Brief of Appellant by EdPatruforAmrock

ACCEPTED 04-19-00044-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 7/10/2019 4:58 PM

No. 04-19-00044-CV FILED IN In the Court of Appeals for the Fourth 4th COURT OF APPEALS SAN ANTONIO, TEXAS Judicial District, San Antonio, 07/10/2019 Texas4:58:25 PM

TITLE SOURCE, INC., Appellant, v. HOUSECANARY, INC., F/K/A CANARY ANALYTICS, INC., Appellee.

KEITH E. HOTTLE CLERK

On Appeal from 2016-CI-06300 73rd District Court of Bexar County, Texas BRIEF FOR APPELLANT Catherine M. Stone State Bar No. 19286000 LANGLEY & BANACK, INC. 745 E. Mulberry Avenue, Suite 700 San Antonio, Texas 78212 Tel: (210) 736-6600 Fax: (210) 735-6889 cstone@langleybanack.com

Allyson N. Ho State Bar No. 24033667 GIBSON, DUNN & CRUTCHER, LLP 2100 McKinney Avenue, Suite 1100 Dallas, Texas 75201-6912 Tel: (214) 698-3100 Fax: (214) 571-2900 aho@gibsondunn.com Helgi C. Walker* GIBSON, DUNN & CRUTCHER, LLP 1050 Connecticut Avenue, N.W. Washington, D.C. 20036-5306 Tel: (202) 955-8500 Fax: (202) 530-9595 hwalker@gibsondunn.com

COUNSEL FOR APPELLANT TITLE SOURCE, INC. ORAL ARGUMENT REQUESTED

David M. Prichard State Bar No. 16317900 PRICHARD YOUNG 10101 Reunion Place, Suite 600 San Antonio, Texas 78216 Tel: (210) 477-7401 Fax: (210) 477-7450 dprichard@prichardyoungllp.com

Jeffrey B. Morganroth* MORGANROTH & MORGANROTH, PLLC 344 N. Old Woodward Ave., Ste. 200 Birmingham, Michigan 48009 Tel: (248) 864-4000 Fax: (248) 864-4001 jmorganroth@morganrothlaw.com

* Pro hac vice application pending ADDITIONAL COUNSEL FOR APPELLANT TITLE SOURCE, INC.

IDENTITY OF PARTIES AND COUNSEL Trial and Appellate Counsel for Title Source, Inc., Plaintiff-Appellant: Catherine M. Stone LANGLEY & BANACK, INC. 745 E. Mulberry Avenue, Suite 700 San Antonio, Texas 78212

Allyson N. Ho GIBSON, DUNN & CRUTCHER, LLP 2100 McKinney Avenue, Suite 1100 Dallas, Texas 75201-6912 Helgi C. Walker GIBSON, DUNN & CRUTCHER, LLP 1050 Connecticut Avenue, N.W. Washington, D.C. 20036-5306

Trial Counsel for Title Source, Inc., Plaintiff-Appellant: David M. Prichard PRICHARD YOUNG 10101 Reunion Place, Suite 600 San Antonio, Texas 78216

Jeffrey B. Morganroth MORGANROTH & MORGANROTH, PLLC 344 N. Old Woodward Ave., Ste. 200 Birmingham, Michigan 48009

Veronica S. Lewis Andrew P. LeGrand GIBSON, DUNN & CRUTCHER, LLP 2100 McKinney Avenue, Suite 1100 Dallas, Texas 75201-6912 Randy M. Mastro GIBSON, DUNN & CRUTCHER, LLP 200 Park Avenue New York, New York 10166-0193

Peter S. Wahby Stephanie R. Smiley Karl G. Dial Samuel G. Davison Kendyl T. Hanks Allison M. Stewart Justin Bernstein GREENBERG TRAURIG, LLP 2200 Ross Avenue, Suite 5200 Dallas, Texas 75201

Robert S. Blume GIBSON, DUNN & CRUTCHER, LLP 1801 California Street Denver, Colorado 80202-2642

Manuel Pelaez-Prada FLORES & PELAEZ PRADA, PLLC 2221 IH10 West, Suite 1206 San Antonio, Texas 78257

Trial and Appellate Counsel for HouseCanary, Inc., f/k/a Canary Analytics, Inc., Defendant-Appellee: Max L. Tribble Matt Behncke Rocco Magni Bryce T. Barcelo Joseph S. Grinstein Jonathan J. Ross SUSMAN GODFREY LLP 1000 Louisiana St., Suite 5100 Houston, Texas 77002-5096

Wallace B. Jefferson ALEXANDER DUBOSE JEFFERSON TOWNSEND 515 Congress Avenue, Suite 2350 Austin, Texas 78701-3562 Thomas R. Phillips BAKER BOTTS, LLP 98 San Jacinto Blvd., Suite 1500 Austin, Texas 78701

Kalpana Srinivasan SUSMAN GODFREY LLP 1901 Avenue of the Stars, Suite 950 Los Angeles, California 90067-6029

David M. Gunn BECK REDDEN, LLP 1221 McKinney, Suite 4500 Houston, Texas 77010

Elisha Barron SUSMAN GODFREY LLP R. Laurence Macon 1301 Ave. of the Americas, 32nd Floor THE MACON LAW FIRM, PLLC New York, New York 10019 750 Rittiman Road San Antonio, Texas 78209 Ricardo Cedillo DAVIS, CEDILLO & MENDOZA, INC. 755 E. Mulberry, Suite 500 San Antonio, Texas 78212

RECORD CITATION GLOSSARY CLERK’S RECORD: VOLUME 1 OF 9 VOLUME 2 OF 9 VOLUME 3 OF 9 VOLUME 4 OF 9 VOLUME 5 OF 9 VOLUME 6 OF 9 VOLUME 7 OF 9 [SEALED VOLUME] VOLUME 8 OF 9 [SEALED VOLUME] VOLUME 9 OF 9 [SEALED VOLUME]

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SUPPLEMENTAL CLERK’S RECORD

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SECOND SUPPLEMENTAL CLERK’S RECORD VOLUME 1 OF 4 SECOND SUPPLEMENTAL CLERK’S RECORD VOLUME 2 OF 4 SECOND SUPPLEMENTAL CLERK’S RECORD VOLUME 3 OF 4 SECOND SUPPLEMENTAL CLERK’S RECORD VOLUME 4 OF 4 [SEALED VOLUME]

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REPORTER’S RECORD: REPORTER’S RECORD VOLUME 1 OF 51A REPORTER’S RECORD VOLUME 2 OF 51A REPORTER’S RECORD VOLUME 3 OF 51A REPORTER’S RECORD VOLUME 4 OF 51A REPORTER’S RECORD VOLUME 5 OF 51A REPORTER’S RECORD VOLUME 6 OF 51A REPORTER’S RECORD VOLUME 7 OF 51A REPORTER’S RECORD VOLUME 8 OF 51A REPORTER’S RECORD VOLUME 9 OF 51A REPORTER’S RECORD VOLUME 10 OF 51A iii

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Record Citation Glossary (continued) REPORTER’S RECORD VOLUME 11 OF 51A REPORTER’S RECORD VOLUME 12 OF 51A REPORTER’S RECORD VOLUME 13 OF 51A REPORTER’S RECORD VOLUME 14 OF 51A REPORTER’S RECORD VOLUME 15 OF 51A REPORTER’S RECORD VOLUME 16 OF 51A REPORTER’S RECORD VOLUME 17 OF 51A REPORTER’S RECORD VOLUME 18 OF 51A REPORTER’S RECORD VOLUME 19 OF 51A REPORTER’S RECORD VOLUME 20 OF 51A REPORTER’S RECORD VOLUME 21 OF 51A REPORTER’S RECORD VOLUME 22 OF 51A REPORTER’S RECORD VOLUME 23 OF 51A REPORTER’S RECORD VOLUME 24 OF 51A REPORTER’S RECORD VOLUME 25 OF 51A REPORTER’S RECORD VOLUME 26 OF 51A REPORTER’S RECORD VOLUME 27 OF 51A REPORTER’S RECORD VOLUME 28 OF 51A REPORTER’S RECORD VOLUME 29 OF 51A REPORTER’S RECORD VOLUME 30 OF 51A [SEALED VOLUME] REPORTER’S RECORD VOLUME 31 OF 51A [SEALED VOLUME] REPORTER’S RECORD VOLUME 32 OF 51A REPORTER’S RECORD VOLUME 33 OF 51A

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Record Citation Glossary (continued) REPORTER’S RECORD VOLUME 46 OF 51A REPORTER’S RECORD VOLUME 47 OF 51A REPORTER’S RECORD VOLUME 48 OF 51A REPORTER’S RECORD VOLUME 49 OF 51A REPORTER’S RECORD VOLUME 50 OF 51A REPORTER’S RECORD VOLUME 51 OF 51A VOLUME 51 PART 1 VOLUME 51 PART 2 VOLUME 51 PART 3 VOLUME 51 PART 4 VOLUME 51 PART 5 VOLUME 51 PART 6 VOLUME 51 PART 7 VOLUME 51 PART 8 VOLUME 51 PART 9 VOLUME 51 PART 10 VOLUME 51 PART 11 VOLUME 51 PART 12 VOLUME 51 PART 13

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REPORTER’S RECORD VOLUME 51A OF 51A EXHIBIT VOLUME – [SEALED VOLUME]

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SUPPLEMENTAL REPORTER’S RECORD

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SECOND SUPPLEMENTAL REPORTER’S RECORD VOLUME 1 OF 7 SECOND SUPPLEMENTAL REPORTER’S RECORD VOLUME 2 OF 7 SECOND SUPPLEMENTAL REPORTER’S RECORD VOLUME 3 OF 7 SECOND SUPPLEMENTAL REPORTER’S RECORD VOLUME 4 OF 7

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Record Citation Glossary (continued) SECOND SUPPLEMENTAL REPORTER’S RECORD VOLUME 5 OF 7 SECOND SUPPLEMENTAL REPORTER’S RECORD VOLUME 6 OF 7 SECOND SUPPLEMENTAL REPORTER’S RECORD VOLUME 7 OF 7

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TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL .......................................................................... i RECORD CITATION GLOSSARY ................................................................................. iii INDEX OF AUTHORITIES.............................................................................................ix STATEMENT OF THE CASE .......................................................................................xiv STATEMENT REGARDING ORAL ARGUMENT ............................................................ xv ISSUES PRESENTED ..................................................................................................xvi INTRODUCTION ........................................................................................................... 1 STATEMENT OF FACTS................................................................................................ 4 HouseCanary promises a “revolutionary” software application. ......... 4 Title Source sues after HouseCanary fails to deliver. .......................... 9 HouseCanary files additional counterclaims...................................... 10 HouseCanary’s own expert found no trace of HouseCanary technology in Title Source’s AVM. ................................................... 11 The court characterizes HouseCanary’s damages expert testimony as “speculative,” but admits it anyway.............................. 13 HouseCanary’s incendiary arguments and speculative testimony produce a $739.6 million judgment. .................................................. 14 New evidence of fraud and collusion emerges post-trial. .................. 15 SUMMARY OF ARGUMENT ........................................................................................ 19 STANDARDS OF REVIEW ........................................................................................... 22 ARGUMENT .............................................................................................................. 24 vii

Table of Contents (continued) The judgment should be reversed and rendered................................. 24 A.

There is no evidence of trade secret misappropriation. .......... 24

There is no causal link between the alleged misappropriation and damages. .............................................. 35

HouseCanaryâ&#x20AC;&#x2122;s fraud and fraudulent inducement claims fail. .......................................................................................... 36

HouseCanaryâ&#x20AC;&#x2122;s contract claims fail. ....................................... 38

The compensatory damages awards cannot stand.............................. 40 A.

There is no evidence of damages. ........................................... 40

The damages awards violate the one-satisfaction rule. .......... 56

The nearly $500 million punitive damages awards are unlawful. ..... 57 A.

The punitive damages awards violate Texas law. .................. 57

The grossly excessive punitive damages awards are unconstitutional. ...................................................................... 59

At minimum, Title Source is entitled to a new trial. .......................... 61 A.

Multiple Casteel errors require a new trial. ............................ 61

Repeated personal attacks on counsel require a new trial. ..... 65

Newly discovered evidence of fraud and collusion requires a new trial. ................................................................. 66

PRAYER FOR RELIEF ................................................................................................. 74 CERTIFICATE OF COMPLIANCE ................................................................................. 76 CERTIFICATE OF SERVICE ......................................................................................... 76

viii

INDEX OF AUTHORITIES Cases Alexander v. Soloman, 15 S.W. 906 (Tex. 1891)......................................................................................71 Atlas Copco Tools, Inc. v. Air Power Tool & Hoist, Inc., 131 S.W.3d 203 (Tex. App.—Fort Worth 2004, pet. denied) ...................... 51, 53 Bartush-Schnitzius Foods Co. v. Cimco Refrigeration, Inc., 518 S.W.3d 432 (Tex. 2017)................................................................................39 Baxter & Assocs., L.L.C. v. D & D Elevators, Inc., No. 05-16-00330-CV, 2017 WL 6040439 (Tex. App.—Dallas Feb. 15, 2017, no pet.).........................................................26 Benge v. Williams, 548 S.W.3d 456 (Tex. 2018)................................................................................24 Benge v. Williams, 548 S.W.3d 466 (Tex. 2018)................................................................................61 Bennett v. Reynolds, 315 S.W.3d 867 (Tex. 2010)................................................................................59 Binder v. Millikin, 201 S.W. 239 (Tex. Civ. App.—San Antonio 1918, writ ref’d) .........................72 BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996) ...................................................................................... 59, 60 Cain v. Bain, 709 S.W.2d 175 (Tex. 1986)................................................................................23 Cargotec Corp. v. Logan Indus., No. 14-17-00213-CV, 2018 WL 6695806 (Tex. App.—Houston [14th Dist.] Dec. 20, 2018, pet. filed) ........................................................... 52, 53 City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005)............................................................. 22, 23, 32, 38 Coastal Transp. Co. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227 (Tex. 2004)................................................................... 40, 50, 55 Columbia Rio Grande Healthcare, L.P. v. Hawley, 284 S.W.3d 851 (Tex. 2009)......................................................................... 23, 24 Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000)..................................................................................61 Cuidado Casero Home Health of El Paso, Inc. v. Ayuda Home Health Care Servs., LLC, 404 S.W.3d 737 (Tex. App.—El Paso 2013, no pet.)..........................................40 ix

DeSantis v. Wackenhut Corp., 793 S.W.2d 670 (Tex. 1990)................................................................................38 Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238 (Tex. 1985)................................................................................23 E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549 (Tex. 1995)................................................................................40 Eagle Oil & Gas Co. v. Shale Expl., LLC, 549 S.W.3d 256 (Tex. App.—Houston [1st Dist.] 2018, pet. dism’d) ......... 57, 58 Educ. Mgmt. Servs. v. Cadero, No. SA-14-CA-587, 2014 WL 12586781 (W.D. Tex. Nov. 18, 2014) ...............34 Educ. Mgmt. Servs., LLC v. Tracey, 102 F. Supp. 3d 906 (W.D. Tex. 2015) ...............................................................34 Embarcadero Techs., Inc. v. Redgate Software, Inc., No. 1:17-CV-444-RP, 2018 WL 315753 (W.D. Tex. Jan. 5, 2018)....................37 ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867 (Tex. 2010)................................................................................51 Ford Motor Co. v. Ledesma, 242 S.W.3d 32 (Tex. 2007)........................................................................... 42, 47 Ford Motor Co. v. Ridgway, 135 S.W.3d 598 (Tex. 2004)................................................................................23 Gannaway v. Trinity Universal Ins. Co., 85 S.W.2d 345 (Tex. Civ. App.—San Antonio 1935, writ ref’d) .......................28 Gharda USA, Inc. v. Control Sols., Inc., 464 S.W.3d 338 (Tex. 2015)................................................................... 22, 26, 40 Glattly v. Air Starter Components, Inc., 332 S.W.3d 620 (Tex. App.—Houston [1st Dist.] 2010, pet. denied..................53 Gonzalez v. Atenea Capital Markets Fund, LP, No. 04-14-00614-CV, 2015 WL 6509750 (Tex. App.—San Antonio Oct. 28, 2015, no pet.) ...............................................56 Greenville Automatic Gas Co. v. Automatic Propane Gas & Supply, LLC, 465 S.W.3d 778 (Tex. App.—Dallas 2015, no pet.) ...........................................33 Hancock v. Variyam, 400 S.W.3d 59 (Tex. 2013)..................................................................................33 Harris Cty. v. Smith, 96 S.W.3d 230 (Tex. 2002)........................................................................... 61, 64 Horizon Health Corp. v. Acadia Healthcare Co., 520 S.W.3d 848 (Tex. 2017)................................................................... 53, 54, 57 Hull v. South Coast Catamarans, L.P., 365 S.W.3d 35 (Tex. App.—Houston [1st Dist.] 2011, pet. denied) ..................70 x

