Entrance of Walt Disney World in Orlando, FloridaUncle Pennybags plans to build a hotel on Marvin Gardens, but to do so, he needs to acquire adjacent properties on Atlantic Avenue, owned by Charles Darrow, and Ventnor Avenue, owned by George Parker. Pennybags knows that if Darrow or Parker knew of his plans, they would demand a higher price for their properties and a still higher price would be demanded by the last lot owner to sell. So Pennybags forms a dummy company called Acme Acquisitions, LLC and appoints his good friend, Lizzie Magie, as its president. Magie approaches Darrow and Parker, who both agree to sell their properties to Acme Acquisitions on favorable terms. After the contracts have been signed, Pennybags announces that he is the true purchaser and that he plans to build his hotel. Furious, Darrow and Parker refuse to consummate the transaction, so Pennybags sues. Are Darrow and Parker out of luck?
Continue Reading Using a Dummy Company Can Be a Smart Business Decision

Ernest “Big Daddy” Bux’s great Auntie Heidi Loper moved to a retirement community when her husband Sam retired years go. A short time later, Sam died. Over the years Heidi’s handyman Don Meetdirts and his wife Ada befriended Heidi. They persuaded her to leave them millions of dollars in cash and other items. Prior Wills would have left Heidi’s property to her family of whom she was very proud – both of the Bux family name and of the assets she and Sam had acquired. When the Wills were changed, Heidi had failing eyesight, deteriorating health and a delicate mental condition. When Big Daddy and the Bux family learned at Auntie Loper’s death that the Meetdirts were the only beneficiaries under the last Will, they asked their favorite attorney if they have a claim of undue influence to deny the Meetdirts any inheritance. Do they?
Continue Reading Grandma Left the Money to Whom? Legal Options for Undue Influence and Changing of Wills

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Wanting to diversify his investments, Ernest “Big Daddy” Bux signed a franchise agreement with GA Fitness last year. Construction by Big Daddy’s contractor Bill Toosuit is scheduled to be completed for in time for an early May grand opening in the new strip center owned and managed by Mawl & Mawl. Last week, in response to the COVID-19 pandemic, the town’s mayor and the state governor prohibited any gathering of more than 10 people and directed that all bars, restaurants and gymnasiums close. Now that gymnasiums are prohibited from opening, Big Daddy’s business is almost certain to fail, and Mawl & Mawl loses a tenant. If Big Daddy stops construction and buys out his current lease obligation, Bill Toosuit loses his construction project and Mawl & Mawl loses a long-term tenant. Can Big Daddy get out of his lease obligations? And his construction contract? Are there other options to get to a win-win?
Continue Reading Can COVID-19 Trigger a Force Majeure Defense?

Woman hangs a card with information about the store closing on a shop window due to the coronavirusWanting to diversify his investments, Ernest “Big Daddy” Bux signed a franchise agreement with GA Fitness last year. Construction by Big Daddy’s contractor Bill Toosuit is scheduled to be completed for in time for an early May grand opening in the new strip center owned and managed by Mawl & Mawl. Last week, in response to the COVID-19 pandemic, the town’s mayor and the state governor prohibited any gathering of more than 10 people and directed that all bars, restaurants and gymnasiums close. Now that gymnasiums are prohibited from opening, Big Daddy’s business is almost certain to fail, and Mawl & Mawl loses a tenant. If Big Daddy stops construction and buys out his current lease obligation, Bill Toosuit loses his construction project and Mawl & Mawl loses a long-term tenant. Can Big Daddy get out of his lease obligations? And his construction contract? Are there other options to get to a win-win?
Continue Reading Can COVID-19 Make a Contract Impossible to Perform?

businessman hands tearing apart money banknote into two peaces. vector illustration in flat designIn this series on defining wins in litigation, we’ve talked about defining the goals and strategies at the outset, clear and open communication, and the benefits of resolving a dispute both financially and reputationally.  The final piece in this series discusses why mitigating the plaintiff’s damage recovery can also be a “win”.  I can speak from experience because I have effectively used this strategy for a client.

