Confidential Settlement Terms: How confidential are they?

In a recent case, the Supreme Court of Virginia, has significantly affected the application of confidential settlement terms in wrongful death claims. This ruling will result in the filing of a written petition stating the relevant terms, with the Release attached, and a file that will remain open for all the world to see. (Perreault v. The Free Lance Star, 276 Va. 375, 666 S.E.2d 352 (2008).)

All medical or doctor malpractice defendants or potential defendants, including their respective insurance carriers, would prefer to keep the settlements of claims confidential.

There are good reasons why individual defendants want Settlement Terms to remain confidential:

• - on the healthcare providers’ part, confidentiality helps to protect their good name and limits the ability of other potential claimants to find and pursue a target with a proven willingness to settle.
  
• - For the insurance carriers, an added benefit is the restriction on the ability of claimants' counsel to research the settlement proclivities of any individual carrier.

The nature of the claims at issue is such that the statutory law of Virginia requires that a Court approve settlements in which the claim is brought for wrongful death, and authorizes approval of such claims brought by a person under a disability.

Specifically, as part of the determination of the General Assembly to protect the beneficiaries to the Estate of a wrongful death Decedent - to ensure that all proper beneficiaries are aware of the claim and settlement, and to ensure that claims are not improvidently or hastily settled-Virginia Code - 8.01-55 requires Court approval of the compromise.

Because persons under a legal "disability" (i.e., minors, prisoners, or persons under a mental or other incapacity) are deemed incapable of contracting, and to promote oversight of such settlements, Virginia Code - 8.01-424 authorizes Courts to approve such settlements. Such Court approval carries with it potential viewing by the public eye.

In Shenandoah Publishing House, Inc. v. Fanning (1988), it was held that the statutory law of the Commonwealth creates a rebuttable presumption of openness to the public of judicial records of civil proceedings.

The issue here was whether or not the trial Court should have entered a protective order sealing various pieces of information and data, as well as the final order approving the settlement of the wrongful death claim that had been brought.

The Court decided in favor of “a societal interest in learning whether compromise settlements are equitable and whether the courts are administering properly the powers conferred upon them.” Against, the decision poses the risks of potential damage to professional reputation, emotional damage, or financial harm.

After this decision, courts throughout the Commonwealth varied in their application of Shenandoah Publishing.

In some courts, the order approving a wrongful death settlement would be sealed from public view-as long as no one objected.

In other courts, the Judge would require that the order remain unsealed.

In still other courts, the order might remain unsealed, but the precise terms of the settlement might not be made a part of that unsealed order.

This last option became less frequent after the Supreme Court decided the 1995 case of Ramey v. Bobbitt, in which the Court held that, to be binding, a Release had to be made part of a wrongful death settlement approved by a court.

In a nutshell, the potential viability of confidentiality had remained murky. Regrettably, the Supreme Court of Virginia recently brought clarity to the issue -- at the cost of a large measure of the confidentiality that has traditionally been a part of the settlement of medical malpractice claims.

The Supreme Court of Virginia acted in the case of Perreault v. The Free Lance Star, which involved the approval by the Spotsylvania Circuit Court of the settlement of four separate wrongful death claims.

The financial terms in each matter were kept private in sealed versions of the petitions (unsealed versions were redacted such that the financial terms were obscured). The Supreme Court of Virginia applied Code - 8.01-55, Shenandoah Publishing, and Ramey, and held that court approval of a wrongful death claim requires the filing of a written petition that contains the complete and unredacted terms of the compromise settlement.

Thus, the file must remain open and must contain a written petition containing all required information, including the financial terms. The case has several significant implications.

Going into the future, it is clear that your bought-and-paid-for confidentiality provision is effective only as to the parties to the immediate proceeding. Because that is the official interpretation of the law, arguably, parties interested in the terms of previous wrongful death settlements (e.g., newspapers or claimants' counsel) may petition the approving Courts to unseal the relevant pleadings.

Also, these principles are likely to be applied to the settlements of claims brought by persons under a disability. The premium that you should be willing to pay for confidentiality and your peace of mind have both just decreased.