ORAL ARGUMENTS TODAY NOVEMBER 16: THE SECURITY AND EXCHANGE COMMISSION BACKS SOMERS TO DEFEAT CHUBB/DIGITAL REALTY

SEC ISSUES 74-PAGE REPORT TO THE COURT DETAILING WHY DIGITAL/CHUBB IS MISTAKEN.

Employment Liability Practice Insurance has created a tenuous triangle between the insurance company (Chubb), the insured (Digital Realty), and the law firm they share Seyfarth Shaw.  There is no real way around the conflict of interest whereby the law firm takes its direction from the insurance company who will pay out damages.   The insured takes a back seat.  The problem is the insurance company isn’t a party to the lawsuit. 

To see this in action, look no further than how Digital Realty has acted improperly in allowing  Chubb, to take over the lawsuit.  Digital filed an appeal that only benefits Chubb’s public policy efforts in the US, to protect its EPL profits. What valid reason would Digital Realty have to take file an appeal, spend hundreds of thousands of dollars to win a battle they would never likely face again.  It makes zero sense so the reasons may likely be either: 

  1.  Digital Realty/Chubb are engaging in frivolous litigation to stall the case and add force me to spend on needless appeals, or
  2.  Digital feels very strongly about winning the appeal for the principle of it,
  3.  Digital’s attorney now has a conflict of interest with its client, Chubb and is acting on it behalf, not the defendant.

Earlier this year I asked Digital to stay the appeal for 90 days when there was a brief discussion of settlement. Chubb’s lawyers at Seyfarth responded that there was “too much invested in the appeal to turn back”.   Interesting response.

In a call last spring with the SEC, I asked why they thought Digital would have appealed Judge Chen’s landmark decision to allow employees who report wrongdoing to management rather than the SEC to qualify as whistleblowers.  The SEC  said they had no idea.  Does anyone?

Digital Realty thumbed it’s nose at the SEC last month filing a 75-page appeal with the United States Court of Appeals of the Ninth Circuit.  Digital’s attempt to toss a wet blanket on a sound decision by Judge Chen in May 2015 is seemingly without reason.  Speculation is that Chubb is the secret money behind the appeal forcing me to fend them off in the 9th Circuit.   Digital Realty to fund a sophisticated response to Chubb’s estimated $200,000 investment in the appeal.  All done in the name of preventing employees from reporting SOX violations to their managers, rather than the SEC.  We think.

Is everything on the up and up or do we have  case of frivolous litigation by Digital Realty?  Perhaps its an attempt by Chubb to affect public policy.  Time will tell.  Clues left along he way may tell us sooner than later.

More to come……

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