SPATHOS v. SMART PAYMENT PLAN, LLC

Filing 131

ORDER DENYING 115 Motion for Summary Judgment; GRANTING IN PART AND DENYING IN PART 117 Motion for Leave to File Sealed Document; GRANTING 119 Motion for Leave to File Sealed Document; GRANTING 122 Motion for Leave to File Sealed Document and 125 Motion for Leave to Seal Exhibits ; GRANTING IN PART AND DISMISSING IN PART 126 Motion for Leave to File Sealed Document. Signed by Judge Sam Sparks. (dl)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION

2018

HAY -7

RAQUEL SPATHOS,
Plaintiff,
CAUSE NO.:
A-16-CV-00898-SS

-vs-

SMART PAYMENT PLAN, LLC,
Defendant.

ORDER
BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause,
and specifically Plaintiff Raquel Spathos' s Motion for Summary Judgment [#115], Defendant

Smart Payment Plan, LLC (SPP)'s Response [#119-2] in opposition, and Plaintiff's Reply [#123]
thereto; SPP's Motion for Summary Judgment [#117-2], Plaintiff's Response [#120-1] in

opposition, and SPP's Reply [#122-2] thereto; and SPP's Motion to Exclude Testimony of

Plaintiff's Expert [#1262].1 Having reviewed the documents, the governing law, and the file as a
whole, the Court now enters the following opinion and orders.

Background
This is primarily a breach of contract case. SPP offers bill payment plan services to car
dealerships. The bill payment plan services allow a car dealership's customers to complete car
loan payments quickly and easily and offer customers the flexibility to set when those payments
are made. SPP uses sales agents to sell its services to car dealerships and, in return, the agents

earn commissions. Plaintiff formerly worked as one of SPP's sales agents.

1

The parties also filed several motions to seal in connection with the pending substantive motions. The Court grants
the parties' motions to seal as a matter of course. Additionally, as the Court was drafting this order, Plaintiff filed a
motion for leave to file an answer to SPP's counterclaims. See Mot. Leave File Answer [#128]. This motion is not
yet ripe and the Court declines to rule on it at this time.

2.

6

I.

The Agreement and Termination
In February 2009, Plaintiff and SPP signed a contract memorializing the specifics of their

relationship.

See Pl.'s

Mot. Summ. J. App. [#1 16-3] Ex. C (the Agreement). Under the

Agreement, SPP engaged Plaintiff to "distribut[e] the Half Payment Plan" and Plaintiff agreed to
distribute the plan for five years in exchange for commissions. Id. at

1

The Agreement specified

that "[a]1l dealers that [Plaintiff] brings to SPP shall remain [Plaintiffj's accounts and all agreed
upon commissions generated by those dealers shall be paid to [Plaintiff] for the duration that the
dealers are involved with the program." Id.
In a section titled "Confidentiality," Plaintiff agreed she would not "directly or

indirectly" disclose any of SPP' s confidential information or use such information "in any
manner either during the term of this Agreement or at any time thereafter, except as required in

the course of distributing the plan." Id. Furthermore, in a section titled "Exclusive Provider,"

Plaintiff agreed to "not distribute any competing payment plans for the duration of this contract."
Id. at2.

In February 2014, Plaintiff incorporated Paywise Payment Plans, LLC (Paywise) in

Delaware and registered the new organization in New York, New Jersey, Florida, Connecticut,
Michigan, and Texas. Pl.'s Mot. Summ. J. [#115] at 3. In March 2014, Plaintiff and Michael
DePetrillo, who formerly developed and implemented software for SPP, began exploring

business opportunities together. Id.
In September 2015, SPP terminated its relationship with Plaintiff and ceased paying

Plaintiff commissions after it learned Plaintiff created Paywise. Def.'s Mot. Summ. J. [#117] at
5.

Plaintiff claims she did not conduct any business through Paywise and never received any

income from Paywise. Pl.'s Mot. Summ. J. [#115] at 3. After the Agreement was terminated,

Plaintiff was hired by and now works for US Equity Advantage (USEA). Id. at 4. USEA offers
similar bill payment plan services as SPP through its Auto Pay Plus System. Id.

II.

