Who doesn’t love the year-end countdown?  We’re here to offer you one of our own – our most-read posts in 2014 about executive disputes.  The posts run the gamut from A (Alex Rodriguez) to Z, or at least to W (Walgreen).  They cover subjects from sanctified (Buddhists and the Bible) to sultry (pornographic materials found in an executive’s email).  Later this week, we’ll bring you a look at what to expect in 2015.

Without further ado, let the countdown begin!

8.            The Basics: Dodd-Frank v. Sarbanes-Oxley

This post is an oldie but a goodie.  It includes a handy PDF chart that breaks down the differences in the Dodd-Frank and Sarbanes-Oxley whistleblower laws.  Each of these laws continues to be a hot-button issue for plaintiffs and employers.

7.            When Employment Relationships Break Bad

America may have bidden adieu to Walter White and his pals on Breaking Bad, but employment relationships continue to spin off in some very unpleasant ways.  Such was the case with Stephen Marty Ward, who ended up in federal prison after he threatened his employer with disclosure of its trade secrets, as we covered in this post.

• Breach of Contract
• Defamation
• Dodd-Frank Act
• Noncompete Agreements ‎
• Religious Discrimination‎
• Sarbanes-Oxley Act
• Severance Agreements
• Social Media
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• Trade Secrets
• Whistleblowers
• White Collar Crime

Netflix, the internet media giant, sued its former vice president of IT Operations, Mike Kail, in California Superior Court, claiming that he “streamed” kickbacks from vendors and funneled them into his personal consulting company. According to the complaint, Kail—who is currently the CIO of Yahoo—exercised broad latitude in both vendor selection and payment.  Netflix alleges that he took in kickbacks about 12-15% of the $3.7 million that Netflix paid in monthly fees to two IT service providers, VistaraIT Inc. and NetEnrich Inc. According to the Wall Street Journal, one line in particular from the complaint piqued experts’ interest: “Kail was a trusted, senior-level employee, with authority to enter into appropriate contracts and approve appropriate invoices.” According to Christopher McClean, an analyst at Forrester Research Inc., this suggests Netflix allowed Kail too much freedom. McClean opined that when individuals are empowered to both choose a vendor and then approve payment, corporate malfeasance can follow.  This is particularly important in the field of information technology, where tech companies vie for business in an ever-competitive market by lavishing incentives on CIOs. Companies that do not incorporate an audit function into vendor selection and payment should consider revisiting their policies going forward.

We recently discussed the hefty $185 million judgment against AutoZone in favor of a former store manager who alleged discrimination and retaliatory discharge following her pregnancy. While this case arose in California, it appears the auto parts retailer is zoned for another similarly-themed legal showdown, this time across the country in West Virginia. In the recent complaint, the plaintiff, Cindy DeLong, claimed that she was placed on a 30-day performance improvement plan for hiring too many women in the stores she managed. She was ultimately fired before the 30 days expired. As you may recall, in the California case, plaintiff Rosario Juarez claimed AutoZone enforced a “glass ceiling” for its female employees, denying them opportunities for promotion. It seems Ms. DeLong managed to chip away at the ceiling as a district manager. But, according to Courthouse News, she now alleges that her practice of hiring women rendered her “not a good fit for the company.”

• Discrimination
• Noncompete Agreements ‎
• Religious Discrimination‎
• The Inbox
• White Collar Crime
• Wrongful Termination

Putting an imperious spin on a Woody Guthrie classic, I imagine Jimmy John’s singing, “This land is my land, this land is my land, from California to the New York island.” The sandwich giant has garnered a meaty amount of press (and congressional scrutiny) lately over the breadth of its non-compete agreements with its employees. The language, as written, would essentially prevent employees, from management down to the hourly sandwich builder, from seeking employment with a competitor for up to two years following the employee’s departure. The non-compete, although not universally utilized by Jimmy John’s franchisees, further defines a competitor as any business that derives more than 10% of its revenue from sandwiches, wraps, hoagies, etc., and is within a 3 mile radius of a Jimmy John’s location.  According to HuffPost, Jimmy John’s has yet to enforce the clause against a minimum wage-earning sandwich maker or delivery truck driver, but The Atlantic’s CityLab map demonstrates the potential impact on the departing employee who might wish to make sandwiches elsewhere.

