A buy/sell agreement only works if everybody involved has enough money. Or at the very least, there is a provision for the necessary money in the agreement. You think a basic life insurance policy will take care of that problem? Think again. Simple life insurance is not enough. Here’s one example why:

Let’s say your name is Roger and your business partner’s name is Emory. Emory is in his mid 60s, seems fit, but then he has a debilitating stroke. His marvelous fourth wife Carol, age 23, strides up to you shortly thereafter in a tight mini-skirt and says, “Roger, I’ve got Emory’s power of attorney. Where’s yours?” You’re dumbfounded. And, you’ve got a problem. Carol’s your new partner. She’d be happy to sell her stake to you, her interests go well beyond the petty concerns of running a business, but you don’t have the funds available to buy her out. Now what?

Next post: another example.

For the next few weeks my posts will focus on issues discussed during the continuing legal education class I taught at the McLean Estate Planning Council in September.

The subject at hand is the types of brawls that can arise in the course of a buy/sell agreement created as part of what is loosely called business succession planning.

Let’s start with the basics. A contract is only as good as the muscle you want to put into fighting for it. If you’re not willing to fight, then it really doesn’t matter how well the contract is written. Before you even think about a buy/sell agreement, or any kind of contract, you really need to ask yourself: Are you willing to fight to protect it? If not, why are you wasting time and money having a contract drawn up?

Next post we’ll look at one of the keys to effective buy/sell agreements: money.

First of all, this is a business decision, not a legal decision. So the lawyer’s input is (or should be) limited to describing the risks and helping the client implement the business decision chosen. Second, my clients always blanche at the news that a contract is only worth the amount of muscle you are willing to put into fighting to force the other side to live up to its terms. Third, no contract will give you full protection against a true crook or con artist. You must always be prepared to back up the contract with emotional or financial muscle.

Now, generally, from the landlord’s perspective, a large company like Rite Aid or Walgreen’s, there is no need for a personal guarantee. But a new or small company, one man band or small family shop, as a commercial landlord, I’m asking for personal guarantee. In fact, in many cases the landlord might ask for a guarantee from spouse of personal guarantor.

If the tenant is unwilling to make a personal guarantee, that is a “red flag.” But a good real estate lawyer can find substitute solutions. What kind of solution? Well, a large deposit might be enough. Not merely 1st and last months’ rent but 6 months rent. Or a bond. Alternatively, maybe the tenant would be willing to issue a personal guarantee for only a portion of lease’s duration? One suggestion by a friend of mine who specializes in commercial real estate deals is to try and lock the tenant into the property by requiring the tenant to have their own “skin” in the game.

Me? I don’t do the deals, only the aftermath. So I want the lease to waive notice for eviction and a confession of judgment. Maybe even liquidated damages. That makes it quicker and cheaper for the client if I have to get involved.

I’m late to the party on this one but I simply could not avoid discussing the case of Nazir v. United Airlines, Inc., 178 Cal. App. 4th 243 (2009). If you want to read the gory details it can also be found at 2009 Cal. App. LEXIS 1659. Now, let’s begin.

Clients frequently confuse being obnoxious or angry with good lawyering. Maybe it’s TV. But clients also confuse high bills or high billing rates with good lawyering. Nonsense! This case deals with a motion for Summary Judgment in what could have been an ordinary harassment/discrimination case. But the lawyers for UAL got carried away. Apparently they decided to try and overwhelm the Plaintiff’s lawyers (from a small firm). Although it worked at the trial level, the appellate court objected calling UAL’s Motion for Summary Judgment “the most oppressive motion ever presented to a superior court.” 178 Cal. App. 303. Truly it was amazing. Probably it’s better if I just quote from the opinion:

Defendants filed a motion for summary judgment/summary adjudication, seeking adjudication of44 issues, most of which were not proper subjects of adjudication. Defendants’ separate statement was 196 pages long, setting forth hundreds of facts, many of them not material–as defendants’ own papers conceded. And the moving papers concluded with a request for judicial notice of 174 pages. All told, defendants’ moving papers were 1,056 pages.

Then, after Plaintiff filed his objection,

Defendants’ reply included, and properly, their response to plaintiff’s additional disputed facts. Defendants’ reply also included, not so properly, a 297-page “Reply Separate Statement” and 153 pages of”Exhibits and Evidence in Support of Defendants’ Reply.”And the reply culminated with 324 pages of evidentiary objections, consisting of 764 specific objections, 325 of which were directed to portions of plaintiff’s declaration, many of which objections were frivolous. In all, defendants filed 1,150 pages of reply.

Amazing.

It is axiomatic that a Motion for Summary Judgment should never cite evidence out of context but in this case UAL’s lawyers did just that and got caught:

a [Summary Judgment] motion “should never cite evidence out of context in an effort to conceal a clearly triable issue of [material] fact,” going on to cite two recent examples in that judge’s court, one in a sexual harassment case, the other in one for wrongful termination. Here, in vivid detail, is a third.”

Id. at 253.

