Two in-house counsel have lost their jobs at the Eaton Corporation after the Cleveland, Ohio, power management company said new emails have emerged—which should have been produced years ago—in a long-running lawsuit.
Eaton confirmed Thursday that Vic Leo, vice president and chief litigation counsel, and fellow litigation counsel Sharon O’Flaherty no longer work at the company. A spokesman wouldn’t discuss the details of their leaving, and they couldn’t be reached for comment.
But the Cleveland Plain Dealer reported earlier that Eaton had fired both lawyers after the email snafu.
On May 10, a judge ordered [PDF] both lawyers—along with CEO Alexander Cutler, general counsel Mark McGuire, chief in-house counsel Taras Szmagala Jr., and outside counsel Michael Schaalman of the Milwaukee law firm Quarles & Brady—to produce sworn affidavits explaining in detail why the emails weren’t originally produced and who was responsible for their withholding.
Now the company is waiting to hear whether Hinds County Judge Jeff Weill, in Jackson, Mississippi, will impose sanctions over the late emails.
Weill’s order for affidavits was part of an eight-years-and-running legal battle between Eaton and six former engineers, who all left the company to join an aerospace manufacturer in North Carolina. In Jackson, Eaton operates one of the world’s largest aerospace hydraulic-pump manufacturing facilities.
Eaton sued the North Carolina company, now called Triumph Actuation Systems, and the six engineers for damages in 2004, claiming they stole some $1 billion worth of trade secrets that were used to compete against Eaton for contracts.
Eaton manufactures electrical power distribution and control equipment, hydraulic products, aerospace propulsion systems, and truck safety systems; it is also one of the world’s largest manufacturers of grips for golf clubs. It has 72,000 employees, with 2011 sales of $16 billion in 150 countries.
The company’s in-house and outside lawyers have suffered so many setbacks in the seemingly endless litigation that some court observers call it Eaton’s “perfect storm.”
Most recently, the U.S. attorney for the Southern District of Mississippi on Wednesday dismissed six-year-old criminal charges against the engineers, without explanation.
The engineers’ defense attorney, J. Clifton Johnson II of Pigott & Johnson in Jackson, said his clients were “very pleased” and “we certainly believe this dismissal serves the interest of justice.” He declined to discuss the case further.
Eaton issued a statement saying, “We believe that the evidence in this case proving the engineers’ culpability is overwhelming and that the decision not to proceed with the trial after many years of delaying tactics by the defendants is disappointing.”
The company’s statement said an FBI raid at Triumph Aerospace in Clemmons, North Carolina, found thousands of pages of Eaton proprietary information.
Eaton, however, was not able to pursue evidence of the theft in its civil suit. That’s because Eaton’s complaint was dismissed in December 2010 for alleged improprieties by its lawyers.
The company was accused of paying off its star fact witness, lying about the payoff during discovery, and hiring a secret outside counsel to influence the then-sitting judge in ex parte communications. The court has already levied $1.5 million in sanctions on Eaton for its misconduct.
The company has denied any intentional wrongdoing, but won’t elaborate on the case. It has appealed the dismissal to the Mississippi Supreme Court.
Meanwhile, Triumph Aerospace and its engineers counter-claimed against Eaton, and that action is ongoing in the Hinds County court. It was here that the previously unproduced emails emerged in April.
The engineers have also filed suit against Eaton in North Carolina, claiming antitrust and other violations.
And if that’s not enough, a group of shareholders have filed a derivative action against Eaton and its officers, including its general counsel, in Cleveland’s Cuyahoga County Common Pleas Court.
The shareholder action, which is ongoing, claims that Eaton’s mishandling of the trade secrets case has cost the company $1 billion in proprietary assets.
See also: “Dismissed Charges One of Many Legal Challenges for Eaton Corp,” CorpCounsel, May 2012.