Consumers Union supports bills to limit secret out-of-court settlements

December 4, 2000

Measures by Assemblymember Steinberg and Senator Escutia Would Limit Agreements in Product Defect, Environmental Hazard and Financial Fraud Cases

SACRAMENTO — Elisa Odabashian, Senior Policy Analyst with Consumers Union’s West Coast Office, made the following statement in support of AB 36 (Steinberg, D-Sacramento) and SB 11 (Escutia, D-Norwalk), which would limit secret out-of-court settlements in product defect, environmental hazard, unfair insurance claims practice or financial fraud lawsuits.
“Many lives could be saved and much suffering could be averted if corporations were not allowed to use secrecy orders in court settlements to hide information about product defects, environmental hazards, or financial fraud.”
“The Firestone/Ford tire tragedies highlight how secrecy orders can have very serious consequences on public safety. Over the last decade–long before the recent recall of millions of Firestone tires sold largely on the popular Ford Explorer–there were 50-100 Firestone tire lawsuits. Most of these court cases were settled with secrecy orders in place that effectively kept information about the potential dangers associated with the tires from the public. According to the Detroit Free Press, to date, there have been 119 deaths and 500 serious injuries associated with Firestone tire tread separations. Many of these deaths and injuries could have been prevented if secret settlements had been barred.”
“Consumers Union believes this legislation will be a strong deterrent to businesses tempted to engage in unethical acts that take lives, harm the environment, or commit financial fraud. We believe this law will motivate corporations to correct the errors that brought them into court in the first place, instead of hiding behind secrecy orders and continuing business as usual until hundreds of unsuspecting consumers are harmed or killed, and recalls are required. We applaud Assemblyman Steinberg and Senator Escutia for taking up this important matter and we urge the legislature to support it.”
Under the proposed measures, out-of-court secret settlements would be barred unless they met strict standards and procedures imposed by the courts. The bills also apply to discovery materials like crash test reports, company documents, and consumer complaints not used at trial.
By applying to settlement agreements and documents not filed with the court, the measures fill a large gap left open by a recently approved Judicial Council rule which applies only to material actually filed with the court. The new Judicial Council rule creates a presumption against secrecy and allows a court to seal records only if strict standards and procedures are met.
Steinberg and Escutia’s identical measures are sponsored by state Attorney General Bill Lockyer and the Consumer Attorneys of California and supported by a broad range of public interest organizations, including Center for Public Interest Law, Congress of California Seniors, Consumer Federation of California, Consumers for Auto Reliability and Safety, Foundation for Taxpayers and Consumer Rights, Sierra Club, and United Policyholders.
Elisa Odabashian or Michael McCauley
Consumers Union West Coast Office

Consumers Union, publisher of Consumer Reports magazine, is an independent, nonprofit testing, education, and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers