AAI Applauds S.C. Supreme Court Decisions on Protective Orders

Key changes made by the South Carolina Supreme Court before adopting criteria for the sealing of court records and settlement agreements help balance the interests of confidentiality and disclosure, according to the Alliance of American Insurers (AAI).

“The court’s order preserves judicial discretion to protect the privacy and confidentiality of litigants,” Robert Herlong, vice president of the Alliance’s Southeast Region, commented.

As originally drafted, Proposed Rule 38 was overbroad and unnecessary, making it more difficult for parties to seal court documents, going so far as to prevent any settlement agreement filed with the court to be sealed.

The Alliance filed comments with the court in January noting that the proposed rule’s “one-size-fits-all” approach was not conducive to the fair and equitable administration of justice. The Alliance also argued that protective orders speed up the discovery process, as litigants are more willing to produce information that will remain confidential.

As a result, two key modifications were made. First, the new rule specifically states that it does not apply to private settlement agreements where the parties agree to have the matter voluntarily dismissed without court involvement. Second, it places the burden of proof on the party seeking to seal the documents to satisfy the court that the public and private interest is best served by this action.

“The purpose of protective orders is to protect the reputation of a party to a lawsuit,” Joyce Kraeger, the Alliance attorney who drafted the association’s comments, said. “To release information produced in discovery is premature because the suit has not been resolved. Release of information collected in response to specific proceedings can be misused and cause unfair damage to the reputation of the party, such as a manufacturer.”

She added that, “The Roman Catholic Church’s sex-abuse scandal and the Firestone tire controversy have contributed to a misguided, yet widespread, perception that all sorts of bad acts and dangerous products are being hidden from the public when any case is settled and includes a confidentiality agreement. In turn, this has led to a knee-jerk reaction by some calling for a ban on confidential settlements in all civil cases.

“However, the truth is that the vast majority of cases do not involve dangerous products or pedophile priests, as trial lawyers would like us to believe. What legitimate public interest would be served by the knowledge that Mary Jones just received a $50,000 settlement from John Smith’s insurance company for injuries she sustained in an automobile accident? Do plaintiffs in these suits really want these sums made public? Arguably, the only ones who stand to benefit from the disclosure of such information are telemarketers and criminals looking for investors in their latest Ponzi schemes.”

Kraeger praised the South Carolina Supreme Court justices for recognizing that “a blanket ‘one-size-fits-all’ approach is not conducive to the fair and equitable administration of justice. Each case should be evaluated on an individual basis by a judge who is in the best position to know, after having reviewed the evidence, whether a protective order is necessary.

“The revised rule strikes a blow against the trial bar’s attempt to discourage settlements and further clog up the courts. Without the important revisions, Proposed Rule 38 would have driven up the cost of litigation and future settlements, ultimately translating into higher costs for goods and services.”

The proposed new rule now goes to the state legislature where it is expected to pass into law, Herlong added.