Total Safety U.S., Inc. v. Rowland

Filing 332

ORDER AND REASONS granting in part and denying in part 143 Motion to Dismiss for Failure to State a Claim; granting in part and denying in part 281 Motion for Partial Summary Judgment. Signed by Judge Ivan L.R. Lemelle on 11/17/2014. (lag)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
TOTAL SAFETY

CIVIL ACTION

VERSUS

NO. 13-6109

GARY ROWLAND
AND 24HR SAFETY

SECTION “B”(4)
ORDER AND REASONS

Nature of the Motions and Relief Sought
The

following

motions

are

before

the

Court:

Motion

to

Dismiss Six Counterclaims (Rec. Doc. No. 143) filed by Total
Safety; and Motion for Partial Summary Judgment (Rec. Doc. No.
281) filed by Total Safety. Defendant, Gary Rowland has opposed
the motions. (Rec. Docs. No. 149, 304). Plaintiff has filed
reply memoranda on both motions. (Rec. Docs. No. 167, 309). The
motions, set for submission on April 23, 2014 and October 15,
2014, respectively, are before the Court on the briefs without
oral argument. Accordingly,
IT IS ORDERED that Plaintiff’s Motion to Dismiss (Rec. Doc.
No. 143) is GRANTED in part and DENIED in part. IT IS ORDERED
that Plaintiff’s Motion for Partial Summary Judgment (Rec. Doc.
No. 281) is GRANTED in part and DENIED in part.

1

Brief Statement of Facts and Procedural History
On October 10, 2013, Total Safety filed an action against
former

employee,

Gary

Rowland

(“Rowland”),

for

breach

of

an

employment agreement. (Rec. Doc. No. 1). The action arose out of
Rowland’s decision to resign from Total Safety on October 6,
2013, and immediately join business competitor, 24HR Safety. In
November

of

2005,

Total

Safety

and

Rowland

entered

into

an

employment agreement containing restrictive covenants and that
automatically renewed every year after an initial two-year term.
These restrictive covenants generally prohibited Rowland from
disclosing confidential information, from soliciting employee(s)
to leave the employ, and from rendering service to or working
for competitors, within certain geographic designations, and for
a “Non-compete Period” of twelve (12) months after leaving the
company’s employ.
On October 23, 2013, Total Safety filed a First Amended
Complaint (“FAC”) to include 24HR Safety. (Rec. Doc. No. 18). In
the

FAC,

Total

Safety

asserted

claims

for

(1)

breach

of

contract, (2) misappropriation of confidential information and
trade secrets, (3) unfair trade practices, (4) conversion, (5)
breach

of

computer
Stored

fiduciary

fraud

and

duty,
abuse

Communications

Act.

(6)
act,

conspiracy,
(8)

(Rec.

(7)

violation

Doc.

No.

of

18).

violation

of

the

Federal

Total

Safety
2

seeks injunctive relief to prohibit Rowland from competing, and
soliciting customers for two (2) years, monetary damages against
Rowland, and injunctive relief ordering Rowland to return all
stolen property. (Rec. Doc. No. 7).
On December 31, 2014, Rowland filed an answer to the FAC,
and asserted counterclaims for (1) unfair trade practices, (2)
failure to pay wages in violation of La. Rev. Stat. § 23:631,
and (3) conversion. (Rec. Doc. No. 87). Rowland seeks monetary
damages. (Rec. Doc. No. 87 at 33). Total Safety filed a reply
(Rec. Doc. No. 146). 24HR Safety also filed an answer to the
FAC. (Rec. Doc. No. 91).
On February 26, 2014, Total Safety was granted leave to
file

a

Second

Amended

Complaint

(“SAC”),

adding

claims

for

specific performance against 24HR Safety and new grounds for
breach of contract as to Rowland. (Rec. Doc. No. 97). The SAC
alleges

that

Rowland

breached

a

separate

2011

“Unit

Award

Agreement,” which he entered into with non-party W3 Holdings, a
Delaware entity that acquired Total Safety at around the same
time. (Rec. Doc. No. 97 at 11, 39-40). Rowland filed an answer,
and added counterclaims for (1) wrongful issuance of a TRO, (2)
intentional interference with contract, (3) abuse of process,
and (4) abuse of rights. (Rec. Doc. No. 128).

3

On March 31, 2014, Total Safety filed a Motion to Dismiss
[Six Counterclaims] for Failure to State a Claim (Rec. Doc. No.
143) as to Rowland’s Second Amended Counterclaim. Rowland filed
a response (Rec. Doc. No. 149), and Total Safety filed a reply
(Rec. Doc. No. 167). On September 11, 2014, Total Safety filed a
Motion for Partial Summary Judgment against Rowland. (Rec. Doc.
No. 281). Rowland filed an opposition (Rec. Doc. No. 304), and
Total Safety filed a reply (Rec. Doc. No. 309).
The Court now reviews contentions, alleged facts, and the
law concerning Total Safety’s motions to dismiss and for partial
summary judgment.
Law and Analysis
I.

Motion to Dismiss Counterclaims under FRCP 12(b)(6)
A district court may not dismiss a complaint under Fed. R.

Civ.

P.

12(b)(6),

unless

it

appears

beyond

doubt

that

the

plaintiff can prove no set of facts in support of his claim
which would entitle him to relief. Blackburn v. Marshall, 42
F.3d 925, 931 (5th Cir. 1995).The complaint must be liberally
construed in favor of the plaintiff, and all facts pleaded in
the original complaint must be taken as true. Campbell v. Wells
Fargo Bank, 781 F.2d 440, 442 (5th Cir. 1980).

4

However, a motion to dismiss under Rule 12(b)(6) operates
to test the sufficiency of the complaint. (1) The first step in
testing the sufficiency of the complaint is to identify any
conclusory allegations. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950
(2009).

Threadbare

recitals

of

the

elements

of

a

cause

of

action, supported by mere conclusory statements, do not suffice.
Id. at 1949 (citing Bell Atlantic Corp. v. Twombly, 127 S.Ct.
1955

(2007)).

(2)

After

assuming

the

veracity

of

all

well-

pleaded factual allegations, the second step is for the court to
determine whether the complaint pleads “a claim to relief that
is plausible on its face.” Iqbal, 129 S.Ct. at 1949.
Total Safety contends that the following six counterclaims
asserted by Rowland fail to state a legally cognizable claim:
(A)

intentional

interference

with

contract;

(B)

unfair

trade

practices; (C) conversion; (D) wrongful issuance of a temporary
restraining

order;

(E)

abuse

of

process;

and

(F)

abuse

of

attempting

to

rights.
A. Intentional Interference with Contract
Rowland

alleges

that

Total

Safety,

“in

enforce the restrictive covenants in the 2011 W3 Agreement and
the non-compete provision in Rowland’s 2005 Employment Agreement
beyond its terms, has acted in contravention of its duty not to
engage

in

an

illegal

restraint

of

trade,

and

has

therefore
5

intentionally

and

unlawfully

interfered

with

Rowland’s

employment relationship with 24HR Safety” under Louisiana law.
(SAC, Rec. Doc. No. 128 at 45).
Louisiana recognizes an extremely limited cause of action
for

intentional

interference

with

a

contract.

Petrohawk

Properties, L.P. v. Chesapeake Louisiana, L.P., 689 F.3d 380,
394 (5th Cir. 2012)(citing 9 to 5 Fashions, Inc. v. Spurney, 538
So.2d 228, 232-34 (La. 1989)). In 9 to 5 Fashions, the court
recognized

“only

a

corporate

officer’s

duty

to

refrain

from

intentional and unjustified interference with the contractual
relation between his employer and a third person.” Id. at 234.
The foregoing duty arises out of a corporate officer’s duty to
those with whom his corporation contracts. Id. at 395; see also
American Waste & Pollution Control Co. v. Browning-Ferris, Inc.,
949 F.2d 1384, 1385 (5th Cir. 1992).
The Louisiana Supreme Court has not directly addressed the
scope of this cause of action since the decision in 9 to 5
Fashions. The Louisiana courts of appeal have conformed to the
limited cause of action expressed in 9 to 5. See e.g. Brown v.
Romero, 922 So.2d 742, 747 (La. Ct. App. 2006); Tallo v. Stroh
Brewery

Co.,

544

So.2d

452,

453-55

(La.

Ct.

App.

1989).

In

Technical Control Systems, Inc. v. Green, the plaintiff urged
the state appellate court to expand upon this cause of action
6

against a corporate entity defendant. 809 So.2d 1204, 1207 (La.
Ct. App. 2002), writ denied, 817 So.2d 100 (La. 2002). The court
concluded that, because “recent attempts by this court to expand
upon this [cause of action] have been reversed by our supreme
court,” the court “must assume that [its] expansive take on
tortious

interference

with

contract

claim

did

not

meet

the

approval of the supreme court.” Id. at 1208-09 (citing Cowen v.
Steiner, 689 So.2d 516 (La. Ct. App. 1997)).
In a decision that followed 9 to 5 Fashions, the Louisiana
Supreme Court, in deciding a res judicata issue, implicitly held
that an action for unlawful interference with the right to do
“business” can be founded on an obligation not to enforce an
illegal

non-competition

agreement

against

former

employees.

