Aaron Morris' Business Law Alert

You Are Not Without Remedies if Someone Defames Your Business

Aaron Morris — Mon, 30 Apr 2012 18:49:55 -0800

I believe in freedom of speech. I fight for freedom of speech. I feel that I must tell you that up front because every time I report a victory in court on a defamation action, I inevitably get some push back, as though I am preventing someone from speaking their mind. Give me a few minutes to explain this case and you’ll see that freedom of speech is served by the fight against false speech.

In this case, my clients were a business (a corporation) and the individual who owns that business. The defendant was starting a business and traveled to an overseas company owned by my client (we’ll call that the "foreign company") and entered into a contract for the creation of some custom software.

And that is where the divergence in the two versions of the story begins. My clients assert (and proved at trial) that the software was fully functional and delivered on time by the foreign company. For reasons not important to the story, the defendant was unable to implement the software and blamed the failure of his start-up business on the software.

Let’s pause there. As I told the jury, if the defendant had elected to go onto Yelp or any other site and post a TRUTHFUL review of my client's business, no matter how harsh and critical, there would have been no action. Indeed, I said that if this was a case where a business was trying to silence a critic for an honest review, then I would have been sitting at defendant’s table in the courtroom defending him.

But that is not what defendant did.

This is the scenario that I see over and over in defamation cases. Someone becomes unhappy with a business or individual, and decides to criticize them on-line. It might even begin with a pure motive – just putting out the word to the public to avoid a business that did not satisfy the customer. But as the person types the words, he or she decides it’s just not stinging enough. In this case, the defendant must have felt that a legitimate review stating that in his opinion the software did not work as promised or was not delivered on time just wasn't hurtful enough. So the reviewer begins to embellish (which is a polite way of saying he lies).

In this case, the defendant took to the Internet and created blog posts about my clients on his own blog, and sent an email to my clients’ customers. Instead of saying the software was late, which is what he claimed at trial, he falsely claimed that the Plaintiffs had taken his money and never delivered anything. Late delivery would have been a breach of contract, but by claiming my clients never delivered anything, that turned it into fraud.

But that wasn’t enough.

He added the false statement that my clients had failed to pay vendors "hundreds of thousands of dollars."

No, still not damaging enough.

He falsely claimed that my client had "funneled work" to his own companies while employed by another company.

Better, but someone might still do business with them.

So he added the false statement, "They are swindlers of the highest kind and have milked many of their clients of money and time."

That should do it.

At his deposition and at trial, the defendant could not show that the software was late, he could not identify any work that was "funneled" away from my client’s former employer, he could not name one vendor who was not paid (or indeed even name a vendor), and he could not name a single client who was "milked of money and time."

Today, an Orange County jury, known for being very conservative with damage awards, awarded $1.5 million jointly and individually to both of my clients for the damage to their reputations.

The jurors got it. Afterwards, some of them expressed their concerns that they do not want people constrained from being critical on the Internet, but they all agreed that false speech like this does nothing to promote the "marketplace of ideas" that we all hold so dear. Even after spending so much time with this case, I still don’t know why defendant was so vicious toward my clients, but the jury agreed with me that a claim of free speech cannot be used as a defense by someone who only sought to destroy another with lies.

Even the Muckety-Mucks are At-Will Employees

Aaron Morris — Mon, 13 Feb 2012 12:46:34 -0800

When employees complain that they have no rights under California’s at-will employment presumption, I explain that it is something that can be negotiated like any contract provision. In other words, if you want a parking spot, negotiate for it. If you want the company only to be able to terminate you for cause, negotiate for it.

Of course as I offer this advice, I am cognizant of the fact that these sort of negotiations usually take place only in circumstances where the employee is bringing a very desirable skill set to the table. In other words, Mark Zuckerberg is probably in a better position to negotiate away the at-will presumption than, say, someone applying for work at Target.

Or is he?

In its registration documents for the upcoming initial public offering, the details of the contracts with Facebook’s top executives have been revealed. As it turns out, CEO Zuckerberg, along with COO Sheryl Sandberg and CFO David Ebersman are all at-will employees of Facebook.

So the next time an employee decries the at-will presumption, just tell them they are in good company.

Internet Defamation Requires a Fast Investigation

Aaron Morris — Wed, 08 Feb 2012 15:26:55 -0800

We were just able to help a client dodge a bullet, and the fact pattern provides a cautionary tale for all.

If you or your business is the victim of Internet defamation by an anonymous poster, and you decide to go after that person, you have many hoops to jump through to get the necessary information. Say you are being trashed on WeTrashPeople.com by an unknown person. (I just made up that name, but I’m sure someone will snatch up the URL.) Unless the site is one of the few that displays the IP address of the poster, you may have to go through three rounds of subpoenas to work your way back to the Internet Service Provider (ISP), such as Cox, Time Warner, or whomever. Complicating things, most ISPs use dynamic IP addresses. In other words, every IP address is used by different subscribers at different times. It is not enough just to know the IP address of the person who posted the lies about you, you must find out who that address was assigned to at the precise time and date the comment was posted.

And that is why you must move quickly. The ISPs all have their own policies on how long they retain that information. If you wait six months to retain counsel to go after the person who is defaming you, by the time the attorney works through the subpoena process, the essential information may be gone.

It appeared that was going to be the case with our client, who waited too long before contacting us. We traced the information all the way back to the ISP, who responded to our subpoena by stating that the information was not retained. With some additional pressing by us, the ISP revised its position and coughed up the information, but that could have been the end of the road for the client’s action.

Bottom line: If you are the victim of defamation, and you think you want to pursue an action, move quickly. Filing an action does not mean you are committing yourself to going to court. More often than not, once we have identified the defamer, an informal resolution can be reached. On multiple occasions we have discovered that the defamer is a competing business who is posting false reviews. They are more than willing to remove the comments once they have been exposed to the light.

Britain's ASA Announces that On-Line Reviews May Not be Trustworthy

Aaron Morris — Mon, 06 Feb 2012 21:57:57 -0800

I found a news squib I came across today to be particularly interesting because it follows the precise example I often use to explain the difference between opinion and a statement of fact, and it shows how one country is dealing with reviews posted for extortionist purposes.

First, the example. If you eat at a restaurant and later post a review that says the food tasted like poison, you are probably safe from a claim for defamation. Most would agree that is mere hyperbole; that you are offering your opinion that the food tasted bad, not that you actually meant it contained poison.

