMA upon request. As of the trial in this case, the FEMA Prime Agreement was scheduled to last until September 30, 2010.

The parties executed the "Subcontract for Labor" on May 3, 2007 — two years after the APPRISE and AIMS Agreements. The Subcontract for Labor governed certain staffing and personnel services that Myriad provided to Alltech for Alltech's performance under the FEMA PRIME Agreement.

Less than one year after Alltech and Myriad won the bid for the 2007 FEMA Prime Agreement, the current controversy arose between Myriad and Alltech. It is undisputed that on March 28, 2008, Myriad denied Alltech access to the Risk Manager system and PB Ace.9 Myriad maintained that it suspended Alltech's access to Risk Manager because Alltech was reviewing the features and functionalities of Risk Manager and PB Ace for the improper purpose of creating: (1) a replacement user interface system, called "Pegasus," and (2) a replacement server storage database, called "DSD."

According to Myriad, development of "DSD" began in 2007, and development of "Pegasus" and "Aries" began in January of 2008. The plan to actually use "Pegasus" as a replacement system was allegedly developed in March of 2008. However, in suspending access on March 28, 2008, Myriad — by letter and by telephone — informed Alltech that Myriad would restore access if Alltech confirmed that it was not misusing Myriad's proprietary information. Mr. Hugh Inglis, the principal-in-Charge of Parson Brinckerhoff s FEMA Housing Project, testified that he would not provide Myriad with the requested confirmation.

On the other hand, Alltech stated at trial that Myriad denied Alltech access to Risk Manager in order to compel contractual re-negotiations and an extension of the existing agreements. Alltech argued that it was forced to develop a replacement to the Risk Manager system and PB Ace in April 2008 so that it could continue performing under its FEMA contract after Myriad denied Alltech access to such systems. Alltech insisted at trial that "Pegasus" and "DSD" were created on a blank sheet of paper without the use of any of Myriad's source code or other confidential information.

On March 28, 2008, Myriad sent a "Notice Of Cancellation of the APPRISE Agreement" to Alltech. On April 3, 2008, Alltech responded by sending a sixty-day notice, pursuant to section 14(a) of the Agreement, informing Myriad that Alltech would not be renewing the APPRISE Agreement for any additional one-year terms. Additionally, on April 30, 2008, Alltech served Myriad with a sixty-day notice, pursuant to section 10(a) of the Agreement, that Alltech would not be renewing the AIMS AGREEMENT for any additional one-year terms. Finally, on May 30, 2010, Myriad sent a "Notice Of Cancellation of the AIMS Agreement" to Alltech.10

On April 2, 2008, Myriad filed the present lawsuit seeking damages and injunctive relief. Thereafter, Alltech filed counterclaims against Myriad seeking damages, specific performance, injunctive relief, and declaratory relief.

A. MYRIAD'S CLAIMS

In its Second Amended Complaint, Myriad asserted the following six causes of action against Alltech: (1) breach of contract — APPRISE Agreement; (2) breach of contract — AIMS Agreement; (3) breach of contract — Subcontract for Labor; (4) trade secret misappropriation; (5) unfair competition by misappropriation; and (6) unjust enrichment.11 In sum, Myriad alleged that Alltech failed to pay sums due under the contracts and breached the specific sections of the APPRISE and AIMS Agreements that forbid misuse and improper disclosure of Myriad's proprietary information.

On August 3, 2009, Alltech filed four separate motions seeking summary judgment on Myriad's claims for: (1) breach of contract — APPRISE Agreement; (2) breach of contract — AIMS Agreement; (3) breach of contract — Subcontract for Labor; (4) trade secret misappropriation; and (5) unfair competition by misappropriation.12 Alltech also filed a motion seeking summary judgment on Myriad's claims for damages.13 The only claim that Alltech did not seek summary judgment on was Myriad's unjust enrichment claim.

On February 18, 2010, the Court granted in part Alltech's Motion for Summary Judgment on Myriad's claim for damages.14 In that Order, the Court ruled that Myriad could seek the following damages at trial: (1) loss of enterprise value (as compensation for trade secret misappropriation); (2) direct lost profits through September 30, 2010 (as compensation for trade secret misappropriation and breach of the AIMS and APPRISE Agreements).15 In the same Order, the Court granted summary judgment in favor of Alltech on Myriad's claims for: (1) direct lost profits from October 1, 2011 until September 30, 2012; and (2) verification services lost profits, i.e. indirect lost profits.16 The Court concluded, inter alia, that these damages were too speculative under Texas law.17 The Court, however, denied Alltech's remaining four motions for summary judgment.18

B. ALLTECH'S COUNTERCLAIMS

In its Answer, Alltech asserted the following six counterclaims against Myriad: (1) breach of contract — AIMS Agreement; (2) breach of contract — APPRISE Agreement; (3) conversion of the AIMS source code under the AIMS Agreement; (4) breach of contract — Subcontract for Labor; (5) conversion of photographs under the Subcontract for Labor; and (6) conversion of photographs based upon the breach of a bailment agreement.19 Alltech essentially asserted that Myriad breached the three contracts at issue by failing to give proper notice of termination, by failing to release inspection photographs stored on Myriad's server, and by failing to provide the AIMS source code.

On August 4, 2009, Myriad filed a motion seeking summary judgment on Alltech's counterclaims for: (1) breach of contract — Subcontract for Labor; (2) conversion of photographs under the Subcontract for Labor; and (3) conversion of the AIMS source code under the AIMS Agreement.20 Myriad also sought summary judgment on Alltech's request for the equitable remedy of specific performance under the Subcontract for Labor.21

On February 18, 2010, the Court granted in part and denied part Myriad's motion for partial summary judgment.22 In that Order, the Court granted summary judgment in favor Myriad on Alltech's counterclaims for: (1) breach of contract — Subcontract for Labor; (2) specific performance — Subcontract for Labor;23 (3) conversion of AIMS source code under the AIMS Agreement.24 Additionally, the Court held that Alltech did not have a viable counterclaim for conversion of photographs based upon the Subcontract for Labor; therefore, the Court granted summary judgment in Myriad's favor insofar as Alltech sought to assert such a counterclaim.25

On the morning of March 1, 2010, jury selection and trial commenced.26 Plaintiff rested on March 2, 2010.27 The next morning, on March 3, 2010, Alltech filed a motion requesting judgment as a matter of law on, inter alia, Myriad's request for the remedy of unjust enrichment.28 On March 5, 2010, the Court granted Alltech's request for judgment as a matter of law on Myriad's claim of unjust enrichment.29 On the same day, the parties closed, and after being duly charged, the jury retired to deliberate on a verdict.30 On March 8, 2010, the jury returned a verdict in response to the questions and instructions submitted to them.31

C. The Jury's Verdict

With regard to Myriad's claims and Alltech's defenses to such claims, the jury unanimously reached the following twenty-two factual conclusions from a preponderance of the evidence:

Based on the foregoing factual findings on liability, the jury awarded the following damages to Myriad:

The jury also found by clear and convincing evidence that Alltech misappropriated Myriad's trade secrets with malice. Based on this finding, the jury awarded Myriad $2,000,000.00 in exemplary damages.34

With regard to Alltech's counterclaims and Myriad's defenses to such counterclaims, the jury unanimously reached the following four factual conclusions from a preponderance of the evidence:

The jury did not award any damages to Alltech for Myriad's conversion of the photographs or any other counterclaim.36 The jury did, however, provide the following hand-written note on the interrogatory for conversion damages: "Note: Jury requests that Myriad return photographs to PB/Alltech immediately."37

D. Myriad's Post-trial Motion

Myriad's current motion requests the Court to enter judgment against Alltech consistent with the jury's verdict. In response, Alltech filed a "Motion To Enter Judgment To Conform The Verdict To The Evidence." As Alltech summarizes, it opposes Myriad's motion on the following four grounds:

Myriad's Proposed Judgment impermissibly:

Alltech also maintains that the jury verdict improperly "deprives Alltech of those damages (value of the converted property) necessarily due as a result of the jury's finding of Myriad's conversion."39 Based on these arguments, Alltech requests the Court to reform the jury verdict. The Court will address each argument prior to entering Judgment.

