Articles Posted in Business Disputes

A developer of healthcare software was denied damages for breach of contract. The court found that the developer had failed to take advantage of a substitute opportunity when its customer ceased paying on its consulting agreement and transferred its obligations to a successor company. Rather than contracting with the successor company, the owner of the software developer formed an entirely separate company to administer the new consulting arrangement. The court rejected this convenient manuever as a failure to mitigate damages, finding that the new arrangement would have completely offset the developer’s losses.

Orawin is a software technology consulting company, owned and operated by a single person. In 2002, the company developed software for SeniorDent, Inc., a dental management company that focuses on providing dental care to nursing home residents. In 2013, the two companies entered into a Consulting Services Agreement which required Orawin to maintain the software’s dental and vision operating systems and provide modifications determined by SeniorDent. SeniorDent agreed to pay Orawin a monthly retainer upon receipt of invoices.

SeniorDent later attempted to merge with Healthcare Delivered, LLC (“HCD”). HCD and Orawin entered into an amended consulting agreement, transferring all rights and obligations from SeniorDent to HCD. Two months later, the merger of SeniorDent and HCD fell apart, and HCD distributed SeniorDent to a holding company owned by the original owners of SeniorDent (“F&R”). HCD then transferred all of its rights to SeniorDent to the holding company. The owner of Orawin later sought payment for consulting services from HCD, and was told that the F&R was responsible for paying his invoice. The owner of Orawin later formed a new company, O&O, to provide services to the newly reorganized SeniorDent. SeniorDent paid O&O its standard fee beginning in December 2015 and has continued to pay every month since. Continue reading ›

A technology company that was accused of purchasing intellectual property and assets in a deceptive manner was denied its motion to dismiss a complaint against it for breach of contract and fraud. The plaintiffs alleged that the technology company deceived them, inducing them to sell their assets and intellectual property with promises that the company would maintain and expand the WiFI network that the plaintiffs ran when the technology company intended only to use the IP and assets to attract new rounds of investment. The court found that the technology company failed to develop its arguments in its motion and that its failure to elaborate and cite authority waived its arguments.

Chirstiaan Cilliers, Daphne Cilliers, World WiFi Network, Inc., and Sunrise Global Marketing, Inc. sued Cobalt Holdings, Inc., in federal court alleging fraud, breach of contract, and several state-law claims. The plaintiffs claimed that Cobalt fraudulently induced them to enter into agreements to sell all of their business assets and intellectual property, consisting of a roaming WiFi network it had developed and maintained in several Caribbean countries. The plaintiffs alleged that Cobalt told them that it intended to further develop the WiFI network when it, in fact, held no licenses to operate WiFI networks in the Caribbean and wanted to acquire the network and intellectual property solely to attract investors as part of a planned round of funding. Continue reading ›

Chicago’s elite Grace restaurant has been shuttered for nearly a year, but the acrimony surrounding its implosion continues to be played out in Illinois courts.

Grace closed abruptly in late 2017 amid a dispute between its star chef and owner, who is now suing the chef and former manager/sommelier for tortuous interference and breach of fiduciary duty.

Michael Olszewski, who opened the Randolph Street hot spot with Curtis Duffy and Michael Muser in 2013, claims Duffy and Muser worked at events in far-flung locations around the globe outside of their employment with Grace, ordered and shipped food on the restaurant’s accounts for these events without his permission or compensation to the business, according to the complaint filed in Cook County Circuit Court.

Olszewski’s suit also claims Duffy and Muser “hatched a scheme” to solicit Grace’s employees to leave the restaurant and thereby force its temporary closure, resulting in lost profits and severe damage to business expectancies. The lawsuit seeks compensatory and punitive damages for the harm caused by Duffy and Muser’s “egregious misconduct.”

Duffy’s culinary skills earned Grace three Michelin stars, making it one of only two Chicago restaurants to gain that distinction. Before the establishment closed, Duffy and Muser tried unsuccessfully to buy it from Olszewski. He accused Duffy and Muser of coming and going from Grace as they pleased, in Muser’s case taking spontaneous and unapproved vacations, with increasing frequency. Continue reading ›

Trump and Today’s America

Part of the Trump Brand has come about from a success story that has arisen due to being able to overcome being bankrupt.  Trump turned around and transformed the brand of a Reality TV show series by the name of, “The Apprentice,”  to eventually triumph from TV into becoming the President of the United States of America.  Did his bankruptcy define his business? Most likely not.  A story emerged, one of a businessman transition to the leadership of a country.

