Brand Services, LLC v. Irex Corporation

Filing 144

ORDER AND REASONS granting Defendant's 104 Motion for Summary Judgment; denying Plaintiff's 105 Motion for Reconsideration. All of Plaintiff's claims are DISMISSED WITH PREJUDICE. Signed by Judge Jane Triche Milazzo. (ecm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
BRAND SERVICES, LLC

CIVIL ACTION

VERSUS

NO: 15-5712

IREX CORPORATION

SECTION: “H”(1)

ORDER AND REASONS
Before the Court is Defendant’s Second Motion for Summary Judgment
(Doc. 104) and Plaintiff’s Motion for Reconsideration (Doc. 105).

For the

following reasons, Defendant’s Motion is GRANTED, and Plaintiff’s Motion is
DENIED.
BACKGROUND
Plaintiff Brand Services LLC alleges that its former employee, James
Stanich, stole files containing confidential and proprietary information
belonging to Plaintiff when he left the company to work with Defendant Irex
Corporation. Plaintiff’s Complaint contends that Irex has acquired its trade
secrets and has profited from this information. Plaintiff brought claims under
the Louisiana Uniform Trade Secrets Act (“LUTSA”) and for the tort of
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conversion.

On May 3, 2017, this Court granted Defendant’s Motion for

Summary Judgment on Plaintiff’s LUTSA claim, holding that Plaintiff could
not show that Irex had been unjustly enriched by the alleged misappropriation.
Instead, all of Plaintiff’s arguments indicated that Irex’s subsidiary, Vertical
Access Solutions (“VAS”), had benefited. This Court held that Plaintiff had not
provided any facts or argument through which this Court could hold Irex liable
for the unjust enrichment of its subsidiary.
In its Motion for Summary Judgment, Defendant inadvertently failed to
move for dismissal of Plaintiff’s state law conversion claim. This Court granted
Defendant the opportunity to do so. Thereafter, Plaintiff filed the instant
Motion for Reconsideration of the dismissal of its LUTSA claim. This Court
will consider each Motion in turn.
LEGAL STANDARD
A. Motion for Summary Judgment
Summary judgment is appropriate “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with affidavits, if
any, show that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.” 1 A genuine issue
of fact exists only “if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” 2
In determining whether the movant is entitled to summary judgment,
the Court views facts in the light most favorable to the non-movant and draws
1
2

Fed. R. Civ. P. 56(c) (2012).
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
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all reasonable inferences in his favor. 3 “If the moving party meets the initial
burden of showing that there is no genuine issue of material fact, the burden
shifts to the non-moving party to produce evidence or designate specific facts
showing the existence of a genuine issue for trial.” 4 Summary judgment is
appropriate if the non-movant “fails to make a showing sufficient to establish
the existence of an element essential to that party’s case.” 5 “In response to a
properly supported motion for summary judgment, the non-movant must
identify specific evidence in the record and articulate the manner in which that
evidence supports that party’s claim, and such evidence must be sufficient to
sustain a finding in favor of the non-movant on all issues as to which the nonmovant would bear the burden of proof at trial.” 6 “We do not . . . in the absence
of any proof, assume that the nonmoving party could or would prove the
necessary facts.” 7 Additionally, “[t]he mere argued existence of a factual
dispute will not defeat an otherwise properly supported motion.” 8
B. Motion for Reconsideration
A Motion for Reconsideration of an interlocutory order is governed by
Federal Rule of Civil Procedure 54(b), which states that: “[A]ny order or other
decision, however designated, that adjudicates fewer than all the claims or the
rights and liabilities of fewer than all the parties does not end the action as to

