Global Supply Chain Solutions, LLC v. Riverwood Solutions, Inc., and Lori Austin ( 2019 )

AFFIRM; and Opinion Filed August 16, 2019.
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-18-00188-CV
GLOBAL SUPPLY CHAIN SOLUTIONS, LLC, Appellant
V.
RIVERWOOD SOLUTIONS, INC. AND LORI AUSTIN, Appellees
On Appeal from the 416th Judicial District Court
Collin County, Texas
Trial Court Cause No. 416-04054-2015
MEMORANDUM OPINION
Before Justices Schenck, Osborne, and Reichek
Opinion by Justice Osborne
After merger talks between appellant Global Supply Chain Solutions, LLC and appellee
Riverwood Solutions, Inc. fell through, Global Supply sued Riverwood alleging claims including
breach of contract, misappropriation of trade secrets, and tortious interference with contract.
Global Supply also sought injunctive relief against appellee Lori Austin. The trial court granted
summary judgment for Riverwood and Austin. In nine issues, Global Supply alleges the trial court
erred by granting summary judgment, striking its expert witnesses, and granting Austin her
attorney’s fees. For the reasons we discuss, we affirm the trial court’s judgment.
BACKGROUND
Global Supply and Riverwood are competitors in the supply chain management industry.
In its petition, Global Supply described the industry as “the business of helping companies manage
both their relationships with suppliers and inventory on their behalf.” At the time of their merger
discussions in 2014, their business models were different. Global Supply’s president, Philip
Odette, explained that Global Supply purchased and sold component parts to its customers and
also provided services to customers for a monthly service fee. One of the services Global Supply
provided was implementing a product data management (“PDM”) solution, using a centralized
software system to store all of the information related to a customer’s product.
Riverwood, in turn, was “exclusively a pay-for-services business,” according to its then-
CEO Ronald C. Keith. Riverwood had a consulting business and a managed service business,
charging clients a fee for each service. Keith contrasted Riverwood’s business with Global
Supply’s: “And so [Global Supply] was a product or what people in the industry would call a
buy/sell business, and ours was purely a services business.” But like Global Supply, Riverwood
offered PDM services. Keith explained that Riverwood began offering PDM services in 2008:
It was always a business that was accidentally pretty good. You know, the people
that are normally our customers are the small to midsize companies that probably
have not really thought about what they need to manage this thing as they get
bigger, and so we would help them with various things, and we’d say, you know,
your data is kind of a mess. There are a number of off-the-shelf programs. Maybe
you should look at, you know, implementing one of them. Quite often they would
say, you know, we don’t have the time or the resources. And we would say, you
know, that is something that, you know, we can do for you if you’d like.
Austin came to work at Global Supply in 2010 as an independent contractor on a specific
project. That year, the company had undergone a change in both ownership and management. Leon
Backes became the owner of the company, and Paul Peck became its president. Peck knew Austin
and recommended her to Global Supply. Under a written agreement dated January 4, 2011 (the
“Austin Agreement”), Global Supply “retain[ed] [Austin] as an independent contractor to perform
consulting services for the Company.” Two provisions of the Austin Agreement are at issue in this
lawsuit:
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 Paragraph 2(b), providing that Austin “will not, during or subsequent to the term of
this Agreement, use the Company’s Confidential Information for any purpose
whatsoever other than the performance of the Services on behalf of the Company
or disclose the Company’s Confidential Information to any third party,” and
 Paragraph 8, “Independent Contractor,” stating the parties’ “express intention” that
Austin “is an independent contractor.” “Nothing in this Agreement shall in any way
be construed to constitute the Consultant as an agent, employee or representative
of the Company, but the Consultant shall perform the Services hereunder as an
independent contractor. . . .”
Peck implemented a proprietary PDM service for Global Supply and trained Austin in
using it. Peck left Global Supply in 2012, and Odette succeeded him as Global Supply’s president.
In 2014, Global Supply began sourcing building supplies for another of Backes’s
companies, Provident Realty Advisers, Inc. (“PRA”), a property development firm. Global
Supply’s principals formed an entity called Integris, described by Odette as “a building supply
company that sells lighting, plumbing, flooring, hardware and other material to multi-family,
hospitality, and other building construction entities,” to undertake this work.
In early 2014, Keith approached Backes at PRA. In a February 20, 2014 email, Keith
introduced himself as Riverwood’s CEO. He asked Backes if they might discuss Backes’s plans
for Global Supply to see “if there might be some kind of synergies between our two firms.” Backes
replied that he had “certainly heard of Riverwood” and “would be happy to chat.” Backes referred
Keith to Odette, and on March 25, 2014, Keith and Odette signed an agreement (the “Letter
Agreement”) to facilitate their discussions. Three Letter Agreement provisions are at issue here:
 Riverwood’s promise in paragraph 2 to use “Evaluation Material” (broadly defined
as “all information, in whatever form or medium, disclosed or provided to you”)
“solely for the purpose of evaluating a possible Transaction” between the
companies;
 Riverwood’s promise in paragraph 9(a) not to “solicit for employment or consulting
services, employ, or otherwise contract for the services of any employee of” Global
Supply; and
 Riverwood’s promise in paragraph 9(b) not to “interfere with or otherwise disrupt
the business relations between [Global Supply] and any of its current or prospective
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customers or suppliers” “as a result of knowledge or information obtained from the
Evaluation Material or in connection with a possible Transaction.”
After Odette and Keith signed the Letter Agreement on behalf of Global Supply and
Riverwood, respectively, Global Supply provided Riverwood with a seven-page Power Point
presentation containing financial information about Global Supply. Global Supply did not provide
any other written material to Riverwood. Odette and Keith soon abandoned their discussions. No
merger occurred.
Three subsequent events gave rise to this lawsuit:
1. September 15, 2014 solicitation of Global Supply customer PRA
On September 15, 2014, Tom David of Riverwood contacted Backes by email. David
wrote:
. . . Wanted to let you know that Riverwood Solutions has begun sourcing building
materials at the request of one of our larger clients.
We have successfully sourced:
interior and exterior lighting products (including parking lot lighting)
kitchen and bath plumbing fixtures
sinks
doors
lumber
Although the savings by product family may vary, the cumulative average landed
costs of all of these products is 35% less than current client reported costs.
Sourcing of other commodities is underway and more to come soon.
We are very interested in expanding our offering to a select group of property
development firms. If you are interested in exploring this opportunity further,
please let me know a good time to call. . . .
Backes did not respond to the email. PRA did not do any business with Riverwood.
2. March 24, 2015 second solicitation of Global Supply customer PRA
Riverwood again contacted Backes about Riverwood’s building supply sourcing business.
In an email dated March 24, 2015, Keith wrote:
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Leon,
My team at Riverwood Solutions has been spending a lot of time sourcing building
materials over the last 6 or 7 months.
Based on the work our team has done on some 300+ different items looking across
sources in China, Vietnam and Thailand, one of the larger multi-family developers
in the US and some friends of our firm have started a company specifically to
address off-shore sourcing of building material as well as other supply chain and
logistics related issues related to multi-family projects. They threw in a very
significant amount of start-up capital.
I know that you had [Global Supply] doing some of this work for you 9 or 10
months ago specifically to help you out at Provident. Perhaps this is something that
we should chat about. We’ve got 11 people in 4 countries working on this initiative
full time. Some of the numbers are pretty attention getting.
Let me know if you like [sic] to discuss this and see if there is some play here for
either Provident or [Global Supply].
Best regards,
Ron Keith
Again, there is no evidence of any response from Backes or PRA.
3. Austin’s resignation from Global Supply to begin employment at Riverwood
In a summary judgment affidavit, Austin testified that on July 16, 2015, she received a call
from Frank McConahey, a former Global Supply project manager who was then working at
Riverwood. McConahey asked if Austin would be interested in coming to Riverwood “to grow its
product data management consulting business.” Austin met with David and accepted an offer to
become Riverwood’s director of PDM services. As required under the Austin Agreement, Austin
gave Global Supply written notice of her resignation on August 19, 2015, stating that her last day
at Global Supply would be September 9, 2015.
Upon receiving Austin’s notice letter, Odette contacted Keith, reminding him of “the non-
solicitation we had in place” and stating that Austin’s hiring was a violation of it. In a follow-up
conversation, Keith told Odette that Riverwood had discussed the matter with counsel and was
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going to proceed with hiring Austin. Keith testified that in the follow-up call, he apologized for
not recalling that the Letter Agreement was still in effect. But he continued:
Having said that, the contract has no validity over what we’re doing here. We’re
hiring someone who is not an employee of yours, and the contract between our
firms says that I can’t hire your employees, and so I’m not doing that. [Odette] said
something to the effect that although she’s not an employee, we’ve always
considered her one. I said: I don’t know what to do with that information, Phil. You
know, the contract says we can’t hire your employees and we’re not. At the same
time, I’ve made an offer to someone. I think rescinding it puts me in a very
precarious position, and so I’m unwilling to do that.
