MOTION MEDICAL TECHNOLOGIES, L.L.C.; WABASH MEDICAL COMPANY, L.L.C.; ORTHOFLEX, INCORPORATED, doing business as Integrated Orthopedics, Plaintiffs-Counter Defendants-Appellees
THERMOTEK, INCORPORATED, Defendant-Counter Claimant-Third Party Plaintiff-Appellant
TRI 3 ENTERPRISES, L.L.C.; THERMO COMPRESSION SOLUTIONS, L.L.C.; WMI ENTERPRISES, L.L.C., Third Party Defendants-Appellees THERMOTEK, INCORPORATED, Plaintiff-Appellant
MIKE WILFORD, Defendant-Appellee
from the United States District Court for the Northern
District of Texas
SMITH, OWEN, and HIGGINSON, Circuit Judges.
STEPHEN A. HIGGINSON, CIRCUIT JUDGE.
Inc. convinced a jury that Mike Wilford and his companies
engaged in unfair competition and fraud in violation of Texas
law. The district court, however, granted judgment as a
matter of law to the defendants, concluding that federal law
preempted the unfair competition claim and that ThermoTek
failed to prove its damages for fraud. We affirm.
designs, manufactures, and sells the VascuTherm system, which
consists of a medical device and specially designed wraps
that provide thermal and compression therapy. ThermoTek sells
this equipment to medical goods distributors, who then sell
or lease it to hospitals and clinics. Once a doctor
prescribes VascuTherm, a distributor delivers it to,
demonstrates it for, and fields questions from the patient.
The distributor then bills the patient's insurance.
addition to vending VascuTherm to distributors, ThermoTek
trains those distributors to use and care for the unit and
wraps. Distributors receive access to a password-protected
portion of ThermoTek's website, user manuals, pricing
data, insurance coding information, and other written
Wilford is an executive of several medical equipment
companies, including Orthoflex, Inc., Motion Medical
Technologies, LLC, and Wabash Medical Co., LLC (the Orthoflex
companies). In 2008, Wilford, through his companies, began
buying and distributing the VascuTherm system. As a
distributor, Wilford received various ThermoTek materials,
including billing codes and product manuals. He visited
ThermoTek's facilities at least twice.
after his companies started purchasing the VascuTherm system,
Wilford reported problems with the product and requested
information about its design, repairs, and manufacturing.
ThermoTek believes these reports were pretexts for Wilford to
obtain proprietary information about VascuTherm. In March
2010, the Orthoflex companies sued ThermoTek in the Northern
District of Illinois, alleging breach of the products'
warranties. ThermoTek alleges that Wilford used the discovery
process to obtain additional proprietary information,
including a non-public version of ThermoTek's §
510(k) application to the Food and Drug Administration (FDA)
for VascuTherm. Wilford eventually developed and began
selling his own unit and wraps, dubbed the Recovery system.
ThermoTek ended its relationship with Wilford in August 2010.
months later, in November 2010, ThermoTek sued Wilford and
another of his companies, WMI Enterprises, LLC, for fraud and
unfair competition in Texas state court. Wilford removed
that case to the Northern District of Texas, which then
consolidated it with the related breach-of-warranty suit from
Illinois. After several pretrial motions and amended
pleadings, the parties tried the following to a jury:
(1) the Orthoflex companies' counterclaim against
ThermoTek for breach of express warranty;
(2) ThermoTek's claim against Wilford for fraud;
(3) ThermoTek's claim against Motion Medical, Wabash
Medical, and Tri 3 Enterprises LLC for breach of contract; and
(4) ThermoTek's claim against Wilford and Thermo
Compression Solutions, LLC for unfair competition by
for our purposes, ThermoTek's Texas common law claim of
unfair competition by misappropriation was the only unfair
competition claim tried to the jury. Although ThermoTek had
pleaded a distinct claim for misappropriation of trade
secrets, it voluntarily dismissed that claim before
jury broke ThermoTek's way. It rejected the Orthoflex
companies' warranty claim, but found for ThermoTek on the
fraud, contract, and unfair competition claims. The jury also
awarded ThermoTek more than $7.5 million in damages for
"lost profits." On the unfair competition claim, it
awarded $4 million for infringing unit sales and $2 million
for infringing wrap sales. On the fraud claim, it awarded
$770, 000 for VascuTherm wrap sales; $500, 000 for VascuTherm
unit sales; $193, 000 for additional expenses from unit
repairs; $90, 000 for additional engineering costs; and $13,
000 for additional evaluation and tooling costs. (The jury
awarded no damages for breach of contract.)
response, Wilford and Thermo Compression renewed their motion
for judgment as a matter of law. See Fed. R. Civ. P.
