Aaron Morris' Business Law Alert

Just How Badly Do You Need to Fire that Employee?

Aaron Morris — Tue, 02 Feb 2010 22:23:17 -0800

Can you say, "appearance of impropriety"?

On a regular basis, I get calls from companies that apparently found it essential to terminate an employee that had just announced she was pregnant, or one who had just requested a leave under the Family Medical Leave Act, or another who just filed a Workers Compensation claim, etc. In all cases, the employers swore to me that the termination had nothing to do with the pregnancy, FMLA request or Workers Comp claim, and I'm convinced that they were sincere.

You see, unscrupulous employees who know how to work the system will take actions to create the appearance of a wrongful termination when they know the ax is about to fall. Sometimes it is blatant to the point of being laughable. I was recently involved in a case where the employee, when summoned to her supervisor's office to discuss a major infraction, took a detour to Human Resources to claim sexual harassment. She didn't have much time to think up a story, so she reported that the sexual harassment she had suffered was seeing her supervisor hug another female employee -- a year earlier -- when that employee's mother had died. Silly yes, but that didn't keep her from claiming that her subsequent termination was retaliation for reporting this unforgivable "sexual harassment."

As an employer, you need to know that the deck is stacked against you if an employment claim goes to the jury. Most jurors do not know about at-will employment, and go into the trial with the preconceived notion that an employer must have good cause to fire an employee. Of course the judge will instruct the jury on the law of at-will employment, but if the jurors hear that you fired an employee for anything less than murder and/or mayhem, right after the employee, say, filed a workers compensation claim, you will be fighting an uphill battle.

The recent court decision of Crawford v. Metropolitan Government of Nashville and Davidson County provides a perfect example of, "what was the employer thinking?" There, the plaintiff employee was questioned about whether she had witnessed sexual harassment by a certain supervisor. She had never volunteered any information, but when specifically asked, she related two instances she had witnessed. Two other employees gave similar accounts.

All three employees were terminated after reporting what they had seen. Crawford sued for wrongful termination on a theory of retaliation, but the case was thrown out by the District Court on the grounds that she had not instigated any sort of investigation, but had merely answered questions. The Court of Appeals agreed, but the Supreme Court reversed the decision and sent the case back for trial. The Supreme Court correctly held (in my opinion) that reporting what she had seen was sufficient to bring her under the anti-retaliation provisions of Title VII. Back in the trial court, Crawford won $1.5 million in damages.

Clearly something was rotten in Nashville, and it certainly appears that justice prevailed. But the case illustrates the hubris of some employers. Don't engage in this type of behavior, of course, but also be aware of any facts that make it look like you are engaging in this type of behavior. Do you really need to terminate that employee who is out on a disability claim? Do you really need to terminate that employee that just broke off her affair with the boss? If his or her work performance is that bad, then document it along with any future infractions. If the employee is beyond redemption, their performance will justify the termination on a later, not so inopportune day. If not, then maybe the employee was not as bad as you thought, and you will have avoided trying to explain your way around some very bad circumstances. Some may view this as caving, but I view it as a pragmatic recognition that when it comes to a trial for wrongful termination, sometimes perception is reality.

For more information about the Crawford decision, read the excellent summary provided by attorney Ellen Simon here.

Think Before You Hit "Send"

Aaron Morris — Mon, 26 Oct 2009 11:53:55 -0800

A (unintentionally) humorous cease and desist letter from a Portland law firm once again illustrates the importance of reviewing what you are sending.

The case involves the Internet site Black Friday, found at www.bfads.net. As you are no doubt aware, Black Friday refers to the day after Thanksgiving, when many retailers come out with ads touting amazing bargains to kick off the start of Christmas shopping. For a few years the Black Friday site has managed to get advanced copies of many of the ads, and has published them on the site so that visitors can pre-plan their shopping excursions.

I personally feel that the Black Friday site offers a real public service, and I can’t imagine why some of the retailers get so upset by this advance look at their ads. If the point is to draw people into your store and make sales, why be upset about some additional advertising? (Unless you are concerned that some other retailer might see the ad and respond with a lower price, but wouldn't that only help consumers -- a goal I'm sure all retailers support?) Indeed, it is my understanding that some retailers have gotten into the spirit of it all, and provide advance copies of their ads to bfads.net. Others, however, feel compelled to make intellectual property arguments and every year bfads.net is hit with a number of cease and desist letters, which the website sometimes posts as badges of honor.

The ad in question this time was the OfficeMax ad. Bfads.net got a hold of an early draft, and published it with a disclaimer that it might not be the final ad since it was riddled with typos and misspellings. OfficeMax responded by having its attorney fire off a cease and desist letter, demanding that the information be removed from the cite by 11:00 a.m. the following day. (Customarily in cease and desist letters the deadline is set at noon or by close of business, but I guess this attorney wanted to make the demand sound really urgent by moving it up to 11:00 a.m.)

Now comes the humorous part. In order to identify the specific ad to which she was referring, the attorney attached a screen shot to her email. No doubt she used some program that allows a screen capture, but what she failed to realize was that the program captured the entire screen, which showed the Windows task bar and all the other programs she was using. One of those programs was Spider Solitaire. So now all of the attorney’s partners know she plays Solitaire at her desk, and in addition to posting her cease and desist letter, bfads.net got the extra satisfaction of referring to the "Spider Solitaire playing law firm" that is trying to shut it down. In the grand scheme of things, not the worst thing that could happen to a law firm, but probably not the image it would prefer to transmit to clients.