On the other hand, if you say that the food did, indeed, poison you, then you’d better be able to back it up with hard evidence. The first cannot be measured – what you think poison tastes like is your opinion. The second statement can be tested, because we can see if the food that day could have lead to food poisoning.

Now to the real life application. It seems that one of the latest fads in Internet extortion is for a reviewer to post a review claiming that he suffered food poisoning at a restaurant. The extortionist then offers to accept, say, $5,000 for the pain and suffering of the poisoning and, oh, incidentally, offers to take down the terrible review as well. Other times the offer to remove the post never comes, because the false allegation of food poisoning is from a competitor.

This bogus review scam has become so rampant in Great Britain that the Advertising Standards Authority (ASA) has informed TripAdvisor that it can no longer claim or even imply that its on-line restaurant and hotel reviews can be trusted. The news item added that it is not always the case the reviewer knows he or she is lying. When one suffers legitimate food poisoning, they almost always blame the last place they ate, not realizing that the incubation period for a good case of food poisoning is usually one or two days, and can take as long as a week. In most cases, it is impossible to know which restaurant is responsible for the poisoning except by finding a common restaurant among a group of victims.

Wrongful Termination Plaintiffs Permitted to Testify as Their Own Experts

Aaron Morris — Mon, 16 Jan 2012 22:04:00 -0800

How would you like to be the employer in this case?

Two police officers at the University of Texas Medical Branch (UTMB) refused to arrest a patient, saying there was no probable cause and the arrest would therefore be illegal. They were shown the door, and now are suing for wrongful termination.

Firing an employee for refusing to break the law is a violation of public policy, and therefore is a wrongful termination. Thus, this entire case will come down to whether it would have been unlawful for the officers to make the arrest, an issue that might be open to the testimony of an expert witness who can explain the law of probable cause.

So, the time came in the case to designate the expert witnesses, and the plaintiffs designated themselves! Counsel for UTMB screamed, claiming that the judge was the best person to decide the issue of probable cause. Besides, counsel argued, the officers had not provided resumes or articles published in legal journals to show their expertise.

Silly counsel, resumes are for . . . well that doesn't really work. But the standard for an expert is not nearly as high as what you argued. There is no requirement that a person be published or have a curriculum vitae in order to be an expert. He need only show that the has sufficient knowledge of a subject to be able to offer an opinion that would be helpful to the jurors. Seems to me that police officers with training and years of experience would be able to provide meaningful testimony as to what constitutes probable cause.

The judge denied the request to exclude the expert testimony of the officers. A more detailed article about the case can be found here.

This is the flip side of the coin I wrote about in Don't Bet Your Job on Whether You're Right. In that case, a City employee decided that depositing a certain check would be illegal, and refused to do so on that basis. She lost her wrongful termination case, because the judge decided it would not have been illegal to deposit the check.

Video Shows A New Way Terminations May Haunt Employers

Aaron Morris — Sat, 14 Jan 2012 23:06:31 -0800

"Pregnancy Discrimination" -- one of my firm's practice areas -- popped up in my Google Alerts, and the link took me the the YouTube video below. The video is of a visibly pregnant woman, complaining about how she suffered job discrimination at work due to her pregnancy. People using YouTube videos to vent is nothing new, relatively speaking, but I found this video interesting for a couple of reasons.

First was the fact that it came up so readily in a search. A Google search for "pregnancy discrimination" yields 1,520,000 hits. The video was posted on January 9, 2012, and five days later I was seeing it in my Google Alerts. Thus, employers need to know that even a modest effort as in the case of this video could quickly put a business in a negative light.

The second point of note is how persuasive it is because of the calm manner it was presented. The woman, who identifies herself only as "Angel", is not screaming or making outrageous claims; she just sets forth the facts like she is making a closing argument at trial.

In this case, the employer will probably receive little if any backlash. The audio is pretty poor (Angel, the most important part of a video is the AUDIO!), it has fewer than 100 hits at the time I am writing this, and I don't believe she ever identifies the employer, only her union. Nonetheless, the video offers a valuable lesson.

An employer always ran the risk that a termination would result in a lawsuit, but could minimize the chances of a successful suit by making certain all laws were followed AND that the termination did not have the appearance of impropriety. That second element is now especially important, because even if the employer can prevail in civil court, it might still be found guilty in the court of public opinion, with a concomitant impact on the bottom line.

Most Hated Corporate Buzzwords

Aaron Morris — Thu, 29 Dec 2011 17:14:02 -0800

CareerBuilder.com did a poll to determine the most reviled corporate buzzwords. Incredibly people are still uttering "outside the box", which is the most hated term by 31 percent of the respondents.

The rest of the list:

Low-hanging fruit (24 percent)
Synergy (23 percent)
Loop me in (22 percent)
Best of breed (19 percent)
Incentivize (19 percent)
Mission-critical (19 percent)
Bring to the table (18 percent)
Value-add (17 percent)
Elevator pitch (16 percent)
Actionable items (15 percent)
Proactive (15 percent)
Circle back (13 percent)
Bandwidth (13 percent)
High level (10 percent)
Learnings (9 percent)
Next steps (6 percent)

So what is the importance of this list to you? Just know that if you choose to bring these cliches to the table, you might incentivize others to circle back on you.

Cell Phone Law Could Spell Trouble for Employers

Aaron Morris — Thu, 15 Dec 2011 13:22:12 -0800

My business partner Deanna Stone wrote an excellent article back in 2008 about how the (then) new hands free cell phone law could expose employers to liability if a worker, on company business, caused an accident while in violation of the law. Now we get news that the National Transportation Safety Board wants a law passed that will ban any cell phone use while driving*, hands free or not. Ms. Stone's advice was good then and is good now. As she said:

Taking these simple precautions can reduce an employer’s potential liability for damages relating to employee violations of the new law:

(1) Draft and distribute a clear policy on the new law in employee handbooks, and have your employees sign an acknowledgment of receipt of the new policy or new handbook incorporating such policy.

(2) When issuing a cell phone to new employees, provide a copy of the new law, the company’s policy on such law, and again have the employee sign an acknowledgment of receipt of such material.

(3) Have a training class for all employees on the new law, the company’s new policy requiring employee compliance with said law when using the company cell phone or their own personal cell phone if used to conduct company business.

(4) Provide or post information on the new law and your new company policy in the office kitchen, break room or other public areas in your office.

