Articles Posted in small business

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ada25-logoThis guest-post is a synopsis of “whether a corporation has a cause of action for retaliation under the ADA,” by Attorney William Goren from his blog, Understanding the ADA.

While the Author concludes the answer is “No” based on the retaliation provision in the ADA, he explores whether a corporation would have an associational discrimination claim because the phrasing of the statute is significantly different than the retaliation statute.

While the Author concludes that no claim exists because of the phrasing of the retaliation provision in the ADA, he also explores whether a corporation would have an associational discrimination claim because the phrasing of the statute is significantly different than the retaliation statute.

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This guest-post, a synopsis of “Let’s Talk About Arbitration” by Attorney William Goren from his blog, Understanding the ADA.  The original post discusses issues pertaining to arbitration of claims arising under the Americans with Disabilities Act. The author assumes that readers know the difference between arbitration and mediation. Covered points include these:

  • Can an ADA claim be subject arbitration?
  • Are there situations in which an arbitration agreement is deemed unconscionable?
  • Can an arbitration agreement assert that an award cannot be challenged for any reason?

The post also discusses:

  1. Whether an arbitration agreement covers ADA matters will depend upon how it is phrased, but if phrased broadly enough, an arbitration agreement can cover ADA matters.
  2. An arbitration agreement can be held unconscionable, but proving that an arbitration agreement is unconscionable is not an easy task.
  3. An arbitration agreement that prevents any challenges whatsoever to the award may well be declared against public policy (It was in Georgia, and Georgia very closely follows the Federal Arbitration Act).
  4. The Second Circuit goes with the stay, but the U.S. Court of Appeals are split on this. Ultimately, it will all come down to what “shall,” means.
  5. In a comment the author also notes a recent California Supreme Court case concluding that the Federal Arbitration Act preempts state requirements as to how notification is given that an agreement is subject arbitration (font size for example).

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Many small business owners find comfort and success capitalizing on a franchise. Franchisors use Non-Compete (“NCA”) and Non-Disclosure (“NDA”) clauses as well as mandatory arbitration provisions to protect themselves. But should such a provision be effective against a non-signing spouse? That was the question before the Appellate Court in the recent 7th Circuit case of Everett vs. Paul Davis Restoration. The short answer? Yes, it is.

The Family Business

Davis Restoration entered into a Franchise Agreement with Matthew Everett, husband of Plaintiff Renee, as the “principal owner” of Franchisee EA Green Bay. Sometime after signing as the sole owner of EA, Matthew transferred 50% of the company to his wife despite not securing permission from the Franchisor beforehand. Eventually, the Franchise Agreement was terminated and the 2-year non-compete provision took effect. Matthew then transferred the remaining 45% of EA to his wife, who continued to operate it under the name “Building Werks” from the same location with the same customers and employees. Moreover, the Franchisor contended, Building Werks continued to capitalize on its good will and reputation.

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So you’re doing business as usual and notice that payments from your customer are getting later and later. Turns out that customer is struggling to navigate in the sputtering economy. Waiting for your money is bad enough; but what if you receive a demand to refund what you’ve been paid? And not because of anything you’ve done but because your customer has filed for Bankruptcy?

Sound like a nightmare? Actually, it happens everyday. So what do you do if you’re next? That was the question addressed in the recent New York case of Davis vs. Clark-Lift, in which a reorganizing Chapter 11 Debtor paid vendors later and later as it listed towards Bankruptcy. But even those lucky creditors who got paid could not escape the demand of the Trustee (Davis) to fork over what they had received.

As the Court in Davis explained, to set aside a payment as a “Preferential Transfer” under Section 547(b) of the Bankruptcy Code the moving Creditor or Trustee must established that the Debtor made it:

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This piece from the Wall Street Journal’s Real Time Economics site answers the question with charts galore! The short answer comes in 3 parts:

1) For working people, 2013 was more of the same slow, jobless recovery;

2) For high net-worth individuals and corporations it was a bonanza; and;

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Let’s face it. Things are tough economically. Most talking heads agree the economy is undergoing a structural change that will affect everybody. Sadly it looks like not everyone is sharing the pain of the Great Recession, however. The rich are getting richer, while the rest of the population keeps on

sliding,

At a time like this who wouldn’t want to get everything they can? What if you were part of a company that wasn’t doing well and decided to make the best of it by jumping on opportunities unearthed by the company?

