Apparently the New York Fed is making secret settlements again. AIG found out about one of them recently after it filed a lawsuit against Bank of America. AIG sought to recover on some of its losses on Residential Backed Mortgage Securities allegedly caused by BofA. It learned that the New York Fed previously "released" BofA from liability for those losses, or tried to. See Gretchen Morgenson, "Fair Game / Don't Blink, or You'll Miss Another Bailout" p.1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, February 17, 2013). This certainly brings back memories of secret settlements that the Treasury Department and the New York Fed made with investment banks allegedly responsible for causing the Great Recession. See, for example, "Residential Mortgage-Backed Securities Group: The Final Installment" article posted here on February 2, 2012.
There may be an issue under Florida law, whether a settlement of Bad Faith Claims can be made confidential by the parties in their settlement agreement, even with a Court's approval. A Florida Statute provides:
Any portion of an agreement or contract which has the purpose or effect of concealing a public hazard, any information concerning a public hazard, or any information which may be useful to members of the public in protecting themselves from injury which may result from the public hazard, is void, contrary to public policy, and may not be enforced.
Fla. Stat. § 69.081(4). The statutory definition of a “public hazard” includes any “person” or “procedure” “that has caused and is likely to cause injury.” Fla. Stat. § 69.081(2). That is a pretty broad definition, which can apply to a wide array of conduct. It was probably meant to.
No Court shall enter an order or judgment in a case subject to this Florida Statute, “[e]xcept pursuant to this section,” which has, among other things, “the purpose or effect of concealing a public hazard” or “of concealing any information which may be useful to members of the public in protecting themselves from injury which may result from the public hazard.” Fla. Stat. § 69.081(3).
Similarly there may be issues of Bad Faith in secret settlements under the laws of other jurisdictions besides Florida.. Cf. Kreuger Int'l, Inc. v. Federal Ins. Co., 2008 WL 5264021 (E.D. Wis. Dec. 16, 2008).
As many attorneys do in many kinds of cases, the attorneys for the parties in a recent Federal Declaratory Relief action stipulated that certain Insurance Coverage information would be produced under seal. In fact, the attorneys apparently stipulated to a Protective Order saying so. Thereafter, they filed some of those materials in the Federal Court File.
The Federal Judge said that although the secrecy stipulation arguably facilitated discovery, the parties could not stipulate that everything they filed in the Court records was confidential and so they could not keep those materials by that expedient forever from the public eye.
To be continued .....
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