Archive for the ‘Choosing a Lawyer’ Category

Using Standard Form Employee Handbooks; Damned if You Do, Damned if You Don’t.

Posted: May 10, 2013 in Choosing a Lawyer, Employee Contracts, Personnel Policy Fun
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Drafting and updating employee manuals, also called personnel manuals or employee handbooks, is a lot like getting your annual medical check up. It’s no fun to do, but we know that it’s an important part of our overall health maintenance. Making sure that your employee handbook is compliant and up to date is an important part of your company’s overall plan to keep good relations with your employees, and to stay out of disputes and lawsuits.

 

There are now many websites, some for free, that allow you to create your own employee manual. Most are actually pretty good. And a dirty little secret of employment lawyers is that many of us use these sites too, either as a starting point, or to find some better language.

 

Can you bypass your lawyer and create your own employee manual? No, at least not completely, because “pretty good” is not always good enough. With some effort, you can probably create an employee handbook yourself that is 80% to maybe even 90% accurate and complete. But it’s that missing/inaccurate 10-20% that will kill you.

 

Here’s why. There is no one-sized fits all handbook. First and foremost, different states have different statutory and common laws. Some of the standard provisions from handbooks created for a national audience would cause direct violations of Massachusetts laws (it’s akin to drinking bland, national beer, when you could be drinking Sam Adams, Harpoon or Pretty Things). Plus, you may be inadvertently placing unnecessary burden’s on your company. For example, you don’t want to obligate your company to comply with the FMLA if you only have 20 employees. There are many different state and federal statutes that apply to different businesses, usually depending on the number of employees.

 

Additionally, every industry and every business is different. There may be different provisions that you absolutely need for your industry. Different statutes you have to follow. There may be other provisions that fit or do not fit with your workplace culture.

 

But you should still benefit from the cost-effectiveness of having free or very reasonably priced personnel manuals readily available on the internet. If you want to manage legal costs, go ahead and create the employee handbook from a reputable site on the web. A good human resources professional could probably create a very good (90% or so) manual in this fashion with a few hours of effort. But don’t stop there. Have your trusted employment attorney spend a few hours to get your manual up to 100%.

 

The above discussion could apply in varying degrees to other employment and business documents, such as non-competes, non-solicitation agreements, confidentiality agreements, service contracts, etc. If you want to save legal dollars, sometimes you can think of the web as a starting point. But unless you see webmd.com as a viable alternative to a visit with your trusted primary care physician, don’t make it your ending point. Saving a few thousand dollars now could cost you tens or hundreds of thousands and a lot of heartache later.

 By Adam P. Whitney 617.338.7000

You’re Damned if You Don’t Have Business Allies

Posted: May 5, 2013 in Business Contracts, Choosing a Lawyer
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No business is an island. You need allies. These include loyal clients, service providers, vendors, business referrers, contractual partners, strategic partners and others. What type of allies you need depends upon what industry you are in. If you are a general contractor, you may need alliances with design professionals, subcontractors and suppliers – persons and entities who you know will treat you fairly and who will support your position when things go awry. If you’re in the real estate business, you may need allies who are brokers, bankers, appraisers and inspectors.

 

When I recently left my law firm to start an independent practice, I saw firsthand the value of business allies. Clients have not only continued with me, they have provided me with IT support, referrals, names of key service providers, support and encouragement. Vendors and service providers have given me special or at least fair deals. The lawyers and support staff at my former firm continue to be valuable allies in many aspects of my business. I get by with a little help from my friends.

 

Most any business needs trusted lawyers, accountants and insurance brokers. Don’t make the mistake of thinking that every professional with the same letters after their name is the same. Search out someone who you trust and have confidence in. Someone who has your back. Forge a long-term relationship that will last for many years. The efforts that you put in to find the right people will be repaid countless times over.

 

Business alliances are always a two-way street. Be ready to give something back, whatever that may be. It may simply mean paying your bills on time without complaint. My best clients do this, and I try to pay them back in spades. I’m much more likely to cut down my time for loyal, long-term clients. I will bend over backwards to find them the right professional that they need for a certain problem. I will consult with them for no charge on certain personal matters not within the scope of the normal business representation. Giving something back may mean referring others to your ally. It may simply mean being fair and honest in your financial dealings. It could just mean being available for advice and support. As stated above, it means having each other’s back when the going gets tough.

