REVISED JANUARY 12, 2017

        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT


                                 No. 16-10155                   United States Court of Appeals
                                                                         Fifth Circuit

                                                                       FILED
SPEAR MARKETING, INCORPORATED,                                 December 22, 2016
                                                                  Lyle W. Cayce
             Plaintiff - Appellant                                     Clerk

v.

BANCORPSOUTH BANK; ARGO DATA RESOURCE CORPORATION,

             Defendants - Appellees




                Appeal from the United States District Court
                     for the Northern District of Texas


Before KING, OWEN, and HAYNES, Circuit Judges.
KING, Circuit Judge:
      This case is before us for the second time. Following our first decision,
the district court awarded Defendants–Appellees nearly $1 million in
attorneys’ fees under state law, or, in the alternative, under the Copyright Act.
Now, Plaintiff–Appellant Spear Marketing, Inc. appeals this award, arguing
that the district court erred in awarding attorneys’ fees under state law
because its state law claim was preempted and erred in alternatively awarding
attorneys’ fees under the Copyright Act because it never pleaded or litigated a
copyright claim. We conclude that no court has ever held the state law claim
                                 No. 16-10155
to be preempted, and therefore the district court did not err in awarding
attorneys’ fees under the state law.
               I.     Factual and Procedural Background
      In this appeal, Plaintiff–Appellant Spear Marketing, Inc. (SMI)
challenges the district court’s award of attorneys’ fees to Defendants–Appellees
BancorpSouth Bank and Argo Data Resource Corp. (Defendants). This appeal
is the second time that this litigation has come before this court. See Spear
Mktg., Inc. v. BancorpSouth Bank (Spear Marketing I), 

(5th Cir.
2015). Because the primary disagreement between the parties is over what
was decided by the district court in the underlying litigation and by this court
in Spear Marketing I, it is necessary for us to provide a detailed review of this
case’s procedural history pertinent to the resolution of this appeal.
A. Initial Procedural History and Grant of Defendants’ Motion for
Summary Judgment
      SMI is a small software developer that produces VaultWorks, a computer
program that assists banks in managing their cash inventories. 

BancorpSouth Bank (BCS) was one of the banks that used VaultWorks;
however, in February 2012, BCS terminated its agreement with SMI because
BCS had reached an agreement with Argo, another software developer for the
banking industry. 

BCS agreed to license Argo’s new program,
Cash Inventory Optimization (CIO), which included functions similar to SMI’s
VaultWorks. 

2012, SMI filed its Original Petition against Defendants in
Texas state court, primarily alleging that Defendants had stolen trade secrets
related to the operation of VaultWorks in order to create CIO. The allegedly
stolen trade secrets included both technical data and information, such as
formulas, algorithms, and methods of operation, as well as business
information, such as customer lists, cost and pricing information, financial
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                                        No. 16-10155
information, and personnel details. The Original Petition asserted ten causes
of action, including claims for misappropriation of trade secrets, 1 theft of trade
secrets under the Texas Theft Liability Act (TTLA), 2 and conversion. SMI did
not assert a copyright claim.
       In September 2012, Defendants removed the case to federal court on the
ground that the claims in the Original Petition were completely preempted by
the Copyright Act. 3 See 17 U.S.C. § 301 (expressly preempting all causes of


       1  To establish a claim for misappropriation of trade secrets under Texas law, a plaintiff
must show: “(a) a trade secret existed; (b) the trade secret was acquired through a breach of
a confidential relationship or discovered by improper means; and (c) use of the trade secret
without authorization from the plaintiff.” Spear Marketing 

.
        2 To establish a claim for theft of trade secrets under the version of the TTLA in effect

at that time, a plaintiff had to show: (1) the defendant knowingly (a) stole the plaintiff’s trade
secret, (b) made a copy of an article representing the trade secret, or (c) communicated or
transmitted a trade secret; and (2) the plaintiff sustained damages as a result. See Tex. Penal
Code § 31.05; Tex. Civ. Prac. & Rem. Code § 134.005(a) (2012).
        3 At the outset, a brief detour into preemption terminology is instructive. “Complete
preemption” is a jurisdictional doctrine sometimes invoked upon removal to federal court.
See 14B CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE & PROCEDURE § 3722.2 (4th ed.
2016). The complete preemption doctrine provides that the preemptive force of some federal
statutes is so strong that “it converts an ordinary state common-law complaint into one
stating a federal claim for purposes of the well-pleaded complaint rule,” such that removal is
possible. GlobeRanger Corp. v. Software AG (“GlobeRanger I”), 

