News & Views of An Indiana Business Lawyer

Blogs to Check Out

2010-03-01T16:59:00.003-05:00

Some law blogs that may be interests to some businesses:

FDA Law Update - just what says it is, a way to keep up to date on happenings at the FDA.
OSHA Law Blog. This may be of more interest to more businesses. Jackson Lewis hosts the blog so its definitely employer oriented.

2010-02-25T11:48:00.000-05:00

Georgia Wills, Trusts and Estate Planning Blog: Estate Planning: A Three-Step Strategy

The estate planning pyramid gives a hierarchy of goals for estate planning. This pyramid is useful in developing an estate planning strategy based on specific client goals. At the bottom of the pyramid is the SELF. The most important goals are centered on maintaining our estate for our own protection and benefit. Likewise an estate plan should provide protection and benefits for the ones that we love, our FAMILY. The next goal is to have the estate plan structured to protect what we have or PRESERVE WEALTH. Beyond that, our estate plan needs to anticipate INCREASING WEALTH. The final consideration is to reduce TAXES AND PROBATE.

Georgia Wills, Trusts and Estate Planning Blog: Estate Planning: A Three-Step Strategy

The Three-Step Strategy

Estate planning is a process, not a set of documents. For an estate plan to achieve all of a clients goals, a three-step strategy should be used.

1. Work with a Counseling Oriented Attorney
2. Use a Formal Updating System
3. Assure your Successors Utilize Fixed Fee Services after death

Garden Leave in Action

2010-01-26T08:29:00.003-05:00

Considering garden leave's novelty, I thought a collection of news articles descring the use of garden leave might be of some help and interest.

Gardening leave has VCCP hanging on phone - Telegraph

However, VCCP may have used all up all its luck, with the launch of the mmO2 service less than 100 days away. Last month, Charles Vallance, VCCP's founder, was sidelined for the next six months on gardening leave after representations from m'learned friends.

Unusually, it is not his former employer that is insisting on this but his former client, Vodafone, which is clearly deeply worried that he is to work for a competitor.

ABN Amro rebels go on gardening leave - Business News, Business - The Independent

ABN Amro, the Dutch financial services group, had slapped in an injunction on Thursday after Mr Luckraft and Mr Thomas suddenly quit their jobs to go to rival Framlington. The writ was for breach of contract to prevent them joining Framlington early. Framlington had poached the pair at the beginning of April, but they had originally agreed to work out their year's notice with ABN Amro. They walked out on Wednesday, claiming an irrevocable breakdown in the working relationship had occurred.

Framlington said: "Following the legal action taken by ABN Amro there has been a further appearance in court today, 24 May 2002. The court has now lifted the Court Order (originally granted without notice to George or Nigel). George and Nigel have agreed to remain on gardening leave pending the resolution of the issues at a trial, which is to be convened as quickly as possible. We welcome an early trial and remain confident that the actions of George and Nigel will be fully vindicated by the court at that time.

Is gardening leave a bed of roses? - Yorkshire Post

Tim Waring became a partner in charge of launching the new Harrogate office of property specialists Knight Frank earlier this year, after quitting his partnership at estate agents Carter Jonas, where he had spent nine years.

Initial reaction when you were first advised of garden leave?

I was a little shocked, even though I could understand why the decision had been made. I'd planned to take my wife to Paris for a few days and the immediate
handover of my mobile phone ensured we enjoyed some wonderful peace and quiet in France.

***

What are your thoughts afterwards and what would you do differently if ever on gardening leave again?

If I was giving advice to anyone about to take gardening leave, I'd say seek advice from someone who has already done it. I did find that for the first one or two months
I was a bit shell-shocked. I'd been used to working at 90mph and suddenly I stopped. I had a lot of lazy mornings and met people for coffee and lunch.
Looking back, I think I could have done more during that early period, but then again, perhaps I needed the time to readjust and take stock

Hightex puts chief on "garden leave"

Stadium roof specialist Hightex today removed chief executive Klaus-Michael Koch with immediate effect and placed him on "Garden Leave" until 24 April 2009.

***

Non-exec chairman Charles DesForges will take a more active role in the company while a replacement chief executive is found. Frank Molter, currently finance director, has also been appointed chief operating officer.

Why Use Garden Leave?

2010-01-24T08:29:00.002-05:00

No, garden leave do think of garden leave as a panacea for all problems of departing employees. I can easily see that a departing employee (and/or their new company) may find the costs of litigation and the money paid during the garden leave outweighed by the profits of jumping ship. (One may also want to read BEAR, STEARNS & CO., INC. v. Sharon, 550 F. Supp. 2d 174 (D. Massachusetts 2008) for an example of a gardening clause not being upheld).

Hong Kong's Career Times gets to the nitty-gritty in Garden leave:

Q1 Why are employers keen to impose garden leave on employees?
A1 Placing an employee who intends to join a competitor on garden leave has several advantages for the employer:
- By temporarily delaying his arrival at the competitor, existing business relationships can be secured;
- The "shelf life" of current confidential information known to the employee will be reduced;
- The employee is not allowed to compete with the employer during his garden leave.

Better off thinking of garden leave as a tool for specific types of employment. I cannot see how it will work in the purely commission types of employment.

I see garden leave working as a very good substitute to non-competition agreements in certain areas. Such as the medical field where non-compete agreements are not exactly favored by the courts (see Enforcement of noncompete agreements).

On the other hand, consider these points from Garden leave a viable option once more as providing a counter-argument to this idea:

The majority went back to first principles and noted that an employer who is paying an employee appropriately is obliged to provide an employee with meaningful work only in limited circumstances - such as where the employee has a specific or unique skill, and where it is clear that the employee's future employment depends on maintaining this skill. Good examples are employees in the entertainment and sporting industries, such as television producers and professional footballers, where garden leave may blunt their skills.

Implications

The good news for employers is that a failure to provide work will not automatically give rise to a breach of contract claim - even if the parties do not include a term in the contract that garden leave is legitimate. As a matter of practice, and to ensure the employee cannot argue they fall within a special skill category, employers should continue to include clauses in employment contracts which allow them to:

# make a payment in lieu of notice; or

# require the employee to take garden leave.

Much depends on the actual terms of the agreement, of course.

More On Limited Liability Companies' Fiduciary Duty

2010-01-23T08:29:00.001-05:00

Now that we have an Indiana Court of Appeals decision describing the fiduciary duty of an LLC to its members, I almost thought to scratch this post. However, Chicago Business Litigation Lawyer Blog's Respected Law Professor's Insights on Corporate Freeze-Out Litigation may still have some benefit to you.

"In Fairness and Good Faith as a Precept in the Law of Corporations and Other Business Organizations, 36 Loy.U.Chi. L.J. 551 (2005), Murdock addresses the fiduciary duty of good faith and fairness that controlling interests of a business owe to minority interests. Noting that this internal duty is a fairly recent legal phenomenon, he surveys caselaw on the subject from around the country that applies to closely held corporations, public corporations and LLCs. Noting that the Uniform Limited Liability Company Act (ULLCA), a model law adopted by several states, doesn't include language that gives members of an LLC fiduciary duties to one another, he praises Illinois for modifying that language to protect members in the updated Limited Liability Company Act."

Garden leave - Writing Up The Agreement

2010-01-22T08:29:00.007-05:00

First, the business needs to decide if a garden leave is a suitable tool. Suitable meaning that it makes economic sense.

Second, the employment contract needs a specific clause that expressly provides for the garden leave. I find support for this in reading A Breach of Contract? by Kate Payne.

Effective Garden Leave -

Include express provision in the Contract of Employment, providing for garden leave and expressly exclude any obligation on the employer to provide work to the employee. Also include an express obligation on the employee not to work for anyone else during the notice period.
Make sure the garden leave lasts no longer than is necessary to protect the legitimate business interests of the employer - the Courts are not shy of intervening to reduce the notice period or, more seriously, invalidate the right altogether.
Team departures - junior brokers and underwriters will often have a shorter notice period than their senior colleagues. Attempts to keep the senior colleagues on garden leave once the more junior ones have started their new jobs with the competitor are likely to fail as the damage to the employers business will already have been done.
Full salary and benefits must be paid throughout the period of garden leave. Failure to do so will amount to breach of contract by the employer and both the garden leave obligation and any restrictive covenants will be unenforceable.
The Key Issues
Employers should give thought to continuing to provide non-obligatory bonus benefits throughout the period of garden leave, such as discretionary bonuses, to help counter any claim by the departing employee that their financial interests have been unfairly prejudiced - this is particularly advisable where they form a major part of the employee's package.
Be cautious in the wording of staff handbooks or training manuals. In the recent Court of Appeal decision William Hill -v- Tucker [1998] the Court considered that the statement in a training manual that the employer was "prepared to invest in its staff to ensure that they have every opportunity to develop their skills" was incompatible with the concept of garden leave.
Payments made by an employer in respect of the garden leave period may be paid to the employee in the usual way or as a lump sum. However, in either case the payment is taxable.

Requiring a writing for the garden leave seems well established in those jurisdictions with ere they are being used. See Garden leave describes the rule in Hong Kong:

Q2 Can I send an employee on garden leave if his employment contract does not contain a specific clause allowing me to do this?
A2 You cannot be certain that you can place an employee on garden leave unless the employment contract clearly states that you have the power to do so.Indiana law requires the same thing in a non-compete agreement. I cannot imagine Indiana courts upholding an oral garden leave agreement.

You can find an English example here.

Hong Kong's Career Times writes on the importance of good drafting - in terms of English common law - in its Factors in drafting an effective garden leave clause:

"What risks are there for the employer if the clause is not properly drafted?

A4 According to the decision in Symbian Limited v Christensen, placing an employee on garden leave effectively terminates the employment relationship but not the contractual relationship. Hence, a departing employee may take up employment elsewhere during the period unless this is expressly forbidden in the contract. Thus, the extent to which a departing employee is free to compete during the garden leave period will depend on how carefully the terms of the employment contract are drafted."

Indiana Funeral Home Law

2010-01-21T06:39:00.001-05:00

Notes from a project for my father that never seems to get very far. With some luck the following listing of Indiana sources might be of use:

The last link should interest anyone dealing with any Indiana professional license that is regulated by the Indiana Professional Licensing Agency.

Intellectual Property and Business Succession Planning

2010-01-20T08:26:00.001-05:00

I try to make the point that what has made Bill Gates all his money is his intellectual property: trademarks, patents and even copyrights. Pennsylvania Trusts and Estates Blog takes this a step further with Intellectual Property in Your Estate:

Forbes published a list of the 13 Top-Earning Dead Celebrities. The estates of these persons are making fortunes with the decedents' intellectual property. How much do they earn? The top-earning 13 decedents earned a combined $194 million over the last 12 months. It makes dying look like a good career move. Who are they? Elvis Presley, Charles M. Schulz, Heath Ledger, Albert Einstein, Aaron Spelling, Dr. Seuss (Theodor Geisel), John Lennon, Andy Warhol, Marilyn Monroe, Steve McQueen, Paul Newman, James Dean, Marvin Gaye.

***

Any author or artist should consider choosing a an executor who is knowledgeable in his or her field to serve as a special executor after his or her death. For example, an author might appoint a family member as executor to take care of the estate in general, but name a literary executor to be responsible for and carry out certain duties with regard to the decedent's written works.

Intellectual property can be a valuable assets and it must be managed in your estate to maximize
income streams income, address infringements, protections, registrations and maintenance.

What have you done to protect your heirs and your business when you die? What have you done to protect your business between now and your death? I do not suggest waiting - get yourself to a lawyer as soon as possible.

Contract Drafting As A Commodity?

2010-01-19T07:20:00.000-05:00

I cannot disagree with Contract Drafting for the 21st Century: A Conversation Between Ken Adams and Ron Friedmann from Strategic Legal Technology.

Ron: It sounds like you think contract drafting should be a commodity.

Ken: Yes, in large measure. And that’s entirely achievable, given all the sophisticated information-technology tools now available to organizations that produce contracts. Companies that buy stuff or sell stuff generally use a few templates repeatedly. After a certain point, their contract volume will be big enough that it would be cost-effective for them to shift to drafting contracts by having their lawyers or, ideally, their businesspeople complete an online questionnaire. Once the questionnaire is completed, clicking “Done” would cause the system to pull together and adjust appropriately the pre-loaded and pre-approved contract language.
A rigorous document-assembly system for contract drafting would save time and money and would allow transactional lawyers to focus on tasks where they add real value—helping devise deal strategy and taking part in negotiations. But serious cultural obstacles remain. I suspect that people who buy into my view of things currently represent a small minority. Sure, you hear a lot of talk of change, but I’ve seen little in the way of action to back it up. So the vast silent majority perpetuates the current dysfunction.

Writing contract ought not take second to the "deal strategy and taking part in negotiations" but this - in my humble, small town opinion - requires a long term relationship with the client.

Nor it Mr. Adams.' views outside of current thinking. Richard Susskind has been predicting similar changes in how we provide legal services for quite some time.

Prophet Richard Susskind Predicts the Future of Law; Internet is Key:
"Now that the ubiquity of e-mail is no longer seen as a wild prediction but an established fact, newer cutting-edge changes to what Susskind describes as the classic interface between lawyers and clients include services that allow clients of some major United Kingdom law firms to download standard contract documents and lawyers in British courts to download standard judicial orders.

What Is An Acceptable Business Risk For Your Business?

2010-01-18T07:02:00.000-05:00

Think you got an idea> Give Reading Word's The dark side of IP a read.

Business people often scoff at lawyers that "you have to take risks in business." True, but the risks should be valid risks: venturing the new product, entering the new market, changing up the marketing and ad campaign, leveraging up for growth tomorrow. Unacceptable risks should be those which introduce fines and penalties, complex litigation and jail time. Many businesses rarely think of the dark side, the flip side of their IP: On whom might you be infringing with what consequences? The reality is that if you do infringe, it will be expensive, time consuming and ruinous to your model. They can shut you down and take your profits. Don't consider this an acceptable business risk. Get the evaluations you need.

I know you don't like thinking about IP rights: they're complicated, uncertain and seem to cost you coming and going, for filing and defense. You tend to protect and defend what you can and leave the rest to fate, calling it risk. Don't. You have talked to the lawyers and have got a lesson in costs. A patent can cost $50,000 and up and may yet not issue or may may be invalidated, and the invention may yet infringe. After all the development costs for your goods and services, patents, and trademarks and copyrights are expensive to defend. Many businesses tread skeptically. Many choose to protect their inventions as trade secrets and close their eyes to much of the real world fate of their IP.

***

Think about how quickly you can be shut down and your profits stripped should your product be ruled to infringe, even a seemingly old, obscure patent. Unless you examine your work honestly according to the reality of IP law, you too run the risk of high damages and costs and being shut down. You need to pay those few thousand dollars at the front end before you go out on a limb and have experts examine the real world for patents, trademarks and copyrights which your products and creations might infringe.

Do you have any ideas what legal woes your business may be sitting on? By the time you think you need a lawyer, the mess may be big enough to swallow the business whole. An ounce of prevention....

Preventive Law and Trade Secrets

2010-01-17T07:02:00.000-05:00

It is a relief to have others repeat my points about preventive law. I wonder how much of it is passed off as being self-serving. It is not. What most do not realize is that cleaning up the mess - litigation - creates more difficulties for us lawyers than does preventive law. Which explains what I like Protecting business model can be costly about from The Wichita Eagle

Attorneys say that although taking legal action is lengthy and expensive, and the outcome uncertain, it's often the only way businesses can protect their intellectual property rights. And interest in protecting intellectual property interests has grown with the shift from a manufacturing to a service economy.