Lesson for all businesses: Check your email attachments and watch the Word metadata. Whenever I drag and drop an attachment into an email, I open it again to make sure it is the correct document. It’s an additional step and 99% of the time proves to be unnecessary, but the couple of times I have caught a mistake has made the effort worthwhile. As to Word documents, unless you are anticipating that the recipient is going to make revisions to the document, send it as a PDF file, not as a Word file. I am amazed by all the resumés I receive in Word format. When I open the file, there are all the misspellings and unrecognized words underlined in red. And while the version sent to me professes the applicant's life long desire to work in the legal field, the prior versions of the document state his lifelong desires to work in advertising, work in retail and to work on a crab boat.

Update: Ironically, the day after I wrote the above comments, I received an email from a very large company that my law firm does not represent, consisting of a string of emails relating to the company’s internal investigation of a dispute with a customer. I skimmed the email, surmising that the company had sent it for my review in anticipation of a lawsuit, but gave up because it never posited any question or sought advice. A few minutes later the sender called and sheepishly asked if I would please delete his email. He had inadvertently sent this internal document to the wrong Aaron.

Again, think before you hit send.

Godaddy.com Named in Action by Attorney Still Unfamiliar with Section 230

Aaron Morris — Sun, 16 Aug 2009 12:28:37 -0800

It seems like every few weeks I have to rail against a lawsuit I read about, wherein the attorney representing the plaintiff brings an action that is clearly barred by the Communications Decency Act. In this latest installment, we find a New York attorney who represents plaintiffs who appear to have a solid case against some individual defendants resulting from some truly horrific defamation on the Internet.

But the attorney could not leave it alone. I can almost see his mind working. He thinks to himself, “these individuals will never be able to pay the judgment, so I’d better look around for some deep pockets.” So, in addition to the individual defendants he names ning.com, wordpress.com, twitter.com, and my personal favorite, godaddy.com.

I sometimes use the analogy that naming a Internet Service Provider in an Internet defamation action is akin to naming Microsoft as a defendant because the defamer used Word to type the defamatory statements. I never thought any attorney would actually go that far, but the attorney in this case surpasses even that far flung analogy. I know it’s a foreign concept to some attorneys and their clients, but a defendant should only be held liable for damages if he, she or it has done something wrong. Here, twitter.com is named because the defendants sent out “tweets” sending their followers to the defamatory content. Godaddy.com is named because the defendants obtained the domain name there, and then set it to forward to their blog on wordpress.com. How could these companies possibly be liable? Well, according to plaintiffs and their attorney, they are liable because what the defendants did amounted to an “irresponsible use of technology.”

Apparently, in this attorney’s world, we have gone beyond even requiring that the website provider check the content of every web page posted on its server. Now it is also the obligation of twitter.com to review and authorize every tweet that is sent, and godaddy.com must view with suspicion every account that sets a domain name to forward elsewhere. Clearly there could be no Internet if such duty and liability could be imposed.

In (very slight) defense of the attorney, he does allege that these companies were informed of the nefarious use of their services, and did nothing to block the content. Among the public there is an urban legend that an Internet company becomes liable once it is informed that it is being used to distribute the defamatory content, but an attorney should know better.

A copy of the complaint can be found here, and a detailed article about the case can be found here.

Company Policies and Procedures are Not the Law

Aaron Morris — Sat, 25 Jul 2009 12:50:53 -0800

Admittedly I'm straying a bit from the business LAW theme of this blog, but when I came across this story in Business Week I knew I had to share it. You may already be aware of this story because it apparently has become quite a phenom, but somehow I missed it until now.

Musician Dave Carroll was traveling via United Airlines with his band mates from the band Sons of Maxwell. While sitting on the tarmac, they witnessed their instruments being tossed around by the ground crew. They reported the incident that second, but according to United Airlines the official report that one of the guitars had been officially damaged was not reported to the official official until after the company dictated 24-hour deadline. Carroll spent nine months trying to get United Airlines to do the right thing, and when he reached the final, official "no" from a company representative (identified in the song as "Ms. Irlweg"), he promised he would write, perform and post three videos about the incident on YouTube. The video link above is the very entertaining first installment of the planned trilogy.

After the video attracted more than 3 million viewers on YouTube, United Airlines agreed to donate money to a charity as an apology to Mr. Carroll. The complete story can be found on Dave Carroll's website.

Lesson for all businesses: I've not yet been involved with a case where the offending company was attacked by way of song, but I get calls every week from companies that let minor situations get out of hand and are now the subject of attack blogs. Your company's policies and procedures are not the law, so don't cite them as justification for rejecting a legitimate complaint. Indeed, even if the law is behind you, that's no basis to deny a valid claim. Do you really want your business practices to be no better than the minimum required by law? Look at what happen to Bank of America when if tried to quote the law to our client. When you receive a customer complaint, consider that you may be dealing with another Dave Carroll.

