Advanced Products & Systems, Inc. v. Gary Simon

STATE OF LOUISIANA

COURT OF APPEAL, THIRD CIRCUIT

06-609

ADVANCE PRODUCTS & SYSTEMS, INC.

VERSUS

GARY SIMON, ET AL.

**********
APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT
PARISH OF LAFAYETTE, NO. 2004-1160
HONORABLE DURWOOD W. CONQUE, DISTRICT JUDGE
**********

GLENN B. GREMILLION
JUDGE

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Court composed of Glenn B. Gremillion, Elizabeth A. Pickett, and J. David Painter,
Judges.

AFFIRMED.

William W. Stagg
Jeffrey Ackermann
Michael J. Vallan
Durio, McGoffin, Stagg & Ackermann
P. O. Box 51308
Lafayette, LA 70505
(337) 233-0300
Counsel for Plaintiff/Appellant:
Advance Products & Systems, Inc.

Thomas M. Flanagan
Jennifer L. Thornton
W. Raley Alford, III
Stanley, Flanagan & Reuter, LLC
909 Poydras, Ste 2500
New Orleans, LA 70112
(504) 523-1580
Counsel for Plaintiffs/Appellants:
Advance Products & Systems, Inc.

Carla Marie Perron
Joe House
Mark Wham
13519 Havershire Lane
Houston, TX 77079
(713) 468-2786
Counsel for Plaintiffs/Appellants:
Advance Products & Systems, Inc.

Henry C. Perret, Jr.
Frank S. Slavich, III
Kyle M. Bacon
Perret, Doise
P. O. Drawer 3408
Lafayette, LA 70502-3408
(337) 262-9000
Counsel for Defendants/Appellees:
Jean Menard Sullivan
Patrick Sullivan
Lucas Johnson
Chad Calais
Gary Simon

Mark R. Beebe
Rusty J. Savoie
Jody R. Montelaro
Peter M. Mansfield
Adams & Reese
4500 One Shell Square
New Orleans, LA 70139
(504) 581-3234
Counsel for Defendants/Appellees:
Nanette Smith Cazayoux
Francis Eugene Cazayoux
CCI Piping Systems, LLC
Cazayoux Commercial Investments, LLC

GREMILLION, Judge.

In this case, the plaintiff, Advance Products & Systems, Inc. (APS),

appeals the trial court’s grant of summary judgment in favor of the defendants, Gary

Simon, Chad Calais, Lucas Johnson, Patrick Sullivan, Jean Menard Sullivan, CCI

Piping Systems, L.L.C., and CCI Pipeline Services, Ltd.1 For the following reasons,

we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The following facts are not at issue: APS is owned by Tom Forlander,

who was convicted of possession of child pornography and sent to serve his sentence

in a federal facility in Beaumont, Texas, beginning in June 2003. During the time he

was incarcerated, Tom appointed his wife of one week, Joann Forlander, as the CEO

of APS. Joann had been a school teacher and had no experience or knowledge of

APS or the industry.

Simon, Calais, Johnson, Sullivan, and Menard were all employed by

APS through December 2003, when they departed to work for CCI. This Texas-based

company was begun several years prior to this time by APS’s former employee,

Francis Cazayoux. In December 2003, Cazayoux formed CCI-La, which employed

the Employee Defendants.

In March 2004, APS filed a petition for injunctive relief urging that the

Employee Defendants violated non-compete and non-disclosure agreements they had

entered into while employed by APS. It further urged that one or more defendants

1
In order to distinguish Patrick Sullivan and Jean Menard Sullivan, we will refer to Jean
by her maiden name, Menard. When referring only to Calais, Johnson, Sullivan, and Menard, we
will use “Employee Defendants.” When referring to all of the defendants, we will use
“defendants.”

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violated the Louisiana Unfair Trade Secrets Act. CCI answered and filed numerous

exceptions and, as plaintiff-in-reconvention, requested attorney’s fees. The Employee

Defendants also answered and requested attorney’s fees and damages.