"Legal protection for inventions, patents and so on has become more important," said Herbert Wamsley, executive director of the Washington-based Intellectual Property Owners Association. "Because in the information age, intangible assets such as technology are more important relative to the traditional kinds of wealth, such as land and labor and capital."

***

Attorneys say the best way to protect company secrets and ideas is to take measures early on to avoid their falling into the hands of competitors.

That includes filing for patents on inventions, registering trademarks and preventing leaks of sensitive information — either by restricting the number of people who know it, or requiring insiders to sign non-compete or confidentiality agreements.

If you want your business to be safe, give me a call.

Tweeting? Facebook? Be Careful What You Say and Do

2010-01-16T07:02:00.002-05:00

Twitter may not seem related to business. Think again, what I am seeing as marketing advice is to join Twitter (I have and you can follow me, if you like).

Therefore, in the hope of preventing litigation, let me suggest reading To Avoid Libel Litigation, Lawyer Advises, Don’t Tank Up and Tweet

Following recent news that a woman is being sued by an Illinois landlord over a tweet she posted on Twitter about her apartment, a California lawyer is offering 10 suggestions to help other users of the popular micro-blog avoid being a defendant in defamation litigation.

At least some of the 10 tips offered by attorney Adrianos Fachetti in a TwiTip post may seem like common sense. For example, tanking up on alcohol and posting a tweet is not a good idea.
However, for those who don't pay sufficient attention to this issue and other potential litigation pitfalls, a horrible fate may await, the lawyer writes—losing the privilege of posting on Twitter

Remember that other social media sites exist to worry the business owner. See Social media permeate the employment life cycle for a whole range of pitfalls for the business owner.

Attorney Fees and Services

2010-01-15T07:02:00.000-05:00

Think About What You Are Getting.

That is what I read as the point in 3 Geeks and a Law Blog's Cost Recovery…Such a deal:

You can see it in recent news items discussing the attitudes of General Counsels at large corporations as they struggle with reducing costs with major law firms. They are negotiating hourly rates aggressively and questioning every item that appears on their bill. The question of whether or not the hourly billing model has gone the way of the dodo has been debating extensively, including by 3Geeks’ own Toby Brown on this page. I think the hourly rate issue should be separate from the online research charges that appear on the bill. As you can see in my analysis below, these charges actually reflect the efficiencies these services provide.

I no linger favor the hourly rate in my practice, preferring flat fees, but I have to admit that this is a good argument for those using an hourly rate.

More importantly, the article touches on what every client should know and what every lawyer should provde: what the clients are getting for their money.

Things To Do Before Signing That Franchise Agreement

2010-01-14T07:02:00.001-05:00

Even if the economy continues its limpid trends though this year, someone ssomehwere will be looking at a franchise opportunity. Franchising offers wonderful opportunites to both the franchisor and franchisee. Unfortunately, franchises also offer achance for a fleeching by the unscrupulous and the criminal minded. Business Opportunities Weblog's

Franchise Contract Time Bombs does a fine job of setting out what can wrong.

* Do the numbers smell a little fishy to you? It is almost unheard of to have a franchise contract that supplies a full income statement. Watch out for exceptionally high and “pretty” looking expected income numbers.

* Take a look at what they want you to pay up front. Some franchisors make money right off the bat with a one time franchise fee. However, if the contract seems to show that you have a lot of costs up front then you should run in the opposite direction. This may mean trouble for you later when your having a tough time and they have already made their money off of you earlier on, recently stated on Forbes.com.

* Make sure your royalty payments are not going to cost you an arm and a leg. Not all franchises charge these but if they do they shouldn’t break the bank to the point where it’s impossible for you to turn a profit.

* How Easy Is It To Get Out Of Your Contract? Franchise agreements can last for 10 years, and many franchisers make it difficult for franchisees to cut and run. Breach the contract and you’ll pay “liquidation damages.” Every UFOC contains (or should contain) a section devoted to rules governing termination, renewal and transfer of contracts. Read it–closely.

I have my own bit of advice: take the francise offering circular and the agreement to a lawyer before you pay a penny.

If you need a lawyer to review a franchise agreement, please contact me for an appointment.

Non-Compete Agreements: Are They Worth the Trouble?

2010-01-13T07:02:00.003-05:00

TechCrunch's Apple And IBM Resolve Employment Dispute; Papermaster Can Now Get To Work raises this question:

Well, now he can finally go make future iPhones and iPods for Apple. The two companies have settled out of court. It kind of makes you wonder why companies even bother with non-compete clauses in employment contracts, especially when they are overly broad. More often than not, they are not worth the paper they are written on.

(CNN Money published a timeline of the case here.)

While I do not generally oppose using non-compete agreements, they do have limitations:

They do not last forever.
The business might lose employees.
The business must enforce the agreement - that is go to court, pay court costs, pay legal fees - which may cost more than what is saved.

For more abstract problems there is Trade Secret Litigation and Free Speech: Is it Time to Restrain the Plaintiffs? by Elizabeth Rowe.

Think of non-compete agreements as a tool. They have their uses and the business must consider how they will use. I would point out that garden leave exists as an alternative/parallel tool to non-compete agreements.

Non-compete agreements exist to protect the employer from unfair competition.

Businesses contemplating the need for a non-competition need to have a long discussion with their attorney before turning them loose on creating a non-compete agreement. If you need a lawyer for a non-compete agreement, please contact me so we can set up a meeting.

Online Resources: freeERISA.com, Federal Forms Catalog and myCorporateResource.com

2010-01-12T07:02:00.001-05:00

Not endorsing any of the following, just providing them for informational purposes.

About freeERISA.com

FreeERISA.com is intended as a useful, website where visitors may view retirement and welfare benefit information on the group or groups of their choice as this data appears on Form 5500 for free.

Federal Forms Catalog for Citizens

Forms.gov provides citizens and businesses with a common access point to federal agency forms.

myCorporateResource.com--Empowering the Corporate Community - Home

myCorporateResource.com is designed to empower corporate professionals with the latest in legal and commercial information from the world’s top law firms and industry insiders. Every year the top 100 American law firms produce more than 10,000 Client Alerts addressing the key commercial and legal issues faced by their clients. We aggregate, review, sort and summarize this content -for free- to give you a really useful corporate resource.

Free Reviewed

2010-01-11T14:11:00.000-05:00

Yes, quite behind the times in posting this review from The New Yorker, Malcolm Gladwell reviews Free by Chris Anderson:

There are four strands of argument here: a technological claim (digital infrastructure is effectively Free), a psychological claim (consumers love Free), a procedural claim (Free means never having to make a judgment), and a commercial claim (the market created by the technological Free and the psychological Free can make you a lot of money). The only problem is that in the middle of laying out what he sees as the new business model of the digital age Anderson is forced to admit that one of his main case studies, YouTube, “has so far failed to make any money for Google.”

***

So how does YouTube bring in revenue? Well, it tries to sell advertisements alongside its videos. The problem is that the videos attracted by psychological Free—pirated material, cat videos, and other forms of user-generated content—are not the sort of thing that advertisers want to be associated with. In order to sell advertising, YouTube has had to buy the rights to professionally produced content, such as television shows and movies. Credit Suisse put the cost of those licenses in 2009 at roughly two hundred and sixty million dollars. For Anderson, YouTube illustrates the principle that Free removes the necessity of aesthetic judgment. (As he puts it, YouTube proves that “crap is in the eye of the beholder.”) But, in order to make money, YouTube has been obliged to pay for programs that aren’t crap. To recap: YouTube is a great example of Free, except that Free technology ends up not being Free because of the way consumers respond to Free, fatally compromising YouTube’s ability to make money around Free, and forcing it to retreat from the “abundance thinking” that lies at the heart of Free. Credit Suisse estimates that YouTube will lose close to half a billion dollars this year. If it were a bank, it would be eligible for TARP funds.

I am still as doubtful as when I wrote this.

Could Taxes Sink Your business?

2010-01-11T08:21:00.002-05:00

Tough Times for Lenders blog posted Ticking Sound: Will the Current Tax Valuation Drag You Down?. Which brought back to mind this headline: State sets sights on back taxes. This comes from that Muncie Star-Pess article:

Sometimes the taxes owed are in dispute. Ed Faulkner Jr. of Faulkner Mortuary, which is included on the list, says he's "been battling with the state for the last 20 years to get our sales tax issues resolved." Faulkner said the amount he owes is less than $10,000 compared to a one-time bill of $160,000.

McFarland noted that some might assume the businesses owing back taxes are all small, "mom and pop" operations, but that isn't the case.

Tough Times has this in its post:

So, my suggestion simply is to add this topic to your workout check list, and include the following as tasks directed at this ticking sound:

* What taxes or assessments cover or encumber the collaterals? Governmental (per a current search of applicable governmental taxing offices)? Private (per a current title report)?
* What valuation has been given to the collateral? (Is it high?)
* How is valuation determined?
* What are the key dates (Due dates? Appeal dates? Etc.)
* Has the owner\borrower contested the valuation? Are written agreements covering valuation in place?
* Is it possible to file a “late” appeal? Are there special conditions for filing a late appeal?
* What input or role does the lender\servicer have in the valuation determination or appeal process? (Under applicable law or regulations? Under the loan documents?)

Todd Franks (with The Cantrell Company) tells me that they have recovered over $100,000 in overpaid property taxes for one loan servicer, after a borrower failed to timely protest their 2008 property tax valuation (in a situation involving Texas real property collateral). His experience is that if the current owner is unsophisticated and\or unfamiliar with the property valuation process, then when the owner is struggling to keep the property and to avoid a loan default or a foreclosure, many owners simply give up on contesting property valuations handed out by taxing authorities. (The result: it is a problem discovered by you AFTER you take title.)

Indiana Case law: LLC Fiduciary Duty to Former Member

2010-01-11T07:02:00.002-05:00

The Indiana Court of Appeals decided that Indiana Liability companies have a continuing fiduciary duty to a former shareholder or member to accurately report the company's fiscal results to the IRS for a year in which the former member held stock or was still a member of the limited liability company. That is Mike A. Abdalla, et al. v. Raed I. and Hani I. Qadorh-Zadin. This is how the Court of Appeals got to that conclusion.

The Court of Appeals started with this legal basis:

Limited liability companies, such as the ones at issue here, were not available in Indiana until the enactment of Indiana‟s Business Flexibility Act in 1993. Ind. Code § 23-18-1-1 et seq. The popularity of LLCs has forced courts nationwide to address traditional business issues in terms of this statutory creation. In Indiana, there is little case law regarding LLCs and hardly any case law concerning fiduciary duties in the LLC context. In light of this limitation, we decided in Purcell v. Southern Hills Investments, LLC, 847 N.E.2d 991, 997 (Ind. Ct. App. 2006), that “common law fiduciary duties, similar to the ones imposed on partnerships and closely-held corporations, are applicable to Indiana LLCs.”

Shareholders in a closely-held corporation, such as Q Realty, owe each other fiduciary duties. G&N Aircraft, Inc. v. Boehm, 743 N.E.2d 227, 240 (Ind. 2001). In such a corporation, “[t]he fiduciary must deal fairly, honestly, and openly with his corporation and fellow stockholders. He must not be distracted from the performance of his official duties by personal interests.” Id.

Against which there was this law:

With regard to the assignment of membership in an LLC, Indiana Code section 23-18-6-4.1(e) provides that “[u]nless otherwise provided in a written operating agreement, a member who assigns the member‟s entire interest in the limited liability company ceases to be a member or to have the power to exercise any rights of a member when an assignee of the member‟s interest becomes a member with respect to the assigned interest.” Despite the option included in the statute to deviate from the provision on assignment of interest, the companies‟ operating agreements clearly state that a member who assigns all
of his interest in the LLCs “shall no longer have any rights or privileges of a Member . . ..” (Appellants‟ App. p. 82). As such, it would appear that the Zidans relinquished their fiduciary duties on August 4, 2006 and thus no longer have a course of action concerning the K-1 Schedules which were drawn up in the Fall of 2007.

The former members argued this:

On the other hand, the Zidans focus our attention on Thompson v. Central Ohio Cellular, Inc., f.k.a., Cellwave Inc., et al., 639 N.E.2d 462 (Ohio Ct. App. 1994). In Thompson, after the plaintiff sold his shares to Cellwave in late 1991, the corporation had tax returns prepared for the 1991 tax year. Id. at 464. On April 1, 1992, Cellwave provided Thompson with a K-1 Schedule that reflected an allocation to him of more than $6 million in long-term capital gains for 1991. Id. Although Thompson claimed that the K-1 Schedule improperly shifted a significant tax burden to him, Cellwave refused to provide a corrected K-1 Schedule. Id. Thompson filed a complaint, alleging breach of fiduciary duty and fraud. Id.

***
Analyzing the character of the „shareholder termination rule,‟ the Cellwave court emphasized that the rule is not absolute. Id. at 470. The court specified that “[t]ermination of the fiduciary relationship does not shield the fiduciary from its duties or obligations concerning transactions which have their inception before the termination of the relationship.” Id. Because the reporting to the IRS of Cellwave‟s financial results for the year 1991 was based on transactions which had their inception before the termination of the fiduciary relationship, the court concluded that Cellwave owed a fiduciary duty to Thompson. Id.

Notice that this differs in several ways from the Illinois case reported by Chicago Business Litigation Lawyer Blog in LLC Members Owe Company, Manager No Fiduciary Duty, Appeals Court Rules.

Small Business (SBA) FAQ

2010-01-10T07:02:00.000-05:00

Docuticker blog published SBA - Frequently Asked Questions which I think fits well with this blog.

Source: U.S. Small Business Administration, Office of Advocacy
From e-mail:

The Office of Advocacy released its annual update to the Frequently Asked Questions. It estimates that there were 29.6 million small businesses in the United States in 2008. Once again, the document shows the importance of entrepreneurship to our nation’s economy, with small businesses accounting for half of nonfarm, private real GDP and half of all private sector employment. In addition, small businesses generate the majority of net new jobs. Firms with fewer than 500 employees accounted for 64 percent (or 14.5 million) of the 22.5 million net new jobs (gains minus losses) between 1993 and the third quarter of 2008. An estimated 627,200 new employer firms began operation in 2008, and 595,600 firms closed that year. Moreover, according to U.S. Census data, seven out of ten new employer firms last at least two years, and about half survive five years.

A Better Business-Lawyer Relationship

2010-01-09T08:21:00.000-05:00

Never having had any success with this concept in Indiana, I still like its potential. Articles like Law.com's Small Law Firm Woos Clients With Monthly Subscription Fees keep me believing that this is the best practice for providing legal services to businesses:

Given the steps they go through to set each client's pricing at the outset, and the flexibility that both sides maintain in the month-to-month arrangement, they don't worry about clients taking advantage. "What if they stay with us one more month or one more year?" Smithline asks. "What if they refer another client?"

Earlier this year, executives at San Mateo, Calif., cloud computing startup Appirio Inc. were looking for a way to cut legal costs. The big firm the company was using wasn't too interested in entertaining flat-fee billing at the time, said Jim Emerich, Appirio's chief financial officer (he declined to name the firm). So the company's work went to Smithline Jha, Emerich said, after a beauty contest that attracted four competitors.

