The case of Pittsburgh Logistics Sys., Inc. v. Barricks, No. :20-CV-04282, 2022 WL 705870 (S.D. Tex. 2022), dealt with determining whether a customer list was a trade secret under the Defend Trade Secrets Act (DTSA) and the Texas Uniform Trade Secret Act (TUTSA).  Additionally, this case dealt with determining whether Pittsburgh Logistics Systems’s (PLS) claims for unfair competition, tortious interference with prospective business, and breach of fiduciary duty were preempted by TUTSA.  Ultimately, the court determined that a factual issue existed as to whether PLS’s customer list was a trade secret.  Moreover, the court determined that the TUTSA preempted PLS’s claims for unfair competition, tortious interference with prospective business, and breach of fiduciary duty.

Continue Reading Southern District of Texas Holds that There is a Fact Issue on Whether a Customer List is a Trade Secret

The case of In re K & L Auto Crushers, LLC,627 S.W.3d 239 (Tex. 2021), dealt with the application of the Texas Supreme Court’s holding in In re N. Cypress Med. Ctr. Operating Co., 559 S.W.3d 128 (Tex. 2018) (orig. proceeding) in the context of a trial court quashing discovery request that sought details about the plaintiff’s medical providers’ negotiated costs and rates.  Ultimately, on the trade secrets issue, the Texas Supreme Court determined that the trial court erred by quashing the Defendant’s discovery request without considering other reasonable means of protecting the alleged trade secret information, such as a protective order.  Therefore, the Court concluded that it was error for the trial court to quash a discovery request without first considering other reasonable means of protecting trade secret information.

Walker sued K&L Auto Crushers (K&L Auto) following a collision Walker was involved in with one of K&L Auto’s drivers.  Walker originally walked away from the accident without reporting any injuries.  However, shortly after the collision, Walker began seeking medical treatment.  Five months after the collision, Walker’s medical treatment culminated in him undergoing surgery to repair injuries he allegedly received to his spine and shoulder from the collision.  In total, Walker incurred around $1.2 million in medical expenses from his medical providers.  In accordance with the Texas Civil Practices and Remedies Code, Walker served medical-expense affidavits to K&L Auto reflecting the $1.2 million in medical expenses.  K&L Auto responded to Walker’s affidavits with its own affidavits challenging the reasonableness of Walker’s medical expenses.

To determine the reasonableness of Walker’s medical expenses, K&L Auto served subpoenas on Walker’s healthcare providers.  Both Walker and Walker’s healthcare providers moved to quash K&L Auto’s subpoenas.  Among other things, Walker and his healthcare providers sought to quash K&L Auto’s subpoenas because they sought information that was protected as a trade secret.  Along with Walker’s motion to quash, he also sought a protective order asserting the same grounds to avoid complying with K&L Auto’s subpoenas.  After a hearing, the trial court quashed K&L Auto’s subpoenas.  K&L Auto moved for partial reconsideration of the order quashing its subpoenas.  In its motion for reconsideration, K&L Auto narrowed the scope of its subpoenas to only include information permitted by the Court’s holding in North Cypress.  K&L Auto also expressed its willingness to enter into a protective order to protect any trade secret information.  The trial court ultimately denied K&L Auto’s motion for reconsideration.

In light of its holding in North Cypress, the Texas Supreme Court concluded that the trial court abused its discretion by denying K&L Auto’s discovery requests because K&L Auto only sought information relevant to the healthcare providers’ billing practices and rates.  The Court reasoned that under Texas Uniform Trade Secret Act (TUTSA) section 134A.006(A), the trial court had a duty to use reasonable means to protect the healthcare provider’s alleged trade secret.  The Court also determined that a presumption in favor of granting a protective order arose under section 134A.006(A).  Thus, when a discovery request seeks information that contains an alleged trade secret, it is an error for the trial court to deny such discovery request without first considering the effectiveness of other reasonable alternatives.

The Court further reasoned that it was error for the trial court to deny K&L Auto’s discovery request without any evidence that a protective order would not address the healthcare provider’s concerns.  The inquiry for courts when determining the appropriate measures when dealing with discovery that involves alleged trades secrets is to consider whether it is possible to permit the discovery while protecting the trade secret.  Here, the trial court did not consider any reasonable alternatives before denying K&L Auto’s discovery request.  Accordingly, the key takeaway for this case is that discovery request seeking trade secret information will not be outright denied.  The trial court must first consider reasonable alternative that would permit the discovery while protecting the trade secret.  Here, Walker and the healthcare providers were unsuccessful in defending the trial court’s decision to quash K&L Auto’s subpoena because they failed to provide evidence that the reasonable alternatives would be unsuccessful in protecting the alleged trade secrets.

