Grace Instrument Industries, LLC v. Melden Schmidt and OFI Testing Equipment, Inc.

• Court: Court of Appeals of Texas
• Decided: April 2, 2015
• Docket: 14-15-00269-CV
• Status: Published

Opinion

ACCEPTED 14-15-00269-CV FOURTEENTH COURT OF APPEALS HOUSTON, TEXAS 4/2/2015 6:03:43 PM CHRISTOPHER PRINE CLERK

No. 14-15-00269-CV __________________________________________ FILED IN 14th COURT OF APPEALS IN THE HOUSTON, TEXAS FOURTEENTH COURT OF APPEALS 4/2/2015 6:03:43 PM __________________________________________ CHRISTOPHER A. PRINE Clerk GRACE INSTRUMENT INDUSTRIES, LLC Appellant,

V.

MELDEN SCHMIDT AND OFI TESTING EQUIPMENT, INC. Appellee. __________________________________________________________________

MOTION FOR EXTENSION OF TIME TO FILE APPLICATION FOR INTERLOCUTORY APPEAL __________________________________________________________________

TO THE HONORABLE FOURTEENTH COURT OF APPEALS:

Appellant files this Motion for Extension of Time to File an Application for

an Interlocutory Appeal under Tex. R. App. P. 28.3(d) and 10.5(b). In support of

this motion, Appellant shows the following:

1. The 113th District Court in Houston, TX granted a No Evidence Summary

Judgment in favor of Appellees on March 2, 2015. Section 51.014(f) of the Texas

Civil Practice and Remedies Code provides that the appellate court may accept an

appeal if the appealing party, not later than the 15th day after the date the trial court

signs the order to be appealed, files in the court of appeals having appellate jurisdiction over the action an application for interlocutory appeal explaining why

an appeal is warranted. See TEX. CIV. PRAC. & REM. CODE 51.014(f).

2. Section 28.3 of the Texas Rules of Appellate Procedure governs permissive

appeals in civil cases. The Court of Appeals may grant a permissive appeal if the

application is filed in the Court of Appeals 15 days after the order to be appealed is

signed. The Court of Appeals may grant an extension if the petition is filed within

15 days of the deadline. This application substantially complies with Section

28.3(d) of the Texas Rules of Appellate Procedure since it has been filed within 15

days of the deadline to file petition for an interlocutory appeal. Out of an

abundance of caution the Appellant timely filed a notice of appeal in the District

Court on March 23, 2015.

3. Appellant Grace Instruments requests an extension of time of forty-five

days, to May 15, 2015. This extension would allow the 113th District Court to make

a final ruling on the Appellant’s Motion for Interlocutory Appeal.

4. Appellant relies on the following facts as a reasonable explanation for the

requested extension of time. Appellant needed additional time to secure funding to

pursue an immediate appeal of this matter. Out of an abundance of caution

Appellant’s counsel filed Notice of Appeal on March 23, 2015 based upon the

Appellant’s expressed desire to file an appeal. The Appellant has not filed any prior

requests for extension. PRAYER

Therefore, Appellant prays that this Court grant this motion for Extension of

Time.

Respectfully Submitted,

________________________________ Alfonso Kennard, Jr. Texas Bar No. 24036888 Ronald E. Dupree Texas Bar No. 24055433 5433 Westheimer, Suite 825 Houston Texas 77056 Main: 713.742.0900 Fax: 713.742.0951 alfonso.kennard@kennardlaw.com ATTORNEY-IN-CHARGE FOR GRACE INSTRUMENT INDUSTRIES, LLC CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing has been served on opposing counsel of record via the court’s ECF system on this 1st day of April 2015.

