Listen to Your Mother
Most clients want their attorneys to be jerks, at least to the other side. And, sadly, most attorneys are more than willing to oblige, because a good fight can really run up legal costs. But in many cases, perhaps even most cases, that is not the best strategy.
As your mother always told you, you can catch more flies with honey than with vinegar. What no one has ever been able to explain to me is why you would want to catch flies, but according to the American Heritage New Dictionary of Cultural Literacy, the idiom stands for the proposition that you can win people to your side more easily by gentle persuasion and flattery than by hostile confrontation. In the litigation context, this could not be more true.
Recently I was retained by a client that was being defamed. Years ago an article in a newspaper had made some false statements about him, and he had fought for a retraction, which was published. Now, years later, a service indexed the old articles in the newspaper, and the article reappeared when our client’s name was searched on the Internet.
Most attorneys would have sent a letter threatening fire and brimstone for this repeated wrong, but I used the conciliatory approach, acknowledging that his was probably just an oversight, and that I was certain they would want to take immediate action to correct the mistake. Because I didn’t threaten legal action, the paper turned the matter over to an editor instead of an attorney, and it was quickly resolved. The article was removed from the index.
Had my demand letter mentioned legal action, the newspaper would have "lawyered up" to respond. That lawyer would have felt compelled to give me some legal theory as to why the paper had no legal obligation to remove the article. We would have sent letters back and forth, advancing our various legal positions. The matter would then have moved to litigation, or at the very least we would have fought over the language of some release the lawyer would have demanded. Instead, by using honey instead of vinegar, the matter was resolved with a single letter and very little cost to the client.
Lesson to all businesses: There are times when a threatening letter is appropriate, but don’t immediately assume that is the best way to go. Don’t think your attorney is being weak if he or she is friendly in the initial contact to the opposition and, similarly, if your attorney is being a jerk for no apparent reason, ask why.
Just How Badly Do You Need to Fire that Employee? (Revisited)
Less than a month ago I wrote on the folly of terminating an employee at an inopportune time, even if your reasons are just and your motives are pure. Apparently the lawyers at Wal-Mart are not subscribers to the Business Law Alert because they did nothing to stop a very questionable termination.
Melissa Jackson is one of several plaintiffs suing Wal-Mart for sexual harassment. Jackson and the other women allege that Wal-Mart did nothing to stop reported sexual harassment by one of the employees. That suit was filed on January 22, and on February 16 Wal-Mart decided it was the perfect time to fire not only Jackson, but her husband as well. Both had been there for close to a decade, and during that time Wal-Mart had never seen a need to fire them, but less than a month after she files an action for sexual harassment, she and her husband had to go.
Do you see how bad that looks? Can you comprehend what the jury is going to think about that decision?
Let me switch perspectives for a moment and explain why Wal-Mart may have made that decision. As I wrote previously, unscrupulous employees will sometimes file employment lawsuits specifically because they know they are on their way out the door. If in defense of the sexual harassment claim by Jackson, Wal-Mart is going to claim that she was about to be terminated and only filed this suit in an effort to keep her job, then Wal-Mart should remain consistent and continue with the termination. Alternatively, it could be that Jackson and her husband have developed attitude problems about Wal-Mart, and are just too toxic to keep around. (I have no personal knowledge of the facts of this case, and offer this case only as a hypothetical fact pattern for discussion.)
But with all that said, was there no other way to handle this matter? I once spoke to the owner of a business that had come up with a very creative approach. He had an employee who was a perpetual problem, not doing his job and filing what the business owner perceived to be fraudulent worker's compensation and labor claims. He desperately wanted to fire the employee, but he knew any termination would be met with a wrongful termination action for retaliation. So, the business owner put the maintenance worker in charge of the flagpole. His duties were to raise and lower the flag, keep the pole and flag clean, and to make certain no one disturbed them. He was given an ergonomic chair to sit on near the flagpole so that he would not make any claims for back injuries, and there he sat, eight hours a day, five days a week, watching the flagpole. The employee could not stand the tedium, and within two weeks had quit.
Although the business owner's plan worked perfectly in that case, I don't suggest for a minute that this is a workable solution. Aside from the fact that many employees might be perfectly content to work as a flagpole watcher, from a legal standpoint the worker could still have made the claim that this newly created position was a form of retaliation. But I offer this tale as an example of an employer that thought outside the box. He looked at the bigger picture and successfully avoided a costly lawsuit.
Businesses tend to think in black and white terms. I often see cases where an employee loyally worked for a company for years, and after being rewarded with a promotion, the company terminates that employee because he is unable to perform the new job duties. Why is no thought given to returning the employee back to the position where he was a valued employee?
Lesson for all businesses: When you are considering terminating an employee and are asking yourself, "how is this going to look?", then take a moment to also ask yourself, "can I solve the problem with something other than a termination?"
Sometimes You Can Talk Your Way Out of Litigation
A call I received yesterday illustrated a common mistake made by business owners; one that I want to pass along so you can avoid making the same mistake.
