A Texas Court of Appeals held on August 22, 2016, that a former employer was entitled to $2.8 million in attorney’s fees against a former employee who used the employer’s information to compete against it. The Court reached this ruling despite the fact that the jury found no evidence that the employer sustained any damages or that the employee misappropriated trade secrets.
Patrick Daugherty was a partner and senior executive at Highland Capital Management, L.P. (Highland), until he left to start a competing business. Highland presented evidence at trial that, after leaving Highland, Daugherty forwarded Highland documents to his personal email address, kept printouts of other emails, and kept 40,000 documents on his laptop that he only submitted for forensic remediation after trial. The documents on his laptop included portfolio and pricing information as well as documents regarding Highland’s internal management and operations.
Ultimately the jury found that the information Daugherty took did not meet the definition of “trade secret” but did constitute “Confidential Information” as that term was defined in Daugherty’s employment agreement. The jury then found that Daugherty had breached his employment agreement and related buy/sell by using or disclosing confidential information and other information. Nevertheless, the jury awarded Highland $0 in damages but did find Highland was entitled to $2.8 million in attorney’s fees. The trial court upheld these findings and issued a permanent injunction against Daugherty preventing him from retaining or disclosing Highland’s confidential information.
Daugherty appealed, arguing that the Texas statute awarding attorney’s fees for breach of contract- Texas Civil Practices and Remedies Code § 38.001(8) – only does so when there is a finding of damages. Daugherty also argued that the award of $0 in damages, and Highland’s efforts to recover a specific dollar amount, foreclosed the possibility of imminent harm, irreparable injury, and no adequate remedy at law, all of which were necessary for a permanent injunction to issue.
The Dallas Court of Appeals rejected these arguments and affirmed the jury verdict and trial court injunction. First, the Court held that Highland had adequately pleaded and presented evidence that the agreements Daugherty breached entitled Highland to and assessment of fees against him independent of § 38.001(8), and that the contract provisions did not require a finding of damages.
The Court further held that the damages question posed to the jury only involved lost profits. Highland presented extensive evidence, meanwhile, that Daugherty’s actions resulted in long-term unquantifiable harm, including the ability of competitors to replicate Highland’s business strategies. Highland also presented evidence that Daugherty’s actions may have resulted in the loss of trust from Highland’s clients. The Court further noted that Daugherty’s contracts with Highland also allowed for injunctive relief as a result of breach.
Daugherty v. Highland Capital Mgmt., L.P., No. 05-14-01215-CV ,2016 WL 4446158 (Tex. App. – Dallas, Aug. 22, 2016).
