On August 7, 2008, the California Supreme Court unanimously ruled in Edwards v. Arthur Andersen that the state legislature effectively restricted the ability of employers to prevent employees from working for competitors.

The Opinion States: “We conclude that Andersen’s noncompetition agreement was invalid. As the Court of Appeal observed, “The first challenged clause prohibited Edwards, for an 18-month period, from performing professional services of the type he had provided while at Andersen, for any client on whose account he had worked during 18 months prior to his termination. The second challenged clause prohibited Edwards, for a year after termination, from ‘soliciting,’ defined by the agreement as providing professional services to any client of Andersen’s Los Angeles office.” The agreement restricted Edwards from performing work for Andersen’s Los Angeles clients and therefore restricted his ability to practice his accounting profession.”

With a few exemptions primarily related to the sale of a business, the court essentially voided all California non-competition agreements.

California Business and Professions Code Section 16600 states:

Except as provided in this chapter, every contract by which
anyone is restrained from engaging in a lawful profession, trade, or
business of any kind is to that extent void.

Still in effect are the protections for the employer in the Uniform Trade Secrets Act which prevent employees from “stealing” the employer’s client list.

This case also takes on issues related to “employee release” agreements often signed upon termination of employment.

The Supreme Court held that employee release agreements in which the employee releases the employer from “any and all” claims do not waive statutory protections provided to the employee in Labor Code Section 2802.

The EEOC reports that discrimination claims, including those based on religion, are on the rise. New guidelines for religious discrimination went into effect July 22, 2008. The following information is directly from the new Section 12 of the EEOC compliance manual.

The entire “Directives Transmittal” is available HERE. The transmittal also contains 14 examples of what constitutes discrimination and what does not. Reading through it would be a great refresher for employers and HR staff.

Directives Transmittal Dated 7/22/08

SUBJECT: EEOC COMPLIANCE MANUAL

PURPOSE: This transmittal covers the issuance of Section 12 of the new Compliance Manual on “Religious Discrimination”. The section provides guidance and instructions for investigating and analyzing charges alleging discrimination based on religion.

EFFECTIVE DATE: Upon receipt

DISTRIBUTION: EEOC Compliance Manual holders

OBSOLETE DATA: This Section of the Compliance Manual replaces Section 628: Religious Accommodation, EEOC Compliance Manual, Volume II and its Appendices: Appendix A, Policy Statement on Ansonia Board of Education v. Philbrook and Religious Accommodation; Appendix B, Policy Guidance On ‘New Age’ Training Programs Which Conflict With Employees’ Religious Beliefs; and Appendix C, Religious Objections to Unionism. It also replaces the following policy documents: Religious Organizations that Pay Women Less than Men in Accordance with Religious Beliefs; Religious Organization Exemption Under Title VII of the Civil Rights Act of 1964, as amended; and Policy Statement on Goldman v. Weinberger (Accommodation of the Wearing of Religious Dress).

The Commission’s Guidelines on Discrimination Because of Religion, 29 C.F.R. Part 1605, remain in effect.

This Section of the Compliance Manual is designed to be a practical resource for employers, employees, practitioners, and EEOC enforcement staff on Title VII’s prohibition against religious discrimination. The Section defines religious discrimination, discusses typical scenarios in which religious discrimination may arise, and provides guidance to employers on how to balance the needs of individuals in a diverse religious climate.[10] The Section is organized by legal topic, as follows:

I - Coverage issues, including the definition of “religion” and “sincerely held,” the religious organization exception, and the ministerial exception.
II - Disparate treatment analysis of employment decisions based on religion, including recruitment, hiring, promotion, discipline, and compensation, as well as differential treatment with respect to religious expression; customer preference; security requirements; and bona fide occupational qualifications.
III - Harassment analysis, including religious belief or practice as a condition of employment or advancement, hostile work environment, and employer liability issues.
IV - Reasonable accommodation analysis, including notice of the conflict between religion and work, scope of the accommodation requirement and undue hardship defense, and common methods of accommodation.
V - Related forms of discrimination, including discrimination based on national origin, race, or color, as well as retaliation.

Internet Auction Giant eBay filed a lawsuit last month against Craigslist, the online classified site which draws over 20 million unique visitors per month. When news of the lawsuit surfaced, details were unavailable as the lawsuit was not made public. A redacted version has just been released and is available HERE.

