MELINDA HARMON, District Judge.
Pending before the Court in the above referenced cause, alleging breach of employee confidentiality agreement, breach of fiduciary duty, unjust enrichment, tortious interference with contract, tortious interference with prospective economic advantage, and civil conspiracy, and seeking compensatory and injunctive relief against a former employee of Plaintiff A.M. Castle & Co. ("Castle"), Thomas K. Byrne ("Byrne"), and his new employer, Oilfield Steel Supply, LLC ("OSS") (collectively "Defendants"), is Defendants' motion for summary judgment (# 60).
Defendants argue that because each of Castle's claims is based on the assertion that information provided to and in possession of Byrne was confidential information which he stole from Castle,
Summary judgment under Federal Rule of Civil Procedure 56(c) is appropriate when, viewing the evidence in the light most favorable to the nonmovant, the court determines that "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." A dispute of material fact is "genuine" if the evidence would allow a reasonable jury to find in favor of the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
Initially the movant bears the burden of identifying those portions of the pleadings and discovery in the record that it finds demonstrate the absence of a genuine issue of material fact on which the nonmovant bears the burden of proof at trial; a "complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Lujan v. National Wildlife Federation, 497 U.S. 871, 885, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990); Edwards v. Your Credit, Inc., 148 F.3d 427, 431 (5th Cir.1998).
If the movant meets its burden and points out an absence of evidence to prove an essential element of the nonmovant's case on which the nonmovant bears the burden of proof at trial, the nonmovant must then present competent summary judgment evidence to support the essential elements of its claim and to demonstrate that there is a genuine issue of material fact for trial. National Ass'n of Gov't Employees v. City Pub. Serv. Board, 40 F.3d 698, 712 (5th Cir.1994). "[A] complete failure of proof concerning an essential element of the nonmoving party's case renders all other facts immaterial." Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The nonmovant may not rely merely on allegations, denials in a pleading or unsubstantiated assertions that a fact issue exists, but must set forth specific facts showing the existence of a genuine issue of material fact concerning every element of its cause(s) of action. Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir.1998).
Conclusory allegations unsupported by evidence will not preclude summary judgment. National Ass'n of Gov't Employees v. City Pub. Serv. Board, 40 F.3d at 713; Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir.1996). "`[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported
Allegations in a plaintiff's complaint are not evidence. Wallace v. Texas Tech Univ., 80 F.3d 1042, 1047 (5th Cir.1996) ("[P]leadings are not summary judgment evidence."); Johnston v. City of Houston, Tex., 14 F.3d 1056, 1060 (5th Cir.1994) (for the party opposing the motion for summary judgment, "only evidence — not argument, not facts in the complaint — will satisfy' the burden."), citing Solo Serve Corp. v. Westowne Assoc., 929 F.2d 160, 164 (5th Cir.1991). The nonmovant must "go beyond the pleadings and by [his] own affidavits, or by depositions, answers to interrogatories and admissions on file, designate specific facts showing that there is a genuine issue of material fact for trial." Giles v. General Elec. Co., 245 F.3d 474, 493 (5th Cir.2001), citing Celotex, 477 U.S. at 324, 106 S.Ct. 2548.
The court must consider all evidence and draw all inferences from the factual record in the light most favorable to the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); National Ass'n of Gov't Employees v. City Pub. Serv. Board, 40 F.3d at 712-13.
Castle and OSS are direct competitors in supplying pipe and materials to the oil and gas industry. Byrne was initially employed as an Inside Sales Representative in Houston, Texas by Tube Supply, Inc., which was subsequently acquired by Castle, a Maryland corporation with its principal place of business in Illinois. In April 2009, when Tube Supply was still his employer, Byrne signed a Confidentiality Agreement, to which Castle was not a party
By virtue of his later employment in Castle's Oil & Gas business unit, Castle claims that Byrne had access to his employer's confidential information. Castle asserts that Byrne was subject to the Confidentiality Agreement all during his employment with Castle and was thereby prohibited from retaining Castle's confidential information and from using it for the benefit of any third party, including his subsequent employer, OSS.
