North Carolina Business Litigation Report

Nondisparagement Provision Wasn't Violated By "Barroom Gossip"

When law firms break up, litigation often follows.  The case of Merritt, Flebotte, Wilson, Webb & Caruso, PLLC v. Hemmings, decided Tuesday by the North Carolina Court of Appeals, involved claims between lawyers of defamation and violation of a nondisparagement provision in a settlement agreement.

The Defendants had left the Plaintiff's firm to start their own practice. The Plaintiff sued them over sharing of fees and reimbursement of costs. The fighting lawyers settled the first lawsuit. A nondisparagement provision was included in their settlement agreement.

Then came round two. Plaintiff sued the Defendants again, saying they hadn't complied with the settlement. The Defendants responded that they were excused from their obligations for several reasons, including a breach of the nondisparagement provision. They counterclaimed for defamation.

The defamation claim involved statements made by Plaintiff's office manager. He had been out one night at a bar in Raleigh called "White Collar Crime." He allegedly said to a friend of one of the Defendants that the Defendant was "untrustworthy" and "suggested" that the Defendant "had done something wrong or committed some kind of crime when he left the firm."

The Defendants said that the office manager had been acting on behalf of the Plaintiff law firm when he made these statements and that the nondisparagement provision had been breached. The Plaintiff disputed that the office manager was authorized to speak for the firm, and said that the after hours statements at the bar hadn't been made within the course and scope of his employment anyway.

The Court of Appeals affirmed the trial court's summary judgment for the Plaintiff, and said that the Defendants could "articulate no legal connection between these facts and the legal relationship of principal and agent. Defendants offered no evidence that the scope of [the office manager's] employment included barroom gossip about members of the firm, and cite no appellate opinions suggesting that an employee is considered an 'agent' of his employer even when he acts far outside the scope of his employment."

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Mack Sperling
Brooks Pierce, LLP
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230 North Elm Street
Greensboro, NC 27401
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Raleigh, NC 27601
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