Bloomberg Employee Claim Highlights Need for Candor

Earlier this week, Brian Martinez filed a lawsuit in the Southern District of New York, claiming that Bloomberg L.P. terminated his employment because he was regarded as disabled and because he is gay, in violation of the Americans with Disabilities Act and employment discrimination laws of New York State and City. 

In a nutshell, Martinez was the victim of domestic abuse, which caused him to suffer a nervous breakdown.  He took two leaves of absence to address his psychological issues and, during the second, Bloomberg eliminated his job in a restructuring.   (Read the Bloomberg Complaint.pdf.)  In the Complaint, Martinez claims that the restructuring was a mere pretext, and that Bloomberg actually fired him because they continued to view him as psychologically disabled even though he was cleared to return to work, and because he is homosexual.

I don't know, or even have an opinion about, whether Bloomberg illegally discriminated against Brian Martinez.  A complaint only give you a piece of the story.  It is possible that Bloomberg has the leaves of absence and the restructuring papered to death and its defense tied up with a bow.  But I was struck by a few allegations in the Complaint that highlight a teachable moment for litigation avoidance in employment.  They are:

1.  Martinez had suffered from domestic abuse for several months before his first leave of absence began. 

2.  Martinez received a positive performance review about 2 weeks into his first leave, but his bonus was not consistent with what it should have been for his performance and his department. 

3.  Martinez asked several times for an explanation of the discrepancy in his bonus, but kept being put off. 

What's the lesson?  Being "nice" instead of candid will get you sued.

I'm not abusing punctuation; I put "nice" in quotations because you really are not being nice to anyone.  If someone isn't performing, you have to tell him even if it means hurt feelings.  Nobody wants to be the meanie, but sugar-coating performance issues is like social promotion in grade school.  Eventually, someone will figure out that Johnny can't read, and it does Johnny no good to be illiterate.  Don't be a jerk about it, but say what needs to be said and help the employee be successful.

My Jedi mind powers tell me that Martinez had a really bad year.  He was being abused at home and had a high-pressure job.  Something had to give, and it was probably his job performance.  But, if the Complaint is to be believed, you would not know that from his performance evaluation or the non-answers he received concerning his bonus.  

Another LSAT Disability Discrimination Lawsuit?

Less than a week after a lawsuit was filed claiming that the Law School Admissions Test discriminates against the legally blind, a Weslyan University senior, Meghan Larywon, filed a suit Thumbnail image for pencil test.JPGclaiming that the Law School Admissions Council (the group that administers the LSAT) discriminated against against her by refusing to give her double time to take the test and 15 minute breaks between sections.  (Here is the complaint: Larywon Complaint.pdf.) 

According to the Complaint, Ms. Larywon suffers from Attention Deficit Disorder and Processing Speed Disorder, which affect her ability to read and process visual information under time pressure.  On the strength of the complaint and supporting affidavits Judge Briccetti issued an Order to Show Cause why Ms. Larywon should not get the accommodation she seeks for the LSAT being administered on June 6.  (Here is the OSC:  Larywon OSC.pdf.)  The hearing was scheduled for this afternoon, but no decision is listed on Pacer yet. 

The documents substantiating Ms. Larywon's disability are not publicly available (nor should it be), so I can't say whether I think the accommodation is justified or not. 

But I understand the LSAC's skepticism.  The controversy over the frequency of ADD diagnoses rages on and Ms. Larywon's own history does not help.  In her academic career, Ms. Larywon was never classified as needing, or actually received, services under the Individuals with Disabilities Education Act.  The fact that Ms. Larywon and her family were able to manage her disability without invoking IDEA or implementing an Individualized Education Program can suggest a wonderful relationship between school and parents, but it can also suggest a private school's willingness to accommodate anyone for anything.  I know plenty of kids with learning disabilities, and they all have IEPs. 

We'll have to wait and see what Judge Briccetti says about it.

Rajaratnam Convicted on All 14 Counts

A jury in the Southern District of New York convicted Raj Rajaratnam, founder of Galleon Group, on all counts of securities fraud and conspiracy.  His scheme was nothing if not audacious -- pay insiders at top American businesses for insider information.  This article by Michael Rothfeld and Chad Bray in the sums it up nicely. 

I doubt Rajaratnam will get the maximum sentence for his crimes (about 205 years).  But I suspect he will find the next 25 years of his life rather unpleasant.  As it should be.

You see, securities fraudsters hold a special place in my heart.  I had the misfortune of working for one who is currently serving a 20-year sentence.  When the firm I worked for fell apart (almost overnight following his arrest), I was high enough on the food chain that my continued employment somewhere was never really an issue, and low enough on the food chain that my professional reputation survive unscathed. 

