TLS Management and Marketing Services LLC v. Rodriguez-Toledo et al

Filing 535

OPINION IN A NON-JURY TRIAL: Defendants Rodriguez, ASG, and GOS are found liable to TLS in the amount of $32,557.50. Permanent injunction issued against these defendants. Final judgment to be entered. Signed by US Magistrate Judge Bruce J. McGiverin on September 28, 2018.(McGiverin, Bruce)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
TLS MANAGEMENT AND MARKETING
SERVICES LLC,
Plaintiff,
Civil No. 15–2121 (BJM)

v.
RICKY RODRÍGUEZ-TOLEDO, et al.,
Defendants.

OPINION IN A NON-JURY TRIAL
TLS Management and Marketing Services LLC (“TLS”) brought this action under the
court’s federal question and supplemental jurisdiction against Ricky Rodríguez-Toledo
(“Rodríguez”), Lorraine Ramos (“Ramos”), Miguel Santo Domingo-Ortiz (“Santo Domingo”),
ASG Accounting Solutions Group, Inc. (“ASG”), and Global Outsourcing Services LLC (“GOS”),
alleging violations of Titles I and II of the Electronic Communications Privacy Act (“ECPA”);
violations of the Puerto Rico Commercial and Industrial Trade Secret Protection Act, (the “Trade
Secret Act”), 10 L.P.R.A. §§ 4131–4141; breach of contract, under Articles 1044, 1054, 1077 and
1206 of the Puerto Rico Civil Code, 31 L.P.R.A. §§ 2994, 3018, 3052, 3371; conversion, under
Article 1802 of the Puerto Rico Civil Code, 31 L.P.R.A. § 5141; and tortious interference with
various contracts, under Article 1802 of the Puerto Rico Civil Code. 31 L.P.R.A. § 5141. Dkt. 74.
I dismissed TLS’s claims under Title II of ECPA, the Stored Communications Act. Dkt.
173 at 12. I denied summary judgment on TLS’s claims under Title I of ECPA (the “Wiretap Act”)
and the Trade Secret Act. I also denied summary judgment on TLS’s breach of contract claims
against Rodríguez, ASG, and GOS for use and disclosure of the buy-sell agreement and the loan
program. I granted TLS’s motions for summary judgment on its breach of contract claims against
Rodríguez, ASG, and GOS for disclosure of the loan agreement and operating agreement, and
against Rodríguez and ASG for disclosure of the U.S. Possession Strategy and retention of TLS’s
Confidential Information. I also granted GOS’s motion for summary judgment on TLS’s breach
of contract claims against it for disclosure of the U.S. Possession Strategy and retention of TLS’s

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

2

Confidential Information. I granted Defendants’ motion for summary judgment on TLS’s
conversion claim and tortious interference claims. I dismissed TLS’s causes of action against
Ramos except for those under the Wiretap Act. Dkt. 383 at 27. And I dismissed TLS’s causes of
action again Santo Domingo. Dkt. 507.
The case proceeded to a five-day, non-jury trial on the surviving claims. The parties
submitted post-trial briefs. Dkts. 524, 525. The case is before me on consent of the parties. Dkt.
93. Remaining are TLS’s claims under the Wiretap Act against Ramos, Rodríguez, ASG, and GOS;
under the Trade Secret Act against Rodríguez, ASG, and GOS; and for breach of contract against
Rodríguez, ASG, and GOS for the use of buy-sell agreements and loan programs. The court also
considers what, if any, remedies are appropriate.
FINDINGS OF FACT
The following findings of fact were stipulated by the parties in their proposed pretrial order
or proven by a preponderance of the evidence at trial. See Dkt. 419.
1.

Tax Law Solutions, LLC, was formed in Puerto Rico on June 28, 2010. In 2012, it changed
its name to TLS Management and Marketing Services, LLC (“TLS”).

2.

TLS is a Puerto Rico-based tax planning and consulting firm divided into the Consulting
Division and the Puerto Rico Division.

3.

TLS’s principals are David A. Runge and Richard M. Colombik.

4.

Colombik testified that, in his opinion, the Consulting Division is valued at about $4.8
million and the Puerto Rico Division is valued at about $30 million.

5.

The Consulting Division creates a personalized Capital Preservation Report (“CPR”) for its
clients to advise them on how to reduce tax liability. The CPR is the Consulting Division’s
main product and has been revised about sixty times.

6.

TLS’s Puerto Rico Division offers a U.S. Possession Strategy (“the Strategy”).

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

7.

3

The Strategy reduces the tax liability of its clientele through strategic use of Puerto Rico’s
Act 20 and Act 73 tax exemption decrees. The Strategy is implemented through documents,
including loan applications, buy-sell agreements, and operating agreements.

8.

TLS claims as trade secrets the methods underlying the Strategy, as well as the current and
potential client lists, contractor roster, implementation documents and forms, and pricing
model.

9.

Accounting Solutions Group (“ASG”) is a corporation duly organized under the laws of the
Commonwealth of Puerto Rico on August 2, 2007. ASG’s only stockholder is Ricky
Rodríguez.

10.

ASG is a boutique firm that offers services in corporate structures, tax planning and
preparation, consulting, auditing, and forensic accounting, among others.

11.

As part of its services for TLS, ASG handled clients under Puerto Rico tax incentive Act 20
and Act 73.

12.

Lorraine Ramos is the wife of Ricky Rodríguez. She is an accountant but does not have a
CPA license.

13.

Ramos has worked at ASG as a subcontractor. Her work consists of bookkeeping tasks and
occupies about one to three hours every month.

14.

Ramos is a self-professed technophobe.

15.

On March 13, 2012, ASG signed a Subcontractor Agreement (“SCA”) with TLS.

16.

The SCA included a confidentiality clause and a non-compete clause. The confidentiality
clause states: “Except as authorized in writing by TLS, neither Subcontractor nor any entity
controlling, controlled by or under common control with Subcontractor (collectively,
‘Subcontractor Affiliates’) will at any time, directly or indirectly, disclose or utilize in any
manner including for Subcontractor's own pecuniary gain, Confidential Information of TLS.
Subcontractor may only use Confidential Information of TLS for a purpose that is necessary
in carrying out the provisions or this Agreement.” Joint Ex. II ¶ 5.1.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

17.

4

The court struck the the non-compete clause because it is invalid under Puerto Rican law.
Dkt. 383 at 16; see Arthur Young & Co. v. Vega III, No. RE-91-508, 1994 WL 909262 (P.R.
May 24, 1994) (noncompetition agreements without geographic, temporal, or client limits
are invalid).

18.

The SCA defines confidential information as “business methods and procedures, clients or
prospective clients (‘TLS Clients’), agent lists, marketing channels and relationships,
marketing methods, costs, prices, products, formulae, compositions, methods, systems,
procedures, prospective and executed contracts and other business arrangements, proposals
and project plans, and TLS Affiliates.” Joint Ex. II at ¶ 5.2.1.

19.

The SCA includes as confidential “TLS reports and any information contained therein,
related work products including implementation documents, and any other information
provided to Client by TLS or TLS Affiliates by or in connection with proposing or delivering
TLS Services.” Joint Ex. II at ¶ 5.2.2.

20.

The SCA includes as confidential the “identities of agents, contractors, consultants, sales
representatives, sales associates, subsidiaries, strategic partners, licensors, licensees, TLS
Clients, suppliers, or other TLS service providers or sources of supply.” Joint Ex. II at ¶ 5.2.3.

21.

The SCA states: “TLS Confidential Information shall not include (a) information disclosed
with the prior written consent of TLS, (b) information that has been previously disclosed by
TLS to the general public, (c) information that is required to be disclosed pursuant to a valid
judicial court order, but only to the extent of and for the purpose of such order, and only if
after receiving such an order Subcontractor provides timely notice of such order to TLS and
cooperates reasonably with TLS’s efforts to contest or limit the scope of such order, or (d)
any strategy or methodology contained in the TLS Plan that is currently being utilized by
Subcontractor or any of Subcontractor’s other clients as a result of Subcontractor’s prior
recommendations (the ‘Excluded Strategies’).” Joint Ex. II ¶ 5.3.

22.

TLS considers any works made for hire under the SCA to be TLS confidential information.
Joint Ex. II at ¶ 7.1.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

23.

5

The SCA required subcontractors to “return to TLS any Intellectual Property of TLS in
Subcontractor’s possession” upon termination of the agreement. Joint Ex. II ¶ 8.4.2.

24.

By its own terms, the confidentiality clause survives any termination of the SCA. Joint Ex.
II ¶ 8.4.3.

25.

The SCA provides for equitable remedies in case of breach. “The Parties recognize and
acknowledge that irreparable damage without an adequate remedy at law may result from a
breach of the Confidentiality and Non-Competition sections of this Agreement.” Joint Ex. II
at ¶ 9.2.1.

26.

By signing the SCA, the subcontractor agrees that TLS may apply for an injunction and, if
granted and upheld by a court, the subcontractor will “pay all legal fees and costs of TLS.”
Joint Ex. II at ¶ 9.2.1.

27.

The SCA also provides that, where a court finds a breach of the confidentiality agreement,
“TLS shall, in addition to all remedies at equity and law, be entitled to receive from
Subcontractor 150% of all fees collected by Subcontractor for such unauthorized use of TLS
Confidential Information and any fees to which TLS would have otherwise been entitled to
receive from any third party if such unauthorized use of TLS Confidential Information also
involved services that would have otherwise resulted in compensation to TLS from any third
party, in contravention of this Agreement.” Joint Ex. II at ¶ 9.2.2.

28.

As a TLS subcontractor, ASG handled clients under Puerto Rico tax incentive Act 20 and
Act 73. Rodríguez managed the termination and resignation process for employees and
consultants, performed internal financial and accounting duties, and generally impressed
Runge and Colombik.

29.

Runge and Colombik offered Rodríguez the position of Managing Director at TLS. He
accepted.

30.

On September 1, 2012, Rodríguez became a TLS employee.

31.

On September 1, 2012, Rodríguez signed a Confidentiality and Non-Disclosure Agreement
with TLS (“NDA”) that included a confidentiality clause. Joint Ex. V.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

32.

