Massachusetts Courts / Business Litigation Session

 

Thumbnail image for FullSizeRender.jpg A recent unpublished decision by the Massachusetts Appeals Court found that an employee could not establish a case for age discrimination under Massachusetts law when his entire job class was eliminated as part of a reduction in force. See Richard A. Porio v. Department of Revenue, 13-P-1621, (memorandum and order pursuant to Rule 1:28, August 27, 2015). Plaintiff is an employee who was laid off when his job class was eliminated, while other, younger members of his same job classification were “provisionally promoted” to a higher job class prior to the cuts. The court held that plaintiff could not establish a prima facie case of age discrimination — that is, his termination did not result in a reasonable presumption of age discrimination sufficient for the court to allow him to proceed with his claim against his employer. In order to raise that presumption, plaintiff would have had to show evidence that the employer failed to treat age neutrally in deciding which positions to eliminate, which the plaintiff failed to do.

The court also found that plaintiff could not proceed on a “disparate impact” theory. Disparate impact does not require a discriminatory motive, but instead focuses on business practices that have the effect of excluding a protected class of people from hiring or promotions. Generally, a plaintiff must show statistical evidence that a particular business practice, usually a testing or measuring procedure, has the same effect as intentional discrimination, and is not a practice that is related to job performance. The court did not specifically apply the facts of plaintiff’s case to this analysis, but instead found that the “fundamental premise” of disparate impact theory does not apply to this scenario, where an entire group of employees is affected by a reduction plan.

Age discrimination suits in Massachusetts can have costly impacts on businesses. Even in the case discussed above, which was ultimately a win for the plaintiff’s employer, the parties were involved in proceedings from 2002 to 2015. Massachusetts businesses are subject to both federal and state age discrimination statutes, and may be liable if age was a contributing factor to a decision at any stage in the employment process, including hiring, promotion, and termination. In addition tothe time and cost of litigation, if found liable, a business may need to pay extensive damages, including emotional distress and treble damages. Furthermore, employers may be hit with fines and other administrative penalties through the Massachusetts Commission Against Discrimination (MCAD).

America’s workforce is growing older, and will continue to do so for the foreseeable future. Now more than ever, employers should begin to think about mitigating the risk of an age discrimination lawsuit through planning and development of employment practices. Whether you are facing a lawsuit or trying to avoid one, an experienced business attorney can help mitigate potential losses in a way that is right for your business.

A scientific or technological advantage is something to be protected. A case in the Business Litigation Session of Suffolk Superior Court demonstrates how cutthroat competition can be in the medical device industry and how the law deals with companies that disregard fair trade practices to gain an unfair advantage.

In 2007, Lightlab Imaging, a company that provides OCT medical imaging for human coronary arteries, had developed the most powerful laser in the industry. Lightlab had a cooperative relationship with Axsun to convert Axsun’s basic laser into one that could be used by Lightlab. Volcano, a competitor of Lightlab, desired a foothold in OCT technology and was well behind in the research and development of a laser with similar capabilities.

 In 2008, Volcano acquired Axsun and viewed the acquisition as a means to both advance its entry into the OCT market and impede the growth of Lightlab. However, the contract between Lightlab and Axsun contained a confidentiality and exclusivity provision which prevented Axsun from selling high performance lasers to Volcano. In connection with Volcano’s indemnification of Axsun as part of the acquisition, Axsun breached its duty of confidentiality and provided Volcano with the specifications for the high performance laser.

In 2009, Lightlab filed suit in Suffolk Superior Court and its application for a preliminary injunction was granted. A subsequent jury trial on liability returned a verdict in favor of Lightlab finding that Axsun had violated the confidentiality provision of the contract with Lightlab. The jury also found that Volcano had misappropriated Lightlab’s trade secrets and interfered with Lightlab’s contract with Axsun.

Instead of trial on damages, the parties stipulated to damages of $200,000. Subsequently, after two jury waived trials, the Court granted Defendant’s summary judgment motion finding that Lightlab had not shown “use” of the trade secrets by Axsun and Volcano other than the due diligence use evidenced during the jury trial and therefore Lightlab had not proven misappropriation of those trade secrets.

On the 93A count, the court found that Lightlab was entitled to $200,000 in damages and because the defendant’s conduct was found to be knowing and willful, Lightlab received another $200,000 in punitive damages plus attorney fees which totaled $4,500,000.

The Supreme Judicial Court recently granted direct appellate review on whether the trial judge correctly excluded expert testimony on future lost profits on the grounds that the methodology used by the expert failed Daubert and was speculative and whether the trial judge correctly ruled that permanent injunctions may protect only specific trade secrets a defendant has already used.  The SJC is soliciting amicus briefs with argument scheduled for Fall of 2013. 

In business, a company or professional’s reputation is paramount. If your reputation is damaged you can suffer lost clients, customers and revenue. Social media has provided a new way for companies and individuals to have their reputation unfairly tarnished.

Social media provides an individual the almost instantaneous ability to broadcast a defamatory statement and reach a large audience. The law has begun to catch up. Recently, a Massachusetts court allowed a $1.5 million attachment of assets in a social media defamation case.  In Clay Corporation v. Colter a car dealership terminated an employee for cause as a result of inappropriate interactions with employees and customers. The employee had cancer and her brother started a social media campaign to disparage the car dealership.

The social media campaign was launched by the employee’s brother who claimed she was fired because she had cancer. The Facebook page created by the defendant garnered tens of thousands of likes and claimed the car dealership had discriminated against other employees with cancer and urged people to boycott the car dealership. The car dealership estimated that it lost over $100,000 in revenue as a result of the social media campaign.  

