No Libel Claim When Former Employer Tells Current Employer that Former Employee Breached a Noncompete Agreement

Rick Seymour

Rick Seymour

A March 18, 2013 case in Federal court in the District of Columbia teaches some useful lessons on the limits of libel law when an employer makes a reasonable publication for a contractually permitted purpose, and does not publish the allegedly defamatory statement any more broadly than necessary.  This is important to employers, because it is always useful to know how to draft an agreement to handle a potentially troublesome situation in a way enabling any legal challenge to be disposed of quickly and relatively inexpensively.  It seems to me that the decision equally benefits former employees, who now have a clear indication that what may seem wrong to them, and may feel with a lawsuit to challenge, is really okay and not something to fight about.

In Murphy v. LivingSocial, 931 F.Supp.2d 21 (D.D.C. 2013), Wendy Murphy worked at LivingSocial and signed a noncompete agreement, which stated among other things that she “agrees that following [plaintiff’s] employment with the Company, the Company shall have the right to communicate the terms of this Agreement to any prospective or current employer of Employee.  Employee waives the right to assert any claim for damages against Company or any officer, employee or agent of the Company arising from such disclosure of the terms of this Agreement.”  The parties had agreed by contract that D.C. law applied, although Ms. Murphy lived in Illinois.  LivingSocial believed that Ms. Murphy was about to work for a direct competitor and thought she might have helped the competitor by helping it solicit employees and customers.  In-house counsel sent her warnings not to violate the agreement, and the court described what happened next:

          Also on March 21, 2012, Brown sent a letter to Travelzoo’s Human Resources Director, Kaity Benedicto, regarding the solicitation of the LivingSocial sales representative. Compl. ¶ 70 & Ex. 4 (“Travelzoo Letter”). The Travelzoo Letter outlined plaintiff’s continuing obligations under the Non–Compete Agreement and demanded that Travelzoo cease and desist further solicitation of LivingSocial employees, customers, or prospective customers. The Travelzoo Letter is the subject of Count IV and defendants’ motion to dismiss.

931 F.Supp.2d at 24.  Ms. Murphy sued LivingSocial and the attorney, claiming libel per se in that her integrity was questioned.  The court held that D.C. law did apply because of the agreement, and rejected the libel claim because the letter to Travelzoo was privileged, both under the privilege for attorneys’ communications sent in anticipation of litigation and under the privilege of consent.  The court’s discussion of the limits of these privileges are useful reminders:

          Here, the Travelzoo Letter was written by LivingSocial’s attorney, advised Travelzoo of plaintiff’s contractual obligations, explained that plaintiff’s actions appeared to have been taken in violation of the contract, stated that LivingSocial reserved its rights “to take all legal and equitable action to protect its business interests,” and demanded that Travelzoo “immediately cease and desist from any further solicitation of LivingSocial employees, customers, or prospective customers.” Compl., Ex. 4. The Court finds that the statements in the letter indicate that litigation was under serious consideration. Furthermore, the statements in the letter bear a clear relationship to the dispute because they defined the nature of the dispute. Accordingly, the Court finds that the Travelzoo Letter is protected by the judicial proceedings privilege.FN3

          FN3. Indeed, plaintiff’s argument that the letter was not sent in anticipation of litigation is belied by the fact that she filed this lawsuit on March 26, 2012, only five days after the date of the letter.

          Plaintiff’s claim also fails because the statements in the letter are protected by the privilege of consent. See Farrington v. Bureau of Nat’l Affairs, Inc., 596 A.2d 58, 59 (D.C.1991) (“Consent is an absolute defense to a claim of defamation.”). The publication of a defamatory statement is privileged if “(1) there was either express or implied consent to the publication; (2) the statements were relevant to the purpose for which consent was given; and (3) the publication of those statements was limited to those with a legitimate interest in their content.” Id.

          The Non–Compete Agreement contains an express provision by which plaintiff consented to LivingSocial’s communicating the terms of the Non–Compete Agreement “to a prospective or current employer” of plaintiff. Non–Compete Agreement at ¶ 6(b). The statements made in the letter, alleging plaintiff had violated the restrictive covenants of the Non– Compete Agreement, were directly relevant to the purpose for which consent was given. Finally, the publication of the statement was limited to Travelzoo’s human resources director, who had a legitimate interest in the content of the statements. Accordingly, the letter is protected by the privilege of consent, and plaintiff’s claim fails.

931 F.Supp.2d at 26-27.

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