Signing Contract.jpgA recent Michigan Court of Appeals opinion highlights the importance of clearly and precisely drafting separation agreements.

Meaning of “Disparagement” 

In Sohal v. Mich. State Univ. Bd. of Trs. & Davoren Chick M.D., (May 17, 2011) the parties executed a Resignation Agreement and Release relating to Plaintiff’s agreement to voluntarily resign from MSU’s medical residency program. Specifically, Plaintiff agreed to resign from his position and the parties further agreed that they would not “knowingly disparage” the other.

Plaintiff was a medical resident in Michigan State University’s program. It was, however, unanimously determined that he should be dismissed from the program. Plaintiff agreed to resign from his position, and MSU agreed to segregate any records regarding the dismissal hearing from his file. The parties further agreed that they would not “knowingly disparage” the other and waived the right to “sue, grieve, or otherwise bring a complaint against the other.” Plaintiff eventually sued the university and an individual doctor and claimed that both breached the resignation agreement and, therefore, Plaintiff and should no longer be bound by it, i.e., he was entitled to rescission of the contract, including the restriction against suing. As to the breach, Plaintiff claimed that since leaving MSU, he had been initially accepted into another residence program but was later denied admission based on information conveyed by the Defendant university and an individual defendant. The statements were directly  responsive to specific inquiries that were required to be answered __.  Defendants, citing a Black’s Law Dictionary   In regard to the definition, defendants stated: “‘Disparagement’ is ‘a false and injurious statement that discredits or detracts from the reputation of another’s property, product, or business.’  Black’s Law Dictionary (7 th ed. 1999).” relied on a different definition of “disparagement,” stating: “The American Heritage Dictionary states that ‘disparagement’ is ‘(1) To speak of in a slighting or disrespectful way; belittle. (2) To reduce esteem or rank.’ . . . See also Webster’s New World Dictionary . . . (also  including a definition of disparage that does not include an element of falsehood.)” definition of the term “disparagement,” claimed that plaintiff failed to put forth any evidence that Chick or anyone else associated with MSU disparaged him. The non-disparagement clause of the resignation agreement stated – “The University agrees that its Trustees, President, directors, officers, and administrators will not knowingly disparage Dr. Sohal. Dr. Sohal agrees that he will not knowingly disparage the University, its Trustees, President, directors, officers, employees, and administrators.” At issue was whether defendants knowingly disparaged plaintiff in violation of the agreement. In denying plaintiff’s motion and granting judgment to defendants, the trial court noted that it had previously decided not to use the Black’s Law definition of disparagement proffered by defendants. Instead, the trial court applied the American Heritage Dictionary definition proffered by plaintiff, explaining that “contracts are interpreted by the commonly understood meaning of their words.” The trial court held that even under that definition, plaintiff failed to present any evidence establishing that defendants disparaged him – “slighted, disrespected, or belittled him.” He argued that because the term “disparage” can reasonably be understood in at least three different ways, the term was ambiguous and extrinsic evidence should have been considered to ascertain the intended meaning of the term and the non-disparagement clause. The court held that the term “disparage” in the non-disparagement clause was not ambiguous. While plaintiff attempted to ascribe several “reasonable” meanings to the term “disparage,” and thus the non-disparagement clause, “the term fairly admits of but one interpretation.” The court noted that several courts of other jurisdictions have determined that the term “disparage” in non-disparagement clauses of settlement agreements was unambiguous, and have similarly defined the term. Affirmed. Plaintiff only asserts that pursuant to the nondisparagement clause of the resignation agreement, defendants had a duty to remain silent regarding his alleged poor performance.  The take away Saying what you mean is not always as easy as meaning what you say. It is therefore, important to review your employment agreements and termination agreements (as well as any other agreements for use in your business) to eliminate or at least reduce ambiguities.  

After signing the Resignation Agreement plaintiff filed suit alleging that since leaving MSU, he “attempted on numerous occasions to associate with another residency program . . . . In each case, he was initially accepted into the program but as soon as the program contact[ed] Defendants . . . , [he] was denied a resident position based on information conveyed by the Defendants.”

There were a number of legal issues involved in Plaintiff’s suit, but for purposes of this post, the parties disagreed as to what a key term – “disparage” – meant.  

Defendants relied on a legal definition of the term “disparagement:” “Disparagement” is “a false and injurious statement that discredits or detracts from the reputation of another’s property, product, or business.” Black’s Law Dictionary (7th ed. 1999).

Plaintiff argued for a different definition of “disparagement:” “The American Heritage Dictionary states that ‘disparagement’ is ‘(1) To speak of in a slighting or disrespectful way; belittle. (2) To reduce esteem or rank.”

The trial court accepted Plaintiff’s definition. On appeal, the Court agreed and further concluded that the term “disparage” in a non-disparagement clause of a resignation agreement was unambiguous and should be given its plain, ordinary dictionary meaning – not the Black’s Law Dictionary. Because it was unambiguous, extrinsic evidence (evidence outside of the four corners of the agreement) could not be considered to determine the meaning of the term.

The take away

Unfortunately, having reviewed a number of separation agreements in the recent past, both employers and employees would greatly benefit from re-reviewing with experienced legal counsel their separation agreements (or any employment agreements for that matter). Such a review could eliminate or at least reduce the risks that a party will later successfully claim the agreement’s ambiguities preclude enforcement or requires a court to decide what the contract means.

Further, this review will also benefit employers in overlooking any of the numerous legal obligations that an employer must satisfy when an employee is terminated. The last thing an employer wants to discover is that a problem employment issue believed to have been resolved is now resurrected because of mistake in drafting.