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Frequently Asked Questions

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Lawsuit/Dispute FAQs

I’m in a dispute, and the other guy’s threatening to sue me. I’ve got some dirt on him, though, and if he doesn’t back off, I’d like to share it with the world. Should I do it? Should I at least threaten to do it?

No and no. Let’s forget for a moment that what you’re proposing isn’t very nice or ethical – and that your participation in such a scheme could end up hurting your reputation.

Your spreading of rumors could very well lead your adversary to file additional claims, such as one for libel (written defamation) or slander (spoken defamation), against you. Even if you were to successfully defend yourself in court against these claims – and there’s no guaranty that you will – is it worth the litigation effort and expense?

A threat to reveal embarrassing information might be even worse, as it could even subject you to criminal charges of blackmail.

A lawyer sent me a notice saying that her client’s seeking an “injunction” against me. What’s that all about?

An injunction is a type of court order in which someone is directed to either do something (other than pay money) or refrain from doing something. If you look a little more carefully at the papers, you should see specifically what the other party wants to order you to do (or stop doing). For example, a business competitor might be requesting an order forbidding you from using certain trademarks that it claims look confusingly similar to its own. Or the competitor might be seeking an injunction requiring you to stop using some of its protected trade secrets.

You’ll have a chance to argue against the injunction. If the court ultimately issues it, though, you’ll have to obey it. Otherwise, you could be held in contempt and punished for defying the judge.

Clear communication is something I appreciated in working with David. I can say that he wasted no time in working with me on clearly defining that goal, devising a set of strategies, and was quite flexible throughout the process. – E.L.

I got served with a Summons and Complaint. It turns out that one of my former vendors is suing both me and my closely held corporation. Can I represent myself and the company?

You can represent yourself, but whether you can represent the company depends on the laws of the jurisdiction you are in. It’s very likely, however, that the company will be required to have attorney – and that your attempt to represent your company in court would be viewed as the unauthorized practice of law.

If we win this lawsuit, will the other side be required to reimburse us for all the legal fees we incurred?

That depends. Sometimes the parties have contractually agreed in advance that the lawsuit’s “loser” will pay the winner’s attorneys’ fees and legal costs. Other times, a specific federal or state law (e.g., a law forbidding racial discrimination) will say that someone who successfully sues for violation of that law is entitled to an award of fees and costs. Or, in the unusual event that the court opts to punish the other side for raising frivolous legal claims/defenses or for using bad faith tactics during the conduct of the case, it might payment to you of some or all of your fees or costs. Unless one of these exceptions applies in your situation, though, you’re probably out of luck.

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Business Law FAQs

I intend to do business with people I know, like, and trust. Is a written contract really necessary?

Absolutely. Written agreements aren’t only for the distrustful, and they’re more than just shields against bad behavior. In fact, good, honest people get into genuine business disputes all the time. A well-written, well-thought-out contract can ensure a true “meeting of the minds” and therefore help prevent misunderstandings. The document also can be used as a future reference point to resolve disputes before they grow ugly and costly.

No offense, but I hate wasting money on you bloodsucking lawyers. If I have to use a written contract, can’t I save legal fees by just ordering an online template and filling in the blanks?

No offense taken. And sure, you can just order a form, fill in the blanks, and hope for the best, but that doesn’t mean youshould. In fact, your proposed approach can be dangerous.

Law isn’t always as “common-sense” and one might believe, and an uninformed choice of contractual wording can lead to unintended, unforeseen consequences. Similarly, even well-educated, professionally accomplished laypersons are usually unable to catch the absence of key contractual language. Finally, a template might not take into account the laws of your particular jurisdiction. Indeed, one size does not fit all. While a template might provide a good starting point, an attorney’s the one who can ensure that it’s appropriate to your existing and potential situations.

By paying competent counsel at the outset, you could save yourself a lot of money and heartache in the long run.

We’re family-owned. Can’t we forego creating a formal business entity, which seems like a big to-do about nothing?

That’s not a very good idea. In addition to possible tax consequences (which you should discuss with your accountant or tax attorney instead of us), foregoing an entity means exposing your personal assets to greater risk. In short, you usually won’t be held personally liable for the mistakes of your closely held corporation or LLC. (Note that there are exceptions to this rule.) Without an entity, though, you’ll personally be responsible for your “business’s” errors, and your personal assets – as opposed to assets owned by the “company” – could be used to satisfy an unpaid judgment against you.

