BarZ Adventures Inc v. Patrick, et al

Filing 166

MEMORANDUM OPINION AND ORDER AND FINDINGS OF FACT AND CONCLUSIONS OF LAW. Signed by District Judge Amos L. Mazzant, III on 05/03/2023. (las, )

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United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

BARZ ADVENTURES INC. d/b/a BAR-Z
MOBILE DEVELOPMENT,
Plaintiff,
v.
TIMOTHY PATRICK, APP STAR, LLC,
and EUGENE RICE
Defendants.

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Civil Action No. 4:20-CV-299
Judge Mazzant

MEMORANDUM OPINION AND ORDER AND
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This case arises out of a former employer-employee relationship whereby Defendant
Timothy Patrick (“Patrick”) used to work for Plaintiff BarZ Adventures Inc. d/b/a Bar-Z Mobile
Development (“Bar-Z”). After being released from Bar-Z, Patrick went to work for Defendant
App Star, LLC (“App Star”) and directly competed with Bar-Z, despite signing an employment
agreement stating that he would refrain from such conduct.
At this point in the proceedings, the Court has dismissed some of the original defendants
with prejudice (Dkt. #103), granted default judgment against a defendant (Dkt. #146), and granted
summary judgment in favor of Bar-Z against the remaining defendants on all pending claims (Dkt.
#161). 1 Additionally, the Court has conducted two bench trials in the above-styled matter. This
Order concerns the Court’s findings from both bench trials, but as a preliminary matter, the Court
will first explain the necessary background.

Since the Court has dismissed all claims against Defendants Colleyville Chamber of Commerce, Princeton Chamber
of Commerce, and Greater Celina Chamber of Commerce based on a voluntary dismissal, the current Order will only
concern defendants that still have issues to be resolved (Dkt. #103). The defendants which meet that criteria are as
follows: Timothy Patrick, App Star, LLC, and Eugene Rice.

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On June 1, 2021, Bar-Z filed its Fifth Amended Complaint against Patrick, App Star, and
App Star’s CEO, Defendant Eugene Rice (“Rice”) (Dkt. #120). None of the defendants responded.
Rice, having been duly cited, not only failed to respond to the Fifth Amended Complaint,
but never responded to any of Bar-Z’s filings. On March 10, 2022, Bar-Z filed Plaintiff’s Motion
for Entry of Default Judgment against Rice (Dkt. #141). Again, Rice failed to respond. On
September 6, 2022, the Court entered a Memorandum Opinion and Order granting the Motion for
Entry of Default Judgment in part, as it still needed to conduct a hearing on damages (the
“September 6 Order”) (Dkt. #146). On October 12, 2022, the Court heard testimony and admitted
exhibits in support of the damages award against Rice. While Bar-Z appeared at the hearing, Rice
did not. At the end of the hearing, the Court did not officially rule on the damages portion of the
default judgment.
On March 10, 2022, Bar-Z filed Plaintiff’s Motion for Summary Judgment against Patrick
and App Star (Dkt. #143). Patrick and App Star failed to respond. However, unlike Rice, Patrick
and App Star had responded to previous filings, therefore, a default judgment was not appropriate.
On March 13, 2023, the Court issued its Memorandum Opinion and Order on the summary
judgment motion (the “March 13 Order”) (Dkt. #161). The Court granted summary judgment in
favor of Bar-Z on all its claims, limiting the tortious interference claim against App Star to the
extent it does not relate to Bar-Z’s exclusive right of its trade secrets. The Court also dismissed
all of Patrick’s and App Star’s counterclaims against Bar-Z with prejudice. At the end of the
March 13 Order, the Court noted that it would “enter an order regarding the damages owed
consistent with the rulings made in this Order” (Dkt. #161 at p. 38).
On March 13, 2023, the Court held a bench trial on all pending matters. None of the
defendants appeared. The Court admitted Bar-Z’s exhibits and heard testimony on attorneys’ fees.

