You Expect Me To Talk To Lawyers?

Partnership and business concept in tag cloud

So much has been written and said about partnerships. Who can forget these one-liners?

“In business, if two partners always agree, there is one partner too many.”
(Or words to that effect.)

And:

“In all of love, one kisses and the other presents the cheek.”
(Generally speaking, of course.)

Both of these snatches of wisdom mean the same: when two or more people get together for anything, one of them ends up calling the shots, sooner or later.

Providing love advice falls outside the job description of the writers for these reports. (Not that we might not try our hand at it anyway when the mood overcomes us.) The point is that, in business, key roles and responsibilities need to be divided among venturers.

Business law is best practiced when the lines of communication between counsel and client are open and readily accessed. However partners may choose to organize themselves (whether as a general partnership, as a corporation, as a limited liability company, or as a non-entity or entity joint venture, to name several popular options), someone should become the prime liaison with outside counsel. If there is a legal department, that is easy: it will be one or more in-house lawyers. But in all other cases, howsoever the business is put together and operates, your lawyers need to be involved, and you will need someone to own the responsibility to communicate regularly (and proactively!) with your lawyers—even if that lucky someone happens to be you.

We are not suggesting that only one person speaks with lawyers. Business is rarely that simple. But we do note that the relationship tends to function smoothest when a skilled person within the organization who is sensitive to the legal issues that arise in the fashion business serves as the primary point of contact with counsel. So—should you be that person, and if not, who should? Ask yourself if you tell your marketers that, worst case, the lawyers can be brought in about potential problems with trademark rights for a new brand a day or two before its nationwide launch. Or consider if you occasionally suggest something such as “The contract looks fine—just sign it.” If so, you are obviously decisive and focused, but your future as legal liaison is not looking very promising—because you are potentially causing the business to run at an unacceptably high level of legal risk, and you are already announcing that you are not yet prepared to make adjustments to prevent that from happening in the future.

When people commit to do business together, they typically bring different talents and strengths into play. The most obvious example in fashion is the designer who pairs up with the business person (or as so many in my family were known, the garmento) who gets the product out the door and brings in the money. The person who is the liaison with the lawyers should be the one who understands that the legal ounce of prevention is worth the proverbial pound of cure and who can also most effectively communicate company needs to counsel and interpret and implement what comes back in response—from comments on contracts to regulatory compliance, and to litigation strategy and beyond.

It has been said that it is more fun to do business as a team than alone and that partners when truly complimentary can create and run businesses of exceptional strength. Just make sure that one of you raises his or her right hand and volunteers to stay in regular contact with counsel. Your partners will thank you for it.

With that simple but important consideration now chiseled in pixels, in our next series of posts we will offer reflections on what the law says about your rights when you team up with others.

Credit: Alan Behr


Zone Defense

Stacks of money and judges gavel on wooden table

Tips to Help Avoid Adverse Claims and Protect Your Company
in the Event of a Lawsuit

It is axiomatic that a successful business in the fashion industry requires close attention to detail and countless hours of work. While the threat of potential litigation should not be at the forefront of management’s thoughts, here are some tips to bear in mind to reduce your potential future exposure and to place your company in a better position to defend itself in the event it is faced with a lawsuit or a potential lawsuit:

