Claims and Bad Faith Law Blog

NO DISPUTE, CASE OR CONTROVERSY? NO BLANKET PROTECTIVE ORDER, EITHER.

In an article on May 24, a seminal decision on blanket protective orders was discussed here in terms of the Court's rulings on secrecy and the presumption of public access.  The case is AgJunction LLC v. Ag Leader Tech., Inc., No. CV-20-02204-PHX-SPL, 2021 WL 1969523 (D. Ariz. March 9, 2021).

    The Court in this case also raised the possibility of an argument that Federal Courts lack the jurisdiction to enter blanket protective orders in the absence of a case or controversy.  Here's why it did.

    The lawyers of record wrote a proposed order in that case that was so comprehensive it would have rewritten the Federal Rules of Civil Procedure, in effect.  The proposed order contained provisions keeping a litany of things secret:

Here, the Proposed Protective Order defines “confidential” material as “any information, document, or thing, or portion of any document or thing that contains: (1) trade secrets; (2) confidential business information, including contracts or license agreements with a third party where disclosure would violate a contractual obligation of confidentiality; (3) personal identifying information, such as a Social Security number; or (4) personal health information protected by the Health Insurance Portability and Accountability Act, of the Party or a Non-Party to whom the Party or Non-Party reasonably believes it owes an obligation of confidentiality with respect to such documents, information, or material.” (Doc. 15-2 at 2). This does not meet Rule 26(c)’s threshold.

AgJunction, 2021 WL 1969523, at *1.

    The parties agreed to this multi-faceted definition of "confidential;" the lawyers stipulated to it and proposed it to a Federal District Judge.  Their problem, however, was not in their language but two-fold, first in their lack of good cause for protection, as was discussed in the previous article here and mentioned in the above quotation.

    Their problem continued with their lack of a dispute, the lack of a case or controversy that cried out for the protection of a Federal Court.  Nothing in that case had yet reached the point of a request for production, a deposition question, an interrogatory, or any objections.  There was, to say again, no case or controversy to activate the Federal Court's Article III jurisdiction.  There was only the lawyers' proposed protective order in case there would be a case or controversy over discovery or evidence later in the case, but there was not a case or controversy at the time of this decision.  Their attempt to manage the possibilities in the case was no substitute for the reality that there was no present, actual, tangible case or controversy:

    Further, no party has shown that there is an actual dispute that commands Court intervention and protection. See Fed. R. Civ. P. 26(c)(1); LRCiv 7.2. The parties remain free to mutually enter into a written agreement to facilitate the exchange of confidential disclosures without court approval or supervision. And, in the event discovery mandates disclosure of specific, harmful, confidential material, the parties will not be precluded from presenting a request to the Court at that time in a manner tailored to protect the particular interests at hand. [Citation omitted.]      Accordingly,

    IT IS ORDERED that the parties’ Joint Motion to Stay (Doc. 15) is granted in part and denied in part. The Motion to Stay is granted and the Motion for Protective Order is denied.

 

AgJunction, 2021 WL 1969523, at*2 (emphasis by the Court).

    The Court in this case did not use the words, but there was no case or controversy over the stipulated proposal for a protective order.  There was no basis for a Federal Court to act.  Federal Courts are prohibited from giving advisory opinions, there is no doubt about that.  Blanket protective orders in the absence of a dispute over discovery or the production of evidence are nothing short of mere advisory opinions, there ought to be no doubt now about that.

 

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BLANKET PROTECTIVE ORDERS vs. BLANKET SECRECY CONTRACTS.

The difference to the parties may be compelling someone else to keep a secret (stipulated blanket protective orders entered by a Court) versus entering into written agreements enforceable as contracts to keep the same secrets (contracts).

          But to a Federal Court sitting within the boundaries of the Ninth Circuit, blanket protective orders are not particularized in that they are not directed to a particular document or to particular information for which a party pleads protection from disclosure.  They do not show any specific harm that would result if the material in question were to be disclosed.

          Since they are not particularized, i.e., not directed to particular material, they fail to show good cause for Court-ordered protection of that particular material and so they fail to meet the requirements for a protective order signed by a Court within the Ninth Circuit.   AgJunction LLC v. Ag Leader Tech., Inc., No. CV-20-02204-PHX-SPL, 2021 WL 1969523, at *1-*2 (D. Ariz. March 9, 2021).

            The Court in this case also raised the possibility of an argument that Federal Courts lack the jurisdiction to enter blanket protective orders in the absence of a case or controversy ....

To be continued ....  Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

IT MIGHT ABUSE DISCRETION, BUT HAPPY ST. PATRICK'S DAY ANYWAY!

 

(Photo by Dennis Wall)

"The district court abused its discretion in permitting Defendants and the DEA to file their pleadings under seal."  In re:  Nat'l Prescrip. Opiate Litig. (HD Media Co. v. U.S. Dep't of Justice), 927 F.3d 919, 939 (6th Cir. June 20, 2019).

           The appellate panel followed this reasoning tree. First, there is a distinction in the Sixth Circuit (as in many courts) "between secrecy in the context of discovery," which is subject to a "good cause" showing, "and secrecy in the context of adjudication, which is generally impermissible due to the 'strong presumption of openness' of court records."  In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 938-39 (emphasis added).  The line of demarcation between discovery and adjudication is crossed when the material in question is put in the court file.  At that point, the public presumptively has access to it.  See In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939.

           This "strong presumption in favor of openness" can be overcome and documents can be sealed from public view when, first, the party seeking to seal the information shows a compelling reason to seal them and, second, the seal is "'narrowly tailored to serve that reason.'"  In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939 (citations omitted).

           This case dealt with the issue of sealing or redacting "pleadings, briefs, or other documents that the parties have filed with the court, as well as any reports or exhibits that accompanied those filings[.]"  In other words, it was not merely the sealing of "pleadings and briefs" filed in the court file that was at issue in this case.  Also at issue was the sealing of "any reports or exhibits" attached to them and therefore also "filed with the court[.]"  These are all "the sort of records" subject to the presumption of public access and therefore subject to the compelling-reasons-and-narrowly-tailored standard before such records may be sealed away from public view.  See In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939.

           In this case, these documents also merited a further, stronger presumption "in favor of openness, ... given the paramount importance of the litigation's subject matter."  In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939.

            Following this reasoning tree to the end, a two-judge majority on the appellate panel held that "[t]he district court abused its discretion in permitting Defendants and the DEA to file their pleadings under seal."  In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939.

The panel's ruling has never been appealed.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

PRESUMPTION OF PUBLIC ACCESS, BUT NO REVERSAL IN FIFTH CIRCUIT.

(Photo © Dennis J. Wall)

Of all Federal Courts, one of the ones you might least expect to uphold the presumption of public access to court records is the Fifth Circuit Court of Appeals.  Yet that is exactly what they have done.

           In what the Court itself described as a "run-of-the-mill case," a unanimous panel chose to identify the differences among a protective order, a stipulated protective order, and sealing evidence.  The entire opinion is worth reading. 

           Here is the reason for decision:

    Judicial records belong to the American people; they are public, not private, documents. Certainly, some cases involve sensitive information that, if disclosed, could endanger lives or threaten national security. But increasingly, courts are sealing documents in run-of-the-mill cases where the parties simply prefer to keep things under wraps.

    This is such a case. The secrecy is consensual, and neither party frets that 73 percent of the record is sealed. But we do, for three reasons. First, courts are duty-bound to protect public access to judicial proceedings and records. Second, that duty is easy to overlook in stipulated sealings like this one, where the parties agree, the busy district court accommodates, and nobody is left in the courtroom to question whether the decision satisfied the substantive requirements. Third, this case is not unique, but consistent with the growing practice of parties agreeing to private discovery and presuming that whatever satisfies the lenient protective-order standard will necessarily satisfy the stringent sealing-order standard.

Hoa Le v. Exeter Fin. Corp., ___ F.3d ___, No. 20-10377, 2021 WL 838266, at *5 (5th Cir. March 5, 2021).

           After losing its head in this rousing tribute to public access, the Fifth Circuit panel returned to its normal and affirmed a summary judgment for the defendant.

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CHALLENGING CONFIDENTIALITY OF "CONFIDENTIAL" DESIGNATIONS: FOUR RULES TO LIVE BY.

 

(Image by NASA)

 

Lawyers tend to write broadly when they write stipulations for protective orders.  They give themselves powers to designate evidence "Confidential" and "Highly Confidential -- Outside Attorneys' Eyes Only."  This is what they did in their stipulated protective order in the case of Edwards Vacuum, LLC v. Hoffman Instr. Supply, Inc. d/b/a His Innov's Grp., No. 3:20-cv-1681-AC, 2021 WL 186932 (D. Or. January 19, 2021).

Except that in that case the lawyers' powers were challenged.  Well, more precisely, some of the powers exercised by some of the lawyers were challenged.

The plaintiff's attorneys designated a lot of deposition testimony either as "Confidential" or as "Highly Confidential."  The defendants challenged these designations with a "Motion to Compel De-Designation of Certain Deposition Testimony."   The defendants' motion was granted in part and denied in part, but the lesson that this case holds lies much more in the way in which the Court reached its decision, than in the decision in this particular case.

"Four legal principles are particularly relevant to Defendants' motion to de-designate, or redesignate, the confidentiality restrictions under the Protective Order of certain deposition testimony of Plaintiff's witnesses."  Edwards Vacuum, 2021 WL 186932, at *1.

Transcribed into a numbered list, here are the four legal principles which this Court applied when one set of lawyers requested relabeling the "Confidential" and "Highly Confidential" designations that another set of lawyers had  placed on deposition testimony:

    1.    The first legal principle, said the Court, was "'well-established,'" which it is at least in the Ninth Circuit where this District Court sits. That is the legal principle that discovery is "'presumptively public'" unless and until a Court has ordered otherwise.  Edwards Vacuum, 2021 WL 186932, at *1.

    2.    "Second, a party's confidentiality designations must be reasonably and narrowly tailored to protect the confidential information the party seeks to shield from further disclosure. In other words, an 'across-the-board' designation is improper, even if some confidential information may be found within the broader designation. As several district courts have explained, a party misuses a protective order when it over-designates discovery materials in that way."  Edwards Vacuum, 2021 WL 186932, at *2.

       3.    "Third," the parties' stipulation for a protective order was written by the lawyers and not by the judge. A stipulated protective order is not dispositive of the outcome even when a stipulation written by the lawyers is accepted by the Court for an order.  In other words, "the fact that the parties may have stipulated to a protective order is not itself a basis for sealing or otherwise restricting access to any specific discovery material."  Edwards Vacuum, 2021 WL 186932, at *2.

    4.    "Finally," said the Court, numerous decisions have established that "'mere embarrassment'" is not enough. Good cause for a protective order requires much more.  If embarrassment is involved, then the embarrassment must "'be particularly serious or substantial'" in order to demonstrate good cause for a judge to enter a protective order.  Edwards Vacuum, 2021 WL 186932, at *2.

The District Judge in this case applied these four legal principles to the deposition testimony which had been designated "Confidential" or "Highly Confidential" by one set of attorneys in the case.  The judge took unusual pains to review and report his rulings on what must have been several hundreds of pages of testimony from four witnesses.  See Edwards Vacuum, 2021 WL 186932, at *4-6.

The extraordinary effort by the District Judge in this case is worthy of attention and, more than that, worthy of high praise.  But the lesson of this case is not in the decision itself, as was said earlier.

The lesson of this case is in the Court's summary of four mandates, four "legal principles," required by the case law of any stipulated protective order submitted by the lawyers in any case.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

"GOOD CAUSE" OR NO "GOOD CAUSE": THAT IS THE QUESTION.

This new article is drawn from research for the manuscript of the 2020 Supplement of LITIGATION AND PREVENTION OF INSURER BAD FAITH, which I have just completed:

The requirement of establishing "good cause" for secrecy was addressed by a recently written provision of a Stipulated Protective Order submitted for signature in a federal court case.  The parties and their lawyers offered the Court their own interpretation of what is and what is not "good cause."

    The so-called good-cause statement in this proposed order was written by an insurance carrier and the individual plaintiff suing it, in Zehtab v. Principal Life Insurance Co., No. 8:19-CV-01649-JLS-KES, 2020 WL 2079987, at *1 (C.D. Cal. April 30, 2020).  Their joint stipulation was clearly an attempt to base all future determinations of "good cause" for secrecy in that case exclusively or primarily on the good intentions of the parties and their lawyers in that case.  (Their proposal also reflects several attempts, one or two for each side in a negotiated agreement, as it were, to stretch the secrecy protection to things not ordinarily deemed worthy of protection under the Constitution and rules.)

    For ease of reference, I have highlighted the significant assertions in the "good cause" provision of this agreed secrecy order:

           B. GOOD CAUSE STATEMENT

The parties anticipate producing certain confidential documents or information in connection with discovery in this matter. Such confidential and proprietary materials and information consist of, among other things, confidential business information, information regarding confidential business practices, or other commercial information, information otherwise generally unavailable to the public, or which may be privileged or otherwise protected from disclosure under state or federal statutes, court rules, case decisions, or common law. Accordingly, to expedite the flow of information, to facilitate the prompt resolution of disputes over confidentiality of discovery materials, to adequately protect information the parties are entitled to keep confidential, to ensure that the parties are permitted reasonable necessary uses of such material in preparation for and in the conduct of trial, to address their handling at the end of the litigation, and serve the ends of justice, a protective order for such information is justified in this matter.  It is the intent of the parties that information will not be designated as confidential for tactical reasons and that nothing be so designated without a good faith belief that it has been maintained in a confidential, non-public manner, and there is good cause why it should not be part of the public record of this case.

