August 2021 – Foldenauer

When Business Partners Disagree About Whether to Resolve Their Disputes Through Arbitration or Litigation

September 17, 2021August 27, 2021 by foldenauer.law

Litigation, where parties in a dispute present their respective sides of the story in front of a judge, is typically stressful and expensive. Therefore, many business partnership contracts include arbitration clauses that require the parties to resolve their disputes outside of court in the presence of an arbitrator. On the one hand, arbitration can allow the parties to resolve their disagreements relatively quickly and inexpensively. On the other hand, it is harder to ensure the impartiality of arbitrators than of judges, and the party that insisted on arbitration from the beginning is usually at a major advantage. Whether to follow an arbitration agreement or proceed to litigation is not always a straightforward matter. If you are involved in a dispute with your business partner and are wondering whether arbitration is a satisfactory path for resolution, contact a San Diego business partnership dispute lawyer.

The Dentons Arbitration Dispute

The complexities of whether to arbitrate or litigate can be seen in the following example. Dentons is the fifth largest law firm in the world, with offices in several U.S. cities and in 76 other countries. It is involved in an ongoing dispute in which two of its partners have accused each other of shady or fraudulent activity. The problems started when Jinshu John Zhang, a Dentons partner, won a $35 million contingency fee. Zhang claims that he was within his rights as an agent of Dentons to have part of the fee paid directly to him, but Dentons CEO Mike McNamara claimed that Zhang’s actions constituted self-dealing. Zhang, meanwhile, alleged that McNamara had forged a letter from a client, ordering a payment sent directly to Dentons. In the spring of 2021, Zhang emailed the U.S. board, describing McNamara as a “massive fraud” and calling for his removal as CEO. On May 5, Dentons terminated Zhang’s employment, and on July 2, it removed McNamara from his position. Zhang claims that Dentons wrongfully terminated his agreement in retaliation after he reported McNamara’s alleged wrongdoing to the board. Dentons claims that Zhang’s allegations against McNamara are “false and slanderous.”

Zhang filed a lawsuit against Dentons in California, pursuant to the California Labor Code. Meanwhile, the parties also engaged in arbitration in New York, and the California courts paused the case, pursuant to the California Code of Civil Procedure. In August 2021, the California court ruled to honor the New York arbitration agreement. Now Zhang must withdraw his lawsuit from the California court and pay $30,000 in fees.

The moral of the story is that the question of arbitration versus litigation is not a simple matter. A business law attorney can help you figure out which California laws apply to your case and can help you proceed appropriately with arbitration, litigation, or both.

Contact Foldenauer Law Group About Complex Business Partner Disputes

A business dispute lawyer can help you if you have tried to resolve your dispute with your business partner through arbitration, but doing so only made things uglier. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Hiring a Cybersecurity Team is Cheaper Than Dealing With Liability Lawsuits

September 17, 2021August 25, 2021 by foldenauer.law

The thought of so many entities possessing your identity information and financial data is terrifying. Think about all the websites on which you have ever entered your credit card information and date of birth; if one of those websites is hacked, the bad guys can use your information to do all sorts of financial damage. As a business owner, though, you have a bigger worry. What if thousands of people, everyone who has ever worked for your company and every customer who has ever kept their credit card information on file with you, get their information stolen when your company’s computers get hacked, and they all blame you? The money it will cost you to fight or settle all those lawsuits will be significant, and it could jeopardize your company’s ability to stay afloat. If you are facing liability lawsuits after your company’s data was compromised, contact a San Diego business law attorney.

Why Data Breaches are a Nightmare for Businesses

People who suffer economic harm because of negligence on the part of a business have the right to file a liability lawsuit against the business and seek damages. Negligence means that the business breached the duty of care to use reasonable caution to protect customers from harm, economic and otherwise. You often hear about customers suing companies after getting injured at a retail store or restaurant for failing to keep the premises safe. If there is an account takeover or data breach at your company, the customers whose data is stolen can sue you for the financial losses they suffered because of the hacking incident. If they can argue that you failed to use reasonable caution to protect their data, the court may award them damages.

