The importance of selecting the right counsel

No matter how good of an employer you are, no matter how well you treat your employees, and no matter how closely you try to follow the myriad laws that regulate your relationships with your employees, the harsh reality is that the fact that you are an employer means that you will get sued. Once you are sued, the first and most important decision you have to make is the choice of the lawyer who will defend you.

For example, consider Falzone v. Licastro (N.D. Ohio 3/4/12) [pdf], which dismissed an employee’s claims against his former employer. The lawyering involved in the briefing directly impacted the viability of the lawsuit:

At the outset, the Court observes that Falzone has greatly complicated the Court’s task.  His ten-page-long opposition to summary judgment does not contain a single heading, is littered with unsupported conclusory allegations, eschews legal analysis for paragraph-long block quotes, and, with a couple of exceptions, either fails to identify the portions of the record on which his claims depend or cites parts of the record so voluminous that the Court can only wonder what it should be looking for.... For this reason alone, a grant of summary judgment to Defendants on Falzone’s claims is appropriate. Nevertheless, because the Court can, on its own, piece together enough of this poorly developed record to address in substance most of Falzone’s claims, it will.

As Falzone illustrates, your choice of counsel can make or break your case. Choose wisely.

What does Groundhog Day teach us about federal courts?

In the movie Groundhog Day, Bill Murray repeats February 2—over, and over, and over again—until he gets it right. In Sollitt v. Keycorp (6th Cir. 2/1/12) [pdf], Kevin Sollitt and his former employer are doomed to repeat his wrong discharge lawsuit, because the bank took an aggressive position in removing his case to federal court.

(For the uninitiated who want to read all about the removal of lawsuits from state court to federal court, click here, read, and then come back.)

In sum, the appellate court concluded that the Edge Act—which permits claims involving international or foreign banking to be filed in federal court—did not provide a basis for removal of Sollitt’s state law wrongful discharge claim. The Court was reluctant to subscribe “an inherently limitless view” to the Edge Act’s grant of federal jurisdiction:

Suppose, for example, that Sollitt had tripped and fallen over a stack of carelessly placed printouts of foreign-currency transactions. This meager association—ridiculous as it is—between the potential negligence claim and the foreign banking transaction that generated the printouts, would appear to suffice for Edge Act jurisdiction under so limitless a view. That cannot be correct….

Sollitt accused a co-worker of misconduct, KeyCorp fired Sollitt, and Sollitt sued in federal court for wrongful termination. KeyCorp’s firing of Sollitt was not an aspect of “banking” and, therefore, Sollitt’s claim of wrongful termination did not “arise out of” a banking transaction, even though the entire episode arguably can be traced back to the PHC foreign currency transaction.

As a result, the case will be remanded back to state court, where it was originally filed. In the interim, the parties litigated the case, and the employer won summary judgment. Now, the parties are going back to state court, (maybe) to do it all over again. The plaintiff will certainly want the chance to re-present the factual issues raised in opposition to the summary judgment motion, or present new issues he may have discovered.

The lesson? Be very careful when you remove cases. A federal court’s subject matter jurisdiction is always in play, at each stage of litigation. An appellate court can bounce a case back to state court even if the district court never even entertained the jurisdictional issue. When that happens, you will have a Bill Murray moment.

Happy Groundhog Day.

When office pranks attack

Read these facts, from Slasinski v. Confirma, Inc. (6th Cir. 1/24/12) [pdf], and I’ll be back to discuss:

In July 2007, members of Confirma’s sales team, including Mr. Slasinski, attended a week-long seminar in Bellevue, Washington.  On the evening of July 25, 2007, Mr. Slasinski and others … attended a dinner cruise….

Near the end of the cruise, but before the boat docked, Mr. Slasinski proceeded toward the ship’s lavatory on the aft end of the boat. Before he reached his destination, Mr. Slasinski observed a colleague named Kris Daw enter the lavatory. Several other Confirma employees were standing nearby, and Mr. Slasinski observed Bickford engage an external lock on the lavatory door, thereby locking Daw inside. A few moments later, Bickford unlocked the door and released Daw to the laughter of those standing nearby.

Mr. Slasinski then entered the lavatory and shortly thereafter discovered that he also had been locked inside … approximately 20 to 25 minutes. During that time, the boat docked and the other Confirma employees disembarked. After some time had passed, Mr. Slasinski began making phone calls to colleagues on his cell phone to request assistance…. Mr. Slasinski then resorted to kicking the door in an attempt to free himself, at which point the boat’s crew discovered and released him.

Like any embarrassed employee, what did Slasinski do? He sued, for false imprisonment. After a four-day trial, the jury returned a verdict in favor of Confirma, which the appellate court upheld:

If the jury accepted Confirma’s version of the facts, and drew all inferences in Confirma’s favor, it could easily have found that Mr. Slasinski entered the lavatory knowing he would be locked inside as part of the prank, and thus initially consented to the confinement. Moreover, for at least part of the duration of his confinement, Mr. Slasinski did not knock, call out to, or otherwise beseech any of the Confirma employees standing nearby to release him. A reasonable jury could conclude, therefore, that any confinement Mr. Slasinski experienced began with his consent, and only after the passage of time became against his will. A jury could further conclude, based on the evidence, that the period of unconsented-to confinement was of such brief duration as to be only momentary or fleeting.

