Cooper Tire & Rubber Co. v. Farese

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT August 23, 2005

Charles R. Fulbruge III
Clerk
No. 04-60774

COOPER TIRE & RUBBER CO.,

Plaintiff-Appellant,

versus

JOHN BOOTH FARESE; FARESE, FARESE & FARESE PROFESSIONAL
ASSOCIATION; JOHN DOES A-A; CLYDE TAB TURNER; TURNER &
ASSOCIATES P.A.; BRUCE R. KASTER; BRUCE KASTER, P.A.,

Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of Mississippi

Before HIGGINBOTHAM, BARKSDALE, and CLEMENT, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

For this diversity action to which Mississippi law applies,

Cooper Tire & Rubber Co. contests the summary judgment awarded John

Booth Farese, Bruce Kaster, and their law firms against Cooper

Tire’s claims for tortious interference with contract and business

relations and for civil conspiracy. Cooper Tire alleges: Cathy

Barnett, upon ending her employment at Cooper Tire, signed a

separation agreement that contained a non-disparagement clause;

nevertheless, she executed an affidavit, prepared with Farese,

containing false and disparaging statements about Cooper Tire;

despite knowledge of the separation agreement, Farese provided
Barnett’s affidavit to another attorney, who provided it to Kaster,

for use in pending litigation in Arkansas against Cooper Tire;

despite knowledge of the separation agreement, Kaster leaked the

affidavit to the media; as a result, Cooper Tire sustained

extremely substantial losses to its stock value; and Kaster paid

Farese $50,000 after the Arkansas litigation was settled. The

district court erred in holding that, as a matter of law, the

separation agreement is void for illegality and unconscionability;

in addition, material fact issues preclude summary judgment.

VACATED and REMANDED.

I.

This litigation springs from the affidavit by Barnett, a

former Cooper Tire employee at its plant in Tupelo, Mississippi.

When the affidavit was prepared with Farese, Barnett was in the

process of having her employment terminated for allegedly

embezzling gift certificates and college football tickets from

Cooper Tire’s company picnic fund. In exchange for its not filing

criminal charges, Cooper Tire required Barnett to execute the

separation agreement, which, inter alia, contained the following

non-disparagement clause:

I agree (a) not to make any public statement
or statements to the media or, directly or
indirectly, provide information of any kind,
whether written or non-written, to, or
otherwise collaborate in any way in the taking
of any action with, any third party concerning
[Cooper Tire], without first receiving the
written approval of [Cooper Tire]; and (b) not

2
 to take action or make any statements which
could cause [Cooper Tire] any embarrassment or
humiliation or otherwise reflect negatively on
[Cooper Tire] or cause [Cooper Tire] to be
held in disrepute. In the event of a
violation of the terms and conditions of this
Section, I agree [Cooper Tire] shall have the
right to seek any injunctive, equitable and
other legal relief available to it.

(Emphasis added.)

The separation agreement, which was prepared on or about 4

October 2001, advised Barnett to seek legal representation before

signing it. Barnett retained Farese of Farese, Farese & Farese,

P.A., in Ashland, Mississippi. During their initial meeting on 12

October 2001, Barnett informed Farese that she and another

employee, Sheila Hall, had burned documents at the behest of Hogan

Cooper, her manager at Cooper Tire; the documents were allegedly

discoverable in pending litigation in Arkansas. See Whitaker v.

Cooper Tire & Rubber Co., No. 2:99CV00220 (E.D. Ark. 2002).

While Barnett was still at Farese’s office, and without her

knowledge, Farese telephoned Tab Turner, a products liability

lawyer in Arkansas who, Farese remembered, had recently obtained a

large verdict against Cooper Tire in Mississippi. The telephone

conversation lasted approximately 40 minutes. Turner suggested

that Farese acquire “a lot” of detailed information from Barnett.

After Farese had talked with Turner, he drafted an affidavit

for Barnett, containing her document-burning statements. She

3
executed it that day. Almost immediately after it was executed,

Farese telephoned Turner and read the affidavit to him.

