Chapter 49 – Oregon Ranked One of The Worst Places to Make a Living

It ain’t Folsom California, is it Linda?

In my ongoing quest to highlight the strains to small business because of the extraordinary negative opinion held by the US District Court of Oregon, Portland Division, and the County Courts in the Portland Metro area, I thought I’d share a sound bite or two.

I just wonder why the following truths simply don’t sink in:

The Five Truths

In many cases the economic model for the proliferation of legal services strips wealth and places it in the hands of those who create fewer jobs. No statement like the above can really be made in a vacuum. But, given the enormous volume of fraudulent lawsuits today, one must conclude that we simply have too many lawyers and so they attack where they think they can prevail at that includes winning by having the leverage to cost the small business its survival…just by attrition, the cost of defending the lawsuit. Sue for a million, settle for $75,000 and the business loses $250,000 and will never really recover.

How many businesses really survive and for how long? See below.

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The survival matrix above is a good indication of the difficulty facing small business. By the 10th year only 35% or so are still around. And if they face one or two of these ridiculous lawsuits, fewer still will survive. Companies with 50 or fewer employees represent 1/3 of the business employment. Companies with 500 or fewer employees represent 99.7%. Attacking the 50 employee group means they probably go away as a result of the lawsuit. To a lesser degree those having more than 300 employees go away. Many are very detailed and fair in how they go about their business. We all pay the price for those who are not.

Does it simply mean we have too many lawyers and the respective State Bars wont control them? Probably.

The difficulty of filing a lawsuit against the State Bar for negligence or Racketeering is that your case will be in front of a judge who is a member of the Bar. The franchise of law is an enterprise of lawyers some of whom are dishonest and some of whom are honest. The best of you need to influence the Bar and set the culture and that means engaging the Judges to stop the frivolous lawsuits as soon as they can, to minimize the damage to the victims of these rapacious lawsuits. If you can do that then business will prosper. If you do not, business will suffer and move to friendlier state or city.

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Chapter 48 – Computer Fraud and Abuse Act Can Prohibit Employee From Deleting Emails

Why isn’t is clearer that this is absolutely one of these areas in which we need to label the destruction of digital information a crime. One of the key areas of destruction by M that we raised with the arbitrator was the absence of email on the business computer M returned at the end of his employment. I wish we had more guidance on this topic 5 years ago. More importantly I wish the bickering between police would have made the jurisdiction questions clearer. The following has been republished with approval from the Cybersecurity Business Law Blog which you can find here.

“[T]he deletion of an employee’s emails can serve as the basis for a CFAA claim in certain circumstances, ….”

In Meridian Financial Advisors, Ltd. v. Pence, 1:07-cv-00995 (S.D. Ind. 2011), the United States District Court for the Southern District of Indiana denied the Defendant’s motion for summary judgment on the Plaintiff’s Computer Fraud and Abuse Act claim, inter alia. The basic facts are these:

Defendant Pence was President and CEO of OCMC, Inc., a company that went into bankruptcy and had appointed as its receiver, Meridian Financial Advisors, Ltd. As Receiver, Meridian took possession of OCMC’s computers, including the one that had belonged to Pence. Meridian then discovered that emails and other computer data detailing improper conduct had been deleted just before Pence left OCMC’s premises. (Opinion p. 6-7).

Meridian sued Pence for violating the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030, et seq., alleging that he and others violated the CFAA by damaging OCMC’s protected computers.

A person violates the CFAA by “knowingly caus[ing] the transmission of a program, information, code, or command, and as a result of such conduct, intentionally caus[ing] damage without authorization, to a protected computer.” 18 U.S.C. § 1030(a)(5)(A)(i) (2010). For CFAA purposes, transmission can be accomplished either over the Internet or through a physical medium such as a compact disc. Int’l Airport Ctrs., LLC v. Citrin, 440 F.3d 418, 420 (7th Cir. 2006). (Opinion p. 20).
Reasoning that the CFAA defines “‘damage’ to include ‘any impairment to the integrity or availability of data, a program, a system, or information’”, the Court found that the deletion of the emails and data impaired the availability of data and, as such is prohibited by the CFAA. (Opinion p. 21). In reaching this decision, the court cited Monson v. Whitby Sch., Inc., 3:09-cv-1096, 2010 WL 3023873, at *3 (D. Conn. Aug. 2, 2010) for the proposition that, “under some circumstances, deletion of an employee’s own email can give rise to a CFAA claim.” Id. The court found that Pence’s deletion of email and data, if found to be true, would be a violation of the CFAA, which finding presented a question of fact that precluded granting of summary judgment on this issue.