Zehtab, 2020 WL 2079987, at *1 (emphasis added).

    Like many other stipulated protective orders, this one appears to have been entered by the Court without change from what the parties wrote.  For one thing, the Westlaw report ends with a California-required "Proof of Service" by one of the lawyers in the case.  Zehtab, 2020 WL 2079987, at *8.  For another, there is not even a signature line for the Judge, although the parties' proposed Stipulated Protective Order does recite that "FOR GOOD CAUSE SHOWN, IT IS SO ORDERED."  Zehtab, 2020 WL 2079987, at *7.

Please read the disclaimer. This blog article ©2020 Dennis J. Wall. All rights reserved.

 

SECRECY IN DISCOVERY AND SECRECY AT TRIAL ARE TREATED DIFFERENTLY.

In In re: Bard IVC Filters Prod's Liab. Litig., No. MDL 15-02641-PHX-DGC, 2020 WL 1070328 (D. Ariz. March 5, 2020), the District Court faced questions of secrecy claims over discovery materials and also secrecy claimed for trial exhibits. Like most Courts, this one treated the questions differently: Most Courts are willing to indulge secrecy in pretrial discovery but not for exhibits introduced in evidence at trial.

    First, the parties submitted a Stipulated Protective Order "governing the designation, handling, use, and disclosure of confidential discovery materials[.]" As is usual with such stipulated orders, the determination of "confidentiality" was made in the first place by the parties and their lawyers.

    Then a Case Management Order (CMO) "governed redactions of material from additional adverse event reports, complaint files, and related documents in accordance with" HIPAA.

    Third, the parties and their lawyers crafted another SPO specifically for Electronically Stored Information (ESI). "[T]o expedite production of ESI, the parties agreed to a primarily 'no-eyes-on' document production as to relevancy while still performing a privilege review for this expedited ESI document production." A CMO was amended apparently to accommodate this SPO.

    Thereafter the Court conducted three bellwether trials or demonstration trials. In Multi-District Litigation like this MDL, these trials offer a sampling of the likely outcomes. The Court in this case denied the defendants' motion to seal trial exhibits and otherwise to keep them confidential as to each of the three cases that were tried. "A list of exhibits admitted at the bellwether trials (excluding case-specific medical records) and documents deemed no longer subject to the protective order are attached as Exhibit 2." In re: Bard, 2020 WL 1070328, at *7.

    Familiarity with the principles of law is presumed here. The Court did not engage in a long discussion of them. Instead the Court ruled and the context of its rulings are known to people familiar with the principles of law they reflect. This opinion is very much worth reading for the outcomes in this regard.

Please read the disclaimer. ©2020 Dennis J. Wall. All rights reserved.

 

WILL THE SECRECY EVER STOP? WILL PUBLIC ACCESS COURT FILES?

This article continues from the end of the article published here on Wednesday, June 5, 2019.

 

2. Under Secrecy agreements and Secrecy orders like the ones in the People of California v. Wells Fargo case, what was marked "confidential" purportedly stays "confidential" even if it is put in front of the judge.  California Rules of Court 2.550 and 2.551 were written to cover the case of what evidence can be sealed and how someone can go about asking a judge to seal that evidence.  However, neither of these Rules applies to the evidence exchanged between the parties as a lawsuit goes forward, which again is called discovery.

Under the Rules of discovery that are meant to apply to all cases, everybody drops the argument that they have a "right" to conceal evidence once they argue that previously concealed evidence is a part of their case.  This includes when they give the judge the evidence they previously marked "confidential" in an effort to get a favorable ruling from the judge on one of their motions. 

Secrecy agreements and their secrecy orders like the ones in the People of California v. Wells Fargo case make the exchange of evidence during litigation more of a joint exercise in concealment than a concerted effort at discovering the truth, or at least discovering evidence.   Using these agreements and orders, people can show concealed evidence to a judge, but not to the public, just by putting  the evidence into an envelope marked "CONFIDENTIAL--FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER AND WITHOUT ANY FURTHER SEALING ORDER REQUIRED."^[1]  This simply could not be done without the secrecy agreements and their orders rewriting the Rules.

3. Keeping control over the evidence marked "confidential." The secrecy stipulations in this case, and the January 2016 agreement in particular, were also written to keep control of the "confidential" evidence after the case was over.  The January stipulation provides that it shall always be "binding" unless the party that designated the evidence as confidential, or a judge, says otherwise.^[2]

It apparently was not enough to make the January stipulation in this case endless, however, even after it became a judge's order in February 2016.  The agreement and its order also add a provision typically found in secrecy stipulations-turned-into-secrecy-orders in many other cases, to the effect that once the case ends, "confidential" evidence must either be returned to the party that designated it "confidential," or it must be destroyed.^[3]  In short, the people that possess the evidence marked confidential are required to give it up at the end of that case.  They cannot make the evidence public.  The evidence can only be used for that one case.  When that one case ends, then the way that the thinking goes behind the secrecy here, there is no longer any reason to hold onto the evidence.  The public has no interest in it, according to the lawyers who write these agreements, it seems, and the public seemingly has no dog in this fight either, according to the judges who enable this behavior by validating these secrecy agreements.

This is the end of a three-part series of articles on representative secrecy stipulations that the parties agreed to in one case, the case of People of California v. Wells Fargo.  This is not the end of secrecy stipulations, of course.

Not by a long shot.

Not yet.

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[1] Id., ¶ 18, at p. 8.

 

[2] Id., ¶ 21, at p. 8.

 

[3] Id., ¶ 22, at p. 9.

 

MORE SECRECY, MORE THROWING SHADE ON YOUR FINANCES?

This article continues from the end of the article published here on Tuesday, June 4, 2019.

The stipulation adopted by a judge's order in February 2016 in People v. Wells Fargo lines up behind many other secrecy stipulations and orders used in many other jurisdictions.  It restricts the use of any evidence marked "confidential," to the lawsuit in which the stipulation is filed.  It provides that such evidence may not be used for any other purpose "whatsoever."^[1]   This was pretty obviously intended to be taken literally.  It would mean that the only people who can use evidence marked "confidential" in the People of California v. Wells Fargo case in California are the people involved in that case.  No-one else can ever use it, or even see it. Even the people involved in the case named People of California v. Wells Fargo cannot use such "confidential" evidence anywhere else.

So, perhaps it would be wrong to assume without evidence that the L.A. City Attorney's Office shared Wells Fargo's forbidden special interrogatory answers with the federal agencies that subsequently filed actions over the same charges against Wells Fargo.  There is absolutely no evidence for that matter that the Los Angeles City Attorney's Office ever shared any information with anyone else that was stipulated to secrecy in that case.  This is a much more certain way of keeping a secret than asking a judge to apply the law.

The City Attorney's Office and Wells Fargo also agreed and the judge ordered in that case that if a party considered "competitively sensitive" information to require a "confidential" marking did not mean that anyone else agreed that it was competitively sensitive just because it was marked confidential.^[2]   In other words, the parties agreed in that case that "competitively sensitive" information could be withheld from public view.

The only party that could possibly care if something was "competitively sensitive" is of course a business which faces competition.  In this case, the only party fitting that description is the bank which was accused of abuses in "cross-selling" financial products to the bank's existing customers.  By grafting the concept of keeping any "competitively sensitive" secret to the overall idea of court protection, the parties rewrote the Rules to benefit themselves.

Perhaps more accurately, one of them did and the other agreed to it.  The Rules say nothing about keeping evidence from the public because the evidence might be "competitively sensitive," of course.  The rewritten rule of secrecy agreements like the January 2016 Stipulation would make it possible for a bank, for example, to withhold evidence that might tend to support charges that it is opening accounts in customers' names without the customers' permission or even knowledge.  If that kind of evidence got out into the public, it could be misconstrued.  Whether misconstrued or true, such evidence would understandably be "competitively sensitive." 

What evidence Wells Fargo may have had in the People of California v. Wells Fargo lawsuit is something we may never know.  Wells was granted the "right" in this case by this stipulated secrecy order to conceal whatever it knew.

When the judge signed this stipulation into an order, Wells Fargo's "right" became a ruling and not just an agreement.

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

 

[1] Id., ¶ 9, at p. 6.

 

[2] Id., ¶ 11.a, at p. 6.

 

SECRECY STIPULATIONS CLOSED ACCESS FOR CLAIMS OF CROSS-SELLING PRACTICES.

Proposed secrecy orders in 2015-2016 California lawsuit filed by the L.A. City Attorney. Many of the changes made by the secrecy agreements in this California lawsuit were made earlier in previous lawsuits, as noted.  Other Rules changes in the agreements signed in this case have not often appeared in other cases, however.

There are three main ways in which their January 2016 secrecy agreement validated by the judge in February in this case changes the Rules that were written to apply to all cases. 

1. The secrecy agreements and proposed orders defined "confidential" to mean what the lawyers say it means.  One of the familiar features of secrecy agreements in private litigation is that the definition of exactly what is "confidential" is always what the lawyers say it is.  Like the stipulated agreements in most cases, the agreements in the case of People of California v. Wells Fargo do not give much of a definition.

What guidance the agreements do give on what is going to be "confidential" in the present case is certainly not based on judges' decisions in past cases.  The agreements and proposed orders generally say that "confidential" means simply whatever the lawyers choose to mark with the word, "confidential."  This includes documents and testimony in all such cases.

In the case of People of California v. Wells Fargo, a judge signed a proposed order which made this proposed agreement into the judge's ruling.  The February 2016 order validating the January secrecy agreement in this case was likely written by the bank.  The judge did not rewrite it.  To the contrary, she took the proposed order, crossed out the word, "proposed," and signed it.  At that point, the stipulation that lawyers wrote became the judge's ruling. 

 The February 2016 order continues down the foggy road of secrecy by adding that "confidential" means any documents or testimony that a party (including its lawyers) "believes in good faith ... is entitled to confidential treatment under applicable law."^[1] 

This includes giving the bank and the L.A. City Attorney in that case "the right to designate as 'Confidential'" any "non-public information," including documents and testimony.^[2]

There is no such thing in the Rules as "non-public information."  The Rules do not even use that term.  Making "non-public information" mean the same thing as protected "confidential" evidence makes it clear that the parties in this case were rewriting the Rules for their own use and, intentionally or not, preventing the public from seeing the evidence if they could.

The people writing the secrecy stipulations in these cases removed any requirement that concealment depends on "good cause shown."  Participants in civil lawsuits in most courts in the United States, including in California, ^[3] can ask a judge to protect them from such things as annoyance, embarrassment, oppression, or undue burden or expense.  However, they cannot ask a judge to protect them under any of the Rules from "non-public information" that may find its way into documents and testimony just because the "information" is "not public," as the participants in the People v. Wells Fargo lawsuit wrote here.

Rather, as we have already seen, the Rules generally governing civil litigation require a party withholding documents during discovery to show "good cause" not to disclose them.  Judges ordinarily rule that the party withholding evidence during litigation has to show that the evidence is privileged or protected from disclosure in some legally recognized way.  Trade secrets "or other confidential research, development, or commercial information"^[4] are examples.  "Non-public information" is not.

Under a Secrecy Stipulation like the one in this case, a person withholding evidence can apparently succeed just by showing that its "designations" were done in the right way in the first place.  If it made the designation the right way, then according to the February 2016 order, the designating person gets to continue to conceal the designated "confidential" evidence.  The only burden is "to uphold any or all designations on Documents, Testimony, or Information."^[5]  People can conceal evidence using a secrecy order like this one by writing the word, "confidential," on anything so long as they say that they "believe[] in good faith that such information is entitled to confidential treatment under applicable law."^[6]

It is certainly easier to prove that a piece of evidence was marked "confidential" in good faith than to prove a privilege against disclosure of that evidence as the Rules require.

It is also a lot easier to prove a good faith belief when you are the only party that possesses evidence of that "good faith belief."

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

 

[1] Stipulation and Protective Order ¶ 1.c., at page 1, entered and filed on February 2, 2016 in People v. Wells Fargo & Co., Case No. BC 580778 (Los Angeles County Superior Court).

 

[2] Stipulation and Protective Order ¶ 2, at page 2, entered and filed on February 2, 2016 in People v. Wells Fargo & Co., Case No. BC 580778 (Los Angeles County Superior Court).

 

[3] The California Code of Civil Procedure regulates civil litigation in California courts.  California Code of Civil Procedure § 2031.060(b) provides as follows in this regard:

(b) The court, for good cause shown, may make any order that justice requires to protect any party or other person from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense.

[Boldface added.]

 

 

[4] Federal Rule of Civil Procedure 26(c)(1)(G). 

 

[5] January 2016 Secrecy Stipulation, ¶ 6, at p. 4. 

 

[6] Id., ¶ 1.c, at p. 1.

 

 

THEY HUNG UP ON THE STIPULATED SECRECY ORDER.

In AT&T Corp. v. Speednet-Sem LLC, No. 18-12791, 2019 WL 1532359 (E.D. Mich. April 9, 2019), because the defendant took so long to eventually say "no" to AT&T's proposal for its stipulated protective order, the time passed for AT&T, a plaintiff in this case, to amend its complaint.