The Decision to File

Of course, filing a bankruptcy is a huge decision.  Sometimes the trigger can be circumstances beyond control.  Even in today’s age, there may still be a stigma applied, as some view it as a moral failure.  As it stands and within a year, we have seen corporate bankruptcies at their highest point.

When a company files for a Chapter 11 bankruptcy, it seeks protection from creditors in trying to restructure debt.  The judge oversees this.  Effectively, it transfers the ownership of the company from shareholders to the creditors.  For the most part, shareholders are the ones that suffer the greatest loss.  Creditors are normally made whole.

What is at Stake?

The tax scheme makes allowances when creditors and shareholders of failing companies write off losses.  In 2018, the new tax law adds uncertainties, but shareholders and creditors knew that losses incurred in 2018 would face the new corporate tax rate of 21%, and so the government would only pick up 21% of the losses. Continue reading ›

A Judge has forced a legal dispute to go to mediation instead of hearing the matter in a trial. The matter is over a natural gas and energy plant issue and involves real estate and land being optioned between two energy plants. Both sides of the dispute have been postponed and to be heard back in court later. The Judge did not want to deal with the matter, as he felt that a resolution could be made.

How did the Court become Involved?

The way the court became involved was with an appeal being filed by the Lordstown Industrial Park.  The Court of Appeals was to decide whether real estate matters should be determined by court or arbitration.

Does Arbitration or Mediation Produce a Different Outcome?

Sometimes channeling through a different medium to litigation produces a different result.  In this case, that is what one of the parties’ feel.  The result may not be reasonable, the decision will then be made to go to litigation which will then drive up time and costs.  One party wants resolution, the other does not.  In their defense, mediation has been a tried option several times and has failed each time.  Issues that cannot be resolved remain outstanding, and it is not just one but quite a few. Continue reading ›

Walking the tightrope of business ethics and practice becomes more and more under scrutiny in a climate where minorities are divided.  Business owners want to maximize potential, please customers and, let’s face it, the money does matter! Have a business and then be implicated with being racist will come into play in affect image negatively.  That’s where allegations of a racist slur have hit the founder of Papa Johns. He came under fire for criticizing the National Football League’s leadership when it came to the anthem “take-a-knee” protests by players. Comments made have come to haunt him in such a way to put him in trouble and, eventually, have led to suit.  In the suit filed, company documents are to be inspected due to the company’s treatment of him since the publication of a rumor.  He says they are false.

The incident surrounds a conference call made and use of the N-word when it came to Colonel Sanders and KFC.  Papa Johns was a sponsor of the National Football League and the context of the conversation came about when national anthem protests were being discussed. In asking him to resign from the company, he feels ousted without proper investigation into the matter. This has, in turn, lead to a “breach of fiduciary duties” in cutting him off from the company.  All marketing materials and commercials, including logos have been edited to remove his name or image as well.  It is likely that all materials that he is entitled to will be brought into the lawsuit.  He feels he will be exonerated. Continue reading ›

Most people associate Fuji and Xerox with an office setting involving photocopying and printing. If you go to their website at: https://www.fujixerox.com They advertise smart work innovation that liberates from Restraints with an open professional expertise.  These are work aspects that most professionals want to aspire to be a part of and probably one of the reasons why they have taken off in the US market.

Fuji Xerox Co., Ltd., is a joint venture partnership between Fujifilm Holdings and Xerox, both being document related services.  Operating out of Tokyo, it was set to be one of the most powerful alliances held between the Japanese and Americans. Continue reading ›

When small companies compete against larger, more established companies working in the same space, they often rely on their unique selling points to set them apart from their competition and establish their own niche in the marketplace. But succeeding with that tactic becomes much more difficult if your competition starts using your own tactics against you.

According to a recent lawsuit against Ray Borg, the UFC flyweight allegedly stole trade secrets and took them to a competitor, broke his contract with a gym and a management company without warning, and committed fraud, among other things.

