Wednesday, July 22, 2009

Now Available as Podcast: So Your Business Has Been Sued: Now What?

by John L. Watkins



On our blog, website, and podcast page, we try to provide businesses with information about how to avoid disputes and litigation.



However, litigation sometimes happens. If the process server arrives at your business, what should you do? Do not panic, but do not procrastinate.



Our new podcast, available on the firm website or our podcast page addresses the initial fundammental steps a business should take if it is sued. Hint: Call your lawyer and forward the suit papers to your lawyer immediately!



The substance of the podcast is also available in an earlier post on this blog and in an article on JDsupra.

Saturday, July 18, 2009

What Tom Watson Teaches Us About Business and Practicing Law

by John L. Watkins

July 18, 2009. Today, I and the rest of the world that pays any attention to golf watched the amazing spectacle of Tom Watson, age 59 and only a couple of months short of his sixtieth birthday, and less than a year after hip replacement surgery, take the lead of the British Open, one of golf’s four major tournaments. No, not the Senior British Open, the British Open, or, for the rest of the world, the Open: The same tournament on the same Turnberry links that sent Tiger Woods, the best golfer on the planet for the last decade, packing after two rounds. The same tournament that Tom Watson has previously won five times, most recently in 1983.

As I am writing this, I have no idea if Tom Watson will pull off a win. Regardless of what happens, what Watson has achieved through three rounds is nothing less than astonishing, and can remind us all of a few important lessons about life, and maybe even about practicing law. Here are a few random, although hopefully appropriate, thoughts.

“This is what it’s all about, isn’t it?” Watson is reported to have asked this question to Jack Nicklaus on the back nine in the heat of their famous “Duel in the Sun” on these same Turnberry links 32 years ago, a legendary battle in which Watson prevailed. Nicklaus supposedly replied, “You bet it is.” Although Watson surely wants to win this year, perhaps more than anyone, the chance to be back in the battle after so many years, doing the one thing he does best, and under the most improbable of circumstances, is itself reward enough.

Although not nearly as true in golf as other sports, most athletes have very limited time in which they can play their game or sport at its highest levels. Fortunately, this is not true for most people in business, and it is certainly not true in practicing law. Watson has reminded us to stay in the game, to enjoy what we do, and to relish the chances – few as they may be – to do something really special in our chosen business or profession.

“Come on, old man.” These words were uttered to Watson during the second round by Sergio Garcia, the brash young Spanish star. At the time, Watson had made a number of bogeys, and the round seemed to be getting away from him. Sergio reminded Watson that he had shot a spectacular round the day before, and, in essence, told Tom to get it in gear. Watson responded with a number of birdies coming in, and, at the end of the day, he shot an even par 70 that took the lead. After the round, Watson thanked Garcia for the pep talk.

Golf, as life, business and law, is, when at its best, an intergenerational game. As much as Watson appreciated Garcia’s words of encouragement, Garcia was no doubt inspired by Watson’s performance. This is as it should be. The young should learn from the experienced, but the experienced can be inspired by and learn from those who are younger.

Tiger Woods, as an example, has certainly inspired many younger golfers. But he also inspired many more experienced golfers to get in the gym and to raise their games. And his example of taking his hat off and shaking hands on the last hole, regardless of his own performance, is an example to all generations.

Watson’s performance is also a reminder that these guys could really play, and, under some circumstances, can still play. There is an unfortunate tendency in athletics for fans to appreciate only the accomplishments their generation, and to downplay the accomplishments of prior generations. Many people who never saw Watson and Nicklaus play (not to mention Palmer, Player, Casper, Trevino, Ballesteros, Faldo, and many others) seem to assume that Tiger and Phil Mickelson and others are somehow inherently better than their predecessors.

The fact that Watson can challenge the young guys at 59 (and after a hip replacement) shows how wrong this assumption is, just as Nicklaus demonstrated with his top 10 finish at the Masters in 1998 at age 58 (before his own hip replacement). If these guys can challenge the current champions now, many years after their prime, it would seem to be a reasonable assumption that, hey, they really were pretty good and still are. And, for the record, if Tiger could go back in time, he would be pretty darn good, too.

The same assumptions made in athletics may also be made in business and law. Law, perhaps of all professions, is intergenerational. I started practicing in 1982 with the old Hansell, Post firm in Atlanta (it is now Jones, Day’s Atlanta office). The lessons that I learned from the Hansell, Post partners – Rhett Tanner, Hugh Dorsey, Jule Felton, David Bailey, Hugh Wright, Rick Kirby, and John Parker, among others – stay with me today. I have tried to pass my own lessons on to a generation of younger lawyers. As I have seen the lawyers I have mentored achieve success, I hope I have repaid the debt.

