IP Law Daily, TRADE SECRETS—W.D. Ky.: Court finds no reason to disturb $10 million jury verdict in paper supplier and distributor dispute, (Apr 7, 2026)

By Justin Marcus Smith, J.D.

Evidence of three trade secrets pertinent to payment terms, prices charged to a customer, and sales history with that customer, though not overwhelming, provided some basis for concluding that the information communicated qualified as trade secrets.

There was no reason to disturb a jury’s verdicts or damages determinations in a dispute between a national distributor of paper and its former supplier, held the federal district court in Paducah, Kentucky. A reasonable jury could have reviewed the plaintiff distributor’s evidence and accepted its theory of the case that the supplier engaged in tortious interference when the supplier’s executives allegedly took steps to end one of the distributor’s profitable sales relationships with a customer. The jury also heard evidence that pricing information the supplier disclosed was trade secret information. The supplier’s contention that the evidence did not show breach of contract, based on breach of confidentiality, merely echoed its trade secrets contentions. An argument about jury passion or prejudice was only a bare assertion. A counterclaim came down to a battle of the experts, and the distributor’s expert had the more complete argument. The jury finding of oppression, fraud, or malice, with a likelihood of harm, in connection with the distributor’s tortious interference claim against the supplier, supported the jury award of $7.2 million in punitive damages, three times the actual damages of $2.4 million. Trebling for deterrent effect was not exceptional and did not offend due process. The court denied the defendant-supplier’s motions for judgment and a new trial, granted in part and denied in part its remittitur request, and denied without prejudice the plaintiff-distributor’s request for attorney’s fees because there was not enough information to confirm the likely number of attorney hours (Veritiv Operating Company v. Phoenix Paper Wickliffe, LLC, No. 5:21-cv-00170-BJB-HBB (W.D. Ky. Mar. 31, 2026)).

Background. Veritiv Operating Company (Veritiv), a national distributor of paper, sued a former supplier, the Phoenix Paper Wickliffe, LLC (Phoenix), for alleged breach of a “protected accounts” agreement after Phoenix and a major customer went to a rival distributor. Phoenix won summary judgment on the Veritiv breach of contract claim, but the Veritiv claims for tortious interference, trade-secrets misappropriation, and breach of a confidentially provision went to trial, as did a Phoenix counterclaim that Veritiv breached their contract by taking unearned prompt-pay discounts.

After a six-day trial, the jury sided with Veritiv on all remaining claims and awarded $10 million in economic and punitive damages. Phoenix sought judgment notwithstanding the verdict under Fed. R. Civ. P. 50(b), a new trial under R. 59(a), and remittitur of the damages award under R. 59(e).

The Phoenix post-trial motions challenged each of the jury’s respective tort, trade-secret, and breach of confidentiality liability findings. The court said Phoenix presented an arguably plausible counter-narrative that Veritiv had been paying late; that Phoenix executives spoke truthfully about Phoenix’s financial and trust concerns about Veritiv; and that a Veritiv competitor had no trouble in securing certain business from a Veritiv customer based on publicly available information, i.e., without any need for Veritiv’s confidential pricing terms, payment terms, and order histories.

Phoenix’s view of the proof might have been the better one, at least in some respects. However, the jury reasonably decided against Phoenix after hearing six days of testimony from a dozen witnesses. After reviewing the evidence, the court could not conclude that the jury arrived at unreasonable findings.

Tortious interference. A reasonable jury could have reviewed Veritiv’s evidence and accepted its theory of the case that the steps Phoenix executives took to arrange a new purchasing agreement through the Veritiv competitor damaged Veritiv by ending Veritiv’s profitable sales relationship with a customer.

Phoenix challenged the sufficiency of the evidence in connection with intentional inference in the form of lies about Veritiv’s payment performance, improper motive when Phoenix sought to switch distributors, and whether Phoenix’s statements to the Veritiv customer actually caused that customer to switch to the Veritiv competitor.

The Phoenix argument about whether Phoenix executives lied simply reweighed the evidence. While a jury could have inferred Phoenix was dissatisfied with lopsided financial terms, a jury could also have reasonably inferred that Phoenix concerns about the timeliness of Veritiv’s payments were disingenuous and hence enough to support a finding that Phoenix intentionally interfered.

The jury could have also reasonably concluded that Phoenix acted contrary to “custom and tradition” and worked in “secret” with Veritiv’s competitor, thereby supporting a finding of improper motive or means. The evidence plainly refuted that Phoenix statements could not have caused the Veritiv customer to switch distributors.

Trade secrets. Evidence about whether Phoenix misappropriated three trade secrets pertinent to Veritiv payment terms, prices charged to the Veritiv customer, and sales history with that customer, though not overwhelming, provided some basis for concluding that the information communicated qualified as trade secrets.

