It is hard to grow a business, and it is hard to protect it. Hiring good people, making smart investments, maintaining proper insurance, and following the advice of your trusted advisors, especially your legal counsel, are some of the ways you can help protect your company.

But business disputes cannot always be avoided. When they arise, you must deal with them intelligently. Sometimes that means a settlement. Sometimes it means fighting to the end.

If you fight, even for a short while, you may have to litigate or arbitrate. Some prefer litigation because it is public, which is good and bad depending on the case. Courts also carry broader authority to compel testimony, enforce judgments, and consolidate related claims. And because courts are not for profit, you are not paying a private arbitrator by the hour to hear your case. Others prefer arbitration because it is generally assumed to be more efficient (I do not agree) and less expensive (definitely not), though it is private and confidential, and that part is true.

Why Confidentiality Matters

Whether you litigate or arbitrate, your disputes sometimes rest upon the terms of a contract. If a contract applies, it may dictate whether to litigate or arbitrate. Too often, parties agree in their contracts to arbitrate for the purported benefits. While I disagree with that generally, not every case and not every dispute is appropriate for litigation. Some cases necessitate the confidentiality protections that arbitration can provide.

Insulating your case from public view by arbitrating is not enough on its own. You must also protect any resulting settlement with confidentiality.

In sophisticated disputes, we always prepare a settlement agreement and release when resolving the dispute. Depending on the case, these agreements can be rudimentary or very complicated. Either way, they usually need to include a confidentiality clause. Sometimes called a non-disclosure agreement, such a provision binds the parties to secrecy about the settlement and its terms.

Maybe you paid a lot or a little. Ultimately, that is your business. Perhaps your reputation is at stake, the perception of your company is at risk, or you fear a loss of consumer trust or diminution of brand value. Worse, a company that settles a lawsuit openly may put a giant target on its back. It reveals how much you are willing to pay to make a problem go away, which invites others to sue.

I have large corporate clients who defend cases aggressively so as not to encourage others to sue. Sue my clients, and it will not be easy for you, especially in suits of questionable merit; we will make you work, and you will not get an easy payout. A strict confidentiality clause acts as a shield, keeping the resolution contained and protected.

Sometimes those who bring the suit also want confidentiality. I have defended many cases where the plaintiff claimed to be due millions of dollars. When faced with a rigorous defense, they sometimes settle for a minimal amount. In employment cases, a public lawsuit can also create a stigma against the employee, depending on the facts of the case. Keeping it quiet allows the employee to take their compensation, protect their dignity, and move on with a fresh start.

More broadly, confidentiality serves another purpose in protecting the efficiency of our court system. Courts are overwhelmed with cases, and many last for years. If every settlement had to be public, parties may never agree to compromise. Confidentiality creates a safe space where both sides can put their cards on the table, make concessions, and find a middle ground without worrying about public backlash.

When Confidentiality Has Limits

Even when the parties agree that confidentiality is important, some exceptions could apply. For example, the terms of a settlement may have to be disclosed for tax purposes or to accountants or other advisors.

Public companies face heightened disclosure requirements. Federal and state securities laws may carry reporting obligations requiring public disclosure of any resolution material to the company's financial performance. Failing to make that disclosure can expose the company and its officers to securities fraud claims, regulatory investigation, and shareholder litigation – all of which tend to be far more damaging than the original dispute.

A court may also order the release of settlement terms, perhaps at the behest of a third party seeking that information through a subpoena or other legal process, assuming the subpoena is valid and not quashed. When I draft confidentiality provisions, I usually account for these possibilities, so it is clear to my adversary that some circumstances could require and authorize disclosure.

At the end of the day, confidentiality is the ultimate currency of compromise. It turns a volatile, dramatic fight into a private, orderly business transaction. By protecting corporate names, shielding personal lives, and saving resources, the promise of secrecy can sometimes engender a resolution that would be harder to achieve in full light.