(5) Inform employees that they company will not foot the cost for violations of the new law, and that they will be personally liable if they choose to violate the new law.

(6) Create a disciplinary policy for any employee who violates the new law, which ultimately can lead to the termination of the violating employee.

(7) If you employ minors, you should taken even greater precautions with such employees especially if their job duties include driving for work purposes. It is a great temptation to a teenager to simply text a friend while driving, and this is a violation of the new cell phone law.

Yes, it's crazy** that the Feds feel compelled to be so ridiculously paternal, and that we need to jump through these hoops as a result, but we're here to keep you off the path of liability.

* I happened to see a reported case from another state that interpreted a statute that made it illegal to text and drive. While stopped at a stop light, the defendant fired off a quick text message and got a traffic ticket for the dastardly deed. He took it all the way to the Court of Appeal, which agreed with the trial court that sitting at a stop light is still "driving".

** Why do I see this as crazy? Because we only need a law that makes it illegal to perform an act that distracts from driving. If you are reading a newspaper while driving, you deserve a ticket and we don't need a law that singles out newspaper reading. How is talking hands free while driving any more distracting than, say, singing along to "Freebird" (which necessitates a lot of head nodding and air guitar), yet we don't have a no Freebird law (yet).

Morris & Stone Gets Triple Damages and Attorney Fees for Fraud

Aaron Morris — Sat, 22 Oct 2011 13:14:55 -0800

When is a breach of contract also fraud? When the party never intended to perform.

When do you get triple damages and all of your attorney fees for fraud? When you hire Morris & Stone (although your results could differ).

Breach of contract is easy to spot, but business owners are often confused about what constitutes fraud. Someone fails to pay all the money owed on an invoice, and the client wants us to add a cause of action for fraud. That's probably not fraud.

The elements of fraud are (1) a misrepresentation of a material fact; (2) made with the intention that the party rely on that representation to his detriment; (3) reasonable reliance on the misrepresentation; and (4) damages. As you can see from the above elements, in the case of a contract, for there to be fraud the fraudulent intent must exist at the time of the contract. If a person enters into a contract intending to perform, if he later fails to perform, that breach will not transmute into fraud no matter now egregious and flagrant his breach. To prove fraud, you must show that at the time the defendant entered into the agreement, he had no intention of performing.

So how do you get into the mind of the defendant to determine if he intended to perform when he signed the agreement? Thankfully, California courts have held that the behavior after the contract was signed can be used to show that the defendant never intended to perform. In our case, the defendant borrowed a significant amount of money from our client, and pursuant to the agreement that money was to be invested in a business venture. The money was never repaid, and our client hired us to recovery the money.

We went her one better. We sued for fraud, because we could see no indication that the money ever went into the business venture. We felt that would be sufficient to show that at the time of the contract the defendant did not intend to perform. He was free to argue that he intended to invest the money at the time of the contract and therefore it was not fraud, but how would he explain that the money was never used for the intended purpose? As we suspected, defendant fought us on discovery, and when we compelled him to respond, he could not provide any proof that the money had ever gone to the business.

But here is where we got really creative. There is a criminal code section that makes it illegal to receive stolen property, and allows a victim to bring a civil action against the criminal to recover three times the value of the stolen property. We sued under that section, alleging that the entire loan process had just been a artifice to relief our client of her money. In other words, he stole the money from our client through a bogus business venture, and kept that money for himself. It was no different than if he had stolen the money by hacking into her checking account. The fact that he used loan documents to steal the money did not make it any less of a theft.

A fact pattern that will support this breach of contract/fraud/theft approach does not arise very often, but we have tried it twice before. In both of the prior actions, we won on the breach of contract and fraud causes of action, but could not get the judge to consider the theft cause of action. The theft cause of action provides a real conceptual hurdle for most judges. Many judges are former District Attorneys or Public Defenders, and their criminal law backgrounds taught them that a criminal cannot be convicted of both stealing property and receiving that property. Yet, here I am arguing to them that I want damages under a statute dealing with receiving stolen goods even though this is the same person that stole the goods (here, the money). In reality, the law says that someone cannot be convicted of both offenses, but can be charged with either. Indeed, the law says that if the statute of limitations has passed for the theft of the goods, the thief can still be charged with receiving the property, because the statute actually states that it is an offense to receive or exercise control over the stolen property. Thus, the same person that steals the property is guilty of exercising control over it if it still has not been returned.

The second conceptual hurdle involves the erroneous concept that the defendant must have been convicted of the offense before the civil suit can take place. After all, the judges reason, the legal standard for the burden of proof on a criminal conviction is beyond a reasonable doubt, whereas in civil court it is just more probable than not. How can a defendant be made to pay under a criminal statute when he has never been convicted of the offense? Complicating the matter, no reported decision has ever discussed the civil remedies under the criminal statute upon which we were relying.

In reality, these concerns are easily disposed of, but the judge must be made to wrap his mind around the concept. In the latter case, no criminal conviction is necessary because it still must be shown in the civil action that the defendant committed the offense. Other cases involving civil enforcement of criminal statutes have made clear that the primary reason the statutes provide for a civil remedy is that law enforcement does not always have the will or resources to go after a criminal. A victim of a crime should not be dependant on the vagaries of the criminal system in order to seek redress. For example, there is a statute that permits cable companies to seek civil damages for the theft of a cable signal. What are the odds that police departments around the state are going to devote resources to going after cable thieves? Therefore, the Court of Appeal held that cable companies can prosecute under these criminal statutes whether or not the defendant has ever been criminally charged. It's a win-win. The cable company can become its own police force in order to discourage cable thieves, and the government need not devote resources to that purpose.

So it is here. There would be little disincentive to using false pretenses to "borrow" money if the worst that could happen to the defendant was that he would someday be ordered to return the money. Morris & Stone uses this criminal statute to impose a quasi-criminal remedy on the defendant, providing a much greater disincentive regarding this type of fraud, since the defendant must pay back three times the amount he took.

This judge finally got it, and tripled the damages, awarding our client three times what she had loaned to the defendant. As a huge bonus, the statute provides that the defendant must pay all attorney fees incurred by the plaintiff. Absent a contract provision, you are not entitled to recover attorney fees under a breach of contract case, and rarely under a fraud claim. Since we used this criminal statute, the court also awarded our client her attorney fees.

We might just start wearing badges.

