LendingTools.com., Inc. v. The Bankers' Bank

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NOT DESIGNATED FOR PUBLICATION

No. 116,382

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

LENDINGTOOLS.COM., INC.,
Appellant/Cross-appellee,

v.

THE BANKERS' BANK, N.A.,
Appellee/Cross-appellant.


MEMORANDUM OPINION

Appeal from Sedgwick District Court; JAMES R. FLEETWOOD and J. PATRICK WALTERS, judges.
Opinion filed September 28, 2018. Affirmed in part, reversed in part, and remanded with directions.

Jay F. Fowler, Amy S. Lemley, Jim M. Armstrong, and Rebekah L. Pinkston, of Foulston Siefkin
LLP, of Wichita, and Daniel E. Lawrence, of Fleeson, Gooing, Coulson & Kitch, LLC, of Wichita, for
appellant/cross-appellee.

Lynn D. Preheim and Christina Joy Hansen, of Stinson Leonard Street LLP, of Wichita, for
appellee/cross-appellant.

Before GREEN, P.J., MCANANY and BRUNS, JJ.

PER CURIAM: LendingTools.com, Inc. (LendingTools) brought this action against
the Bankers' Bank of Kansas, N.A. (BBOK) and The Bankers' Bank, N.A. for
misappropriation of alleged trade secrets under the Kansas Uniform Trade Secrets Act,
K.S.A. 60-3320 et seq.; civil conspiracy; and tortious interference with contract. In
addition, LendingTools asserted a breach of contract claim against the BBOK. Prior to
trial, the district court granted summary judgment to the defendants on the tort claims. At
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the conclusion of a six-week trial, the jury returned a defense verdict on all of the
remaining claims.

After this appeal was filed, LendingTools and the BBOK resolved their
differences. As a result, the only remaining appellee is The Bankers' Bank. On appeal,
LendingTools alleges several errors by the district court. Likewise, The Bankers' Bank
has filed a cross-appeal in which it also alleges that the district court committed several
different errors. Based on our review of the voluminous record on appeal in light of
Kansas law, we affirm in part, reverse in part, and remand this case for further
proceedings.

FACTUAL AND PROCEDURAL HISTORY

The Parties

LendingTools is a Kansas corporation—headquartered in Wichita—that designs
and licenses software systems for use by correspondent banks. A correspondent bank
does not provide banking services to the general public. Instead, a correspondent bank is
a financial institution that provides services on behalf of another financial institution.
Correspondent banks facilitate electronic transfers, conduct business transactions, accept
deposits, and perform other services on behalf of another financial institution.

LendingTools began marketing its correspondent banking software—known as
Financial Portal Services or FP-S—to customers in 2001. Since that time, LendingTools
has improved and refined the software. According to LendingTools, FP-S continues to be
the company's primary product, and its sales comprise the majority of its revenues. Also,
LendingTools submits that its correspondent banking software is unique in the industry.
Moreover, LendingTools asserts that its products and services are proprietary and
confidential.
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The Bankers' Bank is a correspondent bank that provides services to numerous
community banks and to other correspondent banks across the United States. The
Bankers' Bank, owned by a group of community banks, made its headquarters in
Oklahoma City. The Bankers' Bank also develops and licenses software for
correspondent banking services. As to this part of its business, The Bankers' Bank and
LendingTools are competitors. At no time was The Bankers' Bank a customer of
LendingTools nor did the two companies have a contractual relationship.

The Dispute

On April 1, 2003, the BBOK—a correspondent bank headquartered in Wichita—
entered into a Software Co-Development and Commercialization Agreement with The
Bankers' Bank. Together, the two banks developed a software program called Secure
Bank Link. The system operated by The Bankers' Bank was known as iWeb and the
system operated by the BBOK was known as ABIL Web. Subsequently, on November
28, 2005, the BBOK and The Bankers' Bank entered into an agreement to license the use
of correspondent banking software based on iWeb, licensing the software to Compass
Bank in November 2005, to Nexity Bank in June 2006, and to Peoples State Bank of
Commerce in June 2009.

The BBOK also entered into a Master Services Agreement with LendingTools in
August 2006. The BBOK renewed their Master Services Agreement with LendingTools
in August 2009. The Master Services Agreement was not renewed when the contractual
relationship between the BBOK and LendingTools expired in August 2012. It is
undisputed that The Bankers' Bank was not a party to any of the contractual agreements
between the BBOK and LendingTools.

In late 2009 and early 2010, First National Bankers Bankshares (FNBB) and
United Bankers Bank (UBB) decided to obtain their correspondent banking software
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from The Bankers' Bank. At the time of their initial discussions with The Bankers' Bank,
both FNBB and UBB were using LendingTools correspondent banking software and
related services. The parties dispute the nature and extent of the involvement of the
BBOK—if any—in the transactions between The Bankers' Bank and the former
customers of LendingTools.

The Litigation

On May 20, 2011, LendingTools filed a petition in Sedgwick County against the
BBOK, alleging breach of contract. Specifically, LendingTools asserted that the BBOK
breached the Masters Services Agreement by violating a covenant not to compete and by
disclosing confidential information to The Bankers' Bank. On February 27, 2012,
LendingTools filed an amended petition adding The Bankers' Bank as a defendant.

On July 2, 2013, LendingTools filed a second amended petition against the BBOK
and The Bankers' Bank. In the second amended petition, LendingTools made claims
against the BBOK for breach of contract, misappropriation of trade secrets, tortious
interference with contract, civil conspiracy, fraud, and breach of implied covenant of
good faith and fair dealing. As for its claims against The Bankers' Bank, LendingTools
alleged misappropriation of trade secrets, tortious interference with contract, and civil
conspiracy.

On July 22, 2013, The Bankers' Bank moved to dismiss the common-law tort
claims—tortious interference with contract and civil conspiracy—arguing that these
claims are preempted by the Kansas Uniform Trade Secrets Act, K.S.A. 60-3320 et seq.
The BBOK also sought dismissal of these claims. On August 23, 2013, the district court
denied both motions as premature in the motion to dismiss stage because it did not
believe LendingTools had the opportunity to develop any potential claims it may have.
Subsequently, the parties requested that the district court assign the case to a specific
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judge. This motion was granted in an order filed on May 1, 2012, in which Judge J.
Patrick Walters was "permanently assigned" to the case.

On December 18, 2013, LendingTools moved for sanctions against The Bankers'
Bank alleging spoliation of evidence. In particular, the motion alleged that between June
2010 (when LendingTools sent The Bankers' Bank a demand letter) and February 2012
(when The Bankers' Bank received a copy of LendingTools' amended petition adding The
Bankers' Bank as a defendant) The Bankers' Bank deliberately destroyed emails and other
documents relevant to the lawsuit. In its demand letter, counsel for LendingTools had
requested that The Bankers' Bank

"not . . . dispose of or destroy any records that relate in any way to the subject matter [of
this case]. This includes any written or electronic communications (including any backup
or archive copies) between you and any third parties, including but not limited to
Bankers['] Bank of Kansas, N.A., First National Bankers' Bankshares, and United
Bankers' Bank, concerning LT products or services."

In response to the motion for sanctions, The Bankers' Bank argued that the motion
should be denied because its actions were reasonable, not culpable, and did not constitute
spoliation of evidence.

Meanwhile, on April 17, 2014, The Bankers' Bank moved for summary judgment
on the claims of misappropriation of trade secrets and tortious inference with contract.
The district court conducted an evidentiary hearing on the motion for sanctions over
several days in May 2014. After considering the evidence and arguments of counsel, the
district court granted LendingTools' motion for sanctions against The Bankers' Bank. As
a remedy, the district court found that it would give an adverse inference instruction to
the jury at trial. The district court also determined that LendingTools was entitled to an
award of attorney fees and costs in an amount to be agreed upon by the parties or
determined by the court at a later date.
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On May 23, 2014, The Bankers' Bank filed a motion to strike LendingTools'
rebuttal expert report. Moreover, on June 2, 2014, The Bankers' Bank moved for
summary judgment. In this motion, The Bankers' Bank sought judgment as a matter of
law on LendingTools' claims against it on the joint venture and civil conspiracy theories.
The Bankers' Bank also sought summary judgment on LendingTools' claim for damages
for "alleged misappropriation of LT's purported proprietary information or trade secrets,
and/or its supposed tortious interference with LT's contractual relations." These motions
were argued at a hearing held on July 24, 2014, and later ruled on at an August 12, 2014
hearing. Specifically, Judge Walters' granted summary judgment as to the non-Uniform
Trade Secrets Act claims and found that there were significant material facts in dispute as
to the Uniform Trade Secrets Act claim and denied summary judgment as to that claim.

On October 6, 2014, the district court entered an order requiring The Bankers'
Bank to pay $350,000 in attorney fees and expenses to LendingTools arising out of the
motion for sanctions relating to spoliation of evidence. On October 14, 2014, The
Bankers' Bank and the BBOK filed a joint motion to exclude certain opinion testimony
from Stephen C. Mott and Cheryl Yavornitzki, who were identified as expert witnesses
by LendingTools. They also moved to exclude Stephen Mott as an expert witness on
damages and to exclude any damage opinion testimony or evidence from him.

