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Eurecat US, Inc. v. Marklund

Court of Appeals of Texas, Fourteenth District

May 31, 2017

EURECAT US, INC., Appellant

          On Appeal from the 133rd District Court Harris County, Texas Trial Court Cause No. 2012-25700

          Panel consists of Justices Busby, Donovan, and Wise.


          J. Brett Busby Justice

         Appellees Soren Marklund and Douglas Wene started a business, Chem 32, LLC, in competition with their former employer, appellant Eurecat U.S., Inc. Eurecat sued all three appellees, seeking injunctive relief as well as monetary damages. After a lengthy trial, the jury found in favor of appellees on all of Eurecat's claims except its breach of contract action against Wene. The parties submitted their claims for attorneys' fees to the trial court. The trial court signed a final judgment awarding Eurecat: (1) $15, 200 damages for Wene's breach of contract, (2) $15, 000 in attorneys' fees, and (3) prejudgment and post-judgment interest. The final judgment also awarded appellees, as the prevailing parties on Eurecat's claim under the Texas Theft Liability Act, $600, 000 in attorneys' fees.

         Eurecat appeals from the trial court's judgment, raising ten issues. We first revisit the trial court's protective order preventing broad third-party discovery by Eurecat and conclude that it was within the trial court's discretion given evidence that Eurecat breached the parties' confidentiality agreement and sought to use the discovery process and contacts with third parties to harm Chem32 as a competitor. As to Eurecat's claims of breach of fiduciary duty, we hold that the evidence did not support Eurecat's requested instructions and that sufficient evidence supports the jury's failure to find a breach. We also conclude that the trial court properly directed a verdict against many of Eurecat's claims for breach of confidentiality agreements because it failed to show that one agreement was made and that others were supported by consideration. Finally, we hold that under the charge as given, sufficient evidence supports the jury's failure to find that another confidentiality agreement was breached. We therefore affirm the judgment.


         A. Eurecat hires Marklund and Wene.

         Eurecat is a subsidiary of Eurecat, S.A., a French company. Eurecat operates in the specialized field of off-site catalyst activation in North and South America.[1] Beginning in 1996, Marklund served as the president of Eurecat, though he was employed by another company.[2] Marklund became a Eurecat employee in 2005 and signed an employment contract-styled "Letter Agreement"-at that time. Marklund's job as president was to "direct the business of the company, to hire people, manage all different kind of legal affairs, and to do the best to promote the growth and the future of the company." The Letter Agreement provided that Marklund was an at-will employee. The Letter Agreement did not contain a non-compete clause. Eurecat contends that Marklund also signed two Patent and Trade Secret Agreements, but those agreements are not in our record.

         Wene began working for Eurecat in 1999 as the company's production manager. Wene's title changed soon afterward to plant manager. Wene explained that the changed title more accurately reflected his actual responsibilities at Eurecat's manufacturing plant. Wene reported directly to Marklund. Like Marklund, Wene was an at-will employee who did not sign a covenant not to compete.

         Wene did sign a Patent and Trade Secret Agreement when he began work in 1999. Wene promised in that agreement that he would "use his best efforts and utmost diligence to guard and protect [Eurecat's] trade secrets and confidential information." Wene also agreed that during or after his employment with Eurecat he would not "use for himself or others, or divulge to others any of [Eurecat's] trade secrets or confidential information which he may develop, obtain or learn about during or as a result of his employment by [Eurecat] . . . ." Wene also agreed that, upon the termination of his employment, he would not take with him, and would leave with Eurecat, all records, papers, and "all matter of whatever nature which contain [Eurecat] trade secrets or confidential information." The agreement defined both trade secrets and confidential information as

any information received from and concerning the affairs of EURECAT U[.]S. or AFFILIATED COMPANIES, such as products, methods, compilations, lists of customers, pricing procedures, or other information of whatever nature which gives to EURECAT U.S. or AFFILIATED COMPANIES an opportunity to obtain an advantage over competitors who do not know it or use it, but it is understood that said terms do not include knowledge, skills, or information which is common to the trade or profession of EMPLOYEE.

