On November 29, 2011, the Missouri Court of Appeals issued a decision in Whelan Sec. Co. v. Kennebrew recognizing that an employer—or another party having contractual rights—may lose a part of the benefit of the bargain if forced to sit upon those rights. In the case of a non-compete clause, an employer may lose its right to compel an employee to sit out of the marketplace for some time after the employee’s employment has ended.

In Whelan, the defendant employees had significant contact with the employer’s clients during their employment. One of the defendants resigned from his employment in December 2008, while the other resigned in August 2009. On January 4, 2010, the plaintiff employer brought suit against both defendants to enforce restrictive covenants in their employment contracts. The restrictive covenants had a two-year duration and a 50-mile radius. The trial court granted summary judgment in favor of the defendants, concluding that the employment agreements at issue, as written, were overbroad and not reasonable as to time and space and were therefore not valid.

On appeal, the Missouri Court of Appeals reversed the trial court decision. In its opinion, the appellate court reiterated that public policy approves restrictive covenants in employment contracts because the employer has a proprietary right in its stock of clients and their goodwill, and if the covenant is reasonable otherwise, the court will protect the asset against appropriation by an employee. Accordingly, a restrictive covenant is not per se unreasonable if the prohibition is against the solicitation of the employer’s clients and customers. Specifically with regard to the restrictive covenants at issue in Whelan, the court held that the restriction against soliciting clients for a period of two years within a 50-mile radius was not unreasonable on its face.

Notwithstanding the foregoing, due to the protracted litigation process, the two-year restriction mandated by the non-compete agreements had already passed by the time the Court of Appeals rendered its decision. Thus, the court was unable to issue an injunction on behalf of the plaintiff enjoining the defendants from violating the terms of the non-competition agreements. The court was unwilling to enforce the two-year injunction period from the date of the judgment, stating that this would unjustly penalize the defendants, one of whom had established a successful business from the ground up starting nearly two years earlier.

Despite the lack of authority to issue an injunction, the court made clear that this did not mean that the plaintiff had no relief against the defendants. To be sure, the court noted that the purpose of restrictive covenants is to prevent financial loss to employers from competition with former employees. Therefore, the appellate court remanded the case back to the trial court for a determination as to whether the defendants had, in fact, violated the restrictive covenants. The court made clear that if the trial court on remand found that the defendants had breached the restrictive covenants, the plaintiff would be allowed to recover its actual pecuniary losses due to those breaches—as opposed to being awarded an injunction against the defendants.

The Missouri Court of Appeals’ decision in Whelan is important for both employers and employees. The court essentially recognized that the only feasible way to enforce a restrictive covenant in favor of an employer and still protect an employee from an unjust penalty if a drawn-out litigation process renders the restrictive covenant moot is to allow the parties to present evidence on the employer’s actual financial losses resulting from the breach of the restrictive covenant. The decision reiterates that employers still have recourse against a breaching employee in such a situation. And the language of Whelan suggests that this is still the case even if the employer initially claimed that it had “no adequate remedy at law.” As for employees, they need to understand that a clever delaying tactic will not absolve them from liability for breaching a restrictive covenant in their employment contract.

While the exact value of actual pecuniary losses to an employer from a breach of a restrictive covenant would indeed be difficult to ascertain, Missouri has made it clear that employers have the right to compensation for those losses when an injunction is no longer possible.

As either an employer or an employee, it is important to understand the laws governing restrictive covenants. The attorneys at Weiss Attorneys at Law have knowledge and extensive experience advising both employees and employers on state and federal labor laws. Our attorneys are prepared to represent our clients in court, or in arbitration or at mediation, should an employment dispute arise. To learn more on how we can assist you, please contact the employment law attorneys at Weiss Attorneys at Law at 314-588-9500 or at law@weissandassoc.com.

Specifically, the bill would require plaintiffs to prove that the protected criterion—race, color, religion, national origin, sex, ancestry, age or disability—was a “motivating factor” instead of a “contributing factor” in wrongful termination cases or in other discriminatory actions.  The bill would also exempt governments and individual employees from liability.  Under current Missouri law, individual employees can be held liable in workplace discrimination cases if they are in a supervisory or managerial position and they have the power to affect different aspects of their employees’ employment, such as promotions, salary, or termination.

