On November 19, the University of Maryland announced that it is leaving the Atlantic Coast Conference, its home for 60 years, to join the Big Ten Conference. In weighing its decision, Maryland had to consider one big downside: the $50 million exit fee that ACC presidents voted to adopt in September 2012. Maryland hasn’t paid up, and the ACC sued it on November 27 in North Carolina state court, seeking to recover all $50 million.
The principal issue in the case will be whether the exit fee is a proper amount of “liquidated damages.”
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.
Jason Selch had a way of getting to the bottom of things.
Selch, an investment analyst at Columbia Wanger Asset Management, L.P. (a company under Bank of America’s corporate umbrella), was upset after his employer fired his friend. He went to find his boss, Charles McQuaid, and located him in a conference room with Columbia’s Chief Operating Officer. He asked them if he was subject to a non-compete agreement. When the two said no, he “proceeded to unbuckle his pants, pull them down, and ‘moon[ed]’” them. Selch v. Columbia Management, 2012 IL App (1st) 111434.
Once the mooning was complete, Selch’s bosses didn’t turn the other cheek.
As of now, SEC whistleblowers have a one-in-3,001 chance of receiving a whistleblower award. That’s according to the latest annual report from the SEC’s Office of the Whistleblower, which was established to administer the whistleblower bounty program established by the Dodd-Frank Act of 2010.
We’ve previously covered the only award made to date under the whistleblower program – a $50,000 payout, nearly 30% of what the SEC recovered in that particular case. But what we didn’t know at the time was how many tips had actually been made to the SEC by potential whistleblowers.
In an opinion that we have been awaiting, late last week, the U.S. Court of Appeals for the First Circuit affirmed the Massachusetts federal court’s ruling that Starbucks violated the Massachusetts Tip Act by requiring baristas to share with shift supervisors tips left by customers. The First Circuit agreed with the lower court that Starbucks shift supervisors have some managerial responsibilities and therefore cannot share in the tips. The Tip Act prohibits employers from requiring “wait staff employees” – who are defined in the Act as having “no managerial responsibility” and whom the parties agreed include Starbucks baristas – from sharing tips with anyone who is not a wait staff employee. Starbucks argued that its shift supervisors have no managerial responsibility because, just like baristas, they spend the vast majority of their time serving customers. The First Circuit wasn’t buying it, noting that the Act has a bright-line test for defining wait staff employees, that the “no” in “no managerial responsibility” means “no,” and that shift supervisors do not pass the test because they are, for example, “charged with opening and closing the store, handling and accounting for cash, and ensuring that baristas take their scheduled breaks.” The court also said that Starbucks’ internal documents explaining that shift supervisors “‘directly manage’ three to six other employees while on shift” were “potent evidence” against Starbucks. The First Circuit also left intact the lower court’s certification of a class of Massachusetts baristas and its award of damages to them of over $14 million – which includes $7.5 million in tips that Starbucks allocated to shift supervisors. We are still on the lookout for how the New York Court of Appeals will rule in a similar case challenging Starbucks’ tip pooling practices under New York Law.
Sex – or allegations of sex – and breakfast food seemed to dominate the world of employment disputes involving executives this week. There’s more than one joke there, but at Suits-by-Suits we’re lawyers and not comedians, so we’ll let the news speak for itself:
All we need is some toast and bacon. But instead we have these two notes, both relating to Morgan Stanley:
And finally two news notes on employment issues that can affect executives and their companies, and that we cover regularly:
Let’s start this story with a basic truth: it’s generally a bad idea to tell a pregnant woman that her hormones will make her “get emotional” and get “caught up in things” in a way that affects her judgment.
You need not take this from me as a lawyer-blogger. Take it from me as a guy whose wife is pregnant with our first child. Blaming anything in our house on pregnancy hormones is a one-way ticket to the basement couch.
It’s also a bad idea to say this to a pregnant employee, as department-store chain Target Stores is learning. We’ve written about the Pregnancy Discrimination Act of 1978 before, and in some high-profile contexts. But the case of Spigarelli v. Target, which will move forward in federal court in Pennsylvania now that Target has lost its summary judgment motion, shows that this lesson continues to bear discussion.
Following up on an item from yesterday’s Inbox, Marjorie Censer of the Washington Post reports that incoming Lockheed Martin CEO Christopher E. Kubasik will receive a $3.5 million separation payment after being asked to resign last week following revelations that he had engaged in a “lengthy, close, personal relationship with a subordinate employee.”
In the run-up to last night’s elections, we discussed a number of suits by suits with political implications, including ousted Florida Republican Party chairman Jim Greer’s suit against the Florida GOP, as well as two posts (here and here) discussing the implications of Gallaudet University’s decision to suspend its Chief Diversity Officer, Angela McCaskill, for political speech she engaged in outside the workplace opposing same-sex marriage in Maryland (which passed last night, by the way). We also discussed the controversial whistleblower protection provision (§ 922) of the 2010 Dodd-Frank Act in considerable depth (here, here, and here).
Of course – however it may have seemed if you lived in a swing state like Virginia, Ohio, Florida, or Colorado – there was more to October of 2012 than the impending election, and we were on top of those issues as well. In particular, we discussed the strange case of former Goldman Sachs VP Sergey Aleynikov, who was charged twice with stealing Goldman Sachs' intellectual property (in this case, proprietary computer code) but who nevertheless sought indemnification and advancement of his ongoing defense costs from Goldman Sachs. (We also discussed the D&O insurance implications of Aleynikov's lawsuit.)
Here's the full roundup of all of our posts from October:
On Thursday, a 4-3 majority of the Virginia Supreme Court held in VanBuren v. Grubb that individuals such as supervisors or managers could be sued as individuals and held personally liable for the common law tort of wrongful termination (also known as wrongful discharge) in addition to whatever corporate liability the employer may have.
As a practical matter, this gives plaintiffs and their lawyers additional leverage when bringing suits that contain a cause of action for wrongful termination in Virginia by being able to name the former employee’s boss as a co-defendant. From the boss's perspective, this decision means that you, personally, could be named as a defendant and ultimately forced to satisfy a judgment for improperly firing an employee from your own pockets -- not just your company's. It also means that employers and their executives who operate in Virginia need to review their D&O insurance coverage with this potential exposure in mind.
In short: whether you're an executive or an employer, you need to know about this case and its implications on the employment relationship.
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.