, 705 (5th Cir.
2012) (quoting Caterpillar Inc. v. Williams, 

, 393 (1987)). The Copyright Act is
one such federal statute that completely preempts the substantive field. 

Complete
preemption for the purpose of establishing federal subject matter jurisdiction is thus a purely
jurisdictional doctrine that is distinct from ordinary preemption. See Elam v. Kan. City S.
Ry. Co., 

, 803 (5th Cir. 2011). Whereas complete preemption establishes federal
subject matter jurisdiction over a state law claim, ordinary preemption (variably called
“defensive preemption”) is an affirmative defense that a defendant can invoke “to defeat a
plaintiff’s state-law claim on the merits by asserting the supremacy of federal law.” Cmty.
State Bank v. Strong, 

, 1261 n.16 (11th Cir. 2011). Complete preemption and
ordinary preemption therefore may not perfectly overlap; a state law claim may be completely
preempted (meaning there is federal jurisdiction over it) but ultimately not entirely
preempted on the merits (meaning that preemption provides a defense against only some
portion of the state law claim, leaving a viable state law claim to be litigated on the merits).
See GlobeRanger 

(recognizing that “at least part of the factual basis for
GlobeRanger’s claims may fall outside the scope of copyright” and “[i]f none of the claims
were preempted . . . there would not be federal jurisdiction under the complete preemption
doctrine”). For instance, a TTLA claim based on multiple wrongful acts may not be entirely
preempted on the merits if only some of those acts violate rights that are equivalent to
copyright. SMI conceded this distinction at oral argument.
                                                3
                                 No. 16-10155
action falling within the subject matter of the Copyright Act, with a few
exceptions not applicable here). Defendants noted that each of SMI’s claims
concerned the subject matter of copyright and highlighted how the Original
Petition alleged that “Defendants ‘copied objects, materials, devices or
substances, including writings’ belonging to SMI and then ‘communicated and
transmitted’ the copied materials.”        (Emphasis omitted.)   Shortly after
removal, Defendants moved to dismiss all of SMI’s claims, arguing, in relevant
part, that each claim was preempted by the Copyright Act.
      In response to the motion to dismiss, SMI filed a First Amended
Complaint (FAC), which omitted from its TTLA claim allegations of copying,
communicating, and transmitting writings and other materials, and deleted
its conversion claim, leaving nine total claims. Defendants then filed a second
motion to dismiss, arguing once again, in relevant part, that each claim in the
FAC was preempted by the Copyright Act. In turn, SMI moved to remand the
litigation to Texas state court, arguing that the claims in the FAC were not
preempted by the Copyright Act, and thus the district court lacked subject
matter jurisdiction over the claims in the FAC.
      In May 2013, the district court denied SMI’s motion to remand. First,
the district court explained that whether removal was proper should be
determined based on the claims in the Original Petition, not the FAC. Second,
the district court found that the TTLA claim in the Original Petition was
completely preempted by the Copyright Act for the purposes of establishing
federal jurisdiction.   According to the district court, at least some of the
allegedly stolen trade secrets on which the TTLA claim and the conversion
claim in the Original Petition were based fell within the subject matter of
copyright. In July 2013, the district court denied Defendants’ second motion




