• | Jason M. Knott

    Yesterday, the Supreme Court heard argument in the religious discrimination case of EEOC v. Abercrombie & Fitch Stores, Inc., which made our list as one of our five issues to watch for 2015.  The case arises under Title VII, the federal law that makes it illegal for an employer “to discriminate against any individual with respect to h[er] compensation, terms, conditions, or privileges of employment, because of such individual’s . . . religion.”  The EEOC alleges that Abercrombie, purveyor of “authentic American clothing,” discriminated against Samantha Elauf on religious grounds.  The company refused to hire Elauf because she wore a headscarf, or hijab, to her job interview, and the company’s “Look Policy” prohibited employees from wearing “caps.” 

    In earlier depositions in the case, Elauf’s interviewer at Abercrombie testified that she “assumed that [Elauf] was Muslim,” and “figured that was the religious reason why she wore her head scarf.”  The interviewer said that she went to her district manager to discuss the headscarf issue, and told him that “[Elauf] wears the head scarf for religious reasons, I believe.”  The interviewer testified that the district manager then told her not to hire Elauf because of the headscarf and said, “[S]omeone can come in and paint themselves green and say they were doing it for religious reasons, and we can’t hire them.”  As a result, the interviewer lowered Elauf’s “appearance” score on her evaluation, and Elauf didn’t get the job.

    Despite this testimony, the Tenth Circuit still entered summary judgment for Abercrombie, holding that the EEOC’s discrimination claim could not proceed to trial because Elauf “never informed Abercrombie prior to its hiring decision that she wore her headscarf or ‘hijab’  for religious reasons and that she needed an accommodation for that practice, due to a conflict between the practice and Abercrombie’s clothing policy.” 

    The fact that the Tenth Circuit granted summary judgment, even though the interviewer admitted that she assumed that Elauf wore the scarf for religious reasons, helps explain the concerns, and potential solutions, that the Justices raised in yesterday’s argument. 

  • | Graeme W. Bush

    Section 304 of the Sarbanes-Oxley Act of 2002 requires the CEO and CFO of an issuer that has restated its financial statements to reimburse the company for any incentive or equity-based compensation, and for the profits on any stock sales of the company’s stock, during the 12-month period following the first issuance of the offending financial statements.   Although this provision has been used sparingly by the SEC, the recent settlement of SEC investigatory charges by Saba Software, in which executives who were not charged with any wrongdoing agreed to repay bonuses and stock profits, is a cautionary tale for CEOs and CFOs of publicly traded companies.  

    Saba Software became the subject of an SEC investigation and enforcement action arising out of an alleged scheme to overstate revenues by overbooking and pre-booking time statements of international consultants in order to meet pre-arranged time estimates.  As part of the settlement of the SEC charges in the fall of 2014, Saba was required to restate its financial records for the years 2009 through part of 2012.  In a contemporaneous settlement, Saba’s CEO agreed to reimburse the company for over $2.5 million in incentive and equity compensation and profits from stock sales earned following the issuance of the financial statements the company restated.  http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370543035992#.VOtSdC6LXfc.

  • | Jason M. Knott

    Silicon Valley is buzzing about the trial in Ellen Pao v. Kleiner Perkins Caufield and Byers LLP, which got underway on Tuesday.  According to USA Today, a UC-Berkeley professor says that you “can’t be within a stone’s throw of the Valley without hearing” about the case.

    The cast of characters (described here by the San Francisco Business Times) includes a number of heavy hitters, including Pao herself.  Pao, a graduate of Princeton, Harvard Law, and Harvard Business School, is now the CEO of Reddit.  Kleiner Perkins is a well-known venture capital firm in Menlo Park, a city that has been described as the “center of the venture capital universe.”

    Pao’s allegations are explosive.  She contends that she had a brief affair with a married junior partner who continued to harass her after she broke off their relationship.  Her claims about the firm go deeper than just this harassment; she contends that the firm had an overarching culture of discrimination against women, culminating in her dismissal in October 2012. 

