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welcome to the contract teardown show from law insider where legal experts tear down contracts from some of the most well-known companies and high-profile executives around the world in this episode attorney siobhan smith walks through the nda used by charlie sheen with his dates so let's tear it down siobhan how are you today i am excellent and so excited to be here i'm a little pumped about this because we get to mix the world of contract nerdiness with tmz style drama mama stuff and you know that's everybody's favorite so i'm going to show them this document everybody look at this thing this is an nda and we are going to talk about this india because it's a beautiful crazy big picture toxic thing that we're going to talk about the modern world so uh siobhan before we dig into this what is this document when are we gonna run into this kind of thing so this is an nda from uh charlie sheen um some may say he's a celebrity from long ago but many see reruns of his shows all the time um and it was very specific to people um who knew him in a personal sense uh and not necessarily in a business sense yeah by personal it's people he has sex with that's the tmz level of this thing that's going to be great okay siobhan before we get into the drama mama what is your background what brings you to this kind of document do you see these a lot absolutely so i am an attorney i have a practice representing all small businesses in the dc area serving as their outside general counsel i see ndas all the time but typically in a context of a business is going to share their financials to purchase another business or we're hiring this uh employee who will have access to all of our data or we are teaming with another company so very much so in a business context and not in the context that mr sheen is using yeah and i mean we had a conversation as an aside recently with patrick o'malley about nda's uh more on that business side and one of the things that he said is like ndas are explicitly not for this purpose this is sociologically not why we created these things so it's it's a bit fun to to go back and look at this before we dig into the actual text of it tell me the background you mentioned that this is charlie sheen uh this is i guess he's handing this out to women at the dinner table i don't understand how this works what is this thing people who are spit it says spend time and associates so people he is spending time with and associating with okay so like literally anybody um and then this thing i i guess back in um whatever it was seven years ago or something it came out that he was hiv positive and a company called in touch weekly which i guess is a tmz like uh media company went and found got this thing from i guess one of the people that he had talked to got this document and so that's where we're pulling it from is this article when i'm thinking about the use of an nda and maybe this is we'll revisit this in the big picture part at the end of this conversation and nda is a non-disclosure you're trying to define what confidential information is and what people can do with it um this thing he's applying it i'm assuming you're not seeing it much in this purpose where a guy is using it as a way to silence a person a consumer you know an individual no i mean i think if charlie sheen were working with a realtor who was going to have kind of personal access to his information um that would make a lot of sense to perhaps sign an nda but this seems like a very personal situation i i definitely see it in clients maybe you are dealing with hairdressers or kind of other people who are going to have access to things in your home but it's still a business relationship because they're an employer or a contractor of yours and so it makes sense in those instances when celebrities have those agreements but this purely says in the consideration for the opportunity to spend time and associate with yeah i love this let's dig into the document this first paragraph is so great in consideration for the you know you got to put that stuff at the top or whatever in consideration for the opportunity to spend time and associate with you you here being charlie shane in consideration the opportunity to hang out with charlie sheen for your agreement to forego the right to resolve disputes between us before a jury of your peers in a public court proceeding and in considering there's all these like statements of consideration which is awesome law school stuff like the word consideration never came up since law school what do you think of this introduction section and what he's trying to do with setting the terms here in the beginning paragraph yeah i mean i think he's making it clear that the there is consideration here because i think maybe there will be some fight about whether there was consideration here um and then also the foregoing the rights so in the end there's a very long arbitration clause um and just kind of putting that up front to people that like not only are you giving up the right to talk about me but you're giving up the right to have you know a jury of peers decide the matter as well yeah and if you say the word consideration enough it qualifies it becomes consideration right uh let's jump down to 1.3 this section called no participation in books or articles uh without charlie's advance express written consent i'm not going to give and participate in with any interviews or books and if i do i get in trouble what do you think about 1.3 and using that information to go out to the world and sell a book yeah i mean i think when you're talking about ndas in the business since you don't really want to conflate