Show posts for: Executive Compensation

  • No, this headline is not a pun about the closed on-ramps to the George Washington Bridge.  Rather, it’s meant to acknowledge that as the New Year gets into full swing, folks are starting to ramp up their analysis of ongoing issues in disputes that involve executives and their employers.  We’ve seen a number of interesting stories and summaries cross our desk:

    • Ben James of Law360 published a thorough recap of the lingering questions about Dodd-Frank’s whistleblower protections.  We’ve got one more question: will the Supreme Court’s upcoming decision in Lawson v. FMR LLC (we covered the oral argument here) affect a whistleblower’s choice between initially pursuing a Dodd-Frank claim in federal court, or filing a Sarbanes-Oxley claim with the Department of Labor?  Right now, some courts are putting a narrow construction on who can sue under Dodd-Frank, so if the Lawson Court takes an expansive view of Sarbanes-Oxley, it may give new life to that statute as an appealing option for whistleblowers.
    • What’s not ramping up: romance in the home of the new president of Alabama State University.  Debra Cassins Weiss of ABA Journal reports that Gwendolyn Boyd, who is single, will not be allowed to “cohabit with a romantic partner in the university residence so long as she is single,” according to her employment contract.  Boyd says she has “no issue” with the provision.  Sorry, suitors.  (Which, by the way, would be a good name for our group of loyal readers.)
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  • In May, iGate sacked its CEO Phaneesh Murthy, claiming that the Board decided to do so after its outside legal counsel found that Mr. Murthy’s failure to report his relationship with a subordinate employee violated iGate’s policy.  Outside counsel made that finding as part of their investigation of the relationship and the employee’s claim of sexual harassment.  (For spicier accounts of the office affair check out the news stories from the time – like this one.)  Last week, Mr. Murthy sued iGate in California state court claiming that his termination was not with cause and that he is therefore entitled under his employment agreement and company stock plans to compensation and benefits that the company has refused to pay.

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  • Weather gurus are predicting snow, sleet, and rain for our area over the weekend.  Although my kids are hoping for the white fluffy stuff, this amateur prognosticator is predicting a downpour.  In keeping with this theme, the week’s biggest employment news is Robinson Cano’s $240 million deal with the Seattle Mariners (who are well accustomed to rainy skies).  But our sights here at Suits by Suits are on matters a little less lucrative:

    • You still have a chance to win free admission to our Dec. 10 webinar, “Whistleblower Watch: Big Issues in the Latest Whistleblower Cases Under Dodd-Frank, Sarbanes-Oxley, and the Internal Revenue Code.”  For more details on this prize, click here.
    • The First Circuit affirmed a summary judgment ruling in favor of Strine Printing Company against a former sales representative who claimed that his firing resulted in an “oleaginous mass of perceived wrongs.”  The decision addresses a number of employment-related claims, including unjust enrichment, breach of an implied or express employment contract, and misrepresentation.
    • We’ve previously covered the exploits of Larry Conners.  Despite his year-long non-compete agreement, the St. Louis newsman is headed back to TV – as a pitchman.  He’ll be a spokesman for John Beal Roofing.
    • Jeff Green of Bloomberg Businessweek brought us the latest trend in executive hiring – the “golden hello.”  These are multi-million dollar signing bonuses designed to entice new candidates to join the team.  Among them: the $45 million that Zynga paid to entice an industry vet, Don Mattrick.  Some are skeptical of the arrangements, noting that they don’t correlate with successful performance.
    • A Louisiana appellate court has affirmed the dismissal of a lawsuit by former professors at Louisiana College, writes Charles Huckabee of the Chronicle of Higher Education.  The professors claimed that they should have been able to use certain books in teaching classes on religion and values, which were prohibited by the college’s administration.  The court refused to intervene on the ground that it was a religious dispute not proper for court involvement.
    • Dominic Patton of Deadline Hollywood covered Jeff Kwatinetz’s suit against Prospect Park.  The producer and talent manager wants a Los Angeles Superior Court judge to decide whether a noncompete provision in his agreement with Prospect Park can permissibly bar him from competing for five years.   
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  • Twitter’s founders are cashing in on Wall Street, and journalists are piggybacking on the news with articles like this one, which recaps 10 “surprising superstars” of the social network.  No, Suits by Suits didn’t make the cut, but you can still follow us at @suitsbysuits, where we’ll bring you 140-word tweets about news related to executive-employer disputes.  These are the kinds of stories we track:

