Complaint Dismissed! You're Not a Lawyer!

Posted on September 19, 2008 by Gavin Craig

What to do about the non-lawyer representing the small corporation or the LLC? The corporation and the LLC are legally separate entities, and like any other person, must be represented in court by a licensed attorney. In Minnesota a non-lawyer can represent an LLC in Conciliation Court (small claims) and housing court. This makes sense as an exception to the rule.

In my experience there are two situations where non-lawyers try to represent clients.

The Threat from the non-lawyer! The pretend lawyer threatening action if the client doesn't do something - usually pay some money.

I once received a threatening call from a person representing herself as calling from the law department of a company trying collect a debt from a client. It became obvious during the conversation that this person was either 1. not an attorney, or 2. a very bad attorney. When I asked directly if she was an attorney she would not give me a straight answer. The woman was calling from Texas and I reported her to the Texas Bar Association for the unauthorized practice of law.

The Small Corporation or LLC Owner Representing the Company

The general rule is that the non lawyer can't represent a corporation or an LLC in court. Since the party to the proceedings is the company, the company can't be represented by other than a licensed attorney. So when the owner(s) try to represent the company, they immediately create a problem for themselves and their company. In a recent case the Kentucky Court of Appeals just dismissed the case when the case was initiated by a non-lawyer representing the corporation. The trial court judge told the plaintiff to get an attorney to continue - and it did. But the Court of Appeals said no! The filing of the complaint was the unauthorized practice of law and the complaint must be dismissed. So even getting a lawyer later did not save the company. This seems like an appropriate remedy.

The Kentucky case was an eviction action, and in some states a company is not required to have attorneys in these limited types of actions.

There is a lesson for all small businesses. Know the rules before you start a legal action. Talk to a lawyer!

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Oops! The Contract Doesn't Mean What it Says?

Posted on August 20, 2008 by Gavin Craig

The worst contracts I have ever seen were put together by parties without the aid of a lawyer. They can be poorly written, contain language that is based on unstated assumptions, and many times the contract doesn't even describe the agreement. However, even lawyers don't draft perfect documents.

To save money parties sometimes just get old contracts (probably from colleagues,) add a few things, and “cut and paste” or "copy and paste" from different documents those terms they like. Is it a surprise the contracts are not always consistent. Some contracts are literally jotted down on a napkin at a restaurant, or hand written when parties meet and decide to make a deal.

What happens when the parties decide that they are not the friends they once thought they were, and want to change the arrangement, but the contract does not appear to allow the change.Peter Mahler has reported on an interesting decision relating to problems with poorly thought out contract terms. A court in NY had to decide what to do when the parties enter into an agreement governing the operation of an LLC in the state. Arguably the agreement had inconsistent provisions. The court made an unusual decision that the express terms of the contract didn't count. This is the type of decision that reinforces my concern that many times litigation is a "crap shoot."

In the operating agreement in question all of the members agreed to vote for named members the as the LLC managers. Instead, the members voted to remove one of the member managers from that position. But, the agreement was silent about the rights of the members to remove managers. If you must vote for specified parties as managers, how can you vote to remove the same specified party? Yet another part of the agreement discussed the effects of the expulsion of the manager. As Mahler noted:

"In fact, Section 8 of the contract provided for election of a new manager by majority vote of the members should there be less than three managers due to "the death, retirement, resignation, or insanity of a manager."  (Note the omission of any forced removal.)"

So the parties litigated to rights and duties of the members of the LLC to remove the manager. A lesson for all of us is that if you are going to put together an agreement, make sure it is consistent. And, alway assume that there might be circumstances when the parties will disagree, and make provisions in the beginning for handling the disagreements.



 

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