In moving to exclude "certain improper opinion testimony from plaintiffs' experts"
pursuant to K.S.A. 60-456(b), the defendants argued:

"LendingTools.com, Inc., the plaintiff, has designated two expert witnesses in
this action . . . Stephen Mott, who opines on both liability and damages issues; and
Cheryl Yavornitzki, a LendingTools employee and designated liability expert, who has
spent most of the last three years of her employment working on this case. Both Mott and
Yavornitzki give some opinions that are not proper expert opinions under K.S.A. 60-
456(b). The opinions at issue in this motion either (a) are not supported by an adequate
foundation in facts and/or (b) are not proper subjects for expert testimony at all."
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In particular, The Bankers' Bank and the BBOK asked the district court to "reject
LendingTools' tender of Stephen Mott as an expert witness on damages. Neither his
testimony, nor any evidence based on Mott's opinions, should be admitted in this case."

In early December 2014, the district court held an evidentiary hearing on the joint
motion to exclude certain opinion testimony under K.S.A. 2014 Supp. 60-456(b) and the
joint motion to Stephen C. Mott as a witness on damages and to exclude his damage
opinion testimony or evidence. The district court placed certain limitations on the opinion
testimony that LendingTools' experts could render at trial. The district court also
determined that Mott was not qualified to testify as an expert on damages and thus ruled
that he was precluded from testifying about his damages calculations, methodologies, or
theories. Even so, he allowed Mott to testify on other matters. Furthermore, the district
court granted LendingTools' request for additional time to designate a new damages
expert.

On January 23, 2015, the district court held a hearing at which it considered
several matters. Relevant to this appeal, the district court determined that the Kansas
Uniform Trade Secrets Act preempts LendingTools' claims for civil conspiracy and
tortious interference with contract. Accordingly, the district court granted summary
judgment as a matter of law to The Bankers' Bank and the BBOK on these claims.

On March 31, 2015, The Bankers' Bank moved for sanctions against
LendingTools, alleging that LendingTools intentionally hid evidence in discovery and
destroyed relevant evidence that was prejudicial to its case while the case was pending.
The BBOK joined The Bankers' Bank's motion for sanctions on April 7, 2015. The
district court denied this motion in a journal entry filed on May 23, 2016, after finding
that LendingTools produced the necessary and appropriate documents and that the
defendants sustained no injury or damages from any claimed delay in producing the
documents.
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On June 4, 2015, the district court entered a 34-page agreed pretrial order. The
parties agreed—and the district court ordered—that the "Pretrial Order supersedes all
pleadings and shall control the trial of this matter." In the pretrial order, LendingTools
listed its "Theories of Recovery" against the BBOK to be breach of contract and
misappropriation of trade secrets. In addition to seeking substantial monetary relief,
including punitive damages, LendingTools sought an injunction against both The
Bankers' Bank and the BBOK.

In the pretrial order, The Bankers' Bank denied that it misappropriated
LendingTools' alleged trade secrets. Specifically, The Bankers' Bank asserted that none
of the information that LendingTools claimed to have been misappropriated was a trade
secret under the Kansas Uniform Trade Secrets Act, that there had been no
misappropriation, and that LendingTools was not entitled to damages or other relief.
Furthermore, The Bankers' Bank asserted that LendingTools should pay its attorney fees
under K.S.A. 60-3332(i) for allegedly bringing the misappropriation of trade secrets
claim in bad faith.

On July 17, 2015, the district court held a hearing in which it ruled on several
pending motions. Significant to this appeal, the district court denied The Bankers' Bank's
motion for reconsideration of the sanctions imposed against it for spoliation of evidence
and the denial of its motion to strike LendingTools' rebuttal expert report. The district
court also denied a motion for additional sanctions filed by LendingTools against The
Bankers' Bank for allegedly failing to disclose documents.

LendingTools' filed, on August 18, 2015, a motion for amended findings on its
motion for additional sanctions against The Bankers' Bank for spoliation and discovery
abuses. A week later, LendingTools moved for change of judge under K.S.A. 20-311(d).
On September 2, 2015, the district court reassigned the case from Judge Walters to Judge
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Fleetwood. As such, the motion for a change of judge was rendered moot. From that
point, Judge Fleetwood ruled on numerous motions prior to trial.

On October 21, 2015, Judge Fleetwood ruled that he would not instruct the jury
that certain facts had been proven. Instead, he determined that the standard preliminary
instructions would be given to the jury. Additionally, Judge Fleetwood found that "since
this court is stepping into the breach so to speak, it wishes to preserve for itself the ability
to amend, modify or reconsider any rulings as seen fit based on the progress of the trial
and presentation of facts." He then held a case management conference on November 6,
2015, and a status conference on January 26, 2016.

The Jury Trial and Posttrial Motions

A six-week jury trial commenced on February 16, 2016. A review of the record
reveals that trial counsel for each of the parties zealously advocated on behalf of their
respective clients. The record also reveals that Judge Fleetwood diligently strived to
maintain an atmosphere of impartiality as he dealt with many difficult evidentiary
questions and legal issues presented at trial. Specific testimony or arguments of counsel
will be discussed as necessary in the analysis portion of this opinion.

Ultimately, on March 28, 2016, the jury returned a defense verdict on all counts.
On the verdict form, the jury was asked: "Do you find that [The Bankers' Bank]
misappropriated LendingTools' trade secret information?" The jury answered "No" to this
question. The jury was also asked: "Do you find that [The Bankers' Bank] and BBOK
entered into a joint venture or partnership for the purpose of selling software, and that this
joint venture or partnership misappropriated LendingTools' trade secret information?"
Again, the jury answered "No" to this question. The jury also found that the BBOK did
not breach its contract with LendingTools.

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On April 29, 2016, LendngTools filed a motion for a new trial. In the motion,
LendingTools argued that a new trial should be granted because of certain remarks and
conduct of counsel for the BBOK during his opening statement. The district court filed a
journal entry of judgment adopting the jury's verdict on May 16, 2016. Because the
journal entry of judgment had not yet been filed when it filed its motion for new trial,
LendingTools filed another motion for new trial on May 27, 2016.

The district court held oral argument on the motion on June 30, 2016. After taking
the matter under advisement, Judge Fleetwood filed an order on July 14, 2016, denying
LendingTools' motion for a new trial. In the order, the district court found "that the
curative instructions and . . . prior rulings allowed for a fair, if not perfect, trial for both
sides."

The Appeal

LendingTools filed its notice of appeal on August 1, 2016. Two days later, the
district court filed its journal entry requiring The Bankers' Bank to pay LendingTools
$109,222.25 in attorney fees and expenses as sanctions for the spoliation of evidence
found prior to trial. The Bankers' Bank agreed to the amount but preserved its objection
to the district court's ruling that its pretrial conduct justified sanctions.

On August 8, 2016, The Bankers' Bank filed a motion for findings of fact and
conclusions of law regarding the district court's decision to impose sanctions. On August
17, 2016, The Bankers' Bank filed a notice that it deposited $109,222.25 with the clerk of
the court. Later, on August 22, 2016, The Bankers' Bank and the BBOK filed notices of
cross-appeal. The district court filed additional findings in support of its ruling on
sanctions its November 17, 2016.

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While this appeal was pending, LendingTools and the BBOK resolved their
differences. As a result, this court dismissed the BBOK as a party to this appeal on
November 28, 2017, and struck its brief from the record. We also note that The Bankers'
Bank has filed notices of appeal on October 19, 2016, and December 8, 2016, from the
district court's denial of its motion alleging that LendingTools brought this action in bad
faith. Those appeals will be addressed in a separate opinion.

ANALYSIS

Kansas Uniform Trade Secrets Act

In Kansas, trade secrets are protected from misappropriation under the Kansas
Uniform Trade Secrets Act, K.S.A. 60-3320 et seq. The Act—which Kansas adopted in
1981—recognizes that certain information has actual or potential economic value that
may be lost if the information is not reasonably protected from disclosure. As in the
present case, the issue of whether there has been a misappropriation of a trade secret
often involves complex factual and legal questions.

In Progressive Products, Inc. v. Swartz, 292 Kan. 947, 954-55, 258 P.3d 969
(2011), the Kansas Supreme Court explained the protections provided under the Act as
follows:

"Trade secrets are not protected against independent invention. Instead, the law
of trade secrets recognizes that private parties invest extensive sums of money in certain
information that loses its value when published to the world at large. Based on this logic,
trade secret law creates a property right that is defined by the extent to which the owner
of the secret protects that interest from disclosure to others. In doing so, the law allows
the trade secret owner to reap the fruits of its labor and protects the owner's moral
entitlement to these fruits. Trade secret law encourages the development and exploitation
of lesser or different inventions than might be accorded protection under the patent laws,
but which still play an important part in technological and scientific advancement.
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Without trade secret protection, organized scientific and technological research could
become fragmented, and society as a whole could suffer. By restricting the acquisition,
use, and disclosure of another's valuable, proprietary information by improper means,
trade secret law minimizes the inevitable cost to the basic decency of society when one
steals from another. In doing so, trade secret law recognizes the importance of good faith
and honest, fair dealing in the commercial world. (Paraphrasing DVD Copy Control
Assn., Inc. v. Bunner, 31 Cal. 4th 864, 880-81, 4 Cal. Rptr. 3d 69, 75 P.3d 1 [2003], and
the sources cited and quoted therein.)"

