BILL ANALYSIS
AB 36
Page 1
ASSEMBLY THIRD READING
AB 36 (Steinberg)
As Amended May 16, 2001
Majority vote
JUDICIARY 6-3
-----------------------------------------------------------------
|Ayes:|Steinberg, Corbett, | | |
| |Jackson, Longville, | | |
| |Shelley, Wayne | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Robert Pacheco, Bates, | | |
| |Harman | | |
| | | | |
-----------------------------------------------------------------
SUMMARY : Seeks to limit the use of secrecy agreements and
protective orders in specified cases to bring greater "sunshine"
on potentially lethal or financially devastating harms to the
public. Specifically, this bill :
1)Finds that secrecy agreements that prohibit disclosure to the
public or public safety agencies of information relating to
defective products, financial fraud, unfair insurance claims
practices, or environmental hazards are injurious to the
health, safety, and economic well-being of all Californians,
and that it is against the public interest to allow them in
these cases, except in very limited circumstances.
2)Finds that the Judicial Council (JC) has adopted Rule 243.1 of
the California Rules of Court, which creates a presumption
against secrecy for certain documents filed with our courts,
and states that it is the intent of the Legislature to better
protect the health and safety of Californians by creating a
similar presumption against secrecy in cases involving
defective products, financial fraud, unfair insurance claims
practices, or environmental hazards.
3)Applies solely to lawsuits claiming injury, wrongful death, or
financial loss allegedly caused by a defective product,
financial fraud, unfair insurance claims practice, or an
environmental hazard.
4)Provides that in these types of lawsuits, evidence which is
AB 36
Page 2
shielded from public view either through settlement or
confidentiality agreements not filed with the court, or
through discovery protective orders, shall be presumed to be
public information, and may not be kept confidential pursuant
to agreement of the parties.
5)Provides that such information may nevertheless be kept
confidential, for a time period determined by a court, if the
court orders such confidentiality based on a finding that the
evidence is either: a) a trade secret, as defined, or
otherwise privileged under law; or, b) there exists, among
other factors, an overriding interest that overcomes the right
of public access to the information.
6)Provides that, unless the information is a trade secret or
otherwise privileged under existing law, any portion of an
agreement or contract that restricts a party from disclosing
information that is evidence of a defective product, financial
fraud, unfair insurance claims practice, or environmental
hazard to a governmental agency with enforcement authority
over the public hazard is void and may not be enforced.
7)Prohibits any attorney from selling or offering for sale any
information obtained through discovery to any member of the
State Bar or to any other person in violation of the
prohibitions on attorney solicitation, fee splitting, or
financial arrangements among lawyers or non-lawyers. A
violation would be a basis for professional discipline by the
State Bar.
8)Provides that nothing in this bill shall prohibit the
enforcement of that part of an agreement between the parties
which requires the amount of any money paid in a settlement to
be kept secret.
EXISTING LAW provides:
1)Upon a showing of good cause, that courts may issue protective
orders to prevent the public distribution of subpoenaed
documents, writings or papers.
2)Under Rule 243.1 of the California Rules of Court, that court
records are presumed to be open unless confidentiality is
required by law. The new court rule also provides that a
court may order a record sealed only if it expressly finds
AB 36
Page 3
that: a) there exists an overriding interest that overcomes
the right of public access to the record; b) the overriding
public interest supports sealing the record; c) a substantial
probability exists that the overriding interest will be
prejudiced if the record is not sealed; d) the proposed
sealing is narrowly tailored; and, e) no less restrictive
means exist to achieve the overriding interest.
3)For the confidentiality of trade secrets in an action under
the Uniform Trade Secrets Act, by authorizing the court to
issue a discovery protective order which prohibits the
disclosure of a trade secret or limits its disclosure without
prior court approval.
FISCAL EFFECT : None
COMMENTS : This bill seeks to add California to a long and
growing list of states that have already adopted similar
"sunshine" laws or court rules. This bill restricts, but does
not ban, the use of secrecy agreements and protective orders,
which require secrecy in the typical types of lawsuits where the
public is most at risk of repeated and society-wide harm. This
bill is the byproduct of substantial efforts by the proponents
to compromise and narrow the legislation. This bill, and its
companion measure SB 11 (Escutia), pending in the Senate, delete
several key provisions contained in prior years' legislation,
including an earlier standing provision which allowed other
parties to contest secrecy orders or agreements, and a provision
requiring notification to the Attorney General. This year's
bills also specifically allow secrecy agreements for "privileged
information," a provision not included in prior years'
anti-secrecy bills.
