Claims and Bad Faith Law Blog

FILED RATE BARS CLAIMS, UNTIL IT DOESN'T.

A purchaser of electricity foolishly entered into a contract whereby the supplier of electricity could charge an initial rate lower than its filed rates, i.e., lower than the rates filed with the relevant regulatory authority that approved a filed rate.

After the initial rate period expired, the contract provided that the supplier could charge higher rates.  After the initial rate period expired, the supplier in fact charged higher rates.

The purchaser sued.  It asserted several grounds.  On one of them, that the supplier allegedly breached its implied duty of good faith and fair dealing, a panel of the Second Circuit held that there was no bad faith as a matter of law.  The parties contracted for an initial rate that was lower than the filed rate that the supplier was allowed to charge.  That meant there was no breach of the implied covenant of good faith and fair dealing, according to the panel deciding Connecticut law.  Richards v. Direct Energy Serv's, LLC, 915 F.3d 88, 98-100 (2d Cir. 2019).

Their reasoning as to the supplier's higher rates after the initial rate period expired is, with all due respect, circular at best.  The panel ruled that in its view the supplier obviously exercised its discretion in good faith to charge higher rates.  They pointed to evidence that other suppliers charged those high rates, and rejected the evidence that the higher rates were higher than the approved rates that the supplier could charge if it had followed the regulator's rulings.

Seriously.  That's what they said.

On remaining counts, the same panel unhesitatingly applied the filed rate as a defense to the supplier's liability for its charges.

So, in this Second Circuit panel's view, there was no filed rate, until there was.  Regardless of the filed rate, there was no bad faith here, they said.

 Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

IDENTIFYING TRADE SECRETS AT OUTSET, MEANT SUCCESSFULLY PROTECTING REAMS LATER.

In Bombardier Inc. v. Mitsubishi Aircraft Corp., NO. C18-1543JLR, 2019 WL 858777, at *5 (W.D. Wash. February 22, 2019), Bombardier wanted the Court to protect certain categories of documents from disclosure.  Bombardier started by identifying its trade secrets, thereafter asking the Federal District Court to match the categories of documents to the trade secrets it had already identified in general terms from the beginning of the case:

[A]t this stage, Bombardier has identified its trade secrets with enough specificity that the court can determine if the disputed documents are related. In its complaint, Bombardier described technical, business, scientific, technical, economic, and engineering information that relate to its design, development, testing, evaluation, certification, and commercialization processes for its aircraft. (See generally Compl.)  According to Bombardier, “[t]his whole process—design, certification, production—is the heart of each [aircraft manufacturing] company’s competitive advantage.” (Id. ¶ 33.) Bombardier has cited numerous documents that relate to these processes, which Bombardier alleges certain defendants took while still employed at Bombardier and brought to AeroTEC, MITAC, and MITAC America. (Compl. ¶¶ 60-69.) And Bombardier has described in detail how the information in these allegedly stolen documents could assist AeroTEC, MITAC America, and MITAC in certifying its own aircraft. (Id.) In short, Bombardier has sufficiently described its alleged trade secrets for the court to determine if the disputed documents relate to them and should therefore be filed under seal.

(Emphasis added.)  Those who have documents to seal, let them seal, if they can, by following a path like the one that Bombardier has successfully taken in this case.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

POLICY AND THE FACTS TAKE AWAY "ANTI-CONCURRENT CAUSE" EXCLUSION.

In Citizens Prop. Ins. Corp. v. Salkey, 260 So.3d 371 (Fla. 2d DCA 2018) [PAGE NUMBERS NOT PROVIDED BY WESTLAW AT THE TIME THAT THIS ARTICLE IS POSTED HERE], a homeowners insurance policy imposed an "anti-concurrent cause" exclusion, and then took the ACCC away in an endorsement for sinkhole coverage.  That made the issue of "concurrent cause" ripe for resolution by the jury in the underlying case, a Florida appeals court held:

    Citizens argues that its policy contains language sufficient to avoid application of the concurrent-cause doctrine in two places. First, Citizens argues that the earth movement exclusion contained in the policy explicitly contains anti-concurrent cause language:

1.  We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.

....

b.  Earth Movement and Settlement, meaning:

....

(3) mine subsidence;

....

i.  Loss caused by “sinkhole.”

However, the sinkhole endorsement purchased by the Salkeys expressly provides as follows:

The GENERAL EXCLUSIONS – Earth Movement and Settlement exclusion 1.b. does not apply with respect to coverage provided by this endorsement.

