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The 8th U.S. Circuit Court of Appeals has reinstated a 1998 misappropriation-of-trade-secrets and breach-of-contract verdict against ABC Radio Networks Inc. and Walt Disney Co., finding that the trial court erred in throwing out a $40 million judgment against the companies as a matter of law. The appellate court, however, did not reinstate the damages portion of the jury’s decision, but remanded the action for retrial on damages. The plaintiff, Children’s Broadcasting Corp., had accused ABC of breaching a contract to combine forces to establish a national network of radio stations providing children’s programming. In November 1995, Children’s Broadcasting entered into a contract with ABC Radio Networks Inc., whereby ABC would support the development of a 24-hour children’s radio format. In addition, ABC would assist Children’s Broadcasting in selling national advertising for the network and assist in dealing with network affiliates, said plaintiffs’ trial and appellate counsel Thomas F. Cullen Jr. of the Washington, D.C., office of Jones, Day, Reavis & Pogue. However, ABC did not comply with the provisions of the contract, Cullen said, and instead set up a competing 24-hour children’s network with Disney. The Children’s Broadcasting contract with ABC was signed before ABC merged with Disney, he said. “The contract was breached after they became one company.” INTERNAL DOCUMENTS USED? Children’s Broadcasting also charged ABC and Disney with misappropriation of trade secrets, contending that the defendants used the plaintiff’s internal documents, including lists of advertisers, to help establish Radio Disney. The Children’s Broadcasting network went off the air in early 1998. Children’s Broadcasting Corp. v. The Walt Disney Co., No. 3-96 CIV 907 (D. Minn.) The plaintiff also charged fraud and breach of fiduciary duty; these claims were dismissed on summary judgment before trial. The defendants denied any breach or misappropriation, but in September 1998, a St. Paul, Minn., jury ordered ABC to pay $20 million on the breach claim and $10 million on the trade secrets claim, and ordered Disney to pay Children’s Broadcasting $10 million on the trade secrets claim. The jury found that the defendants had misappropriated two trade secrets: a list of Children’s advertisers and Children’s network programming techniques and processes. In January 1999, Judge Donald D. Alsop granted the defendants’ motion for judgment as a matter of law, finding the evidence on causation and damages insufficient to support the jury’s verdict. Alsop found the testimony of Children’s damages expert witness Stephen Willis to be pure speculation, but ordered that if this JNOV were reversed, the defendants would be granted a new trial on causation and damages. Children’s Broadcasting appealed. The plaintiff focused the appeal, said Cullen, on establishing that there was enough evidence at trial to support the claim that ABC and Disney’s actions caused damage to Children’s, citing testimony of witnesses other than Willis. $90 MILLION PRICE TAG These witnesses testified that ABC and Disney were able to accelerate into the children’s radio market by using information gained from Children’s Broadcasting and that ABC itself had once estimated it would cost up to $90 million to acquire Children’s. When ABC entered into the contract with Children’s Broadcasting, Cullen said, “the company was in a young and vulnerable state. ABC failed to sell ad time during a critical time and the company just died on the vine.” The value of the opportunity lost, he said, was substantial — anywhere from $20 million to $170 million. The appellate court found that the jury “had a variety of evidence to consider” to support the damage claim. As a result, “ABC Radio and Disney were not entitled to judgment as a matter of law on damages,” said Cullen. Alsop had granted a new trial on damages in the alternative, finding that Willis’ testimony had tainted the trial. The appellate court affirmed this decision. The 8th Circuit also refused to reinstate the plaintiff’s fraud and breach-of-fiduciary-duty claims. A Disney spokesperson said that the company was “pleased” with the 8th Circuit decision, noting that the court had “rejected the bulk of CBC’s claims,” and that “all that remains of the lawsuit is a trial on damages on two limited claims.” No new trial date has yet been set.

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