In the wake of Pence and Monson, departing employees need to beware that if they delete emails and other computer data from their employer’s protected computer, under the right circumstances they could be violating the CFAA.”

Chapter 47 – Your Reputation was tarnished. Do you turn the other cheek?

One pervasive observation, by me and other small business owners familiar with this case, has come out of this almost 13 year long experience and that is the sense of entitlement coming from the M and the attorneys that represent him or in a broader sense that of any opposing counsel in an employee retaliation case. The entitlement behavior is that they are entitled to say all manner of things about you the owner of a small business and the business itself without recourse, but you the business owner better not defend yourself publicly or it will be another act of retaliation. On the other hand the employee and attorneys can through their legal actions accuse you of fraud and to the unaware that paints a very broad picture of bad activity. I think we need to turn the ship around on that. The company that employed M is now destroyed. And now the entitled are pursuing other companies and me for telling the story.

To a small business owner, the business itself represents years of nurturing and investment, trials and tribulations, success and failure. It is not static. You don’t open your doors and realize immediate success. Quite the contrary. And so when someone attacks your business you are defensive. As an owner you are not in control of everything that everyone does in your company and there is always risk. A business is not the equivalent of a child, but owners do typically have a family like affection for their small business.

Imagine if you will that you are a working Mom. You have a business and you work from home. You have two children and your best friend, who lives next door, also has two children. The children are the same age, 4 & 6, and play together all the time. You love your children and adore your friends children as well. You feel blessed with your life.

An employee who has worked with your company for a few years has been doing less than stellar work for you and you have decided to let that person go. The employee is in a key role and it is imperative you find someone with stronger skills. Just before you let them go in fact the employee attempts to withhold key data from you and so its time. So you give that employee her notice of termination in writing, send the termination letter in the mail as well as send an email and talk to her about your decision. In order to facilitate and assist your employee in finding a new job, you give her 6 weeks notice, but require that no there will be no disruptive behavior. This is a necessary part of being a business owner. It is not easy and it is not fun, but it does need to be done. But there is an uncomfortable peace. Your soon to be ex-employee is not happy and she works from your home office quite a bit.

Weeks pass. One workday your children’s school is closed because of snow. They are at home playing outside with your best friend’s children having a great time. Your friend comes by and asks if you can watch her children while she runs to the store and of course you agree to do so. Happy to do so. But soon after your friend heads to the store the weather turns worse and it is best if the children come inside. You get them inside and they are all soaked and cold and freezing. You get some warm towels and get the wet clothes off of them as best you can, being a Mom to all four children.

Your ex-employee notifies you the next day that she observed you inappropriately touching your neighbors children and calls on you to cease and desist from such behavior attaching a photograph of you wrapping a towel and giving a hug to one of the children. You immediately notify your neighbor and share the email. You also immediately notify the police.

A short time later an attorney representing your soon to be former employee sends you an email notifying you that said employee has filed a criminal complaint with police and informing you to not retaliate. You get a call and email from the police as well and you reply as you would expect an innocent person to reply, which is by all means investigate, the allegations are false, the employee was recently terminated and you believe this to be an act of employee retaliation. You are heart broken.

The police ask the employee to turn over the evidence, photo’s supporting the claim. But she does not. You do turn over the photo provided by your former employee and the police investigate. Your neighbor comes to your defense. You are innocent. You would never hurt any child. Your friends rally around you. While innocent of the allegation, it nonetheless changes your life. It hurts you deeply. The scars of wisdom are painful.

It is clear your employee wants to use this event to reverse the termination decision. It is never clearer to you that the destructive nature of this employee has likely hurt your company for some time and time is ticking. Frankly her last day with your company cannot come soon enough. On her last day she returns the business computer and other equipment provided by the company and you hope this is the end of a bad chapter. The computer she returns in void of important programming she has worked on for the last year and more importantly that critical programming is no longer on any other business computer, nor can it be found on back up discs. The faith you have placed in the former employee was shattered weeks ago and this latest destruction of property is an exclamation point and it will cost you a lot to fix. Little did you know that it would shut your business down for a week and cost you close to $100,000.

Do you turn the other cheek?

I say no. If you do there is no guarantee that the abuse will stop. But you think about it for a bit trying to decide if its worth pursuing the employee for this damage. It’s not. Learn your lesson and move on. Turn the other cheek. And you do.

But soon you have no choice. Your former employee hires an attorney and sues you for Retaliation and Wrongful termination, terms of art in the legal world. The former employee is asking for $1 million in damages and she has sued your business corporation and you personally. You get notice of the lawsuit from an attorney friend even before the legal paperwork arrives. The public attention to you and your business for this unfounded attack will require some action to maintain your reputation. Your competitors will attack this and its such a horrible allegation. Turning the other cheek did not work. The first of a thousand sleepless nights begins now.

