Contracts and Privacy
What is the relationship between public policy and contract damages? A few days back, I blogged about the curious case of Canadian Gabriella Nagy. Nagy, as you may recall, has sued her cellphone company Rogers Communications for $600,000 (Canadian), alleging “invasion of privacy and breach of contract.” According to Nagy, Rogers consolidated her cellphone bill into a global family statement without notifying her. This consolidation led her spouse to see she was calling another man with inordinate frequency, and she was forced to confess an affair. The marriage dissolved, and Nagy blamed the cellphone company.
I think the breach of contract lawsuit, if filed in an American court applying fairly ordinary domestic contract principles, would be a loser. Here are some reasons why.
The common law generally dislikes punishing breach with liability or damages when the inevitable consequence of performance is to motivate socially wrongful conduct, and nonperformance to retard it. Though famously public policy is an “unruly horse,” it is settled law that the morality of the underlying conduct to be protected bears a significant relationship on the ability to seek relief at law (whether in terms of liability or damages.) Consider a lovely case I teach in the first year, Shaheen v. Knight, 11 Pa. & C.2d 41 (1957). In Shaheen, plaintiff contracted with defendant for guaranteed sterility following a vasectomy. When a child resulted, the snipped but still-virile Shaheen sued for breach. Though the vasectomy contract was not itself void – since family planning and private control are social goods- the court believed that to allow damages “for the normal birth of a normal child is foreign to the universal public sentiment of the people.” That is, the availability of damages turns on whether the plaintiff has been subjected to a harm (executory or otherwise) that society seeks to validate as legitimate. The easy example is a contract between A and B to commit a crime or violate a statute. Even if the contract weren’t void on its face, you can’t get damages (nor, often, restitution). A little further down the line are transactions over the means to unlawful conduct. Imagine a seller and a buyer enter into a sales contract, where the buyer is going to promptly relabel the goods for fraudulent resale. Seller, learning of the plan, refuses to deliver and the buyer sues the seller, seeking the difference in value between what he expected (delivery price) and what he got (presumably, market price to cover). Can the buyer recover this remedy? Generally not, unless the seller knew of the improper purpose at the time of the contract, in which case the seller might have to disgorge something.
What about cases where A and B contract not to disclose some fact X, and the nondisclosure will create harm for innocent third parties. These contracts are often enforced (every confidentiality clause probably shelters some fact with the potential for third party harm.) But the degree to which the nonbreaching party can recover ought to turn on what’s being kept secret: if the secret is particularly socially harmful (oozing toxic sludge!) we might believe that the hiding, non-breaching, party doesn’t get to recover for breach. Thus, you sometimes see cases where fraud-revealing employees are protected from consequences of nondisclosure agreements by (effectively) common law whistleblower doctrines.
Where the third-party harm relates to marriage, the law appears to be more categorical. Public policy concerns about contracting and third party harm are strongest in agreements touching on issues of family life and infidelity. This is evidenced (of course) by the skepticism that common law courts traditionally had toward premarital contracts, especially those that purported to limit post-divorce support obligations. The theory was that such provisions encouraged divorce, and thus were not contracts that society wanted. See generally Farnsworth’s Fourth Edition, § 5.4. So, for example, imagine that two parties made a private contract to hide evidence of adultery from their respective spouses. One party, overcome with conscience, decides to fess up. The “nonbreaching” adulterous party sues the “breaching” adulterous party, seeking benefit-of-the-bargain damages. I think there little chance that the non-breaching adulterer could recover any damages in court. Cf. Jim Lindgren, Unraveling the Paradox of Blackmail, 84 Colum. L. Rev. 670, 681 n.58 (1984) (“[N]either a threat to do an immoral act (expose damaging information) nor an offer to breach a public duty (hide criminality) can be the subject of a legal contract.”)
Now, what about the Rogers’ contract? As best I can tell, it says something like the following: “Unless you provide express consent, or disclosure is required pursuant to a legal power, all information regarding you kept by us, other than your name, address and listed telephone number, is confidential and may not be disclosed by us to anyone other than: you; a person who, in our reasonable judgment, is seeking the information as your agent.” Let’s pretend that it’s not reasonable to read “you” or “your agent” as your “family unit,” although I would contest that narrow reading. Let’s also pretend that the contract doesn’t contain a clause permitting the cellphone company to change the method of billing, including bundling into other accounts at the same address, though I bet such a clause is present.