***

So in early 2008, the firm started experimenting by putting a few longtime clients on a flat-fee subscription. They'd estimate what the client would spend with the firm in a year, and divide that by 12 to arrive at a monthly price. (Depending on the client, they say, a month can cost from $6,000 to about $30,000.)
They've since come up with a way to set a monthly price for new clients, too, by negotiating based on what Smithline calls the exploratory month. At first, "You don't know enough about the client and they don't know enough about you." They charge $5,000 for that initial month, during which the firm does as much work as the client will give and learns how frequent and complex its deals are. Then, they negotiate a monthly figure.

"People think it's really complicated, but it can be a really quick and friendly discussion," Jha said.

***

To keep it simple, there are no caps or floors, and neither side is bound legally for more than a month at a time. That way, either party can address major fluctuations in work by requesting an adjustment for the following month, Smithline said. He noted that most client rates are not adjusted more than once a year.

Invoices list the assignments and tasks, but not the time spent, and Smithline says the firm doesn't track time spent internally, either.

So why would a business not prefer this type of relationship to one of hourly fees?

Why Should Businesses Have a Long Term Relationship With Their Lawyers?

2010-01-07T07:02:00.000-05:00

I should point out that for the business, a long term relationship leads to lower costs and better service. Lawyers get to provide a better service (and if you do not think that matters to your lawyer, give them a call and talk with them).

No, I suggest reading Schedule Your Legal Checkup over at JD Supra. Not much longer than this post but you will need Adobe Reader.

If you are an Indiana business wanting to know how a lawyer can help your business, I suggest giving me a call.

For Those Wanting to Check Up on Their Business's Reputation

2010-01-06T11:43:00.002-05:00

I have not tried this out but Iam intrigued enough to pass it along.. Channel Signal seems to collect online chatter about a company and presents the information to the business. This knowledge can be very useful.

20 Small Business Blogs

2010-01-04T14:16:00.000-05:00

From Rush Nigut's Rush on Business blog:

The Franchise King has a great list of 20 small business blogs that have the right stuff. These blogs possess some of the best content on the Web when it comes to small business. Be sure to check them out!

Changes...Shaking Things Up...Thoughts of 09 and 10

2010-01-04T00:11:00.002-05:00

Here I go again, trying to rise out of the ashes. Such is the feeling this late evening after what seems like a furious pummeling received in 2009.

What does not kill me, makes me stronger.

Yeah, right. Of course, it has seeped into my head that the death throes may come much later than the death stroke.

I say all this as a preface to explain some changes and give some thoughts for the coming year.

What has not changed here is that this blog belongs to my other interest of my law practice: business.

Since sometime in May of this year, I saw my business practice shrivel to nothing. It was like a tap was shut off. I know from other lawyers in other states that they have seen an increase in business start ups due to layoffs of bankers and those of similar sorts.

I remain convinced that Indiana is business friendly but not entrepeneur friendly. This blog focueses on small businesses. I honestly believe that our politicians still think in terms of General Motors (the old one, not the new one).

Capital remains scarce for start ups in Indiana. I think Marion County and, perhaps, Tippecanoe County (thank you, Purdue). If anyone wants to disagree that is what there are is a comment section below. I do not think anyone will disagree that capital will be hard to come by well into this year.

Another change: you will find this blog's focus no longer includes my business litigation practice. I will write on litigation topics on my Indiana Business Litigation and Collections Law Blog. I still do not have all the bells and whistles set up for that blog that I have hear (like no newsletter, so far).

Another change: there will be fewer posts. Sorry but I am getting older and also must follow what is drawing business to me. I am looking for fewer but more quality. I have material that needs written on that will coming out here over the next month or two as I get to it. See, I do not get paid to write this blog but it does serve as part of my marketing.

What I would like to see the next year is less litigation and more consulting work. I am not sure why but some potential clients and would have been clients were a little taken aback that they were not my only clients. With taking on business litigation cases on a contingency basis, they did not understand that other clients were subsidizing their work. I got tired of that.

Looking ahead, I think there will be more regulation in terms of scrutiny and businesses had better get used to that. We can have all kinds of philosophical/political/ideological debates on the subject on the subject but I see them being akin to the late night philosophical debates about the meaning of life that one has in college - pretty useless. Things have gotten out of whack and we will need to deal with what Congress and the Indiana General Assembly cranks out.

With more regulation or more effective regulation, businesses must start practicing preventive law. Get you a lawyer and an accountant and keep them in the loop. It is really that simple. Oh, you cannot afford a lawyer or an accountant? Then how long do you think you can afford to run your business? Do you say I do not need insurance for the business? There are many lawyers who offer the same services I do to small businesses: discounted fees, a small monthly retainer and others.

If your view is that I do not need a lawyer until I get into trouble, then you are profligate fool. I know I should be speaking nicely - after all I am trying to get your business. Let me say it gets annoying to have repeatedly given this advice and be ignored: it costs more to get a client out of trouble than it does to keep them out of trouble. I more than a little tired of people coming into the office and being told what it may cost to fix the problem in court and being angry at the cost. No, I should just hold my tongue and cash the checks for fixing but that does not seem quite right to me. So get it in your head: being in business means you need to have a lawyer and you have to budget for it.

Both sides of the attorney-client relationship need to work together and will need to get inventive. Money is tight. You might not realize that I also run a business. I do. I know what it is like to wake in the middle of the night and wonder how I am going to keep the doors open. Without wads of cash on either side of the relationship, we need to figure out what you need and how we can provide it with a profit to both sides of the relationship. That means both sides need to talk to one another and explain what is needed from and by both sides and how it can be delivered to both sides.

That is what I see for the next year: a lot of changes, a lot of grumbling about those changes, and destruction for those who do not change.

What I hope for the coming year is working with businesses so that they can weather the changes.

Now let me go back to writing about this blog.

What I am publishing here is information. Think of this as a lighthouse for those wanting to start an Indiana business or who have an Indiana business. Lighthouses exist to show where the dangers. If you want actual help, then you need to hire me. I cannot answer specific legal questions here. Use the blog to educate yourself on a subject but understand that I have not, probably cannot, write on everything I know. I do not think I have enough time left in this life to put everything into writing. Education is one of my purposes here - but understand that what you learn here is a starting point.

Now for my regular readers, thank you for sticking around. I think some of you still have subscriptions to the e-mail newsletter.

Let me be clear about the subjects I will writing on. Those of you interested in the purely consumer stuff will have a rough going, I am afraid. The market dictates where my practice is going and in these times I must concentrate on other things. (It is not that I no longer doing non-business civil litigation but I must apportion my time for writing to other subjects).

Some prosaic changes for those using the e-mail newsletter: 1) changed and improved (I think) my links - there are now feeds from other blogs dealing with similar topics) and 2) I have weeded out and melded those websites with feeds and 3) improved the links to business sites that are not law related. Again, the idea is getting information to my readers.

Now, let's get to work.

Alcoholic Beverage Law Sites

2010-01-03T11:41:00.000-05:00

I still have my interest in alcoholic beverage law. If you have an Indiana business that deals with alcholic beverages and need a lawyer, please give me a call.

I give these in no particular order:

Changes Are Coming

2009-12-25T19:11:00.002-05:00

Subscribers should notice a new name on the blog. Starting today this blog begins emphasizing the non-litigation but business oriented part of the my practice: starting companies, the law of running a business, and subjects related to this - such as succession planning and employment law.

A new blog dealing only with business litigation issues will be up and running soon.

And to All, A Good Night - Going on Hiatus

2009-10-31T12:21:00.002-05:00

This year has been rocky with this blog as it has been for this part of my practice. With the current economy, it seems unlikely to grow and I need the time I would need to spend on this blog and this practice area in other areas which can keep the bills paid. Even that might be too optimistic at this time. In the past month alone I have been dealing with flu, an eight year old with a broken leg and training a new secretary and all that in addition to the usual tasks of running an office. Overwork and too little rest now have me fighting off bronchitis and the future is not so bright that I need to wear shades. One client has already left me - even though I am still waiting for that court costs check they said they mailed - because of the delays here. With all this in mind, I am taking a hiatus on this blog until the first of next year.

I am also closing out comments. Sorry but I am trying to conserve as much time as energy as possible. At this point, it is a matter of survival.

News: Settlement from IMI in Concrete Price Fixing Case

2009-10-28T21:48:00.000-05:00

$29M deal reached in IMI price-fixing lawsuit | IndyStar.com | The Indianapolis Star

IMI's settlement must be approved by a federal judge before it's official. It would boost the amount of settlement money paid by the companies in the case to $53 million.

"This is an historic settlement. We could not be more thrilled," Irwin Levin, lead attorney for the plaintiffs, said Tuesday.

The settlement funds, minus legal fees and other costs, will be paid to a court-approved class of about 5,000 individuals and companies that bought $700 million of ready-mixed concrete from the seven companies during the four years of the conspiracy, 2000 to 2004. Of the $24 million in settlements, attorney fees and other costs have eaten up $8 million. The fees and costs for the IMI settlement are not known.

Levin, an attorney for the Indianapolis firm Cohen & Malad, said the settlements so far, counting IMI, amount to "one of the highest percentage recoveries in civil antitrust cases in history."

The settlement money will cover more than 90 percent of the estimated overcharges from the price-fixing, Levin said. The first checks to plaintiffs will be mailed late this year or early next year and amount to a kind of eagerly awaited economic stimulus check.

"A lot of contractors are going through difficult times," Levin said. "We need to get this (money) out to them as quickly as possible."

News on Social Media in the Workplace

2009-10-27T07:02:00.002-05:00

From The Tennessean comes Businesses crack down on workers using social network sites

Workplace restrictions on the digital world are forcing employees to give their fingers a rest, even though we've become a society that can't get enough of social networking sites and other online diversions.

Among U.S. companies, 54 percent completely prohibit workers from visiting social networking sites for any reason while at work, according to a report last week from Robert Half Technology.

Nearly one-fifth permit social networking for business purposes only, and 16 percent allow limited personal use.

In the future, more companies will move to block access to social media and monitor what their employees do online, although not completely ban Internet use, said Nancy Flynn, founder and executive director of the ePolicy Institute, which advises employers on how to limit cyber risks.

She doesn't recommend that companies ban all personal Web use or prohibit texting on personal cell phones.

"What I do recommend is that employers put clear rules into place as to how much time you're allowed for personal electronic communication and the times of day to engage in personal use, whether that's the lunch hour or during breaks or for an hour a day," Flynn said.

I emphasized that paragraph. Clear rules help on several levels. Take a good look at what your employees do and your business's needs.

About the business' needs, take a look at Breaking: Twitter costs British economy less than people who gaze out the window.

Limited Liability Companies - Get the Operating Agreement

2009-08-31T07:47:00.000-05:00

Nothing from Why You Need Professional Advice and an Operating Agreement for Your LLC differs greatly from what I advise people wnating to start a limited liability company, so pay attention.

Absent an operating agreement, many critical issues will be determined by statute. Let’s say, hypothetically, that a business person establishes an LLC, coming up with the business plan and strategy and contributing the capital to start the business. Further assume that she decides that a trusted assistant should have a small equity interest in the business, both as a reward and an incentive to perform. Thus, the founder files the LLC paperwork listing herself and the assistant as the two members.

In Indiana . the same surprise awaits the unwary creator of a LLC:

The founder may be surprised to find at a later date that, because there is no written operating agreement, she and the assistant are, by Georgia statute, entitled to equal votes in managing the business. O.C.G.A. § 14-11-308(a)(1). In addition, the founder and the assistant are entitled to equal profit distributions. O.C.G.A. § 14-11-403. The founder will also find, as a consequence, that the assistant has the legal right effectively to block anything the founder wants to do with the business.

Which is why I suggested last week to a potential client that an LLC would not do what he wanted to do - maintain control.

I like the sense of hope given in this paragraph but I would not want to rely on anyone's altruism in a business situation. As Cindy Lauper once sang, money changes everything.

It may be possible, if the assistant is a reasonable person, to clean this up at a later date by adopting an operating agreement that makes the assistant the minority equity holder and that allocates voting rights and profit distributions as was originally intended. However, if there has been a falling out between the two members, or if they simply honestly disagree on what their respective rights should be, it can lead to a very difficult dispute.

Pay attention to this paragraph:

Of course, if the founder had consulted a lawyer in establishing the LLC, this scenario would have been avoided. The issues would have been addressed in an operating agreement, making the founder the manager, establishing the percentages for profit distributions, and dealing with many other issues.

I spoke wiht another person this past week who is looking to litigate a business set up problem. When I asked if the business had been incorporated, I was told that the other people decided a lawyer was too costly. Thiose same people will now be paying more to defend a lawsuit with a likelihood of paying damages. So much for saving money on lawyers.

The Cyberskank Case

2009-08-27T08:05:00.001-05:00

Beware what you do online.

Cybersmear - the Skank Blogger Plans to Sue Google for $15m for Disclosing Her Identity:

A recent ruling about an alleged anonymous slanderous blogs about a New York City model made it to the front page of every news media on the Internet when a New York City Judge ruled that Google had to identify the name of the person who ran the blog called “Skanks of NYC.” When Liskula Cohen (the defamed model ) learned the identity of the anonymous blogger was Rosemary Port, a 27-year-old student at the Fashion Institute of Technology, Cohen decided to not pursue any slander claims against Port. In an interesting turn of events, now Port claims that Google somehow breached a fiduciary duty and Port’s attorney is bringing a claim against Google for $15M.

***

In this instance Port claims the only person on the Internet who saw "Skanks of NYC" blogs was Cohen, and ironically because of Cohen’s lawsuit and the alleged violate by Google of Port’s rights, now everyone on earth knows. I’m sure there a lesson in this case but generally I’m reminded of the New Yorker Cartoon where two dogs are talking and one says to the other “I had my own blog for a while, but decided to go back to pointless, incessant barking.”

Oddly, PC Magazine hits on the legal points better in 'Skank' blogger talks, sues Google for $15m

Legal time-out. That strikes me as nonsensical concept: the fiduciary relationship is the highest, most stringent duty one can have to another, typically the directors duty to shareholders, or a trustee’s duty to beneficiaries. To create such a relationship between a company and someone who creates a free blogging account makes a mockery of the relationship. And what is the duty to protect anonymity? That is definitely not listed in the treatises’ lists of fiduciary duties. What is listed is the duty not to profit from one’s position as the fiduciary. The idea that Google has undertaken a fiduciary relationship with users - and that the duty includes disobeying a court order - is laughable. Now back to our catfight…

Google has a fiduciary duty? Creative is good when kept when the bounds of reality. This idea has only a passing familiarity with reality, but this next argument has even less relationship with reality:

This seemingly trivial yet voyeuristic spat is in fact a major First Amendment case in the making, the lawyer thinks.
I’m ready to take this all the way to the Supreme Court. Our Founding Fathers wrote ‘The Federalist Papers’ under pseudonyms. Inherent in the First Amendment is the right to speak anonymously. Shouldn’t that right extend to the new public square of the Internet?

I think Maureen Dowd does a droll destruction of this argument in her Stung by the Perfect Sting:

Yet in this infinite realm of truth-telling, many want to hide. Who are these people prepared to tell you what they think, but not who they are? What is the mentality that lets them get in our face while wearing a mask? Shredding somebody’s character before the entire world and not being held accountable seems like the perfect sting.

Pseudonyms have a noble history. Revolutionaries in France, founding fathers and Soviet dissidents used them. The great poet Fernando Pessoa used heteronyms to write in different styles and even to review the work composed under his other names.

As Hugo Black wrote in 1960, “It is plain that anonymity has sometimes been assumed for the most constructive purposes.”

