Hand Arendall Harrison Sale Attorney J. Cole Davis was invited to speak last month at an educational seminar for Partners for Environmental Progress, PEP. The topic and presentation, Employee Intrapreneurs: Create a Culture of Internal Innovation to Stimulate Creativity, Efficient and New Market Sales is featured in the article copy.
Speakers were asked to share strategies on how to create a culture of innovation within an organization opening the door to new products, improved efficiencies and expand markets. Cole addressed Intellectual Property processes; encouraging businesses/organizations to formalize the ownership of an idea process. The questions of patents and intellectual property addressed in the beginning helps avoid future conflicts. Tips, tools, lessons and potential pitfalls were discussed leading back to successful experiences.
Cole included information in the presentation regarding ownership of an idea/the entity or person who “owns” the idea, new business, patents, intellectual property policies and also, implementing non-competes for valued employees. He currently advises businesses throughout the state and local government agencies including the City of Panama City Beach, the Bay County School Board, and the City of Mexico Beach, in addition to other regional entities. He practices before state and federal agencies (Department of Labor, EEOC, FCHR, etc.) and also in local, state and federal courts. He presently serves as an Assistant City Attorney for Panama City Beach.
The 200 plus members of PEP come from a broad spectrum of companies, non-profits and organizations with a common purpose of promoting economic prosperity and environmental sustainability in the area.
The PEP members represent the diversity of business and industry along the Gulf Coast including:
Attorney Cole Davis addressed the topic of Medical Marijuana during the Bay County Chamber of Commerce Employment Law Seminar recently. He also had an opportunity to do a brief highlight during the Destin Chamber of Commerce monthly breakfast. For more information: https://www.hsmclaw.com/who-we-are/j-cole-davis
The Florida Supreme Court on April 28, 2016, ruled for an injured worker in a case that will dramatically change how attorneys for injured workers are paid in worker’s compensation disputes.
The case, Castellanos v. Next Door Company, 124 So. 3d 392, 41 Fla. L. Weekly S197b (Fla. 2016), stems from a 2009 dispute over an injured worker’s claim for wage loss benefits under Florida’s Workers’ Compensation Law. The claimant’s attorney spent over 100 hours proving his case and rebutting multiple defenses asserted by the employer and its insurance company. After a final hearing, the claimant was awarded a sum total of $822.70. For his efforts, the attorney was due a fee under the mandatory attorney fee formula prescribed by law. Unfortunately, this formula calculated a fee award of only $1.53/hour. Under the law, the Judge of Compensation Claims had no discretion to award a fee in excess of that formula. The claimant challenged this fee as so unreasonable as to violate the his due process rights.
The case worked its way through the legal system and finally made it to the Florida Supreme Court. In a 55 page opinion, the Court voted 5-2 vote that the attorney fee structure adopted by the Florida Legislature was unconstitutional as violation of the due process rights of workers. The Court found that the right of a successful claimant to a reasonable attorney’s fee has been a “critical feature of the worker’s compensation law since 1941.” The Court noted that the increasingly complex worker’s compensation system now requires a competent attorney to “navigate the thicket.” Because of this, the Court found that a “reasonable” attorney fee is necessary to ensure that the worker’s compensation system assures the “quick and efficient delivery of disability and medical benefits to an injured worker.”
The end result allows attorneys to argue (and judges to decide) whether awarding a successful claimant the statutory fee would result in an unreasonable fee. The Court laid out multiple factors to determine this issue based on its decision in Lee Eng’g & Constr. Co v. Fellows, 209 So. 2d 454 (Fla. 1968). Thus, the starting point remains the statutory formula but judges are empowered to stray from that formula if the result would be unreasonable. Because many worker’s compensation claims can involve complex litigation over comparatively minimal benefits it is likely many attorneys will now argue entitlement to a reasonable fee beyond the statutory formula.
The practice of law will always be affected by how attorneys can be paid, on both sides. Proponents argue that this will allow attorneys to take fewer cases and focus only on the most meritorious claims. However, employers and insurance carriers must now be weary of fighting battles that may risk exposure to fee awards between $200 and $400 per hour. Luckily, Employers are still given 30 days to decide whether a claim is worth the risks involved.
