EJ Madison, LLC., a Texas Limited Liability Company v. Pro-Tech Diesel, Inc. ( 2019 )

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
EJ MADISON, LLC, §
No. 08-17-00229-CV
Appellant, §
Appeal from the
v. §
205th District Court
PRO-TECH DIESEL, INC., A Texas §
Corp. of El Paso County, Texas
§
Appellee. (TC# 2015-DCV2479)
§
OPINION
Appellant, EJ Madison, LLC (“Madison”) appeals from a take-nothing judgment after a
bench trial in which it raised claims against Pro-Tech Diesel, Inc. (“Pro-Tech”) for breach of
contract, breach of fiduciary duty, and misappropriation of trade secrets. In twenty issues,
Madison asserts that the evidence was factually and legally insufficient to support the trial court’s
findings of fact and that it erred in its application of Texas law. Finding no error, we affirm the
trial court judgment.
BACKGROUND
In 2008, Madison, a trucking company, began doing business with Pro-Tech, a company
that services and repairs trucks. In 2013, John Warren, the owner and manager of Madison,
approached Ricardo Rivera, the owner and president of Pro-Tech with a business venture. Warren
told Rivera that Madison wanted to explore the feasibility of creating duel fuel conversion kits to
convert its truck engines from diesel to ones that run primarily on natural gas. Warren considered
Rivera a “diesel expert,” and was interested in Rivera’s input. Warren also wanted Pro-Tech to
install the conversion kits after they were developed.
After sharing the idea with Rivera, Warren presented a Non-Disclosure and Non-
Circumvention Agreement (“Agreement”), which Rivera signed on behalf of Pro-Tech on
February 25, 2013. The paragraph entitled “Non-Disclosure, Non-Use and Non-Circumvention”
provided as follows:
Pro-Tech shall: (a) keep EJM’s Confidential Information in strict confidence: (b)
protect it with the same degree of care as the Pro-Tech treats its own Confidential
Information; (c) not, without the prior written consent of EJM, disclose or permit it
to be disclosed to anyone other than the Pro-Tech’s directors, officers, employees,
agents or consultants who have a legitimate need to know the Confidential
Information for the Pro-Tech to negotiate, participate in, or perform services with
respect to the Projects; (d) will not use, and will not permit its directors, officers,
employees, agents or consultants to use, the Confidential Information for any
reason other than for the Project; and (e) not circumvent EJM in connection with
the Confidential Information. In addition to any other relief that may be available
to EJM, Pro-Tech hereby assigns to EJM the profits, benefits and/or proceeds
obtained by Pro-Tech as a result of any use of the Confidential Information that is
not authorized in writing by EJM and to keep and hold same in trust for EJM and
to tender same to EJM upon EJM’s request. Pro-Tech also hereby grants as
security interest to EJM in all of Pro-Tech’s equipment, accounts and general
intangibles to secure Pro-Tech’s obligations to EJM under this Agreement.
The Agreement defined Confidential Information as follows:
[C]onfidential financial and business information concerning EJM’s business plans,
financing sources, sales, margins, profits, customers, marketing programs and plans,
new product developments, contractual relationships, as well as proprietary
information concerning product technology, software, trade secrets, product
development, new product ideas, and new applications for existing products and
technology. . . all written and electronic communications that are derived from, or
contain, in whole or in part, Confidential Information, including spreadsheets,
memoranda, correspondence, emails, and all other documents.
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. . .
For purposes of this Agreement, Confidential Information will not include
information which (i) is now or hereafter becomes, through no act or failure to act
on the part of either Party, generally known or available to the public; (ii) was
acquired by the receiving Party before receiving such Information from EJM and
without restriction as to use or disclosure; (iii) is hereafter rightfully furnished to the
Pro-Tech by a third party, without restriction as to use or disclosure; (iv) is required
to be disclosed pursuant to law, provided the Pro-Tech uses reasonable efforts to
give EJM reasonable notice of such required disclosure; (v) is independently
developed by the Pro-Tech without the use of or reference to Confidential
Information; or (vi) is disclosed with the prior written consent of EJM.