Target Pays $160,000 Settlement for Failing to Accommodate

Aaron Morris — Wed, 06 Jul 2011 10:08:04 -0800

Target Corp. has agreed to pay $160,000 to settle federal allegations that it discriminated against an employee with cerebral palsy. The case was brought by the U.S. Equal Employment Opportunity Commission, which alleged that Target had cut the hours of Jeremy Schott, an employee of an Orange County, California Target, and that Target had failed to make reasonable accommodations for Schott's disability.

According to court records, Schott was originally hired int 2002 at a part-time stocker and later worked as a cart attendant. Schott's cerebral palsy caused a seizure disorder and some cognitive difficulties, but it was alleged that he could perform all of his job duties with the help of a coach.

Schott performed his job well, and even received an award for his work performance. However, in 2004, after he took a medical leave following a seizure, Target reduced his hours to as little as eight hours per week. The EEOC also alleged that the company failed to ensure Schott's parents or job coach were present during performance reviews and other work meetings. Perhaps most damning of all, the EEOC asserted that Target had failed to engage in any meaningful discussions with Schott regarding possible accommodations.

Under the settlement, Target agreed to pay Schott $5,000 in lost wages and $155,000 in compensation for emotional pain and suffering.

Lesson for all businesses: Employers sometimes attempt to justify termination of a disabled employee without any meaningful accommodation discussion by arguing that the terminated employee never requested it. United Airlines, the airline that breaks guitars, made such an argument. As United Airlines learned, that argument will not fly with California courts.

The Second District Court of Appeals held that the law does not require an employee to somehow "invoke" the protections of the law; they are already there. If the employer knows or should have known that the disability existed, it is the employer's duty to open the dialog for reasonable accommodation.

Sometimes an employee will deny being disabled, until he is terminated for poor job performance and then claims it was disability discrimination. In that case, an employer might find some protection. The court ruled that an employer has no duty to accommodate an employee who denies having a disability. Prillman v. United Air Lines, Inc. (1997).

Class Action Against Twitter Shows Need to Act Paranoid

Aaron Morris — Sat, 30 Apr 2011 12:15:17 -0800

In a recent T-Mobile commercial, in explaining why you pay more for slower Internet access, a character playing the part of an attorney says, "It makes sense if you don’t think about it too much." That will apparently be the argument made by the California attorney that filed a recent class action against Twitter.

Here is how this fight for justice came about. Twitter, like many other services, allows users to opt-in to text notifications. For example, let’s say you were new to Twitter, and you wanted to receive a notification whenever someone sent you a direct tweet. You can instruct Twitter to send a text to your cell phone each time you are tweeted. Then let’s say that you enjoyed these notifications for a few months, but soon you became so popular that your phone was dinging like the bells of Westminster Abbey with notifications of incoming messages.

No problem. Twitter makes it easy to turn off the notifications. Rather than to make you go on-line and make the change, or even to drill down through the notification settings on your phone, all you need to do is respond to one of these text notifications with the word "stop". Twitter politely and efficiently responds with a test message notifying you that your message was received, and never again do you receive anymore text notifications from Twitter, unless and until you turn them back on.

So how could any attorney find fault in this perfect system? Well according to the allegations of the complaint, this process violates the Telephone Consumer Protection Act ("TCPA"). You see, in order to prevent consumers from receiving spam text messages, the TCPA makes it illegal to send text messages unless they were authorized by the recipients. According to the lawsuit, although the messages were authorized by the initial opt-in, when the word "stop" was sent, that removed any authorization. Therefore, the text acknowledging that you would not be receiving any more text messages was not authorized, even though by sending "stop" you are seeking a response by Twitter and any rational person would appreciate confirmation of the request. It makes sense if you don’t think about it too much.

Lesson for all businesses: California is the class action capital of the country. When deciding if something you are doing or contemplating could get you in trouble, don’t just run it through rational thought, but imagine also that there are attorneys out there with no scruples, that will view the conduct in irrational ways in order to cobble together an action against you. (See my prior article on the attorneys that brought a class action because there were no crunch berries in Captain Crunch.)

Does this mean you must bow to the threat of legal action? Not at all. Text notifications are too important to the expansion of Twitter to forego, but with a little tweaking this frivolous action could have been made even more frivolous, perhaps even to the point that it would never have been pursued. Twitter could have added a few words to its terms of use, explaining that a confirming message would be sent in response to the opt-out request. Yes, that is not something that should need explaining, but with that additional clarification the user would have been authorizing the final message, and Twitter would not need to deal with this ridiculous suit.

Be Ever Vigilent to Avoid Disablity Discrimination Claims

Aaron Morris — Mon, 14 Mar 2011 18:32:41 -0800

The calls to our office involving claims for disability discrimination seem to be rising exponentially, and a recent report by the Equal Employment Opportunity Commission explains why.

The EEOC reports that one-quarter of all the discrimination complaints filed with the agency in 2010 involved disability discrimination claims. There are probably many factors involved in that statistic, but I suspect a major factor is the willingness of plaintiffs’ attorneys to pursue such claims. Discrimination claims based on age, for example, can be hard to prove. If age is truly the motivation behind some adverse job action, it is unlikely that the employer telegraphed that fact. The proof of discrimination will need to come from a showing of disparate treatment, with little or no direct evidence that the employer had it out for older employees. But with a disabled employee, proof of discrimination can come from the failure to accommodate the disability, making the proof much easier.

The recent Supreme Court case of Roby v. McKesson Corp. illustrates the point. In that case, the plaintiff was a valued employee for more than a decade, but began taking medicine to deal with some stress issues. That medicine apparently came with some side-effects, including body odor and open sores cause by her scratching herself. She was sometimes unable to go to work, but she could not always comply with the company’s requirement of 24 hours notice (and, frankly, how often does any employee know 24 hours in advance that he or she is going to be sick?). Add to this, the supervisor was alleged to have berated her at meetings about her condition. She sued and obtained a judgment for $20 million, although it was subsequently reduced to $4 million.

In another case, Sandell v. Taylor-Listig, Inc., an employee suffered a stroke, resulting in his use of a cane and slowed speech. The company eventually terminated him, and he sued for discrimination. The trial court threw out the case on a motion for summary judgment, but that ruling was reversed on appeal, finding that while the company had claimed the termination was for poor performance, there was sufficient evidence to let a jury decide whether that claim was a pretext.

