New York Business Law » Corporate Law

What you need to know about Supplier Agreements

Fred Abramson — Mon, 12 Jul 2010 19:48:50 +0000

A good supplier agreement is to designed to keep you out of court. It can also help you win a lawsuit if there is a dispute. If you have an ongoing relationship with a supplier, a well-drafted agreement is crucial. One especially thorny issue is creating a way to easily end a contract. If you have an arrangement with a supplier, there is normally an umbrella agreement which is succeeded by purchase orders.

Here is what you need to know when drafting an umbrella agreement:

Gauge the volume and frequency of the supplies you will require. You should specifically identify the goods that are to be delivered. You should also leave room for anticipated problems, such as a downturn in the economy which could limit your ability to purchase goods.
Is the contract exclusive or non-exclusive? Suppliers usually favor exclusive agreements.
Negotiate a termination clause.
Negotiate a way to limit liability. If you are supplying goods like food, you don’t want to be held liable for damages for lost profits if you fail to make a delivery on time.
Term of the agreement. You should be wary of entering into an agreement for over 3 years. Who knows what your business will look like a decade later?
Confidentiality. You probably don’t want your competitors to know the terms of your agreement. Any information gleaned from a supplier agreement can be used for competitive advantage.

PURCHASE ORDERS

Identify each order and state that it is subject to the umbrella contract.
Create a purchase order that you can re-use. It is best to leave time and quantity blank.
Date the purchase order.

Be aware that problems with supplier agreements is a major source of litigation. I recently litigated a case between a supplier and a franchisee which was a result of a poorly drafted umbrella agreement that cost the franchisee $250,000.00.

If you questions regarding supplier agreements, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

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Do you Know When a Motion to Dismiss Should be Made?

Fred Abramson — Wed, 19 May 2010 15:29:17 +0000

You know that litigation could be expensive. If your attorney is a Linchpin he will always present an analysis of the costs of defending a lawsuit to you. Great attorneys are often able to limit the costs of litigation while continuing to defend you aggressively. Bad attorneys make lots of money by drafting unnecessary motions.

Some judges don’t allow for discovery motions, preferring issues such as the re-scheduling of depositions to be resolved at a conference. “Snake” attorneys will make the motion anyway, viewing it as a billing opportunity.

If you are subject to a lawsuit, one of the tools in your lawyers’ toolbox is a motion to dismiss. If you win a motion to dismiss, your case is over in one sweeping step. However, if you lose and your motion is denied, your litigation costs become more expensive. The rule outlining a motion to dismiss is CPLR section 3211. Because of its costs, the decision of whether you should make a motion to dismiss should not be taken lightly.

What should you look for when making a motion to dismiss?

You should first review and pick apart the complaint.
Does the plaintiff (the person who is suing you) state a cause of action?
Are there any legal defects to the complaint?
Does the complaint make factual sense?
Do you have all the facts? In many cases, you need paperwork from the plaintiff, such as a contract.
Does the court have the right to hear the case?
Are you or your company subject to the court’s jurisdiction? For example, if your company is being sued in New York but has never conducted business there, a motion to dismiss could be appropriate.
Statute of Limitations. The action may not have been timely filed.

What you need to tell your Attorney

If you company has been sued, find out the person who has the most knowledge regarding the lawsuit.
Write a detailed summary of the facts
Notify him of any witnesses with their address, email address, Twitter account and phone number.
Provide all documents related to the lawsuit.

When is winning a motion to dismiss a waste of time and money?

Just because a motion to dismiss can be made, doesn’t mean that it should. There are times when winning a motion to dismiss will not dispose of the case

If you were improperly served, but the case is still well within the statute of limitations, the plaintiff can simply re-serve you.
If there is a technical defect which can be easily changed by an amended pleading, such as the misspelling of your name?
In some instances, by making a motion to dismiss you may alert the plaintiff of your defenses or missing information.

When should you make a motion to dismiss even if you will probably lose?

For tactical reasons, you may decide to show the opposition that you are ready to go to war.
You can obtain facts about the case earlier than waiting for formal discovery, which could take years.

As a defendant, you should always look to settle the case before a motion dismiss is made or an answer is filed. The vast majority of cases are settled before trial. Everyone is aware that the settlement is not a sign of weakness because of the high cost of litigation.

If you or your company has been subject to a lawsuit, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

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Who owns your data at work?

Fred Abramson — Mon, 10 May 2010 16:46:04 +0000

You probably spend much of your time at work in front of a computer. When you are on the run, you use your Blackberry or iPhone for both work and pleasure. But who owns the data that is created, viewed and stored while working?