Byrne resigned from Castle on April 30, 2013 and went to work for OSS. Castle claims that over a course of months before Byrne resigned, Byrne misappropriated confidential information, including customer lists and information, vendor contact information, and sales and revenue data, and subsequently provided them to his new employer, OSS. Furthermore, according to Castle Byrne began soliciting Castle's customers and vendors on behalf of OSS based on this wrongfully obtained information.
To establish a cause of action for misappropriation of trade secrets
A trade secret may consist of
Restatement (First) of Torts § 757 Comment b (1939), cited with approval, Hyde Corp. v. Huffines, 158 Tex. 566, 314 S.W.2d 763, 776 (1958); In accord, In re Bass, 113 S.W.3d 735, 739 (Tex.2003).
Texas law requires that a trade secret be "secret", i.e., that it be neither generally known by others in the same business nor readily ascertainable by an independent investigation. Zoecon Indus. v. Am. Stockman Tag Co., 713 F.2d 1174, 1179 (5th Cir.1983). See also Carson Products Co. v. Califano, 594 F.2d 453, 461 (5th Cir.1979) ("However strong [the plaintiff's] case may be on other indicia of trade secret status," "a substantial element of secrecy must exist, so that, except by the use of improper means, there would be difficulty in acquiring the information."), citing Restatement of Torts § 757 Comment (b) at 6. Regarding the improper means requirement, "obtaining information by observation, experimentation, or general inquiry is lawful, but information is unlawfully obtained if it is gained through a breach of confidence.... The question is not, `How could he have secured the knowledge?' but `How did he?'" Tendeka, Inc. v. Glover, No. Civ. A. H-13-1764, 2015 WL 2212601, at *13 (S.D.Tex. May 11, 2015) (citations omitted). The Restatement of Torts § 757 defines "improper means" as "[m]eans which fall below the general accepted standards of commercial morality and reasonable conduct." Because of the secrecy requirement, the owner of a trade secret must take reasonable measures to prevent it from becoming known to persons other than those permitted by the owner to have access for limited purposes. J.C. Kinley Co. v. Haynie Wire Line Service, Inc., 705 S.W.2d 193, 198 (Tex.App.-Houston [1st Dist.] 1985, writ ref'd n.r.e.).
The Official Comment to the Restatement (Third) of Torts section 757, Comment (b) at 5, provides criteria for determining whether something is a trade secret:
Adopted, In re Bass, 113 S.W.3d at 739. See also Triple Tee Golf, Inc. v. Nike, Inc. 485 F.3d 253, 267 (5th Cir.2007). The owner of the trade secret does not have to satisfy all six factors because trade secrets do not fit neatly into all factors every time. General Univ. Sys., 379 F.3d at 150, citing In re Bass, 113 S.W.3d 735, 739-40 (Tex. 2003).
Items such as customer lists, pricing information, client information, customer preferences, and buyer contacts may be trade secrets if they meet the criteria for such. Global Water Group, Inc. v. Atchley, 244 S.W.3d 924, 928 (Tex. App.-Dallas 2008, pet. denied), citing T-N-T Motorsports, Inc. v. Hennessey Motorsports, Inc., 965 S.W.2d 18, 22 (Tex.App.-Houston [1st Dist.] 1998, no pet.). See, e.g., Guy Carpenter & Co. v. Provenzale, 334 F.3d 459, 467 (5th Cir.2003) (holding that a customer list may be protectable as a trade secret if it is secret and the court examines and determines if it is protectable based on three factors: "(1) what steps, if any, an employer has taken to maintain the confidentiality of a customer list; (2) whether a departing employee acknowledges that the customer list is confidential; and (3) whether the content of the list is readily ascertainable."). If the names and addresses of customers and vendors on a party's customer list are readily ascertainable, however, it is not protectable as a trade secret. Gaal v. BASF Wyandotte Corp., 533 S.W.2d 152, 155 (Tex.Civ.App.-Houston [14th Dist.] 1976, no writ); Numed, Inc. v. McNutt, 724 S.W.2d 432, 435 (Tex.App.-Fort Worth 1987) (finding information was not a trade secret because the owner previously disclosed it in contracts with its customers). Furthermore, "[a] cause of action for misappropriation of trade secrets accrues when the trade secret is actually used." Merritt Hawkins & Assocs., LLC v. Gresham, 79 F.Supp.3d 625, 638 (N.D.Tex. 2015), quoting Computer Assocs. Int'l v. Altai, Inc., 918 S.W.2d 453, 455 (Tex.1996). "``Use' of a trade secret means commercial use by which a person seeks to profit from the use of the secret.'" Id., quoting Gen. Universal Sys., Inc. v. HAL, Inc., 500 F.3d 444, 450 (5th Cir.2007), quoting Trilogy Software, Inc. v. Callidus Software, Inc., 143 S.W.3d 452, 464 (Tex.App.-Austin 2004, pet. denied). "As a general matter, any exploitation of the trade secret that is likely to result in injury to the trade secret owner or enrichment to the defendant is a `use.'"
