Case Studies


Small Business Lawyers, Daily General CounselPerhaps you are wondering if what we do really works. To answer this important concern, we have put together some actual Case Studies of the work we have performed for prior clients.

Case Study #1 - New Biz Day
Our client was a small company with two co-owners. One of the co-owners was also a majority owner of a retail service business, and he had developed a new business model that his customers found extremely attractive and that had greatly increased his regular, repeating business, along with his revenue and profits. Our client had developed the unique point-of-sale hardware and software for implementing this new business model, and it now wished to sell its technology, along with support services, to other businesses nationally in this industry. Our client previously had created an LLC, and it contacted DailyGC™ because it wanted a partnership agreement between the co-owners and a customer contract for selling its technology and support services. Click to read more...

The DailyGC™ Day began with a review of the LLC documents and the history of the LLC. We immediately discovered that there was no Operating Agreement, which is essential for all LLCs. After checking the website of the Secretary of State, we found that it had been more than two years since the LLC was formed and that no Annual Reports had been filed, which meant that the company was subject to being administratively dissolved under state law. Finally, we learned that each owner had loaned money to the LLC, and that the affiliated retail business also had loaned money and services to the LLC, and that none of this had been documented.

We discussed in full with the co-owners their respective roles in the operation and management of the LLC. One of them interfaced more with customers and prospective customers and was more hands-on with the day-to-day operations of the business, and the other was more responsible for the development of the technology. We reviewed the different types of LLC structures that were commonly used for a situation like this, in order to allow for effective operational decision-making while ensuring full reporting and consultation on matters of importance. We also discussed with the co-owners their long-term plans for the company and their exit strategies. Lastly, we discussed the challenges of B2B sales of technology, including their concerns about liability and collection.

Now, it was time for drafting. Specifically, we drafted for the client: 1) An Operating Agreement for the LLC that included all of the partnership-type provisions that the owners had envisioned and needed; 2) A comprehensive customer contract for the client to sell its hardware, software and support services, including essential protective and liability limitation provisions; and 3) Three promissory notes to memorialize the loans that had been made to the LLC. After drafting, we reviewed these documents with the client, made sure that the co-owners understood what was in them, and made some final changes. We also explained to the client how to account for and document on those occasions when the affiliated retail business provided services for the LLC, and we reviewed with the client the easy process for filing Annual Reports electronically with the Secretary of State, so that the client could do this itself right away and in the future, without engaging a lawyer or accountant to do it.

By the end of the DailyGC™ Day, the client had the paperwork it needed to operate the LLC, which included the essential divisions of responsibility and other ownership understandings between the co-owners, a protective customer contract that allowed it to proceed immediately with sales, memorialization of the loans that had been made to date (with a form it could use for future loans), and the knowledge it needed to maintain the LLC as a valid entity under state law.

Case Study #2 - Customer Dispute Resolution Day
Our client, a small manufacturer, was being threatened with a lawsuit by one of its customers. The customer claimed that our client's products were defective and caused them substantial losses. Our client was owed approximately $32,000 by the customer, but the customer refused to pay, claiming that its losses far exceeded that amount. A lawsuit was being threatened imminently by the customer. The client called Daily General Counsel, its small business lawyer. Click to read more...

On the day of General Counsel Services, we reviewed the history of the account and the customer’s claim of defective materials.  It turned out that this customer always had been slow to pay our client’s invoices, typically claiming some minor defect and delaying payment until 60-90 days after the invoice was due.  This led to bad feelings and poor communications between the companies, especially between the people who were most responsible for the account.  We also found that there was an actual basis for the customer’s complaints of defective materials in this situation, but the customer was unable to fully and accurately prove its losses and really was only guessing the amount of its possible damages.

We concluded that intervention by lawyers would not be helpful, and we had our client’s Chairman arrange a face-to-face meeting with its customer’s CEO.  Then, we prepared our client for the meeting.  We developed a range of monetary outcomes for the meeting, depending upon whether or not this dispute would be the end of the business relationship.  We also developed strategies for continuing the business relationship so long as 1) the customer would agree to make all of its future payments within 30 days of the invoice, which would be enforced by our client holding up future shipments of materials, and 2) the customer would agree to make any claims for defects within 30 days of its receipt of shipments.

