Against the Odds, High Court Will Hear Whistleblower Case

Yesterday, the Supreme Court announced that it will hear the case of Jackie Hosang Lawson and Jonathan Zang, two former Fidelity employees who seek to reverse the dismissal of their Sarbanes-Oxley whistleblower claims.  In this post last week on Suits by Suits, we outlined Lawson and Zang’s petition to the Court and described the long odds that petitioners face when they ask the Supreme Court to review their cases.  The U.S. government also didn’t do Lawson and Zang any favors when it told the Court that it shouldn’t take their case.  Now that Lawson and Zang have bucked the odds, they might be feeling like they bought that lucky PowerBall ticket.

The Court has outlined the question presented by Lawson and Zang’s case as follows: 

Section 806 of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A, forbids a publicly traded company, a mutual fund, or “any ... contractor [or] subcontractor ... of such company [to] ... discriminate against an employee in the terms and conditions of employment because of” certain protected activity. (Emphasis added). The First Circuit held that under section 1514A such contractors and subcontractors, if privately-held, may retaliate against their own employees, and are prohibited only from retaliating against employees of the public companies with which they work.

. . .

Is an employee of a privately-held contractor or subcontractor of a public company protected from retaliation by section 1514A?

To prevail, Lawson and Zang must convince the Court that the answer is yes. Read More ›

The Inbox - May 17, 2013

May flowers are blooming, and so is the Suits by Suits news:

• CEO dismissals hit a 10-year high in 2012, according to The Corporate Board’s study of CEO succession practices.  Matteo Tonello of the Corporate Board published this summary of the study on the Harvard Law School Forum on Corporate Governance and Financial Regulation.
• The Anderson County Council is talking settlement in its long-running dispute with former county administrator Joey Preston, reports Bill Poovey of GSA Business.   The South Carolina legislators have spent $3 million in legal fees in their unsuccessful effort to recover Preston’s $1 million severance package.  That money would have bought a lot of Skins’ hot dogs.
• We previously brought you the story of David Nosal, a former Korn/Ferry executive who was facing trial on charges of gaining unauthorized access to Korn/Ferry’s system and stealing trade secrets.  Joanne Lublin of the Wall Street Journal reports that the trial did not turn out well for Nosal: he was convicted on all counts.  Nosal told Lublin that he is confident that the verdict will be reversed.
• New Mexico legislators criticized the large buyout offered to the new head coach at the state university, reported Alex Goldsmith at kqre.com.  Craig Neal will get $1 million plus up to $300,000 if the school decides to fire him in the next four years.  In his defense, Neal could have pointed to Mike Krzyzewski, who received $9.7 million from Duke in 2011 (when, incidentally, the Blue Devils lost to 15-seed Lehigh in the NCAA tournament).
• More sports news: Sean Newell of Deadspin reports that warm and fuzzy coach Bill Belichick and the New England Patriots may have cut a player, Kyle Love, because he was diagnosed with diabetes.  Newell’s post discusses the Americans with Disabilities Act, which could have protected Love from termination based on his condition, and the at-will employment doctrine.

Supreme Court Considering Whether to Accept Sarbanes-Oxley Whistleblower Case

Only a handful of employment cases make it all the way to the Supreme Court’s august chambers at One First Street.  That’s largely because the Court has discretion whether or not to review cases decided by lower courts of appeals.  Thousands of unhappy litigants file petitions for writ of certiorari every year, asking for review from the highest court in the land.  Almost all are turned away.

Tomorrow, the Court will consider whether to accept an appeal by Jonathan Zang and Jackie Lawson in a case that has significant implications for the Sarbanes-Oxley whistleblower protection provision, 18 U.S.C. § 1514A.  Section 1514A, which was passed as a response to the Enron and other financial scandals of the early 2000s, prohibits public companies, as well as “any other officer, employee, contractor, subcontractor, or agent of such company,” from retaliating against “an employee” for protected activity.  The issue in Zang and Lawson’s case is whether Section 1514A protects employees of privately-held companies, if those companies are working as contractors for public companies. Read More ›

Farmers Insurance Wins Summary Judgment on Ex-Employee’s Breach of Contract

As we’ve covered before on Suits by Suits, summary judgment can be a powerful weapon for a party to a civil lawsuit.  By granting summary judgment, a court can resolve a claim before trial, meaning that it’s never heard by a jury.  The standard for granting summary judgment, found in Rule 56 of the Federal Rules of Civil Procedure, is well-known to civil litigators: it is appropriate when there are no genuine issues of material fact and the case can be decided as a matter of law. 

In a recent case from the District of Minnesota, Farmers Ins. Exchange v. West, the Farmers Insurance Group used summary judgment effectively on both offense and defense.  First, it won a ruling that its former district manager, Theodore West, breached his appointment agreement and that Farmers suffered damages as a result.  Then, on defense, it knocked out West’s counterclaims for breach of contract and discrimination.

