Complex Business Divorce for a Construction Company
A new partner in a construction company soon learned his partner, previously the sole owner, had been mismanaging the business for years. Assets were less and liabilities greater than had been reflected on the company’s books. Garson Law represented the “good partner” who wanted to salvage his investment while protecting the company and the jobs of its nearly 100 employees.
The Garson Law team worked quickly on multiple fronts. A lawsuit to dissolve the partnership was filed in order to force the “bad partner” to address the company’s problems. At the same time, our attorneys began renegotiating the partnership agreement and preparing for the possible sale of the business to a third party. In the end, the sale to a third party was accomplished. The Garson Law client recovered his investment, remained to manage the company for the new owners, and was able to save the jobs of most of the company’s employees.
Negotiating the Sale of a Business and a Job with the New Owners
We had counseled this client for years, served on the client’s advisory board, and provided a variety of legal services. When it came time to sell its main business, our client chose Garson Law to lead the negotiations, structure the transaction, and obtain the most favorable deal possible. To protect our client’s relations with the purchasers, with whom our client would continue to work after the sale, we handled all negotiations. Despite a downturn in our client’s business during the negotiations, we were able to negotiate a seven-figure increase in the sales price and we capped our client’s exposure to any post-closing claims by the purchaser. In the end, we achieved the goal of both enhancing the deal for our client and preserving our client’s relationship with the new owners of the business.
The Business “Divorce” & New Beginnings for a Medical Group
We were retained by a group of doctors who had signed complex and (as they subsequently came to realize) disadvantageous “partnership” agreements when they joined a larger practice. Our clients asked for help in leaving this practice. We were able to negotiate a six-figure reduction in the “exit fee,” as well as releases from guarantees on loans and non-competition obligations. We assisted the clients in establishing their new business, including the selection of the appropriate new company entity, the creation of organizational documents and agreements, the hiring and retention of staff, and the drafting of a buy-sell agreement among the doctors.
The Business Drafting the Right Customer Contract
Our client provided security-related services to consumers. Because of the nature of the services provided, the business was exposed to potentially unlimited liability to its customers. At the same time, non-payment for services which already had been rendered was a significant problem for the company. In short, our client faced uncertain prospects due to the twin pressures of potentially unlimited liability and excessive non-payment by customers. To help stabilize the business, we first researched and implemented effective means of limiting our client’s liability exposure, including appropriate disclaimers and caps on liability. We then enhanced the collectability of our client’s accounts receivable by adding provisions for attorney fees, interest on unpaid sums, and a convenient and inexpensive forum for resolution of disputes in the event of consumer non-payment. Simply by implementing these changes in its consumer contract, our client substantially enhanced the value of its business.
The Business Resolving a Meeting Planning Dispute
Our client, a travel agency, called on us to help resolve a dispute over conference arrangements our client had made. The conference was poorly attended, and the company hosting the conference wanted our client to help pay attrition fees owed by the host company under its hotel contract. Worse yet, the host company was planning to replace our client on future conferences already under contract. We reviewed all of the contracts and sent the host company a compelling demand letter that set the stage for a favorable settlement. Under the settlement, our client received a termination fee, preserved its hotel commissions under the contracts for the pending conferences, and obtained a blanket release of any claims that the host company might have. We took our client from defense to offense and arranged a favorable conclusion for a soured relationship.
The Business Merger of Travel Agencies
Our clients owned separate travel agencies. The combined effects of a declining economy, commission cuts, and other supplier actions, made them realize that they had to restructure their businesses to survive. They did not want to be bought out by a mega-agency, so they decided to merge, with each party owning 50% of the business. The first travel industry lawyer they approached refused to help them because he thought that a 50-50 ownership structure was doomed to failure. Then they came to our attorneys. We counseled our clients regarding all of the issues they would face under their proposed structure: legal, business, and social. We also carefully crafted the merger and governing documents they would need to make their plan a success and provided them with the “prenuptial” agreement that would address the situations that were likely to arise. The new entity has been in business for more than five years and is a success.
Avoiding Narrow Doors - and Million-Dollar Liability
Protecting the Subcontractor from an Unexpected Pass-Through Liability
The building may be beautiful, but if its doors are narrower than required under the Americans with Disabilities Act, it can be a big and very expensive problem.
Our client, a construction company, asked us to review a contract it had negotiated to build a very large multi-family residential development. We noted in our review that the contract required our client to warrant to the developer that its construction would comply with all applicable law. We asked whether the architect’s plans had been reviewed for compliance with the Americans with Disabilities Act and FHA regulations and were told that they had not. Upon review, it was discovered that the doors as specified in the construction documents would have been too narrow to comply with ADA and FHA regulations. We avoided the problem for our client by negotiating the “comply with all laws” language out of the contract. The developer avoided the problem – and a potential million-dollar expenditure to cure – by having the architect revise the drawings and review the entire project for ADA and FHA compliance.
