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Showing 24 posts in Confidentiality.

When Employment Relationships Break Bad

DroneOn this blog, we frequently cover employment relationships that go wrong.  Sometimes, really wrong.  But only rarely do we cover events that could land someone in the slammer.

The recent case of Stephen Marty Ward is one of those rare events.  Ward’s case shows that employment relationships gone sour can result in more than hurt feelings and lawsuits – they can result in jail time. 

As reported by Law360, Ward worked for Corsair Engineering, Inc.  During a three-month project for Insitu, a Boeing subsidiary, he gathered information about a “small tactical unmanned aircraft system” – i.e., a drone – that the Navy was working on.  In particular, Ward had access to a “maintenance manual for an integrator system” that had flown over 500,000 combat flight hours.  Here’s a link to some nifty pics of the “integrator system” from the Insitu website, if you’re curious. 

When Ward was fired in October 2011, he called a Corsair employee and said that he had a lot of information and wanted a “healthy settlement” to go away quietly.  In a ruse worthy of Hank Schrader and Jesse Pinkman, Corsair executives negotiated a $400,000 settlement with Ward.  Ward came to pick up his down payment of $10,000, and found himself in handcuffs.  Read More ›

In Battle of Words, Former Netflix Exec Says That Company Defamed Him

Apple iPad displaying NetflixJerry Kowal doesn’t have a lot of nice things to say about his former employer, Netflix.  In a recent lawsuit filed in California Superior Court, he claims that Netflix was a “cold and hostile company,” with a “cutthroat environment.”

According to Courthouse News’s description of Kowal’s complaint, Netflix didn’t have very nice things to say about Kowal, its former content acquisition executive, either.  Kowal alleges that when he told Netflix he was leaving for Amazon, Netflix lashed out by accusing him of stealing confidential information and passing it on to Amazon.  As a result of these accusations and Amazon’s “strict liability policy,” he was fired.

Now, Kowal has sued Netflix, its CEO Reed Hastings, executive Ted Sarandos, and Amazon, alleging a number of torts including defamation, false light invasion of privacy, civil conspiracy, intentional interference with employment relationship, blacklisting and wrongful termination.  Kowal’s suit shows that an employer’s decision to accuse a departed employee of wrongdoing carries with it a significant litigation risk, especially if the employee loses his job as a result of the accusation. Read More ›

The Inbox - Blarney Edition

Businessman Putting Money into PocketTop ‘o the mornin’ to ya!  In honor of St. Patrick’s Day, we considered writing today’s inbox entirely in Irish-speak.  We could have told you to sit down and wet the tea, or sip on a pint of Gat, while we spun tales of how an executive’s suit put the heart crossways in his employer.  But because we didn’t want anyone feeling the fear tomorrow, we decided to stick with our tried-and-true approach of (somewhat) plain American English.

  • Bonuses on Wall Street are flowing like Guinness, says The Age.  New York’s state comptroller says that firms paid their highest bonuses since 2007, with an average of $164,530.  However, for those looking to get a piece of that pot of gold, the news wasn’t all good: jobs in finance declined.
  • Glenn Kessler of the Washington Post’s Fact Checker put together this interesting piece on Edward Snowden’s claim that federal law did not protect him from whistleblower retaliation.  Kessler concluded by awarding Snowden only one Pinocchio for “some shading of the facts.”  Snowden has many Pinocchios to go if he wants to reach the levels achieved by many illustrious citizens of Washington, D.C.
  • Andrew Burrell of The Australian reports that BHP Billiton’s decision to pay large bonuses has boomeranged on the executives of the resources giant, with shareholders voicing their disapproval (subscription required).  Yes, we included this news solely to use the pun.  No, we do not have a subscription to The Australian.
  • TheTownTalk.com brings us news of a Louisiana College VP’s lawsuit against his employer in state court.  The vice president, Tim Johnson, claims that the Baptist school and its president retaliated against him for blowing the whistle on the president’s diversion of funds.  An outside law firm has already advised the college that the president “misrepresented material information to the Board of Trustees on countless occasions,” but a committee appointed by the board rejected that conclusion.
  • A New York trial judge questioned a hedge fund’s efforts to have a former analyst jailed for stealing trade secrets, reported Stewart Bishop of Law360 (subscription required, and yes, we do have one).  Justice Jeffrey Oing told lawyers for Two Sigma Investments LLC that it might be “going over the top” by pursuing jail time for Kang Gao, who is accused of illegally accessing and copying Two Sigma’s confidential information.

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 ›

Federal Judge Upholds Jurisdiction Based on Employer’s Computer Fraud and Abuse Act (CFAA) Claim Against Former Employee

Laptop locked with padlockIn a decision last week, Judge Ewing Werlein Jr. of the U.S. District Court for the Southern District of Texas addressed the question of whether an employer had successfully alleged a claim under the Computer Fraud and Abuse Act (“CFAA”), such that the employer could properly bring its numerous claims against former employees and their companies in federal court.  He ruled that the employer had properly pleaded the CFAA claim, and that as a result, the court had subject matter jurisdiction over the case.  Beta Technology, Inc. v. Meyers, Civ. No. H-13-1282, ‎2013 WL 5602930‎ (S.D. Tex. Oct. 10, 2013‎).

Before we get into the substance of the decision, some background is in order.  Subject matter jurisdiction is an important issue for federal judges.  If there’s no basis for subject matter jurisdiction, a case doesn’t belong in federal court.  First-year civil procedure students learn this rule from the venerable decision in Capron v. Van Noorden, in which the Supreme Court allowed a plaintiff to obtain reversal of a final judgment because he hadn’t properly alleged that the court below had subject matter jurisdiction over his claim.

