The Problem: Confidentiality agreements in lawsuit settlements
can be harmful, even deadly, to the public
The prevalence of confidentiality or secrecy agreements is perhaps one of the least discussed and most fundamental problems with our civil justice system. At various stages of a lawsuit, a plaintiff suing a large corporation for causing serious harm will gain access to compelling information. If the parties decide to settle, there is a chance that all of this information, including that which implicates the corporation’s role in broader public health and safety hazards, will be kept secret under a confidentiality agreement. In participating in a settlement, the plaintiff signs away his or her ability to share information gained about the harm being committed, the settlement amount, and other valuable details.
As a result of confidentiality settlement agreements, a defendant corporation that is conducting harmful business practices may freely continue engaging in the same practices after settlement, with no fear of public reprisal. As a result, more unsuspecting victims are injured by concealed hazards, and then are being forced to re-invent the wheel in asserting their claims against the perpetrators. This system can lead to astonishingly tragic outcomes. For example, the Firestone and Bridgestone tires that exploded on Ford Explorers, killing at least 88 people, were first made in 1993 but not recalled until the year 2000.(1) This is because the public had no access to the vital, life-saving information from prior lawsuits that was kept secret under confidentiality agreements prior plaintiffs had signed during settlement.(2)
Perhaps the most extreme example of this phenomenon is asbestos litigation: lawsuits against manufacturers for knowingly exposing their employees and others to toxic levels of asbestos, causing often fatal lung and respiratory diseases. The first asbestos case was brought and settled in 1933, compensating eleven clients to the tune of $30,000 ($450,000 in today’s dollars).(3) The settlement agreement required that the lawyer not be involved in any future cases, effectively closing off the evidence and expertise he had accumulated.(4) It took forty-five years for anyone to discover this secrecy agreement.(5) Seventy-four years, hundreds of thousands of plaintiffs, and billions of dollars in paid damages later, asbestos litigation remains on the nation’s dockets. Had the details of the health risks of this first case been released to the public, many of these injuries and the litigation they required could have been avoided by implementing stricter and ultimately far less expensive safety standards on the asbestos industry and its service providers.
Many plaintiffs file lawsuits not just for individual compensation for their injuries, but also to prevent the wrongdoer from inflicting harm on future victims. But these plaintiffs face external pressure to settle their lawsuits under confidentiality agreements even when public safety and health are at stake. Although many of these plaintiffs do not wish to settle under such conditions, they often feel they have no other realistic choice. Public interest lawyer Arthur Bryant describes the dilemma:
[W]hat happens at the settlement, is the company often says: ‘We will pay you some large sum of money but only if the amount we're paying you is confidential, you agree to return all those documents to us, and you agree not to tell anybody what you saw.’ And often the plaintiff will say, ‘Well I don't want to agree to that,’ and the company will say, ‘Fine, then we will go back to court and keep fighting for years and years and you'll never get a penny.’ Again many of the plaintiffs and their lawyers feel essentially blackmailed as if they have no choice, particularly when you're representing somebody who is seriously injured and needs the money to pay their medical bills, they really don't have any choice. And that's the way it ends up being kept secret through settlement.(6)
Supporters of confidentiality agreements argue that the corporate defendant’s right to privacy and to contract should trump any larger public safety goals involved in a lawsuit.(7) The privacy interest behind confidentiality settlements is usually recognized when secret information—for instance trademark information—is at issue.(8) But the privacy argument is also often used to protect corporations not from having their valuable trade secrets exposed, but from the “harm” of public accountability for their wrongdoing. As much as privacy is valued, a corporation’s privacy regarding its misdeeds simply should not trump the general public’s right to be aware of serious public health and safety threats.
Even when the plaintiff agrees to secrecy, the judge has the authority to protect the public interest and deny a secrecy agreement, but experts have found that most judges do not.(9) Corporations are supposed to show “for each particular document it seeks to protect… that specific prejudice or harm will result if no protective order is granted,” but often the pressure on judges of running a full docket means that secret settlements are “filed under seal as a matter of course.”(10)
Supporters of confidentiality complain that prohibiting these agreements will prevent many cases from being settled and thus “clog” the courts with full-blown trials.(11) It is this argument that some scholars say creates pressure for many plaintiffs, as well as pressure for plaintiffs’ lawyers and judges, to settle instead of fully adjudicate their claims.(12) But this argument is weak in comparison to the public’s health and safety interest in disclosure. As the asbestos example demonstrates, early public disclosure would save lives and prevent future lawsuits, as well as help businesses model their operations in a way that is beneficial to society, and ultimately, to the business’ reputation and profit margin.
The Policy Proposal: Prohibit Secrecy When Public Health/Safety Are At Stake
The next President must support the introduction of federal legislation prohibiting confidentiality agreements in matters that involve the general public’s health or safety. This would not only reduce repetitive litigation over the same harm with different plaintiffs, but would give corporations added incentive to engage in responsible and safe business practices. Most importantly, it would protect the American public against undue harm.
