Wisconsin Business Law Blog : Waukesha, New Berlin, Oconomowoc Corporate & Real Estate Lawyer & Attorney

             In these tough times, lots of businesses have been closing. In fact, for the fist time in our many years of practice, we’re hearing clients tell us that there is not enough business for both them and their direct competition – that if things continue as they are, they will both go out of business. In fact, they’ve become somewhat friends talking about it. Then the idea comes to one of them: could I pay my competition something to get them to shut down? The answer generally lies in the federal antitrust

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What duties do officers and directors of a closely held business owe the company’s creditors when the company is failing?  Unfortunately, this has become a common question during these troubling economic times.  The answer in Wisconsin appears to be bit different than other states at this point if the failing business is still a “going concern.” In Polsky v. Virnich, thecourt held that officers and directors do not owe a fiduciary duty to creditors unless the company is BOTH: (a) insolvent; and (b) not a “going concern.” The court is quite critical of the “going concern” element reasoning that officers and directors in a closely held business can easily keep a failing business “going” and then drain the insolvent company of all cash via bonues, etc… while the company is insolvent thereby enriching themselves who also happen to be the owners. This appears to be at odds with many other jurisdictions where the rule is that a duty is owed creditors when the company is merely insolvent.

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In Frank D. Gillitzer Electric Co.v. Andersen, a Wisconsin Appellate Court found that a provision in an employment contract that required an employee to repay certain training costs if the employee did not stay with the employer for four years after the training was completed did not violate Wis. Stats. § 103.465.  This was the case even though there appeared to be no disagreement that the “separate” explicit noncompete portion of the employment contract was overbroad and did violate §103.465.  This decision follows a the recent Wisconsin Supreme Court decision in Star Direct v. Dal Pra where the court appears to look more favorably about reading divisibility into employment contracts (as opposed to striking all restrictive covenants in an agreement containing an overbroad covenant). This holding brings up some interesting questions to consider when drafting or litigating noncompetes. What would the result be if the employer would set forth in the employment agreement that 10% of an employee's earnings during first 5 years of employment were really excess payments (or training costs) and if she leaves during that 5 year period, she owes the company 10% of her earnings during her employment?

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As most of my listeners know, I love to keep up with what's going on in technology, and even more so, if it's legal technology. While I couldn't be at LegalTech New York this week, I am watching the posts, tweets and articles written by the myriad of people who are attending. On such blog post discusses cloud computing and why we aren't quite "there" yet:

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Social media includes such Internet applications as Facebook, Twitter, LinkedIN, MySpace and blogging. When people started using such media, many thought it was purely for personal reasons and basically ignored its business implications. That is no longer true. In fact, with hundreds of millions of people using social media, it is rapidly the phone and even email as a primary form of communication.

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When a business is sued, it should report the action to its insurance company, as soon as possible.  Sometimes, an insurer will deny coverage of the claim, asserting that a certain exclusion in its policy is applicable, or other policy defenses.

In Wisconsin, however, this is not necessarily the end of the story.  If there is any possibility that coverage may exist given the terms of the claim made against its insured, the insurer is required to provide its insured with a defense attorney at its cost, and seek a stay of the action while the court determines whether it owes coverage under its policy.  It's failure to do so may result in it being held liable for the claim and its insured's defense costs, regardless of whether coverage actually exists under the policy.

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For decades, the US Government and 24 states have had laws regulating corporate spending to support or oppose candidates running for office. In a most extraordinary US Supreme Court case decided on Thursday, January 21, 2010, justices overruled parts of a 63 year old law which prohibited businesses and unions from producing and running their own campaign ads.

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As a business "deal" is coming together, the parties often wrestle over whether to start the documentation with a "letter of intent"  (LOI) or simply proceed to the actual contracts. While different situations demand different answers to that question, here are some important considerations with respect to what may work best for you.

Using a LOI has the advantage of usually being much less costly, quicker and simpler to draft. While it usually only sets forth the basic terms of an agreement, it is usually not a binding contract, except for certain provisions, such as confidentiality provisions that are intended to protect both parties and take them back to their respective starting points without damage, should the deal fall through.

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For over 50 years, Wisconsin has been deciding cases related to covenants not to compete in working relationships under Wisconsin Stat. § 103.465. On July 14, 2009, in an opinion authored by Justice Michael J. Gableman, Wisconsin’s Supreme Court changed the way that statute will work, much to the benefit of employers. Here’s what they did.

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