By J.J. Conway
Once during a discussion about adverse possession, a lawyer told me that real estate, "is easy to give up and harder than hell to get back." He explained that a neighbor may acquire land from another neighbor quietly over a period of time. Once it was gone, the lawyer said, trying to reclaim it was difficult, legally. I often think of that sharp, practical insight, but usually I am thinking about it in a different context. Lately, I have been thinking about it in the context of settlement agreements.
Settlement agreements are an essential part of a litigation practice. With the overwhelming majority of disputes settled by an agreement signed by the parties, they have a unique place in litigation. Both sides need something from the terms of a settlement agreement. The defense needs finality and a release of liability on settled issues. The plaintiff needs a payment or a benefit and a date for resolution. Both sides need a final order - the lawyers need the ability to close their files and everyone needs to move on with their lives.
In the employee benefit context, settlement agreements have changed through the years. Two decades ago, if a benefit plan wanted keep a settlement confidential, it would "cost extra." At that time, both sides recognized a value to keeping a settlement quiet. If a plan wanted to keep the matter confidential, it was entirely reasonable to ask for an additional compensation for this new and continuing obligation.
Previously, the only part of the agreement that was "confidential" was the dollar amount paid in the settlement. For the party paying a settlement sum, there was a concern that once the word got out, it would drive pricey demands for other plan members.
Later, confidentiality clauses were drafted more expansively. Confidentiality clauses went from restricting one's speech about the precise settlement amount to preventing any further discussion of the case's underlying facts. In time, these expanded confidentiality clauses became standard contract language in releases. Confidentiality clauses just became part of the deal. They no longer "cost extra." Unless somehow unlawful, no major organization settles cases without them.
With that "land grabbed," the next frontier became the inclusion of non-disparagement clauses. Early on, these clauses were bargained for and typically resulted in both sides agreeing to refrain from speaking ill of the other. The result was the inclusion of a so-called "mutual non-disparagement clause."
But as non-disparagement clauses became more common in settlement agreements, their mutuality eroded. Now, it is much more typical for the party paying a settlement amount to include a one-way non-disparagement clause, on top of a confidentiality clause relating to the settlement amount, in addition to a clause barring any discussion of the case's underlying facts. Like the property lawyer said, "easy to give up, hard to get back."
Now, the latest land grab is what can only be deemed a "mega" version of the non-disparagement clause. These pernicious clauses seek to bar a settling party from ever criticizing a party with whom it has settled. The clauses read something like this:
"[The Plan Member] agrees not to make any statements, either written or verbal, or to cause or to encourage others to make any statements, either written or verbal, that defame, disparage or in any way criticize the business reputation, practice, or conduct of the [insurance company]."
The clauses often include a prohibition on using social media:
"The parties agree that the prohibition extends to any internet or social media outline, including Facebook, Twitter, Instagram, and the like."
And, finally, the hammer comes down in the last part of the clause:
"The signatory acknowledges and agrees that any breach of this provision is a material breach and would irreparably harm the [insurance company]."
This is a different kind of clause with considerable implications. Unlike a confidentiality clause which keeps a discrete dispute quiet, this latest version of the non-disparagement clause prevents a settling party from ever criticizing the business practices of an insurance company or benefit plan now or in the future. It is designed to thwart negative online reviews and seeks to prevent insureds from participating in online support groups for categories of denied claims like children's mental health or substance abuse treatments.
These are really restrictive and unfair clauses, and, in today's social media saturated environment, it feels like there is a concerted industry effort to make them standard contract language. But they are qualitatively different than a confidentiality clause. There is a difference between agreeing to settle a dispute and refraining from discussing it further and giving up your free speech rights entirely.
The future restriction of a person's free speech right to criticize an organization's future business practices is a different category entirely. And, unless a barrier is quickly put up, it will be just another land grab that will be harder than hell to get back.
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John Joseph (J.J.) Conway is an employee benefits and ERISA attorney and founder of J.J. Conway Law in Royal Oak.
