Confidential Settlement Amounts Are Not Necessarily Confidential

Courts in the Northern District of California, which have been handling price-fixing class actions in the electronics industry for more than a decade, are continuing to develop ground rules about whether defendants in a price-fixing case are entitled to know the amount for which an opt-out Direct Action Plaintiff (DAP) settles its cases against other defendants. On May 27, 2016, Judge Jon S. Tigar overruled objections to a Special Master’s Report and Recommendation compelling two DAPs to disclose settlement amounts in the Cathode Ray Tube (CRT) Antitrust Litigation, No. 3:07-cv-5944 (N.D. Cal.). Judge Tigar compelled both companies to provide that information to a Special Master so he can determine whether the information should be provided to other defendants to facilitate settlements—even though both companies had already settled all of their claims against all defendants.  ECF 4661.

Defendants in price-fixing cases want to learn the individual settlement amounts that DAPs have agreed to with other defendants for two reasons. First, defendants in antitrust cases are jointly and severally liable for treble damages suffered by a DAP, but they also are entitled to a set-off for the amount that DAP has recovered through settlements with other defendants. Second, defendants argue that knowing settlement amounts for other defendants can facilitate their own settlements. DAPs counter that disclosing individual settlement amounts hinders the settlement process by creating a disincentive to settle early because the settlement amount will not remain confidential, and causing defendants who haven’t settled to nit-pick relative culpability in developing settlement proposals.

Although DAPs in CRT originally objected to disclosing settlement amounts at all, some suggested a compromise whereby settlement agreements would be provided to the Special Master, who then would provide each DAP’s aggregate settlement recovery to defendants. In other words, rather than providing defendants with the exact settlement amount each DAP had obtained from each settling defendant, defendants would be told the total recovery that each DAP had received from all of the defendants it had settled with. This middle ground provides defendants with the amount of the available set-off while still preserving the confidentiality of individual settlement amounts. Then-presiding Judge Samuel Conti accepted this compromise in an October 2015 order.  ECF 4102. In April 2016, the Special Master ordered production of settlement agreements pursuant to that order.  ECF 4611.[i]

One DAP objected because it had dismissed all of its claims and no longer is a party; another DAP objected because it had settled all of its claims and its final dismissal was forthcoming. They argued that defendants were not seeking the settlement information to facilitate settlement with them, but, rather, to facilitate settlement with other DAPs, and the discovery accordingly was improper.

The Special Master and Judge Tigar disagreed. In a May 11, 2016 Report, the Special Master concluded that “[t]he aggregate settlement amounts for all DAPs, including those who have settled all cases, may help parties with active DAP actions to assess the value of their cases and promote further settlement.” ECF 4661 (emphasis added). In his May 26, 2016 order, Judge Tigar agreed that disclosure of the aggregate settlements would “assist defendants who remain in the case decide whether to proceed to trial.” Id. He ordered production of the settlement agreements to the Special Master, who has discretion to determine whether disclosure of the aggregate set-off value will not assist any party whose case is still pending, in which case he can decline to provide the information to defendants.

In short, the court concluded that a defendant’s desire to learn the amount of available set-offs is not necessarily a requirement for a defendant to obtain the aggregate amount for which a DAP settled its cases—even if it has completely settled and dismissed all of its cases. Instead, under the court’s order a defendant can argue that the touchstone is simply whether the information would facilitate settlement with other DAPs.

It remains to be seen who is correct about whether this increased flow of information regarding a DAP’s settlements will facilitate or hinder the settlement process. For example, some defendants may favor deferring settlement to gauge ranges for settlement rather than trying to obtain a “first to settle” discount. And some DAPs may be hesitant to provide a “first to settle” discount, because its aggregate settlements may be disclosed sooner rather than later. Finally, in ongoing, related cases such as the electronics parts cases in the Northern District of California and the auto parts cases in the Eastern District of Michigan, DAPs and defendants need to consider how disclosure of settlement recoveries in one case may affect settlement negotiations, dynamics and amounts in other cases.

[i] In the prior order, Judge Tigar addressed a related issue—the discoverability of cooperation agreements in DAP settlement agreements because of the potential for bias in witness testimony.  He ordered the disclosure “of the verbatim text of the limited portions of the settlement agreements that contain any cooperative agreements that may be used to challenge a witness (or could reasonably lead to evidence that may be used to challenge witness) at trial.”