IN RE: DAIMLER TRUCKS NORTH AMERICA LLC
In this mandamus proceeding, relator complains of the trial court's order directing relator to designate one or more individuals to testify about certain matters relator alleges encompass trade secret information. Relator asserts the trial court's order allows plaintiffs access to the trade secret information without requiring plaintiffs to establish a necessity for the information. Relator also asserts the order is vague. We conditionally grant the petition for writ of mandamus.
Ricardo Garza was involved in an automobile accident. Ricardo and his wife (hereinafter, the “plaintiffs”) sued Daimler Trucks North America, LLC (“relator”) asserting the accident was caused by relator's defective design and manufacture of the truck Ricardo was driving. During discovery, plaintiffs served relator with several notices of deposition, in which they asked relator to designate a person or persons to testify about a wide variety of matters. Relator designated Anthony Moore to testify on its behalf at the first deposition held in October 2017. Plaintiffs later amended their notice of deposition to list additional deposition topics or to change the date and time of a subsequent deposition. Relator moved for a protective order on the scope of this later deposition and raised several objections to plaintiffs' discovery request, including that the request sought trade secret information. In support of this objection, relator submitted the affidavit of Amer Diab in which he identified thirty matters relating to cost and profit information that he contended were trade secrets. Plaintiffs responded, arguing (1) relator failed to satisfy its burden to show the thirty matters constituted privileged trade secrets, (2) plaintiffs satisfied their burden to show the information was necessary to a fair adjudication of their case, and (3) the parties had already entered into a stipulated protective order applicable to any confidential information. Relator responded asserting it had satisfied its burden, but plaintiffs did not satisfy their burden, and the stipulated protective order did not adequately protect the cost and profit-related trade secrets requested by plaintiffs.
On January 5, 2018, the trial court conducted a hearing on the various arguments and objections described above. Following the hearing, the trial court signed the order at issue here. In its order, the trial court stated:
Additionally, although the Court is not persuaded that [relator] has met its burden under Texas Rule of Evidence 507 (“Trade Secrets Privilege”) as to all 30 subject matters identified in the Amer Diab affidavit (Defendant's Exhibit “D”), the Court nevertheless finds, as a matter of caution, (i) that those 30 subject matters encompass trade secret information, (ii) that the Plaintiffs have met their burden of showing that the 30 subject matters identified in the Diab affidavit encompass information necessary to the fair adjudication of their claims, (iii) that the 30 subject matters identified in the Diab affidavit encompass competitively sensitive information and/or confidential business information covered by the Stipulated Protective Order signed by this Court on February 15, 2017, and (iv) that the dissemination of such information at the deposition, or at any time thereafter, may only take place pursuant to the Stipulated Protective Order.
In this mandamus proceeding, relator does not object to the entirety of the order. Instead, relator objects only to the following decretal paragraph:
As to the 30 subject matters identified in the Diab affidavit as encompassing trade secret information, [relator] SHALL designate one or more individuals to testify on its behalf with respect to such matters to the extent such matters are known or reasonably available to [relator], subject to [relator's] right to object to questions propounded during the deposition as provided by Rule 199.5(e), and subject also to the provisions of the Stipulated Protective Order signed by this Court on February 15, 2017, and on file among the papers of this cause.
After relator filed its petition for writ of mandamus, this court requested a response, stayed the above portion of the trial court's order, and granted relator's request that its petition for writ of mandamus and its mandamus record be sealed. The plaintiffs, as real parties in interest, filed a response. In its petition, relator asserts it established the trade secret nature of its cost and profit information and the plaintiffs did not refute the trade secret status. Relator then asserts plaintiffs failed to satisfy their burden to establish, by competent evidence, that the information they seek is necessary to a fair adjudication of their claims. Finally, relator asserts the order is vague and requires relator to “create” trade secret information. In their response to the petition, plaintiffs assert the petition is premature.2 As a preliminary matter, we address this argument first.
IS THE PETITION PREMATURE?
