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Judges: disparagement provision not violated

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The 7th Circuit Court of Appeals twice declined to certify questions to the Indiana Supreme Court a litigant raised in his appeal of a suit involving alleged violations of a non-disparagement clause in a settlement agreement.

David N. Rain sued Rolls-Royce Corp. in federal court claiming the company breached a non-disparagement agreement in a settlement agreement Rolls-Royce and Rain’s company Paramount International Inc. entered into following an earlier lawsuit. Paramount and Rolls-Royce are direct competitors regarding helicopter engines.

They have a contentious history and after a 2005 lawsuit involving intellectual property disputes, the two companies entered into a settlement agreement that contained a provision stating “None of the Parties will disparage the other.” A breach of this will entitle the prevailing party to attorney’s fees and damages.

Two incidents in 2007 led to Rain filing the suit alleging a violation of the settlement agreement. Rolls-Royce filed a complaint in federal court in Texas alleging Rain and Paramount conspired with other defendants to use Rolls-Royce's proprietary information. In that suit, the company referred to Rain and Paramount as “Mr. Doe” and “Principal Corporation.” Also that year, Rain attended an expo as a guest of an authorized maintenance center. A Rolls-Royce vice president asked Rain to leave because he was concerned Rain would bait a Rolls-Royce employee into saying something disparaging. Rain left, which upset the organization that had paid for his ticket to attend.

The District Court granted partial summary judgment for Rolls-Royce on Rain’s breach of contract claim regarding the Texas lawsuit and after a bench trial, ruled in favor of Rolls-Royce on his breach of contract claim regarding the expo incident.

In David N. Rain and Paramount International Inc. v. Rolls-Royce Corp., No. 10-1290, the 7th Circuit found the requirements for applying Indiana’s absolute privilege were satisfied because the allegations made in the Texas court were made in the course of a judicial proceeding to which they were relevant. Rain argued the immunity doesn’t extend beyond defamation and other tort claims to encompass breach of contract claims – an issue Indiana state courts haven’t addressed. Looking to other jurisdictions, the 7th Circuit concluded that the Indiana Supreme Court would conclude that the absolute litigation privilege is applicable to breach of contract actions, at least where immunity from liability is consistent with the purpose of the privilege, wrote Judge Joel Flaum.

The judges also affirmed the judgment in favor of Rolls-Royce on the claim involving the expo event. They concluded, after using dictionary definitions of the term “disparage,” that the word in the settlement agreement properly is limited to actions dishonoring, discrediting, denigrating, or belittling the parties’ economic, business, or professional interests. Rain had argued the District Court erred by not including the sort of personal embarrassment he suffered at the expo event.

He also wanted the 7th Circuit to certify two questions to the Indiana Supreme Court: whether Indiana’s absolute litigation privilege applies to the breach of contract claims, and what the proper definition of disparagement is under the circumstances of the case. The appellate judges declined to certify either question, finding certification to be inappropriate regarding the disparagement definition and unnecessary for his first suggested question.

“If and when it arises again, the state courts will be free to reach their own conclusion, of course, and can tell us if our prediction of Indiana law was correct. Without seeing an obstacle to future state court resolution of the issue, we see no need to require the parties to go through another round of briefing and argument in this litigation,” wrote Judge Flaum.


 

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  1. I just wanted to point out that Congressman Jim Sensenbrenner, Senator Feinstein, former Senate majority leader Bill Frist, and former attorney general John Ashcroft are responsible for this rubbish. We need to keep a eye on these corrupt, arrogant, and incompetent fools.

  2. Well I guess our politicians have decided to give these idiot federal prosecutors unlimited power. Now if I guy bounces a fifty-dollar check, the U.S. attorney can intentionally wait for twenty-five years or so and have the check swabbed for DNA and file charges. These power hungry federal prosecutors now have unlimited power to mess with people. we can thank Wisconsin's Jim Sensenbrenner and Diane Feinstein, John Achcroft and Bill Frist for this one. Way to go, idiots.

  3. I wonder if the USSR had electronic voting machines that changed the ballot after it was cast? Oh well, at least we have a free media serving as vicious watchdog and exposing all of the rot in the system! (Insert rimshot)

  4. Jose, you are assuming those in power do not wish to be totalitarian. My experience has convinced me otherwise. Constitutionalists are nearly as rare as hens teeth among the powerbrokers "managing" us for The Glorious State. Oh, and your point is dead on, el correcta mundo. Keep the Founders’ (1791 & 1851) vision alive, my friend, even if most all others, and especially the ruling junta, chase only power and money (i.e. mammon)

  5. Hypocrisy in high places, absolute immunity handed out like Halloween treats (it is the stuff of which tyranny is made) and the belief that government agents are above the constitutions and cannot be held responsible for mere citizen is killing, perhaps has killed, The Republic. And yet those same power drunk statists just reel on down the hallway toward bureaucratic fascism.

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