(LiMandri v. Wildman, 2013 Cal.App. Unpublished 4023)

At the end of a mediation, Miss U.S.A. pageant runner-up Carrie Prejean settled her defamation lawsuit against certain pageant officials. The settlement included a confidentiality provision protecting both Prejean and her lawyer, LiMandri. Prejean was particularly interesting in preventing disclosure of some compromising videotapes shown during the mediation. The settlement agreement stated: “The Settlement Agreement requires the parties to release a statement saying that they ‘have met, dropped their claims against each other and wish each other the best in their future endeavors.’ Except for such statement, . . . the terms and provisions of this Settlement Agreement, or the fact that the parties entered into this Settlement Agreement, shall never be disclosed by any party hereto (or their . . . attorneys . . .” whether directly, indirectly or otherwise, it being the intent of the parties hereto to maintain the strictest confidentiality regarding this Settlement Agreement, its entry and its contents.” (Italics added.)

The very next day, “TMZ reported that ‘Carrie Prejean nets a big fat zero in her settlement with the folks at Miss California USA, sources tell TMZ. Carrie and the Pageant officials have settled their lawsuits against each other and the terms were confidential . . . until now.’ Later, TMZ reported that Prejean demanded more than a million dollars ‘until the lawyer for the Pageant showed Carrie an XXX home video of her handiwork. . . . We’re told it took about 15 seconds for Carrie to jettison her demand and essentially walk away with nothing.’ The reports mention that defendants agreed to pay LiMandri around $100,000.”

Interestingly, Prejean’s lawyer, LiMandri, not Prejean, brought suit against a pageant officials, and their lawyers, Wildman, Harrold, Allen & Dixon, LLP, for breach of the settlement agreement and fraud. The lawyers moved to strike the complaint for violation of Anti-Slapp. The court granted the motion as to the fraud cause of action, but not the contract and implied covenant of good faith and fair dealing claims. The Court of Appeals affirmed, rejecting both the free speech and litigation privilege arguments made by the lawyers.

The Court reasoned that:

“Signing a confidentiality provision waives First Amendment rights, preventing a party from disclosing the circumstances surrounding a settlement agreement. The court also held that an attorney’s breach of a confidentiality clause is not protected by the litigation privilege. An attorney’s breach of a confidentiality provision is not protected by section 425.16. (Paul v. Friedman (2002) 95 Cal.App.4th 853, 869.) The privacy of a settlement is generally understood and accepted in our legal system, which favors settlement and therefore supports attendant needs for confidentiality. (Hinshaw, Winkler, Draa, Marsh & Still v. Superior Court (1996) 51 Cal.App.4th 233, 241.) Public disclosure of confidential information “would chill the parties’ ability in many cases to settle the action before trial. Such a result runs contrary to the strong public policy of this state favoring settlement of actions. (Board of Trustees of California State University v. Superior Court (2005) 132 Cal.App.4th 889, 899.) As a matter of legal ethics, it is intolerable to imagine that an attorney can freely violate the promise of confidentiality that binds his client. Thus, even if [the defendant] spoke in a public forum with regard to an issue of public interest, it is not necessarily protected speech because defendants voluntarily relinquished their right to discuss Prejean’s case.” (Italics in original.)

Obviously, the courts take violations of confidentiality provisions seriously. Neither the litigation privilege nor First Amendment/Anti-Slapp will save parties or their attorneys from liability for breaching a confidentiality clause, even where the party is a public figure. When TMZ calls, “just say no.”