Preview
FILED
DALLAS COUNTY
2/19/2015 3:58:01 PM
FELICIA PITRE
DISTRICT CLERK
CAUSE NO. DC-14-13894
COREY ELZNER § IN THE DISTRICT COURT
§
Plaintiff, §
§
v. § 298th JUDICAL DISTRICT
§
CYPRESS ASSOCIATES, INC. §
§
Defendants. § DALLAS COUNTY, TEXAS
CYPRESS ASSOCIATES, INC’S FIRST AMENDED ANSWER
AND AMENDED COUNTERCLAIM
Defendant and Counterclaimant Cypress Associates, Inc. (“Cypress”) now files its First
Amended Answer and Counterclaim and, in support thereof, would respectfully show the Court
the following:
I.
Answer
(GENERAL DENIAL AND JURY DEMAND)
1. Cypress generally denies each and every allegation contained in the petition filed
by Elzner in the present lawsuit and demands strict proof thereof by a preponderance of the
evidence. Cypress requests a trial by jury.
II.
Affirmative Defenses
2. Cypress seeks to show that Elzner’s claims are barred in whole or in part by the
affirmative defense of estoppel.
3. Cypress seeks to show that Elzner’s claims are barred in whole or in part by the
Statute of Frauds.
4. Cypress seeks to show that Elzner’s claims are barred in whole or in part by
Elzner’s own fraud.
DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 1
5. Cypress seeks to show that Elzner’s claims are barred by Elzner’s own prior
breach of contract.
III.
COUNTERCLAIM
6. Cypress now files its First Amended Counterclaim and, in support thereof, would
respectfully show the Court the following:
A. Elzner’s work as a Sales Manager for Cypress
7. In the fall of 2012, Elzner was hired as a Sale Manager pursuant to an at-will
employment arrangement. Elzner started work for Cypress in November 2012.
8. Elzner was employed to sell a suite of products designed to help companies
provide health and wellness benefits to their employees. Using pre-tax dollars, employees at
Cypress client companies could select from a variety of benefits (supplemental insurance, life
insurance, short-term disability insurance, etc.) from a “Benefit Bank.” Cypress employees had
the ability to write policies for certain insurance carriers identified within the Benefit Bank and
had the ability to receive commissions or bonuses based on the number of individuals who
participated with those insurers within the Benefit Bank.
9. 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, 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, Elzner directed
DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 2
employers to insurance brokers who did not participate in the Benefit Bank and for whom
Cypress could not write policies. Essentially, 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 the fall of 2013, a Cypress sales meeting was held, at which time Elzner was
directed to cease his practice of diverting customers away from the Benefit Bank. He was
informed that beginning in 2014, any bonus payments to him 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, Elzner began submitting sales
paperwork for the deceased colleague’s clients, seeking to be paid bonuses for his work. In other
instances, 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. On at least one other occasion, Elzner submitted bonus paperwork for
sales made by subordinate employees working under his direction resulting in a double bonus
being paid by Cypress for the single sale. Elzner engaged in these fraudulent activities to falsely
inflate his sales numbers and any resulting bonus payments.
13. Prior to Elzner’s filing this lawsuit, Cypress conducted an audit of his accounts
and determined that Cypress had, in fact, overpaid Elzner by more than $17,000.00. Cypress
informed Elzner of this fact in response to his demand for $70,000.00 in “unpaid bonuses.”
B. Elzner’s acquisition of Cypress Trade Secrets
14. Cypress introduced its suite of products, its business model, pricing, sales
strategies, and many of its customer contacts to Elzner to help him perform his job duties and
responsibilities as a Sales Manager. All such information provided to and shared with Elzner
was provided to him for the express purpose of performing his job duties and was not to be
DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 3
retained by or used by Elzner following his termination from the company. Elzner
acknowledged that he had received and would continue to receive confidential information
during his employment
15. At the time of or shortly after starting his employment, Elzner was provided a
copy of the Cypress Employee Handbook. Elzner reviewed the Handbook and agreed to all
policies and terms set forth therein. Among other things, Elzner agreed to keep confidential and
not disclose certain proprietary information relating to Cypress’ business. Elzner agreed and
acknowledged that Cypress’ customer lists, financial information, pricing strategies, labor
relations strategies, marketing strategies, research and Cypress development strategies and
production processes were confidential and proprietary and that he would at all times exercise
the utmost care in his use of such information during his employment. He further agreed that he
would not remove, retain, copy or utilize any confidential, privileged or proprietary information
of Cypress. He further agreed that upon his termination of employment, he would not remove,
retain, copy or utilize any confidential, privileged or proprietary information of Cypress.
