Company irked by DOJ press release must still abide by settlement agreement

Filed under: News |

By Joy Waltemath

By Dave Strausfeld, J.D.

A company that was annoyed by a DOJ press release announcing a settlement must still abide by the settlement agreement, held a federal district court in Nebraska, ruling on cross-motions for summary judgment. The press release asserted that “[t]he department’s investigation found” a violation, which differed from the settlement agreement that merely stated DOJ had “reasonable cause to believe” the company discriminated against noncitizens. But the stronger language of the press release was not a material breach because it did not frustrate the essential purpose of the settlement agreement, which was to resolve the dispute in a compromise that avoided litigation, so the company was ordered to perform all its obligations under the settlement despite its objection to the press release (U.S. v. Nebraska Beef, Ltd., December 9, 2016, Bataillon, J.).

Company wouldn’t comply with settlement citing press release as breach. An Omaha-based beef packaging company entered into a settlement agreement with DOJ a year and a half ago to resolve the Office of Special Counsel’s investigation into whether the company was discriminating against noncitizens who were legally authorized to work in the United States. The company agreed to pay $200,000 as a civil penalty and compensate affected workers who presented valid claims for backpay, among other terms. But when the time came to pay the civil penalty and implement the other terms, the company refused, saying it objected to how the DOJ had announced the settlement in the press release. In the company’s view, DOJ was in breach because of the manner in which it phrased its press release. The company maintained that this breach excused it from further performance under the settlement agreement.

DOJ then filed a lawsuit against the company seeking specific performance of the settlement agreement. The company responded by asserting a counterclaim for breach of contract and also raising several affirmative defenses, including that the DOJ’s suit was barred by the doctrine of unclean hands. The parties filed cross-motions for summary judgment.

Press release’s wording. In the disputed press release, DOJ stated that “[t]he department’s investigation found” that the company engaged in discriminatory practices related to documenting employment eligibility. But this was not an accurate reflection of the settlement agreement, the company insisted, because the agreement stated only that DOJ found “reasonable cause to believe” the company had used such documentary practices. Also, in the settlement agreement, the company explicitly denied any violation of the law.

The company was particularly upset that “for several days” following the issuance of the press release, “news and media outlets all over the country” reported that the company had been “found” to have violated the law, or words to that effect, when the company expressly denied the allegations as part of the settlement.

No material breach. Siding with DOJ, the court did not believe that the language in the press release varied sufficiently so as to constitute a breach as a matter of law. The press release itself mentioned the word “investigation” four times. And it provided a link to the settlement agreement, which contained a clause stating the company denied the allegations.

The “real question,” the court noted, was whether the language used by DOJ in the press release was a material breach of the settlement agreement. A material breach is something so fundamental to a contract that the failure to perform that obligation defeats the essential purpose of the contract. Here, the purpose of the settlement agreement was to resolve the dispute in a compromise that avoided litigation. DOJ’s press release did not frustrate this purpose.

The “essential purpose” of the agreement, to resolve the dispute without litigation, “remained intact” despite the wording of the press release. Also, the company still had the benefit of its bargain. Further, there was “absolutely nothing” in the settlement agreement that limited or constrained the statements of DOJ, and on the contrary, DOJ was permitted to educate the public about the settlement agreement.

Therefore, because DOJ’s press release did not defeat the essential purpose of the settlement agreement, it did not constitute a material breach and did not excuse the company from its obligations under the agreement. Accordingly, the court granted summary judgment for DOJ and ordered the company to pay the civil penalty and perform all of its other obligations under the settlement agreement.

Source:: Employment Law Daily Newsfeed


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