Derek Gaskamp, Jonathan Miller and Andrew Hunter v. WSP USA, Inc. WSP USA Buildings, Inc. and WSP USA Administration, Inc.

Citation: Not availableDocket: 01-18-00079-CV

Court: Court of Appeals of Texas; February 19, 2020; Texas; State Appellate Court

Original Court Document: View Document

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

On February 20, 2020, the Court of Appeals for the First District of Texas issued an opinion regarding the appeal by former employees Derek Gaskamp, Jonathan Miller, and Andrew Hunter against WSP USA, Inc. and its affiliated companies, following the denial of their motion to dismiss claims related to the alleged misappropriation of trade secrets and confidential information under the Texas Citizens' Participation Act (TCPA). The court granted en banc reconsideration, withdrew its previous opinion from December 20, 2018, and substituted a new judgment. 

WSP had filed suit against Gaskamp, Miller, Hunter, and another former employee, David Sinz, shortly after Sinz founded a competing company, Infinity MEP, which allegedly provided the same services as WSP. Sinz, who had been an office manager at WSP, resigned shortly before founding Infinity MEP, leading to the subsequent resignations of Gaskamp, Miller, and Hunter to join him. 

The court noted that due to legislative amendments to the TCPA effective September 1, 2019, the case would be governed by the pre-amendment version of the statute since it was filed before the amendments took effect. The court affirmed the trial court’s decision, allowing WSP's claims to proceed.

WSP discovered that after the resignation of certain employees, Infinity's website showcased 14 “featured projects” that were allegedly derived from the employees' prior work at WSP and other firms. WSP accused Infinity of misappropriating its successful projects and relationships with high-profile clients without consent to gain business opportunities. An internal investigation and forensic analysis of the computers used by the former employees revealed unauthorized access to trade secrets and proprietary information. Specifically, seven unauthorized USB devices were connected to Sinz’s WSP-issued computer, with the last connection occurring after Infinity was registered with the Texas Secretary of State. The analysis indicated that the day before his resignation, Sinz accessed a folder labeled “Potential Projects,” containing sensitive information about WSP's ongoing projects. Furthermore, Sinz had opened multiple project files unrelated to his work, which included confidential customer data and proprietary Revit files—software integral to WSP's architectural designs, protected as trade secrets. WSP claimed that unauthorized access to these files could enable competitors to benefit from WSP's proprietary expertise without incurring the associated costs and efforts. WSP also alleged that Sinz used this information to promote Infinity’s qualifications, thereby attracting clients and violating his fiduciary duties. The internal investigation found that Sinz and his colleagues engaged in off-book projects using WSP resources and interfered with WSP's contractual relations, leading WSP to assert various legal claims, including under the Texas Uniform Trade Secrets Act.

WSP alleged that former employees violated the Texas Uniform Trade Secrets Act (TUTSA) by misusing its trade secrets and confidential information for personal gain while employed at WSP and subsequently at Infinity MEP. Additionally, WSP claimed violations of the Texas Uniform Fraudulent Transfer Act (TUFTA) for the fraudulent transfer of its trade secrets to Infinity. WSP asserted various common-law claims against the former employees, including breach of loyalty, breach of fiduciary duty, tortious interference with existing and prospective contracts, unjust enrichment, unfair competition, and civil conspiracy. Specifically, WSP accused the former employees of intentionally disclosing and utilizing WSP's confidential information to establish a competing firm, breaching fiduciary duties, and inducing third parties to reduce business with WSP. The allegations of civil conspiracy included collusion among the former employees to misappropriate WSP's information and interfere with its contracts. WSP sought actual and exemplary damages, attorneys' fees, and injunctive relief to prevent further misuse of its confidential information. In response, the former employees denied the allegations and filed a motion to dismiss under the Texas Citizens Participation Act (TCPA), arguing that WSP's lawsuit was a strategic effort to hinder competition rather than a legitimate trade secret protection case. They claimed the suit should be dismissed as it was based on their right to free association.

