Complete Logistical Services, LLC v. Rulh et al

Filing 302

ORDER AND REASONS DENYING 209 Motion for Partial Summary Judgment. FURTHER ORDER GRANTING IN PART AND DENYING IN PART 229 Motion for Summary Judgment. With respect to CLS' request that the Court hold that, in the event Mr. Rulh is... entit led to any increase in his expulsion price, any increased expulsion price must be paid in monthly installment, over a term not to exceed 120 months, and evidenced by a promissory note, as required by the plain terms of the [CLS] Operating Agreement t he motion is GRANTED. The motion is DENIED in all other respects. FURTHER ORDER GRANTING IN PART AND DENYING IN PART 231 Motion to Exclude the Testimony of Mr. Athen. With respect to any legal opinions interpreting the CLS Operating Agreement offer ed by Mr. Sweet, the motion is GRANTED. The motion is DENIED in all other respects. FURTHER ORDER GRANTING IN PART AND DENYING IN PART 239 Motion for Summary Judgment. With respect to CLS' claims for conversion, fraud, breach of fiduciary duty, and violations of the LUTPA, the motion is GRANTED. With respect to all other claims, however, the motion is DENIED. Signed by Judge Eldon E. Fallon on 6/6/2019. (jeg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
COMPLETE LOGISTICAL SERVICES, LLC

CIVIL ACTION

VERSUS

NO. 18-3799

DONALD RULH, JR. ET AL

SECTION “L” (5)

ORDER & REASONS
Before the Court are several motions: (1) Defendant Donald Rulh’s Motion for Partial
Summary Judgment, in which Mr. Rulh also moves the Court to strike Plaintiff’s expert, Mr. Jason
MacMorran, R. Doc. 209; (2) a Motion for Partial Summary Judgment filed by Plaintiff Complete
Logistical Services, LLC (“CLS”), R. Doc. 229; (3) CLS’ motion to Exclude the Testimony of Mr.
Athen M. Sweet, R. Doc. 231; and (4) Defendant Donald Rulh’s Motion for Summary Judgment,
R. Doc. 239. Each motion is opposed, R. Docs. 248, 245, 255, 252, and the parties have offered
replies, R. Docs. 271, 275, 278, 273. The Court heard oral argument on the motions on June 4,
2019. R. Doc. 300. Because the motions are interrelated, the Court rules on them collectively.
I.

BACKGROUND
CLS provides contract labor to various marine industries. It alleges its former member,

Defendant Rulh, breached his fiduciary duties to CLS, misappropriated CLS’ assets, damaged
CLS’ image, and took confidential and proprietary information after he was removed from the
LLC by its remaining members. R. Doc. 98 at 1–3. 1
In its verified complaint, CLS alleges that, as a result of Mr. Rulh’s allegedly egregious

1
The Court notes CLS filed its second amended complaint on November 14, 2018. R. Doc. 138. This amended
complaint served as an amendment to the first amended complaint, replacing paragraph 100 of the first amended
complaint only, R. Doc. 98; accordingly, the Court refers to R. Doc. 98 with respect to all allegations apart from
paragraph 100.

1

conduct—specifically, his failing to collect payments from clients; refusing to reimburse the LLC
for money he borrowed to refinance his private home; arriving intoxicated to company events; and
changing the locks on the CLS office without first discussing the matter with the other LLC
members—the other three members of CLS voted to treat Mr. Rulh as an assignee of the Company,
thereby revoking his authority to manage the business or act unilaterally on its behalf. Id. at 4–6.
CLS alleges that after Mr. Rulh was stripped of this authority, he stole from CLS confidential
information including financial statements, customer lists, and sales records while the other members
were at a company crawfish boil. Id. at 8. According to CLS, these documents were printed, scanned,
and then emailed to Mr. Rulh’s personal email account. Id. at 8. CLS further alleges Mr. Rulh took
this information intending to start a competing business with his co-Defendants. 2 Finally, Plaintiff
alleges Mr. Rulh took $222,000.00 from the LLC’s bank account without authorization. Id. at 2.
According to CLS, this resulted in the company’s inability to pay holiday bonuses to its employees,
including Mr. Scott Coker, head of CLS’ diving division. Id. CLS submits Mr. Coker left CLS
because he did not receive a bonus. Id.
After voting to make Mr. Rulh an assignee of the company, on July 23, 2018, the remaining
CLS members “availed themselves of their rights in the CLS Operating Agreement to expel Mr.
Rulh from CLS membership” and obtained a financial report that valued Mr. Rulh’s expulsion price
at negative $172,664.00. Id. at 14. Ultimately, the remaining members of CLS agreed to offer Mr.
Rulh an expulsion price of $3,333.00 for his 33% membership interest in CLS. Id. at 4.
Based on this factual background, CLS brings claims against Mr. Rulh for violations of the
Defend Trade Secrets Act (“DTSA”); Louisiana Uniform Trade Secrets Act (“LUTSA”); Computer
Fraud and Abuse Act (“CFA”); Louisiana Unfair Trade Practices Act (“LUTPA”); and for unjust

2

On April 1, 2019, as a result of ongoing negotiations among the Court and the parties, a settlement agreement
was reached between Plaintiff and Defendants Arnold Baker, Morris Kahn, and Michele Elwell. R. Doc. 197.

2

enrichment; breach of fiduciary duties, duty of loyalty, and duty of due care; conversion; conspiracy;
and fraud. Id. at 3. Finally, CLS seeks a declaration “that the expulsion proceedings were proper in
all respects and confirming that Mr. Rulh is no longer a member of CLS.” Id. at 4. 3
On May 7, 2018, Mr. Rulh answered the complaint and filed counterclaims against CLS and
a third-party complaint against CLS members Spencer Sens and Natchez Morice, III. R. Doc. 30.
On August 21, 2018, the Court granted Mr. Sens and Dr. Morice’s motion to strike Defendants’ third
party claims against them. R. Doc. 94. On May 2, 2019, Mr. Rulh filed an amended counterclaim,
asserting a breach of contract claim as well as seeking a declaratory judgment that the expulsion
price offered by CLS did not comply with the terms of the Operating Agreement. R. Doc. 237.
II.

PRESENT MOTIONS
The motions presently before the Court mostly overlap. The parties both move to strike the

other’s expert, R. Docs. 209, 231, and both seek summary judgment on the issue of whether the
expulsion price offered to Mr. Rulh complied with the terms of the CLS Operating Agreement, R.
Docs. 209, 229, 239. Finally, Mr. Rulh seeks summary judgment on Plaintiff’s remaining claims,
namely its DTSA, CFAA, LUTSA, and LUTPA claims.
III.

DISCUSSION
The facts relevant to the instant motions are largely undisputed. By April 23, 2014, CLS

consisted of four members: Mr. Rulh, Mr. Spencer Sens, Dr. Natchez “Trey” Morice III, and Dr.

3

CLS also initially sought injunctive relief, which the Court granted. On April 12, 2018, pursuant to CLS’ request
for a temporary restraining order (“TRO”), the Court held a telephone hearing with CLS and granted the request.
Pursuant to the TRO, the Court directed Defendants to return materials taken from CLS, including a computer
allegedly purchased with CLS funds. R. Doc. 8. On April 13, 2018, Defendant moved for an extension of the deadline
to comply with the Court’s order, R. Doc. 10, which the Court granted in part, R. Doc. 11.
On April 16, 2018, Defendants moved to dissolve the temporary restraining order. R. Doc. 13. The Court
held oral argument on Defendants’ motion that same day. The Court determined the TRO should remain in effect as
to the prohibitory elements and ordered the parties to discuss a plan to determine which information, if any, may be
privileged and which should be returned to Plaintiff. On Wednesday, April 18, 2018, the Court approved the parties
proposed order for mirroring the files on the computer and other devices held by counsel. R. Doc. 17.