In September 2004, CCI filed a motion for expedited consideration of

motion for injunctive relief urging that APS filed an identical lawsuit in a Texas

court. It further filed its own motion for injunctive relief urging that APS be enjoined

from pursuing its identical claims in a Texas court. APS then filed a motion to

dismiss without prejudice the individual defendants, but not CCI, from the Texas

lawsuit.

APS filed an amended and restated petition in December 2004. CCI

answered and asserted as plaintiffs-in-reconvention a right to attorney’s fees and

damages for a groundless lawsuit for purposes of harassment. APS filed an exception

and answer to CCI’s reconventional demand urging that it was premature.

In early March 2005, the Employee Defendants and CCI filed a motion

for summary judgment. In late March 2005, APS opposed all of the defendant’s

motions for summary judgment urging that there were multiple disputed facts. It

further urged that summary judgment was premature because it had not had the

opportunity to depose Calais, Johnson, Sullivan, Menard or the Cazayouxs. CCI filed

a motion for attorney’s fees and costs. APS then filed a motion in opposition and a

reconventional demand.

Following a hearing in April 2005, the trial court rendered a judgment

granting summary judgment in favor of the Employee Defendants and CCI. The trial

court held that there was no genuine issues of material fact as to any claim presented

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by APS and dismissed its entire case with prejudice at APS’s cost. APS now appeals.

After filing appellate briefs, APS filed a motion and incorporated

memorandum to strike certain documents that were submitted with the defendants’

brief. The Employee Defendants urge that APS failed to object at the trial court level

to the inclusion of the mentioned documents and failed to assign as error on appeal

the admission of these documents. Although we are inclined to agree with the

Employee Defendants, we find this issue moot as none of the documents were

relevant to our findings on appeal.

ISSUES

APS assigns as error:

1. The trial court abused its discretion by not allowing it to
depose the defendants or otherwise engage in needed
discovery before ruling on the defendants’ motion for
summary judgment.

2. The trial court erred in dismissing the case without a trial
because the record reveals that there are genuine issues of
material fact as to all of APS’s causes of action that APS is
entitled to present to a jury for resolution.

3. The trial court’s granting of summary judgment was the
product of impermissible credibility determinations.

4. The trial court’s granting of summary judgment was
improper because it did not construe all reasonable factual
inferences from the evidence in favor of APS.

5. Summary judgment was improper because defendants’
state of mind, motive, and intent are critical factual issues
that should be determined by the jury at a trial on the
merits.

SUMMARY JUDGMENT

The law pertaining to summary judgment was discussed by the Louisiana

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Supreme Court in its per curiam opinion in Hines v. Garrett, 04-0806, pp. 1-2 (La.

6/25/04), 876 So.2d 764, 765-66 (alteration in original):

We review a district court's grant of summary judgment de novo,
viewing the record and all reasonable inferences that may be drawn from
it in the light most favorable to the non-movant. Summary judgment is
warranted only if “there is no genuine issue as to material fact and [ ] the
mover is entitled to judgment as a matter of law.” La.Code Civ.Proc.
art. 966(C)(1). In ruling on a motion for summary judgment, the judge's
role is not to evaluate the weight of the evidence or to determine the
truth of the matter, but instead to determine whether there is a genuine
issue of triable fact. All doubts should be resolved in the non-moving
party's favor.

A fact is material if it potentially insures or precludes recovery, affects

a litigant's ultimate success, or determines the outcome of the legal dispute. Smith v.

Our Lady of the Lake Hosp., Inc., 93-2512 (La. 7/5/94), 639 So.2d 730. A genuine

issue is one as to which reasonable persons could disagree; if reasonable persons

could reach only one conclusion, there is no need for trial on that issue and summary

judgment is appropriate. Id. Whether a fact is material is determined in light of the

relevant substantive law. Weingartner v. La. IceGators, 02-1181 (La.App. 3 Cir.

4/17/03), 854 So.2d 898, writ denied, 03-1388 (La. 9/13/03), 853 So.2d 645.

