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Legal Update: Facebook Lawsuit, Employment Law, Trump University

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Aired 4/26/11

In today's Legal Update, we'll give you a rundown of cases involving an ongoing dispute over who founded Facebook, whether an employee with bipolar disorder can be fired for making threats in the workplace, and a federal lawsuit against Trump University. Joining us to break down the cases is These Days Legal Analyst Dan Eaton.

In today's Legal Update, we'll give you a rundown of cases involving an ongoing dispute over who founded Facebook, whether an employee with bipolar disorder can be fired for making threats in the workplace, and a federal lawsuit against Trump University. Joining us to break down the cases is These Days Legal Analyst Dan Eaton.

Guest

Dan Eaton, San Diego attorney and These Days Legal Analyst.

Read Transcript

This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

ST. JOHN: If you saw the might have the social network, you know there was wrangling over who really founded face book, and who should reap the millions the social network site has generated. Well, today, it's that time again when our legal analyst, Dan Eaton, gives us the inside track on some of the more intriguing legal cases in the news. So we'll find out what happened in the Winklevoss case, and we'll also be covering a current case that raises questions about whether a plaintiff fired for using violent language at work, can claim she was unfairly dismissed because she was diagnosed with bipolar disorder. By the way, if you have any questions or comments we would love to hear from you, our number here in studio is 1-888-895-5727. That's 1-888-895-KPBS. So Dan, thanks so much for joining us.

EATON: Sure, good morning, Allison.

ST. JOHN: So you know, I just sort of set the scene a little bit about the Winklevoss appeal. The Cameron and Tyler Winklevoss twins are now training in Chula Vista in the hopes of competing in the U.S. Olympics rowing team in 2012, which is an interesting local twist to this story. They claim they came up with the original idea for Facebook, and that they hired Mark Zuckerberg to help them creat the site and that he stole the idea for himself. And in the movie, we heard that they got some money out of this, but earlier this month, the ninth circuit court of appeals handed them a defeat in their ongoing battle. They weren't prepared to just leave it at that. So give us the background in the latest in this case.

EATON: They weren't prepared to leave it, that's to say they weren't happy with the settlement that resulted from the lawsuit that they filed against Facebook about three years ago, as a matter of fact. What happened was the Winklevoss twins and their friend, Divya Nurendra, who is never mentioned, it's always a focus on the twins, but all three of them sued. They sued Facebook and Zuckerberg in federal court claiming that Mr. Zuckerberg stole the idea for Facebook, and Facebook actually turned around and counter sued the Winklevosses, for stealing Facebook users. Well, the whole mess was put together in one ball and they were ordered to go before a private mediator. The private mediator will end up being important in due course. And he facilitated a process designed to help the parties come together and reach some sort of a settlement. Ultimately after a day long of wrangling, they did reach a settlement, and they signed what's called a term sheet and settlement agreement. Ultimately, the parties agreed -- the parties agreed, actually, before they even engaged in the mediation process that the process would be confidential, and that the mediation result would be binding.

ST. JOHN: Okay, well, this is interesting, because it does involve a mediation, and it sort of raises the question about if you go into mediation, can you then go back to court, and in this case, the Winklevosses were ultimately unwilling to accept what happened in the mediation, but were they alone when they went into that negotiation or did they have attorneys with them?

EATON: They weren't. They weren't just the parties that were there in the room. There were a lot of lawyers, Allison. In fact, the Winklevosses brought six lawyers as well as their father. They didn't brick their father for moral support, it turns out their father is actually a former accounting professor at the University of Pennsylvania's highly regarded Horton school of business, and is an expert in evaluating businesses of so they have a lot of firepower in that room as they tried to negotiate a settle:

ST. JOHN: So what were the terms of the agreement?

EATON: Well, here are the basic terms of the agreement, Allison, what happened was after the back and forth, the Winklevoss twins agreed to turn over all of the stock in connect-u, this dating site that they had established, and turn all of that over to Facebook in change for which, they were going to receive a certain amount of cash, and a certain amount of Facebook stock. The -- about 1.25†million shares of Facebook stock, to be specific. Now, everyone agreed, after they signed the term shoot and settlement agreement, that there would be full up documents that needed to be prepared.

