Martensen v. Koch, Venue, and You

Yesterday we looked at a California federal court decision in Martensen v. Koch, in which ex-Oxbow executive Kirby Martensen has sued billionaire William Koch, alleging kidnapping, false imprisonment, conspiracy, and other claims related to his alleged treatment at the hands of Oxbow employees at the Bear Ranch in Colorado.  Specifically, we looked at what the decision means in terms of whether a court can maintain personal jurisdiction over an out-of-state defendant; in the Martensen case, the clear take-away is that committing any portion of an alleged wrong within a state counts as having committed the wrong within that jurisdiction.  So even though most of Kirby Martensen’s kidnapping and false imprisonment allegations relate to conduct that took place in Colorado, because he was allegedly placed on a private plane owned by Oxbow and flown to Oakland, California before being released, the court found that (for purposes of personal jurisdiction) Martensen’s alleged false imprisonment “that began on [Koch]’s private ranch by [Koch]’s agents [in Colorado] continued unbroken until [Martensen]’s release in Oakland, California,” and thus gave rise to personal jurisdiction over Koch in California.

Personal jurisdiction, however, is only the first step in the process of figuring out where you can and should be sued.  Personal jurisdiction determines whether a court has any power over you at all, and is based on the principle – expressed in depth in yesterday’s post – that if you have never set foot in the state of Wyoming, you cannot be compelled to appear in Court in Wyoming.(*)  But just because a state has personal jurisdiction over you doesn’t mean that state is the best place to handle a dispute.  This is the question of venue.  Read on. Read More ›

Martensen v. Koch, Personal Jurisdiction, and You

As you probably know, we here at Suits by Suits have been fascinated by the strange case of Kirby Martensen, the former Oxbow Group executive who alleged that he was kidnapped and falsely imprisoned by billionaire William Koch.  We teased for you last week that Koch’s motion to dismiss, to strike, and in the alternative to transfer venue of the case from California to Colorado was denied, and the case will proceed.

Now, we’ve gotten our hands on the judge’s decision and had a chance to review it in depth; particularly if you’re a civ pro geek like me, it’s worth a read.  Even if you’re not, the decision helps any potential litigant -- and really, isn’t that all of us? -- understand where we can expect to sue or be sued.  Read on.... Read More ›

April 2013 Monthly Roundup

April showers bring May flowers, which, as the old joke goes, usually bring these. At ‎Suits by Suits, however, April brought a mix of interesting stories involving non-‎compete agreements, the mechanics of employment contracts, and all sorts of other ‎topics:‎

• Third Circuit Rejects Narrow Construction of Sarbanes-Oxley Whistleblower Claim
  Jason M. Knott | April 30, 2013
• Recent Breach of Contract Lawsuit Against Michael Keaton Illustrates Measuring Expectation Damages
  Ellen D. Marcus | April 24, 2013
• Why Didn't Rutgers Fire Basketball Coach Mike Rice for Cause?
  Ellen D. Marcus | April 23, 2013
• “You’ve Got…a  Non-Compete!”
  William A. Schreiner, Jr. | April 17, 2013
• Criminal Trial Begins in Case Against Former Executive Search Head
  Jason M. Knott | April 15, 2013
• California Continues to Go After Non-Competes
  P. Andrew Torrez | April 11, 2013
• California Strikes Down An Employee’s Agreement to Arbitrate on Substantive ‎Unconscionability Grounds (As “One-Sided”)‎
  P. Andrew Torrez | April 8, 2013
• Employment Agreement Tip of the Week No. 2: Once You Get It in Writing, Put Out Future Fires by Making Sure the Writing Is Clear
  William A. Schreiner, Jr. | April 5, 2013
• Employment Agreement Tip of the Week No. 1: Get It in Writing
  William A. Schreiner, Jr. | April 3, 2013

Recent Breach of Contract Lawsuit Against Michael Keaton Illustrates Measuring Expectation Damages

Batman has been sued.  Okay, not Batman, but the guy who played him, Mr. Mom and Beetlejuice in the movies – Michael Keaton.  In this lawsuit filed earlier this month in federal court in Illinois, the company that produced the movie The Merry Gentleman (if you’ve never heard of it, that’s the company’s point) alleges that Keaton breached agreements to direct and act in the movie by failing to deliver a satisfactory first cut of the movie on schedule, by working at cross purposes to the company by promoting his own cut of the film to officials of the Sundance Film Festival, and by failing to perform other post-production directorial duties or to assist in promoting the movie.  According to the company, if Keaton had performed his contractual duties, then the Christmas movie would have been released in time for the 2008 Christmas season, rather than May 2009, and, presumably, would have grossed more than the $350,000 than it did at the box office. 

