Court Opinion

ID: 4103012
Source: CourtListenerOpinion
Date Created: 2016-11-29 20:01:20.299865+00
Date Added: 2024-06-11T13:08:34.057185
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                              No. 16-1172

THEODORE G. HARTSOCK, JR., as Personal Representative of the
Estate of Sarah Mills Hartsock (Estate of Sarah Mills
Hartsock),

                Plaintiff – Appellee,

           v.

GOODYEAR   DUNLOP TIRES  NORTH AMERICA LTD,  a                 foreign
corporation; GOODYEAR TIRE & RUBBER COMPANY, a                 foreign
corporation,

                Defendants – Appellants.

--------------------------------------

RUBBER MANUFACTURERS ASSOCIATION;        THE    PRODUCT      LIABILITY
ADVISORY COUNCIL, INC.,

                Amici Supporting Appellants,

THE SAFETY INSTITUTE; SOUTH CAROLINA ASSOCIATION FOR JUSTICE,

                Amici Supporting Appellee.

Appeal from the United States District Court for the District of
South Carolina, at Charleston.    Patrick Michael Duffy, Senior
District Judge. (2:13-cv-00419-PMD)

Argued:   October 27, 2016                  Decided:    November 29, 2016

Before SHEDD and    KEENAN,    Circuit   Judges,       and   DAVIS,   Senior
Circuit Judge.
Unpublished Order of Certification of a question of law to the
Supreme Court of South Carolina.

ARGUED: Earle Duncan Getchell, Jr., MCGUIREWOODS LLP, Richmond,
Virginia, for Appellants.     Mark Charles Tanenbaum, MARK C.
TANENBAUM, P.A., Charleston, South Carolina, for Appellee.    ON
BRIEF: Michael H. Brady, MCGUIREWOODS LLP, Richmond, Virginia;
M. Gary Toole, Bianca G. Liston, MCDONALD TOOLE & WIGGINS, P.A.,
Orlando, Florida, for Appellants.    Mia Lauren Maness, MARK C.
TANENBAUM, P.A., Charleston, South Carolina, for Appellee.
Debora B. Alsup, THOMPSON & KNIGHT LLP, Austin, Texas, for
Amicus Rubber Manufacturers Association. Timothy L. Mullin,
Donna P. Sturtz, MILES & STOCKBRIDGE, P.C., Baltimore, Maryland;
Hugh F. Young, Jr., PRODUCT LIABILITY ADVISORY COUNCIL, INC.,
Reston, Virginia, for Amicus The Product Liability Advisory
Council, Incorporated. Courtney L. Davenport, THE DAVENPORT LAW
FIRM LLC, Germantown, Maryland, for Amicus The Safety Institute.
John S. Nichols, BLUESTEIN NICHOLS THOMPSON & DELGADO, LLC,
Columbia, South Carolina, for Amicus South Carolina Association
for Justice.

Unpublished opinions are not binding precedent in this circuit.

                                2
PER CURIAM:

       Pursuant to Rule 244 of the South Carolina Appellate Court

Rules, we respectfully certify the following question of law to

the Supreme Court of South Carolina:

       Does South Carolina recognize an evidentiary privilege
       for trade secrets?

As we explain, we believe that no directly controlling South

Carolina authority answers this question. Moreover, the answer

will   determine      whether     federal       or    state    law    applies     to    the

discovery      of    trade     secrets    in      this      diversity    action        and,

consequently, will be determinative of this appeal.

                                            I

       In    July    2010,    Sarah     Mills     Hartsock      was     killed    in     an

automobile      crash    on    Interstate       26    in    Calhoun     County,    South

Carolina.      Her    personal    representative,           Theodore     G.   Hartsock,

Jr., brings this survival and wrongful death action asserting

claims      under     South      Carolina       law      for    negligence,       strict

liability, and breach of warranty. Mr. Hartsock alleges that the

vehicle in which Mrs. Hartsock was riding was struck head-on by

another      vehicle.    That    vehicle        had   crossed    the     median    after

suffering a blowout of an allegedly defective tire that Goodyear

Dunlop      Tires    North    America    Ltd.     and      Goodyear    Tire   &   Rubber

                                            3
Company designed, manufactured, and marketed. 1 Federal subject-

matter jurisdiction exists under 28 U.S.C. § 1332 based upon

complete     diversity     of    citizenship          between      the     parties     and

damages alleged to be greater than $75,000.

      During    pretrial       discovery        a    dispute      arose    between    the

parties over certain Goodyear material relating to the design

and     chemical   composition         of   the      allegedly      defective        tire.