copyrights in ndas like if you are transferring copyrights you want to do that in one agreement so what's interesting about this it it says if you write anything talk to anyone especially if you write a book you automatically transfer the copyright to that book to charlie sheen so think about it this way you are dating charlie sheen he buys you a rolex watch which is a nice thing to do you write a book and you mention it on one page the way this is drafted now charlie sheen has the copyright to your book um which doesn't really fly so and i think even thinking about the definition of confidentiality it's incredibly broad it includes information about his friends who are his friends how do you know when you've been in a place with a person that he says is a friend so the broadness of the definition and then these rights that are being given up you know i think they're just a lot of problems with yeah well and i would point back to one back to the confidentiality the definition of confidential information it's it's a pretty exhaustive list obviously uh at the beginning where it's emails instant messages it puts it in scare quotes because nobody's heard of these things text message contracts correspondence faxes look out lawyers uh tapes cd roms usb flash drives sim cards photographs negatives moving or still images audio video but then it goes in and it's it says basically like he makes a bucket which is basically anything that people don't already know about charlie sheen if you say anything about charlie sheen that people don't already know about his favorite color is red uh and people don't know that then you get in trouble so it's a very broad definition and then obviously to transfer that to books or whatever to to pass that copyright over is a that's a whole thing well let's jump down to two um it talks about permitted disclosures responding to subpoenas you see this in nda's a lot where it's basically like okay but if a court tells me you you know i gotta say something that i gotta say something what do you think about the way two tackles that issue i mean it essentially says you won't say anything voluntarily typically when i'm drafting these you have more steps about what to do like you will notify us we will draft a protective order we'll pay your attorney's fees if you don't hear from us in a certain amount of days then you are free to disclose um so it's a little light on process and for a person like charlie sheen who i presume maybe gets sued a lot of you get sued um people get subpoenaed it seems like you will have a little more process about well what do i do if someone comes to ask me for this information and that person is a judge who is asking for the information yeah yeah and that's common in these things um there's there's remedies in here and the one that i want to focus on is this liquidated damages bit uh it says that uh if you have to go after it sometimes it's hard uh to be able to get value back for reputation damage so we're gonna set the number at a hundred thousand dollars uh plus any actual damages what do you think about the liquidated damages section on here yeah i mean personally in my own practice just this week to opposing council have struck these out of kind of non-compete or confidentiality agreements and i get it um because liquidated damages sometimes you want to use when the breaches objective like i was supposed to build this road we were a month late in building this road we've set these liquidated damages here a hundred thousand dollars and it specifically says for each breach or threatened breach of this agreement you can disclose something that actually doesn't damage him you know you could disclose this rolex example in a very lovely story that was confidential no one knew that but you and he uh and it could show him in a favorable life he could get booked on tv shows to talk about it and booked it you know because oh he's done something nice and so are you really damaged just because there was a disclosure well the last thing i wanted to talk about was this arbitration closets uh you know we've talked about arbitration a bit in this show and obviously this is a hot you know it's going before the supreme court uh some of these cases uh what's going on with arbitration whatever the purpose of this document is adding arbitration to it and a person surrendering their you know right to go to a court to sue for their for their rights courts don't love these things um and to see it in this kind of a document which probably is a public policy issue anyway it's a long paragraph uh do you think it's effective what do you think about section four in the arbitration yeah i definitely think it's oppressive i mean i'm not a huge fan of arbitration agreements i understand why a person like charlie sheen would have that because you want to buy some confidentiality if you are litigating these issues and you get that in arbitration um but that being said i i think what courts are grappling with now are in these contexts where one party has so much of an upper hand of the other party i.e you know the harvey weinsteins of the world employment context um where is is that really how we want you know con our contractual law to move um is in this way so i do think this arbitration clause is problematic given the purpose of this nda maybe if it were you know two fortune 500 companies sharing information then it's a different conversation yeah yeah well and as we wrap up i want to sort of step out to that and think about the big picture and and you know nda's just as set aside you contract lawyers like you guys all hate ndas but you all write ndas all the time because this is how bills get paid people are just