Blockchain Innovation, LLC v. Franklin Resources, Inc.

Background

This public version of the order addresses the parties’ motions in limine, which are pretrial requests to limit testimony, exhibits, or arguments before the evidence is presented to the jury. The court explained that these rulings are preliminary and may be changed at trial. It also emphasized that denying a motion to exclude evidence does not mean all evidence covered by the motion will necessarily be admitted.

Plaintiff’s motions

The court granted Plaintiff’s Motion in Limine No. 1 as to statements or evidence that Alina Trombley failed to preserve text messages, and denied it as to Austin Trombley and Aaron Travis. Defendants may not use the term “spoliation” when referring to Austin Trombley or Aaron Travis. For Motions Nos. 2–3, the court stated that Defendants could not introduce the excluded expert opinions of Dr. Seoyoung Kim or Dr. Steven Melvin concerning whether the alleged trade secrets qualified as trade secrets or whether Onsa owned them. Beyond that limitation, the court denied the motions without prejudice.

The court denied Plaintiff’s Motions Nos. 4, 5, and 6 without prejudice. Those motions sought to exclude evidence concerning alleged misrepresentations inducing Franklin Templeton’s investment, alleged mismanagement or losses as a cause of damages, and alleged delay in enforcing nondisclosure-agreement provisions. The court found that such evidence could be relevant to issues including breach of fiduciary duty, damages, the value of the alleged trade secrets, and efforts to keep them secret, even though the court had previously granted summary judgment on certain affirmative defenses.

The court denied Plaintiff’s Motions Nos. 7 and 8 concerning ownership of the alleged trade secrets and Austin Trombley’s intellectual-property agreement. It denied Motion No. 9 concerning the successor relationship between TokenVault, Inc. and TokenVault Limited, explaining that the earlier summary-judgment ruling was limited to the summary-judgment context and did not finally resolve the issue for trial. Regarding Motion No. 10, the court agreed that Defendants could not argue that expert testimony was legally required to establish the existence of trade secrets, but stated that Plaintiff’s decision not to offer such expert testimony was not necessarily irrelevant or unfairly prejudicial.

The court denied Plaintiff’s Motions Nos. 11 and 12 concerning Roger Bayston’s alleged reliance on legal advice, financial advisors, or expert consultants. It granted Motions Nos. 13, 14, and 15, excluding the police report concerning a gun and cocaine residue at Onsa’s offices; evidence of alleged drinking, drug use, or violations of stay-at-home COVID protocols; and evidence of alleged tax fraud or commingling of business and personal assets by Austin or Alina Trombley. The court found that the relevance of this evidence was outweighed by risks of unfair prejudice, confusion, misleading the jury, or wasting time.

The court denied Motion No. 16 concerning settlement discussions without prejudice, allowing trial objections to prohibited uses under Federal Rule of Evidence 408. It denied Motions Nos. 17 and 18 without prejudice, allowing evidence about Onsa’s fundraising, business operations, pre-investment difficulties, and delays in due diligence, subject to objections at trial. It denied Motions Nos. 19, 20, and 21 without prejudice concerning the negotiation of the August 2021 Asset Purchase Agreement and related communications, but ordered Defendants to avoid references to Plaintiff’s litigation counsel in connection with those issues and to redact documents as necessary.

The court denied Motion No. 22 concerning Blockchain’s post-acquisition efforts to restart Onsa’s business, develop its platform, or market or sell its assets. It found that this evidence could bear on the value of the alleged trade secrets and intellectual property. The court denied Motions Nos. 23 through 26 concerning the reasons for Onsa’s wind-down, alleged code deficiencies, intellectual-property ownership issues, and the relationship between Austin Trombley and Tauseef Bashir. It treated these as potentially relevant factual issues for the jury. The court denied Motion No. 27 concerning impeachment with documents designated confidential or for attorneys’ eyes only, and denied Motion No. 28 without prejudice concerning alleged efforts by Austin Trombley to encourage shareholder requests and emails.

Defendants’ motions

Defendants’ Motions in Limine Nos. 1, 2, and 3 were moot. The court granted Defendants’ Motion No. 4, excluding Austin Trombley’s proposed lay opinion testimony about the value of the alleged trade secrets. The court held that, on these facts, the valuation testimony was not rationally based on his perception and involved specialized knowledge requiring expert testimony. The court had also previously excluded Trombley’s expert valuation testimony.

The court granted in part and denied in part Defendants’ Motion No. 5 concerning evidence related to a witness’s mental health. The supplied text contains anonymized references to the witness and does not fully identify the precise evidence included in each part of the ruling. The court found that evidence about Bayston’s conduct toward and rapport with other Franklin Templeton employees was relevant to Plaintiff’s fiduciary-duty claims.

The court denied Defendants’ Motion No. 6 concerning references to Onsa’s “death” and similar language, without prejudice to arguments about relevance or unfair prejudice at trial. It denied Motion No. 7 concerning the sale of Curv to PayPal, without prejudice to trial objections. The court granted in part and denied in part Motion No. 8(a): it excluded Yorkison’s testimony about his knowledge of money-transmitter-license regulations, but declined to categorically exclude his testimony about Onsa’s licenses, including their value, leaving objections about relevance or improper lay opinion for trial. The court denied the portion concerning Bayston’s alleged profanity.

The order’s discussion of Defendants’ Motion No. 9 describes it as an untimely challenge to expert testimony about two 2021 money-transmitter-license transactions and states that the challenge could not be brought on the eve of trial. However, the supplied text’s concluding sentence refers to denying “Plaintiff’s Motion in Limine No. 9,” creating an apparent labeling error. The ruling described in that section is that the challenge to the expert testimony was denied.

For Defendants’ Motion No. 10, the court granted subsection 10(a), ordering a bifurcated trial. In the first phase, the jury will decide liability, compensatory damages, and entitlement to punitive damages. If it finds an entitlement to punitive damages, the same jury will later decide the amount. The court denied subsection 10(b), refusing to broadly exclude evidence about a witness’s or party’s financial condition, including income, bonuses, salary, or compensation, during the liability phase. The court specifically found that Bayston’s salary from Franklin Templeton could be relevant to whether he was disinterested and independent as an Onsa director.

Disposition

The order concludes that the parties’ motions in limine were granted in part and denied in part as stated above. Judge Thomas S. Hixson did not enter a final merits judgment in this order; it governed the use of evidence and presentation of the upcoming trial.