Don't allow egos to waste time, money
Published 10/28/05

An agreement between a worker and its former employer that the worker will not disparage the employer may not always be of real value to the employer.

This point was illustrated in the January 18, 2005 Massachusetts State Court ruling in Boston Partners Asset Management, L.P. v. Wayne Archambo, et al. BPAM is Boston based investment firm founded to manage the large cap, mid cap and small cap value products and other specialty investment products.

Archambo worked at BPAM as a limited partner and senior portfolio manager in charge of small cap and mid cap value products until his resignation in June 2001 when he went to work for a direct competitor of BPAM, Black Rock, Inc.

This change of employment resulted in a lawsuit by BPAM against Archambo concerning the enforceability of a one-year non-compete covenant. On September 7, 2001, BPAM, Archambo and Black Rock entered into a Settlement Agreement wherein, among other things, Archambo and Black Rock agreed they would not disparage BPAM.

BPAM alleges that despite this non-disparagement agreement Archambo criticized BPAM to: an investment consultant; one of BPAM's largest customers and; another financial organization. BPAM thereinafter sued for breach of the non-disparagement provision and to prove its damages hired two experts in the money management industry one of whom opined that BPAM suffered damages not less than $25,000,000 and the other opined damages between $10,000,000 and $30,000,000 as a result of the disparaging remarks.

The Court ultimately excluded both experts' testimony for the upcoming trial, after the parties had spent extensive time and money in the breach of non-disparagement clause litigation, finding that there was no theory or technique to calculate damages offered by the opining experts and no underlying supporting data or analysis for their opinion and therefore the experts' opinions were unreliable.

Archambo had counterclaimed alleging that BPAM's non-disparagement claim was brought in bad faith and constituted an unfair business practice under state law as well as abuse of the legal process. The Court noted that while BPAM's claims were likely to result at trial in achieving a judgment for only nominal damages since no expert was to testify as to actual damages, the Court did find that it was quite possible that BPAM would be able to prove a breach of the non-disparagement clause and therefore Archambo would lose his counterclaim.

In essence, the trial outcome would be a draw. While this case shows that not all non-disparagement clauses can be effectively enforced, workers should also realize that most professionals, including prospective or current employers, view a worker's bad-mouthing of his former employer as inappropriate and indiscrete.

The Court admonished the parties that they had wasted so much time and effort to date in the litigation and recommended that they try to resolve the case before they wasted more time and effort in a litigation that in practical effect will yield neither of them any substantive benefit.

This case helps illustrate how sometimes a worker and its former employer can allow anger and egos to interfere with sound business judgment in determining when to fight and when to simply walk away. Principle is rarely a sound reason for litigation.

J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and business persons on a variety of legal issues, including employment, and advocating on their behalf. You can reach Attorney Marr by e-mail at: dmarr@hamker.com

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