The lawsuit was filed by Wild Bunch Management, which is run by Tim Vaughn, who’s a team member of the gym, Fit NHB. According to the complaint, Borg was working out at Fit NHB and had a three-year contract with Wild Bunch in which the management company would arrange fights for Borg, as well as train and promote the fighter and manage the business side of his fighting career. For his end of the deal, Borg was allegedly supposed to pay Wild Bunch 20% of everything he earned in the cage up to $10,000, plus 10% of any bonuses of $10,000 or more. The contract also allegedly included a non-compete clause in which Borg agreed not to teach martial arts within 50 miles of Fit NHB for the first year after his contract with Wild Bunch had been terminated.

Wild Bunch had allegedly negotiated Borg’s five-fight contract with UFC when Borg allegedly broke off all ties with both the gym and the management company after just the first fight and without any warning. After that point, Borg allegedly switched to Jackson Wink MMA in Albuquerque, a direct competitor of Wild Bunch that’s located across town. Continue reading ›

The past few years of Shari Redstone’s life sound like something taken directly from a soap opera after her aging father, Sumner Redstone, fell ill and required a full-time nurse to take care of him.

You probably know Sumner Redstone as the media mogul who ran the National Amusements theater chain (which owns CBS) for more than half a century. When he got sick, Shari kicked his long-time girlfriend out of his mansion, moved in herself, and took control of her father’s media company. Sumner’s girlfriend is suing Shari for having kicked her out and allegedly turned Sumner against her.

But now Shari Redstone has a bigger problem on her hands. Leslie Moonves, the CBS chief executive, has led a sort of a coup against her with other CBS directors. Moonves and the board of directors are suing Redstone for allegedly acting in her own best interests, even when it allegedly went in direct opposition to the best interests of the company’s shareholders. As a result, they are seeking to dilute Redstone’s voting rights as the majority shareholder of CBS and to strip her of much of her control over the media company.

Since Redstone has the power to fire anyone from the board of directors, why would they do all this at the risk of their own jobs? Continue reading ›

Janitors can be seen as caretakers of a building; custodians. Their role can be either undermined or seen as part of what makes the world go around. They have also hit headlines recently when it comes to the push to have their pay raised. Their recognition has made its way into the realm of Contract Law and that trend is continuing. Janitor tests ended up setting the standard in non-compete cases and situations.

The Janitor Test and Non-Compete Agreements 

A non-compete agreement is a contract between an employee and an employer in which the employee agrees not to enter into competition with the employer during or after employment. These legal contracts prevent employees from entering into markets or professions considered to be in direct competition with the employer. Restricting covenants have had their application in the utilization of a concept that some courts and litigants refer to as the “janitor analogy” or the “janitor test,” when questioning the breadth and scope of a non-compete provision. The test has evolved over the years, which shows us that janitors and the test will stay.

The first case we can look at is Reading & Language Learning Center v. Sturgill (2016). That case arguably had an overbroad, unenforceable agreement because the agreement did not clearly define the capacity in which scope of services could be provided. The speech therapist could even be prohibited from services other than the function in which that person worked previously, including but not limited to, selling furniture, providing cleaning services or plan school functions.

This line of reasoning was also applied in Distributor Service, Inc. v. Stevenson (2014). The Court stated, “[t]he bottom line is that the plain language of the Non-Compete Provision would prohibit Mr. Stevenson from being an ‘employee’ of any entity who engages in ‘Competitive Business Activity,’ whether he is in sales, works as a janitor, or maintains the second employer’s lawn. Thus, it is overbroad and unenforceable.”

When scope was limited, a “janitor analogy” did not go far because the scope of services was limited to areas in which that person had worked previously. The confidential information could, therefore, be used.

The more recent case of Medix Staffing Solutions, Inc. v. Dumbrauf (2018) had “janitor clauses”. It just goes to show that their use is another example of why these sorts of clauses can prove costly to employers. Courts will even be reluctant to want to modify them. On its face, the clause excluded an employee from taking any position with another company that engages in the same business, without regard to whether that position is similar to the prior position held. Accordingly, it was argued that the covenant was “too restrictive” and that the “covenant bars him from taking positions with those companies extend beyond roles that were similar to those he previously held to any position whatsoever at other companies in the industry.” The argument extended so far as to say that he couldn’t even work as a janitor for another company. The question of the justification of broader restrictions vs. legitimate business interests was the main crux of in which way the court was likely to lean. Continue reading ›