What Are Confidentiality Clauses in Settlement Agreements?

Settlement agreements can occur in nearly any kind of civil case – they are done to achieve the highest compensation possible without going to trial. Coming to these agreements can take months, or even years, of intense work preparing the case for trial and presenting this hard work to the other side. When settlement agreements are made, the terms of this agreement must be met. While our clients are most aware of the compensation they agree to, they must also be aware of the different clauses in the agreement which is why we require our clients read, analyze, and ask questions about the agreement. In almost every agreement, confidentiality clauses are included and may be allowed in the final paperwork. Confidentiality agreements are strictly enforced and violating one could land a client in hot water. With expertise in personal injury, the attorneys in St. Louis at The Simon Law Firm, P.C. have decades of experience drafting, negotiating, and executing settlement agreements for a comprehensive range of practice areas. In this blog, we will look at what these clauses are, what happens if a client violates them, and the advantages and disadvantages of them.

Keeping it Quiet: Settlement Agreements and Confidentiality

When signing a settlement agreement, you agree to abide by the clauses and the opposing party will do the same – as such, there is a ‘give’ and ‘take.’ Confidentiality clauses are one of the ‘takes’ from our client and at a base level restrict their ability to discuss the settlement with others. In some cases, the opposing party will add a confidentiality clause that restricts our client from affirmatively stating there was a settlement, who it was with, or how much was awarded in compensation for the alleged negligence. For example, if Client A signs a settlement agreement with Defendant B that says Client A can affirmatively acknowledge the settlement occurred and who Defendant B is, but she cannot disclose the $400,000 settlement amount, she must not say or acknowledge to anyone outside of her attorneys and opposing attorneys the settlement amount. Since this clause is one of the ‘takes,’ we as attorneys review them in settlement agreements to ensure it is appropriate given the circumstances, not too restrictive, and reasonably benefits the opposing party without undue burden to our client. It is important these clauses are perfected because in the event of a violation, our client or even our firm can be held liable.

What Happens if the Confidentiality Agreement is Violated?

In the event one party violates a confidentiality agreement, the other party will have the ability to file a “breach of contract” case in the appropriate venue, usually written into the settlement agreement. In essence, violating a confidentiality agreement is breaching a contract, or going back on one’s written agreement to do or not do something, and damages can be awarded if certain evidence is shown that one party violated the clause. For example, if Client A agrees to the terms above with Defendant B and admits that she settled her case for $400,000, Defendant B can sue her for breach of contract and request damages. In most cases, the damages requested per violation will be written into the agreement. This will likely be negotiated between attorneys and ultimately lowered, but some violations can cost a party more than $10,000 – just for one statement! Not only is our tradition to ‘keep good’ on contracts we enter and ensuring punishment for those who fail to meet expectations, but monetary damages in breach of contract cases are intended to help the party who was the victim of the violation. “The purpose of an award of damages is to make the injured person whole by money compensation.” Finch v. Campbell, 541 S.W.3d 616, 634 (Mo. App. 2017).

Advantages and Disadvantages of a Confidentiality Clause

When thinking of entering a settlement agreement, you and your attorneys will discuss the advantages and disadvantages. For some clients, they are looking forward to their day in court, while others just want to wrap things up as soon as possible. When the time comes that Defendants want to negotiate, it is important to know the pros and cons of settling and what you are and are not willing to concede. For example, if you are a client who just wants to wrap up the case without going to trial, there is a possibility the Defendant will not pay as much since you are wanting to settle as soon as possible. Good negotiations take time and there are times when settling at the first, or even second, opportunity will not net the highest award possible.

For plaintiffs, the advantages of settling are:

• Avoiding uncertainty – In nearly all civil cases, trials are conducted in front of a jury. When we try our cases, we put forth all facts we can to present the strongest case possible. Even so, some juries will find against us, and the years of work will have turned up nothing in compensation for our clients.
• Avoiding appeals – In the event we win at the trial level, Defendants will appeal nearly every verdict against them. In some cases, this can add another year or two until funds are deposited due to the appeals briefing and argument process – and that is only if the Defendants lose their appeal. If they win, the case will have to be re-tried before a new jury, starting the process over again.
• Keep expenses low – Trials can rack up high costs, so settling cases will avoid the need to spend tens of thousands of dollars for experts and their travel, travel for staff members and attorneys, and meals if the case is outside of the attorneys’ locale.

Alternatively, there are some disadvantages of settling:

• No day in court – For some, this is a relief, however some plaintiffs demand their story be heard and we fully respect their motives. Being able to tell your story of pain, strength, and struggle is not only healing, but powerful when presented to a jury. In some cases, plaintiffs drive the litigation with their willpower and help us as attorneys to present an emotionally difficult case.
• Admission of liability – Although the Defendant will be paying monetary compensation to our client, confidentiality clauses often direct our client not to admit of any settlement and explicitly note that they are claiming no liability. It seems like a small paradox, but it keeps our client from discussing certain facts of the negligence, the fact there was a settlement that occurred, and the amount they paid to our client.
• Less compensation – As discussed above, haste in agreeing to settlements can lead to lower money. There are times where a case could bring in millions at trial, but after caps are applied to non-economic damages and the appeals process, the final amount of money can look similar to the settlement amount passed up years before.

These are all considerations we discuss with our clients, and it is important for any client to read their settlement agreement and ask questions. If you or a loved one have been injured due to another’s negligence and need counseling on your options, contact The Simon Law Firm today for a free, confidential consultation.