Experience Means Something. Watching Watson hit smart shot after smart shot in difficult and differing conditions – taking his medicine when necessary – shows the advantage of over 30 years of experience in playing links golf. Even in athletics – where youth must be served – experience still counts for something. This is even more so in business and law.

I hope Tom wins, but, even if he doesn’t, we can all learn something from his most recent accomplishment.

I also think I’ll hit some balls tomorrow after the tournament.

Friday, July 17, 2009

Part II of Podcast on Common Legal Mistakes Made by International Companies in Doing Business in the U.S. Now Available

by John L. Watkins

Part II of our podcast series on Common Legal Mistakes International Companies Make in Doing Business in the U.S. is now available. In this podcast, Tom McLain and I provide the general background regarding legal issues in the U.S. This discussion provides the foundation for more specific issues to be discussed in later episodes. Tom and I discuss the sources of law in the U.S. and the fifty states, and address some of the key legal differences that exist in most U.S. jurisdictions when compared to other countries. Specific topics include:

1. Why there really is no “U.S.” legal system, but instead fifty state legal systems with a federal overlay;

2. Why the U.S. is really not a “common law” system, but a mixture of statutory, regulatory and common law;

3. Some of the key differences between legal issues in the U.S. and most of the rest of the world, including the jury system, the fact that there is generally no “loser pays” rule, the fact that lawyers are permitted to take cases on a “contingency fee” basis, the fact that punitive damages are sometimes permitted, and the fact that, in many state court systems, judges are elected.

The podcast also provides an overview of how, despite the legal challenges, doing business in the U.S. can be managed with an acceptable level of risk. Future podcasts will cover topics on doing business in the U.S. in greater detail.

The podcast is available at http://www.ctflegal.com/podcasts.html or http://www.ctflegal.blip.tv/.

Monday, July 13, 2009

So Your Business Has Been Sued: Now What?

by John L. Watkins

The marshal or process server arrives at your place of business with papers. Perhaps they are delivered through your corporate services company or perhaps they arrive by registered mail. You look at the papers and realize that your business has been sued. This realization is undoubtedly disconcerting, particularly if you have been fortunate enough to avoid litigation previously. Now what do you do?

The first thing you should do is take a deep breath and relax. It is not the end of the world. The remainder of this article will outline some of the basic steps you should take when this occurs.

1. Do Not Panic, But Do Not Procrastinate. All court systems have deadlines within which an Answer, Counterclaim or other papers must be filed in response to a lawsuit. Normally, these deadlines are between 20 and 30 days after delivery of the papers, but they vary. Typically, the front page (the summons) will specify when the papers have to be filed. If your company does not file an Answer in time, the court may enter a default judgment against it, meaning that it loses without a trial. But you do not have 20 to 30 days to wait, you need to be proactive and react immediately.

2. Engage Counsel. You will want to have the papers in the hands of counsel as soon as possible. If you have company counsel, forward copies of the documents immediately. If you do not have counsel, you will need to engage a lawyer. There are many ways to find a good lawyer. You can often get good recommendations from other business owners or trusted advisors. You might also ask attorneys you know for recommendations. If they are not a litigation attorney, they will probably still be able to make referrals.

There are other ways to research and find attorneys. Most lawyers and law firms have websites that include biographies of the attorneys. Check the attorney’s experience in handling similar types of cases. Check the attorney’s academic performance. Although strong academic performance is no guarantee that a person is a good lawyer, it enhances the odds. The most prestigious law firms, large and small, tend to place a lot of weight on academic performance in their hiring decisions. Thus, if a lawyer graduated at the top of his or her class, was on the law review, and has other good credentials, it is positive piece of information, but is not necessarily determinative.

The Martindale-Hubbell Law Directory is a long-standing publication that lists most attorneys. Further, it is now available on line at www.martindale.com or its affiliate, www.lawyers.com. Martindale-Hubbell also rates attorneys on a scale of “AV,” “BV” and “CV.” AV is the best rating. Many lawyers are not rated, which does not necessarily mean anything other than that Martindale has not received enough feedback to rate them. As with all such systems, they should be taken with a grain of salt, but an “AV” rating is one indication that a lawyer is most likely experienced and able. When I engage counsel in other jurisdictions on behalf of clients, all other things being equal, I look for an “AV” rating.

Other information is available through the AVVO website, www.avvo.com. AVVO, which rates lawyers on a scale of 1 to 10, is new and is controversial. If a lawyer has not registered with AVVO and “claimed” his or her profile, AVVO may include only a very basic outline of the lawyer’s background. AVVO may also assign a base rating to such persons, which often seems to be in the range of 6 to 6.5. If a lawyer with such a profile would register and then list awards, bar activities, speaking engagements, etc., that person’s rating might change very quickly to a 9 or a 10. If a lawyer has a very basic listing on AVVO (no photograph, no extensive biography) and a lower rating, that may be simply because the lawyer has not claimed his or her profile and the rating should, again, be taken with a grain of salt. However, if a lawyer has a high rating on AVVO, then that is, again, a piece of positive information.

