UNPUBLISHED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Unpublished Order of Certification of a question of law to the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Unpublished opinions are not binding precedent in this circuit.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.”
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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
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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
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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
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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.
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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.”).
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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,
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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”).
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