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. 

The “Not Discoverable” Approach

An example of a court mandating non-disclosure of confidential settlement terms, even if relevant, comes from New Jersey. In UMC/Stanford, Inc. v. Allianz Underwriters Ins. Co., 267 N.J. Super 52, 67-71, 647 A.2d 182, 190-192 (1994), a policyholder entered into a confidential settlement with certain insurers. A non-settling insurer sought the terms of the settlement agreement, arguing it needed the information to determine if the insurers had paid the entirety of the policyholder’s claimed loss. On public policy grounds, the court upheld the terms of the confidentiality provisions and blocked disclosure of the settlement agreement. The court reasoned that (a) settlements are socially desirable and confidentiality fosters settlements, and (b) the confidentiality provision was bargained-for and such private dealings should be respected.

The “Discoverable” Approach

An example of the other extreme, mandating disclosure of confidential settlement terms, comes from Texas. In Re Continental Insurance Company, 994 S.W.2d 423 (Tex. App. 1999) involves a coverage dispute wherein the policyholder settled with certain of its insurers. One non-settling excess insurer sought full disclosure of all terms of the settlement agreements between the settling parties. The excess insure wanted to know if the policyholder had been made whole by the payments of the settling insurers. In ordering disclosure of the confidential settlement agreement, the court held that “[i]ndividuals cannot protect relevant information from discovery by confidentiality provisions in contracts, even settlement agreements. The private agreement between two individuals does not override the discovery rules.”

Practical Lessons

If you want to discover the terms of a settlement agreement, be prepared to demonstrate why it is relevant to an issue in your case. In every jurisdiction the information sought must be relevant. The most likely provision that will be discoverable is the amount of the settlement, particularly for set-off reasons. If set-off is not available in your case, be prepared to articulate some other reasonable basis for obtaining the terms.

Parties may also consider a protective order executed by all parties and adopted by the Court well before settlement. Such an agreement usually sets in place agreed procedures for documents viewed as confidential and binds all parties down the road. Although disclosure of confidentiality provisions often depends on the quirks of the case and the court, good lawyering can tip the balance.


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