Spear Mktg., Inc. v. Bancorpsouth Bank, CIVIL ACTION NO. 3:12-CV-3583-B
| Decision Date | 11 June 2014 |
| Docket Number | CIVIL ACTION NO. 3:12-CV-3583-B |
| Parties | SPEAR MARKETING, INC. Plaintiff, v. BANCORPSOUTH BANK and ARGO DATA RESOURCE CORPORATION, Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Defendants BancorpSouth Bank ("BancorpSouth") and ARGO Data Resource Corporation ("ARGO") move for summary judgment on Plaintiff Spear Marketing, Inc.'s ("SMI") nine Texas state law claims. For the reasons that follow, the Court GRANTS Defendants' Motion for Summary Judgment (doc. 94).1
This case concerns Defendants' alleged theft of SMI's trade secrets. The trade secrets at issue primarily relate to VaultWorks, SMI's software-based solution designed to help banks optimize cash levels. To elaborate, "VaultWorks primary function is to enable banks to reduce the amount of cash"—a non-earning asset—"in bank branches, ATMs, and central vaults, thereby allowing for therepurposing of surplus cash." (Pl.'s Br. Supp. Resp. Def,'s Mot. Summ. J. ("Pl.'s Resp."), Doc. 121, at 4.) Relatedly, VaultWorks provides "information banks need to order the right amounts of cash by denomination from the Federal Reserve Bank." (Id. at 4-5.)
After using VaultWorks for nearly ten years, BancorpSouth decided not to renew its "VaultWorks Agreement" with SMI in 2012, instead opting to license ARGO's competing cash management software known as the Cash Inventory Optimization ("CIO") solution. SMI complains that BancorpSouth made this decision after colluding with ARGO to misappropriate SMI's trade secrets. In their Motion for Summary Judgment, Defendants argue that SMI has no evidence to support its allegations. The record reveals the following relevant facts underlying this dispute.
SMI is a Texas-based company founded in 1997 by its president, Bill Spear. (Pl.'s App. Supp. Resp. Def.'s Mot. Summ. J. ("Pl.'s App."), Docs. 122-125, at 101.) The three employee organization—including Spear, his son Chris and daughter Debbie—offer just one product, VaultWorks, the software for which Chuck Lawson, an independent contractor, developed at SMI's request. (Id. at 101, 104, 107, 110.)
VaultWorks, as mentioned, is a cash management solution for banks. SMI protects its intellectual property tied to VaultWorks in a number of ways. First, VaultWorks is an application service provider, meaning customers only access VaultWorks using the internet, while the actual software for the program is housed on SMI's own servers. (Id. at 24, 109.) Second, only Bill Spear, Chris Spear, and Chuck Lawson can access SMI's servers hosting VaultWorks' software. (Id. at 2891.) Third, SMI's customers can only view the specific user interface screens and reports they are given access to via the internet, and have no way of accessing VaultWorks' software code,algorithms, or formulas. (Id. at 114, 1058.) Fourth, the information SMI's customers access and exchange with VaultWorks is encoded, and each connection receives a unique session key. (Id. at 24, 2891.) Finally, SMI's customers access their user interface screens using a password that is provided to a select number of bank employees. (Id.)
BancorpSouth, a banking institution based in Tupelo, Mississippi with nearly 300 locations spread across eight states, is one of SMI's former, and largest, banking customers. (Def.'s App. Supp. Mot. Summ. J. ("Def.'s App."), Doc. 96, at 963.) On May 28, 2002, SMI and BancorpSouth entered into an agreement giving BancorpSouth access to VaultWorks for a period of one year, with an option to renew. (Pl.'s App. 2911-13.) The two sides extended their "VaultWorks Agreement" four times, with each extension incorporating all relevant provisions (other than length of services) of the original contract. (Def.'s App. 1050, 1119, 1120.) One such provision provided that the parties "acknowledge that in the course of doing business, each may receive sensitive and/or proprietary information," and therefore jointly "agree not to disclose any of the other's such information to anyone except those with a need to know in order to perform hereunder." (Pl.'s App. 2911.) BancorpSouth and SMI further stipulated that neither party "shall . . . allow any unauthorized party access to SMI's proprietary VaultWorks." (Id.)
Well before entering into the VaultWorks Agreement, BancorpSouth formed a long-standing business relationship with ARGO. ARGO is a Texas-based company offering a range of software solutions to financial institutions nationwide. (Def.'s App. 3.) Its 450-plus employees code and develop these solutions to perform a multitude of functions, including credit risk assessment, fraud prevention, and capturing electronic images of checks. (Id.) BancorpSouth began using one of these ARGO-developed solutions in June 1993. (Id.) At this time, BancorpSouth entered into a licensingagreement with ARGO regarding an early version of ARGO's teller solution—the BANKPRO Teller—which is generally designed to "automat[e] all the operations a bank teller needs to perform." (Id. at 3, 19-31.) Since signing this agreement in 1993, BancorpSouth has continuously employed ARGO's BANKPRO teller solution to automate and manage teller transactions throughout its various locations. (Id. at 960.)
