Opinion
Civil Action 6:20-cv-01173-DTG
04-23-2024
PITTSBURGH LOGISTICS SYSTEMS, INC., Plaintiff and Counter Defendant, v. GLEN ROSE TRANSPORTATION MANAGEMENT, Defendant and Counter Plaintiff.
ORDER GRANTING IN PART, DENYING IN PART, DEFENDANT'S SECOND MOTION FOR SUMMARY JUDGMENT [ECF NO. 168]
DEREK T. GILLILAND UNITED STATES MAGISTRATE JUDGE
This case arises from the actions of Plaintiff's former employee-Mr. Andrew “AJ” Barricks-who left Plaintiff and joined Defendant.
Defendant filed its Second Motion for Summary Judgment on July 12, 2023. ECF No. 168. Plaintiff filed its response in opposition on July 24, 2023. ECF No. 169. Defendant filed its Reply in support on November 22, 2023. ECF No. 171. The Court held a hearing on the motions for summary judgment on November 15, 2023. ECF No. 165. For the following reasons, the Court GRANTS IN PART, DENIES IN PART, Defendant's Second Motion for Summary Judgment, ECF No. 168.
Citations to ECF Nos. refer to filings in this case's docket, Pittsburgh Logistics Systems, Inc. v. Glen Rose Transportation Management, No. 20-cv-1173.
I. FACTUAL BACKGROUND
The factual background is discussed in detail in this Court's Order Denying Plaintiff's Second Motion for Summary Judgment. ECF No. 179 at 2-5, 2024 WL 718695, at *1-3 (W.D. Tex. Jan. 30, 2024).
II. LEGAL STANDARD
The summary judgment standards are well known, and the Court will only recite some relevant portions here. The Court will not grant summary judgment if there are genuine disputes of material fact. Fed.R.Civ.P. 56. Courts will “draw all reasonable inferences in favor of the nonmoving party” when ruling on a summary judgment motion. Williams v Hampton, 797 F.3d 276, 282 (5th Cir. 2015).
III. ANALYSIS
Defendant's summary judgment motion seeks judgment in Defendant's favor on all of Plaintiff's causes of action. This order is organized by the counts alleged in Plaintiff's operative, Amended Complaint. ECF No. 115.
A. Count I: Tortious Interference with Business Relationships, and its TUTSA Preemption
Tortious interference with business relationships requires proof of several elements. Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909, 923 (Tex. 2013) (listing the elements necessary to prove tortious interference with a prospective business relationship). The element that is critical to the analysis here is that tortious interference with business relationships requires Plaintiff to prove Defendant's conduct was independently tortious or unlawful. Id. Plaintiff's Amended Complaint identifies four allegedly independently tortious or unlawful acts by Defendant. ECF No. 115 ¶¶ 32-35. First, Plaintiff argues Defendant misappropriated and converted Plaintiff's trade secret or confidential information. Id. ¶¶ 32-33. Second, Plaintiff alternatively argues Defendant's conduct is independently actionable under the tort of unfair competition by misappropriation. ECF No. 115 ¶¶ 34; ECF No. 131 at 14 & n.17 (citing Baylor Scott & White v. Project Rose MSO, LLC, 633 S.W.3d 263, 287 (Tex. App.-Tyler Aug. 30, 2021, 2 pet. denied)); ECF No. 169 at 7. Additionally, third and fourth, Plaintiff argues Defendant “conspired with Mr. Barricks to breach Mr. Barricks' fiduciary duties to PLS and induced the breach of Mr. Barricks' non-solicitation agreement.” ECF No. 115 ¶¶ 35. Defendant argues the Court should dismiss Plaintiff's Count I (tortious interference with business relationships) because it is preempted by the Texas Uniform Trade Secrets Act. ECF No. 168 at 13-14.
The elements of the tort of unfair competition by misappropriation are: (1) the creation of plaintiff's product through extensive time, labor, skill, and money; (2) the defendant's use of that product in competition with the plaintiff, thereby gaining a special advantage in that competition because defendant is burdened with little or none of the expense incurred by the plaintiff; and (3) commercial damage to the plaintiff. Baylor Scott & White, 633 S.W.3d at 287.
