My guests today are Mark Fenster of the University of Florida Levin College of Law and Dave Hoffman of the University of Pennsylvania Carey Law School. We’re discussing Mark’s recent article, How Reputational Nondisclosure Agreements Fail (Or, In Praise of Breach), forthcoming in The Marquette Law Review.
Mark Fenster is the Marshall M. Criser Eminent Scholar Chair in Electronic Communications and Administrative Law at the Levin College of Law. His legal research has focused on government transparency, legal intellectual history, and constitutional limits on government regulation. He is the author of the book The Transparency Fix: Secrets, Leaks, and Uncontrollable Government Information (Stanford University Press, 2017), and his articles and essays have appeared in the California Law Review, Michigan Law Review, and the Iowa Law Review, among others.
David Hoffman is the William A. Schnader Professor of Law and Deputy Dean at the University of Pennsylvania Carey Law School. Professor Hoffman is a widely-cited scholar who focuses his research and teaching on contract law. His work is typically interdisciplinary, built through collaboration with co-authors from a variety of fields. He has engaged in the national conversation sparked by the #metoo movement, publishing a paper with a (then) Penn Carey Law student that argues that nondisclosure clauses in employment contracts violate public policy.
Further Reading:
Mark Fenster Bio, University of Florida
Dave Hoffman Bio, University of Pennsylvania
Mark Fenster, How Reputational Nondisclosure Agreements Fail (Or, In Praise of Breach), SSRN
David Hoffman & Erik Lampmann, Hushing Contracts
My guests today are Mark Fenster of the University of Florida Levin College of Law and Dave Hoffman of the University of Pennsylvania Carey Law School. We’re discussing Mark’s recent article, How Reputational Nondisclosure Agreements Fail (Or, In Praise of Breach), forthcoming in The Marquette Law Review.
Mark Fenster is the Marshall M. Criser Eminent Scholar Chair in Electronic Communications and Administrative Law at the Levin College of Law. His legal research has focused on government transparency, legal intellectual history, and constitutional limits on government regulation. He is the author of the book The Transparency Fix: Secrets, Leaks, and Uncontrollable Government Information (Stanford University Press, 2017), and his articles and essays have appeared in the California Law Review, Michigan Law Review, and the Iowa Law Review, among others.
David Hoffman is the William A. Schnader Professor of Law and Deputy Dean at the University of Pennsylvania Carey Law School. Professor Hoffman is a widely-cited scholar who focuses his research and teaching on contract law. His work is typically interdisciplinary, built through collaboration with co-authors from a variety of fields. He has engaged in the national conversation sparked by the #metoo movement, publishing a paper with a (then) Penn Carey Law student that argues that nondisclosure clauses in employment contracts violate public policy.
Further Reading:
Mark Fenster Bio, University of Florida
Dave Hoffman Bio, University of Pennsylvania
Mark Fenster, How Reputational Nondisclosure Agreements Fail (Or, In Praise of Breach), SSRN
David Hoffman & Erik Lampmann, Hushing Contracts
[00:00] Mark Fenster: Dave you blogged about soon after its disclosure.
[00:04] Dave Hoffman: Tweeted tweeted about it even more ephemeral and even less useful form of communication.
[00:10] Mark Fenster: Do you delete your tweets so that we can't even find them now?
[00:13] Kim Krawiec: He does. He does. I've gone back and tried to find stuff that Dave tweeted about because I couldn't follow it up at the time. And then I was like, I want to go back to that idea that Dave raised, and it's on. Hey.
[00:26] Kim Krawiec: Hey, everybody. Welcome to the Taboo Trades podcast, a show about stuff we aren't supposed to sell, but do anyway. I'm your host, Kim Krawiec. My guests today are Mark Fenster of the University of Florida Levin College of Law, and Dave Hoffman of the University of Pennsylvania Kerry Law School. We're discussing Mark's recent article, How Reputational Nondisclosure Agreements Fail or In Praise of Breach, forthcoming in the Marquette Law Review. Mark Fenster is the marshall in Chrysler eminent Scholar chair in Electronic Communications and Administrative Law at the Levin College of Law. His legal research is focused on government transparency, legal intellectual history, and constitutional limits on government regulation. He is the author of the book The Transparency Fix Secrets, Leaks and Uncontrollable Government Information from Stanford University Press, 2017, and his articles and essays have appeared in the California Law Review, Michigan Law Review, and the Iowa Law Review, among others. David Hoffman is the William A. Schneider professor of Law and Deputy Dean at the University of Pennsylvania Kerry Law School. Professor Hoffman is a widely cited scholar who focuses his research and teaching on contract law. His work is typically interdisciplinary, built through collaboration with coauthors from a variety of fields. He is engaged in the national conversation sparked by the MeToo movement, publishing a paper with a then pen carry law student that argues that nondisclosure clauses and employment contracts violate public policy.
[02:14] Kim Krawiec: Welcome, guys. Thank you for doing this, both of you.
[02:18] Mark Fenster: Thanks for having us.
[02:19] Dave Hoffman: More to the conversation.
[02:20] Kim Krawiec: Yeah, me too. Me too. Mark, we're going to talk about your paper. How reputational nondisclosure agreements fail or in praise of breach. So, first of all, is it published or accepted for publication? Do you want to tell us anything for publication?
[02:35] Mark Fenster: Yeah, it's accepted for publication from the Market Law Review. Great amount.
[02:40] Kim Krawiec: Who knows when and is it on SSRN yet? If it is, I'll put it. Okay, great. So, listeners, make sure that you download the paper from SSRN in advance of publication. I'll put a link in the show notes so that people can find it. Mark, tell us. I think, in the beginning, in fairly general terms, about your paper and the thesis of it, which, if I understand your argument correctly, is that Rndas NDAs that are designed to protect one or both of the party's reputations, present some known harms that scholars, including Dave, have discussed at some length. But your argument, I think, is that that harm is sort of imperfectly mediated by the fact that they are regularly breached, often without consequence. So feel free to correct that, elaborate on that, whatever you want to do. That was my takeaway. And if it's not right, you should correct me.