Global Supply brought this suit against Riverwood and Austin on September 30, 2015,
asserting claims for breach of contract, violations of the Texas Uniform Trade Secrets Act, tortious
interference with existing contract, and “aiding, abetting, assisting and encouraging” against
Riverwood and pleading for injunctive relief against Austin. Global Supply alleged that its “rights
are threatened with irreparable injury by the loss of its Vice President of Operations, who has
detailed knowledge of Plaintiff’s confidential proprietary information and trade secrets, to a direct
competitor that has engaged in a repeated pattern of attempting to steal customers, employees, and
such proprietary trade secrets.” Austin filed a counterclaim against Global Supply, requesting a
declaration that “she has not breached the Austin Agreement and that her employment by
Riverwood does not violate any statute or contract.”
Global Supply never attempted to establish its right to injunctive relief by setting the matter
for hearing or offering evidence of the irreparable injury it claimed. The Letter Agreement’s three-
year term expired in March 2017, but the Austin Agreement’s nondisclosure provisions continued
“subsequent to the term of this Agreement.”
The parties proceeded with discovery and entered into an agreed scheduling order that
included provisions about designating experts. The parties submitted the order to the trial court,
and the trial court signed it on May 15, 2017. Regarding experts, the parties agreed:
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6. Designations of experts: the party seeking affirmative relief on an issue
shall provide a designation of its testifying experts by August 31, 2017; the
party not seeking affirmative relief on an issue shall provide a designation
of its testifying experts by September 29, 2017
7. Other terms: Expert reports must be served with designations
Global Supply designated three expert witnesses by the agreed deadline, but did not provide reports
for any of them. On the date for designating rebuttal experts, Global Supply designated Peck and
provided a report. On Riverwood’s and Austin’s motions, the trial court struck these designations.
In November 2017, Riverwood moved for summary judgment on Global Supply’s claims.
Austin filed a separate motion for summary judgment on her request for declaratory relief. Global
Supply filed a motion for partial summary judgment on its claim for breach of contract on the
ground that Austin was either its “employee” or its “supplier” as a matter of law, so that Riverwood
breached paragraph 9(a) or paragraph 9(b) of the Letter Agreement as a matter of law. The trial
court granted Riverwood’s and Austin’s motions and denied Global Supply’s.
This appeal followed.
DISCUSSION
I. Standards of Review
We review a trial court’s summary judgment de novo. Dallas Nat’l Ins. Co. v. Calitex
Corp., 458 S.W.3d 210, 221 (Tex. App.—Dallas 2015, no pet.). The movant for a traditional
summary judgment has the burden of showing that there is no genuine issue of material fact and
that it is entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546,
548 (Tex. 1985). Evidence favorable to the non-movant is taken as true, and every reasonable
inference is indulged in the non-movant’s favor. Id. at 548–49. When both parties have moved for
summary judgment and the trial court has granted one party’s motion and denied the other, we
review the summary judgment evidence presented by both sides and determine all questions
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presented. Calitex Corp., 458 S.W.3d at 221. If we conclude the trial court committed reversible
error, we render the judgment the trial court should have rendered. Id.
We review a trial court’s enforcement of a scheduling order for an abuse of discretion. Esty
v. Beal Bank, S.S.B., 298 S.W.3d 280, 295–96 (Tex. App.—Dallas 2009, no pet.). We also review
the trial court’s determination regarding the admission of expert testimony for abuse of discretion.
Transcontinental Realty Investors, Inc. v. Wicks, 442 S.W.3d 676, 680–81 (Tex. App.—Dallas
2014, pet. denied). A trial court abuses its discretion if it acts without reference to guiding rules
and principles. Gunn v. McCoy, 554 S.W.3d 645, 666 (Tex. 2018). “To reverse a trial court’s
judgment based on the exclusion of evidence, we must find that the trial court did in fact commit
error, and that the error was harmful.” Id. We may reverse the trial court’s judgment only if the
erroneous exclusion of evidence probably caused the rendition of an improper judgment, id. at
668, or “probably prevented the appellant from properly presenting the case to the court of
appeals.” TEX. R. APP. P. 44.1(a).
II. Common Questions
There are two questions common to several of Global Supply’s issues. First, Global Supply
contends that Austin was its “employee” or its “supplier” for purposes of sections 9(a) and 9(b) of
the Letter Agreement. All of the summary judgment motions filed by Global Supply, Austin, and
Riverwood included this issue. Second, Global Supply argues that Austin’s “inevitable disclosure”
of its confidential, proprietary, or trade secret information is sufficient to raise a fact issue on the
injury and damages it claims to have suffered on its claims for breach of contract, violations of the
Texas Trade Secrets Act, tortious interference, and “assisting and encouraging” against
Riverwood, and to preclude summary judgment on Austin’s declaratory judgment request.
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A. Was Austin Global Supply’s (a) employee, (b) independent contractor, or
(c) supplier?
Global Supply contends that Riverwood’s solicitation of Austin was a breach of two
provisions in the Letter Agreement: (1) Riverwood’s agreement in Section 9(a) not to solicit
Global Supply’s employees for employment, and (2) Riverwood’s agreement in Section 9(b) not
to interfere with or disrupt the business relations between Global Supply and its suppliers.
Riverwood and Austin respond that because Austin was neither an “employee” nor a “supplier,”
there was no breach of the Letter Agreement as a matter of law.
To support their argument, Riverwood and Austin rely on paragraph 8 of the Austin
Agreement. In paragraph 8, Global Supply and Austin stated their “express intention” that Austin
“is an independent contractor.” Paragraph 8 forbids construction of the agreement “to constitute
[Austin] as an agent, employee or representative of [Global Supply].” The preamble to the Austin
Agreement states that Global Supply “desires to retain the Consultant [previously identified as
Austin] as an independent contractor to perform consulting services.” And paragraph 9 of the
Austin Agreement provides that Austin “acknowledges and agrees and it is the intent of the parties
hereto that Consultant receive no Company-sponsored benefits from the Company either as a
Consultant or employee.”
Global Supply does not point to any conflicting or ambiguous provision. The construction
of an unambiguous contract is a question of law. URI, Inc. v. Kleberg Cty., 543 S.W.3d 755, 763
(Tex. 2018). The Austin Agreement unambiguously provides that Austin is an independent
contractor.
In support of their own motions for summary judgment, Riverwood and Austin also offered
evidence that Global Supply always paid Austin by the hour, did not withhold income or payroll
taxes from her pay, issued her IRS 1099 forms, did not provide paid vacation, sick leave, or health
savings account contributions, and never paid her an annual salary. Austin did not execute an
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employment agreement with Global Supply and was not required to sign the employee handbook.
Even after Austin was given the title of “VP Director of Operations” in January 2015, Global
Supply continued to pay her by the hour pursuant to the Austin Agreement until her resignation
later the same year. Riverwood also relied on a letter written in January 2015 by Terry Gonzalez
in her capacity as Global Supply’s vice president of finance describing Austin as a “contractor”
who “has supplied consulting services on a consistent basis since 2011.” “A contract expressly
providing that a person is an independent contractor is determinative of the relationship absent
evidence that the contract is a mere sham or subterfuge designed to conceal the true legal status of
the parties or that the contract has been modified by a subsequent agreement between the parties.”
Poynor v. BMW of N. Am., LLC, 441 S.W.3d 315, 319–20 (Tex. App.—Dallas 2013, no pet.).
Global Supply contends, however, that it offered “conclusive evidence” that Austin was its
employee, regardless of the Austin Agreement’s unambiguous provisions or the evidence
supporting Global Supply’s treatment of Austin as an independent contractor. Global Supply
argues that its claim is for breach of the Letter Agreement, the Letter Agreement is separate from
the Austin Agreement, and the Letter Agreement does not define “employee,” so we must apply
the common law “control” test for determining whether a worker qualifies as an employee rather
than as an independent contractor. Global Supply then cites cases addressing an employer’s
vicarious liability for the acts of its employee or contractor and an employer’s liability for worker’s
compensation benefits. See, e.g., St. Joseph Hosp. v. Wolff, 94 S.W.3d 513, 542–43 (Tex. 2002)
(considering whether medical residency program was vicariously liable for medical resident’s
negligent treatment of patient).
In support of its contention that it controlled Austin’s work, Global Supply offered
evidence that when Austin joined Global Supply and at the time she signed the Austin Agreement,
Global Supply’s then-CEO assigned her specific tasks and oversaw all of her work. Further, Global
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Supply provided Austin with all of the “tools and instrumentalities” she needed for her work,
“including a computer, desk phone, software licenses, servers, and the hardware and software she
needed,” as well as a cubicle, and later an office. Even though the Austin Agreement provided that
Global Supply could be reimbursed for these tools and instrumentalities, Global Supply never
asked Austin for reimbursement. Austin worked full time at Global Supply, did not report working
for anyone else, and later in her tenure, was given the title of Vice President of Operations.
