As I indicated earlier, these are illustrative examples of Texaco’s approach to diversity, but they do not present an exhaustive inventory of Texaco’s fairness and diversity practices. I hope these examples are sufficient to give you some insight into what has been working at Texaco and what might be applicable to the engineering firms participating in this conference.
Summary of Discussion
Hispanic Engineer National Achievement Awards Corporation
The questions we were asked to address were: How can a company establish credibility in the aftermath of a lawsuit? How can corporate culture be changed? How can you get buy-in from the aggrieved people who were involved in the lawsuit?
At Texaco, some black employees had filed a lawsuit, which was moving forward when the New York Times got hold of a tape recording of a senior manager in an executive meeting allegedly using the N-word and making other disparaging remarks. This became national news, and the Texaco suit became the poster child for discrimination lawsuits across the country, even though it was an ordinary lawsuit much like suits against many other corporations. The Board of Directors decided to negotiate an agreement that would improve the company, change the corporate culture, and earn the buy-in of the litigants. In , the suit was settled.
Six results came out of the settlement. The first was the change in corporate culture. The case was made that diversity was a good business decision for the company. Senior executives and senior managers of the company had to promote diversity. Middle managers had to have a process in place for managing diversity. All employees, minorities, nonminorities, and women, had to go through a diversity learning program.
The second result was the recruitment of minorities into both technical and nontechnical jobs, but especially technical jobs. In research, the majority of people hired at Texaco had come from two universities. As a result of the settlement, the recruiting pool was expanded to include students at 40 universities, including historically black colleges and universities and institutions serving Hispanics.
Three, the core competencies for hiring and promotion were publicized. The company set up a systematic matrix of core competencies for hiring and promotion. These are published on the web site and are open to the public and to employees. If an employee wants to move to the next level, he or she knows the required skills and criteria.
Fourth, bonuses and compensation for managers were tied to diversity. Five percent of the bonus structure was based on meeting diversity targets. If managers
Defense of $ Million Claim for Theft of Trade Secrets; Employee Disloyalty; Breach of Non-solicitation Agreement; Aiding and Abetting
Our client, a very large truck parts supply company, hired the top two managers of plaintiff’s North Dakota branch, with employment to start after a new branch office was built out by client. After waiting in place for three and one-half months, the managers resigned without notice and immediately began recruiting plaintiff’s employees – and were successful in getting 55% of the work force to join our client. The managers and all employees were “at will,” but one of the managers had a non-solicitation agreement and the new employees brought customer lists with them. Plaintiff contended that the employee “lift out” irreparably destroyed their North Dakota business. After a three-week jury trial in North Dakota federal court, the jury returned a defense verdict on all counts.
Thomas J. Shroyer, Curtis D. Smith, Matthew P. Kostolnik, Taylor D. Sztainer, Kelly C. McGinty, Debra L. LaTerza
Ponzi Auditor Exonerated
In re Kelley (Bankr. D. Minn. ; File No. X) – After the collapse of a massive Ponzi scheme, the bankruptcy trustee said an auditor of one of the special purpose entities used to conduct the fraud had negligently failed to detect the fraud, causing damages of $,, After a two-week trial, the arbitration panel rejected the claim and awarded a total defense victory to the CPA firm.
Thomas J. Shroyer, Matthew P. Kostolnik, Taylor D. Sztainer, Debra L. LaTerza, Misty J. Gozola
High Damage Lawsuit Defeated
Bank v. CPA Firm, MT – A CPA firm was sued when several years of audits did not uncover a massive lapping scheme involving a revolving line of credit from a bank. The accounting firm faced claims for the thefts and massive consequential damages from the shareholders of the audit client, the audit client, the lender, and the holding company that acquired the lender. We quickly negotiated a resolution with the audit client’s shareholders in return for the audit client's dropping its claim. We then won a jury verdict against the bank and sustained a dismissal of the holding company’s claim in a ruling by the state supreme court.
Bottom line: The CPA firm incurred costs and settlements that were a small fraction of the total exposure.
Thomas J. Shroyer
Breach of Contract Trial
A major manufacturer of private label food products was sued by its former business partner for breaching their joint venture agreement. The partner claimed that our client set too tight a specification for an ingredient supplied to the venture by the partner. The partner’s damage claim exceeded $34 million.
During the six-week trial, our team of trial attorneys convinced the court that the partner’s expert had made substantial errors and had limited the damages awarded to $,, less than had been offered in settlement and one percent of the amount claimed. Our efficiency in handling large cases was further confirmed when the partner’s financial records disclosed that the plaintiff’s attorneys fees were approximately double the amount of our fees.
