Subscribe

RSSAdd blog to your RSS feed

Follow Us

Twitter LinkedIn

Contributing Editors

Disclaimer
© 2014 Zuckerman Spaeder LLP

Showing 73 posts in Breach of Contract.

…And All He Got Was a Fashionable T-Shirt: American Apparel Terminates Its CEO

Green t-shirtLast week, American Apparel announced that its board had decided to terminate Dov Charney, the company’s founder, CEO, and Chairman, “for cause.”  (We’ve discussed the meaning of terminations “for cause” in prior posts here and here.)  The board also immediately suspended Charney from his positions with the company.  Although the board didn’t initially disclose the reasons for its action, Charney is not new to controversy; in recent years, he has faced allegations of sexual harassment and assault.

The reasons for Charney’s termination have now become public, and they aren’t pretty.  In its termination letter, available here, the board accuses Charney of putting the company at significant litigation risk.  It complains that he sexually harassed employees and allowed another employee to post false information online about a former employee, which led to a substantial lawsuit.  The board also says that Charney misused corporate assets for “personal, non-business reasons,” including making severance payments to protect himself from personal liability.  According to the board, Charney’s behavior has harmed the company’s “business reputation,” scaring away potential financing sources. 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 ›

Executive in the Middle – Texas Monthly and The New York Times Company Duke It Out in Court over Top Editor Jake Silverstein

Newspaper Tempers FlareYou can read about it in the Times:  the publisher of Texas Monthly sued The New York Times Companylast week over Jake Silverstein leaving his post as editor-in-chief of Texas Monthly to be editor of The New York Times Magazine.  Silverstein had a three-year contract with the Texas publisher that was supposed to run through February 2015.  The publisher claims that The New York Times Company tortiously interfered with that contract, causing Silverstein to break it.  This is a common scenario for sought-after executives when they switch companies:  the companies fight in court over them but not against them.  The executive in the middle may feel like she dodged a bullet by not being named as a defendant in the lawsuit.  In fact, it is not so simple. Read More ›

The State-By-State Smackdown - New York vs. Florida: When Two Seemingly Similar Things Are Not The Same

In our recurring “State-by-State Smackdown” series on the evolving law with respect to covenants not to compete, we’ve described the traditional balancing-test approach that is the law in the majority of jurisdictions as the Legitimate Business Interest or “LBI” test.  In understanding this shifting landscape, we’ve typically highlighted statutes and/or judicial opinions in jurisdictions that have begun to shift away (or even depart entirely) from the classical LBI analysis.

Today, we’re doing something a little different, taking our cue from a recent New York state appellate decision:  Brown & Brown, Inc. v. Johnson, 980 N.Y.S. 2d 631 (App. Div., 4th Dep’t, February 7, 2014).  Read on. Read More ›

Advancement in Action: LLC Manager Wins Payment for Litigation Costs

Earlier this week, we outlined the rights of indemnification and advancement, and discussed how those rights can hinge on the statutory law governing a corporation and the private agreements that companies enter into with their officials.  In this post, we review a recent decision to see how these principles apply in real life.

The decision comes from Vice Chancellor Sam Glasscock III of the Delaware Court of Chancery.  Because many companies are incorporated in Delaware, the Delaware courts handle some of the most preeminent disputes involving corporate law, and they have significant experience addressing issues of indemnification and advancement. 

The Vice Chancellor’s opinion illustrates a judicial view that companies sometimes agree to broad rights at the outset of an employment relationship, but then seek to back away from those agreements once a dispute arises.  He wrote:

It is far from uncommon that an entity finds it useful to offer broad advancement rights when encouraging an employee to enter a contract, and then finds it financially unpalatable, even morally repugnant, to perform that contract once it alleges wrongdoing against the employee.

Vice Chancellor Glasscock’s ruling also shows how courts will review the governing statutes and agreements in order to decide whether a company’s denial of advancement is legally justified.

This particular dispute, Fillip v. Centerstone Linen Services, LLC, 2014 WL 793123 (Del. Ch. Feb. 20, 2014), involved Karl Fillip, the former CEO of Centerstone.  Fillip resigned, claiming that he had “Good Reason” for the resignation under his employment agreement and therefore was entitled to receive certain bonuses and severance pay.  When Centerstone wouldn’t pay up, Fillip sued it in Georgia state court, alleging breach of contract and also seeking a declaratory judgment that restrictions in his employment agreement were invalid.  Centerstone then filed counterclaims, which triggered a response from Fillip for advancement of funds to defend against those claims.

Centerstone, as you might imagine, was not happy about this turn of events.  It refused his request, but also said it would withdraw certain counterclaims because it didn’t want to pursue claims “that could potentially trigger an obligation by Centerstone to pay Mr. Fillip’s attorney’s fees and costs in defending them.”  Dissatisfied, Fillip sued in Delaware for advancement of his fees. Read More ›

In Lesson on Error Preservation, Court Affirms Jury’s Rejection of Employee’s Claims

Appeal - typewriterOur state and federal courts generally have two levels of courts: trial and appellate courts.  The archetypal trial court is the knock-down, drag-out venue of TV drama, where judges issue quick rulings and juries weigh the testimony and documents to make their mysterious decisions.  Appellate courts are much more monastic (and thus, much less entertaining for TV’s purposes).  There, learned panels of esteemed judges review cold court records and legal tomes, reviewing the parties’ arguments and applying the law in order to reach their thoughtful and detailed decisions.

