Avoid Business Litigation With These Six Steps

Business litigation is an expensive use of both time and money and should be avoided whenever possible. Even the most favorable of settlements can cost a business months—if not years—of productivity and focus.

To avoid the high costs of litigation, follow these six preventive steps:

  1. Don’t skimp on contracts. Instead of spending a fortune on legal fees when facing a lawsuit in the future, make a smaller, smarter investment in solid contracts and getting clear on agreements up front, in the present.
  2. Audit your insurance policies. Ensure that you have the breadth and depth of coverage your business needs to be protected. Consult with us to help you  decipher how to protect your business best using the right kinds and types of insurance, so that if a lawsuit does happen, you aren’t footing the legal bill.
  3. Keep good records. Simply producing key documents can easily thwart expensive, time consuming lawsuits. Keeping excellent records now can help save money on future litigation. Ask about our LIFT records binder to support you in keeping the right records, and letting go of the rest.
  4. Hire, train, and manage your staff with processes and procedures that mitigate the risk of future lawsuits.
  5. Be proactive. Small disputes can quickly turn into full-blown suits. Deal with minor disputes early to avoid a trip to court. Contact us at the first rumblings of a disgruntled client, vendor or partner.
  6. Only enter into win/win agreements. Commit to caring as much about the outcome with the person you are contracting with as you do about the outcome for yourself. We can help you with that when we are working with you to strategize the documentation of your agreements.

With careful preventative planning, you can safeguard your business against unnecessary and costly litigation.

Protecting your business and your time is a strategic and valuable practice. If you’re ready to take the next step toward preventative planning, start by sitting down with us. As your Business Lawyer, we can guide you in making the difficult decisions you face every day as a leader in business, including how to safeguard your business against legal risks. We look out for your business’s future, so you have time and energy to focus on growth and expansion.

This article is a service of Gratia P. Schoemakers, Estate and Business Attorney. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Call us today at 832.408.0505 to schedule.

Can I Force My Employees to Arbitrate Our Disagreements?

Many employers ask what they can do to avoid lawsuits. One of the best ways businesses can be more proactive in avoiding legal disputes and their attendant costs is to implement arbitration clauses as part of their employment contracts.

Arbitration has traditionally been viewed as less expensive than litigation. While that’s not necessarily true in every case, arbitration certainly has its advantages, such as:

  • expediency;
  • increased likelihood of preserving relationships;
  • confidentiality; and
  • control.

Arbitration is often resolved much more quickly than litigation. As new employment laws and ordinances are enacted, litigation increases. There is a correlation there. And employment litigation can be particularly time-consuming because of the plethora of documents and opinions involved.

In an arbitration, however, the parties can streamline the process and resolve differences more quickly than they would in litigation. Remember, time is money, so an important advantage of arbitration is facilitating quicker and cheaper dispute resolution.

Arbitration can also be advantageous when an employee involved in the dispute is still employed. Because arbitration is less formal and the parties know they need to continue to work together, arbitration can be more successful than litigation at preserving and continuing relationships.

A third advantage of arbitration is that there are no public pleadings filed at courthouses. The proceedings are private, which can help preserve a company’s reputation and the building blocks of its business.

Arbitration also gives the parties more control over the proceedings. Depending on how the arbitration agreement is laid out, the parties can choose the arbitrator or arbitrators, as well as the processes for discovery and evidence. Again, this can be very important in helping to reduce the time and costs of disputes.

States generally allow employers to include an arbitration clause in employment agreements, as well as freestanding arbitration agreements. Some states, however, will scrutinize these clauses more than others.

Generally speaking, arbitration clauses must be viewed as fair to all parties to be enforceable. This basically means that the rights given to the parties must be balanced. If an arbitration clause gives an employer greater rights than an employee, it may very well be invalidated by the courts. In such a case, the employer would lose the benefits of the arbitration provision.

As your  Creative Business Lawyer®, we will work with you to ensure that the agreements your employees sign have the best employment arbitration provision for our state laws.

As part of a comprehensive LIFT Audit, we will review not just your employment agreements, but all agreements your company makes with vendors, clients, and others in support of your business. In addition, we review your insurance, financial systems and tax strategies. Call today to get your Audit scheduled.

This article is a service of Gratia P. Schoemakers, Creative Business Lawyer®.  We offer a complete spectrum of legal services for businesses and can help you structure your operations for success. One of our primary services is a LIFT Start-Up Session,™ in which we guide you through the right choice of business entity, location of business entity, start up agreements, intellectual property protection, employment structuring, insurance, financial and tax systems you need to start your next business and succeed right out of the gate.  Call us today to schedule a time to have a conversation!


