THE NBA, DONALD STERLING, AND TERMINATION FOR CAUSE

The verdict is in. Donald Sterling was naughty. He held some rather unpalatable opinions, voiced them, and instantly acquired fifteen minutes of infamy for all the wrong reasons.

In one magnificent poof, the NBA and the Court of Public Opinion heard his case, and found him wanting. As the NBA’s god du jour wrote his judgment on the walls of every viable television screen in America with a flourish of his magisterial finger, tongues started wagging; some with approval, some with castigation, and some with nothing useful to add. In that singular poof, the money spigot turned on full blast, gushing legal tender down someone’s drain. The spigot will flow for years to come.

There are winners and losers.

The winners include the media, who have yet another reason to sell sensationalism; the NBA, who may, in time, rid itself of a distasteful owner; and the general public, who will have countless hours of entertaining new discussion, ranting and raving to enjoy.

The losers include Donald Sterling, who has to live with Donald Sterling; the NBA, who has to deal with Donald Sterling; and the general public, who will endure countless hours hearing about Donald Sterling.

The more immediate question is whether a lawyer’s blog about the fracas has anything new to offer.

Donald Sterling’s words are more than private thoughts made public. They form the legal fodder for important questions as to the scope and extent of moral turpitude in the context of private contracts. They open the door to consideration of the meaning of the term “for cause”. If, Sterling’s words and thoughts came from the mouth of a corporate manager or director, given a contract that required “cause” for termination, would they be sufficient to constitute “cause”? Would cause exist if the manager or director held such views, but kept them to himself? If not, where is the fine line between bigoted beliefs and bigoted words?

The Washington Supreme Court defined ‘just cause’ in employment cases as “… a fair and honest cause or reason, regulated by good faith on the part of the party exercising the power. We further hold a discharge for ‘just cause’ is one which is not for any arbitrary, capricious, or illegal reason and which is based on facts (1) supported by substantial evidence and (2) reasonably believed by the employer to be true.” Baldwin v. Sisters of Providence, 112 Wn.2d 127, 139, 769 P.2d 298 (1989).

The Court subsequently ruled that “…‘[j]ust cause’ is a term of art in labor law…. Whether there is just cause for discipline entails much more than a valid reason; it involves such elements as procedural fairness, the presence of mitigating circumstances, and the appropriateness of the penalty.” Civil Serv. Comm’n of City of Kelso v. City of Kelso, 137 Wn.2d 166, 173, 969 P.2d 474 (1999). See also Kitsap County Deputy Sheriff’s Guild v. Kitsap County, 140 Wn.App. 516, 519–20, 165 P.3d 1266 (2007) (laying out seven factors typically considered in determining whether just cause exists).

In Sterling’s case, the conduct was measured against the terms of an NBA Constitution that gave broad powers to the Commissioner to effect discipline “upon any person who, in his opinion, shall have been guilty of conduct prejudicial or detrimental to the Association”. 1 The application of “procedural fairness, the presence of mitigating circumstances, and the appropriateness of the penalty” was irrelevant to the decision. It was an opinion call issued by one vested with authority to render the opinion. Tough luck, Donald. Life ain’t fair.

But would the outcome of a similar case in Court rise to the level of just cause in the case of the corporate manager or director? That is a harder call.

In the context of employment, the Civil Rights Act prohibits discrimination based on race, color, religion, sex, national origin, disability, or age in hiring, promoting, firing, setting wages, testing, training, apprenticeship, and all other terms and conditions of employment. Holding or expressing a private discriminatory thought or belief outside of the workplace that does not result in discriminatory conduct inside the workplace would arguably be protected.

The Constitution prohibited Congress from making laws abridging the freedom of speech. So-called “hate speech” that posed an imminent danger of unlawful action, where the speaker intended to incite unlawful action, remains outside the law. In R.A.V. v. City of St. Paul, 505 U.S. 377 (1992), Justice Scalia wrote that: “The reason why fighting words are categorically excluded from the protection of the First Amendment is not that their content communicates any particular idea, but that their content embodies a particularly intolerable (and socially unnecessary) mode of expressing whatever idea the speaker wishes to convey…”.

Donald Sterling’s words cannot, in any event, rise to the level of hate speech intended to incite unlawful action.

But as society loosens its grip on constitutionally protected rights, to the extent that a corporate manager or director’s identical private words create a climate of prejudice that may in turn foster the commission of hate crimes, a court could easily rule that just cause exists for termination.

1 Constitution of the National Basketball Association, Article 35A(d).

Copyright © 2014 Gregory D. Lucas

PRIMER ON FRAUD PREVENTION – Lesson #5

Historians record the earliest known commercial fraud as that of Xenothemis and Hegestratos, who arranged to deliver a shipload of corn to buyers in Athens, planning in advance to sink an empty ship, then claim payment for the corn. The buyers, unaware that the ship was devoid of its load, became an early mark for insurance fraud.

