IP Law Daily $1M attorney fee award upheld in cash management software misappropriation suit
Wednesday, December 28, 2016

$1M attorney fee award upheld in cash management software misappropriation suit

By Greg Hammond, J.D.

A $1 million attorney fee award entered against a cash management software company, based on a Texas Theft Liability Act (TTLA) claim, was affirmed by the U.S. Court of Appeals in New Orleans. Although the TTLA claim, as originally pleaded, was preempted by the Copyright Act, the amended TTLA claim was not preempted, but was litigated and dismissed on the merits. The TTLA consequently supplied the rule of decision (Spear Marketing, Inc. v. BancorpSouth Bank, December 22, 2016, King, C.).

Spear Marketing, Inc.—a company that offers a cash management software-based solution called VaultWorks—alleged that ARGO Data Resource Corp. conspired with BancorpSouth Bank to misappropriate Spear Marketing’s trade secrets, leading to BancorpSouth terminating its VaultWorks agreement. Spear Marketing asserted violations of the Texas Theft Liability Act (TTLA) and conversion.

After the case was removed to federal court, the district court denied Spear Marketing’s motion to remand, based on federal preemption of at least some of the state-law claims by the Copyright Act, and granted summary judgment. The appellate court affirmed the rulings, holding that the TTLA claims were preempted at the time of removal. The district court subsequently granted attorney fees and costs under the Copyright Act and TTLA. Spear Marketing appealed the award, arguing that the lower court erred in awarding attorney fees under the TTLA because the state law claim was preempted.

The appellate court rejected Spear Marketing’s argument that the TTLA claim was completely preempted. The first amended complaint—which was the operative complaint at the time of the attorney fee award—was never held to be preempted. Rather, the appellate court’s previous ruling only addressed the TTLA claim as it was pleaded in the original petition and did not consider the TTLA claim in the first amended complaint. The TTLA claim in the first amended complaint was also distinct from that in the original petition and specifically omitted allegations that were equivalent to a copyright claim, with the intention of avoiding preemption. Moreover, the TTLA claim in the first amended complaint was litigated and dismissed on the merits during summary judgment. Consequently, it was proper to award attorney fees under the TTLA because that law supplied the rule of decision, the appellate court concluded.

The case is No. 16-10155.

Attorneys: Steven Dominic Sanfelippo (Cunningham Swaim, L.L.P.) for Spear Marketing, Inc. Tonya M. Gray (Andrews Kurth Kenyon LLP) for BancorpSouth Bank. David Harlan Harper (Haynes & Boone, L.L.P.) for Argo Data Resource Corp.

Companies: Spear Marketing, Inc.; Argo Data Resource Corp.; BancorpSouth Bank

MainStory: TopStory Copyright TradeSecrets LouisianaNews MississippiNews TexasNews

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