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Detroit Startup Week Kicks Off – Schedule Now Available, Includes Legal Workshops

Today starts art festival in Grand Rapids – I took this photo just minutes ago.

Summer is coming fast and so is Detroit Startup Week. Scheduled from June 18-22.

6.1

According to its website, Startup week is:

“A week long celebration of Detroit’s entrepreneurs. Volunteer-led and completely free for attendees, we are aiming to create a community driven event that builds a stronger startup ecosystem. Startup Week is held in dozens 

of cities around the world.”

Crain’s Detroit reported  that the venue will be moved to outdoors where a crowd of 8,000 – 10,000 is expected, up from last year’s 6,500.

Crain’s reports that Startup week will consist of similar “weeklong collection of panel discussions, speeches, activities, networking and competitions is bringing back its women-tailored entrepreneur events.”

 

The Schedule is Now Available

Check out the great workshops and events for entrepreneurs which will take place in Detroit in the coming weeks.

Last year the week kicked off with Detroit’s Small Business Legal Academy.

 

This year there are several types of legal workshops including:

  • Social Enterprise/non-profit.

Social Enterprise is definitely a trending area in Michigan.

 

I think it is no secret – that startup businesses would do well to get some basic legal  during their business startup

 

I had a client send me this e-mail, below (unprompted) which I was given permission to share – it is extremely on point:

 

“I don’t think you understand how valuable your assistance is. A small guy like me, without you, would sign whatever they put in front of me and get into big trouble because of that someday.  The problem is that most small businesses don’t understand how critical legal review is either.” – client

 

The reality is that there are a host of legal areas that can turn into pitfalls for startup businesses – over the years I have written on quite a few of those areas, including:

Terms and Conditions in Contracts

Non-Competition Agreements

Entity Formation and Personal Liability

Personal Guarantees

 

 

Cash flow is a barrier for startups. This doesn’t mean you should avoid educating yourself on the legal issues affecting your business.

Take advantage of the resources available.

Consult with an attorney – Particularly law firms friendly to startup businesses.

 

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

twitter: @JeshuaTLauka

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Small Businesses and Startups: What you Don’t Know Can Hurt You.

It is truly starting to feel like summer in downtown Grand Rapids! This was the scene today from my office.

5.17.18

 

Summer is coming fast and so is Detroit Startup Week. Scheduled from June 18-22.

 

According to its website, Startup week is:

“A week long celebration of Detroit’s entrepreneurs. Volunteer-led and completely free for attendees, we are aiming to create a community driven event that builds a stronger startup ecosystem. Startup Week is held in dozens of cities around the world.”

 

Crain’s Detroit reported this week that the venue will be moved to outdoors where a crowd of 8,000 – 10,000 is expected, up from last year’s 6,500.

Crain’s reports that Startup week will consist of similiar “weeklong collection of panel discussions, speeches, activities, networking and competitions is bringing back its women-tailored entrepreneur events.”

Last year the week kicked off with Detroit’s Small Business Legal Academy.

I think it is no secret – that startup businesses would do well to get some basic legal  during their business startup

 

I had a client just yesterday send me this e-mail, below (unprompted) which I was given permission to share – it is extremely on point:

 

“I don’t think you understand how valuable your assistance is. A small guy like me, without you, would sign whatever they put in front of me and get into big trouble because of that someday.  The problem is that most small businesses don’t understand how critical legal review is either.” – client

 

The reality is that there are a host of legal areas that can turn into pitfalls for startup businesses – over the years I have written on quite a few of those areas, including:

Terms and Conditions in Contracts

Non-Competition Agreements

Entity Formation and Personal Liability

Personal Guarantees

 

Cash flow is a barrier for startups. This doesn’t mean you should avoid educating yourself on the legal issues affecting your business.

Take advantage of the resources available.

Consult with an attorney – Particularly law firms friendly to startup businesses.

 

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

twitter: @JeshuaTLauka

 

Business Law Update: When Can a Business Sue Another Business over its Corporate Status?

March 29, 2018 Leave a comment

I (like much of West Michigan) am headed out the office and on vacation for my kids’ Spring Break. But before I go I wanted to share an interesting business law case that came out a few days ago.