HB 1219 would also place caps on monetary awards for actual damages based upon the size of the employer, ranging from $50,000.00 for small employers to a $300,000.00 maximum for employers with more than 500 employees.  In addition to actual damages, the bill would limit the amount of punitive damages discrimination victims can recover.

The bill would also establish the Whistleblower Protection Act, which would place in statute existing common law exceptions to Missouri’s at-will employment doctrine.  The Act would make it unlawful for an employer to discharge or retaliate against a person (1) who has reported to the proper authorities an unlawful act of the employer or its agent or serious misconduct of the employer or its agent that violates a state law or regulation or a rule of a governmental entity; (2) who has refused to carry out a directive issued by the employer or its agent that if completed would be a violation of the law; or (3) who has engaged in conduct otherwise protected by statute or regulation.

Proponents of HB 1219 argue that the changes would align Missouri laws with federal protections.  As one lawmaker noted:  “the problem here in Missouri has been exacerbated by court interpretations over the last decade that have made it easier and easier for employees to bring frivolous cases and costly lawsuits against employers.  These court interpretations have forced Missouri businesses to comply with ‘two sets’ of anti-discrimination laws.”  By amending the MHRA to mirror federal law, compliance would be easier for companies.  Proponents also argue that the changes would render frivolous lawsuits more susceptible to summary judgment, which would greatly reduce the cost of litigating a case.  This, in turn, would allow employers to spend more time and money on expanding their businesses rather than fighting lawsuits.

Opponents of the bill contend that it would give employers less incentive to prevent workplace discrimination because it would impose an extremely high burden on employees to prove discrimination.  Opponents also argue that the bill, as written, includes problematic changes in discrimination law, such as removing individual liability and placing caps on actual and punitive damages.  According to some lawmakers, the bill would also significantly limit and weaken “whistle-blower” protections currently afforded under Missouri common law.

The Senate approved its own version of the legislation earlier this week when democrats and republicans finally reached agreement after nearly 15 hours of debate.  Senate Bill 592 is a compromise bill that would keep the “motivating factor” standard from the original version of the Senate bill, but remove certain language effectively directing courts how to decide summary judgment motions.

Although both the House and the Senate seem to be moving toward final legislation, there is still a long way to go before the Missouri Human Rights Act undergoes any changes.  As you may recall, Democratic Gov. Jay Nixon vetoed similar legislation last year to protect “decades of civil rights progress in Missouri.”  Stay tuned.

Weiss & Associates, P.C. provides guidance and representation regarding all types of employment matters, including workplace discrimination.  If confronted with an employment issue, please contact the employment law attorneys at Weiss & Associates, P.C.

In Naaco Materials Handling Group, Inc. v. Lilly Co., No. 11-2415 AV, 2011 WL 5986649 (W.D. Tenn. Nov. 16, 2011), the plaintiff brought a motion to prevent spoliation of evidence due to inadequate preservation efforts being demonstrated by the defendant, Lilly Co..  The original lawsuit alleged unauthorized and improper access to the plaintiff’s secure dealer website.  After initial Federal Rule 30(b)(6) depositions and e-discovery, there was evidence of data spoliation, and the plaintiff sought sanctions for both Lilly’s failure to adequately prepare the Rule 30(b)(6) witness and its failure to take reasonable steps to preserve potentially relevant information.

In determining if sanctions were warranted, the court looked at a number of factors:

In order to determine if sanctions against Lilly are appropriate, the court must first determine (1) when Lilly’s duty to preserve evidence arose; (2) the scope of Lilly’s duty to preserve evidence; (3) whether Lilly’s litigation hold and search and collection efforts were sufficient; and (4) if not, whether sanctions should be imposed on Lilly.