First let me set the scene. When a client comes to an attorney to complain about something, it will always be the case that the attorney takes whatever first step he or she chooses to take based only on one side of the story. In this particular case, a client came to me complaining that someone had posted comments on a blog that defamed his company. I reviewed the blog and the comments certainly were defamatory, if they were false as my client assured me they were.
So, I sent a strongly worded cease and desist letter to the blogger, informing him that I had been instructed to bring an action for defamation, and suggesting that he take down the comments as a way to minimize his damages. But since I am aware that I have heard only one side of the story, I always end such letters with the following statement: "If I have in any way misstated the facts, or there are any other facts of which you think I should be aware, please call or write me immediately."
Within ten minutes of faxing the letter, the blogger called me. But instead of using the opportunity to explain why the statements did not amount to defamation or, if they did, to offer some way to undue the damage he had done, his first screamed statement was, "How could you send a letter like this when you have only heard one side of the story?"
Exactly, dear caller, and that is why the letter invited you to call me with your side. Instead, he immediately went to the usual posturing about how he was going to make sure I was disbarred, drawn and quartered for threatening such a frivolous action, but without ever telling me what made the action frivolous. I served him with the complaint the following day, and once again the action will ultimately end as I have explained here. (He did, however, take down the blog posting.)
Admittedly, a lot of attorneys won’t care what you have to say, and may not care if the action is without merit if they think they can make a buck off the representation. But don’t assume that going in, if you really do have facts to show that the attorney was misinformed.
In one case, for example, a client informed me that he was owed a large sum of money from a former employer for commissions on products sold prior to his termination. In response to my demand letter, the President of the company called to explain why the commissions were not owed, and then sent irrefutable documentation to support his claim. When I showed the documentation to the client, he acknowledged the facts and the terms of the agreement, but said he had hoped I would find someway around that reality as the action proceeded. I took the matter no further, and by spending a few minutes responding to me, the President saved his company a lot of unnecessary litigation.
You must proceed with caution when responding to a demand letter, because the attorney may later try to twist your words to claim you somehow admitted to the wrongdoing. For that reason, you might want to make your response through an attorney. We know the magic words that can keep the response from ever being used against you. But don’t immediately reject the thought of actually responding to an attorney’s letter, and if the facts are on your side, tell your attorney to provide a thoughtful, civil response so that the other attorney won’t feel compelled to prove who is boss.
To Pay My Judgment Now or Later? Comment on the Risk of Judgment Debtor Evasion
C.C.P. § 685.0401 provides that when a judgment includes an award of attorney fees pursuant to a contract, then the "[a]ttorney’s fees incurred in enforcing [the] judgment are included as costs collectible." While most would assume that "enforcing" include measures taken to collect on the judgment, on October 28, 2008 the Third Division of the Fourth Appellate District of the California Court’s of Appeal elaborated on just how broadly the term "enforcing" is to be construed.2
Globalist v. Reda3 involved a failed settlement agreement stemming from a separate action,4 negotiated by the parties to the underlying action as well as by the defendants in the separate action. Albert Reda and Internet Business’s International, Inc., ("IBI") recognized that the amount they owed under the terms of the failed settlement ($75,000.00) was far more favorable than the amount due under the final judgment from the underlying case ($444,600.00), and accordingly initiated enforcement proceedings.5 After successfully defending the settlement enforcement action, Globalist requested the inclusion of the attorney fees incurred in that defense as fees incurred in enforcing the final judgment pursuant to C.C.P. § 685.040.6 The trial court denied this request on the grounds that the fees were incurred in a "different" action, however the Appellate Court found otherwise.7
"Neither section 685.040, nor the Enforcement of Judgments Law of which it is a part, ascribe any special meaning to the word "enforcing."8 "The plain meaning of the word necessarily suggests ‘enforcing a judgment’ would include defending the validity of the judgment against challenge in a separately filed attack."9
The Court went onto note that the sole purpose of Reda’s and IBI’s settlement enforcement action was to "significantly decrease their unsatisfied judgment debtor obligations in this action . . . [and had] Globalist not defended against the specific performance action, it would have lost substantial rights under the judgment in this case."10
Considering it was ultimately held that Globalist’s attorney fees incurred in defending the settlement enforcement action were fees incurred in "enforcing" the underlying judgment, Globalist serves as a lighthouse for all judgment debtors considering wading the waters of avoidance: tread carefully. Indeed, as the court in Jaffe v. Pacelli11 made clear, even filing bankruptcy may not help.
1. California Code of Civil Procedure § 685.040.
2. Globalist v. Reda, 2008 DJDAR 16325 (4th Dist. 2008).
3. Id.
4. Id. at 16325-26.
5. Id. at 16326 & 16328.
6. Id. at 16326.
7. Id. at 16326-27.
8. Id. at 16327.
9. Id.
10.Id. at 16328.
Pay Close Attention to Your Employee Handbook (Part 2)
We last discussed the unintended impact employee handbooks can have on at-will employment. There are also innumerable examples where seemingly boilerplate statements in a handbook dramatically defeated the intent.