2016-01-09 12.56.14

Check out the March 27, 2018  case:

Michigan Radiology Society v OMIC, LLC et al

The first sentence of the opinion sums up the dispute:

This case arises from plaintiff’s effort to prevent defendants from continuing the
operation of their business.

 

 

 

 

Facts:

 

  • Plaintiff is a non-profit corp. Its owners are radiologists licensed to practice medicine in Michigan.
  • Defendant OMIC, LLC,  is a for-profit LLC.
  • OMIC  provides diagnostic imaging to the public and is solely owned and managed by defendant SusanSwider.
  • Defendant Susan Swider is not a licensed physician.
  • Plaintiff sued, claiming that defendants were in violation of:
    • the Michigan Limited Liability Company Act (LLCA)
    • the Business Corporation Act (BCA),  and
    • the Public Health Code (PHC)

 

Plaintiff sued asking for declaratory and injunctive relief.

Basically, Plaintiff claimed “You can’t do that! You need to be properly licensed!”

The case was dismissed by the Trial Court.

A reasonable question to ask is: Why?  

 

Why was the case dismissed by the Trial Court?

Answer: Plaintiff was not a proper party to enforce a claimed violation under the statutes.

Plaintiff did not have “standing”.

 

Who has Standing to Bring a Claim?

The Court of Appeals cited the long standing law of our constitution:

Our constitution requires that a plaintiff possess standing before a court
can exercise jurisdiction over that plaintiff’s claim. This constitutional standing
doctrine is longstanding and stems from the separation of powers in our
constitution. Because the constitution limits the judiciary to the exercise of
“judicial power,” Const 1963, art 6, § 1, the Legislature encroaches on the
separation of powers when it attempts to grant standing to litigants who do not
meet constitutional standing requirements.” Id page 3.

 

So in this case, Plaintiff sued Defendants saying they violated 3 statutes. The question presented was, did the Plaintiff have standing to sue Defendants under those statutes?

“Statutory standing…necessitates an inquiry into whether a statute
authorizes a plaintiff to sue at all.” Id. Page 3.

Basically, the Court held that the statutes above that the Plaintiff sued under (LLCA, BCA PHC), only allowed the Attorney General to sue to enforce a violation.

“[T]he Attorney General alone has the authority to challenge corporate status.” Id. Page 3,  citing  Miller v Allstate Ins Co, 481 Mich 601, 606-608; 751 NW2d 463 (2008)

 

Lesson:

If you are a business and believe another business is operating “illegally” it doesn’t mean you are the proper party to sue them.

Think about this another way: You are business and know of a business that is gouging a client of yours – does that give you the right to sue that business? Do you have standing to sue that business.

Something you should talk with your lawyer about…

For all of those traveling on Spring Break – safe travels!

 

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

Business Law Update: Michigan Bill Would Prohibit Non-Disparagement Clauses with Consumers.

I’m not going to sugar coat it – it is a gray day in downtown Grand Rapids.

I had lunch with a friend today, who told me – he can’t stand it when in response to the question “how are you doing” someone gives a pat answer – “good”.

IMG_2205

 

I agree.

I appreciate authenticity.

And today, is gray, and somewhat depressing and I am a little down.

Yesterday, I attended the funeral of a friend and fellow attorney who died suddenly. I am grieving and in prayer for Adam’s family, including his wife, two small children and his brother and parents.

 

 

 

Ok, enough authenticity, and on to the subject matter of this post…

 

I previously wrote about an interesting article published by the ABAJournal.

The article presents interesting questions that come up in business transactions:

when faced with entering a business relationship should you enter into a non-disclosure agreement? (NDA)

What about if the NDA contains a Non-Disparagement Clause?

What is Disparagement?

Michigan courts have held that “disparagement” is plain in its meaning. It is not ambiguous. Therefore, when signing a non-disparagement clause you can have some reasonable certainty in your conduct.

Disparage – as you will see below – has a fairly common meaning

.

‘Disparagement’ is ‘a false and injurious statement that discredits or detracts from the reputation of another’s property, product, or business.’ Black’s Law Dictionary (7th ed. 1999).

stated another way:

(1) To speak of in a slighting or disrespectful way; belittle.

(2) To reduce esteem or rank.’ . . . American Heritage Dictionary (4th Ed. 2000)

 

Non-Disparagement Clauses in Contracts with Consumers

 

Recently the Federal government passed a law holding that such non-disparagement provisions in contracts are unenforceable under Federal law

California has had such a law in place since 2016.