DISCOVERY

In its first assignment of error, APS argues that the trial court erred in

failing to allow it additional time for discovery. As noted below, the issue was raised

at the summary judgment hearing and the trial court specifically found that APS had

adequate time to conduct whatever discovery it needed and that additional time for

discovery would not change the result. Louisiana Code of Civil Procedure Article

966(C)(1)states: “After adequate discovery or after a case is set for trial, a motion

which shows that there is no genuine issue as to material fact and that the mover is

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entitled to judgment as a matter of law shall be granted.” Additionally, La.Code

Civ.P. art. 966(B) allows the trial court, for good cause, to give the party adverse to

the motion for summary judgment, “additional time to file a response, including

opposing affidavits or depositions.”

La.Code Civ.P. art. 967(C) states (emphasis added):

If it appears from the affidavits of a party opposing the motion
that for reasons stated he cannot present by affidavit facts essential to
justify his opposition, the court may refuse the application for judgment
or may order a continuance to permit affidavits to be obtained or
depositions to be taken or discovery to be had or may make such other
order as is just.

In Simoneaux v. E.I. du Pont de Nemours and Co., Inc., 483 So.2d 908, 912-13 (La.

1986), the supreme court stated:

There is no absolute right to delay action on a motion for
summary judgment until discovery is completed. Under C.C.P. 967, a
trial judge clearly has the discretion to issue a summary judgment after
the filing of affidavits, or the judge may allow further affidavits or
discovery to take place.

...

The only requirement is that the parties be given a fair opportunity
to present their claim. Unless plaintiff shows a probable injustice a suit
should not be delayed pending discovery when it appears at an early
stage that there are no genuine issues of fact.

This court uses the abuse of discretion standard to determine if the trial court allowed

adequate time for discovery. See Mouton v. Sears Roebuck and Co., 99-669 (La.App.

3 Cir. 11/2/99), 748 So.2d 61, writ denied,99-3386 (La. 2/4/00), 754 So.2d 232 .

We find that the trial court did not abuse its discretion in declining to

allow APS additional time to obtain telephone records and to depose the Employee

Defendants. APS had more than a year to depose witnesses between the time it filed

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for injunctive relief in March 2004, and the summary judgment hearing in April 2005.

This assignment of error is without merit.

NON-COMPETE AGREEMENT

APS next argues that genuine issues of material fact exist with regard to

non-compete agreements signed by Simon and Menard. Simon and Menard signed

non-compete agreements on June 2, 1988, during their first round of employment

with APS. Simon left in 1990, and Menard in 1991. The agreement provided that

they would not compete with APS upon termination of their employment within the

same geographical region for two years. Simon and Menard resumed working for

APS shortly after their departure and did not resign until December 2003. However,

during that time, neither Simon nor Menard signed new non-compete agreements.

There is no dispute that they did not violate the non-compete agreement following

their initial departure from APS. Both, however, went to work for CCI, a competitor

of APS in the same geographical region, after their departure in December 2003.

Both APS and the Employee Defendants agree that pre-1989 law on non-compete

agreements applied to the contracts.

APS argued at the hearing and in its brief that the agreements were

ratified when Simon and Menard returned to work because they resumed work having

all of the benefits they had before they left, such as seniority and vacation time. It

urges there are factual and legal disputes as to what effect Simon and Menard’s brief

departure had on their non-compete agreements.

At the conclusion of the arguments, the trial court stated:

I find that, as to those defendant employees who had no noncompetitive
agreement signed, I’m granting the motion for summary judgment. As

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to the two that did, I’m granting a motion for summary judgment as well.
. . I’m granting this one as well, on the basis that I do believe that a
noncompetitive agreement as it was viewed prior to the 1990 revision,
or 1989 statutes, cannot be novated or ratified. I think that, applying
pre-1990 law, that would be frowned upon. And, secondly, I do not find
that there is any evidence – any substantive fact brought forth by the
plaintiff to show me that he will even be able to come close to meeting
his burden of proof at trial or showing substantial expenditure or time
spent specifically on the employee as required by National Motor Club
v. Conque and the Orkin case.

Specifically, the – the Orkin case is really now the keynote case,
because it was– it went far beyond what National Motor Club has.

