Consumer groups urge federal judge to unseal State Farm court records

Friday, October 29, 1999

A federal judge last week heard arguments on a motion to unseal court records in a lawsuit against one of the nation’s largest automobile insurers.

Lawyers for three consumer advocacy groups are asking U.S. District Judge Michael Hogan to open files in the 1994 case Foltz v. State Farm Mutual Automobile Insurance Co. The Eugene, Ore.-based federal judge had presided over the original case.

Attorneys for Consumer Action, Texas Watch and United Policyholders argue that sealing the files violates the public’s right of access to court records as guaranteed by the First Amendment. The groups contend that the Foltz case may help other consumers in lawsuits against insurance companies and may also help the groups in their efforts to battle insurance fraud.

“They had no right to seal official court records that had already been open and available to the public at one time,” said Larry Baron, one of the lawyers representing the three groups. “The First Amendment requires that [State Farm] come forward with reasons for why the file should not stay open, and they [have] failed to do so,” Baron said.

Lawyers for State Farm, however, contend that the files were sealed as part of a private settlement and therefore should remain secret. “Confidentiality was an essential part of the settlement for both sides,” State Farm lawyer Ralph Spooner told Hogan, as reported in The (Eugene) Register-Guard. Spooner refused comment when contacted by the First Amendment Center Online.

In the original case, Debbie Foltz charged that co-defendants State Farm and California Institute of Medical Research & Technology, Inc. had conspired to defraud her of medical benefits. Foltz sought reimbursement from State Farm for medical treatment her son received after an automobile accident. State Farm submitted her son’s medical records to the California Institute for review and, subsequently, reduced or denied benefits. Foltz alleged that the California Institute, under State Farm’s direction, had knowingly falsified reports indicating that her son’s treatment was unnecessary.

The case was litigated for more than four years and was eventually resolved through a confidential settlement. That settlement also stipulated that the court seal more than 450 documents in the case.

Last May, lawyers for the consumer groups filed a motion to open the court records.

“The sealing of this court record prevents the public, including other State Farm policyholders both present and future, from access to formerly-public information,” the groups’ motion states. “If the sealing order in this case stands, the public will never know the details of Foltz’s allegations. … Indeed, the public may not even be able to find out that the case was even filed, because the docket sheet and the record of the case [have] been deleted from the Court’s computer system.”

At a July 6 hearing, Hogan ruled that the three groups could intervene in the proceeding. He gave State Farm 30 days to explain why the file should be sealed and said that the groups’ lawyers would have 30 days to respond.

At the Oct. 19 hearing, Baron argued that State Farm had failed to demonstrate a “compelling reason” why the records should remain sealed.

“The parties cannot bargain away the public’s right of access,” the groups’ attorneys wrote in their reply in support of the motion to unseal the records. “The thrust of State Farm’s reliance argument is that (by settling the case) it has bought out the public’s Constitutional and common-law rights of access to this record.”

State Farm attorneys, however, argued that these rights had not been firmly established by case law.

“The right to access (in civil cases) has not been recognized by the U.S. Supreme Court,” Spooner told Hogan, The Register-Guard reported. “This was a private civil matter.”

The groups’ attorneys argued that the 9th U.S. Circuit Court of Appeals supported public access in the 1995 case Hagestad v. Tragesser. In that case it reversed a district court’s order sealing certain records because the court had failed to explain why they should be sealed. “The Ninth Circuit … require[s] courts to start with a strong presumption in favor of access,” the Hagestad ruling states. The 9th Circuit includes Alaska, Hawaii, Washington, Idaho, Montana, Oregon, Nevada, California and Arizona.

After the July 6 hearing, lawyers for the three groups learned that most of the Foltz file was in State Farm’s possession rather than in the courthouse. According to the groups’ reply in support of the motion, State Farm applied for the return of portions of the Foltz file shortly after the case was settled.

The groups’ attorneys are asking that Hogan not only unseal the records, but also require State Farm to return the records to the court.

Hogan said he would issue a written decision later.