Preis v. Standard Coffee Service Co., 545 So.2d 1010, 1013 (La.
1989). In Gearheard v. De Puy Orthopaedics, Inc., this Court
interpreted this as providing a basis for a cause of action for
intentional interference of

contractual relations

premised on

the foregoing conduct. No. Civ. A. 99-1091, 2000 WL 533352, at
*5-7 (E.D. La. 2000)(stating that the “lost business and lost
profits” in

Preis

“sounds like a claim of interference with

contractual relations”).
This

Court

previously

failed

to

distinguish

between

‘tortious interference with the right to do business,’ and the
7

‘tortious

interference

with

contract’

asserted

here.

Id.

Although both causes of action derive from the same general tort
law, Louisiana Civil Code article 2315, the two are based on
different

principles

and

the

former

requires

a

showing

of

“improper influence” and “malice.” St. Landry Homestead Federal
Sav. Bank v. Vidrine, 118 So. 3d 470, 490 (La. App. 3 Cir.
6/12/13)(declining to extend 9 to 5 Fashions to counterclaim of
tortious interference with contract asserted against a bank but
finding

a

claim

relationship).

for

tortious

interference

with

a

business

In light of this, this Court now declines to

adopt the foregoing rationale previously provided in Gearheard.
More recently, federal courts have taken a circumscribed
approach to the cause of action. See e.g. Petrohawk Properties,
L.P.

v.

Chesapeake

certify

a

question

La.,
to

L.P.,
the

689

F.3d

Louisiana

at

396

Supreme

(refusing
Court

to

because

Spurney [9 to 5 Fashions] is “a controlling opinion on the scope
of

the

action

for

tortious

interference

with

a

contract”);

Boudreaux v. OS Restaurant Services, LLC, No. 14-1169, 2014 WL
4930475 (E.D. La. Sept. 30, 2014)(declining to recognize the
cause of action beyond a ‘corporate office’); Mountain States
Pipe & Supply Co. v. City of New Roads, La., No. 12-2146, 2013
WL 3199724 (E.D. La. June 21, 2013)(declining to extend the
cause

of

action

to

a

contracting

company);

M

&

D

Mineral

8

Consultants LLC v. Wenting li, et al., No. 12-2082, 2013 WL
883689 (W.D. La. Mar. 7, 2013) (finding no tortious interference
with

contract

claim

could

be

asserted

against

manager

of

a

limited liability company).
In sum, the Louisiana Supreme Court has recognized a cause
of

action

for

intentional

interference

with

contractual

relations only “against a corporate officer.” 9 to 5 Fashions,
Inc. v. Spurney, 538 So.2d at 234. Under the Erie Doctrine, this
federal Court sitting in diversity must apply state substantive
law as stated in the final decisions of the state’s highest
court. Baker v. RR Brink Locking Systems, Inc., 721 F.3d 716,
717 (5th Cir. 2013). In light of the jurisprudence that followed
the 9 to 5 Fashions decision, both at the state and at the
federal level, the Court, under Erie, finds that the Louisiana
Supreme Court would not recognize the instant claim against a
corporate entity, and grants the 12(b)(6) motion to dismiss the
counterclaim for intentional interference with contract.
B. Unfair Trade Practices
Total Safety has moved to dismiss Rowland’s claims under
the Louisiana Unfair Trade Practices and Consumer Protection Law
(“LUTPA”),

La.

Rev.

Stat.

51:1401,

et

seq.

LUTPA

§

51:1409

provides that, “Any person who suffers any ascertainable loss of
money or movable property...as a result of the use or employment
9

by

another

person

of

an

unfair

or

deceptive

method,

act

or

practice declared unlawful by § 51:1405 may bring an action....”
Section 1405(A) to which § 1409 refers, states that “[u]nfair
methods of competition and unfair or deceptive acts or practices
in the conduct of any trade or commerce are hereby declared
unlawful.” Private parties have a right of action under LUTPA.
Felder’s

Collision

Parts,

Inc.

v.

General

Motors

Co.,

960

F.Supp. 2d 617, 638 (M.D. La. 2013)(citing Cheramie Services,
Inc. v. Shell Deepwater Production, Inc., 35 So.3d 1053, 1060
(La. 4/23/10)). The Louisiana Supreme Court has held that this
right of action “extends to all persons who assert loss of money
or property as a result of another’s unfair or deceptive trade
practices.” Cheramie, 35 So.3d at 1060.
Louisiana has left the determination of what is an “unfair
trade practice” largely to the courts to decide on a case-bycase

basis.

Id.

However,

cases

have

defined

the

range

of

prohibited practices narrowly. Id. A practice is unfair when it
offends

established

public

policy

and

when

the

practice

is

unethical, oppressive, unscrupulous or substantially injurious.
Id. A trade practice is “deceptive” for purposes of LUTPA when
it

amounts

to

fraud,

deceit,

or

misrepresentation.

Tubos

de

Acero de Mexico, S.A. v. American Intern. Inv. Corp., Inc., 292

10

F.3d 471, 480 (5th Cir. 2002); Mixon v. Iberia Surgical, LLC,
956 So.2d 76, 79 (La. App. 3 Cir. 4/18/07).
Rowland contends that Total Safety violated LUTPA in three
ways: (1) by offering to drop its claims against Rowland if he
returned to his employment with Total Safety while criticizing
24HR Safety in court pleadings for continuing to employ him; (2)
by threatening him with the possibility of injunctive relief
that would prevent him, for a two-year period from “working
anywhere, for any competitor”; and (3) by attempting to enforce
a non-compete agreement beyond it terms. (Rec. Doc. No. 149 at
4-8).
Assuming,
described
Rowland

in

has

without
(1)

not

was

finding,

that

“unethical,

established

or

the

alleged

deceptive

described

how

or
he

conduct

oppressive,”
could

sustained an ‘ascertainable loss of money or property’

have
as a

result. Moreover, Rowland is still employed with 24HR Safety,
and Rowland is not entitled to have Total Safety relinquish its
legal right to sue under the Employment Agreement. See Video
International

Production,

Inc.

v.

Warner–Amex

Cable

Communications, Inc., 858 F.2d 1075 (5th Cir. 1989)(discussing
the Noerr-Pennington Doctrine beyond the antitrust context); see
also

Jones

Energy

Co.

v.

Chesapeake

Louisiana,

L.P.,

873

F.Supp.2d 779, 788-89 (W.D. La. 2012). Similarly, Rowland has
11

not generally plead how the foregoing conduct described in (2)
could have caused him to suffer an ascertainable loss of money
or property.
An aggrieved employee may bring claims for damages under
LUTPA

as

a

Gearheard,

result

2000

of

WL

an

illegal

533352,

at

*8

covenant
(E.D.

La.

not

to

compete.

2000);

Preis

v.

Standard Coffee Serv. Co., 545 So.2d at 1013 (finding that an
employer’s breach of its obligation not to enforce an illegal
non-solicitation
under

LUTPA);

agreement

see

also

against

Landrum

an

v.

employee

Board

of

is

actionable

Comm’rs

of

the

Orleans Levee Dist., 685 So.2d 382, 389 n.5 (La. App. 4th Cir.
1996). Rowland claims Total Safety, in seeking an overbroad TRO,
sought

to

enforce

the

W3

Agreement

and

the

employment

agreement’s restrictive covenants ‘beyond their terms.’ Rowland
contends

that,

under

Gearheard

and

Preis,

this

states

a

cognizable claim under LUTPA.
This

Court

is

guided

by

the

Louisiana

Supreme

Court’s

decision in Preis, which remains intact following amendments to
La.

Rev.

Stat.

§

23:921.

Gearheard,

2000

WL

533352,

at

*5.

However, the precise scope of the holding is unclear. See Smith
v. Coffman, 87 So.3d 137, (La. App. 2 Cir.

2012)(discussing

Preis and stating: “the employee’s claim did involve an alleged
improper

enforcement

by

the

employer

of

a

non-solicitation
12

agreement in an employment contract...In the second suit, the
Preis court held that the employee’s suit based upon LUTPA was
barred by res judicata”). In Coffman, a jury found for a former
employee on a claim of improper enforcement of a non-compete
agreement where the employer opened up a shell office in another
parish such that the covenant could apply. Given the foregoing,
the Court denies the 12(b)(6) motion to dismiss the counterclaim
under

LUPTA

for

alleged

improper

enforcement

of

a

non-

solicitation agreement.
C. Conversion
Rowland contends that Total Safety’s actions in “taking the
re-purchase price for Rowland’s Class A Units (stock), which had
a value of at least $91,000, to offset its fees and expenses in
connection with this litigation without any award or judgment of
damages

in

its

favor

constitutes

self-help

and

an

unlawful

conversion...” (SAC, Rec. Doc. No. 128 at 47-48). The Amended
and Restated Limited Liability of W3 Holdings (“LLC Agreement”)
entitled

the

cancelling

Company,

indebtedness

W3

Holdings,

owed

by

the

to

re-purchase

Member

stock

(Rowland)

to

by
the

Company (W3 Holdings) or any Subsidiary (Total Safety). (Rec.
Doc. No. 143-4 at 10).

