Discovery of Confidential Settlement Information
How airtight is a confidentiality provision in a settlement agreement? In a recent case out of Florida, the court protected a confidential settlement agreement from disclosure to a remaining party. Wal-Mart Stores, Inc. v. Nicolette Strachan et al., ___ So. 2d __, 36 Fla. L. Weekly D2262, Case No. 4D11-2539 (Fla. 4th DCA Oct. 12, 2011). However, is the Wal-Mart decision particular to its facts and jurisdiction? How do other courts view confidentiality provisions? As illustrated below, there are three basic approaches to discoverability of confidential settlements. The prevailing approach is a balancing approach, but there are also two opposing bright-line approaches: the “not discoverable” approach (even if relevant) and the “discoverable” approach (if relevant).
The Wal-Mart Case
The Wal-Mart court hinged on the relevance of the settlement terms. The plaintiffs settled with three out of four defendants, leaving Wal-Mart as the only remaining defendant. Wal-Mart moved to compel production of the amount of the settlement paid by each of the settling defendants. The trial court denied the motion. On appeal, the Fourth District Court of Appeal agreed with the lower court. But the reasons for non-disclosure were particular to a quirk of Florida law. In 2006, the Florida legislature essentially abolished joint and several liability. Therefore, because Wal-Mart would not be responsible for the fault of anyone but itself, the amounts of the settlements could not lead to the discovery of admissible evidence at trial. The opinion does is consistent with the balancing approach of other jurisdictions.
Balancing Approach
The balancing approach weighs the interests of the party seeking disclosure against those of the settling parties, usually siding with the settling parties unless the terms are relevant. A good example of the balancing approach is Hinshaw, Winkler, Draa, March & Still v. Superior Court (Kauffman), 51 Cal. App. 4th 233, 58 Cal. Rptr. 2d 791 (1996). There, the California Court of Appeal balanced the constitutional right of privacy against the interests of “facilitating ascertainment of trust in connection with legal proceedings.”
The balancing approach will sometimes allow for discovery of the agreement. For example, limited discovery of settlement amounts was allowed in the case of New York v. Solvent Chemical Co., 214 F.R.D. 106 ( W.D.N.Y. 2003). There, a non-settling defendant/third-party plaintiff sought to take the deposition of a third-party defendant corporation still actively a party in the case. The party seeking discovery sought to explore the nature and extent of settlement negotiations. The court held that the amounts of the settlements were indeed relevant and allowed that issue to be explored. However, nothing else about the settlement agreement or the negotiations leading up to it were subject to discovery as they were irrelevant to the case and invaded the attorney-client privilege and work product doctrine.
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