Confidentiality in Negotiating Settlement Agreements

Victoria Pynchon, Esq.Settle It Now!!

Dispute Resolution Serviceshttp://negotiationlawblog.com

www.settlenow.com

What Information Subject of Negotiations Can Be

Protected?

Outside the context of litigationFact that Parties

ARE negotiatingTrade Secrets

Trade Secrets Protected by

Law

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

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

Laws Protecting Confidential Proprietary Commercial Information

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.

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 non-disclosure 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

Mediator is Incompetent to

Testify• 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.

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