September 2

South Carolina Judges Voted to Ban Secret Court Settlements

September 2, 2002.

South Carolina Judges Voted to Ban Secret Court Settlements.
By Adam Liptak – New York Times.

The NY Times reports that South Carolina’s 10 active federal trial judges unanimously voted to ban secret court settlements “that have made the courts complicit in hiding the truth about hazardous products, inept doctors and sexually abusive priests.” Chief Judge Joseph Anderson Jr. wrote his colleagues: “Here is a rare opportunity to our court to do the right thing.”

Lawyers agreed the decision is likely to be influential in other federal and state courts. Not a surprise, insurance companies, industry groups and the legal experts that represent them, oppose open ledgers. As one lawyer put it: “The undeniable fact is that the reason they want secrecy is so victim No. 2 does not find out what victim No. 1 got.”

A lawyer representing people who claim abuse by priests, agreed, saying the ruling combined with the Internet “would create a powerful tool for lawyers seeking information on patterns of wrongful conduct.”

The Times reports that the judges interest was spurred by a series of articles in The State, a South Carolina newspaper, that focused on secret settlements by doctors repeatedly accused of medical malpractice. Only Michigan has a rule unsealing secret settlements after one year.

This is the most important decision by the judiciary since the Maryland Court of Appeals ruling (Aug 16, 2001) that unequivocally upheld the right of children to be protected from experiments involving greater than minimal risk if they do not stand to personally benefit. (See: )

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September 2, 2002
South Carolina Judges Seek to Ban Secret Settlements

South Carolina’s 10 active federal trial judges have unanimously voted to ban secret legal settlements, saying such agreements have made the courts complicit in hiding the truth about hazardous products, inept doctors and sexually abusive priests.

“Here is a rare opportunity for our court to do the right thing,” Chief Judge Joseph F. Anderson Jr. of United States District Court wrote to his colleagues, “and take the lead nationally in a time when the Arthur Andersen/Enron/Catholic priest controversies are undermining public confidence in our institutions and causing a growing suspicion of things that are kept secret by public bodies.”

If the court formally adopts the rule, after a public comment period that ends Sept. 30, it will be the strictest ban on secrecy in settlements in the federal courts. Mary Squiers, who tracks individual federal courts’ rules for the United States Judicial Conference, said only Michigan had a similar rule, which unseals secret settlements after two years. The conference is the administrative body for federal courts.

Judge Anderson said the new rule might save lives.

“Some of the early Firestone tire cases were settled with court-ordered secrecy agreements that kept the Firestone tire problem from coming to light until many years later,” he wrote. “Arguably, some lives were lost because judges signed secrecy agreements regarding Firestone tire problems.”

Lawyers say the proposal, which was widely discussed at the American Bar Association’s conference in Washington last month, is likely to be influential in other federal courts and in state courts, which often follow federal practice in procedural matters. In South Carolina, the state’s chief justice has expressed great interest in the proposal.

The Catholic Church scandals are one reason for a renewed interest in the topic of secrecy in the courts, legal experts say.

“All reactions are going to be affected by the bureaucratic cover-your-cassock responses of the church hierarchy,” said Edward H. Cooper, a law professor at the University of Michigan.

But some legal experts and industry groups say the blanket rule is unwise.

“The judges of South Carolina, God bless them, have not evaluated the costs of what they are proposing,” said Arthur Miller, a law professor at Harvard and an expert in civil procedure. He said the ban on secret settlements would discourage people from filing suits and settling them, and threaten personal privacy and trade secrets.

Joyce E. Kraeger, a staff lawyer at the Alliance of American Insurers, said the current system, in which judges have discretion to approve sealed settlements or not, worked fine. “There shouldn’t be a one-size-fits-all approach,” Ms. Kraeger said.

Jeffrey A. Newman, a lawyer in Massachusetts who represents people who say they were abused by Catholic priests, praised the South Carolina proposal. Mr. Newman said he regretted having participated in secret settlements in some early abuse cases. “It was a terrible mistake,” he said, “and I think people were harmed by it.”

Mr. Newman said a rule banning secret settlements, combined with the Internet, would create a powerful tool for lawyers seeking information on patterns of wrongful conduct.

The impact of such a ban could be limited, however, if adopted only by federal courts. Most personal injury and product liability cases, and almost all claims of sexual abuse by clergy, are litigated in state courts.

Several states have laws and rules that limit secret settlements, typically in cases involving public safety. Florida, for instance, forbids court orders that have the effect of “concealing a public hazard.”

Experts say many of those limits are difficult to enforce, particularly when every party to a case is urging the judge to approve a settlement. Indeed, Judge Anderson’s colleagues rejected his proposal, which was limited to matters of public health and safety, in favor of a blanket ban.

The federal proposal in South Carolina has caught the attention of Jean Toal, the chief justice of the South Carolina Supreme Court. Chief Justice Toal said that she would await the formal adoption of the rule before making her own proposal, but that the issue was important and timely.

“I’m very intrigued about this,” she said, noting that some of her interest arose from “recent claims involving pedophilia and sealed cases.” Judge Anderson and Chief Justice Toal noted that a Columbia, S.C., newspaper, The State, had spurred their interest in the issue by publishing a series of articles on secret settlements by doctors repeatedly accused of medical malpractice.

Even under the South Carolina proposal, the settlement amount and the requirement that parties keep quiet could be placed in a private contract not filed with the court. If the contract were violated, a new lawsuit would be required to seek redress. A court-approved settlement, on the other hand, can be enforced by returning to the original judge for a contempt order.

“If they don’t want the might and majesty of the court system to enforce their settlement, that’s one thing,” Chief Justice Toal said. “Sealing the economic terms of the settlement is only one part of it. We’re often talking about sealing the entire public record of the case.”

Opponents of the proposal argue that secrecy encourages settlements, which they say are desirable given limited court resources.

Judge Anderson told his colleagues that their court, at least, had available capacity. He wrote that the court had disposed of 3,856 civil cases in the previous 12 months, which included only 35 cases tried to a verdict.

“If the rule change I propose were enacted and it did result in two or three more jury trials per judge per year (which is far from certain),” Judge Anderson wrote, “I think we could handle the increased workload with little problem.”

Robert A. Clifford, a Chicago lawyer who typically represents plaintiffs, scoffed at the notion that defendants would not settle without secrecy provisions, saying the alternative to a public settlement was a far more public trial.

“The undeniable fact is that the reason they want secrecy is so victim No. 2 does not find out what victim No. 1 got,” Mr. Clifford said.

Ms. Kraeger, of the insurers alliance, did not dispute that. “Making that information widely known could have the effect of driving up litigation costs,” she said.

Professor Miller emphasized that plaintiffs might not want to have their new wealth made public.

“There is a right not to enable every neighbor and business associate to know what you got,” he said. “Would you want to receive calls from telemarketers who discover that you just got $1 million?”

In a forthcoming article in The Hofstra Law Review prompted by settlements in sexual abuse cases involving clergy, Stephen Gillers, a law professor at New York University, argues that confidentiality provisions that forbid victims to talk about their experiences amount to obstruction of justice and violate ethical rules governing lawyers.

Professor Gillers, though, would exclude settlement amounts, trade secrets and private information from any requirement that settlements be made public.

Judge Anderson was most concerned with the selling of secrecy as a commodity, he said in an interview. He recalled being told by a plaintiff’s lawyer that the lawyer had obtained additional money for his client in exchange for the promise of secrecy.

“That’s what really lit my fuse,” the judge said. “It meant that secrecy was something bought and sold right under a judge’s nose.”

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