In Re Xto Resources I, Lp

WALKER, J.,

dissenting.

I agree with the majority that trade secrets are privileged from disclosure if the allowance of the privilege will not tend to conceal fraud or otherwise work injustice. See Tex.R. Evid. 507. I also agree with the majority that the party asserting a trade secret privilege has the burden of proving that the discovery sought qualifies as a trade secret and that the burden then shifts to the party seeking the trade secret disclosure to establish that the information is necessary for a fair adjudication of a claim or defense in the litigation. See In re Bass, 113 S.W.3d 735, 737 (Tex.2003) (orig.proceeding); In re Colonial Pipeline Co., 968 S.W.2d 938, 941 (Tex.1998) (orig.proceeding). I dissent from the majority’s opinion, however, because the majority has wholly skipped over the primary argument asserted by Real Parties in Interest (collectively “Threshold”) that the trade secret information it seeks will “not tend to work injustice” and is “necessary for a fair adjudication of a defense in the litigation.” See Tex.R. Evid. 507; Bass, 113 S.W.3d at 737 .

Relator XTO Resources, I, LP (“XTO”), in its responses to Threshold’s requests for disclosure of XTO’s defensive theories and the general factual basis for the defenses, specifically asserted that one of its defenses was as follows: “With respect to Plaintiffs’ [Threshold’s] claims that [XTO] failed to reassign undeveloped portion of the H Leases and Huddleston Trust Leases, Plaintiffs [Threshold] have failed to this point to demonstrate the nature and/or amount of harm, if any, to a legally sufficient degree.” Thus, at the trade secrets hearing before the trial court, Threshold argued,

Your Honor, ... we think they have, based on their objections, a presentation of management that says we think this well will be worth “X.” That’s one of the very questions at hand.

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They can’t [hide] their opinions. In other words, they’ve — they’ve had puds on this same acreage. Those puds had some — -value assigned, and as [of] Friday they told us that Plaintiffs have failed to demonstrate the nature and amount of harm in any — to legal degree of sufficiency.

And they’re saying there is no damage. They agree that they’ve breached some obligations that were not damage.

Well, we’d like to show that within their own corporate documents they [have] given value to these leases. They’ve given reserve estimates to these leases.

*907 Likewise, Threshold, in its reply brief in response to XTO’s petition for a writ of mandamus explained to this court,

XTO suggests that, although there was a breach, the damages resulting from that breach are minimal or even nonexistent.

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In an effort to address damages, Plaintiffs have requested that XTO produce data that supports the calculations of the reserves booked by XTO underlying the Wise County leases. This will help Plaintiffs and their expert(s) verify their damage model. Of equal if not greater significance, it will enable them to discredit the position currently being taken by XTO. This latter point, though expressly raised in Plaintiffs’ Second Motion to Compel, is wholly ignored by XTO. [Emphasis added.]

Threshold further explained in its brief to this court,

XTO has no basis to contend it did not breach its obligation to reassign approximately 1,249 acres to Threshold. Thus, it simply says its breach did not damage Threshold. It would be patently unfair to permit XTO to tell the jury Plaintiffs are due no damages but not to allow Plaintiffs to see basic data that XTO keeps outside the context of this litigation which Plaintiffs can use to establish their damages. Unless they are allowed to explore this, Plaintiffs cannot receive a fair trial.

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Stated succinctly, and in the language of Rule 507, disclosure is required to prevent an injustice. Without it [disclosure here] Plaintiffs are hampered in refuting XTO’s claim that damages are absent.

Thus, in its motion to compel disclosure at the trade secrets hearing, and before this court, Threshold continuously pointed out the injustice of permitting XTO to rely on the defense that Plaintiffs were not damaged by XTO’s failure to reassign particular leases to Threshold, but yet to permit XTO to shield from disclosure XTO’s own corporate documents showing that internally XTO had assessed a dollar value to the same leases and wells that it had failed to reassign to Threshold.

Because this argument — that allowance of the trade secret privilege would tend to work an injustice by preventing a fair adjudication of XTO’s no-damages defense by preventing Threshold from discrediting this position taken by XTO — appears to raise an alternative ground for affirming Judge Fostel’s ruling, and because the majority fails to address it, I respectfully dissent.