Wells Fargo Tentatively Settles Gender Discrimination Class Action

Registered Rep is reporting Wells Fargo has tentatively agreed to resolve a putative class action gender discrimination lawsuit for $32 million.  See registeredrep.com.  The lawsuit alleged, not unlike prior gender discrimination class actions against Merrill Lynch and Morgan Stanley, that Wachovia (now owned by Wells Fargo) discriminated against female financial advisors in a number of key terms and conditions of employment.   Specifically, the lawsuit alleged that Wachovia n/k/a Wells Fargo discriminated against female financial advisors in signing bonuses, forgivable loans, account distributions, assignment to teams, and partnership opportunities.  As part of the settlement, Wells Fargo will implement a wide array of policies and procedures, including modifying its existing account distribution policy.  Further, Wells Fargo will monitor data concerning up front signing bonuses, as female financial advisors had alleged that Wells Fargo discriminated against female financial advisors with regard to a number of issues pertaining to the provision and recovery of up front signing bonuses.  The settlement will affect female financial advisors who were employed by Wachovia and its successor Wells Fargo from March 17, 2003 through January 25, 2011.  Female financial advisors employed by Wachovia during this period may apply to participate in the claims administration process through April 25, 2011.

Retaliation For Court Testimony Results In $3.99 Million FLSA Verdict

A federal jury has awarded a former LAPD police officer almost $4 million dollars for the retaliatory discharge he allegedly suffered after providing testimony in another FLSA lawsuit.  http://www.latimes.com/news/local/la-me-lapd-20101102,0,195126.story.  The former police officer, Richard Romney, provided testimony in a failure-to-pay overtime case in January 2008.  On the heels of his testimony, the LAPD opened an investigation into Romney, claiming his testimony in court established he, himself, was violating LAPD policies on overtime.  The Chief of Police recommended Romney be terminated for his alleged violation of overtime policies and Romney was eventually terminated.  The jury apparently rejected the LAPD's proffered reason for Romney's discharge, concluding that Romney was terminated for his protected activity under the FLSA.  While there is some uncertainty as to whether the amount of the verdict will withhold scrutiny, there is no doubt Romney provides a cautionary tale for employers contemplating disciplining employees who engage in protected activity.

RBC Reduces Compensation For Low-Producing Financial Advisors

Registered Rep is reporting that RBC Capital Markets is reducing the payout for certain of its financial advisors ("FA").  Specifically, FAs who have been in the securities industry for five or more years and are generating $175,000 to $300,000 in gross production will be effected by the changes to RBC's compensation plan.  http://registeredrep.com/news/rbc_chops_payout/.  The move is the just the latest attempt by a broker-dealer or bank to demand increased productivity and hasten low-producer departures.  According to a RBC Regional Director, RBC advisors who produce $200,000 to $225,000 in annual revenue will have a payout reduction from 34% to 25%.  Advisors who produce $225,000 to $250,000 will have a payout reduction from 34% to 28%. Advisors who produce $250,000 to $300,000 will have a payout reduction from 37% to 34%.  In Florida, generally these Advisors are at-will employees.  Accordingly, RBC may modify its compensation plan at any time and for any reason.  With that said, RBC will not be permitted to retroactively apply its new production grid to commissions already earned.  Such action would violate Florida, and most state, wage and hour laws.

Goldman Sachs Subsidiary Successfully Enjoins Departing Analyst From Sharing Information With UBS

AYCO CO LP, a unit of Goldman Sachs, has successfully obtained a preliminary injunction, enjoining a former analyst from sharing information with his new employer UBS Financial Services.  The lesson simple -- when a financial services professional is transferring from one firm to another it is imperative that she obtain legal counsel concerning restrictive covenants and make certain that: (1) the broker protocol, if applicable, (2) all enforceable contractual commitments, and (3) all common laws, including trade secret laws, are complied with.  Failure to comply with the broker protocol and/or a suggestion of misappropriation of trade secrets or breach of a restrictive covenant can have extremely deleterious effects on both the transitioning employee and receiving firm.  In this matter, the transferring group had a trailing 12 months' commission and fees in excess of $3 million and $558 million in client AUM.  http://www.onwallstreet.com/news/ubs-goldman-sachs-ayco-2667905-1.html.  An injunction that limits the management or transfer of this type of business can have a very significant impact on employee compensation and the receiving firm's perception of its new employees.  Further, if a departing broker violates a restrictive covenant or the common law without the receiving firm's knowledge, it is likely the transferring employee will suffer an adverse employment action; perhaps even finding himself without his former or new job. 

Substantial Threat of Disclosing Trade Secrets Warrants Injunction Prohibiting Employment with Competitor

In Bimbo Bakeries USA, Inc. v. Chris Botticella, 2010 U.S. App. LEXIS 15314 (3rd Cir. July 27, 2010), the Third Circuit Court of Appeals affirmed the issuance of a preliminary injunction where the former employer established there was a substantial threat that its former executive would disclose trade secrets.

In Bimbo Bakeries, the executive at issue was a Vice President of Operations for the company who had access to unequivocally confidential information concerning long term strategies, operating costs, and customer negotiations.  The executive accepted employment with a competitor, Hostess, and then remained employed by Bimbo Bakeries for another two months while waiting to earn a bonus.  Importantly, the Court noted that while employed by Bimbo Bakeries the executive engaged in unusual use of his computer and was determined to have accessed multiple confidential files in rapid succession without seemingly reading the documents in the ordinary course.  A computer forensic expert verified the access, but could not confirm downloading and/or copying.  Significantly, the executive did not have a restrictive covenant preventing him from working for Hostess.  Furthermore, Hostess required that the executive sign an "Acknowledgement and Representation Form" to assure Hostess that the executive did not have any confidential information from former employers and would not use any confidential information in his capacity at Hostess.

