Non-disparagement Agreements

From go, let me state: this post does not address the provision as used in settlements, in the context of product disparagement, or as a term in an employment separation agreement. Rather, as between an employer and employee in the course of employment. Have you guys seen this? I reasonably imagined the provision existed, as a concept or theory, but only recently had a friend be subject to one. The non-disparagement agreement was presented in tandem with a confidentiality agreement, but was distinctly separate and was a one-way street (he could not disparage the employer, but no language protected him from the employer’s disparagement). His encounter startled both of us a little. While acknowledging a company’s interest in controlling its appearance, we wondered what an employee could possibly say that is not already actionable under defamation? And is truth a defense in light of a non-disparagement agreement? Too, if the employee is at-will, why the need for the agreement at all; simply dismiss them (or threaten to) and offer a negative reference. Further, how does the element of leverage factor into the enforceability of a non-disparagement agreement?

In New York, non-disparagement clauses or agreements are intended to protect the employer from misrepresentations about themselves, their product and services, or from unfair competition. C.f. To successfully plead breach of a non-disparagement clause or agreement, an employer must show it sustained damages as a result of the employee's statements. There is some case law addressing non-disparagement clauses as a term of separation agreements, where disparaging statements were made post-separation. It appears concurrent claims of defamation are made to the claim for breach of agreement, and traditional defenses apply. But a review of New York case law does not reveal discussion of agreements concurrent to employment. Employment law is not my practice interest, but I imagine a court would liken the enforceability of such a provision to the same reasonableness standard other restrictive covenants are subject to. For instance, the provision might be enforceable if the employee is: of such import to be sought after by competitors; has been generously compensated in relation to his peers and in the context of his industry; and is exposed to information that is a type of trade secret, or has otherwise been so integral to the employer's work that the employee necessarily has knowledge or know-how that would carry clients or next generation product away from the employer. Too, I imagine the agreement must be reasonable in terms of: the context it was agreed to; the type of, and examples of, such comments that are considered "disparaging" - to whom, about what specifically, in what detail; as well as the length of time the covenant applies (only during the course of employment? or is it presumed the provision applies upon separation as well?).

FWIW: my friend hasn’t told our circle about the agreement, and I have been “politely requested” not to mention his employer here. Whether it was a result of his signing the agreement or his sense of taste and professionalism, I guess, is subject to the perspective of the commenter.

( Photo courtesy of Rosenblumtv).

In Case You Missed It This Week

Erin Brokevich celebrated her 48th Birthday. JDJournal.

There may be a way to avoid your law student debt, after all. AboveTheLaw.

I thought legacy seating - and variations of it - was a staple of how Universities did their business? AboveTheLaw. [UPDATE].

A new contract may be in the works ... facilitating Britney Spears' starring role in a Holocaust movie. Yes, that's right: Britney Spears. Opinio Juris.

(Photo courtesy of Babble).

Wednesday Laughter For the Crowd

Wilkes University, located in Wilkes-Barre Pennsylvania, is planning to open a law school for the fall of 2011; fully operational, it will support 300 full-time and 100 part-time students. In light of this, this, and that (or, I don't know, maybe this or perhaps that), the news of yet another new law school makes me laugh (in that Jack-Nicholson-Joker-sort-of-way).

Hat Tip: Al Brophy at Faculty Lounge.

(Photo courtesy of Wikimedia Commons).

Bonus Restriction on Banks Receiving Government Bailout Money

It is well known that as part of the bank bailout bill, Congress imposed pay restrictions on executives at banks that receive government money. These pay restrictions were further strengthened in the American Recovery and Reinvestment Act of 2009 (the “Recovery Act,” a/k/a the “stimulus bill”). A noteworthy and particularly controversial pay limitation in the Recovery Act requires that bonuses to a certain number of employees (depending on how much government money the bank receives) be limited to long-term restricted stock, and the stock’s value may not exceed one third of the employee’s total annual pay (the “bonus restriction”). For example, an executive subject to the bonus restriction who is paid $1 million in salary would be limited to a bonus of $500,000 in the form of long-term restricted stock. The more government money a bank receives, the greater the number of employees that are subject to the bonus restriction. For example, a bank that receives $500 million or more from the government must apply the bonus restriction to its senior executive officers and at least the 20 next most highly-compensated employees.

