Introduction. TPI Cloud Hosting, Inc. (“TPI”) and Keller Williams Realty Inc. (“KW”) entered into an arrangement for TPI to develop a mobile app for KW’s real estate agents’ business. The alleged price tag to develop this app was $1.8 million. TPI sent a $600,000 invoice for payment to KW which KW refused to pay on the basis that the invoice lacked sufficient detail. The alleged agreement between the parties was never put into writing. TPI eventually sued KW for breach of contract, misappropriation of trade secrets, and fraud. KW filed a motion for summary judgment on the grounds that there were no genuine issues of material fact as to any of these claims so that judgment should be entered by the trial court as a matter of law in favor of KW. The Court denied KW’s motion for summary judgment. TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., A-19-CV-00808-JRN, 2020 WL 4708713, at *1 (W.D. Tex. June 18, 2020).
Background and analysis. In 2015, TPI, a software application developer, entered into discussions with KW to develop a mobile app for KW’s real estate agency business. These discussions resulted in TPI developing a prototype of a mobile app for KW. The parties subsequently entered into discussions for TPI to develop a complete version of the app. TPI sent invoices to KW totaling $600,000 and KW refused to pay them because the invoices lacked sufficient detail. One of the disputed issues between the parties was whether an agreement was reached since it was never put into writing.
Breach of contract claim. KW asked the court to find as a matter of law that there was no agreement between the parties because there were essential terms open for future negotiations. However, TPI presented evidence that KW agreed to pay TPI $1.8 million to develop the app, evidence from its CEO regarding specific features of the app that the parties agreed upon, and evidence of continuous conversations between the executives of the parties pertaining to the app’s development. The court found that there were material facts in dispute so that it was ultimately up to the jury to decide whether a contract existed. Therefore, the trial court denied KW’s motion for summary judgment as to this claim.
Trade secret claim. KW also requested the court to enter judgment in its favor as a matter of law as to TPI’s trade secret claim.
TPI alleges that KW misappropriated the “ideas, plans, and prototypes for [the] integrated software application TPI provided to KW.” (Resp., Dkt. 68, at 12). KW argues that TPI provided only two sources from which trade secrets could even theoretically be stolen: a “wireframe” PDF mockup of what the app could look like and a prototype that TPI’s CEO James Cashiola showed to various KW executives on his cell phone. (Mot., Dkt. 67, at 12–13). KW argues that (a) these displays are not trade secrets, (b) they are premised on broad concepts that are known by the general public, (c) they lack economic value because they are readily ascertainable, and (d) TPI took no effort to protect them, even if they were trade secrets.
TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., supra, *2.
However, the Court found that there were genuine dispute as to what information TPI actually provided to KW and that the trade secret claim was disputed by competent expert testimony. Thus, the court denied KW’s request for summary judgment relief as to this claim. TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., supra, *3.
Fraud claim. KW also moved for summary judgment as to TPI’s fraud claim.
TPI alleges that KW made a “knowingly false representation of future performance with no intention of performing its promise because KW had no intention of making” the $1.8 million payment until it “extracted additional intellectual property from TPI.” (Compl., Dkt. 1, at 6). KW argues that the fraud claim is preempted by the Texas Uniform Trade Secrets Act (“TUTSA”), Tex. Civ. Pract. [sic] & Rem. Code § 134A.001, et seq.
TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., supra, *3.
The trial court found that TUTSA did not preempt the fraud claim. “Here, however, the alleged fraud could have taken place even without trade secret misappropriation. For instance, if KW intended to delay payment until it extracted trade secret information, but never received that information, the fraud claim could still be valid.” Therefore, this fraud claim is not dependent upon the misappropriation of trade secrets, so it is not barred by TUTSA’s preemption clause.” TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., supra, *3.
Thus, the trial court also denied KW’s motion for summary judgment as to the fraud claim.
Conclusion and lessons learned. This case shows why it is important for parties to memorialize their agreements in writing. By doing so, this allows parties to avoid costly legal disputes and to more easily resolve disputes that arise under the contract. This case also shows how the effective use of experts in trade secret claims can help a plaintiff avoid being defeated by a motion for summary judgment. Lastly, just because there is some overlap between trade secret and fraud allegations doesn’t meant that the fraud allegations are preempted by the Texas Uniform Trade Secret Act. The fraud allegations will survive as long as the plaintiff can show that the fraud could have taken place even without the trade secret misappropriation.