Attorney James D. Griffith Now With a New Law Firm

March 30, 2014 Comments Off on Attorney James D. Griffith Now With a New Law Firm

Effective March 31, 2014, attorney James D. Griffith accepted a position as an Associate Attorney with Mangum, Wall, Stoops & Warden, P.L.L.C. located in Flagstaff, Arizona.

Mr. Griffith may be reached at Mangum, Wall, Stoops & Warden, P.L.L.C., Post Office Box 10, 100 North Eldon Street, Flagstaff, Arizona 86001, Tel.: (928) 779-6951 or (800) 514-6064. Website: www.mangumwall.com.

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GOVERNMENT CONTRACTING OPPORTUNITIES FOR MINORITY- AND WOMEN-OWNED BUSINESSES

January 27, 2013 Comments Off on GOVERNMENT CONTRACTING OPPORTUNITIES FOR MINORITY- AND WOMEN-OWNED BUSINESSES

Minority- and women-owned businesses have a competitive edge when submitting bids for certain federal, state, and local government contracts in Arizona. In particular, minority- and women-owned businesses may be interested in the Small Business Administration’s Section 8(a) program and the Arizona Department of Transportation’s Disadvantaged Business Enterprise program.

Small Business Administration’s Section 8(a) Program

The SBA’s 8(a) program is designed as a launch pad for minority- and women-owned businesses. The 8(a) program works closely with other governmental programs to promote economic growth in economically disadvantaged areas. Only small businesses qualify for the 8(a) programs, and eligibility is determined by a cap set on annual receipts, which varies by industry. The owner of the business must qualify as “socially or economically disadvantaged,” but there is a presumption that most minority and women business owners are socially or economically disadvantaged. In addition, the business must be controlled and managed on a day-to-day basis by a minority or woman owner of the business. For more information on the 8(a) program and other SBA programs, click here.

Disadvantaged Business Enterprise Program

The Disadvantaged Business Enterprise (“DBE”) program is a federal program, but administered by state departments of transportation in connection with federal funding for state highway, transit, and airport projects. The purpose of the DBE program is to remedy past and current discrimination against minority- and women-owned businesses, especially in contracts involving highway, transit, and airport programs.

In Arizona, the Arizona Department of Transportation, the City of Phoenix, and the City of Tucson utilize the database of minority- and women-owned businesses that are certified under Arizona’s program. The general requirements for certification are:

  1. A small business that is at least 51% owned by one or more minorities and/or women.
  2. The business may not be a subsidiary of another business and the minority or women owners must control day-to-day operations.
  3. The business must be organized as a for-profit business.
  4. The personal net worth of the minority or woman owner must not exceed $1.32 million, after deducting the owner’s interest in the DBE business and the owner’s equity in a place of residence.

For more information on Arizona’s DBE program and the certification process, click here.

For assistance with the 8(a) Program or the DBE Program, or for more information on the legal services offered by the Law Office of James D. Griffith, P.L.L.C., please call (480) 275-8738 or use the “Contact Us” page on our website.

JUDGE ORDERS ATTORNEYS TO MEET FOR LUNCH: The Power of “Legal Levity”

December 7, 2012 Comments Off on JUDGE ORDERS ATTORNEYS TO MEET FOR LUNCH: The Power of “Legal Levity”

This week I was reminded of the lighter side of the law when I recalled the time a Maricopa County Superior Court judge ordered two attorneys to meet for lunch (at their own expense, of course). The judge’s tongue-in-cheek order is quite humorous, and I thought I’d share it for anyone not familiar with this bit of “legal levity.”

Background

In 2006, the attorney for the plaintiff in a commercial litigation case asked the attorney for the defendant to meet for lunch. The plaintiff’s attorney wanted to discuss the schedule and deadlines for pretrial investigation of facts (referred to as “discovery”), but the defendant’s attorney was suspicious of plaintiff’s attorney’s motives. When the defendant’s attorney did not respond to these requests, the plaintiff’s attorney filed a “Motion to Compel Acceptance of Lunch Invitation” with the judge. In other words, he wanted the judge to order the defendant’s attorney to meet for lunch.

The Order

Judge Gaines, a well-respected judge in Maricopa County, saw an opportunity for little fun and entered an order granting the motion. Major portions of his order follow:

The Court has searched in vain in the [procedural rules, case law, and] leading treatises on federal and Arizona procedure, to find specific support for Plaintiff’s motion. Finding none, the Court concludes that motions of this type are so clearly within the inherent powers of the Court and have been so routinely granted that they are non-controversial and require no precedential support.

