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- Corporate Executive Alert: Tough Clawback Rules Relating to Financial Restatements Are Coming
- The Inbox - The Ways of the “Wolf”
- Non-Solicitation Clauses: They’re Up to You, New York
- Part 2 – How to Motivate Executives to Perform at Their Highest Level Through a Bankruptcy
- How to Motivate Executives to Perform at Their Highest Level Through A Bankruptcy
- Sixth Circuit Upholds Financial Planner’s Sarbanes-Oxley Win
- The Inbox – Orwell’s Big Brother Has An App For That
- The Insurance Benefits From Early Discovery Of Employee-Caused Losses
- The Inbox – When Suits Break Bad
- In Reversal of Fortune, Court of Appeals Finds Ambiguity in Executive’s General Release
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Showing 27 posts in Confidentiality.
Last November, we covered the Supreme Court oral argument in the case of Department of Homeland Security v. MacLean. As a refresher, MacLean was an air marshal who was fired by the Transportation Security Administration (TSA) after he blew the whistle to MSNBC on the agency’s plan to cancel marshal missions to Las Vegas. After the argument, Prof. Steve Vladeck of American University predicted that the TSA would lose the case.
He was right. On Wednesday, the Supreme Court issued its opinion, in which it held in favor of MacLean. The TSA argued that it could fire MacLean because his disclosures were “specifically prohibited by law” in two ways: first, it had adopted regulations on sensitive security information, which applied to the information MacLean disclosed; second, a provision of the U.S. Code had authorized TSA to adopt those regulations. Chief Justice Roberts, writing for the Court, rejected both arguments.
As to the regulations, he wrote, Congress could have said that whistleblowers were not protected if their disclosures were “specifically prohibited by law, rule, or regulation,” but did not. Thus, its choice to only use the word “law” appeared to be deliberate. Further, interpreting the word “law” broadly “could defeat the purpose of the whistleblower statute,” because an agency could insulate itself from liability by promulgating a regulation that prohibited whistleblowing. And as to the argument that Congress-passed “law” prohibited the disclosure, Chief Justice Roberts wrote that the statute in question did not prohibit MacLean’s disclosures. Instead, it was the agency’s exercise of discretion, not the statute, that determined what disclosures were prohibited. Read More ›
A whistleblower generally shouldn’t break the law in order to prove his claims. Indeed, the Whistleblowers Protection Blog says that this is a “basic rule,” and cautions that an employee who breaks the law while whistleblowing in order to get evidence will suffer from attacks on his credibility and may even be referred for criminal prosecution. However, the parameters of this rule aren’t always so easy to follow, as the Supreme Court heard last week in the case of Department of Homeland Security v. MacLean.
The MacLean case arose from a warning and text message. In July 2003, the Transportation Security Administration (TSA) warned MacLean, a former air marshal, and his colleagues about a potential plot to hijack U.S. airliners. Soon after, however, the TSA sent the marshals an unencrypted text message, canceling all missions on overnight flights from Las Vegas. MacLean was concerned about this reduction in security, and eventually told MSNBC about it. The TSA then issued an order stating that the text message was sensitive security information (SSI). When it found out that MacLean was the one who disclosed the message to MSNBC, it fired him.
MacLean didn’t take this while reclining; he challenged his dismissal before the Merit Systems Protection Board. But he lost. The Board decided that TSA didn’t violate the federal Whistleblower Protection Act by firing MacLean for his disclosure, because MacLean’s disclosure violated a TSA regulation that prohibited employees from publicly disclosing SSI. Read More ›
The news hasn’t been great for Walgreen Co. over the past couple of months. According to the Wall Street Journal, in early July, chief financial officer Wade Miquelon slashed his forecast for pharmacy unit earnings to $7.4 billion from $8.5 billion. Miquelon left the company in early August. Shortly thereafter, the Journal ran an article stating that Miquelon’s “billion-dollar forecasting error” had cost Miquelon his job and alarmed Walgreen’s big investors.
Now, Walgreen is fighting a battle on another front – against Miquelon. Last week, Miquelon sued Walgreen in state court in Illinois, alleging that the company, its CEO, and its largest shareholder had defamed him. According to Miquelon, the company’s big investors were told that Walgreen’s finance department was “weak” and had “lax controls.”
The four things that a defamation plaintiff must typically prove to prevail are: (1) the defendant made a false statement about him; (2) the statement was published, i.e., made, to one or more other persons; (3) the defendant was at least negligent in making the statement; and (4) the publication damaged the plaintiff. Thus, if Walgreen and the other defendants can show that any harmful statements they made about Miquelon were true, they stand a good chance of defeating his claims. On the other hand, as we covered in this article, if Miquelon can prove that the defendants engaged in a “premeditated scheme” to do him harm by falsely criticizing his performance, he might be able to recover a substantial verdict. Read More ›
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 ›
Jerry 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 ›
Top ‘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.
Our 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
In 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 ›
We 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.
When 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 ›