The court found that Lilly’s duty to preserve arose no later than when it was served with the lawsuit in December of 2011.  The court next looked at scope, concluding that “given the allegations concerning computer access, which Lilly did not deny, Lilly’s duty to preserve potentially relevant ESI was very broad.”  The court then considered Lilly’s preservation actions, identifying a number of shortcomings:

Upon being served with the lawsuit on February 25, 2011, Lilly took no immediate action whatsoever to preserve any data, electronic or paper. In addition, upon receiving the preservation letter, approximately twelve days later, Lilly failed to issue a written company-wide litigation hold. Instead, [a Lilly employee] simply circulated the litigation hold letter to seven Lilly employees out of Lilly’s 160 employees without any additional instruction. The failure to issue a written litigation hold is “likely to result in the destruction of relevant evidence.”

(emphasis added)

The court went on to cite additional shortcomings, including not notifying all the “key players” who had access the secure dealer website, and that no actions were taken to prevent deletion of emails or backup data.  The court concluded:

In summary, after the duty to preserve was triggered, Lilly failed to timely issue an effective written litigation hold, to take appropriate steps to preserve any existing electronic records, to suspend or alter automatic delete features and routine overwriting features, and to timely and effectively collect ESI. Therefore, the court finds that Lilly breached its duty to preserve relevant evidence.

(emphasis added)

The court then considered the level of culpability (in this case, finding negligence) and prejudice suffered (uncertain, but highly likely given the facts of the case).  The end result: the court imposed preservation actions, additional discovery and monetary sanctions.  Lilly was required to bear these costs because its preservation and collection efforts were woefully inadequate.

The decision in Naaco Materials Handling Group is by no means an anomaly.  If your company has not already established policies to take immediate action if and when it is served with a lawsuit, your company should do so immediately.  This would include, among other things, issuing a company-wide “litigation hold.”

This article was taken in large part from Naaco v. Lilly:  Spoliation Sanctions in Tennessee Case Shows Ongoing Challenge of Preservation, by Brad Harris.

Weiss & Associates, P.C. provides guidance and representation regarding all types of corporate and litigation matters.  If you would like one of our experienced attorneys to prepare or review your company ESI policies, please contact us at Weiss & Associates, P.C.

Whether you realize it or not, being a landlord is an unpredictable and sometimes risky business. If the owner is not careful, being a landlord can create liability subjecting the owner/landlord’s personal assets to recovery. One way to limit this liability is through the formation of a pass through entity such as a limited liability company, or “LLC,” which is registered with the Secretary of State.

One common scenario which many landlords experience is where an individual, whether the tenant or a third party, slips and falls in front of the property.  As you can imagine, the hurt individual will generally look to any party for recovery and may see the property owner as a “deep pocket.”  This typically results in a lawsuit by the hurt individual against the property owner which can sometimes spell trouble, as the owner’s personal assets may be subject to recovery.

Under the above-referenced scenario, the first line of defense for the property owner is through the use of insurance that is kept on the property.  Unfortunately,  insurance is sometimes insufficient.  Therefore, it is prudent for the owner to protect him or herself through other means.  One means of protection comes through the formation of an LLC or other pass through entity.  While there is no perfect solution, the pass through entity provides some additional protections for the property owner.

As previously stated, in order for the entity to be the owner of the property, the property will need to be conveyed from the owner to the entity.  Unfortunately, the terms of many mortgages require notification of any transfer of the property through a “due on sale” clause, which requires the mortgage to be paid in full if the property is sold.  As the transfer of property from the owner to the entity almost certainly qualifies as a “sale” under the terms of the mortgage, the property owner would need to renegotiate the terms of the mortgage and consent to that transfer.

Once the entity is created and the property has been transferred, there are certain corporate formalities that should be followed.  First, the entity must be correctly registered with the Secretary of State in which the entity is incorporated.  Second, the entity must have its own separate bank account so that all income and expenses pass through the entity’s bank account and not through a personal bank account.  The property owner should be careful to not commingle assets, with all expenses being solely for the property, or a court could “pierce the corporate veil” and reach into the owner’s personal assets.  Third, any contracts entered into with respect to the  property should be entered into with the entity and not with the owner individually.  While these are some of the necessary formalities, there are many more.

If you have questions regarding corporate pass through entities or landlord/tenant law, please contact the attorneys at Weiss & Associates, P.C. for a consultation.  Weiss & Associates, P.C. strives to provide its clients and other interested parties information regarding changes to laws affecting their businesses, real estate, employment and personal matters.

