IN RE: PHIL CAULEY, RELATOR
NO. 12-14-00028-CV
IN THE COURT OF APPEALS TWELFTH COURT OF APPEALS DISTRICT TYLER, TEXAS
JULY 23, 2014
ORIGINAL PROCEEDING
By petition for writ of mandamus, Phil Cauley challenges the trial court‘s order granting presuit discovery.1 The real party in interest is Efficien Technology, L.L.C. We conditionally grant the petition.
BACKGROUND
Efficien is the successor in interest to Natural Resource Recovery, Inc. (NRR), and Cauley is a former employee of NRR. While working at NRR, Cauley helped develop a produсt identified as a “carbonator.” Cauley assigned NRR his rights to the intellectual property related to the carbonator.
Since he left NRR‘s employment, Cauley and NRR have had a rather litigious relationship. The underlying dispute primarily related to whether Cauley had used NRR‘s intellectual property to develop a product similar to a carbonator. In the first of two previous suits, Cauley agreed to be enjoined from possessing or using any property belonging to NRR, including intellectual property. NRR agreed that it would not sue Cauley for one year. In the second previous suit, Cauley and NRR reached a settlement agreement in which NRR released Cauley from patent infringement claims.
Efficien, who now owns NRR‘s intellеctual property, sent a private investigator to Cauley‘s new place of business. The investigator took photographs of a product that Efficien believes is substantially similar to a carbonator. As a result, Efficien is investigating several potential claims against Cauley, including claims of unfair competition, patent infringement, breach of fiduciary duty, and trade secret misappropriation.
As part of this investigation, Efficien filed a petition requesting Cauley‘s deposition before suit pursuant to
The trial court held a hearing on the matter. At the hearing, Efficien presented the following evidence: (1) two patents related to the carbonator, (2) three assignments executed by Cauley in which he assigned to NRR any rights to three inventions related to the carbonator, (3) the temporary injunction issued in the first suit between NRR and Cauley, (4) the settlement agreement between the parties in that suit, and (5) the confidential settlement agreement in the second suit involving NRR, Cauley, and several other parties.2 Cauley presented his own affidavit in which he claimed that he could not respond to Efficien‘s questions regarding its requested deposition topics without discussing trade secrets.
The trial court voiced concerns regarding the trade secret issue. In response, Efficien summarized its position as follows:
[W]hether or not we get into the actual technology, that‘s really, you know, the icing on the cake. The real purpose - the motivation here is to make sure that if we have to proceed - if thеre is a simple explanation that puts out the fire, give us a chance to hear it.
On the other hand, if there is not and we do have to go to the next level, we want to do it with the right answers on the floor.
Later in the hearing, Efficien clarified that it “was not asking for the right to go into their trade secrets and [was] asking the court to fashion a way to protect them from having to tell me their trade secrets.” The trial court then asked Efficien to submit its proposed questions to opposing counsel and gave Cauley time to object to the questions.
Efficien submitted its proposed questions to the trial court and also requested authorization to ask follow up questions. Cauley responded with objections, and Efficien filed amended proposed questions.
The trial court denied authorization of a number of Efficien‘s proposed questions and did not permit Efficien to ask follow up questions. But the trial court ordered Cauley to provide written answers, under oath, to the authorized questions propounded by Efficien and to provide a copy of the lease pertaining tо the location where the device was being constructed. Cauley then filed his petition for writ of mandamus in this court.
AVAILABILITY OF MANDAMUS
Ordinarily, mandamus will issue to correct a clear abuse of discretion where
In dеtermining whether the trial court abused its discretion in resolving factual matters or matters committed to the trial court‘s discretion, we may not substitute our judgment for that of the trial court and may not disturb the trial court‘s decision unless it is shown to be arbitrary and unreasonable. Walker, 827 S.W.2d at 839-40. Therefore, to show an abuse of discretion in those matters, the relator must establish that the trial cоurt could reasonably have reached only one decision. Id. at 840.
Review of a trial court‘s determination of the legal principles controlling its ruling is much less deferential because a trial court has no discretion in determining what the law is or applying the law to the facts. Id. Consequently, a clear failure by the trial court to analyze or apply the law correctly constitutes an abuse of discretion. Id.
An order allowing a presuit deposition pursuant to Rule 202 is not a final, appealable order. See In re Hewlett Packard, 212 S.W.3d 356, 360 (Tex. App.–2006, orig. proceeding [mandamus denied]). Therefore, there is no adequate remedy by appeal, and mandamus is the proper avenue to challenge the trial court‘s order granting Efficien‘s petition for Cauley‘s presuit deposition. See id. Consequently, our focus in this proceeding is whether Cauley has shown an abuse of discretion by the trial court.
