Like my man Cole Porter said, in olden days a glimpse of stocking, was looked on as something shocking, now Heaven knows . . . anything goes.
Especially when a company sues a former employee who took documents containing the company’s alleged “trade secrets.”
In a case like that, can the company get a temporary restraining order (TRO) requiring the employee not to use the documents?
Can the judge also make the employee immediately “return” the documents to the company?
After handling cases like this for over a decade, I can tell you the practical answer is simple: in a TRO the judge can—and will—do whatever the judge wants. Anything goes.
It doesn’t really matter what “the law” of trade secrets TROs says. There are a couple reasons for this.
First, as a general rule there is no appeal from a TRO. So you don’t have a bunch of appellate court opinions you can cite.
Second, the TRO case law you can find—mainly federal district court opinions—is a hopeless muddle of conflicting principles and results. I mean, you could try to reconcile all the divergent results based on differences in the facts of the cases, but good luck with that.
You can also cite appellate cases on injunctions, which raise similar issues to TROs, but that case law is also a muddle. Part of the problem is the standard of review: abuse of discretion. Appellate courts don’t decide whether they think the trial court judge made the right decision on an injunction; they just decide if the decision was within the bounds of the judge’s discretion (in theory).
Bottom line: As a practical matter there is no “law of TROs” in trade secret litigation. I will leave it to smarter people to debate whether any law of TROs exists as a philosophical matter.
But if you’re a lawyer handling a trade secrets lawsuit, you still have to make a legal argument for or against a proposed TRO. And it probably won’t sound very persuasive if you just say “Your Honor, you can do whatever you want, I mean, it’s not like there’s going to be an appeal.”
No, you need to know the legal principles that apply to TROs so you can couch your argument in those terms.
Having done a lot of these, I can help you with that.
If you’re trying to get a TRO in a trade secrets case, the first thing you need to do is show that the documents the employee took contain trade secrets.
You’ll find two kinds of court opinion on this issue.
The first kind says that whether the information in the documents is a trade secret is an ultimate issue to be decided at trial, not at the TRO stage, and that it’s enough for the company just to make a “prima facie” case for misappropriation. See, e.g., NRT Texas LLC v. Wilbur, No. 4:22-cv-02847, at *10 (S.D. Tex. Sept. 7, 2022) (“At this stage, the Court is not in a position to weigh the credibility of the evidence,” and plaintiff made sufficient “prima facie case” for threatened or actual misappropriation of trade secrets).
The second kind says the plaintiff must present evidence to prove a “likelihood of success on the merits,” or a “probable right to relief.” In other words, you’ve got to actually persuade the judge there’s a trade secret. See, e.g., Thompson Safety LLC v. Jones, No. 4:24-CV-2483, 2024 WL 4108788, at *2-3 (S.D. Tex. Sept. 6, 2024) (denying preliminary injunction where plaintiff did not carry its burden to show that names on the customer list were not “ascertainable through public sources”).
Coincidentally, the first type of case usually grants a TRO, and the second type usually denies it. Isn’t that interesting?
Anyway, if you’re trying to get the TRO, you should cite some cases from the first category, and if you’re trying to avoid the TRO, you should cite some cases from the second category.
If you’re really fancy, you can try to “distinguish” the cases cited by the opposing counsel, i.e. point out pertinent factual distinctions between the cases they cite and your case. But I wouldn’t spend a lot of billable hours on that. Remember, the judge is going to do whatever she wants anyway.
The next issue is whether the defendant “misappropriated” the documents containing the trade secrets, creating an imminent threat of harm to the company.
Usually there will be evidence the employee copied, transferred, or saved the documents to a non-company device or account, often shortly before leaving the company. In many cases the company will have already done a forensic exam that reveals this.
But at the TRO stage, the plaintiff company usually won’t have any evidence that the employee did anything with the documents, such as giving them to a new employer or using them to take business from the first employer.
So the plaintiff company will cite cases holding that there is an imminent threat of harm when a former employee has the company’s trade secrets and is in a position to use them at a competitor. See, e.g., Gilscot-Guidroz Int’l Co. v. Milek, No. 24-1409, 2024 WL 3011013, at *9 (E.D. La. June 3, 2024) (“to satisfy the irreparable injury element, [plaintiff] need only show that the ‘defendant possesses the trade secrets and is in a position to use them’”). This is sometimes called the “inevitable disclosure” doctrine.
The employee’s lawyer will cite cases rejecting or curtailing the inevitable disclosure doctrine. See, e.g., Nat. Oilwell Varco, L.P. v. Garza, No. H-22-2006, 2022 WL 3098238, at *2 (S.D. Tex. Aug. 4, 2022) (“In Texas, the remedy to mitigate harm when a former employee misappropriates trade secrets is to enjoin the use or disclosure of those secrets. [Plaintiff] has not shown how it could suffer irreparable harm if [defendant] returns to work without disclosing trade secrets.”)
I cover this divergence in The “Inevitable Disclosure” Doctrine in Texas Trade Secrets Litigation.
