Corporate & Business Archives

TRUE DEADLOCK: A LESSON IN DODGING BULLETS

Deadlock. Impasse. Stalemate. There are few words more dreaded to a corporate director (except maybe "SEC investigation"). What to do when the power brokers in a company just can't agree is a problem that plagues business planning experts and litigators alike. Spoiler alert: there are ways to dodge the bullet of corporate deadlock by way of savvy business planning. But what happens when directors are already at the point of no return?

NOT-FOR-PROFIT TO "POT-FOR-PROFIT" - IMPORTANT CHANGES IN MASSACHUSETTS' LEGAL CANNABIS INDUSTRY

When the Commonwealth of Massachusetts first established the framework for its legal marijuana industry, Massachusetts law required dispensaries to form and operate as nonprofit corporations. This mandate forced founders and angel investors alike to implement overly complex corporate structures to legally stream revenue out of the nonprofit corporation to investor controlled entities to make investment in this high-risk industry palatable. A common example included the creation of for-profit management companies providing management and consulting services to the dispensary for a price, controlled by the very same parties providing seed monies to the nonprofit dispensary. Also, commonplace were investor-owned real estate holding companies which would lease space to the nonprofit dispensary, in turn generating reliable rental income for investors as an alternative means to see a return on their investment. Frequently, these contractual arrangements were used in tandem. The need for these complex corporate relationships, however, is obviated by a recent change in Massachusetts law.

Think "GREEN" ALTERNATIVES IN A "GREEN" INDUSTRY

Recent studies on the electrical usage of cannabis cultivations have confirmed what many in the industry have known first hand for quite some time - indoor marijuana grows use substantial amounts of electricity. While the advent of LED grow lighting has helped reduce costs for cultivators willing to deviate from the historical norms of using traditional 1,000 Watt grow lamps, the industry continues to drastically outpace other industries in usage, in part, because lighting is only one contributing factor to a cultivation's electrical bill. The constant humming of fans deployed to balance heat, and sizable HVAC systems needed to disburse moisture and mitigate odor, are also primary contributors.

Mechanics' Liens: A Complex but Powerful Remedy

For a contractor, subcontractor or supplier who has not been properly paid, few remedies match the power of the mechanics' lien. A properly-recorded mechanics' lien allows a party to file an action in state court against the subject property, and to foreclose and force the sale of that property to satisfy the lien amount. In fact, the mechanics' lienor typically has priority over all other creditors except those with superordinate mortgages or liens. Accordingly, a property owner will typically secure a bond for the amount of a properly recorded mechanics' lien, with the lien transferring from the property to the bond. This gives the lienor a source of cash for the satisfaction of the unpaid amount.

Regulatory Agency Removes Roadblocks to Consumer Lawsuits Against Financial Institutions

The Consumer Financial Protection Bureau ("CFPB") has recently banned most types of mandatory arbitration clauses that require credit card and bank customers to use an arbitrator when they have a dispute with a financial institution. The new rule is intended, in part, to deter wrongdoing by financial institutions by allowing customers to file class action lawsuits against them.

WHAT IS DISGORGEMENT'S FUTURE AS A REMEDY FOR S.E.C. VIOLATIONS?

The Securities and Exchange Commission (S.E.C.) has authority to investigate violations of federal securities laws and commence enforcement actions if its investigations uncover evidence of wrongdoing. Initially, the S.E.C.'s statutory authority was limited to seeking an injunction barring any future violations. Beginning in the 1970's, however, courts began granting the S.E.C.'s requests for disgorgement in enforcement proceedings. Disgorgement is a remedy which requires defendants to repay any unlawful monetary gains. Although Congress has since authorized the S.E.C. to seek monetary civil penalties, the S.E.C. has continued to seek disgorgement.

Hashtag Your Ads: FTC Warns Instagram Influencers

Businesses know that their young customers aren't reading newspapers, listening to the radio, or even watching cable television anymore. Instead, they're consuming information and content through their smartphones and the Internet, and streaming their favorite shows from providers like Netflix and Hulu. Companies are adapting, creating Instagram profiles and Snapchat accounts that enable them to reach new age groups. Some enlist social media "influencers," particularly on Instagram, to hawk their products. Those influencers run the gamut from big-time athletes and actors to small-time reality television stars. But whatever the reason for their star power, influencers offer businesses the allure of seemingly organic exposure: candid moments of a household name using a company's perfume or herbal tea, shared with thousands or millions of followers.

RI General Assembly Seeks to Restrict Employers in Their Hiring and Pay Practices

The Rhode Island General Assembly is poised to consider a new law that would prohibit prospective employers from asking candidates about their wage and salary history before making an offer of employment to them. The bill seeks to level the playing field between potential employees and employers so that employees would be free to negotiate and agree upon a wage or salary without their prior compensation setting an arbitrarily low basis for their new salary. On the flip side, however, the bill expressly permits potential employees to disclose their wage and salary history during negotiations. Therefore, if employees believe that their prior wage or salary will help them in negotiations, they are free to disclose that information to the prospective employer.

Wedding "Disasters": Are Negative Online Reviews Defamation?

Businesses depend on their good reputation, especially in the wedding industry. If customers have a bad experience, it's unlikely that they can simply switch to a different wedding vendor. Instead, customers take to online review platforms like Yelp to express their dissatisfaction. Scathing reviews can be especially damaging to wedding vendors, who often only work with customers once, and rely on their positive reviews to drum up future business.

Statute of Limitations versus Contractual Time Periods -- An Important Difference

In a recent Rhode Island Supreme Court decision, OSJ of Providence, LLC v. Aly T. Diene, No. 2016-14-A, the court determined that the expiration of a guaranty in a contract did not operate to shorten the applicable statute of limitations to recover for breach of that guaranty. The defendant was the corporate officer of a restaurant that entered into a five-year lease agreement with the plaintiff. As part of the lease, the defendant executed a personal guaranty that expired on the last day of the twelfth full month following the initial commencement of rent obligations.

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