Texas Supreme Court Confirms that HouseCanary Must Fly Toward a $201 Million Judgment or a Retrial

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On June 17, 2022, the Texas Supreme Court affirmed a lower appellate court’s decision, (which we previously wrote about here), which nixed the plaintiff’s $740 million trade secret win at trial and required the plaintiff to either accept a $201 million breach of contract win (which the defendant decried as  “jackpot justice”) or go back to trial on all claims.

Briefly, real estate startup HouseCanary brought suit against Title Source, Inc., now known as Amrock, alleging misappropriation of trade secrets under the Texas Uniform Trade Secrets Act (TUTSA), fraud, and breach of contract. At trial, the jury awarded HouseCanary $740 million on its TUTSA and fraud claims and $201 million on its breach of contract claim. HouseCanary could elect to recover one or the other, and it elected to recover the $740 million. On appeal, the lower appellate court reversed the trial court decision regarding TUTSA and fraud based on deficiencies in the jury charge. The appellate court then found that the TUTSA, fraud, and breach of contract claims were inseparable, leaving HouseCanary with two options: to retry all of its claims or recover only the $201 million awarded on the breach of contract claim.

HouseCanary sought review from the Texas Supreme Court. In its petition for review, HouseCanary argued that the lower appellate court misconstrued TUTSA by holding that the statute precludes claims based upon alleged contractual breaches that occurred after Title Source had already acquired HouseCanary’s trade secrets. HouseCanary argued that Title Source’s conduct constituted “reverse engineering,” which it described “as an iconic example of ‘improper means’” under TUTSA. HouseCanary also argued that the lower appellate court “misread the evidentiary record” in reaching its conclusion because the “acquisition of secrets followed from (rather than preceded) [Title Source’s alleged] breach.” HouseCanary further challenged the lower court’s ruling on fraud, arguing that the lower appellate court’s finding that the fraud claim was preempted by TUTSA was erroneous and never raised by Title Source below.

Title Source’s successor, Amrock, filed a cross-petition, arguing that if the Texas Supreme Court reviewed the lower appellate court’s decision, it should go further and wipe out the $201 million breach of contract award as well. Amrock criticized the judgment as “a return of ‘jackpot justice’ in Texas” and characterized HouseCanary’s damages evidence at trial as “speculation and wishful thinking.”

In orders issued on June 17, the Texas Supreme Court denied both HouseCanary’s petition and Amrock’s cross-petition, without explanation. Accordingly, the lower appellate court’s decision will stand and HouseCanary will presumably weigh whether to proceed with a $201 million judgment or take a shot at retrying the entire case.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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