Tom Kondash v. Kia Motors Am., Inc ( 2019 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 19a0150n.06
Case No. 18-3181
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Mar 28, 2019
TOM KONDASH, ) DEBORAH S. HUNT, Clerk
)
Plaintiff-Appellee, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE SOUTHERN DISTRICT OF
KIA MOTORS AMERICA, INC., and KIA ) OHIO
MOTORS CORP., )
)
Defendants-Appellants. )
)
BEFORE: GRIFFIN and DONALD, Circuit Judges; and BERTELSMAN, District Judge.
BERNICE BOUIE DONALD, Circuit Judge. In this interlocutory appeal, the parties
dispute whether the district court properly declined to seal records that allegedly contain trade
secrets. Because we find that the district court did not abuse its discretion in determining not to
seal the documents and did not err in determining that the documents did not contain trade secrets,
we AFFIRM.
I.
Plaintiff Tom Kondash brought a class action lawsuit against Defendants Kia Motors
America, Inc. and Kia Motors Corporation (collectively, “Kia”), claiming that the panoramic

The Honorable William O. Bertelsman, United States District Judge for the Eastern District of Kentucky, sitting by
designation.
Case No. 18-3181, Kondash v. Kia Motors Am., Inc., et. al
sunroofs in certain Kia vehicles are defective because the glass breaks without warning. In support
of his motion for class certification, Kondash sought to file numerous internal documents he had
received from Kia during discovery. Pursuant to the protective order put in place for the discovery
process, Kondash initially sought to file the documents under seal. However, the district court
denied Kondash’s motion, directing that the documents be filed unsealed. Kia filed an emergency
motion for reconsideration, arguing that many of its records contained trade secrets. In response,
the district court ordered Kondash to file the records conditionally under seal. The district court
then held an evidentiary hearing, at which a witness for Kia testified that the records were
confidential and contained trade secrets.
At the end of the hearing, the district court ordered the parties to jointly review the
documents and identify anything that both parties agreed contained trade secrets. The court
ordered the parties to analyze in detail, document by document, the propriety of secrecy, and
provide reasoning and legal citations to support their recommendations. After conferring, the
parties withdrew the request to seal as to some of the records, agreed that some records should be
filed unsealed but with redactions and some should be sealed entirely, and disagreed as to whether
some of the documents should be sealed. The parties presented their positions to the district court
for review. Upon review, the court accepted the withdrawn requests and ordered those records to
be filed unsealed. The court then reviewed the documents the parties agreed should be filed
unsealed but with redactions and concluded that the redactions were appropriate. Next, the district
court ordered sealed certain documents that it found contained trade secrets. As to the records on
which the parties disagreed, the district court largely determined that the documents did not contain
trade secrets and ordered those files filed unsealed. Kia now appeals the district court’s decision
to file the disputed documents unsealed.
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II.
Kia contends that the district court erred in finding the disputed documents should be
unsealed, setting forth two arguments: (1) the district court applied the incorrect standard for
sealing records; and (2) the district court erred in holding that the disputed documents did not
contain protectable trade secrets. We address each of these arguments in turn.
A. Standard of Review for Sealing Documents
We review decisions of the district court to seal court documents or records, as well as
orders lifting or modifying a seal, for abuse of discretion. Meyer Goldberg, Inc. v. Fisher Foods,
Inc., 823 F.2d 159, 161 (6th Cir. 1987). “An abuse of discretion exists when the district court
applies the wrong legal standard, misapplies the correct legal standard, or relies on clearly
erroneous findings of fact.” First Tech. Safety Sys., Inc. v. Depinet, 11 F.3d 641, 647 (6th Cir.
1993) (citing Fleischut v. Nixon Detroit Diesel, Inc., 859 F.2d 26, 30 (6th Cir. 1988))
A court’s discretion to seal records is bounded by a “long-established legal tradition” of
the “presumptive right of the public to inspect and copy judicial documents and files.” In re
Knoxville News–Sentinel Co., Inc., 723 F.2d 470, 474 (6th Cir. 1983). Because of the importance
of the rights involved, we have held that “the district court’s decision [to seal documents] is not
accorded the traditional scope of ‘narrow review reserved for discretionary decisions based on
first-hand observations.’” Id. at 476 (quoting United States v. Criden I, 648 F.2d 814, 818 (3d Cir.
1981)). As a result, “[o]nly the most compelling reasons can justify non-disclosure of judicial
records.” Id. (internal citations omitted).