TRADE SECRETS
In his first issue, Cauley contends that the trial court abused its discretion by failing to include in its order the findings required by
Applicable Law
The party seeking protection of information by a claim of privilege has the burden to plead and prove the applicable privilege. See In re Nance, 143 S.W.3d 506, 510 (Tex. App.—Austin 2004, orig. proceeding). When the trade secret privilege is asserted as a basis for resisting discovery, the trial court must first determine whether the requested information constitutes a trade secret. In re Union Pac. R.R. Co., 294 S.W.3d 589, 591 (Tex. 2009) (orig. proceeding). The party resisting discovery has the initial burden to establish that the information sought is a trade secret. In re PrairieSmarts LLC, 421 S.W.3d 296, 305 (Tex. App.—Fort Worth 2014, orig. proceeding). Once the party resisting discovery meets this burden, the party seeking the information must “show reasonable necessity for the requested materials.” In re Bass, 113 S.W.3d 735, 738 (Tex. 2003) (orig. proceeding). This burden-shifting procedure applies when a party resists discovery sought by a Rule 202
A trade secret is “any formula, pattern, device or compilation of information which is usеd in one‘s business and presents an opportunity to obtain an advantage over competitors who do not know or use it.” Bass, 113 S.W.3d at 739. The
A person has a privilege, which may be claimed by the person or the person‘s agent or employee, to refuse to disclose and to prevent other persons from disclosing a trade secret owned by the person, if the allowance of the privilege will not tend to conceal fraud or otherwise work injustice. When disclosure is directed, the judge shall take such protective measure as the interests of the holder of the privilege and of the parties and the furtherance of justice may require.
We consider six factors to determine whether information is a trade secret: (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken to guard the secrecy of the information; (4) the value of the information to the business and to its competitors; (5) the amount of effort or money expended in developing the infоrmation; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Union Pac., 294 S.W.3d at 592. A party asserting a trade secret privilege need not establish that all six factors support finding the information a trade secret because trade secrets do not always fit neatly into each factor and because other factors may be relevant based on the circumstances of a particular case. PrairieSmarts, 421 S.W.3d at 304.
Conclusory affidavits are no evidence of the assertions contained within them. See Ryland Group v. Hood, 924 S.W.2d 120, 122 (Tex. 1996) (holding that conclusory affidavit does not raise fact issue to defeat summary judgment). An affidavit is conclusory if it contains bare, baseless opinions. See Elizondo v. Krist, 415 S.W.3d 259, 264 (Tex. 2013). Stated anothеr way, “[a] conclusory statement is one that does not provide the underlying facts to support the conclusion.” Haynes v. City of Beaumont, 35 S.W.3d 166, 178 (Tex. App.—Texarkana 2000, no pet.).
Application
Here, Cauley relied on his own affidavit to establish the trade secret privilege. He filed his affidavit after Efficien identified the six general topics it sought to cover in Cauley‘s deposition, but before Efficien submitted its proposed questions to the trial court. In his affidavit, Cauley does not specifically address any of the six factors that we review to determine whether information is a trade secret. Instead, Cauley merely recites the definition for “trade secret” under Texas law and asserts that Efficien‘s proposed deposition topics would require Cauley “to divulge confidential information and trade secrets.”
Efficien argues that the discovery authorized by the trial court does not inquire into information that is a trade secret. For instance, at the hearing on presuit discovery before the trial court, Efficien countered that the identity of all sources of funding is not a trade secret because the identity of one‘s funding source can hardly give one a competitive advantage over one‘s competitors. However, a compilation of individuals interested enough in a potential business to invest in it can be a “compilation of information which is used in
But Efficien also argues that Cauley failed to satisfy his burden to show that the authorized discovery actually would infringe upon trade secrets because Cauley‘s affidavit is conclusory. With this argument, we agree. For the information to be given protection, Cauley, as thе party resisting the discovery, must provide evidence that it is a trade secret. Cauley‘s affidavit states his bare, baseless opinion that he would be required to divulge trade secrets. He does not provide a factual basis for this conclusion. We can envision how the authorized questions could elicit information that would meet the definition of a trade sеcret, but that is not proof. Cauley‘s conclusory affidavit does not satisfy his burden. Therefore, the trial court properly could have determined that the questions that it authorized Efficien to ask Cauley did not require the disclosure of information protected by the trade secret privilege.
PRESUIT DEPOSITIONS
Even though we have concluded that Cauley failed to prove the information sought by Efficien‘s questions required the disclosure of trade secrets, this does not end our inquiry. We
must still decide whether the trial court‘s authorization of presuit discovery was an abuse of discretion.
