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Facebook Confidential: Settlement Agreements in the Age of Social Media
Practical Law Legal Update 7-559-4785 (Approx. 6 pages)
Facebook Confidential: Settlement Agreements in the Age of Social Media
by Practical Law Litigation
| Law stated as of 06 Mar 2014 • USA (National/Federal) |
A recent case highlights the need for counsel to keep Facebook and other social media in mind when advising clients on a settlement agreement's confidentiality provisions, and to carefully negotiate and craft a tailored confidentiality provision based on the circumstances of each case.
Keeping a settlement confidential has become increasingly challenging in the age of Facebook and other social media. Counsel must carefully negotiate and draft the confidentiality provisions of every settlement agreement, and emphasize to their clients that even a seemingly private discussion can quickly turn public, which can derail the settlement, require the client to disgorge settlement proceeds, or worse, lead to sanctions.
Courts Will Invalidate a Settlement Based on an "Innocent" Breach of Confidentiality
As a recent Florida case reiterates, courts generally will not hesitate to invalidate a settlement once a breach of a settlement agreement's confidentiality provision becomes known. In Gulliver Schools, Inc. v. Snay, Patrick Snay sued Gulliver Schools, Inc., which operates a private school in Florida, for age discrimination and retaliation after it did not renew his contract as headmaster (No. 3D13-1952, (Fla. Dist. Ct. App. Feb. 26, 2014)). The case settled, with the school agreeing to pay Snay $80,000. The parties' settlement agreement contained a confidentiality provision, which prohibited Snay from discussing the settlement with anyone except his attorneys, professional advisors and spouse. The settlement agreement did not carve out an exception for Snay's other immediate family members.
Only four days after the agreement was signed, Snay told his daughter that the case had settled, and that he was happy with the result. Snay's daughter then posted on Facebook: "Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT." The post went out to approximately 1200 of her Facebook friends, many of whom were either current or past students at the school.
Based on the Facebook post, the school refused to pay Snay his portion of the settlement proceeds. Snay moved to enforce the settlement agreement. Although the trial court found no breach of confidentiality, the Florida Third District Court of Appeal reversed. The appellate court concluded that:
- The settlement agreement was clear and unambiguous.
- The confidentiality provision prohibited Snay from disclosing, either directly or indirectly, "any information" regarding the existence or terms of the settlement to anyone except his spouse, lawyers, or other professional advisors.
- Snay breached the confidentiality provision by discussing the settlement with his daughter, who then did precisely what the confidentiality provision was designed to prevent, namely, advertising to the school's community that Snay had been successful in his lawsuit against the school.
- Snay's claim that he needed to tell his daughter about the settlement did not excuse the breach, as Snay did not make this need known to the school or to the attorneys. Had Snay done so, the parties could have "hammer[ed] out" a mutually acceptable course of action in the settlement agreement.
Counsel Should Advise Clients of the Consequences of Breaching Confidentiality
Two important lessons can be learned from Gulliver v. Snay. First, although it may appear obvious to seasoned attorneys, clients must be reminded that even a seemingly private conversation about a confidential settlement agreement with "trustworthy" third parties who are not bound by the agreement may quickly become public, especially given the prevalence of social media. Counsel must encourage clients to carefully consider the potential consequences of improper disclosure before discussing confidential settlements with anyone. Counsel should also explain the potential consequences, which may include:
- Invalidation of the settlement agreement.
- Liability for breach of contract.
- Disgorgement of settlement proceeds.
- Sanctions.
Counsel Must Tailor Confidentiality Provisions
Second, Gulliver v. Snay highlights that the language of a settlement agreement's confidentiality provision is critical in determining any breach. Attorneys must therefore carefully draft a settlement agreement's confidentiality provision and tailor it to the circumstances of each dispute. When negotiating and drafting confidentiality provisions in settlement agreements, counsel should:
- Clearly articulate what the client is and is not prohibited from disclosing or discussing, including:
- any negotiations prior to settlement;
- the terms and conditions of the settlement;
- the existence of the settlement agreement itself; and
- the existence of the dispute, where the underlying dispute is not based on a filed complaint.
- Specify any circumstances under which the client is permitted to disclose information otherwise prohibited from disclosure, such as to enforce the agreement.
- Discuss with the client the individuals or groups of individuals to whom the existence of the settlement agreement, or any of its terms, must be disclosed (as a legal or practical matter), and carve out an exception for each of those individuals. Ensure that the client understands exactly with whom the client may discuss the settlement.
- Include language specifying what the parties may say if they are asked about the dispute.
Practical Law has several tools and resources available to guide counsel in negotiating and drafting confidential settlement agreements. These resources include:
- For class action settlements, Practice Note, Settling Class Actions: Process and Procedure: Filing the Proposed Settlement Agreement.
- For settlement in employment disputes, Standard Document, Settlement and Release of Claims Agreement: Single Plaintiff Employment Dispute.
For more information generally on the legal risks associated with the use of social media, see Practice Note, Social Media Risks and Rewards.