Beck Reed Riden LLP

Russell Beck in New England In-House on noncompete agreements

steveriden@gmail.com — Wed, 22 Feb 2012 22:51:35 +0000

The February 29, 2012, issue of New England In-House features Russell Beck addressing noncompete agreements for in-house counsel in an article called “Are New England’s in-house counsel free to join competitors?”

Many companies ask new employees to agree to restrictive covenants as a condition of employment. These restrictive covenants can take a variety of forms, including the familiar non-compete agreements and nondisclosure agreements, as well as forfeiture agreements, no-raid agreements, and assignment of inventions agreements.

Unlike most employees, however, lawyers are generally not permitted to enter into noncompete agreements. Rule 5.6 of the Rules of Professional Conduct bars attorneys from entering into noncompete agreements. However, the language in Rule 5.6 leaves open the question whether in-house counsel are always prohibited from entering into non-competition agreements.

In his article, Russell Beck refers to the American Bar Association for an answer:

Despite those questions, the American Bar Association has determined that Rule 5.6 applies not just to outside lawyers, but to in-house counsel as well.

And, as the New Jersey Advisory Committee on Professional Ethics (relying on Virginia, Illinois, Connecticut, Washington and Philadelphia bar opinions, as well as cases involving outside counsel) assayed, “the overwhelming majority of jurisdictions in the United States follow the ABA’s approach and hold that restrictive covenants affecting lawyers, whether employed by corporations or private law firms, generally violate state ethical standards.

Thus, while it is clear that attorneys, including in-house counsel, are generally not permitted to enter into noncompete agreements, one possible exception is based on the role that the in-house counsel takes in his/her new company:

In contrast, it is only when the non-compete prohibits in-house counsel from taking a purely business role that the agreement would likely be enforceable.

Thus, for example, a non-compete that prevents in-house counsel from going to a competitor as a COO would likely be enforceable.

The rationale for that exception to the exception is that the individual’s status as a lawyer is irrelevant to the role and, therefore, client choice for legal services is not at issue.

Russell Beck concludes the article with a reminder that, although in-house counsel are generally free to move about without the burdens of a noncompete agreement, they are not free from all restrictions.

So, while you are almost certainly free to move from in-house job to in-house job, and to bring legal support staff of your choosing, you are not free from all restrictions. Confidentiality and conflicts rules and certain restrictive covenants will govern your transition.

Russell Beck’s complete article appears here.

About Us

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and labor and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

We are widely recognized for our work handling trade secret and noncompete matters. Russell Beck’s work in this area is well recognized; it includes:

Over sixteen years of working on trade secret, noncompete, and unfair competition matters
Authoring the book Negotiating, Drafting, and Enforcing Noncompetition Agreements and Related Restrictive Covenants (4th ed., MCLE, Inc. 2010), used by other lawyers to help them with their noncompete cases
Drafting and advising on the current bill pending before the Massachusetts Legislature to define, codify, and improve noncompetition law
Teaching Trade Secrets and Restrictive Covenants at Boston University School of Law
Founding and administrating the award-winning blog, Fair Competition Law

Stephen Riden in Lawyers USA on the pitfalls of ‘frictionless’ social media

steveriden@gmail.com — Tue, 21 Feb 2012 21:23:42 +0000

Stephen Riden is featured in the December 2011 issue of Lawyers USA in an article about e-discovery and avoiding the pitfalls of frictionless social media. The article is reprinted here. The article also appeared in the January 9, 2012, issue of Massachusetts Lawyers Weekly.

The article is by Lawyers USA reporter Correy Stephenson. It focuses on how users of social media sites, like Facebook, may be unwittingly sharing a detailed history of their interests and purchases with other users. While it can be harmless to share songs from Spotify or articles from the Washington Post with Facebook friends, data shared over online social networks — like purchases from Amazon — can be a treasure trove litigants and their attorneys during the discovery phase of a lawsuit.

Stephen describes this so-called “frictionless” media as follows:

‘[It's t]he idea that people who are connected to Facebook are connected to everything else on the Internet,’ said Stephen D. Riden, a commercial litigator at Beck Reed Riden in Boston. ‘But it also means giving away information. I have several friends that on a daily basis, I know what articles they are reading – it’s a little creepy’

In the article, Steve Riden also talks about Facebook’s Timeline and how access to this level of information can help lawyers, which is not the intention of the typical user:

‘So much of the discovery process is just setting up a timeline and creating a chronology of events, when certain things happened and what was said and done,’ Riden said. ‘Technology that can do that automatically and is almost failsafe makes a lawyer’s job easier.’ The Timeline feature also serves as a reminder that what you do online is never forgotten and does not just disappear, Riden said.