John N. Bowlin Shannon A.S. Quadros 1200 Smith Street, Suite 1400 Houston, Texas 77002 Fax No. 713-658-2553

_________________________________ Alfonso Kennard, Jr. No. 14-15-00269-CV __________________________________________

IN THE FOURTEENTH COURT OF APPEALS __________________________________________

GRACE INSTRUMENT INDUSTRIES, LLC Appellant,

MELDEN SCHMIDT AND OFI TESTING EQUIPMENT, INC. Appellee. __________________________________________________________________

APPENDIX IN SUPPORT OF MOTION FOR EXTENSION OF TIME TO FILE APPLICATION FOR INTERLOCUTORY APPEAL __________________________________________________________________

Exhibit Description

1 Application for Interlocutory Appeal

2 Defendant’s No Evidence Motion for Summary Judgment

-1- Respectfully submitted,

/s/ Alfonso Kennard, Jr. Alfonso Kennard, Jr. Texas Bar No. 24036888 Southern District Bar No: 713316 5433 Westheimer Road, Suite 825 Houston, Texas 77056 (713) 742-0900 (main) (713) 742-0951 (facsimile) alfonso.kennard@kennardlaw.com

ATTORNEY-IN-CHARGE FOR APPELLANT

OF COUNSEL

Ronald E. Dupree Texas SBN: 24055433 5433 Westheimer Road, Suite 825 Houston, Texas 77056 Phone: (713) 742-0900 Facsimile: (713) 742-0951 Email: Ronald.dupree@kennardlaw.com

CERTIFICATE OF SERVICE

I hereby certify that on April 2, 2015 a true and correct copy of the foregoing was served upon Defendant’s counsel via the electronic notification system provided by the federal court system.

/s/ Alfonso Kennard, Jr.________________ Alfonso Kennard, Jr.

-2- EXHIBIT 1 No. 14-15-00269-CV __________________________________________

IN THE FOURTEENTH COURT OF APPEALS __________________________________________

MELDEN SCHMIDT AND OFI TESTING EQUIPMENT, INC. Appellee. __________________________________________________________________

APPLICATION FOR INTERLOCUTORY APPEAL __________________________________________________________________

Appellant files this Application for an Interlocutory Appeal under Section

51.014(f) of the Texas Civil Practice and Remedies Code. In support of this

motion, Appellant shows the following:

1. The 113th District Court in Houston, TX granted a no evidence summary

judgment in favor of Appellees on March 2, 2015.

2. This Court should permit this appeal because the District Court’s decision

involves a controlling question of law as to which there is substantial ground for a

difference of opinion. An immediate appeal from the District Court’s Order may

materially advance the ultimate termination of the litigation. 3. Appellee moved for a no evidence summary judgment arguing in large part

that Grace Instrument Industries had no standing to enforce the non-disclosure

agreement with its former employee Melden Schmidt due to its name change from

“Grace Instrument Company, Inc.” to “Grace Instrument Industries, LLC.” See

Exhibit 1. The district court’s order granting the Appellees’ no evidence summary

judgment involves a controlling question of law because the Texas Supreme Court

has established that a company's change of name does not prevent it from its own

agreements. See In re H&R Block Financial Advisors, Inc., 235 S.W. 3d 177

(Texas 2007). "Under ordinary legal principals, a contracting party that has merely

changed its name is still a contracting party." See e.g. Coulson v. Lake LBJ Mun.

Util. Dist., 781 S.W.2d 594, 595 (Tex. 1989); Texas Co. v. Lee, 138 Tex. 167, 157

S.W.2d 628, 630 (1941). See also Contec Corp. v. Remote Solution Co., 398 F.3d

205, 207 (2d Cir.2005); Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d

753, 757 (11th Cir.1993). The Court of Appeals has also held that the appropriate

mechanism to correct standing would be the Appellee to file a Special Exception.

See Smith v. CDI Rental Equipment, 310 S.W. 3d 559 (Tex. App.-Tyler 2010).

4. Appellant requests that the Court of Appeals accept this appeal due to the

substantial difference of opinion between the 113 th District Court and the Supreme

Court of Texas and the Court of Appeals in Tyler regarding these issues. The immediate appeal of this order may materially advance the ultimate termination of

this litigation.

PRAYER

Wherefore, premises considered, Appellant prays that this Court accept this

Application for Interlocutory Appeal.

________________________________ Alfonso Kennard, Jr. Texas Bar No. 24036888 Ronald E. Dupree Texas Bar No. 24055433 5433 Westheimer, Suite 825 Houston Texas 77056 Main: 713.742.0900 Fax: 713.742.0951 alfonso.kennard@kennardlaw.com ATTORNEY-IN-CHARGE FOR GRACE INSTRUMENT INDUSTRIES, LLC CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing has been served on opposing counsel of record via the court’s ECF system on this 1st day of April 2015.