What does this case mean? I could draw a great lesson about or the risks of lawsuits coming from anyone at any time, or the importance of workplace training to avoid similar problems, or the synergy between employee morale and having a good laugh, but instead, watch this:

See you tomorrow.

A Hanukkah lesson for employers

The story of Hanukkah tells us that in 165 B.C., the Maccabees led a successful revolt against the Greeks, who had invaded Jerusalem and outlawed Judaism. When the Maccabees rededicated the Holy Temple after expelling the Greeks, they only located enough olive oil for the Temple’s menorah to burn for one night. That oil, however, burned for eight nights, the time needed to prepare a fresh supply—the miracle of Hanukkah.

I’ve been thinking of a way to tie this story to the workplace and impart a lesson to employers. The story of Hanukkah is one of perseverance, courage, and fighting for one’s beliefs. Employers are under assault from all fronts—lawsuits from disgruntled employees, overly zealous regulatory agencies and their overly burdensome regulations, and courts that can lack sufficient resources to address these issues properly. It’s easy for businesses throw in the towel, such as by relocating operations out of the country or by paying ransoms to settle meritless lawsuits. Perhaps the lesson here is to simply hold firm.

Happy Hanukkah.

Federal Court pilot program tries to simplify discovery in employment cases

No one enjoys paper discovery. Any practitioner who tells you otherwise is either insane or lying. It’s time-consuming and expensive to gather and review information to produce, and it’s painful to squabble with opposing counsel over information withheld.

In an attempt to address and alleviate some of these concerns, the Federal Judicial Center has published its Pilot Initial Discovery Protocols for Employment Cases Alleging Adverse Action [pdf]. These protocols set forth the documents and categories of information that the plaintiff and defendant must turn over during the initial disclosure process, voluntarily and without a formal request, and no later than 30 days after the employer files its answer or responsive pleading. Molly DiBianca’s Delaware Employment Law Blog provides an excellent summary.

These disclosures are comprehensive, and cover many of the documents that will be exchanged in most garden-variety discrimination lawsuits. Of all of these disclosures, I want to point out one curiosity. Employers are not required to disclose the entire employee handbook, but only its table of contents and index. The only policies that employers are required to initially turn over are those “relevant to the adverse action in effect at the time of the adverse action,” such as discipline or EEO policies. 

In light of these protocols, maybe we need to reconsider the rote production of entire employee handbooks in discrimination cases. Maybe we also need to reconsider the inclusion of tables of contents and indices in handbooks, to limit their discoverability at the outset litigation in federal court.

New rules for removing cases to federal court will impact employers

If you are an employer, or an attorney representing employers (and if you’re reading this blog I’d bet dollars to donuts you fall into one of these categories), the Federal Courts Jurisdiction and Venue Clarification Act of 2011 [pdf] will significantly impact you. Congress passed this bill last week, and PrawfsBlog notes that President Obama expects to sign it into law.

Without getting overly technical (for those who are not familiar with how the removal of cases from state court to federal court works), with some limited exceptions, a defendant has the right to take a case originally filed in state court into federal court if the plaintiff could have filed the case in federal court in the first place. There are two types of cases a plaintiff is jurisdictionally permitted file in federal court: those based on the diversity of the parties (where no plaintiff is a citizen of the same state as any defendant, and the amount in controversy exceeds $75,000), and those based on a federal question (where a claim arises under the Constitution, laws, or treaties of the United States).

The JVCA will make some significant changes in how we remove cases to federal court:

For all removed cases:

• In cases with multiple defendants, it will now be a statutory requirement that all defendants consent to the removal (codifying a long-standing judicial requirement).
• Each defendant will have its own 30-day period after receipt by or service on that defendant of the initial pleading or summons (clearing up a conflict among the circuits, some of which had denied a later-served defendant the benefit of a full 30-day period to file a notice of removal).
• If a later-served defendant is the first to file a notice of removal, earlier-served defendants may consent to the removal even though they had not previously initiated or consented to the removal (also clearing up a circuit conflict).

For removed cases based on a federal question:

• In cases that combine a federal question with non-removable state law claims (workers’ comp claims, for example), the JVCA will require the federal district court to sever the non-removable state law claims and remand them back to state court. This provision presents a risk of bifurcated lawsuits (and duplicative litigation?) in certain instances.

For removed cases based on diversity of citizenship:

• The JVCA adds a bad faith exception to the prohibition against the removal of cases after one year after the commencement of the action. A court can permit this late removal if it finds that the plaintiff acted in bad faith to prevent a timely removal (such as by deliberating hiding the real amount in controversy).
• The JVCA cures the conflict among the circuits in the calculation of the amount in controversy. It permits a defendant to state in the notice of removal the amount in controversy when the complaint is silent, and permits late removal if one learns the amount in controversy via discovery responses. This provision is significant in states like Ohio, which permit boilerplate $25,000 prayers for relief in common pleas court complaints. This provision removes that risk that a defendant who waited to remove a case following discovery on the amount in controversy risked remand based on a late-filed removal. 