Procedural History
Plaintiff filed this action in New Jersey state court on November 4, 2015, requesting a

preliminary injunction and damages for breach of contract, unjust enrichment, tortious
interference with business relations, and conversion. Removal Notice [#1-2] Ex. A (Compl.) at

¶J 29-63. Shortly thereafter, SPP removed this case to United State District Court for the District
of New Jersey. See Removal Notice [#1] at

The Honorable Judge Shipp denied Plaintiff's

1.

request for a preliminary injunction and later transferred the case to this Court. See Order of
Nov. 17, 2015 [#11]; Order of July 21, 2016 [#30].
SPP then counterclaimed against Plaintiff for breach of contract, misappropriation of

trade secrets, unfair competition, breach of fiduciary duty, fraud, fraudulent inducement,

promissory estoppel, and unjust enrichment. Am. Countercl. [#55] ¶

23-112. SPP also

requested its own preliminary injunction. Mot. Prelim. Inj. [#49]. This Court denied SPP's

preliminary injunction request, finding SPP failed to show a threat of substantial injury. Order of
Oct. 28, 2016 [#86].

After discovery closed, SPP moved to amend its answer to add two affirmative defenses
in response to Plaintiff's belated disclosure of alleged oral agreements between SPP and herself
at her deposition. Mot. Leave [#108]. The Court ruled Plaintiff could not rely on oral agreements

or promises disclosed for the first time during her deposition testimony and therefore denied

SPP's motion for leave to amend. Order of Apr. 6,2018 [#118].
The parties now file cross-motions for summary judgment. SPP also moves to exclude
the testimony of Plaintiff's expert.
3

Analysis

I.

Motion to Exclude Expert Testimony
As a preliminary matter, the Court first addresses SPP' s motion to exclude the testimony

of Plaintiffs damages expert, Jared

C. Jordan. Mot. Exclude [#126-2]. Because this Court finds

it difficult to decide objections to expert witnesses outside of the trial context, it is the Court's

practice to consider such objections during the trial. All trials on this docket are "on the clock,"
with limited time to present the evidence. When an objection to expert testimony is lodged
during trial, the Court will recess the jury, listen to the testimony, and make a ruling consistent

with the evidence being presented. If the objection is sustained, the time necessary to hear the

witness's testimony outside the presence of the jury will be subtracted from the presenter of the
witness. If the objection is overruled, the time consumed by listening to the witness outside the

presence of the jury will be deducted from the objector. Therefore, the Court dismisses SPP' s

motion to exclude the expert testimony of Jared C. Jordan without prejudice to re-urging at trial.
I.

Cross Motions for Summary Judgment

A.

Legal Standard
Summary judgment shall be rendered when the pleadings, the discovery and disclosure

materials on file, and any affidavits show that there is no genuine dispute as to any material fact

and that the moving party is entitled to judgment as a matter of law.
Celotex Corp.

v.

Catrett, 477 U.S. 317, 323-25 (1986); Washburn

v.

FED. R.

Civ. P. 56(a);

Harvey, 504 F.3d 505, 508

(5th Cir. 2007). A dispute regarding a material fact is "genuine" if the evidence is such that a

reasonable jury could return a verdict in favor of the nonmoving party. Anderson

v.

Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for summary judgment, the

court is required to view all inferences drawn from the factual record in the light most favorable

to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986);

Washburn, 504 F.3d at 508. Further, a court "may not make credibility determinations or weigh

the evidence" in ruling on a motion for summary judgment. Reeves

v.

Sanderson Plumbing

Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477 U.S. at 254-55.
Once the moving party makes an initial showing that there is no evidence to support the

nonmoving party's case, the party opposing the motion must come forward with competent
summary judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at
586. Mere conclusory allegations are not competent summary judgment evidence, and thus are

insufficient to defeat a motion for summary judgment. Turner

v.

Baylor Richardson Med. Ctr.,

476 F.3d 337, 343 (5th Cir. 2007). Unsubstantiated assertions, improbable inferences, and

unsupported speculation are not competent summary judgment evidence. Id. The party opposing

summary judgment is required to identify specific evidence in the record and to articulate the
precise manner in which that evidence supports his claim. Adams

v.

Travelers Indem. Co. of

Conn., 465 F.3d 156, 164 (5th Cir. 2006). Rule 56 does not impose a duty on the court to "sift

through the record in search of evidence" to support the nonmovant's opposition to the motion
for summary judgment. Id.

"Only disputes over facts that might affect the outcome of the suit under the governing
laws will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248.

Disputed fact issues that are "irrelevant and unnecessary" will not be considered by a court in
ruling on a summary judgment motion. Id. If the nonmoving party fails to make a showing

sufficient to establish the existence of an element essential to its case and on which it will bear
the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.

5

B.