January derives its name from Janus, a two-faced god from ancient Rome, who looks to both the future and the past. Having long retired from his days as the ruler of Latium, Janus today demonstrates some important lessons about the ins and outs of current-day litigation as it may impact you or your business in 2012.

Janus looks back to the past, and every lawsuit will inevitably “look back” at the facts of who, what, where, when and why? One legal adage says, “The facts win lawsuits.” So an important step in dealing with (or avoiding) litigation is totally within your control. It starts with you.

Take Care of Your Facts Now

We have become the Keyboard Society. Text, type, text, tweet, tweet, type and text. We message as much as the spoken word. Like Janus, the prominence of electronic communications has two faces. On the one hand, it provides tremendous opportunity to document, document, document. Think back to your most important three business transactions in the last 30 days. Do you have the major elements of the sale, the deal, the loss or breach, the new hiring in writing?

Yesterday’s facts will become evidence in the future. Without proof, a legal claim is severely compromised. Evidence matters.

Communicate Carefully

On the other hand, emails can be forever. Thus, it is equally important to carefully utilize your computer, or a company computer (tablet, iPhone, etc.), in a business-like and judicious manner. Easier said than done, of course. However, litigation will increasingly require all parties to open their computer systems and electronic storage devices to the opposing side in the information-gathering procedures known as “discovery.” Make good decisions about what appears in writing. Someday, it may become Exhibit No. 1 in the courtroom.

Lawyers also have the task of knowing the law applied to any lawsuit. This also requires a “Janus-inspired” analysis of past legal decisions and an assessment of legal outcomes in the future.

Every legal claim will involve the law, whether a statute, ordinance, government regulation or case law. Once in the courtroom, the law becomes all-important. Lawyers must carefully examine legal precedent from past cases. History repeats itself and so do lawsuits, again and again. While law is constant in many ways, it is also constantly in a state of change.

Spend Some Time With the Law

Reserve time with your lawyers to review the law. Spare yourself a multi-chapter treatise on contract law from the 18th century to modern day, yet see for yourself what it means to have a decision from the appellate courts having immediate sway in the county where your case will be tried, in Missouri either the Eighth Circuit Court of Appeals or the Missouri Supreme Court. Insist on having a clear sense of what specific law applies to a specific lawsuit. It is your right to be informed on recent case law developments, along with new laws passed by the U.S. Congress and Missouri Legislature in Jefferson City, Mo. Effective litigators will walk into the courtroom with a thorough knowledge of the law — ready to hand the trial judge cases to support a claim or defense.

The “look back” at case law is necessary because a set of facts at issue in a 2012 lawsuit may have been similar to a case decided in 1982. Our judicial system is largely premised on precedent. The basic legal elements of a contract — (1) offer, (2) acceptance and (3) consideration — have existed for years and years. Indeed, the legal past plays a major function in the resolution of legal claims in the future. The stability of many legal doctrines often contrasts with the fluid, emotional attachment to the facts. That’s why it is important to look at litigation in more ways than one.

Litigation ebbs and flows between the past and future. The most successful litigants respect the power of each direction and bring a Janus-like approach toward reaching a valuable resolution.

At Weiss & Associates, P.C., our lawyers are able to look in all directions to provide a thorough representation, whether in federal or state courtrooms in Missouri and Illinois. To find out how we can help you with your case, contact us by either calling 314-588-9500, emailing to law@weissandassoc.com or using the “Contact Us” link on this page.

Recent decisions by the National Labor Relations Board (“NLRB”) provide some guidance on this issue.  For instance, comments posted on social media sites are generally protected under Section 7 of the NLRA if they are in relation to broader group activity among employees.  In contrast, mere individual gripes or expressions of displeasure do not constitute protected activity.  This distinction, while vital to an employee’s wrongful discharge claim, is oftentimes difficult to understand.

As discussed in the Meyers cases, and specifically Meyers Industries (Meyers I), 268 NLRB 493 (1984), and Meyers Industries (Meyers II), 281 NLRB 882 (1986), the test for “concerted activity” under Section 7 of the NLRA is whether the activity is “engaged in with or on the authority of other employees, and not solely by and on behalf of the employee himself.”  The question becomes what conduct is “engaged in with other employees” versus “solely by and on behalf of the employee himself.”  A review of recent cases is helpful.

