DTSA “Ownership” Limits for Due-Diligence Disclosures and No Trade-Secret Protection for a Disclosed “Decision-to-Pass” Strategy

I. Introduction

ZipBy USA LLC v. Parzych (1st Cir. Mar. 19, 2026) arises from a classic duty-of-loyalty dispute in the M&A and technology space. Gregory Parzych, while serving as president of ZipBy USA, LLC (“ZipBy”), learned that Q-Free International (“Q-Free”) was considering selling Parzych’s former company, TCS. The jury accepted ZipBy’s view that Parzych advised ZipBy’s owner, Anthony Karam, to decline the acquisition, and then pivoted to pursue the same opportunity for himself via a shell entity (MJP Global Technologies) using diligence materials supplied by Q-Free.

ZipBy and affiliates (TMA Group of Companies Limited and TMA Capital Australia PTY LTD) sued for breach of fiduciary duty and contract, plus trade-secret and other claims, seeking damages and an injunction barring Parzych from acquiring TCS. After a jury verdict for ZipBy on all counts, the district court set aside the trade-secret verdict as legally unsupported, left the compensatory damages intact (as overlapping with contract and fiduciary-duty damages), entered a permanent injunction preventing Parzych from acquiring TCS, and awarded substantial attorneys’ fees under a fee-shifting clause in an IP agreement governed by California law.

The First Circuit affirmed across the board. The opinion is particularly significant for its treatment of: (1) the limits of “ownership” and secrecy when the alleged trade secret is third-party due-diligence information; (2) why an internal “strategy” that is necessarily disclosed (a decision to forgo a deal) is not a trade secret; and (3) the scope of contractual fee shifting for “enforcing” covenants even when litigation includes overlapping non-fee claims.

II. Summary of the Opinion

  • Expert lost-profits testimony admitted: The district court did not abuse discretion under Fed. R. Evid. 702 in admitting ZipBy’s damages expert’s “lost profits” model, notwithstanding reliance on pre-COVID projections, because methodological disputes went to weight, not admissibility.
  • Late-disclosed tax returns excluded: Excluding TCS’s 2021–2022 tax returns as untimely under Fed. R. Civ. P. 26 and 37 was within the district court’s discretion; the attempted eve-of-trial production was not substantially justified or harmless.
  • No continuance required for counsel’s COVID diagnosis: Proceeding with hybrid trial participation (lead counsel remote, co-counsel in person) was not an abuse of discretion; no concrete prejudice was shown.
  • Trade-secret verdict properly vacated: As a matter of law, ZipBy could not sustain DTSA/common-law misappropriation based on (a) Q-Free’s diligence data or (b) ZipBy’s “strategy to forgo” the acquisition.
  • Attorneys’ fees affirmed: The IP agreement’s fee-shifting provision covered fees “incurred in enforcing” its covenants; apportionment was not required for work common to fee and non-fee claims under Reynolds Metals Co. v. Alperson.

III. Analysis

A. Precedents Cited (and Their Role)

1. Expert evidence gatekeeping and reliability

  • Gen. Elec. Co. v. Joiner — Set the appellate standard: evidentiary admissions are reviewed for abuse of discretion, framing the court’s deference to trial management.
  • Daubert v. Merrell Dow Pharmaceuticals, Inc. and Kumho Tire Co. v. Carmichael — Supply the relevance/reliability framework applicable to all expert testimony, supporting admission where the methodology is sufficiently grounded even if disputable.
  • Lawes v. CSA Architects & Eng'rs LLP (quoting Milward v. Acuity Specialty Prods. Grp.) — Emphasizes that the gatekeeping inquiry is not whether the expert is “correct,” but whether Rule 702 is more likely than not satisfied; reinforces the role of cross-examination for “shaky but admissible” evidence.
  • United States v. Mooney and Crowe v. Marchland — Used to reject the idea that expert testimony must be “unassailable” and to distinguish admissibility from weight.

2. Trial fairness, disclosure, and “no surprise” litigation

  • Gomez v. Rivera Rodriguez and Harriman v. Hancock Cnty. — Provide the abuse-of-discretion framework and factors for exclusion under Rule 37(c)(1): justification, harmlessness, litigation history, docket impact, and need.
  • Thibeault v. Square D Co. (quoting United States v. Procter & Gamble Co.) — Anchors the policy rationale: trial is not “blindman’s buff”; pretrial disclosure is meant to make it a fair contest.

3. Continuances and trial management

  • United States v. Saccoccia (quoting Morris v. Slappy) — Supplies the high bar for reversal: denial is error only when it reflects “unreasoning and arbitrary insistence upon expeditiousness.”

4. Judgment as a matter of law and preserving jury verdicts

  • Sharp v. Hylas Yachts, LLC — De novo review standard for JMOL.
  • Crowley v. L.L. Bean, Inc. (quoting Rodowicz v. Mass. Mut. Life Ins. Co.) — “Weighted toward preservation of the jury verdict,” but still permits JMOL when no reasonable jury could find for the verdict winner.

