Recent Civil Rights News

Recently, Mark Krudys has worked to advance inmates’ civil rights claims:

  • On August 13, 2014, Mark Krudys led a nationally broadcast webinar entitled, “Jail and Jailer Liability: The Trial of a Jail Death Case.”  The course covered both practical and substantive aspects of inmate death cases.  The course covered the preliminary steps an attorney must take to initiate the case, discussed the cause of death’s impact on the case, considered who to name as a defendant, and provided information on discovery, experts, jury selection, and trial strategy.  Substantively, the course provided an overview of the relevant law under 42 U.S.C. § 1983 and outlined the requirements for successful civil rights claim under this section.  It covered choice of forum, subject matter jurisdiction, limitations of liability, immunity, standards for culpability, statutes of limitations, and fee shifting.  Example materials provided included previously filed complaints, document requests, jail inspection requests, responses to motions to dismiss and summary judgment motions, and voir dire questions.
  • In the next edition of the Virginia Trial Lawyers’ Association Journal, Mark Krudys will publish an article entitled, “Death or Personal Injury of an Inmate: Is a State Claim or a Federal Civil Rights Claim Under 42 U.S.C. § 1983 the Better Route to Recovery?”
  • Mark Krudys, along with Charlottesville attorney Kyle McNew, recently drafted the Virginia Trial Lawyers’ Association’s amicus curiae in Suzanne Boren v. Northwestern Regional Jail Authority, concerning whether Virginia regional jail authorities are entitled to sovereign immunity.

Advice of Counsel Affirmative Defense May Waive Attorney-Client Privilege

Attorneys should be aware that they risk waiving attorney-client privilege by asserting an advice of counsel affirmative defense. In an antitrust litigation, the U.S. District Court for the District of Idaho recently granted plaintiffs’ motion to compel certain defendants to produce documents identified on their privilege logs because they had waived attorney-client privilege by asserting an affirmative defense that they acted in on the advice of counsel.

In civil litigation, parties often create “privilege logs” describing documents or other items they have withheld from discovery because they are privileged, for example by the attorney-client privilege, or because they fall under the work product doctrine. Under Rule 26(b)(5) of the Federal Rules of Civil Procedure:

When a party withholds information otherwise discoverable by claiming that the information is privileged . . . the party must . . . describe the nature of the documents, communications, or tangible things not produced or disclosed—and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.

The party asserting the privilege has the burden of proving it. Tornay v. U.S., 840 F.2d 1424, 1426 (9th Cir. 1988). To establish that documents are protected by the attorney-client privilege, the party asserting the privilege must prove each element of the following eight-part test:

  1. Where legal advice of any kind is sought;
  2. from a professional legal adviser in his capacity as such;
  3. the communications relating to that purpose;
  4. made in confidence;
  5. by the client;
  6. are at his instance permanently protected;
  7. from disclosure by himself or by the legal adviser;
  8. unless the protection be waived.

In re Grand Jury Investigation, 974 F.2d 1068, 1071 n.2 (9th Cir. 1992).

In In re Fresh & Process Potatoes Antitrust Litig., 2014 U.S. Dist. LEXIS 50828 (D. Idaho Apr. 11, 2014), the plaintiffs claimed that the eighth element of the test applied—that the privilege had been waived—and that the defendants were required to produce the documents for which it was waived in discovery. The plaintiffs moved to compel production of certain documents listed on the defendants’ privilege logs, asserting that, among other things, privilege had been waived through certain defendants’ assertion of the affirmative defense that they acted in reliance on advice of counsel. Id. at *16.

In this antitrust case, certain defendants asserted that they had a good faith belief their conduct was permissible under federal antitrust law and the Capper-Volstead Act (a law that lists permissible collective conduct that does not risk antitrust liability) based upon their counsel’s advice. Id. at *20. The defendants argued that this affirmative defense waived the attorney-client privilege for documents and information relating only to the defendants’ belief in the legality of the precise conduct that the plaintiffs challenged. Id. at *21. Conversely, the plaintiffs argued that the affirmative defense waived the attorney-client privilege for a wide range of topics. Id. at 23. The Court agreed with the plaintiffs, particularly because the parties had previously agreed to a privilege waiver stipulation that was not as “narrowly tailored” as the defendants claimed it to be. Id. at *24-26.

The Court reasoned that a party asserting a defense of advice of counsel should be required to produce all documents relied upon or considered by counsel in forming its advice, otherwise, “a litigant may use the attorney-client privilege as a shield, and deprive the opposing party of the opportunity to test the legitimacy of the defendant’s claim.” Id. at *28 (citing Aspex Eyeware, Inc. v. E’lite Optik, Inc., 276 F. Supp. 2d 1084, 1092 (D. Nev. 2003)). The Court stated that, “[t]o hold otherwise would . . . deprive Plaintiffs of the broader context in which the advice was given.” Id. at *31. The Court elaborated:

It would be patently unfair for a party to assert that they relied upon the advice of counsel, yet deprive the opponent of the opportunity to understand why the advice was given, what other alternatives were looked at, why certain advice was rejected, and how the advice was interrelated to other business decisions. . . . Plaintiffs are entitled to understand and ask questions about the validity of counsel’s advice, and Defendants may not use the assertion of the privilege both ‘as a sword and a shield.’

