Proposed Federal Legislation Could Weaken Secret Legal Settlements

Future fracking cases could be affected

This April, Lisa and Robert Parr of Wise County, Texas won a widely-publicized $3 million verdict in a case alleging they had suffered health problems from pollution related to gas fracking. Last week, a Texas judge upheld that verdict and ordered the defendant, Aruba Petroleum, to pay up.

closeup photo of a woman's face, duct tape covers her mouthPhoto adapted from image by Katie TegtmeyerIt’s not known how many fracking cases have been settled prior to jury verdict, or under what terms, because of the widespread use of non-disclosure agreements.

Although the case was widely labeled as unprecedented, the reality is that the public doesn’t know how many times fracking cases have been settled prior to jury verdict, or under what terms, because of the widespread use of non-disclosure agreements, in which the people involved in the lawsuit promise not to talk about the wrongdoing alleged in the lawsuit or the terms of their legal settlement.

Opponents of these confidentiality orders just got a major boost from an unexpected quarter: Senator Lindsay Graham, Republican of South Carolina, and Senator Richard Blumenthal, a Connecticut Democrat, have introduced a bill called the Sunshine in Litigation Act of 2014 that would effectively end gag orders when public health or safety could be at stake.

“Our legislation would require federal judges, in cases where the facts are relevant to public health and safety, to consider the public interest before issuing an order to seal court records or a settlement agreement,” explained Senator Graham as he announced the bill.

The two senators focused on the unfolding GM scandal in announcing their proposed legislation – but the bill also would have broad implications for environmental lawsuits.

“Concealment can kill, and so can secret settlements,” Senator Blumenthal told The New York Times. “By sealing court records of lawsuit settlements that show serious safety defects, judges are aiding and abetting more deaths, injuries and danger.”

These secrecy pacts have drawn criticism from legal experts who argue that the practice puts public health and safety at risk. “I think there are lives being lost every week in America, due to hazardous products and hazardous activities, as a result of secrecy agreements,” former Texas Supreme Court Justice Lloyd Doggett has said.

Supporters of non-disclosure agreements say barring confidentiality agreements will make it harder for parties to arrive at a settlement, because defendants will have less incentive to reach an agreement. That would mean more costly full trials, which would burden the court system, they argue.

The history of confidentiality agreements in civil lawsuits dates back at least to 1933, when 11 asbestos workers sued their employer, Johns Manville, and the record was sealed as part of their settlement agreement. The hazards of asbestos, which causes the deadly lung disease mesothelioma, ultimately were concealed for more than 40 years, while an untold number of workers and others who handled the deadly fibers died as a result.

Auto manufacturers also have a tortured history when it comes to secret settlements. The  Ford/Firestone tire scandal erupted in 2000 when it was revealed that the companies had known faulty Firestone tires could cause Ford Explorers to overturn. More than 200 people were killed during the span of a decade – but the problem was concealed from regulators and the public through the use of non-disclosure agreements.

The risks that secret settlements pose to public health are especially egregious in environmental cases, since numerous people may be exposed to a threat from air or water and have no way of finding out that others have already been harmed. For example, once an agreement is signed, plaintiffs who believe oil and gas drilling polluted their water well can no longer warn neighbors about the risks of drinking from the same tainted aquifer, or share documents that help prove who caused the contamination. Refusing to keep quiet can mean that litigation can drag on for years – leaving plaintiffs in a home with no running water or unable to afford to move away from a known threat to their family’s health.

The environmental group Earthjustice lists more than a dozen fracking-related cases, involving at least 80 individual plaintiffs, where documentation surrounding the case was ordered sealed – including the Parr case, where discovery materials were ordered sealed in 2012.

Last year, Range Resources found itself in the middle of a PR debacle when the Pittsburgh Post-Gazette reported that two children, ages 7 and 11, had been barred for life from speaking about fracking as part of their family’s $750,000 settlement with Range. After Range drilled a well near their home in 2007, Chris and Stephanie Hallowich discovered that their tap water was contaminated, a problem that eventually made their children ill and drove the family from their home in Mount Pleasant Township, PA.  As part of their 2011 settlement, the Hallowiches agreed to refrain from speaking about fracking and that the documentation in their case would be kept secret. The order only unraveled when two local newspapers entered the legal dispute.

Even federal regulators have found themselves unable to access information in sealed cases. In 1987, the EPA was tasked with investigating the potential harms from oil and gas waste. In their report, which described a documented case where fracking contaminated groundwater, the EPA notes that other cases were believed to have been kept secret.

“Second, very often damage claims against oil and gas operators are settled out of court and information on known damage cases has often been sealed through agreements between land owners and oil companies,” the EPA wrote in its report. “This is typical practice, for instance, in Texas. In some cases, even the records of well-publicized damage incidents are almost entirely unavailable for review. In addition to concealing the nature and size of any settlement entered into between the parties, impoundment curtails access to scientific and administrative documentation of the incident.”

Although litigators say the use of secret settlements is widespread, secrecy, by its nature, makes it difficult to say how many such cases are settled or how aggressive a given agreement might be. Sometimes both sides are simply barred from revealing exactly how much money a case settled for, but other times, even the fact that a settlement was reached is secret, documentation handed over in discovery must be returned, and even the lawyers who worked on the case cannot use their files if they represent others in similar situations or speak publicly about their clients’ claims. Although little is known about how often secrecy pacts are used, one 2004 study reported that over  500 civil cases may have been sealed over a two-year period in federal courts alone.

Secrecy can also skew the public’s perception of the civil court system. “Meritorious cases involving obviously defective products or predatory individuals are secretly resolved,” wrote attorneys Martin Healy, Jr. and David P. Huber. “Meanwhile, media and public attention are focused on less meritorious cases, the so-called frivolous lawsuits.”

The Sunshine in Litigation Act could change all this. A similar bill stalled after passing the Senate Judiciary Committee in 2011. This time around, the proposed legislation has drawn the support of The New York Times editorial board, which published a column titled “Secrecy that Kills.”

“A company should not be allowed to use courtroom settlements to keep lifesaving information from the public,” said Representative Jerrold Nadler of New York when he introduced a companion bill in the House. “Current federal court rules make it too easy for defendants subject to lawsuits to protect their profits over saving lives.”

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