CLINTON W. (BUDDY) PIKE, SR., DANIEL L. WALKER, W. TOBIN WILSON, VHSC CEMENT, LLC AND FEW READY MIX CONCRETE CO., Appellants
TEXAS EMC MANAGEMENT, LLC, TEXAS EMC PRODUCTS, LP AND EMC CEMENT, BV, Appellees
the 77th District Court Limestone County, Texas Trial Court
No. 30, 023-A
Chief Justice Gray, Justice Davis, and Justice Scoggins.
numerous issues, appellants, Clinton W. Pike Sr., Daniel L.
Walker, W. Tobin Wilson, VHSC Cement, LLC, and Few Ready Mix
Concrete, challenge a judgment in favor of appellees, Texas
EMC Management, LLC, Texas EMC Products, LP, and EMC Cement,
BV, stemming from the breakup of a partnership and the
subsequent purchase of the partnership's assets at a
foreclosure sale. In a cross-appeal, EMC Management, EMC
Products, and EMC Cement complain about the trial court's
denial of their request for a permanent injunction in favor
of cross-appellees, Pike, Walker, Wilson, VHSC, and Few Ready
After review, we modify the Amended Final Judgment to delete
Pike's liability for breach of his Management Agreement
with EMC Products and affirm the judgment in all other
respects. We also reverse the trial court's denial of the
permanent injunction and remand for proceedings consistent
with this opinion.
Sufficiency of the Evidence
appellants raise sufficiency challenges with regard to
aspects of the Amended Final Judgment. In a legal-sufficiency
review, we consider the evidence in the light most favorable
to the verdict, indulging every reasonable inference in favor
of the verdict. Autozone, Inc. v. Reyes, 272 S.W.3d
588, 592 (Tex. 2008) (per curiam); Associated Indem.
Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 286
(Tex. 1998). To determine whether legally-sufficient evidence
supports a challenged finding of fact, we credit evidence
that supports the finding if reasonable jurors could, and
disregard contrary evidence unless reasonable jurors could
not. See Kroger Tex. Ltd. P'ship v. Suberu, 216
S.W.3d 788, 793 (Tex. 2006); see also City of Keller v.
Wilson, 168 S.W.3d 802, 822 (Tex. 2005). The factfinder
is the sole judge of the credibility of the witnesses and the
weight to be assigned to their testimony. See City of
Keller, 168 S.W.3d at 819. The factfinder is free to
believe one witness and disbelieve another, and reviewing
courts may not impose their own opinions to the contrary.
Id. As such, reviewing courts must assume that the
factfinder decided all credibility questions in the favor of
the findings and chose what testimony to disregard in a way
that was in favor of the findings, if a reasonable person
could do so. Id. at 819-20.
it is within the factfinder's province to resolve
conflicts in the evidence. Id. at 820. Consequently,
we must assume that, where reasonable, the factfinder
resolved all conflicts in the evidence in a manner consistent
with the findings. Id. Where conflicting inferences
can be drawn from the evidence, it is within the province of
the factfinder to choose which inference to draw, so long as
more than one inference can reasonably be drawn. Id.
at 821. Thus, we must assume that the factfinder made all
inferences in favor of the findings if a reasonable person
could do so. Id. As stated in City of
Keller, the final test for legal sufficiency must always
be "whether the evidence at trial would entitle
reasonable and fair-minded people to reach the verdict under
review." Id. at 827. Anything more than a
scintilla of evidence is legally sufficient to support the
finding. See Cont'l Coffee Prods. Co. v.
Cazarez, 937 S.W.2d 444, 450 (Tex. 1996).
factual-sufficiency challenge, an appellate court must
consider and weigh all of the evidence. Cain v.
Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam). The
verdict should be set aside only if it is so contrary to the
overwhelming weight of the evidence as to be clearly wrong
and unjust. Id. We may not pass upon the
witnesses' credibility or substitute our judgment for
that of the factfinder, even if the evidence would support a
different result. 2900 Smith, Ltd. v. Constellation New
Energy, Inc., 301 S.W.3d 741, 746 (Tex. App.-Houston
[14th Dist.] 2009, no pet.). If we determine the evidence is
factually insufficient, we must detail the evidence relevant
to the issue and state in what regard the contrary evidence
greatly outweighs the evidence supporting the trial
court's judgment; we need not do so when affirming the
Breach-of-Contract Claims Against Walker and Wilson
their second issue, Walker, Wilson, and Few Ready Mix argue
that appellees' breach-of-contract claim against Walker
and Wilson is invalid as a matter of law, arguing, among
other things, that: (1) the failure to provide an infinite
amount of money was not a breach of the Partnership
Agreement; and (2) appellees breached the Partnership
Agreement first. Walker, Wilson, and Few Ready Mix also
contend that EMC Cement lacks standing to recover for
diminished value of the partnership; that the attorney's
fees award is improper; and that the amount awarded to Walker
and Wilson for appellees' breach of the Partnership
Agreement was incorrect.
it is a threshold matter, we will first consider the standing
argument. "Standing is a constitutional prerequisite to
maintaining suit in either federal or state court."
Williams v. Lara, 52 S.W.3d 171, 178 (Tex. 2001)
(citing Tex. Ass'n of Bus. v. Tex. Air Control
Bd., 852 S.W.2d 440, 444 (Tex. 1993)). Standing
"focuses on whether a party has a sufficient
relationship with the lawsuit so as to have a
'justiciable interest' in its outcome."
Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845,
848 (Tex. 2005). Essentially, parties have standing when they
are personally aggrieved, regardless of whether they are
acting with legal authority. See Nootsie, Ltd. v.
Williamson County Appraisal Dist., 925 S.W.2d 659, 661
appeal, Walker, Wilson, and Few Ready Mix assert that EMC
Cement lacks standing to bring a claim against Walker and
Wilson for breach of the Partnership Agreement because the
cause of action belongs to the partnership, not the
individual partners. Appellees counter that this argument
involves capacity and, as such, has been waived by a failure
to file a verified denial under Texas Rule of Civil Procedure
93. See Tex. R. Civ. P. 93.
is a procedural issue dealing with the personal
qualifications of a party to litigate. See Lovato,
171 S.W.3d at 848; see also Hubbard v. Rosenthal,
No. 10-10-00267-CV, 2012 Tex.App. LEXIS 4391, at *9 (Tex.
App.-Waco May 30, 2012, pet. denied) (mem. op.). "[A]
party has capacity when it has the legal authority to act,
regardless of whether it has a justiciable interest in the
controversy." Lovato, 171 S.W.3d at 848-49;
see El T. Mexican Rests. v. Bacon, 921 S.W.2d 247,
250 (Tex. App.-Houston [1st Dist.] 1995, no writ) (stating
that capacity is a party's legal authority to go to court
to prosecute or defend a suit). While standing may be raised
for the first time on appeal, capacity must be raised by
verified plea in the trial court or else it is deemed waived.
See Lovato, 171 S.W.3d at 849; see also Sixth
RMA Partners, L.P. v. Sibley, 111 S.W.3d 46, 56 (Tex.
characterize the standing argument as a challenge to EMC
Cement's right to recover in the capacity in which it
filed suit. In other words, we conclude that Walker,
Wilson, and Few Ready Mix's argument that EMC Cement did
not have authority to prosecute this lawsuit because that
authority belonged to the partnership involves capacity, not
standing. See Pledger v. Schoellkopf, 762 S.W.2d
145, 145-46 (Tex. 1988) (per curiam) (holding that the
question whether claims brought by shareholders belonged to
the corporation involved capacity); see also Baker v.
City of Robinson, 305 S.W.3d 783, 788 (Tex. App.-Waco
2009, pet. denied) (concluding that an individual's
alleged lack of standing to recover lost profits suffered by
a partnership was really an issue of capacity); WHM
Props. v. Dallas County, 119 S.W.3d 325, 330-31 (Tex.
App.-Waco 2003, no pet.) (holding that an issue presented as
a "standing" challenge pertaining to corporate
status actually involved "capacity"). And because
the record does not contain a verified plea filed in the
trial court under Texas Rule of Civil Procedure 93, we
conclude that this argument has been waived. See
Tex. R. Civ. P. 93; see also Lovato, 171 S.W.3d at
849; Sixth RMA Partners, L.P., 111 S.W.3d at 56.