Cybersecurity: An Ounce of Prevention is Worth a Pound of Cure

The best way to avoid lawsuits about stolen customer data is to beef up your cybersecurity. There is no excuse not to use multi-factor authentication and to require strong passwords. All but the smallest businesses need more than one person whose job is to protect employees’ and customers’ data. Even if hiring full-time cybersecurity experts is beyond your budget, you should have an external cybersecurity firm perform vulnerability assessments of your systems periodically. When the WannaCry ransomware attack targeted large companies in 2017, some of the companies got sued. The basis for many of these lawsuits stemmed from the companies’ failure to update and implement the Microsoft patch to protect against the malware.But the companies with adequate cybersecurity standards and assessments had applied the patch and protected themselves.

Contact Foldenauer Law Group About Data Breach Claims

A business lawyer can help you defend your business against claims by people whose data was stolen in an account takeover of your company’s systems. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Yes, At-Will Employees Can Sue You for Wrongful Termination in California

September 17, 2021August 20, 2021 by foldenauer.law

Under California’s at-will employment laws, you can fire employees for any reason, except when you can’t. The most obvious example is when you have signed an employment contract that guarantees the employee’s job until a certain date; if you fire an employee in that situation, they can sue you for breach of contract, as well as wrongful termination. At-will employees can also sue for wrongful termination under certain circumstances, even if the employee handbook clearly states that the employer has the right to terminate the employment relationship at any time and for any reason. If your decision to fire the employee violates public policy or anti-discrimination laws, an at-will employee can still sue you for wrongful termination. If you need to let some of your employees go and want to avoid lawsuits, or if a former employee is claiming that you terminated their employment unjustly, contact a San Diego business law attorney.

What Do At-Will Employment Laws Give You the Right to Do?

At-will employment laws give you the right to fire an employee for poor job performance or misconduct, but you also have the right to terminate an employee even if the employee has done everything right. Many decisions to fire employees stem from financial considerations. The costs of employing even one person are substantial; not only do you pay their wages or salary, but also taxes, and if you provide health insurance benefits, your costs are even higher. For example, the employer simply may not be able to afford so many workers on the payroll. With all the uncertainty as the COVID-19 pandemic drags on, it is hard for many employers to keep their entire pre-pandemic staff on the payroll.

Is it a Coincidence That You Fired an Employee Soon After They Engaged in a Protected Activity?

An employee has the right to sue their employer for wrongful termination if the employer fires the employee as retaliation (punishment) for engaging in a protected activity. The following are examples of protected activities:

Complaining about racial or gender discrimination in the workplace, or threatening to complain about discrimination
Requesting reasonable accommodations for a disability or a religious obligation (such as breaks to perform prayers or permission to wear religiously prescribed clothing at work)
Taking time off from work for jury duty
Requesting an FMLA leave for medical or family caregiving reasons
Filing a workers’ compensation claim about a work injury
Refusing to follow the employer’s instructions to do something illegal
Reporting illegal activity or violations of regulations on the employer’s part

Wrongful termination disputes sometimes arise when an employee engages in a protected action and subsequently loses their job in a “corporate restructuring.” Your lawyer can help you assess your rights to terminate an employment relationship.

Contact Foldenauer Law Group About Wrongful Termination Claims

A business dispute lawyer can help you defend your business against claims by former employees who allege that you wrongfully terminated their employment. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Co-Founding a Startup With a Friend: What Could Go Wrong?

September 17, 2021August 18, 2021 by foldenauer.law

Few things are more fun than brainstorming with a like-minded friend about ideas that can change the world. At first, it seems like implementing the ideas and sharing your brilliant spark with the world could not be more fun, but eventually you will have to face lots of harsh realities. How many people have married their soulmates only to find their marriages plagued by conflict about money? The same can happen when friends start a business together; you become financial partners, and having similar ideas about your company does not automatically translate into having similar ideas about money. The following are three common sources of conflict between startup co-founders. A San Diego business partnership dispute lawyer can help you resolve them.

Dividing the Workload and the Profits

When the project is fun and aspirational, no one thinks about who puts in how much work because the work is its own reward. Once your idea becomes a business venture, you should put in writing what each partner’s responsibilities are and what share of the profits each person will receive, if and when the company becomes profitable. You should also formalize decisions about salaries for the phase when your startup is operating with modest funds. Skipping over these basics is a recipe for resentment if one co-founder gets to spend his day enthusing on social media about the product and sweet-talking influencers while the other spends their days schlepping to the post office to ship orders and responding to emails with customer complaints.

