Hartsock v. Goodyear Dunlop Tires North America Ltd.

UNPUBLISHED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,

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Unpublished Order of Certification of a question of law to the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Unpublished opinions are not binding precedent in this circuit.

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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.

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

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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.

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.

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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

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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.

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.

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”).