Global Supply’s evidence may be relevant for determining its vicarious liability to a third-
party plaintiff for Austin’s negligence, but there is no such claim in this case. Global Supply does
not cite any authority to support its contention that the evidence raises a fact issue on its claim that
regardless of its express agreement to the contrary in the Austin Agreement, Austin was an
“employee” for purposes of the Letter Agreement.
Global Supply also argues that Riverwood cannot rely on the Austin Agreement to establish
that Austin was not an employee because Riverwood was not a party to the Austin Agreement. But
Austin, who is a party to the Austin Agreement, sought and obtained a declaration that her
employment by Riverwood did not violate any contract. She relied on the Austin Agreement to
support her contention that her hiring did not violate the Letter Agreement’s provision prohibiting
Riverwood from hiring a Global Supply “employee.” To grant Austin’s motion for summary
judgment, the trial court construed the Austin Agreement as a matter of law to determine that
Austin was not an employee. Further, Global Supply relies on Austin’s promise in the Austin
Agreement not to disclose confidential information to establish its claims against Riverwood for
misappropriation of trade secrets by hiring Austin. Global Supply may not rely on the Austin
Agreement for some of its claims against Riverwood and disavow it for others. See, e.g., Trinity
Universal Ins. Co. v. Bill Cox Constr., Inc., 75 S.W.3d 6, 10-11 (Tex. App.—San Antonio 2001,
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no pet.) (party cannot accept beneficial portions of contract and deny application of detrimental or
disadvantageous provisions).
Global Supply also argues that if Austin was not an “employee” under section 9(a) of the
Letter Agreement, then she was a “supplier” under section 9(b), “because it is undisputed that she
supplied services to Global Supply.” Global Supply argues that Riverwood learned about Austin’s
“key role” at Global Supply from the merger discussions when Odette and Keith discussed “key
personnel.” Global Supply argues that the information that Austin was considered “key personnel”
fell within the Letter Agreement’s definition of “Evaluation Material.” Consequently, Global
Supply concludes that Riverwood breached section 9(b)’s prohibition against interfering or
otherwise disrupting Global Supply’s business relations with its suppliers “as a result of knowledge
or information obtained from the Evaluation Material or in connection with a possible
Transaction.”
Riverwood counters that both the Austin Agreement and the Letter Agreement distinguish
between “suppliers” on one hand and independent contractors and consultants on the other. The
Austin Agreement refers to Austin only as an independent contractor or a consultant. It uses the
word “supplier” only once, describing “information regarding . . . suppliers and customers” as a
type of proprietary information that Austin must keep confidential. Under the Letter Agreement,
Riverwood agreed not to employ Global Supply’s employees and not to solicit them “for . . .
consulting services . . . or otherwise contract for” their services. The prohibition against interfering
with business relations between Global Supply “and any of its current or prospective customers or
suppliers” is a separate provision that does not refer to contractors or consultants. When
interpreting a contract, we “examine and consider the entire writing in an effort to harmonize and
give effect to all the provisions in the contract so that none will be rendered meaningless.” Coker
v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). Both contracts distinguish between suppliers and
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independent contractors and include provisions specific to each. We conclude that under the
express terms of the contracts, Austin was not a “supplier” for purposes of section 9(b).
B. May Global Supply rely on the “inevitable disclosure” doctrine as summary
judgment proof of injury and damages?
Although there is no direct evidence that Austin disclosed any trade secret or confidential
information to Riverwood, Global Supply argues that it is “inevitable” that Austin has or will
unlawfully disclose its trade secrets in the course of her employment at Riverwood. Global Supply
relies on Austin’s inevitable disclosure of its trade secrets and other confidential or proprietary
information, without more, to raise a fact issue on the injury or damages element of its claims.
Global Supply relies on PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995), in which
the court explained that “a plaintiff may prove a claim of trade secret misappropriation by
demonstrating that defendant’s new employment will inevitably lead him to rely on the plaintiff’s
trade secrets.”1 The court in Redmond explained that “the ITSA [Illinois Trade Secrets Act] plainly
permits a court to enjoin the threat of misappropriation of trade secrets,” but “there is little law in
Illinois or in this circuit establishing what constitutes threatened or inevitable misappropriation.”
Id. at 1268. The question resolved by the court in Redmond was whether PepsiCo had demonstrated
irreparable injury for purposes of obtaining a preliminary injunction. See id. at 1271.
Similarly, in Cardinal Health Staffing Network, Inc. v. Bowen, 106 S.W.3d 230, 241–42
(Tex. App.—Houston [1st Dist.] 2003, no pet.), the court discussed Cardinal’s argument that “the
‘inevitable disclosure’ doctrine effectively relieved Cardinal of having to show irreparable injury
for which it had no adequate legal remedy” in order to obtain a temporary injunction. The court
explained, “[w]e have found no Texas case expressly adopting the inevitable disclosure doctrine,
1
Global Supply also cites Molon Motor & Coil Corp. v. Nidec Motor Corp., No. 16 C 03545, 2017 WL 1954531, at *5 (N.D. Ill. May 11,
2017), for the same proposition. In that case, the court applied the inevitable disclosure doctrine in reaching its conclusion that the plaintiff had
“state[d] a claim to relief that is plausible on its face” for purposes of a motion to dismiss under federal rule of civil procedure 12(b)(6). Id. at *2,
5–7.
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and it is unclear to what extent Texas courts might adopt it or might view it as relieving an
injunction applicant of showing irreparable injury.” Id.2
Texas adopted the Uniform Trade Secrets Act in 2013. See TEX. CIV. PRAC. & REM. CODE
ANN. § 134A.001–.008 (“TUTSA”). With limited exceptions, TUTSA “displaces conflicting tort,
restitutionary, and other law of this state providing civil remedies for misappropriation of a trade
secret,” although it “does not affect . . . contractual remedies.” Id. § 134A.007(a), (b)(1). TUTSA
does not include a provision regarding “inevitable disclosure,” but does permit the issuance of
injunctive relief in connection with “threatened misappropriation” of trade secrets. TUTSA
§ 134A.003.3 Global Supply argues that “[b]y adopting TUTSA, the Texas Legislature has brought
the [inevitable disclosure] doctrine to Texas, to the extent it was not here already.”
Here, however, Global Supply argues that the inevitable disclosure doctrine applies to
provide evidence raising a fact issue on damages. Global Supply pleaded for an injunction against
Austin but never set the matter for hearing or offered evidence to establish its right to injunctive
relief; consequently, it now seeks only damages from Riverwood. Global Supply argues that
applying the inevitable disclosure doctrine to provide proof of damages is “far less consequential”
than applying it “in the injunction context”:
After all, the extraordinary remedy of an injunction is a more drastic interference
with a defendant’s operations than a claim for damages, which does not interfere
with a former worker’s employment prospects or a competitors’ operations in the
way an injunction can. It simply seeks compensation for the value of trade secrets
that are taken.
2
The Bowen court cited this Court’s unpublished opinion in Conley v. DSC Communications Corp., No. 05-98-01051-CV, 1999 WL 89955,
at *3 (Tex. App.—Dallas Feb. 24, 1999, no pet.) (not designated for publication), as “adopting [a] test with similar attributes” to the inevitable
disclosure doctrine. See Bowen, 106 S.W.3d at 242. Our opinion in Conley pre-dates Texas’s adoption of the Uniform Trade Secrets Act, and in
any event, like all other cases discussing the inevitable disclosure doctrine, is limited to the question of whether a plaintiff showed “a probable
injury during the pendency of the trial unless the injunction issues.” Conley, 1999 WL 89955, at *2; see also DGM Servs., Inc. v. Figueroa, No.
01-16-00186-CV, 2016 WL 7473947, at *5 (Tex. App.—Houston [1st Dist.] Dec. 29, 2016, no pet.) (mem. op.) (discussing Conley and concluding
that trial court “was not required by the inevitable disclosure doctrine to relieve DGM of its burden to prove a probable, imminent, and irreparable
injury”).
3
TUTSA also provides, however, that an injunction order may “not prohibit a person from using general knowledge, skill, and experience
that person acquired during employment.” TUTSA § 134A.003(a).