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FINDINGS OF FACT
Having reviewed both motions, the exhibits and evidence presented, and all other matters
properly before the Court, the Court now makes the following facts and conclusions of law
pursuant to Federal Rule of Civil Procedure 52(a). 2 To the extent that any of the findings of fact
constitute conclusions of law, or any of the conclusions of law constitute findings of fact, they are
adopted as such. The Court is of the opinion that Bar-Z has shown that the following facts as true:
1.

The Court fully incorporates the factual findings in its September 6 Order and March
13 Order (Dkt. #146; Dkt. #161).

2.

On April 3, 2017, Patrick entered an Employment, Confidential Information and
Invention Assignment Agreement (“Employment Agreement”) with Bar-Z.

This

Employment Agreement defined “Confidential Information” to include any Company
proprietary information, technical data, trade secrets or know-how, including, but not
limited to, research, product plans, products, services, customer lists and customers,
markets, software, developments, inventions, processes, formulas, technology, designs,
engineering, hardware configuration information, marketing, finances and other
business information disclosed to Patrick directly or indirectly (“Confidential
Information”).

In preparing this order, the Court carefully considered the entire record, including the pretrial filings, trial testimony,
and trial exhibits, and subsequently applied the Fifth Circuit standard for findings and conclusions under Federal Rule
of Civil Procedure 52. See Eni US Operating Co., Inc. v. Transocean Offshore Deepwater Drilling, Inc., 919 F.3d
931, 935–36 (5th Cir. 2019); see also 9C CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE & PROCEDURE § 2579
(3d ed.). Since the “findings of fact and conclusions of law must be ‘sufficient in detail and exactness to indicate the
factual basis for the ultimate conclusion reached,’” Rivera v. Kirby Offshore Marine, L.L.C., 983 F.3d 811, 819 (5th
Cir. 2020) (quoting Lettsome v. United States, 434 F.2d 907, 909 (5th Cir. 1970)), the Court “need only make brief,
definite, pertinent findings and conclusions upon the contested matters.” FED. R. CIV. P. 52(a), advisory committee’s
note to 1946 amendment. This standard does not require the Court to “expressly respond like a debate champion to
every evidentiary or factual contention made by the losing side.” Richard v. Reg’l Sch. Unit 57, 901 F.3d 52, 59 (1st
Cir. 2018); see Century Marine Inc. v. United States, 153 F.3d 225, 231 (5th Cir. 1998) (collecting cases).
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3.

The Employment Agreement also included an agreement not to compete with Bar-Z
for twelve (12) months following his termination of employment with the company.

4.

In September 2018, Bar-Z terminated Patrick for cause.

5.

Patrick signed a Termination Certification, which acknowledged his termination as
well as the provisions from his Employment Agreement that placed a duty on Patrick
to not compete and not disclose Bar-Z’s Confidential Information once he left.

6.

Soon after his termination, Patrick breached his Employment Agreement by directly
competing with Bar-Z and using Bar-Z’s Confidential Information to the detriment of
Bar-Z. This included App Star’s development of mobile applications for Princeton
Chamber of Commerce, Colleyville Chamber of Commerce, and Greater Celina
Chamber of Commerce (collectively, the “Chamber Apps”).

7.

Patrick directly competed with Bar-Z during the twelve-month period that Patrick
agreed not to compete with Bar-Z. Due to the unique market, Bar-Z would have been
the only vendor to provide the Chamber Apps if App Star had not got involved.

8.

App Star derived a profit from the Chamber Apps. Additionally, App Star benefitted
from utilizing Bar-Z’s Confidential Information because it did not have to spend the
various time and expenses that Bar-Z spent to create the framework for the Chamber
Apps (Dkt. #164, Exhibit 3 at pp. 176–81).

9.

The minimum length of a Bar-Z contract dealing with chamber applications is four
years.

10. In the Fifth Amended Complaint, Bar-Z listed Rice as a named defendant. To date,
Rice has not responded to a filing in the above-styled matter, despite receiving the
requisite notice.