16. Cypress spent several years and well over $1 million dollars developing its
customized software program and creating its benefit and enrollment platform and suite of
products, including the first fully-insured wellness policy on the market. Cypress provided
Elzner with access to its customer lists, detailed financial information, and pricing and marketing
strategies, for his use in the course and scope of the performance of his job duties for Cypress.
Elzner agreed that he would maintain the confidentiality of all such information as confidential
and not use or disclose it to any third party upon his separation from the company.
17. Cypress' proprietary software incorporates features of comparative payroll
software programs, is capable of showing before and after participation in a benefit plan, reflects
all applicable tax rates, can import employee group census data and extrapolate said data, enroll
DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 4
employees in the benefit program, generate reports, and assign standardized benefits. Cypress
software programs, its customer lists, detailed financial information, and pricing and marketing
strategies constitute trade secrets under the Texas Uniform Trade Secrets Act (“TUTSA”).
(“Trade Secrets”).
C. Elzner’s Misappropriation of Trade Secrets and Acts of Unfair Competition
18. After leaving employment with Cypress, Elzner began directly competing against
Cypress in the marketplace for wellness benefits. Whether on his own, in collaboration with an
entity named Inspire, or with others, Elzner is working in the same capacity and performing the
same services that he did for Cypress. Specifically, 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,
Elzner will use and presumably has used Cypress Trade Secrets to obtain an unfair competitive
advantage for himself and for others and has caused competitive harm to Cypress in the
marketplace.
19. Elzner has also made false and disparaging comments about Cypress and its
products, specifically telling customers that Cypress product are “not approved for sale” in
certain states, or that certain Cypress products “have drawn scrutiny from the IRS.” These
statements made by Elzner to third parties are false and disparaging to Cypress, have caused it to
lose business and have damaged its business reputation.
Claim No. 1 Fraud
20. During his employment with Cypress, Elzner falsely represented sales of Cypress
products in order to receive a higher performance bonus than he was otherwise entitled to
receive.
DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 5
21. Elzner submitted falsified documentation of sales that had not taken place,
renewals that had been canceled and sales actually made by other Cypress employees, including
a deceased colleague.
22. Elzner’s false representations were made knowingly and with the intent to deceive
Cypress.
23. Elzner knew or should have known that Cypress was relying upon his false
representations including the submission of falsified bonus paperwork.
24. Cypress relied upon Elzner’s false representation to its detriment by overpaying
him bonus payments based upon the falsified data that he submitted.
25. Cypress suffered actual damages as a result of Elzner’s false representations and
fraudulent conduct, 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.
Claim No. 2 Breach of Contract
26. 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 after beginning
employment, Elzner altered the manner in which he sold Cypress products; employing a sales
approach that only served his interests and was actually detrimental to the company’s interests.
When Elzner’s improper conduct and sales practices were discovered, he was notified that his
incentive compensation plan would be adjusted to reflect his deviation from the company’s sales
policies.
27. In the fall of 2013, Elzner agreed to a 50% reduction in his bonus payments if he
continued to divert customers away from the Cypress Benefit Bank. Elzner later sought to
DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 6
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 in bonus payments. Elzner’s submission of paperwork for
full bonuses instead of the agreed upon 50% bonuses, his submission of false bonus paperwork,
and his receipt of unearned bonuses constitute breach of his agreements with Cypress.
28. The agreements entered into by and between Elzner and Cypress described above
were valid and enforceable contracts of employment. Cypress performed or was excused from
performing its contractual obligations. Elzner breached the contract by submitting claims for
bonuses to which he was not entitled, failing to follow company policies and procedures, failing
to perform his job duties and responsibilities in an acceptable manner, and by violating his
promises of confidentiality set forth above. Cypress suffered actual damages as a result of
Elzner’s breach of contract.