Louisiana Revised Statute 23:921 contains the law governing non-

compete agreements. Apart from the requirements of pre-1989 law, we agree that the

non-compete agreements could not be ratified or novated. There was no evidence to

suggest that the employees intended to ratify the contracts, and we agree that pre-

1989 law would frown upon the ratification of a non-compete agreement, which must

be strictly construed against the party seeking its enforcement and strictly construed

in favor of employees. See SWAT 24 Shreveport Bossier, Inc. v. Bond, Sup. 2001, 00-

1695 (La. 6/29/01), 808 So.2d 294; Petroleum Helicopters, Inc., v. Untereker, 98-

1816 (La.App. 3 Cir. 3/31/99), 731 So.2d 965, writ denied, 99-1739 (La. 8/5/99), 747

So.2d 40. Moreover, the overriding principles of public policy dictate that non-

compete agreements are not favored in Louisiana. Id. Accordingly, we find that the

non-compete agreements were no longer valid when Sullivan and Menard resumed

working for APS. Moreover, even if we assumed that they were ratified, there was

no evidence to suggest that APS would have been able to meet its burden of proving

that it had invested substantial sums in specially training Sullivan or Menard or in

advertising their connection with APS, as required by the pre-1989 law pertaining to

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non-compete agreements. See Nat’l Motor Club of La., Inc. v. Conque, 173 So.2d

238 (La.1965), Orkin Exterminating Co. v. Foti, 302 So.2d 593 (La.1974).

Accordingly, we agree that APS will be unable to satisfy its evidentiary burden at trial

and that no genuine issues of material fact exist.

LOUISIANA UNIFORM TRADE SECRETS ACT / CONFIDENTIALITY

AGREEMENTS

In this assignment of error, APS urges that the Employee Defendants

signed confidentiality agreements and had a duty to protect confidential information.

APS argues that there are genuine issues of material fact regarding whether the

Employee Defendants misappropriated from APS and disclosed to CCI: (1) APS’s

customer list and contact information; (2) APS’s design and process for

manufacturing plastic casing spacers; and (3) APS’s accounting and pricing software

and data. In order to show that the trade secrets have been misappropriated, APS

would have to prove that 1) a trade secret existed, and 2) that they were

misappropriated by the Employee Defendants. La.R.S. 51:1431; Pontchartrain

Medical Labs, Inc. v. Roche Biomedical Labs., Inc., 95-2260 (La. App. 1 Cir.

6/28/96), 677 So.2d 1086.

Louisiana Revised Statute 51:1431(4) states:

“Trade secret” means information, including a formula, pattern,
compilation, program, device, method, technique, or process, that:

(a) derives independent economic value, actual or potential, from not
being generally known to and not being readily ascertainable by proper
means by other persons who can obtain economic value from its
disclosure or use, and

(b) is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy.

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Misappropriation means:

(a) acquisition of a trade secret of another by a person who knows or has
reason to know that the trade secret was acquired by improper means;
or

(b) disclosure or use of a trade secret of another without express or
implied consent by a person who:

(i) used improper means to acquire knowledge of the trade
secret; or

(ii) at the time of disclosure or use, knew or had reason to
know that his knowledge of the trade secret was:

(aa) derived from or through a person who
had utilized improper means to acquire it;

(bb) acquired under circumstances giving rise
to a duty to maintain its secrecy or limit its
use; or

(cc) derived from or though a person who
owed a duty to the person seeking relief to
maintain its secrecy or limit its use; or

(iii) before a material change of his position, knew or had
reason to know that it was a trade secret and that
knowledge of it has been acquired by accident or mistake.

La.R.S. 51:1431(2).

The trial court stated at the hearing:

[I] think that in the motion for summary judgment, the plaintiff would
have to at least be able to show me the list somehow got into the hands
of the employees, either that he gave it to them or that they took it
surreptitiously. And I don’t see that at this point; nor do I see that
giving the plaintiff any additional time for discovery would solve that
problem, because, I think, at best, it would raise suspicions but not
substantive facts. So I’m going to grant the motions for summary
judgment with regard to the trade secrets as well.

....