The Partnership Agreement
we will address Walker, Wilson, and Few Ready Mix's
arguments regarding the Partnership Agreement.
partners in EMC Products, a Texas limited partnership, are
EMC Management, EMC Cement, Walker and certain members of his
family, and Wilson. EMC Management is a general partner with
a 1% share in the partnership. EMC Cement is a Class A
limited partner with a 49.5% ownership stake. Walker and his
family and Wilson are Class B limited partners with a
collective 49.5% ownership share in the partnership. Under
the Partnership Agreement, the following was required of
Class B limited partners Walker and Wilson:
Section 2.5. Financing Assistance by Class B Limited
Partners. The Class B Limited Partners shall loan funds
to and/or obtain financing for the Partnership to meet the
Primary Objective until such time as the Partnership has the
financial ability to obtain such financing on its own
resources. The General Partner and the Class A Limited
Partner shall have no obligation to make loans to and/or
obtain financing for the Partnership.
1.5 of the Partnership Agreement outlines the primary
objective of the Partnership as follows: "The Partners
agree that the primary objective of the partnership will be
to maximize the degree and speed of market penetration for
the Products in the State of Texas, in accordance with market
demand and potential, respecting sound business
usage of the term "shall" in Section 2.5 of the
Partnership Agreement imposed a mandatory duty on Walker and
Wilson to loan funds and/or obtain financing. See Lesikar
v. Moon, 237 S.W.3d 361, 367 (Tex. App.-Houston [14th
Dist.] 2007, pet. denied) ("The word 'shall' as
used in contracts is generally mandatory, operating to impose
a duty." (internal citations omitted)); In re
J.L.W., 919 S.W.2d 841, 842 (Tex. App.-El Paso 1996, no
writ) (stating that the term "shall" is generally
construed to be mandatory and may also be considered as
directory). However, despite this language, Walker, Wilson,
and Few Ready Mix assert that their duty to loan or obtain
funds was limited by the "sound business
principals" language of the primary objective, and thus,
the failure to provide an infinite amount of money did not
constitute a breach of the agreement.
not agree with Walker, Wilson, and Few Ready Mix's
interpretation of the Partnership Agreement. The "sound
business principles" language modifies the language
about the partnership's goal of maximizing market
penetration, not Walker and Wilson's obligation to loan
funds and/or obtain financing for the partnership. The
interpretation advanced on appeal by Walker, Wilson, and Few
Ready Mix would require us to rewrite the agreement to move
the "sound business principles" language from
Section 1.5 to Section 2.5 of the Partnership
Agreement-something we cannot do. See Am. Mfrs. Mut. Ins.
Co. v. Schaefer, 124 S.W.3d 154, 162 (Tex. 2003)
("But we may neither rewrite the parties' contract
nor add to its language.").
the extent that Walker, Wilson, and Few Ready Mix contend
that they did not have to provide further financing because
the partnership was unable to meet the primary objective, we
note that such a contention raises the affirmative defense of
excuse-something that Walker and Wilson had to plead and
prove in the trial court. See Tex. R. Civ. P. 94;
see also Trencor, Inc. v. Cornech Mach. Co., 115
S.W.3d 145, 153 (Tex. App.-Fort Worth 2003, pet. denied). A
review of the record reveals that they did neither. As such,
Walker and Wilson waived any excuse argument brought on
appeal. See AMS Const. Co. v. K.H.K. Scaffolding Houston,
Inc., 357 S.W.3d 30, 43 (Tex. App.-Houston [1st Dist.]
2011, pet. dism'd); see also RE/MAX of Tex., Inc. v.
Katar Corp., 961 S.W.2d 324, 327 (Tex. App.-Houston [1st
Dist.] 1997, writ denied) (noting that excuse is an
affirmative defense and thus is waived if not pleaded or
tried by consent).
Walker, Wilson, and Few Ready Mix argue that Walker and
Wilson's breach of the Partnership Agreement was excused
because of the jury's finding that EMC Products also
breached the agreement. Irrespective of the excuse
affirmative defense that was not pleaded in the trial court,
the jury concluded that Walker and Wilson were the first to
breach the Partnership Agreement. However, whether EMC
Products or Walker and Wilson breached first is immaterial
because of the well-settled rule that when a party materially
breaches an agreement, the non-breaching party can elect to
either rescind the agreement or affirm and seek damages, but
not both. See Texana Oil Co. v. Stephenson, 521
S.W.2d 104, 106-07 (Tex. App.-El Paso 1975, no writ).
