Court Rules Company’s Pricing and Financing Terms are Trade Secret and Protected From Disclosure

Posted on: September 12th, 2016

Sysco Iowa, Inc., a food distribution company, appealed a district court’s determination its contract with the University of Iowa does not contain trade secrets, and therefore, is subject to disclosure under Iowa’s Open Records Act.

Sysco and the University of Iowa entered into a contract in 2008, providing Sysco would supply the University with food distribution services from September 2008 through August 2013. The contract contained a confidentiality provision and included information detailing Sysco’s pricing, financing, discount, and delivery terms. A local reporter requested a copy of the contract from the University, pursuant to Iowa’s Open Records Act. Sysco filed a petition seeking an injunction, asserting the contract contained trade secrets. Sysco argued disclosure of the contract would serve no public purpose, but would instead cause substantial and irreparable injury to Sysco by giving its competitors an advantage. The district court found the information in the contract did not qualify for a trade secret exemption to the Open Records Act, and Sysco failed to establish the necessary elements for injunctive relief.

On appeal, the Court of Appeals considered whether the district court erred in finding the information contained in the contract was not a trade secret, thus not exempt from disclosure under the Open Records Act.

The Open Records Act gives citizens the right to examine and copy records maintained by local governmental bodies supported by citizens’ property taxes. The Act supports “a presumption of openness and disclosure.”  Despite the presumption of openness, trade secrets are exempt from the Open Records Act. Determining whether information is a trade secret is a mixed question of law and fact. One element of a trade secret is information that “derives independent economic value.”

The Court of Appeals found Sysco’s claim that disclosure of the entire contract would provide an advantage to Sysco’s competitors was a legitimate concern. The Court held relevant portions of the contract would provide competitors with a blueprint of Sysco’s operating model. Although the Court stated there was no Iowa case law on point, the Court looked to different jurisdictions and held relevant portions of the Sysco contract have independent economic value. The Court articulated:

Sysco derives independent economic value in keeping that knowledge away from its competitors, who would be able to use the information to gain an unfair advantage in bids for future contracts.

The Court of Appeals held the contract contained trade secrets and the trade secrets are exempt from disclosure. The Court of Appeals reversed the district court’s findings.

Sysco Iowa, Inc. v. University of Iowa, No. 15-0999 (Ct. App. Iowa, Aug. 17, 2016).

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