If you work in New York for a private company, you have a reasonable expectation of privacy for your electronic devices, work computers and cellphones. This is especially the case when the company that you work for does not have a policy regarding internet usage. As a result, I have been advising companies to cover their bases by clearly and specifically drafting internet usage policies that explains their employees expectation of privacy.

Restrictive internet usage policies usually include the following:

All the data that is stored on work computers is company property;
Employee’s have no expectation of privacy;
The Employer may monitor its employees computer usage without their knowledge.

The law regarding restrictive internet usage policies have been looked at with increasing scrutiny by the courts. For example, a recent court ruling did not allow an employer to access the Hotmail account of its employee.

Despite a written internet usage policy, employers are not immune from potential lawsuits from employees. Listed below are restrictions that employers should be aware of:

PRIVILEGED DISCUSSIONS. Discussions regarding attorney-client communications may continue to be privileged. If an employee is using the internet for legally permitted employee, like union organizing her communications may be privileged.
DISCRIMINATION. Be aware that you cannot treat your employees differently while monitoring their computer usage.
ACCESSING PRIVATE ACCOUNTS. You cannot access your employee’s Twitter account simply because they accessed their account at work.
NEW YORK STATE LAW. Believe it or not, New York State does not have an invasion of privacy law. Be aware that you cannot fire an employee simply because she tweets.

Be aware that case law is changing on this subject. As a word of caution, use your common sense and think about the golden rule.

For more reading: Who Owns all the data in the Workplace

If you have any questions about who owns your data at work, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

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LLC Operating Agreements, Bacardi and Brothers & Sisters

Fred Abramson — Mon, 12 Apr 2010 14:32:47 +0000

In an LLC, a family council created in the operating agreement is designed to assist decision making on important issues for the family and the business. This can include unique issues for running the family business. If you watch Brothers & Sisters (I don’t, but my wife is addicted to the show) you know what I mean. Each member may have different ideas of what the business should value and the direction the company should take in the future.

Family councils can also serve other functions as well. A common problem for many second generation businesses is sibling rivalries. Some family members may be interested in preserving the family history of the company. An example of a great family business is the Bacardi & Company Ltd., the spirits company. The business was formed in the late 19^th Century in Cuba. The Bacardi’s built a great rum empire with strong roots in its home country. When Castro came to power, the company was forced to flee. The Barcardi’s continue to use the company to carry on the family history and Cuban tradition, and, ultimately, an instrument to help build a stronger family.

Many experts agree that open communication and transparency between members of any business is vital for continued success. Gossip between family members can be toxic. Even though I am not a huge advocate of meetings, the simple formation of a family council allows for an avenue for all the family members to air their grievances. (Festivus anyone?)

A Limited Liability Company offers an excellent way for establishing a family council with proper rules. Here are some provisions that a family business could include in its LLC Operating Agreement:

(1) Schedule meetings at a specific time. You can also list the members that must be present;

(2) Create the position of Secretary, who takes the minutes at all meetings.

(3) Create rules which establish:

Whether only active family members only or inactive members attend the meetings. Should key employees that are not members of the family attend?
A meeting place.
The agenda for the meeting.
Who leads the meeting.

By establishing a family council in your LLC Operating Agreement, you can keep the focus on the long term goals of your business while keeping the petty disagreements at bay.

If you have any questions regarding using your LLC Operating Agreement to establish a family council, contact me a the Law Office of Frederic R. Abramson at 212-233-0666

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New York Tech Community Looks to Repeal LLC Publication Law

Fred Abramson — Wed, 07 Apr 2010 16:28:35 +0000

Crain’s New York Business reports that members of the group of New York Tech Meetup are working to repeal the law that requires companies to pay a publication fee to form a New York Limited Liability Company (LLC).

Publication fees range from $1000 to over $2000 and are a burden on many start-ups. The rates depend on the county where the business is located.

The New York LLC publication law is as follows:

1. Within 120 days of formation of a New York LLC, the LLC must publish a notice in two (2) newspapers, once a week, for a period of six (6) consecutive weeks, as follows:

(a) The notice must include the name of the LLC, the date of filing, the county in which the office is located, the full street address of the LLC, the purpose of the LLC, and a statement regarding service of process on the secretary of state. The information must be precise… there’s no room for errors.

(b) The notice must be published “as though the copy or notice were a notice or advertisement of judicial proceedings.”

(c) The two (2) newspapers must consist of one (1) weekly paper and one (1) daily paper of general circulation in the county where your LLC was formed. The newspapers must be designated by the county clerk for such publication.

2. After the LLC publishing is complete, you must obtain affidavits of publication from the newspapers in which the legal publishing was completed.

3. The affidavits of publication must be filed with the state, along with other information contained in a Certificate of Publication. There are fees for this filing.

