December 04, 2019 Top Story

First Amendment Bars Non-disparagement Clause in Settlement

City cannot reduce payment to victim of police abuse because of public comments

By John M. McNichols

The City of Baltimore cannot enforce a non-disparagement clause in its settlement agreement with a victim of police misconduct. In Overbey v. Mayor & City Council of Baltimore, a divided panel of the U.S. Court of Appeals for the Fourth Circuit held that the First Amendment rights of the victim and a local news organization trumped the city’s right to protect the reputations of its officers and to bring an end to public controversy. Although supportive of the outcome, ABA Section of Litigation leaders are doubtful that the decision portends a sea change in the use of non-disparagement clauses in civil settlements.

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Overbey’s Claims of Abuse by Police

Ashley Overbey brought federal and state claims against three Baltimore police officers who tasered and arrested her while responding to her 911 call. After years of litigation, she agreed to settle her case for $63,000. Although not a defendant in Overbey’s lawsuit, the city was a party to her settlement agreement, which included a clause requiring Overbey to “limit [her] public comments . . . to the fact that a satisfactory settlement occurred involving the Parties.” The agreement further provided that she would forfeit half her recovery if she failed to comply.

Before the city made the settlement payment, the Baltimore Sun published a report on Overbey’s case that included negative comments about Overbey by a city official. After Overbey responded with comments of her own, the city, citing the non-disparagement clause, reduced its payment to just $31,500. Overbey thereafter filed a second lawsuit to compel payment of the remainder. The Baltimore Brew, a local news website, joined in the suit and alleged that the city’s use of non-disparagement clauses impeded its ability to gather information of public concern.

A “Hush Money” Arrangement

On the city’s motion, the district court granted summary judgment and dismissed the lawsuit, holding that the non-disparagement clause did not violate public policy and that the Baltimore Brew lacked standing to challenge the city’s policies. The appellate court reversed, citing the “strong public interests” in “uninhibited, robust, and wide-open debate” on matters of abuses of power. The appellate court also held that the Baltimore Brew had “a legally protected interest in newsgathering” which was “invaded” by the city’s policy, notwithstanding that, unlike Overbey, it had no claim for monetary damages.

“The modern import of New York Times v. Sullivan, outside the context of a libel case, is that citizens should be critical of the government. The Overbey case furthers that principle,” notes Jonathan Peters, Athens, GA, chair of the First Amendment Subcommittee of the Section of Litigation’s Civil Rights Litigation Committee. In fact, the “most telling language in the opinion” was the appellate court’s characterization of the non-disparagement clause as “a ‘hush money’ arrangement,” which is “strong language directed at a public entity,” Peters adds. Notably, the non-disparagement clause was binding on Overbey only, but Section leaders caution against reading too much into that fact. The one-sidedness of the clause “doesn’t add a whole lot for the decision to come out differently,” says Franchesca L. Hamilton-Acker, Lafayette, LA, the Section’s Secretary and Chief Diversity Officer. Indeed, had the non-disparagement clause been bilateral, “you would end up in the same place constitutionally, but the panel wouldn’t have had to hold its nose as much,” adds Peters.

Section leaders also took note of the appellate court’s focus on the right to collect information, the basis of the Baltimore Brew’s standing to sue. “The First Amendment has historically been interpreted as protecting citizens’ rights to communicate. It’s not been as good at protecting the right to gather news,” says Peters. In this regard, Overbey “is one of very few decisions focusing on this particular component of the First Amendment’s panoply of protections in support of robust public debate,” he adds.

Limited Implications to Settlement Agreements Generally

Despite this important development, it is unlikely that Overbey will bar the use of non-disparagement clauses in civil settlements in general. For one thing, the application of the First Amendment turned on the fact that one of the parties was a state actor. The decision’s holding likely does not apply to settlement agreements between private parties. “The outcome of the case has a lot to do with the fact that a city was involved,” explains Hamilton-Acker. Indeed, “the majority in Overbey was careful to spell out that the case involves a government-citizen relationship,” notes Peters.

In addition, Overbey may not apply in all instances where a state actor is involved, as not all cases involving government implicate the same interests. The subject of police misconduct is “very high profile at the present time,” remarks Hamilton-Acker. Thus, in cases involving state actors but less important interests—for example, the negligence of municipal employees—one might expect to see courts uphold non-disparagement clauses in settlement agreements. “The Overbey decision emphasizes the importance of keeping government honest when its powers are as expansive as those of the police,” observes Peters. Absent those concerns, “a court would likely find that case to be less constitutionally significant, and there could very well be a different outcome,” he predicts.

 

John M. McNichols is a contributing editor for Litigation News.


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