If you’re a Texas litigator, like me, then you probably already know that filing documents in state court under seal can be kind of a pain. There’s this pesky Rule 76a of the Texas Rules of Civil Procedure.

Rule 76a reads like it was written by some real do-gooder types:

  • Court records are “presumed to be open to the general public.”
  • Sealing court records requires showing a “specific, serious and substantial interest” that outweighs both the “presumption of openness” and “any probable adverse effect that sealing will have upon the general public health or safety.”
  • You have to file a motion to seal that is “open to public inspection” and “post a public notice” at the courthouse.
  • The public notice must contain “a brief but specific description of both the nature of the case and the records which are sought to be sealed.”
  • The court must hold a public hearing on the motion to seal.
  • The sealing order must state the “specific reasons” for finding the required showing has been made.
  • A non-party—oh, I don’t know, like maybe, the press?—can intervene to oppose a motion to seal.
  • Anyone who participated in the hearing can appeal the ruling.

This is great, right? We can’t have a Ford Pinto situation where Big Corp seals the court records that show its product explodes on impact and kills unsuspecting consumers. Openness! Transparency! Sunlight is the best disinfectant! The public has a right to know!

That all sounds great, but for most practicing litigators, this just sounds like stuff from the movies.

In a typical lawsuit I handle, my client cares a lot about the case, as does the opposing party, but nobody else cares. So, when I file a sealing motion under Rule 76a and post a notice on the courthouse door, I know that no one is going to read that notice or show up at the hearing to contest the motion. Ronan Farrow just isn’t going to care about the confidential profit margins inside Jim Bob’s Valve Supply Shop.

So for me, Rule 76a is just a hoop to jump through, with no public benefit, and it’s kind of annoying. It’s not that big a deal, but it is one more thing my client has to pay for.

This is especially likely to be an issue in my focus area, departing employee litigation, because that kind of case usually includes claims between competitors regarding confidential information and trade secrets. If the point of the lawsuit is to try to protect my client’s trade secrets, the last thing I want to do is reveal the trade secrets in documents publicly filed with the court.

Enter TUTSA, the Texas Uniform Trade Secrets Act. While Rule 76a establishes a presumption of openness designed to protect the public’s right to know, TUTSA has a whole section designed to do the opposite. 

Specifically, Section 134A.006(a) of the Texas Civil Practice and Remedies Code commands that “a court shall preserve the secrecy of an alleged trade secret by reasonable means.” Then it goes on to say that “[t]here is a presumption in favor of granting protective orders to preserve the secrecy of trade secrets.” And the options available to the judge include “sealing the records of the action.”

But how do we square this more permissive sealing rule for trade secrets cases with the more restrictive Rule 76a?

Well, TUTSA itself tells us how. “To the extent that this chapter conflicts with the Texas Rules of Civil Procedure, this chapter controls.” Tex. Civ. Prac. & Rem. Code § 134A.007(c).

And just in case that wasn’t clear enough: “the supreme court may not amend or adopt rules in conflict with this chapter.” Id.

Well, that settles it. If a case involves alleged trade secrets, then a motion to seal is governed by the more flexible provisions of TUTSA, and the hoop-jumping exercises of Rule 76a don’t apply, right?

Not so fast. TUTSA only displaces Rule 76a where the two are in conflict. In HouseCanary, Inc. v. Title Source, Inc., No. 19-0673, 2021 WL 1711123 (Tex. April 30, 2021), the Texas Supreme Court held that TUTSA only displaces some of Rule 76a.

(If the name of the case sounds familiar, maybe it’s because I wrote about the substantive issues in HouseCanary in The Jury Charge in Texas Trade Secrets Litigation.)

Writing for the majority, Justice Busby explained that TUTSA partially displaces the substantive sealing standards of Rule 76a, but “does not provide a separate, self-contained pathway—independent of Rule 76a—for seeking and ordering the sealing of court records.” In other words, “Rule 76a provides procedures and standards for sealing court records that include trade secrets, while TUTSA provides standards for protecting secrets by means including sealing.”