 

Trust and loyalty are the grease of private business and industry operations. This is especially so for small and mid-sized businesses and all service industries. Find loyal, trustworthy business allies, and running your business will be that much better.

 

By Adam P. Whitney, 617.338.7000

You’re Damned if You Don’t Take the Right Steps After Being Sued

Posted: May 31, 2012 in Arbitration, Choosing a Lawyer, Lawsuits
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It sucks when your company gets sued.  But it’s part of operating a successful business.  No one wants to sue a business that has no money and no assets.  The more successful you are, the bigger the target you have on your back.  Lawsuits are not fun.  They are risky.  And very expensive.  No lawyer can change any of that, but there are certain things that you should do, and not do, as soon as you receive lawsuit papers, including the following.

 

  1. Don’t Ignore It.  Although some threatening letters from lawyers are empty threats (you should not ignore these either; some require a response by statute) that you may choose to ignore, a summons and complaint notifying you of a lawsuit will not go away on its own.  In fact, there can be grave consequences, including a default judgment against the named defendants, or, in some cases, an immediate injunction (court order) against your company.  Although a default can sometimes be vacated if you take swift action, you don’t want to leave that to chance.  This leads to the second point …

 

  1. Call Your Lawyer Immediately.  I know this sounds self-serving, and no one likes to pay legal fees, but you need legal advice, and fast.  If your business is a legal entity, such as a corporation or LLC, you cannot represent it in court in Massachusetts (with the exception of small claims).  One of the consequences of incorporating is that your business is a separate legal entity from its owners; unless one of the owners is a licensed lawyer, you will need to hire an attorney or else face default.

 

  1. Choose the Right Lawyer.  All lawyers are not the same.  There are different specialties, different personalities and styles, and different hourly rates.  Your ideal lawyer will have some experience in the type of case at issue, will have a reasonable rate, and will have a personality and style that you can work with.  Don’t be shy about asking tough questions about the lawyer’s experience.  Consider asking for references.  Investigate the lawyer on-line (www.avvo.com is a good starting point).  Ask the lawyer for a litigation budget, a general defense strategy, and the lawyer’s thoughts on alternative dispute resolution.  You will not offend the lawyer by being a smart consumer of legal services.  If you do, then you are probably talking to the wrong lawyer.

 

  1. Check for Insurance Coverage Immediately.  Even if you think that your policy, be it a general liability policy, directors and officers policy, or other insurance does not cover the claim, check with your insurance agent anyway.  You may be pleasantly surprised.  If you are fully covered, the insurer will assign a lawyer and will pay the lawyer, subject to any deductible, and will likely pay for any settlement or judgment.  Sometimes insurers agree that they have a duty to defend your company, subject to a reservation of rights.  This usually means that you can pick your own lawyer, and the insurer will pay the reasonable and necessary legal fees, at least until and unless it or a court determines that there is no coverage.

 

  1. Preserve Electronic and Paper Information.  Put any normal document destruction or e-mail purging programs on hold.  You have a duty to preserve information, which could help you or the other side.  If you destroy information, that fact can be used against you, which may look like you are trying to hide something even when you are not.

 

  1. Be Careful What You Say or Write.  Other than communications with your attorney, almost everything you say about the plaintiff or the lawsuit is discoverable.  That includes internal e-mails with your staff.  It likely includes investigations or interviews that you take without a lawyer (sometimes, it makes sense for companies to do their own investigations).  Your best bet is to let your lawyer handle it.  A meeting with you and your key personnel is not protected from discovery if your lawyer is not there.  E-mails and memoranda can be especially devastating.  Don’t put something in an e-mail unless you want it blown up on a giant poster-board in front of a judge and jury.  If you have any doubt, check with your lawyer.

 

  1. Don’t Just Let the Lawyers Handle It.  Although you want to continue to focus on your business, it would be a mistake to turn the defense of the suit over to your lawyers and then not monitor it.  You want to be involved, because you know your business and the facts better than the lawyers.  There is so much at stake.  Think of yourself as part of the defense team.  If you have no insurance coverage, you can also keep a better handle on legal fees and expenses.

