United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 10, 2011 Decided July 8, 2011

No. 10-5244

RICHARD AMERICA,

APPELLANT

v.

KAREN G. MILLS, ADMINISTRATOR, SMALL BUSINESS 

ADMINISTRATION,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:03-cv-01807)

Richard A. Salzman argued the cause for appellant. 

With him on the briefs was Douglas B. Huron. Elizabeth A. 

Grdina entered an appearance.

Alan Burch, Assistant U.S. Attorney, argued the cause 

for appellee. With him on the brief were Ronald C. Machen,

Jr., U.S. Attorney, and R. Craig Lawrence, Assistant U.S. 

Attorney.

Before: HENDERSON, BROWN, and KAVANAUGH, 

Circuit Judges.
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Opinion for the Court filed by Circuit Judge

KAVANAUGH, with whom Circuit Judge HENDERSON joins.

Dissenting opinion filed by Circuit Judge BROWN.

KAVANAUGH, Circuit Judge: Richard America charged 

his former employer, the Small Business Administration, with 

discrimination. America and the SBA then settled. Under the

settlement agreement, America received $92,500 from the 

SBA. The settlement agreement also required the SBA to 

provide neutral references when potential employers inquired 

about America. America claims that the SBA materially 

breached that requirement of the settlement agreement. 

America sued the SBA in the United States District Court. 

After a bench trial, the District Court found no material 

breach and granted judgment for the SBA. We affirm. 

* * *

Richard America worked in Rural Affairs for the Small 

Business Administration. In 1995, the SBA decided to reassign his position from Washington, D.C., to Kansas City, 

Missouri. America resisted the transfer and eventually 

accepted an early retirement in 1997, three days before he 

would have been fired for failing to report to Kansas City.

America then filed several administrative complaints 

alleging that the SBA engaged in race, sex, and age

discrimination with respect to the attempted transfer. In 1998, 

America and the SBA settled their dispute. America dropped 

his claims in return for $92,500. As part of the settlement 

agreement, the SBA expunged references to America’s 

retirement from his personnel file. The SBA also agreed to 

refer all inquiries about America from prospective employers 

to Human Resources; the purpose of that requirement was “to 
3

ensure that the SBA provided only neutral references about 

him.” America v. Mills, 714 F. Supp. 2d 88, 101 (D.D.C. 

2010).

After signing the settlement agreement, America 

expected to find quick success on the job market. He didn’t. 

He came to suspect the SBA was saying negative things about 

him to potential employers, in violation of the settlement 

agreement. 

In 2000 and 2002, America hired a reference-checking 

company known as Documented Reference Check to contact 

three individuals at the SBA and pretend to be a potential

employer asking about America. America believed that the 

subsequent reports of Documented Reference Check’s 

conversations with those SBA employees showed a material 

breach of the settlement agreement. America therefore sued 

the SBA in District Court. 

After a bench trial, the District Court found that America 

failed to prove that the reports from Documented Reference 

Check were “a totally accurate transcription of [the] phone 

calls.” Id. at 99. The District Court reached that conclusion 

in part because Documented Reference Check’s chief service 

officer gave testimony that the court found “completely 

incredible.” According to the District Court, this key witness

was “evasive and belligerent.” He “made unreasonable 

assertions of privacy and trade secrets regarding such 

straightforward facts as the company’s size and corporate 

structure.” He was “in a position to change a report without 

the knowledge of the person who created the report” and may 

have had an incentive to satisfy clients by altering reports to 

contain negative references. Id. at 98. 
4

There was only one relevant exception to the District 

Court’s broad factual conclusion that SBA employees did not 

make the allegedly negative statements. The District Court 

found that SBA employee Arnold Rosenthal told Documented 

Reference Check that there was “an internal battle going on 

with [America’s] transfer.” See id. at 97, 99. But the District 

Court concluded that this one statement did not constitute a

material breach of the settlement agreement. We agree. It is 

undisputed on appeal that Rosenthal made numerous 

unequivocally positive statements to Documented Reference 

Check. Rosenthal’s overall description of America was quite

positive, and at worst neutral. Rosenthal’s (at worst) neutral 

reference about America thus does not constitute a material

breach of the settlement agreement, the purpose of which was 

to ensure neutral references about America. Even under the 

materiality standard proposed by America, a breach is 

material only if it “relates to a matter of vital importance.” 

Thomas v. HUD, 124 F.3d 1439, 1442 (Fed. Cir. 1997). 

America has not met that standard.

