Automation Support, Inc. v. Becky Wallace

Case: 17-10433 Document: 00514402330 Page: 1 Date Filed: 03/26/2018
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 26, 2018
No. 17-10433
Lyle W. Cayce
Clerk
AUTOMATION SUPPORT, INCORPORATED, doing business as Technical
Support,
Plaintiff - Appellant
v.
HUMBLE DESIGN, L.L.C.; WARREN DAVID HUMBLE,
Defendants - Appellees
Appeals from the United States District Court
for the Northern District of Texas
USDC No. 3:14-CV-4455
Before STEWART, Chief Judge, CLEMENT, and SOUTHWICK, Circuit
Judges.
PER CURIAM:*
Automation Support, Inc., sued Humble Design, LLC, for theft of trade
secrets under the Texas Theft Liability Act. The parties agreed to dismiss the
case with prejudice. Humble Design sought attorney’s fees, which the district
court awarded. We AFFIRM.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 17-10433
FACTUAL AND PROCEDURAL BACKGROUND
Automation Support, Inc., which does business as “Technical Support,”
is a closely-held corporation owned by Renee and Billy McElheney. Technical
Support employed David Humble as Vice President until he resigned in July
2013 to start his own company, Humble Design, LLC. When he departed,
Humble took documents belonging to Technical Support, including project
files, sales quotes, and other materials. Technical Support sued Humble in the
United States District Court for the Northern District of Texas in December
2014 under diversity jurisdiction. It alleged breach of contract and of fiduciary
duty, tortious interference, misappropriation of trade secrets, and violation of
Texas’s trade secrets statute, the Texas Theft Liability Act (“TTLA”).
Following discovery, Humble moved for summary judgment. Humble
argued that if he succeeded on the TTLA claim, he should be awarded
attorney’s fees under the “loser pays” provision of the statute. See TEX. CIV.
PRAC. & REM. CODE § 134.005(b). Before filing a reply, Technical Support
approached Humble and obtained his agreement to file a Joint Stipulation of
Voluntary Dismissal with Prejudice for all alleged claims. In that August 2016
stipulation, Humble expressly reserved the right to pursue attorney’s fees per
his summary judgment motion.
Two weeks after the dismissal, Humble filed a motion under Federal
Rule of Civil Procedure 54 seeking attorney’s fees and costs. Technical Support
raised two primary objections: (1) the court was powerless to award attorney’s
fees because the parties effectively terminated the case through their
voluntary dismissal, and (2) Humble could not qualify as a prevailing party
based on a voluntary dismissal. In February 2017, the court awarded Humble
approximately $69,000 in attorney’s fees and costs. Technical Support timely
appealed.
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In April 2017, Technical Support filed a motion for relief from judgment
under Federal Rules of Civil Procedure 60(b)(4) and 60(b)(6). Under Rule
60(b)(4), Technical Support argued that the attorney’s fee award was void
because Texas amended the TTLA prior to the alleged theft. Under Rule
60(b)(6), it argued that in the interest of justice, the district court should vacate
the judgment to correct the erroneous holding that Humble was a prevailing
party under the TTLA. In May 2017, the district court held that relief should
not be granted under either Rule 60(b)(4) or Rule 60(b)(6). Technical Support
then filed a notice of appeal of the denial of the motion.
We have consolidated the appeals of the attorney’s fees award and the
denial of the Rule 60(b) motion.
DISCUSSION
Under Texas law, the recovery of attorney’s fees is permissible only if
authorized by statute. Merritt Hawkins & Assocs., LLC v. Gresham, 861 F.3d
143, 155 (5th Cir. 2017) (citing Epps v. Fowler, 351 S.W.3d 862, 865 (Tex.
2011)). We have held the TTLA not only permits an attorney’s fee award, it is
mandatory for a party who prevails in a suit. Id.
