Articles Posted in BUSINESS LAW

As an Atlanta, Georgia commercial dispute attorney, I have know Georgia defamation lawsuits are commonly reported in the media involving movie stars, professional athletes and other celebrities who claim that false statements have been made about them. But defamation lawsuits can also blindside Georgia business owners who may be unaware of how communications made by their employees can be interpreted under the law. Even false statements innocently made by employees about competitors or other third parties put businesses at risk. Statements made verbally in a business meeting or communicated via written documents, such as letters, advertising, press releases and emails, can be a source for damaging lawsuits. As a result, it is imperative that all communications, especially those intended for wide distribution, be checked for fairness and accuracy.

Georgia law outlines the four main elements of a defamation claim. The first is the false statement, which may be spoken (known as “slander”) or written (known as “libel”). Secondly, the statement must be spoken or communicated in writing to a third party. Thirdly, the defendant must be shown to have acted with negligence or, in some cases, malice. Lastly, the law requires that damage to the plaintiff be proven, unless the suit is classified as “per se” defamation. “Per se” defamation is based on false statements that are so egregious that they are automatically presumed to be harmful. Examples under which Georgia law considers a statement to be defamatory “per se” include statements that charge the plaintiff with a crime punishable under the law, or statements intended to damage the office or profession of the plaintiff.

The personnel departments of companies must be extremely careful about defamation concerning former employees. For this reason, it is critical to have an experienced North Georgia Business Lawyer review the policies and procedures concerning employee hiring and termination. The company’s communication policy should be reviewed as well, with the prevention of defamation lawsuits in mind. Additionally, it may be wise to consider insurance coverage in the event that any defamation claims are filed against the company.
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Over the years I have handled many construction claims in my Atlanta, Georgia Construction Litigation Law Firm. Many intricacies to construction litigation are not understood by attorneys that do not normally litigate or arbitrate these types of cases. Two of the key concerns of plaintiffs in any Georgia construction dispute are to determine who is liable for Georgia commercial or residential construction defects, and who will pay for the damages that can be recovered. With possibly dozens of workers who touched the worksite, including architects, builders, contractors and independent sub-contractors, it can be difficult to sort out what exactly caused the issue and who the responsible party is.

Many people would automatically assume that the officers and employees of the construction company, when incorporated, would be protected from liability. But under Georgia law, there are ways to assign responsibility to construction company representatives, even when the company is incorporated. Having the construction litigation experience to address these issues effectively is critical. As a result, retaining legal counsel from an experienced Georgia construction litigation and arbitration lawyer is necessary to obtain a favorable outcome.

Besides providing representation for property owners with claims, construction litigation and arbitration attorneys can help construction companies and contractors in Georgia assess risk and organize defenses against potential claims. In today’s tough economic climate, builders and construction companies cannot afford to lose money on lawsuits that expend precious resources. Retaining the best possible Atlanta, Georgia construction legal counsel will save time and money for defendants.
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The focus of this Blog Article will be Self-Dealing and Breach of Fiduciary Duties in this scenario. However, it is important to note that that Self-Dealing is just one way a breach of fiduciary duty can occur.

There are numerous situations where breach of fiduciary duties can arise. There are also many types of fiduciary duties, which can arise. Some of the most commonly breached fiduciary duties are as follows:

• Self Dealing

• Misappropriation of Funds

• Neglect of Fiduciary Duty

• Usurping Business Opportunities for Personal Gain

• Abuse of Power

• Shareholder Oppression

• Shareholder Squeeze Out

• Shareholder Freeze Out

• Conversion of Funds

• Failure to Act When Fiduciary Duty Imposes Such A Requirement

There are also a number of relationships that give rise to fiduciary duties. Some are as follows:

• Directors and Officers in Corporations

• Partners in Business

• Real Estate Brokers

• Real Estate Agents

• Stockholders/Shareholders

• Financial Advisors

• Financial Brokers

• Executors of Estates

• Trustees of Trusts

• Administrators of Estates

• Personal Representatives of Estates

• Guardianships of Wards

• Conservatorshops of Wards

• Powers of Attorney

• Health Care Situations

These different types of breaches of fiduciary duties will be addressed throughout this Atlanta Business Lawyer Blog over the course of time. However, for the purpose of this Blog Article, we will concentrate on one of the most frequently breached fiduciary duties, the classic case of “Self Dealing“.

