TLS Mgmt. & Mktg. Servs. LLC v. Rodríguez-Toledo

TLS MANAGEMENT AND MARKETING SERVICES LLC, Plaintiff, v. RICKY RODRÍGUEZ-TOLEDO, et al., Defendants.

Civil No. 15-2121 (BJM)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

September 28, 2018

OPINION IN A NON-JURY TRIAL

TLS Management and Marketing Services LLC ("TLS") brought this action under the court's federal question and supplemental jurisdiction against Ricky Rodríguez-Toledo ("Rodríguez"), Lorraine Ramos ("Ramos"), Miguel Santo Domingo-Ortiz ("Santo Domingo"), ASG Accounting Solutions Group, Inc. ("ASG"), and Global Outsourcing Services LLC ("GOS"), alleging violations of Titles I and II of the Electronic Communications Privacy Act ("ECPA"); violations of the Puerto Rico Commercial and Industrial Trade Secret Protection Act, (the "Trade Secret Act"), 10 L.P.R.A. §§ 4131-4141; breach of contract, under Articles 1044, 1054, 1077 and 1206 of the Puerto Rico Civil Code, 31 L.P.R.A. §§ 2994, 3018, 3052, 3371; conversion, under Article 1802 of the Puerto Rico Civil Code, 31 L.P.R.A. § 5141; and tortious interference with various contracts, under Article 1802 of the Puerto Rico Civil Code. 31 L.P.R.A. § 5141. Dkt. 74.

I dismissed TLS's claims under Title II of ECPA, the Stored Communications Act. Dkt. 173 at 12. I denied summary judgment on TLS's claims under Title I of ECPA (the "Wiretap Act") and the Trade Secret Act. I also denied summary judgment on TLS's breach of contract claims against Rodríguez, ASG, and GOS for use and disclosure of the buy-sell agreement and the loan program. I granted TLS's motions for summary judgment on its breach of contract claims against Rodríguez, ASG, and GOS for disclosure of the loan agreement and operating agreement, and against Rodríguez and ASG for disclosure of the U.S. Possession Strategy and retention of TLS's Confidential Information. I also granted GOS's motion for summary judgment on TLS's breach of contract claims against it for disclosure of the U.S. Possession Strategy and retention of TLS's Confidential Information. I granted Defendants' motion for summary judgment on TLS's conversion claim and tortious interference claims. I dismissed TLS's causes of action against Ramos except for those under the Wiretap Act. Dkt. 383 at 27. And I dismissed TLS's causes of action again Santo Domingo. Dkt. 507.

The case proceeded to a five-day, non-jury trial on the surviving claims. The parties submitted post-trial briefs. Dkts. 524, 525. The case is before me on consent of the parties. Dkt. 93. Remaining are TLS's claims under the Wiretap Act against Ramos, Rodríguez, ASG, and GOS; under the Trade Secret Act against Rodríguez, ASG, and GOS; and for breach of contract against Rodríguez, ASG, and GOS for the use of buy-sell agreements and loan programs. The court also considers what, if any, remedies are appropriate.

FINDINGS OF FACT

The following findings of fact were stipulated by the parties in their proposed pretrial order or proven by a preponderance of the evidence at trial. See Dkt. 419.

1. Tax Law Solutions, LLC, was formed in Puerto Rico on June 28, 2010. In 2012, it changed its name to TLS Management and Marketing Services, LLC ("TLS").

2. TLS is a Puerto Rico-based tax planning and consulting firm divided into the Consulting Division and the Puerto Rico Division.

3. TLS's principals are David A. Runge and Richard M. Colombik.

4. Colombik testified that, in his opinion, the Consulting Division is valued at about $4.8 million and the Puerto Rico Division is valued at about $30 million.

5. The Consulting Division creates a personalized Capital Preservation Report ("CPR") for its clients to advise them on how to reduce tax liability. The CPR is the Consulting Division's main product and has been revised about sixty times.

6. TLS's Puerto Rico Division offers a U.S. Possession Strategy ("the Strategy").

7. The Strategy reduces the tax liability of its clientele through strategic use of Puerto Rico's Act 20 and Act 73 tax exemption decrees. The Strategy is implemented through documents, including loan applications, buy-sell agreements, and operating agreements.

8. TLS claims as trade secrets the methods underlying the Strategy, as well as the current and potential client lists, contractor roster, implementation documents and forms, and pricing model.

9. Accounting Solutions Group ("ASG") is a corporation duly organized under the laws of the Commonwealth of Puerto Rico on August 2, 2007. ASG's only stockholder is Ricky Rodríguez.

10. ASG is a boutique firm that offers services in corporate structures, tax planning and preparation, consulting, auditing, and forensic accounting, among others.

