Hundreds of thousands of business-related lawsuits are also filed in state and local courts each year as well, although there are no recent statistics. It is therefore very important that your company has an experienced Farmington, Utah corporate lawyer working for the business. Business lawsuits may disclose to the world the first glimpse into a major business conflict or disagreement, or a company’s struggles.
The difference between business-related lawsuits filed in federal court and cases filed in state court is simple. Cases are filed in federal court when the company or person suing the business is based in another state. Cases are filed in state court when both the plaintiff and the defendant are based in the same state.
Each days, hundreds of business executives make decisions that may result in a lawsuit. In fact, some businesses today are facing lawsuits for decisions made by company executives that have been dead for more than 100 years. Other lawsuits may result from what may seem like innocuous, but illegal, decisions. A company or its manager may decide to develop a new product using patented technology or technology owned by someone else but without the approval of that person. Sometimes a manager may discuss information from a former employee’s personnel file with a potential new employer. Or a manager may ask a female potential job candidate her age and whether she plans to have a baby in the next 12 months. All of these incidents may lead to a lawsuit filed against a company.
Suing other businesses
Businesses also sue other businesses. One business may enter into a contract with another business to supply it widgets for a set price. But if the price to produce widgets goes up, the other company may seek to break the contract because it is losing money under the old arrangement. The business receiving the widgets may file a lawsuit seeking to force the company that signed the contract to honor the obligation.
A business may also sue another business if it is owed money and the other company refuses to pay. Maybe the company built decks on the backs of houses for a homebuilder in a new subdivision. But the homebuilder believes the decks were built sloppily and may collapse, so they refuse to pay. The deck builder may sue the homebuilder in court to attempt to collect the money. Or a business may sue another business if it believes that its proprietary product information is being violated. Companies own patents on inventions and trademarks on brand names so that other businesses cannot use them for their gain. When a company believes another company has infringed on its products, it will file a lawsuit.
Businesses will also file lawsuits against another business if it believes that the business is interfering with its ability to operate as a business. A business may be stealing its customers, another company may believe. Or a business may have entered into an arrangement that prevents it from doing business. Or a business may sue another business in which it is an investor. Other business lawsuits may be related to pending mergers and acquisitions.
With any litigation involving your business, you should read the entire filing, assessing the seriousness of the allegations and what damages are being sought. Multiple allegations may be mentioned in the original filing. The plaintiffs and the defendants—there can be more than one on both sides—are also specifically. In some corporate lawsuits, a business may ask in its initial complaint of a lawsuit for a judge to issue a temporary restraining order preventing another company from taking some action that may hurt the business. Many lawsuits simply ask for damages. In some filings, a monetary amount may be mentioned as what the business is seeking to correct how it has been damaged. Many times, the case will be settled before it goes to court.
Settlements and rulings usually come after hearings related to the case in which both sides of the lawsuit argue their point of view.
Different Court Systems
1. County and state courts: Will often handle complaints between businesses that are both from the same jurisdiction, or complaints by consumers who live in the same county as the business.
2. Federal courts: Often handles class action lawsuits filed by employees and consumers against businesses, as well as business litigation against another business when the plaintiff is located in another state from the defendant.
3. Bankruptcy court: Part of the federal court system, bankruptcy court handles cases when a business or individual can not repay its debts to lenders and suppliers.
4. Small claims court: Typically covers disputes under $5,000. Any individual or business may use small claims court, sometimes conducted in the evening for the convenience of the public.
Businesses and companies are not always sued by other businesses. They face lawsuits every day from a variety of other constituents. Most prominently, businesses and companies are sued by shareholders who own their stock, regulators for allegations of violating some law, and consumers who have used one of their products.
Shareholder lawsuits are often cases seeking class-action status in which a handful of shareholders sue the company representing all shareholders. Such suits are often filed against a public company after its stock has fallen dramatically following the release of bad news.
The basic shareholder lawsuit occurs when a company’s stock drops precipitously after it discloses negative news. Shareholders become upset with the company because the worth of their stock has dropped. Many of them sue under the belief that company management knew the negative information but failed to disclose it to investors. They file a lawsuit to recoup some or all of their losses from their investment.
To the businesses, filing such a lawsuit violates the concept of taking risk when an investor purchases stock. By filing a lawsuit, the shareholder is eliminating the risk. From the stockowner’s perspective, they feel the lawsuit has merit because they have not been allowed to properly measure the risks of the company because of the withheld information.
Shareholder lawsuits such as these often divert management from the task of running a company, but are often also the result of management making statements to analysts or at investor conferences that the company cannot back up later with its performance. In addition, these lawsuits can be costly to defend, leading some companies to settle before the case goes to trial.