They argued that federal copyright and patent law preempted
ThermoTek's misappropriation claim, and that ThermoTek
failed to prove its damages. The district court agreed and
entered an amended judgment dismissing all claims with
prejudice and denying all requested relief.
appeal raises three issues. The first is waiver-whether the
failure to plead preemption bars that defense. Second is the
preemption defense's merits-whether federal law indeed
forecloses ThermoTek's unfair competition claim. And last
is the money-whether the jury had enough evidence to assess
lost profits. Though we neither examine nor question the
jury's factual finding that Wilford made material
misrepresentations, we affirm the district court's
decision to grant the motion for judgment as a matter of law
and dismiss ThermoTek's claims.
up is whether Wilford and Thermo Compression waived their
preemption defenses by failing to plead them. The district
court said no-an answer we review for abuse of
discretion. We find no abuse of discretion here.
Rule of Civil Procedure 8(c) requires a defendant to state
affirmative defenses in its responsive pleading. Fed.R.Civ.P.
8(c) ("In responding to a pleading, a party must
affirmatively state any avoidance or affirmative defense . .
. ."). Failure to comply with this rule may result in
waiver. Lucas v. United States, 807 F.2d 414, 417
(5th Cir. 1986) (citing Starcraft Co. v. C.J. Heck
Co., 748 F.2d 982, 990 n.11 (5th Cir. 1984)). But if
"the [affirmative defense] is raised in the trial court
in a manner that does not result in unfair surprise, "
then a "technical failure to comply precisely with Rule
8(c) is not fatal." Id. at 417 (quoting
Allied Chem. Corp. v. Mackay, 695 F.2d 854, 855-56
(5th Cir. 1983) (per curiam)). Because Rule 8(c)'s
purpose is to give the plaintiff fair notice, we recognize
"some play in the joints." Rogers v.
McDorman, 521 F.3d 381, 385 (5th Cir. 2008). A defendant
thus avoids waiver if (1) the defendant raised the
affirmative defense "at a pragmatically sufficient time,
" and (2) the plaintiff "was not prejudiced in its
ability to respond." Lucas, 807 F.2d at 418
(quotation mark omitted) (quoting Allied Chem., 695
F.2d at 856); see also 2 Moore's Federal
Practice § 8.08 (3d ed. 2016).
got fair notice. It learned of the preemption defense at a
pragmatically sufficient time and suffered no prejudice. The
preemption issue first surfaced at the summary judgment stage
before discovery closed and nearly two years before trial.
And, in denying the motion to reconsider its summary judgment
order, the district court noted that it could "consider
a preemption challenge to ThermoTek's unfair competition
claim by motion for judgment as a matter of law and by
post-judgment motion, if necessary, assuming ThermoTek
prevails on that claim at trial." The parties therefore
had two years' notice that preemption was on the table.
resurfaced closer to and during trial. After the parties had
engaged in substantial additional discovery-and still before
trial-Wilford and Thermo Compression raised copyright and
patent law preemption in the parties' joint proposed
pretrial order. Wilford and Thermo Compression raised those
defenses again in Rule 50 motions at the close of both
cases-in-chief. See Fed. R. Civ. P. 50. The charge
conference also addressed preemption.
this was enough to meet our "sufficiently
pragmatic" requirement. We have repeatedly rejected
waiver arguments when a defendant raised an affirmative
defense for the first time at summary judgment-or even later.
See, e.g., Pasco ex rel. Pasco v.
Knoblauch, 566 F.3d 572, 578 (5th Cir. 2009) (no waiver
when defendant first raised affirmative defense of qualified
immunity in summary judgment motion filed two months before
discovery was due and six months before the pretrial
conference); Lafreniere Park Found. v. Brous-sard,
221 F.3d 804, 808 (5th Cir. 2000) (no waiver where defendants
first raised affirmative defense of res judicata in summary
judgment motion and plaintiffs had fourteen months to respond
and filed three responsive briefs during that period);
Allied Chem., 695 F.2d at 855-56 (no waiver where
defendant first raised affirmative defense of usury in motion
for summary judgment and the defense appeared in the pretrial
order); Lucas, 807 F.2d at 417-18 (no waiver when
the government first raised affirmative defense of a
statutory damages cap at trial immediately after expert
testimony on damages). In fact, we have recognized that
sometimes a preemption defense is most suitably raised
after the defendant answers the complaint. See
Fisher v. Halliburton, 667 F.3d 602, 610 (5th Cir. 2012)
("Unless the complaint itself establishes the
applicability of a federal-preemption defense-in which case
the issue may properly be the subject of a Rule 12(b)(6)
motion-a defendant should ordinarily raise preemption in a
Rule 12(c) motion for judgment on the pleadings or a Rule 56
motion for summary judgment." (footnote omitted)).
ThermoTek suffer prejudice "in its ability to
respond." Allied Chem., 695 F.2d at 856. The
company admitted as much to the district court. When asked to
identify specific prejudice, including what it would have
done differently had Wilford and Thermo Compression pleaded
preemption, Ther-moTek's counsel stated, "I
don't know what we would have done differently, "
and "[p]ractically speaking, I don't know that we
would have done anything differently."
district court did not abuse its discretion in reaching the
preemption defense on the merits.
merits question is whether federal copyright and patent laws
preempted the unfair-competition-by-misappropriation claim.
district court held that federal copyright law preempts
ThermoTek's unfair competition claim insofar as that
claim relates to works of authorship fixed in a tangible
medium of expression-here, ThermoTek's ...