Curtis D. Smith
Employer Wins in Non-compete Fight and Back Pay
Our client hired a new salesperson - a hardworking young fellow, eager to prove himself on the job. Shortly after the salesperson started working, his former employer, a competitor in the same industry, sued the salesperson and our client, claiming breach of a non-compete agreement and sought to prevent the salesperson from working for anyone in the industry anywhere in the world for a full year. The former employer actually secured a court order that temporarily forced the salesperson, who had also become our client, to stop working.
After a hearing where we were able to present the full facts, the court declared the non-compete agreement unenforceable, allowing the salesperson to return to work immediately. He was also awarded back pay of more than $31, for the time he was wrongfully prevented from working, and his new employer was awarded more than $36, in attorneys’ fees for having to defend the case.
David P. Jendrzejek
Medicare Reimbursement Lawsuit Dismissed for No Payment
After a hospital chain was sold to another operator, several of the sold hospitals were hit with millions of dollars in Medicare cost assessments. The buyer and the seller “tag teamed” a lawsuit, in an effort to squeeze the CPA firm of the sold chain into paying the assessments on the grounds that financial statement audits had been inadequately reserved for the risk of subsequent assessment, and had failed to properly disclose the risk in footnotes. Moss & Barnett’s defense team used creative discovery to demonstrate that the parties specifically bargained for the risk of a future Medicare assessment in their purchase price, and aggressive case management techniques (including an appearance at a mediation and refusing to offer any payment for settlement) – and the use of an engagement letter indemnity clause to force the dismissal of the lawsuit without any payment.
Bottom line: The lawsuit was dismissed without any payment.
Thomas J. Shroyer, Terese A. West
Making Right on a Fraudulent Deal
The sellers of several small telecommunications companies had suffered huge financial losses due to the fraudulent acts of the purchaser of their enterprises. Ten individuals had sold their local telecommunications companies to a Fortune company as part of an industry “roll-up.” Half of the consideration received for the sale was stock in a subsidiary of the acquiring company. Before the sellers could realize any value in this consideration, the acquirer filed for Chapter 11 bankruptcy and the stock became worthless.
The case presented complex legal issues under both federal and state securities laws, including the application of the Sarbanes-Oxley Act of and the Private Securities Litigation Reform Act of The case was settled with the defendants’ insurer, and the plaintiffs were awarded damages of $2 million, despite the effort of the purchaser to file for bankruptcy protection.
Curtis D. Smith
Settling a Former Shareholders Claims
The majority owner of a successful company was sued by a former minority shareholder she had previously bought out. The plaintiff alleged that his rights as a minority shareholder were violated before he sold his stock. In a case of first impression, the plaintiff claimed that he had been illegally terminated from his employment and was entitled to lost salary. He also claimed emotional distress damages for having been forced off the board of directors, and he argued that his stock sale did not preclude either claim.
Our team of trial attorneys first persuaded the court to dismiss the employment claim, and then resolved the rest of the claim successfully. Decisive developments in the case included locating the plaintiff’s pertinent medical records and forcing the production of his personal diary, which revealed multiple sources of distress beyond his employment termination.
Thomas J. Shroyer, Curtis D. Smith, Taylor D. Sztainer
Swift Action Protects Brand, Shuts Down IP Infringement
When the brand name of a highly successful food product was misappropriated to sell an energy drink to young men as a faux illegal drug, our litigation attorneys and trademark team combined forces, obtained an immediate temporary restraining order, and quickly issued a preliminary injunction in federal court. The result was the entire removal of the infringing product from shelves within days, which sent a loud message that ensured the integrity of our client’s brand and products.
Thomas J. Shroyer
Maximizing and Protecting Rights of Homeowner
Our client’s 15,square-foot lake home suffered major water intrusion and mold infestation. Through a combination of claims against his homeowner’s insurer and the contractor who constructed the home, we recovered a total of $ million. The claim against the contractor, and his subcontractors, was tried to a jury, which resulted in a recovery 20 times the amount that had been offered in settlement prior to trial.
Curtis D. Smith
Protecting a Clients $10M Business Opportunity
Our client had negotiated a very favorable financing arrangement with a wholesaler of electronic goods. Key to the transaction was credit insurance issued by an international insurer. A few months into the arrangement, the credit insurer decided it wanted to withdraw from the deal in violation of its contract. We sued the credit insurer and obtained a temporary restraining order, which prohibited the insurer from withdrawing from the transaction. The case then quickly settled, which allowed our client to make in excess of $10 million over the life of the arrangement.