III. DISCUSSION

A. Myriad's Damages

The Court will first discuss the arguments that pertain to Myriad's damages.

1. Subcontract For Labor

First and foremost, Alltech does not oppose entering judgment on the $198,110.00 the jury awarded to Myriad for Alltech's breach of the Subcontract for Labor.40 An independent review confirms that the evidence at trial supports these damages. Absent any objection, the Court will enter a final judgment on this amount.

2. Limitation Of Remedies Provision In the APPRISE and AIMS Agreements

Alltech does, however, oppose the entry of judgment on Myriad's damages for breach of the AIMS and APPRISE Agreements. Specifically, Alltech contends that the Court should, as a matter of law, disregard the jury's finding of damages for breach of the APPRISE and AIMS Agreements pursuant to an identical limitation of remedies provision contained in both Agreements.41 Paragraph 14(b)—entitled "Term and Termination" — provides:

Relying on Paragraph 14(b),43 Alltech maintains that the Court should disregard the jury's award of $1,647,000.00 for its breach of the APPRISE Agreement and $37,400.00 for breach of the AIMS Agreement.

In response to Alltech's argument, Myriad contends that a subsequent provision contained in both the APPRISE and AIMS Agreements expressly allows Myriad to recover monetary damages for any breach other than a breach for nonpayment. Paragraph 15(b)—entitled "General Provisions" — provides:

Based on Paragraph 15(b), Myriad asks the Court to award the full amount of contractual damages found by the jury.

Alltech is correct that Paragraph 14(b) ostensibly provides that cancellation of the contract shall be the exclusive remedy available to either party in the event of default. Yet, to the contrary, Myriad is also correct that Paragraph 15(b) simultaneously provides that Myriad may nevertheless pursue any action or other remedy for any breach of the Agreement. Thus, the problem presented is that—if not harmonized—Paragraphs 14(b) and 15(b) are in direct conflict with each other regarding the remedies available to Myriad in the event of a default or breach. Simply put, in the Court's view, the problem presented is that the APPRISE and AIMS Agreements are both poorly-drafted contracts.

Seeking to resolve this problem, both parties have made unsuccessful attempts to reconcile Paragraphs 14(b) and 15(b). Neither Myriad nor Alltech has presented a reasonable interpretation and/or reconciliation of these two important provisions. The Court will address both parties' interpretations in turn. The Court will then provide its own harmonization of Paragraphs 14(b) and 15(b).

a. Alltech's Interpretation of Paragraphs 14(b) and 15(b)

Alltech does not attempt to reconcile the two provisions as much as it tries to demonstrate that 14(b) should control. According to Alltech, Paragraph 15(b) "is a general paragraph common to many agreements which simply preserves the parties' rights to equitable relief."45 Alltech further insists that by contrast, Paragraph 14(b) is a specific provision that dictates the sole remedy—cancellation—in the event of any breach other than a breach for "nonpayment."46 Under Alltech's interpretation, Paragraph 14(b) controls—and therefore, dictates cancellation as Myriad's sole remedy—because 14(b) is a more specific contractual provision than 15(b).47

i. Alltech's Interpretation Is Unreasonable

The plain language of Paragraph 15(b) defeats Alltech's interpretation.48 Although not mentioned by Alltech, the Court acknowledges that Paragraph 15(b) is entitled "General Provisions." However, the Texas Supreme Court has explained that although "courts may consider the title of a contract provision or section to interpret a contract, `the greater weight must be given to the operative contractual clauses of the agreement.'"49 Employing this rule of interpretation, greater weight must be placed on the text of Paragraph 15(b), which states in relevant part: "Myriad shall be entitled to, and Alltech hereby consents to the entry of, preliminary and permanent Injunctive relief to enforce the provisions hereof. Nothing herein shall preclude Myriad from pursuing any action or other remedy for any breach . . . all of which remedies shall be cumulative."50 This language reveals that Paragraph 15(b) is not a general provision that preserves the equitable rights of both parties as Alltech claims. Indeed, 15(b) does not preserve any right whatsoever for Alltech. Rather, Paragraph 15(b) specifically permits Myriad—and only Myriad — to pursue any remedy for breach of the Agreement.

Under Alltech's interpretation, Myriad's only remedy for a non-monetary breach would be to cancel the contract and/or seek equitable relief. Yet, this interpretation contradicts the plain language of Paragraph 15(b). Paragraph 15(b) expressly allows Myriad to pursue "any other action or remedy." A "remedy" is the "means of enforcing a right or preventing or redressing a wrong."51 Contrary to Alltech's argument, "remedy" includes "legal or equitable relief."52 The fact that the parties included the phrase "any other. . . remedy" means that Myriad is entitled to seek legal relief. As such, Alltech's interpretation runs counter to the well-established rule of interpretation that a single contract provision may not be interpreted so as to destroy and contradict other express provisions.53

Furthermore, if the parties wanted to expressly preclude Myriad from recovering monetary damages then the parties could have done so. After all, the parties were careful to include language that expressly forbid Alltech from recovering damages from Myriad:

Looking at this provision, it is clear that the parties knew how to limit the recovery of lost profit damages. Yet, the parties did not similarly express an intent to limit Myriad in the same manner. The Court must presume that the omission was purposeful.55 For all of the above reasons, Alltech's interpretation fails.56

b. Myriad's Interpretation Of Paragraphs 14(a) and 15(b)

Myriad asserts that Paragraphs 14(b) and 15(b) can be reconciled because they apply to "different situations."57 Specifically, Myriad maintains that "Paragraph 14(b) applies to monetary defaults, i.e., failures to pay sums under the contract, rather than [other non-monetary] breaches," whereas Paragraph 15(b) "provides remedies for [any other] breach of the agreements."58 As support, Myriad relies on the fact that Paragraph 14(b) references the remedies for nonpayment contained in Paragraph 6. Under Myriad's interpretation, "[i]n the event Alltech stopped paying sums due under the agreements, Myriad would be permitted to charge Alltech for the costs of collection and to cancel the contract [under Paragraphs 6 and 14(b)]. Where, as is the case here, Alltech breached the contracts by stealing Myriad's intellectual property, Myriad would be permitted to recover damages and obtain an injunction [under Paragraph 15(b)]."59

i. Myriad's Interpretation Is Unreasonable

Myriad's interpretation of the contract is not a reasonable interpretation for three primary reasons. First and foremost, the plain language of the contract does not limit Paragraph 14(b)'s application to monetary defaults. Rather, the plain language of 14(b) indicates that it applies "in the event of any default." Furthermore, the purpose of the Agreement is to grant Alltech a license to use Myriad's proprietary information system in exchange for the payment of certain fees by Alltech. To this end, only Alltech is required to make monetary payments to Myriad under the Agreement. In other words, the Agreement does not require Myriad to make any monetary payments to Alltech. It therefore follows that if Paragraph 14 only applies to monetary defaults—as Myriad urges—then Paragraph 14 would solely provide a remedy to Myriad for Alltech's monetary default(s) because only Alltech is required to make monetary payments under the Agreement.60 Yet, that is not the case. Paragraph 14(b) expressly applies to a default "by either party," and mandates "the sole remedy available to either party in the event of a default." Thus, it is contrary to the plain language and purpose of the contract to conclude that 14(b) only applies to "monetary defaults."