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But in HMS Holdings Corp. v. Pub. Consulting Grp., Inc., No. 05-15-00925-CV, 2016 WL
1179436, at *2 (Tex. App.—Dallas Mar. 28, 2016, no pet.) (mem. op.), we explained that when a
trial court hears an application for temporary injunction in a trade secret misappropriation case,
the “ultimate merits” are not at issue:
Importantly, in determining whether to grant trade secret protection by temporary
injunction, a trial court does not determine whether the information sought to be
protected is, in fact and in law, a trade secret. See Mabrey v. SandStream, Inc., 124
S.W.3d 302, 311 (Tex. App.—Fort Worth 2003, no pet.). Rather, the trial court
determines only whether the applicant has established that the information is entitled
to trade secret protection until a trial on the merits. Id. The applicant for a temporary
injunction is not required to establish that it will prevail upon final trial. Id. at 309. The
merits of the applicant’s suit are not presented for review. Id. Findings and conclusions
made by the trial court in conjunction with the interlocutory order may be “helpful” in
determining whether the trial court exercised its discretion in a reasonable and
principled fashion, but they are not binding. Tom James of Dallas, Inc. v. Cobb, 109
S.W.3d 877, 884 (Tex. App.—Dallas 2003, no pet.). The ultimate merits of the
controversy, both legal and factual issues, are not before the trial court. See id.
Moreover, we do not assume that the evidence presented at the injunction hearing is
the same as the evidence that will be developed at a full trial on the merits. Id. at 885.
Our decision is expressly limited to whether the trial court’s interlocutory order was an
abuse of discretion and, like the temporary injunction, has no bearing on the ultimate
merits of the case. Id. at 890.
Id. at *2. Consequently, we conclude that a threatened misappropriation for purposes of a
temporary injunction is not a substitute for evidence of the “actual loss caused by misappropriation
and the unjust enrichment caused by misappropriation that is not taken into account in computing
actual loss” to raise a fact issue on damages in response to a motion for summary judgment.
TUTSA § 134A.004 (Damages).
Having reached these conclusions, we turn to Global Supply’s individual issues.
III. Global Supply’s Issues
A. Global Supply’s breach of contract claim (Issues 1 and 2)
In its first two issues, Global Supply contends the trial court erred by denying its motion
for partial summary judgment and by granting Riverwood’s motion for summary judgment on
Global Supply’s claim for breach of contract. Global Supply alleges that Riverwood breached the
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Letter Agreement with respect to two different parts of Global Supply’s business: (1) the system
it used for sourcing building supplies, and (2) PDM. Global Supply alleges three breaches:
1. Alleged breaches
a. Use of “Evaluation Material”
Global Supply argues that it disclosed confidential information—specifically, the idea that
building supply sourcing can be operated as a standalone business—to Riverwood during their
merger discussions. The parties agree that the only written material Global Supply gave Riverwood
was the seven-slide Power Point presentation. But Global Supply contends that the parties’
principals had discussions in which Odette disclosed the concept to Keith, and Riverwood
subsequently initiated its own standalone building supply sourcing business.
Global Supply also argues that it disclosed two other matters to Riverwood as “Evaluation
Material”: (1) Austin’s name in a discussion of “key employees,” and (2) that PRA, one of
Backes’s other companies, was a property development firm that used Global Supply’s new
building supply sourcing business.
b. Soliciting employees
Global Supply alleges that Riverwood hired Austin in violation of its promise in section
9(a) of the Letter Agreement that it would not “solicit for employment or consulting services,
employ, or otherwise contract for the services of any [Global Supply] employee.” Austin had
expertise in PDM, but was not involved in sourcing building supplies.
c. Interference with customers or suppliers
Global Supply contends that Riverwood interfered with its customers and suppliers Backes
and PRA by its solicitations to Backes. Global Supply also argues that if Austin was not its
“employee,” she was a “supplier,” so that Riverwood violated section 9(b) of the Letter Agreement
by hiring her.
–16–
2. The parties’ motions for summary judgment on Global Supply’s breach of
contract claim
“‘A successful breach of contract claim requires proof of the following elements: (1) a
valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract
by the defendant; and (4) damages sustained by the plaintiff as a result of the breach.’” Sharifi v.
Steen Auto., LLC, 370 S.W.3d 126, 140 (Tex. App.—Dallas 2012, no pet.) (quoting Petras v.
Criswell, 248 S.W.3d 471, 477 (Tex. App.—Dallas 2008, no pet.)).
Global Supply moved for partial summary judgment on the ground that Riverwood’s
solicitation of Austin breached section 9 of the Letter Agreement because Austin was either an
employee or a supplier. We have addressed this argument above, and we conclude that Global
Supply did not demonstrate its right to judgment on this issue as a matter of law. Consequently,
we conclude that the trial court did not err by denying Global Supply’s motion for partial summary
judgment.
Similarly, Riverwood sought summary judgment on the ground it did not violate section 9
of the Letter Agreement because Austin was not Global Supply’s employee or supplier. Riverwood
offered the additional summary judgment evidence we have detailed above to support its
contention that Austin was an independent contractor. For the reasons stated above, we conclude
that Riverwood met its burden to establish its right to judgment on this issue.
Riverwood also sought summary judgment on the ground that there is no evidence “that
any alleged breach [of the Letter Agreement] caused Plaintiff an injury for which the law allows a
recovery of damages.” Global Supply responded that it had competent evidence of damages,
including lost profits. In his deposition, Odette confirmed Global Supply’s discovery response that
$1,015,197 “is the minimum cost [Riverwood] would have [in]curred in human resources and
research development costs to create on its own a competitive building supply system, and process
of the nature and type that it has received via its misappropriation of Global Supply’s building
–17–
supplies system.” He also confirmed that the calculation was “based on the actual cost of the same
expended and incurred by Global Supply in creating its proprietary trade secret building supply
system including salary and compensation paid to Philip Odette, Casee Neal and others.” Terry
Gonzalez, Global Supply’s vice president of finance, testified that she calculated the figure at
Odette’s direction by looking up and adding together the salaries of the persons Odette designated.
Gonzalez explained:
Q. Okay. So the methodology for coming up with $1,015,197 was Mr. Odette
giving you information as to what interns and others, in addition to himself and
Casee Neal were involved in the building supply system?
A. Yes.
Gonzalez had no knowledge about how Riverwood operates its building supply system or whether
Riverwood’s system is the same as Global Supply’s. Odette testified that Gonzalez’s calculation
was “the cost incurred that we had captured in the building supply division up to the point of
[Austin’s] departure.” Although the evidence is undisputed that Riverwood breached section 9(b)
by twice contacting Backes, the breach by David took place one year before Austin resigned and
the breach by Keith took place six months before Austin resigned, so that Global Supply’s damages
calculation does not correlate to the dates of the breaches. In any event, it is also undisputed that
Backes did not respond to the solicitations.
After hearing Riverwood’s motion for summary judgment, the trial court ordered Global
Supply to file a supplemental brief “on the issue of whether it has evidence of damages due to an
alleged violation of Section 9(b)” of the Letter Agreement, and Riverwood to respond.4 Global
Supply complied with the trial court’s order, subject to its objection that “the issue to be briefed
was not a stated ground” in Riverwood’s summary judgment motion and its objection that the trial
4
As we have explained, section 9(b) provided that for three years from the date of the Letter Agreement, Riverwood would not “interfere
with or otherwise disrupt the business relations between the Company and any of its current or prospective customers or suppliers” “as a result of
knowledge or information obtained from the Evaluation Material or in connection with a possible Transaction.”
–18–
court’s “additional consideration of summary judgment, let alone a new motion or new grounds”
violated the court’s scheduling order. Citing David’s testimony that Riverwood began sourcing
building supply materials after the Letter Agreement was signed, and arguing “that Riverwood
benefitted by contracting to receive compensation from customers to whom it provided that new
service, including Wolff Company, Gemco, and Katerra,” Global Supply contended it lost the
$1,015,197 it paid to develop its proprietary and confidential service to source building materials.
Riverwood responded that its grounds for summary judgment included its no-evidence
challenge to Global Supply’s claim that “any alleged breach [of the Letter Agreement] caused
Plaintiff injury for which the law allows a recovery of damages.” Riverwood also pointed to the
motion’s summary of argument section alleging that “[t]here is no evidence of recoverable
damages.” We also note that Riverwood’s motion for summary judgment alleged that Global
Supply has “no evidence that Riverwood has done business with Plaintiff’s customers.”
Consequently, we conclude that the trial court’s order for supplemental briefing did not raise new
grounds.
In its supplemental response, Riverwood argued that the only Evaluation Material it
received from Global Supply was the Power Point slides and “statements by [Odette] that Plaintiff
had started a supply chain management service for building materials for Mr. Backes’ other
company, [PRA].” Riverwood argued:
Riverwood did not use, access, consult, or distribute the slide deck after merger
talks ended. Plaintiff does not argue otherwise. Instead, it argues that it suffered
$1,015,197 in damages for “incurred costs to develop its proprietary, confidential
business service to source building materials.” There is just one glaring, fatal
problem for Plaintiff—Riverwood never received this service. Plaintiff only told
Riverwood that it was sourcing building materials, but never disclosed how. No
trade secret, method, process, formula, or other confidential information about that
business was ever shared. Therefore, the $1,015,197 that Plaintiff allegedly
incurred cannot be recovered from Riverwood.
