While personal injury lawsuit settlements are generally not publicly accessible like cases heard in court, the litigants can still discuss what happened in them to anyone they like. Sometimes, though, the defendant in the case will require the plaintiff to sign a confidentiality clause as a condition of the settlement, which means no one who is party to the suit can discuss it with non-privileged parties. If you find this issue comes up in your case, here are three reasons you should be wary about signing a confidentiality agreement.
The Agreement May Be Too Broad
Defendants request confidentiality clauses for a wide variety of reasons, but the common denominator is that there is something in the lawsuit they don't want anyone else knowing. Many times it's simply the settlement amount and terms. Another common reason is the defendant doesn't want information about his or her wrongdoing to be publicly known.
To achieve their goal, however, sometimes defendants go too far in restricting who the plaintiff can talk to and what they can say and end up treading on the person's First Amendment rights or trying to ban details that are required to be public knowledge.
For instance, the defendant may demand the plaintiff not discuss anything at all about the case, including the court pleadings. The problem is anything that has been filed with the court automatically goes into the public domain. Not only does this requirement not make any sense, it's too broad to be enforceable.
Another, more likely, scenario is the confidentiality clause may prohibit you from discussing certain aspects of the case that other professionals need to know. For example, your accountant has to know how much the settlement was to help you prepare for tax season. A confidentiality agreement may get in the way of that, putting you into a tough bind.
It's important to look closely at the confidentiality clause to ensure it does not tread on your basic rights or have requirements that may cause you to spend time and money eliminating in court.
The Consequences of Violating the Agreement May Be Severe
A second thing you need to look out for is the listed consequences of violating the non-disclosure agreements. At minimum, you may be required to forfeit the settlement if you violate the agreement. For instance, a man was forced to return $80,000 to the defendants in his lawsuit when his daughter posted a taunting message on her Facebook account about the case.
Other times, the consequences may be more severe. The defendant may reserve the right to sue you for damages related to disclosing information about the case that was supposed to be kept secret. For example, if you talk about the case with a non-privileged party (i.e. your attorney, police) and the defendant is sued as a result, he or she could come after you for those damages.
You and your attorney should go over the consequences of violating the terms of the confidentiality agreement very carefully to ensure they're fair.
There May Be Tax Problems
A previous example brought up the issue that a non-disclosure agreement can interfere with your ability to pay the right amount of taxes. However, another issue you may have to contend with is you must pay taxes on the part of the settlement money that was given to you in consideration for signing a non-disclosure agreement.
For instance, if the defendant gives you an extra $10,000 to sign the confidentiality agreement, you are required to pay taxes on that since that money doesn't actually represent any type of loss you sustained as a result of the accident. Except for wages, all compensatory damages—damages designed to reimburse you for your losses—are non-taxable. Most non-compensatory damages are taxable.
When drawing up the settlement agreement, you need to make sure the defendant clearly spells out how much of the money being offered to you is in consideration of the confidentiality agreement so you can account for it when you file your taxes.
For more information about confidentiality clauses or assistance with a car accident case, contact a personal injury attorney.
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