Spear Mktg., Inc. v. BancorpSouth Bank

Citation791 F.3d 586,115 U.S.P.Q.2d 1307
Decision Date30 June 2015
Docket NumberNo. 14–10753.,14–10753.
PartiesSPEAR MARKETING, INCORPORATED, Plaintiff–Appellant v. BANCORPSOUTH BANK; Argo Data Resource Corporation, Defendants–Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Steven Edward Ross, Ross Joyner, P.L.L.C., Thomas C. Wright, Rose Walker, L.L.P., Dallas, TX, for PlaintiffAppellant.

Tonya M. Gray (argued), Nicole Reid Kamprath, Andrews Kurth, L.L.P., Dallas, TX, for DefendantAppellee BancorpSouth Bank.

David Harlan Harper, Attorney (argued), Jason Patrick Bloom, Esq., Allen Ryan Paulsen, Esq., Haynes & Boone, L.L.P., Dallas, TX, for DefendantAppellee ARGO Data Resource Corporation.

Appeal from the United States District Court for the Northern District of Texas.

Before WIENER, SOUTHWICK, and GRAVES, Circuit Judges.

Opinion

WIENER, Circuit Judge:

PlaintiffAppellant Spear Marketing, Inc. (SMI) brought various Texas state law claims against DefendantsAppellees BancorpSouth Bank (BCS) and ARGO Data Resource Corp. (ARGO) (collectively, Defendants) in Texas state court. SMI's claims related to Defendants' alleged theft of trade secrets in connection with a software program developed and sold by SMI. Defendants removed the case to federal court on the basis of complete preemption by the Copyright Act.1 The district court denied SMI's motion to remand and, after discovery, granted Defendants' motion for summary judgment on the merits of the claims. SMI appeals both decisions. We affirm.

I. FACTS AND PROCEEDINGS

SMI is a small, family-run business that produces one product for the banking industry, a computer program called VaultWorks. VaultWorks helps banks manage their cash inventories so that each of their branches has the optimum supply of cash available on site. The program enables banks to identify surplus cash in vaults and ATMs, track daily cash inventory, and eliminate unnecessary cash deliveries to branch and ATM locations.

Although VaultWorks is a software program, none of SMI's customers has access to the software itself. Instead, “SMI's customers can only view the specific user interface screens and reports they are given access to via the internet.”2 Bank branches enter their daily cash information into VaultWorks using these interface screens, and VaultWorks's output data is then displayed to those branches. SMI acknowledges that none of its customers was ever provided with the source code, object code, or software for VaultWorks.

BCS was one of SMI's largest customers. BCS and SMI first entered into a one-year agreement for the use of VaultWorks in May 2002. The parties extended the agreement several times, the last extension occurring in March 2010 for a term of two years.

ARGO, like SMI, develops software for the banking industry. It is significantly larger than SMI and offers a range of products. At all relevant times, BCS used ARGO's automatic teller program, BANKPRO Teller. Around 2004, ARGO began to develop its own cash management program, which ARGO envisioned would eventually be bundled with its BANKPRO Teller. This product, named Cash Inventory Optimization (“CIO”), uses different predictive algorithms than does VaultWorks. Because CIO is installed directly on a bank's computers, it is integrated with the rest of the bank's operating system.3 CIO thus “eliminates ‘the need for branch personnel to manually input cash data,’ as bank employees must do with VaultWorks.”4

Starting in 2008, ARGO began pitching CIO and an upgraded version of the BANKPRO Teller system to BCS. BCS demurred on both products until March 2010, when it told ARGO that it would be interested in CIO if that system could be integrated with the existing version of BANKPRO Teller that BCS was then using rather than ARGO's upgraded replacement product. ARGO discussed this concern internally and, on April 1, 2010, emailed BCS that this integration would be possible.

Also around April 1, 2010, SMI contacted ARGO to see if it would be interested in acquiring SMI. ARGO expressed interest, representing that it neither had nor was currently developing a cash management product similar to VaultWorks. On the strength of ARGO's expression and representations, SMI arranged to demonstrate VaultWorks to ARGO, which it did over the phone and online on April 6. During this demonstration, which lasted approximately one hour, SMI disclosed confidential business and technical information about VaultWorks. After a few more exchanges, ARGO lost interest in acquiring SMI and stopped responding to SMI's emails.

