Opinion ID: 1902510
Heading Depth: 1
Heading Rank: 2

Heading: the disclosure of settlement agreements

Text: The scope of discovery under Maryland law is very broad. The pertinent discovery rule states: (a) Generally.A party may obtain discovery regarding any matter, not privileged, including the existence, description, nature, custody, condition, and location of any documents or other tangible things... if the matter sought is relevant to the subject matter involved in the action.... It is not ground for objection that the information sought is already known to or otherwise obtainable by the party seeking discovery or that the information will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence. Md. Rule 2-402(a). We have noted that the purpose of the discovery rules is to require the disclosure of facts by a party litigant to all of his adversaries, and thereby to eliminate, as far as possible, the necessity of any party to litigation going to trial in a confused or muddled state of mind, concerning the facts that gave rise to the litigation. If all of the parties have knowledge of all of the relevant, pertinent and non-privileged facts, or the knowledge of the existence or whereabouts of such facts, the parties should be able properly to prepare their claims and defenses, thereby advancing the sound and expeditious administration of justice. Baltimore Transit Co. v. Mezzanotti, 227 Md. 8, 13, 174 A.2d 768, 771 (1961); see also Berrain v. Katzen, 331 Md. 693, 697, 629 A.2d 707, 708-09 (1993); Androutsos v. Fairfax Hosp., 323 Md. 634, 638, 594 A.2d 574, 576 (1991); Kelch v. Mass Transit Admin., 287 Md. 223, 229, 411 A.2d 449, 453 (1980); Williams v. Moran, 248 Md. 279, 291, 236 A.2d 274, 281-82 (1967). The discovery rules are broad in scope and are construed liberally to accomplish their purpose. Berrain, 331 Md. at 697, 629 A.2d at 709; Androutsos, 323 Md. at 638, 594 A.2d at 576; Kelch, 287 Md. at 229, 411 A.2d at 453; Mezzanotti, 227 Md. at 13, 174 A.2d at 771. Under the general discovery rule, a party may obtain discovery of information that is relevant and not privileged. Privileges prohibiting or limiting the introduction of evidence are created by the United States Constitution, the Maryland Constitution, statutes, and common law. The Fifth Amendment of the United States Constitution and Article 22 of the Maryland Declaration of Rights protect against compulsory self-incrimination. Evans v. State, 333 Md. 660, 682, 637 A.2d 117, 128, cert. denied, 513 U.S. 833, 115 S.Ct. 109, 130 L.Ed.2d 56 (1994); Choi v. State, 316 Md. 529, 535, 560 A.2d 1108, 1111 (1989); Lodowski v. State, 307 Md. 233, 246-47, 513 A.2d 299, 306-07 (1986). There are also numerous Maryland statutory privileges. See Md.Code (1974, 1995 Repl.Vol., 1997 Supp.), § 9-105 of the Courts & Judicial Proceedings Article (CJ) (confidential marital communications privilege); CJ § 9-106 (spousal privilege); CJ § 9-107 (privilege against self-incrimination); CJ § 9-108 (attorney-client privilege); CJ § 9-109 (patient-psychotherapist privilege); CJ § 9-109.1 (client-psychiatric mental health nursing specialist privilege); CJ § 9-110 (client-accountant privilege); CJ § 9-111 (priest-penitent privilege); CJ § 9-112 (newspaper person-news source privileged); and CJ § 9-121 (social worker-client privilege). Certain common-law rules also prevent the discovery or use at trial of certain matters. Hamilton v. Verdow, 287 Md. 544, 562, 414 A.2d 914, 924 (1980)( The executive privilege concept has been considered part of the common law of evidence.). Respondents have asserted no privilege pertaining to the amounts of the settlement agreements they negotiated with other potentially responsible parties. We next must address whether, as set forth in Rule 2-402(a), the information sought by petitioners was relevant. Although the amounts of the negotiated settlements may have been irrelevant in the pre-trial stage, once the verdicts were rendered against petitioners, the amounts of the settlement agreements became relevant in determining the apportionment of damages as to petitioners under the Maryland Uniform Contribution Among Joint Tort-Feasors Act. Courts outside of Maryland have had the opportunity to address the issue of whether settlement agreements, deemed confidential by the parties that negotiated them, are discoverable. In a case involving the Rhode Island Uniform Contribution Among Joint Tort-Feasors Act, [3] the United States District Court for the District of Rhode Island examined whether a nonsettling defendant could compel disclosure of a settlement agreement negotiated between the plaintiffs and a former codefendant. The plaintiffs in that case had brought a malpractice suit against