13

1. Applicable Law
Total Safety argues that Delaware law governs this claim
because

the

Holdings,
choice

a

of

conversion
Delaware

law

relates
company,

provision

that

to

the

and

the

calls

LLC

Agreement

agreement

for

the

for

W3

contains

application

a
of

Delaware law. Rowland argues that Louisiana law applies to the
state law claims because the choice of law provision in the
agreement is null and void under Louisiana law and because the
parties’ relationship is centered in Louisiana.1
Contract Claim
The

Court

recognizes

that

the

claim

for

conversion

by

Rowland is one that is based in contract rather than in tort.
The LLC Agreement of W3 Holdings, under which the Class A stock
was issued, Section 8.09(b) provides: “The Company may elect to
purchase all or any number of the Management Units...(c) The
Company may pay for the Management Units to be purchased by
it...by...(ii) the cancellation of any indebtedness owed by the
Management

Member

to

the

Company

or

any

Subsidiary

(Total

Safety) thereof.” (Rec. Doc. No. 143-4 at 10).
The Court notes that Total Safety is not a party to the LLC
Agreement; however, Total Safety is a third-party beneficiary to

1

Rowland’s Employment Agreement contains a choice of law provision that calls for the application of Texas law.

14

this agreement, and whether Rowland has a claim for conversion
against Total Safety turns on whether W3 Holdings breached the
agreement
Stated

by

repurchasing

differently,

Agreement,
Safety.

there

No

if

can

the

W3
be

conversion

shares

Holdings
no

with
did

conversion

claim

exists

debt

not
claim

outside

cancellation.

breach

the

against
or

LLC

Total

beyond

the

contractual agreement.2 The Court next turns to the choice of law
provision contained in the agreement.
Choice of Law Provision and Louisiana Law & Public Policy
Article VIII, Section 13.01 of the LLC Agreement provides
that

the

agreement

“shall

be

construed

by,

subject

to

and

governed in accordance with the internal laws of the State of
Delaware without giving effect to conflict of laws or other
principles which may result in the application of laws other
than

the

sitting

internal
in

laws

diversity

of

must

the

State

apply

the

of

Delaware.”

Louisiana

A

court

approach

to

conflicts of law. Klaxon Co. v. Stentor Electric Manufacturing
Co., 313 U.S. 487 (1941). Louisiana recognizes and honors party
autonomy with respect to choice of law provisions, however, such
contractual stipulations are not honored where “there are legal
or ‘strong public policy considerations’ justifying the refusal

2

Rec. Doc. No. 143-4 at 12-13 Article VII of the LLC Agreement provides: “The parties hereto have voluntarily
agreed to define their rights, liabilities and obligations respecting the subject matter of this Agreement exclusively
in contract pursuant to the express terms and provisions of this Agreement...”

15

to honor the contract as written.” NHC Corp. v. Broyles, 749
F.2d 247, 251 (5th Cir. 1985).
Louisiana

Revised

Statute

§

23:921(A)(2)

provides

that

“[t]he provisions of every employment contract or agreement...by
which any foreign or domestic employer or any other person or
entity includes a...choice of law clause...shall be null and
void

except

where

the...choice

of

law

clause

is

expressly,

knowingly and voluntarily agreed to and ratified by the employee
after the occurrence of the incident which is the subject of the
civil or administrative action.”
Rowland contends that the choice of law provision is null
and void under § 23:921(A)(2). Rowland is not an “employee” in
the context of the LLC Agreement as he is not an employee of W3
Holdings. The statute has been judicially extended to various
relationships

which

are

“essentially”

employer/employee.

See

McCray v. Cole, 259 La. 646 (La. 1971)(declaring null and void a
non-compete
with

a

agreement

group

of

wherein

a

psychiatrists,

psychologist,
promised

to

in

association

pay

liquidated

damages should he withdraw and resume his practice in the same
parish);

Nelson

Charles,

63

agreement

v.

So.2d

between

Associated
437

members

(La.
of

Branch
App.

a

1

pilots’

Pilots
Cir.

of

Port

1953)(finding

association

Lake
an

requiring

16

withdrawing

members

to

post

bond

as

contrary

to

the

public

policy because Association had “control” over the member).
In this case, nothing contained within the LLC Agreement
would

support

a

finding

that

Rowland

was

“essentially”

an

employee under its terms. The policy behind the statute is to
counteract “the disparity in bargaining power, under which an
employee,

fearful

readily

refuse

amounts

to

of

to

his

losing

sign

an

his

means

agreement

contracting

away

of

livelihood,

which,

his

if

liberty

cannot

enforceable,
to

earn

his

livelihood.” Winston, 432 So.2d at 940. Rowland did not have to
enter

into

the

agreement

to

maintain

employment

with

Total

Safety; this was an investment decision. W3 Holdings could not
and

did

Rowland’s

not

exercise

employment

control

with

Total

over

Rowland

Safety

would

and

his

work.

not

have

been

affected if he had cashed in his stock or otherwise terminated
the agreement.
The

Court

finds

there

is

insufficient

evidence

of

an

analogous employer-employee “disparity” between Rowland and W3
Holdings that would trigger Section 23:921 and invalidate the
choice of law provision. See Kadant Johnson, Inc. v. D’Amico,
No.10-2869, 2012 WL 1605458, at *10 (E.D. La. 2012). The Court
next analyses the claim of conversion under Delaware law.

17

2. Delaware Law on Conversion
Conversion is defined under Delaware law as “any distinct
act of dominion wrongfully exerted over the property of another,
in denial of [the plaintiff’s] right, or inconsistent with it.”
Leong v. Cellco Partnership, No. 12-0711, 2013 WL 1209094, at
*10 (W.D. La. Mar. 21, 2013)(citing Kuroda v. SPJS Holdings,
LLC, 971 A.2d 872, 891 (De. Ch. 2000)). As discussed, this claim
is a contract claim. To sue for conversion, Rowland’s claim for
conversion must be separate factually or legally from a breach
of contract claim, i.e. that he had a right to money- other than
the right pursuant to the contract- that was violated by W3 and
Total Safety’s exercise of dominion over the money, or stock in
this case. Kuroda, 971 A.2d at 889. Rowland does not contend
that Total Safety violated an independent legal duty separate
from the rights and duties under the agreement.
In sum, Delaware does not recognize a cause of action for
conversion

where

the

claim

only

arises

out

of

rights

and

obligations established under contract. The counterclaim fails
to plead a claim for conversion under Delaware law. For the
foregoing

reason,

the

Court

grants

the

12(b)(6)

motion

to

dismiss the counterclaim for conversion.

18

D. Wrongful Issuance of a Temporary Restraining Order
(TRO)
Rowland contends that Total Safety sought and was granted
on October 28, 2013 a TRO that prohibited him from working for
24HR Safety anywhere in the State of Louisiana, and in Beaumont,
Texas. Rowland claims these areas were not restricted by the
employment agreement. In December of 2013, the Court issued a
subsequent

preliminary

injunction

limited

to

the

areas

restricted by the agreement. Rowland contends that he suffered
damages as a result of the wrongfully issued TRO. (SAC, Rec.
Doc. No. 128 at 43-45).
Louisiana Code of Civil Procedure article 3608 states that
“[t]he court may allow damages for the wrongful issuance of a
temporary

restraining

order

or

preliminary

injunction...on

a

reconventional demand. Attorney’s fees...may be included as an
element of damages....”
The word “wrongful” simply means incorrect, or the result
of a mistake, and does not imply malice or bad faith on the part
of

the

plaintiff.

Arco

Oil

&

Gas

Co.,

a

Div.

of

Atlantic

Richfield Co. v. DeShazer, 728 So.2d 841 (La. 1/20/99); HCNO
Services Inc. v. Secure Computing Systems, Inc., 693 So.2d 835
(La. App. 4 Cir. 4/23/97). A TRO is wrongfully issued if it
infringes upon some right of the enjoined party regardless of
whether

or

not

the

injunction

was

requested

on

good

faith
19

grounds. See HCNO Services Inc., 693 So.2d at 844.

Wrongful

issuance of a TRO is injunctive relief that has been issued when
it should not have been issued because plaintiff had no right to
it. Id. A party has been “wrongfully enjoined” under Fed. R.
Civ. P. 65(c) if it is ultimately found that the enjoined party
had at all times the right to do the enjoined act. Blumenthal v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 F.2d 1049, 1054
(La. App. 2 Cir. 8/8/90). The dissolution of a TRO is prima
facie evidence of damage for wrongful issuance thereof. See HCNO
Services Inc., 693 So.2d at 844.
The terms and conditions of the 2005 Employment Agreement
were

limited

Alabama,

to

Illinois,

22

Louisiana

and

parishes

Pennsylvania.

and

Total

four

Safety

cities
sought

in
and

obtained an expanded TRO that prohibited Rowland from working in
the state of Louisiana and in Beaumont, Texas. The Court later
granted Total Safety a preliminary injunction that reflected the
employment agreement. While there was no dissolution of a TRO in
this

case,

the

modification

lends

support

to

Rowland’s

assertion. A wrongfully issued TRO would infringe upon Rowland’s
right to compete beyond the terms of the employment agreement.
See e.g. Diesel Driving Academy, Inc. v. Ferrier, 563 So.2d 898
(La. App. 2 Cir. 4/4/90).