 

It is one thing if two sophisticated business parties are negotiating a business relationship, but should consumers have specific protections concerning Non-Disparagement Clauses?

 

At least one Michigan lawmaker thinks so.

Michigan House Bill 5193

On October 31, 2017, HB 5193 was introduced to amend the Michigan Consumer Protection Act (“MCPA”).

“The MCPA provides protection to Michigan’s consumers by prohibiting various methods, acts, and practices in trade or commerce.” Slobin v. Henry Ford Health Care, 469 Mich. 211, 215; 666 NW2d 632 (2003).

The Amendment would prohibit anyone engaged in Trade or Commerce from including in a contract with a consumer for the sale of lease or sale of consumer goods:

“A PROVISION THAT WAIVES THE CONSUMER’S RIGHT TO MAKE A STATEMENT CONCERNING ANY OF THE
FOLLOWING:
(i) THE SELLER OR LESSOR.
(ii) EMPLOYEES OR AGENTS OF THE SELLER OR LESSOR.
(iii) THE CONSUMER GOODS OR SERVICES.

(B) THREATEN OR SEEK ENFORCEMENT OF A CONTRACT PROVISION PROHIBITED UNDER SUBDIVISION (A).

(C) PENALIZE A CONSUMER FOR MAKING ANY STATEMENT PROTECTED UNDER SUBDIVISION (A).

 

Of note, under this Bill businesses would still be permitted to include provisions that protect its proprietary information.

 

I understand the intent of this provision. However, it hasn’t made any progress in committee. I will keep you posted on any development.

 

 

Questions?  Comments?

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

Twitter: @JeshuaTLauka

Business Law Basics: A 5 Million Dollar Comma

February 13, 2018 Leave a comment

Today in downtown Grand Rapids is the “World of Winter Festival” where Downtown Grand Rapids, Inc.  provides a “Snow Globe” experience. Very colorful.  A lot of fun downtown.

 

IMG_2150

Rosa Parks Circle, Grand Rapids, Michigan

 

Today I read an article posted by the ABAJournal that illustrates the profound impact on word and grammar usage in contracts and legislation.

As the ABAJournal reported:

“A dairy company in Maine has agreed to pay $5 million to its drivers after a federal appeals court last year found ambiguity in a state overtime law because it lacked an Oxford comma.”

The ABA Journal reported in its story last year Oxford comma issue benefits drivers in overtime case:

“FOR WANT OF A COMMA”

Ambiguity caused by lack of a comma in a law on overtime pay has benefited Maine dairy delivery drivers.”

“The Boston-based 1st U.S. Circuit Court of Appeals pointed out the issue in the first sentence of its March 13 decision(PDF). ‘For want of a comma, we have this case,” the court said in an opinion by Judge David Barron.

Because the statute was ambiguous, it should be interpreted in favor of the dairy workers who distribute milk but do not pack it, the appeals court found.

 

As a result – a 5 Million Dollar  Comma.

 

A SINGLE WORD CAN BE LEGALLY SIGNIFICANT TO SHIFT RISK

A few years back I wrote about how the words used in a contract dispute significantly impacted the rights and obligations in a business dispute, based upon the Michigan Supreme Court’s interpretation.

The Michigan Supreme Court made a distinction between the inclusion of the word “in” in a Title Company’s Closing Protection Letter in a prior case, and the “exclusion” of the word “in” in that instant case. In the Court’s determination:

“Although the distinction is slight—the only difference is the word “in”—the distinction is legally significant.”

Words Matter.

E-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

www.dwlawpc.com

Business Law Update: Recent Court Case On Sour Business Relationships and Arbitration Clauses

February 12, 2018 Leave a comment

Good afternoon, all! The sun was beautiful this morning rising over downtown Grand Rapids.

 

IMG_2144Today I read a recent unpublished Court of Appeals decision that originated out of Kalamazoo County, Michigan –

The case: Elluru v Great Lakes Plastic, Reconstructive, and Hand Surgery PC

 

A summary of the Facts:

  • Plaintiff Elluru and defendant Holley practiced medicine together in  the Company.
  • Holley served as president and Elluru as secretary.
  • They entered into employment agreements with the Company.
  • The agreements provided for termination by the Company for cause upon written notice or without cause upon 90 days’ written notice.
  • They also executed a Stock Redemption Agreement that provided that a shareholder must sell his shares to the Company if he voluntarily terminated his employment  or if the Company discharged his employment with or without cause.  See Elluru , page 1.