a group of physicians and a hospital. The plaintiffs and the former codefendant physicians, who previously had settled with each other, argued the documents were not discoverable by the codefendant hospital because secrecy provisions of the agreement prevented disclosure, the defendant hospital did not show a need for the agreement, and the disclosure of the agreement would inhibit future settlements. After noting that Rule 26(b) of the Federal Rules of Civil Procedure was broad and permitted discovery of information if relevant and not privileged, the court examined the relevancy of the settlement agreement. In concluding the agreement was relevant, the court reasoned: [U]nder the Rhode Island version of the Uniform Contribution Among Joint Tortfeasors Act, ... the damages which the plaintiffs can collect from the Hospital if they successfully prosecute what remains of the case will depend to some extent on the terms, amount, and value of the Physicians' settlement. Bennett v. La Pere, 112 F.R.D. 136, 138 (D.R.I.1986) (citations omitted). The court also concluded there were no other considerations that would militate against the disclosure. Another case discussing whether amounts of settlement agreements are discoverable is Bottaro v. Hatton Associates, 96 F.R.D. 158 (E.D.N.Y.1982). In Bottaro, a case concerning securities law violations, one of the defendants negotiated with the plaintiffs a settlement agreement, which stipulated that its terms would not be disclosed. After the settling defendant was dismissed from the action, the two remaining defendants sought to obtain pretrial disclosure of the agreement. They argued the settlement agreement was relevant in determining whether the settling defendant was liable to them for contribution. Holding the settlement agreement was not relevant at the pretrial stage, the court stated: While it is true that a settling defendant's liability for contribution depends on whether he paid his share of any damage award, this determination cannot be made until a final judgment has been rendered. Only at that juncture will the full liability of all defendants be known, and the pro rata share owed by the settling party ascertained. Even then, the settlement would not be evidence relevant to any issue in this case other than the ministerial apportionment of damages, a mathematical computation which the Court rather than the jury will perform. Hence, the amount of the settlement is not relevant to any issue in this case at this time. Id. at 160 (citations omitted). Other federal courts examining the discoverability of settlement agreements concluded settlement agreements were discoverable if they were relevant. See Young v. State Farm Mut. Auto. Ins. Co., 169 F.R.D. 72, 79 (S.D.W.Va.1996) (holding settlement agreement between client and insurance company that resulted from an unlawful trade practices suit was discoverable in an action by client's former attorney for fees in a tort action because it was relevant to the nature of the agreement between client and attorney and the results obtained in the tort action); Doe v. Methacton Sch. Dist., 164 F.R.D. 175, 176 (E.D.Pa.1995) (recognizing discoverability of settlement agreements but declining to allow discovery because agreement was not relevant); Vardon Golf Co. v. BBMG Golf Ltd., 156 F.R.D. 641, 650-51 (N.D.Ill.1994) (recognizing settlement agreements were discoverable so long as they were relevant but declining to compel disclosure of agreement because defendant did not show it was relevant); Lesal Interiors, Inc. v. Resolution Trust Corp., 153 F.R.D. 552, 563-64 (D.N.J. 1994) (recognizing discoverability of settlement agreements but declining to compel disclosure where party seeking it did not make a particularized showing that material sought was relevant or likely to lead to admissible evidence); Fidelity Fed. Sav. & Loan Ass'n v. Felicetti, 148 F.R.D. 532, 534 (E.D.Pa.1993) (holding party was entitled to discovery of settlement agreement); Morse/Diesel Inc. v. Trinity Indus., 142 F.R.D. 80, 85 (S.D.N.Y.1992) (holding magistrate judge erred in ordering production of settlement agreements where judge did not determine whether the documents were reasonably calculated to lead to the discovery of admissible evidence); Morse/Diesel, Inc. v. Fidelity & Dep. Co., 122 F.R.D. 447, 450-51 (S.D.N.Y.1988) (holding settlement agreements were discoverable because they were relevant to issues of construction costs). [4] Some federal courts have recognized impliedly the admissibility of settlement agreements. See Lafarge Corp. v. Hartford Casualty Ins. Co., 61 F.3d 389, 400-01 (5th Cir. 1995); Haworth, Inc. v. Herman Miller, Inc., 998 F.2d 975 (Fed.Cir.1993). State courts also