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Texas Court Blocks $11M Antitrust Award in Marketers’ Fight

Posted on December 21, 2015

Texas Court Blocks $11M Antitrust Award In Marketers' Fight

By Jess Davis

Law360, Dallas (December 18, 2015, 8:06 PM ET) — A Texas appellate court on Thursday held online marketer One Technologies didn’t violate state antitrust law when it sued a rival who poached one of the company’s marketing analysts, in a decision declining the rival’s request the court revive a $10.9 million antitrust verdict.

The Fifth Court of Appeals in Dallas held One Technologies LP, which markets credit monitoring products online, has immunity from any antitrust liability that may have arisen when the company sued rival Profinity LLC after a One Technologies marketing analyst jumped ship for the upstart competitor. Profinity had asked the court to restore a jury’s finding One Technologies was trying to shut down competition in the lucrative credit monitoring business and had cost the company about $3.6 million in lost profits, which tripled under the Texas Free Enterprise and Antitrust Act.

Profinity alleged One Technologies engaged in predatory conduct by using departing employee Chad Ertel to lay a trap for a newly competing credit monitoring service. But One Technologies alleged the antitrust claim was based on the employment litigation and said because it has the First Amendment right to petition for redress of grievances, it is immune from antitrust liability under the so-called Noerr-Pennington doctrine.

The court said Profinity didn’t show how it would have been hindered from competing had One Technologies not filed the lawsuit and hadn’t shown an independent ground for its antitrust claims outside of the litigation over Ertel.

“We applaud the Dallas Court of Appeals for defending the First Amendment and protecting the company’s constitutional right to stop violations of its employment agreements,” One Technologies counsel Jim Ho of Gibson Dunn & Crutcher LLP said Friday. “The court was right to hold that this antitrust lawsuit is not only wrong — it offends the Constitution. We hope that these litigants will respect the First Amendment and respect this court’s judgment.”

Ertel, a One Technologies marketing analyst, jumped ship for rival Profinity in 2011. One Technologies sued the next year, alleging breach of Ertel’s non-compete agreement and other claims. Profinity counterclaimed, alleging One Technologies had engaged in anticompetitive conduct with the specific intent of achieving monopoly power by harming Profinity’s credit monitoring business.

After an eight-day trial, the jury rejected all of One Technologies’ claims and found One Technologies had engaged in willful or flagrant predatory contract, awarding Profinity $3.6 million in lost profits, which tripled under the statute.

But a trial judge entered a take-nothing judgment, concluding the Noerr-Pennington doctrine barred Profinity’s antitrust counterclaim.

The appellate court also held Profinity’s counterclaim was not actionable under the Texas antitrust statute because the Florida-based company sought damages based on business activities both inside and outside Texas’ borders. The court said Profinity did not show how competition in Texas markets would be improved by the damages Profinity sought.

Pete Marketos of Reese Gordon Marketos LLP said Friday that Profinity is considering appealing the ruling to the Texas Supreme Court.

“Profinity continues to believe that Texas’s antitrust protection should extend to predatory conduct that occurs in Texas and injures a competitor in Texas,” Marketos said. “If Texas antitrust law does not protect competition in Texas merely because an injured business markets and sells its products and services over the internet, then the Texas legislature’s antitrust law is rendered meaningless in an online world.”

Profinity is represented by Peter Marketos, Leslie Chaggaris and Kendal Simpson of Reese Gordon Marketos LLP and Wallace B. Jefferson and Susan Vance of Alexander Dubose Jefferson & Townsend LLP.

One Technologies is represented by Michael Raiff and Jim Ho of Gibson Dunn and Michael McCabe and Jamil Alibhai of Munck Wilson Mandala LLP.

The case is Profinity LLC v. One Technologies LP, case number 05-14-00403-CV, in the Texas Court of Appeals for the Fifth District.