Claim No. 3 Misappropriation of Trade Secrets
29. While employed at Cypress Elzner had agreed and acknowledged that Cypress’
Trade Secrets were confidential and proprietary and that he would at all times exercise the
utmost care in his use of such information during his employment. He further agreed that he
would not remove, retain, copy or utilize any Trade Secrets and that he would return all such
information to Cypress within one business day of the termination of his employment. He
further agreed that upon his termination of employment, he would not remove, retain, copy or
utilize any Trade Secrets. Elzner acquired Cypress Trade Secrets under a duty to keep them
confidential.
30. Cypress has reason to believe that Elzner possesses and has used an unauthorized
copy of Cypress’ software and other Trade Secrets in direct competition with it in the
DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 7
marketplace for wellness benefits causing Cypress to lose customers. For example, since his
departure, Cypress has lost business from several long-standing clients who either canceled or
did not renew with Cypress. At least one client that had been with Cypress for 11 months and
had decided to renew for another year abruptly canceled its renewal and is believed to have been
enrolled by Elzner with another company providing the same or substantially similar suite of
wellness products.
31. On at least one occasion following his termination, Cypress has learned that
Elzner assisted or allowed a third party to improperly utilize the Cypress software to generate a
report for a client after they first “remove[d] all things cypress” from the report and data.
32. Cypress derives independent economic value, actual and potential, from the Trade
Secrets not being generally known to, and not being readily ascertainable by proper means by
other persons who can obtain economic value from the Trade Secrets disclosure or use.
33. Cypress’ Trade Secrets are kept confidential and Cypress has required those
persons who have access to the information to agree to keep it confidential and not use or
disclose it to third parties without its consent.
34. Cypress’ efforts to maintain the secrecy of the Trade Secrets have been and are
reasonable under the circumstances.
35. Elzner acquired the Trade Secrets under circumstances giving rise to a duty to
maintain their secrecy or limit their use.
37. Elzner owed, and continues to owe, a duty to Cypress to maintain the secrecy and
not use or disclose the Trade Secrets.
38. Elzner has misappropriated Cypress’ Trade Secrets, and by the nature of his work
and position in direct competition with Cypress, it is inevitable that he will further disclose
Cypress’ Trade Secrets without Cypress’ express or implied consent.
DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 8
Claim No. 4 Unfair Competition
39. During his employment with Cypress, Elzner was provided access to Cypress
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 began using Cypress’ confidential business information in direct competition
with Cypress in the marketplace for bundled health care and wellness services. Elzner targeted
Cypress’ customers, and in connection with his efforts to steal away business, he made false and
disparaging comments about Cypress and its products. Upon information and belief, Elzner is
using Cypress software or the results of its software and “passing it off” as his own in an attempt
to steal business away from Cypress. Elzner’s actions constitute unfair competition, and Cypress
has suffered actual damages and will suffer further future damages as a result of Elzner’s actions.
Because Elzner’s actions were taken knowingly, not accidentally and with the intent to harm
Cypress, Cypress is entitled to an award of punitive damages to punish and deter such wrongful
conduct in the future.
DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 9
V.
Prayer for Relief
WHEREFORE, PREMISES CONSIDERED, Cypress Associates, Inc. prays that on final
trial of this case, the Court enter a take nothing judgment in favor of Corey Elzner on his claims
for relief, and that judgment be entered for Cypress Associates, Inc. against Corey Elzner for the
following:
1) Actual damages and exemplary damages in an amount in excess of the
minimum jurisdictional limits of the Court;
2) Pre-judgment and post-judgment interest at the maximum rate allowed
by law, attorney’s fees, and costs;
3) Such other and further relief to which Cypress Associates, Inc. may be
entitled, both at law or in equity.
DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 10
Respectfully submitted,
SCHEEF & STONE, L.L.P.
By: /s/ Robert J. Garrey
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 Fax
ATTORNEYS FOR
CYPRESS ASSOCIATES, INC.
DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 11
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 19th day of February, 2015, on the following
counsel of record:
Via Facsimile: 214 379-0849 & E-Service:tca@kilgorelaw.com
Theodore C. Anderson III
Kilgore & Kilgore, PLLC
Kilgore Law Center
3109 Carlisle St.
Dallas, TX 75204
Via Facsimile: 214.254.4941 & E-Service:aet@kilgorelaw.com
Ashley E. Tremain
Tremain Artaza, PLLC
4925 Greenville Ave., Suite 200
Dallas, TX 75206
/s/ Robert J. Garrey
Robert J. Garrey
DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 12
Preview
FILED DALLAS COUNTY 2/19/2015 3:58:01 PM FELICIA PITRE DISTRICT CLERK CAUSE NO. DC-14-13894 COREY ELZNER § IN THE DISTRICT COURT § Plaintiff, § § v. § 298th JUDICAL DISTRICT § CYPRESS ASSOCIATES, INC. § § Defendants. § DALLAS COUNTY, TEXAS CYPRESS ASSOCIATES, INC’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Defendant and Counterclaimant Cypress Associates, Inc. (“Cypress”) now files its First Amended Answer and Counterclaim and, in support thereof, would respectfully show the Court the following: I. Answer (GENERAL DENIAL AND JURY DEMAND) 1. Cypress generally denies each and every allegation contained in the petition filed by Elzner in the present lawsuit and demands strict proof thereof by a preponderance of the evidence. Cypress requests a trial by jury. II. Affirmative Defenses 2. Cypress seeks to show that Elzner’s claims are barred in whole or in part by the affirmative defense of estoppel. 3. Cypress seeks to show that Elzner’s claims are barred in whole or in part by the Statute of Frauds. 4. Cypress seeks to show that Elzner’s claims are barred in whole or in part by Elzner’s own fraud. DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 1 5. Cypress seeks to show that Elzner’s claims are barred by Elzner’s own prior breach of contract. III. COUNTERCLAIM 6. Cypress now files its First Amended Counterclaim and, in support thereof, would respectfully show the Court the following: A. Elzner’s work as a Sales Manager for Cypress 7. In the fall of 2012, Elzner was hired as a Sale Manager pursuant to an at-will employment arrangement. Elzner started work for Cypress in November 2012. 8. Elzner was employed to sell a suite of products designed to help companies provide health and wellness benefits to their employees. Using pre-tax dollars, employees at Cypress client companies could select from a variety of benefits (supplemental insurance, life insurance, short-term disability insurance, etc.) from a “Benefit Bank.” Cypress employees had the ability to write policies for certain insurance carriers identified within the Benefit Bank and had the ability to receive commissions or bonuses based on the number of individuals who participated with those insurers within the Benefit Bank. 9. 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, 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, Elzner directed DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 2 employers to insurance brokers who did not participate in the Benefit Bank and for whom Cypress could not write policies. Essentially, 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 the fall of 2013, a Cypress sales meeting was held, at which time Elzner was directed to cease his practice of diverting customers away from the Benefit Bank. He was informed that beginning in 2014, any bonus payments to him 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, Elzner began submitting sales paperwork for the deceased colleague’s clients, seeking to be paid bonuses for his work. In other instances, 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. On at least one other occasion, Elzner submitted bonus paperwork for sales made by subordinate employees working under his direction resulting in a double bonus being paid by Cypress for the single sale. Elzner engaged in these fraudulent activities to falsely inflate his sales numbers and any resulting bonus payments. 13. Prior to Elzner’s filing this lawsuit, Cypress conducted an audit of his accounts and determined that Cypress had, in fact, overpaid Elzner by more than $17,000.00. Cypress informed Elzner of this fact in response to his demand for $70,000.00 in “unpaid bonuses.” B. Elzner’s acquisition of Cypress Trade Secrets 14. Cypress introduced its suite of products, its business model, pricing, sales strategies, and many of its customer contacts to Elzner to help him perform his job duties and responsibilities as a Sales Manager. All such information provided to and shared with Elzner was provided to him for the express purpose of performing his job duties and was not to be DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 3 retained by or used by Elzner following his termination from the company. Elzner acknowledged that he had received and would continue to receive confidential information during his employment 15. At the time of or shortly after starting his employment, Elzner was provided a copy of the Cypress Employee Handbook. Elzner reviewed the Handbook and agreed to all policies and terms set forth therein. Among other things, Elzner agreed to keep confidential and not disclose certain proprietary information relating to Cypress’ business. Elzner agreed and acknowledged that Cypress’ customer lists, financial information, pricing strategies, labor relations strategies, marketing strategies, research and Cypress development strategies and production processes were confidential and proprietary and that he would at all times exercise the utmost care in his use of such information during his employment. He further agreed that he would not remove, retain, copy or utilize any confidential, privileged or proprietary information of Cypress. He further agreed that upon his termination of employment, he would not remove, retain, copy or utilize any confidential, privileged or proprietary information of Cypress. 