Technical Support raises two issues on appeal. First, it argues that the
district court lacked subject matter jurisdiction to award attorney’s fees under
the TTLA because Humble’s alleged theft occurred after the statute’s partial-
repeal. Second, Technical Support argues that even if the award is not void,
the district court nonetheless erred in concluding that Humble qualifies as a
prevailing party.
I. Validity of district court’s order under Rule 60(b)(4)
Under Rule 60(b)(4), a party may request relief from a void judgment.
See FED. R. CIV. P. 60(b)(4). Here, Technical Support’s Rule 60(b)(4) motion
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argued that because the trade secrets provision of the TTLA was repealed at
the time of Humble’s alleged theft, the district court lacked subject matter
jurisdiction to award attorney’s fees under the TTLA, and the judgment is
therefore void.
Humble argues that Technical Support waived the opportunity to bring
a Rule 60(b)(4) motion because it failed to raise the issue of voidness when it
opposed Humble’s original Rule 54 motion for attorney’s fees. We disagree,
because a Rule 60(b)(4) motion challenging subject matter jurisdiction can be
filed at any time. N.Y. Life Ins. Co. v. Brown, 84 F.3d 137, 142–43 (5th Cir.
1996).
We review the denial of a Rule 60(b)(4) motion de novo. Callon Petroleum
Co. v. Frontier Ins. Co., 351 F.3d 204, 208 (5th Cir. 2003). “We have recognized
two circumstances in which a judgment may be set aside under Rule 60(b)(4):
1) if the initial court lacked subject matter or personal jurisdiction; and 2) if
the district court acted in a manner inconsistent with due process of law.” Id.
We have clarified, though, that “[a] judgment is not void merely because it is
erroneous.” N.Y. Life, 84 F.3d at 143 (citation omitted). Accordingly, “a Rule
60(b)(4) challenge to jurisdiction should be sustained only where there is a
‘clear usurpation of power’ or ‘total want of jurisdiction.’” Callon Petroleum,
351 F.3d at 208 (quoting Nemaizer v. Baker, 793 F.2d 58, 64–65 (2d Cir. 1986)).
As noted above, Texas law controls attorney’s fee awards with regard to
TTLA claims. Spear Mktg., Inc. v. BancorpSouth Bank, 844 F.3d 464, 473 (5th
Cir. 2016). On September 1, 2013, two months after Humble’s departure,
Texas enacted the Texas Uniform Trade Secrets Act (“TUTSA”), which
removed trade secret theft from the TTLA and introduced a heightened
standard for attorney’s fee awards in trade secrets cases. See Act of May, 2013,
83d Leg., R.S., ch. 10, §§ 1–3, 2013 Tex. Gen. Laws 14 (West). Such a change
is relevant because in Texas “[t]he repeal of the statute . . . deprives a court of
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subject matter jurisdiction over the cause.” Quick v. City of Austin, 7 S.W.3d
109, 128 (Tex. 1999). Technical Support argues that Humble’s conduct failed
to constitute theft until November 2013, and by that time the TTLA no longer
authorized an award of attorney’s fees in such cases. We must therefore
determine whether the September 2013 partial-repeal of the TTLA deprived
the district court of subject matter jurisdiction to award attorney’s fees to
Humble.
Technical Support cites to Section 3 of the session law for TUTSA, which
states: “The change in law made by this Act applies to the misappropriation of
a trade secret made on or after the effective date of this Act. A
misappropriation of a trade secret made before and a continuing
misappropriation beginning before the effective date of this Act are governed
by [the TTLA].” Act of May, 2013, 83d Leg., R.S., ch. 10, § 3, 2013 Tex. Gen.
Laws 14 (West). Whether the TTLA provided statutory authorization to award
attorney’s fees therefore turns on the date of Humble’s alleged theft and
whether it occurred prior to the enactment of TUTSA on September 1, 2013.
