X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Without providing guidelines, the Texas Supreme Court held on May 22 that plaintiffs seeking trade secret information from a tire manufacturer must show specifically how the lack of the information could derail a case. The test that the Texas Supreme Court established in 1998′s In Re Continental General Tire Inc. for discovery of trade secret information “cannot be satisfied merely by general assertions of unfairness,” Justice Nathan Hecht wrote for the majority in In Re Bridgestone/Firestone Inc. The plaintiffs in about 150 cases alleging Firestone tire-tread separations and Ford Explorer rollover accidents failed to show how access to the skim-stock formulas used by the tire company at its plant in Decatur, Ga., is necessary for a “fair adjudication” of their claims, Hecht said in the opinion. But Houston solo Mike Phifer, liaison co-counsel for the plaintiffs in the Firestone litigation, says the majority opinion provides no guidelines on what a plaintiff has to do to show that trade secret information is necessary for a claim to be adjudicated fairly. “The court said we can’t have it, but they don’t say what we have to do to get it,” says Phifer, who argued before the Texas Supreme Court that Firestone’s skim-stock formulas should be disclosed. The 8-0 ruling directs 410th District Judge K. Michael Mayes of Conroe, the 2nd Judicial Administration Region’s designated pretrial judge for cases against Firestone and Ford Motor Co., to vacate his September 2001 order that Firestone’s formulas be given to three attorneys for the plaintiffs in the tire-tread separation litigation. The designated pretrial judges for the Firestone cases in six other judicial regions joined Mayes in the order. Firestone filed a petition for writ of mandamus, which was denied by Beaumont’s 9th Court of Appeals in an order issued per curiam in November 2001. According to the Texas Supreme Court’s majority opinion, skim stock is a specially formulated rubber compound that coats the steel belts in a steel-belted radial tire and holds the belts together. The plaintiffs in the Texas Firestone cases alleged that a deficiency in Firestone’s skim stock causes a lack of adhesion between the steel belts in the tires and separation of the tread and steel belts, the opinion said. Firestone argued that the two skim-stock formulas at issue in the Texas suits are trade secrets privileged from discovery under Rule 507 of the Texas Rules of Evidence. The court’s decision that the formulas don’t have to be disclosed is significant for the Firestone litigation, not only in Texas but also nationwide, says Marie Yeates, lead counsel for the tire manufacturer in the mandamus proceeding. Yeates, a partner in the Houston office of Vinson & Elkins, says no court in the nation has permitted plaintiffs in the tread defect cases to obtain Firestone’s skim-stock formulas in discovery but that one court has been waiting to see what happens in Texas. In November 2001, Judge Edward O. Burke, of the Superior Court of Arizona in Maricopa County, said in In Re Ford Explorer/Firestone that he didn’t believe the plaintiffs’ need for the trade secret information outweighed the potential harm of disclosing the information. But Burke said in the opinion that the plaintiffs in the Arizona cases could revisit the discovery issue if Mayes’ order allowing disclosure of the formula was upheld. “Obviously, if Texas let [plaintiffs] have the formula, it’s out and then everybody would have it,” Yeates says. Ileana Blanco, a Bracewell & Patterson Houston partner who represents Goodyear Dunlop North America in similar suits over alleged defective tires, says the Texas Supreme Court’s decision is important to all tire manufacturers. A skim-stock formula is analogous to the formula for Coca-Cola, and tire makers spend thousands of dollars trying to make sure their formulas aren’t known outside their companies, Blanco says. If a plaintiff has access to a skim-stock formula, that provides leverage to get a company to settle that might not have settled otherwise, she says. Blanco says the decision also is significant to other manufacturers that do business in Texas. “If you make a product in this state or it’s delivered in this state, [the opinion] applies to you,” she says. But critics of the majority’s opinion say it doesn’t go far enough. “It almost seems to be a Catch-22,” Phifer says. “We almost have to go before the court and say, ‘We have no evidence.’ If we do that, the defense would come before the court and say we don’t have a case.” Hecht said in the majority opinion that the degree to which information is necessary to a plaintiff’s case depends on the nature of the information and the context of the case. While agreeing that the plaintiffs in Firestone didn’t meet their burden to establish that the formula’s disclosure was necessary to adjudicate their claims fairly, Justice Harriet O’Neill said in a concurring opinion that the majority opinion provides little useful guidance to the bench and bar. The court should have used the opportunity presented in this case to expand on its decision in Continental General Tire, O’Neill said. “[D]etermining what evidence is necessary for a fair adjudication should be more than ad hoc, as the court’s opinion suggests,” she wrote. In her concurrence, O’Neill noted that courts in other jurisdictions have provided guidance on the subject. In 1985′s Coca-Cola Bottling Co. v. Coca-Cola Co., the U.S. District Court for the District of Delaware allowed discovery of the formula for Coca-Cola, “one of the best-kept trade secrets in the world.” The federal court in Delaware held that the formula was relevant to product identity, one of the key issues raised by various bottlers who alleged that Coca-Cola was obligated to sell them syrup for Diet Coke under the same terms as their contracts covering regular Coke. The Delaware court also held that the information sought by the bottlers was not available from another source. Justice Mike Schneider joined O’Neill in the concurring opinion. Justice Dale Wainwright did not participate in the court’s decision. CASE BY CASE Mikal Watts, a partner in the Watts Law Firm in Corpus Christi, has handled more than 80 Firestone tread-separation cases. Calling the majority’s opinion in Firestone “bizarre,” Watts says it cites no court cases, other than Continental General Tire, and shows no legal reasoning for its conclusion. He says the majority’s reasoning appears to be: “It just is because we say it is.” Dan Benson, a Texas Tech University School of Law professor who teaches evidence courses, says he believes the court should have allowed discovery of the formula. Benson says the plaintiffs are trying to find out if the finished tires deviate from specifications either because of skim-stock contamination or because ingredients were used in different proportions than called for in the formula. They need the formula to make that determination, he says. “The fair thing to do is to order it disclosed and surround it with protective orders,” Benson adds. Benson says that having access to a formula during discovery doesn’t mean the plaintiff can introduce the formula at trial. If there is no evidence of contamination, the formula wouldn’t be relevant and therefore inadmissible, he says. Alex Albright, associate dean for students and technology and senior lecturer at the University of Texas School of Law, says the majority in Firestone is saying that a case-by-case analysis will be required to determine if a trade secret must be disclosed. Setting out guidelines would put more discretion in the hands of trial judges, and that doesn’t appear to be what the court wants, says Albright, who teaches Texas civil procedures. Notes Albright: “The majority opinion was written so that the Texas Supreme Court can get involved in these cases.”

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.