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Showing 70 posts in Breach of Contract.

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 ›

No Longer California Dreamin’: Court Rejects Employees’ Bid To Send Case ‎To Golden State

Ashwin Dandekar and Emily Hua live in California.  They worked for Campbell Alliance, a biopharma consulting group, in California.  Yet when Campbell Alliance sued Dandekar and Hua for violating their noncompete and confidentiality agreements, it sued them in federal court in North Carolina.  And the judge in New Bern has now denied the employees’ bid to send the case back to California, meaning they will have to litigate 3,000 miles away from home.  Campbell Alliance Group, Inc. v. Dandekar, No. 5:13-CV-00415-FL (Jan. 3, 2014).  What gives?

A forum selection clause, that’s what.  Typically, in federal court, a court has the discretion to transfer a case to any other district where it “might [otherwise] have been brought,” in order to serve “the convenience of the parties [and] the interest of justice.”  28 U.S.C. § 1404(a).  In making the transfer decision, courts consider the plaintiff’s choice of forum, the residence of the parties, the convenience of parties and witnesses, and other factors that involve whether it’s easier and makes more sense to litigate a case in one location over another.  But when there’s a forum selection clause – i.e., a provision in a contract that says a lawsuit over it shall be brought in a particular state – that clause can be a significant factor in the transfer analysis.  Indeed, in a decision one month ago, the Supreme Court confirmed that forum-selection clauses should typically decide the issue of which federal court should hear a case.  Atlantic Marine Construction Co. v. U.S. Dist. Ct. for the Dist. of Texas, No. 12-929 (Dec. 3, 2013). Read More ›

A-Rod, Part III: What About 60 Minutes?

Alex RodriguezIf you’re following our coverage of the Alex Rodriguez story at all (See our Part 1, a general primer; and Part 2 on the specifics of the 162-game suspension), you probably watched last night’s 60 Minutes, which contained interviews with Tony Bosch of Biogenesis, who claims that he personally administered banned Performance Enhancing Substances to Alex Rodriguez; MLB executive Rob Manfred; and one of Alex Rodriguez’s attorneys, Joseph Tacopina, Esq.

Concurrent with the airing of the program, sports journalists began reporting that the Major League Baseball Players Association (“MLBPA,” the players’ union) was “furious” at MLB’s participation in the TV program.  The MLBPA subsequently issued the following statement:

MLB's post-decision rush to the media is inconsistent with our collectively-bargained arbitration process, in general, as well as the confidentiality and credibility of the Joint Drug Agreement, in particular.  After learning of tonight's "60 Minutes" segment, Players have expressed anger over, among other things, MLB's inability to let the result of yesterday's decision speak for itself.  As a result, the Players Association is considering all legal options available to remedy any breaches committed by MLB.

Let’s evaluate those two arguments. Read More ›

Morgan Stanley Socks “Faithless Servant” With $31 Million Judgment

Butler and Silver ServiceThis past holiday week, many moviegoers took in The Wolf of Wall Street, which is the latest glamorization of Wall Street misdeeds to hit the big screen.  Of course, the most famous moment from a financial flick is still Gordon Gekko’s “Greed is good” speech in 1987’s Wall Street.

Greed isn’t always good, as Joseph F. “Skip” Skowron III, a former portfolio manager for Morgan Stanley, could probably tell you.   Skowron’s admitted misconduct has cost him not only his freedom, but also $31,067,356.76 that he must pay back to his employer.  Morgan Stanley v. Skowron, No. 12 Civ. 8016(SAS), 2013 WL 6704884 (S.D.N.Y. Dec. 19, 2013).

The big judgment arises from Skowron’s August 2011 plea agreement with the government, in which he admitted that he participated in a three-year insider trading conspiracy.  As news reports described, Skowron used insider tips from a French doctor to avoid losses in hedge funds he managed, and then lied to the SEC about the tips.  The judge in Skowron’s criminal case sentenced him to five years in jail, and ordered him to pay restitution to Morgan Stanley of 20% of his compensation over the time of the conspiracy. 

Morgan Stanley then sued him to recoup the rest.  In that lawsuit, it moved for summary judgment based on New York’s “faithless servant” doctrine.  Under that doctrine, if an employer can show that an employee was disloyal – either because he engaged in “conduct and unfaithfulness” that “permeate[d] [his] service in its most material and substantial part, or because he breached “a duty of loyalty or good faith” – it can recover all of the compensation that the employee was paid during the period of disloyalty.  Phansalkar v. Andersen Weinroth & Co., 344 F. 3d 184 (2d Cir. 2003). Read More ›