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Documents that a meat packer alleges are trade secrets taken from its plant are at the center of an appeal once again before the Texas Supreme Court after being stayed for several months because of a bankruptcy proceeding. Acting on a motion by the meat packing company, the Texas Supreme Court reinstated the appeal in Klumpe, et al. v. IBP Inc. on Oct. 17. A key issue in the case is whether an attorney was protected by privilege when he gave documents to another firm that had subpoenaed his client to produce the documents. Also at issue is whether attorney fees from prior litigation are recoverable as damages under an equitable exception. It all started in 1997 when Chris Escamilla lost 3 1/2 fingers while working at an IBP plant in Amarillo, Texas, according to court documents. Escamilla filed a personal injury suit. Steven Klumpe, a former superintendent at the slaughterhouse and Escamilla’s stepfather, was subpoenaed. Responding to that subpoena, Klumpe provided his attorney, Jeff Blackburn — who in turn provided Escamilla’s attorneys with what IBP alleges are trade secrets that Klumpe took from the plant. IBP sued Klumpe, Blackburn and law firm Fadduol & Glasheen in April 1998. IBP alleges in the suit that Klumpe took documents known as “crewing guides” from the plant and gave them to Blackburn in Amarillo, who faxed the documents to the former firm of Fadduol & Glasheen in Lubbock, Texas. Fadduol & Glasheen had represented Escamilla in the personal injury suit against the company. The firm was named as a defendant in IBP’s suit but reached a confidential settlement with the company before Amarillo’s 7th Court of Appeals ruled in the case, says Gregory Weinstein, an attorney for IBP. Lubbock attorneys Kevin Glasheen and Sam Fadduol, who were partners in the firm, did not return two phone calls seeking comment prior to press time. Klumpe and Blackburn allege in their brief that the litigation is a retaliatory or “SLAPP” suit seeking attorney fees of about $400 as damages. Charles “Skip” Watson, a partner in Amarillo’s Mullin Hoard & Brown, which represents Klumpe and Blackburn in the trade secrets theft appeal, says you can’t call $400 in attorney fees damages. “The damages that we’re seeking in this case are a heck of a lot more than $400,” says Weinstein, a partner in Godwin Gruber in Dallas. Klumpe filed for bankruptcy in February after U.S. District Judge Mary Lou Robinson of Amarillo threw out a $10.8 million verdict he was awarded by a federal jury in a wrongful-termination suit, Klumpe v. IBP, against IBP. In July, IBP filed a motion in Klumpe’s bankruptcy proceeding — currently pending in the U.S. Bankruptcy Court for the Eastern District of Wisconsin, where he had resided — to compel the bankruptcy trustee to sell property owned by Klumpe and his wife. The motion filed in In Re Klumpe and Klumpe alleged that the couple failed to disclose a potential $30 million judgment against them in Texas state court for the suit over the trade secrets. The appeal in IBP’s suit against Klumpe and Blackburn was stayed earlier this year after the Klumpes filed a petition under Chapter 7 of the U.S. Bankruptcy Code in February. In Klumpe’s wrongful-termination suit, the jury found that the company, a nonsubscriber to the state’s workers’ compensation system, fired Klumpe almost three months after Escamilla’s 1997 injury solely because he refused to persuade Escamilla to sign a waiver of his right to sue IBP. The jury further found in Klumpe v. IBP that it would have been a violation of Texas Penal Code � 32.46 — which prohibits securing execution of a document by deception — if Klumpe had obtained Escamilla’s waiver. But Robinson concluded in July 2001 that the jury’s finding was not supported by the evidence and ruled in IBP’s favor. The 5th U.S. Circuit Court of Appeals affirmed Robinson’s judgment in a 2-1 decision on Oct. 4. Judge Robert Parker, writing for the majority, said there is insufficient evidence that Klumpe would have committed an illegal act had he agreed to try to get Escamilla to sign the waiver. Chief Judge Carolyn King joined Parker in the opinion. U.S. District Judge Keith P. Ellison of Laredo, Texas, sitting by designation, dissented and held that the jury had enough legally sufficient evidentiary support to reasonably find in Klumpe’s favor. “If judges are willing to set aside jury verdicts as readily as was done in this case, the entire rationale for the civil jury system is sharply attenuated,” Ellison wrote in a dissenting opinion. “This basically is kind of a slap in the face of the jury system,” says Russell McMains, who represents Klumpe in the wrongful-termination appeal. McMains, with the Law Offices of Russell McMains in Corpus Christi, Texas, says a motion for rehearing by the panel was filed Oct. 18. IBP spokesman Gary Mickelson says the 5th Circuit’s decision supports the company’s position and affirms that its Workplace Injury Program is fairly presented to employees. “We believe the jury verdict disregarded the law as well as the factors that led to Mr. Klumpe’s release from employment,” Mickelson says. IBP alleged that Klumpe was fired for taking the crewing guides that were turned over to Fadduol & Glasheen. But Parker said in the opinion that “the record suggests that the stated reason for Klumpe’s termination was pretext.” The jury could find that IBP was motivated to get Escamilla’s waiver “by any means necessary,” Parker said in the opinion. The evidence showed that the hock cutters that Klumpe’s stepson, Escamilla, was using when he cut off his fingers had a history of causing severe injury, the opinion said. Andres Estrada, another IBP employee, sliced off his fingers while operating the hock cutter several years before Escamilla suffered his injury, Parker noted. IBP’s allegations in its state court suit against Klumpe and Blackburn include misappropriation and theft of trade secrets, tortious interference and conspiracy. It asserted claims of breach of