Originally published by Peggy Keene.
A recent case pending in the Ninth Circuit has drawn attention again to how courts will analyze the divulgence of trade secrets in relation to California’s Strategic Lawsuit Against Public Participation (“SLAPP”) statute. SLAPP lawsuits are generally civil complaints or counterclaims, against either individuals or companies, that argue that the injury came as a result of exercising free speech under the First Amendment.
SLAPP Lawsuits Aim to Chill Public Debate
Usually SLAPP claims are brought by against individuals or organizations over public issues and are often based on civil torts. Many experts in the field argue that the principal purpose of a SLAPP suit is to chill public debate over the specific topic at hand because defending against a SLAPP requires significant amounts of time, money, and legal resources. As such, defendants are often dissuaded from pursuing the legal action.
In the case at hand, Anheuser-Busch had filed a SLAPP lawsuit against former employee James A. Clark (“Clark”) for allegedly releasing trade secret information that was eventually used against Anheuser-Busch in a class action lawsuit. Specifically, the case at hand focuses on Anheuser-Busch’s brewing processes, which they have classified as trade secret and were detailed in a document referred to internally as “Page 13.” Anheuser-Busch argues that Clark’s reveal of the processes eventually led to the class action against Anheuser-Busch over allegations that the alcoholic content of Anheuser-Busch’s products is overstated.
SLAPP Statute Analysis
Against Clark, Anheuser-Busch used the SLAPP lawsuit under California law, arguing that it met the two-prong analysis as required by the SLAPP statute and the federal courts agree. First, the courts found that Clark had failed to demonstrate that the information he was being sued over constituted protected conduct, which is the first prong of the test for whether a case constitutes a SLAPP lawsuit. Second, the Ninth Circuit noted that Anheuser-Busch made a successful showing of a probability of the suit prevailing on its merits, which satisfies the second prong.
Employee Statements about Trade Secret Information Hearsay?
As an interesting aside for legal experts, the Ninth Circuit’s opinion also notes that statements made by an employee regarding trade secret information may not be excluded as inadmissible hearsay if the statements can be demonstrated to come from their overall knowledge and not just the trade secrets in question. For instance, in finding that another employee’s statements did not constitute inadmissible hearsay, they analyzed the employee’s work history (30-plus years of work experience in that particular job), expertise in relation to the trade secrets at hand (she was a manager that oversaw the brewing processes detailed in the trade secret), and her official employee duties (how much did she have to rely on the trade secret to complete her job). As a result, they found that her statements did not qualify as inadmissible hearsay because they were a result of her overall work experience and not from mere reliance on trade secret Page 13.
Final Thoughts on SLAPP Lawsuits
Lastly, it should also be noted that the Ninth Circuit also took into account whether Clark had breached confidentiality agreements that he had signed with Anheuser-Busch and was not persuaded by Clark’s argument that Anheuser-Busch did not take adequate measures to protect the secrecy of Page 13. It would behoove legal experts to continue to follow this case as it involves both developments in trade secret law as well as use of the California SLAPP lawsuit statute.
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