[03:34] Mark Fenster: That's great. You did a much shorter version of what I would do. I'll just sort of do a little bit of background as to what drew me to this topic, just because I had not written on contract law before, though I'd begun teaching it for four or five years when this topic came up. But I had, in previous work, talked about questions of how the government, the state generally can try to keep secrets that it had legitimately and perhaps illegitimately, attempted to keep from being disclosed. And it does so through legal means as well as through sort of social and bureaucratic means. And the stories told in that context were that the state can usually keep secrets. But in order to more perfectly keep secrets, it can use its police powers as well as its regulatory ability to keep whistleblowers and those who would otherwise disclose things that would be kept secret from getting out. And the argument in its favor was that the state, in order to function, needs to be able to control its information. And the argument against the argument in favor of greater transparency of the state is that the government needs to open up, that for democracy to work, the information needs to flow to its true owners, the public. And my work on that was partially legal and partially sort of sociological, for better or worse of a term, which is that both of those stories, the idea that the state needs to be able to hold onto its information and that the state needs to disclose its information don't actually capture what occurs on the ground, which is that the government can't control the information that it really needs to try to control, or at least so it says it needs to try to control. And the public can't always get access to information, that public information laws don't actually work that well. And even when they work, there's some question as to how much it in fact assists democracy. And so in the moment of me too, and the point at which these secrets were being disclosed, I felt like, okay, this is an interesting comparative study of can private contracting attempt to do the same thing as the state attempts to do in its efforts to classify and keep secrets from going out. Does it work? Does it not work? And what happens when it doesn't work? And so the relative equivalency of whistleblowers is the breaching of these nondisclosure. And so I wanted to trace through the factual situation, the sort of situation on the ground when breach occurs, particularly at a moment when breach was occurring with some degree of regularity. And what does that say about information? What does that say about secrets? And what does that say about contract law. And those are the basic ideas. And so in the immediate moments following me too, there were a lot of notable law professors as well as a lot of student notes that talked about what are the ways by which particularly when we find these secrets. To be to create harms. Harms to the victim and harms more generally to society. That serial, sexual, prurient. Bad people are able to continue to engage in harms that harm people outside the contract. And if disclosure had occurred, perhaps these additional victims might have been able to avoid their fate. What role does do courts have, what role does the public have and do legislatures have in attempting to stop these kinds of contracts from occurring? And I think all of those means, the legislative means and the development of means by which courts can refuse to enforce these contracts are extremely worthy and can prove successful and efficacious to an extent. But what I was interested in was the extent towards sort of the self help of breach was not only keeping enforcement from occurring enforcement is not quite what I'm trying to get at, but allowing these secrets to be disclosed. So not only can it work to that extent, but it can work sort of in concert with these other means of more traditional normative legal means to try to stop this from occurring. And I guess the sort of reverberation of breach, the fact that breach would occur, the fact that breach would occur, and then enforcement would prove either not to be engaged in by the, by the beneficiary of the contract, but also enforcement measures really seemed to undercut the purpose of the contract itself. And that dynamic seemed really, really interesting as a matter of sort of law and fact. And that was really what I wanted to reflect on and get after in this paper.
[09:35] Kim Krawiec: Great. So before we get into all of the things that you just brought up, if it's okay with you guys, I wanted to ask both of you just some basic factual questions about the mechanics of NDAs, because I have actually always wondered sort of what they look like on the ground. And you both know, and most people don't know. So I think it might be helpful for setting the stage for the discussion. Mark, your paper is focused on these reputational NDAs that include sexual harassment, among other things. And Dave, that's the focus of your paper as well is sexual harassment. There are other areas, right, that are where we frequently see NDAs. And I wondered if one or both of you could just sort of give a brief rundown of what those areas are. And then the main question I had is that leaving aside the differences in the type of conduct or misconduct in this case that's addressed, do you know or do we see differences in the scope or the enforcement mechanisms I e. Injunction or monitor? Are there notable differences in the structure of NDAs across these different settings. Again, other than the public policy concerns that you both bring up in the paper that are specific to sexual misconduct.
[10:55] Mark Fenster: Well, let me do the first cut and then Dave, you can fill in gaps that I leave up in. Let me just sort of map out NDAs generally, maybe talk a little bit about the history of these kinds of NDAs that I'm writing about. So NDAs have been in existence for one problem is that there's no history of it. And one of the dynamics of dealing with this area is that NDAs are except where they are sort of more standard form in an employment context, they are themselves intended to be secret. So trying to find out about them is not the easiest thing in the world to do. You can find out about them, for example, the work on CEO employment agreements where there is an element of nondisclosure that occurs either at the beginning or at some point over the course of the contract. You can find those and there's been some scholarship on those simply because if they're publicly traded companies then some of these contracts would be available. But the kinds of NDAs so NDAs occur in the employment context and are oftentimes part of an employment agreement, particularly in areas where whatever information that an employee has access to could constitute some form of trade secret. So in some ways it's a best practice for, particularly in the tech industry to have nondisclosure agreements as an addition to a sort of suspenders to add to the belt of non compete agreements. So that aspect of it is fairly prevalent and easily defensible as an important aspect of an employment relationship. The kinds of contracts that I am writing about here are a little bit more bespoke because oftentimes they are drafted and then executed after an event that has occurred that constitutes the content of the secret and the secret. That would adversely affect reputation understood broadly as whatever it is that one or both parties view as somehow harming them and harming the regard that the public might have for them or individual members of the public such as, for example, a spouse or an employer or something of that sort. So they are a standard contracting tool, oftentimes a clause within an existing contract or within a contract that is being offered as a condition of employment or as a condition of payment or something like that. And they are specifically focused on either an identified event or a sort of generalized set of information that one is exposed to. So that's sort of a general introduction. But I'm sure I've left things out and Dave could have some stuff to add to what I just said.