If Someone is Offering a Walk-Away, Listen

Aaron Morris — Tue, 14 Jul 2009 21:40:16 -0800

Perhaps because the adrenaline and endorphins flow during a courtroom battle, I become very thoughtful in the calm that follows. I won a small but satisfying court victory today in an Internet defamation case, and it made me realize how much the process mirrors a scene from a movie I just saw.

The movie was Taken, which I thought was very good. Even if you haven’t seen the movie, you probably saw the scene to which I refer since it was shown in the trailers. The main character, who we come to learn is some sort of retired Über-spy, is on the phone with his teenage daughter when she is kidnaped. He hears the bad guy pick up the phone, and he calmly gives the following speech:

I don’t know who you are, and I don’t know what you want.
If you are looking for ransom, I can tell you I don’t have money.
But what I do have are a very particular set of skills;
skills I have acquired over a very long career.
Skills that make me a nightmare for people like you.
If you let my daughter go now, that will be the end of it.
But if you don’t, I will look for you, I will find you and I will kill you.

Most every Internet defamation case I handle starts with such a moment. Not nearly so dramatic, of course, and there are no deaths involved if the defendant doesn’t listen to me, but the concept of a choice is the same.

Most of my defamation clients aren’t seeking money initially; they just want the bad guy to stop defaming them. My marching orders are usually just to get the person to take down the comments. So I write to the bad guy, explaining that this does not need to go any further. He strayed from the path and said and did some things he shouldn’t have, but if he just takes down the posts and walks away, “that will be the end of it.”

That is the moment in time. I am affording the prospective defendant the opportunity to avoid sending his life, or at the very least his finances, in a bad direction. I am less of an advocate and more of a care giver, just trying to convince the patient to stop engaging in self-destructive behavior. But he makes the ultimate decision whether to accept that help, or to continue on his path.

In Taken, the kidnapper could not help himself and responded by saying, “good luck.” He did not take the skill set seriously enough, thinking he would be impossible to find. Today’s defendant also did not take the skill set seriously enough, thinking that since he had hidden his identity and lived across the country we would never find or pursue him. He was one of a few on-line competitors with my client, and had engaged in some trash-talking that escalated into defamatory comments about my client’s business practices. All he had to do was take down the false statements and walk away and that would have been the end of it. He refused, and today a judge ordered him to take down the false statements, and to pay my client over $200,000. I suspect, if he had it to do over again, he'd take the walk-away.

Lesson for all businesses: Pick your battles. If you want to take on a plaintiff that you feel is trying to shake you down, then I’m with you one hundred percent. But don’t get into a court battle just to prove who has the bigger . . . lawyer. The defendant in today’s case had no moral high ground. He knew what he was saying about my client was untrue, so why on earth wouldn’t he take the opportunity to walk away? As a famous philosopher once sang, “You’ve got to know when to hold them, know when to fold them, know when to walk away and know when to run.”

Employment Lawyers Warn Against Glowing Reviews on LinkedIn

Aaron Morris — Tue, 07 Jul 2009 17:45:17 -0800

Corporate employment lawyers can be real buzzkills. I'm reminded of the early days of the Internet when the corporate types were warning all us lawyers to take down our websites because they crossed state lines and therefore constituted the unlicensed practice of law in other states. Now, when everyone is hot on social networking through sites such as LinkedIn, the employment lawyers warn of dire consequences if employers post nice comments about their workers.

You see, when an employee is terminated and a lawyer is looking for a way to claim it was wrongful, they look first to the job evaluations and any awards and accolades. If it can be shown that the employee walked on water, then obviously there was no reason to fire the employee and the termination must have been based on some nefarious reason, such as discrimination.

Sadly, a company's compassion can get it in trouble. A company is forced to terminate an employee due to downsizing, so to give his job search a little boost it creates a recommendation for the employee's LinkedIn profile. An employment lawyer will spin that by arguing that at the very moment the employee was being terminated, the company was saying glowing things about him. When interviewed by Law.com, Philadelphia lawyer Carlyn Plump had this to say about that:

"Just don't do it," Plump said. "Generally, my advice is that I think employers are often better served by merely stating dates of employment, positions with the company and salary, and staying away from much more because there are so many potential ramifications if they say something." She added: "If they say something negative, there could be a lawsuit. If they say something positive, there could be a lawsuit." The entire Law.com article can be found here.

My philosophy? It's not all about avoiding lawsuits. Employers should not be fearful to heap some praise on good and faithful employees just because others file frivolous suits. In any event, for an unfortunate number of plaintiff's attorneys, wrongful termination actions are a form of legalized extortion. They will sue regardless of the merits of the case, hoping for a "cost-of-defense" settlement, and the fact that you said something nice about the employee on LinkedIn will not be the deciding factor.

City Requests Social Site Information from Applicants

Aaron Morris — Sun, 21 Jun 2009 16:55:14 -0800

It’s long been the case that employers check out the social websites of potential applicants to see the real nature of the people they are considering hiring. But trying to view an applicant’s MySpace listing, for example, can be problematic because there might be multiple listings under a given name, and the listing may be not be available for public viewing.

