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:
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.
Non-lawyers often wonder why folks in our profession spend so much time and money poring over the documents and e-mails each side usually has to produce in litigation. Sometimes, these document reviews are the legal equivalent of looking for the proverbial needle in a haystack.
And sometimes, you find the proverbial needle – or needles. And when you do, and the success or failure of the case turns on that e-mail, or set of e-mails, then the time and money spent on the search for those things turns out to have been a wise and necessary investment.
Take the case of TBA Global, LLC v. Proscenium Events, LLC. TBA is an event planning company that “produces live event programs and marketing presentations for companies and branded products.” In the course of its work, it hired three senior employees – Santoro, Shearon, and Cavanaugh. While the exact terms of their agreements differ from each other, all three signed non-compete agreements with TBA that provided that if they ever left the company, they would not “directly or indirectly, communicate with clients or prospective clients” of the company for a period of time (one year for two of the executives, and two years for the other).
Picture an employee who finds himself in legal trouble or has a dispute with his employer, and hires a personal attorney to work through the issue. The employee might think that his communications with his attorneys are privileged and immune from discovery in litigation. But what if the employee uses his work computer to store those communications, and then hands over his computer to his employer upon resignation? How does that affect the privilege?
A recent ruling from Judge Gardephe of the U.S. Southern District of New York answers this question in a way that employees in this situation won’t like. The ruling involves the ongoing trial of Mathew Martoma of SAC Capital Advisors for alleged insider trading. (For press coverage of the trial, see CNN and the New York Times.) A key witness against Martoma will be Sidney Gilman, a former professor at the University of Michigan who says that he provided tips to Martoma about a failing drug trial. In advance of trial, Martoma’s lawyers asked the court to order Gilman to produce his attorneys’ work product. They argued that Gilman had knowingly waived any privilege over that work product because it was stored on hard drives that Gilman returned to the University when he resigned.
The court sided with Martoma and against Gilman and the U.S. government, which joined Gilman in arguing against disclosure. Judge Gardephe ruled that at the time Gilman returned his hard drives, he was in an “adversarial posture” with the University because it had announced that it was investigating his activities. By “returning electronic devices” to his adversary that “contained alleged work product material, Dr. Gilman waived whatever work product protection might otherwise exist with respect to the materials stored on these devices.” Gilman argued that his disclosure was involuntary because he was pressured to return the devices or lose his pension benefits. But Judge Gardephe disagreed, writing that “pressure is not sufficient to demonstrate that production is involuntary.” Rather, production through “compulsory legal process” is required in order to show that a disclosure was involuntary and not a waiver.
Here's a tip that applies when you're negotiating any contract, although in this case we learn it from a negotiation over a severance contract: it's a rather bad idea to make a material change - like, perhaps, increasing the severance payment from 14 weeks of pay to 104 weeks - and then have the other side sign it, without telling them you inserted that change in their draft.
That tip comes from the Sixth Circuit's decision last week in St. Louis Produce Market v. Hughes. Two other helpful tips come from this case. One, for executives seeking to claim under a severance agreement, is to return any of the company's property if it's a condition precedent to obtaining your severance benefit. The other, for those people and their lawyers, is to not willfully disobey the court's discovery orders if you're litigating over the severance agreement.
Via Law360 (subscription required), we learn of this interesting ruling from a California court, limiting Home Depot’s discovery requests seeking a former employee’s Facebook and LinkedIn posts. The court held Home Depot is only entitled to certain social media posts between the employee and other Home Depot employees, not posts with other people or that go to the former employee’s state of mind. Social media raise many unique and interesting challenges for employment relationships -- we’ve dug deeper into these issues here, here, here, and here.
Those of us who write for Suits-by-Suits have had some contentious depositions (where a witness is asked questions in a pre-trial proceeding) in our day, but nothing like this one reported in the American Lawyer. Two Manhattan lawyers were arguing at a deposition when one allegedly “accidently” spit on the other, and the spittee-lawyer then slapped the alleged spitter-lawyer. Of course, one of them sued the other for slander and assault, seeking $1 million. A New York judge has now dismissed the case.
Litigation as a way to settle disputes between companies and executives may at times get hot enough to boil away spit, but it sure beats at least one of the other alternatives. From our “How Not To Settle Executive Disputes” department, the lead sentence in this Courthouse News story says it all: “A disgruntled former partner in a law firm fire-bombed his former partners' house, the husband-and-wife legal managers claim in court.”
Here's a roundup of this week's news involving suits by suits:
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.