Business Law

Do lawyers cause lawsuits?

It is a topic that is stated expressly or implicitly all the time: Lawsuits happen (to frequently in many people’s opinions) because lawyers are riling up people to sue and then paving the road to court. When an apparently silly lawsuit is filed by a business I often hear “well, I guess the lawyers had too much time on their hands.” The tone of the comments about lawsuit-creating-lawyers is that society would be better off without lawyers.

I must admit when I started thinking about this topic it was difficult to get beyond the advertisements by lawyers that seek people harmed by prescription drugs, vasectomies and weight loss scams. Frequently seen during daytime TV and on billboards, these advertisements appear to be plaintiff-trolling – putting the idea of a lawsuit in people’s heads who might not otherwise have thought of it.

Lawyers do not cause lawsuits anymore than doctors cause arthritis. Do lawyers tell people about claims they might not know they had? Do corporate lawyers agitate in favor of litigation when a company’s rights are at stake? YES and YES. And it’s not a bad thing. Let me tell you why it is okay.

Attorneys advise, clients decide.

It is the lawyer’s role to advise their client, including advice on what the client’s rights are and how to protect them. This advice comes in the form of one-on-one consultations between high-powered corporate attorneys and the CEOs of companies. It also comes in the form of an advertisement by an attorney about the chance for victims of a defective prescription drug to be compensated for the harm they suffered. The principal is the same: the attorney provides the advice, discusses the alternatives and the client makes the decision about whether to file a lawsuit. Solid, reliable information is a positive thing.

There is power in numbers.

The mass-advertised lawsuit based on prescription drug defects provides a chance for people to recover for harm that they probably would never have had (due to a lack of resources). A lone individual has little chance to ever pay for or prevail against a giant prescription drug company, mortgage company or other mega-corporation.  The corporation has the resources and experience to make the process so difficult for the individual, that pursuing a lawsuit simply isn’t possible.  Of course, this statement is based on the assumption of two conclusions: (1) lawyers are only seeking and accepting clients who have a legitimate legal claim; and (2) clients are only seeking to be part of lawsuits where they sincerely and in good faith believe they have been harmed.

Our legal system is the worst one in the history of the world, except for all the others.

In other words, our legal system is the best thing going – it provides structure for people to settle disputes civilly, without violence and with a decent amount of predictability. It is not our legal system that is the problem, it is relatively infrequent cases of abuse of the system that are the problem. These few instances (think the grossly distorted McDonald’s coffee burn case from many years ago) receive all the attention rather than the infinitely larger number of times cases are resolved reasonably.

Do you think lawyers in general are the problem or are you willing to consider my position?  Let me know in the comments.

 

 

Posted by Shawn Roberts in Blogposts, Business Law

The Preventative Law Program (PLP)

Several years ago I came out with the Prevenative Law Program, which I cleverly nicknamed the “PLP.”  The goal was to increase people’s and business’s access to early legal help with a fixed costs and structure.  It wasn’t PrePaid Legal, my PLP was a direct relationship with my law firm and all the service someone would need in a variety of areas.  Prevention is favored in many other segments but not so much with law where the prevailing thinking is often “let’s deal with it when forced to deal with.”  One of the problems with this approach is that in many cases dealing with it when forced to is to late.

My marketing description of the PLP is at the bottom of this post.  I have not signed anyone up for the PLP and, probably due to this, I have not mentioned in years.  I would really appreciate your feedback on this idea.  What do you:

  1. like about it,
  2. not like about it,
  3. don’t understand about it?
  4. How could I improve it?

