Can CEO’s learn something from Dolphins owner Stephen Ross’s problems with the NFL?

Posted on August 11, 2022 by Joe Ahmad

Earlier this week, multibillionaire and longtime Miami Dolphins owner Stephen Ross was found to have violated the league’s tampering rules in a scheme described as “unprecedented in scope and severity” by commissioner Roger Goodell.

It’s hard for someone like me not to think about executive employment when I hear the details. Writes Greg Cote in the Miami Herald:

Ross not only cheated, he cheated badly, unsuccessfully, with no guile whatsoever, but as clumsily ham-handed as an amateur thief smiling at the security camera. He wanted to win something awful, and did something awful to get there, and got caught.

 A six-month NFL investigation found Ross as well as Dolphins vice chairman (and future owner-in-waiting) Beal both violated “integrity of the game” rules by tampering between 2019 and ‘22 to lure QB Tom Brady while he still was under contract with the Patriots and later the Buccaneers. And also tampered to lure coach Sean Payton while he still was under contract with the Saints.

Ross was fined $1.5 million and Beal $500,000. Ross was suspended from all team involvement until October and both were temporarily suspended from league committee involvement and league meetings. Far more damaging to the team, the Dolphins were made to forfeit their 2023 first-round draft pick and a third-rounder in 2024.

The tampering rule – which forbids teams from recruiting players under contract on competing teams – is relatively unique to the league. While businesses can enforce non-disclosure rules and in some cases non-compete agreements, businesses generally cannot forbid workers from talking with competitors.

Ross’s actions are surprising because they amount to a flagrant violation of a well-known rule by a someone at the NFL’s highest levels, and that speaks to Ross’s judgment and leadership. Arguably more serious, the probe confirmed the substance of allegations made by former Dolphins coach Brian Flores in a racial discrimination lawsuit filed earlier this year that Ross had urged him to intentionally tank games during the 2019 season.

Writes Rodger Sherman in The Ringer:

“The NFL’s investigation indicates that these claims are true—that Ross did, in fact, tell the Dolphins’ brain trust ‘that the Dolphins’ position in the upcoming 2020 draft should take priority over the team’s win-loss record,’ and that Ross did make a comment about giving Flores $100,000 to lose games.

But Goodell let Ross off the hook with regards to the tanking allegations, noting that Ross stopped telling Flores to prioritize draft position after Flores wrote a letter expressing discomfort with Ross’s requests, and that the Dolphins fought hard throughout the 2019 season, turning around an 0-7 start by winning five of their final nine games. It’s strange logic. It actually seems pretty clear that Ross wanted to tank, but was saved by Flores’s coaching prowess and formal complaints about Ross’s comments. Why does Flores’s admirable refusal to tank exculpate Ross’s clearly stated desire to tank? The report also concludes that the $100,000 comment was a joke and ‘however phrased, such a comment was not intended or taken to be a serious offer.’ This seems like a generous interpretation. Clearly, Flores did not think Ross was joking, and even if he were, it’s also probably not a good thing to make light of.”

Not surprisingly, Ross has denied the claims and disputed the NFL’s findings and his punishment.

Tanking games to improve a mediocre team’s place in the draft is not a new concept, and it probably occurs more than we realize. Still, it has never been proven and punished by the NFL. That streak continues, although with an asterisk based on the findings here.

CEOs find themselves in ethically compromised situations all the time. Fiduciary duty and the “business judgment rule” provide some guideposts to ensure that the interests of the business come before personal interests or gain. In practice, these concepts provide wide latitude. What it comes down to is how leaders respond to the intense pressure to win.

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Despite Two Closely Watched Trial Losses, DOJ Pressing on with Controversial Criminal No-Poaching, Price-Fixing Antitrust Enforcement

Posted on May 24, 2022 by Joe Ahmad

Is the DOJ going too far by aggressively pursuing criminal no-poach and price-fixing charges as per se violations of the Sherman Antitrust Act? In two recent trials testing these enforcement theories for the first time, jurors thought the government’s cases were a stretch. 

In United States v. Jindal et al., a federal jury in Texas acquitted former executives of a healthcare staffing company of all substantive criminal charges for conspiring to hold down wages. A day later in Denver in United States v. DaVita, national healthcare provider DaVita and its CEO Kent Thiry were acquitted on criminal charges that their use of no-poach agreements stymied competition and hindered employees’ ability to progress their careers.  

