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Admit it. You probably didn’t think twice before you sent your last email. But the widespread nature and ease in creating these communications poses tremendous risks. Many assume emails will never be seen by third parties. Others count on a legal right to keep these messages confidential. Yet all too often, these messages are not privileged or the privilege is lost and the emails become crippling evidence in litigation.
There are plenty of legally damaging – and thoroughly embarrassing – business emails that have seen the light of day and often have been used as evidence in court. In fact, emails were reportedly instrumental in convicting both Martha Stewart in her insider stock trading case, and numerous employees in the Enron scandal.
The recent financial crisis produced countless damaging emails. One employee of a company charged with the important task of rating financial products responded to another employee’s concern about a poorly created financial product by stating, “It could be structured by cows and we would rate it.” Another employee of the same company, remarking on the dangerous financial products being sold, said, “Let’s hope we are all wealthy and retired by the time this house of cards falters.”
Emails can create a variety of problems for any business, from violating anti-spam laws to infringing on the copyrights of others to evidencing certain crimes. Despite the virtual permanence of emails and similar messages, you can do certain things to minimize the danger.
Document retention policy: It is advisable to periodically purge emails from business records pursuant to a carefully prepared company policy. But caution is advised.
First, numerous requirements apply. Notably, you can’t destroy potentially damaging emails pertinent to a lawsuit or investigation of which you are actually aware. Second, deleting emails usually just does not work. Absent extraordinary measures, most emails can be recovered from computer systems. Also, in many instances, emails have been forwarded to others who still retain copies.
Attorney-client privilege: In a very general sense, the attorney-client privilege applies to confidential communication between a client and attorney in which the client seeks or receives legal advice. Where the privilege applies, the client has the right to prevent disclosure of the privileged information in court.
To preserve the privilege:
- Privileged information may not be disclosed beyond a ‘need to know’ group
- Communication must be primarily designed to seek or provide legal guidance
Common sense: Aside from carefully crafting and then legally implementing a document retention policy, there are practical and legal precautions you can observe to minimize the danger.
- Don’t unnecessarily copy people on emails
- If counting on attorney-client privilege, only send the message to those involved in making legal decision
- Write as if others will see your message
- Assume your emails will be splashed across CNN’s homepage
Even better, walk down the hall or pick-up the phone! Yes, go old school and talk it out. See? No paper trail.
For more information on this topic see full SmartCEO Legal Elite article here.
The media is making a lot out of the demise of a small but popular DC restaurant, supposedly done in by a Groupon deal gone bad. Back Alley Waffles plight has been spotlighted on CBS This Morning, in the Washington Post and on FoxNews.com. But who is really at fault here, the big Goliath Groupon, or did the restaurant owner bite off more than he can chew?
Only three months after opening, Craig Nelson, the owner of Back Alley Waffles, signed up for a Groupon deal to try to bring in new customers. The problem is, Groupon's discount worked too well. Too many hungry bargain hunters overwhelmed the small waffle shop--and Nelson couldn't keep up. The biggest problem was paying for all the extra ingredients the new customers were consuming. It wasn't like he had a lot of money in the bank to begin with. We were “basically starting a restaurant with no money.” Nelson told CBS This Morning. The waffles may have been great, but Nelson's financial planning wasn't exactly a recipe for success.
In my book, How to Build Your Business and Sell it For Millions, I discuss how sustainability is a key factor for any business owner. Does your business have what it takes to make it in the long haul? A big factor for that is capital. Lack of capital is the biggest reason new businesses fail. Too many entrepreneurs tell themselves, “I have enough money to open the doors. I’ll figure out the rest later.” Nelson found out rather quickly he didn't have time to figure things out "later."
As he told CBS This Morning, “[we couldn’t afford the] cost of food and labor to satisfy Groupon holders and we were so tight financially that we couldn’t bear the cost of that and if forced us under.” He failed Sustainability 101.
But that wasn’t the only factor for the failure of Back Alley Waffles. Groupon has a very extensive contract detailing the dates of the sales, payment times, and terms. When accused of being responsible for the closing of Mr. Nelson’s business, Groupon countered with, “We scheduled his feature on his terms, on a date he selected, under a contract he reviewed and signed.” The information in the contract certainly could have helped Nelson, had he done a better job of going over it. But in an eye-opening admission, Nelson told CBS This Morning, "I didn’t read it carefully enough… their fine print got me.”
