Frequently Asked Questions About Business Law in California
Consult with an experienced Los Angeles legal team
Below, we provide answers to some of the business law questions frequently asked of our California attorneys:
- A customer owes my company a lot of money for products they purchased from us, but I am concerned that they don’t have the money to pay. What do we do?
- Does a company have any recourse if an employee leaves and brings her clients to a competitor? Or recruits other employees to join her at the new company?
- What can I do if a partner seeks to disassociate from or dissolve a partnership on terms that are unfair to me?
- If my business is sued, can I recover the attorneys’ fees I have to pay?
There are a number of issues you need to consider in a situation like this. First, how good are your claims? Is it clear from the contract or other circumstances that you are entitled to be paid? Does the customer have any reasons why they shouldn’t pay all or some of your claim? Finally, is there enough money at stake to pursue it, or should it be written off as a business cost?
Assuming it is worth it for you to pursue the claim, the next issue is whether the customer either has the ability to pay now, or can be expected to pay in the future. This can usually be determined reasonably well through an asset search, much of which can be done by you or an attorney through online resources. If not, we use a professional investigator with greater resources to get a true picture of the customer’s assets, including those which may be held through related companies or, in some cases, are being hidden through various means.
Finally, is the money at stake worth the cost of pursuing litigation, even if it is filed primarily to obtain a judgment against the customer which can be used to collect in the future? Because we have extensive experience in these kinds of matters, we can help you answer that and other related questions.
Although California and many other states protect an employee’s right to join or start a competing business, employers have rights too. State and federal law prohibit the misappropriation of company trade secrets, which include proprietary formulas, processes, methods and, in some cases, customer lists. Moreover, employees owe duties of loyalty to their employers. High-level executives and Board members owe fiduciary duties to the company. So if the defecting employee or officer was “feathering her nest” — communicating with the competitor, recruiting other employees, talking to clients about moving to the new company — while still employed at the old company, the aggrieved company may be entitled to damages and/or injunctive relief. For more information, see https://www.steinbrecherspan.com/blog/what-to-do-when-an-employee-becomes-a-competitor/
Partnership rights are generally governed by the terms of a partnership agreement and/or the Uniform Partnership Act. However, disputes may arise. Any time a partner is disassociated, he or she must be compensated for his or her share of the partnership, less any damages caused by the disassociation if it was wrongful. Any time a partnership is dissolved, the partners may have equal rights in aiding up the partnership, in which case the only remedy for disputes may be for a partner to ask for court supervision of the process. In almost all circumstances, valuation is key. Valuation is governed by various statutory and common law doctrines that must be aggressively and fairly applied to the specific facts of your case, in some cases with the assistance of one of the recognized expert witnesses with whom we have relationships.
Generally, parties to a lawsuit must pay their own attorneys’ fees. Sometimes, a statute may allow the prevailing party to recover its fees from the losing party. The parties may also have a contract that allows the prevailing party to recover fees in certain circumstances. The existence of a statutory or contractual right to fees can have a significant impact on the parties’ decisions to file or defend a case. On the one hand, a potential plaintiff who believes he has a valid claim may be emboldened to sue. On the other hand, the prospect of having to pay the defendant’s fees and costs may deter a plaintiff from filing a weak case. Similarly, for the defendant, the risk of paying plaintiff’s fees may lead to a more generous settlement offer.