ST. JOHN: And this is after the movie? Because in the movie woo thought, okay, that's it, they've settled.

EATON: They've settled, I think actually the term sheet and settlement agreement, actually had already been signed by the time of the movie. And I forget whether in the postscripts, and I saw the film by the way and it was excellent, they prepared all of these papers, 130 pages that Facebook lawyers prepared to finalize the deal, and the Winklevoss twins said we're not signing this, and you know what? Because of information we learned after the media, we're challenging the settlement at all. We don't think it's enforceable. We think you lied to us, and we think that we want to start over and rule our lawsuit against Facebook.

ST. JOHN: So what did an appeals court say about their claim that without signing those 130†pages, the whole thing was invalid?

EATON: Well, what the federal court of appeal said, look, the deal is, each without that hundred and 30†pages which you didn't have to sign, it was very clear what was involved. What chief judge Kazinski said in the 9th circuit opinion that was just handed do you happen, said, quote, the parties agreed at the mediation that Facebook would swallow up connect you, the Winklevosses would get cash and a small piece of Facebook, and both sides would stop fighting and get on with their lives, close quote.

ST. JOHN: Which sounds like a pretty reasonable --

EATON: Well, again, the value was $65†million. You're talking about $20†million in cash, and 1.25†million shares, give or take in Facebook.

ST. JOHN: But the Winklevosses are saying issue -- they're still appealing that. On what grounds?

EATON: They are. They sort of said, no, the settlement agreement is not enforceable, not only because they didn't sign the documents and the Court of Appeals said, no, it was clear enough. Even in the agreement was cheer enough, the heart of the dispute was that they were told that this mediation, the settlement conference, Allison, that the shares of Facebook were worth $35.90. Well it turns out that there was an internal evaluation that Facebook had prepared for tax purposes that actually valued the stock at $8.88 per share.

ST. JOHN: Much les.

EATON: Much, much less, actually. And so according to the Winklevosses, that meant that they probable should have ankled for about four times as much stock as they ultimately got, and they were unhappy because they weren't told about this internal valuation of Facebook stock that Facebook had at the time of the mediation but did not disclose as the parties were settling.

ST. JOHN: Now, the Court says that what happens in a mediation stays in a mediation.

EATON: Right.

ST. JOHN: Like going to Vegas.

EATON: That's right, exactly.

ST. JOHN: And that's so the parties in a mediation can feel free to say whatever they want without fear that later that could be challenged in court. And this is interesting, I guess I could pout out a call to anyone, if you've been in a mediation, did you have this experience that you pretty much had to stick with that binding arbitration? Or is there a possibility of moving beyond mediation and going back to court? Now, in this case, the Winklevosses are trying to go back to court, and what's the ninth court say something.

EATON: Right. Well, understand there's a difference, Allison between mediation and arbitration.

ST. JOHN: Oh, okay, good.

EATON: The parties can't be forced to do anything. They negotiate back and forth and there's a private mediator in there hoping to bring them together. But ultimately what the parties did is they signed a confidentiality agreement that said as you've said before that nothing that was said could later be used if the thing did not settle. Or if any further proceedings. So the heart of the issue was, could the Winklevosses use this alleged misinformation, the failure to disclose the internal valuation, the much hoer valuation of Facebook stock in a later proceeding to allege securities fraud as they have? The 9th circuit said no. The confidential agreement which you signed after the mediation, which you agreed could not be, could not be used to allow you to introduce evidence of the alleged inflated valuation of the Facebook stock that you were told at the mediation. What the Court said was, quote, the Winklevosses can't show that Facebook mislead them about the value its shares or the disclosure of the hoer internal valuation would have significantly altered the mix of information available to them during settlement negotiations, judge Kazinski wrote without such evidence their securities claim must fail.

ST. JOHN: So sounds pretty final. Is it over?

EATON: Well, it would, except that that's not over. The week after the court ruled, it said no, you got what you bargained for, that's the end of it, they actually have now asked for an 11 judge panel, a larger panel of the Court of Appeals, to review this, in the hopes they can review the settlement agreement, and rule their lawsuit against Facebook.

