The case of In re K & L Auto Crushers, LLC,627 S.W.3d 239 (Tex. 2021), dealt with the application of the Texas Supreme Court’s holding in In re N. Cypress Med. Ctr. Operating Co., 559 S.W.3d 128 (Tex. 2018) (orig. proceeding) in the context of a trial court quashing discovery request that sought details about the plaintiff’s medical providers’ negotiated costs and rates. Ultimately, on the trade secrets issue, the Texas Supreme Court determined that the trial court erred by quashing the Defendant’s discovery request without considering other reasonable means of protecting the alleged trade secret information, such as a protective order. Therefore, the Court concluded that it was error for the trial court to quash a discovery request without first considering other reasonable means of protecting trade secret information.
Walker sued K&L Auto Crushers (K&L Auto) following a collision Walker was involved in with one of K&L Auto’s drivers. Walker originally walked away from the accident without reporting any injuries. However, shortly after the collision, Walker began seeking medical treatment. Five months after the collision, Walker’s medical treatment culminated in him undergoing surgery to repair injuries he allegedly received to his spine and shoulder from the collision. In total, Walker incurred around $1.2 million in medical expenses from his medical providers. In accordance with the Texas Civil Practices and Remedies Code, Walker served medical-expense affidavits to K&L Auto reflecting the $1.2 million in medical expenses. K&L Auto responded to Walker’s affidavits with its own affidavits challenging the reasonableness of Walker’s medical expenses.
To determine the reasonableness of Walker’s medical expenses, K&L Auto served subpoenas on Walker’s healthcare providers. Both Walker and Walker’s healthcare providers moved to quash K&L Auto’s subpoenas. Among other things, Walker and his healthcare providers sought to quash K&L Auto’s subpoenas because they sought information that was protected as a trade secret. Along with Walker’s motion to quash, he also sought a protective order asserting the same grounds to avoid complying with K&L Auto’s subpoenas. After a hearing, the trial court quashed K&L Auto’s subpoenas. K&L Auto moved for partial reconsideration of the order quashing its subpoenas. In its motion for reconsideration, K&L Auto narrowed the scope of its subpoenas to only include information permitted by the Court’s holding in North Cypress. K&L Auto also expressed its willingness to enter into a protective order to protect any trade secret information. The trial court ultimately denied K&L Auto’s motion for reconsideration.
In light of its holding in North Cypress, the Texas Supreme Court concluded that the trial court abused its discretion by denying K&L Auto’s discovery requests because K&L Auto only sought information relevant to the healthcare providers’ billing practices and rates. The Court reasoned that under Texas Uniform Trade Secret Act (TUTSA) section 134A.006(A), the trial court had a duty to use reasonable means to protect the healthcare provider’s alleged trade secret. The Court also determined that a presumption in favor of granting a protective order arose under section 134A.006(A). Thus, when a discovery request seeks information that contains an alleged trade secret, it is an error for the trial court to deny such discovery request without first considering the effectiveness of other reasonable alternatives.
The Court further reasoned that it was error for the trial court to deny K&L Auto’s discovery request without any evidence that a protective order would not address the healthcare provider’s concerns. The inquiry for courts when determining the appropriate measures when dealing with discovery that involves alleged trades secrets is to consider whether it is possible to permit the discovery while protecting the trade secret. Here, the trial court did not consider any reasonable alternatives before denying K&L Auto’s discovery request. Accordingly, the key takeaway for this case is that discovery request seeking trade secret information will not be outright denied. The trial court must first consider reasonable alternative that would permit the discovery while protecting the trade secret. Here, Walker and the healthcare providers were unsuccessful in defending the trial court’s decision to quash K&L Auto’s subpoena because they failed to provide evidence that the reasonable alternatives would be unsuccessful in protecting the alleged trade secrets.