John N. Bowlin Shannon A.S. Quadros 1200 Smith Street, Suite 1400 Houston, Texas 77002 Fax No. 713-658-2553

_________________________________ Alfonso Kennard, Jr. EXHIBIT 2 01/09/2015 17:01 7135582550 CHAMBERLAIN PAGE 02/89

CAUSE NO. 2014-33726

GRACE INSTRUMENT § IN THE DISTRICT COURT INDUSTRIES, LLC § § v. § OF HARRIS COUNTY, TEXAS § MELDEN SCHMIDT AND § OFI TESTING EQUIPMENT, INC. § 113th JUDICIAL DISTRICT

DEFENDANTS, MELDEN SCHMIDT AND OFI TESTING EQUIPMENT, INC.'S, NO-EVIDENCE MOTION FOR SUMMARY .JUDGMENT

Defendants, Melden Schmidt ("Schmidt'') and OFI Testing Equipment, Jnc. ("OF!TE'')

(collectively "Defendants"), file this no-evidence motion for summary judgment as to Plaintiff,

Grace Instrument Industries, LLC's, causes of action filed against Defendants for common-law

trade secret misappropriation, breach of fiduciary duty and tortious interference with prospective

business relations, and against defendant Schmidt only for violating the Texas Theft Liability Act

and breach of contract. In support thereof, Defendants show the Court as follows:

INTRODUCTION

\. This lawsuit filed by Grace Instrument Industries, LLC 1 ("Grace" or "Plaintiff') is

nearly identical to a lawsuit filed in 2012 by Grace Instrument Company ("G/C'),2 • 3 an affiliated

entity. In the 2012 lawsuit, it was alleged, among other things, that Defendants misappropriated

GlC's trade secrets. In the current lawsuit, Grace alleges that Schmidt was its employee as

According to the Texas Secretary of State's website, Grace Instrument Industries, LLC was 1

formed on November 29, 2012, and has operated under the assumed name Grace Instrument Company since December 18, 2012. According to its most recently filed Texas Franchise Tax Public lnfonnation Report dated March 15,2013, found on the Texas Secretary of State's website, Hongfeng Bi is the President of Grace Instrument Industries, LLC. 2According to the Texas Secretary of State's website, Grace Instrument Company's Certificate of Term.ination of a Domestic Entity was filed and effective on September 3, 20\3. Its then- President, Hongfcng Bi, signed the Certificate of Termination. 3 See Cause No. 2012-33316; Grace Instn1ment Company v. Melden Schmidt and OFI Testing

Equipment, Inc.; In the \13th Judicial District Court of Harris County, Texas. 01/09/2015 17:01 7135582550 CHAMBERLAIN PAGE 03/89

opposed to GIC's. Notably, GIC terminated its existence in 2013 and ceased to be a valid entity in

Texas. Both OFITE and Grace are manufacturers of oil & gas instrumentation and measurement

tools. In the 2012 lawsuit, GIC's request for injunctive relief was denied, after which it non-suited,

without prejudice, all its claims against Schmidt and OFITE.

2. In this lawsuit, as with the 2012 suit, both Schmidt and OFITE have been sued for

common-law trade secret misappropriation, breach of fiduciary duty and tortious interference with

prospective business relations, and Schmidt only for violating the Texas Theft Liability Act and

breach of contract.• In this suit, a temporary restraining order was requested but denied.

3. Defendants answered this lawsuit with a general denial and several affirmative

defenses. Also, Defendants counterclaimed against Grace requesting sanctions for the filing of a

frivolous lawsuit; requesting a declaratory judgment that Schmidt has not breached the term.s of the

Employee Invention and Confidential Information Agreement ("Employee Agreement"); and

seeking a declaration that Defendants have not misappropriated, disclosed or allowed for the

unauthorized use of Grace's alleged trade secret information. Defendants also request their

attorney's fees.