[14:11] Kim Krawiec: Yeah, I'd like to hear from Dave. I think I was just interested in whether there are differences in the structure of the contracts or the terms. But you actually, Mark, bring up an interesting point, which is maybe perhaps the timing of the contract is different across the settings. Right. Sometimes it's sort of at the moment of employment and the ones that you're talking about, I gather some of those were also at the moment of employment, but many of them are after the conduct occurs. Dave, anything that occurs to you that might be helpful for listeners to know about the structure of NDAs and any differences across the different settings that might be relevant? Again, leaving aside the differences in the type of conduct we're talking about, I.
[14:51] Dave Hoffman: Think Mark identified good question. I think Mark identifies the real hard definitional problem, which I think also kind of runs through the article, which is what is the subject of interest here? So you could imagine that there are provisions in regular employment contracts or regular commercial contracts in which the parties promise certain things about what they're going to do about information going forward, and those might have really nothing to do with reputation, but then later on they get sort of pulled into conduct. That is, reputationally touches, reputational harms. And the parties seek to use that prior clause in ways that we're going to think of as bad. Or it can be after the conduct occurs, they sign a settlement agreement, and it's a settlement agreement that contains within it sort of promises of secrecy. Those might feel different. They might. And that would cut both ways. It might feel worse, it might feel better. It might be paid particularly. It might not be paid particularly. So the definition question is really hard, I think, just in general to sort of get a handle on the topic. We see like a handful of cases litigated talked about. It is really almost impossible to know whether the cases represent anything like do they represent the main run of what the clauses look like? Do the Trump contracts that Mark talks about in this paper look like any other contracts? No one knows, really. Do the handful of decisions that we get that result from the handful of reputational sort of contracts that are articulated? Do they look like the cases?
[16:27] Kim Krawiec: I like this, Dave, because you're suggesting that my ignorance of this is due to a lack of information and not just that I'm ignorant. Very helpful, thank you.
[16:38] Dave Hoffman: Ignorance supposes that there is information, right? So I just don't think that we have a ton of knowledge, nor could we have a ton of knowledge about what goes on in the world. And I think that kind of poses a more general problem that maybe is worth talking about for the article and might be useful for us, which is one of the pitches in the article is that at least the main pitch I see is that breach happens for all kinds of reasons. And that breach mitigates, as you said, Kim, in your summary mitigates the kinds of harms that these clauses might otherwise occasion. I think that that's kind of generally true of all kinds of contracts, not really actually centered around reputational contracts, but rather all contracts are breached all the time. It would be bad if they weren't. No one would want to live in a world where all contracts were performed. That would be a terrible world to live in. And so I think the kind of the question I would love to talk about just a little bit, maybe Mark can give us a sense is, does he think these are distinctive social practices that contracts are playing sort of a different role in here than they are in other kinds of areas of commercial life? The real point I want to put on it is this. So there's a claim in the article that these are not efficient breaches, but I should think they just are. They're just efficient breaches. Now, maybe they're not paid for, but efficient breach doesn't require there to be a transfer from the breaching to the non breaching party, just that there could have been a transfer. I would just say that these are good breaches, just like all kinds of other breaches are good. And I think that then the question is what's different here? And since Mark has all this experience about sort of secrecy and informational disclosure, I thought there might be an answer to that. I would love to hear I would.
[18:21] Kim Krawiec: Love to hear it as well. So I had both of these questions as well. Dave and I also highlighted the portion on efficient breach have a big question mark beside it. So I'm also skeptical that this is not an efficient breach. So maybe you can persuade us or elaborate on that as well as the more general question that Dave posed, which I also had, which is under enforcement or mitigation as compared to what right? Like what's our baseline here? And if you can talk about that a little bit more.
[18:52] Mark Fenster: Let me begin by trying to figure out what might be distinct from the sort of archetypal efficient breach. And there are two things that I would identify. First of all, I'm going to say information. Although information can be itself a commodity with value that is discernible, the fact that this is information that's relating to reputation I think is particularly distinct about these kinds of contracts in part because the reputation is I don't really define reputation in this piece, which is a weakness, I realize. But I think it is an effort to capture the fact that reputation as a thing, as a noun, is itself very difficult to define because it is about the regard that others have for the self. Whatever the self is, it could be a corporate self, could be a private self. And in some regards, reputation can be is a commodity. I mean, when we're talking about a corporate entity that is concerned about its reputation. So I've got a couple of instances in which companies with their customers, with whom they sign a settlement agreement over something wrong that the customers feel as though they experienced, they might require some degree of silence about them. And there the company's understanding of its reputation has a real economic value to it, whereas with a lot of these contracts the reputational value is much squishier. You could in some instances particularly and we can skip ahead very briefly preview the remedy question here. You could identify if an individual has lost an employment contract or some other contract as a consequence of this disclosure. It seems fairly obvious what it is that's being protected here, which is the commercial value of the individual's public regard. Whereas in a lot of these contracts it's much more difficult to understand what it is that's being protected and who it is that it's being protected from. There is a public aspect to it, but there's also a private aspect to it. I mean, in the you know, Trump is both a great example and a terrible example of this because he so he has so papered the world with NDAs and is so concerned about his reputation, seemingly. And yet every disclosure seems not to affect him and may in some ways increase his value to some of his fans. It's hard not to view the nondisclosure agreement with Stormy Daniels as being in some ways protecting the disclosure of this information to his wife who no one could understand the basis of their relationship. But there is some aspect to this that seems as though everyone knows that Trump is a philanderer except perhaps for his wife, who may herself know. But having that be in the public eye itself would lose his reputation at home with his spouse, which I think a lot of these agreements are related to. So to return some ways to the question as recast is that reputation in some of these contracts and I think in a lot of them, particularly where rather than a company being involved in the creation and the offering, of this contract. You have instead an individual who's represented by their personal lawyer. The reputation is a little bit more difficult to define in the way they would in a more typical commercial contract. Which is why I see the point that efficient breach is a term that could apply here but it would apply differently. And I'd be interested in hearing what you guys would have to say in struggling with the model of efficient breach in this sort of context. So persuade me why I'm wrong that this is in fact a form of efficient breach.
