The Future of Confidential Settlements

The future of confidential settlements in the wake of increased passage of sunshine laws has taken a new twist. Sunshine laws generally require full public disclosure of settlement terms that affect public safety. The Federal District Court in South Carolina recently passed the most far- reaching of all sunshine provisions.

United States District Court, District of South Carolina, Local Rule 5.03 took effect November 1, 2002. Local Rule 5.03 provides that "[n]o settlement agreement filed with the court shall be sealed pursuant to the terms of this rule." This blanket prohibition on sealing court-filed settlement agreements with no exception is the broadest sunshine provision adopted to this point. It is likely that the state courts in South Carolina may follow suit.

Florida federal courts soon may move in the same direction.1 At a recent quarterly judges' meeting, the judges agreed to refer the question of the secrecy of confidential settlements to one of its committees for evaluation and recommendation.

Those practicing in Florida's state courts are already familiar with this type of provision. Fla. Ann. Stat. 69.081(3) provides that:

Except pursuant to this section, no court shall enter an order or judgment which has the purpose or effect of concealing a public hazard or any information concerning a public hazard, nor shall the court enter an order or judgment which has the purpose or effect of concealing any information which may be useful to members of the public in protecting themselves from injury which may result from the public hazard.

The whole point of this statute, and others like it, is to prevent making the courts a party to withholding public health and safety information. Still, unlike Local Rule 5.03, Florida's sunshine statute is not so far reaching and does not prohibit confidential settlements in cases that do not implicate public health and safety interests.

Texas has the most sweeping state court sunshine provision with regard to confidential settlement agreements. Under Tex. R. Civ. P. 76a, court records may be permanently sealed from public disclosure only by following stringent public notice and hearing requirements. In Texas, non-party intervenors may attend the public hearing and be heard as to why they believe the documents should remain available to the public. Rule 76a(2)(b) includes in its definition of "court records," settlement agreements not filed of record...