Xenothemis and Hegestratos had not counted on the ship’s other passengers, who they planned to also sink with the imaginary corn, finding fault with the plan. When the scheme was uncovered, the passengers quickly identified alternatives, the least offensive of which was sending Hegestratos to the briny deep with his imaginary load.

The story, though ancient, is by no means the earliest commercial fraud. One need only look to the pages of Genesis to find accounts of commercial fraud that are centuries older. Genesis 29:16-25 describes a classic “bait and switch” that serves as a model for all such scams. After striking a deal to win his beloved Rachel, Jacob honored his contract with Laban, only to find himself wed to Leah. Strange things happen in the dark.

Every thief knows that. Conversely, fraud prevention starts with shining bright lights into dark corners. Crooks hate that. Like Hegestratos’ phony corn, and Laban’s phony plan, the scam artist can be undone by asking hard questions, and imposing even harder conditions.

Take, for example, commodities scams.

The Setup

A gold merchant reaches through your mail, your radio, your television, or your telephone to persuade you that the world is facing economic chaos, in which all investments, including stocks, bonds, cash, houses, and everything you value, will plummet, leaving you destitute. But some will prosper – the wise few who have traded their worldly wealth for gold. When all else fails, they tell you, gold will reign supreme.

Indeed, their charts and graphs and busy digits serve only to confirm that the end is already in sight, and gold is soaring. But for a limited time, and a limited time only, you can get in on the last of the truly great deals – gold at a fraction of its price. With fever mounting, you call the convenient (800) telephone number.

The Proof

Your call will be followed by massive amounts of mail, “proving” the value of the investment. Brochures, flyers, and slick printed documents invariably depict mounds of precious gold coins to fire the blood. If that is not enough, the mail will be followed by telephone call after telephone call alerting you to the desperate need to act now. Charts will show the heady stuff climbing to such heights that it is out of reach for all but the wealthiest few.

The Hook

If you act now, you will receive, free of charge, a gold coin, or a silver dollar that George Washington threw across the Delaware, or the original widow’s mite, or some other ancient “find” that has just been discovered in a cache in some dark hole. But there are only 100 such treasures that will go to the first 100 callers.

The Sting

The price of the investment is inordinately greater than its value. The likelihood of it ever achieving the towering heights to which it is pitched are remote in the extreme. Gold coins sold at a 300% markup are not uncommon. Many a buyer is stuck with an “investment” that will never mature.

When the buyer realizes that the investment was little more than a heavy paperweight, the scam is completed, and the damage is done.

How can I avoid the scam?

Remember Hegestratos’ corn, and Laban’s daughter. Strange things happen in the dark. Shine light on the issue. Ask hard questions. What do independently researched investment journals say? How does gold compare to other available investments? Who is this seller? What information is available about the seller by organizations such as the state Attorney General, or the Better Business Bureau, or FINRA?

Impose hard conditions. For example, any coins purchased must be independently escrowed pending independent appraisal, with no money transferring hands until the conditions are satisfied. When faced with such conditions, the scam artist will slink away to find an easier “mark”.

As every youngster knows, when you turn over a rock, the vermin scramble for cover. Turn over the rocks, and do not allow the vermin to hide from scrutiny. In so doing, you will quickly sink Hegestratos, his phony corn, and a shipload of baloney.

Copyright © Gregory D. Lucas 2014

PRIMER ON FRAUD PREVENTION – Lesson #4

Louis Pasteur is credited with saying, “Chance favors only the prepared mind”, or words to that effect. Whether he actually said it is for librarians and historians to confirm. Whether he intended it to mean what I take it to mean is highly questionable. After all, he was French, a chemist, and a microbiologist, all three of which would give him cause to look down his long nose at a lawyer’s loose application of what was undoubtedly a profound insight taken out of context.

But the statement applies to the prevention of fraud. The one least likely to succumb to the wiles of a crook is one who is most prepared to meet the crook. One of the most common, and most recent scams is a form of “phishing”.

Go Phish

The Phishing Scam relies on the ability of the clever charlatan to obtain sensitive information that opens the door to his financial future, all at the expense of an unsuspecting carp. It usually takes place quickly and easily in a telephone call. But richer scams can be incredibly elaborate, and are often baited with fear.

The scam is favored by crooks because it can be worked quickly, many times during the day, with little trail left behind, and little risk of being caught. And although the size of the purse is usually smaller, the frequency of its success is enough to keep crooks in the game. It works like this:

The Setup

The telephone rings. The caller is from the telephone company, or from the bank, or associated with a lending institution carrying your mortgage. It may even be someone claiming to be with the fraud department of your credit card issuer. There is a problem with your account that they need to discuss with you. The problem is usually serious enough to merit your concern.

