Prevailing-Party Fee Awards Despite Plaintiff’s Nominal Victory: A Commentary on Advanced Analytics, Inc. v. Citigroup Global Markets, Inc.

Introduction

In Advanced Analytics, Inc. v. Citigroup Global Markets, Inc., the United States Court of Appeals for the Second Circuit confronted a long-running trade-secret dispute that had spanned almost two decades, two discovery cycles, and multiple expert submissions.

The core allegation was that Citigroup Global Markets, Inc. (“CGMI”) and its affiliate, The Yield Book, Inc. (“TYB”) (collectively, “Defendants”), illicitly incorporated a proprietary numerical sequence—dubbed the “ACE Numbers”—developed by Advanced Analytics, Inc. (“AAI”) into TYB’s fixed-income analytics software following failed licensing negotiations in the mid-1990s. AAI sought millions in damages for misappropriation, breach of contract (violation of a nondisclosure agreement, or “NDA”), breach of the duty of good faith, quantum meruit, and unjust enrichment.

After the Southern District of New York (Swain, C.J.) granted summary judgment to Defendants on all substantive claims and awarded AAI only nominal damages for a narrow NDA breach, AAI appealed. The Second Circuit—through a non-precedential Summary Order—affirmed in full. Although the Order itself lacks precedential force, its reasoning carries instructive weight on four recurring litigation themes:

How strictly federal courts police evidentiary burdens in trade-secret cases at the summary-judgment stage;
The breadth of a district court’s discretion over discovery;
The circumstances under which only nominal damages are appropriate, even when liability is technically established; and
When a defendant can still qualify as the “prevailing party” entitled to contractual fee-shifting despite the plaintiff’s attainment of limited relief.

Summary of the Judgment

Discovery Rulings: The Court upheld the trial court’s denial of additional discovery, its rejection of alleged discovery misconduct, and its exclusion of an untimely and previously stricken expert declaration (“Fourth Fan Declaration”).
Summary Judgment: Affirmed dismissal of AAI’s trade-secret and related contractual/quasi-contractual claims. AAI failed to produce admissible evidence showing Defendants’ “use” of the ACE Numbers or to rebut Defendants’ independent-development evidence.
Damages: Upheld the award of nominal damages ($1) for Defendants’ limited NDA breach, finding no record evidence tying any actual loss to that isolated retention of a test report.
Attorneys’ Fees: Upheld an award of fees and costs to Defendants under the NDA’s prevailing-party clause. The Court reasoned that Defendants, not AAI, achieved the “central relief sought” because they defeated the primary misappropriation and contract claims involving substantial damages.

Analysis

A. Precedents Cited

The panel relied on a familiar but potent arsenal of authorities:

Celotex Corp. v. Catrett, 477 U.S. 317 (1986) – Clarifies that summary judgment is proper when the non-movant fails to produce evidence on an element for which it bears the burden.
Faiveley Transp. Malmo AB v. Wabtec Corp., 559 F.3d 110 (2d Cir. 2009) – Sets forth the “use” requirement in trade-secret misappropriation: plaintiff must show the defendant’s product is derived from or substantially similar to the trade secret.
Paddington Partners v. Bouchard, 34 F.3d 1132 (2d Cir. 1994) – Warns against “fishing expeditions” in discovery, demanding targeted requests tied to material evidentiary gaps.
Nestor v. McDowell, 81 N.Y.2d 410 (1993) and Manhattan Rev. LLC v. Yun, 919 F.3d 149 (2d Cir. 2019) – Explain the “prevailing party” concept under New York law.
Norfolk S. Ry. Co. v. Pittsburgh & W. Va. R.R., 870 F.3d 244 (3d Cir. 2017) & Jill Stuart (Asia) LLC v. Sanei Int’l Co., 566 F. App’x 29 (2d Cir. 2014) – Approve nominal-damages awards on summary judgment when no evidence supports actual loss.
Additional guardrails on abandonment of issues (Grand River Enters. Six Nations, Ltd. v. Pryor) and the insufficiency of conclusory assertions (Shannon v. NYC Transit Auth.).