K.S.A. 60-3320(4) defines a "trade secret" as:

"[I]nformation, including a formula, pattern, compilation, program, device, method,
technique, or process, that:

(i) derives independent economic value, actual or potential from not being
generally known to, and not being readily ascertainable by proper means by, other
persons who can obtain economic value from its disclosure or use, and

(ii) is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy."

Furthermore, K.S.A. 60-3320(2) defines "misappropriation" as:

"(i) acquisition of a trade secret of another by a person who knows or has reason
to know that the trade secret was acquired by improper means [which is defined in
K.S.A. 60-3320(1)]; or

"(ii) disclosure or use of a trade secret of another without express or implied
consent by a person who

(A) used improper means to acquire knowledge of the trade secret; or

(B) at the time of disclosure or use, knew or had reason to know that his
knowledge of the trade secret was
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(I) derived from or through a person who had utilized improper means to acquire
it;

(II) acquired under circumstances giving rise to a duty to maintain its secrecy or
limit its use; or

(III) derived from or through a person who owed a duty to the person seeking
relief to maintain its secrecy or limit its use; or

(C) before a material change of his position, knew or had reason to know that it
was a trade secret and that knowledge of it had been acquired by accident or mistake."
(Emphases added.)

Accordingly, if the information alleged to have been misappropriated is not a trade
secret, there can be no violation of the Kansas Uniform Trade Secrets Act. See Wolfe
Electric, Inc. v. Duckworth, 293 Kan. 375, 384-86, 266 P.3d 516 (2011) (quoting Electro-
Craft Corp. v. Controlled Motion, 332 N.W.2d 890, 897 [Minn. 1983], which stated:
"Without a proven trade secret there can be no action for misappropriation, even if
defendants' actions were wrongful."). The existence of a trade secret is an issue for the
trier of fact. This includes the question of whether the plaintiff made reasonable efforts
under the circumstances to protect the secrecy of the alleged trade secret. Progressive
Products, 292 Kan. at 957.

Motion for New Trial

On appeal, LendingTools contends that the district court should have granted it a
new trial based on the remarks and conduct of counsel for the BBOK during his opening
statement. In particular, LendingTools argues that it was inappropriate for the BBOK's
attorney to show certain archived documents to the jury while claiming that they were
"live" on the Internet. It appears that these documents had been posted on the Internet
websites of several of LendingTools' customers but had been removed from these
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websites following the deposition of the Eric Goering—the Chief Executive Officer of
LendingTools—on January 22, 2014.

The documents in question contained information that LendingTools claimed to be
trade secrets in this case. Before they were removed from the websites of LendingTools'
customers, the documents were archived at the direction of counsel for the BBOK and
placed on archive.org. Although LendingTools knew that the documents had been on the
Internet prior to trial, it evidently did not know that the BBOK's counsel archived them.
As such, LendingTools argues that it was prejudiced by the visual demonstration and
accompanying remarks of the BBOK's attorney during his opening statement.

In response, The Bankers' Bank points out that it was not involved in the
preservation of the documents by counsel for the BBOK. Moreover, The Bankers' Bank
contends that Judge Fleetwood handled the issue appropriately when it was brought to his
attention and that he did not abuse his judicial discretion in denying LendingTools'
motion for new trial. The Bankers' Bank also argues that the BBOK did not manufacture
or create evidence. Instead, The Bankers' Bank maintains that the BBOK preserved
existing evidence that had been placed on the Internet by third parties and could be
accessed by the public.

As the parties recognize, it falls within the discretion of the district court to grant
or deny a new trial under K.S.A. 2017 Supp. 60-259(a). Consequently, a ruling on a
motion for a new trial will not be disturbed on appeal except upon a showing of abuse of
discretion. Miller v. Johnson, 295 Kan. 636, 684-85, 289 P.3d 1098 (2012). A judicial
action constitutes an abuse of discretion if (1) no reasonable person would take the view
adopted by the trial court; (2) the ruling is based on an error of law; or (3) is based on an
error of fact. Wiles v. American Family Life Assurance Co., 302 Kan. 66, 74, 350 P.3d
1071 (2015).

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Because the motion for a new trial in this case arises out of the remarks and
conduct of counsel for the BBOK during his opening statement, we recognize that the
Kansas Supreme Court has held:

"Remarks of counsel are reversible error when, because of them, the parties have
not had a fair trial. [Citation omitted]. Of course, the trial court is in a better position than
an appellate court to determine whether the verdict resulted from asserted misconduct of
counsel or from passion or prejudice, and ordinarily its conclusion in the matter will not
be disturbed. [Citations omitted.]" Kleibrink v. Missouri-Kansas-Texas Railroad Co., 224
Kan. 437, 443, 581 P.2d 372 (1978).

See Sledd v. Reed, 246 Kan. 112, 117, 785 P.2d 694 (1990). It is with these legal
principles in mind that we review the record in this case.

Prior to counsels' opening statements, Judge Fleetwood instructed the jury as
follows:

"Opening statements and closing arguments are from this point on the only opportunity
when the attorneys can speak directly to you. In short, an opening statement is their
statement of their belief of what will be proved during the course of this trial. A closing
argument will be their statement to you as to what they believe they have proved or what
has not been proved during the course of the trial. It will be for you to determine whether
or not there is sufficient evidence to support their opening statement or closing argument.
But the statements they make during their opening statement [and] during their closing
argument itself [are] not evidence. It is simply their statement as to what they believe will
be proved or has been proved at the end of the case."

The attorneys then gave lengthy opening statements. Speaking first, counsel for
LendingTools initially brought up the issue of his client's documents being placed on the
Internet by several of the company's customers. Specifically, the attorney for
LendingTools told the jury, "Now, one of the issues that you're going to hear about is a
defense that LendingTools' software got posted on the Internet." He went on to explain
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"that some of LendingTools' customers had posted some documents on the Internet that
described a portion of the LendingTools software." He then showed the jury a portion of
the video recording of CEO Goering's deposition at which he was "confronted with that
evidence."

After showing the video, counsel for LendingTools stated that one of the manuals
that had been on the Internet did not exist until 2013, which was after the alleged
misappropriation of LendingTools' trade secrets had occurred. He indicated that another
document on the Internet was a manual created in 2004, which a customer posted around
that time to help the customer's users covert to LendingTools' software system.
According to LendingTools' attorney, his client was surprised to see that these documents
were on the Internet. Moreover, he stated that the postings were "blocked from
searchability by most Internet search engines." In addition, he suggested that the
documents did not "show up on any searches until after August 2012."

During his opening statement, the attorney for the BBOK also addressed
LendingTools' documents that had been placed on the Internet by LendingTools'
customers. Toward the beginning of his opening statement, he told the jury that one of
the reasons the LendingTools information was not a trade secret was because it was "on
the Internet and you're going to see that." He went on to say, "[I]t's huge and you'll see it
on the Internet." Specifically, he stated that "things that [LendingTools] never before this
case claimed were trade secrets were all over the Internet. Their manuals with all the
screenshots and everything were there. You'll see that online—online live with us." He
then moved on to discuss other issues.

Later in his opening statement, the BBOK's attorney returned to the subject of the
LendingTools documents that were found on the Internet during the course of discovery.
He repeated several times that the "online stuff" was "big" and told the jury "the things
[LendingTools] now claim were their trade secrets . . . were on the Internet. They were on
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the Internet for anybody to find." In discussing CEO Goering's deposition, counsel for the
BBOK stated that nobody from LendingTools had looked to see what information was on
the Internet. "Years into this litigation they were [on the Internet] and we showed them to
him."

Counsel then began showing the jury computer images of the LendingTools
manual that were placed on the Internet with "[n]o indication of confidentiality
whatsoever, voluntarily shared by [LendingTools] with their customers, and [the
customers] put it on the Internet for their customers to have access to." According to
counsel for the BBOK, the manual was then placed on the Internet "[n]ot behind a log-in,
not behind any sort of security . . . ,[but] out there for the whole world to see."

The attorney for the BBOK also indicated that the screen the attorney displayed
for the jury was "from a deposition we took of Mr. Goering where we showed him this
stuff." Specifically, counsel told the jury that at Goering's deposition, he ran a search on
an Internet search engine that pulled up manuals placed on the Internet by two customers
of LendingTools "to whom he had given these manuals without telling them they were
confidential and they put them on the Internet for the whole world to see."

Counsel for the BBOK told the jury that the LendingTools' documents had been
"archived" and suggested that "[o]nce it's out there, it's out there forever." He then told
the jury that "what we are looking at . . . right here, right now is live on the Internet." He
also told the jury that "the Internet grabbed this and archived it." Once again, he stated
that "we're seeing it live on the Internet. It can't be a trade secret, it's on the Internet.
These are the keys to their kingdom." Although the record does not reveal how long the
BBOK's attorney spent discussing—and showing to the jury—the LendingTools
documents that were purportedly "live" on the Internet, the remarks take up
approximately 10 pages of the trial transcript.

