United States District Court, E.D. Texas, Sherman Division
STONECOAT OF TEXAS, LLC, STONECOAT GP, LLC, and STONECOAT LP Plaintiffs/Counter-Defendants
PROCAL STONE DESIGN, LLC, PROCAL STONE DESIGN USA, LLC, PROCAL ENTERPRISES, LLC, JOHN PROFANCHIK, SR., JUSTIN KINSER, IRMA VILLARREAL, ALFREDO GONZALEZ, PHILIPPE MERGAUX, and PIERRE-LAURENT CHAMIELEC Defendants/Counter-Plaintiffs
THE MORRISON FAMILY TRUST and KENNETH W. MORRISON, Individually and in his capacity as Trustee Third-Party Defendants
ORDER ADOPTING REPORT AND RECOMMENDATION OF THE
UNITED STATES MAGISTRATE JUDGE REGARDING DEFENDANTS'
MOTIONS FOR SUMMARY JUDGMENT
L. MAZZANT UNITED STATES DISTRICT JUDGE
above-entitled and numbered civil action was heretofore
referred to United States Magistrate Judge Caroline M. Craven
pursuant to 28 U.S.C. § 636. On August 12, 2019, the
Magistrate Judge issued a Report and Recommendation,
recommending the following motions be granted: (1) John
Profanchik, Sr.'s Motion for Summary Judgment (regarding
StoneCoat GP's and StoneCoat LP's remaining claims
against him) (Dkt. #67); (2) Irma Villarreal and Alfredo
Gonzalez's Motion for Summary Judgment (Dkt. #127); (3)
Justin Kinser's Motion for Summary Judgment (Dkt. #128);
(4) ProCal Stone Design, LLC's Motion for Summary
Judgment (Dkt. #129); and (5) ProCal Stone Design USA, LLC
and ProCal Enterprises, LLC's Motion for Summary Judgment
(Dkt. #195). Specifically, the Magistrate Judge recommends
StoneCoat GP's and StoneCoat LP's remaining claims
against Profanchik be dismissed with prejudice,
Plaintiffs' claims against the remaining defendants be
dismissed with prejudice.
StoneCoat of Texas, LLC (“SCOT”), StoneCoat GP,
LLC (“StoneCoat GP”), and StoneCoat, LP
(“StoneCoat LP”) (collectively,
“Plaintiffs”) filed objections to the Report and
Recommendation. The Court conducts a de novo review
of the Magistrate Judge's findings and conclusions.
2017, Plaintiffs filed this case against
defendants-counterplaintiffs ProCal Stone Design, LLC
(“ProCal Stone Design”), John D. Profanchik, Sr.
(“Profanchik”), Justin Kinser
(“Kinser”), Irma Villarreal
(“Villarreal”), Alfredo Gonzalez
(“Gonzalez”), Philippe Mergaux
(“Mergaux”), and Pierre-Laurent Chamielec
(“Chamielec”). ProCal Stone Design, U.S. LLC
(“ProCal USA”) and ProCal Enterprises, LLC
(“ProCal Enterprises”) (together with ProCal
Stone Design, “ProCal”) were later added as
allege the following claims against the ProCal entities,
Profanchik, Kinser, Villarreal, Gonzalez, Mergaux, and
Chamielec: violations of the Lanham Act, 15 U.S.C.
§ 1125(a), and Defend Trade Secrets Act of 2016, Public
Law 114-153 (May 11, 2016); common law and statutory
misappropriation of trade secrets; breach of nondisclosure
and noncompete contractual covenants; conversion; violation
of the Texas Theft Liability Act; tortious interference with
exiting contractual relationships; unfair competition; civil
conspiracy; assisting and encouraging, concert of action by
Defendants; joint enterprise by Defendants; and declaratory
relief under the Declaratory Judgment Act, 28 U.S.C §
other things, Plaintiffs allege Profanchik executed a
non-disclosure/non-compete agreement in order to obtain, and
did obtain, confidential and proprietary information and
trade secrets of Plaintiffs in order to evaluate a possible
purchase of Plaintiffs or an equity investment in Plaintiffs.
