Mr. Hart discusses several common myths associated with employee theft, which will help employers understand the nature of the problem, and ways employers can alleviate the problem in their  company. You can read the full article here. (PDF)

The case presented to the Supreme Court by Engquist, however, differed from Olech in signifiacnt regard. In Enquist, the petitioner, Anup Enquist, was an employee of the Oregon Department of Agriculture (“ODA”), where she worked as an international food standards specialist. Engquist alleged that another ODA employee, Joseph Hyatt, made repeated attempts to harass her. In 2001, Hyatt was promoted to a supervisory position, despite some indications that Enquist may have been more qualified. After Hyatt attained the supervisory position, Engquist alleged that he continued to harass her, and a few months after his promotion, Hyatt, together with the Assistant Director of ODA, fired Engquist, citing budgetary reasons. Engquist, however, alleged that there was no credible justification for dismissing her instead of other ODA employees.

In 2002, Engquist brought suit in federal court against ODA. In her complaint, she included an equal protection claim, asserting that she had been mistreated and fired “for arbitrary, vindictive, and malicious reasons.” In effect, Engquist argued that the Equal Protection Clause forbids public employers from irrationally treating one employee differently from others similarly situated, regardless of whether the different treatment is based on the employee’s membership in a particular class. The District Court, when deciding a motion for summary judgment filed by ODA, held that Engquist could maintain a class-of-one claim by showing “that [ODA's] actions were spiteful efforts to punish her for reasons unrelated to any legitimate state objective.” The District Court also concluded that, “[a]s with any equal protection claim, plaintiff must also demonstrate that she was treated differently than others who were similarly situated.” At trial, the jury ultimately returned a verdict in favor of Engquist on her class-of-one claim.

The ODA appealed the District Court's decision, and the Ninth Circuit reversed, holding that “the class-of-one equal protection theory is not applicable to decisions made by public employers.” The Ninth Circuit, in its decision, contrasted the role that the government played in this case from the role it played in the Supreme Court's Village of Willowbrook decision. In Village of Willowbrook, the Ninth Circuit noted, the government acted a sovereign; whereas here, the government was acting as a proprietor managing its own affairs. The Ninth Circuit concluded that when a government is acting as a proprietor of its own affairs, as it does in the employment realm, the class-of-one theory of Equal Protection does not apply.

The Supreme Court, hearing the case upon Engquist's appeal of the Ninth Circuit's decision, noted the it had previously recognized that the government’s powers are broader when it acts as an employer rather than a sovereign. With this principle in mind, the Court focused on the balance of interests between the government as employer and the employee. The Court noted that it has “long held the view that there is a crucial difference, with respect to constitutional analysis, between the government exercising ‘the power to regulate or license, as lawmaker,’ and the government acting ‘as proprietor, to manage [its] internal operation.’” Furthermore, the Court concluded that “[t]his distinction has been particularly clear in our review of state action in the context of public employment.” Therefore, the Court concluded, “the government as employer indeed has far broader powers than does the government as sovereign.” This is true because “[t]he government's interest in achieving its goals as effectively and efficiently as possible is elevated from a relatively subordinate interest when it acts as sovereign to a significant one when it acts as employer.”

While continuing to undertake this balancing process, the Court looked to its decisions involving the competing interests of the government as employer and the employee in the realm of First Amendment speech by public employees. The Court specifically looked to Connick v. Myers, 461 U.S. 138 (1983), a First Amendment case dealing with state employees, and noted that in Connick it held that “a federal court is not the appropriate forum in which to review the wisdom of a personnel decision taken by a public agency allegedly in reaction to the employee’s behavior.” The Court noted that in Connick it concluded that "government offices could not function if every employment decision became a constitutional matter.” Therefore, “constitutional review of government employment decisions must rest on different principles than review of . . . restraints imposed by the government as sovereign.”

