Supreme Court Ruling May Result in Trade Secret Disclosure

By Adam Brown

Fisher Phillips

Last month, the Colorado Supreme Court ruled that a party in litigation seeking to prevent responsive discoverable information from disclosure under a protective order must first demonstrate that the information in fact constitutes trade secrets or other confidential information before a protective order can be entered. This seemingly obvious requirement illustrates the dangers that can be posed by cutting corners early on in litigation.

The case, In Re Rumnock v. Anschutz, arose out of a car accident that made its way to the Colorado Supreme Court because of a discovery dispute between the parties. After being ordered to produce information requested in discovery, American Family Insurance disclosed some of the information, and also moved for a protective order seeking to preclude the plaintiff from using American Family’s trade secret information outside of the litigation. After a hearing on the motion for a protective order, the trial court granted the motion in part, but only ordered that the information not be disclosed to American Family’s competitors, instead of the blanket order prohibiting use outside of the litigation that American Family had sought.  

American Family then petitioned the Colorado Supreme Court to exercise its original jurisdiction and direct the trial court to enter the protective order American Family had sought. In a somewhat surprising move, the Supreme Court affirmed the holding from below, and held that American Family was not entitled to the protective order it sought because it failed to actually present evidence to the trial court that the information at issue constituted trade secrets or other confidential information.

In so ruling, the court held that while the question of whether certain information constitutes trade secrets is ordinarily a question of fact, where there is no genuine dispute, the court may make such a determination as a matter of law. In this case, the court ruled that the information did not constitute trade secrets as a matter of law because American Family failed to provide any evidence demonstrating that the information was trade secret or otherwise confidential. The court suggested that American Family had the opportunity to submit an affidavit or to provide the information in question to the trial court for in-camera review, but it failed to do either of those things. Ultimately, the court allowed the ruling from below to stand, which exposed American Family’s trade secrets to potentially broad disclosure by non-parties to the litigation, or to anyone or any entity that is not a competitor of American Family.

To read this story and other complete articles featured in the January 30, 2017 print edition of Law Week Colorado, copies are available for purchase online.