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An Illinois Appellate Court recently affirmed a ruling dismissing the defamation claims filed by a manager of a homeowners association stemming from comments made about him during a meeting of the HOA. The Court ruled that the manager could not maintain his claims because the allegedly defamatory comments were protected from liability by qualified privilege.

The plaintiff in the case, Philip Kiss, managed the HOA from 2010 to 2016 and also served as its attorney during this time. The board relieved Kiss of his duties in 2016. In November 2017, one of the board members, Ellen Sheldon, stated during a meeting of the HOA, “I don’t want a person who comes to a homeowners meeting drunk managing our … association and he came drunk in 2015.” In response to a question asking how she knew Kiss was drunk, Sheldon said, “because he stood right at my face and he breathed at my face which was unbelievable[.] I wanted to pass out. And he could not speak clearly. [T]he man did not belong managing us[.] [T]hank God he’s not anymore.”

Kiss sued both the HOA and Sheldon alleging defamation and false light invasion of privacy. The defendants moved to dismiss the complaint arguing, in part, that the statements were protected by qualified privilege because they were made during a board meeting of the HOA. After several amendments to Kiss’s complaint, defendants again sought to dismiss the claims based on qualified privilege. The trial court granted the defendants’ motion and dismissed the claims with prejudice. Kiss appealed arguing that the trial court improperly dismissed his claims and refused to allow him to re-plead his claims for a fifth time. Continue reading ›

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In a recent decision, the Seventh Circuit federal court of appeals reaffirmed the limited role courts have in reviewing arbitration awards. The decision also provides a lesson to litigants about the need for a clearly written and well-reasoned arbitration decision.

The case stems from a fallout between a technology company and an inventor turned equity owner in the company. The defendant Roe invented a nozzle that transforms gases into liquids. Nano Gas expressed interest in acquiring and commercializing the technology. The parties embarked on negotiations resulting in Roe assigning the nozzle to Nano Gas in exchange for a 20% ownership of Nano Gas, a board seat, and a potential salary. Under the terms of the parties’ agreement, Roe’s salary was tied to either Nano Gas successfully raising capital or Roe’s developing his invention into a working machine. Before either milestone could be reached, the parties’ relationship soured.

Roe ultimately left Nano Gas and took with him a prototype machine and a box of Nano Gas’s intellectual property. The parties initially began litigation in a Michigan federal court before the dispute was referred to arbitration. Following a hearing, the arbitrator entered an award generally favoring Nano Gas but awarding compensation to both parties.

The arbitrator found that Nano Gas should compensate Roe for the continued use of his invention. It also found though that Roe should compensate Nano Gas for the financial harms he caused when he continued to use the technology he assigned to Nano Gas and made off with Nano Gas’s intellectual property. The arbitrator considered awarding Roe some sort of royalty on future profits that might flow from Nano Gas’s use of the device Roe invented, but in the end decided against this approach. The arbitrator determined a royalty was not necessary to compensate Roe because he “remains a major shareholder in Nano Gas, and that, as such, he could benefit financially from this in the future should Nano Gas experience profitability and an increase in value.”

Ultimately, the arbitrator ordered Roe to return Nano Gas’s intellectual property or pay Nano Gas $150,000 if he did not return the IP. Then the arbitrator ordered Roe to pay damages to Nano Gas in the amount of $1,500,000, with such payment “to be made by (1) first, subtracting from the amount to be paid to Roe by Nano Gas under this decision ($1,500,000) the amount to be paid to Nano Gas by Roe under this decision ($1,000,000) and (2) thereafter, the remainder ($500,000) in such manner as Roe chooses.” Continue reading ›

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Earlier this month, the New Jersey Assembly’s Labor Committee passed bill A3715, designed to sharply limit the availability, use, and enforceability of restrictive covenants such as non-compete agreements by New Jersey employers. The stated purpose of the bill is to preclude the use of certain post-employment restraints of covenants with certain groups of employees including low-wage workers, students, employees under 18 years old, and seasonal and temp workers. The bill would also preclude the use of restrictive covenants with independent contractors. This new bill is similar in many ways to bills that have been proposed in various state legislatures recently and enacted into law in states such as Massachusetts, Illinois and Washington.