4. If you fail to comply with the LLC publishing law within 120 days of formation, the authority of your limited liability company to carry on, conduct or transact any business in NY state shall be suspended, effective as of the expiration of such 120 day period.

5. The suspension will be annulled upon the filing of the Certificate of Publication, even if filed late.

The main beneficiary of the publication law is print publications like the New York Law Journal and Crains New York Business. Hat tip to Crains for disclosing the conflict. With advertising fees in traditional media in a free fall, expect newspapers to fight for this important source of revenue.

The purpose of the publication requirement is to notify members of the public to know who they are doing business with. I have never heard of anyone who reads the legal notices of any newspaper. Moreover LLC information can easily be searched for free on the New York State Department of State Corporation and Entity Database.

The time has come to abolish the New York LLC publication requirement is law from an era whose time has passed. What do you think?

The Law Office of Frederic R. Abramson represents businesses in New York. If you have a question regarding LLC formation contact me at 212-233-0666.

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What Litigation Costs and Expenses are Recoverable in NY? How about Attorney Fees?

Fred Abramson — Fri, 19 Mar 2010 16:39:16 +0000

Nearly every lawsuit asks for recovery of attorney fees, costs and expenses for bringing the action. When potential clients contact my office for the first time for a civil litigation matter, the most common question asked is whether attorney fees are recoverable.

Attorney fees are generally not recoverable. There are exceptions to this rule, such as when authorized by statute (ie some employment discrimination cases), court rule, or as agreed to by the parties. The case law is rather exhaustive on this subject. I still recall my contract professor in law school engaging my first year contract class on this issue through the use of the socratic method.

Under the English system, the loser of a lawsuit pays for attorney fee’s. However, this was changed in the United States, and under the the American rule, each party has to pay for their own legal costs. This law was established to protect people and businesses who have small budgets who would not be able to start a lawsuit against a company or individual who has deep pockets.

Following a judgment, your lawyer can include a bill of costs. This legal document will list the costs and expenses that you can recover in addition to your judgment. They include the following:

Filing fee for the summons and complaint
Jury Fees
Depositions used at trial
Service of summons by Officer or Process Server
Service of subpeona by Officer or Process Server
Statuatory Witness Fees
Lay Expert Witness Fees and Expenses. But regular expert witness fees, such as for a medical doctor in a personal injury action or a forensic accountant in a trademark claim, are not recoverable.

If you have a question about what fees and expenses are recoverable in New York State, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

The above is for informational purposes and does not constitute legal advice. This is free. Legal advice is something you pay for.

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NY State Court Civil Litigation- Why Case Investigation is Vital

Fred Abramson — Fri, 19 Mar 2010 14:36:26 +0000

If you are planning to start a lawsuit in New York State Court, one of your first tasks is helping you lawyer investigate the facts of your case. Believe it or not, case investigation of your civil litigation matter begins before you walk into your lawyers door and may not end until a judgement has been entered and money has been collected.

There are 2 ways of case investigation:

Informal fact gathering;
Formal discovery requests as per the CPLR. These discovery requests are generally made when a lawsuit has been commenced.

Why is fact investation important:

It’s the law. An attorney cannot bring a lawsuit in New York without making a reasonable investigation that your claim has merit. If you decide to bring a lawsuit without merit, you can be subject to civil money penalties by the judge.
It helps the lawyer research the proper areas of the law. You may believe that you have a simple case where the company that you would like to sue owes you money and they have no defense. However, a full investigation of the facts may reveal that they have a defense, such as the good that you sold to them were not delivered timely.

In New York State Court civil litigation, there is usually little argument about the law. Based on my experience, the side that is able to present the most facts, and present the most logical and pursuasive argument usually wins. Since the vast majority of New York civil litigation cases are settled before trial, it is especially important to convince opposing counsel that the facts of your case are overwealimingly in your favor.

A good lawyer will understand the court’s rules, knows what it takes to uncover evidence helpful to your case without intervention (such as gleaning evidence from social networks) along with the tenacity to press the court to obtain all the evidence to help your obtain your desired outcome.

The Law Office of Frederic R. Abramson represents both plaintiffs and defendants in New York State Court in civil litigation. If you have any questions regarding starting or defending a lawsuit in New York, contact me at 212-233-0666

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Employers with Independent Contract Workers are Targeted by the Government

Fred Abramson — Fri, 19 Feb 2010 23:38:54 +0000

According to the New York Times, the IRS is cracking down on companies that try to pass off regular employees as independent contractors. More than two dozen states are cracking down on employers that improperly claim regular employees as independent contract workers. The federal government believes that enforcement could yield $7 billion during the next decade.

Among the most often misclassified workers are truck drivers, construction workers, home health aides and high-tech engineers.

