Contractually Bound, Litigation of Business | Business of Litigation

CONTRARY TO PUBLIC POLICY–Unenforceable and Void Contracts

“Judicial decision on one contract can rarely help us to the understanding of another.”  Lord O’Hagan, Rhodes v. Forwood, L. R. 1 Ap. Ca. 275 (1876).

contract imageI think one of my favorite contract clauses is when the drafter inserts language that tries to make the agreement exempt from any laws whatsoever. They usually go something like this:

 

“Party A agrees to pay this ‘service/labor/consulting/alternative/termination/whatever’ fee, despite any statutes or law to the contrary.”

 

When I see one of these clauses, I just know there’s something fishy in the agreement.

Why else would anyone go to all the trouble of trying to make it so no laws can apply to the contract? Or even wanting such an application? I suppose, after all, those pesky laws always get in the way and . . . just won’t let me get my way!

 

I have litigated a number of contract cases with similar clauses that purport to contract around the law. And not once have I ever ran across an attorney willing to argue the clause to the court. Just think about trying to make that argument with a straight face.

 

Courts commonly call these types of contract provisions that try to skirt an established law or statute an illegal contract or that the clause is contrary to public policy. When found to be illegal or contrary to public policy, the clause is usually found to be void and unenforceable. In other words, don’t waste your time and any ink or paper writing one of these up and thinking you can bind someone with it.

 

This issue does come up for me from time to time. Usually I get a situation where someone has committed a crime and wants the victim to agree to a contract prohibiting the victim from reporting the crime. I always shoot these down because I won’t draft a contract that is clearly an illegal contract, unenforceable and void anyways.

 

On the flip side, certain statutes specifically permit “drafting around” it. A perfect example is in Minnesota’s Business Corporation Act (“MBCA”) found at Minnesota Statutes, Section 302A.111 (2013). The first section of this statute sets out provisions that are required to be in a corporation’s articles of incorporation. Then in Subdivision 2, the statute explicitly lists particular sections of the MBCA that will apply, unless you modify them in the corporation’s articles of incorporation or in a shareholder control agreement.

 

So, don’t waste your time, money or energy on drafting a contract that would clearly violate a statute or other law making it contrary to public policy/illegal. After all, it will be declared void and won’t be enforceable. However, like most legal issues, there are always exception that  may apply and it could be worth it to figure that out in advance of getting into any agreements where the exception could apply.

 

MKT

www.mktlawoffice.com

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Uncategorized

Give Yourself 5 Stars? Online, It Might Cost You

September 22, 2013

Give Yourself 5 Stars? Online, It Might Cost You

By

“I celebrate myself, and sing myself,” wrote Walt Whitman, America’s great bard of self-promotion. As the world goes ever more digital, quite a few businesses are adopting that philosophy — hiring a veritable chorus of touts to sing their nonexistent praises and lure in customers.

New York regulators will announce on Monday the most comprehensive crackdown to date on deceptive reviews on the Internet. Agreements have been reached with 19 companies to cease their misleading practices and pay a total of $350,000 in penalties.

The yearlong investigation encompassed companies that create fake reviews as well as the clients that buy them. Among those signing the agreements are a charter bus operator, a teeth-whitening service, a laser hair-removal chain and an adult entertainment club. Also signing are several reputation-enhancement firms that place fraudulent reviews on sites like Google, Yelp, Citysearch and Yahoo.

A phony review of a restaurant may lead to a bad meal, which is disappointing. But the investigation . . .

 

Read the whole article here: http://www.nytimes.com/2013/09/23/technology/give-yourself-4-stars-online-it-might-cost-you.html?smid=pl-share

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Litigation of Business | Business of Litigation

Comparing Minnesota LLCs, Corporations and Partnerships

For anyone who has wondered about what some of the significant differences are between forming your business as a S corporation or C corporation, as an Limited Liability Company (LLC), and as a Limited Partnership, below is a handy-dandy chart explaining some of these differences. If you have more questions after reviewing this, make sure you contact a Minnesota Business Law Attorney (I come to mind). Enjoy!

