Frank's Casing Crew & Rental Tools, Inc. v. David L. Sipos

• Court: Louisiana Court of Appeal
• Decided: February 18, 2009
• Docket: CA-0008-0640
• Status: Unknown

Opinion

STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT

08-640

FRANK’S CASING CREW & RENTAL TOOLS, INC.

VERSUS

DAVID L. SIPOS, ET AL.

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APPEAL FROM THE FIFTEENTH JUDICIAL DISTRICT COURT PARISH OF LAFAYETTE, NO. 2005-0684 HONORABLE J. BYRON HEBERT, DISTRICT JUDGE

OSWALD A. DECUIR JUDGE

Court composed of Oswald A. Decuir, J. David Painter, and James T. Genovese, Judges.

Genovese, J., concurs in the result.

AFFIRMED. William W. Stagg Tiffany C. Babineaux Durio, McGoffin, Stagg & Ackermann P. O. Box 51308 Lafayette, LA 70505 (337) 233-0300 Counsel for Defendants/Appellants: Vermilion River Tool & Equipment, Co., Inc. David L. Sipos

Edward C. Abell, Jr. Onebane Law Firm P. O. Box 3507 Lafayette, LA 70502-3507 (337) 237-2660 Counsel for Plaintiff/Appellant: Frank’s Casing Crew & Rental Tools, Inc. Guy E. Matthews Bruce R. Coulombe Matthews, Lawson & Bowick, PLLC 2000 Bering Drive, Suite 700 Houston, Texas 77057 (713) 355-4200 Counsel for Plaintiff/Appellant: Frank’s Casing Crew & Rental Tools, Inc.

Richard J. Putnam, Jr. Richard Johnson Putnam III Putnam Law Firm 118 S. State Street Abbeville, LA 70511-1045 (337) 893-0076 Counsel for Plaintiff/Appellant: Frank’s Casing Crew & Rental Tools, Inc. DECUIR, Judge.

Frank’s Casing Crew and Rental Tools, Inc. (Frank’s) filed suit against its

former employee, David L. Sipos, and his company, Vermilion River Tool &

Equipment Co., Inc. (VERTECO), alleging breach of a confidentiality agreement and

violations of the Louisiana Unfair Trade Practices Act, La.R.S. 51:1401 et seq., and

the Uniform Trade Secrets Act, La. R.S. 51:1431 et seq. After a jury trial, judgment

on the merits was rendered in favor of the defendants, and the plaintiff’s claims were

found to be in bad faith, warranting an award of attorney fees. Frank’s now appeals

the jury verdict alleging jury misconduct and manifest error in the decision reached

by the jury. Sipos and VERTECO also appeal the trial court’s ruling on Frank’s

motion for summary judgment and preliminary and permanent injunctions. For the

following reasons, we affirm in toto the decisions rendered below.

David Sipos worked for Frank’s for ten years, from 1994 through 2004. He

was the head of the Special Operations Group, a design and engineering group

charged with the responsibility to conceive, invent, and construct new oilfield tools

for Frank’s. Sipos was an experienced tool designer when he came to work for

Frank’s, having a number of patents to his credit. At the start of his employment with

Frank’s, Sipos signed a confidentiality agreement, a contract which precluded Sipos

from disclosing to third parties any of Frank’s confidential and proprietary

information.

At issue in this case is a tool known as a flush mounted rotary spider, which is

a piece of oilfield equipment used to handle casing or drill pipe on a drilling rig.

After leaving Frank’s, Sipos set up his own company, VERTECO, and shortly

thereafter obtained a contract to design a new rotary spider for a competitor of

Frank’s. The new design produced by Sipos is the subject of this suit. Frank’s contends that Sipos relied on confidential and proprietary information belonging to

Frank’s in the design of the new tool. In his defense, Sipos contends the information

consisted of his own drawings and calculations, as well as generally known and

readily available information obtained from textbooks, patent records, experts in the

field, and the internet. This case does not involve any allegations of patent

infringement.

