• My colleague Ellen Marcus has written a great piece about Sergey Aleynikov, a vice president and computer programmer at Goldman Sachs who allegedly stole its proprietary computer code as he was heading out the door to work at a competitor.  Aleynikov was indicted and convicted for breaking Federal law when he did so – but a Federal appellate court overturned his conviction.  Now, though, he’s about to face New York State charges for the same alleged theft.  Aleynikov has sued Goldman Sachs, arguing the investment bank has an obligation to reimburse him for the legal fees he’s already incurred (indemnification) and pay his new legal bills as he fights the state charges (advancement).    

    Ellen noted in her piece that the Aleynikov story “illustrates key concepts about indemnification and advancement.”  There is, though, another piece of this puzzle that the Aleynikov matter also illustrates.    

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  • For a baseball player, batting .100 won’t get you into the Hall of Fame.  But for Rosanne Ott, a former Black Hawk helicopter pilot turned portfolio manager, batting .100 kept her case alive.  See Ott v. Fred Alger Mgmt., Inc., No. 11 Civ. 4418 (LAP) (S.D.N.Y. Sept. 27, 2012).

    Ott sued her former employer Fred Alger Management (“Alger”), associated companies, and Alger’s CEO/CIO for alleged violations of the Investment Advisors Act, breach of contract, and the Dodd-Frank Act’s whistleblower provisions.  She also filed a derivative claim against the CEO/CIO on behalf of Alger’s shareholders for breach of fiduciary duty.  In her 10-count, 65-page amended complaint, Ott alleged that Alger had adopted a trading policy for her fund (the Health Sciences Fund) that allowed other Alger funds to make better trades at her fund’s expense.  

    Alger and the other defendants moved to dismiss.  For four counts, Ott didn’t respond, and for five others, the district court decided that she had not adequately alleged supporting facts.  That left only her whistleblower claim, based on the anti-retaliation provision of the Dodd-Frank Act, 15 U.S.C. § 78u-6(h)(1)(A)(i).  (Say that cite three times fast.) 

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  • That’s the question presented by a recent lawsuit filed by Sergei Aleynikov, a computer programmer who was a Vice President at Goldman Sachs responsible for code relating to Goldman’s high frequency trading business (more on “HFT” here) before he left to work for a hedge fund – allegedly bringing Goldman’s “secret sauce” code with him.  We’ve observed before that contractual rights to indemnification can sometimes lead to head-scratching results, but, depending on the outcome, this case may take the cake.  Plus, it nicely illustrates key concepts about indemnification (our focus today) and advancement (our focus later this week).

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  • Suits by Suits Monthly Roundup - September 2012

    | Zuckerman Spaeder Team and Jason M. Knott

    In September, Suits by Suits covered a wide array of disputes across many industries throughout many jurisdictions. Topics reported on include Lilly Ledbetter Fair Pay Act  and Eaton Corporation’s quest to sue six of its engineers. We revisited the UVA failed coup, we discussed common lessons from the “If You Can’t Say Something Nice,” department, and even told a story about two cases with lessons about Title VII and the Equal Pay Act. We also discussed Merrill Lynch and mandatory employee arbitration clauses, how saving money saved an employer from age discrimination, and the statutes of limitations

    In case you missed anything the first time around, here’s a roundup of all our posts from September:

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  • The Inbox

    | Jason M. Knott

    News in suits by suits for you to ponder once you’ve tired of reading about replacement refs and bacon:

    • Every law librarian I know is a kind, mild-mannered person who would never dream of threatening to bash you with a crowbar.  But Donald Raymond, formerly of Southern Illinois University, was accused of making such a threat, and was fired shortly after the allegation.  Karen Sloan at the National Law Journal writes that Raymond sued his employer after his termination, and that his case has now survived a motion to dismiss. 
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  • An executive who brings a discrimination claim must jump through a number of hurdles to get to trial.  On this blog, we’ve posted on a number of occasions about how under the McDonnell-Douglas test, an executive must prove a prima facie case of discrimination, after which the employer has the opportunity to show that it acted for legitimate, non-discriminatory reasons.  If the employer meets this burden, and the executive cannot come forward with evidence to rebut these legitimate reasons, then the court will award summary judgment to the employer before the case even gets to a trial. 

    The Eleventh Circuit’s recent decision in Ostrow v. GlobeCast Am. Inc., No. 11-16043 (11th Cir. Sep. 17, 2012), provides another example of how an employer can defeat a claim of discrimination by presenting non-discriminatory reasons for its actions.  

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  • 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.

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  • We’ve previously written about the disputes that can arise when an employee leaves a job to start a competing company, such as claims that the employee has misappropriated trade secrets or breached confidentiality provisions.  Sometimes the employers win these cases.  And sometimes, they lose in a big way – as the American Chemical Society (ACS) found out in a case that went all the way to the Ohio Supreme Court.  Am. Chem. Soc’y v. Leadscope, Inc., Slip Opinion No. 2012-Ohio-4193. That court's recent decision serves as a caution to employers: if you don’t have reliable evidence that anything’s been stolen, but you sue your employees’ new business anyway, you can end up on the wrong end of a large verdict. 

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  • Time Waits for No One...and No Lawsuit

    | Zuckerman Spaeder Team

    Timing is everything, they say.  That’s especially true when it comes to filing a lawsuit: if your timing is off and you file after the statute of limitations – the amount of time the law allows you to bring your suit – has expired, you can be out of luck.  It becomes more complicated because each state has its own set of these time limits.  Some states give you plenty of time to sue.  Others, not so much. 

    In the employment context, the former general counsel of Martha Stewart Living Omnimedia learned that lesson this week the hard way.  Gregory Barton sued his former employer, alleging he was denied the right amount of severance pay after he was asked to leave the company.  Barton thought New York’s window of six years to bring his suit applied.  Wrong, held the New York judge as she dismissed his case: Delaware’s one year limit applied.

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  • 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.”  

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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
Email | +1 410.949.1149


Andrew N. Goldfarb
Email | +1 202.778.1822

Sara Alpert Lawson_listing

Sara Alpert Lawson
Email | +1 410.949.1181

Nicholas DiCarlo

Nicholas M. DiCarlo
Email | +1 202.778.1835