Chicago Business Lawyer Blog

A recent case involving technology giant Apple shows that having the proper type of insurance can protect against even something as basic as a slip-and-fall claim.

Apple Insider reports that an insurance company recently lodged a complaint against the company disputing a claim by Apple, a Chicago construction company and the Chicago Transit Authority for an incident that happened while an Apple Store was being built here in 2010.

While Chicago Business Attorneys may focus on properly written contracts, protecting intellectual property and dispute resolution -- and all those are critically important as well -- making sure that your home base is protected is crucial too. Employee issues, whether providing protection from injury or ensuring the company is protected from discrimination suits, can just as easily damage a company as any other issue.

Chicago premise liability issues or those involving the products that are packaged and shipped for distribution are issue that must be taken into consideration by a successful business. Any workplace can be opened up to lawsuits and claims if they don't have the right kind of insurance to protect from injuries. This is even more important in business that involves machinery, manufacturing or construction.

According to the news article, Apple is in a pinch because in 2010, the technology giant entered into an agreement with the transit authority and a construction company to renovate a subway station near the store. The deal was to allow Apple to buy out the advertising space and rename the station.

Scaffolding and shoring was set up and Apple and the construction company were set up as "additional insureds" and were supposed to be covered by the insurance company's limited liability coverage. But while under construction, a woman fell and fractured her hip on a sidewalk. The scaffolding company's insurance was added 19 days after the injury, meaning Apple and the construction company were hung out to dry. The companies have now sued each other.

This type of situation can happen in any office setting or work site. Employees can become injured on floors, by chemicals or through hot objects. Companies must ensure they protect themselves to comply with state and federal standards.

Starting in March, the Americans with Disabilities Act will include additional changes that public places must comply with to avoid risking fines or penalties. Among the changes, 1 in 6 parking spaces, a change from 1 in 8 spots, must be van accessible. Mobility devices, other than wheelchairs, must be accommodated.

Shelving and other objects must be no more than 48 inches high. There are other changes in place that went into effect in March 2011, but won't be enforced until this year. This is just another thing that companies must adhere to in order to stay above-board in all respects.

Businesses have a lot on their plate and many things to remember. Dealing with employee issues to ensure premise liability problems don't derail the company is a big one. Complying with state and federal laws regarding the public is another. These issues shouldn't be prioritized over business-related matters, but they also shouldn't be overlooked, either. A Chicago business attorney can help companies ensure compliance and protect them from legal issues at the same time.

Continue reading "Proper Small Business Insurance Can Protect Chicago Companies From Liability Lawsuits" »

The Miami-based small business Rollashoe was hit with a lawsuit recently by Chicago-based candy maker Tootsie Roll, alleging that its Footzyroll ballet shoes infringed on the candy company's trademark, CNNMoney reports.

Chicago small business can be difficult because larger companies are trying to always dominate the market. Sometimes, it takes clever names, along with ground-breaking products to find a niche in the ever-competitive field they are in.

But large corporations will try to pummel any small business that is making a mark and can be seen as a threat. This can lead to lawsuits that attempt to intimidate and weaken a business owner who is simply trying to compete.

But a Chicago small business lawyer can be utilized for many functions aside from defending lawsuits. Whether hiring employees and requiring non-compete clauses to be written into contracts, or setting up contracts with other businesses for distribution or marketing of products, an attorney is helpful in making sure all your bases are covered.

According to CNNMoney, this lawsuit stems from a new line of ballet slippers that are so flexible and small they can be tied up with a string and carried in a canister. In a recently filed lawsuit in the U.S. District Court for the Northern District of Illinois in Chicago, Tootsie Roll claims that consumers could get confused and assume that the shoe is a part of the candy company's brand.

Tootsie Roll made $521 million in sales last year, compared to Footzyrolls' $2 million in sales in 2010. The Chicago candy maker claims the footwear will dilute or tarnish the value of the Tootsie Roll brand and that the actions are "willful, malicious and fraudulent."

The owners of the shoe company -- 28- and 34-year-old sisters -- say the lawsuit is without merit and will threaten their company. They have spent thousands in legal fees fighting with Tootsie Roll, which opposed the trademark application the shoe company made. It was later featured in Oprah's magazine and has gotten sizable contracts from that exposure.

