September 2021 – Foldenauer

NFL Teammates Turned Cannabis Investors Face Lawsuit from Business Partners

September 29, 2021 by foldenauer.law

The success of California’s legal cannabis industry has assuaged the fears of many skeptics who, for decades, argued that legalizing cannabis for recreational and medical purposes would invite crime and lawlessness. To a great extent, the business disputes that have inevitably arisen in the cannabis industry resemble the business disputes that inevitably arise in any industry. Business partners sue each other over issues such as breach of fiduciary duty, breach of contract, and misuse of company funds, just like business partners who sell much less controversial products. California’s cannabis laws seem to be getting it right; it is the confusion and hypocrisy over cannabis going on in other states that complicates matters. It is not hard to understand, from a purely financial perspective, why someone with access to a legal supply of cannabis, would be tempted to divert some of it illegally to other states which barely even have a medical cannabis program to speak of. If your cannabis business plans are going up in smoke because things have deteriorated between you and your business partner, contact a San Diego business partnership dispute lawyer.

Genetixs Sues Two Partners for Selling Cannabis on Black Market

The struggles of professional athletes to transition into the business world after their playing careers end are well documented, but Julio Jones and Roddy White chose to get into the legal cannabis industry in California as opportunities were opening up. Jones and White played together for the Atlanta Falcons until White retired and Jones moved to the Tennessee Titans. Later, they both became partners in Genetixs, a California-based legal cannabis company. According to a lawsuit filed by Genetixs in July 2021, Jones and White conspired with John Van Beek and Shaun Van Beek to sell cannabis on the black market out of a Genetixs facility in Desert Hot Springs. Meanwhile, Jones and White allegedly stopped reporting sales in March.

Genetixs is also suing John Van Beek; it hired him in 2020 to work as an on-site manager and operator, but it fired him in March 2021 after an inspection revealed numerous violations at the facility. The lawsuit also alleges that Van Beek and his son disabled security cameras at the facility to enable the illegal operations to proceed. It accuses them of breach of contract and failure to report cannabis sales. The State of California has not pressed criminal charges against any of the defendants in the lawsuit. A lawyer for Jones and White told the Daily Mail that the lawsuit is retaliation for a previous lawsuit that Jones and White filed against Genetixs.

Contact Foldenauer Law Group About Business Partnerships After a Pro Sports Career

Choosing the right business lawyer can make or break a retired professional athlete’s success in business. A business dispute lawyer can help you get out of bad business deals before they cause heavy financial losses. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

An Intellectual Property Litigation Attorney Can Protect You from Trade Secret Theft

September 24, 2021 by foldenauer.law

Patents, copyrights, and trademarks indicate clearly that an item of intellectual property belongs to its owner, but not all ideas are eligible for those protections. Good ideas are essential to operating a successful business, and intellectual property laws enable you to protect your original ideas, even the ones that are not covered by trademarks, patents, or copyrights. Trade secrets are the information shared only within your company that enables it to function in a unique way or provide unique products or services; if all your competitors knew your trade secrets, your company would lose its competitive edge. Trade secrets are not just the recipes that make the chicken sandwiches at Chick-fil-A, Wendy’s, and Popeye’s different from each other; every business has trade secrets, even cybersecurity firms. If a competitor or former employee is misusing your company’s trade secrets, contact a San Diego intellectual property business lawyer.

The Perils of Proofpoint

In the past several years, the email security software company Proofpoint, which is based in Sunnyvale, has seen its share of legal trouble because of intellectual property disputes. The trouble started when Proofpoint acquired a company called Cloudmark in 2017 for $110 million. Around the same time, Oliver Lemarie, who had been a vice president at Cloudmark, began working for Vade Secure, which is based in France.

One of the main reasons that Proofpoint chose to buy Cloudmark was because of its cloud-based Mail Transfer Agent (MTA) product. Meanwhile, in June 2019, Vade launched a cloud-based MTA product that was very similar to the one Cloudmark had been producing. The new MTA product enabled Vade Secure to obtain nearly $80 million in funding from an investor called General Catalyst; the General Catalyst investment represented nearly 90% of Vade Secure’s funding. Vade also used Cloudmark trade secrets to develop other products, such as its Microsoft 365 Email Content Filter, Vade MTA Builder, and Vade Cloud.