In the article’s conclusion, Stephen notes that individuals who are already involved in litigation should refrain from discussing their circumstances online:

Riden said he warns clients about the ramifications of expressing their frustration with their legal situation online, and suggests that they put it all in a long e-mail which they can send to him. ‘It helps them vent and is protected by the privilege.’

Steve Riden frequently writes and speaks about commercial litigation issues, including social media and electronic discovery.

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Russell Beck in New England In-House on Managing Legal Fees

steveriden@gmail.com — Wed, 25 Jan 2012 23:39:34 +0000

The November 2011 issue of New England In-House features Russell Beck’s guide for controlling legal costs, called “Prevent runaway fees with structured agreements.”

When companies hire a law firm to provide ongoing legal services, the monthly bills can be unpredictable. And unpredictable legal bills can wreak havoc on a company’s legal budget. In his article, Russell Beck offers one solution to the problem of runaway legal fees: the structured agreement.

I had been handling multiple cases every year, year after year, for a particular client. It was complex business litigation. Accordingly, as would be expected, in some years the fees were substantial, and in other years they were comparatively little.

I asked the client whether, for predictability purposes, it would prefer an option in which we agree on an annual fee (to be paid monthly on a pro rata basis) for all of its litigation in Massachusetts (and certain other states). Such arrangements have colloquially been referred to as having a firm “on retainer,” though more recently the term “portfolio billing” has been used.

The client’s reaction was a bit surprising. While it liked the idea of predictable fees, it had a concern — but not the one I expected. Its concern was that the law firm where I practiced at the time would be inundated with all types of small claims litigation that had, to that point, been handled in-house.

The complete article is here. For more information about strategies for containing legal fees, click here.

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Stephen Riden in Forbes on Ownership of Twitter Accounts

steveriden@gmail.com — Mon, 09 Jan 2012 16:14:22 +0000

Stephen Riden is featured in a November 17, 2011, Forbes story titled “Who Owns Employees’ Twitter Accounts?”

The article is written by Forbes staff writer, Kashmir Hill. It follows an earlier Forbes story covering a lawsuit filed by a company against its former employee for using a Twitter account after leaving the company.

In the lawsuit, the company, Phonedog, claims that its former employee, Noah Kravitz, established a Twitter account at the company’s request, and then used that account to promote the company’s services.

When the employee left, the Twitter account went with him. So the company sued and is seeking damages for the alleged theft of its trade secrets, i.e., the Twitter account and its followers.

In the article, Steve discusses the importance of addressing the use of social media accounts in the employee handbook.

It’s an interesting case, and illustrates the importance of employers and employees hammering out these details in advance. “It’s much cheaper to spell this out ahead of time than to litigate it after the fact,” says Stephen Riden, a partner at Beck Reed Riden LLP, who specializes in employment law. He points to Dell’s social media policy as a good example of this, calling it “forward-thinking.”

Click here to read more about the intersection of social media and employment disputes.

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Beck Reed Riden LLP Has Moved

steveriden@gmail.com — Tue, 20 Dec 2011 23:05:36 +0000

Beck Reed Riden LLP has a new home. Our new address is 155 Federal Street, Suite 1302, Boston, MA 02110. All other contact information remains the same.

Our new office is near South Station and directly across the street from the Bank of America building.

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Stephen Riden in Lawyers USA on Litigation Trends

steveriden@gmail.com — Thu, 15 Dec 2011 19:24:02 +0000

Stephen Riden is featured in the November 2011 issue of Lawyers USA in an article about the intersection of technology and litigation. The article is by Lawyers USA reporter Correy Stephenson.

The article focuses on the ways that courts and lawyers deal with new sources of potentially relevant information. For example, the widespread use of social media and embedded GPS technology represent a new avenue of pretrial discovery, with the potential to reveal minute-by-minute details about a litigant’s activities. The article is reprinted here.

Lawyers should be aware of the value of information from unexpected places, Riden said. In addition to the potential treasure trove to be found on social networking sites, he noted that apps with geolocation abilities can track a person without his or her knowledge.

For example, iPhones have “a stealth tracking feature that shows every place you have been,” Riden said, who pulled up his own information on his phone and was “shocked” at how accurate it was.

The article also addresses the the trend among judges toward a more nuanced understanding of electronically stored information, and its role in the courtroom.