In our first case, an employee began complaining to a coworker that the employee’s clients did not want to seek services from the employer.  The employee then started sending a constant barrage of text messages to other coworkers in which she criticized the work quality of the employer’s employees.  One of the coworkers finally had enough, and another coworker suggested that she meet with the employer’s executive director to discuss the employee’s conduct.  To prepare for the meeting, the coworker posted on Facebook that the employee felt that her coworkers did not help the employer’ clients enough.  The coworker then asked other coworkers how they felt about it.  Upon review, the NLRB determined that the Facebook posts were a “textbook example of concerted activity…The discussion was initiated by the one coworker in an appeal to her coworkers for assistance.”

In another case, an employee was asked by her supervisor to prepare an incident report concerning a customer complaint about her own work.  The employee asked for a union representative to be present while she prepared the report, but the employer did not provide a union representative.  Later that day, the employee posted a negative remark about the supervisor on her personal Facebook page, which drew supportive responses from her coworkers and led to further negative comments about the supervisor from the employee.  The NLRB determined that the employee’s conduct was protected under Section 7 of the NLRA.  In addition, the employee did not lose the NLRA’s protection by referring to her supervisor as a “scumbag.”  To be sure, “the Facebook postings did not interrupt the work of any employee because they occurred outside the workplace and during nonworking time.”

In contrast, the NLRB found that an employee was not engaged in protected concerted activity when he was discharged for posting a message on his Facebook page that referenced his employer’s tipping policy in response to a question from a non-employee.  In that case, the employee worked as a bartender at a restaurant.  The employer maintained a policy that waitresses did not share their tips with bartenders even though the bartenders helped the waitresses serve food.  At some point, the employee had a conversation on Facebook with a relative, during which the employee complained that he had not had a raise in years and that he was doing the waitresses’ work without tips.  Importantly, the employee did not discuss his post with any of his coworkers, and none of them responded to it.  In finding that the Facebook post did not constitute concerted activity, the NLRB noted that “although the employee’s Facebook posting addressed his terms and conditions of employment, he did not discuss the posting with his coworkers, and…there had been no employee meetings or any attempt to initiate group action concerning the tipping policy or raises.”

Similarly, the NLRB found insufficient evidence that an employee engaged in concerted activity when he posted profane comments on Facebook that were critical of his employer’s management.  In that case, after an interaction with an assistant manager, the employee posted a comment complaining about the “tyranny” at the store and suggested that numerous employees were about to quit.  Several coworkers responded to the employee’s comment, expressing emotional support and asking why the employee was so wound up.  Three coworkers made supportive comments.  The NLRB concluded that the Facebook postings were merely an expression of individual gripe, and did not constitute concerted activity.  Indeed, “they contained no language suggesting that the employee sought to initiate or induce coworkers to engage in group action; rather they expressed only his frustration regarding his individual dispute with the assistant manager. . . .”

While recent NLRB decisions provide some clarification as to what constitutes “concerted activity” under Section 7 of the NLRA, the line between protected activity and wrongful conduct is still blurry.  However, one this is for certain:  social media posts must be in relation to a group activity among employees to fall with Section 7 protection.

Weiss & Associates, P.C. provides guidance and representation regarding all types of employment matters, including claims for wrongful discharge.  If confronted with an employment issue, please contact the employment law attorneys at Weiss & Associates, P.C.

During subsequent inspections of the property, the plaintiff reiterated the need for fencing at gates because of her animals.  Each time, the sellers and the listing agent expressed that the neighbor would have no problem with the fencing and gates so long as the plaintiff provided the neighbor with a key.  The plaintiff ultimately purchased the property, at which point the sellers fenced the property for the plaintiff and built a gate across the road easement.  The neighbor objected to the gate, later filed suit, and won a judgment against the plaintiff for removal of the gate and damages.

