The case of Vest Safety Medical Services, LLC v. Arbor Environmental, LLC, No. 4:20-CV-0812, 2022 WL 2812195 (S.D. Tex. June 17, 2022) dealt with two issues involving trade secrets.  The first issue considered whether the Texas Uniform Trade Secrets Act (TUTSA) preempted Vest’s civil conspiracy claim.  Ultimately, the court concluded that TUTSA did preempt Vest’s civil conspiracy claim.  In reaching this conclusion, the court relied on the fact that this claim did not rely on facts that were distinct from Vest’s TUTSA Claim.  In the second issue, the court considered whether Vest provided enough evidence for its misappropriation of a trade secret claims to survive Arbor’s summary judgment. Ultimately, the court concluded that there was a genuine issue of material fact as to all elements of Vest’s misappropriation of a trade secret claims. 

Vest sued Arbor for, among other things, violations of the Defend Trade Secrets Act (DTSA) and TUTSA.  Additionally, Vest sued Arbor for civil conspiracy.  Vest provides “online respirator clearances” to aid employers in complying with OSHA regulations for providing respirators to employees that work in hazardous conditions.  Vest’s online respirator clearance process prompts employees to answer a medical evaluation questionnaire (MEQ).  This MEQ includes questions required under OSHA regulations as well as several questions developed by Vest.  Additionally, once employees have answered Vest’s MEQ, Vest’s algorithm analyzes the employee’s answer for compliance with OSHA regulations.

Arbor also offers services related to OSHA respirator regulations.  In 2015, Arbor began to consider offering a respirator clearance service like the one Vest uses.  Later in 2015, Arbor consulted with Vest about the possibility of obtaining a licensing agreement to use Vest’s online respirator clearance.  Ultimately, the parties did not reach an agreement.  In July of 2015, an employee of Arbor used her personal email address to create an account with Affordable Safety Training, LLC (AST).  AST had a contract with Vest and was authorized to sell Vest’s respirator clearance process to its customers.  With the employee’s AST account, the employee was able to access and download Vest’s MEQ and use its respirator clearance process.

In 2017, Vest and Arbor again consulted about the possibility of entering into a licensing agreement.  Like its previous meeting, the parties did not reach an agreement.  However, on the same day that Arbor and Vest met, someone in California used the login that Vest created to meet with Arbor to access the demonstration on a Vest computer.  In 2019, Arbor created its own website called “RespSafety.com.”  This website offered services that were in direct competition with the services that Vest offered.

The first issue the court considered was whether TUTSA preempted Vest’s civil conspiracy claim.  Generally, TUTSA will preempt conspiracy claims unless the plaintiff can show that their civil conspiracy claim is not based on a trade secret misappropriation.  For its conspiracy claim, Vest made the following assertions: (1) “Robert Shelby and Jocelyn Shelby conspired to misappropriate Vest’s trade secrets, including violating [TUTSA and DTSA]”; and (2) “Robert Shelby and Jocelyn Shelby were a member of a combination of two or more persons, who sought to and did accomplish the object of misappropriating Vest’s trade secrets, including Vest’s MEQ.”  Relying on Fifth Circuit authority, the court held that TUTSA preempted Vest’s conspiracy claim. 

Next, the court considered Vest’s misappropriation of a trade secret claim under both TUTSA and DTSA.  Vest alleged that its unified respirator clearance process and its MEQ were trade secrets.  To establish a misappropriation of a trade secret claim, a plaintiff must show that (1) a trade secret exists, (2) that the defendant misappropriated the trade secret, and (3) that the defendant used the trade secret.  When determining whether information is a trade secret, courts have generally relied on the following six factors: (1) is the information known outside of the business; (2) how many of the employees involved with the business know the information; (3) what steps does the employer take to protect the information; (4) how valuable is the information to the employer and its competitors; (5) how much money did the employer expend to develop the information; and (6) the level of difficulty in creating or duplicating the same information.

For the first factor, the court found that Arbor failed to provide any evidence that Vest’s MEQ was widely known within the industry.  For the second factor, the court found that Arbor failed to provide evidence of how many of Vest’s employees or licensees had access to Vest’s MEQ and failed to provide evidence of how many of those employee’s licensees were not subject to a confidentiality agreement.  For the third factor, Arbor argued that Vest disclosed its MEQ to it during the meetings it had with vest in 2015 and 2017.  However, the court found that Vest did not disclose the over 100 unique MEQ questions and required confidentiality agreement from its employees and licensees before they could use such information.  For the fourth factor, the court found that Vest established that its MEQ had value to both it and Arbor.  Vest presented expert testimony of the profits it had received, and the profits Arbor had received from Vest’s MEQ.  For the fifth factor, Vest presented evidence that it cost over three million dollars to develop its respirator clearance process.  However, the court noted that Vest did not specifically state how much it cost to develop the MEQ.  In fact, the court noted that there was testimony establishing that it only took Vest a few weeks to develop the MEQ.  Finally, for the sixth factor, the court found that Vest’s MEQ was not easily duplicated.  The court did note that while there was evidence that it is not difficult to develop your own MEQ, there was no evidence to suggest that it was easy to duplicate Vest’s MEQ. 

Finally, the court analyzed whether there was a disputed fact issue concerning the misappropriation or use elements of a trade secret misappropriation claim.  Arbor argued that there was no misappropriation or use because (1) Vest disclosed its MEQ to it during the 2015 and 2017 meetings; and (2) that Arbor’s employee lawfully purchased the right to download the MEQ from AST.  First, the court noted that in the two meetings, Vest only disclosed a small portion of its MEQ.  Arbor did not have access to the remaining MEQ.  Second, the court noted that Arbor’s employee used her personal email in purchasing Vest’s MEQ.  Thus, the employee implicitly agreed to not use the Vest’s MEQ for any commercial gain without Vest’s written permission. Thus, the court concluded that there was a genuine issue of material fact as to all elements of Vest’s misappropriation of a trade secret claim.