Trade secret and employee mobility lawsuits are sharply on the rise given the government and courts’ distaste for non-competition agreements and the war on talent. Foley’s recent victory in Coe v. DNOW LP, 718 S.W.3d 338 (Tex. App. 2025) (pet. denied), provides a landscape by which companies and attorneys can view and litigate these claims.
The Coe v. DNOW opinion, affirmed by the Texas Supreme Court’s recent denial of review, provides important guidance for companies and litigators across the country. DNOW, a pump and valve distribution company, sued thirteen former employees and a competitor, Permian Pump & Valve, alleging that the employees copied DNOW’s confidential information and trade secrets, causing a “mass exodus” of approximately thirty employees. DNOW pursued three causes of action: misappropriation of trade secrets under the Texas Uniform Trade Secrets Act (TUTSA), civil theft under the Texas Theft Liability Act (TTLA), and breach of fiduciary duty against four high-level managerial employees. After a jury trial that returned favorable findings for DNOW on all three theories, the Court of Appeals reversed the trial court’s judgment almost entirely, and the Texas Supreme Court subsequently denied DNOW’s petition for review. The opinion addresses several areas of law that merit close attention from practitioners, including the proper use of the Texas Pattern Jury Charges, the evidentiary standard for lost profits, the preemptive scope of TUTSA, and the apportionment of damages.
As a result of the problems with the underlying case, Foley was able to secure far more money for the Defendants than Plaintiff DNOW — over $2.3 million in attorneys’ fees compared to a total TUTSA judgment of $33,500.
What has changed because of the Coe v. DNOW decision?
- Conspiracy claims based on trade secret misappropriation are preempted by TUTSA (an issue of first impression in Texas).
- Damages attributable to trade secret misappropriation must be specifically tied to the misappropriation of each trade secret, or they will be disregarded.
- Employees have more guidance about acceptable conduct prior to departure.
- Trial courts have new jury instructions for use in fiduciary duty, TUTSA, and Texas Theft Liability cases.
What were the legal findings resulting in the favorable decision for the Defendant?
- First, the court noted TTLA jury charge must include the full PJC 7.2 definition of “intent to deprive” when the alleged theft involves information that was copied rather than physically removed.
- Second, the TTLA mandates that the prevailing party is awarded attorneys’ fees, which makes these claims risky for plaintiffs.
- Third, breach of fiduciary duty jury charges for departing employees must account for the well-established right of at-will employees to plan to compete, and the broader transactional standard from PJC 104.2 should not be used in the employment context.
- Fourth, lost profits evidence in trade secret cases must be causally linked to the specific misappropriation, must distinguish trade secret damages from damages caused by lawful conduct, and cannot rest on conclusory assumptions.
- Fifth, TUTSA’s preemption of fiduciary duty and conspiracy theories of liability fundamentally changes the damages landscape in multi-defendant trade secret cases, requiring plaintiffs to prove each defendant’s individual proportionate responsibility rather than relying on joint and several conspiracy liability.
What should in-house and litigation attorneys do next?
- Review and updated as needed all policies and procedures regarding trade secret and confidential information, including security practices on the distribution of confidential information outside of the organization.
- Require all employees, not just management, to sign non-disclosure agreements. The court recognized a distinction between confidential information and trade secret information as a basis of preemption.
- If using a “bring your own devices” policy, manage the distribution of data so it does not permeate an individuals’ cloud account.
- Obtain buy-in from management on the importance of managing data and preventing disclosure outside of the organization.
Effective written agreements and policies provide a strong fundamental basis for companies to protect confidential and trade secret information in court. Steps begin at onboarding and could be consistent throughout employment. Foley’s trade secret litigation specialists assist companies daily in protecting their valuable information in the digital era.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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