Proposed Bill in California to Prohibit Confidentiality of Product Defect Settlement Agreement Fails

It seems that we regularly read news stories about defective products. You don't have to search too hard to find a current report on a defective airbag, children's toy or construction element.

Despite the fact that we see these stories so often, many cases involving defective products are settled with an agreement that discovery information be kept confidential. That practice was recently challenged with a bill to prohibit confidentiality clauses in cases involving defective products. However, the proposed measure died in the California Assembly.

What the bill proposed
The bill was introduced to prioritize and increase consumer safety by banning confidential settlements when they involve a defective product.
Currently, when a lawsuit involving an allegedly defective product settles outside of court, it is not unusual for all parties to agree to a confidentiality clause that prohibits public disclosure of information regarding the case. Under the terms of this bill, these elements of a settlement would be prohibited.

Why the bill was proposed
Supporters argue that the secrecy of these settlements puts the public in danger of being hurt or killed by a product known to be defective. When no one involved in the case can disclose information about a potential danger, then there can be no efforts to protect consumers with awareness and possible regulatory action.

Impacts on businesses
Many business owners are fiercely protective when it comes to the information that is available to the public. Without the protection of a confidentiality agreement, cases involving alleged defects could become even more contentious and lengthy. Business owners can be more motivated to challenge disclosure of information during discovery, especially if it contains confidential or sensitive information.

How this can affect business owners today
While this measure was not successful, it should alert business owners in California to the fact that these cases are often divisive and have the potential to drastically affect consumers and businesses. 

Parties who are involved in a defective product lawsuit will, therefore, want to be diligent about how they protect sensitive information, whether this includes a confidentiality agreement or challenges during discovery. 

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