Second, along the same line of reasoning, a reading of Paragraph 14(b) in conjunction with Paragraph 11(a) also reveals that the contract does not limit Paragraph 14(b)'s application to monetary defaults.61 Paragraph 11(a)—entitled "Limitation of Liability"—provides:

Paragraph 11(a) dictates that if Myriad provides Alltech with defective information — which is not a monetary default— then Alltech is permitted to cancel the contract pursuant to Paragraph 14(b). In this regard, Paragraph 11(a) clearly demonstrates that Paragraph 14(b)'s application is not limited to defaults for nonpayment.

Third, contrary to Myriad's assertion, the fact that Paragraph 14(b)—entitled "Term and Termination" references the remedies for nonpayment defaults contained in Paragraph 6—entitled "Charges"—does not confirm that Paragraph 14(b) applies exclusively to nonpayment defaults.63 In fact, the opposite is true. Paragraph 14(b) actually applies to all contractual defaults other than "nonpayment" defaults.64 Indeed, Paragraph 14(b)'s language contradicts Myriad's interpretation: "Except for the remedies for nonpayment set forth in Section 6 ... cancellation shall be the sole remedy available to either party in the event of a default." Looking at this contractual language, Paragraph 14(b) explicitly distinguishes between the remedy available for a "nonpayment" default—(1) suspension of access to the APPRISE system and (2) reimbursement of costs and fees as provided in Paragraph 6—and the remedy available for all other defaults—cancellation. Thus, Paragraph 14(b) clearly applies to all contractual defaults other than "nonpayment" defaults.

For all of the above reasons, the parties' attempts to reconcile and harmonize the apparent conflict between Paragraph 14(b) and Paragraph 15(b) also fails. Accordingly, the Court must provide its own interpretation and harmonization of the parties' intent as expressed by the plain language used in the Agreements.

c. The Court's Harmonization and Reconciliation Of Paragraphs 14(b) and 15(b)

Relying upon well-established principles of Texas law, the Court is able to harmonize Paragraphs 14(b) and 15(b) by giving different meanings to the terms "default" and "breach." When construing a written contract, the Court's primary concern is to ascertain the true intentions of the parties as expressed in the instrument.65 The Court must consider the entire writing and attempt to harmonize and give effect to all the provisions of the contract by analyzing the provisions with reference to the whole agreement.66 When the provisions of a contract appear to conflict, the Court will attempt to harmonize the provisions and assume the parties intended every provision to have some effect.67

i. Texas Law Governing Breach Of Contract

"A breach of contract occurs when a party fails to perform an act that it has expressly or impliedly promised to perform."68 Under Texas law, a breach of contract is either a total breach or a partial breach.69 A total breach is usually defined as a "substantial" or "material" breach of the contract.70 A partial breach is defined as a "breach not so material as to discharge the other party's duty of performance or a breach that is so treated at the election of the other party."71 "[T]he distinction between partial and total breach is a distinction based on how the nonbreaching party treats the breach in terms of the remedies he or she seeks."72 If the breach is total then the non-breaching party may cease performance and sue for damages. If the breach is partial then the non-breaching party must continue performance under the contract and sue for damages.

"Some courts appear to confuse the distinction between total and partial breaches with the distinction between material and immaterial breaches."73 In contrast to total and partial breaches, "[t]he distinction between material and immaterial breaches is a distinction based upon the severity of the breach."74 The severity of the breach determines whether the non-breaching party may seek remedies for a total breach or remedies for a partial breach. When one party to a contract materially breaches the contract, the other party is—if it so chooses—discharged and freed of any obligation to perform and may at that point sue for damages.75 Of course, a non-breaching party may nevertheless treat a material breach as either a partial breach or a total breach. In other words, if a breach of contract is material, the injured party has the right either to cease performance and sue for total breach, or to continue performance and sue for partial breach.76 Conversely, when a breach is immaterial, the nonbreaching party is not excused from future performance and may sue only for the damages caused by the breach.77 Thus, the primary distinction between a material breach and an immaterial breach is that only a material breach excuses the non-breaching party from future performance.78

ii. Texas Law Governing Contractual Remedies

"In the event of a breach a party to contract can pursue any remedy which the law affords in addition to the remedy provided in the contract, unless the contract declares the remedy to be exclusive."79 Therefore, although Texas law permits a non-breaching party to cease performance under a contract and/or sue for damages as recourse for a contractual breach, parties to an agreement may nevertheless contractually specify the remedies available to redress a breach of contract, thereby modifying the legal and equitable remedies outlined above.80 The remedies provided in a contractual agreement may therefore be permissive or exclusive.81 An exclusive remedy precludes other remedies, and a permissive remedy does not preclude other remedies.82 However, the mere fact that the contract includes a particular remedy does not mean that such remedy is exclusive.83 Accordingly, the Court may not construe a remedy specified in the contract as exclusive unless the parties have indicated or declared clearly their intent that it be exclusive.84

iii. The Court's Harmonization

In this case, Paragraphs 14(b) and 15(b) can be harmonized if the contractual terms "default" and "breach" are given different meanings that denote the difference between a material breach and an immaterial breach. Alltech denies that the terms should be given different meanings. Myriad, however, concedes that "the Apprise and AIMS Agreements use the terms to refer to distinct scenarios in which distinct remedies are available."85 A rule of contractual interpretation dictates that "[w]hen parties use different language in different parts of a contract, [the court] may ordinarily assume that they intended different things."86 As such, the fact that the parties chose to use different terms in connection with the different remedies available indicates that the parties intended "default" and "breach" to have different meanings.87 Indeed, this Court has spent an inordinate amount of time attempting to harmonize Paragraphs 14(b) and 15(b), and these substantial efforts have produced only one conclusion—that the only way Paragraphs 14(b) and 15(b) can be reconciled is to give "default" and "breach" different meanings.

Paragraphs 14(b) and 15(b) can be harmonized if the term "default"—as used in Paragraph 14(b)—means "material breach" and the term "breach"—as used in Paragraph 15(b)—means "immaterial breach." Under this interpretation, if a "default" — i.e. a material breach—occurred, Paragraph 14(b) gave—similar to Texas law—Myriad the right either to: (1) treat the material breach as a total breach and cease performance under the contract, or (2) treat the material breach as a partial breach, continue performance under the contract, and sue for the damages caused by the breach as permitted under Paragraph 15(b). Myriad's ability to elect a remedy is indicated by Paragraph 14(b)'s use of the permissive term "may."88 Termination of a contract is permitted, but not required, when a contract provides that one party "may terminate" the contract.89 Therefore, Myriad was permitted to cancel the contract in the event of a material breach as provided in Texas common law, but Myriad was not required to cancel the contract.