         Wene also signed a second Patent and Trade Secret Agreement in 2011.

         Eurecat was a troubled company when Marklund took control in 1996. Once Wene was hired, Marklund and Wene were the top Eurecat employees in the United States, and they worked together closely.[3] Eurecat and Eurecat, S.A. worked out a process for off-site catalyst activation, and Eurecat prospered under Marklund and Wene's leadership. Eurecat did not obtain patents for its off-site catalyst activation process, opting instead to protect the process as a trade secret.[4]

         B. Marklund and Wene plan to compete with Eurecat and later leave to form Chem32.

         In the spring of 2009, Francis Valeri, the chairman of the board for both Eurecat and Eurecat, S.A., attended a meeting at Eurecat's main office in Clear Lake. Valeri told Marklund and the other managers that he was planning to restructure Eurecat. In that reorganization, Marklund's position as president would be eliminated and replaced with two vice presidents, one in charge of production and the other in charge of marketing and sales. Valeri told Marklund he would receive another, unspecified, role within the Eurecat, S.A. family of companies. Marklund was unhappy with the plan and, believing he no longer had a future at Eurecat, he told Valeri he would have to start looking out for his own interest and making his own plans.

         Frederic Jardin was transferred from Eurecat, S.A. to Eurecat soon thereafter, ostensibly for a one-year period to learn sales and marketing in the United States. Jardin became Eurecat's vice president for sales and marketing. Prior to Jardin's 2010 arrival, Marklund had devoted about sixty percent of his time to sales and marketing activities. Feeling underutilized, Marklund testified that he began thinking about other options and thought that the time might have arrived to make a change.

         According to Marklund, sometime during the summer of 2010, he encountered Wene in the Eurecat parking lot. Marklund told Wene, his best friend at Eurecat, that Marklund was uncertain about his future at Eurecat and he needed to start looking for something else to do. Wene asked Marklund to consider starting a company with him to compete against Eurecat. Marklund said he was willing to investigate the possibility, as long as they did nothing that compromised their agreements with Eurecat.

         Marklund and Wene began developing a business plan for the new business. They also began searching for a plant location. Marklund and Wene believed they could use a different method to activate catalyst from the one used by Eurecat.[5]They also planned to sell their service to catalyst manufacturers rather than directly to refineries. It is undisputed that Marklund and Wene never revealed their plans to open a competing business to Eurecat or Eurecat, S.A.

          Marklund traveled to Europe on Eurecat business in September 2010. Part of that business included a meeting with Niels Sorenson, the head of Haldor Topsoe, a catalyst manufacturer and Eurecat customer. Sorenson also happened to be a longtime friend of Marklund's. During the meeting, Marklund testified that he asked Sorenson's opinion on the wisdom of joining Wene in starting a business that would compete with Eurecat. Sorenson told Marklund he did not think it would be a good idea. Sorenson's warning did not dissuade Marklund from continuing to evaluate the possibility of starting a competing business.

         Marklund had another Haldor Topsoe meeting in November 2010, while he was in Europe to attend a Eurecat board meeting. Marklund met with Bradley Cooper, Haldor Topsoe's technical manager for catalyst activation, to discuss both Eurecat business and the idea of starting a new company. Marklund testified that he discussed the potential of the new company doing business with Haldor Topsoe, particularly if it could obtain a higher yield percentage in the production of activated catalyst. Marklund also broached the possibility of Haldor Topsoe providing a letter of intent about potential future business with the proposed entity that could be used in his efforts to obtain financing. Cooper's response was noncommittal on both subjects. At the time of Marklund's 2010 Haldor Topsoe meetings, a new business entity had not yet been formed, nor had a factory site been obtained. Marklund testified that he and Wene were not yet certain they were going forward with the plan.

         Marklund and Wene's planning and preparations continued while they were still employed by Eurecat. They formed Chem32, LLC in February 2011. Marklund met with Sorenson a second time in the spring of 2011, and he again brought up the idea of a letter of intent from Haldor Topsoe. Sorenson agreed to provide a letter, which was ultimately signed on June 17, 2011.[6] On May 31, Marklund notified Valeri of his intent to resign from Eurecat, effective at the end of July.

