In re M-I L.L.C. d/b/a M-I-Swaco

Justice Devine (Opinion)

In a narrow opinion, the Texas Supreme Court addressed whether a trial court abused its discretion by (1) summarily refusing to exclude a competitor’s designated corporate representative from the courtroom during portions of a temporary injunction proceeding where alleged trade secrets would have been discussed; and (2) compelling the production of an affidavit detailing those alleged trade secrets without first conducting an in camera review of the affidavit. In each instance, the Court found the trial court abused its discretion by failing to analyze and balance the competing considerations. It therefore conditionally granted the writ of mandamus.

Jeff Russo worked for M-I and during his employment allegedly learned its trade secrets. In 2014, Russo left M-I and joined National Oilwell Varco, L.P. (“NOV”), a competitor of M-I. Shortly thereafter, M-I sent Russo a demand letter, asserting that he continued to possess M-I’s trade secrets and was in breach of his covenant not to compete. Russo filed suit, seeking a declaration that the covenant not to compete was unenforceable. M-I counterclaimed against Russo for, among other things, breach of the non-compete and misappropriation of trade secrets. M-I also sued Russo’s new employer, NOV, for misappropriation of trade secrets and tortious interference. During the hearing on its application for a temporary injunction, M-I sought to present oral testimony regarding its trade secrets and asked the trial court to exclude everyone except the parties’ counsel, expert witnesses, and Russo from the courtroom. The trial court refused to exclude NOV’s corporate representative—stating it would be a “total violation of due process”—and instead instructed the NOV corporate representative not to use or disclose any trade secrets he heard. After making its ruling, the trial court offered M-I the opportunity to present its trade secret evidence by way of an offer of proof, outside the presence of NOV’s representative, but M-I did not do so. M-I asked the trial court to recess the hearing, so it could seek a writ of mandamus.

M-I filed its petition for writ of mandamus in the court of appeals, and submitted in camera an affidavit detailing the testimony that would have been presented during the temporary-injunction hearing. Russo and NOV objected to the affidavit and moved for access to it. The court of appeals denied the motion for access to the affidavit, but denied M-I’s mandamus petition, as well. Russo and NOV then moved to compel production of the affidavit in the trial court, asserting it was discoverable under Rule 194.2 as a witness statement. Without reviewing the affidavit in camera, the trial court ordered production of the affidavit. M-I then petitioned the Texas Supreme Court for mandamus relief.

The Supreme Court held that the trial court erred by summarily refusing to exclude NOV’s corporate representative from the courtroom on due process grounds without considering the harm to M-I’s proprietary interests. The Court noted the trial court could have conducted an in camera hearing to determine what M-I’s alleged trade secrets were and the impact disclosure of those trade secrets might have on M-I or NOV. The Court observed that, had the trial court conducted the required balancing test, it might have concluded that due process required NOV’s designated representative to be allowed to remain in the courtroom; the trial court’s error was in not conducting the balancing test before deciding the issue. In reaching its decision, the Supreme Court relied on § 134A.006 of the Texas Uniform Trade Secrets Act, which directs trial courts to take reasonable measures to protect trade secrets, including by holding in camera hearings where necessary. For similar reasons, the Court concluded that the trial court erred by compelling the disclosure of the affidavit detailing M-I’s alleged trade secrets without first conducting an in camera review of that document.