Senator Herb Kohl (D-WI) described the problem well in his testimony last December 11 before the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights:

Far too often, court-approved secrecy agreements hide vital public health and safety information from the American public, putting lives at stake. The secrecy agreements even prevent government officials or consumer group from learning about and protecting the public from defective and dangerous products.
    The following example demonstrates how this issue arises and the devastating implications secret settlements can indeed have. Back in 1996, a 7-year-old boy in Washington State took an over-the-counter medicine to treat an ear infection. Within hours, he suffered a stroke, fell into a coma, and he died 3 years later. The child’s mother sued the drug manufacturer, alleging their product caused the stroke.
    Unknown to the mother and to the public, many similar lawsuits alleging harm caused by this very same medicine had been secretly settled. It was not until the year 2000 that the FDA banned an ingredient found in the boy’s medicine. If it were not for this court secrecy in the previous lawsuits, the boy’s mother may well have known about the risks.
    While this case is tragic, it is not unique. In these types of cases, the defendant requires the victim to agree to secrecy about all information disclosed during the litigation or else forfeit the settlement. That individual victim recovers the money that they need to pay medical costs, but, as a result, the public is often kept in the dark about potential dangers.

An even more dramatic account (in terms of the lives affected) involved faulty tires.

From 1992 to 2000, tread separations of various Bridgestone and Firestone tires were causing accidents across the country, many resulting in serious injury and even fatalities. Instead of owning up to their mistakes and acting responsibly, the company quietly settled dozens of lawsuits, most of which included secrecy settlements. It was not until 1999, when a Houston public television station broke the story, that the company ac-knowledged its wrongdoing and recalled 6.5 million tires. By then, it was too late for the more than 250 people who had died and more than 800 injured in accidents related to these defective tires.

Kohl was introducing his Sunshine in Litigation Act, under which he said,

the proponent of a protective order must demonstrate to the judge’s satisfaction that the order would not restrict the disclosure of information relevant to public health and safety hazards.
    This legislation does not prohibit secrecy agreements across the board, for indeed there are appropriate uses for such orders, such as protecting trade secrets, and this bill makes sure that such information is kept secret. But protective orders that hide health and safety information from the public, in an effort to protect the company’s reputation or its profit margin, should not be permitted.

Legislation taking the same approach to the same problem has been attempted in California several times, but so far unsuccessfully.  Then Senator Bill Lockyer carried a bill in 1991 (SB 711) that was vetoed by Governor Pete Wilson. Eight years later Adam Schiff, then a Senate Democrat, introduced SB 1254, which passed its first committee but then met the fate described in a business attorneys’ newsletter.

Over 100 entities registered their opposition to the measure, and the opponents were not only those in the specifically-targeted industries — such as automotive and pharmaceutical manufacturers — but included businesses from every sector of California’s economy, from the entertainment industry, to high tech companies, to the wine industry.  Each opposing company recognized that the measure, if passed, would place all California businesses at risk of losing their confidential information to competitors with the filing of each new lawsuit, regardless of merit.  The opposition stalled the measure, and it was withdrawn without ever reaching a floor vote.

Similar efforts in 2001 by then Senator Martha Escutia of Los Angeles (SB 11) and Assemblyman Darrell Steinberg (AB 36) also failed to get the necessary votes.