Ronald Burdge on United Airlines and the Downside of Secret Settlements

Last month, United Airlines settled its case with the man dragged off the plane — David Dao.

The company and Dao’s attorney announced the fact that there was a settlement, but not the amount of the settlement.

The fact that the amount of the settlement was not made public troubled Ronald Burdge.

Burdge is a consumer attorney in Dayton, Ohio.

He is also the author of the American Bar Association GP Solo Journal article in 2012 titled Confidentiality in Settlement Agreements Is Bad for Clients, Bad for Lawyers, Bad for Justice.

“Clients often object to confidentiality because they are frustrated and angry about what has happened to them and what the defendant did,” Burdge wrote. “Defendants want confidentiality often because of the feared perception of guilt that accompanies a settlement. The secrecy itself, on the other hand, may be adverse to public policy and protection of the public – in short, it can allow wrongful conduct to continue.”

“Confidentiality prevents the public from knowing about systemic wrongful conduct. It can also prevent regulators and government agencies from performing their duty to enforce the law and protect the public. The purpose of the court is to evenly administer justice to all so that all are protected by the law. When violations are hidden by confidentiality, the legal system itself is thwarted from fulfilling one of its fundamental purposes: to protect the citizenry from wrongful conduct.”

“Just as important, the legal system is funded by the citizenry. The use of government employees, monies, and buildings entitles the public to openness in all aspects of the legal process, including settlements that are achieved through use of the court system.”

“Society itself might be better off if all settlements were public knowledge. Wrongful conduct would be exposed not just for the economic justice of the victim, but for the broader societal purpose of curbing such wrongful conduct. Lawmakers and the public can see where problems exist, both in products and service suppliers, and act appropriately.”

In the United Airlines case, the world knew about the wrongful conduct – just not about the amount of the settlement.

Why is it important that the amount of the settlement be made public?

“It’s the amount that teaches both the corporation and the public how such conduct is going to be curbed in the future,” Burdge told Corporate Crime Reporter in an interview last week.

“When you keep the amount of the penalty private, other wrongdoers have no knowledge of what the cost can be and so they have no incentive to curb their own activity,” Burdge said. “There is a reason why punitive damages exist in most of the laws of the United States. It is not just to seek compensation that is fair. A penalty, whether punitive damages from a jury or a substantial settlement that a wrongdoer privately pays, teaches others in its industry that there is a price to pay for such outrageous conduct.”

How did you get interested in the subject of secret settlements?

“I had been watching the surge in confidentiality agreements for a number of years. At the beginning of my practice, confidentiality didn’t seem as if it would appeal to anybody. It just started rising. Nobody cared much for it – other than the manufacturers and corporations who were asking for it. Then confidentiality began to be used to conceal the existence of common defects and common problems with motor vehicles and other consumer products. People were being harmed. People were being paid, not just for their injury, but to keep quiet about it.”

“After seeing enough of that, it just struck me as wrong. Even plaintiffs lawyers, who may be handling a defect case, may not be aware that there have been other lawsuits of that type.”

Often, plaintiffs lawyers like confidentiality agreements.

“There are some who do like it. But they tend to favor it because it may well keep information out of the public eye that they may not care to have the public be quite so aware of – such as allowing things to be kept secret that shouldn’t have been kept secret or the monetary compensation received as part of the settlement, particularly in class actions.”

Should confidentiality agreements be prohibited?

“There are a couple of situations where it is prohibited,” Burdge said. “California has a statute that bars confidentiality in certain circumstances. My own feeling is that once a case is filed in the courtroom, the way that case settles should be public record.”’

Why should it be public record?

“It serves to deter other wrongdoers engaged in similar conduct. And it serves to notify the public of a problem that existed with a particular manufacturer or supplier – or the whole industry itself. But the public may never find out about those things and safety issues may simply be hidden by that confidentiality. I have no doubt that the first airbag that blew up on someone and injured them was one that no one ever heard of.”