11. As part of its services for TLS, ASG handled clients under Puerto Rico tax incentive Act 20 and Act 73.

12. Lorraine Ramos is the wife of Ricky Rodríguez. She is an accountant but does not have a CPA license.

13. Ramos has worked at ASG as a subcontractor. Her work consists of bookkeeping tasks and occupies about one to three hours every month.

14. Ramos is a self-professed technophobe.

15. On March 13, 2012, ASG signed a Subcontractor Agreement ("SCA") with TLS.

16. The SCA included a confidentiality clause and a non-compete clause. The confidentiality clause states: "Except as authorized in writing by TLS, neither Subcontractor nor any entity controlling, controlled by or under common control with Subcontractor (collectively, 'Subcontractor Affiliates') will at any time, directly or indirectly, disclose or utilize in any manner including for Subcontractor's own pecuniary gain, Confidential Information of TLS. Subcontractor may only use Confidential Information of TLS for a purpose that is necessary in carrying out the provisions or this Agreement." Joint Ex. II ¶ 5.1.

17. The court struck the the non-compete clause because it is invalid under Puerto Rican law. Dkt. 383 at 16; see Arthur Young & Co. v. Vega III, No. RE-91-508, 1994 WL 909262 (P.R. May 24, 1994) (noncompetition agreements without geographic, temporal, or client limits are invalid).

18. The SCA defines confidential information as "business methods and procedures, clients or prospective clients ('TLS Clients'), agent lists, marketing channels and relationships, marketing methods, costs, prices, products, formulae, compositions, methods, systems, procedures, prospective and executed contracts and other business arrangements, proposals and project plans, and TLS Affiliates." Joint Ex. II at ¶ 5.2.1.

19. The SCA includes as confidential "TLS reports and any information contained therein, related work products including implementation documents, and any other information provided to Client by TLS or TLS Affiliates by or in connection with proposing or delivering TLS Services." Joint Ex. II at ¶ 5.2.2.

20. The SCA includes as confidential the "identities of agents, contractors, consultants, sales representatives, sales associates, subsidiaries, strategic partners, licensors, licensees, TLS Clients, suppliers, or other TLS service providers or sources of supply." Joint Ex. II at ¶ 5.2.3.

21. The SCA states: "TLS Confidential Information shall not include (a) information disclosed with the prior written consent of TLS, (b) information that has been previously disclosed by TLS to the general public, (c) information that is required to be disclosed pursuant to a valid judicial court order, but only to the extent of and for the purpose of such order, and only if after receiving such an order Subcontractor provides timely notice of such order to TLS and cooperates reasonably with TLS's efforts to contest or limit the scope of such order, or (d) any strategy or methodology contained in the TLS Plan that is currently being utilized by Subcontractor or any of Subcontractor's other clients as a result of Subcontractor's prior recommendations (the 'Excluded Strategies')." Joint Ex. II ¶ 5.3.

22. TLS considers any works made for hire under the SCA to be TLS confidential information. Joint Ex. II at ¶ 7.1.

23. The SCA required subcontractors to "return to TLS any Intellectual Property of TLS in Subcontractor's possession" upon termination of the agreement. Joint Ex. II ¶ 8.4.2.

24. By its own terms, the confidentiality clause survives any termination of the SCA. Joint Ex. II ¶ 8.4.3.

25. The SCA provides for equitable remedies in case of breach. "The Parties recognize and acknowledge that irreparable damage without an adequate remedy at law may result from a breach of the Confidentiality and Non-Competition sections of this Agreement." Joint Ex. II at ¶ 9.2.1.

26. By signing the SCA, the subcontractor agrees that TLS may apply for an injunction and, if granted and upheld by a court, the subcontractor will "pay all legal fees and costs of TLS." Joint Ex. II at ¶ 9.2.1.

27. The SCA also provides that, where a court finds a breach of the confidentiality agreement, "TLS shall, in addition to all remedies at equity and law, be entitled to receive from Subcontractor 150% of all fees collected by Subcontractor for such unauthorized use of TLS Confidential Information and any fees to which TLS would have otherwise been entitled to receive from any third party if such unauthorized use of TLS Confidential Information also involved services that would have otherwise resulted in compensation to TLS from any third party, in contravention of this Agreement." Joint Ex. II at ¶ 9.2.2.

28. As a TLS subcontractor, ASG handled clients under Puerto Rico tax incentive Act 20 and Act 73. Rodríguez managed the termination and resignation process for employees and consultants, performed internal financial and accounting duties, and generally impressed Runge and Colombik.

29. Runge and Colombik offered Rodríguez the position of Managing Director at TLS. He accepted.

30. On September 1, 2012, Rodríguez became a TLS employee.

31. On September 1, 2012, Rodríguez signed a Confidentiality and Non-Disclosure Agreement with TLS ("NDA") that included a confidentiality clause. Joint Ex. V. 32. The NDA states: "Whereas ('TLS') willingness to share Confidential Information is...