Numerous decisions from the Delaware courts establish that a company cannot abandon its promise to advance legal fees and expenses when the covered director, officer, or employee properly invokes it.
The Delaware Supreme Court recently issued yet another decision upholding this principle, ruling in Trascent Management Consulting, LLC v. Bouri that an employer could not escape its promise to provide advancement by claiming that it was induced to provide the promise by the employee’s fraud.
Well, we made it!
In the 10th annual Blawg 100, ABA Journal named Suits by Suits among “the 100 most compelling” blogs in the legal market. We’re thrilled to be recognized and listed alongside some great writers, blogs, and firms.
From ABA Journal:
Every year since 2007, we ABA Journal staffers have assembled a list of our 100 favorite legal blogs for the December issue. Here, you can scroll down to peruse our selections from every past year as well as this one. Some blogs listed over the years are still thriving after a decade or more, while others went dark long ago. And of course, many excellent blogs are absent from later lists only because they’ve been retired to our Blawg 100 Hall of Fame….
Suits by Suits
NEW: Lawyer-bloggers from Zuckerman Spaeder cover disputes between companies and their executives—often in the context of criminal investigations into possible corporate wrongdoing. Can a “suit” be fired for taking the Fifth or otherwise not cooperating with an investigation? If your client is accused of misappropriating trade secrets and his or her computer is seized, what recourse is there? If former company directors or officers face legal claims, can they demand the company advance legal fees?
Thanks to our readers for your support. We hope you find Suits by Suits informative and insightful, and we’re looking forward to another year of writing and posting in 2017.
Check out the complete Blawg 100 list.
When an employee brings a lawsuit involving a plan adopted by their employer, one question is whether ERISA—the Employee Retirement Income Security Act of 1974—applies.
ERISA is a federal law that requires a number of disclosures and safeguards for employee benefit plans. ERISA governs both employee welfare benefit plans (such as insurance or sickness plans) and pension benefit plans (such as retirement plans).
But it doesn’t apply to every plan adopted by an employer, as the recent decision in Hall v. Lsref4 Lighthouse Corporate Acquisitions, LLC, 6:16-CV-06461 EAW (W.D.N.Y. Nov. 10, 2016), shows.
In lawsuits over contracts, parties sometimes assert defenses that contracts are voidable or void. A voidable contract is one as to which the party should have a choice as to whether it is enforceable or not; for example, when a 17-year-old (a legal minor) buys a car, he may have the option to choose whether to abide by the deal. By contrast, a void contract is one that is illegal because it violates the law or public policy. No one—neither hit man nor jilted spouse—can enforce a contract to commit murder.
The doctrine of void contracts arose recently in an employment case in Florida, Griffin v. ARX Holding Corporation. The plaintiff in the case was Nicholas Griffin. Griffin had a blemish on his resume: in 1998, he had pleaded guilty to extortion.
Many of us in the white collar defense bar have written and spoken about the changes wrought by the Yates Memo, but one issue not receiving much attention is the “extraordinary circumstances” exception to the Yates Memo’s application. What is this “extraordinary circumstances” exception?
According to the Memo, “absent extraordinary circumstances, the United States should not release claims related to the liability of individuals based on corporate settlement releases.” This is the much discussed elimination of all-encompassing corporate settlement releases. But the Memo states that there may be “extraordinary circumstances” which justify a corporate settlement that includes releases for the relevant individuals. “Any such release of ... civil liability due to extraordinary circumstances must be personally approved in writing by the relevant Assistant Attorney General or United States Attorney.”
When an employee brings a lawsuit alleging that his employer retaliated or discriminated against him, courts typically assess the claim by using a burden-shifting approach. Under this approach, after the employer offers a “legitimate, nondiscriminatory reason” for its actions, the employee has to come forward with evidence showing that the reason was pretextual.
The recent decision in Stephenson v. Potterfield Group LLC serves as an example of how an employee can meet this burden.
When Congress passed the Sarbanes-Oxley and Dodd-Frank Acts, it included protections for employees who blow the whistle on wrongdoing by their employers. However, those whistleblower protections don’t apply to every report of wrongdoing. Rather, they come into play only when an employee reports particular types of misconduct.
For example, in a recent decision (Erhart v. BofI Holding, Inc.), a federal court in California dismissed claims by an internal auditor (Erhart) against his employer (BofI Holding), ruling that Erhart didn’t plausibly allege that he had been engaged in the "protected activity" necessary to qualify for the whistleblower protections of those statutes.
Thanksgiving is typically a time for gratitude, gathering with family, and acts of kindness among fellow men and women. But in one recent case, a bank used Thanksgiving to force-feed a separation agreement to its outgoing president.
The bank later claimed that the ex-officer had released his rights to benefits under a “top-hat” benefits plan, even though it was not mentioned in the separation agreement. In Buster v. Compensation Committee of the Board of Directors of Mechanics Bank, the plaintiff alleged, and the court agreed, that the bank’s interpretation of the separation agreement did not fly.
Steven Buster worked as president of Mechanics Bank between 2004 and 2012. During his tenure, Mechanics Bank had two retirement plans. The first was the Supplemental Executive Retirement Plan (SERP), a so-called “top-hat plan” because it was available only to a few, select senior employees. The accrual of benefits for the SERP was frozen in 2008. In that year, the bank adopted a separate Executive Retirement Plan (ERP).
