The Appellate Record : Texas Appellate Lawyer & Attorney Kendall Gray for Fifth Circuit & Supreme Court Appeals

Texas Trade Secrets Composed Of Publicly Available Components

Tewari De-Ox Systems v. Mountain States involved claims of misappropriation of trade secrets under Texas law. The interesting part of the case arose because aspects of the "secrets" weren't secret at all because they had been part of a patent application which became public 18 months later under the terms of the Intellectual Property and Communications Omnibus Reform Act of 1999, 35 U.S.C. § 122(b)(1)(A). But the Fifth Circuit revived the trade secret claims because

a trade secret can exist in a combination of characteristics and components each of which, by itself, is in the public domain, but the unified process, design and operation of which in unique combination, affords a competitive advantage and is a protectible secret.

Judge Prado wrote the court's opinion.

Bankruptcy: Officer Of General Partner Also Acting As Fiduciary To Limited Partnership 

FNFS v. Harwood principally involved the question of whether the debtor had committed fraud or defalcation while acting in a fiduciary capacity such that his debts to a limited partnership were not discharged in bankruptcy under 11 U.S.C. § 523(a)(4). The debtor was an officer and director of a company that acted as general partner of a limited partnership to which the money was owed. He argued that while he was a fiduciary to the general partner company, he was not a fiduciary of the limited partnership. Looking to the substance of the business relationship,  the control he exercised and the confidence reposed in him, the court ruled that he was "acting in a fiduciary capacity" to the limited partner.  Some of the key language:

We conclude that an officer of a corporate general partner who is entrusted with the management of the limited partnership and who exercises control over the limited partnership . . . owes a fiduciary duty to the partnership that satisfies Section 523(a)(4). We emphasize that it is not only the control that the officer actually exerts over the partnership, but also the confidence and trust placed in the hands of the controlling officer, that leads us to find that a fiduciary relationship exists sufficient for the purposes of Section 523(a)(4).

Here, the test was satisfied because, as a factual matter, there was evidence that the debtor had exercised near-complete control over both tiers of the entity until a few months prior to his termination, and the general partner's board entrusted the debtor with the sole and plenary authority over the day-to-day management of the partnership enterprise. Judge King wrote the court's opinion.

Mass Tort: No Class Certification Without A Trial Plan To Deal With Individual Issues

Finally, Madison v. Chalmette Refining represents another attempt to certify a class of plaintiffs claiming injury from a mass accident, here the emission of petroleum coke dust from a refiner. According to the Fifth Circuit, the trial court had not done the "rigorous analysis" and "close look" that is necessary before determining that common issues predominate and the case would not degenerate into mini-trials.

The court reversed the district court's class certification order and cast some doubt on its pre-Amchem mass-tort precedents in language indicating (as in Texas state court) importance of a trial plan for dealing with individualized issues:

Whether Watson has survived later developments in class action law–embodied in Amchem and its progeny–is an open question, but even in Watson, the district court had “issued orders detailing a four-phase plan for trial.”. . . . In Turner v. Murphy Oil USA, Inc., . . .  [c]ritical to the court’s predominance inquiry was the fact that “Plaintiffs submitted a proposed trial plan to the Court. The plan provides for a three-phase trial.”  * * * 

We must reverse because, “[i]n its certification order, the [district] court did not indicate that it [had] seriously considered the administration of the trial. Instead, it appears to have adopted a figure-it-out-as-we-go-along approach . . . By failing to adequately analyze and balance the common issues against the individualized issues, the district court abused its discretion in determining that common issues predominated and in certifying the class. We do not suggest that class treatment is necessarily inappropriate. As Chalmette Refining acknowledged at oral argument, class treatment on the common issue of liability may indeed be appropriate. But our precedent demands a far more rigorous analysis than the district court conducted.

Judge Clement wrote the court's opinion.