The case of Larry Nassar, who for years was a doctor for Michigan State University and the U.S. Women’s Gymnastics Olympic team, and who has pleaded guilty to seven counts of criminal sexual conduct, is truly disturbing. In the sentencing phase of the trial, 156 victims made statements to the court about the impact of his acts on their lives.

This case also drew attention to situations where an attempt is made to silence victims through a non disclosure or confidentiality agreement. One of Nassar's victims, McKayla Maroney, reached a settlement with USA Gymnastics (USAG) in December, 2016, which included such an agreement, prohibiting her from speaking about any abuse she suffered at the hands of Nassar. The confidentiality agreement also contained a provision that if Maroney violated the agreement, USAG could "fine" her US$100,000. This raised the question of whether she would, or could, make a victim impact statement at Nassar's sentencing hearing. Ultimately, USAG confirmed that it would not seek to enforce those provisions if Maroney made a victim impact statement.

As a result of USAG's decision, in this case the confidentiality agreement will not have prevented Maroney from speaking out. But what about other victims who have signed confidentiality agreements in the course of settling sexual assault claims, in cases when the other party to the settlement agreement will not agree to waive the confidentiality agreement? Are those persons free to speak without any repercussions? Unfortunately, in Canada, the answer is not clear.

Contracts that are 'contrary to public policy'

The starting point is that, generally speaking, our legal system protects the freedom of competent persons to enter contracts (including confidentiality agreements). To that end, courts will try to give effect to an agreement between parties to a contract. However, as with most legal issues, this is not always clear cut and courts employ many legal doctrines when warranted to find that contracts are not enforceable.

One basis for courts to find that provisions in contracts are void and unenforceable is that a provision in a contract is "contrary to public policy." This doctrine has been applied to render contractual provisions unenforceable in numerous situations, such as some non competition agreements, contracts to commit illegal acts, and contracts that provide that certain statutes do not apply to the parties and their agreements.

What about a contract in which a person agrees not to go to the authorities about a crime? An agreement whose purpose is to stifle a criminal prosecution is contrary to public policy and unenforceable as a result. However, an agreement whose purpose is to settle a civil lawsuit might be enforceable even if the civil lawsuit involves matters that might also support a criminal prosecution. The determining factor seems to be what the primary purpose of the agreement was.

Competing public policy concerns

Having said that, agreements that interfere with the administration of justice will generally be held to be void as contrary to public policy. On the other hand, courts have typically held that there is a strong public interest in promoting settlements. So where does that leave a settlement agreement with a confidentiality clause, meant to settle a private (that is, not criminal) dispute between two parties, regarding behaviour that would also support a criminal prosecution if reported to the authorities? Does the court treat the prohibition against reporting a potential crime to the authorities as an interference with the administration of justice and void as a result, or does it prefer the policy of encouraging settlement of private disputes?

I have not found a case that has considered this question in the context of allegations of sexual assault; in fact, there appears to be little case law regarding the enforceability of confidentiality provisions in agreements to settle civil disputes where the underlying facts could also support a criminal prosecution. One case that appeared to provide some guidance (although it involved the enforceability of an indemnity provision, not a confidentiality provision) considered a separation agreement in which a wife agreed to indemnify her husband for 50 per cent of any payment he might be required to make in the future in respect of retail sales tax liability that he had failed to declare.

At trial, the court found that the real purpose of the indemnity was to discourage the wife from reporting the matters in issue to the authorities, and wrote that "it would be in my opinion, contrary to public policy for the courts to lend assistance to the nondisclosure of statutory offences." However, the case was appealed and while the appeal court ultimately decided that the separation agreement was void as against public policy, it also noted that courts needed to use caution in finding contracts to be void as contrary to public policy so that the doctrine does not "unduly impinge on the basic right to enforce engagements freely and voluntarily made."

The appeal court determined that it could interfere with this separation contract because it was "well settled" that a contractual provision whose purpose was to perpetrate a fraud on a taxing authority was contrary to public policy. The appeal decision leaves open the question of whether the settlement of a private dispute concerning a matter that could also support a criminal prosecution, but which does not involve a fraud on a taxing authority, will be enforceable where it includes a confidentiality provision.

Challenging confidentiality agreements

With the MeToo movement, we are in a new era, in which many victims are more willing to report sexual harassment and sexual assault. We are also hearing about many instances where the perpetrators of harassment or assault have tried to silence their victims through confidentiality agreements. McKayla Maroney challenged the confidentiality agreement she signed; time will tell whether others will follow suit, and how successful such challenges will be.

Pro Bono provides legal information designed to educate and entertain readers. But legal information is not the same as legal advice -- the application of law to an individual's specific circumstances. While efforts are made to ensure the legal information provided through these columns is useful, we strongly recommend you consult a lawyer for assistance with your particular situation to obtain accurate advice.

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