Therefore, "[t]reating a contract as continuing, after a
breach, deprives the non-breaching party of any excuse for
terminating their own performance." Chilton Ins. Co.
v. Pate & Pate Enters., Inc., 930 S.W.2d 877, 888
(Tex. App.-San Antonio 1996, writ denied) (citing W.
Irrigation Co. v. Reeves County Land Co., 233 S.W.2d
599, 602 (Tex. Civ. App.-El Paso 1950, no writ)).
Walker and Wilson continued to perform under the Partnership
Agreement, despite the purported breach by EMC Products and
then sought damages. See id. ("Seeking to
recover damages under the contract, as Pate did, is evidence
that Pate considered the contract as continuing."
(citing Cox, Colton, Stoner, Starr and Co., P.C. v.
Deloitte, Haskins & Sells, 672 S.W.2d 282, 286-87
(Tex. App.-El Paso 1984, no writ))). At the point in time
that Walker and Wilson believed that EMC Products breached
the agreement, they were faced with one of two
mutually-exclusive courses of action: (1) discontinue their
performance, rescind the contract, and sue for material
breach; or (2) continue performing and lose the other
party's material breach as an excuse for its own
non-performance. Id. (citing W. Irrigation
Co., 233 S.W.2d at 602). Therefore, because Walker and
Wilson chose to continue performing their duties under the
Partnership Agreement after they believed EMC Products
breached the agreement, Wilson and Walker forfeited any
excuse for their own breach. See id. ("By its
actions, Pate chose the latter. Because Pate treated the
contract as continuing after Chilton's material breach,
Pate forfeited any excuse for its own breach.").
rejected Walker, Wilson, and Few Ready Mix's complaints
about the jury's breach-of-contract finding, we therefore
overrule their second issue.
Civil Conspiracy & Joint and Several Liability
their third issue, Walker, Wilson, and Few Ready Mix argue
that appellees' joint-and-several liability theories fail
as a matter of law for a number of reasons: (1) the evidence
supporting underlying tort liability is lacking; (2) that the
"knowingly participated" theory cannot be a valid
basis for joint-and-several liability; and (3) the conspiracy
theory is flawed.
elements of civil conspiracy are (1) two or more persons, (2)
an object to be accomplished, (3) a meeting of the minds on
the object or course of action, (4) one or more unlawful,
overt acts, and (5) damages as a proximate result. Tri v.
J.T.T., 162 S.W.3d 552, 556 (Tex. 2005); see BP
Auto., L.P. v. RML Waxahachie Dodge, LLC, 448 S.W.3d
562, 573 (Tex. App.-Houston [1st Dist.] 2014, no pet.). Civil
conspiracy "'requires specific intent' to agree
'to accomplish an unlawful purpose or to accomplish a
lawful purpose by unlawful means.'" Juhl v.
Airington, 936 S.W.2d 640, 644 (Tex. 1996) (quoting
Triplex Comm'cns, Inc. v. Riley, 900 S.W.2d 716,
719 (Tex. 1995)).
a civil conspiracy is found, each co-conspirator is
responsible for the action of any of the co-conspirators
which is in furtherance of the unlawful combination."
Akin v. Dahl, 661 S.W.2d 917, 921 (Tex. 1983)
(citing Carroll v. Timmers Chevrolet, Inc., 592
S.W.2d 922, 926 (Tex. 1979)). "A finding of civil
conspiracy imposes joint and several liability on all
conspirators for actual damages resulting from acts in
furtherance of the conspiracy." Energy Maint. Servs.
Group, LLC v. Sandt, 401 S.W.3d 204, 220 (Tex. App.-
Houston [14th Dist.] 2012, pet. denied) (citing
Carroll, 592 S.W.2d at 925-26; Greenberg Traurig
of N.Y., P.C. v. Moody, 161 S.W.3d 56, 90 (Tex.
App.-Houston [14th Dist.] 2004, no pet.)).
and Lygren both testified that, in 2008 and 2009, they began
negotiating with C-Change in California about financing,
developing, and commercializing EMC Cement's intellectual
property. According to Ronin and Lygren, John Preston, a
managing partner of C-Change, and Alan Quasha, the president
of Quadrant Management, were involved in the negotiations.
