As published July 26, 2021 for Risk Management Counsel of Canada
Childhood was simple. You trusted your best friend with confidential information simply by swearing a "pinky promise". In settlements, a "pinky promise" will rarely do the trick. Instead, a confidentiality clause is a more appropriate tool to stop the parties from sharing confidential information regarding a settlement.
But what happens when a confidentiality clause is breached? As a child, you could simply give your friend the "silent treatment". In settlements, the stakes are higher and there are often very good reasons for wanting information to be held in confidence. It is important for lawyers to stay mindful to possible issues and to know the remedies available when a confidentiality clause is breached.
The appropriate remedy will often depend on two main factors: the existence of a liquidated damages clause and the circumstances surrounding the breach.
The existence of a liquidated damages clause
When determining an appropriate remedy, a decision-maker will often look at whether the parties agreed to a particular remedy. It is not uncommon for confidentiality clauses to specify that if one party breaches that clause, they must repay a portion of the settlement amount. While decision-makers may diverge from what the parties agreed to, they will often consider it.
The circumstances surrounding the breach
A decision-maker will also consider the circumstances surrounding the disclosure of confidential information, including how egregious the breach was. Some other circumstances that are considered are:
- What material was disclosed?
- Did the opposing party simply disclose that a settlement agreement exists?
- Did they disclose the exact amount of the settlement?
- In what forum was the confidential information disclosed?
- Was it disclosed in a personal conversation?
- Was it published online?
- What was the intention of the breach?
- Was the breach premeditated?
- Was the breach inadvertent?
- What was the frequency of the breach?
- Was the breach a one-time breach?
- Was the breach a pattern of multiple breaches?
While the above list is not exhaustive, it provides a good starting point for what might be considered.
CASE LAW ON THE TOPIC
The cases below are examples in which confidentiality clauses are breached and show the range of available remedies.
In Tremblay, a restaurant employee filed a human rights complaint against their employer. The parties proceeded to a mediation to settle the complaint. The employee posted the following statements online:
- "Sitting in court now [redacted] is feeding them a bunch of bull shit. I don't care but I'm not leaving here without my money... lol.";
- "Well court is done didn't get what I wanted but I still walked away with some..."; and
- "Well my mother always said something is better than nothing..." .
The Human Rights Tribunal of Ontario held that, given the circumstances, a forfeiture of $1,000.00 of the settlement amount was appropriate. The Human Rights Tribunal emphasized the importance of confidentiality clauses, the need for deterrence and ensuring the award is not punitive.
In Air Canada, an Air Canada flight attendant was recently suspended pending discharge. Eventually, the employee was reinstated. The flight attendant received six months' pay and signed a memorandum of settlement which included a confidentiality clause. On a flight between Japan and Canada, the flight attendant told co-workers that she was recently reinstated and received six months' pay. The flight attendant disclosed this more than once on the same flight.
The arbitrator ordered the flight attendant to re-pay $7,500.00: one third of the settlement amount. The arbitrator indicated that, while the breach was serious, it was not the same type of egregious breach (in either the degree to which terms were disclosed or breadth of the audience to which the disclosure was made) that occurred in cases where the entire settlement was ordered to be forfeited.
In Dalhousie University, a university professor submitted multiple complaints to the Nova Scotia Human Rights Commission, alleging discrimination by the Dalhousie Faculty of Law. The complaint was resolved by a settlement agreement. The settlement agreement included a confidentiality clause which prevented the parties from publishing or communicating the terms of the agreement. In subsequent court proceedings, the professor filed Rebuttals which disclosed terms of the settlement agreement. The substance of the breach occurred when the professor published the Rebuttals on her website.
In this case, Dalhousie University only sought nominal damages ($1.00), a declaration that the professor breached the settlement agreement, a declaration that the settlement agreement remains valid and a permanent injunction requiring the professor to remove the terms of the settlement agreement from her website. The Court ordered all of the above, holding that substantial relief of damages would be difficult to quantify, and would not protect Dalhousie University's interest in enforcing the settlement agreement.
Settlement agreements often involve confidential information and confidentiality clauses. While the goal of a confidentiality clause is to keep information confidential, breaches do occasionally occur. Lawyers should remain mindful to possible remedies in such an instance, and what decision-makers will consider in granting remedies. Ultimately, by staying mindful to these issues, lawyers will be better prepared to serve their clients' interests.
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.