    • The Texas Supreme Court heard argument this week in Exxon Mobil’s dispute with former executive William Drennen.  Jeremy Heallen of Law360 (subscription required), wrote that after Drennen retired from Exxon (@exxonmobil) and went to work for competitor Hess, Exxon claimed that he had forfeited his restricted stock under a “detrimental-activity provision” in his incentive plan.  Exxon is seeking reversal of the lower court’s holding that the forfeiture violated Texas law, which disfavors “unreasonable” noncompetition agreements.
    • AIG has settled a $274 million dispute with former real estate executive Kevin Fitzpatrick, reported (@nateraymond) Nate Raymond of Reuters.  The terms are confidential, but Fitzpatrick’s lawyer says that he is “very happy.”  Given the potential dollar amounts between $0 and $274 million, it’s easy to guess why.
    • Rachel Louise Ensign of the Wall Street Journal (@RachelEnsignWSJ) (subscription required) covered a developing trend this week: more whistleblowers are coming from corporate compliance departments.  As one example, Ensign described Meng-Lin Liu’s case against Siemens AG, which we covered here.  The possibility of lucrative awards under the Dodd-Frank Act’s whistleblower program may be sparking the trend, although as Ensign points out, compliance officers are subject to additional restrictions under that program.
    • In other whistleblower news, the Senate approved a bill to prohibit companies from retaliating against whistleblowers who report violations of the antitrust laws.  Jennifer Koons of Main Justice (@jenkoons) said that the bill passed with bipartisan support.  “Bipartisan” – does anyone still remember that concept?
    • Newscaster Larry Conners is still trying to get back on television, despite a prior ruling that his noncompete agreement prohibited him from working for other TV stations in the St. Louis market for a year.  Conners’s attorney asked the judge to modify that ruling, which restricted Conners to radio work, wrote (@STLSherpa) Joe Holloman of the St. Louis Times-Dispatch.  We’ve previously examined Conners’s case here and here.
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  • The Inbox

    | Jason M. Knott

    The federal government is closed, but the Suits by Suits news continues to roll in:

    • Johnson & Johnson shareholders are amending their derivative suit against the company and its directors, alleging that the company didn’t act properly when it decided that the lawsuit was not in J&J’s best interest.  According to Joshua Alston of Law360 (subscription required), the shareholders argue that an investigation conducted by K&L Gates was a whitewash and that former CEO Bill Weldon shouldn’t have been paid $175 million over a six-year period.  On the bright side, Weldon may have had a better tenure than the similarly well-compensated Alex Rodriguez.
    • In more J&J news, subsidiary DePuy Synthes sued three of its former sales reps and their new company, Globus Medical, Inc., for allegedly violating noncompete agreements.  Brad Perriello of Mass Device described the allegations, which accuse Globus of recruiting the reps “in an effort to rapidly build its own business . . . by appropriating and capitalizing on the goodwill, customer relationships, and confidential information that DePuy Synthes necessarily entrusts to its sales employees.” 
    • It’s not hard to translate how Rosetta Stone wants this forum dispute to come out.  Carolina Bolado of Law360 (again, subscription required) reports that competitor Open English sued the company, along with several new hires, in Florida for allegedly breaching noncompete agreements.  Rosetta filed a lawsuit in the employees’ home state of California seeking a declaration that the agreements weren’t violated, and has now asked the Florida judge to dismiss in favor of that lawsuit.  Open English, meanwhile, argues that it won the race to the courthouse and is entitled to take its legal talents to South Beach.
    • Big whistleblower news last week, as the SEC announced an award of $14 million to a whistleblower under its Dodd-Frank bounty program.  Further details were not forthcoming, as the law protects recipients of bounties from having their identities revealed.  Given all the press about miserable lottery winners, this could be a very good thing for them.
    • A Virginia sheriff’s deputy is suing his former boss, claiming that he was fired after he reported that another officer slapped an inmate at the county jail.  Rhonda Simmons of the Culpeper Star-Exponent writes that the deputy, who is pursuing a wrongful termination claim, was rehired after the sheriff who fired him was voted out of office.
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  • The ongoing court drama between Marsh Supermarkets and Don Marsh, its former CEO, has taken another twist.  As we previously covered here, in February of this year, a jury in the U.S. District Court for the Southern District of Indiana found that Marsh, the son of the company's founder, defrauded the supermarket chain and breached his employment agreement by misusing company assets to pay for personal expenses.  It awarded Marsh Supermarkets $2,200,000 in damages.

    Now, however, that damages award has effectively been zeroed out by the district court judge, who has found that Don Marsh is entitled to $2.1 million plus attorneys’ fees from the company based on a separate provision in his employment contract.  Order, Marsh Supermarkets, Inc. v. Marsh, No. 09-cv-00458 (S.D. Ind. Jul. 29, 2013).  The court accepted Marsh’s argument that the provision entitled him to payment come “hell or high water” – or fraud.

