The new federal electronic discovery rules become effective December 1, 2006.   Fed. R. Civ. P. 26, 33, 34, 37, and 45 are being amended to take into account the importance of electronic records in the discovery process.

Here are the pending rules amendments.

Thanks to the Minnesota Business Litigation blog for the reminder.

Lawyers may also want to stay tuned for a panel discussion of the new electronic discovery rules with Dennis Kennedy, Tom Mighell and Ron Friedmann of Prism Legal Consulting.

Dennis Kennedy also has a helpful electronic discovery resources page you may want to check out.

Many companies have policies covering Internet use, email, cell phones and other technologies.  But does your company have a policy covering blogs?  If not, you need to consider it.  Kevin O’Keefe of LexBlog posted an interesting article that appeared in Scotland’s National Newspaper regarding the need for companies to rewrite their employment contracts to cover blogs.

In Iowa, most employers hire employees on an "at will" basis rather than through an employment contract.  Accordingly, it is generally more applicable that Iowa employers consider rewriting their employee handbooks to cover blogs rather than employment contracts.

Like O’Keefe, I am not attempting to discourage blogging but it is definitely important for businesses to look before they leap with blogs.  Another issue is what happens if an employee writes derogatory remarks on a Web site unrelated to the employer.  It may cause nothing more than a minor embarrassment, but at worst, it has the potential to affect the company’s entire corporate image. 

You should consider contacting your employment lawyer to conduct a review of your employee handbook policies to see if you have adequately considered the issues involved with the blogging phenomenon. 

In my last post I talked about my reluctance to recommend do-it-yourself solutions when it comes to business contracts, Wills and other documents.  I know it is self-serving but I have just seen do-it-yourself solutions come back to haunt business people too many times to count.  If you are a business person you can pay now or pay later.  The paying later is the part you are likely to enjoy less.

Now I have come back to this issue because I saw two great blog posts directly on point.

New York business lawyer Imke Ratschko found the perfect example of a penny saved, pound foolish.  Imke pointed to an Entrepreneur article which says that the way you need to protect yourself is with a strong contract.  Good advice.  The crazy part is that the author says you don’t need to bring a lawyer in unless it is complex and worth millions.  Now I don’t know about you but most small businesses cannot necessarily afford to lose several thousand dollars, let alone over a million.

Compare this advice with what I found on Mindpetals: 

"There is no substitute for a competent, motivated representation . . . Your lawyer can better represent your interests if you have a rudimentary understanding of the laws, not just in an abstract, “I read the contract” kind of way, but in a practical, applied fashion. Knowing how to ask the right questions and request the right services can make the difference between mere success and real triumph."      

With every business contract, I recommend you at least talk to a business lawyer first to see how much it would cost to draft or review the contract.  You actually may be surprised (in a good way) at the cost.  Then you can make a cost benefit analysis.  It is helpful to have a rudimentary understanding of the laws but unless you are in the business of writing contracts I strongly suggest you leave that part to the business lawyer. 

As a business lawyer, I am reluctant to recommend do-it-yourself solutions.  I have seen many business people run into problems with do-it-yourself contracts, Wills and other documents.  With that caveat, the NOLO Web site is a great online resource.

The NOLO site covers several categories including:

1.  Business and Human Resources;

2.  Patents, Copyrights and & Art;

3.  Wills and Estate Planning;

4.  Property and Money;

5.  Family Law and Immigration;

6.  Rights and Disputes.

Again, I think business people are sometimes surprised to learn that contracts and other documents do not necessarily cost an arm and a leg when you visit a lawyer who regularly practices in business law.  By effectively using technology, many lawyers I know have been able to effectively reduce costs. 

However, I do agree with a recent post on Mindpetals.  There is no substitute for competent, motivated representation from a lawyer but the more you know about the law the better off you are.

Here is an update to the ongoing Iowa consumer case against Microsoft:

Polk County, Iowa District Court Judge Scott Rosenberg has ruled that Roxanne Conlin is allowed to try the case against Microsoft.  Microsoft had filed a motion attempting to exclude Conlin on the basis that she had engaged in misconduct when she persuaded a Hewlett-Packard technician to give her internal documents from another case.  Judge Rosenberg has found "no unethical or improper conduct by Ms. Conlin". 

So it’s game on.  Trial is set for November 13, 2006.

Congratulations to Des Moines attorney Steven Zumbach for his induction into the Iowa Business Hall of Fame.  In reviewing the list of inductees it looks like he is only the second practicing attorney inducted since 1975.  Zumbach is a partner in the Belin Lamson McCormick Zumbach Flynn law firm, a past chairman of the Greater Des Moines Committee and the Greater Des Moines Partnership and is a former member of the Iowa Board of Regents.

Also inducted into the Iowa Business Hall of Fame this year:

Roland and Mary Kemin – founders of Kemin Industries.  Kemin is a worldwide maker of animal and human nutritional products.