The following month, Proofpoint filed a lawsuit against Vade Secure, alleging that Lemarie had intentionally misappropriated trade secrets and used them to compete with Proofpoint. In August 2021, the court ruled in favor of Proofpoint. It ordered Vade to pay $13.5 million to Proofpoint for unjust enrichment and $480,000 for breach of contract, although it did not order Vade to pay any compensation for financial losses it had caused Proofpoint to incur. The court will rule later about how much money, if any, in punitive damages Vade Secure must pay.

This is not Proofpoint’s only legal dispute over trade secrets. It also claims that Samuel Boone, a former Director of National Partner Sales at Proofpoint, shared the company’s sales strategies with a competitor company called Abnormal Security. The lawsuit between Proofpoint and Boone is ongoing.

Contact Foldenauer Law Group About Trade Secret Disputes

A business dispute lawyer can help you seek damages from people who have used your company’s trade secrets without your permission. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Carvana Settles Lawsuit with Four California Counties

September 22, 2021 by foldenauer.law

Paying for the licenses necessary to operate a business is expensive, especially in industries where you must obtain a separate license in every county in which you operate. Paying for the licenses is better than the alternative, though. The fines and judgments you must pay if you get caught operating without the required licenses will cost you even more. Even that is not the worst-case scenario. The lawsuits that result from property damage and personal injuries caused by unlicensed companies cost millions upon millions. If your company is facing a lawsuit because you expanded your business into California or from one California county to another without first obtaining all the required licenses, contact a San Diego business dispute lawyer.

Carvana and the Licensing Disputes

Carvana started in Tempe, Arizona, where it opened its first car vending machine in 2013. In its first few years of operation, a new generation of drivers came of age that associated convenient shopping not with coin-operated vending machines but with clicking on a touch screen phone and making purchases from Amazon and similar ecommerce companies. Recently, Carvana has boasted that it is the Amazon of used car sales. Today, Carvana offers next-day delivery of used cars in more than 300 metropolitan areas throughout the United States.

It appears, though, that Carvana was a little too hasty in expanding into so many markets. In at least four of the counties where it does business, it began delivering cars to customers without first obtaining all the required licenses. Carvana obtained dealer’s and transporters’ licenses to deliver cars to customers with California addresses in 2019, but Carvana vehicles had been shipped into the Golden State for several years by that time. The Los Angeles District Attorney’s Consumer Protection Division began an investigation and discovered that Carvana had been delivering cars to California since 2015.

Later, the District Attorneys of Santa Clara, San Diego, and Ventura Counties joined the Los Angeles DA in prosecuting the case. In August 2021, Carvana agreed to settle the case without admitting that it had done anything wrong. It will pay a total of $850,000 in damages, pursuant to the settlement agreement. $600,000 is in the form of civil penalties, with each of the four counties receiving $150,000. Carvana must also pay $50,000 in administrative costs to each of the participating counties, for a total of $200,000. Finally, Carvana will pay $50,000 in restitution; this money will go to a nonprofit organization, to be chosen by the participating counties, which supports public interests.

Contact Foldenauer Law Group About License Disputes Between Businesses and Public Entities

The desire to grow a company quickly often motivates businesses to cut corners when it comes to obtaining licenses. A California business dispute lawyer can help you settle disputes over licenses, so you can continue to operate your business in lucrative markets. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Community Rallies Around Hawkins House of Burgers in Dispute with California Department of Transportation and Scores a Victory

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

Everyone on the East Coast knows the look of shock you see on a Californian’s face when you tell them that you have never been to In-N-Out Burger, but the absolute best burgers come not from the big regional chains but from the local restaurants, where people in the know remember not just the food, but the décor, the longtime employees, and even the route to get there by car or on foot. Hawkins House of Burgers is one such restaurant, and after it survived a pandemic that caused many thousands of family-owned businesses to close permanently, even if they had been operating for decades, it found the California Department of Transportation threatening to knock down the restaurant over a quibble. Understandably, the community rallied around Hawkins as it faced such an unreasonable request, and now it seems that Hawkins House of Burgers is here to stay in its original location. If your company is facing demands from the state about the land on which your business is located, contact a San Diego real estate dispute lawyer.

After 80 Years, Caltrans Lays Claim to Tiny Corner of Hawkins House of Burgers Kitchen

In 1939, James Henry Hawkins and his father moved from Arkansas to Watts in South Los Angeles, and they opened Hawkins House of Burgers, a hamburger stand which soon developed into a burger restaurant with indoor seating. The restaurant has prospered throughout the decades and overcome obstacles such as in the 1970s, when the state of California tried to buy the land where the restaurant operated to build Highway 105, but Hawkins refused until the state gave up. Today, James’ Hawkins’ youngest daughter Cynthia operates the restaurant with her daughters and grandchildren, meaning that the restaurant has been in the family for five generations.