Appellate courts may not even entertain every argument that a party seeks to make.  For the most part, to argue in the appellate court that the trial court made a mistake, a litigant has to “preserve” the error below – meaning that the litigant must give the trial court the opportunity to rule on the issue in the first instance.  The failure to preserve error has tripped up many an appeal.

The case of Jeff Gennarelli, the former regional vice president of American Bank and Trust Company (ABT), gives us yet another example of this stumbling block.  Read More ›

Alex Rodriguez Teaches Us How to Read a Complaint

A few days before Alex Rodriguez filed his Complaint against Major League Baseball (and, somewhat surprisingly, the Major League Baseball Players Association, his own union), we set out the basic legal framework that will govern A-Rod’s efforts to overturn the arbitration award suspending him for the entire 2014 season.  Now, I’m a baseball lawyer, so obviously I had a unique interest in this particular case, but I also continue to think that the A-Rod case is instructive in the larger context that we write about here at Suits by Suits.

Specifically, A-Rod isn’t just one of the most famous – or infamous, depending on your perspective – baseball players in the world; he’s an employee having a very well-publicized dispute with his employers.  The law that governs A-Rod’s attempts to vacate Fredric Horowitz’s arbitration award is the exact same law that would apply to virtually any private sector employee whose employment-related dispute is governed by arbitration; namely, the Federal Arbitration Act, 9 U.S.C. § 1 et seq.

So, what does A-Rod’s complaint have to teach us as employers or employees?  One thing it can do is to emphasize the importance of reading a complaint backwards.  Read on to discover why. Read More ›

Highland v. Daugherty: Part 2 -- Daugherty Responds

In Part 1 of this post, we looked at a heated executive employment dispute that is being tried in Dallas.  The case involves a former hedge fund executive, sued by his former employer for allegedly not returning 59,000 confidential documents when he resigned and for trying to poach the firm’s clients.  The Dallas Morning News has full coverage here and here

The trial is forcing both sides to air things about the other – and themselves – that they would likely not want raised in a public forum.  In Part 1, for example, we noted how Highland executives testified that a compensation program had to be stopped after the executive, Daugherty, left the firm, because (as the Dallas Morning News put it) Daugherty “engaged in conflict of interest transactions” for the compensation program.  Surely Highland would rather not have raised that issue publicly.  But that’s what aggressive litigation sometimes forces parties to have to do to win their case – which is the cautionary tale of the Highland v. Daugherty trial.   Read More ›

Highland v. Daugherty: All We Need Here Is JR Ewing, Part 1

Many of the executive employment disputes we write about focus on one or two key issues – the enforcement of a non-compete clause in an employment agreement, for instance, or the odd ways a severance package can work

A case being heard in Dallas, however, brings together a whole set of executive-employment-related problems in one place: alleged defamation, corporate confidential information allegedly not returned by a departing executive in breach of a written employment agreement, compensation demands and agreements that were never put in writing, and an executive’s desire to work part-time from home.  Throw in alleged self-dealing and conflict of interest allegations against the executive – who ran a specialty investment team at the employer, a large hedge fund – and you have the sort of intense, angry dispute that used to be featured on a soap opera set in Dallas that captivated the nation in the 1980s

Without, of course, the famous shower scene.   Read More ›

The Inbox – Ramping Up Edition

No, this headline is not a pun about the closed on-ramps to the George Washington Bridge.  Rather, it’s meant to acknowledge that as the New Year gets into full swing, folks are starting to ramp up their analysis of ongoing issues in disputes that involve executives and their employers.  We’ve seen a number of interesting stories and summaries cross our desk:

  • Ben James of Law360 published a thorough recap of the lingering questions about Dodd-Frank’s whistleblower protections.  We’ve got one more question: will the Supreme Court’s upcoming decision in Lawson v. FMR LLC (we covered the oral argument here) affect a whistleblower’s choice between initially pursuing a Dodd-Frank claim in federal court, or filing a Sarbanes-Oxley claim with the Department of Labor?  Right now, some courts are putting a narrow construction on who can sue under Dodd-Frank, so if the Lawson Court takes an expansive view of Sarbanes-Oxley, it may give new life to that statute as an appealing option for whistleblowers.
  • What’s not ramping up: romance in the home of the new president of Alabama State University.  Debra Cassins Weiss of ABA Journal reports that Gwendolyn Boyd, who is single, will not be allowed to “cohabit with a romantic partner in the university residence so long as she is single,” according to her employment contract.  Boyd says she has “no issue” with the provision.  Sorry, suitors.  (Which, by the way, would be a good name for our group of loyal readers.)
Read More ›