–19–
Riverwood also relied on Global Supply’s response to an interrogatory requesting that
Global Supply identify the trade secrets, Evaluation Material, and proprietary and confidential
information that it disclosed to Riverwood. Global Supply identified the Power Point slides, which
did not include discussion of a supply chain management service for building materials, and
“multiple verbal conversations” between Keith and Odette or Backes about “the terms of a
potential acquisition of [Global Supply], by Riverwood.” Global Supply’s response conceded,
however, that these verbal conversations “generally did not involve the delivery by [Global
Supply] of any trade secrets, or proprietary or confidential information, other than that delivered
in writing, and produced as identified above,” that is, the Power Point slides.
Although the parties’ briefs include authority regarding the appropriate measure of
damages for breaches of contract, the issue presented is primarily one of causation. Riverwood’s
summary judgment motion also challenged this element of Global Supply’s breach of contract
claim. Regardless of the proper measure, Global Supply failed to raise a fact issue on the question
whether Riverwood’s breaches of section 9(b)—the solicitations to Backes—were the cause of
any damage. The summary judgment evidence was undisputed that Backes did not respond to
either overture. Riverwood also established that the Evaluation Material did not include any
information, detailed or general, about Global Supply’s “proprietary, confidential business service
to source building materials” other than the service’s existence. Consequently, there was no fact
issue precluding summary judgment on Global Supply’s breach of contract claim.
We conclude that Global Supply did not establish its right to summary judgment on the
ground that Riverwood breached section 9(a) or 9(b) of the Letter Agreement by hiring Austin
because Global Supply did not establish as a matter of law that Austin was either Global Supply’s
employee or its supplier. We also conclude that Riverwood established its right to summary
judgment on Global Supply’s breach of contract claim because Riverwood met its burden to
–20–
establish that its breaches of section 9(b) of the Letter Agreement were not the proximate cause of
any injury to Global Supply, and Global Supply did not raise a fact issue precluding summary
judgment on its claim. We decide Global Supply’s first and second issues against it.
B. Expert witnesses (Issues 3 and 5)
In its third issue, Global Supply contends the trial court erred by striking three witnesses
from giving expert testimony. In its fifth issue, Global Supply contends the trial court erred by
striking the expert testimony of witness Paul Peck.
On August 31, 2017—the last day provided by the scheduling order—Global Supply
designated three expert witnesses: Ken Chaiken, its counsel; Phillip Odette, its president; and Terry
Gonzalez, its vice president. These experts were designated to testify about Global Supply’s
damages and attorney’s fees, but Global Supply did not provide reports for any of these experts.
On the same date, Global Supply filed a motion to modify the scheduling order, alleging as “good
cause” that Austin’s deposition was not set to occur until September 12, 2017, and without her
testimony, Global Supply “is unable to adequately anticipate the scope and extent of expert witness
testimony that may be necessary to further develop evidence in support of Plaintiff’s claims.” The
trial court heard Global Supply’s motion on September 18, 2017, and denied it by order dated the
following day.
On September 29, 2017, Global Supply designated Paul Peck as an expert on the value of
Global Supply’s confidential and proprietary information and Austin’s and Riverwood’s alleged
use and disclosure of that information. Global Supply served Peck’s report with his designation.
Riverwood and Austin filed a motion to strike Global Supply’s expert designations. They
argued that although Global Supply filed suit on September 30, 2015, and agreed to a scheduling
order setting August 31, 2017 as the deadline for expert designation and reports, Global Supply
did not take any depositions or serve any written discovery until after the August 31, 2017 deadline.
–21–
After a hearing, the trial court granted the motion to strike in part. The court struck the
designations of Chaiken, Odette, and Gonzalez, ruling that they “may not provide expert testimony
in this lawsuit.” Peck’s designation was not stricken because it was accompanied by his report and
CV, but Peck was allowed to provide rebuttal expert testimony only “in response to Defendant
Lori Austin’s counterclaim for declaratory relief. Mr. Peck is NOT permitted to offer expert
testimony in support of any claim for which Plaintiff seeks affirmative relief.”
1. Ruling regarding Chaiken, Odette, and Gonzalez
Riverwood’s motion to strike the designations of Odette, Gonzalez, and Chaiken was based
on Global Supply’s failure to furnish reports for each expert in accordance with the parties’ agreed
scheduling order that was signed by both parties and the trial court and filed in the trial court
record. As we have explained, we review the trial court’s ruling for abuse of discretion. Esty, 298
S.W.3d at 295–96.
Global Supply argues that civil procedure rule 195 governs expert designations and reports.
See TEX. R. CIV. P. 195.3 (deposition procedures differ depending on whether expert report has
been furnished), 195.5 (court may order expert to reduce opinions and other data to tangible form).
But here, as the trial court explained at the hearing on the motion to strike, the parties agreed to a
requirement that differed from the rules, as the rules expressly permit parties to do. See TEX. R.
CIV. P. 191.1 (parties may agree to modify discovery procedures; agreements that comply with
rule 11 are enforceable). In Esty, we concluded that where the scheduling order required parties to
“designate experts and provide reports” within a specified time period, the trial court did not abuse
its discretion by striking an expert’s affidavit that was not tendered timely. See Esty, 298 S.W.3d
at 295–96. Consequently, the trial court was within its discretion to strike expert designations that
were not made in accordance with the parties’ rule 11 agreement.
–22–
2. Ruling regarding Peck
Global Supply designated Peck as an expert by the deadline for “the party not seeking
affirmative relief on an issue” under the agreed scheduling order. Global Supply also served Peck’s
expert report on that date. In his report, Peck expressed the opinion that Austin disclosed Global
Supply’s confidential and proprietary information to Riverwood and used the information for
Riverwood’s benefit. As noted, the trial court initially ruled that Peck could testify as a rebuttal
expert in response to Austin’s counterclaim for declaratory relief.
Austin then filed a motion to strike Peck’s testimony on the ground that Peck “reviewed
no data and applied no methodology” to support his opinion that Austin disclosed Global Supply’s
confidential information and trade secrets to Riverwood. Austin quoted Peck’s opinion from his
expert report that “since starting her work for [Riverwood], Lori Austin has disclosed to
[Riverwood] and used the confidential information that she obtained from [Global Supply] for the
benefit of [Riverwood].” Austin also quoted Global Supply’s interrogatory response identifying
“the Global Supply trade secrets, Proprietary Information, or Evaluation Materials that You
contend Lori Austin disclosed to Riverwood”:
Global Supply’s “Product Data Management System,” including its methods,
processes and techniques; Global Supply’s customer information (including some
confidential client identities, contract specifications and terms, and pricing
models); Global Supply’s key supplier identities and pricing models; confidential,
proprietary data about how to use a systems management software program like
Global Supply’s “Systainet Software” and “Arena,” and their features as
customized and used in commerce at multiple client levels; and [Global Supply’s]
. . . trade secret and/or confidential, proprietary data regarding or reflecting their
methods, formulas, patterns, processes and techniques for assisting clients in the
building supply chain management process.
Austin argued that Peck’s opinion “is simply a speculative belief that it is ‘inevitable’ that
Austin disclosed Plaintiff’s confidential information.” She cited Peck’s deposition testimony that
he had not reviewed the pleadings, discovery responses, or documents produced in the litigation
before forming his opinion, and had only briefly reviewed Austin’s and Odette’s deposition
–23–
testimony before his own deposition. Austin also argued that Peck “knows nothing of what Austin
did for [Global Supply], or how she did it, after Peck left his position as CEO in March 2012” and
“knows nothing of Riverwood’s current business, its customers, what Austin has done for
Riverwood, or how she has done it.” Austin contended that Peck’s only personal knowledge of
Riverwood’s business “comes from his interactions with Riverwood’s then-CEO, Ron Keith, three
years before Austin ever worked at Riverwood,” and that Peck had no knowledge or belief that
Austin “has disclosed or used any specific computer file or document from Plaintiff while working
for Riverwood.” She also quoted Peck’s deposition testimony that Austin “inevitably in the course
of her work with Riverwood,” would disclose
information that we would consider at [Global Supply] confidential and proprietary
in terms of methodologies and approaches and ways to improve the delivery of
services in a multi-tenant, multi-choice a la carte offering, in that if you had it—
even if it wasn’t offered a la carte, you would have this rather extensive knowledge
of working in a multi-customer environment that by its very nature includes things
you learn that you wouldn’t have learned otherwise had you not been privy to the
things that were learned at [Global Supply].