Coleman v. Houston Indep. Sch. Dist., 113 F.3d 528, 532 (5th Cir. 1997).
Engstrom v. First Nat’l Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir. 1995).
5 Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
6 John v. Deep E. Tex. Reg. Narcotics Trafficking Task Force, 379 F.3d 293, 301 (5th
Cir. 2004) (internal citations omitted).
7 Badon v. R J R Nabisco, Inc., 224 F.3d 382, 394 (5th Cir. 2000) (quoting Little v.
Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)).
8 Boudreaux v. Banctec, Inc., 366 F. Supp. 2d 425, 430 (E.D. La. 2005).
3
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any of the claims or parties and may be revised at any time before the entry of
a judgment adjudicating all the claims and all the parties’ rights and
liabilities.” “Under Rule 54(b), ‘the trial court is free to reconsider and reverse
its decision for any reason it deems sufficient, even in the absence of new
evidence or an intervening change in or clarification of the substantive law.’” 9
“‘[T]he power to reconsider or modify interlocutory rulings is committed to the
discretion of the district court, and that discretion is not cabined by the
heightened standards for reconsideration’ governing final orders.’” 10
LAW AND ANALYSIS
A. Motion for Summary Judgment
At this Court’s behest, Defendant now moves for summary judgment on
Plaintiff’s claim for state law conversion. Defendant argues that Plaintiff’s
conversion claim should be dismissed because (1) it is preempted by LUTSA,
(2) Louisiana does not recognize a claim for conversion of incorporeals, and (3)
Brand cannot show damages.

Because this Court ultimately finds that

Plaintiff’s conversion claim is preempted by LUTSA, it need not address
Defendant’s other arguments.
In its argument that LUTSA preempts Plaintiff’s conversion claim,
Defendant points to the section of LUTSA, adopted from the Uniform Trade
Secret Act (“UTSA”), which states that the Act “displaces conflicting tort,
restitutionary, and other laws of this state pertaining to civil liability for
Austin v. Kroger Texas, L.P., No. 16-10502, 2017 WL 1379453, at *9 (5th Cir. 2017)
(quoting Lavespere v. Niagara Mach. & Tool Works, Inc., 910 F.2d 167, 185 (5th Cir. 1990)).
10 Id. (quoting Saint Annes Dev. Co. v. Trabich, 443 Fed.Appx. 829, 831–32 (4th Cir.
2011).
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misappropriation of a trade secret.” 11 Defendant argues that pursuant to this
section, LUTSA provides the exclusive remedy for all claims regarding the
misappropriation of business information. Although the Louisiana Supreme
Court has not yet addressed this issue, other courts considering similar UTSA
statutes have adopted this approach. 12 Indeed, the majority approach is that
the UTSA “preempts noncontractual legal claims protecting business
information, whether or not the business information is a Uniform Act trade
secret” 13 “These courts articulate the standard differently, but the thrust of
their interpretation is this: A claim is not preempted if the plaintiff is able to
show the claim is based on facts unrelated to the misappropriation of the trade
secret.” 14
In addition, “[m]ost courts considering whether UTSA preempts a claim
for conversion of trade secrets have concluded that it does.” 15 Those courts

La. Rev. Stat. § 51:1437. This statute is identical to the 1979 version of the UTSA.
In 1985, the UTSA was amended to state that the Act “displaces conflicting tort,
restitutionary, and other law of this State providing civil remedies for misappropriation of a
trade secret.” “The 1985 Amendment replacing ‘pertaining to’ with ‘providing for’ in the sense
of ‘dealing with’ was not a substantive change. Richard F. Dole, Jr., Preemption of Other
State Law by the Uniform Trade Secrets Act, 17 SMU SCI. & TECH. L. REV. 95, 107 (2014).
12 See 360 Mortgage Group, New S. Equip. Mats, LLC v. Keener, 989 F. Supp. 2d 522,
534 n.6 (S.D. Miss. 2013) (collecting cases).
13 Richard F. Dole, Jr., Preemption of Other State Law by the Uniform Trade Secrets
Act, 17 SMU SCI. & TECH. L. REV. 95, 109 (2014). “Under the ‘minority approach,’ Uniform
Act preemption exists only if business information is a Uniform Act trade secret.” Id.
14 360 Mortg. Grp., LLC v. Homebridge Fin. Servs., Inc., No. A-14-CA-00847-SS, 2016
WL 900577, at *6 (W.D. Tex. Mar. 2, 2016).
15 Id. at *7; see New S. Equip. Mats, LLC v. Keener, 989 F. Supp. 2d 522, 534 n.6 (S.D.
Miss. 2013) (collecting cases); PHA Lighting Design, Inc. v. Kosheluk, No. 1:08-CV-01208JOF, 2010 WL 1328754, at *10 (N.D. Ga. Mar. 30, 2010) (“Eleventh Circuit and Georgia
precedent clearly holds that where the allegedly misused information actually does rise to
the level of a trade secret, claims of conversion and unjust enrichment are preempted, to the
extent they are based on a trade secret.”)
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have further held that claims for conversion of confidential and proprietary
information, in addition to trade secrets, are likewise preempted. 16 “Most
courts considering this question have determined UTSA was intended to
preempt all claims based upon the unauthorized use of information.” 17
Plaintiff has not presented any compelling arguments to the contrary, and this
Court is therefore compelled to follow the majority approach. 18 Plaintiff’s
claims for conversion of its trade secrets and proprietary or confidential
business information are therefore preempted by LUTSA.

