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FILED
DALLAS COUNTY
12/30/2014 9:09:46 AM
GARY FITZSIMMONS
DISTRICT CLERK
CAUSE NO. DC-14-13894 Candace Tyler
COREY ELZNER § IN THE DISTRICT COURT
§
Plaintiff, §
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v. § 298TH-M JUDICAL DISTRICT
§
CYPRESS ASSOCIATES, INC. §
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Defendants. § DALLAS COUNTY, TEXAS
DEFENDANTS’ ORIGINAL ANSWER AND COUNTERCLAIM
Defendant and Counterclaimant Cypress Associates, Inc. (“Cypress”) now files its Original
Answer and Counterclaim and, in support thereof, would respectfully show the Court the
following:
I.
Answer
(GENERAL DENIAL AND JURY DEMAND)
1. Defendant generally denies each and every allegation contained in the petition
filed by Plaintiff in the present lawsuit and demands strict proof thereof by a preponderance of
the evidence. Defendants requests a trial by jury
II.
Affirmative Defenses
2. Defendant seeks to show that Plaintiff’s claims are barred in whole or in part by
the affirmative defense of estoppel.
3. Defendant seeks to show that Plaintiff’s claims are barred in whole or in part by
the Statute of Frauds.
4. Defendant seeks to show that Plaintiff’s claims are barred in whole or in part by
Plaintiff’s own fraud.
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5. Defendant seeks to show that Plaintiff’s claims are barred by Plaintiff’s own prior
breach of contract.
III.
Request for Disclosure
6. Defendant requests Plaintiff to disclose within thirty (30) days of this request the
information and materials described in Rule 104.2(a)-(l) of the Texas Rules of Civil Procedure.
IV.
Counterclaims
7. Plaintiff Elzner was employed by Defendant as a salesman, selling the Cypress
Advantage Plan, a suite of products designed to help companies provide health and wellness
benefits to their employees in response to the Affordable Care Act. Using pre-tax dollars,
employees at companies who participated in the Cypress Advantage Plan could select from a
variety of benefits (supplemental insurance, life insurance, short-term disability insurance, etc.)
from a “Benefit Bank.” Cypress Associates had the ability to write policies for certain insurance
carriers identified within the Benefit Bank and had the ability to receive commissions based on
the number of individuals who participated with those insurers within the Benefit Bank.
8. Cypress introduced its suite of products, its business model, pricing, sales
strategies, and many of its customer contacts to Plaintiff Elzner to help him perform his job
duties and responsibilities as a salesman. A majority of this information is considered by
Cypress to be its confidential and proprietary business information and trade secrets; it is not
publicly disclosed, nor disclosed to customers or third parties without reasonable measures to
protect its secrecy. This collective body of confidential and proprietary information constitutes
trade secrets belonging to Cypress and affords it a competitive advantage in the marketplace over
others who do not know or use this information.
DEFENDANT’S ORIGINAL ANSWER AND COUNTERCLAIM Page 2
9. Plaintiff Elzner did work for Cypress, but very quickly into his tenure he
attempted to defraud the company by diverting customer accounts, altering the customer
relationships, submitting requests for compensation for sales made by a former deceased
colleague, and falsifying sales documentation for customers who either canceled their accounts
or decided long ago not to enroll in the Cypress Advantage Plan.
10. Shortly after beginning his employment at Cypress, Plaintiff Elzner began
diverting Cypress Advantage Plan participants away from the Benefit Bank, thereby reducing
Cypress’ commission revenue by up to 50% for each transaction conducted. Instead, Plaintiff
Elzner directed employers to insurance brokers who did not participate in the Benefit Bank and
for whom Cypress could not write policies. Essentially, Plaintiff Elzner was seeking bonus
income for lives submitted to the Cypress Advantage Plan while he simultaneously (and
intentionally) made those lives less profitable for Cypress in transactions never entertained as
part of his employment.
11. In December 2013, a Cypress sales meeting was held, at which time Plaintiff
Elzner was informed that any performance compensation bonus payments would be reduced by
50% for individual lives submitted and then diverted away from the Benefit Bank.
12. Shortly after the death of a Cypress sales colleague, Plaintiff Elzner began
submitting sales paperwork for the deceased colleague’s clients, seeking to be paid bonuses for
his work. In other instances, Plaintiff Elzner submitted false purchase documentation for
customers who either did not renew their accounts with Cypress or who had already decided not
to purchase products from Cypress in the first place. Plaintiff Elzner engaged in these fraudulent
activities to falsely inflate his sales numbers and any resulting bonus.
13. Prior to Plaintiff Elzner’s filing this lawsuit, Cypress conducted an audit of his
accounts and determined that Cypress had, in fact, overpaid Plaintiff Elzner by more than
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$17,000.00. Cypress informed Plaintiff Elzner of this fact in response to his demand for
$70,000.00 in “unpaid bonuses.”