3

Brett Casey. 4 On January 12, 2018, pursuant to section 10.3 of the CLS Operating Agreement, Mr.
Sens, Dr. Morice, and Dr. Casey voted to initiate expulsion proceedings against Mr. Rulh. These
proceedings took the form of three meetings. The first meeting, held January 22, 2018, proceeded
in two parts. First, Mr. Sens, Dr. Morice, and Dr. Casey “agree[d] by vote that [Mr. Rulh] ha[d]
caused direct harm to [CLS]” and thereafter voted to immediately treat Mr. Rulh “as an assignee
of [CLS] for all purposes.” See CLS Operating Agreement, § 10.3. The members then scheduled
the second meeting for February 26, 2018. Having set the second meeting, the CLS Operating
Agreement allowed Mr. Rulh to “make a specific request to [CLS] to receive computer generated
financial reports so that he may have an independent evaluation at his own cost if he so chooses.”
Id. Mr. Rulh did not request financial documents from the company.
At the second meeting, held February 26, 2018, Mr. Sens, Dr. Morice, and Dr. Casey
“agree[d] by vote to have a financial evaluation of [Mr. Rulh’s] interest,” authorizing Postlewaithe
& Netterville to provide CLS with a financial valuation of Mr. Rulh’s interest in CLS. Id.; R. Doc.
98 ¶¶ 65, 67. Pursuant to this authorization, Mr. Jason MacMorran of Postlewaithe & Netterville
completed a valuation of Mr. Rulh’s membership interest, ultimately concluding that the appropriate
expulsion price for Mr. Rulh was negative $172,664.00. Id. at 68. This valuation was “sent out with
the certified notice of the [third] meeting,” which the parties set for July 23, 2018.
In the event Mr. Rulh intended to introduce his own membership valuation at the July 23,
2018 meeting, the CLS Operating Agreement required Mr. Rulh to first request that the members
consider his independent evaluation. See CLS Operating Agreement, § 10.3 (“If the offending
member wishes to introduce his own evaluation price at the meeting, then he must request that his

4
Their ownership interests were: Spencer Sens, 33.33%; Donald Rulh, Jr., 33.33%; Natchez Morice, III, 30.00%;
Brett Casey, 3.33%. Although not explicitly stated, during oral argument, there appeared to be some dispute as to
whether Mr. Casey is, in fact, a member of CLS. The Court notes, however, that this fact is immaterial to the issues
at bar.

4

independent evaluation should be considered.”). On July 6, 2018, Mr. Rulh’s counsel sent a letter
to the remaining members of CLS indicating that Mr. Rulh intended to introduce his own
evaluation prepared by Mr. Athen Sweet. R. Doc. 209-10 at 1; see also R. Doc. 231-10 at 7. In his
letter, Mr. Rulh contended the “fair and proper evaluation for his interest in CLS” was
$7,448,891.00. R. Doc. 209-10 at 1.
During the July 23, 2018 meeting, however, Mr. Rulh stated his $7,448,891.00 price was
“not an official valuation,” and that he “need[ed] more information.” R. Doc. 229-5 at 6. To clarify,
Mr. Rulh’s attorney explained Mr. Rulh had obtained “discounted cash flow analysis information”
and “based upon that analysis [made a good faith] estimate that [Mr. Rulh’s] share was in excess
of $7.4 million.”5 Id. at 6. Nevertheless, thereafter, Mr. Rulh’s attorney stated Mr. Rulh was
“standing down” on “the $7.4 million that was in [his] July 6 letter” and confirmed that Mr. Rulh
was not offering a specific valuation; rather, Mr. Rulh’s attorney explained the $7,448,891.00 was
“just [a] proposal.” 6 Id. at 9. Mr. Rulh and his counsel then left the meeting. Id. at 11.
Following Mr. Rulh’s departure, the members of CLS passed the following resolution
pursuant to section 10.3 of the CLS Operating Agreement:

5

At the third meeting, in explaining what additional information he needed in order to offer an official valuation,
Mr. Rulh stated, “The only numbers I have are from November 30[,] Mark[,] so if we[’re] using February 28 or
whatever the end of February I will need to get those numbers so that I can do it, and have it audited.” R. Doc. 229-5
at 8–9.
6
Mr. Rulh takes issue with whether he did, in fact, offer an official valuation at the meeting. R. Doc. 245 at 8 n.3.
Specifically, Mr. Rulh takes the position that he did not “withdraw” the $7.4 million valuation noted in his July 6
letter, as CLS contends; rather, Mr. Rulh submits the quoted conversation, “In no way . . . indicate[s] that [he was]
withdrawing the valuation, only that he [wa]s willing to negotiate off that number in an effort at amicable resolution
of what is now acrimonious litigation.” Id. During the meeting, the following exchange took place:
Counsel for CLS: Okay, so should we just note for the record you are not going to introduce
the valuation and that your view is that you need more information.
Counsel for Mr. Rulh: We obviously would like more information. Having said that we stand
down on the $7.4 million that was in my July 6 letter. However, however, having looked at the P&N
rebuttal report which does mention in excess of $2.1 million we would consider that if that is part
of the expulsion and that is in fact put on the table is a discussion that we would have, that’s all we
can say right now.
Counsel for CLS: Okay, so there’s no specific valuation, it’s just that’s the proposal.
Counsel for Mr. Rulh: Yes sir.
R. Doc. 229-5 at 9.

5

WHEREAS, the Members have determined Mr. Rulh has caused direct harm to
the Company and his conduct is egregious enough to warrant a full expulsion by
the Company;
NOW, THEREFORE, BE IT RESOLVED, that Mr. Rulh is hereby expelled
from the Company effective July 23, 2018 in accordance with Section 10.3 of the
Operating Agreement of the Company. . . .
WHEREAS, the Members have determined to pay Mr. Rulh $3,333.00 for his
33.3% equity interest in the Company notwithstanding the Members’ determination
that the Postlethwaite & Netterville valuation of Mr. Rulh’s 33.3% equity interest
in the Company at a negative $172,664.00 is a correct valuation for such interest;
NOW, THEREFORE, BE IT RESOLVED, that the Company purchase Mr.
Rulh’s 33.3% equity interest in the Company [for] $3,333.00 . . . .
Id. at 11–12.
After Mr. Rulh was formally expelled from CLS, Mr. Athen Sweet, whom Mr. Rulh now
offers as an expert, prepared a valuation report wherein he concludes Mr. Rulh’s membership
interest in CLS is $6,419,000.00. R. Doc. 231-10 at 16. Although Mr. Rulh no longer contests the
fact of his expulsion, R. Doc. 248-3 at 11–14, he maintains his allegation that CLS failed to comply
with the terms of the CLS Operating Agreement with respect to setting his expulsion price. 7
Chief among the disputes in this matter is the proper calculation of Mr. Rulh’s ownership
interest and corresponding expulsion price. CLS’ expert, Mr. MacMannon, takes the position that
he appropriately calculated Mr. Rulh’s expulsion price as negative $172,664.00, R. Doc. 229-8 at
24; Mr. Rulh’s expert, Mr. Sweet, takes a different position, setting Mr. Rulh’s proper expulsion
price at $6,419,000.00, R. Doc. 231-10 at 16.
In coming to his calculation, CLS expert Mr. MacMorran “perform[ed] a business
valuation of Mr. Rulh’s 33.33 percent ownership interest,” by calculating the value of the company

7
Although Mr. Rulh does not dispute the fact of his expulsion, he does maintain that his conduct was neither
“egregious,” nor did it cause “direct harm” to CLS. R. Doc. 245 at 1–2 (“Mr. Rulh stipulated that he is not seeking to
overturn his expulsion. . . . However, Mr. Ruhl’s stipulation can in no way be construed as conceding that: (1) he
engaged in any wrongdoing; (2) CLS complied with its obligations under the Operating Agreement; or (3) CLS
properly set the expulsion price.”).

