May 2016

 

Some time you are right, and some time you are wrong.  A few months ago I offered the opinion that it was unlikely the Texas Supreme Court would exclude a client representative from the courtroom during a trade secrets case when trade secrets were discussed.  I was wrong.  The Texas Supreme Court has said that you can.  There are a lot of procedural issues in this one with respect to what the judge should have done and we’ll save those for another day.

Here is the short of it.  Plaintiff and Defendant are competitors in the equipment and services business for the oil and gas industry.  Both have spent a lot of money developing mesh screens that filter solid matter from drilling fluid.  This allows them to reuse fluid and keep costs down.  Defendant hired one of Plaintiff’s former employees who had a non-compete.  Plaintiff sued Defendant to enforce non-compete.  During a preliminary injunction hearing the Plaintiff intended to introduce evidence about its trade secrets but wanted the Defendant’s corporate representative removed from the courtroom.  (That left the former employee, lawyers, and the Defendant’s experts.)  The trial judge said no and the appeal (mandamus in Texas) resulted.

Here is what the Texas Supreme Court said:

1. Excluding the representative from the Courtroom was not a violation due process;
2. The trial judge has to weigh/balance the degree of competitive harm the Plaintiff would suffer – it did not engage in this process; and
3. Excluding the representative does not violate Texas “open-courts” provision, the Rule of excluing witnesses; Rule 76a of the Texas Rules of Civil Procedure which permits sealing of court records; and is not an offensive use of the privilege.

The Court went on to hold that it could not engage in the balancing process required of the trial court and remanded back to the trial court for that process.  We shall see how that turns out, but the trial judge is now in a position to exclude the witness if he so chooses.  So despite what I thought a corporate represenative could be excluded.  It wasn’t as if no one from the Defendants’ side would be left int he courtroom.  The former employee and experts were still in the courtroom. I wonder what would have happened if this was not the case?  Certainly that would be factored in the balancing process.

This was the first time the Texas Uniform Trade Secrets Act was discussed by the Texas Supreme Court, though not in great detail or substantively.  Obviously, the court takes seriously the notion of protecting trade secrets at the temporary injunction level.