CAE Integrated v. Moov Technologies

Case: 22-50034 Document: 00516425929 Page: 1 Date Filed: 08/09/2022

United States Court of Appeals

for the Fifth Circuit United States Court of Appeals

Fifth Circuit

FILED

August 9, 2022

No. 22-50034 Lyle W. Cayce

Clerk

CAE Integrated, L.L.C.; Capital Asset Exchange and

Trading, L.L.C.,

Plaintiffs—Appellants,

versus

Moov Technologies, Incorporated; Nicholas Meissner,

Defendants—Appellees.

Appeal from the United States District Court for the

Western District of Texas

USDC No. 1:21-CV-00377

Before Higginbotham, Dennis, and Graves, Circuit Judges.

Per Curiam:

CAE sued its former employee Nicholas Meissner and his current

employer, Moov, for misappropriation of trade secrets and then moved for a

preliminary injunction. The district court denied the preliminary injunction

and CAE appealed. As CAE fails to establish a likelihood of success on the

merits of its claims, we affirm the denial of the preliminary injunction.

Case: 22-50034 Document: 00516425929 Page: 2 Date Filed: 08/09/2022

No. 22-50034

I.

For forty years, CAE Integrated L.L.C. and Capital Asset Exchange

and Trading, L.L.C. (collectively CAE) have sold and traded semiconductor

equipment. Moov Technologies Inc. (Moov) is a smaller company in the used

semiconductor market, founded in 2017. Meissner worked at CAE as a

trader, developing relationships with buyers and sellers of semiconductor

equipment. His employment contract included a non-disclosure agreement

protecting CAE’s “propriety information” including its “customers and

suppliers and any other nonpublic information that has commercial value.”

The contract also included a one-year prohibition on Meissner soliciting

CAE’s actual or potential customers with whom he was in contact during the

year preceding any termination.

Through 2016, Meissner used his personal MacBook for work and

used Google Drive to transfer and store large files, such as photographs of

equipment and purchase agreements. The Google Drive account was linked

to Meissner’s personal Google account. Files saved on his MacBook were

placed in a folder that synced to his Google Drive. In 2016, CAE provided all

employees with computers. Meissner gave his MacBook to CAE to wipe it of

CAE files. At that time, CAE took a snapshot of the computer, as it was then

configured, which was stored on the MacBook’s secondary drive. CAE

returned the MacBook to Meissner, and he continued to use it as a personal

computer until it crashed later that year, when he brought the MacBook to

CAE for repair. CAE never again returned the MacBook to Meissner and he

has had no access to the MacBook since 2016.

CAE fired Meissner on May 1, 2018. Meissner signed a separation

agreement, agreeing to be bound by the 2014 non-compete clause for one

year. He warranted that he had returned all company property, including

documents stored in “his personal email or cloud storage accounts, or

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elsewhere.” The agreement included a general release of CAE’s claims,

known or unknown, against Meissner as of July 26, 2018. After being fired,

Meissner asked CAE to return his MacBook once any CAE files were

removed. While separating Meissner’s personal files from work files, CAE

moved the contents of the Google Drive to a new untitled folder on the

MacBook’s desktop, effectively moving those files to the Google Drive’s

trash. Weeks later, when looking for a personal document in his Google Drive

(from a different laptop), Meissner discovered that the files been moved to

the trash, rather than permanently deleted, and restored the Google Drive’s

contents. At this point, Meissner could access his Google Drive, but had no

access to the MacBook.

After waiting out his non-compete, Meissner joined Moov on June 24,

2019 as Head of Sales. Meissner believed he had no CAE information in his

possession and verified to Moov that he had not retained and would not use

any CAE data. Before starting at Moov, he again checked his Google Drive

account and deleted any documents he thought could contain CAE data. 1

These files were not in his Google Drive when he started at Moov.

In the year and a half after Meissner joined, Moov secured millions of

dollars in investments and thousands of listings for used semiconductor

equipment, valued at over $1 billion. CAE thought such impressive and quick

growth was “highly implausible” “without some sort of a head start.”

