By Marjorie Johnson, J.D.
The federal government’s press release announcing that it had reached a settlement with Nebraska Beef, Ltd., resolving its investigation into whether the company had engaged in discriminatory employment practices in violation of the Immigration and Nationality Act (INA) and that it “found” wrongdoing, did not violate the parties’ settlement agreement. Although the opening recitals stated only that the government had “reasonable cause” and that the company denied any violations, nothing in the agreement limited or constrained the statements of the government. Accordingly, because there was no material breach, a divided Eighth Circuit affirmed summary judgment in favor of the government in its action to enforce the settlement agreement (U.S v. Nebraska Beef, Ltd., August 27, 2018, Smith, L.).
Investigation leads to settlement. In 2012, the United States Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC), a section in the Department of Justice (DOJ), began investigating whether the meat-packing company discriminated against immigrant workers in violation of 8 U.S.C. § 1324b. Specifically, the OSC alleged that the company unlawfully required work-authorized immigrants to provide certain documents not required of nonimmigrants.
In 2015, the parties entered into a settlement agreement that required the company to pay a $200,000 civil penalty, to provide backpay to affected individuals, and to refrain from future practices. Two opening recitals of the agreement set forth the parties’ positions on liability. One recital stated that the OSC had concluded there was “reasonable cause” to believe that Nebraska Beef engaged in practices that violated the statute. Another recital stated that the company denied having violated the statute. Additionally, Paragraph 3(b) of the settlement agreement stated that the OSC maintained its right “to notify the public” about the agreement.
Press release. On the same day that the government executed the settlement agreement, it issued a press release announcing the agreement and linked to a copy of the settlement agreement on its web page. In pertinent part, the release explained that the settlement resolved an OSC investigation into whether Nebraska Beef engaged in employment discrimination in violation of the INA and had “found” that the company “required non-U.S. citizens, but not similarly-situated U.S. citizens, to present specific documentary proof of their immigration status to verify their employment eligibility.” The press release also stated that the INA’s anti-discrimination provision “prohibits employers from making documentary demands based on citizenship or national origin when verifying an employee’s authorization to work.”
Litigation ensues. Nebraska Beef subsequently refused to make payments, arguing that it was not obligated to do so since the government had breached the agreement by stating it “found” wrongdoing. In response, the government filed this breach-of-contract lawsuit seeking to compel compliance with the settlement agreement. Nebraska Beef counterclaimed with its own breach-of-contract claim. It sought to be released from its obligations based on the government’s material breach in stating that its “investigation found” wrongdoing.
The company moved for partial summary judgment and the government filed a cross-motion for summary judgment. The core issue was whether the government’s press release stating that its investigation “found that” Nebraska Beef had engaged in illegal employment practices constituted a material breach of the agreement. The district court determined that it did not and ruled in favor of the government.
“Absolutely had right” to notify public. The court held that while the opening recitals were binding portions of the settlement agreement, no breach, material or otherwise, occurred. Under the agreement, the government “absolutely had the right” to notify the public about the settlement, and even if its press release used different language than the settlement agreement, there was no material breach since the release did not “defeat the essential purpose of the contract” or make it “impossible for the other party to perform under the contract” since the purpose of the agreement was to “resolve the dispute in a compromise that avoided litigation.”
Press release didn’t violate the settlement. On appeal, Nebraska Beef argued that the press release misrepresented the agreement and the facts, and that the government’s claim to have “found” a violation exceeded the scope of an agency’s powers. It also claimed that the district court construed the essential purpose of the agreement too narrowly since, while avoiding litigation was a motivation for settling, it also sought to avoid any admission of liability.
The Eighth Circuit panel majority was not persuaded, and instead agreed with the government’s position that the agreement did not prohibit it from characterizing the settlement as it wished in a press release. Though the agreement did not explicitly authorize the OSC to state that its investigation found violations, it also did not forbid it from doing so. It was “somewhat troubling” for the government to enter into a settlement in which the accused party maintains its innocence, yet nonetheless declare that it found violations of the law. However, while conducting litigation and public relations in this fashion “may be suspect,” it did not materially violate the settlement agreement in a manner that would excuse Nebraska Beef’s contractual obligations.
Dissent finds breach. Dissenting, Judge C. Arlen Beam averred that OSC had in fact breached its contractual duty to notify the public about the settlement agreement when it announced publicly that the “department’s investigation found” Nebraska Beef engaged in employment discrimination in violation of the INA. Given the recitals and contract language of the agreement, along with the portrayal of the agreement by the parties themselves in this litigation, it was “axiomatic” that the essential purpose of the agreement was to both avoid costly litigation and allow Nebraska Beef to avoid admission of liability. And though the agreement did not forbid the OSC from stating that its investigation found violations, it had an obligation to describe the agreement accurately, which included acknowledging that the agreement established only that the OSC had “reasonable cause” and that Nebraska Beef denied any violations.
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