The Court then used these principles as the touchstones for deciding Engquist's case, and concluded that its Olech decision did not create liability for the state government to class-of-one claims raised by state employees. In so concluding, the Court construed the Olech decision narrowly. In Olech, the Court notedthere had been a clear standard against which allegedly discriminatory government action could be measured. According to the Court, the same was not true in the case Engquist. The Court described the state government's decision in Engquist as a “form[] of state action . . . which by [its] nature involved discretionary decisionmaking based on a vast array of subjective, individualized assessments.” In such a context, “allowing a challenge based on the arbitrary singling out of a particular person would undermine the very discretion that such state officials are entrusted to exercise.” Therefore, while the Court's decision in Olech did apply the Equal Protection Clause to the claim of plaintiff who was not alleging class-based discrimination, the Enquist Court concluded that the same rationale could not be extended to cases in which the state government acts as an employer. The Court suggested that recognizing a class-of-one claim in this context would “upset long-standing personnel practices,” because “[t]he power of employers to discharge employees for reasons that may appear arbitrary, unless constrained by contract or statute, is well-established under the common law of at-will employment.” The majority went on to conclude that “[t]he class-of-one theory of equal protection is another constitutional area where the rights of public employees should not be as expansive as the rights of ordinary citizens.”

Although required to do so, Imperial failed to identify lace design No. 8191 as a derivative work on its copyright application. As this appears to have been the result of mere inadvertence rather than fraud, however, this omission in no way invalidates Imperial's copyright registration. See Eckes v. Card Prices Update, 736 F.2d 859, 861-62 (2d Cir.1984); Harrison/Erickson, Inc. v. Chicago Bulls Ltd. Partnership, 1991 WL 51118, at *5 (S.D.N.Y. 1991).

Mr. Rodack testified at trial that, since he believed he had designed the wagons himself based on his own original ideas, there was nothing ‘preexisting’ to report. He may have been entirely incorrect in his narrow reading of the term ‘preexisting,’ but this does not establish intentional or purposeful withholding of information.

Defendant offered nothing to refute Mr. Rodack's claim of lack of understanding of the requirements of section 6 of the application, except the fact that Mr. Rodack had prepared numerous applications in the past. This in itself is insufficient to prove fraudulent conduct or the necessary scienter to warrant invalidation of the copyrights.

The arrangement of the roses over the background portion of Pattern # 1365, while perhaps elementally symmetrical, does not appear to be designed to ease manufacture since, once the decision as to how to place the item against the background was made and executed, the whole piece was copied mechanically. Thus, it did not matter for manufacturing purposes of what the original design consisted. Rather, Sadjan's decision to place the roses in straight rows was an artistic decision. Further, there is no evidence that Sadjan copied the placement of the roses from any source. Consequently, the district court's finding that the particular arrangement given the Folio Rose in Pattern # 1365 was not original was clearly erroneous. Although the arrangement may have required little creative input, it was still Sadjan's original work and, as such, copyrightable.

The nephews, Steve Venturini, III (“Steve III”) and Gregg Venturini (“Gregg”) collectively obtained fifty percent ownership in the corporation when their father, Steve Venturini, II, died in or about 2001. Around the time of their father’s death, Marie offered to purchase Steve III and Gregg’s interest in Steve’s Steak House, Inc. (“the corporation” or “Steve’s Steak House”). Growing up, Steve III and Gregg rarely worked for the corporation. On occasion they would open up or close the restaurant of perform odd jobs for the corporation. Despite the same, for a significant period of time, even after the litigation was commenced by them in the Superior Court of New Jersey, Chancery Division, Bergan County, they received approximately $750.00, per week from the corporation. Marie and her child, Blaise were full time employees of the corporation for a majority of their lives.

Moreover, the court found that Gregg had several physical altercations with his cousin, Blaise. During the course of one altercation, Gregg threatened and did return with his firearm. The local police were called and Gregg was eventually ordered to surrender all of this firearms.

Eventually, Marie terminated Gregg’s and Steve III’s employment and “locked them out” of the business property. As a result of those actions, Gregg and Steve III, commenced this case. In their complaint they sought an accounting, dissolution of the corporation, damages, fees, and costs, and “any and all further relief that this court deems equitable and just.”

