Confidential folder isolated on a white backgroundGrowth in the DFW metroplex is booming, and the City of Flourish is one of the driving forces. Unfortunately, the City has had a difficult time keeping up its infrastructure with the growing population.  Recently the City selected a bid from Slab Mixer Co., a concrete pipe manufacturer, for culverts for a project widening some of the City’s streets.  After the City and Slab signed their contract, a group of Flourish citizens, concerned with how the City’s spending might affect their taxes, requested a copy of the contract under the Texas Public Information Act (TPIA).  When the City notified Slab of the request, Slab asserted that some of the terms in the contract needed to be redacted because they would give Slab’s competitors an advantage in future contracts.  Does Slab have the right to do that?

Background on the Texas Public Information Act

The Texas Public Information Act provides the public with the right to access information the government collects, subject to approximately 60 exceptions.  Tex. Gov’t Code §§ 552.221, 552.101-.154.  One exception is “information that, if released, would give advantage to a competitor or bidder.”  Id. at § 552.104(a).  Historically, the Texas Attorney General’s Office, which is charged with interpreting the Act and maintaining its uniformity, has taken the position that this exception only protects the governmental body, and not a private party.  In other words, the AG believed the Act only allowed a governmental body to protect information that would place it at a disadvantage with other governmental bodies inside and outside of the State of Texas.

Do Private Parties Have a Right to Protect Their Bid Information? 

Yes.  In 2015 the Texas Supreme Court in The Boeing Company et al. v. Paxton held that “a private party may assert the exception to protect its competitively sensitive information.”  The Court found that the plain language of the exception was not limited to a governmental body’s right to protect that information.  It also noted that the governmental body had the right to defer to the private party to assert its competitive interests were at stake and request that the competitively sensitive information be withheld.  Thus, Boeing had standing to assert the exception, but would have to show that the information requested, “if released, would give advantage to a competitor or bidder.”

What about Citizens’ Right to Know How Much Their Government is Spending? 

Some have claimed the Texas Supreme Court’s decision in Boeing has given governmental bodies a carte blanche loophole to avoid turning over any information about their contracts.  According to these critics, the Court’s decision allows the governmental bodies to assert that disclosing that information would give an advantage to the successful bidder’s competitors in the future.

While it’s a superficially appealing position from a taxpayer’s perspective, it ignores another argument that the governmental bodies assert to protect disclosure of this information.  As mentioned above, the governmental bodies have asserted the exception protects disclosure of sensitive information that the body believes will give other governmental bodies an advantage.

For example, the Boeing case points out that the Attorney General ruled the exception protected disclosure of information concerning the Texas Governor’s marketing meetings with businesses in other states because the State is competing with other states to recruit those businesses to relocate. The release of that information would give other states the advantage to approach those businesses with competing or better incentives.

Proposed Legislation

Companion bills (HB 792 and SB 407) have been filed in the Texas House and Senate to address the Texas Supreme Court’s decision in Boeing.  If enacted, the legislation would make clear that the exception only allows a governmental body to protect information that it believes would harm its competitive interests.  It would also apply an “exception to the exception” that would require governmental bodies to disclose that competitive information after the body awards the contract.  HB 792 was recently referred to committee. SB 407 was referred to committee, where it was discussed but not voted upon yet.

Tilting the Scales in Your Favor

That depends on how your business has been affected by the competitive bidding process.  If you have won bids in the past, and your proposals contain proprietary information that gives you a competitive advantage, you should ask the governmental body to redact that information if anyone requests it under the TPIA.  On the other hand, if your business has consistently lost out in the bidding process, you may want to press the Legislature to pass HB 792 and SB 407 this session so that you can see your competitor’s proposals and try to figure out how you can match, or beat, them in the future.

 

Pizza the Action is a major distributor of pizza dough and toppings and provides these products to many large national pizza chains.  Pizza the Action’s top sales person, Eaton Wright, just announced that he was resigning and that he had accepted a position with The Pie’s the Limit, an upstart competitor in the very same industry.  Wright did not have an employment or non-competition agreement with Pizza the Action.  While Wright has ostensibly done nothing yet, Pizza the Action is concerned about Wright providing his new employer with Pizza the Actions’ customer lists, customer data and financial pricing information.  Is there anything that can be done to stop him?

Yes.  During this past legislative session, Texas became the 48th state to enact (its version of) the Uniform Trade Secrets Act (“TUTSA”). TUTSA, which goes into effect September 1, 2013, will provide companies with greater protection of their trade secret information across Texas.  Previously, Pizza the Action may have found it difficult to obtain a temporary restraining order or injunctive relief against Wright without some proof of actual misappropriation of trade secrets.  TUTSA, however, now authorizes injunctive relief for actual and threatened misappropriation.  Pizza the Action could now arguably seek injunctive relief based on the “inevitable disclosure doctrine” where circumstances suggest that Wright would inevitably make use of their trade secret information as part of his new position.  Other significant changes include:

  1. an expanded definition of trade secret (includes lists of actual and potential customers or suppliers as well as financial information);
  2. safeguards to protect allegedly trade secret information during the pendency of the litigation (e.g. through protective and sealing orders);
  3. provisions for the award of attorneys’ fees to both the plaintiff and defendant; and
  4. the availability of exemplary damages (act to exceed twice the economic damages) where the plaintiff establishes willful or malicious misappropriation by clear and convincing evidence.

 Tilting the Scales in Your Favor

The TUTSA seeks to put Texas in step with other states and provide increased predictability for those seeking to assert claims in Texas courts for trade secret misappropriation.  Companies will now have a statute in their arsenal as opposed to merely relying upon employment agreements and case precedent.  Given the increased certainty in the law, businesses should consider choosing Texas as the governing law for their agreements as well as modifying their agreements to reflect the recent changes.  As the ultimate determination of whether information constitutes a trade secret will be case specific, businesses should be able to demonstrate measures taken to safeguard trade secret information and should clearly identify such information as “confidential.”