Center For Auto Services v. Goodyear Tire & Rubber Company:

Arizona Appeals Court Determines That the Same Factors Apply to Unseal a Document as Are Required to Seal It

Introduction

The Arizona Court of Appeals addressed a protective order-related issue involving whether the trial court committed an abuse of discretion when it vacated an order to seal documents protected by a protective order.

Under Arizona Rules of Civil Procedure (“Rule”) 5.4(c), on motion, stipulation, or on its own, a court may order a document to be filed under seal if the following requirements are met in a written order:

1. An overriding interest exists that supports filing the document under seal and overcomes the right of public access to it;
2. A substantial probability exists that the person seeking to file the document under seal (or another person) would be prejudiced if it is not filed under seal;
3. The proposed restriction on public access to the document is no greater than necessary to preserve the confidentiality of the information subject to the overriding interest and;
4. No reasonable, less restrictive alternative exists to preserve the confidentiality of the information subject to the overriding interest.

In addressing the issue, the Arizona Court of Appeals found if all requirements of Rule 5.4(c) have been met to vacate the protective order then the documents may be unsealed.

Background

Leading up to Center for Auto Services v. Goodyear Tire & Rubber Company,[1] Goodyear Tire & Rubber Company (“Goodyear”) was involved in multiple cases regarding a defective tire wherein thousands of documents were provided under a protective order with a confidentiality designation to prevent the parties from disseminating the documents to any third party.

Following settlement in the actions against Goodyear, a third party intervener, Spartan Chassis, Inc. (“Spartan”), moved the superior court to vacate the protective order and a second third party intervener, Center for Auto Safety (“CAS”) moved the court to unseal all court records and to vacate the blanket protective order for thousands of Goodyear documents. The superior court granted the motion and directed the unsealing of filings that contained trade secrets. CAS contended the public has an interest in knowing whether Goodyear concealed a dangerous defect from the government and the public, in addition to a risk to public safety.

Goodyear argued the documents should remain sealed and protected because the documents contain proprietary tire design and disclosure would be of no benefit to public safety. Goodyear’s position was supported by affidavits from its Chief Analysis Engineer.

While the motion was pending, the plaintiffs from an earlier action filed a letter with attachments that they sent to the National Highway Traffic Safety Administration (“NHTSA”) describing why they felt the tire was unsafe. This record was ultimately released by the court by mistake and landed in the hands of a reporter who then revealed the information in a blog.

Although the court found the documents contained trade secrets, the court nonetheless concluded that Goodyear’s interest did not outweigh the public’s need for access. The court stayed the order vacating the protective order and unsealing of the records pending the timely appeal by Goodyear. Goodyear appealed on the basis that the superior court applied the wrong standard for trade secrets when it vacated the protective order and the court improperly devalued its interest to protect its trade secrets, reached unsupported conclusions of law regarding Goodyear’s use of the protective orders, and relied upon erroneous presumptions of public access to raw discovery.

Holding and Reasoning

The Arizona Court of Appeals found that the superior court abused its discretion when it failed to apply Rule 5.4 and concluded that the public’s interest in access outweighs Goodyear’s interest in confidentiality.

Arizona has adopted the Uniform Trade Secrets Act (“UTSA”) regarding trade secret protection. Since the superior court found most material produced under the protective order to be valid trade secrets, the court must preserve the secrecy of trade secrets by reasonable means, including by protective order.[2] A party from whom discovery is sought may move for a protective order under Rule 26(c)(1) and has the burden of proof to show why the order should be entered.[3] Similarly, the party may move for the documents subject to the protective order to be filed under seal pursuant to Rule 5.4(c).

There is no standard for a party who seeks to unseal documents under a protective order, but, under Rule 5.4(h), there is a requirement for third parties to an action who seek to unseal to show why the public should be granted access. The third party has a very heavy burden to show why the public needs access to confidential trade secrets. “The court is required to analyze the same factors to unseal the document as it is to seal it.”[4]

Here, the Court found that Goodyear provided sufficient need to seal the documents shown by the fact that the documents contained trade secrets. The Court held that “a court may expose trade secrets only in extraordinary circumstances, such as when the information has lost the independent economic value created by its secrecy, or when secrecy represents a significant threat to the public welfare.”[5] The Court found that the superior court falsely concluded Goodyear had a lower interest in its trade secrets because of the age of the tire. Trade secrets are protectable so long as they have not been publicly disclosed. The balancing test by the superior court did not satisfy the requirements set forth by the UTSA.

Takeaway

Bad faith actions are common in Arizona. In bad faith actions plaintiffs seek to obtain claim file and company information from insurance companies, which can often lead to disclosure of proprietary information. For this reason, it is important for defense attorneys to obtain protective orders with a confidential designation to prevent disclosure of trade secrets held by the insurance company. Sometimes a non-party may seek to unseal the documents subject to the protective order. In these instances, it is essential for defense attorneys to make sure the court applies Rule 5.4 factors if a non-party seeks to unseal such documentation.

[1] Center for Auto Services v. Goodyear Tire & Rubber Company, No. 1 CA-CV 18-0244 (Ariz. Ct. App. November 26, 2019).

[2] A.R.S. § 44-405

[3] Ariz. R. Civ. P. 26(c)(1)(A)

[4] Center for Auto Safety v. Goodyear Tire & Rubber Company at ¶25.

[5] Id. at ¶23

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