Prior to trial, Frank’s moved for summary judgment on the limited question of

whether Sipos violated the terms of the confidentiality agreement with regard to six

specific pieces of information: (1) the design of a flush mounted spider with a

universal profile, (2) a computer aided design (“CAD”) template adapted by Frank’s

to aid in the design of flush mounted spiders and other oilfield tools, (3) a spring

calculator algorithm used within the context of EXCEL spreadsheet applications, (4)

the concept for the manufacture of flush mounted spiders by the use of bolted plate

construction, (5) the design and concept of a dual rail slip, and (6) the design and

concept of a slip retracting spring. All other issues, including other disputed

information, damages, and statutory trade practices and trade secrets violations, were

deferred to the jury trial. After thorough consideration, summary judgment was

rendered in Frank’s favor based on the finding that items (1) through (4) were

confidential and proprietary information taken by Sipos in violation of the

confidentiality agreement signed by him. The court enjoined Sipos and VERTECO

from using or disclosing any of the four items “until trial on the merits of this case.”

Sipos and VERTECO have now appealed the summary judgment and injunction.

The remaining issues in the case were then presented to a jury in a three and

a half week trial. The jury was asked to consider the confidential and proprietary

2 nature of thirteen other pieces of information to which Sipos may have had access

after he left his employment with Frank’s and found that none of that information was

confidential and proprietary. Regarding the information which was the subject of the

prior summary judgment, the jury found that the products developed by Sipos and

VERTECO were not substantially derived from Frank’s confidential and proprietary

information, including specifically the CAD template and the design of a flush

mounted spider with a universal profile. The jury also found that Frank’s suffered no

damages as a result of Sipos’ breach of the confidentiality agreement. On the unfair

trade practices claim and the trade secrets claim, the jury found in favor of Sipos and

further found that those claims were pursued by Frank’s in bad faith. The trial court

then rendered judgment in favor of the defendants and awarded attorney fees in the

amount of $526,662.62, expert witness fees, and costs. Frank’s has appealed the

judgment, alleging jury misconduct, the use of invalid evidence, and manifest error

in the finding of bad faith and the denial of damages.

Our review of the voluminous record reveals no error in the judgments

rendered below. The basic dispute in this case is whether Sipos, in his design of a

new rotary spider, improperly and illegally relied on information that belonged

exclusively to Frank’s. Frank’s contends that Sipos gathered a variety of information

from the public domain only after Frank’s confronted him about breaching the

confidentiality agreement by using and disclosing programs, drawings, calculations,

and concepts he obtained or created while working for Frank’s. Sipos counters that

argument by showing that his design is different from anything produced by Frank’s

and is not derived from any particular source misappropriated from Frank’s. Rather,

the new design is derived from his experience, general engineering principles,

3 published patent applications, documents readily provided by colleagues in the

oilfield engineering industry, and other public domain sources. Sipos also states that

some of the concepts Frank’s has accused Sipos of copying are detailed in brochures

published by Frank’s for distribution to customers and the general public.

Frank’s urges this court to adopt pertinent federal court holdings such as

Reingold v. Swiftships, Inc., 126 F.3d 645, 652-53 (5th Cir. 1997), which stated

“Protection will be accorded to a trade secret holder against disclosure or

unauthorized use gained by improper means, even if others might have discovered the

trade secret by legitimate means.” See also, Standard Brands, Inc. v. Zumpe, 264 F.

Supp. 254 (E.D. La. 1967). The evidence before us, however, reveals the fallacy of

this argument as it pertains to this particular case: Frank’s failed to prove that

anything actually relied upon by Sipos was a trade secret of Frank’s or otherwise

confidential. While it is certainly true that Frank’s does in fact own proprietary

information, in this case, Frank’s has been unable to show that any of that information

was stolen by Sipos and then used to design his new spider. Rather, Sipos, an

experienced tool designer with specialized skill and knowledge who was referred to

as the “Einstein of flush mounted spiders,” was able to show that the information he

relied on was not only part of his own knowledge and skill, but was also available to

the industry as a whole and, therefore, was not secret. The Standard Brands case

actually highlights the public interest in “the reasonable mobility of such skilled

persons from job to job in our fluid society . . . [who] must be afforded a reasonable

opportunity to change jobs without abandoning the ability to practice [their] skills.”

264 F.Supp. 254, 259.

4 Therefore, Frank’s evidentiary arguments regarding improper, public domain

“hindsight” information gathered after misappropriating the same information from

Frank’s is simply untenable.

