COURT OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 02-13-00338-CV 

IN RE PRAIRIESMARTS LLC AND 

CASEY ROCKWELL

RELATORS

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ORIGINAL PROCEEDING

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OPINION

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I. INTRODUCTION

Relators PrairieSmarts LLC and Casey Rockwell seek a writ of mandamus 

directing Respondent to vacate a September 18, 2013 order granting Real Party 

in Interest TD Ameritrade, Inc.‘s rule 202 petition. See Tex. R. Civ. P. 202. 

Because we hold that Respondent abused his discretion by granting the rule 202 

petition and because Relators possess no adequate remedy at law, we will 

conditionally grant the writ.
2

II. FACTUAL AND PROCEDURAL BACKGROUND

Four former employees of TD Ameritrade subsequently became employed 

by PrairieSmarts.1 Those four individuals are Dr. Renaud Piccinini, Michael

Chochon, Chris Nagy, and Casey Rockwell. Dr. Piccinini obtained a Ph.D. in 

finance in 2004 and wrote his dissertation on risk and volatility in financial 

markets or so-called ―Black Swan Events.‖ Prior to working for TD Ameritrade, 

Dr. Piccinini helped develop risk models for the holdings of First National Bank of 

Omaha. Dr. Piccinini began working for TD Ameritrade in February 2010, and

TD Ameritrade terminated Dr. Piccinini on May 2, 2012, after the Portfolio Margin 

model that he had helped to design received approval from the federal regulators 

at the Financial Industry Regulatory Authority (FINRA).2 Chochon began working 

for TD Ameritrade in 2003, and he was the person who had hired Dr. Piccinini to 

perform the above-described work at TD Ameritrade. TD Ameritrade terminated 

Chochon on March 31, 2011. Nagy joined TD Ameritrade in August 1999 and 

served as Managing Director of Order Routing, Sales, and Strategy. TD 

Ameritrade terminated Nagy on May 26, 2012. Rockwell, a software developer 

and computer programmer, began working for TD Ameritrade in March 2004 and 

voluntarily left in October 2012 to work for PrairieSmarts. 

 

1PrairieSmarts is a Nebraska start-up company. 

2

TD Ameritrade‘s counsel explained that ―the [Portfolio Margin application]

is something that the government requires of organizations like TD Ameritrade to 

demonstrate how we‘re managing risk in our clients‘ portfolios. And the 

government allows us to develop proprietary means to do that.‖ 
3

In January 2013, PrairieSmarts filed a patent application3for a program

that PrairieSmarts calls PortfolioDefenseTM and began beta testing the program. 

TD Ameritrade thereafter filed a rule 202 petition asserting that it appeared likely 

that PrairieSmarts‘s employees Dr. Piccinini, Chochon, Nagy, and Rockwell 

had—in designing PortfolioDefenseTM—misappropriated confidential and 

proprietary assets of TD Ameritrade in violation of the nondisclosure provisions in 

their respective employment contracts. By its rule 202 petition, TD Ameritrade 

sought to depose PrairieSmarts and Rockwell and to have PrairieSmarts and 

Rockwell produce various documents at their depositions. PrairieSmarts and 

Rockwell filed answers to the rule 202 petition, denying all allegations in the 

petition and objecting to the depositions and production of the documents sought 

by TD Ameritrade on the ground that both sought privileged trade secret 

information belonging to PrairieSmarts. PrairieSmarts‘s answer also objected to 

venue in Tarrant County.4 

Respondent set a hearing on TD Ameritrade‘s rule 202 petition; a week 

before the hearing, PrairieSmarts filed affidavits from Dr. Piccinini, Chochon, 

 

3Patent applications are maintained by the United States Patent and 

Trademark Office as confidential for eighteen months after the application is filed 

or until issuance of the patent, whichever comes first, and the information 

regarding patent applications may not be released before that time without the 

permission of the applicant. See 35 U.S.C.A. § 122 (West 2001).

4Because the arguments of Relator PrairieSmarts and Relator Rockwell 

are identical in this original proceeding, except as to the venue issue, we 

sometimes refer to both Relators collectively as PrairieSmarts. 
4

Nagy, and Rockwell, asserting that no confidential information belonging to TD 

Ameritrade was utilized in creating the code for PortfolioDefenseTM and claiming 

that the information sought by TD Ameritrade constituted trade secret information

belonging to PrairieSmarts.