But on the Internet, it’s often less about being constructive and more about being cowardly.

I really do not see this as a landmark on the road of free speech.

For background on the case, here is JUDGE ORDERS 'SKANKS IN NYC' BLOGGER TO REVEAL IDENTITY TO LISKULA COHEN.

Cohen's lawyer, Steven Wagner, said he hopes the decision sends a message to bloggers, Twitterers, and whoever else would use the anonymity of the Internet for cowardly defamations.

"The rules for defamation on the Web -- for actual reality as well as virtual reality -- are the same," Wagner said. "The Internet is not a free-for-all."

But the lawyer for the anonymous blogger warned that the real free-for-all will happen in the court system if everyone who's ever suffered an ugly insult online decides to take their complaint before a judge.

"The floodgates would be opened if you tried to regulate these very broad, common insults and invective on the Internet," said Anne Salisbury.

"You can be really, really mean to people -- you just can't lie about a set of facts that are provable as lies, and that you knew or recklessly disregarded the truth of."

Logos and Trademarking

2009-08-27T07:05:00.001-05:00

David Airey's blog has an interesting post in Logo trademarking tips: A legal perspective

But, before addressing the legal implications, it’s worth noting that a number of our insightful readers and commenters have already helped articulate a variety of pros and cons from a business and marketing perspective (view the comments on Duets Blog). By my count, there appears to be consensus on at least two important points:

1. Having an iconic stand-alone non-verbal logo or wordless trademark symbol is highly desirable, especially for truly international brands; but
2. be prepared to spend a lot of time, effort, and significant resources to achieve one.

Logo trademarking tips: A legal perspective | David Airey, graphic designer

The combination logo is your best bet for trademarking

Generally, this format and style is more flexible, easier to clear for adoption and use, easier to register and protect each element separately, and easier to enforce rights in both verbal and non-verbal elements.

With respect to enhanced flexibility, a trademark owner can elect to always use the verbal and non-verbal elements together, perhaps as a way of reducing the risk of infringing on another’s prior rights in a mark perhaps similar to either the verbal or non-verbal element.

It may also be worth taking a look at "NO FRIGGIN CLUE" Confusingly Similar to "CLUE" for Video Games, Says TTAB from The TTABlog

This blog is #172

2009-08-21T09:58:00.001-05:00

Well, that is according to Avvo and the Alexa page ranking on this page. Thank you, readers. (The Alexa ranking of 2,173,549 does instill a serious sense of humility here.)

Trademarks Post for the Week

2009-08-18T09:27:00.001-05:00

British but some concept cross over the Atlantic and it is a well written article that provokes some thoughts. So take a look at Pitcher's, Pimms, Passing Off

Archbishop Passing Off is already robing up behind the drinks counter to enter the unholy fray with his ‘holy trinty’ of Reputation, Confusion and Damage but who will survive the refining fire of this test?

Is Sainsbury’s passing off its product as that of Diageo? Is there a trade mark infringement?

Surely, no problem with Reputation. Pimm’s has established itself globally as an iconic brand, synonymous with Wimbledon, Henley, May Balls, picnics (see Twitter #VTPP) and all that is sacred about the British Summer.

And, surely, no issue with Damage. One can almost see the out-stretched hand of the thirsty British consumer waivering and submitting momentarily to curiousity and the lower price tag of the Sainsbury’s ‘equivalent’ with huge consequential loss for Diageo.

So the legal armies must face each other on the uncertain legal battle-field of Confusion. But is there really any Confusion? The name is similar and theSainsbury’s product clearly echoes (deafeningly!) the Pimm’s brand ..but we are not talking puffins and penguins here. The product is pretty obviously not the original although it is clearly trading off its reputation.

Another Law Blog Oriented Towards Business

2009-08-17T15:40:00.001-05:00

I jsut ran across Inhouselegal’s Blog today. I found it interesting enough to add it to the blogroll. Give it a look for a different perspective on lawyers and business clients.

New Business Related Law Blog

2009-08-16T12:46:00.002-05:00

Out-House General Counsel is my discovery for today. Not much published but take a look at the links and information flow into the blog - very much oriented to small business. More than a bit envious as Mr. Alexander has found a way into an area I have been trying to figure out: outside general counsel.

For Business: Hiring Decisions

2009-08-09T10:58:00.001-05:00

From Manta.com comes Why Small Business Owners Make Bad Hiring Decisions

Here are 5 reasons why small business owners fail to make good hiring decisions:

1. Lack of time: The business owner is swamped as discussed above and is unable to take the time to make sure that he is making the best hiring decision.

2. Needs a body right now: Typically a small business owner does not have enough back-up staff to handles tasks within the organization if an employee leaves. This creates a crisis and the employer is forced to make decisions too quickly. As you know - haste makes waste.

3. Too emotionally close to the decision: Due to lack of enough people to help make a hiring decision, the employer is the key decision maker and maybe, the only decision maker. Unfortunately this puts the employer too close to the candidate and the process of hiring. Hence the employer may make decisions which are more based on emotion than information.

4. No formal training in hiring: Hiring seems to be almost like an additional, unwanted and unimportant task which befalls a manager. So very few employers go through enough training to understand the intricacies of hiring.

5. Lack of funds: The employer is usually working with a limited budget and sacrifices getting hiring support from a consultant, background checks, use of assessments and proper legal counsel and ends up hiring a candidate that may have shown up as a problem employee if a more detailed investigation had taken place.

More whistleblower suits to come?

2009-08-08T13:21:00.000-05:00

Such was workforce.com's prediction in Outcry on Exec Pay May Spur Rise In Whistle-Blower Suits

As public outrage over executive compensation intensifies, experts believe there will be an increase in whistle-blower lawsuits filed by employees alleging they were fired for opposing their executives’ compensation packages.

Two such lawsuits were filed in March—one involving Citizens Republic Bancorp, a Flint, Michigan-based bank that has been approved to receive $300 million in bailout funds through the Troubled Asset Relief Program, and the other against
McDonald’s Corp.
Experts say that given the heightened scrutiny regarding executive compensation, particularly in the wake of President Barack Obama’s opposition to bonuses given to AIG executives, more lawsuits are coming.

***

Similarly, on March 26 Lisa Bridges, McDonald’s former senior director of compensation, filed a suit in federal court stating she was fired after refusing to certify some executive compensation disclosures in the company’s 2007 proxy statements.
Among the issues that the suit says Bridges opposed were McDonald’s failure to disclose that it had paid for two country club memberships, totaling $3,000, for Tim Fenton, president of the company’s
Asian operations.

Indiana Lawyers Cannot Use Trade-Names

2009-08-06T15:33:00.000-05:00

Another instance where the non-lawyers have us beat? I do not think so but still I thought it would be interesting to the general public.

Court reprimands attorneys for trade-name use

Three attorneys who practiced separately but advertised as an LLC were publicly reprimand by the Indiana Supreme Court for violating several Indiana Professional Conduct Rules by not letting clients know they didn't practice law as a firm.

The Supreme Court combined the disciplinary actions against J. Michael Loomis, Robert A. Grubbs, and Robert J. Wray into one order posted May 8 and agreed a public reprimand was the appropriate discipline for violating Rules 7.2(b), and 7.5(a) and (b). The sanction was consistent with discipline imposed in other cases involving misleading attorney communications.

***

The Supreme Court found the attorneys' use of "Attorneys of Aboite, LLC" and "Attorneys of Aboite" to be improper because a lawyer in private practice shall not practice under a trade name. The use of "LLC" implied that the attorneys were practicing law together as a LLC and not as individuals just sharing office facilities. Using an LLC in a name implies the LLC maintains adequate professional liability insurance or other forms of adequate financial responsibility for the protections of clients and that the State Board of Law Examiners investigated the LLC and certified it, according to the order.

HIPAAA Information

2009-08-03T07:35:00.000-05:00

Health Information Privacy

The Office for Civil Rights enforces the HIPAA Privacy Rule, which protects the privacy of individually identifiable health information, and the confidentiality provisions of the Patient Safety Rule, which protect identifiable information being used to analyze patient safety events and improve patient safety.

How Contracts Help Fight Fraud

2009-08-02T07:05:00.000-05:00

From the Supply Excellence blog comes Fraud Risks (and how Contracts can help):

In other words, a head-in-the-sand approach or playing nice will not protect against fraud … it’ll just prevent you from knowing about it until it’s too late. And while communication early and often is key, the contract tweaks Neil highlighted also point to an important step technology can play in reducing risks of fraud.

Having pre-approved clause language and proper process and approvals in an automated contract management system may root out instances where fraud can take place in the first place. And, worse case, it provides improved after-the-fact visibility in the event that it is not caught proactively.

Notice it is just any contract but a well-written contract that helps fight fraud. Here is another point where a good relationship with the business' lawyer can help prevent problems - such as lost proftis.

FMLA: Getting Fired for Not Calling In

2009-08-01T07:49:00.000-05:00

At this time, I am not taking on contingency fee case and that includes emolyment law cases. Still, trying to keep an eye on developments. So Dismissal for Not Calling In Doesn't Violate FMLA from workforce.com caught my eye:

In June 2006, Bacon sued the hospital in the U.S. District Court for the District of Minnesota, claiming she had been fired in violation of the FMLA. The court found in favor of the hospital, finding that it was entitled to fire her for violating its call-in policy. Bacon appealed.

Affirming the court’s decision, the Minneapolis-based U.S. Court of Appeals for the 8th Circuit agreed that the hospital’s call-in policy was permissible under applicable regulations; that Bacon signed an acknowledgment that the hospital’s policies apply to employees absences; and that although Bacon’s discharge interfered with her FMLA rights, Bacon was terminated to for failing to comply with the call-in policy, and that she would have been terminated for doing so irrespective of whether these absences were related to FMLA leave. Bacon v. Hennepin County Medical Center, 8th Cir., No. 08-1168, (12/22/08).

Paul McCartney Upset Over Not Getting Beatles Rights?

2009-08-01T07:05:00.000-05:00

A bit stale probably, but guardian.co.uk's Paul McCartney 'not devastated' over Michael Jackson will seemed to good let pass without comment,

"Some time ago, the media came up with the idea that Michael Jackson was going to leave his share in the Beatles' songs to me in his will," McCartney wrote on his website. "[It] was completely made up."

That "idea" was first reported by the Mirror in January. Jackson, their source alleged, had decided to build bridges with McCartney by drawing up a new will that left him his share of the Beatles' back catalogue. But after Jackson's death on 25 June, there was no sign of this will – and the singer's assets were all left to a trust.

"The report is that I am devastated to find that he didn't leave the songs to me," McCartney wrote. "This is completely untrue. I had not thought for one minute that the original report [about the will] was true, and therefore the report that I'm devastated is also totally false."

First, let us all remember that Paul is a businessman. I think that was one of the complaints about him when the Beatles broke up (back in those days before The Flood).

Second, I think it has become increasingly clear that Michael Jackson was not too shabby at handling his business.

Third, regardless of what you might think, trademarks are an asset, a type of property, stuff that belongs to whoever is the copyholder.

Copyrights are not to be just given away. Of all the people who know this, the ones who may know this best are writers. I guess music writers know this less.

Trademarking Tweet

2009-07-31T07:16:00.000-05:00

PC Magazine's Twitter Trying to Trademark 'Tweet' is one of those items that make me wonder what the wider world thinks of lawyers and trademarks. Thankfully, this article does note that we lawyers act defensively as well as offensively (no pun intended).

Twitter has attempted to trademark the term "tweet," although the company's founder said it was purely a defensive measure.
If "confusing and potentially damaging projects" emerge, co-founder Biz Stone said in a blog post, then Twitter may take action.
Otherwise, "really awesome" applications that use the term "tweet" are safe, including TweetDeck, TweetMeme, Tweetie, BackTweets, Tweetboard, Stone wrote.
Stone's blog post was a response to a email that began circulating, citing concerns Twitter allegedly had with a third-party app's user interface (UI) and name.
"We have applied to trademark Tweet because it is clearly attached to Twitter from a brand perspective but we have no intention of "going after" the wonderful applications and services that use the word in their name when associated with Twitter," Stone wrote. "In fact, we encourage the use of the word Tweet. However, if we come across a confusing or damaging project, the recourse to act responsibly to protect both users and our brand is important."

Starting A New Business in Indiana? See Indiana Startup.com

2009-07-30T07:05:00.000-05:00

Indianapolis attorney Brian Powers has a new site, Indiana Startup.com. Emphasizing start ups, he is tilling a field that Indiana needs more work in: high tech and Internet. The following is an example of his blog.

The Basics Ways to Buy or Sell a Business | Mergers and Acquisitions

* Stock Sales. In a stock sale, the buyer purchases the outstanding stock issue by the selling corporation – or in the case of an LLC, the outstanding membership interests. The buyer typically assumes all liabilities of the Seller, unless otherwise agreed by the parties. The Buyer gets a carry-over basis in seller’s assets. Seller’s shareholders will pay taxes on the appreciation in their shares. Sellers will usually prefer stock sales due to the advantageous tax position as well as the assumption of liabilities (creating a clean break for the seller’s shareholders).

* Asset Sales. In an asset sale, the buyer purchases seller’s assets, and assumes only those liabilities that it agrees to assume. Any liabilities not assumed remain the obligation of the Seller. Typically the selling company with distribute the sale proceeds to its shareholders via a dividend. With the exception of a pass through entity, the selling company will pay taxes on the asset sale, and the shareholders will pay taxes on the dividend. The buyer gets a stepped-up basis in seller’s assets. Buyers usually prefer an asset sale to a stock sale.

* Mergers. In a merger, the target company (i.e. the seller) typically merges with and into the buyer company – which survives the merger. This is typically accomplished by the buyer converting the stock owned by seller’s shareholders into the consideration given for the merger

* Tax-Free Reorganizations. Although there are many forms of a tax-free reorganization, the basic concept of a tax-free reorganization is that buyer pays the purchase price by using buyer’s own stock as the consideration, which results in a tax free transaction, except to the exten

For those looking to start a new business in Indiana - bookmark it, subscribe to it.

Office News: Truly Solo for Now

2009-07-29T06:40:00.002-05:00

As of yesterday, I no longer have a secretary. Mary decided that her working a second job was just getting too much of a stretch. We have been trying to deal with this problem since mid-May. As I am also trying to move into a new apartment this week, things are a bit of a mess here.

At this point, I have a large stack of documents to process as well documents I need to prepare. This means a bit of a very large slow down in the office.

About the only good news I have to pass along is that the sinus/ear infection seems to have finally passed yesterday. It keep me off my feet yesterday afternoon.

Indiana Court of Appeals Decides Man Incompetent and So Is His Contract

2009-07-29T06:07:00.002-05:00

From The Indiana Lawyer comes Man wasn t competent to sign contract

The Indiana Court of Appeals affirmed a neighbor of a mentally ill man shouldn't have been able to purchase the man's farm because the man was incompetent when he signed the sales contract.

In James Nichols v. Estate of Ernest M Tyler, No. 45A04-0811-CV-640, the appellate court determined the trial court didn't err when it concluded Ernest Tyler was incompetent in February 2005 to convey his farm nor did it err by determining James Nichols failed to rebut the presumption of undue influence over Tyler with regard to the real property transfer.

I cannot but help raise my eyebrows at the fact that the attorney who drew up the Power of Attorney did not question Tyler's competency.