Next, the Agreement described the “Project” as follows:
Pro-Tech and EJM have entered into discussions with each other in connection with
prospective business arrangements and/or opportunities involving the following
commercial project: conversion of trucks, including without limitation, trucks
owned by EJM/its related companies, from diesel powered operation to dual CNG
[compressed natural gas] /Diesel powered operation (the ‘Project’).
Warren testified that he anticipated that, by installing the conversion kits, Pro-Tech would
develop an expertise in the duel fuel technology that would benefit Pro-Tech’s business. He
further testified that the Agreement was necessary to protect Madison’s intellectual property as
well as its relationships with different potential customers or contracts involving the technology.
At the time that Rivera signed the Agreement, he believed it applied only to the natural gas
conversion kit project, and that it did not encompass the general maintenance and repair services
that Pro-Tech had long been providing to Madison. Rivera testified that if the Agreement had
applied to general maintenance and repair services, Pro-Tech would not have entered into the
Agreement. After Rivera signed the Agreement, Pro-Tech installed the conversion kits that were
developed by Madison on Madison’s trucks.
On August 22, 2013, Madison and EL Hollingsworth & Company, Inc. signed a separate
Confidentiality and Non-Disclosure agreement, which indicated the parties were in the process of
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“evaluat[ing] a proposal, negotiat[ing] an agreement, and/or perform[ing] an agreement.”
According to Warren, EL Hollingsworth, which is another trucking company, was originally
interested in acquiring conversion kits for its own trucks. However, after Madison disclosed what
they were doing, instead of purchasing and installing the conversion kits for EL Hollingsworth’s
own trucks, it became a financial partner with Madison by investing in the company and
committing to purchasing conversion kits in the future. But EL Hollingsworth never honored that
commitment.
In addition, by July 2014, EL Hollingsworth assumed operation of Madison’s trucking
company, including the trucks that were converted to the dual fuel system. According to Warren
“it was basically decided that [EL Hollingsworth] would – you know, they would run the fleet of
the trucks. We would take care of the technology. We were just doing what everybody was best
suited to do.” According to Rivera, Warren wanted to “step out of the – out of the trucking
company” so he could focus on the technology. So, Warren approached Rivera to discuss the
idea of Pro-Tech continuing the maintenance program once EL Hollingsworth assumed operation
of Madison’s trucks. In this regard, Rivera testified as follows:
The Court: But how was it communicated or what was the agreement, if there was
one, that Pro-Tech would continue to do the maintenance as a means of just—of,
you know, continuing the business?
[Rivera]: There was---it was a verbal agreement, ma’am. There was no really --
like I said, we were all partners. So it made perfect sense at the time that the
transition—and especially on John’s behalf because he wanted to step out of the –
out of the trucking company. So it was an easy transition and it was a –I’m lost
for words. But it was an –it was an attractive offer for EL Hollingsworth just to
switch over the maintenance.
Q: Why was that an attractive offer for Hollingsworth?
A: Because it made—to them, they didn’t have to go out and find a new repair shop.
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They didn’t have to go out and seek a new maintenance shop. For them it was just
taking over the trucks.
. . .
The Court: What would have been the impact if you had at that point not worked
on the trucks anymore?
A: They probably wouldn’t have taken the deal because they would have had to
start from scratch, and they probably would have had to find another, probably,
location to maintenance the trucks, I would say. I mean, I’m not sure how—but I
would say it wouldn’t have a good impact on the transition between the both
companies. It would have some type of a big effect on it.
Not—would it be enough to cause the deal to go south? I wouldn’t be able
to answer that, but I know it would have been some.
. . .
Q. Now within your personal knowledge, was Mr. Warren aware of the fact that
you had provided this information or a summary of what the charges would be for
maintenance to EL Hollingsworth?
A. Yes, because he -- I kept the same rate. I mean, the --I kept the same -- you
know, me and John talked about it. He wanted me to keep the same rates, keep
everything as the same because that’s what he was pushing for.