It is no secret that employers and their lawyers usually prefer to be in federal court, and removal is often the way we get there. Because the JVCA will affect how we get certain cases into federal court, it is a significant development that warrants our attention. It will go into effect 30 days after President Obama signs it into law.

[Hat tip: @overlawyered]

Ohio Supreme Court rewrites, and protects, the tripartite relationship between attorney, client, and insurer

If your business has employment practices liability insurance, or deals with insurance companies for other coverages, you are probably aware of the strange three-headed relationship that exists between you (the insured), your insurance company, and the attorney your insurance company hires to defend you in litigation. One question that always arises in this unique relationship is whether an attorney-client relationship only exists between the attorney and you (the insured), or if it also exists between the attorney and the insurance company. The answer to this question is significant, because if there is no attorney-client relationship between counsel and the insurance company, then the attorney-client privilege will not shield communications between them.

Conventional wisdom in Ohio has been that no attorney-client relationship exists between an insurance company and retained counsel. The seminal case on this issue was Swiss Reinsurance Am. Corp. v. Roetzel & Andress. Earlier this week, however, the Ohio Supreme Court—in State ex rel. Dawson v. Bloom-Carroll Local School District (11/29/11) [pdf]—flipped conventional wisdom on its head. The case focused on the issue of whether someone could compel disclosure, under Ohio’s public records law, of communications between a school district’s insurance carrier and its legal representative. It has much broader implications for the relationship between an attorney and an insurance carrier. The Court concluded that because an attorney-client relationship existed between the insurer and the insured’s retained counsel, the resulting privilege shielded any such communications from disclosure:

In effect, the insurance company stands in the shoes of the district…. Where a person approaches an attorney with the view of retaining his services to act on the former’s behalf, an attorney-client relationship is created, and communications made to such attorney during the preliminary conferences prior to the actual acceptance or rejection by the attorney of the employment are privileged communications.

This case solves a huge problem for employers’ insurance counsel, and consequently for employers. Under Swiss Reinsurance, and because of the lack of any privilege, communications between employment defense insurance counsel and the insurance company were made at the client’s risk. Thanks to a common sense ruling from the Supremes, these communications are now rightfully protected. Counsel should now be able to speak as freely with the insurer as we do with our clients.

A special circle of hell is reserved for lawyers that don’t extend professional courtesies

I write this post to vent, not to indict. I therefore withhold the names of the guilty.

For those that do not follow me on twitter, I’ve been dealing with an ill child for the past few days. What started as a routine endoscopy turned into an extended stay at the Cleveland Clinic after he developed a hematoma of the small bowel as a rare, but possible, side effect of the biopsy. After the scariest four days of my and my wife’s lives, he appears to be on the mend, although we have another couple of weeks before he is fully healed and home. From the bottom of my heart, I thank everyone for the well wishes these past days.

I was supposed to be in court this morning on a show cause hearing in what has been a very contentious case. On Friday, I left messages for all three opposing lawyers to explain that because of a family medical emergency I could not make the hearing, and to ask for their consent to a continuance. No matter how hard-fought the case, I would never dream that any attorney could refuse such a request under these circumstances. None of them even had the common courtesy to return my call.

I’ve long believed that Dante saved a special circle of hell for lawyers that do not extend common professional courtesies. Last Friday’s experience confirmed this suspicion.

Avoid “kitchen sink” pleading to maintain credibility

Ramadan v. MetroHealth Med. Ctr. (Ohio Ct. App. 1/13/11) is a medical malpractice case, which is an odd fit for a blog about employment law. It teaches, though, a universal lesson about the importance of selective pleading, and not merely throwing everything against the wall and seeing what sticks.

Briefly, Mai Ramadan’s husband died in the operating room during surgery for injuries he suffered while setting his wife on fire. She then sued for the hospital for medical malpractice and loss of consortium. On appeal, she argued that the trial court wrongly admitted evidence about the arson. The court of appeals ruled that because she brought a claim for loss of consortium, the jury was entitled to hear evidence about the quality of her marriage and the events that led to the injuries:

In the instant case, plaintiff argues that evidence of the circumstances that caused the fire and resulting injuries is irrelevant to plaintiff’s medical malpractice claim…. [P]laintiff did not limit her case to a claim of medical negligence. Plaintiff chose to also pursue a claim for loss of consortium, which required proof of damages.... Accordingly, evidence regarding plaintiff’s relationship with Ramadan is relevant to rebut her claim for loss of his “companionship, cooperation, aid, and affection.” Tragically, this evidence included that Ramadan abused plaintiff, ultimately setting her on fire.

To bring this full circle to the world in which we live – employment law – consider these words of caution from Moore v. Avon Prods. (N.D. Calif. No. C 06-03425 10/4/07) about how scattershot litigation undermines one’s credibility:

Simply put, Moore has failed to come forward with any evidence that Avon’s stated reasons for firing him are pretextual. Indeed, Moore’s kitchen-sink approach to his discrimination claims only serves to highlight the extent to which his claims are mutually inconsistent and unsupported by the facts. Was he discriminated against because he was disabled? Because of his age? Because of his sex? Because of his race? Or because of his religion? While Moore urges the Court to answer “all of the above,” on the basis of the evidence before the Court, it appears the correct answer is “none of the above.”