20

A claim for wrongful issuance of a TRO is not an attack
upon the Court.

“The

focus of the ‘wrongfulness’ inquiry is

whether, in hindsight in light of the ultimate decision on the
merits after a full hearing, the injunction should not have been
issued in the first instance. This conclusion is supported by
the plain meaning of Rule 65(c) and the theory underlying it,
that the applicant ‘consents to liability up to the amount of
the bond, as the price for the injunction.’” Blumenthal, 910
F.2d at 1054. The counterclaim states a claim for damages and
attorney fees incurred in defending a wrongfully issued TRO, and
therefore, the Court denies the 12(b)(6) motion to dismiss this
claim.
E. Abuse of Process
Rowland contends that Total Safety’s actions, in seeking
injunctive relief that prohibited Rowland from competing outside
the

territory

restricted

by

his

employment

agreement

and

in

enforcing restrictive covenants in the W3 Agreement constituted
an abuse of process (SAC, Rec. Doc. No. 128 at 46).3
To

state

a

cause

of

action

for

the

tort

of

abuse

of

process, a plaintiff must allege two essential elements: (1) the
existence of an ulterior purpose; and (2) a willful act in the
3

The Unit Award Agreement (Class B Units) incorporates by reference Exhibit A, which provides that parallels the
non-compete provisions of the 2005 Employment Agreement, and provides W3 Holdings and “any of its affiliates”
the right to enforce the Unit Award Agreement and Exhibit A, in the event of a breach.

21

use of the process not proper in the regular prosecution of the
proceeding. Glotfelty v. Hart, No. 2013CA0870, 2013 WL 6858285,
at *4 (La. App. 1 Cir. 12/27/13). Abuse of process involves the
misuse

of

a

process

already

legally

issued

whereby

a

party

attempts to obtain a result not proper under the law.

Id. Thus,

the

abuse

regular

use

of

process

does

not

constitute

an

of

process; there must be a showing of an abuse through an illegal,
improper or irregular use of process Id. An ulterior motive or a
bad intention in using the process is not alone sufficient; the
bad intent must have culminated in the abuse. Weldon v. Republic
Bank, 414 So.2d 1361, 1365 (La. App. 2 Cir. 1982)(citing William
A. Prosser, Law of Torts, Hornbook Series).
Rowland has failed to allege facts to support the second
essential element, and this failure is fatal to his claim. A
party’s intent in invoking the process is not the determinative
issue. “Even if a party has an ulterior purpose in making use of
some legal process, no cause of action exists unless there has
been

some

abuse.”

Grant

v.

Farm

Credit

Bank

of

Texas,

841

F.Supp. 186, 190 (W.D. La. 1992). “While the existence of an
ulterior motive may, perhaps, be inferred from the fact that the
process

has

been

misused

or

misapplied,

the

reverse

is

not

true.” Weldon, 414 So.2d at 1366.

22

Rowland does not allege that Total Safety wrongfully sought
a TRO, but simply that Total Safety sought to enforce a TRO
beyond the terms of the non-compete provisions with an ulterior
motive. Rowland must allege irregular steps in the injunction
process taken on the part of Total Safety under the “cover of
the process.” See Id. at 1366. The counterclaim does not allege
how, in enforcing the restrictive covenants and in seeking an
overprotective

TRO,

Total

Safety

made

irregular

use

of

the

injunction process.
It is not alleged that Total Safety misrepresented to the
Court the scope of the non-compete provisions or engaged in an
act expressly prohibited when seeking a TRO. Cf. Kohlrautz v.
Weber, 365 Fed.Appx. 54, 56 (9th Cir. 2010)(agreeing that abuse
of

process

took

place

where

party

improperly

sought

a

lis

pendens and TRO to obtain pre-judgment attachment for eventual
collection purposes, which is prohibited under law); Advantor
Capital

Corp.

v.

1998)(discussing

Yeary,

the

136

F.3d

distinguishing

1259,

1264

(10th

Cir.

factor

as

whether

the

misconduct is merely incidental to some legitimate purpose and
finding

that

because

misrepresentation

took

place

during

TRO

hearing, the jury could find that conduct was not incidental);
see

also

96C72281997

Cozzi
WL

v.

Pepsi-Cola

811687,

at

*3

General
(N.D.

Bottlers,
Ill.

Dec.

Inc.,
30,

No.
1997)

23

(declining to dismiss claim for abuse of process where plaintiff
alleged coercion following the issuance of TRO).
The Court was aware during the October 28, 2013 TRO hearing
that the Employment Agreement was limited to designated areas
that

did

not

include

Beaumont,

Texas,

and

the

remaining

Louisiana parishes. Rowland has failed to plead the requisite
abuse for an ‘abuse of process’ claim. For the foregoing reason,
the Court grants the 12(b)(6) motion to dismiss this claim.
F. Abuse of Rights
The doctrine of abuse of rights is invoked sparingly in
Louisiana. Lee v. Pennington, 830 So.2d 1037, 1043 (La. App. 4
Cir. 10/16/12). The doctrine is a civilian concept applied in
limited

circumstances

because

its

application

renders

unenforceable one’s otherwise judicially protected rights. Id.
1. Stock Forfeiture and Repurchase Claims
Rowland contends that under a Unit Award Agreement with W3
Holdings, W3 Holdings repurchased units of Class A stock at $84,
630 “to satisfy his indebtedness to Total Safety” and stripped
him of Class B stock worth approximately $500,000, all at the
direction of its subsidiary, Total Safety. (Rec. Doc. No. 149 at
23-24, 149-2 at 2).

24

Class B Stock Forfeiture
The Class B units were granted to Rowland under a 2011
“Class

B

Incentive

Unit

Award

Subscription

Agreement”

(“Unit

Award Agreement”) with W3 Holdings, LLC. (Rec. Doc. No. 117-2).
Under the Unit Award Agreement, Rowland would “become vested” in
his

Incentive

Units

in

accordance

with

the

company’s

LLC

Agreement. However, in the event of “any breach by Participant
of

the

non-competition

or

non-solicitation

provisions”

of

Rowland’s employment agreement, “then all vested Incentive Units
may, at the discretion of the Board of Managers, be forfeited
without further consideration.” (Rec. Doc. No. 117-2 at 5).
The

units

registration
Regulation
Compensatory

were

under
D’s

restricted
the

Rule

1933

701

Arrangements”).

securities,
Securities

and

exempt

from

Act

pursuant

to

(“Exempt

Offerings

Pursuant

to

Sales

grants

or

made

under

this

exemption may be for either deferred compensation or incentive
purposes.4
The Unit Award Agreement incorporates by reference a 26
U.S.C. § 83 Election (“Property transferred in connection with
performance

of

services”)(hereinafter

“Election”).

(Rec.

Doc.

No. 117-2 at 5). The Agreement required a Participant to include

4

Rule 701: Exempt Offerings Pursuant to Compensatory Arrangements, Executive Summary and Background,
available at: http://www.sec.gov/rules/final/33-7645.htm.

25

in his gross income the fair market value of the stock. (Rec.
Doc.

No.

117-2

at

5).

The

Election

states

that

“[t]he

undersigned taxpayer elects, pursuant to Code Section 83(b), to
include in gross income in 2011 as compensation for services
rendered

the

fair

market

value

of

property

received

in

connection with his or her services in excess of the amount paid
for the property...” (Rec. Doc. No. 117-2 at 11). The Election
does

not

provide

compensation

for

that

the

services.

transferred
The

property

Election

constitutes

provides

that

the

transferred property is being included within gross income, as
it is in connection with the performance of services.
This

stock claim

is

based on a Louisiana Supreme Court

case, Morse v. J. Ray McDermott & Co., Inc., 344 So.2d 1353 (La.
1977). The plaintiff had earned an award through his employer’s
supplemental compensation plan, but had not received the entire
award before he was fired. When the plaintiff was fired, the
employer

refused

to

waive

the

plan’s

non-termination

requirement, which resulted in the forfeiture of “already-earned
compensation.”
employer’s

Id.

failure

at

1367.
to

The

waive

Morse
the

court
plan’s

ruled

that

the

non-termination

requirement constituted an abuse of a legal right. Id. at 1369.
This ruling was based on the policy behind the Louisiana wage
forfeiture law, and general notions of justice and fair play.

26

In Cornet v. Cahn Electric Company, Inc., the Louisiana
Supreme Court limited Morse to cases involving forfeiture of
wages. 434 So.2d 1052 (La. 1983). In Cornet, the plaintiff was
denied his interest in a retirement investment fund when he quit
his job before he was eligible for retirement, even though a
portion of his salary was paid into the fund. Id. The court
distinguished

Morse

by

concentrating

on

the

fact

that

the

forfeiture in Morse involved actual wages for services performed
by the employee. Id. at 1056.
Therefore, a cause of action for abuse of rights exists to
recover payments that are either delayed compensation or for
performed services. Hennings, Jr. v. CDI Corp., 451 Fed.Appx.
359,

369

(5th

Cir.

