Christina M. Zern’s Post

It should come as no surprise that the #FTC has responded to lawsuits brought in #federalcourts in Texas to block implementation of its #noncompeteban. The agency alleges a sweeping perspective of its powers to include essentially anything to prevent unfair methods of competition, arguing that ALL non-competes are unfair and negatively affect competition by virtue of their restrictions. It also claims that the #FTCAct, which gave it rulemaking powers, gave it a mandate to adopt such a rule which purportedly does not establish irreparable harm to employers. The notion that high, non-recoupable litigation expense isn't harm for the purpose of seeking #injunctiverelief flies in the face of logic. The FTC also argues that, from a #costbenefit perspective, the positives that would arise from the ban would outweigh any harm to employers. A coalition of 230 national associations, including the #AHA (a lobbying group for the healthcare industry) has opposed the ban and requested a delay in its implementation pursuant to a section of the Administrative Procedure Act (#APA) on the basis that federal agencies are empowered to postpone the effective date of actions pending #judicialreview. The judge in the Texas case intends to issue a ruling by July 3 so the #uncertainty, at least at the injunctive stage, may have a preliminary resolution within the month. However, that will be only the beginning of protracted litigation on #constitutionallaw grounds. In the meantime, not a day elapses when Jeffrey W. Berkman, James Black and other members of our #corporate, #tax and #employmentlaw teams aren't asked to review existing contracts and provide counsel on their validity. #noncompeteagreements #employmentlaw #FTC #restrictivecovenants Eric Miller Rob Altieri Jeffrey Schultz Nickie Bigenho Erika Calderon

A court may find a defendant liable to a plaintiff in #litigation, even in situations where the plaintiff bears some responsibility. Where a law assigns “strict liability,” a defendant is expected to do whatever it can to prevent an injury because it may be responsible where there is one. For example, in a recent case before the state appeals court in Manhattan, a plaintiff sued a defendant because he fell from a ladder. The plaintiff won without a trial, and the defendant appealed, arguing that the court should have considered whether the plaintiff caused the injury himself based on where he placed the ladder and the fact that the plaintiff inspected the ladder and found it to be safe. The court affirmed the decision since a New York law assigns strict liability to accidents arising from a fall from a ladder; assigning “contributory negligence” to the plaintiff is irrelevant, the court held. Cases like this illustrate the need for defendants with strict liability to assume responsibility to prevent injuries. https://lnkd.in/e8dY8NX3

By now, it’s a familiar maxim: when an employee brings an action under the Private Attorneys General Act (PAGA), “the state is the real party in interest.” Iskanian v. CLS Transp. L.A., LLC. That concept is the jumping-off point for anyone wishing to understand the procedural complexities of PAGA litigation. 📖Read more in this L&E #GTblog written by Timothy Long and Sam Hyde: https://buff.ly/3ThxEmY. #California #PAGA #Litigation

Proud to be part of the Eckert Seamans team — alongside Robert W. Levy, Erik J. Frick, and Mark Johnston — that obtained this excellent summary-judgment win in the United States District Court for the District of Columbia in a noncompete, liquidated-damages, and trade-secrets case. In 2020, a staffing-recruiter sales manager ended his employment with the plaintiff staffing company and joined the defendant staffing company. The plaintiff sued the ex-employee, claiming that the ex-employee breached the noncompete and confidentiality clauses in his employment agreement with the plaintiff and violated the District of Columbia Uniform Trade Secrets Act. Despite conceding through discovery that it had no actual damages, the plaintiff sought (as of September 30, 2022) $261,610.72 in liquidated damages, increasing every week indefinitely by $2,335.81 due to an allegedly tolled liquidated-damages clause in the employment agreement. As noted in the Law360 article, "The Court correctly determined that the plaintiff could not prove damages — an essential element of its claims — either actual or liquidated, as after thoroughly examining and analyzing the parties' liquidated-damages clause, the Court rightly determined that it was an unenforceable penalty." #litigation #tradesecrets #summaryjudgment #employmentlaw #noncompetes

Courts in #litigation will enforce an agreement as written without considering external evidence so long as the agreement is clear. But it is very difficult to write an agreement that is so clear that someone cannot reasonably read it to mean something different. And the longer and more complicated an agreement is, the harder it is to avoid competing interpretations. When that happens, a court may require a trial and external evidence to enforce the agreement, which adds cost and uncertainty. For example, in a recent case before the state appeals court in Manhattan, a financial services firm sued to enforce a non-solicitation agreement against a former employee. The employee countersued, arguing his contract entitled him to deferred compensation. Both sides provided commercially reasonable interpretations of the agreement to support why they should prevail on the claim without a trial. The appeals court held that, since both sides had reasonable interpretations, neither could prevail on their summary judgment motions and a trial was needed to hear outside evidence on why one interpretation was the correct one. Cases like this illustrate how important it is to draft agreements that lend themselves to only one interpretation. https://lnkd.in/e7yEpGF5