Many take the approach that when litigation in concerned, the more the merrier. As these examples show, sometimes what you don’t argue is more important than what you do argue.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

When did we all stop accepting responsibility?

A woman in California has filed a class action lawsuit against McDonald’s. She claims that McDonald’s temps kids to eat unhealthily by promoting their fattening food with Happy Meal toys. I know you may this hard to believe, but, yes, parents, if you feed you kids too many Happy Meals, they may get fat. If a court agrees with this lawsuit, the parents who use McDonald’s as a crutch to feed their kids will be absolved of any responsibility for the resulting obesity. Yet, is it just the cheap cardboard box and tchotchke toys, or does the obesity result from parents that are either too busy or too lazy to feed their kids healthy foods? Or, do parents that permit their children to lounge around the house watching TV and playing video games beget overweight kids? Yes, too much fast food can make you fat. But, not only is it not the only reason kids become overweight, I’d venture to guess it is not the main reason either.

We have become a society that refuses to accept responsibilities for our faults. I see it all the time in employment cases. The insubordinate employee is convinced that her race/sex/age/disability was the reason behind her termination. The chronically late employee is convinced that he is being retaliated against despite his unreliability. The overly sensitive employee shrieks that one harmless email is a pattern and practice of lascivious harassment. One theme that resonates over and over in cases I defend is a refusal to accept responsibility. Yes, employers do discriminate, and retaliate, and harass. More often than not, however, businesses simply try to do right by their employees. Yet, if you believe all of the lawsuits that are filed, corporate America is one giant group of bigots and employees are never responsible for their own unemployment.

As we approach the new year, let’s all make it a resolution in 2011 to start taking responsibility for our own faults and shortcomings. It may decrease the number of lawsuits I am called on to defend, but it will make us a more credible society.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Ohio democrats look to go down swinging

In boxing its called a puncher’s chance. As long as you’re on your feet, you always have a chance to knock out the other guy. You might get knocked around for 11 rounds, but as long as you can throw a solid punch in the 12th, you can always win the fight.

This is what the democrats in the Ohio House are trying to do. In last month’s election, the republican tide swept away their control of Ohio’s House. Next month, their half of Ohio’s legislature, along with the Governor’s mansion, will join Ohio’s Senate as republican-controlled. On their way out, the current House majority is going down swinging.

Tomorrow, the Ohio House will hear testimony, and possibly vote, on three long-standing pieces of legislation:

• HB 470 – which would create a new protected class for people who smoke tobacco. For my prior thoughts on this bill, see Bill seeks to snuff out discrimination against smokers.

• HB 488 – which would create a new protected class for women who are lactating, in addition to requiring that employers provide lactating employees reasonable, unpaid time each day to permit the expression of breast milk. I’ve also previously written about this legislation. Because of the recent federal mandate for workplace lactation breaks, this legislation is irrelevant.

• HB 523 – which would create a uniform definition of “employee” in Ohio’s minimum wage, wage payment, and workers’ compensation laws. This statute would broadly define an “employee” as “an individual who performs services for compensation for an employer.” Critically, it presumes anyone who falls under this broad definition is an “employee” and would require the employer to prove otherwise. It also creates a stringent enforcement scheme, which includes a private cause of action, civil penalties, and criminal penalties for misclassifications. Of these three pieces of legislation up for consideration, this is the most significant and has the widest implications for Ohio businesses.

Unlike the weary, late-round boxer, the Ohio democrats have no chance of winning any of these battles. They could win the round by passing one or more these bills, but each would certainly die in the republican-controlled Senate.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Do you know? The voluntariness of release agreements

The facts that led to the severance agreement in Gascho v. Scheurer Hosp. (6th Cir. 11/19/10) [pdf] are what make employment law an interesting way to make a living. The legal issues surrounding the enforceability of a severance agreement, however, are what make this post worth reading.

Mary Ann Gascho, the plaintiff, was a 35-year employee of Scheurer Hospital. For the last 18 years of her employment, she was also married to the hospital’s President and CEO, Dwight Gascho. Dwight, it turns out, was having an affair with one of the hospital’s Vice Presidents. Around the time Mary Ann began to suspect her husband’s infidelities, he began physically abusing her. After Dwight admitted the affair and demanded a divorce, Mary Ann confronted the VP, calling her, among other things, “the whore next door.” That confrontation led to Dwight firing his wife. Cooler heads prevailed, however, when the hospital’s HR Director, Greg Foy, converted the termination into a three-day suspension. That suspension dovetailed into an FMLA leave.

Following the leave, the hospital offered Mary Ann a separation package. Foy presented her the agreement, explained and summarizing its key provisions, recommended that she hire a labor-law attorney to review the document, and told her that she would have 21 days to sign the agreement and seven days to change her mind if she did sign it. There was no physical harm or threats of physical harm between the day she was fired and the day she signed the agreement. Her husband, though, did use various methods of persuasion to try to convince her to sign, including lashing out and yelling at her. After consulting with her children, Mary Ann ultimately signed the agreement.