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11. Four attorneys worked on this case representing Bar-Z. Dan Bitting and Cindy Saiter
of Scott Douglass & McConnico LLP, as well as Clyde Siebman and Anna Skupin for
Siebman Forrest Burg & Smith, LLP (Dkt. #164, Exhibit 4 at p. 6).
12. App Star, Rice, and Patrick created applications that were almost identical to the ones
that Bar-Z created See (Dkt. #164, Exhibit 3 at pp. 183–91). In fact, in the App Star
application that was created for Princeton Chamber of Commerce, there is a button that
users may select that accidently states “City of Granbury” and the “Grangbury [sic]
Chamber of Commerce,” which is a Bar-Z client (Dkt. #164, Exhibit 3 at p. 186). The
applications looked almost identical because the defendants pushed for the applications
“to duplicate the features” of Bar-Z’s applications (Dkt. #164, Exhibit 4 at pp. 1–5).
When the initial prototypes looked different—and not enough like Bar-Z’s
applications— defendants were angry with the developers because they were supposed
to be building “a copy of the other app” (Dkt. #164, Exhibit 4 at pp. 1–5).
13. Bar-Z’s CEO reached out to both Patrick and Rice regarding their conduct that violated
Patrick’s Employment Agreement. Patrick responded saying “Yeah, I know. What are
you going to do about it?” Rice responded saying “yeah, well, what are you going to
do about it?” (Dkt. #164, Exhibit 1 at p. 6). Both Patrick and Rice knew that their
conduct was in violation of Patrick’s Employment Agreement, yet they still acted
together to create the Chamber Apps.
CONCLUSIONS OF LAW
1.

The Court has jurisdiction over the parties and claims herein.

2.

The Court fully incorporates the legal conclusions in its September 6 Order and March
13 Order (Dkt. #146; Dkt. #161).

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3.

Patrick, Rice, and App Star knowingly, willfully, and maliciously developed, marketed,
delivered, and sold advertising for the Chamber Apps in violation of Patrick’s noncompete and by using Bar-Z’s Confidential Information.

4.

In addition, Patrick, Rice, and App Star knowingly, willfully, and maliciously
downloaded Bar-Z’s applications from the Apple App Store to copy, reverse-engineer,
and create derivative works from Bar-Z’s applications in violation of Bar-Z’s and
Apple’s license agreements.

5.

Bar-Z’s source code, unique user interface for its applications, content management
software database (“CMS”), and application programming interface (“API”), as well
as the confidential and proprietary methods by which the CMS communicates with the
app through the API all constitute “trade secrets” within the meaning of the Texas
Uniform Trade Secrets Act (“TUTSA”) and the Federal Defend Trade Secrets Act
(“FDTSA”). TEX. CIV. PRAC. & REM. CODE §§ 134A.001, et seq.; 18 U.S.C. §§ 1832,
1836(B)(3). In addition, Bar-Z’s trade secrets include its “Go to Market” strategy,
which includes its “Sales Playbook,” pricing information, and marketing materials.
These trade secrets are generally unknown information that Bar-Z has invested
considerable time and effort developing, has employed reasonable efforts to protect and
keep secret, and has independent economic value to competitors such as App Star.
Moreover, these trade secrets are not readily ascertainable by proper means.

6.

The evidence is sufficient to establish that App Star, Rice, and Patrick acquired some
of Bar-Z’s trade secrets in violation of the TUTSA and the FDTSA. In addition, App
Star, Rice, and Patrick used and disclosed Bar-Z’s trade secrets in violation of the

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TUTSA and FDTSA. TEX. CIV. PRAC. & REM. CODE §§ 134A.001, et. seq.; 18 U.S.C.
§§ 1832, 1836(b)(3).
7.

App Star, Rice, and Patrick’s intentional acquisition and use of Bar-Z’s trade secrets
was in conscious disregard of Bar-Z’s rights, constitute willful and malicious
misappropriation and have caused Bar-Z irreparable injury for which there is no
adequate remedy at law.

8.

