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Title Source, Inc. v. Housecanary, Inc.

Court of Appeals of Texas, Fourth District, San Antonio

July 10, 2019

TITLE SOURCE, INC., et al., Appellants
v.
HOUSECANARY, INC., f/k/a Canary Analytics, Inc., Appellee

          From the 73rd Judicial District Court, Bexar County, Texas Trial Court No. 2016-CI-06300 Honorable David A. Canales, Judge Presiding

          Sitting: Sandee Bryan Marion, Chief Justice, Rebeca C. Martinez, Justice, Irene Rios, Justice

          MEMORANDUM OPINION

          REBECA C. MARTINEZ, JUSTICE

         These consolidated appeals arise from a business dispute involving trade secrets. After a jury trial concluded, the trial court ordered several admitted exhibits sealed or redacted. Later, the trial court denied appellants' motions to modify the sealing order but clarified the order. Appellants contend in the first consolidated appeal, No. 04-18-00509-CV, that the trial court erred by entering the sealing order. In the second appeal, No. 04-18-00844-CV, appellants contend the trial court erred by refusing to modify the sealing order. Some appellants also contend, in the second appeal, that the trial court's clarification order is void for vagueness.

         Appellee contends that we do not have jurisdiction to consider the first appeal. We first address and deny appellee's jurisdictional challenge. We then hold that the trial court erred when it entered the sealing order. Our resolution of the first appeal renders the second appeal moot.

         BACKGROUND

         Appellant Title Source, Inc. ("Title Source") and Appellee HouseCanary, Inc. f/k/a Canary Analytics, Inc. ("HouseCanary") develop and compile algorithms, software, and data as part of their businesses. Each prize this information as proprietary trade secrets. We take no position on whether this information is, in fact, "trade secrets" as the law defines that term.

         Title Source sued HouseCanary for breach of contract, fraud, and tortious interference. HouseCanary counterclaimed for misappropriation of intellectual property under the Texas Uniform Trade Secrets Act ("TUTSA") and other common-law theories.

         Early in the case, the parties agreed to a stipulated protective order (the "SPO"). Among other things, the SPO provides procedures for the parties to mark information as "CONFIDENTIAL" or "HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY." The SPO grants limited protections for such materials and also specifies procedures for sealing the materials in court. The parties dispute the importance of the SPO, but no party disputes that it was validly entered and is enforceable.[1]

         At a pretrial hearing, the parties presented their lists of exhibits to be preadmitted. Counsel for Title Source and counsel for HouseCanary stated their agreement that the exhibits should be preadmitted and that the parties had no objection to preadmission. The trial court preadmitted the exhibits. Among the preadmitted exhibits are the 14 exhibits the court later sealed or ordered redacted that are in dispute in these appeals.[2]

         Approximately a month into the seven-week trial, Title Source moved to close the courtroom during the trial testimony of a Title Source fact witness who Title Source anticipated would testify about its computer source code. Title Source asserted this code was a trade secret. Title Source also moved to seal documents that would be filed or placed into the record regarding its source code. These records had not been preadmitted before trial. Title Source argued that the requirements for sealing court records under Texas Rule of Civil Procedure 76a did not apply, but Title Source attempted to comply with the requirements regardless.[3] The trial court ordered these source-code documents sealed. HouseCanary too obtained temporary closure of the courtroom during testimony concerning its computer source code.

         It is undisputed that HouseCanary did not request for the exhibits at issue in these appeals be sealed until after the trial concluded. According to HouseCanary, these exhibits reveal HouseCanary's purported trade secrets. The parties do not dispute that several of these exhibits were discussed and displayed at trial; however, they dispute the extent to which the exhibits were discussed and displayed and whether members of the general public or press viewed the exhibits when displayed.

         At the end of trial, the trial court instructed the jury not to talk about or mention confidential aspects of the case regarding trade secrets. The trial court did not provide any guidance as to what those "confidential aspects" were and did not identify particular exhibits as containing trade secrets.