It's rare that people admit that on camera. But not reading a contract is all too common in business. Ever click "accept" to the terms of new software without reading any of the agreement, or sign a car rental agreement without a second glance? In my recent article in SmartCEO magazine, “Read the Contract”, I discuss the importance of reading the fine print and always knowing what you are signing.
Every day, all across the country, thousands of businesses put their companies in jeopardy when they rush to sign contracts. They don’t read them, they don’t understand them and they are not prepared for the consequences. It’s the opposite of I came, I saw, I conquered: I rushed, I signed, I regretted.
For Nelson, the Groupon payment schedule clearly stated that he would receive his payments in three installments, dating anywhere from one to three months after the deal closed. Nelson claims the checks took longer than expected and the company dragged out the check processing- ultimately leading to the lack of funds to pay his creditors. Even if you take Nelson at his word that the checks came late, the real question the media should be asking is, was it Groupon or Nelson himself who really killed Back Alley Waffles.
One bad deal can cost you the profits from 10 good ones – or even your entire business like it did, Mr. Nelson. Build in sustainability. Read your contracts. To learn more about starting a business, you can find more of my articles in the Articles section of this site or you can find my book, How to Build a Business and Sell It for Millions on Amazon.com.
Myths about the law can cost you a fortune. They range from age-old lore, like “possession is nine-tenths of the law,” to mistakes about intellectual property rights. When you fall into the trap of letting these fables guide your decisions, you can get your business into trouble.
In my latest Legal Edge article in SmartCEO magazine, I dispel these myths.
Myth 1: Intellectual Property. Just because you register a new business in your home state doesn’t automatically trademark registration of the business’s name. There is a completely independent process to trademark anything affiliated with your business. Also, unless otherwise stated in a formal written contract, the independent contractors you hired? Only they hold the rights to their IP, not your company.
Myth 2: Signing contracts under duress. The definition of duress seems to be skewed. The only way to be unbound by a contract because of duress is if there was some significant wrongful act by your opponent usually involving threats of physical harm or kidnapping at the time of signing.
Myth 3: Arbitration is quick and cheap. Court can last years and cost thousands even millions of dollars but recently arbitration hasn’t been any better. It can last over a year and cost well into hundreds of thousands of dollars- for each party. It’s best for your bank account to just try to get along.
Myth 4: Everyone’s doing it, so it must be ok. Everyone is clicking through the terms and conditions of a website, everyone is signing the contract they haven’t read, everyone has unpaid interns doing the work of a potential employee- right? Wrong. Although very prevalent, these trends are not things you or your company should be partaking in. They can get you into a lot of trouble- instead of getting paid, you pay just to fulfill the contract you didn’t read, instead of having someone work for free labeled as an intern, you get a lawsuit.
Myth 5: Attorney’s fees. If you win a contract dispute, you are not automatically entitled to reimbursement of your attorney’s fees- contrary to most beliefs. Reimbursement must be clearly stated within the signed agreement between the attorney and client.
To learn more about legal myths you may or may not believe, read my article here.
Every day, companies sign important contracts, honor their part of the bargain and then discover that the other side isn't living up to its end of deal. Most businesspeople go into agreements under the assumption that the other party has the same intentions and ability to honor the contract. Without taking the proper precautions, you may find yourself at on the losing end. In my latest Legal Edge article in SmartCEO magazine, I explain the steps every business owner should take.
- Practice Due Diligence: Background checks, obtaining financial statements and references are the best way to check and re-check the financial integrity of a possible partner. You also want to make sure they are not a habitual “retrader”-- someone who locks into a deal then tries to renegotiate the terms instead of honoring them.
- Take the Proper Protections: Drafting a contract with business terms as well as protections is of the utmost importance to protect yourself in case the other side does not deliver. Having a skilled attorney to draft clauses entitling you to reimbursement of your attorney’s fees if you prevail is recommended.
- Establish Collateral: Establishing deposits, mortgages, deeds of trust and personal guarantees all are good forms of collateral in the case of a breach of the agreement.