BACKGROUND 4. Grace designs and manufactures industrial products for measurement, display and

control of process variables in the oil and gas industry. Grace's President and owner is Hongfeng

"Frank" Bi. Over seven years ago, on or about November 16, 2007, GIC (not the Plaintiff in this

lawsuit) hired Schmidt as its Business Development and Technical Sales Representative. Upon

starting his employment at GIC, Schmidt signed the Employee Agreement which set forth

Schmidt's obligations to GTC with regard to G!C's confidential and proprietary information. GlC

4In both suits, it is alleged that Schmidt breached the Employee Invention and Confidential Information Agreement between by Schmidt and GIC on November 16, 2007.

2 01/09/2015 17:01 7135582550 CHAMBERLAIN PAGE 04/89

laid-off Schmidt in February 2010. In May 2010, Schmidt began working at OFITE as its Business

Development Manager. Schmidt is cuiTently still employed by OF!TE.

5. Schmidt has no contractual or former employment relationship with Grace, the

Plaintiff in this case but Grace nonetheless alleges in its verified pleading that, "Schmidt bas

provided OFITE with Grace Instrument's intellectual property and trade secrets, including design

specifications and technical information for operation of tbe M4600, M7500LSM, M91 00 and

M9300." See attached Exhibit A, Original Petition at p. 9 '1[33. Grace also alleges that, "Schmidt

violated his fiduciary duty and duty of loyalty by misappropriating Grace Instrument's intellectual

property and trade secret information for his personal use and for the use of OFITE." Exhibit A,

Original Petition at p. 10 '1[35.

6. Schmidt has never had any relationship with Grace Instrument Industries, LLC, the

plaintiff in tbis proceeding.

7. Further, Grace's petition alleges that, "Defendant's [sic] have tortiously interfered

with Grace Instrument's business relationships with tbose customers who would have otherwise

purchased Grace Instrument's products through its misuse and utilization of Petitioner's [sic]

intellectual property and trade secrets, breaches or assisted breaches of fiduciary duty, and otber

ways asserted in this action." Exhibit A, Original Petition at p. 11 'I! 38. Grace claims that,

"Schmidt violated the Texas Theft Liability Act by taking trade secret and other confidential

information in which Grace Instrument had a possessory right." Exhibit A, Original Petition at p.

10 '1[37.

8. Finally, Grace alleges in its petition that, "Upon information and belief, in or about

May 2010, Schmidt began a course of conduct that violated his non-disclosure obligations and

duties of loyalty to Grace Instrument under Te>

3 01/09/2015 17:01 7135582550 CHAMBERLAIN PAGE 05/89

to recover attorney's fees for Schmidt's breach of his Confidentiality Agreement with the

Company." Exhibit A, Original Petition p 5 ~ 17, p. 11 ~ 39.

GROUNDS .FOR SUMMARY JUDGMENT

9. The Court should grant this no-evidence summary judgment in Defendants' favor

because, after adequate time for discovery, Grace has no evidence of one or more essential

elements of its claims against both Defendants for common-law trade secret misappropriation,

breach of fiduciary duty and tortious interference with prospective business relations, and has no

evidence of one or more essential elements of its claims against Schmidt for violating the Texas

Theft Liability Act and breach of contract. All of these claims are those for which Grace has the

burden of proof at trial. TEX. R. CJV. P. l66a{i). Most importantly, defendant Schmidt's

relationship and duties were with GIC, a now non-existent entity. Plaintiff Grace has not provided

any evidence as to how it is entitled to enforce a claim belonging to GIC, a non-existent, third-party

entity..

NO-EVIDENCE SUMMARY JUDGMENT

10. To succeed on a no-eviden.ce motion for summary judgment against a plaintiff's

cause of action, the defendant must allege that, after an adequate time for discovery, there is no

evidence of an essential element of the plaintiffs cause of action. TEX. R. ClV. P. 166a(i); see Sw.

Elec. Power Co. v. Grant, 73 S.WJd 211, 215 (Tex. 2002). lfthe defendant meets its burden, the

burden shifts to the plaintiff to produce more than a scintilla of evidence to raise a genuine issue of

material fact on the challenged e.le.ment. Tnx. R. Clv. P. 166a(i); see Forbes, Inc. v. Granada

Biosciences, Inc., 124 S.W.3d 167, 172 (Tex. 2003). The evidence must be sufficient to allow

reasonable and fair-minded people to differ in their conclusions on whether the challenged fact

exists; evidence that raises only a speculation or surmise is insufficient. !d. Ifless than a scintilla

4 01/09/2015 17:01 7135582550 CHAMBERLAIN PAGE 05/89

of evidence is produced, the defendant is entitled to a summary judgment on the plaintiff's cause of

action.

