"Sunshine in Litigation" Legislation: Boon or Bane?

SUNSHINE IS VITAL TO PUBLIC SAFETY

DEFECTIVE AND DANGEROUS PRODUCT

By Martin Healy, Jr. and David P. Huber

For too long, confidentiality in litigation has jeopardized public safety. In a reassuring trend, legislation and court rules promoting public access are becoming more widespread. As former Texas Supreme Court Justice Lloyd Doggett noted, "I think there are lives being lost every week in America, due to hazardous products and hazardous activities, as a result of secrecy agreements."

Dangerous conditions in products ranging from medicines to toys to household goods have been kept secret in lawsuits, including the recent Ford/ Firestone litigation. For years, secret settlements involving predatory members of the clergy have allowed abuse to continue. Only recently are there efforts to determine the full extent of the problem.

Secrecy in litigation is accomplished through confidential settlements, protective orders on documents, and the sealing of court records. Legislation and court rules aimed at treating the problem are often titled "sunshine in litigation" or "sunshine legislation." As Justice Brandeis wrote, "Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman."

Public access to information is vital not only to public safety but also to the efficiency of litigation. It also gives the public an insight into the American judicial system at work. Arguments in opposition to disclosure often rest upon claims of privacy and trade secret.

However, sunshine legislation can accommodate the need for confidentiality in trade secrets, proprietary information, and medical records and does not affect criminal, juvenile, or divorce records. Sometimes, the secrecy requirement goes only to the amount of the settlement. Other times it goes to the particulars of the alleged defect and the fact of the settlement as well as the amount. Some agreements disallow disclosure not only to the public but also to professionals involved in similar claims. In addition, some require a return of all documents relating to the product. While secreting the amount of a settlement may be justified so as not to influence other settlement negotiations, the same cannot be said about nondisclosure of product defects.

SUNSHINE PROMOTES PUBLIC SAFETY

The stark truth is that people are dying because of unwarranted secrecy and lack of access to important information about matters concerning public safety. Dangerous products continue to kill and maim innocent victims because claims and lawsuits are quietly resolved while the products remain on the market. Manufacturers have a duty to report to the Consumer Product Safety Commission if, within a 24-month period, a product is the subject of three civil actions involving death or grievous injury. However, examples abound where this protection is woefully inadequate and often deliberately ignored.

Among the best known and most recent examples is the longstanding problem with defective Bridgestone/Firestone tires. Lawsuits involving the defective tires were settled over a period of 10 years before the tires were recalled. During that time, more than 200 deaths associated with defects in the tires occurred in the United States.

In 1933, the deadly effects of asbestos were exposed but then secreted when a case brought by 11 Johns-Manville employees was settled and the record was sealed. This allowed the industry to continue using asbestos, even though it was known to cause asbestosis and mesothelioma. Unknown numbers of asbestosis victims resolved their claims while manufacturers insisted on strict confidentiality. The truth was hidden for more than 40 years.The total number of resulting deaths is incalculable. As the notorious case and surrounding publicity of General Motors Corp. v Moseley illustrates, General Motors forced confidentiality provisions on settlements concerning sidesaddle fuel tanks in pickup trucks while continuing to manufacture millions of the deadly vehicles. The trucks' design rendered them unreasonably dangerous and susceptible to deadly fires in certain types of crashes. Reportedly, 750 deaths occurred during the 15 years the defect was secreted.

Less widely known, but equally troubling, is the case of defective electric wheelchairs. An Ohio-based manufacturer supplied one quarter of the electric wheelchair market in the United States, with yearly sales over $1 billion. It manufactured 215,000 powered wheelchairs between 1995 and 2000. The $4,500 chairs lacked a $5 fuse, which would have prevented short circuits in the charging system and resulting fires. The manufacturer received more than 30 complaints between 1993 and 2000 describing sparks shooting out of the chairs and causing fires, which destroyed dwellings. In at least four cases, chair occupants were trapped and burned to death. The cases were settled with strict confidentiality provisions. No meaningful publicity resulted, while thousands of defective chairs remained in use. The manufacturer began quietly recalling the chairs in 2000 and received more than 30 complaints in the next two years.

Then there are the clergy who, despite settling sexual molestation claims, were allowed to continue their predation under a veil of secrecy insisted upon by the defendants and unwittingly approved by various courts. In 2002, after the enormity of the problem became public, one participant, Superior Court Judge Margot Botsford, said, "Had I been aware of how widespread this issue was, I might have had a very different reaction to [sealing the case]."8

Although most courts are extremely busy and disinclined to interfere in matters that are the subject of agreement of the parties, courts have refused based on public safety concerns to enter orders sealing court records.9 In South Carolina, in 2002, the 10 active federal trial judges unanimously voted to ban secret legal settlements, saying agreements have made the courts complicit in hiding the truth about hazardous products, inept doctors, and sexually abusive priests. In support of Local Rule 5.03 (DSC) Chief Judge Joseph Anderson, Jr. wrote as follows: Here is a rare opportunity for our court to do the right thing, and take the lead nationally in a time when the Arthur Andersen/ Enron/Catholic priest controversies are undermining public confidence in our institutions and causing a growing suspicion of things that are kept secret of public bodies....Some of the early Firestone tire cases were settled with court ordered secrecy agreements that kept the Firestone tire problem from coming to light until many years later....