Bill A3715 seeks to codify certain common law restrictions on the use of non-compete agreements including those regarding the scope of a non-compete, which require that a non-compete be no broader than necessary to protect the employer’s legitimate business interests. The bill also seeks to introduce new obligations and restrictions including a notice requirement, duration limitations, geographic limitations, garden leave requirement, and choice of law restrictions. Additionally, the bill would eliminate the “blue pencil” doctrine, by precluding a court from judicially modifying or revising an overbroad or impractical restrictive covenant so that it is judicially enforceable while still reflective of the parties’ intent.

If enacted, employers would be required to provide employees with at least 30 business days’ notice of the terms of the non-compete either before the employment begins or the non-compete becomes effective. Additionally, an employer must provide a post-employment notice to employees within 10 days from the termination of employment stating whether the employer intends to enforce its restrictive covenants.

The bill would limit the duration of such restrictive covenants to 12 months from the termination of employment. It would also prevent employers from enforcing covenants not to compete against former employees who simply leave the state of New Jersey, which could severely limit the effectiveness of such restrictions given the state’s relatively small size and proximity to populous neighboring states such as New York. Additionally, the geographic scope of non-competes would be limited to the geographic area in which the employee worked or had a material presence during the two years preceding termination of the employment. Continue reading ›

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A Delaware Chancery Court judge recently rendered a post-trial verdict in the In re Tesla Motors Stockholder Litigation in which he found in favor of co-founder and CEO of Tesla Motors, Elon Musk, on claims that Musk breached his fiduciary duties, was unjustly enriched, and created corporate waste in connection with Tesla’s 2016 acquisition of the SolarCity Corporation.

This high-profile, high-stakes lawsuit stemmed from alleged conflicts of interest created by Musk’s leadership and ownership of both companies during the 2016 acquisition. At the time of the merger, Musk was SolarCity’s largest stockholder and chaired its board of directors. At the same time, he owned 22% of Tesla stock and served as CEO and a director of Tesla. When the potential acquisition of SolarCity came up, Tesla’s board elected not to form a special committee of independent directors to negotiate the transaction. It did, however, condition approval of the acquisition on the “affirmative vote of a majority of the minority of Tesla’s disinterested stockholders” and recused Musk from certain Board discussions regarding the acquisition.

Despite these protections, the plaintiff shareholders alleged that Musk, as Tesla’s controlling shareholder, exerted his influence over Tesla’s board to approve the acquisition at an unfair price, following a highly flawed process, in order to bail out his (and other family members’) foundering investment in SolarCity. Plaintiffs named both Musk and members of Tesla’s board as defendants and sought damages as well as equitable remedies. Before trial, all defendants except Musk settled with plaintiffs, leaving only the claims against Musk proceeding to an 11-day trial over July and August 2021. Continue reading ›

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The Colorado legislature recently passed a bill, now awaiting the governor’s signature, which will substantially limit the ability to enforce non-compete agreements against any workers other than those who are deemed “highly compensated.” In addition, the new law will impose new, stringent notice requirements and penalties if employers fail to comply with the new statutory requirements. If the governor signs the bill, which he is expected to do, the law will go into effect this August, giving employers only a few months to put into place processes to ensure compliance with the law’s new requirements. This bill comes on the heels of a recent change to Colorado’s non-compete law which criminalized the enforcement of non-compete agreements that violate its general non-compete statute.

