BREACH OF CONFIDENTIALITY PROVISION EXCUSES FURTHER PERFORMANCE OF SETTLEMENT AGREEMENT

GDL Masonry Supply, Inc. v. Lopez
Dallas Court of Appeals, No. 05-15-01200-CV (November 2, 2016)
Justices Lang, Myers, and Evans (Opinion)

Ken Carroll

GDL Masonry Supply settled its lawsuit against Lopez and Rapid Masonry Supply through a Compromise Settlement Agreement and an agreed take-nothing judgment. The Settlement Agreement required Rapid and Lopez to pay GDL $60,000 in a series of $10,000 installments. The Agreement included a fairly standard confidentiality clause that prohibited both sides from disclosing the terms of the deal or the events giving rise to the settled claims, as well as a stipulatation that the confidentiality paragraph was a “material provision” and that “any breach of [that] Paragraph shall be a material breach of th[e] Agreement.” Apparently unable to contain himself, GDL’s owner soon bragged to a third party that Lopez had stolen materials from GDL, that GDL had won the lawsuit, and that Lopez owed him money as a result. Lopez and Rapid then sued GDL for a declaration excusing them from further performance under the Settlement Agreement and for their attorney’s fees, based on GDL’s material breach. The trial court granted summary judgment to Lopez and Rapid, and the Dallas Court of Appeals affirmed. Because the parties had expressly agreed that violation of the confidentiality paragraph constituted a material breach of the Settlement Agreement, GDL’s conduct excused further performance—i.e., further payments—by Lopez and Rapid, and entitled them to recover their fees, as well. The Settlement Agreement was not rescinded, however. Therefore, although the Court of Appeals did not say so, it seems GDL remains stuck with the agreed take-nothing judgment in the original case. Moral: If you agree to a confidentiality clause in your settlement, abide by it.