California considers restricting secret settlements in cases involving allegedly defective products, harmful environmental conditions
A new California Senate Bill, S.B. 1149, or the Public Right to Know Act of 2022, seeks to prohibit settlement agreements from containing provisions that prevent the disclosure of factual information in cases involving allegedly defective products or harmful environmental conditions. Information related to trade secrets, citizenship or immigration status, medical information and the amount of the settlement could still be protected from disclosure. The bill was introduced by Senator Connie Leyva (D-Chino), with support from Public Justice and Consumer Reports, and passed California’s Senate Judiciary Committee with amendments on April 7, 2022.
If signed into law, the bill would impact defendants and defense attorneys in matters involving product liability or environmental claims. The proposed law could discourage settlements in civil cases, increase litigation costs, and put confidential and proprietary business information at risk of public disclosure.
California’s proposed legislation
The Public Right to Know Act of 2022, as currently drafted, would:
- Prohibit agreements to restrict “the disclosure of factual information related to the action” as part of any settlement of a civil action regarding a “defective product or environmental condition that poses a danger to public health or safety.” The bill broadly defines “defective product or environmental condition that poses a danger to public health or safety” as “a product or condition that has caused, or is likely to cause, significant or substantial bodily injury or illness, or death.”
- Establish a presumption that disclosure of information relating to such actions shall not be restricted by stipulation or by order of a court or arbitral tribunal.
- Allow certain categories of information to be restricted from disclosure, including (1) medical information, (2) personal identifying information, (3) the amount of the settlement, (4) citizenship or immigration status, and (5) in certain situations, current proprietary customer lists or trade secrets.
- Provide that an attorney’s failure to comply with the provisions will be grounds for professional discipline where the attorney (1) requests that a provision be included in a settlement agreement that prevents the disclosure of factual information that must be disclosed, (2) advises a client to sign an agreement that includes such a provision or (3) moves for an order of nondisclosure that does not meet certain “good faith” requirements.
Importantly, if signed into law, the party resisting disclosure of proprietary customer lists or trade secrets will bear the burden to shield such information from public view. Under S.B. 1149, the party seeking to restrict disclosure must move the court for an order of nondisclosure, demonstrating that the presumption in favor of disclosure is “clearly outweighed by a specific and substantial overriding confidentiality interest.” A party, including an intervenor that has become a party, or a person whose attendance in the action or production of information is required by subpoena may file such a motion for nondisclosure.
Notably, the provisions of the bill could be enforced by members of the public, including news media, “for whom it is reasonably foreseeable that the person will be substantially affected” by violations.
Similar measures to restrict the secrecy of settlements related to products and environmental hazards have previously failed in the state. For example, a 2001 bill that would have banned secret settlement agreements in product defect or environmental cases involving injury or death failed after significant opposition from a political action committee.
Additionally, legislation proposed in 2017 that would have required disclosure of settlement information in cases where a court determined a product or environmental hazard was likely to cause “repeated” deaths or injuries died amid opposition from business groups and the California Judges Association, which said the provisions would be too burdensome for bench officers.