The summary judgment record shows that ARGO began developing a cash management solution to complement its teller solution by as early as 2004. In the initial developmental phase, ARGO hired Dr. Micahael Monticino of the University of North Texas to work on formulas and algorithms for a cash forecasting program that would ultimately drive ARGO's cash management software. (Id. at 4, 42.) Thereafter, ARGO invested more than 10,600 man hours—not including Dr. Monticino's work—to complete the developmental work on a cash management solution that came to be known as CIO. (Id. at 5, 464-599.) By March 16, 2009, ARGO had declared CIO "market ready" and "Generally Available" for customers. (Id. at 5, 601-04.) This means CIO "was fully functional, had been tested and was ready for installation at a customer." (Id. at 863.)
Like VaultWorks, CIO is a cash management solution whose general function is to assist banks in determining optimum cash levels. (Id.) CIO, however differs from VaultWorks in at least a few respects made apparent by the record. While VaultWorks tracks a branch's cash in and cash out balances and generates a cash surplus value for the bank to consider (see, e.g., Pl.'s App. 105-106), CIO is driven by cash forecasting algorithms that predict a bank's specific cash needs in light of the bank's historical cash usage activity at its various locations. (See, e.g., Def.'s App. 863) In addition, CIO is directly installed on the bank's computers, and when properly integrated with thebank's operating systems, automatically draws the historical cash data its forecasting program needs from the bank's teller solution. (Id.) This eliminates "the need for branch personnel to manually input cash data" (id.), as bank employees must do with VaultWorks. (Pl.'s App. 107-08.)
ARGO first mentioned CIO to BancorpSouth in early 2008. At the time, ARGO was pitching an upgraded version of its teller solution, ARGO's Teller Payments system. (Def.'s App. 6.) This upgraded system included a cash management program, CIO, which ARGO was in the process of developing at that time. (Id.) Thus, as part of his February 27, 2008 presentation, ARGO's Vice President Todd Robertson encouraged BancorpSouth's representatives, for the first time, to consider adopting CIO for its cash management needs. (Id.) Though ARGO and BancorpSouth continued to discuss Teller Payments and CIO in March 2008, with Robertson even providing BancorpSouth with an estimated price to license CIO, BancorpSouth did not elect to upgrade at that time. (Id. at 6, 960.) But ARGO's CIO remained on BancorpSouth's radar over the ensuing two years.
In September 2008, ARGO invited customers to its annual Teller Payments Advisory Board, at which BancorpSouth's representatives witnessed ARGO's presentation on CIO. (Id. at 6-7, 720-52, 754-57, 960.) A full year later, ARGO hosted its 2009 Teller Payments Advisory Board, where BancorpSouth's representatives again viewed a presentation on CIO. (Id. at 7, 763-90, 960.) And since CIO had been deemed Generally Available and market ready by that time, ARGO was able to perform live demonstrations of CIO's software to interested attendees, including BancorpSouth. (Id. at 7, 960.)
In March 2010, Todd Robertson met with BancorpSouth's representatives in a renewed effort to convince BancorpSouth to upgrade to Teller Payments, and implement CIO as part of the upgrade. (Id. at 7-8, 960.) At this meeting, BancorpSouth expressed interest in CIO, and proposedlicensing it as a standalone product without upgrading from its BANKPRO Teller solution. (Id. at 7-8, 960-61.) Initially, this would not have been possible. CIO was originally designed to integrate exclusively with ARGO's Teller Payments system, which employed graphical user interface ("GUI") in place of the older, text-based interfacing2 of BANKPRO that BancorpSouth was still using. (Id. at 6, 865.) This meant that the historical cash usage data CIO's forecasting engine needed could not be automatically fed into and read by CIO using BancorpSouth's text-based teller solution. (Id.)
Nevertheless, following his March 2010 meeting, Robertson spoke with ARGO personnel about integrating CIO with BancorpSouth's text-based teller solution, and they "confirmed . . . that it could be done, but that it would take some additional developmental work." (Id. at 8.) Apparently this developmental work involved designing data extraction "software that would deposit the data generated from BANKPRO Teller into the appropriate format to be read by and imported into CIO." (Id. at 865.) With that, Robertson emailed BancorpSouth's representatives on April 1, 2010,...
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