The Med-Mal Settlement and the Confidentiality Clause

Like everyone, doctors and other medical care providers are deeply concerned about their professional reputations. Allegations of medical malpractice, whether completely unfounded or based on solid evidence, can damage a medical practice, or lead a care provider's other patients to question the care they have received in the past. Whenever possible, damage control is desirable when a medical professional stands accused of providing substandard care.

To preserve reputations, settlement agreements often contain clauses emphasizing that, although the parties are settling, the medical professional has not admitted any wrongdoing. In the same vein, attorneys representing medical clients routinely press the opposing side to preserve confidentiality. Complainants may agree not to disclose the details of their alleged injuries, or the amounts they received to conclude the case. Such confidentiality clauses often come at a higher settlement cost to the medical provider, but their value to a practitioner's reputation going forward may be considerable; that is, unless the bargained-for secrecy pact cannot be enforced.

NJ Court Says Disclosure Laws Trump Confidentiality Clause

New Jersey Court Rule 1:38 provides that nearly all but a few enumerated Superior Court records are in the public domain and can be inspected by anyone who wishes to see them. In addition, the New Jersey Health Care Consumer Information Act, N.J.S.A.45:9-22.21 to 22.25, which went into effect in 2004, ordered the Division of Consumer Affairs to create a professional profile of every licensed physician, podiatrist and optometrist. The records compiled on each of these professionals now include “[a]ll medical malpractice court judgments and all medical malpractice arbitration awards reported to the applicable board, in which a payment has been awarded to the complaining party during the most recent five years, and all settlements of medical malpractice claims reported to the board, in which a payment is made to the complaining party.”

It is these rules that ran up against a medical malpractice settlement agreement's confidentiality clause in the recent case of Vares-Ebert v. Kelberg, A-4581-10 ' and the rules won. The conflict in Vares-Ebert arose when the plaintiff, who brought suit for her mother's wrongful death and had reached a settlement agreement with her mother's care providers, balked at signing the agreement. She contended not only that the writing did not reflect the agreed-upon terms, but that the confidentiality clause contained therein was unenforceable as a prior restraint on her constitutional right to freedom of speech. The trial court upheld the agreement, including the confidentiality clause.

In a curt ruling, an appeals court agreed with the plaintiff's position that she could not be compelled by the contract to keep silent, though the ruling was not based on constitutional grounds. Instead the court found that “[t]he confidentiality provisions of the settlement agreement are inconsistent with N.J.S.A. 45:9-22.21 to -22.25, specifically, N.J.S.A. 45:9-22.23a(10) and Rule 1:38, which permit free access by the public to the information sought to be concealed.”

The court did note that, at this point, the settlement agreement normally might not be enforced at all, since the excision of an important portion of it ' the confidentiality clause ' could render the entire agreement null and void. But, stated the court, “[d]efendant ' advised this court at oral argument that the provisions are not central to the settlement and urged enforcement of the settlement as modified by elimination of the confidentiality provisions.” This being the case (and because it found no discrepancy between the agreed-upon terms and the written settlement documents), the appellate court affirmed the order enforcing the settlement agreement, minus the severed confidentiality provisions.

What Now?

What does the Vares-Ebert ruling mean for physicians and their legal advisers in New Jersey and beyond?

First, it has thrown into question whether confidentiality clauses will be enforced in the State of New Jersey ' even those contained in old settlement agreements. Of course, the Vares-Ebert decision gave so little detail that it is not clear what type of information the agreement prohibited the plaintiff from publishing. Was it the settlement amount, or the doctor's name? Both of these would be accessible to the public through the state-run database. But if the agreement's terms went beyond these types of facts, the consequences to confidentiality agreements in physician malpractice cases could prove interesting.

Certainly, an argument in favor of permitting the inclusion of confidentiality clauses in medical malpractice settlement agreements could be made, because although court records and government-gathered statistics on settlement amounts are readily available to the public, this type of information is a far cry from the kinds of statements that a former plaintiff might make and disseminate. Even if the laws requiring settlement information to be made public render secrecy pacts about the first type of data unenforceable, their terms may not necessarily encompass the second type.