And you know, his going rate at the time was only 68 bucks an hour. And
due to the fact that we had been doing business for eight, nine years. So that’s why
his rate was so low. So when he introduced the idea to Hollingsworth—well, their
average rate on the road is 100 bucks an hour, so 100 bucks an hour to versus 68
was an attractive offer.
Q: And to your knowledge, is that one of the reasons that Mr. Warren relied on that
to move forward with that acquisition by EL Hollingsworth?
A. Sure. Because at that point, it was a win/win for everybody. You know, it was
a win/win for Hollingsworth because they had a maintenance shop; as a diesel shop,
it was a win for me; and it was a win for John because he passed over the trucks to
Hollingsworth. So everybody at that time got what they wanted.
Rivera also explained the only thing that changed after EL Hollingsworth began operating the
trucks was the “name on the bill.” Thereafter, with Madison’s knowledge and verbal consent,
Pro-Tech continued to perform the same general maintenance it had been performing on the trucks
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prior to 2013.
Meanwhile, Madison formed Clean Fuel Technologies (“CFT”), of which Rivera was a
partner, and Clean Fuel Technologies II (“CFTII”), of which Clean Technologies was an owner.
These companies focused on further developing the duel fuel technology. In addition, after July
2014, installation of the duel fuel system kits and related repairs were being performed by Pro-
Tech through CFT.
By December 2014, the business relationship between Madison, EL Hollingsworth, and
Pro-Tech soured. According to Warren, EL Hollingsworth began a “hostile takeover attempt” of
the technology company and Pro-Tech aligned with EL Hollingsworth. According to Rivera, the
technology company partners confronted Warren about “making bad business decisions without
letting the partners know.” Rivera said that as a result of these decisions, Pro-Tech was “spinning
out of control in debt” because it “was not getting paid at the time.” After Warren refused to
make changes, Rivera instructed Pro-Tech to stop performing the conversion kit installations for
CFT. In addition, following the split, Rivera believed the Agreement prohibited Pro-Tech from
doing any work on the conversion kits, so it stopped working on them altogether. But, Pro-Tech
continued to perform maintenance services, such as oil changes and tire and windshield wiper
replacement on the trucks formerly owned by Madison that were being operated by EL
Hollingsworth through trial.
On May 11, 2015, counsel for Madison sent Pro-Tech a demand letter accusing Pro-Tech
of violating the Agreement by “enter[ing] into a commercial relationship” with EL Hollingsworth
in July 2014 without Madison’s written authorization. The letter sought “all of Pro-Tech’s
‘profits, benefits, and proceeds’ arising from Pro-Tech’s unauthorized use of the Confidential
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Information.”
Madison filed its original petition on July 27, 2015, and an Amended Petition on June 13,
2017. The Amended Petition raised the following claims: (1) Breach of Contract and Fiduciary
Duty As to the NDNCA; and (2) Misappropriation of Trade Secrets.
Madison never sought injunctive relief. Instead, in addition to other damages, it sought
recovery of all the gross proceeds received by Pro-Tech from July 2014 through trial, which
Madison calculated at $721,789.07, and which Madison maintained would further increase for as
long as Pro-Tech continued to perform maintenance work for EL Hollingworth. Following a
bench trial on June 20, 2017, the trial court announced and explained its verdict from the bench.
The trial court determined that Madison was not entitled to relief and eventually filed findings of
fact and conclusions of law in support of its decision.
STANDARD OF REVIEW
A trial court’s findings of fact are reviewable for legal and factual sufficiency of the
evidence by the same standards that are applied in reviewing evidence supporting a jury’s verdict.
Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994); Howe v. Howe, 551 S.W.3d 236, 249
(Tex.App.—El Paso 2018, no pet.). We determine whether a verdict is supported by the evidence
by viewing the evidence in the light favorable to the verdict, crediting favorable evidence if
reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not.
City of Keller vs. Wilson, 168 S.W.3d 802, 807 (Tex. 2005); see also Wheeling v. Wheeling, 546
S.W.3d 216, 223 (Tex.App.—El Paso 2017, no pet.).