Id. at *31-32 (citing Gorzegno v. Maguire, 62 F.R.D. 617, 621 (S.D.N.Y. 1973).

As a result, defendants should be cautious in asserting an advice of counsel affirmative defense because they could waive attorney-client privilege across the board. On the other hand, plaintiffs should be aware that they are entitled to obtain broad discovery when defendants assert this affirmative defense.

 

Non-Compete Agreements: Do They Overreach?

A company hires a software engineer, or a stock broker, or perhaps a bio-chemist.  This company, knowing the newly hired employee could in the future use his or her knowledge against them, requires the employee to sign a contract agreeing not to look for a job at a rival company for a set period of time.  This type of agreement is known as a non-compete clause.  These are clauses in contracts which prevent a company’s rival from “poaching” their employees.  Employers argue that these agreements are necessary in the world of high-tech and highly skilled jobs, where intellectual property and know-how means everything.  Interestingly, there has been an increasing trend of inserting these agreements into the contracts of jobs that have traditionally not included them, many times unbeknownst to the future employee.

Take Colette Buser of Boston, Massachusetts, a 19-year-old college student searching for a summer job.  As reported by the New York Times, Colette had worked the previous three summers as a camp counselor in the nearby town of Wellesley.  The camp where she worked for all three summers is owned and operated by the Linx Company.  According to Linx’s website, they have “over 30 premier camps” in the Wellesley area; one could say they have captured the summer camp market in Wellesley.  When Colette applied to work at a different camp this summer, she was surprised when the camp turned her down.  Not known to Ms. Buser, her previous contract with Linx included a non-compete clause forbidding her from seeking employment from a non Linx owned camp within a 10 mile radius, for an entire year.  The year-long ban may seem somewhat harsh, but the 10 mile radius stipulation is rather draconian for a young college student with limited means.  As it was with Colette and her family, this probably seems rather bizarre to most people.  How could a rival summer camp threaten Linx by hiring one of their former employees?  Colette’s story is not unique, non-compete clauses are now increasingly being used in all manners of jobs that have traditionally not included any, and like camp counselors, many of these jobs do not require much technical skill (if any).   This begs the question: do companies own the products of their employee’s labors, or do they in fact own the actual talent of their employees?

The owner of Linx, John Kahn, defends the non-compete clauses in his company’s contracts, “Our intellectual property is the training and fostering of our counselors, which makes for our unique environment,” he said. “It’s much like a tech firm with designers who developed chips.”  Mr. Kahn’s statements are not only a bit far-fetched, but many believe the reasoning behind supporting non-compete clauses for all manners of jobs may be flawed, as well.  According to Massachusetts State Representative Lori Ehrlich, these clauses possibly contribute to a moribund economy and halt innovation.  Both Massachusetts and California have a large tech industry sector of their economies.  For many years now, the tech industry in Silicon Valley, California has continued to grow at an astronomical rate, while in Massachusetts it has grown at a much slower pace and has stagnated at times.  Certainly there are many factors contributing to this discrepancy, but it is impossible to ignore that California bans non-compete clauses (except in very special situations), while Massachusetts does not.  California does however have a much higher unemployment rate than Massachusetts, so this may be an aberration.

Virginia courts strongly disfavor restraints on trade.  Virginia Law further require that “non-competition clauses be strictly construed against the employer” (Roto Die Co. v. Lesser, 899 F. Supp. 1515, 1519 (W.D. Va. 1995) (citing Grant v. Carotek, Inc., 737 F. 2d 410,411 (4th Cir. 1984)(emphasis added)) and that ambiguities in the contract [be] construed in favor of the employee” (Omniplex World Servs. V. U.S. Investigations Servs., 270 Va. 246,249 (Va. 2005) (citing Simmons v. Miller, 261 Va. 561, 580-81 (Va. 2001)).  The Supreme Court of Virginia holds restrictive covenants unenforceable when the prohibited competition is “too indirect and tenuous” (Preferred Systems Solutions, Inc. v. GP Consulting, LLC, 284 Va. 382, 393 (Va. 2012).