According to eBay, the reason behind filing the lawsuit is that Craigslist directors Craig Newmark and Jim Buckmaster (also CEO), have unfairly entered into transactions that diluted eBay’s economic interest in the company by more than 10 percent. EBay alleged that both the directors have breached their fiduciary duties.

EBay claims that its equity in Craigslist has been diluted from 28.4 % to 24.85 %. With less than 25% of the company, eBay can no longer place a director on the Craigslist board.

Five days after the lawsuit was filed, Craigslist (headquarters shown above) fired back at eBay, calling the lawsuit unethical and “smelling of a hostile takeover”. Even in the lawsuit, eBay makes it clear that it would welcome the opportunity to purchase all of Craiglist.

Through its acquisitions, eBay has illustrated that it wants to be in the online classified business in a big way. Last year Kijiji (created and launched by eBay in 2005) was made available in select US cities.

Will David triumph over Goliath or will Goliath end up owning David?

Earlier this month the California Supreme Court ruled on 2 issues related to the California Family Rights Act (CFRA) and the Family Medical Leave Act (FMLA) regarding the termination of hospital employee Antonina Lonicki.

Lonicki claimed she was suffering major depression and work related stress. On advice of her physician she requested medical leave and stopped coming to work. Lonicki’s request for medical leave was denied, but she was told she could take paid time off.
She was also told to return to work by a certain date or face termination.

Lonicki sought the opinion of a psychiatrist who documented her depression and recommended another 30 day medical leave. Her employer Sutter Health Central terminated her. She sued her former employer for violating the CFRA by firing her and by failing to follow CFRA procedures when questioning the validity of her sick leave.

Defendant (Sutter Health) moved for Summary Judgment. Sutter’s argument was that plaintiff was not entitled to medical leave under the CFRA because, in the period for which she sought medical leave, she had a part-time job at a different hospital (Kaiser) where her tasks were substantially similar to those she was hired to perform at defendant’s hospital in Roseville. Sutter further asserted that Lonicki’s part time job showed that she did not have a “serious health condition” as required for medical leave under CFRA and FMLA.

The Trial Court granted the Motion for Summary Judgment and upheld the termination. Lonicki appealed and the California Court of Appeal also upheld the termination and Summary Judgment. Lonicki appealed to the California Supreme Court.

The Supreme Court refused to hold that working in a comparable job was "conclusive" evidence no serious health condition justified leave. This Supreme Court opinion paves the way for a trial in which Lonicki’s termination and rights under FMLA and CFRA will be determined.

Internet giant Google has been sued by Aaron and Christine Boring for taking photographs of their property for Google Maps Street View feature. The problem is that the photos were taken from a private road.

For those who have not yet experienced Google Street View it is a feature of Google maps that allows users to actually “visit” the street via the internet through photographs providing a 360 degree view.

Not all cities have this Google feature available yet, but the Boring’s property was included last year. The images are captured by a car similar to the one seen above with an array of cameras mounted to its roof.

Google spokesperson Larry Yu said that the company has a policy of only taking photos from public streets. He also said that concerned citizens can contact the company if they want a photo taken down. Yu added “"We absolutely respect that people may not be comfortable with some of the imagery on the site. We actually make it pretty easy for people to submit a request to us to remove the imagery."

In this case, damages may be difficult to prove since Google is not the only place on the web showing an image of the Boring’s home. The Allegheny County real estate Web site has a photo, a description of the home and the couple's name. The site contains similar information, including pictures, of nearly every property in the county.

The Smoking Gun has a copy of the photos (which are no longer on Google Streetview), a copy of the lawsuit (including the Boring’s home address) and a photo from the Allegheny County website.

Academy Award winning director Woody Allen filed a lawsuit in U.S. District Court in Manhattan seeking $10 Million from American Apparel for use of his image without permission. The lawsuit states that the actor and director does not endorse commercial products or services in the United States.

Allen’s image (shown at right courtesy of Frillr.com), appeared on two billboards in New York and Los Angeles for one week in May 2007. Allen appears as a Hasidic Jew, a character from his movie “Annie Hall”. The lawsuit calls the billboards "especially egregious and damaging."

In a statement, American Apparel defended their use of Allen’s image as “Social Parody” protected by the First Amendment. They also stated “We had no intention of selling garments through the use of Mr. Allen’s image … We will make every effort to resolve this with Mr. Allen in an amicable way.”