6

as a whole using the asset, income, and market approaches. R. Doc. 229-8 at 13. Under these
approaches, Mr. MacMorran underwent his analysis comparing CLS’ “post-incident” and “preincident” metrics and values. Id. “The primary difference between the Pre-Incident and PostIncident forecasts [of CLS] was the treatment of revenues from the diving division as a result of
the departure of Mr. [Scott] Coker attributable to [Mr. Rulh’s having taken $222,000.00 out of the
CLS bank account without authorization].” Id. at 14. 8 Using these valuation methods, Mr.
MacMorran came to his valuation “of a 100 percent ownership interest in the Company on a PreIncident and Post-Incident basis.” Id. at 18. Next, Mr. MacMorran applied reductions for
marketability and control to the post-incident value of the company. Id. at 19–21. After calculating
the 100% “Post-Incident non-marketable, non-controlling interest value” of CLS, Mr. MacMorran
extrapolated Mr. Rulh’s 33.33% interest in the company and reduced Mr. Rulh’s ownership
interest value for diminution of value losses and out of pocket costs, arriving at Mr. Rulh’s
expulsion price of negative $172,664.00. Id. at 24.
Mr. Sweet, Mr. Rulh’s expert, took a different approach. In coming to his valuation, Mr.
Sweet underwent an analysis using three methods to calculate the 100% ownership value of CLS:
(1) a discounted cash flow analysis, (2) a guideline transaction indication of value, and (3) the
guideline public company indication of value. R. Doc. 231-10 at 16. He then extrapolated Mr.
Rulh’s 33.33% interest. Id. Notably, Mr. Sweet did not make any adjustments for lack of control
or marketability. Id. Additionally, Mr. Sweet did not make any reduction for any losses to the
company’s value allegedly caused by Mr. Rulh, as he submits nothing in his analysis “indicat[ed]
[Mr. Rulh had caused CLS] any losses, whether actual or speculative.” Id. at 17. Based on his

8
According to Mr. MacMorran, “[a]lthough Article 10.3 of the Company’s Operating Agreement indicates that
the expulsion price is to consider all losses ‘whether actual or speculative,’” there are “clear links between Mr. Rulh’s
acts and the losses calculated herein, including but not limited to the allegedly unauthorized withdrawal of $222,000.00
and the Company’s inability to keep certain compensation commitments to its Diving Division manager, [Mr. Scott
Coker,] resulting in [Mr. Coker’s] resignation.” Id. at 5.

7

analysis, Mr. Sweet concluded the proper expulsion price for Mr. Rulh is $6,419,000.00. Id.
The relevant facts being largely undisputed, the case is ripe for summary judgment. The
Court first considers the parties’ motions to exclude their respective experts, R. Docs. 209, 231,
before determining whether CLS complied with the terms of the CLS Operating Agreement in
coming to Mr. Rulh’s expulsion price, R. Docs. 209, 229, 239. Finally, the Court analyzes whether
CLS’ remaining claims survive summary judgment, R. Doc. 239.
A. Whether the Court Should Exclude Either Expert
In his motion, Mr. Rulh argues the Court should exclude the testimony of Plaintiff’s expert,
Jason MacMorran, as Mr. Rulh contends Mr. MacMorran’s use of a fair market valuation, wherein
Mr. MacMorran applied discounts for marketability and control, is contrary to the CLS Operating
Agreement and Louisiana law. R. Doc. 209-1 at 18. Further, Mr. Rulh submits Mr. MacMorran also
applied the improper section of the CLS Operating Agreement—specifically, Section 11.3—in
coming to his assessment. Id. Finally, Mr. Rulh contends that, because Mr. MacMorran’s “valuation
of Mr. Rulh’s interest is premised on inapplicable valuation methodology,” and “intentionally
depress[es] the value of Mr. Rulh’s interest,” Mr. MacMorran “has clearly shown an inherent bias
and lack of partiality” and his testimony should therefore be stricken. Id. at 18–19.
In opposition, CLS argues “Mr. Rulh does not point to any ‘deliberate, manifest, pervasive,
and systematic bias [by Mr. MacMorran] in selecting his data points, in adjusting the data points,
and in assigning weights to the data points’ that would render Mr. MacMorran’s testimony
fundamentally unreliable.” R. Doc. 248 at 17. Thus, CLS submits, because Mr. Rulh “merely
challenges Mr. MacMorran’s legal authority to apply discounts,” he has not established that Mr.
MacMorran’s testimony is fundamentally unreliable. R. Doc. 248 at 17. Accordingly, CLS argues
Mr. MacMorran’s testimony should be permitted at trial. Id.

8

In its motion, CLS moves the Court to exclude Mr. Sweet as an expert. R. Doc. 231-1. CLS
takes issue with the methodology employed by Mr. Sweet in coming to his valuation. Id. at 2.
According to CLS, although Mr. Sweet purports to have applied standard industry calculations in
valuing CLS, “Mr. Sweet misapplies valuation techniques, deviates from accepted valuation
principles and professional standards, applies data sources erroneously and inconsistently, and
selects biased data that inflates the value of Mr. Rulh’s interest.” Id. at 3. Moreover, CLS contends
Mr. Sweet’s opinion exceeds his expertise and contains impermissible conclusions of law. Id.
Mr. Rulh opposes the motion, arguing the “legal conclusions” offered by Mr. Sweet in his
report are statements “commonly made by experts, who are permitted to determine the appropriate
valuation methodology based on the facts and circumstances of the case.” R. Doc. 255 at 17. Next,
Mr. Rulh argues Mr. Sweet’s opinions and valuation are consistent with industry practice, pointing
to paragraphs 38–42 of Mr. Sweet’s report, in which he “discusses the merits of the various valuation
methods with consideration for the specific facts and circumstances of this case.” Id. at 21. 9 Finally,
Mr. Rulh argues Mr. Sweet is qualified to render these opinions, as “Rule 702 does not require
valuation credentials, an active CPA license, or membership to any specific organizations.” Id. at 20.
Rather, because Mr. Sweet’s expertise will assist the trier of fact in making its determination, Mr.
Sweet’s experience in the field of business valuations passes muster. Id.
i. The Daubert Standard
The admissibility of expert testimony is governed by Federal Rule of Evidence 702, which
provides that,
If scientific, technical, or other specialized knowledge will assist the trier of fact to
understand the evidence or to determine a fact in issue, a witness qualified as an
9
Mr. Rulh admits Mr. Sweet “did indeed” make an error in his working capital adjustment analysis. R. Doc. 255
at 28. He contends, however, that “processing the correction only results in a DCF equity value of $16,896,781.00, a
reduction of $638,885.00, not ‘approximately $700,000,’ as indicated by CLS/MacMorran. Carrying the correction
one step further to the Summary of Value Indications yields an equity value of $19,002,736.00, a mere reduction of
$255,554.00.” Id.

9

expert by knowledge, skill, experience, training or education, may testify thereto in
the form of an opinion or otherwise, if (1) the testimony is based on sufficient facts
or data, (2) the testimony is the product of reliable principles and methods, and (3)
the witness has applied the principles and methods reliably to the facts of the case.
This rule codifies the Supreme Court’s decisions in Daubert v. Merrell Dow Pharmaceuticals,
Inc., 509 U.S. 579 (1993) and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999).
The threshold question in determining whether an individual may offer expert testimony
under Rule 702 is whether the individual has the qualifications to do so. Fed. R. Evid. 702. “Trial
courts have ‘wide discretion’ in deciding whether or not a particular witness qualifies as an expert.”
Hidden Oaks Ltd. v. City of Austin, 138 F.3d 1036, 1050 (5th Cir. 1998) (quoting Ellis v. K–Lan
Co., 695 F.2d 157, 162 (5th Cir. 1983)). Under Rule 702, “the expert is viewed, not in a narrow
sense, but as a person qualified by ‘knowledge, skill, experience, training or education.’” Fed. R.
Evid. 702 advisory committee’s note.
Apart from determining the qualifications of the expert, the Court must act as a “gate-keeper”
to ensure that the proffered expert testimony is “both reliable and relevant.” Wells v. SmithKline
Beecham Corp., 601 F.3d 375, 378 (5th Cir. 2010). “This entails a preliminary assessment of whether
the reasoning or methodology underlying the testimony is scientifically valid and of whether that
reasoning or methodology properly can be applied to the facts in issue.” Id. (quoting Daubert, 509
U.S. at 592–93). With respect to reliability, the Court’s focus “must be solely on principles and
methodology, not on the conclusions that they generate.” Daubert, 509 U.S. at 595.
When the admissibility of expert testimony is challenged under Daubert, the proponent of
the evidence bears the burden of proving that the testimony is reliable and relevant. Moore v.
Ashland Chem. Inc., 151 F.3d 269, 276 (5th Cir. 1998) (en banc). To meet this burden, a party
cannot simply rely on its expert’s assurances that he has utilized generally accepted scientific
methodology. Id. Rather, some objective, independent validation of the expert’s methodology is
10

