Do You Need A Confidentiality Agreement For Your Divorce?

Divorce cases almost invariably require parties to exchange documents and other types of information, including various kinds of electronically stored information, in order to resolve the non-custodial issues in the case. Those financial documents and other information are relevant to establishing each party’s income and identifying the assets and liabilities subject to division. The question is, Which, if any, of these documents should be protected by a confidentiality agreement?

A general rule of thumb is that information that is not publicly accessible or accessible to your spouse before your divorce should not be made accessible because of your divorce without appropriate protections. For example, private business information—company financials, client data and any other information that the owner(s) do not want to be publicly shared—should be covered in a confidentiality agreement. Whether you are a member of an LLC or a partnership, or you are an employee of a company, it is your responsibility to protect this proprietary information. In most cases, it’s not necessary to include personal information such as your personal bank account statements in such an agreement. Unless you are a celebrity or are otherwise in the public eye, this would be an overreach. Not all financial information needs to be confidential.

The Purpose of Confidentiality Agreements

Confidentiality agreements identify which documents will be labeled “Confidential,” spell out how they will be labeled and prescribe how these documents are to be treated. Typically in divorce, a confidentiality agreement specifies that no one beyond the attorneys in the divorce action, the divorcing parties, the court where the divorce action is pending, and others directly involved in the case (experts retained by one of the parties or people who work in their offices, for example) are allowed access to these documents or the information within. That means parties are prohibited from sharing the information with family, friends, the media (including social media) or anyone else.

In this agreement, the parties generally both acknowledge—and waive their right to subsequently dispute—that there will be harm from any dissemination of the specified information. The consequences of breaching the agreement are laid out as well, typically stating that an immediate injunction will be placed against any improper disclosure of information and possibly providing for financial penalties.

Confidentiality agreements should also include instructions for how to dispose of confidential documents at the end of a case, treat the documents when submitting them to the court as part of a motion, dispute a document’s confidential status, and protect confidential documents under other circumstances. A spouse should not have continuing access to the other spouse’s confidential information after the case has finished (although their attorney may retain a copy for the file), nor should they be able to rely upon any of the confidential documentation made available through the divorce litigation in other litigation in which they would not be entitled to receive such information.

The Dangers of Not Having a Confidentiality Agreement

There are many reasons an owner or a co-owner of a business would want to protect the financial information about that company. As just one example, let’s say you are in the process of selling or hoping to sell your company, and you’ve received a couple of bids. The documents detailing those offers might be subject to discovery in the matrimonial litigation, but you certainly wouldn’t want that history of negotiation getting out to any potential buyers.

It’s not just business owners who should be concerned with confidentiality either. If you are an employee for a company and you need to access confidential corporate records to ascertain your compensation, that company may want a confidentiality order in place to protect them before they release those documents. In fact, many companies include a provision in their employment agreement or handbook saying you can’t share this type of information with anyone other than your attorney or accountant. Usually “your attorney” means the attorney who helped you negotiate the employment agreement and not a future-named matrimonial lawyer. So you could be in violation of that provision unless you work this out with your employer by creating a confidentiality agreement they approve of or obtain their consent (in writing) to produce the information.

When in Doubt…

Courts tend to view confidentiality agreements generously, so if you are unsure as to whether you are entitled to request a confidentiality agreement, go ahead and do it. If you have any legitimate reason for wanting certain information protected, there’s no legitimate reason for the other side to argue against it. No one’s going to say to a court, “I want to be able to air my spouse’s confidential business information.”

If your attorney doesn’t bring up the possibility of a confidentiality agreement at the start of your divorce case, then you should. It’s important to discuss whether any of the information you will need to disclose should be protected. In divorce, being safe is always better than being sorry.

By Kelly Frawley and Emily Pollock, Contributor