Trial Magazine

How many lives have been altered or lost due to defendant wrongdoing that has not been disclosed because of secret settlements? The cases span many practice areas: police misconduct, delaminating tires, faulty gun triggers, dangerous pharmaceuticals, defective medical devices, sexual harassment—the list of preventable tragedies goes on. What can we, as trial lawyers, do to minimize or eliminate the harmful effects of this secrecy when representing our clients in settlement negotiations?

Although some narrow limitations on a party’s right to discuss the results of a lawsuit are justifiable, blanket secrecy in settlements makes the world a more dangerous place. It conceals evidence that might be crucial to other plaintiffs, makes it harder for the public to find lawyers with experience against particular defendants, and undermines the trial bar’s efforts to fight tort “reform.”

Legislative reform efforts to address blanket secrecy have failed thus far, so it’s up to us to tackle this issue.¹ Whenever possible, each of us should abide by the 1989 AAJ resolution denouncing settlements that hide facts.² Undoubtedly, you will face pressure to acquiesce to a defendant’s desire for silence. But if you and your client remain resolute in exposing the wrongdoing that gave rise to the lawsuit, here are some ways to push back on secrecy clauses in settlements.

Argue for Transparency

Discuss the importance of transparency early on with your client. In some instances, however, your client’s privacy interest outweighs the need for openness in our court system—such as cases involving a minor. In the intake interview, talk about the client’s objectives in the litigation, and evaluate his or her tolerance for litigating in the open. Is he or she motivated to help protect others from harm? Is one of the client’s goals to expose wrongdoing as a deterrent to other bad actors? If you and your client see eye to eye about the need for transparency, it will be easier to fight back against secrecy provisions.

In the majority of cases, overbroad secrecy provisions are inserted for one reason only: to avoid embarrassment to the defendant.

In the majority of cases, overbroad secrecy provisions are inserted for one reason only: to avoid embarrassment to the defendant. Ask yourself if the circumstances of your case truly warrant secrecy. Unless your client filed his or her case as John or Jane Doe, the answer is probably no.

Let the defendant know sooner rather than later that you and your client will not be cowed into silence. Avoid the standard approach of waiting until all the other settlement terms are in place only to have the defendant unexpectedly request an overbroad confidentiality clause. If you tell the defendant early on what you and your client are not willing to accept, you’ll avoid that trap.

Ethical conduct. One of the strongest arguments to oppose secrecy comes from the Model Rules of Professional Conduct, adopted by nearly every state.³ It’s hard for a defense lawyer to argue with an obligation to follow the ethics rules that govern our profession. Here are three rules you can point to when declining secret settlements:⁴

• Rule 1.6(b)(1) provides that “a lawyer may reveal information relating to the representation of a client to the extent that lawyer reasonably believes necessary: (1) to prevent reasonably certain death or substantial bodily harm.”
• Rule 3.4(f) prohibits a lawyer from requesting that any person, other than the lawyers’ own client, or the client’s relatives or employees, “refrain from voluntarily giving relevant information to another party.”
• Rule 5.6(b) prohibits lawyers from participating in any settlement agreement that restricts the lawyer’s “right to practice.”

Bar ethics opinions can offer additional support. For example, the American Bar Association’s Standing Committee on Ethics and Professional Responsibility’s Formal Opinion 00-417 states that “a lawyer may not participate or comply with a settlement agreement that would prevent him from using information gained during the representation in later representations against the opposing party, or a related party, except in limited circumstances.”⁵ The Chicago Bar Association’s Committee on Professional Responsibility has found that, unless required by a court, agreeing to a settlement clause prohibiting all disclosures concerning claims made and information obtained in the lawsuit constitutes professional misconduct.⁶

Threats to health and safety. When a defendant’s conduct or product threatens public health and safety (for example, the contaminated “clean rooms” of the New England Compounding Center that resulted in a meningitis outbreak), state sunshine laws, which prohibit or limit secret settlements, can be useful. Unfortunately, only Florida, Louisiana, North Carolina, and Texas have adopted these laws.⁷

As of this writing, proposed legislation in New Jersey would prohibit secret settlements in cases involving public hazards and workplace discrimination.⁸ California recently passed a bill that would prevent secret settlements in sexual harassment cases.⁹

Some courts have lifted confidentiality provisions in settlement agreements that prevent disclosure of health and safety risks, such as those involving defective Remington rifle triggers and defective Cooper tires. Judicial opposition to secrecy can be strong in child molestation cases, Fair Labor Standards Act cases, and cases involving public figures.¹⁰ Check your jurisdiction’s laws for useful authority to oppose secrecy.

Limit Secrecy as Best You Can

Even if you cannot avoid secrecy completely in a settlement, you can push back on attempts to impose unconditional secrecy. The idea is to limit the scope of any gag order, however you can.

Negotiate a time limit. Consider agreeing to wait to initiate contact with the press for six months after the settlement is finalized. Such half-measures often will be enough to satisfy a defendant that wants to settle, and the wrongdoing will still be exposed, even if it is delayed.

Read the proposed language carefully. Can you circumscribe the secrecy provision to specific facts or the amount of the settlement? If you have to include some element of secrecy, avoid (or at least limit) any liquidated damages clause in the event of a breach of any confidentiality provision. Restricting your client from talking to anyone about the case—even the client’s closest friends and family—can cause ongoing anxiety and make it harder for your client to heal.

