Know the Rules

Posted on: September 06, 2013. Post written by: - Tags: , , , ,

Only ask for a favor if you’ve got something you can give in return. Because favors are expensive. And if you don’t acknowledge or return favors, don’t expect those people to do any for you in the future. Really what we are talking about is the golden rule: do unto others as you have them do unto you; In modern language it means treat people how you want to be treated.

You know you have skills, but you have to know the rules. Last night I watched a Denver Bronco defensive player intercept a ball, go straight to the end zone, but drop the ball half a step before he crossed the goal line. He almost had a touchdown. My kids remind me that almost only counts in horseshoes and hand grenades. That player had the skills, but didn’t know the rules.

There’s more information out there than ever on how the game works. If you want to work in any industry or profession you have to know who the players are, learn about where they started out, and then not only how they got to where they are, but where they are going. This will take work. But the payoff is great. For most of us, the areas in which we are trying to find success are not new roads, but old, well-travelled roads. Desire and will only go so far. While traveling down those old, well-travelled roads there is no reason to reinvent the wheel. And by the way there is a reason why clichés became clichés, but I will leave that story to another day.

If you want to discuss the rules, or anything else, feel free to contact me.

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Things you need to know for business and life

Posted on: September 04, 2013. Post written by: - Tags: , , , ,

I am sharing some things I was thinking about over the holiday weekend. I hope you all were able to relax and recharge, and are ready for you and your business to head strongly into the fall.

1. Being the star may be short-lived

Being a rainmaker or achieve success usually takes hard work and time. At points it feels like it is easy to break through, but it can be much harder to sustain.

2. Quality counts.

If you want to maintain your reputation and have longevity at a high level expect to work hard. It’s hard to game the system for your career. Your best bet is to focus on your work and do your best for your clients or customers.

3. Talent is not something you are born with.

There is no way around the fact that you have to do your work and homework to do your best for your clients or customers. Find a niche you like, or yet love, learn and do your best. If you do it is likely your clients, customers and professional acquaintances will help spread the word for you. The goal is longevity.

4. Throwing it all at the wall doesn’t work well.

Even if it makes you feel good to get the message out every way you can, unless your target market is listening it is wasted time and effort. It is not a numbers game, but about being personal. One personal email to an important connector is more important than a press release sent out randomly; The personal touch is everything today. People remember personal emails, phone calls and meetings, which can pay dividends in the future.

At the same time, if using the written word, use spellcheck!

5. Invest in yourself.

Success is slow. Learn well, put what you learn into practice and treat clients, customers and everyone you deal with how you would want to be treated. Yes, try to be professional even when others are not because people will remember the one time you lack professionalism if it happens. And there’s plenty of money to be made in the long run and it comes easier if you don’t make it your number one priority.

Please think of me if you or anyone you know want to discuss these type of issues or have any legal needs.

Neal

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Are there fiduciary duties between members in an Arizona LLC??

Posted on: August 22, 2013. Post written by: - Tags:

In 1992, the Arizona legislature enacted the Arizona Limited Liability Company Act. Since that time the LLC has become the entity of choice for many individuals, businesses, partners and investors. While there obviously are differences between corporations and LLCs, attorneys in Arizona have always believed that there were many similarities.

For instance, when you form a corporation Articles of Incorporation must be filed with the Arizona Corporation Commission. When you form a LLC Articles of Organization containing generally the same type of information must be filed with the Arizona Corporation Commission. Shareholders in a corporation may enter into Bylaws that govern the shareholders, directors, officers and their various dealing with and among each other. Similarly, members in a LLC may enter into an Operating Agreement that governs the members and management of the LCC.

Based on the similarities and the abundance of Arizona case law on corporations, attorneys have looked to that law when dealing with issues between members of LLCs for the past twenty-one years. Part of the reason for this is that there still is, after so many years, little published case law on LLCs regarding issues between members and or managers.

When issues of wrongdoings have arisen between members in a LLC, breach of fiduciary duty claims have been brought in state court lawsuits. Recently, in a lawsuit I am involved with in bankruptcy court, these issues were dealt with in a surprising manner by the bankruptcy judge.