Humble argues that the allegations of the complaint should supply the
relevant date of the theft. It is undisputed that Humble left Technical Support
on July 17, 2013. The complaint alleges that before Humble left Technical
Support, he “misused Technical Support’s resources to further his own
company[.]” It further alleges that “[a]fter leaving Technical Support, Humble
stole Technical Support’s customer documentation and used this information
to further the business of Humble Design[.]” Because the parties do not
dispute that Humble took certain project files, sales quotes, and other
documents when he departed on July 17, the TTLA is the substantive law of
decision. Technical Support failed to limit the complaint’s allegations to
actions occurring after September 1, which means it cannot retroactively
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curtail the reach of the complaint to exclude the period between July 17 and
September 1.
Technical Support argues that based on what it allegedly learned in
discovery, the earliest instance in which Humble utilized stolen information
occurred in November 2013. In support of its argument that November 2013
was the earliest date Humble could have broken the law, Technical Support
cites to the definition of “misappropriation” provided by TUTSA, which as we
already indicated went into effect September 1, 2013. Under TUTSA,
“misappropriation” includes “disclosure or use of a trade secret” without
consent. TEX. CIV. PRAC. & REM. CODE § 134A.002(3)(B). Technical Support
argues that under this definition, Humble failed to actually use or disclose the
information he stole until November 2013, well after the repeal of the TTLA.
The problem with this argument is that we must also consider the
definition of “theft” under the TTLA for allegations occurring prior to
September 1, 2013 — a definition covering a broader category of actions than
“misappropriation” under TUTSA. Under the TTLA, theft encompasses
knowingly stealing a trade secret but does not require subsequent “disclosure
or use” as does TUTSA. TEX. PEN. CODE § 31.05(b)(1) (providing the definition
of theft previously incorporated by the TTLA). Under this definition, it is
undisputed that Humble took confidential information with him when he
departed Technical Support in July 2013, prior to the TTLA’s partial-repeal in
September.
It was therefore appropriate for the district court to rely on the TTLA as
the requisite statutory grant of authority to award attorney’s fees, and it did
not err in denying Technical Support’s Rule 60(b)(4) motion for lack of subject
matter jurisdiction.
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II. Humble as a prevailing party
In the alternative, Technical Support argues that the district court erred
in granting Humble’s Rule 54 motion for attorney’s fees because he was not a
prevailing party under the TTLA. 1
We review the award of attorney’s fees under Rule 54 for abuse of
discretion. In re High Sulfur Content Gasoline Prods. Liab. Litig., 517 F.3d
220, 227 (5th Cir. 2008). The district court abused its discretion if it
“erroneously applied the law or made a clearly erroneous assessment of the
evidence.” Chevron USA, Inc. v. Aker Maritime, Inc., 689 F.3d 497, 505 (5th
Cir. 2012). As previously stated, we apply Texas law when evaluating
attorney’s fee awards under the TTLA. Spear Mktg., 844 F.3d at 473.
Under the TTLA, “[e]ach person who prevails in a suit under this chapter
shall be awarded court costs and reasonable and necessary attorney’s fees.”
TEX. CIV. PRAC. & REM. CODE § 134.005(b). Here, Technical Support and
Humble agreed to a voluntary dismissal of the case with prejudice. Technical
Support argues that the nature of a voluntary dismissal with prejudice
precludes Humble from being classified as a prevailing party under the TTLA,
focusing on a single Supreme Court case in support. See Buckhannon Bd. and
Care Home, Inc. v. W. Va. Dep’t. of Health and Human Res., 532 U.S. 598, 605
(2001). It argues that in Buckhannon, the Court premised prevailing party
status on the presence of a judgment or other judicially sanctioned relief.
Although we cannot locate such language in Buckhannon, the opinion does
state that “[o]ur precedents thus counsel against holding that the term
1Technical Support twice challenged Humble’s status as a prevailing party — first
when it opposed Humble’s Rule 54 motion and later under its subsequent Rule 60(b)(6)
motion. Because Technical Support fails to raise any arguments on appeal challenging the
district court’s denial of its Rule 60(b)(6) motion, we limit our analysis of the prevailing party
issue to the standard of review applied to Rule 54 motions. See Cinel v. Connick, 15 F.3d
1338, 1345 (5th Cir. 1994).
