Opinion
C. A. 8:21-cv-03803-DCC
05-31-2023
Kristopher Wiggins and Billy Paul Cobb on behalf of themselves and all others similarly situated, Plaintiffs, v. State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Company, Defendants.
OPINION AND ORDER
DONALD C. COGGINS, JR. UNITED STATES DISTRICT JUDGE
This matter is before the Court on Non-PartyAudatex North America, Inc.'s (“Audatex”) Motion to Confirm Confidentiality Designations. ECF No. 73. Plaintiffs filed a Response in Opposition and Audatex filed a Reply. ECF Nos. 81, 89. For the reasons set forth below, the Motion is granted.
Although Audatex is not a party to this litigation and therefore not a signatory to the Consent Confidentiality Order entered this case, Audatex has nevertheless produced the documents in response to Plaintiffs' subpoenas in accordance with the terms of the Consent Confidentiality Order. No party has raised any objection or argument challenging Audatex's production pursuant to the Consent Confidentiality Order. Accordingly, by virtue of the parties' apparent consent to Audatex's use of the confidentiality provisions set forth in the Consent Confidentiality Order and because this Order confirms Audatex's confidentiality designations in accordance therewith, Audatex is hereby subject to the Consent Confidentiality Order for purposes of this litigation.
BACKGROUND
This case arises from an automobile insurance dispute in which Plaintiffs owned vehicles that were deemed a total loss by Defendants. See ECF No. 1-1 at 9. Defendants elected to pay Plaintiffs the actual cash value of their insured vehicles pursuant to their insurance policies. Id. at 10. Plaintiffs allege in the Complaint that Defendants employed a total loss settlement process, which involved obtaining a market-driven valuation report from Audatex. Id. To arrive at the valuation of the insured vehicles, the report provided the prices of four different comparable vehicles advertised for sale online and applied a “Typical Negotiation Adjustment” of approximately 6% to each one. Id. Using this method, Defendants valued Plaintiff Wiggins' total loss claim at $12,524.00 and Plaintiff Cobb's total loss claim at $12,194.00 and paid Plaintiffs those amounts as the actual cash values of their totaled vehicles. Id. at 11. Plaintiffs claim that Defendants' use of the “Typical Negotiation Adjustment” to adjust their total loss claims downward violates the applicable insurance policies, is factually erroneous, and was applied solely to pay Plaintiffs less than the actual cash value of their total loss vehicles to which they were entitled by contract. Id. As a result, Plaintiffs claim that without this erroneous adjustment, the actual cash value of their vehicles would have been $848 and $749 higher, respectively. Id. at 13 & n.3-4.
Defendants explain that the market value of Plaintiffs' vehicles were estimated using a valuation tool prepared by Audatex. ECF No. 1 at 2.
On October 15, 2021, Plaintiffs filed a putative class action lawsuit against Defendants in the Oconee County Court of Common Pleas, alleging claims for breach of contract and for a declaratory judgment. Id. at 16-21. Defendants removed the action to this Court on November 19, 2021. ECF No. 1. Defendants sent a written request for appraisal of Plaintiffs' covered vehicles pursuant to their policies on December 21, 2021. ECF No. 20-4 at 1, 5-6. By letter dated the same day, Plaintiffs refused to participate in the appraisal process. Id. at 8. Thereafter, Defendants filed a Motion to Dismiss, or in the Alternative, Compel Appraisal and Stay. ECF No. 20. The Court held a hearing on the Motion on June 16, 2022, granted the Motion to Compel Appraisal and Stay, and denied the Motion to Dismiss with leave to refile within 30 days after the completion of the appraisal process. ECF Nos. 40, 41.
On March 23, 2022, the Court granted the parties' Consent Motion for Confidentiality Order. ECF No. 38. Pursuant to this Order, documents which, upon review by an attorney, are deemed to contain “information protected from disclosure by statute, sensitive personal information, trade secrets, or confidential research, development, or commercial information” must only be disclosed for the purposes of preparing for or conducting litigation. Id. at 2. The reviewing attorney certifies, pursuant to Federal Rule of Civil Procedure 11, that its designations are proper. Id. The rules governing such disclosure are delineated in detail within the Order. Id. at 2-4. Moreover, the Order outlines how challenges to any information designated as confidential shall be addressed. Id. at 5-6. Specifically, Paragraph 8 of the Consent Confidentiality Order provides that “[t]he burden of proving the necessity of a Confidential designation remains with the party asserting confidentiality.” Id. at 5. Any party “who contends that documents designated CONFIDENTIAL are not entitled to confidential treatment shall give written notice to the party who affixed the designation of the specific basis for the challenge,” and “[t]he party who so designated the documents shall have fifteen (15) days from service of the written notice to determine if the dispute can be resolved without judicial intervention and, if not, to move for an Order confirming the Confidential designation.” Id.