Comparing Minnesota Business Entities

Characteristics

C Corporation

S corporation

LLC

Limited Partnership

Limited Liability

Yes

Yes

Yes

Limited Partner- Yes

General Partner-No

Continuity of Existence  i.e., perpetual existence

Yes

Yes

Varies

Varies

Maximum  Number of Owners Allowed

Unlimited

1-75

Unlimited

Unlimited

Variable Interests in Profits and Losses

No

No

Possible

Possible

 Single Owner Permitted

Yes

Yes

Yes

No

 Entity Taxable, i.e. No means pass through taxation allowed

Yes

No

No

No

 Classes of Ownership

Multiple classes permitted.

Only one class of stock permitted however, can be differences in voting rights.

Multiple classes permitted.

Multiple classes permitted

 Types of Owner(s)

Any

Ownership limited to U.S. citizens and residents and to certain U.S. trusts; no corporate (except S corp. which is 100% owner) or partnership shareholders.

Any

Any

Day to Day  Management Structure

Board of Directors (unless reserved to shareholders in Articles of Incorporation).

Board of Directors (unless reserved to shareholders in Articles of Incorporation).

Members or Managers

General Partner

Formality of Structure

Meetings of directors and shareholders, with minutes, required.

Meetings of directors and shareholders, with minutes, required.

Failure to hold meetings of members or managers  or to observe formalities regarding meetings may result in piercing of corporate veil

Per partnership agreement; limited partner engaging in management loses limited liability.

corp org

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Litigation of Business | Business of Litigation

Customers sue LinkedIn, say company hacked their external email for marketing contacts

Customers have sued LinkedIn Corp. in federal court in San Jose, Calif., contending that the professional networking company hacked into their external email accounts in order to obtain email addresses of contacts to which to market its services. The suit seeks class action status and asks for a court order barring the alleged practice and disgorgement of profits, Bloomberg reports. LinkedIn spokesman Doug Madey said that the lawsuit has no merit and that the company will fight it vigorously. “LinkedIn is committed to putting our members first, which includes being transparent about how we protect and utilize our members’ data,” Madey told Bloomberg via e-mail. A Main Justice post provides additional details from the Tuesday complaint. It contends that LinkedIn essentially stole email addresses of friends, associates and business adversaries, among others, then sent emails, “including the name and sometimes the photo, of the LinkedIn customer” asking . . .

via Customers sue LinkedIn, say company hacked their external email for marketing contacts.

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Litigation of Business | Business of Litigation

Lawyer sues over bad Google Plus review

A suburban Chicago lawyer and his law firm have filed a lawsuit because of a bad review on Google Plus. Naperville, Ill., lawyer Paul Nordini and his firm sued the writer, Joseph LaBarre, who wrote that Nordini worked for an “ethically shaky law firm” and an “exceptionally unethical law firm,” report CBS News and the Naperville Patch. LaBarre wasn’t a client of the firm. He is the former spouse of Nordini’s divorce client. The suit claims the review has cost Nordini’s firm, Nordini & Thompson, $10,000 a month in lost business. Nordini seeks $110,000 and an injunction to force LaBarre to take down the review. CBS Chicago reached LaBarre for comment. “What do I think about him filing a lawsuit? I think he’s out of his mind,” LaBarre said. He added that Nordini wants him to take down the review and “if he wanted . . .

via Lawyer sues over bad Google Plus review.

