Attorneys representing plaintiffs in theft of trade secrets lawsuits frequently use the “kitchen sink” approach when selecting the legal causes of action to assert on behalf of their clients. In addition to a theft of trade secrets claim arising under the Texas Uniform Trade Secrets Act (“TUTSA”), lawyers tend to also assert alternative claims based upon the alleged theft of the trade secrets. Examples of alternative claims are conversion, unjust enrichment and unfair competition.
As the saying goes, the fact that everyone does it does not make it right.
Section 134A.007 of TUTSA states that – with few exceptions — the statute replaces other Texas law providing a remedy for misappropriation of a trade secret. This is known as preemption. You might expect defendants in TUTSA lawsuits to frequently raise preemption as a basis for dismissing some of the claims asserted against them. Yet if they are, the issue is not making it into the case law.
I was only able to find one case considering the extent to which TUTSA preempts other legal claims. In March 2016, United States District Judge Sam Sparks issued an opinion holding that TUTSA preempts a plaintiff’s alternative legal claims unless the plaintiff can show that the alternative claim is based on facts unrelated to the misappropriation of the trade secret. That opinion is 360 Mortgage Group, LLC v. Homebridge Financial Services, Inc., No. A-14-CA-00847-SS, 2016 WL 900577 (March 2, 2016 W.D. Tex.).
Judge Sparks also addressed the thorny issue of how TUTSA preemption applies when a plaintiff claims that the business information stolen by the defendant includes both (i) trade secrets and (ii) other business information that does not qualify as a trade secret. Does TUTSA preempt alternative legal claims based upon the theft of the non-trade secret information? Judge Sparks says the answer is yes.