The nature of the web is such that it encourages disclosure of information. This open attitude often leads to individuals posting sensitive items without realizing the consequences. In some cases, the disclosure is harmless. In others, it can result in significant problems if there is a confidentiality clause involved.
A confidentiality clause is a paragraph of legal language inserted into a contract requiring one or both parties signing the agreement to hold any information disclosed as part of the transaction in confidence. Practically speaking, this prohibits the parties from sharing the information with the public or third parties.
Are confidentiality clauses binding? In a word – yes. The disclosure of confidential information in violation of a confidentiality clause is considered a material breach of a contract. The damaged party can then sue for breach of contract among other claims. One rather infamous case bears this out very clearly, although the case deals with an employment dispute.
Gulliver Schools, Inc. v. Snay
In Gulliver Schools, Inc. v. Snay, [Appellate Court Case No. 3D13-1952.], the appellate court looked at a unique situation where the daughter of an individual disclosed confidential information on Facebook. Patrick Snay was the headmaster of Gulliver Schools. A dispute arose regarding his continued employment, and the company did not renew his contract. Snay sued for age discrimination with the case eventually settling for $150,000 including attorney’s fees.
The Snay settlement agreement contained a confidentiality clause. The clause noted the parties would keep the terms of the settlement as well as the existence of a settlement strictly confidential. The failure of Mr. Snay to maintain the confidentiality would result in liquidated damages equaling the money paid to Mr. Snay for the settlement excluding the fees paid to his attorneys. Such confidentiality clauses are very common in settlement agreements.
Within a week of settling the case, Mr. Snay was notified he would not be receiving the settlement money. Gulliver Schools asserted Snay had breached the confidentiality clause. The problem? Snay’s daughter had posted the following to her Facebook account:
“Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.”
The attorneys for Mr. Snay tried to put forth a number of arguments excusing the disclosure, but the courts were having none of it. The confidentiality breach ended up costing the Snays the entire settlement amount and, frankly, they have nobody to blame but themselves.
The simple truth is contract agreements are binding. Whether you are settling a lawsuit or signing a joint venture agreement with another party, the clauses one finds in the contracts are there for very specific reasons. You should assume courts will enforce those provisions, including confidentiality clauses.
When negotiating a contract, you should always retain legal counsel to negotiate the deal, so you understand the exact nature of the language involved and the obligations you agree to. The fact you didn’t read or didn’t understand what a clause meant is not an excuse for breaching the confidentiality clause or any other language in a contract…even if it makes good fodder for Facebook.
Contact me for a free website audit and help with any contract issues you may be facing.
Richard A. Chapo, Esq.