The one major difference from Texas law is that if Myriad opted to treat the breach as a total breach and cancel the contract then Myriad could not thereafter sue for damages. Rather, once Myriad elected to cancel the contract, Paragraph 14(b) limits Myriad's remedy to cancellation.90 Under Texas law, this limitation of liability provision is permitted.91

Conversely, Paragraph 15(b) applies if Alltech committed an immaterial breach or if Myriad opted to treat Alltech's breach as immaterial. Under Paragraph 15(b), Myriad did not have the option to cancel the contract. Instead, Myriad was required to continue performing under the contract, but Myriad could "pursue any action or other remedy . . ." for the partial breach. The fact that Paragraph 15(b) only allows Myriad—and not Alltech—to seek monetary damages for a partial breach harmonizes with the portion of Paragraph 11(b) that forecloses Alltech from recovering "any direct, indirect, special, incidental, consequential, punitive or exemplary damages or losses, including, without limitation, lost profits, downtime costs, labor cost, overhead costs . . ."92

Finally, it is important to note that Paragraph 14(b) provides that "cancellation shall be the sole remedy available to either party in the event of a default."93 The Court acknowledges that "language such as `exclusive' or `sole' remedy are an indication of an exclusive remedy."94 And standing alone, the final sentence of Paragraph 14(b) does indicate that the parties intended cancellation to be the parties' exclusive remedy for any "default." The Court, however, is not permitted to view this one sentence in isolation. In determining the intent of the parties, the general rule is that every clause must be given effect with a view toward what is objectively stated rather than what is subjectively meant by the parties.95 Under this general rule, the Court must therefore examine and give effect to Paragraph 15(b)'s mandate that "Nothing herein shall preclude Myriad from pursuing any action or other remedy for any breach or threatened breach of this Agreement, all of which remedies shall be cumulative."96 By including this provision, the parties did not indicate or declare clearly their intent that cancellation shall always be the exclusive remedy.97 Consequently, the Court is not permitted to construe the remedy specified in Paragraph 14(b) as exclusive, except under the circumstances outlined above.98 Additionally, Paragraph 14(b)'s use of the permissive term "may" is further indication that Paragraph 14(b) does not provide an exclusive remedy except under the circumstances outlined above.

d. Myriad Cannot Recover Contractual Damages Under Either the APPRISE Agreement or the AIMS Agreement

Applying this interpretation to the evidence presented at trial, the Court concludes that Myriad may not recover any lost profits under either the APPRISE or AIMS Agreements because the evidence at trial revealed that Myriad opted to cancel both contracts. The jury found that Alltech materially breached both the APPRISE and AIMS Agreements. Yet, on March 28, 2008, Chris Roussel, CEO of Myriad, sent a letter to Hugh Inglis entitled "Notice Of Termination Of the APPRISE Agreement."99 In the letter, Mr. Roussel "advised that, pursuant to section 14(b), Myriad Development Inc. is terminating the APPRISE Agreement as a result of Alltech's use of Myriad's intellectual property to develop a competing software application in breach of Sections 9 (Ownership) and 13 (Confidentiality)."100 Myriad could have continued performing and sought damages for the breach. Instead, Myriad elected to cancel the contract. Consequently, Paragraph 14(b) of the APPRISE Agreement dictates that cancellation is Myriad's sole remedy.

Likewise, Mr. Roussel sent Alltech a letter on May 30, 2008, entitled "Cancellation of the Master Agreement AIMS Hosting, Development and Systems Interface ("Agreement") for Breach"101 The letter stated, "Please find this notice of cancellation of the Agreement as a result of the material breach by Alltech of its obligations under Sections 6(c) and 9(a) of the Agreement with regard to the intellectual property contained in Myriad's APPRISE System."102 Again, by sending this letter and ceasing performance, Myriad elected to cancel the contract. Paragraph 15(b) of the AIMS Agreement therefore dictates that cancellation is Myriad's sole remedy.

3. Unpaid Amounts Under APPRISE Agreement

Myriad is only entitled to recover $21,623 for unpaid amounts under the APPRISE Agreement. In answer to Interrogatory No. 1G, the jury awarded Myriad: (1) lost profits under the APPRISE Agreement in the amount of $1 million, and (2) "unpaid amounts under the APPRISE Agreement" in the amount of $647,000.00. Alltech correctly contends, inter alia, that "the dollar amount allocated by the jury for unpaid amounts is at a variance with . . . the evidence . . ."103 According to Alltech, Myriad is only entitled to recover $21,263.00 in unpaid obligations under the Apprise Agreement.104 In response, Myriad now maintains that "the jury found that Myriad had lost profits totaling $1,000,000 in 2008 and 2009 and that Myriad was entitled to unpaid amounts, that is, amounts Alltech would have paid Myriad if the contract had been performed in 2010, of $647,000."105

Myriad is incorrect that "unpaid amounts" can be defined as "amounts Alltech would have paid Myriad if the contract had been performed in 2010."106 Myriad's definition of "unpaid amounts" actually defines lost profits. Under Texas law, lost profits are expectation damages that compensate Myriad for the amount of profits Myriad would have earned in the future had the contract not been breached.107 Indeed, the jury was specifically instructed that "[o]ne measure of damages for breach of contract is that amount of damages which restores the injured party to the economic position it would have enjoyed if the contract had been performed. This measure may include reasonably certain lost profits . . . Lost profits may be in the form of direct damages, that is profits lost on the contract itself . . ."108 Likewise, Myriad's own expert, Mr. Gallagher, defined lost profits as "the profits. . . that Myriad would have made had they continued to sell the services to Alltech."109 Also relevant to Myriad's argument, the jury was further instructed to consider lost profits through September 30, 2010.110

In contrast, "unpaid amounts" compensate Myriad for the amounts that Alltech already owed to Myriad on the date of the breach in March 2008 for work Myriad performed prior to the breach. At trial, Mr. Gallagher provided the following testimony on direct examination:

Thus, Myriad's own expert defined "unpaid amounts" as those amounts Alltech owed Myriad "for work that Myriad had done prior to the break-up, and Alltech hasn't paid . . ."112

Applying the proper definition of "unpaid amounts," the evidence Myriad presented at trial demonstrates that Myriad was not entitled to recover $647,000 in unpaid amounts under the APPRISE Agreement. Specifically, Schedule 1 of Mr. Gallagher's expert report provides a "Summary of Economic Damages."113 Schedule 1 indicates that Myriad sought to recover three categories of damages: (1) past unpaid obligations; (2) lost enterprise value; and (3) direct lost profits.114 Schedule 1 states that Myriad suffered $202,311 in damages for "past unpaid obligations."115 Schedule 4 then provides a detailed accounting of the "Monies due to Myriad for Unpaid Obligations."116 Mr. Roussel confirmed during his re-direct examination that Schedule 4 gives a proper accounting of "unpaid obligations."117 According to Schedule 4, Alltech owed: (1) $198,110 in unpaid amounts under the Subcontract for Labor, and (2) $21,623 in unpaid amounts under the APPRISE Agreement.118 The fact that Schedule 4 provides the proper amount of unpaid amounts under each agreement is further represented by the fact that the jury found: (1) Alltech owed Myriad $198,110.00 in unpaid amounts under the Subcontract for Labor; and (2) Alltech did not owe Myriad any unpaid amounts under the AIMS Agreement.119 Both of these factual findings are exact restatements of the amounts listed in Schedule 4.

Notably, Myriad relies upon lines 10 and 15 of Schedule 2.1 as support for its arguments.120 However, line 10 of Schedule 2.1 provides an accounting for "Lost Revenues."121 Line 15 of Schedule 2.1 provides an accounting for "Total Discounted Lost Profits."122 Clearly, both of these sources provide calculations for lost profits, not unpaid amounts.

In sum, the evidence presented at trial directly contradicts the jury's award of $647,000.00 for unpaid amounts under the APPRISE Agreement. Viewing all of the evidence in the light most favorable to Myriad, including but not limited to Plaintiff's Exhibit P-1560, the evidence conclusively reveals that Myriad is only entitled to recover $21,263.00 for unpaid amounts under the APPRISE Agreement. Alltech does not dispute that Myriad is entitled to recover unpaid amounts under the APPRISE Agreement, and the Court agrees that Paragraph 14(b) does not preclude Myriad from recovering unpaid amounts under the APPRISE Agreement.

