Protect Your Confidential Business Information

I often see cases involving the theft of confidential business information by former employees. Attorney Eric Roth has some helpful tips in a recent blog post on how to deal with the problem.

The main take away reminder in my opinion is to take action to protect your trade secrets BEFORE it becomes a problem. As an example, develop confidential information policies in your business to take steps to protect your information including restrictive covenants and send a reminder letter to departing employees of their obligations not to use the confidential business information or violate any non-compete agreements. Conducting a review of a departing employees’ emails is an excellent place to start in order to find out whether confidential information is being downloaded or taken by the employee. Another good idea is to have an exit interview with employees where they return all materials and where you discuss the continuing obligations to your business despite the end of the employee relationship.

Protecting your confidential business information is critical for most employers. Take steps to protect that information now before it is too late.

Roles of Shareholders, Directors and Officers in Closely Held Businesses

I came across this blog post from the Family Business Advocates Blog and thought it was worth sharing. The post describes the various roles of shareholders, directors and officers in closely held family businesses. It’s good information on a topic that is often misunderstood by small business owners.

Read the post here.

Iowa Governor Branstad to Cut $7.7 Million from Judiciary Budget

Governor Branstad announced his proposed budget yesterday with $110 million in cuts. This includes $7.7 million in budget cuts for the judiciary.

The budget cuts in the judiciary are alarming. Today, Chief Justice Mark Cady will give his state of the judiciary address. It will be interesting to hear his comments based upon the fact that past cuts have already thinned out resources for our judicial branch.

I’ll be frank. I did not know there was $7.7 million left to cut from our judicial branch based upon past cuts. Iowans need access to judiciary services and the governor’s proposed budget threatens access to justice for our citizens. This will be a challenge for our judiciary to say the least.

Best Lawyers in America® Recognition for Brick Gentry Lawyers

Several Brick Gentry lawyers were recently recognized by Best Lawyers in America® for 2016-2017.

See the full article here.

Rush Nigut was named one of the Best Lawyers in America® in three categories including:

  • Business Organizations (including LLCs and Partnerships) (Firm receiving a Tier I rating);
  • Closely Held Companies and Family Business Law
  • Franchise Law (Firm receiving a Tier I rating).

Best Lawyers® is the oldest and most respected peer-review publication in the legal profession. Since the first published edition in 1983, it has grown to be widely recognized by clients and legal professionals alike as a significant honor and the most reliable source of legal referrals. The 23rd Edition covers all 50 states and the District of Columbia, and inclusion is based on more than 7.3 million detailed evaluations of lawyers by other lawyers.

Square One DSM Startup Stories to Feature iEmergent

Laird Hedlund Nossuli, CEO, and Bernard Nossuli, COO will join Mike Colwell for the September edition of Square One DSM Startup Stories to share the tale of a vision conceived and brought to life by company founder and Laird’s late father Dennis Hedlund.

I have had the good fortune of working with this company and its executives. Their story is good one.

Here is an excerpt from the Square One DSM press release:

A fairly circuitous path led to the creation of iEmergent and its cloud based tool, Mortgage Market Smart. Dennis Hedlund, after many years as an executive in telecommunications and mortgage companies, saw an opportunity to apply the forecasting methods he had developed for large call centers to quantifying future market opportunities for mortgage lenders. Taking the entrepreneurial leap, he left Wells Fargo and began studying decades of data from a wide variety of public and private sources. He identified unique patterns that would ultimately lead to the development of the iEmergent forecasting model…

Diversifying over the years through product development and service offerings, they have penetrated not only the large national businesses and regional lenders but are now targeting the smaller community institutions with data, products and resources that are tailored to each institution’s size and complexity…

Laird, along with her sister and mother initially joined her father in his pursuit of growing the company. Although both sisters would step away for a while to continue their educations, circumstances called Laird to take the helm as CEO, with the illness and untimely passing of her father. “I had to take the reins in a way I was not at all prepared to do,” confesses this Swarthmore graduate in Religion, who also holds a Masters in Social Work. As she reflected on those challenging times, Laird states “you just keep moving forward, staying true to your goals and your visions,” foreshadowing some of the insights she can share with the Startup Stories audience…

Laird’s husband Bernard came on board as COO at the time of her father’s illness, taking his own entrepreneurial leap leaving a position at DuPont, to help the company continue. “While it is something of a double edged sword, being small and nimble has served us well,” he adds, anxious to share the value they have found in augmenting their in-house skills as needed through outsourcing, consulting and contracting.