Wellogix, 716 F.3d at 877. "Use" would include "soliciting customers through the use of information that is a trade secret." Id.
Defendants contend that although Castle claims that Byrne had access to its confidential information during his employment, Castle fails to identify the specific information that is allegedly confidential. Instead, maintain Defendants, in his complaint Castle uses vague, generic terms that cannot demonstrate that any information he received or retained while employed by Castle is confidential information, and Castle has not and cannot produce sufficient evidence to establish that the information is actually confidential. They point out that the Confidential Agreement also fails to specify with particularity what constitutes confidential information, but is based on broad generalities.
Defendants point out that Byrne has worked in the area of high-pressure pumping and flow equipment for the pumping industry for thirty-five plus years and has learned the various specification ranges because he both purchased and sold bar and tubing required for the manufacturing process. Given these years of experience, Castle cannot show the secrecy of the information that it claims is confidential information. No evidence exists to establish to what extent Castle's purported confidential information is known outside of the business, the extent to which it is known by other employees and people involved in the business, including former employees of Castle now working for competitors, the steps taken by Castle to protect the secrecy of the information, the value of the information to Castle and its competitors, and the ease or difficulty involved in others' properly acquiring or duplicating the information. Castle has refused to address these issues in response to Defendants' discovery requests, but instead asserted objections that the requests are overly broad and burdensome, not reasonably calculated to lead to the discovery of admissible evidence, and lack relevance. # 60, Ex. C.
Because the Court has previously addressed and ruled on Castle's objections to Magistrate Judge Stacy's orders as well as other motions that Castle asserts in its response should preclude the Court's review of the motion for summary judgment, the Court does not repeat those decisions and moves on to the summary judgment issues.
The Court notes that Castle improperly cites to its own statement of facts contained within its response, despite the established law that pleadings are not summary judgment evidence. The Court looks to actual evidentiary support submitted by the parties to determine whether allegations are probative at this stage of the litigation.
Insisting that Byrne stole confidential information protected by Texas law from Castle, Castle claims that Byrne at all times during his employment with Castle was subject to the Confidentiality Agreement he signed with Tube Supply, Inc. and
Castle alleges that before Byrne resigned and commencing at least by February 2013, Byrne put together a list of customer contacts and their electronic email addresses and sent it to his personal email account, and then on to an OSS email address. Castle attaches a redacted copy of these emails, showing the dates when he sent them and the accounts to which he sent them, along with a letter from his attorney describing them and admitting that Byrne in addition had taken information about Castle's customer purchase histories and sales generated by Byrne and other employees from Castle's records. # 64, Group Ex. 2. These electronic communications also contained the following notice:
Id. Castle asserts that it "has no reason to believe that anyone, other than Defendant Byrne and the Castle employee who later located the e-mails sent by Defendant Byrne containing the customer lists that Defendant Byrne compiled, had access to the customer lists Defendant Byrne himself prepared and stole from Castle." See Ex. 3, Castle's Response to Defendants' Interrogatory # 3 ("With respect to the `proprietary and confidential business information' referenced in the Introduction of your Complaint, please identify each employee that is provided with access to such `proprietary and confidential business information'"). Castle first objects to Interrogatory 3 as "not reasonably calculated to lead to the discovery of admissible evidence" and irrelevant, then supplements it with the following:
Id.
