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© 2015 Zuckerman Spaeder LLP

L’Oreal Lawyer Claims Company Fired Him When He Wouldn’t Pursue Problematic Patents

After firing its head patent attorney, Steven Trzaska, L’Oreal is now under fire from Trzaska in New Jersey federal court.  On April 16, 2015, Trzaska sued L’Oreal, claiming that his firing violated New Jersey’s Conscientious Employee Protection Act (“CEPA”).

In his complaint (available at Law360), Trzaska alleges that L’Oreal had a quota for its New Jersey office of 40 filed patent applications in 2014.  But, Trzaska contends, an outside consultant had previously found that many of L’Oreal’s patent applications were purely cosmetic, saying that “the vast majority of its inventions were of low or poor quality.”  Trzaska alleges that his superiors pressured him to file applications to meet the quota.  However, he told them that “neither he nor the patent attorneys who reported to him were willing to file patent applications that the attorneys believed were not patentable.”  Soon after, L’Oreal terminated him, saying that it was hiring a new “head of patents of the Americas.”  Trzaska claims that this explanation was pretext and that the company in fact fired him because he refused to file applications that were not patentable.

How do Trzaska’s claims line up with CEPA?  Read More ›

Seeking Coverage Under Your D&O Insurance Policy: What Is A Claim And When Was It Made?

Companies buy directors & officers (“D&O”) insurance policies with the intention of providing protection for key individuals in a corporate structure.  The recent decision BioChemics, Inc. v. AXIS Reinsurance Co., from the U.S. District Court for the District of Massachusetts, illustrates the importance of the terms of the policy in determining what is covered, what is not, and when you should notify the insurer of a potential claim.

As we’ve previously discussed, an insurance policy can provide more reliable protection for the indemnification rights of the directors and officers in times of financial distress, because corporations plagued by regulatory or other legal problems frequently suffer financial setbacks.  However, when a corporation is the subject of an official investigation, determining exactly what constitutes the start of a covered “claim” may be a matter of some delicacy.  Read More ›

The Inbox – The “Pao Effect”

Ellen Pao may not have won her gender discrimination case against Kleiner Perkins, but she may have inspired numerous women working in Silicon Valley who identified with her cause. According to Fortune, employment lawyers are seeing a heightened awareness among women that the workplace issues they face, and that Ms. Pao articulated in her case, are perhaps more widespread than not. This “Pao Effect” has Kay Lucas, a San Francisco-based employment law attorney, fielding twice as many calls each week from potential clients with workplace gender discrimination concerns. Kelly Dermody, a partner at Lieff Cabraser Heimann & Bernstein, has litigated gender discrimination cases for a decade, and told Fortune that her clients now have a heightened willingness to speak out. Lucas also said that companies are more inclined to settle instead of allowing information to become public, and as we observed with the Pao trial, highly publicized. Lucas noted that many of her clients’ complaints share similar themes involving exclusion from important meetings and denied access to the circles of influence. Yet, she said to Fortune, “these women are not particularly angry; they’re ambitious. They’re not victims; they want to be participants.”

A quick search of legal news gives this “Pao Effect” additional credibility.  According to Law 360, Heather McCloskey recently sued Paymentwall, Inc. for sexual harassment, discrimination, retaliation and failure to take reasonable steps to prevent harassment and discrimination. Ms. McCloskey alleged that executive Benoit Boisset routinely harassed her, calling attention to her physical appearance in a demeaning manner. As she became more vocal in her objections, Boisset used expletives when referring to her, and ultimately terminated her employment. McCloskey also described the workplace environment as young, predominantly male and lacking any formalized set of rules or policies. Kelly Dermody cited these kinds of workplace dynamics as partially to blame for the volume of complaints arising from Silicon Valley. She opined to Fortune that many tech companies take off “really quickly without a lot of attention to human resources.” Consequently, “you have a lot of young managers who make young managers’ mistakes,” which might encompass many of the alleged missteps in the Paymentwall case. Read More ›

The Fashionable and the Furious: Dov Charney Seeks $40 Million from American Apparel

Last summer, we covered in depth the resounding repercussions from American Apparel’s decision to terminate its CEO and founder, Dov Charney.  Now, the sequel has arrived – and it promises lots of action.

