Transcript 2010 ALA Conference Septemberr 20

“Encore for Success”
2010 ALA Conference
September 20-22
Encore at Wynn, Las Vegas
AVOIDING LIABILITY. . .
. . .Successfully traversing the legal minefield
That confronts your business
Daniel E. Beederman
Schoenberg Finkel Newman & Rosenberg, LLC
222 South Riverside Plaza, Suite 2100
Chicago, Illinois 60606
312/648-2300 (ext. 303)
[email protected]
Legal Landmines are Everywhere in the
Business World
In your office
In selling your products
In the products themselves
In communications with or about
competitors
In this room!
Antitrust Laws: An Overview
Federal Antitrust Laws are designed to
provide a framework to protect free
competition for the benefit of consumers
The laws are not intended to regulate
business directly but rather to supplement
and protect natural market forces by
prohibiting business practices which would
tamper with such competitive forces
Antitrust Laws: The Sherman
Act
Outlaws agreements or conspiracies to restrain
competition and acts of monopolization
Makes illegal any contract or conspiracy which
unreasonably restrains trade, such as agreements
among competitors to fix prices, allocate territories or
boycott third parties
Prohibits monopolization or attempts to monopolize
any line of commerce
It is a felony to violate the Sherman Act, which can
result in substantial fines and prison
Antitrust Laws: How to Avoid
Violations
Problems can arise under the Antitrust Laws
whenever competitors get together and/or
communicate
Guidelines to Abide by:
When dealing with competitors, do not exchange or discuss
directly or indirectly, any competitive information
Don’t gossip or jest about prices with competitors, because
innocent communications can be misconstrued or inferred
later to have been part of a scheme to fix prices. Avoid
loose, careless or flippant remarks that can pose antitrust
problems, especially in correspondence, that can pose an
antitrust problem if examined out of context later on
Antitrust Laws:
The Perils of E-Mail (its not
just what you say, its also what you write)
The informality that is associated with e-mails can be dangerous
Avoid jokes or sarcasm, because they do not come across well
in e-mails, and can easily be misunderstood, when examined
out of context.Be careful when responding to e-mails, especially
with "reply to all
Be careful with "forwards." Do not forward e-mails containing
competitively sensitive information to friends or colleagues who
are actual or potential competitors.Delete does not mean
destroy. The best practice is simply not to put anything in
writing that may be later taken out of context or misconstrued
Price Discrimination: The RobinsonPatman Act
Prohibits the sale of the same goods at different
prices to two or more competing dealers or
distributors who intend to resell their products or
goods.
Generally prohibits discrimination between competing
dealers through volume discounts, different rebates,
promotional allowances and other similar tactics
The Robinson-Patman Act: Things to
Watch Out For and Avoid
Charging or offering different rates or prices for
"preferred" distributors or dealers
Volume discounts that are not available to all
dealers/customers on equal terms
Special offers or rates to allow dealers or distributors
to establish themselves in the market
Promotional allowances that are not available on
equal terms and conditions to all distributors or
dealers
Unfair Competition Laws:
These are state and federal laws that protect
consumers and other businesses from unscrupulous
and deceptive practices by competitors and others
Not only may the government sue a business or
person that has engaged in deceptive practices, but
usually competitors and consumers also have a right
to sue to recover damages, as well as attorneys' fees
and punitive damages (penalties)
Unfair Competition Laws:
Examples of Wrongful Conduct
The Lanham Act and the Uniform Deceptive Trade Practices Act
provide that a person or business has engaged in an illegal or
deceptive trade practice when the business or person does any
of the following things:
Passes off goods or services as those of another
Causes likelihood of confusion or misunderstanding as to the
source or approval of goods or services
Uses deceptive representations or designations of the
geographic source of the goods or service
Represents that goods or services are of a particular
standard, quality or grade, or of a particular style or model,
when they are not
Unfair Competition Laws:
Examples of Wrongful Conduct
Disparages the goods, services or business of
someone else by false or misleading
representations
Makes false or misleading statements of fact
concerning the reasons for the existence of a price
reduction
Engages in any other conduct which similarly
creates a likelihood of confusion or of
misunderstanding
Unfair Competition Laws:
Commercial Disparagement:
A claim for product disparagement involves a false or
misleading representation of fact concerning a competitor's
goods or services, and that such a false or misleading
representation was communicated to the public.