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Although the motion for a new trial that is the subject of this appeal is based
primarily on the remarks and conduct of the BBOK's attorney during opening statement,
we note that LendingTools did not assert a contemporaneous objection. Instead, the issue
was not raised to the district court until March 16, 2016, which was the 22nd day of the
trial—after LendingTools had rested. Unfortunately, this limited the options available to
the district court to address the issue.

LendingTools brought this issue to the attention of the district court by way of a
motion for inquiry. The district court heard the initial oral arguments on the motion for
inquiry outside the presence of the jury on March 23, 2016. During this hearing, counsel
for the BBOK stated that "[t]he decision was made [to preserve the LendingTools
documents on the Internet] when those items were found . . . and that was the instruction
given to staff." At the hearing, Judge Fleetwood indicated that he was "not questioning
the appropriateness of archiving" the documents and found the situation to be like an
attorney directing "that all paper memos and such would be . . . saved." Still, the district
court was concerned with the remarks made to the jury about the LendingTools
documents being "live" on the Internet.

At no time did LendingTools request a mistrial. Instead, counsel for LendingTools
argued that the issue should "be handled either in an instruction or by evidence to
establish the person or entity who placed it out there for the world to see." Specifically,
LendingTools' attorney suggested that "the appropriate way is for the Court to identify
that [the documents were] placed [on the Internet] at the direction of counsel for BBOK."
In response, the BBOK's attorney pointed out to Judge Fleetwood that his client had
supplied LendingTools with an exhibit list and copies of trial exhibits in June 2015 that
included the URL—Uniform Resource Locator or Internet address—of each of the
archived documents.

19

The next day, the district court once again considered LendingTools' argument
regarding opening statements. Outside the presence of the jury, counsel for LendingTools
requested that the district court give an instruction to the jury stating—among other
things—"that information shown to you during opening statement was placed on
Archive.org at the direction of counsel for BBOK. You must disregard the demonstration
of LendingTools' trade secret protected information shown in opening statement and all
statements of counsel touching on the demonstration." Counsel for the BBOK also
presented a proposed instruction to address the situation. As a compromise, counsel for
The Bankers' Bank suggested an alternative instruction in which the district court would
tell the jury that it should "disregard any argument or evidence that . . . these things were
on[line] after that certain date in January of 2014 and just leave it at that."

The district court determined that counsel for the BBOK did not have "an
improper motive" in directing his staff to archive the LendingTools documents found on
the Internet. Even so, the district court found that it was inappropriate for the BBOK's
attorney to tell the jury that the LendingTools documents being shown during his opening
statement were "live on the Internet" and "out there for the whole world to see." Before
the final ruling was made, counsel for LendingTools argued to the district court that "we
need to have a curative instruction" due to the prejudicial aspects of the opening
statement of counsel for the BBOK.

Ultimately, the district court decided to give the following instruction to the jury:

"You are instructed that immediately after Eric Goering's deposition on January
22, 2014, the First Carolina iCaps manual exhibit 930, Kansas Corporate Credit Union
Slide Show, exhibit 932 as well as the MIB manual 931 were permanently removed from
the internet."

This instruction was given as Instruction No. 2 and it immediately followed an
instruction that stated, in part:
20

"Statements and arguments of counsel, are not evidence, but may help you
understand the evidence and apply the law. However, you should disregard any
comments by counsel that are not supported by evidence."

After the jury returned a verdict for the defendants, LendingTools sought a new
trial. Relevant to this issue, LendingTools argued in its motion for a new trial that
"[p]rejudice was ignited by misconduct from counsel for the BBOK during opening
statement, fed by other improper statements of defense counsel, and eventually insured
by an inadequate instruction addressing the Internet posting which was given by the
Court after the case was concluded." In their responses to the motion for a new trial, The
Bankers' Bank and the BBOK argued that LendingTools had received a fair trial.

Following oral arguments on the motion for a new trial held on June 30, 2016, the
district court took the motion for a new trial under advisement. On July 14, 2016, Judge
Fleetwood entered a written order denying LendingTools' request for a new trial. In the
order, he stated that "[t]he court remains of the opinion that [the curative] instruction
[combined] with the standard PIK instruction directing the jury to 'disregard any
comments by counsel that are not supported by evidence' is sufficient" to alleviate the
potential prejudice arising from the inappropriate statements made by counsel for the
BBOK in his opening statement.

The first argument presented by LendingTools on appeal is that the "'live'
demonstration of [LendingTools'] confidential information [during opening statement]
was based upon misrepresentation and improper conduct by defendants and their counsel,
which corrupted the verdict." Specifically, LendingTools argues that the district court
should have granted its motion for a new trial because the jury verdict was given under
the influence of passion and prejudice and was contrary to the evidence. See K.S.A. 2017
Supp. 60-259(a)(1)(C) and (D). Additionally, LendingTools argues that it was not given a
21

reasonable opportunity to present evidence to rebut the statements of the attorney for the
BBOK during his opening statement. See K.S.A. 2017 Supp. 60-259(a)(1)(A).

We note that LendingTools also argues that it is entitled to a new trial because the
jury's verdict was procured by corruption of the party that obtained the verdict. K.S.A.
2017 Supp. 60-259(a)(1)(F). However, it is important to recognize that the remarks and
conduct during the opening statements that are in question were made or performed by
counsel for the BBOK—not by counsel of The Bankers' Bank. As noted above, the
BBOK resolved its differences with LendingTools while this appeal was pending and it is
no longer a party to this case. Because LendingTools has not shown that the jury verdict
was procured by corruption on the part of The Bankers' Bank, we conclude that K.S.A.
2017 Supp. 60-259(a)(1)(F) is not applicable to the issue currently presented in this
appeal.

Nevertheless, we find that a new trial is appropriate under the unique
circumstances presented in this case. We recognize that the law guarantees to every
litigant a fair—but not a perfect—trial. See Hurlbut v. Conoco, Inc., 253 Kan. 515, 539,
856 P.2d 1313 (1993) (citing Schneider v. Washington National Ins. Co., 204 Kan. 809,
815, 465 P.2d 932 [1970]). We also recognize that the remarks of counsel—whether
made in opening statements, during closing arguments, or at other times during the
course of a trial—are not evidence. Bullock v. BNSF Railway. Co., 306 Kan. 916, 933,
399 P.3d 148 (2017) (citing State v. Bennington, 293 Kan. 503, 530, 264 P.3d 440
[2011]). Even so, the remarks and conduct of counsel at trial can result in reversible error
when they lead to an unfair trial. Kleibrink, 224 Kan. at 443; see Sledd, 246 Kan. at 117.

Although this is a difficult issue and we appreciate the efforts made by the district
court to try to fashion a remedy to cure the problem, we are convinced based on our
review of the record that the remarks of the BBOK's attorney during his opening
statement fatally infected the trial. Unfortunately, Instruction No. 2 failed to overcome
22

the assertion that the alleged trade secrets were still "live" on the Internet at the start of
the trial. This is particularly true here because one of the primary defenses presented by
both the BBOK and The Bankers' Bank at trial was that LendingTools failed to take
reasonable steps to protect the secrecy of the documents that it claimed to be trade
secrets.

Instruction No. 2 tried to cure the problem created by counsel for the BBOK, but it
did not go far enough. The instruction indicated that the documents had been
"permanently removed from the internet." In reality, the documents had been preserved
on the archive.org website at the direction of the BBOK's attorney. Specifically,
Instruction No. 2 failed to inform the jury that the computer demonstration it witnessed
during opening statement was not actually "live on the Internet" in the way it was
suggested to it by counsel for the BBOK. Furthermore, the instruction did not tell the jury
that while LendingTools had attempted to have the documents removed from the Internet,
the BBOK's attorney had directed his staff to preserve them on the Internet.

We understand that it was the attorney for the BBOK—and not counsel for The
Bankers' Bank—who made the inappropriate statements during opening statements. Even
so, the damage was done and the entire trial was tainted as a result. Thus, we conclude
that the remarks and conduct of the BBOK's counsel denied LendingTools a fair trial.

Failure to Enter Default Judgment as a Sanction

LendingTools next contends that the district court erred in failing to impose
default judgment against The Bankers' Bank as a sanction for spoliation of evidence.
LendingTools filed at least two motions for sanctions against The Bankers' Bank, and this
issue involves the second motion for sanctions. LendingTools also argues that the district
court erred as a matter of law when it stated in an order entered on May 23, 2016, that
LendingTools' request for default judgment was "rendered moot upon submission of [the]
23

question [of liability] to the jury." LendingTools requests that we remand for this case to
the district court so it can "freshly decide" whether to impose default judgment against
The Bankers' Bank as a sanction.

The parties recognize that the decision to impose sanctions for alleged discovery
abuses rests within the sound discretion of the district court. See Schoenholz v. Hinzman,
295 Kan. 786, Syl. ¶ 11, 289 P.3d 1155 (2012). As a result, we review this issue to
determine whether the district court abused its discretion. See In re Marriage of
Bergmann & Sokol, 49 Kan. App. 2d 45, Syl. ¶ 2, 305 P.3d 664 (2013). In other words,
we must determine whether no reasonable judicial officer would rule as the district court
did under the circumstances, whether the district court ignored controlling facts or relied
on unproven representations, or whether the district court acted outside the applicable
legal framework. See State v. Ward, 292 Kan. 541, Syl. ¶ 3, 256 P.3d 801 (2011).

