Brand Servs., L. L.C. v. Irex Corp.

• Decision Date: 21 November 2018
• Docket Number: No. 17-30660,17-30660
• Citation: 909 F.3d 151
• Parties: BRAND SERVICES, L.L.C., Plaintiff - Appellant v. IREX CORPORATION, Defendant - Appellee
• Court: U.S. Court of Appeals — Fifth Circuit

909 F.3d 151

BRAND SERVICES, L.L.C., Plaintiff - Appellant

v.IREX CORPORATION, Defendant - Appellee

No. 17-30660

United States Court of Appeals, Fifth Circuit.

FILED November 21, 2018

Merritt Banning Chastain, III, Esq., Ogletree Deakins, P.C., Houston, TX, for Plaintiff-Appellant.

Ira Matthew Williamson, Miller & Williamson, L.L.C., New Orleans, LA, for Defendant-Appellee.

Before KING, ELROD, and HAYNES, Circuit Judges.

HAYNES, Circuit Judge:

The petition for rehearing is DENIED. The following is substituted in place of the prior opinion.

Appellant Brand Services, L.L.C. ("Brand Services") challenges the district court’s grant of summary judgment in favor of Appellee Irex Corporation ("Irex") on Brand Services’s Louisiana Uniform Trade Secrets Act ("LUTSA") claim and its civilian law conversion claim. Brand Services argues the district court erred by concluding that (1) Brand Services failed to produce sufficient evidence of damages and (2) LUTSA preempted its conversion claim. Brand Services also argues the district court improperly ruled on its claims without first considering Brand Services’s pending discovery motion. For the reasons set forth below, we AFFIRM the district court’s grant of summary judgment as to the civilian law conversion claim based upon trade secrets and REVERSE the remainder of the district court’s judgment, remanding for further consideration in light of this opinion.

I. Factual and Procedural Background

Brand Services, an industrial scaffolding company, claims that its former employee, James Stanich, stole trade secrets and confidential and proprietary information when he went to work for Irex, a competitor. Specifically, Stanich allegedly transferred from his work computer files containing information about software that Brand Services uses to, inter alia, invoice customers and track job productivity. Stanich then purportedly used this information to help Irex develop similar software. Brand Services filed suit based on this alleged misappropriation, asserting claims under LUTSA and for conversion under Louisiana civilian law.

After Brand Services filed suit, the district court set the discovery deadline for February 17, 2017. Brand Services claims Irex filed improper blanket objections to Brand Services’s first request for production, and thereafter repeatedly promised to produce responsive documents but had not done so by the discovery deadline. Brand Services moved to compel production of responsive documents on March 20, 2017. The magistrate judge denied the motion as untimely, but reminded Irex of its duty to supplement under Federal Rule of Civil Procedure 26(e). Irex never supplemented its responses.

The district court then granted summary judgment for Irex on Brand Services’s LUTSA claim. The district court concluded that Brand Services failed to proffer evidence sufficient to create a fact issue on the amount of unjust-enrichment damages Irex obtained from allegedly using Brand Services’s trade secrets. Brand Services moved for reconsideration of the ruling, and Irex moved for summary judgment on Brand Services’s conversion claim.

While Irex’s second motion for summary judgment and Brand Services’s motion for reconsideration were pending, Brand Services discovered responsive documents produced in related proceedings in Pennsylvania. Although Brand Services moved to compel production of these documents in the Louisiana case, because the documents in the Pennsylvania case were provided under a protective order, Brand Services was unable to get representative documents in time to satisfy the magistrate judge in the Louisiana case, and the motion was denied. When Brand Services finally obtained the exemplar documents, it filed a motion for reconsideration. That motion remains unaddressed in the district court.

After Brand Services filed its motion for reconsideration of the discovery ruling, but before the magistrate judge ruled on that motion, the district court granted summary judgment on Brand Services’s conversion claim, holding LUTSA preempted that claim. The district court also denied Brand Services’s motion for reconsideration of the LUTSA ruling, reiterating that Brand Services failed to submit specific evidence to establish its damages. In doing so, the district court did not discuss Brand Services’s pending discovery motion. Brand Services timely appealed.