Matt Townsend of Bloomberg Business reports that Charney has resumed his arbitration against his former employer, in which he is seeking $40 million from the clothing company.  Charney previously agreed to put his claims on hold while American Apparel made its final decision about whether to terminate him.  After an investigation, the board decided in December to cut Charney loose.  Read More ›

Whose Idea Is It? Make Sure Employees Clearly Transfer Ownership Of The Intellectual Property To The Organization Before Parting Ways

            In the previous blog post, we discussed the ongoing bankruptcy litigation between Crystal Cathedral Ministries and its founder Dr. Robert Schuller over the rejection of his Transition Agreement.  That contract purported to spell out the relationship between the parties as Dr. Schuller stepped aside from his post as senior pastor.  The determination of whether that agreement was intended to be an employment agreement, and subject to the strict limitations of section 502(b)(7), or a retirement benefit which is not so limited, is pending before the Supreme Court.  However, Dr. Schuller’s case also presented other interesting issues that could be instructive for other employers.

            In addition to his claim for damages based on the rejection of the Transition Agreement, Dr. Schuller sought compensation from tCrystal Cathedral (the bankruptcy debtor) in an undetermined amount, for allegedly improper use of his intellectual property.  The intellectual property, which consisted of more than 35 years of books, sermons and other writings, had been produced by Dr. Schuller while he was employed by the debtor as its senior pastor.  Dr. Schuller, individually and through a wholly owned corporation, asserted a copyright to these materials.  Under the Transition Agreement between the debtor and Dr. Schuller, the intellectual property was made available to the debtor for use pursuant to a royalty free license.  Read More ›

Transition Is Such A Difficult Thing: Crystal Cathedral’s Battle With Its Founder

Transition for corporate leadership is frequently complex.  When the transition involves a charismatic founder, this step can be even more stressful.  Planning well in advance for the inevitable segue between leaders and outlining the respective roles of both new and departing management can help, but may not fully resolve the issues.  A recent decision involving Crystal Cathedral Ministries, the megachurch founded by famed televangelist Dr. Robert H. Schuller, reflects how nuanced this process can be.  Because this case presents many issues of corporate succession, it provides a gateway for discussing various employment issues that may crop up in a corporate reorganization.  We will focus on the case in a series of articles designed to spotlight these issues.  

            Dr. Schuller founded the Crystal Cathedral in the 1950s.  Later, Crystal Cathedral Ministries was formally incorporated in 1970 with Dr. Schuller as the senior pastor.  During his 36-year tenure in this position, Dr. Schuller wrote numerous books and gave countless sermons and other talks, particularly in his role as the executive creator and director of content for The Hour of Power, a weekly television show produced by Crystal Cathedral Ministries.  In exchange for these services, Dr. Schuller received a salary and benefits, including a housing allowance and health insurance. Read More ›

The Inbox – An Officer and a Whistleblower

When Dodd-Frank became law in 2010, companies with corporate compliance programs viewed the whistleblower provisions warily and anticipated a potential negative impact on the success of their own internal reporting programs. According to a Law360 piece authored by Vinson & Elkins partner Amy Riella, some companies feared that employees would circumvent the internal reporting process in favor of taking information directly to the SEC to reap the financial awards. A related fear was that corporate officers would be incentivized to do the same as they learned of misconduct through compliance channels. The SEC sought to allay these concerns by creating implementation regulations that disallowed corporate officers from bringing actions when they learned of the relevant information through the role they played in the compliance process. In other words, the officer would have to learn of the fraudulent activity through his or her own “independent knowledge or independent analysis.”  There is an important exception to this rule – an exception that recently earned a former company officer a six-figure award for reporting securities fraud.  The exception states that once the company becomes aware of the issue, it has 120 days to address the alleged misconduct. If the company fails to act within the allotted time frame, the door opens for the otherwise ineligible corporate officer to use the second-hand information to become the corporate whistleblower.