Hawkins House of Burgers stayed afloat during the COVID-19 pandemic by selling burgers for take-out and delivery orders, and by the summer of 2021, things seemed to be going in the right direction. In June 2021, the California Department of Transportation (Caltrans) notified Cynthia Hawkins that part of the restaurant, specifically a corner of the kitchen, was infringing on public land, and she would have to modify the building to avoid the area of land within 60 days. Hawkins was incredulous, and the news spread quickly that Caltrans would demand the removal of part of the restaurant, when its location had never been a problem for 82 years. Watts residents, the Black Chamber of Commerce, state legislators, and local radio personalities rallied in support of Hawkins, and this month Caltrans announced that it will negotiate a solution that will allow Hawkins House of Burgers to stay in its present location.

Contact Foldenauer Law Group About License Disputes Between Businesses and the State

A California business dispute lawyer can help you stand up for your rights when public entities attempt to shut down your business. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Man Whose Nude Baby Picture Appears on Iconic Album Cover Sues Band Members and Record Companies

September 17, 2021September 15, 2021 by foldenauer.law

Each of the big moments in music history made a few people rich but left most of the people who contributed to it empty-handed. Sure, Elvis Presley got rich singing “Hound Dog,” but he copied it note for note from Willie Mae “Big Mama” Thornton. Presley continues to draw millions of dollars in income each year, decades after his death, while Thornton died destitute in a Los Angeles boarding house. Music history is also replete with unsung contributors who sued, decades after the fact, for their fair share of the proceeds from the hit songs they helped to create. This month, after years of soul searching, the man who was photographed as an infant for the cover of Nirvana’s Nevermind, has decided to sue the surviving band members and relevant companies for damages. Whether you are in the music business or any other industry, a San Diego business dispute lawyer can help you collect damages if you contributed to something big but were shut out when the money started coming in.

Nevermind Baby Grows Up and Demands His Day in Court

In 1991, the band Nirvana had asked photographer Kirk Weddle to take a picture of a baby in a swimming pool; they planned to use the image on the cover of their upcoming album. On a whim, Weddle asked his friend Rick Elden to have his four-month-old son Spencer photographed naked in the pool. Rick agreed and received $200 for his trouble. The image of baby Spencer Elden appeared on the cover of Nirvana’s album Nevermind, with an image of a dollar bill on a fishhook, which the baby appears to be swimming toward. Nirvana lead singer Kurt Cobain envisioned the cover as a statement on capitalism.

Capitalism did its thing, and 30 years later, the Nevermind cover is one of the world’s most recognizable album covers. Spencer Elden has had conflicting feelings about the image over the years. He has recreated the photo several times (always with a swimsuit), and as a young man, he got a tattoo of the word “Nevermind” on his chest. At age 30, he lives with his mother and spends his time growing tomatoes and making artwork. The thought passed through his mind several times over the years that he could be rich if he had been paid royalties for the use of his image. Things changed when he went to a baseball game a few years ago and realized that, thanks to the Nevermind cover, everyone in the audience had seen him naked. This year, Elden filed a lawsuit against the surviving members of Nirvana, Cobain’s widow Courtney Love, and various record companies, seeking $150,000 from each defendant. The lawsuit raises larger questions, though, about parents publicizing images of their young children.

Contact Foldenauer Law Group, APLC in San Diego, California to discuss potential liability and damages in your business dispute.

HeadSpin CEO Faces Criminal Charges for Defrauding Investors

September 17, 2021September 10, 2021 by foldenauer.law

Business is full of big talkers, especially in the technology sector. When people who deal in mobile apps and other products whose entire existence is located online, it is harder for potential investors to tell when the proprietors of these products talk about how big these products will become. Investors should do their due diligence by asking to see financial records, though; no matter how cool a product is, the decision to invest in it should be based, at least in part, on boring old balance sheets. When the investors ask to see the balance sheets and the big talkers show them fake ones, that is when the real trouble begins. If you are in a financial bind because your company invested in a venture that turned out to be a sham, contact a San Diego business dispute lawyer.

