In Sanchez v. County of San Bernardino, (— Cal.Rptr.3d —-, Cal.App. 4 Dist., August 7, 2009), a California Court of Appeal considered an alleged breach of the confidentiality provision of a contract between a county and its former employee. The trial court found that the confidentiality provision was void as against public policy because the county had a duty to make the particular disclosures it made. The Court of Appeals reversed, finding that the agreement was not void as against public policy and that any First Amendment right the county had to make the disclosures was waived by the confidentiality provision.
Sanchez was a high-ranking employee of the County of San Bernardino (the “County”). In March 2003, she completed negotiations on a labor contract with the Safety Employees Benefits Association (the “Association”), and then in May 2003, she began a “physical romantic relationship” with the president of the Association. Sanchez denies that the relationship created any actual conflict of interest because negotiations with the Association had ended when the relationship began. However, in December 2004, after she disclosed the relationship to the County, the County asked her to resign. On December 20, 2004, Sanchez signed a severance agreement drafted by county counsel. The agreement included the following confidentiality provision:
To the maximum extent permitted by law, the parties further agree that this Agreement, the terms and conditions of this Agreement, the facts, events and issues which gave rise to this Agreement, and any and all actions by Ms. Sanchez and the County in accordance therewith, are strictly confidential and shall not be disclosed or discussed with any other persons, entities or organizations, whether within or without the County, except as may be required by applicable law.
On December 22, 2004, a number of newspaper articles reported Sanchez’s resignation and quoted county officials regarding an “improper relationship” and a “conflict of interest.” Articles with additional and more specific information from county officials continued to appear in newspapers until April 2005. In response, Sanchez filed an action against the County for, among other things, breach of contract. The County argued that it was entitled to summary judgment as to the entire complaint based on the First Amendment and as to the specific charge of breach of contract because “(1) it had a duty to disclose Sanchez’s misconduct, and therefore (a) the confidentiality provision was void as against public policy, and (b) the County’s disclosures were privileged under Civil Code section 47; (2) Sanchez herself had breached and/or waived the confidentiality provision by disclosing the circumstances of her resignation to her family and friends; and (3) Sanchez could not establish that the County’s disclosures had caused her any damages.” The trial court granted the County summary judgment on the grounds that public policy rendered the confidentiality provision void.
The Court of Appeals found that the trial court erred in finding the confidentiality provision void and in determining that there was no triable issue of fact with regard to Sanchez’s breach of contract claim.
First, the court found that the confidentiality provision of the severance agreement was viable. The Public Records Act (the “Act”) provides, in general, that “every person has a right to inspect any public record.” The confidentiality provision in Sanchez’s severance agreement made allowances for disclosures “required by applicable law” in order to comply with the Act. The Act does, however, contain a number of exceptions, including one for personnel files where disclosure would “constitute an unwarranted invasion of personal privacy.” The County pointed out that this court previously held that the public’s interest in disclosure could outweigh the privacy interest of a public official, particularly in cases of misconduct, and that this influenced their decision to disclose the confidential information. The Court of Appeals found this argument unpersuasive, particularly because there was never a request for documents under the Act. In addition, the information disclosed by the County was not contained in any particular document, which meant that the County was under no legal obligation to disclose it and any agreement not to disclose it would not be against public policy.
The court also noted that the County would have had to comply with a request under the Act for the severance agreement itself, as this would have been “required by applicable law;” however, disclosure of the severance agreement would not have revealed the circumstances surrounding Sanchez’s resignation. In addition, the County had disclosed contents of a report prepared by an attorney and labeled “Attorney-Client Confidential Communication.” The Act does not require the disclosure of a document subject to attorney-client privilege unless that privilege has been waived. Here, the “confidentiality provision essentially made it a breach of contract for the County to waive this privilege.”
Second, the court determined that, even if its statements were protected under the First Amendment, the County could still be held liable for breach of the confidentiality provision if it waived its rights to free speech. The Court of Appeals found that there was “no way to construe the confidentiality provision except as a waiver of whatever rights the County would otherwise have had to disclose the circumstances of Sanchez’s resignation.”
Third, the court determined that there were two triable issues of fact: 1) whether Sanchez had waived the confidentiality provision herself by telling her family and friends of the circumstances of her resignation and 2) whether Sanchez had sustained damages as a result of the County’s breach of contract. Sanchez presented evidence that she had only disclosed a limited amount of information regarding her resignation to her family and friends and then only after the County itself had violated the provision. The Court of Appeals found that a reasonable jury could conclude that the violation of the provision by the County excused Sanchez from any further performance of the same. In addition, the court determined that the evidence presented by Sanchez of lost job opportunities based on the negative publicity surrounding her resignation was “sufficient to support a jury finding that the County’s breach of the confidentiality provision caused Sanchez to suffer damages.”
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