Lygren noted that Walker and Wilson were aware of the
C-Change negotiations, though Wilson's testimony implied
that he was unaware of the negotiations. Nevertheless, as a
result of the negotiations, Ronin, Lygren, and C-Change
executed a letter of intent calling "for C-Change to
commit to contribute a maximum investment of 50 million
dollars to . . . California, 49 million to the company and a
million to the idea" in exchange for a 51% equity
interest in a holding company formed to develop and
commercialize EMC Cement technology in California. Beginning
in 2010, Quasha and Preston spoke with Walker and Wilson
several times. Apparently, Quasha and Preston told Walker and
Wilson that they wanted to buy EMC Products' business but
did not want to enter into an agreement with Lygren. Both
Ronin and Lygren testified that they were unaware that Quasha
and Preston were communicating with Walker and Wilson. In any
event, in December 2010, EMC Cement called off negotiations
January 2011, Walker and Wilson, frustrated with the actions
of Lygren and Ronin, decided to stop making the monthly $25,
000 payments on EMC Products' loan with Texas Capital
Bank, thereby causing the partnership to default on an
underlying loan. Phillip Wood, Texas Capital Bank's
Executive Vice President, testified that Walker and Wilson
had stated that their goal was to end their relationship with
Lygren and allow Quasha and Preston to buy EMC Products'
assets at a foreclosure sale following the default. These
plans were subsequently relayed to Quasha and Preston,
according to the testimony.
recounted that, in February 2011, Wilson told Wood that a
group represented by Quasha was interested in EMC Products-a
sentiment that Quasha confirmed to Wood. On April 12, 2011,
Texas Capital Bank noticed the foreclosure of EMC
Products' assets for May 3, 2011.
formed on April 28, 2011. The company is owned by INEA
International, Limited, a company purportedly closely
associated with Quasha and Preston. According to Wood, Wilson
put together the potential sale of the loan to INEA, which
led to Quasha entering into discussions with the bank. These
discussions allegedly resulted in a draft agreement that
designated Quasha as the sole primary contact for purposes of
April 2011, Lygren informed the bank that EMC Products'
license from EMC Cement was "neither assignable nor
transferable" and that the foreclosure proceedings would
result in the disclosure of intellectual property belonging
to EMC Cement. Lygren also noted that the bank had no right
to foreclose and that legal action would be taken if the
foreclosure was to proceed. Lygren then notified Walker a
couple of days before May 3, 2011, that EMC Cement had
terminated the license agreement with EMC Products.
receiving Lygren's notices, the bank decided not to
conduct the foreclosure sale. However, Walker and Wilson
coordinated the purported sale of the loan to Few Ready Mix,
Walker's company, so that Few Ready Mix could foreclose
on EMC Products' assets on May 3, 2011. To facilitate the
purported sale of the loan, Walker and Wilson both wired over
$1.9 million to the bank on behalf of Few Ready Mix.
Thereafter, Few Ready Mix sold EMC Products' assets to
VHSC at the May 3, 2011 foreclosure sale. Wilson served as
the trustee, and Preston was the bidder at the foreclosure
bought EMC Products' assets for $3, 126, 090; however,
the winning bid left an approximate $800, 000 deficiency on
the loan. In any event, Walker testified that he and Wilson
equally shared the proceeds from the sale. A day later, Few
Ready Mix sold the loan agreement to VHSC for $300, 000.
Walker and Wilson once again equally split the proceeds from
the sale. And within days of the sale, VHSC began selling
products produced by EMC Cement's purported trade
on the evidence outlined above, and viewing the evidence in
the light most favorable to the jury's verdict, we
conclude that a rational factfinder could determine that
Walker, Wilson, and Few Ready Mix worked together to achieve
the common goal of delivering EMC Cement's trade secrets
to Quasha and Preston at VHSC by breaching the Partnership
Agreement, defaulting on the loan, and ensuring that EMC
Products' assets were sold to VHSC at the foreclosure
sale-acts that resulted in damage to EMC Cement. See
Tri, 162 S.W.3d at 556; Juhl, 936 S.W.2d at
644; Riley, 900 S.W.2d at 719; BP Auto.,
L.P., 448 S.W.3d at 573; see also Reyes, 272
S.W.3d at 592; City of Keller, 168 S.W.3d at 822.