As judges have become more sophisticated about electronically stored information (ESI), parties are having an increasingly difficult time convincing them that every single piece of metadata is needed in discovery, said Stephen D. Riden, a commercial litigator at Beck Reed Riden in Boston.

“Courts are more resistant to a soup-to-nuts request and will clip parties’ wings if they feel like they are being too aggressive.” Instead, lawyers should be prepared to tailor their ESI requests to the case at hand, he said.

Steve Riden frequently writes and speaks about commercial litigation issues, including electronic discovery.

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Stephen Riden in Forbes on Social Media Employment Disputes

steveriden@gmail.com — Tue, 22 Nov 2011 20:21:54 +0000

Stephen Riden is featured in a November 14, 2011, Forbes story about a lawsuit filed by a company against its former employee for using a Twitter account after leaving the company. The article is written by Forbes staff writer, Kashmir Hill.

When the employee left, the Twitter account went with him. So the company sued and is seeking damages for the alleged theft of its trade secrets, i.e., the Twitter account and its followers.

Stephen Riden, a partner at Beck Reed Riden LLP, who specializes in employment law, says the case is ‘murky,’ in part because Kravitz included ‘Phonedog’ in his Twitter handle. ‘Employers usually address this in their employee manuals — whether an employee can include their name or brand in social networking accounts, and whether accounts are being set up for the company or the employee,’ says Riden. ‘It’s much cheaper to spell this out ahead of time than to litigate it after the fact.’

Click here to read more about the intersection of social media and employment disputes.

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Navigating the Pitfalls of Close Corporations and Shareholder Disputes

steveriden@gmail.com — Mon, 31 Oct 2011 19:52:21 +0000

Being part of a family-owned business or a company with a small number of investors can be a great experience – these types of companies embody the spirit of entrepreneurship and form the bedrock of our economy. These companies – known as “close corporations” – are typically run by a tight-knit group of family members or individuals. Some close corporations are multi-generational family businesses, others are new enterprises, often started with little more than a great idea, an opportunity in the marketplace, and some capital.

When things are going smoothly, and the company’s owners are making a return on their investment, there’s no cause for complaint. As with any business venture, however, internal conflicts can arise. Shareholder disputes in close corporations can take many forms. For example, it is not uncommon for a shareholder or group of shareholders to want a co-owner to leave the company. Differences in management styles or personality conflicts can drive a wedge between business partners. Tensions can also develop between majority and minority ownership interests.

The very thing that can make a close corporation successful – a small group of investors who decide among themselves how to operate the venture – can also make resolution of internal disputes difficult. Because when the small group of owners disagree about how to run the company or who should be in charge, the path to a resolution is not always clear. When tempers flare, shareholder agreements and by-laws are not always helpful for resolving management deadlock.

It can be tricky to find the right solution for parties who are involved in a close corporation dispute. Sometimes, a collaborative process can yield positive results. Other times, it is necessary to resort to litigation. The type of solution is heavily dependent on the nature of the dispute and the dynamics of the owners.

In most cases, obtaining the advice of an attorney who has experience untangling the thicket of ownership interests and legal obligations is the critical first step toward reaching a resolution. Beck Reed Riden LLP’s attorneys frequently handle these types of disputes – both in and out of court. The guide below provides some further background about the nature of close corporation disputes. If you have any questions or if you are involved in a close corporation dispute, please contact us to discuss your situation. Attorneys Russell Beck and Stephen Riden have years of experience in this area and they can be reached via email (info@beckreed.com) or telephone (617-500-8660).

What is a close corporation?

A close corporation is a corporation for which no ready market exists for the trading of its shares. Thus, the shares are neither publicly traded on a stock exchange nor can they be sold to members of the public. The shares of a close corporation are held by a small number of shareholders or investors, who are usually heavily involved in the management and day-to-day operations of the business.

Typically a close corporation is a family business or one that is owned by a small group of investors. It can range from a mom-and-pop restaurant to an IT consulting company.

Shareholders’ duties in a close corporation

Stockholders of a close corporation owe each other a duty of utmost good faith and loyalty. A controlling shareholder cannot pursue any course of conduct if there are alternatives that would be less harmful to minority shareholders. Massachusetts law protects minority shareholders because they cannot sell their stock to avoid oppressive behavior by controlling shareholders.

When disputes might arise between owners of a small business

Disagreement can lead to disastrous results if the shareholders are caught unprepared. For example, a shareholder might decide she no longer wants to remain involved in the business and start a competing venture, taking clients with her. Siblings in a family business might become embroiled in a family feud and cannot reach an amicable resolution because one sibling has taken the assets. Or a couple that owns a restaurant might decide to go their separate ways.