As an independent contractor, there is no employer-employee relationship with the person or company that you are doing business with. The independent contract is a consultant who performs specific duties that the consultant is capable of performing.

At the start of the relationship, it is absolutely vital to have an independent contract agreement (also known as a consulting agreement) drafted to protect both parties. The consequences of failing to establish a consultant as an independent contractor can have dire tax consequences.

In your independent contractor agreement, it is important to establish that the consultant performing the services is not under the control of the employer. In addition, the employer may not directly supervise the consultant.

When it comes time to draft an independent contractor agreement, you should focus on the fee for services rendered and provide a complete description of the services that are to be provided.

According to IRS, you should be aware of the following common law factors when it comes to providing evidence as to degree of control:

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?

Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

If you have a legal question regarding independent contractors in New York, contact the Law Office of Frederic R. Abramson at 212-233-0666

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What can Companies do to Protect their IP and Data from a Google-like Cyber Attack?

Fred Abramson — Thu, 21 Jan 2010 17:46:09 +0000

Protecting intellectual property from a cyber attack is something that all companies need to be concerned about. Google recently released information about a targeted attack on their intellectual property and data that occurred in December, 2009. The attack came from China and according to Google, resulted in the “theft of intellectual property from Google.” Apparently they were not the only company that was under a cyber attacks. At least 20 other corporations were hit, including a law firm that was suing China.

Google explained the cyber attack as follows:

The route attackers used was malicious software used to infect personal computers. Any computer connected to the Internet can fall victim to such attacks.

E-mails were targeted at individuals in each company that were made to appear as that they were coming from other people at each company. They attempted to get their target to click on a link or attachment.

Potential Legal Consequences of a Breach

If your company has been subject to a cyber attack and data has been breached, your company may be subject to litigation. There have been an increase in the number of lawsuits commenced by customers and clients whose data have been compromised. For example, there is currently a lawsuit in Pennsylvania against Heartland Payment Systems, which claims that the company waited to tell consumers about a data breach and failed to protect sensitive information.

Businesses also need to be aware of compliance laws such as Sarbanes Oxley when they lose the personal information of their customers.

Potential Legal Consequences of an Intellectual Property Breach

Cyber Attacks, like the one inflicted against Google, often attempt to steal Intellectual Property. Trademarks, patents, copyrights and trade secrets, are big targets for cyber criminals.

What companies from selected industries can do to protect their data

High-tech: Need to protect source code and engineering design documents.
Banks and Financial Companies: Confidential customer information.
Pharma and Bio-Tech: Trade secrets such as research and the manufacturing of drugs.

If you have any questions or if you wish to discuss this issue further, please don’t hesitate to contact me at The Law Office of Frederic R. Abramson at 212-233-0666.

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6 Reasons Why Hiring a Business Lawyer is not that Expensive

Fred Abramson — Thu, 14 Jan 2010 18:57:55 +0000

If you are a small-business owner, contacting a lawyer is often a scary proposition. It appears to be costly and only a little bit comes back in return. Legal advice and guidance in varied forms is vital to any small business. It is true that you will get a bill. However, hiring an attorney doesn’t have to break the bank.
Here are six business reasons why your company may benefit from the involvement of an attorney:

1. You’re starting a business.

Most businesses decide to start running their business before ever calling a lawyer for legal advice. Don’ make the same mistake. Before you receive a penny, contact a lawyer to review your business structure, legal ramifications and other elements designed to protect your business and help it flourish. Remember than a lawyer isn’t someone you go to just when you have a trouble.
2. Check your contracts.

Make sure that any contracts that you have are in writing. Oral contracts often mean an unpleasant lawsuit later. It is important for an attorney to review every contract you use in your business, both with customers as well as suppliers – or draw up suitable contracts if none are in place.

3. Check if any money is owed.

With the economy in poor shape, it has been more difficult to collect money owed to you. An attorney can help by devising a course of action to collect any funds. In the alternative, if you any money a lawyer can often provide defenses and negotiate on your behalf.
4. Begin to draw on your wealth.

An experienced estate attorney also is essential in setting programs to fund retirement from the proceeds that come from the business. In my experience, many entrepreneurs start late and wait till their 50′s to start an estate plan. An attorney can help you start taking the wealth out of the business now to fund your retirement.

5. Plan for your retirement.

You probably want your business to continue when your retire. A business attorney can address succession.

6. Resolve a business dispute.

Just hiring an attorney will signal that you mean business. Hiring a lawyer early may help you avoid lengthy and costly court action.
Don’t fear the cost.

Legal advice costs money. But it doesn’t need to be as prohibitively expensive as you might fear. Some matters can be handled on as-needed basis and you may not need to a large retainer.

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