Law360 described the DOJ’s strategy as “advancing bold theories that could reshape federal competition regulation.” NYMag described them as a component of the “Biden administration’s ambitious, all-purpose antitrust-enforcement agenda. “ 

At issue in DaVita is the government’s theory that – regardless of their impact – no-poaching agreements can be a “per se” violation of the Sherman Act. Despite the two closely watched acquittals, DOJ Antitrust Division head Jonathan Kanter put on a game face and vowed to press on with dozens of similar enforcement actions in the queue.

“Both of those cases — which were extremely important cases establishing that harm to workers is an antitrust harm — survived motions to dismiss,” Kanter noted, as reported by Law360. “The courts said, ‘These are legally sound cases.’ We want those decisions. … Just because a jury or two decided not to convict on a specific case doesn’t mean the public isn’t demanding more. We’re hearing from the public on a regular basis, and they want more enforcement.” 

While juries and the public often take a dim view of anticompetitive schemes, criminal prosecution should be reserved for exceptional cases, rather than a per se rule. It’s one thing for an individual to bring a case and lay out how they were specifically harmed. The commitment alone that it takes for an individual to take a complaint all the way to trial is an indicator of their conviction. It’s a much greater challenge for government lawyers to convince a jury of a per se violation, regardless of the effects of the action.

Some no-poach agreements should not even be civil violations, much less criminal ones, and the line between an appropriate no-poach and an illegal one is not clear at times even among expert lawyers. In some situations, a no-poach agreement may be a valid exception to an unreasonable restraint of trade – for example, as part of a resolution of past trade secret violations regarding confidential employee or compensation information, or to address violations of a non-solicit by an employee who has left.

Nonetheless, the trend has been more and more to restrict no-poach agreements, and now the government is taking a very aggressive approach against them.  Businesses should be mindful that the DOJ’s commitment to follow through with its controversial position is not going anywhere despite these early losses. Lawyers should advise their clients accordingly to be very wary of them. 

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Covid-19’s Latest Side Effect: A Stampede of Whistleblowers at the SEC

Posted on December 6, 2021 by Joe Ahmad

It seems every day we find new ways the pandemic has upended the way we live and work. Just ask anyone in HR, data security and compliance. It’s no secret that housebound and hybrid workers have been keeping them awake at night – and for good reason. 

The latest proof point is an annual report from the SEC, which documents a stunning amount of whistleblower complaints and monetary payouts in fiscal 2021. Consider:

  • The 12,200 whistleblower complaints filed in fiscal 2021 were more than all previous years combined since the bounty program began in 2012.
  • The 12,200 complaints logged in 2021 represent 76 percent increase over 2020, which itself was a record year.
  • 108 whistleblowers received payouts totaling $564 million in 2021, again more than all previous years combined.
  • Of special concern for businesses: employees and internal whistleblowers are increasingly doing an end run around internal reporting and going straight to the SEC with complaints. That should raise alarms because internal complaints provide businesses a chance to respond, take action and self-report, and potentially mitigate any penalty.

Clearly, filings were on the rise before Covid-19 upended corporate culture. Court rulings and a push by the SEC to encourage whistleblowers have caused a steady increase in such claims. But there’s also no doubt that remote and hybrid working have created a disconnect with compliance frameworks, and that is likely one reason for the 76 percent jump in whistleblower complaints, particularly those that bypassed a company’s internal procedures. Workers at home simply don’t have the same access and opportunity to walk down the hall and poke their head inside a manager’s office to discretely raise a concern.

Many businesses have still not adapted compliance programs to ensure that workers have access to hotlines and other avenues. Reporting has become even more challenging and confusing, and as a result, there’s more reason than ever for employees to bypass the internal process and go straight to the authorities.

Writes Bloomberg Law:

The isolation that comes with being separated from a communal workplace has made many employees question how dedicated they are to their employers, according to lawyers for whistle-blowers and academics. What’s more, people feel emboldened to speak out when managers and co-workers aren’t peering over their shoulders.

