Ask the Court If You Want Confidentiality

Abraham Lincoln’s wisdom revealed itself in a variety of spheres, ranging from the adversities associated with frontier life to challenges in stitching a divided nation together. In respect to legal disputes, Lincoln wisely advised lawyers to “discourage litigation” and, instead, “persuade your neighbors to compromise whenever you can.” Lincoln’s encouragement to compromise evolved into public policy, repeatedly expressed by federal and state courts, that parties should endeavor to settle civil lawsuits.

In today’s litigation environment, mediations and judicial settlement conferences have become the primary method through which lawyers and their clients compromise. Most judges, lawyers, and policymakers — but not all —  accept that confidentiality of settlement discussions, mediation statements, and the like encourages participants to be candid and forthcoming, which increases the chances of a pretrial resolution.

The question arises, though, whether the so-called confidentiality of settlement-related discussions actually precludes those discussions from compelled disclosure, either from a party’s intra-litigation adversary, or a third party during subsequent litigation.

In that regard, let’s debunk a few assumptions and misconceptions.  A federal statute requires each federal district court to implement alternative dispute resolution programs, and impose confidentiality requirements on the participants in those efforts. While most district courts have followed this mandate, their confidentiality rules vary. More importantly, a rule of confidentiality is not the equivalent of an evidentiary privilege. A confidentiality rule merely precludes a party from voluntarily disclosing settlement-related discussions; indeed, courts have sanctioned parties for disclosing settlement-related discussions without consent of all interested parties. But a confidentiality rule does not prevent the compelled disclosure of the settlement discussion. Only an evidentiary privilege fulfills that purpose.

Many of us routinely label settlement communications as “protected by Rule 408.” But what does that classification really safeguard? Federal Rule of Evidence 408, and its state counterparts, precludes the admissibility of settlement discussions, but does nothing to impede the discovery of those communications. And the inadmissibility has limits. The rule permits the admission of settlement communications to prove, for example, a witness’s bias.

If evidence rules and court-mandated confidentiality rules do not prevent the compelled discovery of settlement communications, one can ask whether any real protection exists. And if not, then does a party’s incentive to speak candidly during settlement negotiations evaporate?

At the federal level, the Sixth Circuit recognizes a “settlement privilege” that prevents the compelled disclosure of communications made in furtherance of settlement. Courts have not fully developed this privilege, and limit it to settlement-related communications. Other circuits eschew this privilege in favor of a heightened discovery standard for dispute-resolution negotiations. Some district courts have adopted a mediation privilege which, as the name suggests, is limited to resolution discussions pertaining to a formal mediation.

Protection for settlement-related communications varies under state law. Some states have adopted a settlement privilege by statute or common law. Other states protect communications when related to a formal mediation. Some preclude discovering mediation communications from the mediator but not the mediation participants. And others, similar to federal district courts, impose duties of confidentiality without adopting an evidentiary privilege as required to prevent compelled disclosure. This morass makes it difficult to predict the discoverability of settlement communications.

Fortunately, we can reduce this unpredictability and increase the chances of protection. Let’s understand that a “408” designation does not create an impenetrable barrier to disclosure and choose our written words and positions carefully. Still, it remains important to demand an agreement from your adversary that settlement discussions will not be disclosed without a court order.

Ask the court to include confidentiality requirements in any order referring the case to mediation. If your jurisdiction recognizes a settlement or mediation privilege, then use it and cite it when engaging in resolution discussions. In short, generate evidence of your confidentiality and non-disclosure intent to dissuade a judge from compelling disclosure. As Lincoln also quipped, “The most reliable way to predict the future is to create it.”