We encourage our clients to let us perform ADA/FHA and Architectural Barrier Act reviews at new sites – to spot issues before they become major problems, and to write indemnification clauses that protect clients if architects make compliance mistakes.
Our client was the subcontractor on a large municipal project. The proposed agreement between the general contractor and our client was extremely one-sided in favor of the general contractor. Unfortunately, our client had limited bargaining power and could not expect a balanced agreement under the best of circumstances. Because we knew we could not engage in extended and detailed negotiations with the general, we identified critical risks imposed by the subcontract and focused on negotiating just a small number of key revisions. One such revision required the general to increase the contract price to cover additional costs if the municipality required the use of union labor on the job. In fact, the municipality imposed the union labor requirement and the additional cost was roughly $500,000 – and our client’s contract was increased by that amount. Without our foresight and negotiation skills, our client would have lost the entire profit on the project or, worse yet, sustained a loss.
Making Peace and Finding Profit for the General Contractor
Our client, the general contractor, was dissatisfied with the quality and timeliness of the subcontractor’s grading and excavation. The subcontractor insisted its work was more than adequate and blamed every problem on the general contractor. Our client wanted to replace the subcontractor and file suit, but faced the prospect of substantial liquidated damages if the project was not delivered to the owner on time. We quickly evaluated the situation and recommended that we attempt to negotiate a resolution rather than risk delay and liquidated damages which the general might someday recover as damages from the subcontractor, if the subcontractor remained solvent. We quickly reviewed the contract documents, interviewed the players and studied every e-mail and letter since the project began. Then we met with the subcontractor and presented convincing, detailed evidence of the subcontractor’s violations of the contract. Instead of months of delay and years of litigation, in days we negotiated a mutually acceptable resolution that satisfied both parties, allowed the project to proceed, and brought the project in on time and on budget.
Enforcing Employment Agreements and Avoiding Unfair Competition
Avoiding a Multi-Million Dollar Overtime Mistake
An account executive with an Advertising Agency was leaving the company and threatening to take clients with him. Garson Law represented the Agency, quickly helped to enforce agreements the account executive had signed, and helped the company tighten its employment practices. The firm’s responsiveness saved the Agency from potentially unfair competition.
Our client was a company which employed hundreds of individuals with varying degrees of education, experience and responsibility. Like many employers, our client was unaware of the highly technical and counterintuitive regulations governing overtime pay. Among other things, our client didn’t know that docking “exempt” professionals for partial day absences would nullify the exemption from overtime pay for these employees. We guided our client to the proper treatment of these employees before any claims had been filed and thus avoided potentially multi-million dollar penalties.
Saving an Executive from Taking the Fall
Our client, an executive at a national company, was accused of improprieties and threatened with criminal prosecution unless he provided “restitution” to his employers. We fought back. Hard. We left no stone unturned in our search for evidence, presented a convincing case to the employer, and negotiated severance pay, a release of all claims by the employer, a resignation instead of termination, and no “restitution” payment at all.
Implementing the A's - FMLA, ADA, PDA, etc.
Our client encountered one of the trickiest areas of employment law – the adoption of fair and legal policies for paid and unpaid leave for pregnancy, disability and parents with new-born children. We guided the client through the requirements of the Family and Medical Leave Act, the Americans with Disabilities Act, the Pregnancy Discrimination Act and a variety of related legal requirements. We explained the impact of additional state and local requirements – that are often overlooked, especially by companies operating in multiple jurisdictions. Finally, we drafted policies that were fair, legal, logical and could be understood without a law degree!
A Non-Threatening Non-Compete
After many years of blind trust, our client finally recognized that departing employees were leaving with valuable clients and information. Our client needed to implement a non-compete agreement that would prevent employees from walking away with valuable company assets, but do it in a way that would not upset a largely loyal, dedicated and long-tenured staff. A brief, but effective and enforceable agreement was called for. We identified the key restrictions that would be essential to protecting our client from unfair competition. We distilled these restrictions into a two page agreement – which every employee signed. With little disruption, our client added significant protection to the future value of its company.
Business Succession and Tax Avoidance
The Right Documents for the Circumstances
Our client, the owner and president of a multimillion dollar company, had business succession and estate planning needs. We created the structure he needed to slowly pass his business on to valued key employees. We also established tax avoidance vehicles that would provide for him and his spouse during their lifetimes, leave a substantial inheritance for their children, and save more than one million dollars in estate taxes. At the conclusion of the signing ceremony, he remarked that he was upset about the estate tax system: he had the foresight to use our services and so his children’s inheritance would not be taxed; however, another person in his situation who did not use competent estate planning counsel would have a tremendous tax burden. He was right. Until the estate tax system is changed, the services of qualified estate planning counsel are necessary.