[23:38] Kim Krawiec: I guess I don't see how it's different. Right. The breacher has determined that the benefits to them of breaching outweigh the cost which is by definition efficient as between the parties. Right. We're leaving aside the externalities for the moment but we typically would when we refer to efficient breach. Right. So I guess it doesn't strike me as being different. And reputation is hard to define and hard to value, but so are a lot of other things. Right? And that's entirely why we have things like liquidated damages or remedies that are specified within the contract and other things. And so I guess to me, the behavior of the breacher is itself evidence of the efficiency.
[24:22] Dave Hoffman: I think that's absolutely right. I think these are just obviously efficient breaches in a way. But just to make sure we agree on what that means, I think sometimes people think of efficient breach as, like, it's permitted breach, but that's not really the implication of thinking of something as efficient breach. It just is a way to sort of demoralize the conduct. And so when you say that the breach is efficient, you're just basically saying, well, there were gains that were made. Typically the losers from the trade ought to get paid off for those gains to the extent that one can, but one ought not to have punitive remedies. And so it's the way that economists think of as sort of demoralizing the kinds of breaches that we see. And so I just think there's just no question that these look like other breaches in that they ought at least, and this is sort of very much supporting your thesis ought not to be stigmatized as such. And their result is that we should not look for ways to penalize the conduct, but rather just recognize it as sort of within the party's own bargaining sort of context, a socially optimal outcome, the breaches. And so that's, I think all that was really meant by I don't think there's any way not to think of them as efficient within the ordinary way we think of what efficient breach is.
[25:41] Kim Krawiec: Yeah. And I think to emphasize the point that Dave just made, this doesn't undermine your thesis. I think it helps your thesis. That's one reason I noticed it, because I was like, okay, I don't agree. It's not an efficient breach, and I don't know why you need that claim in the paper, because it doesn't seem to help the thesis.
[25:58] Mark Fenster: So I think this is ultimately a semantic, more than a semantic and perhaps to an extent theoretical, not disagreement, but coming at this question from different angles. I suppose it's my humanistic background that I'm resisting the term efficient here just because whereas in a commercial context, if you described to the breaching party that what you're doing is really you're balancing the expected gains that you would have against the expected losses and the risks that you're taking by breaching, they would agree with that. Even with the use of the term, depending upon their background and who they are. I think it would be hard to talk, particularly in the sexual assault, sexual harassment context, to present that to the victim who breaches and say, well, what you're doing is efficient. However, reframed as you have considered the risks and costs that you are raising by breaching, and you have considered the advantages, the gains, the opportunities that you have to talk about something that is deeply harmful to you in. A meaningful way to people for whom this would have meaning and who would support you. They would say absolutely. That is exactly what I did. So when we changed this in terms of imagining and balancing the risks and costs and benefits, but translated in more emotional and squishy terms, I think people would absolutely agree. So you are right that there is a clear parallel between efficient breach and what's going on here. Thank you for your persuasion on that.
[27:56] Kim Krawiec: I guess I wanted to explore a bit more the notion in the paper that Rndas are under enforced and sort of what you mean by that. And I appreciate the examples that you use in the paper as well as just the theoretical. The way you lay out theory of of why the non breaching party might choose not to enforce all of that makes sense to me. But at the same time, the the prominent examples of breach that you use in the paper the contracts for Trump and Weinstein and O'Reilly, for example, are all cases in which the breaching party did perform through silence. For decades, and in most cases only breached because the offender's conduct continued with others or other information was brought to light about other offenses that they hadn't known about at the time of signing. And so I guess I'm not sure that under enforcement is the term, and I don't have a better one, by the way. But I guess I just wanted to probe that a little bit.
[28:59] Dave Hoffman: And can I just put more of a point on that? Which is sort of one of the things that's interesting about these particular contracts is it was always actually quite unclear whether they were enforceable. I mean, there was a lot of ambiguity about their enforcement. If you look at the formal case law, you would have said, well actually, maybe they're not enforceable, here are all these defenses. But I actually think that for decades the social practice was compliance with the text that basically changed. I mean, it changed in the last couple of years. And I think one of the things that's worth thinking about is why, how, what are the conditions by which sort of a settled social practice when the law doesn't formally change that much? I mean, maybe the statutory law changes a little bit now, but really on the margins here and also non competes, you have just sort of a walking away from a decades old sort of tradition of being bound by maybe potentially unenforceable contracting language. And that would be sort of my pitch is actually it's over enforcement until almost no enforcement. Sort of a pretty disjunctive switch, right?
[30:15] Mark Fenster: It's hard to say quantitatively whether they're under enforced or over enforced, in part because we don't know when, we don't know how many there are, and we only find out about them when they are breached. But I mean, Dave's point is correct, and I think that dynamic is a really important and interesting one and it's where this paper comes out of, which is we don't know. I sense it is my hypothesis that there has been an increase over time in the use of these things. My guess would be the success that they have had gets passed along from lawyer to lawyer and client to client. And if a potential client, a wrongdoer, talks to someone else about their wrongdoing and says, well, you can get an NDA for that, the market for these contracts expands, as well as the sort of attorney who either works for a firm where they become a fixer for these kinds of issues, this gets passed on to them. And so more of these, they begin to proliferate. And the moment at which someone who has signed these contracts, who has been victimized by this, sees other people breaching and sees them either potentially walking away without any wrongdoing or getting support, public support for doing so, creates more of a sort of an impetus to breach. An interesting thing to consider is in the sort of waning and the extent to which there is a sort of reaction against the MeToo movement. Whether this begins to fall back, whether these contracts that perhaps there was a pause put on them or a reconsideration of how to draft them that begins to get reinvigorated. The contracting begins to get reinvigorated and the breaching falls away. And so, normatively, if we want to encourage breach in this context, one question would be how can we do so? Because it would be my hypothesis that the extent of the breach that was occurring for that period in the wake of me too led to a reconsideration of the contract form, which is itself a corrective. And we'd want to encourage those kinds of correctives. And how can we do so? Obviously through legislation, though, as Dave said, most of the state and federal legislation is only working at the margins through legal doctrine that courts can apply, but also just through the sort of self help mechanisms that what I term in the paper breach agents can assist in, whether those are investigative journalists or NGOs or others can assist in that.
