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- The Inbox – December Rain Edition
- California Court SLAPPs Down Employee’s Malicious Prosecution Suit Based on Employer’s Trade Secret Case Against Him
- Upcoming Suits by Suits Whistleblower Webinar – Chance for Free Registration!
- Visions of an Improper Noncompete Provision: Texas Court Rejects LASIK Clinic’s Injunction Request Against Former Doctor
- November 2013 Monthly Roundup
- Skunks, Conquistadores, and Killer Balloons: Why Thanksgiving Is The Best Tuesday (or Possibly Thursday) of the Year
- Texas Strictly Construes Application of Mandatory Arbitration Clause Despite Superseding Agreement With No Such Clause
- Will Fiduciary Liability Insurance Cover Severance Agreement Payments If The Company Can’t Make Them?
- The Inbox, pre-Turkey Day edition
- Upcoming Suits by Suits Webinar: Whistleblower Watch
- After-Acquired Evidence
- Age Discrimination
- Arbitration and ADR
- Breach of Contract
- Civil Litigation
- Dodd-Frank Act
- Equal Pay
- Executive Compensation
- Family Medical Leave
- Fiduciary Duties
- Monthly Roundup
- Motions to Dismiss
- Noncompete Agreements
- Pregnancy Discrimination
- Preliminary Injunction
- Religious Discrimination
- Sarbanes-Oxley Act
- Severance Agreements – Change-in-Control Provisions
- Social Media
- Statutes of limitations
- Summary Judgment
- The Basics
- The Inbox
- Title VII
- Trade Secrets
- Vicarious Liability
- Wage and Hour
- Workplace Conditions (Occupational Safety and Health)
- Wrongful Termination
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
Jason Knott, a partner in Zuckerman Spaeder’s Washington office, represents individuals and companies in civil litigation, white-collar criminal matters, and government investigations. Some of his favorite cases have been “Suits by Suits.”
Showing 90 posts by Jason M. Knott.
California Court SLAPPs Down Employee’s Malicious Prosecution Suit Based on Employer’s Trade Secret Case Against Him
Companies prize their formulas for best-selling products like nothing else. Visitors to the World of Coca-Cola can visit the vault holding the soda syrup recipe. And KFC’s fried chicken seasoning method has been described as one of its most valuable assets.
NuScience Corporation makes the skin product CELLFOOD, which it describes as an “oxygen and nutrient supplement” using “proprietary water-splitting technology.” And as recounted by the California Court of Appeal in a recent opinion, NuScience has fought hard to keep the CELLFOOD formula secret. The California court’s decision addressed an unusual spinoff of NuScience’s trade secret battle: a malicious prosecution complaint filed by a former employee, David McKinney, who alleged that NuScience wrongfully brought a prior racketeering and misappropriation case against him. See McKinney v. NuScience Corp., No. B240831 c/w B244074 (Cal. Ct. App. 2013).
According to the court, most of NuScience’s trade secret troubles involved the Henkel family – father John and sons Michael and Robert – who found a copy of the CELLFOOD formula after it had been purchased by NuScience. After discovering the formula, the Henkels then repeatedly sought to sell it to other buyers, get money from NuScience to hand it over, or sell a competing product. NuScience won federal court injunctions against the Henkels, but Michael and Robert didn’t stop their efforts. And after NuScience fired McKinney, its vice president of sales and marketing, the Henkels got him involved in their efforts to discredit NuScience and use the formula. NuScience then filed its racketeering lawsuit against McKinney and Robert Henkel, alleging that the two engaged in a conspiracy to disparage CELLFOOD and violate the federal judgment against Robert. NuScience eventually dismissed that case without prejudice, asserting that it did so because Robert was threatening to disclose the CELLFOOD formula.
