California Supreme Court Clarifies Whether Counsel is Bound by Confidentiality Provisions in Settlement Agreements

In Monster Energy Co. v. Schechter, 7 Cal.5th 781, 792 (2019) the California Supreme Court was tasked with determining “whether counsel’s signature approving a [settlement] agreement as to form and content for his clients’ signature precludes, as a matter of law, a finding that he also intended to be bound by the agreement.” The Court answered: not necessarily. Notably, this decision came following the Court of Appeal’s categorical holding to the contrary: that a confidentiality provision in a settlement agreement is not enforceable against an attorney that signs the agreement “under the words ‘approved as to form and content,’” which “means only that the document has the attorney’s professional thumbs up.” In reversing the appellate court, the Supreme Court explained that the form used for the attorney’s signature block is not controlling. Rather, this involves a question of intent, which “requires an examination of the agreement as a whole, including substantive provisions referring to counsel.” Id. at 795. The Court further explained that if the “agreement contains no provision purporting to bind counsel or otherwise impose an obligation on him, the question is easily answered. In that circumstance, counsel’s signature that he approved the agreement as to form and content could only mean he is approving it for his client’s signature. But that will not always be the case. An attorney’s signature on an agreement continuing substantive provisions imposing duties on counsel may reflect an intent to be bound even though counsel also approves the document for his client’s signature.” Id. at 792.

While this decision clarifies the question of whether counsel “intends to be bound” by a confidentiality provision in a settlement agreement is one of fact, not form, the Supreme Court did not prescribe what would be necessary to make this showing. The Court did note, however, that reference “both to the parties and their counsel” in a given confidentiality provision may suffice. Having considered the confidentiality provisions in the case before it, the Court announced that provisions stating “Plaintiffs and their counsel agree that they will keep completely confidential all of the terms and contents of this Settlement Agreement” could be deemed sufficient for a factfinder to “reasonably conclude” that an attorney was bound by the confidentiality provision. In light of these developments, parties desiring confidentiality from both the litigants and their attorneys must make an effort to express this intent in their confidentiality provisions. If parties make this intent clear, then according to the California Supreme Court, the attorneys need not sign as “parties to the agreement” because their signature approving the agreement as to it form and content would bind them.

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