The US Department of Justice announced Friday that it has settled a lawsuit brought by former US Army germ-warfare researcher Dr. Steven Hatfill, a development that may moot a landmark contempt case against former USA Today reporter Toni Locy now awaiting a ruling by the US Court of Appeals for the DC Circuit. Under the settlement, Hatfill would drop all damages claims against the government in return for a lump sum payment of $2.825 million and a 20-year annuity of $150,000 amounting to $3 million. Hatfill had initially sued the Department alleging that it violated the US Privacy Act by providing personal information and information about him to journalists - including Locy - during its investigation of the 2001 anthrax attacks in which he was at one point named a "person of interest". Locy had refused to disclose her sources in discovery, arguing that the information Hatfill was seeking was not central to his lawsuit. In a letter to the Court of Appeals Friday informing it of the settlement, Hatfill lawyer Christopher Wright said that Locy's evidence was no longer needed by his client.

In March, US District Judge Reggie Walton found Locy in contempt of court for not disclosing her sources and ordered her to pay a fine of $500 a day, increasing to $1000 a day after one week and then up to $5000 a day after two weeks, the costs of which could not be covered by her former employer. Locy obtained an emergency stay of that order from the Court of Appeals and oral arguments on the merits of the sanctions were heard last month. The appeals court has yet to make a formal ruling on the status of the contempt case in light of the Hatfill settlement, but Locy said late Friday that she and her lawyers are hopeful that the deal would end the matter. Locy will be a professor at Washington & Lee University's journalism school this fall.