Self-dealing is often occurs between officers and directors of Georgia corporations have a fiduciary duty of care and loyalty to the shareholders of those organizations. As such, under Georgia law they are obligated to act in good faith and in the corporation’s best interests. When officers or directors put their own personal interests above those of the corporation and shareholders (i.e. by using corporate assets for their own benefit), this is considered self-dealing. Issues such as self-dealing are a growing issue and occurrence in corporations. The Atlanta Fiduciary Law Attorneys in my Atlanta, Georgia Business Firm have represented numerous clients who have made with claims concerning self-dealing against the “higher-ups” and/or other “shareholders” in the corporation.

When this type of allegation is brought forward, the plaintiff must provide proof that the officer or director derived personal benefit from the transaction. If this is shown, then the officer or director must defend their actions by demonstrating that the transaction was for the benefit of the Georgia Corporation, and any perceived self-dealing was just happenstance and circumstantial. Even when the director or officer does prove that the action was favorable to the corporation, and ultimately the shareholders, it still may be considered a breach of fiduciary duty.

Self-dealing and other breaches of fiduciary duty can financially destroy a corporation. Thus, it is essential to have an operating agreement that clearly defines the obligations of all members and interested parties to a corporation. An experienced Atlanta, Georgia Fiduciary Law Attorney can put a stop to the self-dealing and adequately assist in imposing remedies in equity and at law upon the self-dealing party. Nevertheless, to dispense with arguments that self-dealing did or did not occur; it is wise to have an Georgia operating agreement that defines the responsibilities among members of the company, both for shareholders, directors and officers, and employees. A comprehensive operating agreement should be part of the beginning and day to day operation of any corporation.
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As an Atlanta, Georgia Business Litigation Attorney, I have seen a change in the way business is conducted since the economy started to decline a few years ago. The change is most evident in heavily populated urban areas like Atlanta, but can also be seen across Georgia. The level of trepidation is palpable and Georgia business deals are heavily scrutinized. This means your Georgia business lawyer should conduct intense due diligence prior to letting their client enter into any Georgia business agreement.

The shift can be attributed to the struggle that most businesses are engaged in due to the poor global economic situation. The economic climate has influenced the business community to become more ruthless. Many companies are enforcing contractual agreements strictly and not allowing for any leeway in interpretation or timing. The ability of a customer to pick up the phone, and with a short phone call, gain one-time forgiveness for a particular contractual term, like a payment deadline, is limited. Most companies are tightening their belts and putting profits before customer service and long-standing relationships.

Unfortunately, the state of the economy has encouraged a more serious and illegal type of behavior. Some business people are resorting to fraudulent activities in their business dealings. These activities include, but are not limited to, false advertising, product misrepresentation, and substandard quality resulting in known product defects. As the incidence of business failure increases, more business are resorting to these desperate measures. Because of this, Georgia business dealings between close friends, relatives, and long-time business partners are being scrutinized more closely.

The overall result is a climate of general apprehension. When faced with any contractual issue, it is imperative to seek the legal counsel of a competent Atlanta, Georgia Business Litigation Law Firm. An experienced Georgia business litigation attorney can assist in protecting you during contract negotiations when setting up a business deal and help you later on if disputes arise. As a consumer being represented by an Atlanta business lawyer will let you know your rights up front. As a business owner working with an Atlanta business attorney will give you knowledge of your level of risk and responsibility in any business arrangement.
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Over the past few years in my Atlanta, Georgia business law firm, I have found that causes of action for breach of contract are much more prevalent today than in recent history. As an Atlanta Business Litigation Attorney, I have seen this trend steadily increase and attribute it to both the current economic situation and to the fact that we live in a highly transactional society.

Contracts can be written or oral and others are merely implied, but they can all be valid contracts under Georgia law. The number of businesses that provide services to each of us on a business or personal level is staggering – lending and investment institutions, Internet service providers, hospitals, lawn care services, etc. We use contracts when we set up a Georgia business entity, buy or lease office space or hire employees. The list is endless. Thus, disputes and litigation of Georgia breach of contract cases is endless as well.

