As I discussed in “Be Cautions When Tempted to Leverage Another into an Agreement,” exerting leverage to force a business partner into settling a dispute could constitute deceptive or unfair acts or practices in violation of M.G.L. c. 93A – which allows for awards of multiple damages and attorneys’ fees. But can validly exercising one’s contractual rights also expose a company to Chapter 93A liability? According to the Massachusetts Supreme Judicial Court, it can.… Keep reading

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Historically, Massachusetts courts routinely ruled that it was a violation of  the Massachusetts Wage Act to fail to pay an employee who had been promised payment for her work only after the employer received sufficient funding. For example, in Stanton v. Lighthouse Financial Services, Inc., U.S. District Court Judge Nancy Gertner found not only once, but twice, that John Stanton was an employee under the Wage Act, was entitled to payment of deferred compensation under his employment contract and confirmed that there was no carve out from the Wage Act’s requirements for startups. In reaching her decision, Judge Gertner reasoned that a deferred compensation agreement where the compensation was forfeited violated the Wage Act provision prohibiting the entering into of a special contract to avoid Wage Act obligations. Since Stanton, a number of Massachusetts state and federal court cases have ruled that compensation contingent upon a company’s receiving certain levels of funding were wages that were required to be paid in accordance with the Wage Act and required such wages to be paid promptly and upon termination of employment – even if funding had not then occurred.

In what could be viewed as a new twist, Superior … Keep reading

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In the course of its decision in Chambers v. Gold Medal Bakery, Inc., the Supreme Judicial Court of Massachusetts highlights a number of important rules related to the attorney-client privilege, as well as various rights and duties of officers and directors in closely held corporations.  While it is important to understand the detailed facts of Chambers in order to gain a full appreciation of its multitude of specific rulings, the overarching story is a familiar one that has played itself out over and over again (with the most notorious example being Demoulas v. Demoulas).… Keep reading

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Most businesses have a variety of insurance coverage that they hope never to have to utilize. If and when the time does come to exercise one’s rights to the benefit of such a policy, however, the last thing any in-house counsel wants is to be unaware of a technicality that could lead her company to forfeit those rights. Unfortunately for The Saint Consulting Group (“Saint”), that is exactly the situation in which it recently found itself.

In April of 2010, Saint purchased an insurance policy that covered “a Wrongful Act” made by “Insured Persons.”  As often is the case with insurance policies, while the actual insurer was The Hartford, Saint had purchased the policy through an agent, the Eastern Insurance Group, LLC. 

On June 23, 2010, Saint was sued on a variety of theories of liability arising out of the work that it undertook on behalf of a client. Because Saint wanted to avail itself of the benefits of its insurance policy with The Hartford, which included the cost of defending the litigation, Saint sent Eastern Insurance notice of the lawsuit and included copies of the complaint and first amended complaint at issue. While Eastern Insurance forwarded on that … Keep reading

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In a previous blog post, The Fiduciary Duty of Preserving Corporate Opportunities, I wrote:

In general, an officer, director, partner, LLC member or shareholder in a closely held corporation owes a fiduciary duty not to usurp for his personal benefit, a business opportunity that could and should belong to the corporation.  

While I have no qualms about that statement, a recent decision out of the Massachusetts Superior Court found that a company insider was not liable for breach of fiduciary duty even though she terminated her employment relationship with the company and started her own independent business that undertook the exact same work she had been doing for her prior company.  … Keep reading

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As I have previously warned in prior blog posts here and here, the Massachusetts Wage Act exposes a company and individuals having management responsibility for the company to mandatory treble damages and attorneys’ fees for failing to pay wages.  Because the statute, however, does not define the term “wages,” employees have attempted to apply the Wage Act’s beneficial damages provision to any type of compensation.  A true “bonus” need not be wages and the failure to pay a bonus would then not subject an employer or its management to the risk of treble damages or attorneys’ fees.  Nevertheless, it is not always easy to determine if a particular payment is a bonus or wages.

