Twin Cities Business Litigation Blog : Minneapolis Business Litigation Lawyer & Attorney : Gavin P. Craig Law Firm : St. Paul, Twin Cities, Minnesota MN

How many partners believe that it is a crime to steal from the partnership? Almost all of them I would guess. In a very unusual case reported by The Unincorporated Business Professor Blog, a partner was charged with larceny of partnership property. The court reasoned, using Massachusetts law, that since a partner is the co-owner of the partnership property, the taking can't be larceny.

The reasoning in this ruling is logical, but also contrary to the normal and usual understanding of the character of property belonging to a partnership. The report specifies that Massachusetts uses the UPA and not the RUPA. The ruling doesn't mention what civil responsibility the bad partners might be subjected to, and at a minimum the bad partner violated his fiduciary duty to the other partners and the partnership.

Do partners normally believe that the "theft" of the assets from the partnership would be a crime? Or, do partners believe the opposite? Clearly this is another good reason to avoid partnerships, at least in Massachusetts. If you take this decision to a logical conclusion, joint ventures are a form of partnership. When two corporates combine for a joint venture, can one take all the joint venture property without criminal sanction? It would appear so.
 

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Several legal actions have been started in California challenging the legality of Prop. 8, recently enacted by the electorate. The argument is simple, and hard to refute. Can the majority enact law (change the state constitution) to discriminate against a minority group?

I guess the arguments in favor of Prop. 8 is that the majority can enact laws to discriminate, (not a very persuasive argument) or, that Prop. 8 changed the constitution to allow discrimination, so it is valid. I guess that another way to characterize the argument is: does the majority have the right to enact laws (or amend the constitution) to add exceptions to the equal protection clause. The other unpersuasive argument I have heard is that the majority has spoken and therefore the majority rules. You only need to look back in our country's history to see that this is neither a sound legal argument, nor good public policy.

The last argument I can think of is that this is not really discrimination against a minority, because the effected group is not a minority in the same sense as a race based minority. (Not a protected group.)

I am not aware of any case that provides that the electorate can do this, but this is going to be interesting no matter what. Several years ago when a federal judge ruled that including the term "under God" in the pledge of alliance when recited in a public schools was unconstitutional, I received a few e-mails from people asking me to sign a petition to the court asking the court to over rule the decision. (I have no idea why anyone thought I would send a petition to a court.) When I pointed out that any judge that gave any notice to a petition or any input from the electorate in deciding a case does not deserve to be a judge, the requests stopped.

It will be interesting to see how the California courts handle these cases. Eventually the California Supreme Court will have to decide the issues. In the long term I expect that the court or the electorate will overturn Prop. 8. While I have no talent to foresee the future, I think it is a safe bet that Prop. 8 will not be the law in California 5 years from now.
 

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Jurisdiction is one of those areas of the law that is frequently litigated, not understood by the clients, and fun for the lawyers. What happens when Company A makes a one time sale of its products to a single buyer in Minnesota. When a dispute arises, does a Minnesota court have jurisdiction over the out- of-state seller?

We have two new cases decided by the US District Court in Minnesota, which arguably come to opposite conclusions. I want to point out that both of these decision are very well reasoned.

The first case is Pope v. GMBH. The case involves a single sale into Minnesota, a repair agreement that was performed in Germany, and an order for parts. That was it. The seller had no employees or sales offices in Minnesota, no repair facilities in the states, and all work and repairs were done elsewhere. The primary question before the court was: did the seller intentionally avail itself of the privilege of doing business in Minnesota; and, could the defendant reasonably anticipate being haled into Minnesota courts from these contacts with the state. The court went through the minimum contacts analysis, and determined that yes, the buyer had established the minimum contacts to afford Minnesota courts jurisdiction over a dispute relating to the sale.