  • | John J. Connolly

    An earlier generation of Baltimore lawyers used to say that the outcome of a case should not depend on which side of Calvert Street it was filed. This made sense when the federal court was on the east side of Calvert and the state court on the west. The statement was a colloquial expression of the Erie doctrine, which requires federal courts to apply state law when federal jurisdiction depends on diversity of the parties’ citizenship.

    The Erie doctrine requires federal judges to figure out how state judges would rule in certain matters. You might imagine a federal judge strolling across Calvert Street to ask for some advice. But that’s not how state and federal judges speak to one another (and not just because the federal court long ago moved to a dismal building on Lombard Street).

    Instead, federal judges read the published judicial decisions from the state whose law applies. Under Erie, federal judges are required to follow the holding of decisions from the state’s highest court. They are not required to follow “dicta” – statements in a judicial opinion that are not necessary to the outcome. In many cases, the state’s highest court has not ruled on the particular legal question at issue. In that event, the federal court must predict how the state court would rule based on other sources of state law. One of those sources is “considered dicta” (or well-reasoned dicta) from the decisions of the state’s highest court.

  • | Jason M. Knott

    The Sarbanes-Oxley Act’s whistleblower protection provision, 18 U.S.C. § 1514A, allows a wrongfully terminated whistleblower to recover “all relief necessary to make [her] whole.”  18 U.S.C. § 1514A(c)(1).  The statute then goes on to say that compensatory damages include reinstatement, back pay, and “special damages,” including expert fees and reasonable attorneys fees.  In an opinion issued this week, the Fourth Circuit held that Sarbanes-Oxley damages don’t just include these enumerated damages.  Rather, an employee can obtain other compensation for harm, including emotional distress damages.  Jones v. SouthPeak Interactive Corp. of Delaware, Nos. 13-2399, 14-1765 (4th Cir. Jan. 26, 2015).

    The plaintiff in the case, Andrea Gail Jones, was the former chief financial officer of SouthPeak, a video game manufacturer.  According to the opinion, in 2009, SouthPeak wanted to buy copies of a video game for distribution, but didn’t have the cash to buy the games up front.  Instead, SouthPeak’s chairman, Terry Phillips, personally fronted Nintendo over $300,000.  When SouthPeak didn’t record this debt, Jones raised a stink, eventually telling the company’s outside counsel that the company was committing fraud.  The same day, the company’s board fired her. 

  • | Jason M. Knott

    Last November, we covered the Supreme Court oral argument in the case of Department of Homeland Security v. MacLean.  As a refresher, MacLean was an air marshal who was fired by the Transportation Security Administration (TSA) after he blew the whistle to MSNBC on the agency’s plan to cancel marshal missions to Las Vegas.  After the argument, Prof. Steve Vladeck of American University predicted that the TSA would lose the case.

    He was right.  On Wednesday, the Supreme Court issued its opinion, in which it held in favor of MacLean.  The TSA argued that it could fire MacLean because his disclosures were “specifically prohibited by law” in two ways: first, it had adopted regulations on sensitive security information, which applied to the information MacLean disclosed; second, a provision of the U.S. Code had authorized TSA to adopt those regulations.  Chief Justice Roberts, writing for the Court, rejected both arguments. 

    As to the regulations, he wrote, Congress could have said that whistleblowers were not protected if their disclosures were “specifically prohibited by law, rule, or regulation,” but did not.  Thus, its choice to only use the word “law” appeared to be deliberate.  Further, interpreting the word “law” broadly “could defeat the purpose of the whistleblower statute,” because an agency could insulate itself from liability by promulgating a regulation that prohibited whistleblowing.  And as to the argument that Congress-passed “law” prohibited the disclosure, Chief Justice Roberts wrote that the statute in question did not prohibit MacLean’s disclosures.  Instead, it was the agency’s exercise of discretion, not the statute, that determined what disclosures were prohibited. 

  • | Jason M. Knott

    The hacking of Sony’s private data has been one of the biggest stories in the country over the past couple of months.  It won’t surprise anyone to learn that lawsuits have been filed over the breach.  Indeed, the plaintiffs in several class action lawsuits are seeking to consolidate their cases  into one massive Sony Data Breach Litigation case.

