What’s a “loss?”  And, no, I don’t mean something our beloved Washington Nationals have racked up in equal number to their wins this season. 

I’m talking about a loss as defined in an insurance policy – or, as the word is used in most insurance policies that apply to employment-related claims, a capitalized “Loss.”  Believe it or not, even when this term is specifically defined in an insurance contract, it can still cause confusion.  

• D&O

• • Maybe it’s not fair to name a style of politics after that beautiful city by the lake, but the city’s case is not being helped by the finger pointing this week after an auditor said that the Metra rail agency’s insurance policy could have covered the costs of litigation with Metra’s former CEO Alex Clifford. The high cost of litigation apparently was used as a rationale for the $718,000 separation agreement between Metra and Clifford. This reminds us of one of our mantras here at Suits by Suits:  if litigation is on the horizon, check your insurance policy!
  • Not that the academic style of politics seems much better. On Wednesday, the Iowa Court of Appeals reversed a jury’s award of $784,000 to a former Iowa State University employee who claimed that he was viciously harassed by his superiors after blowing the whistle on his boss for financial misconduct. However, the court left intact the jury’s $500,000 award to the employee for intentional infliction of emotional distress. At trial, the employee presented evidence that his superiors made false accusations to campus police that he was a security threat and potential mass murderer.
  • Here at home (no politics here!), the D.C. Superior Court ruled on Tuesday that three local police officers did not have a valid claim against the D.C. government. The officers contend that they were denied assignments and referred to internal affairs in retaliation for their speaking up about the ineffectiveness of breath-testing equipment used by the police department for suspected drunk drivers. The court found that the evidence does not support the officers’ allegations.
  • Finally, a new survey is out about office politics showing that most people prefer not to friend their boss on Facebook.

• The Inbox

On Tuesday, we examined the dismissal by a Georgia federal court of Lisa T. Jackson’s race-based discrimination claim against Paula Deen and others, and noted that, under Title VII, an employer may not discriminate against an employee for associating with employees of another race.  But we don’t want you to be left with the impression that the association has to be between co-workers.  Courts also have recognized “interracial association” Title VII claims for associations occurring outside of the workplace.  The U.S. Court of Appeals for the Second Circuit is one such court.

• Civil Litigation
• Discrimination
• The Basics
• Title VII

Last week, a federal court in Georgia dismissed Lisa T. Jackson’s race-based discrimination claim against Paula Deen, her brother Earl “Bubba” Heirs, and their restaurant businesses.  Earlier events in the Jackson v. Deen case – including Deen’s deposition testimony and what it may mean for alter ego liability – caught our attention at Suits by Suits.  This recent ruling interests us as a reminder that it is not always the case that a white employee who works in an environment that is hostile to blacks has no claim for damages against her employer for race-based discrimination.

• Civil Litigation
• Discrimination
• Motions to Dismiss
• The Basics
• Title VII

It’s unseasonably cool here in Washington, DC, where most of our Suits by Suits editors toil.  News about the latest in disputes between employers and executives, however, is always in season.  Here are the latest headlines:

• Ruth Simon and Angus Loten of the Wall Street Journal brought us this excellent take on the rising tide of non-compete litigation.  According to Simon and Loten, non-compete agreements are spreading beyond the executive ranks to sales representatives, engineers, and researchers.  For more, check out our ongoing State-by-State Smackdown series on the changing law of non-competes in various states (here, here, here . . . and here).
• A conference call hosted by AOL’s chief exec Tim Armstrong took an unpleasant turn when Armstrong fired – on the spot – Abel Lenz, an employee who was videotaping the call.  The New York Times reported that Armstrong later admitted that he made a “mistake” in the hasty firing, which was broadcast to a thousand employees.  Lenz’s photos of his last moments at AOL later surfaced online at jimromenesko.com. 
• The Third Circuit upheld a decision by the Luzerne County (PA) Retirement Board to terminate the benefits it was paying to a former county clerk, William Brace, based on Brace’s guilty plea to a bribery charge.  Brace claimed that the termination violated his constitutional rights, but the court disagreed, holding that Brace was not entitled to a hearing before the decision.  Brace’s crime appears to have been the acceptance of a $1,500 tailor-made suit from a county contractor, which puts this case in the unique category of Suits by Suits over Suits.
• Matt Reynolds of Courthouse News Service reported that IMAX has sued a competitor for trade secret misappropriation.  IMAX’s complaint alleges that Gary Tsui, a former IMAX employee, sold its 2-D and 3-D conversion technology to the competitor, GDC Technology USA, which is now using the secrets to compete with IMAX.  It calls Tsui an “international fugitive.”  Sounds like this case may be exciting enough for the big screen.
• A former U.S. Bank manager, Serge Adamov, has successfully appealed the dismissal of his claim that he was terminated in retaliation for complaints of discrimination based on his Azerbaijani origin.  The Sixth Circuit held that when an employee does not exhaust his remedies in the Department of Labor before bringing suit in federal court, that failure does not deprive a district court of jurisdiction over the case.  As a result, because the bank did not raise a failure to exhaust as part of its motion to dismiss Adamov’s suit, the district court could not raise it on its own as a ground to get rid of the claim.

• Discrimination
• Motions to Dismiss
• Noncompete Agreements ‎
• The Inbox
• Trade Secrets

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.

• Breach of Contract
• Executive Compensation
• Severance Agreements
• Termination With or Without Cause

As we’ve covered here and here, the Supreme Court will decide this term whether a whistleblower can pursue a Sarbanes-Oxley claim for retaliation by a privately-owned employer.  Jackie Lawson and Jonathan Zang, former employees of Fidelity investment advisory companies, say yes.  The First Circuit said no.

