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Stonecoat of Texas, LLC v. Procal Stone Design, LLC

United States District Court, E.D. Texas, Sherman Division

September 12, 2019

STONECOAT OF TEXAS, LLC, STONECOAT GP, LLC, and STONECOAT LP Plaintiffs/Counter-Defendants
v.
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
v.
THE MORRISON FAMILY TRUST and KENNETH W. MORRISON, Individually and in his capacity as Trustee Third-Party Defendants

          CRAVEN MAGISTRATE JUDGE

          ORDER ADOPTING REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE REGARDING DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

          AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE

         The 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, [1] and Plaintiffs' claims against the remaining defendants be dismissed with prejudice.

         Plaintiffs-counterdefendants 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.

         BACKGROUND

         Plaintiffs-counterdefendants' claims

          In May 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 defendants.

         Plaintiffs allege the following claims against the ProCal entities, Profanchik, Kinser, Villarreal, Gonzalez, Mergaux, and Chamielec:[2] 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 § 2201.

         Among 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.

         Plaintiffs 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., ¶ 5.

         Plaintiffs 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.

         Defendants' motions for summary judgment

         In five 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 (9) damages.

         As an 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 follows:

         First, 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 either claim.

         Second, 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' trade secrets.

         Third, 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.

         Fourth, 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.

         Fifth, 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 alleged interference.

         Sixth, 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 of action.

         Seventh, 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 court.

         Eighth, Defendants assert Plaintiffs' claims for Injunctive Relief fail as a matter of law.

         AUGUST 12, 2019 REPORT AND RECOMMENDATION

         Consideration of all the evidence of record

         On 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.[3] Id. at pp. 24-90.

         Consideration of Plaintiffs' Lanham Act claims (Count 1)

         In her 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.[4] 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.

         She 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.

         Consideration of Plaintiffs' conversion and trade secret misappropriation claims (Counts 2-5)

         The 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.

         In the 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.

         Turning 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.

         She 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.[5] 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.

         The 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. 145.

         After 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.

         According 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.

Id.

         Turning 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.

         After 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.

         Consideration of Plaintiffs' breach of contract and tortious inference claims (Counts 6, 8)

         As set 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).

         The 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.

         These 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.

         The 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. 176-77.

         The 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 granted.

         She 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.

         Consideration of Plaintiffs' breach of fiduciary duty claims (Count 7)

         Noting 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.

         Consideration of Plaintiffs' unfair competition and conspiracy claims (Count 9)

         The 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.

         Consideration of Plaintiffs' claims for declaratory and injunctive relief

         Finally, 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.

         OBJECTIONS

         As permitted by the Magistrate Judge, Plaintiffs incorporated additional evidence into their objections.[6] 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.

         Plaintiffs 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.

         Regarding 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.

         Plaintiffs 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.

         Plaintiffs 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.

         Finally, 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. Id.

         DE NOVO REVIEW [7]

         Dismissal of claims with no specific objections as to those findings

         Federal 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.

         In 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.

         Plaintiffs 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 formula.

         The 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 Rights Agreement.

         Before 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.

         New evidence

         Defendants' July 1, 2019 document production

         On July 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.”[8](“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).

         Certain 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 ...


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