Comcast may have found an enemy for life in a former cable-subscribing customer. Comcast recently received a novel form of public scrutiny when Conal O’Rourke, a PWC accountant, accused it of causing his termination from PricewaterhouseCoopers. O’Rourke alleged in a complaint filed in California federal court that Comcast’s Controller, Lawrence Salva, contacted a PWC principal, alleging that O’Rourke invoked his position at the accounting firm to gain leverage in his ongoing arguments with Comcast over billing issues and equipment charges. According to Bloomberg, the Philadelphia office of PWC billed Comcast around $30 million for its accounting services, thereby giving Comcast leverage to potentially request the action from PWC. PWC, in its defense, claimed that O’Rourke was fired for violating company policy covering employee conduct. O’Rourke allegedly accused Comcast of questionable accounting practices during his (what I am sure were “spirited”) telephone exchanges with Comcast customer service representatives.

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Last week, a Texas state court issued a whopping judgment in favor of a former employee of FE Services LLC. The case stemmed from an employment agreement between the founder of FE Services, doing business as Foxxe Energy, and a friend he enlisted to join the company. Founder James Stewart induced his friend, Marc Jan Levesconte, to work for the company with the promise of a significant cut of any future sale. Levesconte was terminated on the eve of the company’s $52 million acquisition by Ensign Services LLC. According to Law 360, Levesconte brought a breach of contract suit two years ago. Now, the court has decided that Ensign and Stewart owe him $16 million. You may recall the famous scene from There Will Be Blood where energy magnate Daniel Plainview taunts Eli with the milkshake metaphor (“I drink your milkshake!) and revels in his dominance of the oil-rich land. If Stewart drank Levesconte's milkshake, his (presumably) former friend Levesconte is now sipping from his own end of the straw.

As the term implies, a “trade secret” normally describes information kept confidential to prevent unfair competitive advantage. Is it possible that information housed on social media could also be protected as a trade secret? A California federal court will hold a trial on this novel question in Cellular Accessories For Less, Inc. v. Trinitas, LLC, No. CV 12-06736 DDP. The National Law Review discusses the suit in which Cellular Accessories sued a former employee, David Oakes, alleging breach of contract. Oakes, upon his departure, emailed himself a list of business contacts and other supporting information, and ultimately founded his own competing business, named Trinitas. He  continued to maintain his same business contacts on his LinkedIn profile. During his employment with Cellular Accessories, however, Oakes had signed an employment agreement and a statement of confidentiality which forbade the transfer of proprietary information, including the company's customer base. The confidentiality agreement further forbade the use or disclosure of such proprietary information. The company sued him for trade secret misappropriation under the California Uniform Trade Secrets Act and for breach of contract. Whether information is a trade secret under California law depends on whether the information is easily ascertained or otherwise available to the public. In this case, the court said, the parties hadn't given it enough detail to decide whether Oakes's contact list was actually available to everyone else who contacted him, and whether Oakes had control over the public availability of that list. Therefore, the court couldn't resolve the trade secrets issue on summary judgment (although it could resolve the breach of contract claim because Cellular Accessories had not established a loss). Perhaps equally interesting is the question of who owns the LinkedIn account. Can a trade secret belonging to Cellular Accessories exist in a public form essentially owned by the employee? We will keep you updated as the drama unfolds.

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If executives lie and fudge credentials on their resumes, they may find their pantsuits on fire when falsehoods are discovered. For example, the Wall Street Journal recently reported that David Tovar, a top Wal-Mart spokesperson, was terminated recently when a bogus credential was discovered through the company’s promotion-vetting process. According to the Journal, liars and resume-fakers should beware of embellishing their credentials given the increased digitization of transcripts and diplomas. A company named Parchment, for example, houses these credentials in a secure database, allowing employers and employees to substantiate resume claims. Additionally, Pearson PLC has developed a digital platform whereby recipients of licenses and certifications can post “badges” to their profiles on websites like LinkedIn. It’s all in an effort to keep everyone honest, especially those who need a little nudging in that direction.  