6

The NDA states: “Whereas (‘TLS’) willingness to share Confidential Information is
contingent on the (‘Parties) agreement to keep such information confidential and to use such
information only in accordance with the terms and conditions of this Agreement.” Joint Ex.
V at 1.

33.

The NDA includes a confidentiality clause. “Except as authorized in writing, neither Party
nor any entity controlling, controlled by or under common control with such Party
(collectively, ‘Affiliates’) will at any time, directly or indirectly, disclose Confidential
Information of the other Party.” Joint Ex. V at ¶ 1.1.

34.

The NDA defines confidential information as “[a]ll information, whether written or
otherwise and whether or not it is marked ‘confidential’, ‘proprietary’, or ‘copyright’ at the
time of disclosure, regarding (‘TLS’) business methods and procedures, clients or
prospective clients, agent lists, marketing channels and relationships, marketing methods,
costs, prices, products, formulas, compositions, methods, systems, procedures, prospective
and executed contracts and other business arrangements, proposals and project plans, and
(‘TLS’) Affiliates.” Joint Ex. V at ¶ 1.2.1.

35.

The NDA includes as confidential TLS “reports and any information contained therein,
related work products including implementation documents, client and/or prospective client
personal and/or financial information, and any other information provided to (‘Recipient’)
by (‘TLS’) or (‘TLS’) Affiliates by or in connection with proposing or delivering (‘TLS
Services’) (individually or collectively, TLS Plans).” Joint Ex. V at ¶ 1.2.2.

36.

The NDA includes as confidential “[t]he identities of agents, contractors, consultants, sales
representatives, sales associates, subsidiaries, strategic partners, licensors, licensees,
customers, prospective customers, suppliers, or other service providers or sources of supply
including firms in which a (‘TLS’) Principal may have an ownership interest (collectively,
‘TLS’ Affiliates’).” Joint Ex. V at ¶ 1.2.3.

37.

Like the SCA, the NDA includes an equitable remedies section in which the parties agree
that “irreparable damage without an adequate remedy at law may result from a breach of this

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

7

Agreement . . . . Each Party agrees to pay all legal fees and costs of the other Party if a
preliminary or permanent injunction is ordered due to the actions or inactions of the other
Party.” Joint Ex. V ¶ 2.1.
38.

Runge testified that TLS goes to “great lengths” to protect its confidential information.

39.

To protect its confidential information, TLS requires employees, contractors and affiliates,
potential and current clients, and outside consultants to sign nondisclosure and noncompetition agreements. When TLS hosts conferences, all attendees must also sign
confidentiality agreements. U.S. Possession Strategy details are made clear only to people
who have signed NDAs.

40.

TLS stores hard copies of original, signed documents in a secure filing cabinet at its office.

41.

When Rodríguez began working at TLS, client information was scattered among different
consultants and contractors’ computers. Rodríguez suggested purchasing a TLS Dropbox
license to keep all files in the same, central location.

42.

Dropbox is a cloud-based storage system for digital files. A Dropbox user can access his
account on any device connected to the Internet at www.dropbox.com or through a desktop
application on a personal computer. These methods are not exclusive—both may be used to
access the same account. The user simply logs in with the username and password associated
with that account. This cloud-based storage system permits a user to upload files to his
Dropbox account and then, later, access or download those files; the user may use the same
or a different device to do this. In essence, Dropbox stores files and the Internet performs the
transmission function that enables a user to sync his desktop application with the folders
stored in the cloud. The cloud serves as the storage hub for a Dropbox account, and
connecting to that hub permits access to the files stored, whether by download or by
synchronization.

43.

Dropbox users may set the Dropbox account on their personal devices to sync automatically
with the folders on the server or cloud. Dropbox users may also choose to manually sync the
Dropbox account on their personal devices.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

44.

8

When a user is logged in to Dropbox and has an account set to sync automatically, it can take
up to ten or fifteen seconds for a file to upload or download based on the file size and Internet
speed. If a user does not sync automatically, a manual sync can take a similar amount of time,
which also depends on the file size and Internet speed.

45.

If a Dropbox user does not sync his account on his device with the folders in the Dropbox
cloud, then the folders and files will remain in storage in the cloud until they are synced. The
user who manually syncs his account essentially directs Dropbox to send the changes made
to folders and files to his device from the cloud. Without this instruction, those folders and
files would remain in the cloud.

46.

TLS purchased a Dropbox business license to store its electronic information.

47.

Rodríguez served as the Dropbox administrator.

48.

At the time of the events giving rise to this case only key employees had TLS-issued laptops.
Contractors and others used personal laptops to access their TLS Dropbox accounts.

49.

People with TLS laptops were supposed to use only TLS laptops to access TLS confidential
information, although this policy was never made explicit.

50.

Runge and Colombik trusted employees to use their professional judgment when it came to
handling confidential information, and they believe that the NDA provided some guidance.
TLS did not provide written policies or official guidelines beyond the NDAs.

51.

TLS had no specific written policies regarding Dropbox access, password-sharing, or
document-sharing.

52.

Employees, consultants, and other TLS affiliates needed permission to access certain
documents and files; it appears that such permission was merely a password and access to
the TLS Dropbox account.

53.

TLS has no policy on handling confidential information; on photocopying, printing, or
sharing files; on protecting TLS-issued laptops from hacking or viruses; on protecting
personal laptops used for TLS business from hacking or viruses; or on using firewalls,
encryption, or other measures to secure data.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

54.

9

The CPR is never distributed electronically. The CPR is only distributed in hard copy format,
printed on paper that cannot be photocopied. When the CPR is photocopied, the resulting
copy appears as if all of the printed material were blacked out.

55.

Rodríguez’s copy of the TLS Dropbox account contents indicate that about fifty-five
documents included the words “confidential” or “confidentiality” in the name. Of those, the
vast majority were confidentiality agreements. Only a handful were marked “confidential”
as if to indicate that the contents of the file were confidential in a privileged sense. See Ex.
67.

56.

The copy of the TLS Dropbox account does not contain documents or folders labeled
“secret,” “proprietary,” or “copyright,” although three files refer to literal copyrights in the
file name. See Ex. 67.

57.

Runge and Colombik did not instruct Rodríguez on the Dropbox settings for file-sharing or
access. Rodríguez did not adjust the default Dropbox settings.

58.

Dropbox offers additional settings that enable a user to impose additional access restrictions
on certain shared folders, for example.

59.

Rodríguez created Dropbox accounts for TLS employees.

60.

Employees who exited TLS had to return their equipment and key to the office. There was
not a termination policy with regard to Dropbox account access.

61.

In his TLS Dropbox account, Rodríguez had a folder named “RRT- Confidential File TLS”.

62.

When he sought to add non-TLS employee accounts to the Dropbox in June 2014, Rodríguez
asked for and received permission from Runge. Rodríguez created an account for ASG within
the TLS Dropbox, using Ramos’s name and her ASG email. Ex. 61.

63.

ASG’s new TLS Dropbox account was intended not for Ramos but for Rodríguez. Rodríguez
wanted to be able to access his ASG files from his TLS Dropbox account because he still
worked with clients at ASG while working at TLS. He used Ramos’s name to differentiate
his TLS account from the ASG account.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

64.

10

Dropbox records all file activity in a log. This Dropbox log identifies which accounts logged
in, uploaded files to the server, accessed particular folders and files, downloaded files from
the server, and were removed from the Dropbox account.

65.

A Dropbox log reflecting the devices linked to the TLS Dropbox, creation and sharing of
folders, logins, downloaded links and other activity for February 2014 through January 2015
indicates that the account under Ramos’s name accessed the Dropbox a handful of times. Ex.
61.

66.

In June 2014, Rodríguez created TLS Dropbox accounts for the Producer’s Guild and
Management Services International. These were also non-TLS employee accounts that
Runge approved.

67.

As managing director, Rodríguez worked mainly with the Puerto Rico Division. He was not
involved in the Consulting Division and did not handle CPRs.

68.

The Consulting Division often referred clients to the Puerto Rico Division to join the U.S.
Possession Strategy it offered.

69.

Rodríguez managed finances for TLS and, on occasion, personal tax filings for Runge and
Colombik.

70.

Rodríguez was closely involved with the U.S. Possession Strategy. He knew how it worked,
managed its implementation for clients, and often explained to clients the structure and
governing documents that facilitated the Strategy.

71.

Prior to working at TLS, Rodríguez had not performed work pertaining to tax exemption
decrees or the Strategy. Neither ASG nor GOS had performed work pertaining to tax
exemption decrees or the Strategy prior to Rodríguez working at TLS.

72.

TLS has used at relevant times a loan program.

73.

As part of the documents utilized for the Strategy, TLS used at relevant times a loan
application, a buy-sell agreement, and an operating agreement.

74.

Rodríguez created the loan application that TLS used. He downloaded a template from the
Internet, and TLS customized it according to its needs.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

75.

11

Entire sections of TLS’s operating agreement can be found on the Internet on other templates
for operating agreements.

76.

Loan programs, loan applications, operating agreements, and buy-sell agreements are all
standard categories of document used in the tax-planning field and in corporate structuring.

77.

Santo Domingo is an entrepreneur and Rodríguez’s childhood friend. He holds a law degree
and is a notary public.

78.

Santo Domingo began working for TLS in September 2012, although he did not sign a
confidentiality agreement until the following February.

79.

Santo Domingo performed mainly non-business activities for TLS: finding an office, hiring
a tour service for a client, arranging music for a conference, and helping a TLS client design
a website.

80.

During the period Santo Domingo worked for TLS but before he signed a confidentiality
agreement, Rodríguez asked him to review the venue clause of some template contracts and
notarize a few documents. The contracts included marketing services contracts and a
corporate rights assignment.

81.

On February 11, 2013, Santo Domingo signed a “Confidentiality and Non-Competition
Agreement” with TLS to provide services as a subcontractor.

82.

At the end of 2013, Santo Domingo stopped providing services for TLS.

83.

In July 2014, Santo Domingo incorporated Global Outsourcing Services (“GOS”). Santo
Domingo planned to attract business people to bring their assets to Puerto Rico in order to
enjoy the benefits of its tax exemption laws.

