How Secrecy Pacts Keep Regulators, Public in the Dark

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Getty Images

For businesses that make and sell dangerous products, secrecy is a cherished ally. They work hard to prevent safety regulators and litigants from learning about their products’ hazards. One way they accomplish this is by concealing information revealed in lawsuits for those killed or injured by such products.

Automobiles are often targeted in lawsuits, so it is not surprising that car manufacturers are prominent among businesses adept at using judicial tools to keep documents from becoming public. Known as confidential settlement agreements or protective orders, these are court-sanctioned secrecy pacts agreed to by injured plaintiffs, often in exchange for settlement money. In crude terms, they are gag agreements which prohibit plaintiffs from telling regulators and the public what has been discovered in their lawsuits. The facts simply disappear from the public record.

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The incentive for plaintiffs to settle can be great, especially when this means not only receiving compensation for their loss but also avoiding the costs and uncertainties of a jury trial. Accepting a secrecy provision may seem like a small price to pay, but the concealment of information from regulators and the public can mean that more people will die or be injured  until the defect is finally exposed, which may take years or, worse, may never happen.

Ben Kelley

Ben Kelley

Recently the National Highway Traffic Safety Administration (NHTSA) took a step toward discouraging gag-order settlements. It issued an “enforcement guidance bulletin” asking that litigants assure that such agreements allow information to be provided to the agency. Although NHTSA has the power to demand information from an auto company, there’s a Catch-22: It cannot request the information if is not first made aware that there is a safety issue. Court suits against manufacturers are a key source of that information, without which the agency is often flying blind.

This was exemplified in a lawsuit tried in 2010. In Houck v Enterprise Rent-A-Car et al, two sisters had been killed by a defective Chrysler PT Cruiser that was recalled but left unrepaired by Enterprise. When sued by the young women’s parents, the rental-car giant offered to pay them $3 million, but only in exchange for their agreement to hide the facts of the case from the public, the media and regulators. Committed to warning the public about the dangers of recalled but unrepaired rental cars, they refused. The case went to trial, where a jury ruled that Enterprise should pay $15 million to the parents.

The sisters’ mother, Carol Houck, then enlisted the help of safety advocates and legislators to win passage of a federal law banning companies from renting recalled cars without first repairing them. Her efforts led to the Raechel and Jacqueline Houck Rental Car Safety Act of 2015, passed in December. It could save lives.

The Houck case, however, was an exception. The Center for Auto Safety, a Washington-based watchdog group, has notified NHTSA of numerous lawsuits in which information about safety problems was suppressed by settlement agreements, thus delaying NHTSA’s discovery of defects by months or years.

It is not only defendant businesses that promote secrecy agreements. The American Association for Justice is the trade association of plaintiffs’ attorneys. Its Product Liability Newsletter notes disapprovingly that “…all too often, plaintiff lawyers simply agree to overbroad protective orders, sealing orders, and secret settlements in order to ‘get on with’ the litigation It does not have to be this way.”

Nor should it be. As a 2014 American Bar Association article put it, “Confidentiality in settlement agreements is bad for clients, bad for lawyers, bad for justice… When violations are hidden by confidentiality, the legal system itself is thwarted from fulfilling one of its fundamental purposes: to protect the citizenry from wrongful conduct.”

 By law or court policy, about a dozen states try to discourage confidential settlement agreements that keep litigation documents secret. Attempts to win such laws in more states and Congress have been successfully opposed by corporations. As one legal treatise states, companies that make unsafe products “fight like gladiators to keep the documents under wraps.” So far the gladiators are winning.

Ben Kelley is a board member of the Center for Auto Safety, and author of  “Death By Rental Car: How the Houck Case Changed The Law.”

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3 comments to “How Secrecy Pacts Keep Regulators, Public in the Dark”

  1. Louis V. Lombardo

    This is a very important article – of life or death importance!

    The media should carry it as widely as possible – it is information that is not only “fit to print” but essential.

    What the public does not know kills us.

  2. Windle Turley

    Ben:
    It was good to run across you again. Nice article. We must focus more attention to this growing issue. I am glad you are still helping to make us all safer.

  3. Arthur Bryant

    Ben is exactly right! We all need to make sure that court secrecy isn’t used to hide dangers to the public. Our legal system should be used to expose the truth and hold wrongdoers accountable, not to hide the truth and let them avoid accountability. – Arthur Bryant, Chairman, Public Justice

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