But, of course, privacy laws require that they be able to confirm who they are talking to, to assure that sensitive information is not released to an unauthorized party. Therefore, they will need you to provide identifying information, such as your date of birth, your mother’s maiden name, or the three digit code on the back of your credit card.

Once the information is provided, the scam is virtually completed.

The Proof

Of course, what the caller did not count on was reaching a reader of this Blog. When the phone rings, the alarm bells automatically alert you that you may be the target of a scam.

To allay your fears, the caller may tell you to call the fraud department of your bank. (Who really knows how to reach the fraud department of a financial institution?) The caller will, of course offer the convenience of telling you the telephone number to save you the trouble of looking it up. Needless to say, the return call goes straight to the original caller’s desk, and you now have the comfort of knowing the call is genuine. Or do you?

The extra step provides some degree of elusive security. Once the scam artist offers the number, many targets will simply avoid the hassle by engaging in the desired conversation, when there has been no real security provided at all.

The Hook

Once the caller has your attention, they will advise you that someone in Marseilles has been making large charges to your account. They need to know if the charges are genuine. You will deny the charges, alleging them to be fraudulent (unless your wife is actually in Marseilles, in which event, good luck. Keep the dog; lose the wife. Your dog won’t place charges on your credit card).

Your concern that someone is making charges on your account may overshadow the fact that the call itself is fraudulent, inducing you to provide information you would not normally provide.

The Sting

Once the caller has the requested information, it will quickly be used to steal money from you before the caller disappears. You will be left to mitigate the damages by canceling the card, or the account, or by reporting the theft to the proper authorities. But by then, the damage is done.

How can I avoid the scam?

Again, the key to fraud avoidance is a healthy dose of skepticism, coupled with a dash of paranoia. Tell the caller that you do not give information over the telephone; then hang up.

Independently look up the telephone number for your bank, or lending institution, or credit card issuer. For the sake of convenience, your credit card issuer places the fraud prevention number on the back of the card. Get a magnifying glass. You’ll need it.

Call your financial institution using the telephone number you independently confirmed. Using the number the thief provides does nothing but route your call back to the thief. Give that number to the authorities. Otherwise, do not use it!

By independently calling your financial institution, you may learn that the call was fraudulent, and simultaneously save your marriage.

If you are truly lucky, you might be able to hang a stuffed phisherman on your wall. Good luck!

Copyright © Gregory D. Lucas 2014

PRIMER ON FRAUD PREVENTION – Lesson #3

Advance Fee Schemes – Variations on a Theme

In lesson #2, we addressed the typical advance fee scheme. As the public gets smarter, crooks must develop variations that lack the ring of familiarity.

Take, for instance, the “Grandparent Scam”. This scam relies on the susceptibility of doting grandparents who would do anything for kith and kin. Out of the blue one night, they receive a call from someone purporting to be a close relative – grandchild, nephew, cousin – any relationship will do, provided the target is willing to pay to protect them.

The Setup

Like every other Advance Fee Scheme, this con starts with a story. Billie is in trouble. He has been arrested, or lost his passport, or been robbed, or been involved in some terrible accident. He is terrified of his parents finding out, and had no one else to turn to but you. He needs money, and must have it immediately, or some profound consequence will befall him. He is usually traveling out of the country, and has no other way to get money.

The Proof

The skeptical and wily grandparent is too smart to take the story at face value; he must speak to someone in authority. In the case of an arrest, that someone may be a police desk sergeant. In the case of an accident, it may be the admitting nurse at the hospital. It may be a clerk at Western Union, or a consular officer. Conveniently, that person is always within reach of the telephone. The person confirms the story, and provides whatever other information may be necessary to sweeten the bait. Often, the sweetener is important information that Billie left out, usually with extraordinary detail. Of course, the entire story is false.

The Hook

The hook is the tricky part in the Grandparent Scam. There are too many ways that a cautious target can detect the scam. The thieves will usually have pre-arranged a story that prevents the target from checking them out and calling back. For example, if Billie is arrested and must post bail (even more interesting if Billie is arrested in Mexico where he is presumed guilty until proven innocent), he may be entitled to one telephone call. If bail cannot be arranged during the call, he will be booked, or imprisoned, or left in a cold dark cage to vegetate.

In the case of an accident, Billie may not be available at all. He may be in emergency surgery to stop the bleeding. (This story is compelling if there is concern that the grandparent may know Billie too well to be tricked by a fake voice.) His medical insurance card has been rejected or cancelled, and the hospital requires payment by wire transfer, postal money order, or Green Dot MoneyPaks.

Curiously, even if the target has a chance to speak with Billie, more often than not there is not enough familiarity to detect the fraud. Youngster’s voices tend to be sufficiently fungible to fool the most devoted grandparent.

