Subscribe

RSSAdd blog to your RSS feed

Follow Us

Twitter LinkedIn

Contributing Editors

Disclaimer
© 2014 Zuckerman Spaeder LLP

Showing 49 posts in Civil Litigation.

Judge Approves $20 Million in Executive Bonuses From Bankrupt Company, Finding That Incentives Weren't "Lay-ups"

A bankruptcy can be hazardous to the health of an executive’s bonus check.  Sometimes, however, an executive can survive an attack on a bonus in a bankruptcy, and come out clean on the other side.  For example, we covered here how one executive succeeded in keeping most of his incentive payments based on the timing of those payments. 

Now, we have another lesson in how executives can keep their bonus checks despite a bankruptcy, from Judge Christopher S. Sontchi of the U.S. Bankruptcy Court for the District of Delaware.  The company at issue in the case was Energy Future Holdings Corp. (EFH), a holding company with a portfolio of Texas electricity retailers.  EFH filed for Chapter 11 bankruptcy in April of this year. Read More ›

Government Investigations: The Treacherous Path to Obtaining (and Keeping!) Defense Costs Paid Under D&O Policies

Bridge in disrepairFor my first foray into blog-writing, allow me to tell a cautionary tale intersecting two of my favorite topics: defending companies and individuals in government investigations and Directors and Officers (D&O) Liability Coverage. As a contract junkie who enjoys reading, interpreting, and arguing contract language, parsing through various interrelated D&O policy provisions to glean favorable language for my white collar clients offers hours of amusement (lest ye be worried about me, I do have other hobbies).  D&O policies can be effectively used to defray defense costs incurred due to a government investigation.  The trick is keeping the money. 

The recent suit between Protection Strategies, Inc. (PSI) and Starr Indemnity & Liability Co. in the Eastern District of Virginia, case 1:13-cv-00763-LO-IDD, illustrates how difficult keeping the money can be. PSI is an Arlington, Va.-based defense contractor. In January 2012, PSI received a subpoena from the NASA Office of the Inspector General and a search warrant issued by the United States District Court for the Eastern District of Virginia.  On February 1, 2012, the NASA OIG executed the search warrant at PSI’s headquarters.  In addition to the company itself, several of PSI’s current and former officers were informed that they were also targets of the NASA OIG investigation. PSI retained Dickstein Shapiro to represent it and hired separate counsel to represent the individual targets and other company employees. Read More ›

Goldman Sachs Programmer Asks Third Circuit to Take Another Look at Advancement Case

Last week, we covered the Third Circuit’s decision that Goldman Sachs bylaws didn’t clearly establish a vice president’s right to advancement of his legal fees for his criminal travails.  The vice president, software programmer Sergey Aleynikov, isn’t giving up easily, however.

Law360 reports that Aleynikov has filed a petition for panel rehearing or rehearing en banc.  In the federal appellate courts, this is a step that parties can take when they disagree with the decision of the three-judge panel that heard their case.  In a panel rehearing, the panel can revisit and vacate its original decision; in a rehearing en banc, the entire Third Circuit could consider the issue.

Aleynikov contends in his petition that the panel misapplied a doctrine of contractual interpretation called contra proferentem.  In plain English, contra proferentem means that a court will read the written words of a contract against the party that drafted it.  The panel in Aleynikov’s case disagreed as to whether under Delaware law (which governs his dispute), the doctrine can be used to determine whether a person has any rights under a contract.  The two-judge majority said that it can’t, and therefore refused to use the doctrine when it decided whether Aleynikov – as a Goldman vice-president – fell within the definition of an “officer” entitled to advancement under the company’s bylaws.  In dissent, Judge Fuentes asserted that “Delaware has never suggested that there is an exception to its contra proferentem rule where the ambiguity concerns whether a plaintiff is a party to or beneficiary of a contract.”

In his petition, Aleynikov asks the whole Third Circuit to decide who is right: Judge Fuentes or the majority.  He also cites additional Delaware cases that he says support his position, including one “unreported case” that was brought to his counsel’s attention “unbidden by a member of the Delaware bar who read an article commenting on the panel’s decision in The New York Times on Sunday, September 7, 2014.”  Sometimes, to establish a right to advancement rights, it takes a village.

An Officer or a Vice President: Goldman Sachs Programmer Must Prove Advancement Case to Jury After Appellate Ruling

Computer programmer with code in backgroundThe case of Sergey Aleynikov, a former vice president at Goldman Sachs, has drawn a lot of media attention, including these prior posts here at Suits by Suits. Aleynikov was arrested and jailed for allegedly taking programming code from Goldman Sachs that he had helped create at the firm. His story even inspired parts of Michael Lewis’s book Flash Boys. A federal jury convicted him of economic espionage and theft, but the Second Circuit reversed his conviction, holding that his conduct did not violate federal law. Now, Aleynikov is under indictment by a state grand jury in New York.

Unsurprisingly, Aleynikov wants someone else to pay his legal bills – Goldman Sachs. And it is no surprise that Goldman, which accused him of stealing and had him arrested, doesn’t want to bear the cost of his defense. In 2012, Aleynikov sued Goldman in New Jersey federal court for indemnification and advancement of his legal fees, along with his “fees on fees” for the lawsuit to enforce his claimed right to fees. As we discussed in this post, indemnification means reimbursing fees after they are incurred, and advancement means paying the fees in advance. Advancement is particularly important for those employees who cannot float an expensive legal defense on their own dime. Read More ›

Five Takeaways from the Second Circuit’s Dodd-Frank Decision in Liu v. Siemens

Photo of the Manhattan and Brooklyn Bridges
Taiwan and Manhattan’s Foley Square are separated by 7,874 miles, and Taiwanese citizen Meng-Lin Liu couldn’t bridge the distance in federal court.  Liu sought to recover in Manhattan under the Dodd-Frank Act’s anti-retaliation provision (15 U.S.C. § 78u‐6(h)(1)).  However, on August 14, the Second Circuit, which sits in Foley Square, affirmed the dismissal of his whistleblower retaliation claim.  Liu v. Siemens AG, No. 13-4385-cv (2d Cir. Aug. 14, 2014).

As we previously described here, Liu’s case was relatively simple.  He alleged that he repeatedly told his superiors at Siemens in Asia, and the public, that Siemens was violating the Foreign Corrupt Practices Act (FCPA).  As a result, he claimed, Siemens demoted him, stripped him of his responsibilities, and eventually fired him with three months left on his contract. 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 ›

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 ›

…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 ›

Second Circuit To Weigh Whether Whistleblower Protections Extend Internationally

International FlagsWhile we’re talking about whistleblowers, it’s worth noting that two days ago, the U.S. Court of Appeals for the Second Circuit heard oral argument on appeal from the a federal district court’s opinion in Meng-Lin Liu v. Siemens AG, 978 F.Supp.2d 325 (S.D.N.Y. 2013). This case raises the significant question as to whether the anti-retaliation provisions of the Dodd-Frank Act, 15 U.S.C. § 78u-6(h)(1)(a), apply to an employee who is terminated by a non-U.S. corporation that does business in (and is regulated by) the United States. Read More ›