Can a NC public hospital keep a non-medical-malpractice settlement agreement confidential, even when the agreement itself says it must stay confidential?

Plain-English summary

The Onslow County Hospital Authority had settled a dispute with Dr. Martin E. Schick. The settlement agreement contained a "Restricted Disclosure Covenant" purporting to keep its terms confidential. A public records request for the agreement followed. Hospital attorney Fred Carmichael asked the AG whether the hospital could withhold the agreement or release a redacted version.

Chief Deputy AG Andrew A. Vanore, Jr. and Assistant AG T. Brooks Skinner, Jr. concluded the agreement had to be released, mostly unredacted.

G.S. § 132-1.3 governs. This statute (enacted in 1995) makes settlement documents in suits, administrative proceedings, or arbitrations against any state agency or subdivision public records. There is one narrow exception: medical malpractice actions against hospital facilities. The statute forbids state agencies from entering into settlements that purport to be confidential, again with the medical malpractice carve-out. Settlement documents include "all documents which reflect, or which are made or utilized in connection with, the terms and conditions" of the settlement, including correspondence, agreements, consent orders, checks, and drafts.

Because the Schick matter was not a medical malpractice case, § 132-1.3 applied in full. The settlement was a public record. The "Restricted Disclosure Covenant" was contractually meaningless, because the statute prohibited the hospital from even entering into such a covenant. The AG suggested that the entire agreement might be void as a result of the covenant's inclusion, though the immediate remedy was disclosure.

Confidentiality statutes considered and rejected. Carmichael had pointed to several confidentiality provisions as potential bases for redaction. The AG walked through each:

• G.S. § 131E-95 (medical review committee). Protects the proceedings, records, and materials of a medical review committee. Has an "otherwise available" caveat: information presented to the committee is not protected merely because it was discussed there. Since the settlement was not a record of the medical review committee, the statute did not apply. Any prior information protected under § 131E-95 that ended up in the settlement document became "otherwise available" and lost protection.

• G.S. § 131E-97.2 (credentialing). Protects information acquired by a public hospital in connection with credentialing and peer review of practitioners. Has the same "otherwise available" caveat. The settlement was not credentialing information, so the statute did not protect it.

• G.S. § 131E-257.2 (public hospital personnel files). Protects information "gathered by the hospital with respect to an employee." This was the only exception that survived. Information about Dr. Schick that was originally gathered by the hospital in the personnel-file context (such as employment records, performance evaluations, salary information) was protected even when reflected in the settlement.

The AG relied on News and Observer Publishing Co. v. Poole, 330 N.C. 465 (1992), to interpret § 131E-257.2. Poole dealt with state employee personnel files under § 126-22 et seq., and the AG noted the language is virtually identical to § 131E-257.2. The principle is that personnel-file privacy attaches to information first gathered through the personnel-file system, not to information that simply happens to mention an employee.

The narrow personnel-file carve-out. The result: the settlement agreement had to be released in its unredacted form, except for information from Dr. Schick's personnel file that was first gathered by the hospital. That's a thin slice. Most of the settlement (the underlying claims, the resolution terms, the monetary amount, the procedural posture) was fully public.

The opinion was strong public-records doctrine. It made clear that NC public agencies cannot contract their way around § 132-1.3, and that overlapping confidentiality statutes don't combine to create a broader shield than each one offers individually.

Currency note

This opinion was issued in 1997. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. G.S. § 132-1.3 has been amended several times since 1997 to refine its scope. The medical malpractice carve-out has been narrowed in some respects.

Background and statutory framework

Why § 132-1.3 was enacted. Before 1995, NC state agencies sometimes settled cases with confidentiality clauses. The legislature concluded that secret settlements with public money undermined accountability. Section 132-1.3 was the policy correction: settlements involving state agencies are public records, with very limited exceptions.

The medical malpractice carve-out. The exception for medical malpractice actions against hospital facilities reflects a competing policy concern: protecting candid risk-management practices and avoiding chilling effects on settlement of medical claims. The carve-out is narrow; it covers only medical malpractice, not other claims against hospitals.

The Onslow Hospital factual context. The opinion does not detail the underlying dispute, but the analysis works regardless of the merits. The point was that this was not a medical malpractice claim, so the carve-out did not apply.

Why a Restricted Disclosure Covenant is statutorily forbidden. Section 132-1.3 prohibits state agencies from approving or entering settlements with confidentiality terms (outside the medical malpractice carve-out). The hospital lacked the legal authority to bind itself to keep the settlement confidential. The covenant was thus unenforceable as against the public, and the AG suggested it might void the entire agreement.

The "otherwise available" principle. Both § 131E-95 and § 131E-97.2 contain "otherwise available" provisions. The idea is to prevent the privilege from becoming a vehicle for hiding information that the public would otherwise have a right to see. Once information becomes available through other lawful channels (such as a settlement that must be disclosed under § 132-1.3), the privilege does not pull it back into secrecy.

