Colorado Business Litigation Lawyer Blog

I wrote on December 7, 2009 that a Florida jury had awarded $300 million to an ex-smoker with emphysema. Cindy Naugle’s case was one of many formerly involved in a class action against Philip Morris.

On February 25, 2010, law360.com reported that the trial judge reduced the judgment to $30.9 million, finding that the original award was “excessive” and “shocking,” and the result of passion on the part of the jury.

In the initial award, the jury found the ex-smoker 10% at fault and a subsidiary of Philip Morris 90% at fault for the emphysema, resulting in a compensatory damages award of more than $56 million and $244 million in punitive damages.

An appeal is expected.

Continue reading "Judge Reduces $300 Million Award in Philip Morris Case" »

Be on the lookout for a wiener dog named “Spork,” especially if you work for a veterinarian.

Deborah Takahara of KDVR.com reports on February 23 that the 10-year old dog’s owners have been charged by the City of Lafayette, Colorado, with keeping a vicious dog because Spork bit a veterinary technician on the chin during oral surgery (on the dog).

The dog’s owners say that Spork is so cool he cries and won’t sleep without a blanket over him. They also say that the veterinarian tech got too close to Spork’s face with some scissors, which scared the dog. Who knows? Maybe Spork just wanted to keep his teeth intact.

State law does not allow people who work with animals to file vicious dog charges. There is no such exemption under Lafayette’s municipal code.

If the owners are convicted, Spork may suffer the ultimate penalty of euthanasia, a fate which the owners say they will spend their life’s savings to prevent.

All attempts at humor aside, I hope the person bitten has a speedy recovery.

Read more on Spork: "Lafayette Defends Prosecution of Spork the 'Vicious' Wiener Dog"

Google, the most popular computer search engine in Colorado and in the U.S., has expanded into China to augment Google’s user base by over 35% of the market share in China. The only problem is that Chinese law allows its government to require the removal of links on the website that China feels are “subversive or offensive.”

Google, of course, isn’t into censorship. It threatened to shut-down its search engine and possibly leave the country completely. Some observers believe the real reason for the censorship is to prevent China’s citizens from gaining access to politically sensitive information and images.

In order to explore the possibility of an acceptable compromise, Google has temporarily agreed to the censored search engine while Google and the Chinese government try to pursue a negotiated solution to the problem. Apparently, China’s public stance differs from its private one. Observers believe China doesn’t want to lose face by appearing to be anti-technology. And at the same time, Google wants to keep China’s very lucrative market. It is widely believed these tensions so far have prevented a compromise.

Google notes that its China web site has been subject to hack attacks from within China that have resulted in some of Google’s intellectual property being stolen. Google has not directly blamed the Chinese government for these attacks, since Google’s site was not the only site hacked. It is believed that a number of other large companies from various business sectors in the U.S. were also attacked. Google and the U.S. government are investigating in an effort to determine the identity of the hackers.

Google suspects the attack on its web site was for the purpose of accessing the Gmail accounts of Chinese dissidents. Google says, however, that the attack was unsuccessful because only two accounts were accessed. The only information accessed in these two accounts was information such as the date the accounts were opened and the subject line of emails, but not the content of the emails themselves.

I will closely be monitoring this controversy to see who blinks first. Stay tuned.

Today’s blog has absolutely nothing to do with legal commentary, court decisions, or business law. 9news.com reported a story on 02/15/10 that warms my heart.

A Cheyenne, Wyoming couple saw a dining room set advertised on Craigslist™ that they were interested in buying. They drove to Aurora, Colorado, where the dining room set was located, with cash for the purchase.

After making the purchase and loading-up the furniture, they decided to stop to eat at a Wendy’s restaurant just off I-25 in Denver. The man apparently dropped his wallet with credit cards, IDs and $1,200 in it as he got out of the car. When they made a temporary stop on I-25, they discovered that the wallet was missing. They called Wendy’s, believing that the billfold--or at least the $1,200--would be missing.