At the hearing on TD Ameritrade‘s rule 202 petition, TD Ameritrade argued 

that the facts as set forth below constituted ―smoke,‖ ―red flags[,]‖ or ―the indicia 

of a potential appropriation of trade secrets case‖ sufficient to justify the 

requested discovery. TD Ameritrade provided Respondent with three 

demonstrative exhibits that it had created utilizing information from the four 

affidavits filed by PrairieSmarts. The three exhibits are one-page typed sheets 

titled, ―Facts About PrairieSmarts‘s Principals,‖ ―Timeline,‖ and ―Facts Justifying 

Investigation.‖ The documents show the dates the four former TD Ameritrade 

employees left TD Ameritrade and began employment with PrairieSmarts, 

provided a comparison of the time it took to create the Profit Margin model at TD 

Ameritrade versus the time it took to create PortfolioDefenseTM at PrairieSmarts, 

and stated that the following facts justified TD Ameritrade‘s investigation via the 

discovery it had requested from PrairieSmarts: the fact that three of the four 

PrairieSmarts principals were directly responsible for TD Ameritrade‘s 

confidential risk analysis; the fact that PrairieSmarts‘s principals have thirty-one 

combined years of TD Ameritrade tenure; the fact that five days after Dr. Piccinini 

left TD Ameritrade, he co-founded PrairieSmarts; the fact that three months after 

Rockwell started working at PrairieSmarts, a patent application was filed for 
5

PortfolioDefenseTM, while it took fourteen months after Dr. Piccinini‘s hire at TD 

Ameritrade until the Profit Margin application was submitted to FINRA; the fact 

that similarities exist between the two products—TD Ameritrade contends four 

matching components are observable by comparing PrairieSmarts‘s website and 

the FINRA application for Portfolio Margin;

5

and the fact that the products have

nearly identical outcomes, which TD Ameritrade explained was 

PortfolioDefenseTM‘s having nearly the same predictive capability as TD 

Ameritrade‘s Portfolio Margin. TD Ameritrade argued that these ―red flags‖ 

concerned TD Ameritrade and established ―that there is a significant advantage 

to be gained for [TD Ameritrade] to do some investigation, some discovery to see 

how these concepts that line up on both sides are actually performed and 

whether they are performed using confidential information [from] TD Ameritrade.‖ 

At the hearing, PrairieSmarts argued that the circumstances TD 

Ameritrade had characterized as smoke or red flags were nothing more than 

legal activities. PrairieSmarts asserted that some of its managing members—

three of whom had been terminated by TD Ameritrade—had gone on to other 

employers before joining PrairieSmarts and had continued to work in the same 

area of expertise. PrairieSmarts contended that it was a mischaracterization to 

say that it took Dr. Piccinini and the team at TD Ameritrade fourteen months to 

create Portfolio Margin because twelve of the months were ―simply TD 

 

5

TD Ameritrade also admitted into evidence screen shots from 

PrairieSmarts‘s website and the FINRA application for Portfolio Margin. 
6

Ameritrade[ ̳s] using their Portfolio Margin to then get to the one-year audit that 

FINRA would do.‖ PrairieSmarts denied that PortfolioDefenseTM was based on 

any intellectual property of TD Ameritrade and asserted that TD Ameritrade‘s 

Portfolio Margin is different from PortfolioDefenseTM because Portfolio Margin 

was designed for use by brokers—not individual investors; was created to satisfy 

a government-mandated risk analysis requiring brokers to evaluate volatility and 

risk of only 3,000 to 4,000 specifically identified stocks; and is a calculation that 

computes for brokers certain margin requirements for highly leveraged portfolios 

so that brokers can determine when a customer‘s position becomes too risky and 

threatens the broker‘s margin loan. PrairieSmarts contended that, conversely, 

PortfolioDefenseTM was designed for use by individual investors, is not limited in 

its analysis to 3,000 or 4,000 specifically identified stocks, is not required to be 

submitted to FINRA, and that its design constitutes trade secrets of 

PrairieSmarts. PrairieSmarts concluded that Portfolio Margin and 

PortfolioDefenseTM are ―importantly different‖ and that TD Ameritrade should not 

be allowed to take a look ―under the hood‖ at PortfolioDefenseTM only to 

determine that it is not based on TD Ameritrade‘s confidential or proprietary 

assets. PrairieSmarts also claimed that beta testing of PortfolioDefenseTM is 

available through PrairieSmarts‘s website and that TD Ameritrade has the ability 

to participate in the beta testing6and to determine that way whether 

PortfolioDefenseTM performs the same functions as the Profit Margin model.

 

6

In his affidavit, Dr. Piccinini likens the beta testing to ―a free trial of 
7

During the hearing, Respondent decided that he would not rely exclusively

on PrairieSmarts‘s affidavits in ruling on the asserted trade secret privilege but,

per Texas Rule of Civil Procedure 193.4, would also conduct an in camera 

inspection of the documents sought by TD Ameritrade; Respondent ordered the 

documents‘ ―production within one week in a Bates stamped fashion.‖ Following 

the hearing, PrairieSmarts complied with Respondent‘s instructions and 

submitted documents under seal for an in camera inspection. Those documents 

have been filed with this court under seal.