McKinney then filed a malicious prosecution lawsuit based on NuScience’s decision to voluntarily give up the case. However, NuScience quickly moved to strike his lawsuit based on California’s anti-SLAPP statute (Cal. Code Civ. Proc., § 425.16). Read More ›
Weather gurus are predicting snow, sleet, and rain for our area over the weekend. Although my kids are hoping for the white fluffy stuff, this amateur prognosticator is predicting a downpour. In keeping with this theme, the week’s biggest employment news is Robinson Cano’s $240 million deal with the Seattle Mariners (who are well accustomed to rainy skies). But our sights here at Suits by Suits are on matters a little less lucrative:
- You still have a chance to win free admission to our Dec. 10 webinar, “Whistleblower Watch: Big Issues in the Latest Whistleblower Cases Under Dodd-Frank, Sarbanes-Oxley, and the Internal Revenue Code.” For more details on this prize, click here.
- The First Circuit affirmed a summary judgment ruling in favor of Strine Printing Company against a former sales representative who claimed that his firing resulted in an “oleaginous mass of perceived wrongs.” The decision addresses a number of employment-related claims, including unjust enrichment, breach of an implied or express employment contract, and misrepresentation.
- We’ve previously covered the exploits of Larry Conners. Despite his year-long non-compete agreement, the St. Louis newsman is headed back to TV – as a pitchman. He’ll be a spokesman for John Beal Roofing.
- Jeff Green of Bloomberg Businessweek brought us the latest trend in executive hiring – the “golden hello.” These are multi-million dollar signing bonuses designed to entice new candidates to join the team. Among them: the $45 million that Zynga paid to entice an industry vet, Don Mattrick. Some are skeptical of the arrangements, noting that they don’t correlate with successful performance.
- A Louisiana appellate court has affirmed the dismissal of a lawsuit by former professors at Louisiana College, writes Charles Huckabee of the Chronicle of Higher Education. The professors claimed that they should have been able to use certain books in teaching classes on religion and values, which were prohibited by the college’s administration. The court refused to intervene on the ground that it was a religious dispute not proper for court involvement.
- Dominic Patton of Deadline Hollywood covered Jeff Kwatinetz’s suit against Prospect Park. The producer and talent manager wants a Los Angeles Superior Court judge to decide whether a noncompete provision in his agreement with Prospect Park can permissibly bar him from competing for five years.
On December 10, 2013, Suits by Suits contributing editors Ellen D. Marcus and Jason M. Knott will present a live webinar titled “Whistleblower Watch: Big Issues in the Latest Whistleblower Cases Under Dodd-Frank, Sarbanes-Oxley, and the Internal Revenue Code.” (For more details, click the link.)
Now, you have the chance to win a free registration for this upcoming webinar (retail price $149 for BNA subscribers and $249 for non-subscribers). All you have to do is either tweet a link to this post, making sure to reference our Twitter handle (@suitsbysuits), or retweet the link to this post that we’ll put up on Twitter. You can also qualify by commenting in this post with a question for Ellen and Jason to address during the webinar. The deadline to tweet, retweet, or comment is Monday, December 9. On the morning of Monday , December 9, we’ll randomly pick the winner and let him or her know by e-mail or Twitter message.
You may also enter the raffle by following these instructions.
If you’d like to go ahead and register for the webinar, click here.
Visions of an Improper Noncompete Provision: Texas Court Rejects LASIK Clinic’s Injunction Request Against Former Doctor
LASIK eye surgery requires a precise surgeon. If the surgery is unsuccessful, it can result in under- or over-correction, dry eyes, or infection.
LasikPlus of Texas, a Houston eye clinic, recently found out that it should have exercised similar precision when drafting its noncompete agreements. Instead, the Fourteenth Court of Appeals ruled last week that because LasikPlus failed to include required language in its noncompete agreement, one of its doctors can open a competing clinic two miles from its front door. See LasikPlus of Texas, P.C. v. Mattioli, No. 14-12-01155-CV (Tex. Ct. App. Nov. 21, 2013). We suspect there was not a dry eye in the house after that decision.
The covenant at issue in the case was part of LasikPlus’s employment agreement with Dr. Frederico Mattioli. Under the covenant, Dr. Mattioli, for the eighteen months following termination of his employment, could not open a competing clinic within 20 miles or solicit LasikPlus’s clients. Dr. Mattioli could only terminate the agreement with 120 days’ notice, or 30 days’ notice if LasikPlus was already in breach.