In addition to its clothing line, American Apparel, based in Los Angeles is known for its colorful CEO Dov Charney and its political efforts in favor of immigration reform.

Was this “Social Parody”, infringement or just an effort to generate publicity? While we may never know for sure, I predict it will go away quietly with a monetary settlement.

For over 45 years the Magic Castle has been the clubhouse of the Academy of Magical Arts (AMA). On February 21, 2008 the AMA flied a lawsuit against Magic Food & Beverage Inc., a company with an affiliation to Magic Castle Park LLC, the owner of the property, which has been for sale since last year. Although not a subsidiary of Magic Castle Park LLC, Magic Food and Beverage Inc. is affiliated through corporate officers and/or executives common to both entities. This information is based solely on the complaint filed, Case No: BC 385828, in Los Angeles Superior Court.

The lawsuit includes 4 “Causes of Action” as follows:

• Trespass

• Trespass to personal property

• Assault

• Injunctive relief

The following sentence is heresay: AMA members have been told that the AMA wants to stay in the building known as the “Magic Castle”. NOTE: If the AMA governing board would like to make a formal statement to the contrary, I will post a retraction here.

Here is the question. If you were a tenant (AMA) in a 100 year old building (known as the Magic Castle) which was a small part of a parcel of land (10 plus acres) currently for sale and positioned for total redevelopment, would it be smart to sue those affiliated with your landlord if you wanted to stay?

This lawsuit appears to indicate the contrary. Personally, it would be unlikely that I would sue anyone affiliated with my landlord if I wanted to stay.

Following the filing of this lawsuit, the plaintiff (AMA) filed an ExParte application for temporary restraining order and an order to show cause RE: preliminary Injunction.

From the Court Document: “The Court has read and considered the above stated Ex Parte Application.

After argument of Counsel, the Application is denied.”

MercExchange filed a lawsuit against online auction giant eBay in 2001 claiming eBay’s “Buy It Now” infringed on MercExchange patents and technology. In 2003 a jury awarded MercExchange $35 million in damages. The judge reduced the jury award to… $25 million. A federal judge certified the penalty and eBay threatened appeal.

During the above proceedings MercExchange tried to block eBay’s use of “Buy It Now”. In 2006 the Supreme Court made a landmark decision to allow eBay to continue use of “Buy It Now”. Before this ruling patent owners were virtually always granted court orders to block infringements. These actions to block use typically lead to faster more lucrative settlements for the patent owners.

Since the Supreme Court ruling in eBay’s favor, judges throughout the US have denied requests for court orders to block use where the infringer was not a competitor of the patent owner.

Financial terms of the settlement were not disclosed by either party. EBay said it would buy three patents from MercExchange related to “Buy It Now”/fixed priced sales as well as related technology. EBay General Counsel Mike Jacobson stated “The agreement gives us access to additional intellectual property that will help improve and further secure our marketplaces.''

This Supreme Court decision adds a new aspect to the trend written about previously on this blog whereby infringers are strategically using the court system to buy intellectual properties and/or licenses to use intellectual properties.

In 2003 twelve San Francisco Police Officers sued the Police Department alleging that black officers were being favored for promotions to lieutenant. While the city admitted no wrongdoing, a settlement was reached 2 years ago. The settlement was delayed by the City’s approval process and decisions about how to split the proceeds among the plaintiffs.

From 1999 to 2003 thirty-nine lieutenant promotions were made after testing. The suit claimed that 5 black officers were promoted to lieutenant while better qualified officers had been passed over.

Lawyers for the plaintiffs - nine white officers, two Latinos and an Asian American – claimed that such results were statistically impossible without preferential treatment.

San Francisco Police officials have said that race was not a factor in the questioned promotions, all of which were made under acting Chief Alex Fagan who is no longer with the department.

After attorneys fees, one officer will receive $200,000, eight will receive $100,000 each and three will receive $50,000 each.

Alexis Thompson, spokeswoman for City Attorney Dennis Herrera said “This settlement puts to rest old challenges to a series of old promotions under an old administration."

This case in not unique. In Jacksonville Florida four lieutenants in the Fire Department claimed their promotions to Captain were blocked by Fire Chief Ray Alfred. A jury sided with the firefighters and awarded $220,000.