A few days later (16 October), Cooper Tire emailed to Farese

its proposed separation agreement (prepared initially on or about

4 October). Among changes proposed by Farese, he made the

following to its non-disparagement clause, in order to: (1) shift

the separation agreement’s effective date from 4 to 31 October; and

(2) make the clause prospective, by inserting “hereafter” before

its operative language. Farese emailed the revised separation

agreement to Cooper Tire on 18 October.

Almost immediately after emailing his proposed revisions to

Cooper Tire, and without Barnett’s knowledge, Farese faxed her

affidavit to Tab Turner; the cover sheet stated “Tab (a/k/a Lucky

Dog): attached is a copy of the affidavit”. Prior to this email,

Farese had never addressed Turner as “Lucky Dog”. (As developed in

subsequent discovery, Farese believed that, had he provided the

affidavit to Turner after Barnett signed the separation agreement,

“we would have breached the [separation] agreement”.)

Cooper Tire rejected Farese’s proposed changes to the non-

disparagement clause and the separation agreement’s effective date,

but did acquiesce in a number of other changes. Executed by

Barnett on 23 October 2001, the separation agreement states, inter

alia: “I hereby voluntarily resign from employment at [Cooper

Tire] effective October 4, 2001 ....”; “This Agreement does not

4
become effective or enforceable until seven (7) days from the date

on which I execute this Agreement (the ‘Effective Date’)”; and, at

the bottom of the final page, “Effective Date: October 4, 2001”.

(Emphasis added.)

On 22 October 2001 (the day before Barnett executed the

separation agreement), Turner emailed Kaster and Paul Byrd,

plaintiffs’ counsel in the Arkansas Whitaker action, to inform them

of the existence of Barnett’s affidavit, but did not disclose her

identity, stating: “She is not yet ready to come forward due to a

pending employment problem, but is very concerned about what she

has done”. On the other hand, Turner did provide Kaster and Byrd

with a general overview of the affidavit’s contents and ended by

stating:

I thought you should know about this so you
can ask some questions to set the situation
up. I would suggest that you be VERY careful
about how you do this so as not to tip anyone
off about what you might know.

Subsequent to this email, Byrd and his partner, James

Swindoll, telephoned Turner repeatedly, asking whether the affiant

was ready to come forward. By a 5 March 2002 email, Turner

disclosed Barnett’s identity to Byrd. Swindoll soon obtained a

copy of the affidavit from Turner and provided it to Kaster.

The week after obtaining the affidavit, Byrd met with Farese

at his law office in Ashland, Mississippi, where they discussed

Barnett, her affidavit, and what Farese knew about Sheila Hall (as

5
noted, she is identified in Barnett’s affidavit as having burned

documents with Barnett). At his deposition in this action, Byrd

testified that Farese informed him he would have to subpoena

Barnett if he wanted to depose her. (Cooper Tire asserts Farese

did this in order to “get around the language of the [separation]

[a]greement”.)

Cooper Tire learned from Kaster of the affidavit’s existence

during a 13 March 2002 hearing in the Whitaker litigation. Kaster

initially resisted Cooper Tire’s requests to reveal Barnett’s name

and for a copy of the affidavit. The district court in Arkansas

reviewed the affidavit in camera and, in mid-April 2002, ordered

Kaster to produce it to Cooper Tire.

On 11 April 2002, the Whitaker plaintiffs noticed Barnett’s

deposition for 23 April. The record does not reflect whether she

was subpoenaed. Byrd testified in his deposition in the instant

action that he did so; but, he changed his testimony on the

deposition errata sheet, stating he could not remember whether he

had. Farese never determined the validity of the subpoena

(assuming Barnett was subpoenaed); nor, prior to Barnett’s

deposition being noticed, did he tell her that he had been in

contact with the Whitaker plaintiffs’ counsel.

By a faxed 22 April 2002 letter, Farese notified Greg Meyers,

Cooper Tire’s counsel, of Barnett’s deposition, set for 23 April.

Farese asked if Meyers believed the separation agreement prevented

6
Barnett’s testifying; advised Barnett had done nothing since the

execution of the separation agreement to violate it; and claimed

the separation agreement became effective 31 October 2001.

By a faxed 23 April letter, Meyers responded that the

separation agreement did not prevent Barnett from being deposed

pursuant to a valid federal court subpoena. Meyers took exception,

however, to Farese’s assertion that Barnett had done nothing since

the execution of the separation agreement that would violate its

terms. Meyers asserted: the separation agreement stated the

effective date was 4 October 2001; the affidavit was in violation

of the agreement; and if Barnett had executed the affidavit prior

to executing the agreement, then it was bad faith not to disclose

this to Cooper Tire.

By a faxed 24 April letter, Farese replied to Meyers: “You

are correct about the effective date of the agreement; it was

October 4, 2001”. (Emphasis added.) He stated, however, that the

separation agreement was silent regarding any disclosures made

prior to its effective date.

Barnett was deposed on 23 and 24 April 2002. Approximately

two weeks later (10 May), her affidavit was leaked to a national

business television news organization, which gave the story wide

coverage. The story broke that same day, with Cooper Tire’s stock

price dropping approximately 25% ($500 million) in the first hour

of trading and closing the day down 11% ($220 million).

7
 On 14 May 2002, Barnett was subpoenaed to attend a 16 May 2002

hearing in district court in Little Rock, Arkansas, in the Whitaker

litigation. (Farese held a 13 minute telephone conversation with

the Whitaker counsel the morning the subpoena was sent to Barnett;

however, neither party to that conversation recalls its subject

matter.) At the hearing, and in a subsequent deposition, Barnett

testified that she had not wanted to attend the hearing. Despite

her not wanting to do so and her living in another state, over 100

miles from the courthouse in Arkansas, Farese made no effort to

quash the subpoena. See FED. R. CIV. P. 45(c)(3)(A)(ii) (“On timely

motion, the court by which a subpoena was issued shall quash or

modify the subpoena if it requires a person who is not a party or

an officer of a party to travel to a place more than 100 miles from

the place where that person resides ....”) (emphasis added).

The hearing concerned the Whitaker plaintiffs’ sanctions

motion for Cooper Tire’s alleged spoliation of evidence. At the

hearing, and contrary to her affidavit, Barnett testified that she

had not been instructed by Hogan Cooper or anyone else at Cooper

Tire to burn documents. She testified that, instead, she was

afraid of being blamed for the failure to remain current with

Cooper Tire’s document retention policy and of adverse consequences

if anyone found out. When Cooper Tire attempted to question

Barnett about the circumstances surrounding its terminating her

employment, the Whitaker plaintiffs objected, asserting the

8
questions were violative of the separation agreement. As a result,

the court subsequently struck Barnett’s entire testimony because

the defendants (including Cooper Tire) had been prevented thereby

from properly cross-examining her. At the end of the two-day

hearing, which included testimony by Sheila Hall and Hogan Cooper,

the court found there was no credible evidence that anyone at

Cooper Tire instructed Barnett or Hall to burn documents. The

Whitaker action subsequently settled on 31 July 2002 for an

undisclosed amount.

Post-settlement, the Whitaker plaintiffs’ counsel sent Farese

a check for $50,000. In a subsequent affidavit, Kaster stated it

was intended as a gift. After receiving the check, Farese

telephoned Barnett and offered her $25,000, without disclosing the

amount received. Per Barnett’s instructions, Farese made the check

payable to Barnett’s father, in order to hide the proceeds from

Barnett’s husband, who was still employed by Cooper Tire. On his

federal income tax return, Farese listed his $25,000 as “income”.

When deposed in the instant action, Barnett invoked her Fifth

Amendment right against self-incrimination when asked how she

treated her $25,000 for income tax purposes.

On 31 December 2002, Cooper Tire filed this action against

Farese and his law firm, claiming tortious interference with its

contract with Barnett and tortious interference with its business

relations. After obtaining additional information, Cooper Tire

9
added Turner, Kaster, and their law firms as defendants, as well as

a civil conspiracy claim. The district court bifurcated trial on

liability and damages.

Cooper Tire’s claims against Turner and his firm were

dismissed for lack of personal jurisdiction, the dismissal being

certified under Federal Rule of Civil Procedure 54(b) as a partial

final judgment. Cooper Tire’s appeal from that partial judgment

was dismissed voluntarily after a settlement with Turner.

Farese answered and counterclaimed for abuse of process. The

counterclaim was dismissed for failure to state a claim upon which

relief could be granted.

On 9 September 2003, instead of filing an answer, Kaster moved

to dismiss for failure to state a claim. Simultaneously, he moved

to stay discovery, joined later by Farese, pending disposition of

the motion to dismiss. On 20 November 2003, the district court,

inter alia, stayed discovery for 90 days. On 12 December 2003, it

stayed all scheduled depositions for 90 days, but allowed written

discovery during that period; the discovery deadline was vacated

and never reset.

On 30 January 2004, Farese moved for summary judgment.

Pursuant to Rule 56(f), Cooper Tire moved to stay Farese’s motion

pending completion of discovery; Cooper Tire described in the

requisite Rule 56(f) affidavit the numerous outstanding discovery

10
disputes preventing its responding to Farese’s motion. See FED. R.

CIV. P. 56(f).

The district court did not rule on the motion until June,

almost four months later. In the interim, on 13 February 2004,

Cooper Tire submitted an additional Rule 56(f) affidavit addressing

additional disputes that had arisen during discovery, most notably

Kaster’s numerous claims of privilege and Cooper Tire’s outstanding

motions to compel.

Shortly before expiration of the discovery stay on 18 February

2004, Kaster, joined by Farese, moved to extend it. The district

court granted the motion on 1 March 2004, with the stay being

extended an additional 90 days, or until a ruling on Kaster’s

motion to dismiss, whichever occurred first. The order, however,

allowed Cooper Tire to conduct any scheduled depositions in March

and April 2004.

In June 2004, the district court denied Cooper Tire’s Rule

56(f) motion, ruling that it “had ample time to conduct discovery”.

Cooper Tire & Rubber Co. v. Farese, No. 3:02CV210-P-A (N.D. Miss.

3 June 2004) (unpublished order). Subsequently, Kaster’s motion to

dismiss was denied. Kaster answered Cooper Tire’s complaint, and,

shortly thereafter, filed a summary judgment motion similar to his

motion to dismiss.

On 17 August 2004, without additional discovery being

conducted, the district court awarded summary judgment to Farese

11
and Kaster and their firms. The court held: (1) the separation

agreement was ambiguous as to the effective date; (2) this

ambiguity was caused by Cooper Tire’s “draft[ing] the [final]

version of the [separation] [a]greement in direct response to

somehow discovering the existence of the Barnett affidavit”; (3)

under Mississippi law, non-disparagement agreements are void per se

for illegality; (4) under Mississippi law, the separation agreement

was unconscionable; and (5) because the separation agreement was

invalid, Cooper Tire’s claims failed as a matter of law. Cooper

Tire & Rubber Co. v. Farese, No. 3:02CV210-P-A, slip op. at 4-10

(N.D. Miss. 17 August 2004) (emphasis added) (Farese).

II.

A summary judgment is reviewed de novo, applying the same

standard as the district court. E.g., Ford Motor Co. v. Tex. Dep’t

of Transp., 264 F.3d 493, 498 (5th Cir. 2001). Such judgment is

appropriate when “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment

as a matter of law”. FED. R. CIV. P. 56(c). “We construe all facts

and inferences in the light most favorable to the nonmoving party

when reviewing ... [a] summary judgment.” Murray v. Earle, 405

F.3d 278, 284 (5th Cir. 2005) (citation omitted).

12
 “An issue is ‘genuine’ if the evidence is sufficient for a

reasonable jury to return a verdict for the nonmoving party.”