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. . . [I]t seems to me that what you’re asking the Court to do is to allow
you to go on an expedition to determine whether or not you can find any
evidence to support your defense of this motion for summary judgment.
You’re not telling me that there is evidence out there. You’re telling me
you have the right to explore it. I agree that you had a right to discovery
in this case; but I think that in light of the motion for summary
judgment, you have to be able to give me more than, “We have the right
to explore.”

....

. . . [T]he law as I understand it says you had to come here today with
substantive facts to show the – my authority to allow you to take
discovery is discretionary; and I think that in order for me to exercise
that discretion in your favor, you would have had to have given me
something a little more solid. I mean, just tell me that, you know,
there’s one person who has a telephone list that is suspicious or that
would indicate a number of clients were called. I don’t have any of that.

I think the other side of the coin is that the defendants have a right
to be relieved of the burden of the lawsuit if they can show what they
need to show on summary judgment. That’s what summary judgment
is for, and I think they’ve met it. So I’m going to stand on my rulings.

And as to the confidentiality agreement, without being able to
show that any confidence was breached, then I will grant that motion as
well.

We agree with the trial court’s grant of summary judgment on this issue

as well. It was clear at the hearing that APS had no factual basis, nor any proof that

there were any trade secrets involved, much less if they were misappropriated.

Counsel repeatedly stated that he “thought” someone made a copy of the customer list

and, again, argued that he did not have enough time for discovery. At the conclusion

of APS’s argument in its brief, it states, “APS should be allowed to explore the state

of mind of the defendants and present its evidence.” Counsel claimed at the hearing

that some phone records will establish the taking of client lists. As we have stated

before, there was no error in the trial court’s refusal to allow additional time for

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discovery. Simply, there is no evidence, only unsubstantiated allegations, and that

is simply insufficient. There is no doubt that APS will be unable to meet its burden

of proving that a trade secret existed, was misappropriated, or that any confidentiality

was breached.

LOUISIANA UNFAIR TRADE PRACTICES/FIDUCIARY DUTY

APS also argued that the Employee Defendants violated La.R.S. 51:1401

et seq., otherwise known as the Louisiana Unfair Trade Practices and Consumer

Protection Law. Louisiana Revised Statutes 51:1405(A) declares unlawful “unfair

methods of competition and unfair or deceptive acts or practices in the conduct of any

trade or commerce.” In order to recover under the act, APS would have to prove

fraud, deceit, misrepresentation, or other unethical conduct. Dixie Sav. and Loan

Ass’n v. Pitre, 99-154 (La.App. 5 Cir. 7/27/99), 751 So.2d 911, writ denied, 99-2867

(La. 12/10/99), 751 So.2d 855.

In this assignment of error, APS urges that “there are credibility

determinations and fact issues for trial regarding whether the defendants intended to

harm APS’s business,” and that there is “circumstantial evidence, which on a remand

will be bolstered by future depositions and document requests, that the defendants

acted with malice.” Again, APS makes the same allegations as it did with regard to

misappropriation of trade secrets without any evidence to support it. As to what

duties were owed or what breach might have occurred, APS’s counsel replied at the

hearing that “it goes to the discovery issues.” As we have previously noted, there was

no error in the trial court’s refusal to allow additional time for discovery and, clearly,

APS will be unable to meet its burden of proof at trial.

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Based on the foregoing, we find no merit in APS’s assignments of error.

We find that the trial court did not make impermissible credibility determinations, nor

did it fail to construe all reasonable factual inferences from the evidence in favor of

APS. Finally, without any evidence that any of its claims will be proven at trial, the

issue of the Employee Defendants’ state of mind, motive, and intent are never

reached. Accordingly, these assignments of error are without merit.

CONCLUSION

The judgment of the trial court granting summary judgment in favor of

the defendants, Gary Simon, Chad Calais, Lucas Johnson, Patrick Sullivan, Jean

Menard Sullivan, CCI Piping Systems, L.L.C., and CCI Pipeline Services, Ltd. is

affirmed. All costs of this appeal are assessed against Advance Products & Systems,

Inc.

AFFIRMED.

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