Partner Jeff Garber’s Primer on Confidential Settlement Agreements in a Post-Weinstein World

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Partner Jeff Garber’s Primer on Confidential Settlement Agreements in a Post-Weinstein World

It has been widely reported in the media that Hollywood producer Harvey Weinstein (and a growing list of other public figures) was able to skirt years and sometimes decades of allegations of sexual harassment or assault by using settlements or contracts that included nondisclosure agreements (“NDA”): legal provisions that obligate employees or alleged victims to maintain secrecy. Details vary, but generally, NDAs are common features of settlements in these kinds of claims through which the aggrieved party agrees not to pursue litigation or discuss the terms of the deal in exchange for a sum of money. If the NDA is violated, the other party may sue for injunctive relief, which would stop the release of information, and to recover damages from the disclosing party.

The Harvey Weinstein scandal has put confidential settlement agreements in the spotlight. This in turn has ignited a debate as to whether NDAs should even be permitted in situations that involve sexual assault and harassment. The rationale against enforcement of such provisions is that secret settlements in sexual assault and related cases can jeopardize the public (including other potential victims) and allow perpetrators to escape justice just because they have the money to pay the cost of the settlements. These secret settlements in workplace and other settings can ultimately endanger the public by hiding sexual predators from law enforcement and the public. Against that backdrop, many are now viewing confidential settlement agreements with suspicion or even outright contempt.

It must be noted that confidentiality agreements have become a universal legal tool for more benign and legitimate purposes such as protecting trade secrets or confidential financial information.

“Settlement agreements are favored as a means to conserve judicial resources.  Courts will enforce them when it is possible to do so. They are interpreted and governed by the law of contracts.” Spiegel v. H. Allen Holmes, Inc., 834 So. 2d 295, 297 (Fla. 4th DCA 2002).  I wrote in an earlier article about the concept of “Freedom of Contract”, the doctrine which provides that people have the ability to fashion their relations by private binding agreements and to do so without being hampered by undue external control such as governmental interference. Under the concept of “Freedom of Contract,” parties to a dispute are free to fashion their settlement agreement to provide that the terms remain confidential. As with any other agreement, a settlement agreement can be determined to be unenforceable if it was induced by fraud, duress, illegality or some other reason which may render the agreement unenforceable.

NDAs in most instances do not involve nefarious purposes (i.e.: such as covering up sexual misconduct). Such agreements are a means for the parties to avoid a costly lawsuit, negative publicity (lawsuits are usually a public filing) or to bring a conclusion to a pending lawsuit. Common provisions in a confidential settlement agreement are that neither party makes any admissions as to the strength/weakness of their claim/defense and that neither party is permitted to discuss the underlying dispute or its resolution with third parties.

Most confidential settlement agreements are motivated by reasons other than covering up sexual misconduct. For example, the settlement (and/or the underlying lawsuit) may involve information which could give a competitive advantage to a third party. Parties are sometimes more inclined to resolve disputes if they have the assurance that the settlement terms will not be disclosed to the public. In actuality, the clear majority NDAs serve a legitimate public interest of encouraging settlement of matters which do not involve sexual misconduct.

 

About Attorney Jeffrey M. Garber

Jeffrey Garber concentrates his practice in the areas of commercial, business, and real estate litigation in both state and federal courts.

Mr. Garber is admitted to practice law in both Florida and New York. He is also admitted in all Florida U.S. District Courts, the U.S. District Court for the Southern District of New York, the U.S. District Court for the Southern District of New Jersey, and the U.S. Court of International Trade. He is AV Preeminent Peer-Review Rated by Martindale-Hubbell, and earned his J.D. in 1992 from the Jacob D. Fuchsberg Law Center at Touro College in Central Islip, NY.

 

January 2018|News|