In my last few columns (available on my website at hoffmannmediation.com), I’ve stressed the importance of confidentiality in resolving business disputes. In the context of business divorce (disputes among owners), confidentiality provides partners with a forum in which they can freely discuss their concerns with a mediation professional, without allowing their issues to become matters of public knowledge or discussion. Nothing can hurt a company more than airing its internal “dirty laundry” in public. Moreover, in today’s “viral” world, information can be publicly disseminated throughout the world (or your business community) with a few clicks of a Smartphone. Confidential mediation can provide the confidential atmosphere necessary to resolve disputes without escalating the disagreement in public.

We’ve also discussed the issue of confidentiality in connection with the Paula Deen fiasco, which saw Ms. Deen’s retail empire dwindle when portions of a deposition taken in an employment dispute were made public and were quickly disseminated on the internet. I suggested that the problems facing Ms. Deen may have been avoided had she assured that all disputes relating to employment were subject to confidentiality and non-disclosure, and required confidential alternative dispute resolution methods to adjudicate the matters. Provisions protecting confidentiality could be used to assure, by court order if necessary, that Ms. Deen’s business affairs did not become matters of public record or were not otherwise verifiable from a confidential source.

Readers have responded with questions relating to confidentiality requesting further information about “how” one creates these provisions or otherwise develops a confidential system in which to resolve business disputes. First, it is imperative that each business owner speaks with a local attorney to better understand the legal status of confidentiality and contract in your jurisdiction. State statutes and case law differ distinctly in this area. However, there are some basic principles that can assist in developing a confidential atmosphere for dispute resolution. In this column, I’ll speak briefly to contractual provisions – in my next newsletter we’ll discuss some statutory protections that can assist small business.

Principles of contract law generally control the dissemination of confidential information whether in an employment relationship or otherwise among other contracting parties. In Ms. Deen’s case, information was disclosed because nothing concerning her business relationship with her employee was subject to confidentiality rules. Moreover, Ms. Deen failed to contractually provide for the confidential resolution of disputes with her employees.

Contrast Ms. Deen with another great business woman, Oprah Winfrey, who is known for her strict requirements regarding confidentiality and non-disclosure in both her business and personal relationships. Some insight can be gained from reading the Illinois Appellate Court opinion in Coady v. Harpo, Inc., 719 N.E.2d 244 (Il. 1999). Ms. Coady, a former employee of Harpo Enterprises (Ms. Winfrey’s parent company) resigned claiming “constructive termination” based on working conditions, while also indicating her desire to publish a “tell all” book about her experiences as an employee of Harpo. Ms. Winfrey requires that all employees (and indeed others with whom she personally contracts) sign a “Business Ethics, Objectivity, and Confidentiality Policy” that clearly and unequivocally prohibits the contracting party from disclosing, among other things, anything related to Ms. Winfrey or her business or private life. Moreover these contractual agreements also provide for the confidential alternative resolution of disputes relating to these relationships. The Coady court found these contract provisions to be fair, reasonable and enforceable, preventing Ms. Coady from disclosing any information relating to her business or personal relationship with Ms. Winfrey. None of the questionable information could even be disclosed in connection with the litigation brought by Harpo to prevent publication of the book.

While this is an older case, it accurately portrays the general rule that court’s will respect and enforce the reasonable confidentiality provisions of a contract and that “reasonable” can include more than business information but also information relating to the private lives of the contracting parties. Unfortunately Ms. Deen’s business lacked even the rudimentary requirements for contractual confidentiality. As a result, she was forced to “air her laundry” in public, in which disclosure of her racist commentary became viral news overnight.

There are many relatively easy ways in which to protect the confidentiality of business relationships and the resolution of business disputes. Contractual provisions that are fair and reasonable can be enforced to assure that confidential information does not become the evening’s headlines. Equally important, via contract, the parties and choose a confidential means for resolving their disputes, involving mediation, arbitration and the application of statutory and contractual methods. Keep an eye out for my next newsletter in which we’ll discuss some of the statutory protections allowing maintenance of confidentiality in mediation and arbitration.