SECRECY AND THE CIVIL JUSTICE SYSTEM: CONFIDENTIAL SETTLEMENTS, PROTECTIVE ORDERS AND THE PUBLICS RIGHT TO KNOW–THE PLAINTIFFS PERSPECTIVE

By Richard C. Miller

rmiller@monseesmayer.com

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In recent years, or perhaps not so recent, courts’ practices of limiting public access to discovery documents, or “sealing” documents, has come into question. In wake of the Ford/Firestone cases, many states are examining their laws, to determine what the role of the courts should be, and how to deal with protecting company’s trade secrets, while at the same time, protecting the public interest in safety.

The debate teeters on this basic question: what is the role of our civil justice system? Some argue that courts are in place simply to adjudicate individual disputes, thus giving support to the issuance of protective orders. If the role of the court is to simply resolve a conflict between plaintiff and defendant in a particular suit, the public has no right, nor need, to know any particulars of the litigation.

On the other side of the debate are those that argue that courts are in place to protect a broader public interest. Supporters of this view believe that courts are not only accountable to the public, but should also act as guardians or protectors of the public. If this is indeed the role of the civil justice system, confidentiality or protective orders should be limited in their use, so as to disseminate information regarding dangerous products or practices to the public, so that they have the information necessary to make informed choices and to protect themselves from dangerous products.

Most often, defendants argue that the information and documents sought to be protected involve “trade secrets”, and thus it would be a detriment to their company and/or products to force them to make public these valuable documents.

It is important to note that confidentiality occurs at two different times during litigation. The first, and the one that will be given the most attention in this article, is the sealing of discovery documents by courts. The second, involves settlement agreements, and the stipulation put on parties to that agreement to maintain secrecy. These agreements are contracts between the parties, thus the parties can generally set their own terms, and the agreements can be written to provide overwhelming protection, including limiting all disclosure regarding the litigation, or can be written very narrowly, protecting only things such as settlement amount, or certain documents.

While one may ask why a plaintiff would enter into such an agreement, knowing that binding oneself to secrecy will put members of the general public at risk, it is important to know that faced with the possibility of years of litigation, possibly costing millions of dollars, some plaintiff’s have no choice but to enter the agreement and dispose of their case.

This article will outline the current Missouri law with regard to the issuance of protective orders, present a recent bill presented to the Missouri Senate attempting to restrict the use of protective orders, and then compare that Bill to a Texas Rule dealing with protective orders, generally agreed to provide the most protection for consumers by limiting the use of protective orders. The article will go on to discuss a new amendment to local court rules being considered by Federal Judges in South Carolina, and finally, will give examples of recent situations in which the issuance of confidentiality orders have be questioned and/or examined.

The Missouri Rule at issue in this debate is Missouri Supreme Court Rule 56.01(c). Entitled “Protective Orders”, this section states:

Upon motion by the person from who discovery is sought, and for good cause shown, the court may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including: that a trade secret or other confidential research, development, or commercial information not be disclosed or be disclosed only in a designated way.

Mo.R.Civ.Pro. 56.01(c)(7).

This rule gives courts a broad amount of discretion in determining whether or not to issue a protective order, requiring a defendant to show only “good cause”, and it aligns itself with the Federal Rule dealing with the sealing of court rules and trade secrets, 26(c). That rules states, similarly to the Missouri Rule, that upon motion by a party or by the person from whom discovery is sought and upon a showing of good cause, the court may order that a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a designated way. F.R.Civ.P. 26(c)(7).

The most recent case interpreting Missouri Courts’ ability to issue protective orders is Pulitzer Publishing Co. v. Transit Casualty Co., 43 S.W.3d 293 (2001). In that case, the court first noted that there is a common law right of public access to court and other public records. Id. at 300. The court stated, “[g]iven the presumption in favor of open records, an abuse of discretion is present when trial court orders inexplicably seal court records, do not articulate specific reasons for closure, or do not otherwise demonstrate a recognition of the presumptive right of access.” Id.

The court noted that the presumption in favor of openness has been codified by Missouri in section 109.180, which states, “Except as otherwise provided by law, all state, county and municipal records kept pursuant to statute or ordinance shall at all reasonable times be open for a personal inspection by any citizen of Missouri, and those in charge of the records shall not refuse the privilege to any citizen.” Id. The court stated that the right of public access to records stems from the public’s presumed interest in the integrity and impartiality of its government. Id.