According to Plaintiffs, Profanchik ultimately decided not to
invest in Plaintiffs; “but, Profanchik, nevertheless,
misappropriated Plaintiffs' confidential and proprietary
information and trade secrets and used such information and
trade secrets to form Procal and to unlawfully compete with
Plaintiffs.” Dkt. #103, ¶ 3. Profanchik formed or
created the ProCal entities on various dates since May 7,
2015 and allegedly “used and transmitted to Procal
misappropriated proprietary and confidential information and
trade secrets of Plaintiffs to the Procal [entities] to
enable them to unlawfully and unfairly compete against
Plaintiffs.” Id., ¶ 4.
allege Kinser, Villarreal, Gonzalez, Mergaux, and Chamielec
all previously worked with Plaintiffs prior to May 7, 2015
and had executed written agreements not to disclose
Plaintiffs' confidential and propriety information and
trade secrets; however, after May 7, 2015, they began working
for ProCal and began unlawfully and unfairly using
Plaintiffs' confidential and proprietary information and
trade secrets while working for ProCal. Id., ¶
allege Profanchik and ProCal knew of the contractual
agreements made by Kinser, Villarreal, Gonzalez, Mergaux, and
Chamielec, but despite such knowledge, interfered with these
contractual obligations. Id., ¶ 6. Plaintiffs
further allege ProCal “has and continues to falsely
misrepresent its involvement in the industry and has falsely
made claims that are known to be . . . literally false and
that caused confusion in the marketplace regarding
Procal's products, services, goods and
workmanship.” Id., ¶ 7.
motions for summary judgment
separate motions, Profanchik, Kinser, Villarreal, Gonzalez
(together, “individual defendants”), and the
ProCal entities (collectively, “Defendants”) move
the Court to grant summary judgment against the following
claims asserted against them by Plaintiffs: (1) Lanham Act
violations (Count 1); (2) misappropriation of trade secrets
and theft/conversion (Counts 2-5); (3) breach of contract
(Count 6); (4) breach of fiduciary duty (Count 7); (5)
tortious interference (Count 8); (6) unfair competition
(Count 9); (7) declaratory relief; (8) injunctive relief; and
overarching argument, Defendants assert all Plaintiffs'
claims should be dismissed because Plaintiffs' damages
calculations are flawed and without evidentiary support.
Specifically regarding each claim, Defendants argue as
Defendants assert Plaintiffs' Lanham Act claims fail as a
matter of law. According to Defendants, the alleged
violations fall into two categories - false advertising and
trademark infringement - and there is no evidence to support
Defendants assert Plaintiffs' Misappropriation of Trade
Secrets and Confidential and Proprietary Information (Count
2), Misappropriation of Trade Secrets and Confidential and
Proprietary Information, United States Defend Trade Secrets
Act of 2016 (Count 3), Conversion (Count 4), and Texas Theft
Liability Act (Count 5) claims fail as a matter of law for
the following reasons: (1) Plaintiffs do not have any trade
secrets, (2) there is no evidence the individual defendants
took Plaintiffs' trade secrets, and (3) there is no
evidence the individual defendants are using Plaintiffs'
Defendants assert Plaintiffs' Breach of Contract (Count
6) claim fails as a matter of law because there is not a
valid contract and the statute of limitations expired before
Plaintiffs brought this claim. According to Kinser,
Villarreal, and Gonzalez, there was no consideration provided
them when entering in the non-disclosure/non-compete
agreements and those agreements contain unreasonable
limitations. According to ProCal USA and ProCal Enterprises,
they were not party to a contract with Plaintiffs.
the ProCal entities move for summary judgment against
Plaintiffs' claim for Breach of Fiduciary Duty (Count 7),
asserting ProCal did not have a fiduciary relationship with
Plaintiffs. Kinser, Villarreal, and Gonzalez also move for
summary judgment as to this claim. Kinser argues he was not a
fiduciary and the economic loss rule applies. Villarreal and
Gonzalez argue there is no evidence they breached fiduciary
duties to Plaintiffs.
the ProCal entities argue Plaintiffs' Tortious
Interference (Count 8) claim fails as a matter of law because
there is not a valid contract to interfere with and the
statute of limitations expired related to all contracts at
issue before Plaintiffs brought this claim. ProCal Stone
Design further argues related entities cannot interfere with
their own contracts. ProCal USA and ProCal Enterprises
further argue they were not in existence at the time of the
Defendants assert Plaintiffs' claim for Unfair
Competition (Count 9) and all iterations of conspiracy fail
as a matter of law because they are not an independent causes
Defendants assert Plaintiffs' claims for Declaratory
Relief (Count 7) fail as a matter of law because those claims
are redundant and such relief is not available in federal
Defendants assert Plaintiffs' claims for Injunctive
Relief fail as a matter of law.
