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Entries in business litigation (16)

Tuesday
Oct012013

Government Shutdown & How It Affects Your Business

Franchise & Trademark Litigation Lawyer

 

by Tal Grinblat & Stephen T. Holzer

818.990.2120

 

About 800,000 non-critical federal employees are out of the office today, and will remain out until Congress overcomes the impasse regarding the Affordable Care Act. In the meantime, the government shutdown – the first since 1996 – will affect more than your travel plans, but also your business.

Here's how:

1. Courts: Federal Courts will remain open, and operate for the first 10 or so business days as usual. As funding dries up, non-critical employees will have to be furloughed, which means a potential slowing of the judicial process.

Government Shutdown Business Affects2. Commercial Finance: Those seeking business loans and loan guarantees will see their plans impeded. The Small Business Administration saw an influx of loan applications just before the shutdown, which will slow the review process once the SBA resumes operations.

3. Contracted Projects and Construction: Companies with government contracts may not be able to apply for and obtain permits and reviews. Construction projects will shut down.

4. Corporate Strategy: Ready to alert the Federal Trade Commission of anti-competitive practices or unlawful trading? You'll have to wait. (The Security and Exchange Commission is open, for now.)

5. Employer Defense: Employers, you may get a bit of a breather if you're facing employee wage and hour, discrimination, or other claims.  

The Equal Employment Opportunity Commission will continue to process claims, but will not conduct investigations or participate in scheduled mediations. The EEOC will continue to accept charges for filing, to preserve claimants' rights.

The National Labor Relations Board will not process charges (though special circumstances apply), and will postpone hearings.

The Department of Labor will investigate incidents involving serious injury or death and will continue some operations with minimal staff.

Employee Hiring: The E-Verify system of the Department of Homeland Security has been shutdown, which means employers will be unable to process I-9 work authorizations for the time being. You can submit late verifications when DHS resumes full operations.

6. Environmental Law:  The Environmental Protection Agency has mostly gone dark, though a few EPA projects that are not government-funded, and some considered emergency activities, will continue operating.

7. Intellectual Property: The U.S. Copyright Office, as well as its Public Information Office and Tech Support services, are closed. It's still possible to file a Copyright Application, but clients won't get results until the staff comes back to work.

The United States Patent and Trademark Office is open, and will remain open for about four weeks. The PTO will shut down when they run out of reserve funds, and continue to run with minimal staff.

It's not all bad news.

The U.S. Postal Service is considered a private company, so you'll still be able to send and receive mail. The Social Security Administration will continue to send checks, and NASA will continue to keep the  lights on in their control rooms for our astronauts aboard the International Space Station.

But for those of us doing business on a day-to-day basis, we can only hope this shutdown won't last for very long.

 

Tal Grinblat is a Franchise & Trademark Lawyer, and Stephen T. Holzer is an Environmental & Business Litigation Attorney. Contact either of them via email: tgrinblat@lewitthackman.com, or sholzer@lewitthackman.com.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
Wednesday
Feb132013

The 10 Biggest Mistakes Franchisors Make

Business Litigation Attorney EncinoFranchise & Business Litigation Attorney

 

by David Gurnick

818.907.3285

 

 

Thousands of franchise companies offer countless goods and services in the United States. Many are successful in growing their brands, delivering quality goods and services to the public, and generating profits for franchisees and for themselves. Many, even franchisors  with long histories, are not as successful as they could be.

Here are some of the biggest mistakes franchisors make.   

1. Franchising Without Enough Capital

Why do some franchises fail? Franchisors who do not have sufficient funds in their own company, are unable to screen franchisees, perform the supervision and deliver the assistance needed for the system to succeed. Also, lack of funds makes the company appear financially weak. These franchisors are forced to lower their standards and are unable to assert proper contractual authority with franchisees. Lack of capital can be destructive to a franchise system.

 

2. Underestimating Costs 

There is temptation to show prospects that the investment to start a franchise is low. Franchisees depend on the franchisor's costs estimates being accurate. If costs are underestimated, franchisee recruits will become dissatisfied when they learn their true costs, and some will not have enough funds. Franchisors should be candid in estimating the investment costs, and should build in a margin for unanticipated expenses and costs.

 

3. Making the Franchise Agreement Too Strong or Too Weak 

Overbearing franchise agreements can scare away potential franchisees without providing the franchisor a meaningful benefit. Many over burdensome terms will never be enforced, and some, if the franchisor tried to enforce them, would be found to be unconscionable. Conversely, franchisors should review the agreement forms regularly, evaluate which subject areas address true risks for the company and system, and selectively strengthen those provisions.

 

4. Expanding Too Fast and Too Wide 

The chance to expand is intoxicating as it gives the appearance of success to the brand and system. But moving too fast, or having distant locations too soon, before the franchisor has infrastructure, support systems, and understanding of issues in different venues, leaves the franchisor unable to properly manage, supervise and assist franchisees. This mistake can destroy even a good franchise concept.