LendingTools originally requested sanctions against The Bankers' Bank for this
specific conduct in a memorandum of law in support of additional sanctions against The
Bankers' Bank filed on June 15, 2015. Judge Walters denied the motion on the record and
entered a minute order on July 22, 2015, without further explanation. After the case was
transferred to Judge Fleetwood, he again took up the matter at a hearing held on January
5, 2016.

At the hearing, Judge Fleetwood ruled on the record as follows:

"[I]t appears to me that the management of these storage sites and document sites was
poorly done. The existence of them and the apparent contact of them is something that
was discovered only through some laborious work done by attorneys and expert
witnesses in trying to do forensic efforts, and discovering the content of them. I will grant
a sanction as to attorney fees and costs related in that forensic effort." (Emphasis added.)

24

Later, the district court found, "I will allow the costs and fees associated with that.
There will be no other sanction related." (Emphases added.) In addition to making this
ruling prior to trial, the district court also stated that it would give an adverse inference
instruction based on PIK Civ. 4th 102.73 to the jury at trial.

Based on our review of the record, we find that the district court had already
decided before the start of the jury trial what remedies it desired to impose as a sanction
for the alleged spoliation of evidence. In particular, the district court had decided to
impose attorney fees as a sanction and to give an adverse inference instruction to the jury.
Although the amount of the attorney fees was left open until after the completion of the
jury trial, it is apparent that the district court did not desire to impose the harsh penalty of
a default judgment as a sanction. We also find the type of sanctions imposed by the
district court to be reasonable. Accordingly, we conclude that the district court did not
abuse its discretion in failing to enter default judgment as a sanction against The Bankers'
Bank.

Reasonable Efforts Instruction

LendingTools contends that the district court erred in giving the jury Instruction
No. 19, which stated:

"In order to prove that it made 'reasonable efforts' to maintain the secrecy of a
trade secret, a plaintiff claiming trade secret misappropriation must have identified the
trade secret and made it clear to the recipient involved that there was an obligation to
maintain the secrecy of the alleged trade secret."

Here, LendingTools properly preserved the issue for appeal by objecting in writing
to the instruction proposed by the defendants as well as objecting again at the instruction
conference. LendingTools also argued in its motion for a new trial that it was entitled to a
new trial because Instruction No. 19 was erroneously given. See K.S.A. 2017 Supp. 60-
25

251(d)(1)(A). Thus, we must determine if the instruction was legally appropriate—using
an unlimited standard of review—and whether there was sufficient evidence—viewed in
the light most favorable to the requesting party—to support the giving of the instruction.
Finally, if we determine that the district court erred, we must decide whether the error
was harmless—using the test and degree of certainty set forth in Ward, 292 Kan. 541.
Foster v. Klaumann, 296 Kan. 295, 301-02, 294 P.3d 223 (2013).

We find Instruction No. 19 to be both troublesome and confusing. As shown
above, one of the elements of a trade secret under the Kansas Uniform Trade Secrets Act
is that the information claimed to be protected "is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy." K.S.A. 60-3320(4)(ii). This
was adequately explained to the jury in Instruction No. 15. However, Instruction No. 19
attempts to define reasonable efforts to require that a person or entity claiming a trade
secret to specifically identify the secret information and to make it clear that there is an
obligation to maintain its secrecy. These may be reasonable steps to take to protect ones
trade secrets but they are not required under the plain and unambiguous language of the
Kansas Uniform Trade Secrets Act.

In Progressive Products, 292 Kan. at 957, the Kansas Supreme Court found that
K.S.A. 60-3320(4)(ii) "does not require a particular means of protecting a secret; rather, it
requires only that the secret 'is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.'" Accordingly, our Supreme Court upheld a finding
of misappropriation of a trade secret even when "[n]o written instructions were given to
employees that the formula and process were a secret," and "[e]vidence was conflicting
on whether employees were orally informed that they were not to reveal the components
to third parties." 292 Kan. at 960.

In determining whether reasonable efforts under the circumstances were
undertaken, a factor that may be considered to prove a trade secret is that the person or
26

entity asserting to protect the information has specifically identified that information to
be secret upon dissemination to employees, customers, or others. However, this factor is
not necessarily determinative. Thus, we do not find Instruction No. 19 to be legally
appropriate.

Of course, the first question that should be answered in a misappropriation case is
whether the information that the plaintiff desires to protect is in fact a trade secret as
defined by K.S.A. 60-3320(4). If not, there can be no misappropriation of a trade secret
under the Kansas Uniform Trade Secrets Act. See Wolfe Electric, 293 Kan. at 385. To
help the jury determine whether the information constitutes a trade secret under the Act,
simply instructing the jury of the definition set forth in K.S.A. 60-3320(4)—as was done
here in Instruction No. 15—should be sufficient in many cases. Unfortunately, PIK Civ.
4th does not include pattern trade secret instructions, which would have been helpful to
the district court in presiding over this case.

If a district court believes it is necessary to provide additional guidance to the jury
regarding whether the information is a trade secret, as defined in the Kansas Uniform
Trade Secrets Act, it may want to consider giving instructions similar to those set forth in
the Judicial Council of California Civil Jury Instructions (CACI) §§ 4403 and 4404
(2018). We note that California has also adopted the Uniform Trade Secrets Act,
including the definition of a trade secret that is substantially similar—although not
identical—to the definition found in K.S.A. 60-3320(4). See Cal. Civ. Code § 3426.1(d)
(2012).

As for the "Secrecy Requirement" under the uniform act, CACI § 4403 states:

"The secrecy required to prove that something is a trade secret does not have to be
absolute in the sense that no one else in the world possesses the information. It may be
disclosed to employees involved in [name of plaintiff]'s use of the trade secret as long as
27

they are instructed to keep the information secret. It may also be disclosed to
nonemployees if they are obligated to keep the information secret. However, it must not
have been generally known to the public or to people who could obtain value from
knowing it."

Likewise, regarding the "Reasonable Efforts to Protect Secrecy" requirement,
CACI § 4404 states:

"To establish that the [select short term to describe, e.g., information] [is/are] [a] trade
secret[s], [name of plaintiff] must prove that [he/she/it] made reasonable efforts under the
circumstances to keep it secret. 'Reasonable efforts' are the efforts that would be made by
a reasonable [person/business] in the same situation and having the same knowledge and
resources as [name of plaintiff], exercising due care to protect important information of
the same kind. [This requirement applies separately to each item that [name of plaintiff]
claims to be a trade secret.]

"In determining whether or not [name of plaintiff] made reasonable efforts to keep the
[e.g., information] secret, you should consider all of the facts and circumstances. Among
the factors you may consider are the following:

"[a. Whether documents or computer files containing the [e.g., information] were
marked with confidentiality warnings;]
"[b. Whether [name of plaintiff] instructed [his/her/its] employees to treat the
[e.g., information] as confidential;]
"[c. Whether [name of plaintiff] restricted access to the [e.g., information] to
persons who had a business reason to know the information;]
"[d. Whether [name of plaintiff] kept the [e.g., information] in a restricted or
secured area;]
"[e. Whether [name of plaintiff] required employees or others with access to the
[e.g., information] to sign confidentiality or nondisclosure agreements;]
"[f. Whether [name of plaintiff] took any action to protect the specific [e.g.,
information], or whether it relied on general measures taken to protect its business
information or assets;]
28

"[g. The extent to which any general measures taken by [name of plaintiff] would
prevent the unauthorized disclosure of the [e.g., information];]
"[h. Whether there were other reasonable measures available to [name of
plaintiff] that [he/she/it] did not take;]
"[i. Specify other factor(s).]

"The presence or absence of any one or more of these factors is not necessarily
determinative."

We find these instructions adopted by the Judicial Council of California to be an
example of legally appropriate instructions that clarify the types of factors a jury may
consider in determining whether a plaintiff has met its burden to prove the existence of a
trade secret as defined by the Kansas Uniform Trade Secrets Act. Unfortunately, we do
not find that Instruction No. 19 provides that clarification. Instead, we find Instruction
No. 19 to be legally inappropriate because—while it identifies a factor that may
constitute reasonable efforts to maintain secrecy—it suggests that this factor is required
to establish a trade secret under the Act. We also do not find Instruction No. 19 to be
harmless. In particular, we find that the language of the instruction is troubling when
viewed in light of the inappropriate remarks and conduct of counsel for the BBOK during
opening statements.

Limiting Trade Secret Claims

LendingTools also contends that the district judge who originally handled the
pretrial proceedings erred in sua sponte limiting the trade secret claims it could present to
the jury in this case. According to LendingTools, the district judge's ruling was the
equivalent of entering summary judgment without following the appropriate procedure.
We agree.

29

We note that The Bankers' Bank does not address this issue in its briefs. Instead, it
merely states that it adopts the arguments set forth in the BBOK's brief on this issue.
However, as indicated above, the brief filed by the BBOK was stricken from the appellate
record after it was dismissed as a party in this case.