CAE’s CEO announced that CAE was “going to war” with Moov 2 and ran a

forensic exam on Meissner’s MacBook. 3 That forensic analysis looked at the

1

The forensic analysis shows that these documents had been deleted from the

Google Drive.

2

Shortly thereafter, CAE learned that Mark Cuban had invested in Moov.

3

The MacBook had been in CAE’s possession for four years.

3

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2016 snapshot of the Google Drive stored on the MacBook’s secondary

drive 4 and showed the folder synced to Google Drive with thousands of

documents from when Meissner worked at CAE. Meissner does not dispute

that he continued to use his Google Drive to store CAE documents

throughout his time at CAE. But, further forensic analysis also showed that

Meissner had not synchronized his Google Drive since he started at Moov

and showed no access to the Google Drive by Meissner or Moov. Meissner

had deleted all CAE information from his active Google Drive and thus did

not have the data that appeared in the snapshot. And months before the

preliminary injunction hearing, Meissner gave up access to his Google Drive

entirely.

CAE sued Moov and Meissner for trade secret misappropriation

under the Defend Trade Secrets Act of 2016 (DTSA) and the Texas Uniform

Trade Secrets Act (TUTSA). 5 CAE moved for a preliminary injunction to

prevent Moov from contacting 200 of its key customers. After nearly six

months of discovery, the district court held a two-day evidentiary hearing.

The district court found that CAE had not shown a likelihood of success on

the merits and denied the preliminary injunction. CAE appealed the denial

with regards only to its DTSA and TUTSA claims.

II.

We review the denial of a preliminary injunction for abuse of

discretion. 6 We review factual findings for clear error and legal conclusions

4

This copy of the Google Drive was no longer associated with an active Google

Drive account and could no longer sync to anything.

5

18 U.S.C. § 1836 et seq; Tex. Civ. Prac. & Rem. Code §§ 134A.001 et seq.

6

Future Proof Brands, L.L.C. v. Molson Coors Beverage Co., 982 F.3d 280, 288 (5th

Cir. 2020).

4

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de novo, 7 giving “due regard to the trial court’s opportunity to judge the

witnesses’ credibility.” 8 Additionally, “[a] preliminary injunction is ‘an

extraordinary remedy which should not be granted unless the party seeking

it has clearly carried [its] burden of persuasion.’” 9 “Only under

‘extraordinary circumstances’ will we reverse the denial of a preliminary

injunction.” 10

III.

A preliminary injunction is warranted only when the movant shows

“(1) a substantial likelihood of success on the merits, (2) irreparable injury if

the injunction is not granted, (3) that the injury outweighs any harm to the

other party, and (4) that granting the injunction will not disserve the public

interest.” 11 The “burden of persuasion on all of the four requirements for a

preliminary injunction is at all times upon the plaintiff.” 12

To succeed on the merits of its misappropriation of trade secrets

claim, CAE must show that “(1) a trade secret existed, (2) the trade secret

was acquired through a breach of a confidential relationship or discovered by

improper means, and (3) the defendant used the trade secret without

7

Atchafalaya Basinkeeper v. United States Army Corps of Engineers, 894 F.3d 692,

696 (5th Cir. 2018).

8

Harm v. Lake-Harm, 16 F.4th 450, 455 (5th Cir. 2021) (quoting Fed. R. Civ.

P. 52(a)(6)).

9

Future Proof Brands, 982 F.3d at 288 (quoting PCI Transp., Inc. v. Fort Worth &

W. R.R. Co., 418 F.3d 535, 545 (5th Cir. 2005) (alteration in the original)).

10

Anderson v. Jackson, 556 F.3d 351, 355–56 (5th Cir. 2009) (quoting White v.

Carlucci, 862 F.2d 1209, 1211 (5th Cir. 1989)).

