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By: Josh Ferguson
A California Appellate Court recently ruled that the non-disclosure and confidentiality terms of a settlement agreement bind only the parties, and not counsel, unless specifically stated otherwise.
The case involved Monster Energy Company suing Bruce Schecter and R. Rex Parris Law Firm for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) unjust enrichment, and (4) promissory estoppel. Monster Energy Co. v. Schechter, No. E066267, 2018 Cal. App. LEXIS 711 (Cal. Ct. App. Aug. 13, 2018). Those claims were based on Defendants disclosing terms of settlement to a news outlet in violation of the executed settlement agreement. Monster pointed out that the plain terms of the settlement agreement bound the attorneys to the confidentiality provision. The Court of Appeal of the State of California, Fourth Appellate District acknowledged “ the confidentiality provisions of the settlement agreement did at least purport to bind the Attorneys.” The terms provided, “Plaintiffs and their counsel agree that they will keep completely confidential all of the terms and contents of this Settlement Agreement … .” They also stated, “Plaintiffs and their counsel of record … agree and covenant, absolutely and without limitation, to not publicly disclose” the provisions of the settlement agreement. Finally, the agreement said, “the Parties and their attorneys … hereby agree that neither shall make any statement about the Action … in the media … .”
However, the court ultimately opined that was not the issue. They stated the issue is not one of contractual interpretation. A party cannot bind another to a contract simply by so reciting in a piece of paper. No matter how clearly the contract provided that the Attorneys were bound, they could not actually be bound unless they manifested consent. In this case, that did not happen.
The settlement agreement identified the “Parties” as the Fourniers and Monster. The Attorneys then signed under the words, “Approved as to form and content.” The signature block identified them as “Attorneys for [the Fournier] Plaintiff[s].” The court went on to say that “The only reasonable construction of this wording is that they were signing solely in the capacity of attorneys who had reviewed the settlement agreement and had given their clients their professional approval to sign it. In our experience, this is the wording that the legal community customarily uses for this purpose.”
The moral of the story is that if you want to bind someone to a provision, you need to get them to explicitly agree to same and require their execution.
If you have any questions or would like more information, please contact Josh Ferguson at [email protected].