City officials in Bozeman Montana have decided to stop being sneaky about the whole process. When applying for a job there, applicants will find the following question on the employment form:

"Please list any and all current personal or business Web sites, web pages or memberships on any Internet-based chat rooms, social clubs or forums, to include, but not limited to: Facebook, Google, Yahoo, YouTube.com, MySpace, etc." The form also asks for the user names and passwords for all the requested sites.

Of course, organizations such as the ACLU are all up in arms, claiming privacy violations, but the desire of the City is understandable. As has been reported here and at my Internet Defamation Blog, people sometimes reveal amazing things in their blogs. I’ve reported a case involving a nurse and another involving a teacher where their blogs revealed some seriously dark sides and the employees suffered job actions as a result. No one balks when an applicant for the police department is seriously vetted, including reviews of banking records and interviews with friends and former employers. It should not be surprising, therefore, that a city would want access to this truly revealing information.

I offer no opinion on the matter, beyond to say there is just something troublesome about a government agency wanting personal access codes. However, it is also a bit disingenuous to claim an invasion of privacy when the employer is seeking only information that the applicant has chosen to publicly publish. In essence, any objecting applicant is saying that they have the right to reveal only the face they choose to reveal, and that the employer is not entitled to see the face that is shown to others.

Incidentally, the City says that applicants can refuse to provide the requested information, and that will not be held against them.

UPDATE: Responding to the public outcry, the City of Bozeman backpedaled -- slightly. In a press release, the City Manager announced that the City, for the time being, would not request user names and passwords from job applicants. Conspicuous in its absence is any mention that the city will stop requesting information regarding non-password protected sites, or that it will not review those sites.

Again, I think it was a bit much to request user names and passwords, but I applaud the City of Bozeman for being so upfront about the fact that, as an employer, it will seek out these social sites as a part of its background check.

Crunchberries Provide Proof Positive That the Legal System Works

Aaron Morris — Thu, 04 Jun 2009 10:46:36 -0800

Attracted by the nefarious Cap'n Crunch, calling out to her from his cereal box, holding a spoon chock full of crunchberries, Janine Sugawara bought said cereal and for four years continued to buy and consume it, all the while believing she was eating healthy fruit.

When she somehow came to realize that there was no fruit in Cap'n Crunch, she sued on behalf of herself and all the other consumers that believed that the cereal contained anti-oxidant rich crunchberries. She contended that the entire Cap'n Crunch presentation was likely to confuse consumers, especially given the way the Captain is aggressively "thrusting a spoonful of crunchberries at the prospective buyer." (See photo.)

On a motion to dismiss, Judge Morrison England, Jr., sitting in the Eastern District of California, ruled:

"In this case . . . while the challenged packaging contains the word "berries" it does so only in conjunction with the descriptive term "crunch." This Court is not aware of, nor has Plaintiff alleged the existence of, any actual fruit referred to as a "crunchberry." Furthermore, the "Crunchberries" depicted on the [box] are round, crunchy, brightly-colored cereal balls, and the [box] clearly states both that the Product contains "sweetened corn & oat cereal" and that the cereal is "enlarged to show texture." Thus, a reasonable consumer would not be deceived into believing that the Product in the instant case contained a fruit that does not exist. . . . So far as this Court has been made aware, there is no such fruit growing in the wild or occurring naturally in any part of the world."

Plaintiff's are usually given at least one opportunity to amend a complaint to address any deficiencies, but in this case the judge dismissed without leave to amend, concluding there was no way this case could be saved. As the court put it, "the survival of the instant claim would require this Court to ignore all concepts of personal responsibility and common sense." The only sad part of this otherwise humorous case is that plaintiff was able to find counsel willing to ignore that common sense.

Go here for more information, and here for the complete opinion by the court.

Appeal Court Says, "Hold the Foam" on Starbucks Tipping Case

Aaron Morris — Tue, 02 Jun 2009 19:17:52 -0800

Some plaintiffs attorneys received a huge pay cut today, after the California Court of Appeal reversed an $105 million judgment against Starbucks.

The case involved the ever-present tip jar that sits by the register at your favorite Starbucks. It is the procedure of Starbucks, like most every other business that has a tip jar, to split up the tips among all those that were working, including the “supervisors.” As we analyze this case, keep in mind that a “supervisor” at a Starbucks is most likely just another barista that has been there slightly longer than the other baristas, and as a result is put in charge. It’s not like this is someone at the corporate office.

Enter California Labor Code section 351, which 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.”

These rascally class action attorneys thought they had Starbucks by the beans. First they created a somewhat fictional perception of the role of the “supervisors” and spent a great deal of time in the case arguing that they were agents of the employer because they directed the conduct of the other employees. From that viewpoint, it was easy to claim that Starbucks had violated section 351 by including the supervisors in the tip distribution. Judge Patricia Cowett in San Diego Superior Court must have skipped her coffee that day and bought that reasoning and awarded the class of 100,000 baristas $86.7 million, which grew to $105 million with interest.

But 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. Indeed, the Court of Appeal concluded that the purpose behind section 351 was 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.

Further, the “supervisors” are not “agents” of the employer in the sense meant by section 350. The supervisors are not there to grab the tips on behalf of a greedy Starbucks organization; they are just more experienced baristas, probably earning 50 cents per hour more and completely entitled to share in those tips.