16. Cypress spent several years and well over $1 million dollars developing its customized software program and creating its benefit and enrollment platform and suite of products, including the first fully-insured wellness policy on the market. Cypress provided Elzner with access to its customer lists, detailed financial information, and pricing and marketing strategies, for his use in the course and scope of the performance of his job duties for Cypress. Elzner agreed that he would maintain the confidentiality of all such information as confidential and not use or disclose it to any third party upon his separation from the company. 17. Cypress' proprietary software incorporates features of comparative payroll software programs, is capable of showing before and after participation in a benefit plan, reflects all applicable tax rates, can import employee group census data and extrapolate said data, enroll DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 4 employees in the benefit program, generate reports, and assign standardized benefits. Cypress software programs, its customer lists, detailed financial information, and pricing and marketing strategies constitute trade secrets under the Texas Uniform Trade Secrets Act (“TUTSA”). (“Trade Secrets”). C. Elzner’s Misappropriation of Trade Secrets and Acts of Unfair Competition 18. After leaving employment with Cypress, Elzner began directly competing against Cypress in the marketplace for wellness benefits. Whether on his own, in collaboration with an entity named Inspire, or with others, Elzner is working in the same capacity and performing the same services that he did for Cypress. Specifically, 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, Elzner will use and presumably has used Cypress Trade Secrets to obtain an unfair competitive advantage for himself and for others and has caused competitive harm to Cypress in the marketplace. 19. Elzner has also made false and disparaging comments about Cypress and its products, specifically telling customers that Cypress product are “not approved for sale” in certain states, or that certain Cypress products “have drawn scrutiny from the IRS.” These statements made by Elzner to third parties are false and disparaging to Cypress, have caused it to lose business and have damaged its business reputation. Claim No. 1 Fraud 20. During his employment with Cypress, Elzner falsely represented sales of Cypress products in order to receive a higher performance bonus than he was otherwise entitled to receive. DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 5 21. Elzner submitted falsified documentation of sales that had not taken place, renewals that had been canceled and sales actually made by other Cypress employees, including a deceased colleague. 22. Elzner’s false representations were made knowingly and with the intent to deceive Cypress. 23. Elzner knew or should have known that Cypress was relying upon his false representations including the submission of falsified bonus paperwork. 24. Cypress relied upon Elzner’s false representation to its detriment by overpaying him bonus payments based upon the falsified data that he submitted. 25. Cypress suffered actual damages as a result of Elzner’s false representations and fraudulent conduct, 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. Claim No. 2 Breach of Contract 26. 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 after beginning employment, Elzner altered the manner in which he sold Cypress products; employing a sales approach that only served his interests and was actually detrimental to the company’s interests. When Elzner’s improper conduct and sales practices were discovered, he was notified that his incentive compensation plan would be adjusted to reflect his deviation from the company’s sales policies. 27. In the fall of 2013, Elzner agreed to a 50% reduction in his bonus payments if he continued to divert customers away from the Cypress Benefit Bank. Elzner later sought to DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 6 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 in bonus payments. Elzner’s submission of paperwork for full bonuses instead of the agreed upon 50% bonuses, his submission of false bonus paperwork, and his receipt of unearned bonuses constitute breach of his agreements with Cypress. 