Evidence suggested payment terms were integral to Veritiv’s wholesale distribution program. Taken as a whole, the information had independent economic value to Veritiv. Testimony from various executives of both parties and the customer suggested payment terms were generally not known or shared within the industry. The jury also heard testimony that Veritiv “took pains” to keep payment terms information secret, including limiting salespeople to a “need to know” and having all employees sign confidentiality agreements.

As for misappropriation, the jury was free to disbelieve a Phoenix executive’s explanation that he did not make a veiled reference to a Veritiv payment term. Phoenix’s primary counterargument was that Veritiv produced no evidence that disclosure of payment terms actually caused financial harm, but neither state nor federal law requires proof of harm to prove misappropriation. It did not matter that Veritiv asked for only one dollar in damages on the misappropriation claim.

Evidence that Phoenix provided Veritiv’s competitor with a Veritiv customer’s pricing agreements satisfied each element necessary to prove a misappropriated trade secret. Pricing was essential to Veritiv maintaining its relationships with customers. Evidence tended to show the information was proprietary because Veritiv stated that it was so in a “Supplier Packet” disclaimer. Veritiv required nondisclosure. The jury could also have reasonably inferred from record evidence that Phoenix was the most likely source for certain pricing data. Phoenix counterarguments were not persuasive. Among other things, order histories would have had economic value and not been public knowledge.

Breach of confidentiality. Veritiv’s breach-of-contract claim relied on breach of a confidentiality provision, as printed in its Supplier Packet and Purchase Orders, which barred disclosure of any information Veritiv provided to its sellers. The same evidence about trade secrets pertained and was sufficient to support the jury verdict that Veritiv and Phoenix had a contract, Phoenix breached it, and that the breach caused Veritiv damage. Phoenix's protests to the contrary merely echoed its trade-secrets contentions.

Passion and prejudice. The court rejected the Phoenix contention that “passion or prejudice” must have influenced the jury verdict, arrived at after two hours of deliberation. It was a bare assertion, and the record suggested the jury accepted testimony as credible and awarded damages consistent with it. Phoenix did not rebut the damage calculations.

Counterclaim. Phoenix also contended a new trial was necessary because the jury ruled inappropriately on its sole counterclaim, i.e., that Veritiv claimed discounts to which it was not entitled. This facet also largely turned on expert testimony. The experts disagreed, but the jury apparently accepted the Veritiv expert’s version of events instead of the “less complete account” of the Phoenix expert. That conclusion hardly entitled Phoenix to a new trial on this claim.

Damages. The court found the evidence sufficient for a jury to find oppression, fraud, or malice in connection with tortious interference to support the jury award of $7.2 million in damages against Phoenix, three times the actual damages of $2.4 million. The jury heard evidence that Phoenix relied on secret meetings with competitors and consumers. Coordinated and planned timing permitted an inference of conscious wrongdoing. Whether that was the fairest or best characterization of Phoenix conduct and motives may not have been clear, but the court said that was for the jury decide. Veritiv received the benefit of inferences about conscious wrongdoing.

Remittitur review is deferential, and Phoenix presented no evidence of inability to pay, so the jury could not have overlooked that. Nothing could have given the jury a false impression of ability to pay, nor did the sheer amount of punitive damages shock the conscience.

There was also no reason to think, based on the facts and instructions to the jury, that the $7.2 million punitive damages award was unconstitutional under the Due Process Clause. Much of the evidence on the liability question bore on the question of punitive damages. The jury reasonably determined, based on the evidence, that Phoenix’s conduct flowed from “intentional malice” rather than “mere accident.” That sufficed to justify at least some punitive-damage award.

As for the ratio relative to the $2.4 million in compensatory damages, the jury apparently heeded a Veritiv request to consider trebling for future deterrent effect. That was consistent with historical awards. The volume of statutes that provide for trebling also instilled confidence in the jury’s three-to-one ratio. The court said it had no cause to vacate or amend the judgment as a matter of law.

As for $2.4 million in compensatory damages, that was the total Veritiv requested and what was agreed at the charge conference, hence the court remitted an extra $400,000 that the jury awarded specific to misappropriation.

Attorney’s fees. The jury’s finding of “willful and malicious” conduct by Phoenix also entitled Veritiv to “reasonable attorney’s fees” under 18 U.S.C. § 1836(b)(3)(D). Veritiv initially asked for about $290 thousand, but Veritiv conceded several mathematical errors and reduced the request to about $204 thousand. However, the errors and the lack of a responsive briefing to revised formulas and calculations left the court without enough to evaluate the request with certainty. Veritiv could file a new motion with corrected data.

The Case is No. 5:21-cv-00170-BJB-HBB.

Judge: Beaton, B.

Attorneys: Dennis D. Murrell (Gray Ice Higdon, PLLC) for Veritiv Operating Co. Emily Montion (Thompson Hine LLP) for Phoenix Paper Wickliffe, LLC.

Companies: Veritiv Operating Co.; Phoenix Paper Wickliffe, LLC

Cases: TradeSecrets KentuckyNews