The jury rejected Frank’s claims that numerous pieces of information available

to Sipos were confidential, and it also rejected the contention that certain information

found to be confidential by the trial court was used by Sipos in his design of a new

spider. Frank’s urges this court to find that jury misconduct led to these conclusions

and requires reversal. The allegation of misconduct was addressed by the trial court,

and nine members of the jury were deposed post-trial, as were other witnesses. The

evidence showed that some jurors may have spoken briefly about the case prior to the

start of deliberations, and the alternate juror may have heard these comments. Other

alleged misconduct included one juror bringing a legal dictionary into the jury room

and another presenting a “CAD” drawing he had done himself. The trial court

thoroughly considered the testimony and determined that Frank’s was not deprived

of a fair and impartial trial. A new trial was not warranted. We agree. As this court

has previously held, “the burden falls upon the mover to prove that the level of

behavior was of such a grievous nature as to preclude the impartial administration of

justice.” Lavergne v. Family Dollar Stores, Inc., 97-1005 (La.App. 3 Cir. 2/4/98),

706 So.2d 1088. Frank’s did not meet its burden of proof on this issue.

Frank’s next contends the trial court erred in failing to award damages. The

absence of damages was a factual determination by the jury. Knowing that the trial

court had previously found Sipos breached the confidentiality agreement with regard

to four pieces of information, the jury nevertheless found Frank’s had not suffered

any damage or injury as a result of that breach. Indeed, a review of Frank’s economic

5 evidence supports that finding. Frank’s failed to show any damages related to the

alleged misappropriation of information or specific concepts or designs. Instead,

Frank’s attempted to show a loss of market share because VERTECO now makes

flush mounted spiders, but the testimony included no market share analysis other than

the admission that Frank’s market share had actually increased in recent months, as

had its gross profits. Frank’s witnesses also admitted knowing that its other

competitors now manufacture flush mounted spiders. Damages were properly denied.

We likewise find no merit to Frank’s dissension from the jury’s finding of bad

faith. Both the Louisiana Unfair Trade Practices Act and the Uniform Trade Secrets

Act provide for damages in the event a plaintiff’s claims are found to have been

brought in bad faith. Louisiana Revised Statutes 51:1409 authorizes an award of

reasonable attorney fees and costs. Likewise, La.R.S. 51:1434 provides for

reasonable attorney fees. Frank’s does not dispute the amount awarded to the

defendants in this case. Rather, Frank’s contends any award is erroneous because the

trial court’s prior summary judgment in its favor negates any finding of bad faith. To

the contrary, the summary judgment was merely a determination that the

confidentiality agreement had been breached in what was later found to be

insignificant ways. The claims pursued by Frank’s in bad faith are alleged unfair

trade practices and the alleged misappropriation of trade secrets. The totality of the

evidence shows that Frank’s, a multimillion dollar company, intended to put Sipos

out of business. The trade practice at issue was the engineering work in development

by Sipos and his company. The trade secrets at issue mainly involved mathematical

formulae, computer software, and concepts advertised freely by Frank’s. These

claims went far beyond the contract issues decided by the trial court.

6 Finally, we address the permanent injunction issued by the trial court. After

trial on the merits, a permanent injunction “in conformity with the prior rulings of the

Court, the verdict of the jury as to the questions presented to the jury, the law and the

evidence” was issued, permanently enjoining the defendants from “using or

disclosing any one or more of the . . . four items of Frank’s Confidential and

Proprietary Information” as found in the summary judgment. The injunction, though

permanent, was “intended to remain in force until final termination of the suit” as

stated by the trial court in reasons for judgment issued after the jury trial was

concluded. Therefore, the constraints of the injunction will terminate after all appeal

delays have run. We affirm that ruling and decline to expand or extend the injunction

as requested by Frank’s.

Finally, considering the goals of efficient judicial administration discussed by

this court in Fakier v. State of LA, Bd. of Sup’rs, 08-111 (La.App. 3 Cir. 5/28/08), 983

So.2d 1024, we decline to conduct a de novo review of the trial court’s ruling on

summary judgment, as the ruling is moot given the limitations of the injunction and

the conclusions reached by the fact finder after trial on the merits.

Finding no manifest error in the judgment rendered below, we affirm. Because

both parties pursued separate appeals, costs are assessed equally to the defendants and

the plaintiff.

AFFIRMED.