Most important to the success of this scam is that the child is too afraid to call his parents, and asks that the grandparent not tell them. The child will straighten it out with his parents when he returns, and all money paid will be promptly paid back.

The Sting

Once the grandparent performs the ultimate act of love by sending money to “save” Billie, the scam is completed. The next morning, grandpa will call Billie’s parents, only to find that Billie spent the night safe in bed. Grandpa has become another victim.

How can I avoid the scam?

The shrewd grandparent avoids the scam by seeing it for what it is before the thieves set the hook. Grandpa can place the thieves on hold while he calls his children to get more information about Billie’s whereabouts. Of course, the thieves will hang up.

A cool game of “Columbo”, in which the grandparent asks an endless litany of questions, will yield the same result. When the thieves know that Grandpa knows, they will hang up.

Alternatively, Grandpa can wish Billie well, and advise him to be straight with his parents, and hang up. Once the thieves know that the grandparent is not an easy target, they will try the scam on someone less gullible.

The truly shrewd grandparent might obtain an address to which a check can be sent, then turn the information over to the authorities.

The bottom line is that avoiding the scam requires mental preparation. One must decide not to be a victim.

And if, by some chance, Billie really does get in trouble, congratulate him on being related to such wise grandparents, and hang up.

Copyright © Gregory D. Lucas 2014

PRIMER ON FRAUD PREVENTION – Lesson #2

If you are following this Primer, you have learned the following tricks to avoid fraud:

(1) Is the deal too good to be true? If so, walk away.

(2) Are you being pressured to act now? If so, walk away.

(3) Are you being asked to make an advance payment? If so, the warning lights are going off. Are you being told the payment must precede the benefit? If so, walk away.

(4) Are you required to pay by: cash, postal money order, wire transfer, Green Dot MoneyPaks, or any other method that is untraceable and irreversible? If so, walk away.

(5) Finally, when in doubt, walk away.

Advance Fee Schemes

Today we will focus on a traditional “oldie, but nasty” scam, the “Advance Fee Scheme”.

The Setup

The scheme usually starts with a story. Someone tells you that they are in a dilemma, and they need your help. They are in a situation in which they control a massive sum of money in a foreign country, but cannot personally access the funds for some official reason beyond their control. That is where you come in. They need to send the funds to you as a third party. Once you have the funds, you will be permitted to retain a large percentage of the money, sending the difference to them, or to some other third party.

The Proof

The story always includes a substantial amount of impressive documentation, signed by important and highly placed people, sealed with official seals, on government letterhead, with bank statements showing massive bank balances, contracts, promissory notes, letters from major corporations, bills of lading, trade agreements, wire transfers, and irrevocable letters of credit. Of course, all the documents are fraudulent.

The Hook

You will be notified that all of the money has been wired to you, but that it got held up at a major bank, usually in New York. There is a snag that must be overcome to have the money released to you. There is a small transfer fee, or duty, or an import tax that must be paid in order to obtain final release of the funds. In addition, they need additional information from you for tax reporting and identification purposes, such as account numbers, routing numbers, social security numbers, date of birth, or your mother’s maiden name. The bank, after all, must forward appropriate forms to you.

The Sting

Having given over all of your personal information, and having paid whatever sums were required to have the vast sums of fictitious money released to you, you have just become another victim. The thieves are long gone, with your money in their pockets, and a smile on their faces.

How can I avoid the scam?

The only way to avoid the scam is to see it for what it is long before the thieves set the hook. Apply the rules shown above.

(1) Is the deal too good to be true? The first notice will invariably attempt to suck you in by the huge pot of gold at the end of the rainbow. It is always too good to be true.

(2) Are you being pressured to act now? Usually, the pressure to act does not occur until the alleged funds are in transit to you. If hundreds of millions of dollars are waiting for you, and the only thing holding them up is your $80,000 check, if the thieves do not pressure you, you will undoubtedly impose pressure on yourself to get the deal done.

(3) Are you being asked to make an advance payment? There will always be money you must pay, or the deal goes away. The smarter crooks will save the hook for the very end.

(4) Are you required to pay by: cash, postal money order, wire transfer, Green Dot MoneyPaks, or any other method that is untraceable and irreversible? Thieves will invariably require that money be sent in irrevocable and untraceable form. They, in turn, will hide behind national boundaries, preferably with countries that have no trade agreements with the United States. Your efforts to undo what was done will always be futile.

(5) When in doubt, walk away. Reasons for doubt always exist in the first communication. When you receive such offers, do not respond.

For those prudent enough to follow this counsel, congratulations. You win!

Copyright © Gregory D. Lucas 2014

PRIMER ON FRAUD PREVENTION – Lesson #1

From time to time, the world provides sharp reminders that life can be ugly. For every fulfilled longing to achieve the American dream, there is at least one leech devising ways to strip the dream away. We cannot stop the world from producing scam artists. They hide under every rock. But with a little information, and a fair degree of discernment, one can at least make their work a lot more difficult and a lot less fruitful.

