In December 2014, Schlumberger subsidiary M-I LLC (d/b/a M-I SWACO) filed a
writ of mandamus with the Texas Supreme Court over a trade secrets case decided
in Harris County District Court. In its writ, M-I SWACO alleged that the trial
court erred by allowing a representative of the company who hired M-I SWACO’s
former employee to stay in the courtroom during evidentiary proceedings
concerning trade secrets that the employee allegedly misappropriated.
The Underlying Dispute
The underlying lawsuit arises out of National Oilwell Varco’s (NOV) hiring of
Jeff Russo, a former M-I SWACO business development manager. Mr. Russo sued his
former employer, M-I SWACO, seeking a declaration that his non-compete was
invalid and could not preclude him from working at NOV. M-I SWACO in turn filed
a counterclaim for breach of contract and misappropriation of trade secrets,
naming NOV as a defendant. Of particular relevance to the current Texas Supreme
Court case, M-I SWACO alleged that Mr. Russo misappropriated company research
and development, new product development, engineering, and marketing activity
information for use with his new employer, NOV.
During a temporary injunction hearing, M-I SWACO sought to exclude NOV’s
corporate representative from the courtroom. The trial court refused to do so
and instead issued a gag order barring the representative from disclosing or
using trade secret information. M-I SWACO then suspended the injunction hearing
and filed an appeal.
Issue Under Review
The issue before the Texas Supreme Court is whether the trial court erred in
not requiring NOV’s corporate representative to exit the courtroom during the
evidentiary proceedings. Put simply, does the Texas Uniform Trade Secrets Act (TUTSA)
compel the court to exclude from the courtroom representatives for defendant
companies that are alleged to have indirectly misappropriated or received trade
secret information? On one hand, M-I SWACO contends that it was placed in the
“impossible position” of having to either reveal its trade secrets to NOV, its
competitor, in open court or forego legal action to protect its trade secrets.
NOV, on the other hand, contends that forcing the exclusion of a corporate party
representative amounts to an empty chair defendant and allows for easy abuse of
the trade secret protection process.
Under TUTSA, trial courts may use “reasonable measures” to protect trade
secrets during litigation, but the statute does not specify the breadth or scope
of the same. Thus, the outcome of this case will be significant, as it has the
potential to stifle or encourage future trade secret litigation in Texas.
For further information or questions about the information contained in this
legal alert, please contact the authors, your McGuireWoods contact or a member
of the firm’s labor and employment group.