12, 2019 REPORT AND RECOMMENDATION
of all the evidence of record
August 12, 2019, the Magistrate Judge entered a 193-page
Report and Recommendation (“R&R”) regarding
proposed findings of fact and recommendations that
Defendants' motions for summary judgment be granted. Dkt.
#241. The evidence relied upon by the Magistrate Judge is set
forth in detail in the R&R and is not duplicated
herein. Id. at pp. 24-90.
of Plaintiffs' Lanham Act claims (Count 1)
discussion of the Lanham Act trademark infringement claim,
the Magistrate Judge considered whether there was sufficient
evidence to show Defendants used or infringed the
“Stonecoat” mark and concluded the evidence is
insufficient to carry Plaintiffs' burden at the summary
judgment stage. Id. at p. 98. She concluded the
“record evidence is insufficient to create a genuine
issue of material fact that Defendants, much less Kinser,
Villarreal and Gonzalez, used in commerce any reproduction,
counterfeit, copy, or colorable imitation of the
‘Stonecoat' trademark in connection with the sale,
offering for sale, distribution, or advertising of any goods
or services on or in connection with which such use is likely
to cause confusion or to cause mistake or to deceive.”
Id. at pp. 98-99.
then considered Plaintiffs' false advertising Lanham Act
claim, namely that Defendants have falsely stated in
commercial advertising that Defendants “invented”
sprayed limestone and have been in the sprayed vertical
limestone business for “over 17 years.”
Id. at p. 100. Putting aside the fact Plaintiffs do
not sufficiently distinguish the actions of each defendant,
the Magistrate Judge considered whether Plaintiffs have
produced sufficient evidence to create a genuine issue of
material fact that any defendant made alleged false
advertisements in interstate commerce. Id. at p.
105. The Magistrate Judge noted Plaintiffs had not submitted
a specific advertisement (or even more informal type of
promotion) for the Court's review, nor was there any
evidence the alleged false advertisements were made in
interstate commerce. Id. at pp. 105-08. The
Magistrate Judge concluded Plaintiffs have not met their
burden in showing the alleged false advertising statements
(that ProCal “invented” the vertical limestone
product and that Procal had been in the vertical limestone
business for “over 17 years”) were sufficiently
disseminated in interstate commerce nor have Plaintiffs
sufficiently “evidenced the final element, likelihood
of injury.” Id. at p. 108. Thus, the
Magistrate Judge recommended Defendants' motions for
summary judgment regarding all of Plaintiffs' Lanham Act
claims be granted. Id. at p. 109.
of Plaintiffs' conversion and trade secret
misappropriation claims (Counts 2-5)
Magistrate Judge then considered Plaintiffs' conversion
claim, stating conversion does not apply to Defendants'
alleged acts in connection with StoneCoat, which are more
properly considered in relation to Plaintiffs' trade
secret claims. Id. at pp. 111-12. After setting
forth the applicable law regarding trade secrets and trade
secret misappropriation, id. at pp. 112-17, the
Magistrate Judge outlined Plaintiffs' misappropriation of
trade secret allegations (included in Counts 2, 3 and 5 of
the complaint), as well as the evidence relating to the
existence of any trade secrets owned by Plaintiffs.
Id. at pp. 117-25.
first specific issue, whether there is sufficient evidence
Plaintiffs own(ed) a trade secret, the Magistrate Judge
concluded that with the exception of the two formulas
Plaintiffs claim ownership and use of during the relevant
time (first, the limestone formula contained in SCOT's
patent application and then the French formula described in
the Product Rights Agreement), Plaintiffs failed to establish
any other claimed trade secret exists and its value to
StoneCoat as required under Texas law. Id. at p.
131. The Magistrate Judge stated Plaintiffs had not submitted
evidence relating to the six factors that Texas law considers
for trade secret status, and the evidence of record,
including Morrison's affidavit, does not satisfy the
six-part Restatement test. Id. at pp. 131-32.
to the limestone formula, the Magistrate Judge stated that,
unlike the other categories of alleged trade secrets,
“there is some evidence in the record from which the
Court can determine, pursuant to the relevant factors and in
the context of the surrounding circumstances, that
StoneCoat's limestone formula was a trade secret at the
relevant time.” Id. at 135. According to the
Magistrate Judge, disputed issues of fact remain with respect
to whether Plaintiffs took reasonable steps to protect the
limestone formula, and the fact that SCOT may have included
the limestone formula in its March 2015 patent application to
the USPTO “does not diminish the secrecy of the
material during the period before the USPTO approved the
patent or published the application. Id. at pp.