Furthermore, we cannot say that the jury's verdict as to
the civil-conspiracy claim is so contrary to the overwhelming
weight of the evidence as to be clearly wrong and unjust.
See Cain, 709 S.W.2d at 176. Accordingly, we
conclude that the evidence supporting the jury's finding
of civil conspiracy against Walker, Wilson, and Few Ready Mix
is supported by legally- and factually-sufficient evidence.
We overrule their third issue.
their fourth issue, Walker, Wilson, and Few Ready Mix assert
that the trial court's alleged cumulative errors
"probably led to the rendition of an improper
result." We disagree.
reviewing court may reverse a lower-court judgment under the
cumulative-error doctrine when the record shows a number of
instances or error, no one instance being sufficient to call
for reversal, yet all instances taken together may do
so." Rhey v. Redic, 408 S.W.3d 440, 462 (Tex.
App.-El Paso 2013, no pet.) (citing Sproles Motor Freight
Lines, Inc. v. Long, 140 Tex. 494, 168 S.W.2d 642, 645
(1943); Univ. of Tex. at Austin v. Hinton, 822
S.W.2d 197, 205 (Tex. App.-Austin 1991, no writ)). "To
show cumulative error, an appellant must show that, based on
the record as a whole, but for the alleged errors, the jury
would have rendered a verdict favorable to it."
Id. (citing Hinton, 822 S.W.2d at 205).
issue, Walker, Wilson, and Few Ready Mix point to several
instances that they assert demonstrate cumulative error.
Specifically, they complain that the trial court improperly:
(1) included fiduciary-duty questions in the charge; (2)
admitted Plaintiff's Exhibit 129 into evidence over their
objection; (3) overruled their motion for directed verdict on
several claims; and (4) allowed questioning about the failure
to disclose discussions surrounding the purchase of the EMC
Products note. Based on our review of the record and our
analysis of prior issues, there is sufficient evidence to
support the jury's liability findings against Walker,
Wilson, and Few Ready Mix. And as such, we cannot say that,
based on the record as a whole, but for the alleged errors,
the jury would have rendered a verdict in favor of Walker,
Wilson and Few Ready Mix. See Long, 168 S.W.2d at
645; see also Rhey, 408 S.W.3d at 462;
Hinton, 822 S.W.2d at 205. Accordingly, Walker,
Wilson, and Few Ready Mix have not satisfied their burden in
this issue. See Long, 168 S.W.2d at 645; see
also Rhey, 408 S.W.3d at 462; Hinton, 822
S.W.2d at 205. We overrule Walker, Wilson, and Few Ready
Mix's fourth issue.
their first issue, VHSC and Pike assert that EMC Cement's
trade-secret claim fails as a matter of law.
secret is "any formula, pattern, device or compilation
of information which is used in one's business and
presents an opportunity to obtain an advantage over
competitors who do not know or use it." In re
Bass, 113 S.W.3d 735, 739 (Tex. 2003). "There must
be a substantial amount of attendant secrecy for information
to be a trade secret." Sw. Energy Prod. Co. v.
Berry-Helfand, 411 S.W.3d 581, 597 (Tex. App.-Tyler
2013, pet. granted) (citing Rugen v. Interactive Bus.
Sys., Inc., 864 S.W.2d 548, 552 (Tex. App.- Dallas 1993,
no writ)). "[A] trade secret can exist in a combination
of characteristics and components[, ] each of which, by
itself, is in the public domain, but the unified process,
[the] design and operation of which in unique combination
affords a competitive advantage, is a protected trade
secret." Id. (citing Metallurgical Indus.
v. Fourtek, Inc., 790 F.2d 1195, 1202 (5th Cir. 1986)).
"A trade secret is not necessarily destroyed by a
disclosure, but, in disclosing a trade secret, the owner must
establish a confidential relationship with the other party,
by contract or otherwise, or the secret will be lost by the
disclosure." Id. (citing Furr's, Inc.
v. United Specialty Adver. Co., 385 S.W.2d 456, 459
(Tex. App.-El Paso 1964, writ ref'd n.r.e.). With respect
to "use, " Texas law has adopted the Restatement
Any exploitation of the trade secret that is likely to result
in injury to the trade secret owner or enrichment to the
defendant is a "use" under this Section. Thus,
marketing goods that embody the trade secret, employing the
trade secret in manufacturing or production, relying on the
trade secret to assist or accelerate research or development,
or soliciting customers through the use of information that
is a trade secret . . . all constitute "use."