Many questions remain about the full effect of the Castellano decision. Many believe worker’s compensation insurance rates are likely to increase. The Legislature may call a special session to address the Court’s ruling as they did with a similar case in 2008, Murray v. Mariner Health, 994 So. 2d 1051 (Fla. 2008). Regardless, worker’s compensation litigation will remain an ever-changing landscape which requires skilled practitioners on both sides to be aware of the latest changes.
One of the most important and confusing aspects of starting a business is deciding what type entity to form. For many, a limited liability company (LLC) is an attractive option. LLCs offer flexibility in business structure, lack of corporate formalities, tax advantages, and limited liability. However, when this liability is limited can confuse even the most savvy business owner.
When can LLC creditors reach your personal assets?
Traditionally, limited liability meant that an LLC’s creditors could not reach the personal assets of the LLC’s members and vice versa. Generally, a creditor of the LLC can only collect the debt from the assets owned by the LLC. Thus, the LLC’s liability is limited to its own assets. This is referred to as “inside liability.”
For example, assume ABC, LLC, owes Vendor X $10,000 for supplies purchased by ABC. Assume ABC only owns tools, equipment, and office supplies worth $5,000. If Vendor X obtains a judgment against ABC and attempts to collect on this debt, it can only reach the tools, equipment, and office supplies owned by ABC. The personal assets, such as a boats or vacation homes, of ABC’s members are safe from Vendor X’s collection efforts.
When can an LLC member’s personal creditors reach the LLC assets?
Another common problem occurs when an LLC member defaults on personal debts and has a judgment entered against him or her individually. What happens if this judgment creditor wants to go after the LLC? Fortunately, Florida Statutes limit a judgment creditor’s exclusive tool for reaching LLC assets to a “charging order.” A charging order is essentially a lien on a member’s LLC share, giving creditors the ability to attach that member’s distributions from the LLC. The inability to reach the LLC’s actual assets for purposes of satisfying the member’s personal debt(s) is referred to as “outside liability.”
Returning to the example above, assume that First Bank is granted a judgment of $10,000 against Mark Member, a member with a 25% stake in ABC, LLC. ABC has done very well and now owns multiple stores and a fleet of company trucks. As a judgment creditor, First Bank can obtain a charging order (via appropriate motion with the court and corresponding order from the judge) against Mark’s 25% ownership interest in ABC. Then, whenever ABC makes a distribution of the profits to the members, First Bank will be entitled to Mark’s distribution to the extent necessary to satisfy the judgment. The hard assets of ABC are safe within the LLC, as are the other members’ profit distributions issued by the LLC. However, this protection from outside liability is limited depending upon the structure of your LLC, as further discussed below.
It’s Dangerous to Go Alone
One of the first decisions in forming an LLC is the number of members in the LLC. Many business owners enjoy the flexibility of operating alone, as a single-member LLC. However, a single-member LLC is robbed of most of the liability protection discussed above.
In 2010, the Florida Supreme Court ruled in a landmark case that single-member LLCs are not protected from outside liability. This allows a member’s judgment creditors to reach into the LLC to collect against the assets owned by the LLC. The Florida Statutes were later amended to reflect this decision. Therefore, a creditor with a judgment against the single-member LLC’s principal can now foreclose on the LLC and force the sale of the member’s interest in the LLC. For a single member this could mean a total loss of your business. However, for multi-member LLCs, protection from outside liability still applies and a charging order remains the sole remedy available to outside judgment creditors. This was just upheld last month by the Fourth DCA in Young v. Wear It’s At, LLC, ___ So.3d ____, 39 Fla. L. Weekly D1268b (Fla. 4th DCA 2014).
Accordingly, LLC formation can be complicated and stressful for new business owners, especially in light of the recent changes to the Florida Limited Liability Company Act that took effect earlier this year (see Andrew Levy’s February 10th blog post). Proper planning in the early stages can be vital to managing your future successes and minimizing your potential setbacks. We are here to help.