[33:24] Dave Hoffman: One of the pretty interesting claims in the paper is that sort of informational constraints are just harder to wrestle down than other kinds of behavior that contract seeks to control. And this comes out of sort of your own scholarship and sort of some sociological theory about sort of information and secrets. I would love to hear a little bit about that because I've got some questions about how far that claim goes. But I think it might be worthwhile for the listeners to hear why you think information is particularly hard to control as. Through contract or maybe just in general because I think then there's some follow on questions there.
[34:04] Mark Fenster: Yeah, well, I mean, if you so if you think of information as a commodity, something that constitutes a form of property that can be contracted for, it is unlike physical property, it is more difficult to control its movement. So you can put information in a vault but as it becomes digitized or as it's in someone's memory, it is difficult to keep from spreading. And I think that is one of the important aspects of it. Another important aspect of it is to the extent that a contract is about performance, the performance can be seen and is typically something that the party who is benefiting from the performance can monitor. But it's much more difficult to monitor an individual whose performance is about keeping secrets. Particularly insofar as there are cost to surveillance and there are social norms regarding surveillance that might keep the beneficiary from being able to stop someone from whether through technological means or merely by passing information on to a friend or a family member or reporter or meeting with a reporter or the like, that becomes more difficult. So I think there are analogies to any other contracting but because of the subject matter and the difficulty of monitoring performance it becomes a little bit different and a little bit more difficult to monitor and enforce.
[35:44] Dave Hoffman: So I guess I was wondering it's interesting to think about whether that informational category is akin to other areas of in contract law where there's sort of a demand or sort of behavioral demand that law has difficulty to control. And so some of the examples I was thinking about are contracts that touch on sort of sort of personal identity or bodily integrity, which I know Kim thinks about a ton. Ones that sort of talk about sort of familial relations where you get all kinds of interest in breach that you might not otherwise be able to have. And judges sort of unable to sort of corral parties with whatever kind of remedies they might otherwise want. And in those areas I think that sometimes we develop special solicitude doctrines, sometimes we sometimes we don't. The thing that you know, is and I think it's also probably the case that there sometimes we say it's like okay to breach and it's good to breach. And this is also sort of true in generally about the contract course. We think of contract course as like obviously an artificial category, right? It's got all kinds of things in it. Some of them are really unlike each other. And the model of what the course is really makes a difference in terms of what you think is the exceptions and what you think of the norm. Think of the norm as like a commercial contract between two parties about a widget. Then all of these other categories seem exceptional and so confidentiality contracts seem exceptional. Contracts about adoption seem exceptional contracts about the sale of organs which can sale rent, I don't know, seem exceptional. Contracts about labor seem exceptional. But if you think of all of these as just sort of different ways that law mediates relations among people, it's just not so clear what the exception is. And then I think it maybe just pushes a little bit on this question of whether information is distinctive. Kim was nodding a bunch. The listeners can't see her nod. She does seem like she gets what.
[38:10] Kim Krawiec: I'm trying to go no, I definitely do. And the example that occurred to me are commercial surrogacy contracts, which frequently have all sorts of things about how much the surrogate will sleep and what sort of vitamins she'll take and what she'll eat. And nobody really thinks that anybody's doing any serious monitoring of that, but they're there nonetheless, and I at least think serve some purpose by being there in the sense that they lay out sort of what the party's expectations are for each other in a very clear way. But it seems to me to present not just monitoring problems that are at least as severe, but ones that everybody sort of knows really can't be dealt with through any formal mechanism.
[38:52] Mark Fenster: Yeah, I think that's right. And I think there are terms of those contracts. And Kim, I think you're right, never having been in one of those contracts. But I would imagine that the monitoring issues and the idea that we're going to let that particular term be underinforced because that is not the real subject matter of the contract. It's a surrogacy contract. So there is a product that is ultimately produced at the end. And we are hopeful that even if you're fudging on some aspects of the contract, that the product will be acceptable. And we have enough trust between each other because we're swimming in the same direction, hoping that this contract is performed correctly. And we have an ongoing relationship over the course of the contract and perhaps in some contracts even afterwards. This goes beyond the sort of informational issue of these contracts. But the relational aspect of these contracts is again, I would in no way say that they're unique, but they are distinctive to the extent that the parties are agreeing not only to perform and oftentimes, though not always. This is a one shot deal from the beneficiary of the keeping of the secret as opposed to an ongoing performance by the party who is agreeing to keep secret. But not only do they not expect to have an ongoing relationship with each other over the course of this contract, the implicit, if not explicit, in the contract itself is the fact that the parties will have no relationship with each other. That in fact, this is an agreement that is built on a distaste, at least by one party for what was done. And the expectation is that the parties, if they like each other or at least are willing to tolerate each other and be in the same space at the same time. But they need to be protected from each other, not always the case. I mean, there could be reputational NDAs between people who have ongoing relationships but then you would inquire well, then why would you need a contract in the first place? I mean, if you are in fact swimming in the same direction because you both want to keep this a secret and you have an ongoing relationship because you are friends, because you are co employees or co owners of a business, then you don't need to formalize this agreement in a contract. I mean, maybe you would, but you don't have to. So that, I think, is another distinct development. I mean, even if I can't sell you that information is unique, which I don't think that it is. I mean, there are trade secret contracts, there are employment contracts that have these things. So I don't think that the informational aspect of this is unique. And the reputational, the relational thing is not unique either. I mean, there are plenty of plenty of agreements to settle a lawsuit where the parties don't like each other and have no expectation of continuing to deal with each other. But the two together and the personal nature of whatever it is that is being kept secret itself ends up really interesting and distinct dynamic to these kinds of companies.