 

5. Insufficient Screening and Training 

The lure of initial fees and new locations tempts franchisors to lower standards for new franchisees and not devote enough attention to training. This results in franchisees who are hard to deal with and represent the brand poorly.

Franchisors should develop a profile of their preferred franchisees, addressing education, experience, motivation, cooperation, financial and other characteristics, and stick to that profile in recruiting and in evaluating potential transferees of franchised units. A significant investment in background checking, getting to know potential franchisees and providing thorough training to new franchisees in the system’s history, goals, and operations, will improve the prospects for everyone’s success.

 

6. Allowing Poor Locations 

This is really a variant of expanding too fast. Compromising standards as to the locations of franchises results in unsuccessful locations, disputes and site failures. This takes up more of the franchisor's time, costs money, and tarnishes the brand.

 

7. Quick, Do-It-Yourself Changes to the Franchise Agreement 

Negotiating changes to the franchise agreement and hurriedly preparing amendments and addendums can result in misunderstandings, ambiguities and inadvertent violations of franchise laws, all of which can lead to costly disputes. It is less costly to allow the time required for thoughtful drafting of amendments.

 

8. Failing to Deliver Value and Service to Existing Franchisees 

Too many franchisors come to take their successful existing franchisees for granted, enjoying the revenue they deliver and not delivering value in return. Franchisors should deliver continuous value and service, including marketing, support, updating of products. An existing franchisee should feel that they get value equal to or exceeding the royalties they pay, so that they remain satisfied and grateful to be part of the franchise system.

 

9. Squeezing More Revenue From Franchisees Without Considering Their Profitability 

For a franchise system to work, franchisees must be profitable. Franchisee profitability and profit growth should be as much a goal as the franchisor's own profitability.

 

10. Failing to Identify and Protect the Company's Intellectual Property 

A franchisor's brand (trademark) and confidential methods are among its most valuable assets. Failure to protect these devalues the system. The company's intellectual property should be identified and protected both contractually, and in operating procedures required of franchisees and within the franchisor company.

 

 

David Gurnick is certified as a Specialist in Franchising and Distribution Law, by the State Bar of California Board of Legal Specialization. Contact him via email: dgurnick@lewitthackman.com

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
Jan232013

Promises, Promises: Supreme Court Eases Up on Making Fraud Claims

Business Litigation Attorney EncinoFranchise Litigation Attorney

 

David Gurnick
818.907.3285

 

Overruling an 84 year old precedent, the California Supreme Court made it easier to claim a contract was brought about by fraud. Generally, when parties put their full agreement in writing, the law prohibits them from claiming an outside promise or assurance that differs from what the writing says.

For example, say a promissory note promises repayment in three years; but to get a reluctant lender to lend, the borrower orally promises to repay the loan in one year. Later the lender may seek to rescind the loan and cancel agreement, claiming to have been misled by the borrower’s false oral statement.  In countless situations, contracting parties claim they were promised or assured something that differs from what their written agreement says.

Under old law, the lender’s claim would not be allowed. This is because an oral promise of repayment in one year, directly conflicts with the written agreement’s statement that repayment is due in three years. The law calls this the Parol Evidence Rule

In a recent decision, the Supreme Court said it is fundamental that fraud undermines the validity of any agreement. The Court added that the Parol Evidence Rule should not be used to facilitate fraud. The court ruled a party may claim that a contract was induced by fraud, even if the inducement was an oral statement that differs from the agreement’s written terms.

The Court also gave a warning. Proving fraud "requires a showing of justifiable reliance" on the claimed misrepresentation.

If a written agreement says one thing, but a person claims something else was promised orally, there will be questions how the complaining party could rely on the oral statement. Reading the agreement would have revealed the conflict. If the party did not read the agreement, their reliance was not justified. “Negligent failure to acquaint oneself with the contents of a written agreement precludes a finding that a contract is void for fraud,” the Court noted.

The Parol Evidence Rule is still in effect. It still prevents a party from claiming an oral promise makes the parties’ agreement different from what the writing says. By allowing a claim for fraud, the Court’s decision partly changed a long-established California rule. With regard to overruling an 84 year old precedent, the Supreme Court quoted revered Justice Felix Frankfurter, that “wisdom too often never comes, and so one ought not to reject it merely because it comes late.”

The decision is Riverland Cold Storage, Inc. v. Fresno-Madera Production Credit Association 2013 Daily Journal D.A.R. 561 (Jan. 14, 2013). Look for a lot more discussion about this case in legal news.

