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Court Orders Disclosure of Settlement Agreement
Published in the April 2009 issue of Litigation Notes - View Article
In certain circumstances a confidential settlement agreement will have to be disclosed
In Sabre Inc. v. International Air Transport Assn., the Court determined that it would allow a confidential settlement agreement to be revealed because it had the potential to assist in the substantive assessment of issues at hand. The Court found that the privilege that attaches to settlement documents has a particular function – namely to protect a party’s claim or defence from being depicted as “weak” or from establishing that party’s liability. However, in cases where there is also a different function to obtaining settlement information, namely because it is relevant to the matters in issue, this privilege can be set aside.
The case involved a dispute over “aviation intelligence” between Sabre Inc. (Sabre) and the International Air Transport Association (IATA). IATA is responsible for a system of billing and settlement plans (BSPs) through which funds and data flow between airlines and agents selling tickets for airlines. Various agents make payments for sales through the plan and airlines receive a consolidated payment. Sabre Inc. is a company that is itself an intermediary between airlines and travel agents distributing airline services and operates a “global distribution system”. Sabre sends data on to IATA for the BSPs. Both companies are also in the business of selling “intelligence products” for the purposes of marketing, which are created from the flow of data handled by each. In this case, Sabre sued IATA for breach of the duty of confidence and unjust enrichment for allegedly using its data in the creation of such products.
A similar case was brought by Sabre in the United States against Airline Reporting Corporation (ARC). ARC, like IATA, sells “market intelligence products”. The litigation between ARC and Sabre settled by way of a confidential agreement.
It is this agreement that IATA sought to obtain in its case with Sabre. In particular, IATA sought to know whether any agreement was reached between Sabre and ARC concerning the transmission of data and whether Sabre charged ARC for this data. In IATA’s view this information was relevant to determining the “practice and usage” of the industry, to determining whether the data provided was confidential as Sabre claimed, and to determining whether any amount was paid by ARC to Sabre for the purpose of damages.
ARC brought a motion to stop IATA from obtaining the settlement document because, it argued, to reveal this agreement would put its competitive position at risk.
The court dismissed ARC’s first argument based on common law privilege under the “Wigmore test” because ARC had not submitted any affidavit evidence in support of this argument.
The court then turned to a consideration of settlement privilege. The court first considered the “underlying policy rationale” of this privilege. It found that the reason for applying this privilege is to encourage free and frank discussion among the parties without fear that these could be turned against them
as an admission of weakness or liability. This covers both concluded settlement agreements and pre-settlement discussions.
However, the court found that settlement privilege is not absolute. The court agreed with a number of previous rulings that the issue of privilege must be determined functionally. Privilege should not be waived for the purpose of establishing liability or a weak cause of action. However, privilege could be waived where documents related to the settlement, or the document of settlement itself, were relevant apart from establishing liability.
In this case, the court found that the evidence sought was relevant apart from establishing the liability of Sabre. Its purpose was to address “custom, confidential information and qualification of damages”. Therefore, this case was seen by the court as an exception to the general settlement privilege rule.
Sabre Inc. v. International Air Transport Assn., 2009 O.J. No. 903 .