Federal Judges Order Study of Secrecy in Settlements

South Florida's federal district court judges agreed last week to study whether to adopt new rules aimed at maximizing the sunshine cast on federal civil litigation, including a possible ban on secret lawsuit settlements. South Carolina's district court judges voted in July to forbid secret settlements. Such secrecy has come under scrutiny following scandals involving pedophile priests and perilous consumer products.

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South Florida’s federal district court judges have agreed to study whether to adopt new rules aimed at maximizing the sunshine cast on federal civil litigation, including a possible ban on secret settlements in lawsuits. “We had a discussion and it was referred to one of our standing committees for evaluation and a recommendation,” says senior U.S. District Judge James Lawrence King about the decision at the Sept. 12 quarterly judges’ meeting. “A report will be presented sometime in the future, probably at the next meeting.” The judicial meetings are conducted in secret. Chief Judge William J. Zloch of the U.S. District Court for the Southern District of Florida does not grant media interviews. Court-sanctioned secrecy in the nation’s courthouses has come under intense scrutiny following the scandals over pedophile priests, faulty tires, bad doctors and perilous consumer products. In some cases, judges had allowed settling defendants to keep embarrassing, and even dangerous, secrets private. The selective use of litigation secrecy is strongly favored by the insurance industry and the defense bar, which contends that a ban on private settlements will drive up the cost of litigation. The issue, however, was spotlighted at the federal level in July by 10 U.S. district judges in South Carolina. In a unanimous vote, they decided to forbid secret settlements. A final vote will be made after the end of a public comment period on Sept. 30. Judge King, who sits in Miami, presented the matter to his colleagues at the request of Chief Judge Zloch. King began serving notice on litigants in June that he won’t grant their motions to seal cases, in part or in whole, without a showing of compelling evidence that “the private parties’ private interest in confidentiality outweighs the public’s right to access in open judicial proceedings.” “Generally, it was a mild, bland discussion,” says King of the meeting. “I didn’t sense anybody opposed anything.” He declined to be more specific about what was said at the closed-door gathering. In recent weeks, King says he’s turned aside several requests for protective orders, sometimes to the surprise of litigants. In June, he served notice of his concerns in a strongly worded order declaring his unwillingness “to go routinely along” with requests for secrecy by litigants. King’s order came in an age discrimination suit filed by four workers against Hialeah’s Blue Ribbon Meats Inc. Both sides had sought a protective order “to facilitate discovery.” King rejected their request after noting the litigants had “failed to assert any reason” that might necessitate a confidentiality order. Except for King, it isn’t known what South Florida’s federal judges think about the need for reform. But they may want to consider what Chief Judge Joseph F. Anderson Jr. of the U.S. District Court in South Carolina has to say about the issue. Anderson declined to be interviewed, but provided copies of two letters he sent to colleagues this summer. In the letters, he argues that he and his colleagues would do lawyers, the judiciary and especially the public a big favor by eliminating the option of secret settlements when public safety issues are at stake. The issue has been contentious for years in federal court in South Carolina. In 1994, the judges considered a proposal from the local Civil Justice Reform Act advisory group to amend local rules to prohibit court-approved secrecy or confidentiality agreements. “My recollection is that all of the plaintiff’s lawyers on the committee were in favor of it and all of the defense lawyers were against it,” Anderson said in a June 24 letter. “The two lay members of the committee were in favor of the proposal and broke the tie.” At the time, Anderson had just finished presiding over a hard-fought product liability claim with serious injuries. In that case, he said, he was required to preside over “several bitter discovery disputes. When some allegedly damaging documents ultimately came to light, the case settled, but the defendants required that the plaintiff return all of the documents and agree never to disseminate them (or even discuss them with anyone else) as a condition of the settlement.” “In my view, this put the plaintiff’s lawyer — and more importantly, the court — in a very difficult position, because public safety was arguably affected by the decision to rebury these documents in the document repository to be discovered, if at all, by a subsequent set of lawyers in a subsequent lawsuit, following another contentious discovery battle.” The South Carolina federal judges, however, rejected the advisory group’s recommendation. “The argument against it was that such a strict rule would hinder settlements, which our system was designed to encourage,” Anderson said in his letter. But, he says, he’s “even more convinced” today that court-ordered secrecy is wrong. He cites as evidence stories about how sealing orders have been used to shield doctors who have been repeatedly sued for malpractice, as well as to hide information about fatally defective Firestone tires. Those recalled tires killed 101 people, Anderson said in his letter. “Arguably, some lives were lost because judges signed secrecy agreements regarding Firestone tire problems,” Anderson said in his letter. Anderson explained that both plaintiffs’ attorneys and judges are under intense pressure to go along with secrecy deals. “For the lawyer to recommend to the client that the settlement be rejected in favor of some broader public policy notions seems to put the public policy question ahead of the client’s best interest,” Anderson wrote. “Imagine how the [plaintiffs'] lawyer would feel if the settlement were rejected on this basis and then the jury returned a defense verdict in a subsequent trial. For this reason, the lawyer is always going to go along with the secrecy requirement if the settlement amount is fair. “This results in both lawyers asking the judge, in effect, to blink his or her eyes … and order a sealed settlement so that the case can go away. Everyone is then happy: plaintiff gets a reasonable settlement, both lawyers get paid, the defendant gets its secrecy agreement and the judge has one less case to try. No one it seems is looking out for the public interest.” A ban on confidential deals would “relieve the pressure on plaintiff’s counsel and the judge by simply taking the secrecy order off the table as a negotiating chip,” Anderson wrote. In a July 11 letter, Anderson proposed a rule to bar confidential settlements in cases involving public safety. The proposal is modeled loosely on Florida’s Sunshine in Litigation Act, which bars state court judges from sealing judgments that conceal public hazards. “Here is a rare opportunity,” Anderson wrote, “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.”

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