Luckily, Maricella Juarez, a Wendy’s employee, had recently arrived for work. She saw the billfold on the ground and promptly reported the find to her boss, who put the billfold in the store’s safe.

The couple returned to Wendy’s, where the billfold--with all contents intact-- was returned to them. Ms. Juarez was commended by her boss and no doubt by the happy and relieved couple.

Isn’t America a great place?

Continue reading "A Colorado Woman with Honor and Integrity" »

The Denver Post reported on February 9, 2010, that a 19-year old University of Northern Colorado student was arrested and charged with attempted arson, reckless endangerment, criminal mischief and illegal possession of alcohol allegedly for attempting to set fire to a bag of dog poop on his neighbor’s front porch. (Most of us remember this old Halloween trick of “make the neighbor stamp out the flaming bag of dog poop and howl with laughter”).

Apparently the neighbor had called the police earlier because the student and his friends were making too much noise. As the student approached the neighbor’s porch, matches and dog poop in hand, the neighbor-- whose newspaper earlier had been set afire on his porch-- was waiting and subdued the miscreant. The neighbor’s wife, armed with a camera, snapped-away as the events unfolded.

The police duly took photographs of the bag of dog poop and confiscated the matches.

A police spokesperson said the student was intoxicated.

Without attempting to minimize the seriousness of the incident, we should remember the old adage, “Boys will be boys.”

A December study by the legal consultancy firm of Altman Weil showed that the recession notwithstanding, some large law firms are raising their fees to corporations by an average of four per cent in 2010. It is unknown whether or not Colorado law firms were included in the study.

The hourly rate charged by senior partners in these large firms has gone as high as $700-$900 per hour. A local survey by Boston-based BTI Consulting in October disclosed that 15% of Boston’s law firms are raising their rates for 2010, while the remainder is keeping their fees the same as last year.

As I have written before, a corporation that is cost- conscious and result- oriented should look at the advantages of hiring a plaintiff’s firm that charges on a contingent fee basis, whereby legal fees are based upon a percentage of the amount recovered in a lawsuit. If the lawsuit is lost, the lawyer receives no fee. Of course, this type of fee arrangement is normally confined to instances where the corporation is suing another person or legal entity for monetary damages. If the corporation is the defendant in the case (the one being sued), contingent fees are usually not appropriate, although some plaintiff’s firms will fashion a fee agreement whereby the lawyer is paid based upon results in the case.

A corporation or other entity that is considering filing a suit for money damages should feel free to contact this firm for additional information on the various types of legal fee agreements available.

Related postings:

Why You Need a Contingent Fee Lawyer for Your Colorado Business Litigation

Why You Need a Contingent Fee Lawyer for your Colorado Business Litigation, Part II

On January 29, 2010, a Boulder County, Colorado jury awarded $37 million to Jennifer Latham of Lafayette, Colorado, whose health insurance was canceled after the woman sustained severe injuries in an auto accident, including multiple fractures and a brain injury.

Latham had purchased a health insurance policy from Assurant Health just five months before the 2005 accident. After she spent a month in the hospital and another month in rehabilitation at a cost of about $185,000, Assurant Health canceled her policy and refused to pay her medical bills, claiming that Latham had failed to disclose in her application an emergency room visit for shortness of breath and treatment for a uterine prolapse. Latham claimed her insurance company acted in bad faith. The jury agreed with Latham.

Assurant Health was one of the companies investigated by the House Subcommittee on Oversight and Investigations for its policy cancellation practices.

It is not known if Assurant Health will appeal the verdict.

In July 2009, a Colorado jury found a man guilty of 52 criminal counts, including violations of the Colorado Organized Crime Control Act, for stealing $11 million from the Colorado Department of Revenue.

The man’s girlfriend, a supervisor at the department, took the money through various schemes, including creating false businesses and fake tax returns. The woman said she took the funds at her boyfriend’s urging because she loved him and wanted him to leave his wife.

The man said that he believed the woman was withdrawing the funds from her trust account, a claim that the jury found incredible. The man lost all of the money in 18 months on business ventures, land deals, jewelry, cars and trips. His girlfriend spent none of the money on herself.

