Embargo

A big problem in telling anybody anything secret is that they will reveal it. This applies to news embargoes with respect to the time information can be revealed, and also much more generally. Legal contracts can be written, but they are hard to enforce if the information is leaked secretly, though secret leaks do not allow the leaker to get public credit, which ordinarily eliminates the motive for reporters. I hope to write on this subject. Below is a possible formal contract for news embargoes.

Note that there can be a contract even if it is informal and unwritten. A "contract" is a legally enforceable agreement. In general, contracts do not have to be written. All that matters is various requirements such as that there be "a meeting of the minds" of two parties so that they understand what is being agreed upon, that there be "consideration" for both sides so it is an exchange rather than just a one-sided promise, and that the obligations are clear enough that the contract is not "void for vagueness". If the contract is not in writing, it is much more likely to fail in one or more of these respects, and it is much harder to prove what the contract says, but it is quite possibe for an oral agreement to be clear and publicly demonstrable.

A way to have an informal new embargo contract is to have it clear in an email that the reporter is being given the option of using the information in exchange for the benefit the source derives from the possibility of publication after a certain date and that publication before that date is forbidden, and to get written acknowledgement that the reporters agrees to those terms. That is a contract even though it does not specify damages for breach. Most contracts do not specify damages. In such contracts, the law uses default rules, and the ordinary default rule is "expectation damages", meaning that if the reporter prints the information too early, he and his newspaper are liable to pay the source enough money to make the source as well off as if the newspaper had never printed the information. This amount cannot be just the value of "pain and suffering"; it must be objectively proveable in court. A big advantage of a formal contract is that it is easy to insert "liquidated damages", a sum of money that both parties agree is to be paid after breach. That is enforceable so long as it is not clearly in excess of actual damages. I don't know if for that purpose "actual damages" includes emotional harm or not; I'll have to research that and it might depend on the law of the particular state.

Embargo Agreement between Source and Reporter or Advisor

This is an agreement between Source and anyone, whether Reporter or Advisor, who agrees to it by opening the attachment to this email that contains confidential materials. We will use the name “me” to refer to Source and “you” to refer to the Reporter or Advisor.

Here is what we agree. I agree to allow you to read attachments to the email I’m sending you that discusses various topics related to my disputes with Third Party. You agree that if you open the attachments or forward them, you won’t allow anyone to publish them or the information they contain. You can do whatever you like, though, so long as you email me and I give permission. I'd like you to read the documents, and you'd like to read them, so the idea is to make this safe for both of us.

When everything becomes public, this agreement terminates—you can repeat anything that’s already gotten out. I’ll try to notify you of that date in advance if I can see it coming. If you notice anything has been published in the media or the blogososphere or Twitter, I’d appreciate knowing, but you don’t have to let me know.

This agreement is a formalized version of the “embargo agreement” common in the news business (see https://en.wikipedia.org/wiki/News_embargo). When the government is going to release crop statistics, it lets reporters know early, but takes great care that they won’t use the information to trade on the futures markets. When a politician gives a speech, he’ll give a copy to reporters early so they can make instant comments. You may remember in the movie The Devil Wears Prada how the heroine is able to get an advance copy of the latest Harry Potter novel—it’s because it was circulating to book reviewers under embargo. (In the movie, it works out okay, because the leak is just to the obnoxious twin girls, not to the general public.) I don’t know how often written agreements are used, but they’d prevent a lot of problems. A leading case without a written agreement is Cohen v. Cowles Media, 457 N.W.2d 199 (Minn 1990): reporters promised confidentiality and then broke their promise. The court agreed that an oral agreement could be a legally enforceable contract, but what the source and the reporters said to each other was too vague. So actually, if I just told you that you could read my attachments but you’d have to promise to not spill it to the media, that would be a legal contract and I could sue you for damages, but the court would have to decide whether our agreement was too vague or not.