In re R.R., 209 S.W.3d 112 (Tex. 2006)................................................................................23 In re Williams, No. 12-06-00361-CV, 2007 WL 1241517 (Tex. App.—Tyler Apr. 30, 2007, no pet.) ..........................................................68 Jordan Ford, Inc. v. Alsbury, 625 S.W.2d 1 (Tex. Civ. App.—San Antonio 1981, no writ) .............................64 Jurinko v. Med. Protective Co., 305 F. App’x 13 (3d Cir. 2008) .............................................................. 60, 65, 67 Lakeway Reg’l Med. Ctr., LLC v. Lake Travis Transitional LTCH, LLC, No. 03-15-00025-CV, 2017 WL 672451 (Tex. App.—Austin Feb. 17, 2017, pet. denied) .......................................... 35, 36 Lindsey v. Lee, 251 S.W. 562 (Tex. Civ. App.—Fort Worth 1923, no writ) ...............................72 Living Ctrs. of Tex., Inc. v. Peñalver, 256 S.W.3d 678 (Tex. 2008)................................................................................65 Lompe v. Sunridge Partners, LLC, 818 F.3d 1041 (10th Cir. 2016) ...........................................................................60 Marathon Corp. v. Pitzner, 106 S.W.3d 724 (Tex. 2003)................................................................................46 Mercantile Exch. Corp. v. Dailey Petroleum Corp., 930 S.W.2d 242 (Tex. App.—Houston [14th Dist.] 1996, no writ .....................43 Missouri-Kansas-Texas R.R. Co. v. Evans, 250 S.W.2d 385 (Tex. 1952)................................................................................74 Morgan v. Clements Fluids S. Texas, LTD., No. 12-18-00055-CV, --- S.W.3d ---, 2018 WL 5796994 (Tex. App.—Tyler Nov. 5, 2018, no pet.) ..........................................................................................24 Myriad Dev., Inc. v. Alltech, Inc., 817 F. Supp. 2d 946 (W.D. Tex. 2011) ...............................................................57 New Amsterdam Cas. Co. v. Jordan, 359 S.W.2d 864 (Tex. 1962)................................................................................71 Overseas Corp. v. Ellis, 971 S.W.2d 402 (Tex. 1998)................................................................................23 Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1 (1991) .......................................................................................... 60, 62 Phillips v. Carlton Energy Grp., LLC, 475 S.W.3d 265 (Tex. 2015)................................................................................55 PopCap Games, Inc. v. MumboJumbo, LLC, 350 S.W.3d 699 (Tex. App.—Dallas 2011, pet. denied) .....................................65 xi

Remenchik v. Whittington, 757 S.W.2d 836 (Tex. App.—Houston [14th Dist.] 1988, no writ) ....................73 S.V. v. R.V., 933 S.W.2d 1 (Tex. 1996)....................................................................................69 Spera v. Fleming, Hovenkamp & Grayson, P.C., 25 S.W.3d 863 (Tex. App.—Houston [14th Dist.] 2000, no pet. ........................40 Standard Fire Ins. Co. v. Reese, 584 S.W.2d 835 (Tex. 1979)................................................................................65 State Farm Mut. Auto. Ins. v. Campbell, 538 U.S. 408 (2003) ...................................................................................... 59, 60 Steed v. Winder, 130 S.W.2d 403 (Tex. Civ. App.—Galveston 1939, no writ) .............................71 Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1 (Tex. 1991)....................................................................................56 Stewart v. Basey, 245 S.W.2d 484 (Tex. 1952)................................................................................38 Super Starr Int’l, LLC v. Fresh Tex Produce, LLC, 531 S.W.3d 829 (Tex. App.—Corpus Christi 2017, no pet.) ..............................36 Sw. Energy Prod. Co. v. Berry-Helfand, 491 S.W.3d 699 (Tex. 2016)............................................................. 41, 42, 49, 53 Szczepanik v. First S. Tr. Co., 883 S.W.2d 648 (Tex. 1994)................................................................... 51, 54, 55 Terbay v. Pat Canion Excavating Co., 396 S.W.2d 482 (Tex. Civ. App.—Austin 1965, writ ref’d n.r.e.) ......................68 Tex. Cent. R.R. Co. v. Forsyth, 49 Tex. 171 (1878) ...............................................................................................72 Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276 (Tex. 1994)................................................................................54 Texas Comm’n on Human Rights v. Morrison, 381 S.W.3d 456 (Tex. 2012)................................................................................61 Texas Comm’n on Human Rights v. Morrison, 381 S.W.3d 533 (Tex. 2012)......................................................................... 24, 62 TMRJ Holdings, Inc. v. Inhance Techs., LLC, 540 S.W.3d 202 (Tex. App.—Houston [1st Dist.] 2018, no pet.) ................ 44, 48 Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006)......................................................................... 37, 56 Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253 (5th Cir. 2007) ...............................................................................29 United Way of San Antonio, Inc. v. Helping Hands Lifeline Found., Inc., 949 S.W.2d 707 (Tex. App.—San Antonio 1997, writ denied) ..........................52 xii

Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518 (5th Cir. 1974) ........................................................................ 43, 44 Unlimited, Inc. Metal Processing v. Mel Acres Ranch, 443 S.W.3d 820 (Tex. 2014)................................................................................35 Waffle House, Inc. v. Williams, 313 S.W.3d 796 (Tex. 2010)......................................................................... 66, 72 Wakefield v. Bank of Am., N.A., No. 14-16-00580-CV, 2018 WL 456721 (Tex. App.—Houston [14th Dist.] Jan. 18, 2018, no pet.) ......................................................................68 Water Grp., Inc. v. Atchley, 244 S.W.3d 924 (Tex. App.—Dallas 2008, pet. denied) .............................. 28, 29 Westmoreland v. Starnes, No. 07-13-00364-CV, 2015 WL 1325530 (Tex. App.—Amarillo Mar. 24, 2015, pet. denied) ..................................................................................68 Willis v. Maverick, 760 S.W.2d 642 (Tex. 1988)................................................................................68 Statutes Tex. CIV. PRAC. & REM. CODE § 134.005 ................................................................60 TEX. CIV. PRAC. & REM. CODE § 134A.002 .................................... 24, 26, 28, 30, 34 TEX. CIV. PRAC. & REM. CODE § 134A.004 .............................................................35 TEX. CIV. PRAC. & REM. CODE § 134A.007 .............................................................36 Rules TEX. R. EVID. 702 .....................................................................................................40 Other Authorities 5 McDonald & Carlson, TEX. CIV. PRAC. § 28:35 (2d. ed. 2018) ...........................71

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STATEMENT OF THE CASE Nature of the Case:

This is an appeal from a final judgment following a jury trial. Title Source, Inc. commenced a civil action against HouseCanary, Inc. for breach of contract and fraud. HouseCanary, Inc. counterclaimed for breach of contract, fraud, and misappropriation of trade secrets under the Texas Uniform Trade Secrets Act.

Trial Court:

The Honorable David A. Canales, 73rd Judicial District Court, Bexar County.

Trial Court Disposition:

The jury found for HouseCanary on all claims, and the trial court awarded it $235,400,000.00 in compensatory damages and $470,800,000.00 in punitive damages. The trial court also awarded HouseCanary $28,989,154.00 in prejudgment interest, $4,528,711.79 in attorneys’ fees, and postjudgment interest. Title Source sought JNOV because: (1) HouseCanary failed to establish liability on any of its claims; (2) no evidence supported the jury’s compensatory damages awards; (3) the punitive damages awards violate Texas law and the U.S. Constitution; and (4) Title Source is entitled to judgment on its contract claim. Title Source also sought a new trial because: (1) newly discovered evidence warranted a new trial; (2) unreliable testimony by HouseCanary’s experts prejudiced Title Source; (3) the compensatory and punitive damages awards were excessive and contrary to law; (4) the evidence is factually insufficient to support HouseCanary’s claims; and (5) harmful Casteel errors pervaded the jury instructions. The trial court denied both motions.

xiv

STATEMENT REGARDING ORAL ARGUMENT This case involves important issues regarding trade secret law, expert testimony, broad-form jury charges, and punitive damages, as well as a judgment awarding unprecedented damages of more than $700 million based on the alleged misappropriation of technology that was licensed under a $5 million contract. Title Source respectfully requests oral argument because it will significantly aid the Court in resolving these issues, among others, on a lengthy and complex record. TEX. R. APP. P. 39.1.

ISSUES PRESENTED 1.

Must the judgment be reversed and rendered on HouseCanary’s misappropriation of trade secrets claim because there was no evidence Title Source ever acquired HouseCanary’s alleged trade secrets, ever used any such trade secrets, or caused any damages?

Must the judgment be reversed and rendered on HouseCanary’s fraud claims because they are preempted, duplicative of HouseCanary’s misappropriation and contract theories, and lack evidentiary support?

Must the judgment be reversed and rendered on HouseCanary’s contract claim because HouseCanary’s theory of liability was duplicative of its misappropriation claim and HouseCanary never delivered a working app as required by the contract?

Must the $235.4 million compensatory damages awards be reversed and rendered when they rest on unreliable, inadmissible, and highly prejudicial expert testimony?

Must the $470.8 million punitive damages awards be reversed and rendered when the awards violate Texas law and the U.S. Constitution?

Is Title Source entitled to a new trial because of Casteel error in the jury instructions?

Is Title Source entitled to a new trial because of HouseCanary’s repeated personal attacks on the integrity of Title Source and its counsel?

Is Title Source entitled to a new trial based on new evidence that emerged post-trial and seriously undermines the fairness and integrity of the trial—including evidence that HouseCanary colluded with a Title Source executive throughout the parties’ relationship, deceived Title Source about the inadequacy of its products, and suppressed poor test results for its products?

xvi

INTRODUCTION This is an appeal of a jury verdict awarding HouseCanary—a Silicon Valley company backed by wealthy and sophisticated investors that failed to achieve financial viability in the marketplace—a staggering $706 million in damages based on the alleged misappropriation of technology HouseCanary licensed to Title Source as part of a $5 million contract. The verdict is the largest in Bexar County history. That unprecedented award is explained not by law or facts, but by HouseCanary’s colorful yet unsubstantiated pitch to the jury on liability and rank speculation on damages. This case began when Title Source, a national leader in home appraisals, brought a breach of contract suit against HouseCanary for failing to deliver what HouseCanary claimed was a game-changing app that would allow appraisers to complete and submit appraisals in the field. At trial, HouseCanary and its experts admitted that the company failed to deliver a functioning app that satisfied the parties’ contract. To distract from that fundamental breach, HouseCanary spun a tale that Title Source, a big out-of-town corporation, stole trade secrets from HouseCanary to develop copycat products. But HouseCanary had no evidence to support that theory. In fact, the evidence showed just the opposite. Title Source independently developed in-house analytics using its own historical appraisal data and well-known industry concepts. 1

HouseCanary’s own expert, after a thorough review of Title Source’s source code, admitted there was no evidence of “any fingerprints, any clues, any reference to any HouseCanary technology.” RR39:87 (emphasis added). Undaunted, HouseCanary told the jury that Title Source reverse-engineered HouseCanary’s analytics by feeding HouseCanary’s data into a “magic machine.” RR50:62. But HouseCanary’s expert also refuted this theory, repeatedly testifying that Title Source “did not use any HouseCanary data.” RR39:40 (emphasis added). HouseCanary’s damages presentation was even more fanciful. Instead of relying on objective evidence of the value the parties actually put on the technology, HouseCanary’s expert plucked numbers out of thin air to reach the conclusion that the alleged trade secrets—which HouseCanary was willing to license to Title Source under a $5 million contract—were actually worth hundreds of millions of dollars and that HouseCanary’s lost profits were more than six times the contract price. In closing argument, HouseCanary distracted from these evidentiary deficiencies by inflaming the jury’s passion and prejudice. HouseCanary’s lawyers asked the jury to “send a message” to “Corporate America” that would make the “Wall Street Journal.” RR50:70-72. This tactic worked. The jury awarded HouseCanary more than $235 million in compensatory damages and more than $470 million in punitive damages, for a grand total of almost three quarters of a billion dollars. 2

But then HouseCanary’s story started to unravel. The day after the verdict, Title Source’s CEO received an unsolicited email from a whistleblower claiming to have “first hand knowledge” that Title Source’s “loss was based on fallacies and spin” made possible by “collusion among some of [Title Source’s] people and housecanary.” 2ndSupp.CR3:4538. That shocking revelation led Title Source to uncover long hidden collusion between HouseCanary’s CEO and Co-Founder, Jeremy Sicklick, and Title Source’s then-Chief Appraiser and key trial witness, Jordan Petkovski; Title Source also discovered new evidence that Sicklick directed HouseCanary employees to make gross misrepresentations about the readiness, functionality, and accuracy of HouseCanary products and silenced potential witnesses by giving them undefined yet lucrative “consulting” contracts.

Ultimately, four former HouseCanary

executives came forward to attest, under oath, that HouseCanary sold “vapor ware” and did not have “any IP to steal,” let alone trade secrets worth hundreds of millions of dollars. 2dSupp.RR5:73, 3:97-98. Tales of magic machines and imaginary numbers cannot form the basis of any verdict under Texas law, let alone a verdict for $706 million. But allowing this baseless verdict to stand in the face of explosive new evidence would result in a miscarriage of justice. The judgment cannot bear the lack of evidence or the force

of Texas law. This Court should reverse and render or, at minimum, grant a new trial. STATEMENT OF FACTS HouseCanary promises a “revolutionary” software application. Title Source is a leading provider of title insurance, property valuations, and closing services. RR9:13. It has been performing home appraisals on behalf of mortgage lender customers, including Quicken Loans, since 2001. RR9:15, 31. 1 HouseCanary is a San Francisco, California company attempting to develop real estate analytics—software tools that use data to generate information. RR40:30. It is backed by wealthy and sophisticated investors. RR40:28; RR41:21. In December 2013, HouseCanary’s Sicklick and Title Source’s Petkovski began to explore a potential business relationship between the companies. RR9:96; 22:50; RR40:47. HouseCanary signed Title Source’s Non-Disclosure Agreement (“NDA”), RR51-1:235-39, and later pitched what it claimed was a “revolutionary” appraisal app to Title Source—one that would supposedly allow appraisers to work ten times faster by letting them complete and submit appraisals while at a property (“in the field”), rather than having to return to the office. RR51-1:366; RR19:17; RR40:69-70.

Quicken Loans and Title Source are sister companies. Quicken Loans is not a party to this case or contracts at issue. RR26:99-100.

In January 2015, the parties signed a Master Software Licensing Agreement (“MSLA”) requiring HouseCanary to deliver a mobile app for iPads (the “Appraiser App”) and a corresponding web-based version. RR51-1:254-55. Title Source agreed to pay $20 to $30 for each appraisal completed using the app. RR51-1:24059. In reality, HouseCanary did not have a functioning version of the app. RR26:106. With the launch of the app delayed and HouseCanary running out of money, RR51-1:944, HouseCanary pitched a new arrangement, offering to license its data and a bundle of other analytics to replace Title Source legacy products. RR51-2:112-51; RR51A-1:2032-90. As talks progressed, HouseCanary shared marketing and other materials with Title Source, including a “data dictionary,” which described the data HouseCanary was offering to license. RR51A-1:1780-2031; RR27:141-42; RR38:111-12. That data—known as the “data compilation”—was comprised of data acquired from public sources and licensed from third parties. RR27:185. HouseCanary also offered to license “[l]eading edge AVM’s [sic]” (Automated Value Models). RR51A-1:2046. AVMs are computer models or algorithms that estimate a home’s value. RR27:180; RR39:102. HouseCanary was not “the first company to come up with an [AVM].” RR27:180. AVMs have permeated the industry for 20 years, and technical standards 5

for developing them are publicly available. RR46:49, 18:112-13; e.g., RR515:1038-74. Indeed, Ryan Yang, a member of Title Source’s data science team (nicknamed “Smart Drive”), created his own model for estimating home values (called the “Home Valuation Estimator” (“HVE”)), using simple regression analysis months before Title Source received any data from HouseCanary. RR51-6:483-91; RR29:29, 31-33; RR39:16-17. Home buyers and sellers can use free AVMs—like Zillow’s Zestimate—to estimate a home’s value. RR46:49. Additionally, numerous companies license AVMs for commercial use. Title Source had used commercial AVMs for years before HouseCanary even existed. It paid $1.2 million per year to license an AVM called “Compinator” and other data from FNC, another technology vendor. RR46:37, 120. Unbeknownst to Title Source, HouseCanary did not have an AVM to license. Instead, shortly after offering to do so, HouseCanary licensed two AVMs from a company called Black Knight, along with a “property score” (measuring a property’s suitability for AVM valuation based on data availability) and other data for unlimited use for less than $1 million per year. RR51-2:154-83. HouseCanary then combined the two Black Knight AVMs to create what it branded as its Cascade AVM. RR46:27-29. Although HouseCanary later created a home-grown AVM, which it dubbed the “HouseCanary AVM,” it primarily used the Cascade AVM to generate home value estimates during the parties’ relationship. 6

RR27:21. At trial,

HouseCanary also claimed to have a “regression AVM,” which was based on regression analysis. RR27:191. Title Source’s Smart Drive team tested the HouseCanary data and AVM for accuracy. See, e.g., RR51-7:423-24. Title Source provided a list of 10,000 addresses it had recently appraised, and HouseCanary sent back estimated values using the Cascade AVM. RR27:36-38. Ryan Yang then compared HouseCanary’s estimates to the appraised values, as well as to estimates generated by Compinator and his previously developed HVE. RR51-6:483-91; RR29:29, 31-33. HouseCanary was aware of these validation efforts and did not object. RR51-2:783-95; RR27:40. HouseCanary also offered to combine its data and analytics into “Value Reports.” Value Reports contain information about a specific property—e.g., the number of bedrooms and square feet—plus certain analytics, including an AVM estimate and property score.