These precedents collectively fortified the panel’s view that summary judgment is proper absent concrete, admissible evidence; that discovery is not a license for indefinite searching; and that fee-shifting depends on the practical (not merely formal) outcome of the litigation.

B. Legal Reasoning

Discovery Discretion. Applying an abuse-of-discretion standard, the panel accepted the district court’s twin findings that (i) AAI lacked substantive proof of discovery misconduct, and (ii) further discovery requests were overly speculative post-two extensive rounds of discovery. The decision underscores that courts will not compel discovery based on conjecture.
Trade-Secret Misappropriation.
- Prima Facie Failure: The Court held AAI never crossed the threshold of showing “use” of the ACE Numbers. Bare assertions that TYB’s algorithms “must contain” the sequence, unaccompanied by technical comparison or source-code overlap, are insufficient.
- Independent Development: CGMI proffered unrebutted expert and documentary evidence of in-house development—shifting the burden to AAI to create a triable fact issue. Without admissible contrary evidence (the Fourth Fan Declaration was excluded), AAI’s claims collapsed.
Nominal Damages on the NDA Breach. Even where liability was conceded—CGMI retained a single test report—AAI produced no evidence that this retention caused its claimed multimillion-dollar losses. Celotex principles thus mandated nominal damages at the summary-judgment stage.
Prevailing-Party Fee Award. The NDA’s fee clause made no distinction between plaintiffs and defendants; the decisive inquiry is who “prevailed with respect to the central relief sought.” Defendants, having defeated the substantive heart of the lawsuit and exposing AAI to only a token victory, satisfied that standard.

C. Impact

Although technically non-precedential, the Order will likely influence future litigation strategy in several ways:

Heightened Burden in Trade-Secret Cases. Plaintiffs must marshal admissible, technical evidence showing use or derivation—mere access plus suspicion no longer suffices.
Strategic Use of Fee-Shifting Clauses. Parties drafting NDAs (and other IP agreements) should recognize that a defendant can still be the “prevailing party” even if a plaintiff pinches a minor victory. Plaintiffs must weigh potential fee exposure before launching broad, high-stakes claims.
Discovery Discipline. Courts will resist prolonged, speculative discovery—especially in cases with a long procedural history—unless the request is narrowly framed to plug specific evidentiary holes.
Expert Timing and Admissibility. Parties should ensure expert submissions comply with scheduling orders and do not recycle previously stricken material. Non-compliance can prove fatal at summary judgment.

Complex Concepts Simplified

Misappropriation of Trade Secrets: Using or disclosing another’s confidential business information without permission. Proving it typically requires (i) a valid trade secret, (ii) access by the defendant, and (iii) use or derivation of that secret in the defendant’s product or service.
Summary Judgment: A procedural device allowing a court to decide a case without trial when no genuine disputes of material fact exist and the movant is entitled to judgment as a matter of law.
Nominal Damages: A token sum (often \$1) awarded when a legal right is violated but no actual, provable monetary loss flows from the breach.
Prevailing Party (New York Law): The litigant that achieves the main relief it sought in the lawsuit, entitling it—if contracted—to recover attorney fees and costs.
Independent Development Defense: Proof that a defendant created the challenged product or information on its own, without relying on the plaintiff’s trade secret, defeating the “use” element.

Conclusion

Advanced Analytics reaffirms several bedrock principles of federal litigation. First, trade-secret plaintiffs must substantiate the “use” element with concrete, admissible evidence; speculation and hindsight will not suffice. Second, discovery remains bounded by proportionality and specificity, particularly in aged, heavily litigated disputes. Third, even when liability technically exists, the absence of causally linked damages justifies only nominal recovery. Finally, contractual fee-shifting clauses will be enforced according to practical litigation outcomes, meaning defendants can— and often will—recover fees when they defeat the lion’s share of claims, notwithstanding a plaintiff’s minor success.

For practitioners, the case is a cautionary tale: pursue trade-secret litigation only with robust technical proof, adhere strictly to expert and discovery deadlines, and scrutinize fee-shifting provisions before pressing forward. For courts, the decision illustrates a disciplined application of procedural rules to winnow meritless claims and to encourage efficient dispute resolution.