Nondisclosure agreements have been used by corporations for a long time to keep some control over their reputations especially in relation to their competitors. Bloomberg: Rebecca Greenfield, "How Lawyers Protect the Harvey Weinstein in Your Workplace" (subscription may be required).
NDAs were never intended to empower sexual predators. A good, comprehensive discussion of the many issues involved with NDAs, particularly in alleged sexual harassment cases and including legislative measures, is reported by Christian M. Wade, Statehouse Reporter, in "Lawmakers Seek Ban on Non-Disclosure Agreements," Salem, Massachusetts News.
Harvey Weinstein's NDA went beyond employment-related activities to include forced silence about his "personal, social or business activities." Nicole Einbinder, "What Happens if Someone Breaks a Non-Disclosure Agreement?" reported on NPR / Frontline.
Many NDAs are brandished like guns as a scare tactic. They are often used to intimidate people into signing these agreements. People sign NDAs fearing that they risk giving the money back if they say what happened to them. They are also afraid of risking a penalty, when it is often the case that they do not have the money to pay, where the NDA provides penalties for speaking about the nondisclosure.
For example, many nondisclosure agreements have come to light concerning Bill O'Reilly and Fox. As a result of a Federal Judge's decision denying Mr. O'Reilly's motion to seal them, we have the benefit of seeing the terms of some of these actual nondisclosure agreements. The case is Bernstein v. O'Reilly and Fox, ___ F. Supp. 3d ___, No. 1:17-civ-9483 (DAB), 2018 WL 1615840 (S.D.N.Y. April 3, 2018).
The case involved three plaintiffs who, according to the Court in that case, alleged claims in an amended complaint against Defendants Bill O'Reilly and Fox "for defamation, breach of contract, breach of covenant of good faith and fair dealing, and tortious interference." Each of the three plaintiffs -- Rachel Wittlieb Bernstein, Andrea Mackris, and Rebecca Diamond -- agreed to keep certain matters about Fox and Mr. O'Reilly confidential. Interestingly, Mackris's and Diamond's lawyers (they had different lawyers) also agreed to keep those matters about Fox and Mr. O'Reilly confidential. It is highly unusual to include lawyers in a nondisclosure agreement or other kind of release.
The Wittlieb Bernstein nondisclosure does not appear to contain any provision for what would happen to her if she breached the nondisclosure agreement, but the Mackris and Diamond NDAs do provide, in the case of Mackris, that she would have to "disgorge" basically not only the money she was paid as part of the nondisclosure but also any profits or income she made as a result, and in Diamond's case, that she would have to pay back any money that was paid to her as part of her nondisclosure agreement.
Here is the Mackris "disgorgement" provision ("Morelli" and "the Morelli Firm" are references to the lawyers):
(f) Mackris, Morelli and the Morelli Firm acknowledge that the requirement of confidentiality is the most material inducement to O'Reilly and Fox News to enter into this Agreement. Mackris, Morelli and the Morelli Firm acknowledge that the damages to O'Reilly resulting from any breach of this Paragraph 7 or any subsection thereof will be impossible or difficult to ascertain, and Mackris, Morelli and the Morelli Firm expressly agree that in the event of such breach, and notwithstanding Paragraphs 9(a) and 9(c) hereto, O'Reilly shall be entitled to injunctive relief enjoining any such breach, specific performance of this Paragraph 7, and, upon a finding by an arbitration panel or court of competent jurisdiction of breach of this Agreement, it shall be presumed that such breach caused damages to O'Reilly and Fox News, O'Reilly and Fox News shall be entitled to recover such damages and, in addition to any other relief to which O'Reilly and Fox News are entitled by law, Mackris shall return to O'Reilly any payments made under this Agreement, shall forfeit any future payments due under this Agreement, shall disgorge to O'Reilly the value of any benefit earned or received as a result of breach of this Paragraph 7, and shall pay to O'Reilly all reasonable attorney's fees and costs, including forum fees, incurred by O'Reilly in attempting to enforce this Agreement. Upon a finding by an arbitration panel or court of competent jurisdiction that Mackris did not breach this Paragraph 7, O'Reilly shall pay to Mackris all reasonable attorney's fees and costs, including forum fees, incurred by Mackris in defending any action by O'Reilly for such alleged breach.
