#834: NDA Tell-All Today on the show, we talk to one of the most famous NDA breakers of all time, and ask: Is there a legal way out of your NDA?
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#834: NDA Tell-All

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#834: NDA Tell-All

#834: NDA Tell-All

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KAREN DUFFIN, HOST:

Hello. I am Karen Duffin, and I am new here at PLANET MONEY.

KENNY MALONE, HOST:

Hello, and welcome to PLANET MONEY, Karen Duffin.

DUFFIN: They really did say that to me.

MALONE: Oh, we really say that to everybody. So Karen started with us about - what? - 18 days ago.

DUFFIN: Yep.

MALONE: And we asked her to look into nondisclosure agreements, something we've been hearing a lot about - NDA's.

DUFFIN: And as if to prepare myself for this, I had just signed one. It was part of my NPR employment contract. It was pretty standard stuff, but I can't actually tell you the details because my contract says I can't.

MALONE: I think I probably signed one of those, too.

DUFFIN: I think you did.

MALONE: All right.

DUFFIN: So I start digging into NDA's, and somewhere deep in this rabbit hole, I kind of veered into pothead territory. Like, I started to think it's actually kind of crazy - if you really think about it - that you can buy silence. You can calculate what that silence is worth and buy it. And I get it. I do. I worked in Silicon Valley for a decade. And I know that companies make things, and I think it makes sense that they should, for the most part, be allowed to say you, employee, cannot tell the world about it. But over the past year, I watched as #MeToo's crossed my social media feeds, many breaking their silence about harassment for the first time, and I felt a little bad about this, but I was surprised at just how many people I know but I didn't know that about.

So as I studied NDA's, I spoke with women who've signed them, women who'd broken them, lawyers. My mind just kept bouncing between my Silicon Valley days and these #MeToo days, and I started to think, wait, how did we go from that, from protecting corporate secrets to this world in which you can buy someone's silence about something bad you've done, like sexual harassment or assault? How did we get to that place with NDA's? Also what happens if you break one?

(SOUNDBITE OF DANIEL TEPER AND PETER HAJIOFF'S "SPINNING PIANO")

DUFFIN: Hello, and welcome to PLANET MONEY. I am Karen Duffin.

MALONE: And I'm Kenny Malone. And today on the show, we go in search of answers for those questions. How did this happen, and what happens if you break an NDA?

DUFFIN: We talked to one of the most famous NDA breakers of all time, and we learn a few things that maybe - just maybe - could help people who want out of an NDA to get out legally.

SOUNDBITE OF DANIEL TEPER AND PETER HAJIOFF'S "SPINNING PIANO")

MALONE: To find out how we got to this place where NDA's are being weaponized, essentially, to cover up bad behavior, we started with this question - where did NDA's come from to begin with?

DUFFIN: I called Elie Mystal to help me answer that question. He is the editor of the website Above the Law and the legal editor of the excellent podcast More Perfect. He's also the most entertaining law person I know.

ELIE MYSTAL: You got to remember, like, why NDA's exist at all. And it's not really so that you can get away with sexually harassing women.

DUFFIN: Wait a minute.

MYSTAL: (Laughter) That's not - I know it seems like it, but that's not really why they were invented, right? They were invented to protect trade secrets.

DUFFIN: Elie says they weren't really created to silence whistleblowers.

MALONE: OK, so then the question of - how did they become a tool to silence whistleblowers? We took that question to the head of the National Whistleblower Center, Steve Kohn. He says that shift can be traced to...

STEVE KOHN: The rise of Title VII.

DUFFIN: Title VII - it was created to prohibit workplace discrimination, which meant that more employees started suing their companies for workplace discrimination.

KOHN: It opened up employers to liability. So why not use an NDA to make that liability harder to prove?

MALONE: Employers were already using NDA's, the standard job ones that we talked about earlier. But they thought, we're getting sued by all of these people, why don't we also use this to keep people silent about bad things we've done? And things snowballed.

