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Downhole Technology LLC v. Silver Creek Services Inc.

United States District Court, S.D. Texas, Houston Division

April 27, 2017

DOWNHOLE TECHNOLOGY LLC, Plaintiff,
v.
SILVER CREEK SERVICES INC.; STORMFIELD INNOVATIVE TECHNOLOGIES, LLC; DANIEL R. COFFEE; MICHAEL DIDIER; DILLON W. KUEHL; and CHARLES M. WILLIAMS, Defendants.

          MEMORANDUM OPINION AND ORDER

          SIM LAKE UNITED STATES DISTRICT JUDGE.

         Pending before the court are Defendants Silver Creek Services Inc., Michael Didier, and Charles M. Williams's (collectively, the "Silver Creek Defendants") Motion to Dismiss Plaintiff's Complaint and, Alternatively, Motion for More Definite Statement ("Silver Creek Defendants' Motion to Dismiss") (Docket Entry No. 23) and Defendants StormField Innovative Technologies, LLC and Dillon W. Kuehl's (collectively, the "StormField Defendants") Motion to Dismiss and Alternative Motion for More Definite Statement in Response to Plaintiff's Amended Complaint ("StormField Defendants' Motion to Dismiss") (Docket Entry No. 24) .[1] For the reasons stated below, the Silver Creek Defendants' Motion to Dismiss will be granted in part and denied in part, and the StormField Defendants' Motion to Dismiss will be denied.

         I. Factual Background[2]

         Defendant Downhole Technology LLC ("Downhole") manufactures and deploys frac plugs used in the hydraulic fracturing ("fracking") industry. Dillon W. Kuehl was employed as a Field Service Technician by Downhole from March of 2013 to March of 2014. Kuehl signed a Proprietary Information and Intellectual Property Assignment Agreement (the "Kuehl NDA") in which he agreed "to hold in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm or corporation without written authorization . . . any Proprietary Information of the Company" as defined in the NDA.[3]

         From October through December of 2013 Kuehl oversaw installations of Downhole frac plugs for two customers, FTS International Services, LLC ("FTSI") and Rice Energy, at a site in the Marcellus Shale region (the "FTSI/Rice Site"). FTSI and Downhole signed a Master Purchase Agreement for Products and/or Services ("FTSI Agreement"), [4] which included a Confidentiality provision.[5]

         Michael Didier was a consultant for Rice Energy at the time of the installations. Kuehl and Didier were personal friends before Kuehl began overseeing the installation at the FTSI/Rice Site. Charles M. Williams was an Operations Manager for FTSI at the time of the installations. Williams and Didier learned detailed information about the Downhole frac plugs from Kuehl at the FTSI/Rice Site. Daniel R. Coffee, Vice President of Wireline Operations for FTSI, learned detailed information about the Downhole frac plugs from his involvement at the FTSI/Rice Site and through Didier, Kuehl, or Williams.

         In December of 2013 Coffee, Didier, Kuehl, and Williams formed Silver Creek Services, Inc. ("Silver Creek")- At the time, Kuehl was still employed by Downhole. In September of 2014 Kuehl and Williams, along with other individuals, formed StormField Innovative Technologies, LLC ("StormField"). Kuehl and Williams were named as Managing Members of StormField. In October of 2 014 Downhole became aware that Silver Creek, in partnership with StormField, was selling frac plugs similar to the Downhole frac plug, which Silver Creek marketed as "ZIP Plugs."

         Downhole alleges that Silver Creek and StormField have infringed U.S. Patent Nos. 8, 955, 605 ("the *605 Patent") and 9, 010, 411 ("the Mil Patent"). Downhole alleges that defendants knew of Downhole's patents and that Silver Creek and StormField induced and contributed to the infringement of those patents by others. Downhole alleges that Kuehl had knowledge of Downhole's patent rights as a result of his employment with Downhole and the notice of "patent information" and the directions to a website printed on the side of each frac plug package. Coffee and Williams allegedly obtained confidential information belonging to Downhole as a result of Coffee's employment with FTSI and as a result of Williams working at the FTSI/Rice Site. Defendants allegedly used the confidential information they obtained to facilitate creation of their "ZIP Plug."

         Downhole sued Silver Creek and StormField for patent infringement, Kuehl for breach of contract and breach of fiduciary duty, Coffee and Williams for breach of contract, and all defendants for tortious interference, violations of the Texas Uniform Trade Secrets Act ("TUTSA"), [6] and unjust enrichment. Defendants now move to dismiss Downhole's claims for failure to state a claim or, in the alternative, for a more definite statement of Downhole's claims under the TUTSA.

         II. Applicable Law

         A Rule 12(b)(6) motion tests the formal sufficiency of the pleadings and is "appropriate when a defendant attacks the complaint because it fails to state a legally cognizable claim." Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001), cert. denied sub nom. Cloud v. United States, 122 S.Ct. 2665 (2002). The court must accept the factual allegations of the complaint as true and view them in the light most favorable to the plaintiff. Id. (citing Oppenheimer v. Prudential Securities Inc., 94 F.3d 189, 194 (5th Cir. 1996)). To defeat a motion to dismiss a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007). The court does not "strain to find inferences favorable to the plaintiff[]" or "accept conclusory allegations, unwarranted deductions, or legal conclusions." Southland Securities Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 361 (5th Cir. 2004) (internal quotation marks and citations omitted). "[C]ourts are required to dismiss, pursuant to [Rule 12(b) (6)], claims based on invalid legal theories, even though they may be otherwise well-pleaded." Flynn v. State Farm Fire and Casualty Insurance Co. (Texas), 605 F.Supp.2d 811, 820 (W.D. Tex. 2009) (citing Neitzke v. Williams, 109 S.Ct. 1827, 1832 (1989)).

         III. Analysis

         A. Infringement Claims

         As a preliminary matter, Downhole submitted, and the court has accepted, a Notice of Errata correcting paragraphs 41 and 58 of the Amended Complaint.[7] Arguments for dismissal on the basis of those errors are therefore moot.

         Defendants argue that Downhole's claims for induced and contributory infringement fail because Downhole did not plead that defendants had actual knowledge of the patents. But Downhole's pleadings allege that Kuehl had actual knowledge of the patents, "at least" as a result of the "notice" on the device packaging.[8]Downhole further alleges that Kuehl participated in the formation and management of both Silver Creek and StormField.[9] It is therefore plausible that Silver Creek and StormField had actual knowledge of Downhole's patents. Downhole's claims for induced and contributory infringement are therefore facially plausible.

         B. Breach of Contract Claims

         1. Williams

         Williams argues that Downhole's breach of contract claim against him should be dismissed because he was not a party to the contract between Downhole and FTSI. In Texas the elements of a breach of contract claim are (1) the existence of a valid contract; (2) performance or tendered performance by plaintiff; (3) breach of contract by defendant; and (4) damages. See Smith International, Inc. v. Egle Group, LLC, 490 F.3d 380, 387 (5th Cir. 2007). An employee of a company that enters into a contract generally has no individual liability. See, e.g., Willis v. Donnelly, 199 S.W.3d 262, 271 (Tex. 2006) (the corporate shield protects a business owner from individual liability on a contract entered into by the entity); OAIC Commercial Assets, L.L.C. v. Stonegate Village, L.P., 234 S.W.3d 726, 738 (Tex. App.--Dallas 2007, pet. denied) ...


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