Our client was a business owner who wanted to pass ownership of his commercial ventures to his business partner and the remainder of his estate to friends and relatives, all with the least tax burden possible. The matter was complicated by a number of relatives who expected to receive more from the estate than our client was planning to give them. We prepared airtight documents. We also prepared advance medical directives and durable powers of attorney in the event our client became incapacitated and could not manage his own affairs. All of our work became necessary when our client suffered a brain tumor that fully incapacitated him. Our documents took care of him in the manner he intended while he was alive and withstood all challenges from disappointed beneficiaries when he died. All of this was achieved with the lowest tax burden possible under law.
Recovery for Heirs by Will Contest Litigation
An elderly woman died with a will leaving her house “and its contents” to her brother with other siblings sharing the remainder of her estate. At the time she died, all of the woman’s accounts had been liquidated and she had cash – possibly as much as $200,000 – in her home. Following her death, the brother took possession of the house and kept the cash as “contents” of the house. We represented the other siblings in a suit to recover the cash. In a case of first impression in the District of Columbia, the court found after a trial that a bequest of a house “and its contents” does not convey money in the house at the time of death. The brother was required to pay the estate the value of the cash.
Finding the Right Legal Counsel
Our client’s mother had just passed away. The estate was a large one, but the client thought the administration of her estate would be straightforward. He went to a lawyer who conducted a brief review of the estate and advised the client that the administration would take well over a year to complete and would involve substantial legal bills. Confused by this advice, the client came to our attorneys. Our review of the estate found that it was perfectly suited for Maryland’s modified administration procedure. The administration of the estate was concluded in a matter of months at a small fraction of the cost estimated by the first lawyer. The client was right to seek the help of legal counsel, but finding the right legal counsel was what made the administration a success.
Saving the Client's Business by Saving Its Trademark
Preserving Access to Essential Internet Services
Our client was marketing a new food product and receiving large numbers of advance orders from grocery store chains when he learned the trademark he had created had been rejected for registration by the Patent and Trademark Office. The PTO found that the trademark was similar to a registered trademark for another food product and believed that consumers would be confused. Our client considered his trademark essential to the success of the product and sought our help. Upon our review of the matter, we found that the conflicting trademark was no longer being used by its owner and we initiated a cancellation proceeding before the Trademark Trial and Appeal Board. The owner of the abandoned trademark, finding that it owned a potentially lucrative asset, fought back by going to federal court to enjoin our client from using the trademark. We won in federal court, the owner of the abandoned trademark backed down, we obtained the federal registration, and our client is selling his product nationwide under the trademark he wanted.
Our client, an internet company, faced a business shutdown when the vendor supplying booking software and a database of products for the company to sell claimed a breach of contract and threatened to cut off its services unless our client renegotiated its contract. Our client was confident that it had not breached the contract and that the supplier simply wanted to revise the contract that it had decided it did not like. However, even a brief business disruption could devastate our client’s business.
Garson Law designed a strategy to avoid both a business shutdown and revision of the contract. Working with attorneys in the western state where our client was located, we obtained a temporary court injunction compelling the supplier to continue to provide services on the ground that a disruption would cause irreparable harm to our client. We then worked with our client to find a stand-by provider of the necessary internet services. Realizing that it had lost the leverage of a threatened cut-off of services, we were able to negotiate a satisfactory resolution to the dispute.
$1.6 Million Verdict for Fired Employee
Five-Year Case, Two-Month Trial, Five-Hour Jury Verdict; Successful Defense of $15 Million Fraud Against Corporate Officer
A Washington-area businessman sold his small company to the defendant, a significantly larger business. The defendant agreed to employ the former owner for several years at a relatively modest salary supplemented by annual bonuses based upon the performance of the business he had owned, now a unit of the larger company. The defendant fired the former business owner fewer than two months after the acquisition, claiming the employee had directed subordinates to violate state environmental laws. One of our litigation attorneys represented the former business owner in his suit for breach of contract and wrongful termination and won a jury verdict for $1.6 million. [The case was No. DKC-97 2914 in the United States District Court for the District of Maryland.]
Recovery of $600,000 for Bad Tax Advice
Our client was an officer of a very successful life insurance business which he had founded. An insurance brokerage owned by our client’s brother sued our client, claiming that he and his company had committed fraud and other wrongful acts by underpaying and failing to pay commissions on life insurance policies placed through our client’s life insurance business. The complicated case took five years to get to trial. The trial lasted two months and involved the presentation of more than 50 witnesses and hundreds of exhibits. The plaintiff claimed its damages exceeded $15 million dollars and it asked the jury to award the damages against both our client and the insurance business he had founded. Because of the volume of evidence presented and the complexity of the case, closing arguments were spread over two days. After less than five hours of deliberations, however, the jury announced its verdict: for the defense. [The case was No. 236402-V in the Circuit Court for Montgomery County, Maryland.]
