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Marx Mediation Memo #8

Confidentiality: Special Considerations In Sexual Harassment Cases

by Peter J. Marx, Esq., Mediator, Arbitrator


January, 2018

Intense recent (and long overdue) public scrutiny of sexual harassment and related forms of abuse has generated substantial discussion, including proposals for a variety of corrective measures. Not the least of such corrective measures involves the question of confidentiality of sexual harassment claims in general, and of resolution of such claims in particular. Mediated settlement agreements routinely include confidentiality clauses, but with respect to sexual harassment, attention is now being focused on the idea that such clauses may well be contrary to broader policy concerns. This brief article will examine confidentiality from a couple of perspectives, both of which I believe must be considered by counsel in the process of resolving sexual harassment claims: (1) certain provisions of recently adopted federal tax legislation, which are problematic to say the least, and which may well raise more questions than they answer, and (2) a date-rape case I mediated about 25 years ago, the resolution of which turned directly on the same confidentiality issues which are receiving attention today.

(Note: this article is not concerned with the specific mediation confidentiality mandated by California law, which in any event can be waived. See California Evidence Code Sections 1115 et seq. Rather, the focus here is on broad, more or less all-encompassing confidentiality clauses often found in settlement agreements.)
First, with respect to the federal tax legislation adopted in December, 2017, much of the discussion of that legislation has focused on tax cuts, whether the one percent are dumping even more of their tax burden on everyone else, etc. But far less attention has been directed to provisions amending Internal Revenue Code Section 162(q), which provisions disallow deductions for settlement, payment or related attorneys fees pertaining to sexual harassment, if the settlement, payment or fees are subject to a non-disclosure agreement. Unfortunately, these provisions present a series of difficulties which must be considered and overcome in drafting any settlement agreement, and constitute a clear illustration of the notion that the road to hell is sometimes paved with good intentions.
While extensive review of these provisions is beyond the scope of this article, a few concerns should be mentioned, if only to acquaint counsel with some of the difficulties which they will need to address in achieving settlement.
  • Section 162(q) prohibits deduction of attorneys fees paid with respect to a sexual harassment claim and subject to a non-disclosure agreement – but does not distinguish between fees incurred by the claimant and those incurred by the defendant. It is difficult to believe it was intended that the existing deduction be denied to the party who has suffered the sexual harassment, which obviously would contravene present efforts to eradicate the tendency to penalize victims of abuse.
  • Settlement agreements commonly include confidentiality clauses which prohibit discussion or disclosure of any aspect of the case. If such an agreement pertains to a case in which several causes of action are asserted, some alleging sexual harassment and others alleging different types of claims, are deductions for payment and fees to be denied completely, or may those deductions be apportioned to the payment and fees allocated to non-sexual harassment claims?
  • Similarly, most settlement agreements contain blanket releases of all claims, i.e., sexual harassment claims and all sorts of other claims. If, however, the underlying complaint does not in fact include allegations of sexual harassment, will deduction of payment and fees nonetheless be denied if the agreement contains a confidentiality clause?
These are not idle concerns. They may actually impede the current efforts to obtain true justice for sexual harassment victims. For example, an employer otherwise willing to pay a specific amount to settle may instead offer only a lesser amount, if deductions for the payment and related fees are not available.
Various articles discussing these new tax provisions have recently appeared; for an informative review of these provisions and the difficulties they present, see a recent blog post by Mitchell Silberberg & Knupp partner Jeffrey Davine, “#MeToo Can Be #Costly,” which can be found at the firm’s website, https://www.msk.com.
Secondly, about 25 years ago, long before concern about sexual harassment was elevated to the level of the past few months, I mediated a date-rape case in which questions relating to confidentiality were the primary element in achieving settlement. The parties were two college students who had known each other for some time. Their circle of friends would sometimes gather and consume substantial amounts of alcohol, on the occasion in question beginning on a Saturday afternoon and continuing into the evening. The defendant acknowledged that at some point during that time sexual activity had occurred, but asserted that not only did the plaintiff consent, but further, that it was she who had initiated that activity. The plaintiff, on the other hand, contended that she was so completely inebriated that in essence she had no capacity to consent, let alone knowingly, intelligently initiate the activity. She thus took the position that given her condition, the defendant should not have engaged in any such activity with her, regardless of whether she did in fact initiate it.
To me, they both appeared credible. My sense was that the defendant felt badly not only because he found himself a defendant in a lawsuit, but also because he was sincerely troubled by the fact that the situation had resulted in considerable distress for the plaintiff. For her part the plaintiff obviously felt aggrieved, and in particular was extremely disturbed by a sense of shame and embarrassment. Settlement efforts were thus focused on addressing that resulting sense of shame and embarrassment. This was accomplished by preparation of an agreed written statement, drafted at the mediation, which described the factual background, and in which the defendant expressly acknowledged that under the circumstances, he should not have proceeded with any sexual activity, regardless of whether or not that activity was initiated by the plaintiff. But the critical, necessary element for resolution was that it was expressly agreed that this statement would not be confidential. The idea was that the plaintiff could disseminate it as she wished, in her own discretion. While the defendant also agreed to pay a relatively modest sum of money (these were not wealthy people), that was not the plaintiff’s primary interest in pursuing the case. In mediation the objective is to satisfy, to the greatest extent possible, the true interests of the parties, and in this case the plaintiff’s primary interest was not monetary, but rather to relieve her acute sense of shame and embarrassment, and by the same token, to renew her sense of self-esteem and also her standing in the community of friends the parties shared. She believed this could be accomplished by the defendant’s express written acknowledgement described above, which she in turn could distribute to people with knowledge of what had occurred.
The concerns currently being expressed about confidentiality seem to focus on the harm which results from confidential settlements, which tend to conceal from public discourse the extensive problem of sexual harassment, and thus impede meaningful discussion of how to address it. The case described above demonstrates how, in addition, non-confidentiality may be explicitly utilized as a significant and in a given case essential aspect of the resolution of sexual harassment claims.
Questions (and suggestions) are always welcome. Feel free to contact me directly at the telephone number or email address below, and of course if you wish to schedule a mediation, contact me or simply contact my Case Manager at ARC, Ms. Nicole Bethurum, (310) 284-8224, nicole@arc4adr.com.

Peter J. Marx, (310) 442-0052, peterjmarx@earthlink.net.
© Peter J. Marx, 2018




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