28. The agreements entered into by and between Elzner and Cypress described above were valid and enforceable contracts of employment. Cypress performed or was excused from performing its contractual obligations. Elzner breached the contract by submitting claims for bonuses to which he was not entitled, failing to follow company policies and procedures, failing to perform his job duties and responsibilities in an acceptable manner, and by violating his promises of confidentiality set forth above. Cypress suffered actual damages as a result of Elzner’s breach of contract. Claim No. 3 Misappropriation of Trade Secrets 29. While employed at Cypress Elzner had agreed and acknowledged that Cypress’ Trade Secrets were confidential and proprietary and that he would at all times exercise the utmost care in his use of such information during his employment. He further agreed that he would not remove, retain, copy or utilize any Trade Secrets and that he would return all such information to Cypress within one business day of the termination of his employment. He further agreed that upon his termination of employment, he would not remove, retain, copy or utilize any Trade Secrets. Elzner acquired Cypress Trade Secrets under a duty to keep them confidential. 30. Cypress has reason to believe that Elzner possesses and has used an unauthorized copy of Cypress’ software and other Trade Secrets in direct competition with it in the DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 7 marketplace for wellness benefits causing Cypress to lose customers. For example, since his departure, Cypress has lost business from several long-standing clients who either canceled or did not renew with Cypress. At least one client that had been with Cypress for 11 months and had decided to renew for another year abruptly canceled its renewal and is believed to have been enrolled by Elzner with another company providing the same or substantially similar suite of wellness products. 31. On at least one occasion following his termination, Cypress has learned that Elzner assisted or allowed a third party to improperly utilize the Cypress software to generate a report for a client after they first “remove[d] all things cypress” from the report and data. 32. Cypress derives independent economic value, actual and potential, from the Trade Secrets not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from the Trade Secrets disclosure or use. 33. Cypress’ Trade Secrets are kept confidential and Cypress has required those persons who have access to the information to agree to keep it confidential and not use or disclose it to third parties without its consent. 34. Cypress’ efforts to maintain the secrecy of the Trade Secrets have been and are reasonable under the circumstances. 35. Elzner acquired the Trade Secrets under circumstances giving rise to a duty to maintain their secrecy or limit their use. 37. Elzner owed, and continues to owe, a duty to Cypress to maintain the secrecy and not use or disclose the Trade Secrets. 38. Elzner has misappropriated Cypress’ Trade Secrets, and by the nature of his work and position in direct competition with Cypress, it is inevitable that he will further disclose Cypress’ Trade Secrets without Cypress’ express or implied consent. DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 8 Claim No. 4 Unfair Competition 39. During his employment with Cypress, Elzner was provided access to Cypress 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 began using Cypress’ confidential business information in direct competition with Cypress in the marketplace for bundled health care and wellness services. Elzner targeted Cypress’ customers, and in connection with his efforts to steal away business, he made false and disparaging comments about Cypress and its products. Upon information and belief, Elzner is using Cypress software or the results of its software and “passing it off” as his own in an attempt to steal business away from Cypress. Elzner’s actions constitute unfair competition, and Cypress has suffered actual damages and will suffer further future damages as a result of Elzner’s actions. Because Elzner’s actions were taken knowingly, not accidentally and with the intent to harm Cypress, Cypress is entitled to an award of punitive damages to punish and deter such wrongful conduct in the future. DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 9 V. Prayer for Relief WHEREFORE, PREMISES CONSIDERED, Cypress Associates, Inc. prays that on final trial of this case, the Court enter a take nothing judgment in favor of Corey Elzner on his claims for relief, and that judgment be entered for Cypress Associates, Inc. against Corey Elzner for the following: 1) Actual damages and exemplary damages in an amount in excess of the minimum jurisdictional limits of the Court; 2) Pre-judgment and post-judgment interest at the maximum rate allowed by law, attorney’s fees, and costs; 3) Such other and further relief to which Cypress Associates, Inc. may be entitled, both at law or in equity. DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 10 Respectfully submitted, SCHEEF & STONE, L.L.P. By: /s/ Robert J. Garrey 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 Fax ATTORNEYS FOR CYPRESS ASSOCIATES, INC. DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 11 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 19th day of February, 2015, on the following counsel of record: Via Facsimile: 214 379-0849 & E-Service:tca@kilgorelaw.com Theodore C. Anderson III Kilgore & Kilgore, PLLC Kilgore Law Center 3109 Carlisle St. Dallas, TX 75204 Via Facsimile: 214.254.4941 & E-Service:aet@kilgorelaw.com Ashley E. Tremain Tremain Artaza, PLLC 4925 Greenville Ave., Suite 200 Dallas, TX 75206 /s/ Robert J. Garrey Robert J. Garrey DEFENDANT’S FIRST AMENDED ANSWER AND AMENDED COUNTERCLAIM Page 12