Archive for October, 2014

Starbucks Lawsuit Highlights Legal Concerns for Startup Businesses

October 29, 2014 Leave a comment

I saw this article yesterday about this lady who sued Starbucks over a “coffee maker dispute”. The ABAJournal reported on it today as well

That’s not the part that interested me.

She sued Starbucks and after years of litigation she finally settled.

For $250.

Although interesting, that’s not really the most interesting part to me.

Her lawyer is asking the Court to award legal fees in the amount of $175,000.



I can’t help but look at this article and have it remind me of what I hate about litigation.

Don’t hear me wrong, I understand the lawyer’s rationale given in the ABAJournal article-  taking contingency fee cases are sometimes though only way many consumers can prosecute their claims.


My thoughts go to a more general problem with litigation:

the overall effect of litigation tends to be, at the end of a long protracted lawsuit, the lawyers are the ones who win.

Not the clients.


When lawyers are doing their job advising their clients on how best to manage a business dispute, hopefully (and most often) lawyers are advocating for the client’s best interest. Often times, but not always, this approach results in lawyers advising their clients against filing a lawsuit.


So this is a good transition into the main reason for writing this article: – One problem that small businesses and startups run into (besides cash flow, of course):

Typically, businesses don’t know what legal services they need. “they don’t know what they don’t know”


So, sometimes they can end up engaging a law firm that doesn’t have their best interest in mind.


Case Example:

A business client (Client) came in a few months back. He had a business dispute with a customer (Customer) claiming it was owed  a large sum of money.

My Client had the ability to resolve the dispute with his Customer.  Unfortunately, the Customer engaged a law firm to represent it, that almost stopped the case from settling.

The other lawyer jumped in and his first action was drafting a lawsuit and encouraged Customer to file a lawsuit against my Client. He continued to advise Customer to file suit at every step of the way.


Thankfully, this lawyer did not get in the way of the parties from settling. This was primarily because the parties met individually apart from their lawyers and settled. (I might have given my Client this idea).


How unfortunate though.

When parties to a dispute resolve their dispute despite the involvement of their legal counsel, that is a problem.

In the event that case went to trial, the only outcome that would have been different, is that each side would have paid tens of thousands of dollars to their attorneys. I am fairly confident the outcome would otherwise have been no different.


In that instance, the lawyers would have been the winners.


So, businesses are left with the question, how do  you engage the law firms who have your best interest in mind?  Because, lets face it, any lawyer you meet that wants your business is going to tell you they have your best interest in mind.


I read a good article that offers good insight to what truly matter (and don’t matter) to businesses looking to retain outside legal counsel. The article provides insight from three in-house legal counsel to big business. See Above The Law blog – “13 Things That Keep General Counsel Up At Night” See that article here.


In-house counsel see the good, bad, and ugly, of engaging outside legal counsel.


As the general counsel see it, things that  a business will scrutinize over about a prospective law firm:

  •  Unreasonable Firm Billing Demands
  • Turnover and Attrition in Law Firms
  • Lawyers as Lousy Businessmen
  •  The Cost Of Litigation

The general counsel expound on this point:

There are two motivations of outside lawyers that are misaligned with clients’ incentives: (1) The billable hour and (2) The fear of being accused of ‘not leaving any stone unturned.’ … Rather than create efficiencies, the advent of eDiscovery has jacked up discovery costs. Thus, we insist on arbitration and mediation, including the ‘English Rule’ on cost-shifting. Further, we also insist that parties justify discovery requests.

Establishing a fixed cost at the outset prevents outside counsel from ‘going down every rabbit hole.’”

We cap deals and stay in constant communications with the firms to prevent overlawyering and churning documents.


Things that don’t matter to these general counsel:

 Law Firm Rankings.

As the general counsel explain:

We pay no attention to them. Great firms will have some terrible lawyers and vice versa.

We are looking for a relationship. Individuals are more important.