KOHN: So you saw this rise of extremely abusive NDA's that not only said you can't communicate but put specific requirements to help companies cover up misconduct.

DUFFIN: OK, so lots more people are signing these, which leads us to our next big question - what happens if you break an NDA?

MALONE: And to help answer this question, we are going to tell you a story, a story that maybe you think you've heard.

(SOUNDBITE OF FILM, "THE INSIDER")

AL PACINO: (As Lowell Bergman) They're afraid of you, aren't they?

RUSSELL CROWE: (As Jeffrey Wigand) They should be.

DUFFIN: That is Al Pacino and Russell Crowe from the movie "The Insider."

MALONE: Now, OK, I saw this movie years ago, and at that point, I was like, oh, cool, a movie that's about a heroic journalist from "60 Minutes" getting the ultimate insider to blow the whistle on big tobacco. But rewatching it now for this story, you realize, oh, no, no, no, no. This is a movie about non-disclosure agreements. Case in point - the following is all from the first half of the movie.

(SOUNDBITE OF FILM, "THE INSIDER")

CROWE: (As Jeffrey Wigand) I signed a confidentiality agreement.

I have no intention of violating my confidentiality agreement.

UNIDENTIFIED ACTOR #1: (As character) It goes with this guy's confidentiality agreement.

PACINO: (As Lowell Bergman) Confidentiality agreement.

CROWE: (As Jeffrey Wigand) Confidentiality agreement.

PACINO: (As Lowell Bergman) Confidentiality agreement.

UNIDENTIFIED ACTOR #2: (As character) Confidentiality agreement.

DUFFIN: Most of those were Russell Crowe playing the character Jeffrey Wigand, the real-life person who broke a big, mean NDA from big tobacco.

As you look back, was it worth it?

JEFFREY WIGAND: Hell yes. Wow, yes.

MALONE: This is the real Jeffrey Wigand. And that is a hell yes with a huge asterisk.

WIGAND: You've got to make sure that you know your life will never be the same again.

DUFFIN: In the late '80s, early '90s, Jeff was a vice president at Brown & Williamson, or B&W, which was a big tobacco company. And this was an unexpected career move. Jeff is a scientist. He worked in health care for 20 years before that.

MALONE: He agreed to join the tobacco company because they told him that they wanted his help making safer cigarettes, and the pay was great.

DUFFIN: So Jeff takes the job, and he's presented with a pretty basic employment NDA that says, you know, certain parts of his work have to be kept confidential.

MALONE: And he's like, yeah, cool, signed it.

WIGAND: And off I went.

DUFFIN: But within just three months, the company's lawyers sit him down and they hand him these talking points.

WIGAND: One is that nicotine is not addictive and, two, that there is no science that says that smoking kills.

MALONE: Jeff obviously did not agree with this.

DUFFIN: What did you say to them?

WIGAND: You know, well, I'm from the Bronx. You know, I'm not a shrinking flower.

DUFFIN: Yeah.

WIGAND: I just said, you know - I won't tell you what I said, but, I mean, I think you may figure it out what I said.

DUFFIN: Essentially, he said screw you. And four years of tussling between Jeff the scientist and these tobacco lawyers, and Jeff gets fired.

MALONE: Now, at this point, Jeff is not thinking about breaking his NDA to become a whistleblower. His NDA was tied to his severance package and his health care, which was especially important because one of his daughters was chronically ill.

DUFFIN: And so he's going on just trying to put his life back together when B&W sues him. The company had heard that at some point Jeff had talked about his severance package, which is technically a violation of his employment NDA.

MALONE: It was true. He had done this, and Jeff's company used this relatively small technical violation to pressure him into signing a new NDA - an NDA on steroids.

WIGAND: If I signed this new draconian agreement which said, you know, I couldn't talk about anything without first talking to them, and then I'm going to have to tell them what I was going to talk about.