  • Notify your Insurance Carrier. If you are served with a Summons and Complaint, or are threatened with a lawsuit, notify your insurance carrier. If you fail to timely notify your insurance carrier it may deny coverage, and the company could be stuck with otherwise avoidable out-of-pocket defense and indemnification costs.
  • Implement and Enforce an Anti-Harassment Policy. An affirmative defense may exist to protect the company from vicarious liability for certain sexual harassment/discrimination claims based upon actions by supervisors and co-employees if the company implements and enforces an anti-harassment/discrimination policy; exercises reasonable care to prevent and correct promptly any sexually harassing discriminatory behavior; and the employee unreasonably fails to take advantage of any preventative or corrective opportunities provided by the employer or to avoid harm otherwise.
  • Two Company Representatives Should Participate in Disciplinary, Evaluation and Exit Interview Meetings With Employees. Many employment claims (or issues that may give rise to employment claims) can stem from a disciplinary meeting, employee evaluation or exit interview, when a company representative (whether the H.R. director or an immediate supervisor) informs an employee of job concerns, performance issues or that employment is being terminated. It is advisable for the company to have two company representatives at those meetings to be better able to confirm or deny what transpired (to avoid a “he said she said” scenario) in the event of a subsequent claim by the employee.
  • Careful! Emails Are Not Private. Once a lawsuit is underway, the company will likely be required to turn over emails (or entire accounts) that may be relevant to the subject-matter of the lawsuit. So, the next time you send a personal email from your work account, be mindful of its content, especially if you don’t want some lawyer, like myself, reading about your personal life. Conversely, lawyers either prosecuting or defending a case are always looking for the “smoking gun.” So, before you click “Send”, make sure you are comfortable that, if a lawsuit arises, your email will not be the “smoking gun” that an opposing lawyer may be seeking.
  • Keep Accurate Time Records of Non-Exempt Employees. It is not only statutorily required for employers to do so, but is critical to the defense of a Fair Labor Standards Act claim for unpaid (or underpaid) wages, to accurately keep and maintain time records of all non-exempt employees. If the company maintains accurate and orderly time records on a daily basis, you will not be in the position of having to scramble (or spend countless hours) compiling these crucial documents for your defense or trying to defend against an employee’s claim without potentially crucial documentary evidence.
  • Avoid Spoliation Claims Arising From Destruction of Surveillance Videos. Sometimes a claim for spoliation will be made if relevant evidence has been intentionally or negligently destroyed. This can arise not only from the destruction of documents, but also when video surveillance captures relevant footage which is not retained. A possible defense here would be to ensure the company has thoroughly documented and enforced a recycling and retention procedure relating to the company’s surveillance.

The list above is generally focused in my practice areas of litigation. It is not intended to be, and in fact is far from, a comprehensive list. Each point merits its own blog post, which will likely follow in the near future.

Credit: Kathryn T. Lundy

Kathryn is an associate in Phillips Nizer’s Litigation Department and Labor & Employment Law Practice.


Avoiding Large Problems in Small Stores

Schaufenster

Some retailers have embraced the strategy of opening a large number of small stores rather than focusing on a few flagships. Advantages include minimizing the chance of significant economic loss in any given location and increased exposure on a national level.

One drawback to this strategy is that, with the greater number of leases to be negotiated, there is an attendant possibility of large legal fees. The retailer could, with justification, believe that, since the rent is small for each location, the legal fees should be similarly modest.

However, the retail tenant’s counsel cannot be any less vigilant in negotiating these store leases. That is because certain types of liabilities can be very costly, no matter the size of the store or the amount of the rent. Those liabilities generally arise from problems with the physical condition of the store.

Landlords come in all sizes and shapes, and often different negotiation strategies are called for depending on who is on the other side of the table. But there is one thing all landlords have in common: they want the tenant to accept the premises “as is” and be responsible for all physical problems within the demised premises. “You have inspected it,” they will say, “or if you haven’t done so, you should do so at once.” But by the very nature of the small store strategy, the tenant is opening in locations where it is unfamiliar with local laws and may not wish to undertake the expense of hiring local architects and expediters to inspect and report on real or potential problems at each location.

Typically, the tenant retailer knows it will have to do work to prepare the store for its occupancy, but the tenant will likely also be unwilling to accept responsibility for any major construction needed to prepare the space for its occupancy. One would imagine that landlords would feel the same way, but often that is not the case. Even if we leave aside landlords who wrongly seek to conceal defective or environmentally unsafe conditions and look at honest landlords, we find that it is not uncommon for them to worry about their buildings being consistently up to code. Even if the building was in full legal compliance at the time of original construction, laws change, and repairs and replacements over time may not be in compliance with the updated code. The big fear is that, when a retail tenant applies to have its plans approved for its leased space, the building department will return with a laundry list of upgrades that are essential to bring the entire building up to code.

