May 2008
Dark Days Ahead Under the Sunshine in Litigation Act of 2007
On December 11, 2007, Senator Herb Kohl of Wisconsin sponsored S. 2449, the “Sunshine in Litigation Act of 2007.” The bill, co-sponsored by Senators Patrick Leahy and Lindsey Graham, would amend the federal judicial code to greatly limit a federal court’s ability to enter an order protecting the confidentiality of information produced in civil litigation. While the passage of this proposed legislation remains uncertain, its intent and approach are worthy of discussion. Surely openness and transparency are honorable goals, but modern civil litigation must be conducted with a degree of discretion. In the end S. 2449 creates more problems than it fixes by eradicating legal mechanisms that parties have relied on for decades.
S. 2449 would amend 28 U.S.C 111 to prohibit a federal court from entering an order restricting the disclosure of information obtained through discovery in a civil case, unless the court finds either that such an order would not restrict the disclosure of information which is relevant to the protection of public health or safety, or that the public interest in the disclosure of the information is outweighed by a specific and substantial interest in maintaining the confidentiality of that information. In addition, the bill would prohibit a court from approving or enforcing an order that restricts a party from disclosing information to any federal or state agency with authority over the confidential matter, or enforcing any provision of a settlement agreement that prohibits a party from disclosing the terms of a settlement, the amount paid or discussing evidence that involves matters of public health or safety. The act would allow a court to enforce such provisions only where the court finds that the public interest in disclosure of potential health and safety hazards is outweighed by a confidentiality interest.
Not surprisingly, S. 2449 has generated a swath of negative public attention, including an open letter from the Department of Justice condemning the bill. In his letter to Senator Leahy, the Deputy Assistant Attorney General Brian Benczkowski identified several flaws in the proposed legislation. First, Benczkowski emphasized that the bill fails to recognize the important traditional uses of judicial orders to protect negotiations, trade secrets, national security interests and privileged material generated as part of the litigative process. Additionally, he noted that the bill would displace the Federal Rules of Civil Procedure, forces the court to make specific factual findings before entering a protective order, and fails to effectively define the terms “public health or safety.” Yet perhaps the most important observation made by the Department of Justice, and the ramification of S. 2449 which should most concern corporate defendants in civil actions, is the effect the proposed bill would have on the discovery process.
Modern civil discovery is a complicated process often involving the exchange of highly technical and proprietary information. Protective orders facilitate discovery by fostering a sense of cooperation with a corporate defendant, easing concerns of competitive harm outside the litigation itself. If an already burdened court were required to make detailed findings of fact, as required by the bill, the use of protective orders – particularly those readily agreed upon by the parties – will be dramatically decreased. The cost of discovery will naturally increase as the plaintiff is forced to seek court intervention to pry “relevant” information from the unprotected manufacturer. A process that traditionally has been left to parties to litigation will involve more and more judicial resources to administer.
This self-monitoring system of discovery is further undermined by provisions in the proposed bill allowing an agency’s view of confidentiality to trump that of a trial court, the parties and their respective needs. Certainly the trial court is better in tune with the facts at issue in litigation than is an agency. By allowing government agencies to define the parameters of confidentiality agreements, or to override these agreements by confiscating information produced with an understanding that it would be kept confidential, S. 2449 exposes corporate defendants to a dangerous risk. One need only look at recent rule-making by the National Highway Traffic Safety Administration to see that an agency’s view of confidentiality can shift with the political landscape. By undermining the courts’ ability to protect trade secret and proprietary information, the proposed bill could even lead to takings claims as corporate defendants realize competitive disadvantages resulting directly from disclosure to government agencies absent sufficient confidentiality agreements.
Civil defendants face other, potentially greater business risks as a result of S. 2449. Plainly the Sunshine in Litigation Act of 2007 is designed to abrogate the use of protective orders. As a result, it would leave the self-interested plaintiff’s lawyer to decide when and how to release unprotected, but proprietary information. The plaintiff’s lawyer takes it upon himself to determine if the public interest – a term, like public safety, that is not defined in the proposed legislation – is best served by release of information at the early stages of the lawsuit. At least one recent case counsels against allowing plaintiff’s counsel such autonomy. In Cooper Tire & Rubber Co. v. Farese, et al., 248 Fed.Appx. 555, 2007 U.S.App.LEXIS 22565 (5th Cir. Sept. 21, 2007), it was alleged that plaintiff’s counsel deliberately disclosed to the media a confidential affidavit containing false and disparaging statements about a tire manufacturer, causing substantial losses to Cooper’s stock value.
S. 2449 may be well intentioned, but it is poorly constructed and indelicate in its approach. In seeking to increase the safety and welfare of American consumers, the act undermines the legitimate proprietary interests of civil defendants. By removing the security currently afforded by court-issued protective orders, the proposed legislation would transform the self-monitoring tradition of the discovery process, thereby reducing the amount of information available to litigants. If the Sunshine in Litigation Act of 2007 is passed by congress, the future of federal civil litigation may be dark indeed.
For further information on S. 2449, please contact Ken Moran or any of the firm’s other lawyers.