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Connectiuct Business Litigation Blog
Commentary on lawsuits and legal issues impacting Connecticut businesses. Authored by experienced business litigation attorney, Kane Bennett of Aeton Law Partners, LLP.
You might think so, but generally whether the terms alone govern a dispute depends on the language in the contract. When a contractual relationship breaks down, parties that previously agreed to terms of a contract suddenly no longer agree on the meaning of key terms. Many times parties to a contract have evidence that supports one meaning versus another. The question becomes whether any of the evidence is relevant or if the court will simply interpret the terms as written. I have posted before on the implications of the parol evidence rule in Connecticut. A recent Appellate Court case serves to highlight some important aspects of the rule. The case is Sullo Investments LLC v Marci Moreau and will be released for official publication on July 1, 2014. In Sullo, the defendant signed a guaranty agreement for a commercial note. The defendant lost at trial. On appeal, the defendant claimed that the trial court erred because the court went beyond the four corners of the guaranty agreement and considered extrinsic evidence in violation of the parole evidence rule. The Appellate Court disagreed and pointed out that the parole evidence rule is only implicated where the evidence serves to contradict or vary terms that are actually in the contract. The rule: “does not of itself, therefore, forbid the presentation of parol evidence, that is, evidence outside the four corners of the contract concerning matters governed by an integrated contract, but forbids on the use of such evidence to vary or contradict
Trade secret law is constantly evolving as technologies in the workplace change. Staying up to date is critical. Recently, I attended an online seminar focused on theft of trade secrets in the workplace. The presenters included private practice attorneys from a national firm and in-house IP counsel from two large companies. There was a consensus that you cannot prevent an employee from stealing trade secrets in all cases. This is especially so with the advent of cloud computing and bring your own device policies in the workplace. The focus should be on mitigation of risk before the theft, and implementation of an action plan after the theft. I have commented on these same issues several times on this blog. With respect to action plans after theft, I was interested in the insights of the in-house IP attorney. The attorney stressed the importance of having a team assembled to address trade secret theft to include security, technology, and legal. When making a decision on pursuing an injunction in court, the assembled team will need to identify objectives based on a series of factors including the value of the intellectual property at issue and the business issues implicated. I agree with these points. Having a team in place, with written documentation of it, not only will help a business act quickly, but will also serve as evidence of the reasonable measures taken to protect the trade secrets. A dedicated team will also facilitate regular communication between departments to stay on top of
A recent Connecticut Supreme Court case (Blumberg Associates Worldwide, Inc. v Brown & Brown of CT) addressed the prevention doctrine in breach of contract cases. Under the prevention doctrine if a party to a contract prevents, hinders, or renders impossible the occurrence of a condition precedent to his or her promise to perform, or to the performance of a return promise, that party is not relieved of the obligation to perform, and may not legally terminate the contract for nonperformance. In addition, if one party hinders, the other party’s performance will be excused. The other party will not be permitted to recover damages for breach of contract. In sum, when one party causes the failure of performance under a contract, the party cannot take advantage of it legally in court. The prevention doctrine is part of the application of the implied covenant of good faith and fair dealing that is part of every contract. Essentially, it is part of an obligation to proceed under a contract in good faith. The issue in the Blumberg case was whether the prevention doctrine could apply to conduct that occurred before the contract was executed by the parties. The court held that it could not. So, the prevention doctrine only applies if a contract already exists. The reason is because the duty not to prevent or hinder arises only from implied contractual duties. Therefore, if there is no contract, there is no duty. Whether particular conduct constitutes wrongful prevention is decided by a
Ordinarily, the answer is no. However, you must carefully read contract terms before assuming you will not be personally liable for company debts. The Connecticut Supreme Court recently addressed an example where the terms of the contract created personally liability for the president of a company. Yellow Book decisionThe case is Yellow Book Sales v. Valle. When a corporation is the primary party to and signer of a contract, and the signature is by an officer of the corporation, the generally held rule is that the corporation is responsible and not the individual officer. This is a rule of construction or interpretation for contracts. Generally, this rule will apply if the contract is between a corporation and another party, and there is no indication of personal liability in the terms of the contract or on the signature line. However, there are circumstances where the general rule does not apply. In Yellow Book, the Supreme Court of Connecticut found that there were terms in the contract clearly indicating an intent to bind the individual signer as well as the company. In this particular case, the president of the company signed his name and added the terms "president" to his signature. Adding the term "president" did not prevent personal liability in this case because the contract terms were clear that there was a personal obligation. The language in the contract read "[t]he signer of this agreement does, by his execution personally and individually undertake and assume full performance . .
The Connecticut Appellate Court recently decided a case involving damages from loss of data related to 500,000 IBM employees. The case is entitled IMB caseRecall Total Information Management v. Federal Insurance Company. The loss of data included social security numbers and birth dates. The data was lost in the process of transport for storage. Some 4 years later after the loss, there has been no reported identity theft. As I have mentioned on this blog many times, data loss events can cause significant damages to a business. In this case, IBM incurred 6 million in expenses to provide identify protection to its employees and to address the breach. The data storage company paid IBM the full amount of its loss. The storage company, and its subcontractor, tried to get insurance coverage for the IBM claim under a commercial general liability policy. Obtaining coverage for a data loss breach under the terms of a commercial general liability could pose several challenges and the results have been inconsistent across difference courts and cases. In this case, the insured party tried the most likely arguments to obtain coverage, but the insurance company denied it. The litigation that ensured concerned whether the insurance company properly denied coverage. The trial court agreed that it was proper to deny coverage. On appeal, one of the issues concerned the nature of data loss and whether it triggered coverage under the policy for a personal injury. The Appellate Court found that the policy did not provide coverage under the
Generally, there are two sources to determine the rights and duties of members of a Connecticut limited liability company (“LLC”). The first source is an operating agreement. The ability to form a limited liability company (“LLC”) as a legal entity in Connecticut derives from legislative enactment. Title 34 of Connecticut General Statutes covers LLC’s. Title 34 gives great deference to the members of an LLC in forming an agreement on governance of the LLC. Statutory deference creates flexibility and is one of the biggest advantages when choosing a LLC as an entity for a business. The members’ agreements on governance of the LLC are typically documented in a written agreement known as an operating agreement. These agreements are typically drafting by a business attorney. The operating agreement for a LLC will typically document the rights and duties of members and managers for LLC’s. An operating agreement is similar to a partnership agreement. An operating agreement can be simple or complex depending on the needs of the members. Operating agreements can alter or change the statutory rights of members or managers. Members by agreement can define the voting rights of members, the number of votes required to decide matters, and the manner in which managers can be appointed or removed. Members can also agree upon limitations on ownership interests such as transfer of ownership or withdrawal of members. Members further can agree upon duties of managers and members. Unexpected problems sometimes arise when an operating agreement is silent on rights and duties.
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