The car dealership filed suit. To prove a claim of defamation under Massachusetts law a plaintiff must prove that the defendant was at fault for the publication of a false statement regarding the plaintiff, capable of damaging the plaintiff’s reputation in the community, which either caused economic loss or is actionable without proof of economic loss.

In Clay, the Court found that the defendant’s statements on the Facebook page had no factual support. Further, the Court found that the car dealership had suffered a significant loss in business as a result of the social media defamation. Since the Court found that the statements made during the social media campaign were defamatory and the plaintiff had a reasonable likelihood of success on the merits the Court granted a $1.5 million attachment of the defendant’s assets.  

The ease with which a disgruntled individual can publish a new Facebook page or blast their false accusations across social media makes it very easy for a company to be significantly damaged in a short period of time. Cases such as Clay show that the law is catching up with these individuals and there is a remedy available if you or your company has been defamed through social media. 

While companies are often focused on outsider risks such as breach of their systems through a stolen laptop or hacking, often the biggest risk is from insiders themselves. Such problems of access management with existing employees, independent contractors and other persons are as much a threat to proprietary information as threats from outside sources.

In any industry dominated by two main players there will be intense competition for an advantage. Advanced Micro Devices and Nvida dominate the graphics card market. They put out competing models of graphics cards at similar price points. When played by the rules, such competition is beneficial for both the industry and consumers.

AMD has sued four former employees for allegedly taking “sensitive” documents when they left to work for Nvidia. In its complaint, filed in the 1st Circuit District Court of Massachusetts, AMD claims this is “an extraordinary case of trade secret transfer/misappropriation and strategic employee solicitation.” Allegedly, forensically recovered data show that when the AMD employees left in July of 2012 they transferred thousands of files to external hard drives that they then took with them. Advanced Micro Devices, Inc. v. Feldstein et al, No. 4:2013cv40007 (1st Cir. 2013).

On January 14, 2013 the District Court of Massachusetts granted AMD’s ex-parte temporary restraining order finding AMD would suffer immediate and irreparable injury if the Court did not issue the TRO. The TRO required the AMD employees to immediately provide their computers and storage devices for forensic evaluation and to refrain from using or disclosing any AMD confidential information.

The employees did not have a non-compete contract. Instead the complaint is centered on an allegation of misappropriation of trade secrets. While both AMD and Nvidia are extremely competitive in the consumer discrete gpu market involving PC gaming enthusiasts, there are rumors that AMD managed to secure their hardware to be placed in both forthcoming next-generation consoles, Sony PlayStation 4 and Microsoft Xbox 720. AMD’s TRO and ultimate goal of the suit may therefore be to preclude any of their proprietary technology from being used by its former employees to assist Nvidia in the future.

The law does protect companies and individuals such as AMD from having their trade secrets misappropriated. The AMD case has only recently been filed and therefore it is unclear what the response from the employees will be. What is clear is how fast AMD was able to move to deal with such a potential insider threat. Companies need to be aware of who has access to what data and for how long. Therefore, in the event of a breach, whether internal or external, companies can move quickly to isolate and identify the breach and take steps such as litigation to ensure their proprietary information is protected.

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The new Chief Justice of the Massachusetts Supreme Judicial Court is the Honorable Roderick Ireland. He was administered the oath as Chief Justice on December 20, 2010 marking the pinnacle of a career spanning 33 years. In addition to his distinction as the first African-American Chief Justice in the court’s history, Justice Ireland has had the opportunity to contribute to the law in a wide array of areas from juvenile matters to business litigation.

In recent years, Justice Ireland has authored a number of opinions impacting business litigation issues in Massachusetts. Some notable business cases include:

         Boulanger v. Dunkin’ Donuts Incorporated, 442 Mass. 635 (2004)

  • DD shop owner signed a non-compete which stated he could not operate or work for a similar business within 5 miles of any Dunkin Donuts Worldwide for 2 years after selling his franchise.
  • SJC, Ireland writing, held that covenant not to compete was reasonable.  Rejected the argument that such a covenant not to compete harms the public interest in liberty of employment.

          Aspinall v. Phillip Morris , 453 Mass. 431 (2009)

  • Cigarette buyers brought class action against tobacco manufacturer for damages arising from alleged unfair/deceptive marketing of low tar cigarettes.
  • SJC, Ireland writing, held that manufacturer’s use of descriptors was not exempt from proscription against unfair or deceptive practices.

          Pointer v. Castellani, 455 Mass. 537 (2009)

  • President-member of LLC brought claims against other members for freeze-out.
  • SJC, Ireland writing, held that liquidation of the LLC was not a proper remedy for freeze out, in the absence of authorization from the members.

          Amgen v. Commissioner of Revenue, 427 Mass. 357 (1998)

  • Foreign Pharmaceutical Corporation appealed order from Appellate Tax Board which denied its application for abatement of MA excise tax on foreign corporations doing business in MA. 
  • SJC, Ireland writing, held that actions in MA by the corporation’s clinical support specialists went beyond solicitation of orders and thus the corporation had to pay the excise tax

          Route One Liquors, Inc. v. Secretary of Administration and Finance, 439 Mass. 111 (2003)

  • Parking lot owners and operators brought action against State Secretary of Administration and Finance for declaratory judgment that statute imposing excise tax on parking lots within a 3 mile radius of stadiums was unconstitutional
  • SJC, Ireland writing, held that a license to operate a parking lot was a commodity on which an excise tax could be leveled

With a dynamic business litigation environment including increased financial regulatory activity, growing privacy concerns, and legal issues arising from expanding technology, there will be significant opportunity over the next few years for Justice Ireland and the Supreme Judicial Court to shape the law and impact business interests in Massachusetts.