SP Midtown, Ltd. v. Urban Storage, L.P. (Tex App 5/8/08)

SP sued Urban and The Jenkins Organization, Inc. (collectively "Urban") for misappropriation of trade secrets and related claims. The trial court granted summary judgment in favor of Urban and the appellate court affirmed in part, reversed in part, and remanded in part.

SP operates a self-storage facility in Texas. In 2005, Getz, SP's principal, hired Welch as the on-site property manager. As a condition of her employment, Welch was required to sign a contract that included a confidentiality provision. In November 2005, Welch met with Dames, an Urban manager. Dames offered Welch a job as a manger for Urban; Welch accepted, but continued working for SP until the end of the month. Upon inspection of his books, Getz discovered that Welch had no sales in the month of November, with the exception of four sales at the beginning of the month. Getz asked a friend to call Welch and pose as a potential customer. Welch informed her that Urban's prices were more reasonable. A private investigator hired by Getz received the same information while posing as a customer. Getz later discovered that Welch had sent SP's daily rental logs to Urban. These logs contained the names of SP's tenants, the dates on which the rental contracts commenced, the terms of the rental obligations, and the number and size of the units rented. In addition, Urban prepared proposals for two of SP's biggest customers using information obtained from Welch. Both customers transferred their business to Urban.

Evidence existed showing that the information contained in the daily rental logs was not known outside of SP's business. The physical copies of the logs were kept inside a filing cabinet, which was not accessible to the public. There was no publicly available way to ascertain the customers' names contained in these documents. There was also evidence that SP made an effort to keep this information secret. The information contained in the daily rental logs was valuable, as it would allow competitors to undercut SP's prices. Therefore, SP presented more than a scintilla of evidence to create a genuine issue of material fact as to whether the daily rental logs constituted trade secrets. In addition, the evidence showed that Urban improperly acquired SP's trade secrets through the actions of Welch, who violated her duties to SP. A fact-finder could reasonably infer that Urban sent Welch its vacancy reports in an effort to elicit SP's trade secrets. Moreover, SP presented evidence that Urban used its trade secrets for commercial purposes. Urban, with the help of Welch, contacted at least two of SP's customers and persuaded them to transfer their business to Urban. Finally, there was evidence of damages resulting from the actions of Welch and Urban. SP lost these customers and their monthly rental payments. Additionally, SP lost the value of its confidential information.