Learn from LinkedIn: Avoiding Anti-Spam Laws in E-mail Marketing

If you follow business news, you have probably heard about the challenges to e-mails associated with LinkedIn’s “Add Connections” feature. LinkedIn is a social network for business. In Facebook, adding people to your network is known as “friending”; in LinkedIn, it is known as “adding connections.”

What Did LinkedIn Do?

The complaint against LinkedIn alleged that the company accessed its members’ e-mail accounts to aid users in making connections on the service. During the relevant time period, LinkedIn asked for member permission to access e-mail when the member asked the company to add another user as a connection. LinkedIn thereafter sent out two reminder emails if the connection did not respond to the first.

Throughout the lawsuit, LinkedIn denied that it did anything contrary to the law. However, the court found that while LinkedIn had obtained member permission to the send the first “Add Connection” request, it did not have consent to use the member’s email to send the two reminder emails.

LinkedIn agreed to settle the case for $13 million. It also agreed to update its privacy policy.

What Can I Learn from the LinkedIn Settlement?

The key takeaway from a business perspective is that running afoul of anti-spam laws can be very costly. Business owners should be aware of several strict requirements Federal laws place on commercial e-mail use:

  • No false headers allowed;
  • No misleading subject lines;
  • Advertisements must be labeled as such;
  • E-mails must include a physical address;
  • Opt-out mechanisms must be clearly stated;
  • Unsubscribe requests must be timely honored; and
  • Commercial e-mail advertisers are bound by the activities of their contractors.

State laws often place additional requirements on users of commercial e-mail. Those requirements vary by state.

This article is a service of Gratia P. Schoemakers, Creative Business Lawyer®.  We are well-versed in the federal and state laws that apply to businesses, including those governing the transmission of commercial e-mail. Make an appointment today to discuss any questions you have about your e-mail marketing program, or schedule a LIFT Start-Up Session™ (or LIFT Audit™ if your company is established), which includes employment structuring, financial, and tax systems you need for your business.

Can Your Company Actively Avoid The Affordable Care Act?

If you have more than 100 employees, Affordable Care Act requires you to provide health insurance coverage to your full-time workers. On January 1, 2016, the threshold drops to 50 employees or more. The Act defines full-time employees as those working an average of at least 30 hours per week.

Can You Avoid the Requirement By Just Having Part-Time Workers?

Many restaurants, wishing to avoid the ACA requirement of providing health-coverage, have lowered the hours of employees across the board to bring them under the 30-hour limit.

The Dave and Buster’s restaurant chain has been sued in a class action by employees whose hours were reduced to avoid providing health care coverage. The thrust of the complaint is that the reduction violates the Employment Income Security Act (ERISA), which governs employer-provided health insurance as well as retirement plans. ERISA makes it unlawful for an employer to interfere with any right that a plan participant is entitled to under the Act. The suit alleges that the reduction in hours constitutes interference.

Until the Court’s Rule …

If your company has more than 100 employees or  meets the upcoming 50-employee ACA requirement, you will want to carefully assess your staffing plan with the assistance of experienced counsel. We can consider the solution that aligns with the law and meets your company objectives. If you are not an existing client, contact us for a LIFT Foundation Audit where we will review all of your legal, insurance, financial and tax systems and find places you can save money and shore up the foundation to earn more. If you are an existing client, and have more than 50 employees, call to schedule a ACA review and audit today under your membership plan.

Be Careful: Court Ruling Makes Data Breach Lawsuits Much Easier

Do you collect, store and use client and prospect data as part of your business? If so, you must know and follow the rules to keep your business safe from an expensive, unnecessary lawsuit.

Data breaches involving retailers and Internet services are common these days. Naturally, litigation has followed. Breaches involving such notable companies as Target, J.P. Morgan, Home Depot, and Sony have resulted in federal lawsuits claiming that the theft or exposure of private information caused harm to those whose information was compromised.

Federal courts dismissed early data breach cases, finding a lack of standing. This means that the courts found that the plaintiffs who filed suit had suffered no injury to warrant a lawsuit, as required by Article III of the U.S. Constitution.

In later years, however, the tide started to turn in the other direction when, in 2007, the Seventh Circuit Court of Appeals found that a threat of future harm could meet the injury requirement. The Ninth Circuit followed that lead in a case against Starbucks in 2010.

