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- Hands Off! Supreme Court Rules Defendants May Use Innocent Assets to Hire Lawyers
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Showing 27 posts in Summary Judgment.
Normally, in litigation between executives and employees, the executive will bring suit after he or she is fired, alleging wrongdoing by the former employer. This makes sense: the employer, after all, is the one who took the adverse action against the exec. And it’s the one that caused the damage, assuming that the executive can prove his or her claims.
The case of Stephen Stradtman, former CEO of Otto Industries North America, Inc., was not a normal case. For one thing, Stradtman wasn’t fired – he quit. And Stradtman didn’t sue Otto – he sued two other companies (Republic Services, Inc. and Republic Services of Virginia, LLC) and one of their employees. Read More ›
Was American Apparel’s Lawsuit Against Former CEO Dov Charney Brought “By Reason of the Fact” That He Was Its CEO, Such That It Must Advance His Legal Fees?
The legal saga of American Apparel and its founder and former CEO, Dov Charney, has more twists and turns than the latest season of Game of Thrones. We’ve previously blogged about the sundry clashes between the two, including Charney’s ongoing arbitration for severance, the sexual harassment allegations against Charney, and a lender’s threat of default on a major loan after Charney was fired.
Now, Charney and American Apparel are battling in two separate cases in Delaware Chancery Court. In the first, American Apparel has sued Charney for violating a standstill agreement by becoming involved in shareholder suits and commenting to the press. The second case is a follow-on to the first: Charney has sued to force the company to advance his fees for the standstill lawsuit. In this Game of Thrones, you win or you pay for your defense out of your own pocket. Read More ›
Last May, we covered a decision by a Michigan federal court that torpedoed Debourah Mattatall’s claims against her former employee, Transdermal Corporation. Now, thanks to a recent decision by the U.S. Court of Appeals for the Sixth Circuit, Mattatall’s claims have been brought back to life.
To briefly recap the facts, Mattatall used to own a company called DPM Therapeutics Corporation. She sold it to Transdermal and entered into a Stock Purchase Agreement and Employment Agreement with that company. According to Mattatall, Transdermal didn’t comply with its obligations, and she sued it in federal court. But the court quickly granted summary judgment, finding that Mattatall gave up her claims in a settlement agreement that resolved other litigation against her.
In that litigation, DPM’s minority shareholders challenged the sale to Transdermal, and Transdermal countersued those shareholders. The parties to the litigation, including Mattatall, resolved the dispute and entered into a settlement agreement and a general release. The release stated that “Transdermal, DPM, [another controlling owner], and Mattatall and each [minority shareholder] … release[d], waive[d] and forever discharge[d] each other” from any claims arising before the agreement was signed. In Mattatall’s subsequent lawsuit against her employer, Transdermal, the district court ruled that this language released all claims that any party to the agreement had against any other party – even though Transdermal and Mattatall were on the same side in the shareholder litigation, and Transdermal reassured Mattatall that she wasn’t releasing her unrelated claims against it before she signed. Because her claims against Transdermal fell within the “unambiguous” and “broadly worded” terms of the release, this evidence was irrelevant, and Mattatall was out of court. Read More ›
Companies buy directors & officers (“D&O”) insurance policies with the intention of providing protection for key individuals in a corporate structure. The recent decision BioChemics, Inc. v. AXIS Reinsurance Co., from the U.S. District Court for the District of Massachusetts, illustrates the importance of the terms of the policy in determining what is covered, what is not, and when you should notify the insurer of a potential claim.
As we’ve previously discussed, an insurance policy can provide more reliable protection for the indemnification rights of the directors and officers in times of financial distress, because corporations plagued by regulatory or other legal problems frequently suffer financial setbacks. However, when a corporation is the subject of an official investigation, determining exactly what constitutes the start of a covered “claim” may be a matter of some delicacy. Read More ›
The Supreme Court of Washington’s recent decision in Failla v. FixtureOne Corporation is noteworthy on two levels.
First, it involved the surprising claim by a salesperson, Kristine Failla, that the CEO of her employer (FixtureOne) was personally liable for failing to pay her sales commissions. Typically, if an employee had a claim for unpaid commissions, you’d expect the employee to assert that claim against her company, not the chief. But under the wage laws of the state of Washington, an employee has a cause of action against “[a]ny employer or officer, vice principal or agent of any employer ... who ... [w]ilfully and with intent to deprive the employee of any part of his or her wages, [pays] any employee a lower wage than the wage such employer is obligated to pay such employee by any statute, ordinance, or contract.” Read More ›
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
The 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 ›
If you’re confused by this headline, you’re not alone. But you can’t be as confused as Debourah Mattatall must be after losing her lawsuit against her former employer, Transdermal Corporation.
The origin of Mattatall’s lawsuit, appropriately enough, was another lawsuit. Mattatall used to own a company called DPM Therapeutics Corporation. DPM’s minority shareholders sued her to prevent her from selling the company to Transdermal. She went ahead with the sale anyway, and signed a Stock Purchase Agreement and Employment Agreement with Transdermal. According to Mattatall, Transdermal didn’t fulfill its obligations under those deals, citing a lack of funds.
After Mattatall’s sale to Transdermal was final, Transdermal brought its own suit against the DPM minority shareholders. All parties, including Mattatall, eventually settled the two shareholder cases. Before agreeing to the settlement, Mattatall complained about the money that she was owed under the Stock Purchase Agreement and Employment Agreement. Transdermal’s counsel assured her that her claims were “wholly extraneous” and she would be “free to pursue” her claims against Transdermal.
In the written settlement, however, everyone released the claims that they “had, has or hereafter may have” against any other party. Thus, even though Transdermal hadn’t sued Mattatall, according to the language of the release, she was giving up her claims against it. The settlement also included a “merger clause,” under which all prior understandings were “merged” and “supersede[d].” Read More ›
E-mailing Work Documents to Your Personal Account Looks Fishy, Says NY Appeals Court in New Non-Compete Opinion
Non-lawyers often wonder why folks in our profession spend so much time and money poring over the documents and e-mails each side usually has to produce in litigation. Sometimes, these document reviews are the legal equivalent of looking for the proverbial needle in a haystack.
And sometimes, you find the proverbial needle – or needles. And when you do, and the success or failure of the case turns on that e-mail, or set of e-mails, then the time and money spent on the search for those things turns out to have been a wise and necessary investment.
Take the case of TBA Global, LLC v. Proscenium Events, LLC. TBA is an event planning company that “produces live event programs and marketing presentations for companies and branded products.” In the course of its work, it hired three senior employees – Santoro, Shearon, and Cavanaugh. While the exact terms of their agreements differ from each other, all three signed non-compete agreements with TBA that provided that if they ever left the company, they would not “directly or indirectly, communicate with clients or prospective clients” of the company for a period of time (one year for two of the executives, and two years for the other). Read More ›
This 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 ›