Brand Services, L.L.C. v. Irex Corporation
909 F.3d 151
5th Cir.2018Background
- Brand Services, an industrial scaffolding company, sued competitor Irex after a former employee allegedly transferred files with software and confidential information to Irex and helped develop similar software. Claims: Louisiana Uniform Trade Secrets Act (LUTSA) and civilian-law conversion.
- Discovery dispute: Brand Services alleges Irex made improper blanket objections and failed to supplement responses; Brand Services discovered responsive documents from related Pennsylvania litigation after the Louisiana discovery deadline and sought to compel production; magistrate denied the motion as untimely and district court did not resolve a later reconsideration motion.
- District court granted summary judgment for Irex on Brand Services’s LUTSA claim for lack of evidence of damages and held LUTSA preempted Brand Services’s conversion claim; Brand Services appealed.
- On appeal the Fifth Circuit considered diversity and amount-in-controversy (found satisfied), and reviewed the summary-judgment rulings de novo.
- The Fifth Circuit held the district court improperly granted summary judgment without addressing Brand Services’s pending discovery motion, found Brand Services had presented sufficient evidence to permit a reasonable estimate of unjust-enrichment damages under LUTSA, and limited LUTSA preemption: LUTSA preempts civilian conversion claims that are based on trade secrets but does not preempt conversion claims for confidential information that is not a trade secret.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction — diversity and amount-in-controversy | LLC’s members are citizens of DE and GA; complaint pleads > $75,000 | Irex contested diversity/amount | Diversity and amount satisfied; federal jurisdiction proper |
| Whether district court erred by granting summary judgment before resolving Brand Services’s pending discovery motion | District court should have considered exemplar documents from Pennsylvania and motion to reconsider before ruling | Irex relied on procedural timeliness and discovery deadline enforcement | Court: district court erred — summary judgment premature without addressing pending discovery issues |
| Sufficiency of evidence of LUTSA unjust-enrichment damages at summary judgment | Brand Services identified evidence (e.g., time savings in invoicing) supporting a reasonable damage estimate | Irex argued Brand Services failed to proffer specific, just and reasonable evidence of damages | Court: Brand Services met burden to create a fact issue on unjust-enrichment damages; reverse LUTSA summary judgment |
| Whether LUTSA preempts civilian-law conversion claims | Brand Services: conversion claim may survive if it concerns non-trade-secret confidential information | Irex: LUTSA preempts common-law claims arising from same conduct | Court: LUTSA preempts conversion claims based on trade secrets but does not preempt conversion claims for confidential information that is not a trade secret; affirm as to conversion of trade secrets, reverse as to conversion of non-trade-secret information |
Key Cases Cited
- Reingold v. Swiftships, Inc., 126 F.3d 645 (5th Cir. 1997) (summary-judgment standard and trade-secret elements)
- Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867 (5th Cir. 2013) (allowable measure of trade-secret damages includes cost to acquire or develop)
- Bohnsack v. Varco, L.P., 668 F.3d 262 (5th Cir. 2012) (proof of trade-secret damages can rest on reasonable estimation)
- Smith v. City of Jackson, 351 F.3d 183 (5th Cir. 2003) (trial court should not grant summary judgment while discovery motion properly pending)
- In re Katrina Canal Breaches Litig., 495 F.3d 191 (5th Cir. 2007) (Erie-guess methodology to predict state supreme court rulings)
- Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518 (5th Cir. 1974) (approach to estimating uncertain damages)