Nondisclosure Clauses are NOT “Just Boilerplate”

Skip Sperry Blog Leave a Comment

Your company may have entered into a settlement agreement with an employee, vendor, customer, or other party. The settlement could have been months or years ago, and while you recall that the matter settled, you may not remember all of the settlement agreement provisions.

Settlement agreements often contain a nondisclosure clause requiring the parties to the agreement to keep the matter confidential. A typical clause might read as follows:

As part of the consideration for this Agreement, the Parties and their respective counsel agree that the terms and conditions of this Agreement shall be confidential and shall not be disclosed, made public, disseminated, or otherwise communicated to any person or entity by the Parties, their attorneys or representatives unless so ordered by a court of law or other governmental body acting with the force of law, or unless necessary to effect or report the requirements of this Agreement, such as disclosure to a Party’s professional bookkeeper, CPA, or other tax preparer, provided that anyone so informed is also advised of the confidentiality obligations of this paragraph. This provision shall not apply to notification to shareholders or potential investors of the Company, or in so far as the Company is required to disclose debts or obligations in connection with a financing or an offer of securities by the Company. In either of the aforementioned circumstances, only the total consideration paid and the amount of the Settlement shall be disclosed. The Parties further agree that if inquiries are made concerning this Agreement, the Party being asked shall respond to the inquiry with words to the effect of “the matter was mutually resolved.” The Parties agree that each will notify the other in writing as promptly as practicable after receiving any request for testimony or information in response to a subpoena, court order, regulatory request or other judicial, administrative or legal process or otherwise as required by law, regarding the anticipated testimony or information to be provided and at least ten (10) days prior to providing such testimony or information (or, if such notice is not possible under the circumstances, with as much prior notice as is possible).

(Too much legalese for my taste, but you get the point).  Let’s say that two years after a settlement, the company’s CEO is having lunch with a colleague who is going through a similar dispute with the same vendor, and the CEO relates some of the details of the settlement he was able to secure. Has the settlement been breached? Possibly.

Recently, an Oregon attorney has attempted to use breach of a nondisclosure provision to void his sexual harassment settlement with a former employee. The matter is still pending, but it is an example of the dangers of ignoring or not remembering the obligations contained in settlement agreements, including nondisclosure and non-disparagement clauses. All the provisions at the end of contracts that don’t seem to contain much substance may have important ramifications. I recommend generating a contract summary database for your company so that you can quickly review agreements to which you are a party and find the operative provisions.

If you have any questions about this or any other legal topic, please feel free to give me a call.

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