A $115 million judgment against Walmart Inc. in a trade secrets case is under scrutiny after the Bentonville retailer discovered new evidence that a federal judge said could have changed the outcome of the trial.
In April 2021, a federal jury in Little Rock ruled in favor of Ecoark Holdings Inc., formerly of Rogers and now of San Antonio, and a subsidiary, Zest Labs Inc., which had accused Walmart of maliciously taking Zest’s trade secrets for technologies used to manage the supply chain for fresh produce and meats.
The new evidence involves Walmart’s patent application — which allegedly contained the trade secrets. During the discovery phase of the case, Walmart handed over to Zest’s lawyers thousands of pages of documents, including Walmart’s patent application.
Walmart said in filings that if Zest believed the application contained Zest’s trade secrets, Zest had a duty to take reasonable steps to keep it confidential by trying to stop the U.S. Patent & Trademark Office from making it public.
Walmart said if Zest had done that, there might not have been a case.
Instead, Walmart said, Zest did nothing to prevent the application going public. Zest had accused Walmart of using the patent information and disclosing it.
Zest’s attorneys had said in a court filing that it didn’t try to stop the patent office because it never received the application in Walmart’s discovery material. And Zest said that it didn’t learn of the application until after it became public.
“But billing records produced by Zest’s counsel after trial strongly suggested the opposite: that Zest and its counsel did know of the … Application before it became public,” Walmart said in court filings last month seeking a new trial.
“It could have changed everything from simply not even having a case because the … application was withdrawn,” or it could have lowered the amount of damages awarded, one of Walmart’s attorneys, John Keville of Houston, said in a federal court hearing, according to a July 2021 transcript filed in the case.
U.S. District Court Judge James M. Moody Jr. said during the July 2021 hearing that the information was “new evidence. “I sat through the whole trial and I think it … could have made a difference,” Moody said. He said it was “a significant piece of evidence” and that “up until the verdict, I didn’t really know how the jury was going to come back.”
On June 15, Moody ordered Zest’s attorneys to produce about 50 more documents by June 21 to determine when Zest’s attorneys knew about the patent application, the number of attorneys involved, and the significance the attorneys placed on the information.
But the day the documents were due, Zest’s attorney asked the 8th U.S. Circuit Court of Appeals to order Moody to stop conducting the post-trial discovery, arguing that the documents are privileged work product materials, and that Moody’s order “constitutes a clear abuse of discretion.”
Zest is represented at the 8th Circuit by the law firms Williams Simons & Landis of Austin, Texas, McDaniel & Wolff of Little Rock and Robins Kaplan of Minneapolis.
Walmart’s attorneys blasted Zest’s filing in its response. “Zest’s petition strategically omits the district court’s finding that Zest’s counsel made a ‘misrepresentation to the Court’ in a signed pleading and sworn declaration about a ‘material’ fact in this case,” Walmart’s attorneys said. In addition to Keville, of the Sheppard Mullin Richter & Hampton LLP firm in Houston, Walmart is represented by the Little Rock firm of Quattlebaum Grooms & Tull and Wilmer Cutler Pickering Hale & Dorr LLP of Boston. “That misrepresentation effectively eliminated a key Walmart defense and helped Zest persuade a jury to award it $115 million,” which was one of the largest federal jury verdicts in Arkansas in recent history.
Walmart said that Zest’s request shouldn’t be granted. The filings at the 8th Circuit provide some insight into the dispute, in which many of the motions had been filed under seal.
Zest Labs first sued Walmart in federal court in Little Rock in October 2018 and was seeking more than $2 billion in damages.
But Zest’s specific allegations shifted throughout the case, Walmart said in its filing, “ultimately arguing that a Walmart patent application … destroyed Zest’s trade secret when it [was] published during discovery.”
During that phase of the trial, on Feb. 28, 2019, Walmart provided Zest the patent applications. The provisional application said that the anticipated publication date was May 16, 2019, and that’s exactly when the patent office made the application public — about two and a half months after Walmart said Zest received the documents.
“Fast forward to February of 2020, Zest’s motion for summary judgment says it’s undisputed that Walmart allowed the Walmart application to publish without Zest’s consent,” Keville said during a July 2021 hearing in front of Judge Moody.
In February 2020, Walmart responded by saying the application didn’t contain any trade secrets. The retailer also said that Zest had allowed the application to be published without attempting to keep it confidential.
But Zest’s lawyers said that to its attorneys’ knowledge, “Walmart has never produced the provisional or nonprovisional Walmart application,” Keville told Moody.
Zest also filed a declaration from one of its attorneys, Jonathan L. Hardt of Austin, who said he and a paralegal searched for the documents and didn’t find them. Hardt, who is working at another law firm, didn’t return messages for comment.
Zest “repeatedly” told the judge that it could not have prevented the application from being published because it didn’t know that it received the filing, Walmart said in its pleadings at the 8th Circuit.
But it wasn’t until after the trial and Zest’s attorneys filed a motion for attorneys’ fees that Walmart said it discovered otherwise.
Zest’s attorneys filed a motion seeking $46 million from Walmart to pay for attorneys’ fees. And the billing records that Walmart reviewed listed associates for Zest attorneys who “reviewed and discussed Walmart patent applications,” Keville said.
“So it would be very unbelievable, Your Honor, to think that in a law firm, these three associates were doing tasks that none of the people in charge of the case knew about or had any knowledge of,” Keville said in the July 2021 hearing.
But Zest said in its filing at the 8th Circuit last week that there is no new evidence in the case. It said that Walmart knew that it had provided the Zest legal team with the application, but chose not to present it to the jury during the 10-day trial.
“An honest mistake about whether a document was previously produced by Walmart … does not justify overturning a jury verdict or requiring disclosure of Zest’s opinion work product,” Zest’s filing said.
The case is pending.