Proctor & Gamble: Commercial Disparagement
The Devil Made Me Do It
Tort Liability: It ain't a piece of cake!
Torts are actions that cause injury to another
Personal Liability for Compensatory Damages and
possibility of Punitive Damages
Examples:
Tortious interference with actual or prospective
business advantage
Defamation
Fraud
Tort Liability:
Tortious Interference with
Actual or Prospective Business Advantage
Existence of a valid business relationship or the
expectancy of entering into a valid business
relationship
Defendant's knowledge of plaintiff's relationship or
expectancy
Purposeful interference by the defendant that
prevents the legitimate expectancy from ripening into
a valid business relationship or the termination of an
existing relationship
Damages resulting from the interference
Tort Liability: Defamation
Avoid making false claims or statements made with
respect to the quality of a competitor's products or
business
Do not make false, disparaging statements about
your competitors or their products
Be careful if you publish any statement about a
competitor's product or services or a competitor's
creditworthiness or other important matter of
character
Tort Liability: Fraud
Material misrepresentation – What you
say, but shouldn't
Material omission – What you don't say,
but should
Negligent misrepresentation
Products Liability
The liability of any or all parties along the supply
chain of manufacture of any product for damage
caused that product (including component parts)
Goal is to protect consumers from dangerous
products while holding manufacturers, distributors
and retailers responsible for products they knew or
should have known were defective
Under a strict liability theory, liability can be imposed
if a products has a defect, regardless of care taken
by manufacturer or carelessness of plaintiff
When Is Strict Products
Liability Law Invoked
Common theories of product malfunctions:
Design defects
Manufacturing defects
Marketing defects
How to Avoid/Minimize Exposure:
Incorporate
Indemnification
Insurance
Landmines in the Sales Process
When does salesmanship result in
potential commercial liability?
When statements made during the
course of a commercial transaction are
affirmations rising to the level of express
warranties as opposed to being merely
statements of opinion
Puffing Versus Material Terms: Not
Just Blowing Smoke
The term "puffing" is frequently used to denote
exaggerations reasonably to be expected of a seller
to the degree of quality of its product, the truth or
falsity of which cannot be precisely determined.
General Rule: Puffing is okay!
It is not illegal to make claims about your product or
your competitor's product.
Examples: Utilizing the words: best, perfect, prime,
exceptional, a bargain, original, comparable in
quality, and wonderful
Material Terms (Not Puffing):
Verifiable claims must be accurate and substantiated.
Claims that are false or misleading can result in a
lawsuit
When is a statement innocent puffing or an
expression of a material term or warranty?
Can inadvertently create express warranties (even
if not intended)
Express warranties are created by affirmation,
promise, description and sample that becomes
part of the basis of the underlying transaction
Landmines In Contracts and
Commercial Forms
Whose Terms Control the Transaction?
Yes, the small print on the back of a form
means something and can be enforceable
UCC “Battle of the Forms”
How to Avoid Such Landmines
Read the document!
Question or change terms
Don’t sign or otherwise accept
Landmines Arising From
Another’s Bankruptcy
“Bankruptcy laws help people who can
no longer pay their creditors get a fresh
start – by liquidating assets to pay their
debts or by creating a repayment plan.
Bankruptcy laws also protect troubled
business creditors through
reorganization or liquidation.”
(from the Administrative Office of the U.S.
Bankruptcy Courts)
Bankruptcy Preference Claims:
Trustee will seek to recover payments by
Debtor on antecedent debt that are made
within 90 days prior to the date of bankruptcy
Trustee will often send a demand letter
Adversary proceeding in Court
Fraudulent Transfer
Goal: DON’T PANIC. Most preference claims
settle
Defenses to Preference Claims
New Value
Ordinary Course of Business
Consistent with prior payment history and
terms
Industry practices
Venue
Small Claims
Landmines in the Office
Harrassment and Discrimination
Wage and Hour Issues
The 24/7 office
Employee or Independent Contractor
Cell phone/texting
E-mail use (also, who owns them)
Record retention
Confidentiality/Trade Secrets
Not only yours, but those of your principals and
customers
It’s a dangerous (business) world out
there. . .
Watch your step and BE CAREFUL!
If questions arise, consult an
attorney.