ACCEPTED 05-15-00669-CV FIFTH COURT OF APPEALS DALLAS, TEXAS 7/9/2015 8:29:14 AM LISA MATZ CLERK
Case No. 05-15-00669-CV
FILED IN 5th COURT OF APPEALS THE COURT OF APPEALS FOR THE FIFTH DISTRICT DALLAS, TEXAS DALLAS, TEXAS 7/9/2015 8:29:14 AM LISA MATZ Clerk
STAR SYSTEMS INTERNATIONAL, LMIITED,
Appellant,
v.
3M COMPANY and 3M INNOVATIVE PROPERTIES COMPANY,
Appellees.
Interlocutory Appeal from Cause No. 401-01813-2014 401st Judicial District Court, Collin County, Texas Honorable Mark Rusch, Presiding
APPELLANT’S BRIEF
Respectfully submitted,
/s/ Blake L. Beckham Blake L. Beckham State Bar No. 02016500 blake@beckham-group.com Jose Portela State Bar No. 90001241 jose@beckham-group.com THE BECKHAM GROUP, P.C. 3400 Carlisle, Suite 550 Dallas, Texas 75204 Telephone: 214-965-9300 Facsimile: 214-965-9301
AND
Maricela Siewczynski Moore State Bar No. 24032753 maricela@maricelamoorelaw.com Law Office of Maricela Moore PLLC 3400 Carlisle, Suite 550 Dallas, Texas 75204 Telephone: 214-965-5123 Facsimile: 214-965-9301
COUNSEL FOR LOCKHART AND STAR SYSTEMS INTERNATIONAL LIMITED
ORAL ARGUMENT REQUESTED IDENTITY OF PARTIES AND COUNSEL
The following is a complete list of all parties before the Trial Court and the
names and addresses of all Trial Counsel and Appellate Counsel:
1. Defendant Star System International Limited (Appellant in this Court)
represented by:
Blake L. Beckham State Bar No. 02016500 blake@beckham-group.com Jose Portela State Bar No. 90001241 jose@beckham-group.com THE BECKHAM GROUP, P.C. 3400 Carlisle, Suite 550 Dallas, Texas 75204 Telephone: 214-965-9300 Facsimile: 214-965-9301
Maricela Siewczynski Moore State Bar No. 24032753 maricela@maricelamoorelaw.com Law Office of Maricela Moore PLLC 400 Carlisle, Suite 550 Dallas, Texas 75204 Telephone: 214-965-5123 Facsimile: 214-965-9301
2. Defendant Stephen Lockhart (not a party to this appeal)
Blake L. Beckham State Bar No. 02016500 blake@beckham-group.com i Jose Portela State Bar No. 90001241 jose@beckham-group.com THE BECKHAM GROUP, P.C. 3400 Carlisle, Suite 550 Dallas, Texas 75204 Telephone: 214-965-9300 Facsimile: 214-965-9301
Maricela Siewczynski Moore State Bar No. 24032753 maricela@maricelamoorelaw.com Law Office of Maricela Moore PLLC 400 Carlisle, Suite 550 Dallas, Texas 75204 Telephone: 214-965-5123 Facsimile: 214-965-9301
3. Plaintiffs 3M Company and 3M Innovative Properties Company (Appellee in this Court)
William A Brewer III State Bar No. 02967035 wab@brewerattorneys.com Farooq Tayab State Bar No. 24063028 fat@brewerattorneys.com Jack G.B. Ternan State Bar No. 24060707 JGT@brewerattorneys.com Brewer Attorneys and Counselors 4800 Comerica Tower 1717 Main Street Dallas, Texas 75201 Telephone: 214-653-4000 Facsimile: 214-653-1014
ii TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL……………………………………….i TABLE OF CONTENTS ....................................................................................... ..iii
INDEX OF AUTHORITIES…………………………...…………………....….....iv
STATEMENT OF THE CASE…………………………………………………….v STATEMENT REGARDING ORAL ARGUMENT……………………………..vi
STATEMENT OF JURISDICTION………………………………………………vi
ISSUES PRESENTED…………………………………………………………....vii STATEMENT OF THE FACTS………………………………………………….vii
SUMMARY OF THE ARGUMENT………………………………………………1
ARGUMENT…………………………………………………………………….…3 A. The Court Should Apply the Abuse of Discretion Standard of Review When Considering Whether the Trial Court Committed Reversible Error………...3
B. The Trial Court Committed Reversible Error When It Refused to Compel to Arbitration Appellees’ Claims that are Factually Intertwined with Appellees’ Arbitrable Claims…………………………………………………………....3