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                                  No. 16-10155
to dismiss. Regarding Defendants’ preemption argument, the district court
found that at least some of SMI’s alleged stolen trade secrets, “such as
customer   lists,   business   plans,   marketing   strategies,   and   customer
preferences,” fell outside the coverage of the Copyright Act and thus were not
preempted. As a caveat, the district court noted that, once the record was fully
developed, it may find “that some or all of the state law claims are in fact
preempted, and thus [it] may revisit the issue of preemption later in the case.”
      In September 2013, Defendants moved for summary judgment on all
nine claims in the FAC, arguing that (1) all of SMI’s allegations were based on
the alleged misappropriation of trade secrets, and because SMI could not show
that Defendants used SMI’s trade secrets in developing CIO, none of the claims
was viable; (2) no trade secrets existed; and (3) all of the claims were
preempted by the Copyright Act. In June 2014, the district court granted
Defendants’ motion for summary judgment on all nine claims. The district
court concluded that SMI could not establish a trade secret misappropriation
claim because SMI failed to show Defendants’ unauthorized use of those trade
secrets, an essential element of a claim for misappropriation of trade secrets.
And the district court found that each of SMI’s other state law claims, including
its TTLA claim, failed because of the insufficient evidence of Defendants’ use
of SMI’s trade secrets. Given that all of SMI’s claims failed on the merits, the
district court declined to address Defendants’ preemption argument.          The
district court accordingly dismissed all of SMI’s claims with prejudice.
B. Spear Marketing I
      SMI appealed both the order denying its motion to remand and the order
granting Defendants’ motion for summary judgment and dismissing all claims
with prejudice, and this court affirmed. Spear Marketing 

,
598, 600–03. First, with regard to the motion to remand, Spear Marketing I
held that the claims in the Original Petition, not the FAC, dictated whether
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                                      No. 16-10155
federal jurisdiction existed because that was the operative complaint at the
time of removal. 

see Louisiana v. Am. Nat. Prop. & Cas. Co.,

, 636 (5th Cir. 2014) (“[J]urisdictional facts are determined at the
time of removal, and consequently post-removal events do not affect that
properly established jurisdiction.”); Brown v. Sw. Bell Tel. Co., 

,
1254 (5th Cir. 1990) (“When a defendant seeks to remove a case, the question
of whether jurisdiction exists is resolved by looking at the complaint at the
time the petition for removal is filed.” (citing Pullman Co. v. Jenkins, 

, 537–38 (1939))). Looking to the claims in the Original Petition, Spear
Marketing I applied the two-prong complete preemption test 4 and found that
(1) a subset of SMI’s allegedly stolen trade secrets, “the technical trade
secrets,” fell within the subject matter of copyright, and (2) the TTLA claim in
the Original Petition, which alleged wrongful acts such as “[c]opying,
communicating, and transmitting,” was equivalent to a copyright claim. Spear
Marketing 

–98. Thus, Spear Marketing I held that the state
law claims in the Original Petition were completely preempted by the
Copyright Act, and, accordingly, the district court “properly exercised
jurisdiction over” the suit. 

       Spear Marketing I then reviewed the district court’s grant of summary
judgment and dismissal with prejudice, this time considering the claims in the
FAC because that was by then the operative complaint. It analyzed SMI’s
claim for misappropriation of trade secrets and agreed with the district court
that SMI failed to show a genuine dispute regarding an essential element of a
misappropriation claim because SMI failed to show that Defendants used


       4 To determine whether a state law claim is completely preempted by the Copyright
Act, we ask: (1) Does the claim fall within the subject matter of the Copyright Act, see 17
U.S.C. § 102? and (2) Does the state law protect rights that are equivalent to any of the
exclusive rights protected by the Copyright Act, see 17 U.S.C. § 106? Spear Marketing 

.
                                             6
                                       No. 16-10155
SMI’s trade secrets. 

With respect to the other eight claims in
the FAC, including the TTLA claim, Spear Marketing I held that SMI had
waived its right to appeal summary judgment on these claims by entirely
omitting any mention of them from its opening brief. 