With 12,200 whistleblower complaints in the pipeline in fiscal 2021 alone, we can expect even more payouts and higher dollar amounts in the years go come.

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Panel of Global Employment Lawyers Agrees on One Thing: U.S. Noncompete Laws Create Unique Challenges

Posted on October 21, 2021 by Joe Ahmad

The state-by-state patchwork of noncompete laws is difficult enough for U.S.-based businesses, let alone employers with a cross-border presence. I had the pleasure of exploring this topic with a panel of U.S. and UK-based employment lawyers as part to the ELA/ABA 7th Transatlantic Conference: The Global Working World – Evolution, Opportunity and Challenge earlier this month. The panel included Morrison & Foerster global employment lawyer Eric Akira Tate, who co-chairs the ABA Section of Labor and Employment Law’s Subcommittee on Covenants Not to Compete with me, as well as Tarun Tawakley of London-based Lewis Silkin, and Jennifer Millins of London-based Mishcon de Reya.

We all agreed on at least one thing – the inconsistent framework for enforcing covenants not to compete here in the U.S. doesn’t make it easy on anyone. With enforcement left to each state, the results can be wildly divergent. Two states with among the largest and most powerful economies offer a great case in point. California bans most noncompetes while Texas continues to generally enforce reasonable noncompetes.  While noncompetes can be unfair for low-wage and unskilled workers, they can also result in a brain drain for the most in-demand, who move elsewhere for better career opportunities.

I’ve written previously about overreliance on these agreements and the momentum building to limit their reach. 

Our panel noted that many other countries enjoy a more unified approach. Differences between the U.S. framework and that of many other countries are apparent when looking at the Biden administration’s recent executive order to scale back enforcement of noncompetes. The reality is that the executive order is not likely to have a significant impact anytime soon because these laws are created at the state level. The Biden order simply asks federal regulators to look at the issue, but real change will require new legislation.  In today’s polarized environment, that seems unlikely at the federal level. 

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Unjust Accusations Against Doctor Highlight a Pervasive Prejudice

Posted on September 27, 2021 by Joe Ahmad

I’m proud to be able to help Dr. Hasan Gokal start down the road toward justice and begin putting his life back together. The damage he suffered to his reputation and the injustice he experienced shine a light on the pernicious way stereotypes and broad generalizations about ethnic groups play a role in institutional decisions that can inflict lasting harm. Too often, the flawed logic behind these actions goes unnoticed while lives are destroyed in their wake.

Back in December 2020, Dr. Gokal was on the front lines of the nation’s Covid-19 mobilization. Working for the Harris County Public Health department, his days were spent jabbing arms with the desperately need vaccine. The Moderna vaccine presented special challenges because – once thawed to room temperature – the clock starts ticking and the entire vial goes bad in a matter of hours.

On this particular day, Dr. Gokal had an open vial of the Moderna vaccine with 10 leftover doses and no one on the waiting list. Following protocols, he began searching for individuals in the area who could quickly show up to receive the vaccine. And that’s where his troubles began.

Dr. Gokal is a Pakistani-American who lives in the Sugarland area of Houston, a community with an enormous South Asian population. These are Americans who look like him, with similar surnames and shared religious and cultural touchstones.

Not surprisingly, those who accepted his offer to get the vaccine were South Asian immigrants. Dr. Gokal filled out the required paperwork and followed all the rules, but when his supervisors saw the list of names he presented, the knee-jerk reaction was suspicion. Dr. Gokal lost his job, had his professional reputation tarnished, and was subjected to criminal charges.

While Houston is an inspiring melting pot of cultures, it’s not surprising that most of us tend to live in bubbles – it’s just human nature. But sheltered lives create the climate for the kind of injustice that Dr. Gokal experienced.

As the majority population and holder of power, Anglos can spend entire days – lifetimes even – interacting solely with those who look like them. They can help people who look just like themselves every single day without any motive or agenda, and they don’t get fired or accused of committing a crime. Likewise, when a member of the majority community does something wrong – commits a crime, an act of terrorism or displays extreme religious or political fanaticism – the broader community and popular culture view it as an isolated incident by an individual who does not represent the entire group.

