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- The Inbox – This One’s for the Birds
- In Argument in Abercrombie & Fitch Case, Court Offers Solutions for Headscarf Issue
- SOX Clawback Provision Takes Another Bite
- Former Venture Capital Partner Gets Her Day (Actually, Month) in Court
- Hello, Federal: Can Out-of-State Employers Contract Around Maryland’s Wage Payment Law?
- Fourth Circuit Upholds Jury’s Sarbanes-Oxley Award of Emotional Distress Damages to Fired CFO
- Supreme Court Holds That TSA Whistleblower’s Disclosure Wasn’t “Prohibited by Law”
- Individual Liability of Officers and Directors for a Corporate Data Breach
- 2015 Brings Significant Changes to Maryland’s Campaign Finance Laws
- Five Issues in Executive Disputes to Watch in 2015
- "Key Man" Provisions
- After-Acquired Evidence
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Blogs We Like:
The AmLaw Daily
The BLT: The Blog of LegalTimes
Connecticut Employment Law Blog
The D&O Diary
Delaware Employment Law Blog
DeNovo: A Virginia Appellate Law Blog
The Employer Handbook
Executive Pay Matters
The Federal Criminal Appeals Blog
Grand Jury Target
Screw You Guys, I’m Going Home: What You Need To Know Before You Scream “I Quit,” Get Fired, Or Decide to Sue the Bastards
Trade Secrets & Noncompete Blog
Virginia Appellate News & Analysis
WSJ Law Blog
Showing 12 posts from April 2013.
Who 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.
Batman 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 ›
Late 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 report. Read More ›
Today's super-sized Inbox covers all the recent news in suits by suits:
- "Show me the money!" Tom Cruise may have said it most memorably, but we all live it every day. And this week, we've got CNN's profile of the 20 highest-paid CEOs, along with the Wall Street Journal's coverage of a report issued by the AFL-CIO showing that in 2012, U.S. CEOs received, on average, 354 times the compensation of the average worker.
- In the same vein, news outlets remarked on several high-dollar executive severance packages ("golden parachutes"), including a $212.6 million payout for outgoing Heinz CEO Bill Johnson (that the Pittsburgh Post-Gazette called "ridiculous"), a $2.25 million payout to outgoing Genworth Financial, Inc. CEO Michael Frazier, who resigned after Genworth's stock lost 80% of its value, and a comparatively modest $100,000 severance package to former Holly Hill, Florida city manager Oel Wingo, who was fired in 2010 amidst allegations of falsifying documents and destroying records. Similarly, Office Depot Inc. announced that it had "amended" its employment agreement with CEO Neil Austrian after Office Depot's recent merger with OfficeMax; the new agreement would provide Austrian with up to 650,000 shares of Office Depot's stock (currently trading at just over $4 per share).
- Oh, and while we're still showing you the money: a federal bankruptcy judge has thrown out a controversial proposed $20 million severance payment to outgoing American Airlines CEO Tom Horton (that we previously covered here, here, and here) on the grounds that the payout exceeds Congressional maximums for companies in bankruptcy. Not to toot our own horn, but the judge's rationale for throwing out the severance package -- that Horton's value added accrued to American Airlines and not to the new company, and therefore that the bankruptcy rules applied -- is pretty much what we said back in February.
- Still, there's one company in the news that's bucking the "golden parachute" trend: retailer J.C. Penney, which tied former CEO Ron Johnson's compensation to the company's performance. As a result Johnson was essentially not paid at all for his tenure as Penney's CEO, given that he invested $50 million of his own money in the company and exchanged $107 million in Apple Computer stock for stock in J.C. Penney currently worth approximately $12 million (along with millions of "underwater" options to purchase shares at a price two to three times the going market rate).
- We've written a lot about Facebook and the emerging role that social media play in today's workplace. But some wonder if Facebook's management and hiring practices are as cutting-edge as its technology. In particular, Beth A. Stewart, CEO of Trewstar, an executive search firm that specializes in placing female executives, helped organize a protest at Facebook's New York headquarters over the lack of diversity on Facebook's board of directors. In June of 2012, Facebook named its first-ever female director, COO Sheryl Sandberg; since then, it has added another female to its nine-member board of directors.
- A brief foray into international law: After Rina Bovrisse sued her former employer Prada Japan (alleging, among other things, that the Prada Japan CEO had demoted or transferred fifteen female employees for being "old, fat, ugly, disgusting, or [who] did not have the Prada look"), the shoe giant responded by countersuing Bovrisse for $780,000, alleging that her public accusations "damaged the Prada brand." A Japanese court has finally ruled on Bovrisse's lawsuit, finding that although harassment occurred, "the company's behavior was acceptable and employees of a certain rank should be able to handle it." Prada Japan's countersuit remains active -- although an online petition is circulating urging the company to drop it -- and Ms. Bovrisse will appear at the United Nations in Geneva later this month to appeal for equal rights in the workplace.