The party seeking to seal records has the heavy burden of overcoming the “strong
presumption in favor of openness.” Shane Grp., Inc. v. Blue Cross Blue Shield, 825 F.3d 299, 305
(6th Cir. 2016) (citing Brown & Williamson Tobacco Corp. v. F.T.C., 710 F.2d 1165, 1180 (6th
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Cir. 1983)). To meet this burden, the party must show three things: (1) a compelling interest in
sealing the records; (2) that the interest in sealing outweighs the public’s interest in accessing the
records; and (3) that the request is narrowly tailored. See id. (citations omitted). Where a party
can show a compelling reason for sealing, the party must then show why those reasons outweigh
the public interest in access to those records and that the seal is narrowly tailored to serve that
reason. Id. To do so, the party must “analyze in detail, document by document, the propriety of
secrecy, providing reasons and legal citations.” Id. at 305-06 (citing Baxter Int’l, Inc. v. Abbott
Lab., 297 F.3d 544, 548 (7th Cir. 2002)).
The presumption in favor of public access is strong when public safety is implicated. See
Brown & Williamson Tobacco Corp. v. F.T.C., 710 F.2d 1165, 1180-81 (6th Cir. 1983) (vacating
the district court’s sealing order because the litigation potentially involved the information
regarding the true contents of cigarettes). “It is well-established that confidentiality provisions,
protective orders, and the sealing of cases are appropriate litigation tools in some circumstances.
However, the interests of public health and safety will often outweigh any confidentiality interests
that might be implicated.” NHTSA Enforcement Guidance Bulletin 2015-01: Recommended Best
Practices for Protective Orders and Settlement Agreements in Civil Litigation, 81 Fed. Reg. 13026-
02, 13027 (March 11, 2016). This is particularly true in class actions, where, because of the interest
of a broader public outside of the named parties, the standards for overcoming the presumption of
openness “should be applied [. . .] with particular strictness.” Shane Group, Inc. v. Blue Cross
Blue Shield of Michigan, 825 F.3d 299, 305 (6th Cir. 2016) (quoting In re Cendant Corp., 260
F.3d 183, 194 (3d Cir. 2001)).
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Where a district court finds that sealing is appropriate, the court must set forth its specific
findings and conclusions “which justify nondisclosure to the public.” Id. at 306 (quoting Brown
& Williamson Tobacco Corp. v. F.T.C., 710 F.2d 1165, 1176 (6th Cir. 1983)).
Kia contends that the district court erred by impermissibly including in its trade secret
determination consideration of whether access to the documents was of public importance. This
is not the case. The district court properly conducted its analysis by first determining whether a
trade secret existed and then, after finding no trade secret, explained the public’s interest in access
to the relevant documents. See, e.g. Kondash v. Kia Motors America, Inc., No. 1:15-cv-506, 2018
WL 770418, at *4 (S.D. Ohio Feb. 7, 2018) (“Kia has not demonstrated that the reports and
investigation materials are trade secrets. . . . Furthermore, the documents’ contents are of great
public interest, particularly to drivers concerned about their safety and class members interested
in their legal claims in this case.”). 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. While the
existence of a trade secret will generally satisfy a party’s burden of showing a compelling reason
for sealing documents, even if a trade secret does not exist, a court may still find a compelling
reason exists; further, even if a district court finds that a trade secret exists, it must still determine
whether public interest outweighs the moving party’s interests in protecting their trade secret. See
Shane Group, Inc. 825 F.3d at 308 (“‘[I]n civil litigation, only trade secrets, information covered
by a recognized privilege (such as attorney-client privilege), and information required by statute
to be maintained in confidence (such as the name of a minor victim of a sexual assault),’ is typically
enough to overcome the presumption of access.”) (emphasis added) (quoting Baxter, 297 F.3d at
546).
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Though the district court’s discussion was sparse, it is clear from the opinion that the court
determined whether the documents contained trade secrets independent of its consideration
regarding the public’s interest in the information. Accordingly, we find that the district court
applied the correct legal standard and therefore did not abuse its discretion.
B. Trade Secret Determination
Next, Kia argues that the district court erred in determining that the documents at issue
contained no trade secrets. Under Ohio law, a trade secret is defined as “information . . . that
satisfies both of the following: (1) It derives independent economic value, actual or potential, from
not being generally known to, and not being readily ascertainable by proper means by, other
persons who can obtain economic value from its disclosure or use[; and] (2) [i]t is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.” Ohio Rev. Code
§ 1333.61(D)(1)-(2). “This Court reviews for clear error the district court’s factual conclusion that
[no trade secrets exist].” Hickory Specialties, Inc. v. Forest Flavors Int’l, Inc., No. 99-5003, 2000
WL 687681 at *7 (6th Cir. May 19, 2000) (citing Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470,
474 (1974)); see also Kewanee Oil Co., 416 U.S. at 474 (1974) (noting that the Sixth Circuit had
reviewed a finding that a trade secret existed for clear error).