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  • Here in the Baltimore-Washington area, we’re trapped under a dome - a heat dome.  Like the inside of my car on these 100-degree days, disputes involving executives are also heating up, as the latest in Suits by Suits news shows:

    • We’ve covered again and again the fact that district courts are broadly interpreting the Dodd-Frank whistleblower retaliation provision to include employees who don’t report misconduct to the SEC.  The Fifth Circuit has now bucked that trend, in Asadi v. GE Energy (USA) LLC.  We’ll cover this important development in depth next week.
    • In close-to-home news, St. John Barned-Smith of the Montgomery Gazette writes that a Montgomery County, Maryland judge denied the Landon School’s request for summary judgment on a wrongful termination claim brought by its former chief operating officer.  Timothy Harrison contends that Landon’s headmaster ignored his reports that supervisors were discriminating against Hispanic employees.  According to the article, Harrison also complained about the headmaster’s annual $800,000 salary.  (Thanks in advance for finishing this blog post instead of dropping everything and applying for headmaster jobs.)
    • Viacom convinced Judge Sue Robinson of the U.S. District Court for the District of Delaware to throw out a shareholder lawsuit alleging that company directors improperly awarded tax-deductible bonuses.  The July 16 opinion in Freedman v. Redstone, Civ. No. 12-1052-SLR, is here.  But what Delaware giveth, it also taketh away: Viacom suffered a $300 million loss in the Delaware Supreme Court this week in a different shareholder dispute.
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  • BBC’S Severance Pay Does It No Favours In Eyes Of Britain

    | Zuckerman Spaeder Team

    This week, we celebrate the Declaration of Independence – the document that set out the principles on which the United States claimed its independence from Great Britain.  Since then, while we’ve crafted a “special relationship” with our former colonial master, we’ve gone our own way in some particulars – such as getting rid of extra vowels in some of our words and changing some spellings, and driving on the right.  

    One way in which our two nations are similar, however, is that severance pay that is perceived as excessive can stir public controversy. 

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  • You’re gonna be interested in this week’s Suits by Suits news – I guarantee it:

    • Wednesday’s controversial dismissal of George Zimmer, Men’s Wearhouse pitchman and founder, sent reporters into a tizzy as they competed to come up with the best lead.  Tiffany Hsu of the LA Times is the early leader in the clubhouse, starting her article with “The one thing George Zimmer couldn't guarantee was his job at Men's Wearhouse.”  Other candidates: Gary Strauss of USA Today (“Men's Wearhouse no longer likes the way George Zimmer looks.”) and  Michael Smith of the Deseret News (“He's not going to like the way this looks. I guarantee it.”).
    • The Harvard Law School Forum on Corporate Governance and Financial Regulation offered this interesting take on whether attorneys can be Dodd-Frank whistleblowers, from Lawrence West of Latham & Watkins.  The main point: the SEC accepts that attorneys can blow the whistle and disclose client confidences in some limited circumstances, although state ethics rules about maintaining those confidences also will come into play.
    • Joe Davidson of the Washington Post covered the whistleblower implications of Edward Snowden’s disclosures about NSA surveillance programs.  Davidson explained that national security contractors are missing the protections and normal reporting channels that are present for most federal employees who want to blow the whistle on waste, fraud, and abuse.  Of course, even those channels don’t permit a whistleblower to take classified info to the press, wrote Pete Williams of NBC News.
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  • American Airlines’ CEO, Tom Horton, moved one step closer to receiving the $20 million severance payment he’s negotiated with the bankrupt airline.  On Tuesday, the bankruptcy judge hearing American’s case allowed the payment to stay in the airline’s disclosure statement (approval of the statement is a predicate step to ultimately “reorganizing” and exiting bankruptcy).  The approval comes over strenuous objections by the U. S. Trustee, who argued that Horton’s payment violated bankruptcy law.  The judge’s decision isn’t final, and the issue can be revisited down the road, but the fact that it stayed in the disclosure statement (and will be presented to the airlines’ creditors for approval) is one more hurdle cleared for Horton. 

    We’ve written about this payment here, here, and here.  And, no, we don’t write about it so much because we’re jealous of the substantial payment Horton may receive; it’s what this case says about severance and golden parachutes generally.  Although the lifetime of free travel he and his wife would also receive under his severance agreement is, frankly, kind of cool.  

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As the regulatory and business environments in which our clients operate grow increasingly complex, we identify and offer perspectives on significant legal developments affecting businesses, organizations, and individuals. Each post aims to address timely issues and trends by evaluating impactful decisions, sharing observations of key enforcement changes, or distilling best practices drawn from experience. InsightZS also features personal interest pieces about the impact of our legal work in our communities and about associate life at Zuckerman Spaeder.

Information provided on InsightZS should not be considered legal advice and expressed views are those of the authors alone. Readers should seek specific legal guidance before acting in any particular circumstance.

Contributing Editors
John J. Connolly

John J. Connolly
Partner
Email | +1 410.949.1149


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Andrew N. Goldfarb
Partner
Email | +1 202.778.1822


Sara Alpert Lawson_listing

Sara Alpert Lawson
Partner
Email | +1 410.949.1181


Nicholas DiCarlo

Nicholas M. DiCarlo
Associate
Email | +1 202.778.1835


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