Moreover, here the trial court was the sole judge of the credibility of the witnesses and the
weight to be given to their testimony and to the extent that conflicting evidence exists in this record,
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we presume the trial court, as the sole trier of fact, resolved such conflicts in favor of the prevailing
party. City of Keller, 168 S.W.3d at 819-20; Wheeling, 546 S.W.3d at 223. Indeed, as long as
the evidence at trial “would enable reasonable and fair-minded people to differ in their
conclusions,” we will not substitute our judgment for that of the fact finder. City of Keller, 168
S.W.3d at 822; Wheeling, 546 S.W.3d at 223.
Conclusions of law are reviewed de novo. Austin Hardwoods, Inc. v. Vanden Berghe, 917
S.W.2d 320, 322 (Tex.App.—El Paso 1995, writ denied); Burnett v. Burnett, No. 08-15-00339-
CV, 2019 WL 2366963, *2 (Tex.App.—El Paso June 5, 2019, no pet.).
Appellant raises twenty issues challenging each and every adverse factual finding and
conclusion of law entered by the trial court. Appellant’s issues can be grouped into four
categories: (1) Issues One, Two, Four, Five, Eleven, Fourteen, and Sixteen complain about the
trial court’s determinations as they pertain to Madison’s breach of contract claim; (2) Issues Eight
and Twelve relate to Madison’s breach of fiduciary duty claim; (3) Issues Three, Six, Seven,
Thirteen, Fifteen, Seventeen, and Eighteen relate to Madison’s misappropriation of trade secrets
claim; and (4) Issues Nine, Ten, Nineteen, and Twenty complain about the trial court’s denial of
attorney’s fees and damages.1
DISCUSSION
Breach of Contract
The four elements of a breach of contract claim are: (1) the existence of a valid contract;
(2) performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages to
1
Appellant’s brief contains two issues that are numbered “V.” The second one states: “The trial court erred by
granting Appellee’s Plea to the Jurisdiction that Appellant failed to bring suit in time.” The record does not reflect a
plea to the jurisdiction was made or granted. Because this issue appears to be added in error, we do not address it.
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the plaintiff resulting from that breach. Sanders Oil & Gas GP, LLC v. Ridgeway Elec., 479
S.W.3d 293, 299-300 (Tex.App.—El Paso 2015, no pet.). A mere disagreement by the parties
about the correct interpretation of a contract does not render it ambiguous. Rather, “[w]hen the
disagreement between the parties is over the meaning of an unambiguous contract, the court must
determine the parties’ intent by examining and considering the entire writing.” Skinner Custom
Homes, Inc. v. Smith, 397 S.W.3d 841, 845 (Tex.App.—El Paso 2013, pet. denied).
“In determining the objective intent of the parties, we examine the entire instrument in an
effort to harmonize and give effect to all provisions of the contract so that none will be rendered
meaningless.” Id. Finally, we are to construe contracts “from a utilitarian standpoint bearing in
mind the particular business activity sought to be served” and we “will avoid when possible and
proper a construction which is unreasonable, inequitable, and oppressive.” [Internal quotations
omitted]. Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005). If after
the pertinent rules of construction are applied, the contract can be given a certain or definite legal
meaning, then it is unambiguous and we construe it as a matter of law. Skinner Custom Homes,
397 S.W.3d at 845; Frost Nat’l Bank, 165 S.W.3d at 312.
Scope of the Agreement
On appeal, Appellant argues that the trial court’s interpretation of the Agreement’s
language, which excluded from the Agreement’s scope Pro-Tech’s use of EL Hollingsworth
business relationship to perform general maintenance services without Madison’s written
authorization, was erroneous because it renders the following Agreement language meaningless:
Pro-Tech . . . (d) will not use . . . the Confidential Information for any reason other
than for the Project; and (e) not circumvent EJM in connection with the
Confidential Information.
