Scientific MacHine & Welding, Inc. v. Kevin Rose
03-20-00564-CV
| Tex. App. | Mar 23, 2022Background
- Scientific Machine & Welding designs and manufactures custom “smart station” kiosks for FlashParking; its alleged trade secrets are the manufacturing drawings and related design work for those kiosks.
- Kevin Rose was an employee and officer whose duties included developing manufacturing drawings and servicing FlashParking.
- Scientific alleges Rose left on May 1, 2018 to join FlashParking and immediately provided FlashParking with Scientific’s drawings and proprietary information (and removed vendor/customer lists).
- Scientific sued Rose for violation of the Texas Uniform Trade Secrets Act (TUTSA), breach of contract, breach of an implied contract of confidentiality, and breach of fiduciary duty.
- Rose moved for traditional and no-evidence summary judgment; the trial court granted Rose summary judgment on all of Scientific’s claims and granted Scientific summary judgment on Rose’s attorney-fee counterclaim.
- On appeal, the court affirmed, holding (among other things) that Scientific failed to show it took "reasonable measures" to keep the drawings secret and that several causes of action lacked necessary elements or recognition under Texas law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether drawings are trade secrets under TUTSA | Drawings and design work are trade secrets; Scientific took measures to protect them | Scientific made no reasonable efforts to keep them secret (broad employee access, no passwords, provided to vendors without NDAs, produced in discovery without confidentiality) | Judgment for Rose: no genuine issue that Scientific failed to take reasonable measures, so information not protected as trade secrets under TUTSA |
| Breach of fiduciary duty (damages) | Rose disclosed drawings, solicited vendors, and removed lists causing harm to Scientific | No legally sufficient evidence of damages proximately caused by Rose’s conduct; claim also preempted by TUTSA | No-evidence summary judgment for Rose for lack of proof of proximate damages (court did not need to resolve preemption) |
| Breach of contract (existence of contract) | Employment-related documents, Basta’s affidavit, and LOI show confidentiality obligations / contract | No valid contract between Rose and Scientific: cited documents lack mutual promises/consideration; LOI is between companies not Rose personally | No-evidence summary judgment for Rose: Scientific produced no legally sufficient evidence of a valid contract between Rose and Scientific |
| Breach of an implied contract of confidentiality (new cause of action) | Implied confidentiality arises from employment relationship | No recognized separate cause of action in Texas; duty is fiduciary/tortual, not a standalone implied contract | Summary judgment for Rose: Court declines to recognize a new common-law cause of action for breach of an implied confidentiality contract |
Key Cases Cited
- Buck v. Palmer, 381 S.W.3d 525 (Tex. 2012) (undisputed evidence can be conclusive if reasonable people could not differ)
- First United Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214 (Tex. 2017) (elements of breach of fiduciary duty)
- Ford Motor Co. v. Ridgway, 135 S.W.3d 598 (Tex. 2004) (no-evidence summary-judgment standard)
- Merriman v. XTO Energy, Inc., 407 S.W.3d 244 (Tex. 2013) (requirement of proof of proximate-cause damages)
- USAA Texas Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018) (elements required to prove breach of contract)
- Federal Sign v. Texas S. Univ., 951 S.W.2d 401 (Tex. 1997) (consideration and mutuality are necessary for enforceable contract)
- Anderson v. Archer, 490 S.W.3d 175 (Tex. App.—Austin 2016) (court should not recognize new common-law causes of action in the first instance)
- Hampton v. Equity Tr. Co., 607 S.W.3d 1 (Tex. App.—Austin 2020) (declining to recognize a new common-law cause of action)