The question of how to identify a bank’s “most highly-compensated employees” was left open in the Recovery Act. One interpretation was to designate “most highly-compensated employees” based on pay in the current fiscal year, while another interpretation was that “most highly-compensated employees” were identified based on pay in the previous fiscal year. The Treasury Department’s interim final rule, effective as of June 15, 2009, settles the question by stating that “most highly-compensated employee” status is determined based on annual pay earned in the prior year. This, however, does not resolve the “intentional cycling” issue.

Suppose a bank received $500 million of government money in late 2008 and will not repay the government for at least another couple of years. Pursuant to the Recovery Act, the bank in 2009 must impose the bonus restriction upon the twenty five employees who earned the most money in 2008 (“Group 1”). Due to the pay restriction, however, Group 1 is not likely to be the highest paid in 2009, so a different group of twenty five employees (“Group 2”) would be the highest paid in 2009. Group 2 would thus not be allowed to earn bonuses in 2010 while Group 1 could. This could result in a weird game of leapfrog where groups of twenty five employees trade places as the highest paid every year.

The Treasury Department addresses this issue in the interim final rule. It offers a couple of potential methods to mitigate “intentional cycling” by: identifying “most highly-compensated employees” based on an average of the preceding two or three years’ annual compensation, or requiring certain “most highly compensated employees” identified for one year to remain subject to the restriction for a certain number of additional years regardless of subsequent levels of compensation. The Treasury Department invites comment on this issue, including the extent “intentional cycling” is likely to occur, and potential ways to address the issue.

If you wish to comment on this issue or any topic addressed in the interim final rule, you can contact the Treasury Department by e-mail at executivecompensationcomments@do.treas.gov or via snail mail (in triplicate) to Executive Compensation Comments, Office of Financial Institutions Policy, Room 1418, Department of the Treasury, 1500 Pennsylvania Avenue, NW., Washington, DC 20220.

Thank You Stephanie

First off, I'd like to thank Stephanie for inviting me to guest blawg. We've worked together on the paper, Litigation and Recoupment of Executive Compensation, and she's been an effective team leader. I look forward to sharing on this blawg some of what I've learned while researching and writing the paper.

Jon and Kate are splitting!

I love Hollywood gossip (almost as much as the entertainment product the actors and actresses put out), but the salacious reporting this morning of the very human drama also has legal implications. Apart from informing my own continuous drafting of my prenuptial agreements (some girls daydream about their dresses, I suppose), Jon and Kate have planned an interesting approach to the future use of the house and the co-parenting of their fifteen (oh, my mistake, only eight) kids. They are adopting a “bird nest” approach: where the children remain in the marital home, and the parents reside there only when spending their apportioned time with the children.

Bird nesting is a shared custody concept thought to be child-centric. By allowing the children to remain in their home, the children’s stability is protected, as is their relationship with both parents. Too, family law people tell me the arrangement is intended to minimize disputes between parents on sharing time with the children, and the constant to-and-fro of the kids between separate homes (and maybe also, schools). In preparation to post this writing, however, I came across a journal article arguing the arrangement is unnecessary and counter productive, and tends to fail. The author discussed a number of reasons, including: continued hostility between the parents that is detrimentally absorbed by the children, and the quandary of how to handle parents with previous families, or who remarry and build other families later (as nesting is typically not structured to accommodate either).

What I’m wondering first, however, is how practical an option this is for the average middle-class couple going through the trauma of divorce? Who has the financial wherewithal to support the nest, as well as separate apartments or houses for both parents? That’s a lot of money going out each month for mortgage and / or rent, not to mention property taxes and maintenance costs. Also, what are the property rights in this relationship: who owns what, and if the patio is ruined while Mom is at home, does Dad share in the expense of repairing it? If Dad wants to add a stereo system throughout the home, is Mom responsible for contributing to the expense? If she doesn’t, can she participate in any profit earned if the house is sold at a higher value as a result of the improvement? Are “rules of the house” part of the custody agreement ... those that govern both the kids (bed times) and parents (guests)? And I guess most importantly, an arrangement like this requires loads of cooperation from both parents. Is that even a reasonable expectation in the face of dismantling a marriage?