The meeting was successful in restoring the business relationship between these companies and resolving the dispute.  Our client was paid about ½ of what it was owed in return for a complete release of claims for defective goods.  More importantly, both sides reached agreement about how they would do business in the future, including time limits for the customer to assert claims for defects and for making its payments.  The agreement was memorialized in a short 3-page document, which was prepared by the customer’s attorney.  Our client took advantage of DailyGC’s™ partial day video conference follow-up.  During a two-hour session, we reviewed the Release, made modifications that were accepted by the other side and the Release was executed.  The companies are continuing to do business today, with a much better relationship.

Case Study #3 - H.R. Day
Our client, a small general contractor with no H/R department, had a supervisory employee who was accused of sexual harassment. A small business lawyer from Daily General Counsel was contacted to conduct an investigation and make a recommendation. Click to read more...

The day of General Counsel Services began with a meeting with the Chief Operating Officer, who explained the personnel histories of the complainant and the alleged harasser.  The complainant had been with the company for a short time, working as a receptionist, but had been a good employee in every respect.  She was in her mid-20s.  The alleged harasser, approximately 15 years older, had been with the company for a long time, had risen through the ranks, was now a supervisor, and had no prior history of complaints of any kind from his subordinates.  The COO did not want to lose either of them.

DailyGC’s™ lawyer then interviewed the complainant.  She said that shortly after she started working, this senior employee had started being more attentive to her, complimenting her from time to time on how she looked and occasionally rubbing her shoulders.  Shortly after that, he asked her to go out after work.  She knew he was married and was going through a divorce, and she was not interested in any relationship with him outside of work.  She tried to be nice about this at first in declining his requests.  But he had persisted in asking, and she had persisted in declining, and now she was becoming very uncomfortable about the whole situation and raised the complaint.  She was worried about losing her job, unless she went out with him.   All she wanted was for him not to be interested in her socially, so they could have a regular employment relationship at work and no relationship outside of work.

DailyGC™ then interviewed the alleged harasser.  He did not deny any of the essential facts of the complainant, except that he claimed he was not trying to harass her.  He said that he was attracted to her and just wanted to date her and was being – at least in his opinion – persistent in a friendly and socially permissible way.  He was sincere and believable.

DailyGC’s™ lawyer explained to the alleged harasser how the difference between his position – as a supervisory employee – and the receptionist’s position – as a relatively new and subordinate employee – created a situation of disparity under the law, where even polite and persistent requests for a date could give rise to a claim of sexual harassment. He claimed that he never had wanted to make her feel uncomfortable, and he recognized that the last thing that he needed in his life right now was that kind of a claim.  He promised to stop giving her excessive attention and to stop asking her out.  DailyGC’s™ lawyer: 1) warned him of the disciplinary consequences of any further activity of this nature; 2) prohibited him from retaliating against the complainant in any way; and 3) directed him to treat her in a professional and friendly way, like others in the business.

Before the end of the day of General Counsel Services, DailyGC’s™ lawyer wrote a report for the alleged harasser’s personnel file.  At last check, both were still employed by the company and working harmoniously.

Case Study #4 - Mega-Contract Review Day
Our client, a construction contractor, had successfully obtained a lot of new work but now needed a business loan to finance its construction operations. It owned outright the commercial building from which it operated, and it had applied to a bank for a mortgage loan on the building. Our client had hoped that the loan would be as simple as a home mortgage loan. Agreement was quickly reached with the bank on the basic terms for the loan, and after receiving preliminary approval from the bank's loan committee, it awaited receipt of the loan documents. When the documents arrived they were about three inches thick and appeared to be far more complex than our client had anticipated. The bank recommended that the company hire legal counsel to review and explain the documents, and the company hired DailyGC™. Click to read more...

The DailyGC™ Day began with an overview of the loan documents. It turned out that when the owner of the company bought the building many years ago, the title was placed in the name of a separate entity that was created for that purpose. So, the construction company actually was a tenant in the building, with a lease from the separate entity that owned the building. Even though the entities were controlled by the same person, in order for the bank to comply with federal lending regulations, the loan to the construction company had to be structured with a guarantee and mortgage from the entity that owned the building, along with a conditional assignment of rents and leases, a conditional assignment of all assets of the construction company, and a personal guarantee from the individual who controlled both entities. The owner of the company was less than pleased about the vast amount of paperwork, but he understood the reasoning behind it.

