Glattly v. Air Starter Components, Inc.
332 S.W.3d 620
| Tex. App. | 2011Background
- Air Starter Components, Inc. sued Specialized Components, Inc. and its shareholders for misappropriation of trade secrets, and for tortious interference with contract, resulting in jury awards of $168,036.25 and $600,000 respectively, plus injunctions prohibiting use of Air Starter's trade secrets.
- Molina and Fuentes left Air Starter to join Specialized; Molina helped Specialized gain access to Air Starter drawings and customer lists, with a box of Air Starter materials allegedly moved to Molina's Specialized office shortly before Specialized began producing parts.
- Specialized expanded from a job shop to a production shop in 2002, bringing in new directors including Boyd, Kellogg, Ward, and Molina, and later hired Fuentes as a salesperson, leveraging Air Starter customer data and drawings.
- Fuentes had a June 2002 nondisclosure agreement with Air Starter; he began working for Specialized in September 2002 and actively solicited customers for Specialized.
- The trial court determined Fuentes’s contract included a covenant not to compete and reformed it to a two-year restriction; the court also issued injunctions and Air Starter sought affirmance of damages and broader relief on appeal.
- On appeal, the Texas First Court of Appeals reversed portions of damages, holding the lost profits evidence insufficient to prove recoverable damages with reasonable certainty, and modified the injunction term from 30 years to remove the time restriction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are lost profits proven with reasonable certainty? | Air Starter argues damages were proven by Ferguson’s analysis of lost profits from misappropriation and tortious interference. | Glattly/Boyd argue the evidence relied on unsupported assumptions and failed to establish a single complete calculation. | No; damages for lost profits are not proven with reasonable certainty; take-nothing judgment affirmed on damages. |
| Is the Fuentes contract a covenant not to compete and enforceable? | Air Starter contends the contract is a non-disclosure agreement, not a covenant not to compete. | Glattly/Boyd argue contract construction favored the trial court’s covenant-not-to-compete interpretation. | Contract is a covenant not to compete; issue preserved correctly and affirmed as such. |
| Attorney's fees under the Texas Theft Liability Act; prevailing party status? | Air Starter seeks attorney’s fees as prevailing party despite zero damages under TTA. | Defendants contend no prevailing-party status since TTA damages were zero and no injunctive relief is covered. | Air Starter is not the prevailing party; attorney's fees denied. |
| Is the 30-year injunction proper or should it be permanent and broader in scope? | Air Starter seeks permanent injunction prohibiting use of trade secrets and broader restriction. | Court limited to 30 years and limited to trade-secret use rather than broader competition. | 30-year limit improper; injunction should be permanent; scope limited to trade secrets as found by the jury. |
| Did the trial court err in discovery rulings regarding hard drives? | Air Starter sought unredacted hard drives to obtain trade-secret evidence. | Specialized sought protection of privileged information; discovery ruling should stand. | Issue deemed non-destateful; appeal sustained denial of discovery relief. |
Key Cases Cited
- ERI Consulting Engineers, Inc. v. Swinnea, 318 S.W.3d 867 (Tex. 2010) (lost profits require competent evidence with reasonable certainty)
- Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80 (Tex. 1992) (one complete calculation necessary for lost profits; mere contracts not enough)
- Atlas Copco Tools, Inc. v. Air Power Tool & Hoist, Inc., 131 S.W.3d 203 (Tex. App.-Fort Worth 2004) (lost profits insufficient where evidence includes non-recoverable or non-typical sales)
- Capital Metropolitan Transp. Auth./Cent. of Tenn. Ry. & Navigation Co., Inc. v. Cent. of Tenn. Ry. & Navigation Co., Inc., 114 S.W.3d 573 (Tex. App.-Austin 2003) (reasonableness of assumptions in lost-profits proof is key)
- Intercontinental Group Partnership v. KB Home Lone Star L.P., 295 S.W.3d 650 (Tex. 2009) (prevailing-party status requires relief on the claim, not mere liability finding)