A. An Adequate time for discovery has passed.

11. Schmidt and OFITE are entitled to a no-evidence summary judgment on Grace's

causes of action because Grace has had adequate time for discovery and bears the burden of proof

on its multiple causes of action. Specifically, Grace has had an adequate time for discovery

because this case has been on file since June 11, 2014; the parties have exchanged documents; and

Hongfeng "Frank" Bi, the President of Grace, and defendant, Schmidt, have been deposed.

B. Grace has not demonstrated any relationship between itself and Schmidt or the right to enforce a claim of the non-e~istent third-party entity GIC.

12. GIC, Schmidt's former employer, terminated its existence on September 3, 2013.

See attached Exhibit B, Certified Copy of Entity Termination. Schmidt's employment relationship

and contractual confidentiality obligations were solely to GIC. See attached Exhibit C, Employee

Agreement between Schmidt and GIC (also attached as Exhibit A to Grace's Original Petition).

Notably, even though Plaintiff Grace currently uses the d/b/a Grace Instrument Industries, Plaintiff

Grace did not exist at the time of Schmidt's employment with GIC. See attached Exhibit D,

Articles oflncorporation of Plaintiff Grace; see also attached Exhibit E, Grace's d/b/a filing.

I3. Given that Schmidt was emp Joyed by GIC and then terminated two years before

Plaintiff Grace was formed in 2012, Plaintiff Grace has no evidence to show how it is entitled to

enforce obligations owed, if any, by Schmidt to GlC. Plaintiff Grace also has no evidence as to

how it is entitled to prosecute a claim, if any, on the part of GIC, a third-party entity that ceased to

exist as of September 2013.

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C. There i~ no evidence of essential elements of Grace's cause of action against Defendants for common-law trade secret misappropriation.

14. Defendants are entitled to a no-evidence summary judgment on Grace's cause of

action for common-law trade secret misappropriation because there is no evidence to support at

least one of the essential clements of Grace's cause of action. To prevail on a cause of action

against Defendants for common-law trade secret misappropriation, Grace must prove the

following:

a. Grace owned a trade secret;

b. Defendants used or disclosed the trade secret:

(1) in violation of a confidential or contractual relationship with Grace,

(2) after acquiring the trade secret by improper means, or

(3) after acquiring the trade secret from a third party with notice that the third party's disclosure was improper;

and;

c. Grace suffered injury.

K&G Oil Tool & Sen;. v. G&G Fishing Tool Sen;., 314 S.W.2d 782, 787-88 (Tex. 1958) (element

b(l), (2)); Cuidado Casero Home Health v. Ayuda Home Health Care Servs., 404 S.W.3d 737, 744

(Tex. App.-El Paso 2013, no pet.) (elements a, b(l), c); Metallurgical Indus. v. Fourtek, Inc., 790

F.2d 1195, 1204 (5th Cir. 1986) (element b(3)).

15. Grace cannot prevail on its cause of action against Defendants for common-law

trade secret misappropriation because there is no evidence that Defendants used or disclosed a trade

secret owned by Grace, the Plaintiff in this suit, which was not even in existence at the time

Schmidt worked for GIC. Grace, also, cannot demonstrate that Schmidt misappropriated GIC's

trade secrets. Moreover, in Grace's responses to Requests for Production, attached hereto as

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Exhibit F, Grace admits it has no documents evidencing .its c.laims for trade secret

misappropriation. See attached Exhibit F, Discovery Responses Nos. 34--38 (stating Grace has "no

documents responsive to th[esel request[s]"). In addition, the deposition testimony of Mr. Bi,

Grace's owner, also revealed he has no personal knowledge or evidence to support Grace's

allegations of trade secret misappropriation besides his own paranoia and conjecture. See Exhibit

G, Deposition of Frank Bi, p. 21 Ln 1-25, p. 28 Ln 7-17, p. 30 Ln 9-24, p. 31 Ln 3~10, p. 32 Ln 20-

