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Showing 12 posts from April 2013.

Third Circuit Rejects Narrow Construction of Sarbanes-Oxley Whistleblower Claim

Atlantis HotelWho doesn’t like all-expense-paid trips to the Atlantis Resort, the Venetian Hotel, or the Wintergreen Resort?  A recent decision from a federal court of appeals gives us the answer: Jeffrey Wiest, an accountant for Tyco Electronics Corporation

In Wiest v. Lynch, the Third Circuit tackled Wiest’s whistleblower claim, brought after he refused to approve corporate expenditures for conferences at luxurious lodgings. Read More ›

Recent Breach of Contract Lawsuit Against Michael Keaton Illustrates Measuring Expectation Damages

BatmanBatman has been sued.  Okay, not Batman, but the guy who played him, Mr. Mom and Beetlejuice in the movies – Michael Keaton.  In this lawsuit filed earlier this month in federal court in Illinois, the company that produced the movie The Merry Gentleman (if you’ve never heard of it, that’s the company’s point) alleges that Keaton breached agreements to direct and act in the movie by failing to deliver a satisfactory first cut of the movie on schedule, by working at cross purposes to the company by promoting his own cut of the film to officials of the Sundance Film Festival, and by failing to perform other post-production directorial duties or to assist in promoting the movie.  According to the company, if Keaton had performed his contractual duties, then the Christmas movie would have been released in time for the 2008 Christmas season, rather than May 2009, and, presumably, would have grossed more than the $350,000 than it did at the box office. 

Assuming that the company’s allegations that Keaton breached the contracts are true and assuming that Keaton’s breach (rather than market forces or some failure by the company) caused the movie to flop, what are the company’s damages?  This question is relevant not only to Keaton and The Merry Gentleman production company, but to all parties to a broken contract in which one party had promised to provide employment services to another party in exchange for compensation.  In other words, the question is relevant to all contractually-based employment disputes – a frequent topic on Suits by Suits.  The answer may not be what you think, especially if you think that, as damages, Keaton should just give back the compensation that the company paid him. Read More ›

Why Didn't Rutgers Fire Basketball Coach Mike Rice for Cause?

Basketball ImageLate last week, Rutgers announced that it reached a $475,000 settlement with former men’s basketball coach Mike Rice and that no cause for Rice’s termination would be provided.  Recently-publicized videotapes show Rice at practices hitting, kicking and throwing basketballs at his players and taunting them with obscenities and anti-gay slurs (not to be confused with this shocking video of Middle Delaware State women’s basketball coach Sheila Kelly throwing toasters at her players).  The announcement came more than two weeks after Rutgers President Robert Barchi told reporters that Rice was fired, but not for cause.  And that announcement came several months after Rice was suspended from work for three days, following an internal investigation by outside counsel, resulting in this reportRead More ›

The Inbox - April 19, 2013

Today's super-sized Inbox covers all the recent news in suits by suits:

“You’ve got…a non-compete!”

Old ComputerAlmost faster than a pop-up ad, AOL Inc. sued one of its former executives one day after he left the company for another pioneering Internet business – Yahoo, Inc. AOL, which also named Yahoo as a defendant, alleges that Edward Brody’s employment agreements with it prevent Yahoo from hiring him as the head of its Americas sales division. 

AOL’s pleading, filed Friday in New York State court, is not yet a full complaint laying out all of its allegations, but only a summons with notice – which under the rules governing New York’s courts can be used to begin a suit instead of a complaint, but only if it includes “a notice stating the nature of the action and the relief sought.”  The brief “notice” AOL included tells us a lot: Brody, AOL alleges, is bound by two employment agreements – one dated June 2012 and one dated November 2009.  The company – which you may recall started as an online game service for Commodore 64’s and similar early home computers – argues those agreements are enforceable against Brody (who until Thursday was the head of AOL Networks), and “prohibit Defendant Yahoo Inc. from employing and/or using his services during the notice and post-employment restricted periods” in them.   Read More ›

Criminal Trial Begins in Case Against Former Executive Search Head

corporate corruptionWhen an executive competes with a former employer by using its confidential information, the executive takes a substantial risk.  We’ve previously covered how one Hallmark executive lost hundreds of thousands of dollars by using and then deleting confidential info.

