In Reversal of Fortune, Court of Appeals Finds Ambiguity in Executive’s General Release
Last May, we covered a decision by a Michigan federal court that torpedoed Debourah Mattatall’s claims against her former employee, Transdermal Corporation. Now, thanks to a recent decision by the U.S. Court of Appeals for the Sixth Circuit, Mattatall’s claims have been brought back to life.
To briefly recap the facts, Mattatall used to own a company called DPM Therapeutics Corporation. She sold it to Transdermal and entered into a Stock Purchase Agreement and Employment Agreement with that company. According to Mattatall, Transdermal didn’t comply with its obligations, and she sued it in federal court. But the court quickly granted summary judgment, finding that Mattatall gave up her claims in a settlement agreement that resolved other litigation against her.
In that litigation, DPM’s minority shareholders challenged the sale to Transdermal, and Transdermal countersued those shareholders. The parties to the litigation, including Mattatall, resolved the dispute and entered into a settlement agreement and a general release. The release stated that “Transdermal, DPM, [another controlling owner], and Mattatall and each [minority shareholder] … release[d], waive[d] and forever discharge[d] each other” from any claims arising before the agreement was signed. In Mattatall’s subsequent lawsuit against her employer, Transdermal, the district court ruled that this language released all claims that any party to the agreement had against any other party – even though Transdermal and Mattatall were on the same side in the shareholder litigation, and Transdermal reassured Mattatall that she wasn’t releasing her unrelated claims against it before she signed. Because her claims against Transdermal fell within the “unambiguous” and “broadly worded” terms of the release, this evidence was irrelevant, and Mattatall was out of court.