The first issue the Venturini Court needed to address was whether or not Gregg and Steve III, were oppressed minority shareholders. The Court held they were not. The Court found that Gregg and Steve, III, were not actively involved in the corporation. As stated above, they were not regularly employed by the corporation. The Court found that their involvement was “passive” and held that “equity does not aid one whose indifference contributes materially to the” complained of injuries. Harrington v. Heder, 109 N.J. Eq. 528, 534 (E & A 1934). Moreover, the Court found that “mere disagreement or discord between the shareholders is not sufficient to prove a violation of the [minority oppression] statute.” Citing, Brenner v. Berkowitz, 134 N.J. 488, 505 (1993).

The second issue the Court had to address was whether or not the corporation should be dissolved. It found that Steve’s Steakhouse should not be dissolved. The Court in making that determination followed well-established precedents which state that dissolution “is not appropriate” where the corporation is a viable entitle. Steve’s Steakhouse was a thriving business. To dissolve it would be inequitable and contrary to the law and public policy. The Court found that the appropriate remedy in this case was the Court Ordered sale of Steve III’s and Gregg’s stock because it found that “there has been an irretrievable breakdown in the relationship of the shareholders.” Citing, Musto v. Vidas, 281 N.J. Super. 548 (App. Div. 1995); Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474 (1974); see also N.J.S.A. 14A:12-7(8).   The Venturini Court found despite the fact that it did not find that Steve III and Gregg were oppressed, courts of equity have the power “to mandate the buyout.” Citing, N.J.S.A. 14A:12-7. As a result of the same, it considered the testimony of various expert witnesses, so that it could opine as to the “fair value” of Steve III’s and Gregg’s interest in Steve’s Steakhouse.

With regard to the valuation, the Court followed well-established legal precedent and decided that the date of valuation should be the date Steve III and Gregg filed their complaint. In order to determine the fair value of the corporation, the Court considered the valuation of two experts for each side who were charged with providing an opinions of the fair value of the earnings of the corporation along with its principal asset, the building which housed the restaurant.

Finally, the Court decided not to award pre-judgment interest and counsel fees to Steve III or Gregg. The reason it refused to award pre-judgment interest is because it found that the $750 a week pay the brothers received both pre- and during the pendency of the litigation was probably far more than they should have received because they did not provide services for the corporation. Moreover, the Court decided not to award counsel fees to either party because it opined that neither side truly prevailed.

This week's New Jersey Legal Update podcast is presented by Scott Unger, Shareholder of Stark & Stark's Litigation Group.

The danger, however, is real. A case in point was the recent punitive damages award in Tarr v. Bob Ciasulli's Mack Auto Mall, Inc., 390 N.J.Super. 557, 916 A.2d 484 (A.D. February 2007). According to the published court opinion, this was a sexual harassment case where a relatively manageable award of $25,000.00 against an automobile sales franchisee ballooned into an additional $85,000.00 in punitive damages (and attorneys fees) resulting in a very expensive day for the Franchisee. 

Other recent cases have awarded significantly higher punitive damage awards (though they are often reduced later through the appeal process). The bottom line is that the franchise community, like any other employer, needs to be vigilant in preventing “bad” conduct from becoming “egregious/outrageous” conduct.

Address employee problems quickly and be proactive when an employee complains of discrimination and/or harassment. Taking these steps may very well convince a judge that, while the conduct may merit an award of compensatory damages, punitive damages are not appropriate.  In this way you can help manage risks and keep troublesome litigation from becoming business-killing litigation.

In both New Jersey and New York, news is unfolding of possible inappropriate practices of college and university employees accepting perks ranging from stock options, the use of vacation homes, trips, as well as cash provided by loan industry representatives in an effort to become one of the institution’s preferred lenders for prospective students.

More than 90% of all students have some form of student loan, and more than 80% utilize the private lenders recommended by the university. Since these loans are for the most part subsidized by the government, there is little risk of non-payment to the lenders, in fact student loans are not even dischargable in bankruptcy.

Colleges and universities must now face the reality that in spite of their enlightened existence, they too are subject to conflicts of interest, as well as possible civil and even criminal liability.