COURT SECRECY IS CONTRARY TO ESTABLISHED AMERICAN JURISPRUDENCE

As the United States Supreme Court has noted, "For many centuries, both civil and criminal trials have traditionally been open to the public. As early as 1685, Sir John Hawles commented that open proceedings were necessary so 'that the truth may be discovered in civil as well as criminal matters.'" Moreover, the interest in access to court proceedings is even greater when the litigation involves matters of significant public concern. Federal Rule of Civil Procedure 26(c) creates a presumptive right of public access to materials produced in litigation, which should be honored absent compelling reasons for secrecy.

The burden of establishing good cause for nondisclosure rests upon the party seeking the protective order, who must make a "particular factual demonstration of potential harm, [and] not [rely] on conclusory statements."

Public access promotes judicial efficiency. Unnecessary secrecy makes the truth-seeking process more time consuming and costly, with future litigants forced to "reinvent the wheel." Discovery produced in one case is not necessarily produced in another involving the same parties and issues. Secrecy subverts the process of discovering the truth, thus making it more difficult for plaintiffs, who are often in dire financial straits. In Wilk v American Medical Ass'n., the court found an even stronger argument for openness in collateral litigation, where enforced secrecy would cause duplicative work for litigants and the court.

Moreover, repeat defendants benefit from the opportunity to attempt numerous "trial runs" at defenses and strategies while keeping opponents, courts, and the public in the dark. These tactics do not promote justice, but only serve to allow parties to avoid responsibility while dangerous conditions and products remain in the public domain. As the court in Cipollone v Liggett Group, Inc., stated, "requiring each plaintiff in every similar action to run the same gauntlet over and over again serves no useful purpose other than to create barriers and to discourage litigation against the defendants."

Secrecy makes it virtually impossible to verify whether a party's discovery responses are complete and accurate. Discovery responses in one case often differ widely from those in another. Where parties are denied the opportunity to find and freely communicate with similarly situated litigants, one party benefits richly at the expense of the other. Good cause, as contemplated under Federal Rule of Civil Procedure 26(c), was never intended to make litigation more difficult and costly.

Secret settlements distort the public's perception of the justice system. One often overlooked but pernicious effect of unjustified secrecy is that it allows special interests to promote a pervasive fraud on the public. Meritorious cases involving obviously defective products or predatory individuals are secretly resolved. Meanwhile, media and public attention are focused on less meritorious cases, the so-called frivolous lawsuits.

This situation leads to unfounded claims that the "American civil justice system is broken." These claims ignore the legions of meritorious cases for injuries caused by defective products, drugs, negligent physicians, and predatory sexual offenders, but which never reach the public consciousness because they are quietly resolved.

SUNSHINE IN LITIGATION DOES NOT AFFECT LEGITIMATE PRIVACY RIGHTS

Most arguments against openness in litigation appear to rest on a concern for privacy, such as protection of trade secrets or personal information contained in medical records. These concerns are baseless given that existing laws governing privacy and privilege adequately address secrecy requirements of law abiding corporations and individuals.

Specifically, all "sunshine litigation," as well as FRCP 26(c) contain provisions which shield legitimate trade secrets or other private information from release to the public. The good cause requirement of Rule 26(c) is ample protection for any legitimate privacy or trade secret concern.

Legitimate trade secrets are adequately protected. Claims that information should be shielded from disclosure as a "trade secret" are often made in bad faith. Courts have held that information concerning the public health does not constitute a trade secret. Additionally, information concerning the hazardous nature of a product is not a trade secret.20 As pointed out by the U.S. Supreme Court:

We emphasize that the value of a trade secret lies in the competitive advantage it gives its owner over competitors. ...If, however, a public disclosure of data reveals, for example, the harmful side effects of the submitter's product and causes the submitter to suffer a decline in the potential profits from sales of the product, that decline in profits stems from a decrease in the value of the pesticide to consumers rather than from the destruction of an edge submitter had over its competitors, and cannot constitute the taking of a trade secret.

