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Deadly secrets: Companies using courts at your peril

It sounds like a really bad dream, but court documents say it was frighteningly real.

On a chilly Monday morning in January 2003, Julie Curtis steers her 1994 Lexus onto a highway in Fort Worth, Texas. Suddenly, as if it has a mind of its own, the car speeds up. Curtis tries pumping the brakes. Nothing. She tries shifting gears, but the car won't respond. Terrified, she practically stands up in the driver's seat, putting all her weight on the brake pedal. But the 3,300-pound sedan keeps hurtling through the rush hour traffic. Finally, she manages to find an exit, and the car slides to a stop.

Curtis sued Toyota for more than $1 million, alleging she suffered severe and permanent injuries as a result of the vehicle's defective design. The company denied the allegations, but agreed to enter into mediation.

Before the talks began, however, the judge in the case issued what he described as a "standard protective order." Any documents produced in the discovery process — where attorneys share key evidence with the other side — would be "confidential," hidden from the public. After all, he reasoned, the documents might include "trade secrets" that could put Toyota at a competitive disadvantage if released.

Within six weeks, the case settled for an undisclosed amount.

That was in 2005. Nine years later, in 2014, Toyota agreed to pay a record $1.2 billion penalty to avoid criminal prosecution on charges that the company defrauded the public and regulators about a sudden acceleration problem that has been linked to 37 deaths.

It is impossible to know if any of the documents sealed in the Curtis case might have helped alert the public to the danger, which did not start appearing in news reports until 2009. But consumer advocates say the "standard" order entered by the judge has become all too standard in the courts, sometimes with deadly results.

Used and abused

"Court secrecy kills. That's what's happened in product after product after product," says Arthur Bryant, chairman of the watchdog group Public Justice, which has intervened in multiple cases to get records unsealed. "Manufacturers know their products are defective, even when injured victim's sue them they find a way to keep the information secret, and if the courts allow this secrecy to happen more and more people die."

The protective orders have become a common feature in the federal court docket. CNBC examined more than 4,000 product liability cases filed in the first three months of 2014. Of 197 cases that have settled since then, 69 cases — or 35 percent — included a protective order keeping discovery materials confidential.

Indeed, it is hard to find a major consumer scare in recent memory that was not preceded by civil suits in which at least some documents were sealed, Bryant says. The list includes General Motors' faulty ignition switches, Takata's massive air bag recall and Trinity Industries' guardrails. (Trinity is appealing a $663 million judgment earlier this year for allegedly defrauding the Federal Highway Administration.)

"They're used all the time and abused all the time" -Richard Zitrin, expert on legal ethics at the UC Hastings in San Francisco

And then there is the Remington Arms Co., which has routinely sought and obtained protective orders in case after case alleging its popular bolt-action rifles have a dangerous design defect — allegations the company denies.

Federal rules give judges broad discretion in issuing the orders as long as the party asking for the protection is acting in good faith. And a 2012 report by the Federal Judicial Center — the research arm of the federal courts — says the orders can "grease the wheels" in many cases. But critics say companies are increasingly using the orders to hide the truth from the public.

"They're used all the time and abused all the time," says Richard Zitrin, an expert on legal ethics at the UC Hastings in San Francisco.

It's not just companies. Critics say judges struggling with heavy caseloads are often too quick to approve the orders. And plaintiffs' lawyers have an incentive to go along as well, knowing that agreeing to a protective order can often lead to a bigger settlement. Little wonder then that each one of the protective orders CNBC found was "stipulated," or agreed to by both sides.

More recent versions of the orders allow plaintiffs' lawyers to share documents with other attorneys contemplating similar lawsuits — but still keep the information from the public. That's convenient for lawyers, Zitrin says, but "really a horrible thing for real people."

Ain’t no sunshine

Efforts to curtail the practice have had little success.

After reports that General Motors had been entering into confidential settlements for years over its ignition switch issues, Sens Richard Blumenthal of Connecticut and Lindsey Graham of South Carolina introduced the Sunshine in Litigation Act of 2014. It would have prohibited protective orders unless a judge determines the order would not hide safety information from the public.

But business has opposed the concept in the past. The U.S. Chamber of Commerce warned that a similar bill in 2009 threatened "the fundamental rights of litigants to privacy," and said it would burden the courts with parties refusing to engage in settlement talks. The 2014 bill died in committee.

There has been slightly more progress at the state level.

Within days after Richard Barber's 9-year-old son died in a hunting accident in Montana, Barber learned Remington had faced dozens of lawsuits over the same rifle. So Barber campaigned relentlessly for the Gus Barber Anti-Secrecy Act. Passed in 2005, the law bars courts in Montana from "concealing a public hazard" through protective orders and confidentiality agreements.

"It informs the public about critical information they need to take responsibility for their safety and that of their friends and family," Barber says.

Ten other states have some level of anti-secrecy laws — Florida, Louisiana, Texas, Virginia, Arkansas, North Carolina, Nevada, Oregon, South Carolina, and Washington — but experts say the scope and enforcement of the laws are uneven at best, in many cases because the definition of "public hazard" is vague.

Zitrin is seeking legislative sponsors for a proposed California Sunshine in Litigation Act that he hopes will become a model for the rest of the country. But because most major product liability cases are heard in federal courts, the state statutes have a limited impact.

"The best solution is to make it unethical for lawyers to do this," Zitrin says. At the very least, he says, attorneys should be advising their clients about the consequences of agreements that hide information from the public.

"They're advising about the money," Zitrin says, "but people are not just about money."


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