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A Growing Mediation Settlement Agreement Issue: Confidentiality Language

August 14, 2014

All competent mediating attorneys know how significant the signed, mediation settlement agreement is to the ultimate final closure of the dispute.  (If  YOU do not, see, Mediation Settlement Agreements: What You Should Know, January 18, 2012.)

Achieving a tentative mediation resolution, only to have any issue to the wording of your mediation settlement agreement prevent obtaining your resolution can be a disaster.  However, achieving resolution at mediation with an inadequate mediation settlement agreement leading to terminal release language disputes, can be an equal disaster!

Both late-in-mediation issues are increasingly common.  And, thus, increasingly, mediators find themselves often doing as much mediation of the language of the mediation settlement agreement as on the underlying dispute!

I have written with prior advice on how best to avoid this general issue of the mediation settlement agreement language.  See, i.e., Mediation Negotiation Technique:  Create a Negotiation Plan, October 16, 2012; Mediation Tip:  Start/Keep a Mediation Notebook,  July 8, 2014.

However, here is another, more specific, advance language issue tip upon another growing problem that I believe will only become worse in the futureThe defense’s  demand for confidentiality language in the Mediation Settlement Agreement and to be further expressly contained within the soon-to-follow post-mediation formal release.

If confidentiality of any settlement, any term of settlement, or more recently, the existence of the settlement or claim, is to become a required condition of your mediated settlement agreement,  it is critical to plan, in advance, for how and when this forseeable condition to your mediation resolution is to be implemented.

This issue of claim or settlement confidentiality has always been around in some selected disputes for relatively obvious reasons. i.e. Product Liability and Professional Negligence.  But, it’s more modern expanded growth has  likely mirrored the general loss of confidentiality to all settlements that grew due to lawyer advertising.

Prior to social media (or even websites and newsletters), usually, if the subject were raised, it was only the amount of a settlement that was sought to be protected. In essence, the defendants didn’t mind it being inadvertently disclosed that a settlement had occurred, but didn’t want any “encouragement to others” by revealing the extent of any significant settlement.

However, as newsletters began trumpeting “settlement successes” (for obvious purposes) even without divulging terms (at least in numbers), increasingly some defendants began demanding confidentiality of even the “existence” of a settlement.

However, most recently, with the explosion of social media and the increased ability and propensity for lay-persons to intentionally or unintentionally reveal their dispute resolutions to the public, it is clear that this is another mediation issue that will only grow with each defense seminar.

Thus this confidentiality language issue in mediation settlements needs to be identified and exposed for the advance thought of those of you who will be confronting the issue with growing emphasis in the future.

In personal injury matters, primarily in defective product litigation and professional negligence, and increasingly, in injuries in entertainment venues, the sensitivity to publicity as adverse to future income,has long created a trend to include, with fair compensation, the silence of those voluntarily compensated in exchange for avoiding trial.  Other areas, for example, employment disputes, intellectual property matters and any number of commercial disputes, often demand total confidentiality in exchange for negotiated settlements.  Obviously, the more that silence or the lack of publicity is felt necessary to a party, the more the subject becomes a factor in the total negotiation.

Mediated settlement agreements are already, of course, confidential by law and procedure.  Damages from any intentional or unintentional breach of that confidentiality, however, are nebulous at best.

Thus, because of this lack of perceived enforceability, increasingly, many defendants will be requiring their post-mediation release to also include much more specific provisions regarding confidentiality.

Presently such commonly seen requirements are known to range from “good faith” clauses of non-disclosure of the terms of a settlement, through non-disclosure of even the existence of a claim or settlement, to including specific penalty provisions for any alleged breach.

As a purely contract matter between parties, as with any contract, it will be the precision of the terms that will control the enforceability of the precise terms of confidentiality.  And, it must be understood that the enforcement of clearly written terms of confidentiality can clearly be had! See, Gulliver Schools, Inc. et al, v. Snay, __So. 3rd, (3rd DCA, February 26, 2014).

The issue gets increasingly thorny, however, when one party or their counsel, requires, as an additional term of resolution, some factor of confidentiality be agreed to or even guaranteed by the opposing parties counsel( NoteA similar thorny issue, required indemnification by an parties attorney as a requirement of settlement, has been soundly rejected by the Florida Bar. See, Release Language Ethics:  Plaintiff’s Lawyers May Not Personally Indemnify; Defendant’s Lawyers May Not Require Personal Indemnification.  November 30, 2011.

However, confidentiality in any form already presents its own problems for both sides to the issue.

One innate problem is the income tax effects for inclusion of any confidentiality provision and/or the attributed value of this consideration.

One of the principal items of interest to those who settle matters, particularly in personal injury matters, is the alleged non-taxability of such recoveries. (Note: this is and remains a touchy area of controversy and thus is always subject to the opinion of others.) accordingly, one of the issues now contributing to this entire area of coming controversy, is how is this loss (or partial loss, depending upon drafting) to the recovering party to affect this demand by the paying party?

A second issue, sitting in the back of the room, is Florida’s Sunshine Law.  Under certain conditions, it can be legally argued that confidentiality can be illegal.  See, 69.081, Florida Statutes.

In summary, however, other than this initial alert,  there is simply far too much to totally resolve in this posting about this growing potential impediment to resolution, including by mediation.

However, here are a few early and simple suggestions to consider regarding this growing issue,  in advance of your next mediation:

First, plan now that this matter is to likely to be included in any requirement of settlement.

Second, plan for what is to be the required level of confidentiality.

Third, plan to have available, or demand to be produced from the requiring party, before final tentative resolution is reached,  the exact proposed wording of any such requirement.

Fourth, plan to know any and all effects upon the taxability of any such confidentiality-required resolution.

Fifth, plan to know the precise penalty, to whom and for what defined violations of  your confidentiality agreement.

Sixth, plan to attach your final, negotiated version of the confidential language, as an addendum to your Settlement Agreement (or even the complete proposed final release mutually agreed to be used.)

And, finally, please leave enough time to let your mediator assist in mediating these issues!  It really is that important.

If you are lucky, then this advance preparation may be totally unnecessary.  But, frankly, my bet is that it is just a matter of time.

“To be forewarned is to be forearmed”.

Do I need say more?

Dan, from Bronson, Florida.



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