In short, although Rosenthal’s comments may have 

constituted a breach because he did not simply refer the caller 

to Human Resources, we agree with the District Court that the 

breach was not material because Rosenthal’s description of 

America was positive or, at worst, neutral.1

 

 

 1 In proceedings before the Equal Employment Opportunity 

Commission, the SBA conceded breach but retracted that 

concession about three weeks later. America argues that the SBA 

should be bound to that original concession. But the SBA’s 

withdrawal is reasonable even under the standard proposed by 

America because the concession was withdrawn within “weeks, not 

years.” Mazaleski v. Treusdell, 562 F.2d 701, 720 (D.C. Cir. 1977).
5

* * *

We affirm the judgment of the District Court. 

So ordered.
BROWN, J., dissenting. The district court’s unchallenged 

findings of fact are incompatible with its conclusion that the 

Small Business Administration did not materially breach its 

settlement agreement with Richard America. Therefore, I 

respectfully dissent.

To get America to drop his discrimination and retaliation 

claims, SBA agreed to refer “all inquiries from prospective 

employers” to Human Resources. The purpose of this 

agreement was, the district court found, “to ensure that the 

SBA provided only neutral references.” America v. Mills, 714 

F. Supp. 2d 88, 101 (D.D.C. 2010). An SBA employee

therefore materially breaches the agreement when he 

responds to a reference inquiry in a way that casts America in

a negative light. As the district court put it, SBA’s breach was 

material if it “led to the provision of reference information 

that was not neutral and prejudiced [America] in his search 

for employment.” Id.

The district court made a series of findings that lead

inevitably to the conclusion that SBA’s breach was material.

First, the district court explicitly credited a reference 

checker’s transcription of SBA comments concerning “the 

circumstances surrounding Mr. America’s proposed transfer 

to Kansas City, the fact that he did not report there, [and] the 

internal battle over Mr. America’s proposed transfer.” Id. at 

99. Among other comments to that effect were those of SBA 

executive Arnold Rosenthal. Rosenthal told the caller that 

“[t]here was an internal battle going on with [America’s] 

transfer” and that this “was a difficult experience for him.”

The district court found such comments “had to have 

occurred,” because they involve “significant details about the 

SBA and Mr. America’s employment there that no one at [the 

reference-checking company] could have known without 

speaking to people at SBA.” Id. The district court further 
2

found these specific comments by Rosenthal to be “negative

statements.” Id. at 97. America had been forced to retire when 

he refused to accept the transfer, so he had good reason to 

keep that information from prospective employers.

These findings of fact are irreconcilable with the district 

court’s conclusion that SBA’s breach was immaterial. The 

district court tried to make sense of that conclusion by 

holding, “Rosenthal’s reference to the ‘difficult experience’ 

that [sic—should read “of”?] the ‘internal battle’ over Mr. 

America’s possible transfer to Kansas City was not a matter 

of ‘vital importance,’ and did not ‘frustrate substantially’ the 

purpose of the contract.” Id. at 102 (citation and alteration 

omitted). This reasoning is flawed. Given the district court’s 

own findings that these statements were negative, id. at 97, 

and that the purpose of the contract was to prevent negative 

references, id. at 101, SBA’s breach necessarily “[went] to the 

essence and frustrate[d] substantially the purpose for which 

the [settlement] was agreed to.” Draim v. Virtual Geosatellite 

Holdings, Inc., 522 F.3d 452, 454–55 (D.C. Cir. 2008).

My colleagues agree with the district court that SBA’s 

breach was immaterial, because they find Rosenthal’s positive 

statements were more “numerous” than his negative ones. 

Maj. Op. at 4. This reasoning undermines the purpose of the 

settlement agreement. The requirement that a former 

employer refer all employment inquiries to Human Resources

is a dead letter if he may avoid material breach by simply 

pairing every negative statement he utters with a positive one. 

As anyone with hiring experience can attest, employment 

references—especially references for the management-level 

positions America sought—are more art than science. Just a 

hint of negativity may be all it takes to warn a savvy 

employer away from a prospective employee. America 

reasonably hoped to avoid the risk of such value judgments 
3

by insisting that all inquiries be directed to Human Resources, 

which could make only objective statements about his 

employment history. “The judicial task in construing a 

contract is to give effect to the mutual intentions of the 

parties.” Mesa Air Group v. DOT, 87 F.3d 498, 503 (D.C. Cir. 

1996); see Lankford v. Platte Iron Works Co., 235 U.S. 461, 

488 (1915). The court’s interpretation violates this principle

and renders SBA’s agreement with America practically 

unenforceable. 

This case illustrates the pitfalls of including a nondisparagement clause in a settlement agreement between a 

government agency and its former employee. Memories fade,

and the difficulty of ensuring the agency’s personnel abide by 

the agreement grows with every passing year. There are good 

reasons not to enter into such contracts in the first place. But a 

deal’s a deal. Because I believe SBA materially breached its 

settlement agreement with America, I would reverse the 

judgment of the district court with instructions to reinstate 

America’s Title VII suit.