Opinion
No. 14-07-00717-CV
Memorandum Opinion filed May 8, 2008.
On Appeal from the 80th District Court Harris County, Texas, Trial Court Cause No. 2005-77930-A.
Panel consists of Chief Justice HEDGES and Justices ANDERSONand BOYCE.
MEMORANDUM OPINION
This is an appeal from the granting of a no-evidence summary judgment in favor of appellees, Urban Storage, L.P. d/b/a Midtown Mini Storage and d/b/a Midtown Mini Warehouse and d/b/a/ Midtown Self Storage, Midtown Storage, L.L.C., and The Jenkins Organization, Inc. (collectively "Midtown"). In two issues, appellant, SP Midtown, Ltd. d/b/a/ Space Place Midtown ("Space Place"), argues (1) the trial court erred in granting Midtown's no-evidence motion for summary judgment because Space Place presented more than a scintilla of evidence on each challenged element, and (2) the trial court erred in denying Space Place's objections to Midtown's summary judgment evidence. We affirm in part, and reverse and remand in part.
FACTUAL AND PROCEDURAL BACKGROUND
The factual recitation is stated in the light most favorable to the non-movant, indulging every reasonable inference, and resolving any doubts against the motion. City of Keller v. Wilson, 168 S.W.3d 802, 824 (Tex. 2005); Mathis v. Restoration Builders, Inc., 231 S.W.3d 47, 50 (Tex.App.-Houston [14th Dist.] 2007, no pet.).
Mark Getz serves as the president of SPMT, Inc., which is the general partner of Space Place. Space Place owns a self-storage facility located at 3011 San Jacinto Street, Houston, Texas, and in April 2005, Getz hired Stacy Welch as the on-site property manager of this facility. As a precondition to her employment, Getz required Welch to complete both an employment application and an employment contract. The employment application, which Welch signed, stated if she was actually employed she "agree[d] to abide by [the] Employer's rules, procedures, and policies." The employment contract, which Welch also signed, stated one of the manager's responsibilities was to keep all information regarding the facility and its tenants in "strict confidence." According to Getz, he agreed to pay Welch a particular compensation because she agreed to the terms of the employment contract.
In November 2005, Getz learned he needed surgery, and as a result, he spent a great deal of time visiting doctors and submitting to medical tests. Also, during this same time period, Getz had to cover for other employees who were on vacation. For these reasons, Getz was frequently away from the facility, so he relied on Welch more than usual. However, at the beginning of November, unbeknownst to Getz, Welch met with Brett Dames, a manager of Midtown. Dames offered Welch a job as a manager for Midtown, and he offered her a sign-on bonus, which according to Getz, is a practice virtually unheard of in the storage-facility industry. Furthermore, it was Midtown's policy to pay bonuses to its managers based on new business they brought to Midtown. Welch accepted the job with Midtown, but continued working at Space Place's facility until the end of the month.
Once Getz was able to focus his attention on the business at the facility Welch was managing, he learned sales had dropped significantly. Upon inspection of his books, Getz discovered Welch made four sales in the first four days of November, but she made no other sales the rest of the month. Getz knew this was unusual for the business, and he began suspecting Welch of wrongdoing. To investigate his suspicions, Getz asked Beverly Schaffer to call Welch and pose as a potential customer. According to Schaffer, Welch quoted her Space Place's prices but told Schaffer Space Place did not have any 10 x 20 foot units available. Welch told Schaffer a 10 x 15 foot unit would probably work, and she could transfer to a larger unit when one became available. But, as the conversation continued, Welch mentioned another storage facility might have a 10 x 20 foot unit available. Ultimately, Welch recommended Schaffer try Midtown because the prices, deposits, and fees were less expensive. Welch told Schaffer to ask for Tammy and to tell Tammy "Stacy sent [her]."
Based upon Schaffer's conversation with Welch, Getz decided to hire a private investigator to document Welch's actions. J.J. Gradoni, the private investigator, called Welch and posed as a potential Space Place customer. According to Gradoni, Welch told him the rental units at Midtown were "quite a bit cheaper." Welch gave Gradoni Midtown's phone number, and told him to tell Tammy "Stacy sent [him]." Gradoni then called Midtown, and Tammy admitted to Gradoni that Stacy had previously referred customers to her.
After learning Welch was diverting customers from Space Place to Midtown, Getz became concerned Welch might also be disclosing Space Place's trade secrets. Getz printed off documents stored on the fax machine and discovered Welch sent confidential information to Midtown while she was still serving as manager of Space Place's facility. The documents Welch sent were Space Place's daily rental logs for the months of May 2005 through November 2005. The daily rental logs contained the names of Space Place's tenants, the dates the rental contracts commenced, the terms of the rental obligations, the number and size of the units rented, and the employee who handled the transactions. According to Getz, this confidential information would provide a competitor, such as Midtown, an advantage because it could market directly to Space Place's current customers and provide slightly cheaper rates. Getz also discovered someone at Midtown, on more than one occasion, sent Welch a list of Midtown's available units. According to Getz, if Midtown was attempting to divert business from Space Place, such a list would be useful in determining whether Midtown could accommodate the needs of Space Place's current and prospective tenants.