WSP’s claims were challenged by Gaskamp, Miller, and Hunter, who argued that the claims violated their right to free speech and contended that WSP failed to provide clear evidence for each claim. They sought dismissal of the suit along with attorneys’ fees and sanctions. Subsequently, WSP Buildings and WSP Administration filed a Second Amended Petition, which removed WSP USA as a plaintiff and clarified that WSP Buildings owned the trademark and proprietary information involved in the case. Only WSP Buildings asserted claims based on ownership, while WSP Administration, which employed the defendants, dropped six claims but retained those for unjust enrichment, breach of loyalty, and breach of fiduciary duty.

The Second Amended Petition included allegations that Sinz, Gaskamp, Miller, and Hunter accessed and took WSP Buildings’ trade secrets before their resignations. WSP asserted that it actively protected its confidential information by only providing a PDF of its designs to clients, omitting sensitive data. The petition also detailed an off-the-books project, “ME Global,” where the former employees allegedly bid without WSP's knowledge, misrepresenting themselves as WSP employees to the client, Kirksey Architecture. Although Kirksey awarded the project to WSP, the defendants did not disclose their involvement, using WSP resources improperly. It was further alleged that after leaving WSP for Infinity, Sinz, Gaskamp, Miller, and Hunter continued working on ME Global and interfered with WSP’s business by distributing brochures to its clients, which raised concerns about the Houston office's closure.

Mike Brueggerhoff, acting as Vice President Operations Manager for WSP Buildings, verified the Second Amended Petition, confirming its contents as true based on personal knowledge. On the same day, WSP Buildings and WSP Administration submitted a response to Gaskamp, Miller, and Hunter’s TCPA motion to dismiss, while WSP USA, Inc. chose not to respond after nonsuiting its claims. WSP’s response included four arguments against the TCPA dismissal: (1) the motion was moot due to the supersession of the First Amended Petition by the Second Amended Petition; (2) the lawsuit did not arise from the defendants' free speech or association rights, but rather from alleged theft of trade secrets; (3) the TCPA’s commercial-speech exemption applied; and (4) they provided clear evidence for their claims. The trial court denied the TCPA motion without specifying reasons, only noting it was “not meritorious.” Gaskamp, Miller, and Hunter now appeal this denial. WSP contends that the TCPA motion is moot since it was based on the now-superseded First Amended Petition, arguing that amending the petition is a procedural strategy to avoid dismissal similar to rules regarding nonsuit or summary judgment. However, it is noted that Rule 91a permits plaintiffs to amend or nonsuit in response to a dismissal motion, and a court cannot rule on such a motion if the plaintiff has nonsuited the claimed action at least three days before the hearing.

Under Texas Rule of Civil Procedure 91a.5(a), if a plaintiff amends a challenged cause of action at least three days before a hearing, the movant may withdraw the motion or file an amended motion regarding the new cause. The court is required to rule on the motion unless it has been withdrawn or the cause of action has been nonsuited, and it will not consider any nonsuit or amendment not filed as permitted. Unlike the Texas Citizens Participation Act (TCPA), Rule 91a specifically addresses the filing of nonsuits and amendments in the context of motions to dismiss. This distinction is relevant to WSP's argument that the TCPA motion to dismiss was rendered moot by the Second Amended Petition.

The TCPA motion to dismiss is considered a claim for affirmative relief, while a motion for summary judgment is not. In the case referenced, WSP USA was a plaintiff in the First Amended Petition but was nonsuited in the Second Amended Petition, which continued to assert claims only through WSP Buildings and WSP Administration. WSP Administration dropped six claims and only pursued unjust enrichment, breach of loyalty, and breach of fiduciary duty, thereby effectively nonsuiting its statutory claims under TUTSA and TUFTA, along with common law claims. As established in prior case law, an amended petition that omits a cause of action results in its nonsuit as of the filing date. Although a plaintiff can nonsuit a claim before resting their case, this does not affect the rights of the opposing party regarding any pending claim for affirmative relief.

A motion to dismiss that seeks more than a nonsuit constitutes a claim for affirmative relief, which persists despite a nonsuit. Texas law allows TCPA motions to dismiss to survive nonsuit because they may grant the movant a dismissal with prejudice, attorney’s fees, and sanctions. Appellants’ TCPA motion to dismiss, based on the First Amended Petition, is an affirmative request for relief, seeking dismissal of WSP’s claims and recovery of attorney’s fees and costs. WSP’s amendments or nonsuits do not strip Appellants of their right to this relief, thus the TCPA motion was not moot after WSP filed a Second Amended Petition.