required. Id. In this regard, however, it is not necessary for the proponent of the evidence to prove
that “the testimony is factually correct.” Paz v. Brush Engineered Materials, Inc., 555 F.3d 383,
388 (5th Cir. 2009).
Ultimately, a court’s role as a gatekeeper does not replace the adversary system. Daubert,
509 U.S. at 596. “Vigorous cross-examination, presentation of contrary evidence, and careful
instruction on the burden of proof are the traditional and appropriate means of attacking shaky but
admissible evidence.” Id. Proper deference is to be accorded to the jury’s role “as the arbiter of
disputes between conflicting opinions.” United States v. 14.38 Acres of Land, 80 F.3d 1074, 1077
(5th Cir. 1996) (quoting Viterbo v. Dow Chemical Co., 826 F.2d 420, 422 (5th Cir. 1987)). “As a
general rule, questions relating to the bases and sources of an expert’s opinion affect the weight to
be assigned that opinion rather than its admissibility and should be left for the jury’s
consideration.” Id. (quoting Viterbo, 826 F.2d at 422).
ii. Analysis
Both parties challenge the credentials of the other’s expert, their methodology, and
perceived bias. Moreover, CLS challenges the propriety of allowing Mr. Rulh’s expert, Mr. Sweet,
to offer his legal interpretations of the CLS Operating Agreement. The Court addresses each
challenge in turn.
1. Credentials
In reviewing Mr. Sweet’s and Mr. MacMorran’s credentials, the Court concludes both are
qualified to render the opinions they offer. For example, Mr. Sweet is the founder and CEO of a
company that “offer[s] Business Valuations services.” R. Doc. 231-10 at 18. Moreover, from
2008–2012, Mr. Sweet worked for Faulk & Winkler, LLC, “leading acquisition deal teams,
valuations, [and] leading recapitalization efforts.” Id. Similarly, Mr. MacMorran, whose work with
Postlethwaite & Netterville “focuses on business valuation, transaction advisory services, and
11

economic damages” is likewise qualified. R. Doc. 209-12 at 5. Both proffered experts have
sufficient training and experience in the field of business valuations to render an expert opinion on
the overall value of CLS as well as the proper membership and expulsion price for Mr. Rulh. Thus,
the Court concludes both proffered experts have “specialized knowledge [that] will assist the trier
of fact to understand the evidence or to determine a fact in issue.” Fed. R. Evid. 702.
2. Methodology
Next, both parties complain the opposing party’s expert employed unreliable methodology
in coming to their respective valuations. Generally, “questions relating to the bases and sources of
an expert’s opinion affect the weight of the evidence rather than its admissibility and should be
left for the finder of fact.” 14.38 Acres of Land, 80 F.3d at 1077. “Unless wholly unreliable, the
data on which the expert relies goes to the weight and not the admissibility of the expert opinion.”
Rosiere v. Wood Towing, LLC, No. 07-1265, 2009 WL 982659, at *1 (E.D. La. Apr. 8, 2009)
(citing 14.38 Acres of Land, 80 F.3d at 1077).
In this case, neither expert’s assessment is “wholly unreliable.” 10 Thus, the Court will not
exclude either expert on that basis. See 14.38 Acres of Land, 80 F.3d at 1077 (stating that expert
opinions attacked based on the sources or methodology should nevertheless be admitted to allow
the jury to fulfill its role as the proper arbiter of disputes between conflicting opinions). “Vigorous
cross-examination, presentation of contrary evidence, and careful instruction on the burden of
proof are the traditional and appropriate means of attacking shaky but admissible evidence.”
Pipitone v. Biomatrix, Inc., 288 F.3d 239, 250 (5th Cir. 2002) (quoting Daubert, 509 U.S. at 596)
(internal quotation marks omitted).

10
Notably, in its motion, CLS states, “Although this approach is generally accepted in valuing a business like
CLS, Mr. Sweet misapplies valuation techniques, deviates from accepted valuation principles and professional
standards, applies data sources erroneously and inconsistently, and selects biased data that inflates the value of Mr.
Rulh’s interest.” R. Doc. 231-1 at 3 (emphasis added).

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3. Legal Opinions
Finally, CLS criticizes the many instances in which Mr. Sweet’s expert report offers an
opinion interpreting the CLS Operating Agreement. For example, Mr. Sweet explains that, in his
opinion, any valuation of Mr. Rulh’s expulsion price may not consider section 11.3 of the CLS
Operating Agreement. R. Doc. 231-10 at 7–8 (“Articles 10.3 and 11.3 are clearly intended to
govern different transactions. 11.3 (redemption) clearly defines the standard of value and the
premise of value while 10.3 (expulsion) does not.”). Expert testimony that offers a legal opinion
is inadmissible. Estate of Sowell v. United States, 198 F.3d 169, 171 (5th Cir. 1999); Askanase v.
Fatjo, 130 F.3d 657, 669 (5th Cir. 1997). As a result, Mr. Sweet will not be permitted to offer such
opinions on contract interpretation at trial.
Based on the foregoing, the Court will deny both motions to exclude the parties’ respective
experts. At trial, both parties will be free to vigorously cross-examine the other’s expert witness,
leaving for the finder of fact the ultimate decision of how much weight, if any, should be given to
either expert’s opinion. Neither expert will be permitted to give their legal opinion or interpretation
of the CLS Operating Agreement.
B. Whether Either Party’s Claims Survive Summary Judgment
Having concluded both experts will be permitted to testify at trial, the Court turns to an
evaluation of the parties’ cross-motions for summary judgment. CLS takes the position that it is
entitled to a declaratory judgment that the expulsion price offered by CLS comports with the CLS
Operating Agreement. Mr. Rulh takes the opposite position, arguing he is entitled to a judgment
that CLS failed to comply with the terms of the Operating Agreement with respect to the expulsion
price. Mr. Rulh further argues he is entitled to summary judgment on CLS’ remaining claims
against him; namely, that CLS has failed to offer proof of elements essential to their DTSA, CFAA,
LUTSA, and LUTPA claims. The Court evaluates each argument in turn.
13

i. Motion for Summary Judgment Standard
Summary judgment is appropriate when the record before a court supports the conclusion
that there is no “genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56. A party moving for summary judgment bears
the initial burden of demonstrating the basis for summary judgment and identifying those
portions of the record, discovery, and any affidavits supporting the conclusion that there is no
genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the
moving party meets that burden, then the nonmoving party must use evidence cognizable under
Rule 56 to demonstrate the existence of a genuine issue of material fact. See id. at 324.
A genuine issue of material fact exists if a reasonable jury could return a verdict for the
nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1996). “[U]nsubstantiated
assertions,” “conclusory allegations,” and merely colorable factual bases are insufficient to defeat a
motion for summary judgment. See Hopper v. Frank, 16 F.3d 92, 97 (5th Cir. 1994); see also
Anderson, 477 U.S. at 249–50. In ruling on a summary judgment motion, however, a court may not
resolve credibility issues or weigh evidence. See Int’l Shortstop, Inc. v. Rally’s Inc., 939 F.2d 1257,
1263 (5th Cir. 1991). Furthermore, a court must assess the evidence and draw any appropriate
inferences based on the evidence in the light most favorable to the party opposing summary judgment.
See Daniels v. City of Arlington, Tex., 246 F.3d 500, 502 (5th Cir. 2001).
ii. Analysis
The bulk of the summary judgment dispute centers on the expulsion price offered to Mr
Rulh and the proper valuation of CLS. Thus, the Court’s analysis begins there before turning to
the remainder of Mr. Rulh’s motion.

