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
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?