EthosEnergy Field Servs. v. Axis Mech. Grp.
| Decision Date | 10 June 2022 |
| Docket Number | Civil Action H-21-3954 |
| Parties | EthosEnergy Field Services, LLC, Plaintiff, v. Axis Mechanical Group, Inc., Mark Jones, and Dan Henderson, Defendants. |
| Court | U.S. District Court — Southern District of Texas |
REPORT AND RECOMMENDATION
EthosEnergy Field Services, LLC, (EthosEnergy) sued its direct competitor, Axis Mechanical Group, Inc., (Axis), and former employees, Mark Jones and Dan Henderson, alleging violations of the Defend Trade Secrets Act (DTSA), 18 U.S.C §§ 1831-1839, the Texas Uniform Trade Secrets Act (TUTSA), Tex. Civ. Prac. & Rem. Code §§ 134A.001-134A.008, and the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030(g). PL's Orig. Compl., ECF No. 1. EthosEnergy also alleged Texas common law breach of fiduciary duties, aiding and abetting breach of fiduciary duties, unfair competition by misappropriation, tortious interference with contract or business relations, civil conspiracy, and breach of contract. Id.
Axis and Henderson separately filed motions to dismiss the original complaint. ECF Nos. 19, 23. The court granted EthosEnergy's unopposed motions for extension of time to respond to the motions. ECF Nos. 25, 27. By the deadline set EthosEnergy filed an amended complaint. Am. Compl., ECF No 29. The amended complaint asserted fewer claims against Henderson, more claims against Jones, and several of the common law claims in the alternative to the DTSA and TUTSA claims. See ECF No. 29.
Axis and Henderson filed motions to strike or, in the alternative to dismiss the amended complaint, and Jones filed a motion to dismiss the amended complaint. ECF Nos. 34, 36-37. At a hearing on March 31, 2022, the court denied as moot Axis's and Henderson's motions to dismiss the original complaint and denied their motions to strike the amended complaint. ECF No. 39. The parties have fully brief Defendants' three motions to dismiss the amended complaint. See ECF Nos. 34, 36-37, 43-46.
The court recommends that Henderson's motion to dismiss, ECF No. 36, be granted, that Axis's motion to dismiss, ECF No. 34, be granted in part, and that Jones's motion to dismiss, ECF No. 37, be granted in part.
EthosEnergy is in the business of providing “rotating equipment repair and integrated solutions for the maintenance, repair, overhaul and upgrade of industrial rotating and reciprocating equipment.” Am. Compl., ¶ 11. Axis provides the same type of services and is a direct competitor of EthosEnergy. Id. ¶ 25. Jones worked for EthosEnergy from January 1997 to April 2021 serving as vice president of operations and corporate president. Id. ¶¶ 12-13. Henderson worked for EthosEnergy from September 2011 to April 2021 serving as power generation field manager, director of operations for the Gulf Coast, and corporate vice president. Id. ¶¶ 1415.
Jones and Henderson signed intellectual property (IP) agreements with EthosEnergy. Am. Compl. ¶ 18. The IP agreements imposed additional fiduciary responsibilities on Jones and Henderson, including duties not to publish or disclose EthosEnergy's proprietary information and to return all materials containing EthosEnergy's proprietary information. Id. “Jones and Henderson had access to and utilized EthosEnergy's valuable trade secrets, intellectual property, and confidential and proprietary business information as part of their job duties.” Id. ¶ 22.
In March 2015, Axis began recruiting EthosEnergy's employees and customers. Am. Compl. ¶ 26. Jones accepted an offer of employment with Axis in January 2021 and left EthosEnergy in late April 2021. Id. ¶ 28. Before submitting his resignation, Jones began recruiting other EthosEnergy employees, including Henderson, to work for Axis. Id. ¶ 29. Henderson accepted a position with Axis and left EthosEnergy about the same time as Jones. Id. at ¶¶ 29-30, 33.
In early March 2021, “Jones installed five . . . USB storage devices on his EthosEnergy issued laptop” and “accessed and/or saved” files containing EthosEnergy's confidential and proprietary information, including contracts with customers, labor rates, markup rates, and bids. Am. Compl. ¶¶ 55, 60-62.