(Emphasis added.)
The "payback" provision for Diamond and "Diamond's Counsel" reads in pertinent part as follows:
4.5 In the event that Diamond materially breaches any of the warranties, representations or undertakings concerning confidentiality that she has made in this Paragraph, O'Reilly shall be entitled to recover as liquidated damages all payments made to Diamond (excluding payments to her counsel) referenced in Paragraph 1 herein, and O'Reilly shall not be required to make any future payments referenced in Paragraph 1 herein. A breach of confidentiality by Diamond's husband shall be considered as a breach of this Paragraph by Diamond. In the event that Diamond's Counsel materially breaches any of the warranties, representations or undertakings concerning confidentiality that they have made in this Paragraph, O'Reilly shall be entitled to recover the payment made to the counsel responsible for such breach.
(Emphases added.)
None of the alleged victims were subjected to additional penalty provisions, but Mackris's lawyers were. By an amendment apparently attempting to fix the oversight in the original agreement, O'Reilly and Fox required the lawyers to pay a $100,000.00 penalty if they violated the nondisclosure.
Parenthetically, the "Amendment to Confidential Settlement Agreement" specifically refers to mediation demands sent by O'Reilly and Fox, and other persons unknown, to mediator Marc Kasowitz.
The Wittlieb Bernstein nondisclosure agreement is found here, in Download Bernstein v. Bill O'Reilly and Fox Doc 59-2 Rachel Wittlieb (Bernstein) Sev Agr and Gen Rel s 09.09.02 and 09.16.02 Filed 04.04.18 (SDNY No. 1.17-cv-09483.DAB)., and the Mackris and Diamond nondisclosures, and the amendment for Mackris's lawyers, are all found here, in Download Bernstein v. Bill O'Reilly and Fox Doc 59-3 VarExs.B.Mackris and lawyers Confid SA 10.28.04 C. Morelli Ad 11.07.07 D.Diamond and lawyers Confid SA etc.08.11 Filed 04.04.18 (SDNY No. 1.17-cv-09483.DAB).
Another fear comes from the possibility that the corporation or person who drafted the NDA could smear the victim's reputation if the victim disclosed what the agreement was drafted to keep under wraps. The articles cited here all tend to address these issues. In addition, see Julie Hong, "End of the Nondisclosure Agreement? Not So Fast," Wall Street Journal Online posted March 26, 2018 (subscription required); Ronan Farrow, "Harvey Weinstein's Secret Settlements," The New Yorker.
Those are the fears. NDAs have been used in ways that the law used to call "in terrorem," meaning in essence to terrify. There is not much if any case law concerning the validity of NDAs except in cases involving standard commercial concerns, such as trade secrets. There does not seem to be any case law on the validity of NDAs like the ones quoted and described earlier in this article concerning alleged sexual harassment, even when the alleged sexual misconduct occurred in the workplace.
It has been said that the closest authority we have comes from cases like the Gulliver case in Florida. The Gulliver case involved Mr. Patrick Snay's settlement of his claims against Gulliver for alleged age discrimination and for alleged "retaliation under the Florida Civil Rights Act." Gulliver Schools, Inc. v. Snay, 137 So. 3d 1045, 1046 (Fla. 3d DCA 2014). Patrick Snay's settlement agreement included the following "confidentiality provision" which was effectively another "disgorgement" provision drafted with a similar intent as the one in Ms. Mackris's nondisclosure agreement with Bill O'Reilly and Fox, quoted above:
- Confidentiality... [T]he plaintiff shall not either directly or indirectly, disclose, discuss or communicate to any entity or person, except his attorneys or other professional advisors or spouse any information whatsoever regarding the existence or terms of this Agreement ... A breach ... will result in disgorgement of the Plaintiffs portion of the settlement Payments [which as the appellate court noted, amounted to $80,000].
(Emphasis by the Court.)
Mr. Snay told his daughter. She posted on Facebook. One commentator cracked that he would never tell his child when he had come into money himself. Panel Discussion Judicial Records Forum 2014, 83 Fordham L. Rev. 1735, 1806 (2015).
To be continued ....
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