By using and disclosing Bar-Z’s confidential information, Patrick breached his
Employment Agreement with Bar-Z, and Rice and App Star tortiously interfered with
that Employment Agreement. The finding that App Star tortiously interfered with that
agreement is limited to the extent such interference does not relate to Bar-Z’s exclusive
right of its trade secrets. In addition, by this conduct Patrick committed a clear and
serious breach of his fiduciary duties owed to Bar-Z, and Rice and App Star knowingly
participated in that breach.

9.

Patrick further breached his Employment Agreement by working with App Star to
develop, market and sell a competing application to chambers of commerce in Texas
in violation of his twelve-month covenant not to compete. In addition, Patrick’s
violations of his covenant not to compete were deliberate, continuous, and persistent.

10. Bar-Z is entitled to default judgment against Rice.
11. A “flexible and imaginative” approach is applied to the calculation of damages in trade
secret misappropriation cases, meaning there are several ways that it can be measured.
StoneCoat of Texas, LLC v. ProCal Stone Design, LLC, 426 F. Supp. 3d 311, 347 (E.D.
Tex. 2019) (quoting Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518,
538 (5th Cir. 1974)); see also TEX. CIV. PRAC. & REM. CODE 134A.004(a) (“Damages

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can include both the actual loss caused by misappropriation and the unjust enrichment
caused by misappropriation that is not taken into account in computing actual loss.”).
While damages need not be established with mathematical precision, “the evidence
must provide a basis for reasonable inferences.” Alcatel USA, Inc. v. Cisco Sys., Inc.,
239 F. Supp. 2d 660, 671 (E.D. Tex. 2002) (quoting Dyll v. Adams, 167 F.3d 945, 947
(5th Cir. 1999)). According to the Texas Supreme Court, loss of value to the plaintiff
is usually measured by lost profits. StoneCoat of Texas, 426 F. Supp. 3d at 348 n.28.
To recover lost profits, a party must present facts, figures, or data from which the lost
profits can be ascertained. Id.
12. Carrie Little presented evidence of how much the Chambers Apps likely generated
revenue over the span of four years (Dkt. #164, Exhibit 3 at p. 182). She conducted
her calculations based on the number of members each city had and how much
comparable markets were making with Bar-Z. The causation element is satisfied
because Bar-Z has shown to the Court that there was no other competitor in this market
before App Star. This means that if the chambers of commerce wanted an application
like the one they received, Bar-Z would have been the only way for them to do that, if
not for App Star’s misappropriation of Bar-Z’s trade secrets. However, Carrie Little
also presented evidence regarding how much it would have cost Bar-Z to “develop,
market and sell the advertising” for the Chamber Apps. Therefore, the Court will
subtract the cost of development from the lost revenue figure to get a more accurate
lost profits calculation.
13. The Court finds that the evidence presented provides a valid basis to measure Bar-Z’s
lost profits (Dkt. #164, Exhibit 47 ¶ 6–10). The violations of TUTSA and FDTSA, the

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breaches of contract, and the breaches of fiduciary duty proximately caused Bar-Z to
suffer $740,930.65 in actual damages. See Thomas v. Hughes, 27 F. 4th 995, 1018 (5th
Cir. 2022) (explaining one satisfaction rule to prevent double recovery based on a
single injury). The amount comes from $838,637.65 in lost revenue from the Chamber
Apps over the span of four years and subtracting $97,707.00 from that figure to cover
the cost of development for the Chamber Apps that Bar-Z would have had to pay.
14. Defendants’ misappropriations of Bar-Z’s trade secrets in violation of TUTSA and
FDTSA were willful and malicious. TEX. CIV. PRAC. & REM. CODE § 134A.005(3).
Accordingly, the Court will award Bar-Z its reasonable attorney’s fees. Bar-Z is also
entitled to recover its attorney’s fees under TEX. CIV. PRAC. & REM. CODE § 38.001, et.
seq.
15. In utilizing the lodestar method to calculate reasonable attorneys’ fees, the Court finds
that the rates submitted to the Court are reasonable. Dan Bitting of Scott Douglass &
McConnico LLP charged Bar-Z at a rate of $500 an hour. Cindy Saiter of Scott
Douglass & McConnico LLP charged Bar-Z at a rate of $450 an hour. Clyde Siebman
of Siebman Forrest Burg & Smith, LLP charged Bar-Z at a rate of $475 an hour, which
was a discounted rate than what he normally charged, due to Siebman’s belief that local
counsel should not be charging more than lead counsel (Dkt. #164, Exhibit 4 at p. 52).
Finally, Anna Skupin of Siebman Forrest Burg & Smith, LLP charged Bar-Z at a rate
of $350 an hour.
16. The Court also finds that the time records submitted are adequate (Dkt. #164, Exhibit
3 at pp. 1–175). For the Scott Douglass & McConnico attorneys, Dan Bitting worked
546.8 hours for this case and Cindy Saiter worked 506.4 hours for this case. However,

