Extra from Issue No. 42, Originally Published: 12 November 2003
In the comments of a late 2003 newsletter issue, I editorialized that secret settlements, like the one employed in the AAA case, were a bad idea. I said:
Here’s an idea to reduce the outrageous abuse of courts, which you should remember are a branch of the government (and by definition, the government is “of the people, by the people, and for the people” — or, if you will, “owned” by the people): once a lawsuit is filed in court, there should be no secret settlements. You want to use our courts to get justice? Fine, that’s what they’re there for. But if you want The People to enforce justice, The People should have a right to know the outcome of the action. The settlement should be part of the open court record for anyone to see.
John in Virginia agrees: “We have to do something to get rid of ‘undisclosed settlements’. I understand that companies do this in hope of not encouraging others to come after their pockets, but really, we need justice, not secrecy.”
Dan, a recent law school graduate in California disagrees: “This is the first time I have ever disagreed strongly with you. First, the theoretical reason: Settlements are contracts between two private individuals, not judgments of the court. Our law endows judgments with binding, precedential value. Therefore, we should avoid blurring the line between judgments and the compromises reached by people who are not public officials and are motivated primarily by self-interest.
Second, the practical reason: Mandatory publication of settlements would encourage Stella suits. A specific dollar figure is a dangling carrot for some people. Recall [Case 035], where you berated lawyers for drumming up business in clinics that screened people for asbestos-related problems. These lawyers lived off of settlements, and they told their potential clients the going rate. You quoted one man: ‘It’s better than the lottery. If they find something [wrong with me], I get a few thousand dollars I didn’t have. If they don’t find anything, I’ve just lost an afternoon.’ This man did not likely have any injury, but he knew what a settlement was worth.”
Several readers asked me to expand on the concept, and wondered how it could be enforced. Here’s my thinking on the matter.
A secret settlement such as in the AAA case allows both sides to walk away without losing face — each can hint they got the better end of the deal. If it thought it was doing well and would prevail, AAA may have offered a small sum to get the case over with — it would quickly stop the bad publicity they were getting, and it would cost them far less than paying the lawyers to continue on toward even a successful conclusion.
The plaintiffs, knowing their case was going poorly, get to walk away looking good in the public eye since they can imply that their money award is an admission that AAA did them wrong, and they wouldn’t have “lost the case.”
On the other hand, maybe the jury was clearly getting outraged at AAA, and the auto club’s lawyers thought they would lose. As more facts came out they could have looked worse and worse to jury — and the public. The publicity damage could have been incredible, and AAA might have found it cheaper to pay off the plaintiffs with a large sum. By keeping the amount secret, they might figure they would be less likely to attract other people with a grudge wanting to sue.
Either way, such secret settlements are an abuse of the civil courts. In a lawsuit, the plaintiffs and defendants are asking the court — the tribunal branch of the government “of the people” — to judge the case and enforce that judgment. By bringing it to the public sphere, the case becomes public. Once a case has been brought into the public sphere, the case should be required to stay public. Don’t reward frivolous actions by hiding the plaintiff’s loss. By the same token, if it’s not a frivolous case, allowing a guilty party to keep their guilt private is outrageous: others who have been harmed should know what evidence has been presented so that guilty corporations can be brought to justice by all the parties that it harmed.
You want to use The People’s courts to get justice? Fine, that’s what they’re there for. But if you want The People to enforce justice, all of The People should have a right to know the outcome of the action. The settlement should be part of the open court record for anyone to see. It can easily be enforced by making it a procedural rule: once a suit is filed, any settlements must be presented to the court before the case can be dropped. Since there are two sides to the settlement, there would have to be a conspiracy between the two sides to violate the rule — a crime few lawyers would be willing to commit. I hope.
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