STATE OF LOUISIANA
COURT OF APPEAL
FIRST CIRCUIT
NUMBER 2018 CA 0881
TURBINE POWERED TECHNOLOGY, LLC
V&/ VERSUS
PAT, DAVID CROWE, KENNETH BRACCIO, DANIEL FOLEY, GEORGE ACKSON, KENT ELLSWORTH, ARIZONA TURBINE TECHNOLOGY, INC., ADVANCED TURBINE SERVICES, LLC AND TURBINE INTEGRATED POWER SYSTEMS, LLC
P/9j and
2018 CW 0537
VERSUS
DAVID CROWE, KENNETH BRACCIO, DANIEL FOLEY, GEORGE JACKSON, KENT ELLSWORTH, ARIZONA TURBINE TECHNOLOGY, INC., ADVANCED TURBINE SERVICES, LLC AND TURBINE INTEGRATED POWER SYSTEMS, LLC
Judgment Rendered: SEP 0 5 2019
Appealed from the Sixteenth Judicial District Court In and for the Parish of St. Mary State of Louisiana Suit Number 130, 379
Honorable Gregory P. Aucoin, Presiding
D. C. Panagiotis Counsel for Plaintiff/Appellee Lafayette, LA Turbine Powered Technology, LLC
Holden Hoggatt Franklin, LA Adam G. Young Counsel for Defendants/ Appellants Lafayette, LA David Crowe, Kenneth Braccio, Arizona Turbine Technology, LLC and Advanced Turbine Services, LLC John Alden Meade New Orleans, LA
S. Patrick Skiles Morgan City, LA
Thomas T. Townsend Natchitoches, LA
BEFORE: GUIDRY, THERIOT, AND PENZATO, JJ.
2 GUIDRY, J.
Defendants/ appellants, David Crowe, Arizona Turbine Technology, Inc.,
Kenneth Braccio, and Advanced Turbine Services, LLC, appeal from a judgment
of the trial court dismissing their motion to dissolve a preliminary injunction
granted in favor of plaintiff, Turbine Powered Technology, LLC. For the reasons
that follow, we reverse and remand.
FACTS AND PROCEDURAL HISTORY
Ted Lee McIntyre, II invented a turbine -powered equipment package for
hydraulic fracturing, trademarked as the " Frac Stack Pack," which uses helicopter
engines to power frac pumps. McIntyre founded and developed several companies
involving turbine -powered technology to use in the oil and gas industry.
McIntyre granted one of these companies, MTT Properties, LLC ( MTTP), the
exclusive right to make, have made, use, offer for sale, and sell the Frac Stack
Pack.
Additionally, to capitalize on the value of the Frac Stack Pack and turbine -
powered frac technology, McIntyre created Green Field Energy Services, Inc.,
Green Field) as a fracking operations company. MTTP and Green Field
subsequently formed and became members of Turbine Powered Technology, LLC
TPT) to manufacture the Frac Stack Packs. MTTP assigned the Frac Stack Pack
intellectual property to TPT.
On September 22, 2011, TPT and Green Field entered into a Turbine Driven
Equipment License Agreement, under which TPT granted Green Field an exclusive
license to the Frac Stack Pack trademark and an exclusive license to the Frac Stack
Pack technology. Pursuant to this agreement, Green Field received the exclusive
right to use, sell, lease, and commercialize the Frac Stack Pack equipment
purchased from TPT under the agreement. However, TPT did not transfer
3 ownership of the frac intellectual property. During that time, Danny Foley and
George Jackson were employees of Green Field.
TPT subsequently executed a vendor agreement with Advanced Turbine
Services, LLC ( ATS) on October 4, 2011, to provide additional turbine -powered
frac equipment to Green Field. Pursuant to the vendor agreement, ATS agreed to
provide TPT with TF40 and TF55 turbine engines and digital engine controls
FADEC and/ or IDEC)' to be used in the frac equipment. ATS procured the
digital engine controls hardware from its subcontractor, Tucson Embedded
Systems, Inc. ( TES), and resold the hardware to TPT. At the time, Kenneth
Braccio owned and managed ATS and David Crowe was the President, Director,
and majority shareholder of TES. TES subsequently shipped engine controls
directly to TPT. TES executed a mutual non -disclosure agreement with Green
Field, effective June 16, 2013. Green Field filed for bankruptcy in October 2013,
and the bankruptcy proceedings terminated its exclusive license to TPT' s
intellectual property in the Frac Stack Pack and derivative technology.