         Wene found an abandoned factory site in Orange, Texas in May 2011. Wene and Marklund spent the spring and summer of 2011 investigating whether it would be a suitable site for their new business. The investigation included an environmental study conducted in August 2011. According to Marklund, financing for the purchase of the Orange site, as well as Wene's willingness to resign from Eurecat, depended on the result of the August environmental study. The bank approved the loan and Chem32 closed on the Orange site on September 9, 2011. Wene gave notice that he was resigning from Eurecat the same day.

         After the closing, Marklund and Wene moved a trailer onto the site and began working to get the plant up and running. This process took several months, as they had to build and install the plant equipment, commission the plant, and then produce catalyst samples to be evaluated by their potential customers. They began contacting potential customers in the fall of 2011. According to Marklund, Chem32 was finally ready to offer services to customers in June 2012. Chem32's first sales were in the summer of 2012. It is undisputed that Chem32 competes directly with Eurecat by offering similar catalyst activation services.

         C. Eurecat sues Marklund, Wene, and Chem32.

         Eurecat filed this suit in May 2012. Eurecat alleged numerous causes of action against Marklund, Wene, and Chem32, including breach of fiduciary duty, breach of contract, and misappropriation of trade secrets. Eurecat later added a cause of action for violation of the Texas Theft Liability Act. See Tex. Civ. Prac. & Rem. Code Ann. § 134.001 et seq (West 2011). Eurecat also sought temporary and permanent injunctions. Appellees answered and filed a counterclaim alleging that Eurecat (1) engaged in business disparagement, (2) committed tortious interference, and (3) was a monopolist under the Texas Free Enterprise and Antitrust Act.

         Soon after Eurecat filed suit, the trial court signed an order restraining appellees from (1) using or disclosing misappropriated Eurecat computer software; (2) using or disclosing information or documents about Eurecat's activation process obtained during their employment; and (3) intentionally deleting or destroying files or documents that belonged to Eurecat or contained Eurecat confidential or proprietary information. The order also required appellees to allow a forensic computer expert to inspect all computers used by appellees.[7]

         Several months later, the trial court signed an agreed temporary injunction enjoining appellees from using or disclosing "any files, property, software, firmware, documents or other equipment that belongs to Eurecat, that were obtained or created in connection with Eurecat's business, or that contain Eurecat's confidential and proprietary information." The injunction did not prohibit appellees from competing with Eurecat, so long as appellees did so "without using any files, property, software, firmware, documents or equipment belonging to Eurecat, that were obtained or created in connection with Eurecat's business, or that contain Eurecat's confidential and proprietary information."

          The discovery process was riven by disputes shortly after it began. The trial court granted appellees' request for a protective order preventing Eurecat from serving certain third-party discovery. Eurecat challenged this order by filing two petitions for writ of mandamus in this Court, both of which we denied. See In re Eurecat US, Inc., No. 14-14-365-CV, 2014 WL 2547595 (Tex. App.-Houston [14th Dist.] June 5, 2014, orig. proceeding) (per curiam); In re Eurecat US, Inc., 425 S.W.3d 577 (Tex. App.-Houston [14th Dist.] 2014, orig. proceeding).

         Eurecat moved for summary judgment on appellees' counterclaim alleging that Eurecat violated the Texas Free Enterprise and Antitrust Act. The trial court granted the motion, and appellees have not appealed that ruling.

         The remaining claims proceeded to trial, which lasted more than a month. The trial court granted appellees' motion for directed verdict on Eurecat's breach of contract claims based on breaches of the Patent & Trade Secret Agreement that Wene signed in 2011 and that Eurecat contends Marklund signed in 1999 and 2011.

         At the conclusion of the evidence, the trial court submitted Eurecat's remaining claims to the jury in a forty-page charge. The jury found that: (1) Marklund and Wene did not breach their fiduciary duties to Eurecat; (2) Marklund did not breach the 2005 Letter Agreement; (3) Wene did breach his 1999 Patent and Trade Secret Agreement; (4) Eurecat's damages caused by Wene's breach were $15, 200; (5) Eurecat did not have any trade secrets or statutory trade secrets (a predicate question for Eurecat's claim under the Texas Theft Liability Act);[8] (6) appellees did not misappropriate Eurecat property; and (7) Eurecat did not own a protectable trademark in the phrase "Load and Go."