Undaunted, AT&T filed a motion for leave to file its amended complaint late.  The federal court granted AT&T's motion in this case.

But that is not the most noteworthy thing about this case.  Not at all.

The most noteworthy thing about this case in my eyes is that somebody said "no" to a stipulated protective order.

It will be interesting to see what kind of information the public may be able to access without the barrier of a stipulated umbrella protective order to stop us.

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.

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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.

 

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[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.

 

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THE VOLKSWAGEN "DEFEAT DEVICES" ENORMOUS MDL CLAIMS.

This is the beginning of a triolgy of articles that will end our continuing series taking a look at the recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  In this installment and in the next two articles after this one, we will bring the series to a close by taking a 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.

The VW defeat device MDL comes from a family of similar claims.  At the time the VW defeat device MDL was put together, there were other large lawsuits aggregating or combining many claims of many people against other car manufacturers besides Volkswagen.  These include:

• Defeat device claims against Fiat Chrysler which mimicked VW's defeat devices, alternatively labeled as "illegal engine-control software" claims alleged by the United States concerning Fiat Chrysler Automobiles;
• Claims for inflated mileage against Hyundai and Kia;
• A class-action lawsuit against General Motors over alleged programming designed to cheat diesel emissions tests for pollution on some lines of pickup trucks; and
• Demands from the Federal Trade Commission in the first months of 2017 for the "policies, practices and procedures" used by a finance company regarding "technologies to track the location of borrowers' vehicles in case they need to repossess them," including "installing devices that enable them to remotely disable a car's ignition after a borrower misses a payment."^[1]

It is worth mentioning here that in a multidistrict litigation lawsuit against Hyundai and Kia, consisting apparently of plaintiffs who did not settle their claims with Hyundai and Kia the first time around, there are some 566 entries for pleadings and orders on the docket, and that many of the materials filed in the case concern sealing the evidence.  I reviewed all 566 entries and although I may have missed one or more, it appeared that the trial judge granted every motion to seal that was ever filed in that case.^[2]  

    

TOMORROW:  THE VW MDL: ANOTHER STIPULATED PROTECTIVE ORDER.

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[1] Fiat Chrysler Defeat Device claims:  The United States and the State of California sued Fiat Chrysler over defeat devices that basically mimicked VW's defeat devices.  The suits were settled in January 2019 with the Federal Government and the State of California for a combined total of some $330 Million in lieu of civil penalties alone (figures mine), on top of an additional maximum estimate of $185 Million in recall costs.  See Neal E. Boudette, How Fiat Chrysler Overtook the Pack, New York Times, p. B3, January 15, 2019; Neal E. Boudette, Fiat Chrysler's Penalties Reflect Limits of Diesel, New York Times, p. B5, January 11, 2019.

"Illegal engine-control software" claims alleged by the United States against Fiat Chrysler Automobiles:  See Neal E. Boudette, "Business Day Section / U.S. Sues Fiat Chrysler, Accusing It of Using Software to Pass Emissions Tests" (New York Times Online, May 23, 2017), available at https://nyti.ms/2qSYYuH.

 

Hyundai, Kia inflated mileage claims:  After settling regulators' claims for $100 million, Hyundai Motor America and its related corporation Kia Motors America settled for an additional $400 million most of a lawsuit that was brought based on allegations of inflated fuel economy claims for their cars.  See, e.g., Jerry Hirsch, "Hyundai, Kia Reach $400-Million Settlement Over Inflated MPG Claims" (Los Angeles Times Online, December 23, 2013), available at http://articles.latimes.com/print/2013/dec/23/autos/la-fi-hy-hyundai-kia-settle-mpg-lawsuit-20131223.  It was reported four days after the lawsuit settlement was announced, or on December 27, 2013, that the president and CEO of Hyundai Motors America was stepping down and would be replaced when his contract ended on December 31, 2013.  Ronald D. White, "Hyundai Motor America Chief John Krafcik to Step Down" (Los Angeles Times Online, December 27, 2013), available at  http://articles.latimes.com/print/2013/dec/27/business/la-fi-hyundai-chief-resigning-20131228.

A class-action lawsuit against General Motors over alleged programming designed to cheat diesel emissions tests:  See Neal E. Boudette, "G.M. Accused in Lawsuit of Deceit on Diesel Truck Emissions" (New York Times Online, May 25, 2017).

Demands from the Federal Trade Commission in the first months of 2017 for the "policies, practices and procedures" used by a finance company:  See Michael Corkery and Jessica Silver-Greenberg, "DealBook / Federal Agency Begins Inquiry Into Auto Lenders' Use of GPS Tracking" (New York Times Online, February 19, 2017), available at https://nyti.ms/2lwZFaA.

 

[2] See Jerry Hirsch, "Hyundai, Kia Sued Again Over Inflated Mileage Claims" (Los Angeles Times Online, November 8, 2012), available at http://articles.latimes.com/print/2012/nov/08/business/la-fi-mo-autos-hyundai-fuel-economy-lawsuit-20121108.

Since an appellate court decision on January 23, 2018, that MDL continues still.  The appellate court reversed the trial judge's approval of settlement in that case and sent it back for further proceedings.  In re Hyundai and Kia Fuel Economy Litigation, 881 F.3d 679 (9th Cir. 2018), rehearing en banc granted (vacated as precedent in the Ninth Circuit pending rehearing en banc), 897 F.3d 1003 (9th Cir. 2018). 

 

TOMORROW:  THE VW MDL: ANOTHER STIPULATED PROTECTIVE ORDER.

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CONCEALMENT EVEN AFTER DISCLOSURE IN THE GM "IGNITION DEFECT" MDL.

This is the fourth in a series of articles taking a look at the recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  In the last previous article and in this installment, we will continue to take a look first at the General Motors "ignition defect" MDL.  Our special focus will be on the secrecy involved in these huge MDLs, secrecy that is built into such lawsuits as an integral part of them.  To a great extent secrecy is a major reason such lawsuits exist in the first place.

 

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Concealment even after disclosure.   The lawyers in the catastrophic GM MDL case proposed and the judge agreed to another seemingly new provision in the GM MDL blanket secrecy order that would address the possibility of evidence mis-marked for concealment.  The lawyers and the judge provided that if Confidential or Highly Confidential information was disclosed without being designated for concealment, then the party producing it could thereafter "claim or designate" confidentiality, and the party receiving the information "must immediately return" it and all copies of it to the producing party and make no use of such information.  In other words, the judge would never actually have to see it and the lawyers would never have to submit it to the judge to look at.^[1] 

By its own terms the MDL Court's jurisdiction to enforce this Consent Order would never end.  The MDL Court would be the sole arbiter forever without end of whether parties and strangers to this litigation complied with this Order.^[2]

          To summarize, regardless of whether or not it had the purpose of concealing catastrophic defects that have allegedly killed people and injured others so badly that some of the people who allege injuries are now quadriplegics who lost the use of their arms and legs, and some others are paraplegics who lost the use of their lower bodies including both of their legs, the GM MDL case has had the effect of concealing the evidence of what allegedly caused those things.  This is not an unfortunate byproduct of stipulated umbrella secrecy orders like Order No. 10 on file in the GM MDL case.  It is the intended result of those consent orders.

 

NEXT:  THE VOLKSWAGEN "DEFEAT DEVICE" ENORMOUS MDL CLAIMS.

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[1] GM  Order:  In re General Motors LLC Ignition Switch Litigation, Order No. 10, Doc. No. 294, filed 09.10.14 (S.D.N.Y. MDL Number 14-MD-2543):

"Presumption of public access" and GM's "bulk production of millions of pages of documents":  unnumbered paragraph immediately following the title of this Order, "having consented thereto"; both unnumbered "WHEREAS" paragraphs;

"Sensitive information":  ¶ 2 at page 3;

"Lawyers determine in the first place": ¶ 3(c), "Marking," p. 4., pp. 3-4;

"Disappearing ink provision":  ¶ 3(d), "Redaction," at p. 5;

"Designating information as 'Confidential' or 'Highly Confidential' later on at any time" and "Disclosure shall not waive confidential status of such information":  ¶ 3(f), "Errors," p. 6;

            "Challenge one another's 'Confidential' and 'Highly Confidential' designations at any time" and "Good cause" expanded beyond what the law previously authorized:  ¶ 4 (emphasis added), "Challenges to Confidentiality Designations"; at p. 5;

"Use restriction":  ¶¶ 5, "Access to Confidential Information," 6, "Access to Highly Confidential Information," pp. 7-10, and 7(a), "Use of Confidential and Highly Confidential Information/ Restricted to This Proceeding and Related Litigation," p. 10; and

"Return and destroy provision":  ¶ 8 (emphasis added), "Return of Discovery Materials," p. 12.

It bears repeating that this Consent Order is titled, "Protecting Confidentiality and Privileged Materials."

 

[2] See In re General Motors LLC Ignition Switch Litigation, Order No. 10, Doc. No. 294, ¶ 14, "Protective Order Remains In [sic] Force," filed 09.10.14 (S.D.N.Y. MDL Number 14-MD-2543).

The Consent Order in this MDL originally provided that any party could disclose "a potential safety defect" to a government agency.  Id., ¶ 7(a), located in "Use of Confidential and Highly Confidential Information" paragraph, at page 10.    In another Consent Order some two years later, this provision was amended by consent of Defendants and Lead Counsel for plaintiffs once again, to add that GM would also be allowed to assist in "identifying, reporting or resolving any potential safety issue," without any stated limitation to assisting a government agency.  In re General Motors LLC Ignition Switch Litigation, Order No. 103, Doc. No. 2901, filed 05.27.16 (S.D.N.Y. MDL Number 14-MD-2543).  This addition on May 27, 2016 undoubtedly reflects the March 11, 2016 National Highway Traffic Safety Administration ("NHTSA") statement two months earlier that NHTSA's clearly preferred such exceptions to the use of blanket stipulated protective orders. NHTSA influenced more than the lawyers in the GM ignition switch defect litigation, however.  The federal Consumer Product Safety Commission virtually copied the preferences announced by NHTSA on March 11, 2016 when the CPSC released its own preferences for allowing disclosure to the CPSC in secrecy orders and in secrecy provisions in settlement agreements.  See Arthur Bryant, "U.S. Consumer Product Safety Commission Seeks to Limit Court Secrecy" (posted on The Legal Examiner blog on December 12, 2016).

Two additional 'protections' were added by the MDL Consent Order No. 10 in September 2014.  Not only would originally redacted evidence that was marked "Highly Confidential" and that became unredacted by the parties' consent or by Court order still be protected as Highly Confidential nonetheless under paragraph 3(d), "Redaction," on pages 4-5, if in particular any piece of disclosed evidence was "claimed" to be subject either to the attorney client privilege or to the protection that courts give to the work product of attorneys, then its disclosure in this MDL case would not forfeit the privilege or the protection in any other case, federal or state.  Id., ¶ 9(a), "No Waiver by Disclosure," pp. 12-13.

 

NEXT:  THE VOLKSWAGEN "DEFEAT DEVICE" ENORMOUS MDL CLAIMS.

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THE STAGGERING GENERAL MOTORS "IGNITION DEFECT" MDL CLAIMS.

This is the third in a series of articles taking a look at the recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  In the next two installments in this series, we will take a look first at the General Motors "ignition defect" MDL.  Our special focus will be the secrecy involved in these huge MDLs, secrecy that is built into such lawsuits as an integral part of them.  To a great extent secrecy is a major reason such lawsuits exist in the first place.

 

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There is a stipulated protective order, an umbrella secrecy order, in the GM ignition defect MDL.  To be sure, it does not bear either of those names in the Court file.  But it has all the marks of an agreed umbrella secrecy order.

One of the first things that GM did in the new MDL was request confidentiality.  Three months after the MDL case was opened and a judge was assigned to it, GM's lawyers and the lawyers representing people suing GM agreed that the evidence against GM in that litigation should be kept confidential.

The federal judge overseeing the GM MDL wrote that Lead Counsel for the people suing GM "consented" to the confidentiality order three months after the first pleading or exhibit was entered on the docket. 

The order in GM's ignition defect MDL began with a recitation in favor of the presumption of public access to court proceedings.  The court in that case acknowledged that it alone has the duty to authorize information in a court file to be sealed from public view.  Then the order changed direction in some old ways, often with new additions.

Lawyers determine "Confidential Information" in the first place.  Lead Counsel in Multi-District Litigation cases are clothed with the necessary authority to make decisions that bind the other lawyers and the parties.  So it was in the GM ignition defect MDL.  So it is with respect to all of the catastrophe claims in any MDL.

The blanket secrecy order in the GM MDL ruled, by agreement of Lead Counsel in the case, that the lawyers in the case would determine in the first place whether particular materials fall within the order's protection.  Once again, "Confidential Information" is expansively defined far beyond what the law has usually authorized.