When and How to Go Big

Nothing sows discord among friends like the promise of wealth. The fun of owning a small business is at risk when the officials in suits (or, perhaps in this generation, in cargo shorts) show up and start talking about huge amounts of money. Once you start getting offers from big time investors, you should talk to a lawyer about formalizing an agreement with them, so that all the co-founders can be confident that they are getting a fair deal.

When and How to Get Out of the Game

One of the most conflict-prone aspects of operating a startup is when one of the partners decides to leave the business, or when the other partners want to force them out. Sometimes the partner who is leaving the day-to-day operations wants to keep some ownership in the business, which could become much more valuable if the company goes big later on. For these reasons, your initial business organizing documents should spell out in writing how to handle buyouts, transfers of ownership, and dissolution of the company. There is even more room for things to get ugly if one partner accuses another of mismanagement of the company’s finances.

Contact Foldenauer Law Group About Startup Partner Disputes

A business partner dispute lawyer can help you prevent and resolve disputes among the partners in a startup at any phase in the company’s life cycle. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Resort to the Law, Not to Lawlessness, When Business Partnerships Go Bad

September 17, 2021August 13, 2021 by foldenauer.law

More than half of all business partnerships end with the business dissolving because of a dispute between the owners. The business partners who stay together until they retire or until they agree that one partner will buy out the other’s ownership interest are the exception to the rule; they only account for about 30% of cases. Business partnership breakups that are messy enough to require the intervention of a judge are about as common as divorces messy enough to require the intervention of a judge.

Take the dispute between two owners of real estate properties rented out to legal cannabis dispensaries described below as an example. If you no longer see eye to eye with your business partner, contact a San Diego business partnership dispute lawyer before your business partner shows their worst side.

Lawsuit Over San Diego Cannabis Businesses Turns Ugly

Salam Razuki and Ninus Malan owned several legal cannabis businesses in the San Diego area together, but by 2018 their partnership had gone bad. Razuki sued Malan for control of the Balboa Avenue Cooperative in Kearny Mesa. While the lawsuit played out in court, Razuki took to intimidating Malan by hiring gang members to threaten him and steal his mail. In August, Malan filed a restraining order against Razuki.

Razuki and two other business partners, Sylvia Gonzales and Elizabeth Juarez, conspired to hire a hitman to kill Malan. Razuki said that he was tired of his disputes with Malan in civil court costing so much money. They met with the hitman early in the fall of 2018 and discussed a plan where the hitman would persuade Malan to travel with him to Tijuana in November, at which point the dirty deed would take place. Gonzales went across the street to Golden Bloom, another cannabis dispensary the parties owned, and withdrew $1,000 in cash, which she gave to the hitman as a deposit.

As it turned out, the “hitman” was actually an FBI informant. In November, the informant met with Razuki and claimed to have killed Malan, After which, the informant arrested Razuki, who was later charged with conspiracy to commit murder. Then, in August 2019, Malan filed a civil lawsuit against Razuki, seeking money damages for the emotional distress Razuki had caused him.

Contact Foldenauer Law Group About Bitter Disputes Between Business Partners

Most breakups of business partnerships do not devolve into physical violence, but they can still get very unpleasant. A business dispute lawyer can help you resolve your differences with the business partner from whom you have been trying to separate yourself. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Jack in the Box Settles Lawsuit With Franchisees After New CEO Assumes Role

September 17, 2021August 11, 2021 by foldenauer.law

Operating a company on a franchise model can be profitable both for the parent company and for the small business owners that operate individual franchise locations (called “franchisees”). The parties get to divide the decision-making responsibility in a way that makes sense. The parent company is responsible for deciding the brand’s direction and projecting an image that resonates with customers, while the franchisees are responsible for the operation of their own franchise locations. The parties also share expenses and profits, and this is often the cause of disputes between franchise owners and the company with which they franchise. For example, Jack in the Box restaurants recently settled a lawsuit with a group of its franchisees, but in this case, the issue was transparency about marketing efforts. If you are a franchise owner involved in a dispute with the company from which you franchise, contact a San Diego business law attorney.