DUFFIN: Which is to say not just keep the company secrets, but if anyone ever asks him to talk about tobacco at all, he had to tell B&W who asked, what he's going to say and they can even come along with him if they want.

MALONE: And this brings us to the first lesson of Jeff's story. Even an NDA that seems like it is buying kind of innocuous silence can become a weapon. That small violation of the first NDA became a tool to get Jeff to sign that NDA on steroids. And lawyers tell us this happens all the time.

DUFFIN: And it worked in Jeff's case. He says he felt like he had no choice, mostly because of his daughter's illness. He really needed his health care, so he signed.

MALONE: But then a few things started to happen. Jeff remembers, for one, getting these anonymous phone calls.

DUFFIN: Like, what did they say?

WIGAND: You know, leave tobacco alone. I was getting death threats against my children. You know, be careful, you know, where your kids are.

DUFFIN: And later, Jeff would find himself being followed. And it was never proved who did this, but a bullet wound up in his mailbox.

MALONE: The intimidation terrified Jeff, but it also pissed him off. And then one day, he turns on his TV and he sees seven tobacco executives testifying before Congress.

(SOUNDBITE OF ARCHIVED RECORDING)

JAMES W. JOHNSTON: Congressman, cigarettes and nicotine clearly do not meet the classic definitions of addiction.

DUFFIN: It's hard to remember now, but there was a time when people were not 100 percent clear about that fact. But Jeff was crystal clear. He's a scientist, and he had been a vice president at a tobacco company. So he has information that would totally refute that lie.

MALONE: And he had started breaking the NDA in private. He'd been consulting with politicians, the Food and Drug Administration, the Department of Justice, and he had not told his company about this like his mega-NDA required him to do. But going public - that is a different thing.

DUFFIN: Jeff knows that if he does go public, his company will definitely know, and he might lose his health insurance and his severance. He also might get sued for some ungodly amount of money. But at some point, those costs were just not worth the price of staying silent, not for Jeff at least.

WIGAND: I decided I would tell "60 Minutes" everything and anything I knew, not unlike what's her name did, Stormy Daniels.

MALONE: And this brings us to the second lesson from Jeff's story. NDAs are not just used to silence the whistleblower. They can also be used to try and silence the whistle.

DUFFIN: Somehow Brown & Williamson got word that Jeff was talking to "60 Minutes," and they threatened to sue CBS for what CBS was afraid could be billions of dollars.

MALONE: So CBS decides to kill the story. And "60 Minutes" host, Mike Wallace, even goes on air and kind of apologizes for this.

(SOUNDBITE OF TV SHOW, "60 MINUTES")

MIKE WALLACE: We learned of a tobacco insider who might know the whole story. But we cannot broadcast what critical information he might be able to offer - why? - because he had to sign a confidentiality agreement with the tobacco company he worked for. An agreement...

MALONE: In essence, CBS was also afraid of Jeff Wigand's NDA. The movie version of Mike Wallace explained why he was okay killing the story.

(SOUNDBITE OF FILM, "THE INSIDER")

CHRISTOPHER PLUMMER: (As Mike Wallace) What do you think? I'm going to resign in protest - to force it on the air? The answer is no. I don't plan to spend the end of my days wandering in the wilderness of National Public Radio.

MALONE: Mike.

DUFFIN: Ouch.

MALONE: But here's the final lesson from Jeff Wigand's story. Just as NDA's contain technicalities that can get you into trouble if you accidentally violate them - like, for example, talking about your severance - there are also technicalities that might make an NDA breakable legally.

DUFFIN: Jeff had given a deposition at some point that included a lot of damning information about the tobacco industry. And the Wall Street Journal had gotten a hold of this deposition and published part of it.

MALONE: This is one of the ways an NDA can be deemed unenforceable - if the information is already on the public record.

DUFFIN: And with that, CBS becomes a lot less scared of Jeffrey Wigand's NDA.