         Over six weeks after trial ended, HouseCanary filed a motion to seal thirty exhibits that had been admitted into evidence at trial. The motion only refers to Texas Rule of Civil Procedure 76a. HouseCanary gave public notice of its request, and appellants The Reporters Committee for Freedom of the Press and the Houston Forward Times (collectively, "Media Intervenors") as intervenors and Title Source opposed the request. The trial court held a public hearing on the matter and denied HouseCanary's motion from the bench.

         Three days later, HouseCanary filed a "Motion to Reconsider Whether to Seal Certain Core Materials." HouseCanary narrowed its request to eight exhibits, which HouseCanary asserted contain its "most sensitive information." In its motion to reconsider, HouseCanary relied "solely" on TUTSA as the basis for sealing, and specifically disclaimed reliance on Texas Rule of Civil Procedure 76a. HouseCanary also asked the trial court to modify the SPO to recognize TUTSA as the statutory basis for sealing. The trial court heard the matter and verbally ruled it would grant HouseCanary's motion to reconsider and order the eight exhibits sealed. The trial court did not verbally order that the SPO be modified. The trial court instructed HouseCanary to draft an order conforming to the ruling.

         HouseCanary drafted an order that included the eight exhibits specified in the motion to reconsider and six additional exhibits that HouseCanary asserted were exact copies of the eight originally-specified exhibits or contained excerpts from those eight exhibits. Soon thereafter, the trial court signed an order granting the motion to reconsider and ordering the eight originally-specified exhibits sealed in their entirety. The trial court also ordered the additional six exhibits to be redacted to remove and seal the trade secrets contained therein. Title Source and the Media Intervenors appealed this order, which is the subject of the first appeal.

         Shortly after the trial court signed the sealing order, HouseCanary filed, in a separate federal-court proceeding, a motion that included a copy of two of the eight entirely-sealed exhibits.[4] The document filed in federal court is and has been available to the public, except for a brief period during which it was under seal by the federal court.

         Title Source and the Media Intervenors moved to vacate the sealing order as to the two exhibits publicly available in federal court. The Media Intervenors also sought clarification regarding the extent of their right to publish documents they lawfully obtain. The trial court denied the motion to unseal the two exhibits but issued a clarifying order as to the Media Intervenors' right to publish. Title Source and the Media Intervenors appealed the trial court's orders on these matters in the second appeal.

         JURISDICTION

         House Canary initially challenges this court's jurisdiction under Texas Rule of Civil Procedure 76a to consider the first appeal. This dispute raises an issue central to the appeal- whether and to what extent the Texas Uniform Trade Secrets Act ("TUTSA") supplants Rule 76a when a party moves to seal alleged trade secrets. We will consider any potential conflict only to the extent necessary to resolve the appeal.

         Absent specific authorization for interlocutory appeals and original proceedings, appellate courts only have jurisdiction over final judgments. CMH Homes v. Perez, 340 S.W.3d 444, 447 (Tex. 2011). The Texas Supreme Court has deemed that orders relating to sealing or unsealing court records made pursuant to Rule 76a are final, appealable judgments. Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 272 n.13 (Tex. 1992); Eli Lilly & Co. v. Marshall, 829 S.W.2d 157, 158 (Tex. 1992).

         By its terms, Rule 76a applies to the trial court's sealing order and gives this court jurisdiction over the first appeal:

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).

         House Canary argues Rule 76a does not apply, despite this language, because the trial court ordered sealing pursuant to TUTSA, not Rule 76a, and because TUTSA is entirely incompatible with Rule 76a and controls.

         While it is true that the court's order to seal does not mention Rule 76a, this fact alone does not remove the order from the ambit of appealable orders specified by Rule 76a(8)-i.e., "any order . . . relating to sealing or unsealing court records." "Any order" includes an order to seal pursuant to ...


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