Associate Justice Rappos helps flesh out the case law on what happens when a party seeks to reduce their claim to fit into Simplified Procedure. In this case, the Plaintiff was entitled to amend claim to reduce pleaded damages and proceed via Simplified Procedure, but the Defendant was entitled to costs for extra discovery time that would have been avoided. Associate Justice Rappos gives both sides a bit of a mixed bag. After setting the matter down for trial, the Plaintiff moved to reduce the claim to $200,000 and continue in Simplified Procedure because he "could not afford a long trial." The Defendant resisted, claiming he needed leave, and that it would prejudice their ability to fully defend the case if it proceeded by way of summary trial. The Associate Justice found: 1. If the amended pleading meets the requirements of Rule 76.02(7)(b), it MUST proceed by simplified. 2. Leave under Rule 48.04 was not required. Rules 26.01 and 26.02 applied. 3. Leave should be granted because the Defendant would not suffer non-compensable prejudice. Associate Justice Rappos was somewhat critical of the Defendant's argument that they would be prejudiced by being unable to compel testimony of 7 non-employee witnesses at trial. The Defendant failed to put forward any evidence that they had attempted to contact these witnesses over the years. 4. The Defendants were entitled to substantial indemnity costs related to an extra 6 hours of time related to discoveries that would not have been incurred had this proceeded by Simplified from the outset. Arguments re: costs associated with senior counsel were deferred to the trial judge. A mixed bag. Plaintiffs can seemingly amend their claims late in the day to shelter behind the costs cap of Simplified Procedure (although the reasons for the amendment will play a role). Defendants will get some costs thrown away, but the Rule doesn't seem to have the teeth they're looking for, with only modest costs being awarded. Ricci v. Credential, 2024 ONSC 2319 (CanLII), <https://canlii.ca/t/k4d2b>

*COMPLEXITY BANDS (INTERMEDIATE TRACK) - WHAT DO THEY MEAN?* One question which gets asked a lot is how will the Court approach the different complexity bands under the Intermediate Track. The reason this question is so important is that in principle, the higher the complexity band, the higher the fixed recoverable costs. Sir Rupert Jackson who devised the complexity bands helpfully provides some commentary: Band 1 - Will ordinarily be for straightforward cases, where only one is in dispute (such as quantum) and where trial will take one day or less. Key examples are debt claims or quantum only PI claims. Bands 2 & 3 - Cases where both liability and quantum are in dispute will generally go in Bands 2 or 3. Bands 2 & 3 are anticipated as the 'normal' bands for most Intermediate Track cases. Band 4 - Cases where there are serious issues on breach, causation and quantum (but still fall within the Intermediate Track) will fit here. Examples include a business dispute or an employers' liability disease claim where there are serious issues of fact/law and the trial is likely to last 3 days. Still answers on a postcard as to what serious issues of fact/law look like and why such a claim wouldn't be Multi-Track (and not fixed costs at all). Jackson's thoughts are helpful in considering how the judiciary will approach assignment of cases as case law develops, particularly given the definitions within the various complexity bands give a wide degree of discretion. Carter Burnett #costs #law #costslaw #fixedcosts #complexityband #intermediatetrack

Recently, Samuel H. Pond and I co-authored an article for The Legal Intelligencer discussing a very counterintuitive development in the world of workers’ compensation. Judges are permitting defense counsel to question claimants about their fee agreements with attorneys. This practice raises significant concerns. First, defense counsel lacks standing for lodging an objection since, if the verdict favors the claimant, the insurance company covers medical bills regardless. Second, this tactic potentially constitutes tortious interference, as it often involves speculative questions that infringe on attorney-client privilege and seem designed to disrupt fee agreements. Check out the article here: https://lnkd.in/eA4MDX38

Check out the latest blog post that Adam Paine and I wrote about the Delaware Supreme Court's decision, overturning the Chancery Court, holding that the employee choice doctrine applies to forfeiture-for-competition clauses rather than the reasonableness analysis that applies to noncompetes.

#Employers -- the #NLRB's trend of nitpicking discovery requests made in federal cases continues. For the reasons I laid out last week, I find this to be really problematic. At bottom, the Board and its ALJs appear to be comfortable Monday-Morning-Quarterbacking discovery requests and deposition questions in cases in federal and state courts, over which the Board has no jurisdiction. Intended or not, this sort of second-guessing will likely cause defense lawyers to pull punches in federal litigation for fear of a ULP charge. That seems untenable. This latest decision arose out of a wage/hour case brought in California federal court. When litigating that case, the employer's attorney asked one of the opt-in plaintiffs some questions about 1) how he found his lawyer; 2) discussions he had with other opt-ins; and 3) his prior disciplinary history. Pretty standard stuff. Despite recognizing that these relatively benign questions met the relevance standard under Rule 26, the ALJ still found them unlawful under the Board's Guess? test because the employer didn't prove that its need for the information outweighed the employee's right to confidentially confer with his fellow opt-ins about the lawsuit. The Board summarily affirmed the decision. This all stretches the Guess? test too far. If this line of authority is allowed to stand, employers and their lawyers will have to layer on a secondary risk calculus to their deposition preparations -- namely, whether to ask typical questions or refrain from doing so to avoid a Board charge. As to that, what I said last week still applies: the potential for mischief is high.