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- Can Employers Discriminate Against Employees Based on Sexual Orientation? No, According to this Key Court
- Ex-General Counsel Dodged Privilege Claims Before $14.5 Million Verdict (pt 2)
- How Did This Ex-General Counsel Win $14.5 Million From His Former Employer? (pt 1)
- Beware the Deadlock: Delaware Courts Step in on Corporate Dysfunction
- Insider Trading and Related Risks for Executive Branch Employees: Pay Attention to the STOCK Act
- From New York and Delaware Courts, a Double Blow of Bad News for Sergey Aleynikov
- Headed for Overtime? Trump Administration Will Decide Fate of New Time-and-a-Half Rule
- A Closer Look at the New Lawsuit By Baylor Football Coach Art Briles
- Can an Employer Back out of a Promise to Provide Advancement by Claiming That the Employee Committed Fraud?
- Suits by Suits Named to Blawg 100
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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 13 posts from July 2013.
Blog Editor Writes About Noncompetes For National Law Journal; No Word On Whether It Violates His Non-Compete Clause With Us
Regular readers of this space know we’ve written a lot about non-compete clauses in executive employment agreements. Indeed, we should write about them and you should know about them: they can have a significant impact, they’re often misunderstood or overlooked, and the law on them is in a rapid state of flux, as some states reconsider how they will treat them.
Now one of the editors of this blog, P. Andrew Torrez of our Baltimore office, has published a great piece in the National Law Journal about a California state supreme court decision that is spearheading a wave of changes to non-compete clauses all over the nation. It’s a must-read for anyone dealing with employees or corporate operations in the Golden State.
It’s also an honor for us to have one of our own published in the National Law Journal. And we’re not just saying that because of the old maxim about not arguing with people who buy paper by the ton and ink by the barrel, but because NLJ is, as legal periodicals go, a serious and significant one (its blog covering law in our home base of Washington, D.C., is first-rate, too).
P.S.—While we may not find fame and fortune as legal bloggers, there is glory to be had in the ABA Journal’s Blawg 100 list. If you enjoy reading Suits by Suits, please consider nominating us for the Blawg 100 by Friday, August 9. It will only take a few minutes.
Our Suits by Suits Inbox this week:
- Courtney McGrath, the former barn manager for Las Vegas entertainer Wayne Newton, has sued him for defamation. McGrath claims that Newton falsely accused her in a handwritten note posted to the barn door of killing his horse Infinity. Infinity suffered from a disease in its pituitary gland.
- Steven Jacobs, the former CEO of Las Vegas Sands Corp.’s China unit who claims that he was wrongfully terminated for blowing the whistle on alleged ties between the casino company and Chinese organized crime, asked the Nevada Supreme Court this week to allow a hearing on jurisdictional questions to go forward in the trial court even while the casino company appeals earlier decisions against it by the trial court.
- Maria Alvarado, the former laundry manager of Valet Services, Inc. can make a claim for unemployment benefits against Valet, even though she was not fired. According to a decision this week by the D.C. Court of Appeals, Alvarado had good cause to leave if her boss verbally abused her. Alvarado claims that her boss frequently would call her names, including "stupid," and "a piece of crap."
- Joseph Whittaker claims in a lawsuit that he filed against Car-Mart in Missouri federal court that he was terminated as general manager of a Car-Mart location in Cape Girardeau for his severe obesity in violation of the Americans with Disabilities Act.
Former CEO of BDO Is Stuck with Arbitrator's Decision That BDO Does Not Have to Indemnify Him in Criminal Case
Earlier this week, a New York state court declined to second-guess an arbitrator’s decision that BDO, USA does not have to indemnify or pay the legal bills of its former CEO, Denis M. Field, in his criminal case.
