Plaintiffs were various corporate entities and Keith Lee, their founder and chief executive (collectively, “Feenix”). Defendant Michael Blum was the managing member of a commercial real estate developer (“PBM”). Feenix and PBM entered into a landlord-tenant relationship for two Pittsburgh offices. Three years later, Blum signed a separation agreement for his membership interests in a Feenix entity. The agreement included language extending Blum’s non-disparagement and non-disclosure obligations from the entity’s operating agreement. In exchange, Blum received a redemption payment. A falling out then occurred. Feenix refinanced debt through a new debt facility, after first closing a transaction that Blum viewed as a sham. Notwithstanding the separation agreement’s non-disparagement clause, Blum directed an attorney to send a letter to Feenix’s original lender alleging that the transaction was a sham. As a result, the original lender required a holdback of $50,000, ultimately refunding Feenix just over $38,300. Feenix filed claims against Blum; the claim for breach of the separation agreement’s non-disparagement clause survived to a bench trial.
The Superior Court determined that Blum’s letter to Feenix’s original lender constituted a breach of the separation agreement’s non-disparagement restrictive covenant, given the letter’s characterization of Feenix’s actions as a “fraud” and a “sham transaction.” The Court also noted that Blum’s letter shared confidential information regarding Feenix’s refinancing plans and thus was a breach of the separation agreement’s prohibition on disclosure of confidential information. Though Blum’s actions constituted a breach, the Court found nearly all requested damages to be too speculative, including reputational damages, and only awarded damages of just more than $11,000 in connection with the original lender’s holdback. In light of the limited damages award, the Court determined neither party had substantially prevailed and thus declined to award fees under the separation agreement’s fee-shifting provision.
