Hub argued that such a provision was justified “to protect its business interests because Knoll was responsible for many of Hub’s customer relationships and had access to Hub’s [c]onfidential [i]nformation.” Id. at *30. In denying the motion, the Vice Chancellor held that the far-reaching provision was not supported by such “vague and everyday concerns.” Id.
The Court also rejected Hub’s request to read the list of prohibited conduct in such a way as to limit the effect of the provision, thus rendering the whole provision narrowly tailored. Id. at *32. The prohibited conduct was expressly written in the disjunctive, and while the Vice Chancellor “agree[d] that [he was] interpreting them broadly,” reading the provision as Hub requested would create the “perverse incentive” underlying the Court’s reluctance to blue pencil an otherwise unenforceable agreement. Id. at *26, 32.
Some contractual terms of note:
a. “Hub” was defined to include all of its affiliates, subsidiaries, successors and assigns, which expanded the scope to twenty-five entities in four countries (id. at *23);
b. the scope of the restricted business included not only those entities competing with “Hub” but also any entities that were “not yet competing with any Hub entity but planning to conduct business one day that may compete with a Hub entity” (id. at *24);
c. the employment agreement bound Knoll’s “successors, heirs, executors, and representatives” (id. at *32); and
d. in the definition of “competing services,” the inclusion of the phrase “substantially the same as, may be substituted for, or applied to substantially the same end use as, the products, processes or services with which Employee worked” rendered the provision “vague and fail[ed] to provide an objective standard for Knoll to comply with” (id. at *28–29).
Dispute Resolution
New York City Bar Association Issues Comprehensive Report on Mediation Confidentiality in New York State
By Myrna Barakat Friedman
In June 2024, the New York City Bar Association issued a report entitled “Mediation Confidentiality in New York State: Overview of the Current Regulatory and Institutional Landscape with Recommendations.” (Note: The Report was prepared by a subcommittee chaired by the author of this piece.) The Report provides a comprehensive overview of the current legal landscape governing the exchange of information in mediations in New York State and offers recommendations to mediation stakeholders in assessing and strengthening their confidentiality posture. The Report clarifies a number of misconceptions regarding confidentiality in mediations, revealing a fragmented approach: in the absence of legislation governing mediations, the specific confidentiality framework depends on the forum in which a mediation is conducted and any contractual arrangements to which the parties may agree.
The Report notes that New York State has not adopted legislation governing the exchange of information during mediations but that federal and state evidentiary rules relating to settlement discussions have been interpreted by New York courts to cover information shared during mediations. All mediation stakeholders in New York benefit from these evidentiary rules, which prevent confidential information shared during a mediation from being admitted in court proceedings, at least as proof of liability or the amount of damages (although information that is ordinarily discoverable is not shielded from discovery simply because it is disclosed in a mediation).
Separately, for court-mandated mediations, each court has adopted rules for its mediation programs that generally include specific confidentiality protections that extend beyond admissibility in court proceedings. Although each court has its own set of rules and thus the specific language varies, the general standard is one that seeks to have information shared during mediation protected from disclosure. For mediations administered by private institutions, the procedural rules governing those mediations typically include confidentiality protections that apply to the mediator and the parties. Here again, although the specific wording of the rules will depend on the institution overseeing the mediation, the general standard is one that seeks to ensure that all confidential information shared during a mediation is protected from disclosure. Parties in ad hoc mediations do not have the benefit of confidentiality protections from either a court or an administering institution.
In all mediations, counsel is encouraged to review the specific procedural rules that apply to the mediation process and, if they determine the specific circumstances warrant additional protections, agree to a separate confidentiality agreement between the parties to strengthen the confidentiality framework. Obviously, a separate confidentiality agreement will be of particular importance for ad hoc mediations since, unlike court-mandated and privately administered mediations, they aren’t governed by any of the procedural rules that include confidentiality protections. Ultimately, counsel will want to ensure that the necessary confidentiality protections agreed upon cover information shared (i) between the parties, (ii) by the parties to the mediator, (iii) by the mediator to the parties and third parties attending or privy to mediation information, and (iv) by any other persons who may be privy to mediation information in connection with their participation in the process. Counsel may also want to include provisions describing the responsibility of the parties in the event third parties who do not have any connection to the mediation seek to access information shared during the mediation through subpoena or otherwise.
The Report recommends that, once a mediation is initiated, mediators remind the parties that they should examine the applicable rules to evaluate the confidentiality landscape in which they are proceeding and, if appropriate, bring to the parties’ attention the potential benefits of entering into a separate confidentiality agreement. The Report includes specific provisions that mediators may want to consider tailoring and including in their mediator agreements. It also recommends that the parties and the mediator enter into separate confidentiality agreements to ensure that those entered into between the parties are tailored to the particularities of their relationship while the one entered into with the mediator addresses the specifics of the roles of the mediator and the parties vis-à-vis each other.
