Tuesday, January 25, 2011

Elderly Woman Can Sue Law Firm for Unfair Debt Collection

An 85-year-old New Jersey woman who missed her final mortgage payment because she was hospitalized can sue a law firm for unlawful debt collection, even though the law firm contacted her lawyer about the debt and did not contact her directly, a federal court has ruled.
Dorothy Rhue Allen missed her final mortgage payment of $432 on the house she had owned since 1976 because she was in the hospital. The mortgage company began foreclosure proceedings against Ms. Allen through a law firm. When Ms. Allen's lawyer asked how much she would have to pay to resolve the problem, the bank and law firm told her the total charges would be $5,797, including nearly $2,400 in legal fees.
Ms. Allen sued in federal court, alleging these charges were much higher than allowed under the Fair Debt Collection Practices Act. A district court judge dismissed the case, finding that the charges were not covered by consumer protection law because they were sent to Ms. Allen's lawyers. However, a federal appeals court found that the communication to Ms. Allen's attorney was an indirect communication to Ms. Allen and sent the case back to the district court to revisit. Other appeals courts have been divided on this question.
Ms. Allen's attorney, Lewis Adler, who has described his client as "just a wonderful little old lady that got sick," has asked the court to certify the case as a class action, alleging that what happened to Ms. Allen is part of a pattern of systemic abuses by lenders handling foreclosures during the recent real estate bust.
For an article on the case from the Washington Post, click here.
To read the full text of the decision, click here.

Monday, January 17, 2011

Lessons From The Social Network

My wife and I finally got around to watching The Social Network last Saturday. It was a good movie and we enjoyed it, but it brought to mind some lessons that I thought might be useful to business owners and entrepreneurs.

Lesson 1: Get It In Writing

One of the plot lines was the dispute between Mark Zuckerberg and the Winklevoss twins over their claim that Zuckerberg stole the idea for Facebook from them. Zuckerberg had orally agreed to write the code for the Winklevoss' proposed social networking site HarvardConnection (now known as ConnectU).

After settling their claims against Facebook and Zuckerberg, the Winklevoss twins have now come back to argue that the settlement was unfair and their claims are worth $100 million more after Goldman Sach's recent $500 million investment in Facebook. (http://latimesblogs.latimes.com/technology/2011/01/facebooks-winklevoss-settlement-should-be-undone-lawyer-says-mark-zuckerberg.html)

Had Zuckerberg insisted on a written agreement with the twins and their business partner, then he may not have later had to pay out $65 million (or $165 million) to settle their claims against him. As Sam Goldwyn of Metro Goldwyn Mayer Studies once said, "a verbal contract isn't worth the paper it's written on."

Lesson 2: Have Your Own Attorney

Another underlying message in The Social Network concerns the "freeze out" of Zuckerberg's original business partner (and Facebook's original CFO), Eduardo Saverin, who had provided the original startup capital for the business.(http://selmark.blogspot.com/2010/10/eduardo-saverin-facebook-net-worth.html)

According to the movie, Facebook reduced Saverin's stake in the company by creating a new Delaware corporation to acquire the old company and then distribute new shares in the new company to everybody but Saverin. The first mistake made by Saverin in this deal was assuming that Facebook's attorneys represented him, too.

There is an inherent conflict of interest when attorneys represent a corporation and its officers/shareholders. While it may be possible for the conflict to be waived, it may also lead to circumstances where the officer can say – as Saverin says in the movie – "I thought they were MY attorneys, too." The best way to safeguard against this is to make sure you are represented by your own attorney who represents your best interests and not those of the corporation.

Lesson 3: Have Your Attorney Review All Documents

The final lesson from The Social Network is to have your attorney review any documents before you sign them. While this lesson is a corollary to Lesson 2, it nonetheless needs to be stated separately, because although people may have an attorney, they do not always utilize that attorney to review important documents.

If I represent you and you do not ask me to review a document before you sign it, I may later have to give you bad news. Had Eduardo Saverin had an independent attorney review the documents he signed – as a 30 percent shareholder and CFO of the original Facebook LLC – he might not have had his shares diluted from 30 percent to less than 1 percent. Do not assume that because you have a business degree or business experience, you are able to parse important legal documents. That is why you hire us – to read and dissect the documents so that you have an independent opinion as to what they mean.