 

  1. Consider Alternative Dispute Resolution.  First, check to see if a contract at issue requires arbitration.  In some circumstances, arbitration can be quicker and cheaper than litigation (but not always).  It’s also more private.  Also consider, after consultation with your attorney, pursuing early mediation.  If there is some exposure on the claim and the plaintiff and plaintiff’s lawyer appear to be reasonable, you may be able to save tens of thousands in legal fees and eliminate the risk of a judgment in an indeterminate amount.  Consider that, in Massachusetts, interest runs at 12% per annum from the date of the breach of contract or the date of filing.  Do the math; it adds up.  If handled correctly, a request for mediation is not a sign of weakness.

If you or your company have been sued, or you know a lawsuit is on the horizon, and you need assistance, give me a call at 617.338.7000.

You Could Be Damned if You Don’t Have Professional H.R.

Posted: December 19, 2011 in Choosing a Lawyer, Hiring and Firing, Personnel Policy Fun
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Let’s hear it for H.R.! There’s a cheer you don’t hear in the office much. H.R. is the butt of many jokes, including a lot of funny ones about Toby on The Office (Michael Scott said on one episode: “If I had a gun, with two bullets, and I was in a room with Hitler, Bin Laden and Toby, I would shoot Toby twice”). But from an outside counsel perspective, I absolutely love dealing with clients who have professional, competent human resources personnel.

Whether you owners of the company know it or not, your H.R. manager is worth his or her weight in gold because they keep your company out of so much trouble. Today’s human resources professionals are just that, professionals. More than ever before, H.R. has to know so much about federal and state laws and regulations on leave issues, disability issues, pay issues, benefits issues, etc., etc. And the laws change all of the time, so they need to continually update their knowledge. Some H.R. professionals are specialized in some of these areas, and probably know as much as many lawyers.

H.R. professionals know how to document what needs to be documented. This may sound tedious or boring, until you are faced with a lawsuit or potential lawsuit. Then, having proper documentation can make all of the difference. We have a saying in my business, “if it’s not in writing, it didn’t happen.”

H.R. professionals keep your legal fees down in two ways. One, as mentioned above, they keep you out of trouble, including lawsuits and government inquiries. Two, they can handle a lot of things themselves without having to call the outside lawyers. Most H.R. professionals I know seem to know the precise time when a situation morphs from an H.R. issue to a legal issue.

I know that H.R. professionals do many other critical things as well. If used correctly, they are strategic partners for management and set the tone for the company culture. I’m simply giving my perspective as outside counsel. This brief post is not meant to give a full overview of the entire profession.

If you’re company is not large enough to have a full-time H.R. staff person, consider a company that will serve as your out-sourced human resources division. There are plenty of outsourcing companies who will do that for you. Here’s a good article on outsourcing: http://humanresources.about.com/cs/strategichr/a/outsourcing.htm

If you are an H.R. professional at a private company in Massachusetts, or if you have taken on those duties by default (as sometimes happens), I would love to work with you. Call me at 617.338.7000.

By Adam P. Whitney

You’re Damned if You Don’t Have Your Lawyer Review Your Business Contracts

Posted: July 26, 2011 in Choosing a Lawyer, Noncompetes
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If you sign a contract for your business without understanding all of the terms, you could expose your business to serious damages.

No one likes to pay legal fees, I get that, but don’t be penny wise and pound foolish.

All that legalese and boilerplate has meaning. Yes, it can be tedious and boring to read and amend the provisions, but it must be done. Many business people mistakenly believe that contracts are standard, boilerplate, that the terms aren’t enforceable, etc. Many think that the legal terms of contracts aren’t negotiable, so why bother. That’s a defeatist, head in the sand attitude that will only lead to trouble.

Red flag terms that you absolutely need a lawyer to review include the following: indemnification, hold harmless, choice of law, arbitration, continuation or renewal provisions, cancellation provisions, limitation of damages provisions, liquidated damages provisions, noncompetes, non solicitation provisions, legal fees provisions. Personal guaranties, etc.