In October 2012, Dr. Mattioli told LasikPlus that he would be leaving within the month to start his own practice less than two miles away. LasikPlus sued Dr. Mattioli, seeking an injunction to bar him from opening the practice. The employment agreement expressly entitled LasikPlus to an injunction in these circumstances. Further, if the covenant was deemed unreasonable in scope of time or location, other language allowed the court to reform the covenant and enforce it to the degree it would be reasonable.
Yet Dr. Mattioli still succeeded in defeating LasikPlus’s request for an injunction, because the clinic left out a critical piece of the covenant. Read More ›
Here at Suits by Suits, we are thankful that the news about executive-employer disputes keeps flowing like gravy. This past month, we focused a lot of attention on non-compete agreements, many of which met the same fate as an unpardoned turkey. On a day as cold as chilled cranberry sauce, we sent a live correspondent to cover the oral argument in Lawson v. FMR LLC, in which the Supreme Court will decide whether employees of privately-held contractors of public companies have viable Sarbanes-Oxley claims. Finally, as per our holiday tradition, we recapped the history of Thanksgiving, in a post as entertaining as the most memorable Cowboys loss.
- Skunks, Conquistadores, and Killer Balloons: Why Thanksgiving Is the Best Tuesday (or Possibly Thursday) of the Year
November 27, 2013 | P. Andrew Torrez
- Texas Strictly Construes Application of Mandatory Arbitration Clause Despite Superseding Agreement with No Such Clause
November 25, 2013 | P. Andrew Torrez
- Will Fiduciary Liability Insurance Cover Severance Agreement Payments If The Company Can’t Make Them?
November 22, 2013 | William A. Schreiner, Jr.
- Upcoming Suits by Suits Webinar: Whistleblower Watch
November 21, 2013 | Jason M. Knott
- It Was The Added "0" That Did It -- Among Other Things
November 19, 2013 | William A. Schreiner, Jr.
- I Can't Quit You! - Why Quitting a Company May Not Mean Quitting Fiduciary Duties in Virginia
November 14, 2013 | Ellen D. Marcus
- Argument Recap: Five Takeaways from Lawson v. FMR LLC
November 13, 2013 | Jason M. Knott
- What I Don't Know About Your Non-Compete Can't Hurt Me, Right?
November 11, 2013 | Ellen D. Marcus
- Argument Preview: What to Look For in Lawson v. FMR LLC
November 7, 2013 | Jason M. Knott
- “Man Bites Dog” in the Fourth Circuit: Court Reverses Arbitrator’s Award and Enforces Release
November 6, 2013 | Jason M. Knott
- The Basics: Dodd-Frank vs. Sarbanes-Oxley Whistleblower Law
November 5, 2013 | Jason M. Knott
If you are interested in more information about legal issues involving executives and their employers, on December 10, 2013, Zuckerman Spaeder LLP partners and Suits by Suits contributing editors Ellen D. Marcus and Jason M. Knott will present a webinar titled “Whistleblower Watch: Big Issues in the Latest Whistleblower Cases Under Dodd-Frank, Sarbanes-Oxley, and the Internal Revenue Code.” In the session, Ms. Marcus and Mr. Knott will discuss the basics of these whistleblower and anti-retaliation provisions and address new developments in the law, including the Sarbanes-Oxley case currently pending before the U.S. Supreme Court. To register, click here.
On December 10, 2013, Suits by Suits contributing editors Ellen D. Marcus and Jason M. Knott will present a live webinar titled “Whistleblower Watch: Big Issues in the Latest Whistleblower Cases Under Dodd-Frank, Sarbanes-Oxley, and the Internal Revenue Code.” During the webinar, Ms. Marcus and Mr. Knott will discuss the whistleblower and anti-retaliation provisions of the Dodd-Frank and Sarbanes-Oxley Acts, the Internal Revenue Code, and other federal statutes. Their presentation will address the types of businesses and conduct that can be targeted by whistleblowers, the procedures that whistleblowers must follow to pursue and preserve a claim, the remedies available to whistleblowers, and more. Ms. Marcus and Mr. Knott will also examine the pressing issues under these laws that are being debated in the courts. This includes contradictory decisions about whether the Sarbanes-Oxley Act’s whistleblower provision covers employees of privately-held companies, such as investment advisers—an issue that is currently before the U.S. Supreme Court in the case of Lawson v. FMR LLC, which we have previously covered in various posts. To register for the webinar, click here.
