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Discoverability of Settlement Agreements in Multiparty Cases

Retailers, restauranteurs, and hoteliers sometimes find themselves involved in litigation involving multiple parties. Often, when multiple parties are involved, a settlement is reached with one or more parties but not with others. In those cases, business owners and operators should be aware of a new Texas court decision concerning the confidentiality of settlement agreements.

A recent decision by the Houston Court of Appeals addressed when settlement agreements are discoverable. See In re Grecon, Inc., 14-17-00639-CV (Tex.App.-Houston [14th Dist.] Jan. 12, 2018). This case has important implications for maintaining the confidentiality of settlement agreements when litigation proceeds against non-settling parties.

The plaintiff in In re Grecon sued several defendants after a fire and settled with all but one of the parties. After these settlements occurred, the sole remaining defendant served requests for disclosure under Texas Rule of Civil Procedure 194.2, which requires disclosure of the "existence and contents of any relevant portions of a settlement agreement."

The court held that the full contents of the settlement agreements were relevant and discoverable for two reasons. First, the settlement agreements are necessary in order to determine settlement credits under Texas's proportionate responsibility statute. Second, the Court held the agreements are relevant to analyzing potential witness bias or prejudice.

A different majority of the court held that the plaintiff waived any objections to production of the settlement agreements by failing to timely file a motion for protection. The court stated that in "extremely rare cases" when settlement agreements should be withheld, the objecting party bears the burden to timely file a motion for protection.

Moving forward, business owners and operators settling discrete portions of a multiparty case should consider immediately filing a motion for protection to contest disclosure of any portions of a settlement agreement.