AB 889 Poses a Liability Threat to the Business Community

Chris Micheli
Chris Micheli is a Principal with the Sacramento governmental relations firm of Aprea & Micheli, Inc.

Assembly Judiciary Committee Chairman Mark Stone (D-Santa Cruz) has introduced AB 889, reigniting a debate that first began just over 25 years ago in this state. First proposed by then Senator Bill Lockyer in 1991, SB 711 would have banned the use of protective orders in civil litigation. Governor Wilson vetoed the measure. Other legislative efforts were launched in 1999 and 2001. All three of those prior bills — SB 1254 (Schiff) in 1999; SB 11 (Escutia) in 2001; and, AB 36 (Steinberg) in 2001 — failed passage in the Legislature.

Under existing California law, certain types of confidential or privileged information cannot be introduced as evidence in a court action. In addition, current law generally permits the parties to a civil lawsuit to include as a condition to a settlement a provision requiring that information about the settlement or the underlying dispute be kept confidential. AB 899 would effectively prevent the use of protective orders which will increase litigation by limiting businesses’ ability to settle cases.

AB 889 contains the following statement: “It is the intent of the Legislature to better protect Californians from death or substantial injury caused by any danger to the public health or safety, including defective products, environmental hazards, and individuals or entities that physically harm others, by creating a presumption against secrecy that protects the openness of information acquired through discovery. This presumption is to apply to settlement and confidentiality agreements, whether or not filed with the court, and to all stipulations for protective orders that would limit the disclosure of information acquired through discovery.”

AB 889 would add Section 1002.5 to the Code of Civil Procedure to ban so-called “secrecy agreements”. Essentially, the bill states that, in an action based upon the existence of a danger to the public health or safety, information relating to the danger that was discovered during the course of litigation cannot be kept secret in an agreement between the parties or a court order, unless a court bases it upon independent findings.

Moreover, AB 889 provides that protective orders are void as contrary to public policy and may not be enforced by a court. This bill would apply to both civil actions and administrative proceedings in which “pleadings state facts” related to these alleged dangers. As such, any administrative proceeding before a state or local agency could fall within the limitations imposed by this bill, along with all civil litigation in state courts.

Ironically, as the bill is keyed “non-fiscal” by the Legislative Counsel, the bill does not go to the Appropriations Committee, which is supposed to consider the potential fiscal implications of proposed new laws. Instead, AB 899 will be heard by the Judiciary Committee and then the Privacy & Consumer Protection Committee. Assuming passage out of those policy committees, the bill will then be considered on the Assembly Floor.

This bill will increase litigation costs because the parties to civil litigation will fight every document request that an opposing party makes for information that may be sensitive or confidential. As a result, the bill will require increased court hearings thereby increasing legal costs to both parties. It will also result in increased public costs for the additional court filings and litigation, which means much more court congestion for our underfunded and understaffed judicial branch in this state.

The bill defines the terms bodily injury, danger to the public health or safety, independent finding, and personally identifiable information. The “danger” definition includes just about anything in that the bill encompasses an instrument, device, substance, person, entity, procedure, product, or a condition of any of these, that has caused or is likely to cause substantial bodily injury or death. To make matters worse, the definition of “bodily injury” is quite broad, specifically including “psychological trauma.”

While the author acknowledges that “secrecy in litigation is sometimes necessary, for example, to protect personal information or legitimate trade secrets; but it is not appropriate if it keeps evidence of a public danger from public scrutiny.” An allegation of a danger to public health or safety that is contained in a civil complaint is public and the plaintiff’s attorney could readily publicize its contents. Those allegations, the names of the parties, and other information are not prohibited from disclosure.

Confidentiality promotes cooperation in discovery and private settlement of legal disputes outside of the courtroom. While proponents often point to other states’ “sunshine” laws, there are fewer than a dozen states that have enacted such laws and they have had mixed results over the past twenty years.

In addition, California has several counties that have enacted court rules restricting the use of protective orders. Those court rules exist in Los Angeles, San Diego and San Francisco. In general, court records are presumed to be open unless confidentiality is required by law. The use of protective orders encourages the full disclosure of information in discovery without the fear that such information will later enter the public domain.

Existing state law, contained in Civil Code Section 3426.5, provides that a court shall preserve the secrecy of an alleged trade secret by reasonable means, which may include granting protective orders. Existing law allows the court in its discretion to issue such orders based on the evidence presented. It is unclear why the current judicial balancing test should not continue as the standard.

On the other hand, this bill would minimize the courts’ ability to grant a protective order based upon a business’ legitimate interest in protecting its trade secrets. The 5-part test in AB 889 imposes such a high hurdle that it will effectively eliminate the granting of protective orders. Businesses have a legitimate interest in protecting their trade secrets. Current law provides the adequate protections needed to protect the public and the confidential and trade secret interests of parties.

A court must make “an independent finding that the following criteria are met” (i.e., the 5-part test) for a protective order to be issued. Strangely, the bill then provides that such an order “shall not remain in effect after the entry of final judgment or other final determination,” with one exception. The bill also carves out any business disputes in which all of the parties are business entities.

California has liberal discovery rules and pretrial discovery is not a public aspect of a civil trial. These rules allow access to a great deal of information regarding the litigants and third parties, which is why state law grants authority to trial courts to issue protective orders based upon a balancing of interests. Substantially reducing a court’s discretion to issue protective orders will leave courts unable to properly protect the privacy and property rights of parties to litigation.

Chris Micheli is an attorney and registered lobbyist with the Sacramento governmental relations firm of Aprea & Micheli, Inc. He can be reached at [email protected]

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