Curtis D. Smith, Kevin M. Busch
Upholding the Rights of an Insured
Our client suffered a substantial hail loss to its farm buildings, and its insurer offered to pay only a fraction of the replacement cost to repair the damage. We guided our client through the appraisal process required by the insurance policy, but the insurer still refused to pay, claiming that the policy did not contain replacement cost coverage. We commenced litigation and undertook discovery into the insurer’s adjustment practices. The insurer settled by paying the full replacement cost, plus reimbursing our client for its attorney’s fees, employee time, interest, and appraisal costs.
Curtis D. Smith
RICO Charges by Heiress against CPA Dismissed
When the disgruntled heir of a family fortune wanted a “deep pocket” to pay her claim that another heir had stolen from the decedent, she sued the decedent’s CPAs for treble damages and her attorneys' fees under the Racketeer Influenced Corrupt Organization Act. We argued that the allegations of fraud and common enterprise lacked credibility.
Bottom line: Federal court dismissed the claim.
Thomas J. Shroyer
Sibling Will Dispute Resolved
We represented one of the disputing siblings in a family will contest, which involved claims that our client had forged the mother’s signature. During the trial in probate court, Moss & Barnett attorneys convincingly attacked the credibility and reliability of the other side’s handwriting expert during cross-examination, and eventually helped our client prevail.
Thomas J. Shroyer, Cindy J. Ackerman
Dismissal of Claims on Jurisdiction Grounds
A Rhode Island business client and its principals were sued in federal court in Minnesota by a former long-term business consultant for breach of a consulting agreement. We obtained swift dismissal of all claims against our client based on lack of personal jurisdiction. We successfully convinced the court that exercising jurisdiction over our client in Minnesota violated the Minnesota long-arm statute and constitutional due process.
Curtis D. Smith, Taylor D. Sztainer
Successful Resolution of Non-Compete/Non-Solicitation Dispute
Our client was a top executive of a national retail grocery, supply chain, and wholesale distribution company. After leaving the company to take a position at one of its largest competitors, our client and his new employer were sued in federal court for breach of a non-competition and non-solicitation agreement, misappropriation of trade secrets, and interference with contractual relations. After persuading the court to refrain from issuing a temporary restraining order against our client which would have prevented him from working for the competitor, we successfully settled the dispute, and our client now enjoys unencumbered employment with his new employer.
Curtis D. Smith, Matthew P. Kostolnik, Taylor D. Sztainer
Will Sustained Against Forgery Claim
In re Estate, WL (Minn. Ct. App.) – The client was named as sole beneficiary of his mother’s estate, but his sister challenged the will on the grounds that their mother’s signature had been forged by the client. On appeal, after the probate court overruled the forgery claims, the Minnesota Court of Appeals stated that the opinion of the sister’s handwriting expert was effectively “undermined” by the cross-examination of Tom Shroyer.
Thomas J. Shroyer
Fabricated Sexual Assault Claim
Plaintiff v. Non-Profit Client (Ramsey County District Court No. C) – Tom Shroyer defeated a claim that a social worker for a community non-profit agency had sexually assaulted one of his clients. The jury took less than 15 minutes to return a unanimous defense verdict after Tom cross-examined the plaintiff for an entire day.
Thomas J. Shroyer
Minority Shareholder Buyout Limited
Shareholder v. Client Company (Henn. Cty. Dist. Ct. File No. EM 96 ) – When the client corporation abruptly fired its 49% owner, he sued for a premium, “fair value” buyout. After a “battle of experts” on radically differing valuations, the court ruled in favor of the company, drastically curtailing the amount and terms of the buyout.
Thomas J. Shroyer
Ninth Circuit Victory
A small (~$20 million) hedge fund hired the defendants to manage an investment account by using algorithmic software to make trades in the account. After closing the account due to a nearly $2 million loss, the hedge fund learned that most of the trades in the account were made manually, and not via the algorithmic software. The fund sued for breach of contract and fraud, but the federal district court dismissed the claims holding that the parties’ contract did not require software-driven trades. On appeal, the Ninth Circuit panel assigned to the case unanimously agreed with our arguments regarding contract interpretation.
The end result: The Ninth Circuit reversed the district court, giving the hedge fund another chance at recovery.
Joshua P. Oie