[42:18] Kim Krawiec: So I actually think that that is dave, maybe you can think of parallels. I haven't thought of any yet, but I think I would frame it a little differently than Mark just did because to me it is very relational. These people have an ongoing relationship by virtue of the contract that they've signed. It binds them to each other for the duration, right? In addition, in some of these cases at least, these people have ongoing relationships because they continue to run in the same business and professional circles. And so that to me is very much a relationship and one where the secret between them is always in the background. And so it is to me, it's quite relational, but at the same time is much more, I don't know, negative or antagonistic or whatever word we might want to use even than the parties that have settled example because it seems to me that they may still have hard feelings about that, but their relationship with each other is done at that point. And this strikes me as being different because of the ongoing nature of the obligations that the parties have or one of the parties.
[43:22] Dave Hoffman: I think that part of this is sort of the looseness in relational contract theory which is presumably why it has lost a lot of its force in the academy is because it never really got a lot of traction about what relationships count. What don't I mean, if you just think of it as long term versus not long term versus spot. This is clearly a long term coordinating agreement. Whether or not the parties are supposed to like each other, whether they're supposed to see each other, that's not really what the point of what we're doing. It's whether or not they're going to continue to have obligations that presumably have some legal force over time. And one of the things that people criticize relational contract theory is that it just was sort of sloppy about whether or not relationships meant friendships, whether they meant sort of just plans, plans for how we're going to solve problems over years. And as such, it's more of the latter. And I think that the other problem with relational contract theory is it was never clear what to do with the insight. Like you said, we have relational contract theory, maybe we should have more reformation. But once the parties know that that's going to be the solution, then they plan around it. And it's not so obvious what to do, given that the parties are not lab rats and can respond to the doctrine that we put in front of them. And so if you think of them as sort of plans, I think, Mark, you have the exact right question. Why do people write contracts to hold information secret if they're not antagonistic toward each other. And I think that it's just worth thinking a little bit about. One of the reasons people write contracts is not merely to sort of get legal sanctioned for their relationships, but to have ways to plan internally, not across the boundary, but rather inside of the firm. It can be just to sort of make sure they understand the rules of the road. And it can be to sort of have some behavioral force. One of the things that I think you're telling us is that you think that the behavioral force part of this works less well here than it does in other kinds of contracts, which I think I'm totally persuaded by. I mean, not all kinds of contracts all the time, but certainly the behavioral force part of this works less well. And so then it puts more pressure on the other reasons for formalizing these relationships, whether it's the internal planning reason or the coordination reason or the formal sanction reason, for all those reasons. But I do think that relationship as sort of the word, I think you're just pulling from the relational contract theory, and I've never known what to make of that literature sort of in CoET framing.
[46:01] Mark Fenster: Yeah, I mean, it strikes me sort of as someone who is I don't want to call myself a tourist in contract theory, but it's someone who is more of a neo contract theory and looking at it, someone who's coming long after the moment of relational contracting, is that it seems more descriptive than theoretical. And so your frustration with it, Dave, is that it is called a theory, and yet it's not a theory. It's merely a set of insights that I think are worthwhile. And why I raise it in the paper is that there is a relationship here, but there is a relationship in all contracts. But the worst of these contracts, and by worst I mean the ones that strike one in reading them as being the most sort of Icky, as well as the ones that I think are less likely to succeed over time, are the ones that are framed as pure transactions. One shot deals with onerous terms on what it is that the party that is supposed to keep the secret is intended to live by. So that, for example, barring any discussion of the secret with a medical professional would seem to me to be one that is going to lead, more likely lead to a breach and more likely lead ultimately to perhaps if the person seeks medical help or psychological help, counseling of some sort, there might be more encouragement for reach as opposed to a contract. That and so I guess this goes to an extent to the normative aspects of this. Paper, which I generally tend to avoid in all my work, but somewhat am shy about here, is that if you wanted to develop these contracts in a way that are more likely to be enforced and less likely to be icky not enforced, performed, more likely to be performed, and less likely to be icky and viewed as icky by a court, to the extent that the public policy doctrine is itself about ickiness as well as about more. Tangible concerns about third parties. You would want to draft a contract that would recognize the extent of the burden of keeping that secret and not view it as merely something that is bought. You are an automaton who is capable as a victim of bottling up that information in the same way that a company or an employee could be expected to do so. To the extent that you could establish and develop contract terms and institutions, even if they're small eye institutions within the contract itself, that could recognize the extent to which keeping these secrets could actually become more difficult over time, you're more likely to see these contracts work. And the more formal, the more precise, the more specific these contracts can be in terms of the performance, what it is that all the parties that you cannot disclose to and without any outs or recognition of exceptions or anything like that, the more likely you're going to have problems down the line in expecting performance. And then the other insights of the paper. These are the reasons why it's going to be more difficult to enforce these contracts after the fact, after disclosure, and why there might be problems with drawing up terms, for example, with liquidated damages clauses that are so clearly beyond. Well, I don't want to say clearly beyond, but they begin to look like penalties that begin to look as though you're not merely making good faith effort to try to evaluate and estimate what the damages are going to be, but you are going to have something so that a demand letter from an attorney when there's suspicion that disclosure is occurring can have more of an interrupt effect on the recipient.
[50:38] Dave Hoffman: Mark, do you think that you sort of think about, like, the contract in university observe, which of course, is super imperfectly observed because we don't see a lot of things and we only see the exceptional cases. But let's just pretend for a second that the contracts we see are kind of roughly representative of how lawyers have tried to solve the problems that you've identified. What's your explanation for why lawyers have been so bad at what seems like a pretty mission critical task for them? How to get people on board with ongoing long term commitments to not talk about certain topics, and without, obviously, some of the tools that the state has available. But with other tools, including you can kind of write whatever you want. You can do it quietly, and you can make people sign it. You can pay them to sign it.
[51:34] Kim Krawiec: And you can pay.
[51:36] Dave Hoffman: What would you sort of say is the ideology of the lack of creativity sort of, that you see in the world? Is it legal training? Is it our fault? Is it the bar lack of interdisciplinary practice? Or maybe we're just missing the great ones because they never come up and are never breached. They're really amazing, perfectly drafted, perfectly fonted. With the right tax contracts, we don't see what's your guess here? About what the world?
