Legal Lode: Victorious Secret

Can public officials decide what’s good for the people to know and what’s not? They can, and they do. Fortunately, state open meetings and public records laws throughout the country give information-seekers relatively free access to the doings and dealings of government at all levels. These same laws, however, typically provide a host of exceptions for sensitive matter that public agencies handle while transacting official business. But can one rely on a government office or agency being diligent in protecting confidential business information? Sometimes yes, sometimes no. That’s why, when someone is nosing around, the best approach may be what a Texas waste company did – get aggressive and fend for yourself.

Williamson County, Texas, owns a landfill operated by Waste Management of Texas (WM) under an agreement allowing WM to contract with haulers for the disposal of waste at the landfill. When a customer arrives at the landfill, WM generates a waste ticket, which includes the customer’s name, tonnage, and, on some tickets, the rate per ton and the disposal fee. WM keeps the waste tickets, but the County gets to see them.

In August, 2009, the County got a letter requesting the tickets for all loads delivered to the landfill on the preceding July 14. Caught between the requester and WM, the County told WM about the request and asked the state attorney general for an “open records” decision under the state public information law. For its part, WM submitted a letter, along with a sample of waste tickets, to the attorney general asserting that information on the tickets, including customer name, disposal volume, and pricing information, were exempt under state law from disclosure because (a) they were trade secrets and (b) disclosure would likely cause serious competitive harm.

Several months later, the attorney general ruled that customer identification was a trade secret, but WM had not proved that volume and pricing details amounted to a trade secret or that disclosure would be competitively harmful. He directed the County to withhold customer names but release the other information.

WM challenged the attorney general’s decision in a lawsuit filed in state court. The trial judge ruled against WM for the same reasons expressed by the attorney general and ordered the County to disclose the contested information to the requester.

On appeal, WM successfully argued that, besides customer names, pricing and volume information was protected from disclosure as a trade secret, which, under Texas law, can be any formula, device, or information that gives a business an advantage over competitors who do not know it or use it.

Ruling that the County cannot turn over the information to the requester, the appeals court cited key testimony from WM witnesses, including a senior manager and a company attorney.

The manager testified how the company actively protects pricing and volume information, even from its own employees. If a competitor learns pricing and volume information, it can determine the negotiated discount rates in WM contracts, undercut the prices and potentially take customers away, he said. The lawyer testified that WM carefully drafted its landfill operations contract with the County, enabling the company to designate documents, including waste tickets, as confidential information.

To determine whether a trade secret exists, Texas courts weigh a number of factors, including who, if anyone, outside the business knows the information, the measures taken to guard secrecy, and how valuable the information is to the business and its competitors. “Considering the evidence, the trade secret factors weigh strongly in [WM’s] favor . . . conclusively establish[ing] that the pricing and volume information . . . is a trade secret,” the appeals court concluded.

Lawsuits are often won or lost long before the parties get to court. WM’s advantage: smart company policies and practices and a well-drafted contract.

[Waste Management of Texas, Inc. v. Greg Abbott, Attorney General, No. 11-11-00112-CV (Tex.App.Dist.11, Apr. 11, 2013)]

Barry Shanoff is a Rockville, Md., attorney and general counsel of the Solid Waste Association of North America.

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail:[email protected].