For what it’s worth, good luck Counsel to Jon and Kate!

(Photo courtesy of Us Magazine and Splash News).

The Big Picture

Only as high as I reach can I grow, only as far as I seek can I go, only as deep as I look can I see, only as much as I dream can I be. – Karen Ravn.

On that note, I’m starting with the BIG picture.

The law is a process which, like any other process, is in constant motion. Driving the process of law are actors (read: lawyers) who are constantly engaged in defining the relevant legal rules. At its best, the law transforms the naturally chaotic and selfish human beings into socially conscientious benefactors, because lawyers promote those rules governing human behavior which, to borrow the language of game theory, lead to a maximum-sum game: if everyone follows those particular rules, everyone will maximize their own, and everyone else’s benefits.

The cutting edge of economics today is preoccupied with applying game theory principles to public policy matters. One day, perhaps, our economic modeling ability and technology will grow capable of calculating the number reflecting the outcome-sum of any game played by 6 billion human beings. That day, we will have mathematical proof of which rules governing human behavior are, in fact, better for humanity than all other rules. But until that day comes, it is up to the lawyers to tap into our collective intuition and social consciousness and aspire to create and advocate the kinds of rules which, if followed, lead to a universal and perpetual maximum-sum game. No matter what we as lawyers do, the maximum-sum game paradigm must always remain in our minds’ not-so-distant background. This is as true of the work that we do as it is of the lives that we lead.

With this as background, the specific legal question for this post is as follows: in terms of international law, must (or should) Western nations let the sovereign people of Iran sacrifice their lives in the name of freedom and self-determination of its sovereign future generations, or, is it “good” for the sovereignty principle to be, as a matter of international law, inherently flexible and subject to international interference, considering that once self-determination is obtained by the Iranian people, it is likely that, like any other free people, they will demand nothing short of absolute respect for their sovereignty? (I claim no more to have the right answer to this question than I claim to have just stated it clearly, which, clearly, I have not.) Nevertheless, my view is that, as a matter of international law, national sovereignty must yield when self-determination by a people of a nation is in question, at least in times of outbreaks of internal violence directly tied to the very question of people’s self-determination. I plan to address some of the reasons supporting this view in my next post, which, I swear, will be, like, totally way more clear.

Thank You

As a first order of business I'd like to thank Stef Soondar for her tenacity, brilliance, humor and creative approach to professional development. I can't wait to see what you do next, my friend!

Minding the Three P's of E-Discovery

The electronic discovery process entails many hazards that can cause clients and practitioners to wipe out rather than ride safely to shore.

The 2006 amendments to the Federal Rules of Civil Procedure were intended to provide guidance to parties navigating e-discovery. In reality, judges, litigants, lawyers and technologists are still struggling to frame the discovery boundaries of a vast, ever-expanding world of electronically stored information. Thus, every organization must, to a degree, craft its proactive day-to-day information-management strategy and its reactive litigation approach from an e-discovery standpoint.

Do not panic about embarking on this ride. A legally defensible ESI process can result from minding the "Three P's" -- policies, protocols and preservation. If an organization and its counsel follow these practical tips, they will be best equipped to catch e-discovery's cresting wave.

POLICIES: PROACTIVE PROCEDURES

A proactive records-retention program can enable a much smoother ride once litigation ensues. Once on board, the litigator should inquire into the client's records-retention policy and any related policies as well as its overall compliance with these policies.

Hopefully, the organization has frontloaded some effort to achieve efficiencies and information management benefits from a legally defensible, systematized approach to records retention and destruction. An organization with a pre-existing program can more quickly access ESI in a cost-effective way, which will also allow it to assess the relevant contents of the ESI.

Substantial compliance with a retention program can provide a safe harbor once litigation hits. Indeed, a retention policy is really a destruction policy, "created in part to keep certain information from getting into the hands of others, including the government," the U.S. Supreme Court noted in U.S. v. Arthur Andersen, 544 U.S. 696 (2005). Thus, having an adhered-to policy can serve as a justifiable explanation for why responsive information was not retained.

