Arbitration – not boilerplate, and not necessarily quick, easy, or inexpensive!

If you have basic familiarity with contracts, you’ve likely heard the term “boilerplate,” which is often used to mean standard language that the contract writer uses in many of its contracts or even that you may find in contracts across the board.  Of course, just because language might be “standard,” that does not mean that it is innocuous or that you can safely ignore it!

So-called boilerplate language, it it exists, is often found near the end of the contract.  Some contracts stipulate that if a dispute arises from the contract the parties agree to submit the dispute to binding arbitration.  While this clause may be brief and, coming at the end of a contract, may appear almost like an afterthought, it is important to understand that agreeing to arbitrate has very real consequences.

Arbitration clauses are most often seen by consumers in credit card agreements and service agreements with large companies (e.g., “Any dispute in connection with this Agreement shall be subject to binding arbitration in Chicago, Illinois”), but they are also sometimes poorly understood features of contracts between small businesses who somehow heard from an uncle that arbitration was easier or cheaper than going to court.

In  November 2013, a long and expensive arbitration proceeding concerning a Gwinnett County software company came to a conclusion.  The process took three (3) years and cost $3.5 million in legal fees in addition to approximately $150,000 in arbitration costs.

The victors, Kenneth Shumard and Kenneth Shumard Jr. won the right to control the use of medical billing software that is anticipated to be highly valuable.  The Shumards also won $800,000 in attorneys’ fees.  Initially, the Shumards sought a restraining order from the Gwinnett County Superior Court preventing their other partners from making certain use of the software.  Judge Ronnie Batchelor referred the dispute to arbitration, because the partnership agreement between the Shumards and their partners required that disputes go to arbitration.

As such, the Shumards did not have the option to seek judicial process, but instead, were forced to go to arbitration.

Arbitration is conducted under its own standards and is a creature of state law.  In some ways arbitration resembles court proceedings.  For example, in the above-mentioned dispute, the arbitrator received briefs on the matter and received testimony from witnesses.  The arbitrator then required post-trial briefs and issued a written decision.

In other ways, however, arbitration is an animal unto itself.  Arbitrators are not bound the same rules as judges and their decisions are often final.  Their decisions are not subject to normal appellate court review, and only subject to attack in specific instances, such as when the arbitrator is not impartial, failed to make a final determination of the issues, or manifestly disregarded the law.  Basically, arbitration is like “private court.”

A court rarely finds that an arbitrator has committed such failings, and thus, it is best to plan on any arbitration award being the final word.  Case in point, in the above-referenced dispute, the Shumards’ partners, who were unsuccessful in arbitration, went back to Gwinnett County Superior Court Judge Batchelor seeking to have the arbitration award vacated.  Judge Batchelor denied those motions and confirmed the arbitration award.

In Georgia, Chapter 9 of Title 9 of Georgia Statutes sets out the standards for arbitration (the “Georgia Arbitration Code,” O.C.G.A. § 9-9-1 et seq.).  In Georgia, the contract controls.  If a contract that requires disputes be arbitrated is enforceable, the dispute cannot be heard by the courts and must be submitted to arbitration.  The courts do have power, however, to determine whether the contract with the arbitration clause is valid, to compel arbitration, and to validate and enforce an arbitration award.

From partnership agreements and operating agreements to construction deals and a variety of other contracts, a seemingly innocuous arbitration clause can be but a brief paragraph nestled neatly in the final pages of the contract, but nonetheless has great importance.  Before entering into a contract, seek the counsel of a contract attorney to ensure you understand the implications of every section of the agreement.

Water, Water, Everywhere – Or Is it Firearms? What Georgia businesses need to know about the Safe Carry Protection Act

Samuel Taylor Coleridge wrote the line “Water, water everywhere/and all the boards did shrink…” in his epic poem “The Rime of the Ancient Mariner,” but is “firearms, firearms, everywhere/and all the businesses did shirk” now more applicable for Georgia businesses?

The Georgia Safe Carry Protection Act (a.k.a., the “Guns Everywhere” law) goes into effect today, July 1, 2014. These new laws substantially expand the rights of licensed gun owners to carry their guns into myriad locations previously barred to those carrying firearms. Some of the new gun-friendly places may surprise you, as they include bars, public housing, government buildings without screening checkpoints, and churches (with the permission of the church’s governing body).

