Protection for proprietary commercial documents just got stronger in Arizona. The Court of Appeals’ recent decision in Center for Auto Safety v. Goodyear expressly rejected the old “compelling reasons” standard and instead required a showing of “extraordinary circumstances”.
The case arose from a protective order entered in a product liability case against Goodyear Tire & Rubber Company (“Goodyear”). The order protected confidential information from disclosure to anyone other than the plaintiffs. The case eventually settled. Thereafter, plaintiffs discovered Goodyear failed to disclose relevant test results about the subject tire, which resulted in the trial court imposing $2,700,000 in sanctions against Goodyear and its attorneys.
Plaintiffs filed a second lawsuit against Goodyear alleging settlement fraud and abuse of process. The trial court issued a blanket protective order allowing Goodyear to designate documents as confidential provided the designation was based on a good faith belief the documents were confidential. Goodyear produced more than 30,000 documents, including quality control procedures, protocols and testing, information concerning customer complaints, internal policies and procedures on handling customer complaints, warranties and recalls, and other documents containing financial and commercial information. The parties settled the second lawsuit.
Two non-parties, including the Center for Auto Safety (“CAS”) moved to intervene and vacate the protective order. The trial court vacated the protective order and ordered documents filed under seal to be unsealed. The trial court found many of the documents were trade secrets, but also found the public’s need for access to documents relating to tire safety outweighed Goodyear’s interest in confidentiality. Factoring in the court’s decision was its view Goodyear’s interest in confidentiality was reduced by the discontinuance of the manufacture of the subject tire and the unlikelihood competitors would want to copy it. The trial court stayed its decision to allow an appeal.
The Court of Appeals reversed and remanded. The Court relied on Arizona’s adoption of the Uniform Trade Secrets Act (“UTSA”). “The UTSA provides that a court must preserve the secrecy of a trade secret by reasonable means, which may include ‘granting protective orders in connection with discovery proceedings, holding in camera hearings, sealing the records of the action or ordering a person involved in the litigation not to disclose an alleged trade secret without prior court approval.’” (See ¶19 of Court’s Opinion). The Court also recognized confidential or commercial information can be the subject of a protective order. The party seeking confidentiality must show good cause why the court should enter a protective order, including the specific prejudice or harm if the documents are not protected.
In reaching its decision, the Court noted the very purpose of trade secret law is to protect valuable confidential information from discovery because trade secrets derive their value from their secrecy. Significantly, the Court concluded a court may expose trade secrets only in extraordinary circumstances. The trial court must “preserve the secrecy of an alleged trade secret” (See ¶25 of Court’s Opinion) even where the court concludes there exists a potential risk to the public if the documents remain protected. This opinion is good news for those seeking to protect their client’s proprietary documents and presents an additional hurdle for those seeking disclosure.