Under Texas law, an employee “may not act for his future interests at the expense of his employer . . . by a course of conduct designed to hurt the employer.” Navigant Consulting, Inc. v. Wilkinson, 508 F.3d 277, 284 (5th Cir. 2007) (citing Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 199 (Tex. 2002)).
TUTSA specifically preempts some claims. It “displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret.” Tex. Civ. Prac. & Rem. Code § 134A.007(a). TUTSA does not preempt “contractual remedies, whether or not based upon misappropriation of a trade secret,” or “other civil remedies that are not based upon misappropriation of a trade secret.” Id. at § (b)(1)-(2). The “majority approach” described by multiple district courts holds that “TUTSA ‘preempts all claims based on the alleged improper taking of trade secret and confidential business information.'” E.g., BKL Holdings, Inc. v. Globe Life Inc., 660 F.Supp.3d 602, 609-10 (E.D. Tex. 2023) (quoting StoneCoat of Tex., LLC v. ProCal Stone Design, LLC, 426 F.Supp.3d 311, 338-39 (E.D. Tex. 2019)); Embarcadero Techs., Inc. v. Redgate Software, Inc., No. 17-cv-444, 2018 WL 315753, at *3 (W.D. Tex. Jan. 5, 2018) (explaining that the “majority approach” holds TUTSA “was intended to preempt all claims based upon the unauthorized use of information”). Other courts have declined to find preemption when illicitly obtained information is not yet established to be a trade secret. E.g., DHI Grp., Inc. v. Kent, 397 F.Supp.3d 904, 922-23 (S.D. Tex. 2019) (quoting AMID, Inc. v. Medic Alert Found. U.S., Inc., 241 F.Supp.3d 788, 827 (S.D. Tex. 2017) (holding that the plaintiff was allowed to plead that the defendant “misappropriated information protected as trade secrets, and alternatively under the theory that the misappropriated information was not a trade secret but was confidential”)) (“The court fails to see how the plain language of the TUTSA's preemption provision can be read to preempt civil remedies for the misappropriation of information that is not a trade secret.”). Still other courts have drawn a distinction between claims that are preempted by TUTSA because they are premised on conversion of confidential information, and claims that are not preempted because they are supported by facts “unrelated” to trade secret misappropriation. 360 Mortg. Grp., LLC v. Homebridge Fin. Servs., Inc., No. 14-cv-847, 2016 WL 900577, at *6-8 (W.D. Tex. Mar. 2, 2016).
The Court in DHI explained that because neither party had established the trade secret status of any of the information that was illicitly obtained, the court could not say whether any of Plaintiffs' non-TUTSA claims were preempted, but noted “[i]f it is later established that any of the illicitly obtained information is a trade secret under the TUTSA, then the TUTSA preempts Plaintiffs' claims involving the misappropriation of that information.” DHI Grp., 397 F.Supp.3d at 923 & n.80.
Defendant argues Plaintiff's tortious interference claim (Count I) relies on the same facts as the TUTSA claim (Count III) and that TUTSA has been held to preempt claims of misappropriation of confidential information. ECF No. 168 at 13-14 (citing StoneCoat, 426 F.Supp.3d at 337). Defendant adds that in the SDTX Barricks case, the Court granted summary judgment to Mr. Barricks on the basis of TUTSA preemption when Plaintiff relied on the same facts as it does here to support the same claims. ECF No. 168 at 13-14; Pittsburgh Logistics Sys., Inc v. Barricks, No. 20-cv-4282, 2022 WL 705870, at *9-10 (S.D. Tex. Mar. 9, 2022) (hereinafter, “Barricks MSJs”) (finding TUTSA preempted claims for tortious interference with prospective business; unfair competition; and breach of fiduciary duty of loyalty).