Due to GM's announced intent to produce "millions of pages of documents" in bulk, the judge ordered among other things that evidence discovered by the parties shall be kept secret as "Confidential Information" or as "Highly Confidential Information."  In a departure from the standard umbrella secrecy orders discussed in previous articles in this series, and in a departure from the model Sample Confidentiality Order written by judges for lawyers in the Manual for Complex Litigation, Fourth edition, confidential information in the GM order broadly included "sensitive information."  Parenthetically, this agreement to conceal "sensitive information" would find an echo two years later in a nondisclosure agreement required by at least one Member of Congress from interns.^[1]

Returning to procedures used in standard umbrella secrecy orders, including those we have seen in previous sections, the GM secrecy order provided that the lawyers would use these markings for each document for which they had a "reasonable belief" that the documents were "Confidential" or "Highly Confidential."   Once again, this is similar to the "Confidential" and "Highly Confidential" provisions in umbrella secrecy orders we have seen in earlier sections in this Chapter leading up to this section.

Parenthetically, lawyers often argue for blanket secrecy orders concealing everything in advance because it is too time-consuming and expensive to argue that individual documents should be kept secret.^[2]  However, apparently they have the time to mark every document "Confidential" and that expense, in their eyes, is justifiable.

"Return and destroy provision."  With a return and destroy provision in a blanket secrecy order, any party receiving discovery would either return it to the disclosing party, or simply destroy the evidence.  This is an obvious reaction to the admonition in 2004 by the Federal Judicial Center in the Manual for Complex Litigation, Fourth, that under the provisions used at that time and earlier, "[r]estrictions on use in other litigation may not provide complete protection."^[3]

The GM order had a return and destroy provision, but the lawyers who wrote it did more than just copy from one of the orders we have seen earlier in past sections of this Chapter.  For the catastrophe claims in the GM case, the Consent Order further provided that any party terminating its involvement in the multi-district case -- and settlement is certainly one way for a party to "terminate" its involvement -- would be required either to destroy Confidential Information or Highly Confidential Information, or return it to the party from which it came.  And more.

The GM order added something new.  Any "person or entity having custody or control of recordings, notes, memoranda, summaries or other written materials, and all copies thereof, related to or containing discovery materials" of this kind, the GM order said, would be required to provide the producing party with an affidavit that they did their best to destroy the Information or return it to the producing party.   The new addition in the GM order was that the authors of the evidence not only wanted their information back but they wanted someone else's as well.  The order required not only the evidence in question to be returned or destroyed at the conclusion of the case, but also all notes anyone took about the evidence after they received it as well.

"Good cause" kept alive.  The GM agreed secrecy order provided that the party objecting to concealment could file a motion with the Court "for an order withdrawing the designation as to the specific designation on which the Parties could not agree."  If the objecting party filed a motion to disclose a document or part of a document, then the party that marked it Confidential or Highly Confidential "shall have the burden of proving that 'good cause' exists for the designation at issue and that the material is entitled to protection," but not under the law or the Rules.  The good-cause-burden would be to prove entitlement to concealment "as Confidential or Highly Confidential Information under applicable law," meaning that the parties' agreement had already expanded the law's capacity to conceal to previously unauthorized "other confidential, non-public information," including any person's notes about the information, whether made by a lawyer, a paralegal, a party, or anyone else.

The GM Agreed Secrecy Order's New and Revised "Confidential" and "Highly Confidential" provisions.  Then the Consent Order changed direction again.  If the lawyers were mistaken, no problem.  Under their Consent Order in this GM MDL, even if they did not designate information as "Confidential" or "Highly Confidential," they could still designate anything "Confidential" or "Highly Confidential" later on at any time, and they could also challenge one another's "Confidential" and "Highly Confidential" designations at any time. 

The "disappearing ink provision."   Further, if the lawyers were mistaken in blacking out information or if the Court ruled that those materials should not have been blacked out and redacted, in that event this Consent Order added a very unusual blessing to the parties and their lawyers.  If the evidence should not have been redacted, but was redacted and even though a judge ruled that it should not have been blacked out and ordered that it be disclosed instead, then the disclosed information shall still "bear the legend 'Highly Confidential' and shall continue to receive the protections and treatment" of Highly Confidential documents.  In other words, even if a document which the lawyers marked "Highly Confidential" was disclosed because a judge ordered it disclosed, this language appears to require that the marked document would still be "Highly Confidential" anyway.

It might be helpful to think of this as the "disappearing ink" protection.  Even after the information is disclosed, it will disappear.

This is not a matter of inadvertent production of privileged documents.  It is routine for confidentiality orders to provide that inadvertent or unintentional disclosure of confidential documents or information, or disclosure of them to a judge in chambers for her review, shall not generally be deemed a waiver of any claims of confidentiality.   The model Confidentiality Order proposed in the Manual for Complex Litigation, Fourth contains such a provision, for example.^[4]  Rules of Civil Procedure generally allow for the unintentionally disclosed information to be sequestered until a judge allows it to be disclosed once a party makes the claim of privilege and notifies the receiving party that the information was unintentionally disclosed.^[5]  That is not the situation addressed by the GM ignition defect MDL secrecy order "disappearing ink" provision, however.

I am confident in the belief that I have not seen all of the stipulated umbrella protective orders that lawyers have written and judges have ever signed, but I have seen many.  I have never seen any part of an agreement or an order to compare to the disappearing ink provision in the GM MDL litigation.

Except in the VW MDL litigation.  I will return to this subject later.

 

NEXT:  CONCEALMENT EVEN AFTER DISCLOSURE IN THE GM "IGNITION DEFECT" MDL.

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[1] The model Sample Confidentiality Order written by judges for lawyers in the Manual for Complex Litigation, Fourth edition:  § 40.27, "Confidentiality Order," ¶ (c), at page 752, in Manual for Complex Litigation, Fourth (2004).

            The nondisclosure agreement for interns used in at least one Congressional office in the Spring of 2018:  Rachel Wolfe, Exclusive:  Congress Requires Many Unpaid Interns to Sign Nondisclosure Agreements, Vox, posted on March 5, 2018).

 

[2] The matters that should be specifically set forth in "[a]pplications for umbrella orders, usually presented to the court by stipulation of the parties," are set out by the Federal Judicial Center in Section 11.432, "Limited Disclosure/Protective Orders," at pp. 65-66, in the Manual for Complex Litigation, Fourth.

 

[3] § 11.432, "Limited Disclosure/Protective Orders," p. 65 n.138 in Manual for Complex Litigation, Fourth.

 

[4] § 40.27, "Confidentiality Order," ¶ (b), at page 752, in Manual for Complex Litigation, Fourth (2004).

 

[5] See, e.g., Fed. R. Civ. P. 26(b)(5)(B); Fla. R. Civ. P. 1.285.

 

NEXT:  CONCEALMENT EVEN AFTER DISCLOSURE IN THE GM "IGNITION DEFECT" MDL.

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

 

GENERAL MOTORS AND VOLKSWAGEN MULTIDISTRICT LITIGATION LAWSUITS: WHY AND WHAT.

This is the second in a series of articles taking a look at the recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  In future installments in this series, we will take a look first at the General Motors "ignition defect" MDL, and then at the Volkswagen "pollution defeat device" MDL.  Our special focus will be trained on the secrecy involved in these huge lawsuits, secrecy that is built into such lawsuits as an integral part of them.  To a great extent secrecy is a major reason such lawsuits exist in the first place.

    1.  GENERAL MOTORS.

The General Motors ignition defect MDL came about in this way.  There were a number of claims that General Motors^[1] was responsible for deaths and injuries resulting from an ignition defect.  A federal agency, the National Highway Traffic Safety Administration, investigated the alleged ignition defects.  Lawsuits were also filed in which people sought damages for wrongful death and for bodily injuries.

In response, GM announced a settlement fund to be administered by Kenneth Feinberg, the person who administered an earlier settlement fund set up by BP after the Deepwater Horizon disaster.  Although GM's Final Protocol for how it set up the settlement fund was silent about confidentiality requirements, Mr. Feinberg reportedly said that people who participated in GM's settlement fund would not be required to sign confidentiality agreements.^[2]

On the other hand, GM announced that each claimant successfully pursuing a claim against GM's settlement fund would be required to give GM a release.  Thus it was reasonable to expect that GM would insist on confidentiality agreements before it paid money to settle claims.

The "Final Protocol" setting out the standards for GM's "Compensation of Certain Death and Physical Injury Claims Pertaining to the GM Ignition Switch Recall," dated June 30, 2014, understandably recited that anyone accepting GM's settlement funds from this program would have to provide GM with a release.^[3]

 

    2.  VOLKSWAGEN

Volkswagen used software to make around 11 Million diesel cars appear to have cleaner emissions in government testing facilities than they actually gave off on the road.  The software VW invented made its diesel cars start running in a different way once they were put into pollution tests, from the way that they actually did on the road.

            On the road, VW diesel cars gave off more nitrogen oxide than laws allowed.  Nitrogen oxide is one of the causes of smog, breathing problems, and early deaths.  It would eventually take up to some $30 Billion for VW to buy its way out of the many claims that resulted.  VW has reportedly since recovered most of the share price and profits that plummeted right after the pollution-defeat-device allegations emerged.^[4]

            There were so many claims against VW that it is hard to keep track of them.  Perhaps the surest way to describe them all, and how they were combined into one huge MDL, is to set out a general chronology or timeframe of the most significant claims in terms of their ultimate impact on our searches for concealed evidence and secret settlements.^[5]  The following chronology is a timeframe of the most significant catastrophe claims in the disaster that resulted from the VW diesel "defeat device."

            2013-2014:  During these two years, students and faculty from the University of West Virginia got a grant of some $70,000.00 from the International Council on Clean Transportation.  Their task was to road-test certain diesel vehicles on California highways.  The reason for the road tests was that although the diesel vehicles generally passed pollution testing when it was performed by regulators on their equipment indoors, there were reports that the same types of vehicles spewed foul odors and irritants when on the road.

            2014:  The California Air Resources Board or "CARB" began testing the VW diesel vehicles itself after the WVU issued its report in 2014.  The WVU researchers' report reflected a mysterious but glaring difference between the vehicles passing pollution tests performed indoors by regulators like CARB, and the same kinds of VW diesel vehicles giving off pollutants in measurably large amounts that violated California's pollution laws when the cars were driven on the road.

            CARB began discussions with Volkswagen in 2014 about this glaring difference.  VW had many explanations which changed over time.  VW even offered to recall the diesel vehicles under its own plan.  Finally, on September 3, 2015, after more than a year of talks, Volkswagen admitted to the CARB regulators that VW had gamed the tests from the beginning.  VW had built the diesel vehicles to defeat pollution tests rather than building vehicles that would not pollute.

            September 2015:  The first of many lawsuits was filed against Volkswagen on account of the "defeat device" diesel vehicles, which were designed and built with software to defeat pollution tests until VW sold the vehicles and released them onto the streets.

            The first lawsuit was a class action.  It was consolidated into one multi-district litigation ("MDL") with as many as 1,157 other class actions and other kinds of actions against VW.  Ultimately, the MDL would include various makes and models of VW cars, some with 2.0 liter diesel engines and some with 3.0 liter diesel engines, and claims asserted by consumers, dealerships, and others.

            On February 22, 2016 the plaintiffs filed "a 719-page Consolidated Consumer Class Action Complaint" in their MDL against VW.^[6]  Within three to four months, the MDL would settle.

            June, 2016:  Various announcements tell of a settlement for $570 Million of "consumer deception claims against Volkswagen, " made by "over 45 jurisdictions," and of the same settlement, apparently, but reportedly for "a $603 million agreement" with VW and 46 jurisdictions "that covered 2-liter engines."^[7]

            On October 25, 2016 the MDL Court entered its Order Granting Final Approval of a "Consumer and Reseller Dealership Class Action Settlement" over claims arising from the defeat devices in 2.0 liter engine VW cars.

            A word at this point about the amounts paid for these fines, penalties and damages settlements.  The settlement agreements are confusing and vague.  By design, it is hard to figure out from these documents what are the amounts of the fines, penalties, and damages settlements that the defendants are supposed to be paying.  These documents break out many actions Volkswagen agreed to take as a part of these agreements, and they often assigned arbitrary values to the performance of the obligations that VW agreed to take on, such as various recalls of various things, repurchase of certain makes and models, payments based on mileage on each individual vehicle, and so on.  Sometimes the settlement agreements did not even reflect any effort to assign any value in any amount to particular obligations at all.

            The words used in these settlement agreements collectively made it very understandable that many individual people asked to report what amount of money VW was going to pay would each be forced to make their own best guess.^[8]   Media reports announced that the settlements involved VW paying $14.7 Billion. 

            Given the many settlements and agreements that the defeat devices spawned regarding so many different pieces of the puzzle such as 2.0 liter engines, 3.0 liter engines, certain makes and models of cars, vehicles with various mileage, and so on, it is understandably confusing and extraordinarily difficult to estimate how much Volkswagen has agreed to "pay" over its failed defeat devices schemes.  It is also difficult to pin down a figure for the number of vehicles involved.

            The numbers variously reported by newspapers and other media outlets have ranged across a wide spectrum.  The reports seem to have increased over time to settle down on commonly accepted figures, as illustrated by even a few of the reports:

• "$20 Billion" for 600,000 diesel vehicles reported in January 2017;
• "More than $20 Billion" for "nearly 600,000 vehicles" reported in March and in April 2017;
• "$22 Billion" for 500,000 diesel vehicles in the United States, reported in May 2017, and republished in January 2019;
• "Up to $25 Billion" for 580,000 U.S. vehicles reported in March 2017; and
• "$30 Billion" for 11 Million vehicles reported in March, 2018.