Take away

In sum, businesses should be concerned if they engage a law firm that attempts to push them into pursuing a lawsuit without first trying other cost-effective means to resolve the dispute. Although sometimes an immediate lawsuit is the necessary route (e.g. – enforcing a covenant not-to-compete against a former employee actively trying to steal clients), lawyers should have their clients’ best interest in mind.

If you are considering what to look for engaging law firms – in-house counsel are a good resource. They see the good, bad, and ugly of outside legal counsel.



Questions? Comments?




Discounted Legal Documents at Sam’s Club?

October 27, 2014 1 comment

According to the ABA Journal, Sam’s Club will be offering Discounted Legal Services to members of Sam’s Club, see the article here.   Also, you can follow the ABAJournal on twitter at @ABAJournal.

I have posted articles about my thoughts on universal legal documents, such as those offered through LegalZoom, you can see those here.

My chief concern has always been that universal legal forms that have not been drafted or reviewed by a lawyer for a particular clinet have huge pitfalls that non-lawyers intending on utilizing these forms just don’t know what to look for.

Simply put, that’s why you hire a lawyer – “you don’t know what you don’t know”

Back to the article…

According to the article, LegalZoom intends taking it a step further than just providing documents:

“The companies plan to develop “multiple legal solutions” for Sam’s Club members, but initially members will have a couple options, according to a LegalZoom press release and spokesperson Johanna Namir. They are:

• A “suite of estate planning products,” priced at $299, that includes a will or living trust, a power of attorney and a living will. Also included are a year of unlimited revisions and independent attorney consultations of up to a half hour each for personal first-time legal matters. The attorneys will review any documents under a 10-page limit. Additional legal work would be done at a discount of 25 percent off the lawyer’s regular rate.”

It will be interesting to see if Sam’s Club members utilize these services.

questions? comments?


Business Law Update: One-Third of Top Business Websites Have Clauses to Restrict Lawsuits

October 24, 2014 2 comments
Happy Friday all!
The ABAJournal Reported an article today headlined: One-third of top websites have clauses to restrict consumer lawsuits. You can see that article here
That’s right, people. If you want to sue these major companies, you need to demand “arbitration” – likely in the company’s home state, and county of incorporation.  If the company is feeling really aggressive, it’s arbitration clause might actually make you, the moving party, liable for all the arbitration costs.
Among the websites with lawsuit restrictions are:
Amazon, eBay,, OKCupid, Travelocity, the Wall Street Journal, Target and Domino’s Pizza, the story says.
Interestingly, according to the ABAJournal,
Facebook and Google, on the other hand, do not limit users’ right to sue.
I can only conjecture that Facebook and Google don’t see the need in including such “unfriendly” arbitration clauses. Let’s face it, if you are a person suing Google related to your usage of the online search engine, good luck with that lawsuit.
Are Website Terms and Conditions Enforceable?
I previously posted an article about terms and conditions in websites. Those that are in “browse wrap” – just a link at the bottom of the browser, can be easily overlooked by businesses submitting purchase orders, and consumers, alike.
Because they can be overlooked, arguments can be raised, sometimes successfully, that that the limitation of damages, or clauses compelling arbitration should not be enforced.  Businesses’ responses have, of course, been to make such “Terms and Conditions” more prominent on their websites, or require “click wrap” – the user to click their acceptance of the terms before proceeding further.
Simply put, if a business has its legal counsel doing their job, the business will make sure its interests are protected in drafting an enforceable and advantageous terms and conditions page that shifts liability to the end user – whether a consumer or business.
Take Away on Terms and Conditions
Implement Terms and Conditions
I recommend business clients to always include a Terms and Conditions page that is either attached to the back of their physical Purchase Orders, or is included in their Website and incorporated by reference.  The Terms and Conditions will, essentially, allocate risk and liability, on such items like:
  • warranties (what is the provider guaranteeing and what isn’t it?)
  • payment terms (when and how is payment accepted? Late fees?)
  • remedies  (what is your recourse in the event the goods aren’t what the buyer expected? Are your damages limited to a refund, or can you get related damages as well? Can attorney fees be covered?
  • Venue – (where can you bring your dispute? An arbitrator? Who pays the fees? Is the location of the arbitration specified?