The man’s sentence of 58 years in jail was imposed on September 24. His girlfriend pleaded guilty and was sentenced to 24 years in prison. She must also pay $10.8 million in restitution to the state.

The moral of this story is that one should never take that which the tax man has first taken away.

U.S. District Judge Edward J. Lodge, recently issued a preliminary injunction barring Penny Lea Jones of Idaho Falls, Idaho, from preparing federal income tax returns for others, while the lawsuit is pending. The court found that Jones promotes a tax defier scheme that claims large fraudulent tax refunds for customers.

The court found that Jones repeatedly prepared federal income tax returns claiming bogus refunds based on a tax fraud scheme known as the "redemption" scheme. The court held that Jones prepared and filed 333 income tax returns for customers in 2008 and 2009 claiming more than $93 million in fraudulent refunds. The court said that the redemption scheme is based on a frivolous theory that the federal government maintains secret accounts for its citizens, and that taxpayers can gain access to funds in those accounts by issuing IRS 1099-OID forms to their creditors.

The case against Jones is one of seven lawsuits the Justice Department filed across the nation in October 2009 that seek to shut down tax preparers who allegedly promote the redemption scheme. The defendants in those cases allegedly prepared tax returns fraudulently requesting a total of $562.4 million in refunds. Under the scheme, participants file a series of false IRS forms, including tax returns, amended returns, and Forms 1099 (including Form 1099-OID) or Forms W-2, to request fraudulent tax refunds based on phony claims of large income tax withholding.

The Internal Revenue Service (IRS) catches the vast majority of fraudulent redemption-scheme tax refund claims without issuing any refund. Taxpayers who submit the claims face substantial civil monetary penalties, and possible criminal prosecution.

In the past decade, the Justice Department’s Tax Division has obtained more than 435 injunctions against dishonest tax-return preparers and tax-fraud promoters.

The recent 7.0 magnitude earthquake that struck the impoverished nation of Haiti has killed well in excess of 50,000 and injured an unknown number.

Numerous nations, led by the U.S., have begun delivering badly needed food, water, medical supplies and treatment, rescue workers, cleanup and demolition crews and security personnel. One major problem is that the Port Au Prince airport is so crowded that many planes with urgently needed supplies are unable to land and often are delayed for at least one day.

As I’ve written before, when donating to a charitable organization, you should select one or more whose contributions are reasonably sure to get to those in need and are not severely diluted by high administrative expenses, graft and pay-offs.

The internet website charitywatch.org (The American Institute of Philanthropy) has compiled a top-rated list of charities involved in the Haiti earthquake relief efforts. Each charity is given an “A” to “F” rating, based on the portion of their budget going to program services and their fundraising efficiency. You should carefully read the information on the charitywatch.org website in order to diminish the chance of having your credit card number stolen.

In these troubled economic times here in the U.S., many people are financially unable to donate at this time. But if you are able to donate, give an amount you are comfortable with, given your own financial situation. Remember, however, that the need is critical and will be for quit some time to come. I’m sure that all donations will be appreciated sincerely.

Denver station KUSA-TV reported January 11, 2010 that Krahl Construction has
halted work on a $1.5 million project at the main branch of the Denver Public Library as
the apparent result of a January 5 FBI search of Krahl's Chicago headquarters. Krahl also
has an office in Centennial, Colorado.

Krahl notified employees on January 8 that the company would be shutting down
the project. Neither the FBI nor Krahl disclosed why the raid took place, but an FBI
official said the search was part of an ongoing investigation and that the FBI was
"looking for evidence of a crime." No arrests were reported.

Krahl has been paid $430,000 for work already completed, but has been paid
nothing for unfinished work. New bids can be solicited after 10 days according to city
rules.

The company has an "A+" rating from the Chicago Better Business Bureau, and
reportedly does around $100 million a year in commercial construction work. It was
recently working as general contractor on an $81 million project at Riverside Medical
Center in Kankakee, IL, but hospital officials immediately hired another company to
finish the project.