25, p. 36 Ln. 4-9, p. 51 Ln 6-13, p. 53 Ln 1-5, p. 56 Ln 11-15, p. 61 Ln 4-13, p. 62 Ln 15-24, p. 63

Ln 5-16 (stating that he was told: that "Mel Schmidt was disclosing [confidential

information]" but that Bi did not seek to find out what was being disclosed; that he "think[s]

Mr. Schmidt" disclosed confidential information; that "he could not tell" what core holder

OF1TE currently uses; that he "do[esn't] have information about OF1TE design changes

after 2012 on their HTHP linear swell meter"; and that his evidence of Schmidt's disclosure

of Grace's trade secrets was that "Mr. Cruz said that [Schmidt] was attending those meetings

and the - -a device (sic), Grace product information," amongst other things). Consequently,

Grace is without any evidence to support an essential element of its claim of trade secret

misappropriation.

16. In addition, Grace cannot prevail on its claim for trade secret misappropriation

because there .is no evidence that Grace has suffered any injury. See attached Exhibit F, Discovery

Response No. 58 (stating Grace has "no documents responsive to this request"). Without any

evidence to support either actual misappropriation of trade secrets or any resultant injury, Grace has

no evidence of three essential elements of common-law trade secret misappropriation. Therefore,

summary judgment against Grace is proper.

7 01/09/2015 17:01 7135582550 CHAMBERLAIN PAGE 09/89

D. There is no evidence , of essential elements of Grace's cause of action against Defendants for breach of fiduciary duty.

I 7. Defendants are entitled to a no-evidence summary judgment on Grace's cause of

action for breach of fiduciary duty because there is no evidence to support at least one of the

essential elements of Grace's cause of action. To prevail on a cause of acti.on against Defendants

for breach of fiduciary duty, Grace must prove the following:

a. Grace and Schmidt had a fiduciary relationship;

b. Schmidt breached his fiduciary duty to Grace or was induced to breach his fiduciary duty by OFITE;

c. Defendants' breach resulted in

(1) injury to Grace, or

(2) benefit to Schmidt or OFITE.

The elements can be found in the following: Burrow v. Arce, 997 S.W.2d 229, 237 (Tex. 1999)

(element b); Kinzbach Tool Co. v. Corbett-Wallace Corp., 160 S.W.2d 509, 513-14 (Tex. 1942)

(elements a, b, c(2)); Plotkin v. Jaekel, 304 S.W.3d 455,479 (Tex. App.-Houston [1st Dist.] 2009,

pet. denied) (elements a, b, c(l), (2)).

18. Grace's claim for breach of fiduciary duty is first predicated on Schmidt having a

fiduciary relationship with Grace instead of his former employee GIC. As discussed in the

preceding paragraphs, the only potential fiduciary relationship Schmidt bad was with his former

employer GIC. The Plaintiff in this lawsuit never employed Schmidt and was only in existence

two years after Schmidt was no longer a GTC employee. Thus, Plaintiff Grace does not have any

evidence to show Schmidt owes it fiduciary obligations.

\9. Equally important, Grace's claim also requires a showing that Schmidt

misappropriated Grace's intellectual property and trade secret information. See Exhibit A, Petition,

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p. 10 ~ 35. However, as discussed in the preceding paragraphs, Grace can provide no documentary

evidence or competent testimony to support any claims of misappropriation. See Exhibit F,

Discovery Responses Nos. 42-45 (stating Grace has "no documents responsive to th[ese]

request[s]."). See also Exhibit G, Deposition of Frank Hip. 21 Ln l-25, p. 28 Ln 7-17, p. 30 Ln 9-

24, p. 31 Ln 3-10, p. 32 Ln 20-25, p. 36 Ln. 4-9, p. 51 Ln 6-13, p. 53 Ln 1-5, p. 56 Ln 11-15, p. 61

l,n 4-13, p. 62 Ln 15-24, p. 63 Ln 5-16. In addition, Grace has not demonstrated any injury as a

result ofthe alleged misappropriation. !d. at No. 58 (stating Grace has "no documents responsive

to this request"). Consequently, three essential elements of Grace's claim for breach offtduciary

duty are without any evidentiary support. As a result, thi.s Court should issue summary judgment in

Defendants' favor for this cause of action.

