Downhole Technology LLC v. Silver Creek Services Inc. et al
MEMORANDUM OPINION AND ORDER denying 24 MOTION to Dismiss 20 Amended Complaint, granting in part and denying in part 23 MOTION to Dismiss 20 Amended Complaint and Alternatively, Motion for More Definite Statement. Breach of Contract claim against Defendant Williams is dismissed. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)
United States District Court
Southern District of Texas
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
DOWNHOLE TECHNOLOGY LLC,
SILVER CREEK SERVICES INC.;
TECHNOLOGIES, LLC; DANIEL R.
COFFEE; MICHAEL DIDIER;
DILLON W. KUEHL; and CHARLES M.
April 27, 2017
David J. Bradley, Clerk
CIVIL ACTION NO. H-17-0020
MEMORANDUM OPINION AND ORDER
Pending before the court are Defendants Silver Creek Services
Inc., Michael Didier, and Charles M. Williams's (collectively, the
"Silver Creek Defendants") Motion to Dismiss Plaintiff's Complaint
Motion for More Definite Statement
Creek Defendants' Motion to Dismiss")
(Docket Entry No.
Defendants StormField Innovative Technologies, LLC and Dillon W.
and Alternative Motion
Response to Plaintiff's Amended Complaint ("StormField Defendants'
Motion to Dismiss")
(Docket Entry No. 24) . 1
the Silver Creek Defendants'
For the reasons stated
Motion to Dismiss will be
Defendant Daniel R. Coffee's 12(b) (2) and 12(b) (6) Motion to
Dismiss Amended Complaint and Supporting Memorandum of Law (Docket
Entry No. 26) is not yet ripe and will be addressed in a future
granted in part and denied in part, and the StormField Defendants'
Motion to Dismiss will be denied.
Defendant Downhole Technology LLC
Kuehl was employed as a Field
Service Technician by Downhole from March of 2013 to March of 2014.
Kuehl signed a Proprietary Information and Intellectual Property
Assignment Agreement (the "Kuehl NDA") in which he agreed "to hold
in strictest confidence, and not to use, except for the benefit of
or to disclose to any person,
firm or corporation
without written authorization . . . any Proprietary Information of
the Company" as defined in the NDA. 3
International Services, LLC ("FTSI") and Rice Energy, at a site in
Downhole signed a Master Purchase Agreement for Products and/or
Factual allegations are
Complaint, Docket Entry No. 20.
Exhibit A to Amended Complaint, Docket Entry No. 20-1, p. 2.
Exhibit B to Amended Complaint, Docket Entry No. 20-2.
Id. at 4
Michael Didier was a consultant for Rice Energy at the time of
Kuehl and Didier were personal friends before
Kuehl began overseeing the installation at the FTSI/Rice Site.
Charles M. Williams was an Operations Manager for FTSI at the time
of the installations.
Downhole frac plugs from
Vice President of Wire line
involvement at the FTSI/Rice Site
and through Didier, Kuehl, or Williams.
In December of 2013 Coffee, Didier, Kuehl, and Williams formed
Silver Creek Services, Inc.
was still employed by Downhole.
At the time, Kuehl
In September of 2014 Kuehl and
Innovative Technologies, LLC ("StormField").
Kuehl and Williams
were named as Managing Members of StormField.
In October of 2014
StormField, was selling frac plugs similar to the Downhole frac
plug, which Silver Creek marketed as "ZIP Plugs."
9,010,411 ("the '411 Patent").
Downhole alleges that defendants
knew of Downhole's patents and that Silver Creek and StormField
induced and contributed to the infringement of those patents by
Downhole alleges that Kuehl had knowledge of Downhole's
patent rights as a result of his employment with Downhole and the
and the directions to a website
printed on the side of each frac plug package.
Coffee and Williams
allegedly obtained confidential information belonging to Downhole
as a result of Coffee's employment with FTSI and as a result of
Williams working at the FTSI/Rice Site.
Defendants allegedly used
the confidential information they obtained to facilitate creation
of their "ZIP Plug."
infringement, Kuehl for breach of contract and breach of fiduciary
( "TUTSA"), 6
Defendants now move to dismiss Downhole's claims for failure to
state a claim or, in the alternative, for a more definite statement
of Downhole's claims under the TUTSA.
A Rule 12(b) (6)
motion tests the formal sufficiency of the
complaint because it fails to state a legally cognizable claim."
Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001), cert.
denied sub nom.
