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SCUTPA: Reining in Discovery With A Self-Critical Analysis Privilege

In my last two posts, I’ve been discussing the South Carolina Unfair Trade Practices Act, its overuse, and how that overusage can ironically—yet quite foreseeably—thwart the public interest the statute is designed to protect. The problem, specifically, is that the breadth of discovery in actions involving unfair trade practices claims provides a compelling disincentive for businesses to engage in thoughtful self-critical analysis to determine if their goods or services can be provided in a way that is safer or more effective in the hands of consumers. Chilling self-critical analysis is good for no one. The question becomes: How can we give businesses the latitude they need for self-improvement in a way that doesn’t punish them for being responsible corporate citizens? One way this can be accomplished is by the creation of a qualified privilege which would shield self-critical analyses from disclosure in the course of discovery.

Now before we go any further, let me confess that this is not-in any way, shape, or form-an original idea. I have never claimed to be original, and now is no time to start. The idea of a qualified privilege for self-critical analysis dates back at least 40 years, to Bredice v. Doctors Hospital, Inc., 50 F.R.D. 249 (D.D.C. 1970). Bredice was an action for medical malpractice. During discovery, the plaintiff sought information relating to the treatment of a particular patient (who was injured by the alleged malpractice) which had been disclosed to an internal committee comprised of health care providers, as well as the notes and records of the committee regarding the patient’s care. The committee existed for the purpose of monitoring the quality of patient care generally and, perhaps more importantly, for improving standards of health care delivery going forward. The court held that the discovery requested was privileged from disclosure precisely because of the need for health care providers to speak freely about the quality of patient care. The court identified four critical elements to the existence of the qualified privilege for self-critical analysis: (1) that the analysis had been performed by the party claiming the privilege; (2) that the analysis had been conducted under the expectation of confidentiality; (3) that the information sought through discovery would probably not have been prepared if it were discoverable; and (4) that the information prepared as a result of self-critical analysis promotes a significant public interest.

Since Bredice, many states have codified a qualified privilege for health care providers, including South Carolina. See S.C. Code § . However, as a matter of common law, courts have rarely recognized a qualified privilege for self-critical analysis, and almost never in circumstances other than health care. If any professional field deserves a privilege for discussion involving consumer deliverables, medicine is at the top of the list. But should medicine be the only field that deserves a privilege for self-critical analysis? Surely not. Any commercial actor who has the capacity to affect the health and welfare of consumers through the delivery of their products or services should have the benefit of discussing improvement in a venue that can be free from the reach of discovery. Yet the law has been terribly reluctant to embrace any type of general protection for self improvement.

A general qualified privilege, along the same lines expressed in Bredice, would be a welcome development in terms of corporate protection. Though there is no sign that such protection is forthcoming. However, in my next post, I’ll discuss how South Carolina may have already established a framework for reining in discovery of confidential, sensitive information in actions involving the Unfair Trade Practices Act.

SCUTPA: Adverse to the Public Interest?

Welcome688彩票 back. In my last post, I was discussing how the South Carolina Unfair Trade Practices Act has become a standard tool for increasing the scope and expense of litigation. As if litigation needed to get any more expensive. In my concluding remarks, I offered an example of how SCUTPA can – and very often does – require defendants to become their own hangman. This is accomplished by the use of discovery to compel the disclosure of information a defendant may have in its possession relating to other similar claims, thereby providing the plaintiff with the playbook they may need to sustain an unfair trade practices claim that would otherwise be completely and utterly meritless. At the very least, it may substantially cut down the amount of legwork a plaintiff has to do for himself.

You may be thinking to yourself, Ok, if this is true, what company would be so silly as to keep records of other similar claims on file? Lots of them. And it’s not because they’re silly. It’s because they’re responsible. Regardless of whether we’re talking about the manufacturing of goods or the delivery of services, companies that are engaged in commerce responsibly keep track of how useful their goods or services are. And that’s measured by the number of complaints they may receive, as well as the type. Complaints about ineffective goods or services may be relevant to the quality control department; complaints about ineffective goods or services that hurt people may be relevant to quality control and risk management.

In any event, keeping records of claims/complaints is a good business practice. From the societal perspective, we want our businesses taking critical looks at themselves and their goods and services to figure out How can we make this better? How can we make this safer? That analysis is not done in a vacuum. It’s done in the crucible of the American market where only the strong survive.

And that’s why unfair trade practices acts – like SCUTPA – do more harm than good. If unfair trade practices acts can be used to expand discovery to include a company’s confidential information regarding other similar claims, especially in cases where the plaintiff is on a fishing expedition, that creates a strong disincentive – a chilling effect even – for companies to accumulate the information needed to perform the self-critical analyses we want them to do. The practical effect of this should be apparent. Goods and services are probably improved upon – in terms of effectiveness and safety – more slowly than they otherwise would be, if companies had the latitude to engage in self-critical analysis more freely without fear of having their own confidential information used against them in a court of law.