3. Notify Your Insurance Broker and Carrier. You should also call your insurance broker immediately upon receipt of the suit papers and should forward copies of the papers to your broker to determine whether there might be any coverage for the lawsuit. As a further caveat for future reference, if you receive a demand letter threatening a claim before a suit is filed, that should be forwarded to your broker. Some policies require notice of any claim or occurrence and of any suit. It is always better to be safe than sorry. If there does appear to be even a possibility of coverage, it is a good idea to get confirmation directly from the carrier (and not just from the broker) that they are "on notice" of the claim. Your lawyer can be helpful in interacting with your broker and your insurance company. If there is coverage, the carrier will probably have to step in and provide a lawyer to defend the suit at their cost.

4. Preserve All Information. Once you are in litigation, or even aware of the prospect of litigation, you need to preserve all information, including emails and electronic information, that may be relevant to the litigation. You should involve your lawyer in this process. There is one strong word of warning here: Sometimes litigants try to destroy potentially damaging information. Not only may this subject the litigant to sanctions and other legal issues, it never works. The opponent will find out and will be able to prove the other side tried to cheat. There is an old adage among trial lawyers about witnesses who testify: "You lie, you lose." It is the same with litigants who try to hide relevant information.

5. Monitor the Situation Carefully. If you have counsel in place, have notified your broker and carrier, and have preserved all information, you should have taken the necessary preliminary steps. However, you still need to be vigilant. You should expect regular updates from your lawyer. If you have not received them, call the lawyer or send and email.

Make sure your carrier has responded. If the carrier is providing a lawyer, you need to understand that the lawyer is your company's lawyer and not the carrier's lawyer. Unfortunately, some "insurance defense" lawyers (those who are regularly engaged by carriers to defend insureds) seem to forget this. Sometimes, insurance defense lawyers will keep the insurer fully informed, but not the insured, who is the actual client. If this happens to you, you need to speak up and remind the lawyer that your company is the client, not the insurer. It is perfectly appropriate for the lawyer to keep the insurer informed, but the lawyer should also keep you informed.

You should be aware that many insurance policies give the insurer the right to settle the claim, including over your objection. However, you should be fully informed of any proposed settlement and your company should be fully protected in any proposed settlement. There are a few policies that require an insured's consent to settle, so, again, check the terms of your policy.

Our firm, Chorey, Taylor & Feil, A Professional Corporation, has a very active and experienced business litigation department. Five of our senior litigators have been named to the Georgia Super Lawyers list in Business Litigation or General Litigation. All of our litigators that are ranked by Martindale-Hubbell are rated AV. Four of our senior litigators are rated 10.0 by AVVO. Visit our website, www.ctflegal.com, for more information.

Friday, July 10, 2009

Hart-Scott-Rodino Not Limited to M & A

By Tom McLain

When the Hart-Scott-Rodino Antitrust Improvements Act ("HSR") is mentioned, most people think of it as a requirement that may come into play in a merger transaction or some other type of acquisition transaction. However, there are occasional reminders that other sorts of transactions that cannot be classified as a merger or acquisition can be subject to HSR notification requirements. Just this week, such a reminder came with the announcement of an collaboration and exclusive global license agreement between Merck and Portola Pharmaceuticals. According to news reports, the licensing deal requires Merck to pay Portola a $50 million initial fee, followed by additional payments of up to $420 million upon achievement of certain milestones and also provides for double-digit royalties on worldwide sales of betrixaban, a drug for the prevention of stroke in patients with atrial fibrillation. In its press release, Merck commented that the "effectiveness of the collaboration agreement is subject to the expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, if applicable."

While it is true that the vast majority of HSR notifications are filed as a result of a transaction involving a merger or acquisition transaction, the formation of a joint venture or other corporation can trigger a requirement to file an HSR notification. More importantly for Merck, the Federal Trade Commission (the "FTC"), through its informal opinions, has explained that certain exclusive licenses will be treated as the transfer of an asset for purposes of the HSR Act. With respect to the Merck/Portola transaction, the underlying collaboration and license agreement will have to be analyzed to determine whether it is sufficiently exclusive for the FTC to consider it to be an transfer of an asset. Assuming that the Merck/Portola arrangement is sufficiently exclusive, then the parties will have to determine whether other reporting threshold tests are met such as the" size of person test" and the "size of transaction test." The FTC's Introductory Guide II provides basic information regarding the reporting thresholds.