Hamilton v. Segue Software Inc., 232 F.3d 473, 477 (5th Cir. 2000)

(citation omitted). “A fact issue is material if its resolution

could affect the outcome of the action.” Thompson v. Goetzmann,

337 F.3d 489, 502 (5th Cir. 2003) (citation omitted).

Cooper Tire contends the district court: (1) abused its

discretion in denying the Rule 56(f) motion; (2) made improper

factual findings on summary judgment regarding material fact

issues; and (3) erred in concluding the separation agreement’s non-

disparagement clause was void for illegality and unconscionability

under Mississippi law. (Because the summary judgment is vacated,

it is not necessary to reach the Rule 56(f) issue.)

A.

As an affirmative defense, Kaster raises an agreement between

Cooper Tire and the Whitaker plaintiffs’ attorneys, reached during

settlement negotiations for that action and which was described on

the record at a hearing in district court in Arkansas regarding

those negotiations. Because of that agreement, Kaster asserts

accord and satisfaction for any claims arising out of the use of

Barnett’s affidavit or anything else stemming from the Whitaker

action.

The agreement states: “Neither side will assert sanctions

and/or ethical complaints or allegations against anyone arising out

13
of [the Whitaker] case ....” (Emphasis added.) In court, Kaster

characterized the agreement as follows:

We’ve ... agreed, in accordance with the
ethical guidelines, [that] neither side at
this point perceives any unethical violations
or misconduct by the other, and so we agreed
we will not assert any type of sanctions
motions or proceedings or any type of ethical
complaints or allegations, one side against
the other.

(Emphasis added.) Here, he relies on his verbal characterization.

Needless to say, the written agreement, not Kaster’s

characterization, controls.

Kaster raised this defense in his answer to Cooper Tire’s

complaint and in his summary judgment motion. Because the district

court found the separation agreement void on other grounds, it did

not reach this issue.

Contrary to Kaster’s contention, and for purposes of the

instant action, the agreement precludes only criminal and civil

proceedings “between Cooper and Cathy Barnett ....” The agreement

is silent regarding such proceedings against Farese, Kaster, or

their firms. Pursuant to its plain language, this agreement

pertains only to “sanctions and/or ethical complaints or

allegations ... arising out of” the Whitaker action. Restated, it

does not cover the intentional torts claimed here. Kaster’s

defense fails as a matter of law.

14
 B.

The district court made several rulings concerning the

separation agreement’s terms. Two rulings are critical to this

appeal.

1.

First, it held the agreement’s effective date ambiguous. As

discussed, the separation agreement, prepared initially by Cooper

Tire on or about 4 October 2001, states: Barnett resigned

effective “October 4, 2001”; “[t]his Agreement does not become

effective or enforceable until seven (7) days from the date on

which I [Cathy Barnett] execute this Agreement”; and, at the bottom

of the final page, the effective date is given as 4 October 2001.

The agreement was not signed by Barnett, however, until 23 October

2001.

Therefore, whether it became enforceable seven days after 4

October (11 October) or 23 October (30 October) is ambiguous. If

it became effective on 11 October, Barnett’s 12 October affidavit

was covered by its terms. Because the existence of contractual

ambiguity is an issue of law, see, e.g., Miss. Power Co. v.

N.L.R.B., 284 F.3d 605, 619 n.39 (5th Cir. 2002), the district

court did not err in this ruling.

2.

The district court erred, however, in ruling that Cooper Tire

backdated the separation agreement in order to cover Barnett’s

15
affidavit. The court stated: “it is not a stretch to infer that

Cooper Tire more likely than not drafted the second version of the

[separation] [a]greement in direct response to somehow discovering

the existence of the Barnett affidavit”. Farese, slip op. at 5

(emphasis added). As noted, however, and as the district court

acknowledged in its opinion, a court is to make all reasonable

inferences in favor of the nonmovant in ruling on a summary

judgment motion. In this instance, the district court improperly

made a critical inference against Cooper Tire, the nonmovant.