Moreover, we find it is unclear from a review of the record on appeal how or why
the district court reached its decision to limit LendingTools' trade secrets claims. At the
very least, it appears that the appropriate procedure was not followed for the granting of
summary judgment. See K.S.A. 2017 Supp. 60-256 and Kansas Supreme Court Rule 141
(2018 Kan. S. Ct. R. 205). Instead, it appears that Judge Walters decided this issue at a
status conference on May 29, 2015. Prior to the conference, The Bankers' Bank had filed
a motion to continue the trial in which it argued that LendingTools' claims for
misappropriation had increased from 9 alleged trade secrets—7 individual items and 2
compilations—to more than 100 when its expert witness filed a supplemental report
alleging the misappropriation of 92 additional trade secrets.

Although the motion for continuance requested additional time to respond to these
new allegations, it does not appear that either The Bankers' Bank or the BBOK filed a
partial summary judgment motion relating to this issue. Specifically, The Bankers' Bank
argued that LendingTools had waited until approximately 90 days before trial to identify
these additional alleged trade secrets in a lawsuit that had been pending for 4 years. In
response, LendingTools argued that it had adequately disclosed its alleged trade secrets
during the course of discovery. It is, however, unclear from the record on appeal exactly
what LendingTools was claiming to be individual trade secrets as opposed to part of a
compilation trade secret claim.

At the status conference, LendingTools' expert testified, but she did not offer much
clarity to the situation. At first, the expert indicated that nine items listed in her original
report were "a compilation of what was taken" and were "all part of the same trade
30

secret." However, she then stated that the first seven items listed in her original report
were individual trade secret claims while the last two mentioned were compilation
claims. Finally, she testified that the 92 items listed in her supplemental report were part
of LendingTools' compilation claim.

Although Judge Walters denied the motion for continuance, he determined that
LendingTools would be limited to a compilation trade secret claim and would be
precluded from presenting any individual trade secret claims. In ruling from the bench,
Judge Walters stated:

"All right. Ready to write my ruling down? I guess you will probably just order
the transcript. I'm going to—I'm already going to, based on the argument and the—from
counsel that they have made a—I assume they have made an oral request to quash the
LendingTools' supplemental expert disclosures. That is denied. I will allow the expert
disclosures. I'm going to specifically rule that the expert disclosures are limited to a
compilation of the trade secret that was at issue in this case. I will preclude the plaintiff
from alleging that these are individual trade secrets in any way, shape, or form. Either by
hybrid or individually." (Emphasis added.)

Thus, it seems that Judge Walters ruled on this significant legal issue without
giving the parties any notice that he was considering granting partial summary judgment.
Likewise, it does not appear that he did issued findings of fact or conclusions of law.
Perhaps LendingTools trade secret claims should be limited. However, we find that the
procedure utilized by the district court to make this determination was inappropriate.
Thus, we reverse and remand this matter to the district court for further consideration
using an appropriate procedure.

Preemption of Tort Claims

LendingTools further contends that the district court erred in finding that the
Kansas Uniform Trade Secrets Act preempts its claims for tortious interference with
31

contract and civil conspiracy. In particular, LendingTools argues that it should have been
able to present its tort claims at least as an alternative theory of recovery. In response,
The Bankers' Bank argues that K.S.A. 60-3326 bars tort claims based upon the same facts
as a misappropriation of trade secret claim.

Evidently, this issue came before the district court on a motion for summary
judgment filed by the defendants. Regrettably, we can find no journal entry or other
written order in the record on appeal relating to this issue. Rather, it appears that Judge
Walters also ruled on this significant issue from the bench. In doing so, it appears that he
applied a blanket prohibition on the presentation of other tort claims to the jury regardless
of whether they were seeking damages for trade secrets or nontrade secrets.

In Wolfe Electric, 293 Kan. at 401-02, the Kansas Supreme Court found that
certain tort claims are preempted by the Kansas Uniform Trade Secrets Act. In Wolfe
Electric, our Supreme Court found that whether tort claims asserted in a trade secret case
are preempted by the Kansas Uniform Trade Secrets Act requires statutory interpretation
and is a question of law subject to de novo review. 293 Kan. at 400 (citing Zimmerman v.
Board of Wabaunsee County Comm'rs, 289 Kan. 926, Syl. ¶ 1, 218 P.3d 400 [2009]). The
fundamental rule of statutory interpretation is that legislative intent governs if it can be
determined. Ullery v. Othick, 304 Kan. 405, 409, 372 P.3d 1135 (2016).

To determine the Legislature's intent, "statutory language is an appellate court's
paramount consideration because the best and only safe rule for ascertaining the intention
of the makers of any written law is to abide by the language they have used." In re Estate
of Strader, 301 Kan. 50, Syl. ¶ 3, 339 P.3d 769 (2014). As such, we first consider the
plain language of the statute by giving common words their ordinary meanings. When the
plain language of the statute is unambiguous, we are not to "speculate as to the legislative
intent behind it and will not read into the statute something not readily found in it." Cady
v. Schroll, 298 Kan. 731, 738-39, 317 P.3d 90 (2014).
32

K.S.A. 60-3326 states:

"(a) Except as provided in subsection (b), this act displaces conflicting tort,
restitutionary and other law of this state providing civil remedies for misappropriation of
a trade secret.
"(b) This act does not affect:
(1) Contractual remedies, whether or not based upon misappropriation of
a trade secret;
(2) other civil remedies that are not based upon misappropriation of a
trade secret; or
(3) criminal remedies, whether or not based upon misappropriation of a
trade secret."

In addressing this statutory language in Wolf Electric, our Supreme Court noted:

"According to one commentator, '[t]he drafters [of Section 7 of the Uniform
Trade Secrets Act, identical to K.S.A. 60-3326] explicitly abrogate other civil remedies
based on misappropriation of a defined trade secret and, among the courts, there seems to
be little dispute that the UTSA did, in fact, intend to abrogate other civil remedies when a
claim involves misappropriation of a trade secret.' Comment, I Have a Secret?: Applying
the Uniform Trade Secrets Act to Confidential Information That Does Not Rise to the
Level of Trade Secret Status, 12 Marq. Intell. Prop. L. Rev. 359, 367 (Summer 2008);
see, e.g., BlueEarth Biofuels v. Hawaiian Elec. Co., 123 Hawaii 314, 318, 235 P.3d 310
(2010) (stating that '[c]ourts that have considered the UTSA's preemption provision have
"uniformly interpreted [it] to preempt previously existing misappropriation of trade secret
actions, whether statutory or common law" [Citations omitted.]')." 293 Kan. at 401.

Accordingly, our Supreme Court concluded in Wolf Electric that the Kansas
Uniform Trade Secrets Act "limits recovery for trade secrets only" and that "tort causes
of action cannot include a claim to recover for trade secrets [because the Act] is the
exclusive remedy." 293 Kan. at 402. In other words, to the extent that a plaintiff is
seeking to recover for the misappropriation of a trade secret, the Kansas Uniform Trade
Secrets Act preempts all other tort remedies. However, our Supreme Court did not
33

address the issue of whether the Act also preempts "other tort causes of action for
recovery of damages for nontrade secrets." 293 Kan. at 403.

On its face, K.S.A. 60-3326(a) only displaces or preempts law that conflicts with
the Kansas Uniform Trade Secrets Act. The statute goes on to expressly provide that it
"does not affect . . . other civil remedies that are not based on misappropriation of a trade
secret." K.S.A. 60-3326(b)(2). In order for the Kansas Uniform Trade Secrets Act to
apply, it must first be determined whether the information a plaintiff seeks to protect is a
trade secret as the term is defined by K.S.A. 60-3320(4). If the Kansas Uniform Trade
Secrets Act does not apply, then other civil remedies cannot be in conflict with the Act.
Thus, based on the plain language used in these statutes, we conclude that while the
Kansas Uniform Trade Secrets Act provides the exclusive remedy for civil claims based
on the misappropriation of a statutorily defined trade secret, it does not preempt tort
claims based on the misappropriation of information that falls outside of the statutory
definition of a trade secret.

We recognize there is a split of authority regarding the scope of preemption or
displacement in the jurisdictions that have adopted the Uniform Trade Secrets Act. This
"fundamental discord among courts" occurs in deciding whether the Act only preempts
tort actions relating to information "qualifying as a trade secret under the [statutory]
definition" or whether the Act also preempts tort actions of information alleged to be
secret "regardless of whether it rises to the level of a trade secret [under the Act]."
Comment, An Immodest Proposal: How the Kansas Supreme Court Can Unify the
Uniform Trade Secret Act's Preemption of Common Law Claims, 60 Kan. L. Rev. 1147,
1156-57 (2012). This split of authority appears to result from the rules of statutory
interpretation applied by the particular court deciding the issue.

