In Re Continental General Tire, Inc.

Texas Supreme Court
979 S.W.2d 609 (1998)

ELI5:

Rule of Law:

Under Texas Rule of Evidence 507, once a party establishes that requested information is a trade secret, the burden shifts to the party seeking discovery to demonstrate that the information is necessary for a fair adjudication of its claim. The privilege protects the trade secret from disclosure unless the requesting party meets this heightened burden of showing necessity, not just relevance.

Facts:

Kenneth Fisher was driving his pick-up truck when his left front tire, manufactured by Continental General Tire, blew out.
The blowout caused Fisher to lose control of his vehicle, cross the median, and strike a car driven by Dora Pratt.
The collision resulted in the deaths of Dora Pratt and her passenger.
An investigation determined that the tire failed because its tread and outer belt separated from the inner belt.
The tire's belts are made from steel cords encased in a rubber compound known as "skim stock," which is designed to chemically bond the tire's components together during vulcanization.
Pratt's heirs alleged that a design or manufacturing defect in the skim stock prevented the tire's belts from properly bonding.

Procedural Posture:

Dora Pratt’s heirs (plaintiffs) filed a products liability lawsuit against Continental General Tire (defendant) in a Texas trial court.
During discovery, the plaintiffs requested that Continental produce the chemical formula for its skim stock.
Continental objected to the request, asserting that the formula was protected by the trade secret privilege under Texas Rule of Evidence 507.
After a hearing, the trial court ordered Continental to produce the formula, subject to a pre-existing protective order.
Continental sought a writ of mandamus from the intermediate court of appeals to block the trial court's order, but the court of appeals denied relief without a written opinion.

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Issue:

Does Texas Rule of Evidence 507 protect a manufacturer's trade secret chemical formula from discovery when the requesting party has not established that the information is necessary for a fair adjudication of its product liability claim?

Opinions:

Majority - Chief Justice Phillips

Yes. Texas Rule of Evidence 507 protects the trade secret formula from discovery because the privilege against disclosure may only be overcome by a showing of necessity, which the plaintiffs failed to provide. The rule accommodates the competing interests of protecting valuable trade secrets and ensuring a fair adjudication of lawsuits by requiring a party to disclose a trade secret only if necessary to prevent injustice. Merely showing that the information is relevant is insufficient; the requesting party must demonstrate that the information is essential to resolving a material element of its claim. In this case, the plaintiffs presented no evidence to the trial court showing why the skim-stock formula was necessary for their expert to determine the cause of the tire's failure, and thus they did not meet their burden to overcome the privilege.

Analysis:

This case establishes the definitive framework for applying the trade secret privilege under Texas Rule of Evidence 507, clarifying that the privilege is not absolute but requires a heightened showing of necessity to be overcome. By rejecting a simple relevance standard, the court significantly strengthens the protection for trade secrets in litigation, making it more difficult for parties to obtain sensitive proprietary information. The decision creates a clear, burden-shifting test that trial courts must follow, requiring the party seeking discovery to make a particularized showing that the information is essential for a fair trial, rather than merely helpful. This precedent will likely reduce fishing expeditions for proprietary data in product liability and other commercial litigation cases.

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