Commercial Contract Confidentiality: Boeing Changes Landscape

Matthew Marion 'Matt' Coleman's Education Law Legal Blogs

Licensed for 4 years

Attorney in Austin, TX

By Matthew M. Coleman, Associate
Eichelbaum Wardell Hansen Powell & Mehl, P.C.

School districts should be aware of a recent
Texas Supreme Court decision regarding a key provision of the TPIA, which could
have a major impact on their contracts with third parties. On June 19, 2015,
the Texas Supreme Court issued its decision in
Boeing
Co. v. Paxton
, a suit in
which Boeing and the Port Authority of San Antonio sued the Attorney General to
prevent the release of some of Boeing’s information. The Port Authority had
voluntarily notified Boeing that they had received a request for information,
and Boeing asked the Attorney General to withhold information that would allow
their competitors to gain an advantage in future project bids. After Boeing
lost at the trial and appellate courts, the Texas Supreme Court ruled in favor
of Boeing and held that third parties have the right to assert their
competitive interests in withholding information.

At issue in Boeing was section § 552.104 of the
TPIA, which states that information is exempt from mandatory disclosure under
the TPIA if it “would give advantage to a competitor or bidder” upon release. This
is an extremely broad category of information, and could potentially include
any documents or data regarding a third party. The Texas Attorney General had
long held that only government bodies could raise § 552.104, and third parties
could not. Boeing v. Paxton overruled
the Attorney General, and held that § 552.104 is not limited to government
bodies, and applies equally to any person or entity that has a stake in a TPIA
request. Third parties have a right to assert § 552.104 and request that their
information be withheld from public disclosure.

Ultimately,
this means that your vendors and contractors (and really, anyone your district
does business with) have a greater stake in the kinds of information you
release under the TPIA. Vendors and contractors have a right to object when
their information has been requested, but crucially, Boeing did not discuss whether the government body had a duty to
notify a third party when their rights under §552.104 are implicated.

Under the
TPIA, districts are only required to notify third parties of their rights in a
handful of situations, and the Legislature (through foresight or accident) left
§ 552.104 off that list. Fortunately for school districts, this means that you
don’t have a statutory obligation to notify each and every vendor or contractor
when their information has been requested (though you still have to notify them
if, for example, their proprietary information has been requested).

Unfortunately,
Boeing should give you some cause for
concern when it comes to the contracts your district signs with third parties. Confidentiality
clauses are relatively common in contracts, and from time to time contracts
even cite the TPIA directly. Under these kinds of contract clauses, a school
district might violate the agreement if they release information under a TPIA
request that could have been withheld. Since now we know that § 552.104 applies
to third parties, the amount of information that can be withheld under the TPIA
has expanded significantly. While the consequences of violating a
confidentiality clause will vary from contract to contract, a school district’s
best bet is to try to avoid the conflict to begin with.

If your
district has contracts with these kinds of clauses, your best practice should
be to notify the third party and your school attorney when you receive a
request for the third party’s information. From there, your school attorney can
guide you through the TPIA process and ensure you don’t violate either the TPIA
or the contract. Going forward, Boeing
gives school districts strong incentive to negotiate confidentiality clauses
out of their contracts from the very beginning. As always, if you’re unsure
about whether a contract clause is something you should be concerned about, Boeing or otherwise, you should seek
professional legal assistance from your school attorney.

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