Like sands through the hourglass, so are the days of testimony in the Pao/Kleiner Perkins sexism trial. This week’s installment pitted one female venture capitalist against another. Mary Meeker, the top-ranking female partner at Kleiner Perkins, testified to the virtues of Kleiner Perkins and her belief in its fair treatment of women. When gender is a fundamental issue, the testimony of one woman’s experience versus the other can prove pivotal. According to Fortune, Ms. Meeker, a well-known investor who was once dubbed “Queen of the Net,” by Barron’s Magazine, offered a perspective designed to undercut the claims of discrimination advanced by Pao in the previous weeks’ testimony. According to USA Today, Ms. Meeker testified that "Kleiner Perkins is the best place to be a woman in the business." That said, high-ranking women are a minority in the firm and their representation in the senior partnership has remained relatively constant. Kleiner Perkins has seven senior partners, two of whom are women. At the time of Ms. Pao’s termination in October 2012, three of the eleven senior partners were women.      Read More ›

Pao v. Kleiner Perkins: Some Lessons for Employers Thus Far

The ongoing trial in Ellen Pao v. Kleiner Perkins Caufield and Byers has made headline news across the country.  It’s being covered by the Wall Street Journal and USA Today, among other national publications.  Those interested in following the trial can monitor the #ellenpao hashtag on Twitter, or watch liveblogs from Re/code or the San Jose Mercury-News.

Why is the trial so newsworthy?  As we reported here, Pao claims that Kleiner Perkins, a prominent Silicon Valley venture capital firm, discriminated against her because of her gender and then retaliated because she complained.  She claims that she was not promoted to a plum senior partner position because she was a woman, and that the firm fired her because she complained and later sued it.  Her story involves sex, boorish behavior, and office intrigue that ranges from the mundane to the highly dramatic.

With that introduction, here are some -- of many -- takeaways for employers from what has transpired thus far: Read More ›

Should Executives Arbitrate? The Empiricists Weigh In

Should executives include an arbitration clause in their employment contracts? There’s no uniform answer, of course. Arbitration proponents cite its speed, cost, privacy, informality, minimal discovery, and limited appellate rights. Opponents cite pretty much the same list. Volumes have been written about whether arbitration is a better form of dispute resolution than litigation, and we can’t resolve that question here.

But thanks to relatively new state laws requiring public disclosure of certain arbitration information, we can look at the question statistically. Even better, people who understand statistics can look at the question statistically, and we can report what they say.

We started by looking at the data set disclosed by the American Arbitration Association (AAA) concerning employment-based arbitrations. (A detailed explanation of the data, and the data itself, is available on this page of the AAA’s website.) One field of the data reports the employee’s salary in four categories: $250,000 or greater; $100,000 to $250,000; $0 to $100,000; and, regrettably, “not provided by parties.” Over the past five years, the AAA database reports about 7700 employment arbitrations (not necessarily separate “cases”; some cases have multiple records, usually reflecting multiple respondents), but only 2912 of these included data for the employee’s salary range. The following table shows the breakout of records by salary range:

Emp. Salary

Number

Pct of Total

$0 to $100,000

2284

78.4

$100,000 to $250,000

412

14.1

$250,000+

216

7.4

Total (excl. no data)

2912

100.0

Read More ›

Former LSU Assistant Coach Sues School to Avoid $400,000 Buyout

LSU is used to battling with its Southeastern Conference (SEC) foes on the gridiron.  Now, it’s fighting in court with a former assistant who jumped ship to conference rival Texas A&M. 

John Chavis, LSU’s ballyhooed former defensive coordinator, left LSU for A&M at the beginning of this year, sparking headlines about “winning big” at his new home in College Station.  But storm clouds were brewing – LSU’s athletic director, Joe Alleva, said that he expected Chavis to comply with a $400,000 contractual buyout. 

On February 27, Chavis sued LSU in Texas state court, seeking to avoid the buyout.  He named A&M as a defendant as well, but only as an “indispensable party,” reported Jerry Hinnen of cbssports.com.  The Associated Press reported that A&M agreed to pay the buyout for Chavis if he was found to owe it.

LSU, seeking a home field against Chavis, quickly filed a separate case against him in Baton Rouge, claiming that it is entitled to receive the buyout money.

 Chavis’s contract reportedly said that if Chavis left in the first 11 months of his contract, before January 31, 2015, he would have to pay the buyout.   The sequence of events appears to be that Chavis gave a required 30-day notice on January 5 that he was resigning and terminating his contract.  Chavis says that he left LSU by February 4 – after the January 31 end to the buyout period – and didn’t join the Aggie payroll until February 13.  Read More ›