C. The Trial Court Committed Reversible Error When it Refused to Stay Litigation of Appellees’ Claims that Address the Same Issues as Appellees’ Claims that Were Compelled to Arbitration…………………………………9
PRAYER………………………………………………………………………….13
CERTIFICATE OF SERVICE……………………………………………………14
CERTIFICATE OF COMPLIANCE……………………………………………..14
iii INDEX OF AUTHORITIES
CASES
In re Merrill Lynch Trust Co FSB, 235 S.W.3d 185 (Tex. 2007).………….…...3, 9
In re FirstMerit Bank, N.A., 52 S.W.3d 749 (Tex. 2001)….…………..……….......4
Prudential Sec. v. Marshall, 909 S.W.2d 896 (Tex. 1995)……………………...…4
Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266 (Tex. 1992)………………….…...4, 5
Waisath v. Lack's Stores, 474 S.W.2d 444, 447 (Tex. 1971)……………...…….…5
Cleveland Constr., Inc. v. Levco Constr., Inc., 359 S.W.3d 843 (Tex. App.—Houston [1st Dist.] 2012, pet. dism’d)…………….....………….……3
Ascendant Anesthesia PLLC v. Abazi, 348 S.W.3d 454 (Tex. App.—Dallas 2011, no pet.)…………………………………….………...3, 5
Weekley-Homes LP v. Rao, 336 S.W.3d 413 (Tex. App.—Dallas 2011, pet. denied)…………………………………………….vi
Gray Wireline Serv. v. Cavanna, 374 S.W.3d 464 (Tex. App.—Waco 2011, no pet.)……………………………………………….....9
In re Sun, 86 S.W.3d 313 (Tex. App.—Austin 2002, no pet.)………………..……..8
In re Western Dairy Transp., LLC, No. 08-13-00190-CV, 2014 Tex. App. LEXIS 8361 (Tex. App.—El Paso July 30, 2014, no pet.)………………………..vi
STATUTES AND RULES
9 U.S.C. § 16(a)(1)………………………………………………………...……..vi
TEX R. APP. P. 28.1…………………………………………………………...…..vi
TEX. CIV. PRAC. & REM. CODE §51.016…………………………………….…... vi
TEX. CIV. PRAC. & REM. CODE §134A.002…………………………….………....7 iv STATEMENT OF THE CASE
Nature of the Case: Appellees filed suit against Appellant alleging that Appellant obtained their confidential information from Appellees’ former consultants. Appellees asserted claims against Appellant for tortious interference with the former consultants’ confidentiality agreements, conspiracy to tortiously interfere with the former consultants’ confidentiality agreements, conversion of Appellant’s confidential information, and violation of the Texas Uniform Trade Secrets Act.
Parties: Appellant is Star Systems International Limited.
Appellees are 3M Company and 3M Innovative Properties Company.
Course of Proceedings: On April 22, 2015, Appellant filed a motion to compel Appellees’ claims to arbitration and to stay the proceeding on the basis that the former consultants’ confidentiality agreements contained mandatory arbitration provisions. (CR at 67-112.)
Trial Court 401st Judicial District Court, Collin County, Texas
Trial Court Disposition: The Trial Court ordered Appellees to arbitrate their claims that Appellant interfered with the Confidentiality Agreements between Appellees and some of Appellant’s former consultants. The Trial Court also denied Appellant’s request that the Court compel to arbitration Appellees’ claims that Appellant conspired to tortiously interfere with the Confidentiality Agreements, and that the use of Appellees’ allegedly confidential information constitutes conversion and a violation of the Texas Uniform Trade Secrets Act. The Court also denied Appellant’s request that the trial court stay the proceedings pending arbitration of Appellees’ arbitrable claims.
v RECORD AND APPENDIX REFERENCES
References to the Clerk’s Record and Reporter’s Record in this Brief are to
page numbers. Clerk’s Record references are abbreviated by page number as
“CR.” Reporter’s Record references are abbreviated by page number as “RR.”