            These sums and settlements are not to be confused with reports of other settlement events, such as the Federal Government's Press Release in April 2018 announcing that Federal Regulators had settled with Wells Fargo for $1 Billion in fines and penalties over force-placed auto insurance and mortgage practices,^[9] a settlement that drew some criticism as more or less a sham;^[10] and in another settlement, that Wells agreed to settle with "shareholders"^[11] or with "investors"^[12] for $480 Million in May 2018, and equally unrelated claims in August 2018 that Wells Fargo foreclosed on "hundreds" of homeowners due to allegedly faulty software such that Wells Fargo compelled itself to "set aside $8 million to compensate customers affected by the glitch."^[13] 

            For comparison purposes, the GM faulty ignition switch claims involved resulted in over 100 people dead and most of these catastrophe claims resulted in a settlement amount of $2 Billion.  Allegedly defective Takata airbags in cars resulted in a settlement of $1Billion.^[14]

NEXT:  THE STAGGERING GENERAL MOTORS "IGNITION DEFECT" MDL CLAIMS.

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

 

[1] Long before these claims were made, General Motors Corporation in 2009 had already been split between a newly reorganized "new" GM, financed in large part by federal bailout funds, and the "old" GM which was liable in essence for risks from GM's business before there was a "new" GM.  See Bill Vlasic and Neal E. Boudette, "Shell of Old G.M. Surfaces in Court Fight Over Ignition Flaw" (New York Times Online, August 17, 2017), posted at https://nyti.ms/2vlpJEs.

[2] "Those who accept settlements, Feinberg says, will not be required to sign confidentiality agreements."  Jeff Gilbert, "GM Compensation Fund Expected to Pay Out Billions to Victims" (published online by CBS Detroit on June 30, 2014).

[3] GM Ignition Compensation Claims Resolution Facility FINAL PROTOCOL for Compensation of Certain Death and Physical Injury Claims Pertaining to the GM Ignition Switch Recall, June 30, 2014, § VIII, RELEASE, OFFSETS AND LIENS, ¶ A. Release, at 13 (all emphasis in original).

[4] "Volkswagen used software" and "nitrogen oxide" and "recovered most of its share price and profits":  Bloomberg Businessweek television report broadcast on Saturday, March 31, 2018.

[5] Throughout the footnotes showing the sources behind this chronology, I will try to include the developments including other proceedings that were brought against VW on account of the pollution defeat devices, but which did not have as much impact on concealed evidence and secret settlements as the developments listed chronologically in the text at this point.

[6]  2013-2014 and the West Virginia University tests, 2014 and the California Air Resources Board or "CARB," and VW's September 3, 2015 admission:  Jack Ewing, "Inside VW's Campaign of Trickery" (New York Times Online, May 6, 2017), available at https://nyti.ms/2pg43ss.

September 2015   The first action was a class action.  It was consolidated into one multi-district litigation ("MDL"):  See, e.g., In re:  Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation, Order Granting Final Approval of 2.0 Liter TDI Consumer and Reseller Dealership Class Action Settlement, Doc. No. 2102, ¶ 1 at pp. 2-3, filed 10.25.16 (N.D. Cal. MDL No. 2672 CRB (JSC)) [hereinafter "10.25.16 Order"]; Id., Plaintiffs' Notice of Motion, Motion, and Memorandum, Doc. No. 1784, pp. 6-7, filed 08.26.16 [hereinafter "Plaintiffs' 08.26.16 Notice"]; Jack Ewing and Neal Boudette, "Business Day / As VW Pleads Guilty in U.S. Over Diesel Scandal, Trouble Looms in Europe" (New York Times Online, March 10, 2017), available at https://nyti.ms/2mtMneV; Jenny Gesley, "The Volkswagen Litigations" (Library of Congress blog "In Custodia Legis," October 27, 2016).

Also in September 2015 the U.S. Environmental Protection Agency began taking steps to request the U.S. Department of Justice to sue VW, and the Federal Trade Commission filed its own administrative complaint, all the while "California and other state attorneys general announced investigations or filed lawsuits, and many other domestic and foreign government entities launched criminal and civil investigations of Volkswagen and related individuals and entities around the world."

On February 22, 2016 the plaintiffs filed "a 719-page Consolidated Consumer Class Action Complaint" in their MDL against VW:  Plaintiffs' 08.26.16 Notice at 6.

[7] In the Summer of 2016:  Ten States file "environmental lawsuits" against VW on account of VW's "defeat device" software in 3.0 liter diesel engines in certain makes and models of VW cars.  See, e.g., "Volkswagen to Pay Over $157m to Settle Emissions Claims by 10 States" (Associated Press copyrighted story published in The Boston Globe on March 31, 2017); Press Release, New York Attorney General, A.G. Schneiderman Announces Volkswagen to Pay New York $32.5 Million -- Marking First-Ever NY State Environmental Enforcement Penalty Against an Automaker for Emissions Violations (March 30, 2017) (describing the lawsuits ultimately joined by 10 States as "the environmental lawsuits").

June, 2016:   New York Attorney General March 30, 2017 Press Release; Associated Press March 31, 2017 report.

[8] Would each be forced to make their own best guess:   See the 10.25.16 Order, for example.

In January, 2017:  Criminal charges are brought against six Volkswagen executives as a result of the diesel defeat devices.  On the same day that the charges are brought against the six individuals, Volkswagen the corporation pled guilty "to charges of conspiracy to commit wire fraud and to violate the Clean Air Act, customs violations and obstruction of justice."  VW agreed to pay $4.3 Billion "in criminal and civil penalties" as a result of the federal government's "investigation" into VW's diesel defeat devices.  "It was the first time the company has pleaded guilty to criminal conduct in any court in the world," a company spokesperson reportedly said.  It is later revealed that VW's guilty plea and agreement to pay $4.3 Billion in penalties to U.S. authorities was based on an internal investigation VW performed after retaining a law firm to perform the investigation, and German authorities reportedly questioned "the credibility of the company's efforts to uncover wrongdoing in its ranks."  For  January, 2017  Criminal charges are brought:  See Nick Carey and David Shepardson, "Volkswagen Pleads Guilty in U.S. Court in Diesel Emissions Scandal" (Reuters, March 10, 2017); Hiroko Tabuchi, Jack Ewing, and Matt Apuzzo, "Business Day / 6 Volkswagen Executives Charged as Company Pleads Guilty in Emissions Case" (New York Times Online, January 11, 2017), available at https://nyti.ms/2jwcePe.

For it is later revealed: See Jack Ewing and Bill Vlasic, "Business Day / German Authorities Raid U.S. Law Firm Leading Volkswagen's Emissions Inquiry" (New York Times Online, March 16, 2017), available at https://nyti.ms/2m6ChC1.

In March, 2017:  VW agrees to pay $157 Million to a group of 10 states to settle the "environmental lawsuits" filed against VW in the Summer of 2016.  These lawsuits were filed by the 10 states over defeat device software installed by VW in certain vehicles with 3.0 liter diesel engines.  Associated Press March 31, 2017 report; New York Attorney General March 30, 2017 Press Release.  VW's settlement agreement with the 10 states is Exhibit 1, Doc. No. 3114-1, filed on March 30, 2017 in the VW defeat device MDL in the Northern District of California.

[9] See, e.g., Matthew Goldstein, Wells Fargo Pays $1 Billion to Federal Regulators, New York Times Online, April 20, 2018, available at https://www.nytimes.com/2018/04/20/business/wells-fargo-cfpb-penalty-regulators.html?action=click&module=RelatedCoverage&pgtype=Article&region=Footer; Donna Borak, Wells Fargo Fined $1 Billion for Insurance and Mortgage Abuses, CNN Money, April 20, 2018; Allison Zieve, Wells Fargo Fined $1 Billion for Insurance and Mortgage Abuses, Public Citizen / Consumer Law & Policy Blog, April 20, 2018 (linking to the CNN Money report immediately above).

[10] See, e.g., Jeff Sovern, What Are We to Make of the CFPB's Billion Dollar Wells Fine?, Public Citizen / Consumer Law & Policy Blog, April 20, 2018.

[11] Shareholders:   See Stacy Cowley, Wells Fargo Agrees to Settle With Shareholders for $480 Million, New York Times Online, May 4, 2018, available at https://www.nytimes.com/2018/05/04/business/wells-fargo-shareholder-suit-phony-accounts.html?action=click&module=RelatedCoverage&pgtype=Article&region=Footer.

[12] Investors:  See James F. Peltz, Business / Wells Fargo Agrees to Pay $480 Million to Settle Securities-Fraud Lawsuit Over Fake Accounts, Los Angeles Times Online, May 4, 2018.

[13] Jackie Wattles, Wells Fargo Says Hundreds of Customers Lost Homes After Computer Glitch, CNN Money, August 5, 2018, available at https://money.cnn.com/2018/08/04/news/companies/wells-fargo-mortgage-modification/index.html.

[14] See, e.g., Bloomberg Businessweek (television) report broadcast on Saturday, March 31, 2018; Nick Carey and David Shepardson, March 10, 2017 Reuters Report; Jack Ewing, May 6, 2017 New York Times report; Jack Ewing and Neal E. Boudette, March 10, 2017 New York Times report; Hiroko Tabuchi, Jack Ewing, and Matt Apuzzo, January 11, 2017 New York Times report; Bill Vlasic, April 21, 2017 New York Times Report; Associated Press March 31, 2017 report.

For comparison purposes:  These comparison figures were reported by Jack Ewing in his May 6, 2017 New York Times reporting.

 

NEXT:  THE STAGGERING GENERAL MOTORS "IGNITION DEFECT" MDL CLAIMS.

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

 

PREDICATE TO MULTI-DISTRICT LITIGATION, GENERAL MOTORS, AND VOLKSWAGEN.

This is the first installment of a series of articles taking a look at the recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  This installment sets the background and describes how MDLs came to be, how they are used by the courts, the lawyers and the parties, their clients especially to conceal documents, testimony, and information from the public.

In future installments in this series, we will take a look first at the General Motors "ignition defect" MDL, and then at the Volkswagen "pollution defeat device" MDL.  Our special focus will be trained on the secrecy involved in these huge lawsuits, secrecy that is built into such lawsuits as an integral part of them.  To a great extent secrecy is a major reason such lawsuits exist in the first place.

 

Too Big to Sue:  GM and VW.  

General Motors and Volkswagen may be too big to sue.  The "new" General Motors has recently been outfitted with subsidies from the federal government.  As for Volkswagen, in his work on Capital in the modern world Thomas Piketty pointed out almost as an afterthought that Volkswagen is "the leading automobile manufacturer in Europe and the world."^[1]

            In recent years, a large number of different lawsuits against GM and VW were all put into one large lawsuit for GM, and a separate large lawsuit for VW, called "multi-district litigations" or MDLs.  Multi-district litigation requires explanation.  MDLs were originally authorized in order to enable courts and judges to resolve certain civil disputes.  Multi-district Litigation is obviously a ready-made vessel for catastrophe claims.

            As time has passed in the interim, MDLs may have also been used in ways that unnecessarily ignore the presumption of public access to court files.  Even at its best, multi-district litigation is like seeing through a glass darkly.  "[E]ven the final results can be opaque to outsiders."^[2]

            The explanation given here is a brief description of a complex subject.  In simple terms, an MDL is one place for all lawsuits on the same subject.  An MDL is ordered where many similar lawsuits have been filed against the same defendant or group of defendants in multiple states and courts.  The rationale behind ordering an MDL is that judicial economy and consistent results may be achieved by having one court consider and determine various pretrial motions and matters.

            However, it is clear that the defendants' interests dominate when an MDL is ordered.  It is the parties that are sued in these large cases that avoid inconsistent results, not so much the people who sue them and are understandably concerned with the outcome only in their own case.  The defendants' litigation expenses in MDLs are greatly reduced from what the expenses would otherwise be to defend dozens or even hundreds of lawsuits scattered across the country.  MDLs involve defendants who can be sued in "too many places."^[3]

            On the other hand, the people who are suing the defendants in these large MDLs suddenly have been saddled with expenses they did not necessarily anticipate that are required to prosecute any large lawsuit, or at least their lawyers have been saddled with these expenses to the extent that they cannot or do not pass them on to their clients.

            The courts for their part are reluctant to adjudicate mass disputes.  This reluctance has not yet stopped the disputes themselves.  The mass disputes keep coming.  There is no limit on catastrophes.

THEY'RE all TOO BIG TO SUE IN MULTIDISTRICT LITIGATION, BUT THEY'RE THERE TO SETTLE.

Defendants and judges in particular are looking for alternatives to trial especially in the huge cases that are on the multi-district litigation docket.  They have been looking for alternatives to trying lawsuits for quite a long time, actually.  MDLs originated 50 years ago in response to a wave of antitrust lawsuits against electrical equipment manufacturers.  Clearly in response to litigation over natural and man-made disasters, the original concept of multi-district litigation was to combine many lawsuits into one huge lawsuit for "pretrial proceedings."   The pretrial discovery in common in these huge cases basically inquires into what evidence the various parties possess.  The discovery can then at least theoretically be conducted in one case, the MDL, on an economical, nationwide basis.^[4]

         For purposes of concealed evidence and secret settlements, it is important to know that the MDL did not exist before judges and lawyers invented it.  Legislators did not hold hearings on it, academics did not write about it very much at the time, and no Rules Committee in any jurisdiction has ever attempted to write Rules to govern it.  Large corporations accused of nationwide wrongs and their lawyers, many of whom keep popping up from jurisdiction to jurisdiction across the nation to defend the same defendants, were left free to write their own rules with the agreement of lawyers from smaller law firms with individual clients who were allegedly the victims in these cases.