Critically, the District of Pennsylvania and the Third Circuit Court of Appeals both ruled that, notwithstanding the fact there was no non-compete and there was the Hostess Acknowledgment, the executive was enjoined from working for the competition.  The courts both ruled that it is proper to grant a preliminary injunction -- enjoining employment -- to prevent the threatened disclosure of trade secrets where there is a "sufficient likelihood, or substantial threat, of a defendant disclosing trade secrets." 

The Third Circuit concluded that the harm of enjoining someone from earning a living may be warranted where it is "necessary to prevent greater irreperable harm from befalling another party."  Mindful of the harm to the executive, the Court noted, however: "if the Court holds [after a trial on the merits] that Bimbo is entitled to relief, the Court should fashion a remedy appropriate to protect Bimbo's trade secrets without unduly imposing on Botticella's right to pursue his chosen occupation."

 Bimbo Bakeries provides a couple of valuable lessons:

• An employee contemplating resigning for another opportunity who remains on the former company's payroll after accepting a job offer creates certain optical problems.  Specifically, in terms of potential breaches of fiduciary duty and duty of loyalty, as well as garnering new confidential information while planning to depart for the competition, will be frowned upon by a reviewing court.  The Bimbo Bakeries court referenced the time employed by Bimbo Bakeries with a job offer from Hostess with some concern.  If a bonus is in jeopardy, given the timing of a departure, negotiate the bonus from the new employer.

• When an employee, particularly an executive employee, leaves an employer, his or her computer and phones will be meticulously reviewed by a computer forensics company.  While an employee should never take any confidential or trade secret information, the reality that such conduct will be identified by the former employer should be a further reason not to engage in such misconduct.  Further, the proof of such conduct will lead to the imposition of injunctive relief and can form the basis for affirmative claims under federal and state law.

Supreme Court Rules ERISA Fee Claimants Only Need Achieve Some Degree of Success And Need Not Be "Prevailing Parties" To Obtain Attorneys' Fees

In an emphatic 9-0 decision, the United States Supreme Court ruled that an ERISA fee claimant under 29 U.S.C. 1132(g)(1) need only obtain some degree of success as opposed to being a "prevailing party" under the court's Buckhannon precedent.  See Hardt v. Reliance Standard Life Insurance Co.,   http://www.supremecourt.gov/opinions/09pdf/09-448.pdf. 

In Hardt, Reliance denied Ms. Hardt's request for Long Term Disability ("LTD") benefits.  Ms. Hardt filed a claim under ERISA, alleging that Reliance wrongfully denied her benefits.  At the summary judgment stage, the District Court concluded that Reliance had failed to review all of the necessary medical evidence and, therefore, the benefits denial was not based on substantial evidence.  The District Court, however, did not issue a ruling.  Rather, the court remanded the case for Reliance to reconsider all of the medical evidence and act on Ms. Hardt's application for LTD.  Ultimately, Reliance awarded Ms. Hardt LTD.  Hardt then filed an application for attorneys' fees pursuant to 1132(g)(1).  The District Court awarded Hardt fees.

Reliance then appealed the fee award, arguing that Ms. Hardt was not a "prevailing party" under the United States Supreme Court precedent of Buckhannon in that there was (1) no enforceable judgment on the merits, or (2) no court ordered consent decree.  The Appeals Court agreed and vacated the award of attorneys' fees.

The United States Supreme Court in Hardt unanimously rejected the Appeals Court analysis and found that the award of attorneys' fees was appropriate.  Specifically, and significantly, the Court ruled that ERISA has two different fee shifting provisions.  The first, not at issue, 1132(g)(2), governing actions to recover delinquent employer contributions to multi-employer plans provides that fees be awarded only to prevailing parties.  Quite differently, 1132(g)(1), the provision at issue, only requires that the court use its discretion to determine whether either party is entitled to attorneys' fees.  The Court went on to rule that under Ruckelshaus v. Sierra Club, 463 U.S. 680, 694 (1983), the proper standard for fee shifting provisions providing discretion to the court is whether the fee claimant obtained "some degree of success."  The Court then ruled that Ms. Hardt had obtained more than some degree of success and was entitled to attorneys' fees under 1132(g)(1). 

This critical new ruling by the High Court should make ERISA claims much more enticing to plaintiffs' counsel as a plaintiff who effects change, as opposed to obtaining a judgment, may now be entitled to an award of attorneys' fees under ERISA.

Jury returns $250 Million Punitive Damages Verdict in Gender Class Action Against Novartis

A federal Jury in Manhattan handed down a $250 million punitive damages verdict against drug maker Novartis. http://www.bloomberg.com/apps/news?pid=20601100&sid=aIFrBtReIhKs.  This, just two days after the jury returned a verdict in favor of the 5,600 member class of female employees on all three counts of gender discrimination.  The class alleged, and the jury found, that Novartis discriminated against female employees in the terms and conditions of their employment, including disparate pay and promotional opportunities.  The staggering punitive damages award s believed to represent 3% of Novartis' 2009 net income.