STATEMENT REGARDING ORAL ARGUMENT
Appellant believes oral argument would be helpful to the Court in resolving
the merits of this interlocutory appeal involving important issues pertaining to
arbitrability and stay of proceedings and hereby requests oral argument.
STATEMENT OF JURISDICTION
This is an accelerated, interlocutory appeal pursuant to Texas Rule of
Appellate Procedure 28.1, Texas Civil Practice and Remedies Code § 51.016, and
9 U.S.C. § 16(a)(1). See Weekley-Homes LP v. Rao, 336 S.W.3d 413, 418 (Tex.
App.—Dallas 2011, pet. denied) (court has jurisdiction over appeal of order
denying motion to compel arbitration when the parties agree to arbitrate subject to
the FAA or when the transaction at issue affects or involves interstate commerce).
In the alternative, this is a writ of mandamus. See In re Western Dairy
Transp., LLC, No. 08-13-00190-CV, 2014 Tex. App. LEXIS 8361, at *2-3 (Tex.
App.—El Paso July 30, 2014, no pet) (“Mandamus is the appropriate procedure by
which [the court of appeals] may review the trial court’s ruling on a motion to
compel arbitration under the common law.”).
vi ISSUES PRESENTED
1. Did the trial court commit reversible error when it held that Appellees’
claims for conversion, conspiracy to tortiously interfere with the
Confidentiality Agreements, and claims for violation of the Texas Uniform
Trade Secrets Act were not factually intertwined with Appellees’ claims for
tortious interference with the Confidentiality Agreements and on that basis
denied Appellant’s request to compel Appellees’ claims to arbitration?
2. Did the Trial Court commit reversible error when it held that Appellees’
claims against Lockhart and their claims that Appellant tortiously interfered
with the Karr Consulting Agreement did not address the same issues as the
arbitrable claims for tortious interference with the Confidentiality
Agreements?
STATEMENT OF THE FACTS
This lawsuit arises from a dispute over whether certain of Appellees’ former
employees and consultants shared Appellees’ confidential information with
Appellant in violation of their respective confidentiality agreements. Originally,
this lawsuit was filed by Appellees against their former employee Stephen
Lockhart (“Lockhart”) who they alleged violated his non-compete and
confidentiality agreements when he resigned from Appellees’ employment. (CR at
vii 28.) After his resignation, Lockhart joined Appellant as its Chief Technology
Officer (CR at 31.)
On January 23, 2015, Appellees added Appellant as a party and asserted that
Appellant obtained Appellees’ confidential information not only from Lockhart,
but also from Appellees’ former consultants Chris Cheung (“Cheung”), Robert
Karr (“Karr”), Jet Lai (“Lai”), Darko Shyur (“Shyur”), and Ava Tang (“Tang”).1
Cheung, Tang, Lai, and Shyur signed Confidentiality Agreements that prohibited
them from disclosing or using Appellees’ confidential information. (CR at 82, 88,
94.)
Pursuant to the Confidentiality Agreements, the definition of “confidential
information” includes: “trade secrets, inventions, innovations, processes,
information, legal documents, financial records, specifications, and other
confidential, proprietary, and privileged information owned or licensed by
Company and/or used by Company in connection with the scope of work set forth
in Exhibit “A” or in connection with the general operation of Company’s business.
(CR at 82, 88, 94.) The Confidentiality Agreement also contain broad arbitration
provisions, which provide: “Any controversy arising out of the terms of this
Agreement or its interpretation shall be settled and resolved in the State of
California, County of Orange, in accordance with the rules of the American
1 Cheung, Karr, Lai, Tang, and Shyur are collectively referred to herein as “Former Consultants.” viii Arbitration Association, and the judgment upon award may be entered in any court
having jurisdiction over such controversy. (CR at 83, 89, 95.)
Karr also signed a Confidentiality Agreement, however, the one upon which
Appellees rely to support their claims does not contain an arbitration provision.
(CR at 100-105).2
On April 22, 2015, Appellant filed a motion to compel to arbitration
Appellees’ claims against Appellant on the basis that Appellees were equitably
estopped from refusing to arbitrate their claims that rely upon the Confidentiality
Agreements or are intertwined with claims that rely upon the Confidentiality
Agreements (CR at 67-79.).