....

The GENERAL EXCLUSIONS – Loss caused by Sinkhole exclusion 1.i. does not apply with respect to coverage provided by this endorsement.

    Accordingly, because the plain language of the sinkhole endorsement explicitly states that the anti-concurrent cause language found in section 1 of the policy does not apply to sinkhole claims, the anti-concurrent cause provision found in section 1 does not apply in the instant case so as to avoid application of the concurrent-cause doctrine.

The jury in that case found that there was at least one concurrent cause, and so it was proper to instruct the jury accordingly, the appellate court held:

    Therefore, applying [Florida law established by the Florida Supreme Court in Sebo v. American Home Assur. Co., 208 So. 3d 694 (Fla. 2016)] to the instant case, we conclude that the trial court properly instructed the jury on the concurrent-cause doctrine, requiring it to determine if at least one of the concurrent causes was covered under the insurance policy.

Nonetheless, because the jury instructions in that case were confusing, the appellate court reversed the trial court's judgment entered on the jury's verdict for the policyholder, and remanded for a new trial.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

GENERICS FORCIBLY REPLACING BRAND PRESCRIPTIONS, LIKE IT OR NOT.

Another agency of the current Federal Government is taking actions to dismantle consumer protections with a new Administrative State.  This time it is the Centers for Medicare and Medicaid Services (CMS), located in the Department of Health and Human Services (HHS).  They propose to substitute generic drugs for brand drugs when consumers fill their doctors' prescriptions.  Their proposal was only posted on January 24, 2019 and, in a relatively short period for Comments, the deadline for leaving a Comment including in opposition to these new-Federal Government proposals, is Tuesday, February 19, 2019.

Here are the complete Comments I left on https://www.regulations.gov on Sunday, February 17, 2019 in opposition to these particular proposals.

February 17, 2019

To:       The Centers for Medicare and Medicaid Services (CMS),

          Department of Health and Human Services (HHS).

          https://www.regulations.gov

 

Re:    Proposed Changes to ACA Benefits and Payments Parameters for 2020.

          CMS-9926-P

To CMS, HHS:

These Comments are regarding your proposed addition to Regulations in 45 CFR, new proposed §§ 147.106(e)(5) and 148.122(g)(5), and wherever else the same proposed changes discussed in these Comments may be found in your proposals.  Your proposed new regulations §§ 147.106(e)(5) and 148.122(g)(5) are published in 84 F.R. at pp. 313-314.

You advise in 84 F.R. at p. 234 that your proposed new § 147.106(e)(5), for example, would allow issuers of drug plans in all three markets -- individual, small group, and large group -- to allow changes to a formulary.  (Although you do not define the term in your proposals, I understand from general usage by CMS/HHS that "formulary" in this context means a list of prescription drugs covered by a plan, a/k/a a drug list.)

The new additions you propose to existing law would be to allow issuers of plans covering prescription drugs to remove the equivalent of brand drugs from the formulary, i.e., from the plan of prescription drugs that are covered by the issuer.  See, e.g., 84 F.R. at 234.

There are at least three obstacles to implementing these proposed new regulations as law.  The three I would like to address in these Comments are (1) that the proposed new regulations are not a reasonable approach to the availability of prescription drugs to consumers who pay for prescription drug plans, or formularies; (2) that the proposed new regulations are a windfall to the issuers of plans covering prescription drugs, at the expense of consumer choice, and (3) that the term, "generic equivalent," is new and undefined, without so much as a reference I can find to the Federal Food and Drug Administration's process of testing and approving generic drugs for use by consumers.

First, the proposed new regulations are not a reasonable approach to the availability of prescription drugs to consumers who pay for prescription drug plans, or formularies.  The goal of adding generic medical equivalents to prescription drug plans, or drug lists, could reasonably be accomplished without mentioning the removal of brand drugs from the formulary at all.

The real effect of proposed new regulations like §§ 147.106(e)(5) and 148.122(g)(5) is not to permit the addition of generic equivalent drugs to an issuer's list of covered drugs, but rather to permit the issuer to remove brand drugs from the issuer's list.

That in itself is an unreasonable change to the law and, moreover, it is not authorized by the enabling Congressional legislation in the first place.  The clear purpose of the enabling statute was to foster consumer choice, not to limit consumer options, especially when it comes to prescription drugs.

