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THIS ISSUE'S HEADLINES
Fired Employee Who Disparaged Boss on Facebook Can Collect Unemployment
What is Disgorgement’s Future as a Remedy for S.E.C. Violations?
Protect Your Workplace Against Spoofing
Chimpanzees Remain in Custody after Writs of Habeas Corpus Denied
FIRED EMPLOYEE WHO DISPARAGED BOSS ON FACEBOOK CAN COLLECT UNEMPLOYMENT
The Rhode Island Supreme Court recently awarded unemployment benefits to an employee who was fired for posting disparaging comments about his boss on Facebook. Although the worker was already on thin ice due to a host of issues, the employer ultimately fired him after his boss saw the Facebook post. The post was not defamatory or terribly inflammatory, but it was apparently the last straw leading to the employee’s termination.
 The employee sought unemployment benefits, claiming that his Facebook post was protected free speech. But, he was denied at every level. He appealed to the Rhode Island Supreme Court. The Supreme Court ultimately granted him unemployment benefits, not because the Court believed his Facebook post was appropriate, but because the Court found no meaningful connection between the post and his employment.
Significantly, the employee never named his boss or his employer in his Facebook post. The Supreme Court, however, did not focus very much on the substance of the comments or the reasons the employee made them. Rather, the issued boiled down to one question: was the employee’s post sufficiently “connected” to the workplace? The Supreme Court concluded that the post was not sufficiently connected because, among other things, the employee had blocked his boss on Facebook, there was no evidence that any customer or employee saw the post, and the employer failed to show that the post was made on a company device.
Interestingly, the Supreme Court also noted that the employer did not have a social media policy. Although the Supreme Court did not elaborate on the significance of this fact, the Supreme Court effectively put employers on notice that if they do not have a social media policy in place, they will have a harder time disciplining or terminating employees for social media related misconduct. Therefore, employers would be well advised to create a social media and device policy to put their employees on notice of what online conduct is permissible or not.
For more information, contact PLDO Partner Brian J. Lamoureux who focuses his practice on civil litigation, employment law and workplace issues involving social and digital media, and created and teaches an MBA-level course at Providence College called “Digital and Social Media in the Business Environment.” You can also click here to read an article about the decision that was published in RI Lawyers Weekly and includes legal insight and comments by PLDO Partner Matthew C. Reeber, who is an employment law attorney and litigator. To speak to either attorney, please call 401-824-5100 or email Attorney Lamoureux at bjl@pldolaw.com and Attorney Reeber at mreeber@pldolaw.com.
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WHAT IS DISGORGEMENT’S FUTURE AS A REMEDY FOR S.E.C. VIOLATIONS?
The Securities and Exchange Commission (S.E.C.) has authority to investigate violations of federal securities laws and commence enforcement actions if its investigations uncover evidence of wrongdoing. Initially, the S.E.C.’s statutory authority was limited to seeking an injunction barring any future violations. Beginning in the 1970’s, however, courts began granting the S.E.C.’s requests for disgorgement in enforcement proceedings. Disgorgement is a remedy which requires defendants to repay any unlawful monetary gains. Although Congress has since authorized the S.E.C. to seek monetary civil penalties, the S.E.C. has continued to seek disgorgement.
 The United States Supreme Court recently ruled that claims for disgorgement in an S.E.C. enforcement action must be filed within a five-year statute of limitations. The Court’s decision turned on whether disgorgement is a penalty or an equitable remedy, and the court determined it was the former. The ruling will effectively require S.E.C. enforcement staff to complete investigations in a shorter amount of time. Moreover, the designation of disgorgement as a penalty could limit the amount the S.E.C. can seek as a civil monetary penalty on top of any money disgorged. However, the holding of the case and its direct implications are not the real headline.
A literal footnote in the decision could have a much greater impact than the decision itself. It states that “nothing in this opinion should be interpreted as an opinion on whether courts possess authority to order disgorgement in S.E.C. enforcement proceedings or on whether courts have properly applied disgorgement principles in this context.” As such, the Court made a point to say that it has not determined that courts should be ordering disgorgement at all in this context. Importantly, the federal securities law does not list disgorgement as one of the remedies available to the S.E.C.
In 1971, the Second Circuit Court of Appeals upheld an order requiring defendants to repay profits made by trading on confidential information, as an exercise of the equitable powers of a court to prevent wrongdoing. Ever since, the S.E.C. routinely seeks this remedy and courts routinely grant it. Nevertheless, the Supreme Court’s footnote may have opened the door to arguments by defense lawyers that disgorgement is not a permissible remedy in a S.E.C. enforcement proceedings.
The answer to whether disgorgement in securities cases is permissible will involve an inquiry as to whether an English chancery court in 1789 (when Congress adopted the Judiciary Act that gave federal courts the power to hear lawsuits “in equity”) had the power to order that remedy. If the remedy was not an exercise of a court’s inherent authority back in 1789, then disgorgement would not be a permissible exercise of the equitable powers of a court to prevent wrongdoing. However, Congress could resolve the question by specifically authorizing disgorgement as an available remedy in any S.E.C. enforcement action. If you have questions about this article or would like to speak to Attorney Sally P. McDonald, please call 401-824-5100, or email her at smcdonald@pldolaw.com.