A recent Massachusetts case, Boesel v. Swaptree, Inc., helped clarify the distinction between wages and a bonus.  Specifically, Boesel discussed three provisions in an employment agreement that can be used to clarify how the payment to an employee should be characterized:

  • Describe a bonus in a provision that is separate from the provision describing base salary.  In Boesel, the plaintiff argued that the discretionary bonus in his employment agreement was earned ratably over the course of the year and was part of
… Keep reading
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As in-house counsel, how would you like to tell your CEO: “While our customer lists, pricing information, and business processes are trade secrets, we can’t sue the independent contractor who stole them because we did not do enough to protect those trade secrets.”  Sound contrived?  Well, that is exactly the ruling one Massachusetts Superior Court judge recently issued in C.R.T.R., Inc. v. Lao. … Keep reading

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In a prior blog post Three Issues In-House Counsel Should Raise Before Asking Employees To Sign Non-Competes, my co-publisher, Shep Davidson, provided suggestions to help in-house counsel ensure that non-competition restrictions on employees were appropriate and enforceable.

As it is Valentine’s Day, we look at three ways in which enforcement of non-competition agreements is like dating.

1.  Has there been a material change in the relationship?  Massachusetts courts have long held that a material change in the terms and conditions of an employee’s employment will void an otherwise valid non-competition agreement.  What constitutes a material change, however, can vary widely depending upon which judge is hearing the case.  Some judges have applied the material change doctrine only where the change was adverse to the employee (Grace Hunt IT Solutions, LLC v. SIS Software, LLC, 29 Mass. L. Rptr. 460, 2012 WL 108825 (Mass. Super. 2012; Lauriat, J.); R.E. Moulton, Inc. v. Lee, 18 Mass. L. Rptr. 157, 2004 WL 1894910 (Mass. Super. 2004; Kottmeyer, J.).  Other judges have applied the material change where the employee had been promoted, demoted and promoted again (Akibia, Inc. v. Hood, No. SUCV201202974F (Mass. Super. Ct. Oct. 09, 2012); Lycos, Inc. v. Jackson, … Keep reading

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In Commodity Futures Trading Comm’n v. Weintraub, the United States Supreme Court noted that:

[W]hen control of a corporation passes to new management, the authority to assert and waive the corporation’s attorney-client privilege passes as well. New managers installed as a result of a takeover, merger, loss of confidence by shareholders, or simply normal succession, may waive the attorney-client privilege with respect to communications made by former officers and directors. Displaced managers may not assert the privilege over the wishes of current managers, even as to statements that the former might have made to counsel concerning matters within the scope of their corporate duties. [Emphasis added.]

While the foregoing may not seem too surprising to some, what if I told you that the new owners of a business can waive the privilege with respect to communications that the former owners had with company counsel solely to use those communications as evidence against the former owners in litigation? Well, that is exactly what the Delaware Court of Chancery recently allowed to happen in Great Hill Equity Partners v. Sig Growth Equity Fund, LLP.… Keep reading

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Last week I had the pleasure of being a panelist at the Association for Corporate Growth (Boston) and the Turnaround Management Association (Northeast) joint conference on “Challenges and Opportunities in US Manufacturing.” A theme common to all of the speakers was the need to address workforce issues, whether with respect to training, engagement or transition. 

The challenges posed by human capital can often propel or derail improvement strategies, yet certain employment law issues are often overlooked or only addressed at the last minute. If in-house counsel are aware that an improvement plan that requires the exit of employees is being considered, the following issues in advance may help alleviate some last minute problems.

  1. Be sure that all employees have up-to-date, enforceable post-employment restrictive covenants. After implementing a layoff or termination of employees, the last thing that a company needs is to be surprised by a former employee’s attempt to use the company’s confidential information or goodwill to give a competitor an advantage. Reviewing existing confidentiality, non-solicitation and non-competition agreements for enforceability under applicable state laws, and even considering the company’s plan (and costs) for enforcement of post-termination restrictive covenants, will go far to help avoid unpleasant surprises.
… Keep reading
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