Companies can also be sued by regulatory agencies for alleged violation of a multiple number of laws. The agencies can be either state regulators or federal regulators, and the allegations can be either civil or criminal.
Federal regulators can sue a company to prevent it from misleading consumers, or from selling an unauthorized product. They can also sue a company or its executives and allege illegal insider trading or that the company’s financial statements have inflated earnings or revenue. They can sue a company that they believe has engaged in discriminatory or harassing employment practices. They can sue a company or its executives if they believe they have made false statements to the government during an investigation.
State regulators can also file lawsuits. They can allege violations of state laws by a company, or even by a firm hired to do work for a company.
Regulators suing companies is occurring with increasing regularity. In general, when regulators file a lawsuit against a company, it should be a serious sign that something could be amiss with the business.
Consumer protection laws exist in all 50 states and have also been passed by the federal government. And though regulators often file claims against companies for consumer protection reasons, many times consumers take matters into their own hands and file lawsuits themselves.
Consumers sue businesses for a variety of reasons. The consumer most likely has been a customer of the business. Maybe the consumer has discovered that the business has taken advantage of them by using deceptive marketing to get them to purchase the product. Or maybe a consumer has purchased a product from a company and then found that it does not work. The consumer could have also purchased a product that has made them sick or given them an illness. The product could have caused serious physical or mental maladies that are irreversible. Other consumer lawsuits can allege wrongdoing for something a business has not done. The business may be a bank that declines to loan money to a consumer with an excellent credit rating simply because of where they live. Or the business may be an insurance company that has declined to pay a claim to cover medical care. Consumers have also successfully sued insurers for using imitation parts to repair their vehicles.
Sometimes suits filed by employees against companies begin as one lawsuit by one employee, and then other employees who believe they have been treated in a similar manner join as plaintiffs. Sometimes these suits are classified as class- action lawsuits to represent a body of former workers. Cases like this can involve discrimination, harassment, or other hiring practices. Employee-related lawsuits may not always be decided by a trial jury. Cases sometimes will be referred to a mediator or an arbitrator to resolve the dispute. Mediation and arbitration are also often used in international business litigation. Many times, one side or the other will suggest this procedure to settle a case as a way of lowering the costs.
In addition, employee-related lawsuits often include other documents related to a company, such as employee contracts, and internal memos that may give a better indication of working conditions. Those employee contracts can also lead to a business suing current and former workers. Businesses will sue a former employee if they believe that the ex-worker has stolen information or documents and taken it to a new job, particularly a job where the person is working for a competitor. Many companies use noncompete agreements or clauses in contracts requiring their workers to abstain from working for a direct competitor for a certain amount of time.
Noncompete agreements protect trade secrets. A trade secret can be information that gives a company a competitive advantage because it is not generally known and cannot be readily learned by other businesses that could benefit from it. It can be a formula, pattern, compilation, program, device, method, technique, or process that a company has made reasonable efforts to keep secret.
Other companies require employees, particularly executives, to sign agreements when they leave the company that set out postemployment guidelines. These agreements may provide the executives a monetary settlement in return for certain conditions, such as not publicly talking to the media about their tenure while at the company. Some companies have sued former employees who have broken these severance package deals.
On the other side, executives can also sue businesses after they have left the job if the company has not lived up to its side of the agreement. A business can be sued if its executives talk disparagingly about the former coworker, hurting his or her ability to get another job. Or a former executive can sue a company if the business does not uphold the terms of the severance agreement by providing payments or other terms agreed upon in the contract.
The SEC and the Justice Department can launch criminal investigations into public companies suspected of wrongdoing, as they did in June, 2003 with Freddie Mac, the mortgage company that ousted three top executives as a result. The Criminal Division of the Justice Department investigates business crimes such as corporate fraud schemes, financial institution fraud, securities fraud, insurance fraud, fraud involving government programs such as Medicare and international criminal activities, including bribery of foreign government officials in violation of the Foreign Corrupt Practices Act. In addition, the SEC’s Division of Enforcement investigates violations of the federal securities laws, and prosecutes cases using civil lawsuits in federal courts. It often seeks injunctions, and a person who violates an injunction can be subject to fines or a prison term. Many of its cases involve fraud such as fraudulent stock offerings, manipulations, illegal insider trading, or conduct by brokers in violation of securities laws. Whether your business is being sued or intends to sue another business, an experienced Farmington Utah corporate lawyer is your best friend.
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When you need legal help for your business, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.
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