14

1. Whether the Expulsion Price Complies with the Terms of the
CLS Operating Agreement
It is undisputed that section 10.3 of the CLS Operating Agreement governs this issue.
Section 10.3 requires that the members wishing to fully expel another member of CLS must decide,
by majority vote, that the offending member engaged in “egregious” conduct that “caus[ed] . . .
direct harm to the company.” CLS Operating Agreement, § 10.3. “The process of full expulsion
takes three meetings and the timelines are to be strictly construed.” Id. After voting to initiate
expulsion proceedings at the first meeting, a majority of members “must agree by a vote to have a
financial evaluation of the offending member’s interest in order to progression [sic] the expulsion
of the offending member” at the second meeting. Id. There is little guidance offered by the CLS
Operating Agreement with respect to the method by which an offending member’s expulsion price
must be calculated. The agreement dictates simply that, at the third expulsion meeting, a majority
of members “must agree by a vote to expel the offending member and agree on a price to pay the
expelled member for his interest” and that “[t]his price shall take into account all losses caused by
the offending member whether actual or speculative.” Id.
The parties dispute whether this language allows the expulsion price offered to an
offending member to include certain discounts. In its motion, CLS argues that, given the above
quoted language, “there is no legal or contractual prohibition on the application of the discounts
[Mr. MacMorran applied] and they are entirely appropriate under generally accepted accounting
and evaluation standards.” R. Doc. 229-1 at 11. Mr. Rulh disagrees. He argues his expulsion price
should have been calculated under the Fair Value standard, instead of the Fair Market Value
standard employed by Mr. MacMorran, and that applying any discounts to his membership value
is contrary to both the terms of the CLS Operating Agreement as well as Louisiana law. R. Doc.
245 at 12–14; R. Doc. 209-1 at 1.
15

a. Whether Louisiana Law Prohibits the Use of Discounts
In support of his argument that Louisiana law prohibits the use of control and marketability
discounts, Mr. Rulh points to the Louisiana Supreme Court’s holding in Cannon v. Bertrand, 20081073 (La. 1/21/09), 2 So. 3d 393. Mr. Rulh argues Cannon stands for the proposition that “minority
or lack of marketability discounts should be used sparingly in the valuation of a departing
member’s interest, and only when the facts support their use,” and that, under the facts of this case,
“the use of a discount is unwarranted.” R. Doc. 209-1 at 11. In opposition, CLS points out that
“Cannon does not concern the application of discounts in the context of a limited liability company
like CLS”; rather, Cannon applies to limited liability partnerships, which, in the absence of an
agreement on how to value a departing member’s interest, Civil Code articles 2823-2825 apply.
R. Doc. 229-1 at 18. Moreover, CLS submits Cannon “is specifically limited to the interests of
individuals who voluntarily withdraw from a partnership,” but that in this case, Mr. Rulh, the
departing member, was expelled. Id. at 19.
The Court agrees with CLS and concludes Cannon does not control the case at bar.
Although “Cannon did involve the buyout of a minority owner’s interest by the remaining
members of the entity, that entity was a limited liability partnership rather than a limited liability
company,” which are governed by two different legal provisions. Wall v. Bryan, 251 So. 3d 650,
659 (La. App. 2 Cir. 6/27/18) (explaining that LLPs are governed by La. C.C. art. 2823 while
LLCs are governed by La. R.S. 12:1325(c)).
In addition to Cannon, both CLS and Mr. Rulh point to Wall v. Bryan. Unlike Cannon, the
Louisiana’s Second Circuit Court of Appeal addressed valuations of withdrawing members of an
LLC. Id. As the Wall court explained, LLC withdrawals are governed by La. R.S. 12:1325(c),
which provides that “a withdrawing . . . member is entitled to receive such distribution, if any, to
which the member is entitled under a written operating agreement and, if not otherwise provided
16

in a written operating agreement . . . the fair market value of the member’s interest . . . .” Id. In
Wall, the court, applying La. R.S. 12:1325(c), found the application of minority and marketability
discounts was proper. 251 So. 3d at 660 (“[B]oth the first and the fifth circuits have distinguished
Cannon and affirmed the application of post-Cannon discounts in valuations of limited liability
companies.” (citing Vedros v. Vedros, 2016-735 (La. App. 5 Cir. 10/25/17), 229 So. 3d 677;
Trahan v. Trahan, 2010-0109 (La. App. 1 Cir. 6/11/10), 43 So. 3d 218).
Although the Wall case evaluated the use of these discounts in the context of a
noncontrolling interest in an ambulatory surgery center, the holding in Wall makes plain that the
application of marketability and minority discounts in valuating a withdrawing LLC member’s
interest is not contrary to law. As a result, the Court will not grant Mr. Rulh’s motion on that basis.
b. Whether the Terms of the CLS Operating Agreement
Prohibits the Use of Discounts
It is undisputed that, as a binding contract, the CLS Operating Agreement constitutes the
law between the parties. See, e.g., Texaco Expl. & Prod., Inc. v. Smackco, Ltd., No. 98-2293, 1999
WL 539548, at *2 (E.D. La. July 26, 1999). As such, the agreement must be interpreted pursuant
to Louisiana contract law. Ark–La–Tex Safety Showers, LLC v. Jorio, 48,478 (La. App. 2 Cir.
12/18/13), 132 So. 3d 986, 993 (citing Risk Mgmt. Servs., L.L.C. v. Moss, 2009–632 (La. App. 5
Cir. 4/13/10), 40 So. 3d 176).
“Interpretation of a contract is the determination of the common intent of the parties.” La.
Civ. Code art. 2045. “When the words of a contract are clear and explicit and lead to no absurd
consequences, no further interpretation may be made in search of the parties’ intent, and courts
must enforce the contract as written.” Succession of Shaw v. Alexandria Inv. Grp., LLC, 2017-582
(La. App. 3 Cir. 7/26/17), 248 So. 3d 332. When the contract lacks a provision bearing on the issue
before the court, the contract is ambiguous as to that issue. Campbell v. Melton, 2001-2578 (La.
17

5/14/02), 817 So. 2d 69; LFI Fort Pierce, Inc. v. Acme Steel Bldgs., Inc., 2016-71, p. 7 (La. App.
3 Cir. 8/17/16), 200 So. 3d 939, 946, writ denied, 2016-1684 (La. 11/29/16), 210 So. 3d 804.
In this case, the CLS Operating Agreement provides little guidance on the issue of how to
undergo a valuation of an expelled member’s expulsion price. The only guidance offered by the
CLS Operating Agreement is that a majority of members must “agree on a price to pay the expelled
member for his interest,” and that “[t]his price shall take into account all losses caused by the
offending member whether actual or speculative.” CLS Operating Agreement, § 10.3. It is silent
as to how the expulsion price must be calculated. CLS takes the position that, given the CLS
Operating Agreement’s silence on how to calculate Mr. Rulh’s expulsion price, the remaining
members of CLS were free to set the expulsion price at any given amount, so long as the members
agreed to it. Such an interpretation would lead to an absurd result and would permit the remaining
members to arbitrarily set the expulsion price to their benefit, allowing the remaining members to
realize a windfall profit at the expelled member’s expense. Thus, the Court finds the contract is
ambiguous as to that issue.
Having concluded the issue of how Mr. Rulh’s expulsion price must be calculated is
ambiguous, the Court must fill in the gap. The closest provision available to fill in this gap is
Louisiana Revised Statutes section 1325(C), which provides, “if not otherwise provided in a
written operating agreement, within a reasonable time after withdrawal or resignation, [a
withdrawing or resigning member is entitled to receive] the fair market value of the member’s
interest as of the date of the member’s withdrawal or resignation.” Notably, this provision
addresses distributions upon resignation or withdrawal from an LLC, not an expulsion.11 There is

11
During Oral argument, both parties made much of the Louisiana Third Circuit Court of Appeal’s holding in
Mixon v. Iberia Surgical, LLC, 2006-878, p. 10–12 (La. App. 3 Cir. 4/18/07), 956 So. 2d 76, in which the court upheld
the expulsion of an LLC member as well as his expulsion price, which was calculated using a Fair Market Value
valuation methodology. In that case, however, the court upheld the expulsion and the price, as the court concluded it
“the terms of the Operating Agreement clear and controlling in determining the amount owed to a member.” Id. at p.