On May 7, 2015, the trial court granted in part Appellant’s motion to compel
arbitration finding that the Confidentiality Agreements executed by Cheung, Lai,
Tang, and Shyur contained mandatory arbitration provisions that required
Appellees to arbitrate their claims for tortious interference with the Confidentiality
Agreements because the claims related to the agreements executed by Cheung, Lai,
Tang, and Shyur. (CR at 133-135). The trial court also denied in part the motion
2 On March 11, 2015, Appellee filed a counterclaim requesting the trial court declare that the Karr Confidentiality Agreement upon which Appellees rely was superseded by a second agreement, which does not have a confidentiality agreement that survived the termination of Karr’s engagement as a consultant, and that the agreement upon which Appellees rely is of no force or effect. (CR at 61- 66, 107-112.) The trial court has not adjudicated Appellant’s counterclaim. Therefore, for purposes of this appeal, Appellant refers to the Karr Confidentiality Agreement pled by Appellees. ix to compel arbitration finding that Appellees’ claims relating to the alleged
disclosure of confidential information by Karr in violation of his Confidentiality
Agreement, as well as Appellees’ claims for conspiracy to tortiously interfere with
all of the Confidentiality Agreements, conversion of Appellees’ confidential
information, and violation of the Texas Uniform Trade Secrets Act “blend in [with
the claim for tortious interference with the Confidentiality Agreements, but], they
are easily separable.” (RR at 15, CR at 133-135.)
The trial court also denied Appellant’s request to stay the litigation of the
following claims: Appellees’ claims relating to the Karr Confidentiality
Agreement; claims asserting that the use by Appellant of confidential information
that it obtained from Cheung, Lai, Tang, and Shyur constituted conversion,
conspiracy to tortiously interfere with the Confidentiality Agreements, and a
violation of the Texas Uniform Trade Secrets Act; and their claims against
Lockhart for disclosing Appellees’ confidentiality information to Appellant and
breaching his non-compete agreement. (CR at 133-135.)
This interlocutory appeal arises from the trial court’s denial of Appellant’s
request to compel to arbitration all claims that are factually intertwined with
Appellees’ claims for tortious interference with the Confidentiality Agreements
executed by Cheung, Lai, Tang, and Shyur, and its denial of Appellant’s request to
stay these proceeding pending an arbitration of the arbitrable claims.
x SUMMARY OF THE ARGUMENT
The trial court’s denial in part of the Motion to Compel Arbitration and Stay
the Proceedings constitutes reversible error because Appellees’ claims that the trial
court refused to compel to arbitration are factually intertwined with the claims that
the trial court compelled to arbitration. The trial court compelled to arbitration
Appellees’ claims for tortious interference with the Confidentiality Agreements
executed by Cheung, Lai, Tang, and Shyur. Those claims cannot be properly
adjudicated in arbitration if at the same time Appellees’ claims that Appellant
conspired to tortiously interfere with the Confidentiality Agreements executed by
Cheung, Lai, Tang, and Shyur, as well as their claims for conversion and violation
of the Texas Uniform Trade Secrets Act (claims that rely upon the disclosure of the
same confidential information that is allegedly protected by the Confidentiality
Agreements) are ordered to proceed in the trial court in a parallel proceeding.
The trial court also committed reversible error in denying Appellant’s
request to stay the litigation of claims that address the same issues as the claims
that the trial court ordered to arbitration. The trial court compelled to arbitration
Appellees’ claims that Appellant tortiously interfered with the Confidentiality
Agreements executed by Appellees’ former consultants Cheung, Lai, Tang, and
Shyur, but at the same time refused to stay the litigation of Appellees’ claim that
Appellants tortiously interfered with the Confidentiality Agreement executed by
1 Appellees’ former consultant Karr. Appellees make no factual distinction between
their allegations that Appellant interfered with the Confidentiality Agreements
executed by Cheung, Lai, Tang, and Shyur, versus their allegations that Appellant
interfered with the Confidentiality Agreement executed by Karr. Therefore,
allowing their claims relating to the Karr Confidentiality Agreement to proceed in
the trial court while Appellees tortious interference claim, as they relate to the
Confidentiality Agreements executed by Cheung, Lai, Tang, and Shyur, to proceed
in arbitration will render the arbitration moot.