[52:14] Mark Fenster: Well, my guess would be that we see the tip of the iceberg, and the tip of the iceberg is not great and can be affirmatively bad. I mean, the Michael Cohen contract, the Stormy Daniels contract, which I know Dave, you blogged about soon after its disclosure is and I used to actually present it to my tweeted about tweeted.
[52:36] Dave Hoffman: Tweeted about it even more ephemeral and even less useful form of communication.
[52:43] Mark Fenster: Do you delete your Tweets so that we can't even find them now?
[52:46] Kim Krawiec: He does. He does. I've gone back and tried to find stuff that Dave tweeted about because I couldn't follow it up at the time. And then I was like, I want to go back to that idea that Dave raised, and it's gone.
[52:58] Dave Hoffman: Every seven days, I sort of sweep behind me so that no one ever remembers what I write, and I don't feel bound to it. It's perfect.
[53:05] Mark Fenster: Do you find that that frees you to be a better Tweeter? Better in the sense of drawing attention to yourself to the extent that tweet.
[53:13] Dave Hoffman: I would just say it just frees me. I'm not going to make any claim about what it does to the quality of the thing, but I get less anxious about the enterprise. So sorry. You were saying that I also talked about Sammy Daniels and I did, at least allegedly. No one's going to be able to prove that in any but I'm sure.
[53:30] Mark Fenster: The insights were perfect as one of the first of these reputational NDA contracts that failed and failed spectacularly. It, it was an amazing example that, as I noted, I give to my I used I used to give back before they forgot who, you know, Michael Cohen and Stormy Daniels was. I would give them on the first day of class just to see what a particularly bad contract looks like. So I do think that the end of these failed contracts tend to be they don't have to be, but they tend to be the less good ones. The Bill O'Reilly contracts seemed much better. They seemed much more professional. There was, I thought, a much more likely to be enforceable liquidated damages clause in them. I think they also included at least one of them included a recognition of the extent to which the victim might seek medical assistance, counseling assistance, and put some parameters around that, which I think is I'm not going to. Say it's appropriate in a professional sense, but it seemed appropriate from a legal sense of just anticipating the kinds of things that a victim might need to seek and make allowance for that. So the hope would be that as these things become more professionalized, as attorneys develop more expertise in this and see what works and what doesn't, and get feedback, perhaps from lawyers on the other side in terms of drafting. These contracts to the extent that the lawyers on the other side are professional as well. In negotiating, I think you could see better standard forms that would, or at least more standardization across these contracts that could be better. That could recognize the ongoing nature of the relationship of whatever sort these parties are going to have. And you could end up with better contracts. But I mean, you still, for the reasons that I talk about in the paper and we've discussed a bit here, you still run the risk of breach. But Dave, as you noted, contracts are breached all the time. The specific dynamics of these kinds of breaches and the problems of enforcement that we haven't really talked about, but the streisand effect, the fact that the effort to enforce merely brings more attention to the breach itself and the streisand effect itself occurs across lots of contracting areas.
[56:04] Kim Krawiec: How much of the answer to Dave's question is that it's been unnecessary to be better up until fairly recently, right? I mean, all of these agreements, some of which, as you guys both pointed out earlier, were probably legally deficient in a variety of ways and yet they were abided by breach, came only decades into it and often after the circumstances had changed, I think, in the eyes of the breaching party. And so, I mean, this goes to sort of a broader question I had about the paper, but that I think, that you have both answered during the course of this podcast. One of my questions was if Rndas are so inadequate, why do offenders keep using them? And I gather that part of what you're pointing to is really just a change in these social norms about the acceptability of these types of contracts that has made them less useful going forward. You've both pointed to what I assume is correct. At least there's a perceived increased usage of NDAs over the recent years and people continued to conform to them and perform under them. And now that model is under a lot of tension. So is that a lot of what is driving your observations in the paper is the changing social landscape?
[57:24] Mark Fenster: Yeah, I mean the paper was a response to a particular moment where we began to see these contracts and see them breached. Contracts that were themselves kept secret about information that was also kept secret, that suddenly made it into the public eye. But for that social moment this paper wouldn't exist. It was a response to that. I mean, in the same way that Dave's paper was also a response to a particular social moment. We are frequently responding in our scholarship to a moment and I think some of the best and worst scholarship tends to do that. The more lasting scholarship is that which takes a step back and tries to consider what does this moment have to say about larger, larger questions? I think one of the things that we haven't really talked about is the extent to which there is an implicit and oftentimes explicit power relationship between the contracting parties. Here, the party that is attempting to keep secrets not always the case. Sometimes they're on relatively equal planes. But whether these are former employees or just sort of one shot instances of individuals who literally or figuratively run into each other, there's a power dynamic. And the party that is attempting to keep secrets has more financial power, often more social status, has greater access to legal services. Oftentimes these are personal attorneys or individuals who are related to personal attorneys who are drafting these contracts and are presenting them. Sometimes in some of these instances, the party itself, their attorney, is finding the attorney on the other side creating potential, if not real, conflict issues which Stormy Daniels herself alleges in the initial iteration of these contracts. So I think power relations is an important aspect of this. Just one last point about that is that I think these contracts work well in part because of that power relation over time until the moment at which the power relation comes into question. And that would be because of the social norms, the moment at which you see as a victim, other victims who are stepping up and you feel as though, okay, I now have some support. In order to do so.
[59:50] Kim Krawiec: I was going to ask you about the third party. I forget what you called them not instigators something. You had a word for them.
[59:57] Mark Fenster: Well, that would be the bad breach.
[01:00:04] Kim Krawiec: Of breach, just because I'm interested in them and their role and their future role going forward and what their potential liability is. But I didn't have a specific questions about that, other than just to ask you to talk, both of you, to talk more about it and what you foresee for the future.
