In determining the proper scope of the general release, the court analyzed both the express contract language and the parties’ negotiations. Regarding the express contract language, the court found that the general release was ambiguous, i.e., both parties offered reasonable interpretations. The plaintiffs argued that the general release broadly applied to any “obligation” entered into “in connection with the purchase agreement,” which included the noncompete agreement. Under another provision, the plaintiffs argued that the general release relieved them of all future obligations, which would also include obligations under the noncompete agreement. In response, the defendants argued that the only obligations “in connection with the purchase agreement” were the obligations under the purchase agreement. The defendants also argued that the general release applied, by its express terms, to obligations as of the date of the general release. The obligations under the noncompete agreement extended beyond the date of the general release and, therefore, were not extinguished.
Upon finding that both parties offered reasonable interpretations, the court studied the extrinsic evidence to find that: “Evidence of the circumstances surrounding the negotiation and signing of the [general] release discredits plaintiffs’ interpretation.” First, the court found the pre-settlement circumstances did not indicate that the noncompete agreement would be considered as part of the settlement. Second, nothing during the settlement negotiations indicated that the parties were bargaining for the release of the noncompete agreement. Third, “the method by which the [general] release was drafted explains, to some extent, its awkward phrasing and disjointedness.”