Also, allowing Appellees’ claims against Lockhart, as well as their claims
for conspiracy to tortiously interfere with the Confidentiality Agreements,
conversion, and violation of the Texas Uniform Trade Secrets Act to proceed
before the arbitration is completed will render moot the arbitration of Appellees’
claims for tortious interference with the Confidentiality Agreements executed by
Cheung, Lai, Tang, and Shyur.
For these reasons, Appellant request that the Court reverse the trial court’s
order Denying in Part the Motion to Compel Arbitration and Stay the Proceedings,
order the trial court to compel to arbitration all of Appellees’ claims for conspiracy
to tortiously interfere with the Confidentiality Agreements, conversion, and
violation of the Texas Uniform Trade Secrets Act, and stay the proceedings of all
other claims asserted in the trial court.
2 ARGUMENT
A. The Court Should Apply the Abuse of Discretion Standard of Review When Considering Whether the Trial Court Committed Reversible Error. Texas courts apply the abuse of discretion standard of review when
considering whether a trial court committed reversible error in denying a motion to
compel arbitration. See Cleveland Constr., Inc. v. Levco Constr., Inc., 359 S.W.3d
843, 851 (Tex. App.—Houston [1st Dist.] 2012, pet. dism’d). Texas courts also
apply the abuse of discretion standard of review when considering whether a trial
court committed reversible error in denying a motion to stay litigation pending the
outcome of arbitration. See In re Merrill Lynch Trust Co FSB, 235 S.W.3d 185,
188, 196 (Tex. 2007).
In applying this standard, the Court gives deference to the trial court’s
factual determinations and reviews its legal conclusions de novo. See Cleveland
Constr., Inc., 359 S.W.3d at 851. “Whether an arbitration clause imposes a duty to
arbitrate is a matter of contract interpretation and a question of law for the court to
review de novo.” Ascendant Anesthesia PLLC v. Abazi, 348 S.W.3d 454, 458
(Tex. App.—Dallas 2011, no pet.). In a de novo review, the trial court’s decision
is given absolutely no deference. Id. at 348.
B. The Trial Court Committed Reversible Error When It Refused to Compel to Arbitration Appellees’ Claims that are Factually Intertwined with Appellees’ Arbitrable Claims. It is well settled that arbitration is strongly favored under federal and state 3 law. See Prudential Sec. v. Marshall, 909 S.W.2d 896,898 (Tex. 1995). “The
policy in favor of enforcing arbitration agreements is so compelling that a court
should not deny arbitration unless it can be said with positive assurance that an
arbitration clause is not susceptible of an interpretation which would cover the
dispute at issue.” Id. at 899. A party seeking to compel arbitration must show: (1)
the existence of a valid arbitration agreement, and (2) that the dispute falls within
the scope of the agreement. See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753
(Tex. 2001). In making such determination, courts focus on the factual allegations,
rather than the legal causes of action asserted. See Marshall, 909 S.W.2d at 900.
If a claim is factually intertwined with arbitrable claims, the parties should be
compelled to arbitrate their dispute even if the dispute is grounded in a legal theory
distinct from a breach of contract claim. See Jack B. Anglin Co. v. Tipps, 842
S.W.2d 266, 270 (Tex. 1992).
The trial court ordered Appellees’ claims for tortious interference with the
Former Consultants’ Confidentiality Agreements to be adjudicated in arbitration
(CR at 134, RR at 15.) Importantly, Appellees do not appeal the trial court’s
finding on the enforceability and applicability of the Confidentiality Agreements.
Therefore, there is no dispute that the arbitration agreements at issue are
enforceable against Appellees and require that all claims within their scope, as well
as those claims that are factually intertwined, be adjudicated in arbitration.
4 The issue before this Court is whether the trial court committed reversible
error when it held that Appellees’ claims for conspiracy to tortiously interfere with
the Confidentiality Agreements, conversion, and violation of the Texas Uniform
Trade Secrets Act are not factually intertwined with their claims for tortious
interference with the Confidentiality Agreements because, as the trial court noted,
although they “blend,” they are “easily separable[.]” (RR at 15.)
