CPSC Recommends Exemption from Confidentiality Agreements to Permit Disclosure of Product Defects

CPSC Recommends Exemption from Confidentiality Agreements to Permit Disclosure of Product Defects

Manufacturers that are forced to settle claims brought by those injured or killed by their defective products have a strong incentive to keep these settlements secret. They will typically demand that the injured plaintiff or her lawyers execute a “Confidentiality Agreement” as a condition of settlement. These agreements forbid disclosure of the settlement and prevent consumers from learning about potentially deadly defects in the products. Product safety lawyers have long known that onerous confidentiality agreements are a serious impediment to consumer safety.

The Consumer Product Safety Commission (CPSC) recognizes that these agreements can violate principles of public safety and recently recommended “Best Practices for Protective Orders and Settlement Agreements in Private Civil Litigation,” which was published in the Federal Register on December 2, 2016. The CPSC is a “public-health authority with a broad mandate to protect the public against unreasonable risks of injury associated with consumer products.” See 15 U.S.C. 2051 (2014); see also Public Health Authority Notification, 79 FR 11769 (March 3, 2014).

The CPSC acts as a clearinghouse to identify and catalog unreasonable hazards in consumer products and to force manufacturers to remove such defective products from the stream of commerce. The CPSC has been instrumental in identifying and removing such defective products as flammable children’s pajamas, hazardous baby cribs, strangling pull cords, unstable furniture and appliances, choking magnets, and thousands of other deadly and defective products.

Although manufacturers are required by law to report incidents involving their products, they often fail to do so. As the CPSC notes, “If Industry Stakeholders fail to report, CPSC has limited alternative means of obtaining this critical safety information. It is therefore possible that a product hazard will never come to CPSC’s attention. Information in private litigation could, thus, be a key resource for the CPSC when Industry Stakeholders have not satisfied their reporting obligations.”

Confidentiality agreements, however, prevent even the CPSC from learning about critical product defects discovered in civil litigation. This is not a hypothetical concern. In 2008, the United States Senate Committee on the Judiciary found that safety information related to dangerous playground equipment, collapsible cribs, and all-terrain vehicle design defects was kept from the CPSC by protective orders in private litigation. S. REP. NO. 110–439, at 6–8 (2008). The CPSC’s own “cursory review” of product liability cases found protective orders constraining publication of defects in many consumer products, including infrared liquid propane wall-mounted heaters, wheelbarrows, markers, multimeter devices, office chairs, and gas cans (Fed. Reg. Vol. 81, No. 232/Friday, December 2, 2016 /Notices 87024, n.3).

To break this barrier to information to the public, the CPSC recommends that an exclusion be included in all settlement agreements, allowing disclosure of evidence of defective products to be shared with the commission:

“The Commission believes the best way to protect public health and safety is to preemptively exclude or exempt the reporting of relevant consumer product safety information to the CPSC (and other government public health and safety agencies) from all confidentiality provisions.”

This recommendation can easily be followed by inserting a simple sentence into all agreements such as ‘‘Nothing herein shall be construed to prohibit any party from disclosing relevant safety information to a regulatory agency or government entity that has an interest in the subject matter of the underlying suit.’’ This language can have an enormous impact on consumer safety.

All product safety lawyers should heed this recommendation and refuse to execute a confidentiality agreement that does not include this exception, and should educate the courts on its importance to the public safety.