          The parties submitted their requests for attorneys' fees to the trial court. The court signed a final judgment awarding Eurecat: (1) $15, 200 damages for Wene's breach of the 1999 Patent and Trade Secret Agreement; (2) $15, 000 in attorneys' fees; and (3) prejudgment and post-judgment interest. The final judgment also awarded appellees, as the prevailing parties on Eurecat's Texas Theft Liability Act claim, $600, 000 in attorneys' fees. This appeal followed.[9]


         I. The trial court did not abuse its discretion by issuing the protective order.

         Eurecat argues in its first two issues that the trial court abused its discretion when it granted appellees' request for a protective order prohibiting Eurecat from serving third-party discovery on eighty-nine companies. Appellees respond that the trial court properly exercised its discretion in weighing the evidence before it, including the risk that Eurecat's proposed third-party discovery would harm Chem32's business.

         A. Standard of review and applicable law

         We review a trial court's protective order for an abuse of discretion. Ford Motor Co. v. Castillo, 279 S.W.3d 656, 661 (Tex. 2009). A trial court abuses its discretion when it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law. Id.

         The purpose of discovery is to narrow the focus of the trial process. In re Allstate County Mut. Ins. Co., 227 S.W.3d 667, 668 (Tex. 2007). Courts expect discovery requests to be "reasonably tailored" and will not permit fishing expeditions. Texaco, Inc. v. Sanderson, 898 S.W.2d 813, 815 (Tex. 1995). The scope of discovery is largely within the discretion of the trial court. Dillard Dept. Stores, Inc. v. Hall, 909 S.W.2d 491, 492 (Tex. 1995). Courts recognize the need to give parties some latitude in discovery requests, taking into consideration the circumstances and the nature of the case. See In re Am. Optical Corp., 988 S.W.2d 711, 713 (Tex. 1998); Texaco, Inc., 898 S.W.2d at 815.

         Parties are encouraged to work out discovery disputes among themselves without court intervention. McKinney v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pennsylvania., 772 S.W.2d 72, 75 (Tex. 1989); see Tex. R. Civ. P. 191.2. When disputes cannot be resolved, courts may issue a protective order preventing or limiting discovery to protect an affected person from "undue burden, unnecessary expense, harassment, annoyance, or invasion of personal, constitutional, or property rights." Tex.R.Civ.P. 192.6; see also In re Mem'l Hermann Hosp. Sys., 464 S.W.3d 686, 707-08 (Tex. 2015).

         The trial court has broad discretion in granting a protective order. In re Eurecat US, Inc., 425 S.W.3d at 582. To justify a protective order, a party seeking to avoid discovery must produce sufficient facts to show particular, specific, and demonstrable injury. Brewer & Pritchard, P.C. v. Johnson, 167 S.W.3d 460, 466 (Tex. App.-Houston [14th Dist.] 2005, pet. denied).[10] To decide whether a protective order is appropriate, a trial court balances the parties' competing interests. See Garcia v. Peeples, 734 S.W.2d 343, 348 (Tex. 1987) (holding trial court should have balanced parties' competing needs before granting protective order). The trial court's balancing test is codified in Texas Rule of Civil Procedure 192.4(b). Under that rule, discovery "should be limited" if the court determines that "the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues." Tex.R.Civ.P. 192.4(b). The court may also consider harm that the resisting party might suffer as a result of the discovery. See Tex. R. Civ. P. 192.6(b) (authorizing court to protect movant from consequences of requested discovery including harassment or invasion of property rights); In re Weekley Homes, L.P., 295 S.W.3d 309, 322-23 (Tex. 2009) (noting harm party resisting discovery might suffer as result of revealing private conversations, trade secrets, and privileged and other confidential information); see also In re Houstonian Campus, L.L.C., 312 S.W.3d 178, 184 (Tex. App.-Houston [14th Dist.] 2010, orig. proceeding) (considering harm party resisting discovery might suffer as result of revealing members' names).[11]

         B. The trial court acted within its discretion by preventing Eurecat from serving discovery on eighty-nine third-party customers.