The ruling of the Court of Appeal reversed the judgment.

It's OK to Question Litigation Costs

Aaron Morris — Fri, 29 May 2009 20:09:57 -0800

After more than 20 years I can’t believe this sort of thing is still going on.

On-line legal research offered by Lexis and Westlaw used to be very expensive. These services charged by the hour and according to the database being used. Printing out what the research revealed was also expensive, with the services charging by the line. An intensive research session for a major motion could cost thousands of dollars.

The profits being realized by the research services were so high that at the first mega-firm I worked for they offered a free trip to Hawaii to the attorney at the firm that spent the most time using the service. The firm gladly passed along word of the contest and the associates obliged by signing on and staying on for days at a time. Only after I pointed out the conflict of interest in such an arrangement did the firm cancel the contest.

Flash forward a few years and the competition between LexisNexis and Westlaw – the two major services – became intense. They both began offering flat fee arrangements for law firms. For around $200 per month, an attorney can perform unlimited searches in specified databases and print to his heart’s content at no additional charge. But in a throwback to the earlier times, the services continued providing invoices that showed the charges under the old hourly system. The attorney would pay just $200 for the month, but the invoices would reflect, say, $8,000 in search fees, perhaps to make the attorney appreciate the incredible deal he was getting.

This proved too tempting for many large firms. Ignoring the actual cost, big firms continued to bill their clients at the rates reflected in the invoices, turning legal research into huge profit centers. Any other business would recognize that as highly unethical – like a contractor charging a home builder hugely inflated prices for materials – but the big firms just saw it as another in a long line of fictional charges, like billing for faxes.

Apparently the practice has not abated. In an action filed in Los Angeles Superior Court, the firm of Chadbourne & Parke is alleged to have engaged in this practice. According to court records, the firm’s client was billed $108,000 for the law firm's services, of which roughly $20,000 was for legal research fees. At the rate my firm pays for legal research services, it would take nine years to incur those fees.

Lesson for all businesses: If you find yourself embroiled in litigation, don’t be shy about questioning charges, and consider having another attorney audit the legal bills you are receiving. Most clients quite understandably have no point of reference for how long an activity should take or what is a proper amount for the costs. Clients are free to agree to any cost arrangement, but a firm cannot turn costs into a profit center without disclosing the costs in the fee agreement.

Trade Secret Claim Costs Company Over $17 Million

Aaron Morris — Wed, 27 May 2009 13:43:57 -0800

A case that illustrates how NOT to deal with company secrets.

An RV sales manager – we’ll call him Trealoff because that’s his name – was hired by Forest River, an RV company. Forest River was apparently on the cheap side, because it didn’t even provide Trealoff with a computer, forcing him to use his own laptop. According to Trealoff, the company also did not provide him with a promised raise, so he went looking for another job.

When the company got suspicious that Trealoff was looking for greener pastures, it was decided that Trealoff really should not be permitted to leave with all the data residing on his personal laptop computer, gained while he was an employee of Forest River. Reasoning that the data was, after all, the property and trade secrets of Forest River, the president of the company, according to the case, decided that the best course of action was to temporarily steal Trealoff’s laptop and erase the hard drive. Trealoff took exception when his erased hard drive was returned to him, especially given that it contained years of contact information that he acquired independent of Forest River, so he sued.

The San Bernardino jury took exception to the conduct as well, and in addition to awarding Trealoff damages for unpaid commissions, the jurors tacked on punitive damages of $7 million against the RV company and $8 million against the president. (Personally, despite the egregious conduct, I would have found Trealoff contributorily negligent for not backing up the data in the first place.)

Lessons for all businesses: First, get over this concept of trade secrets unless you really do have trade secrets. In many instances, when a company calls me ready to go to the mattresses over alleged trade secrets, I find that the information is not at all secret. For instance, I once represented a company that was being sued by one of their salesperson’s former employers, because the salesperson had contacted their customers. There was no non-solicitation or non-disclosure agreement; the entire basis for the suit was that the customer list was a trade secret. I went on-line and found that the company’s entire customer list was proudly displayed on its website. Case dismissed.

Second, proceed with caution when pursuing trade secret claims. Many companies file groundless lawsuits in an attempt to frustrate a former employee’s efforts to work for a competitor. They reason that even if the action ultimately fails, it may be sufficient to persuade the competitor that the employee is just too hot to handle. If the company decides to call your bluff and hires a firm such as ours, then you will likely be taken to the woodshed, as was Forest River.

Third, provide your employees with computers so that the information contained thereon remains yours.

Another Court Holds that Driving is Not a Major Life Activity

Aaron Morris — Fri, 24 Apr 2009 11:42:04 -0800

For there to be a successful claim of disability discrimination against an employer, there must first be a determination that the employee is, in fact, disabled. Under the Americans With Disabilities Act (ADA), a medical condition can be deemed a disability causes an impairment of a "major life activity." Many disability claims therefore turn on the interpretation of what is a "major life activity."

Such was the issue in the 7th Circuit case of Winsley v. Cook County. Plaintiff in that case was a nurse, and her position required that she drive to the homes of the patients. For medical reasons, the plaintiff became unable to drive, accept to and from work. The County could not continue to employer her with that restriction, and she claimed that was disability discrimination.