On December 17, 2012, Braccio became an employee of TPT and executed
a non -disclosure and confidentiality agreement. Crowe subsequently created
Arizona Turbine Technology, LLC, for which Kent Ellsworth was the agent for
service of process, and Arizona Turbine Technology, Inc. ( AZT) to produce and
sell turbine -powered frac equipment. Crowe and Braccio subsequently co- founded
Turbine Industrial Power Systems ( TIPS). ( R. 154) Thereafter, in July 2016,
Crowe sold his equity in TES back to the corporation. As part of this agreement,
Crowe released all interest in properties and contracts of TES, except Eco- Stim
1 FADEC refers to " Fully Authorized Digital Engine Control" and IDEC refers to " Industrial Digital Engine Control."
0 Energy Solutions, Inc., and TES released all claims of ownership or other interest
in or relating to AZTTech.2
On November 7, 2016, TPT filed a petition for damages and injunctive
relief, naming as defendants Crowe, Braccio, Foley, Jackson, Ellsworth, Arizona
Turbine Technology, LLC, AZT, ATS, and TIPS. TPT alleged that defendants
have usurped and now claim ownership and legal rights in and to TPT' s
intellectual property, trade secrets, and derivative products. TPT asserted that
defendants have no legitimate legal right in or to TPT' s intellectual property or
derivative intellectual property, including modifications of turbine engine controls
for hydraulic fracturing equipment. TPT alleged that defendants publicly and
repeatedly represented themselves to be the owners of TPT' s proprietary
technology and that AZT publicly placed photos and descriptions of TPT' s
equipment and accomplishments on its website, which is designed to mislead
prospective purchasers into contracting with AZT instead of TPT. TPT alleged
that as manager of AZT, Crowe has individually, personally, and unlawfully
misappropriated TPT' s intellectual property, namely digital engine control
modifications developed pursuant to and during the term of the vendor agreement
between TPT and ATS.
TPT asserted that defendants AZT, Crowe, and Braccio publicly and falsely
represented that they and their affiliates own the frac technology developed by and
on behalf of TPT and that the misrepresentations have damaged TPT' s past,
current, and future business contracts and prospects. TPT alleged that Foley,
Jackson, Ellsworth, ATS, TIPS, and Braccio participated in and aided and abetted
AZT and Crowe' s attempted and actual misappropriation.
TPT asserted claims for declaratory relief; breach of contract for breach of
the vendor agreement; bad faith breach of contract; intentional and/ or negligent
z AZTTech is defined in the agreement as AZT, LLC; AZT, Inc., and TIPS.
5 misrepresentation, detrimental reliance; fraud and fraud in the inducement;
violation of Louisiana Unfair Trade Practices and Consumer Protection Law, La.
R.S. 51: 1401, et seq.; Louisiana Uniform Trade Secrets Act, La. R.S. 51: 1431-
1439; criminal liability for business record theft; tortious interference with
business relationships; unjust enrichment; breach of fiduciary duty; and injunctive
relief in the form of a temporary restraining order, preliminary injunction, and
permanent injunction.
TPT also filed an application for a temporary restraining order and for
preliminary injunction. TPT asserted that notice would be futile and that security
was dispensed with by operation of law, because the vendor agreement and non-
disclosure agreement do not include or require applicant to post security and the
contracts constitute the law between the parties. The trial court subsequently
signed an order granting the temporary restraining order on November 14, 2016.
TPT requested service on all named defendants, and a hearing on plaintiff's request
for preliminary injunction was set for January 3, 2017. At the January 3, 2017
hearing, following submission of evidence by TPT, the trial court granted TPT' s
request for a preliminary injunction. Additionally, due to the failure of any of the
defendants to make an appearance, TPT moved for a preliminary default against
the defendants who had been served. 3 The trial court signed an order granting a
preliminary injunction on January 5, 2017, against Ellsworth, Braccio, Arizona
Turbine Technology, LLC, AZT, ATS, and TIPS.' The trial court also entered a
preliminary default against the same defendants and set a hearing to confirm the
default judgment for March 6, 2017.