When she sued the hospital a year later for discrimination, the district court dismissed her claims as barred by the separation agreement. The 6th Circuit agreed, examining the following five factors to determine whether the release was “knowing and voluntary”:

1. Plaintiff’s experience, background, and education.
2. The amount of time the plaintiff had to consider whether to sign the waiver, including whether the employee had an opportunity to consult with a lawyer.
3. Clarity.
4. Consideration.
5. The totality of the circumstances.

1. Mary Ann’s experience, background and education. The court concluded that a nurse—with more than three decades of experience and who rose to a management position—could comprehend the meaning and effect of a settlement agreement.

2. Time to consider the waiver and opportunity to consult an attorney. The hospital gave Mary Ann 21 days to review the agreement and seven days to change her mind after signing it. While Title VII does not have a statutory requirement for waivers, the 21 days mirrors the OWBPA’s requirements for waivers of federal age discrimination claims. “This congressional policy in a related civil rights statute bolsters the conclusion that a 21-day consideration period and a seven-day reconsideration period suffices to establish a legitimate waiver.” That timeline gave Mary Ann ample opportunity to consider the agreement and consult with an attorney.

3. The clarity of the waiver. The waiver “releases and forever discharges [Scheurer] Hospital … from any and all claims of any nature … based on any fact, circumstance or event occurring or existing at or before [Mary Ann’s] execution of this Agreement. [It] includes all claims whatsoever … including … claims under …Title VII of the Civil Rights Act of 1964.” According to the Court, “One does not need a law degree to grasp the import of these terms.”

4. Consideration for the waiver. In exchange for the waiver, the hospital offered Mary Ann a year’s salary plus other benefits, which was more than sufficient consideration.

5. Other relevant circumstances. Mary Ann claimed that she was under duress to sign the agreement. The court disagreed:

All bargaining, whether to buy a house, to take a job or to settle a dispute, comes with implicit economic and psychological pressures—that if the one party does not take the offer, it may go to someone else…. The better the offer, indeed, the greater the implied fiscal threat, creating the possibility that a claim of duress grows stronger the more generous the offer. 

That Gascho worried about having to file a lawsuit (and winning it) if she opted not to accept the settlement offer is precisely the kind of pressure anyone (not independently wealthy) would face in this context…. “No legal system can accept an assertion that ‘this contract was signed under duress because my only alternative was a lawsuit.’ That would eliminate settlement—and to a substantial degree the institution of contract itself.” …

Over one month had passed since the last act of physical violence…. Gascho had plenty of time to consider the agreement, plenty of time to rescind the agreement after signature and plenty of time to consult a labor attorney, as one hospital executive (Greg Foy) recommended she do. She spoke with several people before she signed the agreement, including friends and trusted family members (e.g., her children), and none of them advised her not to sign it. It is difficult to square these circumstances with the notion that Gascho’s husband coerced her to sign the agreement.

Like Mary Ann Gascho, anyone is free to challenge the knowing and voluntary nature of a release. As this case shows, however, it is very hard for employees to win these challenges.Courts treat settlement agreements as sacrosanct. If you resolve a case with an employee and obtain a signed agreement with a release that meets these criteria, you can ordinarily rest comfortably that you are free from future lawsuits brought by that employee.

What dryer drums have to do with unpaid wages (or, a scathing judicial indictment of class action lawsuits as extortion)

Thorogood v. Sears, Roebuck & Company (7th Cir. 11/2/10) [pdf] involves the attempted litigation of multiple class action lawsuits in different states over the issue of whether the advertising of a stainless steel dryer drum was deceptive. In brief, after a district court dismissed a class action lawsuit brought by Thorogood against Sears in Tennessee, the same lawyers filed a similar claim in California on behalf of a different plaintiff, Murray. The case caught my attention because of judge’s scathing indictment of class action lawsuits (I apologize for the long quote, but it is worth reading):

The class action is a worthwhile device for economizing on the expense of litigation and enabling small claims, illustrated by Thorogood’s claim, capped at $3,000, to be litigated at all (though when the claim is deceptive advertising, a proceeding before the Federal Trade Commission is a more economical alternative to a class action suit). But the device also lends itself to abuse. [C]lass members are interested in relief for the class but the lawyers are primarily interested in their fees, and the class members’ stakes in the litigation are ordinarily (and in the present case or cases) too small to motivate them to supervise the lawyers in an effort to align the lawyers’ incentives with their own…. Defendants, wanting to minimize the sum of the damages they pay the class and the fees they pay the class counsel, are willing to trade small damages for high attorneys’ fees…. These convergent incentives forge a community of interest between class counsel, who control the plaintiff’s side of the case, and the defendants, but may leave the class members out in the cold….

An additional asymmetry, also adverse to defendants, involves the cost of pretrial discovery in class actions. One purpose of discovery—improper and rarely acknowledged but pervasive—is: “it makes one’s opponent spend money.” … In most class action suits, including this one, there is far more evidence that plaintiffs may be able to discover in defendants’ records (including emails, the vast and ever-expanding volume of which has made the cost of discovery soar) than vice versa. For usually the defendants’ conduct is the focus of the litigation and it is in their records, generally much more extensive than the plaintiffs’ (especially when as in a consumer class action the plaintiffs are individuals rather than corporations or other institutions), that the plaintiffs will want to rummage in quest for smoking guns.

