Confidentiality Settlements Hide Dangerous Corporate Behavior

Imagine that you come to the time of life where you have a mother that needs constant nursing care. You don't want to admit that she is going to need to go to a skilled nursing facility, but you realize that it is for her own safety. You search the Internet for a facility that can take care of her needs. You want her to be close to you, so you go in to your local nursing home to get a tour. You listen carefully to the empathetic admissions director as she guides you down the hall and tells you about the excellence of care that their long-term care company will provide to your aging mother, while you look at the nice carpet, furnishings, television room, and other “homey touches.” You glance through the federally mandated state surveys of the nursing home in their lobby. It has a few violations and fines, but the admissions director assures you that these technical fines are from over diligent state regulators who get upset if a kitchen pan gets put away wet. The facility seems like a good choice.

You take notes and receive a glossy brochure that shows smiling staff and happy elderly doing art activities, as well as homelike rooms and dining room tables set with fresh roses. You still feel reluctant about having your mother go to a facility such as this, but you have done your investigation and this facility appears to be a place where she could be comfortable and happy with careful aide and nursing staff. The price is high, but you are willing to pay for the quality. You have driven by the place for years and never heard anything negative about it in the newspapers or local news.

What you don't know is that this well-marketed facility could have dozens of civil court settlements against it for incredible lack of care issues, including poor and negligent care that led to unnecessary pain with premature and nightmarish deaths of older residents who didn't have a way to defend themselves. Past family members could have lived through the hell and guilt of watching their parents die from lack of food or water, bedsores from lack of turning residents. Residents might have had untreated fevers and infections, or could have fallen and broken bones, but medical treatment was ignored until it was too late. Many residents' relatives have filed lawsuits, not just for compensation, but as many of them have told me, to make sure that this doesn't happen to someone else's parent. These types of lawsuits take time and usually require the family members to relive the horrors of what happened to their loved one.

But the community knows nothing of this and knows the facility by its well-manicured lawns, the large fish tank in the lobby and elders singing along with activity staff in the music room. How does this happen? It happens because many of these lawsuits never make it to trial and are settled out of court in a confidential settlement where the amount of money and the facts around the lawsuit are kept confidential, to “save” the reputation of the company from the next round of unsuspecting family members.

Having spent several decades investigating nursing homes, hospitals and assisted living facilities, I know this problem all too well. When a family member sues a nursing home, the plaintiff attorney and his or her investigator gather up detailed facts about the alleged lack of care, including examining medical records that have often been altered and interviewing ex-employees on their specific and general knowledge of the lack of care in the facility. The family members usually start the process out of outrage and guilt for the lack of care, which usually has led to the death of a parent. The civil lawsuit, if successful, will lead to monetary compensation, but many family members also want justice, a sense of closure, knowing that the facility was exposed to the world so that their loss of a parent does not feel in vain.

But as these cases move slowly through the legal process, the company makes a calculated decision on whether they can make each case just go away – because even a successful trial would make the community aware that there are charges against the facility. The plaintiff attorney uses the damning information he has gathered to push for a settlement, especially since in most private injury cases, the plaintiff attorney doesn't get paid until the case is won. Also, the company realizes that if they are able to drag the case out, the family members get more desperate for closure, especially if the case goes on for years after they have buried their loved one. So, the case, in many states, is settled with a confidential settlement, meaning that the amount of money paid is confidential and the facts, declarations of former employees, and other important information is sealed from the community forever.

These confidentiality agreements, sealed year after year, can lead the public to think that their local nursing home, hospital or day care center is a good community facility, while they may have hundreds of thousands of dollars in judgments against them and buried factual information showing horrific care and suffering. Even though the state is supposed to be doing surveys and investigating complaints, these companies have gotten good at hiding problems from state investigators who are not there every day, like the family members, to see the problems. The state does catch some of the more glaring problems, but even though these reports are required to be put in the public lobby of the nursing home, they are not obvious and are written in a way that many family members do not understand.

