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.

Standard, the plaintiff in this case, is an oilfield services business that focuses on hauling water from oil and gas leases to disposal wells. Gene Hornbeck (Hornbeck), a defendant in the case, worked for Standard as an Operations Manager. Prior to his employment, Hornbeck signed a work agreement that included both non-compete and non-solicitation provisions. Hornbeck left Standard after a year and a half to work for competitor Mesquite, another named defendant. Standard eventually filed suit for, among other things, misappropriation of trade secrets on the basis that Standard employees joined Mesquite and some of Standard’s customers began using Mesquite’s services instead of their own.

The defendants filed motions to dismiss Standard’s claims pursuant to provisions of the TCPA, which the trial court denied. The defendants immediately filed this interlocutory appeal.

According to the Court, the TCPA was designed to prevent strategic lawsuits against public participation. The TCPA itself has a three-step burden-shifting procedural framework. First, the defendant moving for dismissal must show that the plaintiff filed a legal action based on the defendant’s exercise of the right to free speech, the right to petition, or the right of association. Second, assuming the defendant is successful, the plaintiff then must establish by clear and specific evidence a prima facie case for each element of its claim to avoid dismissal. Finally, the defendant can still obtain dismissal if he presents a valid defense to the plaintiff’s claim and proves each element of that defense. The Texas legislature amended the TCPA to specifically exclude actions arising from employer-employee relationships in the misappropriation of trade secrets arena, but this amendment did not take effect until after the accrual and filing of Standard’s suit. As the amendment did not affect the operation of the prior version of the TCPA, the Court did not consider the effect of this new amendment.

In its analysis, the Court determined that Standard’s claims are covered by the TCPA because the claims are based on the defendants’ exercise of their free speech rights through their discussions with customers and their association rights through their association with customers and employees. However, the Court found that Standard failed to present clear and specific evidence of a prima facie case for misappropriation of trade secrets because Standard failed to establish that it made any effort to protect its trade secrets. Further, the Court noted that simple facts showing that Standard’s employees and customers moved to Mesquite without proof that Mesquite used Standard’s proprietary information were conclusory and insufficient to meet the clear and specific evidence standard.

Special thanks to Kyle Markwardt for his assistance with this blog post.