Federal Rule of Civil Procedure 45 also permits the Court to protect a person subject to a subpoena that requires disclosure of “a trade secret or other confidential research, development, or commercial information.” Fed.R.Civ.P. 45(d)(3)(B)(i).
During this litigation, Plaintiffs have subpoenaed Audatex for documents and corporate testimony. ECF No. 73 at 1. Audatex claims that they have fully complied with those subpoenas and provided the requested information pursuant to the Consent Confidentiality Order entered in this case, and Plaintiffs do not contend otherwise. Id. at 1-2. By letter dated February 22, 2023, Plaintiffs challenged Audatex's designation of certain documents as confidential. ECF No. 73-1. After meeting and conferring about the issue, the parties were unable to resolve the dispute, and Audatex subsequently filed a Motion to Confirm Confidentiality Designations on March 23, 2023. ECF No. 73. On March 27, 2023, the Court held a telephone discovery conference with the parties in an effort to resolve their dispute regarding certain confidentiality designations that Audatex has asserted over various documents and deposition testimony produced in this case. ECF No. 76. The Court encouraged the parties to continue working to resolve the discovery dispute, but if they were unable to do so, then the Court would decide Audatex's motion once the briefing had been completed. Id. Thereafter, Plaintiffs filed a Response in Opposition, and Audatex filed a Reply. ECF Nos. 81, 89. The Motion is now before the Court.
APPLICABLE LAW
“Discovery under the Federal Rules of Civil Procedure is broad in scope and freely permitted.” Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 402 (4th Cir. 2003); see Fed.R.Civ.P. 26(b)(1) (“Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case[.]”). The Court may, however, “for good cause, issue an order to protect a party . . . from annoyance, embarrassment, oppression, or undue burden or expense . . . requiring that a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a specified way[.]” Fed.R.Civ.P. 26(c)(1)(G). “In deciding whether good cause exists, the district court must balance the interests involved: the harm to the party seeking the protective order and the importance of disclosure to the public.” Rech v. Wal-Mart Stores E., L.P., C. A. No. 8:19-cv-02514-BHH, 2020 WL 3396723, at *2 (D.S.C. June 19, 2020). “Some factors to consider in making this determination are privacy interests, whether the information is important to public health and safety and whether the party benefitting from the confidentiality of the protective order is a public official.” Id. (citing Pansy v. Borough of Stroudsburg, 23 F.3d 772, 787-88 (3d Cir. 1994)).
The parties may also request the Court's standard confidentiality order (i.e., a blanket protective order) as part of the discovery phase of the litigation. “A blanket protective order . . . often is nothing more than a Fed.R.Civ.P. 29 stipulation between the parties to keep discovery confidential.” Haynes v. S. Carolina Waste, LLC, C. A. No. 5:21-cv-01544-JMC, 2022 WL 2037925, at *1 (D.S.C. June 2, 2022) (quoting SmithKline Beecham Corp. v. Synthon Pharms., Ltd., 210 F.R.D. 163, 167 (M.D. N.C. 2002)). “Courts grant blanket protective orders less deference than protective orders entered pursuant to a finding that the information is subject to Rule 26(c) protection.” Schaefer v. Family Med. Ctrs. of S.C., LLC, C. A. No. 3:18-cv-02775-MBS, 2019 WL 2135675, at *13 (D.S.C. May 16, 2019) (citing SmithKline Beecham, 210 F.R.D. at 167).