On Tuesday, the Supreme Court heard oral argument in Lawson v. FMR LLC. As we explained in this post, Lawson presents the question of whether Sarbanes-Oxley’s whistleblower anti-retaliation provision (Section 806 of Sarbanes-Oxley, codified at 18 U.S.C. § 1514A) shields employees of privately-held contractors of public companies such as the plaintiffs, who are employees of investment advisers for Fidelity mutual funds. We editors of Suits by Suits don’t often get the chance to report live on the cases we cover, but an argument at One First Street was too tempting to pass up, even on a blustery Washington day. Here are five major takeaways that we drew from the argument (with the caveat that reading the tea leaves from an oral argument is always a difficult proposition):
1. The Court is uncomfortable with the scope of potential Sarbanes-Oxley claims that would result from the Fidelity employees’ interpretation of the statute.
A number of Justices pressed Eric Schnapper, who argued for the Fidelity employees, and Nicole Saharsky, arguing for the United States in support of the employees, as to how the Court could limit the reach of the statute if it holds that Sarbanes-Oxley allows employees of private companies to bring whistleblower retaliation claims. Justice Breyer posed a hypothetical involving an employee of a privately-held gardening company who reports on mail fraud by his employer, is fired, and then brings a whistleblower anti-retaliation claim, arguing that he is covered by Sarbanes-Oxley because his company has gardening contracts with public companies. Schnapper argued that the statute as written would cover the gardener, but the Justices were less convinced that Congress intended this kind of reach for Sarbanes-Oxley. Justice Breyer even commented that the fear of expanding the statute to cover “any fraud by any gardener, any cook, anybody that had one employee in the entire United States” was the “strongest argument” against the Fidelity employees’ position. Read More ›
Twitter’s founders are cashing in on Wall Street, and journalists are piggybacking on the news with articles like this one, which recaps 10 “surprising superstars” of the social network. No, Suits by Suits didn’t make the cut, but you can still follow us at @suitsbysuits, where we’ll bring you 140-word tweets about news related to executive-employer disputes. These are the kinds of stories we track:
- The Texas Supreme Court heard argument this week in Exxon Mobil’s dispute with former executive William Drennen. Jeremy Heallen of Law360 (subscription required), wrote that after Drennen retired from Exxon (@exxonmobil) and went to work for competitor Hess, Exxon claimed that he had forfeited his restricted stock under a “detrimental-activity provision” in his incentive plan. Exxon is seeking reversal of the lower court’s holding that the forfeiture violated Texas law, which disfavors “unreasonable” noncompetition agreements.
- AIG has settled a $274 million dispute with former real estate executive Kevin Fitzpatrick, reported (@nateraymond) Nate Raymond of Reuters. The terms are confidential, but Fitzpatrick’s lawyer says that he is “very happy.” Given the potential dollar amounts between $0 and $274 million, it’s easy to guess why.
- Rachel Louise Ensign of the Wall Street Journal (@RachelEnsignWSJ) (subscription required) covered a developing trend this week: more whistleblowers are coming from corporate compliance departments. As one example, Ensign described Meng-Lin Liu’s case against Siemens AG, which we covered here. The possibility of lucrative awards under the Dodd-Frank Act’s whistleblower program may be sparking the trend, although as Ensign points out, compliance officers are subject to additional restrictions under that program.
- In other whistleblower news, the Senate approved a bill to prohibit companies from retaliating against whistleblowers who report violations of the antitrust laws. Jennifer Koons of Main Justice (@jenkoons) said that the bill passed with bipartisan support. “Bipartisan” – does anyone still remember that concept?
- Newscaster Larry Conners is still trying to get back on television, despite a prior ruling that his noncompete agreement prohibited him from working for other TV stations in the St. Louis market for a year. Conners’s attorney asked the judge to modify that ruling, which restricted Conners to radio work, wrote (@STLSherpa) Joe Holloman of the St. Louis Times-Dispatch. We’ve previously examined Conners’s case here and here.