The Poole holding. News and Observer Publishing Co. v. Poole (1992) addressed whether information about a state employee that was reflected in non-personnel-file records was protected by § 126-22's personnel-file confidentiality. The NC Supreme Court held that only information "gathered by" the agency in the personnel-file context was protected. The same analysis applied to § 131E-257.2's nearly identical language.

The strong public-records baseline. § 132-1 sets a strong presumption that all government records are public. Confidentiality statutes are narrowly construed against the presumption. The AG's opinion applied that posture: confidentiality statutes were given their precise scope, no more, and the settlement was treated as presumptively public.

Common questions

Q: Can a NC state agency negotiate a settlement clause requiring the other party to keep terms confidential?

A: No, not under § 132-1.3. The statute prohibits the agency from approving such terms. The agency can settle but must accept that the settlement will be public.

Q: What if the other party insists on confidentiality?

A: The agency cannot grant it. The other party's options are to litigate, accept a public settlement, or walk away.

Q: Does this apply to all state agencies?

A: Section 132-1.3 covers any agency of NC government or its subdivisions, as defined in § 132-1. That definition is broad and includes state, county, and municipal agencies and authorities.

Q: Does the medical malpractice carve-out cover hospital-employed physicians sued personally?

A: The opinion did not parse that question. The statute's text refers to medical malpractice "against a hospital facility." Suits against individual physicians may not be covered by the carve-out.

Q: Can a sealed court order keep a settlement secret?

A: Section 132-1.3(b) allows sealing only on a written order finding that (1) the presumption of openness is overcome by an overriding interest and (2) the interest cannot be protected short of sealing. The order must articulate the interest and make specific findings sufficient for appellate review.

Q: What about information from a peer review or credentialing committee that ends up in the settlement?

A: Under the AG's reading, such information becomes "otherwise available" once it appears in a settlement that must be disclosed and is no longer protected.

Citations from the opinion

• N.C. Gen. Stat. §§ 132-1, 132-1.1, 132-1.3, 132-6
• N.C. Gen. Stat. § 126-22 et seq.
• N.C. Gen. Stat. § 131E-95
• N.C. Gen. Stat. § 131E-97.2
• N.C. Gen. Stat. § 131E-257.2
• N.C. Gen. Stat. § 159-39
• News and Observer Publishing Co. v. Poole, 330 N.C. 465, 412 S.E.2d 7 (1992)

Source

• Landing page: https://ncdoj.gov/opinions/public-records-settlements/

Original opinion text

November 26, 1997

Mr. Fred M. Carmichael

Summrell, Sugg, Carmichael & Ashton P.A.

310 Broad Street

New Bern, North Carolina 28560

Re: Advisory Opinion; Public Records; N.C.G.S. § 132-1.3; Settlements made by or on behalf of public agencies, public officials, or public employees.

Dear Mr. Carmichael:

Thank you for your letter dated November 11, 1997 requesting an Advisory Opinion on whether settlement agreements in which the State (in this case a public hospital) is a party may be withheld from public inspection. Specifically, you asked if the Onslow County Hospital Authority is required to release the settlement agreement between it and Dr. Martin E. Schick in its entirety or with any confidential matters, as specified in the agreement or as provided by the confidentiality statutes, redacted.

As you are aware, the statute which governs in this case is N.C.G.S. § 132-1.3 (1995).

Public records, as defined in N.C.G.S. § 132-1, shall include all settlement documents in any suit, administrative proceeding or arbitration instituted against any agency of North Carolina government or its subdivisions, as defined in N.C.G.S. 132-1, in connection with or arising out of such agency's official actions, duties or responsibilities, except in an action for medical malpractice against a hospital facility. No agency of North Carolina government or its subdivisions, nor any counsel, insurance company or other representative acting on behalf of such agency, shall approve, accept or enter into any settlement of any such suit, arbitration or proceeding if the settlement provides that its terms and conditions shall be confidential, except in an action for medical malpractice against a hospital facility. No settlement document sealed under subsection (b) of this section shall be open for public inspection. (emphasis added)

(b) No judge, administrative judge or administrative hearing officer of this State, nor any board or commission, nor any arbitrator appointed pursuant to the laws of North Carolina, shall order or permit the sealing of any settlement document in any proceeding described herein except on the basis of a written order concluding that (1) the presumption of openness is overcome by an overriding interest and (2) that such overriding interest cannot be protected by any measure short of sealing the settlement. Such order shall articulate the overriding interest and shall include findings of fact that are sufficiently specific to permit a reviewing court to determine whether the order was proper.

