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Showing 12 posts from May 2014.

The Inbox: May 30, 2014

It's that time again... time to check in on the week's news in Suits by Suits:

  • Ok, so we discuss noncompetes a lot here on this blog -- but even we were surprised by this next story.  Apparently God himself -- or herself; we're open-minded types -- has now gotten in on the act.  Patheos blogger Warren Throckmorton discusses the interesting case of Phil Poirier, a community group pastor who was essentially fired from the Mars Hill megachurch in Everett, Washington for his refusal to sign a non-compete agreement that would ban him from taking a “next church ministry” within ten miles of any Mars Hill church (which has hundreds of “branches” across the U.S.).  Throckmorton is continuing to update the fascinating saga, including creating a “no-compete zone” map highlighted in red that illustrates the practical consequences of the clause Poirer refused to sign.  (Hint:  it's virtually all of the state of Washington.)
  • Now that we’ve discussed religion, I suppose we can check in on a hot-button political issue, too.  Stoking the debate over executive pay inequality  is a recent survey of CEO pay conducted by the Associated Press (using data provided by Equilar, an executive pay research firm).  The AP’s findings are that that the median CEO received $10.5 million in compensation in 2013, up 8.8% from the previous year.  Of that, $1.1 million is in base salary (up 4.8% from 2012), with the largest incentive-based components being cash bonuses (median $1.9 million, up 12.6%) and stock awards ($4.5 million, up 4.2%). 

Worker Mobility in Silicon Valley: The End of the “Handshake” No-Hire

Hand refusing to shake with anotherAs long-standing readers of Suits by Suits know, California is at the forefront of the “state-by-state smackdown” regarding covenants not to compete, having prohibited essentially all such clauses by statute.  (You can refresh your recollection by reviewing our discussion of California law, here.)

Consequently, one of the arguments deployed by other states looking to restrict or ban noncompetes is that the business climate created in California encourages worker mobility, and that climate in turn is attractive to the technology sector (and in particular, to technology start-ups), who depend upon “poaching” away top talent that may be underpaid at a competitor.  You can read these arguments in more depth here (part 1), here (part 2), and most recently here (part 3).

The common thread that runs through these arguments is that California encourages worker mobility, and that mobility, in turn, is good for Silicon Valley.  The argument has some appeal. Read More ›

From Flowers And Cemeteries To Barbecue And Beaches: How We Got Memorial Day

Memorial Day carved out on beach sand with flags and blue, white, and red starsWhile we’re a blog about disputes between executives and companies, we can’t overlook those significant days when those companies and executives pause for a national holiday.  Through our first year, we’ve looked at how holidays – when most business stops and courts close (putting a brief halt to the disagreements we cover) – came to be, and their impact on the American workspace

Regular readers will guess where we’re going today.  Assuming you are not one of the 35 million-odd Americans traveling more than fifty miles for the traditional start to summer – and if you are, put down the device on which you’re reading this and watch the road, as someone is likely braking in front of you – read on for our look at how we got to enjoy Memorial Day. Read More ›

The Inbox - Beach Getaway Edition

Beach Chairs on BeachHere at the Suits by Suits Executive Employment Dispute Resolution and Litigation Centre, we’re closing the door and shutting things down, to paraphrase Alan Jackson, as Memorial Day approaches (our history of that day is here, by the way).  We’ve decided to walk to the beach this year because it may actually be faster than getting on the highway – given that fifteen percent of our Washington, D.C. home base clogs the roads to get out of town, while more than that come in to wander around the National Mall in search of restrooms

Assuming you are not reading this while you’re driving, you may find this collection of developments in the world of executive employment disputes and related fields to be interesting:

  • Some interesting thoughts about the criticism The New York Times faces after its surprise firing of executive editor Jill Abramson is here; it includes this truism: “An important lesson is for employers to understand that the leverage that they may have over employees in the workplace does not necessarily extend to the court of public opinion.” 
  • An alleged whistleblower who worked at Dish Network in its South Asian business alleges the satellite TV provider is blacklisting him from working in Bollywood
  • The growing scandal surrounding the Veterans’ Affairs department has, of course, whistleblower implications – we’ll likely be writing about this more in the future, but here’s one note about an allegedly blown whistle at a Colorado VA facility
  • Those cyber-thieves got more than data; they got a chunk taken out of his pay too: former Target CEO Gregg Steinhafel had his 2013 compensation slashed by more than one-third by the retailer’s board of directors this week; he’ll also have to repay over $5 million in retirement benefits.  Don’t cry too loudly for the CEO whose exit was an “involuntary termination” after a data breach scandal rocked the company’s holiday shopping season last year: he still has a golden parachute worth more than $54 million.  
  • Maybe he’s not an executive, but he’s certainly a high flyer: an air marshal who was fired after discussing cutbacks to the air marshal program on television will have to defend his appellate victory at the United States Supreme Court.  Robert MacLean convinced the U. S. Court of Appeals for the Federal Circuit that he should have been allowed to use a whistleblower defense when the TSA undertook to fire him; this week, the Supremes agreed to hear the government’s appeal of that ruling.  
  • Insert the Memorial Day beer-drinking pun of your choice here: A St. Louis jury returned a verdict in favor of megabrewer Anheuser Busch this week, finding that it did not discriminate against a former top-ranking executive when it paid her less than men in similar positions.  Even though her bonus and salary were over 40 percent lower than her male predecessor’s, the jury found no evidence to support the executive’s claim of gender discrimination.  

Not “Engineered To Amaze”: Quicken’s “Non-Contact Provision” Unenforceable Because It’s Too Broad, Arizona Appellate Court Holds

Business People WhisperingWe’ve written about this issue before, but it bears repeating: as a general matter, the more narrowly tailored and economically justifiable a non-compete agreement is, the more likely it is to be enforced (assuming state law allows it at all).  The same standard applies to the closely related “non-contact” clause that keeps former employees from luring their old colleagues away to new positions. 

An Arizona appellate court’s decision earlier this month reinforces this principle.  That court held – in Quicken Loan v. Beale – that a “non-contact” clause that kept former Quicken loan managers from contacting current loan managers for two years wasn’t narrowly tailored to protect Quicken’s financial interests, and was an unreasonable restriction on the former employees’ speech rights.  And, on a purely financial note, the court affirmed that Quicken had to pay its former employees’ attorney’s fees – as well as the fees the former employees’ new company, loanDepot, incurred when it jumped into Quicken’s suit. Read More ›

Lawyers like their clients – really, they do. But they can’t vouch for them.

Guarantee StampLet me explain what that means: “vouching” is, for us members of the bar, both a technical term and a no-no.  When it’s done at the trial of an executive employment dispute, it can unfairly prejudice the jury – and, ultimately, the “vouched-for” side can have its victory overturned by an appellate court.   We’ll see how this happened in the case of one Mindy Gilster. 

But first, more on “vouching.”  In law, it means essentially what non-lawyers think it means: to give a personal assurance of the credibility or truth of something.  All of us use this in our daily lives: “I know you’ll love that restaurant;” “trust me, you’re making the right decision;” and so on.  Lawyers, though, can’t “vouch” for their clients or for a witnesses’ credibility.  Not only is it considered a bad practice, but the Rules of Professional Conduct in most states forbid us from “assert[ing] personal knowledge of facts in issue…or stat[ing] a personal opinion as to the justness of a cause, the credibility of a witness, [or] the culpability of a civil litigant…”  Put another way, lawyers need to build arguments from the facts that are actually entered into evidence, and not on what they personally think the facts should be. Vouching comes up most often in criminal cases – but, as in the case of our subject today, it can surface in civil litigation over employment disputes. Read More ›

Buyer Beware: Hiring Competitor’s Star Executive May Not Only Get You Sued but Get You Sued in the Competitor’s Favorite Court

Court HouseWe have written before here on Suits by Suits about the risk to a company hiring an executive from a competitor of being sued by the competitor for tortiously interfering with the executive’s non-compete agreementA recent decision from a federal court in Pennsylvania sheds light on another facet of that risk:  being forced to defend the lawsuit in a faraway court favored by the competitor because the executive agreed to be sued there.  Read More ›

Do “Pornographic Materials” That Were Discovered in Senior VP’s E-mails After He Was Fired Let Company Off the Hook for Severance?