Cloud v. United States,
The court must accept the factual allegations of the complaint as
Tex. Civ. Prac. & Rem. Code
true and view them in the light most favorable to the plaintiff.
Id. (citing Oppenheimer v. Prudential Securities Inc., 94 F.3d 189,
(5th Cir. 1996)).
To defeat a motion to dismiss a plaintiff
plausible on its face."
1955, 1974 (2007).
Bell Atlantic Corp. v. Twombly, 127 S. Ct.
The court does not "strain to find inferences
favorable to the plaintiff" or "accept conclusory allegations,
unwarranted deductions, or legal conclusions."
Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 361 (5th Cir.
(internal quotation marks and citations omitted).
are required to dismiss, pursuant to [Rule 12(b) (6)], claims based
on invalid legal theories, even though they may be otherwise wellpleaded."
State Farm Fire and Casualty Insurance Co.
(Texas), 605 F. Supp. 2d 811, 820 (W.D. Tex. 2009)
v. Williams, 109 S. Ct. 1827, 1832 (1989)).
As a preliminary matter, Downhole submitted, and the court has
accepted, a Notice of Errata correcting paragraphs 41 and 58 of the
Amended Complaint. 7
Arguments for dismissal on the basis of those
errors are therefore moot.
contributory infringement fail because Downhole did not plead that
Plaintiff's Notice of Errata, Docket Entry No. 27.
defendants had actual knowledge of the patents.
pleadings allege that Kuehl had actual knowledge of the patents,
"at least" as a result of the "notice" on the device packaging. 8
Downhole further alleges that Kuehl participated in the formation
therefore plausible that Silver Creek and StormField had actual
knowledge of Downhole's patents.
Downhole's claims for induced and
contributory infringement are therefore facially plausible.
Breach of Contract Claims
against him should be dismissed because he was not a party to the
contract between Downhole and FTSI.
In Texas the elements of a
breach of contract claim are (1) the existence of a valid contract;
(2) performance or tendered performance by plaintiff; (3) breach of
contract by defendant; and (4) damages.
Inc. v. Egle Group, LLC,
490 F.3d 380,
See Smith International,
(5th Cir. 2007).
employee of a company that enters into a contract generally has no
See, e.g., Willis v. Donnelly, 199 S.W.3d
(the corporate shield protects a business
owner from individual liability on a contract entered into by the
"Furthermore, as a result of his employment with Downhole,
Kuehl had knowledge of Downhole's patent rights
Complaint, Docket Entry No. 20, p. 15 ~ 47.
Id. at 8
entity); OAIC Commercial Assets, L.L.C. v. Stonegate Village, L.P.,
234 S.W.3d 726, 738 (Tex. App.--Dallas 2007, pet. denied)
[to sue for breach of contract] is established by proving that the
defendant was a party to an enforceable contract with either the
plaintiff or a
party who assigned its
cause of action to the
Downhole responds that "this stage of the proceeding does not
contract. '" 10
But Downhole must at least allege that Williams was
a party to a valid contract.
Downhole alleges that "[t]he FTSI
Agreement is a valid contract between Downhole and FTSI" and that
obligations under the FTSI Agreement." 11
Williams and Downhole.
But Williams' employment
Absent an allegation that Williams was a
party to a valid contract with Downhole and that Williams breached
that contract, Downhole's claim against Williams fails.
of contract claim against Williams will therefore be dismissed.
Kuehl argues that Downhole's breach of contract claim against
him "fails to plead that any information that was provided to Kuehl
Plaintiff' s Response in Opposition to Certain Defendants'
Motions to Dismiss ("Plaintiff's Response"), Docket Entry No. 28,
Amended Complaint, Docket Entry No. 20, p. 23
agreement with Downhole. " 12
Downhole cites two paragraphs from its Amended Complaint in its
30. None of the Defendants
developed/ marketed/ or sold
improperly misappropriating and
and trade secret information
could have designed 1
the ZIP plug without
belonging to Downhole
Kuehl has breached the Kuehl NDA in at
least the following ways:
On information and belief
confidential information of Downhole to others 1 including
StormField 1 all in violation of the Kuehl NDA.
On information and belief Kuehl has improperly
used confidential information belonging to Downhole to
facilitate creation of the ZIP Plug for StormField. 14
In order for Kuehl to improperly use confidential information/ he
must first have obtained that information.