The trial court's denial of Appellants’ motion to dismiss is under review, with three main issues raised on appeal. Appellants question whether WSP’s verification of its amended petition met the necessary evidentiary burden, assert that the TCPA applies to WSP's claims, and contend that the trial court erred by not awarding attorney’s fees against WSP USA, Inc. for its failure to respond. Additionally, Appellants challenge whether WSP presented sufficient evidence for a prima facie case regarding its claims.

The TCPA aims to protect individuals from retaliatory lawsuits that could intimidate or silence them concerning public matters, and it is to be construed liberally to fulfill its intent. The act encourages constitutional rights such as free speech and petitioning while safeguarding the ability to file legitimate lawsuits. The TCPA outlines a three-step process for dismissal, requiring the trial court to assess pleadings and affidavits. The movant must demonstrate that the TCPA applies by a preponderance of the evidence, indicating that the non-movant's legal actions relate to the movant's exercise of free speech, the right to petition, or the right of association.

The TCPA (Texas Citizens Participation Act) establishes a three-step process for motions to dismiss based on free speech and association claims. First, the movant must demonstrate that the TCPA applies, shifting the burden to the non-movant to present clear and specific evidence of a prima facie case for each essential element of their claim. If the non-movant fails to meet this burden, the trial court must dismiss the claim. Even if the non-movant satisfies this requirement, the court will dismiss the claim if the movant can show, by a preponderance of the evidence, valid defenses. If a dismissal occurs under the TCPA, the court is required to award the movant court costs, reasonable attorney's fees, and may impose sanctions on the non-movant to deter similar future actions.

Non-movants can bypass these requirements if they can demonstrate that an exemption to the TCPA applies, such as the commercial-speech exemption. The denial of a TCPA motion to dismiss is reviewed de novo, with the court favoring the non-movant's pleadings and evidence. The applicability of the TCPA to the claims in question is also a matter of statutory interpretation, requiring courts to discern the Legislature's intent through the statute's language as a whole. To obtain a dismissal, the movant must show that the non-movant's legal action relates to an exercise of free speech or association, as defined by the TCPA. In this context, the Appellants claim that WSP's lawsuit is based on their exercise of the right of free association.

Appellants claimed that their lawsuit stemmed from their communications related to the formation and pursuit of a common interest, specifically Infinity, which allegedly involved misappropriation of WSP’s trade secrets, breach of fiduciary duties, and tortious interference with business relationships. While WSP's claims for damages and injunctive relief are recognized as legal actions, courts have diverged in their interpretations of whether the Texas Citizens Participation Act (TCPA) right of association protects alleged misconduct involving trade secret misappropriation and conspiracy.

The Third, Twelfth, and Fourteenth Courts of Appeals have ruled that the TCPA right of association does protect the actions of alleged tortfeasors sharing and using misappropriated trade secrets or conspiring to engage in tortious conduct, emphasizing that the definition of “communication” under the TCPA encompasses various forms of expression related to collective interests. In contrast, the Fifth Court of Appeals, in Dyer v. Medoc Health Services, determined that allegations of conspiracy to misappropriate trade secrets and interfere with business relationships do not qualify for TCPA protections. The Dyer court referenced previous rulings, particularly Coleman I, which argued that TCPA protections should only apply to communications involving public or citizen participation, thus concluding that communications related to conspiracy for private gain lack the requisite public element for TCPA protection.

The court in Dyer determined that interpreting the statute to grant a “right of association” based solely on private communications related to the misappropriation of trade secrets would undermine the Texas Citizens Participation Act (TCPA) aimed at preventing strategic lawsuits against public participation. In Kawcak v. Antero Resources Corporation, the Second Court of Appeals ruled that tortfeasors conspiring to commit a tort for personal gain did not engage in the right of association. The court emphasized that “common interests,” as defined in the TCPA, must extend beyond the self-serving conspiracy of two individuals. It referenced various dictionary definitions of "common," concluding that it signifies interests that are broader and shared among a community, rather than those narrowly focused on personal gain. Thus, the TCPA did not protect claims involving only two tortfeasors acting in their self-interest. The court left open the question of whether three or more tortfeasors acting together would meet the “common” interest criterion, and it indicated that the term should be interpreted using its ordinary meaning, which encompasses several definitions, including public or community-related interests.