WIGAND: Brown & Williamson's representation clearly misstated what they commonly knew as language within the company.

DUFFIN: "60 Minutes" decides it is now legally okay to run their interview with Jeff Wigand.

(SOUNDBITE OF TV SHOW, "60 MINUTES")

WIGAND: Most certainly. It's a delivery device for nicotine.

WALLACE: A delivery device for nicotine. Put it in your mouth. Light it up. And you're going to get your fix.

WIGAND: You'll get your fix.

DUFFIN: How did that feel?

WIGAND: Clean.

DUFFIN: Huh. What do you mean?

WIGAND: I mean, no longer am I the silent knower of harm. I am now describing the harm.

DUFFIN: Jeff is credited with helping force the tobacco industry into a multibillion-dollar settlement, which was a game changer in how Americans understood the dangers of tobacco. And the fact that we live in a world where no one questions whether or not smoking is bad for you - Jeff helped make that happen.

MALONE: As part of that big settlement, Jeff's former company agreed to drop their lawsuit against him. And so that is ultimately how Jeff got out of his nondisclosure agreement.

DUFFIN: So he didn't really face legal consequences for breaking his NDA. But we wondered if he had - and for other people who break theirs - what punishments can the law impose on NDA breakers?

MYSTAL: If you violate an NDA, there is a penalty. It is not jail.

DUFFIN: Again, legal expert Elie Mystal.

MYSTAL: We do not throw you in the iron maiden for breaching a contract.

MALONE: And this is because an NDA is a civil agreement, and civil agreements are mostly settled by paying damages.

MYSTAL: For the person that changes their mind about an NDA, it becomes a math problem, right? If you breach the NDA, there is a penalty. You decide if you want to pay that penalty. You decide if that's worth it to you.

DUFFIN: So 99 percent of the time, the penalty for breaking an NDA is not jail time. It is money. But it can quickly become about much more than money because you've probably just made someone in power very angry.

MALONE: And so it is always risky to break an NDA. But we discovered that it isn't a prison. There are these little escape hatches. We explain a few of them after this.

DUFFIN: I asked Elie Mystal - so is there a way to break an NDA legally?

MYSTAL: Well, now we get into my favorite part of the NDA conversation, which is whether or not the NDA was enforceable to begin with. One of the problems that people get into is that they think the signed contract is gospel.

DUFFIN: But actually there are a lot of reasons an NDA might be unenforceable. It's too vague. Or the information it covers is already in the public domain. Or maybe the other side breaks it themselves. Also NDAs can never prohibit you from talking to law enforcement ever.

MALONE: And even if that NDA is enforceable, the damages hanging over the NDA might not be. So for example, the Stormy Daniels nondisclosure agreement - she was paid $130,000. And a lawyer threatened to sue her for $20 million for breaking it.

DUFFIN: But if that ever actually went to court, it's just probably not going to be upheld.

MYSTAL: That is unconscionable on its face. Unconscionable is actually also a legal standard, right? You cannot have damages that are so out of whack with what the initial contract was for that those damages would, quote, "shock the conscience."

DUFFIN: I love that we have these legal words that sound like a southern woman being like, I declare that is unconscionable.

MYSTAL: Exactly. If the damages give you the vapors, then those aren't necessarily going to be enforced against you.

MALONE: But so sure, this may be true.

MYSTAL: There's a whole slew of things that you can't sign away, but people don't necessarily know that, right?

DUFFIN: Right, and especially the person signing it usually doesn't know that.

MYSTAL: Right.

MALONE: So most people stay silent because they think they have to. But there are laws that can help people void their NDAs if the secret that person is keeping hurts other people. These laws are a bit of a patchwork. They vary state to state. And the federal ones are mostly industry specific - like laws, for example, that let you report bad stuff in sanitation or food, aviation and dozens of other specific things.