It was this line of reasoning that compelled the U.S. District Court for the District of Massachusetts to uphold a confidentiality clause in a settlement agreement, despite the fact that some of the information disseminated in breach of that agreement was already in the public domain. In Huynh v. City of Worcester, 2010 U.S. Dist. LEXIS 84140 (2010), the plaintiff had sued the City of Worcester, MA, and individual defendants, alleging false arrest and excessive force, in violation of the constitution's Fourth and 14 Amendments. The parties settled, and the plaintiff signed a release of all demands in exchange for $47,000. Included in the release was a confidentiality clause ' bargained for and specifically cited by the defense and acknowledged by plaintiff and his counsel as consideration for the money damages ' proscribing the plaintiff or his attorney from discussing the case, beyond stating the fact that it had been settled.

A few months later, a local newspaper published an article in which the plaintiff's attorney discussed the settlement, the amount the plaintiff received and some details of the case. He told the reporter that the defendants' conduct in arresting his client had been “egregious” and “reflected bad judgment.” Because of these statements, the defendants charged breach of contract and moved to vacate the order of dismissal in the underlying action. The plaintiff's attorney countered, inter alia, that his comments to the newspaper reporter concerned matters that were already in the public domain, and that the settlement agreement's confidentiality clause violated the plaintiff's First Amendment rights.

The court found that the attorney had violated the settlement agreement's confidentiality terms and that he could make no valid constitutional argument, as individuals may voluntarily waive their constitutional rights. See Brady v. U.S., 397 U.S. 742 (1970). In Huynh, the attorney had advised his client to accept the clause's constraints on his free speech rights in exchange for the settlement payment, and the plaintiff had done so willingly. Thus, there was no constitutional question to address.

Because the fact of the settlement and its terms were by law a matter of public record, the plaintiff next argued that the attorney's statements to the press could not constitute a breach of the confidentiality clause, because they concerned matters already in the public domain. Rejecting this argument, the court stated, “While the amount of the settlement was concededly a matter [of] public record ' [the attorney] ' breached the confidentiality clause by discussing the other elements of the case with the press,” such as the extent of plaintiff's injuries, the “poor judgment” of the individual defendants, and similar things. It was this extraneous data ' information not contained in public records ' that the confidentiality clause could legitimately prevent the plaintiff and his attorney from disseminating. (Because the fault in breaching the agreement was the attorney's and not the plaintiff's, the court declined to rescind the contract, but ordered the attorney to pay all costs involved with the motion to vacate the order of dismissal.)

The Settlement Agreement

Using the teachings of Huynh, let's look at the med-mal settlement agreement. When a government-mandated database state's that Dr. X settled a wrongful death suit for $550,000, this information, being already in the public domain, might lead a court like that in Vares-Ebert to conclude that it would be pointless and against public policy to enforce a confidentiality clause forbidding discussion of those facts. However, this dry public record is not the same information as a series of blog postings by the aggrieved widow of Dr. X's patient, who complains that Dr. X paid her only a measly $550,000 after killing her beloved husband, because Doctor X doesn't care enough about her patients to order diagnostic tests. A confidentiality pact controlling this type of fact and opinion information, bargained for and agreed to by all parties, arguably would not be encompassed by the medical malpractice public disclosure laws, and so would not run afoul of them.

Conclusion

Many states besides New Jersey require publication of at least some medical malpractice settlement information. For example, in California, settlement records are subject to publication for doctors who have settled three or four professional negligence actions (depending on medical specialty) for over $30,000 within the previous 10 years. And, pursuant to 26 V.S.A. ' 1368, Vermont's Department of Health publishes all physician professional negligence settlement activity within the previous 10-year period.

Although state law may require that public records be kept on medical malpractice verdicts and settlements, confidentiality clauses in settlement agreements may still be legitimate and enforceable because not all information about medical malpractice cases is contained in public depositories. That is good news for medical practitioners, because the injury to a physician's reputation from a disgruntled ex-plaintiff unbound by a confidentiality agreement is potentially far greater than that posed by an unexciting public record of the settlement.

But even the more narrow reading of the Vares-Ebert and Huynh cases could impact the validity of many medical malpractice settlement agreement confidentiality clauses, as such clauses often prohibit plaintiffs from discussing settlement amounts or naming names ' facts that are frequently made available to the public by law. The question whether this type of data should be included in confidentiality clauses going forward ' and whether courts should enforce such pacts if limits are placed on discussing information already in the public domain ' is likely to engender more litigation in future.

Janice G. Inman is Editor-in-Chief of this newsletter.