During that same period, Jones also contacted Enterprise Fleet Management (Enterprise), which managed EthosEnergy's fleet of vehicles, and, contrary to EthosEnergy's instructions, directed Enterprise to sell several vehicles. Am. Compl. ¶¶ 39-40. An Enterprise representative questioned Jones's decision to sell those particular vehicles, which were newer models with low mileage, and Jones confirmed his directive to sell. Id. ¶ 41. Jones informed Enterprise that Axis's chief operating officer (COO) “may be interested in purchasing some of the newer units.” Id. ¶ 39. Axis purchased four of EthosEnergy's fleet vehicles, three of which had been assigned to employees who later resigned to work for Axis. Id. ¶¶ 44-46. Due to high demand and low inventory, EthosEnergy was not able to replace those vehicles for six to eight months. Id. ¶ 47.
After joining Axis, Jones and Henderson traveled with Axis's COO and Axis's co-owner to northern California to solicit other employees from EthosEnergy. Am. Compl. ¶ 66. They falsely told EthosEnergy's employees that they should join Axis because EthosEnergy planned to close the northern California office. Id. A total of sixteen employees left EthosEnergy to work for Axis. Id. ¶ 67.
Jones, Henderson, and Axis also solicited EthosEnergy's customers by falsely telling them that EthosEnergy was planning to close offices and would be unable to provide the services that it had been. Am. Compl. ¶ 68. A total of five customers left EthosEnergy to become customers of Axis. Id. ¶ 69.
A complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Federal Rule of Civil Procedure 12(b)(6) authorizes the court to dismiss a complaint for “failure to state a claim upon which relief can be granted.” A motion to dismiss under Rule 12(b)(6) “is not meant to resolve disputed facts or test the merits of a lawsuit.” Sewell v. Monroe City Sch. Bd., 974 F.3d 577,581 (5th Cir. 2020).
To survive a motion to dismiss, the plaintiff must have pleaded “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Calogero v. Shows, Cali & Walsh, L.L.P., 970 F-3d 576,580 (5th Cir. 2020) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). This plausibility standard “does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence” to support the allegations. Twombly, 550 U.S. at 556. “[A] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable[.]” Id.
Courts accept “all well-pleaded facts as true” and “view[] them in the light most favorable to the plaintiff.” Allen v. Walmart Stores, L.L.C., 907 F.3d 170,177 (5th Cir. 2018) (quoting Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999)). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. “Factual allegations must be enough to raise a right to relief above the speculative level.” Allen, 907 F.3d at 177 (quoting Twombly, 550 U.S. at 555).
EthosEnergy raised eleven causes of action in its amended complaint. All three Defendants moved to dismiss the amended complaint in its entirety. The court examines each claim to determine whether EthosEnergy has stated any plausible claim to relief.
EthosEnergy brought trade secrets claims under federal and Texas statutes against Jones and Axis for misappropriation of “EthosEnergy's revenue, rates EthosEnergy charges(ed) to its customers,... its ‘mark-up' rates that show EthosEnergy's profits on a particular contract[,]” including pricing information related to customers that Axis solicited. Am. Comp. ¶¶ 84-103.
A claim of trade secret misappropriation maybe brought under DTSA and TUTSA. 18 U.S.C. § 1836(b)(1); Tex. Civ. Prac. & Rem. Code § 134A.004. Because both the federal and state statute are based on the Uniform Trade Secrets Act, the elements are similar but not identical. See DBG Grp. Invs., LLC v. Puradigm, LLC, Civil Action No. 3:2i-CV-678-S, 2022 WL 313435, at *3 (N.D. Tex. Feb. 2, 2022). To state a claim under DTSA, a plaintiff must allege facts showing: (1) a trade secret; (2) misappropriation; and (3) that “the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” 18 U.S.C. § 1836 (b)(1). DTSA's definition of “misappropriation” includes acquisition of trade secrets with the knowledge that they were acquired by improper means or disclosure or use of trade secrets without consent. See 18 U.S.C. § 1839(5). The definition of “improper means” includes theft and “breach of a duty to maintain secrecy.” 18 U.S.C. § 1839(6)(A).
To state a claim under TUTSA, a plaintiff must allege facts showing: (1) a trade secret; (2) acquisition “through a breach of a confidential relationship or discovered by improper means; [(3)] the trade secret was used without authorization; and [(4)] the trade secret owner suffered damages as a result.” Snowhite Textile & Furnishings, Inc. v. Innvision Hosp., Inc., No. 05-18-01447-CV, 2020 WL 7332677, at *4 (Tex. App.-Dallas 2020, no pet.).
“Trade secret” is defined by TUTSA to mean:
all forms and types of...
To continue reading
Request your trial