Use case law to reject terms. You can find good authority rejecting proposed settlement terms designed to limit the plaintiff’s, or the attorney’s, use of information gleaned from litigation. For example, the Supreme Court of Kentucky disciplined a lawyer for including a clause in a settlement agreement that prohibited a former client from cooperating with any state bar investigation of the attorney’s conduct.¹¹ And a California appellate court has held that “it would be contrary to public policy to permit a party to litigation to dissuade or otherwise influence the testimony of a percipient witness through a private [settlement] agreement.”¹²

Again, look at state bar ethics opinions for support. For example, the Connecticut Bar Association’s Professional Ethics Committee found that a confidentiality provision in a settlement that prohibited a plaintiff from discussing relevant facts with other parties to the litigation was improper.¹³

Don’t be party to the cover-up that defendants seek. If you and your client insist on transparency, the world will be safer—and more just.

Lori E. Andrus is a partner at Andrus Anderson in San Francisco. She can be reached at lori.andrus@andrusanderson.com.

Notes

1. In every Congress since 1995, lawmakers have unsuccessfully introduced legislation that would put serious limits on secrecy in cases involving substantial hazards to the public. This Congress, Rep. Jerrold Nadler (D-N.Y.) introduced such a bill, the “Sunshine in Litigation Act of 2017” (H.R. 1053). As of this writing, it has zero cosponsors. To read a Q&A with Rep. Nadler, see p. 30.
2. Am. Ass’n for Justice (formerly Ass’n Trial Laws. Am.), Resolution on Protective Orders (May 6, 1989), reprinted in James E. Rooks Jr., Settlements and Secrets: Is the Sunshine Chilly?, 55 S.C. L. Rev. 859, 876 app. A (2004).
3. If your state has not adopted the Model Rules, check its ethics rules for similarly helpful provisions.
4. For an in-depth discussion of ethics rules in this context, see Jon Bauer, Buying Witness Silence: Evidence-Suppressing Settlement and Lawyers’ Ethics, 87 Or. L. Rev. 481 (2008), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1159748.
5. ABA Standing Comm. on Ethics & Prof’l Responsbility, Formal Op. 00-417 (2000), http://tinyurl.com/ybxdc8n8.
6. Chi. Comm. on Prof’l Responsibility, Informal Op. 2012-10 (2013); see also N.H. Ethics Comm., Advisory Op. 2009-10/6 (2009) (violation to prevent disclosure of “information concerning the suit that is public, if doing so would have the effect of restricting the right of plaintiff’s counsel to practice law or the public’s right to identify and retain qualified legal counsel”); S.C. Ethics Advisory Comm., Advisory Op. 10-04 (2010) (agreement to refrain from identifying or using the defendant’s name for “commercial or commercially-related publicity purposes” was improper); D.C. Comm. on Prof’l Responsibility, Advisory Op. 335 (2006) (“may not compel counsel to keep confidential and not further disclose in promotional materials or on law firm websites public information about the case, such as the name of the opponent, the allegations set forth in the complaint on file, or the fact that the case has settled”).
7. Fla. Stat. Ann. §69.081 (West 2018); La. Code Civ. Proc. Ann. art. 1426(D) (West 2018); N.C. Gen. Stat. Ann. §132-1.3 (West 2018); Tex. R. Civ. Proc. Ann. §76(a) (West 2018).
8. S. 121, 218th Leg. (N.J. 2018) (passed the New Jersey Senate on June 7, 2018); Assemb. 1242, 218th Leg. (N.J. 2018) (being considered in the New Jersey Assembly Labor Committee as of this writing).
9. S. 820, 2017–2018 Leg., Reg. Sess. (Cal. 2018) (awaiting Governor Jerry Brown’s signature as of this writing).  [Editor's note: Governor Brown signed S.820 into law on Sept. 30, 2018.]
10. See, e.g., Order Partially Granting Motion to UnsealAleksich v. Remington Arms Co., Inc., No. CV-91-05-BU-RFC (D. Mont. Sept. 4, 2012); Order on Defendant’s Motion to Continue Protective Order, Toe v. Cooper Tire & Rubber Co., No. CL 106914 (Iowa Dist. Ct., Polk Cnty. Jan. 18, 2012) (finding that public trial transcript will not be sealed); C.R. v. E., 573 So. 2d 1088 (Fla. Dist. Ct. App. 1991) (Cobb, J., dissenting) (requirement of confidentiality of child molestation void as a matter of public policy); Bank of Am. Nat’l Trust & Savings Ass’n v. Hotel Rittenhouse Assocs., 800 F.2d 339, 343–46 (3d Cir. 1986) (“[T]he generalized interest in encouraging settlements does not rise to the level of interests that we have recognized may outweigh the public’s common law right of access.”); Hicks v. Vortex Marine Constr., Inc., 2017 WL 2664361 (M.D. Fla. May 4, 2017) (rejecting proposed settlement in Fair Labor Standards Act case due in part to overbroad confidentiality clause); Hardy v. Kaszycki & Sons, 2017 WL 6805707 (S.D.N.Y. Nov. 21, 2017) (unsealing certain documents relating to settlement over protest of Donald Trump).
11. See Ky. Bar Ass’n v. Unnamed Attorney, 414 S.W.3d 412 (Ky. 2013).
12. McPhearson v. Michaels Co., 117 Cal. Rptr. 2d 489, 493 (Cal. Ct. App. 2002).
13. Conn. Bar Ass’n Comm. on Prof’l Ethics, Informal Op. 2011-1 (2011), https://tinyurl.com/yb3u16co; see also Ind. State Bar Ass’n Legal Ethics Comm., Formal Op. No. 1 of 2014 (2014), https://tinyurl.com/ya2jwrfu.