Skull on Computer KeyboardBon-Ton Stores, Inc. alleges in a lawsuit that it recently filed against its former Senior Vice President, Director of Sales Gary Pralle that – after the company fired Mr. Pralle – it discovered “pornographic materials” and “documents containing racial slurs” in his e-mails.  According to Bon-Ton, had it known about this “after-acquired evidence” before it fired Mr. Pralle, it would have had “cause” for firing him under its “Executive Severance Pay Plan” such that Mr. Pralle would not be entitled to severance.  In other words, Bon-Ton v. Pralle is an example of a company invoking the after-acquired evidence doctrine to overcome a breach of contract claim.  (Bon-Ton also alleges that bad behavior by Mr. Pralle that the company knew about before it fired him also gave the company “cause,” but those allegations mess up the example so we’re ignoring them.) Read More ›

The Inbox – May Showers Edition

RainI thought April showers brought May flowers, but the month of May has brought both showers and flowers to the DC-Baltimore area.  Luckily, our colleague Andrew Torrez was not parked on the Baltimore street that was swept away by the recent deluge.  As for this week’s news in employer-executive disputes, we’ve managed to pluck a few tidbits that have bloomed despite the storms:

  • In the continuing saga of a proposed ban on non-compete agreements in Massachusetts (which we have covered here and here), 37 technology CEOs recently wrote to the state legislature to advance the cause of the ban, reported Kyle Alspach of BetaBoston;
  • Two trade associations have resolved an expensive dispute over poaching of employees.  Dietrick Knauth of Law360 wrote that TechAmerica sued the Information Technology Industry Council for hiring away the leaders of its government procurement team, but has now agreed to a settlement.  TechAmerica argued that the Council wanted to put it out of business by stealing its member companies. 
  • Patron Tequila settled during trial with an executive who claimed that he was entitled to $70 million in bonuses – and just in time for Cinco de Mayo.  City News Service said that Ajendra Singh sued Patron and its founder, John Paul DeJoria, alleging that he was promised equity bonuses based on the value of the company in exchange for operating its new factory in Mexico.
  • A California Senate committee is recommending a bill that would raise corporate taxes for companies who have CEOs that make more than 100 times that of its median worker, and would provide tax benefits to companies whose CEOs make less than that ratio.   Harold Meyerson of the Washington Post wrote that the bill was “one of the few remaining avenues that could enable workers to regain some of their lost income,” “in the absence of both unions and full employment.”
  • Melissa Lipman of Law360 reports that eBay settled an antitrust suit alleging that it entered into an anti-competitive agreement with Intuit not to recruit each other’s employees.  The deal includes an injunction and a $3.75 million payout.  The $3.75 million is more than the price for the third most expensive item ever bought on eBay – lunch with Warren Buffett.

Release of Claims Means Exactly What It Says – Even When It Doesn’t

Image of General Release FormIf you’re confused by this headline, you’re not alone.  But you can’t be as confused as Debourah Mattatall must be after losing her lawsuit against her former employer, Transdermal Corporation.

The origin of Mattatall’s lawsuit, appropriately enough, was another lawsuit.  Mattatall used to own a company called DPM Therapeutics Corporation.  DPM’s minority shareholders sued her to prevent her from selling the company to Transdermal.  She went ahead with the sale anyway, and signed a Stock Purchase Agreement and Employment Agreement with Transdermal.  According to Mattatall, Transdermal didn’t fulfill its obligations under those deals, citing a lack of funds.

After Mattatall’s sale to Transdermal was final, Transdermal brought its own suit against the DPM minority shareholders.  All parties, including Mattatall, eventually settled the two shareholder cases.  Before agreeing to the settlement, Mattatall complained about the money that she was owed under the Stock Purchase Agreement and Employment Agreement.  Transdermal’s counsel assured her that her claims were “wholly extraneous” and she would be “free to pursue” her claims against Transdermal. 

In the written settlement, however, everyone released the claims that they “had, has or hereafter may have” against any other party.  Thus, even though Transdermal hadn’t sued Mattatall, according to the language of the release, she was giving up her claims against it.  The settlement also included a “merger clause,” under which all prior understandings were “merged” and “supersede[d].” Read More ›