DUFFIN: They're usually called whistleblower laws - sometimes public policy exceptions. And as I studied these in the midst of this #MeToo moment, I started to wonder do these exceptions extend to victims of sexual harassment.

LISA BLOOM: I'm not aware of any case law that says a sexual harassment NDA is invalid because it violates public policy.

MALONE: This is Lisa Bloom, an attorney that you may have heard of because she did very briefly joined Harvey Weinstein's legal team. But she has spent the bulk of her career representing sexual harassment victims against powerful men, like Bill O'Reilly and Bill Cosby.

DUFFIN: I don't understand why sexual harassment doesn't live as a clear policy exception to NDAs.

BLOOM: It's probably because nobody has challenged it far enough to get to the appellate level, which is where legal precedent gets made.

DUFFIN: In other words, someone has to fight it to the highest level of the courts where rules can be made that apply to everyone who follows. And it doesn't appear that's happened yet.

MALONE: Elie and Lisa both agree that the reason for this is pretty simple - kind of a bummer but simple.

MYSTAL: I think you've partially answered your own question. They made a movie about that bro.

MALONE: That bro being Jeffrey Wigand.

MYSTAL: Like if you're going to be the person to do this, this is your life now. This is your whole life - being this person and being in real kind of legal jeopardy. Trying to get this standard changed both in a court of law and in a court of public opinion, that's a heavy load to expect any one person to carry.

DUFFIN: It's a load that many people very understandably do not want to carry and shouldn't have to. Many victims welcome NDAs. They let them get restitution and just move on with their lives. For those who do want whistleblower laws to cover sexual harassment NDAs, Elie says that probably won't come through the courts.

MALONE: Like many whistleblower laws - and this is not something we say often - it may be easiest to have the change come through Congress.

DUFFIN: But so far, whistleblower protections for reporting sexual harassment do not seem to have been established either by case law or statutory law.

MYSTAL: As far as I know, right now, whistleblowing about your company's culture of sexual harassment is just not in that tone.

DUFFIN: Why?

MYSTAL: Because Congress has not, in its wisdom, decided to elevate people who are whistleblowing about harassment and assaults to the level of a whistleblower who is, you know, talking about financial crimes or environmental disasters. We might be on the cusp of that. That might be the legal legacy of #MeToo for all we know - to change how we think about this at a statutory level.

MALONE: And maybe it will. There are a few signs that things are starting to happen. Some states are passing and modifying statutes that say you cannot use NDAs in sexual harassment or abuse cases.

DUFFIN: And tucked into the new federal tax law is a provision that disincentivizes the use of NDAs in sexual harassment and abuse cases. It says that if you decide to use an NDA, you can no longer deduct the cost of that settlement from your taxes. So you know, change can show up in unexpected places.

(SOUNDBITE OF LAWRENCE MAU YIP WONG'S "POP DROP")

MALONE: If you have a secret that you think deserves telling, please get in touch. We are planetmoney@npr.org. Also we have a super secret way to do that. If you would like, you can go to securedrop.npr.org. You can tell them PLANET MONEY sent you. And this is probably obvious, but we are not lawyers. So if you are thinking of breaking an NDA, you should call a lawyer.

DUFFIN: We could not have made this show without our wonderful intern Aviva DeKornfeld. She pitched this story. She did a bunch of great reporting on it. Thank you so much, Aviva.

MALONE: Today's show was produced by Sally Helm with help from Nick Fountain and Alexi Horowitz-Ghazi. Our editor is Bryant Urstadt. And our supervising producer is Alex Goldmark.

DUFFIN: Special thanks also to Jodi Short, Marion Brown, the National Whistleblower Center.

MALONE: They have an excellent whistleblowers' guide.

DUFFIN: Reporting from the wilderness of National Public Radio, I'm Karen Duffin.

MALONE: And I'm Kenny Malone. Thanks for listening.

(SOUNDBITE OF LAWRENCE MAU YIP WONG'S "POP DROP")

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