Meanwhile, looking at the actual opinion, there are some very important facts left out of the news report (pages 2 -3 of the opinion):

In March 2002, with the assistance of Shuster, Tyler formed a revocable living trust and transferred to the trust the real estate, including a 124 acre farm and a farmhouse valued together at about $1.5 million, which he had inherited from his mother. Nichols was the trustee of the trust and Tyler was the sole beneficiary. On February 8, 2005, Tyler signed a Direction to Sign Contract for Conditional Sale of Real Estate (the “Contract”), directing Nichols as trustee to sell his real estate held in trust to Nichols. Nichols took the property by another trust which he formed. Under the terms of the Contract, Tyler retained a life estate in the property, and Nichols was required to pay Tyler $200 per month until Tyler‟s death. Nichols was also responsible for paying all taxes, assessments, and insurance with respect to the property. Throughout the dealings between Tyler, Nichols, and Shuster, Shuster was never made aware of Tyler‟s mental health history.

Online Resource for Indiana Businesses

2009-07-25T09:14:00.000-05:00

Indiana's Secretary of State's Business Services Division maintains a web page here that is actually a portal for all things busienss for the Secretary of State's office. Bookmark it.

Trademarks - Franklin College Suit From Start to Quick Finish

2009-07-24T10:24:00.000-05:00

I learned of the Franklin College trademark case from The Indianapolis Business' College sues like-named competitor and, frankly, did not hold out much hope for the interloper.

The confusion has finally gotten to Franklin College.

The liberal arts college south of Indianapolis filed a lawsuit today alleging trademark infringement against Ohio-based Franklin University, which will open a campus in Castleton this fall.

Franklin University has run a heavy advertising campaign to mark its entrance into Indianapolis. But Franklin College said the marketing blitz has been too close to Franklin College's own branding.

***

Moseley said that since Franklin University's advertising began in May, Franklin College has received many calls, comments and e-mail messages asking why the school has changed its name or whether it has opened a satellite office for online courses. He also complained that the colors and clock tower in some Franklin University ads are strikingly similar to Franklin College's logo.

"We have great concerns about the impact of the obvious confusion, especially with prospective students and employers of our alumni," Moseley stated.

***

In an interview in June, Linda Steele, vice president of marketing for Franklin University, said the school never considered operating under a different name than Franklin in Indianapolis.

"The Franklin College issue came up and we really did have to take a step back and ask the question whether that is a showstopper," Steele said. "Obviously, we think not, because we chose to go forward."

Well, here is the report from The Indiana Lawyer Blog noting that the suit has been settled and has a link to the settlement agreement. Reading the settelment agreement, I think everyone will see a sensible solution that works for the benefit of both parties and also resolves the problem. It may be a bit snarky but perhaps a bit of training on trademarks for the marketing division?

Indiana's Mortgage Foreclosure Task Force

2009-07-24T08:42:00.000-05:00

I am highlighting The Mortgage Foreclosure Task Force web page today. Mostly for the lawyers (because it gives a schedule of CLE for mortgage cases) but there is a map showing the highest foreclosures (with Madison County being one of the highest) and a link to a FTC video (homeowners should go there)

Thinking of Using A Non-Traditional Workweek?

2009-07-24T07:05:00.000-05:00

Then give workforce.com's The Legal Implications of Nontraditional Workweeks a read:

The federal act’s parameters mesh reasonably well with what might be the simplest version of a less conventional workweek, which is one consisting of four 10-hour workdays. If all nonexempt employees actually stick precisely to that schedule and work no more than 10 hours in any workday, and if all four of their 10-hour workdays fall within a single workweek, then no FLSA overtime is due to any of them for such a workweek.

But this is not the case for an employee who, for instance, works four days of nine hours, 12 hours, 11 hours, and 10 hours, for a total of 42 hours in one workweek. In that situation, the employee is due two hours’ worth of FLSA overtime, even though he or she was not scheduled to work it.

With few exceptions, the FLSA does not allow employers to average or offset overtime hours worked in one workweek against non-overtime ones worked in another, or to "pay" for overtime in time off weeks or months later. This has tripped up unwary employers who adopt four-day/five-day alternating schedule.

***

Ordinarily, a workweek change involves work time that overlaps both the new and the old workweeks. The Labor Department will deem wages to have been paid properly for those hours if the employer: (1) assumes first that the overlapping hours were worked in the "old" workweek, then computes straight-time and overtime pay due for each of the workweeks, and then totals the sums; (2) performs the same calculation assuming instead that the overlapping hours were worked in the "new" workweek....

Linked-in Recommendations: Pro and Con

2009-07-23T07:05:00.000-05:00

Delaware Employment Law Blog provides the con in Warnings Against LinkedIn Recommendations: Justified or Propaganda?

Sounds legitimate to me. Indeed, if a supervisor tells an employee how wonderful he or she is all the while thinking terrible things about the quality of the employee’s work product or habits, then there is likely going to be a contradiction between the reason the supervisor tells the employee he or she is being fired and the real reason. Or not. Maybe the supervisor, who is too chicken to be upfront and honest with the employee requesting a recommendation to just come out and say, “You know, Bob, I’m going to have to pass. I don’t think I could write a recommendation for you because you haven’t been a very good performer while you’ve worked for me.”

Instead, the supervisor chickens out and says, “Uh, sure, Bob. I’d be glad to write a recommendation for you. Right after I get back from lunch.” He then proceeds to write a “recommendation” that is pretty bland, entirely generic, and, to most people, having nothing to do with the specific individual. Good for the wimpy supervisor! If it’s a “positive” recommendation that is purely vanilla standard issue, then no harm done.

Personally, I like the above-reasoning, but then I recommend plan vanilla recommendations before the advent of sites like Linkedin. I also suggest reading all of this post.

And for the con is LinkedIn Reviews Can Come Back to Haunt Employers, Lawyers Say from The ABA Journal - Law News Now

If an employer writes a positive review for an employee who is later fired, that review could be presented as evidence that discrimination rather than performance brought on the termination, the National Law Journal (reg. req.) reports.

"Generally, my advice is that I think employers are often better served by merely stating dates of employment, positions with the company and salary, and staying away from much more because there are so many potential ramifications if they say something," Carolyn Plump, a partner at Philadelphia's Mitts Milavec told the National Law Journal. "If they say something negative, there could be a lawsuit. If they say something positive, there could be a lawsuit."

The story cites a recent poll from Jump Start Social Media stating that 75 percent of hiring managers use LinkedIn to research candidates.

States Can Now Enforce Their Fair Lending Laws

2009-07-22T12:15:00.000-05:00

Some news from The United States Supreme Court, Supreme Court Allows States to Enforce Fair-Lending Laws

A sharply divided U.S. Supreme Court has ruled that states can enforce their consumer protection and fair-lending laws against national banks.

Writing the 5-4 majority opinion, Justice Antonin Scalia said the federal National Bank Act does not prevent ordinary enforcement of state law.

His ruling affirms in part and reverses in part an appellate decision in favor of the federal Office of the Comptroller of the Currency in a lawsuit concerning former New York Attorney General Eliot Spitzer's investigation into alleged lending discrimination.

***

Justice Scalia said the question at issue is whether the OCC's regulation preempting state law enforcement could be upheld as a reasonable interpretation of the National Bank Act.

The regulation cannot be upheld because a state's sovereign visitorial powers and its power to enforce the law are two different things, he said. The National Bank Act preempts the former but does not preempt the ordinary enforcement of state law.

When a state attorney general sues a national bank to enforce a state law, he or she is not acting as a supervising sovereign rather than as a law-enforcing sovereign, Justice Scalia said.

Thus, such a lawsuit is not an exercise of visitorial powers, the majority held.

Now let us see how much the states do.

Congress to Restore GM, Chrysler Franchisees?

2009-07-21T18:34:00.000-05:00

I admit I am of two minds about House bill aims to restore GM, Chrysler dealers as I can sympathize with the impulse but really do not like the method. Here, I would leave the matter to the market and let that judge the wisdom of the bankruptcy process.

Palmer Chrysler Jeep Dodge on the west side closed last month as part of Chrysler LLC's bankruptcy reorganization. But the dealership would sell the company's cars once more given the chance.

"We would do it again, yes," said Garry Huffman, a partner in the Palmer dealership that had sold Chrysler vehicles since 1956.

There's a slim chance he'll get it. The U.S. House of Representatives yesterday approved a plan to force Chrysler and General Motors Co. to restore agreements with dealers shed during their bankruptcy proceedings.

The provision, part of a spending bill that passed 219 to 208, would require the automakers to restore franchise agreements with thousands of dealers as a condition of receiving federal aid.

Has Practice in Federal Court Gotten Even Harder?

2009-07-21T17:55:00.002-05:00

This from Drug and Device Law's On Iqbal And Twombly indicates that we will now face a higher standard in pleading a Complaint in federal court.

Iqbal v. Ashcroft, __. U.S. __ (May 18, 2009) (here's a link to the decision through the Supreme Court website), came down last Monday, holding that the more rigorous pleading standards set forth in Bell Atlantic v. Twombly, 550 U.S. 544 (2007), apply to all civil actions.

And then the implications: "Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 14. "Second, only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 14-15.

I suggest reading all of the original post as it has a wide range of opinions on the case. My own opinion remains what I have thought long of the federal courts: they want as little business as possible.

Qui Tam Case for Indiana: Carol A. Glaser v. Wound Care Consultants Inc

2009-07-20T06:04:00.003-05:00

The issue for the Seventh Circuit Court of Appeals in Carol A. Glaser v. Wound Care Consultants Inc., et al. was jurisdiction:

SYKES, Circuit Judge. Carol Glaser received medical treatment from Wound Care Consultants and was later contacted by an attorney who told her that Wound Care might have improperly billed Medicaid for her treatment. She filed this qui tam action under the False Claims Act (“FCA”), 31 U.S.C. § 3730, seeking recovery as a relator for money the government paid as a result of alleged false or fraudulent Medicare and Medicaid claims submitted by Wound Care. But the government was already aware of the possible improprieties in Wound Care’s billing practices and had commenced an investigation more than four months before Glaser filed her lawsuit. Accordingly, the district court dismissed Glaser’s complaint for lack of subject-matter jurisdiction under 31 U.S.C. § 3730(e)(4), which blocks jurisdiction if the FCA action is “based upon” a “public disclosure” of the alleged fraudulent conduct “unless . . . the person bringing the action is an original source of the information.” Glaser appealed.

The Seventh Circuit had a different standard for determining a public disclosure and has now changed that standard:

The threshold jurisdictional question in this case requires us to determine whether Glaser’s lawsuit is “based upon” a “public disclosure” of Wound Care’s alleged fraudulent billing practices. We take this opportunity to revisit our prior interpretation of the phrase “based upon” in § 3730(e)(4)(A). In United States v. Bank of Farmington, we held that an FCA lawsuit is “based upon” a public disclosure and therefore subject to the jurisdictional bar of § 3730(e)(4) when the lawsuit “depends essentially upon publicly disclosed information and is actually derived from such information.” 166 F.3d 853, 864 (7th Cir. 1999). Although we reaffirmed
the Bank of Farmington holding in United States ex rel. Fowler v. Caremark RX, L.L.C., we acknowledged that it is the minority interpretation. 496 F.3d 730, 738 (7th Cir. 2007). To date, eight other circuits have read the phrase “based upon” in § 3730(e)(4)(A) more broadly, holding that an FCA lawsuit is “based upon” a public disclosure when the relator’s complaint describes allegations or transactions that are substantially similar to those already in the public domain.

Which may put a premium on getting to federal court quickly:

Applying this standard to Glaser’s case, we affirm the district court’s application of the jurisdictional bar. Allegations that Wound Care was improperly billing Medicare
and Medicaid for services performed by physician’s assistants were publicly disclosed in early 2005 when the government notified Wound Care that it was investigating these billing practices. Glaser’s complaint is based on this publicly disclosed information in that her allegations of fraudulent billing are substantially similar to those the government had already lodged against Wound Care in its investigation. Glaser cannot show she is an original source of the allegations in her complaint because she learned about Wound Care’s alleged fraudulent billing from her attorney and then asserted the attorney-client privilege to avoid divulging how her attorney learned of this information. The district court properly dismissed Glaser’s complaint for lack of subject-matter jurisdiction.

If you think you have a whistleblower, government fraud case, call an attorney now.

Jimi Hendrix and Trademarks

2009-07-13T08:21:00.000-05:00

I admit to being a fan of both trademarks and Jimi Hendrix. Which made noting Ron Coleman's post “Excuse me while I kiss this guy” from his blog LIKELIHOOD OF CONFUSION® a no-brainer:

The signature was a trademark? It had secondary meaning? I think maybe John Hancock’s signature has secondary meaning, but I can’t think of too many other ones, though I am sure there are. But Hendrix’s? Here’s the reasoning, per Mike’s excerpt from the opinion:

During oral argument, counsel for defendants indicated that defendants are now confining their use of the signature to posters, fine art prints, and apparel. The Court interprets counsel’s remark as a concession that defendants’ use of Jimi Hendrix’s signature constitutes branding, and it is not exempted from infringement liability by either the nominative or the classic fair use doctrine.

“Branding” — “infringement” — “liabilty” — “fair use” — all very interesting concepts.

But they only apply to trademarks, Your Honor! How you got a trademark here?

Avoiding Common Legal Business Mistakes

2009-07-11T08:03:00.000-05:00

I find I do can find no way to easily summarize Common Legal Mistakes Businesses Make and How to Avoid Them, Part II from John L. Watkins. The best I can do is list the topics covered:

Mistake Number 6: Ignoring Key Contractual Provisions
Mistake No. 7: Assuming it's Non-Negotiable
Mistake No. 8: Using Internet Forms
Mistake No. 9: Letting Your Employees Vary Your Terms and Conditions

Business owners - read this article. Anyone reading me for any length of time knows that I emphasize preventive law. Here is an article showing business owners what can be prevented.

Messy Inheritance or Not?

2009-07-11T07:16:00.002-05:00

Read Avoid the Inheritance Nightmare

What Happens to the Business if There is a Divorce?

2009-07-10T12:34:00.001-05:00

Consider this scenario from The Golden Scribe's Prenuptial Agreements to Protect the Family :

In a similar fashion, business partners can be protected with a prenuptial agreement. If Tom and Scott have worked over the past five years to create a successful business, and Tom is about to get married, the business and its assets can be protected by the prenuptial agreement. This not only protects Tom, but it protects Scott, as well. Without a prenuptial agreement, Tom and Scott’s business could potentially be torn apart by a divorce.

What happens to your business if this was you or a partner or other co-owner? Don't know for sure? Get yourself to a lawyer ASAP. If you are in Indiana and do not already have legal counsel, give me a call.

Oh, what if everyone is married before starting the business? Think about a post-nuptial agreement.

Obama Changing Enforcement of Immigration Laws?

2009-07-10T07:05:00.001-05:00

I hope employers saw the news on this but if not take a look at Jackson Lewis' ICE Sends Over 650 Employers I-9 Audit Notices in Nationwide Immigration Enforcement Initiative

Six hundred fifty-two employers throughout the country are receiving I-9 Notice of Inspections (NOIs) from the Department of Homeland Security’s Immigration and Customs Enforcement (ICE) unit, the Government has announced. ICE is the federal agency responsible for investigating employers for immigration worksite violations. The NOIs require employers to provide copies to ICE of all of their employee Form I-9s and supporting documents by a specified date. In most instances, however, employers are given only three business days to present their records to the local ICE office.