Space Place's fax machine contained a memory function that permitted users to print out faxes which previously had been sent or received.
Additionally, Getz discovered that at some point in November, Welch met with certain Midtown employees and provided confidential information regarding Catholic Charities, one of Space Place's largest customers. Based on the information provided by Welch, Midtown prepared a proposal for Catholic Charities, and sent the proposal in an attempt to persuade Catholic Charities to switch its business to Midtown. The proposal stated "[i]f any additional information is needed, please contact Stacy or [Troy Sheppard]." The "Stacy" referred to in the letter was Welch. At the time Midtown prepared the proposal, it knew Welch was still working as the manager of Space Place's facility. After Catholic Charities received the proposal, Welch and certain Midtown employees held a meeting with a representative from Catholic Charities, again attempting to persuade it to switch its business. Welch attended the meeting as a representative for Midtown despite still being employed with Space Place. On November, 28, 2005, two days before Welch quit working for Space Place, she sent another letter to Catholic Charities, again offering it incentives to switch its business. The letter had Midtown's name, phone number, and address on it, and it was signed by Welch. According to Getz, Welch, while still a manager for Space Place, also assisted Midtown in drafting a letter to JBA Aviation, Inc., another Space Place customer.
As a consequence of these actions, both Anna Rasmussen and JBA Aviation stopped doing business with Space Place and transferred their business to Midtown. Based on Getz's experience, the average tenancy of customers at facilities similar to Space Place is approximately 2.3 years. According to Getz, there was no reason to believe Rasmussen and JBA Aviation would have left Space Place but for Welch's actions. Rasmussen had been paying Space Place $99 per month and JBA Aviation had been paying $345 per month. Space Place lost these customers and their monthly rental payments.
Furthermore, according to the daily rental logs for the month of November 2005, Welch signed up four new tenants the first four days of the month; however, she did not make a single sale after November 4. Coincidentally, on or about November 4, Welch met with Dames, and Dames offered Welch a job and a sign-on bonus to work as a manager of Midtown. At some point after this meeting, Welch began diverting business to Midtown, and in Getz's opinion, based on a historical analysis of Space Place's business, Welch's efforts to divert business cost Space Place at least six customers it would have had otherwise.
In December 2005, Space Place filed suit against both Welch and Midtown. As to Welch, Space Place alleged breach of contract; breach of fiduciary duty; theft, misappropriation, and/or misuse of confidential information and/or trade secrets; unjust enrichment; tortious interference with contractual relationships; tortious interference with prospective business relationships; and conspiracy. As to Midtown, Space Place alleged theft, misappropriation, and/or misuse of confidential information and/or trade secrets; unjust enrichment; tortious interference with contractual relationships; tortious interference with prospective business relationships; and conspiracy. In September 2006, Midtown and Welch each filed a no-evidence motion for summary judgment. The two motions were the same in all respects except Welch's motion addressed the two additional causes of action for breach of contract and breach of fiduciary duty. Space Place filed one response to the two motions and argued evidence existed to support each element of each cause of action. Ultimately, the trial court denied Welch's motion but granted Midtown's motion. Space Place sought a severance as to the causes of action against Midtown, which the trial court granted. Space Place also nonsuited Welch. This appeal followed.
These are the causes of action alleged against Welch and Midtown in Space Place's Second Amended Petition. Midtown alleges a Third Amended Petition exists; however, the trial court certified to this court Plaintiff's Third Amended Petition was not found in the trial court case file and a document inquiry revealed it had not been filed with the trial court.
DISCUSSION
A. Did the Trial Court Err in Granting Midtown's No-Evidence Motion for Summary Judgment?
In its first issue, Space Place argues the trial court erred in granting Midtown's no-evidence motion for summary judgment because Space Place presented more than a scintilla of evidence on each challenged element of each cause of action. More specifically, Space Place argues it presented evidence to support each element of theft, misappropriation, and/or misuse of confidential information and/or trade secrets; unjust enrichment; tortious interference with contractual relationships; tortious interference with prospective business relationships; and conspiracy.
1. Standard of Review
We review the granting of summary judgment de novo. Cruikshank v. Consumer Direct Mortg., Inc., 138 S.W.3d 497, 500 (Tex.App.-Houston [14th Dist.] 2004, pet. denied). We may affirm a summary judgment only on grounds specifically stated in the motion. Id. Where, as here, the trial court's order granting summary judgment does not specify on what grounds it was granted, it must be affirmed if any of the grounds asserted are meritorious. W. Invs., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex. 2005).
In a no-evidence motion for summary judgment, the movant must specifically state the elements as to which there is no evidence. Walker v. Thomasson Lumber Co., 203 S.W.3d 470, 473-474 (Tex.App.-Houston [14th Dist.] 2006, no pet.). The trial court must grant the motion unless the respondent produces summary judgment evidence raising a genuine issue of material fact. Tex. R. Civ. P. 166a(i). However, the respondent is" `not required to marshal its proof; its response need only point out evidence that raises a fact issue on the challenged elements.'" Hamilton v. Wilson, ___ S.W.3d ___, No. 07-0164, 2008 WL 820717, *1 (Tex. March 28, 2008) (quoting Tex. R. Civ. P. 166a cmt.)).