Moreover, this inference is unsupported by the record.

(Indeed, no appellee contends the ruling is correct.) The record

reflects: the 4 October 2001 effective date was in the original

version of the agreement; Farese attempted to change the effective

date to 31 October 2001, but that change was rejected by Cooper

Tire; and Cooper Tire did not learn that Barnett was the source of

the affidavit until April 2002, when the district court in Arkansas

compelled its production. Additionally, communications between

Turner and counsel for the Whitaker plaintiffs show they wanted to

keep secret until the most opportune time the affiant’s identity

and the affidavit’s contents.

Accordingly, Farese and Kaster contend that, even if the

district court’s ruling on this point is reversed, summary judgment

is still appropriate because contractual ambiguities should be

resolved against the drafter (Cooper Tire). (The only authority

16
cited for this proposition is a Mississippi Supreme Court

dissenting opinion concerning a deed of trust. See Shutze v.

Credithrift of Am., Inc., 607 So. 2d 55, 72 (Miss. 1992) (Lee, J.,

dissenting).) This is a misstatement of Mississippi law.

The Mississippi Supreme Court has held: “where a contract is

ambiguous and uncertain, questions of fact are presented which are

to be resolved by the trier of facts, [therefore,] the granting of

summary judgment is inappropriate”. Shelton v. Am. Ins. Co., 507

So. 2d 894, 896 (Miss. 1987) (citing Dennis v. Searle, 457 So. 2d

941, 945 (Miss. 1984)). Accordingly, the separation agreement’s

effective date is a fact question to be decided by the trier of

fact at trial.

C.

The district court held that, as a matter of law, and

regardless of whether Barnett’s affidavit was covered by the

separation agreement, that agreement was both illegal and

unconscionable. Each ruling is erroneous.

1.

Whether a contract clause is unenforceable on grounds of

illegality or public policy is a question of law. See, e.g.,

MacPhail v. Oceaneering Int’l, Inc., 302 F.3d 274, 278 (5th Cir.

2002), cert. denied, 537 U.S. 1110 (2003). In ruling, the district

court noted the following Mississippi Supreme Court precedent:

There is no doubt that the courts have the
duty and the power to declare void and

17
 unenforceable contracts made in violation of
law or in contravention of the public policy
of the state. This Court has exercised this
power in several classes of illegal contracts,
including ... when the principal purpose of
the contract directly furnishes aid and
protection to an illegal enterprise ....

Smith v. Simon, 224 So. 2d 565, 566 (Miss. 1969) (citation

omitted). The district court held the separation agreement aids

and protects an illegal enterprise because it “would discourage

employees from informing the authorities of alleged illegal actions

committed by their employers and would enable unscrupulous

employers to cover up illegal acts”. Farese, slip op. at 7.

This reasoning is flawed in several respects. First, while

the district court stated correctly that illegal contracts are

unenforceable in Mississippi, it cited no Mississippi statutes or

case law declaring non-disparagement clauses illegal. Quoting

Martin v. Estate of W.W. Martin, 599 So. 2d 966, 968 (Miss. 1992),

the district court stated that the Mississippi Supreme Court

“know[s] of no talismanic test whether a contract offends public

policy”. Farese, slip op. at 7. Two years after Martin, however,

the Mississippi Supreme Court, in refusing to invalidate a contract

clause on public policy grounds, held:

The power to invalidate contracts or
agreements on the ground that they violate
public policy is far reaching and easily
abused, and this court is committed to the
doctrine that the public policy of the state
must be found in its constitution and
statutes, ‘and when they have not directly
spoken, then [it must be found] in the

18
 decisions of the courts and the constant
practice of the government officials.’

Heritage Cablevision v. New Albany Elec. Power Sys., 646 So. 2d

1305, 1313 (Miss. 1994) (quoting United States v. Trans-Missouri

Freight Ass’n, 166 U.S. 290, 340 (1897)); see also Orrell v. Bay

Mfg. Co., 36 So. 561, 564 (Miss. 1904). Appellees do not cite any

statute, constitutional provision, case law, or practice by

Mississippi government officials that supports non-disparagement

clauses being illegal per se.

