Trial News

The Sixth Circuit has ruled that Kia Motors’s records regarding allegedly defective sunroof glass do not qualify as trade secrets that must be sealed, finding that the lower court correctly held that a strong public interest in disclosure outweighed the automaker’s interest in sealing the records and correctly applied Ohio law to determine that the records were not trade secrets. (Kondash v. Kia Motors Am., Inc., 2019 WL 1418168 (6th Cir. Mar. 28, 2019).)

Tom Kondash brought a class action on behalf of himself and other Kia owners in federal district court in Ohio claiming that certain Kia panoramic sunroofs are defective because they shatter without warning. After Kia moved to seal several documents associated with the case, the plaintiff agreed to some of these requests. However, the class disputed whether other documents should be sealed, including those discussing Kia’s investigations of the glass breaks; the impact of ceramic paint on the glass; warranty, goodwill, and parts data; vehicle package pricing data; and Kia’s government communications.

The district court looked to Ohio law to determine whether the disputed documents constitute trade secrets and therefore may be filed under seal. Ohio has adopted the Uniform Trade Secrets Act definition of “trade secret,” which allows certain technical and business information that both “derives independent economic value . . . from not generally being known” and “is the subject of efforts that are reasonable under the circumstances to maintain its secrecy” to be protected.

The lower court looked to Ohio Supreme Court precedent about what factors must be examined to determine whether a document constitutes a trade secret. (State ex rel. Plain Dealer v. Ohio Dept. of Ins., 687 N.E.2d 661 (1997).) These factors include the extent to which the information is known to those outside and within the business, the precautions that have been taken to guard the information, the value of the information as against competitors, the effort and cost of obtaining or developing the information, and the effort and cost of duplication for others. Based on these factors, the district court found that Kia failed to demonstrate a compelling reason to seal the majority of the disputed documents. The court noted the presumption in favor of access when the public has a strong interest in documents that potentially contain trade secrets. The court allowed five documents containing dealer pricing information to be redacted.

On Kia’s interlocutory appeal, the Sixth Circuit considered whether the district court applied the correct standard in deciding not to seal the majority of the records. The court reviewed the district court’s determinations for abuse of discretion. Noting that a party seeking to seal records must overcome the “strong presumption in favor of openness” and public access, the circuit court applied a three-part test to determine whether Kia met its burden: Did Kia have a “compelling interest in sealing the records”; does this interest “outweigh the public’s interest in accessing the records”; and is “the request is narrowly tailored.”

The Sixth Circuit rejected Kia’s argument that the district court erred in considering whether access to the documents was of public importance in its trade secret analysis. “Not only was it proper for the district court to address whether the information was of public importance, it was a necessary step in the analysis.” Courts “must determine whether public interest outweighs the moving party’s interests in protecting their trade secret.”

The Sixth Circuit also considered whether the district court erred in determining that the records do not contain trade secrets. Applying the same Ohio Supreme Court six-factor test as the district court, the Sixth Circuit found no clear error in the district court’s determinations. It rejected Kia’s argument that that a distinction must be made in trade secret treatment between product development and manufacturing testing records and testing records after a problem has been identified. Although Kia cites four cases when internal investigations were considered trade secrets, the court found it is not bound by these cases, because they are all outside of the Sixth Circuit.

Oakland, Calif., attorneys David Stein and Steven Lopez, who represent the class, said they were “pleased that both the district court and the appellate court have weighed in on the side of the public’s right to access court records, especially in light of the driver safety and consumer protection issues at stake in this litigation.”

On April 11, Kia Motors filed a petition for en banc review of the Sixth Circuit’s decision.