E. There is no evidence of essential elements of Grace's cause of action against Defendants for tortious interference with prospective business relations.

20. Defendants are entitled to a no-evidence summary judgment on Grace's cause of

action for tortious interference with prospective business relations because there is no evidence to

support at least one of the essential elements of Grace's cause of action. To prevail on a cause of

action against Defendants for tortious interference with prospective business relations, Grace must

prove the following:

a. There was a reasonable probability that Grace would have entered i.nto a business relationship with a third party;

b. Defendants intentionally interfered with the relationship;

c. Defendants' conduct was independently tortious or unlawful;

d. The interference proximately caused Grace's injury; and

e. Grace suffered actual damage or loss.

Coinmach Corp. v. Aspenwood Apartment C01p., 417 S.W.3d 909, 923 (Tex. 2013).

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21. Grace cannot prevail on its cause of action against Defendants for tortious

interference with prospective business relations because Grace has no evidence to support its

allegations. See Exhibit F, Discovery Response No. 48 (stating Grace has "no documents

responsive to this request"). Moreover, Grace has not specified or evidenced any prospective

relationship that was lost because of Defendant's alleged actions. Furthermore, Grace has no

documents to support any claim of injury as a result of any action on the part of Defendants. See

attached Exhibit F, Discovery Response No. 58 (stating Grace has "no documents responsive to

this request"). Given that three out of the five essential elements of Grace's claim for tortious

interference with prospective relationship are wholly unsupported by any evidence, this Court

should issue summary judgment in Defendants' favor as to these claims.

F. There is no evidence of essential elements of Grace's cause of action a~ainst Schmidt for violating the Texas Theft Liability Act. ·

22. Schmidt is entitled to a no-evidence summary judgment on Grace's cause of action

for violating the Texas Theft Liability Act because there is no evidence to support at least one of

the essential elements of Grace's cause of action. To prevail on a cause of action against Schmidt

for violating the Texas Theft Liability Act ("ITLA"), Grace must prove the following:

a. Grace had a trade secret;

b. Schmidt unlawfully appropriated the trade secret by taking it without Grace's effective consent or Schmidt appropriated the prope.rty with the intent to deprive Grace of the property; and

c. Grace sustained damages as a result of the theft.

TEX. ClV. PRAC. & REM. CODE §134.003(a) (element b); TEX. PEN. CODE §3l.03(a), (b) (elements

a-c).

23. At the outset, Grace's TTLA claims are flawed because Schmidt has never had any

afflliation with Grace, the Plaintiff in this suit, and has been an OFJTE employee prior to and since

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Plaintiff Grace came into existence as an entity in 2012. Grace can provide no evidence showing

any relationship between Schmidt and Plaintiff Grace. Grace's allegations of Schmidt's

employment prior to OFJTE all center on GIC, a non-existent non-party to this suit.

24. Further, Grace cannot prevail on its cause of action against Schmidt for violating the

Texas Theft Liability Act because there is no evidence that Schmidt unlawfully appropriated any

Grace or GIC trade secret or that Schmidt appropriated a trade secret with the intent to deprive

Grace or GJC ofthat trade secret. See attached Exhibit F, Discovery Responses Nos. 34-38 (stating

Grace has "no documents responsive to th[ese] request[s]"). See also Exhibit G, Deposition of

Frank Bi, p. 21 Ln 1-25, p. 28 Ln 7-17, p. 30 Ln 9-24, p. 31 Ln 3-10, p. 32 Ln 20-25, p. 36 Ln. 4-9,

p. 51 Ln 6-13, p. 53 Ln 1-5, p. 56 Ln 1\-15, p. 61 Ln 4-.13, p. 62 Ln 15-24, p. 63 Ln 5-16 (stating

that he was told: that "Mel Schmidt was disclosing [confidential information]" but that Bi did

not seek to find out what was being disclosed; that he "think[s] Mr. Schmidt" disclosed

confidential information; that "he could not tell" what core holder OFITE currently uses;

that he "do[esn't] have information about OFITE design changes after 2012 on their HTHP

linear swell meter"; and that his evidence of Schmidt's disclosure of Grace's trade secrets

was that "Mr. Cruz said that [Schmidt] was attending those meetings and the - - a device