Respondent subsequently issued a September 18, 2013 order finding that 

―the likely benefit of allowing TD Ameritrade to take the requested discovery to 

investigate one or more potential claims outweighs the burden or expense of the 

procedures set out herein.‖ The order granted TD Ameritrade‘s rule 202 petition 

in toto, ordering that the requested depositions be taken within forty-five days 

and that ―each deponent must produce . . . all of the documents requested by TD 

Ameritrade, Inc. as described in its Verified Petition for Rule 202 Deposition.‖ 

TD Ameritrade‘s rule 202 petition requested—and Respondent‘s order 

authorized—TD Ameritrade to depose Rockwell and PrairieSmarts and to elicit 

testimony on at least the following topics:

 

Microsoft Word[—the user can try the product] without being able to access the 

underlying programming and source code that allows Microsoft Word to operate 

and that is the confidential, proprietary, and trade secret information of 

Microsoft.‖ 
8

a. Any and all patent applications related to any 

PrairieSmarts tool, software, or system (including but not limited to 

PortfolioDefenseTM) filed by or caused to be filed by PrairieSmarts or 

any one or more of its managing members, including any and all 

patent applications that form the basis of PrairieSmarts‘[s] claims 

that PortfolioDefenseTM is patent pending.

b. The time horizon, statistical distribution, and confidence 

interval used in any PrairieSmarts tool, software, or system 

(including but not limited to PortfolioDefenseTM) and whether any 

one or more of the time horizon, statistical distribution, and 

confidence interval support what PrairieSmarts refers to as the 

―Range of Motion (History).‖

c. The approach used in the implied volatility-based model 

of any PrairieSmarts tool, software, or system (including but not 

limited to PortfolioDefenseTM), including how PrairieSmarts converts 

option pricing to what it refers to as the ―Range of Motion (Implied).‖

d. Identification of methods, concepts, or ideas imported 

from the dissertation of Renaud ―Ron‖ Piccinini into any 

PrairieSmarts tool, software, or system (including but not limited to 

PortfolioDefenseTM).

e. How PortfolioDefense performs calculations in 3/10 of a 

second, as PrairieSmarts claims.

f. Whether PrairieSmarts purchased, generated, or 

otherwise acquired historical market, financial, and/or securities data 

for use in designing, developing, and testing PortfolioDefenseTM, 

and, if so, from what source such data was purchased or otherwise 

acquired.

g. Whether PrairieSmarts used TD Ameritrade‘s 

Confidential and Proprietary Assets, including historical market, 

financial, and/or securities data, in designing, developing, and 

testing PortfolioDefenseTM.

h. The disposition, from October 2012 up to and including 

the present, of any privately purchased external storage device and 

other similar hardware that Mr. Rockwell used while employed by TD 

Ameritrade to access TD Ameritrade resources (including TD 
9

Ameritrade‘s systems and data, including TD Ameritrade‘s 

Confidential and Proprietary Assets).

i. The design, development, and testing of 

PortfolioDefenseTM, including the identity of contributors and the 

history of development. 

TD Ameritrade‘s rule 202 petition requested Relators to produce—and 

Respondent‘s order required Relators to produce—for inspection and copying at 

their depositions the following categories of documents:

a. Any and all patent applications related to any 

PrairieSmarts tool, software, or system (including but not limited to 

PortfolioDefenseTM) filed by or caused to be filed in any patent office 

by PrairieSmarts or any one or more of its managing members, 

including any and all patent applications that form the basis of 

PrairieSmarts‘[s] claims that PortfolioDefenseTM is patent pending.

b. Documents sufficient to show the identity of contributors 

and the history of development of any PrairieSmarts tool, software, 

or system (including but not limited to PortfolioDefenseTM), including 

information from a code repository, project tracking software, version 

control systems, and vendor contracts.

c. Documents sufficient to show any and all source(s) from 

which PrairieSmarts purchased, generated, or otherwise obtained 

historical market, financial, and/or securities data for use in 

designing, developing, and testing PortfolioDefenseTM.

d. Documents sufficient to show the identification of 

methods, concepts, or ideas imported from the dissertation of 

Renaud ―Ron‖ Piccinini into any PrairieSmarts tool, software, or 

system (including but not limited to PortfolioDefenseTM).

e. Documents sufficient to show the time horizon, 

statistical distribution, and confidence interval used in any 

PrairieSmarts tool, software, or system (including but not limited to 

PortfolioDefenseTM).
10

f. Documents sufficient to show the approach used in the 

implied volatility-based model of any PrairieSmarts tool, software, or 

system (including but not limited to PortfolioDefenseTM).

g. Documents sufficient to show the manner in which 

PortfolioDefense performs calculations in 3/10 of a second, as 

PrairieSmarts claims. 

The order also contained an ―Attorney‘s Eyes Only‖ provision, limiting 

access of the above information but permitting disclosure to TD Ameritrade of 

―the general nature of the Attorney‘s Eyes Only Information, without disclosing 

the specifics of any such information, and to the extent such general disclosure is 

necessary for advising [TD Ameritrade].‖ 

PrairieSmarts filed this petition for writ of mandamus, and we granted 

temporary emergency relief, staying the depositions and associated document 

production granted by Respondent‘s order. TD Ameritrade timely filed a 

response; PrairieSmarts timely filed a reply. 

