Atlanta Business Litigation Attorney Blog | Fulton County Commercial Collections Lawyers | Georgia Loan Modication Law Firm

Starting a new business is the best time to avoid future conflicts

2012-05-18T21:34:58Z

Starting a new business is an exciting experience. The world can seem full of opportunities and all the interested parties share a common goal and are ready to work together seamlessly to make sure that the business succeeds. Finding a location and hiring new employees only increases the anticipation of running a successful business. Future conflict between business partners may be the last thing on anyone's mind, but this is often the best time to ensure that agreements are in place to avoid unnecessary conflict down the road and ensure that your interests are protected.

It may be too late once a conflict boils over to avoid litigation and expensive consequences that can cost business owners dearly and hamper their business operations. Early on during the business formation process, when lines of communication are still healthy, it may be easier to set out clear and mutually beneficial agreements to deal with potential disagreements.

Employment lawsuit arises out of Atlanta school cheating scandal

2012-05-16T14:47:11Z

Last year, an investigation was released which implicated 44 schools and 180 different educators in a scheme to improve the appearance of test scores by cheating and punishing those that attempted to report the misconduct. As a result of this investigation the Atlanta Public School District placed three administrators on paid leave arguing that they either knew or should have known of the misconduct taking place in schools under their supervision. Now the three administrators have filed an employment lawsuit claiming that the district breached their employment contracts and ruined their reputations.

The APS is in the process of holding hearings for the 180 educators that have been implicated in the cheating scandal. The three administrators that are involved in the lawsuit have not yet had their hearing and claim that this delay is a violation of their due process rights.

]]> According to a report in the Atlanta Journal Constitution, the APS was forced to delay the hearings because some of the evidence critical to the investigation was being held by the district attorney's office and was only later made available to the APS so that it could move forward with the investigations.

As part of the termination process, the teachers are allowed to contest the charges at a hearing. While awaiting those hearings, the APS informed the three administrators that their employment contracts would not be renewed for next year. The non-renewal does not entail the same hearing process as a termination during the term of the contract.

Whatever the results of these specific instances, it is important when terminating an employee that all of the procedural requirements are followed. A situation may exists where even though an employee has committed misconduct, missteps in the termination process can expose an employer to unnecessary liability.

Source: Atlanta Journal Constitution, "Three accused of cheating sue APS for $6 million,"Jamie Sarrio, May 10, 2012

Best practices for criminal background checks on job applicants

2012-05-12T02:44:41Z

Businesses want to hire the best person for the job any time that they have an open position that they would like to fill. They are looking for competent and trustworthy individuals who can perform the tasks of the job and will not require undue oversight. Hiring the wrong employee could not only cost a business a great deal in lost productivity and opportunities, but in some situations could even expose them to a negative hiring or retention claim.

It is understandable that employers want to take every reasonable step to ensure that they have a comprehensive understanding of an applicant before extending an employment offer. But it is important to have a clear and defendable policy around for the use of criminal background checks. Recently the EEOC released enforcement guidance for investigators indicating that the use of criminal background checks in the hiring process has the potential to violate Title VII.

]]> The EEOC made explicit in a separate statement that "Title VII does not prohibit an employer from requiring applicants or employees to provide information about arrests, convictions or incarceration," but the statement went on to say that it was their position that criminal background checks can have the effect of discriminating against minority job applicants.

The guidance from the EEOC offers a handful of generalized best practices for businesses to follow when using criminal records check in the hiring process. They basically boil down to ensuring that hiring managers and others are familiar with Title VII in order to develop and follow policies that are consistent with the law. Because every company is unique it is important that you are relying upon more than just general best practices, it is best to have advice from someone who takes the time to understand your business and has experience in employer-side employment litigation.

Source: Business Management Daily, "EEOC urges caution on criminal background checks," May 4, 2012

Atlanta mayor's denial of liquor license overturned

2012-05-09T16:52:23Z

A Fulton county judge has overturned the decision by the Atlanta mayor to deny an alcoholic beverage license to a local business. In these tough economic times, Atlanta businesses are looking for any feasible ways to serve their customers that will provide additional revenue and improve their bottom line. One avenue that some businesses have explored is adding alcohol sales to an existing business.

