This week, our search for intriguing precedent has taken us all the way to the County of Lewis and Clark, Montana, and the case of Shannon Marsden.
Marsden, an employee of Blue Cross Blue Shield Montana (“BCBSMT”), had an employment agreement with a clause that required arbitration of any dispute arising under it. The agreement was for a two-year term, but provided that Marsden could be fired if the president of the company “believed that it would be in the best interest of BCBSMT.”
After BCBSMT terminated Marsden’s employment, she brought a claim under Montana’s Wrongful Discharge from Employment Act (“WDEA”), alleging that she was fired because she reported illegal rebates of insurance commissions.
However, Marsden’s claim came with a catch.
In our last installment, we described a dispute between CBS, on the one hand, and three former producers of the CBS show Big Brother, on the other, in which the former producers argued that CBS had waived its contractual right to arbitrate by spending months pursuing litigation against the former producers before demanding arbitration. Because many employment contracts have mandatory arbitration clauses, the possibility of waiver must be on the radar screens of parties to an employment dispute. We discussed the flipside of this issue, arbitration by estoppel, in July.
The threshold question is whether the party seeking arbitration acted inconsistently with the right to arbitrate.
Reality TV is a guilty pleasure for some - not us at Suits by Suits, mind you, as we prefer to focus our attention on the more pressing legal questions of our time. Reality TV is also a highly competitive industry and fertile ground for lawsuits between companies and star employees with lessons for all of us about employment contracts. In our last episode, MSNBC and the former host of My Big Obnoxious Fiance taught us about repudiating contracts. In this episode, CBS and three former producers of Big Brother teach us about waiving a contractual right to arbitrate an employment dispute.
The three former Big Brother producers - Corie Henson, Kenny Rosen and Michael O’Sullivan – eventually wound up working on the production of ABC’s The Glass House, which CBS has called a blatant rip-off of Big Brother, and which aired last summer. Before it aired, in May 2012, CBS sued ABC and the three former producers in federal court in Los Angeles. The former producers had signed non-disclosure agreements (NDAs) with CBS in connection with their work on Big Brother. CBS sought to temporarily restrain ABC from airing the first episode of The Glass House, claiming that ABC and the former producers had violated CBS’s copyrights and misappropriated its trade secrets in the production of the show. CBS also claimed that the former producers violated the NDAs by disclosing confidential information and trade secrets relating to technical, behind-the-scenes aspects of filming and producing Big Brother.
On Sept. 17, 2012, a U.S. District Court denied Merrill Lynch’s petition to vacate an arbitration panel’s award of $10.2 million to two of its former advisors, Tamara Smolchek and Meri Ramazio. The award – split almost evenly between $5.2 million in compensatory damages for deferred compensation and $5 million in punitive damages – helps to illustrate the growing (and changing) role that arbitration plays in disputes between high-level executives and their employers.
For decades it has been conventional wisdom that employee arbitration clauses favor the employer by taking potentially sensitive cases away from a jury (because “everyone knows” that juries are “more sympathetic to employees”). (Or, as a more employer-friendly article puts it, arbitration can reduce the likelihood of an “irrational award” because arbitrators “tend to be more conservative than juries.”)
Additionally, arbitration clauses can favor the employer where the employee is required to share in some (or all) of the costs of the arbitration by discouraging plaintiffs who would otherwise have been able to secure plaintiffs’ counsel on a contingent fee basis for a trial by jury. (Note that courts continue to grapple with this issue, and many courts have determined that if an arbitration clause would unduly burden a plaintiff from exercising his or her legal rights, that arbitration clause is invalid and the plaintiff is free to litigate in court instead. See, e.g., Ball v. SFX Broadcasting, Inc., 165 F. Supp. 2d 320, 238-40 (N.D.N.Y. 2001) (discussing cases).
Is this still the case? Read on.
Many of the cases we talk about here on Suits by Suits are breach of contract cases brought by executives against their former employers. Sometimes, however, the employer turns the tables, bringing an action against a former executive for breaching its confidences. When that happens, the executive can find himself owing the company a lot of money, rather than the other way around.
Such was the fate of a former lawyer for Toyota named Dimitrios Biller, the subject of the Ninth Circuit’s recent opinion in Biller v. Toyota Motor Corp., 668 F.3d 655 (9th Cir. 2012).
Sexual discrimination claims continue to be big news in the world of suits by suits. We’ve previously commented at some length regarding the novel issues raised in the sexual harassment lawsuit brought by former Kleiner Perkins partner Ellen Pao.
Today, we turn to a related and equally unique issue: a sexual orientation claim brought under the auspices of the Americans With Disabilities Act, 42 U.S.C. § 1201 et seq. Although there is no federal statute that protects employees from discrimination on the basis of sexual orientation generally, Brian Anthony Martinez, the former international managing director of television for Bloomberg Media, brought a lawsuit against his former employer in 2011, alleging that he was terminated after Bloomberg discovered that he had undergone therapy for domestic abuse from his male partner, thus (arguably) bringing his claims under the ADA.
Continuing our coverage of the sexual discrimination lawsuit between former partner Ellen Pao and venture capital firm Kleiner Perkins (prior stories are here and here), on Friday, Kleiner Perkins moved the San Francisco Superior Court to compel arbitration of its dispute for a second time -- this time with a twist.
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.
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John J. Connolly
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