II. Jurisdiction

Although the parties do not contest jurisdiction on appeal, we must consider our jurisdiction sua sponte. See Ruhrgas AG v. Marathon Oil Co. , 526 U.S. 574, 583, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999) ; Simon v. Wal-Mart Stores, Inc. , 193 F.3d 848, 850 (5th Cir. 1999). Brand Services filed suit based on diversity jurisdiction under 28 U.S.C. § 1332. Thus, we have jurisdiction over the district court’s final decision only if diversity jurisdiction was proper below. See 28 U.S.C. § 1291. Here, two issues exist: (1) whether the parties meet the diversity requirement in light of Brand Services’s status as a limited liability company¹ and (2) whether the $75,000 amount-in-controversy requirement is met. See 28 U.S.C. § 1332(a). After we requested supplemental briefing on the former, Brand Services submitted undisputed evidence that its members are citizens of Delaware and Georgia. Accordingly, we accept this filing as establishing diversity. See 28 U.S.C. § 1653 ; Carlton v. Baww, Inc. , 751 F.2d 781, 789 (5th Cir. 1985) ; see also Burdett v. Remington Arms Co., L.L.C. , 854 F.3d 733, 734 n. 1 (5th Cir. 2017).

As far as the amount in controversy, the face of the complaint alleges facts showing it is more likely than not that more than $75,000 is at stake.² When a complaint alleges an unspecified amount of damages, the party invoking diversity jurisdiction must show by a preponderance of the evidence that the amount-in-controversy requirement is met. See St. Paul Reinsurance Co. v. Greenberg , 134 F.3d 1250, 1253 (5th Cir. 1998). We ask whether "it is facially apparent [from the complaint] that the claims exceed the jurisdictional amount," and if it is not, the court may "rely on summary judgment-type evidence to ascertain the amount in controversy." Id. (internal quotation marks omitted).

Here, Brand Services pleaded damages exceeding the $75,000 floor. Brand Services alleged that it invested more than $300,000 in "[r]edevelopment" costs associated with the allegedly misappropriated software. For its LUTSA claim, Brand Services may recover what it would cost to acquire, lease, or develop misappropriated trade secrets. See Wellogix, Inc. v. Accenture, L.L.P. , 716 F.3d 867, 879 (5th Cir. 2013) (applying Texas law). Accordingly, we conclude that Brand Services satisfied the amount-in-controversy requirement and that diversity jurisdiction was proper in the district court.

III. Standard of Review

"We review a district court’s grant of summary judgment de novo, applying the same standard of review as would the district court." Reingold v. Swiftships, Inc. , 126 F.3d 645, 646 (5th Cir. 1997). "Summary judgment is proper only when it appears that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Id. (citing FED . R. CIV . P. 56(c) ). "On summary judgment the inferences to be drawn from the underlying facts contained in the affidavits, depositions, and exhibits of record must be viewed in the light most favorable to the party opposing the motion." Reingold , 126 F.3d at 646.

IV. Discussion

Turning to the merits of the appeal, we begin with the discovery disagreement. Brand Services claims the district court prematurely granted summary judgment because Brand Services’s discovery motion was never ruled upon. Brand Services argues that the district court should not have ruled on its LUTSA and conversion claims before considering the import of the documents from the Pennsylvania litigation.

A district court has discretion to deny as untimely a motion filed after the discovery deadline. See Vann v. Gilbert , 482 F. App'x 876, 879 (5th Cir. 2012) (per curiam) (affirming summary judgment and finding no abuse of discretion in denying a motion to compel where the scheduling order required all discovery to be completed by a specific date and the motion was filed after that date); Curry v. Strain , 262 F. App'x 650, 652 (5th Cir. 2008) (per curiam) (finding no abuse of discretion where the district court dismissed a motion to compel in part because it was filed almost one month after the discovery deadline). But when a properly filed discovery motion is pending, a district court should not grant summary judgment without first considering whether more discovery is required. See Smith v. City of Jackson , 351 F.3d 183, 197 (5th Cir. 2003) ; Wichita Falls Office Assocs. v. Banc One Corp. , 978 F.2d 915, 919 n.4, 919–20 (5th Cir. 1992) ; Int’l Shortstop, Inc. v. Rally’s, Inc. , 939 F.2d 1257, 1267 (5th Cir. 1991).

Here, the district court failed to address the motion to reconsider the proffered exemplar documents that Brand Services alleges would show that Irex failed to properly respond to the discovery requests and to supplement as directed by the magistrate judge. Brand Services claims it moved to compel immediately after discovering the responsive documents in the Pennsylvania litigation. There is some indication that Brand Services could not have reasonably discovered these documents sooner: Irex’s initial blanket objections to Brand Services’s discovery request were grossly improper, and thereafter Irex did little to comply with Brand Services’s requests. Therefore, Brand Services was arguably diligent in seeking these documents even though it did not discover them until after the discovery deadline had passed. At a minimum, Irex’s conduct in this discovery proceeding is highly questionable and bears further examination in light of the exemplar documents. Thus, the district court improperly granted summary judgment without fully examining Brand Services’s...