14. After leaving employment with Cypress, Plaintiff Elzner went to work with one
of Cypress’ competitors; Spectrum Benefits. Upon information and belief, Plaintiff Elzner is
working in the same capacity and performing the same services for Spectrum Benefits that he did
for Cypress. Specifically, Plaintiff Elzner is selling the same types of products to the same
customers with whom he had a relationship at Cypress. In the course of doing so, Plaintiff
Elzner will and presumably has used Cypress confidential information and trade secrets to obtain
an unfair competitive advantage for himself and for Spectrum Benefits and has caused
competitive harm to Cypress in the marketplace.
Fraud
15. During his employment with Cypress, Plaintiff Elzner falsely represented sales of
Cypress products in order to receive a higher performance bonus than he was otherwise entitled
to receive. Plaintiff Elzner submitted falsified documentation of sales that had not taken place,
renewals that had been canceled and sales actually made by another Cypress employee, a
deceased colleague. Cypress relied upon Plaintiff Elzner’s false representation to its detriment
by overpaying him bonus and/or commission payments based upon the falsified data that he
submitted. Cypress suffered actual damages as a result of Plaintiff Elzner’s false representations,
and because Elzner’s representations were made knowingly and intentionally, Cypress is entitled
to an award of punitive damages to punish and deter such wrongful conduct in the future.
Breach of Contract
16. Plaintiff Elzner was hired as a Sales Manager to sell Cypress products to
customers in a certain defined manner. Elzner agreed to honestly and faithfully perform his job
duties and responsibilities and to comply with all company policies and procedures. Shortly
DEFENDANT’S ORIGINAL ANSWER AND COUNTERCLAIM Page 4
after beginning employment, Plaintiff Elzner altered the manner in which he sold Cypress
products; employing a sales approach to only served his interests and was actually detrimental to
the company’s interests. Elzner further failed to perform his duties and responsibilities in When
Elzner’s sales practices were discovered, he was notified that his incentive compensation plan
would be adjusted to reflect his deviation from the company’s sales strategy, and he agreed to a
50% reduction in his incentive compensation during a teleconference in the fall of 2013. Elzner
later sought to disavow this agreement. Elzner’s actions in deviating from the company’s sales
strategy as well as submitting false sales documentation constitute a breach of his agreement to
work as a Sales Manager for Cypress and have caused Cypress actual damages including, but not
limited to the overpayment of more than $17,000.00.
Misappropriation of Trade secrets and Confidential Information
17. During his employment with Cypress Plaintiff Elzner was provided access to
Cypress trade secret and confidential and proprietary business information relating to the
operation of its business including but not limiting to product pricing, sales strategies, customer
and target customer information and strategies, the identification of key employees and decision
makers within customer and target customer organizations. Immediately after leaving
employment with Cypress, Elzner went to work for a direct competitor of Cypress’, Spectrum
Benefits, and, upon information and belief, Elzner is performing the same duties and
responsibilities for Spectrum and calling upon the same customers with whom he worked while
employed by Cypress, and using Cypress’ trade secret and confidential information in direct
competition with Cypress in the marketplace for bundled health care and wellness services.
Elzner’s actions constitute a breach of the Texas Uniform Trade Secrets Act (“TUTSA”) and
give rise to a claim for misappropriation of trade secrets and confidential information. Cypress
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has suffered actual damages and will suffer further future damages as a result of Elzner’s actions
and seeks to recover all damages allowed under the TUTSA and common law as applicable.
V.
Prayer for Relief
WHEREFORE, Defendant and Counterclaimant Cypress Associates, Inc. respectfully
requests the Court grant Plaintiff Corey Elzner a take-nothing judgment and award Defendant
and Counterclaimant Cypress Associates, Inc. its actual damages, punitive damages as allowed
by law, its reasonable and necessary attorney’s fees, and such other and further relief to which it
may be justly entitled.
Respectfully submitted,
SCHEEF & STONE, L.L.P.
By: /s/ J. Mitchell Little
__________________________
J. Mitchell Little
State Bar No. 24043788
mitch.little@solidcounsel.com
Robert J. (“Bob”) Garrey
State Bar No. 07703420
bob.garrey@solidcounsel.com
2600 Network Blvd, Ste. 400
Frisco, Texas 75034
(214) 472-2100 Telephone
(214) 472-2150 Telecopier
ATTORNEYS FOR DEFENDANT
CYPRESS ASSOCIATES, INC.
DEFENDANT’S ORIGINAL ANSWER AND COUNTERCLAIM Page 6
CERTIFICATE OF SERVICE
I hereby certify that in accordance with the Texas Rules of Civil Procedure a true and
correct copy of the foregoing has been served on the 29th day of December, 2014, on the
following counsel of record:
Theodore C. Anderson III
Ashley E. Tremain
Kilgore & Kilgore, PLLC
Kilgore Law Center
3109 Carlisle St.
Dallas, TX 75204
Fax: 214 379-0849
aet@kilgorelaw.com
/s/ Robert J. Garrey
______________________________________
Robert J. Garrey
DEFENDANT’S ORIGINAL ANSWER AND COUNTERCLAIM Page 7