have held that settlement agreements, deemed confidential by the parties who negotiated them, are discoverable. See Council of Unit Owners of Sea Colony East v. Carl M. Freeman Assocs., C.A. 86C-AU-52, 1990 WL 128185, at  (Del.Super.Ct.1990) (holding a portion of settlement agreement was discoverable but prohibiting discovery of the remaining portion because it was not relevant); Perez v. State Indus., Inc., 578 So.2d 1018, 1020 (La.Ct.App.1991) (holding settlement agreement was discoverable and could be used to show bias despite rule prohibiting the introduction of settlement agreements to prove liability); Page v. Guidry, 506 So.2d 854, 857-58 (La.Ct.App. 1987) (holding settlement agreements were discoverable where the agreements were not admitted to establish liability but were admitted to apportion damages and assess the plaintiff's credibility and veracity); Corn Exch. Bank v. Tri-State Livestock Auction Co., 368 N.W.2d 596, 599 (S.D.1985) (stating [a]ny agreement between some, but not all, of the litigants should be disclosed upon the request of any party in accordance with our rules of procedure); Ford Motor Co. v. Leggat, 904 S.W.2d 643, 649 (Tex.1995) (stating [s]ettlement agreements are discoverable to the extent they are relevant (citation omitted)); Collier Servs. Corp. v. Salinas, 812 S.W.2d 372, 377 (Tex.Ct.App.1991) (holding settlement agreement was discoverable because it was relevant to a judgment creditor's search for assets from which to collect its judgment); Slusher v. Ospital, 777 P.2d 437, 444 (Utah 1989) (holding where an injured plaintiff and one or more, but not all, defendant tort-feasors enter into a settlement agreement, the parties must promptly inform the court and the other parties to the action of the existence of the agreement and of its terms). Cf. Arkansas Best Corp. v. General Elec. Capital Corp., 317 Ark. 238, 246-47, 878 S.W.2d 708, 712 (1994) (holding that when parties enter into a court-approved settlement agreement, the public may access the information contained in the settlement agreement); Scott v. Nelson, 697 So.2d 1300, 1301 (Fla.Dist.Ct.App.1997) (holding settlement agreement in another case between defendant and an individual that contained a confidentiality provision prohibiting the individual or her attorneys from responding to any inquiry of any kind could not be used to bar the deposition of the individual). But see In re N.Y. County Data Entry Worker Prod. Liab. Litig., 162 Misc.2d 263, 268, 616 N.Y.S.2d 424, 428 (Sup.Ct.1994) (holding compelling need for privacy articulated by the plaintiffs outweighs the reasons stated by defendants for discovery of the settlement agreements), aff'd, 222 A.D.2d 381, 635 N.Y.S.2d 641 (1995). When settlement agreements termed Mary Carter [5] agreements are involved, some state courts require disclosure of the agreement to the nonsettling parties and the court and permit disclosure to the jury. See Mustang Equip., Inc. v. Welch, 115 Ariz. 206, 211, 564 P.2d 895, 900 (1977); Kuhns v. Fenton, 288 So.2d 253, 253-54 (Fla.1973); Cox v. Kelsey-Hayes Co., 594 P.2d 354, 359-60 (Okla.1978). Given the broad scope and purpose of Maryland's discovery rules, the relevancy of the amounts of the settlements to the damages petitioners were required to pay, the fact that the settlement agreements are not privileged, and the persuasive authority from other jurisdictions, we conclude that the relevant portions of such settlement agreements are discoverable. We recognize the importance of maintaining the confidentiality of settlement negotiations. For example, Maryland Rule 5-408 prevents the admission of compromises or offers to compromise to prove the amount or validity of a civil claim. We also recognize that protecting confidentiality of negotiations encourages parties to enter into settlement agreements. We have stated on numerous occasions that the policy of this State is to encourage parties to negotiate compromises or settlements of law suits. See Lahocki, 286 Md. at 726, 410 A.2d at 1045; Chertkof v. Harry C. Weiskittel Co., 251 Md. 544, 550, 248 A.2d 373, 377 (1968), cert. denied, 394 U.S. 974, 89 S.Ct. 1467, 22 L.Ed.2d 754 (1969). The Maryland discovery rules contain provisions designed to afford protection against disclosure of sensitive information, such as information that may be contained in settlement agreements, under appropriate circumstances. Maryland Rule 2-403 gives the trial court authority to enter a protective order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense. The court may enter an order requiring that certain matters not be inquired into or that the scope of the discovery be limited to certain matters or that a trade secret or other confidential