In one instance, an employee handbook provided that employees could be asked to submit to a drug test if the employer had reasonable cause to expect drug use. This is really just a recitation of the law on drug testing, which is tolerant of random drug tests, but requires a higher standard for 
targeted testing. What the employer meant was that it would follow the law, utilizing random tests, but only using testing an individual with cause. However, the court interpreted the provision to mean that employees could only be tested with reasonable cause. Kraslawsky v. Upper Deck Co. (1997) 56 Cal.App.4th 1142.
And the changes do not end there. In another case, an employee at a car dealership drove one of the cars to lunch, and rear-ended another driver, causing injury. The dealership tried to avoid liability by claiming that the lunch run was outside the employee’s course and scope of employment. As evidence, the employer pointed to the employee handbook, which prohibited the "unauthorized" use of cars from the lot, and claimed that it had never authorized such use. However, the same handbook provided a list of what was prohibited, and did not include using the cars for trips to lunch. The court held that there was therefore nothing in the handbook that prohibited what the employee had done. Taylor v. Roseville Toyota, Inc. (2006) 138 Cal.App.4th 994. Thus, a poorly written handbook actually reached out beyond the company’s own employees and created liability as to third parties.
Employee handbooks are useful tools, but they require close inspection from all angles to make certain they are not having an unintended result.
Update on Enforceability of Mandatory Arbitration Clauses in the Context of Employment Law
While arbitration successfully reduced lengthy litigation and enabled employers to avoid unpredictable juries, in recent years the doctrine of unconscionability has placed potential limitations on the enforceability of arbitration agreements. Forcing an employee to sign an arbitration agreement may render it procedurally unconscionable. Employers have responded by allowing the employee to “opt out” of the agreement. While the 9th Circuit Court of appeals has repeatedly upheld arbitration agreements as long as the employee had a meaningful opportunity to “opt out,” a recent California Supreme Court ruling has confused this issue by refusing to enforce an arbitration agreement despite the employee’s ability to “opt out.” Gentry v. Superior Court, 42 al. 4th 443 (2007).
The Gentry Court also blurred the distinction between procedural and substantive unconscionability. Pursuant to Gentry, an employer should provide the employee with the choice to accept or reject the arbitration agreement without overt or subtle pressure and, if the employee accepts the agreement, require the employee to affirmatively “opt in” (i.e. to sign it). Further, because Gentry blurs the line between procedural and substantive unconscionability, the employer must be sure to remove all unfair provisions or the court may not enforce the arbitration agreement at all, $even if the employee has opted in.
A recent California Court of Appeal decision held an arbitration agreement unconscionable, despite a provision providing the arbitrator the exclusive authority to determine enforceability of the arbitration agreement. Ontiveros v. DHL Express (USA) Inc., C.A. 1st/2 No. A114848, June 30, 2008. A t the time employee Gina Ontiveros was hired by Airbourne Express, she was provided with a binder of employment materials which included an arbitration agreement. She was advised she needed to sign it in order to start her new position, but was not provided any real time to review the documents she was provided or signed. The arbitration agreement provided that it covered all claims between the parties and that she gave her right to a jury trial.
Airbourne Express was subsequently acquired by DHL Express Inc., and Ontiveros remained an employee of DHL Express. Ontiveros filed a complaint for sexual harassment in 2005. DHL filed a motion to compel arbitration, but the trial court denied it holding that the arbitration agreement was unenforceable because, inter alia, the clause providing that the arbitrator must decide disputes relating to applicability, enforceability or formation of the agreement is not sufficient to require the Court to compel arbitration if the contract is unconscionable. The Trial Court found that it is required, as a threshold issue, to determine whether the arbitration contract is unconscionable, despite any provision requiring arbitration of issues relating to enforceability. The Trial Court then held that the agreement was unconscionable because the employee did not even know she had signed an arbitration agreement until after she filed suit and, further, the agreement was an adhesion contract in that the employee did not have the opportunity to review it or negotiate it.
The California Court of Appeals affirmed, stating that the reasoning and holding of the court, in Bruni v. Dideon, 160 Cal. App. 4th 1272 (2008) and Murphy v. Check ‘n Go of California, Inc., 156 Cal. App. 4th 138 (2007), supports the Trial Court’s conclusion that it had the authority to determine the unconscionability issues raised by the employee. The Court of Appeal also affirmed the trial court’s ruling that the arbitration agreement was unconscionable. Ontiveros v. DHL Express (USA) Inc., C.A. 1st/2 No. A114848, June 30, 2008.
Proposed Legislation re Enforceability of Mandatory Arbitration Clauses
Proposed legislation aims to curb mandatory arbitration clauses in contracts. In mid July, 2008, the House of Representatives’ Judiciary Subcommittee on Commercial and Administrative Law approved three arbitration-related bills, including the Arbitration Fairness Act which, if passed, would ban pre-dispute arbitration clauses outright. The other two bills would ban mandatory arbitration agreements in contracts involving automobile sales and nursing homes. The Senate Judiciary Committee is considering its own legislation concerning nursing home arbitration.