Plaintiff responds by claiming that its “tortious interference claim does not rely on the existence of a trade secret as an essential element.” ECF No. 169 at 19. Rather, Plaintiff points to “the customer lists shared by Mr. Barricks and received by GRTM,” which included “billing addresses, phone numbers, and tax identification information.” Id. Plaintiff contends that this information is confidential, but not a trade secret. Id. at 18-20 (citing ECF No. 131 at 12 n. 14); ECF No. 131 at 12 n. 14 (first citing Ex. 2 (ECF No. 131-2) (email from Mr. Barricks to Defendants with billing addresses and phone numbers for customers); then citing Ex. 15 (ECF No. 131-15) (Exemption List with customer names and federal tax ID numbers)). Nonetheless, Plaintiff has elsewhere claimed that “the customer list itself” is a trade secret. ECF No. 169 at 20 (emphasis added).
Plaintiff relies on DHI's holding to support its argument that TUTSA does not preempt claims based on misappropriation of information that is not a trade secret. ECF No. 169 at 19 (citing DHI, 397 F.Supp.3d at 923). Plaintiff argues that it is proper to plead that Defendant misappropriated trade secrets and alternatively that it misappropriated confidential information that was not a trade secret. Id. (citing DHI, 397 F.Supp.3d at 922). Plaintiff argues the Barricks court's finding of preemption lacked key pieces of evidence-ECF No. 131-2, an email from Mr. Barricks to Defendants with billing addresses and phone numbers for customers; and ECF No. 131-15, an Exemption List with customer names and federal tax ID numbers-that have only recently become available and are not Plaintiff's trade secrets. Id. at 18; ECF No. 131 at 12 n. 14.
The Court finds Plaintiff's tortious interference with business relations count (Count I) is preempted by TUTSA. The res judicata effect of the Barricks court ruling is that the customer list and related, emailed, information are trade secrets. Pittsburgh Logistics Systems, Inc. v. Barricks, 20-cv-4282, 2022 WL 2353334, at *7 (S.D. Tex. June 30, 2022) (hereinafter “Barricks FF&CL ”). The Barricks court found preemption based on Plaintiff's evidence that Mr. Barricks emailed a customer list entitled “AJ Lifetime Numbers 8.14.19” to himself and later serviced six former PLS customers. Barricks MSJs, 2022 WL 705870, at *3, *9-10 (“The document contained the names of PLS's customers who had worked with Mr. Barricks and included the numbers of loads, total revenue, total cost, margin, and margin percentage.”).
The fact Plaintiff has now submitted email exhibits with an Exemption List and customer contact information and tax ID numbers does not alter the conclusion of preemption. TUTSA defines “Trade secret” as “information” that “derives independent economic value, actual or potential, from not being generally known.” Tex. Civ. Prac. & Rem. Code § 134A.002(6)(B). Here, the confidential information Plaintiff argues is not a trade secret is the very same information that gives value to the customer list that Plaintiff argues is a trade secret. The Court disagrees with Plaintiff that there is a distinction between its trade secret customer list and its allegedly misappropriated confidential information. Regardless of the specific non-trade secret information-addresses and tax ID numbers-Plaintiff's tortious interference claim would not exist without the trade secret information. See Thomas v. Joule Processing LLC, No. 23-cv-1615, 2023 WL 8437634, at *4-5 (S.D. Tex. Dec. 5, 2023) (finding TUTSA preemption of claim for tortious interference with prospective business relationships because “the factual basis of the common law claim, as pleaded, would not exist ‘without the use of alleged trade secrets'”). Even if this Court accepted Plaintiff's distinction between the trade-secret customer list and the confidential information contained in the list, the “majority approach” holds that TUTSA preempts all claims based upon the unauthorized use of trade secret or confidential information. E.g., BKL Holdings, 660 F.Supp.3d at 609-10; Embarcadero, 2018 WL 315753, at *3.