The DailyGC™ lawyer then proceeded to read all of the loan paperwork in detail, twice, in order to understand all of the intricate provisions, terms and conditions. Some of the terms were found to be totally inappropriate, as the bank’s lawyer apparently had used forms from a previous loan and had not changed them. Other terms were found to be inconsistent with the commitment letter, and still others were overly oppressive. These types of problems are fairly common with first-draft loan documents.

The lawyer then met with the owner of the company and explained the details of the loan. They identified together certain reporting and covenant requirements that the company could not satisfy the way the documents were written. It would be in default of the loan almost from Day 1! These absolutely needed to be changed. The lawyer pointed out the other loan provisions that needed to be changed just to clean up the documents and to make them consistent with the commitment letter. Finally, the lawyer identified terms that would be good to negotiate, distinguishing between those that the bank likely would be responsive to and those that the bank was unlikely to change.

The DailyGC™ Day concluded with the lawyer providing a primer to the owner on how to negotiate directly with the bank. Armed with this information, the owner was able to make the changes that were required in the loan documents, and a couple weeks later, the loan closed. The owner fully understood the details of the loan he had secured, and the company obtained the financing that it needed for its operations, on terms that were accurate, clearer and substantially more favorable to the company than originally had been written in the loan documents.

Case Study #5 - Business Compliance Day
Our client, a successful home improvement contracting company, operated its business by having no employees and instead only hired independent contractors on an as-needed basis. At the end of the year, our client requested Social Security numbers from its workers so that it could issue 1099s. Our client contacted the small business lawyers at DailyGC™ when one of the workers sent a letter complaining that he had been wrongly classified as an independent contractor and demanding that our client issue him a W-2 instead of a 1099. Click to read more...

The first order of business during our DailyGC™ day was to review the working relationship between the client and the worker.  Since the client controlled and directed all aspects of the services performed by the worker, and those services were within the usual course of business of our client, we quickly concluded that the worker had, in fact, been misclassified as an independent contractor, instead of an employee.

DailyGC™’s lawyer then advised the client of the far-reaching consequences of misclassification, which included the failure to pay withholding tax, social security tax, workers compensation insurance, and unemployment insurance.   To the extent the worker’s hours exceeded 40 hours in any given week, our client also had potential liability for unpaid overtime wages, which carries steep penalties for non-payment.  Our client also was at risk to the Massachusetts Department of Labor for penalties for failure to report the hiring of its independent contractors who earn more than $600 per year.  Rather than face the prospect of an audit by the Department of Labor, with fines and penalties for non-compliance, our client agreed to issue a W-2 to the worker and pay the taxes.  This was satisfactory to the worker.

DailyGC™’s lawyer and the client also examined the company’s hiring practices and considered various strategies to avoid the carrying cost of employees whose services were not needed on a full-time basis.  Our client now plans to use sub-contractors who operate their own independent businesses and who perform the same services for other business owners and homeowners.  If individual workers are still needed on occasion, our client will attempt to hire them from a staffing agency.  As a last resort, it will hire individuals as W-2 employees.

Case Study #6 - H.R. Day
Our client, an automotive parts distributor, had several divisions within its company; purchasing, receiving, sales, distribution, repairs, accounting, and management. In order to simplify its payroll and avoid overtime, the client paid every employee a salary, regardless of the number of hours worked. The client contacted the small business lawyers at DailyGC™ when it received a letter from a former employee who was demanding more than $4,000 in unpaid overtime wages. Click to read more...

This client’s DailyGC™ Day began with a thorough evaluation of the ex-employee’s claim.  We examined the duties and responsibilities to assess whether the former employee was exempt from overtime, or whether he was “non-exempt,” in which case he was entitled to overtime pay.  Since the individual in question had worked in purchasing and assisted in the fulfillment of customer orders and had no management duties, we concluded that he was entitled to overtime.

