IP Law Daily, TRADE SECRETS—5th Cir.: Dismissal of trade secret misappropriation claims affirmed, (Apr 8, 2025)

By Thomas K. Lauletta, J.D.

Although the appellate court rejected the district court’s Daubert analysis for dismissal, it affirmed the dismissal of the misappropriation claims on other grounds.

The U.S. Court of Appeals affirmed a Texas district court decision dismissing DeWolff Boberg & Associates’ suit against defendants Justin Pethick and the Randall Powers Company for misappropriation of trade secrets. The district court had dismissed the case against the defendants based on an exclusion of the plaintiff’s expert witness on a Daubert analysis. Although the appellate court questioned the validity of the district court’s Daubert analysis, it affirmed the dismissal based on other grounds. More specifically, the appellate court was not convinced that the items identified by the plaintiff were trade secrets, and no evidence was presented that the defendants used or disclosed the alleged trade secrets (DeWolff, Boberg & Associates Inc. v. Pethick, No. 24-10375 (5th Cir. Apr. 3, 2025)).

DeWolff, Boberg & Associates, Inc. (“DB&A”) is a management consulting firm that provides consulting services to various industries such as electronics, food, manufacturing, and defense contractors. Randall Powers, a former DB&A employee, started his own management consulting business, the Randall Powers Co. (the “Powers Co.”), which DB&A alleged was a direct competitor.

DB&A alleged that it placed various trades secrets in a database maintained by Share Point. DB&A contends that it implemented measures to prevent the leakage of data from the Salesforce Database, such as requiring employees to sign non-compete, non-solicitation, and non-disclosure agreements. Access to the database is limited to certain employees on an as-needed basis.

DB&A hired Justin Pethick as a regional vice president in October 2018. In this role, Pethick had access to the Salesforce Database. Pethick signed the non-disclosure, non-compete, and non-solicitation agreements, and his access to the Salesforce Database was password protected.

On April 24, 2020, Pethick accepted a position at as position with the Powers Co., and also retained his position at DB&A until DB&A learned of his employment by the Powers Co. Thereafter, DB&A sued Pethick and the Power Co. on several causes of action. The instant proceeding only relates to DB&A’s claim for misappropriation of trade secrets. This claim was based on Pethick’s alleged diversion of three prospective clients from DB&A to the Powers Co.: (1) Sechan Electronics, (2) Arcosa Wind Towers, and (3) Beyond Meat.

DB&A retained Dr. Stuart B. Miller as an expert to calculate the profits it would have earned for consulting services had Sechan, Arcosa, and Beyond Meat hired DB&A instead of the Powers Co. Granting the defendants’ Daubert motion to exclude Miller’s testimony, the district court entered summary judgment against all of DBA’s claims based on the court’s conclusion that this expert testimony was the only evidence raised by DB&A to support its claims.

DB&A appealed the dismissal to the U.S. Court of Appeals for the Fifth Circuit. The appellate court questioned the validity of the district court’s Daubert analysis but affirmed the dismissal on other grounds. First, the appellate court stated that DB&A failed to adequately identify the specific trade secrets that were contained within two databases that it cited. More importantly, the court held that DB&A presented no evidence that Pethick or the Powers Co. had used or disclosed the trade secrets.

Court action. The Court of Appeals affirmed the district court summary judgment dismissal of DB&A’s trade secrets misappropriate claim.

The Case is No. 24-10375.

Judge: Clement, E.

Attorneys: Brandy Renee Manning (Condon Tobin Sladek Thornton Nerenberg, P.L.L.C.) for Dewolff, Boberg & Associates Inc. Lea C. Dearing (Berman Fink Van Horn, P.C.) for Justin Pethick.

Companies: Dewolff, Boberg & Associates Inc.; Randall Powers Company

Cases: TradeSecrets TechnologyInternet LouisianaNews MississippiNews TexasNews