Confidentiality in Negotiating Settlement Agreements
Victoria Pynchon, Esq. Settle It Now!! Dispute Resolution Services http://negotiationlawblog.com www.settlenow.com
What Information Subject of Negotiations Can Be Protected?
Outside the context of litigation
Fact that Parties ARE negotiating Trade Secrets
Technical information
Plans, designs and patterns Processes, methods, techniques and formulas. Computer sofware (programs or source code)
Business Information
Financial information Cost and pricing information Market analyses or forecasts Customer lists Business relationships business opportunities Marketing and advertising plans Personnel information
Trade Secrets Protected by Law
It’s a trade secret if It derives economic value from being secret. It took time and money to develop It is not generally known to the public its owner exercises reasonable efforts to keep a secret
Constitutional Privacy Protections Uniform Trade Secrets Acts Trade secret is misappropriated if a person acquires a trade secret knowing or having reason to know that the trade secret has been acquired by "improper means," discloses or uses a trade secret the person has acquired by "improper means" or in violation of a nondisclosure obligation, discloses or uses a trade secret the person knew or should have known was derived from another who had acquired it by improper means or who had a nondisclosure obligation or discloses or uses a trade secret after learning that it is a trade secret but before a material change of position.
Laws Protecting Confidential Proprietary Commercial Information
Why Protect the Confidentiality of Business Negotiations
Due diligence Freedom to Brainstorm business opportunities and solutions Free enterprise
Parties’ right to strike their own deals Parties’ right to be free from public or other scrutiny
Common Protections for Confidential Settlement Communications
Evidence of an offer to compromise and, statements made during an effort to negotiate a compromise of a disputes claim are
inadmissible in evidence to prove liability.
Limited Protection for Non-Mediated Settlement Negotiations
• settlement negotiations generally inadmissible to prove liability only – Admissible unless undue prejudice would outweigh probative value – no guarantee – Rarely restrictions on discovery of settlement negotiations • Parties often required to file “confidential” MSC statements • documents filed with Court won’t be sealed unless the party seeking nondisclosure can prove it would suffer prejudice to legitimate business or proprietary interests.
Enforcing Agreements Reached During MSC’s
Enforcement by Way of Motion agreement reached during pending litigation written stipulation (by the parties) to settle case; or Oral stipulation (by the parties) to settle in the presence of the court If parties request, Court may retain jurisdiction to enforce settlement until fully performed.
Confidentiality in Mediation (California)
• Prohibits
– Mediator – Participants – From revealing any written or oral communication made during mediation
• Bars admission in any civil action of
– Anything said – Any writing
• Made for the purpose of, in the course of or pursuant to the mediation OR a mediation consultation
• Neither disclose nor subject to discovery
• No mediator “shall be competent to testify in any subsequent civil proceeding as to any statement, conduct [or] decision occurring at or in conjunction with the proceeding [over which the mediator presided] . . .” with exceptions not relevant here. Evidence Code section 703.5.
Incompetent to
Testify
Mediator is
Denny Crane Demonstrating the Meaning of “Incompetence” Under the Law
•
Why Confidentiality is So Important in Mediated Negotiations
•
Fairness – Safeguards present in legal proceedings (evidentiary and procedural rules) are absent in mediation – Prevent proceeding from being “gamed”
• “free” discovery • Capitalize on admissions • Catch other side with guard down
Efficacy
– Mediators must be able to draw out baseline positions and interests – Compromises often require admission of unprovable facts – Mediators taught to draw out party feelings of guilt, shame, remorse, etc.
•
Mediator Neutrality
– If mediator can be a witness, she/he would have to “turn” on a party whose confidentiality he/she assured & to whom he/she promised to be neutral
• Privacy
– Some people are attracted to mediation BECAUSE it allows them to resolve their disputes in private – Some are attracted so they can keep proprietary information or trade secrets confidential
Ethics Deceptive Practices by Parties to Mediation
•Bottom line •Legal positions •Factual support for legal positions •Reasons for negotiation position •Party interests, needs •Authority given to negotiator •Need to seek greater authority
Deceptive Practices by Mediator
• separate caucus communications inherently deceptive • mediator “telegraphing” confidential party positions to other side • mediator “predictions” as to:
•Other side’s settlement authority •Other side’s ability to pay •Other side’s evidence or legal positions