RR51-9:158-65.

Value Reports also include

“similarity scores,” which measure how similar the subject property is to nearby properties and sales. Id. Title Source had received similar reports from Black Knight as early as 2009. See RR42:57-59; RR51-1:280. Title Source and HouseCanary discussed multiple contract options. Those options included “licens[ing]” and “warehous[ing]” HouseCanary’s “entire database with the ability to commercialize this info” for $10 million per year. RR51-13:17980. Ultimately, Title Source “back[ed] away” from this option because it wanted to 7

“validate the accuracy of [HouseCanary’s] data” before making a sizeable financial commitment. Id. at 180. Instead, in November 2015, the parties amended the MSLA (“Amendment One”) to give Title Source: (1) unlimited use of the app, to be “deployed in [the] field” by November 1, 2015; and (2) unlimited access to Value Reports (including property scores, AVM values, and comparable sales on a per-request basis, which were also separately provided via digital stream). RR51-1:263-64. Title Source was entitled to use the specified data and analytics “for its internal purposes and the internal purposes of its Affiliates Quicken Loans Inc. and One Reverse Mortgage,” RR51-1:272-73, and to immediately terminate the agreements if the app failed to meet performance requirements. RR51-1:265, 275-76. Title Source agreed to pay a flat-rate of $5 million annually. RR51-1:263-64. In March 2016, HouseCanary continued its effort to market products to Title Source, offering to “build a model of appraisal complexity.” RR27:62; RR51A1:1181-89. HouseCanary, however, “never developed” this model. RR27:187; RR51-5:16 (emphasis added). By April 2016, HouseCanary had sent Title Source approximately 150,000 Value Reports. RR51-10:1144-46. To “validat[e] [ ] the information that [it] was receiving,” Title Source stored the reports “on a development database.” RR28:41-

42, 46-48; RR27:45-46. HouseCanary expected—and was fully aware of—this practice. Id. Title Source sues after HouseCanary fails to deliver. Long after the November 2015 due date, HouseCanary was only able to provide “look and feel” demonstrations of the app. RR17:10-12; RR51-10:5-7; RR51-9:1097-1101. At a March 2016 training session, Title Source appraisers found the app unusable because key features were missing. RR24:33-34, 45, 102, 117; RR51-10:798-801. It was a “car without an engine.” RR51-8:520. By April 2016, the app still was not functional, and HouseCanary again pushed back the rollout to no sooner than June 2016. RR51-5:740-41; RR39:25; see also RR38:154; RR38:91-92. As the app was “not remotely ready for production and deployment” on “the schedule originally promised and agreed to,” Title Source proposed restructuring the agreements. RR51-10:822-55. HouseCanary refused. RR51-10:939-42. Instead, Sicklick demanded payment in full, RR51-10:947-48, even though HouseCanary’s executives believed Title Source “should not have to pay for [the appraiser app] when [HouseCanary] [it]sel[f] d[id] not feel it is ready.” RR51-5:6-7. Title Source filed suit for breach of contract and fraudulent inducement, and terminated the agreements. CR1:24. HouseCanary counterclaimed. Id. at 32.

HouseCanary files additional counterclaims. After ending its relationship with HouseCanary, Title Source restarted work on its own AVM. The project was assigned to Dr. Claude Wang, who was never involved with HouseCanary.

RR30:128, 132-33.

Dr. Wang concluded that

regression analysis, which had been used in Yang’s earlier HVE, was “too simple for this complicated problem, so [he] didn’t use it.” RR31:14; RR29:54-55. Instead, Wang used a freely available “machine-learning” technique, combined with Title Source’s extensive historical appraisal data, to build an entirely new model called “MyAVM.” RR30:140, 150-51; RR30:40-44. Machine learning is a process where a computer analyzes a set of known inputs and outputs to discover patterns between the two. The computer then applies what it has “learned” to make predictions.

RR25:78. Title Source debuted MyAVM at a 2016 technology

conference hosted by Quicken Loans, but has never monetized or offered it commercially. RR51-6:354-91; RR37:145. After HouseCanary learned about MyAVM, it amended its counterclaims to allege that Title Source: misappropriated alleged trade secrets in violation of the Texas Uniform Trade Secrets Act (“TUTSA”); breached the NDA, MSLA, and Amendment One by reverse-engineering HouseCanary’s products, warehousing its data, and not paying for its services; and committed fraud and fraudulently induced HouseCanary to enter into those agreements. CR1:202. 10

HouseCanary’s own expert found no trace of HouseCanary technology in Title Source’s AVM. At trial, HouseCanary claimed five purported trade secrets: (1) AVMs (the Regression AVM, Cascade AVM, and HouseCanary AVM); (2) similarity score; (3) complexity score; (4) data dictionary; and (5) data compilation. HouseCanary’s theory was that Title Source misappropriated these alleged trade secrets by using them to develop its own AVM. HouseCanary relied on “the same facts” to support its breach of contract and fraud claims. RR50:20. That theory, however, had a fatal flaw: It is undisputed that HouseCanary never provided Title Source its source code, algorithms, or formulas for any of its purported trade secrets. RR39:86-87. To paper over that problem, HouseCanary relied exclusively on an expert, Dr. Vernon Rhyne. After thoroughly investigating the source code for Title Source’s MyAVM, however, Rhyne testified that he found no evidence of “any fingerprints, any clues, any reference to any HouseCanary technology.” RR39:87 (emphasis added). That testimony left HouseCanary to claim that Title Source must have reverse-engineered HouseCanary’s AVM from data in the Value Reports (and general descriptions of the complexity and similarity scores) by using machine learning to create MyAVM: This case is about technology that is magical, technology that can take a Coke can—imagine a machine that is spitting out Coca-Colas. . . . But it is a magic machine, because the more Coca-Cola cans you put into it, it learns. You’re training that machine with the secret 11

ingredients and the secret processes, and all the trade secrets that we have shown you is HouseCanary’s property. . . . That’s the magic of machine-learning. . . . [Title Source] stole the very technology and the analytics. They stole the secret formula. RR50:62-63. Yet Rhyne had already refuted this theory, too. He repeatedly admitted that MyAVM was not trained with HouseCanary data. RR39:39-40 (“[Y]ou know that Title Source did not use HouseCanary data to train its myAVM product. . ., right?” A: “I believe that’s true.”); see also id. at 54, 60. Indeed, he agreed MyAVM was developed using only Title Source’s “internal information, information from FNC, US Census, and publicly available data.” RR39:60. Although Rhyne initially suggested that Ryan Yang had attempted to reverseengineer HouseCanary’s AVM when he compared the results of the “Cascade” AVM to his HVE model, Rhyne admitted it was “equally likely” that Yang was refining his HVE to predict actual appraised values, rather than trying to match HouseCanary’s model. RR39:101-03. Rhyne also acknowledged that HVE is “limited in its capability” and uses a different methodology than MyAVM. RR39:129.

That is, HVE was not “trained” using machine-learning at all.

RR32:100-101. Rhyne also testified that Yang referenced HouseCanary’s data dictionary when he refined the factors used in his HVE model. RR38:124; see RR51-8:36712

88. On cross-examination, however, Rhyne admitted that the factors were “common sense,” and that the pages of the data dictionary Yang referenced were sourced— unaltered—from Black Knight. RR39:55, 93. Since HouseCanary’s own expert contradicted the basis of its claims, HouseCanary resorted to telling the jury tales about “magical” technology, and claiming that “a house of lies has been perpetrated in this court.” RR50:13. HouseCanary also argued that this case was not just about Title Source but “corporate unethical behavior,” and told the jury to “send a message” to “Corporate America” that would make the “Wall Street Journal.” Id. at 72. The court characterizes HouseCanary’s damages expert testimony as “speculative,” but admits it anyway. Rather than relying on the $5 million value the parties actually placed on HouseCanary’s technology via contract, HouseCanary’s hired a damages expert, Walter Bratic, to opine that a “reasonably prudent investor” would have paid $201.6 million to own just HouseCanary’s trade secrets for two years or, in the alternative, $64.1 million as a reasonable royalty to license the trade secrets for two years. Notably, Bratic testified that Title Source would pay $145 million per year for Quicken Loans—a nonparty—to use HouseCanary’s technology 13.2 million times per year, with bankers having to work 24 hours a day to reach that number. Despite describing this testimony as “a stretch” and “very speculative,” the trial court

allowed it. RR2:89-90. Bratic also estimated HouseCanary lost $33.8 million in profits due to Title Source’s alleged breach of contract or fraud. RR45:183-84.

CR4:9674. HouseCanary’s incendiary arguments and speculative testimony produce a $739.6 million judgment. The jury found for HouseCanary on all counterclaims, and against Title Source on all of its claims. It awarded damages in lock-step with Bratic’s testimony: •

$201.6 million and $64.1 million—as alternative measures of damages—for misappropriation under TUTSA (Question 39); breach of contract for the NDA (Question 43), the MSLA (Question 44), and Amendment One (Question 45);

• $403.2 million in punitive damages for HouseCanary’s misappropriation claim (Question 42); •

$33.8 million (Bratic’s lost-profits figure) as damages for both HouseCanary’s fraud claim (Question 13) and contract claim (Question 28) based on Amendment One, in addition to the misappropriation damages awarded for breach of Amendment One (Question 45); and

•

$67.6 million in punitive damages on HouseCanary’s fraud claim (Question 13).

The damages awarded for the misappropriation claim amount to more than 100 times the total revenue HouseCanary earned for the sale of all its products (not just those containing the alleged trade secrets) to all its customers over the same period. RR46:86. HouseCanary elected to recover on its misappropriation and AmendmentOne-based fraud claims. CR4:8844, 8848-49. The trial court entered judgment, awarding HouseCanary $739.6 million comprised of: • $235.4 million in compensatory damages ($201.6 million for misappropriation and $33.8 million on the Amendment One fraud claim); • $470.8 million in corresponding punitive damages ($403.2 million for TUTSA misappropriation and $67.6 million for fraud); • $29 million in prejudgment interest; and • $4.5 million in attorneys’ fees. 2ndSupp.CR2:4048-49. New evidence of fraud and collusion emerges post-trial. The day after the verdict, Title Source’s CEO received a startling, unsolicited email from a pseudonymous whistleblower:

2ndSupp.CR3:4538. Title Source’s CEO followed up with the whistleblower, but he was fearful of coming forward. Id. Title Source thus began independently investigating the disturbing allegations. HouseCanary tried to stifle the investigation by filing a motion for a temporary restraining order, which it withdrew the morning of the hearing. CR6:11546. It also “started offering [post-trial consulting agreements] to all previous employees,” 2ndSupp.CR3:4626, proposing to compensate them upwards of $250 per hour to provide unspecified “assistance to HouseCanary” related to this litigation, 2ndSupp.CR3:4554. Chris Stroud, HouseCanary Co-Founder and Chief of Research, admitted he “d[idn’t] have any idea” what “kind of consulting” the former employees were supposed to do. 2ndSupp.CR3:4628. Former employees viewed these offers as “hush money” and “an attempt to get [them] ‘under contract’ to 16

HouseCanary and to prevent [them] from speaking to [Title Source].” 2dSupp.RR2:149-50; 2ndSupp.CR3:4543 ¶ 20; 2ndSupp.CR3:4535-36 ¶ 18 (describing arrangement as “payola or bought testimony”). Through the investigation, Title Source identified Anthony Roveda, HouseCanary’s former Director of Appraiser Experience and Director of Appraiser Research, as the author of the email. Three other former HouseCanary executives also came forward following trial: Rob Walker, former Managing Director, Analytics and Data; Dan Majewski, former Vice President of Business Development; and Tom Ciulla, former President of Sales. Each had extensive knowledge about HouseCanary’s technology and the previously undisclosed relationship between HouseCanary’s CEO Sicklick and Petkovski, a key Title Source witness at trial. 2ndSupp.CR3:4532-59; 2dSupp.RR4:14. All four whistleblowers testified that HouseCanary’s app “wasn’t a functioning product,” was “vapor ware,” and had “none of the [promised] capabilities.”

2dSupp.RR5:73, 3:178.

They further testified that Sicklick

“instructed” HouseCanary employees to “misrepresent[] the nature of the Appraiser App” and “its readiness for the market,” firing those who did not fall in line. 2dSupp.RR3:179, 181-82; 2dSupp.RR5:72-73. In February 2016, Dan Majewski emailed Tom Ciulla expressing his “concerns” over Sicklick’s “gross misrepresentation” that the app was “ready to roll out on a national scale” and 17

refusing to “risk” his “reputation and integrity” to act as a “‘human shield’ for TSI/QL.”

2dSupp.RR7:94-95.

Moreover,

the

investigation

revealed

that

HouseCanary had withheld key information from discovery, including the results of third-party testing revealing that its AVM was “very mediocre.” 2dSupp.RR3:173; 2dSupp.RR4:116-17; 2dSupp.RR5:64-65; CR2:2499; 2dSupp.RR6:45-46. The whistleblowers also revealed that Petkovski—the senior Title Source executive who managed the HouseCanary relationship—had not been acting in Title Source’s best interest, unbeknownst to the company.

At some point before

HouseCanary pitched the Appraisal App to Title Source, Sicklick and Petkovski engaged in negotiations for Petkovski to join HouseCanary in a senior sales capacity and receive an equity stake in the company.

2ndSupp.CR3:4562-63, 4565.

Discussions about Petkovski joining HouseCanary were “commonplace” at HouseCanary, with Sicklick often internally commenting that Petkovski would be joining the organization. 2dSupp.RR2:107-08, 143, 170; 2dSupp.RR3:184-85, 18791; 2dSupp.RR4:28, 53-56; 2dSupp.RR5:51, 56-57. As part of this understanding, Petkovski and Sicklick held numerous undisclosed meetings and calls, and Petkovski edited HouseCanary’s sales presentations before they were presented to Title Source, helped HouseCanary recruit personnel and investors, and introduced HouseCanary to potential customers.

2dSupp.RR7:188-294. 2 He also fed HouseCanary ideas (including for the app itself) and helped HouseCanary secure the data it later sold to Title Source, all while knowingly concealing the failings of HouseCanary’s products from his employer. 2dSupp.RR2:145-46; 2dSupp.RR5:71-72. Until Roveda’s post-trial email, Title Source had no reason to doubt Petkovski’s loyalty. The trial court denied Title Source’s motions for JNOV and a new trial without explanation. This appeal followed. SUMMARY OF ARGUMENT No evidence supports HouseCanary’s trade secret claim. No legally or factually sufficient evidence supports even a single element of HouseCanary’s misappropriation claim for even a single trade secret. Instead, the evidence at trial conclusively established that Title Source acquired nothing more from HouseCanary than industry-standard concepts, generalized descriptions, and outputs—not the trade secrets submitted in the Jury Charge. HouseCanary’s own expert admitted that in reviewing Title Source’s “MyAVM,” he found no evidence of “any fingerprints, any clues, any reference to any HouseCanary technology.” RR39:87 (emphasis added). And HouseCanary’s

Title Source sought to introduce these emails at the hearing and made an offer of proof. 2dSupp.RR5:250-52. The trial court erroneously sustained HouseCanary’s objection in a posthearing order. 2ndSupp.CR3:6485.

unsubstantiated accusations that Title Source misappropriated HouseCanary’s data cannot overcome unrebutted testimony that Title Source did not use HouseCanary data to create MyAVM. The only conclusion a reasonable jury could draw from this evidence is that Title Source never acquired and never used any supposed trade secret—defeating liability for misappropriation and requiring reversal and rendition. HouseCanary’s fraud and contract claims merely repackage its deficient misappropriation claim. As HouseCanary’s trial counsel admitted, it relied on the “same facts” that purportedly supported its misappropriation claim to support its breach of contract and fraud claims. RR50:20. With no evidence of misappropriation, HouseCanary’s duplicative fraud and breach claims fail, too. Moreover, HouseCanary’s fraud theories are preempted by TUTSA. To the extent HouseCanary’s contract and fraud claims encompass more than misappropriation, they fail on their own terms: HouseCanary never delivered a functioning app as required by the contract, obviating Title Source’s responsibility to pay. There is also no evidence to support HouseCanary’s fraudulent inducement claim, which is based on the unproven theory that Title Source did not intend to comply with Amendment One from the outset. No evidence supports the compensatory damages awards. HouseCanary supported its request for hundreds of millions of dollars in compensatory damages with nothing more than the ipse dixit of its expert, Bratic—testimony the trial court 20

itself described as “very speculative” and “a stretch.” RR2:89-90. Bratic’s opinions constitute no evidence and are unreliable because his calculations are based solely on speculation and conjecture that not only lacks record support, but affirmatively contradict it. The $470.8 million punitive damages awards violate Texas law and the U.S. Constitution. The punitive damages awards of almost half a billion dollars are unconstitutionally excessive by any measure.