5. Trade secrets: secrecy measures, ownership, and misappropriation

  • ZipBy USA LLC v. Parzych (D. Mass.) and Viken Detection Corp. v. Videray Tech. Inc. — Support treating DTSA and Massachusetts standards as “substantially similar.”
  • Allstate Ins. Co. v. Fougere and Incase Inc. v. Timex Corp. — Provide the Massachusetts common-law articulation (trade secret + improper means/breach of confidentiality) and justify analyzing state and federal claims “in tandem.”
  • Ruckelshaus v. Monsanto Co. — Key conceptual anchor: trade-secret “property” is defined by the owner’s protection from disclosure; secrecy is relational and control-based.
  • Jet Spray Cooler, Inc. v. Crampton (1972) — Cited for the “measures taken to guard secrecy” factor, which the court uses to reject “trade secret” status where secrecy is not maintained.
  • Jet Spray Cooler, Inc. v. Crampton (1979) — Cited in the damages discussion (analogous context) for the proposition that plaintiffs may seek either unjust enrichment or actual loss; used to rebut the claim that only restitution is available in corporate-opportunity cases.

6. Remedies and fee shifting under contract (California law)

  • Small Just. LLC v. Xcentric Ventures LLC and Gay Officers Action League v. Puerto Rico — Frame standards of review: fee awards for abuse of discretion, but legal errors are per se abuses of discretion.
  • Holsum de P.R., Inc. v. ITW Food Equip. Grp. LLC — Contract interpretation is reviewed de novo.
  • In re Newport Plaza Assocs., L.P. — Allows the court to accept parties’ agreement on the applicable substantive law (here, California).
  • Reynolds Metals Co. v. Alperson — Controls apportionment: fees need not be apportioned when incurred on issues common to fee-eligible and non-fee claims.

B. Legal Reasoning

1. Lost profits as damages for a diverted corporate opportunity

The court rejected Parzych’s categorical argument that Massachusetts law permits only restitution (disgorgement) for misappropriated corporate opportunities. While Demoulas v. Demoulas Super Mkts., Inc. and Hanover Ins. Co. v. Sutton show that restitution is available, the First Circuit emphasized the absence of any rule making restitution exclusive. By analogy to trade-secret remedies recognized in Jet Spray Cooler, Inc. v. Crampton (1979), the court saw no doctrinal barrier to awarding “actual loss” style damages (lost profits) when properly proved.

On admissibility, the court treated disputes about the pre-COVID projections and “but for” performance assumptions as classic weight-not-admissibility issues under Daubert v. Merrell Dow Pharmaceuticals, Inc. and Lawes v. CSA Architects & Eng'rs LLP. The central move was to accept that a post-acquisition business may perform differently than its standalone actuals because of synergies—making reliance on projections not inherently illogical.

2. Excluding late tax returns under Rules 26 and 37

The court treated the exclusion as straightforward Rule 37(c)(1) preclusion: the disclosure came two years after fact discovery and seven days before trial. Under Harriman v. Hancock Cnty., the justification was thin (documents existed; defendant waited), and the “harmlessness” claim failed because the late disclosure would deprive ZipBy of the chance to investigate and respond. The court also minimized need: the evidence was largely cumulative of Radford’s anticipated testimony.

3. No abuse of discretion in continuing trial with remote participation

Applying United States v. Saccoccia, the First Circuit found no “unreasoning and arbitrary insistence upon expeditiousness.” The record showed: (i) the court considered alternatives, (ii) co-counsel was present and active, (iii) lead counsel chose remote participation even when offered an in-person masked closing, and (iv) the appellant identified no concrete prejudice beyond general skepticism about “trial by Zoom.”

4. The core trade-secret holding: third-party diligence data and “decision-to-pass” are not ZipBy trade secrets on this record

The most precedential portion of the opinion is its refusal to let trade-secret law do work that is better handled by fiduciary-duty and contract doctrines. The court affirmed JMOL against ZipBy on both DTSA and Massachusetts claims, treating the standards as “substantially similar” per Viken Detection Corp. v. Videray Tech. Inc. and analyzing them “in tandem” per Allstate Ins. Co. v. Fougere.

(a) Q-Free’s financial diligence materials: ZipBy tried to characterize itself as an “owner” of Q-Free’s information under 18 U.S.C. § 1839(4) (arguing it was a licensee obligated to keep the information confidential). The First Circuit’s functional response was: even if ZipBy had some confidentiality-based right to use the information for evaluation, the record showed Q-Free—the true originator—did not object once it was “soon obvious” Parzych was pursuing the deal for himself, and a Q-Free executive effectively confirmed indifference (“Fine for us. It doesn't matter as long as we know who we deal with.”). Using Ruckelshaus v. Monsanto Co., the court underscored that trade-secret rights track the owner’s control and protection of secrecy; the evidence did not support ZipBy “standing in Q-Free’s shoes” to police Parzych’s use of Q-Free’s data via a trade-secret claim.