Suppose your customer accuses your company of taking certain actions that violated the terms of your contract.  After digging into the contract and some other communications between the parties, it is clear you breached the contract.  It also appears that your employees’ actions violate a statute that allows the customer to recover punitive damages.  The customer claims $500,000 in compensatory damages, and wants another $3 million in punitive damages.  What do you do from a litigation strategy standpoint?
Continue Reading Defining a Win in Litigation: Mitigating Losses

Feedback online or review on computer laptop concept vector illustration, flat cartoon pc with voting hands thumbs gesture and reviews stars, idea of like or dislike symbolsIf your business provides consumer-oriented goods or services, your reputation is very important to you.  When I use the term “consumer-oriented,” I mean goods or services that are primarily used for personal or household purposes.  That is not to say that businesses that do not directly affect consumers are not worried about their reputations.  In fact, they are, because reputation means everything.

Suppose one of your customers claims one of your employees stole an item while they were at the customer’s home making repairs.  You interviewed all of the employees who were at the customer’s home.  None of them saw the item in question.  You speak to the homeowner, and discover that your employees were working in a completely different part of the house than where the homeowner keeps the item.  You looked in the company vehicles and do not see any evidence of the item.  The only thing supporting the customer’s claim is that the customer was not home at the time your employees were there.  The customer files a police report.  Your team cooperates, and the police do not find sufficient evidence to support any charges.  The customer is insistent that your employees took the item, and is threatening to sue.  What do you do?
Continue Reading Defining a Win in Litigation: Saving Reputational Costs

tornado over the house (3d rendering)Henry Gale was having difficulty leasing his modest four-bedroom house in North Dallas. But his fortunes changed when multiple tornadoes blew through the city in late October, damaging multiple nearby homes. Suddenly faced with several offers, Henry doubled his rental rate and signed a twelve-month lease with the Diggs, a family whose home was undergoing a lengthy restoration due to tornado damage. But Henry’s elation turns to despair the next month when the Diggs sue him for “price gouging.” Are dark skies ahead for Henry?
Continue Reading Price Gouging Law in Texas: How it Works and How it Backfires

My last article pointed out a situation where parties conflate contractual indemnity and damages clauses.  The standard language in Dunce’s Caps’ contract provided for an indemnification of “any and all losses arising from any breach of any representation or warranty in the agreement” and capped those losses at the price of the order. When Dunce’s failed to deliver the promised 100,000 hats, Flat Backs filed an arbitration action seeking recovery of an alleged $4 million in damages, even though the purchase order price was only $500,000. Ignoring Dunce’s damages cap argument, the arbitrator Terry B.L. Judge awarded Flat Backs the full $4 million. Arguing that Judge was not permitted to award Flat Backs more than $500,000, Dunce’s appealed to the state court seeking to overturn the arbitration award because Judge exceeded his jurisdictional limits. Did Dunce’s contractual indemnification provision operate as a cap on the damages that Flat Backs could recover for Dunce’s breach of contract?
Continue Reading The Case of Mistaken Indemnity, Part 2

Struggling these last several months with the family dynamics and dilemmas of transitioning his family business to the next generation, Big Daddy Ernest Bux, 65, now turns to ordinary, practical considerations. What are Big Daddy’s businesses worth, and do they have sufficient value/cash flow to accomplish his plans? Will Big Daddy’s estate planning cover the estate taxes and transfer estate assets consistent with his plans and goals?

Continue Reading Family Matters: Can a Family Business Succeed Without Maximum Valuation and Sound Estate Planning?

Nifty Counsel, Dunce’s Caps in-house lawyer, came up with what he thought was a brilliant way to minimize the company’s liability to its customers.  Nifty added arbitration provisions to Dunce’s customer purchase order agreements, and included language that the customer agreed the arbitrator could not award the customer damages exceeding the price of the order.  Flat Backs, a major retail hat company, filed an arbitration action against Dunce’s after Dunce’s failed to deliver 100,000 Auburn Tigers 2019 NCAA Men’s Basketball Champions hats.[1]  The demand for arbitration alleged $4 million in damages, even though the purchase order price was only $500,000.  Terry B.L. Judge, the arbitrator, ignored Dunce’s arguments that the purchase order’s arbitration clause prohibited Judge from awarding Flat Backs more than $500,000, and awarded Flat Backs the requested $4 million.  Dunce’s then asked a court to overturn the arbitration award for the same reason – Judge exceeded his jurisdictional limits.    
Continue Reading The Case of Mistaken Indemnity