South Carolina Recognizes Trade-Secrets Privilege

Answering the 4th Circuit’s certified question, the South Carolina Supreme Court, in a 4–1 decision, adopted a trade-secrets privilege—even though the state’s trade-secrets statute never mentions “privilege.”  The new privilege is qualified, meaning a party may obtain otherwise privileged trade secrets by proving a substantial need for the information.  Hartsock v. Goodyear Dunlop Tires N. Am., Ltd, 2018 WL 1938540 (S.C. Apr. 25, 2018).  You may read the opinion here.

Tragic Accident

While traveling on I–26 in Calhoun County, S.C., a Monaco RV’s tire “blew out,” allegedly causing the RV to cross the median and strike head-on a car in which Sarah Mills Hartsock was a passenger.  Mrs. Hartsock died as a result, and her husband sued Goodyear in federal court under diversity jurisdiction alleging that Goodyear’s tire was defective.

Federal Discovery Rules or State Privilege Law?

Goodyear sought a protective order to preclude plaintiff from obtaining “the design and chemical composition of the allegedly defective tire,” and specifically the tire liner’s butyl content.  The magistrate judge applied a federal-law balancing test, rather than state law, and denied the protective-order request. You may read the magistrate judge’s opinion here.

The district judge adopted the magistrate judge’s ruling without substantive comments, but granted an interlocutory appeal.  The issue before the 4th Circuit is whether federal discovery rules or South Carolina privilege law governs the trade-secrets-disclosure issue.  This issue begs the question that the federal appellate court certified to the South Carolina Supreme Court:

Does South Carolina recognize an evidentiary privilege for trade secrets?


Privilege Issues Confronting the Trump–Cohen Special Master

As detailed in my post, Reports of the Privilege’s Death are Greatly Exaggerated, the SDNY rejected the U.S. Attorney’s request that its “taint team” conduct the initial privilege review of documents seized in the FBI’s raid on attorney Michael Cohen’s Trump Tower office.  The Court likewise rejected Cohen and President Trump’s request that their respective legal teams make the initial privilege calls.

Instead, the court, in this Order, appointed former magistrate judge Barbara S. Jones as Special Master to conduct the privilege review. Special Master Jones submitted her initial report to the Court on May 4, 2018, which you may read in full here.

To date, the USAO has produced to Cohen and Special Master Jones electronic contents of certain telephones and iPads as well as electronic copies of eight boxes of hard-copy documents. The USAO anticipates producing the final bulk of seized materials by May 11, 2018.  The privilege review is underway, and Cohen and Trump’s lawyers will provide their first privilege designations to the Special Master today, May 7, 2018.

So, what privilege issues are likely to arise requiring the Special Master’s privilege decision?  Here are a few.

Disclosure Protections

Let’s first identify the legal protections that Cohen and Trump may assert to preclude documents from federal prosecutors’ review.

Obviously, Cohen and Trump will assert protections afforded by the attorney–client privilege.  The privilege is quite narrow, as it only protects confidential communications between a client and her lawyer made for legal-advice purposes.  The privilege belongs to Cohen’s clients, not Cohen, although Cohen must assert the privilege unless his client(s) direct otherwise.

It is likely that the raid consumed communications between Cohen and his lawyers, including lawyers representing him in adult-film star Stephanie Clifford’s pending California case against Trump.  If so, Cohen owns that privilege and will certainly assert it.

A less-mentioned protection that may become operative is the work-product doctrine.  This doctrine generally protects documents evidencing an attorney or party’s opinions and mental impressions made when involved in or anticipating litigation.  Given that Cohen negotiated a non-disclosure agreement with Clifford, whether on his behalf or Trump’s, a plausible argument exists that Cohen and Trump anticipated some litigation involving her.  They will have to prove it, though.

Who are the Clients?

Special Master Jones must identify Cohen’s attorney–client relationships before analyzing the privilege elements.  Cohen disclosed that, from 2007 through January 2017, he “worked at the Trump Organization” serving in the role of “Executive Vice President and Special Counsel to Donald J. Trump.”  In this role, he “served as legal counsel to Trump Organization, Donald J. Trump.”  What do these vague statements mean from a client-identification perspective?  Special Master Jones will need to know.

In 2017–2018, Cohen also represented three other clients. He represented President Trump in the Clifford matter and Elliot Broidy, the former RNC Deputy Finance Chairman, in a non-disclosure arrangement with a former model. (New York Times story here).

And he may or may not have represented Fox News’ Sean Hannity.  Cohen says yes, but Hannity denies it.  Special Master Jones must determine whether Cohen and Hannity had an attorney–client relationship before deciding whether the privilege protects their communications from federal prosecutors’ review.

Legal Advice or Business Advice?

Cohen’s role with the Trump Organization will pose another set of privilege issues.  Special Master Jones will consider whether the privilege protects communications between Cohen and other Trump Organization employees.  The privilege only covers communications made so that the lawyer—purportedly Cohen—can render legal advice to his client (whoever that is).

The privilege will not protect Cohen’s communications involving business advice for the Trump Organization.  More…

Reports of the Privilege’s Death are Greatly Exaggerated 1

What a sad month for the privilege.  While I was away in trial and attending other day-job responsibilities the last few weeks, the president announced the death of the attorney–client privilege.  It was a good life, and I’m sorry to see it end.

Born in 1577 in the English case of Berd v. Lovelace, 21 Eng. Rep. 33, the privilege lived a long life that emboldened some and frustrated others.  It successfully navigated the Atlantic during Colonial America, survived a revolution and civil war, expanded during the Industrial Revolution, and withstood the Internet Age, only to perish abruptly and unceremoniously in cauldron of federal prosecutors, a president, a lawyer, and a porn star.

Rest in peace, dear privilege.

But wait. It appears the rule of law has resurrected the privilege, and it may return stronger than ever.  Let’s unfold this death-and-resurrection story. More…