Opinion
1 CA-SA 12-0030
03-01-2012
CATHOLIC HEALTHCARE WEST, a California corporation dba ST. JOSEPH'S HOSPITAL AND MEDICAL CENTER, Petitioner, v. The HONORABLE ARTHUR ANDERSON, Judge of the SUPERIOR COURT OF THE STATE OF ARIZONA, in and for the County of MARICOPA, Respondent Judge, SELECT SPECIALTY HOSPITAL-PHOENIX, INC., a Delaware corporation, Real Party in Interest.
MARICOPA County Superior Court No. CV 2008-014568
DECISION ORDER
The Court, Presiding Judge Diane M. Johnsen and Judges Donn Kessler and Patricia A. Orozco, participating, has considered Catholic Healthcare West dba St. Joseph's Hospital and Medical Center's ("CHW") petition for special action, Select Specialty Hospital-Phoenix, Inc.'s ("SSH") response, and CHW's reply. For the reasons stated below, we accept jurisdiction of the special action and grant CHW relief by vacating that portion of the superior court's order requiring CHW to disclose to SSH the amount CHW paid to settle claims by plaintiff Deborah Polillo ("Polillo").
The facts are relatively simple and undisputed. James Polillo brought a complaint against CHW and SSH alleging negligence and abuse, neglect, and exploitation under the Adult Protective Services Act, Arizona Revised Statutes ("A.R.S.") sections 46-451 to -459 (2005 and Supp. 2011). The complaint arose from alleged negligent medical care provided to James Polillo while he was a patient of CHW and SSH. Deborah Polillo was later substituted as the plaintiff in her capacity as personal representative for James Polillo's estate and on behalf of the estate.
CHW and Polillo entered into a confidential settlement agreement that resulted in a dismissal of the complaint against CHW. Following the settlement, SSH named CHW as a non-party at fault pursuant to A.R.S. § 12-2506(B) (2003).
As trial approached, SSH filed a motion to compel CHW to provide it with a copy of the settlement agreement, redacting the settlement amount. SSH argued that the other terms of the settlement could reasonably lead to the production of admissible evidence. SSH argued that the agreement would affect a lien against any settlement or judgment held by the Arizona Health Care Cost Containment System ("AHCCCS") and any release of CHW would support its argument that it too was released because CHW provided the care at issue as an agent of SSH. CHW and Polillo objected to the motion. The superior court ordered CHW to allow SSH's attorney to view the settlement agreement, including the settlement amount, but required SSH to keep the terms of the settlement confidential and made no finding that any part of the agreement would be admissible into evidence.
CHW brought this special action seeking to vacate the disclosure order. At a hearing in this Court on a motion to stay the order, CHW stated that it was willing to permit SSH's attorney to view the settlement agreement, but not the settlement amount. SSH still wanted to view the settlement amount. We stayed the court's disclosure order only to the extent it permitted SSH's attorney to view the settlement amount. Following our order, SSH contends its attorney viewed the rest of the settlement agreement, that the agreement released CHW from liability, and the confidentiality clause allows disclosure by order of a court.
Given that counsel for SSH has already reviewed all of the settlement agreement except the settlement amount, the only remaining issue is whether the superior court abused its discretion in ordering CHW to disclose the amount of the settlement. See Sandblom v. Corbin, 125 Ariz. 178, 182, 608 P.2d 317, 321 (App. 1980) (holding appeal moot if facts preclude court from rendering decision that has any practical effect on the parties).
We accept jurisdiction because there is no equally plain, speedy, or adequate remedy on appeal of a potentially erroneous order requiring the disclosure of confidential agreements over the objection to a party to the agreement. Miller v. Kelly, 212 Ariz. 283, 284, ¶ 1, 130 P.3d 982, 983 (App. 2006).
Turning to the merits, we start from the premise that our discovery rules are very broad and permit the discovery of any non-privileged information that, even if inadmissible in court, may reasonably lead to the discovery of admissible evidence. Ariz. R. Civ. P. 26(b)(1)(A); Indus. Comm'n v. Superior Court (Friend), 122 Ariz. 374, 375, 376, 595 P.2d 166, 167, 168 (1979); Grimm v. Ariz. Bd. of Pardons & Paroles, 115 Ariz. 260, 269, 564 P.2d 1227, 1236 (1977). Generally, to obtain discovery of a confidential settlement, a non-settling party must meet a higher standard than just that the settlement may be reasonably calculated to lead to discovery of admissible evidence. Young v. State Farm Mut. Auto. Ins. Co., 169 F.R.D. 72, 76-77 (S.D. W. Va. 1996) (collecting cases). This is because confidential settlement agreements are entitled to remain confidential in part to encourage parties to settle claims without fear of the terms of the settlement being disclosed to others. Miller, 212 Ariz, at 287, ¶¶ 12-13, 130 P.3d at 986 (citing Ariz. R. Evid. 408, which makes inadmissible evidence of a compromise to prove liability for, or an amount of, a claim). At least one court has stated that under the majority rule, to obtain disclosure of a confidential settlement amount a party must make a particularized showing of the likelihood the disclosure will lead to admissible evidence. Young, 169 F.R.D. at 76 (citing Bottaro v. Hatton Assocs., 96 F.R.D. 158, 159-60 (E.D.N.Y. 1982)).