Conclusion? Two thumbs up for The Social Network; two thumbs down for the choices made by the principals.

Now what movie is next in my Netflix queue?

Lee Keller King

The Vethan Law Firm

Thursday, January 13, 2011

Proposed Chinese Law Would Require Adult Children to Visit Elderly Parents Regularly

Adult children in China would be required to visit their elderly parents on a regular basis under a proposed amendment to the nation's Law on Protection of the Rights and Interests of the Aged.
Wu Ming, an official with the Ministry of Civil Affairs, is reported as saying that the amendment would allow elderly parents ignored by their children to go to court to claim their legal rights to be physically and mentally cared for.

China has 167 million citizens over age 60, half of whom live alone without children and 20 million of whom cannot take care of themselves. In traditional Chinese culture, filial piety -- respect for one's parents and ancestors -- is one of the paramount virtues. But the longstanding tradition of children caring for aged parents is being challenged by history's largest human migration, in which 130 million Chinese have moved to cities in search of jobs, leaving nearly 60 million growing up apart from one or both parents, according to a recent article in the New Yorker. In effect, capitalism appears to be undermining traditional values, and the state's attempted solution is to legislate morality.

Wang Shichuan, a news analyst quoted by the site CriEnglish.com, questioned whether a moral issue is susceptible to a legal solution. Wang noted that many adult children work outside their hometowns and have little opportunity to visit their parents due to all-consuming jobs and few days off.

The Ministry of Civil Affairs is set to submit the proposed amendment to the Legislative Affairs Office of the State Council in the near future, according to the news site Global Times.

Monday, January 10, 2011

Big Ideas for Growing Business

As the economy picks up steam and more businesses are formed and look to expand, all business people must seriously review their company agreements and shareholder agreements. The governing documents have become essential for every business, regardless of size. Company agreements, such as shareholder, Limited Liability Company agreements and Limited Partnership agreements are essential to defining the rights and responsibilities of each equity member/partner to the business and to each other.

Business partners assume everyone will dedicate their full time and energy to the venture, when that is not the common understanding, even amongst the partners. For example, will a business permit a shareholder or member to also be engaged in different (albeit unrelated) business ventures, or will it require full time effort by every officer or director?

Even when a business is up and running, the equity owners must decide if anyone of them may sell his or her equity interests to a third party, may be willed to his or her heirs, and decide what happens to that interest if a partner in the business is involved in a particularly nasty divorce or has judgment against him or her.

It’s an old but true adage that if you failed to plan; you planned to fail.

Charles M.R. Vethan
The Vethan Law Firm, PC

Monday, January 3, 2011

It Depends

We were giving a presentation to entrepreneurs at the
University of Houston Small Business Development Center and questions kept coming up that Charles or Elyse or I could only answer “it depends.” I know that it must have been frustrating to our audience because it was frustrating to us. But the truth is that with the law, the best answer we can give on the spot is often “it depends.”

Application of the law – and especially labor and business law – depends on the specific facts of each scenario. How big is your business? How many employees does it have? What are the duties of your employees? Are your “employees” actually independent contractors? Are they exempt or nonexempt.

The fact-specific analysis needed to analyze YOUR situation means that there are probably no “one size fits all” solutions for your business and your employees. Without a face-to-face consult and time to discuss your concerns with you, we will most likely not be able to give you a definite answer.

Unfortunately, even after a consult, we may not be able to give you a definite answer. The law is in constant flux and what was a good and valid answer last year, may not be a good answer this year. Moreover, there just may not be a definite answer at this time. Some legal questions are only settled after someone takes a case to court.

Part of what you are bargaining for when you hire a business attorney is that we will keep constant with the law and thus be able to give you an answer for today and today’s issues. This means that we keep up with the cases, read the law journals and keep track of legal blogs and Twitter feeds.

Or as one of our associates says, “we read stuff so you don’t have to.”

Is that of value to you and your business? If you think so, give us a call.

Lee Keller King
The Vethan Law Firm, PC