(b) ZipBy’s “internal strategy to forgo the TCS opportunity”: The court rejected this as a trade secret because implementing the strategy required telling Q-Free ZipBy was not interested, and ZipBy pointed to no evidence that such communication was confidential. Critically, the DTSA definition requires “reasonable measures to keep such information secret,” 18 U.S.C. § 1839(3)(A). With “no measures at all” to keep the “decision to pass” secret, no reasonable jury could find trade-secret status.

5. Fee shifting: “incurred in enforcing” covenants reaches the litigation as tried, and common-issue work need not be apportioned

The IP Agreement contained (i) an injunctive-relief clause with stipulated irreparable harm and (ii) a fee-shifting clause making the employee responsible for “reasonable attorneys’ fees and court costs incurred in enforcing any of the covenants.” The First Circuit read this as two distinct effects—not as a fee clause limited to injunction-only proceedings.

Parzych’s narrower reading (fees only for obtaining injunctive relief; or not “enforcing” because the covenants did not govern his pursuit of TCS) failed on the way the case was tried: the jury was instructed that Parzych’s conduct violated Section 1 of the IP Agreement (devoting energy/skills to the company’s best interests), and the jury found a breach of the IP Agreement. With that liability intact, the fees were “incurred in enforcing” the agreement’s covenants.

As to overlap with other claims (including trade secrets, on which ZipBy ultimately lost), the court relied on Reynolds Metals Co. v. Alperson to affirm non-apportionment for work on issues common to fee and non-fee claims. The district court’s practical reduction to two-thirds of requested fees was upheld as within its discretion.

C. Impact

  • Trade-secret doctrine is not a backstop for loyalty breaches: The opinion signals skepticism toward plaintiffs relabeling a fiduciary/contract violation as DTSA misappropriation, especially where the alleged “secret” originates with a third party and the third party does not act like a secrecy-enforcing owner.
  • Third-party diligence data may be hard to plead as “your” trade secret: Companies receiving diligence materials under NDAs should expect heightened scrutiny when claiming they “own” the information for DTSA enforcement purposes—particularly if the originator’s conduct shows permissive disclosure or indifference.
  • “Decision-to-pass” information is rarely secret in practice: If a strategy is effectuated through outward communication and no confidentiality protocols attach, it will struggle to satisfy § 1839(3)(A)’s “reasonable measures” requirement.
  • Fee-shifting clauses can have broad reach in mixed-claim cases: Where a contract claim is proven and shares a common factual nucleus with other theories, Reynolds Metals Co. v. Alperson supports awarding fees for common work even if some claims fail.
  • Trial practice lessons: (i) late “impeachment” framing will not save undisclosed documents when they also bear on damages; (ii) generic objections to remote participation will not show prejudice absent specific examples.

IV. Complex Concepts Simplified

Trade secret (DTSA)
Information with independent economic value from not being generally known, where the owner took “reasonable measures” to keep it secret (18 U.S.C. § 1839(3)(A)). If the information is shared or acted upon without confidentiality safeguards, it may stop being a “trade secret” for DTSA purposes.
Misappropriation
Using or acquiring a trade secret through improper means or in breach of a duty, and without consent (18 U.S.C. § 1839(5); see also the Massachusetts formulation quoted via Allstate Ins. Co. v. Fougere and Incase Inc. v. Timex Corp.).
“Ownership” of a trade secret
DTSA requires the plaintiff to be an “owner.” ZipBy argued “licensee = owner.” The court’s record-driven response emphasized practical control: if the originator behaves as if it can disclose freely and does not object to the challenged use, it is difficult to treat the recipient as the party who can enforce secrecy rights as “owner.”
Judgment as a matter of law (JMOL)
A post-trial ruling that, even viewing evidence in the verdict winner’s favor, no reasonable jury could legally reach that verdict. The First Circuit applied this to the trade-secret counts.
Fee shifting and “common issues”
Under Reynolds Metals Co. v. Alperson, if work advances both fee-eligible and non-fee claims based on the same core issues, courts need not split (“apportion”) those fees.

V. Conclusion

ZipBy USA LLC v. Parzych affirms substantial remedies for disloyal conduct (damages, injunction, and contractual fees) while sharply limiting the reach of trade-secret law in that setting. The First Circuit’s key contribution is a pragmatic trade-secret boundary: third-party M&A diligence materials and a non-confidential “decision to pass” cannot be converted into the employer’s trade secrets on a record showing no meaningful secrecy enforcement or measures. At the same time, the court underscores that traditional tools—fiduciary-duty and contract enforcement, plus fee shifting where bargained for—remain potent.