ST. JOHN: Well, they felt people might say that they agree with the judge, let's get on with our lives. Why don't the Winklevosses just take the hundred and 50 million and get on with their lives? What are the Winklevosses thinking.

EATON: I've read their submission asking for a larger court of appeal panel to hear the case, and what they Winklevosses say, that's their choice to make. The Winkel Vosses insist that whether they, quote, would be better off financially keeping the proceeds of the settlement, rather than rescinding or undoing and proceeding with their loss against Facebook is a personal judgment for them, not the appellate to make, close quote. So they're going to continue fighting, and we'll see then whether a 9th circuit panel will hear it, then if not, whether the Winklevosses take it all the way to the U.S. Supreme Court.

ST. JOHN: Well, interesting because it does sound as though perhaps what they got was a lot less than what they thought they were gonna get in the original mediation, so --

EATON: Although they had a lot of firepower there. In fact, the Court uses term sophisticated no fewer than four times, in the course of this, but their argument is, wait, sophisticated parties are entitled to disclosure as well in the context of the mediation.

ST. JOHN: 1-888-895-5727 is the number, and we do have a caller on the line, although I'm not sure whether this distinction between arbitration and mediation, perhaps this is an opportunity to talk more about that, Ian is calling us from Solana Beach. Go ahead.

NEW SPEAKER: Good morning, Allison, and to your guest, I wanted to point out that in my experience, the arbitration is an extremely fair process. And I wish that more people would settle by that means. I went through an arbitration, and I'd like to point out to your listeners that, first of all, you can select your -- both parties select the arbitrator, so you can go through lists of them until you find the one that you like, or three, and you can introduce any evidence that you wish to introduce. And everything is valid. And the arbitrator will listen to everything you have to say, and there are no games, and there's no postponements, and you sit down and you work it out.

ST. JOHN: Okay, Ian, well, thanks for that. I know as an attorney, you Dan, may or may not feel so positive about arbitration. What's your response?

EATON: Well, it really depends, where you stand depends on where you sit. Some people say, no, I want a full jury trial, and I want to have all the rules of evidence, and some like Ian prefer the relative informality of an arbitration. Realize an arbitration is binding. What the Winklevosses under went, however, was an informal mediation. They weren't bound to come up with an agreement at all. But because they did agree at the end of the day, the ninth circuit said they had to stick with their deal.

ST. JOHN: Okay, interesting. Well, you could almost make another movie about this.

EATON: So, and I expect there will be a social network two actually.

ST. JOHN: Okay, good, well, let's move onto the next case that you're going to bring to us today which concerns whether an employer may fire someone for threats of violence the employee claims were triggered by a mental disability. Tell bus this case. This is in California.

EATON: Let me set the factual background, because it concerns, actually, an employee of the superior court of Orange County.

ST. JOHN: Oh, interesting.

EATON: Her name was Linda wills, and Ms. Wills had been diagnosed in 1997 with by polar disorder, and just for my own education, actually, the Court of Appeal opinion says that, quote, person's experience a manic episode may become irritable, verbally and physically aggressive and loud. Inappropriate behavior can also occur, including blurting out socially inappropriate and even threatening comment, close quote, from people who have this unfortunate disorder, which is characterized by swings -- mood swings between manic and depressive. Ms. Wills was assigned to the Anaheim police department as a clerk, and ultimately she was kept waiting outside in the summer heat shortly after being assigned to a detention facility there to help them process certainly information, and she was very angry, and she started yelling at the people who had let her in, accusing them of letting her sit out there in the summer heat, deliberately. And said, in reference to a popular film that a couple of them had been added to her Kill Bill list. She later claimed that the comment had been made in jest.

ST. JOHN: Okay. So this went to court, and the conspire -- I guess her employer, what? Reassigned her? Is that what happened?

EATON: Well, yeah, the jail people said, don't send this woman back to us anymore. So they agreed to that. She was actually out on medical leave while she dealt with this manic episode that she had had, and she was ready, then, to return. While she was out on leave, however, she forwarded a profane ring tones to some coworkers and some dark and disturbing e-mails as well.

ST. JOHN: So then she was ready to come back to work, and her employer wasn't too happy about that. He put her a paid leave.

EATON: Right.

