Statements made in the course of settlement negotiations are inadmissible at trial, per Rule 408 of the NC Rules of Evidence. But does that dead end to admissibility protect against the production of such items during discovery?
No, said Judge Bledsoe, in his Opinion late last month in Duke Energy Carolinas, LLC v. AG Insurance SA/NV, 2018 NCBC 38. He could have rejected Defendant Duke’s claim that communications regarding settlement of ther cases weren’t subject to production on this principle:
Our courts have long recognized that ‘[t]he relevancy test for discovery is not the same as the relevancy test for admissibility into evidence. To be relevant for purposes of discovery, the information [sought] need only be ‘reasonably calculated’ to lead to the discovery of admissible evidence.’ Shellhorn v. Brad Ragan, Inc., 38 N.C. App. 310, 314, 248 S.E.2d 103, 106 (1978); see also N.C. R. Civ. P. 26(b)(1); Lowd v. Reynolds, 205 N.C. App. 208, 214, 695 S.E.2d 479, 483 (2010). If this test is met, a party may not object to a discovery request merely because ‘the information sought will be inadmissible at the trial.’ N.C. R. Civ. P. 26(b)(1).
But Defendant Duke argued for a "settlement privilege," which has been recognized by some courts. Well, Duke didn’t push for a full-blown privilege but something short of that, urging the Court to "require that a “heightened standard of relevance” be met before documents prepared for and communications made during settlement negotiations can be discovered." Op. ¶19.
The danger of not adopting its position, said Duke, was that "“[p]arties are unlikely to propose the types of compromises that most effectively lead to settlement unless they are confident that their proposed solutions” will not be used for some purpose in later litigation“ by some future third party.” Op. ¶20.
Judge Bledsoe disagreed, and said that Duke’s argument that settlement negotiations should get special protection in discovery "has been widely criticized and rejected by the majority of federal courts that have considered the issue." Op. ¶22.
Although Judge Bledsoe refused to give accord a blanket privilege to the previous settlement negotiations, he did an in camera review of the documents which Duke sought to protect from discovery. He denied Duke’s Motion for a Protective Order to the extent that the documents involved concerned "coal combustion residuals" (i.e. coal ash) or the power plants at issue in the case. He granted the Motion as to documents he deemed "not reasonably calculated to the discovery of admissible evidence. These documents concerned asbestos litigation or power plants not involved in the lawsuit before him.
The Business Court has previously held that settlement agreements are discoverable.