Lawson and Zang have now filed their opening brief in their attempt to persuade the Supreme Court to disagree with the First Circuit and reinstate their claim.  And they have even included a non-gratuitous George Clooney reference.  (Hat tip to scotusblog.com for making this and numerous other Supreme Court resources available.) 

Lawson and Zang’s argument involves the interpretation of 18 U.S.C. § 1514A, the provision of Sarbanes-Oxley that allows whistleblower claims.  They argue that the plain language of Section 1514A applies to protect not only employees of publicly traded companies and mutual funds, but also employees of contractors of those companies, such as the Fidelity investment advisers at issue in their case.  The statute bars contractors from retaliating against an “employee”: Lawson and Zang contend that this should be read to refer to those contractors’ “own employees,” in addition to the employees of public companies with whom the contractors work.  Br. at 15.  They argue that it wouldn’t make any sense to only prohibit retaliation by contractors against others’ employees, since it would be very difficult, if not impossible, for a contractor to terminate someone else’s employee.  Br. at 22.

• Sarbanes-Oxley Act
• Whistleblowers
• Wrongful Termination

Yes, yes, we’ve asked you before to nominate us to the you-know-what, but we swear this is the very last time because nominations for that prestigious list close today.  We only ask because for lawyers who blog, this list is like the Academy Awards, and the Emmys, and the Grammies, and the Country Music Awards, all rolled into one.  And at Suits by Suits we are, in fact, ready for our close-up, Mr. DeMille (take the afternoon off if you know what movie that’s from).  Thanks if you’ve already nominated us. 

We’re not all about awards around here, though.  We’re hard at work.  While the streets around our Suits by Suits Global Headquarters are notoriously quiet while most folks are at the beach and Congress has left town, we’ve been scouring the planet looking for interesting stories to bring to your attention.  We have much to do – the CEO of Amazon is not yet paying $250 million for our work, unlike the venerable blog-printed-on-dead-tree just up the street.  Perhaps it’s because they have horoscopes and we don’t. 

In any event, here are some more items to add to that stack of must-read beach books:  

• Discrimination
• The Inbox
• Whistleblowers

You may have heard about the strange case of Larry Conners, the former news anchor for KMOV-TV 4 in St. Louis, Missouri who was fired after posting on his Facebook page that he suspected that he was being targeted by the IRS in response to a hostile interview he conducted with Pres. Barack Obama in 2012.  (The IRS claims that Conners and his wife owe more than $85,000 in back taxes from 2008-2010.)  You may have even read our coverage of Conners’s subsequent lawsuit against KMOV-TV here on Suits By Suits.

Last Friday, a state court judge in Missouri denied Conners’s motion for a temporary restraining order (TRO) that would have suspended the operation of Conners’s non-compete clause with KMOV and permitted Conners to seek another TV job in St. Louis.

What does this mean for Conners – and, more broadly, for employers and employees in Missouri?  Read on.

• Noncompete Agreements ‎

If you’re a regular reader of Suits By Suits, you know that we think state law regarding the interpretation and enforceability of non-compete clauses is rapidly changing, driven in large part by recent appellate decisions in California that effectively renders most non-compete clauses unenforceable in that state.

Last month, we kept you apprised of a new law that passed the state legislature in Connecticut; that law, Connecticut Public Act No. 13-309, would have required employers who are acquired by or merged into another company and who require their employees to accept a non-compete clause as a condition of continued employment to provide those employees with a copy of the agreement and at least 7 days’ notice to evaluate whether or not to sign the agreement.

Notably, the final bill passed by the legislature was substantially cut down from its original form, which would have altered the common-law standard (the “Legitimate Business Interests” test or LBI) Connecticut courts use in evaluating whether or not such clauses are enforceable.  The amended bill made no changes to Connecticut’s legal standard; as such, we predicted that the law would do “very little to alter the landscape.”

That prediction turned out to be quite the understatement, as Connecticut’s Gov. Dannel P. Malloy vetoed the bill by returning it to the legislature without his signature.

Gov. Malloy’s articulated reason for vetoing the proposed legislation is that “the bill leaves certain key terms undefined or unclear,” which he argues “has the potential to produce legal uncertainty in the event of merger or acquisition.”  The implication is that such uncertainty would increase the risks of litigation on both sides; Gov. Malloy accordingly requested that in the next session, the legislature return with “greater clarity” for the benefit of both employers and employees.

How the legislature will respond is anyone’s guess, but it’s worth pointing out that the current common law standard governing the enforceability of noncompete clauses in Connecticut – which the governor called “robust” in his veto statement – is itself a somewhat ambiguous balancing test (LBI) that requires a court to evaluate numerous factors, including a clause’s (1) duration, (2) geographical scope, (3) protection of the employer, (4) restraint on the employee’s right to pursue work, and (5) interference with the public interest.  See Robert S. Weiss & Assocs v. Wiederlight, 208 Conn. 525 (1988).  Obviously a “reasonable” duration is less defined than a specific term (say, six months, as is being considered in neighboring Massachusetts).

Might Gov. Malloy’s veto and admonition encourage the Connecticut Judiciary Committee – which previously approved a bill that would have changed the Weiss common-law standard by a vote of 44-0 – to revisit that state’s long-standing use of the LBI balancing test to evaluate the validity of noncompetes?  We’ll be watching.

• Noncompete Agreements ‎