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According to Appellant, Madison’s general business relationship with EL Hollingsworth
constituted “confidential information” and that this nonuse provision expressly prohibited Pro-
Tech from using it for any reason outside the duel fuel conversion project. Appellant also claims
that the non-circumvention language quoted above likewise prohibited Pro-Tech from generally
circumventing Madison as to any business relationship with EL Hollingsworth.
Pro-Tech responds that the Agreement did not apply to any information unrelated to the
conversion kit project. Rather, Pro-Tech maintains that the Agreement protected the business
relationship Madison shared with EL Hollingsworth only to the extent it was related to the
conversion kit project and that EL Hollingsworth’s identity was only confidential to the extent it
was tied to the conversion kit project. In support of its interpretation, Pro-Tech points to the
description of the “Project” found in the recitals which limited the application of the Agreement
to “prospective business arrangements and/or opportunities involving the following commercial
project: conversion of trucks, including without limitation, trucks owned by Madison/its related
companies, from diesel powered operation to dual CNG/Diesal powered operation (‘the Project’).”
We agree with Pro-Tech that the scope of the Agreement, read as a whole, was limited to
the conversion kit project and did not prohibit the general truck maintenance services Pro-Tech
was performing on trucks previously owned by Madison and later acquired by EL Hollingsworth.
Because Appellant points us to no evidence in the record establishing that Pro-Tech was
performing work related to the duel fuel conversion project after Pro-Tech stopped doing business
with Madison, we overrule Appellant’s points of error related to this claim.
In addition, we find further support for our holding in the definition of “Confidential
Information,” which expressly excludes:
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[I]nformation which (i) is now or hereafter becomes, through no act or failure to
act on the part of either Party, generally known or available to the public; (ii) was
acquired by the receiving Party before receiving such Information from EJM and
without restriction as to use or disclosure; (iii) is hereafter rightfully furnished to
the Pro-Tech by a third party, without restriction as to use or disclosure. . . (v) is
independently developed by the Pro-Tech without the use of or reference to
Confidential Information . . . . [Emphasis added].
This language contemplates that any information possessed by each party before entering into the
Agreement was not confidential. In addition, because Pro-Tech had been performing general
maintenance on the trucks Madison owned before and after the agreement, such work was
“independently developed” and did not fall within the definition of confidential information.
Moreover, at the time EL Hollingsworth took over Madison’s trucks, it became a third party that
rightfully engaged the services of Pro-Tech to continue the general maintenance Pro-Tech had
been providing before the Agreement was executed.
Applicability of the Covenant Not To Compete Act
Furthermore, Appellant’s interpretation of the nonuse provision would render it
unenforceable because it would constitute an unlawful restraint of trade or commerce. See
TEX.BUS.&COM.CODE ANN. § 15.05 (“Every contract . . . in restraint of trade or commerce is
unlawful”). Appellant argues that the nonuse provision generally prohibits Pro-Tech from
accepting any business from EL Hollingsworth without Madison’s consent in perpetuity. Such
an interpretation in effect forever prevents EL Hollingsworth from engaging the services of the
one entity that had serviced the trucks it acquired from Madison. Pro-Tech argues that such an
interpretation would make the Agreement subject to the Covenant Not to Compete Act and
unenforceable as unreasonably broad. Appellant responds by pointing out that Pro-Tech is not its
competitor and therefore the Act does not apply. While it is true that Pro-Tech is not a competitor
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with Madison, the record suggests that EL Hollingsworth is.
Any Agreement that prohibits Pro-Tech from accepting business from Madison’s
competitor is a covenant not to compete. See Marsh U.S.A., Inc. v. Cook, 354 S.W.3d 764, 768
(Tex. 2011)(treating a “Non-Solicitation Agreement” as a restrictive covenant subject to the
Covenants Not to Compete Act in part because it prohibited Cook from “accepting business” from
former and prospective clients); see also Eden Hannon & Co. v. Sumitomo Trust & Banking Co.,
914 F.2d 556, 562 (4th Cir. 1990)(treating a Noncircumvention and Nondisclosure Agreement that
prohibited Sumitomo from “independently pursuing lease transactions” for approximately three
years as a covenant not to compete because it was “merely a twist on employment noncompetition
agreements”).
