Articles Posted in Business Litigation

photo-online-defamation-200x300Online reviews can help a business grow or cause it to shrink. They are increasingly powerful, double edged tools. Some businesses work very hard to obtain positive reviews and that effort can hit heavy head winds because of an anonymous, vocal, unhappy customer or two. If a business is harmed by a false, negative review, what can it do?

Americans benefit from free speech but that freedom has limits, including defamation. Generally if a business’ reputation is harmed by a false statement and it can prove damages, it may have a legal action for defamation against the party making the false statement. Defamation in a written form is libel while slander is oral defamation.

The California Court of Appeal, First District, Division Four issued a ruling in July protecting a business’ ability to fight online, anonymous speech that may be libelous (ZL Technologies, Inc. v. Does, Glassdoor) though in the context of employee, not customer, reviews. The plaintiff found that it received very poor reviews on the job posting website Glassdoor. They complained about management, compensation and its work environment, making it that much harder for ZL to find job candidates.

photo-arbitration-record-300x200An arbitration is an alternate dispute method that’s becoming increasingly popular and controversial. Thanks in part to that controversy Governor Brown signed into law in October a bill allowing a party to have a certified shorthand reporter transcribe any related proceedings. This may help in case a party wants to challenge the arbitration decision in court.

An arbitration is essentially a private trial.

  • A single arbitrator or a panel of arbitrators normally sit as judge and jury in the case. They are normally practicing attorneys or retired judges.

photo-LLC-law-change-225x300All good things come to an end and that could include a limited liability company or LLC. California law will change in 2017 and make it easier to dissolve and to wind up its affairs. If you’re involved in an LLC and thinking it’s run its course and time to pull the plug, depending on the circumstances, you may want to wait another couple months.

An LLC is a hybrid business entity. It’s a combination of a partnership and corporation.

  • Its main advantage over a partnership is like the shareholders of a corporation the LLC’s owners’ (members’) liability for its debts and obligations is limited to their financial investment.
  • However LLC members can participate in its management and profits or losses flow through to its members like a partnership.
  • An LLC can’t be formed for businesses that provide professional services that require a state professional license, such as a legal or a medical practice.
  • Forming an LLC is easier to form and maintain than a corporation. LLC’s don’t issue stock, are not required to hold annual meetings or keep written minutes, which a corporation must to preserve the liability protection for its owners.
  • Articles of organization must be filed with the state and LLC members must enter into an operating agreement. An oral one will suffice but a formal, written agreement is a better idea for all those involved.
  • An LLC is normally managed by its members, but they can agree to hire a manager to handle its affairs.
  • For state income tax purposes an LLC will be classified as a partnership if there is more than one owner but members can elect to have it taxed as a corporation.

Earlier this year the California legislature made minor language changes to the Revised Uniform Limited  Liability Company Act (RULLCA) and they will go into effect in January. RULLCA currently states that an LLC could be dissolved and its activities wound up if, among other things, a majority of its members voted to dissolve it. Continue reading

Good Morning.  I still can say it’s good morning even though it’s almost noon time.  I woke up early this morning and went to Torrance courthouse for a hearing. On the way back to my office, I thought about a video that I put out last month where I talked about how your attorney’s character count.

Not only does your attorney’s character count, but also your attorney’s personality, the way that they handle your matter, and how they litigate a case. All of these shape the landscape of your case; Meaning, they can affect whether or not your case is going to find resolution, whether or not your case is going to be litigated efficiently as efficient as possible, and/or whether or not your case is going to be settled within a reasonable time.

I currently have two partnership dispute cases that are in the extreme. They’re both dealing with dispute between partnerships that have a significant amount of real estate holdings.  In one case, I filed on behalf of my client against the other partner and received a call from the other attorney. The first thing that came out of his mouth was, “Hey, what does your client want?”. I told him exactly what I’m expecting and what my client wants in terms of resolving this issue. The other side’s attorney listened and we worked out a resolution plan.

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https://www.orangecountybusinessattorneyblog.com/files/2017/02/photo-Ms.-America-pageant-300x225.jpgThose of us running businesses have a supporting cast, whether they’re contractors, suppliers, funders, banks, attorneys or employees. If a trusted cast member disappears at a critical time what do you do? Susan Jeske found herself in that situation in September. Like most of us she made due with what she had and went forward.

Jeske owns the Ms. America® Pageant. She purchased it in 1999 after winning the competition in 1997. Ms. America contestants are often well into their careers, sometimes are married and often range from 26 to 40 years old. The 2017 event was scheduled for September 3 in Brea. At the last minute Jeske got some bad news.

She learned on August 30 that Costa Mesa based BTB Event Productions, the company hired to produce the pageant, was shutting down and their equipment was being sold off. As a result Jeske was left scrambling to find a stage, runway and proper lighting. “I have 43 contestants flying in from across the country that are coming in tomorrow and I don’t have anything,” Jeske told the Orange County Register on August 31.

photo - yogurt spoliationEvidence is the life blood of a lawsuit. If you think you may have a legal claim against a party it’s important you not alter any evidence and maintain its integrity. If you think you may be sued, or have already been sued, you may be tempted to alter or destroy damaging evidence. That’s not a good idea because it may open you up to possible sanctions by a judge.