That ties in to the second objection addressed in these Comments.  The proposed new regulations, such as for example §§ 147.106(e)(5) and 148.122(g)(5), are an undeserved windfall for the makers of generic drugs, and at the expense of consumer choice.  Lists of covered drugs are of course lists contained in plans for coverage of drugs.  These plans are paid for by consumers in whole or in part including by the payment of deductibles and co-pays, and often paid for as well by a share of the premiums charged for coverage under these plans.  Consumers have paid for the right to have their physicians and medicalcare providers prescribe drugs and to fill these prescriptions with brand drugs at the option or choice of the consumer, and not by the choice either of the pharmaceutical manufacturer or the issuer.  For this reason as well, the proposed new regulations, including §§ 147.106(e)(5) and 148.122(g)(5), should not and cannot be adopted.

The third and final objection to proposed new regulations §§ 147.106(e)(5) and 148.122(g)(5) which will be addressed in these Comments is the undefined use of the phrase, "generic equivalent."  This phrase is found in the proposed new authority to be conferred upon issuers to "add a generic equivalent to a formulary[.]"  See, e.g., proposed new regulation § 147.106(e)(5), 84 F.R. at p. 314, and proposed new regulation § 148.122(g)(5), also in 84 F.R. at p. 314.

The phrase used in this new proposed regulation is not limited to "medically equivalent."  (Emphasis added.)  Nor is it limited by reference, so far as I can find, to FDA-generic-approved medicines.  Without such limitations, the proposed new authority to replace brand drugs on drug lists with "a generic equivalent" is overly broad and so it is meaningless.  It would, for example, allow issuers and generic drug manufacturers to buy their way onto drug lists to add drugs that their own proprietary  'research' and support has 'determined' to be "a generic equivalent," without limitation to generic medicines already approved by the FDA.   For this reason as well, the proposed new regulations, including §§ 147.106(e)(5) and 148.122(g)(5), provide no limiting guidelines and so are void and of no effect.  They cannot validly be promulgated.

For each and all of these reasons, whether taken separately or together, the proposed new regulations, including §§ 147.106(e)(5) and 148.122(g)(5), cannot validly be promulgated as administrative regulations and, moreover, they are void and of no effect as new law.

Sincerely,

Dennis J. Wall

Please Read The Disclaimer.  This post ©2019 Dennis J. Wall.  All Rights Reserved.

INSURANCE BAD FAITH STATUTES:

ARE UNFAIR AND DECEPTIVE ACTS AND PRACTICES ENOUGH ANY MORE?

Did you ever wonder what will become of Insurance Bad Faith Statutes if people asserting claims under those statutes would be required to plead and prove "actual injury" because of the alleged statutory violations?

That's one lawyer's way of asking whether there is anything left of Insurance Bad Faith Statutes in an age that requires a judge to agree that there is "actual injury" in every claim.

I have wondered about this, and I wrote about it in a new Section of my 2018 Supplements, Section 3:28.50, titled "Injury in Fact":  What Happens to Bad Faith Statutes? 2018 Supplement, Volume 1, of Litigation and Prevention of Insurer Bad Faith (Thomson Reuters Third Edition).

I am making it available to you on my website for you to reprint, at no cost to you, with the permission of the publisher.  Republished there with the permission of the author and Thomson Reuters.  No further republication or reproduction of this material may be made without the express written permission of the publisher.

Enjoy the research and expand on it!  Let me know what you find, if you can.  I am going to expand on the research on this subject myself in my 2019 Supplements! 

Please Read The Disclaimer.  This blog article ©2019 Dennis J. Wall.  All Rights Reserved.

COVERAGE LAWSUIT AFTER LIMITATIONS PERIOD, AND NO PROMPT NOTICE EITHER ...

... add up to summary judgment for a homeowner's carrier.  But actually either of the policyholder's violations of the insurance contract would have sufficed in this Connecticut case.

In Discuillo v. Allstate Ins. Co., NO. 3:17-CV-234 (KAD), 2019 WL 499255 (D. Conn. February 8, 2019), a Connecticut homeowner sustained her alleged loss in February 2015.

She advised her homeowner's insurance carrier of the loss fourteen months later, in April 2016.

She filed suit after the 18 months limitations period provided in her homeowner's policy, in January 2017.

