Senate Judiciary Committee Approves "Sunshine" Bill That Clouds Up Settlements

Here at MassTortDefense we know that while not the "sexy" part of litigation, the nuts and bolts of settlement agreements are crucial to clients.  That is why it caught our eye that the U.S. Senate Judiciary Committee last week approved a bill that would require courts to consider so-called public health and safety concerns before approving the sealing of certain legal agreements and settlements in product liability suits.

The committee voted 12-6 to pass S. 623, the so-called Sunshine in Litigation Act. The bill would  prohibit a federal court, in any civil action in which the pleadings state facts relevant to the "protection of public health or safety," from entering an order restricting the disclosure of information obtained through discovery, or from approving a settlement agreement that would restrict such disclosure, or restricting access to court records, unless in connection with that order the court has first made certain findings of fact.  Specifically, the bill requires the court to find that: (1) the order would not restrict the disclosure of information relevant to the protection of public health or safety; or (2) the public interest in the disclosure of past, present, or potential health or safety hazards is outweighed by a specific and substantial interest in maintaining the confidentiality of the information, and the requested protective order is no broader than necessary to protect the confidentiality interest asserted.

The bill similarly would prohibit the court from enforcing any provision of a settlement agreement that prohibits a party from disclosing that a settlement was reached or the terms of the settlement, other than the amount paid, or from discussing the civil action, or evidence produced in it, that involves matters relevant to the protection of public health or safety -- unless, again, the court finds that the public interest in the disclosure of past, present, or potential health or safety hazards is outweighed by a specific and substantial interest in maintaining the confidentiality of the information or records in question, and the requested order is no broader than necessary to protect the confidentiality interest asserted.

Surprisingly Republican Senators. Orrin Hatch, R-Utah, and Chuck Grassley, R.-Iowa, joined all 10 Democrat committee members in support. But the bill seems ill-conceived and even unnecessary. As pointed out by the American College of Trial Lawyers' Federal Rules of Civil Procedure Committee, the bill would establish an undesirable precedent by circumventing the procedure set out in the Rules Enabling Act that Congress established for amending the Federal Rules of Civil Procedure. These kind of ad hoc legislative initiatives that address specific parts of the Federal Rules contradict the careful, open, deliberative, rigorous ways that the rules have been amended from time to time.

Moreover, the bill would would unduly restrict the discretion of trial judges to regulate civil litigation and would impose substantial new fact-finding burdens on the courts, without a demonstrated need for those changes.  There is no compelling evidence that protective orders governing discovery or confidentiality provisions in settlement agreements are frequently abused. Nor is there evidence that federal courts do not currently have the power to regulate those agreements. 

Moreover, as written, the bill would lead to more confusion, not less, regarding what information has to be released, and when.  As pointed out by Steve Zack, President of the ABA, the language is is vague and indefinite, threatening to sweep up many cases having little to do with true public health or safety.  And it certainly would  require the parties and courts to spend extensive time and resources litigating whether and how the statute applies.  The politicians seem to forget  that protective orders are critical to both plaintiffs and defendants, including by helping to safeguard against dissemination of highly personal sensitive information or trade secrets.  

Perhaps Congress should spend less time on restricting judicial discretion and more on seeing that federal judges are paid a market-competitive wage.  A district court judge on the bench since 1993 failed to receive a total of $283,100 in statutorily authorized but then-denied pay. Appellate court judges have lost even more.
 

Toyota Court Recognizes "Apex" Rule for Corporate Executive Depositions

The Michigan Court of Appeals ruled last week that two top Toyota executives do not have to give depositions in a personal injury lawsuit involving the death of a Flint, Mich., woman whose vehicle allegedly suddenly accelerated and struck a tree. See Alberto v. Toyota Motor Corporation, No. 296824 (Mich. Ct. App.,  8/5/10).

Plaintiff filed this wrongful death action and claimed that decedent drove a 2005 Toyota
Camry at a speed of less than 25 miles per hour when the vehicle suddenly accelerated to a speed in excess of 80 miles per hour. Plaintiff also asserts that decedent attempted unsuccessfully to apply the vehicle’s brakes, but the vehicle struck a tree, went airborne, struck another tree; plaintiff’s decedent sustained fatal injuries.

Plaintiff noticed the video depositions of Yoshimi Inaba, defendant’s Chairman and Chief
Executive Officer, and Jim Lentz, defendant’s President and Chief Operating Officer, and defendant moved in response for a protective order to prevent the depositions because neither Mr. Inaba nor Mr. Lentz participated in the design, testing, manufacture, warnings, sale, or distribution of the 2005 Camry, or the day-to-day details of vehicle production.  Thus neither officer had unique
information pertinent to issues in the case.  The trial court denied the protective order, and defendant appealed.