In 2013, the U.S. Supreme Court clarified the standard, ruling that threatened injury must be “certainly impending” to constitute an injury sufficient to support a lawsuit.

Since the Supreme Court’s decision, federal courts have struggled to define the level of necessary injury to support a valid data breach claim. In the Seventh Circuit, cases against Barnes & Noble and Neiman Marcus were both dismissed for lack of standing. The Ninth Circuit, however, did not abandon its position that a threat of future harm could meet the injury-in-fact requirement. In a case against Sony, the U.S. District Court for the Southern District of California found that the allegations of Sony’s collection and subsequent disclosure of personal information was sufficient to establish standing.

Most recently, in July 2015, the Seventh Circuit came full circle when it reinstated the previously dismissed class action against Neiman Marcus. In doing so, the appeal court held that there was a non-speculative, substantial risk of future harm.

What does this mean for you and your business? It means that you must follow established industry standards relating to the collection, use, and storage of data.

A Creative Business Lawyer can help you protect the confidentiality, integrity, and accessibility of data you collect. Make an appointment today to discuss any questions you have about data breach avoidance, or schedule a LIFT Start-Up Session, which includes employment structuring, financial, and tax systems you need for your business.

Chuck E. Cheese Settles Background Check Case for a Lot of Dough: What Does It Mean for Your Business?

After a major class action settlement earlier this year, business owners may no longer think first about pizza when they hear the name “Chuck E. Cheese’s.” CEC Entertainment, the formal name of the pizza and entertainment chain, paid $1.75 million to settle a class action lawsuit challenging its use of background checks in hiring.

What Was the Lawsuit About?

The plaintiffs alleged that Chuck E. Cheese’s hiring process violated the federal Fair Credit Reporting Act and related state law. These laws provide that disclosure and authorization forms for background checks be (1) clear and conspicuous and (2) in a stand-alone format. The laws also require that additional disclosures be provided to those who suffer adverse hiring actions as a result of the information received in background checks. Violations of these laws can subject employers to actual damages between $100 and $1,000 per violation, as well as punitive damages, attorney fees, and costs.

The certified class consisted of over 28,000 applicants to Chuck E. Cheese’s restaurants. The central claims were that the authorization form was improperly incorporated into the employment application along with other items in the hiring package. In addition, a subclass was certified that consisted of over 400 applicants who suffered adverse actions, such as the loss of job offers, due to information received in their background checks.

What Was the Settlement?

The settlement requires the company to pay up to $1.75 million to the class members. The main class members will receive approximately $38 each; the subclass members will receive about $63 each. In addition, Chuck E. Cheese’s agreed to change its background check and authorization forms prospectively. A federal judge has approved the proposed settlement.

What Can Business Owners Learn from the Lawsuit?

Although the dollar value provided to each class member was somewhat insubstantial, this settlement demonstrates how quickly damages can add up. Basic background check law is reasonably clear and easy to follow.

  • Make background check disclosures and authorizations clear and conspicuous;
  • Ensure disclosures and authorizations are not combined with other documents;
  • Do not add to disclosure and authorization forms, such as by inserting certifications, releases, or continued consent to ongoing background checks.

In addition, if you are going to take an adverse action against an applicant because of information you receive during a background check, make sure you provide the additional disclosures that are required by law.

Creative Business Lawyers are well-versed in the federal and state laws that apply to businesses, including the Fair Credit Reporting Act. Make an appointment today to discuss any questions you have about background checks, or schedule a LIFT Start-Up Session, which includes employment structuring, financial, and tax systems you need for your business.

Five Steps You Can Take Now to Be Ready for Litigation

In our world of electronic communication, your business needs to be prepared to handle a major risk of litigation in which you could be responsible for producing records, reports and data from your computer network and systems.  Electronic discovery could cost your business tens or even hundreds of thousands of dollars, if you are sued.

Find Out What Your Business Owns and Where It Is Stored

To begin with, knowing who uses your company assets can make dealing with electronic discovery issues much simpler. Create and maintain a list of the equipment and devices each employee uses, as well as the hardware and software used to do business. Make sure you know what data your business owns, where it is located, and what backup procedures are in place. Gathering this information is the first, critical step in preparing for electronic document production.

Create a Litigation Plan

Litigation is reasonably anticipated (because a complaint is filed or you receive a demand letter), you  have a duty to preserve relevant documentation. To meet this duty, your business will need a plan to identify potentially relevant documents; to preserve those documents; and to suspend any routine destruction of documents. This is typically accomplished through a litigation hold, which is issued by your lawyer to those employees who are likely to have relevant information. Email can be particularly cumbersome due to its sheer volume, its routine destruction, and the fluidity and informality with which it is used.

