NDAs: Time to take abusive defence seriously

Thanks to the excellent work of the Financial Times, nondisclosure agreements are in the news again. We know relatively little about the NDAs in the Presidents Dinner case, other than an allegation that the waitresses were asked to sign them without reading them. Although, the Prime Minister is reportedly ‘looking into’ whether such agreements need regulation. I want to return to the Weinstein case where it has been reported, but not verified, that an NDA drafted by Allen & Overy in relation to allegations of impropriety made by Zelda Perkins.

• The report says that if “any criminal legal process” involving Harvey Weinstein or Miramax requires [Perkins] to give evidence, she will give 48 hours notice to Mark Mansell, a lawyer at Allen & Overy, “before making any disclosure”.
• In the event her evidence is required, “you [she] will use all reasonable endeavours to limit the scope of the disclosure as far as possible”, adding that she will agree to give “reasonable assistance” to Miramax “if it elects to contest such process”.

And that the NDA was concluded through, “days of gruelling questioning at Allen & Overy’s London office, capped by a 12-hour session before a phalanx of Mr Weinstein’s lawyers that broke at 5am”. I have written previously about the here, where I suggested that the facts might be investigated as a potential attempt to pervert the course of justice. Again, I emphasise the need for some caution, as we do not know all the facts, or whether these facts are accurate.

I have been thinking further about this and reading the SRA’s Walk the Line document, which provides a resource for solicitors to think about their obligations around litigation and steps leading up to potential or threatened litigation. That’s document focuses on a range of potential problems including:

• “predatory litigation against third parties, where the solicitor, in the interest of the client, uses the threat of litigation to obtain settlement, often from several opponents, on cases that have no real merit, but where the cost of settlement is less than the financial, emotional or reputational cost of fighting the claim.”
  
• And, “taking unfair advantage of a third party.”
  
• And finally, “excessive litigation, where the solicitor fails to consider their other duties when following a client’s wish to pursue aggressive and, in particular, speculative litigation.”
  

It is worth noting also that the Walk the Line document identifies using litigation (or the threat of it) to “silence criticism or stall another process,” as an abuse.

How might Walk the line help us think about the Weinstein case? In general terms, it reminds lawyers of their obligations not only to clients but to third parties and to the administration of justice. The points about threats of litigation remind us that ethical litigation extends more broadly than litigation itself.

The language of Walk the Line is often couched in the bringing of litigation. This is a slightly one eyed approach. In principled terms, it must be true that the mounting of defences of no real merit are similarly problematic to the bringing of predatory claims. We perhaps see a similar ‘claimants are the problem’ emphasis in the next statement, “The most harmful examples are often predatory litigation schemes, which can become widespread and affect very large numbers of individuals.” If, as has been suggested to me, employment lawyers regularly advise on NDA’s in ways which inhibit the disclosure of criminal conduct, one might not call them predatory litigation schemes, but they are certainly analogous. Defendants, not just claimants, can be a problem: but are they? What would the arguments be?

The starting point for lawyers thinking about their obligations to the administration of justice is usually taken to be the recognition that they must not, “attempt to deceive or knowingly or recklessly mislead the court” (O5.1 in the Solicitors Code). This includes not being complicit in another person deceiving or misleading the court (O(5.2)). The code provides examples, indicative behaviours (IBs), suggesting that, “constructing facts supporting your client’s case or drafting any documents relating to any proceedings containing: (a) any contention which you do not consider to be properly arguable.” IB(5.7) is likely evidence of knowingly or recklessly misleading the court.

One argument would be that either in the course of negotiations or by the inclusion of the above clauses in an NDA, Weinstein’s lawyers are contending that such clauses are enforceable. It might be argued that “contentions” are only arguments about facts, but there is no necessary reason for this being so. Without engaging in a detailed interpretation of the Code, the first part of IB (5.7) deals with the construction of facts [in any form] and the second part deals with the drafting of documents containing contentions. There is no reason that I can see for not thinking that contentions could – indeed should – include contentions about law. Indeed, more broadly, it is well understood that lawyers are obliged to draw to the attention of courts authorities and provisions which are contrary to their argument if they are not brought up by their opponent. Such an obligation would fit with seeing contentions as including contentions of law. Furthermore, in broad terms, the courts place higher obligations on lawyers not to mislead the court (and their opponents) about the legal basis of any claim than they do about facts: one is not generally obliged to correct an opponent’s mistake around facts, but one might be if they make a mistake about law (such as missing out a key case that which supports them). Again, such an obligation would fit with an idea that one should not mislead the court knowingly or recklessly when making points of law. One can, however, I should emphasise, make legal points which are arguable, even if one does not believe them to be correct.