Selling a Unicorn

From 2015 until 2020, Manish Lachwani, the CEO of the mobile development testing company HeadSpin, talked a big game about the business deals his company had secured and would secure in the near future. It appears, though, that in talking up the market-dominating potential of HeadSpin, he may have played fast and loose with the truth. He claimed that HeadSpin was in the process of closing deals with some of the business giants of Silicon Valley. The valuation Lachwani claimed for the company grew and grew, until sometime in 2018 it appeared to morph into a unicorn, a privately traded company valued at more than $1 billion. Lachwani even showed the investors falsified sales records, thus persuading investors to contribute about $80 million to the company, $2.5 million of which Lachwani allegedly pocketed.

In March 2020, a HeadSpin employee exposed Lachwani’s falsehoods by producing the company’s real financial records. In the first quarter of 2020, HeadSpin suffered a net loss of $15.9 million, not a net profit of $3.7 million, as Lachwani had claimed. Lachwani is now facing charges for wire fraud and securities fraud. If convicted, he could face a sentence of up to 20 years in prison and a fine of up to $5.25 million.

Financial Crime in the Business Sector

Securities fraud is a widespread problem. The Justice Department began keeping data on financial crime separately from other crimes in 2011, and the rate of financial crime convictions steadily declined since then, but then it saw an uptick in 2020. When someone is convicted of a financial crime, the court sometimes orders them to pay restitution to the parties harmed by their actions. Even if Lachwani is not ordered to pay restitution (or is not convicted), the investors he allegedly defrauded have the right to seek damages by filing a civil lawsuit.

Contact Foldenauer Law Group About Picking Up the Pieces After Being Defrauded

A California business dispute lawyer can help you recover from your financial losses after an investment you tried to make turned out to be based on lies. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Walgreens and City of San Francisco Clash Over Exchange of Records in Opioid Lawsuit

September 17, 2021September 8, 2021 by foldenauer.law

Today, most doctors agree that, except in a very limited set of circumstances, the risks of prescribing opioids on a long-term basis outweigh the benefits. This realization comes too late for millions of Americans struggling with addiction to opioids prescribed after an injury. Many cities around the country have filed lawsuits against the pharmacies and drug manufacturing companies that have contributed to the ongoing opioid addiction epidemic. The lawsuit between the city of San Francisco and multiple defendants involved in the manufacture and distribution of addictive prescription opioid painkillers will likely find imitators in many different jurisdictions. One of the defendants, Walgreens, has disagreed with the city about many of its requests in the discovery phase of the case. If your company is a party in a lawsuit, a San Diego business dispute lawyer can help you decide which documents to request and how to respond to document requests from the other party.

San Francisco Calls for Transparency, but Walgreens Cites Medical Privacy Concerns

Lawsuits between two big businesses, or between a big business and a government entity, almost never resolve quickly, and the legal dispute between the city of San Francisco and a group of major players in the opioid crisis is no exception. One of the reasons that lawsuits take so long is the discovery phase, when the parties request documents and depositions from each other to use as evidence at trial.

San Francisco has been trying to get access to a large enough body of data from Walgreens to prove that employees of its pharmacies dispensed opioids irresponsibly, filling some prescriptions that were obviously falsified and dispensing pills to patients whose records show obvious evidence of doctor shopping, which means obtaining similar prescriptions from multiple physicians in a short period of time. The parties agreed that Walgreens would release records, but there was no decision on how many records it had to release. At first, Walgreens requested access to a statewide database of records, but a judge denied the request. San Francisco has asked the court to order Walgreens to release all its electronic records, plus 1,000 randomly selected records stored offsite (these records are several years old) and 500 randomly selected records currently stored at its pharmacies (these records are from the past three years). Walgreens argues that complying with this request would waste time and money, since the records would need to be redacted by hand to remove patients’ identifying information so as not to violate medical privacy laws. San Francisco is not buying this excuse; it claims that it is possible to redact the records automatically, which is quick and inexpensive.

Contact Foldenauer Law Group About your Business Dispute

A California business dispute lawyer can help you navigate a protracted discovery phase in your lawsuit. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Court Issues Decision Allowing Church to Buy Fresno’s Tower Theatre

September 17, 2021September 3, 2021 by foldenauer.law

As gorgeous as real estate properties may look on Zillow, there are plenty of reasons that a real estate deal can fall through. First time homebuyers often hear from friends that you should never get emotionally attached to a property until you move in. If residential real estate sales are so complicated, think of how much more complicated it is when a buyer wants to buy a commercial property and make it serve a completely different purpose. “What if the buyer wants to turn the space from a bar into a church?” is not just a thought experiment meant to test the mettle of aspiring real estate agents. It is really happening right now in Fresno. Earlier this year, a judge ruled that the owners of the Tower Theatre can sell the building to a religious organization that plans to use it as a house of worship. If you want to sell a commercial real estate property to someone who intends to repurpose it, but your tenants object, contact a San Diego real estate dispute lawyer.

