{"id":59,"date":"2016-05-23T14:42:33","date_gmt":"2016-05-23T18:42:33","guid":{"rendered":"http:\/\/blogs.duanemorris.com\/tradesecretslaw\/?p=59"},"modified":"2016-05-23T14:42:33","modified_gmt":"2016-05-23T18:42:33","slug":"texas-supreme-court-holds-that-a-trial-court-must-balance-the-parties-competing-interests-before-deciding-whether-a-corporate-representative-should-be-excluded-from-an-injunction-hearing-invo","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/tradesecretslaw\/2016\/05\/23\/texas-supreme-court-holds-that-a-trial-court-must-balance-the-parties-competing-interests-before-deciding-whether-a-corporate-representative-should-be-excluded-from-an-injunction-hearing-invo\/","title":{"rendered":"Texas Supreme Court Holds that a Trial Court Must Balance the Parties\u2019 Competing Interests Before Deciding Whether a Corporate Representative Should be Excluded from an Injunction Hearing Involving Trade Secrets under the Texas Uniform Trade Secrets Act"},"content":{"rendered":"

By
\nShannon Hampton Sutherland, Co-Chair, Duane Morris Non-Compete\u00a0and Trade Secrets Practice, http:\/\/www.duanemorris.com\/attorneys\/shannonhamptonsutherland.html<\/a>, and
\nCorey M. Weideman, Duane Morris Associate,\u00a0http:\/\/www.duanemorris.com\/attorneys\/coreymweideman.html<\/a><\/p>\n

On May 20, 2016, in In re: M-I, LLC, d\/b\/a M-I Swaco<\/em>, No. 14-1045, 2016 Tex. LEXIS 389 (Tex. May 20, 2016), the Texas Supreme Court issued its much anticipated first decision involving the Texas Uniform Trade Secrets Act (\u201cTUTSA\u201d). TUTSA, which became effective on September 1, 2013, updated Texas law governing trade secret matters by, among other things, providing an unambiguous definition of a \u201ctrade secret\u201d, expanding injunctive relief, and authorizing recovery of attorneys\u2019 fees for willful and malicious activity. TUTSA also includes a specific provision requiring trial courts to protect the secrecy of a trade secret through reasonable means. See<\/em> TEX. CIV. PRAC. & REM. CODE \u00a7 134A.006. This section of TUTSA, and the extent to which a trial court must protect the secrecy of an alleged trade secret during an injunction hearing, was the focus of the Court’s attention in In re: M-I, LLC<\/em>.<\/p>\n

In In re: M-I, LLC<\/em>, the Texas Supreme Court held that the due-process right of a party to have a designated representative present at an injunction hearing involving alleged trade secrets is not absolute, and the trial court abused its discretion when it summarily concluded \u2013 without first balancing the competing interests at stake \u2013 that excluding the defendant\u2019s corporate witness from portions of the injunction hearing involving trade secrets would violate due process.<\/p>\n

The basic facts of the trade secret case underlying the mandamus proceeding in In re: M-I, LLC\u00a0<\/em>are typical: an employee with a signed non-compete and confidentiality agreement left his job to work for one of his former employer\u2019s competitors, and a dispute ensued shortly thereafter. The former employer, M-I, filed suit for trade secret misappropriation and sought injunctive relief against its former employee and his new employer, National Oilwell Varco, L.P. (\u201cNOV\u201d).\u00a0 Relying on Section 134A.006 of TUTSA, M-I requested that NOV\u2019s corporate representative be excluded from the courtroom during a portion of the hearing on M-I\u2019s application for temporary injunction. The trial court summarily denied M-I’s request, however, concluding that the exclusion of NOV’s designated representative would be a \u201ctotal violation of due process.\u201d Instead, the trial court admonished NOV\u2019s representative not to disclose or use anything he heard in the courtroom. Concerned about disclosing testimony regarding its trade secrets to NOV and placing the secrecy of the alleged trade secrets\u00a0at risk by doing so, M-I postponed the injunction hearing to file a mandamus request with an intermediate appellate court. The intermediate appellate court denied the mandamus request and M-I filed a new mandamus request to the Texas Supreme Court.<\/p>\n

Mandamus relief is available, the Court noted, when the trial court abuses its discretion and no adequate appellate remedy exists. The Court first explained that there is no adequate appellate remedy for an erroneous order to disclose a trade secret before\u00a0examining whether the trial court abused its discretion.<\/p>\n

In conditionally granting M-I\u2019s request for mandamus relief, the Texas Supreme Court held that the trial court abused its discretion by summarily refusing M-I\u2019s request to conduct portions of the temporary injunction hearing outside the presence of the NOV\u2019s designated representative. The Court explained that courts have discretion to exclude parties and their representatives in limited circumstances when \u201ccountervailing interests overcome [the] presumption\u201d in favor of participation. Rather than summarily denying M-I\u2019s request, the Court explained, the trial court was required, at a minimum, to balance the parties\u2019 competing interests.<\/p>\n