2011).5

Payments

that

are

subject

to

discretion and do not automatically accrue throughout the year
for services performed, are not actionable, as they constitute
“gratuitous bonuses” or “discretionary payouts.” Id.
The Class B Incentive Unit Award Agreement, however, makes
clear that the units were being granted for an incentive purpose
and

not

for

a

compensation

purpose.

Additionally,

the

Participant, Rowland, acknowledged that the “Incentive Units,”
as they are referred to throughout the agreement, were being
5

In Hennings, an employee argued that he “retired” in 2008, and sought a performance based bonus for the year
2007. 451 Fed.Appx. at 368. While retirement could entitle the employee to a bonus, resignation or termination
would cause him to be ineligible. Id. The Fifth Circuit found that because the payments were discretionary, and not
mandatory, they could not be recovered in a cause of action for abuse of rights.

27

acquired for “investment purposes only.” (Rec. Doc. No. 117-2 at
2).

Further,

Rowland’s

salary,

a

base

salary

subject

to

a

discretionary annual increase, was fixed under the Employment
Agreement

with

Total

Safety.

(Rec.

Doc.

No.

1-2

at

3).

Similarly, his benefits were detailed. (Id.).
The

Court

notes

that

this

case

is

distinguishable

from

Hennings in the sense that, certain Incentive Units were not
future payments or bonuses, but had already vested. However,
even vested units were subject to discretion, and therefore not
a mandatory payment to the Participant

under the

Unit

Award

Agreement. (Rec. Doc. No. 117-2 at 5). In Cornet, the employee
already possessed an interest in the investment fund, yet the
case established the Morse limitation. 434 So.2d 1052. Whether
the discretion was exercised at the direction of Total Safety is
irrelevant. The focus of the inquiry is the purpose of the stock
plan,

whether

performance,

the
and

plan
whether

substitutes
payments

salary
are

or

pay

discretionary

for
or

mandatory. Lloyd v. Georgia Gulf Corporation, 961 F.2d 1190,
1193 (5th Cir. 1992); Id. at 1066.
The stated purpose of the stock grant at issue is in the
title, to provide employees with incentives. Rowland was not
required to participate in the plan. There is no evidence that
Rowland’s salary and/or employee benefits would have changed had
28

he decided not to take part in the stock plan. This is supported
by the fact that Rowland’s 2005 Employment Agreement pre-dates
the Unit Award Agreement.6 Rowland does not contend that unit
awards substitute salary or pay for performance. Rowland neither
gained nor lost any money when the stock was forfeited.7 The
Court finds that this stock claim has no basis in the law, and
grants the 12(b)(6) motion to dismiss for failure to state a
claim upon which relief can be granted.
Class A Stock Repurchase
The Class B stock was issued pursuant to the terms of the
Amended and Restated Limited Liability Company Agreement (“LLC
Agreement”) for W3 Holdings. (Rec. Doc. No. 128-1 at 2).
Section 8.09 (b) provides: “[t]he Company may elect to
purchase all or any number of the Management Units of any
Management member...by delivering written notice.” (Rec. Doc.
No. 143-3 at 10).
Section 8.09 (a) provides: “[i]f a Management Member ceases to
be employed by or provide services to the Company and its
Subsidiaries for any reason, all of the Management Units held
by such Management Member...(other than any Class B Units
which are forfeited), will be subject to purchase by the
Company...at a purchase price equal to the Repurchase Fair
Market Value of such Management Units.” (Id.).
Section 8.09 (c) provides: “[t]he Company may pay for the
Management Units to be purchased by it pursuant to the
Purchase Option by...(ii) the cancellation of any indebtedness

6

Rowland has never claimed the existence or provided a modified Employment Agreement, in light of the Unit
Award Agreement.
7
This is so despite the fact that Rowland cannot take a deduction with respect to the forfeited property. Cf.
Cornet, 434 So.2d at 1056.

29

owed by the Management Member to the Company or any Subsidiary
thereof....(Id.).
A repurchase took place under the LLC Agreement at a Fair
Market Value (“FMV”) per Class A of $930, for an aggregate price
of $84,630. Rowland contends the stock had a significant higher
FMV, almost $500,000 and was wrongfully repurchased to satisfy
“indebtedness.” Although, this claim is also based on the Morse
abuse of rights doctrine, the doctrine is not as well developed
in this context.

However, simply because this factual scenario

has yet to be addressed does not lead to a conclusion that it is
not actionable.
For the abuse of rights doctrine to apply, “the holder of
an individual right must exercise that right to the detriment of
another simply for the sake of exercising it.” Brumley v. Leam
Investments, Inc., No. 2012 WL 525474, at *19 (W.D. La. 2012).
The cause of action, can apply when at least one of the four
conditions is met: (1) predominant motive for exercise of the
right is to harm; (2) there is no serious or legitimate motive
for

exercise

of

the

right;

(3)

the

exercise

of

the

right

violates moral rules, good faith, or elementary fairness; or (4)
the exercise of the right is for a purpose other than for which
it was granted.” Lee v. Pennington, 830 So.2d at 1043; Id.
While the primary motive for the repurchase is unclear,
Rowland believes the repurchase was to harm him. Payment for the
30

repurchase was completed by cancelling Rowland’s debts to Total
Safety.

Those

debts

consist

of

litigation

and

investigation

costs related to the instant litigation. (Rec. Doc. No. 128-1 at
2). Given that no judgment has been issued in this case, the
unfairness

of

this

is

clear.

However,

Total

Safety

did

not

exercise the right of repurchase. Under Section 8.09 of the LLC
Agreement, repurchase could only be exercised by the Company, W3
Holdings. The repurchase may very well have benefitted Total
Safety to Rowland’s detriment; however, Total Safety is not the
party that exercised that right. Total Safety was not the holder
of

the

repurchase

right

and

therefore

the

abuse

of

rights

doctrine cannot apply here. For this reason, the Court grants
Total Safety’s 12(b)(6) motion to dismiss the counterclaim for
abuse of rights with respect to the stock repurchase.
2. Overbroad TRO
Rowland contends that Total Safety sought an overbroad TRO,
thereby violating the right to sue and committing an abuse of
rights. In this jurisdiction, a party may be entitled to damages
for the abuse of the process of injunction. Stewart v. Mix, 30
La.

Ann.

1036,

1039

(La.

1878);

Clipper

Estates

Master

Homeowners’ Ass’n, Inc. v. Harkins, No. 2013 CA 0429, 2013 WL
5925762 (La. App. 1 Cir. 11/4/14). A cause of action for abuse
of

the

civil

process

has

been

understood

to

fall

under

the
31

umbrella of the broader cause of action for abuse of rights.
Fidelity Bank and Trust Co. v. Hammons, 540 So.2d 461, 465 (La.
App. 1 Cir. 1989); Weldon v. Republic Bank, 414 So.2d 1361, 1364
n.1 (La. App. 2 Cir. 1982). It follows that, under Louisiana
law, a cause of action for abuse of rights exists that would
allow recovery for abuse of the injunction process.
Rowland claims that an overbroad TRO was sought to harm
and, or, harass him. This meets at least one of the conditions
for the abuse of rights doctrine to apply. However, as discussed
above under (E), because Rowland has failed in pleading a claim
for abuse of process, Rowland has also failed to allege a claim
for an abuse of rights as alleged.

The counterclaim fails to

plead a claim to relief for abuse of rights as a result of an
abuse

of

the

injunction

process,

and

the

Court

grants

the

12(b)(6) motion to dismiss this claim.
Accordingly, and for the reasons enumerated above,
IT IS ORDERED that the Motion to Dismiss is GRANTED in part
and

DENIED

in

part.

IT

IS

ORDERED

that

the

following

counterclaims are DIMISSED pursuant to Federal Rule of Civil
Procedure

12(b)(6):

intentional

interference

with

contract;

conversion; abuse of process; and abuse of rights. IT IS ORDERED
that

the

motion

to

dismiss

is

DENIED

as

to

the

following

32

counterclaims: unfair trade practices; and wrongful issuance of
a temporary restraining order.
II.

Motion for Partial Summary Judgment under Rule 56
Summary

judgment

is

appropriate

only

if

“the

pleadings,

depositions, answers to interrogatories, and admissions on file,
together with the affidavits show that there is no genuine issue
as to any material fact and the movant is entitled to judgment
as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986); TIG Ins. Co. v. Sedgwick James, 276 F.3d 754, 749 (5th
Cir. 2002).
A party may move for partial summary judgment as to one or
more elements of a claim. See Federal Rule of Civil Procedure
56(a). The proponent of the motion bears the burden of showing a
lack of evidence to support his opponent’s case. Fed. R. Civ. P.
56(c); Stauffer v. Gearhart, 741 F.3d 574, 582 (5th Cir. 2014).
If a motion for partial summary judgment is properly supported,
the opposing party may not rely merely on allegations or denials
in

its

specific

own

pleadings,

facts

showing

but
a

must,

genuine

in

its

factual

response,
dispute

set

for

out

trial.

