Antitrust Law Daily Wrap Up, ANTITRUST—Tex. App.: Noerr-Pennington doctrine precludes credit monitoring monopolization counterclaim, (Dec 21, 2015)

By Linda O’Brien, J.D., LL.M.

The Noerr-Pennington doctrine barred a credit monitoring service’s counterclaim that a competitor attempted to monopolize the credit monitoring product market through its breach of contract suit over the hiring of one of its former employees in order to gain access to confidential information, the Texas Appellate Court in Dallas has ruled. Thus, the trial court’s grant of the competitor’s motion for judgment notwithstanding the verdict was vacated and the counterclaim was dismissed for lack of jurisdiction (Profinity, LLC v. One Technologies, L.P., December 17, 2015, Lang, D.).

One Technologies (OT) and Profinity both offer credit monitoring products on the Internet. From June 2009 until November 2011, Chad Ertel was employed by OT to market OT’s credit monitoring products. As a condition of employment, Ertel signed an agreement, which contained confidentiality and non-compete provisions. In October 2011, Ertel accepted an offer of employment from Profinity. Prior to leaving OT, Ertel signed an addendum to the agreement that provided he would not engage in a competing business within a certain territory for a period of one year after leaving OT.

In April 2012, OT filed suit against Ertel and OT, alleging breach of contract claims that Ertel disclosed confidential information to Profinity, solicited OT clients, and promoted Profinity’s competing product, and that Profinity hired Ertel to market its products in order to gain a competitive advantage. Profinity asserted a counterclaim, based on the Texas Free Enterprise and Antitrust Act (TFEAA), asserting that OT attempted to monopolize the credit monitoring market. A jury found against OT on its breach of contract claims and in favor of Profinity on its antitrust counterclaim. The trial court granted OT’s motion for judgment notwithstanding the verdict (JNOV) as to the antitrust counterclaim, but denied the motion regarding the breach of contract claims. Both OT and Profinity appealed.

Antitrust counterclaim. The appellate court determined the Noerr-Pennington doctrine barred any claim for damages incurred by Profinity in its operations within Texas. The doctrine provides immunity from antitrust liability to “those who petition the government for redress” and bars claims based on conduct incidental to the prosecution of a suit with respect to such redress. Profinity’s contention that its counterclaim alleged independent conduct that was not premised on OT’s lawsuit or conduct incidental to the lawsuit was rejected. The court noted that Profinity presented no evidence that it would have been damaged by any of Ertel’s alleged representations without the filing of OT’s lawsuit.

Furthermore, Profinity conceded at trial that the company would not have been adversely affected in the absence of the litigation. Since Profinity’s counterclaim was based upon the lawsuit, the trial court did not err in concluding that the counterclaim was barred by the Noerr-Pennington doctrine. Therefore, the grant of the JNOV was vacated, and the counterclaim was dismissed for lack of jurisdiction, the appellate court concluded.

Breach of contract claims. However, the trial court’s denial of the JNOV on OT’s breach of contract claims was proper, since OT did not conclusively prove damages as a result of the breach. OT’s argument that un-rebutted expert testimony was introduced at trial on damages was rejected. The appellate court noted that OT’s expert was controverted by Profinity’s damages expert and OT cited no authority to support their argument that such “un-rebutted” testimony constituted conclusive evidence.

The case is No. 05-14-00403-CV.

Attorneys: Andrew P. Legrand Sr. (Gibson, Dunn & Crutcher LLP), Michael A. McCabe (Munck Wilson Mandala, LLP) and Jessica L. Spaniol (Crouch & Ramey, LLP) for One Technologies, LP. Kendal Simpson (Reese Gordon Marketos LLP) for Profinity, LLC.

Companies: One Technologies, L.P.; Profinity, LLC

Cases: Antitrust TexasNews