C. Award of Attorneys’ Fees
       Following the decision in Spear Marketing I, Defendants filed a motion
in the district court for attorneys’ fees and costs under the TTLA or,
alternatively, under the Copyright Act, 17 U.S.C. § 505. 5 In relevant part,
Defendants argued that they prevailed on the merits of SMI’s TTLA claim, and
therefore, were entitled to attorneys’ fees under the TTLA. 6 In opposition, SMI
argued that an attorneys’ fees award under the TTLA was not proper because
that claim was preempted and therefore Defendants had not prevailed on the
claim’s merits. In January 2016, the district court granted Defendants’ motion
for attorneys’ fees under the TTLA or, alternatively, under the Copyright Act,
explaining that its award would not vary between the two statutes. 7 The
district court first addressed the argument for attorneys’ fees under the TTLA.
The district court viewed itself as facing a dilemma: it needed to decide
“whether to treat Defendants as prevailing parties under the TTLA because
they successfully defended against SMI’s TTLA claim, despite the fact that
[Spear Marketing I] later held the TTLA claim was completely preempted.”



       5  Section 505 of the Copyright Act provides that “[i]n any civil action under [the
Copyright Act], the court in its discretion may allow the recovery of full costs by or against
any party . . . [and] may also award reasonable attorney’s fee to the prevailing party as part
of the costs.” 17 U.S.C. § 505.
        6 Under the TTLA, anyone who “prevails” in a TTLA suit “shall be awarded court costs

and reasonable and necessary attorney’s fees.” Tex. Civ. Prac. & Rem. Code § 134.005(b).
Texas courts have interpreted “prevails” to include parties who successfully defend against a
TTLA claim, such as achieving a dismissal with prejudice. See, e.g., Arrow Marble, LLC v.
Estate of Killion, 

, 706–07 (Tex. App.—Houston [1st Dist.] 2014, no pet.).
        7 The district court also addressed the amount of fees and costs awarded, but these

portions of the judgment are not challenged by either party on appeal.
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                                       No. 16-10155
Finding no binding legal authority on how to answer this question, the district
court awarded nearly $1 million in attorneys’ fees to Defendants because the
TTLA claim was fully adjudicated, necessitating the expenditure of attorneys’
fees and costs by the parties. 8 SMI timely appealed the award.
               II.    Award of Attorneys’ Fees under the TTLA
       We review the district court’s award of attorneys’ fees under its first
alternative basis: the TTLA. A district court may not award attorneys’ fees
“unless a statute or contract provides” the basis for such an award. Baker Botts
L.L.P. v. ASARCO LLC, 

, 2164 (2015) (citing Hardt v. Reliance
Standard Life Ins. Co., 

, 252–53 (2010)). A state law, such as the
TTLA, can provide the basis for an attorneys’ fee award if that state law
supplies the rule of decision. See Walker Int’l Holdings, Ltd. v. Republic of
Congo, 

, 415 (5th Cir. 2005). We review de novo the question of
whether a state law supplied the rule of decision. 

district court interpreted Spear Marketing I as holding that
the TTLA claim was preempted by federal law. The district court thus viewed
itself as facing a dilemma. On the one hand, it could not award attorneys’ fees
under the TTLA because the TTLA claim was preempted, and thus federal law
supplied the rule of decision.          On the other hand, the TTLA claim was
adjudicated on the merits—it was dismissed with prejudice—and therefore,
the TTLA’s attorneys’ fees provision should apply. The crux of the dispute
between the parties is not over the law, but rather over the district court’s
interpretation of Spear Marketing I. Put another way, the parties do not



       8 With regard to its alternative basis for the attorneys’ fee award, the Copyright Act,
the district court found persuasive Fourth Circuit precedent holding that a preempted state
law claim constitutes a civil action for the purposes of section 505 of the Copyright Act, and
therefore, a district court has discretion to award fees under section 505 when a state law
claim is found to be preempted by the Copyright Act. See Rosciszewski v. Arete Assocs., Inc.,