Colorado’s non-compete statute, C.R.S. § 8-2-113, was relatively unchanged for the roughly four decades from 1982, when it was enacted, until 2021. The law generally prohibited agreements not to compete but excepted restrictive covenants in contracts for the purchase of a business or its assets, agreements to protect trade secrets, and agreements with executive and management personnel and their professional staff. It also allowed employers to recover the expense of educating and training employees who left employment less than two years after being hired. And while the law made non-compete agreements with physicians void, it permitted the recovery of monetary damages against a physician who breached the agreement, though not against physicians treating patients with rare medical conditions. In 2021, the Colorado legislature amended the law to make an employer’s violation of the law a Class 2 misdemeanor. Continue reading ›

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For nearly six weeks, many have followed the defamation trial between Johnny Depp and his former wife Amber Heard. The trial has provided potent insight into the destructive effects of drugs, alcohol, and stardom. It has also highlighted the perhaps more relatable lesson that ending a marriage can be a messy process. Emotions run high, tempers flare, and deep wounds can lead former spouses to lash out. Sometimes these outbursts result in saying things that are hurtful or even defamatory. Such is the basis of the case of Depp and Heard.

The dispute between Depp and Heard stems from a December 2018 opinion column by Heard printed in The Washington Post. In the column, Heard described herself as a victim of domestic violence. While the column did not name Depp directly, Depp has argued that it included enough detail and time references to allow readers to deduce that she was talking about Depp, to whom she was married briefly from 2015-2016. For instance, the 2018 column stated “two years ago, I became a public figure representing domestic abuse, and I felt the full force of our culture’s wrath for women who speak out.” Readers were quick to connect the dots recalling that she had first raised allegations of abuse during her and Depp’s 2016 divorce proceedings. These allegations were also reported in a London tabloid that Depp sued unsuccessfully in 2020 for labeling him a “wife-beater.”

Depp responded to the op-ed by suing Heard for $50 million. She responded by countersuing Depp for $100 million in damages. The seven-person jury in the case is considering Heard’s countersuit alongside Depp’s original claim.

One lesson about defamation law can be learned from considering where the suit was filed. Depp filed suit in the in Fairfax County Circuit Court in Virginia, though neither he nor Heard live or work in Virginia. Both reside, at least part time in California, but neither chose to file their claims in a California court. Why? There are at least two reasons. Continue reading ›

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A California state appellate court recently issued an opinion reviving a class-action lawsuit concerning alleged violations of requirements employers must follow when performing employment-related background checks. In its opinion, the Court reversed summary judgment entered in favor of book retailer Barnes & Noble in a class-action lawsuit accusing the retailer of failing to strictly comply with the requirements for obtaining authorization for background checks found in the Fair Credit Reporting Act (FCRA). The Court’s decision breathes new life into the putative class action which was remanded to the trial court for further proceedings.

The FCRA is a federal statute that is meant to protect consumer privacy and promote fair and accurate credit reporting. Part of the law contains a number of requirements that employers must follow when performing employment-related background checks. Two of these requirements are found in 15 U.S.C. 1681b and require an “employer who obtains a consumer report about a job applicant first to provide the applicant with a standalone, clear and conspicuous disclosure of its intention to do so, and to obtain the applicant’s consent.” The FCRA further requires that the disclosure be contained in a document that consists solely of the disclosure.

In 2018, the plaintiff applied to work for Barnes & Noble. During the application process, Barnes & Noble’s consumer reporting agency, First Advantage, emailed the plaintiff a link to a website containing the retailer’s consumer report disclosure and asked her to authorize Barnes & Noble to perform a background check. The plaintiff alleges that she clicked the link, viewed the disclosure, and authorized Barnes & Noble to perform the background check.

First Advantage had prepared the consumer report disclosure statement that appeared on Barnes & Noble’s website. Included with the statement was a footnote that stated:

Nothing contained herein should be construed as legal advice or guidance. Employers should consult their own counsel about their compliance responsibilities under the FCRA and applicable state law. First Advantage expressly disclaims any warranties or responsibility or damages associated with or arising out of information provided herein.

Continue reading ›

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The Texas Supreme Court dealt a fatal blow to Brazilian state-run petroleum company Petrobras’s breach of fiduciary duty claims against former joint venture partner Belgian Transcor Astra Group S.A. The Texas high court ruled that an $820 million settlement agreement between the two oil and gas companies precluded Petrobras from asserting breach of fiduciary duty claims accusing Astra of bribing certain high-ranking Petrobras employees.

