Brian Rogers

Post image for Whelan Security Co. v. Kennebrew Update: Noncompetes in Missouri

In this 2013 post, I blogged about Whelan Security Co. v Kennebrew, an important Missouri case involving an employee noncompetition agreement. In that case, the Missouri Supreme Court enforced a general noncompetition agreement and modified a non-solicitation agreement against out-of-state former employees.

Specifically, the Court held that a general restriction on competition within a 50-mile radius was enforceable. However, a covenant restricting the employees from soliciting the employer’s customers for two years after termination of employment was too broad as written, because the covenant was not limited geographically and there was no other language that would have limited the scope of the provision (such as restricting the prohibition to customers with which the employees had contact during the course of their employment). The Court modified the covenant accordingly. The Court also held that a covenant restricting the employees from soliciting prospective customers was too broad, not to mention the fact that the Missouri Supreme Court questioned in Healthcare Services of the Ozarks, Inc. v. Copeland whether an employer has a legitimate interest in prospective customers.

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Post image for Signing a Personal Guarantee Can Be Surprisingly Costly

When you own a small business, signing personal guarantees often seems like a necessary evil. Unless your company has strong credit, landlords, lenders, and others will often require you to personally guarantee your company’s obligations to them. One of the most harrowing experiences I had when I set up my own law firm was signing a merchant services agreement so I could accept payment by credit card — which of course required a personal guarantee.

Although business owners can protect their personal assets from their business’s liabilities by doing business through a corporation or a limited liability company, your company can’t shield you from liability arising out of your own actions. Also, you’ll be on the hook for company debts that you personally guarantee.

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Post image for Signing Quotations

I’ve advised people for years not to sign the other side’s purchase orders, acceptances, quotations, and other ordering documents unless the documents have been fully negotiated. That’s because it puts you at a huge disadvantage in the battle of the forms.

I’ve also advised people to negotiate terms that are essential — even if they don’t sign a fully-negotiated contract — and have both parties sign a document setting out those terms, because you can’t win the battle of the forms. So if — as a seller — a 12-month limited warranty and liability cap in the amount of your product’s purchase price are important to you, you should make sure that you and your buyers sign contracts agreeing to those terms. Otherwise, you’ll probably end up with a broad, four-year warranty and unlimited liability (the defaults under Article 2 of the Uniform Commercial Code, which governs contracts for the sale of goods).
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Post image for Revisiting Liquidated Damages

Last week I discussed a case in which a Missouri appellate court upheld personal guarantees when the purported guarantors had signed a promissory note under the words “Personal Guaranty and Acceptance of Terms.” In that same case, the court held that a “late fee” was an unenforceable penalty, rather than an enforceable liquidated damages clause.

I’ve discussed liquidated damages provisions in these virtual pages before. In Liquidated Damages Provisions Can Be Your Friend, But Don’t Overreach, I talk about the difference between enforceable liquidated damages provisions and unenforceable penalties. So many people followed Google to that piece looking for sample contract language that I later posted a Liquidated Damages Clause Example.

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Post image for Revisiting Personal Guarantees

There are a surprising number of cases dealing with whether people who purportedly signed a personal guarantee actually agreed to personally guarantee a contract.

Many of the issues I’ve seen arise when someone signs at the bottom of a contract as “guarantor” rather than signing a separate guarantee document. There’s nothing wrong with doing that, but it can cause issues. For example, I discussed a case in 2012 involving a corporate officer who signed a credit application that contained guarantee language. The officer signed the document only once, the signature did not indicate whether he was signing in his individual capacity or on behalf of the company, there was only one signature line, and the guarantee language did not clearly evidence that a personal guarantee was intended. The court held that the officer had not agreed to personally guarantee the company’s obligations and stated:

When considering whether a signatory to a contract intended to sign the agreement in his corporate or individual capacity, the determinative question is whether, in view of the form of the signature to the agreement, the language of the so called guaranty clause is sufficient to manifest a clear and explicit intent by [the signatory] to assume a personal guaranty contract. … Accordingly, our courts have adopted the policy that in order to hold a corporate officer individually liable in signing a contract of guaranty … the officer should sign the contract twice[,] once in his corporate capacity and once in his individual capacity…. By signing the contract twice, the officer executing the contract for his corporation clearly manifests his intent to assume personal liability. [citations and internal quotation marks omitted]

Drafters should clearly indicate that persons signing guarantees in contracts are signing in their individual capacities and they should include a separate signature block for them the sign in that capacity. [click to continue…]

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Post image for Be Careful about Contractual Duties to Provide Insurance

When someone takes on a contractual obligation to provide insurance, that duty can preclude them from looking to the other party for damages covered by the required insurance.

