Court seeks end to secret settlements

From the Fall 2002 issue of The News Media & The Law, page 19.

By Sara Thacker

Recent news stories exposing years of sexual abuse of children by Catholic priests, injuries from medical malpractice and suffering by victims of faulty products beg the question: Why didn’t the public know sooner?

The answer: Secret settlements.

Filed “under seal,” secret court settlements enable companies, organizations and individuals to settle cases without exposing the terms of the settlement agreement to the public. While this practice may encourage settlement, the public is kept in the dark about potential safety and health risks.

In South Carolina, the federal judiciary is considering a local rule banning secret settlements. The proposed rule reads: “No settlement agreement filed with the court shall be sealed pursuant to the terms of this rule.” If adopted, the proposed rule would be the broadest of its kind because it does not require a balancing of the public’s interest in openness against the parties’ interest in secrecy.

Eight years ago, the federal courts in South Carolina rejected a similar rule prohibiting secret settlements. But times have changed. As Chief Judge Joseph F. Anderson wrote to other South Carolina judges considering the proposed rule: “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 in secret by public bodies.”

By permitting open access to settlement agreements, the proposed local rule will enable journalists to alert the public to possible safety and health risks posed by consumer products or organizations sooner.

“Without a disclosure requirement, journalists will not even know there is a story to cover,” said Gail Siegel, executive director of the Coalition of Consumer Rights.

Clergy abuse under seal

In January 2002, The Boston Globe discovered that during the last 10 years, the Archdiocese of Boston secretly settled child molestation claims against at least 70 priests. Although the secrecy surrounding these settlements makes it difficult to identify the number of victims involved, the Globe estimated that the number of abuse victims exceeded 200. After the Globe published its investigative report, hundreds of new victims came forward and reports of priests’ sexual abuse and misconduct surfaced across the country.

Because these settlements were secret, the public had no way of knowing that sexual abuse of children by priests was a national problem.

“If I had been aware of how widespread this issue was, I might have had a very different reaction to it [sealing the case],” Superior Court Judge Margot Botsford told The Boston Globe regarding her 1995 order sealing the records of a clergy sex abuse case in Suffolk County, Mass.

Because the use of secret settlements was routine, it took years before the public knew about the numerous accounts of sexual abuse of children by priests. By then, many more children had suffered at the hands of priests.

“Almost all of these survivors believe they are the only ones, even when there is lots of evidence to show otherwise,” said David Clohessy, executive director of SNAP, the Survivors Network of those Abused by Priests. “So people reach settlements and sign gag orders believing: One, the problem is minimal and two, it will be taken care of . . . that the priests will get treatment and never be around children again.”

When the victims who sign gag orders see a picture of the same priests committing the same abuse again to other children, they “feel re-victimized, duped and guilty,” Clohessy said.

Even high-ranking priests who were aware of these secret settlements acknowledge that secrecy allowed abuse of children to continue.

“Ultimately, there is nothing to be gained by secrecy except avoidance of scandal,” wrote Cardinal William Keeler, Archbishop of Baltimore, in a letter to 180,000 registered families in his archdiocese. “Rather than shrinking from this scandal — which too often, has allowed it to continue — we must address it with humble contrition, righteous anger and public outrage. Telling the truth cannot be wrong.”

On Sept. 25, Keeler disclosed the names of 56 priests accused of sexual abuse since 1958. In the last 20 years, the Baltimore Archdiocese and its insurance carriers have spent $4.1 million on settlements paid to victims and more than $1.5 million for living expenses, psychiatric and medical treatment for suspended priests, counseling for victims, and legal expenses for accused priests.

“If we had any inkling whatsoever of the magnitude of harm that was out there, maybe we, as a joint group of plaintiff lawyers, would have tried to encourage our clients to be outspoken in many cases. It is hard not to look back and say the greater good would really have been served by the lack of secrecy earlier on,” said Laurence E. Hardoon, a Boston attorney who represents victims of clergy sex abuse told The Boston Globe.

Consumer safety

Secret settlements not only hide child abuse, they hide defects in numerous well-known products. Secret settlements have concealed hundreds of injuries and deaths allegedly caused by products such as Agent Orange, asbestos, Prozac, silicone gel breast implants and tires.

Manufacturers have profited from secret settlements through the continued sale of these products, while the public suffered.