Lacking evidence of malice,

HouseCanary inflamed the jury’s passion and prejudice with its closing argument, exhorting the jury to send a message to “the business community” about “corporate unethical behavior,” RR50:72, and repeatedly impugning the integrity of Title Source and its lawyers by accusing them of telling “outright lies.” RR50:65-67. Even in hard-fought litigation, these comments were out of bounds. Charge error requires a new trial.

The jury charge was infected by

presumed-harmful Casteel error. It impermissibly used broad-form questions on liability (for which there was no supporting evidence), while asking the jury to award lump-sum damages, making it impossible to attribute damages to any particular trade secret. The jury was also erroneously instructed to find trade secret damages for breach of contract claims. Newly discovered evidence of fraud and collusion requires a new trial. After trial, shocking new evidence emerged that HouseCanary had colluded for years with 21

Title Source’s Chief Appraiser and key trial witness to misrepresent the accuracy and readiness of HouseCanary’s products, suppressed negative testing results for its AVM, and silenced potential witnesses with lucrative consulting agreements, among other things. Given the inherently covert nature of fraud and collusion, Title Source understandably did not uncover this scheme pre-trial despite its continued diligence. If a jury were to hear the new evidence, it could not and would not reach the same verdict, much less award HouseCanary more than $700 million. STANDARDS OF REVIEW Under the no-evidence standard, this Court should reverse and render judgment when the record shows: (a) a complete absence of evidence of a vital fact; (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (c) the evidence offered to prove a vital fact is no more than a mere scintilla; [or] (d) the evidence establishes conclusively the opposite of the vital fact. Gharda USA, Inc. v. Control Sols., Inc., 464 S.W.3d 338, 347 (Tex. 2015). “[P]roper review” of a jury verdict “prevents jurors from substituting their opinions for undisputed truth.” City of Keller v. Wilson, 168 S.W.3d 802, 816–17 (Tex. 2005). “When evidence contrary to a verdict is conclusive, it cannot be disregarded.” Id. at 817. Nor can evidence “be taken out of context in a way that makes it seem to support a verdict when in fact it never did.” Id. at 812.

“Evidence that is so slight as to make any inference a guess is in legal effect no evidence.” Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004). And “[i]ncompetent evidence is legally insufficient to support a judgment, even if admitted without objection.” City of Keller, 168 S.W.3d at 812. Regarding factual sufficiency, the Court “must consider and weigh all of the evidence, not just that evidence which supports the verdict.” Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 406–07 (Tex. 1998); Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam). The Court should reverse and remand for a new trial if the jury’s finding “is so contrary to the overwhelming weight of the evidence that the verdict is clearly wrong and unjust.” Mar. Overseas, 971 S.W.2d at 407. “The standard of review for an excessive damages complaint is factual sufficiency of the evidence.” Id. at 406–07. A trial court’s denial of a new-trial motion is reviewed for abuse of discretion. In re R.R., 209 S.W.3d 112, 114 (Tex. 2006) (per curiam). A trial court abuses its discretion when it acts in an arbitrary or unreasonable manner or without reference to any guiding rules or principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985). This Court likewise should order a new trial if charge error probably caused the jury to render an improper verdict. Columbia Rio Grande Healthcare, L.P. v. Hawley, 284 S.W.3d 851, 856 (Tex. 2009). “Charge error is generally considered 23

harmful if it relates to a contested, critical issue.” Id. Casteel error is “presumed harmful.” Texas Comm’n on Human Rights v. Morrison, 381 S.W.3d 533, 534 (Tex. 2012) (per curiam); Benge v. Williams, 548 S.W.3d 456, 475–76 (Tex. 2018). ARGUMENT The judgment should be reversed and rendered. A.

There is no evidence of trade secret misappropriation.

A “trade secret” is information that derives “independent economic value . . . from not being generally known” or “readily ascertainable.” TEX. CIV. PRAC. & REM. CODE § 134A.002(6)(B). To establish misappropriation, a plaintiff must prove ownership of the alleged trade secret and either: (a) “acquisition of a trade secret” by “improper means”; or (b) “disclosure or use of a trade secret.” Id. § 134A.002(3). Damages are recoverable only if they are “caused by misappropriation.” Id. § 134A.004(a) (emphasis added). Thus, a plaintiff must “show an injury if it seeks damages,” i.e., “the defendant’s subsequent commercial use” of misappropriated trade secrets. Morgan v. Clements Fluids S. Texas, LTD., No. 12-18-00055-CV, --S.W.3d ---, 2018 WL 5796994, at *8 (Tex. App.—Tyler Nov. 5, 2018, no pet.). An absence of evidence on just one element of misappropriation requires judgment in Title Source’s favor. Here, HouseCanary failed to show any of these elements, much less all of them.

Title Source never acquired any HouseCanary trade secrets.

HouseCanary claimed that the trade secrets Title Source acquired during their contractual relationship were “the very technology and the analytics,” as well as “the secret formula[s],” in HouseCanary’s products. See, e.g., RR50:62-63. But the evidence conclusively establishes that HouseCanary never provided its “secret sauce” of algorithms and analytics to Title Source. HouseCanary only provided, in sales presentations and per the contracts, generalized descriptions of, and outputs from, its models. None of that information comes close to being a trade secret. The notion that the documents HouseCanary gave Title Source contained trade secrets is further belied by HouseCanary’s repeated use of them in open court––without making any attempt to protect them from public disclosure. See Opening Br., Title Source, Inc. v. HouseCanary, Inc., No. 04-18-00509-CV (Oct. 1, 2018 Tex. App.— San Antonio); Tex. Civ. Prac. & Rem. Code Ann. § 134A.002(6). 3 HouseCanary’s Three AVMs. AVMs are a “set of algorithms” that generate estimated home values. RR40:31. According to HouseCanary, these algorithms were the “secret sauce” that “put [the AVMs] all together.”

RR44:73. But

HouseCanary admittedly never provided Title Source any algorithms for any of its

The day this brief was due, this Court held the trial court erred when it entered an order sealing the documents. Title Source, Inc. v. HouseCanary, Inc, No. 04-18-00509-CV & 04-1800844-CV (July 10, 2019 Tex. App.—San Antonio). Title Source intends promptly to seek leave to file a supplemental brief addressing the implications of that decision for this case.

models. HouseCanary’s own expert, Dr. Rhyne, concluded that “[Title Source] didn’t have any of the analytics inside of” HouseCanary’s models. RR38:119. HouseCanary’s Chief of Research also admitted that the company does not “provide information about how its models operate to its customers.” RR27:183. These admissions “establish[] conclusively the opposite of [a] vital fact.” Gharda, 464 S.W.3d at 347. To be sure, HouseCanary, as part of its sales pitch, explained some basic principles behind its AVMs. But it is undisputed that each of these concepts—such as comparing values of similar properties or the use of regression analysis—has been publicly known and used in the real estate industry and in statistics for decades. RR27:195; RR41:114-15; RR30:141, 146-47; RR51-5:1038-74; RR39:43-44, 87. It is elementary that common knowledge is not a trade secret. Baxter & Assocs., L.L.C. v. D & D Elevators, Inc., No. 05-16-00330-CV, 2017 WL 604043, at *9 (Tex. App.—Dallas Feb. 15, 2017, no pet.); see also TEX. CIV. PRAC. & REM. CODE § 134A.002(6)(A). Moreover, although Title Source received value estimates for specific properties generated by two of HouseCanary’s AVMs, the jury was asked to find that the “HouseCanary AVMs” were trade secrets, not these outputs (i.e., value estimates). RR50:62-63; Question 37.

Similarity Score. Value Reports also included a similarity score measuring (on a scale of 1 to 100) how similar nearby properties and sales were to the subject property. HouseCanary provided Title Source only background “information about the similarity score” and “outputs from the similarity score model” on the Value Reports, RR27:155-56, never the algorithm. As with the AVMs, there is no evidence that Title Source ever obtained the “secret sauce,” i.e., the “Similarity Score” itself, which was the question put to the jury. HouseCanary only shared a document that largely reproduced the publicly available description of a similarity score on HouseCanary’s website. Compare RR51A(1):119 with RR51-7:94-103. This document—which HouseCanary claimed at trial contained its “core trade secrets,” CR4:9282—explains that HouseCanary measures the similarity of two properties by comparing: (1) neighborhoods (e.g., zip codes and school districts); and (2) physical characteristics (e.g., number of bedrooms and bathrooms). This is not “trade secret” information. Any real estate agent, mortgage lender, appraiser, or indeed average American knows that property characteristics and location drive property value. That is why HouseCanary executives themselves described this information as “generic,” not “proprietary.” RR51-9:259-64. Indeed, after trial, HouseCanary conceded in subsequent litigation against Quicken Loans that this document is not a trade secret. 2dSupp.RR7:330-31. That 27

precludes liability. Cf. Gannaway v. Trinity Universal Ins. Co., 85 S.W.2d 345, 347 (Tex. Civ. App.—San Antonio 1935, writ ref’d) (granting new trial due to “admission against interest made by the successful party after the trial”). Complexity Score. Title Source never received a “Complexity Score” model for the simple reason that HouseCanary never developed one. At trial, HouseCanary confusingly referred to two different things as a “Complexity Score”: Stroud discussed an “appraisal complexity score,” RR26:132, while Rhyne referred to a complexity score as a “property score,” RR38:114-15.4 Neither was a trade secret. First, the idea of an “appraisal complexity score”—which was supposed to measure how difficult it would be for a human appraiser to complete an appraisal, RR26:125—was described in a PowerPoint presentation that HouseCanary sent Title Source, RR51A-1:1181-89. However, HouseCanary “never developed” the model and “shelved [the project] indefinitely.” RR26:132-33, 125-26; RR51-5:16-17. As a result, HouseCanary cannot claim that this model had any “independent economic value, actual or potential.” TEX. CIV. PRAC. & REM. CODE § 134A.002(6)(B); see also Glob. Water Grp., Inc. v. Atchley, 244 S.W.3d 924, 929 (Tex. App.—Dallas 2008, pet. denied) (rejecting trade secret status for formula in part because plaintiff

Even more confusingly, HouseCanary also referred to the “property score” as the “valuation suitability score.” E.g., RR27:162.

“directs us to no evidence of the value of its formula to its business”); Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 266 (5th Cir. 2007) (trade secret must be “valuable to [plaintiff’s] business”). Furthermore, the presentation contained no formulas, no source code, no description of how to build this hypothetical mathematical model, just a generalized description of the concept. The “imprecise nature of the information weighs heavily against it being a trade secret.” Glob. Water Grp., 244 S.W.3d at 930. Second, the “property score”—which measures whether there is enough data to create an accurate AVM estimate—was owned by third-party licensor Black Knight. It thus does not qualify as a HouseCanary trade secret. Question 37; RR27:32-33. Data Compilation. The evidence also conclusively establishes that Title Source never acquired HouseCanary’s “data compilation,” its bulk dataset comprised of data from public and third-party sources. See, e.g., RR27:92, 108, 152, 185-96. To be sure, Title Source received a limited number of individual data points in the Value Reports. Yet those disaggregated data points are not the same thing as the complete “data compilation,” any more than a bucket of sand is the same thing as the beach. In fact, the data conveyed in the 150,000 Value Reports are a small fraction of HouseCanary’s entire “dataset” covering “100 million residential properties.” RR27:108, 110, 152. In HouseCanary’s own words, its “bulk dataset” 29

is what “made possible . . . a precomputed nationwide AVM.” See, e.g., id. at 108; see RR38:132 (“[T]he key to doing a good model—the devil is in the data, and you’ve got to have more data.”). Thus, it was the aggregation of all the information in the “data compilation,” not a subset of the underlying pieces of information standing alone, that constituted the purportedly valuable trade secret. Title Source undisputedly never acquired this aggregation––the “data compilation.” Data Dictionary. HouseCanary provided Title Source with a “data dictionary” (a descriptive index identifying the categories of data contained in the data compilation). At trial, HouseCanary claimed to have a smoking gun showing that Ryan Yang copied certain pages from its data dictionary. But the relevant pages were not developed or owned by HouseCanary—they too were owned by Black Knight. RR39:93-95; compare RR51A-1:1780-2031 with RR51-8:368-73; see also RR51-2:154-83. From this evidence, no reasonable jury could find, as this jury did in response to Question 37, that Title Source acquired a trade secret that was “owned” by HouseCanary. See also TEX. CIV. PRAC. & REM. CODE § 134A.002(3). 2.

Title Source never used any of HouseCanary’s alleged trade secrets.

Because Title Source never acquired HouseCanary’s alleged trade secrets, it could not possibly have “used” them. TEX. CIV. PRAC. & REM. CODE § 134A.002(3).

HouseCanary tried to prove use by arguing that Title Source reverse-engineered the trade secrets by feeding its data into a “Magic Coke Machine” to build an in-house AVM. HouseCanary was long on rhetoric but short on evidence. HouseCanary’s own expert, Dr. Rhyne, conducted a thorough investigation of Title Source’s source code and concluded that MyAVM did not contain “any fingerprints, any clues, any reference to any HouseCanary technology.” RR39:87. According to Rhyne, there was not “any indication” that MyAVM used HouseCanary technology, nor was there “any implementing of the HouseCanary data dictionary” in MyAVM. Id. at 86-87. Rhyne further concluded that Title Source “did not use any HouseCanary information for its training data.” RR39:54-55. Instead, Rhyne found that Title Source trained MyAVM using Title Source’s own 3.7 million historical appraisals and public source data, RR39:54-55; RR31:4143, consistent with Claude Wang’s testimony about his development of MyAVM, RR31:39-43. Likewise, HouseCanary’s other expert, Dan Manheim, testified that based on his source code review he “didn’t see any evidence of [HouseCanary’s] similarity score.” RR38:22. Additionally, neither expert identified any source code for a complexity score or model, in MyAVM or otherwise. RR38:46. The testimony of HouseCanary’s own experts is undisputed and conclusive: Title Source did not use HouseCanary’s data and outputs to develop or train 31

MyAVM. To avoid this fact, HouseCanary tried to use emails and testimony to suggest that Title Source planned to use HouseCanary’s data to build its own models. E.g., RR51-9:90-91. But the undisputed evidence shows it never did so. And “evidence that might be ‘some evidence’ when considered in isolation is nevertheless rendered ‘no evidence’ when contrary evidence shows it to be incompetent.” City of Keller, 168 S.W.3d at 812–15, 817. Unable to show any misappropriation with respect to MyAVM, HouseCanary attempted to confuse the issue by pointing to Ryan Yang’s earlier work on a different model, HVE. But HVE was not “trained” using a “magic machine”; it was a simple regression analysis developed months before Title Source ever received any HouseCanary data. RR51-6:483-91. Although HouseCanary relied on an email in which Yang compared “HC Model Performance” with “TSI Model Performance,” RR51-8:362-65, this document does not show “reverse engineering” of any kind. It just shows ordinary due diligence by an employee attempting to determine whether HouseCanary really offered the quality model it advertised. In fact, HouseCanary’s own expert, Rhyne, admitted it was “equally likely” Yang was merely comparing HVE’s performance with HouseCanary’s AVM, while trying to get his model to match the actual appraisal value (not HouseCanary’s estimates). RR39:103. That testimony is fatal: “a jury may not reasonably infer an ultimate fact from ‘meager circumstantial evidence which could give rise to any number of inferences, none 32

more probable than another.’” Hancock v. Variyam, 400 S.W.3d 59, 70–71 (Tex. 2013) (citation omitted). Similarly, there is no evidentiary support for any developmental link between MyAVM and HVE. HVE was a simple regression model that used “common sense” factors to try to estimate home values. RR39:55. Title Source did not use it for any purpose, let alone a commercial one. RR29:54-55. By contrast, MyAVM used a “cutting-edge technology machine learning method,” RR30:150; 31:39; was trained using millions of historical Title Source appraisals and public data, RR31:41-43; and was modeled by Dr. Claude Wang, RR30:151-52. HouseCanary broadly asserted that Yang’s mere presence on the MyAVM development team—even in a tangential role—was enough to show a developmental connection. Without more, Yang’s involvement proves nothing: an employee who had access to alleged trade secrets cannot be presumed to have used them later. Greenville Automatic Gas Co. v. Automatic Propane Gas & Supply, LLC, 465 S.W.3d 778, 787–88 (Tex. App.—Dallas 2015, no pet.) (former employee’s extensive knowledge of customer lists was “not evidence” that employee used that

knowledge to create new employer’s customer list). In short, there was no evidence of reverse-engineering, or any other use. 5 3.