4. Sufficient Evidence Of Reasonable Royalty Damages

Contrary to Alltech's assertion, the jury's verdict on reasonable royalty damages must stand. As compensation for Alltech's misappropriation of Myriad's trade secrets, the jury awarded damages calculated as reasonable royalty. The reasonable royalty amount awarded represents the amount that Myriad and Alltech would have agreed to as a fair price for licensing Myriad's trade secrets. In closing arguments, Alltech's counsel described the $250,000 licensing fee as "the only number that has any reliability you've heard during trial as to what [Myriad's] system is worth."123 Alltech, however, now contends that Myriad may not recover $250,000.00 in reasonable royalty damages for two primary reasons. First, Alltech maintains that there is no evidence of such damage in the record. Second, Alltech asserts that the royalty damages were not determined as of the date of misappropriation as required.

"In an action for trade secret misappropriation, the plaintiff can recover actual damages based on the value of what has been lost by the plaintiff or the value of what has been gained by the defendant."124 Reasonable royalty represents the value of what a defendant has gained as a result of the misappropriation.125 The Fifth Circuit has explained that:

This fictitious royalty "is calculated based on what a willing buyer and seller would settle on as the value of the trade secret."127 "The cases allow a plaintiff considerable flexibility in establishing a reasonable royalty," but the calculation may not be based upon sheer speculation.128

Based on the foregoing authority, the jury was instructed that the proper measure of reasonable royalty is to calculate what Myriad and Alltech would have agreed to as a fair price for licensing Alltech to put the trade secrets to the use Alltech intended at the time the misappropriation took place.129 Pursuant to well-established Fifth Circuit precedent, the jury was further instructed to consider the following factors in calculating a reasonable royalty: (1) the resulting and foreseeable changes in the parties' competitive posture; (2) prices past purchasers or licensees may have paid; (3) the total value of the secret to Myriad, including Myriad's development cost and the importance of the secret to Myriad's business; (4) the nature and extent of the use Alltech intended for the secret; and (5) whatever other unique factors in the particular case might have been affected by the parties' agreement, such as the ready availability of alternative process.130

At trial, the parties presented ample evidence on each of the above factors. To begin, Mr. Roussel provided testimony that addressed the first factor—the resulting and foreseeable changes in the parties' competitive posture—and the fourth factor—the nature and extent of the use Alltech intended for the secret:

Alltech and Myriad initially started in a non-competitive posture, but after Alltech's development of a replacement system, the parties eventually ended in a de facto competitive posture.

Specifically, the evidence revealed that Myriad first became involved with Alltech in 2002.132 Alltech's insurance inspection division licensed Risk Manager from 2002-2005.133 In 2005, at the end of a five-year contract with FEMA, Alltech's FEMA division was looking to implement more advanced software for its next FEMA bid.134 On June 6, 2005, in preparation for its next FEMA bid, Alltech licensed a customized version of Myriad's Risk Manager system.135 On June 30, 2005, Alltech hired Myriad to develop the AIMS program to replace Alltech's prior software.136

Almost a year later, in June 2006, Alltech asked Myriad to be a part of Alltech's team to bid for a FEMA contract inspecting damage from Hurricane Katrina.137 Myriad agreed to become a member of Alltech's bidding team, but Myriad refused to sign Alltech's proposed "Teaming Agreement" because the agreement gave Alltech all rights, title, and interest to the Myriad's AIMS PB Ace software.138 Alltech bid for but did not win the FEMA contract.139 In September 2006, FEMA permitted Alltech to re-bid.140 In December 2006, Myriad and Alltech signed a Teaming Agreement, which unlike the first Teaming Agreement, gave Myriad complete ownership of the AIMS and Risk Manager software.141 In its re-bid, Alltech "touted Myriad's Risk Manager product."142 On March 30, 2007, Alltech informed Myriad that their team won the FEMA re-bid.143 The undisputed evidence showed that Alltech paid Myriad millions of dollars in fees from the FEMA contract.144 Myriad made 1.3 million in revenue from the inspection fees alone.145

Alltech's actions in copying Myriad's system and software placed Alltech in competition with Myriad for the FEMA inspection fees. Alltech admits that it developed an interface system and storage database for use with its FEMA contract.146 Once implemented, Alltech used its own system to perform all the work Myriad previously performed for FEMA.147 As a result, Alltech retained the inspection transaction fees and license fees that Alltech would have otherwise been required to pay to Myriad under the APPRISE Agreement.148

Alltech also elicited testimony during cross-examination regarding the second factor-prices past purchasers or licensees may have paid. Chris Roussel provided the following testimony on cross-examination:

This testimony was particularly relevant to the jury's necessary inquiry regarding the amount Myriad and Alltech would have agreed to as a fair licensing price for Alltech to put Myriad's trade secrets to the use Alltech intended at the time the misappropriation took place. As noted, Alltech used Pegasus/DSD in order to conduct property inspections for FEMA under the 2007 "PRIME Agreement."150 As of the trial in this case, the FEMA Prime Agreement was scheduled to run until September 30, 2010.151

In comparison, the "new Myriad" intended to use the Risk Manager and PB Ace systems in order to complete its obligations to Alltech under the APPRISE Agreement, AIMS Agreement, and any FEMA Agreements Alltech obtained after 2005.152 Thus, considering the exactitude in purpose and timing of the two licenses, the jury was entitled to conclude that the amount the "new Myriad" was willing to license Risk Manager from ISO was congruent to the amount Alltech may have been willing to license Risk Manager from Myriad.

Alltech complains that "the only testimony was from Roussel as a willing seller, who, without testimony concerning what a willing buyer would pay, might just as well have testified that he was ready, willing and able to license his system for $1 billion."153 Contrary to Alltech's argument, Mr. Roussel provided testimony about what a willing buyer and seller would agree to as a reasonable licensing price. Mr. Roussel explained that ISO proposed to purchase Myriad's insurance and mortgage businesses, and Myriad would continue to exist as a "government services" business. The $250,000 represented what the new Myriad—the buyer—was willing to pay to ISO and the amount ISO—the seller—was willing to accept from Myriad.

The Court is also not persuaded by Alltech's argument that "Myriad's attempt to attribute the value of a 2006 license to the value of the trade secrets which were allegedly misappropriated in 2008 runs afoul of `the principle requiring the valuation of trade secrets [to be] measured at the time of the alleged misappropriation.'"154 This Court agrees that "the proper measure is to calculate what the parties would have agreed to as a fair price for licensing the defendant to put the trade secret to the use the defendants intended at the time the misappropriation took place."155 However, this rule does not preclude the jury from considering evidence of a licensing fee agreed to in 2006. Indeed, numerous Fifth Circuit panels have instructed that the trier of fact should consider "prices past purchasers or licensees may have paid."156 Furthermore, as explained above, both licenses—the new Myriad's license from ISO and Alltech's hypothetical license from Myriad—were meant to service the same contract with FEMA in 2007. Thus, a licensing fee calculated in 2006 was an apt comparison. Equally important, Myriad presented evidence that the misappropriation began in 2007.157

Mr. Roussel also provided testimony that specifically addressed both facets of the third factor. Specifically, during direct examination, Mr. Roussel provided testimony regarding the total value of the secret to Myriad, including Myriad's development cost and the importance of the secret to Myriad's business:

Finally, Hugh Inglis testified that there was no readily available alternative to Myriad's Risk Manager System at the time Myriad denied Alltech access to Risk Manager, and Alltech spent at least $800,000 to build a replacement system.159 The jury was entitled to consider these additional facts and any other unique factors in this particular case that might have been affected by the parties' agreement.

The jury was instructed that any estimation of reasonable royalty damages cannot be based on sheer speculation, and that if too few facts exist then reasonable royalty damages cannot be awarded to Myriad.160 Viewing all of the evidence in the light most favorable to the verdict, the Court concludes that the jury did not base its award on sheer speculation. Rather, as demonstrated above, sufficient evidence was presented to support the jury's verdict of $250,000 in royalty damages.

