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Commercial LitigationTrade Secrets

A slippery slope? Schlumberger v. Rutherford and implications for future abuse of the Texas Anti-SLAPP statute in trade secret litigation.

September 18, 2014

Commercial LitigationTrade Secrets

A slippery slope? Schlumberger v. Rutherford and implications for future abuse of the Texas Anti-SLAPP statute in trade secret litigation.

September 18, 2014

Back to Fish's Litigation Blog

 

Sometimes, the cure is as bad as (or even worse than) the disease. When it comes to Anti-SLAPP statutes, that has, at times, seemed to be the case. Such statutes are intended to quickly defeat meritless suits filed to stifle free speech and thwart legitimate filings with courts and government agencies (“SLAPP” stands for “strategic lawsuits against public participation”). Indeed, they have often proven useful in facilitating the early dismissal of litigation before the commencement of costly fact discovery. But, because they amount essentially to a pre-discovery summary judgment and may result in significant awards of fees and costs to the defendant, Anti-SLAPP statutes have also been misused as a tool to cut off legitimate claims before they can be fully and fairly litigated. Some Ninth Circuit judges have recently voiced their view that the federal courts in their circuit made a serious mistake in applying the California statute in federal cases, given how incompatible many of its more harsh procedures are with the Federal Rules of Civil Procedure.   See Makaeff v. Trump University, 715 F.3d 254 (9th Cir. 2013)  And now, in Texas, which only enacted its Anti-SLAPP statute[1] in 2011, a trial court has recently issued a ruling with troubling implications for future Anti-SLAPP counterattacks by defendants in trade secrets cases.

In Schlumberger v. Rutherford, the 127th District Court of Harris County granted a defendant’s Anti-SLAPP motion.[2] According to the pleadings, Rutherford, an in-house Schlumberger intellectual property lawyer, left to work for Acacia, a non-practicing entity focused on monetizing patents through litigation and licensing. Schlumberger alleged that Rutherford then shared confidential and proprietary trade secret information with Acacia, and that Acacia relied on that information in buying a patent it could – and did – assert against Schlumberger in a patent infringement suit. Also after Rutherford’s arrival at Acacia, another Acacia subsidiary sued Schlumberger for infringement of a second patent the company had acquired before hiring Rutherford. Following the filing of these two suits by Acacia entities, Schlumberger sued Rutherford , alleging breach of fiduciary duty, trade secret misappropriation, conversion, breach of contract, and civil theft, seeking injunctive relief and damages. In response, Rutherford filed an Anti-SLAPP motion, requesting the early dismissal of Schlumberger’s case due to Schlumberger’s alleged failure to provide “clear and specific evidence” supporting every element of its claims. In the motion, Rutherford described the suit against her as “Schlumberger’s attempt to stifle constitutional rights” of association and petition.

In late August, after multiple filings by each party and two substantive hearings, the court granted Rutherford’s Anti-SLAPP motion, dismissing all of Schlumberger’s claims except breach of contract, and ordering Schlumberger to pay $350,000 in attorneys’ fees and $250,000 in sanctions. In less than six months’ time, Schlumberger’s fact-intensive trade secret case had gone up in smoke while still on the launching pad. The court then denied Schlumberger’s request for findings of fact and conclusions law, citing a provision of the statute that limits that right to Anti-SLAPP movants. On September 15, Schlumberger filed its notice of appeal, and on September 16, Rutherford filed a notice of partial appeal, indicating that she would be challenging the court’s denial of the Anti-SLAPP motion with respect to Schlumberger’s breach of contract claim. [3]

Clearly, the appeal of the Schlumberger v. Rutherford Anti-SLAPP dismissal is one to watch. Typically, such suits are filed well before all the facts are fully known to the plaintiff, both to ensure the preservation of easily-destroyed ESI and to prevent – perhaps through a preliminary injunction— further dissemination of trade secret information. However, in choosing when to file and how to cast its pleadings, a potential plaintiff must carefully balance its desire for evidence and trade secret preservation against the risk of being slapped down by an Anti-SLAPP motion. Defendants in such cases, on the other hand, may have a powerful new weapon in their arsenal if the trial court’s ruling survives the appeal.

 

[1] The Texas Citizen Participation Act (TCPA) (Civil Practice and Remedies Code (“CPRC”) § 27.001, et seq.)

[2] The authors take no position on the merits of the parties’ respective claims and defenses and base this blog post only on publicly available pleadings and orders.

[3] Expedited interlocutory appeal is available for all rulings on TCPA motions to dismiss.

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