Most importantly for private businesses, the Safe Carry Protection Act reinforces the rights of both licensed and unlicensed gun owners to carry guns in their private (non-company owned) cars and trucks. Practically, both the Act and the 2010 Business Security and Employee Privacy Act not only allow employees to bring firearms onto a private employer’s parking lot but also bar employers from prohibiting concealed guns on their property.

Georgia law also limits the ability of private employers to search locked, privately owned vehicles owned by both employees and their invited guests.

So what is an employer to do?

  1. First, business owners with should determine whether or not their businesses are subject to the new Safe Carry Protection Act and/or the Business Security and Employee Privacy Act, as these laws do not apply to all types of businesses.
  2. Next, companies subject to one or both of these laws then should reevaluate any firearm policies to make sure they comply with Georgia law.
  3. Finally, business owners should contact their commercial insurance representative to ensure that the current policy covers any potential liability created by the Safe Carry Protection Act or the Business Security and Employee Privacy Act.

If, as a business owner, you are ever unsure how a new (or existing) state or federal law, or perhaps a new court decision you may have read or heard about in the news, applies to your business, that would be a great time to pick up the phone and talk to a business attorney at Briskin Cross and Sanford.

New Facebook Message: You’ve Been Sued!

Does service of a civil lawsuit count if the defendant is personally handed the legal papers? Absolutely, as long as the person serving the papers is permitted to do so (different courts have different rules).

Does service count if the legal papers are handed to the defendant’s 27 year-old brother who lives with the defendant? Maybe.

But what about legal papers served on the defendant through the defendant’s personal Facebook account?

The answer is some countries is yes, a defendant can be served through a personal Facebook page.

Until quite recently, courts in the United States have refused to allow service through Facebook, citing concerns that doing so would deny defendants due process and actual notice of the lawsuit, which is required by the Constitution and related federal and state laws.

But in March 2013, a court in the Southern District of New York addressed the Federal Trade Commission’s request to serve non-U.S. defendants through email and Facebook after struggling to serve the foreign defendants personally. The judge ultimately granted the request, noting that while service through email alone satisfied the due process and notice requirements, service only through Facebook may not.

The U.S. is not the first country to tiptoe into the land of service via social media. In 2008, Australia allowed service on defendant debtors through Facebook when the attorneys were able to match the defendants’ birth dates, friends, and email addresses on the Facebook pages to their loan applications.

A year later a Canadian court allowed service on the defendant through the HR department of the defendant’s former employer and through the defendant’s private Facebook page. A New Zealand court also approved this method. The United Kingdom’s High Court has allowed service of an injunction on an anonymous blogger through a Twitter account, and Australia has allowed service through text message. All of these countries have similar due process and notice requirements as the United States.

Service of process can be tricky.  It can vary not only from country to country, but from state to state, county to county, and even court to court.  However, just because some courts have shown a willingness to move the law in new directions with the proliferation of social media, this does not mean that they have yet come to anything like a clear consensus.  Since service of process is one of the initial steps in asserting your rights in court, be sure you get it right.  Talk to a litigation attorney at Briskin, Cross and Sanford if you are in any doubt.

UPDATE – Raysoni v. Payless Auto Deals, LLC et al.

In a previous blog, I discussed the case of Raysoni v. Payless Auto Deals, LLC et al. (see “To Carfax or not to Carfax“), a rather frustrating case in which the Georgia Court of Appeals held that the plaintiff did not have a good claim for fraud against a used car dealership even though the salesman for the dealership told Raysoni that the car he purchased was not in a wreck – which was a blatant lie and the salesman knew it.

In that case, the Court of Appeals held that despite the salesman’s lie, a claim for fraud could not be supported because Raysoni’s reliance on the lie was not justified.

In a claim for fraud, the plaintiff must show that his/her reliance on a false and injurious representation was reasonable or justifiable. The Court of Appeals found that after verbal negotiations between Raysoni and the salesman, Raysoni signed a written contract which clearly stated that the car had been in a wreck, that a buyer was not to rely on the representations of a salesperson, and that a buyer should get the car independently inspected. The contract trumped the salesman’s representations as well as the Carfax report which showed the car as being clean.

Apparently, Raysoni did not take this decision lying down, as he is now appealing to the Supreme Court of Georgia.   Oral Arguments are set for June 16, 2014.