Appellants claim their right of association is exercised in relation to their business venture, Infinity. However, the court disagrees with their interpretation of the term "common" as it relates to the Texas Citizens Participation Act (TCPA). The court emphasizes that terms must be understood in context and that "common" should reflect a public component, aligning with the TCPA's goal of protecting constitutional rights while allowing for legitimate lawsuits. This interpretation is supported by existing definitions of related rights—free speech and petition—which also require public relevance. Moreover, recent amendments to the TCPA, specifically House Bill 2730, clarify that the exercise of the right of association involves collective action pertaining to governmental proceedings or public matters. Thus, for an action to qualify as an exercise of this right, it must relate to issues that serve the public interest.

The amended definition of "exercise of the right of association" is not applicable to the current case, but the Legislature's later interpretations of ambiguous laws are considered highly persuasive. A well-established legal principle holds that subsequent legislation can clarify the meaning of prior statutes, especially when the earlier law is unclear. The court referenced the principle from *Cannon’s Adm’r v. Vaughan*, which states that related acts should be interpreted together to ascertain the Legislature's intent. The pre-amendment definition of "exercise of the right of association" is deemed uncertain, as indicated by the legislative analysis noting the need for amendments to address "overly broad or unclear" provisions in the TCPA. Texas courts have reached inconsistent conclusions regarding what constitutes an "exercise of the right of association," especially concerning actions taken by tortfeasors for private gain.

The Legislature, aware of these conflicting interpretations, amended the statute in 2019 to limit the definition of "common interests" to those associated with governmental proceedings or matters of public concern. This amendment clarifies that acts taken for private interests do not qualify for protection under the right of association. The proper interpretation of "common" in this context is defined as relating to the community at large. The Appellants claim their "common interest" was their business venture, Infinity, but their actions—such as misappropriating trade secrets and conspiring to commit torts—primarily benefited the tortfeasors themselves.

Appellants failed to demonstrate that the tortfeasors collectively engaged in activities concerning public interests or that WSP's lawsuit related to their right of association. The court referenced Texas Civil Practice and Remedies Code § 27.005(b)(3), indicating the Appellants did not meet the burden of proof required. Regarding the right to free speech, the Appellants claimed that their communications, which allegedly involved misappropriating and conspiring over WSP’s trade secrets, constituted an exercise of this right as they pertained to a "good, product, or service in the marketplace." However, the court clarified that not all communications linked to broadly defined categories in the statute qualify as matters of public concern. The emphasis on "in the marketplace" implies that relevance to a public audience is necessary, and prior Texas Supreme Court rulings have indicated that private communications are only protected under the TCPA if they have public relevance beyond private interests. The court concluded that the internal communications among the Appellants and other tortfeasors lacked public relevance and only concerned the private financial interests of the parties involved, thus not constituting a matter of public concern.

Appellants failed to prove by a preponderance of the evidence that WSP's lawsuit was connected to or a response to their exercise of free speech. They claimed that their communications to parties outside the tortfeasor group implicated their free speech rights. However, WSP's First Amended Petition did not allege that Appellants posted information about WSP’s projects on Infinity’s website; instead, it stated that Infinity and Sinz were responsible for this conduct. The allegations related to tortious interference were similarly directed at Infinity and Sinz, not Appellants. While the petition mentioned "off-book projects," it lacked specifics necessary to determine whether the conduct involved protected communications. Citing precedent, the court noted that without detailed allegations about the timing and nature of the communications, it could not ascertain if they fell under the Texas Citizens Participation Act (TCPA). Furthermore, Appellants pointed to WSP’s request for injunctive relief as evidence of their exercise of free speech rights, but this request concerned potential future actions rather than past conduct, failing to support their claim.