Given that, as of the 2009 amendment to the regulations, the daily penalties that can be assessed for a failure to make a required notification filing are $16,000 per day, it is quite important to remember that the HSR Act applies to things beyond mere mergers and acquisitions. Thus, it is important to remember that, whenever two companies come together to form a joint venture, form a corporation or limited liability company, or undertake a collaborative or exclusive arrangement, the implications under the HSR Act should be considered.

Thursday, July 9, 2009

New Podcast Series on Common Legal Mistakes by International Companies

by John L. Watkins

As a compliment to our continuing series of blog posts on legal issues for international companies, Tom McLain and I have just released the first part of a series of podcasts covering common legal mistakes that international companies make when doing business in the U.S., and ways to avoid them.

Part I is an introduction to the series, and discusses why the U.S. is an attractive market for international companies, particularly in the current tough economic environment. We also explain some of the reasons why our home state of Georgia should be on any company's short list of locations for its U.S. business operations. Finally, we discuss the five fundamental mistakes that international companies often make in setting up shop in the U.S. However, as Tom points out in the podcast, many of these issues apply equally well to domestic companies.

The podcast is available on the firm's website on the podcast page, www.ctflegal.com/podcasts.html or on the firm's page on blip.tv, www.ctflegal.blip.tv. Further podcasts in the series will be released in coming weeks.

Friday, July 3, 2009

Should businesses risk using form agreements from the Internet?

By Tom McLain
You can find anything on the Internet. That includes form legal documents. However, just because you can find a form legal document that seems to pertain to your particular situation, should you use it? In the majority of instances the answer is no. Is that simply a self-serving answer from a lawyer or is there a rational basis for the answer? Read on and make your own determination.

Let me provide you with a peek into how I and many other attorneys draft contracts. At the core of the process is a skill you learned in kindergarten: cutting and pasting. Even when I am drafting a contract involving a subject matter that is new to me, there is always some component of reusing clauses and parts of agreements that I have used before. The primary driving force behind this is efficiency: if I do not have to draft everything from scratch, then I can deliver the contract to my client far more quickly (and cheaply). Moreover, I am able to reuse clauses that I have spent considerable time tweaking to get just right. In effect, the contracts that I write are generally a compilation of various "form agreements." Of course, there is also a significant amount of customized drafting and creation of clauses that are necessary to fit the particular situation.

So, if I use forms, why do I say that non-lawyers should not? Well, let me answer this by explaining a little more of my drafting process. When I consider which document to use as a starting point, I need answers to four questions: 1) which party did we represent, 2) was there equal bargaining power, 3) were there unusual circumstances, and 4) how heavily negotiated was the agreement. Thus, if I were representing a seller of a business, I would not want to start with an asset purchase agreement that I drafted while I was representing a buyer who had all the bargaining power in a transaction where the seller was desperate for cash and had no attorney. If I used that particular asset purchase agreement, then I would be using a document that was heavily stacked in favor of a buyer when I was representing a seller. This drives home a most important point: when it comes to legal documents, ONE SIZE DOES NOT FIT ALL.

So lets look at a particular example that seems to be quite common. Suppose you decide to search the Internet for a free confidentiality agreement form because you need to hire a consultant for your business. The point of a confidentiality agreement is to protect the confidential and proprietary information that your company uses to create whatever competitive advantage it has in the marketplace, arguably the single most valuable asset of the company. So, when you find a free confidentiality agreement form on the Internet that looks like it may be a good one, can you tell whether it was drafted to favor the company or to favor the consultant? If the form is "neutral," is that good enough for you or are you more interested in using a document that provides your company with as much protection as possible? Do you have the experience to know whether the form agreement is missing any key elements? Was the form agreement prepared to protect a business like yours? (Drafting to protect a technology company is far different than drafting to protect a brick manufacturer). Is the only document you need a confidentiality agreement or are there other ancillary agreements that are important? Do the provisions in the form agreement comply with the law applicable in your state or could portions of it be unenforceable? Without the answers to these questions, there is no way for you to safely predict whether using the form confidentiality agreement will protect your company or leave it vulnerable.

A confidentiality agreement may seem like a generic and harmless agreement that could be picked up from almost any source. Hopefully, this discussion has made it clear that there are many factors that need to be considered and that you need experience legal counsel to guide you through those considerations. In short, a confidentiality agreement needs to be customized to fit the particular business and the particular circumstances. The same sort of analysis holds true for almost any legal agreement you can imagine. So, can you find free legal documents on the Internet and use them? Sure. Will there be consequences? If you are extremely lucky, maybe not, but is it a risk worth taking? If you execute a form agreement, it could actually wind up being worse than having no agreement at all. Only you can decide if your business to too valuable to take such risks. You may decide that the risk is acceptable, but at least you now have an idea of the nature of that risk.