5. No Evidence Of Punitive Damages

Turning to Alltech's final argument regarding Myriad's damages, the Court concludes that Myriad may not recover the $2 million in exemplary damages awarded by the jury. Alltech argues that the jury's punitive damages award fails for three reasons. First, relying on its argument that there is no evidence of reasonable royalty damages, Alltech contends that the punitive damages award cannot stand in the absence of actual damages.161 As outlined above, the Court has found sufficient evidence of reasonable royalty damages, and therefore, Alltech's first argument is overruled. The Court will address each of the two remaining arguments in turn.

a. No Evidence of Actual Malice

Second, Alltech correctly contends that there is not clear and convincing evidence of actual malice.162 In response, Myriad maintains that the great weight of the evidence supports the jury's finding that Alltech acted with actual malice.163 Actual malice is defined in the Texas Civil Practice and Remedies Code as "a specific intent by the defendant to cause substantial injury or harm to the claimant."164 Thus, to establish that Alltech acted with malice, Myriad had to prove that Alltech possessed a specific intent to cause substantial injury or harm to Myriad.

Myriad has cited to ample evidence in the record that Alltech engaged in wrongful conduct. Myriad has also provided evidence that it suffered financial harm from Alltech's conduct. Myriad, however, has failed to pinpoint any evidence presented at trial that Alltech specifically intended to harm Myriad. As the Texas Supreme Court has explained, a mere showing that the act is wrong or unlawful is not sufficient to support an award of exemplary damages.165

This Court has conducted an independent review of the trial record, and after an exhaustive review of every page in the record, this Court has also failed to identify any evidence that Alltech had the specific intent to cause substantial injury or harm to Myriad. Rather, the evidence merely indicates that Alltech intentionally and wrongfully misappropriated Myriad's trade secrets when creating its own replacement system. But as the Fifth Circuit has explained, "[m]erely because a tort is classified as intentional does not mean that any injury caused by the tortfeasor is willful. This case illustrates the distinction, since misappropriation of proprietary information and misuse of trade secrets are wrongful regardless of whether injury is substantially certain to occur."166 Consequently, Texas law does not permit Myriad to recover the punitive damages awarded.

b. No Implied Malice

Myriad is also unable to recover punitive damages under the "implied malice" standard. Myriad's alternative contention is that "in Texas, malice may be implied from a finding that a defendant knowingly misappropriated trade secrets without justification, and such a finding alone will support an award of exemplary damages."167 Myriad relies solely upon U.S. Sporting Prods., Inc. v. Johnny Stewart Game Calls, Inc., 865 S.W.2d 214 (Tex.App.Waco 1993, writ denied), for its proposition that implied malice applies to trade secret misappropriation claims for purposes of assessing exemplary damages.168 However, Myriad's reliance on this case is misplaced for three primary reasons.

First and foremost, U.S. Sporting Products decision was released on September 29, 1993, and a painstaking Erie analysis reveals that the implied malice standard articulated in U.S. Sporting Products was superseded by a 1995 amendment to section 41.002(a) of the Texas Civil Practice and Remedies Code.169 Historically, Texas common law defined actual malice (malice in fact) as "ill-will, spite, evil motive, or purposing the injuring of another."170 In contrast, Texas common law allowed the application of implied or legal malice when wrongful conduct was intentional and without just cause or excuse.171 In 1987, the Texas legislature codified the rules governing punitive damages.172 The legislature adopted the common law actual malice definition.173 The statute did not—and has not—incorporated the implied malice standard. Nevertheless, as originally enacted, Chapter 41 did not abrogate the common law implied malice standard either. Chapter 41, however, has since been amended to abrogate the implied malice standard.

Section 41.002(a) of the Texas Civil Practice and Remedies Code dictates the applicability of Chapter 41.174 As originally enacted, the applicability of section 41.002 was limited. When enacted, Chapter 41 only applied to "[a]n action in which a claimant seeks exemplary damages relating to a cause of action as defined by Section 33.001."175 Stated more clearly, with incorporation of section 33.001, "Chapter 41 applied to any action for negligence and any action for personal injury, property damage, or death based on strict liability, products liability, or breach of warranty, but there were sixteen exceptions."176 Prior to 1995, at least one court of appeals held that implied malice was sufficient in order to award punitive damages for any claim not listed in Section 33.001 because Chapter 41 only applied to the causes of action listed in Section 33.001,177 Notably, misappropriation was not and is not listed in Section 33.001. Since its enactment, the Texas Legislature has amended Chapter 41 six times — twice in 1989, twice in 1995, once in 1997, and once in 2003. The 1995 amendment is the only amendment that has dispositive bearing on the current issue.178

In 1995, the 74th Texas Legislature "passed significant and far-reaching tort reform legislation."179 As part of that tort reform, the Legislature amended section 41.002(a) to mandate that Chapter 41 "applies to any cause of action in which a claimant seeks exemplary damages relating to a cause of action."180 Thus, the 1995 amendment simply deleted the limiting language "as defined by Section 33.001."181 Consequently, Chapter 41 is no longer limited to actions for negligence, personal injury, property damage, and death based on strict liability, products liability, or breach of warranty. As amended, Chapter 41 "applies broadly" to any cause of action.182 Section 41.002(a) has retained this language since 1995.183 Therefore, Chapter 41 now "applies to any cause of action seeking punitive damages, whether based in law or equity ...," including trade secret misappropriation.184

Of equal importance, section 41.003 mandates that "exemplary damages may be awarded only if the claimant proves by clear and convincing evidence that the harm with respect to which the claimant seeks recovery of exemplary damages results from: (1) fraud; (2) malice; or (3) gross negligence."185 Section 41.003 does not permit exemplary damages for implied malice. The Texas Supreme Court recently observed that "[t]he clearest expression of a mandatory condition is to say `only if.'"186 Thus, when read in conjunction as required, section 41.002(a) and section 41.003(a) dictate that in any action in which a claimant seeks damages relating to a cause of action,—such as the present case—exemplary damages may not be awarded unless the claimant proves by clear and convincing evidence that the harm results from fraud, malice or gross negligence.187

Notably, the 1995 amendment only applied to causes of action accruing on or after September 1, 1995. As indicated, U.S. Sporting Products was decided in 1993, and the case was therefore governed by the 1989 codification of Chapter 41. Also, the cause of action at issue in U.S. Sporting Products—common law misappropriation—did not fall into any of the categories listed in section 33.001. In fact, the U.S. Sporting Products court made certain to specifically note that section 41.002(a) was inapplicable because it did not apply to intentional torts.188 Accordingly, the U.S. Sporting Products court was seemingly correct in its application of implied malice to the facts of that case. However, as explained above, Chapter 41 is no longer limited to the causes of action listed in section 33.001. Therefore, the holding in U.S. Sporting Goods does not govern this case. Rather, Myriad's trade secret misappropriation is governed by Chapter 41, and section 41.002(a) requires actual malice—not implied malice. As explained above, Myriad has failed to present sufficient evidence to satisfy the actual malice standard.

U.S. Sports Products is not applicable to the facts in this case for two additional reasons. U.S. Sporting Products involved a claim for unfair competition by misappropriation, also known as common law misappropriation.189 Therefore, contrary to Myriad's assertion, the U.S. Sporting Products court did not specifically hold that "malice may be implied from a finding that a defendant knowingly misappropriated trade secrets without justification."190 Rather, the court held that implied malice is the appropriate standard for assessing exemplary damages in a common law misappropriation case.191 Trade secret misappropriation and common law misappropriation are very similar causes of action, but they are nonetheless distinct causes of action. As the U.S. Sporting Products Court explained:

The jury in this case found from a preponderance of the evidence that Alltech's actions did not constitute common law misappropriation (unfair competition by misappropriation).193 Myriad has not provided, nor has a diligent search by the Court produced, any legal authority that expressly supports Myriad's proposition that implied malice is the proper standard for awarding exemplary damages in a trade secret misappropriation case. Without guidance from the Texas Supreme Court, the Fifth Circuit, or a Texas court of appeals, this Court is unwilling to expand the application of implied malice — to the extent the implied malice standard is still viable under Texas law.