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PROTECT YOUR WORKPLACE AGAINST SPOOFING
We read about companies and individuals being scammed by hacking or spoofing routinely. No business or individual is immune. Spoofing is a technique in which the spoofer goes to great lengths to secure access to user systems and the information behind protective fire walls. This type of scam artist tracks email communication in an attempt to trick the recipient of an email to release sensitive information or even gain access to bank accounts and confidential information. Email spoofing is also referred to as “phishing,” and is employed to make the recipient of an email believe that the sender is a known source. Always beware of “From” when you do not recognize the sender because what appears to be real, may turn out to be a phishing attempt. And anytime a sender is asking for a password or personal information, delete the email immediately.
 Internet scam artists are sophisticated thieves who set up fraudulent websites to obtain information from victims or seek to install viruses on their victims’ computers. Once the spoofer gains access to the system, they send illegitimate emails to unknowing recipients. Common scams are to ask for passwords or direct the recipient to send company funds to a third party. Another example of this type of spoofing is when the recipient of an email is directed to a site that looks like it’s from their credit card company and the person is asked to log into the site. If you do log into the site, the spoofer could then log onto the real site and create significant damage by using the personal account information.
We all need to be extremely cautious whenever we receive a message asking for personal information and only download files from trusted sources. Make certain that your system is adequately protected with firewalls to block inquiries that are sent from unknown sources and maintain up to date antivirus software. Spoofers and online scams are becoming more sophisticated. It is wise to test your antivirus program regularly and install upgrades and plug-ins as necessary. Below are a few steps recommended by security experts, which will improve your online security against spoofers and cyber scams:
- Passwords should always be at least eight characters and include a combination of letters and numbers unrelated to you or your family. Weak passwords are a target for spoofers.
- Don't allow others to access your password protected sites without you being present and change your password routinely.
- Keep passwords on an old computer not connected to the internet and if you don't have an extra computer, encrypt the files.
- Another layer of protection could involve keeping the files in two locations. Copy the encrypted files to a DVD or flash drive and give it to a trusted family member or friend. If your computer is infected by a virus and temporarily unusable, those files will still be available to you.
- Don’t enter user names or passwords when an e-mail or pop-up window asks for it.
All businesses must be diligent in protecting confidential information and employing technology consultants to make certain that state of the art encryption and fire walls are effective. For more information about this issue or other business matters, please contact Managing Principal Gary R. Pannone, who was named Rhode Island’s 2017 Lawyer of the Year by Best Lawyers for his business law practice, at 401-824-5100 or email gpannone@pldolaw.com.
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CHIMPANZEES REMAIN IN CUSTODY AFTER WRITS OF HABEAS CORPUS DENIED
A New York state appeals court recently denied writs of habeas corpus to two chimpanzees, Tommy and Kiko. Habeas corpus (Medieval Latin for “that you have the body”) is a recourse in law through which a person can report an unlawful detention or imprisonment to a court and request that the court order the custodian of the person, usually a prison official, to bring the prisoner to court to determine if the detention is lawful.
The Nonhuman Rights Project argued, on Tommy and Kiko’s behalf, that chimpanzees should be treated as legal “persons,” entitled like humans to bodily liberty. The group asked for the chimps to be released from their captivities by private owners in New York State, and be sent to a large primate sanctuary in Florida. Notably, the animal rights group’s effort was supported by the likes of serious intellectuals such as British primatologist Jane Goodall, and Harvard Law School Professor Laurence Tribe.
The Nonhuman Rights Project argued that chimpanzees and humans share many behavioral, cognitive and social capabilities. However, the court concluded that these shared capabilities “do not translate to a chimpanzee’s capacity or ability, like humans, to bear legal duties, or to be held legally accountable for their actions…”
The court noted that a chimpanzee charged with a crime would not be deemed fit to proceed under the human legal standard, because it would not have the capacity to understand the proceedings against them or to assist in their own defense. It was further noted that chimpanzees who have killed or seriously injured human beings have not been prosecuted.
The Nonhuman Rights Project argued that the ability to acknowledge a legal duty or legal responsibility should not be determinative of entitlement to habeas relief since, for example, infants cannot comprehend that they owe duties or responsibilities, nor can a comatose person, and yet both have legal rights. Animal activists have further argued that since corporations are deemed “persons” under the law, chimpanzees should be too.
Chimpanzees are considered to be the closest living relatives of humans. They can walk upright, use tools and communicate in a manner that is similar to that of human nonverbal communication, using vocalizations, hand gestures and facial expressions. There is also some evidence that they can recreate human speech.
To date, Chimpanzees have not been granted human rights by our courts. However, this case was not the first legal challenge in this regard, and it is unlikely to be the last. If you have questions about this article or would like to speak to Attorney Sally P. McDonald, please call 401-824-5100, or email her at smcdonald@pldolaw.com.
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