I hope the innocent former Galleon employees are as lucky.

Federal Judge Rules: Mark Zuckerberg is Not Moving Back In With The Rents

Billionaire 20-Something CEO Remaining in Cali "Indefinitely"

Flowers and Golden Gate.bmpU.S. District Judge Richard Arcana ruled yesterday that after moving to California in 2004, starting up a multi-billion dollar company in California that currently has more than 1,600 employees in California, and never returning to reside in New York, Mark Zuckerberg is domiciled in California.  (Read the decision: Facebook Ruling.pdf.)

Why does this matter?  Good old diversity of citizenship.  Plaintiff Paul Ceglia brought a lawsuit against Zuckerberg in New York state court, claiming that he owns 84% of Facebook.  Zuckerberg's lawyers removed to federal court on diversity jurisdiction grounds.  Zuckerberg resides in California, Facebook, Inc. is a Delaware corporation, and Ceglia resides New York.  

Ceglia moved for remand, arguing that because Zuckerberg represented in a lawsuit commenced in 2004 that he was domiciled in New York, he is a New York domiciliary for the purposes of a lawsuit commenced in 2010.  If true, this would destroy diversity:  both Ceglia and Zuckerberg would be New York residents and the federal court would not have jurisdiction.  

So much can -- and has -- changed in the ensuing 6 years.  Zuckerberg went from being a 20-yr old college sophomore on a leave of absence, spending some time in Palo Alto as he worked on his little Internet start-up, to Time's Person of the Year and a key figure in the Middle East uprisings.  All while residing in California. 

I just don't see Ma and Pa Zuckerberg setting up a basement apartment for young Mark anytime soon, and neither did Judge Arcana.

I can't say that I fault Ceglia's lawyers.  I'd rather roll the dice on his case in state court than federal court.

LOVE this headline: "Feds sue New Canaan man for lack of subtlety"

As reported in the New Haven Advocate

A majority owner of Michael Kenwood Group LLC, based in Stamford, Illarramendi allegedly took $53 million from one of his hedge funds (valued at $540 million) and slipped it into his bank account, according to a lawsuit filed by the Securities and Exchange Commission in Hartford Federal Court last month.

He then put that $53 million in his own “companies” — including, the civil suit alleges, one called “Nuclear Energy Company” — without the knowledge or permission of his hedge-fund investors, a textbook case of conflict of interest.

Not so texbook, for an wannabe fraudster anyway, is that Illarramendi told the SEC what he was doing, reporting that “the $53 million transferred from the funds to private equity investments were loans from the funds to entities controlled by Illarramendi."

The Moral of the Story:  If you are going to steal, try to be a little creative about it.  The SEC Enforcement Division employes top-flight investigators.  Give them a chance to shine.

LLCs in Diversity Jurisdiction: Keeping the Playing Field Bumpy

Your company has just been sued in a foreign state court by an LLC organized in that foreign state demanding more than $75,000 in damages. But you’re not fazed because you can remove to federal court and get rid of the baseless case on a 12(b)(6) motion, right? Wrong!

Or, at least, possibly wrong because you are probably asking the wrong question. In every Court of Appeals Circuit that has ruled on the question (including the Second), and nearly every District Court in the Circuits that are silent, the citizenship of an LLC is not the state where it is organized, but rather the state of citizenship of its members.

The rule is based on sound, if narrow, interpretation of 28 U.S.C. § 1332(c), which states that “a corporation shall be … a citizen of any State by which it has been incorporated and of the State where it has its principal place of business…” In Carden v. Arkoma Assocs., 494 U.S. 195 (1990), the Supreme Court states confirms the strict interpretation of § 1332(c) – if it ain’t a corporation, § 1332(c) does not apply. (The Court acknowledges that it is being “unresponsive to … the changing realities of business organization,” so that is something.)

I have not done a state-by-state survey, but I’m willing to bet that very few states, if any, had adopted limited liability company acts when Carden was decided. This is a classic example of trying to fit a square peg in a round hole. Still, the Supreme Court’s intellectual honesty is little comfort when your company has just been served.

So what’s a defendant to do? You have two choices:

  1. Wing it – file the notice of removal and hope neither the plaintiff nor the Court calls you out.
  2. Aggressively pursue jurisdiction discovery to find out the citizenship of the members. Remove within 30 days of the date when you receive the document or other information from which you can determine the citizenship of the members and, no matter what, have it all done within the first year.

Simple, right?