So what does TUTSA displace and not displace?

Specifically, HouseCanary held that TUTSA replaces the Rule 76a presumption that court records are open with a presumption “in favor of granting protective orders to preserve alleged trade secrets, including those in court records.”

But HouseCanary rejected the argument that “TUTSA supplants all of Rule 76a and provides an entirely separate path to sealing.” “Showing a conflict between TUTSA and one part of Rule 76a does not displace the whole rule,” Justice Busby reasoned. “Those procedures include public notice, the prohibition against motions for reconsideration absent changed circumstances, and the right of appeal.”

But how do you give public notice without spilling the beans? Easy. “[H]olders of a trade secret can notify the public of the type of information they seek to seal without disclosing that information,” the court said.

This is perhaps the most important practical result for practicing litigators: even in a trade secrets case, if you want a sealing order you still have to post the public notice required by Rule 76a.

And you still have to show that less restrictive means than sealing entire records—such as redaction—would be effective to preserve the trade secrets. That’s because TUTSA “lists a sealing order as only one of several means of preserving a trade secret.”

Thus, TUTSA is not necessarily a free ticket to seal any document filed with the court that a party claims contains alleged trade secrets.

So, the upshot of HouseCanary is that if you want to file a document in Texas state court under seal, on the ground that it contains alleged trade secrets, then you should:

  1. File a motion to seal under Rule 76a.
  2. Cite the presumption of protection of trade secrets from TUTSA, Tex. Civ. Prac. & Rem. Code § 134A.006(a).
  3. Point out the presumption of openness in Rule 76a(1) does not apply (citing HouseCanary).
  4. Explain why less restrictive means, such as redaction, would not be adequate to protect the secrecy of the information. Tex. R. Civ. P. 76a(1)(b).
  5. Post the required public notice, including a “brief but specific description of . . . the nature of the case,” Tex. R. Civ. P. 76a(3), and a description of the “type of information” you seek to seal “without disclosing that information.” HouseCanary.
  6. Present your proposed sealing order at the hearing.
  7. Make sure your proposed order recites all the things required by Rule 76a(6) (except you probably don’t have to include “the specific reasons for finding and concluding whether the showing required by paragraph 1 has been made,” because under HouseCanary, that requirement is displaced by TUTSA).

Yes, this is kind of a pain, but no, you don’t have to reinvent the wheel every time you do it. I’m sure some helpful blogger will publish a form Motion to Seal soon.

And assuming nobody shows up at the hearing to oppose the motion, your motion will usually be granted.

But there’s still one problem. This procedure is all well and good for pretrial filings with the Court, but what about evidence at trial? In a trade secrets trial, there will be both testimony and exhibits that reveal the alleged trade secrets. Trials are generally open to the public.

So if you offer evidence of your client’s trade secrets, or fail to object when the other side does so, have you waived trade secrets protection?

This was also an issue in HouseCanary. Title Source argued that HouseCanary waived trade secret protection by offering exhibits containing the trade secrets and discussing them in open court.

But the Texas Supreme Court said these facts alone did not conclusively establish a waiver. The court reasoned that information does not have to be kept “absolutely secret” to maintain trade secret status. Only “reasonable measures” are required. Tex. Civ. Prac. & Rem. Code § 134A.002(6)(A). Whether secrecy has been lost is a “fact-intensive determination,” and publicly filing a document containing the trade secrets is just one factor to consider.

“Other relevant considerations include whether and when subsequent measures were taken to preserve the document’s secrecy, whether a competitor could readily ascertain the information, and whether the document was further published or disseminated outside court records.”

Thus, Title Source did not conclusively show that the exhibits lost their trade secrets status just because they were offered in a trial open to the public.

Dealing with trial exhibits containing alleged trade secrets is still a practical problem. But HouseCanary at least establishes that trade secrets status is not automatically lost just because an exhibit is admitted in the trial without a sealing order.

_______________________

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

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