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Contract Law and Freedom of Speech Alan E Cornell Law Review Volume 83 Article 1 Issue 2 January 1998 Promises of Silence: Contract Law and Freedom of Speech Alan E. Garfield Follow this and additional works at: http://scholarship.law.cornell.edu/clr Part of the Law Commons Recommended Citation Alan E. Garfield, Promises of Silence: Contract Law and Freedom of Speech , 83 Cornell L. Rev. 261 (1998) Available at: http://scholarship.law.cornell.edu/clr/vol83/iss2/1 This Article is brought to you for free and open access by the Journals at Scholarship@Cornell Law: A Digital Repository. It has been accepted for inclusion in Cornell Law Review by an authorized administrator of Scholarship@Cornell Law: A Digital Repository. For more information, please contact [email protected]. PROMISES OF SILENCE: CONTRACT LAW AND FREEDOM OF SPEECH Alan E. Garfieldt INTRODUCTION ................................................. 263 I. THE SOUNDS OF SILENCE: WHAT CONTRACTS OF SILENCE SEEK TO SUPPRESS AND WHY THEY NEED TO BE REGULATED ............................................. 268 A. Contracts of Silence to Protect Economic Interests.. 269 B. Contracts of Silence to Protect Privacy and Reputational Interests .............................. 272 C. Contracts of Silence to Protect Government Secrets. 274 D. Why Contracts of Silence Need to Be Regulated .... 274 II. REGULATING CONTRACTS OF SILENCE INDIREcmY: CONTENT-NEUTRAL CHECKS ON THE ENFORCEMENT OF CONTRACTS ............................................. 276 A. Contract Formation Problems ...................... 277 1. Lack of Consideration............................. 278 2. Lack of Mutual Assent ............................ 279 3. Lack of Objective Intent to Make a Legally Binding Contract......................................... 282 4. Lack of Definiteness .............................. 283 5. Lack of Written Evidence: The Statute of Frauds..... 284 B. Defenses to Enforcement ........................... 285 1. Unconscionability................................. 285 2. D uress........................................... 286 C. Limitations on Remedies ........................... 289 Im. REGULATING CONTRACTS OF SILENCE DIRECTLY. WHEN THE SALE OF A PARTY'S SILENCE SHOiU VIOLATE PUBLIC PoucY .................................................. 294 A. Creating the Analytical Framework: The Restatement Balancing Test ...................................... 295 B. The Restatement Balancing Test in Practice: Considering the Extreme Cases ..................... 299 t Associate Professor of Law, Widener University School of Law. I am grateful to John Culhane, Erin Daly, E. Allan Farnsworth, David Frisch, Barry Furrow, Kenneth Gra- ham, Jr., Eugene Grimm, Louise Hill, Michael Him, Laura Ray, andJohn Wadis for their valuable comments on earlier drafts. ReshaJeneby and Kristin DeRidder provided helpful research assistance. Deborah Dantinne provided excellent secretarial assistance. CORNELL LAW REVIEW [Vol. 83:261 1. The Restatement Balancing Test When There Are Powerful Arguments for Enforcement: Contracts to Prevent the Disclosure of Trade Secrets .............. 300 a. Public Policy Analysis of Contracts to Prevent the Disclosure of Trade Secrets ..................... 300 b. Applying the PublicPolicy Analysis to the Restatement Balancing Test .................. 303 2. The Restatement Balancing Test When There Are Powerful Arguments Against Enforcement: Contracts to Conceal a Crime ............................... 306 a. Public Policy Analysis of Contracts to Conceal a Crime ....................................... 307 b. Applying the Public Policy Analysis to the Restatement Balancing Test .................. 309 C. The Restatement Balancing Test in the Uncertain Middle Ground: Developing a Test to Distinguish Between Legitimate and Illegitimate Contracts of Silence ............................................. 312 1. A Test for Evaluating Contracts of Silence .......... 314 a. Preliminary Thoughts on Sources of Public Policy ....................................... 318 i. Should First Amendment JurisprudenceBe a Source of Public Policy? ... 319 ii. Should Limitations on Tort Liability Be a Source of Public Policy? ... 321 iii. The Interrelation of These Arguments with the Test for Evaluating Contracts of Silence. 324 2. Applying the Test: Selected Examples ................ 324 a. Contracts to Conceal Tortious Conduct ......... 324 i. Employment Contracts..................... 326 ii. Settlement Agreements .................. 332 b. Contracts to Suppress Disparagingor EmbarrassingInformation ..................... 336 i. Employment Contracts..................... 326 ii. Contracts to Protect PersonalPrivacy ....... 332 3. Why Courts Should Adopt the Proposed Test ......... 