Under Texas law, since 2013, covenants not to compete are governed by the Covenants
Not to Compete Act (Act). TEX.BUS.&COM.CODE ANN. § 15.50-.52. Consequently, in order for
the nonuse provision to be enforceable, it would have to meet the requirements of the Act. A
covenant not to compete is enforceable if it contains limitations as to time, geographical area, and
the scope of activity that are reasonable and do not impose a greater restraint than is necessary to
protect the goodwill or other business interest of the promisee. TEX.BUS.&COM.CODE ANN.
§ 15.50(a). If the covenant contains limitations that are not reasonable and impose a greater
restraint than is necessary, then the Court “shall reform the covenant” to make them reasonable.
TEX.BUS.&COM.CODE ANN. § 15.51(c). Once it reforms a covenant not to compete, a trial court
cannot award damages for injuries incurred from violation of the covenant before it was reformed.
Id.
Here, the evidence established that Pro-Tech was performing general maintenance work
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with Madison’s knowledge and without complaint from Madison between July 2014 and
December 2014 while the trio were still working together. Madison’s failure to object to Pro-
Tech’s use of EL Hollingsworth’s business relationship during this time suggests Madison did not
believe prohibiting such use was necessary to protect Madison’s goodwill or other business
interests with respect to the conversion project, which means that if the nonuse provision had
prohibited that activity, the scope of the prohibition was unreasonably broad.
In addition, the nonuse provision did not have a time restriction, which likewise rendered
it unreasonable. See TEX.BUS.&COM.CODE ANN.§ 15.51(c)(requiring limitations on time); see
also Central States Logistics, Inc. v. BOC Trucking, LLC., 573 S.W.3d 269, 277 (Tex.App.—
Houston [1st Dist.] 2018, pet. denied)(“A covenant not to compete that extends for an
indeterminable amount of time is not reasonable and, as a result, in not enforceable.”)(citing
Cardinal Pers., Inc. v. Schneider, 544 S.W.2d 845, 847 (Tex.App.—Houston [14th Dist.] 1976,
no writ).
Accordingly, even if Appellant’s interpretation of the nonuse provision was correct, in
order for it to be enforceable, on these facts, going forward, it would have to be reformed to narrow
its scope and to impose a time restriction. However, Madison never sought reformation in the
trial court. Consequently, we are without authority to grant such relief here. This is an additional
and alternative basis on which the trial court’s judgment is affirmed. Accordingly, Appellant’s
Issues One, Two, Four, Five, Eleven, Fourteen, and Sixteen are overruled.
Breach of Fiduciary Duty
"The elements of a breach of fiduciary duty claim are: (1) a fiduciary relationship between
the plaintiff and defendant, (2) a breach by the defendant of his fiduciary duty to the plaintiff, and
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(3) an injury to the plaintiff or benefit to the defendant as a result of the defendant's breach." Fred
Loya Insurance Agency, Inc. v. Cohen, 446 S.W.3d 913, 919 (Tex.App.—El Paso 2014, pet.
denied). Madison’s amended petition alleged that Pro-Tech breached a fiduciary obligation
imposed by the Agreement by “failing to turn over the profits, benefits and proceeds of its
commercial relationship” with EL Hollingsworth. At trial, Madison established that EL
Hollingsworth had paid Pro-Tech $212,290.91 in gross proceeds for the general maintenance work
Pro-Tech performed between July 2014 and May 2015. Relying on the following language in the
Agreement, Madison argued that it was entitled to those proceeds and all subsequent proceeds
going forward:
In addition to any other relief that may be available to EJM, Pro-Tech hereby
assigns to EJM the profits, benefits and/or proceeds obtained by Pro-Tech as a
result of any use of the Confidential Information that is not authorized in writing
by EJM and to keep and hold same in trust for EJM and to tender same to EJM
upon EJM’s request. Pro-Tech also hereby grants as security interest to EJM in all
of Pro-Tech’s equipment, accounts and general intangibles to secure Pro-Tech’s
obligations to EJM under this Agreement.