Russell Gerdin – founder of Heartland Express trucking company.  The company went public in 1986 and now has more than $450 million in annual revenue.

Read the Des Moines Register article about the inductees.

A blog post by the New Jersey Law Blog discusses the recent trend of franchisors’ attempts to expand the number of persons that will be covered under the non-competition clause in a franchise agreement.  Litigator John MacDonald believes that franchisors must have reasonably limited expectations when seeking to enforce non-competition agreements against franchisee spouses and relatives.

I agree with MacDonald.  I have reviewed franchise agreements on behalf of franchisees that sought non-competes against spouses.  But if the spouse is not involved in the franchise business I believe it raises serious questions about whether such a non-competition agreement is enforceable.  Some franchisors have been willing to take out the clause in negotiations while others have insisted the clause remain in the franchise agreement.  It will be interesting to follow this growing trend from franchisors and I would attempt to negotiate such a provision out of any franchise agreement you are considering if you are a prospective franchisee. 

I recently read an excellent reminder on corporate governance issues written by business and real estate lawyer Traci D. Ellis.   

Ellis wrote that good corporate governance is essential to running and growing a business. Here are some of her examples of good corporate governance:

  1. Hold regular board of director and shareholder meetings in accordance with the bylaws.
  2. Document those meetings with meeting minutes.
  3. Observe corporate formalities (e.g. segregating corporate assets from personal assets; adhering to the bylaws, etc.)

Also, she recommends you should review the shareholder agreement and bylaws regularly (at least annually) to ensure that they accurately reflect how the company is being run and amend them as necessary.

Thanks to Imke Ratschko of the New York Small Business Law Blog for leading me to Traci’s site.  I also found Alex Simpson’s Corporate and Securities Law Blog through Traci and Imke’s site.  All three of these blog sites contain informative articles on business and corporate law issues.  I recommend you check them out.

Where should I incorporate my small business?  I hear this question a lot from would be entrepreneurs in Iowa.  The question used to surprise me but after seeing the numerous advertisements for Delaware and Nevada corporations on the Internet I suppose it is a legitimate question.

Delaware has reputation and history on its side.  Delaware’s Division of Corporations boasts that more than a half a million business entities make their legal home in Delaware including more than 50% of all U.S. publicly-traded companies and 60% of the Fortune 500.  Businesses, especially large ones, choose Delaware because of the state’s business laws and respected Court of Chancery.  Corp Law Blog says it is because of Delaware’s predictability. 

Nevada has recently exploded in popularity for many businesses.  This is due to Nevada’s pro-business climate, low-tax mentality and the lack of an information sharing agreement with the IRS.

Delaware or Nevada may offer viable options for some companies but in general most Iowa small businesses are wise to incorporate in Iowa.  First, Iowa has very low fees when it comes to incorporating your business.  It is a $50.00 fee to file Articles of Incorporation for a domestic corporation in the state of Iowa.  Further, it only a $30.00 fee every two years for a biennial report if you file online.  These fees are extremely low compared to other states.

Second, you won’t avoid Iowa taxes by incorporating your Iowa small business in Nevada or Delaware.  The tax and corporation laws of Iowa will require you to register your company and pay fees as a foreign corporation in Iowa and you will be required to pay Iowa state income taxes for any income earned.  (You also do not avoid federal income taxes by incorporating in Nevada despite the lack of an information sharing agreement with the IRS).

And the perceived court advantages in Delaware?  That might be fine for a large business that is actually going to litigate a case in Delaware but it is probably not cost effective for most Iowa small businesses to litigate their cases in Delaware.  Besides unless you have well-written forum selection clause in contracts your Iowa small business will likely end up in Iowa courts anyway.

If you have questions regarding where you should incorporate your Iowa small business you should be sure to contact a business attorney licensed in Iowa. 

Iowa patent and technology lawyer Brett Trout recently posted about a couple of cases where bloggers were hit with big verdicts.  One of the verdicts included $11.3 million awarded to a Florida woman after being called a "crook", "con artist" and a "fraud" in an online post. 

This just points out that businesses must look before they leap with blogs.  Blogging raises a whole host of issues incuding copyright infringement, privacy issues and defamation.  I recall an instance on the Web where a former employee blasted an employer and then the employer openly discussed on the Web the circumstances of the employee’s departure.  The employee could have faced a defamation claim and also a claim for divulging trade secrets of the company regarding pay and product information.  On the other hand, the employer could have faced privacy claims for sharing the circumstances of the employee’s termination.

Companies considering a corporate blog should consider seeking advice from a lawyer with a good understanding of technology and blog law.

Often blogging is similar to email.  It is often a less formal method of communication and some bloggers don’t think it through before posting their words for the world to see.  So look before you leap when it comes to blogging.