The writers support the concept. Conversation has been called “the socializing instrument par excellence” (Jose Ortega y Gasset, Invertebrate Spain) and “one of the greatest pleasures in life” (Somerset Maugham, The Moon and Sixpence). John Dryden referred to “Sweet discourse, the banquet of the mind” (The Flower and the Leaf).

Plaintiff’s counsel extended a lunch invitation to Defendant’s counsel “to have a discussion regarding discovery and other matters.” Plaintiff’s counsel offered to “pay for lunch.” Defendant’s counsel failed to respond until [this] motion was filed.

Defendant’s counsel distrusts Plaintiff’s counsel’s motives and fears that Plaintiff’s counsel’s purpose is to persuade Defendant’s counsel of the lack of merit in the defense case. The Court has no doubt of Defendant’s counsel’s ability to withstand Plaintiff’s counsel’s blandishments and to respond sally for sally and barb for barb. Defendant’s counsel now makes what may be an illusory acceptance of Plaintiff’s counsel’s invitation by saying, “We would love to have lunch at Ruth’s Chris with/on . . .” Plaintiff’s counsel. [Here, the judge added a footnote: Everyone knows that Ruth’s Chris, while open for dinner, is not open for lunch. This is a matter of which the Court may take judicial notice.]

. . . .

There are a number of fine restaurants within easy driving distance of both counsel’s offices, e.g., Christopher’s, Vincent’s, Morton’s, Donovan’s, Bistro 24 at the Ritz-Carlton, The Arizona Biltmore Grill, Sam’s Café (Biltmore location), Alexi’s, Sophie’s and, if either counsel has a membership, the Phoenix Country Club and the University Club. Counsel may select their own venue or, if unable to agree, shall select from this list in order. The time will be noon during a normal business day. The lunch must be conducted and concluded not later than August 18, 2006.

. . . .

The cost of the lunch will be paid as follows: Total cost will be calculated by the amount of the bill including appetizers, salads, entrees and one non-alcoholic beverage per participant. [Another footnote added by the judge: Alcoholic beverages may be consumed, but at the personal expense of the consumer.] A twenty percent (20%) tip will be added to the bill (which will include tax). Each side will pay its pro rata share according to number of participants.

Judge Gaines then ordered that the attorneys discuss pretrial discovery motion, protective order, and out-of-state depositions, which the attorneys were disputing. Here, a footnote states: “The Court suggests that serious discussion occur after counsel have eaten. The temperaments of the Court’s children always improved after a meal.” The judge then ordered that the attorneys file a “joint report detailing the parties’ agreements and disagreements regarding these motions [and] filed with the Court not later than one week following the lunch . . . .”

The court docket shows that a “Joint Report on Outstanding Discovery Disputes” was filed by the attorneys to comply with the order. Just goes to show that, sometime, a little bit of “legal levity” can be as powerful as “legal logic.” Click here for a full copy of the order.

For more information on the legal services offered by the Law Office of James D. Griffith, P.L.L.C., please visit our website.

UNDER A COMMERCIAL LEASE, CAN A LANDLORD COLLECT RENT FROM A TENANT AFTER THE TENANT’S VALID ASSIGNMENT OF THE LEASE?

October 26, 2012 Comments Off on UNDER A COMMERCIAL LEASE, CAN A LANDLORD COLLECT RENT FROM A TENANT AFTER THE TENANT’S VALID ASSIGNMENT OF THE LEASE?

Under Arizona law, a tenant under a commercial lease remains liable to the landlord for payment of rent even after the tenant validly assigns the lease to a new tenant.

Remember Sally’s Café and the lease of space in Citywide Properties’ building at the corner of Fifth and Mill? (See my discussion of commercial leases and non-assignment clauses here.) Let’s say that Sally’s Café leased space from Citywide and later assigned the lease to Joe’s Burgers after Citywide consented to the assignment. That means the assignment is valid and enforceable in the eyes of the law.

“Privity” (I know, I know, it’s legal jargon)

In this situation, both Sally’s Café and Joe’s Burgers have liabilities under the lease with Citywide. The legal rule states that a validly assigned lease creates “privity of estate” between the landlord and the new tenant, but that the landlord and original tenant are still in “privity of contract.” In other words, the landlord and the new tenant owe obligations to each other because of the new tenant’s (valid) possession of the leased property, but the landlord and the original tenant still have obligations to each other under the lease agreement.