III. THE ISSUES PRESENTED

In three issues, PrairieSmarts contends in its petition for writ of mandamus 

that TD Ameritrade failed to meet its burden under Texas Rule of Civil Procedure 

202 to show that the benefit of possibly avoiding the expense of a lawsuit 

outweighs the burden on PrairieSmarts of disclosing trade secrets, that TD 

Ameritrade failed to meet its burden under Texas Rule of Evidence 507 to show 

how lack of presuit access to PrairieSmarts‘s trade secrets would so impair the 

presentation of TD Ameritrade‘s case on the merits that there is a real threat of 

an unjust result, and that venue for TD Ameritrade‘s rule 202 petition is not 
11

proper in Tarrant County to obtain the deposition of PrairieSmarts‘s corporate 

representative. 

IV. STANDARD OF REVIEW

Mandamus relief is proper to correct a clear abuse of discretion when there 

is no adequate remedy by appeal. In re Frank Motor Co., 361 S.W.3d 628, 630–

31 (Tex.) (orig. proceeding), cert. denied, 133 S. Ct. 167 (2012); In re Prudential 

Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex. 2004) (orig. proceeding). A party 

to a rule 202 petition against whom suit is anticipated may seek review of an 

allegedly improper rule 202 order via mandamus. In re Wolfe, 341 S.W.3d 932, 

933 (Tex. 2011) (orig. proceeding); In re Jorden, 249 S.W.3d 416, 420 (Tex.

2008) (orig. proceeding); In re Emergency Consultants, Inc., 292 S.W.3d 78, 80 

(Tex. App.—Houston [14th Dist.] 2007, orig. proceeding [mand. denied]); In re 

Hewlett-Packard, 212 S.W.3d 356, 360 (Tex. App.—Austin 2006, orig. 

proceeding). A party to a rule 202 proceeding has no adequate remedy by 

appeal if the trial court abused its discretion by ordering discovery that would 

compromise procedural or substantive rights. In re Chernov, 399 S.W.3d 234, 

235 (Tex. App.—San Antonio 2012, orig. proceeding). As in other original 

proceedings, we review a trial court‘s order granting a verified petition to take 

depositions before suit under an abuse of discretion standard. Patton Boggs LLP 

v. Moseley, 394 S.W.3d 565, 568–69 (Tex. App.—Dallas 2011, orig. proceeding).

V. APPLICABLE LAW
12

A. Trade Secrets

A trade secret ―is one of the most elusive and difficult concepts in the law 

to define.‖ Lear Siegler, Inc. v. Ark-Ell Springs, Inc., 569 F.2d 286, 288 (5th Cir. 

1978). Generally, a trade secret is any formula, pattern, device, or compilation of 

information used in a business, which gives the owner an opportunity to obtain 

an advantage over his competitors who do not know or use it. Taco Cabana Int’l, 

Inc. v. Two Pesos, Inc., 932 F.2d 1113, 1123 (5th Cir. 1991), aff’d, 505 U.S. 763 

(1992); In re Bass, 113 S.W.3d 735, 739 (Tex. 2003) (orig. proceeding) (quoting 

Computer Assocs. Int’l v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1994)).

Combinations of disclosed technologies may constitute a trade secret. See, e.g.,

Ventura Mfg. Co. v. Locke, 454 S.W.2d 431, 432–34 (Tex. Civ. App.—San 

Antonio 1970, no writ).

Texas courts consider the following factors in determining whether the 

material at issue qualifies for the trade secret privilege: (1) the extent to which 

the information is known outside of his business; (2) the extent to which it is 

known by employees and others involved in his business; (3) the extent of the 

measures taken by him to guard the secrecy of the information; (4) the value of 

the information to him and to his competitors; (5) the amount of effort or money 

expended by him in developing the information; and (6) the ease or difficulty with 

which the information could be properly acquired or duplicated by others. In re 

Union Pac. R.R. Co., 294 S.W.3d 589, 592 (Tex. 2009) (orig. proceeding); Bass, 
13

113 S.W.3d at 739. All six factors need not exist to establish a trade secret 

because trade secrets do not fit neatly into each factor every time and because 

other factors may also be relevant depending on the circumstances of a 

particular case. Bass, 113 S.W.3d at 740.

A litigant may claim a privilege to refuse to disclose a trade secret so long 

as the allowance of the privilege will not tend to conceal fraud or otherwise work 

injustice. Tex. R. Evid. 507. Thus, in determining whether a trade secret must 

be disclosed, a trial court utilizes a two-step, burden-shifting procedure. In re 

Cont’l Gen. Tire, Inc., 979 S.W.2d 609, 613 (Tex. 1998) (orig. proceeding). First, 

the party resisting discovery by asserting a trade secret privilege must establish 

that the information sought is, in fact, a trade secret. Id. Once the party resisting 

discovery meets this burden, the burden then shifts to the party seeking to obtain 

discovery concerning the trade secret to establish that the information sought is 

necessary for a fair adjudication of its claims. Id. 