In announcing the initiative, ICE Assistant Secretary John Morton emphasized ICE’s commitment to worksite enforcement. He said the audits were “a first step in ICE’s long-term strategy to address and deter illegal employment.” ICE noted that the employers were selected for inspection as a result of “leads and information obtained through other investigative means.” The 652 NOIs exceed the total number of NOIs issued by ICE in all of Fiscal Year 2008. ICE declined to identify the companies receiving these notices on account of the “ongoing, law enforcement sensitive nature of these audits.”

On this same subject is Work-Site Enforcement Official Wants to Work With Employers:

John Morton, assistant secretary for U.S. Immigration and Customs Enforcement in the Department of Homeland Security, reiterated in a speech Tuesday, June 16, in Arlington, Virginia, the administration’s policy of pursuing criminal prosecutions against employers who knowingly hire illegal workers.

But Morton, who has been on the job for four weeks, also said that he wants to work with companies that are fastidious about compliance.

“I want employers to view ICE as a true partner to find ways to stay within the law,” he said in a speech at an American Council on International Personnel conference. “As we move forward, I hope we have a much better relationship.”

A source of tension between employers and the Department of Homeland Security is an electronic employment verification system called E-Verify. About 128,000 employers have voluntarily signed up to use the mechanism, which checks new-hire information against DHS and Social Security databases.

New Indiana Business Law Blog - Internet Start Ups

2009-07-09T11:51:00.000-05:00

I want to point out Brian Powers' Indianapolis Business Law Blog. I just learned about this blog in the past few days. Mr. Powers appears to be taking on a niche that is a bit different for Indiana and more specific than what I do on this blog: Internet start ups.

Give him a look if you are looking at an Internet (and I would think a tech start up).

By the way, for those lawyers reading this - take a look at his blog. Very interesting and a design that is very useful. Ah, so much enjoyable than this blog.

Old News: US Supreme Did Not Take Indiana's Wine Case

2009-07-09T10:25:00.001-05:00

I caught SCOTUS denies Indiana wine case from The Indiana Lawyer Daily during my hiatus from this blog. I think it still worth publicizing.

The Supreme Court of the United States won't consider whether Indiana's wine shipping law is constitutional by requiring in-person contact before any direct delivery is allowed.

Justices considered the case of Patrick L. Baude, et al. v. David L. Heath and Indiana Wine and Spirits Wholesalers of Indiana, Nos. 07-3323 and 07-3338, at a private conference on Thursday, and the decision denying the writ of certiorari came this morning when the order list was released.

Attorneys had asked the court in early February to accept the case, which challenged an Aug. 7, 2008, ruling from the 7th Circuit Court of Appeals.

The Circuit court ruled that Hoosiers must first make face-to-face contact at a winery to verify their age before being allowed to purchase any alcohol online or by phone. Appellate judges reversed a 2007 decision from then-U.S. District Judge John D. Tinder in Indianapolis, who'd struck down part of the state's 2006 law banning out-of-state shipments to Indiana customers without that initial in-person contact.

Silliness prevails in Indianapolis over alcoholic beverages but they might take a serious look at what this may do to our developing wine and beer industry. More importantly, considering Indiana's budget problems, what it will do tax revenues.

What is a Litigation Attorney?

2009-07-09T07:46:00.002-05:00

I suspect I will get comments from other lawyers about the difference between a a litigation attorney and a trial lawyer. Relax. I did not write this post for us lawyers but for the non-lawyers. (For the record, I do think of myself as a trial lawyer and not a litigation attorney). And, Attorney at large, has written a good article for laypeople about what litigation attorney or a trial lawyer does:

What Does A Litigation Attorney Do, Anyway
Litigation Takes A Long Period Of Time.

Very rarely does the litigation process go quickly. It’s not that litigation attorneys don’t want to expedite the process as much as possible – it’s just that there are an unbelievable number of details and legal procedures that have to be followed in any type of litigation. Court systems and their rules also introduce their own level of bureaucracy that only extends the amount of time needed for litigation attorneys to cover all the bases necessary.

Again, litigation is a very complicated process. While it might sound simple to simply carry a lawsuit through the court process, every experienced litigation attorney knows that this is just not the case at all!

The Costs of Restructuring A Business

2009-07-08T12:05:00.001-05:00

Canada's Slaw raises a point with its Focus on Employees: The Hidden Costs of Restructuring a Business that I think often gets overlooked when restructuring a business (whether in or out of bankruptcy) - the employees. Yes, we know they are there but do we really pay attention?

Planning for a business restructuring often takes months; yet in my experience, insufficient resources are typically devoted to managing the human resources consequences, leading to significant additional or ‘hidden’ costs. The following are some examples of strategies that can mitigate costs and losses associated with terminated or disaffected employees:

* Rumours of a pending sale of a business or layoffs are worrisome and distracting to employees, resulting in lost productivity, higher benefit costs, poorer client relations and service, and attrition of key employees. Emphasize the importance of taking steps to maintain confidentiality throughout the planning or negotiating stages.
*

How fairly employees believe they and laid off co-workers were treated during the restructuring will affect retained employees’ commitment and productivity. Consider what if any steps you can take to minimize the chances that employees will become disaffected and/or leave as a result of the restructuring.
*

If you are considering providing ‘working notice’ of termination for employees, consider the hidden costs of such a plan including increased benefit claims and costs, the potential negative impact on service to clients and customers during the working notice period, and the risk that those employees will not complete critical tasks or facilitate a transition prior to their termination. Offering a closing bonus or increased severance offer payable at the end of the working notice period dependent upon maintaining service levels or completion of the key tasks, is one way to manage those risks.
*

If the sale or closure of a business or business unit is delayed, do not expect that an extension of employees’ working notice will be welcomed by those employees. One consequence of that event is that any negotiations for the final severance packages, if not yet settled, will be negatively affected. If it is reasonably foreseeable that the sale or closure date may be delayed, consider the benefits of agreeing to more generous severance package terms in exchange for an early settlement coupled with a right for the employer to later apportion what part of the severance will consist of working notice and pay in lieu of notice.
*

Business owners who have agreed to sell their business but stay on as an employee after the closing are usually not prepared for and/or underestimate the difficulties associated with the change in control and culture that inevitably occurs. Ensure that any new employment agreements have good severance provisions that can be triggered by the former owner/now employee, and minimize any linkages to payment of the sale proceeds with the length of employment, post-closing.
*

If retention of key employees is a condition of sale, determine what is necessary to secure their employment, or continued employment. Key employees’ leverage increases as costs to negotiate and implement the sale have been incurred, and as closing nears. Consider the relative risks of early communication of a sale that may not close in order to secure key employees, versus the costs of not securing key employees early.
*

Consider the culture of an acquired business when imposing new employment contracts. Even when a purchaser agrees to offer employment to current employees on substantially the same terms, if the form of employment contract (i.e. formality, tone, or one-sided language) is at odds with what the employees are used to, the employee-purchaser relationship will get off to a bad start. That in turn may affect the employees’ willingness to buy into or adapt to operational changes implemented by the purchaser, or result in loss of productivity or other costs associated with attrition.

Yahoo and False Profiles - 9th Circuit Case

2009-07-08T09:16:00.000-05:00

Technologist blog gave me 9th Circuit Reopens Yahoo! Case Over False Profiles and I suggest it be read at length. First as a sign that we still have a lot to figure out how to legislate for the Web and secondly as a caution for honked off ex-significant others.

After the relationship ended, her former boyfriend created fake profiles for Barnes on Yahoo! websites containing nude and semi-nude photographs and a solicitation for sex. The ex also went on chat rooms posing as Barnes and directed men to these fake profiles, which also contained the contact information for Barnes' work.

Before too long, men began calling and showing up at Barnes' place of employment expecting sex. According to the complaint, Barnes asked Yahoo! to remove the profiles in writing, but after four letters had not received a response. Finally, just before a local TV news program ran a story on the fake profiles, Yahoo!'s Director of Communications allegedly contacted Barnes and promised that she would take action to have the profiles removed.

***

The 9th Circuit held last Thursday that Section 230 of the Communications
Decency Act granted Yahoo! immunity for the negligent undertaking
portion of Barnes' claim. Section 230 states that "[n]o provider or
user of an interactive computer service shall be treated as the
publisher or speaker of any information provided by another information
content provider."

The court found, and Barnes did not contest, that Yahoo! is an
"interactive computer service." The court then declared that Section
230 barred the negligent undertaking claim since the undertaking in
question was the de-publication of third-party material. The court
interpreted Section 230 to block a claim that would be based on an
interactive computer service's actions as a publisher, and held that
the district court correctly dismissed that portion of the action.

The court determined that the opposite held true for Barnes' claim
based on promissory estoppel, since the promise to engage in the
activities of a publisher is not the same thing as actually engaging in
the activities of a publisher, according to the court. Since the
promissory estoppel claim didn't involve treating Yahoo! as a publisher
of the information from a third-party, the court said, Section 230 did
not prevent the suit from moving forward.

In distinguishing between the two claims, Judge Diarmuid O'Scannlain
wrote that "[p]romising is different [from undertaking], because it is
not synonymous with the performance of the action promised."

Having seen something like this done to a friend of mine, I am sympathetic to the plaintiff but I got to wonder about the culpability of Yahoo on this one.

Worried About Financing a Case Needing Experts?

2009-07-07T08:49:00.000-05:00

Small Firm Business's Litigants Lacking Big Tech Bucks Can Still Play Ball has some interesting points that I have yet to really work out - at this point, I do not have this issue in any of my pending cases.

"In a survey, several federal district court judges also opined that Rule 403 permits the trial judge to bar the proponent's expert testimony when the opponent lacks the wherewithal to afford a rebuttal expert. Savikas & Silverman, 'Making the Poverty Objection: Parties Without Fancy Exhibits Could Claim Unfair Prejudice, But Not All Judges Would Agree,' NLJ, July 26, 1999, at C1.

Is it proper to invoke Rule 403 in that fashion? On the one hand, Rule 403 does not embody any egalitarian objective. Neither the text of the statute, the accompanying advisory committee note, nor any passages in the congressional deliberations over Rule 403 indicate that the drafters intended judges to resort to Rule 403 to compensate for an imbalance of financial resources between the litigants.

As quoted above, Rule 403 lists a number of probative dangers. Several other federal rules provisions contain lists. For example, Rule 404(b) lists some of the recognized noncharacter theories of logical relevance of uncharged misconduct. Likewise, Rule 407 enumerates several permissible purposes for introducing evidence of subsequent remedial measures."

Lauth Bankruptcy Follow Up

2009-07-07T07:46:00.000-05:00

A bit of older news from The Indianapolis Star is Judge: Lauth can operate bankrupt subsidiaries. Interesting to see what they paid out in fees before filing bankruptcy. The real question for a Chapter 11 case is will the business survive the process (which ought to explain the caution and care taken with Chrysler and GM).

Judge Basil H. Lorch III ruled it's in the best interest of creditors and others for Lauth management to continue operating its bankrupt subsidiaries, despite a plea from a major lender that Lauth be removed.

The three Lauth subsidiaries that filed for Chapter 11 reorganization bankruptcy May 1 control dozens of Lauth-developed office, industrial and retail properties across the country.

"Many of the developments are only partially completed, and most are in financial distress," said a court filing by LIP Holdings, a Lauth debtor controlled by Inland American Real Estate Trust of Chicago.

***

The case figures to be one of the largest bankruptcies of an Indiana commercial developer.

Inland, acting through LIP Holdings, accused Lauth managers of trying to bail out the distressed properties with collateral from healthier properties from other subsidiaries. That would benefit Lauth executives who've personally guaranteed debts of some of the properties in bankruptcy, LIP charged.

In his ruling, the judge ordered Lauth not to "cross-collateralize" any assets in bankruptcy or issue new debt.

Resop said Lauth's court filings show it paid $100,000 to a Chicago law firm for debt counseling in November, an indication Lauth contemplated filing for bankruptcy long before Inland made its move in April to take control of some Lauth-developed properties.

Music Downloading - How the Canadians Do It

2009-07-06T09:17:00.000-05:00

While I have posted on music downloading, this is actually more of an intellectual curiosity of mine. With that understood, here is Maybe the Jury Didn’t Like the Songs from Slaw:

So how might this have played out in Canada? The legality of file sharing has been hotly debated in this country for many years, and the issue boiled over again recently with the Canadian Recording Industry Association (CRIA) trading pot shots in the press with copyright luminaries like Michael Geist and Howard Knopf over both the legality of the practice and its effect on the recording industry. The best guidance available to Canadians on the issue comes from two cases, decided in 2004 and 2008 respectively, which still leave some uncertainty as to the legality of file sharing in Canada. What is clear, however, is that thus far CRIA has not had nearly the same success in the Canadian Courts that the RIAA has had in the U.S.

Under Canada’s Copyright Act, private copying of a musical recording for private use is expressly permitted. The trade off is the requirement for payment by consumers of a blank media levy, which levy is payable on blank CD-ROMs and other “audio recording media”. The blank media levy provisions of the Act were inserted at the behest of CRIA and others, who have since collected multi–millions of dollars in such levies.

The private copying exemption was inserted into the Act in the days of LPs, cassettes, 8 Tracks and reel to reel recording devices – long before the Internet and digital recording media made the process of copying a recording much simpler and faster, with no degradation in the quality of the original recording, no matter how many generations removed the copy is from the original.

***

So, musical tastes aside, a case similar to the Thomas-Rasset case in Canada would by no means have the same result. Even if CRIA were able to convince a Court to order an ISP to divulge the identity of the alleged file-sharer, and even if CRIA could prove to a Court that the defendant’s conduct in uploading or downloading the recordings in question was not within the private copying exemption, the total statutory damages that could be awarded to CRIA, if not grossly out of proportion to the damage suffered, could not exceed $20,000 per recording, for a total of $480,000 (Can.). Not a trifling amount to be sure, and if the Canadian Court decided to add punitive damages on top of that, a result not far off the Thomas-Rasset decision could arise.

Having said that, the likelihood of the music industry actually receiving payment of such monies from file-sharing defendants is pretty remote: as Ms. Thomas-Rasset rightly quipped, “You can’t get blood from a turnip”. Clearly, it is the publicity from such monumental awards that RIAA and CRIA really covet in their efforts to deter what they see as a serious threat to their livelihood. Whether such deterrence is actually achieved in the long run is anyone’s guess. In any event, we may never get the chance to see a case like this in Canada: it appears that the RIAA is now changing its strategy in the U.S. to target ISPs rather than individual file sharers, and it seems reasonable to assume that CRIA will, again, follow suit.

I think we need to rethink a lot of our intellectual property law in light of the Internet. However, Congress has a few things that are probably bit more pressing at just this moment. Meanwhile, this bit from John Dvorak's FTC Is Ready to Pounce on Dishonest Bloggers gets a thumbs up from me:

This is like the government, in cahoots with the RIAA, going after some mom in Ohio for stupidly leaving Kazaa running on her machine and discovering she's been a transit point for the "Best of Bee Gee's" for the past two years. Meanwhile, the Asian mobs off the Indonesian coast are cranking out commercial counterfeit CDs by the millions. Do something about that first before you go after the oh-so-dangerous mom in Ohio.

GM Bankruptcy Moving Forward

2009-07-06T07:06:00.003-05:00

So reports The New York Times:

A federal judge approved a plan by General Motors late on Sunday to sell its best assets to a new, government-backed company, a crucial step for the automaker to restructure and complete its trip through bankruptcy court.