On a motion for summary judgment, the trial court concluded, and the District Court agreed, that driving is not a major life activity. The court noted that activities recognized as major life activities by the Equal Employment Opportunity Commission (EEOC) "are so important to everyday life that almost anyone would consider himself limited in a material way if he could not perform them." The court concluded, however, that "this is not the case with driving." The court noted that the 2nd, 10th and 11th Circuits have all reached the same conclusion.

As you can see, the determination of what is a "major life activity" can be very nuanced. Most of us would feel very limited if we could not drive, but the law looks more at the body than the activity. For example, if a medical condition made it difficult to sit for periods of time, the court might find that to be a sufficient impairment. But translating that inability to some external activity such as driving is less likely to pass muster.

Twitter Comments Can Land Businesses in Court

Aaron Morris — Tue, 07 Apr 2009 11:23:52 -0800

Twitter comments (along with others) have now become the basis for an Internet defamation lawsuit.

Courtney Love, always a class act, has been posting “tweets” about fashion designer Dawn Simorangkir, also known as Boudoir Queen. Simorangkir claims that Love failed to pay money that was owed to her. Love claims otherwise, and refered to Simorangkir as a “nasty lying hosebag thief”, as well as accusing her of being a drug addict and a prostitute, according to the Associated Press.

Assuming the comments were false, the statements are clearly defamatory, but the case will still present some interesting issues if it ever makes it to trial. Defamation is always about reputation, and defamatory remarks do not always translate to loss of reputation. Given the context of the statements and the person making them, will anyone believe that Simorangkir is guilty of the acts claimed by Love?

Lesson for all businesses: Are your employees "twittering" or sending instant messages from their computers at work? Plaintiff attorneys look for the deep pocket, and if an employee sends a defamatory tweet from an office computer, you can bet your company will be named in the action. One way to protect the company is to make such conduct outside the scope of employment, and it is only outside the scope of emploment if the company has a written and enforced policy against using company computers for such purposes.

Can Businesses Terminate Employees for Blog Posts?

Aaron Morris — Sat, 14 Mar 2009 13:38:47 -0800

The Internet, through social websites and blogs, offers fertile ground for employers that want to run an informal background check on current and prospective employees. And, since everything eventually ends up in court, the actions taken when something unacceptable is found during such a background check provide new issues for lawyers who deal with free speech and defamation.

Take the case of Nina Yoder. She was expelled by the University of Louisville's nursing school because of her Internet postings. Yoder has now sued the university, alleging that the expulsion violated her First Amendment rights.

The nursing school expelled Nina Yoder on March 2, saying her MySpace postings "regarding patient activities and identification as a University of Louisville School of Nursing student violates the nursing honor code which you pledged to uphold," according to a copy of her dismissal letter, which was attached to the suit.

In her blog postings, copies of which she attached to her own complaint, Yoder makes caustic comments about Christians and blacks. I attempted to go to the website to make my own determination about the appropriateness of her comments, but she appears to have taken down her MySpace page.

According to an article posted at courier-journal.com, the nursing school is upset because some of Yoder’s postings are about specific patients (although they are not mentioned by name). In one of her postings, she wrote about a birth she witnessed: "Out came a wrinkly bluish creature, all Picasso-like and weird, ugly as hell ... screeching and waving its tentacles in the air." I’m not sure a patient would want the miracle of her child’s birth described in that way by someone who should, like any medical professional, respect her privacy, but I can also see that as a failed attempt to humorously describe what she had seen.

But there was far more. The school officials were probably equally unimpressed when Yoder wrote about how the nursing school is in downtown Louisville, adjoining an area "inhabited by humanoids who have an IQ of 10 and whose needs and actions are basically instinctive. As in, all they do is ––––, eat, –––– and kill each other." She did, however, graciously concede, "OK, maybe I am generalizing yet again."

As discussed in a prior blog posting, Yoder and her supporters are using the "there’s so much trash on the Internet you can’t hold my trash against me" defense. As Yoder wrote in her petition requesting reinstatement to the nursing program, "If profanity was grounds for dismissal for the School of Nursing, the nursing school would go bankrupt." Her petition to the school for reinstatement can be seen here.

The court has not yet set a hearing date on Yoder’s request that the nursing school be ordered to reinstate her. We’ll know then if the trash defense worked. The standards are different in the academic arena than in the employment context. Under California’s at-will presumption, an employer would generally be safe terminating an employee for something said on a blog, but California’s Constitution affords more free speech protections than even the First Amendment, so tread carefully. For a more detailed analysis of employees and blogs, see You Write What You’re Told.

Defamed Businesses Finding More Barriers to Redress

Aaron Morris — Sat, 14 Mar 2009 00:19:48 -0800

A recent decision out of Maryland illustrates the legal tension that exists between anonymous Internet defamers and the businesses they victimize.

Someone trashed a Dunkin’ Donuts on-line, claiming it was unsanitary and dirty. DD didn’t appreciate that comment, and sought the identity of the person who had posted the comment. In deciding whether the message board was required to disclose that information, Maryland’s highest court decided that the victim of the comments must go onto the board and basically give notice to the defamer. This gives the defamer an opportunity to protect his anonymity by removing the offending comment (although some unscrupulous sites won’t allow the person that posted the comment to take down his own message). Then the victim must persuade the court that the comments constitute defamation. Defamatory comments are not protected speech, so the court can then require disclosure.