Plaintiffs assert the petition for writ of mandamus is premature because the trial court has not yet rendered a decision on the matters for which relator seeks relief. Plaintiffs contend the trial court's order does not require relator to provide any information at the deposition. Instead, according to plaintiffs, the order only requires relator to designate a person to testify on its behalf at a deposition “in which questions might be asked regarding matters [relator] considers to be trade secrets.” Plaintiffs rely on Texas Rule of Civil Procedure 199.5(e) to contend relator may object during the deposition if it believes the information sought is a trade secret.
The trial court's order states, in part, that relator “SHALL designate one or more individuals to testify on its behalf with respect to [the 30 subject matters] to the extent such matters are known or reasonably available to [relator], subject to [relator's] right to object to questions propounded during the deposition as provided by Rule 199.5(e).” Rule 199.5(e) provides as follows:
Objections to questions during the oral deposition are limited to “Objection, leading” and “Objection, form.” Objections to testimony during the oral deposition are limited to “Objection, nonresponsive.” These objections are waived if not stated as phrased during the oral deposition. All other objections need not be made or recorded during the oral deposition to be later raised with the court. The objecting party must give a clear and concise explanation of an objection if requested by the party taking the oral deposition, or the objection is waived. Argumentative or suggestive objections or explanations waive objection and may be grounds for terminating the oral deposition or assessing costs or other sanctions. The officer taking the oral deposition will not rule on objections but must record them for ruling by the court. The officer taking the oral deposition must not fail to record testimony because an objection has been made.
Tex. R. Civ. P. 199.5(e).
An attorney may instruct a witness not to answer a question during an oral deposition if it is necessary to preserve a privilege. Id. 199.5(f). A trade secret is privileged and, therefore, can be the basis of an objection during a deposition. In re Lowe's Companies, Inc., 134 S.W.3d 876, 878 (Tex. App.—Houston [14th Dist.] 2004, orig. proceeding). “However, where a hearing [on a deposition objection] is held on a claim of privilege, including trade secrets, the party asserting it must present sufficient evidence to support it.” Id. Plaintiffs conclude that until the trial court issues an order compelling a response to a specific deposition question, relator's request for mandamus relief is premature and should be denied. We disagree.
The trial court's order directs relator to designate a representative “to testify” about the “30 subject matters identified in the Diab affidavit.” As discussed further below, relator's complaint is that, because the plaintiffs did not satisfy their burden to obtain such information, the trial court abused its discretion by ordering the deposition of a corporate representative on matters that encompassed trade secrets. Mandamus relief is appropriate from an order that improperly requires disclosure of a trade secret. See In re Bass, 113 S.W.3d 735, 738 (Tex. 2003) (orig. proceeding). “If a trial court orders production once trade secret status is proven, but the party seeking production has not shown a necessity for the requested materials, the trial court's action is an abuse of discretion.” Id. Therefore, because the trial court ordered a deposition that encompasses possible trade secrets, we conclude relator's petition is not premature, and we next consider whether the parties satisfied their burden regarding the discovery of trade secrets.
TRADE SECRET'S SHIFTING BURDENS
Texas Rule of Evidence 507 provides a privilege entitling a party to refuse to disclose its trade secrets “if the allowance of the privilege will not tend to conceal fraud or otherwise work injustice.” Tex. R. Evid. 507(a); In re Cont'l Gen. Tire, Inc., 979 S.W.2d 609, 610 (Tex. 1998) (orig. proceeding). Under Rule 507, the party resisting discovery of trade secrets must first establish the information sought constitutes a trade secret. Cont'l Gen. Tire, 979 S.W.2d at 610, 613. Once the party resisting discovery establishes the information is a trade secret, the burden shifts to the requesting party to establish the information is “necessary for a fair adjudication of its claims.” Id. If the requesting party meets that burden, the court should compel disclosure of the information subject to an appropriate protective order. Id. at 613. However, “[t]hat a trial court has ordered the parties to enter into a protective order with respect to trade secret information does not dispense with the requesting party's burden to establish the necessity for the discovery of the trade secret information to fairly adjudicate a claim or defense.” In re Hewlett Packard, 212 S.W.3d 356, 364 (Tex. App.—Austin 2006, orig. proceeding).