    So far, the plaintiffs in those cases haven’t alleged claims against individual Sony officers or directors.  This begs a couple of questions: is that something that plaintiffs do?  And what kinds of allegations can they bring?

    The answer is that a number of plaintiffs have brought claims against officers and directors who worked at companies that suffered data breaches.  Typically, they allege that the defendants did not properly manage the company’s cyber risks.

    For example, in February 2014, Kevin LaCroix of D&O Diary brought to our attention lawsuits that Target shareholders filed against the company’s officers and directors, arising from the massive theft of Target’s private customer information.  The shareholders alleged that the company’s executives and board knew how important the security of private customer information was, and failed to take reasonable steps to put controls in order to detect and prevent a breach.  Further, they alleged, the defendants exacerbated the damage by publicly minimizing the breach.

  • | Conor B. O'Croinin

    As an executive, there is a strong likelihood that at some point in your career, you will be asked to make a campaign contribution—especially if you work in an area with a close affiliation with government. The rules are complex, and there is wide variation among federal and state rules. In addition, those differing rules are constantly in flux. For instance, the Maryland General Assembly has made several changes to Maryland campaign finance law that took effect on January 1, 2015, the start of the State’s new four-year election cycle.

    First, the Maryland legislature raised the individual contribution limit from $4,000 to $6,000. (The legislature also raised the so-called “aggregate limit” on all contributions from $10,000 to $24,000. But as a result of the Supreme Court’s intervening decision in McCutcheon v. FEC, Maryland’s aggregate contribution limit was unconstitutional and therefore unenforceable even before the change took effect.)

    Second, the legislature addressed a peculiar aspect of pre-2015 Maryland campaign finance law. Under Maryland law, unlike federal law, corporations may make campaign contributions. But if a corporation is a wholly-owned subsidiary of another corporation, contributions from these entities are considered to be made by a single contributor. Likewise, if multiple corporations are owned by the same stockholder, they are deemed to be a single contributor. We’ll call this the corporate attribution rule.

  • | Jason M. Knott

    In our last post, we counted down our most popular posts of 2014, from A-Rod to Walgreen.  Now it’s time to take a look at the issues in executive disputes that are likely to draw plenty of attention in 2015.

    1.            Dodd-Frank Bounties and Whistleblower Litigation on the Rise

    In November 2014, the SEC released its annual report on its Dodd-Frank whistleblower award program.  The theme of the report is that Dodd-Frank is paying off – both for the SEC and for whistleblowing employees.  The SEC reported that it issued whistleblower awards to more people in its 2014 fiscal year than in all previous years combined, including a $30 million bounty to one whistleblower in a foreign country.  The number of whistleblower tips received continues to increase, and we expect news of more substantial awards in 2015.  Meanwhile, litigation over various Dodd-Frank issues, such as whether a whistleblower claim is subject to arbitration, whether the shield against whistleblower retaliation applies overseas, and whether a whistleblower must report to the SEC in order to bring a retaliation claim, will continue to percolate in the federal courts.

    2.            The Supreme Court Weighs in on Employment Issues

    A couple of key Supreme Court cases will address employee rights that apply across the board, from the C-suite to the assembly line.  In Young v. United Parcel Service, the Court will decide whether, and in what circumstances, the Pregnancy Discrimination Act requires an employer that accommodates non-pregnant employees with work limitations to accommodate pregnant employees who have similar limitations.  And in EEOC v. Abercrombie & Fitch Stores, Inc., the Court will address whether an employer can be liable under the Civil Rights Act for refusing to hire an employee based on religion only if the employer actually knew that a religious accommodation was required based on knowledge received directly from the job applicant.

  • | Jason M. Knott

    Who doesn’t love the year-end countdown?  We’re here to offer you one of our own – our most-read posts in 2014 about executive disputes.  The posts run the gamut from A (Alex Rodriguez) to Z, or at least to W (Walgreen).  They cover subjects from sanctified (Buddhists and the Bible) to sultry (pornographic materials found in an executive’s email).  Later this week, we’ll bring you a look at what to expect in 2015.

    Without further ado, let the countdown begin!