Last year, New Orleans District Attorney Eddie Jordan resigned after a judge found his office liable for $3.7 Million in a reverse discrimination lawsuit. Jordan was accused of firing 35 white employees and hiring black employees to replace them.

Most of us have seen the LifeLock advertisement in which company CEO Todd Davis reveals his Social Security number and then speaks about the effectiveness of the company’s protections. Experian’s lawsuit claims that LifeLock’s ads are fraudulent and misleading. Experian also claims that LifeLock’s primary means of protecting its 600,000 clients is filing a fraud alert every 90 days for each LifeLock client.

A fraud alert is a notice/flag put on your credit report through the consumer reporting agencies. This flag establishes that as part of any credit approval process, you need to be notified.

Experian claims LifeLock’s practice of filing fraud alerts on behalf of clients is illegal because, under the Fair Credit Reporting Act, “fraud alerts can only be requested by the individual consumer or an individual acting on behalf of the consumer."

Further the lawsuit claims, adding four alerts per year for 600,000 LifeLock members to Experian’s database will degrade the effectiveness of legitimate fraud alerts over time. Credit grantors could lose the ability to distinguish between fraud alerts added by consumers who legitimately believe that identity theft is imminent and those added by LifeLock. The complaint alleges that credit grantors will have reason to doubt the credibility of all fraud alerts and their effectiveness for consumers legitimately impacted by fraud and identity theft will be severely compromised.

The complaint against LifeLock was filed by Experian in the U.S. District Court for the Central District of California.

Allianz Life Insurance Co. is reportedly the largest seller of annuities in California. According to the Department of Insurance, Allianz allegedly used deceptive sales tactics to mislead thousands of elderly people into purchasing unstable and/or unsuitable annuities. Many of those mislead were over 80 years old!

An annuity is a contract between a person and a financial institution (insurer) in which the person makes at least one payment and in turn receives "tax-deferred growth of earnings" back from the insurer.

California Department of Insurance officials conducted an examination into Alliance which revealed that in 2004/2005 Allianz replaced 126 existing annuities with financially unsuitable annuities for elderly clients.

In addition to the $10 Million penalty, Allianz agreed to implement a “suitability review” for customers over 65 to insure they are “fully aware of the products they are purchasing."

California Insurance Commissioner Steve Poizner stated “This landmark settlement ends years of aggressive and misleading marketing schemes targeted to our most elderly and vulnerable. The fact that Allianz used deceptive practices and high-pressure sales tactics to lure and cajole seniors into buying unsuitable policies is appalling. However, today's settlement represents a real change for the industry and is a tremendous victory for all California seniors."

Anyone with questions regarding insurance matters can contact the California Department of Insurance consumer hot line at (800) 927-HELP or visit http://www.insurance.ca.gov.

In a lawsuit filed by a Los Angeles Police Officer injured while accompanying an arrestee being transported by ambulance, the Court of Appeal upheld the trial court’s decision that the ambulance driver was protected by the Medical Injury Compensation Reform Act (MICRA).

Officer Randy Canister was injured during the ambulance ride when the ambulance hit a curb, alledgely to avoid a car while enroute to a hospital. Canister was not wearing a seatbelt. Immediately following the accident, Canister provided a written statement which stated that he had not worn a seat belt as a “tactical” decision. He later recanted that statement and claimed that he did not know the ambulance had seatbelts and no one told him.

Canister claimed that Emergency Ambulance Service (EAS) was operating the ambulance negligently, and that driving the ambulance was not within the scope of protection provided to emergency health care providers under MICRA.

EAS presented evidence that all ambulance drivers in California, including the one driving at the time of this accident, must have special licenses issued by DMV to operate an ambulance. EAS also presented relevant case law and precedent illustrating that driving an ambulance was within the definition of “professional services” protected by MICRA.

In the opinion by Justice Madeleine Flier, the Court of Appeal rejected Canister’s argument, concluding that EMTs are healthcare providers, and that any negligence by EMTs in driving an ambulance constitutes professional negligence.

Some cases simply should not be appealed and this was one of them.

Every good trial attorney knows which of his/her cases should go to trial,

The California Supreme Court reversed a decision by the Court of Appeals allowing a class action lawsuit to proceed over disclosure of chemically color enhanced salmon sold in many California grocery stores. Named in the lawsuit are Albertson’s Inc., Safeway Inc., The Kroger Co., Trader Joe’s, Costco Wholesale Corp., Whole Foods Market Inc., Bristol Farms Inc., Ocean Beauty Seafoods Inc., and various subsidiaries.