Lesson for businesses: The definition of what constitutes a disability is very broad. If you have an employee claiming some condition that is limiting their ability to work or which needs some special accommodation, listen. You have an affirmative duty to engage the employee in a good-faith dialogue to determine what can be done to accommodate the condition, even if the employee never makes such a request.

Is Sexual Harassment Ever Permissible in the Workplace?

Aaron Morris — Thu, 17 Feb 2011 11:27:13 -0800

Back in the days before the term "hostile work environment" had yet been coined, a valid claim of sexual harassment usually required that a supervisor was using his position to seek sexual favors from a subordinate. Then it evolved that the perpetrator did not need to be a supervisor, but sexual harassment could exist when the company failed to protect an employee from improper harassment, even at the hands of peers. And then finally it came to be that the perpetrators did not even need to be employees; even customers or others could create a hostile work environment.

But how do the courts handle it when, from all indications, a hostile work environment is seemingly an inherent part of the job? How would that ever arise, you ask? Well, the most famous case in this regard is Lyle v. Warner Bros. Television Prods. In that case, the plaintiff was a writer’s assistant on the "Friends" television show. She took exception to the sexually charged nature of the writing and production process, which included meetings that were fraught with sexual comments and innuendos, often demeaning to women. She lost her action after the court determined as a matter of law that a show about sex and other adult themes could not be written without reference to and meetings about sex and other adult themes.

Some thought Lyle would be the first of many cases to recognize that a hostile work environment is unavoidable in some industries. For example, can a female prison guard claim hostile work environment because the prisoners are always peppering her with sexual comments? Well, funny you should ask because that is the precise situation that arose in Freitag v. Ayers. There, a prison guard at Pelican Bay state prison finally had enough and sued based on a hostile work environment. The prison thought it had an out with the Lyle reasoning, since prisoners will be prisoners and the prison cannot control their behavior. But the court disagreed, and held that even where the harassment is likely to occur, the employer must take reasonable steps to end the harassment. The facts of Lyle were very specific, and if a prison is required to shield female guards from mouthy prisoners, then there will be few circumstances where a hostile work environment will be found to be a necessary evil.

Lesson for all businesses: The duty to protect from a hostile work environment goes far beyond protecting employees from supervisors. Businesses must provide a shield from all people the employee comes in contact with, whether it be other employees, customers or vendors.

Retaliation Claims Can Extend Beyond the Employee

Aaron Morris — Tue, 25 Jan 2011 17:23:01 -0800

I have always made this claim, but the Supreme Court finally agreed with me.

Title VII makes it illegal for an employer to retaliate against an employee who has filed a discrimination claim. But what if an employer is genuinely evil, and knowing that attacking the employee would be obvious retaliation, instead seeks to put that employee in her place by demoting a spouse or firing a friend? Can that other person also invoke the protections of Title VII, arguing that even though he did not file the complaint, he is protected from retaliation?

That is the situation that allegedly arose in Thompson v. North American Stainless. Miriam Regalado, a female employee, filed a sex discrimination claim, and three weeks later, according to the suit, the company fired her fiancée Eric Thompson. Thompson sued under Title VII, claiming the company had fired him to retaliate against Regalado for filing her complaint.

The District Court was not impressed with the complaint, holding that Title VII did not permit this sort of third-party claims. The Court of Appeals for the 6th Circuit agreed, but the Supremes reversed.

"Thompson was an employee of NAS, and the purpose of Title VII is to protect employees from their employers' unlawful actions," he wrote. "Hurting him was the unlawful act by which the employer punished [Regalado]." In those circumstances, said Scalia, Thompson is "well within the zone of interests" protected by Title VII.

With this opinion, the Supreme Court has cleared up a split of decisions among differing districts. Third-party claims now have the green light.

Lesson for businesses: As I have preached here before, in the context of employment law, perception is reality. The reasons and motives of North American Stainless for terminating Thompson may have been perfectly appropriate, but the timing was terrible. The company created a new claim, and bolstered the original claim. The flagpole watcher approach would have been a better option.

A Primer on SLAPP Suits and Anti-SLAPP Motions

Aaron Morris — Tue, 14 Dec 2010 12:47:35 -0800

I routinely receive calls from parties and attorneys who have run afoul of California’s anti-SLAPP statute. Since most of the calls arise from defamation actions, I previously did not think the topic was appropriate for this business blog, but recent events have changed my mind. Some of my own anti-SLAPP motions have arisen in the business context, as well as the inquires from other attorneys. It is clear that business people need to have at least a cursory understanding of what constitutes a SLAPP action before pursuing litigation, since it is equally clear that many attorneys are not conversant with this area of the law.

What is a SLAPP suit, and what is an anti-SLAPP motion?

A "SLAPP suit" is a lawsuit that is intended to censor, intimidate and silence critics by burdening them with the cost of a legal defense until they abandon their criticism or opposition. I use the expression Spurious Litigation Against Public Participation, since that better captures both the goal of the plaintiff and the nature of the lawsuit, but the standard verbiage is "strategic lawsuit against public participation".

The action is spurious and frivolous because the typical SLAPP plaintiff does not care whether he wins the lawsuit, and often knows he has no chance of prevailing. The plaintiff's goals are accomplished if the defendant succumbs to fear, intimidation, mounting legal costs or simple exhaustion and abandons the criticism. The heart of California’s anti-SLAPP legislation is set forth in subpart (e) of Code of Civil Procedure section 425.16, which provides:

(e) As used in this section, "act in furtherance of a person's right of petition or free speech under the United States or California Constitution in connection with a public issue" includes:

(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law;

(2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law;

(3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest;

(4) or any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.

To win an anti-SLAPP motion, the defendant must first show that the speech in question falls under one of the four sections set forth above. But that is just the first prong of the analysis. If the defendant proves the speech was protected, the plaintiff can show that he is still likely to prevail on the action. In other words, defamatory speech is not protected simply because it falls under one of the four sections.

So how do you know a SLAPP action when you see it? That is not always obvious, and as many attorneys and their clients have painfully learned, failing to recognize they have created a SLAPP can be extremely costly. One of my recent anti-SLAPP successes provides a good example of how an attorney can be caught in this trap.

I’ll Sue You if You Sue Me.