The Court notes that Castle's conclusory statements that it "reasonably believes" something are not competent summary judgment evidence and will not satisfy its evidentiary burden. Castle should have, but did not, submit admissible evidence of
Castle claims that on March 7, 2013 Byrne helped OSS employees Nick Jones, Humberto Leniek, and Chad Williams to prepare a purchase order to Castle's supplier, Tenaris, for materials. # 64. Group Ex. 4. On or about May 19, 2013, Byrne announced to customers he had serviced while at Castle that OSS would have enough inventories to meet their needs within a few weeks. # 64, Ex. 5.
In response, Defendants point out that the only "evidence" provided by Castle consists of five heavily redacted emails and "a presumably auto-generated footer stating that emails "
From the section on "Substantive law" in this Opinion and Order, it is apparent that the Court fully agrees with Defendants.
Finally Castle argues that because Byrne obtained the information for the customer list from Castle while employed there, the list is protectable as a trade secret. He cites Rimkus Consulting Group, Inc. v. Cammarata, 688 F.Supp.2d 598, 667 (S.D.Tex.2010) ("Even if the information was readily available in the industry, it will be protected if the competitor obtained it working for the former employer" and rejecting defendant's summary judgment argument that the company's customer list was not a trade secret based solely on evidence that the information on the list had been assembled from the company's records); T-N-T Motorsports, Inc. v. Hennessey Motorsports, Inc., 965 S.W.2d 18,
Here the Court must agree with Castle that some Texas courts have held that even if customer information is readily available in the industry, liability will be upheld if the defendant gained the information in usable form while working for the former defendant. See M.N. Dannenbaum, Inc. v. Brummerhop, 840 S.W.2d 624 (Tex.App.-Houston [14 th Dist.] 1992, writ denied), citing American Precision Vibrator Co. v. Nat'l Air Vibrator Co., 764 S.W.2d 274, 277 (Tex.App.-Houston [1st Dist.], 1988, no writ), withdrawn and stayed on other grounds, 771 S.W.2d 562 (Tex.App.-Houston [1st Dist.] 1989, no writ), and Crouch v. Swing Machinery Co., 468 S.W.2d 604, 607 (Tex. App.1971) ("An ex-employee will not be permitted to make use of a secret list of customers, nor of any other confidential information obtained about the customers by virtue of his former employment. This rule has been applied in a multitude of cases."); see also Jeter v. Associated Rack Corp., 607 S.W.2d 272, 275 (Tex.Civ.App.-Texarkana 1980, writ ref'd n.r.e.) (noting that in K & G Oil Tool & Serv. Co. v. G & G Fishing Tool Service, 158 Tex. 594, 314 S.W.2d 782 (1958), cert. denied, 358 U.S. 898, 79 S.Ct. 223, 3 L.Ed.2d 149 (1958), the Texas Supreme Court opined that "it is unquestionably lawful to gain possession, through proper means, of a competitor's product and, through inspection and analysis, create a duplicate, unless the item is patented," the Texarkana court concluded that "the mere fact that such lawful acquisition is available does not mean that he may, through a breach of confidence, gain the information in usable form and escape the efforts of inspection and analysis."). This Court has found that a number of courts in Texas have continued to recognize the viability of Bummerhop rule. See, e.g., Tendeka, 2015 WL 2212601, at *14; Alliantgroup, LP, 803 F.Supp.2d at 626 ("Even if information is readily available in the industry, it will be protected if the competitor obtained it working for the former employer."); Rimkus, 688 F.Supp.2d at 667-68; The Variable Annuity Life Ins. Co. v. Miller, No. 07-01-0117, 2001 WL 1598331, at *3 (Tex.App.-Amarillo 2001).
Accordingly, because Castle has raised a genuine issue and shown that Defendants may not be entitled to summary judgment as a matter of law, the Court
ORDERS that Defendants' motion for summary judgment is DENIED.