This is the case for one Atlanta luxury salon and tattoo parlor. The business applied for a liquor license and met all of the code and other requirements necessary for approval. But despite meeting all of the explicit requirements for approval, the mayor of Atlanta acted to deny the license. Now a judge has overturned the mayor's denial declaring the denial wrongly denied the business of a liquor license.

]]> This is not the first time that we have seen this type of situation. A business goes through the painstaking process of identifying all of the relevant codes and regulations and then does the work of ensuring that they are incompliance before applying for a liquor license. But despite following the law, the license is arbitrarily denied.

The reason we have specific regulations governing the issuance of alcoholic beverage licenses is two-fold. On one hand, the regulations ensure that licenses are not granted in situations where the business is not appropriately positioned to sell alcohol. This protects the community from poorly managed or even dangerous alcohol sales. The other reason we have these regulations is to that businesses that comply with the regulations are not arbitrarily denied the right to sell alcohol.

If the fear is that businesses complying with the regulations should not sell alcohol, it may be time to revisit the regulations and amend them as necessary. It is not appropriate to simply move the goalposts for some businesses.

Source: Virginia Highland-Druid Hills Patch, "Fulton Judge Overrules Atlanta Mayor, Grants Liquor License to Ink Lounge," Jaclyn Hirsch, April 27, 2012

SEC suit against investment firm revived

2012-05-04T18:32:02Z

In 2009, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against an investment firm alleging that it had not given investors sufficient information regarding the risks of certain auction-rate securities. In response, the firm argued that the investments lost value because of a situation beyond its control, namely the global financial collapse of 2008.

Last year, a federal district court judge considering the case, determined that the SEC failed to demonstrate that the investment firm had encouraged its brokers to misinform investors. The judge said, "Failure to predict the market...does not amount to securities fraud." But now the 11th U.S. Circuit Court of Appeals has ruled that the district court was in error and that the lawsuit filed by the SEC against the investment firm can proceed. The case will now be returned to the same judge in the U.S. District Court in Atlanta.

]]> The decision by the Circuit Court of Appeals turned on whether the apparently omitted warnings were 'material.' Generally, an omitted fact is material if a "reasonable shareholder" would deem it to be important. The court did not spend time examining whether the investment form may have actually violated any laws.

While the investment firm provided general cautionary language regarding the risks of investment, the appeals court said that these warnings were not sufficient to warn investors. This reasoning begs the question of the scope of information that could meet the materiality test. There are certainly unforeseeable eventualities that could be relevant to an investor's decision.

Source: The Chicago Tribune, "Federal appeals court overturns ruling, revives SEC suit against Morgan Keegan," Ted Evanoff, May 3, 2012

Revoking job offers and employment lawsuits

2012-05-02T14:05:38Z

When recruiting a new employee for a position with your company, the selection process requires a great deal of consideration. The applicant must not only be capable of accomplishing the requirements of the position, but should also be someone who will be an increasingly valuable asset that suits both your long and short term talent needs. In most cases once that selection has been made the process is over. But occasionally business realities may change before the new hire ever comes on board.

Recently, a former long-time assistant coach for Georgia Tech says he was offered a head coaching position at Kennesaw State. According to the assistant coach, after the president of the college offered him the job, he resigned his current position and shuttered his own business running basketball camps so he could focus on gearing up to coach the Owls. But before the assistant coach could ever take over the reins, the president withdrew the job offer. Now the assistant coach has filed an employment lawsuit against the Kennesaw State.

]]> Apparently, the school president had talked to the assistant coach in the living room of the president's house. The assistant coach and the school president happened to be next door neighbors. The assistant coach acknowledged that when he spoke with the president about the job, he was told that they were not ready to make any sort of official announcement and that the assistant coach would have to wait at least until the school terminated the current coach.

It is important for any employer to be able to hire and retain the individuals that it decides are best suited to help the employer succeed. This is true whether it is coaching a team or producing widgets. Even in cases where a prospective employee, who is not selected, takes legal action as a result of not being hired, the employer should have little to worry about so long as it has been diligent in adhering to the proper procedures.