- SEIU Healthcare Pennsylvania, a subchapter of the Service Employees International Union, announced that it will return to the National Labor Relations Board with new allegations against the University of Pittsburgh Medical Center ("UPMC"), alleging that UPMC has "unlawfully disciplined or threaten to discipline over 17 employees" for supporting the SEIU. UPMC had previously reached a settlement with the NLRB in which it agreed to rescind policies that retaliated against employees who supported unionizing.
- Whistleblower Paul Blakeslee was awarded $3.4 million from an Alaska federal court jury in his retaliation and age discrimination claims against Shaw Environment & Infrastructure, Inc. Blakeslee informed Shaw managment in 2008 that a project manager had allegedly defrauded both Shaw and the government in connection with various equipment leases; 17 days later, Blakeslee was fired.
- As always, we'll continue to bring you all the recent developments in legal disputes over covenants not to compete (and surely you're reading our "State by State Smackdown series, right?). First up: companies that allegedly have tried to circumvent uncertainty over noncompetes -- particularly in California -- by agreeing amongst themselves not to recruit each others' employees. Recently, we discussed the antitrust implications over eBay's alleged "handshake" deal with software manufacturer Intuit not to recruit each other's employees; last week, a federal district court judge in California ruled that thousands of employees could not proceed as a class action with similar allegations against goliaths Apple and Google for precisely the same reasons -- that the plaintiffs could not show a class-wide injury as a result of any alleged agreement between Apple and Google not to poach each other's employees.
- Second: four Renown Health executives, including CEO Jim Miller, have resigned from the Nevada-based nonprofit after the hospital system attempted to force them to sign non-compete agreements. Miller and other executives successfully sued Renown over the practice, and in December, the FTC ruled that Renown could not enforce the contractual provisions under antitrust law (because Renown controlled up to 97% of the market).
- Next: Medical company Kinetic Concepts, Inc. (KCI) of San Antonio has reached a settlement with former executive Israel Vierma, who left KCI for rival Smith & Nephew; the confidential deal resolves the parties' dispute over Vierma's noncompete agreement.
- And in a new one for us: Houston-based food group Landry's, Inc. has sued to block the opening of a new Houston restaurant, "Mr. Peeples Seafood + Steaks," on the grounds that the restaurant's GM, Tim Kohler, is violating a noncompete agreement he signed with his former employer, Vic & Anthony's Steakhouse (which, in turn, is owned by Landry's). Turnover is common in the restaurant industry, so this will be an interesting case to watch.
- Finally: Mondaq has a very nice summary of the Fifth Circuit's recent opinion in Avalon Legal Information Svcs. v. Keating, which discusses the evidence a court may consider when enforcing a noncompete clause in Florida.
- Remember Kirby Martensen, the former Oxbow Group executive who alleged that he was kidnapped and falsely imprisoned by billionaire William Koch? We sure do. Koch has now moved to dismiss Martensen's California lawsuit for lack of personal jurisdiction; Martensen claims that Koch has sufficient contacts with the jurisdiction and, in the alternative, seeks leave of court to conduct jurisdictional discovery, a rare practice in federal court.
- Former Fox Sports music director Jerry Davis has sued Fox Sports, alleging that the company "has never employed a black person as vice president or higher" -- which covers 34 executive positions -- in its nineteen-year history.
- We've covered the emergence of "say-on-pay" lawsuits pursuant to Section 951 of the Dodd-Frank Act in light of the "business judgment rule"; this week, our friends at the Harvard Law School Forum on Corporate Governance and Financial Regulation also weigh in this week with a summary piece highlighting the lack of success "say-on-pay" plaintiffs have had in both state and federal court. (We also recommend this article from the Social Science Research Network entitled "Should Shareholders Have a Say on Executive Compensation?")
- Music and television producer Lisa Sanderson sued Garth Brooks and his production company, Red Strokes Entertainment, alleging that the country music star used his "infectious charisma" to fraudulently induce Sanderson to abandon her lucrative TV career in favor of pitching crazy promotional ideas (such as attempting to get Brooks to star in Stephen Spielberg's Saving Private Ryan). We have two words for Ms. Sanderson: Chris Gaines.
Almost 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 ›
When 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 ›
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.”
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
Time 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 ›