Business contracts are used to substantiate and clarify the commitment to an agreement between at least two parties or more. With the shear volume of contracts that we come in contact with, it is not surprising that legal claims for breach of contract are common. A breach of contract occurs when the promise made per a contract is not fulfilled. For example, a breach of contract exists when the service or product specified in the contract is not delivered, if payment for the service or product is not made in a timely fashion, or if there is a failure to complete or start the work specified in a contract.

When faced with a breach of contract, it is best to seek the counsel of an experienced Georgia business attorney who handles breach of contract disputes. An attorney will analyze the situation and pursue the most appropriate course of action. Once a breach occurs, the non-breaching party is usually freed from the contractual obligation. Georgia courts typically resolve these cases by awarding damages that make the non-breaching party whole, as if they had never entered into the contract. When money awarded by the court does not fully compensate for the breach, the breaching party may be ordered to fulfill the terms of the agreement anyway. If the breaching party is found to be intentionally acting in bad faith, the court may award attorney’s fees as well as punitive damages to the harmed party.
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While each state has its own laws regarding operating agreements, Georgia business law does not specifically require LLCs to have a Georgia operating agreement. However, it is wise to draft one, since the operating agreement is arguably the one document that provides significant legal protection to members of any partnership or corporation. In my Atlanta, Georgia Business Law firm, I have seen many clients come to me with serious issues stemming from a failure to draft this agreement, especially in family run businesses. Neglecting to draft this document before or upon creating a partnership or corporation often results in costly and time-consuming litigation.

The Georgia operating agreement allows you to define the LLC’s financial structure and working relationships between members. Key items to be addressed and defined by the agreement are percent ownership of each member, duties and rights of each member, voting power of the members, allocation of profits and losses, the management model and rules for meetings and voting. Additionally, the operating agreement will include provisions that outline not only what will occur if the business is sold, but also what will happen if a member dies, becomes incapable of performing the stated duties, or wants to sell their share of the business.

Although an operating agreement in Georgia can be oral (for multi-party LLCs only), it is always best to prepare it as a formal written document. In Georgia, the preparation of a written operating agreement should not be overlooked for several important reasons. It will help limit misunderstandings between members, ensure that the business is run by the rules established by the owners (not by the default rules of Georgia statute) and it will protect the company’s limited liability status (by preventing “piercing the corporate veil“). Protecting the company’s limited liability status is especially important if one person owns the LLC. With a properly drafted operating agreement, the one-person LLC can easily defend its status as an LLC in court proceedings, and the owner can avoid personal liability issues.
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The majority of the businesses in the United States are close corporations. Georgia close corporations are classified as having a maximum of fifty shareholders, no publicly traded stock and active management by shareholders. Because close corporations usually employ the shareholders, these companies generally have a more relaxed management style. The downside is that this management model puts the minority shareholders in a situation where they quickly can be faced with “squeeze out” or “freeze out” tactics, that typically result in termination of employment with the company.

Often times, income from employment is the most valuable stake that these minority shareholders have as shareholders. Shares held have no value on the open market. That, coupled with the fact that majority shareholders are unlikely to buy the minority’s shares at a fair price, leaves the minority shareholder with little or nothing upon being terminated. Georgia business law statutes provide protection for minority shareholders faced with this situation. Just as in ordinary corporations, all shareholders in close corporations have the right to inspect the documents pertaining to the company, including, but not limited to, bylaws, shareholder meeting minutes, documentation of actions taken outside of meetings and resolutions related to share classification. In the case of wrongdoing, documents discovered during inspection can provide the required evidence to file a lawsuit against the company.

Additionally, Georgia law states that the majority shareholders have a fiduciary duty to the minority, allowing for minority shareholders to sue for dissolution of the close corporation when these duties are not fulfilled. These suits can be filed if the majority shareholders have acted, are acting or are expected to act in an illegal, fraudulent, oppressive or unfair fashion toward the minority. Minority shareholders also can sue for fair valuation of their shares. Whatever the circumstance, it is critical to seek the counsel of an experienced Atlanta, Georgia Business litigation attorney to resolve shareholder complaints. Having a properly drafted operational agreement can prevent these types of disputes from developing, but if conflicts do arise, a qualified lawyer will ensure that all possible legal avenues are pursued to help the minority shareholder receive fair treatment and compensation under Georgia law.
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The Atlanta business lawyers at The Libby Law Firm have noticed that in these tough economic times when everyone is trying to save money, a lot of consumer offers seem to good to pass up. When we complete a purchase, sometimes we come to the realization that we have been mislead or a contract has been breached, and by this time it is often too late to return the product or we are left with what seems to be no recourse. So what can an ordinary consumer do when faced with a deceptive business practice? It is common to feel powerless, but fortunately Georgia has a law to help consumers fight back.