, 233 (4th Cir. 1993).
                                              8
                                       No. 16-10155
dispute that, if the TTLA claim was preempted, then the award of attorneys’
fees was improper. Nor do they dispute the converse—that, if the TTLA claim
was not preempted, then the award of attorneys’ fees was proper. Specifically,
SMI argues on appeal that the district court erred in awarding attorneys’ fees
under the TTLA because Spear Marketing I held that the TTLA claim was
completely preempted, and, according to SMI, when a claim is completely
preempted by federal law, an award of attorney’s fees cannot be based upon
state law. Moreover, SMI urges, the TTLA permits awards only to a party
“who prevails in a suit under” the TTLA, and given that the TTLA claim was
rendered a nullity through preemption, Defendants were not prevailing parties
under the TTLA. Finally, SMI argues that Spear Marketing I’s preemption
holding became the law of the case and superseded any conflicting findings
made by the district court. 9
       We disagree. The TTLA claim in the FAC—the operative complaint at
the time of the attorneys’ fee award—was never held to be preempted. Spear
Marketing I addressed only the TTLA claim as it was pleaded in the Original
Petition and did not consider the TTLA claim in the FAC. This is significant
because the TTLA claim in the FAC was distinct from that in the Original
Petition and specifically omitted allegations that were equivalent to copyright,
with the intention of avoiding preemption. And the district court also never
held that the FAC’s TTLA claim was preempted. Rather, the TTLA claim in
the FAC was litigated and dismissed on the merits during summary judgment,




       9SMI also argues that Defendants should be judicially estopped from arguing that the
TTLA claim was preempted, but SMI did not raise this argument until its reply brief and
thus waived it. See In re Katrina Canal Breaches Litig., 

, 459 n.3 (5th Cir. 2010).
                                              9
                                        No. 16-10155
and therefore it was proper to award attorneys’ fees under the TTLA because
that law supplied the rule of decision. 10
       The district court mistakenly interpreted Spear Marketing I as holding
that the TTLA claim in the FAC was preempted. 11 Nevertheless, we conclude
the district court reached the correct outcome in awarding attorneys’ fees
under the TTLA. The district court’s misunderstanding stems from its failure
to distinguish between the TTLA claim in the Original Petition and that in the
FAC. As our foregoing review of the procedural history should make clear,
Spear Marketing I did not hold that the TTLA claim as asserted in the FAC
was preempted. In fact, Spear Marketing I did not address the TTLA claim in
the FAC at all. Rather, Spear Marketing I considered the TTLA claim only in
the context of reviewing the district court’s denial of SMI’s motion to remand.
In reviewing this denial, Spear Marketing I considered the TTLA claim only as
it was asserted in the Original Petition because that was the operative
complaint at the time of removal. Spear Marketing 

–98.
Indeed, in conducting the equivalency prong of the preemption test comparing
the TTLA claim and a copyright claim, Spear Marketing I quoted language
from the TTLA claim in the Original Petition that was specifically omitted from
the TTLA claim in the FAC, such as allegations that SMI’s confidential
information was “communicated” and “transmitted.”                      

      Spear
Marketing I concluded that the TTLA claim in the Original Petition was



       10 Because we agree with Defendants that the TTLA claim was never held to be
preempted, we do not address their alternative bases for affirming the award of fees under
the TTLA.
       11 The district court’s confusion may stem from Spear Marketing I’s footnote 62, which

discussed the course of conduct a district court can take after a claim is found to be completely
preempted. Spear Marketing 

n.62. Yet Spear Marketing I only considered
the TTLA claim as it was asserted in the Original Petition, and thus footnote 62 is merely
dicta because the FAC’s TTLA claim—not the Original Petition’s TTLA claim—was by then
the operative claim.
                                              10
                                  No. 16-10155
completely preempted, and thus removal was proper and remand not
warranted. 

makes clear that Spear Marketing I did not reach
the question of whether the FAC’s TTLA claim was preempted.
      SMI urges that even if Spear Marketing I only dealt with the TTLA claim
in the Original Petition, its holding necessarily means that the FAC’s TTLA
claim is equally preempted because it is based on the same trade secrets. Yet
this argument ignores the fact that the claims in these two pleadings are
distinct. SMI filed the FAC in response to Defendants’ motion to dismiss the
Original Petition on preemption grounds. SMI described its reasons for filing
the FAC in part as an attempt to avoid Defendants’ preemption argument by
omitting allegations of wrongful copying, communicating, and transmitting of
trade secrets, all of which “fall squarely within the exclusive rights protected
by [the Copyright Act].” 