A. Relator's Burden
Relator bore the initial burden to establish that the information sought by the plaintiffs constitutes a trade secret. See Cont'l Gen. Tire, 979 S.W.2d at 613. The trial court found “as a matter of caution, ․ that those 30 subject matters [identified in the Diab affidavit] encompass trade secret information.” At the January 5, 2018 hearing, plaintiffs' attorney expressly asked the court to make this finding. In their response to relator's petition for writ of mandamus, plaintiffs do not challenge the finding. Therefore, the burden shifted to the plaintiffs. See Cont'l Gen. Tire, 979 S.W.2d at 610, 613.
B. Plaintiffs' Burden
Because the trial court found that relator established the information sought by the plaintiffs encompassed trade secrets, the burden shifted to the plaintiffs to establish the information is “necessary for a fair adjudication of [their] claims.” Id. Here, the trial court found that plaintiffs satisfied this burden; however, relator has challenged this finding. Relator asserts plaintiffs failed to satisfy their burden with competent evidence. Plaintiffs counter that evidence, such as an expert's affidavit, is not always necessary to demonstrate the need for trade secret information. To resolve this issue, we must decide whether plaintiffs were required to present evidence to satisfy their burden.
We begin with the elements of plaintiff's cause of action. To prove a design defect, the plaintiffs must show (1) there was a safer alternative design; (2) the safer alternative design would have prevented or significantly reduced the risk of injury, without substantially impairing the product's utility; and (3) the safer alternative design was both technologically and economically feasible when the product left the control of the manufacturer. Tex. Civ. Prac. & Rem. Code Ann. § 82.005(a)-(b) (West 2017); see Gen. Motors Corp. v. Sanchez, 997 S.W.2d 584, 588 (Tex. 1999). At the January 5, 2018 hearing, plaintiffs' attorney explained that showing the economic feasibility of a safer alternative design went “to the core of our case.”
Plaintiffs' counsel alleged economic feasibility could only be evaluated in relation to the total costs and the total sales price of the vehicle, comparable vehicles, and the component parts. But, the plaintiffs presented no evidence or proof of their need for the information. The entirety of their “proof” consisted of counsel stating the above section 82.005 factors and then asserting economic feasibility went to “the core” of plaintiffs' case and could only be evaluated “in relation to the total costs and the total sales price of the vehicle, comparable vehicles and the component parts.” Counsel then argued:
We've outlined in our petition what our claims are and what we have to prove via chapter 82 in order to carry the day and prevail.
․ If the resisting party meets its burden, the burden shifts to the party seeking the trade secret discovery to establish that the information is necessary for a fair adjudication of its claim, which we've done so by showing the Court what we've alleged and what chapter 82 requires in order for us to carry the day. And that goes to the economic feasibility, Your Honor, in chapter 82.
․ [Under Texas law] [t]o establish economic feasibility, the plaintiff must ․ introduce proof of the cost of incorporating this technology.
So all these cases, Judge, go to what we're required to prove to carry the day and what we're trying to prove.
Now, Judge, two of the components, the RSC and the ECS, they were available as optional features on the truck Mr. Garza was driving, so to demonstrate economic feasibility, we need to show the costs and sales price of those components and the costs and sales price of the truck that Mr. Garza was driving, as well as the costs and sales price of the trucks of the type that Mr. Garza was driving. Two other components, the automatic seat pull down system and the seat integrated side airbag are known collectively as the roll tech system, they're either standard or optional features in the companion Cascadia model that Mr. Moore identified in his deposition that had been manufactured and came off the assembly line before this truck was manufactured.
So and there again to prove economic feasibility, which is what we're required to do, we have to show the costs and the sales price of those components when they're added to a truck and the costs and sales price of the truck to which they would be added, which includes the Cascadia.
And then lastly, Judge, the remaining two design changes, the strengthening certain features of the cab installing a roll bar, they're not presently available as options on the truck that Mr. Garza was driving, but to determine economic feasibility of strengthening the cab features, we'd have to know at the outset the cost of the features in their current condition in the tractor Mr. Garza was driving. We need to know whether Daimler attempted to strength the cab in the related Cascadia model that Mr. Moore identified. And if so, the costs of doing that in the Cascadia model. ․
But, Judge, in sum, the information identified in the Diab affidavit is necessary to a fair adjudication of the plaintiff's claim, which is what the case law tells us. And we have to get this information in order to prove our case.