ST. JOHN: So you know, during the investigation, we know that Ms. Wills claimed that the kill bill reference was just a joke. Did she manage to sort of explain away all these other the disturbing e-mails and stuff too?

EATON: Well, it's also important to realize that Ms. Wills doctor in the midst of the investigation sent the employer a letter explaining that these outbursts were the funk of a mental disability, bipolar. She did explain the quote unquote joke, she said that the ring tone was meant as sort of a joke, and she said that the, mails while apparently dark and disturbing were actually meant to thank certain coworkers for supporting her. In any event, all of it was tied to her disability, and she said she couldn't be disciplined for something that had as its origins her disability.

ST. JOHN: So that's the key here, isn't it? That she's contending that her firing was because of the disability related conduct. And that that's the same as firing her because of the disability, and so it's discrimination.

EATON: That's right.

ST. JOHN: And this question comes up a lot, what's the precedence of this?

EATON: It has. Several federal courts have said, no, even if it has its origins in mental disability, if you're acting out and you're fired for acting out and other employees would be fired for similar behavior, the employer can do that. But the ninth circuit has taken a somewhat different tack in the case in which Ms. Wills most heavily relied, a case called Gambini, they said, look, conduct resulting from a disability is considered to be part of the disability, rather than a separate basis for termination, close quote, in the Gambini casing it was another employee with bipolar disorder, who after being giving a performance improvement plan ended up kicking her cubicle and throwing things and so forth, frightening her coworkers, and that resulted in Ms. Gambini's termination.

ST. JOHN: So it sounds like Ms. Will's case, is a distinction between behavior versus the diagnosis.

EATON: It does. And the 9th circuit said the two couldn't be separated. But the Court of Appeal actually distinguished the Gambini case on the basis that, look, the employer fired Ms. Gambini in that case not for threatening her coworkers but for frightening them. And this was very different.

ST. JOHN: That's a key different isn't it?

EATON: It is the key difference.

ST. JOHN: What they felt rather than what she did.

EATON: Exactly. And so far as an actual threat as opposed their reaction of fright. So what the Court of Appeals said was look, it issued a relatively narrow holding and said that the discrimination law is not violated when an employee is fired because her employer honestly believes that the employee had made threats or engaged in actual violence against coworkers, even where such threats or violence may have been said to have been caused by a disability. Quote, if employers are not permitted to make this distinction, the court of appeals explained, they are caught on the horns of a dilemma. They may not discriminate against an employee with a disability but at the same time must provide all employees with a safe work environment free from threats and violence.

ST. JOHN: So it's -- it sounds like this is not resolved, this issue about if somebody has a diagnosis and behaves out of line and gets fair fired this is still unresolved as to whether that's discrimination or not.

EATON: It is, outside of the context of threats or violence. For example, sleeping on the work place has been in the news respect to certain controllers and so forth. But the Court of Appeal, to make it very clear how narrow their holding was, added, we express no opinion on whether the California discrimination -- disability discrimination law permits an employer to distinguish between disability caused misconduct and the disability itself in any factual setting other than threats or violence against coworkers.

ST. JOHN: In other words, if those threats of violence, and the coworkers are feeling afraid. That's enough.

EATON: And the employer honestly, not necessarily reasonable, as long as the employer honestly believes that they are a threat, the employer can take action against the employee.

ST. JOHN: Interesting. Okay, well, hopefully that's a little help for employers out this who may be facing that particular --

EATON: Yeah, and it is an issue, sure.

ST. JOHN: So now let's move on to your third case, study, this hour. And it involves a federal lawsuit pending right here in San Diego federal court against Trump university. Donald Trump, brought by unhappy former students of a real estate investment program involving a man whose name has been in the news a lot, Donald Trump. So what are the former students, including a man from Del Mar, suing about?

EATON: Well, there are four unhappy students who took his real estate investment seminar that once was called Trump university, now it's called Trump entrepreneur initiative. And they're claiming that they spent tens of thousands of dollars for this real estate institute, and they just didn't get what they paid for. In a nutshell, those who are suing Trump university claim that they responded to advertising inviting them to attend a free seminar, then they paid up to $1,500 for follow up three-day seminar, and then some of them paid almost $35,000 for yet another follow-up seminar, and they said that they got limited, if any benefit. What the complaint says, according to the pending complaint that's on file with the San Diego federal court, is, quote, the primary lesson Trump university teaches its students is how to spend more money by buying more Trump seminar course, close quote. They claim now [CHECK AUDIO].