3 According to the record, TPT presented evidence that service had been made on all named defendants except Crowe. Crowe was not served with notice of the petition until after the trial court signed the judgment granting a preliminary injunction.
4 We note that Foley, Crowe, and Jackson are not named in the order granting TPT' s preliminary injunction. Jackson was subsequently dismissed by plaintiff on February 13, 2017; however, in a subsequently filed amended petition, Jackson was again named as a defendant. 0 Crowe, Braccio, Arizona Turbine Technology, LLC, AZT, and ATS
thereafter filed exceptions to plaintiff' s petition. However, Ellsworth did not make
an appearance on the record. Therefore, following the March 6, 2017 hearing to
confirm default judgment, the trial court signed a judgment ordering that a
judgment of default be entered against Ellsworth and awarding TPT
30, 239, 464. 00 in damages.
On May 26, 2017, defendants Crowe, Braccio, AZT, ATS, and Foley filed a
motion to dissolve preliminary injunction and for damages. Defendants asserted
that there is no legal or factual basis to support the preliminary injunction,
including that TPT is not at risk of suffering irreparable harm absent the injunction;
TPT has an adequate remedy at law; TPT cannot show that it is likely to prevail on
the merits; and the requirement of security has not been met. The trial court held a
hearing on June 15, 2017, on the defendants' motion to dissolve preliminary
injunction. The trial court took the matter under advisement and subsequently
signed a judgment on July 17, 2017, denying the motion to dissolve.
While the matter was under advisement, the defendants filed a notice of
removal, stating that they had removed the action to the United States District
Court for the Western District of Louisiana. TPT filed a motion to remand in the
U.S. district court, which was granted on February 23, 2018, and the action was
remanded to the Sixteenth Judicial District Court. Defendants filed a motion to
correct the record, seeking to have the trial court re -date or re- enter a judgment
denying defendants' motion to dissolve because at the time the trial court signed
the July 17, 2017 judgment, it had been divested of jurisdiction because the case
had been removed to federal court. Because the defendants desired to appeal from
the trial court' s judgment denying their motion to dissolve, they requested that the
trial court cure any technical problems in the July 17, 2017 judgment. The trial
court, however, denied defendants' motion.
7 TPT thereafter filed a motion for contempt, claiming that the defendants
were in contempt of the trial court' s order granting a preliminary injunction in
favor of plaintiff. At the contempt hearing, the trial court again ruled on
defendants' motion to dissolve preliminary injunction, denying the motion, and
subsequently signed a judgment on April 2, 2018, reaffirming its previous
judgment denying the motion to dissolve. Crowe, AZT, Braccio, and ATS now
appeal from the trial court' s judgment. Additionally, Crowe, AZT, Braccio, and
ATS have filed an application for supervisory writ of review seeking a stay of the
preliminary injunction pending the appeal and expedited assignment of the appeal.
DISCUSSION
A preliminary injunction is an interlocutory procedural device to preserve
the status quo between the parties, pending a trial on the merits. Generally, a party
seeking issuance of a preliminary injunction must show that he will suffer
irreparable injury, loss, or damage if the injunction does not issue and must show
entitlement to the relief sought; this must be done by a prima facie showing that the
party will prevail on the merits. Marchand v. Texas Brine Company, LLC, 18-
0621, pp. 5- 6 ( La. App. 1st Cir. 1/ 28/ 19), _ So. 3d _, _. In making a prima
facie showing, the plaintiff is required to offer less proof than is necessary in an
ordinary proceeding for permanent injunction. State through the Louisiana State
Board of Examiners of Psychologists of the Department of Health and Human
Services v. Atterberry, 95- 0391, p. 6 ( La. App. 1st Cir. 11/ 9/ 95), 664 So. 2d 1216,
1220.
Irreparable injury" is considered to be a loss sustained by an injured party,
which cannot be adequately compensated in money damages or for which such
damages cannot be measured by a pecuniary standard. Southern Marsh Collection,
LLC v. State Traditions, LLC, 17- 0459, p. 7 ( La. App. 1 Cir. 11/ 1/ 17),
2017WL4985217. However, when the plaintiff is alleging that the defendant is
N. acting in direct violation of a prohibitory law, there is no need to prove irreparable
harm. Furthermore, a showing of irreparable harm is not required when there is
some specific provision of law that otherwise provides such relief. State, through
the Louisiana State Board of Examiners of Psychologists of the Department of
Health and Human Services, 95- 0391 at p. 6, 664 So. 2d at 1220.