Enforce Terms and Conditions

And of course, its important that a business enforces its terms.  I have had clients who have been sued before and forgot of their advantageous language in their terms and conditions.  If a business is sued and it waits too long in the litigation before raising its right to arbitration, the court very well might consider the business to have “waived its right” to arbitration. Although, “Waiver of a contractual right to arbitrate is disfavored” by the Courts. Best v Park W Galleries, Inc, No. 305317, 2013 WL 4766678 (Mich Ct App September 5, 2013), app den 495 Mich 979 (2014).
Questions? Comments?

Court Enters Order and $25 Million Judgment Against Work-at-Home Scheme

October 22, 2014 Leave a comment
If a work-at-home business opportunity seems too good to be true, it probably is.
It most certainly is if it is a “Wealth Building Home Business Plan” called QuikSell.

A federal judge recently held that Zaken Corp of Thousand Oaks, California and its President Tiran Zaken made false and misleading statements in marketing work-at-home business opportunities and promising commissions to consumers, the Justice Department announced in its press release.

According to the Dept’s press release, “the court found that 110,000 consumers had bought the defendants’ program and “more than 99.8 percent never earned any commission whatsoever.”

The Zaken Corp. and Tiran Zaken lured customers with claims that purchasers could expect that “two to four hours a week working this business will earn participants an average of $3,000 to $6,000.

They further claimed that “the average commission checks associates get … will be approximately $4,280!

In the court’s written decision, Judge Pregerson of the Central District of California found that “fewer than one percent of consumers ever earned any income at all.

The Court held that Zaken Corp violated the Federal Trade Commission Act by making false claims regarding the earnings potential of QuikSell.

The court also found that The Zaken Corp. and Tiran Zaken violated the Federal Trade Commission (FTC)’s Business Opportunity Rule, which requires sellers of business opportunities to provide specific, truthful information to help consumers evaluate a business opportunity prior to purchase.

Under Michigan law, this business Could have been prosecuted under the Michigan Consumer Protection Act, which protects consumers from these types of  “business opportunities.”

Questions? Comments?


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Business Law Update: Jimmy John’s Non-Competes: Teenagers Can’t Deliver Sandwiches?

October 17, 2014 3 comments

Above the Law is a legal blog that posts interesting news in the legal world. I had to comment on this latest one I saw:

Jimmy John’s Serves Up Sandwiches And Oppressive Non-Compete Agreements.

See the link:  or follow Above the Law on twitter: @atlblog

In Michigan, Non-Competes are enforceable to protect legitimate business interests.

MCL 445.774a provides:

“1) An employer may obtain from an employee an agreement or covenant which protects an employer’s reasonable competitive business interests…”
Further the Agreement must be reasonable:
  • “as to its duration,
  • geographical area, and
  • the type of employment or line of business.”

Quick note – I posted an article about a possible change to Michigan covenants not-to compete statute, you can see that article here – no new movement on that HB. It might just be stuck in committee where it will die…

At any rate,

The question posed by the Above the Law article is a good one – ok, Jimmy Johns, you have a non-compete agreement, that may be valid…so,

to what end?

What is the point? What type of legitimate business interest is Jimmy Johns trying to protect here?

As lawyers who have the luxury of a business court docket in Grand Rapids, Michigan, we have a court system that understands that businesses do have a legitimate interest to protect, thus making non-competes valid. However, courts are also quick to strike, or limit, any restraint they deem unreasonable.

I would hate to be the lawyer representing Jimmy John’s to enforce an injunction in Grand Rapids Circuit Court to enjoin an 18-year old from making sandwiches…

questions? comments?