On the one hand, courts applying a literal or plain language reading of the
preemption provision have concluded that it does not apply to information that does not
34

rise to the level of a statutorily defined trade secret. Consequently, if the information does
not meet the statutory definition of a trade secret, then a plaintiff is free to pursue other
civil remedies. See Burbank Grease Services, LLC v. Sokolowski, 294 Wis. 2d 274, 281,
717 N.W.2d 781 (2006) (plain language of Uniform Trade Secrets Act does not preempt
civil remedies based on misappropriation of confidential information that falls outside of
statutory definition of a trade secret); accord Nucor Corp. v. Bell, 482 F. Supp. 2d 714,
726-27 (D. S.C. 2007); Stone Castle Financial, Inc. v. Friedman, Billings, Ramsey & Co.,
Inc, 191 F. Supp. 2d 652, 658-59 (E.D. Va. 2002). We believe that this interpretation of
the Act is consistent with the Kansas Supreme Court's direction that we should not
speculate as to the legislative intent behind a statute or attempt to read something into the
statute that is not readily apparent on its face. Cady, 298 Kan. at 738-39.

On the other hand, several courts have concluded that the Uniform Trade Secrets
Act should be interpreted broadly. As a result, these courts have held that the Act
preempts most—if not all—tort claims seeking to protect allegedly secret information
regardless of whether it meets the statutory definition of a trade secret. See, e.g., Opteum
Financial Services, LLC v. Spain, 406 F. Supp. 2d 1378, 1380-81 (N.D. Ga. 2005)
(plaintiff was not entitled to pursue tort claims regarding information it alleged was a
trade secret); Thomas & Betts Corp. v. Panduit Corp., 108 F. Supp. 2d 968, 971 (N.D. Ill.
2000); AirDefense, Inc. v. AirTight Networks, Inc., No.C 05-04615JF, 2006 WL 2092053,
at *2 (N.D. Cal. 2006) (unpublished opinion) (claims based on the same factual
allegations as claims for misappropriation of trade secrets are preempted); Mortgage
Specialists, Inc. v. Davey, 153 N.H. 764, 777, 904 A.2d 652 (2006). Although there may
be valid public policy reasons to interpret the preemption provision so broadly, it is not
the role of this court to add to the clear statutory language adopted by the Kansas
Legislature.

In this case, LendingTools has essentially pleaded alternative theories of relief. Its
primary theory of relief is that The Bankers' Bank misappropriated information protected
35

as trade secrets under the Kansas Uniform Trade Secrets Act. In the alternative,
LendingTools seeks to alternatively recover damages under the theories of tortious
interference with contract and civil conspiracy. Even if the jury determines that the
information is not a trade secret under the Act, it is possible that it may still be able to
recover on its tort claims if it can come forward with sufficient evidence to prove the
elements of its tort claims.

Hence, we find that even if the district court had followed the proper procedure to
grant partial summary judgment in favor of The Bankers' Bank on the ground that its tort
claims were preempted under K.S.A. 60-3326, such a ruling would have been premature.
Specifically, we find that it was premature for the district court to make a decision
regarding preemption before the jury determined whether the information that
LendingTools sought to protect met the statutorily definition of trade secret set forth in
K.S.A. 60-3320(4). See Stone Castle Financial, 191 F. Supp. 2d at 659 ("unless it can be
clearly discerned that the information in question constitutes a trade secret, the [c]ourt
cannot dismiss alternative theories of relief as preempted by the [Uniform Trade Secrets
Act]"); accord AMID, Inc. v. Medic Alert Foundation United States, Inc., 241 F. Supp. 3d
788, 826-27 (S.D. Tex. 2017). Because it cannot be established from the record on appeal
whether the information at issue in this case is a trade secret as defined by K.S.A. 60-
3320(4), we cannot determine at this point whether LendingTools' alternative claims are
preempted.

Finally, we note that The Bankers' Bank argues in its brief that even if this court
concludes that LendingTools' claims for tortious interference with contract and civil
conspiracy are not preempted, the "inability to bring the tort claims was at most harmless
error, and does not provide a basis for reversal." Specifically, The Bankers' Bank argues
that "summary judgment should have been entered for Defendants on the merits" because
LendingTools "could not prove the necessary elements to support those claims."

36

Once again, we are at a disadvantage since it appears that the district court never
reached this issue because it found that LendingTools' tort claims were preempted by the
Kansas Uniform Trade Secrets Act. Although we find summary judgment on the
preemption issue to be premature, we conclude that it is appropriate for the district court
to address the merits of the summary judgment motion filed by The Bankers' Bank on
remand. Specifically, the district court should determine whether LendingTools has come
forward with sufficient evidence to establish the necessary elements to support a claim
for tortious interference with contract as set forth in Burcham v. Unison Bancorp, Inc.,
276 Kan. 393, 423, 77 P.3d 130 (2003). Likewise, the district court should determine
whether LendingTools has come forward with sufficient evidence to establish the
necessary elements to support a claim for civil conspiracy as set forth in State ex rel.
Mays v. Ridenhour, 248 Kan. 919, Syl. ¶ 2, 811 P.2d 1220 (1991); see Central National
Bank v. Estate of Weber, No. 116,109, 2017 WL 6547041, at *2 (Kan. App. 2017)
(unpublished opinion).

On remand, unless the district court determines that summary judgment can be
entered on these claims for a reason other than preemption, the first question the jury
should be asked on the verdict form is whether any of the information LendingTools
seeks to protect is a "trade secret" as that term is defined in the Kansas Uniform Trade
Secrets Act. If the jury determines that any of the information is a trade secret,
LendingTools would be barred under K.S.A. 60-3326 from recovery on its tort claims as
to that information and the jury should be instructed to move on to the question of
whether The Bankers' Bank misappropriated any trade secrets. However, if the jury
determines that some or all of the information are not trade secrets, it should be instructed
to consider LendingTools' tort claims as to that information.




37

Designation of New Damages Expert

In its cross-appeal, The Bankers' Bank contends that the district court abused its
discretion by allowing LendingTools to designate a new damages expert more than a year
after its expert disclosure deadline and well after the close of discovery. Specifically, The
Bankers' Bank argues that the district court's decision "effectively punished" it for filing a
successful motion to strike Lending Tools' original damages expert. The Bankers' Bank
also argues that the district court's decision gave LendingTools the opportunity to find a
"better" expert and gave it a "Daubert do-over" resulting in a disservice to the orderly
administration of justice. In response, LendingTools contends that the district court did
not abuse its discretion. Likewise, LendingTools points out that district courts are given
broad discretion to control discovery in civil cases, including setting deadlines for the
designation of expert witnesses.

The parties agree that we are to review the issue of whether the district court erred
in allowing LendingTools to belatedly designate a new damages expert under an abuse of
discretion standard. Indeed, district courts have broad discretion in supervising the course
and scope of discovery. Miller v. Johnson, 295 Kan. 636, 688, 289 P.3d 1098 (2012).
Likewise, the admission of expert testimony generally lies within the trial court's sound
discretion, and its decision will not be overturned in the absence of an abuse of
discretion. Puckett v. Mt. Carmel Regional Med. Center, 290 Kan. 406, 444, 228 P.3d
1048 (2010). As indicated above, a judicial action constitutes an abuse of discretion if (1)
no reasonable person would take the view adopted by the district court; (2) is based on an
error of law; or (3) is based on an error of fact. Wiles, 302 Kan. at 74.

Here, there is no allegation that the district court erred as a matter of law or that it
based its decision to grant LendingTools leave to designate a new damages expert on an
error of fact. As such, we must determine whether no reasonable person would have
taken the view adopted by the district court. Although we do not necessarily agree with
38

the district court's decision and question the wisdom it, we find it to fall within the realm
of reasonableness. Thus, we conclude that that the district court acted within its broad
discretion in allowing LendingTools to substitute a new damages expert for the one that
was stricken.

Failure to Specifically Identify Trade Secrets

The next issue presented in cross-appeal filed by The Bankers' Bank is whether the
district court abused its discretion in denying a motion to dismiss filed on the first day of
trial and a motion for judgment as a matter of law made during trial based on The
Bankers' Bank's allegation that LendingTools failed to identify the specific trade secrets
that it claimed were misappropriated. In response, LendingTools argues that the district
court did not err in denying the motion to dismiss. LendingTools argues that the evidence
presented at trial was sufficient to require submission of the issue of misappropriation of
trade secrets to the jury.

The Bankers' Bank filed its motion to dismiss under K.S.A. 60-237(b) (discovery
sanction) and K.S.A. 60-241(b) (lack of prosecution) for failure to comply with court
orders requiring LendingTools to identify its trade secret claims. A district court's
decision to dismiss a case for either of these reasons is reviewed for abuse of discretion.
Canaan v. Bartee, 272 Kan. 720, 726, 35 P.3d 841 (2001). Moreover, The Bankers' Bank
moved for judgment as a matter of law under K.S.A. 60-250. We review a district court's
decision on a motion for judgment as a matter of law under the former directed verdict
standard of review. Bussman v. Safeco Ins. Co. of America, 298 Kan. 700, 706, 317 P.3d
70 (2014). So we must resolve all facts and inferences that may reasonably be drawn
from the evidence in favor of the party against whom the ruling was sought. When
reasonable minds could reach different conclusions based on the evidence, the motion
must be denied. 298 Kan. at 706-07.