- Third Party Protection: Sometimes proposing a deal between two parties is not enough to really protect yourself. Getting a third party involved that can oversee the agreement can make you and your company more secure. Letters of credit from an established bank or bonds that require a third party’s signature are both great ways to ensure third party protection.
- Prepare for the Fight: How many times have you heard the phrase, ‘always be prepared’? Even when you are entering a partnership or bargain that you believe will be mutual and both of you will have the highest level of integrity, it cannot hurt to live by those words. Be prepared for a possible fight. Save evidence, send proper notices and always fulfill your end of the bargain so they cannot argue mutual abandonment of the deal.
One bad deal can wipe out the profit of ten good ones. Although taking the aforementioned steps may seem tedious, obtaining protection and preparing for the fight are measures that may make all the difference in preserving the benefit of your bargains. To learn more about protecting your bargains, read my article here.
Most people view leases as something they can never get out of. Little do they know, there are many ways to plan an escape from an otherwise binding property lease.
In my most recent Garson Claxton article, I discuss the three main strategies for getting out of a bad lease.
1. Explore Technicalities: This is not a strategy that works for most, but it is not impossible to find a flaw in the lease. Leases must state: what is the rent, where is the premises, when the rent term begins and ends, etc. If any of those integral parts are missing, the lease is null and void and can be countered in a court of law. Although, the best chance at leaving a bad lease behind due to technicalities is to never move in to the establishment once the lease has been signed.
2. Bad Landlords: Typical leases often prohibit termination despite outrageous conduct by their landlord. But this can be overcome. With the right combination of critical facts and finding the correct court case or state law to uphold it, the lease can be battled.
3. Nothing Left to Lose: When a business is going under and there is nothing left to lose- such as in a bankruptcy type situation, the lease can usually be terminated with a limit of one year’s rent as compensation. I do not recommend this as it is expensive and intrusive to your business. What I usually tell my clients is to shut down your current business and form a new business elsewhere. Sometimes landlords will attempt to pursue the new business for payment of the old rent but if you follow the proper precautions, landlords will rarely collect.
To learn more about finding and building escape latches in leases, read my article here.
SmartCEO magazine recently held a roundtable with Washington DC’s top attorneys to discuss the state of today’s businesses and regulatory agencies and how it all affects you. Jack Garson was invited to participate and weigh in on a few crucial topics - from real estate to intellectual property.
The first topic was today’s ‘good news’ for business in the DC area.
“We’re seeing a surge in apartment construction and metro-oriented construction fed by the demographic shift.” Jack explained.
This is a wonderful opportunity for the people of Washington, DC, Northern Virginia and Maryland. With the recent construction of the Silver Line, Northern Virginia has opened up a lot of metro-oriented projects as well as the free flow of capital to the area. The greatest news about all of the improvements being made in the area is that banks feel comfortable enough to finance them.
As the discussion continued, questions turned to a more advisory feel, speaking about intellectual property, real estate and overall business tips. Jack spoke about maintaining your intellectual property and how to avoid leaving it at risk of exposure. His most important tip was to do a full search of the names and registration information you want to use for your service or product. This is crucial to ensure you do not encroach on anyone else’s IP. It is also important, that after you obtain your name and registration, that you monitor the use of your IP as to avoid others using it.
The next topic discussed was, business and real estate. When expanding your business, you may need more space in which to work, but leasing or buying is a big deal.
“Your real estate should satisfy the needs of your business… Do what’s best for the business. The business is your golden goose. In most cases, you’re making your money on a thriving business, not on the real estate.”
As the program progressed, more topics were covered including mistakes made during hiring, contract workers, interview protocol, financing, and salary exemption. Whether you are ready to start a new business and need to protect your IP, you are ready to expand, or you are hiring, Jack offers his professional advice in SmartCEO magazine every month in the Legal Edge section. To learn more about ways to improve your business, click here to listen to the entire Roundtable event podcast:
The face of small business is changing and lately, the pace of that change has quickened. On April 5th, 2012, President Obama passed the Jumpstart Our Business Start Ups Act reducing the legal burdens that small businesses face in raising capital.
