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Showing 18 posts in Executive Compensation.
Twitter’s founders are cashing in on Wall Street, and journalists are piggybacking on the news with articles like this one, which recaps 10 “surprising superstars” of the social network. No, Suits by Suits didn’t make the cut, but you can still follow us at @suitsbysuits, where we’ll bring you 140-word tweets about news related to executive-employer disputes. These are the kinds of stories we track:
- The Texas Supreme Court heard argument this week in Exxon Mobil’s dispute with former executive William Drennen. Jeremy Heallen of Law360 (subscription required), wrote that after Drennen retired from Exxon (@exxonmobil) and went to work for competitor Hess, Exxon claimed that he had forfeited his restricted stock under a “detrimental-activity provision” in his incentive plan. Exxon is seeking reversal of the lower court’s holding that the forfeiture violated Texas law, which disfavors “unreasonable” noncompetition agreements.
- AIG has settled a $274 million dispute with former real estate executive Kevin Fitzpatrick, reported (@nateraymond) Nate Raymond of Reuters. The terms are confidential, but Fitzpatrick’s lawyer says that he is “very happy.” Given the potential dollar amounts between $0 and $274 million, it’s easy to guess why.
- Rachel Louise Ensign of the Wall Street Journal (@RachelEnsignWSJ) (subscription required) covered a developing trend this week: more whistleblowers are coming from corporate compliance departments. As one example, Ensign described Meng-Lin Liu’s case against Siemens AG, which we covered here. The possibility of lucrative awards under the Dodd-Frank Act’s whistleblower program may be sparking the trend, although as Ensign points out, compliance officers are subject to additional restrictions under that program.
- In other whistleblower news, the Senate approved a bill to prohibit companies from retaliating against whistleblowers who report violations of the antitrust laws. Jennifer Koons of Main Justice (@jenkoons) said that the bill passed with bipartisan support. “Bipartisan” – does anyone still remember that concept?
- Newscaster Larry Conners is still trying to get back on television, despite a prior ruling that his noncompete agreement prohibited him from working for other TV stations in the St. Louis market for a year. Conners’s attorney asked the judge to modify that ruling, which restricted Conners to radio work, wrote (@STLSherpa) Joe Holloman of the St. Louis Times-Dispatch. We’ve previously examined Conners’s case here and here.
The federal government is closed, but the Suits by Suits news continues to roll in:
- Johnson & Johnson shareholders are amending their derivative suit against the company and its directors, alleging that the company didn’t act properly when it decided that the lawsuit was not in J&J’s best interest. According to Joshua Alston of Law360 (subscription required), the shareholders argue that an investigation conducted by K&L Gates was a whitewash and that former CEO Bill Weldon shouldn’t have been paid $175 million over a six-year period. On the bright side, Weldon may have had a better tenure than the similarly well-compensated Alex Rodriguez.
- In more J&J news, subsidiary DePuy Synthes sued three of its former sales reps and their new company, Globus Medical, Inc., for allegedly violating noncompete agreements. Brad Perriello of Mass Device described the allegations, which accuse Globus of recruiting the reps “in an effort to rapidly build its own business . . . by appropriating and capitalizing on the goodwill, customer relationships, and confidential information that DePuy Synthes necessarily entrusts to its sales employees.”
- It’s not hard to translate how Rosetta Stone wants this forum dispute to come out. Carolina Bolado of Law360 (again, subscription required) reports that competitor Open English sued the company, along with several new hires, in Florida for allegedly breaching noncompete agreements. Rosetta filed a lawsuit in the employees’ home state of California seeking a declaration that the agreements weren’t violated, and has now asked the Florida judge to dismiss in favor of that lawsuit. Open English, meanwhile, argues that it won the race to the courthouse and is entitled to take its legal talents to South Beach.
- Big whistleblower news last week, as the SEC announced an award of $14 million to a whistleblower under its Dodd-Frank bounty program. Further details were not forthcoming, as the law protects recipients of bounties from having their identities revealed. Given all the press about miserable lottery winners, this could be a very good thing for them.
- A Virginia sheriff’s deputy is suing his former boss, claiming that he was fired after he reported that another officer slapped an inmate at the county jail. Rhonda Simmons of the Culpeper Star-Exponent writes that the deputy, who is pursuing a wrongful termination claim, was rehired after the sheriff who fired him was voted out of office.
“Hell or High Water” or Fraud: Court Rules That Supermarket Scion Was Entitled To Post-Termination Benefits Despite Misconduct
The ongoing court drama between Marsh Supermarkets and Don Marsh, its former CEO, has taken another twist. As we previously covered here, in February of this year, a jury in the U.S. District Court for the Southern District of Indiana found that Marsh, the son of the company's founder, defrauded the supermarket chain and breached his employment agreement by misusing company assets to pay for personal expenses. It awarded Marsh Supermarkets $2,200,000 in damages.
