Wyoming Supreme Court Remands Fracking Chemical Disclosure Case to District Court for Reconsideration

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On March 12, 2014, the Wyoming Supreme Court issued a highly anticipated ruling in a case concerning the scope of trade secret protection available to exempt certain fracking chemical information—which Wyoming requires to be provided to the Wyoming Oil and Gas Conservation Commission (Commission)—from public disclosure. The decision, however, rested largely on technicalities and declined to answer the substantive question of whether individual fracking chemicals qualify as trade secrets.

The suit arose after environmental groups sought disclosure from the Commission of several companies’ fracking chemicals under Wyoming Public Records Act. The Supervisor of the Commission, who is the legal custodian of such chemical records, found the records exempt from public disclosure as trade secrets under the Wyoming Public Records Act. In reaching that decision, the Supervisor applied the definition of trade secrets in Wyoming’s Uniform Trade Secrets Act.

The environmental groups then filed suit challenging the Commission’s decision as arbitrary, capricious, and an abuse of discretion under the Wyoming Administrative Procedure Act (APA). The district court, applying the APA, reviewed the Commission’s decision and found that it was reasonable and in accordance with Wyoming law. In affirming the Commission’s decision, the district court referenced three different definitions of trade secrets—the federal Freedom of Information Act (FOIA) definition, the Restatement (Third) of Unfair Competition definition, and the Wyoming Uniform Trade Secrets Act definition—and found that fracking chemical information could qualify as a trade secret under all three. The court did not, however, independently determine whether the information sought was actually a protected trade secret, and instead reviewed the reasonableness of the Commission’s decision.

On appeal, the Wyoming Supreme Court ruled that the environmental groups should not have sought review of the Commission’s decision as an administrative action under the APA. Rather, the Court found that the proper procedure was to apply to the district court for an order directing the Supervisor to “show cause” why the chemical information was protected from public disclosure as a trade secret. The difference between the two procedures is that the APA permits the district court only to review the Commission’s decision on the record presented, while the order to show cause procedure allows the district court to hold evidentiary hearings and make an independent determination on the trade secret question. Based on that ruling, the Wyoming Supreme Court remanded the case to the district court to allow the parties to try again under the correct procedure.

To provide guidance on remand, the Wyoming Supreme Court also adopted the definition of trade secrets used by federal courts under FOIA as the proper definition to apply in determining if information is protected from disclosure under the Wyoming Public Records Act. A trade secret under FOIA is “a secret, commercially valuable plan, formula, process, or device that is used for the making, preparing, compounding, or processing of trade commodities and that can be said to be the end product of either innovation or substantial effort.” This definition is narrower than the common-law alternatives, and requires a “direct relationship” between the trade secret and the productive process. The Court did not apply this definition to the fracking chemicals at issue, finding that the district court must conduct that analysis in the first instance on remand.

The decision is available here.

Coverage is available here and here.

Topics:  Chemicals, Fracking, Public Disclosure

Published In: Civil Procedure Updates, Energy & Utilities Updates, Intellectual Property Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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