20 Dec Loose Lips Sink Settlements or Why You Should Avoid Confidentiality Provisions
No plaintiff ever asks for a Confidentiality Provision to be part of their settlement agreement. That is a defense-driven device that could cost plaintiffs their settlements. Case in point —Gulliver Schools, Inc. et al. v. Patrick Snay, Third DCA Florida (February 26, 2014).
In that case, Snay had been a Headmaster at Gulliver Schools, which Snay’s daughter attended. When his contract was not renewed, he filed a two count Complaint sounding in age discrimination and retaliation. The parties settled the case on November 3, 2011, and executed a Settlement Agreement that provided, inter alia, for a payment to Snay in the amount of $80,000.00. It also included a Confidentiality Provision that stated in pertinent part as follows:
- Confidentiality. . . [T]he plaintiff shall not either directly or indirectly, disclose, discuss or communicate to any entity or person, except his attorneys or other professional advisors or spouse any information whatsoever regarding the existence or terms of this Agreement. . .A breach. . .will result in disgorgement of the Plaintiff’s portion of the settlement Payments.
On November 7, 2011, four short days after settlement agreement execution and before the settlement funds were received, Gulliver notified Snay that he was in breach of the settlement agreement based on the following Facebook post by his daughter:
Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.
The post went out to approximately 1200 of the daughter’s Facebook friends. Gulliver then refused to pay the $80,000.00 based on the confidentiality breach. Snay filed a Motion to Enforce the Settlement in the trial court, which was granted. Gulliver appealed, and the appeals court reversed the trial court.
Using basic contract interpretation principles, the appeals court found as a matter of law that the Confidentiality Provision had been breached when the Snays told their daughter about the settlement.
What are the lessons to be learned from this case besides banning your children from social media?
- Do not agree to a Confidentiality Provision if at all possible.
- If that is not possible, make the consideration for that provision separate and apart from the underlying settlement.
- Make the provision as narrow as possible – i.e. make defendants spell out exactly who cannot be told what or what specifically can be said.
- Make the exceptions as broad as possible – i.e. family, financial consultants, financing companies and institutions.
Be mindful as well that a Confidentiality Provision can come into play if you or your clients are seeking financing based on the settlement. Make sure that disclosure for financial reasons is also exempted from the provision.
Blindly accepting Confidentiality Provisions insisted on by defendants can be costly to you and your clients. Just ask the Snays!