The court need not
strain to infer from Downhole 1 s allegations that Kuehl obtained the
confidential information while employed by Downhole and that he
later used the information to Downhole
facts pled as true/ Downhole has stated a legally cognizable claim
for breach of the Kuehl NDA.
Response/ Docket Entry No. 28
Amended Complaint/ Docket Entry No. 20
Section 134A. 007
remedies for misappropriation of a
tortious interference, and unjust enrichment are
preempted by the TUTSA.
In a recent
Judge Rosenthal provides
analysis of preemption under the TUTSA.
AMID, Inc. v. Medic Alert
Foundation United States, Inc., Civil Action No. H-16-1137, 2017
WL 1021685, at *27 (S.D. Tex. March 16, 2017).
By pleading common-
law causes of action in addition to misappropriation of
alternative theories of relief.
It sought relief on the theory
that [the defendant] misappropriated information protected as trade
and alternatively under the theory that the misappro-
priated information was not a trade secret but was confidential."
Id. at *28.
Because the court concluded that the plaintiff "could
recover on its tort claim without proving that the information
protected as trade secrets," the motion to dismiss on the
basis of TUTSA preemption was denied.
Like the plaintiff in AMID,
Inc., Downhole's claims include
misappropriation of confidential information and other allegations
in addition to the misappropriation of trade secrets.
breach of fiduciary duty claim against Kuehl stems in part from the
fact that Kuehl was allegedly "engaging in conduct competitive to
the interests of Downhole"
as well as disclosing
defendants also alleges the misuse of "confidential information,"
which may or may not include trade secrets . 16
And Downhole's unjust
enrichment claim against defendants similarly involves the "taking
Downhole. " 17
Downhole's claims involve activity other than misappropriation of
trade secrets and permit recovery in the event that the information
secrets," the claims are not preempted by the TUTSA.
breach of contract claims and that "Downhole has not alleged facts
establishing a legal duty independent of the confidentiality clause
of the agreement between Downhole and FTSI." 18
Defendants cite a
Texas Supreme Court case for the proposition that a party may not
recover under a tort theory when "the only loss or damage is to the
Amended Complaint, Docket Entry No. 20, p. 22
Id. at 24
Id. at 27
Sil ver Creek Defendants'
No. 23, p. 8 ~ 18.
Motion to Dismiss,
subject matter of the contract. " 19
alleged basis for TUTSA liability.
But the NDA is not the only
Downhole has alleged that Kuehl
Moreover, even if the general rule in DeLanney applied to Kuehl,
the rule would not preclude TUTSA claims against the remaining
contract on their part.
Defendants also argue that "Downhole pleads its TUTSA claim in
supporting misappropriation" 21 and that Downhole "has not identified
which specific trade secrets were misappropriated, or by whom." 22
Downhole is required to identify specific trade secrets in its
Downhole pleads that it has trade secrets relating to
the manufacture and use of its frac plugs and that defendants used
those trade secrets to develop their competing product.
specifically pleads that
[s]uch trade secrets include, but are not limited to, the
products developed, the associated hardware design,
related firmware and software, components that were
Id. (citing Southwestern Bell Telephone Co. v. DeLanney, 809
S.W.2d 493, 494 (Tex. 1991)).
Amended Complaint, Docket Entry No. 20, p. 22
Sil ver Creek Defendants'
No. 23, p. 8 ~ 19.
No. 24, p. 15.
Motion to Dismiss,
identified and used in connection with its frac plug
technology, the general know-how and negative know-how
learned in conjunction with the trial and error process
in developing, testing, marketing, and selling its frac
plug and associated technology, and also in conjunction
with significant expenditure by Downhole in pursuit of
developing its frac plug technology. 23
Downhole's pleadings contain sufficiently defined categories to
definite statement is required.
And taken as true,
pleadings set forth sufficient factual allegations to support its
claims under the TUTSA.
Conclusions and Orders
For the reasons explained above,
the court concludes that
Downhole has failed to plead a legally cognizable claim for breach
of contract against Williams.
That claim is therefore DISMISSED
with prejudice as to Williams.
The remainder of Downhole's claims
are legally cognizable and facially plausible.
Defendants' Motion to Dismiss
The Silver Creek
(Docket Entry No. 23)
GRANTED in part and DENIED in part, and the StormField Defendants'
Motion to Dismiss (Docket Entry No. 24) is DENIED.
SIGNED at Houston, Texas, on this 27th day of April, 2017.
UNITED STATES DISTRICT JUDGE
Amended Complaint, Docket Entry No. 20, p. 25 ,
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