Create or Revise Your Document-Related Policies

Ensure that your document-related policies are not stale. Work with your information technology staff or a consultant, as well as legal counsel, to incorporate electronic documents into these policies. Your policies should detail who owns the data and lay out rules relating to the creation, communication, and storage of data. They should also address employer expectations regarding social media, as well as the use of personal devices and accounts for business purposes. We can help ensure these policies are legally compliant.

Educate Your Employees

Once your litigation plan and policies are set, it’s time to educate your employees. Most employees are conscientious and don’t want to do anything to harm their employers’ interests. However, lawsuits can be intimidating, and often, employees feel that their expectations are unclear.

Provide a question-and-answer session or a presentation for your employees to talk about your new document-related policies. Discuss the potential adverse consequences to the company of failing to preserve documents or of failing to suspend automatic destruction. We can advise you regarding the most critical points to include.

Discuss Potential Litigation and Planning with Your Lawyer

Many of the items above can best be achieved working with a lawyer who understands and cares about your business. As a Creative Business Lawyer(r) firm, we  develop  proactive relationships with our clients, which means working with us is like having General Counsel on your team.  If you have not had a comprehensive review of your legal, insurance, financial and tax systems recently, give us a call to schedule a LIFT Foundation Audit. During your audit, we’ll identify any holes in your systems and design a plan to fill them so you can focus on growing your business at the maximum of impact and income with minimal risk to you and your family.

Call today to make an appointment with a Creative Business Lawyer. We offer a complete spectrum of legal services for businesses and can help you make the right selection. We also offer a LIFT Start-Up Session, which includes employment structuring, financial, and tax systems you need for your business.

Alternatives to Trial: Alternative Dispute Resolution

If you are involved in a lawsuit, the thought of going to trial may be intimidating. Many people have never been in a courtroom, so they envision a large, formal room with wooden trim, an overbearing judge in a long, black robe, and a jury that appears condemning. Most lawsuits, however, never go to trial. Instead, they are settled through “alternative dispute resolution,” known as ADR, for short. ADR just means that different methods are used to resolve legal disputes, rather than a traditional trial. The most common forms of ADR are mediation and arbitration.

Mediation: A Discussion About Common Goals

Perhaps the most common form of alternative dispute resolution is mediation. In mediation, the people involved in the lawsuit, known as “parties,” choose an independent person, known as a “mediator,” to help explore solutions to their dispute. The mediator’s job is to help the parties see the strengths and weaknesses of their respective positions and to help them find common ground.

Before the mediation, the parties (or their lawyers) usually give the mediator copies of important documents, as well as summaries of how they see the case. This allows the mediator to prepare for the mediation by understanding what happened, as well as each party’s legal position.

On the day of the mediation, the parties and the mediator meet in a common location, often the office of the mediator or one of the lawyers. Most mediators begin by giving everyone an overview of how the mediation will work. Some even ask the parties to talk to each other before they begin, just to introduce themselves and perhaps explain the basics of their positions.

However, at some point, it is likely that the parties will be placed in different rooms.

After the parties are separated, the mediator visits each room. This gives the parties an opportunity to explain how they view the case in more detail. It also gives the mediator the chance to ask questions and to point out weaknesses in their cases. The hope is that the mediator can help the parties see their cases more realistically. Sometimes, the mediator may go back and forth between the parties several times, and usually, at some point, settlement amounts will become part of the discussion.

The great thing about mediation is that it is nonbinding; in other words, the parties get to decide whether to settle. Although they may feel pressured to do so to avoid the cost and worry of going to trial, the mediator cannot make them.

Arbitration: A Miniature Trial

Arbitration is more formal than a mediation but less formal than a trial. Arbitration is typically used because it is required by a contract between the parties, such as an employment agreement, a rental agreement, or even a credit card agreement. The arbitration clauses in these agreements usually require that binding arbitration. With binding arbitration, the parties are typically stuck with whatever the arbitrator decides. In fact, the binding nature of most arbitrations is what sets them apart from mediation.

Arbitration is a lot like a miniature trial. The parties may select the arbitrator, or an agreement between them may spell out how an arbitrator is to be selected. For example, many collective bargaining agreements, which set forth how labor unions and employers will work together, may name a certain organization of arbitrators to be used or describe how an arbitrator will be selected.