18

no civil code article or revised statute that specifically addresses this situation. See Susan Kalinka,
Dissociation of a Member from a Louisiana Limited Liability Company: The Need for Reform, 66
LA. L. REV. 365, 405–09 (2006).
Although it would not do violence to the statute to interpret it as including involuntary
withdrawals, the Court could find no Louisiana case law applying Louisiana Revised Statutes
section 1325(C) to an expulsion. See id. at 406 (“[T]here is no statute in the Louisiana LLC Law
defining the term ‘withdrawal.’ If an expulsion is treated as an involuntary withdrawal within the
meaning of section 12:1325, an expelled member should be entitled to a distribution.”). As a
federal court sitting in diversity the Court may not “expand state law beyond its presently existing
boundaries.” Kimble v. Cargo Carriers, Inc., 45 F. App’x 318 at *3 (5th Cir. 2002) (quoting
Barfield v. Madison Cty., 212 F.3d 269, 272 (5th Cir. 2000)) (internal citations and quotation marks
omitted). As a result, the Court concludes there exists a genuine issue of material fact as to how to
calculate the value of Mr. Rulh’s 33.33% interest in CLS, less a deduction for “all losses caused
by the offending member whether actual or speculative,” see CLS Operating Agreement, § 10.3,
in order to come to the proper expulsion price for Mr. Rulh. This issue will be left for the jury.
c. Whether Mr. Rulh has Waived His Ability to Challenge
his Expulsion Price
In opposition to Mr. Rulh’s motion for summary judgment on the issue of whether CLS
complied with the terms of the CLS Operating Agreement with respect to setting his expulsion
price, CLS argues Mr. Rulh’s “refus[al] to meaningfully participate in the expulsion process”
waived his ability “to challenge his expulsion price ex post facto.” R. Doc. 252 at 26. Mr. Rulh

11. In this case, however, the CLS Operating Agreement is ambiguous as to how an expelled member’s expulsion
price should be calculated.

19

responds by pointing to language in the CLS Operating Agreement he contends precludes CLS’
waiver argument. R. Doc. 239-1 at 37.
Section 10.3 of the CLS Operating Agreement states “the offending member may make a
specific request to [CLS] to receive computer generated financial reports so that he may have an
independent evaluation at his own cost if he so chooses” and that “[i]f the offending member wishes to
introduce his own valuation price at the meeting, then he must request that his independent evaluation
should be considered.” Based on this plain language, the Court concludes Mr. Rulh’s participation in
his expulsion was permissive, but not required. Thus, the Court finds Mr. Rulh’s failure to request
financial records in advance of the second meeting and “stand[ing] down” on the valuation he offered
at the third meeting did not waive his right to subsequently challenge his expulsion price.
However, to the extent CLS seeks an order finding that “in the event Mr. Rulh is . . . entitled
to any increase in his expulsion price, any increased expulsion price must be paid in monthly
installments, over a term not to exceed 120 months, and evidenced by a promissory note, as
required by the plain terms of the [CLS] Operating Agreement,” R. Doc. 229-1 at 11, 20–21, the
Court will grant the motion. Mr. Rulh has neither opposed this request, nor has he offered any
evidence that the unambiguous terms of the CLS Operating Agreement requires any different.
2. Defend Trade Secrets Act
Next, Mr. Rulh moves for summary judgment on CLS’ DTSA claim. To prevail under the
DTSA, a plaintiff must prove (1) the existence of a trade secret, (2) misappropriation of the trade
secret by another, and (3) the trade secret’s relation to a good or service used or intended for use
in interstate or foreign commerce. 18 U.S.C. § 1836(b)(1); see also Source Prod. & Equip. Co.,
Inc. v. Schehr, No. 16-17528, 2017 WL 3721543, at *2 (E.D. La. Aug. 29, 2017) (Vance, J.). Mr.
Rulh challenges the first two elements of CLS’ DTSA claim, contending: (1) “CLS has failed to
establish how the purported ‘Confidential Information’ derives independent economic value from
20

not being generally unknown or readily ascertainable through proper means,” (2) “CLS cannot
establish that the ‘Confidential Information’ affords a ‘demonstrable competitive advantage to
actual or potential customers,’” and (3) “CLS [cannot] establish that the alleged Confidential
Information was ‘misappropriated.’” R. Doc. 239-1 at 12.
a. The existence of a trade secret
A “trade secret” under the DTSA includes scientific and technical information that “the
owner thereof has taken reasonable measures to keep . . . secret” and “derives independent
economic value . . . from not being generally known to, and not being readily ascertainable through
proper means by, another person who can obtain economic value from the disclosure or use of the
information.” 18 U.S.C. § 1839(3).
Plaintiff alleges Mr. Rulh took profit and loss statements, customer lists, and sales analyses
without authorization and offers competent summary judgment evidence substantiating this
allegation, including Mr. Rulh’s own statements. See R. Doc. 239-2 at ¶ 19–23 (admitting he took
the documents); R. Doc. 252-11 (stating he “had Ms. Janet [Pipitone] pull recent numbers for TD and
CLS as I don’t have access anymore.” (emphasis added)).
As he did in his motion to dismiss, Mr. Rulh argues these documents may not be considered
trade secrets. As the Court previously held, these documents, including the CLS customer list, can
be considered trade secrets. 12 For example, in Alfasigma USA, Inc. v. EBM Med., LLC, the plaintiff
alleged the defendants violated the DTSA when they “used [the plaintiff’s] confidential customer
lists in order to market [their products] to [the plaintiff’s] customers.” No. 17-7753, 2018 WL

12

Moreover, “existing state law on trade secrets informs the Court’s application of the DTSA.” Source Prod. &
Equip. Co. v. Schehr, No. 16-17528, 2017 WL 3721543, at *2 (E.D. La. Aug. 29, 2017) (Comparing 18 U.S.C. §§
1836, 1839, with LUTSA § 1); see also JJ Plank Company, LLC v. Bowman, No. 18-0798, 2018 WL 3579475, at *3–
4 (W.D. La. July 25, 2018). Louisiana courts have routinely held customer lists may constitute a trade secret. See
Pontchartrain Med. Labs., Inc. v. Roche Biomedical Labs, Inc., 677 So. 2d 1086, 1090 (La. App. 1 Cir. 1996); Wyatt
v. P02, Inc., 651 So. 2d 359 (La. App. 2d Cir. 1995).

