Before you read this, go ahead and open your desk drawer. Look beyond what may be some rather odd contents, and the fact that those contents may speak volumes about you.
Dig down and find the employee handbook that’s likely buried in there. There’s a good chance you got this on your first day of work, put in in the drawer, and haven’t looked at it since. But move those ketchup packets aside and pull it out, because the question for today is: does that book form a contract between you and your employer (or you and your employees, if you’re the owner of the business)?
Since Lance Armstrong confessed to Oprah last week that he used performance enhancing drugs, speculation about the legal consequences came faster than Dave Stoller drafting the 18-wheeler in Breaking Away. Some of the speculation is about SCA Promotions’ demand that Armstrong return the $7.5 million that it paid him to settle a lawsuit. Armstrong brought the lawsuit after SCA (an insurer of a sponsor) refused to pay him bonuses for his Tour de France victories, citing doping allegations. Armstrong’s lawyer has said that SCA is out of luck: “When SCA decided to settle the case, it settled the entire matter forever. No backs. No re-dos. No do-overs. SCA knowingly and independently waived any right to make further claims to any of the money it paid.”
In last week’s Inbox, we briefly discussed the dispute between rival insurers Aon and Alliant Insurance Services, Inc.; that lawsuit centers around Aon’s allegations that Alliant raided Aon’s top executives in violation of those employees' covenants not to compete contained within their employment agreements with Aon. That dispute is currently being fought via two parallel lawsuits brought in two different states, New York and California.
Ordinarily, the plaintiff is “master of his or her complaint,” meaning that even if a lawsuit could be brought in multiple jurisdictions, courts will typically defer to the forum chosen by the plaintiff. When parties have claims against each other but prefer different states, this doctrine often results in a so-called “race to the courthouse” in which the first party to file “wins” his or her chosen forum. The “first filed” complaint – the “winner,” if you will, then typically moves to either stay or dismiss the second-filed parallel jurisdiction in the “loser’s” state, and the “loser’s” court almost always complies. This may not be high-minded justice, but it is routine.
Or so we thought.
Document discovery in litigation is a way for parties to learn about the actual facts underlying a dispute. Sometimes, however, parties intentionally destroy documents in advance of litigation (which is called “spoliation”). Spoliation can have very serious consequences, including a court-imposed “adverse inference” instruction. When a court gives such an instruction, it tells the jury that it may assume that documents deleted in advance of discovery would have been bad for the party who deleted them.
This happened to Janet Murley, a former vice president of marketing for the Hallmark Group. As a result, she is now hundreds of thousands of dollars poorer.
When a dispute between executive and company reaches the point of litigation, usually the executive’s title begins with “former.” But not always. Sometimes litigation proceeds while the executive remains an officer or director of the company. How does the executive’s fiduciary duty to the company affect her litigation strategy and conduct?
When an employer fails to pay an employee wages that are due, the employer might have to pay far more than the amount it owed. Under the laws of a number of states, employees who don't receive earned wages can sue for those wages – and the wage laws may permit treble damages (i.e., a recovery of three times the amount of the lost wages) if the employee can prove the claim.
These kinds of wage laws don’t just apply to hourly employees, but can also be extended to cover C-level executives who are entitled to severance benefits and bonuses. Velarde v. PACE Membership Warehouse, Inc., 105 F.3d 1313 (9th Cir. 1997), shows how that might occur.
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.
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.”
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.
John J. Connolly
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