Plaintiff's cited authorities are distinguishable. See ECF No. 169 at 19-20 (first citing DHI, 397 F.Supp.3d at 922-23; then citing 360 Mortg., 2016 WL 900577, at *7-8). Plaintiff's cited authority of DHI is distinct because although DHI declined to find preemption when neither party established the trade secret status of any of the illicitly obtained information, here the instant record and prior Barricks court's holdings establish the presence of trade secrets. DHI, 397 F.Supp.3d at 923; Barricks FF&CL, 2022 WL 2353334, at *7; Barricks MSJs, 2022 WL 705870, at *9-10; 360 Mortgage is distinguishable because it held facts underlying a claim must be “unrelated” to trade secrets to avoid preemption but here Plaintiff's allegations on tortious interference (Count I) are directly related to facts that form the basis of the trade secret misappropriation claim. 360 Mortg., 2016 WL 900577, at * 7.
Therefore, the Court GRANTS Defendant's Motion for Summary Judgment on Count I: tortious interference with business relationships and finds that this claim is preempted by TUTSA. ECF No. 168 at 13-14.
B. Count II: Unjust Enrichment
Plaintiff's second cause of action is based on unjust enrichment. Unjust enrichment occurs when a person wrongfully secures a benefit or passively receives a benefit that would be unconscionable to retain. Eun Bok Lee v. Ho Chang Lee, 411 S.W.3d 95, 111 (Tex. App.-Houston [1st Dist.] 2013, no pet.). This can occur when a party obtains a benefit by taking undue advantage of another such as by fraud or duress, however unjust enrichment does not exist to remedy a simple unfortunate loss. Id. at 112.
The Court finds there is a disputed fact issue as to unjust enrichment. Defendant points to two customers-Select Energy and Novvi-who identified legitimate reasons that they stopped doing business with Plaintiff as evidence negating the unjust enrichment claim. ECF No. 168 at 9. Defendant points to evidence that Mr. Barricks never discouraged customers from working with Plaintiff and gave customers the contact information for Plaintiff's new sales representative as undercutting this claim because Plaintiff retained the opportunity to do business with the customers. Id. at 2. Plaintiff points to evidence showing that Defendant pursued the customers with the assistance of Mr. Barricks and never told Mr. Barricks to stop soliciting the customers despite notice from Plaintiff of its claims. ECF No. 169 at 15. This evidence and the Court's previous findings persuade the Court that summary judgment on this claim should again be denied. ECF No. 179 at 7, 2024 WL 718695, at *4 (finding there is a disputed fact issue as to unjust enrichment); ECF No. 62 at 7, 2022 WL 15527752, at *3 (W.D. Tex. Oct. 27, 2022) (holding that “[n]either party has established their right to summary judgment on [Plaintiff]'s unjust enrichment claim”), report and recommendation adopted, ECF No. 69, 2022 WL 18110174 (W.D. Tex. Dec. 8, 2022). The Court concludes that summary judgment for Count II: unjust enrichment is DENIED.
C. Count III: Misappropriation under the Texas Uniform Trade Secrets Act, and
D. Count IV: Violation of the Defend Trade Secrets Act
To prevail on its summary judgment motion under these claims, Defendant is required to show no genuine issue of fact for one or more of the elements of each claim. To be entitled to summary judgment on Plaintiff's claim for trade secret misappropriation under TUTSA or DTSA, Defendant must establish no genuine issue of fact as to one or both of the required elements: (1) the existence of a trade secret and (2) misappropriation by Defendant. Barricks FF&CL, 2022 WL 2353334, at *6; see also Tex. Civ. Prac. & Rem. Code § 134A.002 et seq.; 18 U.S.C. § 1831 et seq.; Miner, Ltd. v. Anguiano, 383 F.Supp.3d 682, 702 (W.D. Tex. 2019).
The Court is persuaded that genuine issues of fact exist under each count. The Barricks court considered and determined that the customer list is a trade secret, which is relevant to the first element. BarricksFF&CL, 2022 WL 2353334, at *7. The Barricks court further found based on the facts presented at the SDTX bench trial that Plaintiff “failed to show that Defendant misappropriated that trade secret.” Id. at 8. As a result, the Barricks court concluded “that PLS has failed to establish liability for trade secret misappropriation.” Id.; see also ECF No. 168 at 10-11.