ST. JOHN: A brilliant business strategy for the Trumps.

EATON: Well, it is except they point to these showing a very high level of customer satisfaction. But those who are suing say, no, you violated the consumer protection law, you engaged in fraud, there was breech of contract. And that's all before the complaint pending before San Diego's chief federal judge, Irma Gonzalez.

ST. JOHN: And I think this is so interesting in view of the fact that we are hearing amount more about private universities and whether they're really offering students the value that they think they're gonna get. So how has Trump university and Donald Trump himself personally, right, 'cause they've included him in the law. How have they responded?

EATON: Right, they added in this most recently filed complaint, they added Donald Trump as a defend saying his personal involvement somehow made him liable. What the people who are Mr. Trump and Trump university have said in response is, look, surveys showed that over 95 percent of the attendees have rated the quality relevance and youthfulness of the program as excellent. Including the surveys prepared by one of those now suing Trump university.

ST. JOHN: She thought it was a great court.

EATON: Well, that's what she wrote. And they attached these to a filing that we'll get to in a moment. Now, Trump university and Donald Trump both have file would motions asking chief judge Gonzalez to throw out parts of the case, in all of the cases against Mr. Trump because they contend there are flaws in the complaint. One flaw that Trump university identifies in its pending motion is that it that the claims are too vague for Trump to know what they're supposed to be defending against. And Mr. Trump himself said, look, you can't say that I did anything wrong or that -- for which I can be legally responsible. And more over, said Mr. Trump, the claims about himself are inconsistent. On the one hand, plaintiffs are claiming he was legally responsible because he was heavily involved in Trump university programs. On the other hand, plaintiffs say he is legally responsible because he was not involved enough. One of the claims is that the people who are suing are making is that, look, they said that these would be hand picked real estate investment advisors who would help the students along. In fact, they weren't hand picked by Mr. Trump. They had never met. But the Trump attorneys are saying.

ST. JOHN: So now how did the plaintiffs respond to that? I would be interested to know what it was that happened between her saying she thought it was a wonderful course to suing them for being so inadequate.

EATON: Well, Trump university's motion, and Donald Trump's motion to dismiss is now pending before chief judge Gonzalez and the decision is expected in a few weeks. But understand that Trump university did not stop in just trying to counteract the plaintiff's lawsuits, as I mentioned. One of the suing said she was very, very satisfied. And in fact, subsequently, about a year after enrolling in the program, she started sending letters to her bank and the better business bureau and Trump university said oh, no. That's unacceptable. You're saying defamatory things on the Internet, and so forth. So they filed what's called an antislap suit saying -- excuse me, not an antislap suit. They filed the lawsuit claiming she had committed defamation. And the people who are representing this person who sued said wait a minute, you're trying to child my free speech. So they filed an antislap motion saying throw this out, because they're trying to chill my free speech, and there's no reasonable likelihood, that they're going to win on the merits.

ST. JOHN: No, the bottom line is, Donald Trump is still on the hook for†-- - is he still facing --

EATON: Judge Gonzales is going to rule on his motion to dismiss, but the bottom line is that antislap motion is that judge Gonzalez denied it and said that claim against the person suing can go froward because while she had engaged in protected activity, there is a reasonable likelihood that Trump university is going to win against this plaintiff for defamation for saying that they have committed certain kinds of criminal misconduct.

ST. JOHN: So as an attorney, would you say that it's more up to sort of buyer beware here that students just need to really hook into things before they start putting down their money? Expensive course we're talking about, syrup thousands of dollars.

EATON: Certainly be careful about what you say about those with whom you do business, but it's up to the judge, and it's going to be very interesting to see how this case unfolds in the coming weeks and months.

ST. JOHN: Good, well, thank you so much for giving us your thumbnail, your very detailed thumbnail with all of these three cases, all of which have links to San Diego.

EATON: Absolutely. Very nice to be here.

ST. JOHN: That's Dan Eaton, Dan Diego attorney and These Days's legal analyst.

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