        The Federal Judicial Center has tried to fill the void with a manual written by judges for other judges and for lawyers, the Manual for Complex Litigation, Fourth, but as we shall see, they do not even follow their own model secrecy orders.

         Regardless of its origins, the MDL today makes it hard to sue large defendants.  The cases that end up in MDLs today stand out first for the total number of MDLs they are put into.    Excluding the large numbers of specialized cases filed by prisoners and Social Security applicants, the number of MDLs has ballooned from about 16% of all federal court cases in 2002, to over 50% of the federal courts' dockets today.^[5]

        As of March, 2017, some 233 MDLs were pending in the federal courts.  The legal standard for all these MDLs is the same.  Established by federal statute, an MDL can be made from active civil cases that contain "one or more common questions of fact" and have been filed in different federal judicial districts.  According to the federal statute that authorizes MDLs -- but which does not do anything else besides authorize them, such as declare the rules that MDLs should go by -- cases like these can be vacuumed up, so to speak, into one big lawsuit called an MDL "for coordinated or consolidated pretrial proceedings[.]"^[6]  Limiting MDLs to "pretrial proceedings" is telling in ways that the authors of the statutory language probably never intended.

         It bears repeating that no rules have been written specifically to govern MDLs.  MDL procedures are proposed by the parties, especially by the larger parties that naturally drive the MDL.  The proposals of these larger parties are adopted with some regularity by mutual agreement with the other parties in the MDL.  It has been said that the "creation" of an MDL under the federal statute is the only part of an MDL that is not based on consent of the parties.^[7]

 

End of the first installment, the Predicate to MDLs.  NEXT:  GENERAL MOTORS AND VOLKSWAGEN MULTI-DISTRICT LITIGATION:  WHY, AND WHAT THEY HAVE IN COMMON.

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

 

[1]  Thomas Piketty, Capital in the Twenty-First Century, trans. Arthur Goldhammer (Cambridge, MA and London:  Belknap Press of Harvard University Press, 2014), 143.

 

 

[2] E.g., Abbe R. Gluck, "Unorthodox Civil Procedure:  Modern Multidistrict Litigation's Place in the Textbook Understandings of Procedure," 165 U. Pa. L. Rev. 1669, 1692-93 (2017).  See Alexandra D. Lahav, "A Primer on Bellwether Trials," at 7 n.20 (Essay, Aug. 4, 2017), Rev. Litig. 37 (forthcoming 2017), available at SSRN:  https: //ssrn.com/abstract=3013402  (combining mediations and tactics such as in bellwether trials in MDLs, the problem is that such procedures are not public and lack many benefits of trials).

 

 

[3] Abbe R. Gluck, "Unorthodox Civil Procedure," 165 U. Pa. L. Rev. at 1682 (emphasis in original).  See in addition the language of Section 1407 itself, the MDL referral statute found at 28 U.S.C.A. § 1407; Abbe R. Gluck, "Unorthodox Civil Procedure," 165 U. Pa. L. Rev. at 1698.

 

 

[4] MDLs began with a raft of antitrust lawsuits against electrical equipment manufacturers:   Stephen B. Burbank, "The MDL Court and Case Management in Historical Perspective" at 1, 2 (April 28, 2017 Paper submitted to GWU Conference titled "Multi-district Litigation Roundtable" for an April 28, 2017 Panel Discussion on "Case Management Strategies by Transferee Judges"), available at https://www.law.gwu.edu/sites/www.law.gwu.edu/files/downloads/MDL.GWU.pdf; Abbe R. Gluck, "Unorthodox Civil Procedure" 1671-72.

          The original concept was common discovery on an economical, nationwide basis:   Jay Tidmarsh, "The MDL as De Facto Opt-In Class Action" at 1, 6 (Undated paper submitted to George Washington University Law School. Conference titled "Multi-district Litigation Roundtable" for an April 27, 2017 Panel Discussion on "MDL Panel Decision Making"), available at https://www.law.gwu.edu/sites/www.law.gwu.edu/files/downloads/Tidmarsh-MDL-Paper.pdf.

 

 

[5] MDLs are one such alternative:  Jotwell; "The Settler-in-Chief," by Jay Tidmarsh reviewing Adam Zimmerman, "Presidential Settlements," 163 U. Pa. L. Rev. ___ (forthcoming 2015), available at SSRN, https://courtslaw.jotwell.com/the-settler-in-chief/.

            From 16% in 2002 to over 50% now:  See, e.g., Elizabeth Chamblee Burch, "Monopolies in Multidistrict Litigation," 70 Vand. L. Rev. 67, 72 (2017); John Rabiej, "Two Proposals to Improve How Courts Manage 'Mega-MDLs,'" at 4 (Undated Essay submitted to GWU Conference titled "Multi-district Litigation Roundtable" for an April 28, 2017 Panel Discussion on "Alternatives to MDL Practice"), available at https://www.law.gwu.edu/sites/www.law.gwu.edu/files/downloads/rabiej.mdlpaper.pdf.  Mr. Rabiej defined "mega-MDLs" in his essay as those with 900 cases or more.

 

[6] 233 pending MDLs in March, 2017:  Abbe Gluck, "Unorthodox Civil Procedure," 165 U. Pa. L. Rev. at 1679.

            The statute:  28 USCA § 1407.

[7] No Rules specifically written for MDLs:  Abbe R. Gluck, "Unorthodox Civil Procedure," 165 U. Pa. L. Rev. at 1675, 1688; see John Rabiej, "Two Proposals to Improve How Courts Manage 'Mega-MDLs,'" at 1.

            Has been said "creation" of MDL only aspect of MDLs that is not based on consent:  Abbe R. Gluck, "Unorthodox Civil Procedure," 165 U. Pa. L. Rev. at 1700.  Cf. Jay Tidmarsh, "The MDL as De Facto Opt-In Class Action" at 5 (comparing role of consent in opt-in class actions with MDLs).

            Overall:  See Elizabeth Chamblee Burch and Margaret S. Williams, "Repeat Players in Multidistrict Litigation:  The Social Network," 102 Cornell L. Rev. 1445, 1455-59 (2017).

 

End of the first installment, the Predicate to MDLs.  NEXT:  GENERAL MOTORS AND VOLKSWAGEN MULTI-DISTRICT LITIGATION:  WHY, AND WHAT THEY HAVE IN COMMON.

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

 

 

 

 

PRESUMPTION OF PUBLIC ACCESS TO COURT FILES: ALIVE IN 2019?

There is a strong presumption of public access to Court files.  The origins of the presumption are both the common law and the First Amendment to the United States Constitution.[1]  The Constitutional presumption of public access to Court files is independent of the common law.[2]  This presumption is or should be at work in catastsrophe claims in particular, but nowhere does it face greater challenges.

            Both presumptions of public access to Court files, whether based upon the common law or upon the First Amendment, apply with particular strength in the case of judicial records.  For example, the presumption is very strong that judicial records relating to summary judgment should remain open and accessible to the public.  This is because these proceedings adjudicate the relative rights of the parties and, in the case of summary judgment proceedings in particular, often serve as substitutes for trials.[3] 

            The idea that the public pays for judicial proceedings is central to both presumptions of public access to the records of judicial proceedings.  "The parties are hereby advised that '[a]s an undertaking funded by the people of the United States, [this court's] decision will be publicly published to decide both the matter at hand, and also guide other entities on the law.'"[4]  To put it another way:

    The court is aware of the cost to the parties and in some ways the cost to the truth-finding process that comes with proceeding in an open forum.  But the public nature of [the] forum in which the parties have chosen to air their dispute and the manner of operation needed for the forum to maintain its legitimacy and integrity extract certain costs from the litigants that come before it.  But for very limited circumstances, the publicity of an adjudication is one of those costs.  The parties have not met the heavy burdens needed to permit this court to operate in secret.[5]

          Whether based on the common law or on the First Amendment, the presumption of public access to Court files is not absolute.[6]  "The presumption of public access may be rebutted."[7]

          Properly rebutting the presumption of public access may depend largely on whether a given case involves issues important to the public.  An example is a case presenting "information bearing on defects and safety concerns with products."[8]  Cases involving claims for damages allegedly caused by catastrophes and disasters, whether the disasters are natural or man-made, clearly contain within them issues important to the public.

          So do cases involving insurance coverage for natural and man-made disasters, because it has been held that many issues present in ordinary insurance cases, while not perhaps "garden-variety," involve "claims-handling" practices and often involve claims of insurance bad faith as well.  "Public importance" has effectively been equated with "the potential to impact concretely the legal rights of other carriers and/or insureds not before the court."[9]

          This is the overall standard that one court has applied to an insurance case to determine whether that case contains issues of such importance to the public, that the public should be allowed to know them and the documents, testimony, and information that relate to those issues.  The insurance carrier sought to seal and to keep a seal on its files and deposition testimony of its representatives.  The insured involved in the case manufactured and sold clothing that protected coal miners including their ability to breathe.  The insured sued its umbrella commercial CGL carrier in that case for alleged wrongful denial of coverage and bad-faith claims handling practices, among other things.

The District Court denied the insurance company's motion to seal, holding under the circumstances of that case as follows:

    Finally, the information plaintiff seeks to maintain under seal is of public importance to defendant, its fellow carriers, the underlying claimants with unresolved claims and future claimants. The parties' dispute encompasses numerous issues of public importance, including plaintiff's claims-handling role, what constitutes proper exhaustion, the burden of proving the judgments or settled claims fall within the grant of coverage, the trigger of coverage for each type of dust/substance exposure involved, whether general administrative expenses in coordinating a national defense may be apportioned and proportionally allocated as a form of ultimate net loss covered under the policy and so forth. Other carriers and all current and future claimants have a significant interest in knowing (1) the types of litigation and settlement practices that will be deemed to be acceptable and give rise to indemnification under the standard terms in the policy and (2) the range and type of evidence and information as well as the legal arguments and precedents that a court will consider and find important in resolving these disputes. These entities and individuals are members of the public and have the potential to have their rights affected by the resolution of the issues forming the parties' dispute. That interest cannot be summarily discounted in the name of protecting the plaintiff's ability to minimize its financial exposure from the debacle created by its past products.[10]

            The burden is on the party seeking to overcome the presumption of access to show the interests in secrecy at stake that arguably outweigh the presumption.  It has been held that showing "a clearly defined and serious injury" equals the showing of "good cause" needed to overcome the presumption.[11]  The burden is to show that disclosure will cause "a clearly defined and serious injury" and to show it with specificity.  The showing cannot succeed, it has been held, if it is "bereft of specific examples."[12]

            In general terms, the presumption of access is not ordinarily overcome regarding "information that is used by a party to shelter itself from additional liability and litigation[.]"[13]  In other words, the possibility or even likelihood that documents, testimony, and information revealed in one lawsuit may be shared with lawyers and parties in other lawsuits is not a good reason to conceal them from the public:

 With increasing frequency, defendants, as well as other insurers, are finding themselves embroiled in litigation over whether there is coverage for property damage as a result of environmental harm. The courts have emphatically held that a protective order cannot be issued simply because it may be detrimental to the movant in other lawsuits.[14]

 

[1] E.g., Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1066, 1070 (3d Cir. 1984); Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 559 (W.D. Pa. 2014).

[2] E.g., In re Cendant Corp. (Goldstein v. Forbes), 260 F.3d 183, 198 n.13 (3d Cir. 2001);  Republic of Philippines v. Westinghouse Elec. Corp., 949 F.2d 653, 659 (3d Cir. 1991) (dicta; Third Circuit's analysis in this case was expressly confined to the common law).

[3]  E.g., Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1135-36 (9th Cir. 2003); Rushford v. New Yorker Mag., 846 F.2d 249, 252 (4th Cir. 1998).

[4] Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., No. 09-290, 2013 WL 1336204, at *11 (W.D. Pa. March 29, 2013).  Accord, Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 587 (W.D. Pa. 2014).  Cf. Newman v. Graddick, 696 F.2d 796, 801 (11th Cir. 1986) ("In addition, open proceedings may be imperative if the public is to learn about the crucial legal issues that help shape modern society.  Informed public opinion is critical to effective self-governance.").

[5] Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 587 (W.D. Pa. 2014).

[6] E.g., Bank of America Nat'l Trust & Sav's Ass'n v. Hotel Rittenhouse Assoc's, 800 F.2d 339, 344 (3d Cir. 1986); Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 560 (W.D. Pa. 2014).

[7] In re Cendant (Goldstein v. Forbes), 260 F.3d 183, 194 (3d Cir. 2001).

[8] Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 561 (W.D. Pa. 2014).

[9] Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 566-67 (W.D. Pa. 2014) (emphasis added).                                                   

[10] Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 581 (W.D. Pa. 2014).

[11] E.g., Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1071 (3d Cir. 1984) (emphasis added); Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 560 (W.D. Pa. 2014).

[12] In re Cendant (Goldstein v. Forbes), 260 F.3d 183, 194 (3d Cir. 2001).