While neither party specifically refers to res judicata or collateral estoppel, they dispute the effect of the Barricks court's decision. See ECF No. 168 at 10-11; ECF No. 169 at 16-17; ECF No. 171 at 6. Res judicata might bar Plaintiff's claims if these same issues were previously litigated by privies of the current parties. Oreck Direct, LLC v. Dyson, Inc., 560 F.3d 398, 401 (5th Cir. 2009)(holding that res judicata prevents parties or privies from relitigating issues that were or could have been resolved in a prior case); see also Stock Bldg. Supply of Tex., L.P. v. Richardson, No. 06-cv-192, 2007 WL 9702864, at *4 (W.D. Tex. May 23, 2007) (citing United States v. Davenport, 484 F.3d 321 (5th Cir. 2007)) (refusing to apply res judicata or collateral estoppel because the moving parties failed to prove the two cases involved the same facts). Neither party disputes that Barricks involved the same parties or those in privity, that it was a court of competent jurisdiction, or that it reached a final judgment. The dispute, however, is whether facts uncovered since the Barricks case prevent summary judgment on the trade secret causes of action.
Defendant contends that the Barricks court decision prevents Plaintiff from raising a fact question about the second element of TUTSA or DTSA. Defendant points to the Barricks court's finding that Mr. Barricks did not misappropriate the trade secret. ECF No. 168 at 10. Defendant adds the evidence Mr. Barricks did not use the customer list is stronger now than it was at the Barricks trial because Barricks, while having client cell phone numbers on his phone, and not deleting them, did not call the customers-they called him. ECF No. 171 at 3. Defendant further contends it did not use the information because only Mr. Barricks had direct contact with the customers, which negates any possibility that any other employee of Defendant used the alleged trade secrets. ECF No. 168 at 11.
Plaintiff counters that the Barricks finding is not binding because of newly discovered evidence. Plaintiff points to new evidence showing that Defendant used Barricks's customer list to Defendant's benefit. ECF No. 169 at 16-17. Plaintiff argues Defendant set up the customers in Defendant's system using the information in the list and furthered its goodwill with Mr. Barricks during his onboarding by promising it would not adversely assert dominance over the customers on the list. Id. Plaintiff asserts that new evidence also allegedly shows that Defendant never told Barricks to stop servicing the Restricted Customers, even after the Barricks bench trial and ruling. ECF No. 131 at 10 (¶ 32).
Given the new evidence, this Court declines to apply res judicata to the second element of TUTSA and DTSA, and finds there is a genuine issue of material fact as to whether Defendant misappropriated Plaintiff's trade secrets. Defendant's Motion is DENIED for Count III, Misappropriation under the Texas Uniform Trade Secrets Act and Count IV, Violation of the Defend Trade Secrets Act.
E. Count V: Civil Conspiracy
Plaintiff's civil conspiracy claim requires proof of five elements. MVS Int'l Corp. v. Int'l Advert. Sols., LLC, 545 S.W.3d 180, 196 (Tex. App.-El Paso 2017, no pet.) (listing the elements necessary to prove civil conspiracy). To prevail on its summary judgment motion, Defendant must show that there is no genuine issue of material fact on at least one of those elements in Defendant's favor. First, Plaintiff must show a combination of two or more persons, and second, that the persons sought to accomplish an object or course of action. Id. Third, Plaintiff must prove a meeting of the minds on the object or course of action. Id. Fourth, Plaintiff must prove at least one unlawful, overt act taken in pursuit of the object or course of action. Id. And fifth, Plaintiff must prove damages proximately caused by the conduct. Id.
The first element that Mr. Barricks and Defendant are two or more persons. However, that means an element of the claim is indisputably met, which does not help Defendant's Motion for Summary Judgment in Defendant's favor.