In this case, our (future) client had entered into a settlement agreement with the defendant in a prior action. The settlement agreement required the defendant company to pay damages to our client, and contained a confidentiality agreement. Two years after the settlement agreement was signed, the defendant had still not paid the damages to the plaintiff, so he retained our firm to sue to collect the money due under the agreement.

We filed the action for breach of contract, attaching a copy of the settlement agreement. The defendant answered the complaint and also filed a cross-complaint, claiming that it was a breach of the confidentially agreement to attach the settlement agreement to the complaint. Incidentally, counsel for defendant had discussed with me his intention to cross-complain on this basis, and I had warned him that would be a really bad idea. He did so anyway.

The reason the cross-complaint was a bad idea was because it was a SLAPP. Do you see why? Remember again what SLAPP stands for – Spurious Litigation Against Public Participation. Under section 42516(e)(1), "any . . . writing made before a . . . judicial proceeding" is an "act in furtherance of person’s right of petition." Defendant had breached the settlement agreement, so clearly we were entitled to sue for breach of that contract. That is the public participation – taking a case before a court for redress of a grievance. By claiming that we had breached the agreement by attaching the confidential settlement agreement, Defendant was just suing our client for suing. Stated another way, the defendant company was in essence saying, "for daring to make our breach of the agreement public, I’m going to sue you." I filed an anti-SLAPP motion against the company for the cross-complaint.

So let’s run this case through the two-prong, anti-SLAPP analysis. Our burden was to show that the speech was protected under the anti-SLAPP statute. The speech here was the complaint itself, with the settlement agreement attached. Filing a complaint is a specifically protected activity under the anti-SLAPP statute, and comments made in conjunction with litigation are protected under Section 47. There was no issue that our complaint was a protected activity.

That takes us to the second prong, by which the plaintiff, here the cross-complainant, must show a reasonable likelihood of success on the merits of the case, even if the speech is a protected activity. The company had failed to pay our client the money due under the agreement, so it was clearly in breach, and therefore could not possibly prevail on its own breach of contract claim, since one of the elements of a breach claim is performance.

The court granted our anti-SLAPP motion, to the utter shock of opposing counsel. Counsel had argued that the motion could not be granted because the facts were in dispute. He erroneously thought that, like a motion for summary judgment, the evidence cannot be weighed. But an anti-SLAPP motion is supported by evidence. We provided evidence that the money owed had never been paid, and there was no evidence that could be presented to the contrary.

The company must now pay all of our client’s attorney fees. Fortunately for the company, I am very efficient at these motions, but I have received calls from attorneys facing fees exceeding $100,000 after they unwittingly created a SLAPP action.

Bottom line for businesses: You probably have no desire to become acquainted with the minutia of California’s anti-SLAPP laws, but if you are going to be involved with any litigation, whether bringing or defending an action, the possibility of a SLAPP action needs to be on your mental checklist. As the above example illustrates, it may never be a thought to your attorney, and you will be the one to pay the price.

Another Crack in the Community Tip Jar -- Lu v. Hawaiian Gardens Casino, Inc.

Aaron Morris — Tue, 10 Aug 2010 14:53:54 -0800

Back in June of 2009, I wrote about the Starbucks tipping case. Some rascally class action attorneys had won a huge payday, claiming that Starbucks was violating the sanctity of the community tip jar. You see, Labor Code section 351 states that no "employer or agent" shall take any part of the gratuity "left for an employee by a patron." An "agent" is defined by section 350(d) as anyone who can hire or fire, or who controls the acts of the employees."

The attorneys managed to convince a Superior Court Judge in San Diego that when Starbucks permitted "supervisors" (you know, the ones that make 25 cents an hour more because they’ve been there the longest) to take a cut of the community tips, that violated section 351. The judge awarded $105 million in damages for this outrage. Since Starbucks would need to sell like a hundred Caramel Macchiatos to cover that, it appealed.

The Court of Appeal said, "hold the foam." The flaw in the logic is obvious (understanding that I always have perfect 20-20 hindsight with court decisions). When I sit down at a restaurant, enjoy my meal and the service, and then leave a tip, I am leaving a tip for my specific server. However, when I order a latte at a Starbucks and drop my change into the tip jar, who am I tipping? I'm certainly not intending to tip only the barista. At that point, I don’t even know who is going to prepare my beverage (or even if it will be tip worthy). It is probably far more likely that I'm tipping the friendly cashier that accurately took my order and retrieved my scone. Or perhaps my intent was to tip the person that cleaned the washroom where I washed my hands before stepping up to the counter. As you can see, in the case of a community tip jar, we can never truly know who generated the tip, so it makes much more sense to assume that it is my intent to tip everyone working there, who have all joined to make this such a special coffee experience, from the supervisors down. Hell, I wouldn’t even mind if the owners took a cut, because after all they are the ones that hired the fine people who cleaned the restroom, who took my order, who retrieved my scone and who made the Venti, whole milk, extra hot latte that Aaron drank.

Indeed, the Court of Appeal concluded that the purpose behind section 351 was not so much to quibble about splitting up the tips, but rather to "prevent a fraud on the tipping public" by prohibiting an employer from giving a tip left for a server to someone not intended by the tipper. There is no such fraud with the Starbucks tip jar.

Today, the California Supreme Court put another crack in the ol’ tip jar. In Lu v. Hawaiian Gardens Casino, Inc., former dealer Louie Hung Kwei Lu sued the casino, claiming its policy of requiring dealers to segregate 15 or 20 percent of their tips and pay them into a community tipping pool violated the statute. Lu launched his action before I had written my Starbucks article, so without the benefit of that wisdom, he felt it was unfair that a percentage of "his" tips were being distributed to various service workers, including the people who brought him his chips, host, floor people and concierges. But in Lu’s defense, a dealer's situation is slightly different than the community tip jar at Starbucks. When someone gives a tip to a dealer, he or she is usually thanking the dealer for a good hand. It is far more likely that tip is intended for and directed at the dealer, not the people who support him. Thus, under the reasoning of the Starbucks case, splitting the dealer's tip would be a fraud on the tipping public.

But the Supreme Court dealt Lu a bust hand, upholding the ruling of the Court of Appeal. It gave no thought to the intent of the tipper, but instead decided that Labor Code section 351 does not provide a private cause of action for violation of that section. Rather, the penalties for violating the statute are built in. Section 351 provides that an employer who violates section 351 is guilty of a misdemeanor, and can be fined or even imprisoned. The statute does not also permit doubling down with private actions by the employees themselves.