Title Source never acquired anything by “improper means.”

There is also no evidence that Title Source acquired any information from HouseCanary by “improper means,” i.e., “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy . . . or espionage through electronic or other means.” TEX. CIV. PRAC. & REM. CODE § 134A.002(2). Where, as here, HouseCanary disclosed any alleged trade secret willingly as part of marketing materials or pursuant to the parties’ contracts, there can be no acquisition by “improper means.” See Educ. Mgmt. Servs., LLC v. Tracey, 102 F. Supp. 3d 906, 914 (W.D. Tex. 2015) (where plaintiff “admits that it willingly disclosed trade secrets” under confidentiality agreement, defendant’s later alleged breach “is irrelevant to the method by which he obtained access to the trade secrets in the first instance”); Educ. Mgmt. Servs. v. Cadero, No. SA-14-CA-587, 2014 WL 12586781, at *2 (W.D. Tex. Nov. 18, 2014) (no allegation of “improper means”

HouseCanary also claimed Title Source warehoused HouseCanary’s data in violation of Amendment One. The restriction on “creat[ing] any database,” RR51-1:272-73, however, did not prohibit Title Source’s storage of Value Reports while validating the accuracy of the data. Stroud admitted that he expected Title Source to put the data somewhere. RR27:45–46. Moreover, mere storage of Value Reports does not demonstrate their use to develop MyAVM.

where claimant “attempts to hold the [d]efendant liable under TUTSA based only on his breach of the non-disclosure agreement”). B.

There is no causal link between the alleged misappropriation and damages.

A plaintiff may only recover damages “caused by misappropriation.” TEX. CIV. PRAC. & REM. CODE § 134A.004(a) (emphasis added); see Lakeway Reg’l Med. Ctr., LLC v. Lake Travis Transitional LTCH, LLC, No. 03-15-00025-CV, 2017 WL 672451, at *14 (Tex. App.—Austin Feb. 17, 2017, pet. denied) (“[w]ithout that causal link, [claimants] cannot succeed on a claim for misappropriation of trade secrets”). Notwithstanding that fundamental rule, HouseCanary and its experts assumed, instead of proving, this critical element. E.g., Hous. Unlimited, Inc. Metal Processing v. Mel Acres Ranch, 443 S.W.3d 820, 833 (Tex. 2014). HouseCanary did not even try to claim that the alleged misappropriation caused it to suffer any “actual loss.” TEX. CIV. PRAC. & REM. CODE § 134A.004. Instead, its damages claim rested entirely on the theory that Title Source was unjustly enriched. As evidence of unjust enrichment, HouseCanary pointed to only one purported “commercial use” of its trade secrets—Title Source’s development of MyAVM. However, Title Source never used the alleged trade secrets to develop MyAVM.

Supra Section I.A.2.

Moreover, the evidence decisively showed

MyAVM was never monetized or offered commercially. RR51-6:354-91; RR37:145. Consequently, there was no evidence from which a reasonable jury could have found that HouseCanary suffered competitive injury or Title Source was unjustly enriched. The absence of a proven causal link between the alleged misconduct and any harm to HouseCanary, or unjust enrichment to Title Source, results in rendition on the misappropriation claim. Lakeway, 2017 WL 672451, at *14. C.

HouseCanary’s fraud and fraudulent inducement claims fail. 1.

TUTSA preempts the fraud and fraudulent inducement claims.

HouseCanary’s fraud and fraudulent inducement claims are preempted by TUTSA, which “displaces conflicting tort . . . law of this state providing civil remedies for misappropriation of a trade secret.” TEX. CIV. PRAC. & REM. CODE § 134A.007(a).

TUTSA “eliminat[es] alternative theories of common law

recovery”—like HouseCanary’s fraud-based claims—“which are premised on the misappropriation of a trade secret.” Super Starr Int’l, LLC v. Fresh Tex Produce, LLC, 531 S.W.3d 829, 843 (Tex. App.—Corpus Christi 2017, no pet.) (citation omitted). HouseCanary’s counsel squarely admitted that it was relying on “the same facts” to support both its misappropriation and “[its] fraud claim”: “we say that they

took our trade secrets, information we disclosed to them about our models.” RR50:20 (emphasis added); CR4:9606 ¶ 83. The fraud claim, which thus “stem[s] from . . . the taking of . . . confidential information,” is preempted. Embarcadero Techs., Inc. v. Redgate Software, Inc., No. 1:17-CV-444-RP, 2018 WL 315753, at *3 (W.D. Tex. Jan. 5, 2018). 6 HouseCanary’s fraudulent inducement claim is also a recycled version of its “improper means” theory of misappropriation under TUTSA. Although Title Source believes the TUTSA misappropriation claim is unsupported, supra Section I.A.3, if the Court disagrees, the TUTSA misappropriation claim preempts the fraudulent inducement claim because both are premised on the same basic assertion, i.e., Title Source convinced HouseCanary to enter the contract to acquire the trade secrets. 2.

The fraud-based claims fail for lack of evidence.

Because they rely on the same core facts as the misappropriation and contract claims, see CR4:9590, 9606 ¶¶ 25, 83, the fraud and fraudulent inducement claims fail along with the primary claims for lack of evidence. See supra Section I.A. The fraud-based claims fail for another reason:

HouseCanary failed to

identify any material misrepresentation made by Title Source with the intent it would

HouseCanary’s fraud claim is also duplicative of its contract claim, and independently barred for this reason. “[M]ere breach of contract . . . may not be evidence of fraud.” Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 304 (Tex. 2006).

be relied upon by HouseCanary. See DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex. 1990). At trial, HouseCanary took various exhibits “out of context in a way that ma[de] [them] seem to support a verdict when in fact [they] never did.” City of Keller, 168 S.W.3d at 812. For example, the fact that members of the Smart Drive team expressed interest in HouseCanary’s data cannot be interpreted as bad intent when evaluated in context: These discussions occurred during due diligence while Title Source was considering whether to enter into a full data licensing agreement. See RR51-8:305-07, RR51-2:72-76. They show only that Title Source was weighing its contractual options and testing the completeness and accuracy of the information they were licensing, as any business would do. Similarly, Title Source’s request to include a termination provision in Amendment One, RR51-13:179, is nothing more than standard contracting practice. D.

HouseCanary’s contract claims fail.

Like the fraud claims, “both” of HouseCanary’s contract claims rest on the “same facts” as the misappropriation claim—as HouseCanary made clear. See, e.g., RR50:20. HouseCanary went so far as to (erroneously) seek the same misappropriation damages for its contract claims, further demonstrating the overlap. RR49:25-27; see Stewart v. Basey, 245 S.W.2d 484, 486 (Tex. 1952) (“The universal rule for measuring damages for the breach of a contract is just compensation for the 38

loss or damage actually sustained.”). The absence of evidence of misappropriation, supra Section 1.A, thus dooms HouseCanary’s contract claims. HouseCanary’s only separate contract theory is that Title Source failed to comply with the notice-and-cure provision and should have paid HouseCanary. Question 36. Title Source was excused from any obligation to perform, however, because HouseCanary materially breached the agreement by failing to deliver a working app. Supra p.9; Bartush-Schnitzius Foods Co. v. Cimco Refrigeration, Inc., 518 S.W.3d 432, 436 (Tex. 2017) (per curiam).

As the evidence showed,

HouseCanary recognized internally that it still had “work to do to get the product ready” and Title Source “should not have to pay for that when we ourselves do not feel it is ready.” RR51-5:6-7. Moreover, both Stroud and Rhyne admitted that the app never included all of the required functionality. RR26:115; RR38:91-92, 10607, 154. Accordingly, the jury’s rejection of Title Source’s contract claim also should be reversed. Questions 16, 22. ***** Jury determinations are not lightly overturned. But those determinations cannot stand where, as here, there is no evidence to support them and the record evidence affirmatively contradicts them. Here, the verdict should be overturned because HouseCanary’s own expert testified that there was no trace of HouseCanary

technology in MyAVM or any evidence that Title Source used HouseCanary’s data to train MyAVM. The compensatory damages awards cannot stand. A.

There is no evidence of damages.

In addition to sufficient evidence of liability, each of HouseCanary’s claims requires adequate proof of damages. Cuidado Casero Home Health of El Paso, Inc. v. Ayuda Home Health Care Servs., LLC, 404 S.W.3d 737, 744 (Tex. App.—El Paso 2013, no pet.) (misappropriation); Spera v. Fleming, Hovenkamp & Grayson, P.C., 25 S.W.3d 863, 873–74 (Tex. App.—Houston [14th Dist.] 2000, no pet.) (fraud and contract).

HouseCanary’s sole evidence on damages was Bratic’s testimony.

Because it was based on ipse dixit and directly contradicted by objective record evidence, it is no evidence of damages, see Gharda, 464 S.W.3d at 350, and Title Source is entitled to judgment on all of HouseCanary’s claims. See Coastal Transp. Co. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 232 (Tex. 2004) (“conclusory or speculative” testimony “is not relevant evidence” and “cannot support a judgment”). In the alternative, a new trial is warranted because Bratic’s testimony failed to satisfy E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549, 556 (Tex. 1995), and Texas Rule of Evidence 702.

Bratic’s testimony on misappropriation damages was unreliable and no evidence.

Bratic’s analysis and testimony were nothing but guesswork.

hypothesized that a “reasonably prudent investor” would have valued ownership of the trade secrets at $201 million based on two years of usage (2017 and 2018), and that Title Source would have paid a reasonable royalty of $64 million over two years to use the five purported trade secrets, despite the undisputed objective evidence that the parties’ own real-world contract permitted Title Source to use all of those “secrets”—along with additional technology and data licensed by HouseCanary— on an unlimited basis for $5 million per year. RR51-1:263-64. Bratic ignored the value that both parties, including HouseCanary, placed on the alleged trade secrets. Bratic’s imaginary approach was unnecessary given the parties’ actual contract and produced grossly excessive and factually unsupported damages. The Texas Supreme Court has made crystal clear that “relying on imagination is not justified when objective evidence is available.” Sw. Energy Prod. Co. v. Berry-Helfand, 491 S.W.3d 699, 720–21 (Tex. 2016). Courts “cannot excuse the absence of objective evidence that places the [contract] in context and bears directly on ‘the amount that a person desiring to use the trade secret would be willing to pay for its use.’” Id.

Here, the best “objective evidence” of “the amount” Title Source “would be willing to pay for” use of the trade secrets is the $5 million Title Source agreed to pay—and HouseCanary accepted—for use of the alleged trade secrets (plus additional items). Id. at 721. Bratic’s utter failure to consider the price Title Source actually agreed to pay for the very uses he was purporting to value renders his testimony no evidence of damages. Id.; see also Ford Motor Co. v. Ledesma, 242 S.W.3d 32, 38–39 (Tex. 2007) (“Expert testimony is unreliable if it is based on unreliable data”). In addition, Title Source contracted to use HouseCanary’s AVM as a replacement for a competitor product, but paid only $1.2 million per year for that product. RR46:37, 120. No company would “reasonably” pay $64 million to license (for two years) a substitute for a product that previously cost approximately $1 million (for one year). HouseCanary itself paid less than $1 million per year to use two Black Knight AVMs to “create” the Cascade AVM. RR46:27-29. Additionally, no “reasonably prudent investor” would pay more than 100 times the total revenue HouseCanary earned for the sale of all its products combined to own only the alleged trade secrets. RR46:86. Bratic’s damages figures are not remotely in the realm of realistic market values for AVMs. His testimony is no evidence for the additional reason that trade secrets must be valued “at the time the misappropriation took place.” Berry-Helfand, 491 S.W.3d 42

at 711; see also Hou. Mercantile Exch. Corp. v. Dailey Petroleum Corp., 930 S.W.2d 242, 248 (Tex. App.—Houston [14th Dist.] 1996, no writ) (damages opinion no evidence where expert provided no basis to determine whether allegedly misappropriated products “were, in fact, [used] for all, part, or none of any month or other time period”). Bratic accepted that premise, but then chose the wrong date— assuming, without explanation, that all five trade secrets were misappropriated in January 2015, when the MSLA was signed. RR45:132; CR4:9712. But the record establishes that Title Source did not have access to any purported trade secrets at that time: some did not even exist until more than a year later. RR38:112 (AVM did not exist January 2015, outputs not disclosed until July 2015); RR38:134-35 (similarity disclosure sent in December 2015); RR26:125-26 (complexity score proposal shared March 2016, but model never developed); RR38:112 (first disclosure of data July 2015); RR8:86 (data dictionary sent June 2015). That error is fatal.

Relatedly, when Bratic testified, HouseCanary had already publicly

disclosed its supposed trade secrets at trial (January 2018). The damages clock at minimum stopped then, not the end of 2018. In addition, Bratic’s “reasonably prudent investor” measure of damages is permissible only “when the defendant has in some way destroyed the value of the secret.” Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 535 & n.26 (5th Cir. 1974). HouseCanary made no claim of destruction. “Where the 43

plaintiff retains the use of the secret,” as here, “the total value of the secret to the plaintiff is an inappropriate measure.” Id. at 535. Instead, an alternative measure of damages, like a reasonable royalty, is appropriate. E.g., TMRJ Holdings, Inc. v. Inhance Techs., LLC, 540 S.W.3d 202, 210–11 (Tex. App.—Houston [1st Dist.] 2018, no pet.). On top of those blatant legal errors, Bratic’s methodology involved a series of rank assumptions untethered from any evidence. To calculate the “reasonably prudent investor” and “reasonable royalty” figures, he used identical formulas:

CR4:9699, 9722. For the number of expected transactions, Bratic estimated that Title Source would use HouseCanary’s trade secrets an astonishing 14 million times a year. CR4:9685. He further opined that a “reasonably prudent investor” would pay $11 per use and that Title Source would pay $3.50 per use as a “reasonable royalty.” RR2:84; CR4:9724.

CR4:9704.

CR4:9724.7 Those inputs collapse under the slightest scrutiny and are “very speculative” and “a stretch,” as the trial court recognized. RR2:89-90.

Bratic applied a 15.3 percent discount rate to get the final damages figures. RR45:132, 133, 162, 178; CR4:9709, 9726.

13.86 Million Expected Transactions Per Year. Bratic’s 13.86 million figure for expected uses combines two numbers—660,000 and 13.2 million—which he essentially made up. Speculation plus speculation equals no evidence. Marathon Corp. v. Pitzner, 106 S.W.3d 724, 728 (Tex. 2003) (per curiam) (“[A]n inference stacked only on other inferences is not legally sufficient evidence.”). •

660,000: Based on a public website screenshot, Bratic simply assumed Title Source would use the alleged trade secrets for every one of the 660,000 appraisals it facilitates annually. RR45:94. The record evidence conclusively establishes, however, that Title Source’s appraisers never use AVMs to create appraisals—indeed, the rules and regulations governing appraisers prohibit it. RR15:16, RR17:53; RR46:62.

•

13.2 million: Bratic assumed that Quicken Loans would use HouseCanary’s technology 13.2 million times per year. The trial court rightly “struggle[d]” with the fact that Bratic was “using a third party’s potential use or appropriation of this stuff . . . , that’s not a party to the contract, certainly not a party to the case” to support his valuation. RR2:89. Bratic also never explained why Title Source would pay $145 million per year for a third party’s use. See, e.g., RR45:99-114.

•

To create this figure, Bratic also assumed Quicken Loans would use an AVM 55,000 times per day. That would require Quicken Loans’ bankers to provide home value estimates to potential clients 24 hours a day, including in the middle of the night. RR45:106-07.

•

Because HouseCanary “received no production on Quicken Loans’ use of . . . AVMs,” RR46:44, Bratic based the 55,000 figure entirely on two emails from self-interested HouseCanary executives that on their face contradict that figure:

•

As HouseCanary’s CEO testified, the first email merely reflects that HouseCanary’s system had a maximum capacity of “50,000 value reports per day”—not the number of uses Quicken Loans expected to generate every day. RR40:122-23.

•

The second email notes there are “5k-10k” “incoming leads” at Quicken Loans per day. RR51-12:523-24. Based on this, Bratic arbitrarily chose to add 5,000 uses, merely “assum[ing]” without support “that Quicken Loans orders a value report every time [it] receives a customer inquiry.” Id. at 46:54.

•

Bratic then admitted that Quicken Loans would not even “necessarily” use myAVM because it accesses and uses other AVMs. RR46:44, 49.

Bratic’s assumptions were not only unfounded and nonsensical, but improper and unnecessary. His job was to evaluate “what a tortfeasor”—not third-party Quicken Loans—“would have paid had it bought the technology.” TMRJ Holdings, 540 S.W.3d at 210–11. HouseCanary has since sued Quicken Loans in federal court, where the question of whether and to what extent Quicken Loans used any trade secrets can be fully and fairly adjudicated without the need for rampant speculation with respect to Quicken Loans in this case. $11 Per Use for a “Reasonably Prudent Investor.” Bratic’s “support” for his $11 per use valuation was a lone email:

CR4:9701 (citing RR51-7:381-82); RR45:116.

