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Clark v. Butoku Karate Sch., LLC, No. 326638 (Mich. App., 2016)

Statutes: MCL 450.4101, MCL 450.4305, MCL 450.4509

Plaintiff Joby Clark and Defendant were the sole members of a Michigan Limited Liability Company operating a karate school.  Clark was the subject of a rumor that he had a sexual relationship with an underage student.  The parties agreed that Clark would leave the business to prevent damage to the school.

business divorce attorneys medical practice
What is sufficient evidence of membership in a limited liability company? It is not uncommon that the intentions of the parties in forming a limited liability company are poorly documented and or non-existent.

The plaintiff in this case argued that documents that indicated his initial interest in the LLC were sufficient to establish his membership. These include emails in which he expressed his interest in participating in the LLC, the fact that he was included as a signatory in an early letter of intent with HUMC, the fact that he was initially included in an email group of members and the receipt of meeting notices.

Appellate Court Considers Evidence of LLC Membership in Ownership Dispute Among Critical Care Doctors

Limited Liability Company AttorneysProbably the most litigated issue in my practice involves the expulsion of a member of a limited liability company in response to some wrongful conduct or breach of the operating agreement. We represent majority owners when they are trying to remove a member and we represent the minority member who is fighting removal. Not all states permit removal or expulsion – known as involuntary dissociation – for misconduct and some recent decisions indicate that in the states that do, it may be harder than once thought.

Involuntary Dissocation of a Limited Liability Company Member

There was a belief, perhaps unreasonably so, that Courts were unwilling to keep people in business together when plainly the owners were no longer capable of maintaining a working relationship. The New Jersey Supreme Court, in the first decision by any state supreme court on the topic, held that the concept of “not reasonably practicable” to stay in business together means more than a personality conflict. It requires a structural inability to act, such as ongoing deadlock or significant wrongful conduct.

We counsel many owners of limited liability companies that the filing of a Certificate of Formation does note automatically protect the owners from person liabilities.  There are a number of business practices, often referred to as the “corporate formalities” that should be followed.

A case from Iowa’s Court of Appeals illustrates this principle, in which the court affirmed the finding of a trial court that the owners of a limited liability company were personally liabile for $235,000 owed to a supplier.  Keith Smith Co. v. Bushman, 873 N.W.2d 776(Table), 2015 WL 8364910(Table) (Iowa App., 2015).

The supplier claimed that the defendant was essentially a shell company with inadequate capitalization.  The trial court agreed and the appeals court affirmed.

Restrictive Covenant Attorney
Litigating with a former employee for violation of a restrictive covenant agreement becomes more complicated when the former employee was terminated without good cause.  And because we are an at-will employment economy, this becomes an issue more frequently than one might imagine.

As one author notes, it typically is not the underperformer who creates a problem for their former employer.  It’s the superstars, of course, that threaten to walk out the door not because they were fired but because they plan on taking a big chunk of business.

Include Poor Performance as Grounds for Termination

Trademark infringement defense lawyers
Defenses to a trademark infringement lawsuit may prevent the plaintiff from recovering any damages or receiving an injunction that prohibits a competing use.

The most common defenses to trademark infringement require the defendant to prove that:

  1. Invalid Mark. The registration for the trademark is invalid or that the mark is not distinctive or recognized by the public.

Trademark Infringement Attorney
A trademark is any work, image, sound, device or other identifying feature that tells the world the source of a product or service.  It may be a word like “Hagen Daz,” a logo such as the interlocking “C”s that identify Chanel products, or even the shape of Coca-Cola bottle.

Trademark litigation encompasses a broad range of “infringing” behaviors from the peddling of knockoff goods to diluting the value of a mark by using a similar name.  There are marks registered in the federal trademark office, marks registered in state trademark offices and common law marks that aren’t registered anywhere.  Trademarks are subject to both state and federal laws, and trademark lawsuits can be brought in both the state and federal courts.

Damages for Trademark Infringement are Calculated in Different Ways

Copyright Infringement Damages
The digital world that we live in requires a business owner to have some grasp of the damages available for copyright infringement.  There are a few reasons why this is so:

  • Copyright infringement is widespread, even though it is often unintentional or done without the knowledge or authorization of the business owner.  No matter, the business is still liable along with any individual who participated in the infringement.
  • Copyright infringement is misunderstood.  There is a general failure of people to understand what a copyrighted work is and what it means to copy.  Particularly damaging to a business owner may be the belief that crediting the author permits copying.  It doesn’t.

copyright infringement defense lawyer
The fair use doctrine is intended to limit the exclusive rights that copyright holders own.  It permits copying for a limited purpose and is a defense against copyright infringement.  Some examples of the uses that are considered fair use are criticism and parody.  The essential inquiry in a case involving fair use is whether the copying created a different “transformative” work.

The internet and digital media has made it very easy to copy copyright-protected content.  When you or someone in your company is making an unauthorized use of a picture or content in your marketing or advertising via online content, or making copies of video, letters or a competitor’s brochures, your business may be sued for copyright infringement and liable for the damages, including attorney fees.

Fair Use Doctrine is a Defense to Copyright Infringement

alternative dispute resolution attorneys
Mikhail Gorbachev and Ronald Reagain in Reykjavik neogitations

Ronald Reagan’s success in negotiating with Soviet Premier may have come from his clear vision of what he hoped to achieve in the process, and his understanding of what exactly was his best alternative to a negotiated settlement, the BATNA of the negotiation.

It is this vision of the results, inside and outside the negotiation, that results in successful outcomes.  We need to have a clear objective and vision of what we seek to achieve, while being guided by a clear understanding of both our own BATNA and and that of our counterpart.

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