In Storey v. RGIS Inventory Specialists, Kenneth Storey leased property to RGIS. The property was destroyed by a fire allegedly caused by one of RGIS’s employees. The lease required RGIS to repair damages to the leased premises caused by the negligence or intentional acts or omissions of RGIS, its agents, servants, or employees. Storey sued RGIS for damages resulting from the fire. The court dismissed Storey’s case on a summary judgment motion.

Why wasn’t Storey able to recover from RGIS? Because provisions in the lease agreement–including Storey’s obligation to provide insurance–showed that the parties intended to exempt RGIS from liability for loss from fire. The lease required Storey  to procure insurance for the benefit of both parties in an amount equal to the replacement costs of the leased premises. In addition, the lease required RGIS to surrender the premises in good order “ … damage by fire … excepted,” which evidenced the parties’ intent to exempt RGIS from liability from loss from fire.

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Post image for Revisiting “No Reliance” Language in Contracts

A (fairly) recent 8th Circuit case reminded me of the importance of including “no reliance” language in even simple contracts.

Exploring the idea of drafting simplified contracts for simple situations, I posted a sample contract for a sale of goods a couple of years ago. The idea was to draft a B2B contract that would afford minimum effective legal protection in situations where there’s no special reason to think that the agreement would be litigated. A reader left the following comment and I revised my form agreement in response:

The Disclaimer of Warranty and Entire Agreement clauses are very likely insufficient to negate claims of fraudulent inducement. I would suggest having a clause to address a potential fraudulent inducement claim even under a “minimum effective legal protection” scenario to decrease the buyer’s opportunity to manufacture factual disputes that would preclude a dismissal in seller’s favor. Language acknowledging that the Buyer is entering into the agreement based only on its own inspection of the goods (even if the seller has superior/peculiar knowledge of the goods) and an acknowledgement that Seller has made no representations about the goods may help.

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Advice

I attended a presentation to a room full of business owners the other day. The presenters were professionals who operate in trusted advisor roles. The topic was improving the value of your business by making yourself less indispensable.

An interesting part of the event was a discussion during the Q&A following the presentation. Someone mentioned the frustration of receiving financial statements from a CPA without commentary. What benefit to the business owner is the information without context, without direction, without advice?

If a business hires a CPA to prepare financial statements, and the CPA delivers financial statements, she’s done her job, right? Maybe. Or maybe not. The consensus in the room was that CPAs who do so aren’t doing their whole job, or at a minimum are letting the opportunity for providing additional value–maybe for additional fees–slip away.

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Post image for Are Lawyers Like Gardeners Who Mow with Scissors?

Law firm business models are under a lot of pressure. And this has been true for quite some time. When I was a young lawyer at a regional corporate firm, I would go to the office early in the morning, leave in the evening, and bill almost every minute in between. And clients would pay for all that time. But it’s increasingly difficult to get clients to oblige.

Companies have long complained about the ever-increasing hourly rates charged for legal work. And during the recession in the late 2000’s, they began to push back on rates in a big way. They also started pulling more of their work in-house. Companies were able to do more of their own legal work because there was simply less to do during the recession. Plus their in-house lawyers were willing to work extra hard in light of market turmoil and job insecurity. Then, when business began to pick up and corporate legal departments once again needed help with overflow, they simply hired new lawyers rather than sending the work to their outside firms.

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Post image for Save Yourself From Yourself With a Simple Email Checklist

The end-of-year deal-closing season has just come to a close. So I’ve been sending a lot of emails that I don’t want to screw up.

We’ve all felt it, that feeling of dread deep in your gut just after you hit “send.” Did I send that sensitive document to the wrong party? Did I attach the right document? Did I delete stuff from the bottom of the email chain that shouldn’t be forwarded? Fearing the worst, you click on the email in your “sent” folder to see whether life will go on as normal. Or whether you’ll need to polish up your resume.

Routine is a quality killer

Sending an email is so easy. It’s so routine. So why do we mess it up so often when there’s so much at stake?

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