Journal of Free Speech Law: "Breach Agents: The Legal Liability of Third Parties for the Breach of Reputational NDAs," by Mark Fenster

The article is here; the Introduction:

Over the past decade, nondisclosure agreements intended to protect the reputation of one or both parties from embarrassing disclosures have failed, sometimes spectacularly. Among those humiliated by revelations of their past behaviors are Donald Trump, Vince McMahon, Neil Gaiman, and Harvey Weinstein; among those companies and institutions affected are the Catholic Church, the Miss USA Pageant, and some of the largest tech companies. These agreements' failures have occurred when one party to the agreement gave an interview, passed along leaked documents, or filed a public lawsuit that became the basis of public reporting about the secrets that the contract concerned, as well as about the contract itself. Commentators and critics have offered various prescriptions to stem the enforcement of the most egregious contracts intended to prevent a party from reporting sexual assault and harassment that violates criminal or civil law. In a recent article, I described the specific doctrinal, social, and informational dynamics that both render such contracts vulnerable to breach and frustrate their enforcement.

This Article considers the potential liability of third parties that assist or spur the breach of such contracts. Journalists have most frequently played key roles in these disclosures by contacting a party and encouraging them to reveal their secrets. Friends and family members have also initiated or encouraged breach, as have attorneys and activists who hope to reveal a party's wrongdoing. Such non-parties serve as "breach agents," outsiders to the contract who advise, encourage, or help one of the parties disclose the information they had agreed to keep secret. They play an integral role in breaking the dams that keep information private—whether, viewed sympathetically, to advance the public good by bringing egregious behavior to light or, viewed critically from the perspective of the nonbreaching party, to violate a legally enforceable promise and undermine contractual stability.

As non-parties to the contract, breach agents are vulnerable to suit under the common law tort of interference with performance of a contract. The relationships between that tort and contract law—and between the tort and the First Amendment rights of journalists and others to gather news, to speak, and to publish—last inspired widespread consideration and commentary in 1996, when the tobacco company Brown & Williamson attempted to use a non-disclosure clause in an employment contract to silence a former executive who had been interviewed by the CBS television news show 60 Minutes.

Two developments since that time have made this issue newly relevant for attorneys and legal academics. The first is the Supreme Court's decision in Bartnicki v. Vopper (2001), which concerned a suit against third parties who disclosed confidential information that another party had illegally obtained. Bartnicki simultaneously established a test that in most factual scenarios will protect the press or a source which did not itself obtain the information illegally, and also refused to grant a blanket constitutional protection for reporting truthful information that would apply no matter how a source had obtained the information.

Second, individuals and institutions have increasingly relied upon NDAs outside of the employment context to protect personal and corporate reputations, even after the recent wave of breached contracts and the resulting embarrassing disclosures. Occasionally, the parties litigate in the aftermath of a breach; for example, one state court recently extended constitutional protection to The New York Times, which had used its successful persuasion of a party to an NDA to breach as the basis for a front-page story about President Donald Trump's finances. Given both the supply of NDAs and the high demand for their breach among the press and the public alike, more such litigation is likely to arise.

This Article describes the robust protection that the First Amendment offers third parties from tort claims, as well as the situations that mark such protection's likely limits. Parts I and II describe, in turn, reputational NDAs and the breach agents who play key roles in encouraging disclosure of the secrets bound by such agreements. Part III explains the tortious interference with contract doctrine on which parties to the contract can rely to seek recovery against breach agents. Part IV discusses the broader First Amendment protections that breach agents can use to defend themselves from tort suits, how courts have resolved the few such lawsuits which have reached them, and the general parameters of those protections.

Comments

[Stephen Lathrop]

To the extent that NDAs actually protect the public interest, perhaps there should be a rebuttable presumption they are enforceable. If your private employment work with critical nuclear materials gives you access to information about when and where shipments will take place, your employer's interest to protect that information runs parallel with the public's. But where both public and private interests exist, legal protection should turn only on questions of the public interest, not the private one.

Otherwise, the rebuttable presumption should be against NDAs, and strongly so. First and foremost, the party who signs one is almost always in an equivocal position. It is almost invariably going to be someone with power over the signee who presents the contract. Which means knowledge about the appropriate size and value of a payment to keep silent will always turn on questions to which the signer may not be privy.

The signer has a right to expressive liberty which normally serves, among other things, as personal protection. That liberty affords an opportunity to invoke public support, and to enforce publicly approved norms, against someone more powerful who has compelled a signature. That liberty is not a right with a value frozen in time at the moment a contract is signed. It changes with passage of time, and with change of circumstances. The powerful person compelling a signature often enjoys power over time to change circumstances in ways the signee was powerless to anticipate.

Finally, it should be taken as a principle governing public life that people who enjoy power sufficient to compel private NDA signatures require by that reason more scrutiny than others do. That principle should be rigorously enforced as an aspect of expressive liberty worthy of court protection.