The Federal Circuit on Monday sided with a Fifth Circuit ruling which found that shipbuilder United States Marine Inc.’s trade secrets suit against the U.S. Navy belongs in the U.S. Court of Federal Claims, finding it can’t say its sister circuit’s ruling was clearly wrong.
A three-judge panel for the appeals court declined to find the Fifth Circuit’s analysis in error. The Fifth Circuit held that USMI’s claim depends on an adjudication of the Navy’s contract obligation, which is presumptively limited under the Tucker Act to the CFC for claims of this magnitude.
The panel held that when the Tucker Act’s reach overlaps with that of another statutory regime, in this case the Federal Tort Claims Act, it certainly is possible that the other regime takes precedence.
However, the panel only sought to establish whether the Fifth Circuit’s ruling was clearly erroneous or “not even plausible,” the opinion said
“We cannot say that the Fifth Circuit’s determination, that in this case it is the FTCA that gives way, is clearly wrong,” the panel wrote.
USMI and then-partner VT Halter Marine Inc. had worked together in 1993 to develop and design a high-speed military combat craft known as the Mark V, according to court documents. VT Halter built and sold 24 Mark V units to the Navy under contracts preventing the Navy from using the designs for future manufacturing or disclosing them to other parties without permission, though USMI was not a party to that contract, court records show.
USMI and VT Halter alleged that the Navy misappropriated their trade secrets when it contracted with competitors to design and build the Mark V.1, the next generation craft that was intended to be as similar to the Mark V as possible, according to the opinion. USMI and VT Halter claimed that the Navy then disclosed many of the Mark V designs to their competitors.
A Louisiana federal court sided with USMI and awarded the company a $1.46 million tort judgment, but the Fifth Circuit nixed the award in a split decision and ordered the lower court transfer the case to the CFC.
In the Federal Circuit, USMI argued that the court transfer could set its case up to fail, as the company lacks standing to bring a contract dispute against the Navy, but the panel ruled that the Navy’s argument for the CFC’s jurisdiction legally acknowledges that USMI is entitled to breach of contract, injury and damages questions, having established that USMI has a right to recover upon satisfactory proof of those questions.
“It follows that this court’s action in now adopting the government’s argument and affirming the transfer order, which depends on the claims court’s having jurisdiction, establishes that right,” the panel wrote.
Even if the panel had sided with USMI, it noted that as a coordinate court, the Fifth Circuit isn’t bound by any ruling that the Federal Circuit might make independently on this question, and the case would “seemingly be left without a forum” unless the U.S. Supreme Court intervened in the action.
Representatives for the parties could not be immediately reached for comment Monday.
Judges Alan D. Lourie, S. Jay Plager and Richard G. Taranto sat on the panel for the Federal Circuit.
USMI is represented by Marcus B. Slater Jr., Leonard Egan and Jennifer J. Zeien of Slater and Zeien LLP.
The case is United States Marine Inc. v. United States, case number 2012-1678, in the U.S. Court of Appeals for the Federal Circuit.