## Facts

- Michael D. Bakst entered into a settlement agreement with Community Memorial Health System, Inc. (Community Memorial) to resolve prior litigation.
- The settlement agreement included a nondisparagement clause requiring the parties to refrain from making disparaging statements about each other.
- Bakst later sued Community Memorial for breach of contract, alleging Community Memorial made negative statements about him in violation of the nondisparagement clause.
- Bakst alleged the statements harmed his reputation in the health-care industry and affected how others viewed him in the employment market.
- According to Bakst, prospective employers declined to hire him because they feared his alleged damaged reputation would reflect poorly on their organizations.
- Bakst sought contract damages tied to lost employment opportunities (economic loss), rather than seeking damages for generalized injury to reputation as an independent item of recovery.
- Before trial, Community Memorial filed a motion in limine seeking to exclude evidence and argument about (1) emotional distress and (2) reputational damage, contending those items are tort-type harms not recoverable in a breach-of-contract case.
- Bakst opposed the motion, arguing that reputation-related evidence was necessary to explain why employers allegedly refused to hire him and to connect the claimed breach to his claimed economic loss.

## Issues

1. In a breach-of-contract action alleging violation of a settlement agreement’s nondisparagement clause, may the plaintiff introduce evidence of reputational harm and emotional distress when offered to support claimed economic damages from lost employment opportunities?

## Decision

- The court declined to bar reputation-related evidence across the board where it was offered to prove causation and foreseeability for Bakst’s claimed economic loss (lost employment opportunities).
- The court treated emotional distress and generalized reputational injury as non-economic, tort-type harms that are not recoverable as independent contract damages in an ordinary breach-of-contract claim.
- The court therefore limited the use of reputation and emotional-impact evidence to the extent it helped prove recoverable pecuniary damages (such as lost job opportunities), rather than allowing it as a separate measure of damages.

## Legal Principles

- Contract damages generally compensate for economic loss caused by breach, including expectation damages and foreseeable consequential damages.
- Emotional distress damages are generally not available for breach of contract absent a recognized exception; parties typically must pursue a tort theory to recover for mental suffering.
- Harm to reputation, standing alone, is commonly treated as tort-type injury; however, economic loss that flows from reputation-related effects (such as identifiable lost employment opportunities) may be recoverable in contract if the loss was foreseeable at the time of contracting and can be proven with reasonable certainty.
- Where a contract term is aimed at preventing disparagement, evidence about how allegedly disparaging statements affected third parties may be relevant to whether the claimed economic loss was caused by the breach.
- A motion in limine addresses the admissibility and limits of evidence at trial; courts may allow evidence for a proper purpose (economic-loss proof) while restricting its use to avoid an improper damages theory (stand-alone non-economic recovery).

## Conclusion

In *Bakst v. Community Memorial Health System, Inc.*, the court addressed the boundary between nonrecoverable tort-type harms and recoverable contract damages in a nondisparagement dispute. While emotional distress and generalized reputational injury were not permitted as independent contract damages, the court allowed reputation-related proof to the extent it supported Bakst’s claim that the alleged nondisparagement breach foreseeably caused identifiable economic loss through lost employment opportunities.


Bakst v. Community Memorial Health System, Inc., 2011 WL 13214315 (2011)