The most important obligation, of course, is the obligation to pay rent, which follows the assignment to the new tenant. Thus, the new tenant is obligated to pay rent to the landlord. This also applies to other obligations, such as the landlord’s obligation to make repairs or common area maintenance.

In our hypothetical case, because Citywide and Joe’s Burgers are in privity of estate, Citywide will be liable to Joe’s Burgers if Citywide fails to make a repair or maintain the building as required under the lease. Similarly, Joe’s Burgers will be liable to Citywide if Joe’s Burgers does not pay rent.

So why isn’t Sally’s Café off the hook when it validly assigns the lease to Joe’s Burger? Sally’s Café can still be held liable because Sally’s Café is in privity of contract with Citywide. If, for example, Joe’s Burgers fails to pay the rent, Citywide can sue both Joe’s Burgers and Sally’s Café for the outstanding rent. The only exception would be if Citywide had released Sally’s Café from liability under the lease.

Assignment to Third Tenant

Can the lease be assigned to a third tenant? Yes. What happens? Basically, the second tenant is released from all liability and the third tenant is in privity of estate with the landlord. In our case, Joe’s Burgers would be released from liability, and the third tenant (Valerie’s Vegan) owes the rent to Citywide. But Sally’s Café remains liable under privity of contract with Citywide.

Please remember that this is merely a general discussion of obligations and liabilities of landlords and tenants after the assignment of a commercial lease. This discussion should not be seen as legal advice, and any specific situation should be considered on its own terms. If you would like further information, or have a specific situation, please contact me by using one of the contact options provided on my website.

CAN A TENANT ASSIGN A COMMERCIAL LEASE IF THE LEASE INCLUDES A NON-ASSIGNMENT CLAUSE?

October 19, 2012 Comments Off on CAN A TENANT ASSIGN A COMMERCIAL LEASE IF THE LEASE INCLUDES A NON-ASSIGNMENT CLAUSE?

Under Arizona law, the general rule is that tenants of commercial properties are free to assign their leases—regardless of any contract provision that prohibits assignment of the lease. The catch is that, if the contract prohibits assignment, the assignment also breaches the lease, and the landlord can terminate the lease.

So, if Sally’s Café leases space in a commercial building at the corner of Fifth and Mill, and the lease prohibits assignment of the lease, can Sally’s Café assign the lease to Joe’s Burgers without risking liability for breaching the lease? No, but that may not be the end of the story.

Waiver.

Sally’s Café may be able to avoid liability if the landlord—let’s call it Citywide Properties—waives the non-assignment clause. A landlord waives a non-assignment clause if the landlord knows of the assignment and does not object. Typically, a landlord waives a non-assignment clause in a commercial lease when the landlord accepts rent from new tenant, but it could also be proven by receipt of a letter from the original tenant and the landlord’s failure to respond.

So, let’s say Sally’s Café assigns its lease to Joe’s Burgers in violation of the non-assignment clause. The next day, the owner of Citywide Properties notices a new sign over the door to the property that advertises Joe’s Burgers. She stops in the restaurant and speaks to Joe, who tells her he has taken over the lease. The following day, Joe delivers a rent check to the office of Citywide Properties, and Citywide cashes the check. A week later, the owner of Citywide decides that she does not like the clientele attracted to Joe’s Burgers. Can Citywide terminate the lease? No, because Citywide learned of the lease (from Joe) and accepted rent from Joe (that is, failed to object).

Consent.

Many commercial leases, however, permit assignment of the lease by a tenant, but require the landlord’s consent before assignment. These consent clauses are permitted in Arizona, but a landlord can only withhold consent if doing so is reasonable.

So, how does our scenario change if the lease entered by Sally’s Café allowed the lease to be assigned, but required Citywide’s consent? Sally’s Café wants to assign the lease to Joe’s Burger and contacts the owner of Citywide. Citywide’s owner considers the request and decides not to consent to the assignment because Joe’s Burgers caters to biker gangs.

Was it reasonable for Sally’s Café to withhold consent? Questions of reasonableness are usually matters for a jury to decide, which makes a definitive answer difficult. In addressing the question, however, a jury might consider the credit-worthiness of the new tenant, the nature of the new tenant’s business, the general character of the area (for example, upscale retail businesses), the remaining term or length of the lease, current economic conditions, and other factors.

Conclusion.

Okay, I’ve given a basic overview of the general rules on assignment of commercial leases, but this discussion should not be seen as legal advice, since any specific situation should be considered on its own terms. If you would like further information, or have a specific situation, please contact me by using one of the contact options provided on my website.