In his appellate brief, Raysoni argued that the Court of Appeals incorrectly applied the law, based on the Georgia Supreme Court case City Dodge, Inc. v. Gardner (1974), arguing that fraud prior to the entering of the contract voids the contract, and thus the disclaimer in the contract is of no significance. Under City Dodge, the disclaimer in a contract is only one of the factors a jury will look at in deciding whether reliance was justifiable, but does not by itself preclude a finding of fraud.  Raysoni also reiterated the fact that the disclaimer was in a font size the equivalent of 5.6 Arial type (!!) buried in other text.  See if you can find the disclaimer of damage:

disclaimer text

It will be interesting to see how the Supreme Court deals with the issue of justifiable reliance.  Stay tuned for the conclusion of this case… and feel free to call a contract attorney at Briskin, Cross & Sanford if you ever have ANY doubt about what you are being asked to sign.

The neverending cycle: bankruptcy and homeowner/condominium association dues

When the economy took a dive in 2007 taking the housing market with it, hundreds of thousands of Americans, walked away from homes and condominiums and declared bankruptcy to get out from under unmanageable debt.

But what about those homeowner association and condominium dues? Who is responsible for those? Common sense might lead you to think that the bank that holds the mortgage would be on the hook for association dues, too.  After all, the home was “given back” to the bank… wasn’t it?

Well… Not so fast. Under bankruptcy law, the owner of the house or condo remains personally liable for all homeowner association and condominium dues that accrue after the bankruptcy was filed and before legal title passes from the owner to the bank.  Due to a glut in inventory, many banks have been slow to actually take title to the property from the former borrower, and until they do, condominium association dues and fees owed continue to tick up.

To make matters worse, the homeowner or condominium association has four years to file a lawsuit against the owner under Georgia law, O.C.G.A. §9-3-29. If the association files the lawsuit before the expiration of those four years, the dues and fees continue to accrue during the lawsuit, assuming the bank does not successfully foreclose on or sell the property, causing legal title to transfer from the owner.

The result can be a perfect storm for a property owner, who, after discharge from bankruptcy, may once more be facing a judge with thousands of dollars in past-due association fees and dues and very limited options for relief, if any, from a potentially unbearable debt.

Annual Registration Deadline for Georgia Corporations and LLCs – May 31st, 2014

In Georgia, the annual filing deadline for a business entity’s “Annual Registration” with the Secretary of State is usually April 1st; however, for the past two years the Secretary of State has extended the deadline to May 31st.

The filing fee required with the filing of the Annual Registration will be $50 in most instances (i.e., if there are no prior unpaid fees), or $30.00 for nonprofit corporations.

We have included Instructions (click link) that may help guide you through the process of using their new website, which you can access here: Georgia Secretary of State Filing System.

Please note that if our Firm, or any one of our attorney’s, is currently listed as your registered agent, you should update the registered agent name to BCS Corporate Services, Inc.  This is our Firm’s subsidiary that now exclusively handles these services. This also applies to companies that currently list Penn Law Firm, P.C.

If you have any questions about Annual Registrations or have trouble with the registration process, please feel free to call our office.

If we currently represent you and you would like to request that we file the Annual Registration for you, please contact Stacy Pettefer by email at spettefer@briskinlaw.com and confirm at the same time:

(i)  the principal office address of your entity;

(ii) the name and address of your registered agent (if it is not Briskin, Cross & Sanford, LLC); and

(iii) in the case of a corporation (rather than an LLC), the names and addresses of the President/CEO, Treasurer/CFO, and Secretary.

Does My Company Need to File an Annual Registration?

Most U.S. states require registered businesses to maintain current information with that state’s office of the Secretary of State.

In Georgia, all Corporations must typically file an Annual Registration within 90 days of the filing of their Articles of Incorporation (unless the Articles were filed between October 1 and December 31, in which case the Corporation is required to file its Annual Registration the following year by the April 1st deadline).

LLCs are not required to file an Annual Registration during their first calendar year.

In short, this year (2014):

  • All LLCs and Corporations formed in (or prior to) 2013 must file an Annual Registration by May 31, 2014 (for Corporations incorporated after October 1, 2013 or LLCs organized at any time during 2013, this will be the first Annual Registration).
  • LLCs formed on or after January 1, 2014, will not have to complete an Annual Registration until April 1, 2015.

Late registrations are subject to penalty fees of $25.00, and failure to file or keep registrations current can lead to the Secretary of State changing your business’s status to “Administratively Dissolved.” An “Administratively Dissolved” corporation or company may not transact business in Georgia or use the Georgia court system but may be reinstated within a certain time period upon certain conditions and the payment of a fee (you should contact us at once if your company has been administratively dissolved).