A quick test will determine whether you need a lawyer’s review. Ask yourself, do you understand all of the terms? Do you know what your exposure is? A good lawyer is like contract insurance. You might pay $1,000 for a lawyer to review, revise and negotiate a contract (it could be more, it could be less), but you could save yourself tens or hundreds of thousands in liability.

I can’t tell you how many times I’ve had a business client come to me after the business dealings went awry, and their either being sued, or they are looking to sue because of the other party’s wrongdoing. When I examine the contract, I see numerous unfavorable or poorly drafted provisions that easily could have been addressed before signing. But (insert clichés about barn doors and horses, trains leaving stations, and ships sailing).

If you’re a Massachusetts business faced with a vendor or other contract with some of the above terms, or if even if your own contract needs a tune up, give me a call at 617.338.7000. I’ll look at it and give you a quote on cost before charging you a dime (assuming there is no conflict of interest).

By Adam P. Whitney

You’re Damned if You Do … Use a Competitor’s Stolen Customer List or Information or other Trade Secrets

Posted: April 28, 2011 in Choosing a Lawyer, Employee Contracts, Hiring and Firing, Lawsuits, Noncompetes, Rogue Employees, Trade Secrets and Proprietary Business Info.
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If you hire a new employee from a competitor, you should make damn sure that the employee did not bring any trade secrets or proprietary information from the former employer. Otherwise, you could face significant exposure to your company, especially if others at your company participated in use of the trade secrets (the term “trade secrets” can be broad to include any proprietary business information, including customer lists and customer information).

This is the lesson of the attached case report, People’s Choice Mortgage, Inc. v. Premium Capital Funding d/b/a Topdot Mortgage. In the interest of full disclosure, I was the trial attorney for People’s Choice Mortgage (“PCM”), the prevailing party in the case.

The following is a summary of the case report, which is a public record: PCM employed Mr. Bodden, who turned out to be a dreaded Rogue Employee. Mr. Bodden then went to work for Topdot while still employed at PCM, and kept working for PCM for an additional five weeks. Bodden had access to PCM’s customer information. Because his commission structure was better at Topdot, Bodden used the PCM documents at Topdot to solicit and close loans. The Court concluded that Topdot had constructive knowledge that Bodden was using PCM documents. The case report makes for an interesting read.

The awards themselves against Topdot and Boddon were not large. PCM prevailed against Bodden in the amount of $39,005 ($64,589.20 after interest). PCM prevailed against Topdot for $12,279, which was doubled to $24,558 under Chapter 93A, which became $31,773 with interest. The bigger award was the attorneys’ fees and costs award against Topdot of $88,170.57.

That comes to a total of $184,532 against Topdot and Bodden for their use of PCM’s trade secrets. Not to mention the costs that they incurred on their own attorneys and other legal costs, which could bring the total exposure to a quarter million dollars.

If you have any questions regarding how to protect your trade secrets, what to do if a former employee is using your trade secrets, or how to make sure a new hire is not exposing your company, call me, Adam P. Whitney, at 617.338.7000.

Findings of Fact, Rulings of Law, and Order for Judgment

You’re Damned if You Don’t Get Legal Advice Before Making Your Employees Pee in a Cup

Posted: March 21, 2011 in Choosing a Lawyer, Disability Liability, Hiring and Firing, Personnel Policy Fun, Privacy, Drug Testing, Etc.
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Most employers I have spoken with mistakenly believe that any employee can be tested for drugs. Nothing is that easy, especially in Massachusetts. If you want to minimize exposure (to legal liability, that is), you had better have a policy that is narrowly tailored and carefully crafted.

That is because Massachusetts is tougher on employers in this regard than other states are. In Massachusetts, an overly broad drug testing policy will subject the employer to liability for invasion of privacy and, if an employee is terminated for refusing to be tested, possibly for wrongful discharge. The Massachusetts Supreme Judicial Court ruled that peeing into a cup is a private act (yes, judges think about such things) and that your medical information is also private.

This is another area of the law where the employer may have to treat individual employees differently. For example, an employer would be justified to test employees who drive a company vehicle for many miles per year (under certain federal statutes, such as the trucking industry, drug testing can be mandatory; this trumps state law). Also, an employer would be justified testing employees where their jobs are such that being under the influence of drugs would pose a danger to themselves and/or the public. But for other employees who just sit in an office, their privacy interests may outweigh the employer’s interest in a drug-free workplace.

