Indiana Intellectual Property Law News
Miami, Florida – The Third District Court of Appeal for the State of Florida heard the appeal of Gulliver Schools, Inc. (“Gulliver”) and School Management Systems, Inc. in the age-discrimination and retaliation lawsuit of Patrick Snay. Appellants prevailed on their claim that Mr. Snay had breached the confidentiality clause of the settlement agreement, thus 
eliminating Gulliver’s obligation to pay portions of the settlement amount.
Patrick Snay, formerly the headmaster of Gulliver, sued for age discrimination and retaliation when Gulliver did not renew his contract for the 2010-2011 school term. The dispute was settled and the parties executed a release for the full and final settlement of Snay’s claims. Under the settlement, the school would pay $10,000 in back pay and $80,000 to Snay to settle the matter, as well as $60,000 for Snay’s legal fees.
As part of the settlement, Snay agreed to a detailed confidentiality clause, which provided that the existence and terms of the agreement between Snay and the school were to be kept strictly confidential and that, should Snay or his wife breach the confidentiality provision, a portion of the settlement proceeds (the $80,000) would be disgorged by Snay to Gulliver. This provision read, in pertinent part: “[T]he plaintiff shall not either directly or indirectly, disclose, discuss or communicate to any entity or person, except his attorneys or other professional advisors or spouse any information whatsoever regarding the existence or terms of this Agreement . . . A breach . . . will result in disgorgement of the Plaintiffs [sic] portion of the settlement Payments.”
Shortly after the agreement was signed, Snay informed his daughter that his lawsuit against Gulliver had been settled and that he was happy with the result. Snay’s daughter posted news of the agreement on Facebook, “Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer.” This Facebook post was available for viewing by approximately 1,200 of Snay’s daughter’s Facebook friends, many of whom were either current or past Gulliver students.
Gulliver learned of the Facebook post. Four days after the agreement was signed, Gulliver notified Snay that it considered the Facebook post to be a material breach of the agreement. Gulliver stated that, while it would pay the amount of the settlement which constituted attorneys’ fees, it would not pay any of Snay’s portion as a result of the breach of the confidentiality clause.
Snay moved to enforce the settlement agreement, arguing that his statement to his daughter and her comment on Facebook did not constitute a breach. The trial court agreed, finding that neither Snay’s comments to his daughter nor his daughter’s Facebook comments constituted a breach of the confidentiality agreement.
Gulliver appealed. The appellate court held that the plain language of the contract prohibited the disclosure that Snay had made, stating “before the ink was dry on the agreement, and notwithstanding the clear language . . . mandating confidentiality, Snay violated the agreement by doing exactly what he had promised not to do.” Moreover, the court noted that the significance of confidentiality to Gulliver was evinced by the fact that the majority of the proceeds of the settlement agreement expressly hinged on compliance with the confidentiality provision.
Based on the clear and unambiguous language of the parties’ agreement and Snay’s subsequent testimony that he had, in fact, breached the confidentiality provision, the appellate court found for Gulliver and reversed the trial court’s order granting the Snays’ motion to enforce the settlement agreement.
Practice Tip:
It’s not hard to see how this happened. As parents, the Snays recognized that it was important to inform their daughter of the resolution of this matter. Not only was this settlement significant to Mr. Snay, but the news that a satisfactory resolution had been reached also was presumably intended to assist his daughter in dealing with the difficulties she had apparently encountered as a result of the dispute with Gulliver. According to Mr. Snay, these difficulties had left his daughter with “quite a few psychological scars which forced [him] to put her into therapy.” It is also not difficult to imagine that, feeling vindicated, the Snays’ college-aged daughter would do what many people that age do with big news: she posted it on Facebook.
In situations such as these, contract attorneys must take special care to provide whole-picture legal counseling to their clients, both during settlement negotiations and after. It was not unforeseeable that Mr. or Ms. Snay would inform their daughter of the settlement. Nor was it unforeseeable that she would, in turn, want to share the news with her friends. Presumably, the Snays’ daughter had not realized the importance of confidentiality.
Here, this problem might have been avoided. First, in drafting the confidentiality clause, release of the information to the daughter could have been included. Thus, Mr. Snay would not have signed an agreement that he presumably knew – as he was signing it – that he would soon violate. Second, an explicit and dire warning by the settlement attorney representing Mr. Snay should have been given to anyone privy to the settlement to lessen the chance of an inadvertent breach of the contract, for example: “You, your wife and your daughter absolutely must adhere to the provisions of the confidentiality clause or you could lose some or all of the benefits of this settlement agreement.”
This case, Case No. 3D13-1952, was heard by Chief Judge Shepherd and Judges Wells and Scales in the Third District Court of Appeal, State of Florida.