Safety and Health Reporter
Brien Roche Law > Blog > Personal Injury > Secret Settlements and Litigation Secrecy

Secret Settlements and Litigation Secrecy

Fairfax Injury Lawyer Brien Roche Addresses Secret Settlements

Brien Roche

Secret settlements and secrecy in lawsuits are common. However they can be dangerous.  Remington Firearms Company knew of hundreds of documented deaths and injuries. They were caused by defects in their Model 700 trigger mechanism.  They concealed this flaw for years.  Secret settlements were the order of the day. As a result these prevented other plaintiffs from discovering the problem.

The Standard For Secret Settlements

If secrecy is sought in the course of litigation the defendants should meet the proper test.  In other words protective orders dealing with discovery should require a showing of good cause. This is required under Federal Rule 26(c).  The good cause must be fact-based.  Convenience alone does not satisfy the standard.  The order should state who has the burden of showing the good cause.

If there is dispute over whether particular items are protected it should be stated in the Order that the document cannot be marked as Confidential.

Tax Issues

Where a party is requesting secrecy, there may be tax issues involved.  If a sum of money is being paid to an injured party the compensation for the injury is tax free. However the compensation for the secrecy is not tax free.  Therefore in a $200,000 settlement, if there is a secrecy provision, then the document should state how much of that $200,000 is the consideration for the secrecy.  From the point of view of the plaintiff, you want that amount to be as little as possible.

Another alternative is to have a separate agreement dealing with the secrecy with separate consideration.

Binding Counsel

Where the secrecy provision binds counsel, there are other issues to be considered.  That is, if counsel is to sign the agreement agreeing to the confidentiality, there can be ethical issues.  This potentially puts the attorney at odds with the client.  That is the attorney is in a position arguably where he has to enforce the agreement against the client.

If the agreement intends to restrict the ability of counsel to represent other plaintiffs, that may be barred.  In addition there may be ethical issues associated with defense counsel even communicating these types of proposals.
Call, or contact us for a free consult.

Secret Settlements and Sealing Files

Another common defense tactic is to ask that court files be sealed.  The proponent of secrecy must show that sealing is warranted. It must meet the standards under both federal common law and the First Amendment.  Mere embarrassment to a defendant is not enough. Also concern that public access could result in more litigation is not a reason for secrecy.  In other words the reasons must be fact-based.

The law supports open court records. This is especially so in cases that involve dangerous products.  Very few defendants are able to meet the First Amendment and the Federal Common Law requirements.  Secret settlements may be worth a great deal during settlement discussions.  The defendant wants to avoid future claims. They may also want to keep a known dangerous product on the market.  However if those are the goals then the defendant should be held to the test.

For more information on tort and personal injury matters contact Brien Roche. Also for info on secret settlements see the pages on Wikipedia.

Comments are closed.

Contact Us For A Free Consultation

Secret Settlements and Litigation Secrecy

Fairfax Injury Lawyer Brien Roche Addresses Secret Settlements

Brien Roche

Secret settlements and secrecy in lawsuits are common. However they can be dangerous.  Remington Firearms Company knew of hundreds of documented deaths and injuries. They were caused by defects in their Model 700 trigger mechanism.  They concealed this flaw for years.  Secret settlements were the order of the day. As a result these prevented other plaintiffs from discovering the problem.

The Standard For Secret Settlements

If secrecy is sought in the course of litigation the defendants should meet the proper test.  In other words protective orders dealing with discovery should require a showing of good cause. This is required under Federal Rule 26(c).  The good cause must be fact-based.  Convenience alone does not satisfy the standard.  The order should state who has the burden of showing the good cause.

If there is dispute over whether particular items are protected it should be stated in the Order that the document cannot be marked as Confidential.

Tax Issues

Where a party is requesting secrecy, there may be tax issues involved.  If a sum of money is being paid to an injured party the compensation for the injury is tax free. However the compensation for the secrecy is not tax free.  Therefore in a $200,000 settlement, if there is a secrecy provision, then the document should state how much of that $200,000 is the consideration for the secrecy.  From the point of view of the plaintiff, you want that amount to be as little as possible.

Another alternative is to have a separate agreement dealing with the secrecy with separate consideration.

Binding Counsel

Where the secrecy provision binds counsel, there are other issues to be considered.  That is, if counsel is to sign the agreement agreeing to the confidentiality, there can be ethical issues.  This potentially puts the attorney at odds with the client.  That is the attorney is in a position arguably where he has to enforce the agreement against the client.

If the agreement intends to restrict the ability of counsel to represent other plaintiffs, that may be barred.  In addition there may be ethical issues associated with defense counsel even communicating these types of proposals.
Call, or contact us for a free consult.

Secret Settlements and Sealing Files

Another common defense tactic is to ask that court files be sealed.  The proponent of secrecy must show that sealing is warranted. It must meet the standards under both federal common law and the First Amendment.  Mere embarrassment to a defendant is not enough. Also concern that public access could result in more litigation is not a reason for secrecy.  In other words the reasons must be fact-based.

The law supports open court records. This is especially so in cases that involve dangerous products.  Very few defendants are able to meet the First Amendment and the Federal Common Law requirements.  Secret settlements may be worth a great deal during settlement discussions.  The defendant wants to avoid future claims. They may also want to keep a known dangerous product on the market.  However if those are the goals then the defendant should be held to the test.

For more information on tort and personal injury matters contact Brien Roche. Also for info on secret settlements see the pages on Wikipedia.

Contact Us For A Free Consultation

Contact Us For A Free Consultation