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Jason M. Knott

Email | 202.778.1813

Jason Knott, a partner in Zuckerman Spaeder’s Washington office, represents individuals and companies in civil litigation, white-collar criminal matters, and government investigations. Some of his favorite cases have been “Suits by Suits.”

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  • Complaint Provides Further Details About Former CFO’s Defamation Suit Against Walgreen

    | Jason M. Knott

    When we first examined Wade Miquelon’s suit against his former employer, Walgreen, we didn’t have access to his complaint.  Now we do.  The complaint sheds more light on Miquelon’s allegations, helping to explain why they are causing a spiral of problems for the drug company.

    As you may recall from our last article on the case, Miquelon alleges that Walgreen defamed him (in layman’s terms, lied) when it told the Wall Street Journal and investors that he had botched the earnings forecast for the 2014 fiscal year, and that his finance unit was “weak” with “lax controls.”  According to Miquelon’s complaint, Walgreen executives made these negative statements for an entirely different reason: they had an “unchecked desire” to push Walgreen’s merger with Alliance Boots to completion.  Miquelon alleges that an activist investor had threatened him for being “too conservative,” and that rather than standing up for him, the company’s CEO and its largest shareholder decided to disparage him in order to “deflect investor disappointment” and push through the merger.

    Miquelon’s complaint is also somewhat of a public relations document, because it praises his work and goes into his interactions with the CEO and shareholder in great detail.  It even says that Miquelon was next in line to be CEO (although the complaint also says he turned down that chance, instead deciding to move on).  As to the allegedly botched earnings forecast, the complaint says that Miquelon recognized the problem well in advance of the call in which the company announced it was withdrawing its earnings goal.  It also says that he was pressured at the same time by the company’s CEO to raise his estimate of earnings per share that would result from the Alliance Boots merger.  The most explosive allegation on this front is that the CEO told him that he had “no choice” but to approve a $6.00 earnings per share estimate, rather than a lower one that would hurt the merger.

  • This Year’s Scariest Posts on Executive Disputes

    | Jason M. Knott

    In honor of Halloween, we are looking over our shoulder at some of the most frightening news that we have brought to you this year on Suits by Suits:

    • Earlier this week, we told you the tale of a CEO who was hauled into court thousands of miles away and slapped with an employee’s wage bill.  That’s the kind of stuff executive nightmares are made of.
    • Bonfires are part of what makes Halloween special.  Unless they involve torching a laptop, destroying evidence, and getting hit with an adverse inference for spoliation at trial, which is what happened to one unhappy executive.
    • The SEC announced its presence as a boogeyman for employers who punish whistleblowers, filing its first Dodd-Frank anti-retaliation action against one company and ordering a $30 million bounty for another employee.
    •  Terror babies are scary, as anyone who’s seen Rosemary, Chucky, and Damien on screen knows.  Now, we have more terror babies to add to the mix, thanks to the bizarre saga of Rep. Louis Gohmert and fired Texas art director Christian Cutler.
    • Ever been lost in a hall of mirrors?  Just think how confused this executive was, after her employer told her that she wasn’t releasing her claims for a shareholder payment and then defeated those same claims based on … her release.
    • And perhaps the scariest story of all: the company that lost a non-compete dispute and then had to pay $200,000 of its opponent’s legal fees.  That’s like finding a razor blade in your Mounds bar.
  • Employee Wins Cross-Country Wage War Against CEO

    | Jason M. Knott

    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.” 

  • A Closer Look At The Defamation Suit By Walgreen’s Former Finance Chief

    | Jason M. Knott

    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.

  • Judge Approves $20 Million in Executive Bonuses From Bankrupt Company, Finding That Incentives Weren't "Lay-ups"

    | Jason M. Knott

    A bankruptcy can be hazardous to the health of an executive’s bonus check.  Sometimes, however, an executive can survive an attack on a bonus in a bankruptcy, and come out clean on the other side.  For example, we covered here how one executive succeeded in keeping most of his incentive payments based on the timing of those payments. 

    Now, we have another lesson in how executives can keep their bonus checks despite a bankruptcy, from Judge Christopher S. Sontchi of the U.S. Bankruptcy Court for the District of Delaware.  The company at issue in the case was Energy Future Holdings Corp. (EFH), a holding company with a portfolio of Texas electricity retailers.  EFH filed for Chapter 11 bankruptcy in April of this year.

  • After Torching Laptop, CEO Feels the Heat of Sanctions

    | Jason M. Knott

    Fire consumes all – including, perhaps, one CEO’s chance of winning his lawsuit.  Because G. Wesley Blankenship burned relevant evidence, the jury in his case will now be told that it should assume the lost documents were bad for him.  

    Blankenship left his job as CEO of Security Controls, Inc. in early 2012.  He soon decided to put even more distance between himself and his employer by having a bonfire.  Into the flames went Blankenship’s laptop and his SCI paper files. 

    This turned out to be a bad choice when Blankenship sued SCI and its directors in mid-2012, alleging that they weren’t giving him proper value for his shares in the company.  Blankenship’s lawyers eventually informed SCI of the fire, and SCI moved for sanctions, arguing that Blankenship had knowingly “spoliated” – i.e., destroyed – relevant evidence.  As we’ve previously discussed in this post, spoliation can have serious consequences for litigants.  Among these consequences are jury instructions that allow jurors to assume that the destroyed documents were detrimental to the party’s case.

  • Foreign Whistleblower Cashes in on Report to SEC

    | Jason M. Knott

    On September 22, the Securities and Exchange Commission announced its largest award to date under its whistleblower program: $30 million.  The SEC said that the whistleblower, who lives in a foreign country, came to it with valuable information about a “difficult to detect” fraud. 

    In the order determining the award (which is heavily redacted to protect the identity of the whistleblower), the SEC commented that the claimant’s “delay in reporting the violations” was “unreasonable.”  In arguing for a higher bounty, the claimant contended that he or she was “uncertain whether the Commission would in fact take action.”  This argument, however, didn’t support a “lengthy reporting delay while investors continued to suffer losses.”

  • Goldman Sachs Programmer Asks Third Circuit to Take Another Look at Advancement Case

    | Jason M. Knott

    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

    | Jason M. Knott

    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.

  • Five Takeaways from the Second Circuit’s Dodd-Frank Decision in Liu v. Siemens

    | Jason M. Knott


    Taiwan and Manhattan’s Foley Square are separated by 7,874 miles, and Taiwanese citizen Meng-Lin Liu couldn’t bridge the distance in federal court.  Liu sought to recover in Manhattan under the Dodd-Frank Act’s anti-retaliation provision (15 U.S.C. § 78u‐6(h)(1)).  However, on August 14, the Second Circuit, which sits in Foley Square, affirmed the dismissal of his whistleblower retaliation claim.  Liu v. Siemens AG, No. 13-4385-cv (2d Cir. Aug. 14, 2014).

    As we previously described here, Liu’s case was relatively simple.  He alleged that he repeatedly told his superiors at Siemens in Asia, and the public, that Siemens was violating the Foreign Corrupt Practices Act (FCPA).  As a result, he claimed, Siemens demoted him, stripped him of his responsibilities, and eventually fired him with three months left on his contract.

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Contributing Editors
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Jason M. Knott
Partner
Email | 202.778.1813


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Andrew N. Goldfarb
Partner
Email | 202.778.1822