Dr. Gokal’s case is a reminder that other groups don’t have the same experience. Too often, we’re painted with a broad brush based on an accumulation of isolated incidents. Popular culture and the news media don’t help in this regard, and the entire group ends up being treated with suspicion.

Nine months later, few noticed when the criminal charges and professional allegations were unceremoniously dropped. Dr. Gokal is now working to restore his good name. Our lawsuit seeking damages from Harris County Public Health is part of that process.

National and international media have been following this important story – including CNN “Texas doctor fired for using leftover Covid-19 vaccine doses sues county for discrimination”; KPRC-TV NBC-2 “Former doctor accused of stealing COVID vaccines now suing Harris County”;  the Houston Chronicle  “Dr. Hasan Gokal, cleared of vaccine theft charge, sues Harris County for racial discrimination” ; Houston Public Media – NPR “Doctor Accused Of Stealing COVID Vaccines Sues Harris County For More Than $1 Million” ; USA Today  “Doctor fired for giving leftover COVID-19 vaccines to people with ‘Indian’ names sues for discrimination” ; Winnipeg Free Press  “A roundup of COVID-19 developments for Tuesday Sept. 21, 2021”; and News Indian Express  “US doctor cleared of COVID-19 vaccine theft sues Harris County.”  We hope they stick with this important story to the end.

Joe Ahmad is co-founder of Houston-based Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing, or AZA, where his practice focuses on legal issues surrounding executive employment. He is an active member of the South Asian Bar Association.

 

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There’s More to Learn from Jeopardy! than Trivia

Posted on August 30, 2021 by Joe Ahmad

Q: This household-name company allowed an insider to lead a high-profile executive search only to end up hiring himself for the job. It then failed to perform basic vetting that might have uncovered the new guy’s embarrassing history of insensitive and derogatory public statements.

A: What is Sony’s botched search to replace iconic Jeopardy! host Alex Trebek?

The saga continues for legions of intensely loyal Jeopardy! fans who’ve lived the ups and downs of the gameshow’s search to replace iconic host Alex Trebek. Debate rages over who should take the helm, but this much they can agree on: Sony Pictures’ handling of the effort has been a resounding failure.

The mistakes and mishandling began soon after Trebek succumbed to pancreatic cancer. Sony quietly appointed the show’s executive producer, Mike Richards, to lead the search for a replacement. The show rolled out a handful of guest hosts trying out for the job. LeVar Burton developed a passionate following, and others like champion contestant Ken Jennings and sitcom star Mayim Bialik drew strong reviews.

Few realized that Richards was leading the search and had also thrown his hat in the ring, and most were shocked to learn that he had been selected. Richards didn’t have time to prove his doubters wrong. Within days, a journalist for The Ringer began uncovering insensitive statements that Richards had made on a podcast. Richards’ halfhearted “that’s not who I am” apology could not prevent the inevitable. The seat held by Trebek for 37 seasons is now open again.

There’s so much wrong here from an executive employment standpoint. Executive searches that are not well-defined, objective and professional do not do anyone any favors. In addition, a thorough vetting process is critical for executive hires today. When someone like Richards – who was an integral part of the search – ends up with the job, that should raise red flags and prompt extra vetting, not less.

This happens a lot with internal candidates. Since they already have a position with the company, there is a sense that some vetting, background checks, etc. have already occurred. But in reality, assuming a more prominent role should bring more scrutiny. Think about this way: How many times have we seen damning information come out about a politician who had an existing political position when they run for president? 

If the insensitive comments made by Richards were uncovered so easily, it makes you wonder whether Sony had done any vetting at all.

Writes Variety:

What should have been a triumphant period of “Jeopardy” now appears to be the beginning of a long, chaotic crisis for a show that, until recently, was the model of consistency. From the moment of his announcement, Richards was a deflating choice. His status as the show’s executive producer lent the sense that the months of host auditions had been rigged in his favor from the start.

There’s always been a lot to learn from watching Jeopardy! Executive employment law can now be added to the list.

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When it Comes to Lawyers and Allegiances, Execs Should Look Out for No. 1

Posted on June 15, 2021 by Joe Ahmad

Embattled former Theranos CEO Elizabeth Holmes learned an inconvenient truth when it comes to allegiances between outside law firms, their corporate clients and individuals on the executive team.