One of the advantages of operating a business as a corporation in Denver is that, with some exceptions, shareholders (owners), officers and directors normally do not have personal liability for corporate debts. Under certain circumstances, however, there may be personal liability, such as for certain unpaid taxes and when equitable principles cause the court to “pierce the corporate veil,” where the court looks behind a corporate entity and takes action as though no entity separate from the members itself existed.

In the recent (October 29, 2009) Colorado Court of Appeals opinion in McCallum Family L.L.C. v. Winger, the court succinctly sets out the requirements for piercing the corporate veil. These requirements are:

1. The corporation is the “alter ego” of the person or entity in issue. Factors determining status as an alter ego may include whether:
a. The corporation is operated as a distinct business entity;
b. funds and assets are commingled;
c. adequate corporate records are maintained;
d. the nature and form of the entity’s ownership and control facilitate
misuse by an insider;
e. the business is thinly capitalized;
f. the corporation is used as a "mere shell";
g. legal formalities are disregarded; and
h. corporate funds or assets are used for noncorporate purposes.

Not all of the requirements need be present in every case. Each case must be decided on its unique factors.

2. The court must determine whether justice requires recognizing the substance of the relationship between the person or entity sought to be held liable and the corporation over the form because the corporate fiction was "used to perpetrate a fraud or defeat a rightful claim."

3. The court must consider whether an equitable result will be achieved by disregarding the corporate form and holding a shareholder or other insider personally liable for the acts of the business entity.

A major lesson to be learned from the foregoing principles is that a corporation must be operated in all respects as a business entity separate and apart from its shareholders, officers, directors and insiders. The requirements of paragraph No. 1 should be strictly observed; otherwise the benefits of immunizing individuals from corporate debt may be placed in jeopardy.

As a follow-up to my article “United Airlines Ramp Supervisor Awarded $3M Damages for Airline’s Retaliation to Her Discrimination Complaint,” I see that an interesting alleged discrimination case has arisen in the Puerto Rico office of the U.S. Attorney.

Juan E. Milanes, a male Assistant U.S. Attorney, claims that the office of Rosa Emilia Rodriguez-Velez, Acting U.S. Attorney for the District of Puerto Rico, was a “girl’s club” where male attorneys were discriminated against and were faced with a hostile work environment.

In his complaint for damages and other relief, now filed in the U.S. District Court in Puerto Rico, Milanes claims that when he was in the narcotics unit, supervised by a female Assistant U.S. Attorney, he was subjected to numerous acts of discrimination, and that his superior created a hostile work environment. Milanes further claims, among other things, that when he complained to the Acting U.S. Attorney, she retaliated against him by denying certain benefits to Milanes’ children, when the same benefits were given to her friends in the “girl’s club.” Milanes also claimed that his superior assigned him the oldest and weakest narcotics cases, threatened him with disciplinary action, and attempted to sabotage his trial work. He says his attempt to transfer to Kosovo was blocked by Ms. Rodriguez-Velez by the filing of a written reprimand on the day he was to leave.

Milanes was placed on administrative leave and forced to resign, an action he says constituted a constructive discharge. It should be noted that only the allegations of Milanes’ complaint are outlined here. Ms. Rodriguez-Velez’s version of the events has not yet been reported.

What is the moral here? Doesn’t the highest government attorney in a U.S. possession have to follow federal law when it comes to her employees? Is it not only businesses who sometimes fail to observe the law? Stay tuned. I will be following this case with interest.

Kudos to Michael Doyle at Suits and Sentences.

Jennifer McInerney, a former United Air Lines ramp supervisor, was awarded $3 million by a federal court jury in Colorado after finding that McInerney was retaliated against by United for making a discrimination complaint.

