United States: Agreements With Outside Consultants: The Importance Of Confidentiality Clauses

Recent developments have highlighted the risk of hiring an outside consultant to work on a project without an enforceable confidentiality agreement in place. Increasingly, consultants are using the experience they have gained working for industry clients as a springboard to later sell that expertise in lawsuits brought against those clients and others in the industry. As the contracting party, you will be well served by having strong confidentiality agreements in place to prevent a consultant entrusted with sensitive information from turning around years later and using that same information against you in a future lawsuit.

The need for strong confidentiality agreements was highlighted in the environmental products liability litigation which last week culminated in a $236 million verdict against ExxonMobil. One of the plaintiff’s key witnesses was an expert who previously worked as a consultant for a defendant on projects directly relevant to the issues in the litigation who had been exposed to the defendant’s confidential information. The defendant had not required the consultant to enter into a confidentiality agreement during the project. The defendant moved to prevent the plaintiff from using the expert against it in the lawsuit, but the court denied the defendant’s request, in large part because of the lack of a confidentiality agreement with the consultant. Had the defendant really been interested in keeping the information confidential, the court reasoned, it would have made its expectations clear to the consultant in writing by including a confidentiality clause in the consulting agreement.

Drafting Concerns

In drafting a confidentiality agreement, there is often tension between the client’s desire to keep sensitive information confidential and a consultant’s possible obligation to report information to government regulators. Reporting obligations imposed by federal, state, and local statutes may restrict a client’s ability to obtain full protection against disclosures by a consultant. In the environmental context, for example, if hazardous substance contamination is discovered in the course of transactional due diligence, anyone who arguably has “control” over the facility at which the release has occurred has an obligation to report it to the EPA if the magnitude of the contamination exceeds reportable quantities. In some states, like New Jersey, “any person” who discovers a release from an underground storage tank has an obligation to report it to state authorities. In those circumstances, even the best written confidentiality agreement will not protect information discovered by a consultant from disclosure. A reasonable confidentiality clause should accommodate the consultant’s need to adhere to mandatory reporting requirements while preserving a company’s desire to maximize confidentiality and maintain control over any communications with regulatory authorities that might become necessary.

The clause should also require that all communications with the government by the consultant need to be cleared by the client or its counsel. The proviso should include language to the effect that if the consultant believes that it must promptly communicate with a governmental agency before obtaining such consent, it will afford the client or counsel a reasonable opportunity to first undertake such communication and, in all events, oblige the consultant to promptly notify the client of any such communications.

Finally, it is generally advisable to also include a “conflict of interest” provision to prevent a consultant from using its work product against that client in any way, in any forum, without prior written consent of counsel, and to reserve for you or your counsel the final word as to whether a conflict or potential conflict exists.

Suggested Confidentiality Clause

A suggested confidentiality clause follows:

(a) The work product of Consultant shall mean any and all tangible products, data, reports, information recorded by whatever means, documents, written materials, and any and all other work products, or any portion thereof, including drafts, prepared, generated or provided by Consultant in connection with Consultant’s performance of the Services (“Work Product”). All Work Product shall be the sole property of the Client. Consultant hereby assigns to the Client all rights, title and interest in any and all Work Product, including any and all copyright ownership rights in such Work Product.

(b) For purposes of this Agreement, all information that Client provides to Consultant, all information pertaining to the Services performed by Consultant, and all information regarding Client’s business, including, without limitation, the identity of Client, shall be deemed and treated as strictly confidential, non-public information (“Non-Public Information”) unless and until Client specifically authorizes Contractor in writing that any such information may be treated as public. Except as specifically required by law, Consultant may disclose Non-Public Information only with Client’s prior written consent. Consultant shall have no authority to disclose Non-Public Information except in accordance with this section. Information already in the public domain shall not be considered Non-Public Information.

(c) Consultant shall neither deliver, reveal, nor report any Work Product or any Non-Public Information, obtained or created pursuant to this Agreement, to any federal, state or local government or agency, or to any other person or entity, public or private, without (i) express prior written permission of Client, or (ii) a court or administrative order requiring disclosure. In the event that Consultant forms the opinion that it is required by applicable law to disclose any Work Product or any Non-Public Information or is served with a court or administrative order requiring disclosure of any Work Product or any Non-Public Information, it will immediately notify Client in writing, and shall, in accordance with Client’s direction, respond, appeal or challenge such subpoena, or court administrative order, prior to disclosure, and shall cooperate fully with Client in responding, appealing or challenging any such subpoena, or court or administrative order. Neither Consultant nor its related entities shall disclose any Work Product or any Non-Public Information to any person or entity, nor shall they use or allow the use of any Work Product or any Non-Public Information, to further any private interest other than as contemplated by this Agreement. Consultant shall take appropriate measures to ensure the confidentiality and protection of all Work Product and all Non-Public Information and to prevent its advertent or unintentional disclosure or its inappropriate use by Consultant or its subcontractors, or by its or their employees or related entities. This duty shall survive the expiration or termination of this Agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.