March 2009
South Carolina Supreme Court Establishes Standard for Discovery of Trade Secrets in Civil Actions
By Jana Roemmich
On March 2, 2009, the South Carolina Supreme Court ruled on the case of Laffitte v. Bridgestone Corporation, Opinion No. 26606, 2009 LEXIS 44 (S.C. 2008), reversing the ruling of the trial court compelling defendants Bridgestone Corporation (“Bridgestone”) to disclose its trade secret compound formula. The Court’s decision sets forth an unambiguous standard for discovery of trade secrets in civil cases, tightening existing South Carolina law.
Plaintiffs in a product liability action filed in Hampton County, South Carolina, alleged a tire manufactured by Bridgestone failed as a result of a defect in its manufacture or design, giving rise to a single vehicle accident on July 16, 2005. During discovery in that action, plaintiffs requested, Bridgestone produce its proprietary formula for the rubber compound used in the manufacture of the steel belts (“skim stock”) in the subject tire. Bridgestone objected to such production, arguing that plaintiffs had not met their burden of proving “necessity” for the trade secret formula under Rule 26(c) of the South Carolina Rules of Civil Procedure and the South Carolina Trade Secrets Act, S.C. Code Ann. §§ 39-8-10 (the “Act”).
Following an evidentiary hearing on this matter, the Honorable Carmen T. Mullen, held that plaintiffs were entitled to discovery of the complete skim stock formula, under either under Rule 26(c) or the Act, subject to a protective order. Specifically, Judge Mullen found that, under the Act, plaintiffs had shown “substantial need” for the trade secret information.
The South Carolina Supreme Court granted Bridgestone’s petition for a Writ of Certiorari and, following extensive briefing and oral arguments, reversed the decision of the trial court. While the Court concluded that either the Act or Rule 26(c) governed the issue, it analyzed the question using the civil procedure rule. Even supported by the affidavits of two experts, the Court determined that plaintiffs failed to establish a “substantial need” for the trade secret information under South Carolina law. Specifically, the Court found that although plaintiffs claimed to need the information, their experts’ testimony failed to indicate how the case was incapable of being fairly adjudicated without the trade secret information. Significantly, the Court held that the trial court failed to analyze the availability of reasonable alternatives, such as chemical analyses and belt peel adhesion testing, which are methods relied upon by the National Highway Traffic Safety Administration (“NHTSA”) to evaluate tires. In short, plaintiffs failed to meet their burden of establishing that the trade secret skim stock formula was not only relevant, but necessary to the specific issues involved.
The Court further determined that once the opposing party establishes that the information is trade secret, the proponent “cannot merely assert unfairness but must demonstrate with specificity exactly how the lack of the information will impair the presentation of the case on the merits to the point that an unjust result is a real, rather than a merely possible, threat.” In re Bridgestone/Firestone, Inc., 106 S.W.3d 730, 733 (Tex. 2003). Moreover, in determining whether the trade secret information is subject to discovery, the trial court must evaluate whether there are reasonable alternatives available to the party seeking discovery. In fact, the Court held that trade secrets are only subject to discovery when the case cannot be fairly adjudicated unless the information is available.
Lisa M. McMurdo briefed the issue for Bridgestone and assisted Wallace K. Lightsey of Wyche Burgess Freeman & Parham, of Greenville, South Carolina, in preparing for the argument.
For further information, please contact Jana P. Roemmich, Lisa M. McMurdo, or any of the firm’s other attorneys.