Court of Appeals affirms that settlement agreements are public records

In 2008 Carolinas Healthcare System filed a lawsuit against Wachovia, which was settled in 2012 with a confidential agreement. Attorney Gary Jackson sought a copy of the agreement under the N.C. Public Records Act, which specifically designates settlement agreements as public. CHS declined to provide it and a trial court found it was exempt because the lawsuit was initiated by CHS. On Wednesday the Court of Appeals affirmed that settlement agreements are public records regardless of who initiates the lawsuit. 

Carolinas Healthcare System filed a lawsuit in 2008 against Wachovia Bank over losses in the hospital’s investment accounts. The lawsuit was settled in 2012 when the bank and the hospital entered into a confidential settlement agreement. Charlotte attorney Gary Jackson then requested a copy of the agreement under the N.C. Public Records Act

Section 1.3 of the Public Records Act specifically deals with settlement agreements, making clear that they are public records with two exceptions – one for medical malpractice settlements against hospitals and one where the agreement has been sealed by court order. In refusing to release the settlement agreement, Carolinas Healthcare System claimed that the settlement was exempt because the language of Section 1.3 refers to lawsuits “instituted against any agency” of state government. Since the hospital instituted the action, it claimed the settlement agreement was exempt; that by expressly designating settlement agreements in lawsuits initiated against an agency as public records, the General Assembly necessarily created an exemption for settlement agreements were the public entity initiated the lawsuit. 

Jackson sued the hospital to get access to the record. In July 2013, Superior Court Judge Robert Sumner dismissed the lawsuit, agreeing with the hospital’s interpretation that settlement agreements are exempt when a government agency initiates the lawsuit. 

On Wednesday, the Court of Appeals rejected that interpretation of the public records law. The court noted that the General Assembly’s intent was to create a broad right of access and that documents created by government entities are public records unless specifically exempt. The court found that section 1.3 of the Public Records Act does not create a specific exemption for settlements when the lawsuit is instituted by a government entity. The court said that such a position would be inconsistent with previous rulings on attorney-client privilege communications, which become public after three years. 

“If we upheld CHS’ and the trial court’s construction of N.C. Gen. Stat. § 132-1.3, then settlement documents in actions instituted by a public agency would not be public records, but all ‘communications and copies thereof’ from the agency’s attorney relating to that settlement would become public record
in three years” Judge Martha Geer wrote for the majority. “We do not believe that the General Assembly intended to allow the public to have access to attorney communications regarding settlements — which would include, for example, letters attaching settlement agreement drafts — but to deny access to the actual finalized settlement documents.”

Judges Linda Stephens and Sam Ervin, IV were also on the panel and joined Judge Geer’s opinion. 

Read the court’s opinion hereRead coverage from the Charlotte Observer here