Transparency in Settlements: An Argument Against Confidentiality

    Open courts and records, including settlements, are a hallmark of the American judicial system.   But all of that is changing.  Although everyone’s experiences may be different, I think it is a common denominator among trial lawyers that confidentiality agreements have grown like amoebas over the last 30 years.  When I first started to practice, including such a clause in a settlement contract was a rarity.  Today, it is clear that in the tort world – those in an emotionally charged situation – are left with the difficult choice of whether to settle the matter in deals sweetened by a secrecy clause. While there are some legitimate reasons for confidentiality, most of those fall or simply do not exist in the vast majority of these cases.  However, an increasing number of corporate defendants are demanding confidentiality in settling cases because business interests want to keep people uninformed in their concerted effort to gain more from the system.  The result is that keeping those similarly injured in the dark provides corporate America with a distinct advantage, all at the expense of the innocent and uninformed.  In other words, the less transparent the settlement, the greater the risk to the public on many levels.

    Strong reasons exist to keep proceedings open, including the finality of them.  Let me enumerate a few:
*The ability to evaluate the civil justice system as well as the regulatory, corporate and scientific environments is enhanced through viewing cases to their conclusion.
*The quality of justice is enhanced by enabling the public to better monitor the results of cases and to be more informed.
*Transparency of results allows similarly situated litigants to ensure they are being treated equally and fairly.
*Cases involving product design defects that jeopardize public safety are brought to the attention of consumers, regulators and lawmakers.  For instance, the Consumer Product Safety Act requires manufacturers to report to the Consumer Product Safety Commission (CPSC) whenever a product is the subject of three verdicts or settlements arising out of claims of death or serious bodily injury.  From 1991, when this reporting requirement began, to 2002, only 551 reports were filed with the CPSC even though more than 150,000 product liability lawsuits were filed in federal court alone.
*Consumers can make more informed and rational decisions on important issues like health care if they have sufficient information about the safety of products, drugs or available treatment. *Confidentiality agreements leave unredressed the social harms that led to the lawsuit itself such as discrimination, pollution, defective manufacturing, sexual abuse, chronic negligent conduct.
*Lawmakers can see where problems lie and can more fairly allocate tax dollars in supporting the civil justice system; for example, the CPSC may be understaffed in evaluating and regulating the safety of toys.
*Keeping the settlement of legitimate injuries secret allows tort reformers to cry wolf because it appears that people are not really injured or that they simply gave up.
*Confidentiality fosters a culture of secrecy that can disproportionately burden those with less legal sophistication or power particularly when an inexperienced individual is up against a repeat offender.
*Although some victims may have legitimate needs to keep a settlement secret, a money for silence offer as a dispute resolution is a questionable ethical approach to litigation that satisfies more the needs of publicity-conscious defendants.
*Litigants and the public can better understand the civil justice process which promotes confidence in the process.
Certainly, national security, trade secrets and threats of potential harm to others are the types of information that give courts reason to go through a balancing process to determine if public access to judicial records outweighs privacy concerns.  But many mass disasters, including recidivist negligent doctors or faulty products, deal with the public health, safety and right to know.  Privacy interests also diminish when civil litigation is brought against public agencies or officials.  Litigants should not be entitled to seal court records simply because they reached an agreement.  Parties should be made to iterate the reasons for confidentiality if that is a priority, and judges need to examine those reasons and be held accountable for their decisions to allow sealing.

    Need I recount a few tragedies where defective products with allegedly hidden defects hurt not only those who initially were victimized, but thousands of others who were hurt or killed because settlements were kept secret: Dow Corning’s silicone gel breast implant, Firestone tires on SUVs that was linked to more than 250 death over eight years while cases were kept secret under agreed protective orders and confidential settlements, General Motors’ side-mounted gas tanks, the Dalkon shield, the Shiley heart valve, lead poisoning, environmental hazards, doctors sexually assaulting their patients.  Although some of these issues may be sensitive, the public needs to be made aware of these dangers.  Even child sex abuse cases involving priests that were settled and sealed years before such abuse was widely known has forever hurt innocent victims, as occurred in the Boston archdiocese over a period of years.  Although one must always keep their own client’s interest uppermost in mind, a strong public interest also exists in arguing against settlements that limit information when a public harm is involved. 