As we have noted here before, the first battle in a legal dispute between a company and its former executive is often over whether the dispute will be decided by a judge (and, ultimately, a jury) or a private arbitrator. Field v. BDO underscores why the stakes for that battle are so high: if you don’t like the arbitrator’s decision, you almost certainly will be stuck with it. That’s because the standard that courts apply in reviewing arbitrators’ decisions – even decisions about what the law requires – is a very forgiving standard. By contrast, the standard that appellate courts apply in reviewing trial judges’ decisions is less forgiving, which means that losers in the courts have a better shot at reversing decisions they don’t like than losers in arbitration. Read More ›
In federal courts across the country, employers have sought to limit the Dodd-Frank Act’s definition of “whistleblower.” Just last week, this challenge seemed futile. Both the SEC (in its regulations) and a number of federal district courts had rejected employers’ reading of the statute, under which the “whistleblower” term – and the accompanying right of action for retaliation – would be limited to those employees who reported misconduct to the SEC.
Last Wednesday, the Fifth Circuit flipped the script, holding that “the plain language of the Dodd-Frank whistleblower-protection provision creates a private cause of action only for individuals who provide information relating to a violation of the securities laws to the SEC.” Asadi v. GE Energy (USA), L.L.C., No. 12-20522 (5th Cir. Jul. 17, 2013), slip op. at 5. Read More ›
Here in the Baltimore-Washington area, we’re trapped under a dome - a heat dome. Like the inside of my car on these 100-degree days, disputes involving executives are also heating up, as the latest in Suits by Suits news shows:
- We’ve covered again and again the fact that district courts are broadly interpreting the Dodd-Frank whistleblower retaliation provision to include employees who don’t report misconduct to the SEC. The Fifth Circuit has now bucked that trend, in Asadi v. GE Energy (USA) LLC. We’ll cover this important development in depth next week.
- In close-to-home news, St. John Barned-Smith of the Montgomery Gazette writes that a Montgomery County, Maryland judge denied the Landon School’s request for summary judgment on a wrongful termination claim brought by its former chief operating officer. Timothy Harrison contends that Landon’s headmaster ignored his reports that supervisors were discriminating against Hispanic employees. According to the article, Harrison also complained about the headmaster’s annual $800,000 salary. (Thanks in advance for finishing this blog post instead of dropping everything and applying for headmaster jobs.)
- Viacom convinced Judge Sue Robinson of the U.S. District Court for the District of Delaware to throw out a shareholder lawsuit alleging that company directors improperly awarded tax-deductible bonuses. The July 16 opinion in Freedman v. Redstone, Civ. No. 12-1052-SLR, is here. But what Delaware giveth, it also taketh away: Viacom suffered a $300 million loss in the Delaware Supreme Court this week in a different shareholder dispute.
Corporate mergers aren’t just about the bottom line. They also have a human side, impacting employees who are laid off as a cost-cutting measure and employees whose responsibilities change as a result of the transition.
Contracts between executives and employers can play a role in this transition. Many employment contracts and benefit plans feature change-in-control provisions. These provisions can allow executives to obtain benefits if they are terminated after a change in corporate control, or even if they resign for “good reason” after their responsibilities are meaningfully altered.
In 2006, John D. Clayton, the Director of Worldwide Acquisitions and Divestitures for Burlington Resources, Inc., had one of these arrangements when Burlington merged with ConocoPhillips. Burlington’s severance plan provided a right to benefits if an employee quit for “good reason” within two years of a change in control. If there was a “substantial reduction” in the employee’s responsibilities, that would be a “good reason” for resigning, entitling the employee to benefits upon resignation.
Just before the March 2006 merger, Conoco offered Clayton a position as its Manager of A&D, and he signed a waiver of benefits under the plan. But then, shortly after the merger, it reassigned him to the position of Manager of Business Development. As Manager of A&D, he would have worked with properties that were already yielding petroleum, while as Manager of Business Development, he would only work with exploratory or developmental properties.
Clayton was disgruntled with the change, and filed a claim for severance benefits – without resigning – in August 2006. The trustee of the severance plan denied the claim because Clayton hadn’t actually quit. Clayton worked for Conoco for two more years, but then resigned in March 2008 (within two years of the change in control) and claimed severance benefits. The trustee denied his claim, determining that he had not suffered a “substantial reduction” in his responsibilities and therefore had not resigned for “good reason.”