The Federal Judge took the easy question first and entered summary judgment for the carrier because the contractual limitations period had clearly been violated in this case.  Discuillo v. Allstate Ins. Co., NO. 3:17-CV-234 (KAD), 2019 WL 499255, at *2 (D. Conn. February 8, 2019). 

Then the Federal Judge addressed the lack of "prompt notice" issue.  This was a little more difficult to deal with because after all, what is "prompt notice" of a loss under a homeowner's policy can be subject to interpretation.  In this case, notice was clearly delayed for 14 months.  The undisputed lack of "prompt notice" clearly prejudiced the carrier in this case because it was also undisputed that it was deprived of an adequate  opportunity to inspect the property so as to determine the cause of the loss by the time notice was given.  The Federal Judge entered summary judgment against the policyholder on this additional ground as well.  Discuillo v. Allstate Ins. Co., NO. 3:17-CV-234 (KAD), 2019 WL 499255, at *3-*4 (D. Conn. February 8, 2019).

Suit limitations provisions tend to be applied more often in the decided case law than "prompt notice" policy provisions.  But in some cases either provision will suffice to adjudicate a coverage claim without needing to reach the substance of the claim.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

THE LATEST AMENDED STIPULATED PROTECTIVE ORDER IN MICROSOFT'S (LATEST) CASE.

In the latest case against Microsoft, a United States Magistrate Judge signed the parties' First Amended Stipulated Protective Order obviously written for concealment.  The case is Uniloc 2017 LLC v. Microsoft Corp., NO. 8:18-CV-02053-AG (JDEx), 2019 WL 451345 (C.D. Cal. February 5, 2019).

In this stipulated amended protective order, the parties stipulated and the Magistrate Judge agreed that:

    Discovery in this action is likely to involve confidential, proprietary, or private information requiring special protection from public disclosure and from use for any purpose other than this litigation. Thus, the Court enters this Protective Order. This Order does not confer blanket protections on all disclosures or responses to discovery, and the protection it gives from public disclosure and use extends only to the specific material entitled to confidential treatment under the applicable legal principles.

Uniloc 2017 LLC v. Microsoft Corp., NO. 8:18-CV-02053-AG (JDEx), 2019 WL 451345, at *1 (C.D. Cal. February 5, 2019) (emphasis added). 

Never before has "from use for any purpose other than this litigation" been an accepted reason for a protective order.  It simply has never appeared among the list of "the applicable legal principles."  Until now.

Now, in this Microsoft case, it has.  By stipulation.  And by the official order of a magistrate judge.  Whether this will actually stand as precedent or not, by the clear terms of this stipulated order, nobody outside of this Microsoft case can ever so much as see this stuff:

A receiving party may use designated material only for this litigation.

Uniloc 2017 LLC v. Microsoft Corp., NO. 8:18-CV-02053-AG (JDEx), 2019 WL 451345, ¶ 4.1, at p. *2 (C.D. Cal. February 5, 2019).  The public cannot see it.  Other lawyers and other parties and in fact anyone outside of this Microsoft litigation cannot see it.

All because of a new legal invention crafted by the stipulation in Microsoft's latest case, and signed by a magistrate judge into law:  because "private information" is likely to be discovered and so must be protected "from use for any purpose other than this litigation."  (Emphasis added.)

Baseless in law, perhaps, but as written that seems pretty absolute.  It was intended to be.  Do you think differently?

There may be other features of this stipulated order worth seeing the light of day, and if so, I will try to point them out in future articles.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

WIND 2019: THE 20th ANNUAL CONFERENCE ENRICHES THE DISCUSSION.

Photograph by Dennis J. Wall.

The Annual Conference of the Windstorm Insurance Network, or WIND, turned 20 this year.  The 20th Anniversary WIND Annual Conference was held at Walt Disney World.  Some 1,200 people attended.  The Annual Conference attendees, like the members of WIND, are professionals in the property insurance claim process.  At the WIND Annual Conference they present the policyholder sides and the insurance company sides of major property insurance issues.

WIND picks its speakers and its session topics through the work of its Speakers Committee.  This group of about ten people has the charge of staying on top of speakers and current issues for the Annual Conference and, from what I saw myself this year, they do their job well.

For example, one current issue or "hot topic" of discussion in property insurance circles is clearly what explains the handling of catastrophe claims resulting from the 2017 Hurricanes and other catastrophes then and since.  As one presenter explained, first of all we had not had a catastrophe for a number of years.