In accordance with this tradition, the Missouri Supreme Court adopted Court Operating Rule 2 which governs public access to the records of the judicial department and provides exceptions to that rule, including documents that are confidential pursuant to a court order. Id. at 301. According to the court in Pulitzer, subject to the exceptions of Court Operating Rule 2, there “is a presumption in favor of the public’s right to access to court records and … the presumption cannot be overcome absent a compelling justification that the records should be closed.” Id. The court noted that there are “important exceptions that limit the presumption of open records when sufficiently important interests outweigh the public’s right of access.” Id. When there are higher interests favoring nondisclosure, courts routinely see fit to close some public records. Id.

The court held that in order to close court or other public records, the court in its order must identify specific and tangible threats to important values that override the importance of the public’s right to access, stating that vague or uncertain threats claimed by one party normally would not justify closure. Id. at 302. The court noted that it is up to the objecting party to plead and prove convincing reasons to rebut the presumption of openness, and advised that the burden is not on the party attempting to prevent sealing or the records or to open sealed records. Id. at 302.

In Wright v. Campbell, the court specifically addressed the sealing of documents that a party claims contain trade secrets. 938 S.W.2d 640 (Mo.App.E.D. 1997). In that case, the court stated that a party seeking production of documents which contain trade secrets of confidential information must establish that the documents are relevant and that it has a specific need for the documents in order to prepare for trial. Id. at 643. According to the concurring opinion, Missouri Court Rule 56.01, which governs protective orders in the discovery process is modeled after Federal Rules of Procedure 26(c), and thus, federal precedent regarding the federal rule is persuasive authority for the construction of Mo.R. 56.01(c). Id. at 645 (concurring opinion of Crandall, J).

Accordingly, a party seeking protection under Federal Rule 26(c)(7) must show that the information sought is confidential and a specific harm could result from disclosure of the information. Id. In Blue Cross and Blue Shield of MO v. Anderson, the court presented 4 factors used to determine whether the information is indeed confidential, including: 1) the extent to which the information is known outside the business; 2) the extent to which the information is known to those involved in the business; 3) the extent of the measures taken to guard the secrecy of the information; and 4) the value of the information to the business and its competitors. Id. (quoting Blue Cross, 897 S.W.2d 167 (Mo.App. 1995).

The concurrence went on to state that the initial burden is on the party seeking the protection order to demonstrate that good cause exists for the issuance of a protective order, which then shifts the burden to the discovering party to establish that the documents are relevant and that it has a specific need for the documents in order to prepare for trial. Id. at 645,643.

According to Missouri Supreme Court Rule 56.01, a party attempting to be issued a protective order must only satisfy the court that good cause exists to protect the documents or information, but it appears as if the development of common law has heightened that requirement, by requiring a showing of a “compelling justification” that the records should be closed, and requiring courts to identify “specific and tangible threats to important values” in order to override the presumption of openness. Pulitzer at 301-02.

In 2001, Senator Steelman introduced to the Civil and Criminal Jurisprudence Committee Missouri Senate Bill 0309, entitled “Prohibiting the sealing of civil court records, with limited exceptions.” That bill qualified the good cause requirement by requiring that the court find good cause exists based on a showing that the request is narrowly tailored and that no less restrictive means exist to protect disclosure of prejudicial or confidential information and that:

  1. The information requested to be sealed is a trade secret or other confidential research, development, or commercial information; and
  2. (b) Public disclosure of the record or proceeding would subject any party to undue harassment, embarrassment, annoyance, humiliation, oppression, burden or expense; and
  3. (c) An interest exists which substantially outweighs the right of public access to the information contained in the record or proceeding and the overriding interest will be imminently compromised if the record is not sealed or the proceeding not closed.

See Senate Bill No. 309 (91 st General Assembly).

Subsection 2 provides that the subsection shall not apply and shall not constitute the basis of a court order sealing a record in a civil suit in cases involving defective products, personal injuries, etc., unless an abuse of a child is involved in the claim. Id.

This bill, if passed, would provide significant protection to consumers, making public documents involving personal injury and defective product cases. Unfortunately, the bill was not passed into law during the 2001 session.

As a model, the Missouri Legislature may consider looking to the Texas Rule of Civil Procedure on the subject. That rule provides that court records are presumed to be open to the general public and may be sealed only upon a showing of all of the following:

  1. a specific, serious and substantial interest which clearly outweighs:

1) this presumption of openness;

2) any probable adverse effect that sealing will have upon the general public health or safety;

(b) no less restrictive means than sealing records will adequately and effectively protect the specific interest asserted.

TX.R.Civ.Pro. 76a.

In it’s definition of court records, that statute includes settlement agreements not filed of record, excluding all reference to any monetary consideration, that seek to restrict disclosure of information concerning matters that have a probably adverse effect upon the general public health or safety…, and well as discovery, not filed of record, concerning matters that have a probable adverse affect on the general public health or safety, … except discovery in cases originally initiated to preserve bona fide trade secrets. TX.R.Civ.Pro. 76a(b)(C).