Franchisees Have Had Enough of Jack in the Box Clowning Around With the “Advertising Budget”

Jack in the Box hamburger restaurants have been a recognizable fixture in San Diego since the 1950s, and the company has successfully conducted some memorable advertising campaigns: from the “Jack’s Back” commercials in the 1990s to the bowl haircut commercials of the fall of 2009. It has also had its share of image problems, such as when shipments of meat from Australia, destined for U.S. restaurants, were supposed to contain beef but actually contained horse meat and kangaroo meat, and the less said about the “Angus beef” controversy of 2007, the better.

The dispute that settled between Jack in the Box and a group of its franchisees was something different, however. The franchisees were frustrated because, starting in 2017, sales at most of the restaurant’s locations declined, and the franchisees blamed insufficient advertising. They alleged that Jack in the Box CEO Lenny Comma was making irresponsible cuts to the advertising budget, and to make matters worse, he refused to show them the budget when asked. The franchisees began to call for the removal of Comma. The company, however, did not remove him. Instead, he left the company when he retired in early 2020. The new CEO, Darin Haris, was much more accommodating to the franchisees. In late 2020, Haris settled the lawsuit with the franchisees. The details of the settlement have not become public, so it is unclear how much money the franchisees received.

Even though this lawsuit settled, reaching an agreement cost a lot of money for the franchisees and for the Jack in the Box. The sooner you contact a business law attorney, the sooner you can stop losing money and start finding solutions.

Contact Foldenauer Law Group About Franchise Disputes

A business dispute lawyer can help you resolve your differences with the company from which you franchise a restaurant or other kind of business, and the sooner you contact a lawyer, the better. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Independent Contractors Can Sue for Employment Discrimination Too

September 17, 2021August 6, 2021 by foldenauer.law

Earlier this year, the California Department of Fair Employment and Housing (DFEH) filed an anti-discrimination lawsuit against the video game company Activision Blizzard. The lawsuit was brought on behalf of women who allegedly experienced harassment and a hostile work environment and who did not receive fair pay while working for the company. This month, the DFEH expanded the lawsuit to include not only former employees but also women who had worked for Activision Blizzard on a temporary basis, as independent contractors. One of the changes DFEH made in the amended complaint was to refer to the plaintiffs as “workers” instead of “employees,” since the company did not classify all of them as employees. This lawsuit is a manifestation of two widespread problems. The first is the “frat boy” culture of entitlement and sexual harassment, which is widely documented in California’s video game industry. The second is an even more pervasive problem, that of the gig economy, where employers classify as many workers as possible as independent contractors in order to avoid giving them the basic rights due to employees. If a former employee or former independent contractor is suing your company or threatening to sue your company for discrimination, contact a San Diego business law attorney.

Employment Protections for Non-Employee Workers

Many women who worked for Activision Blizzard, whether full time or on a temporary basis, felt that the company treated them unfairly. They characterized their work environment as a “video game bro” culture, where sexual harassment and disrespectful treatment of women were frequent occurrences. The company gave the women who worked there an unsustainably heavy workload, while paying them less than it paid men who did less work. At first, the women tried to resolve the issue by bringing their complaints to administrators within the company, but the administrators did not seem to take the matter seriously. Therefore, they brought their complaints to the DFEH, which filed the referenced lawsuit.

Protection against employment discrimination is not just for employees who receive a W-2 at the end of each tax year. If this were not the case, employers could get around the law by only hiring independent contractors and issuing 1099s to everyone. This is why workers, whether they are employees or independent contractors, have the right to file a discrimination complaint if their employer treats them unfairly based on their race, gender, religion, nationality, age, or disability (these are known as “protected characteristics”). Paying a worker less because of a protected characteristic is a form of discrimination, as is workplace harassment and retaliating against workers who complain about discrimination.

Contact Foldenauer Law Group About Employment Discrimination Complaints

Employment discrimination lawsuits take a long time and have many steps. The sooner you hire a lawyer, the better. A business dispute lawyer can help you resolve conflicts with employees who allege workplace discrimination, before or after the employees notify the DFEH of their complaints. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Are Your Trade Secrets Safe Under the New Restrictions on Non-Compete Agreements?

August 17, 2021August 4, 2021 by foldenauer.law

If you were dating someone, and they told you that you could never have another romantic relationship after breaking up with them, you would either say “pffft!” or file for a restraining order. Why do employees tolerate such behavior from employers and former business partners, then? Non-compete clauses are a common feature of employment contracts in some industries. As of 2021, approximately one in five workers has signed a non-compete agreement with their current employer. At their worst, non-compete agreements harm the economy by limiting workers’ ability to seek employment and companies’ ability to recruit new employees. On the other hand, companies have the right to protect their trade secrets. If you are involved in a dispute about the use of privileged information by a former partner or employee of a company, contact a San Diego intellectual property business lawyer.