21

1604961, at *1 (E.D. La. Apr. 3, 2018). In analyzing the defendants’ motion to dismiss, the district
court concluded that the plaintiff had sufficiently pleaded the existence of a trade secret, as the
plaintiff’s complaint “set[] forth allegations regarding the formulation of its [products], as well as
customer lists and other information used to market [its products].” Id. at *3.
The district court also noted that the definition of a trade secret under the DTSA is broad and
includes “information that derives independent economic value from not being generally known to
or ascertainable by other persons, that is the subject of reasonable efforts to maintain the
information’s secrecy.” Id. 13 Notably, even if a compilation of information consists of “readily
available” information, “it may be protected as a trade secret given the difficulty and expense of
compiling the information.” 360 Mortg. Grp., LLC v. Homebridge Fin. Servs., Inc., No. 14-00847,
2016 WL 900577, at *4 (W.D. Tex. Mar. 2, 2016) (citing Zoecon Indus. v. Am. Stockman Tag Co.,
713 F.2d 1174, 1179 (5th Cir. 1983)).
In this case, CLS alleges Mr. Rulh “accessed CLS’ proprietary and confidential electronic
data” including Plaintiff’s financial statements, customer lists, and sales records, which are kept on
Plaintiff’s “secure and protected computer system.” R. Doc. 98 at ¶ 98. Moreover, Plaintiff alleges it
“maintains its Confidential Information as confidential within CLS and does not share this information
outside of CLS,” R. Doc. 98 at ¶ 38, which Plaintiff alleges makes the information “highly valuable.”
Id. at ¶ 39. Finally, Plaintiff alleges it “derives a competitive advantage and independent economic
value, both actual and potential, from the Confidential Information, because the Confidential
Information is not generally known to the public or to others who can obtain economic value from its

13

See also SPBS, Inc. v. Mobley, No. 18-391, 2018 WL 4185522, at *4 (E.D. Tex. Aug. 31, 2018) (finding pricing,
contracts, customer lists, and client contacts were trade secrets); BRG Insurance Solutions, LLC v. O’Connell, No. 162448, 2017 WL 7513649, at *8 (N.D. Tex. July 18, 2017) (finding plaintiffs had stated a claim under the DTSA based
on the allegation defendant had stolen their client list); Mission Measurement Corp. v. Blackbaud, Inc., 216 F. Supp.
3d 915, 920–21 (N.D. Ill. 2016) (holding that a complaint was well-pleaded when it identified the purported trade
secrets as including “business models, . . . business plans, and product development plans”).

22

disclosure or use.” Id. at ¶ 39. CLS has substantiated each of these allegations.
With respect to Mr. Rulh’s assertion that CLS has no evidence that its customer and revenue
lists held independent economic value, CLS offers the deposition testimony of its corporate officer,
Mr. Sens. Mr. Sens testified that the CLS customer list, which includes corresponding revenues for
each customer, held an independent economic value, explaining that if CLS’ competitors were to
obtain the CLS customer list,
then that would give them a more competitive advantage on who to target if they
were going to go—seriously go after my business. Just like if a brand new start-up
was to come up and have my customer list with my revenues since the start of the
company, they’re going to go, yep, this is where we’re going first.
R. Doc. 252-4 at 11. Although Mr. Rulh states in his affidavit that CLS’ revenues are generally
known, Mr. Sens testified they are not. Thus, there exists a genuine issue of material fact as to
whether the CLS customer and revenue lists have independent economic value.
Finally, Mr. Rulh contends CLS has no evidence it made reasonable efforts to protect its
trade secrets. In opposition, CLS again points to the deposition testimony of its corporate officer,
Mr. Sens. Id. In his deposition, Mr. Sens testified that: (1) CLS’ financial records were stored in
an electronic system, (2) the system is password-protected, (3) the employees with access executed
confidentiality agreements, in which the employees acknowledged that the information was
protected, and (4) that CLS specifically instructed Ms. Janet Pipitone, who Mr. Rulh admits
provided him with CLS’ alleged trade secrets, that she was not permitted to provide any financial
information to Mr. Rulh. Id. at 29–32.
This testimony, which contradicts Mr. Rulh’s assertion to the contrary, is sufficient to create
a genuine issue of material fact as to whether CLS took sufficient steps to keep its confidential
information a secret. CheckPoint Fluidic Sys. Int’l v. Guccione, No. 10-4505, 2012 WL 3579838, at
*17–18 (E.D. La. Aug. 17, 2012) (holding that “requiring employees to sign a confidentiality
23

agreement as a condition of employment, by password protecting certain confidential and proprietary
information and limiting access to those passwords, and by requiring confidentiality agreements
before disclosing” trade secrets constituted reasonable efforts to protect trade secrets).
It is undisputed that Mr. Rulh took CLS’ customer list. Whether CLS’ customer list
constitutes a trade secret and the extent to which CLS kept its customer list a secret is a question
of fact inappropriate for a determination on summary judgment. See Ruby Slipper Café v. Belou,
No. 18-1548, 2019 WL 1254897, at *6 (E.D. La. Mar. 19, 2019) (quoting CheckPoint Fluidic Sys.
Int’l, Ltd. v. Guccione, 888 F. Supp. 2d 780, 796 (E.D. La. 2012)); Oneida Grp., Inc. v. Steelite
Int’l U.S.A., Inc., No. 17-957, 2017 WL 6459464 at *6–7 (E.D.N.Y. Dec. 15, 2017) (collecting
cases). Moreover, there exists a genuine issue of material fact as to whether CLS’ customer and
revenue lists derived independent economic value and the extent to which CLS took steps to keep
these lists secret. Thus, Mr. Rulh is not entitled to summary judgment on this basis.
b. Misappropriation of the Trade Secret
Mr. Rulh next argues CLS has no evidence he misappropriated the alleged trade secrets.
The DTSA defines “misappropriation” as:
(A) acquisition of a trade secret of another by a person who knows or has reason to know
that the trade secret was acquired by improper means; or
(B) disclosure or use of a trade secret of another without express or implied consent by a
person who—
(i) used improper means to acquire knowledge of the trade secret;
(ii) at the time of disclosure or use, knew or had reason to know that the knowledge of
the trade secret was—
(I) derived from or through a person who had used improper means to acquire the
trade secret;
(II) acquired under circumstances giving rise to a duty to maintain the secrecy of the
trade secret or limit the use of the trade secret; or
(III) derived from or through a person who owed a duty to the person seeking relief
to maintain the secrecy of the trade secret or limit the use of the trade secret; or
(iii) before a material change of the position of the person, knew or had reason to know
that—
(I) the trade secret was a trade secret; and
(II) knowledge of the trade secret had been acquired by accident or mistake . . . .
24

18 U.S.C. § 1839(5). The statute further defines improper means as including “breach or
inducement of a breach of a duty to maintain secrecy.” Id. § 1839(6)(A).
In his motion for summary judgment, as in his motion to dismiss, Mr. Rulh argues CLS has no
evidence he took trade secrets by improper means, as he was “arguably . . . still a member of CLS.” R.
Doc. 239-1 at 23; R. Doc. 103-2 at 15. In opposition, Plaintiff submits that, at the time Mr. Rulh took
the documents, he had no authority to do so. R. Doc. 252 at 16. The Court previously held this
allegation was sufficient to overcome Mr. Rulh’s motion to dismiss. R. Doc. 126 at 9. At the summary
judgment stage, CLS has substantiated that allegation with competent evidence, pointing to, among
other pieces of evidence, an email Mr. Rulh sent to Mr. Morris Kahn, in which Mr. Rulh states he “had
Ms. Janet [Pipitone] pull recent numbers for TD and CLS as I don’t have access anymore.” R. Doc.
252-11 (emphasis added). Thus, there is a genuine issue of material fact as to whether Mr. Rulh “ha[d]
reason to know that the trade secret was acquired by improper means” or that it was “derived from or
through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade
secret or limit the use of the trade secret.” 18 U.S.C. § 1839(5)(A), (B)(ii)(III). As a result, the
Court finds a genuine issue of material fact as to whether Mr. Rulh misappropriated CLS’ trade
secrets as defined by the DTSA.
Because there exists a genuine issue of material fact as to whether CLS can prove the DTSA’s
essential elements, the Court will deny Mr. Rulh’s motion for summary judgment with respect to
this claim.
3. Louisiana Uniform Trade Secrets Act
Mr. Rulh next contends CLS has no evidence upon which a jury could base a finding that
Mr. Rulh violated the LUTSA. R. Doc. 239-1 at 26. However, Mr. Rulh states the bases for this
argument is the same as his argument that CLS has no evidence upon which a jury could base a
25