Bohnsack v. Varco, L.P., 668 F.3d 262, 279 (5th Cir.
2012) (quoting Restatement (Third) of Unfair Competition
§ 40 cmt. c (1995)); see Sw. Energy Prod. Co.,
411 S.W.3d at 597.
Texas law, trade-secret misappropriation requires: (1) the
existence of a trade secret; (2) a breach of a confidential
relationship or improper discovery of the trade secret; (3)
use of the trade secret; and (4) damages. See
Bohnsack, 668 F.3d at 279; see also Trilogy
Software, Inc. v. Callidus Software, Inc., 143 S.W.3d
452, 463 (Tex. App.-Austin 2004, pet. denied); IBP, Inc.
v. Klumpe, 101 S.W.3d 461, 476 (Tex. App.-Amarillo 2001,
pet. denied). Proof of trade-secret misappropriation often
depends upon circumstantial evidence. Sw. Energy Prod.
Co., 411 S.W.3d at 598 (citing SI Handling Sys.,
Inc. v. Heisley, 753 F.2d 1244, 1261 (3d Cir. 1985)).
trial, Ronin testified about the information that EMC Cement
maintained as trade secrets and about specific documents that
contained trade-secret information. Specifically, Ronin
described confidential Mill Records and test reports from
2010 that contain specific details about EMC Cement
processes. Ronin explained that the records show the test
results of processing materials through high-energy
vibratory-ball mills ("VBM") under different
conditions. According to Ronin, the tests show that changing
the speed at which fly ash is fed through the mill affects
the final product. Additionally, the tests indicate the
effects of varying the size and weight of the grinding media,
the particle size of the fly ash, and the configuration of
the openings on the mill wall. Ronin testified that these
test results and records were not intended to be disclosed to
the public because they were trade secrets.
also explained the he did fill out a patent application for
the VBMs, but that he purposely excluded certain information
to prevent it from being released to the public. Ronin noted
that: "We didn't include information related to an
exact positioning of the openings, an exact configuration of
the openings, an exact size of the openings related to
different rates, through capacities of the mill. So this
whole element you always keep it out like the trade
secret-know how." He denied including the aforementioned
Mill Records and reports from 2010 in the patent application.
later testimony, Ronin stated that EMC Cement maintained
information as trade secrets about the grinding media-i.e.,
the ceramic balls-within the mills, the frequency and
amplitude of the mill's vibrations, data regarding the
alteration of fly ash in the mill, and the results of
performance tests on two EMC products, CemPozz and PozzoSlag.
Ronin also testified that these trade secrets gave EMC Cement
a competitive advantage over its competitors in the cement
industry because EMC Cement was the "one company
who's doing this" and that EMC Cement had always
taken measures to protect and guard the secrecy of the
record reflects that Pike, the former general manager of EMC
Products who eventually became President of VHSC, included
the Mill Records in the patent application he filed on May 6,
2011, just three days after VHSC acquired the EMC assets at
the foreclosure. With regard to the Mill Records, Pike
testified that "[t]he data belonged to Texas EMC but
what we did with that data and how we modified that mill,
particularly the mill, I felt like it was the mill
modification nothing to do with the process."
Nevertheless, Pike admitted that this information was
EMC's trade secrets and that it contained
on our review of the evidence, a rational factfinder could
conclude that EMC Cement identified its trade secrets at
trial; that Pike used his position at EMC Products to obtain
the trade-secret information that ultimately benefitted his
new employer, VHSC- a competitor of EMC Products; that Pike
used the information in his patent application and VHSC used
the information to produce cement subsequent to the
foreclosure sale; and that the use of the trade-secret
information caused EMC Cement damage. See Bohnsack,
668 F.3d at 279; Sw. Energy Prod. Co., 411 S.W.3d at
598; Trilogy Software, Inc., 143 S.W.3d at 463;
Klumpe, 101 S.W.3d at 476. Therefore, viewing the
evidence in the light most favorable to the jury's
verdict, we conclude that the trade-secret-misappropriation
finding is supported by legally-sufficient evidence. See
Reyes, 272 S.W.3d at 592; City of Keller, 168
S.W.3d at 822; see also Bohnsack, 668 F.3d at 279;
Sw. Energy Prod. Co., 411 S.W.3d at 598; Trilogy
Software, Inc., 143 S.W.3d at 463; Klumpe, 101
S.W.3d at 476. Additionally, we cannot say that the
jury's verdict as to this claim is so contrary to the
overwhelming weight of the evidence as to be clearly wrong
and unjust. See Cain, 709 S.W.2d at 176. Thus, we
further conclude that the jury's finding as to this claim
is supported by factually-sufficient evidence. See
despite our conclusion that the jury's finding on the
trade-secret-misappropriation claim is supported by legally-
and factually-sufficient evidence, VHSC and Pike contend that
EMC Cement consistently disclosed its "secret"
technology in patent applications and public materials;
therefore, there was no trade secret to misappropriate. In
addition, VHSC and Pike allege that they were authorized to
use any trade secrets that EMC Cement might have had based on
licenses acquired in the foreclosure sale.
