HouseCanary, Inc. v. Title Source, Inc.

622 S.W.3d 254

HOUSECANARY, INC. f/k/a Canary Analytics, Inc., Petitioner,

v.TITLE SOURCE, INC., Reporters Committee for Freedom of the Press, and Houston Forward Times, Respondents

No. 19-0673

Supreme Court of Texas.

Argued October 27, 2020

OPINION DELIVERED: April 30, 2021

David M. Prichard, Catherine M. Stone, San Antonio, Ashley Elizabeth Jones Johnson, Allyson Newton Ho, Dallas, David E. Keltner, Fort Worth, Jeffrey B. Morganroth, Randy Mastro, Veronica S. Lewis, Dallas, Helgi C. Walker, Manuel Alejandro Pelaez-Prada, San Antonio, Peter S. Wahby, Allison M.P. Stewart, Dallas, Harriet O'Neill, Austin, Andrew Patrick LeGrand Sr., Dallas, for Respondents Title Source, Inc.

Joseph Cecere, for Respondents Houston Forward Times.

Joshua A. Romero, Austin, Amanda N. Crouch, San Antonio, Charles L. Babcock, Houston, for Respondents The Reporter's Committee for Freedom of the Press.

Herbert J. Hammond, Timothy Eugene Hudson, Dallas, Kelly Dean Hine, Dallas, Jeremy Heath Coffman, Irene Kosturakis, Houston, Kevin C. Smith, Joseph F. Cleveland Jr., Fort Worth, for Amicus Curiae The Business Law Section of the State Bar of Texas.

Max L. Tribble Jr., Jonathan J. Ross, Houston, James K. Taylor, Dallas, Rocco Magni, Bryce Barcelo, David M. Gunn, Robert B. Dubose, Houston, Ricardo G. Cedillo, San Antonio, R. Laurence Macon, Erin H. Huber, Matthew Behncke, Houston, Kalpana Srinivasan, Benjamin A. Geslison, Joseph S. Grinstein, Houston, Wallace B. Jefferson, Austin, Thomas R. Phillips, for Petitioner.

Justice Busby delivered the opinion of the Court in which Justice Guzman, Justice Lehrmann, Justice Boyd, Justice Devine, and Justice Blacklock joined.

In this case, we consider whether the Texas Uniform Trade Secrets Act (TUTSA) provides a separate pathway for sealing court records to which Texas Rule of Civil Procedure 76a does not apply. The trial court denied a motion to seal brought under Rule 76a, then granted a motion to reconsider that relied exclusively on section 134A.006a of TUTSA. See TEX. CIV. PRAC. & REM. CODE § 134A.006a.

We hold that TUTSA displaces some provisions of Rule 76a but does not provide an independent, self-contained pathway for sealing court records. Because the trial court failed to apply the non-displaced provisions of Rule 76a in ruling on the motion to reconsider, it abused its discretion in granting that motion, and we affirm the portion of the court of appeals' judgment that reverses the sealing order. We remand for the trial court to exercise its discretion under the applicable provisions of both TUTSA and Rule 76a.

BACKGROUND

HouseCanary, Inc. makes technology that estimates the current and future value of residential real estate. HouseCanary entered into a licensing agreement that allowed Title Source, Inc. to evaluate and ultimately use HouseCanary's appraisal technology. The parties later disputed the terms of the agreement, and Title Source sued for breach of contract, claiming HouseCanary failed to deliver what it promised. HouseCanary asserted counterclaims including misappropriation of its trade secrets, alleging Title Source used HouseCanary's technology to build derivative products in violation of the licensing agreement.

Anticipating that the litigation might require production and use of confidential, proprietary, or private information, the parties agreed to, and the trial court signed, a stipulated protective order. This order, which was issued under Rule of Civil Procedure 192.6(b) and TUTSA section 134A.006, allowed the parties to designate material for protections limiting access and use. TUTSA lists several protective measures that such orders may include, and the order incorporated most of the suggested measures. See TEX. CIV. PRAC. & REM. CODE § 134A.006(a) ("There is a presumption in favor of granting protective orders to preserve the secrecy of trade secrets ... [, which] may include provisions limiting access to confidential information ..., sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.").