[13] Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1137 (9th Cir. 2003).  To the same effect, e.g. :  Wauchop v. Domino's Pizza, Inc., 138 F.R.D. 539, 547 (N.D. Ind. 1991) ("The risk—or in this case, the certainty—that the party receiving the discovery will share it with others does not alone constitute good cause for a protective order."); Nestle Foods Corp. v. Aetna Cas. & Sur. Co., 129 F.R.D. 483, 486 (D.N.J. 1990) (stating that "if the basis for defendants' motion is to prevent information from being disseminated to other potential litigants, then defendants' application [for a Rule 26(c) protective order] must fail").

[14] Nestle Foods Corp. v. Aetna Cas. & Sur. Co., 129 F.R.D. 483, 486 (D.N.J. 1990).

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PROPOSED ORDERS ONCE WERE GOOD ... AND CAN BE AGAIN continued.

Continued from Tuesday, January 8, 2019.

The idea behind the law is simple in this regard.  Every court so far as is known recognizes that before a judge can allow evidence to be concealed, the party asking to conceal that evidence should show good cause to conceal it.  Without a showing of good cause, concealment is not allowed during discovery of the evidence, or afterward.  Sometimes good cause is shown for concealing a part of the evidence, or displaying it publicly in a way that minimizes harm to someone if it were completely, nakedly exposed to public view.[1]

    This way of dealing with confidentiality or secrecy, however, requires the lawyers and their clients to clearly identify each piece of evidence that they want to conceal, document by document.  Or, in very large cases, the lawyers and their clients are required to clearly identify the categories or sets of information that they want to conceal, and show why.  That is what a showing of good cause has required in lawsuits in the United States, and it is what a showing of good cause should require in lawsuits now.

    The idea is that not a single piece of evidence should be left to concealment by chance, and judges should be enabled to review the claim to concealment and compare the claim to each piece or set of evidence to see if good cause has been shown to conceal it.

    This way of doing things can make it expensive and time-consuming to discover evidence unless the parties truly have good cause that they can show to a judge.  Many large businesses and wealthy individuals have an incentive to keep some or all of their dealings a secret.  This is an incentive that most other people do not have, or if they do have the incentive to conceal evidence, it is too expensive to contest all but a relative handful of evidence being concealed if they actually have to show good cause to keep evidence secret.

    Some say that it can even be expensive in very large cases to group evidence in categories and submit or contest good cause for keeping broad categories of secret evidence protected and concealed.

    The solution?  I suggest one right here, right now.  Enforce the law.

    The cure is close at hand.  It is for judges and lawyers to follow the law as it exists right now.  To say again, the law requires that good cause must be shown in order to keep information in court files secret.  Judges and lawyers should not be able to change the law by their agreements.  If they were required to follow the law instead, and show good cause for concealing evidence, then judges and lawyers would profit from the results.  So would the public.

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[1] See Federal Rule of Civil Procedure 26(c), which provides in part:

The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including one or more of the following:

(A) forbidding the disclosure or discovery;

(B) specifying terms, including time and place or the allocation of expenses, for the disclosure or discovery;

(C) prescribing a discovery method other than the one selected by the party seeking discovery;

(D) forbidding inquiry into certain matters, or limiting the scope of disclosure or discovery to certain matters;

(E) designating the persons who may be present while the discovery is conducted;

(F) requiring that a deposition be sealed and opened only on court order;

(G) requiring that a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a specified way; and

(H) requiring that the parties simultaneously file specified documents or information in sealed envelopes, to be opened as the court directs.

[Boldface added.]

HOW PROPOSED ORDERS USED TO BE, AND CAN BE AGAIN.

Continued from Claims and Issues Blog, Monday, January 7, 2019.

How proposed orders have worked in the past.  In all systems of justice in the United States, whether in the federal system or in any one of the State or other systems, judges have made rulings and lawyers have written proposed orders which are supposed to correctly reflect those rulings.  The lawyers send their proposed orders to the judge, who reviews them to see if they accurately reflect her rulings.  This historical model works when the ruling is already made by the judge and the proposed order is written to reflect the judge's ruling.

    The long-standing judicial system of lawyers writing proposed orders and sending them to the judge to sign, has always worked efficiently only if the judge made an earlier ruling that the proposed order is supposed to reflect.  The judge is then in a good position to review the proposed order and compare it to her earlier ruling.

    A system in which parties and their lawyers propose orders tends to break down whenever the proposed orders do not reflect the judge's ruling but instead reflect what the parties and their lawyers want.

    In the case of secrecy stipulations with proposed orders, judges are presented with a proposed order which turns their stipulation into a judge's ruling, as if by magic.  These are proposed orders mandating secrecy, concealing evidence and settlements without any mention of good cause for the concealment.

    Judges then often take a proposed secrecy order and sign it as it was written, just as in the case of People of California v. Wells Fargo.  Sometimes, as happened with the February Proposed Order in this case, a judge merely crosses out the word, "proposed," before signing the secrecy order.[1]

    That relatively new use of an old system of proposed orders written by lawyers and supposedly reviewed by judges now serves the purposes of secrecy in court and agency proceedings alike.  The public will generally not know what was actually done, or by whom.  The public will know only that some uncertain number of people were hurt.  It is unlikely that there will be an uproar or any public demands for change.  And the evidence will be kept as secret as possible or perhaps not even offered.  If no lawsuit is filed and no enforcement action is taken at all, then secret harmful conduct will be kept secret and will not stop.

    And people who might be able to avoid harm if they knew the full story, cannot take action to protect themselves because they do not know the harm that may await them.

 

[1] Stipulation and Protective Order entered and filed on February 2, 2016 in People v. Wells Fargo & Co., Case No. BC 580778 (Los Angeles County Superior Court).  See generally Dennis J. Wall, Lender Force-Placed Insurance Practices § 3.1, "Secrecy First, and Then Settle" (American Bar Association Publishing 2015).

 

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YOUR JUDGE IS SIGNALLING LIKELIHOOD OF SIGNING STIPULATED SECRECY ORDERS.

 Continued from article posted here on New Year's Day, 2019.

 

    It is important to note also that there is a pretty reliable sign that a judge is more likely than not to sign an umbrella secrecy order in any given case:  The judge adopts the secrecy order proposed by the parties and their lawyers in the case because the court's budget does not permit the hiring of all the people that it would take to review all the documents which the parties in a large case want to keep secret.  Signing an umbrella secrecy order minimizes any need to spend time and money reviewing each and every document or set of documents that one party or another wants the judge to mark "confidential."  Instead, the parties and their lawyers mark each document "confidential."  In some cases, an umbrella secrecy order totally eliminates the need to review documents for confidentiality purposes.

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"THE INFLICTION OF STIPULATIONS ON LITIGATION OF FACTS AND ON SETTLEMENTS"

PART TWO OF TWO PARTS COMPLETED WITH ALL FOOTNOTES REPRINTED HERE ON THURSDAY, NOVEMBER 29, 2018.

The following reprint from the book, Catastrophe Claims:  Insurance Coverage for Natural and Man-Made Disasters, is with the permission of Thomson Reuters West, the publisher, and Dennis J. Wall, the author of the reprinted selection.  This selection, Section 2:19 (2018, Thomson Reuters), is reprinted here with permission of Thomson Reuters.  Any further reproduction without the consent of the publisher is expressly prohibited.

Note:  Access to hyperlinked citations are restricted by Thomson Reuters West in this publication; subscription may be required by Thomson Reuters West to access the hyperlinked citations that appear below.

Continued from the end of Part One on Tuesday, November 27, 2018:

    In addition to the Ursomano case, there are as noted two other decisions which have been found to be on point at this time. In one of the two other available decisions which have been located on point in addition to Ursomano, a Federal Court in Oklahoma stayed an alleged lender force-placed insurance class action because the Court in Oklahoma was advised by the defendants that the defendants were negotiating settlement with the parties in the Florida case. On the strength of that representation alone, and without requiring any proof or a written order or even a briefing on the res judicata affirmative defense, the Federal Court in Oklahoma swiftly entered its order staying the proceedings in Utah unless the plaintiffs in Oklahoma could prove that their claims are not barred by the Fladell proceedings in Florida, proceedings to which the Oklahoma plaintiffs are not parties. The Oklahoma Federal Court's decision is in the case of Ali v. Wells Fargo Bank, N.A.¹⁷

    In the other case which has been located as being on point here, a Federal Court in the State of Washington conditionally enjoined a foreclosure proceeding and refused to immediately dismiss an alleged LFPI class action. However, the Federal Court in Washington State required the plaintiffs in that case, none of whom it seems are plaintiffs in the Fladell case in Florida, to prove that their claims are not barred by the settlement to which they are not parties. The Federal Court's decision in Washington State is in the case of Keller v. Wells Fargo Bank, N.A.¹⁸

    Beyond the three cases which have just been discussed, each decision coming from a different Federal Court and a different jurisdiction, Ursomano from California, Ali from Oklahoma, and Keller from Washington State, there are many other lender force-placed insurance class action cases and many other types of cases which are pending and others which are likely to be filed in the future. Some of those class actions will involve the same defendants as in cases which have settled and in which a “class” has been “certified for settlement purposes,” as in the Fladell case. Orders in those cases will be used in defense in other cases, whether or not they contain expressions of res judicata, preclusive effect as does the stipulated settlement order in Fladell.

    Although the Fladell case was ultimately settled by a stipulated agreement which the Court approved in that case, it is interesting to note the several objections which the Fladell defendants raised to class certification when they were against it and before they were for it.

    The Court never addressed any of the defendants' objections, and it did not adjudicate them, either. What follows is taken mainly from the defendants' own Response in Opposition to Plaintiff's' Motion for Class Certification in Fladell, which the defendants filed in December 2013.¹⁹

    In the Fladell case, the defendants pointed out in their opposition that the plaintiffs were seeking limited certification. According to the Fladell defendants, the plaintiffs requested certification of a national class on three Federal claims but not of their Florida law claims, for which the plaintiffs requested certification “of a Florida-only class.”²⁰ That statement obviously contradicts the position taken afterward by the same defendants in other legal proceedings, that the Fladell class settlement bars all lender force-placed insurance claims in all other cases in the nation.

    In approving the Fladell parties' settlement agreement, the parties and the Federal Judge said that the Florida class action settlement complied with Federal Rules 23(a) and 23(b). Rule 23 requires among other things that the proposed class action procedure be a superior means of adjudicating the alleged claims and that the current named plaintiffs are adequate to represent the alleged classes in pursuing those claims.

    When the defendants opposed the class certification motion, and before they were in favor of it, they objected that the proposed class action was an inferior means by which to adjudicate the plaintiffs' claims:

Plaintiffs are not adequately representing borrowers in every state other than Florida, and this action is an inferior way for them to litigate.²¹

    Of even greater significance here, however, the defendants objected to certification in Fladell because of the potential danger that other Courts might preclude the potential claims of other people in other lawsuits who did not participate in the Fladell settlement agreement:

Plaintiffs seek national certification only on federal-law claims, which are, at best, highly dubious. If those claims are certified but fail on the merits, res judicata may prevent borrowers residing in 49 other states from bringing the more substantial state-law claims that Plaintiffs assert only for the proposed class of Florida borrowers. This is not a superior method of adjudication, nor adequate representation of those absent borrowers.²²

    In this same vein, it bears repeating that, as the Fladell defendants pointed out, the Fladell plaintiffs requested certification “of a Florida-only class” of Florida claims, and those Florida claims were four in number: “contract, implied covenant, unjust enrichment, and fiduciary duty.”²³ Yet, the defendants argue now, in other cases, that they tried to settle and the Federal Court purportedly approved their settlement in the Fladell case in Florida of every claim in every State in the nation involving also allegations of “alleged tortious interference,” alleged compliance with “disclosure” laws, “the receipt or non-disclosure of any benefit,” the making or failure to make any “communications” concerning LFPI insurance anywhere, and last but not least, “the regulatory approval or non-approval of any insurance policy, or the premium thereon, placed or charged by the Wells Fargo Defendants.”²⁴

    It is noteworthy but perhaps not entirely surprising that District Judges often make their secrecy decisions in unreported Orders. Being unreported, they are much harder to find than reported decisions. In one such secrecy Order, captioned “ORDER RE: ADMINISTRATIVE MOTIONS TO SEAL,”²⁵ a District Court treated a motion for class certification as a nondispositive motion even though disposition of the motion for class certification was at the heart of the plaintiffs' collective claims. The parties once again stipulated to secrecy, in this instance, to request that exhibits filed in connection with the motion for class certification should be kept secret. Applying an explicitly lesser standard for sealing documents and parts of documents when they are exhibits concerning “nondispositive” motions as opposed to dispositive motions, the District Court entered its Order granting the parties' stipulation to “file all documents sought to be sealed in redacted form consistent with their joint submission.”²⁶ In other words, the holding that a motion to certify a class in a case in which the reason for the lawsuit's existence lies in class certification -- and few if any putative class action lawsuits fit into any other category -- drove the decision to keep documents secret which probably and almost certainly would support the plaintiffs' substantive claims in the case.

