SC Lawyer, May 2004, #6. Secret settlements: reports of their demise are premature.

• Author: By Eli A. Poliakoff, Kris Hines and Matthew T. Richardson

South Carolina Lawyer

2004.

SC Lawyer, May 2004, #6.

Secret settlements: reports of their demise are premature

South Carolina LawyerMay 2004Secret settlements: reports of their demise are prematureBy Eli A. Poliakoff, Kris Hines and Matthew T. RichardsonSouth Carolina's state and federal courts have restricted - but not prohibited - so-called "secret settlements." As widely reported in state and national media, the U.S. District Court for the District of South Carolina and the Supreme Court of South Carolina have adopted rules addressing court-enforced secret settlements. In November 2002, South Carolina's federal district court adopted Local Civil Rule 5.03(c) and in May 2003, the state supreme court enacted South Carolina Rule of Civil Procedure Rule 41.1. National headlines - "Judges Seek to Ban Secret Settlements in South Carolina" read The New York Times - heralded the demise of sealed settlements in the Palmetto State. The reports of their demise are premature. The new rules establish a rebuttable presumption against court-enforced secret settlements but do not constitute an outright ban.

Before considering how to apply the new rules, the practitioner should consider whether they even apply to the proposed settlement. Both the state and federal rules address settlement agreements sealed by an order of the court, i.e., "court-enforced secret settlements." The rules do not affect secret settlements enforced by private contract. Litigants remain free to enter into contractually enforced secret settlements. State Rule 41.1 expressly states that it does not apply to private settlement agreements. Parties cannot rely on the contempt power of the court to enforce a private agreement but must bring a separate breach of contract action to remedy a breach of the private agreement. However, when a party seeks a court order to keep settlement terms private, the new rules apply.

Local Civil Rule 5.03 (c)

Local Civil Rule 5.03 (c) of the U.S. District Court for the District of South Carolina prohibits court-enforced secret settlements: "No settlement agreement filed with the Court shall be sealed pursuant to the terms of this Rule [Filing Documents under Seal]." However, Local Civil Rule 1.02 provides an escape valve by allowing the court to suspend or modify any local rule for good cause. In a forthcoming article in the South...