Ray v. Lynass
| Docket Number | 1:21-cv-0020-DH |
| Decision Date | 02 November 2023 |
| Parties | Michelle Ray, Absolute Facility Solutions, LLC, Plaintiff v. Patrick Lynass, Defendant |
| Court | U.S. District Court — Western District of Texas |
Before the Court is Defendant Patrick Lynass's Motion for Partial Summary Judgment on Lynass's Counterclaims, Dkt 47; Motion for Summary Judgment on Plaintiffs' Causes of Action, Dkt. 48; and all related briefing. After reviewing these filings, and the relevant case law, the Court denies Lynass's Motion for Partial Summary Judgment, Dkt. 47 and grants in part and denies in part Lynass's Motion for Summary Judgment, Dkt. 48. In particular, the Court denies both of Lynass's motions in all respects, except as to AFS's now-abandoned anti-cybersquatting claim.
Plaintiffs Michelle Ray and Absolute Facility Solutions, LLC (“AFS”) bring this lawsuit against Lynass based on his alleged misappropriation of AFS's property and confidential information. Dkt. 18, at 1-2. In 2015, Lynass and Ray co-founded AFS- a Texas-based company specializing in information management consulting-and executed a limited liability company agreement. Id. at 4. Plaintiffs allege that from AFS's inception, Lynass “failed to close a single deal from any lead derived on his own” as director of sales. Id. at 7. In November 2020, Absolute voted to terminate Lynass as director of sales and treasurer of the company. Id. at 8.
Upon termination, Lynass was required to return AFS's property, assets, and confidential information. Id. Yet Plaintiffs allege that upon termination from his position as sales director at AFS, Lynass misappropriated “company property and confidential information including sensitive financials, customer and pricing information, future company plans, and has converted them for his own separate use in interstate commerce.” Id. at 1. Plaintiffs further allege that Lynass has used this information to thwart AFS's relationship with “employees, contracts, and clients.” Id. at 2, 7-8. At issue, in particular, is AFS's contract with UCLA Health, which Plaintiffs claim Lynass usurped. Id. at 7-8.
Plaintiffs brought ten causes of action against Lynass for violations of the Anti-Cybersquatting Consumer Protection Act, the Texas Uniform Trade Secrets Act, and the Defend Trade Secrets Act, as well as for breach of fiduciary duty, conversion, tortious interference, and breach of contract. Id. at 11-24. Lynass brings counterclaims for breach of formal fiduciary duty, breach of informal fiduciary duty, and breach of the Company Agreement, and seeks the appointment of a receiver as well as declaratory judgment as to certain aspects of the parties' Company Agreement and the status of client accounts held by AFS. Dkt. 30, at 41-47.
Lynass moves for summary judgment on all ten of AFS's causes of action and for partial summary judgment on his claims for breach of the Company Agreement, breach of fiduciary duty and informal fiduciary duty, and his request for declaratory judgment. Dkts. 48, at 3-13; 47, at 2-12.
Summary judgment is appropriate when the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Washburn v. Harvey, 504 F.3d 505, 508 (5th Cir. 2007). A dispute regarding a material fact is “genuine” if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for summary judgment, the court is required to view all inferences drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986); Washburn, 504 F.3d at 508. Further, a court “may not make credibility determinations or weigh the evidence” in ruling on a motion for summary judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477 U.S. at 254-55.
Once the moving party has made an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586. Mere conclusory allegations are not competent summary judgment evidence, and thus are insufficient to defeat a motion for summary judgment. Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007). Unsubstantiated assertions, improbable inferences, and unsupported speculation are not competent summary judgment evidence. Id. The party opposing summary judgment is required to identify specific evidence in the record and to articulate the precise manner in which that evidence supports his claim. Adams v. Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th Cir. 2006). If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which it will bear the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.
AFS brings a claim for violation of the ACPA related to Lynass's alleged refusal to release AFS's domain name account to AFS and attempt to “blackmail AFS over the domain name, [by] offering to sell it back to AFS for a fee.” Dkt. 18, at 13. To prevail on its ACPA claim, AFS must show (1) registration of a domain name, (2) that was “identical or confusingly similar to” a mark that was distinctive at the time of registration, and (3) “bad faith intent” at the time of registration. See 15 U.S.C. § 1125(d)(1).
Lynass argues that he is entitled to summary judgment on AFS's ACPA claim because AFS cannot show the existence of a distinctive mark. Dkt. 48, at 3-4. AFS responds that it “abandons this claim.” Dkt. 53, at 12. When a party fails to pursue a claim or defense beyond the party's initial complaint, the claim is deemed abandoned or waived. Black v. Panola Sch. Dist., 461 F.3d 584, 588 n.1 (5th Cir. 2006) (plaintiff abandoned claim when she failed to defend claim in response to motion to dismiss); see also Keenan v. Tejeda, 290 F.3d 252, 262 (5th Cir. 2002) () (citation omitted).
The Court grants Lynass's motion for summary judgment as to the ACPA claim.
AFS brings a claim under the DTSA arguing that Lynass misappropriated trade secrets known only to managers at AFS such as customer software customizations and preferences, customer and supplier lists, and pricing data. Dkt. 18, at 14. AFS states these trade secrets are contained on “laptops still in Lynass' attorney's possession.” Id. at 14.
To state a claim under the DTSA, a plaintiff must allege (1) the existence of a trade secret, (2) misappropriation of the trade secret by another, and (3) the trade secret's relation to a good or service used or intended for use in interstate or foreign commerce. 18 U.S.C. § 1836(b)(1); Blue Star Press, LLC v. Blasko, No. SA-17-CA-111-OLG (HJB), 2018 WL 1904835, at *2 (W.D. Tex. Mar. 6, 2018). The DTSA defines misappropriation as the “acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means” or the “disclosure or use of a trade secret of another without express or implied consent by a person who ... used improper means to acquire knowledge of the trade secret.” 18 U.S.C. § 1839.
Lynass argues that he is entitled to summary judgment on Plaintiffs' DTSA claim because he surrendered the laptops containing the trade secrets at issue, and thus, he has been unable to “use” the trade secrets within the meaning of the DTSA since at least June 7, 2021 (the date AFS filed its complaint and Lynass surrendered the laptops). Dkt. 48, at 6. Lynass further argues that AFS has no evidence that he “used the information it alleges is protected under the DTSA.” Id. at 5. AFS responds that there is a fact issue as to whether Lynass could have used its trade secrets because Lynass returned the laptops eight months after he was formally terminated and acquired alleged AFS's UCLA Health account “in December 2020, seven months before he turned the laptops over to his attorney.” Dkt. 53, at 14. According to this timeline, Lynass would have been in possession of the laptops as he pursued AFS's UCLA Health account.
In support of its position that Lynass was in possession of the laptops when he acquired AFS business and could have used the trade secrets within the meaning of the DTSA, AFS presents a declaration from co-plaintiff Michelle Ray, and minutes of the November 10, 2020, Special Board Meeting. See Dkts. 54-1; 54-7. There is also evidence in the record demonstrating when Lynass acquired the UCLA Health account. See Dkt. 61-1, at 3 (). The undersigned agrees that Lynass's summary judgment argument that “he cannot have misappropriated trade secrets because the laptop was in the possession of his attorney is fatally flawed” because “there is an eight-month window in which [he was in possession of the laptops] and could have copied and/or used the information.” Dkt. 53, at 14. At a minimum,...
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