136-37 (quoting Innovatier, Inc. v. CardXX, Inc.,
No. 08-CV-00273-PAB-KLM, 2011 WL 3293789, at *4 (D. Colo.
Aug. 1, 2011)). The Magistrate Judge concluded there is a
genuine issue of material fact whether the limestone formula
constituted a trade secret before the patent application was
published in September 2015. Id. at p. 138.
then discussed the French formula and first concluded, based
on the record before the Court, that the Final Judgment
entered by the court in the Hopkins State Litigation did not,
as a matter of law, prevent Plaintiffs from arguing that the
French formula is a StoneCoat GP trade secret. Id.
at p. 140. The Magistrate Judge noted there are no findings
by the jury or the court in the Hopkins State Litigation
regarding Mergaux's termination of the Product Rights
Agreement or of the ownership of the French formula, and she
also considered Plaintiffs' supplemental filings
regarding the hearing with the bankruptcy court regarding a
proposed settlement of Mergaux's appellate rights in the
appeal of the Hopkins State Litigation. The Magistrate
Judge concluded “Plaintiffs have raised a fact issue as
to whether the French formula should be accorded trade secret
protection.” Id. at pp. 140-41.
Magistrate Judge then considered whether there is sufficient
evidence Defendants acquired either trade secret through a
breach of a confidential relationship or other improper
means. She first concluded the evidence of record is
insufficient to create a genuine issue of material fact that
Villarreal or Gonzalez acquired or discovered (through
improper means or otherwise) the limestone formula or the
French formula, the only possible trade secrets at issue in
this case. Therefore, the Magistrate Judge recommended
Villarreal's and Gonzalez's motion for summary
judgment on Counts 2-3 and 5 be granted. Id. at p.
concluding there are genuine issues of material fact with
respect to whether both Profanchik and Kinser acquired or
discovered the limestone formula and the French formula
through improper means, id. at pp. 145-51, the
Magistrate Judge considered whether there is sufficient
evidence Profanchik (and by extension the ProCal entities)
and Kinser use or used either formula. Regarding the
limestone formula, the Magistrate Judge stated the relevant
time period is between early 2015 and September 10, 2015, the
date the patent application disclosing the limestone formula
was published. Id. at 152. The issue before the
Magistrate Judge was whether there is sufficient evidence the
individual defendants used the limestone formula prior to
September 10, 2015 to set up a competing business.
Id. at p. 153.
to the Magistrate Judge, the “only evidence in the
record of possible use of the limestone formula within the
relevant time period is the evidence that Kinser and Gonzalez
were creating samples of limestone mix in Kinser's
backyard and that by September 2015 Kinser was already
‘blowing stone' in the showroom that would later be
utilized by ProCal Stone Design.” Id. at pp.
155-56. However, the Magistrate Judge stated there is no
evidence any of the limestone mix at issue was manufactured
or produced by Profanchik or Kinser with StoneCoat's
limestone formula, “much less any evidence that it was
manufactured in such a way as to research and accelerate the
development of a competing product.” Id. at p.
156. The Magistrate Judge concluded as follows:
The Court, having considered the evidence of record and
drawing all reasonable inferences in favor of Plaintiffs,
finds there is not sufficient evidence to create a genuine
issue of material fact that Profanchik and Kinser used the
limestone formula prior to September 10, 2015.There is also
no evidence the yet-to-be-formed ProCal entities ever used
the limestone formula contained in the patent application
prior to September 10, 2015. As such, the only alleged trade
secret that could have been used by Profachik (and by
extension ProCal) and/or Kinser would be the French formula.
to the French formula, the Magistrate Judge stated the
evidence before the Court, which was primarily created in the
Collin County Litigation, reveals ProCal Stone Design does
not manufacture its own limestone mix. Rather, it purchases
its limestone mix ready-made from a company in Spain, which
sold the same product to many others in the industry.
