ESPN Productions Scores Win with Indiana Tax Court’s Ruling Prohibiting Public Access to its Tax Returns and Trade Secrets
On April 9, 2015, ESPN Productions, Inc. recorded its biggest play of the day in the Indiana Tax Court, when the Court granted the Company’s request to seal from public disclosure tax returns, a production services agreement, and two cable television license agreements. ESPN Productions performs production services for its parent company, ESPN, Inc., and protested the Department of Revenue’s corporate income tax assessments for the four years at issue. On appeal to the Tax Court, ESPN Productions filed a motion for summary judgment. It also requested a protective order for the aforementioned documents and a “Supplement to Protest,” which were submitted in support of the motion.
The Court conducted a hearing on the request. No member of the public appeared to testify against sealing the documents. The Department did not object to the protective order.
The Court first explained that Indiana’s Access to Public Records Act (APRA) guarantees that “all persons are entitled to full and complete information regarding the affairs of [their] government.” Slip op. at 3 (quoting Ind. Code § 5-14-3-1). Moreover, the Indiana Supreme Court has adopted Administrative Rule 9 “to secure the public’s access to court records.” Slip op. at 4. However, both the APRA and Administrative Rule 9 allow exceptions to the general rule of public access – including the exclusion of tax returns and trade secrets.
The tax returns clearly were excluded from public access by statute and Administrative Rule 9.
The production services and cable television license agreements were excluded from public access as trade secrets. Protecting trade secrets, the Tax Court observed, “helps to foster a healthy, competitive marketplace.” Slip op. at 6 (citation omitted). The Court further explained: “Indiana courts have long held that a trade secret has four general characteristics: 1) it is information; 2) that derives independent economic value; 3) from not being generally known, or readily ascertainable by proper means by others who can obtain economic value from its disclosure or use; and 4) that is the subject of efforts, reasonable under the circumstances, to maintain its secrecy.” Id. The agreements met these standards. Each contained pricing information that derived independent value from not being known or readily ascertainable by competitors, and they included confidentiality clauses to preserve the secrecy of the information.
The Court declined to seal the Supplement to Protest. Specifically, ESPN Productions sought to exclude two quotes from the document. The Court refused, however, because “the quotations do not contain any business model or pricing information; rather, the quotations merely and innocuously state the general purpose” of the cable television license agreements. Slip op. at 9.
The Court’s order in ESPN Productions, Inc. v. Department of State Revenue, Cause No. 49T10-1312-TA-76, can be viewed here.