Jean-Paul Boulee testifies before the Senate Judiciary Committee during his confirmation hearing to be U.S. District Judge for the Northern District of Georgia, on Nov. 13, 2018. (Photo: Diego M. Radzinschi/ALM)

A federal judge in Atlanta refused to stop an insurance company from consummating a high-dollar settlement opposed by the policyholder. 

In a 22-page order Friday, U.S. District Judge J.P. Boulee ruled that a preliminary injunction sought by LabMD founder Michael Daugherty stopping the settlement "would not serve the public interest."

Boulee said that Sentinel Insurance Co. and other defendants "choose to settle meritless claims all the time, and they do so  for myriad reasons."

"Certainly,  litigation should not ensue each time a questionable lawsuit is settled," he concluded.

Boulee ruled on an emergency motion for a temporary restraining order meant to stop Sentinel and parent insurance company, The Hartford, from paying $750,000 to the owner of a defunct data security firm who tried to stop publication of Daugherty's book, "The Devil Inside the Beltway."

When Robert Boback, owner of the defunct firm, Tiversa, was unable to stop Daugherty from publishing, he sued LabMD and Daugherty for defamation over the book's contents.

The book is Daugherty's personal account of his battle with the U.S. Federal Trade Commission over a 2008 data breach at LabMD and Boback's role in the federal investigation. Tiversa gained access to LabMD's medical files, according to court documents detailing the legal fight. LabMD's data vulnerabilities prompted the FTC investigation.

Daugherty has blasted Boback's suit as "a sham," and his TRO request contended that it was not in the public interest to handsomely reward groundless litigation.

But Boulee said he was unaware of any case in Georgia or before the U.S. Court of Appeals for the Eleventh Circuit, where a judge has been asked to enjoin a settlement made within policy limits.

The judge held that that, even if the defamation claims are frivolous, LabMD and its lawyers have not clearly shown that Sentinel acted in bad faith in pursuing a settlement. "There are many reasons to settle a case," he said.

Boulee also rejected arguments that Sentinel acted in bad faith, finding the insurer didn't settle behind the plaintiffs' backs. The judge also said that Sentinel has already spent $2.9 million over six years to defend LabMD, and Daugherty has insisted on a jury trial.

"If [Sentinel] had settled on the first day of litigation, the Court's analysis might be different," Boulee added.

Boulee also rejected arguments that settling Boback's suit will chill Daugherty's free speech rights.

"Plaintiffs make no argument that the settlement would somehow prevent them from speaking out about the corruption," Boulee said. "Plaintiffs will still be able to give interviews or speak about the issues giving rise to writing the book. If [the] plaintiffs' speech was chilled by the filing of the lawsuit, neither the settlement nor a successful jury trial will negate the chill created by the initial filing."