Source: USA Today, "Prospective coach sues Georgia school over alleged job offer," Ray Glier, May 1, 2012

Religious school accused of wrongful termination

2012-04-27T22:26:30Z

The 11th U.S. Circuit Court of Appeals in Atlanta recently heard arguments regarding an employment dispute regarding a religious school that terminated a female teacher after it was discovered that she was pregnant and unmarried. This proceeding in the appellate level court comes after a decision by a federal trial court in which the District Court ruled in favor of the school, reasoning that this teacher had not been treated any differently than other employees who engaged in similar activities while working for the school.

The school explained that all employees are expected to abide by a code of conduct and serve as role models for students at the Christian school. Those expectations are included in an employee handbook that is provided to all employees.

]]> As you may know, there are certain exceptions from various discrimination laws for religious employers. This January the U.S. Supreme Court recognized what is known as the 'ministerial exception.' This protects the First Amendment freedom of these institutions to practice their religion by allowing for certain exceptions to anti-discrimination laws.

The teacher claims that the religious school's decision to terminate her employment was not based on religious belief but rather that the school simply did not want to have to hire a substitute teacher while she was on maternity leave. The school counters that if that was their concern they simply would have not renewed her contract for the following school year when she would have been on leave rather than terminating her immediately.

Source: The Huffington Post, "Jarretta Hamilton, Teacher, Allegedly Fired For Being Pregnant Has Case Heard In Court," GREG BLUESTEIN and KATE BRUMBACK, April 10, 2012

Should debtors be able to defy court orders with impunity?

2012-04-25T19:26:44Z

The often unstated underpinning of our judicial system is that the authority of the court must be respected. When a court properly issues an order it is mandatory that the person to whom the order is directed comply. If there was no mechanism for ensuring that the decisions of our courts were to be respected, our judicial system would simply be an advisory body providing suggestions as to what it thought people should do assuming that they are willing.

One enforcement mechanism for our civil court system is the ability to find someone in contempt of court. That is, when an individual disobeys an order from the court the court can order that the person be held until they are willing to comply with the lawful order of the court. This is often seen in cases where a non-custodial parent refuses to pay their court-ordered child support obligations, but it can also apply to other collections scenarios when a debtor refuses to comply with a lawful court order.

]]> Recently some have contended that it is improper for people to held for a failure to pay a debt. But this argument confuses the issue, it is not simple non-payment of the debt that incurs the risk of contempt of court, but rather only in those cases where the debtor is in direct violation of a court order. While the ability to enforce orders from the court is important, it is not the creditors who wish to see debtors held for contempt.

For creditors the objective is not to punish a delinquent debtor, but instead to recover the largest possible portion of the outstanding debt while incurring the least amount of cost in doing so. While a finding of contempt may motivate an otherwise unwilling debtor to conform with a court ordered payment, being behind bars may also seriously interfere with their ability to make any future payments.

Source: CBS Money Watch, "Jailed for $280: The return of debtors' prisons," Alain Sherter, April 20, 2012

FDIC seeks to weaken the Georgia Business Judgment Rule

2012-04-20T13:55:05Z

They say that hindsight is always 20/20, this is that when looking back at prior decisions it is easy to say that you would have acted differently. Having the benefit of seeing the ramifications of your decisions play out would make almost anyone a better decision maker. Unfortunately, while making decisions in the present we do not have the ability to see into the future to know whether we are correct.

An acknowledgement of this phenomenon of Monday morning quarterbacking is the business judgment rule. The business judgment rule protects officers of businesses who make decision which they believe to be in the best interest of their business, even when they are wrong. But now the Federal Deposit Insurance Corporation (FDIC) is seeking to weaken this rule in a lawsuit involving a number of failed Georgia banks.

]]> The FDIC insures customer deposits in banks, and in the event of a bank failure takes over the affairs of the bank. When they do this, they sometimes look back at the actions for the former bank directors to see if they may be held liable for any part of the bank's failure. The court has said that bank officers are protected from claims of simple negligence by the Georgia Business Judgment Rule, and can only be held liable for gross negligence.

The FDIC is asking the court to reconsider this ruling or give it permission to appeal to the 11th Circuit Court of Appeals. Since Georgia has the largest number of bank failures in the nation over the nation over the last few years, the FDIC is probably very anxious to ask the federal appeals court to weaken the state's business judgment rule.

Source: Atlanta Journal Constitution, "FDIC looks to appeal banking decision," Ernie Suggs, April 17, 2012

Are your employment practices keeping up with technology?