…[W]e thank you for your wisdom, direction and calm approach to what seemed to be a very difficult issue at the time, you’re the best! – J.D. (Business Owner)

We want to start doing business with Company X, but it’s under an exclusive contract with a competitor of ours. What if we just try to convince Company X that violating the contract and doing business with us instead will be worth the risk of litigation?

If you do this, your competitor might sue you and win. Someone who knows of a contract between two others and intentionally convinces one of those parties to breach it could be held liable for “tortious interference with contract.” And in some circumstances, the “interferer” could even face greater liability than the breaching party.

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Franchise Law FAQs

What’s a Franchise Disclosure Document?

Before a new franchisee signs a Franchise Agreement or pays any money to the franchisor, the franchisor must provide him/her with a Franchise Disclosure Document, or “FDD.” The FDD, which is mandated by the Federal Trade Commission’s Franchise Rule and franchise registration and disclosure laws in certain states, is a type of prospectus specific to franchise offerings. (In fact, the predecessor to the FDD was called a “Franchise Offering Circular.”)

The document, broken into 23 different “items,” is intended to provide the prospective franchisee with information regarding the franchisor, the franchisor’s owners and officers, its existing and former franchisees, and the specific franchise opportunity being offered. Among other things, it should contain (i) information regarding the litigation and bankruptcy histories of the franchisor and its key representatives and employees; (ii) audited financial statements from the franchisor; (iii) general explanations of franchisee rights, performance obligations and restrictions, and investment requirements; and (iv) a copy of the proposed Franchise Agreement and related contracts such as software license agreements.

Very pleasant and so patient. I wish I had had [Dave] in the beginning to look over the agreement and be my legal guide. – P.W.

I received an FDD from the Franchisor. Can I be certain that it contains all the information I need?

No. Although the FDD contains a lot of information, the franchisor is not required to include every fact that might be relevant to your decision to purchase the franchise. For example, the FDD need not tell you the actual or anticipated earnings of an individual franchise (although a franchisor that otherwise makes such “financial performance representations” to potential franchisees must also include them in the FDD). Similarly, the FDD does not specifically describe what your day-to-day operating requirements will be, and those “system standards” tend to be extremely comprehensive. Regardless, system standards usually can be changed during the course of the franchise relationship at the franchisor’s whim – making the franchise relationship largely unpredictable anyway.

Further, while the Federal Trade Commission requires franchisors to prepare and use FDDs, the federal government doesn’t review the documents before they’re used. With a few notable exceptions, in fact, most of the state governments don’t review them, either. In most cases, the only time a franchisor can be held legally accountable for an inaccurate or incomplete FDD is after the fact – either through a lawsuit brought by a misled franchisee or through a governmental enforcement action (which is relatively rare).

Despite those significant limitations, an FDD can be a very informative document. Make sure you understand its contents before purchasing the franchise.

The franchisor’s representative made some oral promises that aren’t in the Franchise Agreement that he asked me to sign. He also told me not to worry about some of the document’s scary-sounding language – telling me that the company’s “legal department” had insisted on including this silly mumbo-jumbo. Can I safely rely on what he’s told me?

No. The Franchise Agreement almost certainly contains language saying that you didn’t rely on oral promises and that the terms written into the document represent the “entire agreement” between the parties. In the event of a later dispute, the franchisor is likely to “forget” having made those promises and rely on what’s actually written in the document. Moreover, the harsh-sounding language was put in the contract for a reason. If the business people didn’t think it was important enough, they would’ve overruled the lawyers and kept it out. (You also don’t know who will be making decisions for the franchisor in the future. The “future” franchisor decision-maker might be more enthusiastic about enforcing the agreement than the current one is.)

My franchised business is losing a lot of money, and franchise support has been almost nonexistent. Can I just fold up shop and go out of business?

Unless your particular Franchise Agreement expressly permits you to stop doing business at the time of your choosing – and it probably does not – shutting down without the franchisor’s permission is usually a bad idea. By doing so, you might end up being sued for enormous “future damages” – consisting of, among other things, royalties that you would have paid the franchisor if you had stayed in business. In addition, depending on the Franchise Agreement’s terms, you might also be held liable for the attorneys’ fees and costs that the franchisor incurs in going after you. (If you rent the franchised premises, you might also remain liable to the landlord for all future rent owed during the lease term.)

When a client of the Ross Law Firm seeks to exit a franchise system, we like to see if different options – involving either cooperation with the franchisor or possible legal claims against the franchisor – exist.