This issue came up in purported false advertising class action lawsuits filed last year against Whole Foods Supermarkets, according to the Philadelphia Inquirer. They are based on a Consumer Reports story concerning store brand Greek yogurt. Six samples were found to have on average 11.4 grams of sugar while the labels stated that they only had two grams of sugar.

Attorneys for the store stated yogurt samples had been retained for testing. Plaintiffs’ attorneys weren’t so sure. They filed a motion in court claiming all of the yogurt in question had actually been destroyed after the products were pulled from the shelves when the article was published and a prior lawsuit was filed in Philadelphia in 2014.

The motion states that the store admitted in writing that it “believes the voluntarily withdrawn product was destroyed pursuant to Whole Foods protocol.” Whole Foods responded with a statement not quite denying the allegations. “Whole Foods Market took reasonable steps to preserve relevant evidence for this case and we believe there is more than sufficient evidence supporting that fact.”

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photo - pick the right boardIf you’ve chosen a corporation as the structure for your business you need to have a board of directors. If chosen well these people can be a huge asset to your company and help your business become more successful. Choosing the wrong people can be a big setback, sucking time, energy and resources away from managing a business and towards a malfunctioning board.

A board of directors is elected by stockholders and it oversees the corporation’s management. Daily functioning of the business should be left to executive officers recruited and retained by the board. Major decisions affecting a business should be decided at the board level.

If you have a new business you need to find directors. If you have an existing company after a board member leaves you may need to find a replacement. In either case, here are some things to think about.

  • Find someone you trust. A board member will be privy to the company’s innermost secrets. A board member who uses his or her position for personal gain, perhaps by starting a competing company or working for one, would be a huge problem. Though this could be grounds for legal action against this individual, the threat of a lawsuit might not necessarily prevent the person from trying to cash in on his or her access to the company.
  • Those to avoid: VentureBeat lists The Do-Nothing, The White Flag (avoids confrontation), The Cabalist (his or her personal agenda is foremost), The Meddler (focuses too much on details) and The Pontificator (just wants to hear himself talk).
  • Are there too many board members? Do meetings get bogged down because too many people are involved? Is it difficult to reach a decision because of so many opinions? A larger board will also probably be less engaged with the business.
  • What skillsets you should be looking for in board members depends on the maturity of the business. Individuals whose skills are especially helpful for a startup may not be so helpful with a mature, established business. Board members should also have a mix of skills that complement each other and members of management.
  • A board member should be a good fit with the culture of the business. Is the culture dominated by those with strong opinions or run by consensus?
  • How much compensation should a board member receive? If you want skilled, experienced people their time is very valuable. It will take a commitment by a board member to become engaged, do the homework necessary to make informed decisions and attend and participate in board meetings.

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If your company has employees driving either company owned or employee owned vehicles in the course of their duties depending on the circumstances your firm may be held liable for their negligence. Given the potential damages of a catastrophic accident it’s important that your company has sufficient insurance to cover this situation. Without proper insurance your company could be responsible for paying for your legal defense, settlement amount or damages awarded at a trial.

If you have employees driving their own vehicles for company purposes you need to review your coverage. If such a company related errand or delivery is done in a vehicle not owned by your company and an accident occurs your insurance may not cover it. Most business owners have a general liability policy. It’s a common myth this policy will cover anything and everything that could result from business related negligence but most of these policies do not cover car accidents.

There are several potential causes of action that could be filed against you.

  • The legal doctrine of ‘respondeat superior’ means that an employer can be held responsible for the negligent acts of an employee if he or she is acting within the scope of his or her employment. The reasoning is the employer is exercising some control over the employee while the employee is doing his or her job. This can include actions taken by an employee driving his or her own vehicle or one owned by the company.
  • Another legal doctrine impacting such a situation is that an employer has an obligation to defend legal claims against an employee who is acting within the scope of his or her job. If the employer fails to do so the employer can be sued by the employee to get a court order mandating the defense or to pay the employee’s legal bills.

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photo - new franchise lawA new state franchise law goes into effect on January 1 which is much more favorable to franchisees. It makes it more costly for franchisors to pull out of agreements and gives franchisees more time to correct any alleged breach of a franchise agreement.

The new California Franchise Relations Act will cover any franchise agreement signed or renewed after January 1 as well as any franchise agreements that have an indefinite duration which may be terminated by the franchisee or franchisor without cause.

The part of the new law that should have the biggest effect on franchisor/franchisee relations are the new repurchase requirements.

photo - ex-employeesThis can happen in many ways but a recent Inc. magazine article brings up the fact that statements and opinions of former employees can damage your company’s reputation and make it more difficult to attract good job candidates. Just as online reviews of products and services (even lawyers) have multiplied across the internet, so have reviews of employers.

In the article J.T. O’Donnell describes a business owner having a hard time finding candidates for job openings, with three people backing out of interviews. With openings unfilled he was having a hard time meeting his clients’ needs. O’Donnell learned his company had restructured two years earlier resulting lay offs. Some of those let go used social media to blast the company and its management.

Just as you may do online research on people you’re considering hiring, those looking for work also may do online research of possible employers. These job seekers, especially ones whose skills are in high demand, may be very picky if they read things they don’t like. The job candidate may discount one or two truly negative reviews as being written by malcontents, but if multiple, consistent negative statements about your company or management are found they may be given some weight.