They are concerned that the lawsuit could cripple their business, which could top $3 million in sales, but has been hampered by the candy maker's actions.

Sadly, business is cut-throat and lawsuits like these happen every day. Big businesses, even candy companies that claim shoe companies could confuse consumers, like to flex their muscle. They know that small businesses don't have the legal budget that they do.

But an experienced Chicago small business attorney can help. Being able to attack the lack of merit of the lawsuit is a way to start. Showing that the products are so different they couldn't confuse the average consumer is another aspect.

Big businesses don't simply use lawsuits to attack competitors, though. They try to hire away their employees, make deals with other businesses to run them out of a specific geographical area or niche product area. These are all areas that can be addressed with a lawyer who can help write solid contracts.

Continue reading "Chicago-Based Tootsie Roll Sues Footwear Maker Footzyrolls For Trademark Infringement" »

The U.S. Department of Labor has sued a Marshfield builder and its owners for more than $100,000 for alleged violations of the Employee Retirement Income Security Act. The case is being pursued by the EBSA's Chicago office.

Chicago business attorneys often see startups struggle to stay on the right side of state and federal employment regulations. Seeking small business legal advice can help ensure that success does not become as disastrous as business failure.

As we reported recently on our Chicago Business Lawyer Blog, employment issues and other legal issues can pose a threat to tech startups or other small businesses.

In this case, the lawsuit was filed in U.S. District Court. It alleges the company failed to forward nearly $18,000 in 401(k) contributions between 2006 and 2008. It also says the company failed to remit timely payments to the plan, which had 52 participants and about $250,000 in assets as of March 2009. The suit also accuses owners of failing to pay nearly $100,000 in employer contributions to the Prevailing Wage Plan from 2007 to 2009. The plan mandates that the builder make prevailing wage contributions to the plan using proceeds received under state and federal contracts.

"The Labor Department is committed to ensuring workers keep what they earn," said Steve Haugen, EBSA's regional director in Chicago. "We will continue to hold fiduciaries accountable when they ignore their responsibilities and put workers' hard-earned retirement income at risk."

The lawsuit seeks to restore contributions to both plans and to remove the company and its owners as plan fiduciaries.

Federal and state prevailing wage plan requirements are a complex part of doing work as a government contractor. As contractors have submitted increasingly lean bids to secure jobs in a tough economy, running afoul of wage and hour regulations, retirement regulations and other state and federal employment regulations has become more common.

Companies may also be best served by using an attorney to establish wage and benefit plans, retirement plans, medical plans, employee benefits and health reimbursement accounts.

Chicago small business attorneys can assist in many areas, including:

-Contracts and Agreements

-Corporate and Finance

-Intellectual Property and Technology

-Executive and Employment Issues

-Licensing Distribution and Sales

-Real Estate

-Environmental Health and Safety

While we all think of economic struggles as the primary destroyer of small businesses -- they can also become a victim of their own success. This is particularly true when a growing business fails to get experienced legal advice at critical steps in its evolution. Discussing your overall legal needs and legal strategies with a Chicago attorney who is experienced in small business issues is an excellent first step. Knowing you have a solid legal foundation can make all the difference when building for the future.

Continue reading "Small Business Legal Advice Can Keep Chicago Companies in Compliance with State and Federal Regulations" »

This is to provide and discuss a few practice points collected at a recent, mid-August meeting sponsored by the Midwest Business Brokers and Intermediaries associaton ("MBBI").

For background, the membership of MBBI includes business brokers, M&A intermediaries, investment bankers, attorneys, accountants, banks, SBA lenders, valuation service providers, individual buyers, private equity groups and corporate buyers. Members may represent buyers or sellers of businesses with revenues ranging from a few hundred thousand dollars to over $100 Million. In addition to helping business owners confidentially sell or acquire companies, members have expertise in performing business valuations, raising capital and providing financing, legal, and accounting services related to the M&A transaction. More information is available at www.mbbi.org.

The meeting attendees including a number of prospective buyers looking to purchase small manufacturing businesses. The consensus seemed to be that even well-qualified buyers with adequate resources are finding it difficult to locate suitable businesses for sale. It may be that the recession has led to a larger pool of buyers who once were employees, but after layoffs and the like, now want to try to control their own fate by purchasing an existing business.