Marketing I’s holding that the
TTLA claim in the Original Petition was preempted does not necessarily
extend to the TTLA claim in the FAC. For this same reason, SMI’s law of the
case argument also fails. While Spear Marketing I may be highly persuasive,
it does not constitute the law of the case such that the FAC’s TTLA claim is
necessarily preempted. See Med. Ctr. Pharmacy v. Holder, 

, 834
(5th Cir. 2011) (“[A]n issue that is not expressly or implicitly decided on appeal
does not become part of the law of the case.”).
      We also note that in addition to limiting its analysis to the TTLA claim
in the Original Petition, Spear Marketing I limited its analysis to complete
preemption for the purposes of establishing federal jurisdiction and did not
reach the question of “ordinary” preemption—that is, whether federal
preemption provided a defense against all the trade secrets upon which SMI’s
TTLA claim was based.       Contrary to the district court’s assertion, Spear
Marketing I said nothing to suggest that the TTLA claim was entirely
preempted, i.e., that every trade secret alleged to be stolen fell within the
                                       11
                                 No. 16-10155
subject matter of copyright. To the contrary, Spear Marketing I suggested that
it only considered a portion of the trade secrets alleged to be stolen—technical
trade secrets (not the business trade secrets that SMI alleged were also
stolen)—in conducting its preemption analysis. Spear Marketing 

(“When we apply this [preemption] principle to SMI’s claims, we see
that the technical trade secrets found within VaultWorks fall within the subject
matter of copyright.” (emphasis added)). Having made this finding, the court
needed to go no further because complete preemption was established on the
basis of just this subset of trade secrets. Spear Marketing I thus not only did
not reach the TTLA claim in the FAC but also did not reach the question of
whether the trade secrets comprising the TTLA claim were entirely preempted
on the merits.
      In addition to the absence of any preemption holding by Spear Marketing
I on the TTLA claim in the FAC, there was also never a holding by the district
court that the TTLA claim in the FAC was preempted. To the contrary, in its
order denying Defendants’ motion to dismiss the FAC on preemption grounds,
the district court concluded that at least some of the allegedly stolen trade
secrets comprising the TTLA claim fell outside the subject matter of copyright
and thus were not preempted.       The district court specifically cited SMI’s
“customer lists, business plans, marketing strategies, and customer
preferences” as trade secrets falling outside the subject matter of copyright and
thus not entirely preempted.      The court noted that it may revisit this
conclusion later on after the record was fully developed, but it never did. And
later on, in granting Defendants’ motion for summary judgment, the district
court explicitly declined to address whether the FAC’s TTLA claim was
preempted. Indeed, the basis on which the district court granted summary
judgment on the TTLA claim was that SMI failed to show that Defendants had
actually stolen its trade secrets, an essential element of a TTLA claim. See
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                                     No. 16-10155
Tex. Penal Code § 31.05; Tex. Civ. Prac. & Rem. Code § 134.005(a) (2012). The
district court even recognized that it had never made such a finding of
preemption when it was addressing the attorneys’ fees motion. Clearly, the
district court never held that the TTLA claim in the FAC was preempted.
      We conclude that, at the time of the motion for attorneys’ fees, no court
had ever held that the TTLA claim in the FAC was preempted. Rather, the
district court adjudicated the TTLA claim in the FAC on the merits, dismissing
it with prejudice. The TTLA therefore supplied the rule of decision in this case,
and, accordingly, the district court did not err by awarding attorneys’ fees
under the TTLA. 12 See 

(“State law controls . . . the
award of . . . fees . . . where state law supplies the rule of decision.” (quoting
Mathis v. Exxon Corp., 

, 461 (5th Cir. 2002))); Tex. Civ. Prac. &
Rem. Code § 134.005(b) (providing that anyone who “prevails” in a TTLA suit
“shall be awarded court costs and reasonable and necessary attorney’s fees”).
                                   III.   Conclusion
      For the foregoing reasons, we AFFIRM the district court’s attorneys’ fees
award.




      12Because we conclude that attorneys’ fees were properly awarded under the TTLA,
we do not address the district court’s alternative grounds for awarding the fees under the
Copyright Act.
                                           13