But Lu, or at least others who follow, did win the side pot. While the Supreme Court held that there is no private action under section 351, the court noted there would be nothing preventing a claim under some other theory, such as common law conversion (the civil law equivalent of theft).

In-House Counsel's Negligence is not Imputed to Company

Aaron Morris — Tue, 11 May 2010 10:02:05 -0800

Companies and their in-house attorneys were given an amazing gift by the California Court of Appeal this week.

The case in question arose from an innocent little wage claim. Maria Gutierrez was a cashier at a gas station owned by G&M Oil Company. She sued G&M, claiming that the company had failed to provide workers with meal breaks or to compensate them for the time they would spend counting out their registers at the end of a shift.

G&M was represented by Michael Gray, who was both the family-owned company's Vice President and General Counsel, as well as the son of the company's CFO. According to the court's opinion, the trial court entered a $4 million default judgment against G&M after Gray failed to defend the action. Not surprisingly, G&M removed Gray and brought in outside counsel to challenge the huge judgment with a motion to vacate.

The motion to vacate presented some interesting issues. Under Code of Civil Procedure § 473, a court "shall" grant a motion to vacate if the attorney screws up, and is willing to sign what is referred to as a "mea culpa" declaration, admitting his or her mistake, and begging that it not be imputed to the client. But here, since Gray was the Vice President of the company, he in essence was the client, so the mea culpa declaration was basically saying, "don't hold me responsible for what I chose to do." Unlike an innocent client who did not know that his attorney was dropping the ball, shouldn't a company be held to the decisions of its attorney when that attorney is part of the company? The trial court did not think so, and ruled that an attorney is an attorney, whether in-house or not. The trial court granted the motion to vacate, threw out the default judgment and put the matter back on the trial calendar.

Labor claims are typically handled on a contingency basis, often for one-third of any amount recovered, and the Labor Codes provide for recovery of all attorney fees, so you can imagine how crestfallen plaintiff's counsel was when the court threw out what may have been a more than $1.4 million pay day. The ruling on the motion to vacate was appealed.

The Court of Appeal sided with G&M, and upheld the trial court's decision to vacate the judgment. The court was willing to view Gray as wearing two hats. Yes, he was an officer of the company, but for purposes of the litigation he was acting as the company's general counsel, and not as an officer.

Was the ruling by the Court of Appeal correct? Often bad facts make bad law. The specter of a four million dollar default judgment, combined with the fact that, according to the decision, Gray had kept the action a secret from the rest of the company officers, meant that the trial court and then the court of appeal were both going to look for a way to provide relief. Further, there is a very strong public policy that matters should be decided on the merits, and not on technicalities. Therefore, the case was probably decided correctly, but there was a wrinkle that may have eluded the Court of Appeal.

I have defeated motions to vacate in the past by showing the court that the attorney in question is not providing a true mea culpa declaration. The attorney must ask for relief based on a mistake, not on a failed litigation strategy. In one case, I sued a company but the attorney for the company decided the matter was subject to an arbitration provision and simply refused to participate in the litigation. Just as in this case, after I obtained the substantial default judgment, the company brought in new counsel and filed a motion to vacate using the former attorney's mea culpa declaration. However, I defeated the motion by persuading the court that the attorney was not admitting to any mistake, but rather was continuing to argue that the matter had to be submitted to arbitration. The court agreed that an attorney cannot try one strategy, and if it fails, file a mea culpa declaration and go to plan B.

With this week's ruling by the Court of Appeal, companies with in-house counsel could try that approach. An individual defendant who knows about an action and simply decides to ignore it will not be granted relief on a motion to vacate, because there has been no mistake or inadvertence – the party just chose to ignore the action. Gray, the Vice President of G&M, attended two status conferences in the matter, and for whatever reason elected not to pursue a defense. Why is G&M getting a pass from that decision, when an individual defendant would not?

The mea culpa declaration approach of section 473 is self-policing in the sense that an attorney will not file a mea culpa declaration unless there has been a real mistake, because he or she is basically admitting to malpractice. With in-house counsel, especially where the counsel is an officer, the corporation could simply instruct the attorney to file the mea culpa declaration, whether or not the attorney agrees there was a mistake, since the attorney will know he is not exposing himself to a malpractice claim.

The Court of Appeal's ruling can be found here.

Don't Play Fast and Loose With Discovery Responses

Aaron Morris — Tue, 06 Apr 2010 10:22:45 -0800

A very interesting case out of federal court in Atlanta today provides some important lessons for businesses.

In the case, Lockheed Martin Corporation and L-3 Communications Integrated Systems are suing one another. Both companies make some nice money refurbishing military aircraft around the world. Problem is, according to Lockheed, L-3 got into the business working as a subcontractor for Lockheed, and then used Lockheed's trade secrets to go off on its own. For its part, L-3 claims that it is not using any trade secrets, and alleges that the entire action is but an attempt to stifle competition, and therefore amounts to antitrust.

After a three-week trial, the jury found in favor of Lockheed and awarded $37.3 million in damages, representing the amount of profit Lockheed claimed it would have made from a 427 million dollar contract L-3 obtained, plus some breach of contract damages. However, the jury did not award punitive damages. Lockheed also sought $16 million in legal fees.

Now the fun begins.

I've written here before that trade secrets must be actual secrets if a company is going to successfully claim that they were stolen. In one case, for example, a company sued our client claiming he had "stolen" their secret customer list and was using it to solicit business for his new company. I went onto the plaintiff company's website and found a list of all of their customers, proudly displayed. Case dismissed.

So, did Lockheed understand this basic principal of trade secrets? According to today's decision, during the discovery process L-3 had demanded production of any documents that would show that Lockheed allowed any other companies to use the alleged trade secrets without any sort of license. Obviously you can maintain a trade secret even though you tell others so long as you license the information to them, or make them sign non-disclosures and the like. But if you hire a subcontractor to provide services and show them all the trade secrets on how the work is performed, with no limitation on how that information can be used, then the sub is under no obligation to maintain the trades secrets and they really aren't secrets anymore.

In response to the discovery, according to the court, Lockheed did not produce certain documentation about a company called CASA, which had used the alleged trade secrets with no license. Unfortunately for Lockheed, that documentation was produced in another case, L-3 learned of it, and moved for a new trial, asserting that the verdict would have been different had the jury been made aware of these facts.

