SCUTPA: Adverse to the Public Interest?

Welcome 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.

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