Keeping a Business Dispute Confidential: Sealing, Protective Orders and Publicity

Start from the presumption: court records are open

Texas Rule of Civil Procedure 76a states the rule plainly: court records are presumed to be open to the general public. That covers the petition and its allegations, the answer and any counterclaim, motions, exhibits attached to them, and orders. In Dallas County those filings are searchable online. A customer, a competitor or a reporter can read a petition the day after it is filed, and the allegations in it are protected from defamation claims by the judicial proceedings privilege, which means they can be as pointed as the drafter chooses.

Two consequences follow. First, a business deciding whether to sue should assume the complaint will be public and write it accordingly. Second, a business that has been sued should expect the allegations to circulate and should plan its response to customers and staff rather than hope the filing goes unnoticed.

Sealing records under Rule 76a

Sealing is possible but deliberately difficult. Under Rule 76a(1), court records may be sealed only on a showing of a specific, serious and substantial interest that clearly outweighs both the presumption of openness and any probable adverse effect that sealing would have on the general public health or safety, and only if no less restrictive means than sealing will adequately protect that interest. Embarrassment, competitive disadvantage in a general sense, and the parties' mutual preference for privacy do not meet the standard.

The procedure is public in itself. A motion to seal must be filed and a public notice posted at the courthouse, stating that a hearing will be held in open court on a motion to seal, with the hearing set no sooner than 14 days after the motion is filed and the notice posted. A verified copy of the notice is filed with the clerk of the Supreme Court of Texas. Any person may intervene to oppose sealing, and a sealing order is appealable. Records can be temporarily sealed on a showing of a probability of the required interest and of irreparable injury, pending the hearing.

Two categories matter for businesses. Documents filed in connection with a motion, such as summary judgment evidence, are court records and need a 76a order to be sealed. Unfiled discovery is generally not a court record and does not need a sealing order, with an exception for unfiled discovery that concerns matters with a probable adverse effect on general public health or safety, the administration of public office, or the operation of government. Documents filed in an action originally arising under the Family Code are excluded from the rule.

Protective orders under Rule 192.6

Most of what a business wants to protect is not in the court file at all. It is in the documents exchanged in discovery: customer lists, pricing, margins, financial statements, source code, personnel files. Rule 192.6 allows a party to move for an order protecting it from undue burden, unnecessary expense, harassment, annoyance or invasion of personal, constitutional or property rights, and the court may order that a trade secret or other confidential research, development or commercial information not be disclosed or be disclosed only in a designated way.

In commercial cases this takes the form of an agreed confidentiality order, often in two tiers:

• Confidential: seen by the parties, their counsel, experts and the court, used only for the lawsuit.
• Attorneys' eyes only (sometimes called highly confidential): seen by outside counsel and experts, not by the opposing party's own employees or officers. This is the tier for material a competitor-litigant should never see.

A protective order also sets how confidential material is filed if it must be filed, usually under temporary seal pending a 76a motion, and what happens to it when the case ends. It does not keep documents from the other side's lawyers; it controls who else sees them and what they can be used for. What discovery is in a business lawsuit explains what the other side can demand in the first place.

Trade secrets get a stronger shield

Section 134A.006 of the Texas Uniform Trade Secrets Act directs a court to preserve the secrecy of an alleged trade secret by reasonable means, and lists them: protective orders in discovery, in camera hearings, sealing the records of the action, and ordering anyone involved in the litigation not to disclose the alleged trade secret without court approval. The statute creates a presumption in favor of granting protective orders to preserve secrecy, and it sets out the factors a court weighs when deciding whether a party's own representative, as opposed to its lawyers, may see the other side's secret: the value of the information, the degree of competitive harm, whether the party is a competitor, and whether the representative's role requires access.

This is why trade secret cases are the one category of business dispute where sealing of filings is routine rather than exceptional. How a trade secret lawsuit unfolds describes the TRO, expedited discovery and sealing sequence.

Arbitration: private, not necessarily confidential

Arbitration hearings are closed to the public, filings go to the arbitration provider rather than a courthouse, and there is no public docket. That is privacy, and it is real. Confidentiality is a separate question. Provider rules generally bind the arbitrator and the administrator to confidentiality but do not, by themselves, prohibit the parties from disclosing the existence of the proceeding, the filings or the award. If the parties want that, the arbitration clause or a separate agreement has to say so.

Arbitration also touches the public record at the edges. A motion to compel arbitration is filed in court. An award is confirmed, modified or vacated by a court, and the motion to confirm attaches the award. A party that wants an enforceable judgment will usually have to file the award. Arbitration vs. court covers the broader trade-offs.

Mediation and settlement

Mediation communications are confidential by statute. Section 154.073 of the Civil Practice and Remedies Code makes a communication relating to the subject matter of a dispute, made by a participant in an ADR procedure, confidential, not subject to disclosure, and inadmissible as evidence, with limited exceptions. The mediator cannot be compelled to testify. This is one reason mediation is where candid numbers are exchanged.

A settlement agreement can include a confidentiality clause covering its terms, the amount and sometimes the existence of the dispute, with a non-disparagement clause alongside it. Enforcement is by contract: the remedy for breach is a claim for damages or liquidated damages if the agreement sets them. Confidentiality clauses cannot prevent a party from responding to a subpoena, reporting to a regulator or complying with the law, and the agreement should say so. If the case was already on file, the public record of the lawsuit remains; the settlement keeps only the terms private. Structuring a business settlement covers the drafting.

Federal court

Rule 76a does not apply in federal court. The federal courts recognize a common-law right of public access to judicial records and require a party seeking to seal to justify it document by document, with the court weighing the public interest against the reasons for secrecy. The Fifth Circuit has been exacting about this, and blanket sealing of exhibits by agreement is not accepted. Protective orders for discovery are available under Fed. R. Civ. P. 26(c) on a showing of good cause, and two-tier confidentiality orders are routine in the Northern District of Texas.

Managing publicity

Lawyers are constrained in what they may say publicly about a pending case. Clients are less constrained but should be careful: statements about the other party outside the courtroom do not carry the judicial privilege, can be defamatory, and can be used in the case. A short, factual holding statement for customers and employees ("a dispute exists, it is in the proper forum, we are confident in our position") is usually the right amount. Social media posts are discoverable and rarely help.

If the other side goes public, options include a response through counsel, a motion for a protective order if the publicity is tied to misuse of discovery material, and, in extreme cases, a defamation claim, though Texas's anti-SLAPP statute makes that claim expensive to bring badly.

A realistic plan

• Assume the pleadings will be read, and draft or answer them with that audience in mind.
• Negotiate a two-tier protective order at the start of discovery, before documents change hands.
• In trade secret cases, invoke Section 134A.006 at the outset and file sensitive material under seal with a 76a motion ready.
• Use mediation for candid exchanges that should never be public.
• If arbitration is chosen for privacy, write confidentiality into the clause rather than assuming it.
• Put confidentiality and non-disparagement into the settlement, with a carve-out for legal obligations.

Tina Wysk handles commercial cases in which confidential financial and competitive information is at stake, in Dallas state and federal courts and in arbitration.