The second case, Bellisio Foods v. Prodo Pak Corp, came to the opposite conclusion and found that the defendant had not established the minimum contacts. The facts of the Bellisio case are a little different. Again we have as single sale into Minnesota. Again there is a dispute. Apparently in the Bellisio case the seller entered into a contract without knowing where the equipment was to be delivered. In other words the court found that the buyer had never expressly advised the seller where the equipment was to be delivered, leaving the seller with the choice of breaching the contract or delivering into Minnesota. While it seems odd that a seller would contract for a sale without knowing where the products were to be delivered, that is exactly what happened. The court found that leaving the seller with the choice of breach or delivery into the state was not the same as a seller intentionally availing itself of the privilege of doing business in Minnesota.

Minnesota has been quite open to finding jurisdiction over out-of-state parties in the last decade. I find it doubtful that Bellisio's management even thought about the jurisdiction issue when they learned of the delivery site. The court did not mention any objections from Bellisio.

These are fun issues for lawyers, and no so good for clients because they are expensive to fight. What was the advantage to Minnesota law in the Bellisio case? Prodio was incorporated in Delaware and located in New Jersey. Is there a significant difference in the law or perhaps a statute of limitations?

In the Pope case it is more clear cut. No one wants to go to a foreign country to litigate a contract dispute. In addition to the costs, US companies are generally unfamiliar with the laws of foreign jurisdictions.

In any case these are two cases the raise interesting issues and both could have been decided a different way, depending on how you interpret the facts and apply some of the legal factors important to establishing jurisdiction.

 

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I have been very busy answering complaints, drafting complaints and preparing discovery. It is sad when life gets in the way of Blogging. On the positive side, life is interesting and I am working with some very interesting legal and procedural issues. More later!
 

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I spent as fair part of my career as an in-house corporate counsel for several large corporations. I don't regret that experience at all, and I watched as corporate executives made many (sometimes costly) errors in judgment despite counsel to do something different.

But when the need for outside counsel arose (usually to defend a lawsuit, but sometimes to get specialized advice about certain areas of the law) the business almost always hired a major law firm. Why? Larger law firms are expensive, and some have a tendency to load up cases with lawyers. (Assigning multiple lawyers to a case - thereby giving all the lawyers a case where they can charge their time. )

I once called a large (I wont mention the name) firm in Washington DC to ask if they had anyone in the firm that could handle a specialized international law question. I talked to a senior partner and he set up a telephone conference with some other senior people at the firm so I could ask them about their capabilities. We had a telephone conference that lasted about 45 minutes where I asked a number of questions.

We had not even made the decision about who to hire as counsel when, within a week, they sent me a bill for $3,500.00 for the telephone call. Their theory must have been that my company should pay for the time they took to convenience me that they could handle the matter I inquired about. I told them what they could do with their invoice, but the larger lesson is that large firms need to generate fees to stay alive. So they charge everything - regardless of how inappropriate it is. I probably don't even need to mention that we elected to give the work to another (smaller) firm.

Does the corporate client get more for their money? Do they get a better result that is worth the extra money? I truly doubt it. That is not to say that larger firms always overcharge or that teams of lawyers are never appropriate. There are some issues where, because of the complexity, there is a need to get several lawyers involved, or the resources of large firms are sometimes needed.

When I set up my practice I was able to handle both large and small cases. When necessary I teamed up with other lawyers. I enjoy cases where the opposing party hires a large law firm, because they generate lots of motions and bill for every minute. The opposing party sometimes gets real sticker shock when the first legal bills arrive. I try to wait until I am sure that the other party has received bills from the law firm before I will suggest settlement discussions.

The point of this post is not that all larger law firms are bad, but in my experience they are not a bargain for the corporate client either. I once saw a $6,000,000 problem resolved by another large DC firm and the legal bills were - yes, you guessed it - a little over $6,000,000.

I handle a lot of business and commercial disputes. Usually the client is a smaller firm or an individual. I think that I bill fairly for the work I do, and I don't need to feed a large overhead. Business owners should think about the cost of legal services and at least investigate other possibilities. My recommendation - interview different firms or lawyers and ask a lot of questions. It rarely pays to get the most expensive legal services when the matter does not justify the expense. It never hurts to ask a law firm how they bill and what can the client expect for the cost! And, it can be costly to react and not ask! It is also costly to assume that the larger the firm is better at handling the matter at hand. Big does not equate to better.
 

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