Also, commercial information readily ascertainable from examining the product or from "reverse engineering" is not a trade secret. In U.S. v IBM Corp., the court lists six factors for determining whether information constitutes a trade secret:

  1. The extent to which the information is known outside the company;
  2. The extent to which the information is known by employees and independent contractors involved with the company;
  3. The extent of measures taken by the company to guard the secrecy of its information;
  4. The value of the information to the company and its competitors;
  5. The amount of effort or money expended in developing the information;
  6. The ease or difficulty with which the information could be properly acquired or duplicated by others. Often, defendants claim information is a trade secret that does meet this test. There is no question that a company's "secret formula" should be protected against discovery by its competitor. Rule 26(c), "sunshine litigation" and other openness rules specifically provide safeguards to protect such information.

Legitimate privacy rights can be protected. Claims that a right to privacy is being infringed are often unfounded. Corporations often do not enjoy the same right to privacy as individuals."Except for the appropriation of one's name or likeness, an action for invasion of privacy can be maintained only by a living individual whose privacy is invaded."

Parties seeking secrecy often argue that disclosure will "embarrass" a litigant. Only "embarrassment" that would significantly harm a company's competitive and financial position justifies a protective order. Where a litigant claims that disclosure will cause adverse publicity, courts have noted, "it is not the duty of Federal Courts to accommodate the public relations interest of litigants." In Brown & Williamson Tobacco Corp. v F.T.C., the court wrote as follows:

The natural desire of parties to shield prejudicial information contained in judicial records from competitors and the public...cannot be accommodated by courts without seriously undermining the tradition of an open judicial system. Indeed, common sense tells us that the greater the motivation a corporation has to shield its operations, the greater the public's need to know. In such cases, a court should not seal records unless public access would reveal legitimate trade secrets, a recognized exception to the right of the public access to judicial records.

Opponents of disclosure often raise fears that a claimant's private information will be inappropriately revealed - e.g., that court files will expose a plaintiff's sensitive medical records. It is ironic, if not hypocritical, that those who have wreaked havoc on innocent victims would raise concerns about innocent victims' privacy rights. In any event, such arguments fail to acknowledge what every practitioner knows - that sunshine statutes and rules accommodate legitimate privacy concerns, as they do legitimate trade secrets.

VARIOUS APPROACHES TO SUNSHINE LAWS

Sunshine in litigation can be implemented through legislation and/or rule changes. Nine states have enacted sunshine legislation: Arkansas, Delaware, Florida, Indiana, New York, North Carolina, Oregon, Virginia, and Washington. Eight more have adopted sunshine rule changes: California, Georgia, Delaware, Idaho, Louisiana, Michigan, New Jersey, and Texas. The federal seventh circuit has adopted a stringent approach to protective orders. Several decisions and 7th Circuit Internal Operating Procedure 10 require stringent review of even agreed claims of confidentiality on nearly a document-by-document basis.

Ethical issues. Affair settlement offer with a secrecy provision may raise ethical issues. Attorneys have an ethical obligation to "expedite litigation consistent with the interests of the client."31 Those obligations may prevent an attorney resisting a settlement offer requiring secrecy if it benefits the client. A possible solution lies in a commentator's proposed amendment to the ABA Model Rule 3.2 (the preferred new language is in italics)

A. A lawyer shall make reasonable efforts to expedite litigation consistent with the interest of the client. (Alt.) A lawyer shall not participate in offering or making an agreement, whether in connection with a lawsuit or otherwise, to prevent or restrict the availability to the public of information that the lawyer reasonably believes directly concerns a substantial danger to the public health or safety, or to the health or safety of any particular individual(s).

ILLINOIS HAS CONSIDERED THE ISSUE.

In a 2001 survey of Illinois voters, the Coalition for Consumer Rights found that 90.8 percent of those questioned opposed secret settlements that had information about dangerous products. Despite this, HB 1191, a sunshine bill passed by the House in the last Illinois legislative session, did not make it out of the Senate.

The bill would amend the Code of Civil Procedure, creating a new "sunshine in litigation" section. It would prohibit courts from entering an order or judgment concealing a public hazard and would render any such agreement or contract void as contrary to public policy. It specifically limits disclosure of trade secrets upon good cause shown. It does not apply to individuals, so their predatory actions or gross negligence could still be secreted.

CONCLUSION

The need to protect privacy and trade secrets is advanced to justify secrecy in litigation. In a constitutional democracy, however, the justice system's starting point should be openness, allowing secrecy only when special circumstances warrant it. Enacting a well-drawn sunshine-in-litigation act will serve the public good without infringing legitimate rights.

The dangerous product attorneys at Healy Scanlon Law Firm have particular experience representing injured people and the families of those killed in complex cases involving products liability, transportation, interstate trucking, motorcycle, auto and railroad injury, aviation injury, medical malpractice, workplace injuries, workers compensation, construction injury, premises liability, police misconduct and other serious or catastrophic injuries. To set up a free legal consultation contact the dangerous product lawyers at 800-787-5431.