An informal survey of attendees indicated that even for relatively small deals, it remains most likely that the parties will enter into a "letter of intent" or "LOI" rather than proceeding to negotiate a definite agreement right away. An LOI is a short, preliminary agreement that usually sets out briefly the transaction scope, structure and pricing elements and establishes an exclusivity period. It is similar to a term sheet. It usually is helpful to confirm that the parties are on the same general page, before proceeding to incur the time and expense of due diligence and hasing out all the transaction details. Typically, care is exercised to address the degree to which an LOI is binding or non-binding.

Another key point mentioned was the concept of seller's or owner's discretionary income. Often valuation methods may include a consideration of price to earnings ratio or a multiple of net income. So, under such a method, the higher the income, the higher the purchase price expected. Buyers should be aware that net income for privately held businesses often is suppressed by non-essential expenses incurred at the choice or preference of the owner. For example, an owner may elect to take a higher level of salary, have family members or friends be compensated for services to the business or, with some reasonable business basis, channel vehicle, networking, subscription and other expenses through the operation. Accordingly, buyers should not be surprised when seller's take the position that such expenses should be added to the operating results of the business for valuation purposes.

Jeremy A. Gibson is a Chicago business lawyer with significant experience in the buying and selling of businesses. Please contact us to discuss your merger & acquisition issue or other concern. We are availabe to work with business buyer or sellers throughout the area, including Arlington Heights, Buffalo Grove, Chicago, Deerfield, Des Plaines, Evanston, Glenview, Highland Park, Hinsdale, Lake Forest, Libertyville, Mount Prospect, Naperville, Northbrook, Oak Brook, Palatine, Rolling Meadows, Schaumburg, Skokie, Oak Brook, Oak Park, Vernon Hills, Waukegan, Wheeling and Wilmette.

I was talking to a businessman the other day about an investment he was considering. He is looking at one of those self storage facilities. It seems like an attractive opportunity at the right price. It's fully leased with many longtime tenants for its almost 200 units. It appears to be a relatively simple and stable business model, with relatively few workers, utilities or expenses. The purchaser gets not only the operation but the real estate as well. This seems promising and no red flags jumped out.

However, even though I try to be very practical about risks and expenses, I encouraged him to be very thorough and consider zoning, geotechnical and environmental assessments. Why? Because when you're entering into a merger or acquisition or loan or similar transaction you have to worry about more than your own worries. You have to consider what the next investor, purchaser or lender is going to think or do. In other words, you don't want to get stuck with the hot potato or left standing when the music stops.

For example, I have had a long-time specialty in managing environmental risks and matters for mergers, acquisitions, divestitures and financings. It's clear that when the deal centers around factories, refineries, mines and the like no one is going to question doing extensive due diligence about the potential for chemical contamination to present material hidden or contingent liabilities. But, with less alarming properties and businesses there's often an understandable tendency to want to avoid the expense of environmental studies or tests. Still, if there's a decent chance that these issues will come up down the road anyway, then it is far better to bite the bullet and deal with it upfront, rather than have an issue be unearthed when you're now stuck with problem.

Once I was involved in litigation that arose when the purchaser of a sand and gravel pit later discovered that a previous owner had his trucks collect waste drums on their return trips and then bury them in a corner of the property. This eventually resulted in a multi-million dollar remediation. There's no guarantee that standard environmental investigations would have diagnosed this condition, but it would have been preferable to have made the attempt. And, this can apply to other aspects of a business that can present time bombs, including potential employment, product liability, regulatory compliance and contractual obligation risks.

So, if you are considering investing in new business or property, remember that it's important to worry about the concerns of the other guy, in addition to your own, to avoid getting stuck in the middle.

The Chicago business attorneys of Jeremy A. Gibson & Associates, P.C. are experienced in mergers & acquistions and other due diligence scenarios and are available to meet you in our Chicago, Deerfield and other satellite offices.

In my last post, I noted that businesses should pay attention to several contract drafting and negotiation practices that can protect them from significant, or even catastrophic, liability. Now, I want to focus in on a potentially important aspect of these issues: the relationship of indemnification and liability limitation provisions.