I suppose being GM does get a judge to work on a holiday weekend (some holiday) and work he did:

In his 95-page opinion, Judge Gerber wrote that he agreed with G.M.’s main contention: that the asset sale was needed to preserve its business in the face of steep losses and government financing that is scheduled to run out by the end of the week.
“Bankruptcy courts have the power to authorize sales of assets at a time when there still is value to preserve — to prevent the death of the patient on the operating table,” Judge Gerber wrote.
With the approval of the restructuring plan, G.M. and the government are seeking to close the sale by Thursday afternoon, when a four-day stay of the judge’s order expires. The government, which is financing the reorganization, had given G.M. until Friday to win approval for the sale or risk losing its bankruptcy financing.

***

If completed by Friday, G.M. would be near the end of an unusually quick trip through the bankruptcy courts, turning itself into smaller company with fewer brands and a new focus on fuel-efficient cars.
Under the terms of the revised deal, G.M. would sell its most desirable assets, including the Chevrolet and Cadillac brands, to a new company owned largely by the American and Canadian governments and a health care trust for the United Automobile Workers union. The Obama administration anticipates taking the company, which will still bear the General Motors name, public next year.

Let us hope that is not old wine in new bottles for several reasons - our tax dollars, the employees, the economy and, frankly, the bankruptcy system.

And now from the creditors' side (or is it just some of them?):

It is possible that creditors who objected to the terms could file an appeal. Lawyers for several opponents argued during the hearings that the G.M. sale stripped them of their rights as creditors. A lawyer representing three dissident bondholders urged Judge Gerber to call what he said was the Obama administration’s bluff on the July 10 deadline.

Er, I think Obama is anything but a bluffer. Not something I would want reported in any newspaper. The fact is that this kind of case - really any Chapter 11 - there is a bit of gamesmanship, of gambling, to get the biggest slice for one's clients without killing the business. More can be gotten if the business is merely lamed and good chance of nothing if the business is in an iron lung.

Bankruptcy - Southern District of Indiana - New Rules

2009-07-06T07:05:00.002-05:00

Effective July 13:

http://www.insb.uscourts.gov/WebForms/notices/prodchange.pdf

Also:

There is a new notice posted regarding a revised general order on the use of electronic filing and a new ECF administrative policies and procedures manual.

http://www.insb.uscourts.gov/WebForms/notices/ecfadminnot.pdf

Contracts, Language and Making a Fetish of Archaic Style

2009-07-06T07:05:00.000-05:00

I really admire AdamsDrafting Blog and Mr. Adams sane approach to drafting contracts.

What to Do When the Other Side Wants to Change Your MSCD-Compliant Language may lack a punch of some other posts but it brings to mind similar discussions:

But that said, it’s likely that anyone who’s a mindless slave to traditional usages will, on reviewing an MSCD-compliant draft, instinctively seek to change the language back to what they’re used to. I don’t know how often that happens—I’d be interested to hear, dear readers, what your experience has been.

An obvious response would be to tell anyone requesting changes that you’re only going to consider changes that have a bearing on meaning, and that nothing would be gained by racking up lawyer time discussing stylistic changes. It’s standard deal etiquette that you stick with the drafter’s language unless you have good reason for asking for a change.

I think too many clients think that a contract not overflowing with legalisms (and especially archaic legalisms) must be necessarily shoddy when the opposite is true.

A contract should say what it means in language that all understand so all know what is required of them.

And for those who think anyone can write any contract, please understand plain English contracts are harder than one might think. Those who think so might just think that parodying Ernest Hemingway is also an easy task when it is not.

Those interested in contracts need to keep an eye on the Adams Drafting Blog.

Muncie - Tomorrow - Free Legal Consult

2009-07-06T04:36:00.002-05:00

So reports The Muncie Star-Press this morning:

Free legal assistance available on Tuesday -

Low-income residents can get free legal assistance on civil matters from an attorney 9 a.m.-noon Tuesday at Maring-Hunt Library, 2005 S. High St.

Indiana Legal Services sends an attorney to Muncie twice each month to offer free assistance.
No appointment is necessary.
To be eligible for services, a person must have a household income that is less than 125 percent of the federal poverty income level, meaning an income of $13,000 for a one-person household or an income of $26,500 for a four-person household. Those ages 60 or older are automatically eligible for services.
For civil legal problems requiring immediate attention, call (800) 869-0212

Indiana Lemon Law - New Case

2009-07-05T15:05:00.000-05:00

As I am still catching up from hiatus last month, I can only offer The Indiana Lawyer Daily report on a new lemon law case, COA rules on first impression lemon-law issue

The Indiana Court of Appeals tackled today an issue of first impression regarding the state's lemon law: Once a consumer has met the law's repair threshold, he can still file an action under the lemon law even if a subsequent repair fixes the problem.

In Metro Health Professionals, Inc. v. Chrysler, LLC,
No. 06A04-0809-CV-547, Metro Health Professionals purchased a Jeep from
a Chrysler dealer in October 2006. MHP took the vehicle in for service
at a repair facility authorized by Chrysler to address issues with all
the warning lights in the dash coming on, gauges that quit working,
headlights shutting on and off spontaneously, and the transmission
shifting into low gear spontaneously. Each time it was brought in,
Chrysler claimed there wasn't a problem. Finally, after the fifth time
MHP brought the car in for service, the repair facility replaced the
front control module and the problems haven't occurred since.

Congratulations to Robert Duff of Lebanon, Indiana for his win for the consumer.

Michael Jackson's Will...Why The Surprise?

2009-07-05T14:35:00.000-05:00

I caught a few headlines that expressed surprise that Michael Jackson left nothing to ex-wife. I am thinking, why should he have? More importantly, notice Jackson use of a trust.

The Associated Press headlined the story much more sedately with Judge: Mom has temp control of Jackson's property

LOS ANGELES (AP) — A judge ruled Wednesday that Katherine Jackson will retain limited control of 2,000 items from Neverland until another hearing is held Monday.

Superior Court Judge Mitchell Beckloff called for a speedy compromise between attorneys for Katherine Jackson and the two co-executors of Michael Jackson's will — lawyer John Branca and John McClain, a music executive and a family friend.

"I would like the family to sit down and try to make this work so that we don't have a difficult time in court," the judge said.

The New York Times has some interesting points in its Jackson’s Will Could Set Off Legal Struggle:

A five-page will written in 2002 and filed in state court Wednesday by two executors who were once business partners of Mr. Jackson gives the entire estate to a family trust, and names his mother, Katherine Jackson, as a beneficiary of the trust and as legal guardian of the children.

***

It was not clear if the will filed Wednesday was the only one. With Mr. Jackson employing a revolving door of legal advisers and others over the years, Mrs. Jackson’s lawyer, Burt Levitch, did not rule out possibility of multiple wills.

But if the 2002 will is deemed valid and a trust receives all of Mr. Jackson’s assets, many of the details of his finances could remain secret. The trust documents are private.

News: Sentate Version of Health Care Plan

2009-07-05T12:15:00.000-05:00

From msnbc.com's First Read blog comes Kennedy committee releases health plan

Employer Play or Play: ("Shared Responsibility of Employers")
-- companies that do not offer "adequate coverage" to full time workers would pay an annual fee of $750 per employee
-- companies that do not offer coverage for part-time workers pay $375 per employee
-- firms with less that 25 employees would be exempt from fees
-- companies most cover 60% of the cost of the monthly premiums to avoid fees

You Got an Online Presence But What If You Die?

2009-07-05T09:00:00.000-05:00

This little problem was in my mind when I ran across Legacy Locker (such as what would happen to this blog). This is how it describes itself:

The safe and secure way to pass your online accounts to your friends and loved ones.
Legacy Locker is a safe, secure repository for your digital property that lets you grant access to online assets for friends and loved ones in the event of death or disability.

Do give it a look.

Where Divorce and Business Law Intersect

2009-07-03T15:27:00.001-05:00

How can a divorce injure a business? I can think of several ways but Ex-Wife Can’t Talk About Divorce to Media—Ever, Conn. Court Rules from ABA Journal - Law News Now shows another way and the means of protection:

The ex-wife of a wealthy skin doctor can't talk about her divorce with the media—ever, Connecticut's Supreme Court has ruled.
The ruling establishes that private waivers of First Amendment free speech rights are "presumptively enforceable," the Connecticut Law Tribune reports.

Still, the state's high court said such decisions should be made on a case-by-case basis and should consider the abilities of the individual waiving rights.

The ruling enforces a confidentiality agreement signed by Madeleine Perricone, the wife of multimillionaire skin doctor Nicholas V. Perricone, who agreed not to talk about her divorce in the early stages of its bitter and contentious filing, the Associated Press reports.

Tweeting Employees?

2009-07-03T08:45:00.003-05:00

Let us count the ways Internet access has impacts employment law: E-mail. web surfing, downloading files, and blogging. All have had their crisis moments and now Tweets Create Legal Issues for Lawyers and Employers:

By answering, in 140 characters or less, the question "What are you doing now?" corporate and professional employees "may convey proprietary information, may reveal other privileged or private information and may expose the company to claims of defamation or harassment," writes Jones Day partner Steven Bennett in a cover story for the May issue of the New York State Bar Association Journal.

The original article is here in PDF format.

Not to denigrate the problems of tweeting, but my online experience makes me think that the real problem with any such employee is a lack of common sense. That lack may create more problems for the employer than merely tweeting.

What to do if your company gets a deposition notice?

2009-07-02T15:22:00.000-05:00

Read Be Prepared to Deal With Deposition Notices and get ready to call your lawyer:

Your company has just been served with a 30(b)(6) deposition notice under the Federal Rules of Civil Procedure, and it is your job to respond to the notice and determine who will testify on behalf of the corporation. Is there anything you can do to ensure that your company puts its best foot forward at the deposition? The answer is yes: There are numerous strategies for selecting and preparing witnesses to participate in these depositions.

A 30(b)(6) deposition is a widely used litigation tool that requires a corporation to appear at a deposition and respond to questions regarding a specific list of topics contained in the notice. Since these depositions make it easier to depose the right corporate officers and managers on the right topics, as in-house counsel you need to be aware of how to avoid the many potential pitfalls of 30(b)(6).

Take a good look at the list of topics in the notice. Once you fully comprehend the crucial points involved, you need to identify the right witness or witnesses to speak on behalf of your company. Balance the number of witnesses against cost and time constraints.

The scope of a 30(b)(6) deposition is broad: A company can proffer as many witnesses as it needs to cover all areas of inquiry. A corporation may prefer to respond to a particular topic of inquiry covered in a plaintiff's notice by designating several corporate representatives. But doing so may unnecessarily subject the corporation to many hours of deposition testimony that an opposing party otherwise might not have the ability to take. And that isn't necessarily an outcome that you want to encourage.

Oh, if you think just because it says "federal" that this may not apply to you, then think again. Indiana's trial rules have a similar rule for our state courts:

(6) A party may in his notice name as the deponent an organization, including without limitation a governmental organization, or a partnership and designate with reasonable particularity the matters on which examination is requested. The organization so named shall designate one or more officers, directors, or managing agents, executive officers, or other persons duly authorized and consenting to testify on its behalf. The persons so designated shall testify as to matters known or available to the organization. This subdivision (B)(6) does not preclude taking a deposition by any other procedure authorized in these rules.

What does it take to start an Indiana partnership?

2009-07-02T08:33:00.003-05:00

The following pretty much condenses Indiana's law on forming a partnership:

... Copenhaver v. Lister, 852 N.E.2d 50, 58 (Ind. Ct. App. 2006). To form a partnership, parties must join together to carry on a trade or adventure for their common benefit, each contributing property or services, and having a community of interest in the profits. See id. In addition, to establish a partnership relation between parties, there must be: (1) a voluntary contract of association for the purpose of sharing profits and losses, which may arise from the use of capital, labor, or skill in a common enterprise; and (2) an intention on the part of the parties to form a partnership. Id. The intention that controls in determining the existence of a relationship is the legal intention deducible from the acts of the parties. Id. The intention to form a partnership must be determined by examining all the facts of the case, and the conduct of the parties reveals their true intentions and the construction they placed upon any agreement. See id.

What may not be so clear is that the "partners" may not know that they are partners. No formal partnership agreement is required - only actions as listed above.

Which makes partnerships a bit dangerous for the unwary. See partners can be held liable for the actions of other partners even without the first partner's knowledge and all the partners' personal assets are on the line.

Got an EEOC Mediation in Your Future?

2009-07-02T08:03:00.002-05:00

Then give workforce.com's 10-Plus Tips for Succeeding in an EEOC Mediation: Part One a read:

...A simmering-pot is a person whose resentment is at a low boil. Simmering-pot employees have turned off, left the organization prematurely, sabotaged their companies or gone out on extended stress leaves. Some of these pots, if left unattended, will become the people who file charges with the Equal Employment Opportunity Commission, alleging discrimination. The best goal for your organization is to stay out of the EEOC process, and mediation can help you do that. But if a charge has been filed and you’re before the EEOC, consider these tips on how to prepare for success in a mediation. In part two of this article, I’ll suggest some tips for the EEOC mediation itself, as well as some ideas for steering clear of problems in the future.

Tip One: Don’t ignore the simmering pot.
Tip Two: Honestly ask yourself whether you really have a workplace
dispute ‘covered.’
Tip Three: Consider hiring a neutral third-party mediator
to work through the issues.
Tip Four: Understand that EEOC mediators want the employer
to bring a substantive offer to the table.
Tip Five: Consider whether to bring counsel to the mediation.

Why Deeds Are Tricky - Indiana Joint Tenancy Case

2009-07-01T09:00:00.000-05:00

Screw them up and big trouble and Court reverses joint tenancy interest ruling has the latest example:

In Janice and Burdette Ramer v. Betty Smith, No.
57A04-0804-CV-202, Betty and Richard Smith executed a warranty deed
conveying a tract of land to Betty's daughter, Janice, and her husband,
Burdette Ramer, who had begun constructing a home on the land with the
help of Richard. After some problems with the conveyance, the parties
executed a second warranty deed, with the Smiths conveying a 16.99 acre
tract of the property and the Ramers conveying the original 6.60 tract
of land conveyed in the first deed to all four individuals, creating a
23.59 acre tract. The granting clause of the second deed read: "RICHARD
W. SMITH and BETTY J. SMITH, husband and wife, and BURDETTE RAMER and
JANICE RAMER, husband and wife ... Conveys and warrants to: RICHARD W.
SMITH, BETTY J. SMITH, BURDETTE RAMER, and JANICE RAMER, as Joint
Tenants With right [sic] of Survivorship ...."

Richard died four years later, and Betty filed a petition for partition of the 23 acre tract. The trial court concluded the second deed conveyed a one-half joint tenancy interest to the Ramers, which they held as tenants by the entireties, and Betty was entitled to one-half. The trial court valued the land at nearly $310,000, with the Ramers' house valued at $185,400. The trial court appointed a commissioner to sell the property at public sale because the property can't be divided into equal shares of value without physically dividing the residence.

The Court of Appeals reversed the trial court, finding instead the parties had one-third undivided interest as joint tenants.

"In addition, the phrase 'with right of survivorship,' the placement of the names in a list implying equal treatment, and the omission of the phrase 'husband and wife' from the grantee clause after having been used in the grantor clause all indicate intent to create a joint tenancy," wrote Judge Margret Robb.

The appellate court also affirmed the Ramers weren't entitled to contribution for value added to the property. The Smiths had contributed to the value of the property by giving the Ramers a 6-acre tract of land, and Richard had helped excavate the land for construction of their home, wrote the judge. In addition, when joint tenancy is created, each tenant acquires an equal right to share in the use and enjoyment of the land during their lives and are entitled to an equal share upon partition, wrote Judge Robb.

