Torts - Cases, Principles, and Institutions Fifth Edition, 2016a

Witt & Tani, TCPI 10. Damages
Settlement raises questions about another goal of torts as well: holding defendants
publicly accountable. For a devastating example, consider legal historian Barbara Welke’s
finding that between 1942 and 1954, “an untold number of children were horribly burned” when
the highly flammable fabric on the chaps of their Gene Autry cowboy suits came into contact with
a flame or spark. Settlements with confidentiality clauses helped ensure that the cowboy suits
continued to sell and circulate—and continued to kill and maim children—years after the danger
had been discovered. Not knowing the cause of their losses, many families simply accepted moral
and financial responsibility for their own children’s terrible injuries. Barbara Young Welke, The
Cowboy Suit Tragedy: Spreading Risk, Owning Hazard in the Modern American Consumer
Economy, 101 J. AM. HIST. 97 (2014). Note that families entering into such settlements appear to
have benefited from the confidentiality terms, in the sense that had they not agreed to these terms,
they perhaps would not have received compensation, or would have received it only after greater
outlays of time, effort, and expense. Does that make a difference in the analysis?
More recently, in 2014, General Motors came under harsh criticism for failing to recall
cars that had faulty ignition switches—a safety defect associated with several deaths.
Investigations revealed that General Motors was well aware of the defect. It had settled several
tort lawsuits arising out of the defect, but had included confidentiality provisions in each
settlement agreement that prevented the government or other users of the car from learning of the
defect. The confidentiality provisions allowed General Motors to avoid recalling cars for over a
year—although it ultimately did once the defect became public. Bill Vlasic, Inquiry by General
Motors Said to Focus on Its Lawyers, N.Y. TIMES, May 17, 2014. The use of non-disclosure
agreements in sexual harassment settlements has raised similar concerns. See, e.g., Matthew
Garahan, Harvey Weinstein: How Lawyers Kept a Lid on Sexual Harassment Claims, FIN. TIMES,
Oct. 23, 2017; Michelle Dean, Contracts of Silence: How the Non-Disclosure Agreement Became
a Tool for Powerful People to Stymie Journalists from Informing the Public, COLUM. J. REV.,
Winter 2018.
Should settlement agreements that include confidentiality provisions be enforceable? On
the one hand, confidentiality agreements inflict external costs on unrepresented third parties (that
is to say: us!) by keeping some risk secret and making it harder for societies to protect
themselves. On the other hand, confidentiality agreements allow plaintiffs to gain higher value
settlements than they otherwise would be able to obtain because it gives them an additional thing
of value to exchange with the defendant. Is there any justification for allowing plaintiffs to sell
the right to share information about a tort risk?
Some scholars argue for enforcing what they call “semi-confidential” settlements that
disclose the subject matter, but not the magnitude of settlements. Such an approach would
“liberate some information that is useful to third parties or the state, while still encouraging the
defendant to settle—at a price that packs some deterrence punch.” Saul Levmore & Frank Fagan,
Semi-Confidential Settlements in Civil, Criminal, and Sexual Assault Cases, 103 CORNELL L. REV.
311 (2018).
6. The Death of Liability?
As you will likely learn when you take business organizations, a standard feature of
corporations is that their shareholders are generally not personally liable for the liabilities of the
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