When determining whether a restrictive covenant is valid, the Virginia Supreme Court considers the function, geographic scope, and duration of the restriction as a whole (Home Paramount Pest Control Companies, Inc. v. Justin Shaffer, et al., 282 Va. 412, 415 (Va. 2011) (citing Simmons v. Miller, 261 Va. 561, 581, (Va. 2001)).  Thus, a non-compete provision is not enforceable unless it is “narrowly drawn to protect the employer’s legitimate business interest, is not unduly burdensome on the employee’s ability to earn a living, and is not against public policy (Omniplex, 270 Va. at 249).  Conversely, the Supreme Court of Virginia has upheld contracts not to compete only if they are sufficiently “narrowly drawn” to prevent only direct competition with the employer by the former employee.  For example, in Preferred Systems Solutions, Inc. v. GP Consulting, LLC, the court enforced a non-compete clause that proscribed work on one specific project, for only two specific companies, and was limited to only 12 months (284 Va. 382,393 (Va. 2012)).

Alternative Fee Arrangements Are Catching On, Even For Litigation

The Washington Post reports that law firms and in-house counsel are increasingly using alternative fee arrangements, such as flat fees, for litigation.  When the economic downturn prompted corporate clients to scale back their outside legal spending several years ago, law firms responded by experimenting with alternative fees.  Alternative fee arrangements can be anything that is not traditional hourly billing, including flat fees, success fees, and contingency fees.

Personal injury and other plaintiff’s litigation cases have used contingency fees for decades.   In the past, though, corporate clients typically paid their lawyers by the hour, for both transactional and litigation work.  Now, alternative fee arrangements have become fairly popular for transactional work, such as real estate deals.  Alternative fee arrangements have been slower to catch on for corporate litigation work, however, because of a perceived uncertainty and unpredictability in litigation.

But now, lawyers and in-house counsel are working out systems, and in some cases software programs, to help them price most litigation scenarios for alternative fee arrangements.  They are also negotiating carve outs in case unexpected events change the circumstances of the case.

In corporate litigation cases using alternative fee arrangements, the lawyer and the client typically agree to a payment system at the beginning of a case – often a flat fee with a success fee for certain scenarios, such as if the case is dismissed at an early stage of the lawsuit.  The overall payment system is based on estimates of how much the case is likely to cost in total.  Or, as in one example in the Washington Post article, the company may pay the law firm a pre-agreed flat fee for each phase of the litigation: investigation, discovery, trial preparation, trial, appeal, etc.

The Washington Post notes that this type of fee system is spreading throughout the legal community.  For example, entire practice groups within several large law firms now exclusively use alternative fee arrangements, having completely stopped billing by the hour.  The legal community’s perception of alternative fees has also changed: the Washington Post reports that in 2009, 28 percent of firm leaders believed alternative billing would be a permanent change in the legal industry.  By 2013, however, 80 percent of firm leaders believed non-hourly billing was here to stay.  Similarly, in a recent survey by the Association of Corporate Counsel of 1,200 general counsel, 37 percent of the chief legal officers expect the use of alternative fees to increase while only 4 percent expect it to decrease.

While large law firms are just beginning to adapt to alternative fee arrangements for litigation, small firms have been using them for years.  Small firms are often more flexible and are more open to working out unconventional and innovative fee systems to provide clients with the most bang for their buck.  In addition to flat fees, success fees, and contingency fees, when it meets the circumstances of the case, Mark Krudys also takes cases with blended fee arrangements, e.g., a low hourly fee blended with a lower percentage contingency fee.  If you’re interested in exploring alternative fee arrangements like these for corporate litigation matters, consider working with a small firm to develop a system that specifically matches your needs.

Mark Krudys Recognized by Super Lawyers Business Ed.

Mark J. Krudys has been recognized by Super Lawyers Business Edition 2013 as a top attorney in commercial litigationAccording to its publisher, the Business Edition “features the top attorneys in commercial practices across the nation and in London.”  Each attorney featured in this Super Lawyers publication “exhibits excellence in the practice of law and has been included on a Super Lawyers list in 2012 or 2013.”  See www.SuperLawyers.com

Securities /Brokerage Firm Litigation News

Our Securities/Brokerage Firm litigation team, led by Mark Krudys, achieved several recent victories on behalf of our clients in front of the Financial Industry Regulation Authority (FINRA) Panel.  In March 2013, our securities team obtained a $300,000 award from FINRA on behalf of a former executive of Anderson & Strudwick, a former Richmond brokerage firm, against five guarantors of a loan that our client made to A&S.  When A&S defaulted on the loan, the five guarantors, former executives at A&S, refused to honor their guaranties.  The FINRA Panel awarded the principal amount of the loan, interest, attorney’s fees, and filing costs.

In June 2013, our team won another FINRA award on behalf of the same former Anderson & Strudwick executive for unpaid employment benefits in the sum of $361,026, plus attorney’s fees and pre- and post-judgement  interest.

In June 2013, our team achieved a signicant ruling from the FINRA Panel against First Command, a Texas-based brokerage firm that markets financial products to the military community.  Our client, a former military officer turned investment advisor, sought to enjoin First Command from enforcing against our client an onerous non-compete clause contained in First Command’s standard employment contract with its investment advisors.  The FINRA Panel ruled that the non-compete clause was unenforceable.  This ruling may have implications for hundreds of First Command investment advisors.