Proposed Law Aims to Remove Shroud of Secrecy in Court Settlements

A cadre of corporations whose profit margins outweigh product safety have found a loophole in the litigation process: sealed settlement agreements. Such agreements are legal, as there is no law prohibiting them, and often left up to the discretion of the courts.

Consumer advocates have a problem with that. The problem lies within the fact that unscrupulous executives, whose dangerous cribs, faulty ignition switches and toxic toys have injured or killed their users, could bury the bad news behind a pile of protected paperwork.

“Major corporations and manufacturers use protective orders to broadly shield vast amounts of information, vital to health and safety, from public scrutiny,” reads a press release on Democratic New York Congressman Jerrold Nadler’s Web site. “Defendants also often require, as part of settlement agreements, that documents or other records revealing critical dangers uncovered during litigation be kept secret.”

Nadler, a member of the House Transportation and Infrastructure Committee, is pushing for legislation that would prevent the practice that puts public safety at risk. The Sunshine in Litigation Act, introduced in 2014, would amend the judicial code in federal courts to prohibit parties from entering into orders restricting the disclosure of information. The fine print calls for “enforcing any provision of a settlement agreement between or among parties to such civil action that prohibits a party from disclosing that a settlement was reached or the terms of the settlement (excluding any money paid) that involve matters relevant to the protection of public health or safety, or from discussing matters relevant to the protection of public health or safety involved in such civil action.”

Sealed settlement agreements occur in all kinds of cases, including antitrust, copyright, employment and patent. A report by the Federal Judicial Center titled Sealed Settlement Agreements in Federal District Court found that, of the many different types, about 30 percent of those that result in sealed settlement agreements relate to personal injury.

The American Association for Justice firmly backs the bill, saying it will shed much-needed light on information that could prevent harm to the average, everyday American.

“Whether it’s dangerous cribs, defective drugs or exploding tires, court secrecy endangers consumers and allows corporations to hide wrongdoing,” reads a blog on the association’s Web site. “Americans have a right to know about hazardous and defective products. By restricting secrecy, companies would be unable to hide significant product hazards and would be motivated to correct these hazards earlier instead of waiting until more product related deaths and injuries occurred.”