D.C. Circuit Holds Contractual Clause Directing Non-Disparagement Implies Employer Itself Cannot Disparage

The D.C. Circuit recently held that a "Mutual Non-Disparagement" clause requiring an employer to "direct" its employees not to disparage a former employee could reasonably be interpreted as prohibiting the employer itself from making disparaging statements.

In Wright v. Eugene & Agnes E. Meyer Foundation, Dr. Terri Wright, a former employee of the Eugene and Agnes E. Meyer Foundation (the "Foundation"), filed suit against the Foundation after discovering its CEO, Nicola Goren, had made disparaging statements about her.

The Foundation hired Wright in early February 2018 as its Vice President of Program and Community. During Wright's tenure, Goren criticized her "interpersonal skills" and identified "communication issues." In October 2019, Goren fired Wright, citing the same concerns. Wright believed these alleged issues were pretextual, but to attempt to avoid litigation, she entered into a Severance Agreement with the Foundation. The Severance Agreement contained a provision titled "Mutual Non-Disparagement" that read as follows:

Less than a month after the termination, Goren attended a meeting of the Washington Regional Association of Grantmakers (WRAG) in her capacity as Chair of WRAG's Board. In a conversation with WRAG's CEO, "Goren complained that she was feeling backlash from abruptly terminating Wright." She then claimed she "had no option" but to proceed with the termination because "Wright was 'toxic,' fostered a 'negative climate' at the Foundation, and 'had to be fired or two-thirds of the staff would leave.'"

After learning of these statements, Wright filed suit for, among other things, breach of the Severance Agreement. The district court dismissed the claim, holding "the non-disparagement clause obligated the Foundation only to direct its employees not to disparage Wright, leaving the Foundation and its officers and employees free to in fact disparage her." Upon appeal, the D.C. Circuit reversed.

The Court deemed the Severance Agreement "ambiguous and reasonably capable of Wright's interpretation" for several reasons. First, components of the Severance Agreement's plain language suggested "symmetry" of the non-disparagement obligations, namely the title "Mutual Non-Disparagement" and the use of the word "likewise" when introducing the Foundation's obligation. Second, the "provided, however" clause, which granted Foundation personnel the ability to disparage Wright if in litigation or arbitration, would be "pointless" if all the Foundation needed to do was issue a "directive" and there was no further requirement not to disparage. Third, the Court found that the history of the parties' negotiations also lent credence to Wright's position. Because Goren had previously criticized Wright's interpersonal skills, Wright found the non-disparagement requirement "critically important." The Court reasoned that an alternative interpretation of the provision would "make little sense," as it would allow the Foundation to freely disparage Wright while "acting through the very person who signed the contract, who fired Wright assertedly based on criticisms of her professional skills, and who controlled the Foundation to a significant extent."

Ultimately, the Court found that deeming Wright's interpretation reasonable enough to survive dismissal better harmonized the Severance Agreement's terms as a whole, though it noted that whether Wright's position will ultimately prevail "remains to be seen."

The Court's decision emphasizes the need to clarify non-disparagement clauses in employment and separation agreements, including careful review of their headers and any other introductory text. Where an employer attempts to limit its non-disparagement obligations, such as requiring only a directive, the surrounding text must support that reading.