 

David Gurnick is a Business and Litigation Attorney, a Certified Specialist in Franchise and Distribution Law (State Bar of California Board of Legal Specialization), and the author of two legal treatises. You may reach him via email for more information.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
Wednesday
Dec262012

What to Do When a Claim is too Small to Hire a Lawyer

Corporate Litigation Lawyer Los AngelesBusiness Litigation  

 

Paul C. Bauducco
818.907.3245

Many people and companies have disputes or potential lawsuits involving damages in the thousands, or tens of thousands of dollars. While these claims are important, they are often too small for the party to hire a lawyer to file an action.

I have often explained to potential clients why a claim for several thousands of dollars, while a significant sum, was not large enough to justify hiring a lawyer to litigate, since the costs and attorney’s fees they would pay would be far greater than any judgment they might win.

Fortunately, there is an alternative other than walking away from the claim. The California Legislature has provided for Small Claims Courts to resolve such disputes quickly and inexpensively.

In Small Claims Court a person or company can quickly bring a claim to trial without lawyers, who may not represent either party; and without expensive pre-trial motions and discovery. However, the damages which can be claimed in the Small Claims Courts are limited.

In most cases, an individual can seek damages up to $10,000, while a corporation or business is limited to damage claims of $5,000. If a party’s claim is worth more than the allowable damages, the party can still bring a small claims action, but the party’s damage award may not exceed the maximum damage award allowed under the statute. Filing fees for a small claims case range from $30.00 (claims up to $1,500) to $75 (claims of $5,000 to $10,000).

The rules of evidence and other legal formalities do not apply in Small Claims Court, since there are no lawyers involved. The parties tell their stories -- presenting their witnesses, documents and other evidence to a judge, as there are no jury trials.

The Los Angeles Superior Court has an excellent website explaining the small claims process, fees, service of pleadings, etc.

Small Claims Court is a very useful tool when a claim is important, but not large enough to hire a lawyer.

 

Paul C. Bauducco is the Chair of our Business Litigation Practice Group. Contact him via email: pbauducco@lewitthackman.com.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
Wednesday
Oct312012

California Landowners & Managers: 7 New Laws in Effect January 1st

Corporate Litigation Lawyer Los AngelesCommercial Real Estate Litigation  

 

Paul C. Bauducco
818.907.3245

 

Whether you own private or commercial rental property, serve as a member of a housing association, are a California realtor, or just have an interest in buying, selling or leasing property, take note:

With the New Year come new rules regarding your real estate.

Hopefully you are already in compliance with the new laws Governor Jerry Brown signed this past legislative season. If not, there are some important property ownership and management laws you should be ready for on January 1st.

 

2013 Common Interest Development & HOA Laws

 

Assembly Bill 1838 amends the Davis-Stirling Common Interest Development Act,  which regulates common interest developments like apartments, condos, townhouse developments and stock cooperatives.

1.  Cancellation Fees: HOAs won't be able to collect cancellation fees for HOA sales disclosure documents under AB 1838 if the cancellation is requested in writing, and if the work on the order has not yet been fulfilled, or if the HOA has already been compensated for that work.

2.  Davis-Stirling Simplified: The Act has also been reorganized. Assembly Bill 805 (the bill relocates the Act to a different part of CA Civil Code) doesn’t go into effect until January 1, 2014, so HOAs won't have to change governing documents to reflect the move until the end of 2013.

 

New Laws for Landlords & Property Managers

 

If you own or manage apartments, townhouses or space in an RV park, these new California landlord tenant laws apply to you:

3.  Notice of Default: Landlords must disclose written notice of default under any mortgages or deeds of trust on rental properties to any prospective tenants, if renting properties containing one to four residential units, before signing a lease agreement. Under Senate Bill 1191, the tenant may void the lease and recover either one month's rent or twice the amount of damages and all prepaid rent should a landlord fail to provide notice.

4.  Foreclosure Notice: Month-to-month tenants must be given a written 90 Day Notice to Terminate a rental unit when a property is foreclosed. If a tenant still has a fixed-term lease, generally the tenant can remain until the end of the term, under Assembly Bill 2610

5.  Mobile Home Owner Rights: Per Assembly Bill 2150, managers or owners of mobile home parks must provide a specified notice in the rental agreement for space, before February 1st of each year, starting in 2013. The notice sets forth rights and responsibilities of the mobile home owner, including a 90 day notice of a rent increase.

6.  Abandoned Property: When a tenant quits the premises and leaves behind personal property, the landlord must sell the abandoned property at public auction if it is worth $700 (formerly $300) or more, per Assembly Bill 2521.

7.  Animal Control: Landlords who allow tenants to keep pets cannot require tenants to have their pets declawed or devocalized as a condition of occupancy, per SB 1229.

These are just some of the California real estate laws affecting landlord-tenant relations and home owner associations in 2013. Please feel free to contact me if you have any questions regarding real estate or construction law.  A better understanding of the law can prevent problems and litigation.

Paul C. Bauducco is the Chair of our Business Litigation Practice Group. You may reach him via email: pbauducco@lewitthackman.com.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
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