Clayton then filed a claim in state court. Conoco, however, removed the dispute to federal court, on the ground that the severance plan required an “ongoing administrative program” and therefore fell within federal jurisdiction under ERISA (the Employee Retirement Income Security Act). And in federal court, Clayton’s claim met its end. Read More ›
As we’ve previously covered here and here on Suits by Suits, a battle is raging in the federal courts over whether the new whistleblower protections in the Dodd-Frank Act of 2010 apply only to individuals who report misconduct to the SEC. But the fight, to this point, is as one-sided as Pickett’s Charge.
In a May 2013 decision, Judge Jesse Furman of the U.S. District Court for the Southern District of New York joined four other judges who have accepted employees’ expansive reading of the Act. Murray v. UBS Securities, LLC, No. 12-cv-5914 (May 21, 2013). Read More ›
This week in Suits By Suits:
- If you've been reading our "State-by-State Smackdown" series on noncompete agreements, you know that this is a hot legal area right now. From a business perspective, the Wall Street Journal's MarketWatch reports that more and more firms are requiring noncompetes from their employees, which may result in perceived overreach when those clauses are tested in court. Last month, we discussed retailer Best Buy's broad new noncompete clause.
- In an interesting twist, a Texas state appellate court held that an arbitrator could award a one-year extension of the parties' one-year noncompete clause contained in a settlement agreement. Nationsbuilders Ins. Svcs, Inc. v. Houston Int'l Ins. Group, Ltd. et al. (No. 05-12-01103-CV; Tex. 5th App. Dist. July 3, 2013). The appellate court overturned the trial court's refusal to confirm the arbitration award on the ground that the arbitrator had "exceeded his powers" pursuant to the Federal Arbitration Act, 9 U.S.C. § 10(a).
- Chicago, Illinois began an investigation of the $442,000 in severance payments received by outgoing Chicago metropolitan rail agency Metra CEO Alex Clifford, who resigned last month with nearly eight months to run on his contract amidst complaints that Clifford was "abrasive, autocratic, [and] unaware or unwilling to work with politicians who have say-so over Metra funding."
- Following up on a story from across the pond that we covered last week: the British Commons Public Accounts Committee is investigating nearly £25m in severance pay awarded to 150 outgoing BBC executives, many of which are alleged to have exceeded the amounts called for in the former employees' employment agreements. The chairman of the BBC Trust has testified that he knew nothing about such payments; the former director-general claims otherwise ("Aye ye did. I told you.").
- More international news: counsel for the Chinese Football Association (that's soccer to our U.S. audience) says that the league is likely headed to binding arbitration before the international Court of Arbitration for Sport regarding disputed severance pay for former coach Jose Antonio Camacho, who was fired as the coach of China's national soccer team following last month's 5-1 loss to Thailand.
- We admit it: occasionally we follow reality TV news -- but only because of the fascinating legal implications! So, uh, perhaps we were aware of the strange case of Amy's Baking Company -- an Arizona eatery featured on the Fox reality show "Kitchen Nightmares," hosted by famously shouty chef Gordon Ramsey -- and the corresponding public meltdown, which has (of course) gone viral. Late last month, Radar Online secured a copy of ABC's employment contract, which was brought to our attention because of the (almost certainly unenforceable) one-year noncompete clause contained in paragraph #20. Earlier this week, however, the owners of Amy's Baking Company have claimed that they've revised their contract, eliminating the noncompete clause and other objectionable provisions including keeping employee tips. [If you haven't seen the original "Kitchen Nightmares" episode, you can watch it in full on YouTube here.]
- Finally, if you'll forgive us a bit of self-promotion: Law360 (subscription required) had a great interview with our own Jason Knott, and Andrew Torrez was quoted in a piece by Crain's Chicago Business discussing the implications of the Fifield decision that was analyzed here last week.
As we here at Suits By Suits continue to monitor changes in state law regarding the status of covenants not to compete (the “State-by-State Smackdown”; see our latest post here), a fifth state has gotten into the act: Connecticut.
