Secret Settlements

South Carolina Takes Steps To Stop Secret Court Settlements

Secrecy is bought and sold in some American courtrooms, a leading and respected federal judge has said, and people are dying, possibly because of decisions made by judges.

Now, in an unprecedented reform, judges in South Carolina are cracking down on deals like those in a number of Firestone-Ford cases, in which lawsuits were settled secretly, people were paid money, and the magnitude of the problem was kept hidden for years.

To understand why judges are concerned, reports Dan Rather, consider what happened to a teacher named Annie Davis.

Davis says she had picked up a prescription at the CVS drug store in the tiny town of Denmark, S.C., and the pharmacist made a big mistake.

"I had a reaction to the medicine," she says. "It was making me feel very sick. My mouth, like, I was having seizures or whatever at my mouth."

The doctor had prescribed Halotestin, a hormone drug that would help her recovery from having a cyst removed from her breast. The pharmacist actually gave her Haldol, a very powerful, anti-psychotic drug that has nothing in common with Halotestin.

Davis' husband, Woody Washington, took her to the hospital. "I had, obviously, the little medication tab that comes with the medication," he says. "And I presented it to the doctor. And so the doctor asked me, he said, 'How long has your wife been a mental patient?' And it, you know, I'm saying, you know, 'My wife has never been committed.' And he said, 'Well, this medication here's prescribed for mental patients.' And it blowed me away."

Davis and her husband eventually sued CVS. But the case never went to a jury. Instead, both sides agreed to a settlement that they also agreed would be secret. Companies insist on that secrecy because fat financial settlements attract attention and may even invite more lawsuits.

When Davis' lawyer, Dick Harpootlian, first took Annie Davis's case, he wanted to find out whether anyone else had sued CVS. He discovered another case - alleging that a four-year-old girl got the wrong prescription. A prescription for an antibiotic was filled with a heart medication instead and the child was in pediatric intensive care for a week, he says. The suit was settled but details of the settlement are confidential.

Harpootlian is forbidden to talk about anything he may have learned about CVS in preparing the case.

"Do you mean to tell me," Rather asked, "that if in those documents there was a clean chain of events demonstrating that this was not the only case where CVS had misfilled prescriptions, if the documents showed that, you wouldn't and couldn't tell me?

Harpootlian answered, "Absolutely not. Wouldn't tell you. Couldn't tell you. Won't tell you."

Moreover, Harpootlian says the public has no right to know in such cases.

That may sound outrageous, but for years – until South Carolina began rocking the boat - Harpootlian's position has been legal, ethical standard operating procedure in court rooms all over the country

"It just struck the members of our court," says Joe Anderson, chief federal judge in South Carolina, "that that was not in the public interest and it was not good public policy for our court system."

The plaintiff would get money, frequently a substantial amount; the attorneys on both sides would get paid; the defendants would get the secrecy they wanted; and the judge would have one less case to try.

Everybody was a winner except the public and the public interest.

Anderson doesn't give many interviews, but he agreed to talk to 60 Minutes II, partly because of a story it did in 2000 on fatal accidents linked to Firestone tires and Ford SUVs.

Judge Anderson wrote a letter to his fellow federal judges and even mentioned the CBS story. "Arguably," he wrote, "some lives were lost because judges signed secrecy agreements regarding Firestone tire problems." The federal court then voted unanimously it would no longer approve any secret agreements in South Carolina in cases where public safety was involved.

"It's been controversial, to be honest," says Anderson. "It's been very controversial."

Anderson's reform is a big change for South Carolina, a self-described conservative state where the Confederate flag still flies outside the state capitol and the federal building is named after former Sen. Strom Thurmond.

Few people are more upset about the reform than Dick Harpootlian. He says secret settlements guarantee a good deal for his clients as well as protection for the company being sued.

"We made an allegation," he says. "They said it's not true. We then settled the case, without any public trial. That has an economic worth. My job representing a client is to get the maximum economic benefit for that client."

Anderson says, "Well, that is what really lit my fuse when this rule was proposed. It was surprising to me to hear some lawyers say - and again you cannot generalize too much - but some lawyers said, as plaintiffs' lawyers basically, 'We like the concept of court-ordered secrecy because it gives us the opportunity to leverage a little bit more money out of the defendant at settlement time.'

"If true, that means that the concept of secrecy is a commodity that is being bought and paid for on the market place, not just under the judge's nose, but with the judge's complicity and that just strikes me as wrong," Anderson says.

After Judge Anderson's federal court announced it was banning certain secret agreements, the South Carolina state court, where the Davis lawsuit was filed, decided to act. That's where Annie Davis's case was.

Jean Toal, chief judge in state court, says she was disturbed by newspaper reports that secret agreements in her court were protecting some doctors accused repeatedly of malpractice.

"They involved repetitive conduct at times that the public did not know about and these settlements were sealed by consent of the parties," she says, with the approval of the judge.

Harpootlian says Toal will be facing some stiff opposition. "No defense attorney I've talked to is excited about seeing those reforms," he says. " No plaintiff's lawyer I talked to is excited about those reforms but it doesn't help us do our job to represent that client."

It's even possible, Harpootlian says, that lawyers will try to make an end run around the courts and make secret agreements without asking for a judge's approval.

But that is only possible if clients like Annie Davis agree. These days, even she has reservations.

"I wish I had gone to trial," she says. "Then that really would have exposed them and that, you know, people know exactly what this pharmacy's doing to people."