Litigation Privilege Does Not Bar Breach of Contract Claim Arising From Violations Of Confidentiality Provisions Contained in a Settlement Agreement
Back in 2009, Carrie Prejean, a former Miss California USA, expressed her sentiments about traditional marriage in response to a question posed by Perez Hilton during the Miss USA Pageant. Several pageant judges said afterward that she did not win because of her answer. The owner of the Miss Universe Organization, Donald Trump, admitted her views probably cost her the crown. After later being terminated as Miss California, Ms. Prejean filed a lawsuit for defamation, religious discrimination, and related claims.
Above: Venice Bathing Beauty Pageant, 1926. M.F. Wheeler. Library of Congress.
JAMS mediation and a settlement followed, after the law firm for one of the defendants showed Ms. Prejean, her attorney, and the mediator “a compromising video and photographs.” The settlement was confidential, providing the parties could only say they had dropped their claims against each other and “wish each other the best in their future endeavors.” Alas, that was not to be, as embarrassing details about the confidential settlement were revealed to the media. Questioned about the compromising video, Ms. Prejean described it as a “youthful indiscretion that she sent to a boyfriend when she was 17 and ‘the biggest mistake of my life.’”
The alleged breach of the confidentiality provision resulted in satellite litigation, SLAPP motions by defendants, and four appeals involving Ms.Prejean’s attorney LiMandri, attorneys for the defense, and executive directors of the Miss California USA pageant, but not Ms. Prejean. The trial court granted an anti-SLAPP motion only as to LiMandri’s cause of action for fraudulent inducement of the settlement, but denied the motion with respect to LiMandri’s contract claims. Appeals and a cross-appeal followed. LiMandri v. Wildman, Harrold, Allen & Dixon, LLP/Li Mandri v. Moakler, Case Nos. B234460 & B237158 (2nd Dist. Div. 2 June 6, 2013) (Boren, P.J. author: 3:0) (unpublished).
The Court of Appeal ruled the defense attorney Nguyen made statements about a matter of public interest, but that LiMandri demonstrated a probability of prevailing on his claims. As a party to the settlement agreement, the defense law firm waived its right to speak publicly. Therefore, post-settlement breaches of the confidentiality agreement were not protected speech. However, promises made during the settlement discussions are protected. Because LiMandri had not shown probability of prevailing on his fraud claim, there was no basis for piercing the settlement privilege and disclosing statements made during settlement, and thus not way to prove fraudulent inducement. All the judgments were affirmed on appeal.
The opinion includes some tart comments. The defense law firm mentioned the trial court had ruled that LiMandri lacked standing, but failed to mention that the standing ruling was vacated on reconsideration. “Misrepresenting the trial court’s rulings and record on appeal,” admonished the Court, “is a poor and discrediting practice.” As to any postsettlement statement about Ms. Prejean’s case beyond the good wishes, the Court added, “[t]hough it touched a matter of public interest, it may prove to be costly rather than ‘free’ speech, if it is found to be a breach of the two confidentiality agreements.”
I do wonder what damages LiMandri, the attorney, will prove for breach of the confidentiality agreement. Does the settlement agreement contain a liquidated damages clause? We’ll only find out if the case goes to trial.