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California Law Would Limit Confidentiality and Protective Orders

May 2, 2022

In early April, the California Senate Judiciary Committee voted to approve Senate Bill 1149, introduced in February by state senator Connie M. Leyva (D-Chino), termed the “Public Right to Know Act of 2022.” SB 1149 bill would add Chapter 3.8 to the California Code of Civil Procedure to generally prohibit confidentiality provisions in settlement agreements in California state court lawsuits or arbitrations involving public health issues due to a:

“Defective product or environmental condition that poses a danger to health or safety.”

These are in turn defined as a “…product or condition that has caused, or is likely to cause, significant or substantial bodily injury or illness, or death.”

Exceptions would exist for information regarding the amount of a settlement, trade secrets, and a Plaintiff’s identity, medical information, and immigration status. No particular evidentiary showing by the Plaintiff is required in order to establish that a product or environmental condition is “dangerous” or presents a “public health or safety risk.” Whether that means that only an unverified Complaint to this effect would suffice is not addressed in the text of the bill. The bill also creates a right to challenge a confidentiality provision as an intervenor, and/or through a separate lawsuit for declaratory relief by members of the media or “anyone who might be affected by information being kept confidential.”

The bill is supported by Consumer Reports and Public Justice and opposed by a large number of business organizations, including AdvaMed, Biocom California, California Life Sciences, and the California Chamber of Commerce. Some of the examples used in the preamble reference high-profile pharmaceutical and medical product liability litigation and the Berkeley balcony collapse tragedy. The bill’s proponents maintain that confidentiality and secrecy regarding information in these types of cases have harmed the public.

Bill Progress

The bill was amended in the State Senate on April 7 to add language allowing standing to an intervenor-party or a third party whose documents are being subpoenaed to file a motion for non-disclosure in order to protect trade secrets. A third and final reading of the bill, with possible additional amendments, and debate in the Senate, has yet to occur. If SB 1149  passes by a majority vote in the Senate (21 votes), it would then be sent to the California Assembly for its own consideration and possible amendments. It is deemed a non-urgency matter that doesn’t require funding for its implementation, and if passed by both California legislative bodies and signed by the Governor, would become effective as of Jan. 1, 2023. It does not contain a retroactivity provision.

Potential Impact on Product Liability and Environmental Personal Injury Cases

  1. The SB 1149 specifically provides that confidentiality provisions in covered  settlement agreements are void and unenforceable as a matter of law;
  2. Significantly, the proposed legislation also declares  a presumption against non-disclosure of information and documents from a case, which would include a prohibition against court-ordered Protective Orders that typically prevent the litigants, counsel, and experts from disclosing documents produced in the case,  for example, by a manufacturer-defendant under the terms of a Confidential Protective Order;
  3. While the bill would allow the holder of trade secrets (either as an original defendant, an intervenor, or third party whose documents are subpoenaed) to make a separate motion to prevent disclosure, the request must be narrowly tailored in scope and duration.  But even a successful motion for non-disclosure this likely wouldn’t cover a large amount of documents and information that is requested of a defendant in the course of discovery. For example, before producing a client’s documents in product liability litigation (such as, a manufacturer’s records re: the product’s design, manufacturing, component parts and materials, complaint history, quality control, marketing, etc.), manufacturer’s counsel typically require and routinely receive, a fairly strict Stipulated Protective Order that entered by the court order as a matter of course in the types of cases covered in the proposed statute. Trade secrets whose disclosure would cause significant harm to the holder should  be allowed to remain confidential under the motion procedure  but a significant amount of information and documents  would not;
  4. If SB 1149 becomes law, plaintiff’s counsel will generally be free to share a large amount of what would now be non-confidential documents and information produced in discovery in a prior case with future plaintiff-clients and plaintiff’s counsel. This would be due both to the text of the bill about a “presumption” against confidentiality orders and because the bill creates a right to a separate civil cause of action for declaratory relief by members of the press and/or anyone who might be affected by information being kept confidential. The bill would further provide that counsel who violate the provisions of the statute can be investigated by the State Bar, either for insisting on a confidentiality provision that is contrary to the proposed statute or for advising a client (such as a plaintiff) to sign an agreement with a confidentiality provision that is contrary to the provisions of the proposed statute.

The bill doesn’t have a retroactivity provision. If it ultimately becomes law and part of the CCP, we can expect, at a minimum, additional law and motion activity on the scope of trade secrets and an added burden to the courts and litigants as the contours of the statute are developed in future litigation.

The views and opinions expressed in the article represent the view of the author and not necessarily the official view of Clark Hill PLC. Nothing in this article constitutes professional legal advice nor is intended to be a substitute for professional legal advice.

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