Details on the event:

$15 admission fee (includes lunch) or free (if you don’t want lunch).

11: 30 a.m.
September 21st 2016
Greater Des Moines Partnership

700 Locust Street, Suite 100

Conference Center (street level)

Purchase your tickets/make reservations – http://members.desmoinesmetro.com/events/details/september-startup-stories-53786

Contact at info@squareonedsm.com for more information.

Coaches Beware! Lawsuits to Become New Norm?

It was reported that Iowa State women’s basketball coach Bill Fennelly and ISU have been sued by former player Nikki Moody. Fennelly is known as a “passionate” and “demanding” coach. In other words, he isn’t afraid to “get after” players in order to motivate them. Moody obviously took exception to his techniques and has alleged the coach caused a “hostile” work environment because of “racial harassment.” Moody alleges that Fennelly treated black women and other minorities differently than white players because of their race. Much of the complaint focuses on the fact that Fennelly allegedly referred to Moody (and another black player) as “thugs.” Many former players in particular have spoken out in support of Fennelly.

The lawsuit should be a wake up call for all coaches. Many coaches are considered “passionate” and “demanding” by players and parents. Often these coaches may use “colorful” language when talking with their players. Some players may be able to handle it and others may not. Some players may be more of a target than others in practice and games for various reasons, whether it relates to performance, attention span, hustle, desire, respectfulness or dozens of other reasons. And sometimes coaches may simply go too far in the manner with their passionate and demanding approach.

Does that mean coaches need to be soft on players? I don’t think so. Coaches can still demand much of their players. But coaches also need to be aware of what they say and how they say it. Cursing by coaches has long been generally accepted (particularly at the college and pro levels), but it is a bad idea. So is calling your players derogatory names and making threats to them (whether it relates to playing time, expulsion from the team or other issues). I am not saying Bill Fennelly engaged in that type of behavior. I don’t know the facts. But I have been around the fields and courts enough to know that coaches engage in that sort of behavior frequently. Coaches get upset and emotional. It happens. But insulting and berating players shouldn’t be accepted and all too often that is what happens.

Lawsuits like Moody’s are not new. The University of Illinois was also sued this past year for allegedly creating a racially hostile environment. The players initially demanded $10 million but eventually settle the case for $375,000. An assistant coach was fired as a result. Many coaches will need to adjust their behavior or else they will become targets. I also expect these lawsuits to continue to trickle down from the college and high school ranks down into AAU and other youth related programs. (Programs better make sure their insurance covers them for these sorts of lawsuits). In the end, the Moody v. ISU case will likely resolve itself with a settlement short of trial. It seems too risky for a collegiate coach to have their dirty laundry aired in a public setting. It would be horrible for recruiting. And that’s exactly why these cases will become the new norm.

Read the entire Moody petition here.

Important Reminder: Review Your Estate Plan

There is a really good article in the Des Moines Register today written by Frank Mokosak discussing how a periodic review of your estate plan will alert you to any necessary changes. It seems to come in waves in my legal practice but recently I have had a number of clients need to change their Wills and estate planning documents for one reason or another.

According to the article, events leading to a review include:

  • Change in your marital status
  • Addition to your family through birth, adoption or marriage (stepchildren)
  • Death or incapacitation of spouse or family member
  • Spouse, parents or other family member has become dependent on you
  • Substantial change in the value of your assets or your plans for their use
  • Receipt of a sizable inheritance or gift
  • Change in income level or income requirements
  • Retirement
  • You have plans to change any part of your estate plan

The article also discusses some specific provisions to review including, but not limited to:

  • Who are your family members and friends? How do you feel about them?
  • Do you have a valid will? Does it reflect your current goals and wishes? Does your choice of an executor or a guardian for your minor children remain appropriate?
  • In the event you become incapacitated, do you have a living will, durable power of attorney for health care or Do Not Resuscitate order to manage medical decisions?
  • What property do you own and how is it titled?
  • Have you reviewed your beneficiary designations for your retirement plans and life insurance policies?
  • Do you have any trusts, living or testamentary?
  • Do you plan to make any lifetime gifts to family members or friends?
  • Do you have plans for charitable gifts or bequests?
  • If you own or co-own a business, have provisions been made to transfer your business interest? Is there a buy-sell agreement with adequate funding? Would lifetime gifts be appropriate?
  • Do you own sufficient life insurance to meet your needs at death?
  • Have you considered the impact of gift, estate, generation-skipping and income taxes, both federal and state?