Assuming that the company’s allegations that Keaton breached the contracts are true and assuming that Keaton’s breach (rather than market forces or some failure by the company) caused the movie to flop, what are the company’s damages?  This question is relevant not only to Keaton and The Merry Gentleman production company, but to all parties to a broken contract in which one party had promised to provide employment services to another party in exchange for compensation.  In other words, the question is relevant to all contractually-based employment disputes – a frequent topic on Suits by Suits.  The answer may not be what you think, especially if you think that, as damages, Keaton should just give back the compensation that the company paid him. Read More ›

Shareholders Can Have Their Say on Executive Pay, But Not Much Else

Earlier this week, we noted that, when shareholders go to court to challenge executive compensation as excessive, they are often unsuccessful because courts generally defer to the business judgments of corporate boards.  So, what’s a shareholder who strongly disagrees with how much a company is paying management to do?  The shareholder could vote with her feet by selling her shares.  Or, she could propose that the company’s executive compensation practices or the board that approved them be put to a vote at the next shareholders’ meeting.  Shareholder proposals like these often face stiff opposition by management, and could be left off the agenda all together if management obtains permission from the SEC to exclude them. Read More ›

The Basics: "Hacking," the Computer Fraud and Abuse Act, and You

Today we're going to look at a federal statute that is increasingly becoming central to disputes between outgoing executives and their former employers -- a statute originally designed to prohibit computer "hacking."

Now, if you’re anything like me, when you hear the word “hacking,” you probably envision Matthew Broderick using a dial-up modem to break into his high school’s computer and change his grades.  (In fact, Broderick pulled this same trick twice in the 1980s; first in WarGames and then again in Ferris Bueller’s Day Off.)  Indeed, if you asked the average person to define “hacking,” they would probably come up with something like WarGames; that is, they would consider hacking to be breaking into a computer or network to which you were not given permission to access, in order to do something nefarious, like changing your grades or starting World War III.

It probably comes as no surprise that after those blockbuster movies (and some real-life events, too), Congress enacted a statute to prohibit “hacking” back in the heyday of the 1980s.  That statute – the Computer Fraud and Abuse Act (“CFAA”) – is still the law today, and is codified at 18 U.S.C. §§ 1030.

But what you might not know is that in many areas of the country, there's a court-interpreted disconnect between the CFAA’s definition of hacking and Matthew Broderick.  That disconnect, in turn, has become a very real issue today for departing executives and their employers.  For example, if you’ve been fired and you delete files off of your laptop before returning it, you may be civilly and even criminally liable under the CFAA in some jurisdictions.  (International Airport Centers, LLC v. Citrin, 440 F.3d 418 (7th Cir. 2006).  (Less relevant – but more salacious – is the Justice Department’s efforts to prosecute a mom under the CFAA for lying about her age on MySpace.)  United States v. Drew, 259 F.R.D. 449 (C.D. Calif. 2009).

It all depends on how the courts in your area interpret the CFAA.  Read on.... Read More ›

Wow! A $56 Million Golden Parachute for the Heinz CEO. Well, that depends on what you mean by "golden parachute."

This week, Heinz sounded a lot like American did last week (as we noted) in justifying the size of a golden parachute for its CEO upon the completion of a merger. Heinz’s spokesperson claimed that payments to its CEO William Johnson totaling $56 million "reflect Mr. Johnson’s success in creating billions of dollars in shareholder value," including "the 19% premium" that Heinz shareholders are to receive for their shares when Heinz is acquired by Berkshire Hathaway and 3G Capital. For those of us who consider $56 million to be a whole lot of money – no matter what they guy did for ketchup sales – the spokesperson might also have said that only about $17 million of that amount (okay, still a whole lot of money) is really a golden parachute. Read More ›

Why the Color of Your Parachute May Be Gold - Change-in-Control Severance Agreements for C-Suite Employees

On Friday, we reported on American Airline CEO Tom Horton’s golden parachute in the merger agreement between American and US Airways.  American is asking the court overseeing its bankruptcy to approve the merger agreement, which includes a letter agreement between American and Horton.  The letter agreement provides that Horton’s employment with American will be terminated at the time of the merger, and – so long as he agrees to release American and US Airways from any claims – he will be paid severance totaling nearly $20 million in cash and stock. 

Why would any company agree to such a thing?  According to American, its agreement with Horton is “in recognition of [his] efforts in leading [American’s] restructuring and his role in enhancing the value of [American] and overseeing the evaluation and assessment of potential strategic alternatives that culminated in the Merger.”  In other words, to compensate him for helping to make possible a good merger and then getting out of the way.  The new company created by the merger can only have one CEO, and it is best for the new company not to be distracted by disputes with former executives of the old company. Read More ›

EPLI: If You Hire Or Manage People And You Don’t Know What That Stands For, You ‎Should Probably Read This: Part 1‎

There are things we’re all supposed to do before a catastrophe occurs, to help prevent that catastrophe or minimize the harm from it.  This list would include changing the batteries in your smoke detectors, or making sure your car is kept in good repair, or seeing the dentist every so often for a thorough teeth cleaning. 

If you are an executive or a business owner with any role in hiring or managing others, I’m about to add one more suggestion to that list: check to figure out if you have insurance for employment-related allegations for which you may, in some circumstances, be held personally liable.  Read More ›

EPLI: If You Hire Or Manage People And You Don’t Know What That Stands For, You ‎Should Probably Read This, Part 2‎

In Part One of this series, we looked at insurance for employment-related claims against business owners and managers.  Specifically, we looked at employment practices liability insurance (“EPLI”), and I suggested you find out if your company has this coverage – which, if you’re doing any of the hiring, firing, or supervising, is something you should know.      

Assuming your company (or entity – employment-related claims hit not-for-profits as well) has EPLI, then you need to ask some more questions to really understand what it covers and how it will work.  And the time to consider this is before you may potentially have a claim for coverage under it.  Read More ›