Worship in the Front, Party in the Back?

Many kinds of businesses had a rough time during the pandemic, but theaters arguably got it the worst. It is unsurprising, then, that the owners of the Tower Theatre in Fresno decided to sell the building, even though the theater had been a fixture of the community for decades. Lots of people will be sad to see the theater go, but no one was more upset by the news than the owners of the Sequoia Brewing Company, a bar and restaurant that rents a space in the theater’s building. In fact, the owners of Sequoia had been under the impression that they had a right of first refusal if the owners of the Tower Theatre were to attempt to sell the building.

Meanwhile, Tower Theatre found a prospective buyer in Adventure Church, but the Sequoia Brewing Company tried to block the sale. When the owners of the restaurant found out, they sued the Tower Theatre, accusing them of fraudulent concealment. They also allege that Adventure Church knew that Sequoia’s lease agreement with Tower included a right of first refusal but conspired with Tower to conceal the sale. Tower argued that Sequoia had not demonstrated that it would be able to buy the building if Tower had made that option available. In March 2021, the court ruled that the sale to Adventure Church can proceed. This may be better news for Sequoia than it seems, though. Representatives of Adventure Church indicated that, after the sale, they are open to continuing to rent the space to the Sequoia Brewing Company.

Contact Foldenauer Law Group About Disputes Over Real Estate Purchase and Sales Agreements

A California business dispute lawyer can help you persuade the court to allow you to go through with the sale of a piece of commercial real estate. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

Lawyer Up to Protect Yourself From the Treachery of Dishonest Business Partners

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

50% of marriages end in divorce, but that is a better track record than business partnerships. 70% of business partnerships dissolve for reasons other than the retirement or death of one of the partners. Some business partners knew each other as friends before they incorporated a business together, but even that is not a perfect safeguard against deception. However, at least you know your partner well enough to know when he is not acting like his usual self. When someone you have not known for a long time proposes a business partnership, it is best to do your due diligence before legally tying your destiny to theirs. If your business partner has started to show their true colors, and their true colors are not pretty, a San Diego business partnership dispute lawyer can help you get out of the relationship and save yourself.

The 800Xchange Story: A Cautionary Tale

Chris Smith and Edward Shin met as co-workers for a lead generation company in Southern California. They later founded 800Xchange, a lead generation company targeting the debt consolidation industry. While Shin presented a wholesome image, he had a history of financial crime and a gambling addiction. In 2010, Shin diverted a large sum from the company’s accounts and used it to pay court-ordered restitution for a prior criminal conviction of his. Smith confronted Shin, who retaliated by murdering Smith, 33. Shin then led Smith’s family to believe that Smith was sailing around the world; he impersonated Smith in emails to Smith’s family. He also forged Smith’s signature on documents dissolving the company. Shin is currently serving a life sentence for Smith’s murder. Clearly, this is a worst-case scenario, but a dishonest business partner can cause you serious trouble.

How to Build a Business Partnership on a Foundation of Trust

If you were hiring an employee, you likely would conduct a criminal background check. It also makes sense to do one for a prospective business partner. You should ask to see your prospective partner’s recent income tax returns and run a credit score. It is also a good idea to require both partners’ signatures for transactions involving large amounts of money and for any significant business contracts and purchases.

Shady Business Partner Red Flags

The following behaviors should raise suspicion about dishonest behavior by your business partner:

Your partner refuses to talk about some of their past projects
Your partner claims to have been involved in a certain business project, but a Google search shows no record of this (even businesses that have been closed for a while often turn up on Google searches)
Your partner resists your efforts to be organized about record keeping
Money that your company has earned is unaccounted for

The best time to talk to a lawyer is before things get bad, and if things are already bad, the time to contact a lawyer is now.

Contact Foldenauer Law Group About Disentangling Yourself from a Bad Business Partnership

A business partner dispute lawyer can help you avoid heavy financial losses if you recently found out that your partner is bad news. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.

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