There are several other factors to consider when drafting a drug testing policy. Thus, an employer must retain a knowledgeable employment lawyer. The dollars that you spend on the drafting end could save you tens of thousands for what you might spend on the litigation end if you are sued and have a poor policy. Self-serving? Definitely. But in reality, most employers decide against drug testing after they learn the legal issues involved.

By Adam P. Whitney, 617.338.7000.

You’re Damned if You Don’t Consider the Costs of Litigation

Posted: March 15, 2011 in Choosing a Lawyer
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Businesses that can afford them must decide whether to use the Big Boston Law Firms (“Biglaws” for short) for their legal work. This is an easy choice for large businesses. For the most part, the Biglaws do excellent legal work. They have excellent reputations and customer relations and a wide range of resources and expertise. The in-house counsel or manager that chooses the Biglaws for legal work insulates himself or herself from internal criticism. Even if the result is not satisfactory, no one can blame the in-house counsel or manager who hired a top firm.

A recently reported case from the Business Litigation Session, Brooks Automation, Inc. v. Blueshift Technologies, Inc. 2006 WL 1537520, *1 (Mass.Super.) illustrates both the excellent work that large firms do, and the staggering amount of legal fees and costs that a client can incur. We know this because the prevailing party filed an application with the Court for an award of fees and costs (the prevailing party won on a c. 93A claim, which allows for the recovery of fees and costs). It sought $873,830.50 in attorneys’ fees and $88,222.25 in costs, for a total of $962,052.75. The Court awarded the fees and costs. It reasoned that the attorneys were well qualified and did an excellent job on an important legal matter for their client.

The judge had some other interesting observations:

“To be sure, there are certainly able, smaller, purely local law firms that could have represented Blueshift in this action, perhaps at a lower price. Yet, it would have been difficult for a small law firm to devote the quantity of resources needed to be devoted in a short time frame to obtain the result that [the Biglaw] was able to produce for Blueshift.”

I agree with the judge that there are able, smaller law firms that could have represented Blueshift well. But this litigation, compressed into a short time period, apparently required a massive amount of lawyer and paralegal time. The judge is right that it would have been difficult for a small firm devote the sheer quantity of resources. Thus, in the Blueshift case, the client was well served to retain a Biglaw (especially since the opponent had to pay the legal fees). However, the vast majority of business and employment law cases do not need such a massive amount of resources in such a short time.

The judge had some other interesting observations:

“Certainly, in some cases, the number of attorneys and staff who billed time in this case on behalf of Blueshift-ten attorneys, a senior litigation technology specialist, a paralegal, and a case assistant-would be excessive or inefficient, but this Court does not find that it was here. To be sure, the billing rates charged by all the attorneys and paralegals are large, but they are roughly the median charged among comparable large firms with Boston offices, and therefore reflect approximately the “going-rate” in the large firm attorney market. To characterize these attorneys’ fees as “unreasonable” simply because they are expensive would be a moral judgment, not a market judgment. By analogy, it may seem crazy that a utility infielder in major league baseball earns $1.5 million per year while a Superior Court judge earns $112,000, but that does not mean it would be unreasonable for a baseball team to pay that amount. Indeed, an arbitrator may justly find that the ballplayer is “entitled” to that amount if his salary is determined by arbitration. The $600 per hour billed by [the senior attorney] is certainly a great deal of money, but it is comparable to that billed by other lawyers in Boston of his ability and experience.”

There you have it. $600 an hour is the going rate for an experienced Biglaw lawyer. Some charge more, some less.

By contrast, you can find very good business litigators for $200-$300 an hour in smaller firms, especially outside of Boston, and for $300 – $350 inside Boston. Hiring a less expensive lawyer can work to your advantage if your opponent hires a Biglaw. If you know that for every $1,000 in legal fees that you spend, your opponent is spending $2,000 or $3,000, you have an advantage. For example, there may be much more pressure on your opponent to settle the case rather than incur more legal fees.