    8.            The Basics: Dodd-Frank v. Sarbanes-Oxley

    This post is an oldie but a goodie.  It includes a handy PDF chart that breaks down the differences in the Dodd-Frank and Sarbanes-Oxley whistleblower laws.  Each of these laws continues to be a hot-button issue for plaintiffs and employers.

    7.            When Employment Relationships Break Bad

    America may have bidden adieu to Walter White and his pals on Breaking Bad, but employment relationships continue to spin off in some very unpleasant ways.  Such was the case with Stephen Marty Ward, who ended up in federal prison after he threatened his employer with disclosure of its trade secrets, as we covered in this post.

  • |

    A D&O liability policy protects key individuals in a corporate structure.  These individuals are likely targets for shareholder frustration if an entity is underperforming or suffering from other troubles.  In addition, they may be exposed to personal scrutiny from regulators if the corporation is investigated for any wrongdoing.  As previously discussed in this space, an insurance policy can provide more reliable protection for the indemnification rights of the officers and directors in times of financial distress because corporations plagued by regulatory or other legal problems frequently suffer financial setbacks.  However, when a bankruptcy results from the financial troubles, not all insurance policies offer the same protection for the payment of fees and expenses for its directors and officers. 

    Under section 541 of the Bankruptcy Code, a debtor’s liability insurance policy is the property of a bankruptcy estate and is subject to the jurisdiction of the Bankruptcy Court, including the automatic stay.  There is considerable disagreement among the courts over whether the proceeds of the policy are also property of the estate.  The actual determination of whether the proceeds are property of the estate is made on a case by case basis and is controlled by the express language and scope of the policy. 

    When the D&O policy only provides direct coverage to the debtor, there is little doubt that the proceeds are part of the debtor’s estate and are to be administered by the Bankruptcy Court for the benefit of all creditors.  Similarly, when the policies only provide direct coverage to the individuals for their indemnification claims courts generally hold that the bankruptcy estate has no interest in the proceeds.  However, when the policy provides direct coverage to both the debtor and the directors and officers, the proceeds will be property of the estate if depletion of the proceeds would have an adverse effect on the estate.  Depletion of the proceeds will be construed to have an adverse effect on the estate if the policy proceeds actually protect the estate’s other assets from diminution. 

  • |

    Corporate directors and officers may think indemnification provisions are sufficient to protect them from claims asserted against them by shareholders or regulators.  However, if a director or officer chooses to rely solely on indemnification in bylaws or contracts, and ignores the availability of directors & officers (“D&O”) liability insurance, he or she could be making a significant mistake.  In particular, a D&O policy can offer these individuals more reliable protection in times of financial distress.  When corporations are plagued by regulatory or other legal problems, they may also suffer from financial setbacks, eventually leading to bankruptcy proceedings. The manner in which a bankrupt corporation has provided for the payment of fees and expenses for its directors and officers may be critical to the individuals affected. 

    Under section 502(e) of the Bankruptcy Code, a claim for indemnification is subordinated to the class of claims in which the underlying claim is placed.  This means that, to the extent that the directors and officers are jointly liable with the corporation to a third party on an adverse claim, they will not receive any distribution on their resulting indemnification claim unless, and until, all of the claims of the class in which the underlying obligation is placed have been paid in full.  This provision is intended to provide for equality of distributions in favor of all similarly situated creditors: if the underlying claim receives payments from both the corporation and the director and officer defendants and then the defendants receive payment on account of any contributions they made on the claim, that claim will have received a higher rate of distribution at the expense of other creditors.

  • | O'Neill, Ashley

    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.”

  • | Jason M. Knott

    Helen of Troy isn’t just a famous mythological beauty.  It’s also a publicly-traded maker of personal care products.  And now, it and its directors are defendants in a suit by Helen of Troy’s founder, Gerald “Jerry” Rubin.

    Executives who bring suit against their former employers frequently want to show that they were terminated for reasons other than performance, and Rubin is no different.  In his complaint, as reported by El Paso Inc., Rubin describes the history of Helen of Troy and its staggering growth.  From humble origins – a “wig shop in El Paso, Texas” – Helen of Troy grew into a “global consumer products behemoth, generating revenues in excess of approximately 1.3 billion dollars.”  And then the roof caved in.  Rather than “celebrating [Rubin’s] extraordinary success,” Rubin alleges, Helen of Troy’s directors turned on him in order to save their own skins, and eventually forced him out of the company.