In my latest Legal Edge article in SmartCEO Magazine, I explain the changes the Jumpstart bill has on your company. The main steps the Jumpstart bill takes towards deregulation are:
- Reducing fundraising burdens for smaller companies
- Presenting new exemptions from certain securities registration requirements for “crowdfunding”
- The creation of a new category of business that will be exempt from many existing legal requirements applicable to companies that go public
- Allows companies to raise money from far more investors than ever before
The time for small business is now, as long as you know how to use this law to your advantage. To learn more about how to use the new JOBS Act to provide the opportunity for your small business to raise much-needed capital and reduce requirements, you can read my article here.
Business is no longer a “build it and they will come” affair. To create and maintain a profitable business, you need a competitive edge. Your competitive advantage can both drive more business your way and – critically – protect you against copycats.
In my latest Legal Edge article in SmartCEO, I point out the keys to distinguish your business from others while fending off imitators and keeping you On The Edge of the competition. In order to identify your competitive edge you first must:
- Figure out what makes your business different and profitable.
- Make sure you are attentive and responsive to your customers, especially when providing services.
- Understand your customers.
- Build your advantage based on what your customers want and protect it.
- Stay current and fresh.
Protecting a competitive edge can take a variety of forms. It may be as simple as a restaurant that not only has good food, but is meticulous about cleaning its bathrooms. It also could be as straightforward as training your staff. Often your advantage may come in the form of what most companies identify as their most valuable assets-- their employees. If you keep your employees happy- with more than just a paycheck, your customers will be happy and in turn, you and your business will be happy. But don’t forget, you have to protect that happiness to be successful. Protect yourself, your employees, your customers and your entire business by implementing important employment policies, necessary legal protections, contracts, and customer agreements, etc.
Keeping your business and advantage fresh is critical to success. Your advantage today can be your disadvantage tomorrow if you don’t protect and manage it. Stay current and remember, the only thing that remains constant in business is change. So keep an eye on your competitors and stay ahead of the curve. To find and build your competitive edge, read my article here.
When it comes to success, there are no shortcuts. So why would you put your business in jeopardy by taking one?
Business is hard, and companies are reaching for results. In my latest Legal Edge article in SmartCEO, I discuss the Desperate Measures companies are taking to get those results and how during the process, some businesses are taking dangerous shortcuts and risking dire consequences. Risky short-term behavior comes in many forms; through misuse of government contracts, rushing into what they see as “easy money”, or compromising long-term goals by opting for a quick sale.
The government sets aside special work for minority and disadvantaged businesses. Big companies are trying to get a piece of the pie by appointing new figure heads to appear as being minority owned or disadvantaged. They are also entering contracts under the condition they subcontract a portion of the work to a smaller, local, disadvantaged company but only providing said company with meaningless work. Both situations can lead to being audited by the government for non-compliance with these legal contracts.
In addition to government audits, companies can hurt themselves without meaning to; either by rushing into tempting easy money deals without knowing the rules or simply by trying anything and everything to just stay afloat. When your company is in trouble, you will do anything to generate revenue and stay in business. But when you are bending your back to make a quick sale, you may be compromising the very business you are trying to save.
In the end, the short-term benefits achieved by cutting corners can ultimately turn into long-term disaster. You need to step back and look at how your decision today fits into your company’s future. To make sure your company survives today and thrives tomorrow, read my article here.
Going on interviews can be stressful. Holding interviews shouldn’t be; if you know what you’re doing. Sadly, most employers have no idea how to choose good candidates and ditch the bad ones.
My latest Legal Edge article in SmartCEO is called “Are You Pregnant?”. In it, I discuss why the hiring process should begin before the actual interview and highlight the mistakes most employers make when interviewing. Major points to judge a viable candidate by are punctuality, level of preparation, credibility and consistency. In addition to quality control, I also delve into possible legal battles your company could be facing due to lack of employment training. A lot of untrained interviewers may ask unlawful questions that put the company in a position to be sued due to discriminatory wording. Asking about pregnancy, disability, race, religion, national origin or age in an interview is considered federally unlawful and can result in a trip to court. In addition to discrimination, digging into a person’s personal information on the internet can result in liabilities for your company. You can read the entire article here to start taking the steps to ensure you hire the right person for the job.
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