Once you have filed your Annual Registration, the Secretary of State will immediately consider your entity to be in “Active/Compliant” status; however, although your Annual Registration is considered paid the minute you file and pay online, the online record may not update immediately and may take a day or longer to reflect your “Active/Compliant” status.

You should also file an additional Annual Registration at any time during the year (and pay the $50.00 fee) to update the information on record if it is no longer accurate; however, you cannot pay for future years, and filing more than once in a year will not change your obligation to file the following year.

Who Files the Annual Registration?

Although we serve as registered agent for many of our clients, the filing of the Annual Registration is the responsibility of the members, managers, officers, or directors of the business. This ensures that the primary purpose of the Annual Registration is served: to accurately update your business address and officers’ names and addresses and to confirm or appoint a new registered agent for the service of process.

These records are public and should only be updated by an authorized person. They may also be used in determining, among other things, which jurisdiction your business will be subject to in a court of law.

Notice

The Secretary of State typically notifies businesses of the Annual Registration deadline by sending a postcard to the business address listed in its records. Please note that some companies imitate these notices. Any notice not from the Secretary of State is a solicitation. Please feel free to contact us if you are uncertain about a notice you have received.

Other States

If you are registered to do business in more than one state, you may need to file an Annual Registration in each state in which you are registered. Also, if you are transacting business in a state with which you are not officially registered, please contact one of our attorneys, and we can assist you with coming into compliance and protecting your interests in foreign states.

About Briskin, Cross & Sanford, LLC

Briskin, Cross & Sanford, LLC is a Business, Commercial, and Technology firm that has built a full-service business practice representing privately held companies and their executives, including many start-up businesses and technology firms across North Metro Atlanta and the surrounding areas.

The inevitably unclear application of the inevitable disclosure doctrine

By now, word is out that Georgia non-compete or non-solicitation agreements are easier for employers to enforce as a result of new laws passed by the state legislature that apply to all contracts entered into after May 11, 2011.

On May 6, 2013, however, the Georgia Supreme Court took the opportunity to restrict the enforcement of non-competition agreements that the parties never actually entered.

What?  Run that past me again…

Michael Holton worked as the vice president and chief operating officer of Physician Oncology Services, LP (“Physician Oncology”) from August 2009 through October 2011. In November 2011, Holton accepted employment with a direct competitor of Physician Oncology. Perhaps not surprisingly, a lawsuit ensued, with Physician Oncology seeking to prevent Holton from working for this or any other competitor.

What is surprising, in addition to claims for breach of a non-competition agreement and misappropriation of trade secrets, is a claim made by Physician Oncology on an “inevitable disclosure” theory, claiming that Holton “would inevitably misappropriate, disclose, and misuse” Physician Oncology’s trade secrets and other confidential information.

The inevitable disclosure doctrine allows a plaintiff to prove a claim of trade secret misappropriation by showing that the defendant’s new employment will inevitably lead the defendant to rely on the plaintiff’s trade secrets. The danger of the inevitable disclosure doctrine, of course, is that it imposes a non-competition covenant where one otherwise does not exist. It may also extend the time of a covenant not to compete beyond the time identified by the actual non-competition covenant originally agreed between the parties as trade secrets and certain confidential information may be protected indefinitely whereas restrictive covenants usually have a time limit.

Georgia law unquestionably recognizes claims of both actual and threatened misappropriation of trade secrets, but does it recognize claims for the “inevitable disclosure” of trade secrets? The answer the Georgia Supreme Court provided is… not in all circumstances.

In Michael Holton’s case, the Court clearly established that Georgia does not allow independent claims under the inevitable disclosure doctrine that would allow a Georgia court to prevent an employee from working for another employer or from disclosing a trade secret. What the court did not address is whether the inevitable disclosure doctrine may be applied under Georgia law to support a claim for the threatened misappropriation of trade secrets.

In other words, for those seeking clarity, the good news is that the Georgia Supreme Court restricted the applicability of the inevitable disclosure doctrine in certain circumstances; the bad news is that the Georgia Supreme Court did not clearly state under what circumstances the doctrine does apply under Georgia law.

The inevitable result is that inevitable disclosure doctrine claims will likely continue to arise until the Georgia Supreme Court has the opportunity to revisit the matter and, hopefully, clear up the applicability this cause of action under Georgia law… or at least add a few more puzzle pieces to the overall picture.