Then they made frivolous objections to the evidence just because they thought they could get away with it:
Two illustrations should suffice. First, plaintiff testified that “[s]ome of the names [he] was called by [his] co-workers … were ‘sand nigger,’ ‘sand flea,’ ‘rag head,’ and ‘camel jockey.'” Defendants lodged four objections, two of which were lack of foundation and hearsay. No adjective is adequate to describe an objection that one who is called names lacks “foundation” to testify about them. And one does not need to be Wigmore to know that plaintiff was not introducing the names for their truth.

The Court’s sarcasm is well placed.

Overall, UAL was not well-served by such aggressive behavior of their lawyers. Presumably UAL had a story to tell about what happened. But this was not the way to tell it. To me, this looks like the lawyers had a deep-pocket client who would pay any price. So they took advantage.

No small firm would do that because we would surely get caught. No small firm would do that because we value our clients too much to treat them like that. This behavior is a disgrace to all lawyers.

What’s the difference? Think of it this way: When a man looks at his children, he believes they are his; when his wife look at his children, she knows they are his.

When you are being deposed – don’t say you know something, if you believe it to be true.

Depositions are open by right to attorneys and parties as well as the witness you are deposing. Sometimes opposing counsel will ask for permission for their summer law clerks/externs or other innocuous individuals to attend. That shouldn’t be a problem.

Even though you may not like it, generally experts are allowed to attend depositions. This is so they know what testimony they may have to rebut as well as to assist attorneys in technical areas where the attorney will not have full knowledge about the subtleties of the subject matter. IT, medical doctors, engineers etc.

But what about 3rd party witnesses? If that happens and the attorneys don’t agree to exclude witnesses, you will need to get a protective order. Some attorneys will attempt to bring in third parties in attempts to intimidate your client or your witness. Object right away and, if necessary, seek a protective order on the basis of witness sequestration. If it is a surprise, get the judge on the phone.

The National Institute of Trial Advocacy discusses this issue at length in one of its invaluable guides:

Outsiders: Members of the public, including other witnesses, relatives of witnesses, members of the media, and counsel not of record in the instant case, are not excluded by any rule, but may be excluded by a protective order issued by the court. Fed.R.Civ.P. 26(c)(5).

Practice Tip: According to the language of the Rules, depositions are not closed proceedings; they are instead part of the public disposition of civil litigation, of which the trial is also a part. Nevertheless, many counsel and judges continue to believe that depositions are private, and that “outsiders” may be excluded as a matter of right. The existence of Rule 26(c)(5) should have concluded discussion on this question long ago because there would be little sense to recognizing the specific authority of the court to limit those who may attend a deposition if depositions were normally closed proceedings. As a practical matter, because most depositions take place in private conference rooms, people not formally associated with the case can be excluded by the party or counsel controlling the room through tenancy or ownership.

A related question which often arises is whether future deposition witnesses may attend depositions. In Fed.R.Civ.P. 30(c), which provides that examination and cross-examination will “proceed as permitted at the trial under…the Federal Rules of Evidence,” the language “except Rules 103 and 615” has been added. Rule 615 is the “rule on witnesses,” providing that, at the request of any party, witnesses will be excluded from the courtroom until after they testify. By specifically excluding Rule 615 from those rules applying to depositions, the authors of the new Federal Rules of Civil Procedure are recognizing that deposition witnesses may be present at other depositions, absent a protective order.

Of course, counsel can avoid many of these problems by stipulating as to who may be present at the deposition. Because the method of recording the testimony can be changed by stipulation, and because the requirement of an oath can be avoided by stipulation, even the officer and the reporter are not actually necessary. Thus, at least in theory, the parties could stipulate that the witness give the deposition by speaking in a stream-of-consciousness style into a Playschool tape recorder while standing, all alone, in a broom closet. If the public is interested in attending, however, a stipulation between the parties should not be sufficient to close the deposition.

Of course, if the deposition is being held at the offices of a party or any attorney, non-participants in the litigation may be excluded on simple trespass grounds, or admitted on simple “host-guest” principles. However, if a party obtains an order excluding or including such an observer, that order would obviously control. The more important question is whether a party wants to object to the presence of an observer. The decision should not be knee-jerk; the presence of a reporter for The New York Times may put pressure on the executive who was planning to stonewall at the deposition; therefore, the taking attorney should not be too quick to stipulate that the deposition in his own offices should be closed to outsiders perhaps some reflection on the impact of publicity from the lawsuit will compel more reasonable settlement offers.

NITA’s “Deposition Rules, The Pocket Guide to Who, What, When, Where, Why, and How”, 3rd edition by David M. Malone.

Before any attorney worth her salt puts a witness on the stand in a trial or arbitration or even a meditation, they absolutely must know what the witness will say. Now, if the witness is friendly, it’s no problem: you just ask, write down the answers and have it written up as an affidavit. But if the witness is independent or unfriendly, the attorney must get the statements under oath the hard way–that’s when the witness is deposed.