Stauffer, 741 F.3d at 582. However, the court must draw all
justifiable inferences in favor of the non-moving party. TIG
Ins. Co., 276 F.3d at 759. A court must refrain from making
credibility

determinations

or

weighing

the

evidence.

Celtic
33

Marine Corp. v. James C. Justice Companies, Inc., 760 F.3d 477,
481 (5th Cir. 2014).
A

genuine

dispute

of

material

fact

exists

when

the

“evidence is such that a reasonable jury could return a verdict
for

the

L.L.C.,

nonmoving
736

“defeat

F.3d

party.’”
396,

summary

Royal
(5th

400

v.
Cir.

judgment

with

CCC

&

R.

2013).

Tres

A

Arboles,

party

conclusory

cannot

allegations,

unsubstantial assertions, or ‘only a scintilla of evidence.’”
Celtic Marine Corp., 760 F.3d at 481; TIG Ins. Co., 276 F.3d at
759.
If the court does not grant all the relief requested by the
motion,

it

including

may

an

enter

item

of

an

order

damages

stating

or

other

any

material

relief-

that

factis

not

genuinely in dispute and treating the fact as established in the
case. Fed. R. Civ. P. 56(g).
Total

Safety

following

claims:

fiduciary

duty,

seeks
(A)

(C)

partial

breach

of

summary

judgment

contract,

misappropriation

of

trade

(B)

on

the

breach

secrets

of

under

Louisiana law, (D) unfair competition under Louisiana law, and
(E) computer fraud and abuse under federal law.

34

A. Breach of Contract Claim
Total Safety seeks partial summary judgment to establish
the validity and enforceability of the employment agreement and
the non-compete clauses; and, to establish that Rowland breached
the

confidentiality,

return-of-property,

and

non-competition

provisions of the employment agreement.
The Non-Compete Clauses and Louisiana Public Policy
This Court sitting in diversity is generally required to
apply the Louisiana approach to conflicts of law. See Klaxon Co.
v.

Stentor

Electric

Manufacturing

Co.,

313

U.S.

487

(1941).

However, Louisiana allows the parties to a contract to stipulate
in their contract which state’s laws are to govern them. NHC
Corp. v. Broyles, 749 F.2d 247, 251 (5th Cir. 1985). Rowland’s
employment contract with Total Safety provides that the contract
is to be governed by Texas law.8 Such contractual stipulations
are

not

honored,

however

where

“there

are

legal

or

‘strong

public policy considerations justifying the refusal to honor the
contract as written.” Id.
“Louisiana’s
noncompetition

strong

agreements

public

between

policy

employers

and

restricting
employees

is

8

Rec. Doc. No. 1-2 at 9.: Choice of Law: All issues and questions concerning the construction, validity, enforcement
and interpretation of this agreement shall be governed by, and construed in accordance with, the laws of the state
of Texas, without giving effect to any choice of law or conflict of law rules or provisions (whether of the state of
Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the state
of Texas.

35

based on the underlying state desire to prevent an individual
from contractually depriving himself of the ability to support
himself

and

consequently

become

a

public

burden.”

Technical

Industries, Inc. v. Banks, 419 F.Supp. 2d 903, 910 (W.D. La.
2006). Because non-compete covenants are in derogation of the
common right, they must be strictly construed against the party
seeking their enforcement. Id. Non-compete agreements are deemed
to be against public policy, except in the limited circumstances
delineated by statute. Id.
Non-compete agreements are “null and void” under La. Rev.
Stat. § 23:921, unless they fit certain limited and specifically
described exceptions. Section 23:921 dictates that to be valid,
such agreements must designate “a specified parish or parishes,
or municipality, or parts thereof” where the agreement is to be
effective,

and

those

parishes

and

municipalities

are

further

limited to those areas where the party seeking to enforce the
non-compete
specified

agreement
parish(es)

carries
or

on

a

like

business

municipality(ies).

The

within

the

non-compete

period cannot exceed “two years from the date of the last work
performed under written contract.” La. Rev. Stat. § 23:921(c).
Non-competition,

non-solicitation,

and

non-recruitment

covenants are subject to the foregoing requirements as all three
constitute non-compete provisions. Restivo v. Hanger Prosthetics
36

& Orthotics, Inc., 483 F.Supp. 2d 521, 532 (E.D. La. 2007). The
employment agreement at issue specifies the 22 parishes and 5
municipalities in which all three covenants apply, and provides
that the covenants apply if Total Safety “carries on a like
business”

in

the

designated

areas.

The

Agreement’s

non-

competition, non-solicitation, and non-recruitment periods were
each 12 months following the end of Rowland’s employment. The
Court

finds

that

the

Agreement’s

non-competition,

non-

solicitation, and non-recruitment provisions do not contravene
Louisiana law and public policy.
Validity of the Employment Contract under Texas Law
The Court next addresses the validity and enforceability of
the contract and the non-compete provisions under the applicable
choice of law provision: Texas.9
Validity of the Employment Contract
A valid contract requires (1) an offer, (2) an acceptance,
(3) a meeting of the minds, (4) each party’s consent to the
terms,

(5)

execution

and

delivery

of

the

contract

with

the

intent that it be mutual and binding, and (6) consideration.
9

La. Rev. Stat. § 23:921(A)(2) provides that: “The provisions of every employment contract or agreement… by
which any foreign or domestic employer…includes a choice of law clause in an employee’s contract of employment
or collective bargaining agreement...shall be null and void except where the…choice of law clause is expressly,
knowingly, and voluntarily agreed to and ratified by the employee after the occurrence of the incident which is the
subject of the civil or administrative active.” Rowland does not contend that the agreement is illegal under this
section, and although Rowland claims to have forgotten signing the agreement, Rowland does not claim that the
agreement was signed unknowingly or involuntarily.

37

Mack v. John L. Wortham & Son, L.P., 541 Fed.Appx 348, 362 (5th
Cir. 2013). The essential terms must be defined with sufficient
precision to enable the court to determine the obligations of
the

parties.

Id.

(citing

New

Process

Steel,

L.P.

v.

Sharp

Freight Sys., No. 01-04-00764, 2006 WL 947764, at *3 (Tex. Civ.
App.

Apr. 13, 2006)).
The employment contract with Total Safety was signed by

Rowland

and

the

company

in

2005.

Under

the

terms

of

the

agreement, Rowland was to be paid a base salary, subject to an
annual discretionary increase, as well as a performance bonus,
and

was

to

consideration

receive

health

for

continued

his

and

welfare

diligence

employee. (Rec. Doc. No. 1-2 at 2).

benefits,
and

loyalty

all

in

as

an

Rowland does not contest

consent or mutual assent, and nothing in the record suggests
that these requirements are at issue. The terms of the ten (10)
page agreement are clear and precise.
The Court next turns to whether an otherwise enforceable
agreement exists, and begins by resolving whether Rowland was an
at-will employee of Total Safety.

The long standing rule in

Texas provides for employment at will, terminable at any time by
either party, with or without case, absent an express agreement
to the contrary. Federal Express Corp. v. Dutschmann, 846 S.W.2d
282,

283

(Tex.

1993).

Although

Item

2

of

the

employment
38

agreement provides for an employment period of two years, with
automatic one year period renewals, Rowland could be terminated
without cause under Item 6.10 Otherwise enforceable agreements
can emanate from at-will employment; however, so long as the
consideration for any promise forming such agreements is not
illusory. Light v. Centel Cellular Co. of Tex., 883 S.W.2d 642,
644 (Tex. 1994). Consideration for a promise is illusory if is
dependent on a period of continued employment.
In

this

Agreement

case,

the

contains

Court

determines

non-illusory

that

promises

the

Employment

serving

as

consideration: Total Safety’s promise to pay the base salary if
it terminated Rowland for a reason other than cause as set out
in the agreement is a non-illusory promise. See Guy Carpenter &
Co., Inc., 334 F.3d 459, 465 (5th Cir. 2003)(holding employer’s
promise
employee

to

pay

a

without

designated
good

cause

severance
was

if

it

terminated

non-illusory);

see

the
also

Corporate Relocation, Inc. v. Martin, No.3:06-CV-232-L, 2006 WL
4101944, at *12 (N.D. Tex. Sept. 12. 2006). The Court notes that
Rowland does not contest the overall validity of the contract.11
Rowland does contend that the 2005 employment agreement may no

10

Rec. Doc. 1-2 at 4: “ Notwithstanding Section 2 of this Agreement, the Employment Period shall end on the
earlier of...(ii) termination by the Company with or without Cause.”
11
Rowland does contend that the 2005 Employment Agreement may have been superseded by a later
employment agreement; however, does not provided much detail on this. Ultimately, this is a separate issue
altogether that does not affect the findings here. (Rec. Doc. No. 304 at 22).

39

longer be enforceable as it may have been superseded by later
agreements.
The Court finds that the employment agreement constitutes a
valid

contract,

and

further,

that

the

validity

of

the

2005

Employment Agreement is not a disputed issue in this matter.
Although the Court finds that the Agreement may be enforceable,
the Court declines to find that the 2005 Employment Agreement is
enforceable as this is a genuine issue of material fact for
trial.
Enforceability of the Non-Compete Provisions
Texas

Business

and

Commercial

Code

Annotated

§

15.05

provides that “[e]very contract, combination, or conspiracy in
restraint
Section
15.05...a

of

trade

15:50(a)
covenant

or

commerce

provides
not

to

is

that
compete

unlawful.”