Then the business relationship took a turn for the worse…

  • In 2015, Elluru began to express his desire to dissolve the Company.
  • Elluru called for special meetings of the shareholders to discuss his proposals for dissolution.
  • Holley disagreed with the plan to dissolve the corporation.
  • Instead, on December 7, 2015, Holley sent a letter to Elluru that he had terminated Elluru’s employment with the Company.
  • Elluru also was notified that, pursuant to the Stock Redemption Agreement, his shares were being acquired by the Company.
  • Elluru was further notified that, because he was no longer employed by the Company, he was also terminated as an officer and director of the Company.
  • The letter also reminded Elluru that he was subject to a non-compete agreement. Id, Page 1-2.

Not completely unexpected, Elluru sued Holley and Company and asked the Court to:  A. Dissolve the Corporation and B. Set Aside his Termination.

Holley and the Company filed a motion to compel Elluru to Arbitration pursuant to an arbitration clause in the parties’ employment contract. Id. Page 2.

Holley argued that “the employment agreement required that the claims be submitted to arbitration. Holley argued that “arbitration was required because all of the claims arose out of the employment agreement.” Id.

The Circuit Court denied Holley’s motion. Holley appealed.

The Court of Appeals was presented with this issue:

“whether the issue of arbitrability should have been decided by the trial court or by the arbitrator.” Id.

 

About Arbitration Clauses…

 

Michigan law favors upholding arbitration clauses in contracts.

Under Michigan law, arbitration clauses are to be liberally construed with any doubts to be resolved in favor of arbitration. Amtower v William C. Roney & Co., 232 Mich App 226,233 (1998).

 

 

In this case, the Court noted that:

The Uniform Arbitration Act, MCL 691.1681 et seq…provides that, where there is an agreement to arbitrate, a trial court must order the parties to arbitrate unless the court determines that there is no enforceable arbitration agreement. The Act further provides that it is for the court in the first instance to determine arbitrability…” Id. (my emphasis).

There is an exception to the rule that the Court determines arbitrability… 

The parties contractually agreed to delegate to the arbitrator the question of arbitrability. Id. Citing Rent-A-Center, West, Inc v Jackson, 561 US 63, 69 n 1; 130 S Ct 2772; 177 L Ed 2d 403 (2010).

In the instant case – the Court looked at the Employment Agreement:

“In paragraph 10 of the employment agreement, the parties agreed that ‘[a]ny controversy or claim arising out of or related to . . . this Employment Agreement . . . shall
be settled by arbitration . . . in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association . . . .’ Those rules provide that the “arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.'” Id. Page 3.

 

The Court of Appeals agreed with Holley:  “that this matter should have been submitted to arbitration and that the trial court should have held the claims in abeyance pending the outcome of arbitration.” Id. page 2.

 

 

Lessons and General Arbitration Considerations:

1. Arbitration Clauses are favored. A Court generally decides whether the clause is enforceable, and whether or not the matters are arbitrable.” However, the parties’ can contract to allow the issue of arbitrability to be decided by the arbitrator.

2. This brings up a general point – the parties could have negotiated differently in their employment and shareholder agreements before signing. “Freedom of Contract.

3. Arbitration clauses have the benefit that they are usually most cost-effective, quick, and they are private (as opposed to court cases which are public filings).

4. Where is the Other Party located? For a client who engages in business over state lines, an arbitration clause might not be effective if you are trying to quickly collect a debt owed.  Instead, you  might want a “Jurisdiction and Venue Selection Clause

This clause would include language indicating that no matter where the dispute occurred, the contract will be interpreted under Michigan law, and the parties agree that any dispute shall only be resolved in _______ County (Typically,  Kent County, Michigan, for my clients.) Therefore, if your contract contains a jurisdiction and forum selection clause, and you are owed money by a company in Florida, you would not need to retain a Florida attorney to try and collect.

