business law – Foldenauer

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.

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.

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.

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.

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.

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