Other than counsel's arguments, plaintiffs offered no witness testimony or other evidence that the information they sought from relator was necessary for a fair adjudication of their claims. Instead, plaintiffs' attorney merely pointed to the allegations in plaintiffs' petition and to Texas Civil Practice and Remedies Code chapter 82, and argued that because section 82.005 required certain proof, the information sought from relator was necessary to a fair adjudication of plaintiffs' case. Relator objected that the plaintiffs needed more than mere arguments from an attorney. We agree.
Although the Texas Supreme Court has not provided a specific test to be applied in determining whether the requesting party has carried its burden to show that trade secret information is necessary to a fair adjudication of its claim, the Court has stated the test is not satisfied by general assertions of unfairness or relevance. In re Bridgestone/Firestone, Inc., 106 S.W.3d 730, 732-33 (Tex. 2003) (orig. proceeding) (unfairness); Cont'l Gen. Tire, 979 S.W.2d at 613-14 (relevance). The party seeking the information “must demonstrate with specificity exactly how the lack of the information will impair the presentation of the case on the merits to the point that an unjust result is a real, rather than a merely possible, threat.” Bridgestone/Firestone, 106 S.W.3d at 733.
Nor is it enough to show that the information would be useful to the party's expert; rather, the party must show that it is necessary. See Cont'l Gen. Tire, 979 S.W.2d at 611. If an expert can form an accurate opinion on the relevant subject without the trade secrets, then the information is useful rather than necessary. See In re XTO Res. I, LP, 248 S.W.3d 898, 905 (Tex. App.—Fort Worth 2008, orig. proceeding) (holding party failed to show necessity when expert testified trade secret information would be useful to prepare report with least amount of uncertainty, but opinion could be formed without it). If an alternative means of proof is available that would not significantly impair the presentation of the case's merits, then the information is not necessary. See In re Union Pac. R. Co., 294 S.W.3d 589, 592-93 (Tex. 2009); Cont'l Gen. Tire, 979 S.W.2d at 615.
In Continental General Tire, the Supreme Court noted:
․ The plaintiffs contended at oral argument before this Court that their expert has found sulfur on the belt surfaces of this tire, and that plaintiffs need Continental's formula to determine whether sulfur is a regular component of the skim stock or whether it was a foreign material improperly introduced during manufacture. Regardless of whether this theory might otherwise justify discovery of the compound formula, an issue on which we express no opinion, plaintiffs presented no evidence supporting this theory to the trial court. Under these circumstances, given the highly proprietary nature of the information, the plaintiffs have not carried their burden under Rule 507 of demonstrating that the information is necessary for a fair trial. [Emphasis added.]
Id. at 615; see also XTO Res. I, LP, 248 S.W.3d at 905, n.1 (“The dissent quotes extensively from the argument of Threshold's counsel before the trial court and in its brief in this court ․. But the argument of counsel is insufficient to support the discovery of trade secrets; a party must present evidence.”); In re Diamond Shamrock Ref. Co., L.P., 07-06-0315-CV, 2007 WL 63370, at *1-3 (Tex. App.—Amarillo Jan. 10, 2007, orig. proceeding) (mem. op.) (“It is not enough to simply state that the information is necessary. Nor do general assertions of unfairness suffice. ․ In other words, the litigant must satisfy the test through the presentation of competent evidence.”); In re Desa Heating, L.L.C., 2-06-088-CV, 2006 WL 1713489, at *3 (Tex. App.—Fort Worth June 22, 2006, orig. proceeding) (mem. op.) (“However, the trial court had no evidence before it of Heartland's need for the information. The trial court merely had Heartland's explanation, ․ and Heartland's unsupported contention that ‘the information is material and necessary to prove Heartland's lost profits and is unavailable from another source.’ ”).
