Title Source, Inc. v. HouseCanary, Inc., No. 04-19-00044-CV, 2020 WL 5027667 (Tex. App.—San Antonio Aug. 26, 2020, pet. granted) is a new case addressing the jury charge in Texas Uniform Trade Secrets Act (TUTSA) cases. In a previous post, I discussed the Casteel problem in the misappropriation instructions that resulted in reversal of this multi-million dollar judgment and the court’s evaluation of the evidence supporting the existence of the trade secrets. (For complete discussion of the facts, please see this previous blog post. Since I wrote that post, the Court withdrew its earlier opinion and held, in addition to its previous holdings, that HouseCanary must also retry its breach of non-disclosure agreement claims if it elects on remand to retry its TUTSA claims because the claims were not separable from each other without unfairness to the parties.)
Today, I want to address the court’s analysis of whether HouseCanary’s fraud claim was preempted. TUTSA “displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret.” Thus, when the gravamen of a common law claim duplicates a TUTSA claim, the common law claim is preempted. However, because TUTSA’s preemption provision applies only to conflicting common law remedies, a common law claim is not preempted by TUTSA if it addresses harm separate from the trade secret misappropriation.
In Title Source, HouseCanary asserted claims for both TUTSA violations and fraud. A large part of HouseCanary’s fraud claims overlapped with the TUTSA claims so that was preempted. However, HouseCanary also alleged that “TSI never intended to pay HouseCanary the agreed-upon fee for its services and that HouseCanary was induced to enter into Amendment One and relinquish its rights under the ‘potentially more lucrative’ licensing agreement ‘based on the representation that TSI would provide its historical appraisal data to HouseCanary.’” These claims would not be preempted. However, because the jury answered a single broad form question on fraud, the court could not affirm the fraud finding and had to reverse for a new trial.
The Texas Supreme Court has granted petition on this case so we will have to wait to see if the Court reaches the same conclusion.