Of current interest to parties following the development of new laws and rules dealing with the confidentiality is the current situation in South Carolina Federal Courts. Currently, South Carolina Rule 5.03 requires parties filing documents under seal to follow a mandatory procedure, and provides that failing to obtain prior approval as required by the rule shall result in summary denial of any request or attempt to seal filed documents. See South Carolina Local Court Rule 5.03. The rule further provides that nothing in the rule limits the ability of the parties, by agreement, to restrict access to documents which are not filed with the court. Id.

According to the rule:

A party seeking to file documents under seal shall file and serve a “Motion to Seal” accompanied by a memorandum. The memorandum shall: (1) identify, with specificity, the documents or portions thereof for which sealing is requested; (2) state the reasons why the sealing is necessary; (3) explain (for each document or group of documents) why less dramatic alternatives to sealing will not afford adequate protection; and (4) address the factors governing sealing of documents reflected in controlling case law. A non-confidential descriptive index of the documents shall be attached to the motion.

South Carolina Court Rule 5.03(A).

In response to the recent pedophile priest allegations, as well as the Ford-Firestone scandal, South Carolina Federal judges have unanimously approved a proposed amendment to their local rules, which simply states, “No settlement agreement filed with the court shall be sealed pursuant to the terms of this rule.” Proposed Local Rule Amendment, available at http://www.scd.uscourts.gov/notices/docs/ruleamend.pdf.

The court will hear public comment on the adoption of said Amendment until September 30, 2002, at which time they will determine whether they will formally adopt the amendment. This is said to be the strictest ban on secrecy in settlements in the federal courts. While adoption of the amendment will not effect current state practices, state courts may soon follow in the ban against secrecy in settlements.

Confidentiality of documents in court proceedings lead to unnecessary injury and expense to the general public. The rationale behind anti-secrecy rules and laws is to protect the public. When these documents are kept sealed, and protected from public discovery, consumers have no way of finding out of product dangers, which leads to more unnecessary injury.

There are numerous examples of cases in which documents and information has been kept from the public, leading to injuries that could have been prevented had the documents been released to the public when they were first discovered.

A recent situation in which confidentiality orders were challenged involves the dilution of pharmaceuticals by pharmacist Robert R. Courtney. After theKansas City Star filed a Motion to Intervene in the case in order to contest the sealing of documents filed by Defendants Eli Lilly and Company and Bristol-Myers Squibb Company, the Circuit Court Judge ordered the unsealing of most of those documents, in order to allow the public access to the information.

The most recent of these cases was the Ford Motor Co. and Bridgestone/Firestone cases. Some accuse the company’s of knowing of the defect in the tires for up to eight years before the company’s decided to recall the defective tires in 2000. According to the LA Times, many of the cases were kept out of the public eye because the company’s, without acknowledging liability, quietly settled many of the lawsuits, with confidentiality agreements, sometimes barring all parties from discussing aspects of the case. LA Times, “Tire Recall Fuels Drive to Bar Secret Settlements”, Sunday, September 10, 2000. (excepts available at http://braytonlaw.com/news/legisnews/091200-firestone1.htm). According to the article, key documents in many of the cases were sealed or returned to the two companies, which helped keep the recurring problem out of the public eye. Id.

This isn’t the first time this problem has been discovered. In the early 1980’s Zomax was an arthritis pain reliever, manufactured by McNeil Laboratories, that caused acute and sometimes fatal allergic reactions in many consumers. In numerous lawsuits filed against the manufacturer in 43 states, the company insisted on protective orders and confidential settlements. Id. The drug was recalled in 1985 by the FDA, at which time the agency believed the drug could have been a factor in up to 14 deaths and 403 life-threatening allergic reactions. Id.

Time and time again, innocent consumers are injured by defective products. Had a confidentiality order or confidential settlement agreement not been signed, the information could have been released to the public, and prevented hundreds, if not thousands of senseless deaths. Big companies are protecting their pocketbooks, and possibly criminal liability, by insisting that this information be kept quiet. It’s time to hold them accountable for their defective products, and insist that state legislatures pass rules and laws that protect the public from senseless injuries and deaths. Large companies and corporations have the upper hand, as courts are granting them protection, at the expense of the public safety.

In wake of the Firestone scandal, in 2001 13 states were considering some type of legislation banning confidential settlements in cases that compromise public safety. Lawyers Weekly USA, 2001 LWUSA 353. It’s time for citizens to take a stand and encourage their legislators to pass this legislation, in order to protect themselves from senseless injuries and death.