$135 Million Settlement Payment from Eaton to Triumph in Now Legendary Mississippi (and ultimately North Carolina) Trade Secrets Row
You knew this day would come – you just didn’t know what the contents of the day would unveil. Eaton Corp. has reportedly agreed to settle for $148 million ($135 million to Triumph Group and $13 million to the former Eaton engineers) what might ultimately prove to be the most screwed-up trade secrets misappropriation case in American jurisprudence.
Eaton originally sued some of its former engineers and their new employer (then called Frisby but now called Triumph after the North Carolina company was acquired by the Triumph Group from Philadelphia) in 2004 in Mississippi state court. Eaton claimed Frisby hired six Eaton engineers who stole trade secrets used to make aircraft hydraulic pumps and motors and were using them to assist Frisby in competition. Eaton claimed at one time that the value of the trade secrets approached $1 billion. Frisby and six former employees aggressively denied the allegations and counter-sued Eaton.
Eaton’s lawsuit was dismissed after it was discovered the company’s lawyers were paying former Hinds County District Attorney Ed Peters to improperly influence then-Hinds County Circuit Judge Bobby DeLaughter. The ex-judge was convicted in 2009 for lying to the FBI about discussions with Peters outside of court about a legal-fee dispute involving now-disbarred Mississippi plaintiff’s lawyer Dickie Scruggs. DeLaughter was sentenced to 18 months in prison. Eaton claimed it knew nothing of the improper activities – but Frisby and the six engineers didn’t back off and continued to prosecute their counter-claims and later initiated a new lawsuit in federal court in North Carolina alleging a host of unfair and illegal litigation and competitive practices by Eaton.
Eaton appealed and appealed the dismissals of its claims but the Mississippi Supreme Court would have none of it. Multiple Eaton in-house attorneys lost their jobs and shareholders of Eaton actually brought shareholder derivative claims alleging that the mishandling of the matter was a material event in the share price of the company.
This settlement marks the needed end of what should obviously go down in trade secrets litigation history as one of the worst turnarounds for a trade secrets plaintiff ever witnessed.