The burden on the party seeking discovery of trade secrets requires a 

demonstration with specificity of exactly how the lack of the trade secret 

information will impair the presentation of the case on the merits to the point that 

an unjust result is a real, rather than a merely possible, threat. In re 

Bridgestone/Firestone, Inc., 106 S.W.3d 730, 733 (Tex. 2003) (orig. proceeding). 

The test cannot be satisfied merely by general assertions of unfairness. Id. Nor 

is necessity established by a claim that the information would be useful rather 

than necessary. See In re XTO Res. I, LP, 248 S.W.3d 898, 905 (Tex. App.—
14

Fort Worth 2008, orig. proceeding). If an alternative means of proof is available 

that would not significantly impair the presentation of the case‘s merits, then the 

information is not necessary. See Union Pac. R.R. Co., 294 S.W.3d at 592–93. 

Finally, this specificity showing must be made with regard to each category of 

trade secret information that is sought. In re Goodyear Tire & Rubber Co., 392 

S.W.3d 687, 696 (Tex. App.—Dallas 2010, orig. proceeding). Only if the 

requesting party meets this burden of establishing that the trade secret

information is necessary for a fair adjudication of its claims should the trial court 

compel disclosure of the trade secret information, subject to an appropriate 

protective order. Cont’l Gen. Tire, Inc., 979 S.W.2d at 613.

B. Rule 202 of the Texas Rules of Civil Procedure

Texas Rule of Civil Procedure 202 permits a person to petition a trial court 

for authorization to take a deposition before suit is filed in two circumstances: (1) 

to perpetuate or obtain the person‘s own testimony or that of any other person for 

use in an anticipated suit; or (2) to investigate a potential claim or suit. Tex. R. 

Civ. P. 202.1(a), (b). The trial court may order that the requested deposition be 

taken only if it expressly finds either (1) that allowing the petitioner to take the 

requested deposition may prevent a failure or delay of justice in an anticipated 

suit or (2) that the likely benefit of allowing the petitioner to take the requested 

deposition to investigate a potential claim outweighs the burden or expense of 

the procedure. In re Does, 337 S.W.3d 862, 865 (Tex. 2011) (orig. proceeding); 

Jorden, 249 S.W.3d at 423.
15

Rule 202 depositions are not now and never have been intended for 

routine use. Jorden, 249 S.W.3d at 423. There are practical as well as due 

process problems with demanding discovery from someone before telling them 

what the issues are. Id. To prevent an end-run around discovery limitations that 

would govern the anticipated suit, a rule 202 petitioner cannot obtain by rule 202 

what it would be denied in the anticipated action. Wolfe, 341 S.W.3d at 933. 

Accordingly, courts must strictly limit and carefully supervise presuit discovery to 

prevent abuse of the rule. Id.

C. To Obtain Presuit Discovery of Information that Qualifies as Trade 

Secret Information, the Burdens Imposed Under Rule of Evidence 507 and

Rule of Civil Procedure 202 Must Both Be Satisfied

Rule 202.5 provides, ―The scope of discovery in depositions authorized by 

this rule is the same as if the anticipated suit or potential claim had been filed.‖ 

Tex. R. Civ. P. 202.5. Thus, the burden-shifting procedure utilized when a party 

to a lawsuit resists discovery by asserting the trade secret privilege set forth in 

rule 507 of the rules of evidence is equally applicable when a party resists 

discovery sought by a rule 202 petition by claiming trade secret privilege.7 

Accord Wolfe, 341 S.W.3d at 933 (recognizing presuit discovery under rule 202 

is the same as if the anticipated suit or potential claim had been filed). 

 

7

This is the position taken by TD Ameritrade; it argues that ―the Rule 507 

analysis applicable here should be exactly the same as it would be had TD 

Ameritrade actually filed its trade secret misappropriation claim first and then 

sought the same discovery.‖ 
16

A rule 202 petitioner must also establish either that allowing the requested 

deposition may prevent a failure or delay of justice in an anticipated suit or that 

the likely benefit of allowing the requested deposition to investigate a potential 

claim outweighs the burden or expense of the procedure. Tex. R. Civ. P. 

202.4(a)(1), (2); Does, 337 S.W.3d at 865. This is a totally separate burden than 

the burden shifted to a party seeking discovery of information proved by the party 

resisting discovery to constitute trade secret information. Compare Does, 337 

S.W.3d at 865, with Bridgestone/Firestone, Inc., 106 S.W.3d at 733. 

