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. 

• Arbitration
• Civil Litigation
• Discrimination
• Wrongful Termination

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. 

• Civil Litigation
• Sarbanes-Oxley Act
• Whistleblowers
• Wrongful Termination

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.”

• Discrimination
• Noncompete Agreements ‎
• Religious Discrimination‎
• The Inbox
• White Collar Crime
• Wrongful Termination

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.  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.

• Civil Litigation
• Discrimination
• Pregnancy Discrimination
• Wrongful Termination

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.]

• Fifth Amendment
• Whistleblowers
• White Collar Crime
• Wrongful Termination

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.

• Civil Litigation
• Discovery
• Releases
• Severance Agreements
• Wage and Hour‎
• Wrongful Termination

Last week, American Apparel announced that its board had decided to terminate Dov Charney, the company’s founder, CEO, and Chairman, “for cause.”  (We’ve discussed the meaning of terminations “for cause” in prior posts here and here.)  The board also immediately suspended Charney from his positions with the company.  Although the board didn’t initially disclose the reasons for its action, Charney is not new to controversy; in recent years, he has faced allegations of sexual harassment and assault.

The reasons for Charney’s termination have now become public, and they aren’t pretty.  In its termination letter, available here, the board accuses Charney of putting the company at significant litigation risk.  It complains that he sexually harassed employees and allowed another employee to post false information online about a former employee, which led to a substantial lawsuit.  The board also says that Charney misused corporate assets for “personal, non-business reasons,” including making severance payments to protect himself from personal liability.  According to the board, Charney’s behavior has harmed the company’s “business reputation,” scaring away potential financing sources.

• Age Discrimination
• Breach of Contract
• Civil Litigation
• Executive Compensation
• Indemnification and Advancement
• Releases
• Severance Agreements
• Termination With or Without Cause
• Wrongful Termination

Let me explain what that means: “vouching” is, for us members of the bar, both a technical term and a no-no.  When it’s done at the trial of an executive employment dispute, it can unfairly prejudice the jury – and, ultimately, the “vouched-for” side can have its victory overturned by an appellate court.   We’ll see how this happened in the case of one Mindy Gilster. 

But first, more on “vouching.”  In law, it means essentially what non-lawyers think it means: to give a personal assurance of the credibility or truth of something.  All of us use this in our daily lives: “I know you’ll love that restaurant;” “trust me, you’re making the right decision;” and so on.  Lawyers, though, can’t “vouch” for their clients or for a witnesses’ credibility.  Not only is it considered a bad practice, but the Rules of Professional Conduct in most states forbid us from “assert[ing] personal knowledge of facts in issue…or stat[ing] a personal opinion as to the justness of a cause, the credibility of a witness, [or] the culpability of a civil litigant…”  Put another way, lawyers need to build arguments from the facts that are actually entered into evidence, and not on what they personally think the facts should be. Vouching comes up most often in criminal cases – but, as in the case of our subject today, it can surface in civil litigation over employment disputes.

• Wrongful Termination

Jerry Kowal doesn’t have a lot of nice things to say about his former employer, Netflix.  In a recent lawsuit filed in California Superior Court, he claims that Netflix was a “cold and hostile company,” with a “cutthroat environment.”

According to Courthouse News’s description of Kowal’s complaint, Netflix didn’t have very nice things to say about Kowal, its former content acquisition executive, either.  Kowal alleges that when he told Netflix he was leaving for Amazon, Netflix lashed out by accusing him of stealing confidential information and passing it on to Amazon.  As a result of these accusations and Amazon’s “strict liability policy,” he was fired.

Now, Kowal has sued Netflix, its CEO Reed Hastings, executive Ted Sarandos, and Amazon, alleging a number of torts including defamation, false light invasion of privacy, civil conspiracy, intentional interference with employment relationship, blacklisting and wrongful termination.  Kowal’s suit shows that an employer’s decision to accuse a departed employee of wrongdoing carries with it a significant litigation risk, especially if the employee loses his job as a result of the accusation.

• Civil Litigation
• Confidentiality
• Defamation
• Wrongful Termination

We see – and report on – plenty of whistleblower complaints here at Suits-by-Suits. We’re mostly interested in how those complaints play out legally, and what they can teach us about ways to avoid, or manage, whistleblower disputes and what leads to them.  But outside of the law, some complaints include alleged facts that just tell a compelling story in and of themselves. 

How about these allegations in Glenn Meeks’ wrongful termination complaint against Chicago State University: Financial mismanagement, a romantic relationship between top university executives, high-level posts filled with unqualified personnel, intrigue on the university’s board of trustees after Meeks complained of these things, and – a bonus, from a storytelling perspective – a suspicion of improper interference by the Governor of Illinois in the whole thing. 

And another bonus: Meeks filed his complaint in Illinois state court just two weeks after another whistleblower at the same university was awarded $2.5 million.   

• Whistleblowers
• Wrongful Termination