A federal court permitted a company to bring claims of non-disparagement and defamation against a former employee after he authored a book on workplace bullying—even though the book didn’t name the employer.
For more than 30 years, Matthew Paknis operated a consulting business focused on management and leadership training. In 2005, he began providing a seminar for managers at Toray Plastics, which he continued for a decade.
In 2016, Toray hired Paknis to work full time in its human resources department. Issues arose a few months later between Paknis and Toray management, and he was placed on administrative leave and eventually terminated in September 2017.
Paknis and Toray participated in mediation to resolve any potential claims arising from his termination. Toray learned that Paknis had signed an agreement to write and publish a book titled Successful Leaders Aren’t Bullies.
The parties executed a settlement agreement releasing each from liability that included a non-disparagement clause specifically addressing the book, with a provision that Paknis would pay Toray $55,000 for each violation of the non-disparagement clause.
Paknis’ book went on sale in September 2018. In it, he wrote about dysfunctional corporate cultures and environments, with examples of workplace bullying taken from his career as a consultant. According to Paknis, the examples represent compilations of his experience, with details from different companies blended together to remove identifiable information.
Toray filed suit against Paknis for breach of contract, unjust enrichment and defamation. The company asserted that several current and former employees believed the book to contain information about Toray.
Both parties moved for summary judgment and U.S. District Court Judge William E. Smith denied both, with the exception of granting Paknis’ motion on Toray’s unjust enrichment claim.
For its breach of contract claim, Toray pointed to 14 separate statements in the book that allegedly violated the non-disparagement clause. Even though the book does not name Toray or its employees directly, the company attempted to connect each of the statements with facts about its business operations, leadership team or other information.
A breach of the non-disparagement clause occurs if Paknis made statements which “reasonably could be construed to be derogatory or disparaging to Toray,” Judge Smith said, finding genuine issues of material fact remained on the question of whether the statements could be construed to be about Toray.
“It is undisputed that the book does not identify Toray or its employees by name,” he wrote. “But a breach may still occur if the reference in the book is clear enough that a reader could reasonably construe the passage to be about Toray.”
A fact finder would be better suited to resolve this dispute, the court said, although it noted “serious questions” about the enforceability of the liquid damages clause, as such provisions are meant to compensate for loss, not to exact punishment for breach.
Judge Smith tossed Toray’s unjust enrichment claim, which hinged on a disputed contractual provision, leaving the damages unavailable.
As for Toray’s defamation claim, the court allowed it to move forward with regard to some of the 14 statements. A handful of statements contained factual assertions “that simply could not be construed as injurious to Toray’s reputation, even if false and about the company,” the court said, making them not actionable.
However, material issues of fact remained for other statements with regard to falsity and whether the ordinary reader would understand the statements to “concern” Toray, Judge Smith found.
To read the memorandum and order in Toray Plastics (America), Inc. v. Paknis, click here.
Why it matters: While the court cautioned the employer about its chances of success on certain elements of the case, it allowed the claims of disparagement and defamation to move forward, finding the dispute better suited to a fact finder.