At trial, Pro-Tech established that it made no profit doing business with EL Hollingsworth and
actually lost money. Accordingly, Pro-Tech argued it received no profit, benefit and/or proceeds
from the general maintenance work it performed for EL Hollingsworth. It is unnecessary to
resolve this question. Because we concluded as a matter of law that the Agreement excluded the
general maintenance work Pro-Tech performed on the trucks formerly owned by Madison, we also
conclude that Pro-Tech was not required to assign to Madison any profits, benefits, and proceeds
Pro-Tech earned by performing that work. Accordingly, we overrule Appellant’s Issues Eight
and Twelve related to this claim.
Misappropriation of Trade Secrets
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Appellant’s claim of misappropriation of trade secrets is controlled by the Texas Uniform
Trade Secrets Act (TUTSA). The elements of misappropriation of trade secrets under TUTSA
are: (1) ownership of a trade secret; (2) misappropriation of the trade secret; and (3) an injury, if
the plaintiff is seeking damages. TEX.CIV.PRAC.&REM.CODE ANN. §§ 134A.002(1), (3), (6),
134A.004(a); Morgan v. Clements Fluids South Texas, Ltd., No. 12-18-00055-CV. 2018 WL
5796994 (Tex.App.—Tyler 2018, no pet.). At the time that Appellant filed its suit, TUTSA
defined trade secret as:
[I]nformation, including a formula, pattern, compilation, program, device, method,
technique, process, financial data, or list of actual or potential customers or
suppliers, that: (A) deprives independent economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or use;
and (B) is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
TEX.CIV.PRAC.&REM.CODE ANN. § 134A.002(6)(2016).2
Here, Appellant argues that “[t]here is simply no question but that EL Hollingsworth
constituted [Madison]’s trade secret information (as its customer or potential customer).”
Madison further claims that the fact that it waited until after Pro-Tech signed the Agreement to
introduce it to EL Hollingsworth is evidence of Madison’s reasonable efforts to protect this
information. Madison also asserts that Pro-Tech was able to enter into business with EL
2
An amendment to the definition of trade secret became effective on September 1, 2017. See Acts, 2017, 85th Leg.,
R.S., Ch. 37 (H.B. 1995), Sec. 1. TUTSA now defines trade secret as: “all forms and types of information, including
business, scientific, technical, economic, or engineering information, and any formula, design, prototype, pattern, plan,
compilation, program device, program, code, device, method, technique, process, procedure, financial data, or list of
actual or potential customers or suppliers, whether tangible or intangible and whether or how stored, compiled, or
memorialized physically, electronically, graphically, photographically, or in writing if: (A) the owner of the trade
secret has taken reasonable measures under the circumstances to keep the information secret; and (B) the information
derives independent economic value, actual or potential, from not being generally known to, and not being readily
ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of
the information.” TEX.CIV.PRAC.&REM.CODE ANN. § 134A.002(6)(eff. Sept. 1, 2017).
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Hollingsworth only after Madison introduced the two companies and that Pro-Tech derived an
economic benefit from the introduction. This evidence is insufficient to establish that EL
Hollingsworth’s identity was a trade secret for purposes of TUTSA. See eg. In re Bass, 113
S.W.3d 735, 739 (Tex.2002)(setting forth Restatement of Torts’s six-factor test to determine
whether trade secret exists. Factors to be weighed include in part: (1) extent to which the
information is known outside of his business; (2) the extent of the measures taken by him to guard
the secrecy of the information; and (3) the ease or difficulty with which the information could be
properly acquired or duplicated by others).
First, the trial court expressly found EL Hollingsworth was not Madison’s customer. The
record supports the finding. Warren testified that EL Hollingsworth did not purchase or install
conversion kits on its own trucks. Rather, EL Hollingsworth became a partner in the conversion
kit venture and took over the operation of the trucking company owned by Madison, which
included the general maintenance services being performed by Pro-Tech. Although Warren
testified that EL Hollingsworth committed to purchasing conversion kits in the future, there was
no evidence presented that it ever did so.
