Three people can keep a secret, declared Benjamin Franklin in Poor Richard’s Almanack – if two of them are dead. Lawyers are more optimistic, and believe those who sign a confidentiality agreement will keep their mouths shut. That includes attorneys.
That final point would seem to be obvious, but it was the focus of a case that went all the way to the California Supreme Court. The state’s highest court reversed a somewhat surprising Court of Appeal ruling that had exempted an attorney from a confidentiality agreement he signed and then apparently violated. (Monster Energy v. Schechter)
In 2012 Monster Energy Co. was sued by a couple whose 14-year-old daughter died of cardiac arrest after she consumed two Monster Energy drinks. In 2015 the parties reached a confidential settlement agreement.
The agreement said it was made “on the behalf of the settling Parties, individually, as well as on the behalf of their, without limitation, respective beneficiaries, trustees, principals, attorneys, officers, directors” and a long list of other persons (emphasis added.)
The confidentiality clause also said, “The Parties understand and acknowledge that all of the terms, conditions and details of this Settlement Agreement including its existence, are to remain confidential.
“Plaintiffs and their counsel agree that they will keep completely confidential all of the terms and contents of this Settlement Agreement, and the negotiations leading thereto, and will not publicize or disclose the amounts, conditions, terms, or contents of this Settlement Agreement in any manner.”
If a journalist asked about the case the agreement stated, “the Parties and their attorneys and each of them hereby agree” that the only response would be, “This matter has been resolved.”
Bruce Schechter, one of the attorneys for the family, signed the agreement under the notation “Approved as to form and content.”
Shortly after the settlement was signed, a legal news website attributed quotes to Schechter indicating that the case resulted in “substantial dollars” for the family. The article said Schechter could not reveal the exact amount because “Monster wants the amount to be sealed,” but quoted him as saying that he had filed three other cases against Monster Energy.
Monster sued Schechter and his law firm, alleging breach of contract for violating the confidentiality agreement, as well as other causes of action.
Schechter responded with an anti-SLAAP motion. The term refers to “Strategic Lawsuits Against Public Policy,” meaning suits aimed at discouraging others from speaking out on public issues or controversies. California courts can dismiss a case if a judge determines it is aimed only at preventing someone from exercising their First Amendment rights, concerns an issue of public interest, and has no real likelihood of prevailing.
Schechter also argued that he hadn’t signed the agreement as a party, and thus was not bound by it. He said his signature was intended only to inform his client that he regarded the wording of the agreement as acceptable and that they were free to sign it.
The Riverside County Superior Court denied the anti-SLAAP motion. It concluded that the “suggestion that [Schechter] is not a party to the contract merely because he approved it as to form and content only is beyond reason.”
Schechter then took the case to the California Court of Appeal, in Riverside. The appellate justices reversed the lower court’s denial of the anti-SLAAP motion. Citing earlier cases, they accepted Schechter’s argument that his signature was intended to convey only that he was approving the agreement for his clients’ signatures.
Monster took the case to the high court, which reached the opposite conclusion. Unlike the precedents cited by Schechter, in this case “The confidentiality provisions are not only extensive but repeatedly refer both to the parties and their counsel,” the justices said.
They noted that the document said “Plaintiffs and their counsel agree that they will keep completely confidential all of the terms and contents of this Settlement Agreement,” and “Plaintiffs and their counsel of record…agree and covenant, absolutely and without limitation, to not publicly disclose” information about the settlement.
That fact that Schechter’s signature was accompanied by a notation about approving the agreement as to form and content does not preclude a finding by the trial court that he intended to be bound by the terms of the agreement, the Supreme Court concluded.
Reversing the Court of Appeal, it sent the case back to the trial court for a full hearing.
By Laurie Murphy