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This question was inspired by recent settlements like Monica Cellio's and Nick Sandman's cases, but I'm interested in the subject in general as well.

When parties agree to a settlement that includes a large payment and an NDA, is the party that receives the payment allowed to actually use it? Take Nick Sandman's case as a hypothetical example. If CNN paid him several million dollars, and Sandman spends it quickly, it will be obvious to everyone that CNN paid him. Sandman isn't otherwise wealthy, if he suddenly buys a Lamborghini or a private jet, that money must have come from CNN. So doesn't this violate his NDA? I mean, he would have made it obvious that CNN paid him to drop the case just as clearly as if he had tweeted it.

I guess my question could be summed up as: "What counts as disclosure with regards to Non-Disclosure Agreements?"

  • The short answer is yes. The analysis is a bit more lengthy and finding authority on the point usually considered obvious might be hard, but it is unambiguously true. – ohwilleke Jan 8 at 18:51
  • IANAL but I assume that would be negotiable. However, if you were offered a settlement with the condition that you could never spend the settlement money but must forever hold it in escrow, would you accept? – emory Jan 8 at 20:34
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Can individuals spend money acquired in settlements that include an NDA? is the party that receives the payment allowed to actually use it?

Yes. Payment of a substantial sum is oftentimes the main or only incentive for the injured party to bind himself in an NDA. A prohibition to spend that money would de facto nullify the benefit without which the party would have declined the NDA.

Sandman isn't otherwise wealthy, if he suddenly buys a Lamborghini or a private jet, that money must have come from CNN. So doesn't this violate his NDA?

No, typically it does not.

Depending on (1) who the parties are, and (2) the hitherto divulged details of the controversy, the public might infer anyway --and with reasonable certainty-- who must have paid a substantial sum to settle the dispute. Thus, plaintiff Sandmann's [hypothetical] purchase of luxurious items would not really provide the public with new information.

Similarly, if instead of buying luxurious items the indemnified person spends that money on rather necessary expenses (be it medical, property & casualty, etc.) ensuing from the injury, a prohibition to spend the money would lead to another absurdity: That of perpetuating or worsening the harm inflicted to the plaintiff who couldn't otherwise afford medical treatment, new living arrangements, or repairs/replacement of property, accordingly.

If the payer thinks it is important enough, perhaps the NDA could include terms requiring the payee to use some extent of discretion as to the pace of spending the money. However, such need on the payer's part seems rare, and the injured person is likelier to decline the NDA altogether if the clauses for management of the compensation are unreasonable.

What counts as disclosure with regards to Non-Disclosure Agreements?

Any revelation, by the parties, that contravenes the terms and purpose of the NDA in that it would give non-parties information which cannot be ascertained from prior and/or independent publications and filings. That is otherwise hard to answer because it totally depends on the terms --and boilerplate-- of each NDA.

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