The Ohio Supreme Court has set forth six factors to be considered in determining whether
an item constitutes a trade secret:
“(1) The extent to which the information is known outside the business; (2) the
extent to which it is known to those inside the business . . .; (3) the precautions
taken by the holder of the trade secret to guard the secrecy of the information;
(4) the savings effected and the value to the holder in having the information as
against competitors; (5) the amount of effort or money expended in obtaining and
developing the information; and (6) the amount of time and expense it would take
for others to acquire and duplicate the information.”
Heartland Home Fin., Inc. v. Allied Home Mortg. Capital Corp., 258 F. App’x 860, 861-62 (6th
Cir. 2008) (quoting State ex rel. Plain Dealer v. Ohio Dep’t of Ins., 687 N.E.2d 661, 672 (1997)).
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A finding as to one factor is not dispositive, but “‘[a] business or possessor of a potential trade
secret must take some active steps to maintain its secrecy in order to enjoy presumptive trade secret
status.’” Id. at 682 (quoting State ex rel. Plain Dealer, 687 N.E.2d at 672). The fact that a
document will reveal “competitively-sensitive financial and negotiating information” is not an
adequate justification for sealing—rather, “the proponents of closure bears the burden of showing
that ‘disclosure will work a clearly defined and serious injury.’” Shane Group, Inc., 825 F.3d at
307 (quoting In re Cendant Corp., 260 F.3d 183, 194 (3d Cir. 2001)).
Kia has not shown that the district court committed clear error in determining the disputed
documents do not contain trade secrets. Although the district court’s explanation was sparse, it is
evident the court applied Ohio’s standard for determining whether a trade secret exists. See, e.g.
Kondash, 2018 WL at *4 (“Kia has not demonstrated that the reports and investigation materials
are trade secrets. . . . [T]he Court fails to see how these documents constitute a ‘procedure’ or
‘process’ that derives independent economic value from not being known and is the subject of
efforts to maintain its secrecy. . . . The knowledge that ceramic paint weakens tempered glass is
already known throughout the automotive industry.”).
Additionally, Kia contends that the district court erred in its factual determinations because
it distinguished testing for product development and manufacturing from testing in response to a
problem; but its cited authority does not support Kia’s proposition. Kia cites to two cases where
Ohio courts found that a company’s testing and analysis of its product performance post-market
entrance are trade secrets. See Procter & Gamble Co. v. Stoneham, 747 N.E.2d 268, 271-72 (Ohio
Ct. App. 2000) (noting that a former P&G employee had knowledge of, among other things, the
company’s plans for “revitalization of existing products,” “the perceived weakness of products,”
and relevant “market research” and finding that the employee was “privy to massive amounts of
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information that constituted trade secrets”); Valco Cincinnati, Inc. v. N&D Machining Service,
Inc., 492 N.E.2d 814, 817 (Ohio 1986) (finding the company’s materials and manufacturing
processes were trade secrets because they were unique and “developed only after a great deal of
experimentation, testing and field experience”). However, neither case dealt with investigative
reports created in response to, and for the purpose of, investigating an incident that resulted in
litigation. Further, in both cases, the court found that the Ohio’s six-factor test weighed in favor
of the proponent of sealing the records because, among other reasons, the information was not
widely known, and the company had taken steps to keep the information private. In contrast, the
district court in this case found the opposite; a finding that Kia has not demonstrated was clearly
in error. Finally, although Kia cites to four cases outside the Sixth Circuit where the same type of
information—internal investigation processes pertaining product issues that resulted in
litigation—were considered trade secrets, we are not bound by those decisions, especially where,
as here, the district court specifically applied Ohio-trade-secret law, and those cases did not.1
III.
Because the district court applied the correct standard when determining whether to seal
the disputed documents and did not commit clear error in determining whether the disputed
documents contained trade secrets, we AFFIRM the district court’s decision.
1
See McDonnell v. Southwest Airlines Co., 292 F. App’x 679, 680 (9th Cir. Sep. 11, 2008) (district court did not abuse
its discretion in sealing documents showing “procedures and communications geared toward investigating the cause
of the airline crash”); Velasco v. Chrysler Grp. LLC, No. CV 13-08080 DDP, 2017 WL 388797, at *3 (C.D. Cal. Jan.
