Kang Haggerty News

Much Ado about Non-Competes

May 9, 2014 | Kang Haggerty LLC

In energy, technology, healthcare and other key sectors of the economy, employers increasingly insist their employees agree to non-competes and other post employment restrictions. Yet when the employment relationship ends, the restrictive covenants are either ignored by both the employee and the employer or fought out in court with the outcome both uncertain and costly.

Employers have legitimate interests in protecting their confidential business information and key customer relationships developed at significant expense. Consequently, many employers require new employers to agree to contractual employment and post-employment restrictions on their activities and conduct. Such restrictive covenants may be a part of an employment agreement or set forth in a separate non-compete and non-disclosure agreement. New employees eager to start out on the right footing are inclined to sign whatever documents are presented to them in connection with the hiring process. Later, if the relationship ends questions arise as to the enforceability of the restrictions. Understanding the basic legal principles applicable to enforcement of restrictive covenants can help both parties.

Bad Sportsmanship? Class Action Filed Against NCAA for Student Compensation

May 2, 2014 | Kang Haggerty LLC

The question of whether student-athletes in college sports are adequately compensated for their services is a debate that has persisted for many years. It has recently become a particularly hot topic in light of a decision by the National Labor Relations Board that Northwestern University’s football players can unionize; as well as a study done by Drexel University and the National Collegiate Players Association that says that the average college football player is worth $178,000 per year, and the average college basketball player, $375,000 per year.
On one hand, student-athletes receive what otherwise would be expensive tuition, room, and board at no cost; other than the time they spend playing and training for a sport they presumably love. On the other hand, colleges – particularly colleges with juggernaut football and basketball programs – generate obscene amounts of money from these student-athletes’ services; which makes the tuition, room, and board the athletes receive look meager by comparison.

The Walls Come Tumbling Down: The Economic Loss Doctrine Uncovered

April 25, 2014 | Kang Haggerty LLC

The economic loss doctrine prevents a plaintiff from recovering purely economic losses via a tort action (i.e., a negligence claim) in the absence of personal injury or damage to “other property.” One court has described the economic loss doctrine as “prohibit[ing] plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract.” Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 618 (3d Cir. 1995). In other words, a plaintiff should be limited to a contract claim “when loss of the benefit of a bargain is the plaintiff’s sole loss.” Id.

To illustrate, if a property owner hires a contractor to build a wall, which subsequently collapses due to the contractor’s negligence in constructing the wall, the property owner cannot sue the contractor for negligence. The property owner’s redress is confined to the terms of the contract. Given that the wall collapsed, it is likely that the contractor breached the contract with the property owner, who presumably bargained for a wall that should not collapse. Since nothing other than the wall was damaged, and no one was injured, however, the property owner’s relief is restricted to what was specifically bargained for – the wall. Thus, the property owner will only be able to recover the cost of the wall, or the cost of repairing the wall (i.e., he should only get what he bargained for: a wall).

No Application of Fair Market Credit by New Jersey Appellate Division

April 18, 2014 | Kang Haggerty LLC

The borrowing relationship of debtor and creditors is at the heart of the American economy, and therefore the subject of many lawsuits. In the case of Atlantic Stewardship Bank v. Puddingstone Funding, LLC, (2013 WL 5777539) the New Jersey’s Appellate Division held that the amount of the outstanding debt the defendants were required to re-pay should not have a “fair market value credit” applied to it.

Plaintiff Atlantic Stewardship Bank sought to collect on a $2.5 million note that matured on July 1, 2009 and it also alleged defendants had defaulted on their loan obligations by failing to make two monthly payments in June and July 2009. Defendants Puddingstone Funding, LLC, et al. rebutted by stating, among other things, that plaintiff had acted in bad faith by not allowing Puddingstone to liquidate collateral to satisfy the debt, reneged on a verbal agreement to lower the interest rate on the loan, and disseminated defendants’ private financial information. Continue reading ›

Pit Stop: Crashing into Bad Faith Practices as Insurer Neglects Insured

March 28, 2014 | Kang Haggerty LLC

Reversing the trial court’s order granting summary judgment in favor of the insurer in a declaratory judgment action brought by the insured, the Superior Court in Lanigan v. T.H.E. Insurance Company, No. 646 WDA 2013, (Pa. Super. March 14, 2014) held that the insurer breached its duty to defend the insured in a claim arising from an accident during a race.

On March 31, 2007, in a dramatic and fatal twist of events, Lanigan was racing at the Mercer Raceway Park in Mercer, Pennsylvania when his throttle stuck and he lost control of his car while turning. Crashing into the catch-fence near the pit, his car struck Steven Guthrie, Jr. and Samuel Ketcham, who were standing behind the fence. Mr. Guthrie died as a result of the injuries incurred, and Mr. Ketcham was seriously injured.