When evidence to support arbitrable claims is the same evidence that is
relevant to the claims that are not grounded in contract, the claims are factually
intertwined and should all be determined in arbitration. See Tipps, 842 S.W.2d at
271 (although misrepresentation claims are grounded in legal theories distinct from
the contract claims, claims are factually intertwined because the same evidence
will be required to support DTPA and breach of contract claims); see also
Ascendant Anesthesia PLLC, 348 S.W.3d at 462 (“To be within the scope of an
arbitration provision, the allegations need only be factually intertwined with
arbitrable claims or otherwise touch upon the subject matter of the agreement
containing the arbitration provision.”).
Appellees assert in support of their tortious interference with existing
contract claims that Appellant interfered with the Former Consultants’
Confidentiality Agreements by using Appellees’ “confidential information,” as that
term is defined. (CR at 39). “Confidential information” as used in the
5 Confidentiality Agreements means: “trade secrets, inventions, innovations,
processes, information, legal documents, financial records, specifications and other
confidential, proprietary and privileged information owed or licensed by
[Appellees], and/or used by [Appellees] in connection with the scope of work set
forth in ‘Exhibit A’ or in connection with the general operation of [Appellees’]
business.” (CR at 25, 42.) Therefore, to prevail on their claim for tortious
interference with the Confidentiality Agreements, Appellees will have to present
evidence that Appellant used their trade secrets, inventions, processes, information,
legal documents, financial records, specifications, and other confidential and
proprietary information. This is the same evidence that Appellees will be required
to present to support their claims for conversion, conspiracy, and violation of the
Texas Uniform Trade Secrets Act.
To prevail on their conversion claim, Appellees must prove that Appellant
exercised unauthorized and unlawful control over Appellees’ personal property to
the exclusion or inconsistent with Appellees’ rights. See Waisath v. Lack's Stores,
474 S.W.2d 444, 447 (Tex. 1971) (conversion is the unauthorized and unlawful
assumption and exercise of dominion and control over the personal property of
another which is to the exclusion of, or inconsistent with, the owner's rights). The
“property” that Appellees assert Appellant converted is the information that is
covered by the Confidentially Agreements’ definition of “confidential
6 information.” (CR at 42) (“[Appellant] assumed and exercised the right of
ownership over confidential and proprietary information, trade secrets, and
tangible property belonging to [Appellees] to the exclusion of [Appellees’]
rights.”). Therefore, Appellees will attempt to rely upon the same evidence to
support their claims for tortious interference with the Confidentiality Agreements
and for conversion.
The Texas Uniform Trade Secrets Act makes it unlawful for a party to
acquire a “trade secret” of another if the party knows or has reason to know that
the trade secret was acquired by “improper means.” TEX. CIV. PRAC. & REM. CODE
§ 134A.002(3)(A). The term “trade secret” is defined by the Texas Uniform Trade
Secrets Act to mean: “information, including a formula, pattern, compilation,
program, device, method, technique, process, financial data, or list of actual or
potential customers or suppliers. . . .” TEX. CIV. PRAC. & REM. CODE §
134A.002(6). The term “improper means” includes theft, bribery,
misrepresentation, breach or inducement of a breach of a duty to maintain secrecy,
to limit use, or to prohibit discovery of a trade secret, or espionage through
electronic or other means.” TEX. CIV. PRAC. & REM. CODE § 134A.002(2).
Appellees allege that Appellant is in violation of the Texas Uniform Trade Secrets
Act because it acquired Appellees’ “trade secrets” that Appellant obtained from the
Former Consultants who allegedly breached their Confidentiality Agreements.
7 (CR at 41) (“[Appellant] acquired, disclosed and used [Appellees’] trade secrets by
improper means, in that it took trade secrets known by Lockhart and the Former
Consultants and used them to its benefit.”). Therefore, to prove their claim,
Appellees will seek to present evidence that the Former Consultants breached the
Confidentiality Agreements and disclosed the allegedly confidential and
proprietary information protected by those agreements. This is the same evidence
that Appellees will seek to rely upon to support their claim for tortious interference
with the Confidentiality Agreements.