Id. at p. 157. According to the Magistrate Judge,
“Plaintiffs do not contend that ProCal Stone Design,
despite the fact it claims to have bought the French formula
from Mergaux in 2016, manufactures its own limestone mix
using the French formula.” Id.
setting forth the applicable law on the definition of
“use, ” id. at pp. 157-59, the
Magistrate Judge concluded there was no evidence in the
record showing Profanchik, Kinser, and/or ProCal Stone Design
used or currently use the French formula. Id. at p.
159. The Magistrate Judge further explained as follows:
As far as the Court can tell, Plaintiffs have not relied on
any new evidence generated from the discovery conducted in
this case, much less any evidence, circumstantial or
otherwise, that could create a genuine issue of material fact
as to Defendants' ‘use' of the French formula.
With the record before the Court, the Court cannot find a
reasonable juror could find that Profanchik, Kinser, and/or
ProCal Stone Design used (at a time uncertain) the French
formula Mergaux states they purchased. The uncontroverted
evidence before the Court is ProCal Stone Design does not
manufacture its limestone mix.
Id. On the record before the Magistrate Judge, she
held it would not be reasonable for a jury to infer that
Profanchik, Kinser, and/or the ProCal entities used the
French formula, the only remaining trade secret at issue.
Id. at 160. In conclusion, the Magistrate Judge
recommended Profanchik's, Kinser's, and the ProCal
entities' motions for summary judgment regarding the
trade secret misappropriation and related claims (Counts 2-3,
5) be granted. Id.
of Plaintiffs' breach of contract and tortious inference
claims (Counts 6, 8)
out by the Magistrate Judge in Section VII of the R&R,
Plaintiffs assert a breach of contract claim (Count 6)
against all Defendants and a tortious interference with
existing business relationships claim (Count 8) against the
ProCal entities and Profanchik. Id. at pp. 160, 179.
In their breach of contract claims, Plaintiffs have generally
alleged “the contracts and agreements described [in the
complaint] and entered into by the defendants are valid and
enforceable contracts” and “defendants did not
perform their obligations.” Id. at pp. 160-61
(quoting Dkt. #103, ¶¶ 203, 206).
Magistrate Judge first considered the ProCal entities'
motions for summary judgment as to the breach of contract
claims, noting it is undisputed that no contract exists
between Plaintiffs and ProCal and Plaintiffs' arguments
regarding their breach of contract claims focus on the
non-disclosure/non-compete agreements signed by Profanchik,
Kinser, Villarreal, and Gonzalez. Id. at pp. 161-62.
The Magistrate Judge recommended the ProCal entities'
motions for summary judgment as to Plaintiffs' breach of
contract claims (Count 6) be granted, leaving only
Plaintiffs' breach of contract claims against Kinser,
Villarreal, and Gonzalez related to their
non-disclosure/noncompetition (“NDA”) agreements.
Id. at p. 162.
defendants argue Plaintiffs have failed to plead any specific
breaches of contract with regard to them. To the extent the
Court finds otherwise, these defendants move to dismiss the
breach of contract claim against them because of lack of
consideration and because the NDAs are unenforceable as a
matter of law because they do not contain reasonable
restrictions. Specifically, these defendants assert the NDAs
are illusory and not supported by consideration; contain an
unreasonable industry-wide scope and undefined geographic
restriction; and contain an unreasonable five-year term.
Id. at p. 162.
Magistrate Judge first concluded the agreements satisfy the
requirements of the first element, which requires that the
non-compete agreement be ancillary to or part of an otherwise
enforceable agreement at the time the agreement is made.
Id. at p. 171 (further finding there is sufficient
evidence Kinser, Villarreal, and Gonzalez received
confidential information after they signed the agreements,
and said information can support the non-compete agreements
entered into by these defendants). The Magistrate Judge then
considered the reasonableness of the restrictions contained
in the agreements and found the scope of the non-complete
agreements is impermissibly broad, especially considering the
five-year time restriction and the fact there is no
geographical limitation or acceptable substitute in the
non-compete provisions. Id. at p. 174. Noting the
non-compete agreements are unenforceable as a matter of law,
the Magistrate Judge then considered whether the Court should
reform the agreements. Id. at pp. 175-77. She
concluded reformation is unwarranted. Id. at pp.