Taking Hurricanes in Florida as an example, the last major Hurricanes to hit Florida came in 2004 and 2005, named Charlie, Frances, Ivan and Jeanne in 2004, and named Katrina and Wilma in 2005.  So it had been awhile before Hurricanes Harvey, Irma and Maria struck Texas, Florida, and Puerto Rico the hardest, in 2017.

All panelists were in agreement on the central ingredient for success in handling catastrophe claims (as well as other kinds of claims):  Communication.  If you say that you are going to call the policyholder every Friday to update her on the status of her claim, for example, then make the telephone call that you said that you would make, even if all you have to tell her that week is that there is nothing new but that you will call again when there's been a development.

Notice is a big issue in recent Catastrophe Claims handling.  Panelists conjectured about the reasons for the increase in such issues in recent years.  One suggestion was that higher deductibles may be contributing to late notice to insurance companies, because policyholders with the higher deductibles may conclude that the claim could not reasonably exceed the amounts of their deductibles, but of course the amounts of the claims resulting from catastrophes usually present a second catastrophe, the first being the loss itself, and the second being the amount of indemnity that is required as a result of the loss.

Tying into the idea of high deductibles generally being a cause of late notice, other presenters suggested that late notice of claims after recent catastrophes may have been caused at least in part by the implementation of high Hurricane deductibles.  Many of the high Hurricane deductibles, they pointed out, took effect just before Hurricane Harvey in 2017.

Another suggestion came out of the nature of the catastrophes such as Hurricane Irma, in which the catastrophe claims were apparently largely based on wind-driven rain which causes damage that does not show up until later.

Countering these suggestions was the basic and simple notion that it doesn't cost anything to report a claim (not even the cost of a stamp, I might add, since the advent of Fax and email, although keeping a paper copy of a letter put in the mail is still probably a very sure way of incontestably giving notice).

Another current issue is the evidentiary effect, if any, of insurance companies' pre-catastrophe inspection reports.

Managed repair was a popular topic.  Once coverage is accepted by an insurance company for even a part of the loss -- such as coverage for repair of the damaged property -- then, according to the discussion at another panel, the policyholder would have the right to an appraisal, even in a repair situation.

Whatever the state of coverage that might exist in that situation, once again the idea is current and under discussion by those involved in property insurance claims and will come as no surprise to the attendees of this year's 20th Anniversary WIND Annual Conference.

Photograph by Dennis J. Wall.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

WIND 2019: THE 20th ANNUAL CONFERENCE CONTINUES THE CONVERSATION.

Photograph by Dennis J. Wall

WIND, which stands in for Windstorm Insurance Network, blew into Walt Disney World for its 20th Annual Conference recently.  WIND has grown from an initial membership of some 350 people into a roll call of about 1,300.  They come from 36 States, and from other countries including Singapore, France, and Germany. 

About 1,200 people attended the Annual Conference in 2019.  WIND members and the people who tend to attend the Annual Conference as well, are all professionals representing policyholder and insurance company sides of property insurance disputes, in basic and simple terms.

The sessions I attended this year generally proved the WIND format, which is not unique to WIND but works everywhere it is used to present insurance issues as far as I can see:  A panel of four presenters, for example, would have one policyholder lawyer, one policyholder public adjuster, one insurance company representative or independent adjuster, and one defense attorney to present points of view.

The panel presenting Commercial Policies and Claims followed this model.  Like every other session I attended, the panel that presented this topic emphasized the long-standing truth that the insurance policy is the starting point for the answer to every insurance coverage question.

Whether presenters said that "the insurance policy is king," or compared purchasing a policy to going to the store where what you come out with depends on what you get, the central idea behind every issue is always what the policy says.

Besides expressing eternal truths, as it were, the panelists at WIND raised cutting-edge questions in property insurance for all participants to consider.  An example of current questions is whether there is coverage under property insurance policies for experts' assistance to policyholders in adjusting or presenting claims under their policies?  The suggestion was raised that perhaps good arguments in favor of coverage for that assistance would be available under coverage for Adjustment Expenses, whatever the coverage might be called in a given policy.

Another suggestion was that perhaps there is such coverage available under Extra Expense coverage.  Whatever the source of coverage there might be for that particular expense, the idea is new and current and will come as no surprise to the attendees of this year's 20th Anniversary WIND Annual Conference.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

LAST IN THE SERIES: "USE RESTRICTION" AND SUMMARIZING THE SERIES.

