Confidentiality Agreements Work!

In Florida a man ("Mr. Snay") sued his employer for age discrimination. They settled (like most lawsuits do), and pursuant to a confidentiality agreement the employer paid Mr. Snay $80,000.

Enter Mr. Snay's teenage daughter, who writes her 1,200 Facebook friends, stating "Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT."

In finding that Mr. Snay had to disgorge the $80,000 settlement, the court stated that "Snay violated the agreement by doing exactly what he had promised not to do. His daughter then did precisely what the confidentiality agreement was designed to prevent."
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When representing our clients, we like to use confidentiality agreements-even when they may seem onerous. The concept is simple, and it is discussed by scholars who basically state that sometimes what one pays for in a settlement or other transaction is precisely the confidentiality. See: Drewsen, Merete Løwe and Lando, Henrik and Cummins, Tim, On the Drafting of Confidentiality Agreements (July 17, 2006).

Thus, the value that Mr. Snay's employer placed on confidentiality was $80,000. Since the confidentiality was breached, his settlement was no longer worth $80,000. Since the settlement is no longer worth $80,000, disgorgement is appropriate.

When private companies enter into settlement agreements with shareholders, we always recommend that our clients have the shareholders sign a confidentiality agreement in addition to whatever other transaction documents are entered into. Having a confidentiality agreement in place can help a company recover other claims resulting from a shareholder's breach of that agreement.

This blog site provides general information about the law only and does not constitute legal advice. You should not act or refrain from acting based on these materials without first obtaining legal counsel. Call one of our attorneys at 800-642-6388 to see how the information in these articles may apply or not apply to your particular situation. This website also contains links to third-party websites. We are not responsible for, and make no representations or endorsements with respect to, third-party websites, or with respect to any information, products or services that those websites might provide.

POSTED BY: Gil Bradshaw
POSTED: 27th March 2014
FILED AS: Corporate Law