The Company may be inclined to seek the shelter of confidential arbitration. The impetus for such a strategy lies in the twin goals of obtaining a fair adjudication on the merits while avoiding unwanted, and perhaps, misguided criticism in the court of public opinion that has the potential not only to tarnish a corporate’s image, but to encourage other potential litigants. Company considering confidential alternatives to litigation, however, need to be aware of several pitfalls that can lead to the public disclosure of arbitration proceedings, evidence, and results, as well as the use of the same by other litigants in non-confidential proceedings.
A ruling by the Massachusetts Superior Court highlights the difficulty company face in relying on private arbitration as a means to keep sensitive information confidential. In Dever v. Oppenheimer, the court ruled that a blanket confidentiality agreement imposed by the arbitration panel to protect sensitive documents was contrary to public policy. There, the arbitration centered on Dever’s claim that Oppenheimer fired him for cooperating with the Massachusetts Securities Division that was investigating an ex-broker accused of defrauding an elderly couple. After the arbitration panel awarded Dever $73,000, Dever sought to confirm and modify the award by striking the confidentiality provision. In support of his request that the arbitration award be stripped of its confidentiality provisions, Dever argued that the subject documents should be made public to clear his name of any wrong doing. Oppenheimer argued that the confidentiality provision was necessary to protect sensitive documents that contained embarrassing personal information.
In confirming and modifying the award, Judge McIntyre struck the confidentiality provision, concluding that it was contrary to public policy which favors open access to information, especially in the securities industry. As a result of the ruling in Dever, several sensitive documents were made public, including a draft settlement offer that Oppenheimer submitted to the Massachusetts Securities Division in which it admitted several email policy violations as well as several oversights in its handling of the broker’s case.
The Dever decision underscores the courts’ aversion to treating arbitration awards as confidential and demonstrates the potential for “public policy” arguments to unravel protections that may have been the primary motivation for entering into a “confidential” arbitration to begin with. Care needs to be taken to structure confidentiality provisions narrowly so that they will better withstand judicial scrutiny and to consider adding provisions to arbitration agreements on the front end that attempt to prohibit or limit a party’s ability to seek to have the confidential proceedings made public.