A retention policy can even serve as a shield from sanctions. In Gippetti v. United Parcel Service Inc., 2008 WL 3264483 (N.D. Cal., 2008), the plaintiff sought spoliation sanctions after alleging that the defendant had inaptly destroyed relevant ESI. At issue in the case were UPS employees' driving records. The defendant company responded that some of the requested documents had been destroyed as part of a routine retention policy, which called for destruction of driving records to cope with sheer volume. The court relied on the policy's routinized approach when denying the spoliation motion.


PROTOCOLS: PRE-EXISTING PLANS

In addition to due diligence as to the client's retention policy and compliance with that policy, the litigator should assess the organization's litigation-hold protocols and efforts undertaken since the instant matter was reasonably anticipated.

Including a litigation-hold protocol as part of a retention policy or program is a risk-management boon. The protocol should memorialize actual practices. At a minimum, it should identify someone -- most likely from the company's legal department -- as the point person for assessing whether a hold is warranted, maintaining a log of situations that did and did not result in a hold and administering issued holds.

Risk insulation can then ensue. First, if an opponent alleges destruction of evidence based on deficiencies in administration of an issued hold, a response can point to an overall defensible protocol followed in the given instance. Second, if an opponent contends that a hold should have been issued but was not, one can point to a systematic assessment approach and perhaps a spreadsheet showing how many demands the organization gets annually and how few ripen into litigation. (See Keithley v. Homestore.com, 2008 U.S. Dist. LEXIS 61741 (N.D. Cal., 2008), as clarified by 2008 U.S. Dist. LEXIS 70246, where the judge expressed dismay at a litigant's lack of a litigation-hold protocol.)

Part of the litigation-hold program should be a generic hold notice, explaining ESI's role as a significant discovery source and the importance of suspending ESI deletion. The form notice should also particularize the organization's key ESI repositories. If the form notice meets those goals and is kept up to date, no one will need to create a new process each time. The form should not be blindly followed but instead should be tailored to each matter, in part because the attorney work-product doctrine only applies if a document is created in "anticipation" of litigation.

As soon as litigation counsel is hired, the lawyer should ascertain what has happened and marshal all writings documenting whatever steps have been taken. Moving forward, it is important for counsel to work with the client to document facts demonstrating compliance.

Producing such documentation, including the actual hold notice, may not ultimately be ordered by the court. Indeed, hold notices are protected under attorney-client privilege and attorney work-product doctrine, and a litigant should not readily waive either protection. A litigant that has effectively implemented a hold may gain credibility with the judge by selectively divulging some underlying details. Moreover, at some point, notices and related memos may have to be produced -- thus, becoming a shield against adversarial attack and/or judicial scrutiny.

If a discovery dispute arises, courts afford varying degrees of protection to the hold notice. At an early stage in one case, the court ordered the responding party to disclose factual information contained in the hold notice, including names and titles of 600 employees who received the hold notice. The court, in In re eBay Seller Antitrust Litigation, 2007 WL 2852364 (N.D. Cal., 2007), also acknowledged that details of the responding party's employees' ESI collection and preservation efforts would be fair game not only in the meet-and-confer context but also in a FRCP 30(b)(6) deposition notice of a person familiar with those efforts. However, the defendant in the eBay litigation was not required to disclose the actual notice or any of its privileged contents.

Other courts have afforded broad content protection once the responding party establishes that the notice is likely work-product. In Gibson v. Ford Motor Co., 510 F. Supp. 2d 1116 (N.D. Ga. 2007), the court found that compelled production of the notice or its contents could dissuade other businesses from issuing such instructions. The court in Gibson reasoned that parties should be encouraged to issue such directives.

As litigation proceeds, however, higher expectations may kick in when a tenable argument of bad faith arises. The judge may mandate a detailed inquiry into the responding party's retention practices and hold process. One well-known opinion, Rambus Inc. v. Infineon Technologies AG, Inc., 222 F.R.D. 280 (E.D. 2004), addressed the veil-piercing of both attorney-client privilege and work-product protection based on fraud, arising out of a situation in which the plaintiff had engaged in dubiously timed "shred days."

