This M&A story analyzes Armbruster Capital Management v. Barrett, a crucial 2025 case revealing how a Buyer can weaponize “truthful” statements to destroy a Seller’s reputation post-closing. Learn about the concept of “defamation by implication” and discover the specific legal risk management tool—the “Safe Harbor” non-disparagement clause—that lower middle market founders need to negotiate to protect their legacy and client relationships during an exit.
M&A Stories
December 2, 2025
Imagine you have just sold your business. You built it over twenty years on a foundation of personal trust and integrity. As part of the deal, you agree to stay on for a year to help transition your loyal clients to the Buyer.
Six months later, the culture clash is unbearable. The Buyer is bureaucratic and aggressive. You decide to resign and move on. You assume the separation will be professional.
Then, your phone starts ringing.
Your former clients are forwarding you an email from the Buyer. It states that the industry is “highly regulated,” that the firm has strict “ethics policies,” and that you resigned because you found those policies “overly burdensome.”
Technically, the Buyer is telling the truth. You did complain about their mountain of red tape. But the implication is devastating: the Buyer is telling your life-long clients that you left because you couldn’t handle ethical compliance. They are torching your reputation to ensure clients don’t follow you out the door.
The Case: Armbruster Capital Management v. Barrett
This exact scenario played out in a recent New York case, Armbruster Capital Management v. Barrett. Elizabeth Barrett sold her wealth management firm to Armbruster. When the relationship soured and she resigned, Armbruster sent emails to her former clients implying she left to avoid compliance rules designed to protect investors.
Barrett sued for defamation. The Buyer argued they were simply stating facts: she had complained about the paperwork, so the email was true.
The appellate court eventually sided with Barrett, ruling that even “substantially true” statements can be defamatory if they are carefully curated to create a false, negative impression of the seller’s integrity. This is known as “defamation by implication.” Thus, her defamation claim survived Buyer’s first legal challenge. But this only gets her to first base. She must now run the gauntlet of further litigation, unless it settles.
The Hidden Risk for Sellers
While Barrett won a legal victory, it came at a terrible cost. She had to endure years of litigation and the initial damage to her reputation just to get a court to say she had a right to sue.
For a lower middle market seller, this is a failure of risk management. The mistake wasn’t the resignation; the mistake was failing to control the narrative of the exit before the deal ever closed.
Buyers, especially private equity firms, are terrified of client churn. If you leave, they fear the value of their investment leaves with you. To prevent this, they often feel justified in painting you as “unaligned” or “difficult” to convince clients that they are better off staying with the “institutional” safety of the Buyer. Relying on professional courtesy is not a strategy. You need a contractual shield.
The Solution: The “Reciprocity Pivot”
You might think you need to demand a pre-written press release in your purchase agreement to prevent this. In reality, a sophisticated Buyer (the Goliath) will rarely agree to that in the final contract stage. They will argue they cannot predict the future.
However, you can achieve the same protection by leveraging a clause the Buyer will almost certainly demand from you: the Non-Disparagement Clause.
In almost every deal, the Buyer’s first draft will insist that you promise never to disparage the company. This is your opening. Instead of fighting this request, you should accept it on one condition: it must be mutual.
Once you have established mutuality, you insert a specific “Safe Harbor” mechanism. This is a clause stating that if the parties cannot agree on a joint statement regarding your departure, neither party is allowed to say anything other than a neutral, pre-agreed phrase.
The “Silver Standard” Language
Your counsel can insert language into the Non-Disparagement section that operates as a tripwire. It should state that in the event of a separation, the parties will cooperate to draft a joint announcement. Crucially, it must state that until such an agreement is reached, any written communication to clients regarding your departure is limited to the statement that you have “resigned to pursue other opportunities.”
This simple sentence strips the Buyer of the ability to “spin” your exit. If Armbruster had been bound by this clause, their email about “compliance burdens” would have been an immediate breach of contract. Barrett wouldn’t have needed to prove the complex legal standard of defamation; she would only have needed to show they used the wrong words.
The Takeaway
You cannot force a Buyer to be nice. But you can force them to be neutral. By anticipating the “narrative war” that happens when a founder leaves, and using the Buyer’s own boilerplate language to build a defensive safe harbor, you protect the most valuable asset you own: your good name.
See: Armbruster Capital Mgt., Inc. v. Barrett, 858 CA 24-01076, Appellate Division of the Supreme Court of New York, Fourth Department (November 21, 2025).
Thank you for reading this blog. If you have any questions, insights, or if you’d like to engage in a more detailed discussion on this matter, I invite you to reach out directly.
Feel free to send me an email. I value thoughtful discussions and am always open to connecting with business owners, management, as well as professionals who share an interest in the complexities of M&A law in lower middle market private target deals.
By John McCauley: I write about recent problems of buyers and sellers in lower middle market private target deals.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Check out my books: Buying Established Business Assets: A Guide for Owners, https://www.amazon.com/dp/B09TJQ5CL5
and Advisors and Selling Established Business Assets: A Guide for Owners and Advisors, https://www.amazon.com/dp/B0BPTLZNRM
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