    Why did the directors need to sacrifice Rubin to save their positions?  According to Rubin, the answer lies with an entity called Institutional Shareholder Services (“ISS”).  ISS is a proxy advisory firm that conducts analysis of corporate governance issues and advises shareholders on how to vote.  Because shareholders often follow ISS’s recommendations, it can have substantial influence over the affairs of publicly-traded companies.  Indeed, some participants in a recent SEC roundtable suggested that ISS could have “outsized influence on shareholder voting,” or even that it has the power of a “$4 trillion voter” because institutional investors rely on it to decide how to vote.

    Rubin alleges that if ISS decides a CEO is making too much money, it will demand that the compensation be cut or that the CEO be fired.  If its demand isn’t followed, it will “engineer the removal of the board members through [a] negative vote recommendation.”  Board members then will cave to ISS’s wishes to preserve their own positions.

    Rubin claims that this is what happened in his case.

  • | Jason M. Knott

    It's no secret on this blog that when   employment relationships go sour,   criminal charges can be one potential     result.  Now we have another example, by way of the recent indictment of Arturas Samoilovas.  

    According to the indictment, filed in Ohio federal district court, Samoilovas worked as a contract employee for Eaton Corporation as a financial analyst.  In April 2014, he applied for several full-time positions, but was told that he didn’t get the jobs.  Unhappy about the rejections, Samoilovas “accessed the Eaton Corporation’s computer system,” inserting “certain malicious computer codes … into six … financial spreadsheets.”  If executed, these codes would have resulted in deleted files.  In other words, they were malware

  • | Jason M. Knott

    On Monday, AutoZone found itself on the wrong end of a $185 million verdict in favor of a former store manager, Rosario Juarez.  Yes, you read that right.  $185 million.  This stunning verdict appears to have been the result of Juarez’s allegations of discrimination and retaliatory discharge, combined with an insider turned witness who provided extremely damaging testimony against the auto parts retailer.

    In her complaint, Juarez alleged that AutoZone had a “glass ceiling” for women employees, which it kept in place through a hidden promotion process where open positions were not posted.  According to Juarez, she succeeded in cracking the glass ceiling, securing a store manager position, but when she became pregnant, she was treated differently by her district manager.  After giving birth, she complained about the unfair treatment and was soon demoted by the manager, who told her that she could not be a mother and handle her job.  Later, she was terminated as the result of a loss prevention inquiry, in which she refused to participate in a “Q&A” statement about a theft at the store.  Juarez alleged that the loss prevention department’s request for a statement was a pretext to fire her. 

    We’ve spent a lot of time on this blog discussing allegations of pregnancy discrimination like these (see, for example, here, here and here).  The short of it is that a company can’t treat pregnant women, or women who have  given birth, differently than it treats other employees.  But we’ve never covered a verdict for pregnancy discrimination that looked more like a Powerball win than a litigation result.

  • | O'Neill, Ashley

    If you find yourself in the digital dating scene (or the market for highly-valued start-ups for that matter), you are probably familiar with Tinder, the dating app that allows users to identify potential dates with an easy swipe of a finger on a smartphone.  Last July, Whitney Wolfe, Tinder’s former VP of marketing, sued the company, alleging that she was sexually harassed by Tinder’s fellow co-founders, CMO Justin Mateen and CEO Sean Rad. The suit primarily focused on the ugly breakup between Mateen and Wolfe, and Mateen ultimately resigned in September, after Wolfe’s suit revealed his “private messages to [her] containing inappropriate content.”  Now, the aftershocks of Wolfe’s suit have spread to impact Rad’s employment as well.  As discussed in this lengthy Forbes piece, the company’s majority owner, IAC (InterActivCorp), decided to oust Rad as CEO early this month, in part due to his involvement in the Wolfe-Mateen brouhaha.   IAC says it still wants Rad to stay involved and focus on Tinder’s business, so for now, it’s not undoing the “match” between Rad and the company he founded.

