A reporter for a business publication somehow obtained information contained in a privately held company’s confidential interim financial statements. As the reporter was about to disseminate that information in an email alert to the publication’s subscribers, the company sued, described the financials as trade secrets belonging to the company, and obtained from a Louisiana state court judge a TRO enjoining issuance of the email. The defendant removed the case to the Eastern District of Louisiana federal court where a magistrate judge conducted a preliminary injunction hearing and then ruled that freedom of speech and of the press guaranteed by the First Amendment trumped the company’s efforts to prevent a potential violation of the Louisiana Uniform Trade Secrets Act. Rain CII Carbon, LLC v. Kurzy, Civ. Ac. No. 12-2014 (E.D. La., Aug. 20, 2012).
Rain CII Carbon, LLC is one of the largest coke calciners in the world (coke calciners convert a by-product of the oil refining process into a material essential to aluminum smelting). Its quarterly financial compilation statements are confidential, made available only on a secure, password-protected website to persons who have a right to the information and who sign a non-disclosure agreement.
The day after a compilation of Rain’s 2012 second quarter financial results appeared on the company’s website, business publication Debtwire, a member of the Financial Times Group, prepared the email alert reporting Rain’s earnings. What particularly rankled the company was that its highly confidential gross margins could be calculated from information in the email alert.
Rain immediately filed suit against Debtwire in a Louisiana state court, requesting a TRO — and preliminary and permanent injunctions — to stop the publication. That court granted the TRO. Debtwire’s emergency appeal was unavailing, whereupon Debtwire removed the litigation to federal court based on diversity jurisdiction. Rain promptly filed an amended complaint, adding Kurczy (the reporter who broke the story) and corporate affiliates of Debtwire as defendants, and Rain moved to remand on the ground that complete diversity was lacking. The motion to remand was denied. A preliminary injunction hearing was scheduled for one week later, the parties stipulating that the TRO would remain in place until the hearing.
The hearing took place on a Friday. Among the documents admitted into evidence was Kurczy’s affidavit in which he swore that he had not accessed Rain’s secure website and had not seen the earnings compilation itself. The court issued its ruling the following Monday which was only three weeks after the compilation had been prepared. For purposes of the motion for preliminary injunction, the judge accepted Rain’s contentions that its earnings compilation constituted a trade secret and that publication might cause irreparable economic harm to the company. Nevertheless, finding that the information in the email alert was truthful and was of potential interest to the email’s subscribers, the court held that Rain had failed to overcome the strong presumption against a prior restraint.
First Amendment cases suggest that a litigant must overcome significant obstacles in order to persuade a federal court to enjoin the press from publishing truthful information on a matter of public concern, even if what is to be published is a trade secret. Having had more success in the state courts than in the U.S. District Court , Rain currently is in the process of appealing to the Fifth Circuit Court of Appeals denial of the motion to remand.