11

Brock Servs., L.L.C. v. Rogillio, 936 F.3d 290, 296 (5th Cir. 2019); Winter v. Nat.

Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).

12

Canal Authority of Florida v. Callaway, 489 F.2d 567, 573 (5th Cir. 1974).

5

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authorization from the plaintiff.” 13 If there are trade secrets at issue, they

would have been improperly acquired by Meissner, thus we address the first

two elements of CAE’s misappropriation claim together.

A.

A trade secret is information which derives independent economic

value from being not generally known or readily ascertainable through proper

means. 14 The existence of a trade secret is a question of fact. 15

CAE alleges that Meissner and Moov misappropriated transactional

documents and customer lists. What CAE refers to as the “transactional

documents” are files from the Google Drive with purchase orders, invoices,

customer equipment needs, and pricing history. Meissner has not had access

to his MacBook since 2016 and he testified that the Google Drive contained

none of the transactional documents when he started at Moov. The district

court found Meissner’s testimony credible and the forensic analysis

confirmed that before Meissner began at Moov, he deleted any remaining

transactional documents from his Google Drive. Forensics also showed that

the only overlap between Moov’s files and the 2016 Google Drive snapshot

was two publicly available files from third parties. The district court did not

13

GE Betz, Inc. v. Moffitt-Johnston, 885 F.3d 318, 325 (5th Cir. 2018) (quoting CQ,

Inc. v. TXU Mining Co., 565 F.3d 268, 273 (5th Cir. 2009)) (emphasis in the original).

14

Under TUTSA a trade secret includes any “compilation,” “financial data,” or

“list of actual or potential customers or suppliers” that derive economic value from “not

being generally known to, and not being readily ascertainable” by another person. Tex.

Civ. Prac. & Rem. Code § 134A.002(6). Under DTSA a trade secret includes any

“compilation[]” or “financial . . . information” that derives economic value from “not

being generally known to, and not being readily ascertainable” by another person. 18

U.S.C. § 1839(3).

15

Gen. Univ. Sys., Inc. v. Lee, 379 F.3d 131, 150 (5th Cir. 2004) (citing

Restatement (Third) Unfair Competition § 39 cmt. d (1995)).

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err in finding that CAE failed to show that Meissner and Moov had access to

trade secrets in the transactional documents.

CAE also argues that Meissner and Moov misappropriated customer

lists.16 But, as Meissner testified and forensics confirmed, the Google Drive

contained no customer lists when he started at Moov. CAE contends that

Moov’s knowledge of some CAE customers shows that Moov

misappropriated trade secrets. Without any evidence that Meissner and

Moov accessed or used data in the Google Drive the remaining potential

sources of customer identities is Meissner’s personal knowledge or public

sources. Any injunctions placing conditions on “employment shall be based

on evidence of threatened misappropriation and not merely on the

information the person knows.” 17 Meissner’s knowledge of whom he worked

with while at CAE, absent other evidence, is insufficient to support a finding

that he misappropriated trade secrets. 18

16

The district court found that while Moov had information for certain CAE

customers, this was not a trade secret because the semiconductor equipment industry was

a “closed system with a limited number of players” so it was “likely that competitors will

have contact with the same potential customers simply by virtue of competing in the

industry.” CAE attacks the district court’s characterization of the semiconductor market,

describing the semiconductor market as “opaque,” where “absent an intermediary” one

would find it quite difficult to compete. However, we need not determine the size of the

market to determine whether Meissner misappropriated trade secrets.

17

18 U.S.C. § 1836(b)(3)(A)(i)(I); see also Tex. Civ. Prac. & Rem. Code

§ 134A.003(a) (restricting injunctions from “prohibit[ing] a person from using general

knowledge, skill, and experience that person acquired during employment”).

18

E.g. Marek Brother Sys., Inc. v. Enriquez, No. 3:19-CV-01082, 2019 WL 3322162,

at *4 (N.D. Tex. July 24, 2019) (denying injunction where plaintiff “failed to persuade the

court that the customer information [defendant] sent to his personal e-mail address ‘[was]

not generally known or readily ascertainable by independent investigation’”); BCOWW

Holdings, LLC v. Collins, No. SA-17-CA-00379, 2017 WL 3868184, at *15 (W.D. Tex. Sept.