360 Mortg. Grp., LLC, 2016 WL 900577, at *6.
Id.; see Diamond Power Int’l, Inc. v. Davidson, 540 F. Supp. 2d 1322, 1345 (N.D. Ga.
2007) (“If a plaintiff could alternatively recover for misappropriation of non-proprietary
information or misappropriation of unguarded proprietary information, the legislative
judgment contained in the GTSA—that such information should otherwise flow freely in the
public domain—would be subverted. And it would make little sense to go through the
rigamarole of proving information was truly a trade secret if a plaintiff could alternatively
plead claims with less burdensome requirements of proof. Since such an attempt to
circumvent those requirements would be ‘in conflict’ with the mandates of the GTSA, the
GTSA renders such claims superseded.”).
18 Indeed, Plaintiff relies solely on J.T. Shannon Lumber Co. v. Gilco Lumber, Inc.,
No. 2:07-cv-119, 2010 WL 234996, at *8 (N.D. Miss. Jan. 15, 2010), which held that a claim
for conversion of trade secrets was not preempted. Another court has noted, however, that
this is “[t]he only case that has found a claim for conversion of trade secrets is not preempted.”
New S. Equip. Mats, 989 F. Supp. 2d at 534 (“With respect, the court must disagree. Every
other court considering the issue has held to the contrary.”). In addition, Plaintiff cites to
Elliott Co. v. Montgomery, No. CV 6:15-02404, 2016 WL 6301042, at *4 (W.D. La. Sept. 28,
2016), report and recommendation adopted, No. CV 15-02404, 2016 WL 6301106 (W.D. La.
Oct. 26, 2016), for the proposition that courts allow parallel LUTSA and conversion claims.
Elliot, however, does not address preemption and merely allowed Plaintiff’s conversion and
LUTSA claims to proceed past the motion to dismiss phase. Neither of these cases compels
a different result.
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B. Motion for Reconsideration
“The essential elements of a claim pursuant to LUTSA are: (a) the
existence of a trade secret; (b) a misappropriation of the trade secret by
another; and (c) the actual loss caused by the misappropriation.” 19 In its First
Motion for Summary Judgment, Defendant argued, and this Court agreed, that
Plaintiff could not show that it suffered damages from the alleged
misappropriation of its trade secret. In its ruling on Defendant’s First Motion
for Summary Judgment, this Court stated that:
Plaintiff argues that Defendant has been unjustly enriched
by the use of its trade secrets. Specifically, it argues that Stanich
copied an application developed by Brand called Schedule D, which
aids in invoicing, preparing quotes, and estimating and comparing
the cost of projects. Plaintiff alleges that Stanich created a version
of Schedule D for use by his new employer, Defendant’s subsidiary
Vertical Access Solutions (“VAS”). Plaintiff alleges that the
Schedule D program developed by Stanich has saved VAS in
administrative personnel costs and allows the company to be more
efficient and effective.
Plaintiff alleges that these facts
demonstrate that VAS has been unjustly enriched by the use of its
trade secrets.
It also alleges that its trade secrets have
independent economic value because of the development costs and
efficiencies gained from their use.
Defendant rebuts that VAS is not a party to this case and
that Defendant cannot be held liable for the unjust enrichment of
its subsidiary. It is well-settled that a parent corporation is not
liable for the acts of its subsidiary. 20 Plaintiff has not provided any
facts or argument through which this Court could hold Defendant
liable for the unjust enrichment of its subsidiary, VAS. Plaintiff
19

2005).