finding that he violated the DTSA. Id. at 26–27. As a result, the Court will deny Mr. Rulh’s motion
for summary judgment with respect to CLS’ LUTSA claim.
4. Computer Fraud and Abuse Act
Mr. Rulh next moves for summary judgment on CLS’ CFAA claim. He argues the
allegations CLS brings in its second amended complaint are “conclusory” and that the record
shows “CLS clearly cannot support a cognizable loss under the CFAA.” R. Doc. 239-1. Much like
his argument for why he is entitled to summary judgment on CLS’ DTSA claim, Mr. Rulh again
largely recasts the arguments this Court already rejected in his motion to dismiss.
As the Court previously explained, the CFAA prohibits unauthorized access to a “protected
computer,” as defined by 18 U.S.C.A. § 1030(e)(2), for the purposes of obtaining information,
causing damage, or perpetrating fraud, 18 U.S.C. § 1030(a)(2). The CFAA defines “protected
computer” as “a computer . . . which is used in or affecting interstate or foreign commerce or
communication.” 18 U.S.C.A. § 1030(e)(2)(B). “Pleading specific facts that the defendant
accessed a computer connected to the internet is sufficient to establish that the accessed computer
was ‘protected.’” Merritt Hawkins & Associates v. Gresham, 948 F. Supp. 2d 671, 674 (N.D. Tex.
2013) (citing United States v. Trotter, 478 F.3d 918, 921 (8th Cir. 2007) (holding that the accessed
computer was “protected” because defendant “admitted the computers were connected to the
Internet”); Becker v. Toca, No. 07-7202, 2008 WL 4443050, at *5 (E.D. La. Sept. 26, 2008)
(finding the plaintiff sufficiently pleaded the computer was “protected” because he claimed
“computers were connected to the internet”)).
To prevail on a civil CFAA claim, a plaintiff must prove that one of the first five factors
listed in 18 U.S.C. § 1030(c)(4)(A)(i) is present. See 18 U.S.C. § 1030(g). In this case, CLS alleges
the first factor, a “loss” during a one-year period of at least $5,000 in value. See §
1030(c)(4)(A)(i)(I). “Loss” is defined under the CFAA as:
26

any reasonable cost to any victim, including the cost of responding to an offense,
conducting a damage assessment, and restoring the data, program, system, or
information to its condition prior to the offense, and any revenue lost, cost incurred,
or other consequential damages incurred because of interruption of service.
18 U.S.C. § 1030(e)(11).
In this case, as he did in his motion to dismiss, Mr. Rulh argues CLS’ CFAA claim fails,
as CLS has no evidence it suffered an interruption in service as a result of Mr. Rulh’s theft.
Moreover, Mr. Rulh contends that, “although CLS spent money on a company to forensically look
at all previous and current defendants’ computers, CLS did not hire a company to look at CLS’
own computer to determine if there was any damage.” R. Doc. 239-1 at 29. In opposition, CLS
argues the Court has already rejected Mr. Rulh’s interruption of service argument and that CLS
has evidence demonstrating that it sustained a loss in excess of $5,000 in investigating and
responding to Mr. Rulh’s unauthorized access. R. Doc. 252 at 19.
As the Court explained in its order denying Mr. Rulh’s motion to dismiss, several of our
sister circuits have held that the plain language of the statutory definition includes two separate types
of loss: (1) reasonable costs incurred in connection with such activities as responding to a violation,
assessing the damage done, and restoring the affected data, program system, or information to its
condition prior to the violation, as Plaintiff alleges here; and (2) any revenue lost, cost incurred, or
other consequential damages incurred because of interruption of service. See Brown Jordan
International, Inc. v. Carmicle, 846 F.3d 1167, 1173–74 (11th Cir. 2017); Yoder & Frey Auctioneers,
Inc. v. EquipmentFacts, LLC, 774 F.3d 1065, 1073–74 (6th Cir. 2014); A.V. ex rel. Vanderhye v.
iParadigms, LLC, 562 F.3d 630, 646 (4th Cir. 2009); see also 18 U.S.C. § 1030(e)(11). Because the
statute is written in the disjunctive, it is only the second type of loss that requires a plaintiff to prove
its losses resulted from an interruption in service. On the other hand, the first type of loss may be
proven independent of an interruption of service. In sum, “‘Loss’ includes the direct costs of
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responding to the violation in the first portion of the definition, and consequential damages resulting
from interruption of service in the second.” Brown, 846 F.3d at 1174.
In its opposition to Mr. Rulh’s motion to dismiss, CLS made plain that it alleges a loss of the
first type. Now on summary judgment, CLS provides evidence to substantiate its allegation. For
example, CLS offers the declaration of Mr. Sens, who states, “To date, CLS has incurred
substantial expense, exceeding $20,000.00 in obtaining . . . forensic examinations” of:
(1) the CLS owned desktop computer used by Janet Pipitone prior to her
termination, (2) the CLS owned desktop computer used by Shawana Harris prior to
her termination, (3) the CLS owned laptop used by Ms. Harris prior to her
termination; and (4) the CLS owned laptop used by Mr. Rulh prior to his expulsion
from CLS.
R. Doc. 252-8 at 3. Thus, the Court finds there is a genuine issue of material fact as to whether the
forensic examinations of these computers were conducted in “respon[se] to the violation” and
whether CLS actually incurred these costs. As a result, the Court concludes Mr. Rulh is not entitled
to summary judgment on CLS’ CFAA claim.
5. Louisiana Unfair Trade Practices Act and CLS’ Claims for
Conversion, Fraud, and Breach of Fiduciary Duty
Finally, Mr. Rulh argues CLS has no evidence it has suffered any damages as a result of
his alleged conversion, fraud, breach of fiduciary duties, or alleged violations of the LUTPA. R.
Doc 239-1 at 30–31; R. Doc. 273 at 6–7. He submits, “CLS has stipulated that it has suffered no
recoverable damages arising from these alleged acts, and, consequently, these claims are not
justiciable and must also suffer dismissal.” R. Doc. 239-1 at 1. As Mr. Rulh submits CLS “has not
suffered any damages in the form of lost revenues, lost profits, or otherwise,” he has borne his
burden on summary judgment with respect to these claims, thereby shifting the burden to CLS. Id.
at 30–31. CLS offers no opposition to this contention. As a result, the Court will grant Mr. Rulh
summary judgment with respect to these claims.
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IV.

CONCLUSION
For the foregoing reasons;
IT IS ORDERED that Defendant Donald Rulh’s Motion for Partial Summary Judgment,

R. Doc. 209, be and hereby is DENIED.
IT IS FURTHER ORDERED that the Motion for Partial Summary Judgment filed by
Plaintiff Complete Logistical Services, LLC, R. Doc. 229, be GRANTED in part and DENIED in
part. With respect to CLS’ request that the Court hold that, “in the event Mr. Rulh is . . . entitled to
any increase in his expulsion price, any increased expulsion price must be paid in monthly
installment, over a term not to exceed 120 months, and evidenced by a promissory note, as required
by the plain terms of the [CLS] Operating Agreement” the motion is GRANTED. The motion is
DENIED in all other respects.
IT IS FURTHER ORDERED that CLS’ motion to Exclude the Testimony of Mr. Athen
M. Sweet, R. Doc. 231, be GRANTED in part and DENIED in part. With respect to any legal
opinions interpreting the CLS Operating Agreement offered by Mr. Sweet, the motion is
GRANTED. The motion is DENIED in all other respects.
IT IS FURTHER ORDERED that Mr. Rulh’s Motion for Summary Judgment, R. Doc.
239, be GRANTED in part and DENIED in part. With respect to CLS’ claims for conversion,
fraud, breach of fiduciary duty, and violations of the LUTPA, the motion is GRANTED. With
respect to all other claims, however, the motion is DENIED.

New Orleans, Louisiana on this 6th day of June, 2019.

_______________________
Eldon E. Fallon
U.S. District Court Judge

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