This appeal presented the question whether Michigan should formally adopt the apex
deposition rule in the corporate context. As used by other state and federal courts, the apex
deposition rule provides that before a plaintiff may take the deposition of a high-ranking or
“apex” government official, the plaintiff must demonstrate that: (1) the government official or officer possesses superior or unique information relevant to the issues being litigated, and (2)  information cannot be obtained by a less intrusive method, such as by deposing lower-ranking persons. See, e.g., Baine v Gen Motors Corp, 141 F.R.D. 332, 334-35 (M.D. Ala. 1991).  Courts have applied the apex deposition rule not to shield high-ranking officers from discovery, but rather to sequence discovery in order to prevent litigants from deposing high-ranking government officials as a matter of routine procedure before less burdensome discovery methods are attempted. See, e.g., Sneaker Circus, Inc. v. Carter, 457 F Supp 771, 794 n. 33 (E.D.N.Y. 1978).

Courts have reasoned that giving depositions on a regular basis would impede high-ranking government officials in the performance of their duties, and thus contravene the public interest. See, e.g., Union Savings Bank v. Saxon, 209 F. Supp. 319, 319-320 (D.D.C. 1962). In essence, the apex deposition rule prevents high-ranking public officials from being compelled to give oral depositions unless a preliminary showing is made that the deposition is necessary to obtain relevant information that cannot be obtained from another discovery source or mechanism. Baine, 141 F.R.D. at 334-336.

Premised on similar reasoning, several federal appellate and district courts have extended
application of the apex deposition rule to high-ranking corporate executives. Generally, these
cases hold that before a high-ranking corporate executive may be deposed, the plaintiff must
establish that the executive has superior or unique information regarding the subject matter of the
litigation, and that such information cannot be obtained via a less intrusive method, such as by
deposing lower-ranking executives, etc. See, e.g., Salter v. Upjohn Co., 593 F.2d 649, 651 (5th Cir.
1979); Lewelling v Farmers Ins. of Columbus, Inc., 879 F.2d 212, 218 (6th Cir. 1989); Thomas v.
Int’l Business Machines
, 48 F.3d 478, 482-484 (10th Cir. 1995); Mulvey v. Chrysler Corp, 106 F.R.D.
364, 366 (D.R.I. 1985); Evans v. Allstate Ins. Co., 216 F.R.D. 515, 518-519 (N.D. Okla. 2003).

Some state courts, including California and Texas, have also adopted the apex deposition rule
in the corporate context. For example, in Liberty Mut. Ins. Co. v. Superior Court, 10 Cal. App. 4th
1282; 13 Cal. Rptr. 2d 363 (1992), the California Court of Appeals, relying on federal decisions
adopted the apex deposition rule in the corporate context and held that the potential deponent, the company President and Chief Executive Officer, could not be deposed absent a showing that the officer had “unique or superior personal knowledge of discoverable information.” Id. at 1289.

The court here adopted the apex deposition rule in the public and private corporate context as consistent with Michigan’s broad discovery policy, which allows a trial court to control the timing and sequence of discovery for the convenience of parties and witnesses and in the interests of
justice. Recognizing that the highest positions within a business entity rarely have the specialized
and specific first-hand knowledge of matters at every level of a complex organization, courts
have adopted the apex deposition rule in the corporate context to: (1) promote efficiency in the
discovery process by requiring that before an apex officer is deposed it must be demonstrated
that the officer has superior or unique personal knowledge of facts relevant to the litigation, and (2) prevent the use of depositions to annoy, harass, or unduly burden the corporate parties.

The rule does not mean that an apex or high-ranking corporate officer cannot be deposed under any circumstances. The rule is to ensure that discovery is conducted in an efficient manner and that other methods of discovery have been attempted before the deposition of an apex officer is conducted.

Adopting the apex deposition rule in the corporate context does not shift the burden of proof, but
merely require the party seeking discovery to demonstrate that the proposed deponent has unique
personal knowledge of the subject matter of the litigation and that other methods of discovery
have not produced the desired information.  It is invoked only after the party opposing discovery has moved for a protective order and has made a showing regarding the lack of the proposed deponent’s personal knowledge and that other discovery methods could produce the required information. In other words, after the party opposing the deposition demonstrates by affidavit or other testimony that the proposed deponent lacks personal knowledge or unique or superior information relevant to the claims in issue, then the party seeking the deposition of the high-ranking corporate or public official must demonstrate that the relevant information cannot be obtained absent the disputed deposition, said the court of appeals.

Here, the record reflected that Mssrs. Inaba and Lentz had only generalized knowledge of Toyota’s alleged unintended acceleration problems, but had no unique or superior knowledge of or role in designing the subject vehicle or in implementing manufacturing or testing processes.