So, a rule 202 petitioner seeking presuit discovery of information that has 

been proven to be trade secret information must first satisfy the burden under 

rule 507 of the rules of evidence of demonstrating the necessity for its discovery 

of the trade secret information by showing with specificity exactly how denial of 

the discovery will impair the presentation of its case on the merits to the extent

that an unjust result is likely. See Bridgestone/Firestone, Inc., 106 S.W.3d at 

733; Cont’l Gen. Tire, Inc., 979 S.W.2d at 613. If a rule 202 petitioner satisfies 

this burden of showing the necessity for discovery of the trade secret information, 

the rule 202 petitioner must next show that it is entitled to obtain such trade 

secret information presuit because allowing the requested deposition and 

associated document production may prevent a failure or delay of justice in an 

anticipated suit or that the likely benefit of allowing the requested deposition and 

associated document production to investigate a potential claim outweighs the 

burden or expense of the procedure. Tex. R. Civ. P. 202.4(a)(1), (2); Does, 337 
17

S.W.3d at 865. In summary, a rule 202 petitioner seeking presuit discovery of 

information that has been proven to be trade secret information must satisfy both 

of the two distinct and separate burdens imposed under rule 507 of the rules of 

evidence and under rule 202 of the rules of civil procedure. See HewlettPackard, 212 S.W.3d at 363–64 (addressing both burdens); In re Rockafellow, 

No. 07-11-00066-CV, 2011 WL 2848638, at *3 (Tex. App.––Amarillo 2011, orig. 

proceeding) (mem. op.) (same). 

D. Analysis

1. PrairieSmarts Established that the Information Sought by TD Ameritrade

Concerning PortfolioDefenseTM Constitutes Privileged Trade Secret 

Information

Dr. Piccinini explained in his affidavit that PortfolioDefenseTM is ―based on 

my life[‘s] work in this area and put into functional computer code using Mr. 

Rockwell‘s computer programing expertise.‖ He stated that the details of how 

PortfolioDefenseTM works and how it was developed are not known outside of 

PrairieSmarts and that it cannot be duplicated by others without access to 

PortfolioDefenseTM‘s underlying programming code and its models. Dr. Piccinini 

and Rockwell are the only PrairieSmarts employees with access to the 

PortfolioDefenseTM computer code and to the details of the methods and models 

used in PortfolioDefenseTM; Nagy and Chochon do not have access. The 

secrecy of PortfolioDefenseTM is guarded by restricted access to its programming 

code and models through multiple layers of authorization by limiting access to Dr. 

Piccinini and Rockwell, by storing the PortfolioDefenseTM information on secured 
18

servers protected by a commercial grade firewall, and by refusing to disclose or 

share the PortfolioDefenseTM software or its underlying models with any third 

parties. PortfolioDefenseTM is the only asset of PrairieSmarts and is extremely 

valuable to PrairieSmarts. According to PrairieSmarts, PortfolioDefenseTM is the 

only product of its kind that provides individual investors with information on all 

types of investments so that the value of PortfolioDefenseTM is significant not only 

to PrairieSmarts but also to its competitors. At the time Dr. Piccinini signed his 

affidavit, PrairieSmarts had expended $300,000 to $850,000 and had spent 

months to develop PortfolioDefenseTM. Dr. Piccinini further stated in his affidavit 

that ―PortfolioDefense cannot be duplicated by others without access to 

PortfolioDefense‘s underlying programming and its models. Others may try to 

develop a similar product, . . . but while any such product may perform similar to 

PortfolioDefense, it could not result in the same output assessment of risk even 

with identical input parameters.‖ The documents produced by PrairieSmarts for 

in camera review by Respondent likewise support the trade secrets privilege

asserted by PrairieSmarts.

8

 

8

TD Ameritrade contends that PrairieSmarts does not rely on the 

documents themselves to meet the burden of establishing trade secret status. 

But Relators‘ unopposed motion to file documents under seal that was filed in 

this court explained that PrairieSmarts submitted for in camera review by 

Respondent the documents that it contends are protected and requests that 

those documents be filed under seal in our court as part of the mandamus 

proceeding so that we may examine all of the evidence considered by 

Respondent. Thus, the documents were before Respondent and are before us in 

addressing the issue of trade secret status.
19

Applying the trade secret factors enunciated by the Texas Supreme Court,

each of the factors weighs in favor of Relators; the record establishes and we 

hold that Relators met their burden of showing that all but one category of the 

information sought by TD Ameritrade—both by asking deposition questions on 

the topics listed above9 with the exception of deposition topic (h) and by 

production of documents in the categories listed above—constitutes trade secret

information.10 See, e.g., Union Pac. R.R. Co., 294 S.W.3d at 591–92 (applying 

factors and holding ―Union Pacific‘s affidavits establish trade secret protection 

under the Restatement factors‖); Bass, 113 S.W.3d at 739–42 (applying factors 

and holding that relator‘s evidence, including affidavits, established that ―seismic 

data and its interpretations are trade secrets‖ although the fifth factor did not 

weigh in favor of trade secrets protection); Rockafellow, 2011 WL 2848638, at *3 

(applying factors and holding that relator‘s affidavit established that relator‘s 

supplier list and information related to the identities of suppliers were trade 

secrets). 

 

9See In re Lowe’s Cos., 134 S.W.3d 876, 879–80 (Tex. App.—Houston 

[14th Dist.] 2004, orig. proceeding) (addressing assertion of trade secret privilege 

to information sought in a deposition). 

