by KPMLAW | May 24, 2016 | KPMBlog, News, Uncategorized, Updates
Written by Jessica Relyea, Esq. Edited by Brian Cafritz, Esq. With the ubiquitous nature of social media, more and more retail and restaurant establishments are requiring confidentiality clauses in settlement agreements to contain strong penalties that deter a breach. In an effort to streamline litigation should a breach occur, those provisions often contain liquidated damages clauses, which state the parties agree a breach of confidentiality would result in a return of all settlement proceeds. This begs the question, is this provision enforceable? If a plaintiff breaches confidentiality, can you get the settlement funds back? The Supreme Court of Virginia has held, and the Eastern District of Virginia has recently reaffirmed, that parties “may agree in advance about the remedy resulting from a breach, including damages, but only when (i) the actual damages contemplated at the time of the agreement are uncertain and difficult to determine with exactness and (ii) the amount fixed is not disproportionate to the probable loss.” Job v. Simply Wireless, Inc., 2015 U.S. Dist. LEXIS 171535, *11 (E.D. Va. Dec. 22, 2015). A breach in confidentiality would be a good example of when actual damages are unknown, as the facts surrounding the breach are also unknown at the time the release is negotiated and executed. The bigger question for a restaurant or retail establishment to consider is whether or not the amount of damages is proportional to the probable loss. To help answer that question, Virginia courts will allow discovery into a liquidated damages clause to determine if the “stipulated damages are grossly in excess of the actual damages suffered by the non-breaching party.” O’Brian...