In 2006, Petrobras and Astra formed an ill-fated joint venture of Pasadena Refining System Inc. The joint venture between the two multi-national oil companies soon began to unravel. After the parties found themselves embroiled in several disputes, they initiated an arbitration to break up the partnership which resulted in a 2009 arbitration award requiring Astra to sell its 50% interest to Petrobras for $640 million.

Astra alleged that pursuant to the arbitration award it turned over its interest in the Texas refining company, but Petrobras never paid the $640 million purchase price for that interest. A series of lawsuits ensued leading to Astra obtaining judgments against Petrobras totaling more than $750 million with more than $400 million more in pending claims when the parties agreed to a global settlement. Under the 2012 settlement agreement Petrobras agreed to pay Astra $820 million in exchange for a release by each party of all claims against the other party.

By 2016, the peace between the companies ended when Petrobras initiated two separate legal proceedings against Astra. First, Petrobras filed a lawsuit against Astra and several of its employees, asserting that they breached fiduciary duties owed to Petrobras by offering bribes to certain Petrobras officials and failing to disclose the offers during the parties’ settlement negotiations. Petrobras also asserted derivative claims for declaratory judgment, conspiracy, aiding and abetting, unjust enrichment, and exemplary damages and attorney’s fees, and sought to invalidate the 2012 settlement agreement and render it unenforceable. Simultaneously, Petrobras initiated arbitration proceedings to invalidate the 2006 stock-purchase agreement due to the bribes Astra allegedly paid to Petrobras officials in connection with that agreement. Continue reading ›

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We previously wrote about Chicago Bears legend Richard Dent’s lawsuit seeking the identities of individuals who he alleges defamed him and cost him and his company to lose a lucrative contract. Dent initially lost at the trial court level but won in the appellate court. The Illinois Supreme Court then agreed to consider the case.  In its recent opinion, the Court ruled against Dent finding that he is not entitled to discovery to determine the names of people that he claims wrongly accused him of sexual harassment and drunken behavior in the course of an investigation, which ultimately cost him and his company a lucrative marketing contract with an energy supplier.

Justice Michael J. Burke wrote the majority opinion, which was joined by everyone but Justices Rita Garman, P. Scott Neville, and Anne Burke, who took no part in the decision. Justice Garman penned a dissenting opinion which was joined by Justice Neville.

As we previously wrote about, the case revolves around the March 2019 Rule 224 petition filed in the Cook County Circuit Court by Dent and his company, RLD Resources, seeking discovery related to the identity of certain individuals the petitioners claimed defamed Dent. In their petition, the petitioners asked the judge to order energy supplier Constellation to disclose the names and addresses of at least three individuals who allegedly defamed Dent. Continue reading ›

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Approximately 38,000 consumer lawsuits have been filed against Johnson & Johnson for allegedly including asbestos in their baby powder, which allegedly caused ovarian cancer and mesothelioma. Executives at Johnson & Johnson allegedly knew about the risks of asbestos for decades and still included it in their baby powder. Those same executives deny the allegations that their product is contaminated or that it caused anyone to get sick.

The company finally pulled its baby powder off the shelves in 2020, but only because bad publicity had hurt sales, according to the giant pharmaceutical company.

The results of the lawsuits against Johnson & Johnson have been a mixed bag. The company has emerged victorious in some of those lawsuits but has been ordered to pay billions of dollars to plaintiffs in other lawsuits.

People with ovarian cancer or mesothelioma are too sick to work and need caregivers to tend to their basic needs, which means either a family member can’t work, or they need to hire a full-time caregiver. Those expenses could be covered by a settlement in the lawsuit against Johnson & Johnson, but the company, which is valued at $400 billion, has found a legal loophole to avoid facing those lawsuits. Continue reading ›

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