Second, simply because a contract can possibly result in some

unlawful end, it does not follow that courts should automatically

withhold enforcement of the contract. See Martin, 599 So. 2d at

969. As the Martin court held: “Where the contract on its face is

without taint, we will not necessarily withhold enforcement because

some unlawful end is thereby made possible”. Id. That court noted

it had “enforced fire and property loss insurance policies though

the insured premises had been used as a house of prostitution ...

[and] a lease agreement though the demised premises ha[d] been used

as a restaurant that regularly sold to its customers (then) illegal

intoxicating liquors”. Id. (citations omitted). The mere

possibility that an employer could use a non-disparagement clause

to hide illegal activity is, therefore, insufficient to void the

clause on grounds of public policy.

19
 Finally, the district court’s concern that these clauses will

discourage employees from disclosing their employers’ illegal

activities is addressed by Mississippi law. Mississippi recognizes

an exception to the employment-at-will doctrine, which allows

employees to sue for wrongful discharge if they are “terminated

because of (1) refusal to participate in illegal activity or (2)

reporting the illegal activity of [their] employer to the employer

or anyone else”. Harris v. Miss. Valley State Univ., 873 So. 2d

970, 986 (Miss. 2004) (citation omitted). Arguably, it would be

against public policy for an employer to sue a former employee for

violating a non-disparagement clause by disclosing the employer’s

illegal activities. In any event, as conceded by Cooper Tire’s

counsel in his 23 April 2003 response-letter to Farese, the

separation agreement could not prevent Barnett from testifying in

court or at a deposition pursuant to a valid subpoena.

It goes without saying that non-disparagement clauses are

common in situations where two parties terminate their employment

relationship by contract. See Equal Employment Opportunity Comm’n

v. Severn Trent Servs., Inc., 358 F.3d 438, 440 (7th Cir. 2004)

(“Such private gag orders appear to be fairly common.”). They are

intended to prevent a disgruntled former employee from

disseminating sensitive or false information in revenge for being

terminated. Id. This action demonstrates the valid legal purpose

these clauses serve.

20
 2.

In addition to its void-for-illegality holding, the district

court held the separation agreement’s possible retroactive

effective date rendered the agreement unconscionable because

“Barnett had no meaningful choice in entering the [separation]

[a]greement since her reputation was on the line for future

employment, as well as Cooper Tire’s apparent threats” of criminal

prosecution. Farese, slip op. at 8-9. In so holding, the district

court relied on its improper inference, discussed supra, that

Cooper Tire employed the 4 October effective date in order to cover

Barnett’s affidavit.

Whether a contract or contractual provision is unconscionable

is a question of law. Ting v. AT&T, 319 F.3d 1126, 1135 (9th

Cir.), cert. denied, 540 U.S. 811 (2003). In Mississippi,

unconscionability can be either substantive or procedural. West v.

West, 891 So. 2d 203, 213 (Miss. 2004).

a.

“Procedural unconscionability goes to the formation of the

contract.” Id. (citation omitted). Such unconscionability

generally requires showing lack of either knowledge or

voluntariness. Norwest Fin. Miss., Inc. v. McDonald, 905 So. 2d

1187, 2005 WL 67487, at *4 (Miss. 2005).

In negotiating the separation agreement, Barnett was

represented by counsel. (Indeed, the agreement advised Barnett to

21
obtain counsel.) This weighs against procedural unconscionability.

Id. Moreover, as stated above, the district court relied on its

improper inference that Cooper Tire utilized the 4 October

effective date in order to cover Barnett’s affidavit. Considering

this factor, along with her representation by Farese during the

negotiations, and, as discussed infra, the favorable terms of the

agreement to Barnett, Barnett lacked neither knowledge nor

voluntariness in entering the agreement. There was no procedural

unconscionability.

b.