It’s a tough course for the victim, because being forced to go into the lion’s den will often only fan the flames. However, as this case makes clear, a victim may well be barred at the door if he does not have the fortitude to take that step.

For a more complete discussion of the Maryland case, go to Internet Free-for-All Promises An Ongoing Test of Free Speech.

Top Five Employee Suits

Aaron Morris — Fri, 13 Mar 2009 22:36:01 -0800

The EEOC recently identified the five most commonly filed employee suits, which are:

sex discrimination and harassment (30.1 percent);

retaliation (22.2 percent);

race discrimination (13.5 percent);

disability discrimination (12.8 percent); and

age discrimination (8.2 percent).

Sadly, many such cases are fomented by plaintiffs’ attorneys who don’t properly advise their clients. Never mind that in a huge number of cases there is not a scintilla of evidence that the termination was based on discrimination, it is enough that the employee belonged to a protected class. In most cases the employer ponies up some cost of defense settlement amount to avoid the uncertainty of trial.

Thus, no one can advise you how to keep your employees from pursuing legal action, but my first post on this site still remains solid advice on how to ultimately prevail if you decide to go the distance.

Act Natural When Contemplating Litigation

Aaron Morris — Mon, 23 Feb 2009 16:16:57 -0800

Changing the facts slightly to preserve confidentiality, I received a call from someone who had paid a company to create a website. When the website was up and running, the caller discovered that the web design company had, in essence, left a backdoor open. Someone with a little computer knowledge could have made changes to the website. The caller was outraged, saying that if this error had been discovered and exploited, it could have cost his company millions.

I asked if he had notified the company of the problem so it could be corrected. He told me he had not, because he wanted to keep the problem in place until he filed a lawsuit. In other words, he was leaving his company’s website vulnerable to vandals in order to preserve a possible action, rather than to fix the problem and avoid any damages. That’s a crazy case of the tail wagging the dog.

That mentality is wrong on a couple of levels. It shows that the caller is not as interested in correcting the problem as he is in getting money. Consider how a jury would react. He was so upset by the negligence of the web design company that he is asking us to give him millions, but he did nothing to fix the problem?

Also, it fails to recognize the need for actual damages. This is a simple concept that sometimes alludes even my fellow attorneys. If there are no damages, then it’s no harm no foul. If no one found the open door, then how was the caller harmed? He may have a small case for breach of contract since the designer didn’t create a proper website, but with no damages there is no actionable negligence.

Don’t act in some artificial manner to “preserve” an action. When this caller discovered the open door, the natural thing to do would be to call the company and ask that the door be closed. To leave the door open while seeking out legal representation is a very unnatural reaction. By all means, he could take a few minutes to save some screen shots as evidence in case legal action becomes necessary, but acting intentionally to leave the problem in place or even to create damages where none exist, will hurt the case far more than it helps.

Stimulus Package Includes COBRA Health Insurance Subsidies

Aaron Morris — Sat, 21 Feb 2009 23:25:19 -0800

Before getting to today’s topic, I’m going to once again shout into the wind as I have for years that employers providing health insurance for employees was never a good idea. The conceptual flaw is apparent. Providing health insurance as a benefit puts a third party between the two real parties to the contract. The doctor is no longer in contract privity with his or her patient. When a patient is spending real dollars for health care, they have an incentive to bargain down the price. When uncle employer is paying, the sky’s the limit, and health care prices soar. The result is what we see today. Strikes are more often over health insurance than worker safety or pay, and when an employee is fired, the cost of maintaining the insurance under COBRA has grown too high. Employers can still offer health benefits, but it should be in the form of a monthly payment. “Here’s $500 a month for health insurance. Whatever you don’t spend, you can keep.” If that approach had been used, the push to offer health care at lower prices would have been far more intense than HMOs negotiating fees.

Which leads me to the issue at hand. The latest stimulus plan includes a COBRA subsidy for employees laid off between September 1, 2008 and December 31, 2009. If you have an employee that declined COBRA coverage after September 1, 2008, you must notify the employee of this subsidy. There is a needs test, but it’s pretty high – a maximum of $125,000 annual income for singles, $250,000 for couples. The employee can draw the subsidy for no more than nine months.

Incidentally, in line with what I said in my opening rant, many terminated employees call my office wanting to pursue wrongful termination actions, motivated most by the fear of losing their health insurance. They rail against the ridiculous cost of the COBRA plan, unaware that was the price their employer was paying. Often as not, they are unaware that they don’t need that COBRA coverage. COBRA only makes sense if the terminated employee is going to be uninsurable due to a pre-existing condition. Admittedly, something as simple as taking heartburn medication will constitute a pre-existing condition, but make certain your former employee knows that if they do not have such a condition, it will be far cheaper to get a bare bones bridge policy until they find another employer that is making the mistake of providing health insurance.

