Virginia Supreme Court Muddies Damages Valuation of Lost Goodwill In Trade Secret Matter

The Virginia Supreme Court has complicated the valuation of lost goodwill damages in trade secrets matters in its June 7, 2012 decision in 21st Century Systems, Inc. v. Perot Systems Government Services, Inc., No. 110114. 

The matter arose from the departure of several employees from Perot Systems Government Services, Inc. (“Perot”), who subsequently joined a competitor company. Perot filed suit with multiple counts, including breach of fiduciary duty, breach of non-disclosure agreement, breach of non-competition and non-solicitation agreements, violation of Virginia’s business conspiracy act, and violation of Virginia’s Uniform Trade Secret Act. During trial, Perot provided evidence that several of the key employees had downloaded numerous Perot documents and accessed those files while working at the competitor. Defendants challenged the propriety of Perot’s damages expert, but the trial court denied the motion to strike, instead striking defendants’ counter expert for failure to adequately disclose his opinions prior to trial. The jury returned a verdict in favor of Perot on all claims, including $4 million in compensatory damages and $12 million in trebled damages, most of which was predicated upon lost goodwill damages. 

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