First, it is common to seek to prevent liability for certain types of indirect or remote types of damages, such as from business interruption, lost profits and government sanctions. Second, companies frequently try to cap their liability related to a contract either to the amount of their revenues or some other reasonable sounding level, such as $100,000 or $1 million. Third, there are many instances where businesses agree to indemnify and "hold harmless" the other party from all damages (including the incurrence of attorneys fees) arising from, on the broad side, their breach of the agreement or law, or, on the narrow side, their intentional misconduct or gross negligence.

In my experience, these tendencies often result in some unanswered contract questions: Is the indemnification obligation subject to the limitation on the types of damages? And, similarly, is the indemnification obligation subject to the cap on the total amount of damages? If not, then the entire effort to manage exposure or risk will be undermined - particularly if the indemnity is very broad.

For example, if the indemnitor must hold harmless the indemnitee for any breach of the agreement, no matter the degree of maliciousness or culpability, then the breaching party not only faces unlimited exposure, but may have to pay the indemnitee's legal expenses as well. So, the indemnitor should try very hard to make sure that the remedy and damages limitations expressly apply to the indemnification. However, if there's a much narrower obligation, such as indemnification only for intentional misconduct, or personal injury, then it is more difficult to argue that a cap should apply.

So, it is essential to remember to think through limitation and indemnification mechanisms and make sure the relationship has been addressed. Otherwise, there may be a gaping hole in the efforts to make a contract armor-plated or bulletproof.

Our Chicago business lawyers have extremely deep experience with all types of contracts and agreements, including the risk management points discussed above. Contact us to speak to a Chicago contract lawyer about your particular needs. We are available for meetings in Chicago and Deerfield and many surrounding towns.

Recently, I consulted with a new client about some corporate matters. The client provides certain routine and specialized maintenance services to building owners and operators. In the course of discussing the business, I obtained a copy of the company's standard services agreement with customers. This form had been used with a number of customers for a long time without incident. But, it was a time bomb.

If you are a vendor or seller there are several basic protective steps you can take with contracts that literally can save your business. And, virtually all purchasers will find them acceptable most or all of the time because these measures are reasonable and done by the purchasers themselves when acting as a supplier. However, this client had not focused on this matter.

In short, every vendor or seller should make some effort to: (1) disclaim all warranties except those that are specifically provided; (2) limit aggregate liability to the amount of the purchase or some other reasonable amount; and (3) avoid liability for consequential or punitive damages. If this is not done, then the vendor or seller potentially faces unlimited or very high liability if something goes wrong and the purchaser's business is interrupted or suffers lost revenues or profits. For example, what if the maintenance client's personnel accidentally disconnected or damaged network wiring that caused lost data or brought down online sales? It's unlikely this client expects to have such high potential liability where it is getting paid a relatively small amount; but that can happen without the right contract provisions.

These are just some of the items in the fine print of contracts that can be easy to ignore or gloss over but actually can be critically important for when that one in a thousand or million event happens. So, take some care to make sure you have appropriate contract and agreement forms and have them reviewed every so often.

We have extremely deep experience with all types of contracts and agreements, including the risk management points discussed above. Contact us to speak to a Chicago contract attorney about your particular needs. We are available for meetings in Chicago and Deerfield and many surrounding towns.

Given the increasingly competitive nature of the job - and college and graduate school admissions - markets, students and graduates often want or feel the need to gain experience in the field of their interest by taking unpaid internships. There are even firms that advertise assistance in procuring such stints. Similarly, employers can find it both good and good for them to offer such opportunities. (On a personal note, I can say that my (paid and unpaid) internships were great steppingstones and provide great memories.)

As always, there's a catch. Employers should be alert as labor authorities are escalating scrutiny of work-based training arrangements. However tempting it is to say that no good deed goes unpunished, there is a potential concern that internships can present an issue under the federal Federal Labor Standards Act ("FLSA"). If an intern looks and acts basically like an employee, and not much like a student, then it probably is illegal to not pay him or her, as reported in a recent New York Times article.