Peck testified that his opinion was based on his belief that Austin’s disclosure of confidential
information to Riverwood was inevitable because “it’s impossible for her not to have done so,”
rather than on any actual knowledge of any particular confidential information Austin took from
Global Supply and was using at Riverwood.
Austin argued that Peck’s opinions were not based on any data and consequently were
unreliable under the rules of evidence and applicable case law. See TEX. R. EVID. 702; Cooper Tire
& Rubber Co. v. Mendez, 204 S.W.3d 797, 800 (Tex. 2006) (expert testimony is unreliable if “there
is simply too great an analytical gap between the data and the opinion proffered,” quoting Gammill
v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 727 (Tex. 1998)). “The trial court is not required
to admit opinion evidence which is connected to existing data only by the ipse dixit of the expert.”
Mendez, 204 S.W.3d at 801 (internal quotations omitted). Austin concluded that Peck’s opinion
–24–
was unreliable and inadmissible because it was based only on Global Supply’s argument that
Austin’s disclosure of its trade secrets was “inevitable,” not on any data, analysis, or evidence.
Global Supply’s response to Austin’s motion detailed Peck’s knowledge of Global
Supply’s proprietary PDM service based on his work at Global Supply and with Austin from 2010
to 2012. Peck also provided an additional affidavit. But as Austin pointed out in her reply, Peck
admitted he did not know “how Riverwood performs its processes,” what customers Riverwood
serves, what Riverwood’s customers have asked Riverwood to do, how Riverwood uses Arena
software, or whether Riverwood offered the “a la carte service” that he testified made Global
Supply’s system “different.” Consequently, although Peck was knowledgeable about Global
Supply’s proprietary information as of 2012, he had no basis for an opinion as to how or if Austin
might be using it at Riverwood in 2015. We conclude that it was within the trial court’s discretion
to grant Austin’s motion to strike Global Supply’s designation of Peck as an expert witness. See
Mendez, 204 S.W.3d at 800 (trial court’s determination that expert is qualified and testimony is
relevant and based on reliable foundation is reviewed for abuse of discretion).
3. Harmless error
In any event, Global Supply argues in its reply brief that any error by the trial court in
striking the designations was “ultimately harmless” because Odette and Gonzalez may give
“competent lay testimony about injury and damages.” Similarly, Global Supply argues that Peck’s
testimony “that Austin would inevitably disclose Global Supply’s trade secrets while working for
Riverwood need not qualify as expert testimony under TEX. R. EVID. 702, because it qualifies as
lay opinion testimony under TEX. R. EVID. 701.” Absent an error that probably caused the rendition
of an improper judgment or prevented proper presentation of the case to the court of appeals, we
cannot reverse. TEX. R. APP. P. 44.1.
We decide Global Supply’s third and fifth issues against it.
–25–
C. Global Supply’s TUTSA claim (Issue 4)
Global Supply pleaded that Riverwood misappropriated trade secrets either learned during
the merger talks or acquired through Austin. Riverwood moved for summary judgment on Global
Supply’s claim for misappropriation of its trade secrets in violation of TUTSA on one no-evidence
ground and two traditional grounds. Riverwood contended there was no evidence that Global
Supply’s “purported trade secrets are trade secrets; that Riverwood misappropriated the alleged
trade secrets; that Plaintiff suffered damages (whether framed as unjust enrichment or a reasonable
royalty); that Riverwood’s alleged misappropriation was willful and malicious; and/or that
Plaintiff incurred reasonable attorney’s fees as a result.” See TUTSA § 134A.002(3) (defining
“misappropriation”); § 134A.004 (recovery of damages for misappropriation). Riverwood’s
traditional grounds included its argument that Global Supply’s “‘inevitable disclosure’ argument
cannot support a TUTSA claim for damages.” In its fourth issue, Global Supply contends the trial
court erred by granting Riverwood’s no-evidence and traditional motions for summary judgment
on Global Supply’s TUTSA claim.
Global Supply contends it offered evidence on all elements of its TUTSA claim. It argues
(1) it had protectable interests in its building supply sourcing business and in its PDM program,
(2) evidence that Austin is doing the same work at Riverwood that she did at Global Supply is
sufficient to raise a fact issue on misappropriation, which can be proved by “inevitable disclosure”
in Texas, and (3) it was not required to sue each of its former employees who defected to
Riverwood in order to preserve its trade secrets. It also alleged that it suffered damages in the
amount of $2,149,319 “representing the compensation it paid to those who developed Global
Supply’s PDM and building supply sourcing businesses that Riverwood misappropriated—a fair
estimate of the costs that Riverwood itself would have had to incur if it had developed those
businesses on its own.”
–26–
The undisputed summary judgment evidence showed that Global Supply did not share any
information about its building supply sourcing business model with Riverwood. The seven-slide
Power Point presentation did not include this information. In its discovery response, Global Supply
conceded that Odette’s and Backes’s discussions with Keith “generally did not involve the delivery
by [Global Supply] of any trade secrets, or proprietary or confidential information, other than that
delivered in writing.” Nonetheless, Global Supply contends that the idea itself—that building
supply sourcing could be operated as a standalone business—is the trade secret that was
misappropriated by Riverwood. It argues that discussions regarding its proprietary concept for a
building supply sourcing business constituted “Evaluation Material” under paragraph 2 of the
Letter Agreement. Global Supply explains in its brief:
As for the building supply sourcing business, Global Supply demonstrated that it
had a protectable interest in both the business and its customers, and that both
depended on keeping the information secret. As Odette explained, “first-mover
status” in the industry was essential. (CR 2960) The business model took extensive
effort to develop, but it would be easy to copy, making it essential for Global Supply
to get a foothold in the market for building supply sourcing before its model became
publicly known.
But Global Supply does not point to any summary judgment evidence that it shared with
Riverwood any information about its “business model” that “took extensive effort to develop.”
Instead, the evidence showed that Riverwood had sourced building supplies some years before it
contacted Global Supply about a possible merger. Although Keith testified he did not know before
the 2014 merger discussions that Global Supply was sourcing building supplies, he also testified
that Riverwood had already undertaken building supply sourcing projects for at least two
customers prior to 2014. Global Supply dismisses this evidence as “one-off projects” rather than
“a full-fledged building supply sourcing business line,” but does not identify proprietary,
confidential, or trade secret information it shared with Riverwood to support this distinction.
Global Supply also cites Peck’s testimony to support its argument that building supply sourcing
–27–
“was unlike anything Riverwood was doing at the time,” based on a conversation Peck had with
Keith, but Peck also conceded the possibility that both Riverwood and other companies could have
been providing the services prior to 2014 without his being aware of it.
Riverwood admits, and the uncontroverted evidence shows, that both Keith and David
contacted Backes during the Letter Agreement’s three-year term about using Riverwood for
sourcing building supplies, knowing that Backes or his company PRA was a Global Supply
customer. But the evidence is also uncontroverted that Backes did not respond to, and Global
Supply did not lose any business from, Backes or PRA.
Consequently, we conclude the trial court did not err in granting summary judgment on
Global Supply’s claim that Riverwood misappropriated trade secret or other confidential or
proprietary information about Global Supply’s building supply sourcing business.
We also conclude that Global Supply did not raise a genuine issue of material fact on its
claim for misappropriation relating to its PDM program. Although Global Supply argues its claim
does not depend on Austin’s inevitable disclosure of trade secrets, there is no other evidence raising
a fact issue on misappropriation by Riverwood through its employment of Austin. Riverwood
offered Austin’s testimony that she (1) returned all company property to Global Supply and did
not retain any Global Supply documents when she resigned; (2) signed, and has complied with, an
agreement with Riverwood prohibiting improper use of her prior employers’ information; (3) has
never disclosed any Global Supply confidential or proprietary information or trade secrets to
Riverwood; and (4) has “only used information ‘which is generally known and used by persons
with training and experience comparable to my own, which is common knowledge in the industry
or otherwise legally in the public domain, or which is otherwise provided or developed by’
Riverwood.” Austin also testified that she had not disclosed to Riverwood or used at Riverwood
the five specific categories of information Global Supply claims as its trade secrets or proprietary
–28–
or confidential information in this case, and further testified that her work at Riverwood has been
performed using publicly-available software and other tools supplied by Riverwood’s customers.
The only evidence to the contrary is Peck’s speculative testimony that Austin must have disclosed
Global Supply’s confidential or proprietary information in order to do her job at Riverwood. Peck
conceded that he had no knowledge or information about the work Austin was actually doing at
Riverwood or about Riverwood’s product data management system. Austin, in contrast, testified
about how she performed her job responsibilities at Riverwood without using Global Supply’s
confidential information.