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Woman Gets 7 years for filing fake $100B liens against 4 judges

October 15, 2014 Leave a comment

Don’t mess with the Federal Government.

I reported on this story back in August, see my blog post here and here

The ABA reports today the results of this lady’s rampage against the Federal Government – 7 years in prison. See the article here.

As the ABA reports, “Five years ago, Cherron Phillips was a successful career woman with two children, friends and relatives with impressive records of achievement and no criminal record.” – now she will be serving 7 years in prison.

Her attorney advocated for “probation” claiming that his client’s actions were akin to passing off monopoly money and being charged with counterfeiting.

However, the Judge disagreed – calling Ms. Phillips actions, tantamount to “paper terrorism”

I can understand both positions.

However, I reiterate my thoughts in my earlier blog post – these types of actions make it very difficult to defend when one party is not playing by the rules.

How can you defend against recording a $100B maritime lien (whatever that is) on someone’s property? nonsense.

It’s impossible to argue with crazy.




Categories: Uncategorized

Real Estate Law Update: “Lost Note” and Tenant Waiving a Trial By Jury

October 7, 2014 Leave a comment

A few Real Estate Bills made some progress last week in the Michigan Legislature.




I. House Bill 4640, et al.  “the Lost Mortgage”

This Bill was introduced in April 2013 and has gone through amendments and substitutions. On Thursday October 2nd Substitute Number 2 passed the Senate 103 – 4 . You can see the entire legislative history of the Bill here


What does the Bill do?


The Report that came out of the committee on banking and financial institutions summarized the bill’s (and its companion bill) effect as follows

  • It would provide for the recording and use of affidavits affecting real property to allow an unrecorded mortgage to be recorded.

Why is it necessary?

The State Bar of Michigan’s Real Property Section issued a position statement that clarifies the need for this bill.

Essentially, this Bill is necessary to deal with a Court Decision, In re Neal, 406 BR 288 (2009), which held

“Under Michigan law, affidavit of lost mortgage filed by mortgagee did not itself convey interest in property, and thus could not be recorded to establish mortgage or to perfect mortgage. M.C.L.A. § 565.201(1)(a).”

Therefore, as the Real Property Law puts it:

Only an original instrument can be recorded, the affidavit and copy of the lost mortgage at issue could neither
perfect any security interest nor count as notice of any interest. The type of affidavit at issue has long been used in
real estate practice. 


Banks, if you assigned the mortgage and note to 10 different other banks, and you lost the original, oops… you might have trouble proving you have a perfected security interest. Not any longer, under HB 4640.


II. House Bill 5869 – Truth in Renting Act – Lease Can Include Language That Will Waive a Jury

The Bill applies to the Truth in Renting Act, which holds void certain provisions if they are included in a residential lease. You can see the text of the bill here Basically, residential tenants have certain rights, that they should not be allowed to waive, like a Landlord’s duty to mitigate their damages, for instance.


The Bill was introduced on Wednesday October 1 and referred to the Judiciary Committee


What does the Bill do?

It would provide that a residential lease cannot waive a tenant’s right to notice of legal proceedings (e.g. – summons, complaint, notice to quit tenancy) – but the lease specifically allows a landlord to include language in a lease that would waive a tenant’s right to demand a jury trial.


Why is it necessary?

I haven’t reviewed any policy explanations, but my own observations, providing a landlord and tenant with the opportunity to waive a trial by jury would provide for judicial economy. It is easier to schedule a bench trial, as opposed to creating a jury pool to select from, and then panel a jury to decide whether or not rent is owed (when likely, the case will get resolved short of trial regardless).


Most tenants when they appear on their own behalf at eviction hearings will request a judge, if they request a jury, they are required to pay the jury filing fee, which often times they don’t have (otherwise they would likely be paying their late rent).



Questions? Comments?










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