The merit of Murray’s case, like Thorogood’s, of which it is a close copy, is slight. But the pressure on Sears to settle on terms advantageous to its opponent will mount up if class counsel’s ambitious program of discovery is allowed to continue. A letter from Mark Boling, Murray’s co-counsel, to Sears’s counsel, printed at the end of this opinion, illustrates the point. The letter reminds Sears that discovery is proceeding and “will involve Plaintiff’s counsel delving into the full extent of Defendants’ alleged wrongdoing” in order to justify not only equitable relief but also punitive damages—which are potentially very large given the size of the class and the possible preclusive use of any judgments favorable to the plaintiffs in suits brought in other states. The letter continues: “as we progress through the various stages of this litigation, the cost of settlement will necessarily increase…. At this point, we may want to consider whether an appropriate olive branch for resolution can be mutually created on a class wide basis commensurate with the status of the case. If interested, please pick up the telephone and call me. In the meantime, Plaintiff will continue to diligently and timely prosecute this case to an appropriate result.” In other words, unless Sears settles now (implicitly for modest relief for the class and an agreement with class counsel to recommend to the judge generous fees for Krislov and Boling), it will incur the considerable cost of responding to class counsel’s distended project of “delving” and assume the risk of a very large adverse judgment. And as Boling’s letter also points out, “if plaintiff is successful on a motion for class certification, the court as the gate keeper will demand a more significant recovery for resolution.”

This scenario is not all that much more different than the standard wage and hour class action.

• Like the Sears example, employers in wage and hour class actions bear a disproportionately large share of time and expense in discovery. Employers have most, if not all, of the wage and hour records, many of which are archived and expensive to recover. Discovery of email exponentially adds to the discovery expense. These high costs bear heavily on an employer’s decision whether to settle or litigate a case.

• Like Sears, employers feel an inordinate pressure to settle these claims. The exposure in wage and hour lawsuits can be large (sometimes, even “bet the company” like exposure). The risk of high attorneys’ fees award only serves to exacerbate that pressure to settle. It is not a secret that claimants use that exposure to their advantage to leverage early resolutions.

• And, like the Federal Trade Commission in a consumer case, there exists a federal agency that can economically litigate a meritorious claim, the Department of Labor.

Now that we all know what dryer drums have in common with wages and hours, we can get back to defending class action lawsuits.

[Hat tip: PointofLaw.com]

Court concludes that “common slang” does not violate non-disparagement clause in severance agreement

I’ve seldom, if ever, negotiated a separation or settled an employment dispute for an employer without insisting that a non-disparagement clause be part of the signed agreement. The reasoning is simple—it’s not in a company’s best interest to have an ex-employee running around bad-mouthing it or trashing its reputation. The reality, however, is that a clause in a contract is only as good as one’s ability to enforce it when breached. In Ohio Education Assn. v. Lopez (10/19/2010) [pdf], one Ohio appellate court has removed a good deal of the bite from this class of clauses in separation and settlement agreements.

The facts of Lopez are straight-forward. In connection with the resignation of its assistant executive director and general counsel, the Ohio Education Association presented Lopez with a severance agreement. The agreement contained the following non-disparagement language, which is similar to that which you will find in most such agreements:

Employee further agrees not to at any time disparage, defame, or otherwise derogate Employer’s Officers, Executive, Committee Members, employees or agents.

OEA sued Lopez for an alleged breach of that clause by leaving the following voicemail for its outside counsel:

Davey, you never call me anymore. This is el jeffe. Call me sometime. I’m all settled with the OEA so you don’t have to worry about this gag order and all this s___ that slimebag Reardon said to you. So call me…. Bye.

The court of appeals concluded that while the voicemail did breach the non-disparagement clause, the breach was immaterial and therefore not actionable:

Here, the purpose of the separation agreement was to end the employment relationship and resolve all disputes. The nondisparagement provision was a negotiated term of the agreement. The provision OEA alleged Lopez breached uses the terms “disparage, defame, or otherwise derogate.” All of these terms connote harming a person’s reputation or causing one to seem inferior. The term “slimebag” is a common slang expression meaning “[a] despicable person, usually a male.” McGraw-Hill Dictionary of American Slang and Colloquial Expressions (4th ed.2006), 323…. This kind of trifling figure of speech is of so little consequence it cannot be said to be material and should be disregarded…. [T]he slang expression is such a part of modern casual speech as to be almost meaningless. OEA could not demonstrate that the message caused any damage to OEA or Reardon.

Because this case requires a showing of actual harm to prove a material breach of a non-disparagement clause, it will make it that much more difficult to enforce these provisions. Nevertheless, they remain an important part of any severance or settlement agreement because: 1) they establish the expectation that ex-employees are to act professionally and business-like when talking about your organization, and 2) protect your business from the malicious speech intended to cause real harm.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Court compels production of social networking user names, logins, and passwords, and dispels any notions of personal privacy

As I’ve recently discussed (Discovey of Social Networks in Employment Disputes and More on the Lack of Privacy in Social Media), social networking profiles and posts have become fertile ground for the formal discovery of information about litigants. Last month, one Pennsylvania trial court took this discovery one step further, and ordered the production of a plaintiff’s social networking user names and passwords.