Through the rest of 2010, ARGO continued marketing CIO to BCS. Finally, in early January 2011, BCS agreed to license CIO from ARGO. The two companies conducted a lengthy implementation process that lasted the rest of the year. During this time, BCS sent ARGO various screenshots of the VaultWorks user interface because ARGO needed historical cash usage data from BCS's branches to troubleshoot CIO's forecasting function. That data was readily accessible from the VaultWorks output screens for each branch.

CIO was finally implemented successfully at the end of 2011, and BCS “notified SMI on January 12, 2012 of its intention not to renew the VaultWorks Agreement.”5 That agreement thus expired in February 2012.

In September 2012, SMI filed this suit against Defendants in Texas state court, alleging ten causes of action: violation of the Texas Theft Liability Act (“TTLA”), misappropriation of trade secrets, conversion, unjust enrichment, fraud, constructive fraud, breach of contract, tortious interference, unfair competition, and civil conspiracy. SMI claimed that Defendants had stolen both technical and business trade secrets related to VaultWorks.

Defendants removed the case to federal court on the ground that SMI's claims were completely preempted by the Copyright Act. SMI then amended its state court petition (“Original Petition”) to delete its conversion claim and remove various references to copying and distribution. It then moved for remand, contending that removal had been improper because none of its claims were preempted. SMI explained in its opening brief that it voluntarily abandoned its conversion claim [t]o narrow the issues in this lawsuit” and that it removed portions of its TTLA claim related to copying of trade secrets “even though this district's own precedent holds [those portions] are not preempted by the Copyright Act.” The district court denied SMI's motion, holding that the conversion and TTLA claims were completely preempted. The court did not consider whether SMI's remaining claims were preempted, choosing instead to exercise supplemental jurisdiction over them per 28 U.S.C. § 1367.

After discovery, Defendants filed a motion for summary judgment, seeking dismissal of all of SMI's remaining claims. The district court granted this motion, holding that “SMI ha[d] failed to establish that genuine factual disputes exist for certain essential elements of its nine Texas state law claims, and as such, summary judgment in Defendants' favor [wa]s warranted.”6 SMI timely appealed the summary judgment order and the order denying its motion to remand.

II. ANALYSIS
A. Denial of SMI's Motion to Remand
1. Standard of Review

We review the denial of a motion to remand to state court de novo.7 Under this standard, [a]ny underlying findings of fact are subject to review for clear error.”8

2. Time–of–Filing Rule

The district court considered SMI's motion to remand by evaluating the Original Petition for grounds for removal. SMI asserts that the district court should have considered SMI's amended complaint (“Amended Complaint”), in which SMI dropped its conversion claim and deleted language accusing Defendants of copying VaultWorks. Defendants counter that removal is assessed according to the time-of-filing rule.

[J]urisdictional facts are determined at the time of removal, and consequently post-removal events do not affect that properly established jurisdiction.”9 It is this court's established precedent that once a case is properly removed, the district court retains jurisdiction even if the federal claims are later dropped10 or dismissed.11 In Brown v. Southwestern Bell Telephone Co., we held that [w]hen a defendant seeks to remove a case, the question of whether jurisdiction exists is resolved by looking at the complaint at the time the petition for removal is filed.12 We noted that “when there is a subsequent narrowing of the issues such that the federal claims are eliminated and only pendent state claims remain, federal jurisdiction is not extinguished.”13 We wrote a thorough and definitive explanation of this issue in Hook v. Morrison Milling Co.:

Before analyzing our appellate jurisdiction over this appeal, we first note that the district court's subject matter jurisdiction was proper at all times. To begin with, this case was properly removed pursuant to 28 U.S.C. § 1446. Hook's original petition alleged, inter alia, that she was wrongfully discharged in retaliation for filing a workers' compensation claim.... MMC's removal of Hook's claims was unquestionably proper. Furthermore, Hook's subsequent deletion of her wrongful discharge claim does not render MMC's removal improper. We have stated on several occasions that a post-removal amendment to a petition that deletes all federal claims, leaving only pendent state claims, does not divest the district court of its properly triggered subject matter jurisdiction. In a jurisdictional inquiry, we look at the complaint as it existed at the time the petition for removal was filed, regardless of any subsequent amendments to the complaint.14

Nothing cited by SMI disturbs this conclusion. First, SMI relies on 28 U.S.C. § 1447(c), which requires a district court to remand an action [i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction.”15 But this “any time” language regarding jurisdictional defects must be read in tandem with the first sentence of the subsection, which requires...

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