Prompted by Firestone scandal, bill would require disclosure of many settlement agreements, some discovery material

From the Summer 2001 issue of The News Media & The Law, page 48.

Last summer’s Firestone tires scandal prompted an outcry from public advocates who wondered how a company could hide a potentially fatal defect from public knowledge even though the company had been sued numerous times.

Firestone was sued on multiple occasions by plaintiffs who claimed that people were killed or severely injured in auto accidents due to defective tires. Each lawsuit was privately settled and the discovery materials gathered in each case were never released to the public. When the public eventually learned more than 100 people died in similar accidents, presumably due to defective tires, there was an outcry. Legislators demanded to know how a company could keep a defective product secret if it potentially endangered so many lives.

As a result, California legislators proposed two bills that could allow public access to settlement agreements and perhaps some discovery materials in order to learn more quickly of fraud or product defects.

Assembly Bill 36 and Senate Bill 11 were identical when introduced in December 2000. The bills are now in committee.

In the preamble to the bills, the legislators clearly stated their motivation for drafting the statute.

“Secrecy agreements can have tragic consequences. A widely known example of the disastrous consequences of secrecy agreements is the tragedy resulting from dangerous defects in Firestone tires, which have reportedly caused more than 150 deaths and more than 500 injuries worldwide. For many years, Bridgestone/Firestone, Inc. knew about these dangerous defects, but kept the information out of the public eye by secretly settling many lawsuits brought as a result of crashes related to defective tires. During that time, the public continued to drive on Firestone tires, unaware of the mortal danger to their families and themselves. As a result of these hidden, dangerous defects, on August 9, 2000, Bridgestone/Firestone, Inc. and Ford Motor Co. jointly announced that Firestone would recall over 14 million tires. In the absence of a secrecy agreement, information about this dangerous product could have been disclosed publicly, which could have saved lives and avoided injuries. However, the companies demanded secrecy as the price of compensation for victims, resulting in many deaths and injuries that could have been avoided absent demands for secrecy agreements.”

The bills also cited other well-known consumer issues.

“The circumstances that allowed secrecy regarding the claims of victims of the Northridge earthquake and the contaminated drinking water connected with the story of Erin Brockovich also highlight the need for openness.”

The proposed change would prohibit secrecy agreements that hide “information that is evidence of a defective product, unlawful energy price manipulation, unfair insurance claims practices, or an environmental hazard that was discovered during the course of litigation but never filed with the court.”

As written now, the rule could prohibit both secret settlement agreements or protective orders hiding discovery materials if either of such types of documents contained evidence of fraud or hazards.

However, the rule does permit a party to ask the court for a protective order upon settlement of a claim. The party must show “good cause” for the protective order, and the court has the option of redacting any part of the document it finds is not necessary to inform the public of fraud or danger.

The proposed bill would allow parties to keep secret the amount of money paid to settle the claim. — AG