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Red Ball Technical Gas Services, LLC v. Precise Standards & Solutions, Inc.

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

January 3, 2018

RED BALL TECHNICAL GAS SERVICES, LLC, Plaintiff,
v.
PRECISE STANDARDS & SOLUTIONS, INC., et al, Defendants.

          MEMORANDUM & ORDER

          HON. KEITH P. ELLISON, UNITED STATES DISTRICT JUDGE

         Pending before the Court is the Joint Motion to Dismiss Plaintiffs' First Amended Complaint filed by Defendants Roy Rodriguez, Thomas Kennedy, and Precise Standards and Solutions, Inc. (Doc. No. 13.) Based on consideration of the filings and applicable law, the motion is GRANTED IN PART and DENIED IN PART.

         I. BACKGROUND

         The following facts are drawn from Plaintiff Red Ball Technical Gas Services' First Amended Complaint. (Doc. No. 8.) In May 2016, Red Ball purchased ISGAS, Inc. (Doc. No. 8 at 2.) At this point, two employees of ISGAS, Defendants Rodriguez and Kennedy, left to work for Defendant Precise Standards, a direct competitor. (Id. at 2-3.) Precise Standards had recently been founded by a former owner of ISGAS, Vinh Hua, and Rodriguez and Kennedy soon became partial owners of Precise Standards as well. (Id. at 3, 7.) These maneuvers yielded Red Ball's claims for breach of contract and for misappropriation of trade secrets in violation of Texas and federal law. (Id. at 7-9.)

         ISGAS was and Red Ball now is in the business of making gas standards, that is, “developing the proper hydrocarbon blend for a specific calibration for extracted raw materials needed in various industries.” (Doc. No. 8 at 4.) Since its founding in April 2016, shortly before Red Ball's purchase of ISGAS, Precise Standards has been in the same business. (Id. at 7.) At ISGAS, Rodriguez worked as a salesperson, while Kennedy worked as a “blend lab manager.” (Id. at 5.) The filings do not make clear their roles at Precise Standards.

         No party asserts that Rodriguez or Kennedy was subject to a non-compete agreement. Instead, Red Ball alleges that Rodriguez and Kennedy have taken Red Ball's proprietary technical and business information for use at Precise Standards. In Red Ball's view, Rodriguez and Kennedy thereby breached contracts they had formed as employees of ISGAS when they signed that company's Employee Manual, which contains confidentiality provisions. (Doc. No. 8 at 7-8.) Red Ball also asserts that all three defendants, by allegedly taking and using proprietary information, violated Texas and federal law prohibiting the appropriation of trade secrets. (Id. at 8-9.)

         Red Ball's factual allegations center on a gas cylinder bearing a Precise Standards label that Jimmy Collins, a Red Ball employee, observed at a customer's facility. (Doc. No. 8 at 6-7; Doc. No. 8-1 at 25.) The label was conspicuous because its formatting was identical to Red Ball's, excepting the Precise Standards logo at the top. The label was suspicious because it allegedly bore “calibration certification numbers” issued by the National Institute of Standards and Technology (NIST). (Doc. No. 8 at 6.) As Red Ball explains:

N.I.S.T. numbers are unique to the specific calibration equipment used for making standards and represent an industry-recognized certification by a third-party calibration company that measuring equipment falls within accepted tolerances. In the standards-making industry, N.I.S.T. numbers are updated with each calibration, which generally occurs every six months. To insure traceability of calibration certifications, N.I.S.T. numbers are not reused.

(Id.) That Precise Standards' labels would bear NIST numbers is not, in and of itself, indicative of unlawful conduct. Rather, the particular numbers on this label gave that indication. According to Red Ball, the numbers on the label seen by Collins were issued to ISGAS in April 2013, three years before Precise Standards' founding, and should have been valid for no more than one year. (Doc. No. 8 at 6.)

         In Red Ball's view, the appearance of old NIST numbers issued to ISGAS on a Precise Standards label implies that Precise Standards was using Red Ball's “trade secret spreadsheets, ” which record the composition of various specially blended gases and customers' specific uses of them. (Doc. No. 8 at 4-6.) That inference is bolstered by Red Ball's apparent discovery that the gas cylinder observed by Collins actually belonged to ISGAS. (Id. at 7.)

         In their Motion to Dismiss, Defendants dispute the legally material facts. They disagree that the Employee Manual was a legally binding contract, and they reject the inferences that Red Ball draws from the product label and cylinder observed by Collins. (Doc. No. 13 at 2-6.) Defendants also argue that none of Red Ball's allegations implicates Rodriguez, the former ISGAS salesperson. (Id. at 7.)

         II. APPLICABLE LAW

         The Federal Rules of Civil Procedure require a complaint to contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). In turn, the Federal Rules permit a district court to dismiss a claim for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6).

         “A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 557 (2007)). The complaint must plead “only enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. When ruling on a motion to dismiss, the court must “construe facts in the light most favorable to the ...


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