Like everyone, doctors and other medical care providers are deeply concerned about their professional reputations. Allegations of medical malpractice, whether completely unfounded or based on solid evidence, can damage a medical practice, or lead a care provider's other patients to question the care they have received in the past. Whenever possible, damage control is desirable when a medical professional stands accused of providing substandard care.

To preserve reputations, settlement agreements often contain clauses emphasizing that, although the parties are settling, the medical professional has not admitted any wrongdoing. In the same vein, attorneys representing medical clients routinely press the opposing side to preserve confidentiality. Complainants may agree not to disclose the details of their alleged injuries, or the amounts they received to conclude the case. Such confidentiality clauses often come at a higher settlement cost to the medical provider, but their value to a practitioner's reputation going forward may be considerable; that is, unless the bargained-for secrecy pact cannot be enforced.

NJ Court Says Disclosure Laws Trump Confidentiality Clause

New Jersey Court Rule 1:38 provides that nearly all but a few enumerated Superior Court records are in the public domain and can be inspected by anyone who wishes to see them. In addition, the New Jersey Health Care Consumer Information Act, N.J.S.A.45:9-22.21 to 22.25, which went into effect in 2004, ordered the Division of Consumer Affairs to create a professional profile of every licensed physician, podiatrist and optometrist. The records compiled on each of these professionals now include “[a]ll medical malpractice court judgments and all medical malpractice arbitration awards reported to the applicable board, in which a payment has been awarded to the complaining party during the most recent five years, and all settlements of medical malpractice claims reported to the board, in which a payment is made to the complaining party.”

It is these rules that ran up against a medical malpractice settlement agreement's confidentiality clause in the recent case of Vares-Ebert v. Kelberg, A-4581-10 ' and the rules won. The conflict in Vares-Ebert arose when the plaintiff, who brought suit for her mother's wrongful death and had reached a settlement agreement with her mother's care providers, balked at signing the agreement. She contended not only that the writing did not reflect the agreed-upon terms, but that the confidentiality clause contained therein was unenforceable as a prior restraint on her constitutional right to freedom of speech. The trial court upheld the agreement, including the confidentiality clause.

In a curt ruling, an appeals court agreed with the plaintiff's position that she could not be compelled by the contract to keep silent, though the ruling was not based on constitutional grounds. Instead the court found that “[t]he confidentiality provisions of the settlement agreement are inconsistent with N.J.S.A. 45:9-22.21 to -22.25, specifically, N.J.S.A. 45:9-22.23a(10) and Rule 1:38, which permit free access by the public to the information sought to be concealed.”

The court did note that, at this point, the settlement agreement normally might not be enforced at all, since the excision of an important portion of it ' the confidentiality clause ' could render the entire agreement null and void. But, stated the court, “[d]efendant ' advised this court at oral argument that the provisions are not central to the settlement and urged enforcement of the settlement as modified by elimination of the confidentiality provisions.” This being the case (and because it found no discrepancy between the agreed-upon terms and the written settlement documents), the appellate court affirmed the order enforcing the settlement agreement, minus the severed confidentiality provisions.

What Now?

What does the Vares-Ebert ruling mean for physicians and their legal advisers in New Jersey and beyond?

First, it has thrown into question whether confidentiality clauses will be enforced in the State of New Jersey ' even those contained in old settlement agreements. Of course, the Vares-Ebert decision gave so little detail that it is not clear what type of information the agreement prohibited the plaintiff from publishing. Was it the settlement amount, or the doctor's name? Both of these would be accessible to the public through the state-run database. But if the agreement's terms went beyond these types of facts, the consequences to confidentiality agreements in physician malpractice cases could prove interesting.

Certainly, an argument in favor of permitting the inclusion of confidentiality clauses in medical malpractice settlement agreements could be made, because although court records and government-gathered statistics on settlement amounts are readily available to the public, this type of information is a far cry from the kinds of statements that a former plaintiff might make and disseminate. Even if the laws requiring settlement information to be made public render secrecy pacts about the first type of data unenforceable, their terms may not necessarily encompass the second type.