Our client, a local family, relied upon their long-time tax advisor to prepare returns for their family business. The IRS audited the family’s returns and concluded that they had utilized an illegitimate tax shelter to reduce taxes, resulting in the imposition of substantial interest and penalties in addition to the payment of taxes which should have been paid several years earlier. Our litigation attorneys filed a lawsuit against the family’s tax advisor and eventually obtained a settlement in which the tax advisor paid the family more than $600,000.
Successful Pursuit of Injunction Against Corporate Issuer of Bonds; Financial Insurer Obtains Security Resulting in $25 Million in Insured Bonds Being Paid at Maturity
The client, a financial insurer, guaranteed that it would pay principal and interest on $25 million of corporate bonds if the issuing corporation defaulted. The corporation, which was in dire financial straits, amended the indenture under which it issued the insured bonds in order to strip away restrictive covenants protecting the bondholders—and the client—in order to pay millions to shareholders (through stock dividends and redemptions) ahead of the bondholders, regardless of the corporation’s financial health. On behalf of the insurer, one of our attorneys filed suit in federal court to enjoin the corporation from paying equity ahead of debt, which endangered payment of the bonds at maturity. The court consolidated a preliminary injunction hearing with a hearing on the merits, and expedited trial. After a week of trial, the judge agreed with the client that the corporation’s attempt to amend the bond indenture was improper and that the corporation should seriously consider settling before he formally ruled—which it did, on terms that resulted in the insured bonds being paid in full at maturity. [The case was No. 01 Civ. 3822 in the United States District Court for the Southern District of New York.]
Buying the Farm (But in a Good Way)
Negotiating a Complex Lease and Avoiding a $1 Million Loss
Our client wanted to purchase a large tract of farm land for commercial development. Title to the property was complicated by numerous poorly documented sales of the parcels that had been consolidated to form the tract, and because the farm straddled two counties. In fact, the title abstractor said that the title to the property was the most complicated he had ever seen. We resolved all of the title concerns and also negotiated and prepared the purchase agreement. In our negotiations, we made sure that the seller would be responsible for any taxes associated with the change from agricultural use to commercial use. This provision alone paid for our services because the seller, and not our client (the buyer), was required to pay the substantial agricultural transfer tax at closing. We also obtained numerous other protections for our client in the purchase agreement and made a very complicated transfer into a hassle-free closing for our client.
Our client was a large commercial tenant which had outgrown its premises and needed to move its expanded business into larger space. Our client had the right to terminate its lease three years before the end of the term and it had located new space in anticipation of exercising the right to terminate. After the client came to us to negotiate the new lease, we discovered that the client and its broker had overlooked the intricacies of the termination right in the existing lease. To successfully terminate the existing lease, our client was required to provide a termination notice by a certain date and vacate the premise by a later, fixed date. If the new landlord was late in delivering the new premises – a fairly common occurrence – and our client therefore was late in vacating the existing premises, our client would forfeit the early termination right and remain liable for another three years’ rent—in addition to the rent payable under the new lease. In short, a minor timing problem could result in a loss to our client of over one million dollars. With this understanding, we negotiated a strict indemnification agreement with the new landlord which provided that the new landlord would pay all rent due to the former landlord in the event the new premises could not be delivered on time. With this “incentive,” the new landlord had no problem meeting the delivery date required in the new lease.
Helping a Tenant Escape Renovation
Our client was referred to us after the large downtown office building where it was located began major renovation. Extreme noise from jackhammers and other construction equipment had started to interfere with our client’s business and there would be many months of noise to come. Our client wanted to terminate the lease, but had been told its lease allowed the renovation with no possibility of termination. We developed a strategy based on a thorough review of the case law of constructive eviction and interpretation of the applicable lease provisions. We also guided our client in collecting evidence of the existing and impending disturbance to our client’s business. With the law and evidence in hand, we negotiated with the landlord. We obtained not only a termination of the lease, but also a six-figure settlement to defray the expense and inconvenience our client would experience in relocating its business to new premises.
A Master Lease for the Future for a Landlord Planning Renovations
Our client, the owner/landlord of numerous retail and office buildings, was planning a major renovation and additional construction at one of its retail and office complexes. This client needed to continue entering into new leases, yet also retain the ability to renovate and build in the future. We identified the landlord’s specific requirements and created provisions throughout the landlord’s master lease that preserved the necessary flexibility for future work. These provisions addressed relocation of tenants, demolition of buildings, tenant cooperation with facade renovations, construction in common areas, and the appropriate allocation of common area expenses. With little alarm to the current and future tenants, the landlord was able to preserve all meaningful options for future work, while continuing to lease premises in the near term.