My franchisor unfairly found me in “default” and then terminated my Franchise Agreement. Can “corporate” really get away with that?

That depends on a number of factors. First, let’s assume that you really have been doing an admirable job running your business and meeting your obligations while the franchisor has saddled you with one unnecessary roadblock after another. Let’s also assume that your franchisor has an ulterior motive for pushing you out (such as the existence of a better financed, multi-unit owner who wishes to take your place).

Even with those assumptions, we’d need to look at, among other things, your Franchise Agreement, the Operations Manual, and the actual facts to see if the franchisor can make the case that you defaulted. Since Franchise Agreements tend to be extremely one-sided in favor of franchisors, there’s an excellent chance that the franchisor can “manufacture” a default against you.

We’d also need to see, though, if you have valid defenses and/or legal claims that you could assert against your franchisor. Note that, while most states will enforce unfair franchise contracts, some states have “franchise relationship” laws that forbid the franchisor to terminate without “good cause.”

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Employment Law FAQs

I need to give my key employees access to sensitive, valuable information such as customer lists, price lists, and business strategies. Is there anything I can do to prevent them from using this information to compete with me or sharing it with a competitor?

Yes. At the Ross Law Firm, we’ll sometimes help a client minimize the risk by preparing one or more “restrictive covenants” — such as a confidentiality agreement, a non-solicitation agreement, and/or a non-compete agreement — for the client to present to key employees for signature. Regardless of whether you use restrictive covenants, however, you should take clear steps to ensure that no one but the key employees can access the confidential information. Demonstrating your sincere steps to maintain secrecy could be important in order to later win a lawsuit for violation of a state “trade secrets” statute.

Our work environment is a fun one, and it can get rowdy. We – men and women alike – use salty language and make sexual innuendos. The only problem is that we’ve got a new employee who can’t take a joke. Can we just tell her to either lighten up or go to a work environment that’s more to her liking?

Not unless you want to defend a sexual harassment lawsuit. What you’re describing is a classic “hostile environment” harassment scenario. Your offended employee’s sensitivities probably won’t be judged in court (or in an administrative hearing) in relation to those of her co-workers. Rather, the question is whether the environment could be considered hostile to a typical woman of reasonable sensibilities.

If you like raunchy humor, use it with your friends – outside of work. If you’re looking to protect your business from liability, though, set some clear behavioral boundaries and then enforce them.

My employee complained about discrimination, but I don’t believe him. In fact, he seems like a real troublemaker. Can I just fire him?

If you do this, you’re playing with fire. A complaint of discrimination (including harassment) should be taken seriously – for both the employee’s sake and your own. Not only must management undertake a good faith investigation of the discrimination complaint, but it also must (i) take the necessary steps to rectify any discrimination that has occurred, and (ii) create an intelligent paper, or e-mail, trail of both the investigation and the resolution. Please note that even if the complaint turns out to lack merit, a decision to subject the complaining employee to termination, demotion or some other punishment could lead to liability for unlawful “retaliation” under anti-discrimination statutes.

I’m about to fire one of my employees, and I think she knows it. In fact, she’s been sending me e-mails containing false accusations against me. At this point, though, I’m inclined not to further inflame a bad situation. Should I just ignore her?

It depends on the circumstances and the particular allegations. It sounds, though, like she might be setting you up for a lawsuit of some sort, and your silence could come back to hurt you. In some cases, one’s failure to deny accusations could be interpreted by a court to be an “implied admission” that the accusations are true. The Ross Law Firm will sometimes help an employer decide whether and how to respond to an employee’s hostile correspondence.

The Equal Employment Opportunity Commission has notified me that a former employee has filed a “charge of discrimination” against my company. What does this mean for us?

Your employee claims that you violated a federal anti-discrimination statute such as the Americans with Disabilities Act, the Age Discrimination in Employment Act, or Title VII of the Civil Rights Act (which prohibits employers of a certain size from discriminating on the basis of race, color, religion, sex, or national origin). Before filing a lawsuit in court under one of statutes enforced by the EEOC, the employee or job applicant must file a notice with the EEOC and give the agency time to investigate and evaluate the case. The EEOC occasionally joins in and becomes a party to eventual litigation against the employer. Usually, though, it simply makes a non-binding decision and attempts to help the parties resolve the matter without involving the courts. If the EEOC has neither joined the case nor succeeded in resolving the matter, it will issue a “right to sue” letter that entitles the employee/applicant to file his lawsuit.

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