A no-evidence summary judgment is essentially a pretrial directed verdict, and we apply the same legal sufficiency standard in reviewing a no-evidence summary judgment as we apply in reviewing a directed verdict. Mathis v. Restoration Builders, Inc., 231 S.W.3d 47, 50 (Tex.App.-Houston [14th Dist.] 2007, no pet.). We review the entire record in the light most favorable to the non-movant, indulging every reasonable inference, and resolving any doubts against the motion. City of Keller v. Wilson, 168 S.W.3d 802, 824 (Tex. 2005). We sustain a no-evidence summary judgment if (1) there is a complete absence of proof of a vital fact, (2) rules of law or evidence bar the court from giving weight to the only evidence offered to prove a vital fact, (3) the evidence offered to prove a vital fact is no more than a scintilla, or (4) the evidence conclusively establishes the opposite of a vital fact. Walker, 203 S.W.3d at 474. Less than a scintilla of evidence exists when the evidence offered to prove a vital fact is so weak so as to do no more than create a mere surmise or suspicion of its existence, and in legal effect is no evidence. Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004). More than a scintilla of evidence exists when the evidence rises to a level that would enable reasonable and fair-minded people to differ in their conclusions as to the existence of the vital fact. Id. 2. Analysis a. Theft, Misappropriation, and/or Misuse of Confidential Information and/or Trade Secrets
In Space Place's petition, its first cause of action against Midtown is broad enough to encompass both a statutory claim under the Texas Theft Liability Act and a common law claim of misappropriation. Midtown did not file special exceptions requesting Space Place be more specific. Instead, Midtown's motion for summary judgment addressed both a statutory cause of action and a common law cause of action, and argued no evidence existed for each element. Therefore, we will address both causes of action and determine whether Space Place produced sufficient summary judgment evidence to survive Midtown's motion. Under a common law cause of action for misappropriation of trade secrets, a plaintiff must prove the following elements: (1) existence of a trade secret; (2) breach of a confidential relationship or improper discovery of a trade secret; (3) use of the trade secret; and (4) damages. Trilogy Software, v. Callidus Software, Inc., 143 S.W.3d 452, 463 (Tex.App.-Austin 2004, pet. denied) (citing IBP, Inc. v. Klumpe, 101 S.W.3d 461, 476 (Tex.App.-Amarillo 2001, pet. denied)). Use of a trade secret means commercial use, by which a person seeks to profit from the use of the secret. Atl. Richfield Co. v. Misty Prods., Inc., 820 S.W.2d 414, 422 (Tex.App.-Houston [14th Dist.] 1991, writ denied).
Under the Texas Theft Liability Act, "theft" is defined as "unlawfully appropriating property or unlawfully obtaining services as described by Section . . . 31.05 . . . [of the] Penal Code." Tex. Civ. Prac. Rem. Code Ann. § 134.002(2) (Vernon 2005). Section 31.05 of the Penal Code is titled "Theft of Trade Secrets," and states "[a] person commits an offense if, without the owner's effective consent, he knowingly: (1) steals a trade secret; (2) makes a copy of an article representing a trade secret; or (3) communicates or transmits a trade secret." Tex. Penal Code Ann. § 31.05(b) (Vernon 2003).
The Texas Theft Liability Act provides a private cause of action for many different forms of theft. Theft of a trade secret, as defined in section 31.05 of the Penal Code, is the only form of theft applicable in this case. See Tex. Civ. Prac. Rem. Code Ann. § 134.002(2) (Vernon 2005); Tex. Penal Code Ann. § 31.05 (Vernon 2003).
The daily rental logs Welch sent to Midtown are the only potential trade secrets involved in this case. Space Place presented evidence these daily rental logs contained the names of Space Place's tenants, the dates the rental contracts commenced, the terms of the rental obligations, the number and size of the units rented, and the employee who handled the transactions. Accordingly, we must determine whether Space Place produced sufficient summary judgment evidence to create a fact issue on whether the daily rental logs constitute trade secrets.
In its brief, Space Place argues the common law tort of misappropriation does not solely depend on the existence of a trade secret. Essentially, Space Place argues a claim of misappropriation of confidential information can survive even if the information does not constitute a trade secret. We disagree. There is no cause of action for misappropriation of confidential information that is not either secret, or at least substantially secret. Stewart Stevenson Servs., Inc. v. Serv-Tech, Inc., 879 S.W.2d 89, 99 (Tex.App.-Houston [14th Dist.] 1994, writ denied).
A trade secret is any formula, pattern, device, or compilation of information which is used in one's business and presents an opportunity to obtain an advantage over competitors who do not know or use it. Sharma v. Vinmar Int'l, Ltd., 231 S.W.3d 405, 424 (Tex.App.-Houston [14th Dist.] 2007, no pet.). Customer lists, pricing information, client information, customer preferences, buyer contacts, blueprints, market strategies, and drawings have all been recognized as trade secrets. Id. "Secret" implies the information is not generally known or readily available. Id. However, the mere fact that knowledge of a product or process may be acquired through inspection, experimentation, and analysis does not preclude protection from those who would secure that knowledge by unfair means. Id. In Texas, courts condemn the employment of improper means to procure trade secrets. Id. The question is not "How could he have secured the knowledge?" but "How did he?" Id. A person is liable for disclosure or use of a trade secret if he either (1) discovers the secret by improper means; or (2) his disclosure and use, after properly acquiring knowledge of the secret, constitutes a breach of the confidence reposed in him. Id.
