Hartsock v. Goodyear Dunlop Tires N. Am. Ltd.

• Decision Date: 25 April 2018
• Docket Number: Opinion No. 27793,Appellate Case No. 2016-002398
• Court: South Carolina Supreme Court
• Parties: Theodore G. HARTSOCK, Jr., as Personal Representative of the Estate of Sarah Mills Hartsock (Estate of Sarah Mills Hartsock), Plaintiff-Respondent, v. GOODYEAR DUNLOP TIRES NORTH AMERICA LTD., a foreign corporation; Goodyear Tire & Rubber Company, a foreign corporation, Defendants-Appellants.

422 S.C. 643

813 S.E.2d 696

Theodore G. HARTSOCK, Jr., as Personal Representative of the Estate of Sarah Mills Hartsock (Estate of Sarah Mills Hartsock), Plaintiff-Respondent,

v.GOODYEAR DUNLOP TIRES NORTH AMERICA LTD., a foreign corporation; Goodyear Tire & Rubber Company, a foreign corporation, Defendants-Appellants.

Appellate Case No. 2016-002398

Opinion No. 27793

Supreme Court of South Carolina.

Heard September 28, 2017

Filed April 25, 2018

Wallace K. Lightsey, of Greenville, M. Gary Toole, of McDonald, Toole & Wiggins, of Orlando, Fl., pro hac vice, E. Duncan Getchell, Jr. and Michael H. Brady, both of McGuire Woods LLP, both of Richmond, Va., pro hac vice, for Defendants-Appellants.

Mark C. Tanenbaum of Mark C. Tanenbaum, P.A., of Mt. Pleasant; and Mia Lauren Maness, of Charleston, both for Plaintiff-Respondent.

Debora B. Alsup, of Thompson & Knight LLP, of Austin, Tx., pro hac vice, for Amicus Curiae the Rubber Manufacturers Association.

Frank L. Epps and Hannah Rogers Metcalfe, both of Greenville, for Amicus Curiae the South Carolina Association for Justice.

JUSTICE KITTREDGE :

This Court accepted the following certified question from the United States Court of Appeals for the Fourth Circuit:

Does South Carolina recognize an evidentiary privilege for trade secrets?

Answer: South Carolina does recognize an evidentiary privilege for trade secrets, but it is a qualified privilege.

I.

In its Order of Certification, the Fourth Circuit summarized the relevant facts and procedural history as follows:

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 Company [collectively "Goodyear"] designed, manufactured, and marketed. 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). The court also stayed the proceedings pending Goodyear's anticipated appeal. After Goodyear appealed, a panel of [the Fourth Circuit] agreed to permit the appeal. The parties filed briefs, and [the Fourth Circuit] heard oral arguments in October 2016.

Hartsock v. Goodyear Dunlop Tires N. Am. Ltd. , 672 Fed.Appx. 223, 224–25 (4th Cir. 2016) (footnotes omitted).

II.

We answer the certified question by analyzing how privileges are recognized in South Carolina and evaluating the South Carolina Trade Secrets Act (hereinafter "Trade Secrets Act"), S.C. Code Ann. §§ 39-8-10 to -130 (Supp. 2017).

A.

An evidentiary privilege is "[a] privilege that allows a specified person to refuse to provide evidence or to protect the evidence from being used or disclosed in a proceeding." Evidentiary Privilege , BLACK'S LAW DICTIONARY (10th ed. 2014). The principle underlying recognition of a privilege is simple: although the public "has a right to every man's evidence," an exception may be justified "by a public good transcending the normally predominant principle of utilizing all rational means for ascertaining truth." Jaffee v. Redmond , 518 U.S. 1, 9, 116 S.Ct. 1923, 135 L.Ed.2d 337 (1996) (citations omitted). "[A]n asserted privilege must also ‘serv[e] public ends.’ " Id. at 11, 116 S.Ct. 1923 (quoting Upjohn Co. v. United States , 449 U.S. 383, 389, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981) ).¹ In addition, "[i]t is well recognized that a privilege may be created by statute" as deemed appropriate by Congress or a state legislature. Baldrige v. Shapiro , 455 U.S. 345, 360, 102 S.Ct. 1103, 71 L.Ed.2d 199 (1982) ; accord In re Decker , 322 S.C. 215, 218–19, 471 S.E.2d 462, 463–64 (1995).