Louisiana Code of Civil Procedure article 3607 allows an interested person
to move to dissolve a preliminary injunction after providing two days' notice to the
adverse party or shorter notice as determined by the court. The sole question to be
determined at a hearing to dissolve a preliminary injunction is whether or not, on
the facts disclosed, the court should have granted the injunction in the first
instance. On a motion to dissolve a preliminary injunction, a trial court should not
consider arguments or evidence that could have been raised at the time the
preliminary injunction was issued. 43A C. J. S. Injunctions § 430 ( 2019).
In the instant case, Crowe, AZT, Braccio, and ATS assert that because all of
TPT' s claims against them derive from alleged misappropriation and/ or revelation
of claimed trade secrets, TPT failed to carry its burden of making a prima facie
showing that it is likely to prevail on the merits of its claims because TPT failed to
identify a specific trade secret and failed to show irreparable injury. Additionally,
Crowe, AZT, Braccio, and ATS assert that the preliminary injunction is invalid
because it is overly broad and fails to require a bond.'
The Louisiana Uniform Trade Secrets Act, La. R.S. 51: 1431 et. seq.,
prevents one person or business from misappropriating a trade secret developed by
another. See Bihm v. Deca Systems, Inc., 16- 0356, p. 19 ( La. App. 1st Cir.
8/ 8/ 17), 226 So. 3d 466, 482. Louisiana Revised Statutes 51: 1432 allows a
5 Crowe, AZT, Braccio, and ATS also assert on appeal that the preliminary injunction should be dissolved because it constitutes an impermissible prior restraint on speech. However, this
argument was not presented to the trial court, and therefore, it is not properly before this court for consideration on appeal. See Johnson v. Montoya, 13- 1951, p. 6 ( La. App. 1 Cir. 5/ 2/ 14), 145 So. 3d 418, 422.
I plaintiff to obtain injunctive relief for actual or threatened misappropriation of a
trade secret. See B & G Crane Service, L.L.C. v. Duvic, 05- 1798, pp. 3- 4 ( La.
App. 1st Cir. 5/ 5/ 06), 935 So. 2d 164, 166.
Louisiana Revised Statutes 51: 1431( 4) defines a " trade secret" as:
information, including a formula, pattern, compilation, program,
device, method, technique, or process, that:
a) derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use, and
b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Misappropriation" is defined in La. R.S. 51: 1431( 2) as:
a) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
b) disclosure or use of a trade secret of another without express or
implied consent by a person who:
i) used improper means to acquire knowledge of the trade secret; or
ii) at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was:
aa) derived from or through a person who had utilized improper means to acquire it;
bb) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
cc) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
iii) before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.
The threshold inquiry in every trade secrecy case is whether a legally
protectable trade secret exists. Engineered Mechanical Services, Inc. v. Langlois,
464 So. 2d 329, 333 ( La. App. 1st Cir. 1984). Whether something constitutes a
10 trade secret is a question of fact. Engineered Mechanical Services, Inc., 464 So. 2d
at 333.
If the information is found in fact to be a protectable trade secret, it then
becomes necessary to determine whether an express or implied contractual or
confidential relationship existed between the parties, which obligates them not to
use or disclose the secret information. Engineered Mechanical Services, Inc., 464
So. 2d at 333. Finally, the plaintiff must prove the party receiving the secret
information wrongfully breached its duty of trust or confidence by disclosing or
using the information to the injury of the plaintiff. B & G Crane Service, L.L.C.,
05- 1798 at p. 4, 935 So. 2d at 167.
In its petition seeking a preliminary injunction, TPT asserted that the trade
secrets at issue are the " design, manufacture, and controls for TPT' s turbine -
powered hydraulic -fracturing pumping equipment ... includ[ ing] but ... not limited
to formulas, patterns, compilations, programs, methods, techniques and processes
invented and developed by TPT to control turbine engines used in the hydraulic
fracturing business for stimulation of oil and gas wells." At the unopposed January
3, 2017 hearing on its request for a preliminary injunction, TPT submitted several
documentary exhibits establishing that TPT and its member, Green Field, had
entered into several agreements related to manufacturing T55 and T40 engines
with digital controls for use in the oil and gas industry. TPT entered into a vendor
agreement with ATS to provide TPT with TF40 and TF55 turbine engines and
digital engine controls ( FADEC and/ or IDEC) to be used in the frac equipment.