[01:00:19] Mark Fenster: Well, there are obviously, because there's an existing business tort for the interference with contractual relations, it's not as though it is unique to these contracts that there would be third parties who have an interest in encouraging. What I think is interesting here is the extent to which this is institutional in the role of investigative reporters in attempting to for public interested reasons, as well as for commercial and personally interested reasons, in trying to encourage a party to breach. And that is, kim embedded in your question about how institutionalized this already is and whether those institutions will fade away with winnowing of the press? That would be a question for the future to the extent to which what we saw with the weinstein and the O'Reilly stories, which were instigated, instigated to loaded a term, but encouraged by investigative reporters, the extent to which that will continue. And there was a moment in the me too movement of institutionalization where I sort of looked to see if there were women's rights NGOs, groups of attorneys, public interest attorneys, who were trying to play a role in saying, if you would like to breach this contract, come to us. In the same way that the victims of sexual violence, they're NGOs that would encourage that. And that raises the question of tort liability, which I think might be part of what would be staunching us that most of these NGOs are associated or focused on the legislative aspects of attempting to change the law in that way.
[01:02:18] Kim Krawiec: And what would usually be the remedy? I mean, I'm saying usually, and I recognize that we only have a handful of cases, but are we talking about injunctions? Are we talking about monetary damages? Both are a possibility. I'm interested in the was it Chrissy Teigen who put up money? And so it of course depends on what the amount of the damages are. But it seems to me that it might be worthwhile for the New York times to just sort of say, yeah, we'll pay all this. It's worth it to get the scoop. But that would suggest then some defect in the ability to set damages, I suppose.
[01:02:51] Mark Fenster: Well, I think they would. I mean, the Mary Trump book issue where she breached an NDA that was attempting to settle there, was part of a settlement agreement over Fred Trump's estate, where there was an effort to stop publication of the book by Putatively, donald's brother, who then died. So now Donald has to be the party who's enforcing this, and there the remedy that they sought was to stop publication book which they lost but recently they won on the question of whether they could enforce the contract against Mary. And so I think that's part of the issue when it is an investigative reporter you're wading into constitutional waters that you wouldn't be wading into quite so clearly when it comes to an individual contracting party.
[01:03:48] Kim Krawiec: So do you think we'll see more activity from these third party breach agents? Is that what you called them?
[01:03:56] Mark Fenster: Investigative reporters, at least for the moment, are not going anywhere. And I think that this was a beat once you either investigated reporter tell me that there's and I think this was a bit overblown but there's never just one NDA. That is if there is an NDA frequently. And with Harvey Weinstein, I think that was true. There's usually another NDA. And so you can use that as a series of breadcrumbs that you can follow in a trail to disclose the actual thing that's going on. And so I think that is something that will not go away. The extent to which there is budget, there is patience for these kinds of investigative journalism. That's a real question.
[01:04:39] Dave Hoffman: My only thought on this, and it's just a really interesting topic for you to think about. Maybe explore more marks I think we would benefit from it is the relationship between these breach agents and on the one hand like Cass Sunstein's old Norm entrepreneur idea of sort of cascades availabilities cascades and people whose job it is to push in the public sort of changing social practices and whether these breach agents sort of are examples of that and what are the differences? Relevant differences? And the second sort of people that the Breach agents made me think about is the new, in relative terms, litigation funding industry and what effect the death of the Champray doctrine had on the ability of outside parties to influence litigation, which is really what this is sort of it's like how third parties intervene in private disputes, maybe. I mean in the litigation funding, it's to make a profit here, it's to excavate wrongdoing but they're basically just like maximizing their own welfare. And so what are the parallels or dissonances, if any between the breach agents and just your regular litigation funders who are coming in and say like act go ahead, I'll help fund this activity or I'll help push this activity. Otherwise it's a really interesting PAPERMARK. You're really onto a lot of super cool stuff from where I sit.
[01:06:03] Mark Fenster: Yeah, I mean the NGO world I think is where we would likely to see that because there is, as you noted, there's no money that these victims can get. They've gotten their money and it's all in a defensive posture. They're raising these questions in terms of litigation in the posture of a defendant. And so merely just paying the legal fees is going to be difficult for them. Which is why. Having to enforce them legally is much more difficult than trying to enforce them sub legally, pre legally through demand letters, through threats, other things like that. And so this is a truly public, interested, nevertheless welfare maximizing opportunity. And I haven't seen that. And I would be very interested in seeing that. I would be very interested in contributing to it because I think it's a worthwhile cause.
[01:06:57] Kim Krawiec: Let me reiterate that the paper is fascinating and I gather you have more papers planned on this topic. That's what I gathered from this one.
[01:07:05] Mark Fenster: Yes, I have. I have sort of moved a little bit in different directions and where I'm going to go next on things. But the investigative journalist piece, their understanding of what their legal risks are, I think is really interesting, the sort of sociology of trying to encourage these breach agents, their actual legal risk as well as their perceived legal risk, which can be quite different, obviously, particularly for reporters and the legal risks that victims face. It would be very interesting to do follow up work with the legal services industry too, to find out. I mean, lots of interesting work is being done on the development of contract forms and the sort of proliferation of it. This is just a particularly difficult area to try to uncover that thanks to.
[01:07:55] Kim Krawiec: Both of you for doing this. I meant to say earlier, I'll say it now, and I will also put it in the show notes that Dave's article on this topic is called Hushing Contracts and it's in Wash. You Law Quarterly, is that right, Dave? You don't know?
[01:08:13] Dave Hoffman: I think it was Law Quarterly.
[01:08:14] Kim Krawiec: Oh, is it now? Law Review?
[01:08:15] Dave Hoffman: Okay, maybe.
[01:08:17] Mark Fenster: I think everyone's tried to normalize their names.
[01:08:20] Kim Krawiec: Yes.
[01:08:22] Dave Hoffman: Well, guys, I'm sorry to have to hop. This was an amazing conversation. Mark, great to talk to you. And Kim, great to see you again.
[01:08:27] Kim Krawiec: Yeah, you too. Thanks for doing this. That was fun.
[01:08:30] Dave Hoffman: Bye.
[01:08:31] Mark Fenster: Thanks, Kim.
[01:08:33] Kim Krawiec: Yeah. Thanks, Mark. This was funny.