HOUSTON – In an issue of first impression, the Court of Appeals for the First District of Texas has found that a nonprofit rodeo group is not bound to disclose the amount of money that it pays to its entertainment performers, finding that information to be a protected trade secret.
Appellate court judges Richard Hightower, Veronica Rivas-Molloy and April L. Farris handed down an opinion to that effect on July 31 in Dolcefino Communications, LLC’s action versus Houston Livestock Show & Rodeo, Inc., which Rivas-Molloy authored.
“The underlying dispute between HLSR and appellee Dolcefino Communications, LLC began when Dolcefino was hired to investigate an alleged sexual assault occurring in 2017 at a Los Vaqueros Trail Ride event in Liberty County, Texas. The claimant, Brie Anna Williams, filed a personal injury lawsuit arising from the sexual assault. She filed claims against the man who allegedly sexually assaulted her, his alleged accomplice, Los Vaqueros Rio Grande Trail Ride Association, LLC, and HLSR. Williams retained Dolcefino as an investigative consultant for the lawsuit,” Rivas-Molloy said.
“In 2018, while working as Williams’ investigator, Dolcefino sent a series of requests to HLSR requesting to inspect and obtain copies of HLSR’s financial records under Section 22.353 [of the Texas Business Organizations Code]. Among the laundry list of requested records, Dolcefino requested ‘copies of documents detailing [HLSR’s] general ledger for the last three fiscal years.’ On June 27, 2018, HLSR notified Dolcefino that it was preparing HLSR’s general ledger for the last three fiscal years for ‘public inspection,’ but that it would be redacting from its general ledger the individual amounts paid to performers because HLSR considered that information as proprietary, confidential and trade-secret information. HLSR also advised Dolcefino that it would be filing a declaratory judgment action. Dolcefino followed up with another Section 22.353 request, this time asking for inspection of all HLSR ‘performance contracts with any concert performer from Jan. 1, 2014 to the present.”
Section 22.353 governs the public’s right to inspect and duplicate the financial records of nonprofit organizations.
On July 19, 2018, HLSR made its general ledger for the fiscal years 2014, 2016 and 2017 available to Dolcefino for inspection. Although the ledger excluded the individual amounts paid to each concert performer, the ledger included the total aggregate amount HLSR paid to all concert performers for the last three fiscal years.
After further back-and-forth litigation, a Harris County court found that Dolcefino had the right to inspect the rodeo group’s full and unredacted records, and that the HLSR did not establish that the performer fees are a trade secret.
The group then appealed to the First District Court of Appeals.
In a declaration from HLSR President and CEO Joel Cowley, he said he considered the requested information “highly confidential, proprietary business information, and a trade secret of HLSR.”
“The performance contracts between HLSR and individual concert performers are not publicly available. HLSR does not disclose or share the contents of its performance contracts between each of the various artists and HLSR, including the compensation paid for the performance, with outsiders. The performance contracts, particularly the compensation paid for the concert performance, are treated as closely guarded secrets of HLSR. None of the performers know what any of the other performers are paid by HLSR, and the performance contracts contain confidentiality clauses requiring the performing artist to agree to keep the amount of the performance fee confidential and to not disclose the amount to any third party other than persons who have a need to know in order to aid or facilitate the performance,” Cowley said.
“Consistent with the highly confidential, trade secret nature of the amount of each artist’s compensation, HLSR carefully guards this information in its offices and takes steps to maintain the secrecy of this information. Access to the information is very narrowly limited. Even within HLSR, access is restricted to a very small group of employees on a ‘need to know’ basis. In addition to myself, the only persons associated with the organization who have access to individual artist’s compensation information are HLSR’s Managing Director and Manager of Entertainment and Concert Production, Chief Financial Officer, Controller and General Counsel, and they are required to keep the information confidential. Other HLSR personnel do not have access to this information, nor do members of HLSR’s Executive Committee of its Board of Directors.”
Cowley added that “disclosure of the amount paid to the individual artists for their performances could be highly detrimental to HLSR’s efforts to negotiate and retain future artists for performances at the Rodeo…[and] the information could be used by performers as a bargaining chip to raise their performance fees”, in addition to causing the group competitive harm and hampering its ability to endow educational programs and scholarship awards.
The appellate court concurred, finding that Dolcefino “did not establish that disclosure of HLSR’s trade secret information is necessary for any purpose.”
“In light of HLSR’s substantial property interests in protecting its trade secret information, which effectively would be destroyed by public disclosure of the fees it pays to individual concert performers, HLSR’s disclosure of the total aggregate amount it paid concert performers during the relevant time period thus fulfilling the purpose of Section 22.353, and Dolcefino’s failure to present any evidence establishing that disclosure of such trade secret information is necessary for any purpose, even if required, we hold the trial court erred by declaring that HLSR is not entitled to redact the fees it pays to individual concert performers from its general ledger before making its records, books and reports available to the public for inspection under Section 22.353 and ordering HLSR to disclose such information to Dolcefino for public inspection,” Rivas-Molloy stated.
“The trial court further erred by denying HLSR’s motion for summary judgment seeking declarations that HLSR ‘established that the performer fees constitute trade secrets’ and that HLSR ‘is entitled to redact [performer expenditures] from the general ledgers before public inspection,’ granting Dolcefino’s cross-motion for summary on that issue, and declaring that HLSR ‘failed to establish that the performer fees are a trade secret and not subject to public inspection pursuant to Tex. Bus. Orgs. Code Section 22.353’ and thus is ‘not entitled to redact performer expenditures” from its general ledger.”
Court of Appeals for the First District of Texas case 01-22-00491-CV
113th District Court, Harris County, Texas case 2018-50038
From the Southeast Texas Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com