Now, however, that damages award has effectively been zeroed out by the district court judge, who has found that Don Marsh is entitled to $2.1 million plus attorneys’ fees from the company based on a separate provision in his employment contract. Order, Marsh Supermarkets, Inc. v. Marsh, No. 09-cv-00458 (S.D. Ind. Jul. 29, 2013). The court accepted Marsh’s argument that the provision entitled him to payment come “hell or high water” – or fraud. Read More ›
Here in the Baltimore-Washington area, we’re trapped under a dome - a heat dome. Like the inside of my car on these 100-degree days, disputes involving executives are also heating up, as the latest in Suits by Suits news shows:
- We’ve covered again and again the fact that district courts are broadly interpreting the Dodd-Frank whistleblower retaliation provision to include employees who don’t report misconduct to the SEC. The Fifth Circuit has now bucked that trend, in Asadi v. GE Energy (USA) LLC. We’ll cover this important development in depth next week.
- In close-to-home news, St. John Barned-Smith of the Montgomery Gazette writes that a Montgomery County, Maryland judge denied the Landon School’s request for summary judgment on a wrongful termination claim brought by its former chief operating officer. Timothy Harrison contends that Landon’s headmaster ignored his reports that supervisors were discriminating against Hispanic employees. According to the article, Harrison also complained about the headmaster’s annual $800,000 salary. (Thanks in advance for finishing this blog post instead of dropping everything and applying for headmaster jobs.)
- Viacom convinced Judge Sue Robinson of the U.S. District Court for the District of Delaware to throw out a shareholder lawsuit alleging that company directors improperly awarded tax-deductible bonuses. The July 16 opinion in Freedman v. Redstone, Civ. No. 12-1052-SLR, is here. But what Delaware giveth, it also taketh away: Viacom suffered a $300 million loss in the Delaware Supreme Court this week in a different shareholder dispute.
This week, we celebrate the Declaration of Independence – the document that set out the principles on which the United States claimed its independence from Great Britain. Since then, while we’ve crafted a “special relationship” with our former colonial master, we’ve gone our own way in some particulars – such as getting rid of extra vowels in some of our words and changing some spellings, and driving on the right.
One way in which our two nations are similar, however, is that severance pay that is perceived as excessive can stir public controversy. Read More ›
You’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.
My kids love the game. We all know the rules: you only act if the caller says the words “Simon Says.” If those words don’t precede the command, then don’t move – or else.
The current lawsuit by Simon Property Group (“Simon”) shareholders in Delaware Chancery Court is kind of like a grown-up game of Simon Says, although in this version, the shareholders issue the commands, and Simon can’t act until they give permission.
The lawsuit involves Simon’s alleged promises that it would tie compensation to performance and that shareholders would have the opportunity to vote on material changes to compensation. After making those promises, Simon raised the pay of its CEO David Simon. (The CEO’s surname and the name of the company are no coincidence.) The Simon shareholders now claim that NYSE listing rules and Treasury regulations required the company to hold an investor vote before amending its stock incentive plan and granting David Simon a large stock award that was not based on performance.
American Airlines’ CEO, Tom Horton, moved one step closer to receiving the $20 million severance payment he’s negotiated with the bankrupt airline. On Tuesday, the bankruptcy judge hearing American’s case allowed the payment to stay in the airline’s disclosure statement (approval of the statement is a predicate step to ultimately “reorganizing” and exiting bankruptcy). The approval comes over strenuous objections by the U. S. Trustee, who argued that Horton’s payment violated bankruptcy law. The judge’s decision isn’t final, and the issue can be revisited down the road, but the fact that it stayed in the disclosure statement (and will be presented to the airlines’ creditors for approval) is one more hurdle cleared for Horton.
We’ve written about this payment here, here, and here. And, no, we don’t write about it so much because we’re jealous of the substantial payment Horton may receive; it’s what this case says about severance and golden parachutes generally. Although the lifetime of free travel he and his wife would also receive under his severance agreement is, frankly, kind of cool.
Late last week, Rutgers announced that it reached a $475,000 settlement with former men’s basketball coach Mike Rice and that no cause for Rice’s termination would be provided. Recently-publicized videotapes show Rice at practices hitting, kicking and throwing basketballs at his players and taunting them with obscenities and anti-gay slurs (not to be confused with this shocking video of Middle Delaware State women’s basketball coach Sheila Kelly throwing toasters at her players). The announcement came more than two weeks after Rutgers President Robert Barchi told reporters that Rice was fired, but not for cause. And that announcement came several months after Rice was suspended from work for three days, following an internal investigation by outside counsel, resulting in this report. Read More ›
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
Time for our second tip of the week about employment agreements. We’re looking at things many of us think we should do about employment agreements but that, oddly enough, aren’t being done – at least in the two cases we profile this week, each of which made it to a state high court.
Our first tip was straightforward: if you have an employment agreement, or think you have one but aren’t sure – get it in writing.
Our second tip follows the first. Once you’ve reduced your employment agreement to writing, make sure it’s clear – or at least, as clear as possible. Clarity will reduce the time and money you’ll spend if you get into a dispute over the agreement. Read More ›