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BBB Industries, LLC v. Cardone Industries, Inc.

Court of Appeals of Texas, Second District, Fort Worth

May 9, 2019

BBB Industries, LLC, Appellant
v.
Cardone Industries, Inc., Appellee

          On Appeal from the 17th District Court Tarrant County, Texas Trial Court No. 017-271617-14

          Before Sudderth, C.J.; Kerr, J. [1]

          MEMORANDUM OPINION

          Elizabeth Kerr Justice.

         Cardone Industries, Inc. is a Pennsylvania corporation that produces and sells remanufactured aftermarket automotive parts and products, including brake calipers, power-steering products, gears, and rack-and-pinion products. BBB Industries, LLC is an Alabama company that directly competes with Cardone. This case arises from BBB's alleged misappropriation of Cardone's trade secrets and confidential information.

         In 2014, Cardone sued BBB and Joel Farina, a Texas resident and former Cardone employee, in Tarrant County, Texas. Cardone claimed that Farina stole its trade secrets and confidential information related to its general business model when he resigned from Cardone and jumped ship to BBB in 2013. BBB and Farina answered and entered general appearances. Over three years after it filed suit, Cardone amended its petition to allege that in 2010, 2011, and 2014, BBB misappropriated Cardone's trade-secret and confidential information related more specifically to Cardone's power-steering business with National Auto Parts Association (NAPA), a Georgia-headquartered company. Cardone's new allegations involved BBB conduct both before and after Farina decamped to BBB.

         BBB filed a special appearance concerning Cardone's NAPA-based misappropriation allegations, arguing that because those allegations were severable claims, BBB could specially appear to challenge the trial court's personal jurisdiction over it as to those claims even though it had already generally appeared in the suit three years earlier. See Tex. R. Civ. P. 120a(1) ("A special appearance may be made as to an entire proceeding or as to any severable claim involved therein." (emphasis added)). The trial court denied the special appearance, and BBB filed this interlocutory appeal. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7). Concluding that even if a party may lodge a special appearance and theoretically obtain a severance under these circumstances, we will affirm because Cardone's new allegations are so interwoven with its initial misappropriation allegations that they involve the same facts and issues, and the trial court thus properly exercised its discretion in denying BBB's special appearance.

         Background

         Cardone alleges that starting in 2010, BBB began a campaign to overtake Cardone's market share. At that time, BBB "had a relatively minor presence" in the automotive-parts retail aftermarket, and Cardone was NAPA's exclusive power-steering vendor. BBB decided that it wanted to enter the power-steering market and sell power-steering products to NAPA. Cardone contends that to that end, BBB actively solicited NAPA to get Cardone's trade-secret information. According to Cardone, NAPA voluntarily offered up a copy of Cardone's power-steering arrangement sheet-a document containing the Cardone-NAPA contract's essential terms-which enabled BBB to grasp completely the terms of Cardone's power-steering program with NAPA. Cardone alleges that BBB knew that the arrangement sheet was a trade secret and used it to "unfairly and illegally advance its economic interest to enter the power steering market sector" to Cardone's detriment. Cardone further alleges that in addition to trade secrets, BBB also obtained Cardone's confidential information when, in March 2011, it acquired Cardone's core[2]-pricing information for NAPA power steering.

         In early 2013, Farina, who worked from his Texas home[3] as Cardone's Senior Vice President of Retail Accounts, began working toward ending his employment with Cardone by giving six months' notice of his desire to terminate a particular employment agreement. In his position with Cardone, Farina "played a key role in developing, among other things, Cardone's confidential sales and marketing strategies and plans, pricing discount strategies and plans, and business development plans and strategies" and "regularly consulted with other Cardone executives and key sales employees regarding such strategies and plans." Farina also had access to and gained knowledge of Cardone's trade secrets and confidential information, including sales and marketing strategies, costs, credit and financing information, pricing and discount strategies, customer preferences and ordering history, business processes, and supplier information. During his employment with Cardone, Farina signed several agreements designed to protect Cardone's trade-secret and confidential information from disclosure.

         In August 2013, Farina resigned from his position at Cardone to work for BBB as its Senior Vice President-Aftermarket Retail Sales. Shortly before his resignation, Farina had disclosed to BBB Cardone's fill-rate strategy with NAPA.[4] Immediately after his resignation, Farina downloaded documents containing Cardone's confidential, proprietary, and trade-secret information from Cardone's computer systems to his personal and BBB-issued electronic devices. These documents included information related to Cardone's brake-caliper product line and its power-steering business with NAPA.

         Sometime in 2014, BBB allegedly obtained confidential information related to Cardone's pricing discounts for NAPA power steering, enabling BBB to match or beat Cardone's pricing. Cardone claims that BBB used and continues to use this information-along with the arrangement sheet it obtained in 2010 and the core-pricing information it received in 2011-to unfairly compete with and outbid Cardone and to win power-steering business from NAPA, causing "tens of millions of dollars in damages to Cardone."

         In April 2014, Cardone sued BBB and Farina in Tarrant County, Texas, claiming that Farina took Cardone's confidential, proprietary, and trade-secret information when he left Cardone to work for BBB and that he and BBB used and continued to use that information to unfairly compete with Cardone. Cardone alleged claims for trade-secret misappropriation, misappropriation of confidential information, unfair competition by misappropriation, conversion, breach of fiduciary duty, breach of contract, and conspiracy. Because Farina is a Texas resident and because Cardone alleged that Farina's acts of misappropriation happened in Texas, BBB and Farina did not contest personal jurisdiction over them.

         In June 2015, a Tarrant County grand jury indicted Farina on multiple felony counts, including breach of a computer system and trade-secret theft. Nearly two years later, Farina pleaded guilty to theft of trade secrets (a third-degree felony) pursuant to a plea bargain, and a Tarrant County Criminal District Court sentenced him to 10 years' confinement, probated for three years, plus a $10, 000 fine and $150, 000 in restitution.[5] See Tex. Penal Code Ann. § 31.05.

         Cardone's original and first amended petitions made no mention of BBB's allegedly obtaining Cardone's trade-secret and confidential information related to its NAPA power-steering business in 2010, 2011, and 2014, alleging misappropriation of broad categories of information. But in October 2017, Cardone amended its petition a second time to add new factual allegations under the heading "BBB's Additional Acts of Misappropriation of Cardone's Trade Secrets." Cardone now specifically alleged that in 2010, 2011, and 2014, BBB obtained Cardone's trade-secret and confidential information related to Cardone's power-steering business with NAPA and that it used and continues to use that information to unfairly compete with Cardone. Cardone added no new causes of action.

         BBB then filed a special appearance as to Cardone's NAPA-related misappropriation allegations, arguing that because those were severable claims with little or no connection to Texas, the trial court should dismiss them for lack of personal jurisdiction. See Tex. R. Civ. P. 120a(1). After a hearing, the trial court denied the special appearance without ...


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