The plaintiffs thereafter brought suit against the sellers and the listing agent for fraudulent misrepresentation and negligent misrepresentation respectively.  After discovery, the trial court granted summary judgment in favor of the defendant.  In doing so, the trial court noted that:  (1) the plaintiff had constructive notice of the easement per the recording statute; (2) the plaintiff had actual knowledge of the easement; and (3) the statements in question were opinions of future third-party actions (i.e., the neighbor’s consent to the gates), not actionable representations of existing fact.  The plaintiff appealed the decision.

On appeal, the Missouri appellate court affirmed the trial court’s judgment on the basis that the plaintiff failed to establish justifiable reliance, a required element of misrepresentation.  As the court opined:  “[i]nextricably, the plaintiff never contacted [the neighbor] in the weeks preceding her offer or during the five-month delay prior to closing.”  And of particular importance, the court noted that neither the sellers nor the listing agent spoke on behalf of the neighbor, so their statements to the plaintiff “were mere predictions or opinions that things would work out for the plaintiff to have a gate, with [the neighbor’s] consent or acquiescence, despite the recorded easement.”  Citing well-established Missouri caselaw, the court held that the since the sellers and the listing agent were not speaking on behalf of the neighbor, the plaintiff had no right to rely upon their representations as to what the neighbor might do in the future.  As the court made clear, “[s]tatements, representations, or predictions about an independent third party’s future acts simply do not constitute actionable misrepresentation.”

Weiss & Associates, P.C. provides guidance and representation regarding all types of real estate matters, including misrepresentation claims relating to the sale or purchase of real property.  If confronted with a real estate issue, please contact the attorneys at Weiss & Associates, P.C.

From the next isle over, the Irish philosopher, Jonathan Swift, had a differing view when he said,  “Laws are like cobwebs, which may catch small flies, but let wasps and hornets break through.”  We’re glad he lightened up when he penned, “Gulliver’s Travels.”

Back in the B.C. era, Aristotle noted, “Law is order, and good law is good order.”  Greece has certainly changed a lot since his days.

Perhaps Thomas Jefferson could read into the future when in 1821 he described the U.S. Congress in this way, “That one hundred and fifty lawyers should do business together ought not to be expected.”   But in that same time frame, Wendell Phillips voiced this solution, “The best use of laws is to teach men to trample bad laws under their feet.”   The U.S. legal scholar, Roscoe Pound agreed about change, saying: “The law must be stable, but it must not stand still.”

Finally, also from across the pond, the great English scholar, Samuel Johnson, gave this summary, “The law is the last result of human wisdom acting upon human experience for the benefit of the public.”  Well said, Sir Johnson!

Many will continue to search for the true meaning about the law and lawyers.  Except, perhaps, for the ancient scholar, Origen, who identified the exact location where he thought the law could be found:

“Conscience is the chamber of justice.”

#    #   #

In D. R. Horton, Inc. v. Michael Cuda, decided on January 3, 2012, D. R. Horton required its employees to execute a “Mutual Arbitration Agreement” (“MAA”) as a condition of their employment.  Pursuant to the MAA, all employment-related disputes had to be resolved through individual arbitration, waiving the right to a judicial forum.  In other words, each employee had to agree, as a condition of employment, that they would not pursue class or collective litigation of claims in any forum, arbitral or judicial.

In holding the MAA unlawful, the NLRB noted that Section 7 of the NLRA vests employees with a substantive right to engage in specified forms of associational activity.  Specifically, Section 7 provides that employees shall have the right to “engage in…concerted activities for the purpose of collective bargaining or other mutual aid or protection. . . .”  (emphasis added).  The NLRB reiterated its long-held position that this provision protects employees’ ability to join together to pursue workplace grievances, including through litigation.   As such, by prohibiting employees from bringing collective or class claims in any forum, “[t]he MAA thus clearly and expressly bar[red] employees from exercising substantive rights that have long been held protected by Section 7 of the NLRA.”

Weiss Attorneys at Law provides guidance and representation regarding state and federal employment matters in both judicial and arbitral forums.  If confronted with an employment issue, please contact the employment law attorneys at Weiss Attorneys at Law.

Consultation with experienced corporate counsel such as Weiss & Associates, P.C. can help you achieve and secure your objectives.   Contact one of our attorneys or visit our website at www.weisslawstl.com for more information.