Application
Fact issues and credibility determinations preclude summary judgment here. The key

issue in this case is whether Plaintiff materially breached the Agreement first, excusing SPP from
later performance. What constitutes a breach of the Agreement is a question of law for this
Court. See Matter of Dallas Roadster, Ltd., 846 F.3d 112, 127 (5th Cir. 2017). Relevant here, the
Agreement, by its terms, prohibited Plaintiff from disclosing "directly or indirectly" SPP' s

confidential information or using such information "in any manner either during the term of [the]

Agreement or any time thereafter, except as required in the course of distributing [SPP' s] plan."

Agreement at

1.

Under the Agreement, Plaintiff promised to "not distribute any competing

payment plans for the duration of this contract." Id. at 2.
Whether Plaintiff materially breached these duties and thus excused SPP from paying

Plaintiff commissions is question of fact for the jury. See Dallas Roadster, 846 F.3d at 127 (5th
Cir. 2017) (stating whether breaching conduct occurred and whether a breach is material are

questions of fact). SPP has provided some evidence from which a reasonable jury could infer

Plaintiff disclosed SPP's confidential information or distributed a competing payment plan while
the Agreement was in effect. See Def.'s Mot. Summ. J. [#117] at 9-12. However, should the jury

determine that Plaintiff did not breach the Agreement, then any failure to perform under the

Agreement by SPP would not be excused.
Furthermore, whether SPP' s information is entitled to trade secret protection, whether

Plaintiff misappropriated any of SPP 's alleged trade secrets, and whether SPP suffered any
damages from such misappropriation feature factual issues to be determined by the fact finder.
See Gen. Universal Sys., Inc. v. Lee, 379 F.3d 131, 150 (5th Cir. 2004) ("The existence of a trade

secret is properly considered a question of fact to be decided by the judge or jury as fact-

finder."). However, the Court notes SPP asserts for the first

timein its response to

Plaintiff's

motion for summary judgmentits trade secrets are its (1) customer lists, information, and
preferences; and (2) technological information. Def.'s Resp. Pl.'s Mot. Summ. J. [#119-2] at 6.

By contrast, SPP previously

allegedin

its amended counterclaims, preliminary injunction

briefing, and interrogatory responsesits trade secrets were (1) the variable debit options for its
customers; (2) the program matching debits to customers' paydays; and (3) the lease calculator

display identifying the benefits of using SPP's services. Am. Counterci. [#55] ¶ 31; Def.'s Mot.
Prelim. Inj. [#51] at 9; Pl.'s Reply App. [#124-8] Ex. H (Def.'s Interrog. Resp.) at No. 6. SPP
offers no explanation for its revised trade secrets and provides little explanation on the meaning

of "technological information."

See

Def.'s Resp. Pl.'s Mot. Summ. J. [#119-2] at 6. As

previously noted in this case, Federal Rule of Civil Procedure 37 states "[i]f a party fails to
provide information

.

. .

as required by Rule 26(a) or (e), the party is not allowed to use that

information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the
failure was substantially justified or is harmless."

FED.

R.

Civ. P.

37(c)(1); see

also

Order of Apr.

6, 2018 [#118] at 3-4. SPP caimot alter the trade secrets it claims Plaintiff misappropriated on

the eve of trial.
In sum, there are factual issues and credibility determinations to be evaluated by the fact

finder and the disposition of this case, as a matter of law, would best be served after the

introduction of evidence. The Court therefore denies the parties' cross motions for summary
judgment.

7

Conclusion
Accordingly,
IT IS ORDERED that Defendant Smart Payment Plan, LLC's Motion for Leave

to File under Seal its Motion for Summary Judgment [#117], Motion for Leave to File

under Seal its Opposition to Plaintiff's Motion for Summary Judgment [#119], Motion
for Leave to File under Seal its Reply [#122], and Motion for Leave to File under Seal

Motion to Exclude Testimony of Plaintiff's Expert [#126] are GRANTED;
IT IS FURTHER ORDERED that Plaintiff Raquel Spathos's Motion for Leave to

Seal her Opposition to Defendant's Motion for Summary Judgment [#120] and Motion

for Leave to Seal Exhibits [#125] are GRANTED;
IT IS FURTHER ORDERED that Defendant Smart Payment Plan's Motion to
Exclude Testimony of Plaintiff's Expert [#126-2] is DISMISSED without prejudice to re-

urging at trial;
IT IS FURTHER ORDERED that Plaintiff Raquel Spathos's Motion for

Summary Judgment [#115] is DENIED; and
IT IS FiNALLY ORDERED that SPP's Motion for Summary Judgment [#117-2]

is DENIED.
SIGNED this the

7

day of May 2018.

S AM S PAR

SENIOR UNITED STATES DISTRICT JUDGE