The University of Detroit Mercy’s Titans athletic department has seen its share of controversy stemming from a lawsuit filed by former assistant basketball coach, Carlos Briggs. According to The Varsity News, Briggs claimed he was terminated for blowing the whistle on an affair between the athletic director and another assistant coach. A federal judge dismissed the case, asserting that no recognized cause of action arose from his colleagues’ extramarital relationship. Briggs is appealing with the hopes that an oral argument on the merits will give weight to his claims.

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The court of public opinion giveth, and taketh away. You may recall that we reported on the reinstatement of Arthur T. Demoulis as Market Basket’s CEO, following weeks of customer and employee advocacy for the chief. Public opinion, in the case of Desmond Hague, cut the other way in unrelenting fashion. Mr. Hague, president and chief executive of Centerplate, a catering company servicing sports and entertainment venues, was captured on video kicking and abusing an otherwise docile Doberman Pinscher puppy. The Washington Post reports that when the footage made its way to the SPCA of British Columbia, it quickly went viral and users of social media demanded his resignation. Initially, Centerplate dismissed the incident as a personal matter. As media attention increased, Centerplate announced that Mr. Hague would undergo counseling and community service. The masses remained unimpressed, and as the pressure mounted, Mr. Hague was ultimately removed from his position. Given the power of social media, it appears that the court of public opinion has rendered its verdict.

The National Law Review, citing the recent lawsuit filed by TrialGraphix Inc. against its competitor FTI Consulting, Inc. in the New York Supreme Court, offered helpful tips to employers on both sides of the battle over poached employees. In this case, four high-ranking employees conspicuously left TrialGraphix for FTI Consulting. As in similar suits filed by Booz Allen and Arthur J Gallagher Co. (which we discussed here), claims of corporate poaching usually involve claims of trade secret theft and interference with client business relationships. The article highlights the importance of clearly-worded, reasonably-framed restrictive covenant agreements, safeguarding data upon the employee’s departure, and requiring employees to formally acknowledge the return of all company proprietary information and devices. Similarly, employers seeking to hire these employees should review any non-compete agreements to ensure compliance while also requiring the employee to refrain from using the previous employer’s confidential information or trade secrets. Non-disparagement agreements can also go a long way to prevent ill will between the old and the new employers.

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It’s only a matter of time before the traffic swells return to D.C. after a blissful summer of light, breezy roadway locomotion.  As the holiday weekend begins to take hold, ushering in the anticipated congestion, here are a few highlights from around the web to ease you into the long weekend. 

Departing employees leaving for the greener pastures of a rival in their industry might see red when the former employer suspects foul play and takes action.  Such was possibly the case when Arthur J. Gallagher Co. sued three of its former insurance executives in New York federal court as well as Howden Insurance Services Inc., the rival that inherited the trio.  According to Law 360, AJG claims that the executives conspired to stagger their departure dates, steal proprietary information, and lure clients away to Howden.  AJG attributes the projected $700 million loss in revenue in 2014 to business redirected to Howden upon their departures.  AJG first seeks to enjoin Howden from soliciting or working with 13 of AJG current and former clients, and to bar the use of trade secrets allegedly taken from them.

Booz Allen Hamilton Inc., a Virginia-based consulting firm known for its lucrative government contracts business, sued former employees last year in a New Jersey district court for conspiring to steal proprietary information from the company.  According to Washington Business Journal,  Booz Allen recently amended its complaint to name Deloitte and some of its senior executives in the suit, claiming that they obtained proprietary information about salaries, roles, and security clearances of key employees for the purpose of luring them, their intellectual capital, and the potential business stream to Deloitte.  The Booz Allen team was devoted to the Instructional Development and Immersive Learning (IDIL) capability which invested in and developed 3-D modeling, animations, and interactive simulations. 