research, development, or commercial information not be disclosed or be disclosed only in a designated way. Md. Rule 2-403. Although this Court has not examined the specific issue of whether a party may examine confidential settlement agreements, we have discussed a party's ability to inspect other information deemed confidential where the confidentiality is created by statute. For example, in Zaal v. State, 326 Md. 54, 602 A.2d 1247 (1992), we addressed whether a criminal defendant could inspect the confidential school records of a child he allegedly had abused. In that case, the defendant subpoenaed the victim's school records, which are confidential pursuant to Maryland regulations. The school board responded by moving for a protective order. During the hearing on that motion, the defendant argued the information in the records could contain information revealing a pattern of conduct affecting the victim's credibility. The trial court, following an in camera inspection of the records, quashed the subpoena, denying the defendant access to the records. In our opinion, we set forth the appropriate standards and procedures to be utilized when a criminal defendant attempts to obtain discovery of confidential information. We stated the defendant seeking the information must first show a need to inspect the confidential information. We described this need to inspect as a reasonable possibility that review of the records would result in discovery of usable evidence. Id. at 81, 602 A.2d at 1260. In determining whether the defendant has met the need-to-inspect showing, the court may consider the nature of the charges and the issue before the court. Once the defendant meets the need-to-inspect showing, the court may elect to review the records alone, to conduct the review in the presence of counsel, or to permit review by counsel alone, as officers of the court, subject to such restrictions as the court requires to protect the records' confidentiality. Id. at 87, 602 A.2d at 1264. We applied the Zaal procedure to a civil case in Baltimore City Dept. of Social Servs. v. Stein, 328 Md. 1, 612 A.2d 880 (1992). In that case Stein, a defendant in a negligence action, sought to obtain all of the records of the Baltimore City Department of Social Services (BCDSS) relating to the plaintiffs. Under Maryland Code (1957, 1991 Repl.Vol.), Art. 88A, § 6, however, the records were confidential. The BCDSS filed a Motion for a Protective Order, and Stein moved to compel production of the documents. The trial court denied the BCDSS's request for a protective order and granted Stein's motion to compel. In our opinion, after noting that the records sought by Stein, by statute, were confidential, we cited extensively to the standards and procedures outlined in Zaal and adopted that same approach for civil cases. We went on to emphasize, however, that even when a party seeking disclosure has shown a need to inspect, there should be no greater disclosure allowed than is necessary to meet the `need to inspect' shown by the party seeking inspection. Stein, 328 Md. at 31, 612 A.2d at 894. There certainly would be no greater standard, and there may be significantly less of a standard, where there is no statutory basis for the claims of confidentiality, as in this case. Petitioners had a need to inspect so much of the settlement agreement as was relevant to a determination of whether, and how much, the judgments against them might be affected by (1) the way in which the agreement classified the settling defendant, i.e., tortfeasor or nontort-feasor, (2) whether a pro tanto or pro rata release was intended, and (3) the amount paid for the release. Petitioners demonstrated more than `a reasonable possibility that review of the [settlement agreements] would result in discovery of usable evidence.' Id. at 27, 612 A.2d at 893; Zaal, 326 Md. at 81, 602 A.2d at 1260. [6] The amounts of the settlement agreements in the instant case in fact were utilized by the trial court to determine the amounts of the final judgments entered against each petitioner. This evidence, however, was completely withheld from petitioners. We hold that such a procedure was inappropriate. Accordingly, we vacate the trial judge's apportionment of damages against the respective petitioners and remand for further proceedings consistent with this opinion. While we hold complete nondisclosure of the settlement agreements was inappropriate, the complete disclosure of negotiations leading up to the settlement agreements likewise, depending on the circumstances upon remand, might also be inappropriate. The sums and certain of the conditions of the settlements, however, are relevant and discoverable in the context of this proceeding.