The emperor has no clothes: how courts deny protection for confidential information; litigants' rights to protection of information not used in judicial proceedings should trump any public right to access.

• Author: Blaner, Kathleen L.

THROUGHOUT the centuries, fairy tales have provided valuable lessons about human nature and have given us surprising insights into complex adult transactions. One story, about the emperor's new clothes, sheds significant light on an ongoing controversy about whether information produced in the preliminary stages of civil litigation should be kept confidential when it is not used in court.

In the fairy tale, several entrepreneurial tailors trick the emperor into believing that they have designed the most exquisite clothing ever made for royalty. In reality, the tailors have fashioned nothing. To demonstrate his acute, discerning judgment and his great vision to the people he rules, the emperor claims to see the "exquisite garments" that the trickster tailors pretend to parade before them. The emperor's advisors are afraid to tell him there is nothing there. The tailors pretend to measure and fit the "garments" just as if they had real cloth in their hands. No one is willing to admit that there is nothing in the tailors' hands and that, when the emperor "puts on" the garments, the emperor is wearing no clothes.

THE NEW FAIRY TALE

This tale parallels how courts have reacted to the protective order and confidential settlement controversy over the last decade (1) Some members of the media and the organized plaintiffs bar claim that confidentiality orders entered in litigation have concealed horrific defects in products that have killed hundreds or have kept secret corporate misdeeds that have caused unconscionable harm. (2) Others, including the research arm of the United States Judicial Conference and the chair of the conference's Advisory Committee on Civil Rules have tried to point out that the facts alleged simply do not support the claims. (3)

Despite the lack of real substance to the claims, over the last decade it has become increasingly difficult to protect confidential information produced in discovery in civil litigation. Many courts no longer allow parties to a lawsuit to stipulate to a protective order providing blanket protection against public disclosure for information that implicates privacy or property rights. Instead, they insist on a document-by-document review of the thousands--indeed, tens of thousands--of pages often produced in complex litigation, regardless of whether that information will ever be found sufficiently relevant to use in actual court proceedings. (4)

Courts also are increasingly refusing to allow litigants to settle legal claims conditioned on a promise that the settlement will be kept confidential. (5) Even a non-substantive order of dismissal that follows the parties' agreement to settle a dispute becomes a triggering device that courts use to justify disclosure of information produced in the embryonic stages of litigation. (6) Recent decisions from the U.S. Court of Appeals for the Seventh Circuit place litigants in an untenable catch-22 position. A settlement will remain confidential only if is never approved by the court. However, if it is never approved by the court, the parties lack the ability to seek enforcement of the agreement if one fails to comply.

FORGETTING THE LITIGANTS

It seems as if courts have forgotten that litigants have rights at stake in the protective order controversy--or, at least, courts are giving them very little attention. Yet the privacy and property rights implicated in information in today's world have assumed transcendent importance to society, just as the protective order debate has raged most fiercely. (7) The rapid growth of electronic communications has placed personal privacy high on the endangered species list. The development and protection of intellectual property related to electronic commerce, as well as more traditional forms of commercial activity involving trade secrets, are among the paramount concerns of most businesses. (8) A company's proprietary interest in its intellectual property may often be that company's most valuable asset.

At a time when the need for confidentiality is greater than ever before for both private individuals and the business community, the courts are less likely to provide assurances that information produced in litigation will be kept confidential and protected. (9) This paradox, wherein courts refuse to protect what now requires the highest levels of protection, is the result of a systematic campaign by the organized plaintiffs bar and the communications media over the last 15 to 20 years.

These two groups have somehow convinced many courts, both state and federal, into believing that there is a problem that needs to be fixed. They have made some courts believe that courts can and should be champions of the public welfare through the active dissemination of confidential information, although the information was exchanged between private parties to resolve private, civil legal disputes. They have convinced courts to believe and act as if this role somehow trumps the courts' obligation to serve as a neutral arbiter of legal disputes. Courts have reacted to horror stories in the media about "court secrecy" and have give greater credence to public opinion based on bald allegations than to documented claims of privilege and confidentiality.

Fortunately for society, the claims of the plaintiffs bar and the media have been investigated by judicial officers and scholars and been called "unfounded." (10) Indeed, this emperor has no clothes. But unfortunately for many parties who have been hauled into court against their will and compelled to produce highly confidential information, courts have acted as if the claims were true. The truth is that there is no problem that needs to be addressed and nothing that warrants changes in legislation or court roles.

NOT A ROLE FOR COURTS

No matter how strongly they believe to the contrary, courts rarely, if ever, are meaningful resources for warning the public about imminent public health risks, active environmental hazards or other pending threats to the public welfare. By the time a dispute gets into a court, any threat to the public has been or could have been made known to the public through a variety of other means. Usually there is immediate media coverage of even the most nascent suggestion that a consumer product, corporate conduct, environmental incident or government action is potentially harmful or wrong. Regulatory agencies, local governments and the media are far better suited to providing information to the public.

In a number of cases, the initial media claims and lawsuits have had no scientific basis. Good products and businesses have been unfairly taken off the market or driven out of business. (11) That was the fate of the Audi 5000 automobile and the Dow Corning breast implants. Both products were needlessly withdrawn from the market following massive media campaigns and thousands of lawsuits in which protective orders were involved. Scientific evidence eventually vindicated both products, but that came too late. Women had thousands of unnecessary operations to remove the implants alleged to be harmful. Dow Coming went into bankruptcy as a result of the litigation. The market for Audi products in the United States was devastated for years, and Audi and Audi owners suffered irreparable financial loss. (12) In the recent controversy over Firestone tires, a New York Times article exposed the fact that the plaintiffs' lawyers themselves had concealed information about accidents involving the tires from the appropriate regulatory agency in order to have better control of the litigation and garner higher settlement awards. (13) Contrary to the claims that Bridgestone/Firestone hid vital information from the public, the 11th Circuit found that Firestone actually had produced trade secrets in the litigation which warranted a confidentiality order. (14)

CAMPAIGN IN THE STATES

When the protective order controversy began in the early 1990s, more than half of the states considered legislation or court rules to restrict the use of protective orders and confidentiality agreements. In 1991, 28 states considered but did not enact restrictive legislation of this type. (15) The same year, four states considered rules changes, but only two--New York and Delaware--put them into effect. Two states--Florida and Texas--in 1990 enacted changes that appeared likely to place heavy restrictions on the availability of protective orders, particularly in product liability litigation. (16)

Section 69.081(4) of the Florida statute states:

(4) Any portion of an agreement or contract which has the purpose or effect of concealing a public hazard, any information concerning a public hazard, or any information which may be useful to members of the public in protecting themselves from injury which may result from the public hazard, is void, contrary to public policy, and may not be enforced. Texas Rule of Civil Procedure 76a states that "court records ... are presumed to be open to the general public," and it defines "court records" as, among other things, "discovery, not filed of record, concerning matters that have a probable adverse effect upon the general public health and safety."

In practice...