 

Posted by Shawn Roberts in Blogposts, Business Law

6 critical legal issues to consider when starting a new business

Amidst the adrenaline rush of creating a new business, there are several legal items I regularly discuss with people who are starting a business.  Below are six (6) critical items you need to consider prior to getting your business up and running:

  • Be an entity. You may have been called worse things, but this is actually not a slam. An entity, in this context, is structure that provides separation between you, your assets and your business. For example, a corporation and a limited liability company are both entities. In contrast, someone doing business under their name, with nothing more formal, is operating as a “sole proprietor”; there is no separation between personal and business.
  • What type of entity should I be? Surprisingly, for legal purposes there is not a huge difference. Both a corporation and a limited liability company provide a wall of separation between their owners and the business. A corporation has shareholders, a limited liability company typically has members.
  • Have your organizational documents in place. For a corporation, it is written minutes of the organizational meeting of the shareholders and board of directors, plus bylaws. For a limited liability company, it is an operating agreement.
  • Know who your employees are or are not. One of the easiest ways for a business to create a mountain of liability is to treat individuals who are actually employees as independent contractors. That means failing to withhold and do payroll properly and to secure worker’s compensation insurance. If you have any doubt about whether an individual is an employee or independent contract, talk to an attorney. You do not want to get caught in the Independent Contractor Trap.
  • Protect your Intellectual Property. If you have words, pictures, symbols, code, software or an invention, take the proper steps to legally and officially claim ownership to it. It might be registering a trademark, securing a trade name, seeking copyright or even patent protection.
  • Maintain the regular records that are required. For a corporation, it is at least the written records of shareholders and directors meetings and other major actions. Treat the entity like it is a separate and distinct entity (separate records, separate bank accounts, etc. . .)

What other issues have you considered when starting a business?

 

Posted by Shawn Roberts in Blogposts, Business Law

What an attorney thinks of Legal Zoom – Part II: The bad

In my last post I discussed the circumstances that led to the creation of Legal Zoom services and why its creation was a good thing for attorneys.  Today, I describe that downside of the commoditization of legal services.

Legal Zoom is less than good because it offers an incomplete solution.

For the low, low price of $$$, you can have a Will, form a corporation or secure a basic trademark.  You get the bare minimun:  existence as a corporation, a functioning Will or a simple trademark.  What is missing?  The counseling element, knowledge and experience that all good attorneys provide.  The question should not be “Can I get incorporated?”, the questions should be:  “Do I need a corporation or limited liability company?”, “How should the entity be structured?”, “How do I develop a structure for recordkeeping and legal documents?”  

These are the questions that when answered properly help lay a solid foundation for any business or estate planning document.  The acts of incorporation, drafting and executing a Will or bringing a limited liability company into existence is a part of the process, not the whole process.  It is like fixing a leaky faucet with a do-it-yourself kit from Home Depot only to discover later when your kitchen floods that all your plumbing is bad.  

Legal Zoom and similar sites provide access to the system but do not completely equip users for flourishing within the system.  In “3 easy steps” a business has addressed all the necessary legal issues and built a solid foundation.  If you check all the boxes you have addressed all the issues.  Law is a commodity that can be bought and sold in bulk.  My experience teaches me that none of those statements are correct.

With the creation of your business or your Will you want a relationship with your attorney not a one-click stand.

What are your experiences with Legal Zoom and related products?

 

 

Posted by Shawn Roberts in Blogposts, Business Law

What an attorney thinks about Legal Zoom – Part I

It is a loaded question: asking a practicing attorney what he thinks about a service which reduces the need for attorneys.  However, I want to weigh in and you might be surprised at some of my thoughts.  

Legal Zoom is one of several services that allows people to form corporations and make Wills for a very low price, all online.  As part of the work I do for people, I bring corporations into existence and assist people in setting up Wills.  

Legal Zoom is good because it forced attorneys to consider what we provide that has actual value.

There was a time when actually creating the documents that are Wills and that form corporations was closer to “magic.”  When word processing was limited to a chosen few individuals and businesses that could use computers.  When there were no websites that provided information, connected people and allowed online transactions.  When word processing and access to materials was at a premium, the market supported charging for those items.

Those days have passed and most people can process their own documents and access the Internet from the comfort of the couch.While the times changed, much of the legal profession did not.  We (or many of us) kept operating in an market that had long since been altered.  There was little value in actually typing the document – a million forms were available online.  There was almost no value in knowing a process that was open to everyone (such as filing documents with the secretary of state online).  We were left selling services 1975 style in the 2000s.  There was a response from the market:  Legal Zoom and similar companies.