In pretrial wrangling before the August 31 start of her federal criminal fraud trial, Holmes found herself without attorney-client privilege related to years of discussions she had with what she considered to be her legal team. U.S. Magistrate Judge Nathanael M. Cousins had a different opinion about the relationship.

Writes Law360:

Holmes argued in her briefs that the law firm began jointly representing her and Theranos in 2011 in an intellectual property dispute. She said that over time their relationship “grew organically,” with Boies and his firm jointly advising Holmes and the company on a variety of topics through 2016, including in her interactions with the media and the U.S. Centers for Medicare & Medicaid Services.

But U.S. Magistrate Judge Nathanael M. Cousins ruled last week that the communications are subject only to corporate privilege and that the former CEO had not shown that she made it clear to Boies Schiller attorneys that she was seeking legal advice in her personal capacity and not just as a company executive.

This is an important lesson that execs should take to heart – your company’s lawyers do not represent you, even when your interests are aligned. It can be confusing when the executive is friends with the lawyer, whether it’s outside counsel or an in-house counsel. The personal relationship has the effect of blurring the lines between company and executive in the executive’s mind. Oftentimes, the executive feels like the lawyer is their personal lawyer.

I often get a phone call when an executive has an ah-ha moment like this or when the company’s lawyer advises them to obtain their own counsel. It can be a difficult concept to grasp when you think that your interests are aligned, but at the end of the day, a personal lawyer has a duty to look after your interests and only your interests.

In Holmes’ case, there was some confusion about the scope of the law firm’s role because the relationship grew as the startup expanded. There was no engagement letter spelling out the scope of the law firm’s role. While lawyers should always make their representation crystal clear, it’s never too soon for an executive to understand that lawyers paid by the company typically represent the company. That means you don’t have personal privilege. And if there is no engagement agreement, you should assume that the lawyer represents the company and not you.

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Former MLB Pitcher Claims Astros Stole More than Hand Signals in Runup to 2017 World Series

Posted on May 20, 2021 by Joe Ahmad

Former MLB pitcher Mike Bolsinger has come up with a novel legal strategy as he (literally) relitigates his shoddy third-of-an-inning performance against the Astros in their runup to the 2017 World Series.

The journeyman pitcher gave up four runs and four walks in his ill-fated appearance in a series marred by revelations that the Astros employed an elaborate sign-stealing operation in an attempt to give their offense an upper hand.

Writes the Houston Chronicle:

Continuing to maintain that the Astros’ 2017 sign stealing cost him a job in the major leagues, former Toronto Blue Jays pitcher Mike Bolsinger refiled his lawsuit against the team in Harris County District Court on Thursday afternoon.

Bolsinger, who hasn’t pitched in the majors since allowing four runs and four walks in a third of an inning against the Astros on Aug. 4, 2017, contends his signs were trade secrets under Texas’ Uniform Trade Secrets Act. He is seeking more than $1 million in damages.

The details of the Astros’ scheme are well-known by now. Spies in the outfield used a high-powered camera to intercept hand signals to the opposing team’s pitchers. Astros batters were then alerted about the likely pitch that was on the way by banging on a metal trash can.

“The owners of these trade secrets had taken the reasonable measures customary in the baseball industry to keep the signs secret,” Bolsinger’s suit reads. “Moreover, the signs derived independent economic value, actual or potential, from not generally being known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.”  But this seems to gloss over the question of whose “trade secret” it is – and that is assuming it meets the legal definition of trade secret under the law.  

I touched on some of the lawsuit’s weaknesses in a recent Law360 article:

While TUTSA broadly defines who qualifies as a trade secret owner, Joe Ahmad of Ahmad Zavitsanos Anaipakos Alavi & Mensing PC, told Law360 on Friday that he believes there’s a “real issue as to whether he has any ownership interest at all in the signs.”

“They belong to his team, and I don’t know that he can claim an interest in them,” he said.