Under the Texas Theft Liability Act, "trade secret" is defined as "the whole or any part of any scientific or technical information, design, process, procedure, formula, or improvement that has value and that the owner has taken measures to prevent from becoming available to persons other than those selected by the owner to have access for limited purposes." Tex. Penal Code Ann. § 31.05(a)(4) (Vernon 2003); See Tex. Civ. Prac. Rem. Code Ann. § 134.002(2) (incorporating definitions from the Penal Code). We conclude the statutory definition of trade secret is consistent with the common law definition; therefore we will conduct only one analysis. See Klumpe, 101 S.W.3d at 472 ("The statutory definition of trade secret comports with the definition used when tort and contract trade secret law is considered.").
To determine whether information constitutes a trade secret, a court applies the following six factors:
(1) the extent to which the information is known outside the claimant's business;
(2) the extent to which the information is known by employees and others involved in the claimant's business;
(3) the extent of the measures taken by the claimant to guard the secrecy of the information;
(4) the value of the information to the claimant and to its competitors;
(5) the amount of effort or money expended by the claimant in developing the information; and
(6) the ease or difficulty with which the information could be properly acquired or duplicated by others.
Id. The party claiming the trade secret need not satisfy all six factors because trade secrets do not fit neatly into each factor every time. Id. at 425. The status of the information claimed as a trade secret must be determined through a comparative evaluation of all the relevant factors, including the value, secrecy, and definiteness of the information as well as the nature of the defendant's misconduct. Id.
When viewed in the light most favorable to the non-movant, as we must, the evidence supports four of the six factors. Evidence existed that the information contained in the daily rental logs was not known outside of Space Place's business. According to Getz, the physical copies of the daily rental logs were kept inside a filing cabinet, which was not accessible to the public. Getz considered the information contained in the daily rental logs to be proprietary and confidential. There was no publicly available way to ascertain the customers' names contained in these documents. Additionally, this information was known by Welch based on her agreement to keep it confidential. There was also evidence Space Place made an effort to keep this information secret. As stated, Space Place kept the daily rental logs in a filing cabinet not accessible to the public. Additionally, Space Place provided Welch a code so she could access the confidential information on the computer, and it required Welch to sign an employment contract in which she agreed to keep all information regarding the facility and its tenants in "strict confidence." Space Place also presented evidence regarding the value of the information. According to Getz, the information contained in the daily rental logs would allow competitors, such as Midtown, to directly market to a specific set of customers with obvious self-storage needs. The information would allow competitors to slightly undercut Space Place's prices and take its business. In fact, Dames, a manager of Midtown, admitted this was not the type of information he would want his competitor to know. Accordingly, we conclude Space Place presented more than a scintilla of evidence to create a genuine issue of material fact as to whether the daily rental logs, which Welch sent to Midtown, constitute trade secrets.
Next, Space Place argues evidence exists to support the remaining elements of both a statutory claim and a common law claim of misappropriation. We agree. Space Place presented evidence that Midtown improperly acquired Space Place's trade secrets through the actions of Welch, who violated her contractual and common law duties to Space Place. Space Place presented evidence Midtown sent Welch, via fax, Midtown's vacancy reports on more than one occasion. In addition, Welch sent Midtown Space Place's daily rental logs, which contained Space Place's trade secrets. According to Getz, Midtown's vacancy reports would be useful for Welch to determine whether Midtown could accommodate the needs of Space Place's current and prospective customers, and Space Place's trade secrets would be useful in allowing Midtown to directly market to Space Place's customers. From this evidence, a fact finder could reasonably infer Midtown sent Welch its vacancy reports in an effort to elicit Space Place's trade secrets.
Apart from any written contract, an employee owes a duty to his employer to refrain from using confidential information acquired during the employment relationship in a manner adverse to the employer, even after the employee has been terminated. T-N-T Motorsports, Inc. v. Hennessee Motorsports, Inc., 965 S.W.2d 18, 21-22 (Tex.App.-Houston [1st Dist.] 1998, pet. dism'd).
Space Place also presented evidence Midtown used Space Place's trade secrets for commercial use. Midtown, with the help of Welch, contacted at least two of Space Place's customers and tried to persuade them to switch their business from Space Place to Midtown. Midtown offered Space Place's customers cheaper prices than they were paying at Space Place and incentives to switch their business. Midtown used Space Place's information in an effort to persuade Space Place customers to become customers of Midtown, enabling Midtown to enhance its profit.