Remember 2002? That year, A Beautiful Mind won best picture, and the University of Maryland won the NCAA basketball tournament. It is also the year that Rite Aid and its former General Counsel, Franklin Brown, began litigating over Brown’s indemnification rights. They are still fighting, which brings us to Brown v. Rite Aid Corp., CA No. 11596-VCL, the latest chapter in the 14-year-long dispute.
The Delaware Chancery Court is generally a forgiving forum for an director or officer seeking to vindicate indemnification or advancement rights conferred by a Delaware company. But there are limits, and a recent decision by the Chancery Court in the Brown case concerned one such limit: a claim for indemnification must be brought within three years of final disposition of the proceeding that triggered the indemnification demand.
When an employee sues an employer, the forum selection clauses in her employment agreement can affect where the claims can be litigated—but only if those clauses are enforced.
For example, we previously discussed a court’s decision not to enforce an employee’s agreement to arbitrate because the employer failed to countersign her employment agreement.
The Department of Justice’s recent Yates Memo creates a new emphasis on individual accountability for corporate or entity wrongdoing. It also enhances the risk to corporate employees that they will need to choose between cooperating with an employer’s investigation—and potentially incriminating themselves—or asserting their Fifth Amendment right to remain silent and risking their jobs. (For examples of this dilemma, see our posts here and here.)
But being fired for “taking the Fifth” is not a recent phenomenon.
In the last century, this issue arose in the 1950s, when employment contracts more commonly contained “good conduct” or “morals” clauses.
An employee who is accused of participating in corporate wrongdoing can face potentially life-changing choices almost immediately. When a company learns of alleged wrongdoing, it is likely to start an internal investigation into the misconduct. As part of the investigation, attorneys or other investigators will seek to interview those with relevant knowledge, including employees who are allegedly involved in the wrongdoing.
When that happens, the employees face a critical choice: do I stay silent, or do I talk to the investigators? If the employees refuse to talk, they could be fired; if they do talk, the government could use their statements against them in a criminal case.
Every year, the ABA Journal selects 100 of the best law blogs. It is currently accepting nominations for the 10th annual version of this list. If you enjoy reading Suits by Suits, we hope that you’ll take a few moments to nominate us.
Nominations are due no later than 11:59 p.m. CT on Aug. 7, 2016.
We hope you’ll consider nominating Suits by Suits. But regardless, thanks for reading.
When a company learns that its employees may have done something unlawful, it should try to get the facts and figure out whether wrongdoing actually occurred. One way to do this is to conduct an internal investigation, in which attorneys or other investigators collect documents and interview employees to gather information about what happened.
But what happens when employees refuse to cooperate? Can they be fired and denied severance benefits that would otherwise have been due?
After a spate of horrific shootings at schools and businesses across the country, employers started conducting unannounced “active shooter” drills to train employees how to react if a murderous gunman shows up at their workplace. Unsurprisingly, some of these unannounced drills have gone awry.
In 2013, the Pine Eagle Elementary School in Halfway, Oregon, population 286, held an active shooter drill that was too much for its employees to bear. Now, Pine Eagle finds itself in the middle of a lawsuit in Oregon federal court, brought by former teacher Linda McLean.
It is the norm for high-achieving employees to strive for and tout their successes. Recently, however, one person’s novel reaction to failure—his own termination—may show a future employer as much about his character as any of his considerable accomplishments.
Sree Sreenivasan was plucked from Columbia’s School of Journalism a few years ago to become the New York Metropolitan Museum of Art’s chief digital officer. According to Quartz, Mr. Sreenivasan brought the famed museum into the digital age through inventive social outreach efforts and a revamped, mobile-friendly website.
Owners of stolen trade secrets now have another weapon in their arsenal.
Last month, President Obama signed the Defend Trade Secrets Act (the DTSA), which creates a new cause of action in federal court for the misappropriation of trade secrets. The DTSA does not preempt state laws governing misappropriation of trade secrets, so employers and other trade secret owners may now bring actions under the DTSA and applicable state laws. See 18 U.S.C. § 1838.
When a former officer or director of a company must defend against legal claims, advancement of legal fees by the company can be critical to a successful defense. The Delaware Chancery Court frequently addresses issues related to advancement of fees for former officers and directors. For example—as we discussed in this post—that court recently resolved a claim by former Vice President Al Gore and a colleague for advancement of legal fees, ruling that they were entitled to advancement from the company that bought their employer (Current Media) and assumed Current Media’s indemnification and advancement obligations, even though they had never worked for the purchaser
What happens when an employer tries to change the basis for terminating an employee?
Recently, the Supreme Judicial Court of Massachusetts considered whether an employer could change the basis for the termination from “without cause” to “with cause” and withhold severance benefits otherwise owed the former employee. In EventMonitor, Inc. v. Leness, the employee won the battle, but the cost may have consumed the spoils of war.
Last week, the U.S. Supreme Court issued a plaintiff-friendly decision resolving disagreements over the question of when a constructive discharge claim accrues. The lower courts didn’t agree on when the clock should start ticking on claims by employees that they were forced to quit, creating uncertainty for plaintiffs who faced the possibility that their claims would be barred by the statute of limitations if they didn’t sue soon enough.
We cover a broad range of issues that arise in employment disputes. Occasionally, we also spotlight other topics of relevant legal interest, ranging from health care to white-collar defense to sports, just to keep things interesting.
Led by Jason Knott and Andrew Goldfarb, and featuring attorneys with deep knowledge and expertise in their fields, Suits by Suits seeks to engage its readers on these relevant and often complicated topics. Comments and special requests are welcome and invited. Before reading, please view the disclaimer.