If the independent witness is in your state, you subpoena them to come and testify. Using a subpoena is a must to protect your client. After all, what if something happens and the witness doesn’t show up? So prepare and have served on the witness a Subpoena. Each jurisdiction will have its own form. Use that. Have the subpoena served professionally by a process server. You need to be sure the subpoena is served properly because if it is not served properly you can invalidate the subpoena. If you want to be considerate, you call them, tell them what you are doing and try to coordinate schedules and find a convenient location. In many states there are geographic limits to how far you can compel a witness to travel. You may also, depending on your state’s rules, have to pay the witness a witness fee. Above all, try to be considerate. After all, treating an independent witness inconsiderately will not help your client. Then take the deposition.

But if the independent witness is in another state, the process is much more complicated. If you want to take the deposition of an out-of-state witness, you need permission. Why? Because the courts of your state do not have jurisdiction (power) over the people in another state. So you have to find a “work-around.” Although simple in concept, the solution can be procedurally complicated. First, does your state have some agreement with the state where the witness is located? Virginia, Maryland and D.C. have such an agreement, incorporated into their laws. Check for these. Usually what must happen is that you must obtain a “letter rogatory” from your court asking the other jurisdiction’s court to open a new case and to permit you to issue a subpoena for taking witness depositions. Usually it is not problem but you will have to go through the procedure. Each state has its own procedure so ask someone at the courthouse.

Depositions are where the lawyers get to ask the various witnesses and parties what they know. Depositions are used for many different things, but the important thing about depositions today is that they let the lawyers “lock down” what the witnesses are going to say. To do that you need a certified Court Reporter to transcribe every bark, bite, burp and statement by the attorneys, the witnesses and everyone else. You will have to pay for the Court Reporter. Those bills go to the lawyer and s/he will pay them and pass the costs on to you. So, since there are 2 lawyers, can they split the cost of the deposition? No, they should not. The lawyer hosting the deposition pays. The lawyer defending the deposition buys a copy. Nonsense about splitting the costs is just that—nonsense.

Sometimes a client will come to me and want me to threaten someone with criminal prosecution. Usually the conversation goes like this:

PC: “‘Joe’ owes me $50,000.00. I want you to tell him that if he doesn’t pay me I’ll have him arrested for theft, fraud, conspiracy, and whatever else I can think of. That’ll scare him into paying me right away.”

Me: “Sorry, I can’t do that It would be unethical and could be considered extortion and get me (and you) arrested.”

PC: “WTF?”

Here’s the answer:

In D.C., Maryland and Virginia, it is unethical to threaten criminal prosecution to obtain an advantage in a civil matter. But what exactly counts as a threat? The prohibition goes beyond mere threats of criminal prosecution. In fact, threatening to report someone to a disciplinary agency (e.g. the Bar) is a violation as well. Here are some examples of prohibited threats:

• Sending a letter to an opposing party, in an attempt to collect a bad check that the party had given to the attorneys’ client, stating that issuing a check with insufficient funds to cover it is a misdemeanor and that the attorneys planned to exercise their rights to file a criminal complaint against the party.
• Sending a letter to a company hired by an opposing party to manage an apartment complex in which the attorney demanded that the company resign, and stated that failure to comply with this demand would result in a request for criminal charges against the company for embezzlement and other appropriate offenses.
• Telling the mother of a child to be adopted that her demand for an additional $3,000 was an attempt at extortion for which she could be prosecuted.

So what can I do? Well, a statement that “all available legal remedies will be pursued” unless satisfactory settlement is promptly forthcoming is not, in itself, ethically improper. Or I can just report him to the authorities.

You’ve heard of the “outrageous” McDonald’s case? You know it, it’s the poster child for tort reform. Well, did you know that:

1. Despite hundreds of warnings (at least 70 prior reported complaints), McDonalds refused to lower the coffee temperature from a point where it knew it would cause severe burns if it directly contacted the body;
2. Stella Liebeck was a passenger, not the driver as some have claimed;
3. The auto in which Mrs. L was a passenger was stopped to allow Mrs. L to add the customary cream & sugar to the flimsy styrofoam cup.

If you doubt this, then visit www.lectlaw.com/files/cur78.htm The Actual Facts about the Mcdonalds’ Coffee Case

I don’t mind arguing about the benefits of tort reform but let’s all work from the same facts.

I love the jury system. We all should. We trust our peers to get it right in criminal law. So how come we don’t trust them to get it right when it comes to medical malpractice? O, right, it’s the lawyers’ fault. Is it? It’s not the lawyers who are giving out large verdicts–it’s a jury. So tort reform is actually saying that a jury is too dumb or too emotional to be trusted with money. Is that right? But we can trust a jury of our peers to do justice in criminal cases? How can that be?

I’ve tried over 40 jury cases and I’ve got to admit–Jury’s usually get it about right. Sometimes I don’t agree, but juries try to get it right. Usually I’d rather have a jury than a judge–not always, but usually.

Why are only plaintiff lawyers criticized? They get paid only when they win because they are on contingency. How about all the defense lawyers who get paid whether or not they win? Shouldn’t they be criticized for running up costs in losing cases?