The Perils of A Family Business or How to Save Thanksgiving

Imagine that you are sitting at the Thanksgiving dinner table with your family—aunts, uncles, cousins, and distant relatives from out of town.  Someone at the table cavalierly asks: “who did you  vote for ?”  World war III breaks out while the family members debate Hillary versus Trump.

Now imagine that these same people are shareholders and employees in your family business.  If these people cannot agree among two candidates about whom to vote for, how they will be able to agree about the joint management of their financial affairs?  The answer is – only with great difficulty.  This is one reason why so many family businesses, and so many families, end up in costly litigation.

Here are some observations, from someone who has litigated many intra-family disputes, about what might have been done to avoid a nasty and expensive lawsuit.

I.          Sign a Contract

It may seem elementary, but this fundamental concept is often ignored by people in business.  Should you really sign a contract with your brother about the maintenance of a family business?  After all, isn’t this the person that you grew up with, shared a room with, and is your best friend?  Of course you should.  The interesting thing about the negotiation of shareholders’ agreements among family members is how absolutely divergent the views are of different family members about how to run the business.  These views often manifest themselves in the negotiation process.  Imagine, however, that there was no negotiation process and, instead, the business simply began and the debate commenced without  a written agreement.  The likelihood is that chaos would ensue, profits would dissipate through disagreements and nothing of a material nature would be accomplished. Thus, this basic point — the execution of a contract — is a fundamental and necessary component to the establishment of a family business.

II.         Establish a Hierarchy

Someone has to be the boss.  Historically, it has been Dad.  However, in “modern families” other people can be asked to assume the mantle of leadership.  Generally, it is wise to choose the person with the most business experience, the best education, and the most obvious leadership skills.  In any family, the appropriate candidate should be obvious.  If the parties cannot agree on this, it is generally a bad sign.  Leadership is essential to any business and a family business is no different.

III.        Treat The Family Business Like A Real Business 

            The family business is a real business.  The family business should not be run like a family. The conversation between the leaders in the family business should not mimic the conversation at the Thanksgiving dinner table.  Rather, family businesses should conduct regular meetings, where notes are taken, minutes kept, and tasks assigned.  You should be able to judge the potential success of your family business by determining how easy it is to apportion tasks among family members after the Thanksgiving dinner is concluded – who will wash the dishes, the pots, clean the tables, fold the linens and take out the garbage?  If this process proceeds smoothly following the big dinner, there is a greater likelihood that the family business has a chance of success.  If the parties cannot agree, following dinner, how to clean up, how will they be able to run a business?

IV.       Utilize written job descriptions

            The easiest place to witness a good old fashioned power struggle is in the family business. This is because the people who comprise it have a long history together. In every family there are those who win the power struggle and those who lose it. Those struggles could be over the color of a room, the radio station that is played in the car during the family vacation to what everyone eats for dinner. The family business is an opportunity for the perennial loser to flex his or her muscles and establish a new beachhead, a place where his or her opinion is heard and obeyed. The problem is that it is only sometimes that the person who is espousing an opinion actually has the expertise to do so. Maintaining written job descriptions will create necessary boundaries and will ensure that only those people with a particular expertise handle those areas 

            V.        Maintain   Performance Measurements

            After Cousin Johnny joins the family business he needs to be able to accept criticism.  Cousin Johnny’s performance must be measured.  Cousin Johnny must be treated like any other employee.  If Cousin Johnny is given preferential treatment, by Dad, because he is Cousin Johnny, there will be resentment by other family members and by other employees who might not be family members.  Cousin Johnny’s performance should be reviewed at least once a year and honest feedback provided.  Cousin Johnny should have a personnel file in which notes are kept.  This will prevent problems with Cousin Johnny in the future if, for some reason, he is removed from the family business and decides to sue.  Treating Cousin Johnny like an employee is a much better idea than treating Cousin Johnny like Cousin Johnny.