343 IV. REGULATING CONTRACTS OF SILENCE ON CONSTITUTIONAL GROUNDS: WBEN ENFORCING A CONTRACT OF SILENCE SHOULD VIOLATE THE FIRST AMENDMENT ................ 347 A. State Action ........................................ 349 B. W aiver .............................................. 354 C. The Constitutionality of Enforcing Contracts of Silence ............................................. 358 CONCLUSION ...................................................... 362 19981 PROMISES OF SILENCE 263 "This is not a case aboutfree speech, rather it is one about contracts and misrepresentation.' INTRODUCTION In an article written over thirty years ago about contracts that vio- late public policy, Professor M.P. Furmston noted that "[o]ne of the most interesting unresolved points is the extent to which one can sell one's silence."2 Although Professor Furmston was discussing English jurisprudence when he made this observation, his words were, and remain, equally true of American law. The extent to which a party can bind himself contractually to silence is largely unexplored in Ameri- 4 can case law3 and legal literature. I Cohen v. Cowles Media Co., 14 Media L. Rep. (BNA) 1460, 1464 (D. Minn. June 19, 1987). The Cohen case has a complicated subsequent history. See infra notes 80, 100 and accompanying text (discussing subsequent history). 2 M.P. Furmston, The Analysis of Illegal Contracts,16 U. ToRoNTo LJ. 267, 293 (1966). 3 See, e.g., Sandra S. Baron et al., Tortious Interference: The Limits of Common Law Liabil- ityfor Newsgathering 4 Wm. & MARY BiL Rrs. J. 1027, 1037 (1996) (stating that "[n]o re- ported cases appear in which a court specifically refused to enforce a confidentiality agreement because an employer had no legitimate interest in suppressing information of public concern"). In a few narrow areas, courts routinely decline to enforce contracts of silence on pub- lic policy grounds. For example, courts have denied enforcement to contracts of silence that obstruct the administration ofjustice, such as contracts to conceal a crime or contracts to suppress the testimony of a witness. See RESTATEMENT (FIRsT) OF CONTRaTS §§ 554, 548 (1932). Contracts to conceal a crime are discussed at length in this Article. See infra notes 230-66 and accompanying text. Contracts to suppress evidence are briefly discussed infra note 35. Courts also invalidate contracts containing overbroad employee confidentiality agree- ments. As this Article explains, the case law in this area focuses on the public policy of preventing restraints of trade and not on a public policy favoring freedom of speech. See infra notes 221-29 and accompanying text. Courts are just beginning to consider how to treat employee confidentiality agreements that implicate only speech interests. See, e.g., Margaret A. Jacobs, WillPromises of Silence Pass Tests in Court7, WALL ST.J., Dec. 14, 1995, at BI (noting that "[c]ourts are really struggling" with how to rule on employee confidential- ity agreements that seek to suppress information about corporate wrongdoing). 4 The literature is particularly sparse on the public policy implications of contracts of silence. See E. ALLAN FARNSWORTH, CoNTRAcTs § 5.2 n.9 (1982) (noting without elabora- tion "an example of an interesting argument based on public policy," the argument made in Snepp v. United States, 444 U.S. 507 (1980), that prepublication review required by a Central Intelligence Agency employment contract was "'unenforceable as a prior restraint on protected speech'"). But see Baron et al., supra note 3, at 1031-37 (briefly discussing the enforceability of contractual "silence" provisions in the context of analyzing press liability for tortious interference with source confidentiality agreements); Julia A. Martin & Lisa Y. Bjerknes, The Legal and Ethical Implications of Gag Clauses in PhysicianContracts, 22 AM.J.L. & MED. 433 (1996) (discussing whether gag provisions in physician contracts with health maintenance organizations should be enforceable); Steven I. Katz, Comment, Unauthorized Biographies and Other -Books of Revelations": A Celebriy's Legal Recourse to a Truthful Public Discourse, 36 UCLA L. REv. 815, 842-47 (1989) (discussing whether nondisclosure agree- ments with celebrities should be unenforceable on public policy grounds, but focusing on the public policy of preventing unlawful restraints of trade). In the time surrounding the Supreme Court's decision in Cohen v. Cowles Media Co., 501 U.S. 663 (1991), which involved 264 CORNELL LAW REVIEW [Vol. 83:261 This void in the case law and scholarship is not necessarily sur- prising. Since parties are generally free under contract law to strike whatever bargain they please-there is "freedom of contract"5-the central conundrum contracts of silence pose is whether their suppres- sion of speech makes a difference. Is there something inherently
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