There is also evidence of damages resulting from Welch and Midtown's actions. Two of Space Place's customers, Rasmussen and JBA Aviation, transferred their business to Midtown, and according to Getz, there was no reason to believe they would have left but for these actions. Based on Getz's experience, the average tenancy of customers at facilities similar to Space Place is approximately 2.3 years. Rasmussen had been paying Space Place $99 per month and JBA Aviation had been paying $345 per month. Space Place lost these customers and their monthly rental payments. Additionally, Space Place lost the value of its confidential information. We conclude Space Place presented more than a scintilla of evidence on each element to create a genuine issue of material fact as to whether Midtown misappropriated Space Place's trade secrets under either the Texas Theft Liability Act or the common law. Therefore, the trial court erred in granting summary judgment on these causes of action.
While we recognize the elements of a statutory claim and a common law claim of misappropriation are not exactly the same, we conclude the same evidence supports both causes of action. Under a statutory claim, "[a] person commits an offense if, without the owner's effective consent, he knowingly: (1) steals a trade secret." Tex. Penal Code Ann. § 31.05(b)(1); see Tex. Civ. Prac. Rem. Code Ann. § 134.002(2). "Steals" is defined as "[acquiring] property or services by theft," and "theft" is defined as "unlawfully [appropriating] property with intent to deprive the owner of property." Tex. Penal Code Ann. §§ 31.01(7), 31.03(a) (Vernon 2003). We find Space Place's evidence, explained in detail in this section, supports a reasonable inference that Midtown knowingly stole Space Place's trade secrets, as defined in the Penal Code. See id. §§ 31.01(7), 31.03(a)-(b), 31.05(b)(1); Tex. Civ. Prac Rem. Code Ann. § 134.002(2).
b. Unjust Enrichment
A party may recover under the unjust enrichment theory when one person has obtained a benefit from another by fraud, duress, or the taking of an undue advantage. Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992). Unjust enrichment is an equitable principle holding that one who receives benefits unjustly should make restitution for those benefits. Villarreal v. Grant Geophysical, Inc., 136 S.W.3d 265, 270 (Tex.App.-San Antonio 2004, pet. denied). Unjust enrichment occurs when the "`person sought to be charged [has] wrongfully secured a benefit or [has] passively received one which it would [be] unconscionable to retain.'" Id. (quoting City of Corpus v. S.S. Smith Sons Masonry, Inc., 736 S.W.2d 247, 250 (Tex.App.-Corpus Christi 1987, writ denied)).
Midtown's motion for summary judgment alleges Space Place failed to produce evidence that Midtown obtained a benefit from the taking of an undue advantage because no evidence exists to prove (1) the alleged information was confidential; (2) Midtown unlawfully appropriated any alleged confidential information; (3) Midtown intentionally or wrongfully used confidential information; and (4) damages. However, based on the analysis above regarding misappropriation, we conclude Space Place produced more than a scintilla of evidence to prove Midtown wrongly secured a benefit by improperly obtaining Space Place's trade secrets. We conclude Space Place created a genuine issue of material fact as to whether Midtown was unjustly enriched. Therefore, the trial court erred in granting summary judgment on this cause of action.
c. Tortious Interference with Contractual Relationships
The elements of tortious interference with contractual relationships are: (1) the existence of a contract subject to interference; (2) the occurrence of an act of interference that was willful and intentional; (3) the act was a proximate cause of the claimant's damage; and (4) actual damage or loss occurred. Baty v. Protech Ins. Agency, 63 S.W.3d 841, 856-57 (Tex.App.-Houston [14th Dist.] 2001, pet. denied). Midtown's motion for summary judgment alleged Space Place failed to produce evidence of each element.
In response, Space Place produced evidence Midtown interfered with Space Place's customers' contracts. As evidence of the first element, Space Place provided evidence three of its customers, JBA Aviation, Rasmussen, and Catholic Charities, had valid contracts with Space Place. Space Place also produced evidence of the remaining three elements. As explained in detail above, Space Place provided evidence Midtown improperly misappropriated Space Place's daily rental logs, which contained these three customers' names and their information regarding rental space and price. Subsequently, Midtown, with the help of Welch while she was still a manager of Space Place, contacted Space Place customers in an attempt to persuade them to switch their business from Space Place to Midtown. As a result, JBA Aviation and Rasmussen switched their business to Midtown. The loss of these customers caused Space Place actual damages in the form of lost rental payments.
In addition to evidence Midtown interfered with Space Place's customers' contracts, Space Place also presented evidence Midtown interfered with Welch's employment contract with Space Place. While Welch was serving as manager for Space Place, Dames met with Welch, offered her a position as a manager of Midtown, and offered her a sign-on bonus. According to Getz, providing sign-on bonuses is a practice virtually unheard of in the storage-facility industry. Welch accepted the position with Midtown, but continued working at Space Place for the rest of November. However, after Welch's meeting with Dames, Welch began diverting customers from Space Place to Midtown and acting as a representative of Midtown. Midtown was aware of Welch's actions. In fact, Welch and certain Midtown employees held meetings together in which Welch provided confidential information. They also met with Space Place customers together acting as agents of Midtown. From this evidence, a fact finder could reasonably infer Midtown willfully and intentionally interfered with Welch's employment contract which required her to keep facility and tenant information in "strict confidence," required her to keep the occupancy of Space Place high, and required her to motivate current tenants to retain their storage units. As a direct result of Midtown's actions, Space Place suffered damages in the form of lost customers and the loss of confidential information.