39

A plaintiff seeking relief for misappropriation of trade secrets under the Uniform
Trade Secrets Act "must identify the trade secrets and carry the burden of showing that
they exist." MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511, 522 (9th Cir.
1993). A sufficient disclosure of the trade secrets is necessary to "allow [a defendant] a
fair opportunity to prepare and present their best case or defense at a trial on the merits."
Phoenix Technologies, Ltd. v. DeviceVM, Inc., No. 09-4697-EDL, 2010 WL 8590525, at
*2 (N.D. Cal. 2010) (unpublished opinion). In fact, courts from other jurisdictions have
required that trade secrets be disclosed with reasonable particularity prior to discovery.
See, e.g., Vention Med. Advanced Components, Inc. v. Pappas, No. 2016-0696, 2018 WL
2905593, at *6 (N.H. June 8, 2018); DeRubeis v. Witten Technologies, Inc., 244 F.R.D.
676, 681 (N.D. Ga. 2007).

Prior to trial, a district court should require a plaintiff to "'describe the subject
matter of the trade secret with sufficient particularity to separate it from matters of
general knowledge in the trade or of special knowledge of those persons . . . skilled in the
trade.'" (Emphasis added.) Imax Corp. v. Cinema Technologies, Inc., 152 F.3d 1161,
1164-65 (9th Cir. 1998) (quoting Universal Analytics v. MacNeal-Schwendler Corp., 707
F. Supp. 1170, 1177 [C.D. Cal. 1989] [finding that adequate disclosures distinguish trade
secrets "from matters of general knowledge in the trade or of special knowledge of those
persons . . . skilled in the trade," aff'd 914 F.2d 1256 [9th Cir. 1990]).

"To meet this requirement, the plaintiff must make two showings: '[f]irst, the plaintiff
must clearly identify what the "thing" is that is alleged to be a trade secret, and second,
the plaintiff must be able to clearly articulate why that "thing" belongs in the legal
category of [a] trade secret.' [Agency Solutions.Com, LLC v. TriZetto Group, Inc., 819 F.
Supp. 2d 1001, 1015 (E.D. Cal. 2011)]. Upon an adequate disclosure, 'the defendant may
then use that level of detail to determine the limits of the trade secret by investigating
whether the information disclosed is within the public domain . . . or to develop . . .
defenses.' Loop AI Labs, Inc. v. Gatti, 195 F. Supp. 3d 1107, 1115 (N.D. Cal. 2016)
(citing Brescia v. Angelin, 172 Cal. App. 4th 133, 147, 90 Cal. Rptr. 3d 842 [2009])." E.
40

& J. Gallo Winery v. Instituut Voor Landbouw—En Visserijonderzoele, No. 1: 17-CV-
00808-DAD-EPG, 2018 WL 3062160, at *4 (E.D. Cal. 2018).

We also note that the use of generic descriptions—such as "including"—have been
held to be "so vague and unspecific as to constitute no disclosure at all since Defendants
cannot 'ascertain at least the boundaries' of the alleged trade secrets." Loop AI Labs, Inc.,
v. Gatti, 195 F. Supp. 3d 1107, 1116 (N.D. Cal. 2016) (quoting Computer Economics,
Inc. v. Gartner Group, Inc., 50 F. Supp. 2d 980, 984 [S.D. Cal. 1999]). This type of
generic description is insufficient "because it does not clearly refer to tangible trade
secret material." Imax Corp., 152 F.3d at 1167. A plaintiff's "inability to describe the
alleged trade secret with reasonable particularity puts the action in jeopardy" and may
even result in the entry of summary judgment. Brescia v. Angelin, 172 Cal. App. 4th 133,
149, 90 Cal. Rptr. 3d 842 (2009). However, once a plaintiff has presented sufficient
evidence to survive a dispositive motion, the existence of a trade secret becomes a
question fact for the jury. Progressive Products, 292 Kan. 947, Syl ¶ 5.

We find the amount of detail that must be disclosed by a plaintiff seeking relief for
misappropriation of trade secrets under the Kansas Uniform Trade Secrets Act—as well
as that required to carry the burden of proving the existence of a trade secret—must be
determined on a case-by-case basis. Prior to or during the course of discovery, the district
court may require less specificity than would be required to survive a dispositive motion.
However, by the time the case reaches the final pretrial conference, a plaintiff should be
required by the district court to "concisely" identify the trade secrets alleged to have been
misappropriated and the factual contentions that are allegedly sufficient to meet the
elements set forth in K.S.A. 60-3320(4). See Kansas Supreme Court Rule 140 (c) (1)
(2018 Kan. S. Ct. R. 203) (each party must concisely state its factual contentions as well
as its claims and defenses at the final pretrial conference); K.S.A. 2017 Supp. 60-216(d)
and (e).

41

Unfortunately, the present case appears to have gotten "off track" during the
pretrial process. The importance of case management, pretrial discovery, and pretrial
conferences was emphasized by former Associate Justice of the United States Supreme
Court William J. Brennan Jr. in an address to the American College of Trial Lawyers in
April 1958. Justice Brennan stated that "[p]retrial discovery and pretrial conference
procedures can truly be employed as a scalpel to lay bare the true factual controversy,"
but he pointed out that they "will not work unless [the trial judge] makes it so by his
leadership." See Becton Dickinson and Co. v. Tyco Healthcare Group LP, No. Civ.A. 02-
1694 GMS, 2006 WL 890995, at *10 (D. Del. 2006) (unpublished opinion) (quoting
Justice Brennan, Changes in Trial Tactics, Address before the American College of Trial
Lawyers [April 1958]). Although Judge Walters entered an agreed pretrial order in this
case, it was not fashioned with a scalpel.

The confusion over exactly what LendingTools contends to be the trade secrets
that The Bankers' Bank misappropriated continued at trial. Because the verdict form did
not ask the jury to determine the existence of any trade secrets—but instead jumped
directly to the question of whether the jury found that The Bankers' Bank
"misappropriated LendingTools' trade secret information"—it is unclear if it found any or
all of the information to be a "trade secret" as defined by K.S.A. 60-3320(4). On the one
hand, it is possible that the jury did not find any of the information to constitute a "trade
secret." On the other hand, it is possible that the jury found some or all of the information
to constitute a "trade secret" but did not find a "misappropriation" under K.S.A. 60-
3320(2).

Nevertheless, based on the applicable standards of review, we do not find that the
district court erred in denying the motion to dismiss or the motion for judgment as a
matter of law presented at trial. We do not find that the district court acted unreasonably
in denying the motion to dismiss on the first day of trial. Moreover, when the record on
appeal is reviewed in the light most favorable to LendingTools, we find that reasonable
42

minds could reach different conclusions based on the evidence. Thus, we will not replace
our judgment for that of the district court regarding these motions.

Claim for Lost Profits

The final issue presented by The Bankers' Bank in its cross-appeal is whether the
district court erred in denying its motion for judgment as a matter of law on
LendingTools' claim for lost profit damages. The Bankers' Bank contends that
LendingTools' claim for lost profits is premised on the allegation that the BBOK, UBB,
and FNBB would have renewed their contracts with LendingTools but for the alleged
misappropriation of trade secrets. According to The Bankers' Bank, representatives of
these customers testified that they would have left at the expiration of their contracts with
LendingTools "no matter what" and Lending Tools presented no evidence at trial to the
contrary. In response, LendingTools contends that The Bankers' Bank relies upon
"testimony from compromised and biased witnesses" in support of its position regarding
the lost profits claim.

As indicated above, we review a district court's decision on a motion for judgment
as a matter of law under the former directed verdict standard of review. Bussman, 298
Kan. at 706. This means we must resolve all facts and inferences that may reasonably be
drawn from the evidence in the light most favorable of the party against whom the ruling
was sought and where reasonable minds could differ based on the evidence, the motion
must be denied. 298 Kan. at 706-07. Applying this standard of review, we conclude that
although The Bankers' Bank may have a strong argument to present to the jury regarding
whether LendingTools is entitled to recover lost profits, the district court did not err in
denying the motion for judgment as a matter of law and allowing evidence relating to the
lost profit damages be presented at trial.


43

CONCLUSIONS

In conclusion, while recognizing that the law does not guaranty a perfect trial, we
find that a new trial is appropriate under the unique circumstances presented in this case.
We find that the prejudicial acts of counsel for the BBOK during opening remarks to the
jury tainted the entire trial and denied LendingTools a fair trial. Although this conclusion
in and of itself is sufficient to cause us to reverse the verdict and remand for a new trial,
we also find that Instruction No. 19 was not legally appropriate. Moreover, we conclude
the district court should reexamine the compilation trade secret issue on remand using the
appropriate procedure. We also conclude that while the Kansas Uniform Trade Secrets
Act provides the exclusive remedy for civil claims based on the misappropriation of a
statutorily defined trade secret, it does not preempt tort claims based on misappropriation
of information that falls outside of the statutory definition of a trade secret.

We also conclude that the district court did not abuse its discretion in failing to
enter default judgment as a sanction against The Bankers' Bank. Furthermore, we
conclude that that the district court acted within its discretion in allowing LendingTools
to substitute a new damages expert for the one that was stricken prior to trial. We find the
district court did not err in denying the motion for judgment as a matter of law and
allowing evidence relating to the lost profit damages be presented at trial. Finally, we do
not find that the district court erred in denying the motion to dismiss or the motion for
judgment as a matter of law presented at trial.

Affirmed in part, reversed in part, and remanded for a new trial.