A recurring procedural dispute arises in theft of trade secrets lawsuits.  How should a trial judge resolve a Plaintiff’s request to exclude a Defendant from the courtroom during the time the plaintiff discloses its trade secrets to the court? 

Defendants argue that due process guarantees them the right to be present in court at all times during a lawsuit.  Plaintiffs argue that the trial court possesses discretion to exclude Defendants from the courtroom while allowing the Defendants’ attorneys and retained expert witnesses to remain (the lawyers and expert witnesses would be prohibited from disclosing the trade secrets to the Defendant).

On May 20, 2016, the Texas Supreme Court issued an opinion addressing a Plaintiff’s effort to exclude a Defendant’s corporate representative from a temporary injunction hearing while the Plaintiff testified about its trade secrets.  The Plaintiff did not seek to exclude from the hearing defense attorneys or retained experts.  The Plaintiff also did not seek to exclude another defendant who used to work for the Plaintiff and who allegedly knows the trade secrets at issue.  The case is In re M-I L.L.C.

The Texas Supreme Court ruled that the U.S. Constitution Fourteenth Amendment Due Process Clause mandates a presumption in favor of a defendant participating in court proceedings, but there is no absolute right to be present – even at a civil trial.  The competitive harm that the Plaintiff would suffer from disclosure of its trade secrets to a particular person designated as the Defendant’s corporate representative must be weighed against the presumption in favor of the Defendant’s participation.  Trial courts must now consider these three factors to determine whether a Defendant’s corporate representative may be excluded from the courtroom:

  1. The relative value of the Plaintiff’s trade secrets, as well as whether the person serving as the corporate representative acts as a competitive decision-maker in the Defendant’s business.
  2. The degree to which the Defendant’s ability to defend against the Plaintiff’s claims would be impaired by excluding the corporate representative.  To make this determination, the trial court must consider the corporate representative’s role in the Defendant’s business and whether, by virtue of that role, the corporate representative possesses specialized expertise not available to the Defendant’s outside experts.
  3. In the context of a temporary injunction hearing, the trial court must also consider the preliminary stage of the proceedings.  The Texas Supreme Court did not elaborate on this point beyond noting that a preliminary injunction maintains the status quo rather than adjudicating a case on the merits.  Nevertheless, the point appears to be that this third factor weighs in favor of a plaintiff the more preliminary the nature of the courtroom proceeding.   This factor may weigh in favor of the defendant at trial and outcome dispositive hearings.

The Texas Supreme Court did not decide whether the trial court should have excluded the Defendant’s corporate representative from the temporary injunction hearing.  Instead, the Supreme Court ruled that the trial court committed error by not conducting the “due-process balancing” test list above.  The issue now goes back to the trial court to decide whether to grant or deny the Plaintiff’s request.

Although the opinion only involved a specific scenario (a request to exclude a corporate representative from a temporary injunction hearing), it also provides guidance for how trial courts should resolve other requests to prevent disclosure of trade secrets to litigants.  For example, the issue can arise when deciding who may attend depositions or trial and which persons may view documents exchanged in discovery.

 

photo credit: Back of the courtroom via photopin (license)

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