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Consequences of the confidentiality clause: confidentiality clauses are a fact of every plaintiff lawyer's life. If your client's agreement has one, make sure you understand what it requires - and what it doesn't - to avoid making a potentially costly misstep.

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In many practice areas, confidential settlements are a fact of life. In my nursing home practice, some form of confidentiality clause is proposed in every case that gets settled.

Although some clients strongly dislike the idea of signing a confidentiality clause, it is relatively rare for a settlement to collapse due to a plaintiff's unwillingness to sign one. As unsavory as the clauses may be--particularly to you as the plaintiff attorney--ultimately your client has to decide whether to accept a proposed settlement based on all the terms, including confidentiality.

Moreover, an attorney who counsels a client to reject a settlement due to such a clause takes a significant risk. If the case is ultimately unsuccessful, the lawyer could be to blame.

Let's say your client does accept a settlement offer. Once the agreement is signed, the money disbursed, and the file closed, it is easy to forget certain terms, including any confidentiality provisions it might contain. However, litigation over alleged breaches of these agreements has become commonplace, and courts are more than willing to enforce them. Therefore--no offense to Yogi Berra--it ain't always over even when it's over.

Courts strongly favor settlement. You know this if, like most plaintiff lawyers, you have ever started a trial only to have the judge twist your arm to try to compel you to settle.

The policy favoring settlement has made its way in to many opinions. Courts have said that "honoring the parties' express wish for confidentiality may facilitate setflement, which courts are bound to encourage," (1) and that "settlement agreements are highly favored in the law and will be upheld whenever possible because they are a means of amicably resolving doubts and uncertainties and preventing lawsuits." (2)

Courts generally enforce confidentiality agreements, citing the policy favoring settlement and fundamental contract law. For example, arguments that confidentiality agreements restrict a party's First Amendment right to speak on matters of public concern have been unsuccessful. (3) Constitutional rights may be waived if the waiving party does so freely and with an understanding of the waiver's consequences. In the context of litigation, where the party is represented by counsel and the parties negotiate a settlement agreement, these requirements are often met. (4)

Thus, a party who seeks to avoid a confidentiality agreement has to do so based on the principles of contract law by proving fraud, mutual mistake, or other applicable defenses. The party seeking to avoid the agreement bears the burden of proof. (5)

Several questions warrant your attention when negotiating settlement agreements and conducting your affairs after the ink has dried. How will the clause be interpreted and enforced, and by what court? What are the mechanisms of enforcement and remedies for breach? Will the draconian clauses that the defense demands actually be enforced? May you publicize any aspects of a confidential settlement? What can you do to protect against overbearing clauses?

Interpretation and enforcement

Sometimes it is unclear that an agreement has even been reached. Parties often reach a verbal settlement and then fail to agree on written settlement terms. Under these circumstances, the case probably has not yet been dismissed, and a party can seek summary enforcement of the oral agreement in the court where the underlying dispute is pending. (6) That is, because there has been no dismissal, no act has occurred that arguably has divested the forum court of jurisdiction. In federal court, the majority rule...