This is the last of our continuing series of articles taking a look at the presumption of public access to Court files.  In recent articles we have been looking at the examples of secrecy on display, as it were, in recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  In this final article, we will bring the series to a close with our look at the Volkswagen "pollution defeat device" MDL.  Our special focus will be trained on the secrecy involved in this huge lawsuit, secrecy that is built into multi-district litigation and similar huge lawsuits.  To a great extent secrecy is a major reason such lawsuits exist in the first place.

 

"Use Restriction":  In other cases, standard blanket secrecy orders purport to prohibit disclosure to others, who may be identified, by category but never by name, or maybe not at all.  The use restriction in the VW order was written to go one step further.  It is a "Restriction on Disclosure in Actions Outside U.S." and in particular to "legal counsel[.]"^[1]

By way of contrast, in many other cases, a stipulated protective order will specifically say who will never be given concealed material.  When material is designated as not subject to public disclosure in a given case, the agreed order may be written so as to single out in particular lawyers representing other plaintiffs in other cases against the same or similar defendants.

Here, in the stipulated protective order in the VW MDL, we get to see the flip side of that coin.  In the VW MDL order, the approach was taken to list every kind of person who can see the otherwise publicly undisclosed information.  That list in the stipulated secrecy order in the VW MDL simply does not include lawyers involved in the representation of other clients in other cases.  Parenthetically, it also does not include requests for public information under the Freedom of Information Act, or "FOIA."^[2]

These more or less unique provisions may reflect the international marketing of Volkswagens.  Describing the set of people who can see the concealed information is infinitely simpler than trying to describe all the different proceedings and the people involved in them all over the world who cannot see the information.  Denying access under the Freedom of Information Act, if valid, will prevent or at least slow down the availability of that information for other proceedings of any type across the planet.

Sealing the materials a judge uses to make a ruling.  The VW order clearly provides that any "Protected Material" under the agreed order that "is used in any court proceeding ... shall not lose its protected status through such use."^[3]  Once again, as we have already seen in earlier sections, in particular in section 2:20 regarding insurance companies, many courts treat materials used by a judge to make her ruling as presumptively open to the public by the very fact that the judge based her ruling on it, so that the public should see it too.

The Crucial Feature of agreed Umbrella Secrecy Orders:  Agreed blanket secrecy orders prevent disclosure of the evidence without the requirement that a judge determines whether there is good cause for the nondisclosure.  The VW order shares this feature with standard Umbrella Orders, unlike it must be said, the GM order which does require proof of good cause for the "Confidential" or "Highly Confidential" marking.^[4]  

The VW order is the same as the GM order, however, with respect to what the lawyers mark as "Confidential" or "Highly Confidential."  What the lawyers mark with those designations will be "Confidential" or "Highly Confidential," even after the particular case is over.  The lawyers only need to do their marking "in good faith" of all the evidence they "reasonably believe to be" either Confidential or Highly Confidential.

What the lawyers may choose to mark "Confidential" in the VW MDL seems anchored on things "that qualify for protection under Federal Rule of Civil Procedure 26(c)."  So far, so good, but the permissions to the lawyers and parties to designate things "Confidential" and so withhold them from the public do not end there.

The VW stipulated secrecy order changes the Rules by adding that nothing in this agreed order precludes any party from "seeking additional protections not currently contemplated by this Order to be applied to any particular document or category of documents," which of course includes Confidential Information.^[5]

Exactly what are the "additional protections"?  The order does not say, and it does not offer a clue.  What the "additional protections" to keep evidence Confidential may be, remains to be determined by the lawyers and their clients in that case.

Both the GM stipulated secrecy order in New York and the VW agreed secrecy order in California provide that if the lawyers were wrong in concealing evidence from the public as Confidential or Highly Confidential, that is no problem once again -- even if a Court declares that the evidence in question should be opened to the public, it will still be protected so long as the lawyers marked the evidence with the words, "Confidential" or "Highly Confidential."^[6]

An old standby:  "Non-public information."   Similar words and phrases are used throughout the secrecy documents in many cases and in a lot of situations.  The VW MDL secrecy order refers, for example, to concealing information simply because someone claims that it is "non-public information"^[7] as in the Wells Fargo settlements of cross-selling accusations that we encountered in section 2:21.  These agreed secrecy orders are not alone in using the term.  That same term, "non-public information," is also used and is also not defined, in the Nondisclosure Agreements apparently introduced to employees in the White House since on or about January 20, 2017.^[8]

Summary of the effects of stipulated umbrella protective orders on litigation of catastrophe claims and of insurance coverage claims for natural and man-made disasters.  State court actions may provide more transparent lawsuits than federal courts.  The United States Constitution provides the presumption followed by many federal courts to allow the public access to court files, yet federal procedures not only authorize but encourage concealed evidence and secret settlements.