Thus, you agree by opening the attachment that if you violate this agreement you owe me $100,000 in “liquidated damages”. Liquidated damages mean we won’t try to estimate actual damages resulting from your violation, which might be much higher--- remember the $200,000 figure below-. Instead, we just agree to the $100,000 figure. I of course do not have to sue and collect, even if you’re in the wrong, and I won’t sue you if a leak happens but I decide it was an innocent mistake.

$100,000 may seem outrageous, but it’s actually small compared to the actual damage. If this story breaks into the news too early, Third Party will lose too much face to back down, so I’ll have to sue. I don’t want to sue if I can get them to back down instead. My legal fees if I sue will be very high. Someone I was talking with recently said he’s paid his lawyers almost $100,000 already. The amount will easily exceed $200,000 if it goes to trial. The attorneys I’m thinking of hiring are much more expensive than his, because I want to “do it right”. For example, one of them charged a recent client $790/hour. So a lot of money is at stake.

I fear you might be offended or intimidated by this agreement. Please don’t be. I am trusting you with valuable confidential documents. In turn, I want you to trust me not to sue you out of greed. If you know me, you know I’m a pretty nice guy and not greedy, even if I’m hard on people who cheat. Remember, too, that this agreement allows me to show my documents to people I don’t know personally (e.g. reporters) but who might give me advice or might want to write articles on my controversy after the date it goes public. I want to be as helpful as I can to reporters without risking premature publicity. This whole thing sounds a bit scary, but it is a serious business, with important people who hate me and want to destroy me. It’s understandable if you decide you don’t want to get involved. You must decide for yourself what the morally right thing to do is.

A last point. By “the media” I mean not just newspapers, TV, and radio, but weblogs, Twitter, Facebook, and other social media and Internet outlets— and anything else that would amount to public exposure. I don’t mean talking about it with friends; I will be happy if this develops rumors that get back to Third Party and show them I mean business. But don’t post on it in your weblog, if you have one.

The agreement ends with this sentence, and it’s just what’s in this document, not anything else.

Questions

• Should this boldface the $100,000 liquidated damages, or not? I want the other party to notice it, but I don't want to scare them.

• Should I use boldfacing at all?

• Would it be better to write a contract that doesn't use liquidated damages at all, but makes it clear that it is a legally binding contract? This would make it be for the usual expectation damages. It would actually be for bigger damages, I think, but it would fool the other party into thinking it was less dangerous to read the attachment.

• Have I succeeded in giving "consideration" to both sides, so this is not a gift, but a contract?

Notes

• This is not a typical contract. For starters, it is unusual to have a legally binding agreement at all. Instead, people rely on social norms. If I tell a friend "Please don't leak this to the media" I rely entirely on their goodwill. If I tell a reporter "this is for deep background only", I rely on the professional norms. So people may think it is weird that I use an Agreement, and will speculate as to why I do so.

• I want to appear benevolent and nonthreatening. Thus, I want to avoid legalese at all costs. That is why I use contractions and the Devil Wears Prada example. I must at the same time create heavy legal penalties and be nonthreatening.

• One reason to use liquidated damages is the standard one. The parties can figure out a reasonable estimate of actual damages, but the court can't, and the parties would spend a lot on legal fees, time, and uncertainty trying to argue before a court.

• A second reason to use liquidated damages is special. I want to impress on the other party the cost I will incur if they leak the information. A good way to impress it on them is to specify numbers and put some of the risk on them. I actually *do* want to scare them, some.

• Although I think this is a legally binding contract, much more than a shrinkwrap contract, it would be pretty much impossible to enforce against a malicious party of reasonable intelligence. If the documents were leaked and appeared in the media, I'd have a hard time proving who leaked them. The leak could be done by anonymous email, with careful timing to avoid blame. Why execute the contract, then? ---Because I want to emphasize moral blame, and because it does mean that someone cannot earn personal glory or credit by leaking.

• One improvement I should make is to emphasize that the liquidated money damages do not excuse a journalist from violating professional norms. I want both incentives to work. Some economists have worried about whether if you specify a money price for doing action X, people think that means you're driving the moral price to 0, so you can actually get *more* violation than before. It should be possible to phrase things so you add the prices rather than eliminating one of them.

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