Providence Title Co. v. Truly Title, Inc.

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PROVIDENCE TITLE COMPANY v. TRULY TITLE, INC., ET AL.

CIVIL No. 4:21-CV-147-SDJ

United States District Court, E.D. Texas, Sherman Division

August 22, 2024

MEMORANDUM OPINION AND ORDER

SEAN D. JORDAN, UNITED STATES DISTRICT JUDGE

Before the Court is Defendants Graham Hanks and Truly Title Inc.'s (the “Truly Defendants”) Motion for Summary Judgment on Plaintiff Providence Title Company's Tort and Contract Claims. (Dkt. #262). For the following reasons, the motion is GRANTED in part and DENIED in part.

I. Background

Providence and Truly are competitors in the Texas title insurance market. In April 2019, Truly and Providence commenced negotiating Truly's potential acquisition of Providence. The parties entered into a nondisclosure agreement (“NDA”), whereby the parties agreed to keep confidential certain information disclosed for the purpose of negotiating. Truly also agreed to a non-solicitation agreement that restricted its ability to solicit Providence's employees. Pursuant to these agreements Providence supplied Truly with confidential and proprietary information. However, the parties were unable to agree to terms and negotiations ceased in November 2019.

According to Providence, after the breakdown in the parties' negotiations, Truly began to use the information Providence provided to solicit Providence's employees and customers. Specifically, less than one year after Providence and Truly ceased their acquisition talks, Truly began discussing with Defendants Tracie Fleming and Mark Fleming the possibility of their leaving Providence to work for Truly. At the time, Tracie Fleming was Providence's President and Mark Fleming was Providence's Team Leader for operations in Johnson County, Texas. Unknown to Providence, Truly had entered into employment agreements with Tracie and Mark Fleming in December of 2020. The agreements provided that Tracie Fleming would serve as Truly's Executive Vice President and Area Manager over the Greater Fort Worth Area and that Mark Fleming would serve as a Senior Vice President. Providence did not learn of Truly's agreements with Tracie and Mark Fleming until the Flemings resigned from their positions with Providence on February 3, 2021. Defendant Kim Sheets-Sheffield, another one of Providence's Team Leaders, also left Providence to work for Truly around the same time.

The departure of these key employees was accompanied by an exodus of Providence personnel to Truly from several of Providence's North Texas offices. In total, nearly two dozen Providence employees joined Truly during the relevant timeframe. Providence contends that the Truly Defendants' actions violated both state and federal law. Specifically, it brought claims against both Defendants for (1) violation of the federal Defend Trade Secrets Act (“DTSA”),^[1] (2) conspiracy to violate the DTSA,^[2] (3) violation of the Texas Uniform Trade Secrets Act (“TUTSA”), (4) knowing participation in a breach of fiduciary duty,^[3] (5) tortious interference with the Shareholders' Agreement, (6) tortious interference with prospective contractual relationship, (7) tortious interference with prospective customer relationships, and (8) civil conspiracy. Additionally, Providence brought a claim against Truly for breaches of the non-solicitation agreement and the NDA.

Shortly after the commencement of this suit, Providence moved for a preliminary injunction to enjoin (1) the Flemings from violating the noncompete agreement, (2) all Defendants from soliciting Providence's employees and customers, and (3) all Defendants from using Providence's trade secrets. (Dkt. #8). Providence's request for an injunction against the Truly Defendants was premised on its claims that Truly breached the NDA and that Defendants misappropriated its trade secrets. The Court denied the motion as to the Truly Defendants, finding that Truly's obligations with respect to Providence's confidential information had expired and that Providence failed to show that Defendants misappropriated any trade secret. See Providence Title Co. v. Truly Title, Inc., 547 F.Supp.3d 585, 607-13 (E.D. Tex. 2021).^[4]

After the Court ruled on the motion for preliminary injunction, robust motion practice ensued. The Truly Defendants filed two motions for summary judgment- one seeking judgment on Providence's misappropriation-of-trade-secrets claim, (Dkt. #258), and another seeking judgment on Providence's tort and contract claims, (Dkt. #262). The Court now considers the latter motion.