But Bolsinger’s problems don’t stop there. He will have a difficult time proving that his pitching would have been more effective without the Astros’ sneaky measures. While courts have emphasized “a flexible and imaginative approach to the problem of damages,” to quote an often-cited passage from University Computing v. Lykes-Youngstown Corp., 504 F.2d 518, 538 (5th Cir. 1974), Bolsinger will still have to prove a connection between the harm he is claiming – damage to his MLB career – and the taking of the trade secrets.  A judge or jurors might be skeptical that his MLB career was derailed by that one brief outing. Bolsinger has reportedly performed well in the minor leagues and in Japan. Professional baseball is a sophisticated free market for talent. If just one team thinks he has the stuff, he will be called back.  And if he is right, it would seem that at least one team would recognize this and overlook that outing. 

Supreme Court Justice John Roberts famously claimed that a judge’s role is focused on calling balls and strikes. Bolsinger may want to think twice about his chances with this one.

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As Gov. Cuomo Keeps Grip on Power, His Baggage Would be a C-Suites Career-Ender

Posted on March 24, 2021 by Joe Ahmad

New York Gov. Andrew Cuomo is hanging on as accusations of sexual harassment, inappropriate relationships and workplace hostilities pile up. The revelations are coming so fast that they’re hard to keep straight. Multiple women, including current and former aides, have detailed a list of inappropriate behavior. A broader narrative has also emerged about the sharp elbows, bullying and ruthless political tactics he has employed in his rise to power. Finally, he’s under FBI scrutiny over the way his administration reported Covid-19 deaths in nursing homes.

He’s lost key support from New York lawmakers, as well as senators like Chuck Schumer Kirsten Gillibrand and Jerry Nadler. But with his reelection some time away, many observers say he’ll likely stick it out.

Uncomfortable relationships with subordinates. Leadership marked by bullying and hostility. The accusations have a familiar ring in the halls of corporate America, but there’s a striking difference lately in the way they’re handled. A generation ago, executives and politicians alike usually skated when claims of sexual harassment and worse surfaced. That has changed in board rooms, at least.

Corporate boards today show very little tolerance for such behavior. Perhaps the most recent example is that of former McDonald’s CEO Steve Easterbrook, who was unceremoniously cut loose shortly after he was hired over allegations that he covered up inappropriate relationships with three subordinates. He is now in a legal tangle with McDonald’s over his $57 million severance compensation. The Wall Street Journal reports that corporations are increasingly withholding executive pay longer, hoping to avoid the hassle of recouping money if execs are later found responsible for misconduct.

But Cuomo doesn’t have to answer to a board, and it doesn’t matter that most of his fellow politicians – even those among his party – don’t really like him. Ultimately, he only has to answer to voters.

A business, meanwhile, has to be concerned with goodwill.  Behavior like this by leaders – combined with a leadership style described by The Nation as “petty, controlling and grandiose” – is very harmful to business. 

Governments generally are not concerned about goodwill, so paradoxically politicians are not accountable, except for elections. But elections only go so far. If you have 51 percent support of voters, but the remaining 49 percent strongly disapprove, that is usually good enough. That doesn’t fly in the business world. A business – especially those that are publicly traded – simply can’t tolerate a 49 percent loss in business or impairment to its goodwill. Realistically, if this were a public company CEO, he would have already been shown the door. 

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Tracking the Impact of the Defend Trade Secrets Act After Five Years 

Posted on March 16, 2021 by Joe Ahmad

The now five-year-old Defend Trade Secrets Act has had a big impact, I reported in a Texas Lawyer commentary “Tracking the Impact of the Defend Trade Secrets Act After Five Years.” 

 

“Trade secret filings were on the rise even before the DTSA and have only increased since. Texas is no exception: three judicial districts in Texas—the Eastern, Northern and Southern Districts—were among the top five in the United States for trade secret litigation filings, according to an analysis by the global advisory firm Stout. Meanwhile, workplace trends affected by the pandemic shutdown are expected to keep trade secret litigation dockets busy going forward,” I wrote. 

 

Because the notion lifetime employment is now a thing of the past, and workers increasingly view themselves as free agents with loyalty first and foremost to themselves, an increase in these kinds of cases was coming even before the new law. The COVID-19 shutdown magnified this trend.  

 

President Joe Biden favors limiting the use of covenants not to compete by businesses that use these agreements as a blunt tool for protecting proprietary confidential information and several states have limited the ability to enforce noncompete agreements. If this happens on a national level too, I expect businesses will turn to trade secret theft litigation even more to protect confidential information.  

 

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