We have all seen circumstances where the unexpected has occurred. It’s just a super idea to take a look at your Will and estate planning documents periodically, preferably annually. If changes need to be made, don’t sit on it. Usually people think most about their estate documents around the holidays when family is together. But for some reason it’s human nature to put off the completion of documents even after engaging a lawyer to draft them. And get comfortable with the idea of discussing your estate. It is understandable that people do not want to talk about issues surrounding death but as one person I met recently pointed out in a somewhat joking, but truthful way, “Ain’t none of us getting out of this alive.”

Individual Liability for Employer Wage and Hour Violations? Be Careful in California

I read an article this past weekend indicating that INDIVIDUALS in California may have liability for wage and hour violations of employers. A scary thought for employee managers indeed.

“…Enterprising members of the plaintiffs’ bar have recently sought to read the new law as authorizing a private right of action against individual managers. These lawyers have seized upon a legislative oversight. Although 12 of the 13 bill’s enactments refer to the Labor Commissioner, the 13th provision—Section 558.1 of the Labor Code—does not expressly mention “Labor Commissioner.” These lawyers have seized upon this obvious oversight to argue that Section 558.1 goes further than its 12 companion provisions and somehow creates a private right of action against individuals.”

That means potential personal liability for managers in California relating to  unpaid overtime, unpaid minimum wage, denied meal/rest breaks, untimely termination pay, inadequate wage statements, and failure to reimburse for employee business expenses.

Fortunately for Iowa based managers within companies, there are not currently provisions under Iowa law that would hold a manager personally liable for such violations as the language in the Iowa wage payment collection statute is limited to an “employer”. But if you are an employer from Iowa with California operations and employees, this is something to put on your radar screen. The author of the article warns employers would be well-advised to take proactive measures to ensure compliance with California’s unique wage and hour landscape, such as auditing current pay practices and policies. It is expected the courts will remedy the interpretation in California but you just never know about the courts so this will be an interesting issue to follow.

 

 

Former Franchisee Defeats Non-Compete Claim

In a recent case decided against AAMCO, a former franchisee and his spouse defeated a non-compete claim. The Florida franchisee had sold his AAMCO franchise after 21 years and opened a new business more than 90 miles from his former franchise location. The non-compete prohibited the franchisee from opening up a competing business within 10 miles of the former franchise location OR within 10 miles of ANY other franchise location. The former franchisee’s new business location was 1.4 miles from another AAMCO franchise location.

The franchisee argued that the non-compete effectively prevented them from opening anywhere on the Florida Gulf Coast. The franchisee had not taken any of their former AAMCO clients with them and there was no evidence the franchisee used the AAMCO name, mark or goodwill in any manner.

The judge agreed with the franchisee and ruled that the non-compete was overly broad and unduly burdensome because the agreement was not narrowly tailored to protect AAMCO’s business interests. The judge modified the non-compete to read that the franchisee could not compete within 10 miles of its former location for a period of two years.

This favorable decision is significant for franchisees. Many Iowa franchisees sign franchise agreements that contain similar non-compete restrictions. The arguments in this case provides some good ammunition for trying to defeat similar franchise non-competes here in Iowa. Iowa judges are permitted to revise non-competes if they believe the restrictions are not reasonable to protect the necessary business interests of the franchise. I could see a similar result happening in Iowa courts under the right circumstances.

 

Investigate Franchises Carefully Before Investing or Buying

In the Des Moines Register today there is an article about a food truck franchiser that allegedly got cross-wise with investors and franchisees. The article shows just how critical it is to perform due diligence when it relates to franchises (or any other business opportunity). I have a number of posts available I have written over the years on franchise due diligence.

But what’s interesting to me is that investors were actually asked for smaller sums of money (example $14,000) than what you might ordinarily expect for a national franchise operation. In my experience if someone is asking for you to “invest” in their business in smaller amounts such as $10,000 to $20,000, be very careful. This may be a sign of someone who is merely looking to meet a short-term cash deficit/problem rather than someone who is actually looking for a long-term investor. Business “investors” are typically asked for larger sums of money such as $100,000 and above. The individuals asked to “invest” the smaller sums of money almost always have a more difficult time getting their money back. To compound the problem agreements of this smaller nature are often not reviewed by lawyers (or sometimes lack a written agreement entirely) and almost always lack key terms to provide recourse and collateral for the investor.

Buyer beware!

 

LexBlog