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.

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 ›

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”?

You’ve Got (Unprivileged) Mail: Court Rules That Prosecutors Can Use E-mail Sent by Personal Attorney to Employee’s Work Account

Employees use their work e-mails for all kinds of communications, from the business-related to the personal and private.  When a dispute arises, however, it’s getting more difficult to keep those private e-mails from seeing the light of day.

For example, last week’s Inbox highlighted one recent decision in which a New York federal court ruled that an executive had “no reasonable expectation of confidentiality or privacy” in his work e-mail.  United States v. Finazzo, No. 10-CR-457 (E.D.N.Y. Feb. 19, 2013).  Read More ›

The Inbox – February 22, 2013

We’re not sequestering this week’s Suits by Suits news:

• Novartis announced that it would rescind its agreement to pay its former chairman, Daniel Vasella, $78 million to keep him from working for competitors and sharing his experience with them.  According to the New York Times, the proposed payment sparked outrage in Novartis’s home country, Switzerland.  Vasella released a statement that was significantly more even-keeled than anything I would have written after losing $78 million.
• In other departure news, American Airlines CEO Tom Horton will get a $20 million severance payment when his company’s merger with US Airways is finalized, reported the Dallas Morning News.  Plus he gets lifetime flight benefits, although the agreement doesn’t appear to prohibit the company from putting him in a middle seat in the back of the plane.

Grey’s Anatomy Takes On The Law, And The Law Wins

Many people love the ABC medical drama Grey’s Anatomy.  I’m not one of them.  Maybe it’s because I generally dislike any show in which a character is assaulted by an icicle.

Recently, however, the show featured an issue that is near and dear to the hearts of those of us who focus on executive-employer disputes: non-compete agreements.  The episode in question involved a plotline in which the lead characters were planning to buy their own hospital.  They concluded that they couldn’t tell one of their colleagues about the plan, because he had a non-compete/non-disclosure agreement with a competing buyer, and he could end up in jail if he breached that agreement.  Did the show get this right? Read More ›

In Hallmark Ruling, Court Affirms Jury Verdict Against Greeting Card Exec

Document discovery in litigation is a way for parties to learn about the actual facts underlying a dispute.  Sometimes, however, parties intentionally destroy documents in advance of litigation (which is called “spoliation”).  Spoliation can have very serious consequences, including a court-imposed “adverse inference” instruction.  When a court gives such an instruction, it tells the jury that it may assume that documents deleted in advance of discovery would have been bad for the party who deleted them. 

This happened to Janet Murley, a former vice president of marketing for the Hallmark Group.  As a result, she is now hundreds of thousands of dollars poorer. Read More ›

The Inbox

With only two weeks to go until the Mayans’ end of days, what better way to spend your time than reading this week’s latest in Suits by Suits:

• A store manager for American Apparel has sued Dov Charney, the company’s CEO, accusing him of assault.  UPI reports that the manager alleges that Charney called him nasty names and tried to rub dirt on his face at an industry convention.  Lawyers can get a bad rap, but I doubt anything like that has ever happened at the ABA’s annual meeting.

How Is An ACC "Exit Fee" Like Damages for Competing with a Prior Employer?

On November 19, the University of Maryland announced that it is leaving the Atlantic Coast Conference, its home for 60 years, to join the Big Ten Conference.  In weighing its decision, Maryland had to consider one big downside: the $50 million exit fee that ACC presidents voted to adopt in September 2012.  Maryland hasn’t paid up, and the ACC sued it on November 27 in North Carolina state court, seeking to recover all $50 million.

The principal issue in the case will be whether the exit fee is a proper amount of “liquidated damages.”  Read More ›

When Suits By Suits Go Political, Part II: Jim Greer vs. the Republican Party of Florida

Stop us if you’ve heard this before, but we’re still not a political blog.

Nevertheless, when the former Chairman of the Republican Party of Florida, Jim Greer, sues the Republican Party, Florida State Senate President Mike Haridopolous and Florida State Sen. John Thrasher for unpaid severance pay and $5 million in damages following his 2010 resignation – and the Republican Party replies with allegations that Greer engaged in fraud and money laundering, funneling $300,000 from the Republican Party to his own pockets, well, we can’t resist.

Twice, in fact.  Back in September we advised you that Greer was filing suit, and that his lawyer was confident of victory.  (“They’re [the Republican Party] dead. … Jim Greer will win the criminal case and Jim Greer will win the civil case.”)

Two days ago, the Republican Party struck back, moving to dismiss the portion of the lawsuit that includes the individual defendants, Sens. Haridopolous and Thrasher.  But the Court rejected that argument, permitting Greer's lawsuit to go forward against both the Republican Party and the state senators, apparently on the theory that the individual legislators were acting as individuals and not on behalf of the Republican Party when they allegedly offered Greer $124,000 to resign back in 2010.

(Greer calls the offer a “severance payment”; media sources have not been so generous in their characterization.)

Although most of us don’t face the same sort of political issues that Jim Greer and the Republican Party of Florida do, many employers do face similar risks when they contemplate firing a prominent, high-level employee.  For those employers, the “nightmare scenario” is that the employee will run down his or her former employer in the press, or possibly air dirty laundry that the employer would rather not have out in the open. 

If you’re thinking that Jim Greer used that exact same strategy, you would be right.  In his deposition – leaked to the press, of course – Greer called Republican Party officials “whack-a-do, right-wing crazies” not-so-secretly plotting to suppress minority votes in Florida.  (The full transcript of Greer’s deposition can be found here.)

Often times, employers chafe at the idea of paying a high-level employee to go away; after all, they’ve already decided this person isn’t worth keeping.  How can they possibly be worth paying?  The practical reality is that sometimes the benefits of an amicable settlement – including a general release of all claims and non-disparagement and non-disclosure agreements – can leave the employer better off than simply rolling the dice.

We’re betting that the Republican Party of Florida wishes it had just paid Greer back in 2010.

Postscript:  A grand jury indicted Greer on multiple fraud counts in 2010 and his criminal trial is scheduled for February, 2013.