(c) Except for confidential communications as provided in N.C.G.S. § 132-1.1, the term "settlement documents," as used herein, shall include all documents which reflect, or which are made or utilized in connection with, the terms and conditions upon which any proceedings described in this section are compromised, settled, terminated or dismissed, including but not limited to correspondence, settlement agreements, consent orders, checks, and bank drafts.

The statute makes it clear that only medical malpractice cases are exempt from disclosure in settlements in which the State is a party. You state in your letter that this case does not involve medical malpractice. Therefore, the settlement agreement is a public record and must be released pursuant to N.C.G.S. § 132-1.3 in its unredacted form. The settlement agreement itself, through its "Restricted Disclosure Covenant" offers no protection to the information contained therein. In fact, it could be argued that the hospital was not authorized to enter into an agreement with such a provision and therefore, the entire agreement is null and void.

You next ask if those portions of the settlement agreement which contain information which is protected by the "confidentiality statutes" must also be released pursuant to N.C.G.S. § 132-1.3. In determining whether the "confidentiality statutes" protect information within the settlement agreement, we must look at each statute to see, specifically, what each is intended to protect.

N.C.G.S. § 131E-95 (Medical review committee) reads in pertinent part:

(b) The proceedings of a medical review committee, the records and materials it produces and the materials it considers shall be confidential and not considered public records within the meaning of N.C.G.S. § 132-1, "'Public records' defined," and shall not be subject to discovery or introduction into evidence in any civil action against a hospital or a provider of professional health services which results from matters which are the subject of evaluation and review by the committee. No person who was in attendance at a meeting of the committee shall be required to testify in any civil action as to any evidence or other matters produced or presented during the proceedings of the committee or as to any findings, recommendations, evaluations, opinions, or other actions of the committee or its members. However, information, documents, or records otherwise available are not immune from discovery or use in a civil action merely because they were presented during proceedings of the committee. A member of the committee or a person who testifies before the committee may testify in a civil action but cannot be asked about his testimony before the committee or any opinions formed as a result of the committee hearings. (emphasis added)

This statute protects the proceedings of a medical review committee, the records and materials it produces and the materials it considers with the caveat that if the information is otherwise available, it is not immune from disclosure "merely because [it was] presented during the proceedings of the committee." Unless the settlement agreement itself was considered by the Medical Review Committee, it must be released in its unredacted form. Furthermore, any information previously protected by N.C.G.S. § 131E-95 which is included in the settlement agreement is now "otherwise available", and therefore, no longer immune from disclosure.

N.C.G.S. § 131E-97.2 (Confidentiality of credentialing information) reads:

Information acquired by a public hospital, as defined in N.C.G.S. § 159-39, a hospital that has been sold or conveyed pursuant to N.C.G.S. § 131E-8, a State-owned or State-operated hospital, or by persons acting for or on behalf of a hospital, in connection with the credentialing and peer review of persons having or applying for privileges to practice in the hospital is confidential and is not a public record under Chapter 132 of the General Statutes; provided that information otherwise available to the public shall not become confidential merely because it was acquired by the hospital or by persons acting for or on behalf of the hospital. (emphasis added)

This statute protects information acquired by a public hospital in connection with the credentialing and peer review of persons having or applying for privileges to practice in the hospital. Since the settlement agreement was not acquired in connection with the credentialing and peer review of Dr. Schick it is not protected by N.C.G.S. § 131E-97.2. Furthermore, any information previously protected by this statute which is included in the settlement agreement is now "otherwise available", and therefore, no longer immune from disclosure.

N.C.G.S § 131E-257.2 (Privacy of employee personnel records) reads in pertinent part: Notwithstanding the provisions of N.C.G.S § 132-6 or any other general or local act concerning access to public records, personnel files of employees and applicants for employment maintained by a public hospital are subject to inspection and may be disclosed only as provided by this section. For purposes of this section, an employee's personnel file consists of any information in any form gathered by the public hospital with respect to an employee . . .

N.C.G.S. § 131E-257.2 protects only information "gathered by the hospital with respect to the employee." Unless the information included in the settlement agreement was first gathered by the hospital, it is not exempt under N.C.G.S. § 131E-257.2. News and Observer Publishing Co. v. Poole, 330 N.C. 465, 412 S.E.2d 7 (1992). Although Poole dealt with personnel files of State employees pursuant to N.C.G.S. § 126-22 et seq., the language of the two statutes is virtually identical and we believe Poole to be controlling on this issue.

In conclusion, based on the facts as presented, we believe that the settlement agreement between Dr. Schick and Onslow Hospital Authority must be released to the requestor in its unredacted form, except for information from Dr. Schick's personnel file which was first gathered by the hospital. Should you have any further questions, please do not hesitate to contact this office.

Andrew A. Vanore, Jr., Chief Deputy Attorney General

T. Brooks Skinner, Jr., Assistant Attorney General