DISCUSSION
Audatex seeks an order confirming its prior designation of certain deposition testimony and Plaintiffs' Expert Report of Phillip Johnson as confidential. ECF No. 73 at 9-13. Audatex argues that the deposition testimony and the Johnson Report should remain confidential because they contain extensive information regarding the company's proprietary valuation methodology, which constitutes valuable intellectual property and has not previously been published to the public. Id. Specifically, Audatex contends the deposition testimony provides substantial details of Audatex's methodology underlying its valuation process, which, if un-designated as confidential, would become accessible to Audatex's competitors and cause enormous commercial injury. Id. at 9-12. Likewise, Audatex claims the Johnson Report contains a detailed analysis of the statistical basis for Audatex's Typical Negotiation Adjustment methodology and includes summaries and graphical representations of Audatex's data used in its Autosource® valuation product. Id. at 12-13. In contrast, Plaintiffs object to the designation of these documents as confidential, arguing that Audatex has made repeated and detailed public representations about its methodology because it is disclosed as an adjustment on every Audatex valuation report provided to a State Farm insured; thus, Plaintiffs assert the documents are not deserving of protection under Federal Rule of Civil Procedure 26(c). ECF No. 84 at 12.
Audatex also seeks to confirm its prior designation of Excel spreadsheets containing car sales data used in its proprietary valuation process as confidential. ECF No. 73 at 7-9. However, Plaintiffs agree in their response that the Excel spreadsheets should remain confidential. ECF No. 84 at 7 (“Plaintiffs have agreed that the Excel spreadsheets with the transaction data may remain under seal.”). Accordingly, Plaintiffs no longer challenge Audatex's confidentiality designation as to the Excel spreadsheets; thus, the Court need not address it.
Having considered the arguments and submissions of the parties, the Court finds that Audatex has demonstrated good cause to uphold the confidential designation of the deposition testimony and the Johnson Report. See Seattle Times Co. v. Rhinehart, 467 U.S. 20, 36 (1984) (“Rule 26(c) confers broad discretion on the trial court to decide when a protective order is appropriate and what degree of protection is required.”); Rech, 2020 WL 3396723, at *2 (“Good cause is the only statutory requirement for determining whether or not to issue a protective order.”). Here, Audatex has shown that it considers the information to be confidential commercial information that is not available to the public. Audatex has further articulated the potential competitive harm that it could suffer if the detailed discussion of Audatex's methodology underling its Autosource® valuation product contained in the deposition testimony and the analysis thereof included in the Johnson Report were un-designated as confidential in this case.
In addition, Plaintiffs have not articulated any need for the confidential designation to be removed that would serve Plaintiffs' interest or the public at large. Rather, Plaintiffs argue the information should be made public so that State Farm insureds who may later become class members in this case can understand the merits of this lawsuit in the context of their own experience with totaled vehicles under their insurance policies. The Court finds Plaintiffs' argument unpersuasive and that disclosure of the confidential information is not “important to public health and safety.” Pansy, 23 F.3d at 787-88. Indeed, Audatex concedes, and the Court finds, that confirmation of the confidentiality designations at issue here does not limit Plaintiffs' access to the documents, as they have already been produced in discovery, nor Plaintiffs' ability to use the information freely in their prosecution of this case. Thus, in the absence of any articulated interest to the contrary, the Court finds that the balance of interests favors confirmation of Audatex's confidentiality designations pursuant to the Consent Confidentiality Order entered in this case.
Moreover, the Court recognizes that the parties in this case have engaged in extensive discovery efforts, which likely would not have occurred absent the entry of the Consent Confidentiality Order. See Brookdale Univ. Hosp. & Med. Ctr., Inc. v. Health Ins. Plan of Greater N.Y., 2008 WL 4541014 at *3 (E.D.N.Y. Oct. 7, 2008) (“The Court also recognizes that the parties in the instant action have engaged in (and continue to engage) in extensive discovery efforts, and this exchange of information would not have occurred (and would in all likelihood come to a standstill) but for the ‘existence and sanctity' of the Protective Order.”). Absent any substantial need, removing the confidential designation of these documents “could chill further discovery cooperation in this case.” Rech, 2020 WL 339723, at *3. Therefore, considering all of the relevant factors and balancing the parties' respective interests, the Court finds that it is appropriate to confirm Audatex's confidentiality designations in this case.
CONCLUSION
For the reasons set forth above, Non-Party Audatex North America, Inc.'s Motion to Confirm Confidentiality Designations [73] is GRANTED.
IT IS SO ORDERED.