10Respondent‘s order, although containing the ―Attorney‘s Eyes Only‖ 

provision, did not make an express finding that PrairieSmarts had established 

that information sought by TD Ameritrade constituted trade secrets; TD 

Ameritrade asserts in its response to PrairieSmarts petition for writ of mandamus 

that the information is not subject to a trade secret privilege. As set forth above, 

the record conclusively establishes that PrairieSmarts proved its trade secret 

privilege, except with regard to deposition topic (h).
20

2. TD Ameritrade’s Burden Under Rule of Evidence 507 Not Satisfied

Once PrairieSmarts met its burden to establish that the information sought 

by TD Ameritrade constituted privileged trade secret information under rule 507 

of the Texas Rules of Evidence, the burden then shifted to TD Ameritrade to 

show that the trade secret information sought is necessary for a fair adjudication 

of TD Ameritrade‘s claims. See Cont’l Gen. Tire, Inc., 979 S.W.2d at 613. In its 

second issue, PrairieSmarts argues that TD Ameritrade did not satisfy this 

burden because TD Ameritrade did not produce any evidence or expert 

testimony to support its contention that the trade secret information sought by TD 

Ameritrade from PrairieSmarts is necessary to support any claim against 

PrairieSmarts.11 According to PrairieSmarts, TD Ameritrade has not identified 

any injustice that will ensue if it is not granted pre-suit access to the 

 

11PrairieSmarts also argues that TD Ameritrade cannot meet its burden of 

establishing that the trade secret information sought by TD Ameritrade is 

necessary for the fair adjudication of the merits of an existing claim because 

there is no existing claim. See, e.g., Bass, 113 S.W.3d at 743 (explaining in a 

non-rule 202 case that ―in order for trade secret production to be material to a 

litigated claim or defense, a claim or defense must first exist‖ and holding as a 

matter of law the claim did not exist); Hewlett-Packard, 212 S.W.3d at 363 (citing 

Bass in a rule 202 proceeding for the proposition that ―[i]n order for a trial court to 

determine whether the trade secret production is necessary for a fair adjudication 

of a claim or defense, a claim or defense must first exist‖ and holding that, 

because no claims existed, the required showing of a specific, real threat of an 

unjust result as opposed to a theoretical, possible threat of an unjust result was 

not possible). In light of rule 202.5‘s provision that ―[t]he scope of discovery in 

depositions authorized by this rule is the same as if the anticipated suit or 

potential claim had been filed,‖ we decline to hold that a rule 202 petitioner can 

never obtain presuit discovery of trade secret information simply because a suit 

has not been filed. 
21

PortfolioDefense programming but has demonstrated only that it would be 

convenient, possibly less expensive, and a source of ―comfort‖ to it regarding the 

alleged misuse of its property. 

TD Ameritrade contends that it met its burden of establishing necessity 

under the rule 507 burden-shifting analysis. It references the facts that it 

presented at the hearing in the trial court on its rule 202 petition—these are the 

same facts contained in the three demonstrative exhibits titled, ―Facts About 

PrairieSmarts‘s Principals,‖ ―Timeline,‖ and ―Facts Justifying Investigation.‖ 

These facts, TD Ameritrade contends, indicate ―the highly suspect circumstances 

at play here.‖ TD Ameritrade asserts that it established necessity because ―the 

[trade secret] information at issue is the very subject of TD Ameritrade‘s claim of 

misuse or misappropriation.‖ 

The facts relied upon by TD Ameritrade to justify investigation into a claim 

against PrairieSmarts are facts relevant to the rule 202 burden, not to the burden 

shifted to TD Ameritrade under rule 507. That is, the facts contained in the three 

demonstrative exhibits titled, ―Facts About PrairieSmarts‘s Principals,‖ ―Timeline,‖ 

and ―Facts Justifying Investigation‖ are relevant to establishing whether TD 

Ameritrade met its rule 202 burden to show that the benefit of allowing TD 

Ameritrade to take the requested depositions to investigate a potential claim for 

misuse or misappropriation of proprietary information outweighs the burden and 

expense of the procedure. But these facts do not rise to the level of a 

particularized showing that PrairieSmarts‘s trade secret information is necessary 
22

to enable TD Ameritrade to prove of one or more material elements of its claims 

against PrairieSmarts and that it is reasonable to conclude that the information 

sought is essential to a fair resolution of a misuse or misappropriation lawsuit

against PrairieSmarts—facts required by the rule 507 burden.

