American Precision Vibrator Co. v. National Air Vibrator Co.

764 S.W.2d 274, 10 U.S.P.Q. 2d (BNA) 1129, 1988 Tex. App. LEXIS 3041, 1988 WL 133784
Court of Appeals of Texas·Decided December 15, 1988·No. 01-87-00686-CV·Published·Cited by 51 cases

Opinion

OPINION

LEVY, Justice.

Appellee, National Air Vibrator Company (“National”), brought this suit for damages and injunctive relief against appellants Jim Guy and Shirley Breitenstein, former employees, who had earlier resigned and formed American Precision Vibrator Company (“American”), a competitor in the industrial vibrator market. Appellee claims that appellants appropriated trade secrets and confidential information in violation of their fiduciary duty owed to appellee. Trial was to a jury, which found for appellant Breitenstein and against appellant Guy on the issue of appropriation and awarded $400,000 in actual damages and $500,000 in punitive damages against appellants Guy and American.

After motions by each side, the court entered judgment in accordance with the verdict and permanently enjoined appellants from manufacturing and selling certain vibrator models. Appellants’ motion for new trial or, alternatively, to modify judgment, was overruled, whereupon this appeal was taken.

National was a company engaged in the business of selling air-operated piston type vibrators, conveyors, feeders, vibrator tables, and related goods. Relevant to this case are the air-operated piston-type vibrators, which are devices used to facilitate the movement of granular materials. The Neundorfer family acquired National in 1979. At that time, appellant Guy, who had worked at National for 13 years, was vice-president of engineering and sales, and appellant Breitenstein, who had worked there for 24 years, was treasurer and on the board of directors.

Following National’s sale, Breitenstein and Guy both resigned from the company, Breitenstein on October 4, 1979, and Guy on December 15, 1979. They then became president and secretary, respectively, of appellant American, a new company formed in December, 1979. In March and April, *276 1980, American began selling air-operated piston-type vibrators, and eventually had nine or 10 models that competed directly with some of National’s models. In addition to National and American, there were three to five other companies that manufactured air-operated piston-type vibrators.

Prior to December, 1979, National maintained two sets of customer cards consisting of approximately 2,000 to 4,000 cards each. Both sets were identical except that one was arranged alphabetically and the other was arranged geographically. After December, 1979, the geographically arranged set was discovered missing. Between the formation of American and the time of the trial, a period of over six years, American sold vibrators to 143 of the customers whose names were contained in the card file. National also maintained drawings and blueprints showing the details of its air-operated piston-type vibrators. National provided testimony from a witness who stated that he had been to the American office in April, 1980, while Guy was on the premises, and had seen National blueprints and the missing file of geographically arranged customer cards. Both Guy and Breitenstein denied ever having had the National blueprints or customer cards after leaving the employment of National.

Appellants’ first four points of error will be considered together. They contend that the trial court erred in overruling their objection to the submission of special issue no. 2, which reads as follows: “Do you find from a preponderance of the evidence that said National Air Vibrator Company customer cards and/or blue prints constituted trade secrets?” The jury answered, “We do” as to both the customer cards and blueprints. Appellants urge that the evidence was factually insufficient to prove that the customer cards, blueprints, and drawings were trade secrets. Appellants further contend that the trial court also erred in overruling their motion for new trial because the evidence was factually insufficient to show that the customer cards, blueprints, and drawings were trade secrets.

A “trade secret” may consist of:

any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers.

4 Restatement of Torts § 757, Comment b (1939) (emphasis added), cited with approval in Hyde Corp. v. Huffines, 158 Tex. 566, 586, 314 S.W.2d 763, 776 (1958). In Texas, customer lists have been recognized as trade secrets. Collins v. Ryon’s Saddle & Ranch Supplies, Inc., 576 S.W.2d 914 (Tex. Civ.App.—Fort Worth 1979, no writ); see also David v. Bache Halsey Stuart Shields, Inc., 630 S.W.2d 754 (Tex.App.— Houston [1st Dist.] 1982, no writ).

Before something can be termed a “trade secret,” there must be a substantial element of secrecy. Rimes v. Club Corp. of America, 542 S.W.2d 909, 913 (Tex.Civ. App.—Dallas 1976, writ ref’d n.r.e.).

The owner of the secret must do something to protect himself. He will lose his secret by its disclosure unless it is done in some manner by which he creates a duty and places it on the other party not to further disclose or use it in violation of that duty.

Furr’s, Inc. v. United Specialty Advertising Co., 385 S.W.2d 456, 459 (Tex.Civ.App. —El Paso 1964, writ ref'd n.r.e.). The Furr’s court went on to cite 4 Restatement of Torts § 757 that,

[o]ne who discloses or uses another’s trade secrets, without a privilege to do so, is liable to the other if (a) he discovers the secret by improper means, or (b) his disclosure or use constitutes a breach of confidence reposed in him by the other in disclosing the secret to him....

Id.

In the case at bar, the jury heard evidence that American’s customer cards were considered to be confidential. Bill Neundorfer, who had worked for 20 years as a distributor for National before he pur *277 chased the company, testified that although he knew the company had a customer list, he had never been allowed to see it. He testified that the customer list information “was not divulged to anyone that [he knew] of and having worked with National for twenty years, [he] never was afforded the opportunity to inspect it.”

Jim Guy testified on cross-examination as an adverse witness that, without dispute, the customer cards were confidential and that the information on them was valuable. Guy also testified that while he was an employee of National, he considered the blueprints and drawings to be “confidential and proprietary” information. However, he also testified that while he personally considered the blueprints and drawings to be confidential, they had never been so classified.

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American Precision Vibrator Co. v. National Air Vibrator Co., 764 S.W.2d 274, 10 U.S.P.Q. 2d (BNA) 1129, 1988 Tex. App. LEXIS 3041, 1988 WL 133784 (Tex. Ct. App. 1988).

764 S.W.2d 274 (American Precision Vibrator Co. v. National Air Vibrator Co.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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