26, 2017) (sealing “technical data pertaining to efforts to understand failures in [the product that] are inextricably
intertwined with information about Chrysler’s technical capacity”); Grayson v. Gen. Elec. Co., No. 3:13-cv-1799,
2017 WL 923907, at *3 (D. Conn. Mar. 7, 2017) (same); McCrary v. Elations Co. LLC, No. EDCV 13-0242, 2014
WL 12561600, at *5-*6 (C.D. Cal. Dec. 8, 2014) (same).
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GRIFFIN, Circuit Judge, dissenting.
In my view, the district court committed multiple legal errors and thus abused its discretion.
Given these errors, I would vacate the district court’s order and remand for a ruling under the
correct legal standards. I respectfully dissent.
I.
Kia’s challenge takes us to the intersection of two robust legal interests: (1) the public’s
interest in access to court records and (2) a party’s interest in protecting its trade secrets.
Access to Court Records. The public has a strong interest in knowing what information
court records contain. Brown & Williamson Tobacco Corp. v. F.T.C., 710 F.2d 1165, 1180 (6th
Cir. 1983). Such knowledge allows the public to assess the conduct giving rise to a lawsuit, the
lawsuit’s result, and the result’s merits. Shane Grp., Inc. v. Blue Cross Blue Shield, 825 F.3d 299,
305 (6th Cir. 2016). This interest brings with it a “strong presumption in favor of openness.” Id.
(quoting Brown & Williamson, 710 F.2d at 1179). And this presumption imposes a heavy burden
on a party seeking to seal court records. Id. (citing In re Knoxville News-Sentinel Co., 723 F.2d
470, 476 (6th Cir. 1983)).
To meet that burden, a party must show three things. First, it must show a compelling
interest in sealing the records. Id. This requires a party to provide, for each record, detailed reasons
why the record warrants sealing and legal citations to support those reasons. Id. Second, the party
must show why its interest in sealing the records outweighs the public’s interest in accessing them.
Id. at 307. And third, the party must show that its request is narrowly tailored. Id.
Trade Secrets. The concept of trade secrets originated in England in the early 1800s and
came to the United States a few decades later. See Sharon K. Sandeen & Christopher B. Seaman,
Toward a Federal Jurisprudence of Trade Secret Law, 32 Berkeley Tech. L.J. 829, 835 (2017).
In an era of industrialization, trade secrets protected proprietary manufacturing knowledge. Id.
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Since then, much has changed. The source of trade-secret law has expanded—starting in the
common law and moving to the Restatement of Torts, state law, and eventually federal law. See id.
at 835–53. The scope of what constitutes a trade secret has expanded as well; it now comprises
financial, business, scientific, technical, economic, and engineering information. See 18 U.S.C.
§ 1839(3).
With this expansion has come a three-part test for determining whether a record includes
trade secrets. The record must contain the right type of information. Id. The party that owns the
record must take reasonable measures to keep the information secret. Id. at § 1839(3)(A). And
the information must derive independent economic value from not being generally known. Id. at
§ 1839(3)(B).
Intersection of the Interests. Whether a record contains trade secrets and whether it should
be sealed are distinct inquiries. The former requires factual findings; the latter requires legal ones.
Thus, when a party asks a court to seal records because they contain trade secrets, the court must
conduct a bifurcated analysis. First, the court must make factual findings as to which types of
information the records contain, whether the party takes reasonable measures to keep the
information secret, and whether the information derives value from its secrecy. Then, the court
must reach legal conclusions as to whether the party has a compelling interest in sealing the
records, whether that interest outweighs the public’s interest in accessing them, and whether the
party has narrowly tailored its request.
The answer to the first inquiry affects the answer to the second. Trade secrets are an
exception to the presumption in favor of open court records. Shane Grp., 825 F.3d at 308; Brown
& Williamson, 710 F.2d at 1180. But the exception is neither automatic nor universal. The
existence of a trade secret within a record shows that a party has a compelling interest in sealing it
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that outweighs the public’s interest in accessing it but speaks not to whether the request to seal is
narrowly tailored. Consider, for example, a lengthy internal memorandum that mentions a single
trade secret in a single sentence. A request to seal the entirety of the record would lack narrow
tailoring because redaction could preserve the trade secret while providing access to the rest of the
record. Put differently, a party may not invoke the trade-secret exception to shield from the public
eye other, less sensitive information.