Of course, what I have said so far applies specifically to the duty to the court and this case has not gone anywhere near a court yet. If, and I emphasise again that it is an if, a lawyer could not stand up and properly argue that the inhibitions on Ms Perkins cooperation with the police, then could they make the same point elsewhere? We do not know, whether and how, such clauses might have gone into the Weinstein NDA. Let us assume, for the sake of argument, that Weinstein’s lawyers argued that: such clauses were necessary, such clauses were enforceable, and Ms Perkins’ lawyer acceded. Or, let us imagine that the clauses were included without any discussion. Let us assume also that 5.1 and 5.2 are not directly engaged by such discussions, even though they are conducted in the shadow of potential litigation. What might the professional rules say about that situation?

Before I get too far into that, let me deal with one important matter. I am dealing with what follows on the assumption that an NDA which seeks to inhibit the signatory from disclosing potentially criminal conduct by third parties would be struck down as unenforceable. There might be a range of opinion on this, and this would depend in part on the facts of the particular case; but in general terms (and I emphasise I am not an employment or contract lawyer) the quite strong view that I am picking up is that this assumption is probably a correct view on the facts as reported. I emphasise that the further one gets from this assumption the harder it is to see any problem of professional ethics arising (at least in the sense of whether professional Codes may have been breached).

So, back to what is of particular interest to me…

It might be argued that a lower standard of honesty and integrity is demanded of lawyers when they are away from court. On the one hand, this makes sense: lawyers might be expected to be particularly careful when dealing with the courts and their opponents in litigation. On the other hand, there is always the judge and one’s opponent (if represented) to guard against misbehaviour when the court is engaged. In particular, there are greater structural protections against abuse when the court (or an opponent) is able to exercise some supervision over how parties behave and matters are better documented. To my mind, the absence or weakening of such structural protections is an argument for a similar obligation of honesty and integrity away from the court. Indeed the Bar’s Code of Conduct recognises an obligation not to knowingly or recklessly mislead or attempt to mislead anyone (rc9.1). The solicitors code of conduct is expected to contain similar obligations when it is revised (See Annex 1 here). And whenever I raise with solicitors the difference between the bar and the solicitors’ current codes of conduct, to ask the question whether solicitors can knowingly or recklessly mislead people away from the court, they dismiss the suggestion out of hand. In the abstract at least, they think that solicitors do have an obligation not to knowingly or recklessly mislead an opponent because of their duty to act with integrity.

The need to consider one’s duty to act with integrity is strengthened by an obligation under O(11.1): “you do not take unfair advantage of third parties in either your professional or personal capacity.” This is supplemented by examples: IB(11.7) taking unfair advantage of an opposing party’s lack of legal knowledge where they have not instructed a lawyer; and IB(11.8) demanding anything for yourself or on behalf of your client, that is not legally recoverable, such as when you are instructed to collect a simple debt, demanding from the debtor the cost of the letter of claim since it cannot be said at that stage that such a cost is legally recoverable. The argument here would be that demanding unenforceable elements in an NDA is akin to claiming something that is not legally recoverable.

It could be argued that 11.7 indicates that unfair advantage problems are confined to unrepresented parties. Again, I think this is probably a misreading. The Code does not require any such reading. The outcome does not confine the obligation to acting against unrepresented parties. And, Walk the Line suggests that in being, “careful not to take unfair advantage of the opponent or other third parties …Special care is needed where the opponent is unrepresented .” Special care, of course, indicates that the SRA thinks some care is needed whether or not the parties are represented. If we assume for a moment that Weinstein’s lawyers managed to exploit a lack of knowledge or understanding in Perkins’ lawyer (again, this is speculation not fact), they are not necessarily protected simply by the fact that Perkins was represented. Of course, as the SRA note, “solicitors involved in litigation [need not generally… ] ensure that their opponents do not fall into traps of their own making.” But any misinformation around the meaning, effect, and/or enforceability of the clauses in the NDA might well be sufficient to lead to a ‘taking advantage’ finding, as might anything done to actively encourage a misunderstanding on the part of their opponent’s lawyer (or the opponent herself) about the NDA.

A further point, going to integrity is that,

If a solicitor knows that a client’s case is not honestly brought, they must not act. Where suspicion arises or the context is high-risk, the solicitor’s duty to the administration of justice and the public interest would demand proper verification of the instructions and evidence. Correspondence with lay opponents in particular must not be misleading or intimidating. (In the matter of Brian Miller and David Gore, Solicitors Disciplinary Tribunal, 2010, cited in Walk the Line).

