Texas Supreme Court Considers Whether Texas Uniform Trade Secrets Act Can Keep Corporate Representatives From the Courtroom

February 2, 2016

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.