    Consumers of taxi and black car services have witnessed a sea change in options over the past few years. Thanks to internet-based car-summoning applications, customers are empowered with a range of efficient, cost-conscious alternatives to standing on the corner, arms waving, eyeing every yellow vehicle that approaches.  Now, Lyft, one of the leading entrants into this new market, is squabbling in court with an employee who left it to join the other market leader, Uber.  According to Courthouse News Service, Lyft recently sued its former COO, Travis VanderZanden, alleging that he breached his employment contract when he left the company to become Uber’s new VP of international growth.  Lyft says that VanderZanden stole 98,000 pages of confidential financial projections and forecasts, business strategies, marketing plans, and international growth documents. It also accuses VanderZanden of soliciting Lyft’s employees to join Uber, including Lyft’s former VP of operations. Meanwhile, just this week, Uber is rumored to be in talks with investors to raise significant capital toward international expansion. It seems obvious that Uber is focusing on growing its international market share, and perhaps time will tell if Lyft can prove a misappropriation of its own confidential international strategy.

  • | Sara Alpert Lawson

    Recently, in a government investigation by the civil division of a United States Attorney’s Office, an employee of a private company was deposed pursuant to a Civil Investigative Demand (CID).  The employee, on the advice of counsel, refused to answer questions on certain topics and invoked the Fifth Amendment right against compulsory self-incrimination (she “took the Fifth” in common shorthand).  Several days later, she was fired by her employer for taking the Fifth.  (The employer claimed that it wanted to show cooperation with the government’s investigation and taking the Fifth is viewed as being non-cooperative.)  When I recounted this story to my non-lawyer fiancée, he was outraged and wondered how could her employer do such a thing? Wasn’t this retaliation? Didn’t she have a clear wrongful termination claim against her employer? Good questions. While most, if not all, states (and the federal government) have enacted provisions to protect employees who blow the whistle on illegal activity from retaliatory discharge, is there any protection from discharge for an  employee of a private company who chooses to keep mum to protect herself?

    The short answer is no.

    In our Bill of Rights, No. 5, it is written that “[n]o person … shall be compelled in any criminal case to be a witness against himself.” Although the text limits the right to stay silent in a criminal case, it is generally accepted that a witness may assert the right in any context in which the witness fears his/her statements may later be used against him/her. Thus, as an American I have the right to refuse to answer questions or offer information which I fear could incriminate me. [A full discussion of the scope of Fifth Amendment protection is beyond the scope of this post.  To learn more about the Fifth Amendment protections against self-incrimination, I refer the reader to The Privilege of Silence, authored by my fellow Zuckerman Spaeder attorneys Steven M. Salky and Paul B. Hynes and available here.]

  • | Jason M. Knott

    A whistleblower generally shouldn’t break the law in order to prove his claims.  Indeed, the Whistleblowers Protection Blog says that this is a “basic rule,” and cautions that an employee who breaks the law while whistleblowing in order to get evidence will suffer from attacks on his credibility and may even be referred for criminal prosecution.  However, the parameters of this rule aren’t always so easy to follow, as the Supreme Court heard last week in the case of Department of Homeland Security v. MacLean

    The MacLean case arose from a warning and text message.  In July 2003, the Transportation Security Administration (TSA) warned MacLean, a former air marshal, and his colleagues about a potential plot to hijack U.S. airliners.  Soon after, however, the TSA sent the marshals an unencrypted text message, canceling all missions on overnight flights from Las Vegas.  MacLean was concerned about this reduction in security, and eventually told MSNBC about it.  The TSA then issued an order stating that the text message was sensitive security information (SSI).  When it found out that MacLean was the one who disclosed the message to MSNBC, it fired him. 

    MacLean didn’t take this while reclining; he challenged his dismissal before the Merit Systems Protection Board.  But he lost.  The Board decided that TSA didn’t violate the federal Whistleblower Protection Act by firing MacLean for his disclosure, because MacLean’s disclosure violated a TSA regulation that prohibited employees from publicly disclosing SSI.       

  • | 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.

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.

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Jason M. Knott
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