Magistrate Judge next addressed Plaintiffs' claim that
Kinser, Villarreal, and Gonzalez breached the non-disclosure
provisions of the NDAs by disclosing Plaintiffs'
confidential information. According to the Magistrate Judge,
the uncontroverted evidence shows Kinser was never paid by
SCOT. Id. at p. 178. Regarding Villarreal and
Gonzalez, although the evidence shows they had access to
information before and after the execution of the
non-disclosure agreements that could be characterized as
confidential information, the Magistrate Judge concluded
“Plaintiffs have not produced evidence sufficient to
create a genuine issue of material fact that Villarreal or
Gonzalez used any confidential information thereby breaching
the nondisclosure covenants.” Id. The
Magistrate Judge recommended Kinser's, Villarreal's,
and Gonzalez's motions for summary judgment as to
Plaintiffs' breach of contract claims (Count 6) be
also recommended summary judgment be granted against
Plaintiffs' tortious interference with existing business
relationship claims (Count 8) against the ProCal entities and
Profanchik. In so finding, the Magistrate Judge noted she had
previously found the Kinser, Villarreal, and Gonzalez
covenants not to compete unenforceable and declined to reform
them and also that there is no evidence Kinser was subject to
the non-disclosure agreement and Plaintiffs have not produced
sufficient evidence showing that Villarreal or Gonzalez used
any confidential information thereby breaching their
non-disclosure covenants. Id. at p. 181. According
to the Magistrate Judge, the only remaining contract at issue
in this case is the 2011 Product Rights Agreement, and
Plaintiffs have failed to produce sufficient evidence showing
Profanchik or the ProCal entities knowingly induced Mergaux
or Chamielec to breach their contract obligations.
Id. at pp. 181-84.
of Plaintiffs' breach of fiduciary duty claims (Count
the only remaining breach of fiduciary duty claims in this
case are against Kinser, Villarreal, and Gonzalez, the
Magistrate Judge first found insufficient evidence that would
support finding a fiduciary relationship between Plaintiffs
and Kinser. Id. at p. 188. Thus, she recommended
Kinser's motion for summary judgment on Plaintiffs'
breach of fiduciary duty claim be granted. The Magistrate
Judge next considered Plaintiffs' breach of fiduciary
duty claims against Villarreal and Gonzalez, noting they did
not owe any fiduciary duties to Plaintiffs after they
resigned their employment. Id. at p. 189. The
Magistrate Judge stated there is no evidence that either
Villarreal or Gonzalez misappropriated Plaintiffs' trade
secrets, solicited Plaintiffs' customers, or carried away
any confidential information; as such, the Magistrate Judge
recommended Villarreal's and Gonzalez's motion for
summary judgment as to Plaintiffs' claims for breach of
fiduciary duty be granted. Id.
of Plaintiffs' unfair competition and conspiracy claims
Magistrate Judge also found summary judgment appropriate on
Plaintiffs' unfair competition and civil conspiracy
claims. Id. at p. 190. According to the Magistrate
Judge, Plaintiffs' unfair competition and conspiracy
claims depend on Plaintiffs' establishing one or more of
the claims previously discussed. Id. Because they
have failed to do so, Plaintiffs' derivative claims also
fail, according to the Magistrate Judge.
of Plaintiffs' claims for declaratory and injunctive
to the extent not mooted by the Magistrate Judge's
recommended grant of summary judgment on Plaintiffs'
claims, the Magistrate Judge recommended summary judgment be
granted for Defendants on Plaintiffs' request for
declaratory judgment. Id. at p. 191. She also
recommended Defendants' motions for summary judgment
regarding Plaintiffs' claims for injunctive relief be
granted, noting Plaintiffs cannot establish a likelihood of
success on the merits when all of their causes of action
should be dismissed. Id.
permitted by the Magistrate Judge, Plaintiffs incorporated
additional evidence into their objections. See Dkt.
#261 at p. 13, n. 6 (denying Plaintiffs' motion for leave
to supplement their responses to Defendants' motions for
summary judgment but advising Plaintiffs they may incorporate
the information into their objections to the August 12, 2019
R&R). In addition to the entire record considered by the
Magistrate Judge, Plaintiffs request the Court consider the
new evidence attached to the objections. The Court will
consider the new evidence in its de novo review.
first object to some of the Magistrate Judge's
recommendations regarding their conversion and trade secret
misappropriation claims. Specifically regarding the
conversion claims, Plaintiffs assert the Magistrate Judge
erred in recommending dismissal of their claim that
Profanchik and ProCal Stone Design converted the physical
envelope containing physical documents describing the French
formula. Dkt. #265 at p. 12. According to Plaintiffs, once
intangible property has been merged into a paper document,
the physical document (property) is subject to a conversion
claim. Id. at p. 12.
their trade secret misappropriation claims, Plaintiffs first
assert the Magistrate Judge did not address Plaintiffs'
Defend Trade Secrets Act (“DTSA”) claims.
