The opinion of the court was delivered by: BY THE COURT; HARVEY BARTLE, III
This is a lawsuit to enjoin the defendants LLMD of Michigan, Inc. and Leon and Michael Winitsky (collectively "LLMD") from breaching the confidentiality provision of a settlement agreement. This Court has subject matter jurisdiction based on diversity of citizenship and an amount in controversy in excess of $ 50,000, exclusive of interest and costs. 28 U.S.C. § 1332.
The agreement in issue here involves the settlement of a diversity action which LLMD filed in this Court in 1989 at Civil Action No. 89-9163 against Marine Midland Realty Credit Corporation ("Marine Midland") and USLIFE Life Insurance Company ("USLIFE").
LLMD alleged that Marine Midland and USLIFE breached an agreement to lend LLMD some $ 10 million in connection with an attempted purchase of a 177 acre tract in Springfield, Michigan.
During the recent jury trial of the 1989 case before the undersigned, LLMD called an individual from the Jackson-Cross Company ("Jackson-Cross") as an expert witness. He testified on direct examination as to LLMD's lost profits of $ 6.0 million because of the alleged breach of contract. Cross-examination, however, established that his written loss computation, which was previously submitted in an expert report, contained a series of serious mathematical errors. The expert was unable to give an opinion as to the amount of LLMD's loss after those errors were exposed. As a result, this Court struck his testimony in its entirety. Before the conclusion of the trial, the parties to the action reached a settlement, and Civil Action No. 89-9163 was dismissed pursuant to Local Rule 23(b). The settlement agreement was not made part of the record in the case, was not incorporated into an order of the court, and was not approved by the court.
The written settlement agreement signed by the parties provided in relevant part:
[The parties] ... agree not to disclose any of the financial terms or conditions of this Settlement Agreement and General Release except as required by law or by judicial or administrative process or regulation. The non-disclosure agreement set forth in this paragraph is a material inducement to Marine and USLIFE to enter into this Settlement Agreement and General Release ....
After learning of the pendency of the state action against Jackson-Cross, Marine Midland and USLIFE filed a motion with this Court, in Civil Action No. 89-9163, to preclude LLMD and the law firm representing those parties, from disclosing, in connection with that state court action, the financial terms of the settlement. The motion for an injunction proceeded to a final hearing before this Court on March 26, 1993. On that same day, however, the Court of Appeals for the Third Circuit decided Sawka v. Healtheast, Inc., 989 F.2d 138. That court held:
... unless a settlement is part of the record, incorporated into an order of the district court, or the district court has manifested an intent to retain jurisdiction, it has no power beyond the Rules of Civil Procedure to exercise jurisdiction over a petition to enforce a settlement ...
We called this case to the attention of counsel, who then filed supplemental briefs. Based on Sawka, this Court denied the motion for injunction for lack of jurisdiction. In the meantime, Marine Midland and USLIFE brought the present independent diversity action which also seeks "to enjoin violation of [the] settlement agreement." The parties have agreed that the testimony taken at the final injunction hearing in Civil Action No. 89-9163 should be incorporated by reference here.
The confidentiality provision of the settlement agreement in Civil Action No. 89-9163 expressly prohibits the disclosure of the financial terms of that settlement except as "required by law or by judicial or administrative process or regulation." Plaintiffs contend that the exception is inapplicable where as here a party "voluntarily and consciously invoked the 'judicial process'" by initiating a state court action to collect damages. LLMD, on the other hand, maintains that disclosure is permitted where a party is seeking to recover damages in a lawsuit. LLMD also argues that (1) plaintiffs cannot meet the standards for injunctive relief; (2) a prohibition on disclosure would violate the Federal Anti-Injunction Act, 28 U.S.C. § 2283;
and (3) the Philadelphia Court of Common Pleas can adequately protect the interests of plaintiffs under Rule 4012 of the Pennsylvania Rules of Civil Procedure which permits the issuance of Protective Orders.
The only authority cited by either party with respect to the meaning of the confidentiality clause is Reiser v. West Company, No. 88-334, 1988 U.S. Dist. LEXIS 3243 (E.D. Pa., filed April 14, 1988). Reiser was an action for alleged sexual discrimination. During discovery the plaintiff subpoenaed a prior West Company employee who previously had brought a similar action against the company. The defendant company sought to bar the witness' testimony on the ground that a confidentiality agreement was part of the terms of the settlement of her lawsuit. That confidentiality agreement, however, provided that information subject to confidentiality could be disclosed "pursuant to legal process." Based on the fact that "it is well established ...