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the total amount of fees was discounted, meaning that the client was not charged the
full $501.280.00. 3 For the Siebman Forrest Burg & Smith attorneys, Clyde Siebman
worked 52.2 hours for this case and Anna Skupin worked 9.3 hours. The Court finds
that no hourly exclusions are necessary. Therefore, the hours that were billed and
discounted are considered reasonably expended.
17. Finally, the Court sees no circumstances that warrant a lodestar adjustment, especially
considering the discounts that are already taken into consideration.

Here, Scott

Douglass & McConnico LLP provided a discount to the client and one of the attorneys
at Siebman Forrest Burg & Smith, LLP offered a discounted rate as well. No further
adjustments are necessary.
18. Bar-Z has incurred $430,206.50 in reasonable and necessary attorneys’ fees of Scott
Douglass & McConnico LLP and $28,050.00 in reasonable and necessary attorneys’
fees of Siebman, Forest, Burg and Smith, LLP.
19. Defendants’ willful and malicious misappropriation was proven by clear and
convincing evidence. Accordingly, the Court may award exemplary damages in an
amount capped at two times the award for actual damages. TEX. CIV. PRAC. & REM.
CODE § 134A.004(b). Given Rice and Patrick knew that their actions were violating

The Court finds a discrepancy in the records that were submitted and the request by Bar-Z’s counsel as to the
appropriate amount of fees Compare (Dkt. #164, Exhibit 3 at p. 15) with (Dkt. #164, Exhibit 4 at p. 6). For the Scott
Douglass & McConnico, LLP fees, the total amount discounted does not accurately reflect the amount of fees that
were attributed to solely Dan Bitting and Cindy Saiter. In the records that were submitted, other attorneys of the firm
were included on the invoices, but they were not included on the “total attorneys’ fees” portion of the spreadsheet
(Dkt. #164, Exhibit 3 at p. 175). The Court agrees with this calculation. However, the “reduced fees for all
timekeepers” calculation seems to have included a discounted rate for all attorneys, not just Dan Bitting and Cindy
Saiter, which is clear from looking at invoice #266498 See (Dkt. #164, Exhibit 3 at p. 111). Therefore, the actual
amount of attorneys’ fees are likely higher than the number submitted. However, because the Court cannot discern
what the appropriate discount rate was for Dan Bitting and Cindy Saiter—given that the other invoices do not list the
specific discount amounts for each attorney—the Court will keep the lower amount submitted. The Court finds that
those fees are reasonable, provided that the total amount of attorneys’ fees are likely higher.
3

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Patrick’s Employment Agreement and still did it anyway, the Court is inclined to grant
Bar-Z the full amount allowed.
20. Patrick’s breaches of the Employment Agreement have and will continue to damage
Bar-Z and have caused and will continue to cause irreparable harm to Bar-Z, for which
Bar-Z has no adequate remedy at law.
CONCLUSION
For the foregoing reasons, Plaintiff BarZ Adventures Inc. d/b/a Bar-Z Mobile Development
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is entitled to actual damages, injunctive relief, and exemplary damages against Defendants
Timothy Patrick, App Star, LLC, and Eugene Rice. The Court will enter a Final Judgment
consistent with the findings of this Memorandum Opinion and Order.
IT IS SO ORDERED.
SIGNED this 3rd day of May, 2023.

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AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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