Id. at p. 13. According to Plaintiffs'
objections, neither DTSA nor the Texas Uniform Trade secrets
Act (“TUTSA”) requires “use” of the
trade secret in order to prove misappropriation. Rather, all
that is required is acquisition of a trade secret by improper
means. Additionally, Plaintiffs contend Profanchik's and
ProCal's “use” of the French formula without
StoneCoat GP's consent constitutes misappropriation.
Plaintiffs further assert Profanchik and ProCal have promoted
and marketed (“bragged” about) the French formula
through their solicitation of customers and references to
their “French beginnings, ” partnership and
association with Chamielec who invented and developed the
French formula which is claimed to be the “original
formula” now claim to be owned exclusively by
Profanchik and ProCal. According to Plaintiffs, Profanchik
and ProCal have touted their partnership and close working
relationship with Chamielec and Chamielec's
“perfection” and “innovation” of the
French formula in France. Thus, according to Plaintiffs,
Profanchik and ProCal have used the French formula to promote
their business, market their business, and solicit customers
in interstate commerce. Dkt. #265, Exs. 6, 7 and 9.
further object to some of the Magistrate Judge's
recommendations regarding Plaintiffs' breach of contract
claims against Kinser, Villarreal, and Gonzalez. According to
Plaintiffs, the restrictions in the non-compete agreements
are reasonable and clearly for the purpose of protecting the
goodwill, trade secrets, and confidential information of
StoneCoat. Dkt. #265 at p. 24.
also object to the Magistrate Judge's recommendation that
their claims against Profanchik and ProCal regarding their
alleged interference with StoneCoat GP's Product Rights
Agreement be dismissed. Relying on the new evidence submitted
in their objections, Plaintiffs argue there is sufficient
evidence in the record to create a genuine issue of material
fact that Profanchik knowingly induced Mergaux and Chamielec
to breach their contract obligations.
Plaintiffs object to the Magistrate Judge's
recommendations regarding Plaintiffs' unfair competition
and conspiracy claims, as well as their request for
injunctive relief. According to Plaintiffs, because there are
valid substantive claims, the derivative claims are valid as
well. Id. at p. 29. Plaintiffs further maintain they
are entitled to injunctive relief to the extent permitted by
law, including injunctive relief regarding their trade secret
misappropriation claims and contract interference claims.
NOVO REVIEW 
of claims with no specific objections as to those
Rule of Civil Procedure 72 provides “a party may serve
and file specific written objections to the proposed
findings and recommendations.” Fed.R.Civ.P. 72(b)(2)
(emphasis added). “Parties filing objections must
specifically identify those findings [to which they object].
Frivolous, conclusive or general objections need not be
considered by the district court.” Nettles v.
Wainwright, 677 F.2d 404, 410 n.8 (5th Cir. 1982) (en
banc), overruled on other grounds by Douglass v. United
Servs. Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996) (en
banc); Chase Bank USA, N.A. v. McLain, No.
1:12-CV-353, 2013 WL 713404, at *1 (E.D. Tex. Feb. 26, 2012).
The August 12 R&R specifically provided that in order to
be specific, “an objection must identify the specific
finding or recommendation to which objection is made, state
the basis for the objection, and specify the place in the
magistrate judge's report and recommendation where the
disputed determination is found.” Dkt. #241 at p. 192.
their objections, Plaintiffs specifically address the
following: (1) Plaintiffs' conversion claims against
Profanchik and ProCal Stone Design for converting the
physical envelope and physical papers within the envelope
describing the French formula; (2) Plaintiffs' trade
secret misappropriation, DTSA, and TUTSA claims regarding the
French formula and Profanchik/ProCal's use of it; (3)
Plaintiffs' claims against Kinser, Villarreal, and
Gonzalez for breach of their non-compete agreements; (4)
Plaintiffs' claims against Profanchik and ProCal
regarding their alleged interference with StoneCoat GP's
Product Rights Agreement; (5) Plaintiffs' unfair
competition and conspiracy claims; and (6) Plaintiff's
request for injunctive relief. However, Plaintiffs do not
specifically object to the numerous other findings and
conclusions of the Magistrate Judge.