Late last year, and effective this past January, JC adopted
Rules 243.1 and 243.2 of the California Rules of Court to
provide a standard and procedures for courts to use when a
request is made to seal a court record. In general, court
records are presumed to be open unless confidentiality is
required by law. The Advisory Committee Comment to the rule
notes that the standard is based on NBC Subsidiary (KNBC-TV)
Inc. v. Superior Court (1999) 20 Cal. 4th 1178, which held that
there is a first amendment right of access to documents used at
trial or as a basis of adjudication. The comment also notes
that the rules do not apply to records that the court must keep
confidential by law, and do not apply to discovery proceedings,
AB 36
Page 4
motions, and materials that are not used at trial or submitted
to the court as a basis for adjudication.
Trial court statistics continue to indicate that only about 2%
of the civil cases go to trial. In other words, the great
majority of cases settle before trial. When this high
proportion of cases is settled before trial, evidence uncovered
during discovery which may, if open to the public and press,
potentially save countless lives and deter devastating financial
losses, is rarely, if ever, filed with the court. In fact,
settlement agreements typically require the return of documents
and the preservation of their confidentiality. The provisions
of this bill are therefore intended to supplement, and
complement, the court rule already adopted by the Supreme Court.
The recent Firestone/Bridgestone tire debacle highlights the
extent to which secrecy orders may literally be the difference
between life and death. To date, more than 150 people have died
and more than 500 people have been injured while driving on
defective Firestone tires. Recalls of Firestone tires began
last summer. But long before, over the previous 10 years, over
200 of these cases were quietly settled with secrecy orders
attached, effectively muzzling victims, attorneys, and the media
from warning the public about the potentially fatal dangers
associated with their products. As many consumer groups have
noted, had information about tire separations been made public
years ago, there seems to be little question that many lives
could and would have been saved.
Two other separate public health hazards, tobacco and the drug
Fen-Phen, are also cited by the bill's sponsors to show how
disclosure of health risks can have dramatically different
outcomes and, according to this bill's supporters, demonstrate
the protective power of disclosure. Regarding tobacco,
supporters note that in 1994, the state of Florida brought an
action against several tobacco companies to recover health care
costs it expended due to tobacco-related illnesses. During the
litigation, tobacco documents were discovered that showed that:
1) the companies had knowledge of the harmful effects of
tobacco; 2) the companies knew nicotine was addictive; and, 3)
the companies specifically targeted minors in advertising
campaigns. Although this information had surfaced in prior
cases throughout the country, the information was hidden from
the public when the defendants obtained protective orders to
AB 36
Page 5
keep the documents secret. Fortunately, this bill's supporters
state, "Florida passed a 'Sunshine in the Courts Act' in 1991,
and the tobacco companies could not hide the documents under
Florida law. The discovery of these documents allowed
California to sue for the same cost recovery in 1996. The
California cases are now settled with a net gain of $25 billion
for California taxpayers over the next 25 years."
Conversely, assert this bill's supporters, "lack of disclosure
can lead to ugly consequences for consumers. In May 1997, a San
Francisco case settled against the manufacturers of Fen-Phen, a
popular diet drug, on the condition that documents be kept
secret. [The documents] showed that Fen-Phen caused heart valve
damage and the life threatening disease, pulmonary hypertension.
It was not until September 15, 1997, when the FDA removed the
product from the market, that the dangers became public. During
the five months between the first settlement and the recall,
unsuspecting patients continued to ingest Fen-Phen, causing
enormous harm, particularly since these heart disorders are
affected by the length of time the patient took the drug. At
least ten manufacturers, including American Home Products, had
received 'adverse reaction reports' indicating the danger, but
failed to take adequate steps to protect users. Instead,
manufacturers used the current court system to hide the dangers.
There are currently coordinated actions pending in California
and in federal courts."
One of the principal attacks on this bill made by this bill's
opponents is that this bill will dramatically increase
litigation in California, which, they argue, has been suffering
from an explosion in lawsuits. However, recent evidence
suggests the claimed litigation explosion is more rhetoric than
reality. In a February 1, 2001, L.A. Times article, entitled
"We Aren't Seeing You in Court," the paper reported that
"America's litigation explosion has fizzled. Americans are no
longer suing each other as much. Californians are suing each
other much less. After years of steady decline, the number of
big-money personal injury lawsuits in California is roughly half
of what it was a decade ago. Small claims have fallen to levels
unseen in 30 years." According to this report, "No systematic
research has been done on the causes ? But a review of
statistics kept by the center and by California's Judicial
Council makes it clear that nationally, over the last decade,
the rate of tort lawsuits has slightly declined while, in
California and some other states, the rate has plunged."
AB 36
Page 6
If, as this bill's opponents assert, passage of an anti-secrecy
law in California will lead to a new litigation explosion, one
would expect to find the same trend in other states that have
already enacted similar laws. However, a review of case filing
statistics in other states that have passed anti-secrecy
legislation suggests that case filings have not in fact
increased after the new laws took effect.
Analysis Prepared by : Drew Liebert / JUD. / (916) 319-2334
FN: 0000786