We know that if the cellphone contract said “we don’t disclose adultery”, and Rogers nontheless disclosed, both liability and damages would be a tough haul. Can it be that Nagy has a stronger claim to recover money simply because the contract didn’t mention adultery? Sort of! Nagy could surely recover if Rogers breached by failing to provide her cellphone service. And she probably could recover for breach of contractual privacy if the activity protected by the privacy clause didn’t have a tendency to encourage divorce. But I don’t think an American court would give damages where the underlying conduct incented by such damages is so intimately tied up in the marital relationship.
Surprisingly (or not) I can find only one case directly on point. In Hennig v. Alltel Communications, Inc., 903 So.2d 1137 (LA.App. 2005), the plaintiff made the following familiar allegation: “Plaintiff, Catherine Hennig, filed the instant suit for damages against Alltel Communications, Inc. and an unnamed employee alleging that defendants were liable for invasion of privacy, negligence and breach of contract in releasing plaintiff’s cellular phone records to plaintiff’s husband without her authorization. Plaintiff alleges that Alltel’s actions in releasing this information caused the breakup of her marriage in that her husband filed for a divorce on the basis of adultery shortly after obtaining the phone records. Plaintiff seeks damages from defendants for mental anguish, emotional distress, embarrassment and humiliation she sustained as a result of Alltel’s release of these records.” The court, affirming a dismissal, tartly noted that “she fails to offer any support for this position [of a contractual right against disclosure]. Further, although plaintiff alleges that the acts of Alltel constitute a tortious invasion of her privacy, we fail to find that the conduct of defendant in releasing plaintiff’s phone records to her husband was unreasonable. Plaintiff and her husband were living as man and wife at the time of the disclosure, and as noted by the trial court, a spouse is legally entitled to view the records associated with a community debt.”
My co-blogger and friend Dan Solove, commenting on the original post, is flabbergasted that contract law could work this way: “Are you advocating a morality exception to contracts? If a person does something that is deemed immoral by many people, does this mean that the contract is unenforceable? I’m surprised you seem to be arguing for some very radical changes to contract law.” I’ve got to say that it is mildly shocking in itself that Dan is so unsettled by a basic precept of contract law like public policy limits on enforceability. Can anyone really believe that a contract is simply enforceable as written, regardless of social consequence or moral context? This would be an innacurate view of how contract disputes are resolved. If you want to think of this as a “morality exception,” ok, though it’s probably more accurate to conclude that social convention and moral judgment are baked into the meaning of what a legally binding contract is.
How does this square with the very occasional case where a tort plaintiff has sued and won for the disclosure of the fact of an affair? See, e.g., McSurely v. McClellan, 753 F.2d 88, 112- 13 (D.C.Cir.), cert. denied, 474 U.S. 1005, 106 S.Ct. 525, 88 L.Ed.2d 457 (1985). I’m not entirely sure, though obviously differences between tort and contract matter, not least because in one the adulterer has premeditatedly sought the law’s protection for immoral conduct. It’s also the case that there are privacy rightsin dealing with the government that are distinct from (and deeper than) those created solely by a privacy clause in a cellphone contract. As I commented in that earlier post, the tort of privacy against a commercial counterparty, when the right is generated by the contract, should be shaped by the empirics. Thus, do individuals believe that when you sign up for a cellphone, your company will not disclose your calling patterns to strangers? Certainly. Do people think that buyers of cellphones have obtained a damages-enforced tort right to get to hide information from their spouses, who probably would still have a public right to access such data because s/he is bound to the contract’s obligations? I think that most people would say not.
Stepping back, is it possible that Nagy’s tort claim would survive and her contract claim would fail (in a hypothetical where she sued an American company in an American court)? I suppose so – but I tend to doubt it. Tort law, even more than contract law, is comfortable judging plaintiffs.
[Update: I edited for style & removed some typos.]