Defendant argues the exemption list was not an unlawful object or course of action. Defendant argues the list was created for the six customers in question because they were Mr. Barricks's, and he needed an exemption to Defendant's non-compete agreement so he could take those customers if he left Defendant. ECF No. 168 at 12. Defendant also adds it had no input in shaping that exemption list, but Barricks had demanded it “through his headhunter.” Id. Defendant separately argues it is entitled to summary judgment on Plaintiff's civil conspiracy claim because civil conspiracy “is not an independent tort.” Id. at 11 (citing Agar Corp. v. Electro Cirs. Int'l, LLC, 580 S.W.3d 136, 142 (Tex. 2019)).
Plaintiff responds that a common purpose and meeting of minds can be shown because even if Defendant had no input in creating the exemption list, Defendant still accepted the Exemption List, signed it, and used the information on it to set up the customers in Defendant's system. ECF No. 169 at 17. Additionally, Plaintiff argues that Defendant has and continues to monetarily benefit from Mr. Barricks servicing the excluded customers. Id. at 18. Plaintiff argues that it has met the requirement that civil conspiracy include an independent tort because it alleges tortious interference with business relationships and misappropriation of confidential and trade secret information. Id. at 17-18 (citing Agar, 580 S.W.3d at 142); ECF No. 115 ¶¶ 77-81 (alleging independently tortious courses of conduct for the alleged civil conspiracy); ECF No. 131 at 21 (same).
The Court finds that there is a genuine dispute of material fact as to civil conspiracy. While there is no dispute that the first element-a combination of two or more persons-is met, fact issues exist for the other elements. The Court finds the undisputed evidence demonstrates Mr. Barricks discussed the customer list with Defendant's recruiter as part of being hired, and neither Defendant nor Barricks have attempted to stop servicing the excluded customers since Barricks started with Defendant. This is sufficient evidence to raise a fact question about whether Defendant and Mr. Barricks had a “preconceived plan and unity of design and purpose” under the second and third elements. Goldstein v. Mortenson, 113 S.W.3d 769, 779 (Tex. App.-Austin 2003, no pet.). The Court finds Plaintiff's allegations of misappropriation of trade secrets are relevant to the fourth and fifth elements. As the Court above found genuine issues of fact under those claims, they similarly create issues of fact for this conspiracy claim. Because the Court found Plaintiff's tortious interference claim to be preempted, however, it cannot be the basis of Plaintiff's conspiracy claim. The Court DENIES Defendant's Motion for Summary Judgment on the civil conspiracy claim.
F. Damages
Defendant seeks summary judgment that Plaintiff is not entitled to attorney's fees because, according to Defendant, under Texas law, attorney's fees must be provided for by statute or contract, and Defendant contends that there is no contract or statute that awards attorney's fees for Plaintiff's claims. ECF No. 168 at 12-13. Plaintiff refers to its affirmative summary judgment briefing, where it identified provisions of the DTSA and TUTSA that provide for attorney's fees only if there is willful and malicious appropriation. ECF No. 169 at 18 (citing ECF No. 131 at 24); see also 18 U.S.C. § 1836(b)(3)(D); Tex. Civ. Prac. & Rem. Code § 134A.005(2)(3).
The Court DENIES Defendant's Motion for Summary Judgment on Plaintiff's claim for attorney's fees because Plaintiff has identified statutes that provide for such an award.
IV. CONCLUSION
For the foregoing reasons, the undersigned ORDERS that Defendant's Second Motion for Summary Judgment, ECF No. 168, is GRANTED IN PART, DENIED IN PART, as set forth herein:
1) Defendant's Motion for Summary Judgment (ECF No. 168) is GRANTED as to Plaintiff's Count I: Tortious Interference with Business Relationships, in that the Court finds Plaintiff's Count I: Tortious Interference with Business Relationships, is preempted by TUTSA, and is therefore DISMISSED.
2) Defendant's Motion for Summary Judgment (ECF No. 168) is DENIED as to Plaintiff's Count II: Unjust Enrichment; Count III: Misappropriation under the Texas Uniform Trade Secrets Act; Count IV: Violation of the Defend Trade Secrets Act; Count V: Civil Conspiracy; and damages.
IT IS SO ORDERED.