Inside Perspective: The disingenuous call for disclosure

Dan Harper is vice president, corporate counsel and secretary for Océ North America, Inc., a Canon Group Co.  He is also immediate past president of the Chicago Chapter of the Association of Corporate Counsel. The views expressed herein are the opinions of the author and do not reflect the position or viewpoint of Océ North America Inc., Canon Inc. or any of the Océ or Canon companies.

A confidential settlement agreement – to those who have never seen one, conjuring the idea of a secret document created to memorialize the loathsome behavior of some corporate executive, is intriguing.  The call for the parties to release the document in order that the truth be known to all and the subsequent refusal on the part of the people involved to do so, creates in the one seeking to uphold the sanctity of the agreement a presumption that she is hiding something.  If the “truth” supports her story, if it does not damage her reputation, then why would she not release the very document that will free her from suspicion, rebut the presumption that she has done something wrong and allay the fears of the populace that demands the right to know?

For those who have been involved in creating and perhaps even signing settlement agreements on behalf of their companies, there is no mystery, no suspense, no intrigue, no glamour in anything set forth in the settlement document.  The document is not an elocution like those we see on TV when the bad guy pleads guilty and is required to articulate in open court the bitter details of his awful deeds.  Rather, the “Confidential Settlement Agreement and Release” is a fairly mundane document.  It contains no details, no admissions, no apologies, no damaging assertions or implications.  The purpose of the agreement is to put the dispute to rest and to allow the parties to get on with life – whether this be in the business world, the political arena or the local neighborhood bridge club.

The average, everyday settlement agreement is a more or less sterile instrument, the most controversial part of it being the parties’ “agreement to disagree” about the troubles between them.  There is no discussion of the facts giving rise to the disagreement, there is no name calling, there is nothing “sexy” that anyone would have the slightest interest in reading.   In addition to the “agreement to disagree”, the document contains promises made by one party to the other supported by consideration.  Generally, the parties simply promise that they will not sue each other (or will stop the suit in which they are involved), release each other from any other problems that may exist between them, one pays the other a sum of money (or not) and both agree that there will be no further public discussion about any terms of their agreement.  A contract is created and all of the sanctity afforded such a contract in our system is bestowed upon the relationship thus created.

A settlement agreement does not address the reasons the people and business agree to resolve their disputes.  For some, settlement is the result of the realization that their claims have little or no merit; others know that by bringing a claim (meritorious or not) they can capitalize on the trouble they have created or may yet create for the other party and with little effort force a “nuisance” settlement (easy cash).  In these nuisance cases the cost to defend even a meritless claim far outweighs the cost to settle it – in terms of money, inconvenience to the parties, impact on reputation (deserved or not) and uncertainty of the outcome.  There are others whose conscience demands that they do what is right and defend a meritless claim, at whatever cost.

The point is, the fact that the parties entered into a settlement agreement should in no way, in and of itself, suggest to anyone that the claim being made has merit.  Nothing, not even a hint of guilt or liability can or should be read into the fact that the parties settled.  Further, even if the parties agreed to revisit the matter by talking about it at a later date and then allow the settlement agreement to be released to the public, the agreement itself would likely not give any insight whatsoever into the actual dispute and therefore would not satisfy the disgusting voyeuristic appetites of those making the demand for “full disclosure”.  The only avenue left to the parties would be to reargue the merits of their claims and defenses in a public, unregulated forum – and why would they voluntarily do that?  After all, both sides agreed to settle in the first place so they could avoid such a fight, which otherwise would have been held in a much more professional manner, in a very structured forum, governed by strict rules framing how the dispute is to be resolved – in court!

Most well informed people, including journalists, understand that most settlement agreements are nothing more than what has been described above.  They also know that those who sign them are contractually obligated not to discuss the terms.  So it is inherently unfair, irresponsible and unethical to engage in behaviors that bait one of the parties to a settlement agreement to “defend” herself against the false implications arising out of the fact that she chose, for whatever reason, to settle a matter in the past.

As in-house counsel, we must be wary, for even the most mundane “form” settlement agreement may one day be pulled out of a drawer and waived around by one of the parties.  That party may believe that his former adversary, now a person of power, influence or aspirations well beyond those she had when he knew her years ago, may be in a position to offer something more than what had originally been agreed because more is now at risk.  We, as lawyers, know better and we (as ethical lawyers) should help our nonlegal friends, family and colleagues better understand the implications of creating false innuendos from an otherwise innocuous document.

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One response to “Inside Perspective: The disingenuous call for disclosure

  1. Dan, I usually agree with you. On this one, however, I do not. While settlement agreements are generally mundane and form based, confidential settlement agreements are used far less frequently. Very often, the confidential information is the amount paid to settle, as a defendant often does not want other potential claimants to know how much they might get for a similar suit. In those cases where settlement occurs prior to litigation, the facts of the claim are often recited in the confidential agreement and one goal is for both the underlying occurrence and the settlement amount to remain a secret. No one would ever know a claim existed and was settled.

    The amount of the settlement payment surely is tied to the relative merit of the claim. In the case of Republican candidate Cain, I am of the opinion that the confidential agreement might tell us some useful information: what were the claims and how much was paid to get out of them. Again, the higher the amount of the settlement payment, the greater the likelihood that there was some merit to the claim and/or that the conduct was egregious. Nothing mundane about knowing that!

    Keep up the good writing.

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