churning out ndas and debating them and going over there and i think about the nda as you know a proxy for trust and you and i talked about this a little bit before is is i'm going to put this nda in because i'm nervous i'm nervous something is going to happen it's going to harm me more in the long run than filling this thing out even if i'm not sure if this thing is even enforceable so whatever an nda is supposed to do uh and the reason that we have this thing in in the universe this seems like a particularly gross use that is really rooted in we don't he doesn't trust this person that he's in this relationship whatever the relationship is he doesn't trust this person in the relationship tell me about nda's maybe big picture as a proxy for trust and do you think this is a good use of it do you or should we just burn all these down should we just burn all these down i'm trying to lean you toward we should burn all these different ones you know people often come to me ndas and contracts in general but especially nda's like we need an ironclad nda because we're sharing xyz and we're just not sure or have this great idea and i want to share with this person but i'm not sure then don't share it with them like if you do not trust a person a document is not going to make it the person trustworthy it is not a way to make a person you know a better person just because they sign this nda so i always encourage people you know share your idea but there is a secret sauce that you don't have to reveal necessarily when talking to people about things um so you don't necessarily want to go running in a door with an nda every single time you want to use your business judgment your discernment in terms of who you do business with um before you put an nda but but let me push back a little bit maybe um i recently uh read a book called the lonely sentry which is a it's a it's an interesting idea about you know how a lot of the systems that used to stand in for trust so i can trust john because he's my neighbor i can trust sally because we go to church together i can trust susan because she's my friend's friend's friend but as social networks become more virtual more detached you know people don't have these long-term relationships the law is an interesting sort of stand-in for that it has always been a stand-in for we're gonna generate trust between two people who are not part of the same tribe have really no reason to trust each other um and so we're gonna be this proxy for trust the the idea in that book and that i think there might be some merit to is that we're while businesses actually understand their long-term relationships better people are becoming less and less attached right they're they're becoming more and more detached from these large social systems and can law we're doing this clumsy bludgeon of law to try to stand in for the as a proxy for trust is there a healthy way to use law whether it's an nda or some other way to sort of create trust in these relationships you think if if i'm doing a hookup on tinder i don't know what any of that sentence means but apparently it's the thing the kids do if i've got a hookup on tender i mean we do the same with an uber driver now where an uber driver is basically we trust uber therefore we trust this person there's we know there's contract in there somewhere is there some stand-in for that for the charlie sheens of the world that just that just want to spread their seed you know how can law help the poor charlie sheens of the world i mean i think that's an interesting point i think it's very true that you're using this to stand in as the trust um but so i think it's twofold i think it is maybe it is an nda but it's a carefully drafted nda maybe it's not super broad but i also think it is you know this is going to go off the deep end of not being law but you need to develop your internal mechanisms of when do i trust a person like if you just don't trust yourself to trust people then develop the internal mechanisms of what does that look like and if you're a business owner you can create a checklist of like well who do we do business with who do we not do business with and so i think you know as a single person not on tinder you know i have to develop my checklist of like what are the signals for me to you know go out with someone and not have to show up with an nda to have a first date with this person that i went out with charlie sheen just go to therapy charlie sheen okay go to therapy work your stuff out i'm sorry lawyers i did just try to create a whole new market for you of tender ndas uh to get you a whole new bit of business but siobhan killed it uh siobhan thank you for hanging out with us we appreciate it if people want to reach out to you and learn more about what you do and the businesses you serve what's the best way to connect with you sure my website is the sjslawfirm.com i am on instagram at siobhan j smith people can always email me email me siobhan at the sjslawfirm.com um or follow me on linkedin or i'm all over the socials on the socials well we'll have links to all that and this contract and this story over at lawnsider.com resources also if you want to be a guest on the contract tear down show just email us we are at community linesider.com we'd love to chat with you siobhan thank you again you guys have a good day we'll see you next time thank you so much thanks so much for tuning in to this episode of the contract teardown show from law insider if you're enjoying the show please feel free to rate subscribe and leave a review wherever you listen to your podcasts that helps others find the show we really appreciate it thanks again for listening and we'll catch you in the next episode