Whistleblower Expansions Continue: SOX Covers Subcontractor Employees

March 19, 2014 | Kang Haggerty LLC

Whistleblower protections continue to expand with the recent U.S. Supreme Court decision in Lawson v. FMR LLC, which ruled that the anti-retaliation protection provided to whistleblowers by the Sarbanes-Oxley Act of 2002 (“SOX”) applies to employees of private companies that contract with public companies. Enactment of SOX was prompted by the collapse of Enron Corporation. In particular, §1514A(a) provides that “No [public] company . . ., or any officer, employee, contractor, subcontractor or agent of such company, may discharge, demote, suspend, threaten, harass, or discriminate against an employee in the terms and conditions of employment because of [whistleblowing activity].”

Back to the Future- Or, Back to the Courthouse

March 12, 2014 | Kang Haggerty LLC

In a blast from the past and a shout out to movie buffs everywhere, the widow of John DeLorean is in litigation against a company from Texas associated with her husband’s legendary car famously featured in the Back to the Future films. According to Sally DeLorean, DeLorean Motor Company in Texas has exploited the car’s trademark and image of its builder, her husband. He began his career working for General Motors in the 1960s and 1970s and eventually became so popular as a carmaker that he starred in a whiskey ad in Playboy magazine in 1981. His iconic car model only had 9,000 finished copies but was such a craze that it landed a role in pop culture history in film.

Settlement Reached In Long Island Hospital Dispute

March 4, 2014 | Kang Haggerty LLC

The State University of New York has reached a deal with unions and Northern Brooklyn community groups regarding the future of its Long Island College Hospital.

In February of 2013, SUNY’s board of trustees voted to close the hospital and were seeking sell the property to (likely one of four) developers who are competing in a bid process. Various groups from the community blocked the closure with a web of legal actions brought by a coalition of local community groups, unions and elected officials, who were calling for a totally new, transparent Request for Proposals (bidding) process that “respond to the health care needs of the community.” Meanwhile, SUNY claimed that the losses—estimated at as much as $13MM per month—that resulted from the hospital’s continued operation threaten the structure of the state’s entire public college system. Continue reading ›

SEC Alert: Scottrade $2.5MM Settlement

February 21, 2014 | Kang Haggerty LLC

It seems the U.S. Securities and Exchange Commission is one of the busiest federal agencies lately, as it brought down the hammer once again, this time obtaining a $2.5 million penalty from Scottrade, Inc. by way of settlement……

SEC Alert: Scottrade $2.5MM Settlement

It seems the U.S. Securities and Exchange Commission is one of the busiest federal agencies lately, as it brought down the hammer once again, this time obtaining a $2.5 million penalty from Scottrade, Inc. by way of settlement. From March of 2006 until 2012, an affiliate of Scottrade, Inc. failed to provide the SEC with accurate “blue sheets,” which essentially log the details of all trading activity both within a firm and with its customers. Blue sheet data is necessary for the SEC to identify and analyze trades in the course of investigations and other work, as they contain the details of each equity or options trade that is routed through clearing broker-dealers. (They are called “blue sheets” because the form was blue, but in the ‘80s, the process became electronic. Still, the term “blue sheet” is commonly used.) Continue reading ›

SEC Insider Trading Alert: Teo’s Musicland Insider Trading Appeal Unsuccessful

February 18, 2014 | Kang Haggerty LLC

On February 10, 2014, the Third Circuit Court of Appeals affirmed a lower federal court’s jury verdict of insider trading against Alfred Teo and a trust he controlled. Alfred Teo Sr., a former shareholder in Musicland Stores Corp…..

SEC Insider Trading Alert: Teo’s Musicland Insider Trading Appeal Unsuccessful

On February 10, 2014, the Third Circuit Court of Appeals affirmed a lower federal court’s jury verdict of insider trading against Alfred Teo and a trust he controlled. Alfred Teo Sr., a former shareholder in Musicland Stores Corp, a conglomerate company that oversaw numerous music endeavors including Sam Goody music stores and Suncoast Motion Picture Co. video shops, was found guilty of insider trading. Teo and his trust were ordered to disgorge gains of $17,000,000 and to pay prejudgment interest of an additional $14,000,000. Teo received and traded on confidential information from insiders of Musicland about an impending all cash tender offer by Best Buy for all the shares of Musicland. The decision in SEC v. Teo is another stark illustration of the painful economic consequences of insider trading. Continue reading ›

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