Sunday, April 7, 2013

Settlements Hijack Legal System

A New York judge has approved Bank of America's (BAC) $2.43 billion settlement of a class action lawsuit brought by shareholders over the company's acquisition of former competitor Merrill Lynch. Meanwhile, Trayvon Martin’s parents have settled a wrongful-death claim filed against the homeowners association of the subdivision where their son was killed.

A judge for the U.S. District Court for the Southern District of Manhattan approved the settlement Friday. The bank proposed the settlement in late September. The agreement resolves allegations that Bank of America did not disclose the state of its finances or those of Merrill Lynch when it agreed to buy Merrill in September 2008.

Judge Kevin Castel said the settlement was "hard fought," but called the final deal was "fair, reasonable and adequate."

According to the Orlando Sentinel, the settlement amount was marked out in five pages that it reviewed. Lower in the agreement, the parties specify that they will keep the amount confidential.

Benjamin Crump, the attorney for Trayvon Martin’s parents, declined to comment Friday. He told The Associated Press that the filing was confidential.

Zimmerman has been charged with second-degree murder in Martin’s death. Zimmerman claims he was attacked and acted in self-defense, but Martin’s family claims he targeted the unarmed 17-year-old mainly because Martin was black. Zimmerman’s parents are white and Hispanic.

Augusta's almost decade-long battle to keep a porn shop X-Mart closed ended when in 2010 the city agreed to a settlement with the adult store. Taxpayers were out $550,000.

The city had argued that the adult store presented the wrong image for visitors coming into Augusta along busy Gordon Highway. Courts disagreed.

"I don't think this is a win for anyone," said Commissioner Don Grantham, who stands by his vote to keep X-Mart closed. "I think it is immoral," he said. "I don't think we need to have that type of business in Augusta."

"I just don't believe that we can legislate morality," said Commissioner Alvin Mason. "I don't believe we are constitutionally able to do that."

A new Gallup poll ranks Augusta's Richmond county as the eighth most religious metro area in the country, showing that 55 percent of residents consider themselves to be very religious.

Protect Repeat Offenders 
A confidentiality clause seeks to prohibit the parties to a settlement from disclosing the settlement terms and sometimes more. Confidentiality raises numerous problems.

For Ronald L. Burdge, a principal at a law firm, there are valid reasons to oppose confidentiality. It can be bad for clients, bad for lawyers, and bad for the legal system.

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.

A good example is the Eleventh Circuit’s long-standing approach that settlements in Fair Labor Standards Act (FLSA) litigation should not involve confidentiality because it contravenes congressional intent behind the law and undermines regulatory efforts (Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982)) and that FLSA settlement agreements must be filed in the court’s public docket (Hanson v. Wells Fargo Bank, No. 08-80182-CIV, 2009 WL 1490582 (S.D.Fla. May 26, 2009)).

Unlike most states, Florida has a statute that prohibits concealment of public hazards, which effectively prohibits confidentiality (Fla. Stat. Ann. 69.081). California has a similar statute that forbids non financial confidentiality of motor vehicle problems in its Lemon Law settlements (Cal. Civil Code 1793.26).

Secrecy in settlements also hurts lawyers. A lawyer cannot place a fair and reasonable value on a case when the lawyer cannot compare it to other known cases. It is particularly harmful to inexperienced lawyers who may be most prone to undervaluing a case. The secrecy allows the perpetrator to assess a fair value while preventing the innocent victim from doing likewise.

Confidentiality does not actually promote settlement. The vast majority of cases already are settled without trial. Fundamentally, a settlement of a court case should be a public proceeding, just as a trial is a public proceeding of a court case.

Moreover, the legal system does not belong to any industry. It belongs to the public. Courts function best in the daylight of an open, transparent administration of justice. Otherwise, people cannot observe and understand what is going on and how the courts protect everyone by their fair administration of justice. Secrecy protects repeat offenders and harms everyone else. Openness is consistent with basic Constitutional principles of our government.

As Rosie Cisneros put it: "With more than a million lawyers and 70,000 lawsuits a day, the U.S. civil justice system has been corrupted into a gigantic get-rich-quick lottery, a new national pastime played 20 million times a year by a growing army of self-styled “victims” and their increasingly powerful and predatory attorneys."

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