PRESERVATION OF POTENTIALLY PERTINENT ESI

Simply issuing a litigation-hold notice is not nearly enough to satisfy the preservation obligation. Counsel has to navigate various facets of an obligation that has been coined as the "Zubulake Duty" in the wake of Zubulake v. UBS Warburg, 229 F.R.D. 422 (S.D.N.Y 2004). An attorney has a duty to understand her client's retention program and information management systems. The lawyer should communicate with the client to ensure that all potential sources of relevant information are parsed out. The client's backup regime should also be discussed. It is also highly advisable to periodically check back with "key players" who were hold-notice recipients.

In civil litigation, a vast body of case law addresses preservation's flip-side: spoliation, which refers to the destruction of information reasonably anticipated to be discoverable. Potential sanctions include monetary penalties (attorney fees, costs and/or pay-for-proof sanctions); exclusion of evidence; delay of trial; and, in extreme cases, an adverse inference jury instruction or even dismissal or judgment on the merits.

Among the decisions underscoring the importance of taking the Zubulake Duty seriously is Phoenix Four Inc. v. Strategic Resources Corp., 2006 WL 1409413 (S.D.N.Y., 2006). The court in that case ordered the defendant and its attorneys to each pay more than $25,000 for failing to find "hidden server partitions" containing crucial evidence. The court noted that the attorneys had not employed a methodical approach to discover potential sources of information and had instead relied solely on their client.

In Qualcomm Inc. v. Broadcom Corp., 2008 WL 66932 (S.D. Cal, 2008), the attorneys ignored several warning signs indicating that their client had failed to adequately search for relevant information. In particular, Qualcomm had not produced e-mails from key employees who were part of an e-mail distribution list pertaining to key subject matter and had failed to search the e-mails of individuals listed as most knowledgeable.

Thus, an attorney must execute a plan that actively enables uncovering potential ESI sources and is most likely to ensure that the client engages in comprehensive preservation and collection.
The bottom line? Adhering to systematized proactive and reactive approaches can keep an organization and its counsel upright as they surf the e-discovery waves.

Robert D. Brownstone, law and technology director at Fenwick & West, advises clients on electronic discovery, electronic information management, retention/destruction policies and protocols and information-security matters. Juleen Konkel is a former associate in the firm's intellectual property litigation and electronic information management practice groups. View full post and comment string ...

Introducing Guest Blawger, Olga Y. Wayne

I am very pleased to introduce one of my favorite law dorks, Ms. Olga Y. Wayne. Olga and I have known one another for several years, and apart from her questionable taste in cinema (can “cinema” reasonably be used to describe The Matrix and The Terminator?), Olga is remarkably creative and was invited to write here specifically to see where her intellectual curiosity takes her next. She will be guest blawging here for the next four weeks.

Olga lives and practices in the Greater Philadelphia area. She is a General Litigation attorney whose practice spans matters of Employment and Alternative Dispute Resolution, in the context of Corporate and Securities transactions. She also acts as Vice-Chair for the American Bar Asosciation’s Young Lawyers Division. Olga graduated from both Harvard College and Temple University’s Beasley School of Law. She is admitted to practice in Florida, New Jersey, and Pennsylvania.

Welcome, Olga! I am looking forward to reading your writing and am grateful for your contribution here!

Self-Introduction, Permablawger Stephanie L. Soondar

My name is Stef and I would like to introduce myself and explain a little about why I started this blawg.

I am aggressively seeking permanent placement in the New York City legal market (me, and every third lawyer in the City). One of the efforts I have undertaken is extensive research and writing. I have collaboratively authored a piece with Allen entitled entitled Litigation and Recoupment of Executive Compensation (forthcoming), and am currently putting the foundation pieces together for a substantial document discussing Shari’ah compliant transactions. Both documents are quite lengthy, footnote-heavy, and require a series of drafts and edits. There are loads of other legal topics I am interested in, however, that would require less time and stoic presentation. Blawging was the next logical step … though my invitation to a faculty law blawg was not. Which describes the circumstances many of my peers also face. And so: why not create a forum where young professionals could distinguish themselves and their ideas professionally? Et voilà, Forward Movement was born.