5, 2017) (denying injunction because “[c]ustomer relationships do not qualify as trade

secrets,” even if a company “invests time and money to cultivate those relationships”).

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Furthermore, CAE has not identified a single contact whose

information was not publicly available or ascertainable through proper

means. Semiconductor industry participants are available in third-party

directories, meet at conventions and trade shows, and can be found through

online searches. Of the 200 contacts that CAE requested the district court

enjoin Meissner and Moov from contacting, the majority were listed in

Moov’s database before Meissner joined Moov. The district court did not

clearly err in finding that neither Meissner nor Moov misappropriated trade

secrets.

B.

Even if CAE had established that Meissner or Moov misappropriated

trade secrets, it failed to show the use or potential use of trade secrets. 19 CAE

contends that Moov could never have succeeded without CAE’s data,

claiming that “the ‘use’ of this data can reasonably be inferred from Moov’s

results.” This inference is insufficient to support a finding that Moov used

CAE’s trade secrets.

Months before the preliminary injunction hearing, Meissner

relinquished access to his personal Google Drive. Meissner cannot access

anything saved in his Google Drive, nor can Moov. “The critical question in

issuing the injunction and also the ultimate test on review is whether

defendant’s past conduct indicates that there is a reasonable likelihood of

19

CAE need not show actual use of trade secrets; however it must show that

Meissner or Moov is “in a position to use” trade secrets. TFC Partners, Inc. v. Stratton

Amenities, LLC, No. 1:19-CV-58, 2019 WL 369152, at *3 (W.D. Tex. Jan. 30, 2019); see

Cardoni v. Prosperity Bank, 805 F.3d 573, 590 (5th Cir. 2015); Malone v. PLH Grp., Inc., No.

01-19-00016-CV, 2020 WL 1680058, at *4–5 (Tex. App.—Houston [1st Dist.] Apr. 7,

2020, pet. denied).

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further violations in the future.” 20 As there is no continued access to the

MacBook or Google Drive, there is no threatened future use of trade

secrets. 21 CAE did not present sufficient evidence that Meissner or Moov

used CAE’s files or are in a position to do so.

CAE cannot show a likelihood of success on its trade secrets claim as

it cannot show that Meissner or Moov are in a position to use its trade

secrets. 22 We affirm the district court’s denial of the preliminary injunction.

IV.

Moov alternatively argues that we could affirm because CAE released

its right to bring this suit entirely. Although Meissner’s post-separation

agreement included a general release of claims that CAE had against

Meissner as of July 26, 2018, this argument has no purchase. By its terms, the

release does not cover “any claims relating to or arising from [Meissner’s]

willful or wanton misconduct, fraud, or criminal conduct.” As

misappropriation of trade secrets is a felony under Texas and federal law,

these claims were not released. 23 Moreover, the release only covers

Meissner, not Moov. The separation agreement has no bearing on this suit.

****

20

SEC v. Blatt, 583 F.2d 1325, 1334 (5th Cir. 1978).

21

E.g. Embarcadero Techs., Inc. v. Redgate Software, Inc., 1:17-CV-444-RP, 2017 WL

5588190, at *6 (W.D. Tex. Nov. 20, 2017) (where defendant relinquished access to Google

Drive, “a preliminary injunction is not necessary to prevent potential harm”).

22

CAE argued that should this Court find it had shown a likelihood of success, that

we should look to the remaining preliminary injunction factors. As CAE must carry the

burden on all four elements, its failure to show a likelihood of success alone is sufficient to

justify a denial. PCI Transp., 418 F.3d at 545.

23

Tex. Penal Code § 31.05; 18 U.S.C. § 1832.

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We AFFIRM the denial of the preliminary injunction.

10