Goodyear objected to producing this material, asserting that it

constitutes trade secrets. The district court eventually found,

and Mr. Hartsock does not dispute, that the material does, in

fact,     constitute     trade    secrets.          However,      the     court   ordered

Goodyear to produce the material subject to a confidentiality

order.     In   doing    so,     the    court        applied      federal     discovery

standards, rejecting Goodyear’s contention that South Carolina

trade secret law applies.

      Goodyear thereafter moved for reconsideration, reiterating

its argument that South Carolina law applies. The district court

denied    the   motion    but    certified          its   order    for    interlocutory

review pursuant to 28 U.S.C. § 1292(b). 2 The court also stayed

      1Goodyear Dunlop is now known as Sumitomo Rubber USA, LLC.
For ease of reference, we will refer to the defendants
collectively as “Goodyear.”
      2 Section 1292(b) provides that when a district judge
believes that an order that is otherwise not appealable
“involves a controlling question of law as to which there is
(Continued)
                                            4
the   proceedings       pending    Goodyear’s     anticipated     appeal.   After

Goodyear appealed, a panel of this Court agreed to permit the

appeal. The parties filed briefs, and we heard oral arguments in

October 2016.

                                          II

      Goodyear contends that “the district court erred when it

applied Rule 26 [of the Federal Rules of Civil Procedure] and

federal case law, rather than the South Carolina Trade Secrets

Act (“SCTSA”), S.C. Code Ann. §§ 39-8-10 through 39-8-130, and

South   Carolina        precedent,        in   determining     the     burden   of

production and persuasion that Hartsock must bear to overcome

the   trade    secret    privileges       asserted   by    Defendants.”   Opening

Brief of Appellants, at 2. In Goodyear’s view, the SCTSA – as

interpreted in Laffitte v. Bridgestone Corp., 674 S.E.2d 154

(S.C. 2009) – provides “greater protections from discovery of

trade secrets for civil litigants than [currently] recognized by

federal common law,” Opening Brief of Appellants, at 19, and

Goodyear asserts, as it did below, that Mr. Hartsock has not met

his   burden    under     the     state    standard.      Goodyear’s   appeal   is

substantial ground for difference of opinion and that an
immediate appeal from the order may materially advance the
ultimate termination of the litigation, he shall so state in
writing in such order.” In that instance, the court of appeals,
“in its discretion, [may] permit an appeal to be taken from such
order.”

                                           5
premised on its assertion that South Carolina law recognizes an

evidentiary privilege for trade secrets.

       Mr. Hartsock agrees that the issue presented “is the legal

standard       to    be    applied      in    determining        when      and       under    what

conditions . . . trade secrets [must be] disclosed in products

liability litigation based on diversity jurisdiction.” Brief of

Appellee, at 2. Not surprisingly, however, he disagrees with

Goodyear’s assertion that state law applies. Instead, he argues

that the “only law applicable to the issue before the Court

derives from the Federal Rules of Civil Procedure and federal

common law.” Id. at 11. Further, despite his insistence that

only       federal    law    applies,        he       contends   that      “the       SCTSA    and

federal rule are not, in fact, contradictory.” Id. Taking this

argument      a     step    further,     he    asserts        that   even    if       the    state

standard      applies,       “it   is    improbable           that   the    District         Court

would have reached a different conclusion.” Id. at 33. 3

                                              III

       “The       federal     courts     have          long   recognized         a    qualified

evidentiary privilege for trade secrets and other confidential

commercial information.” Federal Open Mkt. Comm. of Fed. Res.

Sys. v. Merrill, 443 U.S. 340, 356 (1979). Being a qualified

       3
       This assertion seems debatable in light of the district
court’s certification of the issue under § 1292(b). We express
no opinion in that regard.

                                                  6
privilege,    federal        courts     have    not     afforded       “automatic    and

complete    immunity      against       disclosure,      but    have    in   each    case

weighed [the] claim to privacy against the need for disclosure.”

Id. at 362 (citation omitted). Thus, as a general matter of

federal litigation, “trade secrets have widely been held to be

discoverable upon appropriate findings and with an appropriate

protective order.” MDK, Inc. v. Mike’s Train House, Inc., 27

F.3d 116, 120 (4th Cir. 1994).

      From a procedural standpoint, the district court acted in

accordance    with     this     general        proposition       in    resolving      the

discovery     issue.        Goodyear     does     not     take     issue     with    the

proposition itself. Instead, as noted, Goodyear contends that

the   proposition      is    inapplicable       because        South    Carolina     law,

rather than federal law, applies.

      Because this is a diversity case, we are obliged to apply

state substantive law and federal procedural law. Gasperini v.