VI.       Establish and Maintain Written Hiring Criteria

            If a family business is successful, the likelihood is that it will expand into hiring people who are not members of the family.  It is also possible that additional family members may want to join the business.  After all, everyone wants to be successful and what better way to be successful than to join something that already is successful.  Plus, if your family business prospers, you might find relatives coming out of the woodwork asking for jobs.  This is why you need to maintain written hiring criteria.  You might decide that it is important for your family business to hire only college graduates, or individuals with engineering degrees.  This will assist you in rejecting candidates, whether family or not, who may not have the requisite criteria.  If these hiring criteria are maintained in writing, it will make Thanksgiving dinner all that much easier when Cousin Bob, whose application been rejected from the company, appears at your doorstep, Thanksgiving morning, holding an apple pie.

VII.      Establish an Advisory Board

            The problem with working with a family member during the day and then having Thanksgiving dinner with that family member the following weekend is that issues regarding the family business are more likely to arise at inappropriate times— e.g., during holidays, on weekends, or during the evening.  If “Dad” or “Mom” is in charge of the business, this is more likely to happen.  One suggestion for taking Dad or Mom “out of the loop” would be to establish an advisory board of individuals who have been retained for the purpose of dealing with sticky issues, within the family business, which might place Dad or Mom in an awkward position.  Let the “advisory board” take the heat for a difficult issue.  In this manner, Mom or Dad can explain, before asking Cousin Johnny to “pass the turkey”, the decision that was made, which may negatively impact him, was out of our hands.  The decision was made by the advisory board.

Enjoy your Thanksgiving Turkey with your family and do not discuss either business or politics.

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Ten Things to Consider When Negotiating a Contract

1. Who are the contracting parties. If you are the payor (the person that is paying under the contract) it is best to avoid a personal guaranty. If you are the payee (the person receiving payment under the contract) it is best to get a personal guaranty.
2. What is the consideration. Typically, for contracts to be enforceable, there has to be consideration which, in laymen’s terms means, that one party needs to give something and the other party needs to get something.
3. The contract should be signed in front of a notary public. Signing in front of a notary reduces the possibility that one signatory may later claim that the signature on the contract does not belong to them.
4. Carefully proofread the contract. Typographical errors can obscure the meaning of the contract which may cause a Court to later determine that the contract is “ambiguous.”
5. Avoid constructions against the drafter. If you are the party drafting the contract, and the contract is being negotiated, you should include a clause that says that, in the event of an ambiguity, which is discovered later, the contract will not be construed against you. In other words, the ambiguity will not be held to be your fault; the fault will be shared equally.
6. Maintain your home turf by including a jurisdiction and venue provision. It is always better to litigate in your home state if litigation becomes necessary. For further evidence, ask the Golden State Warriors.
7. Be careful to use the correct draft. Circulating multiple redline drafts of a contract can be very efficient. It can also be fraught with peril if you use the wrong draft since a Court is likely to enforce the draft with the signatures on it regardless of whether it is the correct draft or not.
8. Make sure the person signing on the other side has the authority. Check to see if you need a board resolution if the contracting party is a corporation or other business entity. Not all corporate leaders are vested with the authority to sign large contracts. Read the company by-laws of the other contracting party if necessary.
9. Make sure the contract clearly spells out deadlines and required time periods and avoid vague language like “as soon as possible” or “promptly.” Instead, try this: “no later than thirty days from the execution of this agreement.” Its hard to argue with that language.
10. Verify and do not rely on oral statements. People make all sorts of claims when negotiating a contract. It is best to verify the truth of those statements through documents or financial statements. Don’t take anyone’s word for it.

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ROGER SLADE’S TEN THINGS TO DO WHEN YOU GET SUED

  1. When the process server comes to the door, with the complaint, make sure your name is on it before you accept it.
  2. Do not speak to the process server other than to say “thank you” (once you determine that your name, or your company name, is on the complaint)
  3. Accept service once you determine that it is you; avoiding service or running away from the process server also makes you look bad (think O.J. Simpson in the White Bronco).
  4. Call your lawyer and schedule an immediate appointment (generally, you only have to 20 days, absent an extension, to respond to a Complaint.)
  5. Retain the lawyer by signing his or her retainer agreement.
  6. Write down the date your response is due to the complaint.
  7. Download all of your relevant email and other documents and send it to your lawyer; do not destroy anything.
  8. Make a list of everyone that may corroborate your story and provide the list (names, addresses and telephone numbers) to your lawyer along with a description of everything these individuals may know.
  9. Explain to your employees (if applicable) what the lawsuit means and instruct them not to speak to anyone about it other than you and your lawyer.
  10. Shut up – don ‘t call your adversary, your friends, or your Mom to tell them about the case. It may come back to haunt you later.