Dorsey v. N. Life Ins. Co., No. 04-0342, 2005 WL 2036738, at *12 (E.D. La. Aug. 15,

Andry v. Murphy Oil, U.S.A., Inc., 935 So. 2d 239, 249–50, (La. App. 4 Cir. 2006)
(“Louisiana law does not permit a court to hold the parent company liable for it subsidiary’s
actions without proof that the parent company knew of and approved those actions.”).
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20

also has not provided any facts showing that Defendant itself
benefited from the alleged misappropriation of Plaintiff’s trade
secrets. Accordingly, Plaintiff cannot succeed on its claim against
Defendant under the LUTSA. 21
In its Motion for Reconsideration, Plaintiff expounds on the facts of this
case and more convincingly defends its claim. It argues that the Court’s prior
order was based on a misunderstanding of the facts of the case. It clarifies that
Stanich is an employee of Irex, not VAS, and that Irex is solely in the business
of providing financial support and shared services—such as IT—to its
subsidiaries. Plaintiff points out that Irex performs no revenue-generating
work of its own, and instead, gleans all of its profits from its subsidiaries. It
therefore argues that Irex is liable under LUTSA because it benefited from the
misappropriation of Brand’s trade secrets performed by Irex’s direct employee,
Stanich.
Even given this more cogent theory of the case, however, Plaintiff still
fails to prove the actual loss or damages caused by the misappropriation.
Under Louisiana law, the plaintiff carries the burden of proving its damages,
and it must do so with reasonable certainty. 22 Defendant argues that Plaintiff
makes only “ultimate and conclusory assertions about purported damages”
without identifying specific evidence to establish such. This Court agrees.

Brand Servs., LLC v. Irex Corp., No. 15-5712, 2017 WL 1709348, at *2 (E.D. La.
May 3, 2017).
22
Mobil Expl. & Producing U.S., Inc. v. Cajun Const. Servs., Inc., 45 F.3d 96, 101–02
(5th Cir. 1995).
21

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Damages cannot be proven by mere speculation or conjecture. 23 While a
perfect measure of damages is not required, the plaintiff “must furnish data for
a reasonably accurate estimate of the amount of damages.” 24 Plaintiff has
failed to do so. Plaintiff offers the following evidence regarding damages:
1. An estimate from Stanich and another Irex employee that Brand’s trade
secrets would save Irex two to three days in administrative personnel
costs per project each month when preparing month-end invoices.
2. Testimony that Brand’s trade secrets had been developed over the course
of 17 years at “considerable ongoing investment.”
Plaintiff then opines that a factfinder could estimate monetary damages based
on these scant facts. It states that, “Two or three days of administrative
personnel costs measured at $100 per day, for each project per month, will
exceed $1,000 per month even if Irex was involved in as few as four scaffolding
projects per month.” 25 Plaintiff does not, however, provide any evidence that
the administrative costs saved by Irex’s use of its trade secret amount to $100
per day—or any other number for that matter. The finder of fact would be
required to guess, as Plaintiff has done, as to Defendant’s monthly
administrative savings in order to determine to what extent Defendant was
unjustly enriched. Where the claim is of “such a nature as to preclude the
ascertainment of the amount of damages with certainty,” damages may not be
determined by mere speculation or guess. “[I]t will be enough if the evidence
show[s] the extent of the damages as a matter of just and reasonable inference,
23

1974).

Nat Harrison Assocs., Inc. v. Gulf States Utilities Co., 491 F.2d 578, 587 (5th Cir.

24

Id.
Doc. 124.

25

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although the result be only approximate.” 26 No such just and reasonable
inference can be made based on the facts in the summary judgment record.
Accordingly, Plaintiff has failed to raise a genuine issue of material fact
regarding the third element under LUTSA—actual loss caused by the
misappropriation. 27
CONCLUSION
For the foregoing reasons, Defendant’s Second Motion for Summary
Judgment is GRANTED, and Plaintiff’s Motion for Reconsideration is
DENIED. All of Plaintiff’s claims are DISMISSED WITH PREJUDICE.

New Orleans, Louisiana this 17th day of July, 2017.

____________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE

Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563 (1931);
Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867, 879 (5th Cir. 2013) (quoting DSC Commc’ns
Corp. v. Next Level Communications, 107 F.3d 322, 330 (5th Cir. 1997)).
27 See City of Bossier City v. Camp Dresser & McKee Inc., No. 11-0472, 2014 WL
4660791, at *4 (W.D. La. Sept. 16, 2014) (“[Plaintiff’s] statements regarding ‘substantial
expenses’ and ‘considerable expenses’ are ultimately conclusory facts. The statements are
unsupported by any detailed factual evidence in the summary judgment record. Accordingly,
CDM has failed to raise a genuine dispute of material fact as to the third element of its
detrimental reliance claim.”).
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