Cautious Courts Eye Confidential Product Liability Deals

The Product Safety & Liability Reporter™ provides updates on significant developments and issues in product safety and liability litigation and regulation, plus analysis from top litigators. Get...

By Steven M. Sellers

Feb. 29 — Confidential settlements are a staple of tort litigation, but recent product liability rulings show that secrecy may be wearing thin when courts believe the public is at risk, lawyers and academics tracking the issue tell Bloomberg BNA.

The agreements typically require nondisclosure of payment terms and evidence.

They are often driven by an injured plaintiff's need for immediate compensation and a manufacturer's desire to protect trade secrets and quell future claims.

But what about confidential settlements involving a product, especially a mass consumer product, that may harm other, unknowing consumers?

Several lawyers interviewed by Bloomberg BNA in February and March agreed that recent rulings reveal caution in the courts.

But they have contrasting views about where confidential settlements stand, whether their widespread use will continue and, if so, whether that's a positive or a negative development.

“I think courts are getting much warier about secrecy, particularly when the public could be in danger,” attorney Arthur Bryant, chairman of Public Justice, a consumer advocacy organization in Oakland, Calif., told Bloomberg BNA.

Erik Gordon, a professor at the University of Michigan's business and law schools in Ann Arbor, Mich., agreed the courts are giving confidential settlements “a lot more scrutiny.”

But Gordon told Bloomberg BNA recently that he doesn't see the trend as a death knell for such agreements.

“I don't know that the result will be that there are fewer secrecy agreements,” Gordon, who has advised a number of companies on legal and other issues, said. “I think the judges are going to look carefully and decide on a case-by-case basis.”

A prominent defense attorney thinks this is as it should be and says that confidentiality also protects plaintiffs and their lawyers.

Some plaintiffs worry about their own privacy, such as protecting medical information, Mark Behrens of Shook, Hardy & Bacon, in Washington, said. And their attorneys benefit by keeping hard-earned work product, such as information gained in discovery about product makers, to themselves, he added.

Court Qualms?

The trend of scrutinizing confidential settlements began with state litigation “sunshine” laws, Arthur Miller, a professor at New York University Law School, New York, told Bloomberg BNA.

“There’s been a very significant shift which has been going on really for more than a decade in judicial attitudes about sealing records,” said Miller, who has written extensively on federal civil litigation, unfair competition and privacy.

The trend also stems from qualms about the courts' role in enforcing confidential settlements.

Joseph Anderson Jr., a judge with the U.S. District Court in South Carolina, wrote in a 2008 article that “it is the court's imprimatur that litigants desiring secrecy covet,” describing competing forces for and against confidentiality as being at a critical juncture (Joseph F. Anderson Jr., Secrecy in the Courts: At the Tipping Point, 53 Vill. L. Rev. 811 (2008)).

“This allows them to hide behind the judge's signature when they decline to discuss the case with inquiring media, other litigants, and perhaps even regulatory authorities,” said Anderson.

Those and related concerns linger. In 2015, appellate judges from 38 states participated in a forum on judicial transparency hosted by the Pound Civil Justice Institute, a Washington-based legal think tank started by trial lawyers, where the discussions included issues that arise in proposed confidential settlements.

Driven Toward Settlement

Confidential settlements have a place in product liability litigation, according to Miller, who said legitimate privacy and procedural interests are often in play.

“In many of the settlements, there are very significant privacy interests at stake, caused by the medical condition of the plaintiff, the family relationships among the plaintiffs, children, etc.,” Miller said.

“If you do not allow these settlements to provide for sealing, people will not settle,” Miller said. “People will fight about discovery issues for fear that the price of discovery, or of a settlement, is the ventilation of either corporate secrets or, on the other side, individual privacy.”

Corporate defendants may enter into confidential settlements for varied reasons, such as to protect trade secrets, manage payouts for any future settlements and minimize litigation costs—particularly when a plaintiff has a strong case.

Companies, however, aren't alone in seeking secrecy, Behrens, of Shook, Hardy & Bacon, told Bloomberg BNA Mar. 4.

“It's not unusual that the plaintiff has asked for it because there’s something in a medical record they’d like to keep private,” said Behrens, who focuses on product liability defense and litigation reform issues. “They want that protected as much as a company wants to protect its trade secrets.”

