The Secret Storm

Proposed bill would ban confidentiality agreements in Arizona liability lawsuits

Last August, Bridgestone/Firestone Inc. announced it was recalling millions of potentially flawed tires, many on the super-popular Ford Explorer. It was the first nationwide warning by the company that tread could separate from the tires at high speeds, a defect that may be linked to hundreds of accidents and dozens of deaths.

Everyone who's followed this highly publicized story knows now that there had been tread separation accidents for many years, but Firestone successfully hid the problem from consumers and government regulators through secrecy agreements in numerous lawsuits that the company had settled out of court.

Firestone isn't the first corporation to find it cheaper to quietly settle damage suits than to risk many more cases -- and millions more dollars -- by telling people a problem exists. Remember the exploding gas tanks on Ford Pintos? Leaking breast implants? Cracking heart valves?

State Senator Scott Bundgaard
State Senator Scott Bundgaard

Now, Arizona is poised to join a growing number of states that have passed or are considering legislation that would prohibit secret settlements.

As early as next week, lawmakers are expected to take up debate on Senate Bill 1530, introduced by Senator Scott Bundgaard (R-Glendale), that would bar confidentiality agreements in lawsuits that involve defective products, environmental hazards and financial fraud, including insurance cases.

"It's wrong that a company looks at it that it's cheaper to settle the case and hide the problem," says Bundgaard. "These corporate bean counters shouldn't be compromising the health and safety of Arizona families."

Lawyers who specialize in product liability and financial cases are very familiar with the so-called "repeat litigants" -- major companies that are frequently sued, says Richard Langerman, a Phoenix lawyer and member of the Arizona Trial Lawyers Association who helped research anti-secrecy legislation at Bundgaard's request.

But plaintiffs' attorneys are often prevented by confidentiality agreements from comparing notes. Not only are they prohibited from discussing settlement amounts and critical issues in a case, but the secrecy agreements often go much further. Firestone, for instance, has required as a condition of settlement that opposing lawyers return all company documents they might have obtained. The company has even made plaintiffs turn over their blown tires.

Typically, Langerman says, companies argue that secrecy agreements are necessary to protect trade secrets or proprietary business concerns. But, he says, the practice has become "too widespread and detrimental to the public."

The proposed legislation presumes that information is public in actions for "injury, wrongful death or financial loss caused by a defective product, financial fraud or environmental hazard." That information could be contained in settlement agreements, whether filed in court or not, or documents obtained through the discovery process.

A judge could order information sealed, but only if it's found to be privileged or a trade secret or if a strict test is met, set out in the legislation, that an "overriding interest" requires secrecy.

Some attorneys as well as business lobbyists argue that being able to keep information confidential -- particularly the amount of money a company is willing to pay -- encourages settlement, which is often to the plaintiff's benefit, too, and keeps cases from taking up court time.

But Langerman believes the real cost comes with having to argue the same issues over and over. And, he says, people are continuing to get hurt because harmful situations are buried in secrecy agreements.

"As attorneys, we keep fighting the same battle that's been fought 200 times before," Langerman says. "It's incredibly inefficient in terms of the system; it's a waste of judges' time and the public's money."

Several business lobbyists contacted by New Times hadn't seen the bill yet and couldn't comment on it until they'd seen the details.

The bill is nearly identical to a California proposal that's before that state's legislature this year. Last year, a similar measure was defeated in the face of strong opposition from business and insurance groups. This year's bill -- as well as the Arizona proposal -- is narrower in scope, primarily because it's dropped a provision that would have allowed third parties, such as media outlets, to challenge a confidentiality agreement.

Still, both the California measure and the Arizona bill are expected to be strongly opposed by industry groups.

Bundgaard and the bill's supporters are hoping to line up witnesses that the Legislature will have a hard time saying no to.

At least two Arizona families have been caught up in the Firestone tire tragedies. Both lost college-age daughters who died in separate rollover accidents involving Ford Explorers equipped with Firestone tires.

Bundgaard says corporations are on shaky public relations ground and shouldn't block the measure. "They should have no excuse not to take this as an opportunity to bring [problems] to light for the benefit of the public," he says.

Approval of the legislation won't mean that information on defective products, contaminated water supplies or bad insurance practices will automatically come to light. The bill only prevents keeping information secret; there's no notification provision or mechanism for broadcasting problems to the public. It would mean that plaintiffs would be free to talk to government regulators; Firestone, for instance, used secret settlements to keep people injured in the tread accidents from discussing details with federal safety officials.

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