Plaintiffs in Los Angeles, Alameda and Monterey counties consolidated lawsuits in 2004 claiming that the named stores sold fish with chemical additives canthaxanthin and astaxanthin. The additives allegedly changed the grayish color of farm raised salmon to resemble the color of wild salmon. The lawsuit claims that the stores’ failure to disclose the use of chemical additives to consumers was misleading. The lawsuit also claims possible concerns exist over farm raised salmon and consuming artificial coloring agents.

Specifically the lawsuit contains causes of action for unfair or deceptive trade practices under the Consumer Legal Remedies Act; false and misleading advertising; negligent misrepresentation and unfair and unlawful business acts and practices in violation of the state’s Unfair Competition Law, which includes the Sherman Law.

In the unanimous opinion the justices held that the Federal Food, Drug, and Cosmetic Act does not preempt deceptive marketing claims under California’s Sherman Food, Drug, and Cosmetic Law because Congress explicitly intended to allow states to establish their own disclosure requirements and remedies for violations, and because the plaintiffs’ claims were based on state, rather than federal, law.

What is the true color of your salmon? Only your grocery store knows for sure, and until this lawsuit is resolved, they aren’t telling!

Lisa Krinsky was formerly president and CEO of SFBC International in Florida. On a financial message board hosted by Yahoo, Krinsky was the target of some very negative, crude and vulgar comments. Krinsky filed suit against 10 pseudonymous posters for libel and interference with contractual/business relationships.

The problem was that she had to identify the people she was suing. Krinsky attempted to discover the defendants’ identities by serving a subpoena on Yahoo. Yahoo notified Doe 6 that it would comply with the subpoena in 15 days unless a motion to quash or other legal objection was filed.

Doe 6 then moved in superior court to quash the subpoena on the grounds that (1) plaintiff had failed to state a claim sufficient to overcome his First Amendment rights for either defamation or interference with a contractual or business relationship, and (2) plaintiff's request for injunctive relief was an invalid prior restraint.

Santa Clara Superior Court Judge Socrates P. Manoukian concluded that the totality of circumstances justified the relief Krinsky was seeking, and denied Doe 6’s motion to quash.

Doe 6 appealed.

On appeal, Justice Franklin D. Elia wrote for the court that posters to Internet message boards had a First Amendment right to shield their identity, and that this right could only be overcome if Krinsky could make a prima facie showing that a case for defamation existed.

Directly from the opinion, which can be found HERE “We thus conclude that Doe 6's online messages, while unquestionably offensive and demeaning to plaintiff, did not constitute assertions of actual fact and therefore were not actionable under Florida's defamation law. Because plaintiff stated no viable cause of action that overcame Doe 6's First Amendment right to speak anonymously, the subpoena to discover his identity should have been quashed.”

While we in no way condone the vulgarity and crudeness used by Doe 6 (as quoted in the opinion), we commend the California Court of Appeals for protecting our free speech rights related to the Internet.

Deborah and Lonnie Bolden, and David and Dolores Contreras filed a lawsuit this week claiming that KB Home and a unit of Countrywide inflated appraisals, defrauding them out of tens of thousands of dollars.

The Boldens say they paid $70,000 more for their home than neighbors who used different appraisers. The lawsuit alleges that Countrywide and KB "conspired with affiliated appraisers to generate fraudulent" appraisal reports.

The Boldens' attorney, tells of a neighbor who had used their own appraiser and got KB to reduce the price of their home by $61,000. He also said that to keep houses at their contracted price, KB exaggerated appraisals during a falling market in 2005 and 2006.

The lawsuit seeks restitution, compensatory and punitive damages and class-action status for all California KB Home customers who bought homes from August 2005 to July 2006 and used Countrywide financing.

KB Home issued a statement saying "we believe that our full and complete investigation will show these allegations to be without merit."

This comes on the heels of a Whistleblower lawsuit filed against Countrywide KB Home Loans (joint venture) by former Regional VP Mark Zachary. In the lawsuit Zachary claims to have been fired after reporting that employees were using false income amounts and inflated appraisals to facilitate the closing of home loans.