McInerney became pregnant in 2005. Anticipating that her pregnancy may have complications, she requested assignment to alternate positions, which requests were denied. Her son was born 11 weeks premature in November and she took all available family and medical leave, vacation leave and sick time. When her time off expired in March 2006, United refused to give her additional unpaid leave, although McInerney claimed that male ramp attendants were given unpaid time off. United ordered her to return to work in March 2006. When she didn’t return, United terminated her, claiming there was a shortage of ramp supervisors, and that when McInerney requested unpaid leave, the company couldn’t hold her job open any longer.

The jury found that although United did not discriminate against McInerney
because she was a woman when it refused her request for additional unpaid leave, but it did find that she was retaliated against for having made the discrimination complaint to the company in the first place.

Senior Federal District Judge Richard P. Matsch denied United’s post-trial motions, including a motion for reduction in the $3 million judgment amount. As to the latter motion, the judge said, “The defendant consistently refers to this case as a “garden-variety” emotional distress damages case. That characterization is a reflection of the same callous indifference to Ms. McInerney's plight as was shown by Kevin Mortimer in refusing to consider the plaintiff's repeated requests for accommodation.”

Colorado and other employers should look very carefully at their personnel decisions following an employee’s request for accommodation and discrimination complaints. Employer rules should prohibit any retaliatory action against the employee. Training of supervisors and making employees aware of recognizing possible retaliatory actions is a good starting place for preventing lawsuits similar to the McInerney case.

I recently wrote of the S.E.C.’s abysmal failures in not detecting Bernard L. Madoff’s billion dollar Ponzi scheme. (See “Bernard Madoff: An Epilogue, Parts I and II”). H. David Kotz, the S.E.C.’s inspector general has now issued two reports in which he recommends dozens of changes in the way the agency evaluates tips, trains investigators and documents examinations of securities firms.

The first report, pertaining to the S.E.C’s inspections and examinations office, recommends 37 improvements that would effectively overhaul nearly every aspect of the division’s operations. The recommendations include the manner in which investigators follow up on tips and the creation of step-by-step procedures in identifying potential securities laws violations.

The inspector general also issued 21 recommendations to the S.E.C.’s division of enforcement, including a formal process for handling complaints and improving the working relationships within the division. One recommendation would mandate that tips and complaints be reviewed by at least two persons with experience in the subject area before taking further action.

The S.E.C. has been directed to establish formal procedures regarding the scope and planning of examinations and the selection of staff members for specific investigations. Mr. Kotz ordered the two S.E.C. divisions to submit a written plan within 45 days detailing how they would apply the recommendations.

A re-reading of my previous blogs on this subject is recommended in order to give context to the ills addressed by the inspector general.

On September 30, 2009, I wrote about the government requirement that imposed upon contractors on certain federal projects a mandate to use the “E-Verify System” to verify a worker’s eligibility to work in the U.S. Employers were required to fire employees whose E-Verify information failed to match government SSA database information. (See “Compliance by Federal Contractors with the E-Verify System Became Mandatory Effective September 8, 2009”).

On October 9, 2009, the Department of Homeland Security (DHS) rescinded the rule. In 2007, several organizations, including the American Civil Liberties Union, National Immigration Law Center, and American Federation of Labor and Congress of Industrial Organizations had filed suit against DHS, claiming that clerical errors and inaccurate records could threaten legal U.S. workers.

At least two courts had issued injunctions to prevent the law from taking effect, while an Arizona federal court had refused to issue such an injunction. The governor of Rhode Island had issued an executive order requiring state agencies and contractors doing business with the state to use the E-Verify System. Both the Bush and Obama administrations supported the law.

[Source: Andrew Morgan, “DHS rescinds controversial 'no-match' employment rule,” Jurist, 10/9/09]

George Gombossy, a former consumer affairs columnist for the Hartford Courant, sued the newspaper and its owner, the Chicago-based Tribune Co., claiming the companies violated his free speech rights by forcing him out of his job.

Gombossy wrote columns and blogs that were critical of Courant advertisers, to which the newspaper’s owners took issue, saying the newspaper couldn’t afford to lose the business. In April, Gombossy told his editors he plann3ed to write a column about a state investigation into Sleepy’s, a mattress company that advertises with the Courant. As a result, Gombossy’s position was eliminated.

