579 S.W.3d 390
Tex. App.2017Background
- EMC Products, a Texas limited partnership, held technology and trade secrets developed by EMC Cement; partners included EMC Management (1%), EMC Cement (49.5% Class A), and Walker/Wilson (49.5% Class B).
- Walker and Wilson were contractually obligated (Partnership Agreement §2.5) to provide financing; disputes arose over defaults on a Texas Capital Bank loan and a May 3, 2011 foreclosure sale of EMC Products’ assets.
- VHSC (a new company) purchased EMC Products’ assets at the foreclosure; Pike (former EMC Products manager) resigned and became VHSC president and filed a patent application disclosing technology from EMC Cement.
- Jury found breaches of the Partnership Agreement by Walker/Wilson, misappropriation of trade secrets and conspiracy involving Walker, Wilson, Few Ready Mix, Pike, and VHSC, tortious interference with Pike’s Management Agreement by VHSC/Pike, and awarded damages plus attorney’s fees.
- On appeal, the court affirmed most liability findings, modified the judgment to delete Pike’s liability for interfering with his own Management Agreement, reversed the trial court’s denial of a permanent injunction, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing/Capacity to sue on partnership claims | EMC Cement (plaintiff) had capacity to sue for partner breaches and harms to partnership interests | Walker/Wilson: EMC Cement lacked standing; claim belonged to partnership | Court treated the claim as a capacity issue (not standing) and found defendants waived it by failing to file a Rule 93 verified plea; waiver affirmed |
| Breach of Partnership Agreement (financing obligation) | EMC Cement: §2.5’s mandatory “shall” required Walker/Wilson to loan/obtain financing; their failure breached the Agreement | Walker/Wilson: obligation limited by “sound business principals”; EMC Products breached first; excuse defense | Court held §2.5 mandatory; “sound business principals” did not limit §2.5; defendants waived excuse defense; jury finding for plaintiff upheld |
| Trade-secret misappropriation & injunction | EMC Cement: trade secrets (mill records, VBM configurations, process parameters) were misappropriated; injunction required because defendants possess and can use secrets | VHSC/Pike: secrets disclosed in patents/public materials; foreclosure conveyed licenses; trial court denied injunction (no imminent harm) | Court held evidence supported misappropriation finding; licenses terminated pre-foreclosure so FH sale didn’t authorize use; trial court’s factual findings on nonuse were unsupported — reversed denial of permanent injunction and remanded |
| Damages and attorney’s fees (valuation, lost profits, development-costs saved, fee segregation) | EMC parties presented valuation experts (EBITDA methodologies) and claimed lost value, investor value, and development-cost savings; sought fees under Chapter 38 | Defendants: expert projections speculative, development-costs-saved unsupported, fees not timely produced/tied to presentment, fees not segregated | Court found valuation testimony (Lygren, Miller, Swanstrom) sufficiently connected to data for jury; development-costs-saved theory lacked sufficient proof but investor-value finding was reinstated; attorney’s-fees award upheld (no prejudice, claims intertwined so segregation not required) |
Key Cases Cited
- AutoZone, Inc. v. Reyes, 272 S.W.3d 588 (Tex. 2008) (legal-sufficiency review standard)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standards for reviewing sufficiency of evidence)
- Tri v. J.T.T., 162 S.W.3d 552 (Tex. 2005) (elements of civil conspiracy)
- Juhl v. Airington, 936 S.W.2d 640 (Tex. 1996) (civil conspiracy requires specific intent)
- Bohnsack v. Varco, L.P., 668 F.3d 262 (5th Cir. 2012) (definition of "use" of trade secret under Restatement)
- Helena Chem. Co. v. Wilkins, 47 S.W.3d 486 (Tex. 2001) (lost-profits proof and reasonable certainty)
- Gammill v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713 (Tex. 1998) (expert reliability and analytical gap doctrine)
- Havner v. Merrell Dow Pharms., Inc., 953 S.W.2d 706 (Tex. 1997) (when expert methodology is unreliable, testimony fails as legal evidence)
- Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1 (Tex. 1991) (one-satisfaction rule and when segregation of fees is unnecessary)