84.

Around or prior to October 2014, Rodríguez provided Santo Domingo a list of bullet points
on the business milestones to be completed for GOS. Rodríguez also directed him to the
proper office to apply for an Act 20 exemption decree.

85.

Like TLS, GOS had a loan program, used a loan application, and had a buy-sell agreement.

86.

Santo Domingo created the buy-sell agreement for GOS.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

87.

12

At the beginning of 2014, Rodríguez sent Runge a number of emails complaining about his
compensation. Rodríguez felt that his salary should grow in proportion with his increasing
responsibilities at TLS.

88.

Runge asked Rodríguez to submit a formal request for a raise in March 2014. In response,
Rodríguez submitted an industry analysis of CEO salaries.

89.

Runge and Rodríguez’s accounts differ over the intention behind the analysis Rodríguez
submitted, but both agreed at trial that the benchmark number ($750,000) was much larger
than TLS could afford. See Ex. 37.

90.

Rodríguez did not receive a raise, and the discussions strained his business relationship with
TLS.

91.

Rodríguez began to feel disenchanted with TLS.

92.

In April 2014, Runge invited Rodríguez and Santo Domingo to his apartment to discuss a
new line of business in the insurance industry. Colombik did not attend the meeting, which
struck Rodríguez as odd; he requested Colombik attend future meetings. Santo Domingo and
Rodríguez now disagree as to whether it was a U.S. Possession Strategy project or whether
it an entirely new entrepreneurial scheme.

93.

Santo Domingo and Rodríguez began researching the insurance idea’s potential. After a
month or two, Rodríguez informed Santo Domingo that the idea would not come to fruition
based on information from Runge.

94.

A few other, work-related events in 2014 made Rodríguez feel uncomfortable in his role at
TLS. Rodríguez thought that the climate had changed, and Runge and Colombik no longer
respected his business acumen.

95.

On September 3, 2014, Rodríguez copied the following documents from his TLS Dropbox
account and placed them in a GOS subfolder of his linked ASG folder: 1) a template of an
Operating agreement which Colombik had given to him; 2) a certificate template; 3) a loan
program application; 4) a promissory note; 5) a security agreement; and 6) a certificate
ledger.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

96.

13

Later in September 2014, Rodríguez brought a Western Digital, external hard drive to work
and copied the complete contents of the TLS Dropbox account onto an external hard drive.
The copied information included templates for TLS forms, client loan applications and buysell agreements, lists of current and potential TLS clients, TLS contractors, valuation reports,
a new insurance strategy, two CPRs, and other information TLS considers confidential. The
drive contained about twenty-six gigabytes of information in total. See Ex. 67.

97.

The templates and forms copied are standard types of forms in the industry, but TLS, like
many companies, personalized them and puts them to particular uses within their own
business model.

98.

Rodríguez concedes that he did not have authority to copy the contents of the TLS Dropbox
account.

99.

On January 16, 2015, Rodríguez resigned from TLS.

100. On January 16, 2015, Rodríguez returned his office key, instructed Human Resources to
remove him from the payroll, and left the building. Rodríguez notified Runge via email,
effective immediately. Ex. 1.
101. Later on, in another communication to Runge, Rodríguez cited poor compensation and
general dissatisfaction as factors motivating his resignation.
102. On January 16, 2015, Rodríguez did not remove TLS confidential information from his ASG
laptop or disable its TLS Dropbox access. Rodríguez states that he did not access the TLS
Dropbox account after his resignation.
103. Rodríguez did not delete the files he copied on September 3, 2014. Rodríguez did not return
the external hard drive or wipe the copied TLS Dropbox data from it.
104. After his resignation, Rodríguez asked the principals at then-current TLS client Marlin
Environmental (“Marlin”) to post references for Rodríguez on his LinkedIn page.
105. In late January or February 2015, Rodríguez took a 70% ownership stake in GOS and began
working there.
106. By early 2017, Santo Domingo left GOS, and Rodríguez became the sole owner.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

14

107. In order to provide tax exemption services in Puerto Rico, GOS obtained a tax exemption
decree under Act 20.
108. Rodríguez used two of the TLS documents he copied; he modified a loan application for a
GOS client, and he used the TLS operating agreement to structure GOS.
109. The GOS website advertised a new insurance solution in language evoking the idea
contemplated in Runge, Santo Domingo, and Rodríguez’s discussions in April 2014. Ex. 66.
GOS never provided the insurance solution to a client.
110. Rodríguez also sought referrals for GOS and contracted with some TLS clients and a former
TLS advisor to act as referral sources for GOS. The referral sources did not provide referrals.
111. Rodríguez personally contacted two other TLS clients on GOS’s behalf. Ultimately, he met
with only one to discuss tax alternatives in Puerto Rico.
112. GOS attracted only one client. That client was not connected to TLS.
113. Harris Hospice (“Harris”), a TLS client, decided to leave TLS in February 2015. Its principal
obtained Rodríguez’s contact information and asked him to help exit the Strategy.
114. On May 25, 2015, Marlin engaged the services of ASG for “consulting services to assist…
(‘Client’) in the tax compliance review of several transactions they are executing that
compromises the tax jurisdictions of the U.S. and the Commonwealth of Puerto Rico.”
115. On June 8, 2015, Harris engaged ASG “for consulting services.”
116. On June 11, 2015, Marlin signed a new engagement letter with ASG for tax compliance
review and the setup of a limited liability corporation (“LLC”). Marlin’s attorney provided
all forms needed for Marlin’s LLC.
117. On June 18, 2015, Harris engaged ASG to create and structure an LLC to facilitate their exit
from the Strategy. Exs. XI, XI-a.
118. Marlin paid ASG $2,162.50 for services rendered. Ex. 44.
119. Harris paid ASG $8,690.00 for services rendered. Exs. 38, 40, 48.
120. ASG used the TLS operating agreement template that Colombik had provided to Rodríguez
in his capacity as managing director in order to set up Harris’s new corporation.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

15

121. Harris and Marlin each sent Rodríguez all of their documentation relating to the U.S.
Possession Strategy, which Rodríguez used to prepare memoranda on the most tax efficient
way to exit TLS.
122. Rodríguez sent emails to the principals of Harris and of Marlin commenting on TLS
information that they forwarded and offering his analysis and advice on Runge’s emails.
Rodríguez commented on elements of the Strategy, including pricing, implementation and
exit, and other business procedures. See, e.g., Exs. 39, 41, 42, 45.
123. Rodríguez concedes that he referred to TLS pricing formulae and other information that
belonged to TLS in these emails and did not have express written authority to do so.
124. Runge testified that TLS had difficulty settling on an appropriate pricing structure for the
Strategy. TLS tried several different pricing schemes before settling on the version that it
currently uses.
125. For both Harris and Marlin, TLS rejected the proposed exit strategies, and the proposed LLCs
were not formed.
126. TLS commenced this lawsuit in August 2015. Dkt. 1.
127. In September 2015, TLS sent Defendants litigation hold notices requesting the preservation
of “all documents, data, and electronic information from all sources related to the subject
matter of this litigation.”
128. In February 2015, Rodríguez transferred all the data on his ASG-issued laptop, which still
had limited access to the TLS Dropbox account, to a new laptop. He gave the ASG laptop to
his children and discarded it a few months later when it stopped working.
129. Rodríguez and Ramos both used this laptop for ASG work. At trial, they both claimed that
only he used it to access Dropbox despite Ramos’s interrogatory responses to the contrary.
The testimony was credible, however, and it is probable that the handful of logins from the
Ramos account reflect Rodríguez’s activity. Ex. 61.
130. The ASG laptop and the data it contained are the object of an adverse inference instruction.
Dkt. 212.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

16

131. In 2016, Rodríguez passed all the TLS Dropbox account information from the Western
Digital hard drive to three flash drives, one of which he gave to his counsel in the instant
case. See Ex. 67.
132. Rodríguez disclosed the other two flash drives containing the TLS Dropbox account
information to the Internal Revenue Service (“IRS”).
133. At trial, Rodríguez identified three companies that provided services resembling the Strategy:
Capstone Capital, Trident RMC, and Caribbean Consulting Partners.
134. Capstone Capital was founded in April 2013 after TLS presented the Strategy to its managing
director. It offers insurance-linked securities and life-policy aggregation, which are not
services TLS provides.
135. Trident RMC is a management and consultant company that offers outsourcing to Puerto
Rico and reduced tax liability for its clients. Trident was founded in 2015 by Michael Sciotti,
a former TLS employee, who Rodríguez had hired. As part of his employment, he signed
TLS’s confidentiality and nondisclosure agreement. Sciotti was terminated from TLS on
May 16, 2014. See Ex. 67.
136. Caribbean Consulting Partners was founded by the same lawyer who helped structure TLS.
DISCUSSION
I.

