Attorneys – Fees – Trade Secrets Protection Act – Bad Faith Requirement

Bruning & Federle Mfg. Co. v. Mills. (Lawyers Weekly No. 07-07-0951, 6 pp.) (Linda Stephens, J.) Appealed from Iredell County Superior Court. (Kimberly S. Taylor, J.) N.C. App.

Even though G.S. 6-21(12) allows an award of attorney’s fees in a Trade Secrets Protection Act case without regard to bad faith, since G.S. 66-154(d) requires a showing of bad faith or maliciousness before a court can award attorney’s fees under the TSPA, we hold that a trial court may only award attorney’s fees to the prevailing party in an action under the TSPA if a claim of misappropriation is made in bad faith or if there is willful and malicious misappropriation.

We affirm the trial court’s denial of the defendants’ motion for attorney’s fees.

We must interpret two statutes that both address the award of attorneys’ fees in actions under the TSPA. Under G.S. 66-154(d), “If a claim of misappropriation is made in bad faith or if willful and malicious misappropriation exists, the court may award reasonable attorneys’ fees to the prevailing party.”

In the same legislation by which it enacted the TSPA, the General Assembly added subsection (12) to G.S. 6-21. That statute reads in pertinent part, “Costs in the following matters shall be taxed against either party, or apportioned among the parties, in the discretion of the court: … (12) In actions brought for misappropriation of a trade secret under [the TSPA]. The word costs’ as the same appears and is used in this section shall be construed to include reasonable attorneys’ fees in such amounts as the court shall in its discretion determine and allow….”

G.S. 66-154(d) is at odds with G.S. 6-21. A trial court “may” award attorneys’ fees under Sec. 66-154(d), while under Sec. 6-21, a trial court “shall” award costs, which “shall be construed to include” attorneys’ fees. Under Sec. 66-154(d), the trial court may only award attorneys’ fees to the prevailing party if “a claim of misappropriation is made in bad faith or if willful and malicious misappropriation exists.” Under Sec. 6-21, a trial court has the discretion to tax costs against either party or apportion costs between the parties and has the discretion to determine the amount of a “reasonable” fee. Importantly, neither party must show “bad faith” or “willful and malicious misappropriation” under Sec. 6-21 to be awarded costs.

While we agree with defendants that to superimpose the conditions of Sec. 66-154(d) on Sec. 6-21 would “eviscerate” Sec. 6-21 for TSPA cases, we also note that to ignore the conditions of Sec. 66-154(d) when awarding “costs” under Sec. 6-21 would render Sec. 66-154(d) meaningless. We must resolve the statutes’ conflict in a manner which most fully effectuates the legislative intent.

We conclude that in an action under the TSPA, a trial court may only award attorneys’ fees to the prevailing party “if a claim of misappropriation is made in bad faith or if willful and malicious misappropriation exists,” pursuant to G.S. 66-154(d).

Affirmed.