That email references a third-party AVM (completely unrelated to HouseCanary’s technology) that costs $11 per use, but states that price “would obviously be cost prohibitive . . . for each of the hundreds of thousands of leads bankers work.” RR51-7:381-82 (emphasis added). The email directly contradicts Bratic’s opinion that Title Source would pay $11 per use, and it has nothing to do with the value of the HouseCanary trade secrets at issue. With respect to the AVMs that were at issue, Bratic failed to identify any evidence that any entity ever paid $11 per use for either HouseCanary’s AVMs or MyAVM. That is because there was none. Bratic nevertheless elected to apply the “cost prohibitive” $11 figure to all of the 13.2 million artificially-inflated transactions. His approach adds a contradicted figure to a speculative one. $3.50 Per Use for a Willing Third Party. Bratic also set the “reasonable royalty” rate at $3.50 by randomly picking the mid-point of the $3 to $4 per-report price that HouseCanary offers the general public if they purchase at least “50 value reports.” RR46:77, 113. He selected $3.50 for no reason other than the fact it was the mid-point. Further, Bratic’s job was to value the trade secrets, not “Value Reports,” which he admitted are not equivalent to the five alleged trade secrets. RR45:15758; RR46:17; see Berry-Helfand, 491 S.W.3d at 720–21 (reasonable royalty must reflect value of trade secret at issue—not cost to license some other product). If 49

anything, Bratic’s admission that HouseCanary sells Value Reports—a more comprehensive product that includes, as one component, AVM estimates—for between $3 and $4, only further undermines his opinion that a reasonably prudent investor would pay $11 for the AVM estimates alone. RR46:17, 77, 113.8 Even setting that aside, Bratic acknowledged that HouseCanary provides bulk purchasers, like Title Source, additional discounts but refused to factor them into his calculation. RR46:79–81. Accordingly, Bratic’s “reasonable royalty” rate cannot justifiably be used to measure what a party requesting nearly 14 million Value Reports would pay in the real world. The underlying components of the $3.50 rate are unfounded and no evidence of damages. Coastal Transp., 136 S.W.3d at 232–33. 2.

Bratic’s testimony on lost profits damages was unreliable and no evidence.

Bratic opined that HouseCanary was entitled to an additional $33.8 million in lost profits for breach of (or fraud relating to) Amendment One. CR4:9726-38. He assumed that HouseCanary would have earned $5 million of revenue per year from the parties’ contract and added another $5 to $10 million of revenue per year from

Post-trial, HouseCanary advertised its AVM for just $1 per use, tacitly conceding the technology was worth far less than Bratic opined. 2ndSupp.CR3:5054.

Title Source’s independent contractors. He then presumed a 95-percent profit margin and discounted to present value:

As demonstrated below, these calculations are not “based on objective facts, figures, or data from which the amount of lost profits may be ascertained.” Szczepanik v. First S. Tr. Co., 883 S.W.2d 648, 649 (Tex. 1994) (per curiam). Consequently, Bratic’s lost-profits opinion is unreliable and no evidence. See ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867, 876 (Tex. 2010) (“The amount of the loss must be shown by competent evidence with reasonable certainty.”). Three-Year Period. Despite recognizing that Amendment One had a oneyear term—after which Title Source was entitled to terminate the contract at will— Bratic impermissibly computed HouseCanary’s lost profits over a three-year period. RR45:164, 46:90-92. This error alone renders the lost profits opinion unreliable, inadmissible, and no evidence. See Atlas Copco Tools, Inc. v. Air Power Tool & Hoist, Inc., 131 S.W.3d 203, 206–09 (Tex. App.—Fort Worth 2004, pet. denied) (expert’s lost-profits calculation speculative because it assumed contract would be 51

renewed for six years); United Way of San Antonio, Inc. v. Helping Hands Lifeline Found., Inc., 949 S.W.2d 707, 711–12 (Tex. App.—San Antonio 1997, writ denied) (no recovery where future funding was wholly discretionary). 95-Percent Profit Margin. Bratic’s 95% profit margin was based on a single line in HouseCanary’s aspirational business plan:

CR4:9735 (citing RR51-8:1761-63); RR45:173. Bratic “never explained what, if anything he did to substantiate the business plan’s projections.” Cargotec Corp. v. Logan Indus., No. 14-17-00213-CV, 2018 WL 6695806, at *8–11 (Tex. App.— Houston [14th Dist.] Dec. 20, 2018, pet. filed) (emphasis added). In fact, the document showed HouseCanary was expecting negative profit margins with revenue of only $8.8 million and “$10–$12M” in “annual” costs—that is, the business was failing to achieve financial viability in the marketplace. RR51-8:1762-63; RR42:82 (HouseCanary lost $22 million in 2017). Texas courts have consistently “rejected 52

damages opinions,” like this one, “predicated on assumptions made in internal projections or business plans not shown to be reasonable.” Cargotec, 2018 WL 6695806, at *10 (citing cases); e.g., Atlas Copco, 131 S.W.3d at 209 (rejecting lostprofits projections based on “one record year and the unsubstantiated projections” for full period); Glattly v. Air Starter Components, Inc., 332 S.W.3d 620, 632 (Tex. App.—Houston [1st Dist.] 2010, pet. denied) (no evidence supported lost-profits award where expert “applied the profit margin [Air Starter] provided to her”); Horizon Health Corp. v. Acadia Healthcare Co., 520 S.W.3d 848, 859–66 (Tex. 2017) (no evidence of lost profits where expert “based his calculations on the average profit generated by a contract sold by Horizon generally, not the profit generated by the [specific] contracts [at issue]”). Also, by the time Bratic offered his opinions, HouseCanary’s actual profit margin for the relevant time frame was available. RR51-8:1763. Again, “relying on imagination is not justified when objective evidence is available.” BerryHelfand, 491 S.W.3d at 720–21. Expected Revenues from Title Source’s Independent Contractors. Bratic’s lost profits opinion further assumed HouseCanary would earn almost $30 million in profits from appraisals performed by Title Source’s “panel appraisers.”

That

assumption is pure conjecture and lacks any record basis. “[A]nticipated profits cannot be recovered where they are dependent upon uncertain and changing 53

conditions, such as market fluctuations, or the chances of business, or where there is no evidence from which they may be intelligently estimated.” Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 279 (Tex. 1994). Bratic speculated that half of Title Source’s 20,000 panel appraisers would use HouseCanary’s app to conduct 244 appraisals for clients other than Title Source, earning HouseCanary $7.20 in profit per use:

CR4:9732, 9737; see generally RR45:169-71, 46:72-73. None of these figures are grounded in reality or fact. See Szczepanik, 883 S.W.2d at 649. In addition, “a plaintiff seeking damages based on lost profits from future business opportunities [must] adduce evidence establishing that prospective customers would have done business with the plaintiff absent the defendant’s misconduct.” Horizon Health, 520 S.W.3d at 859–66. Here, there is no evidence 54

that any independent appraiser would have used HouseCanary’s app, let alone 10,000 appraisers. To make matters worse, Bratic testified that he arrived at the 10,000 figure by just assuming half of Title Source’s 20,000 panel appraisers would choose to use the app, without any reason for picking that number other than the fact it was the halfway point. RR45:169-71. That is the definition of ipse dixit. Moreover, there is no evidence that Title Source’s conduct caused HouseCanary to lose sales to panel appraisers. Panel appraisers are not Title Source employees. They are independent contractors who make their own decisions about what tools to use, especially when working for clients other than Title Source. See Szczepanik, 883 S.W.2d at 649–50 (testimony that company “expected to make a profit” legally insufficient where clients had a choice about which company to use). Bratic’s further assumptions of 244 uses per year at a profit of $7.20 per use were likewise plucked from thin air. RR45:170. “The law is wisely skeptical of claims of lost profits from untested ventures or in unpredictable circumstances, which in reality are little more than wishful thinking.” Phillips v. Carlton Energy Grp., LLC, 475 S.W.3d 265, 280 (Tex. 2015). Bratic’s “conclusory testimony” is precisely that and “cannot support [the] judgment.” Coastal Transp., 136 S.W.3d at 232. *****

If just one of Bratic’s inputs on any measure of damages was insufficient, the entire opinion crumbles. Here, all of his inputs were speculative guesswork—and judgment on each of HouseCanary’s claims must be reversed and rendered. B.

The damages awards violate the one-satisfaction rule.

Because HouseCanary’s misappropriation, fraud, and contract claims all alleged the same injury of misappropriation, HouseCanary is barred by the onesatisfaction rule from “recover[ing] on more than one.” Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 303 (Tex. 2006); see also Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991) (“Appellate courts have applied the one satisfaction rule when the defendants commit the same act as well as when defendants commit technically differing acts which result in a single injury.”). HouseCanary took the position below that all three claims are based on the “same facts”—the purported taking of “trade secrets.” RR50:20. Under the one-satisfaction rule, it cannot double-dip. Likewise, HouseCanary cannot receive punitive damages for both its fraud and misappropriation claims. See Tony Gullo Motors, 212 S.W.3d at 306 (“Chapa is entitled under the verdict to exemplary damages for either fraud or violation of the DTPA.”). At minimum, the judgment must be reformed to eliminate the multiple recoveries. See Gonzalez v. Atenea Capital Markets Fund, LP, No. 04-14-00614CV, 2015 WL 6509750, at *4 (Tex. App.—San Antonio Oct. 28, 2015, no pet.). 56

The nearly $500 million punitive damages awards are unlawful. HouseCanary successfully convinced the jury—with its inflammatory rhetoric—to take the unsupported $235 million compensatory damages awards and then double them for another $470 million in punitive damages. The punitive damages awards are equally and independently unlawful. A.

The punitive damages awards violate Texas law.

Misappropriating trade secrets or fraudulently inducing someone to enter a contract does not, by itself, justify punitive damages. See Eagle Oil & Gas Co. v. Shale Expl., LLC, 549 S.W.3d 256, 283–85 (Tex. App.—Houston [1st Dist.] 2018, pet. dism’d) (“[I]ntentional misappropriation and misuse of . . . trade secrets is not legally sufficient evidence of malice.”). A plaintiff must also “submit clear and convincing evidence of outrageous, malicious, or otherwise reprehensible conduct.” Horizon Health, 520 S.W.3d at 867. In particular, a plaintiff must “prove that the defendant[ ] specifically intended for [plaintiff] to suffer substantial injury that was ‘independent and qualitatively different’ from the compensable harms associated with the underlying causes of action.” Id. (citation omitted). Relying only on the alleged “evidence of the tort itself,” id., HouseCanary “failed to pinpoint any evidence . . . that [Title Source] specifically intended to harm [HouseCanary]” much less in a qualitatively different way from the alleged misappropriation, Myriad Dev., Inc. v. Alltech, Inc., 817 F. Supp. 2d 946, 976 (W.D. 57

Tex. 2011). And there was no evidence—much less clear and convincing evidence— of any “outrageous” or “malicious” conduct by Title Source. Eagle Oil, 549 S.W.3d at 283–85. Lacking evidence, HouseCanary resorted to inflammatory and divisive argument, telling the jury: •

“[T]his isn’t about settling disputes between one party and another” but cracking down on “corporate unethical behavior”;

•

“[T]ell[] the United States of America and the business community that this community, Bexar County, Texas, is where we draw the line on corporate unethical behavior”; and

•

“Stand[] up and . . . tell[] Corporate America I’ve had enough of this,” by putting this case “in the Wall Street Journal.”

RR50:71-72. In the same blustering vein, HouseCanary relentlessly and personally attacked Title Source’s counsel, asserting they: •

“[A]sk[ed] false and misleading questions . . . designed to mislead and confuse you”;

•

Engaged in “head fake[s]”;

•

“[O]utright lie[d].”

RR50:12-13, 65, 66. This incendiary argument is no substitute for evidence and cannot support the punitive damages awards.

The grossly excessive unconstitutional.

punitive

damages

awards

are

The punitive damages awards also violate Title Source’s right under the U.S. and Texas Constitutions to be free from grossly excessive punitive damages awards. State Farm Mut. Auto. Ins. v. Campbell, 538 U.S. 408, 416, 426 (2003); Bennett v. Reynolds, 315 S.W.3d 867, 873 (Tex. 2010). Each of the factors governing judicial review of punitive damages demonstrates that the award here fails to comport with Due Process. State Farm, 538 U.S. at 418 (citing BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 575 (1996)). First, the degree of reprehensibility for the alleged misconduct is low: •

The alleged “harm arose from a transaction in the economic realm, not from some physical assault or trauma.” Id. at 426;

•

Title Source did not act with “indifference to or a reckless disregard of the health and safety of others.” Id. at 419;

•

HouseCanary, which is backed by sophisticated and wealthy investors, lacks financial vulnerability. Id.

•

There is no evidence Title Source “repeatedly engag[ed] in prohibited conduct while knowing or suspecting that it was unlawful.” Gore, 517 U.S. at 576. This is the only trade secrets case ever brought against Title Source in two decades of doing business.

•

There is no evidence of any specific intent to harm HouseCanary, much less cause substantial injury. State Farm, 538 U.S. at 419.

Second, the ratio of actual harm to punitive damages is grossly disproportional. The only harm HouseCanary identified is the loss of a $5 million payment under Amendment One, resulting in a stunningly excessive 95-to-1 ratio. Even accepting the inflated compensatory damages of $235 million, the punitive damages are still unconstitutional. In cases involving substantial compensatory damages—and $235 million is certainly “substantial”—“a lesser ratio, ‘perhaps only equal to compensatory damages,’ can reach the outermost limit of the due process guarantee.” State Farm, 538 U.S. at 425; e.g., Lompe v. Sunridge Partners, LLC, 818 F.3d 1041, 1073–75 (10th Cir. 2016) ($1.95 million “substantial”); Jurinko v. Med. Protective Co., 305 F. App’x 13, 28 (3d Cir. 2008) ($1.6 million “substantial”).

Here, the punitive damages were double the

compensatory damages, and those damages, even if legitimate, are more than sufficient to “punish[] and deter[].” Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 21 (1991). Third, the nearly $500 million in punitive damages is vastly disproportionate to civil penalties in comparable cases. The Texas Theft Liability Act provides that “a person who commits theft”—including theft of a trade secret—is liable for actual damages and a statutory award “not to exceed $1,000.” Tex. Civ. Prac. & Rem. Code § 134.005(a)(1); see Gore, 517 U.S. at 584 ($2 million punitive award

unconstitutional where comparable civil penalties ranged from “$5,000 to $10,000”). At minimum, Title Source is entitled to a new trial. A.

Multiple Casteel errors require a new trial.

“[A] new trial is required when a trial court submits a broad-form liability question containing both valid and invalid theories of liability, because the . . . court cannot determine whether the jury relied on an invalid theory.” Texas Comm’n on Human Rights v. Morrison, 381 S.W.3d 456, 534–35 (Tex. 2012) (per curiam) (citing Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 388 (Tex. 2000)). Further, a “presumption-of-harm rule must be applied” “when [a broad-form] question allows a finding of liability based on evidence that cannot support recovery” because it is impossible to ascertain “whether the jury found liability on an improper basis.” Benge v. Williams, 548 S.W.3d 466, 475–76 (Tex. 2018). The same is true with respect to jury instructions that “mix[] valid and invalid elements of damages in a single broad-form submission.” Harris Cty. v. Smith, 96 S.W.3d 230, 233–34 (Tex. 2002). HouseCanary failed to prove any of the legally required elements of misappropriation for any of the alleged trade secrets, warranting judgment for Title Source. Supra Section I.A-B. If HouseCanary failed to prove at least one element

for at least one trade secret, Title Source is entitled to a new trial on all trade secrets due to the broad-form questions submitted to the jury. That is the case here. 1.

There is Casteel error in the improper means instructions.

Because all of the purported trade secrets were freely acquired from HouseCanary, HouseCanary had no legally sufficient evidence to prove misappropriation by “improper means.” Supra Section I.A.3. Nevertheless, over Title Source’s objection, the trial court instructed the jury that it could find misappropriation if there was “improper means” of acquisition, along with an additional theory of misappropriation. Question 38; RR49:21; see Morrison, 381 S.W.3d at 537. The charge, however, only asked the jury whether “Title Source misappropriate[d] HouseCanary’s trade secrets.” Question 38. This makes it impossible to know whether the jury erroneously relied on an impermissible theory of misappropriation by improper means, and therefore it was harmful Casteel error to submit Question 38 to the jury. See Morrison, 381 S.W.3d at 534–35. 2.

There is Casteel error in the references to “complexity score.”