Once a case is filed in court – that publicizes the wrongdoing, right?

“It does. But manufacturers typically sign off on secret settlements. The filing of the lawsuit itself may give it some publicity. But there is no court record on the resolution if there is a secret settlement. So, it basically gets swept under the rug.”’

Your preference would be that if the case is filed in a court, all documents thereafter should be public including a settlement agreement. In the United Airlines case, no case was filed. In cases where no case is filed in court, are you saying that confidentiality in those cases is okay?

“No. When you are dealing with a public corporation, settlements they enter into involving disputes with people who have been physically injured – those cases don’t deserve confidentiality.”

“The primary reason is that the public corporation is public. If it is a small private business or just two individual people, it’s offensive if they choose to buy and sell constitutional rights. But that’s on a different footing than a public corporation.”

“A public corporation is accountable not just to their stockholders, management and employees, but to the public at large. Anybody in the public can be affected by the conduct. And there is no way to measure that conduct if the settlements are kept secret.”

Don’t you have a constitutional problem if you require those contract agreements to be made public – for example, the agreement between United and the man dragged off the plane?

“I have a problem with the whole idea of a corporation being a person. It doesn’t live or breath except by the creation of lawyers and laws. It seems fundamentally wrong that corporations can buy and sell politicians with investments in donations and dark money. But the real problem goes deeper. The corporation is just a construct by lawyers and legislators to create legal immunities. And they created a legal personage that is just a fiction.”

You said that United Airlines was just buying the constitutional rights of the man dragged off the plane. What constitutional rights were they buying?

“The right to free speech. You have an individual person harmed by corporate conduct. The corporation requires confidentiality of those settlement terms from the individual person – we are not going to give you a check if you don’t agree to this clause.”

“The corporation is forcing the victims to decide between immediate compensation and fighting for who knows how long to get who knows how much after spending who knows how much to get there. That’s all dependent on the desire of the wrongdoer to keep it all secret. United didn’t want the dollar amount to be known. United is essentially buying the First Amendment rights of the victim.”

There has been no public lawsuit – how can the state say no to that settlement? Wouldn’t that be an unconstitutional infringement on contract?

“Many corporations are the creation of state laws. Banks are created by virtue of federal laws. But either way, you have a legal entity that exists, not as a physical matter, but only as a legal matter. If you can create the rules by which a legal entity can come into existence, then you can create the rules by which it can remain in existence. And one of those rules is the ability to require them to make public what they pay to settle personal injury cases against them.”

“The rules of the game are written by the government.”

When we spoke last week, you mentioned that you are a member of the National Association of Consumer Advocates. This debate has been ongoing in that organization. What is the consensus of the organization on confidentiality?

“There are several attorneys who I know of who outright refuse to engage in secret settlements. The vast majority recognize that it isn’t always a clear cut situation. Instead, general advice is given to the consumer not to agree to confidentiality. It is the consumer’s case. And it becomes the consumer’s individual decision. But it is not always so cut and dried. It is a bit of a moral quandary, both for the attorney as well as for the victim who is being asked to surrender legal rights in exchange for being paid x number of dollars at an earlier stage of the case.”

“There are some attorneys who absolutely won’t represent a consumer if the consumer says he or she wants to engage in a secret settlement.”

“But the majority of attorneys simply advise their clients what is good and what is bad, what is right and what is wrong on a legal level and let the client make the moral decision.”

You are not an attorney who refuses to represent consumers who want to keep cases secret.

“That is correct. My philosophy is that I hate it. I don’t like it. I don’t think it’s right. It’s morally wrong. The legislatures around the country and the Congress and the lawyers have allowed the creation of the corporation that has the ability to do that. I advise the clients as to what the risks are — and at times there are rather high risks –  and let the client make the decision.”

[For the complete q/a format Interview with Ronald Burdge, see page 31 Corporate Crime Reporter 19(12), print edition only.]

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