Finally, in U.S. Sports Products, the jury found that the defendants "committed the misappropriation `knowingly, willfully, and deliberately.'"194 The court specifically explained that its holding was based on the jury's finding that the defendants committed the misappropriation "knowingly, willfully, and deliberately."195 Here, Myriad did not request a "knowing, willful or deliberate" finding. Nor did Myriad request a jury instruction on implied malice.196 In fact, Myriad relied upon an implied malice standard for the first time in its post-verdict reply. Accordingly, for all of the reasons stated above, Myriad's request for punitive damages based upon implied malice must be denied as a matter of law.

6. One Satisfaction Rule

The Court has already concluded that Myriad is not entitled to recover lost profits for breach of contract, but the Court will further show that the jury's award of royalty damages for trade secret misappropriation and lost profits for breach of the AIMS and APPRISE Agreements is a violation of the one satisfaction rule. Alltech correctly complains that "the breach of contract and misappropriation damages compensate Myriad for a single alleged wrong which caused a single alleged injury."197 Alltech maintains that Myriad "is made whole if it is compensated for either damages arising out of its breach of contract claim or damages arising out of its claim for misappropriation of trade secrets — but not both."198 Myriad counters that:

Applying Texas and Fifth Circuit precedent, the Court agrees with Alltech.

In Texas, a party is entitled to sue and seek damages on alternative theories of liability.200 The one satisfaction rule, however, "applies to prevent a plaintiff from obtaining more than one recovery for the same injury."201 This rule is based on the principle that, with only one injury, "there can, in justice, be but one satisfaction for that injury."202 The one satisfaction rule therefore "limits a plaintiff's recovery to one of several overlapping theories, notwithstanding that elements required under the separate theories of action vary somewhat, and notwithstanding that the amounts awarded vary from claim to claim."203 Accordingly, when the actual damages suffered arise out of only one injury, "the one satisfaction rule operates to reduce a plaintiff's adjudicated damages ... even when different acts are involved."204

In this case, Myriad's damages for trade secret misappropriation and breach of the APPRISE and AIMS Agreements compensate for a single, indivisible injury. First, Myriad relied upon the exact same facts to establish both causes of action. The elements of trade-secret misappropriation are: (1) the existence of a trade secret owned by the plaintiff; (2) breach of a confidential relationship or improper discovery of a trade secret; (3) use of the trade secret; and (4) injury.205 In its Complaint and at trial, Myriad relied upon Alltech's breach of the confidentiality provisions in the APPRISE and AIMS Agreements in order to establish both: (1) a breach of contract, and (2) the second element of its trade secret misappropriation claim—the existence and breach of a confidential relationship:

Myriad's two theories of recovery are clearly overlapping.

More importantly, Chris Roussel testified that the damage Myriad suffered as a result of the trade secret misappropriation is the loss of its ability to work with FEMA:

Of great importance to the current issue, it is vital to note that all of the evidence presented at trial indicated that prior to Alltech's breaches and misappropriation, FEMA was Myriad's only government market client. Likewise, Mr. Roussel admitted at trial that Alltech has only used the Pegasus system to service Alltech's contract with FEMA:

Therefore, when Mr. Roussel testified that Myriad lost the opportunity to serve "the government market," what Mr. Roussel was really saying is that Myriad lost the opportunity to serve FEMA. The jury already awarded Myriad lost profits for money Myriad would have earned if the FEMA-related contracts had been performed as promised. In short, the royalty damages and the lost profits compensate Plaintiff for the same injury—loss of the FEMA business.

As explained above, "[i]n an action for trade secret misappropriation, the plaintiff can recover actual damages based on the value of what has been lost by the plaintiff or the value of what has been gained by the defendant."210 "The value of what has been lost by the plaintiff is usually measured by lost profits."211 In contrast, the value of what the defendant has gained as a result of the misappropriation can be measured by a reasonable royalty.212 In this particular case, the value of what Myriad has lost is the same as the value of what Alltech has gained—fees on the FEMA contract. Notably, the Court is not holding that breach of contract damages and trade secret misappropriation impermissibly compensate for a single injury in every case. On the contrary, the Court can envision instances where damages for breach of a contract are distinct and separate from damages for trade secret misappropriation. For example, in this case, if Alltech had used its Pegasus system in order to obtain or usurp other non-FEMA government contracts then the damages associated with those non-FEMA contracts would conceivably not violate the one satisfaction rule. In that instance, Myriad would have lost the opportunity to serve "the government market"—apart from FEMA. However, that did not happen in this case. Accordingly, looking at the unique facts of this case, the Court holds that Myriad's lost profits damages for breach of the APPRISE and AIMS and Myriad's reasonable royalty damages for trade secret misappropriation compensate Myriad for a single and indivisible injury.

As a consequence of the above finding, Myriad would normally be required to choose between reasonable royalty damages and lost profit damages. However, in light of this Court's holding that Myriad may not recover lost profits under the APPRISE and AIMS Agreements, Myriad is left without a choice. As explained by Fifth Circuit, "Texas courts have a straightforward way of implementing the one-satisfaction rule with different damage awards for more than one cause of action based on the same harm. The courts simply treat these cases as failures by the plaintiff to elect a single theory of recovery from several alternative theories and use the jury findings affording the greater recovery."213 The Texas Supreme Court has held that "where the prevailing party fails to elect between alternative measures of damages, the court should utilize the findings affording the greater recovery and render judgment accordingly."214 In this case, $250,000.00 for reasonable royalty damages indisputably affords Myriad the greatest recovery. Accordingly, the Court will enter judgment on this amount.

B. Alltech's Damages

As a final issue, Alltech is not entitled to a judgment of $25 million in damages for Myriad's conversion of Alltech's photographs because Alltech did not present evidence of the photographs' fair market value. As outlined above, the jury found from a preponderance of the evidence that Myriad did convert Alltech's inspection photographs.215 The jury did not, however, award Alltech any damages as compensation for the conversion.216 For this reason, Alltech asks the Court to overturn the jury's finding of $0 in damages, and to instead, award $25,707,460.00 to Alltech as compensation for Myriad's conversion.217

The jury was instructed that:

Alltech does not dispute that this jury instruction is, in fact, a verbatim iteration of Texas law.219 In its Response, Alltech contends that it "presented uncontroverted evidence that the fair market value of the inspection photographs at the time of conversion by Myriad was $25,706,460.00."220 Myriad, however, correctly highlights that Alltech did not actually present evidence of fair market value.221 Rather, Alltech only presented evidence of the estimated amount it would cost Alltech to replace the photographs—i.e. the "replacement costs."222 In its Reply, Alltech concedes that it only presented evidence of replacement costs—not evidence of the photographs' fair market value. Alltech nevertheless contends that Texas precedent unequivocally permits the consideration of replacement costs for conversion damages.223

Reviewing the evidence presented at trial, Myriad is correct that Alltech only presented evidence of replacement cost. Hugh Inglis provided the following testimony on direct examination:

Mr. Inglis explained that the $20 per photo figure was based on quotes Alltech had received in the past to obtain replacements.225 Likewise, Alltech's damages expert, James Davis, testified that the $20 million figure presented at trial represented "the contingent cost for the replacement of photos for the inspections. It's based upon the total number of inspections being 1,285,323 at a rate of $20, and that's per inspection, not photograph."226