2012-04-16T21:26:42Z

Even as the economy continues its slow recovery, employers know it is still vital to help their employees to be as productive as possible. Increases in productivity can be sought in a number of different ways. Increased training or using a more flexible workforce taking advantage of vendors and contractors where it makes the most sense. One of the biggest ways in which employers are seeking to boost productivity is through the use of technology.

It used to be that the idea of a regular office worker telecommuting seemed like science fiction. But with high-speed internet connections common in many homes, smart phones allowing workers to be connected anywhere, and a vast array of other technologies, many employers are finding that technology is allowing for great leaps rather than incremental gains in productivity. But these technologies also carry a risk. Employers must be certain that their workers and technologies are performing in accordance with all of their human resource and time reporting responsibilities.

]]> Focusing on telecommuting generally and smart phones specifically, both of these tools tend to blur the line between when someone is actually on the clock. Obviously they are not punching a clock when if they are working from a coffee shop. If your work provided iPhone or Blackberry receives an email after hours an employee may feel like they should take quick action if appropriate.

It is important that employers have clear practices in place to ensure that their workers are complying with company policies regarding time reporting. The number of employment lawsuits making claims for unpaid overtime has increased drastically in the last few years.

Source: Atlanta Journal Constitution, "Workers suing employers over hours, pay since recession," David Markiewicz, April 16, 2012

SEC files lawsuit regarding alleged Ponzi scheme related to a Georgia church

2012-04-13T15:14:42Z

One increasingly important sector for many financial investment professionals is 'Socially Conscious Investing.' The idea is that there are many potential investors whose want to be sure that their money is not used to benefit business that carry out their business in a manner which the investor finds morally unacceptable. Funds are instead invested in companies that work for positive social change or that support the community.

These types of investments are attractive to a great number of investors, particularly when they are marketed as providing rates of return that are competitive or even better than traditional investments. But the SEC has recently filed a lawsuit in Federal District Court in Atlanta that accuses one man of targeting church members in a fraud scheme.

]]> The lawsuit alleges that the defendant solicited more than $11 million, primarily from church members by telling them that the money would be invested in small local businesses that would assist community development. But, while a portion of the funds may have gone to these purposes, the SEC accuses the defendant of also using some of the funds for personal purposes such as rent on his apartment and funding his wife's singing career. They also say that he used the funds to prop up his investment firm.

The suit from the SEC follows a suit brought by the investors directly that also included the church and its pastor as defendants, asserting that the church had facilitated and promoted the fraudulent scheme. Both lawsuits remain ongoing.

Source: Atlanta Journal Constitution, "SEC complaint alleges that Ponzi scheme targeted church members," Shelia M. Poole, April 12, 2012

Do employers risk litigation even for performance based terminations?

2012-04-11T14:26:25Z

We have all heard of the difficulties some service members face in finding employment after a deployment. But for many employers, the skills and discipline that military service instills are a great match for their workforce needs. It is disconcerting however when an employer is called into question for terminating a service member even when the termination is related to the employee's poor performance on the job.

The Atlanta Journal Constitution recently reported on the story of a former employee of Home Depot. The store explains that they terminated the employee because of performance issues wholly unrelated to his military service. A spokesman for Home Depot reiterated that, "We would never tolerate the termination of one of our military associates for anything other than legitimate reasons unrelated to military service." Despite this, the U.S. Justice Department is now bringing an employment lawsuit against the employer in regard to this employee's termination.

]]> In the lawsuit, the government claims that the employee's military service related absences were the real reason that the employee was fired. They are asking Home Depot to rehire this employee, pay for his lost wages and benefits and admit that they had violated the law.

Every employer knows the value of good employee and understands that terminating and replacing and an employee involves significant expense in terms of training and human resource expenses. In light of this fact employers generally try to retain employees who perform well. The unfortunate truth however is that it is often in an employer's interest to have clear policies in place regarding termination decisions so that if they are questioned they can easily demonstrate that the decision was based solely on appropriate and legal factors.

Source: Atlanta Journal Constitution, "U.S. sues Home Depot over veteran's firing," April 5, 2012

Employee demoted for violating employment policy

2012-04-04T16:31:56Z

Georgia employment law can be very complex. Especially in the area of contracts and non-compete agreements, implementation and enforcement can be difficult. A recent story of a disciplinary issue with a Firefighter highlights some of the issues that can arise between employers and long-time employees where policies and procedures might not always be clear.

