Gag Clauses (continued)

"California Acts to Bar Gags in Defect Cases"

"LOS ANGELES – California motorists who obtain restitution from auto makers for defective vehicles may no longer have to promise they will stay quiet as part of their settlements.

California lawmakers passed a bill this week that would bar auto makers from imposing gag rules in agreements to repurchase cars or trucks deemed defective under the state's lemon law. The bill, the first of its kind in the nation, awaits the signature of Gov. Pete Wilson; an aide indicated that Mr. Wilson was likely to sign it.

Vows of silence over the settlement terms of a court case, or details of a matter resolved privately, are common in disputes involving medical malpractice, product liability and corporate malfeasance. Increasingly, consumer advocates say, these secrecy clauses are being written into auto makers' agreements to buy back badly flawed vehicles. Some regulators say the gags erode their oversight by making it hard for them to track vehicles that have been branded as lemons.

In a Senate hearing last June, Mark Krause, a lobbyist for defense lawyers, testified that the proposed legislation would generate more litigation and work against consumers, making auto makers less likely to negotiate. 'By having a gag clause, it sweetens the pot,' he said. 'It makes it easier for manufacturers to settle.'

But Rosemary Shahan, president of Consumers for Auto Reliability and Safety, an advocacy group in Sacramento that asked law makers to introduce the bill, argued that 'gag clauses interfere with agencies that are supposed to protect us.'

Besides the Association for California Tort Reform, several auto makers also opposed the legislation. Ray Buttacavoli, regional manager for the General Motors Corporation in Sacramento, said most lemon-law repurchases were voluntary. 'We feel we ought to be able to impose conditions on those buybacks,' he said."

– New York Times, August 21, 1998