(sic), Grace product information," a.mongst other things). In fact, Grace has not identified

what, if any, trade secrets have been misappropriated. Id. As with its other claims, in this instance,

Grace also cannot demonstrate any injury as a result of Schmidt's alleged acts or omissions. See

attached Exhibit F, Discovery Response No. 58 (stating Grace has "no documents responsive to

this request"). Therefore, Grace cannot sustain its claim that Schmidt violated the Texas Theft

Liability Act.

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G. There is no evidence of essential elements of Gracb•s cause of action against Schmidt I for breach of contract. ;

25. Schmidt is entitled to a no-evidence summaryijudgment on Grace's cause of action

for breach of contract, (i.e., breach of the Employee Agrcenllent), because there is no evidence to

support at least one of the essentia.l elements of Grace's cause of action. To prevail on a cause of

action against Schmidt for breach of contract, Grace must prove the following:

a. There is a valid, enforceable contract;

b. Schmidt breached the contract; and

c. Schmidt's breach caused Grace to suffer injury.

Marquis Acquisitions, Inc. v. Steadfast Ins. Co., 409 S.W .3d 808, 813-14 (Tex. App.-Da\las 2013,

no pet.).

26. Grace cannot prevail on its cause of action against Schmidt for breach of contract

because there is no valid and enforceable contract between Plaintiff Grace and Schmidt. As

discussed above, the Employment Agreement, for which Grace seeks enforcement, was between

Schmidt and GlC. As discussed above, non-party GIC has been a non-existent entity since 2013.

Furthermore, even if Grace were to somehow demonstrate that .it has the authority to prosecute

claims on the part of GTC, there is no evidence that Schmidt breached the Employee Agreement by

disclosing or misappropriating any of GIC's or Grace's proprietary and trade secret information.

See attached Exhibit F, Discovery Responses Nos. 20, 21, 27, 34-37, 39, 40, 46--51, and 54-56

(stating Grace has "no documents responsive to th[ese] request[s).''). In addition, to sustain a

claim for breach of contract, Grace bears the burden of proof as to its sustained damages as a result

of the alleged breach. Grace, however, is unable to do so. See attached Exhibit F, Discovery

Response No. 58 (stating Grace has "no documents responsive to this .-equest"). Because Grace

has no contractual relationship with Schmidt and cannot provide competent summary judgment I

12 01/09/2015 17:01 7135582550 CHAMBERLAIN PAGE 14/89

evidence showing any breach on the part of Schmidt or of any resulting damages, Grace's claim for

breach of contract necessarily fails. For this reason, this Court should enter summary judgment in

Defendants' favor.

For the foregoing reasons, Defendants ask the Court to grant this motion for summary

judgment, and for such other legal and equitable relief to which Defendants are justly entitled.

CHAMBERLAIN, HRDLICKA, WHITE, WILLIAMS & AUGHIRY

By: Is/Josh N. Bowlin William S. Helfand State Bar No. 09388250 Bill.Helfand@Chamberlainlaw.com Josh N. Bowlin State Bar No. 24036253 Josh.Bowlin@Chamberlainlaw.com Shannon A.S. Quadros State Bar No. 24072766 Shannon.Quadros@Cbamberlainlaw.com 1200 Smith Street, Suite 1400 Houston, Texas 77002 Telephone: (713) 658-1818 Telecopier: (713) 658-2553

ATTORNEYS FOR DEFENDANTS

13 01/09/2015 17:01 7135582550 CHAMBERLAIN PAGE 15/89

I hereby certify that a true and correct copy of the foregoing has been served via hand delivery; facsimile and Email on January 9, 20\5, to the following:

Alfonso Kennard, Jr. Kennard Blankenship Robinson P.C. 5433 Westheimer Rd., Suite 825 Houston, Texas 77056 Fax: 713-742-0951 E-mail: Ronald.Dupree@Kennardlaw.com; Alfonso.Kennard@Kennardlaw .com

lsi Josh N. Bowlin Josh N. Bowlin

1688327.4 120691..000001