We conclude Space Place presented more than a scintilla of evidence on each element to create a genuine issue of material fact as to whether Midtown tortiously interfered with Space Place's customers' contracts. We also conclude Space Place presented more than a scintilla of evidence on each element to create a genuine issue of material fact as to whether Midtown tortiously interfered with Welch's employment contract with Space Place. Therefore, the trial court erred in granting summary judgment on this cause of action.
d. Tortious Interference with Prospective Business Relationships
The elements of tortious interference with a prospective business relationship are: (1) a reasonable probability the plaintiff would have entered into a business relationship; (2) an independently tortious or unlawful act by the defendant that prevented the relationship from occurring; (3) the defendant did such act with a conscious desire to prevent the relationship from occurring or the defendant knew the interference was certain or substantially certain to occur as a result of the conduct; and (4) the plaintiff suffered actual harm or damages as a result of the defendant's interference. Id. at 860. Midtown's motion for summary judgment alleged Space Place failed to produce evidence of each element.
To support the first element, Space Place relies on evidence Welch diverted phone calls from Space Place to Midtown and evidence Space Place suffered a significant drop in business during the month of November. However, we conclude mere phone calls from potential customers do not reach the level of a reasonable probability that Space Place would have entered into a business relationship. While it is not necessary to prove the contract would have certainly been made but for the interference, it must be reasonably probable, considering all the facts and circumstances attendant to the transaction. Milam v. The Nat'l Ins. Crime Bureau, 989 S.W.2d 126, 132 (Tex.App.-San Antonio 1999, rule 53.7(f) motion overruled). More than mere negotiations must have taken place. Id. Space Place did not produce evidence of clients with which it had even begun negotiating, but instead, only produced evidence Welch was diverting phone calls of people inquiring about Space Place. Additionally, mere evidence of a drop in customers is not sufficient evidence to support this element. See id. (holding references to the number of clients per year an attorney had generally represented in the past and evidence that almost no one had retained him since the incident was not sufficient to support a reasonable probability he would have entered into the contract but for the interference). We conclude Space Place did not produce any evidence of a reasonable probability that it would have entered into a business relationship. Therefore, the trial court did not err in granting summary judgment on this cause of action.
e. Conspiracy
The elements of civil conspiracy are (1) a combination of two or more persons; (2) the objective to be accomplished is an unlawful purpose or a lawful purpose by unlawful means; (3) a meeting of minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as the proximate result. Ins. Co. of N. Am. v. Morris, 981 S.W.2d 667, 675 (Tex. 1998). Civil conspiracy requires specific intent. Triplex Commc'ns Inc. v. Riley, 900 S.W.2d 716, 719 (Tex. 1995). For a civil conspiracy to arise, the parties must be aware of the harm or wrongful conduct at the inception of the combination or agreement. Id. Because liability depends on participation in some underlying tort, conspiracy is considered a derivative tort. Baty, 63 S.W.3d at 864 (citing Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996)). Therefore, to prevail on a civil conspiracy claim, the plaintiff must show the defendant was liable for some underlying tort. Id. (citing Trammell Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 635 (Tex. 1997)). Proof of a civil conspiracy may be, and usually must be, made by circumstantial evidence, but vital facts may not be proved by unreasonable inferences from other facts and circumstances. Schlumberger Well Surveying Corp. v. Nortex Oil Gas Corp., 435 S.W.2d 854, 858 (Tex. 1969).
Space Place brought claims against Midtown for conspiracy to misappropriate trade secrets, tortiously interfere with contractual relationships, tortiously interfere with prospective business relationships, and induce Welch to breach her fiduciary duty. Midtown's motion for summary judgment argued Space Place failed to produce summary judgment evidence of each element of conspiracy for each underlying tort.
It is settled as the law of this State where a third party knowingly participates in the breach of duty of a fiduciary, such third party becomes a joint tortfeasor with the fiduciary and is liable as such. Baty, 63 S.W.3d at 863.
First, Space Place produced evidence of a combination of two or more personsCnamely, Welch and Midtown. Next, we find the evidence produced by Space Place, which is recounted in detail in the factual section above and in sections (A)(2)(a) and (A)(2)(c) above, and the reasonable inferences which can be drawn from this evidence, provide more than a scintilla of evidence to support the remaining elements of a conspiracy to misappropriate trade secrets and tortiously interfere with contractual relationships. However, because we determined the trial court properly granted summary judgment on Space Place's claim of tortious interference with prospective business relationships, Midtown cannot be held liable for conspiracy with respect to that cause of action. See Baty, 63 S.W.3d at 864 (stating conspiracy is a derivative tort).
In oral argument, Midtown tried to argue because Space Place had nonsuited Welch, there was no evidence of a combination of two or more persons. We disagree. The first element of a civil conspiracy does not require proof of a combination of two or more "parties to the lawsuit," but rather, proof of a combination of two or more "persons." Welch and Midtown are "persons" for purposes of this cause of action; therefore, it is irrelevant that Midtown nonsuited Welch.