Center for Humanities, Inc., 518 U.S. 415, 427 (1996). The issue

presented    involves       both    a    matter    of    pretrial       discovery     and

evidence. Ordinarily, “the Federal Rules of Civil Procedure and

Federal     Rules    of      Evidence     govern        the    disputes      concerning

discovery    and    the      admission     of     evidence.”       Bradshaw     v.    FFE

Transp. Servs., Inc., 715 F.3d 1104, 1107 (8th Cir. 2013).

      Because the district court applied federal law to resolve

the parties’ discovery dispute, the preceding statement appears

                                           7
at first blush to be dispositive. The twist, however, arises

from Goodyear’s contentions that South Carolina recognizes an

evidentiary privilege for trade secrets and the standard for

disclosure       of    such       information         is    more       stringent      than     the

federal standard. Goodyear’s argument implicates Rule 501 of the

Federal Rules of Evidence, which provides that “in a civil case,

state law governs privilege regarding a claim or defense for

which state law supplies the rule of decision.” Under this rule,

when, as here, “the substantive decision . . . is governed by

state law, the state law also determines the privilege of a

witness.” Seidman v. Fishburne-Hudgins Educ. Found., Inc., 724

F.2d 413, 415 n.1 (4th Cir. 1984).

      This      brings      us    to    the    heart       of    the   matter:       does    South

Carolina     recognize           such   a     privilege?         The    parties      vigorously

dispute this point. Compare Brief of Appellee, at 11 (“South

Carolina’s      Trade       Secrets      Act     does      not    include      creation      of   a

trade secrets privilege.”) with Reply Brief of Appellants, at 1-

2 (“Rule 501 . . . requires application of South Carolina’s

trade     secrets          privilege        to       Hartsock’s        effort        to     compel

production       of    Defendants’            Trade     Secrets”).        If     Goodyear         is

correct that South Carolina recognizes an evidentiary privilege

for     trade     secrets,         then       South     Carolina         law     governs       the

determination         of    whether      Mr.     Hartsock        has    met    his    burden      to

                                                 8
require Goodyear to produce the trade secrets. Conversely, if

Mr. Hartsock is correct, then federal law applies.

     The     Supreme     Court     of    South       Carolina       has   stated       that

“privileged    matter      in    South    Carolina         is    matter   that    is    not

intended to be introduced into evidence and/or testified to in

Court.” S.C. State Hwy. Dept. v. Booker, 195 S.E.2d 615, 620

(S.C. 1973). The court has also recognized that not every matter

intended to be “confidential” is necessarily “privileged.” See

S.C. St. Bd. of Med. Examiners v. Hedgepath, 480 S.E.2d 724, 726

(S.C.   1997);     see   generally        Communist        Party    of    the    U.S.    v.

Subversive Activities Control Bd., 254 F.2d 314, 321 (D.C. Cir.

1958) (“Almost any communication . . . may be confidential. . .

. But privileged means that the contents are of such character

that the law as a matter of public policy protects them against

disclosure.”).

     We have not found any South Carolina authority that appears

to   definitively        answer         the       question.       Indeed,       different

provisions    of   South    Carolina          law   tend    to   point    to    different

answers. For example, Rule 30(j)(3) of the South Carolina Rules

of Civil Procedure defines the term “privilege” for deposition

purposes as including “trade secret protection.” That definition

supports Goodyear’s argument, but Mr. Hartsock can draw support

for his argument from Ex parte Capital U-Drive-It, Inc., 630

S.E.2d 464, 469 (S.C. 2006), in which the court stated: “Public

                                              9
access to court records may be restricted in certain situations,

such as matters involving juveniles, legitimate trade secrets,

or   information        covered   by    a     recognized    privilege.”     The

disjunctive nature of this statement suggests that trade secrets

are not covered by a “recognized privilege.”

     Of course, we are aware of the SCTSA and the state supreme

court’s interpretation of the act in Laffitte. Unquestionably,

the SCTSA reflects the state legislature’s intent to provide

trade   secrets     a     significant    level   of    protection.    However,

whether that protection amounts to an evidentiary privilege is

not clear from either the SCTSA or Laffitte. On one hand, the

Laffitte standard for handling civil discovery of trade secrets

seems   akin   to   the    qualified    evidentiary    privilege     for   trade

secrets that generally applies in federal courts. On the other

hand, in explaining the three-part balancing test it adopted for

determining whether trade secret information is subject to a

discovery protective order, the Laffitte court observed that “in

jurisdictions where trade secrets are protected by a codified

evidentiary    privilege,      the   courts    apply   a   similar   balancing

test.” 674 S.E.2d at 162 n.11. This observation could reasonably

be read to mean that unlike those other jurisdictions, South

                                        10
Carolina    does    not   have    a   codified     evidentiary   privilege   for

trade secrets. 4

     In light of the foregoing, we believe that the issue of

whether South Carolina recognizes an evidentiary privilege for

trade secrets is both unresolved by any definitive state law and

sufficiently debatable to warrant certification of the question

to the Supreme Court of South Carolina.

