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Damonte v. Hallmark Financial Services, Inc.

Court of Appeals of Texas, Fifth District, Dallas

July 12, 2019

JAMES DAMONTE, Appellant
v.
HALLMARK FINANCIAL SERVICES, INC. AND HEATH XS, LLC, Appellees

          On Appeal from the 101st Judicial District Court Dallas County, Texas Trial Court Cause No. DC-18-05976

          Before Justices Whitehill, Molberg, and Reichek

          MEMORANDUM OPINION

          AMANDA L. REICHEK JUSTICE

         James Damonte appeals the trial court's denial of his motion to dismiss under the Texas Citizens Participation Act ("TCPA"). In eight issues, Damonte generally contends the trial court erred in denying his motion because the lawsuit brought against him by Hallmark Financial Services, Inc. and Heath XS, LLC (collectively "Hallmark") is based on, related to, or in response to his exercise of his rights of free speech and association. Damonte further contends Hallmark failed to establish by clear and specific evidence a prima facie case for each of the elements of its claims. Because we conclude Damonte failed to show that the TCPA applies to the claims made against him by Hallmark in this case, we affirm the trial court's order.

         Background

         Hallmark is a diversified specialty lines property/casualty insurance company licensed to do business in all fifty states. In 2008, Hallmark acquired Heath, an underwriting company. At the time of the acquisition, Damonte was executive vice president of Heath working in New Jersey along with a small team of fellow employees. Damonte moved to Dallas after the acquisition, but continued as Heath's executive vice president supervising the same team. He went on to serve additionally as president of the Casualty, Aviation, and Programs divisions of Hallmark.

         During his employment with Heath, Damonte signed an employment agreement that included provisions for the protection of confidential and proprietary information. The agreement contained certain non-competition, non-solicitation, non-disclosure, and confidentiality restrictions that applied during Damonte's employment and up to two years after his employment terminated. For purposes of these restrictions, the company was defined to include Heath's parent company, its subsidiaries, and any other entity controlled by or under common control with Heath or its subsidiaries to the extent Damonte was "actively involved in the business thereof."

         In 2015, Damonte executed a Confidentiality and Non-Solicitation Agreement with Hallmark. Similar to his employment agreement with Heath, this agreement provided for the protection of the company's confidential and proprietary information. With respect to the prohibitions on solicitation, Damonte agreed, among other things, that for a twenty-four month period following the termination of his employment, he would not "entice, solicit, or induce, or attempt to entice, solicit, or induce, any employee, consultant, or independent contractor of Hallmark . . . to terminate his/her/its relationship with Hallmark for any reason whatsoever, without the prior approval of the company."

         On April 19, 2018, Damonte submitted his resignation to Hallmark effective May 9. According to Hallmark, after submitting his resignation, Damonte began to pressure Hallmark management to amend his non-compete obligations. This, coupled with "a change in Damonte's behaviors prior to his resignation," prompted Hallmark to begin reviewing employee activity relating to the download, transmittal, and deletion of electronic data housed on the company's servers. Hallmark claims it discovered that two employees who worked closely with Damonte sent multiple emails to themselves at their private email addresses containing substantial amounts of Hallmark's confidential and proprietary information. Hallmark further asserts there was no business reason to explain this conduct.

         Hallmark brought this suit alleging that, on information and belief, Damonte misappropriated and wrongfully disclosed Hallmark's confidential information. Hallmark further alleged that Damonte actively solicited other employees to collude in a scheme to damage and compete with Hallmark. Hallmark asserted claims for breach of fiduciary duty, breach of contract, and violations of the Texas Uniform Trade Secrets Act.

         Nine days after Hallmark filed suit, Damonte filed a motion to dismiss under the TCPA. In his motion, Damonte argued that "the entire basis of the lawsuit is Hallmark's unverified allegation that Mr. Damonte engaged in a scheme with other employees of Hallmark to compete against Hallmark" and, therefore, "the entire lawsuit is 'based on, relates to, or is in response to' Mr. Damonte's association with Hallmark employees." Damonte further contended that the purpose of the suit was to chill his exercise of his rights to free speech and association because his discussions with other Hallmark employees prior to his resignation concerned their complaints about mistreatment, poor compensation, and the company's strategic direction. Finally, Damonte contended Hallmark could not provide clear and convincing evidence to support each of the elements of its claims against him.

         In support of his motion, Damonte submitted a declaration in which he stated that, throughout 2017, Hallmark employees came to him with complaints about the company. He stated he repeatedly spoke with Hallmark executives about the employees' concerns, but the concerns were ignored. Damonte asserted that he resigned from Hallmark because the company refused to respond to its serious morale issues and he believed the organization would ultimately lose key employees resulting in lower work quality and reputational damage. Damonte denied any knowledge of employees sending emails from their company accounts to their personal accounts and stated that any such acts were committed without his authorization or involvement.

         On May 21, 2018, Hallmark filed a motion for expedited discovery under the TCPA requesting that it be allowed to conduct discovery relevant to Damonte's motion to dismiss. Damonte opposed the motion, stating the sole allegation against him was that he "associated with individuals whom Hallmark believed acted wrongly" and "Hallmark's petition provides all the information the court needs" to decide the motion to dismiss. The trial court did not rule on Hallmark's motion.

         On June 12, Hallmark filed a declaration by David Miller, the company's senior vice president of human resources. In the declaration, Miller discussed the investigation that led to the discovery that two employees associated with Damonte had emailed confidential information to their personal email accounts. According to Miller, when Damonte resigned, he stated he did not have any future employment plans, which raised "red flags." Within three weeks after Damonte resigned, eight other employees, who either worked closely with Damonte or were related to him, also resigned. Seven of the eight employees stated, like Damonte, that they had no future employment plans.

         Miller stated that Hallmark's investigation revealed that one employee who worked with Damonte, Elaine Kelly, sent herself approximately fifty emails containing confidential and proprietary information in the few weeks prior to Damonte's resignation and that attempts were made to permanently delete many of those emails off the company servers. A second employee, Korey Bruner, sent herself approximately 150 emails shortly before Damonte resigned. Miller stated these emails contained "highly proprietary information and trade secrets" including underwriting guidelines, training documents, forms for underwriting, and customer contact information. Kelly and Bruner were among the eight employees that left Hallmark shortly after Damonte resigned and stated they did not have future employment plans.

         Three weeks after Hallmark submitted Miller's declaration, Damonte filed a supplemental declaration along with eight additional declarations signed by the Hallmark employees who resigned shortly after he did. Generally, the declarations stated that Damonte never solicited the other employees to leave their employment with Hallmark and they all left because of problems with the company. Damonte further stated he did not collude with anyone to ...


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