Tuesday, March 18, 2014

Gloating

A recent case from the Court of Appeal in Florida illustrates the perils of confidentiality clauses in settlement agreements, but something more as well. Patrick Snay brought an age discrimination suit against a private school that did not renew his contract as headmaster, and settled the case for $80,000 plus $60,000 in attorneys' fees. (According to footnote 5 of the opinion, it appears the settlement was accomplished by mediation.) So far, so good. The settlement agreement contained a strict confidentiality clause prohibiting the plaintiff from disclosing, directly or indirectly, any information whatsoever about the existence or terms of the agreement to anyone except professional advisers. But Snay's daughter, who was a student at the school, and apparently had also suffered as a result of the dispute, had to be told something, Mr. Snay figured. So he simply informed her that the case was settled and that he was happy with the result.

Snay's daughter promptly published the following on her facebook page:
"Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT."
The school refused to make the $80,000 payment. Snay moved to enforce the settlement agreement. The trial court granted his motion, but the Court of Appeal reversed, holding that he had breached the agreement by informing his daughter that the case was settled and that he was happy with the result.

On one level, the case simply provides a cautionary tale about the drafting and enforcement of confidentiality clauses. These need to be considered very carefully! Had the parties inserted language commonly used that permits them to announce that the case has been resolved to both parties' satisfaction, but bars any further disclosures, the problem could have been avoided. Had family members been included in the list of people to whom disclosure could have been made, the problem could have been avoided. Had the father simply told his daughter that he could not say anything to her about the case at all, the problem could have been avoided. Had the father, despite his breach, sworn his daughter to secrecy, most likely the problem could have been avoided. Perhaps better yet, had the daughter, who appears to have been affected by the case to such an extent that she needed counseling, participated in some fashion in the settlement negotiations so that she better understood all of the reasons that the case was being resolved, the problem perhaps could have been avoided. (See my prior post on agents, noting the importance of including all affected parties so as to avoid miscommunications.)

On another level, this case might be about much more than a party's breach of a confidentiality clause. It has been widely reported that it was the daughter's facebook post that cost her father the $80,000 settlement payment. Strictly speaking, that is not true. The daughter was not a party to the settlement agreement, and the school could not refuse to perform based on her actions. The Court of Appeal makes clear in its opinion that it was only the father's comments to his daughter that breached the settlement agreement, not the daughter's facebook post. So why did the court even mention the details of the daughter's facebook post, or the fact that it was disseminated to her 1200 facebook friends? It's hard not to draw the conclusion that the tone of the facebook post influenced first the school's decision to withdraw the agreed-upon payment, and second the Court of Appeal's decision to validate this refusal to perform the agreement.

A settlement agreement is supposed to represent peace. Ideally, both parties should be at peace with the result. It's best not to view settlement as a victory or defeat for one side or the other, but instead and most importantly as a peaceful resolution of the dispute that benefits both sides, especially compared to the costs of continued conflict. I am of course speculating here, but perhaps because she was not included in the settlement negotiations, and perhaps because she had suffered herself as a result of her father's dismissal from her school, Snay's daughter was not fully at peace with the result. She needed to take a final jab at the family's adversary, and brag about their victory. What she might not have understood was that such jabs are not considered good form after cases are settled, and that they create a new offense, stirring up all of the negative feelings created by the dispute itself. Likely the school had its reasons for not renewing the contract, valid or not, and its officials probably felt the payment was excessive, and only justified to avoid the even higher costs and risks of continuing the litigation. I'm speculating about that as well, but that is usually the employer's response to discrimination claims by employees.

Many considerations support the inclusion of confidentiality provisions in settlement agreements, one of which is to encourage good behavior on both sides, allowing them to remain at peace. But such clauses should be drafted carefully so they don't turn into a trap for the unwary that can allow the other side to renege on its promises.

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