But Patrick Malone of Patrick Malone & Associates in Washington, who represents plaintiffs in product liability cases, told Bloomberg BNA that plaintiffs often are driven toward settlement by companies who use procedural and other tactics to delay paying out on legitimate claims to injured parties.

The need for money in the pocket can then sometimes trump the worry plaintiffs have about the dangers posed to other people.

“Most injured people who come to lawyers like me tell us very early, ‘I just don’t want this to happen to someone else,' ” Malone said in a Feb. 26 e-mail.

“It’s only when they get beaten down by years of litigation that they will even entertain the idea of wrapping up the case in a secrecy agreement that leaves the danger lurking out there for other unsuspecting citizens,” said Malone, who lectures and writes on the dangers of confidential settlements in tort litigation.

Recent Cases Reveal Tension

Some of these tensions played out in a recent ruling against Remington Arms Co. over an alleged defect in some of its popular rifles. The flaw allowed the guns to fire without trigger pressure, according to the plaintiffs, resulting in a number of fatalities.

Remington sought an order in 2014 barring disclosure of details about the trigger mechanism—known as the Walker Fire Control trigger assembly—but the U.S. District Court for the Western District of Missouri balked, in Pollard v. Remington Arms LLC, W.D. Mo., No. 13-cv-00086, protective order denied, 12/3/14.

“Given that this case involves alleged design flaws with the Walker Fire Control assembly, there is a strong public interest in not allowing the Court's orders to be used as a shield that precludes disclosure of this danger,” the court said.

Remington agreed in December 2015, apart from a class settlement, not to oppose public access to court documents in personal injury cases brought over the alleged defect.

A New York court took a similar route last November. It refused a bid by parents to seal a proposed settlement of a suit against Graco Children's Products Inc. over an allegedly defective stroller linked to the strangulation of their child, in Guardino v. Graco Children's Prods., Inc., 2015 BL 392041, N.Y. Sup. Ct., No. 42325/2010, 11/24/15.

“[T]he Court finds that there is a strong public interest in a lawsuit involving the death of a child allegedly caused by a defective baby stroller,” the New York Supreme Court said. “The parties' interest in keeping the details of their settlement confidential do not constitute good cause to the extent that it outweighs this public interest.”

The U.S. Court of Appeals for the Ninth Circuit ruled similarly in January 2015 that FCA US LLC, the successor to Chrysler Group LLC, will have to give “compelling reasons” to seal defect-related documents in a class action over its power modules, in , 2016 BL 6286, 9th Cir., No. 15-55084, 1/11/16 .

Practical Realities

Some arguments against protective orders and confidentiality agreements don't reflect the practical realities of litigation, according to Behrens.

“My experience is that it’s not in the interest of plaintiff lawyers who spend their own money building the case—they don’t want to give it away for free,” Behrens said. “They may say they are the ones who own the keys to the castle, so they have to be associated with other cases.”

He referred to the release of discovery information—from the plaintiff as well as the defense—that occurs when protective orders and confidential settlements are disallowed.

Gordon, of the University of Michigan, echoed that theme.

“There is no right of any particular plaintiff or plaintiff’s counsel to get the work product of somebody else,” Gordon said. “But that’s what they’re talking about—a right to get discovery somebody else has paid for and somebody else has conducted.”

Gordon added that regulatory agencies, rather than civil litigation, provide the better mechanism to assess the dangers a product poses to consumers.

Looming Litigation?

Confidential settlements lie at the end of a two-way street that begins early in a case—and plaintiffs' lawyers play a role in moving product liability litigation toward openness, according to Malone, the plaintiffs' lawyer.

“The strong lawyers work hard from the beginning of the case to narrow secrecy of document disclosures in discovery and to oppose secrecy at the end of the case too,” said Malone.

But if the ultimate destination is an end to confidential settlements, it may hurt all plaintiffs' interests because defendants will have more reason to litigate, according to Gordon.

“If you take that away, all the big company has left is its might and power to battle the plaintiffs forever and ever, and I’m not sure we end up in a good place,” Gordon said.

To contact the reporter on this story: Steven M. Sellers in Washington at ssellers@bna.com.

To contact the editor responsible for this story: Steven V. Patrick at spatrick@bna.com.