    Some allege that confidentiality can promote settlements and, therefore, unclog the  judicial system.  Arthur R. Miller, Jr., “Confidentiality, Protective Orders, and Public Access to the Courts,” 105 Harv.L.Rev. 427, 486 (1991).   Statistics, however, do not bear out this contention.  James E. Rooks, Jr. (Senior Policy Research Counsel with the Center for Constitutional Litigation) “Settlements and Secrets: Is the Sunshine Chilly?” 55 S.C.L.Rev. 859 (2004).  I argue that already some 95 percent of cases are settled without a trial.  Statistics indicate that in 1962, one in six tort cases went to trial; by 2002, only one in 46 was tried.  See Marc Galanter, “The Vanishing Trial: What the Numbers Tell Us, What They May Mean,” Dispute Resolution Magazine 3 (Summer, 2004).  The number of state court civil trials in 22 states dropped from 36.1 percent in 1976 to 15.8 percent in 2002.  See, Brian J. Ostrom, et al. “Examining Trial Trends in State Courts: 1976-2002,” 1 J. Empirical Legal Studies 755, 776 app. B (2004).  We don’t need less trials; we need more public trials so that cases are determined by one’s peers and the general public gains an understanding of the resolution of disputes through the civil justice system.  I am certainly in favor of settlement, arbitration and mediation of cases, but not for the sake of making cases go away.  If a settlement is fair to victims who were hurt, then a trial is not necessary; however, I approach every case ready for trial, particularly when they may need to stand up for what is right for others as well.  Many of my clients are very right-minded people and understand that the case they bring is not for selfish reasons.  They want procedures to be corrected and a process to change so that others are not hurt.

    Take, for example, the fire in a county administration building in Chicago that killed six and injured dozens more.  Because of the poor firefighting rescue tactics in that high rise, procedures have been changed and more fire drills are regularly conducted in high rises throughout Chicago.  Those who survived want the proceedings to be public.  Another example is a Chicago area man who lost his wife and daughter in a commercial plane crash in Sioux City, Iowa.  He was not interested in money or in settling.  He wanted to know what went wrong and would not settle until the defendants sorted through the rubble and figured out what caused the crash.  It was not because he could bring back his family; it was so that it would not happen to anyone else in the future.  The settlement figure of $15 million must be made public.  Or take, for instance, the 70-year-old woman who was severely injured in that crash.  Her husband seated beside her was killed.  The defendants argued for a confidential settlement; she would not because she, too, wanted answers and the defendants treated her as if an elderly person was not worth a fight in court.  We took the defendants to trial and a jury awarded her $28.3 million.  It would not bring back her husband nor the good health she once enjoyed in her golden years.  It was to make a statement to companies everywhere that she was a person just like everyone else and the value of her life, and so many other senior citizens like her, should not be diminished just because she was older than others. 

    Some states have passed “sunshine” laws that restrict private confidentiality.  Florida enacted one of the broadest statutes in 1990 (Fla. Stat. Ann. Sect. 69.081(2), (4) (West 2004) that involves settlements “concealing ... information concerning a public hazard” and “that has caused and is likely to cause injury.” The Act defines a “public hazard” as “an instrumentality, including but not limited to any device, instrument, person, procedure, product, or a condition of a device, instrument, procedure or product, that has caused and is likely to cause injury.” In 2002, South Carolina judges of the United States District Court amended Local Rule 5.03 to provide that “[n]o settlement agreement filed with the Court shall be sealed pursuant to the terms of this Rule.”  See, Richard A. Zitrin, “The Laudable South Carolina Court Rules Must Be Broadened,” 55 S. C. L. Rev. 883, 891-95 (2004) (collection of state sunshine laws).   Some courts have pierced the confidentiality provisions when a compelling government need or a statutory mandate requires the disclosure of information, particularly when the public health or safety is involved.  See Rooks, “Settlements and Secrets: Is the Sunshine Chilly?” 55 S. C. L. Rev. 859 (2004). At the very least, sunshine laws give reason for judges to examine the public interest involved, rather than routinely grant a request to seal.

    If defendants continue to successfully argue for confidentiality, groups like RAND are going to become irrelevant because they need to evaluate the results of cases.  Confidentiality simply will not allow them to do so.  Payors hold this information and if they fight against share their information, the ability of researchers to perform is compromised.  Further, the ability of the judiciary to allocate public resources for the administration of justice is skewed because the number of transactions is inaccurate.  With confidential settlements, judges are unable to make a case for greater public resources in areas where they are really needed.

    Stakes appear to be much higher and motives appear to be less than honorable in today’s litigation.  No longer do courts just agree with a request for confidentiality.  More and more are insisting on demonstrating justification to ensure justice as well as to protect injured consumers in future cases.  Attorneys need to insist on the same, pointing out the deleterious effect this conspiracy of silence creates for the next injured victim as well as for the entire system itself.  As I have said in the past, if attorneys do not take this societal duty seriously, they should not be surprised when their expectations and demands are labeled exorbitant because the precedent has been kept out of the public eye.
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Robert A. Clifford is a partner at Clifford Law Offices, a nationally recognized personal injury and wrongful death firm in Chicago.  Mr. Clifford also is on the RAND Institute’s Board of Overseers.