Consumer advocates and legal experts concerned about the public’s interest advocate this approach.(13) And evidence shows that the American public agrees. A New Jersey poll showed that 69 percent of respondents opposed secrecy agreements that hide hazards in the products they use, and agreed that “when lawsuits over allegedly defective products are settled out of court, the public has a right to know its terms.”(14)
A few states have taken the lead and implemented rules prohibiting or restricting secrecy agreements that would adversely affect the public’s health or safety.(15) In Texas, courts must balance the presumption of openness and the potential adverse effect that sealing would have on public safety with a specific and substantial interest a party may have for sealing the records.(16) The records can be sealed only if a significant interest outweighs the interest in keeping the records open.(17) The court must also find that there is no less restrictive means to protect the privacy interest asserted by the party.(18) Florida law prohibits a court from enforcing a secrecy agreement that has “the effect of concealing a public hazard or any information concerning a public hazard.”(19)
Forty additional states have introduced similar bills, but none has become law. What is needed is universal federal legislation that applies across the nation. Over the past twelve years, Senator Herb Kohl (D-Wisconsin) and various other Congressional representatives have proposed legislation that would do just that, but it has never passed.(20) The Sunshine in Litigation Act of 2005, the latest of these proposed bills, would have barred judges from enforcing confidentiality agreements related to public health and safety. This bill essentially declares such confidentiality agreements unenforceable due to conflict with public policy.
The passage of legislation like the Sunshine in Litigation Act would signal significant progress in the effort to rebalance priorities in favor of the public’s health and welfare. America needs a President who will actively advocate for this legislation.
(1) See, e.g., Laurie Katrky Dore, The Confidentiality Debate and the Push to Regulate Secrecy in Civil Litigation, Report of the 2000 Forum for State Court Judges, Roscoe Pound Foundation (2000); Daniel J. Givelber and Anthony Robbins, Public Health Versus Court-sponsored Secrecy, 69 Duke J. L. & Contemp. Problems 131, 132 (2006), also available at http://law.duke.edu/journals/lcp.
(2) See, e.g., People Over Profits, Secrecy: Unnecessary Court Secrecy Bad for Public Policy, available at http://www.kintera.org/htmlcontent.asp?cid=71443 (“A confidential settlement kept known defects in Bridgestone/Firestone tires secret for almost a decade. If that early court had not approved the initial settlement with the secrecy order, Bridgestone/Firestone would have likely resolved the defect at a much earlier date, potentially saving hundreds of needlessly lost lives.”).
(3) Daniel J. Givelber and Anthony Robbins, Public Health Versus Court-Sponsored Secrecy, 69 Duke J. Law and Contemporary Problems 131, 132 (2006), also available at http://law.duke.edu/journals/lcp.
(4) See, Paul Brodeur, Outrageous Misconduct: The Asbestos Industry on Trial, 114 (1985).
(6) Chris Richards, The Law Report, “Deadly Secrets—The Dangers of Confidentiality Agreements” (Interview with Arthur Bryant of Trial Lawyers for Public Justice) (RADIO NATIONAL Mar. 10, 2000). Transcript available at http://www.abc.net.au/rn/talks/8.30/lawrpt/stories/s195024.htm.
(7) See, e.g., Richard Epstein, The Disclosure Dilemma: Why a Ban on Secret Legal Settlements Does More Harm than Good (BOSTON GLOBE, D1 Nov. 3, 2002).
(8) Fed. R. Civ. Pro. 26 (c).
(9) See, e.g., Hon. Jack B. Weinstein, Secrecy and the Civil Justice System, 9 J.L. & Pol’y 53, 58 (“Courts have broad discretion in entering protective orders and sealing records. Most agreements are uncontested, and crowded calendars put great pressure on judges to move cases. As a result, judges routinely approve sealing and secrecy orders.”).
(10) Phillips v. Gen. Motors, 307 F.3d 1206, 1212 (9th Cir. 2002); Foltz v. State Farm, 331 F.3d 1122 (9th Cir. 2003).
(11) See, Richard Epstein, supra note 60.
(12) See, e.g., Laurie Katrky Dore, The Confidentiality Debate and the Push to Regulate Secrecy in Civil Litigation, Report of the 2000 Forum for State Court Judges, Roscoe Pound Foundation (2000); USAction, “Court Secrecy: What you Don’t Know Might Kill You” (USACTION July 21, 2004), also available at http://www.usaction.org/site/pp.asp?c=eiJPJ5OVF&b=127967#i; Robert Schwaneberg, “The Dilemma of the Secret Settlements” (STAR-LEDGER Oct. 19, 2003).
(13) See, e.g., Daniel J. Givelber and Anthony Robbins, Public Health Versus Court-sponsored Secrecy, 69 Duke J. L. and Contemp. Problems 131, 132 (2006), also available at http://law.duke.edu/journals/lcp. (Authors suggest barring judges from enforcing confidentiality agreements that would suppress information relevant to public health. They also propose that juries be allowed to consider previously negotiated confidentiality agreements when deciding on liability for punitive damages). See also, Robert Schwaneberg, “The Dilemma of the Secret Settlements” (STAR-LEDGER Oct. 19, 2003) (Quoting statements in support of such laws, by Richard Zitran, director of the Center for Applied Legal Ethics at University of San Francisco Law School, Rosemary Shahan, founder of Consumers for Auto Reliability and Safety, and others.).
(14) See Star-Ledger/Eagleton-Rutgers Poll # 144 (September 2003) (“Lawsuits claiming that a particular product is defective and caused injury are frequently settled out of court. Which of the following statements comes closer to your view: Companies should have the right keep the terms of out-of-court settlements secret if all parties involved agree to it - OR - The public should have the right to know the terms of defective product cases, even if they are settled out-of-court.”).
(15) See, e.g., Texas R. Civ. Pro. 76 a (1990); Fla. Stat. Ann. 69.081 (2000).
(16) See, Texas R. Civ. Pro. 76 a (1990).
(19) Fla. Stat. Ann. 69.081, Florida Sunshine in Litigation Act (2000).
(20) Senator Kohl and others have been proposing this legislation since at least 1995.