Applicable Law
Presuit discovery is not intended for routine use. In re Jorden, 249 S.W.3d 416, 423 (Tex. 2008) (orig. proceeding). Presuit discovery creates practical and due process problems because discovery demands are made оf individuals or entities before they are told what the issues are. Id. “Courts must strictly limit and carefully supervise presuit discovery . . . .” In re Wolfe, 341 S.W.3d 932, 933 (Tex. 2011) (orig. proceeding) (per curiam).
In recognition of these concerns, presuit discovery under Rule 202 is available only if the trial court makes one of two findings: (1) allowing the petitioner the requested discovery may prevent a failure or delay of justice in an anticipatеd suit; or (2) the likely benefit of allowing the petitioner to take the requested discovery to investigate a potential claim outweighs the burden or expense of the procedure.
Presuit discovery under Rule 202 expressly requires that discovery be ordered “only if” the required findings are made. In re Does, 337 S.W.3d 862, 865 (Tex. 2011) (orig. proсeeding) (per curiam). Thus, we are not permitted to deem the findings implied from support in the record. Id. The trial court has no discretion to order presuit discovery without the required finding and abuses its discretion when it does so. Patton Boggs, 394 S.W.3d at 571.
Analysis
Here, the trial court ordered presuit discovery but did not make the required finding. Efficien argues two bases for excusing the trial court‘s failure.
Second, Efficien argues that Cauley waived the trial court‘s error when Cauley‘s counsel “approved as to form only” the trial court‘s order. But it is well settled that a party‘s approval of an order as to form is not consent to the substance of the order. See Bion Constr., Inc. v. Grande Valley Homes, L.L.C., Cause No. 04-09-00060-CV, 2009 WL 4669844, at *4 (Tex. App.—San Antonio 2009, no pet.) (mem. op.). Instead, by approving an order as to form, the party merely indicates that the order accurately sets forth the trial court‘s ruling. Bexar Cnty. Criminal District Attorney v. Mayo, 773 S.W.2d 642, 644 (Tex. App.—San Antonio 1989, no writ). A party who approves an order as to form “waives no error which may be assigned against the proceedings prior to or incident to the judgment.” Sigma Sys. Corp. v. Elec. Data Sys. Corp., 467 S.W.2d 675, 677 (Tex. App.—Tyler 1971, no writ) (quoting McDonald, Texas Civil Practice, § 17.10, p. 1336). Cauley did not waive his argument that the trial court failed to make the required finding when his attorney approved the trial court‘s order as to form only.
Efficien has not shown that the trial court‘s failure to make the required finding can be excused. Therefore, we hold that the trial court abused its discretion when it ordered presuit discovery without the required finding that the likely benefit of allowing the petitioner to takе the requested deposition to investigate a potential claim outweighs the burden or expense of the procedure. See Patton Boggs, 394 S.W.3d at 571.
DISPOSITION
For the reasons set forth above, we have concluded that the trial court abused its discretion in authorizing the presuit deposition in this case. Accordingly, we conditionally grant Cauley‘s petition for writ of mandamus and direct the trial court to vacate its order granting Efficien‘s presuit deposition on written questions to Cauley. We trust that the trial court will promptly comply with this opinion and order. The writ will issue only if the trial court fails to do so within ten days after the date of the opinion and order. The trial court shall furnish this court, within the time for compliance with this court‘s opinion and order, a certified copy of its order evidencing cоmpliance.
BRIAN HOYLE
Justice
Opinion delivered July 23, 2014.
Panel consisted of Worthen, C.J., Griffith, J., and Hoyle, J.
(PUBLISH)
PHIL CAULEY, Relator V. HON. RANDALL L. ROGERS, Respondent
NO. 12-14-00028-CV
COURT OF APPEALS TWELFTH COURT OF APPEALS DISTRICT OF TEXAS
JULY 23, 2014
ORIGINAL PROCEEDING
JUDGMENT
ON THIS DAY came to be heard the petition for writ of mandamus filed by PHIL CAULEY, who is the relator in Cause No. 62,356-A, pending on the docket of the County Court at Law #2 of Smith County, Texas. Said petition for writ of mandamus having been filed herein on January 23, 2014, and the same having been duly considered, because it is the opinion of this Court that the petition is meritorious, it is therefore CONSIDERED, ADJUDGED and ORDERED that the said petition for writ of mandamus be, and the same is, conditionally granted.
And because it is further the opinion of this Court that the trial judge will act promptly and issue an order vacating its order granting presuit discovery, the writ will not issue unless the Honorable Randall L. Rogers, Judge of the County Court at Law #2 of Smith County, Texas, fails to do so within ten (10) days from the date of this order.
It is further ORDERED that EFFICIEN TECHNOLOGY, LLC, pay all costs incurred by reason of this proceeding.
Brian Hoyle, Justice.
Panel consisted оf Worthen, C.J., Griffith, J., and Hoyle, J.