Subscribe

RSSAdd blog to your RSS feed

Follow Us

Twitter LinkedIn

Contributing Editors

Disclaimer
© 2017 Zuckerman Spaeder LLP

Showing 7 posts from July 2014.

Dov Charney’s Pants And A Sexually Charged Workplace – ‎ What Is A Company Seeking To Minimize Litigation Risk To Do?‎

We at Suits by Suits are so excited by American Apparel’s dispute with its recently-fired CEO and founder Dov Charney that we can barely keep our shirts on.  After all, the dispute between the clothing manufacturer and its controversial former leader is bursting at the seams with takeaway points for feuding companies and C-suite employees (and those wanting to avoid having feuds).  For example, as we described in an earlier post, the dispute illustrates that terminating a key company officer may jeopardize company financing.  The dispute also presents the question:  can a company like American Apparel, which knew that Charney was apparently known for not being able to keep his pants on, decrease its exposure to the inevitable sexual harassment lawsuit by having all of its employees acknowledge in writing that the company’s workplace is sexually charged?   It depends.    Read More ›

Virginia Tech Professor Argues That University Officials Violated His Constitutional Rights When They "Demoted" Him

Virginia Tech SignHarold “Skip” Garner is a tenured professor at Virginia Tech who makes $342,000 a year, according to this article in the Roanoke Times.  Yet he is still suing university officials, including former president Charles Steger, for $11 million.  Why?

He says that the officials violated his constitutional rights when they removed him from his position as Executive Director of the Virginia Bioinformatics Institute (VBI).  In his complaint, available here, he claims that he was demoted without “advance notice of his removal or demotion” and without any “opportunity whatsoever to contest the merits of the action.”  He alleges that this lack of procedural protections “deprived [him] of property and liberty without due process of law.”  This kind of claim is known as a “Section 1983” claim: i.e., a claim brought under 42 U.S.C. § 1983, which provides a federal cause of action to individuals who are deprived of constitutional rights by the actions of state officials.  In the employment context, Section 1983 claims can arise when state officials discipline employees without affording them notice and an opportunity to be heard.  See, e.g., Ridpath v. Board of Governors Marshall University, 447 F.3d 292 (4th Cir. 2006).  That’s the kind of claim Garner is alleging here. Read More ›

Two Federal Agencies Battle In Federal Court Over Whistleblower Treatment

Talk about your inter-family disputes: one federal agency – the Department of Labor – has filed suit against the United States Postal Service, an independent federal agency (but one of the few explicitly authorized by the Constitution).  The reason for the federal lawsuit, filed in Missouri: the Postal Service’s alleged poor treatment, firing, and alleged harassment of an employee who claims he blew the whistle on safety hazards in a mail facility. 

Here’s the background, delivered despite any contrary weather: Thomas Purviance worked for the Postal Service for 35 years, most recently as a maintenance supervisor at a mail distribution center near St. Louis.  He had no record of disciplinary or performance issues.  In late December 2009, Purviance complained to his supervisors about what he perceived to be carbon monoxide and fuel oil leaks from some of the equipment at the center, as well as a pile of oil-soaked rags which he thought was a safety hazard.  Getting no response, Purviance eventually called the local fire marshal and made a 911 call to report the carbon monoxide leak.   Read More ›

The Inbox: July 18, 2014

We’re in the midst of summer and the news outlets are replete with anti-compete and whistleblower developments.  But before we get to those, let’s turn our attention to China:

If the dog days of summer here in the U.S. aren’t sweltering enough, imagine what they must feel like in the bustling, smog-laden cities of China. The Wall Street Journal reports that Coca- Cola Co. offers “environmental hardship pay” to some employees as a condition for relocating to some of China’s cities. Ed Hannibal of the HR consulting firm, Mercer LLC, indicates that it is not uncommon for multinational companies to offer the extra pay to incentivize workers to relocate to polluted cities. It helps to offset severe living conditions and ensure the company’s continued presence on the ground. 

These days it seems employers face an uphill battle to see non-compete agreements prevail in court.  Recently, a Louisiana state court carefully examined the terms of a non-compete in Gulf Industries, Inc. v. Boylan (La. App. 1 Cir. June 6, 2014).  The National Law Review reports that the employer in this case inserted a two year non-compete provision into a one-year employment contract. According to the Court, even though Boylan’s employment extended two years past the date specified in the employment contract, the non-compete provision kicked in when the one year employment term was satisfied. The employer sought to extend the non-compete, arguing that it did not take effect until Boylan resigned. The Court disagreed and held that the non-compete had run during Boylan’s continued employment with the company. Little did he realize at the time, but Boylan was quite the multi-tasker. Read More ›

By Terminating Its CEO, American Apparel Unexpectedly Unravels Lending Agreement

Firing a key executive can have repercussions beyond a severance dispute or a wrongful termination or discrimination claim by the executive.  American Apparel’s recent termination of its CEO, Dov Charney, provides the latest example of the wide-ranging consequences that can arise when a C-level employee is let go.  In American Apparel’s case, the consequences have included the threat of default on a $15 million loan and a resulting shareholder lawsuit.

How did this happen?  According to the New York Post, when Lion Capital LLC lent American Apparel the $15 million, the two entered into a lending agreement that said American Apparel would be in default if it fired Charney.  After American Apparel’s board told Charney it was going to fire him in 30 days, Lion Capital accelerated its demand for payment on the loan, threatening the company with bankruptcy.  American Apparel argued in an SEC filing that it wasn’t in default because Charney was still technically CEO.  However, it continued to work behind the scenes to remedy the situation.  Now, the company now appears to have struck a deal with a hedge fund to save it from Chapter 11. Read More ›

The Inbox - Independence Day Edition

Happy 4th of July! While many Americans enjoy a festive day of parades, barbecues and fireworks, let’s see if this week’s highlights spark your interest:

  • The American Apparel/Dov Charney feud seems set to implode as the parties fire missiles and missives at one another. According to Fortune, Mr. Charney requested a special shareholder meeting in an attempt to increase the number of sympathetic directors on the board while also reporting in a regulatory filing that he is working with investment firm Standard General to amass a controlling interest. Meanwhile, American Apparel responded by adopting a poison pill which would cap a shareholder or group of shareholders interest at 15 percent.
  • Bloomberg reported that the former employees of Goldman Sachs, who have alleged gender bias in their suit against it, ignited a class certification request on Tuesday. In support of their motion, the plaintiffs argued that female vice presidents and associates were systematically paid and promoted less than their male counterparts in the investment banking, management and securities divisions since September 10, 2002.   
Read More ›

What’s Worse Than Losing A Non-Compete Dispute? Paying $200K ‎For The Fun Of Losing

Jar of Money Emptying OutNo one likes to be wrong, and being proven wrong stinks.  And that’s especially true for folks in my profession – we’re not known for being gracious losers. 

But even worse than just being proven wrong is having to pay the other side what they spent to prove you wrong.  This is a relatively rare thing in the United States: the “American Rule” means that each side pays its own attorney’s fees, unless a contract or statute shifts the winner’s fees to the losing party’s side of the ledger.   

But those fees – over $200,000 of them – were shifted to the loser in Stuart Irby Co. v. Tipton, et al., an Arkansas case involving a non-compete clause that the plaintiff said prevented three of its former salesmen from going to work for another business in the electrical supply industry.  As we’ve noted, Arkansas can be a tough place for businesses trying to enforce non-competes: for example, its courts won’t rewrite them for the parties if they’re overly broad or otherwise unenforceable. Read More ›