The case occurred in Florida, but serves as a worthwhile example of two well-meaning parties that came in to conflict over possibly confusing terms of employment. The firefighter had been at the department for over ten years and during that time had been doing some contract work in the office of another local department, without realizing that the office work was not allowed without permission from his primary employer.

]]> The issue came to light when the man had to go on sick leave for an injury that occurred outside of his employment, and was working under contract at the other office at the same time. The nuances of the employment agreement between the man and the city didn't allow this arrangement, and the department determined that he was violating policy.

The two parties were able to reach an agreement recently that seems to resolve the issue and allow the man to keep his job. As a result of his long years of service, work performance and clear disciplinary record, the firefighter was granted leniency and was reinstated. However, he has been demoted to lieutenant, which comes with a 20 percent pay cut. As a consolation, the reinstatement comes with all back pay and benefits lost during the termination period.

Source: Tampa Bay Times, "Former Zephyrhills fire marshal reinstated but demoted over sick leave dispute," Lisa A. Davis, March 21, 2012

Georgia restaurant's liquor license suspended

2012-04-02T14:29:00Z

A Georgia restaurant's liquor license was recently placed in jeopardy when a server was accused of selling beer to a 19-year-old woman. The License Review Board voted to suspend the restaurant's liquor license for two weeks.

The restaurant has never had a violation in its 20 years of operation. However, it was the subject of an alcoholic beverage compliance check in November of last year. An undercover police officer and a teenaged volunteer went to the restaurant. The 19-year-old ordered a beer from their server, who was also the owner's wife.

]]> While the server did check the underage volunteer's Georgia driver's license, she allegedly sold the underage customer an alcoholic beverage. According to their defense, the server requires the use of reading glasses, but she was not wearing them at the time of the sting operation. She says this lead to her misreading the woman's driver's license. Despite restaurant's explanation as to why the incident occurred, the licensing board still voted to suspend their license.

In addition to this violation, the server did not have a valid alcohol work permit, which the owner says was based upon a misunderstanding concerning Georgia law.

This type of sting operation by an undercover law enforcement official is not uncommon. These tactics frequently result in liquor license violations, such as in this case. In fact, selling alcoholic beverages to a minor is one of the most common liquor license violations.

The two-week liquor license suspension is one of the administrative consequences that can be faced by restaurants who have violated their alcoholic beverage license.

In addition, sometimes the server and the license holder can both face criminal charges and consequences. Thankfully, no criminal charges have been filed in this case. In the meantime, the owner of this Georgia restaurant is considering dropping their liquor license rather than worry about the renewal process or facing criminal sanctions for an alcoholic beverage license violation in the future.

Source: Northeast Cobb Patch, "China Dynasty's Liquor License Suspended," March 28, 2012

Bank loan write off raises questions

2012-03-30T02:58:42Z

In January 2007 two Georgia lawmakers took out a $2.3 million dollar loan to purchase a hotel. But given the timing of the loan, at the height of the real estate market, it is not surprising that the pair soon found themselves in financial trouble and began to have trouble making the payments. In January of 2010 the bank sued them for default.

As the financial troubles of the hotel owners mounted in late 2009, and one of the partners preparing to run for Congress, the partners transferred ownership of the property to a third party. But as guarantors of the loan, they remained financially responsible. Now, an agreement to settle the loan for just over $1 million is raising eyebrows.

]]> Like too many other banks in Georgia the original lender had gone under and the dispute was acquired by a new bank. When that occurred the bank entered into a loss-share agreement with the Federal Deposit Insurance Corporation. As part of this agreement the FDIC will be responsible for up to 80 percent of the losses that result from the accounts of the previous failed bank.

Because the FDIC will likely eat a large portion of the write down some are questioning whether the details of this settlement. But it is unclear whether it would ever be likely that any larger amount would have been realistically repaid. The party to which they transferred the property had only begun managing the hotel when he left his job repossessing cars and is not portrayed as a man of means. The hotel itself is abandoned and will likely be demolished.

Source: Atlanta Journal Constitution, "In failed hotel venture, Ga. Republicans appear to cut loan nearly in half ," McCaffrey Shannon, March 27, 2012