GM bankruptcy and Franchising Law

2009-06-30T12:37:00.000-05:00

Another potential problem from the GM bankruptcy (and actually any franchisor's bankruptcy) gets point out in PA Joins 36 States With Objections in GM Bankruptcy Case

Additionally, Corbett said that there are serious concerns regarding the methods being used in the termination of dealer franchises, along with the terms that continuing dealers are being forced to accept.

“Pennsylvania law specifically prohibits manufacturers from coercing dealers and allows dealers to formally protest any substantial modifications to their franchise agreements,” Corbett said. “Our community-based businesses are being asked to sign away important protections they have under state laws.”

Problem I see is this: bankruptcy law being federal law trumps state law and the coercion and modification claims may go nowhere.

FMLA case out of Indiana Supreme Court

2009-06-30T11:36:00.000-05:00

A victim of my hiatus is Worker's entire service decides FMLA eligibility from The Indiana Lawyer:

In an issue of first impression, the majority of Indiana Supreme Court justices ruled an employee filling multiple positions with the same employer is eligible for leave under the Family and Medical Leave Act if the employee's total service is sufficient to qualify, even if the service in either position alone doesn't qualify.

Gary Community School Corporation v. Tom Powell, No. 45S03-0809-CV-482, the high court had to determine whether an employee's FMLA eligibility is determined by the employee's entire service to the employer or separately for each position. The trial court ruled Tom Powell was an eligible employee for purposes of both his teaching and coaching positions; the Indiana Court of Appeals reversed, holding the issue is controlled by the parties' treatment of the jobs as unified or separate.

Powell worked as a math teacher, night school teacher, and head football coach in the summer of 2001 when he had to take FMLA leave for seven weeks. When he returned to his job as math and night school teachers, he learned the Gary Community School Corp. fired him from his head football coaching job. He complained to the high school principal and spoke with a news reporter. He was denied the position in 2002 and 2003. That led to his action against GCSC alleging it violated FMLA by not restoring him as coach for the 2001 season and by retaliating against him for taking FMLA leave by rejecting his application in subsequent years to become the head coach.

GM Bankruptcy and Warranty Issues

2009-06-30T11:30:00.000-05:00

Although Lemon Law Blog worried over GM's warranty claim in GM Bankruptcy - A Looming Consumer Disaster. It now appears that GM will honor those claims; although I would like a better confirmation than this.

On the other hand, this bit of news shows the conumser concerns are shared by others: PA Joins 36 States With Objections in GM Bankruptcy Case

Corbett noted that the Attorneys General who joined in this filing do not necessarily oppose the planned sale of General Motors, but they have expressed concern that the current agreement is unclear or ambiguous about many important consumer issues, including:
· Lemon Law claims and warranty issues
· Personally identifiable information of consumers
· Workers compensation claims
· Tax claims
· Environmental claims

We amy know more later today as GM has a hearing scheduled for today.

New Indiana Workmen'c Comp Cases

2009-06-28T15:37:00.001-05:00

Employers read this.

Judges rule on workers comp billing issues

Employers or their insurers - not health care providers - must prove when medical expenses for injured employees might be considered higher than what's allowed under the state's workers' compensation statute, according to the Indiana Court of Appeals.

In a series of rulings today that deal with injured firefighters and city workers in multiple Hoosier communities, a three-judge appellate panel interpreted the Indiana Workers' Compensation Act and how it applies to state statutes about medical billing disputes.

"This case requires us to review several statutes under the Act that balance the right of medical service providers to seek payment for medical care to injured workers, against the right of employers to demand that such payments not be excessive," the unanimous panel wrote, turning to its own Indiana precedent as well as rulings from other state and federal courts.

The cases are Washington Township Fire Department v. Beltway Surgery Center, No. 93A02-0811-EX-01006; City of Michigan City v. Memorial Hospital, No. 93A02-0811-EX-01010; and Onward Fire Department v. Clarian Health Partners, No. 93A02-0811-EX-01007. Three other suits on identical issues, filed the same day in November and assigned to the same writing panel of judges, have not been ruled on.

United States Supreme Court and Age Discrimination

2009-06-27T15:34:00.000-05:00

Trying to catch up from my hiatus with this new report from workforce.com on the latestADEA case from the United States Supreme Court:

Supreme Court Puts Age Bias Burden of Proof on Plaintiff

In a 5-4 ruling Thursday, June 18, the court held that in an age bias case, an employee has to prove that age was the only reason he or she was fired, demoted or suffered some other work setback.

The chairman of the Senate Judiciary Committee, Sen. Patrick Leahy, D-Vermont, called the decision an “overreaching by a narrow majority” that would hurt older employees.

Leahy’s reaction may signal that Congress will act to overturn the decision, as it did recently in a pay discrimination case.

The Supreme Court held that under the Age Discrimination in Employment Act, age cannot be one of many factors that led to an adverse employment action.

2009-06-27T15:19:00.001-05:00

Oops, seems someone else had a less than stellar week.

From The Indiana Lawyer comes Judge criticizes counsel seeking class certification

Don't expect one federal judge to re-examine a ruling by another jurist on the same court if you don't present any new facts or arguments on a similar case and issue.

That's the message to federal attorneys practicing in the Southern District of Indiana, as detailed in a decision Thursday from U.S. District Judge David F. Hamilton in Blanca Gomez and Joan Wagner-Barnett v. St. Vincent Health, No. 1:08-CV-0153. The judge denied a class-action certification motion involving two ex-hospital workers who allege their former employer didn't provide adequate notice of COBRA rights to more than 250 people qualified for that extended health insurance between May 2004 and January 2006.

New OSHA Law Blog

2009-06-27T14:34:00.002-05:00

Big firm Jackson Lewis publishes OSHA Law Blog. For those employers/businesses dealing with federal OSHA issues, you should subscribe to this blog. It actually has a RSS feed!

What is a Cooperative Business?

2009-06-27T14:33:00.001-05:00

Understanding Cooperative Forms of Business [Book Excerpt] - ABA Book Briefs Blog

A cooperative business generally has the following characteristics:

1. It is owned and controlled by the people who use its services or buy its products (its "owner/customers").
2. Its primary focus is to provide its services or goods to its owner/customers and not to the general public.
3. It is democratically controlled by its owner/customers, and each owner/customer has one vote regardless of the amount of services or products it purchases from the cooperative.
4. The primary objective of the cooperative is to maximize benefits, rather than profits, for its owner/customers.

Federal and state governments treat cooperatives differently from other business entities. One reason is that the rewards from their operations go almost entirely to their owner/customers rather than to outside investors, and they often provide services or products that would otherwise be unavailable from investor-owned enterprises. The success of agricultural cooperatives in helping farmers emerge from economic depression paved the way for the formation of other cooperatives, such as those providing electric and telephone service in rural areas, attracted by tax advantages and low-cost, government-backed financing. While preferences continue to be extended to some cooperatives today, governments have also imposed restrictions on cooperatives based on their unique characteristics.

What are you doing to protect your significant other if you die?

2009-06-21T16:50:00.001-05:00

Give a look at Economic crisis heightens financial fallout for bereaved:

Researchers conclude that some financial difficulties following death of a partner can be prevented; others can be avoided. Policymaking must address the immediate circumstances of people experiencing bereavement. In the long term, enabling people to sustain paid employment throughout their working lives, occupational and private pensions, will help ensure an acceptable standard of living in retirement and protect people whose partner has died from financial hardship and economic decline.

Call a lawyer and get started.

Not Dead, Just a Long Hiatus

2009-06-21T15:53:00.002-05:00

For my regular readers, an apology for the very long stretch between posts. An appeal and personal issues made writing for the blog a bit of a luxury. I am back and there will be a lot of material coming your way over the next few weeks.

New Statute Relating to Residential Foreclosures

2009-06-19T16:13:00.000-05:00

Thanks to Indiana Commercial Foreclosure Law and its 2009 Indiana State Legislation - One Foreclosure Bill for bringing this to my attention:

The June edition of Hoosier Banker, published by the Indiana Bankers Association, has a really good article entitled "Wrap-up of 2009 Legislative Session" written by Amber Van Til, VP-Governmental Relations, and Dax Denton, AVP-Governmental Relations. In the article, they address the Indiana General Assembly's 2009 banking-related bills, and Indiana's passage of three bills dealing with depositories. Despite all the recent negative publicity involving lenders and several legislators' efforts to pass multiple mortgage and foreclosure-related bills in 2009 (click for example), only one bill passed that directly affects mortgage foreclosures, Senate Bill 492: click here for a digest of the bill and click here for a .pdf of the enacted statutory changes.

SB 492 will be effective June 30, 2009. The legislation is not unlike the mediation-related procedural rules recently adopted by the Marion County (Indianapolis) court system, about which I wrote on March 15, 2009. SB 492 creates the opportunity for non-binding settlement conferences between lenders and borrowers, and various notices must be sent and filed before the lender can proceed with the foreclosure suit. Significant to the primary readers of this site, lenders/plaintiffs are not required to send the notices mandated by the bill if "the loan is secured by a dwelling that is not the debtor's primary residence...." In other words, like the Marion County scheme, commercial foreclosures are excluded from the new statute.

Preparing for Estate Planning

2009-05-21T11:57:00.001-05:00

Getting Ready for Estate Planning

The purpose of this site is to help you organize your thoughts and information before you see an advisor about an estate plan. Many people avoid estate planning because they think that the process will be overwhelming. We believe that the six steps provided here will help you get ready. These steps are frequently recommended by experts. They are:

1. Initiate the discussion
2. Take stock of the present
3. Develop objectives
4. Choose advisors
5. Consider alternatives
6. Review and modify

You can use the steps in any order, but they will probably make the most sense if you start with step 1 and proceed to step 6.

I see nothing wrong with this list, check out the site, but more importantly - start working on your estate planning.

Starting a New Business? Think About the End, Too

2009-05-17T17:23:00.000-05:00

Take a look at NJBIZ.com's Breaking up is hard to do — so have a plan

“You start a business hoping that it will last forever,” said Raymond Felton, a co-managing partner with the Woodbridge law firm Greenbaum, Rowe, Smith & Davis LLP. “But it doesn’t always work out that way, and in this weak economy, we’re seeing more quarrels between owners that lead to splitting their companies apart.”

A business split can be driven by a failure, or one partner may just lose interest in the company, said William R. Watkins, a partner in the Summit office of law firm Lindabury, McCormick, Estabrook, & Cooper P.C.

In one case, a New Jersey-based residential and commercial developer was owned by two unrelated families, and operated profitably under its founders for many years, said Felton, who worked on the case, “but when the owners’ sons took over the company, they started to squabble, the business suffered and the partners took their dispute to court.

“The litigation ran for 18 months, and the company was eventually split up. It likely would have been resolved a lot faster if the partners already had a breakup agreement in place before they started to disagree,” he said.

Breaking up is hard to do — so have a plan - NJBIZ.com

“Even if there’s no fight, a closely held company should have buy-sell or other provisions that lay out what will happen if an owner dies suddenly, or wants to retire,” Felton said. “Without such an agreement, the surviving business partner may suddenly be paired up with a spouse, heir or someone else that they never planned to work with.”

Many startups delay drafting a breakup agreement, said Deborah A. Hays, a partner with the Haddonfield law firm Archer & Greiner P.C.

“They say they don’t have the time, or maybe they want to save on legal fees,” she said. “But then it never gets done, and they forget about it until there’s a breakup that can really run up large legal fees.”

If your business does not have a plan for dissolution, give me a call.

Twitter as Posing A Threat for Business?

2009-05-17T06:18:00.000-05:00

Twitter and e-Discovery

The reason this is not newsworthy but is worth a blog post and why the Bryan Cave post is a bit behind the times as well, is that simply put, ‘everything that exists is discoverable’ at least pretty much. This would apply to any tweets that had been stored by a company or a user or anyone else. Attorney client communications, data deemed to be inaccessible for technical reasons and a few other kinds of electronic data may be protected, by a specific legal principles or by time and cost constraints. Information deemed to be privileged may also be withheld, but note that you can only do that AFTER there are lawyers involved, meaning you are already in the soup. At that point, you are paying a legal professional to actually read stuff and determine its status in a given case. You’ll already be writing checks.

Twitter and e-Discovery

So you do need a Twitter policy, but that policy mostly consists of common sense. And of course, everyone is likely to act reasonably most of the time. But. The piece goes on to suggest that ‘data needs to be preserved’, implying that we should all be saving Tweets, I guess. That’s where the confusion comes in. The juxtaposition of these thoughts might lead you to believe that it is standard legal advice is to ‘save everything’. As it happens, it often is standard legal advice to save everything. There are very few instances, however, in which you are required to ‘save everything’. If you are covered by the SEC rules that all broker dealer communications be saved for a period of three years, you’d better be doing something about your broker’s tweets. In a way, you’re lucky if you are covered by that rule. Most of us wish the rules were as clear for us. As one SEC official allegedly put it: when we said everything, we meant everything. If someone throws a brick through your window, with a note tied to it, you need to save the note, the brick and the string. But alas, that is not most of us, and we must decide, ourselves, what happens to the note, the brick and the string.

A well thought out, consistent policy, one that is enforced, for all electronic communications, is what you need. And you do need to seek legal advice, as well as best practice advice. Gartner does not give the former, but we do give the latter. We would always recommend that any policy be vetted by legal counsel or outside counsel. However, a policy you craft yourselves, with business leaders and house counsel, using best practice advice from Gartner, the Sedona Group, an ABA publication or a myriad of other sources is going to be a great deal cheaper than some other alternatives.

Indiana Legislation - Teacher Discipline Statute

2009-05-16T15:43:00.000-05:00

Governor gives teachers more legal protection

Teachers don't feel comfortable disciplining students because of possible lawsuits, Daniels and Zoeller said. Teachers would essentially be given the same qualified immunity status as state police or government officials, they said.

"Quality education cannot start until order prevails, and as of today Indiana has the strongest law protecting teachers against unruly students, unreasonable parents, and lawyers of all kinds," Daniels said. "This essentially eliminates the ability to sue a teacher or school acting in good faith, and ends the threat of legal harassment, except in the most extreme of circumstances."

Daniels described "good faith" as anything that doesn't involve a personal vendetta against a child.

Elimination? Maybe and maybe not. Maybe three days of fighting some sort of virus, I am just not in a very optimistic frame of mind.

FTC Amends Rules on Practice

2009-05-16T10:01:00.000-05:00

FTC Issues Final Rules Amending Parts 3 and 4 of the Agency’s Rules of Practice:

"Through the Federal Register notice announced today, the Commission has made changes to several areas of the rules. First, the amendments eliminate Rule 3.11A (Fast Track Proceedings). The Fast Track Proceedings are unnecessary because of the expedited deadlines in the new Part 3 rules.

Second, changes in Rule 3.25 clarify the procedures for the Commission to consider possible settlements while a matter is in administrative litigation.

Third, Rule 3.31(g) has been amended to be consistent with a new federal rule of evidence regarding how parties must deal with documents subject to privilege that another party claims were inadvertently produced.

Finally, amended Rule 4.2 requires a party to file a redacted public version of a petition for certain types of Commission action (such as a petition to quash a subpoena) in non-Part 3 matters if it requests confidential treatment for the petition. The rule also makes other changes that will facilitate the development of a new Commission electronic filing system for adjudicative proceedings."