We hold that an attorney's argument that trade secret information is necessary is not sufficient to satisfy the burden. Instead, a party must present evidence to support discovery of trade secrets.
Plaintiffs alternatively contend the trial court had before it the testimonial evidence of the Diab affidavit and the deposition of relator's corporate representative Anthony Moore based on which the trial court could conduct a balancing test. See id. (“In each circumstance, the trial court must weigh the degree of the requesting party's need for the information with the potential harm of disclosure to the resisting party.”). Plaintiffs attached Moore's deposition transcript to their motion to compel and they discussed some of Moore's testimony at the hearing, but they did not submit the deposition itself into evidence at the hearing. To the extent the trial court may have considered Moore's deposition testimony, we do not believe his testimony—as relator's corporate representative—addressed, much less showed, that relator's trade secret information was necessary to a fair adjudication of plaintiffs' claims. Furthermore, the fact that Moore testified at an earlier deposition does not waive relator's right to assert a trade secret objection about other information. See id. at 614 (“However, that Continental was willing to produce certain information under a protective order does not mean that Continental has waived its right to assert Rule 507 about other information which it may regard as more competitively sensitive or less necessary for the plaintiffs' case.”).
We conclude plaintiffs did not meet their burden to establish the information they sought is “necessary for a fair adjudication of [their] claims.” Cont'l Gen. Tire, 979 S.W.2d at 610, 613. Therefore, the trial court erred when it compelled relator to designate a corporate representative to testify about the “30 subject matters identified in the Amer Diab affidavit” without a showing of necessity. Id. at 615 (holding that, without evidence of necessity, requesting party did not carry its burden for compelling disclosure of trade secret). And, because relator has no adequate remedy by appeal, mandamus relief is appropriate. See id. (holding that appeal was an inadequate remedy when requesting party failed to establish necessity, yet the trial court nevertheless compelled production of trade secrets).
Relator also challenges the portion of the trial court's order that states: “[Relator] SHALL designate one or more individuals to testify on its behalf with respect to such matters to the extent such matters are known or reasonably available to [relator] ․.” Relator asserts the meaning of the phrase “reasonably available” is unclear and requires it to create evidence that does not exist.
“The rules do not permit the trial court to force a party to create documents which do not exist, solely to comply with a request for production.” In re Guzman, 19 S.W.3d 522, 525 (Tex. App.—Corpus Christi 2000, orig. proceeding). However, the language used in the protective order tracks the language in Texas Rule of Civil Procedure 199.2(b), which provides, in pertinent part, as follows: “Each individual designated must testify as to matters that are known or reasonably available to the organization.” Tex. R. Civ. P. 199.2(b)(1).
We conclude the trial court's order is not vague and does not require relator to create evidence that does not exists.
For the reasons stated above, the trial court erred by ordering relator to designate a corporate representative to testify about the “30 subject matters identified in the Diab affidavit” because the plaintiffs did not satisfy their burden. Therefore, we conditionally grant the petition for writ of mandamus and order the trial court to vacate that portion of its order requiring relator to “designate one or more individuals to testify on its behalf with respect to” “the 30 subject matters identified in the Diab affidavit as encompassing trade secret information.” The writ of mandamus will issue only if the trial court fails to comply within fifteen days from the date of our opinion and order.
Because relator has failed to meet its burden to establish an abuse of discretion by the trial court and an inadequate remedy by appeal, I dissent from the majority's opinion and order requiring the trial court to vacate the relevant portion of its order directing relator to designate one or more individuals to testify about certain matters that relator alleges encompass trade secret information. See In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136 (Tex. 2004) (orig. proceeding).
2. In their response, plaintiffs also assert the petition should be dismissed because relator did not comply with Texas Rule of Appellate Procedure 52.3(j), which provides that “[t]he person filing the petition must certify that he or she has reviewed the petition and concluded that every factual statement in the petition is supported by competent evidence included in the appendix or record.” Tex. R. App. P. 52.3(j). On March 1, 2018, relator filed an amended petition that contains the proper certification.
Opinion by: Patricia O. Alvarez, Justice
Dissenting Opinion by: Rebeca C. Martinez, Justice