The case of Forum Energy Technologies, Inc. v. Jason Oil & Gas Equipment, LLC, No. H-20-3768, 2022 WL 1103078 (S.D. Tex. April 13, 2022) considered whether the Texas Uniform Trade Secrets Act (TUTSA) preempted Forum Energy’s claims for unfair competition, conspiracy, and/or tortious interference with prospective business relations. Ultimately, the court determined that only Forum Energy’s tortious interference with prospective business relations was preempted. In reaching this conclusion, the court determined that the underlying facts of Forum Energy’s tortious interference with prospective business relations claim was based on the same underlying facts as its TUTSA claim. However, in determining that TUTSA did not preempt Forum Energy’s other claims, the court relied on the fact that Forum Energy alleged that Jason Oil misappropriated confidential information and not trade secret information.
Both Forum Energy and Jason Oil manufactured and sold tubing equipment that is used in oil and gas operations. Forum Energy sued Jason Oil, for unfair competition, conspiracy, tortious interference with prospective business relations, tortious interference with contract, and claims under the Defendant Trade Secrets Act (DTSA) and TUTSA. Jason Oil subsequently moved to dismiss Forum Energy’s unfair competition, conspiracy, and tortious interference with prospective business relations claims on the basis that TUTSA preempts those claims.
In its petition, Forum Energy alleged that Jason Oil had bribed one of its employees to provide Jason Oil proprietary information about Forum Energy’s Duracoil. Forum Energy further asserted that Jason Oil flew the employee to China to help Jason Oil manufacture a product that directly competed with Duracoil. Ultimately, Jason Oil created a product named RelaCoil. This new product was in direct competition with Forum Energy’s Duracoil. Ultimately, because Jason Oil began to market its RelaCoil to Forum Energy’s customers, Forum Energy asserted that it had lost profits and customers.
In its analysis, the court noted that TUTSA preempts all other civil remedies that provide for misappropriation of trade secrets. For TUTSA to preempt a common law claim, the common law claim must be based on the same underlying facts as a plaintiff’s TUTSA claim. Here, in its tortious interference with prospective business relations claim, Forum Energy asserted that “Defendants misappropriated [its] trade secrets and other confidential information.” The court found that this claim was based on the same underlying facts as Forum Energy’s TUTSA claim. The court reasoned that without Jason Oil’s alleged use of Forum Energy’s trade secret information, there would be no interference with Forum Energy’s prospective business relationships. Accordingly, the court dismissed this claim.
Alternatively, the court determined that Forum Energy’s unfair competition and conspiracy claims were not preempted by TUTSA. In making this determination, the court relied on the plain language of TUTSA that other civil remedies not involving misappropriation of trade secrets are not preempted. In Forum Energy’s unfair competition claim, Forum Energy alleged that Jason Oil “misappropriate[ed] Forum’s confidential information.” The court determined that Forum Energy did not have to prove the existence of a trade secret to succeed on this claim. Thus, TUTSA did not preempt this claim. For Forum Energy’s conspiracy claim, the court again determined that Forum would not have to prove the existence of a trade secret to succeed on this claim. Rather, Forum Energy could support this claim by merely showing that there was a plan between Jason Oil and the employee to steal confidential information from Forum Energy.
The primary takeaway from this case is that TUTSA preempts all civil remedies that are based on the same underlying facts as a plaintiff’s TUTSA claim. Essentially, a claim alleging some form of misappropriation will be preempted if it is necessary to prove the existence of a trade secret to succeed on the claim. However, it is critical to note how important the court found the distinction between information that is a trade secret and information that is confidential.