Likewise, the separation agreement was not substantively

unconscionable. “Substantive unconscionability occurs when the

terms of the agreement are so one-sided that no one in his right

mind would agree to its terms.” West, 891 So. 2d at 213 (citation

omitted).

Through Farese’s negotiations, Barnett received numerous

concessions: (1) her indebtedness for the alleged embezzlement was

reduced from $3,000 to $1,000; (2) Cooper Tire would not press

criminal charges; (3) it would not oppose her application for

unemployment benefits; (4) it agreed to language it would use if a

future employer requested a reference for Barnett; and (5) her

husband’s employment would not be affected by her resignation or

actions.

22
 Considering these substantial changes favorable to Barnett,

the terms of the agreement are not “so one-sided that no one in his

right mind would agree to its terms”. Id. The separation

agreement, including its possibly having a retroactive effective

date, is not substantively unconscionable.

D.

Cooper Tire claims tortious interference with contract and

business relations, and civil conspiracy. Pursuant to Mississippi

law, tortious interference with business relations requires

showing: “(1) the acts were intentional and willful; (2) the acts

were calculated to cause damage to the plaintiffs in their lawful

business; (3) the acts were done with the unlawful purpose of

causing damage and loss without right or justifiable cause on the

part of the defendant (which constitutes malice); and (4) actual

loss and damage resulted”. PDN, Inc. v. Loring, 843 So. 2d 685,

688 (Miss. 2003). In addition to the above elements, tortious

interference with contract includes malicious interference with a

valid contract. Levens v. Campbell, 733 So. 2d 753, 759-61 (Miss.

1999). Civil conspiracy requires showing: “(1) two or more

persons or corporations; (2) an object to be accomplished; (3) a

meeting of the minds on the object or course of action; (4) one or

more unlawful overt acts; and (5) damages as the proximate result”.

Gallagher Bassett Servs., Inc. v. Jeffcoat, 887 So. 2d 777, 786

(Miss. 2004).

23
 As the nonmovant, Cooper Tire provided the following evidence:

Farese was aware that Cooper Tire required a separation agreement

with Barnett; Farese drafted an affidavit containing disparaging

false information concerning Cooper Tire; Farese was aware that, if

the separation agreement was then in effect, the affidavit would

violate it; before Farese drafted the affidavit, he spoke to

Turner; as soon as the affidavit was executed, Farese forwarded it

to Turner; Turner disclosed the existence of the affidavit to the

Whitaker plaintiffs’ counsel (which included Kaster) and eventually

provided them with a copy; Kaster released the affidavit to the

media during the Whitaker pre-trial mediation; Cooper Tire’s market

capitalization dropped $220 million the next day; Cooper Tire

settled the case shortly thereafter; and the Whitaker plaintiffs’

counsel paid Farese $50,000, who in turn paid Barnett $25,000.

Moreover, Farese provided the affidavit to a lawyer who had

litigated previously with Cooper Tire, and Farese did not disclose

to Barnett that she was not required to attend the hearing at the

Arkansas district court. The record contains evidence of telephone

calls between Farese, Turner, and Kaster, before and after the

dissemination of the affidavit to the media. It can be inferred

that these conversations included discussions about Barnett and the

separation agreement.

Furthermore, Cooper Tire was not allowed to complete

discovery, including pending motions to compel the disclosure of

24
information claimed privileged by Kaster. Discovery remains to be

completed.

Finally, Cooper Tire’s claims turn in large part on proving

Farese and Kaster’s motives and intent. These types of

determinations, which involve the summary judgment movants’ state

of mind, are particularly ill-suited for summary judgment. Int’l

Shortstop Inc. v. Rally’s, Inc., 939 F.2d 1257, 1265 (5th Cir.

1991), cert. denied, 502 U.S. 1059 (1992). In short, genuine

issues of material fact preclude summary judgment.

III.

For the foregoing reasons, the summary judgment in favor of

Farese, Kaster, and their firms is VACATED; and this matter is

REMANDED for further proceedings consistent with this opinion.

VACATED; REMANDED

25