Executive Order Protects Workers from Overreach by Non-Compete Clauses

An executive order issued by President Biden in July 2021 targeted overreach by non-compete clauses in employment contracts. The ostensible purpose of non-compete clauses is to prevent employees from taking the business secrets and innovative business practices they learned in the scope of their work and using it to open a new business that competes directly with their former employer. Despite this, many businesses require employees who do not have specialized insider knowledge to sign non-compete agreements that limit their ability to seek employment in their geographic area after their employment ends. In fact, over 20% of employees who do not have bachelor’s degrees are subject to non-compete agreements. The executive order authorizes, and even encourages, the Federal Trade Commission to “address agreements that may unduly limit workers’ ability to change jobs.” Meanwhile, California courts have consistently ruled that most workers have the right to “job hop,” and that this right is an essential component of fair market competition.

How California Law Keeps Your Trade Secrets Safe

If you are trying to protect your trade secrets, California is a good place to do it. With or without non-compete agreements, the Uniform Trade Secrets Act, which is part of the California Civil Code, acknowledges that trade secrets are a kind of intellectual property, and businesses have the right to protect their intellectual property. Whether client lists count as trade secrets depends on the circumstances. President Biden’s executive order implies that, the more specific the agreement is about which information the former employee or partner may not share, the better, and it is sufficient to specify that a party to the agreement may not share client lists. Meanwhile, California courts have ruled that “general business know-how” is not a trade secret, but rather expertise that the employee has gained in the course of their work for the employer.

Contact Foldenauer Law Group About Protecting Trade Secrets

An intellectual property lawyer can help you enforce your trade secrets or fight for your right to fairly compete in the marketplace. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Breach of Contract Lawsuits

August 17, 2021August 1, 2021 by foldenauer.law

Signing a business contract is a reason to celebrate. When one party does not fulfill their contractual obligations, though, one or both parties can suffer heavy financial losses. Failure to do what you promised to do in a contract is called breach of contract, and it is a common source of disputes between companies and their employees, vendors, and clients, as well as between business partners. A San Diego business contract dispute lawyer can help you resolve disputes that have arisen in connection to existing contracts.

What You Must Prove in a Breach of Contract Lawsuit

When you file a breach of contract lawsuit, a plaintiff must prove the following:

The plaintiff (you) and the defendant (your business partner, employee, supplier, or client) entered into a legally enforceable contract
You fulfilled your contractual obligations or, if you did not fulfill them, it was under circumstances under which the contract itself, or California law, requires the defendant to hold you harmless
The defendant did not fulfill their obligations and did not have a legally or contractually valid excuse not to fulfill them
The plaintiff suffered financial losses or some other measurable harm
The defendant’s non-performance of their contractual duties caused plaintiff’s losses

What Happens if You Win a Breach of Contract Lawsuit?

In your lawsuit, you must specify what you want the defendant to pay you or anything else you want the defendant to do or stop doing in order to repair the breach. You can seek compensatory damages, where the defendant reimburses you for the financial losses they caused you to incur. You can also seek nominal damages, if the defendant did not cause you to lose money but only caused you avoidable expenditures of time and effort. Or, in some cases, you can seek to have the defendant specifically perform under the agreement. If you and the defendant agree to cancel the contract, the defendant can pay you restitution, which means returning things to the way they were before you signed the contract, such as by refunding a deposit that you paid them. However, most lawsuits settle before going to trial, so you and the defendant, with the help of your lawyers, will most likely be able to agree on an amount of money that the defendant should pay you that would satisfy the defendant’s obligation to you.

Resolving Breach of Contract Disputes Without Going to Court

Many breach of contract lawsuits are preventable. Drafting an airtight contract after reaching a thorough understanding with the other party is enough to stop most breach of contract disputes before they start. It is highly recommended to seek out a seasoned lawyer to assist with the drafting of your contract.

Contact Foldenauer Law Group About Breach of Contract Claims

A contract lawyer can help you avoid costly litigation when resolving business contract disputes. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

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