Federal guidance on the subject provides a relatively stringent test for concluding that no wages are required: "The U.S. Department of Labor Wage and Hour Division established criteria based on U.S. Supreme Court interpretations of the FLSA for determining whether work is employment or training. In general, persons performing work will be deemed to be trainees not covered by the FLSA if all of the following criteria are met:

• the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;

• the training is for the benefit of the trainees or students;

• the trainees or students do not displace regular employees, but work under their close observation;

• the employer that provides the training derives no immediate advantage from the activities of the trainees or students; and on occasion the employer's operations may actually be impeded;

• the trainees or students are not necessarily entitled to a job at the conclusion of the learning experience (though employers may offer jobs to students who complete training); and

• the employer and the trainees or students understand that the trainees or students are not entitled to wages or other compensation for the time spent in training (though a stipend may be paid for expenses).

In the event that any one of these criteria is absent, the work performed by the student will likely constitute employment subject to the provisions of the FLSA." [Emphasis added.]

Accordingly, even though the probability that an unpaid internship not intended to take advantage of an intern ever would lead to a wage claim is low, care should be taken to make sure that there are substantial educational aspects to the experience. Further information is available from the Wage and Hour Division. And, of course, do not hesitate to contact our Chicago business and employment lawyers for assistance.

Life can seem so much simpler when you are a one-man or one-woman band, such as if you are a sole proprietor or owner of a business. There are no committees or meetings to deal with and you can do exactly what you want, how you want, when you want. However, there just are many times when can't or don't want to go it alone and two or more can do so much more together than apart. That's when you are talking about a "partner" relationship, whether your situation involves a true partnership (which is not so common anymore), corporation, limited liability company ("LLC") or a joint venture.

All of those different structures generally present the same sets of important planning and management issues, regardless of the legal form. And, in the vast majority of cases, it will make sense to discuss and prepare some form of relationship agreement, whatever the name. For a corporation, it will be a shareholder or stockholder agreement. For an LLC, it will be an operating agreement. For the latter situations, it will be a partnership or joint venture agreement (unless all issues are covered in the documents for any entities formed by the venture). Typically, the level of commitment is such, and the potential upside or stakes are such, that it is important not to leave arrangements unwritten or defer them until revenues or profits reach a certain level.

What might be so important that it can't wait? Here's just a short list of key topics to consider:

• Capital contributions and commitments. It is important for prospective shareholders, members or partners to have well-grounded plans for the level of investment expected of each at the outset and anticipated milestones.
• Distributions. If the common enterprise has some success and does generate profits, then an area of potential disagreement is whether to take money out or keep investing it. This will depend upon the financial and tax needs of each partner.
• Conflicts of interest. Often partners have outside business activities and interests that may well overlap and even potentially compete with the common venture. The expectations and priorities as to potential competing business opportunities and time demands should be fully explored.
• Management and control. Every business presents countless actions to take and decisions to make. Often partners have different roles and levels of participation. More often than not, some level of supermajority approval or partner consent is required for shareholder, board, officer, personnel, finance, business plan, acquisition, contract, real estate, litigation and other matters involving some threshold level of money or materiality.
• Sale or transfer of interests. Often the most essential partner matter is addressing what happens when the business seeks an additional new investor, a partner dies, a partner wants to sell his or her stake or a third party want to purchase the entire business. A host of common (and sometimes complex) techniques has developed for such situations, including "rights of first refusal" or first offer, "drag along," "tag along," "preemptive right" and "buy/sell" provisions.

I can speak from handling past partner arrangements, that it is very helpful to have worked through these issues early. For example, when a manufacturing joint venture was ended after years of collaboration, the partner agreements helped provide a much smoother separation. In fact, for that very reason, partner understandings should be viewed as serving much the same purpose as prenuptial agreements. After all, it is unlikely that any partnership will last forever.

We will cover some of the above points in more detail in the near future. In the meantime, the business attorneys of Jeremy A. Gibson & Associates, P.C. bring extensive experience and insights to such corporate matters as corporation shareholder or stockholder agreements, LLC operating agreements, partnership agreements and joint venture partnership agreements. They are available to serve and meet with clients throughout the Chicago, Illinois area, including Arlington Heights, Buffalo Grove, Deerfield, Des Plaines, Evanston, Glenview, Highland Park, Hinsdale, Lake Forest, Libertyville, Mount Prospect, Naperville, Northbrook, Oak Brook, Palatine, Rolling Meadows, Schaumburg, Skokie, Oak Brook, Oak Park, Vernon Hills, Waukegan, Wheeling and Wilmette. Contact us anytime for a complimentary consultation.