The Result. After Kondash filed the records conditionally under seal, Kia asked the district
court to keep many of them sealed because they contained investigation findings, pricing
information, government communications, and other sensitive data Kia believed were trade
secrets. Regarding the records the court ordered unsealed, it grouped them into five categories,
each of which it analyzed separately. Kondash v. Kia Motors America, Inc., No. 1:15-cv-506,
2018 WL 770418, at *4–5 (S.D. Ohio Feb. 7, 2018). For some categories, it discussed at length
whether it would seal the records. Id. For others, it provided only a few sentences devoid of legal
support. Id. at *4. Unlike the majority, I would hold that the district court, in ruling as it did,
abused its discretion by committing four legal errors.
First, the district court conflated the trade-secret inquiry with the records-sealing inquiry.
The majority would have us think otherwise, but they misrepresent the district court’s decision.
They say “[t]he district court properly conducted its analysis by first determining whether a trade
secret existed and then, after finding no trade secret, explained the public’s interest in access to the
relevant documents.” For support, they excerpt this quote from the district court’s opinion:
Kia has not demonstrated that the reports and investigation materials
are trade secrets. . . . Furthermore, the documents’ contents are of
great public interest, particularly to drivers concerned about their
safety and class members interested in their legal claims in this case.
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Notice the ellipsis. It omits four sentences. And those sentences reveal the error:
Kia has not demonstrated that the reports and investigation materials
are trade secrets. Unlike in [Proct[e]r & Gamble Co. v. Ranir, LLC,
No. 1:17-CV-185, 2017 WL 3537195 (S.D. Ohio Aug. 17, 2017)],
Kia does not propose narrowly-tailored [sic] redactions to these
documents. More importantly, however, the Court fails to see how
these documents constitute a “procedure” or “process” that derives
independent economic value from not being known and is the
subject of efforts to maintain its secrecy. Unlike in [Procter &
Gamble Co. v. Stoneham, 747 N.E.2d 268 (Ohio Ct. App. 2000)],
there is no evidence that these reports were created with the
significant outlay of time and money. Rather, all appear to be
routine forms or documents, or reports generated in response to
potential litigation over sunroof shattering. Under the logic
presented by Kia, virtually all internal documents would fall under
the category of a “trade secret.”
Furthermore, the documents’ contents are of great public interest,
particularly to drivers concerned about their safety and class
members interested in their legal claims in this case.
Id. at *4 (emphasis added). The district court begins by stating a conclusion: Kia’s investigation
records don’t contain trade secrets. One reason it gives for this conclusion is that the records don’t
contain information that derives independent economic value from not being generally known. To
be sure, that’s part of a trade-secret inquiry. 18 U.S.C. § 1839(3)(B). But the first reason the
district court gives is that Kia failed to propose narrowly tailored redactions. And that’s not part
of a trade-secret inquiry; it’s part of a record-sealing one. See Shane Grp., 825 F.3d at 307.
The district court made the same error elsewhere as well. For example, it said:
The knowledge that ceramic paint weakens tempered glass is
already known throughout the automotive industry. To the extent
the document focuses on how much of the Kia sunroof is covered in
ceramic paint, that information can be discerned by looking at a
vehicle. Thus, sealing is not appropriate.
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Kondash, 2018 WL 770418, at *4. This ties the sealing inquiry to whether the information was
publicly known, which is a part of the trade-secret inquiry. The district court also said:
The warranty and/or goodwill payments are not the type of pricing
and negotiation information that would reveal highly sensitive data
about Kia. Rather, the goodwill payments and information about
warranty payments are extremely relevant to this action and thus of
great public interest. The Court, therefore, will unseal these
documents.
Id. at * 5. This ties the data’s sensitivity, which is a part of the trade-secret inquiry, to the public’s
interest in accessing it, which is a part of the sealing inquiry. The district court further said:
The Court is persuaded that dealer price information is private.
Therefore, the Court documents should be unsealed except that the
dealer price information may be redacted[.]
Id. This ties the sealing inquiry to whether the information was publicly known, which is a part
of the trade-secret inquiry. Finally, the district court said:
Kia asserts this information is confidential because it includes ball[-
]drop[-] testing results and the documents are treated as confidential
by law. The Court finds this investigative testing as a result of the
shattering incidences is distinguished from testing performed while
developing a new product. As such [sic], the Court will not seal [the
exhibits].
Id. This ties the sealing inquiry to whether the information is the trade-secret type.
