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SCOTUS requests government's take on limits to punitive damages

3 minute read

A general view of the Supreme Court building at the start of the court's new term in Washington, U.S. October 4, 2021. REUTERS/Jonathan Ernst

  • 7th Circuit found $280 million punitive damages award excessive
  • Appeals court said facts didn't justify amount
  • Epic says decision to slash award was unprecedented

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(Reuters) - The U.S. Supreme Court on Tuesday asked the U.S. Solicitor General to share the government's views of a case in which a federal appeals court slashed a $280 million award punishing India-based IT service provider Tata Consultancy Services for stealing medical software company Epic Systems' trade secrets.

The 7th U.S. Circuit Court of Appeals said last year that the amount of punitive damages, which was double what Epic was awarded as compensation for the trade-secret misuse, was excessive under the U.S. Constitution.

In its bid to have the high court review that ruling, Epic said the decision nixed a type of award that has been "permitted for hundreds of years," and said the ruling "cannot be squared with history."

The high court didn't give the government a deadline to weigh in on the case.

Tata, through its attorney Carter Phillips of Sidley Austin, declined to comment. Epic and its attorney Michael Brody of Jenner & Block didn't immediately respond to a request for comment.

Verona, Wisconsin-based Epic first sued Tata in 2014 in Wisconsin federal court. In an amended 2015 complaint, Epic accused Tata of taking thousands of confidential documents from its computer systems to help develop a competing software provider, Med Mantra.

A jury awarded Epic $240 million in compensation and $700 million in punitive damages, in one of the largest trade-secret verdicts on record. U.S. District Judge William Conley slashed the total award to $420 million in 2017, cutting Epic's compensatory damages to $140 million and punitive damages to $280 million, based on a Wisconsin law that caps punitive damages at double compensatory damages.

The 7th Circuit further reduced the punitive damages award based on the Due Process Clause of the 14th Amendment, instructing the district court to limit it to $140 million at most.

Writing for a unanimous three-judge panel, U.S. Circuit Judge Michael Kanne said the award was unconstitutionally high because Tata's conduct wasn't "reprehensible to an extreme degree," and that doubling the already-high compensation award was "unnecessary to reflect Epic's uncertain economic harm."

In its April petition for Supreme Court review, Epic argued that the 7th Circuit's ruling was unprecedented.

"No decision of this Court has rejected a punitive damage award of two times compensatory damages," Epic said. "No decision of this Court, or any other, has found that a jury's award in compliance with a state's statutory ratio violates due process."

Epic said the appeals court made an "unprecedented substitution of its judgment for the judgment of the jury and the Wisconsin legislature," and that its decision "conflicts with decisions of this Court and other courts" while "calling into question a long tradition of statutes permitting treble damages (or other multiples) in cases involving economic loss."

Tata said in June that the high court shouldn't review the 7th Circuit's ruling because its decision was based on the facts of the case, and didn't create a broad rule about punitive damages that conflicted with other courts.

The case is Epic Systems Corp v. Tata Consultancy Services Ltd, U.S. Supreme Court, No. 20-1426.

For Epic: Michael Brody of Jenner & Block

For Tata: Carter Phillips of Sidley Austin

Read more:

Epic Systems wins $940 mln U.S. jury verdict in Tata trade secret case

U.S. jury cuts damages in TCS-Epic trade secrets lawsuit

Blake Brittain reports on intellectual property law, including patents, trademarks, copyrights and trade secrets. Reach him at blake.brittain@thomsonreuters.com

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