As technology becomes more sophisticated, scam artists invariably find ways to keep pace. But there are commonalities that are dead giveaways of an impending scam. Knowing the signals is always the first step to uncovering the fraud.

At birth, we were each given an implanted piece of equipment with batteries that last a lifetime. The best fraud detector on earth is the human gut. It has infinitesimal sensitivity, and is almost always accurate – provided the bearer learns to use it. Like a fine piano, it is usually in tune. The problem, of course, is that its use requires frequent disciplined practice, and the bearer must learn to correctly interpret the output.

The gut usually discerns if something is wrong. If it feels wrong, it probably is wrong. Every scam artist understands that, and knows that to be successful, they must overcome those natural defenses. They know that there is one certain way to insure that our internal equipment will never work: they persuade us turn it off. For that reason, every scam is designed to overwhelm us with data suggesting that the opportunity is so vastly greater than the risk that we stop listening to the gut.

How do they do that?

They start by overpowering us with deals that are too good to be true; with empty promises and guarantees supported by vapor, all tied to the requirement that we act now, without stopping to think, without seeking a second opinion, without passing go, and without collecting $200. The time pressure to act, and the risk of losing the “prize”, keeps us emotionally vested in the process. They cap the fraud off with the illusion that we are the ones in ultimate control.

By focusing on the enormity of the opportunity, while distracting us from the steady flashing warning signals, we persuade ourselves to short-circuit the gut; to turn it off.

The solution? Learn to listen. Tune out the opportunity. Tune out the arbitrary deadlines. If a deal is genuine, there is always time to get it right; to perform due diligence; and to get good counsel. If the deal is false, no crook will hang around long enough to learn the outcome of the due diligence.

Consider the plight of the wary bass. If it doesn’t bite something, it goes hungry. If it bites the wrong thing, it will find a nasty hook in the bait. The prudent bass will slow down, study all the angles, and determine the full nature of the bait. Then, only if the bait is right, the bass will test its authenticity.

The sly fisherman, who understands that instinctive caution, draws the bait away, such that if the bass does not act now, the opportunity is lost. (There is a reason it is called a “lure”.) The bass has a choice: let the target of opportunity pass, and live to swim another day, or strike fast without thinking before the bait is gone.

Like the bass, a primal urge induces us to strike fast. Every thief, and every marketer, understands that. And like the experienced fisherman, they draw the bait away to trigger the strike response. The bait is everywhere. “For a limited time, and a limited time only.” “For 2 days only.” “Sale ends today!” “While supplies last.” “First come, first served.” Some of those come from legitimate businesspeople selling needed goods and services. Some do not.

How can you tell one from the other?

First, ask yourself if the deal is too good to be true. If it is, let it go. If it is legitimate, another will pass by this afternoon. You will never regret the fraud that did not suck you in.

Second, evaluate the pressure you feel to act now. The greater the pressure, the more likely it is that a bottom-dwelling scum sucker is dangling it before you. Legitimate business opportunities virtually always provide the opportunity to conduct reasonable due diligence. If you must act now or lose the deal, lose the deal. You are no worse off by letting a good deal get away. You will be far worse off if you bite the thief’s hook.

Third, ask if you must make an advance payment of any kind. If so, walk away. Consider this, if you buy a bag of plums from your grocer, you pay and receive the benefit in the same exchange. Although thieves offer to do the same, you will not learn that the plums are paper maché until the deal is done and the thief is long gone.

Fourth, evaluate how you are asked to pay. There are certain clues that an offer may be fraudulent. If you are required to pay by cash, postal money order, wire transfer, Green Dot MoneyPaks, or any other method that is largely untraceable and irreversible, don’t bite. Let some other unfortunate bass take the bait.

You do not have to lose. Listen to the warning signals. If something feels wrong, it most assuredly is wrong. The simple corollary is that if something feels wrong, the opportunity is non-existent. If there is no opportunity, there is no reason to consider the scam. Result? You win.

I hate it when the bad guy wins. Don’t let the victim be you.

Copyright © Gregory D. Lucas 2014

Are Noncompetition Agreements Enforceable?

As a practical matter, every noncompetition agreement (“NCA”) is a restraint on trade. Because public policy generally disfavors restraints on trade, NCAs are similarly disfavored. But for those mourning the agreements they signed, don’t celebrate just yet. Because NCAs are not unenforceable per se, they may still be deemed valid if they are reasonable in view of the circumstances under which they were entered. Sheppard v. Blackstock Lumber Co., Inc., 85 Wash.2d 929, 540 P.2d 1373 (1975); Racine v. Bender, 141 Wash. 606, 615, 252 P. 115 (1927).