In McMillen v. Hummingbird Speedway, Inc. (Pa. Ct. of Common Pleas 9/9/10), the plaintiff filed suit to recover damages for substatial injuries he allegedly sustained during a stock car race. The defendant asked in discovery for the names of any social networking sites to which the plaintiff belonged, along with users names, logins, passwords. The plaintiff objected, claiming that his Facebook and MySpace user names and login information were confidential. The trial court disagreed, and ordered the production: “Where there is an indication that a person’s social network sites contain information relevant to the prosecution or defense of a lawsuit, … access to those sites should be freely granted.” It relied, in part, on Facebook’s terms and conditions, which the court concluded dispelled any notion that information one posts on Facebook is private:

Yet reading their terms and privacy policies should dispel any notion that information one chooses to share, even if only with one friend, will not be disclosed to anybody else…. Facebook users are thus put on notice that regardless of their subjective intentions when sharing information, their communications could nonetheless be disseminated by the friends with whom they share it, or even by Facebook at its discretion. Implicit in those disclaimers, moreover, is that whomever else a user may or may not share certain information with, Facebook’s operators have access to every post….

The court also found that the relevancy of social networking information outweighed the potential of harm from the disclosure of that information.

Furthermore, whatever relational harm may be realized by social network computer site users is undoubtedly outweighed by the benefit of correctly disposing of litigation. As a general matter, a user knows that even if he attempts to communicate privately, his posts may be shared with strangers as a result of his friends’ selected privacy settings. The Court thus sees little or no detriment to allowing that other strangers, i.e., litigants, may become privy to those communications through discovery….

Millions of people join Facebook, MySpace, and other social network sites, and as various news accounts have attested, more than a few use those sites indiscreetly…. When they do and their indiscretions are pertinent to issues raised in a lawsuit in which they have been named, the search for truth should prevail to bright to light relevant information that may not otherwise have been known.

In last Sunday’s New York Times Magazine, Walter Kirn made the following observation about the intersection between social networking and the loss of personal privacy:

As the Internet proves every day, it isn’t some stern and monolithic Big Brother that we have to reckon with as we go about our daily lives, it’s a vast cohort of prankish Little Brothers equipped with devices that Orwell, writing 60 years ago, never dreamed of and who are loyal to no organized authority. The invasion of privacy—of others’ privacy but also our own, as we turn our lenses on ourselves in the quest for attention by any means—has been democratized.

As McMillen illustrates, by choosing to sacrifice our personal privacy through social interactions on social websites, we are also choosing to sacrifice our right to protect those interactions from discovery. 

[Hat tip: Delaware Employment Law Blog]

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Do you know? Litigating disputes in court does not always make business sense

I believe that litigation is the worst possible way to settle disputes. This may come as a shock, considering that I am a litigator and trial lawyer. Consider, however, that when you decide to litigate, you resolve to pay me six figures for the following: to prepare and respond to discovery requests, produce and review documents, prepare for, take, and defend depositions, draft and respond to motions, and prepare for a trial that has less than a 5% chance of ever occurring. You also resolve to have years of your life and the lives of your employees sucked up by document productions, depositions, reviews of letters, pleadings, and motions, and court appearances. All the while, I’m also dealing with obstreperous opposing counsel (which drives up your cost even more) and an over-taxed court system that likely lacks the time, resources, and manpower your case deserves. In other words, in many cases you are tossing good money after bad. It’s my job to appropriately counsel you so that does not happen.

There are lots of cases that have to be litigated to be resolved. A (small) percentage of them will even need the wisdom of a jury of our peers to conclude. When a plaintiff makes a settlement demand many times in excess of what it will cost you defend the case, litigation makes sense. When the future of your business hinges on an outcome (such as a key employee’s theft of trade secrets), litigation makes sense. When an employee did something horrifically wrong causing the termination, and you cannot in good judgment pay that employee any amount of money, litigation makes sense.

Litigating on principle, though, is not preferred. When ex-employee accuses you of bigotry by suing you for discrimination, your natural inclination is to roll up your sleeves and fight to defend your name. In many cases, that inclination is wrong. You are running a business, and litigation should be treated as a business decision, not an emotional decision. Emotional decisions cost money, and end up as headlines in your local newspaper.

Steve Strauss, writing at USAToday.com, offers businesses this advice: “Not every dispute is a litigation-worthy dispute. Even in the best of cases, you should think that your odds of winning are 50-50. The judge may say yes, or she may say no. The jury may find in your favor, or not. It's 50-50. Of course some suits are better than others, but you just never know what a judge or jury will do.” He is right when he says when you litigate “you are playing with fire and if you are not careful, you will get burned.” Keep these ideas in mind in your next employment dispute. They will lead to a reasoned business decision, not an emotional one.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Interesting data in latest litigation trends survey

Law firm Fulbright & Jaworski has released its 6th annual Litigation Trends survey (you can also read my thoughts on the 2009 survey and 2008 survey). This year's survey of 275 U.S. companies of various sizes and industries has some interesting findings:

• More than 25% of those surveyed expect the number of disputes their companies face to increase in the next 12 months, while only 6% foresee a decrease.
• 40% of U.S. respondents cite the poor economy as the reason for the expected increase in litigation next year.
• 49% of respondents had labor and employment litigation pending in 2010, up from 45% in 2009.
• Yet, employment cases of various types either increased at a slower pace in 2010 as compared to 2009.

