Manufacturers and franchisors who settle cases with their dealers and franchisees often do so in part to stop harm to the supplier’s reputation in the marketplace. In those circumstances, the settlement agreement often includes a non-disparagement clause. The Supreme Court of Connecticut strongly upheld such a clause on March 25 in TES Franchising, LLC v. Feldman, 2008 WL 726293 (Conn. March 25, 2008). The court enjoined Feldman from any further violation of the settlement agreement and remanded to the trial court to determine how much he would have to pay for his past violations. The court found that the non-disparagement clause was important to the agreement because it not only prevented negative comments to potential new franchisees, but it protected confidential information shared by the parties during their former relationship.
The Franchise Memorandum