Appellants failed to prove that the claims in the First Amended Petition pertained to their exercise of free-speech rights, which ended the inquiry into the applicability of the Texas Citizens Participation Act (TCPA) to WSP USA’s claims. Following the motion to dismiss, WSP Administration and WSP Buildings filed a verified Second Amended Petition with new allegations against Appellants, asserting that they improperly bid for the "off the books" ME Global project while still employed by WSP Administration, misrepresenting themselves as WSP employees. Appellants allegedly utilized WSP resources and confidential information for this project without notifying WSP, which later learned Appellants continued working on it after joining Infinity. WSP Administration and WSP Buildings contended that the TCPA's commercial-speech exemption applied to Appellants' actions regarding the ME Global project. However, it was concluded that the communications in question were not protected as free speech because they did not concern a matter of public interest, being limited to the private financial interests of the involved parties rather than public concern regarding goods or services in the marketplace.

Allegations concerning the ME Global project are deemed not to involve a "matter of public concern," thus Appellants' actions regarding the project are not protected under free-speech rights. The Appellants' distribution of advertising brochures to WSP’s clients raised inquiries about WSP's Houston office potentially closing. Assuming this act constitutes free speech, it still falls under the commercial-speech exemption of the Texas Citizens Participation Act (TCPA). This exemption applies to legal actions against those primarily engaged in selling goods or services, provided the conduct is related to such transactions and directed at actual or potential customers.

The Supreme Court of Texas outlines four criteria for the commercial-speech exemption's applicability: (1) the defendant is engaged in selling or leasing goods/services, (2) the statement or conduct arises from their capacity as a seller, (3) the conduct relates to a commercial transaction involving those goods/services, and (4) the audience consists of actual or potential customers. The burden of demonstrating the exemption's applicability lies with the party asserting it.

In assessing whether this burden is met, courts consider pleadings and record evidence. Appellants argue that WSP's verified pleadings alone are insufficient to establish this exemption. However, the factual allegations in the pleadings are recognized as vital evidence of the legal action's nature, potentially sufficient to demonstrate statutory exemption without requiring additional proof. Thus, the factual allegations alone may suffice to fulfill the Castleman criteria for the exemption.

The court analyzed allegations in live pleadings to assess the applicability of the commercial-speech exemption. It referenced several cases, including Giri and Dickens, which utilized live petitions to determine if the first Castleman element was satisfied. The court concluded that the Appellants were primarily engaged in selling or leasing services based on their business activities as outlined in the pleadings. The First and Second Amended Petitions characterized Infinity as a provider of various services, and the Appellants' roles within the company supported the conclusion that they were engaged in this business.

For the second Castleman element, the court evaluated whether the Appellants acted as sellers while engaging in the complained-of conduct. The allegations indicated that the Appellants distributed advertising materials to clients of WSP, their competitor, which allegedly fueled rumors about WSP's operations. This conduct was deemed to further Infinity’s business objectives, thus meeting the requirement of acting in their capacity as sellers.

The third Castleman element was also found to be satisfied, as the court noted that the statements or conduct in question stemmed from commercial transactions related to the services provided by Infinity. Overall, the court determined that all three Castleman elements were fulfilled, thereby affirming the application of the commercial-speech exemption in this context.

The conduct of sending advertising brochures to WSP's clients was aimed at securing customers for Infinity, thereby constituting a commercial transaction related to the services offered by Infinity. Utilizing confidential information from a prior employer to attract the same clientele satisfies the criteria for commercial speech. The actions of Appellants in marketing to WSP's clients fulfill the requirements of the Castleman case, confirming the applicability of the commercial-speech exemption under the Texas Citizens Participation Act (TCPA). 

The court concluded that the communications made by Appellants involving the misappropriation of WSP's trade secrets and breach of fiduciary duties are not shielded by the TCPA as free speech or association rights. The Appellants' claim that WSP USA's lack of response to their motion to dismiss warranted an award of attorneys’ fees was rejected, as they did not demonstrate that the claims were protected by the TCPA. Additionally, the burden to prove a prima facie case did not shift to WSP Buildings and WSP Administration since the TCPA was found inapplicable. Consequently, the trial court's denial of the Appellants' motion to dismiss was affirmed, and the court did not address the prima facie case claims due to the TCPA's non-applicability.