We also note that neither TUTSA nor common law prohibits the use of general knowledge,
skill, and experience a person acquired during employment. See TUTSA § 134A.003(a); T-N-T
Motorsports, Inc. v. Hennessey Motorsports, Inc., 965 S.W.2d 18, 22 (Tex. App.—Houston [1st
Dist.] 1998, pet. dism’d). There is no dispute that Austin was valuable to Global Supply for more
than her knowledge of PDM; Global Supply explains that she “came to be viewed as Global
Supply’s ‘most critical employee’ for PDM operations, both because of her unsurpassed
understanding of the product, and her skill as a facilitator and communicator.” Only the first of
these attributes is implicated by Global Supply’s trade secret claims, yet Global Supply initially
pleaded for broad injunctive relief that would curtail Austin from maintaining her livelihood and
earning a salary commensurate with her skills. An injunction that prohibits lawful activities is
overly broad. See Computek Computer & Ofc. Supplies, Inc. v. Walton, 156 S.W.3d 217, 223 (Tex.
App.—Dallas 2005, no pet.).
We conclude that Global Supply did not raise a genuine issue of material fact on its TUTSA
claim. We decide Global Supply’s fourth issue against it.
–29–
D. Global Supply’s tortious interference claim (Issue 6)
Global Supply pleaded that Riverwood willfully and intentionally interfered with the
Austin Agreement, alleging that Austin “terminated, breached or failed to perform under the
Austin Agreement as a result of Defendant Riverwood’s interference.” Riverwood moved for
summary judgment on this cause of action, alleging there was no evidence of willful and
intentional interference, proximate cause, or actual damages incurred as a result of the interference.
See Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77–78 (Tex. 2000)
(elements of tortious interference with existing contract are existing contract subject to
interference, willful and intentional act of interference, that proximately caused plaintiff’s injury,
and caused actual damages or loss).
Riverwood argued that it did not willfully or intentionally induce Austin to violate her non-
disclosure obligation in section 2 of the Austin Agreement. It offered affidavit testimony by
Austin, Keith, and David that no such inducement ever occurred. Global Supply responded that
“Riverwood interfered with the Austin Agreement when it solicited and hired Austin to grow,
manage and develop its competing PDM service, which caused her to violate Section 2 of the
Austin Agreement to not disclose Plaintiff’s trade secrets.” Global Supply relied on “undisputed”
facts that:
 Austin possessed Global Supply’s PDM service trade secrets because she had spent
several years managing, developing, and growing the service;
 Austin agreed to keep Global Supply’s PDM trade secrets confidential;
 Austin used and disclosed Global Supply’s trade secrets to develop, grow and
manage Riverwood’s PDM service;
 Riverwood interfered with Austin’s confidentiality obligation under the Austin
Agreement when it solicited her and hired her to manage, grow, and develop its
competing PDM service;
 Because of Austin’s “abrupt termination,” Global Supply was unable to deliver
services it had agreed to perform for its customers or solicit new customers;
–30–
 Odette testified that because of Austin’s resignation, Global Supply was unable to
deliver large service offerings to its customers and was unable to continue to offer
part of its business services to customers; and
 Odette testified to Global Supply’s average profit margins for the contracts Global
Supply was unable to perform after Austin’s departure.
Global Supply, however, did not cite any summary judgment evidence to support its contention
that “Austin used and disclosed Global Supply’s trade secrets to develop, grow and manage
Riverwood’s PDM service.” Odette admitted in his deposition that he did not know whether
Riverwood had any type of product data management system before hiring Austin. He “believed”
she has intentionally disclosed Global Supply’s confidential information to Riverwood “[b]ecause
it’s inevitable”:
Q. Do you know whether Riverwood uses this same structure for building
materials?
A. I do think that they—I think Lori is following the disciplines she learned with
us. I don’t know if —I’m assuming she’s following what we taught her.
Q. Okay. That’s your assumption and belief. Do you have any actual evidence one
way or the other? . . .
[A.] I have not spent any time looking at what they are doing in product data
management with their customers. I don’t have access to it. I don’t have influence
over it. The only thing it is, is impacting us and—and our ability to do the same.
Q. Okay. But to be clear, your belief is based on the fact that that’s how Ms. Austin
learned to do it while at Global Supply and your assumption is that’s how she is
doing it at Riverwood. Did I state that accurately?
A. I guess it’s inevitable. I believe it’s inevitable.
Austin, however, testified to the following (referring to Global Supply as “GSCS”):
14. I understand, per Section 1.4 of the Employee Proprietary Information and
Inventions and Non-Solicitation of Employees and Customers Agreement and the
terms of my GSCS Consulting Agreement, that I have a continuing obligation not
to disclose to Riverwood (or anyone else) any confidential or proprietary
information or trade secrets that I learned from GSCS. I have complied with that
obligation at all times. I have never disclosed GSCS trade secrets, confidential
information, and/or proprietary information to Riverwood. When I resigned from
GSCS, I returned all company property to GSCS and did not retain any GSCS
documents. Also, consistent with Section 1.4, at all times while employed by
–31–
Riverwood, I have only used information “which is generally known and used by
persons with training and experience comparable to my own, which is common
knowledge in the industry or otherwise legally in the public domain, or which is
otherwise provided or developed by” Riverwood.
15. I have never used at Riverwood, or disclosed to Riverwood, any of the
following:
 GSCS’s “Product Data Management System,” including its methods,
processes and techniques;
 GSCS’s customer information (including confidential client identities,
contract specifications and terms, and pricing models);
 GSCS’s supplier identities and pricing models;
 GSCS’s confidential, proprietary data about how to use a systems
management software program like Global Supply’s “Systainet Software”
and “Arena” and their features as customized and used in commerce at
multiple client levels; or
 GSCS’s methods, formulas, patterns, processes and techniques for assisting
clients in the building supply chain management process.
16. No one currently or formerly employed by Riverwood—including but not
limited to Frank McConahey, Tom David, and Ron Keith—has ever asked or
encouraged me to use or disclose any of the items specified in Paragraph 16 [sic]
above, or any other trade secrets, confidential information and/or proprietary
information of GSCS.
17. Despite what GSCS may believe, my work at Riverwood has been performed
using customer-supplied tools, including Arena or Autodesk PLM, as needed.
Arena is a cloud-based supply chain management software that is owned and
developed by Arena Solutions (https://www.arenasolutions.com/products/plm/).
Likewise, AutoDesk PLM is a competing software that is owned by AutoDesk
(http://www.autodeskfusionlifecycle.com/en/).
18. Arena and AutoDesk PLM are both freely available to anyone who pays a
license to use them. GSCS did not develop that software. Riverwood does not
change, modify, alter, or customize Arena or AutoDesk PLM in any way. Instead,
I use generally known, industry standard best practices that Riverwood had utilized
even before my employment there. I know this to be true both through my own
work at Riverwood, and because I have worked extensively with Lorrie Deale, an
independent contractor that Riverwood utilized to perform PDM consulting
services before my employment began.
19. When I first arrived at Riverwood, I reviewed Ms. Deale’s prior work in Arena,
and saw that she conformed to these best practices. I have never asked her to
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implement any GSCS “confidential, proprietary data” about how to use Arena, nor
have I done so.
Similarly, Keith and David testified that they had never asked or encouraged Austin to use
or disclose to Riverwood any of the trade secrets or confidential or proprietary information
identified by Global Supply in its discovery responses as having been misappropriated, and to their
knowledge, Austin had never done so. Global Supply did not point to any summary judgment
evidence to the contrary. If evidence was developed in the parties’ extensive discovery that
Austin’s work at Riverwood involved use of anything other than “industry standard best practices,”
including publicly-available software, Global Supply does not direct us to it. Although a former
employee may not disclose trade secrets, she “may use the general knowledge, skills, and
experience acquired during employment to compete with a former employer.” Trilogy Software,
Inc. v. Callidus Software, Inc., 143 S.W.3d 452, 467 (Tex. App.—Austin 2004, pet. denied). We
conclude Riverwood established that no willful and intentional act of interference by Riverwood
was a proximate cause of injury or damages to Global Supply, and Global Supply did not raise a
genuine issue of material fact precluding summary judgment. See Prudential Ins. Co. of Am., 29
S.W.3d at 77–78. We decide Global Supply’s sixth issue against it.
E. Global Supply’s “assisting and encouraging” claim (Issue 7)
In its seventh issue, Global Supply argues that “Riverwood knew Austin would
misappropriate Global Supply’s trade secrets and intended to help her do it.” Citing Juhl v.
Airington, 936 S.W.2d 640, 644 (Tex. 1996), Global Supply argues that the trial court erred by
granting summary judgment on its claim that Riverwood assisted and encouraged Austin’s
misappropriation of trade secrets.