II. Legal Standard

“Summary judgment is appropriate only when ‘the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'” Shepherd ex rel. Est. of Shepherd v. City of Shreveport, 920 F.3d 278, 282-83 (5th Cir. 2019) (quoting FED. R. CIV. P. 56(a)). A defendant is entitled to summary judgment if it “identifies a lack of evidence to support the plaintiff's claim on an issue for which the plaintiff would bear the burden of proof at trial,” unless the plaintiff proffers “summary judgment evidence sufficient to sustain a finding in plaintiff's favor on that issue.” Smith v. Harris Cnty., 956 F.3d 311, 316 (5th Cir. 2020) (cleaned up).

Because Federal Rule of Civil Procedure 56 requires that there be no “genuine issue of material fact” to succeed on a motion for summary judgment, “the mere existence of some alleged factual dispute” is insufficient to defeat a motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (first emphasis omitted). A fact is “material” when, under the relevant substantive law, its resolution might govern the outcome of the suit. Id. at 248. “An issue is ‘genuine' if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party.” Hamilton v. Segue Software Inc., 232 F.3d 473, 477 (5th Cir. 2000) (citing Anderson, 477 U.S. at 248). When a movant shows that the nonmovant failed to proffer sufficient evidence to establish an essential element of its claim, “there can be ‘no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

“Courts consider the evidence in the light most favorable to the nonmovant, yet the nonmovant may not rely on mere allegations in the pleading; rather, the nonmovant must respond to the motion for summary judgment by setting forth particular facts indicating that there is a genuine issue for trial.” Int'l Ass'n of Machinists & Aerospace Workers, AFL-CIO v. Compania Mexicana de Aviacion, S.A. de C.V., 199 F.3d 796, 798 (5th Cir. 2000). Further, “Rule 56 does not impose upon the district court a duty to sift through the record in search of evidence to support a party's opposition to summary judgment.” Malacara v. Garber, 353 F.3d 393, 405 (5th Cir. 2003) (cleaned up). Thus, the nonmovant must cite to the evidence it contends supports its opposition to the motion for summary judgment. See FED. R. CIV. P. 56(c)(3) (“The court need consider only the cited materials, but it may consider other materials in the record.”).

III. Discussion

Providence asserts several causes of action against the Truly Defendants for their conduct following the breakdown in Providence and Truly's acquisition negotiations, including numerous tort and breach-of-contract claims. The Truly Defendants argue that they are entitled to summary judgment because the claims are preempted by TUTSA^[5] and, in any event, Providence has failed to present sufficient evidence supporting its claims.

Because the Court concludes that Providence has failed to present sufficient evidence to survive summary judgment on any of its claims, the Court need not consider whether those claims are likewise preempted. See Sci. Mach. & Welding, Inc. v. Rose, No. 3-20-564-CV, 2022 WL 850409, at *3 (Tex. App.-Austin Mar. 23, 2022, no pet.) (mem. op., not designated) (granting summary judgment for lack of evidence and not reaching defendant's TUTSA preemption challenge); Nguyen v. ABLe Commc'ns, Inc., No. 2-19-69-CV, 2020 WL 2071757, at *16, 22 (Tex. App.-Fort Worth Apr. 30, 2020, no pet.) (mem. op., not designated) (assuming claims were not preempted and addressing merits).

A. Knowing Participation

The Truly Defendants move for summary judgment on Providence's claim that they knowingly participated in breaches of fiduciary duties. This cause of action requires Providence to prove: “(1) the existence of a fiduciary relationship; (2) that the third party knew of the fiduciary relationship; and (3) that the third party was aware that it was participating in the breach of that fiduciary relationship.” Meadows v. Hartford Life Ins. Co., 492 F.3d 634, 639 (5th Cir. 2007) (citing Cox Tex. Newspapers, L.P. v. Wootten, 59 S.W.3d 717, 721-22 (Tex. App.-Austin 2001, no pet.)).

In evaluating this claim, the Court finds particularly instructive the decision in Crossroads Hospice, Inc. v FC Compassus, LLC, where the court considered whether the defendant-Crossroads-knowingly participated in a breach of fiduciary duty by Darla Clement, the plaintiff's (Compassus) former executive director. 606 S.W.3d 294 (Tex. App.-Houston [1st Dis.] 2020, no pet.), judgment vacated but not withdrawn, 2020 WL 3866902 (Tex. App.-Houston [1st Dist.] July 9, 2020).^[6]There, while she was still employed by Compassus, Clement reached out to Crossroads-a Compassus competitor-with a business plan for Crossroads to expand into Houston, where Compassus was located. Id. at 298. Clement was eventually put into contact with Crossroads's Chief Operating Officer, Tony...