In evaluating the issue of reasonableness, courts engage in a balancing test to determine if the need for the NCA to protect the business interests of the one requiring it is greater than the competing harm caused on the one restrained, and on the public that will be deprived of the services of the one restrained during the term and in the geographic area of the restraint. Racine v. Bender, supra; Restatement (Second) of Contracts § 188 (1981).

Because of those competing interests, courts are tasked with insuring that NCAs are no greater in scope than reasonably necessary to protect the business or good will of the party requiring the restraint. Wood v. May, 73 Wash.2d 307, 438 P.2d 587 (1968); Central Credit Coll. Control Corp. v. Grayson, 7 Wash.App. 56, 60, 499 P.2d 57 (1972).

How can you know whether an agreement is “reasonable”? Because reasonableness is subjective, there is no way to test its limits with any certainty. But one may engage in the same sort of analysis that a court would perform to predict a more likely than not outcome.

Analysis of Competing Factors

The first factor is whether the restrictive covenant is warranted under the circumstances. For example, a covenant in the context of employment may be viewed differently than a covenant given in the course of the sale of a business. Employers have a legitimate interest in protecting their client base and their trade secrets. Therefore, an employee who, by virtue of the employment, is exposed to the employer’s customers and secrets would reasonably be restricted from later disclosing or using that information to the employer’s disadvantage, within limits. The same would be true if the employer provided unique training that gave an employee a new skill set that, but for a restriction, could be used to the employer’s detriment.

The second factor deals with the harm to the employee caused by the restraint. People must have an opportunity to earn a living. Generally, a court will evaluate the reasonableness of the restraint by analyzing its geographic and temporal restrictions. The broader the geographic area and the longer the time restrictions are, the greater the likelihood that an NCA will be deemed unreasonable.

The third factor addresses the harm to the public caused by the lack of services it will have from the one restrained during the term of the NCA. That harm may include restraint of trade, limits on employment opportunities, and the denial of public access to necessary services. Organon, Inc. v. Hepler, 23 Wash.App. 432, 436 n. 1, 595 P.2d 1314 (1979). But notwithstanding that harm, the court must balance its concerns with the employer’s right to protect its business.

What if the NCA is unreasonable?

If a court deems an NCA to be unreasonably broad or unreasonably restrictive, it may still be enforceable to the extent that a court deems reasonable. Thus, courts are tasked with evaluating a contract’s purposes to enforce the contract to the extent necessary to accomplish those purposes. An NCA given in connection with the sale of a business may predictably be more restrictive than one given in connection with employment. The stakes are greater. The buyer’s investment in the business can be rendered worthless if the seller is permitted to immediately set up shop across the street.

To address the issue, attorneys will often include contractual provisions that permit the court to narrow unreasonable contracts to the maximum extent necessary to render the contract reasonable. For example, in Wood v. May, supra, using its equitable powers, the court enforced an unreasonably broad restraint by narrowing a 100 mile geographic area to the greater Seattle area, and reducing the five year time period to two years.

While there are no standard times or distances that a court will, or will not enforce, the best rule of thumb continues to be the smell test. If it seems excessive, it probably is excessive. And if it smells like California (a state that proscribes NCAs), it will not be enforced in any event.

Copyright © Gregory D. Lucas 2014

Religion and the First Amendment

There is a lot of talk lately about the First Amendment. A lot of it centers on the misplaced preoccupation with “separation of church and state”. We throw the term around as loosely as a poorly packed cow pie on a wet day, assuming that the reference carries great weight with its intended audience. But like the assumption that an ancient coin bearing an image of Caesar belongs to Caesar, we often fail to consider what lies on the other side of the coin.

The First Amendment states that:

“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.”

Curiously, the term “separation of church and state” does not appear anywhere in the Constitution, much less the First Amendment.

With respect to issues of religion, there are two differing interests in the First Amendment: the Establishment Clause (“Congress shall make no law respecting an establishment of religion …”), and the Free Exercise of Religion Clause (“Congress shall make no law … prohibiting the free exercise [of religion]”). Both clauses were originally intended by our nation’s founders to protect the individual’s right to exercise religion of choice, while prohibiting Congress from adopting an official government religion. Had separation of church and state been a concern, the founders would have said so. Except for the prohibition on Congress, they didn’t.

The individual’s right to worship freely, and to communicate those beliefs, was limited only by a compelling governmental interest that justified limiting individual rights. The challenges that would forever after be raised in that balancing of interests would make any Constitutional Law attorney’s cash register sing out for joy.

