Lakeway Regional Medical Center, LLC and Surgical Development Partners, LLC// Lake Travis Transitional LTCH, LLC N/K/A Lake Travis Specialty Hospital, LLC v. Lake Travis Transitional LTCH, LLC N/K/A Lake Travis Specialty Hospital, LLC// Lakeway Regional Medical Center, LLC Surgical Development Partners, LLC Brennan, Manna, & Diamond, LLC And Frank T. Sossi
03-15-00025-CV
| Tex. App. | Sep 21, 2015Background
- LTT developed Lake Travis Specialty Hospital and shared extensive confidential project materials (architectural plans, MEP specs, financial pro formas, operations plans) with SD P and LRMC under a May 2009 Confidentiality Agreement and a September 15, 2009 Letter of Intent (LOI) that included confidentiality, standstill, and binding Section 2 terms subject to conditions precedent.
- Sossi (lawyer) simultaneously represented/served LRMC and SDP and had access to LTT materials; he and others communicated with HUD during LRMC’s application for a $166.9M HUD Section 242 mortgage.
- In May 2010 Sossi sent HUD a memorandum (the May 10 email) criticizing LTT’s facility (conversion costs, code/zoning issues), and HUD relied on those representations in proceeding with LRMC’s guaranty; LRMC’s loan funded shortly thereafter.
- LTT alleges defendants used LTT’s confidential/project information (provided only to evaluate an acquisition) to secure HUD insurance for LRMC and then abandoned the LTT transaction, injuring LTT and depriving it of value and investor support.
- At the trial-court pretrial stage Judge Yelenosky granted partial summary judgment for defendants on LTT’s misappropriation-of-trade-secrets claim and on LTT’s claim for breach of Section 2 of the LOI; LTT seeks reversal of those rulings and challenges exclusions of summary-evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held (trial court) |
|---|---|---|---|
| Whether LTT’s disclosed materials qualify as trade secrets | LTT: compilation of technical, financial, and operational documents and practices were secret, valuable, developed at great expense, and protected by confidentiality agreements — a fact question | Defs: materials were not trade secrets / were publicly available or not proprietary | Court granted summary judgment for defendants (no trade-secret liability) |
| Whether defendants acquired secrets via confidential relationship or improper means | LTT: disclosure occurred in the course of acquisition negotiations and under agreements creating duties of confidence; defendants then used that info for HUD submissions | Defs: any information came from non-confidential sources (e.g., landlord) or was not acquired improperly | Court granted summary judgment for defendants on acquisition/breach theory |
| Whether defendants used or disclosed the alleged trade secrets | LTT: defendants used documents and site-inspection knowledge to compute conversion costs and to disparage LTT to HUD (May 10 email), thereby using/disclosing secrets and causing commercial harm | Defs: they did not use LTT’s secrets or did not disclose them to HUD in a way that caused injury | Court found insufficient evidence of unauthorized use/disclosure and granted summary judgment |
| Whether Section 2 of the LOI is an enforceable, binding agreement | LTT: LOI expressly labels itself "Binding Letter of Intent," sets detailed monetary and assumption-of-lease terms, and contains conditions precedent; defendants prevented conditions from occurring (so cannot rely on nonoccurrence) | Defs: Section 2 is an unenforceable agreement to agree or conditions precedent were not satisfied | Court granted summary judgment for defendants that Section 2 claim fails |
| Whether the trial court abused discretion by excluding portions of LTT’s summary-judgment evidence | LTT: exclusions (parts of Project File, Berry declaration statements, HUD-related exhibits) were erroneous because many objections were mooted by amended responses and the evidence was properly authenticated | Defs: objections maintained; certain material lacked proper citation or foundation | Court sustained several objections and excluded some evidence in its evidentiary ruling |
Key Cases Cited
- Bracey v. City of Killeen, 417 S.W.3d 94 (Tex. App.—Austin 2013) (summary judgment de novo review; nonmovant evidence must be taken as true)
- In re Bass, 113 S.W.3d 735 (Tex. 2003) (factors for determining trade-secret status and trade secret is typically a fact question)
- McCalla v. Baker’s Campground, Inc., 416 S.W.3d 416 (Tex. 2013) (an agreement containing all material terms may be enforceable even if it contemplates future documents)
- Southwestern Energy Prod. Co. v. Berry-Helfand, 411 S.W.3d 581 (Tex. App.—Tyler 2013) (compilation of public and nonpublic elements can constitute a protectable trade secret; damages measures include reasonable royalty)
- Clear Lake City Water Auth. v. Friendswood Dev. Co., Ltd., 344 S.W.3d 514 (Tex. App.—Houston [14th Dist.] 2011) (a party cannot rely on nonoccurrence of a condition precedent when its own actions prevented performance)
- Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518 (5th Cir. 1974) (various forms of trade-secret damages, including reasonable royalty and defendant’s benefits)