To resolve a discovery dispute in a Fair Credit Reporting Act (FCRA) case, a judge in the Western District of Kentucky recently compelled the production of the plaintiff’s settlement agreements with several former co-defendants. Under the “one-satisfaction rule,” the agreements reduced the remaining defendant’s potential liability, making them relevant to the case and thus discoverable.
In Wellemeyer v. Trans Union LLC, et al., No. 3:20-cv-00814-DJH-LLK, 2022 U.S. Dist. LEXIS 92890 (W.D. Ky. May 24, 2022), defendant IC System, Inc. (ICS) moved to compel the production of three settlement agreements between the plaintiff and ICS’s former co-defendants.
The plaintiff had brought three FCRA claims against ICS, several credit reporting agencies, and Charter Communications LLC. He alleged that all of the defendants contributed to the inclusion of a derogatory reference in his consumer reports, which reduced his credit rating.
In discovery, ICS moved to compel the production of the plaintiff’s settlement agreements with the co-defendants under the one-satisfaction rule, which prevents double recovery. Under the rule, a party may receive only one full satisfaction for an alleged injury, even if the recovery comes through judgments against multiple parties. Whether the one-satisfaction rule applies depends not on whether the defendants committed distinct conduct leading to the alleged injury, but on whether the injury itself is indivisible. If the injury resulted from multiple actions by different parties but is “singular” in nature, the one-satisfaction rule applies.
In Wellemeyer, ICS argued the plaintiff’s recovery from ICS should be reduced by the amounts the plaintiff received from the settling defendants under the one-satisfaction rule. ICS argued the settlement agreements were, therefore, relevant to ICS’s litigation strategy and calculation of its potential liability.
The plaintiff opposed the motion to compel on the ground that settlement agreements are generally not admissible under the Federal Rules of Evidence because public policy favors the settlement of disputes.
The district court agreed with ICS. Laying the groundwork to grant the motion to compel, the court first reiterated that the federal discovery rules are broad, and that the Sixth Circuit generally holds settlement agreements are discoverable. The court then concluded the one-satisfaction rule, which applies in tort cases, also applies to FCRA cases because FCRA cases are often decided with reference to tort principles.
The district court then applied the one-satisfaction rule to the case in which the plaintiff alleged three FCRA claims, none of which were alleged exclusively against ICS. The plaintiff’s alleged injury also was “a singular one that resulted from a specific transaction or series of transactions taken by the parties originally listed as codefendants.” The court rejected the plaintiff’s argument that the alleged injury was divisible among the defendants without any clarification of “precisely how [ICS’s] conduct resulted in an injury that is distinguishable from the general reduction in the Plaintiff’s credit rating and access to capital.” The plaintiff’s belief about ICS’s greater liability over the other defendants was similarly unpersuasive.
The district court compelled the production of the settlement agreements. In doing so, it acknowledged the concern that production was premature before ICS was held liable. However, the court compelled immediate production because “there is no efficiency in delaying the discovery once it has been determined that the desired materials are relevant.”
The district court also acknowledged that future settlements might chill, by fear, a of production of the agreements. The court therefore issued a protective order, prohibiting the parties from using or disclosing the settlement agreements in any way outside the litigation.
Wellemeyer has implications for both litigating and settling parties.
- Litigating parties should keep prior co-defendant settlements and the singular or multifaceted nature of the injury top of mind. If the injury can be treated fairly as indivisible and the plaintiff recovers for a defendant’s portion of that injury, the remaining defendants can argue their liability (if any) is reduced.
- Litigating parties should remember that discovery is broad. When a defendant’s litigation strategy turns on the perceived value of a case, prior settlement agreements may be deemed relevant to a remaining party’s case and thus potentially discoverable (depending on the court).
- Settling parties should draft settlement agreements with prophylactic confidential and protective language. If the litigation continues with one or more co-defendants, they will want to reduce their ultimate liability, and the settlement agreements may be sought.