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Cleveland Business & Commercial Law Blog

When cooperation turns to litigation, we can help

One of the advantages that commercial transactions have at the outset is the convergence of interests between the business partners: everybody is interested in making money. But sometimes after the ink is dry on the contract what began as a case of great expectations can break down into something that you did not anticipate or want, and you can find yourself seeking a way to salvage the situation or even to get out of it.

Simply put, there are businesses in Ohio, in other states and especially in foreign countries that see business relationships as zero-sum transactions. What do you do when the company you engaged to make your products in another country starts making and selling knock-offs of its own? What is your remedy when the distributor to whom you assigned exclusive territorial rights in one state or country starts selling outside its territory? How should you respond when it becomes apparent that your contract partner is stealing your intellectual property? 

An overview of non-compete agreements in Ohio

The saying, "Knowledge is power" is one that many businesses in this state understand even if they never utter those words. In the present-day information era, often what is most important to a company's profitability or even its survival consists of data, processes, customer lists, trade secrets and other intangibles that cannot be physically removed from the employer's premises but which can be taken away in the experience and knowledge of departing employees. The loss of key information to a competitor can spell disaster for a business if a former employee divulges it without any concern for the consequences to his former employer or to himself.

For many years, businesses that need to protect sensitive information and to prevent the loss of customers to competing companies have relied on non-compete agreements to protect them. The purpose of these agreements, which an employee enters into with his employer as a condition of initial or continued employment, is to prohibit that employee from revealing proprietary or confidential information of his former company to his new employer.

Contract disputes in Ohio

If two individuals or organizations enter into a written agreement, it is considered to be a contract. If the one of the parties does not meet their obligations as defined by the agreements, they are considered to be in breach of contract. When this occurs, the dispute can either be resolved through mediation, arbitration or through the court system, and the court system is the most common way of handling disputes.

There are a few ways that a party may be in breach of contract. These can include failing to perform, failing to perform in a timely manner or failing to perform in the way prescribed by the contract. Breaches may be described as material or immaterial depending on how important that portion of a contract was.

Travel clubs accused of violating consumer protection laws

Several interrelated companies have been accused of violating Ohio's consumer protection laws. According to a lawsuit that was filed by the state's Attorney General, the group of companies used deceptive business practices when they sold travel club memberships to their customers. Furthermore, it was suggested that when customers tried to cancel their memberships, the companies did not honor their cancellation policies.

The lawsuit states that the companies mailed postcards to consumers offering A2Z travel club memberships. The postcards claimed that the recipients might receive prizes like airline tickets and vacation packages. However, the postcards did not reveal that listening to a two-hour sales presentation was required to qualify for the prizes.

Avoiding small business legal mistakes in Ohio

Many small business owners make errors that could potentially lead to the failure of their businesses and significant personal liability for business debts. It is important for small business owners to be aware of the common errors they might make in order to take steps to avoid them.

When a business has employees, the business should make sure they have human resource materials that outline the employees' responsibilities, work practices and expectations. Some businesses fail after employees bring lawsuits, and having human resource materials can help prevent such actions if an employee is terminated. Businesses should also consider blocking employee access to certain websites to prevent them from the personal use of any computers at work. If they have sensitive customer information on their work computers, they should have safeguards in place to protect the information from hackers.

Qualifying for a small business loan

Some small companies in Ohio may be able to qualify for Certified Development Company/504 loans from the U.S. Small Business Administration as long as they meet certain requirements. This type of debt financing may be used to expand or improve a company's operations through the purchase of real estate other than rental properties, equipment or another approved business asset.

To qualify for a CDC/504 loan, the SBA requires businesses to operate as for-profit companies and is doing business in the United States. Though a small business owner must be able to show that they will have the ability to repay the loan using their company's projected cash flow, the business owner must also be able to demonstrate that the company has had an average annual net income after taxes of less than $5 million for the past two years.

Pitfalls to avoid with online business opportunities

Starting an Internet business is something that many Ohio residents have considered, and tales of billionaires barely old enough to shave can be compelling. However, the rules of commerce do not magically disappear because transactions are completed online, and virtual businesses must pay their bills and win customers just like their brick-and-mortar counterparts. Any individual thinking about paying for a business opportunity would be wise to remember the principle of caveat emptor, but this is especially true of online ventures.

While there are no doubt solid Internet business opportunities on the market, many promise far more than they can ever deliver. These less reputable opportunities attract interest by offering the ability to work from home and avoid much of the hard work involved in building a traditional business, and they often cite the Internet as a medium that makes success all but assured. However, sure things do not exist in the real world, and entrepreneurs would be wise to follow the accepted rules of business planning.

What is the CAN-Spam Act?

Ohio businesses that use email for advertising or to promote commercial services or products need to be aware of the CAN-Spam Act as violations of the act can result in fines of $16,000 for each email in violation of it. The act does not prohibit the commercial use of emails, but it does prohibit such emails from being written and sent in certain ways.

The main requirements of the CAN-Spam Act are easy to adhere to, so compliance is not difficult. Businesses are forbidden from using deceptive or misleading information in the "from" and "to" lines of the emails, and the person or business sending the email must be clearly identified. Similarly, subject lines of emails cannot be deceptive and must reflect the email's content.

Shareholder lawsuit against Blackberry dismissed

Ohio residents may be interested to learn that a shareholder lawsuit filed against Blackberry was recently dismissed. The lawsuit involved allegations that the company had artificially inflated its stock price by misleading its shareholders about the popularity of the Blackberry 10, which was launched in January 2013.

Designed to help recapture market share the company had lost with the surging popularity of Apple's iPhone and Samsung's Google-powered Android devices, the Blackberry 10 failed to sell as projected. Although the phone received positive reviews, sales were low, leading to a $930 million writedown for unsold inventory that caused Blackberry's shares to tumble by one-sixth in value in a single day.

Errors for small business owners to be cautious of

Ohio individuals who are considering starting a small business should try to avoid a few legal pitfalls. One is failing to make sure that there is not already a trademark on the name they have in mind for a business or product, as this can lead to a lawsuit.

Another error is failing to separate business and personal matters. Two things need to be done to ensure this separation. One is creating the business as a separate legal entity. Consultants, independent contractors and other one-person businesses with no storefront may think that this is not necessary, but in 2013, more than 40 percent of small businesses were the target of a threatened or actual civil lawsuit. Even if a business is successfully sued, if it is a separate legal entity, the owner's personal assets will not be vulnerable.

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