Court Holds the Weekley Homes Standard Applies
The Houston Court of Appeals (14th) has held that the plaintiff in a trade secrets lawsuit is not automatically entitled to a forensic examination of a defendant’s device that was allegedly used to take the defendant’s alleged trade secrets. In re 4X Industrial, LLC, __ S.W.3d __, No. 14-23-00183-CV, 2024 WL 333798 (Tex. App.—Houston [14th Dist.] Jan. 30, 2024) (orig. proceeding).
Rather, to obtain an order for “direct access” to the defendant’s computer or electronic storage device, the plaintiff must satisfy the requirements established by the Texas Supreme Court in In re Weekley Homes, 295 S.W.3d 309 (Tex. 2009). Those requirements include showing that the defendant defaulted on his discovery obligations. 4X Industrial, 2024 WL 333798 at *6.
If you’re not a lawyer who regularly handles such cases, this may sound pretty technical, but it’s actually a big deal, with important practical consequences. I’ll explain.
Requests for “Direct Access” in Trade Secrets Litigation
Here’s how it usually goes down.
Dawn Davis sells windows for Paula Payne Windows. She doesn’t have a non-compete, so when Paula Payne starts cutting her commissions, she jumps ship and goes to work for competitor Real Cheap Windows.
So far, so good.
But Dawn messes up on the way out. On her last day of work at Paula Payne, Dawn copies 300 files from her work laptop on to a thumb drive and takes the thumb drive with her.
Or she emails the 300 files to her personal email address. Or has them in Google Drive. Or she puts them on an external hard drive. There are endless variations, but you get the idea.
Let’s pause here to note: Sometimes the employee does stuff like this for a justifiable reason, sometimes for a bad reason, and sometimes it’s kind of “in between.” So there may be malicious intent, but you shouldn’t just assume that.
Anyway, Paula Payne does a forensic review of Dawn’s laptop, which reveals everything Dawn did, including copying the 300 files to the thumb drive.
Let’s pause again to note: You’d think by now every employee would understand that everything they do on a computer leaves an electronic trail, so there’s generally no hiding the fact that they took company documents. But no. They don’t. And that reality keeps me fully employed.
The lawyer for Paula Payne Windows sends Dawn Davis a nastygram saying we’ve caught you red-handed and you’d better turn over all your devices and accounts to our forensic expert immediately, or we’ll sue. Sue, I tell you, sue!
Let’s suppose Dawn doesn’t cooperate. “Working at that place sucked after the private equity firm bought it, and they stiffed me on my last commissions,” she tells her lawyer. “I’m not about to give them anything!”
So there’s a lawsuit. And the first thing Paula Payne’s lawyer does (after the obligatory “emergency” TRO hearing) is send a request for production of documents. Including a request for Dawn to turn over the thumb drive and any personal computer she connected it to for examination by a forensic expert.
Dawn’s lawyer objects, citing Weekley Homes. “Weekley Homes requires a threshold showing that Dawn defaulted on her discovery obligations before direct access may be ordered,” her lawyer writes, “and there has been no such showing here.”
More specifically, Weekley Homes requires showing four things to get a direct access order:
(1) the responding party has defaulted on its discovery obligations;
(2) less intrusive means would be inadequate to obtain the relevant information;
(3) the requested direct access is likely to result in identifying relevant information to be produced; and
(4) direct access will not impose an undue intrusion on the responding party.
Weekley Homes, 295 S.W.3d at 317-22.
Undue intrusion can occur, for example, if the court order doesn’t include a protocol for protecting the responding party’s private or privileged documents.
Paula Payne’s lawyer files a motion to compel and responds. “This is a trade secrets lawsuit where the thumb drive at issue contains the very documents that Plaintiff claims Defendant stole,” she argues. “The Weekley Homes standard simply does not apply.”
So what is the trial court to do?
Does Weekley Homes Apply to Trade Secrets Suits?
The defendant’s argument is that the Weekley Homes standard applies generally to all civil suits, including suits alleging misappropriation of confidential information or trade secrets.
There is nothing in the Weekley Homes opinion indicating its standard is limited to any particular type of lawsuit, or that it doesn’t apply to trade secrets suits.
Furthermore, the policy concerns behind the Weekley Homes standard apply just as much when a defendant is accused of taking the plaintiff’s documents.
Suppose the plaintiff accuses the defendant of stealing a hard copy of a confidential customer list. The plaintiff serves a request to come into the defendant’s house to search his file cabinets for the list. This would never be allowed!
But a request for direct access to an electronic device is just as invasive, in principle. In some ways, considering the sheer amount of personal information that could be found on an electronic device, it is even more invasive.
That’s why the Texas Supreme Court said a request for direct access is to an electronic device is “particularly intrusive and should be generally discouraged, just as permitting open access to a party’s file cabinets for general perusal would be.” Weekley Homes, 295 S.W.3d at 317.