The case of Six Dimensions, Inc. v. Perficient, Inc., 969 F.3d 219 (5th Cir. 2020), dealt with the application of non-compete provisions in employee contracts after certain employees left to work for a competitor. Ultimately, on the trade secrets issue, the Fifth Circuit determined that the plaintiff Six Dimensions failed to provide evidence that the defendant Perficient acquired the trade secrets within the meaning of the Texas Uniform Trade Secrets Act (TUTSA). Therefore, the Court affirmed the decision of the District Court not to grant a new trial on this issue. Continue Reading Fifth Circuit Holds that Employee’s Possession of Trade Secrets Does Not Establish that the New Employer Acquired Trade Secrets

The case of Recif Res., LLC v. Juniper Capital Advisors, L.P., No. CV H-19-2953, 2020 WL 6748049 (S.D. Tex. Nov. 17, 2020), arose out of failed discussions between potential investors in an oil and gas development project. Ultimately, the Court concluded that the plaintiff Recif Resources, LLC (Recif) failed to present evidence showing that its alleged trade secrets had economic value or that the defendants, collectively called Juniper, used those trade secrets. Continue Reading Failure to Prove Independent Economic Value in Oil & Gas Trade Secrets Case

The case of Phazr, Inc. v. Ramakrishna, No. 3:19-CV-01188-X, 2020 WL 5526554 (N.D. Tex. Sept. 14, 2020), evaluated the pleading requirements expected of a plaintiff in a misappropriation of trade secrets claim under the federal Defend Trade Secrets Act (DTSA) and the Texas Uniform Trade Secrets Act (TUTSA).  Ultimately, the Court determined that the plaintiff failed to meet the plausibility standard expressed in Twombly-IqbalContinue Reading Northern District of Texas Holds that Plaintiff Failed to Plead Claim for Trade Secrets

The case of Mesquite Servs., LLC v. Standard E&S, LLC, No. 07-19-00440-CV, 2020 WL 5540189 (Tex. App.—Amarillo Sept. 15, 2020, no pet.), arose from a dispute over a non-compete agreement and examined the role that the former version of the Texas Citizens Participation Act (TCPA) can play in a misappropriation of trade secrets claim under the Texas Uniform Trade Secrets Act (TUTSA). Ultimately, the Seventh Court of Appeals, Amarillo concluded that conclusory allegations, without more, did not meet the clear and specific evidence standard prescribed under the TCPA. Continue Reading Conclusory Allegations Do Not Meet the Clear and Specific Evidence Standard under the TCPA

The case of KBIDC Investments, LLC v. Zuru Toys Inc., No. 05-19-00159-CV, 2020 WL 5988014 (Tex. App.—Dallas Oct. 9, 2020, no pet.), involved a dispute between two inventors who each created a system for filling and sealing recreational water balloons. Ultimately, the Court determined that the plaintiff in the case, KBIDC Investments (KBIDC), presented evidence that was too indefinite and uncertain to constitute circumstantial evidence of misappropriation of a trade secret under the Texas Uniform Trade Secret Act (TUTSA). Continue Reading Vague Facts Insufficient to Support Trade Secrets Claim

The case of Infinity Sys., Inc. v. Gray Mech. Contractors, LLC, No. 01-19-00253-CV, 2020 WL 5637505 (Tex. App.—Houston [1st Dist.] Sept. 22, 2020, no pet.), a Texas Uniform Trade Secrets Act (TUTSA) case, involved a motion to dismiss under the previous version of the Texas Citizens Participation Act (TCPA).  Ultimately, the First Court of Appeals, Houston determined that private communications between parties who communicate for personal, pecuniary gain are not protected by the TCPA. Continue Reading The TCPA Does Not Apply to Purely Private Communications for Pecuniary Gain

Winning a trade secret misappropriation case at the summary judgment stage is difficult.  The case of C&M Oilfield Rentals, LLC v. Location Illuminator Techs., LLC, No. P:18-CV-039-DC, 2020 WL 7012008 (W.D. Tex. Sept. 30, 2020) illustrates that point.  C&M Oilfield Rentals involved the alleged misappropriation of trade secrets used to construct an oil rig-mounted lighting system. Ultimately, the Court determined that it could not decide this case at the summary judgement stage because a genuine issue of material fact existed as to whether a trade secret existed and whether the defendant used an alleged trade secret. Continue Reading The Difficulties of Winning a Trade Secrets Case at the Summary Judgment Stage

Title Source, Inc. v. HouseCanary, Inc., No. 04-19-00044-CV, 2020 WL 5027667 (Tex. App.—San Antonio Aug. 26, 2020, pet. granted) is a new case addressing the jury charge in Texas Uniform Trade Secrets Act (TUTSA) cases.  In a previous post, I discussed the Casteel problem in the misappropriation instructions that resulted in reversal of this multi-million dollar judgment and the court’s evaluation of the evidence supporting the existence of the trade secrets. (For complete discussion of the facts, please see this previous blog post.  Since I wrote that post, the Court withdrew its earlier opinion and held, in addition to its previous holdings, that HouseCanary must also retry its breach of non-disclosure agreement claims if it elects on remand to retry its TUTSA claims because the claims were not separable from each other without unfairness to the parties.) Continue Reading Even More Lessons from Title Source v. HouseCanary