At trial, HouseCanary referred to two different complexity scores, using confusing and overlapping terms, but the evidence conclusively establishes that the “appraisal complexity score” and the “property score” are different models that seek to quantify different types of information. Supra pp. 28-29. Similarly, the jury heard 62

testimony about three different HouseCanary AVMs: the Regression AVM, the Cascade AVM, and the HouseCanary AVM. E.g., RR27:178, 191. Nonetheless, Questions 37 and 38 only asked whether HouseCanary owned a trade secret in, and whether Title Source misappropriated, a “Complexity Score” and “HouseCanary AVMs.” Questions 37–38. As Title Source argued at the charge conference, neither “Complexity Score” nor “AVM” were defined by the jury charge, and the jury was not given any guidance on which AVM or which complexity score they were being asked to assess. RR49:19. Consequently, it is impossible to know which complexity score(s) or AVM(s) the jury found to be misappropriated. Title Source demonstrated that no evidence supports liability for either of the two complexity scores, or any of the three AVMs. Supra Section I.A. Critically, Stroud admitted HouseCanary does not own or have a trade secret in the property score. RR27:32-33. The Court need only be persuaded that there was no ownership or misappropriation of just one of the scores or one of the AVMs to set aside the jury’s answers to Questions 37 and 38. Because there is at least one such problem here, the broad-form nature of those questions requires a new trial. See Benge, 548 U.S. S.W.3d at 475-76.

There is Casteel error in the lump-sum damages instructions.

Finally, there was Casteel error in the submission of a broad-form question on misappropriation damages. See Harris Cty., 96 S.W.3d at 233–34. Questions 37 and 38 listed the alleged trade secrets and asked the jury to answer “yes” or “no” as to whether HouseCanary owned each one and whether Title Source misappropriated each one. Yet, in Question 39, the jury was asked, again over Title Source’s objection, for a single lump-sum damages award for misappropriation of the five trade secrets combined. (Question 39); RR49:21-22. Title Source demonstrated that HouseCanary failed to prove liability for any of the five alleged trade secrets. Supra Section I.A-B. Nonetheless, under Casteel, the entire damages award must fall if the Court concludes there was insufficient evidence of ownership or misappropriation for just one because the lump-sum damages award makes it impossible to know what portion was based on trade secrets that withstand liability challenges, and what portion was allocated to trade secrets that do not. See Harris Cty., 96 S.W.3d at 233–34.9

Because Title Source contests liability, an error in damages necessitates a new trial on “the entire case.” Jordan Ford, Inc. v. Alsbury, 625 S.W.2d 1, 3 (Tex. Civ. App.—San Antonio 1981, no writ).

Repeated personal attacks on counsel require a new trial.

HouseCanary repeatedly impugned the integrity of Title Source and its lawyers, claiming that “a house of lies . . . has been perpetrated in this court.” RR50:12-13; supra p.58. Title Source objected to these “[a]ttacks on counsel,” RR50:13-14, and the Court occasionally instructed HouseCanary’s counsel to “[r]ephrase” and “move on,” id. at 14, but the attacks and epithets continued unabated. Unfortunately, the damage was done. While HouseCanary’s heated rhetoric worked to inflame the jury, it violated well-established Texas Supreme Court precedent. See, e.g., Living Ctrs. of Tex., Inc. v. Peñalver, 256 S.W.3d 678, 681 (Tex. 2008) (per curiam); Standard Fire Ins. Co. v. Reese, 584 S.W.2d 835, 840 (Tex. 1979) (prohibiting “[t]he use in argument of the epithets, ‘liar,’ ‘fraud,’ ‘faker,’ ‘cheat,’ and ‘imposter’”).

HouseCanary’s

“unsupported, extreme, and personal attacks on opposing parties and witnesses,” including “the [repeated] use of inflammatory epithets such as ‘liar’” resulted in incurable error. PopCap Games, Inc. v. MumboJumbo, LLC, 350 S.W.3d 699, 721 (Tex. App.—Dallas 2011, pet. denied). These attacks were prejudicial and require a new trial. See Living Ctrs., 256 S.W.3d at 680–81.

Newly discovered evidence of fraud and collusion requires a new trial.

Although the Court need look no further than the trial record to determine there was insufficient evidence to support the unprecedented $740 million verdict, the unsustainability of this verdict is underscored by the new evidence of fraud and collusion that came to light the day after trial based on the whistleblower’s email. No reasonable jury would have found that Title Source somehow victimized HouseCanary to the tune of three-quarters of a billion dollars had the jury known about Petkovski’s double-dealing, Sicklick’s pattern of misrepresentation and retaliation, HouseCanary’s suppression of testing results, and HouseCanary’s silencing of witnesses with “consulting” contracts, to name just a few examples. When the truth finally emerged, the trial court should have granted a new trial to let the jury hear the full story. The trial court reversibly erred in refusing to do so. Title Source satisfied each prong of the new-trial test: (1) new evidence became known after trial; (2) no lack of due diligence prevented the evidence from being discovered sooner; (3) the evidence is not cumulative or impeaching; and (4) the evidence would likely produce a different result. Waffle House, Inc. v. Williams, 313 S.W.3d 796, 813 (Tex. 2010).

The evidence emerged post-trial.

Title Source’s post-trial investigation—triggered by Roveda’s unsolicited email—revealed for the first time that HouseCanary had long colluded with Jordan Petkovski, then Title Source’s Chief Appraiser and a key trial witness. At a posttrial evidentiary hearing, Title Source presented unrebutted testimony from not one but four former HouseCanary executives, demonstrating that: Petkovski “was acting in HouseCanary’s best interest and not [Title Source’s],” 2dSupp.RR2:170; HouseCanary’s app was “vapor ware” and “wasn’t a functioning product,” 2dSupp.RR5:73; Sicklick “instructed” HouseCanary employees to “misrepresent[] the nature of the Appraiser App,” firing employees who refused to do so, 2dSupp.RR3:179,

181-82;

2dSupp.RR5:72-73;

third-party

testing

HouseCanary’s AVM showed it was “very mediocre” and not “remotely a competitive AVM,” 2dSupp.RR3:173; and HouseCanary offered former employees “hush money,” 2dSupp.RR2:149-50; 2ndSupp.CR3:4543 ¶ 20; see supra pp. 16-17. None of the four whistleblowers who testified to those facts at the evidentiary hearing on the new-trial motion was deposed or involved in the trial. The new evidence emerged only after trial, as a result of Roveda’s email, because he was so offended by the outcome that he came forward as a matter of conscience.

Title Source exercised reasonable diligence.

Due diligence does not require perfection or scorched-earth discovery, only “reasonable” efforts under the circumstances. Terbay v. Pat Canion Excavating Co., 396 S.W.2d 482, 490–91 (Tex. Civ. App.—Austin 1965, writ ref’d n.r.e.). Title Source exercised more than reasonable diligence here by deposing ten fact witnesses, serving almost 450 discovery requests, and reviewing more than 35,000 pages of document production. Title Source was “entitled to rely on the discovery responses provided” by HouseCanary. Westmoreland v. Starnes, No. 07-13-00364CV, 2015 WL 1325530, at *4 (Tex. App.—Amarillo Mar. 24, 2015, pet. denied), and none of it remotely suggested collusion with Petkovski or suppression of key evidence. Moreover, the diligence requirement is “relaxed” by a “showing of fraudulent misrepresentation or concealment by the adverse party” and where breach of fiduciary duty is at issue. In re Williams, No. 12-06-00361-CV, 2007 WL 1241517, at *2–3 (Tex. App.—Tyler Apr. 30, 2007, no pet.); see also Willis v. Maverick, 760 S.W.2d 642, 645–46 (Tex. 1988) (“Facts which might ordinarily require investigation likely may not excite suspicion where a fiduciary relationship is involved.”). Indeed, the Texas Supreme Court has “repeatedly ‘held a fiduciary’s misconduct to be inherently undiscoverable.’” Wakefield v. Bank of Am., N.A., No.

14-16-00580-CV, 2018 WL 456721, at *5 (Tex. App.—Houston [14th Dist.] Jan. 18, 2018, no pet.) (citation omitted). Here, the new evidence reveals that the parties’ entire business relationship was, unbeknownst to Title Source, infected with concealment and breaches of fiduciary duty. It showed Petkovski had been colluding with HouseCanary from the start—communicating with Sicklick and other HouseCanary employees via his personal email account, secret late-night phone calls, and clandestine meetings to feed HouseCanary ideas, keep Title Source from discovering that HouseCanary’s products did not work, and negotiate his future position at HouseCanary. See, e.g., 2dSupp.RR5:70-71, 148-49; 2dSupp.RR7:92 (communicating over personal email and requesting calendar invite at his “work address” only “if this is a discussion topic that can be exposed”). Title Source did not suspect such duplicity from its own fiduciary—and the law did not require Title Source to “inquire into [a] fiduciary’s actions” when it was “unaware of the need to do so.” S.V. v. R.V., 933 S.W.2d 1, 8 (Tex. 1996). The new evidence also showed HouseCanary obstructed Title Source’s ability to uncover the truth, both before and after trial. Multiple whistleblowers testified that Sicklick made several “inaccurate representations [to Title Source] as to data or functionality or timing,” 2dSupp.RR5:75-76, and repeatedly “instructed” HouseCanary employees to “misrepresent[] the nature of the Appraiser app,” 69

2dSupp.RR3:178-79. HouseCanary also offered paid “consulting” contracts to key witnesses—including Roveda and Walker—before and after trial in an apparent attempt to suppress their testimony. 2dSupp.RR2:150-51; 2dSupp.RR3:209-10. HouseCanary has since admitted those contracts had no legitimate business purpose. 2dSupp.RR7:313. HouseCanary also tried to stop the truth from coming out by seeking to block Title Source’s investigation. See supra p.16. Moreover, HouseCanary suppressed critical evidence. Title Source requested all documents “relating to any testing” of HouseCanary AVMs.

CR2:2499.

HouseCanary was required to produce those documents—yet produced only four documents relating to testing, none of which were actual test results. Thus, when Stroud boasted at trial about how well HouseCanary’s AVM tested, Title Source was effectively neutered by its lack of awareness of the undisclosed results. RR27:182. Only after Walker’s and Majewski’s post-trial testimony did Title Source learn about the existence of the results that, if known, would have disproved Stroud’s testimony. 10 In short, until Roveda first sounded the alarm, there was “nothing to indicate” that Title Source “was put on inquiry” of the extraordinary confluence of fraud,

HouseCanary twice claimed it had produced the results. 2ndSupp.CR3:5230-31; 2dSupp.RR3:167. Finally, in its Sur-Reply, HouseCanary acknowledged it never did. 2ndSupp.CR3:5638. That discovery abuse alone merits a new trial. Cf. Hull v. South Coast Catamarans, L.P., 365 S.W.3d 35, 42–43 (Tex. App.—Houston [1st Dist.] 2011, pet. denied).

collusion, witness manipulation, and evidence suppression that HouseCanary directed behind the scenes. Alexander v. Soloman, 15 S.W. 906, 908–09 (Tex. 1891). Under these highly irregular circumstances, Title Source exercised due diligence, and a contrary conclusion would take the “rule requiring diligence” too “far.” Steed v. Winder, 130 S.W.2d 403, 404 (Tex. Civ. App.—Galveston 1939, no writ). 3.

The evidence is not impeaching or cumulative.

“When the discovery of the evidence has been prevented by the fraud or perjury of the opponent,” as here, “neither the fact that it is cumulative nor that it is impeaching testimony should prevent an order for a new trial.” 5 McDonald & Carlson, Tex. Civ. Prac. § 28:35 (2d. ed. 2018) (citing cases). In any event, the new evidence here is not impeaching or cumulative. The new evidence presents stunning facts the jury never heard about HouseCanary’s and Petkovski’s secret relationship and the larger fraudulent scheme. And the new evidence pertaining to contested issues—such as the readiness of the app—is of a fundamentally different kind and character than that presented at trial. New Amsterdam Cas. Co. v. Jordan, 359 S.W.2d 864, 866 (Tex. 1962) (evidence not cumulative “when it is of a different character, and merely tends to prove the … [same] proposition by proof of a new and distinct fact”). At trial, HouseCanary witnesses testified the app was functional and the AVM was best in class. The 71

whistleblowers’ testimony constitutes directly contrary party admissions that are a fundamentally different kind of evidence than third-party trial testimony. E.g., Lindsey v. Lee, 251 S.W. 562, 565 (Tex. Civ. App.—Fort Worth 1923, no writ). Finally, because the new evidence “goes to prove facts material to the issue[s] in the case,” it is not impeaching even though it also “tend[s] to contradict or lessen the credit of opposing witnesses.” Hous. & Tex. Cent. R.R. Co. v. Forsyth, 49 Tex. 171, 181 (1878). 4.

The evidence would likely change the outcome.

The new evidence “is so material it would probably produce a different result if a new trial were granted.” Waffle House, 313 S.W.3d at 813. Common sense indicates that if the jury had known about HouseCanary’s long-running collusion and deceptive scheme, the jury’s perception of the entire case would have been significantly different. Specifically, in a new trial, HouseCanary’s contract and fraud claims would fail. The “law abhors double dealing, especially upon the part of one in whom a trust is reposed and confidence given.” Binder v. Millikin, 201 S.W. 239, 241–42 (Tex. Civ. App.—San Antonio 1918, writ ref’d). It therefore prohibits a third party (HouseCanary) who colludes with an agent (Petkovski) from making any claim against the principal and reaping damages based on a “secret arrangement.” Id.;

Remenchik v. Whittington, 757 S.W.2d 836, 840 (Tex. App.—Houston [14th Dist.] 1988, no writ). With the benefit of the newly-discovered evidence, HouseCanary’s misappropriation claim would likely—if not undoubtedly—implode. If a jury heard four former HouseCanary insiders consistently testify that the company was selling “vapor ware” and did not have “any IP to steal,” 2dSupp.RR5:73, 2dSupp.RR3:9798, it likely would find that HouseCanary had no proprietary trade secrets at all. At a minimum, in light of evidence that HouseCanary’s AVM was “very mediocre” and not even commercially viable, 2dSupp.RR3:70, 173-76, a jury would reject the astronomical damages awarded here and award no damages (or much lower damages). A properly and fully informed jury likely would not award punitive damages if it knew of HouseCanary’s own duplicity and under-the-table machinations. Finally, Title Source would prevail on its fraud and contract claims. A jury likely would conclude that HouseCanary—secretly working with Petkovski— fraudulently induced Title Source into the MSLA and Amendment One with promises of an app and other products that were at best aspirational.

The

whistleblowers’ testimony leaves no doubt that HouseCanary failed to deliver a working app under the contract. Supra Section I.A.D.

In sum, the new evidence touches each claim in this case, and “justice will be better served by giving the jury the benefit of such [newly discovered] evidence.” Missouri-Kansas-Texas R.R. Co. v. Evans, 250 S.W.2d 385, 393 (Tex. 1952), overruled on other grounds, Houston Lighting & Power Co. v. Atchison, Topeka, & Santa Fe Ry. Co., 890 S.W.2d 455 (Tex. 1994). PRAYER FOR RELIEF For the foregoing reasons, Title Source respectfully requests that the judgment be reversed and rendered for Title Source and that HouseCanary take nothing. In the alternative, Title Source requests that the Court reverse the judgment and remand the cause for a new trial. Dated: July 10, 2019 Allyson N. Ho State Bar No. 24033667 GIBSON, DUNN & CRUTCHER LLP 2100 McKinney Avenue, Suite 1100 Dallas, Texas 75201-6912 Tel: (214) 698-3100 Fax: (214) 571-2900 aho@gibsondunn.com Helgi C. Walker* GIBSON, DUNN & CRUTCHER, LLP 1050 Connecticut Avenue, N.W. Washington, D.C. 20036-5306 Tel: (202) 955-8500 Fax: (202) 530-9595 hwalker@gibsondunn.com

Respectfully submitted, /s/ Catherine M. Stone Catherine M. Stone State Bar No. 19286000 LANGLEY & BANACK, INC. 745 E. Mulberry Avenue, Suite 700 San Antonio, Texas 78212 Tel: (210) 736-6600 Fax: (210) 735-6889 cstone@langleybanack.com

David M. Prichard State Bar No. 16317900 PRICHARD YOUNG 10101 Reunion Place, Suite 600 San Antonio, Texas 78216 Tel: (210) 477-7401 Fax: (210) 477-7450 dprichard@prichardyoungllp.com Jeffrey B. Morganroth* MORGANROTH & MORGANROTH, PLLC 344 N. Old Woodward Ave., Ste. 200 Birmingham, Michigan 48009 Tel: (248) 864-4000 Fax: (248) 864-4001 jmorganroth@morganrothlaw.com COUNSEL FOR APPELLANT TITLE SOURCE, INC. * Pro hac vice application pending

CERTIFICATE OF COMPLIANCE This brief complies with the type-volume limitation of TEX. R. APP. P. 9.4(i)(2)(B) because it contains 14,969 words, excepting those portions of the brief excluded from the word count under TEX. R. APP. P. 9.4(i)(1) as calculated using Microsoft Word 2016, the software used to prepare this brief.