Retail tenants must anticipate and respect that fear, and savvy tenant counsel should be able to handle the concerns of the landlords with sensitivity (and often creativity) to help the landlords overcome their fears. The solutions that arise in these situations, when parties cooperate and reasonable compromises are made, can be mutually beneficial. But one thing is certain: the goal of counsel for the retail tenant is to do what is reasonably necessary to help keep costs both predictable and under control.

Credit: Steven J. Rabinowitz

Steve is counsel in Phillips Nizer’s Real Estate Law practice.


Ahoy, Retailer!

Battleship_USS_Missouri

Flagship is a naval term meaning the vessel on which the senior officer commanding a formation of ships has made his seaborne headquarters. A “flag officer” (typically an admiral) has a distinctive flag that flies from the mast of his command vessel so that it is clear to all which ship in the fleet is his “flagship.” It is often, but not necessarily, the largest of the ships under his command. American English being rich in metaphors and neologisms, flagship soon became jargon for a retailer’s home store—usually the first or primary store and often the location of corporate headquarters. Because every brand wants every customer to see it as (to use another neologism) a BFF wherever the customer is located, brands were soon launching flagships all over. In time, we have seen the term applied to any store carrying all, or nearly all, product lines available under a brand—or simply its largest store in a given city.

So what does flagship mean today? After careful analysis of market conditions, lexographic innovations and the synchronicity between industry slang and nautical terminology, we hereby offer a revised definition: A flagship is any retail door big enough to have a Nespresso machine in the break room.

So now we know.

Credit: Alan Behr

Photo Credit: Richard Brown (Own work) (Wikimedia Commons)


What a Lovely Ankle, Dude.

Guy-CroppedRolledJeans-AnklesShowing

Last summer, we were treated to a new take on the skinny pants trend for men.  In this go-around, it was sans socks, and the trousers were either hemmed several inches above the ankle or simply rolled up to resemble a pair of clam-diggers that had spent too much quality time in the clothes dryer.  In the late Victorian era, you might have heard that an attractive woman had a “well-turned ankle”—because that was about the only part of her below the neck that cleared most of the enveloping layers in between.  As anyone has recently offered such praise for women’s ankles?

We invite readers to share with us whether, at any point in the history of humankind, in any culture or territory, anyone has had anything exceptional to say about the allure of men’s ankles.

I have a photograph of my father at about the age of twelve, standing beside his nanny and his horse.  He was wearing plus-fours, and as was correct for the period, he also wore socks that disappeared into the breeches.  You see, guys: sometimes the old ways are the best ways.  As the summer season unfolds, let us all sit back and take heed of the advice of a wise friend who has often reminded me, “Socks are important.”

Credit:  Alan Behr


Would Bogart Play An Asset Protection Associate?

Woman Stealing Clothes From Store

Like government, finance and many sectors of business, fashion is not above altering its use of language to soften perceptions.  My brother’s first job was assistant fragrance buyer at a department store; if he had known that he was actually developing a career in “beauty,” he might not have quickly given it all up for a life in the financial markets.

When I first began working in a department store, the in-house cop was called the “detective.”  Although there were days when it seemed that our shoplifters outnumbered our paying customers, our man never caught as much as a head cold.  Needless to say, he was replaced by four rougher sorts who called themselves “security.”  Not long after my mother retired from the department store where she worked (You see a pattern here, right?), security became “loss prevention.”  More recently, we’ve seen “asset protection.”  Along the way, practitioners’ tools have become more sophisticated, and they have gotten better at what they do—which is the important job of stopping theft (now called “shrinkage”); but the perception of dangerous charm of a “detective” in the Raymond Chandler/Dashiell Hammett mode does not come to mind when considering the tech-savvy guy who controls a bank of video monitors.  Would Humphrey Bogart have played an asset protection associate?  We will have to think about that.

Credit:  Alan Behr


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