It was this line of reasoning that compelled the U.S. District Court for the District of Massachusetts to uphold a confidentiality clause in a settlement agreement, despite the fact that some of the information disseminated in breach of that agreement was already in the public domain. In Huynh v. City of Worcester, 2010 U.S. Dist. LEXIS 84140 (2010), the plaintiff had sued the City of Worcester, MA, and individual defendants, alleging false arrest and excessive force, in violation of the constitution's Fourth and 14 Amendments. The parties settled, and the plaintiff signed a release of all demands in exchange for $47,000. Included in the release was a confidentiality clause ' bargained for and specifically cited by the defense and acknowledged by plaintiff and his counsel as consideration for the money damages ' proscribing the plaintiff or his attorney from discussing the case, beyond stating the fact that it had been settled.

A few months later, a local newspaper published an article in which the plaintiff's attorney discussed the settlement, the amount the plaintiff received and some details of the case. He told the reporter that the defendants' conduct in arresting his client had been “egregious” and “reflected bad judgment.” Because of these statements, the defendants charged breach of contract and moved to vacate the order of dismissal in the underlying action. The plaintiff's attorney countered, inter alia, that his comments to the newspaper reporter concerned matters that were already in the public domain, and that the settlement agreement's confidentiality clause violated the plaintiff's First Amendment rights.

The court found that the attorney had violated the settlement agreement's confidentiality terms and that he could make no valid constitutional argument, as individuals may voluntarily waive their constitutional rights. See Brady v. U.S. , 397 U.S. 742 (1970). In Huynh, the attorney had advised his client to accept the clause's constraints on his free speech rights in exchange for the settlement payment, and the plaintiff had done so willingly. Thus, there was no constitutional question to address.

Because the fact of the settlement and its terms were by law a matter of public record, the plaintiff next argued that the attorney's statements to the press could not constitute a breach of the confidentiality clause, because they concerned matters already in the public domain. Rejecting this argument, the court stated, “While the amount of the settlement was concededly a matter [of] public record ' [the attorney] ' breached the confidentiality clause by discussing the other elements of the case with the press,” such as the extent of plaintiff's injuries, the “poor judgment” of the individual defendants, and similar things. It was this extraneous data ' information not contained in public records ' that the confidentiality clause could legitimately prevent the plaintiff and his attorney from disseminating. (Because the fault in breaching the agreement was the attorney's and not the plaintiff's, the court declined to rescind the contract, but ordered the attorney to pay all costs involved with the motion to vacate the order of dismissal.)

The Settlement Agreement

Using the teachings of Huynh, let's look at the med-mal settlement agreement. When a government-mandated database state's that Dr. X settled a wrongful death suit for $550,000, this information, being already in the public domain, might lead a court like that in Vares-Ebert to conclude that it would be pointless and against public policy to enforce a confidentiality clause forbidding discussion of those facts. However, this dry public record is not the same information as a series of blog postings by the aggrieved widow of Dr. X's patient, who complains that Dr. X paid her only a measly $550,000 after killing her beloved husband, because Doctor X doesn't care enough about her patients to order diagnostic tests. A confidentiality pact controlling this type of fact and opinion information, bargained for and agreed to by all parties, arguably would not be encompassed by the medical malpractice public disclosure laws, and so would not run afoul of them.

Conclusion

Many states besides New Jersey require publication of at least some medical malpractice settlement information. For example, in California, settlement records are subject to publication for doctors who have settled three or four professional negligence actions (depending on medical specialty) for over $30,000 within the previous 10 years. And, pursuant to 26 V.S.A. ' 1368, Vermont's Department of Health publishes all physician professional negligence settlement activity within the previous 10-year period.

Although state law may require that public records be kept on medical malpractice verdicts and settlements, confidentiality clauses in settlement agreements may still be legitimate and enforceable because not all information about medical malpractice cases is contained in public depositories. That is good news for medical practitioners, because the injury to a physician's reputation from a disgruntled ex-plaintiff unbound by a confidentiality agreement is potentially far greater than that posed by an unexciting public record of the settlement.

But even the more narrow reading of the Vares-Ebert and Huynh cases could impact the validity of many medical malpractice settlement agreement confidentiality clauses, as such clauses often prohibit plaintiffs from discussing settlement amounts or naming names ' facts that are frequently made available to the public by law. The question whether this type of data should be included in confidentiality clauses going forward ' and whether courts should enforce such pacts if limits are placed on discussing information already in the public domain ' is likely to engender more litigation in future.

Janice G. Inman is Editor-in-Chief of this newsletter.