The invoices admitted into evidence confirm that ATS acquired these controls
from TES. According to the terms of the vendor agreement, TPT shall own the
intellectual property for all changes or modifications paid for and/ or funded by
TPT under the agreement. However, the express terms of the agreement do not
state that it applies to anyone other than TPT and ATS.
11 As a result of its work with TPT, TES executed a TES Mutual Non -
Disclosure Agreement with Green Field, who held the license to the frac
technology, whereby both parties agreed to maintain the confidentiality of their
respective proprietary information, including trade secrets, product design
information, technical information, source codes, etc. Braccio, who subsequently
became an employee of TPT, also executed a confidentiality agreement with TPT.
TPT also submitted website printouts from MTTP and TPT regarding the
Frac Stack Pack units and technology and printouts from Eco- Stim and AZT
depicting similar technology. Additionally, TPT submitted a copy of the lawsuit it
filed against Energy New Technologies International Corporation for violating a
confidentiality agreement it had with TPT regarding the Frac Stack Pack
technology and a consent judgment rendered pursuant thereto. Finally, TPT
submitted an assignment from TES to TPT of a fifty-one percent interest in US
Patent No. 9, 429, 078 for a multi -compatible digital engine controller, for which
Crowe is listed as an inventor and TES is listed as the applicant.
From our review of the evidence submitted by TPT in support of its
application for preliminary injunction, we find that while TPT makes broad
assertions in its petition regarding its alleged trade secrets, TPT failed to present
any testimony or other evidence clarifying these broad assertions. See e. g.,
Engineered Mechanical Services, Inc. v. Langlois, 464 So. 2d 3291 335- 337 ( La.
App. 1 st Cir. 1984). None of the aforementioned evidence sheds any light as to the
content of any alleged trade secrets alleged by TPT. Furthermore, to the extent
that the information contained in US Patent No. 9, 429, 078 constitutes a portion of
any alleged trade secret, because the information is contained in a patent, it is
generally known to ... other persons who can obtain economic value from its ...
12 use" and as such, cannot form the basis of any trade secret claim.' See La. R.S.
51: 1431( 4)( a); See Tewari De -Ox Systems, Inc. v. Mountain States/ Rosen, L.L.C.,
637 F. 3d 604, 611- 612 ( 5th Cir. 2011).
At the hearing on defendants' motion to dissolve preliminary injunction, the
trial court acknowledged that it was still unsure as to what intellectual property was
at issue in this case, even after it had already granted TPT' s preliminary injunction,
commenting that "[ TPT is] just trying to protect some intellectual properties,
which I do not know what those intellectual properties are." Additionally,
McIntyre was unable to give a consistent answer regarding the source of his trade
secret claims, providing multiple, differing answers as to what specifically
constitutes the alleged trade secrets of TPT.
As such, considering the failure of TPT to make a prima facie showing that
it will prevail on the merits of any of its claims related to its alleged trade secrets,
we find that the trial court erred in dismissing defendants' motion to dissolve
preliminary injunction. Additionally, due to our decision on appeal, we deny the
writ application filed by Crowe, AZT, Braccio, and ATS.
CONCLUSION
For the foregoing reasons, we reverse the judgment of the trial court
dismissing the motion to dissolve preliminary injunction and remand this matter to
the trial court for further proceedings consistent with this opinion. Additionally,
we deny the writ application filed by David Crowe, Advanced Turbine
Technology, Inc., Kenneth Braccio, and Arizona Turbine Services, LLC. All costs
of this appeal are assessed to Turbine Powered Technology, LLC.
REVERSED AND REMANDED; WRIT DENIED.
6 TPT asserted at the hearing on the motion to dissolve and in brief on appeal that Crowe improperly filed the patent application after misappropriating their trade secrets. However, this allegation was not contained in TPT' s petition or application seeking a preliminary injunction and as such, could not form a basis for the trial court granting the preliminary injunction. 13