In support of their conspiracy claim, Appellees allege that Appellant and
Lockhart conspired to interfere with the Former Consultants’ Confidentiality
Agreements. (CR at 45). Therefore, to prove their conspiracy claim, Appellees
will have to prove that Appellant, in fact, interfered with the Confidentiality
Agreement. The evidence that Appellees will attempt to present to support their
tortious interference with a contract claim is the exact same evidence that it will
seek to rely upon to support their claim for conspiracy to tortiously interfere with
the Confidentiality Agreements.
The complete overlap of factual issues mandates that Appellees adjudicate
their conspiracy, conversion, and violation of Texas Uniform Trade Secrets Act
claims in arbitration. See In re Sun, 86 S.W.3d 313, 318 (Tex. App.—Austin 2002,
no pet.) (tort claims are intertwined with arbitrable claims when they are factually
8 based entirely upon the same alleged acts).
C. The Trial Court Committed Reversible Error When it Refused to Stay Litigation of Appellees’ Claims that Address the Same Issues as Appellees’ Claims that Were Compelled to Arbitration. “Both the Federal and Texas Arbitration Acts require courts to stay litigation
of issues that are subject to arbitration.” In re Merrill Lynch Trust Co., 235 S.W.3d
185, 194 (Tex. 2007). “Without such a stay, arbitration would no longer be the rapid,
inexpensive alternative to traditional litigation it was intended to be so long as one
could find a trial judge willing to let the litigation proceed for a while.” Id. (internal
quotation omitted). “Thus, when an issue is pending in both arbitration and
litigation, the Federal Arbitration Act generally requires the arbitration to go forward
first. [A]rbitration should be given priority to the extent it is likely to resolve issues
material to this lawsuit.” Id. (internal quotation omitted). “Even when a party has
brought arbitrable claims against one party and claims not subject to arbitration
against another party in the same lawsuit, courts should stay all litigation if the
collateral litigation addresses the same issues as arbitration which threatens to render
the arbitration moot.” See Gray Wireline Serv. v. Cavanna, 374 S.W.3d 464, 472
(Tex. App.—Waco 2011, no pet.) (citing Merrill Lynch Trust, 235 S.W.3d at 195-
196)).
This case arises from Appellees’ assertion that Lockhart and the Former
Consultants had access to 3M’s technical knowledge, product information, pricing
information, and customer information, and that they shared this information with 9 Appellant. (CR at 20-21, 41.) (First Am. Pet., ¶¶ 27-29, 108). Appellees assert that
when the Former Consultants shared Appellees’ information with Appellant, they
breached the Confidentiality Agreements. Appellees rely on the Former Consultants’
purported contract breaches to support their claims against Appellant under various
causes of action. (CR at 25-26, 39-40, 41, 42, 45.) (First Am. Pet., ¶¶ 40-43, 100-
102, 107-108, 113, 129).
The trial court correctly held that Appellees’ claims that Appellant tortiously
interfered with Cheung, Lai, Tang, and Shyur’s Confidentiality Agreements must be
determined by arbitration. Therefore, Appellees’ claims that Appellant tortiously
interfered with the Confidentiality Agreements executed by Tang, Cheung, Shyur,
and Lai were compelled to arbitration, and all discovery and proceedings relating to
the alleged interference by Appellant with the Confidentiality Agreements executed
by Tang, Cheung, Shyur, and Lai’s Confidentiality Agreements were stayed. (CR at
134.)
