Settlement agreements with non-disclosure clause

A good editorial − Secrecy That Kills – −from the New York Times making this crucial point:

For more than a decade, G.M. was aware of the faulty switches that caused some of its cars to accelerate suddenly and deactivate air bags. But as Bill Vlasic of The Times has reported, the company kept the danger hidden from regulators and from the public by reaching legal settlements with families that were conditioned on the families keeping silent.

I’ve written a number of times about non-disclosure and non-disparagement pacts in settlement agreements (here’s one, although there are many; if you’re interested you can search on “non-disclosure”), and how they keep us, the public, from knowing how much someone was willing to pay to keep the person they were paying from talking about how much was paid. Or how badly a defendant has behaved to people like us.

Non-disclosure clauses definitely cut down the wow factor in enormous settlement agreements. But as the Times makes clear they also cut down the information we really need so that we can understand how grave was the situation that led to the settlement in the first place.

If, say, GM can force victims of a deadly fault in their cars to keep quiet, potential future victims might not be informed that there is a deadly fault in their cars.

And lawyers pursuing cases can be deprived of adequately informational case law, if the case does not openly state the wrong and the remedy. And since useful case law, I’ve recently come to understand, is almost always found in appellate decisions, if someone settles a case in the lower court and insists on a non-disclosure clause, that case − which could have become highly useful to later lawyers pursuing similar cases − is in effect non-existent as a potent cite for future similar cases.

I’ve wandered somewhat off the path of this Times editorial, but squarely onto a connected path: non-disclosure clauses, which have sometimes been found unconstitutional, are not good things. They can only protect the wrongful actor, i.e., the defendant, from being exposed to other future plaintiffs as a bad guy.

UPDATE: Here’s a piece I just picked up from Twitter on employment law, which discusses employment separation agreements, i.e., settlement agreements between employers and employees. You’ll notice that the lawyer who wrote this piece says not to include non-disparagement clauses in separation agreements, and says why.


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