In any event, small and medium size businesses should recognize that litigation can be very expensive and choices of which counsel to hire should be considered carefully. Some clients think that if they hire a Biglaw, it will immediately bring their opponent to its knees (the “my lawyer can beat up your lawyer” approach). This rarely happens in reality. And if it doesn’t, get ready to open your checkbook. Or, find a less expensive lawyer who can handle the matter more cost effectively.

By Adam P. Whitney, 617.338.7000.

You’re Damned if You Don’t Respect Corporate Formalities

Posted: March 15, 2011 in Choosing a Lawyer, Corporate Formalities, Lawsuits
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Business people who incorporate often think that the corporate form protects them from lawsuits. That is true only to a point (you are not protected for wrongful acts that you personally commit), and only if you respect corporate formalities. If you do not, you could unwittingly be inviting personal liability, or liability for a parent or sister company. The whole point of incorporating (including forming an LLC) is to limit exposure for that specific corporation. But your effort to limit exposure doesn’t end on the date of corporation. Even taking simple steps can go a long way toward limiting this exposure. Here are some simple things you can do.

1. When you sign any contract, proposal, purchase order, invoice, letter, etc, be clear that you are signing in your corporate capacity. Don’t ever simply sign “Joe Smith.” If you do, you could get personally sued and your opponent will claim that they thought they were doing business with you personally. The claim could be total b.s., but shame on you for exposing yourself like that. How should you sign it? Easy: “Joe Smith as President of J.S. Corp.” You can even add “and not personally,” to make it clear. In fact, your company should be clearly identified as the contracting party.

A short war story makes the point. I defended a law suit a few years ago where three business people started a business, duly incorporated their new business, and hired a contractor to put up a substantial commercial building. The owners then did not heed the above advice; they referred to one another as “my business partner.” The also failed to make clear that contracts were in their corporate capacity. When the corporation eventually ran out of funds, the contractor sued the business “partners” personally, claiming that he thought it was a partnership and did not know about the corporation. The claim had enough traction to make it all the way to a jury trial. We convinced the jury that the contractor knew who he was dealing with because he received checks from the corporation and some of his own invoices listed the corporation. But you don’t want to rely on a jury’s good judgment.

2. If you operate more than one corporation, such as a parent or sister corporation, or even if you have corporate partners, be very clear with whom a third party is contracting. Do not use shorthand names to describe your company. Make it clear to corporate partners and clients that each corporation is separate and one cannot bind the other, and that a contract with one does not bind the other. How you do this in practice depends on precisely how you do business.

Another short war story makes this point. I defended a company called Jones Plumbing Systems, Inc. (names changed to protect the innocent). The owners of Jones Plumbing Systems, Inc. decided to go into business with a supplier named Smith, and together they formed a new corporation called Jones Plumbing Supply, Inc. All well and good. To give the new company some recognition, they referred to the two companies collectively as “Jones Plumbing Group.” This would not really be a problem if they had followed Rule No. 2. However, Smith got sloppy and started entering contracts as “Jones Plumbing Group,” even though it was not a legal entity. Smith turned out to be a poor businessperson, and the owners of Smith Plumbing Systems cut their ties with him. However, the damage was done. Jones Plumbing Group could not pay its debts, so a creditor sued Jones Plumbing Systems, Inc., claiming that it thought it was doing business with Jones Plumbing Systems, or with a joint venture called Jones Plumbing Group. Here, the jury found for the creditor, undoubtedly thinking that this was merely a corporate shell game on behalf of Jones Plumbing. We were able to convince the trial judge that Jones Plumbing Systems committed no violation of c. 93A, so the damages were limited to single damages and the plaintiff had to pay its own attorneys’ fees.

3. Follow corporate formalities. There is a theory in Massachusetts and other states called “piercing the corporate veil.” That’s a fancy way of saying that a plaintiff can get at the assets of a stockholders or a parent corporation if the corporation did not follow corporate formalities. This theory is too complicated to explain in detail here, but generally you need to make sure that you are keeping business accounts separate and not commingling monies or assets, that the corporation has adequate insurance or assets and is not just an empty shell, and that you keep corporate records and books like one would expect of a corporation. There are twelve factors in all that a court will look to, but the key is whether the corporation is a sham and has perpetrated some wrong or fraud on a third party.

By Adam P. Whitney, 617.338.7000.