record includes testimony from Ronin, the inventor of the
process, about the methods and tools he developed over time
for activating fly ash and the data collected from years of
experimentation. And as outlined above, information related
to the unique configuration, use, and maintenance of the VBMs
used to produce CemPozz and PozzoSlag were kept as trade
secrets within the company and were not disclosed to the
public in advertising materials or in a patent application
filed by Ronin. In fact, Ronin testified that he purposefully
excluded certain trade-secret information from his patent
application to protect it from disclosure to the public.
Ronin also noted that PozzoSlag, for example, could not be
reproduced using only the information contained in the patent
application. The disputed trade-secret information was needed
to replicate PozzoSlag. Moreover, the record reveals that it
was Pike, not Ronin, who disclosed EMC Cement trade-secret
information to the public via his patent application.
addition, we are not persuaded by VHSC and Pike's
contention that they were authorized to use EMC Cement's
trade secrets by virtue of the licenses acquired in the
foreclosure sale. The Deed of Trust acquired after the
foreclosure sale provided the following definition for
"Contracts": [A]ll of the right, title and interest
of [EMC Products], including equitable rights, in, to, and
under any and all . . . contracts, licenses, or permits which
are directly or indirectly related to, or connected with, the
development, ownership, maintenance or operation of the
[cement plant]." Despite this language, Lygren testified
that EMC Cement terminated the License Agreement before the
foreclosure sale. To corroborate Lygren's testimony,
appellees included an email dated April 20, 2011, notifying
Walker that EMC Products' rights under the License
Agreement with EMC Cement had been cancelled. Therefore, at
the time of the foreclosure sale, EMC Products had no license
to convey to VHSC, and thus, VHSC could not have acquired use
of EMC Cement's trade secrets by virtue of the License
Agreement. Accordingly, we reject VHSC and Pike's
arguments with regard to the trade-secret-misappropriation
finding and overrule their first issue.
Breach of Contract, Tortious Interference With an Existing
Contract, & Conspiracy
their second issue, VHSC and Pike argue that appellees'
tortious-interference, breach-of-contract, and conspiracy
claims fail as a matter of law.
elements of a breach-of-contract claim are: (1) the existence
of a valid contract between plaintiff and defendant; (2) the
plaintiff's performance or tender of performance; (3)the
defendant's breach of the contract; and (4) the
plaintiff's damage as a result of the breach. Runge
v. Raytheon E-Systems, Inc., 57 S.W.3d 562, 565 (Tex.
App.-Waco 2001, no pet.). On the other hand, the elements for
a cause of action for tortious interference with a contract
are: (1) an existing contract subject to interference; (2) a
willful and intentional act of interference with the
contract; (3) that proximately caused the plaintiff's
injury; and (4)caused actual damage or loss. Prudential
Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d
74, 77 (Tex. 2000).
2006, appellees hired Pike as the general manager to oversee
day-to-day operations for EMC Products. As a condition of his
employment, Pike signed a Management Agreement, which
provided that, among other things, he agreed to be bound by
the confidentiality provisions of EMC Products' License
Agreement with EMC Cement. Specifically, the Management
Agreement provides the following:
The Manager agrees that he is subject to the same obligations
of confidentiality and secrecy with respect to the
Company's or Ltd's Confidential Information as set
out in the License Agreement attached as Exhibit B hereto for
a duration of his engagement with the Company and for a
period of 10 (ten) years following his ...