Second, the trial court also concluded as a matter of law that EL Hollingsworth’s identity
was readily ascertainable by proper means such as trade journals, reference books or published
material, and that EL Hollingsworth’s identity was not substantially secret. In our view these
conclusions of law are supported by the reasonable inferences drawn from the evidence that EL
Hollingsworth was a trucking company publicly operating in the United States outside of Madison;
and that because there is no evidence that Madison made efforts to keep EL Hollingsworth’s
identity a secret from others while it was operating Madison’s trucks in El Paso. Indeed, like Pro-
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Tech any other vendors or service companies previously doing business with Madison were
necessarily informed that EL Hollingsworth took over Madison’s trucking company and that
billing should be sent to EL Hollingsworth. Once Madison transferred operation of the trucks to
EL Hollingsworth, its identity was easily discoverable by anyone.
Finally, because Madison sought damages, in order to prevail on this claim, Appellant must
demonstrate an injury caused by the alleged misappropriation, which Madison failed to do.
TUTSA defines damages as “actual loss caused by misappropriation and the unjust enrichment
caused by misappropriation that is not taken into account in computing actual loss.”
TEX.CIV.PRAC.&REM.CODE ANN. § 134A.004(a). At trial, Warren testified as follows:
Q: Did EJ Madison lose any business that it would otherwise have from EL
Hollingsworth because of the maintenance services that were provided?
A: Yes. EJ Madison made an introduction to—one being very lucrative—to Pro-
Tech. And we commonly made introductions of businesses to other businesses
that were lucrative and we made money on them. That’s the whole purpose of it.
And I have—I have—every introduction that I’ve ever made that’s been successful,
I’ve made something from them; but I don’t do introductions for free.
Madison’s evidence of “actual loss” is purely speculative. There is no evidence establishing that
either Pro-Tech or EL Hollingsworth would have agreed to pay Madison for the introduction, or
that they would have paid Madison for its written authorization to enter into a commercial business
relationship.
As discussed above, because the record is clear that Pro-Tech stopped doing any work on
the conversion kits in December 2014 and that Pro-Tech merely continued to provide to
EL Hollingsworth the same general maintenance services for which Madison had been paying Pro-
Tech before the Agreement was executed, Madison cannot demonstrate it was damaged by Pro-
Tech’s use of any information it provided. Indeed, the record reflects Madison actually benefitted
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from Pro-Tech’s acceptance of business from EL Hollingsworth by ensuring a smooth operational
transition of the trucks from Madison to EL Hollingsworth. For these reasons, we overrule
Appellant’s Issues Three, Six, Seven, Thirteen, Fifteen, Seventeen, and Eighteen related to this
claim.
Attorney’s Fees/Damages
Appellant asserts that the trial court erred in concluding as a matter of law that Madison
was not entitled to attorney’s fees under TEX.CIV.PRAC.&REM.CODE ANN. § 38.001 et. seq. or
damages. Chapter 38 of the Civil Practices and Remedies Code allows recovery of attorney's fees
in breach of contract cases: "A person may recover reasonable attorney's fees . . . in addition to
the amount of a valid claim and costs, if the claim is for . . . an oral or written contract."
TEX.CIV.PRAC.&REM.CODE ANN. § 38.001(8). However, the Texas Supreme Court has long held
that attorney’s fees are only recoverable under the statute if the litigant: (1) prevails on a breach
of contract claim; and (2) recovers damages. See MBM Financial Corp. v. Woodlands Operating
Co., L.P., 292 S.W.3d 660, 666 (Tex. 2009). Because Madison did not prevail on any of its
claims, it was not entitled to attorney’s fees or damages. We overrule Issues Nine, Ten, Nineteen,
and Twenty.
CONCLUSION
Having overruled all twenty issues Appellant raised in this appeal, we affirm the trial
court’s judgment.
November 22, 2019
YVONNE T. RODRIGUEZ, Justice
Before Alley, C.J., Rodriguez, and Palafox, JJ.
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