BROOKS COMPANY v. CAMBRIDGE SECURITY SEALS (2018)

SUMMARY ORDER

Plaintiff E.J. Brooks Company, d/b/a TydenBrooks (“TydenBrooks”) and defendant Cambridge Security Seals (“CSS”) cross-appeal following a jury trial at which TydenBrooks largely prevailed. We assume the parties’ familiarity with the facts and record of the prior proceedings, as set forth in our prior decision in E.J. Brooks Co. v. Cambridge Security Seals, 858 F.3d 744 (2d Cir. 2017), to which we refer only as necessary to explain our decision to vacate the judgment as to damages and remand the case to the District Court for further proceedings.

On appeal, the parties disputed whether TydenBrooks’s damages on its misappropriation of trade secrets, unfair competition, and unjust enrichment claims under New York law could be calculated based on CSS’s avoided costs. They also disputed whether, assuming that avoided costs are a permissible measure of damages, prejudgment interest under § 5001(a) of the New York Civil Practice Law and Rules is mandatory. Because these disputes implicated important, unsettled questions of New York law, we certified to the New York Court of Appeals the following questions relating to damages:

1.  Whether, under New York law, a plaintiff asserting claims of misappropriation of a trade secret, unfair competition, and unjust enrichment can recover damages that are measured by the costs the defendant avoided due to its unlawful activity.

2.  If the answer to the first question is “yes,” whether prejudgment interest under New York Civil Practice Law and Rules § 5001(a) is mandatory where a plaintiff recovers damages as measured by the defendant’s avoided costs.

E.J. Brooks, 858 F.3d at 752. Concluding that CSS’s remaining challenges not encompassed by the certified questions were without merit, we affirmed the District Court’s judgment as to liability. Id. at 746 & n.2.

In an opinion filed on May 3, 2018, the New York Court of Appeals answered the first certified question in the negative. The court held that “compensatory damages must return the plaintiff, as nearly as possible, to the position it would have been in had the wrongdoing not occurred—but do no more.” E.J. Brooks Co. v. Cambridge Sec. Seals, No. 26, ––– N.Y.S.3d ––––, ––––, ––– N.E.3d ––––, 2018 WL 2048724, slip op. at 2 (N.Y. May 3, 2018). Having answered the first certified question in the negative, the New York Court of Appeals did not reach the second. Id. at ––––, at 2 n.1.

The New York Court of Appeals’s answer to our first certified question requires that we vacate the District Court’s judgment as to damages and remand the case for further proceedings. Among other things, on remand the District Court may consider whether TydenBrooks has waived any claim for damages under any theory other than avoided costs.

For the foregoing reasons, the judgment of the District Court is VACATED as to damages, and the case is REMANDED for further proceedings consistent with the opinion of the New York Court of Appeals and this order. We thank the New York Court of Appeals for its assistance in resolving an unsettled question of New York law.