When Talk Is Not Cheap

money-where-mouth-isIt is common for parties to settlement agreements to include terms by which the parties agree to keep their settlement confidential. The reasons for these provisions vary. Sometimes a settling party with considerable wealth does not want others to know that the party paid to settle a dispute for fear of becoming a target for others with frivolous claims looking for a nuisance settlement. Other times, parties are worried about adverse consequences to their business reputation or personal image if word of the settlement or the circumstances giving rise to it comes to light. But, one of the most perplexing aspects of confidentiality provisions is what the penalty should be if one party or the other violates the confidence. That was certainly not the case, though, for one recent situation in which a Hollywood icon was involved; the breaching party lost half a million dollars.

M.G. v. O.G. was decided by the Court of Appeal on August 9, 2016. Despite the Court’s effort to keep the names of the parties confidential—and indeed, the case cannot be located on the Los Angeles Superior Court website, likely because of a confidentiality order—the case was wire service fodder. M.G. is actor Mel Gibson. O.G. is his former companion, Russian-born singer-songwriter and pianist Oksana Grigorieva. The couple lived together for a time and had a daughter. When they separated, Gibson sued to establish paternity of their daughter. Grigorieva made several claims against Gibson in the suit as well, including for domestic violence and defamation. The parties reached a settlement which included that Gibson would pay $20,000 per month in child support for their daughter and provide a house for Grigorieva and the daughter until the daughter reached age 18. In addition, Gibson was to pay Grigorieva a total of $750,000 spread over five years.

As part of the settlement agreement, Grigorieva agreed to keep confidential “any and all information and facts related to the asserted claims and events underlying this Agreement.” The agreement specified that a breach of the confidentiality obligation would result in Grigorieva’s forfeiture of all remaining installments of the $750,000 settlement payment.

After receiving the first installment of $250,000, Grigorieva appeared on the Howard Stern radio show and made statements that implied Gibson had committed domestic violence against her. Gibson reopened the settled case as a result. In the reopened case, she resisted his efforts to prove the authenticity of the recording of the radio show on which she appeared. As a result of her actions, the trial court not only found that she violated the confidentiality provision so that Gibson did not have to pay the remaining $500,000 due, but the court also awarded Gibson $13,530 for the legal fees and costs he incurred due to her refusal to cooperate in authenticating the recording of the show.

The Court of Appeal agreed with the trial court’s ruling. It held that even though Grigorieva did not directly state that Gibson had committed domestic violence against her, the agreement restricted her ability to make statements “related to” her domestic violence claims against Gibson. Since the agreement was intended not only to resolve all of the issues between the parties, including Grigorieva’s claims for battery, defamation, and other claims against Gibson, the confidentiality clause encompassed not only express statements about her domestic violence claims but also implicit assertions about those claims that might cause others to conclude that the claims were true. And, the Court of Appeal upheld the order requiring Grigorieva to pay Gibson the $13,530 in fees.

Besides the tabloid aspects, there are some interesting legal observations about this case. First, no matter how hard the parties tried to keep the information about them from the public, the very nature of the court system made their efforts virtually impossible. Second, is confidentiality provsions in agreements can cover both actual and implied statements if the hearer would reasonably infer the information that is supposed to be kept confidential from statements made by the party. Third, it is possible to contract away free speech rights. The court found that Grigorieva did so, and her breach of that contract cost her dearly. Finally, given that the agreement spelled out the sanction for her breach of the confidentiality provision—the loss of remaining payments due under the contract—an argument can be made that she is no longer bound by the agreement since she has nothing more to lose. In this case, though, talk was not so cheap.