Gombossy’s attorney said this was the first time a journalist has used a state law that protects free speech in the workplace to protest a firing on grounds he was trying to protect consumers and keep his newspaper ”trustworthy.”

A spokesperson for the Courant says Gombossy had no contract for continued employment and the companies had the right to make a business decision to eliminate his position, a decision it stands by and will defend.

Gombossy has since started his own consumer affairs website www.ctwatchdog.com. He worked for the Courant for more than 40 years and was chosen to write the consumer affairs column 2007. He says he received excellent performance reviews and his column was widely promoted by the newspaper.

His suit seeks past and future economic losses, including fringe and retirement benefits, punitive damages and attorneys fees.

[Source: The Associated Press, September 29, 2009]

Denver based company, Vail Resorts, Inc. announced September 28, 2009 that it, together with the U.S. Forest Service and the National Forest Foundation, will contribute to a $4 million, three-year project to restore habitat devastated by Colorado’s worst fire in history. The 2002 Hayman fire destroyed 600 buildings, including 133 homes, and burned trees and vegetation on about 215 square miles. Erosion from burned areas caused sediment to build up around Cheesman Reservoir, creating a threat to a main source of water for Denver homes.

Most of the project’s work will focus on about 70 square miles of the most severely affected areas in four watersheds feeding the Upper South Platte River. More than 200,000 trees will be planted, plus willows, dogwood, grasses and sage to restore river areas.

According to Tom Sullivan, state director for the Nature Conservancy, without man’s help it may take 500 years before the forest restores itself.

About 65 percent of the water people use, including for farms and drinking water, comes from watersheds under the management of the Forest Service., About 75 percent of the water supply in Colorado comes through national forests. "The mountains are
the water towers of the West," according to Rick Cables, director of the Forest Service in Denver/

Denver Water, the owner of Cheesman Reservoir, has already spent $8 million planting seedlings, building sediment traps, repairing roads, installing bigger drainage pipes and doing other work to protect the watershed.

Continue reading "$4 Million Project to Help Restore Habitat Harmed by Colorado’s Hayman Fire" »

As most Denver businesses with federal contracts know, effective September 8, 2009, compliance with the free E-Verify internet-based system, formerly voluntary, became mandatory. The rule applies if the prime contract for services or construction is more than $100,000 with a period of performance longer than 120 days. For subcontractors, the value of services or construction must exceed $3,000.

Contractors and subcontractors are required to register with E-Verify within 30 days of the contract award date. The system, which facilitates compliance with federal immigration laws, requires that employers run new hires, whether or not employed on a federal contract, and existing employees directly working on these contracts, through the E-Verify system to determine the person’s eligibility to work in the U.S.

E-Verify compares the information on the individual’s Employment Eligibility Verification Form (I-9) against federal government databases to verify work eligibility. The E-Verify system is operated by the Department of Homeland Security in cooperation with the Social Security Administration. Applicable government contracts must have an E-Verify provision in the contract document. Penalties for non-compliance with the system’s mandatory requirements range from fines to criminal penalties and loss of eligibility to complete or bid on applicable federal government contracts.

The U.S. Chamber of Commerce and various industry associations filed a suit in a Maryland federal court, mounting serious legal challenges to the validity of the system, but the court upheld the system.

It would be prudent for prime contractors to have a provision in their subcontracts for mandatory compliance by subcontractors with the E-Verify system. Affected Colorado contractors should feel free to contact this office or their existing counsel for advice concerning the E-Verify system.

A September 10, 2009 decision by the 2nd Circuit U.S. Court of Appeals holds that an employer may be held liable for age discrimination allegedly committed by third parties, including an independent contractor.

Manhattan Apartments, Inc. (MAI) was the owner of an apartment building. Robert Brooks (Brooks) was hired by MAI as an independent contractor to interview and hire “Showers,” or persons who would show the apartments to prospective renters. In interviewing plaintiff Michael Halpert (Halpert) for a Shower’s job, Brooks allegedly told Halpert that he was “too old” for the position. Halpert sued MAI under the federal Age Discrimination in Employment Act.

