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.

• Arbitration
• Arbitration and ADR
• Breach of Contract

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. 

• Confidentiality
• Trade Secrets

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.

• Breach of Contract
• Statutes of limitation‎s

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.”  

• Discovery
• The Inbox

Here’s the tale of  two cases with four lessons about Title VII and the Equal Pay Act when it comes to claims that an employer (in this case, Dollar Tree Stores) pays employees (in this case, Dollar Tree Store Managers) less because of their gender.  As we’ve said previously, claims for pay discrimination can be brought under both laws. 

The first case was filed in 2008 in federal court in Alabama by Cynthia Ann Collins and Beryl Dauzat against Dollar Tree alleging that the company violated the Equal Pay Act by paying them and other female Store Managers less compensation than male Store Managers doing the same work.  In 2009, the court certified an opt-in collective action under Section 216(b) of the Fair Labor Standards Act (or, the “FLSA,” of which the Equal Pay Act is a part), allowing all women who were classified as Store Managers for Dollar Tree between 2006 and 2009 to join the lawsuit.  Under the court’s order, notice of the lawsuit was sent to all Dollar Tree Store Managers employed by the company between 2006 and 2009.  To join the lawsuit, a woman would have to complete and sign a form and send it to the court no later than the deadline expressly consenting to become a party to the lawsuit and authorizing the named plaintiffs and their counsel to act as her agents in prosecuting her Equal Pay Act claims against Dollar Tree.  About 350 women joined the lawsuit.

• Discrimination
• Equal Pay
• The Basics
• Title VII

Perhaps the best ongoing show in the Washington area -- outside of Capitol Steps -- is the drama surrounding the Metropolitan Washington Airports Authority's governing board.  We wrote earlier about how MWAA's board was in the unique position of funding the legal costs of a board member, Dennis Martire, to fight his own removal from the board, because the story illustrates some important principles about how indemnification clauses between companies or organizations and executives can work.  Today, the Washington Post has reported that Mr. Martire is returning to the board (at least temporarily), thus putting an end to the litigation over his seat.  The Post also has an excellent article on a new addition to the agency: an ethics and accountability adviser sent to it by U.S. Transportation Secretary Ray LaHood. 

It’s very likely that your grandmother, an aunt or uncle, or some other wise and guiding figure in your life taught you the maxim we started in our headline: If you can’t say something nice, don’t say anything at all. 

That’s a saying that captures a theme that comes out of many of our posts here on Suits-by-Suits.  It’s not just a decent piece of advice for life, but in business relationships as well. 

Of course, there are times when you can’t follow it, and have to say something.  This is especially true when key employees leave a company, and the company is compelled to explain the departures.  But as genetic-analysis company Sequenom learned last Thursday in a ruling from a California appellate court, if you’re going to say something that’s not nice about a former employee, then follow another rule that we lawyers are especially fond of: get your agreement with the former employee in writing before you say anything about him.  Or, you can face long and protracted litigation over who did and said what. 

• Breach of Contract

This week in suits by suits:

• On Tuesday, the U.S. Court of Appeals for the First Circuit heard oral argument in the case brought by Starbucks baristas alleging that the company violated the Massachusetts Tip Law by requiring the baristas to share their tips with shift supervisors .  We reported on this case earlier and will be on the lookout for the First Circuit’s decision.  The key question in the case – whether or not Starbucks shift supervisors have “managerial responsibility” – was argued to the court early on Tuesday.
• The IRS awarded a record $104 million to former UBS employee and whistleblower Bradley Birkenfeld, who had previously been convicted of tax fraud for advising UBS clients to avoid paying income taxes.  Birkenfeld's testimony disclosed how UBS was offshoring client assets to evade U.S. income tax; as a result, UBS agreed to pay $780 million in criminal fines and release data for nearly 5,000 accounts.
• Author and playwright David Macaray has written a provocative article for the Huffington Post entitled "The Golden Parachute is Un-American" (and, he also argues, "curious," "bizarre," and "con jobs").

• The Inbox

This isn’t a political blog; although the lawyers here at Suits by Suits certainly have political opinions (and often strong ones at that!), we’re more of a roll-up-your-sleeves-and-get-things-done bunch.  We want to help high-level employees and their employers be aware of the potential pitfalls that exist in the workplace and to rely on our experience as litigators when something does go wrong.

But sometimes those pitfalls are red or blue; sometimes employers (Chick-Fil-A, anyone?), or high-profile employees get into trouble precisely because they’ve made their political opinions public. 

Eleven years ago today – and one day after the 9/11 attacks on the World Trade Center and the Pentagon – then-University of Colorado Professor Ward Churchill published an essay entitled “Some People Push Back:  On the Justice of Roosting Chickens.”  

Through some strange circumstances (which we discuss below), that 9/12 essay sparked controversy nearly three and a half years later, after which, Prof. Churchill alleges, he was wrongfully terminated by the University of Colorado in retaliation for the opinions he expressed.  Although he won at trial, the jury verdict was set aside by the trial court judge on a motion for judgment as a matter of law; on Monday, that ruling was upheld by the Colorado Supreme Court.  Professor Churchill has vowed to appeal to the U.S. Supreme Court.  If and when he does – and if the Supreme Court grants certiorari – we’ll continue to cover this case.

Although Professor Churchill’s 9/12 article is unusual, we know that individuals – whether speaking for themselves or on behalf of their employer – are going to speak out on the issues that matter most to them, particularly in an election year, just as Professor Churchill did on the day after 9/11.  Is there anything we can learn from those 9/12ers?

• Wrongful Termination

Two quick news notes from the broader employment law world: Governor Jerry Brown of California has signed into law a bill that creates a higher bar for employers that would move employees wearing clothing or hairstyles based on religious beliefs – such as turbans or hijabs – out of public workspaces and into back rooms.  The new law will require employers to show an undue hardship, essentially a particular difficulty or expense, to accommodate those employees.   It's clearly a response to a lawsuit involving this exact issue and Disneyland --  which colleague Andrew Torrez covered here. 

And from the New York Times Magazine comes this great article with the fitting headline “How Not To Fire A College President,” about the attempted ouster of University of Virginia President Theresa Sullivan.  Perhaps the key takeaway from this cavalier move: when planning to remove a liked and respected C-level executive, try to get leaders of affected constituencies within the organization to buy in before the ouster. 

• Religious Discrimination‎