Balancing Due Process and Confidential Trade Secrets: The Texas Supreme Court Clarifies the Standard for Corporate Representative Attendance in Judicial Proceedings in Trade Secret Cases

Chris Hanslik

May 23, 2016

When a lawsuit is filed against your company, your company is allowed to designate a corporate representative to attend hearings, depositions, and if necessary, trial. Historically in Texas, a designated corporate representative was allowed to attend almost all proceedings in which evidence was taken. Last week, however, the Texas Supreme Court put parameters on a corporate representative’s ability to attend temporary injunction hearings where a competitor’s trade secrets are discussed.

In In re M-I L.L.C. d/b/a M-I SWACO, the Trial Court was asked to excuse NOV’s corporate representative to conduct portions of a temporary injunction hearing involving M-I SWACO’s alleged trade secrets. The Trial Court refused to do so. M-I SWACO appealed.

The case percolated to the Texas Supreme Court where it held that the Trial Court abused its discretion in refusing M-I SWACO’s request to conduct portions of the hearing outside the presence of NOV’s corporate representative. In so finding, the Texas Supreme Court outlined a balancing test that should be employed when considering the parties’ countervailing interests in trade secret cases. Though there is a presumption favoring participation by the accused in judicial proceedings, the Supreme Court noted the following should also be considered:

  • The degree of competitive harm the movant would suffer from the dissemination of its alleged trade secrets to the non-movant;
  • The relative value of the movant’s alleged trade secrets;
  • Whether the corporate representative sought to be excluded from the proceedings is a competitive decision-maker for the non-movant;
  • The degree to which the non-movant’s defense of the movant’s claims would be impaired by the exclusion of the corporate representative; and
  • Whether the corporate representative possesses specialized expertise that would not have been available to the non-movant’s outside expert witnesses absent the corporate representative.

After considering these factors, the Texas Supreme Court said the Trial Court may have been within its discretion to decide that due process required NOV’s designated representative to be present at the temporary injunction hearing. However, without conducting this test, the Trial Court abused its discretion in refusing to excuse NOV’s corporate representative. The Supreme Court issued the writ of mandamus and directed the Trial Court to conduct the required balancing.

For litigants, this means the selection of your corporate representative has a new set of considerations. To safeguard your corporate representative’s ability to attend all evidentiary proceedings, these balancing factors are now important to keep in mind. By way of example, at least in trade secret cases, it may no longer be advisable to designate the “competitive decision-maker” for your company as your corporate representative.

Ultimately, though balancing tests are never one-size-fits-all, if corporate representative attendance is important, you should now—at the very least—make the In re M-I L.L.C. d/b/a M-I SWACO factors a part of your designation calculus.