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South Carolina federal judges ban secret settlements; other jurisdictions may follow.

Federal judges in South Carolina have unanimously agreed to stop sealing settlement agreements. The proposed local rule stipulates: "No settlement agreement filed with the court shall be sealed pursuant to the terms of this rule."

In a letter to the state's federal judges proposing the change to Local Rule 5.03, Chief U.S. District Court Judge Joseph Anderson expressed concern over the adverse public-safety implications of secrecy agreements. For example, "doctors who are repeat offenders in medical malpractice cases" benefit from these agreements, he wrote. He also cited litigation involving rollovers caused by defective Firestone tires: "Arguably, some lives were lost because judges signed secrecy agreements regarding Firestone tire problems."

Anderson noted that plaintiff attorneys face "a real dilemma" when a defendant offers an attractive settlement contingent upon a secrecy agreement, because they are "under an ethical obligation to obtain the best settlement possible for the client." Banning court-ordered secrecy agreements "would relieve the pressure on plaintiffs counsel and the judge in such situations by simply taking the secrecy order off the table as a negotiating chip."

"These enhancements of the public's right to know and contributions to public health and safety are of great value," said ATLA President Mary Alexander, in a letter to the clerk of court supporting the proposed rule. "Secrecy is the antithesis of American justice. The U.S. Constitution requires open courts."

Kathryn Williams, immediate past president of the South Carolina Trial Lawyers Association, voiced that organization's support for the proposed rule in a letter to Anderson. "Consumers cannot make good decisions about which products to buy or with whom to do business without adequate information," she wrote. "Many times, that information can only be forced into the open through discovery in a lawsuit."

Some plaintiff lawyers question the effectiveness of the ban because it will affect only court-approved agreements; settlements not submitted to the court could still contain privacy clauses. A ban may hinder settlement negotiations, they say, and some cases, such as those involving children or some types of medical malpractice, may warrant secrecy to protect the plaintiffs.

During a public comment period that ended September 30, the court received "about 150 pages" of comments, evenly split between support and dissent, said Anderson. The judges will meet again this month to decide whether to finalize the rule.

Whether or not it is approved, the proposed measure has sparked other courts' interest. For example, federal judges in the Southern District of Florida met in September and agreed to study whether to expand that state's so-called sunshine law, which restricts privacy agreements, or possibly enact a total ban.

The South Carolina state courts are also considering following suit. Chief Justice Jean Toal said the state-level judges were planning to discuss the issue at their judicial conference in September.

Four states--Arkansas, Florida, Louisiana, and Washington--already ban secrecy agreements involving hazardous products. Twelve others have guidelines for when judges can seal settlements.
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Author:Jurand, Sara Hoffman
Date:Nov 1, 2002
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