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TEN REASONS TO SEND THAT CONTRACT ON YOUR DESK TO A LAWYER

  1. THE PERSON WHO DRAFTED THE CONTRACT IS COUNTING ON THE FACT THAT YOU WILL NOT SEND THE CONTRACT TO A LAWYER
  2.  THE CONTRACT IS LIKELY TO HAVE LANGUAGE THAT A LAY PERSON MAY NOT UNDERSTAND.
  3.  THE CONTRACT IS LIKELY TO HAVE BEEN DRAFTED BASED UPON PRIOR LITIGATED CASES WHICH A LAY PERSON COULD NOT POSSIBLY KNOW ABOUT IT.
  4.  THERE ARE PROBABLY AMBIGUITIES IN THE CONTRACT WHICH COULD HURT YOU LATER.
  5.  BECAUSE YOU ARE PROBABLY NOT THINKING ABOUT WHERE YOU COULD BE SUED IN THE EVENT THAT THINGS GO WRONG.
  6.  YOU MAY NOT HAVE CONSIDERED HOW TO END THE CONTRACT
  7.  YOU MAY NOT KNOW WHO IS SUPPOSED TO SIGN THE CONTRACT FROM THE OTHER SIDE.
  8. YOU NEED ADVICE ABOUT WHETHER HAVING AN ARBITRATION CLAUSE IS A GOOD IDEA.
  9.  YOU SHOULD UNDERSTAND WHAT A PREVAILING PARTY ATTORNEYS’ FEE PROVISION DOES.
  10.  YOU DON’T KNOW WHAT YOU DON’T KNOW.

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How to Communicate With Your Lawyer

Lawyers are supposed to be masters of communication. That is what they, supposedly, learned in law school. They learn how to write, crisp, clear sentences and are supposed to shape those sentences into cogent, well orchestrated paragraphs which are later supposed to be formed into persuasive arguments.

Lawyers learn oration in law school, so they can present their arguments to a Court and sometimes even to a panel of judges. These are the people who become politicians and stand up on the floor of the political convention waxing on about the future of America. So, how come it is that these same people seem to have so much trouble communicating with you, the client, about your case or matter ? The answer is that, despite all of that wonderful training, most often, no one has taught your lawyer how to communicate with you, the client.

In that event, therefore, it is likely that you that will have to communicate with them. There is often no sense in sitting around waiting for your lawyer to call you with an update or send you an unsolicited status report letter. Chances are, it is not coming. Accordingly, in order for the client to ensure that they communicate with their lawyers, it is often incumbent upon the client to initiate the dialogue.

And, what is the best way to do that you ask ? Here are some suggestions.

  1. Be Persistent.

Often lawyers are separated from their clients by receptionists, paralegals, associates, vacation schedules, court appearances, meetings and the often omnipresent automatic email response which tells you that your lawyer is “out of town” and will be checking email only “intermittently.”

Let’s start with the basics. When you receive the boilerplate email message response from your lawyer, telling you that your lawyer is unavailable, don’t believe it. Your lawyer is seldom, if ever, totally unavailable. Rare is the lawyer who travels to the Antarctic, in the middle of Winter, where there is no cell phone reception and no access to email. Lawyers are not permitted such travel. Law firms generally frown on lawyers who disappear entirely and become unavailable to clients. In reality, your lawyer is likely lying on a beach somewhere, looking at his email and his cell phone, and ignoring you while sipping his or her pina colada.

Your lawyer is likely reading your email even if he or she is not responding. Therefore, when you email your lawyer, demand a timely answer. The only excuse that a lawyer should have for failing to timely respond to emails is – death. And, in that unfortunate event, you should expect a prompt email from his Secretary advising you of his demise and informing you as to who at the firm has inherited your matter.

Get your lawyer’s cell phone number and use it. The best time to do this is at the beginning of the representation before you establish yourself as a pest and he does not want to give it to you. Lawyers should return telephone calls. While lawyers do go to Court, and attend trials, the average Court appearance lasts less than one hour. Demand a return call, therefore, the same day. Rare is the trial that lasts beyond 5:30 p.m. And why is that ? That is because the Judge knows that the lawyer has to return phone calls – your phone call.

Tell the lawyer’s receptionist when you need to hear back from him or her. Use words, if appropriate, like “urgent”, “important” or “time sensitive.” Don’t use words like “emergency” unless you really mean it. Some Courts define the term “emergency” as the imminent threat of death or bodily injury. Your lawyer will like you better if you use that definition and do not refer to emergencies that are really not emergencies.

  1. What to Say to Your Lawyer

Ask your lawyer to speak English to you. Is this really so much to ask after how much you have paid him or her ? Why should you have to have your law dictionary open just to understand what the guy is talking about. If you don’t understand what they are talking about, say so. “Dude, thanks for that 20 minute ‘explanation’ but that actually makes no sense to me.” Some lawyers, the good ones, may actually appreciate that. The bad lawyers will explain it again saying essentially the same incomprehensible thing they said the first time.

Ask about timing. “How long will this take ?” is one of my favorites. The reason that it is one of my favorites is because it almost always takes longer than anticipated. The reason for this is two fold – first, your lawyer likely has other things to do and, second, so does the Judge. You should consider whether you can live with the likely time schedule and how you may feel when the estimated completion date actually passes and the resolution of your matter ends up taking longer than planned. Can you handle the wait ? If the answer is no, you may want to consider alternative forms of Justice such as those recommended by Don Corleone in The Godfather[1]

Ask about the Cost. This is one of your lawyer’s least favorite questions. Why ? Because he or she likely has no real way to answer it. That, of course, does not prevent the average lawyer from trying. The problem with the question of “how much will this cost” is that, in order to answer this question properly you will have to be able to accurately predict what the other side (your adversary) will do. Nonetheless, you, the client, are entitled to an answer to this question, even it if is only an estimate subject to caveats.

Ask for your Bill. Smart clients ask to be billed at least every thirty days and, sometimes, even more often. The bill should tell you what is going on in your case. If it does not, don’t pay it. You should know and understand what you are paying for and why.

Ask for a case plan. Many lawyers really have no idea of how to resolve a case timely and efficiently. No, they did not learn that in law school. What we learned in law school was how to read cases and, then when were done reading cases, we read even more cases, and more cases, until it came time for the Bar Exam and we were then asked to regurgitate the “holdings” of those cases back at some invisible grader, in a far away city, that we never met before and will, in fact, never meet. That is how we become lawyers. Not one word about strategy. Not one class in case planning or billing or how to communicate with you.

The way lawyers learn these important tasks is on the job, when you, the client, ream us. And this, my dear client, is how we learn to be lawyers, not by reading the “holdings’ of piles of cases in law school.

One last thought. Lawyers are people too (I know that may seem hard to believe). We actually work better and harder for people that we like. So, be nice. It may benefit you in the long run.

 

 

 

 

[1] This is called satire and is not intended to be taken seriously so please do not tell my friends and relatives that I recommended that you take a “hit” out on your adversary.

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ARE YOUR CLIENT’S FLORIDA’S WAGES EXEMPT FROM INTERSTATE GARNISHMENT?

The Florida Litigator

Representing a debtor in a Florida collection action, in which your client is the head of his or her household, is usually fairly straightforward.  Your client resides in a debtor’s  haven.  In Florida, it is difficult for creditors to reach your client’s assets if she is the head of household.  In Florida, there is an exemption from garnishment statute that limits the ability of creditors to garnish the wages of someone who is determined to be a “head of household.”  F.S. §222.11 (2012).  In order to avoid the effect of this statute, a creditor must obtain from the debtor an explicit waiver.

Florida also frowns upon certain common collection devices used in other states known as “Confessions of Judgment.”   If you live in New York, for example, a creditor can have your client sign a Confession of Judgment and, in the event of a default on a loan, can march…

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PEACE THROUGH WAR – A SHORT PRIMER ON HOW TO ACHIEVE A COST EFFECTIVE AND RELATIVELY QUICK SETTLEMENT

Source: PEACE THROUGH WAR – A SHORT PRIMER ON HOW TO ACHIEVE A COST EFFECTIVE AND RELATIVELY QUICK SETTLEMENT

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