The first point is whether defending an allegation through a gag clause can be described as a case dishonestly brought? It may well depend on how it is defended, although the grilling described above suggests that it was defended and defended quite aggressively. On the other hand, it will likely be alleged that this was merely an investigation not a defence. I am not very impressed by such shallow semantics myself: what matters is the honesty not the action undertaken. Again, interpreting what is going on here requires a broader look at the context and factual matrix as it was ought to have been known to the lawyers.

If we return to IB11.8, might an obligation in an NDA amount to a demand for something (silence) which is not legally attainable (or recoverable in the words of the indicative behaviour)? Let us imagine there is a reason advanced that, if it had some foundation, justifies inhibiting a victim from talking to the police. I am finding it hard to imagine such a situation, particularly in the context of a pattern of repeated incidents of the kind that are alleged, but even so. With a foundation offered, Weinstein’s solicitors would be obliged to properly verify the instructions and the evidence on which it is based. So a point of investigation would be, did they? Similarly, if there was a repeated pattern of incidents which the lawyers were aware or ought to have been aware, then that too should weigh in their mind when acting aggressively for their client.

The same point applies to the solicitor’s obligation not to allow one’s independence to be compromised. Independence is mandatory on solicitors and includes independence from the client, where the solicitor’s obligation to protect the rule of law, or the need to maintain the profession’s reputation is engaged (for example, the SDT have said solicitors):

“must and should on occasion be prepared to say to [their] client ‘What you seek to do may be legal but I am not prepared to help you do it’.” (In the matter of Paul Francis Simms, Solicitors Disciplinary Tribunal, 2002 cited in Walk the Line).

This last comment is an interesting, I think potentially controversial, one, suggesting there are situations where a lawyer need not, sometimes must not, assist clients in taking advantage of their legal interests. In this case, if we imagine there is a strained but just about arguable case that the NDA is enforceable, the contexts in which the claims are brought (again, if we assume a pattern of incidents of the kind reported in the press) might mean the arguable point should not be advanced. In a way, this might merely restate that the lawyer is independently responsible for the tactics adopted in any particular case. They cannot simply say they are acting on instructions as an excuse for aggressive actions. All lawyers have to think independently about the implications of those actions. The SRA suggest that whether or not a claim [or defence] is abusive, “is determined heavily by the proportionality of the claimant’s actions, and ultimately by the merits of their claim should it reach a court”. Weak merits, or very weak merits at least, and disproportionate – if arguably legal – responses can then be called into question.

An interesting point remaining is whether simply dropping into the agreement a clause that one knows or strongly suspects is not enforceable might be sufficient here? If the merits are extremely weak and the clauses disproportionate, then it seems to me it can be criticised on the basis that independence, and other principles in the Code are comprmised. It might also be argued that the lawyer is contending that the enforceability of such a clause is properly arguable by the fact of its inclusion. In this way the questions arise again: are they taking advantage of their opponent? A finder a fact would be wary of saying that such advantage had been taken, or that an opponent had been misled, but that may depend on the circumstances.

The SRA document sensibly concludes with this reminder, “There will always be complex situations where maintaining the correct balance between duties is not simple and all matters must of course be decided on the facts . It is important for solicitors to recognise their wider duties and not to rationalise misconduct on the mistaken basis that their only duty is to their client .” To which I would add, nor should they lay claim to the idea that they were merely advisers, irresponsible for their client’s wrongs. We have shown elsewhere how such an attitude can diminish a lawyers ethical inclination. That kind of attitude may be part of the problem here, as may the claim made by some employment lawyers that NDAs ‘walk the line’ of enforceability by design, and therefore do not warrant ethical sensitivity. That they walk the line of enforceability by design redoubles my concern that they do merit scrutiny.

The facts of this case and my reading of the Walk the Line document suggests to me a few things:

1.There plainly needs to be an investigation of the Weinstein case and similar cases. I imagine this is underway.

2. The SRA, and perhaps to the Bar Standards Board, should conduct a sectoral review of practices around nondisclosure agreements.

3. The SRA should also, whilst it is thinking about this, revisit the Walk the Line document. It contains a subtle but significant and continuing bias in its focus: claimant lawyers may, sometimes do, bring abusive claims, but defendants and their lawyers may defend claims abusively too. whatever the rights or wrongs of the Weinstein case, the level of risk and the level of harm associated with such agreements is high. That needs greater attention.