The Wiretap Act

TLS claims that after Rodríguez resigned in January 2015, Defendants violated the Wiretap
Act by intercepting TLS confidential information contained in the TLS Dropbox account by
accessing it through Rodríguez’s ASG laptop computer.
The Federal Wiretap Act, 18 U.S.C. §§ 2510–2522, “provides a private right of action against
one who ‘intentionally intercepts, endeavors to intercept, or procures any other person to intercept or
endeavor to intercept, any wire, oral, or electronic communication.’” In re Pharmatrak, Inc., 329 F.3d
9, 18 (1st Cir. 2003) (quoting 18 U.S.C. § 2511(1)(a), and citing 18 U.S.C. § 2520 (statutory provision
authorizing a private right of action)). To establish a Wiretap Act claim, a plaintiff must show “that

a defendant (1) intentionally (2) intercepted, endeavored to intercept or procured another person

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

17

to intercept or endeavor to intercept (3) the contents of (4) an electronic communication (5) using
a device.” See Pharmatrak, 329 F.3d at 18.
An “electronic communication” is “any transfer of signs, signals, writing, images, sounds,
data, or intelligence of any nature transmitted in whole or in part by a wire, radio, electromagnetic,
photoelectronic or photo-optical system that affects interstate or foreign commerce.” 18 U.S.C. §
2510(12). A device is “any device or apparatus which can be used to intercept a wire, oral, or
electronic communication.” Id. at § 2510(5). “Intercept” is defined as “the aural or other
acquisition of the contents of any wire, electronic, or oral communication through the use of any
electronic, mechanical, or other device.” 18 U.S.C. § 2510(4). Interception is otherwise understood
broadly and consists of “captur[ing] or redirecting in any way” the contents of an electronic
communication. United States v. Rodriguez, 968 F.2d 130, 136 (2d Cir. 1992); accord Noel v. Hall,
568 F.3d 743, 749 (9th Cir. 2009). The First Circuit has joined the other circuits who have
considered the issue and “determined that ECPA . . . require[s] that communications be intercepted
contemporaneously.” Boudreau v. Lussier, No. 16-1049, 2018 U.S. App. Lexis 23283, at *29 (1st
Cir. Aug 21, 2018).
Boudreau requires plaintiffs to engage in detailed, technical analysis of the mechanics of
interception in order to meet their burden. Id. In Boudreau, the First Circuit affirmed a district
court’s grant of summary judgment on Wiretap Act claims against a defendant after he could not
present sufficient evidence that his employer’s capture of screenshots from his computer
constituted “contemporaneous interception.” Id. at 21. The opinion distinguishes a lay definition
of “contemporaneous interception” from its technical meaning. The defendant argued that
screenshots of email timestamps alongside a desktop computer clock with the same time of day
qualified as proof of contemporaneity, but the First Circuit stated that stamps showing the same
time do not “necessarily evince contemporaneous interception.” Id. at 29. Determining
contemporaneity “would require an understanding of, for example, among other things, what SSP
actually does (and on what sort of time-scale it does it) when it captures a screenshot, what a web
browser's progress bar actually indicates, and how exactly Yahoo! Mail auto-saves emails as a user

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

18

drafts them.” Id. A court must be able to consider the “precise mechanism” by which interception
occurs. Id. at 30; cf. United States v. Councilman, 418 F.3d at 67, 69 (1st Cir. 2005) (only after
lengthy testimony as to how exactly email programs transmit data did the court hold that messages
in “transient electronic storage” remained electronic communications in transit). Other circuit
courts likewise emphasize the importance of expert testimony in order to analyze whether
technology permits contemporaneous interception under ECPA. Boudreau, 2018 U.S. App. Lexis
23283, at *30 (citing Luis v. Zang, 833 F.3d 619, 631–32 (6th Cir. 2016); United States v.
Szymuskiewicz, 622 F.3d 701, 703–04 (7th Cir. 2010)).
Dropbox differs from classic methods of electronic communication because users do not
normally communicate with each other, as in email, but rather communicate with the Dropbox
cloud by uploading, downloading, and syncing files. An interception in the Dropbox context takes
the form not of duplicating or redirecting communications but rather syncing a Dropbox account
in order to capture changes made to files on the Dropbox server. Synchronization arguably may
fall into the broadly defined “intercept” because it represents the capture or redirection of a
transmission, depending on the mechanics of how the interception occurs. See Noel, 568 F.3d at
749.
Importantly, however, Dropbox users have the option to either sync their own folders
automatically with the folders on the server or to sync those folders manually. Defendants’ expert
testified that even when a user’s Dropbox account is set to sync automatically and reflect changes
made to a folder by other users or on other devices, it can take ten to fifteen seconds for a file to
upload or download. On the other hand, if a user is not already logged into his account when the
changes are made or does not elect to sync files automatically, then the communications are stored
in the cloud. The user must then initiate the synchronization himself, causing the transmission of
files from cloud to computer. This is more akin to direction than redirection. Without the user’s
action, the files would remain in the cloud. In the case of manual synchronization, there might be
no existing transmission to intercept through redirection; rather, the user directs the transmission
from beginning to end. This scenario is analogous to accessing files in permanent storage, which

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

19

exceeds the scope of the Wiretap Act. Nevertheless, electronic communication in “transient
electronic storage that is intrinsic to the communication process” may still be intercepted within
the meaning of the Wiretap Act in theory, provided the user’s laptop was logged in and set to sync
automatically. See Boudreau, 2018 U.S. App. Lexis 23283, at *30. Here, however, the record is
silent as to whether Rodríguez’s ASG laptop was set to sync automatically or whether it was ever
logged in to the TLS Dropbox account so as to conceivably intercept any transmissions after
Rodríguez left TLS.
TLS attributes the deficiency in proving contemporaneous interception to the discarded
ASG laptop, and asks the court to invoke the adverse inference for spoliation. See Dkt. 212. TLS’s
expert claimed that the only way he could prove contemporaneity or interception was to analyze
the laptop through which it allegedly occurred. Defendants’ expert, however, noted that Dropbox
retains a log of all file activity. This Dropbox log identifies which accounts uploaded files to the
server, accessed particular folders and files, and downloaded files from the server. Defendants
introduced into evidence a log indicating the devices linked to Dropbox, creation and sharing of
folders, logins, and other activity for February through October 2014. See Ex. 61. This log supports
the testimony that a similar record exists for the period between Rodríguez’s resignation and when
he discarded the ASG laptop. Strangely, neither party produced such a record, yet TLS never
challenged Defendants’ assertions that such a record exists and what it could potentially prove.
Rodríguez admitted that the ASG laptop retained access to the TLS Dropbox account after
his resignation but denied TLS’s claim that he accessed the TLS account. This log, it seems, would
prove clearly whether or not Rodríguez automatically synced files from the Dropbox, thus
redirecting TLS’s transmissions. Because it would show both a login and any automatic or manual
download, it would also clarify whether or not Rodríguez had the intent the Wiretap Act requires.
TLS, as the plaintiff, has the burden here. Most troubling, TLS did not contradict the existence of
this log. In light of this failure, the court accords very little weight to the adverse inference that
arose due to Rodríguez’s disposal of his laptop. With an adverse inference sanction, the “trier of
fact may (but need not) infer from a party’s obliteration of a document relevant to a litigated issue

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

20

that the contents of the document were unfavorable to that party.” Booker v. Mass. Dep’t of Pub.
Health, 612 F.3d 34, 45 (1st Cir. 2010) (quoting Testa v. Wal–Mart Stores, Inc., 144 F.3d 173, 177
(1st Cir. 1998)) (emphasis added); see also Nation-Wide Check Corp. v. Forest Hills Distribs., Inc.,
692 F.2d 214, 217 (1st Cir. 1982) (“When the contents of a document are relevant to an issue in a
case, the trier of fact generally may receive the fact of the document’s nonproduction or destruction
as evidence that the party which has prevented production did so . . . [because] the contents would
harm him.”) (emphasis added). With additional doubt over whether there was a contemporaneous
interception as opposed to access to stored documents, the weight of the evidence favors the
Defendants. As a result, the court need not delve deeper into whether an automatic Dropbox
synchronization, had it been proven, in fact qualifies as a contemporaneous interception under the
Wiretap Act.
In the end, TLS has failed to prove by a preponderance of the evidence that Defendants
intercepted any information from TLS’s Dropbox account after Rodríguez left TLS in January
2015. Accordingly, I find that TLS has not proven by a preponderance of the evidence that
Defendants violated the Wiretap Act.
II.

The Trade Secret Act 1

TLS claims as trade secrets the Capital Preservation Report (“CPR”), the U.S. Possession
Strategy, and the confidential information that comprises the Strategy, as defined in the SCA and
NDA. Mere subjective belief that something is a trade secret is not dispositive, however. Trade
Secrets § 4.04 (Law Journal Press 2018) (citing Fail-Safe, LLC v. A.O. Smith Corp., 674 F.3d 889,
894 (7th Cir. 2012)). To prevail, TLS must first show that its claimed trade secrets are (1)

1

Puerto Rico adopted the Uniform Trade Secrets Act (“UTSA”) in 2011. Nearly every state has
adopted the UTSA. 1 MILGRIM ON TRADE SECRETS § 1.01(c)(i) (Matthew Bender 2018). Puerto Rico state
court proceedings are conducted in Spanish and few, if any, trade secret cases have been translated into
English, which is required for this court to consider them. See D.P.R. Civ. R. 5(g). In their briefs, the parties
have relied exclusively on the statutory language, the facts of the case, and persuasive authority; they have
neither translated nor stipulated to translations of case law. See Dkts. 524, 525. As such, this court will
“begin with settled principles of state law and then consider persuasive authority from other jurisdictions
and the teachings of learned treatises.” Wheeling & Lake Erie Ry. Co. v. Keach, 799 F.3d 1, 10 (1st Cir.
2015).

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

21

information that (2) has financial value or provides a business advantage (3) because they are not
common knowledge or readily accessible, and (4) TLS employs reasonable security measures to
maintain secrecy. See 10 L.P.R.A. §§ 4132(a)–(b).
Then, TLS must prove that Defendants misappropriated those trade secrets.
“Misappropriation” is defined as:
(a) The acquisition of a trade secret belonging to another by a person who knew or should
have known that he/she acquired such secret directly or indirectly through improper
means, or
(b) the disclosure or use of a trade secret belonging to another without his/her express or
implicit consent, by a person who:
(1) used improper means to gain knowledge of the trade secret, or
(2) at the time of disclosure or use, such person knew or should have known that
such trade secret was:
(A) Obtained through a person who acquired such information through the
use of improper means;
(B) obtained under circumstances from which a duty to maintain
confidentiality or to limit use ensues;
(C) obtained through a person who had the duty-bound to the trade
secret’s owner to maintain confidentiality or limit use, or
(D) known by accident or by mistake.
Id. at § 4134.
As a preliminary matter, Defendants argue that the CPR should not be included as a trade
secret because TLS did not expressly claim it as a trade secret until trial began. Defendants cite
Federal Rules of Civil Procedure 26 and 37 in support of excluding the CPR. Rule 26 also requires
parties to timely supplement disclosures and responses “if the party learns that in some material
respect the disclosure or response is incomplete” and has not otherwise been disclosed. Fed. R.
Civ. Pro. 26(e)(1)(A). Failure to disclose information may result in exclusion of that information
at trial unless “the failure was substantially justified or is harmless.” Fed. R. Civ. Pro. 37(c)(1).