At an arbitration, the parties can put on evidence, much like a formal trial. They can call witnesses to testify and submit documents for the arbitrator to consider. Ultimately, however, the final decision on the case is in the hands of the arbitrator. These decisions usually cannot be challenged except on very limited grounds.

If you are in need of a trusted legal advisor for your business, contact a Creative Business Lawyer today. We believe that every business should have a close relationship with its lawyer to discuss any legal question that might arise.


What Happens When a Goliath Takes Your Trademark

Terri Kelly, a mother of six who started her “second life” as an entrepreneur designing comfortable flip-flops, did everything right when she launched her company.  First, she designed a great product that addressed a market need.  She worked tirelessly to get her product into shops, boutiques and local stores.  And she trademarked her unique branding statement:  “Yoga Pants for Your Feet®”.

So imagine her dismay when she learned that billion-dollar shoemaker Skechers was using her trademarked term to market their Stretch Fit sneakers nationally.

Terri’s story, which appeared recently on Savor Magazine’s Savor the Success blog, is an entrepreneur’s nightmare, a real David vs. Goliath conundrum.  Billion-dollar companies have lots of financial resources to wage a legal battle, while entrepreneurs like Terri do not.  Still, Terri knew in her gut that the right thing to do was fight back.

She started by having her attorney draft a cease-and-desist letter.  Unfortunately, it was ignored and Skechers continues to use her trademark, according to the blog.

Terri then turned to her mentor, Savor Magazine editor-in-chief Angela Jia Kim, for advice and this is what Kim told her:

“Terri, what would you advise your daughter? What would you tell her to do if a billion-dollar company used her trademark that she fought for? This is bigger than you, Terri. You will be fighting for so much more than you. This may be your life’s calling. How many of us entrepreneurs back down from bigger companies, more powerful businesses because we don’t have the resources, the energy, or the money to fight them? I’ve been there. So many entrepreneurs have been there. And now you are HERE. You are leading the torch for small companies to stand up for themselves, because having someone else use your Trademark is not fair.”

On May 13, 2015, Terri filed suit against Skechers to protect her trademark.  According to the blog, Skechers said,

“While we ordinarily do not comment on pending litigation, this warrants a response. Skechers categorically denies the allegations, and believes this case is nothing more than an attempt to trade on Skechers’ long track record of success. We look forward to vindicating our position in court.”

Terri Kelly did many things right to protect her intellectual property.  First, she protected her brand by registering for a trademark.  When she learned of the infringement, she took immediate action with a cease-and-desist request.  When that didn’t work, she mustered up her courage and filed a lawsuit to protect her fledgling company.

Terri is also harnessing the power of social media for her cause.  On her blog, she wrote:

“My wallet is very small. But my will is very large. That is my trademark and I am going to fight for it. Please support me by using the hashtags #defendourtrademarks #skechers and send a message to Skecher’s that just because they are big does not mean they have the right to grow their company by using someone else’s idea, which happens to be protected.”

As a result, people have begun boycotting Skechers and even returning products they bought there.  We’ll keep you posted on what happens with this case. In the meantime …

Your business ideas and brand are important property worth protecting.  If you are interested in learning more about intellectual property protection strategies, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.



How to Keep Suppliers From Putting Your Business at Risk for a Data Breach

Two major retailers that suffered a major data breach affecting millions of customers – and their bottom lines – have one thing in common: both got hacked through their vendors.

Home Depot’s security system was breached by a hacker that stole credit card details and emails for over 56 million customers. The hacker gained access by using password information belonging to a Home Depot vendor. Target had credit card and personal data belonging to more than 70 million customers stolen after a hacker used the company’s heating and cooling vendor to access Target’s system.

A recent case study by compliance program provider The Red Flag Group in Compliance Insider laid out a six-step process to help companies manage supply chain risk:

  1. Collect data on suppliers. Review and assess each vendor as to performance and business necessity.
  2. Validate your data. Check records and references provided by vendors and interview their staff. Review each vendor’s processes for protecting client data, then assign a risk score based on the data you collected on each vendor.
  3. Rank the risk. Take the knowledge you have gathered and compare the risks against industry data, then rank each vendor as to risk accordingly.
  4. Apply risk management controls. Implement internal and external risk management procedures and policies to ensure ongoing compliance.
  5. Manage the relationship. Create training programs for vendors based on your own compliance program and monitor your transactions with each vendor.
  6. Continuous reporting and monitoring. Document all the information you have obtained in a dedicated “virtual data room” for all suppliers. Build continuous monitoring, review and reporting into your compliance process.

We can help you keep your company in compliance through effective risk management. Call our office to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.