Ninth Circuit has Second Thoughts About Labor Law Decision

Aaron Morris — Sat, 21 Feb 2009 23:18:13 -0800

The Ninth Circuit has called for a take-back. In November the court decided and I reported that out-of-state employees are subject to California labor laws for any work performed in the state. That case involved instructors who traveled to various states, including California, to teach classes on software.

This week the Ninth Circuit withdrew its published decision in Sullivan v. Oracle, and asked the California Supreme Court for guidance on specified issues presented by the case. One of those questions was:

“Does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week?”

We’ll have to wait to see if the Supremes agree to answer the question.

Don't Believe Your Bank When it Reports a Check has Cleared

Aaron Morris — Sun, 25 Jan 2009 01:20:26 -0800

At some point a scam becomes so old and tired that I assume no one would ever fall for it. Certainly one of my fellow attorneys could not be duped by, for example, the old "Nigerian trying to get money out of the country" scam, right?

Tell that to Houston attorney Richard Howell, Jr., a 23-year legal veteran and partner in the firm of Buckley, White, Castaneda & Howell. He fell for the oldest check fraud scam around. And he is not the only attorney victim of this variation on the Nigerian scam.

Here’s how it works. An attorney is contacted via e-mail from a foreign company ("FC"). FC did business with a company located near the lawyer’s office, and is looking for representation in collecting a huge unpaid account of, say, $900,000. The attorney is asked to handle the matter on a one-third contingency basis. The attorney is understandably intrigued by the possibility of collecting a $300,000 fee. But being wary of an email from a foreign company, he goes on line and confirms that there is in fact such a company located near his office, doing the sort of business discussed in the email.

Sometime later, perhaps even before the attorney has sent a fee agreement, FC sends another email stating that the local company has made a partial payment of, say, $300,000. FC still needs the attorney to collect the remaining $600,000, and it is honoring the contingency agreement. FC has instructed the local company to make the check payable to the attorney, and asks that the attorney please deposit the funds and wire $200,000 to FC’s account, keeping $100,000 for himself.

Sure enough, the check arrives a few days later, and the attorney deposits it in the firm’s account. But our savvy attorney is no fool. There is no way he is going to wire funds to FC until he is damn sure the check has cleared. He waits a full ten business days, and only after the bank confirms that the funds have cleared does he wire the money to FC. About six weeks later, the attorney gets a call from his bank stating the $300,000 deposit has been reversed. The attorney is now out $200,000.

But how is that possible if the check "cleared"? This scam only works because the vast majority of people, even attorneys, do not understand what it means when a bank says "the funds have cleared." In our scam, FC printed up some fraudulent checks from a company it knew would have lots of money in its account; let’s call the local company Humongo Steel. The account information is easy to come by, either by dumpster diving or just by getting a legitimate check from Humongo Steel, perhaps by way of a merchandise refund or being one of the company’s vendors. Alternatively, Humongo Steel might be in on the scam. Let’s assume Humongo Steel banks with Bank of America. FC writes a fraudulent check to the attorney on Humongo Steel’s Bank of America account, and the attorney deposits it into his Citibank account. Citibank’s computer asks Bank of America’s computer, "is there sufficient money in Humongo Steel’s account to cover a $300,000 check?" Bank of America’s computer answers "yes" and credits the money to Citibank. This all takes place the same day the check is deposited, but banking regulations date back to a time when the checks had to be physically transported around the country, so the Feds allow Citibank to hold those funds for ten days. Citibank takes the full ten days so it can play the float. After the ten days, Citibank happily reports to the attorney that the funds have cleared and shows the $300,000 in his account.

But there is another step in the process. The check written on Humongo Steel’s account sits in the bank until the next time statements are sent out. If the check hits the bank right after statements were mailed, that check could sit there 29 days. Assuming Humongo Steel has not opted for checkless statements, the check is eventually stuffed into Humongo Steel’s account statement and mailed. The mailroom gets the statement and passes it along to accounting. Accounting goes to reconcile the account and finds the fraudulent $300,000 check. Humongo Steel has up to 30 days to report that fraudulent check. When it does, the bank has Humongo Steel sign a statement swearing to the fraud, and Bank of America then gets its $300,000 back from Citibank, who gets is back from attorney.

Did you do the math? The bank told the attorney the funds had cleared after just ten days, but it can take 59 days or more to know if funds have really cleared. Richard Howell, Jr. is suing Citibank, claiming it was negligent in reporting the funds had cleared, but he is going to lose. By law an account holder has 30 days to report a discrepancy in an account statement. The attorney should have known better.

Lesson for all businesses:

I’m reminded of teaching my young son about stranger danger. I told him not to get in the car with a stranger. I told him the stranger might temp him with candy, or a toy, or ask for help finding a lost puppy. One day my wife and I both got delayed, so we sent a stranger (to him) to pick him up. I told our friend that if he was resistant, tell him to go talk to the people in the office, who I had put on notice of the situation. He got in our friend’s car without hesitation or question, and when I later asked him why he did that despite all my warnings about stranger danger, he said, "I knew it was okay because she didn’t offer me candy or a toy, or ask for help finding a missing puppy."

The scam might not take the precise form just discussed, but if it involves you cutting a check or wiring funds from a deposited check, it might be a variation. Don’t do it. You now know that it can take two months for a check to truly clear. Even a cashier’s check can be bogus.