What did Legal Zoom get right?  It charged the correct price for the technical act of completing form documents.  It guarantees the documents are legal and for the low, low price of $$$ you can have a Will or form a corporation while you are at Starbucks.  In the process, Legal Zoom and similar sites actually helped attorneys and consumers of legal services.

Tomorrow, I will discuss the downside of Legal Zoom and related services.

 


Posted by Shawn Roberts in Blogposts, Business Law

Don’t let the buried bones come back to haunt you

Every giant company started somewhere as a tiny entity or maybe just one person. When businesses are young, the focus is on things like product development and survival. Understandably, the focus is not on all of the different legal requirements for forming an entity or maintaining the entity after it is formed. These are details which are often pushed off to the point of “success.” Deals are done to bring in capitalwith often little thought being given to the consequences of the deal in the future. For instance, a company may give an ownership stake of say 5% to someone. The 5% usually does not come with the ability to manage the affairs of the company, however, the 5% owner continues to own an interest in the company forever and less something officially changes that.

As a company grows, employees multiply and founders look for serious capital infusion, the need for books and records to be clean and neat increases. It is at that point where a renewed focus is put on the organizational documents and the records of the company and this focus often discloses issues which need to be corrected or cleaned up. Sometimes, a “cleanup” means that the company has to pay a substantial amount of money to someone that either is an owner of the company or claims to have an ownership interest in the company. Mark Zuckerberg in the continuing saga of Facebook’s founders and owners is a great example of where issues popped up after the company became successful.

Prevent these issues by doing it correctly from the start: correctly forming the company with your Secretary of State, correctly getting the initial organizational documents drafted and signed tracking major events of the company in being certain to understand all of the consequences of giving anyone an ownership interest in the company.

These are the types of issues I work on frequently with clients, if I can do anything to help out with your business, please let me know.

Posted by Shawn Roberts in Blogposts, Business Law

Is my Oklahoma non-compete agreement enforceable?

The short answer is that if your non-compete agreement is controlled by Oklahoma law the non-compete agreement is not enforceable if it goes beyond the limitations in Title 15 O.S. section 219.A.

The Law

With a couple of exceptions, Oklahoma law is clear that a former employee is allowed to work in his or her chosen business or industry even if a piece of paper says otherwise.  While competition is allowed, Oklahoma law prohibits a former employee from soliciting the established customers of the former employer.  When the Supreme Court of Oklahoma addressed the non-compete issue in 2011 it was crystal clear about enforceability:

Title 15 O.S.2001 § 219A is the Legislature’s pronouncement on Oklahoma’s public policy regarding covenants not to compete. It provides that where an employee has executed a covenant not to compete with an employer, the employee “shall be permitted to engage in the same business as that conducted by the former employer or in a similar business as that conducted by the former employer as long as the former employee does not directly solicit the sale of goods, services or a combination of goods and services from the established customers of the former employer.” The statute goes on to provide that any provision in a contract between an employer and an employee in conflict with the provisions of the section “shall be void and unenforceable.
¶ 21 Subsection A utilizes the mandatory term, “shall,”in association with the employee’s right to engage in the same or similar business as that of the employer while subsection B provides that “any” provision in a contract between the employer and employee conflicting with those terms “shall be void and unenforceable.” The term “any” is all-embracing and means nothing less than “every” and “all.”The plain, clear, unmistakable, unambiguous, and unequivocal language of 15 O.S.2001 § 219A prohibits employers from binding employees to agreements which bar their ability to find gainful employment in the same business or industry as that of the employer. The only exception allowed by the statutory provision is that the employee may be barred from soliciting goods or services from the employer’s established customers.

Protections for the Employer

An employer who invest its’ resources in training an employee and has disclosed confidential information to the employee still has ways to protect itself.  A strong employment agreement providing protection for confidential information and trade secrets goes a long way to protect an employer’s interest.

To sum it up, a former employee can compete against his former employer. However, he cannot do it using the employer’s confidential information or by directly soliciting the former employer’s established clients.

If you have questions about Oklahoma non-compete agreements from either the employee or employer perspective, please feel free to email or call me. I have worked with both employers and employees so I understand the issues from both directions.

 

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Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma non-compete