Bill Would End Gag Clauses That Stifle Victims Who Sue

Times Staff Writer

Wendy Conner asked a San Diego doctor to smooth over a forehead scar in 2000. But her plastic surgeon injected fat from her abdomen into an artery in her head, permanently blinding her right eye.

Conner sued and eventually settled for what she says was a small sum. As part of that legal agreement, she promised not to turn the doctor in to state authorities. “It’s a horrible thing when somebody does something so terrible to you, and then you have to cover for them for the rest of your life,” she said.

For decades, negligent doctors and other professionals in California have deterred their victims from reporting them to state regulators by making silence a condition of settling lawsuits. Regulators, consumer advocates and lawmakers say these legally dubious gag clauses are among the most troublesome gaps in California’s consumer protection efforts.


They are pressing to ban the stipulations, even though Gov. Arnold Schwarzenegger refused to do so last year. The governor vetoed legislation that had passed with bipartisan support, saying that eliminating gag clauses “does not further the goal of making California more business-friendly.”

“The whole practice is just unconscionable, and it deprives executive branch agencies of the information they need to do their job,” said Julianne D'Angelo Fellmeth, the state-appointed independent monitor for the Medical Board of California. “I don’t understand how the governor didn’t see that the first time around.”

Conner still will not publicly identify her surgeon even though the medical board in January forced the doctor, Richard M. Escajeda, to surrender his license. Investigators charged that the year after he blinded Conner, Escajeda botched a breast implant surgery in another woman and then failed to anesthetize her properly during a subsequent surgery, causing her to experience the entire painful operation.

There are other reasons besides gag clauses that regulators never learn of lawsuits that could be evidence of professional malfeasance. Court officials and hospitals, for instance, are required by law to report criminal convictions, disciplinary actions and civil judgments against doctors, but Fellmeth’s evaluation of the medical board last fall found that many do not.

The problems are not limited to the medical profession. Under state law, attorneys and automobile makers are banned from trying to stop former clients from complaining to regulators, but there are no similar prohibitions for 230 other types of licensed professionals in California.

Democratic lawmakers have resurrected last year’s proposal as AB 446, sponsored by the chairwomen of the two legislative panels that oversee the state’s professional regulators, Assemblywoman Gloria Negrete McCloud (D-Chino) and Sen. Liz Figueroa (D-Fremont). An Assembly hearing is set for today.

The measure would still allow secret settlements in which plaintiffs promise not to reveal the nature of the case’s resolution, including the amount of money paid out. But 2.3 million California professionals -- including accountants, architects and embalmers, as well as healthcare professionals such as doctors, psychologists and nurses -- would face discipline from California’s regulatory boards if they were to insert gag clauses that dissuaded plaintiffs from making complaints to authorities.

“Gag clauses in malpractice settlements present unnecessary roadblocks which impede the medical board’s investigators from their sworn duty to protect the public,” the board president, Mitchell Karlan, said through a spokeswoman. State regulatory boards for 10 other professions endorsed last year’s effort to outlaw the provisos.

The strongest opposition has come from builders, engineers and small contractors. They fought last year’s proposal and are preparing another campaign to block this year’s version.

Richard Markuson, deputy executive director of Consulting Engineers and Land Surveyors of California, a Sacramento-based association, said professionals already are required to report to regulators any large civil lawsuit settlements.

“This would eliminate some of the finality that a settlement could bring to parties in a dispute,” Markuson said.

Schwarzenegger agreed, writing in his veto message that “even after the resolution of a civil suit, this bill could still require a licensee to [undergo] a second adjudication before a regulatory body.”

It is far from clear that the gag clauses are enforceable. The attorney general’s office last year told lawmakers that it believed such clauses cannot be imposed, citing several judicial rulings.

One was a 2000 appeals court ruling that voided a settlement that prohibited customers of a securities agent from reporting misconduct. The court ruled that the inclusion of the confidentiality clause was “not only directly connected to [the agent’s] misconduct, but is an instance of misconduct in itself.”

Still, advocates and plaintiffs say the pressure to consent to gag clauses often is intense.

Jody Costellos said that her San Diego home contractor demanded during settlement negotiations in 2002 that she withdraw the complaint she had filed with the Contractors State License Board. When she refused, scuttling the settlement talks, her lawyer promptly dropped her as a client, she said.

“That was my reward for not agreeing to a gag clause,” Costellos said sarcastically.

Costellos found another lawyer and ended up reaching a settlement that helped recoup a portion of her costs, which included $60,000 for the flawed house renovation and $112,000 worth of repairs. Her contractor was given a three-year license suspension, she said.

“With contractors, the last thing they want is for you to complain to those regulatory agencies because then they get their licenses revoked and they can’t practice,” said Costellos, who now assists other aggrieved homeowners through her website.

But other victims naively abide by the terms of the gag clause. Conner, the blinded woman, who now lives in Los Angeles, said her attorney wanted her to pay up front toward the cost of a trial if she didn’t agree to the settlement agreement. She acquiesced.

Conner alleged that during her ordeal, she had asked her doctor whether he had been sued and he said no. She said she later discovered that Escajeda had settled a number of malpractice and negligence lawsuits. In addition, his license had been suspended for five years during the 1990s after he was accused of fondling women’s newly augmented breasts while they were still under anesthesia, and making sexually inappropriate comments to other patients.

Reached by telephone, Escajeda, now 75, said he was not familiar with any gag clause in his lawsuit settlement with Conner and referred questions to his attorney, Marianne Barth. She did not respond to inquiries from The Times.

Conner, a jewelry designer and writer, said she lost her depth perception when she lost use of her eye. She said her teenage children had to run her business while she was recuperating.

The medical board eventually learned about her case through someone else and included it in the board’s accusation against Escajeda. Even so, in an interview, she would only refer to him as “Doctor X.”

“When the medical board called and said they’re going to investigate this, my first thought was, ‘I’ve been waiting for your call,’ ” she said.

Conner still believes that she was legally able to speak about the case only because investigators approached her. “What I signed was so ironclad,” she said, “I will always be sort of looking over my shoulder.”