Chapter 46 -LIABILITY V. QUASI-JUDICIAL IMMUNITY OF THE ARBITRATOR

Following is a quote from a very well written paper outlining and challenging arbitrator immunity. Read on. “In this context it is important to stress that granting absolute immunity and thus allowing all kinds of harmful misconduct to go unpunished is the wrong message to send to the parties involved in the arbitral proceeding. To the parties, arbitral immunity can have two implications: first, if one party is willing to use unethical methods to influence the outcome of the arbitration she has considerable chances of finding an arbitrator who will cooperate; second, if one party is not willing to use unethical methods to influence the outcome of the arbitration she may lose the case to the other party. To the arbitrators the land of no sanctions can mean that they may attract all kinds of appointing parties, especially those willing to use unethical means to win their case. The danger is thus that the arbitrators willing to act unethically will receive ample appointments, while remaining free from sanctions, whereas those participants who refuse to do so, will not be appointed. It can thus be argued that absolute immunity drives all participants in the arbitration procedure to a “race to the bottom,” diminishing the professional standards that ensure the quality of the awards rendered and the continuation of the growing movement83 towards arbitration.”LIABILITY_V._QUASI-JUDICIAL_IMMUNITY_OF

I am struck by the conclusion that “if one party is willing to use unethical methods to influence the outcome of the arbitration she has considerable chances of finding an arbitrator who will cooperate; second, if one party is not willing to use unethical methods to influence the outcome of the arbitration she may lose the case to the other party.” Those of us naive enough or foolish enough to believe the integrity of arbitrators need to now understand that the abuses of power and influence are at an all time high. Fast money perhaps. I’m not really sure.

One of the ways unethical arbitrators avoid or at least minimize the exposure of public ridicule is to issue an award decision only, without publishing the reasoning and merits of the position of the parties, evidence, etc. I like to call this the David Wilson approach. David is an arbitrator in Denver, specializing in International Arbitration.

I remain confused as why the arbitrator ruled in the way that he did. This discussion must allow for some possibility that this is not just an issue of cognitive confusion and reliance on a colleague that shamefully lead him astray.

The interim motions were not prepared in opinion form. In fact I still don’t know why he ruled the way he did on our two bites at the summary judgment motion. My attorneys should not have allowed this. They did.

Until next time.

 

Chapter 45 -Verdex wins

JENNER & BLOCK WINS JURY VERDICT IN FAVOR OF L-3 COMMUNICATIONS VERTEX IN WHISTLEBLOWER LAWSUIT

On January 12, 2016, Jenner & Block secured a significant win for client L-3 Communications in a civil False Claims Act lawsuit that accused L-3 subsidiary Vertex Aerospace of overbilling the US Army for helicopter maintenance when its mechanics were required by the Army to be available for work supporting combat operations in Iraq and Afghanistan. After a five-day trial in the US District Court for the Northern District of Texas, the jury deliberated less than an hour before returning a verdict in favor of L-3.

Vertex performed helicopter maintenance for the Army in southwest Asia during the Iraq and Afghanistan wars. Overall, Vertex provided more than 5,000 personnel to assist the Army in supporting and maintaining the full range of military combat helicopters. In 2010, a former Vertex mechanic alleged the company had submitted inaccurate records and claims for payment. After the government declined to intervene in the case, he pursued the action with a plaintiff’s law firm. At trial, the plaintiff asserted the company’s and the Army’s actions violated their government contracts. He sought damages in the amount of $480 million, based largely on the suspect testimony of an expert witness.

At trial, the expert’s figures were demonstrated to be nothing more than speculation. And defense witnesses, including decorated combat veterans, testified the Army required Vertex mechanics to be at their sites in forward-operating bases for 12 hours a day, seven days a week. According to the witnesses, this was essential to saving lives by assuring that battle-damaged and heavily used helicopters could be repaired immediately and returned to service.

Partners W. Jay DeVecchio and Michael B. DeSanctis led the trial team representing L-3. The team also included Associates Emily Chapuis, Mark P. Gaber and Alex S. Trepp; Government Contracts Analyst Anna M. Sturgis; Senior Paralegal Albert K. Peterson; Paralegal Coordinator Cheryl L. Olson; Legal Secretaries Lynne T. Colbert and Patricia Bryant; Project Assistant Adam H. Weidman; former associate Michael W. Khoo; and former project assistant Omar N. Khan.

Just sayin!