Take, for instance, the case of Draper v. Logan County Pub. Library, 403 F. Supp. 2d 608 (W.D. Ky. 2005). Kimberly Draper was a librarian in the Logan County Public Library. On occasion, she had the audacity to wear religious jewelry that included crosses, or religious T-shirts. In its efforts to impose its twisted view of separation of church and state on Ms. Draper, the Library enforced its dress code on her prohibiting clothing depicting religious, political, or potentially offensive decoration. In particular, the Library Director ordered her to remove a cross that she was wearing. When she refused, Draper was summarily fired.

Draper’s right under the Free Exercise Clause to wear the cross, and the Library’s intent to eliminate religious speech by its employees met head-on.

For Draper to prevail, she had to establish that:

(1) she was engaged in a constitutionally protected activity; (2) that the defendant’s adverse action caused her to suffer an injury that would likely chill a person of ordinary firmness from continuing to engage in that activity; and (3) that the adverse action was motivated at least in part as a response to the exercise of her constitutional rights. Cockrel v. Shelby County Sch. Dist., 270 F.3d 1036, 1048 (6th Cir.2002) (quoting Leary v. Daeschner, 228 F.3d 729, 737 (6th Cir.2000)) (alterations in original).

To prove that she was engaged in a constitutionally protected activity, her actions had to fall within constitutionally protected conduct known as “expressive conduct” or “symbolic speech”. In other words, by wearing a cross, she had to have intended to convey a particular message that would have a great likelihood of being understood by those who saw it as carrying her intended message. Texas v. Johnson, 491 U.S. 397, 404, 109 S.Ct. 2533, 105 L.Ed.2d 342 (1989). Second, Ms. Draper had to show that her conduct touched on a matter of public concern. Cockrel, 270 F.3d at 1048.

Once she met those requirements, the burden shifted to the government to demonstrate that her interest in speaking on this matter was outweighed by its interest in promoting the efficiency of its public services. (quoting Leary, 228 F.3d at 737); see Rankin v. McPherson, 483 U.S. 378, 388, 107 S.Ct. 2891, 97 L.Ed.2d 315 (1987).

In holding in favor of Ms. Draper, the Court ruled that:

In determining whether contested speech addresses a matter of public concern, a reviewing court must question “the extent to which the speech advances an idea transcending personal interest or opinion which impacts our social and/or political lives.” Dambrot v. Cent. Mich. Univ., 55 F.3d 1177, 1189 (6th Cir.1995). Thus, speech that can “be fairly considered as relating to any matter of political, social, or other concern to the community” is protected, while speech involving matters “only of personal interest” is not. Cockrel, 270 F.3d at 1052 (citing Connick, 461 U.S. at 149-49, 103 S.Ct. 1684)….The phrase “public concern,” does “not mean matters of trancendent importance, such as the origins of the universe or the merits of constitutional monarchy; [it] mean[s] matters in which the public might be interested, as distinct from wholly personal grievances . . . and casual chit-chat.” Dishnow v. Sch. Dist. of Rib Lake, 77 F.3d 194, 197 (7th Cir.1996).

Query, then, how jurisprudence could justify a nearly opposite holding in Daniels v. City of Arlington, Texas, 246 F.3d 500 (5th Cir.2001), in which a police officer’s act of wearing a small gold cross pin on his uniform was admittedly a symbolic [expression] of his religious beliefs — but intensely personal in nature, and did not constitute a matter of “public concern”.

Kimberly Draper’s cross was a matter of public interest. Officer Daniels’ cross was not.

The tortured reasoning behind the denial of Officer Daniels’ right to wear a cross suggests that courts will always find a way to do whatever they want to do. More’s the pity.

If the Constitution is our only protection from the abuses of government, and if those protections can be discarded like yesterday’s cheese, we live in imminent peril.

Nelson Mandela wrote: “When a man is denied the right to live the life he believes in, he has no choice but to become an outlaw.”

It may be time to break out the spurs.

Copyright © 2014 Gregory D. Lucas

Thoughts about “Bitmoney”

“Airplanes are interesting toys but of no military value.”
– Marshal Foch, 1911

We have all seen or read them – those quotes from men of old who said it could not be done. Such sentiments abound in the ranks of bystanders who lived to regret their short-sightedness.

In 84 AD, Sextus Julius Frontinus predicted that the implements of war had reached their apex – they could not be further improved.

In 1878, Western Union opined that the telephone could never be considered a practical form of communication, and that it had no inherent value.

In 1932, none other than Albert Einstein concluded that nuclear energy would never be obtainable, because it required splitting the atom at will.

The list goes on.

Not wanting to be numbered among those whose inability to believe prevents them from fully exploring what is possible, I avoid opinions about what the future holds. Rather than concluding that something cannot be done, I find myself in the camp of those wondering whether it should be done. Granted, that requires the imposition of one’s moral judgments on the subject, but I am certainly willing to be the moral conscience of society. (Strangely, no one ever asks me!)

The topic at hand is alternative currency.