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‘prevailing party’ authorizes an award of attorney’s fees without a
corresponding alteration in the legal relationship of the parties.” 532 U.S. at
605. Indeed, the notion of a change in the legal relationship between the
parties correlates with the test embraced both by Texas and the Fifth Circuit
for determining prevailing party status. Accordingly, we have held that
Buckhannon did not alter the Fifth Circuit’s “longstanding principle that ‘a
dismissal with prejudice is tantamount to a judgment on the merits[.]’” U.S.
ex rel. Long v. GSDMIdea City, LLC, 807 F.3d 125, 128 n.2 (5th Cir. 2015)
(quoting Schwarz v. Folloder, 767 F.2d 125, 130 (5th Cir. 1985)).
The Texas Supreme Court has analyzed the language of Buckhannon,
concluding that “[a]s the Fifth Circuit has observed, a dismissal or nonsuit with
prejudice is ‘tantamount to a judgment on the merits.’” Epps, 351 S.W.3d at
868 (quoting Dean v. Riser, 240 F.3d 505, 509 (5th Cir. 2001)). Further, “[t]he
res judicata effect of a nonsuit with prejudice works as a permanent,
inalterable change in the parties’ legal relationship to the defendant’s
benefit . . . . As such, we hold that a defendant is a prevailing party when a
plaintiff nonsuits a case with prejudice.” Id. at 868–69 (citations omitted).
In response, Technical Support argues that the language in Epps
discussing nonsuits with prejudice is dicta. This argument fails because the
court relied on its description of nonsuits with prejudice to help provide the
basis for the effect of nonsuits without prejudice. See id. at 869. In the
alternative, Technical Support attempts to distinguish Epps by arguing that
in Texas, a party may nonsuit a case without prejudice later into the life of a
case than federal courts allow under Rule 41. Because Rule 41 requires
opposing party stipulation for dismissals following a motion for summary
judgment, Technical Support argues that the only way it could have secured a
stipulation from Humble was to agree to a dismissal with prejudice. This
argument fails for two reasons. First, Rule 41 does not preclude an opposing
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party from stipulating to a dismissal without prejudice, making the alleged
conflict with Texas law purely speculative. See FED. R. CIV. P. 41(a)(1).
Second, Technical Support merely alludes to a potential conflict of law issue,
failing to cite a single case in support. “A party who inadequately briefs an
issue is considered to have abandoned the claim.” Cinel v. Connick, 15 F.3d
1338, 1345 (5th Cir. 1994).
Humble was a prevailing party under the TTLA.
III. Remand to award appellate attorney’s fees
Humble requests that we remand the case for an award of appellate
attorney’s fees. He identifies the same provision of the TTLA entitling a
prevailing party to attorney’s fees as the basis for also recovering appellate
attorney’s fees. TEX. CIV. PRAC. & REM. CODE § 134.005(b). Technical Support
failed to challenge the issue of appellate attorney’s fees in its reply brief.
Again, we apply Texas law when determining whether to award
attorney’s fees under the TTLA. Spear Mktg., 844 F.3d at 473. We have
previously held that “Texas law further provides that a party entitled to
recover attorneys’ fees at trial is also entitled to recover them for successfully
defending the case on appeal.” DP Sols., Inc. v. Rollins, Inc., 353 F.3d 421, 436
(5th Cir. 2003) (citing Gunter v. Bailey, 808 S.W.2d 163, 166 (Tex. App.—El
Paso 1991, no writ)). We recently applied DP Solutions to attorney’s fee awards
under the TTLA. Merritt, 861 F.3d at 155–57. As in DP Solutions, Humble is
therefore “entitled to attorneys’ fees relating to its defense of the district court
judgment in this appeal.” 353 F.3d at 436.
We AFFIRM the district court’s award of attorney’s fees, AFFIRM the
district court’s denial of Technical Support’s Rule 60(b) motion, and REMAND
for the district court to determine the proper amount of attorney’s fees to award
Humble for this appeal.
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