In particular, the order required parties who received material designated for protection to store and maintain that material securely and limit access only to those specified in the protective order, effectively mandating non-disclosure in other circumstances. Whether material was designated as "confidential" or "highly confidential–attorneys' eyes only" determined who could access the material, with "confidential" information being more easily accessible to employees of counsel and experts employed by a party or its competitor. The order allowed one party to challenge the other's designation of material as highly confidential and move the trial court for approval to disclose that material. The protective order also operated as a temporary sealing order under Rule 76a(5). When protected material was filed under temporary seal, a party seeking to keep the material confidential could file a motion under Rule 76a within five business days to make the sealing permanent.

Trial concluded with jury findings in favor of HouseCanary, including that Title Source misappropriated HouseCanary's trade secrets.¹ Seven weeks later, HouseCanary filed a Rule 76a motion to seal thirty trial exhibits and posted a notice of public hearing. In response to HouseCanary's motion, Title Source provided record citations showing that all but one of the exhibits had been freely discussed in open court—including by HouseCanary itself—and the remaining exhibit duplicated other material used in open court. TitleSource also argued that the motion did not meet several of Rule 76a's requirements. Two media organizations—the Reporters Committee for Freedom of the Press and the Houston Forward Times—intervened and joined Title Source in opposing the motion. The trial court held a hearing and subsequently denied HouseCanary's motion to seal.

HouseCanary moved to have the trial court reconsider sealing, this time limiting the request to eight exhibits and raising TUTSA as the sole basis for sealing. The trial court granted the motion to reconsider under TUTSA and asked HouseCanary to draft an order sealing the eight exhibits. HouseCanary's draft order added six more exhibits that it had not moved to seal. Title Source objected to this addition, but the trial court signed the order as drafted.

Title Source appealed the trial court's decision to seal the exhibits and a panel of the court of appeals reversed. 603 S.W.3d 829, 841 (Tex. App.—San Antonio 2019). A majority of the panel held that the trial court abused its discretion in granting the motion to reconsider because HouseCanary did not comply with the procedural and substantive requirements of Rule 76a, which the parties had agreed to follow in their stipulated protective order. Id.

The majority first addressed whether it had jurisdiction over the appeal. Id. at 834. Title Source contended that jurisdiction was proper under Rule 76a(8), which provides:

Any order (or portion of an order or judgment) relating to sealing or unsealing court records shall be deemed to be severed from the case and a final judgment which may be appealed by any party or intervenor who participated in the hearing preceding issuance of such order.

TEX. R. CIV. P. 76a(8). HouseCanary resisted jurisdiction, pointing out that its motion to reconsider was based entirely on TUTSA, which provides that it controls over the Rules of Civil Procedure to the extent of any conflict. In HouseCanary's view, Rule 76a creates a comprehensive scheme with burdens and presumptions, notice procedures, and appellate rights, and everything about that scheme is incompatible with TUTSA. The majority disagreed, concluding it had jurisdiction because the trial court's order related to sealing court records and TUTSA was silent on the question of immediate appeals, so there was no conflict. 603 S.W.3d at 835.

The majority then looked to the parties' stipulated protective order to decide whether the trial court erred in ordering sealing. It saw the order as the parties' and trial court's means of implementing TUTSA section 134A.006(a), which includes a presumption favoring such orders. Id. at 840. TUTSA requires trial courts to preserve trade secrets by reasonable means, and the majority concluded that the stipulated protective order provided those means, which included incorporating Rule 76a's standards and procedures for the parties to follow when seeking to seal exhibits at trial. Id. The majority held that the trial court abused its discretion when it granted the motion to reconsider sealing without applying those standards and procedures, which did not conflict with TUTSA. Id. at 841.

A concurring justice focused on HouseCanary's and the trial court's failure to comply with other aspects of the protective order. Id. at 842 (Marion, C.J., concurring). The concurring justice reasoned that the trial court satisfied its TUTSA obligation to take reasonable measures to preserve trade secrets by signing the stipulated protective order. Id. In addition to incorporating Rule 76a, the order provided procedures for protecting trial testimony from public disclosure and required a separate agreement or order to govern the use of designated protected material at trial. Id. Because the exhibits were publicly disclosed when HouseCanary used them in open court without obtaining an order to preserve their secrecy, the concurring justice concluded that the trial court erred in sealing them retroactively. Id. at 843.

We granted HouseCanary's petition for review.

ANALYSIS

Understanding the procedural context that frames the parties' arguments is essential to the proper disposition of this appeal. The key procedural facts are these: HouseCanary filed a post-trial motion under Texas Rule of Civil Procedure 76a to seal thirty exhibits used at trial, eight of which it argued contained trade secrets. Title Source and two intervening media...