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

22

“Rule 26 promotes fairness both in the discovery process and at trial.” Thibeault v. Square D.
Company, 960 F.2d 239, 244 (1st Cir. 1992).
Defendants are correct that the CPR was not specifically listed in the pretrial order, Dkt.
419, and dispositive motions focused on the Strategy. Nor is the CPR listed explicitly in either the
NDA or SCA as Confidential Information, though it falls under a “related work products . . . in
connection with proposing or delivering” TLS services. Joint Ex. V ¶ 1.2.2.
TLS argues that it was unaware that Rodríguez’s sweep of the Dropbox account included
at least two CPRs until well after discovery ended. Defendants rightly respond that TLS knows
precisely what is on its Dropbox account, has had continuous access to that account, and had three
full months before trial during which it had a copy of the documents Rodríguez copied to examine
the contents. By the same token, however, Defendants had the copied data for nearly four years
before trial. Rodríguez admitted to copying the entire TLS Dropbox account, and he cannot now
disavow responsibility for having copied documents with which he was unfamiliar. This is an
entirely foreseeable consequence of his actions. Both parties were faced with an overwhelming
quantity of data, but each party had access to that data, in some form or another, for the same
period of time. Excluding the two CPRs on the drive would allow Defendants to pick and choose
which claims TLS may bring against them in contravention of Rule 26’s underlying intent that
litigation be fair. Failure to explicitly disclose two documents on a hard drive with twenty-six
gigabytes of information is substantially justified, especially when the information was already
available to Defendants.
Moving on, the Trade Secret Act broadly defines “information.” A trade secret could be
any “[k]knowledge that broadens or clarifies knowledge already garnered. It includes, but is not
limited to, any formula, compilation, method, technique, process, recipe, design, treatment, model
or pattern.” Id. § 4131(a). For trade secret purposes, “information” casts a wide net. Regardless of
the broad scope, not all knowledge qualifies as trade secret-eligible information. TLS proposes
that the CPR, the Strategy, and the documents and information underlying the Strategy all qualify
as information protectable as trade secrets.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

23

The CPR is a report that TLS customizes for each Consulting Division client. Colombik
testified that the CPR embodies the Consulting Division. Each client receives a personalized CPR,
and its underlying model evolves as laws and techniques change. The CPR has been revised about
sixty times. It is distributed to clients, but disclosure through sale or other commercialization does
not necessarily defeat a marketed product’s trade secret status. See Milgrim § 1.05(2).
Methods, techniques, and what might be classified as “know-how” require a greater degree
of precision and specificity when outlining what qualifies as a trade secret and what does not.
Milgrim § 1.09(3). When skill, knowledge, and experience can be compiled to create a secret use
that provides competitive advantage, that compilation may qualify as a trade secret. Id. (citing SI
Handling Sys., Inc. v. Heisley, 753 F.2d 1244, 1261–1262 (3d Cir. 1985) (recognizing that certain
methods and techniques merited trade secret protection but information that consisted only of
employees’ skill, knowledge and experience was not a trade secret). In this case, individual client
information and public information contained in the CPR are not trade secrets. The method by
which TLS compiles that information and the skill, knowledge, and experience used to compile it
are the core of what can be protected as a trade secret. The CPR itself qualifies as a trade secret
not because it covers knowledge or skill but because the compilation of that knowledge and skill,
applied to client information, provides TLS with a competitive advantage. Here, TLS’s claim of
trade secret status for the CPR itself is appropriately specific and narrow. See Milgrim, § 1.09(3)
(“If protection is sought for a very broad accumulation of knowledge and experience, a court might
reject such claim as an attempt to simply cover knowledge and skill . . . a reasonable degree of
precision and specificity is appropriate.”)
The U.S. Possession Strategy is a tax-planning method dependent on Puerto Rico tax law
and embodied in the documents TLS and its clients use to implement the Strategy. TLS argues that
the Strategy and the different forms and templates used to implement the Strategy are trade secrets.
These documents, in many cases, are standard templates for the creation and consummation of
business relationships. However, “sometimes highly valuable trade secrets may have material in
the same ‘package’ that is not a trade secret; the presence of such material should not in any way

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

24

negate the trade secret value of that which in fact is secret.” See 1 Milgrim on Trade Secrets §
1.08(4) (Matthew Bender 2018).
The Strategy is analogous to the CPR; it is a process and method building on the knowledge
and experience of employees that is used to give TLS a business advantage. See Milgrim § 1.09(3)
(citing SI Handling, 753 F.2d at 1261–62). Including work product, such as the CPR or Strategy,
interprets “information” sensibly. The same, however, cannot be said of the documents and data
that underlie the Strategy.
The inclusion of these underlying documents in the NDA and SCA does not elevate them
to trade secret status. See Milgrim § 4.02(1)(b) (citing ITT Telecom Prods. Corp. v. Dooley, 262
Cal. Rptr. 773 (Cal. Ct. App. 1989)). The SCA includes as confidential:
business methods and procedures, clients or prospective clients (“TLS Clients”),
agent lists, marketing channels and relationships, marketing methods, costs, prices,
products, formulae, compositions, methods, systems, procedures, prospective and
executed contracts and other business arrangements, proposals and project plans,
and TLS Affiliates.
Joint Ex. II at ¶ 5.2.1. The SCA also includes as confidential “TLS reports and any information
contained therein, related work products including implementation documents, and any other
information provided to Client by TLS or TLS Affiliates by or in connection with proposing or
delivering TLS Services.” Joint Ex. II at ¶ 5.2.2.Finally, the SCA also considers confidential
“identities of agents, contractors, consultants, sales representatives, sales associates, subsidiaries,
strategic partners, licensors, licensees, TLS Clients, suppliers, or other TLS service providers or
sources of supply.” Joint Ex. II at ¶ 5.2.3. The NDA confidentiality clauses are equally sweeping.
See supra Findings of Fact, ¶¶ 32–36.
“The mere presence of a confidentiality agreement does not elevate nontrade secret matter
to trade secret status . . . [or] bestow even confidential status on information that is not in fact
confidential.” Milgrim § 4.02(1)(b). The documents and templates underlying the Strategy are all
commonly used in the tax-planning industry. Granting trade secret protection for standard forms
available online perverts the purpose of trade secret law. Trade secrets cannot be publicly available

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

25

information, and downloadable Internet forms and templates qualify as public information as much
as tax exemption decrees and IRS guidelines. Accordingly, I find that the documents and forms
that TLS uses to implement the Strategy are not by themselves protectable as trade secrets.
Courts are divided over whether customer lists and pricing methods may be accorded trade
secret status. “The customer list cases stand on the periphery of that area of the law which can best
be described as ‘the trade secret quagmire.’ The confusion created by decisions concerning the use
of customer lists and customer contracts by ex-employees is due to the fact that the decisions
seemingly turn on arbitrary distinctions unrelated to trade practices.” Crouch v. Swing Mach. Co.,
468 S.W.2d 604, 606 (Tex. Civ. App. 1971). On the other hand, a trade secret may relate to those
more peripheral aspects of business relations, such as pricing, marketing, and customer identity.
Restatement (Third) of Unfair Competition § 39 cmt. d (Am. Law. Inst. 1995). “A customer list is
not protectable as a trade secret under the rule stated in § 39 unless it is sufficiently valuable and
secret to afford an economic advantage to a person who has access to the list.” Id. at § 42 cmt. f.
State courts are divided on the question of customer lists. See Milgrim § 1.09(7). Often, the
question of whether a customer list is granted trade secret protection depends on whether it is
readily ascertainable from another source or lacks value. This implicitly acknowledges that such a
list is eligible for trade secret status. Pricing has been treated similarly, with state courts both
granting and denying trade secret status to cost and pricing information. Id. at § 1.09(8)(b). This
suggests that the determination depends on the facts presented at trial, so pricing also qualifies as
“information” for the purposes of § 4131(a).
A claimed trade secret must also have “independent financial value or that provides a
business advantage, insofar as such information is not common knowledge or readily accessible.”
10 L.P.R.A. § 4132(a). The CPR is a closely guarded secret, shared only with clients and consisting
of some public and some private information. Though an outsider might guess at its contents,
structure, and method of analysis, there is no method by which it can be accessed absent a
disclosure.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

26

The Strategy’s value, in contrast, depends on highly public information: Act 20 and Act 73
tax incentives, federal tax laws, and industry-standard forms. In fact, tax legislation is its keystone.
Milgrim analogizes: “it may be said that painting constitutes only a novel combination of the three
primary colors and (normally) two-dimensional forms. Yet the combinations are infinite. A trade
secret is equally recognized when a familiar principle is given a new application.” Milgrim §
1.07(5). Similarly, the laws and forms cannot achieve trade secret status due to their wide
publication and ready accessibility. The Strategy, however, remains largely either unknown or
inaccessible despite the commonly known information underlying it. Runge testified that, to his
knowledge, no other company offered the same U.S. Possession Strategy that TLS markets, and
Rodríguez identified only two companies that offer similar services, both involving a former TLS
affiliate or consultant. Trade secret holders do not have to ensure absolute secrecy; they may make
limited disclosures to further economic interest without losing trade secret status. Metallurgical
Indus. v. Fourtek, Inc., 790 F.2d 1195, 1200 (5th Cir. 1986) (citing Restatement of Torts, § 757
cmt. b (1939)). Disclosures to employees are a necessary part of growing a business, though
subsequent use of the secret by said employee may indicate an issue with TLS’s security measures.
See id.
A Minnesota court ruled that trade secret status was not defeated merely because more than
one company in an industry knew the information; as long as the information was not generally
known, it could still enjoy trade secret status. Electro-Craft Corp. v. Controlled Motion, Inc., 332
N.W.2d 890, 900 (Minn. 1983); accord Fishkin v. Susquehanna Partners, G.P., 563 F. Supp. 2d
547, 582–586 (E.D. Pa. 2008) (noting that multiple companies may hold a trade secret, though the
information at issue was too widely known and ascertainable to constitute a trade secret); but see
Wal-Mart Stores v. P.O. Mkt., 66 S.W.3d 620, 632–635 (Ark. 2002) (reversing a multimillion dollar
award because the trade secret’s individual elements were generally known and their combination
was obvious to someone investigating the subject). Here, the knowledge of the Strategy originated
with TLS and does not appear to be readily ascertainable by companies unaffiliated with TLS, so
it meets the statutory requirement under § 4132(a).

