» Texas appellate court hears business dispute centering on tortious interference and misappropriation claims

Texas appellate court hears business dispute centering on tortious interference and misappropriation claims

Last month, a state appellate court issued an opinion in a Texas tortious interference case discussing whether the defendant corporation improperly “poached” workers whom the plaintiff corporation had “located and groomed.” Ultimately, the appellate court concluded that the defendant corporation was entitled to summary judgment on each of the plaintiff’s claims, affirming the dismissal of the case. 

The facts of the case

According to the court’s opinion, both plaintiff and defendant corporations are in the business of supplying offshore labor to energy companies. The plaintiff had a contract with two other companies in which one company would provide the plaintiff with laborers that the plaintiff would then place with one of its energy clients. In effect, the plaintiff corporation was the middleman in the staffing transaction. 

On December 15, 2015, the plaintiff’s client gave notice to the plaintiff that it would no longer continue to use the plaintiff’s services, because it needed a lower-cost option. After several months of discussion between the defendant corporation, the labor supplier and the plaintiff’s former client, the defendant was invited to submit a bid for the client’s business. The defendant corporation did so, and ultimately secured the client’s business. The agreement provided that the defendant would supply the same laborers that had previously been provided by the plaintiff corporation. The plaintiff corporation filed a lawsuit against the defendant alleging that the defendant engaged in tortious interference with its contracts between the labor supplier and its client. 

The trial court granted the defendant’s motion for summary judgment, noting that the plaintiff’s case was contingent on proving that the defendant misappropriated workers from the plaintiff. However, the court pointed out that the theory of misappropriation had not been applied to people, explaining “had the workers in question been employed by the plaintiff they could not have been prevented from going to work for defendants or anyone else. Why, then, where the plaintiff does not employ the workers in question, could plaintiff prevent them going to work for Defendants or anyone else?” The plaintiff appealed. 

The appellate court affirms the lower court’s decision

The court began its analysis by noting that a defendant bringing a motion for summary judgment must show “that no genuine issues of material fact exist on at least one essential element of the cause of action asserted against it and that it is entitled to judgment as a matter of law.”

To establish a claim of misappropriation, or unfair competition, the court explained that a plaintiff must establish three elements:

  • The plaintiff created a product through extensive time, labor, skill and money;
  • The defendant used that product in competition against the plaintiff, gaining a special advantage because the defendant did not have to incur the expense to develop the product; and
  • The plaintiff suffered commercial damage as a result.

The plaintiff’s claim centered on a finding that its system of locating, hiring, training and getting offshore laborers to domestic corporations constitutes a “work product.” In support of its claim, the plaintiff argued that the “institutional knowledge that it developed over time and used to craft this pool of labor,” and its “ability to navigate the international customs issues involved” constitute work product.

The court rejected the plaintiff’s claim. Initially, the court noted that knowledge, training and expertise, are not typically considered work product. The court went on to explain that the training and certification provided by the plaintiff were similarly not work product. These assets, the court held, could not be separated from the laborers themselves, once they were imparted. The court also noted that the contract the plaintiff relied on to establish its claim clearly states that the employees themselves were to remain employees of the labor-supplying corporation, meaning that they never “belonged” to the plaintiff.  

The court went on to affirm the denial of the plaintiff’s remaining claims, finding that the plaintiff’s evidence was insufficient to establish a claim of tortious interference. In so holding, the court noted that the contract between the plaintiff and its client was not in effect at the time when the defendant engaged the client, and that the plaintiff could not point to any evidence that the defendant induced the labor-supplying corporation to terminate its contract with the plaintiff.

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