In Juhl, the court discussed the “concert of action” theory incorporated in section 876(b)
of the Restatement (Second) of Torts, which “imposes liability . . . for substantially assisting and
encouraging a wrongdoer in a tortious act.” Id. Setting out the elements for recovery under section
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876(b), the court concluded that even if it adopted section 876(b), the plaintiff could not recover
under its terms. Id. The court explained that “[t]he purpose of the concert of action theory is to
deter antisocial or dangerous behavior,” noting that “instances where concert of action liability has
been imposed have almost always involved conduct posing a high degree of risk to others” such
as drag racing or reckless driving. See id. at 644–45 (collecting cases).
The court concluded that the defendants’ conduct, participating in a protest and allegedly
causing injury to a police officer who sustained a back injury carrying them away from the site,
“was simply not the type of highly dangerous, deviant, or anti-social group activity which was
likely to cause serious injury or death to a person or certain harm to a large number of people.” Id.
at 645; see also III Forks Real Estate, L.P. v. Cohen, 228 S.W.3d 810, 816 (Tex. App.—Dallas
2007, no pet.) (misrepresentation of assets in financial statement “is not the type of activity
addressed in the concert of action cases noted in Juhl”). And following Juhl, we concluded in West
Fork Advisors, LLC v. SunGard Consulting Services, LLC, 437 S.W.3d 917, 921–22 (Tex. App.—
Dallas 2014, pet. denied), that none of the allegations in a suit for misappropriation of trade secrets
“can be cast as dangerous or deviant or antisocial,” so that summary judgment was proper on the
plaintiff’s claims for aiding and abetting. Similarly here, Riverwood’s alleged conduct cannot “be
cast as dangerous or deviant or antisocial.” See id. Summary judgment was proper on Global
Supply’s claim against Riverwood for assisting and encouraging Austin’s alleged
misappropriation of trade secrets. We decide Global Supply’s seventh issue against it.
F. Austin’s requests for declaratory relief (Issue 8)
In its eighth issue, Global Supply contends that the trial court erred by declaring that
(1) Austin did not breach the Austin Agreement, and (2) Austin’s employment at Riverwood did
not violate any contract or statute. Global Supply contends that the trial court erred in these rulings
for the same reasons it erred in its rulings on Global Supply’s claims for (1) tortious interference
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with contract, (2) violations of TUTSA, and (3) breach of the Letter Agreement. We have
addressed each of these issues in our previous discussion and decided them against Global Supply.
For the same reasons, we decide Global Supply’s eighth issue against it.
G. Austin’s request for attorney’s fees (Issue 9)
In its ninth issue, Global Supply argues that the trial court erred by awarding Austin her
attorney’s fees. The trial court’s order granting summary judgment to Austin included the
following rulings:
(7) Pursuant to Tex. Civ. Prac. & Rem. Code Chapter 37, the Court
DECLARES that (a) Austin has not breached the Consulting Agreement
that she executed with Plaintiff, and (b) Austin’s employment by
Riverwood does not violate any statute or contract.
(8) Pursuant to Tex. Civ. Prac. & Rem. Code § 37.009, the Court DECLARES
that it is equitable and just that Austin recover from Plaintiff $78,000 for
her reasonable and necessary attorney’s fees.
We review for abuse of discretion a trial court’s award of attorney’s fees under civil practice and
remedies code Chapter 37, the Uniform Declaratory Judgments Act. City of Carrollton v. RIHR
Inc., 308 S.W.3d 444, 454 (Tex. App.—Dallas 2010, pet. denied).
Global Supply argues that it sought only injunctive relief against Austin, and Austin cannot
recover attorney’s fees for defending against an injunction request. Global Supply also complains
that the trial court erred by including Riverwood’s fees for defending against Global Supply’s
breach of contract claim in the award of attorney’s fees to Austin.5 Global Supply argues that “[t]he
Declaratory Judgments Act cannot be used to obtain otherwise impermissible and unavailable
attorney’s fees,” citing MBM Financial Corp. v. Woodlands Operating Co., L.P., 292 S.W.3d 660,
669 (Tex. 2009).
5
Global Supply does not present additional argument on this point or include citations to the record other than to the affidavit testimony of
Austin’s attorney that “the vast majority” of the legal services performed on Austin’s counterclaim also applied to Riverwood’s defense. Counsel’s
statement, however, was part of more detailed testimony addressing the “duty to segregate fees incurred for discrete legal services that did not
advance Austin’s Counterclaim.”
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Global Supply contends that there was “no legitimate reason” for Austin to pursue
declaratory relief “because Global Supply’s claims and Riverwood’s defenses already placed those
same matters at issue,” and because Austin “pursue[d] declaratory relief after Global Supply
dropped6 its request for an injunction.” Global Supply argues that both of Austin’s requested
declarations duplicated issues that were already before the court, specifically: (1) her request for a
declaration that “her employment by Riverwood did not violate any statute or contract” duplicated
the issues in Global Supply’s breach of contract claim against Riverwood, and (2) her request for
a declaration that she had not breached the Austin Agreement “was already encompassed within
Global Supply’s tortious-interference claim.” Consequently, Global Supply argues, it was error to
grant Austin’s motion for summary judgment and to award her requested attorney’s fees.
In MBM Financial Corp., the plaintiff Woodlands Operating Corp. sued for breach of
contract, fraud, and declaratory judgment. MBM Fin. Corp., 292 S.W.3d at 663. At trial,
Woodlands recovered no damages on its breach of contract and fraud claims. See id. at 663–64.
Although Woodlands obtained five declarations, the declarations merely duplicated the issues in
the fraud and contract claims. Id. at 670–71. The court held that “when a claim for declaratory
relief is merely tacked onto a standard suit based on a matured breach of contract, allowing fees
under Chapter 37 would frustrate the limits Chapter 38 imposes on such fee recoveries.” MBM
Fin. Corp., 292 S.W.3d at 670. Explaining that “[a]t trial, the Woodlands recovered no damages
on its breach of contract claim, so it cannot recover fees under Chapter 38,” the court held that
“[a]llowing it to recover the same fees under Chapter 37 would frustrate the provisions and
limitations of the neighboring chapter in the same Code.” Id.
But the court rejected MBM’s arguments that declaratory relief was improper, concluding
that (1) declaratory relief is available under chapter 37 of the civil practice and remedies code in
6
We note that there are no amendments to Global Supply’s petition or any dismissals or nonsuits in the appellate record.
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contract cases “before or after there has been a breach” and after a contractual relationship has
been terminated; (2) declarations of non-liability are not barred in contract cases; and (3) the
existence of another available remedy, such as a claim for breach of contract, does not bar the right
to maintain an action for declaratory judgment. Id. at 667–69; see also CIV. PRAC. & REM.
§§ 37.001–.011 (Declaratory Judgments Act).
Here, in contrast, Austin did not tack her declaratory judgment action onto a standard
breach of contract claim. Cf. MBM Fin. Corp., 292 S.W.3d at 670. She did not allege a claim for
breach of contract against Global Supply, nor did Global Supply allege a breach of contract claim
against her. As we have discussed, there are two questions common to several of Global Supply’s
issues on appeal: (1) whether Austin was an employee or a supplier for purposes of Global
Supply’s claim against Riverwood for breach of the Letter Agreement, and (2) whether Global
Supply could rely on the “inevitable disclosure” doctrine as summary judgment proof of its injury
and damages on all of its claims against Riverwood. But these common questions do not establish
that Austin’s request for declaratory judgment “merely duplicated the issues already before the
trial court.” Cf. City of Carrollton, 308 S.W.3d at 455. Austin sought declarations that she had not
breached her agreement with Global Supply and that her employment by Riverwood did not violate
any statute or contract. To obtain these declarations, Austin was required to establish that she did
not use or disclose Global Supply’s “Confidential Information” as defined in section 2 of the
Austin Agreement, a matter different from whether Riverwood used “Evaluation Material” in
violation of the Letter Agreement. It is undisputed that Austin had no involvement with the 2014
merger discussions between Global Supply and Riverwood and in fact was not aware of them until
after she gave notice of her resignation in August 2015. We conclude that the trial court did not
abuse its discretion by awarding Austin her attorney’s fees under civil practice and remedies code
section 37.009. We decide Global Supply’s ninth issue against it.
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CONCLUSION
We affirm the trial court’s judgment.
/Leslie Osborne/
LESLIE OSBORNE
JUSTICE
180188F.P05
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Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
GLOBAL SUPPLY CHAIN SOLUTIONS, On Appeal from the 416th Judicial District
LLC, Appellant Court, Collin County, Texas
Trial Court Cause No. 416-04054-2015.
No. 05-18-00188-CV V. Opinion delivered by Justice Osborne;
Justices Schenck and Reichek,
RIVERWOOD SOLUTIONS, INC., AND participating.
LORI AUSTIN, Appellees
In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.
It is ORDERED that appellees Riverwood Solutions, Inc., and Lori Austin recover their
costs of this appeal from appellant Global Supply Chain Solutions, LLC.
Judgment entered this 16th day of August, 2019.
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