The long-running trade secrets case involving Walmart Inc. and Zest Labs Inc. took another twist last month with Zest Labs seeking sanctions against the Bentonville retailer.
Zest wants sanctions against Walmart and its former discovery counsel, the New York office of Skadden Arps Slate Meagher & Flom LLP, for allegedly “concealing crucial evidence that would have greatly aided Zest” throughout the trial, according to its recent motion filed last month in U.S. District Court in Little Rock.
In 2021, Zest received a $115 million jury verdict against the Bentonville retailer, but it was later set aside by U.S. District Judge James Moody Jr.
Zest said in its filing last month that Walmart concealed patent information that could have led to “significantly higher damages, had the evidence been timely produced.” It also said the evidence would have been a “critical rebuttal” to Walmart’s motion for a new trial and sanctions against Zest, a motion made after the jury ruling.
Moody has agreed with Walmart’s motion and said in a filing that he is considering sanctions against Zest and its former attorneys at the firm Williams Simons & Landis of Austin, Texas, for making misrepresentations to him about when they knew about a patent application tied to the litigation.
The messy legal case began after a Zest subsidiary, Ecoark Holdings Inc., formerly of Rogers and now of San Antonio, sued Walmart in 2018. Zest said Walmart was supposed to turn over in discovery all patents or patent applications related to Zest’s supply-chain technologies used to manage fresh produce and meats.
Zest alleges Walmart destroyed Zest’s trade secret when the patent was published in 2019 by the U.S. Patent & Trademark Office.
But Walmart said at the time that it had turned the filing over during discovery and blamed Zest for not taking reasonable steps to keep it confidential by trying to stop the patent office from making it public. Moody wouldn’t let Walmart argue to the jury that Zest knew about the application but failed to try to block it from being made public.
It wasn’t until after the jury award in 2021 that Walmart said it discovered — while going through billing records of Zest’s attorneys — that Zest had seen the patent application.
Moody ruled that evidence would probably have changed the outcome of the trial. He set aside the jury’s verdict and ordered a new trial, which is set to start Jan. 21.
But in the meantime, Zest’s new attorneys recently discovered that Walmart had two other patent applications that allegedly had never been disclosed to Zest. “The evidence demonstrates that Walmart and Skadden intentionally hid the Concealed Patents from both this Court and Zest,” Zest’s filing said. Zest is represented in the filing by the firms of Bartko LLP of San Francisco, McDaniel Wolff of Little Rock, Schaerr Jaffe of Washington, D.C., and Blue Peak Law Group of Palo Alto, California.
“Walmart disclosed only the one patent application that it intended to abandon, while hiding the two other related patent applications that Walmart intended to continue pursuing,” the filing said.
The filing said that both concealed patents referenced Zest’s technology “extensively, using the term ‘Zest’ more than 400 times and citing documents from this litigation.”
Zest said that Walmart’s pursuit of the concealed patents “separately constituted misappropriation, and it was inevitable that Zest’s trade secrets, contained in the Concealed Patents, would eventually be published regardless of what happened” with the patent that was published.
Zest asked Moody to allow targeted discovery related to the concealed patents and prevent Walmart from using the argument that Zest should have tried to stop or could have stopped publication of its trade secrets in Walmart’s patents.
Walmart said in an email statement to Arkansas Business that it “will respond appropriately to the court” but believes the filing is an attempt at distraction.
“It’s important to remember the Court has already found certain statements Zest made were misleading, which led to the reversal of the original jury verdict and potential additional penalties,” the statement said.
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