                                        IV

     One final point needs to be made. As noted, the parties

disagree whether the South Carolina and federal standards for

disclosure of trade secrets actually differ. Given its decision

to certify the issue for appeal, the district court appears to

agree with Goodyear that the South Carolina standard is more

stringent than the federal standard; otherwise, its decision to

certify the question for interlocutory appeal seems pointless.

At least one other district judge in South Carolina has viewed

the standards in this manner. See Griego v. Ford Motor Co., 19

F.Supp.2d    531,    532-33      (D.S.C.   1998)    (noting   that   the   SCTSA

provides “heightened protection for trade secrets” and “appears

to establish a more stringent standard for the production of

trade secrets” than the federal standard).

     4 The observation does leave open, however, the possibility
that the court itself was creating or recognizing an evidentiary
privilege for trade secrets.

                                        11
      To the extent it is relevant, several of the organizations

that filed amicus briefs in this appeal appear to agree as well.

For   example,       the   South   Carolina    Association       for     Justice         –

arguing in Mr. Hartsock’s favor – states: “The Supreme Court of

South Carolina has held the South Carolina General Assembly’s

amendment to the [SCTSA] provides a different test governing

disclosure.     The    issue     currently    before   the   Court       .    .    .    is

whether the [federal standard] should be discarded in favor of a

more restrictive test that results in unfairness to consumers.”

Brief     of   South       Carolina   Association      for   Justice,             at   i.

Similarly,     the    Rubber     Manufacturers     Association      –    arguing        in

Goodyear’s favor – contends that in South Carolina “there is a

heightened     burden      for   discovery    of   trade   secrets.”         Brief      of

Rubber Manufacturers Association, at 15. 5 There is also academic

commentary viewing the South Carolina standard as being more

stringent. See Ranee Saunders, If I Told You Then I’d Have To

Kill You: The Standard For Discovery of Trade Secrets in South

Carolina, 61 S.C. L. Rev. 717, 726 (2010) (noting that the test

expounded      by    the   Laffitte   court    “presents     some       slight,        but

distinct, differences from the balancing test applied in other

      5One amicus organization does not share Goodyear’s view.
See Brief of The Safety Institute (supporting Mr. Hartsock), at
24 (“TSI agrees with Hartsock that Federal Rule of Civil
Procedure 26 is the applicable standard and that the [SCTSA] is
compatible with, not contrary to, the federal standard.”).

                                        12
jurisdictions”        that    “increase        the    burden       on    South    Carolina

litigants requesting discovery of a trade secret”).

     Because         this    appeal       is     primarily           focused      on     the

applicability of state or federal law rather than the purported

difference      between      the    two   bodies      of     law,       and   because    the

district court appears to view the state standard as being more

stringent,      we   have    accepted     that       view    for     purposes     of    this

order. In this posture, if we conclude that South Carolina law

applies, then we will vacate the discovery order and remand for

further   proceedings         in    the   district          court,      which    is    best-

situated to supervise discovery. See Ardrey v. UPS, 798 F.2d

679, 682 (4th Cir. 1986) (explaining that the district court

“has wide latitude in controlling discovery” and that we will

not overturn its decisions “absent a showing of clear abuse of

discretion”). Of course, if the state supreme court agrees to

answer    the    certified         question,     then       our     decision     will    be

dictated by the court’s answer.

                                           V

     Based on the foregoing, we respectfully request that the

Supreme Court of South Carolina accept and answer the foregoing

certified question, thereby providing the parties, the courts,

                                          13
future    litigants,   and    the   public      with   definitive    guidance

regarding trade secrets in South Carolina. 6

     We direct the Clerk of Court to forward a copy of this

order    under   official    seal   to    the   Supreme    Court    of   South

Carolina.

                                                          QUESTION CERTIFIED

     6 See Brief of Rubber Manufacturers Association, at vi
(explaining that the question “is of great importance to trade
secret protections in general, and to tire manufacturers in
particular, whose competitive products are used in South
Carolina and throughout the nation”); Brief of The Safety
Institute, at 3 (noting that “this case appears to involve a
relatively   straightforward  analysis   of  which standard is
applicable to trade secret disclosure in a products liability
case based on diversity jurisdiction,” but it “also presents a
quandary from a public policy perspective”).

                                     14