The Inbox – Netflix and the stream scheme
Netflix, the internet media giant, sued its former vice president of IT Operations, Mike Kail, in California Superior Court, claiming that he “streamed” kickbacks from vendors and funneled them into his personal consulting company. According to the complaint, Kail—who is currently the CIO of Yahoo—exercised broad latitude in both vendor selection and payment. Netflix alleges that he took in kickbacks about 12-15% of the $3.7 million that Netflix paid in monthly fees to two IT service providers, VistaraIT Inc. and NetEnrich Inc. According to the Wall Street Journal, one line in particular from the complaint piqued experts’ interest: “Kail was a trusted, senior-level employee, with authority to enter into appropriate contracts and approve appropriate invoices.” According to Christopher McClean, an analyst at Forrester Research Inc., this suggests Netflix allowed Kail too much freedom. McClean opined that when individuals are empowered to both choose a vendor and then approve payment, corporate malfeasance can follow. This is particularly important in the field of information technology, where tech companies vie for business in an ever-competitive market by lavishing incentives on CIOs. Companies that do not incorporate an audit function into vendor selection and payment should consider revisiting their policies going forward.
We recently discussed the hefty $185 million judgment against AutoZone in favor of a former store manager who alleged discrimination and retaliatory discharge following her pregnancy. While this case arose in California, it appears the auto parts retailer is zoned for another similarly-themed legal showdown, this time across the country in West Virginia. In the recent complaint, the plaintiff, Cindy DeLong, claimed that she was placed on a 30-day performance improvement plan for hiring too many women in the stores she managed. She was ultimately fired before the 30 days expired. As you may recall, in the California case, plaintiff Rosario Juarez claimed AutoZone enforced a “glass ceiling” for its female employees, denying them opportunities for promotion. It seems Ms. DeLong managed to chip away at the ceiling as a district manager. But, according to Courthouse News, she now alleges that her practice of hiring women rendered her “not a good fit for the company.”
The news of Jimmy John’s restrictive non-competes garnered significant attention from the public and even Congress, and now Jimmy John’s has an opportunity to respond in the litigation that brought the issue to light. Plaintiffs in Illinois district court filed a putative wage class action against Jimmy John’s LLC and its franchisees seeking, in part, a declaratory judgment preventing the enforcement of the non-compete agreements signed by lower level employees. In moving to dismiss the case, Jimmy John’s and its franchisees essentially made a “no harm-no foul” argument. According to Law 360, they argued that the plaintiffs lacked standing because they had not alleged that the non-competes were ever enforced, or were even threatened to be enforced. The defendants further argued that the class action covering 35 states was the improper forum to litigate questions of varying state laws: “Noncompete claims are state and case specific and cannot be pursued as a nationwide class action.”
The Chief of the Atlanta Fire and Rescue Department, Kelvin Cochran, is stewing in hot water while on administrative leave over his decision to distribute a religious book to employees in his department. Cochran authored the religious tome, and in it, equated “homosexuality” and “lesbianism” with “sexual perversion.” Given his position of authority and the nature of the statements made against members of the community, the mayor’s office placed Cochran on leave while underscoring the administration’s zero-tolerance policy toward discrimination. According to The Washington Post, Mayor Kasim Reed read the book and acknowledged that some parts conflict with the city’s anti-discrimination policies. The mayor’s office is investigating whether Cochran engaged in discriminatory practices or violated any laws before considering further disciplinary action.