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

27

Courts generally find that information has the required independent financial value if a
competitor would find it useful and duplication would require cost, time, and effort. Milgrim §
1.07A. “In a similar vein, independent economic value is not ‘assessed using hindsight,’ i.e., the
fact that a trade secret later turns out to not have been as valuable as originally thought does not
mean that it did not have the requisite independent economic value at the time of
misappropriation.” Id. For example, were someone to misappropriate a trade secret but be unable
to profit from it because a law or other necessary circumstance had changed, the trade secret’s
value would not be diminished.
Trade secrets that combine public and nonpublic information are often treated as
independently valuable “as long as a competitor would have to incur considerable expense to
recreate the combination.” Milgrim § 1.01(2)(c)(iii)(C). The CPR has undergone sixty different
revisions over the course of its lifespan. That it would require cost, time, and effort to duplicate
the methods it contains seems clear. The Strategy, likewise, is updated and adjusted according to
individual client’s needs and changes in the applicable law. The two companies that Rodríguez
noted which offer services similar to the U.S. Possession Strategy compete with TLS, and their
impact on TLS’s market share is unclear. Be that as it may, TLS litigates vigorously in defense of
its intellectual property, indicating a baseline economic value that is often accepted as sufficient
for this inquiry.
Next, TLS must prove that it took reasonable security measures to protect its claimed trade
secrets. In large part, whether or not information qualifies as a trade secret is determined by its
secret keepers. See 10 L.P.R.A. § 4133. Reasonable measures must be taken to maintain the
confidentiality of a trade secret, or it loses its protected status. Id. A measure’s reasonableness
depends on the foreseeability of potential access, the risks associated with that access, and the costbenefit ratio between the measure and the secret itself. Id. “Measures that can be deemed to be
reasonable to maintain the confidentiality of the trade secret include,” inter alia, “requiring
company employees authorized to access such information to sign confidentiality agreements,”
“establishing control measures for the use of or access to such information by company

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

28

employees,” or “implementing any technologically available measures when publishing or
transmitting such information over the Internet, including the use of email, web pages, message
boards, and any other equivalent medium.” Id. §§ 4133(c), (g), (h).
Runge testified that TLS goes to “great lengths” to protect its confidential information.
U.S. Possession Strategy details are made clear only to people who have signed NDAs, even when
it comes to attracting prospective clients. TLS never issued the CPR in electronic format but rather
distributed it to clients on paper that could not be photocopied. In the TLS Dropbox account, only
two CPRs appeared, indicating that few electronic versions exist where general employees might
access them. Likewise, a step-by-step description of the Strategy does not seem to appear in any
single document or file on the Dropbox. Rather, implementation of the Strategy depends on the
knowledge and experience of TLS’s employees, who, as mentioned, are bound by NDAs. I find
that these measures were reasonably sufficient to protect and maintain the confidentiality of the
CPR and the Strategy.
The measures meant to protect the documents and information underlying the Strategy are
a different matter. Beyond the broad SCA and NDA language, Runge and Colombik acknowledged
that employees and others were trusted to use their professional judgment and discretion when
handling confidential information. Employees, consultants, and affiliates needed passwordprotected accounts to access the TLS Dropbox account. Beyond a simple password, however, TLS
has no policy on handling confidential information; on photocopying, printing, or sharing files; on
protecting TLS-issued laptops from hacking or viruses; on protecting personal laptops used for
TLS business from hacking or viruses; or on using firewalls, encryption, or other measures to
secure data. Dropbox boasts additional security features besides a password, but neither Runge nor
Colombik asked Rodríguez, who administered the TLS Dropbox, to instruct employees on its use,
to restrict sharing capacities, or to limit access to certain folders or files. As a result, he did not do
so. The contents of the Dropbox account that Rodríguez copied indicate that some documents were
labeled “confidential” but not many and certainly not as many as TLS claims are trade secrets. See

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

29

Ex. 67. These unlabeled documents include client information and spreadsheets as well as pricing
generally and for specific clients.
Reasonableness depends on “foreseeable conduct whereby the trade secret could be
accessed and the nature of the risk ensuing from such conduct.” 10 L.P.R.A. § 4133. When
information is stored in the cloud for hundreds of employees, consultants, clients, advisors, and
affiliates to access, it is clear that someone else might also attempt to get their hands on it. The fact
that one former employee formed a competing company demonstrates that the claimed secrets
were in demand and the confidentiality agreements might not be sufficient protection. The risk
posed by unauthorized access, a company competing with TLS for market share and clients, is
great. Runge identified the clients as the “revenue model” of their business; losing clients would
impact revenue directly. Clearly, violations of the NDA were foreseeable and presented a danger
to the Puerto Rico Division’s survival. The documents and client identities left exposed in the
Dropbox account simply were not protected to a reasonable degree.
A short cost-benefit analysis between potential security measures to mitigate those
foreseeable risks and the trade secret indicates that TLS should have taken additional security
measures had they wanted to properly protect the information underlying the Strategy. There were
a number of ways TLS could have limited access to its confidential information at no or at minimal
cost to themselves. TLS used only the basic default settings on Dropbox, but the Dropbox enables
further protections that went unused. For example, sharing links and files could have been
restricted. TLS also could have asked employees to label files and folders “confidential,”
“proprietary,” or “secret.” Some files on the account are labeled “confidential,” but the number
pales in comparison to the number claimed as trade secrets. See Ex. 67. A policy on passwordsharing, on handling confidential information, and on file-sharing could have been inserted into
the NDA that TLS required employees, consultants, and affiliates to sign.
These are all simply implemented, minimally expensive security measures with
disproportionately large benefits. In comparison, TLS never issued the CPR in electronic format
but rather distributed it to clients on paper that could not be photocopied. When TLS values its

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

30

Puerto Rico Division at more than six times its Consulting Division, it is reasonable to expect
greater security measures in proportion to the greater value. The measures protecting the
documents underlying the Strategy appear to have been haphazard and utterly dependent on
confidentiality agreements and employee discretion. Especially in the digital age, where electronic
information is always vulnerable, lacking clear policies on confidential information, technology,
and digital security is unreasonable. TLS has shown by a preponderance of the evidence that the
CPR and the Strategy qualify as trade secrets. TLS has not shown that the documents and
information underlying the Strategy were the object of reasonable security measures, so those
materials are denied trade secret status. This delineation between the documents and information
composing the Strategy and the Strategy itself fits squarely within the trade secret canon. Trade
secret law treats a whole as greater than the sum of its common, accessible, known parts. Milgrim
§ 1.08(4). When a trade secret consists of well-known components, there is extensive public
literature, and the defendant is experienced and knowledgeable in the domain, there may still be
trade secret protection. Id. at § 1.08(5). In those cases, “the scope of trade secret rights will be
narrowly drawn to the plaintiff’s precise utilization of the components.” Id. Nor does this
delineation affect the SCA and NDA’s definitions of the underlying documents and information
as “confidential.” Contracts may provide confidentiality of information even in the absence of
trade secret status. See, e.g., Dooley, 262 Cal. Rptr at 781–82.
The next question is whether TLS has proven that Defendants misappropriated its trade
secrets—namely the CPR and the Strategy. Misappropriation is “[t]he acquisition of a trade secret
belonging to another by a person who knew or should have known that he/she acquired such secret
directly or indirectly through improper means, or the disclosure or use of a trade secret belonging
to another without his/her express or implicit consent.” § 4134(a)–(b).
Here, although Rodríguez had legitimate access to the TLS Dropbox in general, he
conceded that he acted without authority when he copied its entire contents in September 2014.
That copy captured two CPRs. Accordingly, Rodríguez’s unauthorized acquisition of the CPR
violates § 4134(a).

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

31

In addition, Rodríguez meets the elements in § 4134(b)(2). That subsection identifies
misappropriation as disclosure or use of another’s trade secret without consent by a person who,
“at the time of disclosure or use, such person knew or should have known that such trade secret
was . . . obtained under circumstances from which a duty to maintain confidentiality or to limit use
ensues . . . or known by accident or by mistake.” § 4134(b)(2)(B), (2)(D). The language of §
4134(b) notably encompasses disclosure or use. Unauthorized disclosure of the CPR or the
Strategy alone may support liability for misappropriation. 4 Milgrim on Trade Secrets § 15.01; see,
e.g., StorageCraft Tech. Corp. v. Kirby, 744 F.3d 1183, 1185 (10th Cir. 2014) (accepting an
argument that, in the absence of any evidence of use, defendant’s mere disclosure of a trade secret
to a competitor gave plaintiff grounds for a reasonable royalty as relief).
Rodríguez both disclosed and used his knowledge of the Strategy in emails with TLS
clients who sought to leave TLS. Harris, a TLS client, decided to exit the Strategy in February
2015, after Rodríguez left TLS. Harris formally engaged ASG for consulting services on June 8
and for arranging his exit from TLS via an LLC on June 18. During that time, Harris emailed
Rodríguez all of its documentation relating to the Strategy. Rodríguez commented on it, gave
Harris advice, and used it to prepare an exit strategy memorandum for Harris. Rodríguez opined
on TLS’s loan program, implementing the final Strategy stages, and TLS’s pricing estimates. Ex.
39, 45. Harris paid ASG $8,690.00 for services rendered. Exs. 38, 40, 48.
Marlin, another TLS client, also decided to exit the Strategy and also engaged ASG to
assist. On May 25, 2015, Marlin engaged ASG for consulting and tax compliance services; on June
11, Marlin engaged ASG to structure its exit from TLS. During that time, Marlin emailed
Rodríguez all of its documentation relating to the Strategy. Rodríguez commented on it, gave
Marlin advice, and used it to prepare an exit strategy memorandum. Exs. 41, 42. Marlin paid ASG
$2,162.50 for services rendered. Ex. 44.
Rodríguez conceded that he did not have authority to refer to TLS information in these
emails. That information encompassed non-trade secret documents and pricing but also Strategy
implementation and the procedure by which clients could exit. As the former managing director of

