Monday, December 23, 2013

On copyright ownership.

If you create a work that you can otherwise copyright, you would not be able to copyright it if you assigned your rights in the work to someone else, created it for hire, or created it within the scope of your employment. Unless you are well-versed in copyright law, you may not know if you did this.

If you do not own the work, you can seek a license from the owner. If you own the work, you can license it to others.

Thursday, December 19, 2013

Choosing the right business entity when starting a company.

Choosing an organizational structure is one of the more important decisions you will make in starting a business. You only want a partnership if it is a limited liability partnership (LLP) or limited liability limited partnership. You may want a limited liability company (LLC), which has characteristics of both LLPs and corporations. In fact, LLCs are not recognized by the IRS. If you are a one-person LLC, the business entity will be disregarded for federal tax purposes. If you are in a multiple-member LLC, you will be taxed as a partnership by default. If you, your lawyer and accountant determines it is economically advantageous to be taxed as a corporation, you can elect to be taxed as such.

If numerous stakeholders are involved, you might want a corporation. As common sense indicates, corporations are taxed at the federal corporate tax rate. For any business entity, state tax rates may differ, so individual considerations will predominate in deciding what the best organizational structure is for your business.

Wednesday, December 18, 2013

Iowa head football coach Kirk Ferentz likely has a defamation claim against a former player.

Embattled former University of Iowa wide receiver Derrell Johnson-Koulianos (a/k/a "DJK") went on a recent Twitter rant leveling defamatory allegations against his old coach and current Iowa head football coach, Kirk Ferentz. DJK got in plenty of trouble at Iowa, and was kicked off the team in 2010 after a drug arrest. He never played again for the school, did not play in the NFL, and was unsuccessful in tryouts with the Arena Football and Canadian Football Leagues.

DJK alleges that Ferentz once required DJK to wear a trash can on his head during a practice, and was responsible for arranging the drug arrest that resulted in DJK's removal from the football team. DJK claims that all of this will be included in a book to be released in Iowa and Ohio in 2014, but no book deal has been arranged.

For a public figure to have a viable claim for defamation, the defendant must have said or written a false and defamatory statement of fact about a third person, with recklessness or malice, and no First Amendment privilege to do so. DJK's assertions are statements of fact that are likely false. If they are true, Ferentz has no claim, but DJK's veracity has been shown to be less than reliable in the past.

The statements were published via Twitter, and appear to have been published for the sole purpose of damaging Ferentz's reputation. If Ferentz can show he suffered damages because of the statements, which will not be easy, he has a viable defamation claim against DJK.

Tuesday, December 17, 2013

Employees vs. Independent Contractors vs. Franchisees.

When starting a business, you must decide whether you will work with employees, independent contractors, or franchisees. All are different and each has a different relationship with the principal of a business. Principals or bosses have the most potential liability with employees; they have the least potential liability with independent contractors.

If you have a business, it does not really matter whether you call your workers employees or independent contractors. The specifics of the relationships matter, most importantly the amount of control you exercise over the workers and how they conduct their daily tasks. The more control you exercise over them, the more likely you have employees. If the workers control their hours and how they do their job, and pay for their own supplies, you are more likely to have independent contractors.

The IRS provides guidance on the distinction between employees and independent contractors. As you would expect, there are more tax requirements with employees than with independent contractors. An attorney can help if you are unsure whether you have employees or independent contractors, or you can file a Form SS-8 with the IRS, which is a request for a formal determination. There is risk in filing a Form SS-8 if you have been calling your workers independent contractors, because you may be required to pay past employment taxes if the IRS determines that you have employees. But it does provide certainty for your business going forward.

If you want to franchise your business, the requirements are much different. Federal law requires a business owner to provide the prospective franchisee with a Franchise Disclosure Document at least two weeks before the Franchise Agreement is signed. The Franchise Disclosure Document has many requirements, but all are designed to protect the franchisee's investment, by providing transparency before the franchisee invests money in the franchise.

Additionally, each state's laws differ on what other disclosures may be necessary. The formalities and specific requirements are strict in franchise law. If you get one wrong, your entire Franchise Agreement may be void.

Wednesday, December 11, 2013

The prerequisite of "commonality" in class actions.

It is axiomatic that class actions must involve common questions of law or fact. Otherwise, a class action would be inappropriate. This is called "commonality," and requires that the questions of law or fact are similar enough that a just result can be obtained without litigating multiple cases. In other words: different people, same story.

