On January 13, before the Texas Supreme Court, two major oil-and-gas-services companies disputed whether Texas’s new trade secret laws require a trial court to exclude a party’s corporate representative from a hearing at which trade-secret testimony from the opposing party is given.

Jeff Russo is a former employee of M-I SWACO, a Schlumberger subsidiary, who left to work for National Oilfield Varco (NOV) in early 2014.  Russo filed suit against in April 2014, seeking a declaratory judgment on his non-compete agreement.  M-I SWACO counterclaimed for breach of contract and misappropriation of trade secrets and further sued NOV as a defendant.  The parties entered into an agreed protective order and engaged in expedited discovery.

At a temporary injunction hearing, M-I SWACO sought to present evidence of its trade secrets through oral testimony and asked the trial court to temporarily clear the courtroom of everyone except the parties’ counsel, their experts, and Russo.  The trial court denied the request, stating “I am not going to exclude a representative of a party that you’re making claims against from [the courtroom],” and adding that it would be “a total violation of due process.”  To protect M-I SWACO’s alleged secrets, the trial court instead issued a gag order for NOV’s representative prohibiting disclosure or use of anything heard in the courtroom.  This mandamus followed.

At issue in the appeal is the trial court’s authority under the newly-enacted Texas Uniform Trade Secrets Act (TUTSA) to “preserve the secrecy of an alleged trade secret by reasonable means.” Tex. Civ. Prac. & Rem. Code §134A.006.

M-I SWACO argued that, in order to preserve the secrecy of its trade secrets, “reasonable means” required in this case disclosing the alleged secrets in the presence of NOV’s attorneys and experts, and in front of Russo, but not in front of NOV itself.  The trial court’s order, M-I SWACO argued, “created a needless dilemma” in which, “one way or the other,” NOV would be given access to M-I SWACO’s trade secrets through NOV’s corporate representative.

NOV argued, however, that the trial court’s gag order directed at NOV’s corporate representative is sufficient protection for the alleged trade secrets, and that TUTSA permits nothing more.  “Not only does TUTSA not authorize the relief M-I SWACO seeks, it expressly authorizes courts to issue the relief the trial court ordered here,” NOV argued in its brief.  “Although that is not exactly what M-I SWACO wanted, it cannot constitute an abuse of discretion as a matter of law.”

At oral argument before the Texas Supreme Court, M-I SWACO’s counsel argued that there would be times when a gag order such as the one the trial court entered in this place would be appropriate, but only in those situations where the competitor already knew the trade secret.

NOV’s counsel argued at the hearing, however, that excluding the defendant from the court room during the hearing would constitute a radical departure from the American processes of jurisprudence.

TUTSA became effective in Texas on September 1, 2013.  The parties appeared to agree that the matter before the Texas Supreme Court was a matter of first impression.

The parties briefs before the Texas Supreme Court can be accessed here.

Access to the oral hearing can be found here.