David Nosal, the former head of executive search firm Korn/Ferry’s CEO recruiting practice in Silicon Valley, is about to find out whether he is going to suffer an even more severe punishment: time in federal prison.  Read More ›

California Continues To Go After Non-Competes

We’ve written at length about the rapidly-changing landscape regarding covenants not to compete, including the first-in-the-nation law in California that essentially prohibits all such agreements, and we’ve kept you abreast of how various states have responded to the California statute, including New York and Massachusetts.  (“The State-by-State Smackdown”)

Now, covenants not to compete typically arise in the context of an employment agreement, with the employee agreeing that if she leaves the company (or is fired), she will not flee to the company’s closest competitors.  Typically, the question as to whether such agreements are enforceable turns on how narrowly-tailored the covenant is to serve its purpose, which means the determination is generally made on a case-by-case basis.  This reflects a balancing of two goals:  ensuring free and fair competition in the marketplace, and also protecting a company against rivals seeking to “poach” its employees and potentially steal secrets, practices, and other confidential information.  It’s a tough balance to strike, and the parties typically only figure out exactly where the line should be drawn once one party sues the other. Read More ›

California Strikes Down An Employee’s Agreement to Arbitrate on Substantive ‎Unconscionability Grounds (As “One-Sided”)‎

One of the most important trends in the relationship between employers and employees is the proliferation of mandatory arbitration clauses in the employment contract.  In particular, we’ve noted that once an employment contract contains an agreement to arbitrate, courts frequently send non-contractual claims to the arbitration forum as well under the theory that such claims “arise out of” the employment agreement.

Because arbitration is generally perceived as being employer-friendly – although we’ve cautioned employers that isn’t always the case – employee plaintiffs are on the lookout for ways to convince a court that their arbitration clauses should not apply.

One approach is for the employee to argue that the employer has waived his or her right to arbitrate because the employer has “acted inconsistently” with the right to arbitrate claims.  We looked at the legal basis for this argument (as well as indulged in some trash TV) in a two-part series just a few months ago.  (Part one, Part two)

Another approach is for plaintiffs to challenge the clause as unfair.  The argument goes something like this:  for many employees – although typically not executives – the employment contract is presented on a “take it or leave it” basis; that is, it is a contract of adhesion over which the employee has little to no ability to negotiate particular provisions.  Accordingly, if an arbitration provision is drastically unfair to the employee, the court can strike it down under the doctrine of “unconscionability,” which permits a court to throw out a contractual provision that is so one-sided as to be “unusually harsh and shocking to the conscience.”

The latter approach is vividly illustrated by a recent California appellate decision, Compton v. American Management Services. Read More ›

The Inbox, Cherry Blossom Edition

Here at SuitsbySuits Headquarters in Washington, the Nationals are blossoming and the fabled cherry trees are about to.  Here’s what’s caught our eye between Bryce Harper’s home runs and the crowds on the National Mall

Eric Murdock, who compiled the video showing former Rutgers’ basketball coach Mike Rice’s abusive behavior toward players, plans to sue Rutgers for wrongful termination.  According to Murdock’s lawyer, Rutgers did not renew Murdock’s contract as director of player personnel after he reported Rice’s behavior to the school last summer.

Not the best negotiating strategy: Workers at a greeting card company in France have kidnapped their boss in a dispute over pay.

Non-compete agreements aren’t just for office workers: a St. Petersburg, Florida chef has been enjoined from working in any restaurant in Pinellas County because she signed one.

And in another food-type note, the U.S. Second Circuit Court of Appeals has ruled in favor of biscuit maker Stella D’Oro and against the National Labor Relations Board, overturning the NLRB’s finding that the company’s failure to provide a copy of its financial statement to an employee union was an unfair labor practice.

Employment Agreement Tip of The Week No. 2: Once You Get It In Writing, Put Out Future Fires By Making Sure The Writing Is Clear

Fire fightersTime for our second tip of the week about employment agreements.  We’re looking at things many of us think we should do about employment agreements but that, oddly enough, aren’t being done – at least in the two cases we profile this week, each of which made it to a state high court.    

Our first tip was straightforward: if you have an employment agreement, or think you have one but aren’t sure – get it in writing.  

Our second tip follows the first.  Once you’ve reduced your employment agreement to writing, make sure it’s clear – or at least, as clear as possible.  Clarity will reduce the time and money you’ll spend if you get into a dispute over the agreement.  Read More ›