The vast majority of bona fide commercial cases end in settlement. It has become a generally accepted practice in commercial practices to include a confidentiality provision in settlements so as to ensure that the parties will not discuss the contents of the settlement with anyone. The provision is designed to truly end the dispute, preclude boasting of success, and avoid having competitors or other similarly situated litigants know the extent of the negotiated bargain.
The clauses have become so common that they are sometimes glossed over by a lawyers who then fail to counsel their clients regarding the ramifications of the agreements, or ignored by the clients in their quest to pocket the long-awaited results. The case of Gulliver Schools, Inc. v. Snay, decided on February 26, 2014 by Florida’s Third District Court of Appeals, demonstrates the catastrophe of such a callous review. A copy of the decision is available here.
Mr. Snay brought an action against Gulliver for wrongful termination due to unlawful age discrimination. After a year of litigation, the parties settled the dispute whereby Gulliver agreed to pay Mr. Snay back pay and damages in the total amount $90,000, plus pay for his attorneys’ fees. The settlement agreement included a provision stating:
13. 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 Plaintiffs portion of the settlement Payments.
Not unexpectedly, Mr. Snay shared with his family that the case had been settled. Excited for her father and unable to restrain her disdain for Gulliver, Mr. Snay’s daughter turned to Facebook and made the following post:
Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.
Gulliver did not “suck it.” Instead, Gulliver took the steps to disgorge the payments made to “Papa Snay.” Mr. Snay defended against the disgorgement claim by asserting that he did not disclose the terms of the agreement, rather, “[m]y conversation with my daughter was that it was settled and we were happy with the results.” The Third District found that such a “disclosure” was a material breach of the settlement agreement:
[T]he plain, unambiguous meaning of paragraph 13 of the agreement between Snay and the school is that neither Snay nor his wife would “either directly or indirectly” disclose to anyone (other than their lawyers or other professionals) “any information” regarding the existence or the terms of the parties’ agreement.
Gulliver Schools, Inc. v. Snay, 39 Fla. L. Weekly D457a (Fla. 3d DCA Feb. 26, 2014).
The implications of the Gulliver case are far-reaching, and the moral of the story is quite clear. A settlement agreement will not be treated differently than any other agreement. Confidentiality clauses should be carefully crafted to include language that the parties will be able to understand and accept. The inclusion, scope and remedy for such a breach are all negotiated terms, and counsel should not hesitate to strike or edit unacceptable language. Then, particular attention should be given by counsel to explain the reach of each provision of the settlement agreement.