Secret settlements in hazardous cases

Secret settlements have been scrutinized over the past year, mostly due to the infamous Ford-Firestone lawsuits involving people injured or killed in rollover accidents blamed on defective tires.

But the secrecy issues in those cases are different from the question of access to settlements in general. In cases discussed elsewhere in this report, the issue focuses on whether the press or public are entitled to access alternative dispute resolution proceedings or documents, such as settlement agreements. In many of the "public hazard" cases, however, the issue is whether other documents, such as pleadings or discovery materials, can be sealed as a condition of settlement. The analysis of legal issues relating to those other documents is often different from the analysis of whether there is access to the ADR proceedings themselves.

A few states have rules that allow access to settlement agreements and other materials in cases that present public safety issues. Texas Rule of Civil Procedure 76a was one of the first such rules, and it remains one of the broadest. It allows access to unfiled settlements and unfiled discovery as well as documents filed with the court. It also allows third parties, like the media, to intervene.

It is still possible to seal a record in Texas, but a party must meet two hefty requirements. First, a court must balance the presumption of openness and the public's interest in the records against a specific and substantial interest a party may have for sealing the records. The records cannot be sealed unless some significant interest outweighs the interest in keeping the records open. Second, the court must find that there is no less restrictive means to protect the privacy interest asserted by the party.

Other states that have passed antisecrecy rules are Virginia, North Carolina, New York, Oregon, Georgia and Florida, but their statutes are not as broad as the Texas rule.

The Virginia statute allows plaintiffs' attorneys to share information, but it does not allow information to be released to the public. (Va. Code Ann. 8.01-420.01(A))

The North Carolina and Oregon statutes apply only to settlements involving the government, not private companies. (N.C. Gen Stat. 132-1.3(b)(2); Or. Rev. Stat. 30.402)

The New York statute allows records to be sealed upon a showing of "good cause," but the standard is fairly loose and not sufficient to protect the public interest. (N.Y. Ct. R. 216.1(a))

The Georgia rule applies only to documents filed with the court and does not allow third-party intervention. (Ga. Unif. Super. Ct. R. 21)

The Florida rule applies only to court orders and judgments, but it does allow third-party intervention. (Fla. Stat. Ann. 69.081)

Last year, California's Judicial Council amended its Rules of Court to spell out the conditions that must be met before a document may be sealed. The rule has made it more difficult for records to be sealed, but it does not specifically grant access to unfiled documents in public hazard cases. (Cal. Rule of Court 243.1) This year, the legislature considered a bill that would have banned secret settlements in cases involving public hazards, but the bill failed in the last legislative session. (A.B. 36, S.B. 11)

Arizona also considered a bill that would have limited the abilities of parties to enter into secret settlements in public hazard cases. The bill failed after substantial lobbying by business interests. (Arizona S.B. 1530)

Similarly, Nevada rejected a bill that would have made public any settlement that concealed a public danger. (Nevada S.B. 411)

Despite the lack of media-friendly legislation, sealing orders can usually be challenged when parties try to seal court records as a condition of settlement. An oft-cited case in this area is Brown v. Advantage Engineering Inc., 960 F.2d
1013 (11th Cir. 1992).

In Brown, the U.S. Court of Appeals in Atlanta (11th Cir.) held that a district court had abused its discretion in sealing a court record as a condition of a settlement without finding that there were extraordinary circumstances that required sealing.

The appellate court said, "It is immaterial whether the sealing of the record is an integral part of a negotiated settlement between the parties, even if the settlement comes with the court's active encouragement. Once a matter is brought before a court for resolution, it is no longer solely the parties' case, but also the public's case. Absent a showing of extraordinary circumstances . . . the court file must remain accessible to the public."

Thus, the media should make efforts to challenge sealing orders, as courts may find the sealing orders erroneous on their own.