It comes in many forms, from simple barter to the latest newsmaker – Bitcoin. A digital currency that exists only in the electronic circuitry of the computer world, Bitcoin is one of the latest indicators that people long to be free from the ravages of governmental regulation and control. Rightly or wrongly, Bitcoin was created to be free from the dictates of any central authority, deriving its value from a global system of supply and demand, free of currency manipulation (otherwise known as legitimized theft).

Like neighbors exchanging a shaker of salt for a cup of sugar, Bitcoin crosses international boundaries at the speed of light, enabling the business world to instantly trade goods and services free of the dictates of a central currency system. Bitcoin has no Federal Reserve to mint more Bitcoins at a whim; no government authority to spend their value into oblivion. Although Bitcoin transactions leave an electronic trail, tracking the trail to an individual participant is an extraordinary challenge, even for hackers.

Like frantic shepherds who learn that the sheep somehow got out of the paddock, federal regulators pull their hair as they try to find ways to regulate and tax that which slips through their fingers. The dance is almost comical, were it not for the unintended consequences. Government does nothing well. And there are always consequences for everything it does. Some of them are intended. For those, our politicians will someday answer to their Maker. Some are unintended, and those are usually the hardest to stomach.

The question remains, do we need alternative currencies like Bitcoin? Do they add anything of real or lasting value? Aren’t the Dollar, Euro, Peso or Pound enough?

The answer is yes. Why? Alternative currencies reintroduce reason into an unreasonable world. They provide a means by which people of good will can live together, work together, and cooperate to make each other’s lives a little easier, at least until government closes the loophole.

Assume, for example, that Molly and John work in the same business. John offers to buy lunch if Molly will cover his shift. It is a simple enough exchange – a form of barter. That sort of thing takes place ten million ways, ten million times every day. Molly receives the benefit of a meal, something having economic value, in exchange for her time. Molly’s basis in time is zero. The IRS considers that a form of taxable transaction. John receives services from Molly, which, if done often enough, may subject him to the reporting of payroll taxes on the value of meals provided during the year, while Molly must report the meals as additional income.

(In the hush that follows, someone moans, “You’ve got to be kidding!”)

In a world in which almost every aspect of our lives is monitored and subjected to the scrutiny of agencies, prying eyes, and greedy hands, it is good to know that somewhere someone is bucking the system. It gives us hope, and reminds us that just beyond our earthly realm is an Eden over which the IRS has no jurisdiction.

P.S. I recently saw two neighbors exchanging a cup of sugar for a shaker of salt. Someone should send them a 1099.

Copyright © 2014 Gregory D. Lucas

Utility Bill Scam

Phishing is in the news again. Get used to the word. You will start seeing it a lot. Simply stated, phishing is any attempt to gain access to your confidential and/or financial information, including such things as account numbers, credit card numbers and security codes, passwords, and so forth, under the guise of being a legitimate business. Phishing is never legitimate, and almost always an attempt to steal money from you in one form or another.

Here is the latest version.

In a Consumer Alert issued on February 26, 2014, the Attorney General issued a warning about a company that has been scamming customers nationwide. Reports are now coming in that the scam hit Washington consumers. The company, posing as a public utility, is e-mailing invoices for utility services provided to you. The invoices include notices that the bill is “due upon receipt” or “past due.”

Consumers are invited to view their latest invoice by clicking a link. The link, of course, will not provide you access to your invoice. Instead, it downloads a malicious malware or spyware that can interrupt the normal function of your computer, or mine your financial or other sensitive information.

The e-mails include such things as account numbers, billing dates, and the amount of charges supposedly due, or past due.

While phishing scams appear in a large variety based on the creativity of the thieves behind them, they share certain characteristics:

(a) Someone will contact you, usually by telephone or e-mail, claiming to be a representative of some legitimate vendor or service provider.

(b) They may give you information to boost your confidence that you are dealing with a legitimate party.

(c) They will need a little information from you to: (i) confirm that they are talking to an authorized party, or (ii) to enable them to log into their database, or (iii) any other excuse they devise to persuade you to give them information.

(d) If this is being done electronically, they will ask you to click a link in their e-mail to open your file, or account, or statement, or other information. Once you click the link, you embed in your computer malware or spyware that harms your computer or enables them to gain information held on your computer.

(d) Once you have trusted them a little, they may ask for more sensitive information, such as your credit card number, security code, Social Security Number, password, or any other confidential information they happen to need to complete the scam.

(e) Once they have your information, the theft is virtually completed.

If you receive such calls, refuse to give information to the caller, and hang up. If the contact comes electronically, immediately delete the e-mail. DO NOT CLICK ANY LINKS IN THE E-MAIL.

If you have questions about your account with a vendor or service provider, contact the vendor or service provider directly.

For additional information, you may contact this firm, or visit the Attorney General’s website at: http://www.atg.wa.gov/InternetSafety.aspx.