We next assessed what was owed based on the available records. Since our client did not utilize a time clock, the company’s payroll records were limited to the attendance records.  The complaining employee had maintained his own time records but had miscalculated the amount of overtime due.  DailyGC’s™ lawyer explained how overtime is calculated in this situation and provided a copy of the applicable Department of Labor (DOL) Fact Sheet.  We discussed strategies for the client to educate and negotiate with the ex-employee.  Once the former employee learned that our client was prepared to pay promptly on the amount calculated in accordance with the DOL rules, the parties came to terms for settlement.

In light of this pay dispute, our client was concerned that it was at risk for future wage claims from other employees with duties similar to the ex-employee, as well as employees performing different work in other divisions of the company. At the client’s request, we analyzed the status of the work performed by its other employees in each division.  In fact, we found several workers who were entitled to and should have been paid overtime pay.

We then addressed the delicate issue of converting many workers from salary to hourly pay.  The owner wanted to be sure that no employee suffered a pay decrease, and the owner was not willing to install a punch clock.  A solution was found whereby employees turn in weekly time sheets reflecting the hours worked, and we revised the compensation agreements for the affected employees.   The switch to hourly pay went well, and the client is now in compliance with the wage and hour laws that apply to its employees.

Case Study #7 - Legal Triage Day
Our client, a start-up that makes on-line educational games for young children, was ready to hire its first employee. It had obtained a sample offer letter at a seminar for entrepreneurs, along with a broad non-competition and non-disclosure agreement. The client also had large orders on the horizon from distributors who planned to market our client’s games to institutional buyers, such as school systems and a national day care center chain. These distributors usually had their own form of supply contract. The client contacted the small business lawyers at DailyGC™ because it wanted to customize the offer letter and to make sure that it was protected in the non-competition and non-disclosure agreements. Click to read more...

On the day of General Counsel Services, we first tackled our client’s offer letter.  We reviewed many aspects of the employment relationship that the client had not considered, such as whether the offer was subject to favorable reference checks, a criminal record check, and completion of a job application; the job title, duties and responsibilities; whether the employee would be paid on an hourly basis or on salary and, in either event, whether the employee was eligible for overtime, time off and other benefits; and working hours, resignation notice period, outside employment and several other key terms.

We next reviewed the scope and enforceability of the non-competition agreement.  Finding the form to be likely unenforceable, we revised it to restrict the new employee from competing in certain territories for a limited period of time.  The DailyGC™ lawyer then analyzed the client’s standard form of non-disclosure agreement and revised it to reflect the trade secrets and confidential information that our client would be sharing with its new employee.

Once our client was satisfied with the newly revised offer letter, non-competition and non-disclosure agreements, DailyGC™’s lawyer then reviewed our client’s commercial contracts with its distributors.  We proposed several changes to each of the existing contracts, and used them to create a new form of distributor contract with terms that were more beneficial to our client.

By the end of the DailyGC™ Day, our client had a new set of operating agreements with its employees and its distributors that offered far more protection in the event of a future dispute.

PRIORITY ISSUES DESCRIPTIONS
At DailyGC, we provide legal advice and counsel on the full range of legal problems and legal-related business issues that small businesses and startups routinely face in their management, sales, operations and administration. The following are examples of these kinds of problems. You may use these descriptions on your Priority Issues Identifier Form� or you may write your own descriptions.
Business Contracts and Relations:
� Customer Contracts and Disputes
� Vendor Contracts and Disputes
� Collections
� Bank/Lender Relations and Issues
� Landlord/Tenant Relations and Issues
� Bonding/Insurance
� Nondisclosure and Confidentiality Agreements
� Procurement and Management of Outside Counsel
Employment:
� Recruiting/Hiring Practices
� Employment Agreements
� Employee Compensation and Benefits
� Employee Manuals, Policies and Procedures
� Compliance with Government-Required Benefits Programs
� Payroll Compliance with Court Orders
� Discrimination and Harassment Claims
� Management and Discipline of Problem Employees
� Terminations
� Unemployment Insurance Claims
� COBRA Procedures
� Hiring Independent Contractors
Dispute Resolution:
� Case Analysis and Assessment
� Mediation/Arbitration
� Strategies for Litigation, Discovery and Negotiation
� Settlement Analysis
General Corporate:
� Entity formation
� Corporate Governance and Record-Keeping
� Shareholder Relations
� Compliance with Governmental Regulations
� Compliance with Corporate Contractual Obligations
� Contract Review, Analysis and Negotiation Coaching