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Everything Was Going Fine Until…

Your customer or borrower has been paying like clockwork and you, the creditor or vendor, have been dispensing goods and services as promised. Then your customer starts to pay a little later, then later still. Why not? Times are tough. So you do the decent thing and take their payments without complaining. Next thing you know, your customer seeks bankruptcy protection, leaving you holding the bag for thousands, tens of thousands, even hundreds of thousands of dollars worth of goods and services. Money you’ll never see again. 

The Worst Part Is (Not) Over

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Written by Jonathan Trent and Mazyar Hedayat  Edited by Mazyar M. Hedayat, Esq.

Small business remains the backbone of the most vibrant economy in the world. America leads in innovation and hard work thanks in large part to small businesses and entrepreneurs. But despite the best intentions of their owners small businesses have a high failure rate; especially in the first few years of operation. 

But why the high failure rate? One of the most common reasons is that the business owner, entrepreneur, or manager of the business 

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By Andrew Jackson  Edited by Mazyar M. Hedayat, Esq.

In this post we will skim the surface of how the Automatic Stay, put into effect via Section 362 if Title 11 of the United States Code, helps clear the air for people and companies that file Bankruptcy; allowing them to repay their creditors the best they can. What Is the Automatic Stay? Bankruptcy is the Federal process by which an individual, a couples, or a business entity is permitted to shed liabilities and obtain a fresh start. This process can take the form of a one time liquidation or a reorganization that unfolds over time. But all forms of Bankruptcy have one thing in common: the Automatic Stay found at 11 USC 362.  So what is the Stay? It is

a self-executing, universal injunction that goes into effect the moment a case is filed and keeps most creditors from exercising control over the assets of the Bankruptcy Estate.

Why An Automatic Stay?

To ensure that similarly-situated creditors get treated equitably in a Bankruptcy, Congress wrote the Bankruptcy Code to ensure that nobody could get the advantage. The Automatic Stay ensures that there is enough to go around, and that no single Creditor gets too much; even if what is left to distribute is only pennies on the Dollar. Under the Code, fairness equals equitable distribution.To ensure fairness, Section 362 makes it a punishable offense for most creditors to take actions such as:

  • Filing or pursuing a lawsuit to collect
  • Garnishing wages or issuing a citation
  • Filing or foreclosing a mortgage or lien
  • Demanding payment orally or in writing

What if the Stay is Violated?

Because the intent of Congress in creating the Automatic Stay was to usher in a quiet period during which the Bankruptcy Trustee could take stock of assets and liabilities without having to fight the Debtor’s battles, penalties for violation of the Stay are harsh. Any breach of the peace, with or without the creditors’ knowledge, is considered contempt of Court punishable by injunctive, monetary, and in proper circumstances punitive, damages. This is worth repeating:creditors can be punished even if they did not know  that they were violating the Automatic Stay. As long as the Stay is in effect – that is, a Bankruptcy case was filed – violation by a creditor is a civil offense. Note however; Congress considered some things too important even for the Automatic Stay. Thus, Criminal matters are not affected; nor are family law (i.e. Divorce) matters.

How is the Automatic Stay Put Into Effect?

Neither a Debtor, the Debtor’s Lawyer, nor the Court needs to take any action to activate the Stay – it comes into existence by operation of law when the case is filed. How do creditors know? Every creditor listed in the Bankruptcy Petition is served notice by the Court Clerk.

What if My Creditors Say They Didn’t Know?

All creditors identified in the Petition receive notice of the case from the Court Clerk, and all recipients are bound by the provisions of §362 whether or not they know they are violating it. You read that right: even if a creditor was unaware of the Stay when they violated it, they can nonetheless be punished by the Bankruptcy Court. In fact, the Automatic Stay is so powerful that it restrains not only creditors but the majority of Judges and Attorneys from exercising dominion or control over assets of the Bankruptcy Estate.

How Long Does The Automatic Stay Last?

In practice, the Automatic Stay lasts for a relatively short time in the case of liquidation and much longer in the event of reorganization. In Chapter 7 the Automatic Stay protects all non-exempt property that can be administered by the Trustee for about 90 days (the length of most Chapter 7 cases). That is, until a discharge is issued, the Stay protects all items in the Bankruptcy Estate. In Chapter 11 and 13 the Stay remains in effect for as long as the Plan of Reorganization is active. In Chapter 13 that means a maximum of 5 years. In Chapter 11 that means a long as it takes to repay creditors according to the Plan approved by the Court and a majority of unsecured creditors. Wrapping It All Up After reading this article it should be evident that the Automatic Stay is a powerful tool. While we have discussed only a fraction of its ramifications here, you should now have a better understanding of this portion of the Bankruptcy Code. Take advantage of your new appreciation for the law by contacting M.Hedayat & Associates to set up a free telephone or office consultation.

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