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Dallas Court of Appeals Evaluates Standard for Attorneys’ Fees Under TUTSA

Article by Heath Coffman

The Texas Uniform Trade Secret (TUTSA) allows a defendant to recover its attorneys’ fees if (1) the claim for misappropriation was brought in bad faith or (2) a motion to terminate an injunction is made or resisted in bad faith. The recent Dallas Court of Appeals case of Performance Pulsation Control, Inc. v. Sigma Drilling Technologies, No. 05-17-01423, 2018 WL 6599180 (Tex. App.—Dallas 2018, no pet. h.) is one of the few cases that has evaluated that standard.

In Performance Pulsation Control, plaintiff Sigma filed a lawsuit against defendant Performance Pulsation Control (PPC), alleging misappropriation of trade secrets under TUTSA. At deposition, though, Sigma’s owner Justin Manley admitted that he—and not Sigma—was the owner of the trade secrets. Subsequently, Manley was added as a plaintiff, and Sigma non-suited its claims. The next day, Mandley non-suited his claims against PPC. PPC then filed a motion for sanctions and for attorneys’ fees under TUTSA.

The trial court, though, refused to award any fees, and the Dallas Court of Appeals affirmed. The Court reasoned that there was evidence in the record that Sigma owned a patent to some of the processes associated with the trade secret, and the fact that plaintiffs nonsuited their claims did not compel a conclusion that there was no merit to plaintiffs’ claims.

The lesson here is that a non-suit of a claim is not—by itself—a sufficient basis to award defendant its attorneys’ fees under TUTSA.