These portions of the district court’s decision don’t comport with the bifurcated, sequential
analysis the law requires. First, a court must ask whether a record contains trade secrets. To do
so, it must examine the information the records contain, the steps the record’s owner takes to keep
the information secret, and what value, if any, that information derives from being secret. 18
U.S.C. § 1839(3). Then, with the answer to the trade-secret inquiry in mind, a court must ask
whether it should seal the records. To do so, the court must examine the interest in nondisclosure
of the party seeking sealing, the public’s interest in accessing the record, and the scope of the
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request to seal. Shane Grp., 825 F.3d at 305–07. By mixing and matching the prongs of these
distinct inquires, the district court erred.
The district court’s second legal error occurred when it ruled that Kia’s records didn’t
contain trade secrets without making the factual findings that the law requires. As discussed above,
that inquiry involves findings as to which types of information the records contain, whether the
records’ owner takes reasonable measures to keep that information secret, and whether the
information derives value from its secrecy. See 18 U.S.C. § 1839(3). If a court concludes that
records fail as to one of the factors, it need not address the others. But it may not skip the process
entirely, which is what the district court did. Of fifteen potential factual findings, it made one:
Independent
Reasonable economic value
Right type of measures to keep from not being
information? information secret? generally known?
Internal-
Investigation
Records
Ceramic-Paint
Records
Warranty,
Goodwill, and No.
Parts-Data Records
Vehicle-Package-
Pricing Records
Government-
Communication
Records
Kondash, 2018 WL 770418, at *4–5. To be sure, the district court more than once mentioned
whether the records contained private information. See, e.g., id. at *4 (“The knowledge that
ceramic paint weakens tempered glass is already known throughout the automotive industry. To
the extent the document focuses on how much of the Kia sunroof is covered in ceramic paint, that
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information can be discerned by looking at a vehicle.”) (emphasis added); id. at *5 (“The warranty
and/or goodwill payments are not the type of pricing and negotiation information that would reveal
highly sensitive data about Kia.”) (emphasis added); id. at *5 (“The Court is persuaded that dealer
price information is private.”) (emphasis added). But a trade secret must be more than private; it
must derive independent economic value from its privacy. See 18 U.S.C. § 1839(3)(B). So to the
extent the district court made factual findings as to the privacy of Kia’s records, those findings,
alone, could not establish the existence of a trade secret.
To analyze whether the district court correctly declined to seal the records because they
contained no trade secrets (which would mean Kia lacked a compelling interest in filing them
under seal), then, we would need to make numerous factual findings in the first instance. This we
may not do. As an appellate court, our task is to review the district court’s factual findings, not to
supply our own findings when the district court hasn’t made them. See, e.g., Taglieri v. Monasky,
907 F.3d 404, 408 (6th Cir. 2018) (en banc) (noting the different roles that district courts and
appellate courts play when it comes to fact finding). Yet my colleagues overlook this glaring
deficiency.
The district court erred a third time when it created a distinction between pre-sale and post-
sale product testing that lacks any basis in law or logic. For example, the court ordered unsealed
one record, which contained Kia’s projection of how many sunroofs will shatter in the future,
because the court saw a difference between “product development and manufacturing” and the
response to “product problems.” Kondash, 2018 WL 770418, at *5. The court also rejected Kia’s
request to keep sealed two records related to sunroof testing because the court characterized the
testing as “investigative” rather than testing for “developing a new product.” Id. I can find no
legal support for this distinction. “[T]he term ‘trade secret’ means all forms and types of financial,
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business, scientific, technical, economic, or engineering information,” 18 U.S.C. § 1839(3)
(emphasis added), not just what a company creates before a product’s release. Indeed, this
distinction makes little sense. Like many companies, Kia offers warranties for its products.
Warranties create ongoing customer relationships. To maintain those relationships, Kia must
respond to customer dissatisfaction. And Kia has an interest in responding better than its
competitors do: each time Kia turns a frown upside down, the more likely the company is to earn
the customer’s repeat business.
The majority rejects Kia’s arguments regarding the district court’s testing distinction
because Kia hasn’t cited binding case law directly on point. Although the lack of such authority
tells us we are not required to side with Kia, it says nothing about whether we should. If a statute’s
plain language is clear (e.g., “‘trade secret’ means all forms and types of financial, business,
scientific, technical, economic, or engineering information”), we cannot abandon our interpretive
duties because another court hasn’t previously ruled on the issue.