These statistics are the opposite of what one would expect in a down economy that is trying to rebound. Race, sex, age, disability, and religious discrimination cases all slowed in 2010. Yet, most respondents expect discrimination cases to increase in 2011. 

It's hard to know what to make of these results. On the one hand, one would expect the pace of employment litigation to pick up in a down economy. On the other hand, it could simply be that the economy, and its effect on jobs, was worse last year than this year. Or, maybe 275 companies is too small of a sample to be truly predictive of what's happening in corporate America. Regardless, it is foreboding that businesses almost unanimously see the pace of litigation either quickening or staying the same in 2011. In other words, I'm sure I'll have plenty to write about in the coming year.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

A trial lawyer’s worst nightmare: a story from the trenches

I was defending a contentious age discrimination case. At trial, the plaintiff called as her first witness the president of the small non-profit defendant. For more than three hours, he took what can only be described as a verbal beating. The cross-examination ended with this bang:

  Q: And you admit that you take age into account in every employment decision you make at the foundation?

  A: Yes.

The admission was shocking because the question had not been previously asked in any deposition. The plaintiff’s lawyer took a flyer, but must have felt he had softened the witness up enough after three-plus hours. The damning admission hung in the courtroom for a week until I had the chance to try to rehabilitate my client as part of my case. By that point, no one cared that he was trying to answer the question honestly—that this 70-year-old man equated age with experience, and usually tried to hire older. While the jury returned a big number (the worst defeat of my career), it was half of the plaintiff’s final settlement demand (which I call a win nonetheless).

I was reminded of this story earlier this week by reading a two-part series in BLR’s HR Daily Advisor, 9 Things You Don't Want to Have to Admit in Court (part 1 and part 2). No amount of preparation could have stopped my witnesses from making the admission he made. Nevertheless, the takeaway from these stories is that preparation is the key to any successful testimony.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Do you know? Ten tips for effective litigation holds

The purpose of a litigation hold is to stop the destruction of potentially relevant or discoverable documents and information pursuant to a retention policy or otherwise. With the advent of electronic discovery, it is incumbent upon litigants to employ litigation holds as soon as claim or potential claim is reasonably clear. Otherwise, relevant documents might be destroyed, leading to sanctions such as adverse inferences, dismissal of claims, or default judgments. In other words, failing to implement a litigation hold is a quick way focus your case away from the law and the facts and on to discovery issues.

The following is a list of 10 practical tips for implementing a meaningful litigation hold during active or pending litigation:

1. Describe the pending claim.

2. Identify the recipient of the hold letter as someone who may have personal knowledge regarding the matter, or who may be in possession of or have access to information or documents potentially relevant to the matter.

3. Order the suspension of any deletion, overwriting, or any other destruction of electronic information relevant to the matter that is under the recipient’s control. This task will be much more daunting for an IT manager than an individual employee’s work station.

4. Broadly define the scope of covered information to include all documents, records or data of every kind residing or recorded (intentionally or unintentionally) in any medium or location other than within a person’s memory: paper, magnetic tape, photographs, maps, diagrams, applications, databases, microfilm, microfiche, emails, intranet, instant messages, blogs, voicemails, metadata, and any other electronic means of communication that are created, stored or received on the company’s computers or network systems or any other devices (phones, PDAs, applications or storage devices) or systems capable of storing electronic information.

5. Instruct that the recipient search all information for anything relevant or potentially relevant to the claim. Emails and other electronic information should be segregated in a PC or Outlook folder, and all paper documents in a hard file.

6. Hoarding is not a bad thing. Tell recipients to err on the side of over-saving.

7. Designate one company employee as the point person for any questions about the litigation hold and employees’ duties to preserve information and documents.

8. Alert recipients about the to the risk to the company and its employee for failing to heed the litigation hold request.

9. Ensure that the recipient signs a verification signifying the receipt the litigation hold.

10. Periodically recalculate the litigation hold to ensure continuing compliance.

A lesson from Columbus Day

When I took the dog out for her morning walk, I noticed a newspaper in my driveway. You might not think that is all that remarkable, but when you only have weekend delivery, a Monday newspaper means one of two things: either the delivery person screwed up, or today’s a holiday. That is how I remembered that today is Columbus Day. No banks, no mail, no courts, but a Plain Dealer in my driveway. (Apologies to my wife for not bringing the paper in – lost in my own thoughts walking back into the house).

Christopher Columbus set out for Asia, and ended up discovering the Americas. Here’s where I bring this around to employment law. Where you start a case may not be where you end up. You might think you have the greatest defense since the ‘85 Bears, until the decision maker royally screws up his deposition. Or, you could have a serendipitous moment when you discover during the plaintiff’s deposition that he lied on his job application and never even graduated from high school (yes, this once happened to me). Few employment cases end up where you think they will when you start. The ability to course-correct is the hallmark of a winning case.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.