Confidentiality Agreements Are Not “Standard”

Today’s outrageous social media story concerns Patrick Snay, who settled a lawsuit against his former employer for $80,000. The settlement agreement contained a confidentiality clause that he apparently violated by telling his daughter that “he’d settled and was happy with the results,” and that his daughter apparently violated when she posted this on Facebook:

Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.”

Gulliver, the defendant, saw the posting, refused to pay the settlement due to the breach of the agreement, and now the whole thing is front-page news.

If the lawyer did not discuss the confidentiality clause in detail with his client, the lawyer screwed up. If Snay did not discuss the confidentiality clause with his family, then he screwed up. No matter what, both Snay and his daughter did really stupid things.

But what really bugs me is this statement, which appears in the Yahoo! Shine post:

The agreement contained a standard confidentiality clause, prohibiting Snay or the school from talking about the case.

There is no such thing as a “standard confidentiality clause.”

First, it is not standard for settlement agreements to have confidentiality clauses, even if many companies would like it to be so. Settlement agreements are negotiated, and confidentiality is a material term that must be bargained for during the settlement negotiations.

When I was suing debt collectors, many of them tried to sneak in a confidentiality agreement after we agreed on the material terms of the settlement. That is never okay, and no judge ever agreed with this approach. Most confidentiality agreements prevent the plaintiff and his heirs, assigns, etc., from discussing the lawsuit forever. That means if you or your children or their children ever disclose whatever was supposed to be confidential, the company might be able to sue for damages. That’s not something to which anyone should agree lightly.

Second, sometimes the confidentiality clause the defendant wants to use includes things like talking about the claims. Except the claims are usually public record. Preventing the parties from confirming what is already in the public record (and probably available online) is just silly.

Third, there is no such thing as a standard confidentiality clause. Some, like the one in Snay’s settlement agreement with Gulliver, are comically broad and amount to something like a “gag order.” The Miami Herald wrote that the agreement “required Snay and his wife to keep the ‘terms and existence’ of the agreement private.” In other words, they could not even say whether the case had settled. This is most definitely not a standard term. Most confidentiality clauses I have seen will at least allow the parties to say that the case has settled.

Some confidentiality clauses are more limited, and many apply only to the terms of the agreement, not the claims or the very existence of a settlement.

By talking about confidentiality clauses as if they were a standard part of every settlement agreement, journalists are (hopefully unwittingly) playing into the hands of corporate defendants, who very much want all settlements to be secret and all confidentiality clauses to be as broad as possible. While some plaintiffs might be just as eager as defendants to keep the settlement a secret, that is hardly universal among plaintiffs.

Lawyers and clients should read confidentiality clauses carefully, limit them to sensible terms, demand consideration for them, and never assume that they are standard.