Announcement: The Common Draft collection of contract clauses and templates is posted (in draft); it includes several hundred clauses, with extensive annotations, explanations, and commentary. If you’d like to be notified of significant developments, please subscribe to updates at right. See also my first e‑book, Signing a Business Contract? A Quick Final Checklist for Greater Peace of Mind.
Settling a dispute might mean letting a monitor look over your shoulder, maybe for years
Some business execs seem to assume that they can settle pretty much any legal dispute by just paying some money and maybe agreeing to mend their ways. But settling might not be that simple: it might require an agreement to on-going monitoring, which could be an expensive pain in the (neck). Here are a few recent examples.
• Google agreed to settle a privacy dispute with the U.S. Federal Trade Commission. According to the FTC’s press release, “[t]he settlement bars the company from future privacy misrepresentations, requires it to implement a comprehensive privacy program, and calls for regular, independent privacy audits for the next 20 years.” (Emphasis added.) [ADDED 2011-11-29:] In November 2011 the FTC announced a similar agreement with Facebook.
• In 2010, the Hilton hotel chain agreed to settle a trade-secret lawsuit brought by competitor Starwood Hotels; the NY Times’s Dealbook blog reported that the settlement agreement required Hilton to submit to court-appointed monitors for two years to prevent the alleged misconduct from happening again.
• In 2005, Abercrombie & Fitch agreed to a consent decree to settle a racial-discrimination suit; as summarized by the lead counsel for the plaintiffs, the company agreed to institute policies and programs to promote diversity and prevent discrimination — and to allow a monitor to regularly evaluate and report on its compliance with the settlement terms.
So if you’re wondering whether a particular business practice is worth the risk, you should think about whether you’d want to put up with having a monitor looking over your shoulder and getting into your business if it came to a lawsuit.