ITT gets to keep its loss in arbitration secret.
Last Friday, the Fifth Circuit upheld enforcement of a confidentiality provision in an arbitration clause. The provision stated:
All aspects of the arbitration proceeding, and any ruling, decision or award by the arbitrator, will be strictly confidential. The parties will have the right to seek relief in the appropriate court to prevent any actual or threatened breach of this provision.
The court concluded that it could separate the arbitration clause — including the part requiring confidentiality — from the rest of the contract under the severability doctrine of Prima Paint Corp. v. Flood & Conkling Mfg. Co., 388 U.S. 395 (1967). The court also held that the district court properly entered a permanent injunction barring the winners of an arbitration proceeding from disclosing the award and record to another claimant that brought a separate arbitration against the same defendant. ITT Educational Svcs. Inc. v. Arce , No. 07-20438 (5th Cir. June 27, 2008).
Blawgletter wonders how much good ITT will get out of this victory. Won’t the new claimant ask it for the same stuff it produced in the earlier arbitration? And can’t he obtain the record from ITT itself, which can hardly cite the earlier claimants’ expectation of confidentiality as an excuse after they’ve shown themselves willing to waive secrecy?