Claim for violation of nondisclosure agreement must establish that the information disclosed was true

Nondisclosure agreements are in the news. Here’s an interesting aspect of making a claim that a nondisclosure agreement was violated – plaintiff’s claim for violation of a nondisclosure agreement must establish that the alleged wrongful disclosure was of confidential but true information, which was covered by the nondisclosure agreement. Of course, there are also other important issues relating to whether or not a nondisclosure agreement was breached – such as, for example, whether the holder of the privilege (e.g., the plaintiff employer) can actually prevent the disclosure, or reporting of the information to all sources or just some sources (such as, for example, to the police or to a regulatory entity or to the board of directors, compared to the press or the public), or whether, regardless of the existence of the nondisclosure agreement, the person disclosing the information has standing and a right to bring a legal action relative to the event or occurrence from which the information arose (such as, for example, in a situation of alleged unlawful discrimination or harassment).

See, e.g., Glassdoor, Inc. v. Superior Court (2017) 9 cal. App. 5th 623, which held:

“An employer cannot establish a claim for breach of a nondisclosure agreement unless it is prepared to prove, and does prove, that the defendant disclosed actual confidential information, i.e., that his or her statements were, in some relevant degree, true. Nothing in this record would sustain a finding that the CEO’s statements—reported by Doe inaccurately, according to MZ—had this effect.

MZ’s hesitation on this point may be understandable, because Doe’s supposed disclosures do not cast MZ in a favorable light. But MZ cannot be excused from the requisite showing merely because proving a prima facie case might be embarrassing to it. If Doe accurately disclosed company policy, or the CEO’s statements regarding that policy, it was incumbent upon MZ to present evidence to that effect. Instead it denied the accuracy of Doe’s report without identifying any real confidential information it might be understood to have disclosed. MZ therefore failed to establish a prima facie case predicated on Doe’s account of the CEO’s statements.”

As an additional requirement, in trade secret cases the holder of the secret (e.g., the plaintiff employer) is required to describe the trade secret so that the court and the defendant are sufficiently apprised of the confidential information that is alleged to have been wrongfully disclosed – thus, since the disclosure of that confidential information by the holder of the secret would mean that the trade secret information is no longer secret and would therefore invalidate the holder’s entire case of trade secret secrecy, keeping that information confidential, while also sufficiently disclosing that information to the court and to the defendant is a requirement that must be carefully accomplished. Thus, for example, for California state court nondisclosure and trade secret cases, see also Cal. Civ. Code §3426.5, which states in part that the Uniform Trade Secrets Act, requires the trial court to “preserve the secrecy of an alleged trade secret by reasonable means, which may include granting protective orders in connection with discovery proceedings, holding in-camera hearings, sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.”

That’s all for now. Of course, each situation is different.

David Tate, Esq., Royse Law Firm, Menlo Park, California office, with offices in northern and southern California.

Royse Law Firm – Practice Area Overview – San Francisco Bay Area and Los Angeles Basin

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Good video about the GC relationship with the CEO, the Company and the Board – forwarding from Inside America’s Boardrooms

I have provided below a link to a recent Inside America’s Boardrooms video discussing the relationship between the general counsel (GC) and the CEO and the Board. You don’t hear these discussions very often. The GC represents the Company, not the CEO. But, of course, those common interests are most often aligned, but not always. The Board acts on behalf of the Company and the Shareholders, and as such you might say that the GC also represents the Board, but not the Board Members individually, and even this relationship between the GC and the Board can get sticky in some circumstances. This is a fascinating and important discussion.

Best to you, David Tate, Esq., Royse Law Firm, Menlo Park, California office, with offices in both northern and southern California,


Split the CEO and the chair roles, or have co-chairs, or have a lead director, or not?

Greetings folks.

The question is: split the CEO and chair roles, or have co-chairs, or have a lead director, or not?

This is a question that can be divisive and pit people on different sides against each other.

This seems to be an annual discussion for shareholders of some of the corporations that haven’t split or in some manner separated the roles.

And each director of a corporation certainly could also voice his or her preference and recommendation about whether or not to split or separate the roles.

What would each director prefer for the processes of the company that he or she oversees, for the board on which he or she serves, and for the CEO that he or she elected?

I have to say that I haven’t seen this issue with respect to nonprofits.  The issue may exist, but the nonprofits that I have been involved with have had separate executive director and board chair roles.

Why spilt the roles? What are the advantages to splitting?

Why not split the roles? What are the advantages to not splitting?

Why select or not select a middle path – the CEO as Chair with a Co-Chair Director or a lead director?  What are the advantages?

I don’t believe that you can necessarily generalize – each corporate situation, and the interactions can be different.

Two of the important issues for me are: who determines what is on the agenda and who runs the meeting?

By determining the agenda, I mean with input from the directors, the CEO, the CFO and others who should be giving agenda recommendations.

But who actually then determines what topics specifically will be on the meeting agenda?

And who actually then runs the meeting?

Because determining the actual agenda and running the meeting can be influential and directive.  This topic of course can also naturally flow into other separate issues which we will not be discussing here – such as the extent of the role of the chair or co-chair and his or her manner of style or governance – controlling, collaborative, facilitative, . . . ?

So, do the directors believe that the CEO should handle those two tasks, the agenda and running the meeting . . . or a chair, co-chair or lead director, and why?

And does the CEO believe that he or she should handle those two tasks . . . or a chair, co-chair or lead director, and why?

What is best for the particular corporation, board, and shareholders?  One approach doesn’t necessarily fit all.

Just some thoughts about decision making on top of what everyone else has already said.

Thanks for listening.  Dave Tate, Esq. (San Francisco)