Lastly, we must determine whether Welch had a fiduciary duty to Space Place before we can determine whether Midtown can be held liable for civil conspiracy to induce Welch to breach her fiduciary duty. Space Place argues Welch's managerial position at Space Place gave rise to certain fiduciary duties, including the duties of good faith, honesty, and loyalty. Midtown argues Welch did not owe a fiduciary duty to Space Place because there is no evidence Welch was an employee of Space Place. Instead, Midtown argues Welch was actually an employee and agent of Gemcorp Co. Midtown also contends less than a scintilla of evidence exists to prove Welch ever held a position of trust and confidence with Space Place.
Gemcorp Co. is a company established by Getz for the purpose of providing his employees a various self-storage locations health insurance and other benefits.
The term "fiduciary" generally applies "to any person who occupies a position of peculiar confidence towards another," refers to "integrity and fidelity," and contemplates "fair dealing and good faith." Kinzbach Tool Co. v. Corbett-Wallace Corp., 138 Tex. 565, 571, 160 S.W.2d 509, 512 (1942). Texas courts have held certain employees owe a fiduciary duty to their employers under an agent/principal theory. See Johnson v. Brewer Pritchard, P.C., 73 S.W.3d 193, 203 (Tex. 2002) (holding an associate at a law firm owes a fiduciary duty to his or her employer not to personally profit or realize any financial or other gain or advantage from referring a matter to another law firm or lawyer, absent the employer's agreement otherwise); Daniel v. Falcon Interest Realty Corp., 190 S.W.3d 177, 184-87 (Tex.App.-Houston [1st Dist.] 2005, no pet.) (holding the project manager and on-site superintendent for a construction project was an agent and, therefore, owed his employer a fiduciary duty); Abetter Trucking Co. v. Arizpe, 113 S.W.3d 503, 510-11 (Tex.App.-Houston [1st Dist.] 2003, no pet.) (holding a key employee of a trucking company, who was in charge of all field operations and was the principal person who interacted with the drivers and clients, was an agent and, therefore, owed his employer a fiduciary duty); Herider Farms-El Paso, Inc. v. Criswell, 519 S.W.2d 473, 477 (Tex.Civ.App.-El Paso 1975, writ ref'd n.r.e.) (holding a manger of a retail poultry and egg outlet occupied a position which gave rise to the duties of a fiduciary). In an agency relationship, such as employer-employee, courts take all aspects of the relationship into consideration when determining the nature of fiduciary duties flowing between the parties. Nat'l Plan Adm'rs, Inc. v. Nat'l Health Ins. Co., 235 S.W.3d 695, 700 (Tex. 2007).
When a fiduciary relationship of agency exists between employee and employer, the employee has a duty to act primarily for the benefit of the employer in matters connected with his agency. Johnson, 73 S.W.3d at 200. Among the agent's fiduciary duties to the principal is the duty to account for profits arising out of the employment, the duty not to act as, or on account of, an adverse party without the principal's consent, the duty not to compete with the principal on his own account or for another in matters relating to the subject matter of the agency, and the duty to deal fairly with the principal in all transactions between them. Id. If an agent, while employed by his principal, uses his position to gain a business opportunity belonging to the employer, such conduct constitutes an actionable wrong. Abetter Trucking Co., 113 S.W.3d at 510.
First, we must address Midtown's argument that Space Place failed to provide evidence Welch was a Space Place employee. Instead, Midtown argues Welch was an employee of Gemcorp; therefore, she did not owe Space Place any fiduciary duties. Initially, we point out Midtown failed to raise this no-evidence argument in its motion for summary judgment, so it has effectively waived this argument. See Tex. R. Civ. P. 166a(i) (stating the motion must state the elements as to which there is no evidence). Even if Midtown had properly preserved this issue, we conclude Space Place presented more than a scintilla of evidence Welch was a Space Place employee. According to Getz, he established Gemcorp as a joint employment company so he could provide his employees better benefits. The evidence also demonstrates while Getz admitted Gemcorp issued Welch payroll checks for a portion of her compensation, Gemcorp billed Space Place for each payroll check, which Space Place then reimbursed. Additionally, the evidence shows Space Place directly compensated Welch for her work by giving her free rent and utilities in an apartment owned by Space Place. The lease agreement for the apartment was made between Space Place and Welch and was effective "[a]s long as [Welch] remain[ed] employed at [Space Place]." Welch admitted in her affidavit and deposition she was employed by Space Place. Also, the employment contract Welch signed stated "Space Place Self Storage" at the top of the document.
Welch raised this argument in her motion for summary judgment, but because Welch is not a party to this appeal, we cannot consider her motion. Midtown's motion for summary judgment stated "Plaintiff has failed to produce competent evidence as to the origin of Ms. Welch's fiduciary duties," but we do no find this language sufficient to preserve this claim.
Furthermore, even if Welch was a general employee of Gemcorp, she might also be considered a borrowed employee for Space Place. The Texas Supreme Court has long recognized a general or regular employee of one employer may become the borrowed employee of another if such other employer or his agents have the right to direct and control the details of the particular work. See St. Joseph Hosp. v. Wolff, 94 S.W.3d 513, 537-38 (Tex. 2002). If Welch is the employee of Gemcorp, Space Place produced evidence it had the right to control and direct the details of Welch's work, making her a borrowed employee for Space Place. Accordingly, we conclude Space Place presented more than a scintilla of evidence to create a genuine issue of material fact as to whether Welch was a Space Place employee, or at the very least, a borrowed employee.