The plaintiff, on the other hand, will cite the part of Weekley Homes that approvingly cites federal case law allowing direct access to devices when the use of the device to take the plaintiff’s documents is part of the cause of action at issue. See id. at 319.
Plus, the lawsuit at issue in Weekley Homes had nothing to do with allegations of taking the plaintiff’s documents, the plaintiff will argue.
In response, the defendant will cite cases that applied the Weekley Homes standard to departing employee cases involving allegations like misappropriation of trade secrets. See, e.g., In re Methodist Primary Care Group, 553 S.W.3d 709, 717pinna (Tex. App.—Houston [14th Dist.] 2018, orig. proceeding); In re Pinnacle Engineering, Inc., 405 S.W.3d 835, 842-44 (Tex. App.—Houston [1st Dist.] 2013, orig. proceeding).
These cases applied the Weekley Homes standard, apparently assuming it applies to cases involving allegations of misappropriation of company documents. But until recently, there was no clear answer to the question.
Now there is.
Houston Court of Appeals Directly Rejects Argument That Weekley Homes Does Not Apply to Trade Secrets Litigation
The plaintiff in 4X Industrial, Russell Marine, obtained a trial court order requiring production of two electronic storage devices by a former employee of the plaintiff who allegedly used the two devices to take company documents. 4X Industrial, __ S.W.3d at __, 2024 WL 333798 at *4.
In the court of appeals, Russell Marine argued that the Weekley Homes standard did not apply, or that if it did, the standard had been met. Id. at *5.
Specifically, Russell Marine contended that Weekley Homes does not apply “because the information it seeks from the [former employee’s] Devices is the subject matter of the lawsuit.” Id. at *6. It cited Weekley Homes’ acknowledgment that direct access is more likely to be allowed when there is a direct relationship between the device and the claims. Id.
“Effectively,” the court of appeals said, “Russell Marine asks us to recognize a plaintiff’s automatic right to directly access electronic storage devices when the claims are for misappropriation of trade secrets and there is an indication that trade secrets were taken electronically.” Id.
The court of appeals declined to do this: “We do not read Weekley Homes as suggesting that examination of another party’s electronic storage device is automatic in any type of case, including cases alleging misappropriation of trade secrets. Surrendering an electronic storage device for examination by another litigant is particularly intrusive no matter what claims are at issue. Importantly, the availability of electronic discovery is always subject to a balancing test.” Id.
“In any given case,” the court said, “consideration of the relevant interests may counsel against direct access to an electronic storage device because the production of documents from the device may prove adequate without a need to examine the device itself.” Id.
The court of appeals noted Weekley Homes’ acknowledgment of federal cases amenable to allowing direct access when there is a direct relationship between the electronic storage device and the claim itself. Id. “This result makes sense when considering the balancing of relevant concerns as applied to trade secrets theft cases,” the court said, “but neither Weekley Homes nor the cases it discusses suggest that a misappropriation of trade secrets plaintiff has an automatic right to conduct a forensic examination of electronic storage devices.”
Then the court noted that both the Fourteenth Court of Appeals and the First Court of Appeals had applied the Weekley Homes standard to similar cases involving allegations such as theft of trade secrets. See id. (citing Methodist Primary Care Group and Pinnacle Engineering).
Accordingly, the court held that the Weekley Homes standards applied.
Why the 4X Industrial Decision is Important
Fully appreciating the importance of the 4X Industrial decision may require some familiarity with the use—and overuse—of direct access orders by Texas trial courts in departing employee lawsuits.
The unfortunate trend, at least in some trial courts, was to treat a request for direct access to a defendant’s devices as almost automatic in a case where the plaintiff alleges a former employee took company documents and put them on a personal device.
And shouting “but Weekley Homes, Your Honor!” didn’t always work. Trust me.
In fairness, there is some logic to ordering a former employee to turn over a device that allegedly has the company’s documents on it. But immediately jumping to a direct access order is improper, for reasons Weekley Homes addressed. There are hurdles the plaintiff should have to clear before obtaining such an intrusive remedy.
Unfortunately, it had become common for both the requesting lawyers and judges to brush aside the requirements of Weekley Homes in this type of case.
Some lawyers would request direct access to devices in their first request for production of documents, before there was any possibility that the responding party had defaulted on its discovery obligations. And some trial court judges tended to assume they had the authority to order direct access in a trade secrets case as long as they thought it was fair and expedient.
But that’s not how it works. The 4X Industrial decision has now made that clear. We should thank the lawyers for the 4X Industrial defendants for that!
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Zach Wolfe (zach@zachwolfelaw.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at Zach Wolfe Law Firm (zachwolfelaw.com). Thomson Reuters has named him a Texas Super Lawyer® for Business Litigation every year since 2020.
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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