On Tuesday, November 12, the Supreme Court will hear argument in the most-watched case of this Term (at least for those of us who edit this blog). The case, Lawson v. FMR LLC, presents the question of whether an employee of a privately-held contractor of a public company can bring a whistleblower retaliation claim against his or her employer under the Sarbanes-Oxley Act of 2002. The plaintiffs in the case, and the parties who have appealed to the Supreme Court, are Jackie Lawson and Jonathan Zang.
In their lawsuit, Lawson and Zang claim that their employers – a group of privately-owned Fidelity subsidiaries that serve as “investment advisers” to publicly-held Fidelity mutual funds – retaliated against them for raising concerns about fraud. Here’s a handy chart from Fidelity’s brief that illustrates the relationship between the parties:
The First Circuit dismissed Lawson and Zang's claims, holding that Sarbanes-Oxley’s anti-retaliation provision only protects employees of public companies. Because Lawson and Zang worked on the blue side of the chart, and not the yellow side, they couldn’t bring a claim for retaliation. (The mutual funds on the yellow side have no employees; they do their business through their contractors on the blue side.)
What do Lawson and Zang argue?
The parties spend a lot of time parsing the language of the Sarbanes-Oxley anti-retaliation provision (18 U.S.C. § 1514A). In their opening and reply briefs, Lawson and Zang argue that the plain text of the law shows that Congress intended to shield employees of contractors of public companies from retaliation for reporting corporate misconduct. If Congress didn’t mean to protect those employees, they say, it wouldn’t have prohibited retaliation by “any officer, employee, contractor, subcontractor, or agent” of “such [public] company.” Under Fidelity’s reading of this provision, the language about contractors would only come into play if a contractor retaliated against a public company employee, and because that doesn’t happen in the real world, the use of the term “contractor [or] subcontractor” would be meaningless. Read More ›
There’s a famous aphorism in journalism: “When a dog bites a man, that is not news, because it happens so often. But if a man bites a dog, that is news.”
The same is true of arbitration awards. When a federal court confirms an arbitration award, it isn’t newsworthy, because that’s what everyone expects will happen. But when a court tosses an arbitrator’s decision, it creates headlines.
On October 28, the Fourth Circuit made news by vacating an arbitration award issued to a former employee of an accounting firm. Kiran M. Dewan, C.P.A., P.A. v. Walia, No. 12-2175 (4th Cir. 2013). The former employee (Walia) was a native of Canada on a work visa who joined the Dewan firm as an accountant. When he was terminated, he signed a release in which he gave up any tort or contract claims he had against the company in exchange for a payment of $7,000. Three months later, the firm filed an arbitration against Walia, alleging that he had violated noncompete and nonsolicitation provisions in his employment agreement. Walia filed counterclaims alleging that the firm underpaid him in violation of visa regulations, breached his employment agreement, and fraudulently sought to withdraw its sponsorship of his visa. The arbitrator found that Walia’s release was legally enforceable, but also found that Dewan (the president of the firm) brought baseless claims and purposely sought to injure Walia’s immigration interests. As a result, the arbitrator awarded Walia over $450,000.
In the build-up to its decision, the Fourth Circuit recognized the dog-bites-man principles of confirming arbitration awards. It wrote that under the Federal Arbitration Act, “the scope of judicial review for an arbitrator’s decision is among the narrowest known at law because to allow full scrutiny of such awards would frustrate the purpose of having arbitration at all—the quick resolution of disputes and the avoidance of the expense and delay associated with litigation.” The Federal Arbitration Act and the common law only allow an arbitration award to be vacated when
- the award was “procured by corruption, fraud, or undue means”;
- there was “evident partiality or corruption” in the arbitrators, or either of them;
- the arbitrators “were guilty of misconduct”;
- the arbitrators “exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made”; or
- “an award fails to draw its essence from the contract, or the award evidences a manifest disregard of the law.”
In other words, to vacate an arbitration award, a party must show that the winning party bought the award; the arbitrators were crooked or obviously biased; the arbitrators botched the arbitration to such a degree that a final and definite award wasn’t even made; or the arbitrators didn’t follow the contract at issue and/or disregarded binding law. Read More ›