12 See 

Bridgestone/Firestone, Inc., 106 S.W.3d at 732; Cont’l Gen. Tire, Inc., 979 

S.W.2d at 613. The facts justifying an investigation alleged by TD Ameritrade 

and asserted at the hearing on its rule 202 petition concerning the ―highly 

suspect circumstances at play here‖ certainly establish that PrairieSmarts‘s trade 

secret information might be useful to TD Ameritrade in prosecuting a lawsuit. But 

merely proving that trade secret information might be useful—even useful in 

preparing an expert report with the least amount of uncertainty—does not prove 

that disclosure of the trade secret information is necessary or essential to a fair 

resolution of TD Ameritrade‘s claims. See Cont’l Gen. Tire, Inc., 979 S.W.2d at 

611; XTO Res. I, LP, 248 S.W.3d at 905. Although the facts justifying an 

investigation by TD Ameritrade demonstrate the possible threat of an unjust 

result in a misuse or misappropriation of trade secrets claim, they do not, 

standing alone, satisfy the required higher standard of demonstrating a real

threat of an unjust result. See Bridgestone/Firestone, 106 S.W.3d at 734 

(explaining that ―[t]he mere possibility of unfairness is not enough to warrant 

disclosure‖ of trade secret information). The facts justifying an investigation by 

 

12TD Ameritrade does not link the requested trade secret discovery to 

proof of any element of any cause of action.
23

TD Ameritrade likewise do not establish that the only means available to TD 

Ameritrade to discover whether Dr. Piccinini, Chochon, Nagy, and Rockwell 

misused or misappropriated TD Ameritrade‘s confidential, proprietary information 

is by the production of the trade secret documents and information listed in TD 

Ameritrade‘s rule 202 petition and ordered produced by Respondent. See Union 

Pac. R.R. Co., 294 S.W.3d at 593.

13

 In summary, the facts presented by TD 

Ameritrade as justifying an investigation are relevant to a determination of rule 

202.4(a)(2)‘s requirement that ―the likely benefit of allowing the [rule 202] 

petitioner to take the requested deposition to investigate a potential claim 

outweighs the burden or expense of the procedure,‖14 but they do not satisfy TD 

Ameritrade‘s burden under rule 507 to establish ―with specificity exactly how the 

lack of the [trade secret] information will impair the presentation of the case on 

the merits to the point that an unjust result is a real, rather than a merely 

possible, threat.‖ Bridgestone/Firestone, Inc., 106 S.W.3d at 733.

 

13While evidence that trade secret information is not available through any 

other means is not a required showing, it is evidence supporting a finding of 

necessity for disclosure. See Union Pac. R.R. Co., 294 S.W.3d at 593.

14TD Ameritrade also argues that Respondent ―would have been within its 

discretion to include consideration of the protective order‘s terms and conditions 

in its weighing of the ultimate likely benefit and the burden.‖ That a trial court has 

ordered the parties to enter into a protective order with respect to trade secret 

information, however, does not dispense with the requesting party‘s burden to 

establish the necessity for the discovery of the trade secret information. See

Hewlett-Packard, 212 S.W.3d at 364 (citing Cont’l Gen. Tire, Inc., 979 S.W.2d at 

610). 
24

Because PrairieSmarts established that all of the information sought by TD 

Ameritrade in its verified rule 202 petition, with the exception of deposition topic 

(h), constitutes trade secret information, and because TD Ameritrade failed to 

satisfy the burden under rule 507 of the rules of evidence of establishing 

necessity, we hold that Respondent abused his discretion by ordering the presuit 

depositions and the document production. See Bass, 113 S.W.3d at 738 (―If a 

trial court orders production once trade secret status is proven, but the party 

seeking production has not shown a necessity for the requested materials, the 

trial court‘s action is an abuse of discretion.‖). We sustain Relators‘ second 

issue.15

VI. CONCLUSION

Having determined that Respondent abused his discretion by issuing an 

order permitting presuit discovery of information and documents that were proven

to be subject to a trade secrets privilege in the absence of proof of necessity by 

TD Ameritrade, we conditionally grant the writ. Respondent is directed to vacate 

his September 18, 2013 order authorizing the presuit depositions of Rockwell 

and PrairieSmarts and compelling the production of documents concerning 

PortfolioDefenseTM.

16

 Because we are confident that Respondent will comply 

 

15Because PrairieSmarts‘s second issue is dispositive, we need not 

address its other issues.

16Although deposition topic (h) in TD Ameritrade‘s rule 202 petition does 

not seek trade secret information, because rule 202‘s benefit-burden analysis will 

be different given the viability of only one topic on which only Rockwell may be 
25

with this directive, the writ will issue only if Respondent fails to do so. Our 

disposition of this original proceeding serves to lift the stay previously imposed by 

this Court. See Tex. R. App. P. 52.10(b).

/s/ Sue Walker

SUE WALKER

JUSTICE 

PANEL: GARDNER, WALKER, and MEIER, JJ.

MEIER, J. filed a concurring opinion.

DELIVERED: January 23, 2014

 

deposed, this provision must likewise be vacated. Nothing in this opinion, 

however, precludes further action in the trial court by the parties, if they so 

choose, to attempt to obtain a presuit deposition concerning deposition topic (h) 

from Rockwell only, not PrairieSmarts. And nothing in this opinion precludes 

Respondent from hearing such a request or ruling on it after conducting the rule 

202.4(a)(2) benefit-burden test.