Recent legislation in California may increase legal costs, make settlements more difficult, and risk confidential business information being released to the public. The Public Right to Know Act of 2022 seeks to prohibit settlement agreements containing provisions that prevent the disclosure of facts about defective products or environmental hazards discovered during litigation.1
The Public Right to Know Act (SB-1149), as currently drafted and dated May 9, 2022,2 would:
- Prohibit settlement agreements in civil actions that restrict “the disclosure of factual information” regarding a “defective product or environmental hazard that poses a danger to public health or safety.” The bill defines “defective product or environmental hazard that poses a danger to public health or safety” as “a product or environmental hazard that has caused, or is likely to cause, significant or substantial bodily injury or illness, or death.”
- Establish a presumption that no order of a court or arbitral tribunal may restrict “discoverable factual information” related to such actions.
- Offer protection for certain categories of information from disclosure, including (1) medical information, (2) personal identifying information, (3) the amount of the settlement, (4) current proprietary customer lists or trade secrets (if the party seeking to restrict its disclosure moves the court or arbitral tribunal in good faith for an order of nondisclosure), or (5) citizenship or immigration status.
- Provide that an attorney’s failure to comply with these provisions will be grounds for professional discipline.
If SB-1149 is signed into law, California would join several other states that have enacted “anti-secrecy” laws, including Florida, Louisiana, Montana, South Carolina, and Washington.3 The law would allow litigants to speak to the press, regulators and the public about ongoing hazards that risk public safety uncovered during the course of discovery.
However, for defendants and defense attorneys in cases involving product liability or environmental claims, the proposed law could discourage parties from entering into settlements, increase time and money spent on litigation, and risk confidential and proprietary business information being released to the public.
SB-1149 establishes a rebuttable presumption that discoverable factual information related to defective products or harmful environmental hazards should not be restricted by court order. As such, under the proposed law, the party resisting disclosure of proprietary customer lists or trade secrets bears a high burden to restrict public access to this information. The party that seeks to restrict disclosure must move the court for an order of nondisclosure, demonstrating that the presumption in favor of disclosure is “clearly outweighed by a specific and substantial overriding confidentiality interest.” The bill would allow a party, including an intervenor that has become a party, or a person whose attendance in the action or production of information is required by subpoena, to file a motion for nondisclosure.
Notably, the provisions of the Act could be enforced by members of the public, including “a representative of news media acting on behalf of the public”, if it is “reasonably foreseeable that the person will be substantially affected” by violations. The party affected by the alleged violation “may challenge the provision, agreement, or order by motion in the covered civil action, or by bringing a separate action for declaratory relief in the superior court.”
Under the Act, the State Bar of California is authorized to investigate cases brought to its attention of attorneys who may have violated certain provisions of the Act. Thus, the Act exposes members of the Bar to disciplinary action for non-compliance.
3Notably, SB-1149 provides that attorneys who fail to comply with the Act may face professional discipline. This is not the case in these other states.