    In sum, stipulations have recently taken over much of litigation both in lieu of discovery which keep the evidence secret, and in settlement stipulations in which parties try to provide by agreement what they could not obtain by litigation. The most glaring example of the latter conduct is in the recent attempts by defendants to write and propose settlement stipulations for class actions that attempt to dispense with the requirements of class actions, and which will stand as res judicata determinations of those requirements if the same allegations are raised in other cases against the defendants. The effects of all of these stipulations remain to be worked out in each individual case, but until then, practitioners and their clients should be aware of the possibilities which they may face in presenting their catastrophic claims. In particular, these stipulations have not confronted the public policy sometimes embodied in statutes tending to prohibit public harm caused by secret agreements.²⁷

© 2018 Thomson Reuters. No Claim to Orig. U.S. Govt. Works.

Footnotes

1

Houston Cas. Co. v. Charter Oak Fire Ins. Co., No. 1:16-cv-535-LJO-EPG, 2017 WL 35500 at *1 (E.D. Cal. January 3, 2017).

2

Cabrera v. Government Emp's Ins. Co., 2014 WL 2999206 (S.D. Fla. July 3, 2014) (Seltzer, Chief U.S.M.J.).

3

Cabrera v. Government Emp's Ins. Co., 2014 WL 2999206 *9 (S.D. Fla. July 3, 2014) (Seltzer, Chief U.S.M.J.).

4

See Cabrera v. Government Emp's Ins. Co., 2014 WL 2999206 *9 (S.D. Fla. July 3, 2014) (Seltzer, Chief U.S.M.J.).

5

See generally Dennis J. Wall, “Conditional and Other ‘Nonspecific’ Objections to Discovery Are No Objections at All in an Insurance (or in Any Other Case),” 33 Ins. Lit. Rptr. 437 (2011).

6

Floyd Norris, “High & Low Finance / Failed Bank's Broken Vows Mean Little” p. B1, col. 1 (New York Times Nat'l ed., “Business Day” Section, Friday, September 19, 2014). The order of the Federal Court in North Carolina can be found in FDIC v. Rippy, Order of September 10, 2014 granting defendants' summary judgment motion, Dkt. No. 124 (E.D.N.C. Case No. 7-11-cv-00165-BO).

7

FDIC v. Rippy, Dkt. No. 124, Order of September 10, 2014 granting defendants’ summary judgment motion, at p. 3 (E.D.N.C. Case No. 7-11-cv-00165-BO).

8

FDIC v. Rippy, Dkt. No. 71, May 21, 2013 Amended Stipulated Protected Order and Non-Waiver Agreement, at p. 2 (E.D.N.C. Case No. 7-11-cv-00165-BO).

9

Fed. R. Civ. P. 26.

10

In addition to the clear language of Rule 26, the Advisory Committee Notes to the present enactment of Rule 26(c) in 1970, provide:

The new reference to trade secrets and other confidential commercial information reflects existing law. The courts have not given trade secrets automatic and complete immunity against disclosure, but have in each case weighed their claim to privacy against the need for disclosure.

    An alternative to secrecy stipulations pursued in the cases, is to settle the class action case and provide for secrecy in the settlement agreement which the Court is then requested to approve. This method of obtaining secrecy is at work in the class action lawsuit filed against the high-profile corporations of Silicon Valley who allegedly conspired to limit their workers' “mobility and incomes.” David Streitfeld, “New Accord is Expected in Hiring Ban,” p. B1, col. 5 (New York Times Nat'l ed., “Business Day” Section, Thursday, January 15, 2015). As explained in this Times report, a second settlement agreement was reached in the case and presented to the Court for approval “[t]o head off a trial and the exposure of reams of incriminating emails.” The Federal District Judge already rejected one settlement because the amount was too low to be “‘within the range of reasonableness,'” i.e., the original settlement amount presented for the Court's approval was unreasonably low. Although the second attempt at a settlement agreement contains more money, “[t]he settlement money is pocket change to the companies, which include some of the world's wealthiest. If they let the case go to trial, however, it might corrode their image as forward-thinking, worker-friendly benevolent empires.” David Streitfeld, “New Accord is Expected in Hiring Ban,” p. B1, col. 5 (New York Times Nat'l ed., “Business Day” Section, Thursday, January 15, 2015).

11

Fladell, et al., Plaintiffs v. Wells Fargo Bank, N.A., et al., Defendants (S.D. Fla. Case No. 13-cv-60721), app. dismissed (unreported) (11th Cir. August 4, 2015).

12

Ursomano v. Wells Fargo Bank, N.A., No. C-13-4381, 2014 WL 644340 *1-*2 (N.D. Cal. February 19, 2014).

13

Ursomano v. Wells Fargo Bank, N.A., No. C-13-4381, 2014 WL 644340 *2 (N.D. Cal. February 19, 2014).

14

Ursomano v. Wells Fargo Bank, N.A., No. C-13-4381, 2014 WL 644340 *2 (N.D. Cal. February 19, 2014). [Emphasis added.]

15

Fladell v. Wells Fargo Bank, N.A., No. 13-cv-60721-FAM, 2014 WL 5488167 (S.D. Fla. October 29, 2014), app. dismissed (unreported) (11th Cir. August 4, 2015). The appeal to the Eleventh Circuit Court of Appeals was filed in Fladell after several plaintiffs objected to the attorney's fees award in that case of $19 Million “payable pursuant to the terms of the settlement agreement.”

16

Ursomano v. Wells Fargo Bank, N.A., No. C-13-4381, Dkt. No. 74 filed on Nov. 12, 2014 (N.D. Cal. Case No. C-13-4381).

17

Ali v. Wells Fargo Bank, N.A., No. CIV-13-876-D, 2014 WL 819385, at *2 (W.D. Okla. March 3, 2014) (granting defendants' motion to stay lender force-placed insurance claims of plaintiffs who were not parties in the Florida case, unless those plaintiffs could prove that their claims were not settled in Fladell). The Ali case was distinguished when the same issue was raised, with a different result, in the case of Valdez v. Saxon Mort. Serv's, Inc., No. 2:14-cv-03595-CAS(MANx), 2015 WL 93387, at *2 (C.D. Cal. January 6, 2015): “Here, in contrast, the Lee settlement [the asserted fact of which was relied on in Ali] will not resolve all of plaintiffs' claims; rather, as moving defendants argue, the Lee settlement ‘if approved, will resolve claims against Ocwen [] and Deutsche Bank [] ….’ Mot. Stay at 1.”]

18

See, e.g., Keller v. Wells Fargo Bank, N.A., No. C14-422, 2014 WL 6684895 *2-*3 (W.D. Wash. November 25, 2014) (“limited injunction” ultimately granted against defendants foreclosing on plaintiffs' home so as to allow the plaintiffs to prove that their case is not included in the Fladell settlement).

19

Fladell v. Wells Fargo Bank, N.A., No. 13-cv-60721-FAM, Dkt. No. 108 [hereinafter “DE 108”], filed December, 2013 (S.D. Fla. Case No. 13-cv-60721-FAM), app. dismissed (unreported) (11th Cir. August 4, 2015).

20

DE 108 at page 1.

21

DE 108 at page 19.

22

DE 108 at pages 2-3. [Emphasis added.]

23

DE 108 at page 1.

24

Fladell v. Wells Fargo Bank, N.A., 2014 WL 5488167 *7 (S.D. Fla. Oct. 29, 2014), app. dismissed (unreported)(11th Cir. August 4, 2015).

25

Stitt v. Citibank, N.A., ORDER RE: ADMINISTRATIVE MOTIONS TO SEAL, Dkt. No. 152 Filed December 17, 2015 (N.D. Cal. No. 4:12-cv-032892-YGR).

26

Stitt v. Citibank, N.A., ORDER RE: ADMINISTRATIVE MOTIONS TO SEAL, Dkt. No. 152, at p.2, Filed December 17, 2015 (N.D. Cal. No. 4:12-cv-032892-YGR).

27

See, e.g., 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 3:107, “Settlement of third-party bad faith claims: Confidentiality (protected) or concealment (void)” (3d Edition and 2017 Supplement, Thomson Reuters West); 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 9:28, “Settlement of first party bad faith claims: Confidentiality (protected) or concealment (void)” (3d Edition and 2017 Supplement, Thomson Reuters West), examining among other things, Florida Statute Section 69.081.

End of Document

© 2018 Thomson Reuters. No claim to original U.S. Government Works

 

The above reprint from the book, Catastrophe Claims:  Insurance Coverage for Natural and Man-Made Disasters, is with the permission of Thomson Reuters West, the publisher, and Dennis J. Wall, the author.  This selection, Section 2:19 (2018, Thomson Reuters), is reprinted here in its entirety with permission of Thomson Reuters.  Any further reproduction without the consent of the publisher is expressly prohibited.

 

QUIET IN THE COURTS! GOOD FAITH CLAIMS FILES.

There are many insurance bad-faith claims.

Most of them settle.

Virtually all insurance bad-faith cases in litigation include fights over production of claims files.  If you are the claims representative for the insurance company who handled the underlying case against the policyholder, or who handled the claim of the policyholder for coverage, then it is your file that supposedly show your company's risk of bad-faith exposure.

Some cases are likely to lead to large verdicts against your company for bad faith.  Most, probably not.  Consider an alternative.

Your claims handling shows your good faith.  Your claims file is good faith on display.

Consider an alternative to concealing evidence and making secret settlements.

When you have handled this claim like so many other claims in good faith, your claims file shows your good faith. 

Maybe not all fights over production of your claims file are necessary.

Maybe not all bad-faith claims need to be settled either.

Consider putting good faith on display.

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"INJURY IN FACT": WHAT HAPPENS TO BAD FAITH STATUTES?

New Section 9:14.50 contains only a part of the new material in the combined 661 pages of text excluding Tables in the 2018 Supplements to Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Third Edition Thomson Reuters), in addition to sections of new material including on Force-Placed Insurance, Defenses in Force-Placed Insurance cases including the Filed Rate Doctrine, the Status of Social Security, and Settlement of First Party Bad Faith Claims including secrecy agreements and sealing orders, among others.

Section 9:14.50 is titled, "'Injury in Fact':  What Happens to Bad Faith Statutes" when courts require allegations and proof of what they call "injury in fact" in the litigation of bad-faith claims?

I want to give you a link to the new Section but the publisher will not let me right now.  I will ask for Thomson Reuter's copyright permission and if they agree, I will provide you the link in a following post here and on Claims and Issues Blog!

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

SOMETIMES, BAD FAITH CLAIMS COME UNDER OTHER NAMES.

In Lowrey v. Oregon Mut. Ins. Co., No. 2:17-cv-00831-RSL, 2017 WL 3769424 (W.D. Wash. Order Dated August 22, 2017, Filed August 29, 2017), the Court signed a Stipulated Protective Order that will make it easier to conceal evidence and keep any future settlement a secret.  So secret that the Stipulated Protective Order does not say what kind of case this is, or even what the parties have alleged.

Here is what this case is about.  Here is what the parties have alleged, so far.  The Stipulated Protective Order intentionally or otherwise does not even hint at these things.

The plaintiff filed a complaint in the U.S. District Court for the Western District of Washington in May, 2017.  Her complaint was based on the defendant's refusal to hire her because she changed her gender from male to female.

The plaintiff alleged that she changed her gender after some 20 years of handling insurance claims including supervising others in the handling of insurance claims.  She alleged that after she told the defendant's interviewers that she, the plaintiff, had changed her gender, the defendant essentially discriminated against her when the defendant interviewed her for an open claims-adjuster position but refused to hire her.

Apparently, one of the defendant's stated reasons for refusing to hire her as a claims adjuster was that she did not have the experience that the defendant was looking for in a claims adjuster.

She alleged three claims:  sex discrimination, violation of a Washington statute protecting gender identification, and "retaliation" in connection with the violation of the Washington statute.  She sought damages including lost wages and benefits, punitive damages, and attorney's fees.  See Janet Lowrey v. Oregon Mut. Ins. Co., DE 1, Complaint, Filed May 26, 2017 (W.D. Wash. No. 2:17-cv-00831-RSL).  (NOTE TO MY READERS:  The blogging platform for this article, Typepad, does not permit access to the pdf's from the Court file that are pinpoint referenced in this article.)

Oregon Mutual Insurance Company filed its answer on June 30, 2017.  It carefully denied most of the plaintiff's allegations by reference to each numbered paragraph of the complaint.  It further listed 13 paragraphs of affirmative defenses also essentially denying the plaintiff's allegations.  Id., DE 7, Answer of Oregon Mutual Insurance Co., Filed June 30, 2017.  

The case has been set for Trial beginning on December 3, 2018.  It is expected to last 5 days.  Id., DE 10, Order Entered July 18, 2017.

What a lot of things the Stipulated Protective Order does not mention.  Many things will be mentioned here about this case, however, as this case proceeds through discovery.  Everything revealed here will be what becomes publicly available from the Court file.  With this article, we have already begun.

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UMBRELLA PROTECTIVE ORDERS IN INSURANCE BAD FAITH CASES.

Umbrella protective orders are often proposed and entered in insurance bad faith cases.  They forestall discovery in advance, and in the usual case they often act as a bar to disclosing information that might be damaging to the insurance company. 

Umbrella protective orders are discussed at length by Dennis J. Wall, "Attorneys Decide, Judges Sign Off:  Protecting and Sealing Concealed Evidence Including in Insurance Coverage and Bad Faith Cases," ©2017 Matthew Bender & Company, a member of LexisNexis, in New Appleman on Insurance / Critical Issues in Insurance Law, pp. 1-88 (Spring 2017).

Dennis Wall is at work on a book about how concealed evidence and secret settlements change our lives.

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.