In a recent case, MacDonald v Jenzabar, Inc., Appeals Court No. 17-P-45 (Jan. 11, 2018), the Massachusetts Appeals Court reaffirmed its strong policy of “giving effect to a general release, even if the parties did not have in mind at the time all of the matters that might be covered.” In so doing, the court counseled that “any exceptions to, or reservation of rights in, a general release should be stated in clear terms.” Had the parties done so more clearly in MacDonald, they might well have avoided more than five years of litigation.

MacDonald arose out of a series of employment agreements between an employee, MacDonald, and his employer, Jenzabar, Inc. (“Jenzabar”). The agreements, inter alia, gave MacDonald rights to preferred stock and stock options. When MacDonald left Jenzabar in May 2009, he executed a severance agreement which included a broad general release of claims, with MacDonald agreeing to:

• fully, irrevocably and unconditionally release, acquit and forever discharge [Jenzabar] from any and all claims, liabilities, obligations, promises, agreements, damages, causes of action, suits, demands, losses, debts, and expenses (including, without limitation, attorneys’ fees and costs) of any nature whatsoever, known or unknown, suspected or unsuspected, arising on or before the date of this Agreement and/or relating to or arising from your employment and your separation from employment with the Company and/or any of the Released Parties, including, without limitation, . . . any and all claims under the Employment Agreement dated as of June 30, 2004 by and between you and Jenzabar . . . .

The severance agreement made clear that a confidentiality agreement that MacDonald had signed would continue to be binding upon him after the termination of his employment. Jenzabar used the severance agreement to extend the non-compete obligations of the confidentiality agreement from two years to five years. The stated justification for the reasonableness of this extension was (1) MacDonald’s senior position with Jenzabar; and (2) the Company’s grant to MacDonald of substantial stock options. At the time he executed the severance agreement, MacDonald had neither exercised any of the stock options nor received any preferred shares of stock. The Agreement was silent regarding the stock options and preferred shares.

When MacDonald sought to exercise his stock options and made a claim for the preferred stock previously awarded to him, Jenzabar refused these claims, claiming that MacDonald had released any rights to preferred stock or to exercise stock options by virtue of executing the severance agreement which included the general release of claims. MacDonald claimed that these rights had been excepted from the general release by virtue of the provision of the agreement affirming the survival and extension of the non-compete and confidentiality obligations. The trial court rejected MacDonald’s claims to the preferred shares and, finding the release ambiguous as to the stock option issue, allowed MacDonald’s stock option claim to go to a jury which found that MacDonald was entitled to 1000 shares of Jenzabar stock.

The Appeals Court ultimately found for Jenzabar on all claims, holding that “the plain language of the release is only susceptible of one reasonable interpretation: barring something to the contrary elsewhere in the severance agreement, MacDonald released all rights to the preferred shares and stock options.” Noting that exceptions to the terms of a general release must be stated in clear terms, the court found that “[i]f the language in section 6 [relating to the confidentiality and non-compete obligations] was intended to create an exception for MacDonald’s rights to the preferred shares and stock options, it fell well short of achieving the required level of clarity.”

While the Appeals Court ultimately ruled in favor of Jenzabar, it did not do so until the parties had engaged in five years of litigation. Thus, settling parties may want to think twice about adding terms to a release or settlement agreement that could be read as exceptions to a general release. On the other hand, a party seeking an exception to a general release is on notice that such an exception should be stated clearly and unequivocally, and that it should not expect a court to imply a term that is not clearly expressed.