Examining the issue of trade secret misappropriation when parties have contractually limited their liability from breach, the US Court of Appeals for the Eleventh Circuit reversed the district court’s dismissal of the case, finding that a plaintiff could still recover damages under a theory of unjust enrichment. Pemco Aircraft Engineering Services Inc. v. The Boeing Company, Case No. 22-13776 (11th Cir. Apr. 4, 2025) (Pryor, Branch, Carnes, JJ.)
Pemco and Boeing, who are usually competitors, entered into an agreement to jointly bid for a government contract. The parties’ contract had three separately executed parts that functioned as one agreement. When the contractual relationship fell apart, Pemco sued Boeing for breach of contract and trade secret misappropriation. Based on Boeing’s contractual breach, a jury awarded Pemco more than $2 million of out-of-pocket damages. The district court dismissed the trade secret misappropriation claim, however, as time-barred under Alabama law. After Pemco appealed, the Eleventh Circuit reviewed and determined that the trade secret misappropriation claim arose under Missouri law, not Alabama law, and that under Missouri law, Pemco’s trade secret claims were not time-barred. On remand, Pemco brought amended trade secret misappropriation claims under Missouri law, which the district court dismissed based on the parties’ contract, which limited liability. Pemco appealed.
The issue on appeal was whether the parties’ contractual limitation of liability provision precluded any damages, even for misappropriation. The contractual provision lists the categories of damages that the parties disclaimed, namely, incidental, punitive, and exemplary, or consequential damages. The Eleventh Circuit explained that two sophisticated parties negotiating at arm’s length are permitted by Missouri public policy considerations to contractually limit future recovery for even intentional torts. By including punitive and exemplary damages, which are available only for tort claims and not contractual ones, the parties clearly intended to include torts related to the contract within its scope. Thus, even though trade secret misappropriation is a tort and not a contractual claim, the Court found that the claim was restricted by this provision and Pemco was therefore limited in its potential recovery.
The Eleventh Circuit next looked to whether the jury award had sufficiently compensated Pemco. The district court found that a Missouri trade secrets claim was barred in this context because of a full recovery under the related contract claim. The Court, however, distinguished the two causes of action. So long as the trade secrets claim provides a separate, non-duplicative remedy, it can stand on its own despite other recoveries under the contract. The Missouri Trade Secrets Act explicitly provides for an unjust enrichment remedy not available for contractual breach and the parties chose not to limit recovery for unjust enrichment. Thus, the Court concluded that this remedy was available as a trade secret claim that was not, and could not have been, available to Pemco under the contract.
Boeing advanced two arguments against the availability of an unjust enrichment remedy. Boing argued that any further award would be duplicative of the previous jury award and that unjust enrichment constitutes a consequential damage and thus is barred under the contract.
Relying on the jury instructions and basic damages principles, the Eleventh Circuit explained that the jury verdict compensated Pemco for reliance expenditures while an unjust enrichment award would function to disincentivize corporate espionage and would remove ill-gotten profits from Boeing that it acquired by theft. The Court reasoned that the jury award was compensatory while an unjust enrichment remedy would be restitution. Regarding Boeing’s second argument, the Court differentiated consequential damages from an unjust enrichment remedy, explaining that consequential damages are foreseeable and proximate damages experienced by the plaintiff, while unjust enrichment considers an unfair profit that a defendant has acquired. The Court further explained that unjust enrichment goes beyond making a plaintiff whole and “seeks to deprive the wrongdoer defendant of the gain it obtained from conduct that inflicted the loss on the plaintiff.”
The Eleventh Circuit remanded the case to allow Pemco to prove it is entitled to a further remedy under unjust enrichment.