The judge agreed. Out goes the $37.3 million judgment, and out goes the request for $16 million in attorney fees. The parties are back to square one with a new trial, and unless the judge later reverses his position, Lockheed now has no way to recover the attorney fees incurred in the initial trial. A good discussion of the trial and the trade secret issues, before the judge decided to grant a new trial, can be found here.

Lessons for all businesses: If you are in the right, then the truth should be your servant. Too often, businesses want to hide the ball when responding to discovery. I love it when attorneys think they are being clever by making groundless objections and withholding documents based on tortured interpretations of what is being requested. Time after time, opposing counsel fails to realize that I already have the documents being requested, and it is the objection that is far more powerful. For example, in business litigation I will ask for all documents that the other side contends forms the contract between the parties. Inevitably, the other side will object, claiming that the request is just too ambiguous because they just can't figure out what I mean by "contract". Brilliant strategy. Now at trial, I get to exclude all of the documents the other side wants to put on to prove their interpretation of the contract, because they were not produced in discovery, and I get to make the witness look like a fool for claiming that he could not understand the meaning of the term "contract". Don't play fast and loose with discovery responses, because as Lockheed just learned, the consequences can be severe. (Which is not to say Lockheed acted inappropriately, only that it paid the price for failing to turn over documents the judge felt should have been turned over. These are attorneys that can run up a $16 million legal bill; you think I want them coming after me?)

And finally, before going to the mat over trade secrets, take a hard look at whether they are really secret.

Listen to Your Mother

Aaron Morris — Wed, 31 Mar 2010 16:40:17 -0800

Most clients want their attorneys to be jerks, at least to the other side. And, sadly, most attorneys are more than willing to oblige, because a good fight can really run up legal costs. But in many cases, perhaps even most cases, that is not the best strategy.

As your mother always told you, you can catch more flies with honey than with vinegar. What no one has ever been able to explain to me is why you would want to catch flies, but according to the American Heritage New Dictionary of Cultural Literacy, the idiom stands for the proposition that you can win people to your side more easily by gentle persuasion and flattery than by hostile confrontation. In the litigation context, this could not be more true.

Recently I was retained by a client that was being defamed. Years ago an article in a newspaper had made some false statements about him, and he had fought for a retraction, which was published. Now, years later, a service indexed the old articles in the newspaper, and the article reappeared when our client’s name was searched on the Internet.

Most attorneys would have sent a letter threatening fire and brimstone for this repeated wrong, but I used the conciliatory approach, acknowledging that his was probably just an oversight, and that I was certain they would want to take immediate action to correct the mistake. Because I didn’t threaten legal action, the paper turned the matter over to an editor instead of an attorney, and it was quickly resolved. The article was removed from the index.

Had my demand letter mentioned legal action, the newspaper would have "lawyered up" to respond. That lawyer would have felt compelled to give me some legal theory as to why the paper had no legal obligation to remove the article. We would have sent letters back and forth, advancing our various legal positions. The matter would then have moved to litigation, or at the very least we would have fought over the language of some release the lawyer would have demanded. Instead, by using honey instead of vinegar, the matter was resolved with a single letter and very little cost to the client.

Lesson to all businesses: There are times when a threatening letter is appropriate, but don’t immediately assume that is the best way to go. Don’t think your attorney is being weak if he or she is friendly in the initial contact to the opposition and, similarly, if your attorney is being a jerk for no apparent reason, ask why.

Just How Badly Do You Need to Fire that Employee? (Revisited)

Aaron Morris — Sat, 20 Feb 2010 10:41:42 -0800

Less than a month ago I wrote on the folly of terminating an employee at an inopportune time, even if your reasons are just and your motives are pure. Apparently the lawyers at Wal-Mart are not subscribers to the Business Law Alert because they did nothing to stop a very questionable termination.

Melissa Jackson is one of several plaintiffs suing Wal-Mart for sexual harassment. Jackson and the other women allege that Wal-Mart did nothing to stop reported sexual harassment by one of the employees. That suit was filed on January 22, and on February 16 Wal-Mart decided it was the perfect time to fire not only Jackson, but her husband as well. Both had been there for close to a decade, and during that time Wal-Mart had never seen a need to fire them, but less than a month after she files an action for sexual harassment, she and her husband had to go.

Do you see how bad that looks? Can you comprehend what the jury is going to think about that decision?

Let me switch perspectives for a moment and explain why Wal-Mart may have made that decision. As I wrote previously, unscrupulous employees will sometimes file employment lawsuits specifically because they know they are on their way out the door. If in defense of the sexual harassment claim by Jackson, Wal-Mart is going to claim that she was about to be terminated and only filed this suit in an effort to keep her job, then Wal-Mart should remain consistent and continue with the termination. Alternatively, it could be that Jackson and her husband have developed attitude problems about Wal-Mart, and are just too toxic to keep around. (I have no personal knowledge of the facts of this case, and offer this case only as a hypothetical fact pattern for discussion.)

But with all that said, was there no other way to handle this matter? I once spoke to the owner of a business that had come up with a very creative approach. He had an employee who was a perpetual problem, not doing his job and filing what the business owner perceived to be fraudulent worker's compensation and labor claims. He desperately wanted to fire the employee, but he knew any termination would be met with a wrongful termination action for retaliation. So, the business owner put the maintenance worker in charge of the flagpole. His duties were to raise and lower the flag, keep the pole and flag clean, and to make certain no one disturbed them. He was given an ergonomic chair to sit on near the flagpole so that he would not make any claims for back injuries, and there he sat, eight hours a day, five days a week, watching the flagpole. The employee could not stand the tedium, and within two weeks had quit.

Although the business owner's plan worked perfectly in that case, I don't suggest for a minute that this is a workable solution. Aside from the fact that many employees might be perfectly content to work as a flagpole watcher, from a legal standpoint the worker could still have made the claim that this newly created position was a form of retaliation. But I offer this tale as an example of an employer that thought outside the box. He looked at the bigger picture and successfully avoided a costly lawsuit.

Businesses tend to think in black and white terms. I often see cases where an employee loyally worked for a company for years, and after being rewarded with a promotion, the company terminates that employee because he is unable to perform the new job duties. Why is no thought given to returning the employee back to the position where he was a valued employee?

Lesson for all businesses: When you are considering terminating an employee and are asking yourself, "how is this going to look?", then take a moment to also ask yourself, "can I solve the problem with something other than a termination?"