Next, we must determine whether Welch occupied a position of confidence towards Space Place, giving rise to certain fiduciary duties under an agent/principal theory. Space Place produced evidence it hired Welch as the on-site manager, which was the most important day-to-day position at the facility. According to Getz, the manager was responsible for supervising all interactions with current and prospective tenants and for marketing the facility. The manager was in charge of all daily financial transactions and had the authority to transact business on behalf of Space Place without daily supervision. Space Place provided the manager access to all of its data regarding tenants, prospective tenants, pricing, vendors, and marketing information. Additionally, Welch stated in her deposition she considered herself to be in a position of trust. Based on this information, we conclude Space Place produced more than a scintilla of evidence to prove Welch held a position of confidence and trust as the manager. Therefore, Welch possessed a fiduciary relationship with Space Place. See Johnson, 73 S.W.3d at 203 (holding an associate at a law firm owes a fiduciary duty to his or her employer not to personally profit or realize any financial or other gain or advantage from referring a matter to another law firm or lawyer, absent the employer's agreement otherwise); Daniel, 190 S.W.3d at 184-87 (holding the project manager and on-site superintendent for a construction project owed his employer a fiduciary duty); Abetter Trucking Co., 113 S.W.3d at 510-11 (holding a key employee of a trucking company, who was in charge of all field operations and was the principal person who interacted with the drivers and clients, owed his employer a fiduciary duty); Criswell, 519 S.W.2d at 477 (holding a manger of a retail poultry and egg outlet occupied a position which gave rise to the duties of a fiduciary). Welch owed Space Place the duties associated with an agency, imposing on Welch the duty not to act as, or on account of, an adverse party without the principal's consent. See Johnson, 73 S.W.3d at 200.
In Midtown's Supplemental Brief on Fiduciary Duty, Midtown admits "[i]f Ms. Welch were the employee of [Space Place] she may owe them a fiduciary duty."
Having determined Space Place presented more than a scintilla of evidence to support the argument Welch owed certain fiduciary duties to Space Place, we conclude the evidence produced by Space Place, which is recounted in detail in the factual section above, and the reasonable inferences which can be drawn from this evidence, provide more than a scintilla of evidence to support the elements of a conspiracy to induce Welch to breach her fiduciary duty.
Accordingly, we conclude Space Place presented more than a scintilla of evidence on each element to create a genuine issue of material fact for conspiracy to misappropriate, conspiracy to tortiously interfere with contractual relationships, and conspiracy to induce Welch to breach her fiduciary duty. Therefore, the trial court erred in granting summary judgment on these causes of action. However, we conclude Space Place did not present at least a scintilla of evidence on each element to create a genuine issue of material fact for conspiracy to tortiously interfere with prospective business relationships. Therefore, the trial court did not err in granting summary judgment on this cause of action.
B. Did the Trial Court Err in Overruling Space Place's Objections to Midtown's Summary Judgment Evidence?
In its second issue, Space Place argues Midtown produced incompetent summary judgment evidence, and the trial court erred in overruling Space Place's objections to the evidence. More specifically, Space Place argues Midtown's evidence was conclusory, contained improper verifications, failed to show personal knowledge, was unauthenticated, and was hearsay.
1. Analysis
Midtown filed a no-evidence motion for summary judgment but also attached evidence to its motion. However, the fact evidence may be attached to a no-evidence motion for summary judgment does not mean the motion should be disregarded or treated as a traditional motion. See Binur v. Jacobo, 135 S.W.3d 646, 651 (Tex. 2004). Thus, we still construe Midtown's motion as a no-evidence motion. In a no-evidence motion for summary judgment, the non-movant bears the burden of producing competent summary judgment evidence; therefore in this case, Space Place bore the burden of producing proper summary judgment evidence, not Midtown. See Tex. R. Civ. P. 166a(i). Pursuant to this rule, we have not considered the evidence attached by Midtown in conjunction with its motion. See Southtex 66 Pipeline Co., Ltd. v. Spoor, 238 S.W.3d 538, 542 n. 1 (Tex.App.-Houston [14th Dist.] pet. denied) (stating even though the movant in a no-evidence summary judgment attached evidence, the appellate court did not consider the evidence). As a result, Space Place's objections to Midtown's evidence were irrelevant; therefore, we need not address Space Place's second issue on the merits. See Tex. R. App. P. 47.1. Appellant's second issue is overruled.
CONCLUSION
We reverse the judgment of the trial court granting Midtown's summary judgment motion as to Space Place's causes of action for theft, misappropriation, and/or misuse of confidential information and/or trade secrets; unjust enrichment; tortious interference with contractual relationships; and conspiracy to misappropriate, tortiously interfere with contractual relationships, and induce the breach of a fiduciary duty. We remand these portions of the judgment to the trial court for further proceedings consistent with this opinion. We affirm the judgment of the trial court granting Midtown's summary judgment motion as to Space Place's causes of action for tortious interference with prospective business relationships and conspiracy to tortiously interfere with prospective business relationships.