The U.S. District Court for the Southern District of New York granted summary judgment in favor of MAI on the basis that Brooks was an independent contractor and that MAI could not be held liable for the act of an independent contractor. The court of appeals reversed the decision and remanded the case to the trial court for trial, including a determination of whether or not MAI’s degree of control over the interview and hiring process for the Shower position rendered Brooks MAI’s agent with respect to that position. The court noted that there was evidence on both sides of that issue, as disclosed by the summary judgment affidavits.

Business entities should take note that, contrary to general principles of non-liability of the principal, a person or business that hires an independent contractor may indeed be responsible for the acts of an independent contractor. This case amply demonstrates the importance of obtaining competent legal advice from an experienced business attorney concerning the sometimes complex issues of legal responsibility of one business or person for the acts of another.

[Source: Halpert v. Manhattan Apartments, Inc., ---F.3d---, 2009 WL 2881388, (CA.2, 2009)]

When your business has a complex lawsuit that you want filed or defended, how do you find a trial attorney who is the best for the kind of case you have and who is experienced and affordable? There are many areas of the law where not all of the lawyers with subject matter expertise (e.g., contract, torts, etc.) also have the ability to actually prepare and take a difficult case to trial in a competent and professional manner.

Preparing and trying a case to verdict demands an attorney with the strategic and persuasive ability to convince a jury of the righteousness of your case. These abilities are independent of the branch or area of law that is involved. They come from many years of experience in successfully trying or favorably settling various types of cases. Before you select your attorney, here are some things you can do that will help ensure that you choose the right one:

1. Ask the attorney how many cases he or she has tried. Attorneys who successfully try many cases usually have the respect of other lawyers and can negotiate a more favorable case settlement.

2. Find out what types of fee arrangements can be made. Attorneys who typically defend cases normally charge on an hourly basis. One unfavorable aspect of this type of fee arrangement is that the attorney gets paid whether you win or lose. A distinct advantage to you, therefore, is a fee arrangement, such as a contingent (percentage) fee, where the lawyer only gets paid if you win. Yet another fee arrangement is the lump sum fee. Again, the lawyer gets paid, win or lose. There are also combinations of a lump sum fee with a contingency for success.

3. Ask the attorney for a professional resume that sets forth the attorney’s legal education, memberships in professional (just pay the dues) and honorary (by invitation only) organizations, awards, experience, publications, etc.

4. Ask around. Business associates who have hired lawyers are sometimes good sources. Other lawyers in the community usually know who the best trial lawyers are. Check out the lawyer in a legal directory, such as the Martindale-Hubbell Law Directory©. This publication can usually be found at your local library. It contains a lawyer’s legal ability and ethics ratings, using input from lawyers in the local community who know the lawyer.

5. A face-to-face meeting with the lawyer is a good idea. You can learn a lot about the lawyer’s personality, demeanor and, if you ask a few questions, about his ethics and standards. You should feel comfortable and at ease with your lawyer.

6. Make sure to ask the lawyer if he or she will personally be involved in all major aspects of preparing and trying the case.

The Federal District Court for the Northern District of Texas has decided that an arbitration clause in a Blockbuster Inc. contract with its customers was illusory and could not be enforced by Blockbuster.

The lawsuit was brought by customers after the names of movies the customers rented from Blockbuster were published on Facebook under a contract between Blockbuster and Facebook. Customers claimed that such publication violated the Video Privacy Protection Act which prohibits a videotape service provider from disclosing personally identifiable information about a customer without the customer’s written consent. Blockbuster attempted to invoke the binding arbitration clause, taking the position that the court had no authority to decide the underlying issue and that it must be decided by arbitration.

The Blockbuster/customer contract contained a provision providing basically that the contract could be amended by Blockbuster “at its sole discretion” and “at any time.” The amendment became effective merely by posting it to the Blockbuster internet website. This right to amend did not exclude the arbitration provision The customers countered that the arbitration provision was “illusory” and that Blockbuster could not unilaterally change the rules of the game.