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

32

TLS, a party to ASG’s SCA, and a party to the NDA, Rodríguez had sufficient notice that he had
a duty to “maintain confidentiality.” He obtained the information in the course of his employment
at TLS, a condition of which included signing an NDA. ASG was bound by the confidentiality
clause in the SCA as well as in the NDA Rodríguez signed because it is an “entity . . . controlled
by” Rodríguez. Joint Ex. V 1.1. Defendants argue that ASG never disclosed the Strategy because
the clients provided the documents and everyone involved in the conversation was subject to
nondisclosure and confidentiality agreements. This misapprehends the law. Even where a trade
secret has been acquired properly, use or disclosure without authorization constitute
misappropriation. Milgrim §1.01(2)(c)(ii). Although the clients may have largely understood the
process by which they could exit TLS or the cost estimates of exiting the Strategy, it is unlikely
that they were familiar with the mechanics of why they had to undergo such specific exit
procedures or why TLS provided certain cost estimates. Furthermore, “use of a trade secret to
injure the trade secret owner or for any purpose other than serving the interest of the trade secret
owner will be seen as ‘use’ for misappropriation purposes.” Id. Each customer retained ASG for
the purpose of leaving TLS, and Rodríguez applied his knowledge of the Strategy to smooth the
way for these clients.
With regard to the CPR, there is no evidence that Rodríguez used the two reports that he
copied, nor is there evidence that he disclosed the CPR to clients or potential clients of ASG or
GOS. TLS is not seeking liability under the Trade Secret Act for any disclosure to a regulatory
agency. See generally Dkt. 419 at 54–55. As a result, the court does not need to reach Defendants’
whistleblower defense. The court does, however, note that Puerto Rico provides whistleblower
protections only for government employees, 1 L.P.R.A. § 601, and the Trade Secret Act, 10
L.P.R.A. §§ 4131 et seq., makes no provision for non-governmental employees.
Accordingly, I find that TLS has proven by a preponderance of the evidence that Rodríguez
and ASG violated the Trade Secret Act by misappropriating the CPR through wrongful acquisition
and the Strategy through unauthorized disclosure and use.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

III.

33

Breach of Contract

“Under Puerto Rico law, a cause of action for breach of contract consists of three elements:
(1) a valid contract, (2) a breach by one of the parties to the contract; and (3) resulting damages.”
Ocasio v. Perfect Sweet Inc., No. 16-2012, 2018 U.S. Dist. LEXIS 124598, at *7 (D.P.R. July 23,
2018) (quoting Mega Media Holdings, Inc. v. Aerco Broad. Corp., 852 F. Supp. 2d 189, 199 (D.P.R.
2012)). A party seeking damages must show a causal link between the breach and the damages
sought. See Nazario v. Vélez & Asoc., 98 T.S.P.R. 54 (P.R. 1998) (“As is known, when the breach
of a contractual obligation causes harm to any of the contracting parties, an action for damages for
breach of contract lies.”); see also Colon v. Blades, 717 F. Supp. 2d 175, 185 (D.P.R. 2010) (“An
action for damages for breach of contract . . . only lies when the damage suffered exclusively arises
as a consequence of the breach of an obligation specifically agreed upon, which damage would
not occur without the existence of a contract.”). TLS alleges that Rodríguez, ASG, and GOS are
all liable for breach of contract.
A number of TLS’s breach of contract allegations were granted for the issue of liability at
the summary judgment stage. Dkt. 383. The court held that ASG, GOS, and Rodríguez breached
the confidentiality clauses in the contracts by taking and using TLS’s loan agreement and operating
agreement. Id. at 18. The court further held that Rodríguez and ASG violated the confidentiality
clauses of the SCA and NDA by both using the Strategy and, through using it, disclosing it to the
clients for whom they were working. Id. at 19. For the same claim the court granted summary
judgment in favor of GOS. Id. at 20. The court also granted summary judgment for TLS’s claim
that ASG and Rodríguez breached the NDA and SCA by keeping files after their employment with
TLS ended. Dkt. 383 at 20–21. GOS was granted summary judgment on the same claim. Id. TLS’s
remaining breach of contract issue at trial, apart from damages, was a claim against Rodríguez,
ASG, and GOS for using similar buy-sell agreements and loan programs. Dkt. 419 at 42.
As a preliminary matter, there must be a valid contract for there to be a subsequent breach.
A valid contract exists where there is “(1) the consent of the contracting parties, (2) a definite
object which may be the subject of the contract, and (3) the cause for the obligation which may be

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

34

established.” 31 L.P.R.A. § 3391. Contracting parties indicate their consent by mutual “offer and
acceptance of the thing and the cause which are to constitute the contract.” 31 L.P.R.A. § 3401. A
contract exists from the moment one or more persons consent to bind himself or themselves, with
regard to another or others, to give something or to render some service.” 31 L.P.R.A. § 3371. The
parties agree that the SCA and the NDA are valid, binding contracts.
The NDA affects Rodríguez, ASG, and GOS’s relationship with TLS because Rodríguez
controls both entities as the sole shareholder. See Joint Ex. V ¶ 1.1 (the NDA encompasses the
parties and “any entity controlling, controlled by or under common control” of the parties).
Likewise, the SCA affects Rodríguez and GOS because he is the “entity controlling” ASG, and
GOS is “under common control with [ASG].” Joint Ex. II ¶ 51.
The confidentiality clause in the SCA states:
5. Confidentiality
5.1. Except as authorized in writing by TLS, neither Subcontractor nor any entity
controlling, controlled by or under common control with Subcontractor
(collectively, “Subcontractor Affiliates”) will at any time directly or indirectly,
disclose or utilize in any manner including for Subcontractor’s own pecuniary gain,
Confidential Information of TLS. Subcontractor may only use Confidential
Information of TLS for a purpose that is necessary in carrying out the provisions of
this Agreement.
5.2. “TLS Confidential Information” shall include, without limitation, all of the
following, which shall be treated as Confidential Information of TLS by
Subcontractor:
5.2.1. All information, whether written or otherwise and whether or not it is marked
“confidential”, “proprietary”, or “copyright” at the time of disclosure, regarding
TLS’ business methods and procedures, clients or prospective clients (“TLS
Clients”), agent lists, marketing channels and relationships, marketing methods,
costs, prices, products, formulae, compositions, methods, systems, procedures,
prospective and executed contracts and other business arrangements, proposals and
project plans, and TLS Affiliates;
5.2.2. TLS reports and any information contained therein, related work products
including implementation documents, and any other information provided to Client
by TLS or TLS Affiliates by or in connection with proposing or delivering TLS
Services (individually or collectively, “TLS Plans”);

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

35

5.2.3. The identities of agents, contractors, consultants, sales representatives, sales
associates, subsidiaries, strategic partners, licensors, licensees, TLS Clients,
suppliers, or other TLS service providers or sources of supply (collectively, “TLS
Affiliates”);
5.3. TLS Confidential Information shall not include (a) information disclosed with
the prior written consent of TLS, (b) information that has been previously disclosed
by TLS to the general public, (c) information that is required to be disclosed
pursuant to a valid judicial court order, but only to the extent of and for the purpose
of such order, and only if after receiving such an order Subcontractor provides
timely notice of such order to TLS and cooperates reasonably with TLS’ efforts to
contest or limit the scope of such order, or (d) any strategy or methodology
contained in the TLS Plan that is currently being utilized by Subcontractor or any
of Subcontractor’s other clients as a result of Subcontractor’s prior
recommendations (the “Excluded Strategies”).
Joint Ex. II ¶¶ 5.1–5.3.
The confidentiality clause clearly prohibits the use of TLS’s methods and procedures, but
it does not outlaw the use of every method or procedure resembling TLS’s. Defendants argue that
claiming a breach for similar buy-sell agreements and loan programs is an “outlandish
interpretation.” Dkt. 525 at 83. The clause is indeed broad, but, as the court has said, breadth does
not automatically invalidate a confidentiality clause. Dkt. 383 at 16. Expansive definitions in
contracts have been upheld. Puerto Rico Tourism Co. v. Priceline.com, Inc., No. CV 14–01318
(JAF), 2015 WL 5098488, at *5 (D.P.R. Aug. 31, 2015) (court found a statute was unambiguous
even though the definitions included lists of terms “without limitation”); Cellu-Beep, Inc. v.
Telecorp, Inc., 322 F. Supp. 2d 122, 124 (D.P.R. 2004) (arbitration clause including description of
terms that were “without limitation” was “pretty explicit and its language plainly obvious”).
To prove a breach of contract with regard to the buy-sell agreement and the loan program,
TLS must prove that its own distinct buy-sell agreement and loan program were used in violation
of the confidentiality clause. At trial, more evidence was devoted to the confidential information
in general and items for which liability had been established, such as the loan agreement and
operating agreement, than to the buy-sell agreement or to the loan program. Each of these are
common business methods and procedures utilizing them unfold in many different contexts at
many different companies.

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

36

ASG and GOS each used buy-sell agreements, which TLS employed in the event a client
chose to exit TLS. The GOS buy-sell agreement template used, however, was not TLS’s. Santo
Domingo prepared the form on his own and customized it to GOS’s needs. TLS did not show any
relation between the TLS buy-sell agreement and the GOS or the ASG versions. The
confidentiality agreement cannot be interpreted so broadly as to inhibit former employees and
contractors from ever using methods or procedures that bear a resemblance to those TLS practiced.
This reasoning applies with even more force the loan program, which regulates the
relationship between company and client. Had TLS been able to prove at trial that ASG or GOS
borrowed the same underlying formulae or an identical structure, then extending the confidentiality
clause to include this specific business method would be sensible. Without that specificity,
protecting the common concept of a loan program which shares only features that, by definition,
make it a loan program and none of the features that characterize it as a TLS-specific program,
exceeds the reach of the confidentiality clause.
Accordingly, I find that TLS has not proven by a preponderance of the evidence that
Defendants breached their agreements with respect to the buy-sell agreements and loan program.
IV.