A court’s resolution of disputes between small business owners

Resorting to the courts does not necessarily lead to optimal results. In some cases, the only recourse in a close corporation dispute is the dissolution of the corporate entity, a solution that many shareholders find unsatisfactory.

The case of Graham v. Fish, a Massachusetts Superior Court case decided on May 4, 2011, illustrates how one court’s resolution of such business disputes can lead to harsh results. In that case, Gordon Graham and David Fish were the sole shareholders of Tennis Camps at Harvard, Inc., a children’s summer camp. Both Graham and Fish held contract positions as Harvard tennis coaches, which allowed them to access Harvard’s facilities during the summer. When Graham lost his contract position, Fish became uninterested in continuing the business relationship and formed a competing camp, the Tennis Academy.

Graham sued Fish for breach of fiduciary duty. Although shareholders of a close corporation owe each other the duty of utmost good faith and loyalty, the court ruled that it would impose no liability on Fish unless Graham could show that there was a less harmful and reasonably practicable alternative to achieve the legitimate business purpose. Thus, the court found that Fish was free to seek dissolution and establish a new camp, because he was under no obligation to continue the business. According to the court, when Graham lost his access to the Harvard facilities, Fish had a legitimate business purpose for discontinuing the camp he owned with Graham.

The Graham case illustrates that an aggrieved shareholder may not be able to recover in court unless he can affirmatively show one of two things: either that the alleged wrongdoer has no legitimate business purpose for his action, or that there was a legitimate business purpose but that objective could have been achieved through a less harmful alternative means. In practice, these can be difficult standards to meet.

In essence, to prevail in a dispute over a party’s alleged breach of fiduciary duties, courts want to see evidence that one of the parties acted in a clandestine manner, stole corporate assets for his exclusive use, or misused corporate assets in launching a competing entity. In the court’s view, the only remaining solution is to dissolve the corporation. For most shareholders, dissolution of the corporation is not a satisfactory answer.

Let Beck Reed Riden LLP help you navigate your close corporation dispute

With years of experience representing partners, owners, and family members in a variety of corporate disputes, Russell Beck and Stephen Riden have earned the skills and perspective necessary to provide thoughtful guidance to business owners involved in shareholder disputes. We are committed to developing custom-fit, appropriate solutions for the complex relationships that are inherent in these types of conflicts. Attorneys Russell Beck and Stephen Riden can be reached via email (info@beckreed.com) or telephone (617-500-8660).

Stephen Reed Presenting Seminar for Employment Attorneys on MCAD

steveriden@gmail.com — Wed, 26 Oct 2011 18:51:08 +0000

On October 26, 2011, Stephen Reed is giving a presentation about appearing before the Massachusetts Commission Against Discrimination (MCAD) as part of an MCLE seminar titled “On Your Feet at the MCAD.”

This seminar will help attorneys build the skills needed to make an effective case when appearing before the MCAD.

The agenda for the seminar is as follows:

MCAD Overview.
Faculty Demonstration of an Investigative Conference and Mock Investigative Conference with MCAD Investigators.
Faculty Demonstration of Conciliation Conference and Mock Conciliation Conference with MCAD Mediators.
Faculty Demonstration of Pre-hearing Conference and Mock Pre-hearing Conference with MCAD Hearing Officers.
Faculty Demonstration of Opening Statement and Mock Opening Statement with MCAD Hearing Officers.
View from the MCAD.

Stephen Reed represents employers in a wide array of labor and employment matters, from counseling companies on day-to-day employee-relations issues to litigating cases in court and administrative agencies.

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Russell Beck Among Top 100 New England Super Lawyers

steveriden@gmail.com — Tue, 25 Oct 2011 14:56:29 +0000

Massachusetts Super Lawyers Magazine selected Russell Beck as one of the Top 100 Super Lawyers in New England for 2011.

Russell Beck’s practice concentrates on complex business litigation, including high-tech and intellectual property matters, business-to-business conflicts, unfair competition claims, breach of contract claims, employee mobility issues, attorney/partner mobility matters, land use cases, and healthcare payor/provider disputes. Russell is also a leading authority on the law of trade secrets and noncompetes.

The selection of the top 100 Super Lawyers in New England is based on a process of peer review following a survey of lawyers from the region. The Super Lawyers selection process is described in detail here.

All of Beck Reed Riden LLP’s attorneys have been selected as Super Lawyers or Rising Stars this year.

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