Attorney Conflict Of Interest After Sale Of Corporation

A closely held corporation retained a law firm to work on a merger with an acquisition company. At the time, the law firm also represented the sole shareholder of the corporation in personal matters. Following the merger, the buyer alleged breach of representations and warranties against the shareholder. The shareholder retained the law firm but the buyer objected on conflict of interest grounds. New York's highest court ruled that the law firm could not represent the shareholder because the attorney-client privilege on pre-merger communications between the law firm and the corporation transferred to the buyer in the merger.

Why This Is Important... Corporations and individual shareholders that use the same attorney should be aware that if the corporation is merged, and a dispute arises between the buyer and the shareholders, the law firm may be prohibited from representing the shareholder.

Agreements In Employment Handbooks May Be Invalid

A U.S. District Court recently ruled that an arbitration agreement between an employee and his employer, which referred to an arbitration procedure in an employee handbook, was invalid. The agreement was invalid because the employee handbook contained a standard disclaimer saying that the handbook was not intended to create a binding contract.

Why This Is Important... Companies began adding disclaimers about 10 years ago to ward off suits where employees claimed the handbook was a contract. While it may be convenient to include arbitration or noncompete-- agreements in employee handbooks, doing so can have severe consequences for the employer unless the employer is willing to make the whole handbook a contract.

Lessee Entitled To Interest On Security Deposit

In a class action, the Court ruled that a man who leased a car and put down a $550 security deposit, but was not given interest on the money, may be entitled to punitive damages and attorneys' fees. The Court found that the failure to pay interest could be a violation of the Uniform Commercial Code ("UCC") and may have violated both the federal Consumer Leasing Act and a state consumer protection statute.

Why This Is Important... Many businesses that lease personal property don't think the "interest on collateral" provisions of the UCC apply to security deposits in connection with such transactions. They should include a provision in the lease to specify exactly what happens to the interest. The provisions of Article 9 don't apply, if the parties expressly agree otherwise.

Customs Law Pointers

Many businesses are looking internationally to increase their sales and profits. Invariably, this means dealing with U.S. Customs Law. Active Nicolai Law Group clients have received a memorandum which gives pointers on dealing with the law. If you want a copy e-mailed to you, just subscribe to our mailing list and we will be happy to send you one.