(Vernon

“[n]otwithstanding
is

enforceable

if

2002).
Section
it

is

ancillary to or part of an otherwise enforceable agreement at
the time the agreement is made to the extent that it contains
limitations as to time, geographical area, and scope of activity
to be restrained that are reasonable....”
The
compete,

Court

next

containing

non-recruitment

considers
the

whether

the

non-competition,

covenants,

was

“ancillary

covenant

not

non-solicitation
to

or

part

of”

to
and
an

40

otherwise

enforceable

agreement.

First,

as

discussed,

the

enforceability of the 2005 Employment Agreement is a genuine
issue

of

material

fact.

Second,

Total

Safety

has

failed

to

demonstrate that the noncompete covenants are ancillary to the
2005 Employment Agreement.
The Texas Supreme Court has stated that to be ancillary to
or

part

of

an

otherwise

enforceable

contract,

“(1)

the

consideration given by the employer in the otherwise enforceable
agreement

must

give

rise

to

the

employer’s

interest

in

restraining the employee from competing; and (2) the covenant is
designed

to

enforce

the

employee’s

consideration

or

return

promise [the promise not to disclose the trade secrets].” Guy
Carpenter & Co., Inc., 334 F.3d at 465. Total Safety did not
explicitly

promise

in

the

employment

agreement

to

provide

Rowland with confidential or proprietary information, or trade
secrets,

in

exchange

for

his

promises

not

to

compete.

Cf.

Olander v. Compass Bank, 363 F.3d 560, 564-65 (5th Cir. 2004);
Corporate Relocation, Inc. v. Martin, 2006 WL 4101944, at *12.
The non-illusory promise regarding Rowland’s entitlement to a
base salary if Total Safety terminated him for a reason other
than

cause

does

not

give

rise

to

an

“interest

worthy

of

protection” by the non-compete covenants. Cf. Id. at *13; Light,
883 S.W.2d at 647.

41

The

Court

need

not

discuss

whether

the

limitations

are

reasonable under Section 15:50(a). To the extent that the motion
for

partial

summary

enforceability
denied.

To

of

the

judgment

the

seeks

noncompete

extent

that

the

to

establish

provisions,
motion

for

the

the

motion

partial

is

summary

judgment seeks to establish that the employment contract is a
valid

agreement;

contravene

and

Louisiana

that

the

public

noncompete

policy,

the

provisions

Court

makes

do

not

factual

findings in favor of Total Safety.
Rowland’s Breach of the Employment Agreement
The Court analyses Total Safety’s breach of contract claim
under Texas law. The essential elements of a breach-of-contract
claim are (a) valid contract (the non-compete agreements) were
formed

between

performed

its

Total

Safety

obligations

and

under

Rowland,
the

(b)

contract,

Total

Safety

(c)

Rowland

breached his contract by engaging in a competing business within
one year after employment terminated; and (d) Total Safety was
damaged as a result. See Strange v. HRsmart, Inc., 400 S.W.3d
125, 129 (Tex. App. 2013); West v. Triple B Servs., LLP, 264
S.W. 3d 440, 446 (Tex. App. 14th Dist. 2008).
Total Safety specifically requests that the Court find (1)
that

Rowland

restricted

improperly

territory;

competed

(2)

that

with
Rowland

Total

Safety

improperly

in

the

solicited
42

Total

Safety’s

customers

for

work

within

the

restricted

territory; (3) that Rowland improperly recruited Total Safety’s
employees to join competitor, 24HR Safety; and (4) that Rowland
improperly

stole

and

retained

Total

Safety’s

confidential

information.
As discussed, Total Safety has not established that the
non-compete

provisions

are

enforceable

under

Texas

law.

This

failure is fatal to Total Safety’s ability to establish all four
elements of a breach of contract claim. As it is unclear whether
the noncompete provisions are enforceable under Texas law, the
Court cannot find that Rowland breached the employment agreement
by (1) improperly competing with Total Safety, (2) improperly
soliciting

Total

Safety’s

customers,

or

(3)

improperly

recruiting Total Safety’s employees.
Rowland

acknowledges

“improperly”

downloading

and

taking

with him Total Safety files on 7 flashdrives. (Rec. Doc. No. 304
at 1). Rowland also does not contest the confidentiality of the
information. These are not genuine issues of fact for trial.
However,

under

the

employment

‘Confidential Information,’

12

agreement’s

provision

for

misuse and/or disclosure of Total

Safety’s confidential information is required. Rowland maintains
12

Rec. Doc. No. 1-2 Item 7: “The Employee agrees that he shall use the Confidential Information only as necessary
and only in connection with the performance of his duties hereunder. Employee agrees that he shall not disclose
to any unauthorized person or use for his own or any other purposes...any Confidential Information without the
prior written consent…”

43

that

the

information

was

not

disclosed

or

misused.

Rowland

further contends that: “[t]o date, 24HR Safety has produced over
75,000 pages of documents from the forensic imaging, and not one
shred of paper demonstrates that Rowland ever provided any Total
Safety documents to 24HR Safety. Thus, whether Rowland breached
the employment agreement through misuse and/or disclosure of the
downloaded confidential information is also a genuine issue of
fact for trial. The Court finds that Rowland downloaded and took
with

him

confidential

employment.

However,

information
the

Court

in

leaving

declines

to

Total
partial

Safety’s
summary

judgment as to Rowland’s liability for breach of the non-compete
and confidentiality provisions of the 2005 Employment Agreement.
B. Breach of Fiduciary Duty Claim Under Louisiana Law
Louisiana courts have confined fiduciary duties to special
relationships of trust and confidence. Ducote Jax Holdings, LLC
v. Bradley, No. 04-1943, 2007 WL 2008505, at *9 (E.D. La. 2007).
In

regard

to

the

employee-employer

relationship,

an

employee

owes a duty to his employer to be loyal and faithful to the
employer’s interest in business. Novelaire Technologies, LLC v.
Harrison,

994

So.2d

57,

64

(La.

App.

5

Cir.

8/19/08).

The

fiduciary duty of an employee does not end when the employment
is

terminated.

Novelaire

Technologies,

LLC

v.

Harrison,

994

So.2d at 64.
44

A cause of action for breach of fiduciary duty requires
proof of fraud, breach of trust, or an action outside the limits
of the fiduciary’s authority. Id. In Novelaire Technologies, the
court, on a request for a preliminary injunction,

held that

plaintiff made a prima facie showing that the defendant breached
his

fiduciary

duty

where

plaintiff

argued

that

defendant

violated a promise not to disclose confidential information. Id.
at 64.
Total Safety contends that Rowland breached his duty of
loyalty to Total Safety by stealing Total Safety’s confidential,
proprietary information in order to compete against Total Safety
for his and 24HR Safety’s benefit- and by continuing to retain,
access and disclose Total Safety’s confidential information to
24HR Safety’s owners.
Although
contentions,

Rowland
Rowland

does

not

directly

does

dispute

respond

disclosing

to

these

confidential

information to 24HR Safety. Therefore, there is a genuine issue
of

material

fact

as

to

whether

Rowland

was

acting

in

contravention of his duty of loyalty. This claim for breach of
fiduciary duty is best left to the jury. The Court declines to
enter partial summary judgment as to Rowland’s liability on this
claim.

45

C. Misappropriation of Trade Secrets
Louisiana Uniform Trade Secrets Act
Total

Safety

claims

Rowland

Claim

“downloaded

Under

the

confidential,

proprietary information to the flash drives, emailed them to
personal email accounts, and even printed some.”13 Total Safety
contends that the stolen files contained Total Safety’s trade
secrets.
To

establish

a

violation

under

Louisiana

Uniform

Trade

Secrets Act (LUTSA),(1) there must first be a determination that
legally

protected

whether

an

trade

express

or

secret
implied

actually

existed,

contractual

or

(2)

if

so

confidential

relationship existed between the parties obligating recipient of
alleged

secret

material

finally the obligee
secret

information

not

must

to

prove

wrongfully

use
that

or

disclose

it,

and

(3)

the party receiving the

breached

its

duty

of

trust

or

confidence by disclosing or using the information to the injury
of the obligee. See La. Rev. Stat. Ann. §51:1431(2)(b)(ii)(bb);
Restivo v. Hanger Prosthetics & Orthotics, 483 F.Supp. 2d 521,
533 (E.D. La. 2007).
Existence of a Legally Protected Trade Secret
Louisiana
including

13

a

law

defines

formula,

a

patter,

“trade

secret”

compilation,

as

“information,

program,

device,

Rec. Doc. No. 281 at 39.