So what happened in West’s case, and why did Farmers prevail? Read More ›

April 2013 Monthly Roundup

April showers bring May flowers, which, as the old joke goes, usually bring these. At ‎Suits by Suits, however, April brought a mix of interesting stories involving non-‎compete agreements, the mechanics of employment contracts, and all sorts of other ‎topics:‎

• Third Circuit Rejects Narrow Construction of Sarbanes-Oxley Whistleblower Claim
  Jason M. Knott | April 30, 2013
• Recent Breach of Contract Lawsuit Against Michael Keaton Illustrates Measuring Expectation Damages
  Ellen D. Marcus | April 24, 2013
• Why Didn't Rutgers Fire Basketball Coach Mike Rice for Cause?
  Ellen D. Marcus | April 23, 2013
• “You’ve Got…a  Non-Compete!”
  William A. Schreiner, Jr. | April 17, 2013
• Criminal Trial Begins in Case Against Former Executive Search Head
  Jason M. Knott | April 15, 2013
• California Continues to Go After Non-Competes
  P. Andrew Torrez | April 11, 2013
• California Strikes Down An Employee’s Agreement to Arbitrate on Substantive ‎Unconscionability Grounds (As “One-Sided”)‎
  P. Andrew Torrez | April 8, 2013
• 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
  William A. Schreiner, Jr. | April 5, 2013
• Employment Agreement Tip of the Week No. 1: Get It in Writing
  William A. Schreiner, Jr. | April 3, 2013

Third Circuit Rejects Narrow Construction of Sarbanes-Oxley Whistleblower Claim

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. 

In Wiest v. Lynch, the Third Circuit tackled Wiest’s whistleblower claim, brought after he refused to approve corporate expenditures for conferences at luxurious lodgings. Read More ›

Criminal Trial Begins in Case Against Former Executive Search Head

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 ›

March 2013 Monthly Roundup

For us here in the greater Baltimore/Washington metropolitan area, March was true to form – or at least, the Farmer’s Almanac – and came in like a lion (with city-closing snow and everything!) but has gone out like a lamb, as today is beautifully sunny with highs in the mid-60s.

As the Farmer’s Almanac tells us, that saying was rooted in the ancient belief that weather would seek a balance, and that good events would cancel out bad ones.  That sense of balance held true for your Suits by Suits editors this month as well, as Ellen Marcus documented the unique ability of shareholders to protest “golden parachutes” for companies emerging from Chapter 11 bankruptcy – as contrasted with their general inability to do much else.  Bill Schreiner explained how the average executive can protect herself from incurring certain legal expenses through directors & officers’ (“D&O”) insurance policies, while noting the limits of those D&O policies especially in high-profile cases like former Penn State coach Jerry Sandusky.  Andrew Torrez continued to document the push-and-pull in the legislative arena over whether and to what extent courts should uphold covenants not to compete contained in employment contracts, and warned Gov. Deval Patrick that the proposed new law in Massachusetts may not do what he expects it to do.  And Jason Knott warned us that only 2% of Sarbanes-Oxley whistleblowers succeed on their claims, while walking us through a comprehensive recent decision by the Second Circuit that maps out how future whistleblowers can prove the elements necessary to assert their cases.

A full list of all of our articles from March follows.  And remember, Suits by Suits is now on Twitter – and that’s no April Fools!

• Shareholders Can Have Their Say on Executive Pay, But Not Much Else
  Ellen D. Marcus | March 28, 2013
• Tom Horton's Severance is Probably in the Golden Parachute Bag if the Court Applies the Business Judgment Rule Rather than Section 503(c) of the Bankruptcy Code
  Ellen D. Marcus | March 26, 2013
• How Does that Burden of Proof Work Again? The Second Circuit’s Recent Sarbanes-Oxley Decision Explains
  Jason M. Knott | March 20, 2013
• You’ve Got (Unprivileged) Mail: Court Rules that Prosecutors Can Use E-mail Sent by Personal Attorney to Employee’s Work Account
  Jason M. Knott | March 18, 2013
• More on Covenants Not to Compete: A Proposed Massachusetts Law Gets a Big Endorsement
  P. Andrew Torrez | March 13, 2013
• The Basics: "Hacking," the Computer Fraud and Abuse Act, and You 
  P. Andrew Torrez | March 11, 2013
• Federal Court of Appeals Rejects Sarbanes-Oxley Whistleblower’s Challenge to Department of Labor Ruling
  Jason M. Knott | March 7, 2013
• Everything Has a Limit, Jerry Sandusky Edition – Part 2
  William A. Schreiner, Jr. | March 7, 2013
• Everything Has a Limit, Jerry Sandusky Edition – Part 1
  William A. Schreiner, Jr. | March 7, 2013
• Wow! A $56 Million Golden Parachute for the Heinz CEO. Well, that Depends on What You Mean by "Golden Parachute."
  Ellen D. Marcus | March 6, 2013
• Groupon CEO's Departure Memo: Watch What You Say, Even if You Say it Nicely
  William A. Schreiner, Jr. | March 4, 2013

The Inbox - March Madness Edition

Since you’re already giving up all productivity during the big dance, why not check out the latest in Suits by Suits?

• Bloomberg says that Hercules Offshore has defeated a “say on pay” lawsuit brought by a shareholder who claimed that the Hercules board should not have ignored an investor vote that the company’s executive compensation was too high.  Was defeating this lawsuit one of the fabled “Twelve Labours”?

How Does That Burden of Proof Work Again? The Second Circuit’s Recent Sarbanes-Oxley Decision Explains

Earlier this month, we blogged about an important decision by the U.S. Court of Appeals for the Second Circuit in Bechtel v. Administrative Review Board, a Sarbanes-Oxley whistleblower case.  In Bechtel, thecourt upheld the Department of Labor’s denial of a whistleblower claim, even though it found that the administrative law judge (“ALJ”) had applied the wrong legal standard. 

So how did the ALJ get the law wrong?

To understand the ALJ’s error, it’s important to understand how the governing law defines the burden of proof in a Sarbanes-Oxley case.  Read More ›