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A recent decision from the Third Circuit proved a boon to employers facing the dangers of class arbitration in costly wage/hour disputes.  In its decision, the Third Circuit determined that courts, rather than arbitrators, should decide whether class arbitration exists in the absence of specific language in the arbitration agreement.  Employers generally oppose class arbitration because of arbitrators’ tendency to allow them, and the low prospects of overturning an unfavorable arbitration decision.  The longer-term consequences of the decision also bode well for employers who seek to insert class waivers in their arbitration agreements.  Law 360 interviewed Steven Suflas, a Ballard Spahr partner, who opined that employers can now take solace in the fact that a court will likely enforce class waivers found in arbitration agreements. 

Speaking of upholding class waivers in arbitration agreements, the California Supreme Court’s recent Iskanian decision did just that.  However, the court did carve out a general exception to the rule, stating that employers may not bar arbitration of claims brought under the Private Attorneys General Act (PAGA) as a matter of California public policy.  As if on cue, plaintiffs in a federal putative wage class action against CarMax Auto Superstores California LLC filed new state claims under PAGA, claiming they could not be arbitrated despite being ordered to arbitrate other claims on July 2.  As reported by Law 360, CarMax argues that plaintiffs are seeking to avoid the arbitration order with the state PAGA claims while plaintiffs maintain that the suits are substantially different. 

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Just when government whistleblowers hoped retaliation was on the decline following the passage of the Whistleblower Protection Enhancement Act, there appears to be a 2.0 version out, and it’s coming with a vengeance.  The latest wave in retaliation comes in the form of criminal investigations lodged by government agencies against truth-telling employees.  Rather than risk detection with a baseless termination or demotion, these employers have increasingly begun to wage criminal investigations, said Tom Devine, legal director for the Government Accountability Project in an interview with Government Executive.  Devine stated that such actions are a scary, dangerous trend, and that forcing someone out of a government position through criminal investigations could forever damage the employee’s prospects for future employment.

NYG Capital LLC made two headlines this week when a former intern accused its CEO, Benjamin Wey, of sexual harassment and wrongful termination, among other things.  The plaintiff, Hanna Bouveng, a Swedish native, was working in the US on a J-1 visa when the alleged actions took place.  Upon her termination, Bouveng alleges that Wey continued to stalk, harass and malign her reputation.  Meanwhile, as also reported by Law 360, a former graphic design artist was terminated shortly after cooperating with attorneys investigating Bouveng’s charges against Wey.  Yonatan Weiss lent credence to Bouveng’s accusations and claims he was fired for being truthful during interviews on the subject.

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We’re in the midst of summer and the news outlets are replete with anti-compete and whistleblower developments.  But before we get to those, let’s turn our attention to China:

If the dog days of summer here in the U.S. aren’t sweltering enough, imagine what they must feel like in the bustling, smog-laden cities of China. The Wall Street Journal reports that Coca- Cola Co. offers “environmental hardship pay” to some employees as a condition for relocating to some of China’s cities. Ed Hannibal of the HR consulting firm, Mercer LLC, indicates that it is not uncommon for multinational companies to offer the extra pay to incentivize workers to relocate to polluted cities. It helps to offset severe living conditions and ensure the company’s continued presence on the ground. 

These days it seems employers face an uphill battle to see non-compete agreements prevail in court.  Recently, a Louisiana state court carefully examined the terms of a non-compete in Gulf Industries, Inc. v. Boylan (La. App. 1 Cir. June 6, 2014).  The National Law Review reports that the employer in this case inserted a two year non-compete provision into a one-year employment contract. According to the Court, even though Boylan’s employment extended two years past the date specified in the employment contract, the non-compete provision kicked in when the one year employment term was satisfied. The employer sought to extend the non-compete, arguing that it did not take effect until Boylan resigned. The Court disagreed and held that the non-compete had run during Boylan’s continued employment with the company. Little did he realize at the time, but Boylan was quite the multi-tasker.

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