Again, the conflict in the case law is interesting, but don’t try to puzzle it out. You’ll only drive yourself crazy.
The next issue is whether the imminent harm of the defendant using the trade secrets is “irreparable” for purposes of a TRO, i.e. whether it is an injury that could be adequately compensated by damages.
Some cases say it is. See, e.g., Chevron U.S.A., Inc. v. Guajardo, No. H-17-1549, 2017 WL 2265694, at *2 (S.D. Tex. May 24, 2017) (citing Am. Express Fin. Advisors, Inc. v. Scott, 955 F. Supp. 688, 693 (N.D. Tex. 1996)).
Some say it isn’t. See, e.g., Advanced EDR Sys., LLC v. Design Solutions, Inc., No. A-07-CA-698-LY, 2007 WL 9710218, at *2 (W.D. Tex. Aug. 27, 2007) (“the lost goodwill of a company like [plaintiff], operated over a short period of tie, is generally compensable in money damages”).
I explore this issue in Irreparable Injury, I Presume? Again, I wouldn’t spend a lot of your time trying to reconcile these cases. Just cite some of the ones that support your position.
Now we get to the nitty-gritty, will the judge grant the TRO, and if so, what will it say?
Judges are usually willing to grant the part of the TRO that says “Defendant will not use or disclose Plaintiff’s confidential, proprietary, or trade secret information.” They figure, what’s the harm in ordering that? The Defendant shouldn’t be doing that anyway.
That, of course, is part of the problem. As a general rule, injunctions that effectively just say “follow the law” are disfavored. Unless there is evidence the defendant has already used the alleged trade secrets or is about to use them, I say the plaintiff doesn’t need a TRO that says don’t use them.
But a lot of judges won’t agree with me.
The other big problem with this kind of TRO is that it doesn’t define the alleged “confidential information” or “trade secrets” specifically enough for the defendant to know exactly what he can or cannot do. I cover this in Fuzzy Language: The Specificity Requirement in Departing Employee Litigation.
But most judges are not going to want to get down in the weeds of figuring out what is actually a trade secret or not. So they’ll go with the general language.
The harder question is whether the TRO will order the defendant to “return” the documents to the company. How exactly does one “return” documents in electronic form? See How Should Employees “Return” Electronic Files?
To keep it simple, suppose the defendant transferred a hundred company documents to a USB drive on her last day of work. How do you order her to “return” those?
I suppose the former employee could just hand over the USB drive, but the drive itself is her property. And suppose it also has her own personal documents on it.
The employee could plug the drive into her computer and email the documents on it to her lawyer, to be forwarded to the plaintiff’s lawyer. But there’s a big problem with that: metadata. Anything she does with the documents can alter the metadata, which is potential evidence in the lawsuit.
And then what does she do, delete the documents? That would potentially violate her duty to preserve evidence, which arose as soon as she learned about the lawsuit, if not earlier.
The bottom line is that “returning” company documents is just not that simple, and that’s one reason this kind of relief usually shouldn’t be in a TRO. If anything, this issue should be addressed later, either by agreement of the parties or at an evidentiary hearing. It usually shouldn’t be ordered “on the fly” at a short TRO hearing.
A related question is whether the TRO should require the defendant to turn over her computer, phone, and other electronic devices for forensic examination. This is called a “direct access” order.
Direct access orders are highly invasive. “Providing access to information by ordering examination of a party’s electronic storage device is particularly intrusive and should be generally discouraged, just as permitting open access to a party’s file cabinets for general perusal would be.” In re Weekley Homes, 295 S.W.3d 309, 317 (Tex. 2009).
In most cases, it’s inappropriate to include a direct access order in a TRO. The limited purpose of a TRO is to maintain the status quo for the short time between the TRO and an injunction hearing. Injunctive relief should be “narrowly tailored to enjoin the actual or threatened misappropriation of trade secrets to apply only to the use of confidential or trade secret information.” Nat. Oilwell Varco, L.P. v. Garza, No. H-22-2006, 2022 WL 3098238, at *2 (S.D. Tex. Aug. 4, 2022).
A direct access order is inappropriate for a TRO because it “would alter, rather than preserve, the status quo.” Advanced EDR Sys., LLC v. Design Solutions, Inc., No. A-07-CA-698-LY, 2007 WL 9710218, at *2 (W.D. Tex. Aug. 27, 2007).
But judges often include a direct access order in a TRO anyway.
If you can’t handle that, maybe TRO practice is not for you.
Like my man Coolio said, if you can’t take the heat, get yo a$$ out the kitchen.
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Zach Wolfe (zach@zachwolfelaw.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at Zach Wolfe Law Firm (zachwolfelaw.com). Thomson Reuters has named him a Texas “Super Lawyer”® for Business Litigation every year since 2020.
These are his opinions, not the opinions of his firm or clients. Reasonable people can disagree. Every case is different, so don’t rely on this post as legal advice for your case.
Stephan is the sports journalist for the Maple Grove Report.