The law is called the Georgia Fair Business Practices Act and it protects Georgia consumers against many types of unfair and unscrupulous practices related to transactions made on personal, family and household products. The protection that this law gives to the consumer is broad, including, but not limited to, provisions on health spa and gym memberships, credit reports, insurance, telemarketing, multilevel marketing opportunities, “going out of business” sales and specific types of promotional activities, such as vacation prize offerings, contests and giveaways.

The Georgia act (O.C.G.A. Sections 10-1-390 et seq.) is enforced by the Governor’s Office of Consumer Affairs and specifically prohibits the following:

1) Misrepresenting who the actual manufacturer is of the good or service
2) Claiming that goods come from a geographical location, when they actually come from a different location
3) Representing used goods as new

4) Falsely stating the quality, grade or model of goods and services
5) Making false or misleading statements about a business or its product or service
6) Advertising goods or services with the intent of not honoring the advertising claim
7) Advertising goods or services without enough product on hand to satisfy consumer demand, except when the advertisement states that quantities are limited
8) Making untrue statements about sale prices

If you feel that you have purchased a product or service that is not living up to the claims stated by the seller, contact a qualified Atlanta, Georgia Business Attorney. Your attorney will work with you to recover damages and fight to stop the offending seller from continuing the unfair or deceptive practice.
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Imagine the scenario: you and your partner establish a new business entity in Atlanta and after some minor adjustments to the layout of the new office space, you are finally ready to move in and begin day-to-day operations. You quickly realize that your current office equipment is inadequate and outdated. Furniture and computer equipment is required. Because this is a new business venture, there is little cash available and it is decided that each one of you will buy some of the equipment for the office. You both pay for the equipment with personal funds. You buy the furniture at a cost of $12,500 and your partner buys computer equipment for $18,200. As time passes, you and your partner enthusiastically focus on generating business and the exact amount that each of you spent on the equipment is a fading memory.

Initially these expenditures do not seem to pose a problem. Yet without proper documentation, this seemingly innocent scenario can turn into a conflict that, even when business is good, may put a strain on your relationship with your partner. More serious legal consequences may arise if your business is sold or liquidated. Without adequate legal intervention, it may become a matter of “he said, she said” debt that is difficult to resolve.

The good news is that this situation can easily be avoided by property setting up Personal Guarantee Promissory Notes. These promissory notes should reflect the specifics of the business deal in order to ensure fair treatment for all involved, so using a boilerplate agreement is usually insufficient. Seeking the help of an experienced Atlanta, Georgia Business Attorney who will take into consideration the relevant facts specific to your business is critical to having your interests fully addressed and enforced.

Never go it alone. Protect your self and your business by implementing the proper legal instrument through a qualified business attorney. Your attorney will draft a Personal Guarantee Promissory Note that is specific to the unique circumstances and needs of your business and will ensure that your wishes, needs and desires are fully addressed and enforced.
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Atlanta business law firms that practice in the area of fraud litigation have seen a dramatic rise in the number of cases. The fraud lawyers at my firm believe the increase in the number of fraud cases is due to the troubled economic times that persons and businesses in the Atlanta, Georgia, area are experiencing. In this troubled economy, we believe otherwise honest people have turned to fraudulent activities to make ends meet.

In a well-known case, ReMax North Atlanta v. Clark, 244 Ga. App. 890 (2000), the Georgia Court of Appeals elaborated on the tort of fraud, which has five essential elements. They are as follows:

1. A false representation or omission of a material fact;

2. Scienter – or knowledge;

3. Intention to induce the party claiming fraud to act or refrain from acting;

4. Justifiable reliance; and,

5. Damages

Fraud can take place in many areas of business. Presently, our Atlanta fraud lawyers are seeing the largest number of fraud cases in the areas of real estate transactions, the construction and building of homes, and the accounting and managing of monies or assets.
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