         We have seen this discovery dispute twice before. The trial court signed a protective order preventing third-party discovery that Eurecat sought to obtain from a list of eighty-nine of its customers other than Haldor Topsoe. Eurecat sought mandamus relief from the order, which another panel of this Court denied in a reasoned opinion. See In re Eurecat US, Inc., 425 S.W.3d at 583. Eurecat subsequently moved the trial court to reconsider the protective order and the trial court denied that motion. Eurecat once again sought mandamus relief in this Court, which the same panel denied. See In re Eurecat US, Inc., 2014 WL 2547595, at *1.

         Our opinions on these mandamus petitions discuss most of the pertinent background. We do not repeat all of that information here, but a few additional facts are relevant. Following the denial of Eurecat's first mandamus petition, Chem32 identified the customers on Eurecat's list that it had contacted, and the trial court signed an agreed discovery order directing both sides to produce certain documents-including invoices and proposals to provide services-concerning those sixteen customers. The order also directed the parties to produce the same documents concerning three additional companies that were not on Eurecat's original list of eighty-nine companies. At a hearing held on April 29, 2014, the trial court noted that discovery among the parties could have been used to limit the scope of Eurecat's requested third-party discovery and mitigate any resulting harm to appellees.

         In this appeal, Eurecat renews its arguments that the trial court abused its discretion by signing the protective order, which it contends: (1) categorically prohibited any discovery into Chem32's business with third parties, an area Eurecat argues is reasonably calculated to lead to the discovery of admissible evidence; (2) was not based on competent evidence; and (3) denied discovery on a matter put in issue by appellees.[12] Eurecat goes on to argue that the protective order was harmful for two reasons. First, Eurecat contends the discovery it was allowed to take from Haldor Topsoe revealed Marklund and Wene had secretly solicited Haldor Topsoe before they resigned from Eurecat. According to Eurecat, "because appellees had lied about their pre-resignation communications with Topsoe, they most likely lied about their pre-resignation communications with other customers as well." Second, Eurecat asserts the protective order was harmful because appellees exploited it during closing argument by pointing out Eurecat's failure to present third-party testimony that Wene revealed Eurecat trade secrets.[13]

         We begin our analysis of these arguments by considering whether the trial court abused its discretion. Eurecat initially argues that the trial court unreasonably restricted Eurecat's access to information when it granted the protective order because the proposed discovery would have led to admissible evidence of whether Marklund and Wene solicited other customers before resigning. This potential relevance, however, is not sufficient by itself to show that a protective order was improper. See Tex. R. Civ. P. 192.4, 192.6 (authorizing trial court to limit or prevent discovery regarding otherwise-relevant matters in appropriate circumstances); Axelson, Inc. v. McIlhany, 798 S.W.2d 550, 553 (Tex. 1990) ("Thus the trial court has discretion to narrow the scope of discovery on a case by case basis with a protective order."). Moreover, Eurecat's characterization of the trial court's order as a categorical prohibition of discovery regarding Chem32's business with third parties is not supported by the record. The trial court never prohibited discovery regarding Chem32's relationship with Haldor Topsoe. It also ordered Chem32 to produce records regarding its relationship with sixteen Eurecat customers that Marklund and Wene identified as companies Chem32 had done business with or had contacted. Finally, Eurecat acknowledged in its second mandamus petition that it had alternative means of discovery regarding Chem32's business with third parties, and the trial court noted the possibility of narrower third-party discovery following discovery among the parties.

         Turning to the evidentiary basis for the order, Eurecat argues it should have been allowed to take discovery regarding Chem32's business with third parties because prior discovery regarding appellees' solicitation of Haldor Topsoe had called their credibility into question, and it should not be forced to rely on their self-serving discovery responses. Eurecat also contends that the discovery sought was directly relevant to, and necessary to defend against, Chem32's antitrust counterclaim. Eurecat asserts that ...

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