Remedies

TLS brought claims alleging Wiretap Act violations, Trade Secret Act violations, and
breach of contract against Rodríguez, Ramos, ASG, and GOS. TLS did not carry its burden with
regard to the Wiretap Act. TLS proved that Rodríguez and ASG violated Trade Secret Act. Prior
to trial, the court found liability on the part of Rodríguez and ASG for breaching the confidentiality
clauses by using TLS’s loan agreement and operating agreement, for using and disclosing the
Strategy to clients, and for keeping files after employment with TLS ended.
The Trade Secret Act provides for equitable and legal relief. In cases where a plaintiff
proves that a trade secret has been misappropriated, “the court may issue a permanent injunction
once the case has been fully heard.” 10 L.P.R.A. § 4136. “The court may, under extraordinary
circumstances, order that reasonable royalties be paid if it finds that prohibiting the future use of
an industrial or trade secret would be an unreasonable measure.” Id. TLS has requested permanent

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

37

injunctive relief against Rodríguez and ASG, ordering them to return all TLS trade secrets in their
possession and enjoining them from using or disclosing those trade secrets in the future.
TLS further demands damages for the material harm sustained. TLS seeks $34,500,000,
the market value of the Strategy, or, in the alternative, $4,858,000, the market value of the CPR.
Dkt. 524 at 32. TLS argues that these sums measure statutory damages as well as royalties for four
years of misappropriation of its trade secrets. The law states:
Except in cases in which there has been a change in position or situation, before the
defendant was aware or should have been aware of the concept of misappropriation
concerning the information of the industrial or trade secret, and this renders a
monetary settlement non-equitable, the plaintiff may recover any material damages
sustained because of such misappropriation. The plaintiff may also claim any
additional damages caused by any advantage obtained by the defendant as a result
of such misappropriation which have not been included in the computation of losses
caused by such damages. If unable to prove, to the satisfaction of the court, material
damages or damages caused by improper advantage, the court may order the
payment of royalties for a term that shall not be longer than the term for which the
use of such information would have been prohibited.
The court, in its discretion, may fix the sum total for damages in an amount that
shall not exceed thrice (3) the proven damages when the court finds that the
violation was intentional and perpetrated in bad faith.
10 L.P.R.A. § 4137.
TLS failed to present an expert qualified to testify to the valuation of TLS, the CPR, or the
Strategy. Though Colombik offered his personal opinion as to the values, he did not provide a
breakdown of the damages or analyze any specific harms TLS suffered as a result of the violation.
As a result, I do not grant much weight to his testimony on this issue. Even if I did consider
Colombik’s valuation testimony, I find that the amounts TLS requests—$34,300,00 or
$4,858,000—grossly exceed the any reasonable estimate of the material harm TLS sustained due
to Defendants’ limited use of TLS’s trade secrets.
In the absence of that specific proof, the statute empowers the court to order the payment
of royalties. See § 4137. A non-exhaustive list of the factors that the court should consider are:
“[l]oss of profit for the owner of such information; value of the sum that would have been paid to

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

38

a consultant to develop such information; depreciation of such information’s value as a result of
disclosure; developing costs in the process of acquiring such information, or such information’s
market value.” § 4137(a)–(e). The CPR and the Strategy’s value have been unaffected due to the
limited use and disclosure that Rodríguez’s misappropriation entailed. Loss of profit, cost of
development, and cost of acquisition through legal means are all difficult to estimate, and little to
no proof was presented as to these facts. Here, the only solid figures of the value of what
Defendants misappropriated is the $10,852.50 paid to ASG by Harris and Marlin.
“The court, in its discretion, may fix the sum total for damages in an amount that shall not
exceed thrice (3) the proven damages when the court finds that the violation was intentional
[and/or] perpetrated in bad faith.” 2 § 4137. In this case, Rodríguez intentionally put his knowledge
of the Strategy to use for clients leaving TLS for his own personal, pecuniary gain. Rodríguez did
so despite two different confidentiality agreements prohibiting him and prohibiting ASG from such
conduct. In light of the misappropriation of the CPR and the intentional disclosure and use of the
Strategy, the court awards damages of $32,557.50 to TLS under the Trade Secret Act.
As relief for breach of contract, TLS again demands a permanent injunction against
Rodríguez, ASG, and GOS ordering them to return to TLS all TLS documents in their possession

2

TLS cites a discrepancy in the translation of § 4137 between the English and Spanish editions of
the Laws of Puerto Rico Annotated. The English edition states that the court may treble damages when a
“violation was intentional and perpetrated in bad faith.” 10 L.P.R.A. § 4137 (emphasis added). The Spanish
edition does not require both conditions: damages may be tripled when “la violación fue intencional o de
mala fe.” 10 L.P.R.A. § 4137 (emphasis added). It is the district court’s duty to ensure that all pleadings in
a federal court be conducted in English. United States v. Rivera-Rosario, 300 F.3d 1, 6 (1st Cir 2002); see
also Estades-Negroni v. Assocs. Corp. of N. Am., 359 F.3d 1, 2 (1st Cir. 2004); United States v. MillánIsaac, 749 F.3d 57, 63 (1st Cir. 2014). District court judges “must not consider any untranslated documents
placed before them.” Millán-Isaac, 749 F.3d at 64. This policy clarifies evidentiary and legal matters for
the appellate court, and it facilitates the integration of all district courts within the federal system.
Notwithstanding, First Circuit case law on the subject remains primarily focused on opinions and evidence
provided in Spanish without a certified translation. It does not address the issue faced by counsel when the
official English translation is incorrect. When there is a discrepancy between the English and the Spanish
edition of a statute, Puerto Rican law instructs that the statute’s language of origin prevails. 31 L.P.R.A. §
13. “If the statute is of Spanish origin, the Spanish text shall be preferred to the English.” Id.; accord
Farthing v. Coco Beach Resort Mgmt., 2017 U.S. Dist. LEXIS 217887, at *8 n.1 (“Insofar as the English
translation is incorrect, the Court uses its own translation of the statute.”) (Velez-Rive, J.). Because this is
a state law claim, the court follows the proper translation of “or” rather than “and.”

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

39

and permanently enjoining them from using or disclosing TLS confidential information as defined
in the SCA and NDA (Joint Exhibits II and V, ¶¶ 5 and 1, respectively). TLS also demands
$27,131.25 as damages for ASG and Rodríguez’s breach of the SCA. Finally, TLS demands
reasonable costs and attorneys’ fees under the SCA and NDA.
Like the SCA, the NDA includes an equitable remedies section in which the parties agree
that “irreparable damage without an adequate remedy at law may result from a breach of this
Agreement . . . . Each Party agrees to pay all legal fees and costs of the other Party if a preliminary
or permanent injunction is ordered due to the actions or inactions of the other Party.” Joint Ex. V
¶ 2.1.Exs. II and V, ¶¶ 9.2.1 and 2.1. The court found irreparable harm and granted a preliminary
injunction to TLS. Dkt. 212. The court now grants a permanent injunction against Rodríguez, ASG,

and GOS. Each party must return to TLS all TLS documents in their possession and may not use
or disclose TLS confidential information.
The SCA also entitles TLS to “150% of all fees collected by Subcontractor for such
unauthorized use of TLS Confidential Information.” Joint Ex. V ¶ 9.2.2. Marlin and Harris
collectively paid ASG $10,852.50 for consulting services which involved the use and disclosure
of confidential information. The court will enforce the contract terms related to obtaining
injunctive relief, as allowed under the SCA and NDA, but refrains from awarding TLS 150% of
the fees collected as allowed under the SCA because this would be duplicative of the damages
awarded under the Trade Secret Act. “A plaintiff is not entitled to duplicative damages; it may
recover only the amount of damages it actually suffered.” Garshman Co. v. G.E., 176 F.3d 1, 5 (1st
Cir. 1999). Legal remedies are intended to make a plaintiff whole but not “more than whole.” Sindi
v. El-Moslimany, 896 F.3d 1, 26 (1st Cir. 2018). TLS seeks relief for essentially the same conduct:
use and disclosure of the Strategy and its underlying forms in violation of the SCA and NDA. To
award TLS damages for the same conduct under two different statutory schemes would permit
TLS to double dip. See Bogan v. City of Boston, 489 F.3d 417, 425 (1st Cir. 2007) (internal
quotations omitted) (“The law abhors duplicative recoveries; thus double awards for the same
injury are impermissible.”); accord Dopp v. HTP Corp., 947 F.2d 506, 517 (1st Cir. 1991) (rev’d

TLS Management and Marketing Services LLC v. Rodríguez -Toledo, et al., Civil No. 15–2121 (BJM)

40

in part on other grounds) (remedies may become redundant where the same conduct gives rise to
multiple causes of action).
TLS’s request for costs and attorneys’ fees may be made through a post-judgment motion
in accordance with Local Rule 54(a). TLS should be prepared to provide its invoices and evidence
that its attorneys’ rates are consistent with industry standards.
PERMANENT INJUNCTION ORDER
Ricky Rodríguez-Toledo, ASG Accounting Solutions Group, Inc., Global Outsourcing
Services LLC, and their officers, servants, employees, attorneys, successors and assigns, and any
person acting in concert or participation with them, are hereby enjoined from using or disclosing
any of TLS’s “confidential information” or its trade secrets in violation of, and as defined by, the
SCA and NDA. Joint Ex. II ¶¶ 5.2–5.2.3; Joint Ex. V ¶¶ 1.2.–1.2.4. “Confidential information”
includes TLS’s business methods, systems, and procedures; clients; agent lists; marketing channels
and relationships; marketing methods; costs; prices; products; formulae; prospective and executed
contracts; business arrangements; proposals; project plans; reports; implementation documents;
and clients’ personal and financial information. “Confidential information” also includes the
identities of TLS’s agents, contractors, consultants, sales representatives, sales associates,
subsidiaries, strategic partners, licensors, and licensees. Trade secrets include the Capital
Preservation Report and the U.S. Possession Strategy. Defendants must locate and return to TLS
all documents in their possession, if any, that contain TLS’s confidential information or trade
secrets. Defendants must also ensure that their businesses, including the webpages for those
businesses, are not employing TLS’s confidential information or trade secrets.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 28th day of September, 2018.
S/Bruce J. McGiverin
BRUCE J. MCGIVERIN
United States Magistrate Judge