/s/ Catherine M. Stone Catherine M. Stone CERTIFICATE OF SERVICE In accordance with Texas Rules of Appellate Procedure 6.3 and 9.5(b), (d), and (e), I hereby certify that on July 10, 2019, the foregoing document was electronically filed through the Courtâ&#x20AC;&#x2122;s electronic case filing system and served by electronic service on all counsel of record identified below. Max L. Tribble Matt Behncke Rocco Magni Bryce T. Barcelo Joseph S. Grinstein Jonathan J. Ross SUSMAN GODFREY LLP 1000 Louisiana St., Suite 5100 Houston, Texas 77002-5096 mtribble@susmangodfrey.com mbehncke@susmangodfrey.com rmagni@susmangodfrey.com bbarcelo@susmangodfrey.com jgrinstein@susmangodfrey.com jross@susmangodfrey.com Counsel for HouseCanary, Inc.

Elisha Barron SUSMAN GODFREY LLP 1301 Ave. of the Americas, 32nd Floor New York, New York 10019 ebarron@susmangodfrey.com Counsel for HouseCanary, Inc. Ricardo Cedillo DAVIS, CEDILLO & MENDOZA, INC. 755 E. Mulberry, Suite 500 San Antonio, Texas 78212 rcedillo@lawdcm.com Counsel for HouseCanary, Inc.

Kalpana Srinivasan SUSMAN GODFREY LLP 1901 Avenue of the Stars, Suite 950 Los Angeles, California 90067-6029 ksrinivasan@susmangodfrey.com Counsel for HouseCanary, Inc.

Wallace B. Jefferson ALEXANDER DUBOSE JEFFERSON 515 Congress Avenue, Suite 2350 Austin, Texas 78701-3562 wjefferson@adjtlaw.com Counsel for HouseCanary, Inc.

David M. Gunn BECK REDDEN, LLP 1221 McKinney, Suite 4500 Houston, Texas 77010 dgunn@beckredden.com Counsel for HouseCanary, Inc.

Thomas R. Phillips BAKER BOTTS, LLP 98 San Jacinto Blvd., Suite 1500 Austin, Texas 78701 tom.phillips@bakerbotts.com Counsel for HouseCanary, Inc.

R. Laurence Macon THE MACON LAW FIRM, PLLC 750 Rittiman Road San Antonio, Texas 78209 larry@maconlawfirm.net Counsel for HouseCanary, Inc.

Joshua A. Romero Megan Davis JACKSON WALKER, LLP 100 Congress Avenue, Suite 1100 Austin, Texas 78701 jromero@jw.com Mndavis@jw.com Counsel for The Reporters Committee for Freedom of the Press

J. Carl Cecere CECERE PC 6035 McCommas Blvd. Dallas, Texas 756206 ccecere@cecerepc.com Counsel for The Houston Forward Times

Amanda Crouch JACKSON WALKER, LLP 112 E. Pecan Street, Suite 2400 San Antonio, Texas 78205 Acrouch@jw.com Counsel for The Reporters Committee for Freedom of the Press

/s/ Catherine M. Stone Catherine M. Stone

APPENDIX INDEX A.

Final Judgment

TEX. CIV. PRAC. & REM. CODE ยง 134.005

TEX. CIV. PRAC. & REM. CODE ยง 134A.002

TEX. CIV. PRAC. & REM. CODE ยง 134A.004

TEX. CIV. PRAC. & REM. CODE ยง 134A.007

TEX. R. EVID. 702

5 McDonald & Carlson, TEX. CIV. PRAC. ยง 28:35 (2D ED. 2018)

APPENDIX A

§ 134.005. Recovery, TX CIV PRAC & REM § 134.005

APPENDIX B

KeyCite Yellow Flag - Negative Treatment Unconstitutional or PreemptedLimited on Preemption Grounds by Spear Marketing, Inc. v. BancorpSouth Bank, 5th Cir.(Tex.), June 30, 2015

Vernon's Texas Statutes and Codes Annotated Civil Practice and Remedies Code (Refs & Annos) Title 6. Miscellaneous Provisions Chapter 134. Texas Theft Liability Act V.T.C.A., Civil Practice & Remedies Code § 134.005 § 134.005. Recovery Currentness (a) In a suit under this chapter, a person who has sustained damages resulting from theft may recover:

(1) under Section 134.003(a), from a person who commits theft, the amount of actual damages found by the trier of fact and, in addition to actual damages, damages awarded by the trier of fact in a sum not to exceed $1,000; or

(2) from a parent or other person who has the duty of control and reasonable discipline of a child, for an action brought under Section 134.003(b), the amount of actual damages found by the trier of fact, not to exceed $5,000.

(b) Each person who prevails in a suit under this chapter shall be awarded court costs and reasonable and necessary attorney's fees.

Credits Added by Acts 1989, 71st Leg., ch. 2, § 4.05(a), eff. Aug. 28, 1989.

Notes of Decisions (101) V. T. C. A., Civil Practice & Remedies Code § 134.005, TX CIV PRAC & REM § 134.005 Current to legislation effective May 29, 2019, of the 2019 Regular Session of the 86th Legislature. Some statute sections may be more current, but not necessarily complete through the whole Session. See credits for details. End of Document

§ 134A.002. Definitions, TX CIV PRAC & REM § 134A.002

APPENDIX C

(1) “Claimant” means a party seeking to recover damages under this chapter, including a plaintiff, counterclaimant, cross-claimant, or third-party plaintiff. In an action in which a party seeks recovery of damages under this chapter on behalf of another person, “claimant” includes both that other person and the party seeking recovery of damages.

(1-a) “Clear and convincing” means the measure or degree of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established.

(2) “Improper means” includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, to limit use, or to prohibit discovery of a trade secret, or espionage through electronic or other means.

(3) “Misappropriation” means:

(A) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(B) disclosure or use of a trade secret of another without express or implied consent by a person who:

(i) used improper means to acquire knowledge of the trade secret;

(ii) at the time of disclosure or use, knew or had reason to know that the person's knowledge of the trade secret was:

(a) derived from or through a person who used improper means to acquire the trade secret;

(b) acquired under circumstances giving rise to a duty to maintain the secrecy of or limit the use of the trade secret; or

§ 134A.002. Definitions, TX CIV PRAC & REM § 134A.002

(c) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of or limit the use of the trade secret; or

(iii) before a material change of the position of the person, knew or had reason to know that the trade secret was a trade secret and that knowledge of the trade secret had been acquired by accident or mistake.

(3-a) “Owner” means, with respect to a trade secret, the person or entity in whom or in which rightful, legal, or equitable title to, or the right to enforce rights in, the trade secret is reposed.

(4) “Proper means” means discovery by independent development, reverse engineering unless prohibited, or any other means that is not improper means.

(5) “Reverse engineering” means the process of studying, analyzing, or disassembling a product or device to discover its design, structure, construction, or source code provided that the product or device was acquired lawfully or from a person having the legal right to convey it.

(6) “Trade secret” means all forms and types of information, including business, scientific, technical, economic, or engineering information, and any formula, design, prototype, pattern, plan, compilation, program device, program, code, device, method, technique, process, procedure, financial data, or list of actual or potential customers or suppliers, whether tangible or intangible and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if:

(A) the owner of the trade secret has taken reasonable measures under the circumstances to keep the information secret; and

(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.

(7) “Willful and malicious misappropriation” means intentional misappropriation resulting from the conscious disregard of the rights of the owner of the trade secret.

Credits Added by Acts 2013, 83rd Leg., ch. 10 (S.B. 953), § 1, eff. Sept. 1, 2013. Amended by Acts 2017, 85th Leg., ch. 37 (H.B. 1995), § 1, eff. Sept. 1, 2017.

Notes of Decisions (29) V. T. C. A., Civil Practice & Remedies Code § 134A.002, TX CIV PRAC & REM § 134A.002 Current to legislation effective May 29, 2019, of the 2019 Regular Session of the 86th Legislature. Some statute sections may be more current, but not necessarily complete through the whole Session. See credits for details.

§ 134A.002. Definitions, TX CIV PRAC & REM § 134A.002

End of Document

§ 134A.004. Damages, TX CIV PRAC & REM § 134A.004

APPENDIX D

Vernon's Texas Statutes and Codes Annotated Civil Practice and Remedies Code (Refs & Annos) Title 6. Miscellaneous Provisions Chapter 134A. Trade Secrets (Refs & Annos) V.T.C.A., Civil Practice & Remedies Code § 134A.004 § 134A.004. Damages Effective: September 1, 2017 Currentness (a) In addition to or in lieu of injunctive relief, a claimant is entitled to recover damages for misappropriation. Damages can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss. In lieu of damages measured by any other methods, the damages caused by misappropriation may be measured by imposition of liability for a reasonable royalty for a misappropriator's unauthorized disclosure or use of a trade secret.

(b) If willful and malicious misappropriation is proven by clear and convincing evidence, the fact finder may award exemplary damages in an amount not exceeding twice any award made under Subsection (a).

Credits Added by Acts 2013, 83rd Leg., ch. 10 (S.B. 953), § 1, eff. Sept. 1, 2013. Amended by Acts 2017, 85th Leg., ch. 37 (H.B. 1995), § 3, eff. Sept. 1, 2017.

Notes of Decisions (45) V. T. C. A., Civil Practice & Remedies Code § 134A.004, TX CIV PRAC & REM § 134A.004 Current to legislation effective May 29, 2019, of the 2019 Regular Session of the 86th Legislature. Some statute sections may be more current, but not necessarily complete through the whole Session. See credits for details. End of Document

§ 134A.007. Effect on Other Law, TX CIV PRAC & REM § 134A.007

APPENDIX E Vernon's Texas Statutes and Codes Annotated Civil Practice and Remedies Code (Refs & Annos) Title 6. Miscellaneous Provisions Chapter 134A. Trade Secrets (Refs & Annos) V.T.C.A., Civil Practice & Remedies Code § 134A.007 § 134A.007. Effect on Other Law Effective: September 1, 2013 Currentness (a) Except as provided by Subsection (b), this chapter displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret.

(b) This chapter does not affect:

(1) contractual remedies, whether or not based upon misappropriation of a trade secret;

(2) other civil remedies that are not based upon misappropriation of a trade secret; or

(3) criminal remedies, whether or not based upon misappropriation of a trade secret.

(c) To the extent that this chapter conflicts with the Texas Rules of Civil Procedure, this chapter controls. Notwithstanding Section 22.004, Government Code, the supreme court may not amend or adopt rules in conflict with this chapter.

(d) This chapter does not affect the disclosure of public information by a governmental body under Chapter 552, Government Code.

Credits Added by Acts 2013, 83rd Leg., ch. 10 (S.B. 953), § 1, eff. Sept. 1, 2013.

Notes of Decisions (9) V. T. C. A., Civil Practice & Remedies Code § 134A.007, TX CIV PRAC & REM § 134A.007 Current to legislation effective May 29, 2019, of the 2019 Regular Session of the 86th Legislature. Some statute sections may be more current, but not necessarily complete through the whole Session. See credits for details. End of Document

Rule 702. Testimony by Expert Witnesses, TX R EVID Rule 702

APPENDIX F Vernon's Texas Rules Annotated Texas Rules of Evidence (Refs & Annos) Article VII. Opinions and Expert Testimony (Refs & Annos) TX Rules of Evidence, Rule 702 Rule 702. Testimony by Expert Witnesses Currentness A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue.

Credits Eff. March 1, 1998. Amended by orders of Supreme Court March 10, 2015 and Court of Criminal Appeals March 12, 2015, eff. April 1, 2015.

Notes of Decisions (1595) Rules of Evid., Rule 702, TX R EVID Rule 702 Current with amendments received through March 1, 2019 End of Document

ÂŠ 2019 Thomson Reuters. No claim to original U.S. Government Works.

§ 28:35.Not cumulative or impeaching, 5 McDonald & Carlson Tex. Civ. Prac. §...

APPENDIX G 5 McDonald & Carlson Tex. Civ. Prac. § 28:35 (2d. ed.) McDonald & Carlson Texas Civil Practice | November 2018 Update Roy W. McDonald Elaine A. Grafton Carlson Chapter 28. Motion for New Trial and Other Post-Judgment Motions III. Grounds for New Trial E. Newly Discovered Evidence

§ 28:35. Not cumulative or impeaching

References To sustain a new trial, evidence offered as newly discovered must not be merely cumulative or impeaching of that offered at trial. 327 Evidence is "cumulative" when it is of the same kind and tends to prove the same point. 328 Hence, it is not merely cumulative when of a different character, and…tends to prove the former proposition by proof of a new and distinct fact. "The meaning of the rule…can not be to exclude, as cumulative, newly discovered evidence of subordinate points or facts bearing on the general question…. But it must mean that new evidence to a subordinate point or fact, is not competent where the subordinate point or particular fact was before gone into…." 329

Similarly, evidence is not merely impeaching testimony when it tends independently to prove material facts, and the chance that it incidentally may impeach a witness will not prevent the granting of a new trial. 330 When the discovery of the evidence has been prevented by the fraud or perjury of the opponent, neither the fact that it is cumulative nor that it is impeaching testimony should prevent an order for a new trial. 331 The same is true when the verdict rests on testimony of the adverse party that the new evidence conclusively shows to be false. 332

Footnotes 327

New Amsterdam Cas. Co. v. Jordan, 359 S.W.2d 864, 866 (Tex. 1962) (alleged newly discovered evidence is insufficient to require new trial when evidence is in nature of impeachment); Summers v. WellTech, Inc., 935 S.W.2d 228, 234 (Tex. App.—Houston [1st Dist.] 1996, no writ); Cornelison v. Aggregate Haulers, Inc., 777 S.W.2d 542 (Tex. App.—Fort Worth 1989, writ denied) (testimony that witness had given conflicting statements prior to his deposition testimony as used at trial would only have been impeachment); Texas Employers' Ins. Ass'n v. Ramirez, 770 S.W.2d 896, 902–03 (Tex. App. —Corpus Christi 1989, writ denied) (employee's work record discovered after trial was substantially the same as trial evidence regarding employee's work level, evidence cumulative); Matter of Marriage of Yarbrough, 719 S.W.2d 412, 415 (Tex. App.—Amarillo 1986, no writ) (cumulative evidence is that which proves the same facts as other evidence); Fettig v. Fettig, 619 S.W.2d 262, 267 (Tex. Civ. App.

§ 28:35.Not cumulative or impeaching, 5 McDonald & Carlson Tex. Civ. Prac. §...

—Tyler 1981, no writ) (no competent offered to show any newly discovered evidence but was instead cumulative); Eckert v. Smith, 589 S.W.2d 533, 538 (Tex. Civ. App.—Amarillo 1979, writ ref'd n.r.e.) (newly discovered evidence that would prove doctor saw more patients on day in question than what he had testified to, namely impeaching). In re Marriage of Yarborough, 719 S.W.2d at 415.

328 329

Houston & T.C. Ry. Co. v. Forsyth, 49 Tex. 171, 180, 1878 WL 9156 (1878) (quoting Aiken v. Bemis, 3 Woodbury and Minot, 358). See New Amsterdam Cas. Co. v. Jordan, 359 S.W.2d 864, 866 (Tex. 1962) (alleged newly discovered evidence is sufficient to require new trial when evidence is in nature of impeachment). Huggins v. Carey, 108 Tex. 358, 363–64, 194 S.W. 133, 135–36 (1917); McClelland v. Mounger, 107 S.W.2d 901, 907 (Tex. Civ. App.—Amarillo 1937, writ dism'd by agr.). See Payne v. Douglas, 241 S.W. 238 (Tex. Civ. App.—El Paso 1922, writ dism'd w.o.j.) (stating that the impeaching evidence is also original evidence in that it tends to show appellee did not sustain serious or permanent injuries). New Amsterdam Cas. Co. v. Jordan, 359 S.W.2d 864, 866 (Tex. 1962). See Wolf v. Mahan, 57 Tex. 171, 173, 1882 WL 9482 (1882) (when evidence relates to an issue first raised by opponent during trial, and this is evidence that could not have been anticipated, and movant has had no fair opportunity to present its case, reason for rule forbidding cumulative evidence is inapplicable). See also Steed v. Winder, 130 S.W.2d 403, 405 (Tex. Civ. App.—Galveston 1939, no writ) (false testimony). Chilson v. Metropolitan Transit Authority, 796 F.2d 69, 71, 5 Fed. R. Serv. 3d (LCP) 818 (5th Cir. 1986) (relying on Texas courts' reasoning that new trial should be granted on basis of new evidence substantially different from that relied on at trial and would make evidence at trial incorrect). See Gannaway v. Trinity Universal Ins. Co., 85 S.W.2d 345, 347 (Tex. Civ. App.—San Antonio 1935, writ ref'd) (when an interested witness, after trial, admits its testimony on a decisive issue was incorrect or perjured, this may constitute an admission against interest and justify a new trial). But see Stinson v. Boulevard Undertaking Co., 91 S.W.2d 1172, 1174 (Tex. Civ. App.—Galveston 1936, no writ) (newly discovered evidence of disinterested witness on point supported at trial only by testimony of interested witness held cumulative, and hence not ground for new trial though other requirements satisfied); Alford v. Cole, 65 S.W.2d 813, 815 (Tex. Civ. App.—Texarkana 1933, writ dism'd by agr.) (if new evidence does not conclusively disprove testimony, usual rules apply).

330

331

332

End of Document