In 1933, the Johns-Manville Co. secretly settled a case brought by 11 employees for asbestos-related injuries. According to a report by the Coalition for Consumer Rights, this settlement was not disclosed until 40 years later.

During this time, thousands of workers contracted respiratory diseases as a result of asbestos. Had the public known about the 1933 suit, it could have been alerted to the dangers surrounding asbestos earlier.

More recently, the public learned about secret settlement agreements between the Ford Motor Co., Bridgestone/Firestone Inc. and the victims of defective Firestone tires. The National Highway Traffic Safety Administration estimates that Firestone tires caused 203 deaths and more than 500 injuries.

Although plaintiffs filed approximately 100 lawsuits over 10 years, until recently, the public was left in the dark about the dangers posed by these defective tires. Meanwhile, lives were lost.

“I think there are lives being lost every week in America, due to hazardous products and hazardous activities, as a result of secrecy agreements,” U.S. Rep. Lloyd Doggett (D-Texas) told the National Law Journal. Doggett is a former Texas Supreme Court Justice, who drafted the state’s judicial rule restricting secret settlements in 1990.

Even the size of the settlement is critical to understanding the severity of risk to the public.

Often corporations will settle cases for relatively small amounts of money in order to avoid the cost of litigation. However, the larger the settlement

payment, the more likely the

corporation perceives itself at risk for liability.

“Dollars reflect the severity of the injury” and act as “a barometer,” consumer rights advocate Siegel said. “Big settlements raise red flags. You want those red flags to go up so that you know what cases to pay attention to.”

Bargaining chips

The secrecy of settlement agreements is bought and sold at the expense of the public. Sometimes referred to as “hush money ” recipients, plaintiffs are often pressured into agreeing to secrecy as a condition of settlement.

“I’m ashamed I took their money now. I should have gone and reported it to the police or filed a lawsuit and called a press conference to announce it. If we had done that, this problem would have been exposed long ago,” said abuse victim Ray Sinibaldi in an interview with The Boston Globe.

Plaintiffs’ attorneys and the victims themselves are torn between obtaining the largest settlement possible and exposing these public threats. Banning secret settlements would mean defendants could not impose secrecy as a condition of settlement.

A basis for openness

South Carolina’s proposed local rule banning secret settlements is consistent with current law establishing a presumptive right of access to court documents of all types.

Some courts have also extended this presumptive right of access to unseal secret settlement agreements. The U.S. Court of Appeals in Philadelphia (3rd Cir.) unsealed a settlement agreement between a private hotel and bank in a foreclosure action, recognizing a presumption of access that is overcome only when interests in secrecy outweigh the public interest in access. (Bank of America Nat’l Trust and Savings Ass’n v. Hotel Rittenhouse Assocs.)

In applying this traditional balancing test, the court found that encouraging settlement of litigation did not justify denial of public access to the settlement agreement and records.

Even assuming that secret settlements encourage the quick resolution of cases and free court dockets, the court found that it “cannot permit the expediency of the moment to overturn centuries of tradition of open access to court documents and orders.” In other words, the court’s general interest in promoting settlements does not rise to the heightened interest necessary to overcome the presumption of openness.

While the court did not specifically address the parties’ privacy interests, parties seeking to seal settlement agreements often claim their civil dispute is private.

When a private party commences a civil suit in a forum that is traditionally open to the public, any expectation of privacy is diminished. By filing suit in a public forum, private parties acknowledge that private remedies have not worked.

Once parties request the full power of the state to assist them in resolving their dispute, the process is no longer a private matter and open access is required.

The parties’ desire to make their suit private by agreement never rises to the heightened interest necessary to overcome the presumption of openness.

If adopted, South Carolina’s proposed federal rule would strengthen the presumption of open access and prevent parties from contracting out of this common law right.

Open settlements provide greater assurance that the public will discover when defendants may be exposing the public to harm and encourages discussion of public affairs. In addition to promoting heightened public awareness, “disclosure of settlement documents serves as a check on the integrity of the judicial process,” the Third Circuit held in the Hotel Rittenhouse case.

When secret settlements occur under the auspices of the court, the judiciary contributes to the cloak of secrecy that conceals health and safety risks from the public. This gives the appearance that courts prefer to shield defendants from public scrutiny rather than alert the public to life-threatening harm, abuse or injury.

Under South Carolina’s proposed rule, courts would no longer be able to help defendants hide their actions from public view.