Some privileges are not limited solely to communications, and some privileges are absolute, while others are qualified. Among the more well-known privileges recognized in South Carolina are the privilege against self-incrimination, U.S. Const. amend. V, the attorney-client privilege, Drayton v. Industrial Life & Health Ins. Co. , 205 S.C. 98, 31 S.E.2d 148 (1944), and the news media qualified privilege.² S.C. Code Ann. § 19-11-100 (2014). A review of privileges in general reveals the common thread is that public policy favors the confidentiality of these communications or information. See, e.g. , S.C. State Highway Dep't v. Booker , 260 S.C. 245, 254, 195 S.E.2d 615, 619–20 (1973). Moreover, "privileged matter in South Carolina is matter that is not intended to be introduced into evidence and/or testified to in Court." Id. at 254, 195 S.E.2d at 620.

South Carolina has one evidentiary rule referencing privileges—Rule 501, SCRE —which states:

Except as required by the Constitution of South Carolina, by the Constitution of the United States or by South Carolina statute , the privilege of a witness, person or government shall be governed by the principles of the common law as they may be interpreted by the courts in the light of reason and experience.

(emphasis added). Thus, unlike many other jurisdictions, South Carolina does not delineate specific privileges through its rules of evidence. Rather, our evidentiary privileges are provided through an assortment of sources: the South Carolina or United States Constitution, the common law, or a statutory provision.

When construing a purported statutory privilege, there is no requirement that the word "privilege" be used by the General Assembly in order to evidence an intent to create one. See, e.g. , State v. Copeland , 321 S.C. 318, 323, 468 S.E.2d 620, 624 (1996) (citing section 19-11-30 of the South Carolina Code of Laws as providing a marital privilege although the statute does not use the word "privilege" and simply states "no husband or wife may be required to disclose any confidential or, in a criminal proceeding, any communication made by one to the other during their marriage" (emphasis added) ). Our role as a court, of course, is to interpret a statute to discern and effectuate legislative intent. Charleston Cty. Sch. Dist. v. State Budget & Control Bd. , 313 S.C. 1, 5, 437 S.E.2d 6, 8 (1993) ("The cardinal rule of statutory construction is to ascertain and effectuate the intent of the legislature.").

With these principles in mind, we turn to the question at hand—does South Carolina recognize an evidentiary privilege for trade secrets?

B.

Generally, a trade secret is "information including, but not limited to, a formula ... process, design, prototype, procedure, or code," which "derives independent economic value ... from not being ... readily ascertainable by proper means." S.C. Code Ann. § 38-9-20(5)(a). "[T]he value of a trade secret hinges on its secrecy," so "owners or inventors go to great lengths to protect their trade secrets from dissemination." Laffitte v. Bridgestone Corp. , 381 S.C. 460, 472, 674 S.E.2d 154, 161 (2009) (quoting Bridgestone Am. Holding, Inc. v. Mayberry , 878 N.E.2d 189, 192 (Ind. 2007) ) (footnote omitted). Indeed, the importance of "trade secret protection to a healthy economy has been widely accepted for some time." Id ."Over the last two hundred years, the law has developed mechanisms for accomplishing this end." Id. In South Carolina, the Trade Secrets Act is designed to protect trade secrets before, during, and after litigation. See S.C. Code Ann. §§ 39-8-10 to -130 (Supp. 2017); see also Laffitte , 381 S.C. at 473–74, 674 S.E.2d at 161–62. At issue here is the protection afforded during litigation.

Originally, in 1992, the General Assembly enacted the Uniform Trade Secrets Act ("UTSA"), which was narrow and focused upon actions regarding the misappropriation of trade secrets. However, in 1997, the General Assembly effectively repealed UTSA and replaced it with the Trade Secrets Act, which affords broad trade secret protections in any action—not just misappropriation. S.C. Code Ann. § 39-8-60(B). Most importantly, the new legislative provisions added the requirement for a "substantial need" to be shown before a trade secret holder would be compelled to disclose a trade secret.³ Id.

In order to be protected, a trade secret must be the subject of reasonable efforts "to maintain its secrecy," S.C. Code Ann. § 39-8-20(5)(a)(ii), and, if so, the trade secret "is protectable and enforceable until it is disclosed or discovered by proper means." S.C. Code Ann. § 39-8-30(A). The Trade Secrets Act provides protection "[i]n any civil action where discovery is sought of information designated by its holder as a trade secret." S.C. Code Ann. § 39-8-60(B). We find it is here that the General Assembly evidenced its intent to create a qualified privilege for trade secrets.

Although the General Assembly did not use the word "privilege," the protections afforded by section 39-8-60—namely, that the holder of a trade secret may refuse to...