Certainly, there is a societal interest in allowing parties to engage in broad discovery against each other in the course of litigation. But that interest is not unlimited. And it should be more strictly limited in circumstances where more compelling societal interests – such as better, safer, more competitive goods and services – are at stake.  Ironically, one of the fundamental elements of an unfair trade practices claim is that the defendant’s business practice had an adverse impact on the public interest.  However, the law gives no consideration to the adverse public impact caused by unreasonably excessive discovery.

My next few posts will take a look at what could be done to make SCUTPA more equitable for plaintiffs and defendants, as well as what the South Carolina Supreme Court may have already done to rein in SCUTPA-related discovery abuses.

The South Carolina Unfair Trade Practices Act: Used and Abused

Prepare yourselves, faithful readers. This week’s post from Yours Truly actually offers substantive legal content. Or at least what passes for it under the Buckingham blog standard, which admittedly, is exceptionally low. This post addresses the . It seems like almost every law suit I defend these days includes a SCUTPA cause of action. I don’t think it’s because there’s an onslaught of companies out there engaging in unfair or deceptive trade practices. No, I think it’s just because SCUTPA is overused. Extremely overused. To the point where I might be caught off guard if I got a complaint that didn’t assert a SCUTPA claim.

There’s a couple of reasons, I think, why the unfair trade practices act is tossed around so freely. The first two reasons are fairly obvious. Reason No. 1: The statute is one of the few vehicles through which a party can recover attorneys’ fees. Reason No. 2: The statute also authorizes treble damages. For those of you who are fortunate enough to live a life outside the legal profession, “treble” is more than just a musical clef. At law, “treble” means triple. Whatever damages you have, multiply it by three. By themselves, reasons 1 and 2 are incentive enough to bring a SCUTPA action. But wait! There’s more.

Reason No. 3: It’s easy to allege a violation of SCUTPA. All you have to do is claim that the defendant engaged in an unfair or deceptive trade practice (which is not clearly defined), that you were damaged by the practice, and that the practice had an adverse impact on the public interest. To allege that, you only have to claim that the practice was repeated, or that it is merely capable of being repeated. Add a pinch of righteous indignation and voila! You’ve tripled a defendant’s exposure! Whether you can actually prove unfair trade practices at trial, well, that’s a horse of a different color, one that you won’t have to ride for at least 18 months down the long road of litigation.

Theoretically, this is a tremendous advantage for plaintiffs. Settlement negotiations are based on a party’s risk. To the plaintiff, the risk is that trial will result in a defense verdict. To the defendant, the risk is that trial will result in a plaintiff’s verdict for the maximum amount of exposure. Therefore, by increasing a defendant’s amount of exposure, a plaintiff is also increasing the settlement range.

From the defense perspective, a frequently asked question is whether SCUTPA actions can be dismissed at an early stage of litigation. Regrettably, the answer is “maybe, but probably not.” Motions to dismiss are intended to test the legal sufficiency of pleadings. In other words, the court reviews whether the complaint uses the magic words needed to state a valid cause of action. As noted above, for SCUTPA claims, there are only a few magic words needed, and they’re not clearly defined. The statute doesn’t meaningfully define an “unfair or deceptive trade practice.” Furthermore, on a motion to dismiss, the deck is kind of stacked against defendants. The law requires courts to view the complaint in the light most favorable to plaintiffs. Also, plaintiffs needn’t offer proof in support of their allegations at the dismissal stage. Consequently, unless there’s some legal deficiency with the way a plaintiff has brought their SCUTPA action, the action is around to stay for awhile.

Which leads to Reason No. 4 of why SCUTPA actions are so prevalent these days: the long, arduous process of discovery. The scope of discovery is defined by the allegations of the complaint. Just as SCUTPA actions allow plaintiffs to increase the amount of a defendant’s exposure, they also allow plaintiffs to increase the scope of discoverable information. After all, a plaintiff must prove that a defendant engaged in other similar conduct, or that their policies make it likely that the defendant will engage in other similar conduct in the future. This information is critical to a plaintiff’s SCUTPA action, especially if he never previously had that information. And where better to obtain that information than from the defendants themselves? Consequently, SCUTPA is used as a tool for plaintiffs to embark upon fishing expeditions against defendants.

Let’s take this to a practical level. Suppose a person claims to have been injured by a defective product. They sue the manufacturer for negligence, strict liability, and breach of warranty – the holy trinity of products liability. Without a SCUTPA action, the plaintiff is limited ordinarily to discovery against the defendant on design and manufacturing issues. However, with SCUTPA, the plaintiff can arguably obtain discovery – from the defendant – on other similar claims that have been brought against it by other, unrelated individuals. Essentially, the law requires the defendant to become his own hangman. I’ll let you be the judge of how fair – or unfair – that is.

This post is already long enough. But there’s plenty more to talk about. In the coming weeks, I’m discuss why allowing such broad discovery is adverse to the public interest. Thereafter, I’ll suggest how SCUTPA can be fixed. Perhaps it goes without saying, but the opinions expressed in this post are just the thoughts of one simple lawyer. I certainly don’t have all the answers. But I know something’s broken when I see it. And I also know that there’s just not that much unfair and deceptive business going on in South Carolina.