Some background: like most states – but unlike California – Connecticut follows the traditional balancing-test approach used in most states to evaluate the legality and enforceability of employer covenants not to compete. (This is sometimes called the “legitimate business interests” or “LBI” test.) Under Connecticut law, courts must consider the reasonableness of a non-compete clause’s (1) duration, (2) geographical scope, (3) protection of the employer, (4) restraint on the employee’s right to pursue work, and (5) interference with the public interest. See Robert S. Weiss & Assocs v. Wiederlight, 208 Conn. 525 (1988).
Before the July 4 holiday, the Connecticut state legislature passed a new law with respect to non-competes. The law itself does very little to alter the landscape, but most intriguing is what the legislature rejected. Read more after the jump…. Read More ›
Here at Suits-by-Suits Headquarters in Washington, D.C. we’re all smarting from having our town named one of America’s snobbiest cities. Although we’re not all snobby by geography: one of our editors, P. Andrew Torrez, is in fact based in a wonderful place called Charm City.
But we’re not going to be mad for long, because it’s the week we celebrate the Declaration of Independence. As Americans, we revere this document that sets out our basic freedoms and lays the foundation for our nation. And, as lawyers, we’re proud that its author Thomas Jefferson, one of our own breed, did such a poetic job of setting forth his case with clarity and brevity. So, we’ll try to borrow some of his best lines in the Declaration for this week’s Inbox, where we highlight the interesting things that have come over the transom:
- “He has …sent hither swarms of Officers to harrass our people, and eat out their substance.” There’s always much eating of substance – and networking – at Rasika in D.C.’s West End. (Indeed, the article that calls D.C. “snobby” uses Rasika’s clientele as evidence of snobbiness). Our friends at the Blog of Legal Times wrote this interesting article about how Rasika is suing its former executive chef for the return of some $30,000 the restaurant spent in immigration-related fees; it also alleges the chef used confidential business information to get a new job. We’ll watch this one.
- “Our repeated Petitions have been answered only by repeated injury.” We’ve written before about the heated dispute between Don Marsh, former CEO of Marsh Supermarkets, and the grocery store chain. Mr. Marsh was found liable in February to the company for $2.2 million in expense reimbursements and other items he wasn’t entitled to. Now, in a separate dispute over $2 million in severance Mr. Marsh claims he is due, Mr. Marsh says his company’s arguments for not paying the remaining severance are “hogwash,” “flip-flopping,” and “simply wrong.” Cleanup on Aisle 5…
- “…they are endowed by their Creator with certain unalienable Rights:” Religion and employment together is a constant and volatile source of friction, and this week is no different. The EEOC, responding to complaints from Liberty Institute, a group that purports to defend religious freedom, has reversed its dismissal of teacher Walt Tutka’s claim that he was illegally terminated. Tutka was fired by a New Jersey school district after giving his pocket Bible to a student who asked about a biblical quote; he also alleges his firing was based, in part, on his membership in Gideons International, the Bible-distributing group.
- “For cutting off our Trade with all parts of the world”: Or, at least, cutting a company off from its clients. That is what specialty equipment maker Daily Instruments says its former sales manager, Erik Heidt, tried to do when he copied client profiles, order lists, and other information just before going to work for a Daily Instruments competitor. In its suit against Heidt, Daily says such conduct violates Heidt’s employment agreement.
- “He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.” Or lack of salary: Mark Pincus, the founder and CEO of Zynga, will continue to get just $1 in compensation in his new role as “Chief Product Officer;” according to Fortune magazine, he won’t get a change-in-control severance payment or increase in his equity stake as former Microsoft executive Don Mattrick becomes CEO.
- “They too have been deaf to the voice of justice and of consanguinity:” Company executives and company boards, perhaps, as they continue to provide large golden parachutes in the face of public opposition – at least according to this New York Times story about a University of Michigan study, analyzed here. We take no position on whether such payments reflect what the study calls an “empathy gap” between companies and stakeholders, but suggest it’s a good practice for companies to consider the public appearance of large golden parachutes when they contemplate them.