46

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.” La. Rev. Stat.
§ 51:1431.
Here, Total Safety contends that Rowland downloaded dozens
of files, including the following files: billing information,
pricing

analysis

plans, and
that

site

stolen

information

for

specific

customers,

budget

inspection documents.14 Total Safety contends

information

was

proprietary

and

confidential

information. The Employment Agreement provides that confidential
information is that “concerning the business or affairs of the
Company or any of its Subsidiaries or their customers.”15
Rowland
information

does
onto

the

not

dispute

flashdrives.

downloading
However,

Total

confidential
Safety

must

still establish that any or all of the information constitutes
trade secret. Total Safety generally pleads and avers that the
information contains the “recipe for how we do business with a
client,” and that possession of the information by a competitor
“gives them a very competitive advantage... know our rates and
14
15

Rec. Doc. No. 281-1 at 24.
Id. at 5.

47

our costs...”16 Although Total Safety claims that the information
is

not

available

established

nor

to

the

public,

identified

which

Total

Safety

documents

has

and

neither

information

derive “independent economic value”17 or that the information is
“not readily ascertainable by proper means.” Rowland’s liability
on this claim turns on whether the information is trade secret.
While Total Safety is given leeway at the pleading stage to
plead generally, on a motion for partial summary judgment, Total
Safety bears the burden of establishing that the nature of the
subject documents is not a “genuine issue of fact.” A reasonable
jury

could

find

that

the

downloaded

information

did

not

constitute trade secret under Louisiana law.
The

Court

finds

that

the

existence

of

trade

secret

information among the downloaded documents is a genuine issue of
fact in this case, and because Rowland’s liability under the
statute

turns

on

the

nature

of

the

information

contained

therein, the Court declines to enter partial summary judgment as
to Rowland’s liability under the Louisiana Uniform Trade Secrets
Act.

16

Rec. Doc. No. 281 at 41.
When Total Safety filed the SAC, Total Safety acknowledged its inability to “list all of the trade secrets that were
misappropriated...however, Total Safety knows that he downloaded over 200 electronically stored files belonging
to Total Safety…”. Rec. Doc. No. 117 at 44.
17

48

D. Unfair Competition Claim Under the Louisiana Unfair
Trade Practices and Consumer Protection Law
Total Safety contends that Rowland’s theft of the company’s
confidential

and

proprietary

information

in

breach

of

his

fiduciary duty constitutes deceptive and unethical conduct under
LUTPA.

Total

Safety

further

contends

that

Rowland

“recruited

Total Safety’s employees by fully orchestrating employment with
24HR

Safety

for

Justin

Rowland

and

Jackie

Mixon.

Rowland

responds by stating that “[d]isputed issues of material fact
preclude a finding of liability on Total Safety’s LUTPA claim,”
however, provides no discussion of what those disputed issues
are. (Rec. Doc. No. 304 at 13-14).
Rowland admits to downloading confidential information in
leaving Total Safety’s employment. (Rec. Doc. No. 304 at 1).
However, Rowland contests disclosing or otherwise misusing the
downloaded confidential information in breach of fiduciary duty.
In order to recover under LUTPA, a plaintiff must prove
fraud,

misrepresentation,

or

unethical

conduct.

Computer

Management Assistance Co. v. Robert F. DeCastro, Inc., 220 F.3d
396, 404 (5th Cir. 2000).

The range of prohibited practices

under

narrow.

LUTPA

America,

is

Inc.,

extremely
875

F.Supp.

2d

667,

Cargill,
675

Inc.

(E.D.

La.

v.

Degesch

2012).

An

example of such unethical practices would be the “solicitation

49

and diversion of an employer’s customers prior to termination.”
Restivo, 483 F.Supp. 2d 521, 535 (E.D. La. 2007).
Although Rowland does not contest orchestrating employment
with 24HR Safety, Total Safety has not established that the
solicitation took place prior to Rowland leaving Total Safety.
The solicitation of customers after the end of the employment
relationship does not form the basis of a cause of action for
unfair competition. Restivo, 483 F.Supp. at 535. The Court finds
that there are genuine issues of material fact involved in this
claim, and declines to enter

partial

summary judgment as to

Rowland’s liability.
E. Computer Fraud
1030(a)(4)

and

Abuse

Claim

Under

18

U.S.C.

§

Total Safety seeks a partial summary judgment “to establish
that Rowland accessed his Total Safety computer and exceeded his
authorization by knowingly downloading Total Safety’s valuable
trade secrets and confidential, proprietary information so as to
retain

possession

of

this

information

once

he

resigned

from

Total Safety...” and further, that the information obtained is
valued at more than $5,000. (Rec. Doc. No. 281-1 at 47).
The Computer Fraud and Abuse Act (“CFAA”) prohibits certain
intentional

or

authorization.

knowing
See

18

access

U.S.C.

§

to

a

computer

1030(a)(4)-(5);

without

Larson

v.
50

Hyperion Intern. Technologies, LLC, No. 12-50102, 494 Fed.Appx.
493, 497 (5th Cir. Oct. 19, 2012).18 The statute provides a civil
remedy for any person who suffers damage or loss resulting from
such a violation. 18 U.S.C.A. § 1030(g); Fiber Systems Intern.,
Inc. v. Roehrs, 470 F.3d 1150, 1156 (5th Cir. 2006).
A

plaintiff

must

prove

the

following

elements:

“(1)

defendant has accessed a protected computer; (2) has done so
without authorization or by exceeding such authorization as was
granted;

(3)

has

done

so

‘knowingly’

and

with

‘intent

to

defraud’; and (4) as a result has ‘further[ed] the intended
fraud

and

obtain[ed]

anything

of

value.’”

Associated

Pump

&

Supply Co., LLC v. Dupre, No. 14-9, 2014 WL 1330196, at *5 (E.D.
La. April 3, 2014). A civil action can only be maintained under
Section 1030(a)(4) of the CFAA if the violative conduct involves
a Section 1030(a)(5)(B) factor, of relevance is, (i) loss to 1
or more persons during any 1 year period aggregating at least
$5,000 in value. 18 U.S.C. § 1030(a)(5)(B).
Rowland contends that there are genuine issues of fact on
elements (2), (3) and (4) that preclude partial summary judgment
on this claim. Although Rowland does not discuss two of these
points, Rowland does argue that it is unclear whether authorized

18

“(a) Whoever- (4) knowingly and with intent to defraud, access a protected computer without authorization, or
exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of
value....” 18 U.S.C.A. § 1030(a)(4).

51

access was exceeded. In the criminal context under the statute,
it has been held that computer user “has reason to know” that he
or she is not authorized to access data or information when his
actions are in furtherance of a criminally fraudulent scheme.
Associated Pump & Supply Co., LLC. v. Dupre, 2014 WL 1330196 at
*6 (citing U.S. v. John, 597 F.3d 263, 272 (5th Cir. 2010)).
However, this specifically applies in the criminal context. The
Fifth

Circuit’s

discussion

in

John

was

taken

to

indicate

approval that, in the civil context, under the terms of a broad
confidentiality

agreement,

a

former

employees’

actions

may

exceed authorized access within the meaning of 1030(a)(4). Id.
at *6.
In

Dupre,

the

Fifth

Circuit

was

ruling

on

a

12(b)(6)

motion. In denying the motion, the court stated “there was an
Agreement

and

Dupre

accessed

and

misused

information

in

contravention of the Agreement- Plaintiff states a claim for
civil liability under the CFAA.” Id. at *6.
In the instant case there is a confidentiality agreement,
and

as

previously

discussed,

a

violation

under

the

confidentiality provision consists of disclosure and/or use for
a

personal

purpose

or

any

other

purpose

without

consent.19

19

Rec. Doc. No. 1-2 Item 7: “The Employee agrees that he shall use the Confidential Information only as necessary
and only in connection with the performance of his duties hereunder. Employee agrees that he shall not disclose

52

Rowland

contends

that

the

confidential

information

was

not

disclosed, which is a genuine issue of fact for trial. Rowland’s
use of the downloaded information is also a genuine issue of
fact for trial. For these reasons, the Court declines to enter
partial summary judgment as to Rowland’s liability under the
CFAA.
Accordingly,
IT

IS

ORDERED

that

Total

Safety’s

Motion

for

Partial

Summary Judgment under Rule 56 (Rec. Doc. No. 281) is GRANTED in
part

and

Employment

DENIED

in

Agreement

part.

The

constitutes

declines to find that

Court
a

finds

valid

that

contract.

the
The

2005
Court

the agreement is enforceable, or that

Rowland breached the agreement’s restrictive covenants, as it is
unclear

whether

However,

the

they

Court

are
finds

enforceable
that

the

under

applicable

restrictive

law.

covenants

contained in the 2005 Employment Agreement do not contravene
Louisiana

law

and

public

policy.

The

Court

does

find

that

Rowland downloaded confidential information onto flashdrives in
leaving his employment with Total Safety.
The Court finds that there are genuine issues of fact for
trial on claims for breach of fiduciary duty, and claims under

to any unauthorized person or use for his own or any other purposes...any Confidential Information without the
prior written consent…”

53

LUTSA, LUTPA,
partial

and the CFAA, and therefore declines to enter

summary

judgment

as

to

Rowland’s

liability

on

these

claims. Based on the foregoing, the Court further declines to
enter a permanent injunction against Rowland.

New Orleans, Louisiana, this 17th day of November, 2014.

____________________________
UNITED STATES DISTRICT JUDGE

54