Looking at this testimony, the Court is of the opinion that reasonable and fair-minded persons in the exercise of impartial judgment could conclude that Alltech was not entitled to any conversion damages because Alltech did not satisfy its burden of presenting evidence of the fair market value of the photographs to either a seller or a buyer.227

It is also important to note that the precedent Alltech relies upon for the proposition that "caselaw . . . unequivocally permits . . . consideration [of replacement costs] for conversion damages"—Aronovich v. Foresight—is not applicable to the present issue at hand. In that case, Foresight hired Aronovich, a freight forwarding company, to move Foresight's equipment to Mexico.228 Thereafter, Foresight sued Aronovich when its equipment did not arrive in Mexico.229 Aronovich never filed an answer in the lawsuit and failed to appear at a default judgment hearing.230 At the default judgment hearing, Foresight submitted an affidavit from its president as evidence of its unliquidated damages.231 The affidavit stated that Foresight expended $21,950 to buy equipment to replace the original missing equipment.232 The trial court granted the default judgment against Aronovich, and awarded the requested $21,950 to Foresight.233 On appeal, Aronovich complained that the trial court erred in awarding damages because there was no evidence of the fair market value of the equipment.234 The appellate court held that absent controlling authority to the contrary, the affidavit testimony stating the replacement cost of the equipment was sufficient to establish the amount of unliquidated damages for purposes of the default judgment.235

Of import here, the Aronovich court specifically stated that it "found no authority, nor has Aronovich cited us to any authority, which does not allow Foresight to establish the fair market value of the equipment by introducing evidence of its replacement cost."236 Therefore, the Court's holding was explicitly based upon the absence of "controlling authority to the contrary."237 Here, both Myriad and the Court have identified one contrary authority that speaks to the precise issue at hand—sufficiency of the evidence at trial. Specifically, in 2008—eleven years after the Aronovich decision was issued—the Texas court of appeals in San Antonio held that evidence in a conversion case was factually insufficient where the jury award reflected replacement value of property, but the proper legal standard was the fair market value.238 Sitting as an Erie court, this Court is not permitted to ignore the Texas court of appeals's holding.239

Furthermore, Myriad is correct that "[t]he quotation from Aronovich is taken out of context as the replacement costs in Aronovich supported the fair market value determination because the plaintiff actually purchased the substitute goods from the open market. In contrast, the hypothetical replacement costs that Alltech presented have absolutely no relationship to what an actual buyer would have paid for the photographs."240 Moreover, Alltech does not actually need to or intend to replace every photograph. And unlike Aronovich, this case is not a default judgment case. Rather, this case went to trial and the jury was properly instructed that the applicable standard was "the price which the properly would bring when it is offered for sale by one who desires, but is not obliged to sell, and is bought by one who is under no necessity of buying it." The Court "presumes that the jury heard, understood, and followed the trial court's instructions."241 The Court will therefore not overturn the jury's verdict.

Finally, this Court holds that Alltech would be unjustly enriched if the Court were to award Alltech $25,706,460.00 for conversion of the photographs. The Texas Supreme Court has admonished that "[a] conversion should not unjustly enrich either the wrongdoer or the complaining party."242 The evidence at trial was that FEMA made twelve requests for photographs over a two-year period.243 Hugh Inglis and Mr. Roussel both testified that each time FEMA requested photographs, Myriad—the wrongdoer—promptly provided the photographs to FEMA.244 In fact, Mr. Inglis testified that Myriad "became more than cooperative with the government to give them the photos."245 Myriad recently provided evidence in support of its motion that it returned all of the converted photographs to Alltech on March 22, 2010, per the jury's written request.246 Finally, Mr. Inglis testified that the government owns the photographs.247 This Court recognizes that "conversion can take place even when the person in possession does not have title to property, so long as he has a right of possession."248 But the Court concludes that awarding Alltech $25 million in contravention of the jury's verdict would unjustly enrich Alltech for its lost right of possession. For all of the above reasons, the Court must deny Alltech's request to overturn the jury's verdict on conversion damages.

In final conclusion, the Court enters the following Final Judgment on the above conclusions of law pursuant to Rule 58 of the Federal Rules of Civil Procedure.

IT IS THEREFORE ORDERED that Myriad Development, Inc.'s Motion For Judgment (Dkt. No. 433) is hereby GRANTED IN PART AND DENIED IN PART.

IT IS FURTHER ORDERED that Alltech, Inc.'s Opposition To Plaintiffs Motion For Judgment And Defendant's Motion To Enter Judgment To Conform The Verdict To The Evidence (Dkt. No. 449) is hereby GRANTED IN PART AND DENIED IN PART.

IT IS FURTHER ORDERED that Myriad SHALL RECOVER $21,263.00 for unpaid amounts under the APPRISE Agreement.

IT IS FURTHER ORDERED that Myriad SHALL RECOVER prejudgment interest from Alltech on the amount of $21,263.00, at the rate of 5.0 percent.249 The prejudgment interest shall accrue beginning on April 2, 2008 and ending on the day preceding the date of this Judgment.

IT IS FURTHER ORDERED that Myriad SHALL RECOVER postjudgment interest from Alltech on the amount of $21,263.00, at a rate of 0.25 percent per annum from the date of this Judgment until paid in full.250

IT IS FURTHER ORDERED that Myriad SHALL NOT RECOVER lost profits for breach of the APPRISE Agreement.

IT IS FURTHER ORDERED that Myriad SHALL NOT RECOVER lost profits for breach of the AIMS Agreement.

IT IS FURTHER ORDERED that Myriad SHALL RECOVER $198,110.00 in unpaid amounts under the Subcontract for Labor.

IT IS FURTHER ORDERED that Myriad SHALL RECOVER prejudgment interest from Alltech on the amount of $198,110.00, at the rate of 6.0 percent.251 The prejudgment interest shall accrue beginning on April 2, 2008 and ending on the day preceding the date of this Judgment.

IT IS FURTHER ORDERED that Myriad SHALL RECOVER postjudgment interest from Alltech on the amount of $198, 110.00, at a rate of 0.23 percenter per annum from the date of this Judgment until paid in full.252

IT IS FURTHER ORDERED that Myriad SHALL RECOVER $250,000.00 in reasonable royalty for misappropriation of trade secrets.

IT IS FURTHER ORDERED that Myriad SHALL RECOVER prejudgment interest from Alltech on the amount of $250,000.00, at the rate of 5.0 percent. The prejudgment interest shall accrue beginning on April 2, 2008 and ending on the day preceding the date of this Judgment.253

IT IS FURTHER ORDERED that Myriad SHALL RECOVER postjudgment interest from Alltech on the amount of $250,00.00, at a rate of 0.23 percent per annum from the date of this Judgment until paid in full.254

IT IS FURTHER ORDERED that Myriad SHALL NOT RECOVER $2,000,000.00 in exemplary damages for misappropriation of trade secrets.

IT IS FURTHER ORDERED that Plaintiff Myriad Development, Inc. shall TAKE NOTHING against Alltech, Inc. on Myriad's claims for unfair competition by misappropriation and unjust enrichment.

IT IS FURTHER ORDERED that Alltech shall TAKE NOTHING against Myriad on Alltech's counterclaims. Specifically, Alltech SHALL NOT RECOVER $25,706,460.00 for conversion of the photographs.

IT IS FURTHER ORDERED that the Court shall separately consider and rule upon Myriad's Application for Attorneys' Fees and Costs and Bill of Costs pursuant to Federal Rule of Civil Procedure 54 and Local Rule CV-7(i)of this Court.

IT IS FINALLY ORDERED that this case is hereby CLOSED.