5. Arbitration may be a gamble.

Businesses should realize that if you elect to arbitrate a matter and you do not like what the arbitrator finds – your rights to appeal may be severely limited.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

Twitter: @JeshuaTLauka

Business Law Update: Concerning Current Politics and Non-Disparagement Clauses

January 9, 2018 Leave a comment

Today I read an interesting article published by the ABAJournal.

The ABAJournal article asks an interesting question (all politics aside):

“If Trump sues Bannon for violating a nondisclosure agreement, what are his damages?”

Again, all politics aside, the article presents interesting questions that comes up in business transactions: when faced with entering a business relationship should you enter into a non-disclosure agreement? (NDA)

money-73341_640

The thought that comes to mind when I hear the word “Politics”

What if the NDA contains a non-disparagement clause? Can you even enforce it if breached? If so, what are your damages?

Going back to the ABAJournal Article, one legal scholar quoted in the ABAJournal article opined that such a lawsuit would be problematic, given damages are speculative (my paraphrase). University of Arizona law professor Jane Roberta Bambauer stated:

“It’s difficult for litigants to claim large damages when the nature of the award is that they expected to be less embarrassed (as opposed to NDA cases involving trade secrets and other financially valuable pieces of information that the protected party expected to exploit himself)”

Regardless of the damages argument, in general, such agreements are enforceable. That was the opinion of Yale Law Professor Stephen L. Carter who stated:

 

“We can put aside nondisparagement clauses buried in the boilerplate of consumer contracts, which companies sometimes try to use to prevent those who buy their products from posting negative reviews. Most courts have understandably held such clauses unenforceable,”…“But when non-disparagement clauses are included in employment contracts or separation agreements, they are enforced more or less routinely.”

 

Non-Disparagement Clauses…With a Penalty?

Would you sign a non-disparagement clause with a penalty attached to it in the event of breach?

A few years ago an interesting story emerged regarding a non-disparagement clause involving a settlement entered into by the City of Lansing.

As a lawyer, if I was approving my client’s signature on the City of Lansing Settlement agreement, I’d want to be sure that my client fully understood what constitutes “disparagement”

 

What is Disparagement?

Michigan courts have held that “disparagement” is plain in its meaning. It is not ambiguous. Therefore, when signing a non-disparagement clause you can have some reasonable certainty in your conduct.

Often times as part of a confidential settlement agreement, the parties to a dispute will agree not to “disparage” each other.

Disparage – as you will see below – has a fairly common meaning.

‘Disparagement’ is ‘a false and injurious statement that discredits or detracts from the reputation of another’s property, product, or business.’ Black’s Law Dictionary (7th ed. 1999).

stated another way:

(1) To speak of in a slighting or disrespectful way; belittle. (2) To

 reduce esteem or rank.’ . . . American Heritage Dictionary (4th Ed. 2000)

2. Michigan Case Law Concerning “Non-Disparagement Agreements”

Rarely have I ever seen a non-disparagement clause become an issue. In fact, a review of Michigan case law supports this – I found only a handful of cases in Michigan where the parties litigated over one party’s alleged “disparagement” after a settlement agreement was entered.

One such case was the 2011 case of Sohal v. Mich. State Univ. Bd. of Trs. & Davoren Chick M.D., 2011 Mich. App. LEXIS 915, *12-14, 2011 WL 1879728 (Mich. Ct. App. May 17, 2011).)

There the Court held: “the term “disparage” in the non-disparagement clause is not ambiguous. While plaintiff attempts to ascribe several “reasonable” meanings to the term “disparage,” and thus the non-disparagement clause, the term fairly admits of but one interpretation.” Citing Meagher v Wayne State Univ, 222 Mich App 700, 722; 565 NW2d 401 (1997).

As the Court noted, “Other state courts have determined that the term “disparage” in non-disparagement clauses of settlement agreements are unambiguous.” (citations omitted).

 

In closing – non-disparagement clauses are standard clauses (but not universally used). Courts have consistently held that “Disparage” is a plainly understood term. It isn’t an ambiguous term.

Disparagement clauses may be enforceable. Most often, I would presume they would at least serve the purpose of deterring a party from speaking disreputably after a settlement is signed. However a good question to ask before entering into the agreement; unless you have a stipulated damages provision, how will you calculate damages in the event of a breach?

 

Questions?  Comments?

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

Twitter: @JeshuaTLauka