Tuesday, December 10, 2013

Limited partners have limited liability but general partners have unlimited liability.

Limited partners in a limited partnership are not liable for the partnership's debts and obligations. General partners in either a general or limited partnership are liable for the partnership's debts and obligations. A general partnership is between two or more persons who are actively involved in the management of the partnership. A limited partnership has one or more general partners and one or more limited partners. Only general partners are actively involved in the management of a partnership. General partners are agents of the partnership, and can enter into contracts and carry on the partnership's ordinary business. Limited partners cannot; they are not agents of the partnership.

If you are a limited partner in a limited partnership, you are in the clear. If you are a general partner in either a general or limited partnership, you are subject to potential liability, including for the actions of other partners. If you are a general partner, it is important to file the necessary documents to effect a limited liability partnership (for general partnerships) or a limited liability limited partnership (for limited partnerships).

If you do not know whether your partnership has limited liability or not, it probably does not. You have to take affirmative action with the filing authority in your state to obtain limited liability. Unlimited liability is the default rule for general partners.

Friday, December 6, 2013

MDL sought in NCAA concussion litigation.

In the past I discussed multidistrict litigation (MDL) and when it is strategically advantageous. MDL is similar to a class action, but distinct. MDL is appropriate when there are one or more common questions of fact involved in different lawsuits that are pending in different judicial districts. In such cases, the actions may be transferred to any district for consolidated pretrial proceedings.

Certification as a class action requires common questions of fact -- or law -- and more. It requires a proposed class too large to join all the members in the pending lawsuit, the same or similar claims and defenses among the class members, and the lead plaintiffs must fairly and adequately represent the entire class's interests. A class action also requires either the risk of inconsistent or preclusive results in other lawsuits if the class is not certified, or that the common questions of law or fact predominate over those affecting only individual members.

The latest NCAA concussion litigation is a good example of a case where consolidation for MDL is sought. The first case was filed in 2011, and several more have been filed this year.

Wednesday, December 4, 2013

On the new concussion class action lawsuit against the NHL.

Concussion lawsuits against sports organizations are in vogue. The NFL recently settled a class action lawsuit for $765M. The NCAA is currently facing one. Now, former NHL players filed a class action complaint against the NHLThe number of plaintiffs started at 10, but has grown to more than 200. All of the concussion lawsuits center around a condition called Chronic Traumatic Encephalopathy (CTE). The NHL players' suit alleges the same culpable conduct on the NHL's part as the former NFL players' suit alleged against the NFL: that the league withheld information and research on the effects of repeated head trauma.

With the NHL suit, it is pretty simple. If the NHL withheld information from the players, then it will likely be found liable or will pay a lot of money in settling. The opposite is not true. If the NHL does settle for a lot of money, it does not necessarily mean that it would be found liable if the case went to trial. When the NFL settled its class action, it admitted no liability.

The players will still need to file a motion for class certification. At this point, they just filed the class action complaint, which leaves the door open for class certification. Individual federal district courts set their own rules regarding deadlines for class certification.

Tuesday, December 3, 2013

On show-cause orders in college football.

When a college coach or staff member commits serious violations of the NCAA constitution or bylaws, the NCAA can impose a show-cause order on that person for a specified period time. Show-cause orders are issued by the Committee on Infractions (COI). The COI is the judge and jury in NCAA enforcement proceedings.

Any school that hires a coach subject to a show-cause order must demonstrate to the COI why the school should not be penalized for simply hiring that coach. In effect, a show-cause order is contagious; hiring an "infected" coach can infect the school that hired him or her.

At this time of year, the college football regular season is ending. Unsuccessful coaches are fired and successful coaches leave schools for better employment. This leaves fans questioning who their team's next coach will be. While coaches under show-cause orders are not technically prohibited from coaching, they are effectively prohibited from doing so.

The two most prominent former college football coaches subject to show-cause orders are Jim Tressel and Chip Kelly. Tressel was the head coach at Ohio State University from 2001 through the 2010 season, and Kelly was the University of Oregon's head coach from 2009 through the 2012 season.

Tressel is under a five-year show-order until December 19, 2016. If any school hires him before then, additional penalties can be summarily imposed on the school. Tressel is also unable to participate in any conference championship, bowl or playoff games during the time the order is effective, and he would have to sit out the first five games of his first season back in coaching.

Kelly's show-cause is less burdensome, but still essentially prevents him from coaching before the order expires at the end of the 2014 football season. If any school hires him before then, it will be subject to any number of penalties simply for hiring him.