The district court’s fourth legal error came when it rejected some of Kia’s arguments
without explanation. Kia sought to keep sealed records relating to warranty repairs and goodwill
payments (which cover repairs of out-of-warranty vehicles) because the information revealed
failure rates for parts and the company’s approach to addressing customer dissatisfaction outside
the warranty period. The district court dismissed these arguments without discussing why they
lacked merit; it simply “reject[ed]” them. Kondash, 2018 WL 770418, at *5. When we review a
district court’s exercise of its discretion, we must have enough of an explanation to meaningfully
review its decision. See, e.g., Mich. State AFL-CIO v. Miller, 103 F.3d 1240, 1248 (6th Cir. 1997)
(faulting a district court for failing to explain the basis for its decision). A district court must do
more than state the rule and result, id., and here the district court didn’t even state the rule.
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Case No. 18-3181, Kondash v. Kia Motors Am., Inc., et. al
My colleagues neglect this error as well, rejecting Kia’s arguments in the same perfunctory,
conclusory fashion as the district court. They say “it is clear from the opinion that the court
determined whether the documents contained trade secrets independent of its consideration
regarding the public’s interest in the information.” But do they explain why that is so? No. They
also say “it is evident the Court applied Ohio’s standard for determining whether a trade secret
exists.” Not only is Ohio law likely the wrong law to apply—as I explain below—but the majority
yet again relies on a bare, unsupported conclusion.
II.
Next, we need to address the district court’s explanation for its decision to permit the
redaction of some records and to keep others sealed. The parties agreed to redact or seal certain
exhibits, and the district court accepted those compromises without much scrutiny. Kondash,
2018 WL 770418, at *2–3. As to the records that would be redacted, the district court explained
what they were (dealer invoices and design drawings) and then said only that it was “satisfied that
the[] redactions are narrowly-tailored [sic] and appropriate.” Id. at *3. And as to the exhibits that
would remain sealed, the district court again described what they were (technical-design details
and replacement-parts revenue information) and said that the technical records would remain
sealed because they contained “information about engineering modifications, Kia’s engineering
requirements, and related design elements” and that the revenue records would remain sealed
because “the dollar figures depicted are not publicly known.” Id.
Although the majority does not address this ruling, I would, and I would hold that the
district court abused its discretion in four ways. First, when examining Kia’s technical records,
the district court again conflated the trade-secret standard with the records-sealing one. Whether
a record contains technical information matters when determining whether it contains trade secrets
but, standing alone, says nothing about whether the record should be sealed.
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Case No. 18-3181, Kondash v. Kia Motors Am., Inc., et. al
Second, when examining Kia’s revenue records, the district court premised its ruling on an
incomplete view of what constitutes a trade secret. That information is private, standing alone,
makes not a trade secret; the information must derive value from being private. 18 U.S.C.
§ 1839(3)(B). It must also be the right type of information, and it must be subject to reasonable
measures to maintain its privacy. Id. at § 1839(3), (3)(A). Although a record may warrant sealing
even if it doesn’t contain trade secrets, Kia never argued that its revenue records should remain
sealed for other reasons. Nor did the district court say that the private nature of the information
was itself a compelling reason to keep the records sealed—much less one that outweighed the
public’s interest in seeing them. And even had the district court said as much, that the records are
private says nothing about the scope of Kia’s request.
Third, the district court failed to meet its burden of explanation. As we recognized in Shane
Group, a court that seals records must provide “specific findings and conclusions” to justify its
decision. 825 F.3d at 306. This obligation is independent of whether a party objects to sealing the
records. Id. And it requires the court to address “why the interests in support of nondisclosure are
compelling, why the interests supporting access are less so, and why the seal itself is no broader
than necessary.” Id. A court’s failure to meet this obligation is grounds to vacate an order to seal.
Id. Here, the district court addressed neither Kia’s interest in nondisclosure nor such an interest’s
weight relative to the public’s interest in access. The court did say Kia’s request was narrowly
tailored, but it never explained why that was so. The district court’s stated basis for its ruling was
therefore “brief, perfunctory, and patently inadequate.” Id.
Fourth, to the extent that the district court meant to rest its decision on the existence of
trade secrets within the records, the district court again failed to make the required factual findings.
Nowhere did the district court determine whether Kia took reasonable steps to keep the information
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Case No. 18-3181, Kondash v. Kia Motors Am., Inc., et. al
private or whether the information derived independent economic value from not being generally
known. 18 U.S.C. § 1839(3). Those are findings we may not make in the first instance.
III.