We need not decide whether to adopt that heightened standard because SSH did not meet the more relaxed test requiring that it show discovery of the amount is reasonably calculated to lead to the production of admissible evidence. SSH argues the superior court did not abuse its discretion in allowing it to see the settlement amount because: (1) The payments made by AHCCCS are admissible under A.R.S. § 12-565 (2003) and the settlement amount will affect any SSH liability on the AHCCCS lien; (2) Knowing what CHW settled for will assist it in settlement negotiations with Polillo; and (3) The terms of the agreement provide the settlement is not confidential if disclosure is ordered by a court. We disagree with SSH on all grounds.
SSH also appears to argue that CHW's dietary staff acted as its agent in providing care to Polillo, and a release of the agent releases the principal. We fail to see how the amount of the settlement would lead to any discoverable evidence on this issue. See Miller, 212 Ariz, at 286, ¶ 8, 130 P.3d at 985 (holding settlement amount not discoverable if not relevant to issues and not reasonably calculated to lead to discovery of admissible evidence).
First, the settlement amount would not necessarily lead to evidence of the remaining lien. For purposes of establishing damages, a defendant can introduce in this type of action collateral sources of payment from insurers and possibly AHCCCS, while the plaintiff can introduce evidence of any lien for such payments. A.R.S. § 12-565(A). SSH has other ways to determine the amount AHCCCS paid for care and the status of that lien; it can simply ask AHCCCS or check the status of the recorded lien. As CHW correctly points out, the amount of the settlement does not mean that all of the settlement funds were used to help satisfy the lien. Moreover, the amount of the lien does not increase SSH's potential liability as determined by any jury verdict. Its liability will be determined by its share of fault, if any, and the amount of any damages found by the jury.
We do not find any of the cases cited by SSH on this issue helpful. In Estate of Hegarty v. Beauchaine, 727 N.W.2d 857, 890-91, ¶¶ 108-10 (Wis. Ct. App. 2006), the court held that the hospital's malpractice carrier should have been permitted to review a settlement between the plaintiff and other defendants to determine whether a release was issued and whether the settlement might be evidence of bias by a witness. Here, SSH is not claiming such bias and has seen the rest of the settlement to determine if there was a release. In Young, 169 F.R.D. at 77, 78-79, the trial court permitted prior trial counsel, who was seeking to collect contingency fees from its prior client, and other trial counsel to review the underlying settlement amount between the client and an insurer. The court's reasoning was that since the amount of any possible fee was involved, the amount of the settlement would be relevant to its determination of the fee possibly owed to plaintiffs. Id. at 78. That is not the issue here. Finally, in Llerena v. J.B. Hanauer & Co., 845 A.2d 732, 739 (N.J. Super. Ct. 2002), the court permitted a plaintiff alleging sexual harassment against her employer to obtain a confidential settlement agreement in a similar case brought by another employee against the same employer. The court weighed the interests of confidentiality against the interest of the public in eliminating such harassment as well as the possible relevance of the settlement to show that the employer was aware of harassment occurring and failed to take any action to stop it. Id. at 736-39. Those latter interests are not present here and if they were, would be weighed with other factors under Arizona Rule of Civil Procedure 26(c)(2), which deals with release of confidential documents to non-parties.
Second, separate from any contention that the settlement amount is reasonably calculated to lead to the discovery of admissible evidence, SSH argues that the superior court properly concluded disclosure of the amount would assist SSH to settle Polillo's claim. Clearly, such information will assist SSH because, presumably, if it knows the range of any possible damages, it can subtract the amount of the settlement (less the lien) and begin settlement negotiations from that lower amount rather than from the total damages. However, one reason to protect confidential settlements is to encourage parties to settle claims. Miller, 212 Ariz, at 287, 11 12-13, 130 P.3d at 986. If a plaintiff and fewer than all the defendants desire to settle a claim on a confidential basis, that desire will be thwarted if they know that a non-settling defendant can simply discover the settlement amount to use the amount as a bargaining chip in later negotiations. This would deter, not encourage, settlements, which is in conflict with Arizona's stated policy to encourage settlements. Id.
Third, we cannot agree that because the settlement agreement may recite that its terms could be disclosed by an order of a court that such a provision would preclude one of the parties from opposing such an order. Without the terms of the confidentiality provision before us, we assume that the agreement did not preclude such opposition.
Accordingly, we accept jurisdiction of the special action and grant relief to CHW. We vacate that portion of the superior court's order requiring CHW to disclose to SSH the amount of its settlement with Polillo.
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DONN KESSLER, Judge