The trial court did not compel to arbitration or stay Appellees’ claims that
Appellant interfered with Karr’s Confidentiality Agreement because the
Confidentiality Agreement upon which Appellees rely in support of their claim that
10 Appellant interfered with Karr’s confidentiality obligations does not contain an
arbitration agreement. (CR at 43.)3
The practical result of the trial court’s order is that the exact same arbitrable
tortious interference claims will be adjudicated in parallel proceedings: claims
relating to Tang, Cheung, Shyur, and Lai’s Confidentiality Agreements will be
determined in arbitration while claims relating to Karr’s Confidentiality Agreement
will proceed in the trial court. Also, although the court stayed the discovery and
proceedings relating to Tang, Cheung, Shyur, and Lai, it did not stay any of the
discovery or proceedings relating to Karr. (CR at 134.) The stay as currently in
effect creates a quagmire and renders moot the arbitration proceeding because
Appellees do not distinguish their claims between Karr and the other Former
Consultants. (CR at 19) (defining the term “Former Consultants” to include Cheung,
Karr, Lai, Shyur, and Tang); (CR at 19) (alleging that Appellant misused
Confidential Information from the “Former Consultants,” including Karr); (CR at 41)
(alleging in support of violation of Texas Uniform Trade Secret Act claim that
“Former Consultants,” including Karr, breached their duties and shared confidential
information with Appellant); (CR at 42) (alleging in support of conversion claim that
3 Appellant filed a counterclaim seeking a declaration that the contract on which Appellees rely is not the controlling agreement between Appellees and Karr. However, that claim has not been adjudicated, and therefore, for purposes of this appeal, Appellant will refer to the agreement on which Appellees rely. (CR at 61- 66.) 11 Appellant used confidential information that it obtained from “Former Consultants,”
including Karr); (CR at 45) (alleging in support of their conspiracy claim that
Lockhart and Appellant conspired to use Appellees’ confidential information in
violation of the Confidentiality Agreements executed between Appellees and
“Former Consultants,” including Karr).
Allowing the trial court proceedings to continue also renders moot the claims
that are arbitrable because Appellees’ claims that Lockhart shared confidential
information with Appellant will proceed without allowing a complete determination
of whether Appellant rightfully obtained the “confidential information” at issue from
Tang, Cheung, Shyur, and Lai.4
For the reasons stated above, all claims by Appellees against Appellant and
Lockhart should be stayed pending the arbitration of Appellees’ arbitrable claims
because Appellees’ claims against Appellant and Lockhart all address the same
issues as the claims that are required to be determined by arbitration.
4 The only claim that Appellees assert against Lockhart that does not arise from Appellees’ allegation that Lockhart disclosed Appellees’ confidential information or that he acted improperly in concert with Appellant is Appellees’ breach of the non-compete agreement claim. (CR at 33.) (First Am. Pet.¶ 69). The trial court committed reversible error when it refused to stay the litigation of this claim because Appellees’ assertion that Lockhart’s breach caused Appellees to lose customers cannot be adjudicated without first adjudicating whether the purported loss of customers to Appellant was caused by activities by the Former Consultants, and that particular claim relates back to the Confidentiality Agreements. 12 PRAYER
For these reasons, Appellant respectfully requests that the Court reverse the
trial court’s order denying in part the Motion to Compel Arbitration and to Stay
Proceedings and remand this cause to the trial court for further proceedings
consistent with this Court’s ruling. Appellant also respectfully request such further
relief, general or specific to which it may be entitled at law or in equity.
/s/ Blake L. Beckham Blake L. Beckham State Bar No. 02016500 blake@beckham-group.com Jose Portela State Bar No. 90001241 jose@beckham-group.com THE BECKHAM GROUP, P.C. 3400 Carlisle, Suite 550 Dallas, Texas 75204 Telephone: 214-965-9300 Facsimile: 214-965-9301
Maricela Siewczynski Moore State Bar No. 24032753 maricela@maricelamoorelaw.com Law Office of Maricela Moore PLLC 3400 Carlisle, Suite 550 Dallas, Texas 75204 Telephone: 214-965-5123 Facsimile: 214-965-9301
13 COUNSEL FOR LOCKHART AND STAR SYSTEMS INTERNATIONAL LIMITED
CERTIFICATE OF SERVICE
I hereby certify that on July 9, 2015, a true and correct copy of the foregoing Appellant’s Brief was served on all counsel of record listed below in accordance with Rule 9.5(c) of the Texas Rules of Appellate Procedure via electronic filing as follows:
Via Electronic Mail at JGT@brewerattorneys.com Jack George Ternan Brewer Attorneys and Counselors 1717 Main Street Ste. 4800 Dallas, Texas 75201
/s/ Maricela Siewczynski Moore Maricela Siewczynski Moore
CERTIFICATE OF COMPLIANCE
This brief complies with the type-volume limitation of TEX. R. APP. P. 9.4(i) because, exclusive of the matters excepted from the word count limitations of the Rule, this Brief contains 3,523 words.
I:\STAR Systems Int'l\Appellant Brief 070815.doc