Finally, the district court, the parties, and now my colleagues have erred in assuming Ohio
law governs whether Kia’s documents contain trade secrets. In the past, state law governed civil
trade-secret inquires by default because there was no federal civil trade-secret law. But that
changed in 2016 with the enactment of the Defend Trade Secrets Act, 18 U.S.C. § 1836. Thus,
both federal law and Ohio law now define “trade secret” for the purposes of civil lawsuits.
This overlap requires us to look to the Erie doctrine, which establishes that federal courts
sitting in diversity jurisdiction apply state substantive law and federal procedural law. Erie R.R.
Co. v. Tompkins, 304 U.S. 64, 78 (1938); see also Gasperini v. Ctr. for Humanities, Inc., 518 U.S.
415, 427 (1996). Whether federal law or Ohio law applies to the trade-secret inquiry, then, depends
on whether the issue is substantive or procedural.
To identify the nature of a legal issue, the Supreme Court has adopted an “outcome-
determination test,” which asks whether it would “significantly affect” a lawsuit’s outcome if a
federal court applied federal law instead of state law that would have controlled had the lawsuit
remained in state court. Gasperini, 518 U.S. at 427–28 (quoting Guaranty Trust Co. v. York, 326
U.S. 99, 109 (1945)). In other words, the outcome of a case should be “substantially the same, so
far as legal rules determine the outcome of a litigation, as it would be if tried in a State court.”
Guaranty Trust, 326 U.S. at 109. When applying this test, courts must consider Erie’s twin aims:
“discouragement of forum-shopping and avoidance of inequitable administration of the laws.”
Gasperini, 518 U.S. at 428 (quoting Hanna v. Plumer, 380 U.S. 460, 468 (1965)).
Here, the issue appears to be procedural. Kondash has not sued Kia for trade-secret
misappropriation; his claims are for negligence, breach of express warranty, and breach of implied
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Case No. 18-3181, Kondash v. Kia Motors Am., Inc., et. al
warranty. And how he files Kia’s records—under seal or in the open—seems unlikely to affect
the outcome of the case. He will still be able to file the records, and the district court will still
consider them. So sealing records will leave untouched how the district court (or eventually a
jury) resolves any ultimate issues in the case.
Erie’s twin aims further suggest that the issue is procedural. Unless a party has the devious
ulterior motive of forcing its opponent to disclose trade secrets, it would have no reason to forum
shop—whether documents must be filed under seal is simply too far removed from a case’s merits.
Even if a party was so devious, it isn’t clear that federal law defines “trade secret” advantageously.
Every state except New York has adopted the Uniform Trade Secrets Act. See Legislative Bill
Tracking - Trade Secrets Act, https://tinyurl.com/y87nmbf5, (last visited Mar. 13, 2019) (listing
every state but New York and Massachusetts as having adopted the Act); H.B. 4868, 190th Gen.
Ct. (Mass. 2018), subsequently codified at Mass. Ann. Laws ch. 93, § 42 (LexisNexis) (adopting
the UTSA). And the Defend Trade Secrets Act and the Uniform Trade Secrets Act define “trade
secret” similarly: both refer to similar types of information; both require the information to be
subject to reasonable measures to keep it secret; and both require the information to derive value
from not being generally known. Compare 18 U.S.C. § 1839(3) with UTSA § 1(4)(i) (available at
https://tinyurl.com/ybqres3e (last visited Mar. 13, 2019)). Given these similarities, the distinction
between federal law and state law might be one without a difference. If that is so, application of
federal law would neither encourage forum shopping nor lead to inequitable administration of the
law because both federal and state law would compel the same result.
So despite the majority’s mechanical application of Ohio law, federal law appears to apply.
That said, the parties have never had the opportunity to express their views on the issue. Thus,
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Case No. 18-3181, Kondash v. Kia Motors Am., Inc., et. al
because I would remand the case for application of the correct legal standard, I would also leave
it to the district court to determine in the first instance which law applies.
* * *
In sum, I would hold that the district court abused its discretion by: (1) conflating the trade-
secret standard with the record-sealing one; (2) failing to make the factual findings that a trade-
secret analysis requires; (3) inventing an illogical distinction between pre-sale and post-sale
product testing; (4) rejecting some of Kia’s arguments without explanation; (5) relying exclusively
on a factor that, alone, answers neither the trade-secret inquiry nor the records-sealing one; and
(6) failing to explain its basis for redacting some records and keeping others sealed. This does not
mean the district court necessarily erred in determining what to keep sealed, to unseal, or to redact.
Nor does this mean Kia necessarily met its burden of justifying its request to keep the records
sealed. Instead, I would remand to the district court to apply the correct legal standard.
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