contract and breach of a confidential relationship against Klumpe. VALUE OF THE GUIDES The company also alleged that it is owed damages for attorney fees incurred because it had to obtain an order to protect the crewing guide. According to IBP’s brief, the guides detail the most efficient sequence in which to process meat and the number of personnel required for each step in the process and where personnel should be located. “They spent millions of dollars developing [the guides],” Weinstein says. James Wood, who represented Klumpe in the wrongful-termination suit against IBP, questions whether IBP values the guides as much as it claims. “I have a copy of the very same documents in my office,” says Wood, with the Wood Law Firm in Amarillo. “They’ve never asked for the documents back.” Weinstein says he was unaware that IBP had not gotten back all the copies of the guides. IBP alleges in its brief that Fadduol & Glasheen had represented numerous plaintiffs in personal injury claims against the company and routinely sought production of the guides. The company successfully resisted producing the guides by arguing that they constitute trade secrets, IBP’s brief alleges. Blackburn had financial motivation to provide the guides to Fadduol & Glasheen because he had referred Escamilla’s case to the Lubbock firm and would collect a 25 percent referral fee, the company alleges in the brief. Fadduol & Glasheen ultimately negotiated a more than $1 million settlement in Escamilla, et al. v. IBP, according to the brief. Judge Samuel Kiser, former judge of Amarillo’s 181st District Court, granted a summary judgment to Klumpe, Blackburn and the Lubbock law firm on March 20, 2000. In November 2001, the 7th Court of Appeals overturned all parts of the summary judgment except IBP’s claims based on the alleged wrongful disclosure of the guides. The appeals court held that the existence of fact issues precluded summary judgment on some of IBP’s claims, including the legality of Klumpe’s removal of the documents, the conspiracy claim and whether attorney fees are recoverable as damages. Justice Phil Johnson wrote the opinion for the court and was joined by Chief Justice John Boyd and Justice Don Reavis. Klumpe and Blackburn argue on appeal that the 7th Court of Appeals’ opinion changes settled areas of law in three areas. According to their brief, nonparty custodians of corporate documents must either risk contempt of court if they fail to comply with a subpoena or retaliatory suits for theft of trade secrets or breach of employment contracts if they do comply. Attorneys performing privileged acts of receiving documents subpoenaed from nonparty clients who are custodians will be at risk of being sued for conspiracy to steal trade secrets or tortious interference with employment relationships, the brief alleges. The brief further alleges that retaliatory litigation will get new life if “no evidence of damages” summary judgments can be defeated by calling attorney fees from previous litigation damages. “That is a change in law,” Watson alleges. IBP alleges in its brief that, while Klumpe was one of seven employees at the Amarillo facility who had access to the crewing guides, he did not have control over those documents. Weinstein alleges that the company had strong policies in place to assure that the guides were secure. Klumpe and Blackburn allege in their brief that Klumpe took the documents to Blackburn because IBP attorney Ken Muncy of Amarillo told him to do just that. The brief cites a portion of an affidavit from Muncy in which he says he explained to Klumpe that he was to meet Muncy at Blackburn’s office and bring whatever documents he had in his possession that he believed were responsive to the subpoena. Muncy declines to comment. Weinstein says his interpretation is that Muncy allegedly gave those instructions after he found out that Klumpe had the documents. THE TIMELINE � April 5, 1997: IBP employee Chris Escamilla, stepson of Steven Klumpe, severs 3 1/2 fingers on his right hand while working on a hock cutter. While Escamilla is in the hospital, IBP allegedly tells Klumpe to get his stepson to sign a document waiving his right to sue the company. � April 15, 1997: Represented by Fadduol & Glasheen, Escamilla files Escamilla, et al. v. IBP Inc. in the 320th District Court in Amarillo. � June 29, 1997: Klumpe gave IBP “crewing guides” to his attorney, Jeff Blackburn, who faxed the documents to Fadduol & Glasheen in response to a subpoena served on his client. � June 30, 1997: IBP fires Klumpe. � April 1998: IBP files IBP Inc. v. Klumpe, et al. against Klumpe, Blackburn and Fadduol & Glasheen in Amarillo’s 181st District Court alleging misappropriation and theft of trade secrets, tortious interference, conspiracy and other claims. � May 21, 1998: Escamilla, et al. v. IBP Inc. settles for $1.9 million. � April 6, 1999: Klumpe files Klumpe v. IBP Inc. in U.S. District Court in Amarillo alleging that he was wrongfully discharged by the meat packing company. � March 20, 2000: Judge Samuel Kiser, presiding judge of the 181st District Court, grants summary judgment for Klumpe, Blackburn and Fadduol & Glasheen in IBP Inc. v. Klumpe. � July 2, 2001: U.S. District Judge Mary Lou Robinson of Amarillo grants judgment as a matter of law to IBP in Klumpe v. IBP Inc., throwing out a $10.8 million verdict for Klumpe. � Nov. 16, 2001: Amarillo’s 7th Court of Appeals reverses part of the summary judgment in IBP Inc. v. Klumpe. Fadduol & Glasheen settles with IBP before the 7th Court of Appeals rules. � Feb. 20, 2002: Klumpe and his wife file a Chapter 7 bankruptcy petition in the U.S. Bankruptcy Court, Eastern District of Wisconsin. � Oct 4, 2002: In a 2-1 decision, the 5th U.S. Circuit Court of Appeals affirms Robinson’s judgment in Klumpe’s wrongful-termination suit. � Oct. 17, 2002: The Texas Supreme Court reinstates the appeal in IBP’s suit against Klumpe and Blackburn. (Sources: Court documents in the various cases)

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