            Some of the procedures followed in federal courts that encourage concealed evidence and secret settlements include judicial approval of secret class action settlements, and multi-district litigations or MDLs.  Judicial certification of classes for the purpose of settlement, and MDLs by their very nature, are designed and constructed to encourage settlements.  Both class action settlements and MDLs are by their nature large cases which put tremendous pressures on individual plaintiffs by a few very large, usually corporate defendants.

            We have discussed numerous examples in the immediately preceding sections of this Chapter of how the judicial system, and particularly the federal judicial system, encourages and approves concealed evidence and secret settlements, including the GM ignition defect MDL and the VW defeat-device MDL.

            The intention behind the recent previous sections of this Chapter has been to illustrate the difference between concealing evidence and making the evidence publicly available for the public to see.  In order to achieve this result uniformly throughout federal courts and state courts alike, it is now clear that changes are necessary.  First and foremost, the behavior of judges needs changing.  No new rules are needed.  What is needed instead is to enforce the rules that exist, particularly the requirement that protective orders and sealing orders depend on a showing of good cause from the party or parties requesting the secrecy.

 

Last in a series.  Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

 

[1] This is § 7.5, at page 11 in Pretrial Order No. 12:  Stipulated Protective Order, Doc. No. 1255, filed on February 25, 2016 in In re:  Volkswagen "Clean Diesel" case.

[2] The distribution list' simply does not include lawyers involved in the representation of other clients in other cases:  §§ 7.2 and 7.3, on pp. 9-11, in id., titled, respectively, "Restrictions on Use of Confidential Information" and "Restrictions on Use of Highly Confidential Information."

            The concealed information cannot be obtained with FOIA requests:  § 12.4, p. 16, in id.

 

[3] § 13.4.2, at p. 18, in id.

 

[4]See  GM Order No. 10, filed 09.10.14, ¶ 4, at p. 6.

 

[5] VW Pretrial Order No. 12:  Stipulated Protective Order, § 2.9, filed on February 25, 2016,  pp. 3-4.

 

[6] Designating evidence as "Confidential" or "Highly Confidential," which the lawyer "reasonably believes," in "good faith":  It is enough to quote one of the two secrecy orders, because in substance they are identical.  To quote the VW secrecy order, VW Pretrial Order No. 12:  Stipulated Protective Order, §§ 2.3, 2.6, 2.9, 2.18, and ¶ 5, at pp. 3-4, and 5-8, filed on February 25, 2016:

If counsel for the Producing Party agrees or if the Court orders that Discovery Material initially redacted shall not be subject to redaction or shall receive alternative treatment, and the Discovery Material is subsequently produced in unredacted form, then that unredacted Discovery Material shall continue to receive the protections and treatment afforded to documents bearing the confidentiality designation assigned to it by the Producing Party.

The quotation is from  id., § 11.1, p. 14, in a paragraph titled, "11. REDACTIONS ALLOWED."  (Underlining in original.)  The corresponding GM secrecy order's provision is in ¶ 3(d) at page 5, GM Order No. 10, filed 09.10.14.  Although the wording is slightly different when the two provisions are compared side-by-side, the substance is virtually identical.  Clearly whoever wrote the VW order filed in February 2016 in a Court in California read the GM order that was filed in a Court in New York a year-and-a-half earlier in September 2014, and changed the words in order "to protect the innocent," you might say..

 

[7] VW Pretrial Order No. 12:  Stipulated Protective Order, § 12.7, at p. 13, filed on February 25, 2016.

 

[8] Cf. Ruth Marcus, "Trump Had Senior Staff Sign Nondisclosure Agreements.  They're Supposed to Last Beyond His Presidency" (Washington Post Online, posted March 18, 2018) (quoting from a reported draft nondisclosure agreement implemented by the current Administration at the White House, as to "'confidential' information, defined as 'all nonpublic information ....'" (emphasis added).)  The author was clear that she was in possession of only a draft nondisclosure agreement, and so she was not quoting any other version of the document, if any.

 

Last in a series.  Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.