do not mention the Magistrate Judge's recommendations
regarding their Lanham Act claims, breach of fiduciary duty
claims, or their claims for declaratory relief. With the
exception of their conversion claims against Profanchik and
ProCal Stone Design regarding the physical envelope
containing papers describing the French formula, Plaintiffs
do not reference, much less object to, the Magistrate
Judge's other findings regarding their conversion claims.
Plaintiffs do not object to the Magistrate Judge's
findings regarding any alleged trade secret other than the
French formula. Nor do Plaintiffs object to the Magistrate
Judge's findings and ultimate conclusion that there is
insufficient evidence in the record to create a genuine issue
of material fact that Villarreal and Gonzalez acquired or
discovered (through improper means or otherwise) the French
Court agrees with those findings and conclusions of the
Magistrate Judge and adopts them as the findings and
conclusions of the Court with no further discussion.
Specifically, the Court agrees Plaintiffs' Lanham Act
claims (Count 1), breach of fiduciary duty claims (Count 7),
and claims for declaratory relief against all defendants
should be dismissed. The Court also grants summary judgment
against Plaintiffs' conversion claims (Count 4) against
Kinser, Villarreal, and Gonzalez. The Court also grants
summary judgment against Plaintiffs' trade secret
misappropriation (and unfair competition and conspiracy
claims) (Counts 2-3, 5, 9) against Villarreal and Gonzalez.
The Court also grants summary judgment against
Plaintiffs' breach of contract claims (Count 6) against
Profanchik and the ProCal entities and against Kinser,
Villarreal, and Gonzalez for violation of the non-disclosure
agreements. Finally, the Court grants summary judgment
against Plaintiffs' tortious interference claims (Count
8) against Profanchik and ProCal regarding their alleged
interference with any contract other than the 2011 Product
considering Plaintiffs' objections to the findings and
conclusions of the Magistrate Judge as to certain remaining
conversion, trade secret misappropriation, breach of
contract, and tortious interference claims, as well as
Plaintiffs' unfair competition and conspiracy claims and
request for injunctive relief, the Court sets forth the
additional evidence relied upon by Plaintiffs that was not
before the Magistrate Judge.
July 1, 2019 document production
1, 2019, Defendants produced the Declaration of Lawrence A.
Stelly (a French interpreter) interpreting a French language
contract dated September 15, 2016 and entitled:
“CONTRACT OF ASSIGNMENT FOR KNOW-HOW AND INTELLECTUAL
PROPERTY.”(“September 15, 2016
Contract”). This contract was between Chamielec and
Profanchik and was for the assignment to Profanchik of a
“specific formula” owned by Chamielec and
“corresponding confidential information and
know-how” to enable the fabrication of an application
of “lime-based coatings for interior and exterior walls
on commercial buildings and residential houses.” Dkt.
#265-1 at DEF 4630. In the September 15, 2016 Contract,
Chamielec sold, and Profanchik purchased, all of the
“formulas” and intellectual property related to
manufacturing and applying sprayed limestone to
“interior and exterior walls” for a price of
“125, 000 Euros.” Id. at DEF 4631. The
assignment was for all of the intellectual property of
Chamielec “worldwide.” Id. The contract
also provided that Chamielec was unaware of any “third
parties” that would know of the formula or the
intellectual property he was selling to Profanchik
“with the exception of Mr. Ken Morrison and of the
company Stonecoat in Addison Texas.” Id. at
DEF 4632, 6(h).
information on the interpretation of the September 15, 2016
Contract was “redacted” by Defendants; thus, on
July 20, 2019, Plaintiffs' counsel requested that the
redacted information be provided “under AEO.” On
July 23, 2019, Defendants' counsel emailed
Plaintiffs' counsel declining to provide those pages in
un-redacted form, stating the “specific pages contain
the secret formula ingredients and percentages for each
ingredient.” Dkt. #265-2. She further stated “the
secret formula is and remains secret.” Id.
Plaintiffs' counsel stated she would be amenable to
discussing a possible stipulation as to the formula and
indicated she could ...