In 1992, Elizabeth Elting and Philip R. Shawe founded TransPerfect Global, Inc. (“TransPerfect”), a provider of language and technology solutions for businesses around the globe. When Ms. Elting wanted to dissolve her relationship with TransPerfect, the company held an auction and a custodian made some of TransPerfect’s confidential information available to potential bidders. The custodian’s agent, however, mistakenly gave the bidders access to trade secreted materials, such as TransPerfect’s proprietary pricing methodology, the average rate of pay for linguists, and customer revenue averages.
Shawe was the winning bidder. A few years after the auction, TransPerfect, now controlled by Shawe, filed a lawsuit against the other auction participants claiming misappropriation of the TransPerfect trade secrets that had been mistakenly disclosed during the auction. Specifically, TransPerfect alleged that the defendants used its proprietary pricing scheme, obtained during the auction, to poach TransPerfect’s customers. TransPerfect also alleged that the defendants only participated in the auction to gain access to the confidential information. Shawe claimed they never intended to bid on TransPerfect’s intellectual property and failed to return or destroy the auction material upon request. After TransPerfect’s claims were dismissed on summary judgment, the defendants moved for attorneys’ fees.
The Defend Trade Secrets Act (DTSA) allows recovery of attorneys’ fees if the underlying claim is brought in “bad faith.” Defendants argued that TransPerfect brought the lawsuit with no factual support on two key issues: that the confidential information was improperly obtained, or that it was used beyond the auction’s agreed-upon limits. They also argued that Shawe brought the lawsuit in bad faith because he was upset when he later realized he had overpaid for TransPerfect and had failed to take business from Lionbridge Technologies, TransPerfect’s primary competitor.
The U.S. District Court for the Southern District of New York agreed that TransPerfect lacked factual support for its misappropriation claims, finding specifically: “After filing this litigation, TransPerfect appeared to be conducting a search for a viable claim. It continued this search even after it became clear that it could not prove that it had suffered any damages from an alleged misappropriation of trade secrets.” The court also noted that Shawe brought litigation against every entity connected to the auction, relaying comments by the Delaware Supreme Court, that Shawe’s litigation strategy was reprehensible and “akin to ‘throwing pizzas at the wall.’” But even this was not enough to warrant an award of attorneys’ fees under the DTSA. Despite these findings, the court ruled that TransPerfect’s claims did not lack a colorable basis. Nor did the court find that the lawsuit had been brought for an improper purpose, as required by the DTSA.
The lesson is clear. The burden to obtain attorneys’ fees under the DTSA in the Southern District of New York remains significant—even claims deemed to be no more than a fishing expedition may not lead to an award of fees.
The case is TransPerfect Global, Inc. v. Lionbridge Technologies, Inc., 2022 WL 2119344 (S.D.N.Y. May 31, 2022).