The Iowa Court of Appeals issued an opinion on May 12, 2021, regarding sanctions in a case that originally involved a dispute between an employer and an employee. This case has been the subject of several news stories lately for the drama that unfolded in court filings over several years, but the lesson for employers isn’t in the drama but the decision of the court.
About the case
This began as a standard employee termination, with the terminated employee starting his own company in the same industry. With that, the lawsuits began, including contentious arguments about a non-compete agreement, confidential information, and various trade secret issues.
In an effort to limit the scope of the litigation, the parties entered into a consent agreement before the court. The consent agreement prohibited the parties from making disparaging statements “about adverse parties to this case, their services, products, policies or abilities - whether verbally or in writing, including the on-line postings and website, regardless of the truth or the falsity of such statements.” In other words, an extremely broad non-disparagement requirement. It didn’t matter if the comment was true or not - you weren’t supposed to say it.
Then the motions began, with one party bringing at least 12 motions for sanctions against the other, successfully arguing that the non-disparagement clause had been breached. This case does not go to the issue of the validity of a non-compete or trade secrets concerns but mostly to the non-disparagement agreement itself.
When the various motions for sanctions were raised, they were resisted with the accused “generally admitting he made the statements” but denying that these statements violated the consent order, citing to context as well as truth or veracity.
This was further complicated by the fact that the person allegedly violating the disparagement clause also had a podcast and made multiple comments on that podcast about the matters that were at issue with the court. There were also motions relating to Facebook posts and similar use of social media.
What the court decided
The court’s opinion is 57-pages long and details the 12 motions for contempt and sanctions regarding the violation of the anti-disparagement agreement as well as a history of discovery problems and other issues within the case. Ultimately, the takeaway from this case is that anti-disparagement agreements, particularly if all parties to the agreement are represented by counsel, do have teeth and are enforceable via court action. While this was an agreement made directly with the court, the language of the case can carry over to private agreements regarding anti-disparagement such as those which might be contained within a severance agreement or settlement.
However, the history of the case also indicates that having an anti-disparagement agreement is not always effective, it does not always work in actually stopping comments and behaviors. An agreement only works if everyone abides by it. For some, social media is an enormous temptation to air their grievances. In attempting to enforce an anti-disparagement clause, clear evidence which includes things such as Facebook posts, published or broadcasted podcasts, and similar items go a long way in convincing the court that disparagement or a breach of the agreement has actually occurred.
Perhaps anti-disparagement agreements can be enforceable, but it can be difficult to prove that the issues occurred. Employers should place their expectations in writing, provide a copy to the employee and consistently enforce the terms of the agreement. Consistent enforcement, as occurred in this case, can be a key to validating agreements of this type.