The court concluded that the arbitration provision was “illusory and unenforceable” and thus determined that the customers were not compelled to have their claims arbitrated.

The moral of this incident is that corporations should be very careful about including this type of unilateral right to amend in their contracts without first seeking legal advice from their attorney. It should be noted that this case applies only to Texas contracts. No attempt has been made by yours truly to determine the status of the law on this issue in other state or federal jurisdictions.

A new law, effective June 2, 2009 is of vital importance to employers in Colorado. The law imposes substantial fines and other punishment to any employer who misclassifies an employee as a subcontractor. The fine for a first willful violation is up to $5,000 for each misclassified employee. For a second willful violation, the fine is up to $25,000 for each misclassified employee and a two year disqualification pf the employer from contracting with any agency of the state.

The purpose of the bill is to protect rights to unemployment and workers compensation to those who should be classified as employees, to ensure that employers pay appropriate taxes to the state, and to prevent an unfair competitive advantage to those employers who misclassify persons as independent contractors over those who properly classify persons as employees.

An employer may request a written opinion from the Director of the Division of Employment and Training in the Department of Labor and Employment, concerning whether the employer should classify a person as an employee or independent contractor. The Director’s opinion is merely advisory and not binding. Thus, in the event any person files a complaint against the employer, and a hearing is conducted pursuant to the rules set up by the Director, an individual may be deemed by the Director to be an employee, notwithstanding an earlier informal opinion that the individual is an independent contractor.

It is interesting to note that nowhere in the law are there any definitions or guidelines concerning how to classify an individual. Thus, it would seem that the employer makes the classification at his, her or its peril.

Colorado court opinions give some guidance in this area. For example, in the 1993 case of Brighton School Dist. v. Lyons, the Court of Appeals notes that there are two tests for determining whether a relationship is one of employer-employee or independent contractor, the “control” test, and the “relative nature of the work” test.

Under the “control” test, the most important factor in determining employment status is whether the alleged employer exercises control over the means and methods of accomplishing the contracted service. This test also considers factors such as whether compensation is measured by time or lump sum and which party furnishes the necessary tools and equipment to perform the work.

Continue reading "New Colorado Law Punishes Employer for Misclassifying “Employee” as “Independent Contractor" »

In a previous post about high risk and Colorado business litigation, I reminded companies who hire lawyers by the hour of the substantial expense of that arrangement as well as the potential conflict of interest between the business and its lawyers. Now, let’s look at a couple of other risks.

Risk #3: Lack of courtroom experience. The law firm who bills you hourly often has a bunch of junior associates who do most of the case preparation. The lawyer who will try the case, though, is rarely involved in the early stages. Why would you want lawyers preparing your important case when the lawyers may never have tried a lawsuit? Some of them have never been inside a courtroom. Hiring an injury lawyer who agrees not to be paid unless you recover money means that your lawyer will be involved from the very beginning. No more junior associates churning out huge monthly attorneys’ fees.

Risk #4: Case becomes too technical. You don’t need a lawyer who knows the nooks and crannies of arcane accounting practices and has memorized the footnotes to the rules of the SEC. When you sue a brain surgeon who has made a mistake, don’t look for a lawyer who has been to medical school. Look for a good injury lawyer. When your family has been injured because of a design defect in an automobile, don’t hire a lawyer who has been trained as a mechanical engineer. Hire an injury lawyer. Injury lawyers understand how to simplify the case and keep the jury focused on the trial story and not on accounting practices.

I would enjoy the opportunity to discuss with you or one of your customers how we can work with you on select high risk / high reward business litigation. We work on a contingent fee basis. Contingent fees are not just for injured people. They also work well for commercial/financial institutions who do not want to front large legal fees in a case where success is not assured. In those cases, we become your partner. We do not take a fee unless we recover money for you. Contact me.

~Jim Gilbert~