Next time, liabilities of the original tenant and the new tenant when the assignment is valid.

BUSINESS FORMATIONS AND WHY BUSINESS OWNERS SHOULD CONSULT A LAWYER

September 5, 2012 Comments Off on BUSINESS FORMATIONS AND WHY BUSINESS OWNERS SHOULD CONSULT A LAWYER

Forming a corporation, a limited liability company, or a partnership can be exhilarating, frightening, and frustrating—all at the same time. But experienced businesspeople know that this anxiety can be reduced by consulting a lawyer early in the process because it can help avoid or minimize the problems related to running the business and working with partners.

You’re probably thinking, “Why should I talk to a lawyer—they’re expensive, I’m trying to start a business, and I need to control costs. Besides, the lawyer is just going to fill out a form and file it with the State of Arizona.”

First, consulting a lawyer is probably not as expensive as you think. Although big law firms will charge big law firm prices (some well over $1,000), many sole practitioners and small firms provide services to start-up businesses at very reasonable prices. And the relatively small up-front expense can avoid or minimize much more expensive problems as a later time. Pay a little now, or risk paying a lot later.

Second, a lawyer should be consulted early in the start-up process because the lawyer will do more than fill in a form. Lawyers are trained to understand how corporations, limited liability companies (LLCs), and partnerships structure the relationships between those involved in the business. A lawyer can help determine which type of business entity is appropriate based on the nature of the business venture. They also understand how corporations, LLCs, and partnerships differ in terms of the tax consequences and the potential for liability to third parties.

Third, consultation with a lawyer is valuable because the lawyer can draft articles and bylaws, an operating agreement, or a partnership agreement that fits the needs of clients. This is particularly important when two or more individuals want to work together as co-owners of a business. These documents structure the business relationship between the individuals and determine their rights and obligations if a business dispute develops between them or the business is found liable to a third party.

Finally, experienced businesspeople consult lawyers when starting a business because it establishes a relationship with a business lawyer. A lawyer will take the time to discuss the proposed business with the entrepreneurs involved and the best way to structure the relationship between them. Using a document preparer or simply completing a form supplied by the state does not address these issues. In addition, the entrepreneurs may need assistance determining whether the business is subject to regulation by the state or federal government. And it’s always possible that, at a later time, the owners of the business may need assistance with understanding and negotiating a contract or resolving a dispute with a third party.

When starting a business, think about consulting a lawyer. Doing so can avoid or minimize certain problems that can arise in running a business and working with partners—which will save money in the long run. If you’d like to learn more about starting a business, please contact the Law Office of James D. Griffith, P.L.L.C. using one of the contact options available on the firm’s website.

ARE YOU PROTECTING YOUR TRADE SECRETS?

September 4, 2012 Comments Off on ARE YOU PROTECTING YOUR TRADE SECRETS?

All businesses rely on proprietary information that is valuable specifically because it provides an economic advantage over competitors. Businesses in Arizona can protect that information under the Uniform Trade Secrets Act to prevent employees and/or competitors from, in effect, stealing it and using for financial gain or a competitive edge.

As a smart business person, you already know that you rely on valuable proprietary information in running your business. But you may not be protecting all of your proprietary trade secrets. Why? Because virtually any information can be protected as a trade secret if it is (1) valuable in a business or trade specifically because it is not generally known to others, and (2) kept secret by reasonable efforts. This broad definition can include almost any formula, pattern, technique, process, method, device, or compilation.

Need some concrete examples? The most common example is the secret formula for Coca-Cola®, but the examples are many and varied. Consider these:

•   Client lists

•   Spreadsheets used for calculating bids

•   Best seller list (prior to release)

•   All research and development, including manuals, experimental studies, and testing results (and even the knowledge in an employee’s head)

•   Mathematical or scientific formulas, such as the chemical formula for a medication

•   Recipes for many food products, such as cookies, soup, salad dressing

•   Formulas for consumer products, such as toothpaste or mouthwash

•   Formula for WD-40® (a silicon-based lubricant)

•   Processes used to manufacture products made with Teflon®

•   Techniques used on a lathe to manufacture replacement parts for airplanes

•   Financial formulas used to estimate return on investment or profit margin

•   Financial information and statements

•   Sale performance information

•   Market research

The important thing is that the information have value to the business specifically because it is not known to others (and the business took reasonable steps to protect the secrecy of the information). For more on trade secrets, see a discussion of Arizona’s Uniform Trade Secrets Act here.

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