There are areas of civil law where confidentiality agreements are needed, especially when one company sues another and trade secrets are involved. There have been various legal examinations of problems of confidentiality settlements, but they have often been product liability cases to protect the general public. Despite this interest, state confidential agreements continue in many areas where the public should be privy to this knowledge.

Some states are showing concern about this and making baby steps to solve the problem. California has a special law to protect abuse against the elderly and disabled people called the Elder Abuse and Adult Dependent Civil Protection Act (EADACPA), and many nursing home and hospital abuse civil cases are filed under it. In 2004, the state passed laws saying that confidential settlement agreements are “disfavored” in civil suits using the EADACPA law. However, it isn't required, and there are many loopholes in this law, so companies have continued to push for confidential settlements to protect their image.

There have been other attempts at passing legislation on confidential settlements, including the work of Sen. Herb Kohl several years ago. Here is an explanation taken from a legal analysis of the problem:

These bills reached their high-water mark in 1994 with hearings before the Senate Judiciary Subcommittee on Courts and Administrative Practice. Since then, the bills have died in committee. Senator Kohl, Democrat of Wisconsin, has been the chief sponsor of most of the bills, and his comments upon introducing the Sunshine in Litigation Act of 2003 are typical:

There are no records kept of the number of confidentiality orders accepted by state or federal courts. However, anecdotal evidence suggests that court secrecy and confidential settlements are prevalent … From 1992-2000, tread separation of certain Bridgestone and Firestone tires caused a great number of car accidents, many involving serious injuries or fatalities. Bridgestone/Firestone quietly settled dozens of lawsuits resulting from faulty tire crashes, most of which included secrecy agreements. It was only in 1999, when a Houston public television broke the story, that the company admitted the defect and recalled 6 .5 million tires. Some States have been proactive in dealing with this problem. Florida, for example, has in place a Sunshine in Litigation law that severely limits the ability of parties to conceal information that effects public health and safety. Michigan has a rule that requires that secret settlements be unsealed two years after they are approved. And just last year, the judges of the United States District Court for the District of South Carolina unanimously agreed not to accept any secret settlements at all. While these steps indicate movement in the right direction, we still have a long way to go. It is time to initiate a federal solution for this problem. The Sunshine in Litigation Act is a modest proposal that would require Federal judges to perform a simple balancing test to ensure that the defendant's interest in secrecy truly outweighs the public interest in information related to public health and safety. Specifically, prior to making any portion of a case confidential or sealed, a judge would have to determine by making a particularized finding of fact – that doing so would not restrict the disclosure of information relevant to public health and safety. Moreover, all courts, both Federal and State, would be prohibited from issuing protective orders that prevent disclosure to relevant regulatory agencies.

Senator Kohl reintroduced the same act in 2009, and he cited numerous product liability cases that demonstrated the need for the legislation. Based on its history, it may take years for such a bill to pass, especially because of all the complicated legal issues around banning confidential settlements in numerous types of cases, and because there is so much discretion given to the judge to conduct a “balancing” act when deciding what should be confidential.

Another way to view this problem is to not to look with a broad brush at all types of liability and personal injury cases, but to pass a law completely banning confidential settlement agreements and the sealing of factual records for certain protected groups of people. These groups would be people who are at a greater risk for abuse and less able to protect themselves against poor or dangerous care. A total ban on confidential settlements for this protected class would not allow the companies to pressure judges to grant waivers, and would not burden the courts with weighing the options. I would suggest that the protected group consist initially of elderly, minors and victims of sexual abuse, but the group could be expanded with time if it shows that this prohibition is useful in getting information on wrongdoing out to the community where the company resides.

The public must be informed about what is going on with their local nursing home, hospital and child care center before they put their loved ones in the care of these facilities. The local press should have the ability to alert the public to successful settlementsin which the amount of the settlement and the facts gleaned from the case sound potential alarms. You have the right to know what is going on in your neighborhood behind previously closed legal doors.