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Litigation of Business | Business of Litigation, Technically Lawful

Clicking ‘like’ is protected by First Amendment, 4th Circuit says in case of fired jailer

A Facebook “like” is speech that is protected by the First Amendment, a federal appeals court has ruled in the case of a sheriff’s employee who lost his job for liking the sheriff’s election opponent. A federal judge in Virginia had ruled that clicking like was “insufficient speech to merit constitutional protection,” but the Richmond-Va.-based 4th U.S. Circuit Court of Appeals disagreed. Liking a political candidate’s campaign page “is the Internet equivalent of displaying a political sign in one’s front yard, which the Supreme Court has held is substantive speech,” the court said. The National Law Journal, Bloomberg News and the Wall Street Journal Law Blog covered the ruling, and How Appealing linked to the opinion (PDF). The court ruled on behalf of jailer Daniel Carter, who lost his job after Hampton, . . .

via Clicking ‘like’ is protected by First Amendment, 4th Circuit says in case of fired jailer.

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Attorneys & Lawyers & Counselors, Litigation of Business | Business of Litigation

So you’ve been served, huh?

I get a lot of calls that start off something like this, “Someone banged on my door last night and then handed me a legal-looking letter. The court file number is blank so I can ignore it, right?” I usually then ask them if it is two documents with the words “SUMMONS” and “COMPLAINT on them. Once they say yes, I tell the caller they just got served with a lawsuit and that it would be best to not ignore it.

In Minnesota, unlike most other states, an attorney can start a lawsuit without going to the courthouse and filing it there first.

As a result,court-pix there will not be a court file number on the  initial legal documents they got (pleadings)–YET.  Nonetheless, and as long as it is a typical civil state court action, the caller (now a “Defendant“) must serve a written answer to the allegations in the Complaint within 20 days. If they don’t, the person or business suing them can obtain a default judgment from the Court for the full amount of money requested in the Complaint. This is not good and can result in garnishment of wages, seizure of non-exempt property and levying on personal bank accounts.

After the caller/Defendant calms down, I usually ask them to e-mail or fax me a copy of the Complaint so I can see what the case is about.  Depending on the nature of the case, I then usually say they want to contact their insurance companies right away and see if the insurer will provide coverage for the claim, and perhaps more importantly, provide them with an attorney to defend the case.  If not, I am more than happy to help.

Some of the most important things I tell the Defendant (hopefully my new client) to do right away is to not talk about the case to anyone until they can meet with me first. If we do meet, initially we will discuss the details the case so I gauge how much, if any, potential liability they may be facing and what options may be available to us for resolving the case.

I always ask that the client gather up all documents that in may relate to the allegations in the Complaint and the whole case, to get me copies of the documents ASAP and to not throw anything away.  I also ask the client to get me copies of any e-mails related to the case and stress that it is extremely important that they do not delete any e-mails or other electronic information on their computers. I always explain that if any related computer files are deleted or modified (even if done for completely innocent reasons), it could be very harmful to the case. In these situations it is not unusual for the Plaintiff’s lawyer to find out and inform the Court about it. If that is the case, the Court could  wind up seeing the deletion of computer data (or any other evidence) in a negative light and hold the client responsible for destroying evidence.

If I am hired to defend the case, I am always completely honest about the risks and costs potentially involved and I insist that my new client be fully honest with me too. After all, I can not do my job and properly defend the case unless I know everything that went on before they were sued. Litigation can be grueling and, more often than not, any secrets that are not disclosed to me about the case at the beginning can come back to haunt the client before their case is over.

So basically, the most important things to remember if you get sued are to act quickly in contacting  your insurer and/or finding a lawyer to defend you. Remember to keep your mouth shut about the case and gather up and preserve all documents (whether on paper or in your computer) related to the case. And always be completely honest with your attorney and tell them everything that led up to the lawsuit.

Getting sued won’t be the end of the world, and if you take these simple first steps, the case will go much smoother for you. Keep in mind there are many ways to resolve a legitimate case through settlement, mediation and other ways. Likewise, cases that are not legitimate may be subject to dismissal.

No matter what your case is about, you are entitled to a vigorous,  strong and aggressive defense. Since the Plaintiff started the litigation, I make sure they have to prove it. If you are sued, please keep me in mind if you need an attorney that will protect your rights with zeal and compassion, while always trying to find the most favorable way to get the case over with.

MKT

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