I live in New York City and am admitted to practice in New Jersey and New York. I graduated from Temple University’s Fox School of Business, and separately, Temple's Beasley School of Law and the University of Kent at Brussels. My practice interests include Business Bankruptcy, Finance, as well as Corporations and Securities.

Introducing Guest Blawger, Allen Major

Introducing legal Pop Star Allen Major. Allen and I have been collaborating for months on a substantial research document entitled Litigation and Recoupment of Executive Compensation (forthcoming). Allen researched and composed, among other sections, a thorough investigation of TARP and its impact on executive compensation. He has been the consummate teammate: thorough research, easy to work with, and a reliable and timely performer. We currently have various third parties commenting on the draft, and he has been described by a reputable commenter as a “great writer.” I am pleased to have him guest blawg here for the next four weeks.

Allen lives in New York City and is admitted to practice in New York state. He is a graduate of both Johns Hopkins University and Cardozo Law School. Formerly of Heller Ehrman, Allen has Corporate and Securities transactional experience, including matters of Finance and Mergers and Acquisitions. His professional interests include Corporate Governance and Bankruptcy.

Welcome Mr. Allen! Am excited you are guest blawging with us and appreciate your time!

Introducing Guest Blawger, Juleen Konkel

One day recently I received in the mail a child’s toy: a proud, one-inch, sterling white unicorn … with a shocked mime pierced on it’s horn. Jules may object to her gift to me being used as an illustration, but I feel the image makes vivid her perseverance and hustle (and her sense of humor). Give Juleen a spool of thread, and the next day she’ll have somehow created a posh bolero. I am happy to announce Juleen Konkel will be guest blawging at Forward Movement for the next four weeks.

Juleen is a graduate of both the California State University at Hayward and the Franklin Pierce Law Center. She currently focuses her practice on Intellectual Property Business Transactions. She has an extensive biochemistry background, and has recently co-authored a journal article entitled Minding the Three P's of E-Discovery (forthcoming in two publications). Juleen lives in San Francisco and is admitted to practice in California.

Welcome! Am pleased you are writing with us in the next month, and am thankful for your investing the time! As a side note, Jules: the unicorn currently sits at my desk and is a hit with my immediate co-workers. Thanks again.

(The Mime is on Holiday, temporarily replaced by the Business Man).

About this site; Posts begin Monday, June 22nd!

Welcome! And thanks for visiting our site. We are polishing details, but will begin regular posting starting next Monday, June 22nd.

There are several quality law faculty blawgs and well-known attorney blogs reporting on either Big Law or the current Big Unemployment crush. Forward Movement is created amidst such discussion, but with a very positive intent. This blawg is a collection of young professionals taking control of their careers and focusing their energy on efforts that will push their professional development forward. Research will be presented here, as well as general commentary and opinion. All discussions will be substantive in nature, within either a legal or business context. Hopefully our writing will also be entertaining and useful!

As a matter of housekeeping, please note:

- All work is original to the blawg post author, and all copyrights from that blawg post are reserved.

- The views expressed within a blawg post are those of the author, and unless otherwise noted, do not reflect the views of the author's employer or the other authors writing on this blawg.

- This site is a means of education, marketing, and entertainment. It is neither written or publicly provided for as counsel or advice.

Enjoy, comment, and by all means: reach out to the authors if there are projects you would like to collaborate on or other opportunities you want to explore! Thanks.

[UPDATE] Additional details on this form of attorney advertising:


Privacy Policy: Apart from readers' ISP addresses, which is a component of the blawg's analytics and can be publicly viewed via the SiteMeter at the bottom of the homepage, no other reader information is viewed. Additionally, no reader information - whatsoever - is collected.

Terms of Use: This site is informational in nature, and intended to be a means of open communication. The terms of use a reader agrees to are contained within this blawg post, and within the language presented as a condition of commenting on a post. Readers whose behaviour is inappropriate in light of these collective terms will not have their comments published. Reciprocally, should a reader voluntarily compose an appropriate comment, that reader is giving Forward Movement license to publish that comment on the blawg. View full post and comment string ...