The two main categories for federal jurisdiction in non-criminal cases are diversity jurisdiction and federal question jurisdiction.  Diversity jurisdiction, as defined in 28 U.S.C. § 1332, permits the federal courts to hear disputes between citizens of different states – i.e., “diverse” citizens – so long as more than $75,000 is at stake.  Federal question jurisdiction, which is defined in 28 U.S.C. § 1331, allows the federal courts to address “all civil actions arising under the Constitution, laws, or treaties of the United States.”  And under 28 U.S.C. § 1367, once the court has jurisdiction to hear one claim, it can hear any other claims that form “part of the same case or controversy,” even when those claims drag additional parties into the mix. Read More ›

The Inbox

St. Basi'sWe thought about getting a Putin op-ed to cap off this week at Suits by Suits.  But instead, we decided to stick with our tried-and-true formula of canvassing the week’s headlines in employer-executive disputes:

  • Bloomberg Law reported on a recent ruling by the Delaware Chancery Court that a company officer and trustee could not invoke the attorney-client privilege for communications with their personal attorneys and advisors sent from their work e-mail accounts.  The court wrote that the company could access the e-mails because it had reserved the right to do so in its employee manual, and therefore the officer and trustee did not have a reasonable expectation of privacy in the e-mails.
  • Pete Brush of Law360 (subscription required) covered the hearing in the New York Court of Appeals, the state’s highest court, on claims by a former Intesa SanPaolo executive, Giuseppe Romanella.  Romanella alleges that the company illegally fired him after he complained of depression.  The company argues that it was allowed to fire him because he refused to provide any reasonable time frame for his return from leave.
  • A federal judge tossed a number of claims against Bloomberg LP in an EEOC case alleging that the company discriminated against employees who returned from maternity leave, reported Jonathan Stempel and Jennifer Saba of Reuters.  The court found that the EEOC could not pursue a class action because it failed to show that discrimination was Bloomberg’s standard operating practice.  Further, the judge said that the EEOC had failed to investigate its individual plaintiffs’ claims and unfairly rebuffed Bloomberg’s attempts to settle.  The Wall Street Journal characterized this as a “sue first, investigate later” approach.
Read More ›

Cough Syrup Manufacturer Suffers Bad-Tasting Appellate Defeat

Cough SyrupWhen Yu-Hsing Tu worked at pharmaceutical company UCB Manufacturing, he signed a strict confidentiality agreement.  In the agreement, Tu promised that he would never disclose any of UCB's “secret or confidential information,” including a laundry list of items such as “designs, formulas, processes, . . . techniques, know how, improvements, [and] inventions.”  Tu's work was important to UCB: he helped formulate its cough syrup products, including Delsym, and had significant knowledge of its “Pennkinetic system” for controlled release of cough medication in liquid form. 

In 2001, Tu left UCB and started working for his friend Ketan Mehta at Tris Pharma.  Soon after, Tu and Tris Pharma began formulating generic versions of UCB’s cough syrups.  Six years later, Tris's competitive products were on the market, and UCB lost a lot of market share. 

UCB immediately went to court and sued Tu and Tris for misappropriation of trade secrets, breach of contract, and unfair competition.  It asked for a preliminary injunction -- a court order early in the lawsuit that would require Tris to stop using its trade secrets until the merits were finally decided.  After a five-day hearing focused on the misappropriation claim, the trial judge denied the injunction, maintaining the status quo for Tris.

Shortly after that win, Tu and Tris took the offensive in the litigation, moving for summary judgment.  At that point, UCB made a decision that would end up costing it later on: it voluntarily gave up its claim for misappropriation of trade secrets.  The trial court then granted Tu and Tris’s motion for summary judgment on the other claims, relying on its finding during the preliminary injunction phase that Tu and Mehta were credible when they testified that they didn’t misuse UCB’s confidential info.  UCB appealed. Read More ›

The Inbox - First Day of Summer Edition

Suits HangingYou’re gonna be interested in this week’s Suits by Suits news – I guarantee it:

  • Wednesday’s controversial dismissal of George Zimmer, Men’s Wearhouse pitchman and founder, sent reporters into a tizzy as they competed to come up with the best lead.  Tiffany Hsu of the LA Times is the early leader in the clubhouse, starting her article with “The one thing George Zimmer couldn't guarantee was his job at Men's Wearhouse.”  Other candidates: Gary Strauss of USA Today (“Men's Wearhouse no longer likes the way George Zimmer looks.”) and  Michael Smith of the Deseret News (“He's not going to like the way this looks. I guarantee it.”).
  • The Harvard Law School Forum on Corporate Governance and Financial Regulation offered this interesting take on whether attorneys can be Dodd-Frank whistleblowers, from Lawrence West of Latham & Watkins.  The main point: the SEC accepts that attorneys can blow the whistle and disclose client confidences in some limited circumstances, although state ethics rules about maintaining those confidences also will come into play.
  • Joe Davidson of the Washington Post covered the whistleblower implications of Edward Snowden’s disclosures about NSA surveillance programs.  Davidson explained that national security contractors are missing the protections and normal reporting channels that are present for most federal employees who want to blow the whistle on waste, fraud, and abuse.  Of course, even those channels don’t permit a whistleblower to take classified info to the press, wrote Pete Williams of NBC News.
Read More ›

The Inbox - May 17, 2013

Indian Hawthorne FlowersMay 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.

Criminal Trial Begins in Case Against Former Executive Search Head

corporate corruptionWhen 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 ›