The bankruptcy judge dismissed claims based on breach of fiduciary duty based on the belief that there are no fiduciary duties between members of a LLC unless they are specifically provided for in an operating agreement. This was shocking to me, as well as to other attorneys at my firm and other firms who I spoken with about this issue. The bankruptcy judge specifically said the Arizona Limited Liability Company Act does not state that there are fiduciary duties between members, there is no Arizona case law on the issue and declined to impose fiduciary duties on members unless specifically set forth in the operating agreement.

As always, whether the potential lack of fiduciary duties is good or bad depends on the position of you or your client. There are situations where you or your client will or won’t want there to be fiduciary duties between LLC members. Because of this, the important takeaways include the following:

  1. At the time LLCs are being formed if you or your client want there to be fiduciary duties between members put it in the operating agreement to be safe.
  2. If you don’t want there to be fiduciary duties between members specifically state there are no fiduciary duties on the operating agreement.
  3. It is impossible to know what other Arizona state, federal or bankruptcy judges will find on this issue in any given case based on my recent experience.
  4. Attorneys need to be speaking with their clients about this issue to determine whether an existing operating agreement needs to be amended.

If you or your clients have concerns with this type of issue, please let me know if I may be of assistance in discussing and analyzing the issues so educated decisions can be made about either existing relationships between members or where there have been actions that appear to support a claim for a breach of fiduciary duties between LLC members.

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Not All Customer Lists Are Trade Secrets

Posted on: August 14, 2013. Post written by: - Tags: , , ,

In a case decided this past April, the Arizona Court of Appeals found that whether a business’s customer list is a trade secret requires a factual inquiry. Calisi v. Unified Financial Services, LLC, Case No. 1 CA-CV-0812.  The court’s holding requires a two part inquiry to determine whether a customer list is, in fact, a trade secret.

First, a trial court must determine whether the customer list has been kept secret and there have been reasonable efforts to keep the customer list secret. If the facts show this to be the case, courts then must consider four factors to determine whether a customer list is a trade secret: (1) whether the customer list contains a selective accumulation of detailed, valuable information about customers; (2) whether substantial efforts were expended to identify and cultivate the customer base such that it would be difficult for a competitor to acquire or duplicate the same information; (3) whether the information in the customer list derives independent economic value from its secrecy and gives the business a demonstrable competitive advantage over others in the industry; and (4) whether the business divulged its customer list externally or internally. If a business cannot provide and present evidence to a court to support these four factors its customer list is not a trade secret.

The takeaway from this case is that  it is important to keep your customer list secret, and clearly never provide the list to people outside of your business, and to be able to clearly provide background on the list to support the four factors enunciated by the Court of Appeals.

As a side note, two of my partners represented the plaintiff and were successful on all issues in the appeal.

If you or anyone you know needs advice or assistance on either side of a customer list or trade secret case, please call me for assistance at (602) 248-1009 or email me at nhb@jaburgwilk.com.

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Thoughts on Arizona corporations

Posted on: August 07, 2013. Post written by: - Tags: , ,

Many attorneys and business owners look to the Arizona statutes and disillusion has swords for minority shareholders to potentially break deadlock, but do not look at the down side of such actions based on the same statutory framework. Other statutory provisions allow a corporation to, after the filing of a judicial dissolution action, purchase the shares of the dissenting shareholder for fair value, which is decided by the judge, who is entitled to set the price and the terms of sale. This makes the filing of a judicial dissolution action potentially problematic for minority shareholders. There are strategies and ways to structure corporations in their bylaws to avoid this issue.

The point is that whether you’re dealing with majority owners or minority owners in a corporation that sophisticated planning can be done either in forming the corporation or amending his bylaws depending on your clients position. If you have clients who may need assistance either selecting the proper form of organization for their business or drafting documents for a new or existing business to protect their specific interests, please keep me and my firm, Jaburg Wilk, in mind.

If you have any questions or want to discuss these type of issues, please call me at 602-248-1009.

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