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When you form a business venture with another person, you doubtlessly hold out high hopes that the collaboration will be fruitful and rewarding for all. Unfortunately, that does not always happen. In real life, sometimes relationships sour and disputes arise. When they do, it is important to make sure that you have an experienced Georgia business lawyer on your side to protect your commercial interests and rights.

One example of a business entity whose shareholders ended up in litigation was a pair of North Georgia dermatologic surgeons who formed a practice together. At some point after problems erupted, one doctor (the president) threw the other (the vice president) out of the practice. This meant removing him not only as a employee but as an officer and director of the practice as well. Both doctors were equal shareholders in the practice. The expelled doctor took two steps:  he formed his own practice, and he sued for being thrown out of the original practice.

The expelled doctor won his lawsuit, and the court ordered him reinstated as an employee, as well as the vice-president, secretary, and treasurer of the practice. That case went to the Georgia Court of Appeals, and the appellate court upheld the lower court’s decision because it decided that the action was improper. (One doctor threw out the other when only the practice’s board of directors could properly take such an action.)

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Sometimes, achieving a favorable ruling on liability and damages, while an enormously important step, isn’t always the end of the line for getting the compensation you deserve. In certain circumstances, you may need to undertake additional legal actions to collect the money you deserve, including filing garnishment actions against other entities. Sometimes, it also involves seeking default judgments. To make sure you have access to all of the procedural techniques available to get the money owed to you, make sure you have retained a skilled Georgia collections attorney.

One example of a case in which the award of damages was only the beginning was the litigation undertaken by a lien services company. The lien services company sued a health care and logistics services provider. The lien services company achieved success in that case, obtaining a money judgment. To seek out the money it was owed, the lien services company filed a garnishment action against a different corporation.

In this garnishment case, the defendant took no action in response to the lien services company’s initial filing. Due to the defendant’s inaction, the lien services company asked the trial judge to issue a default judgment. A default judgment means that the defaulted party failed to take the required steps within the mandatory time period established by the law. Generally, for a defendant in Georgia, the law allows 30 days to file an answer. After those 30 days, if the defense has submitted no answer, it is in default. After a defendant is in default for 15 days, the trial court can enter a default judgment. Once that happens, the default judgment carries the same impact as a judgment on the merits.

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An old adage says “caveat emptor” or “let the buyer beware.” Similarly, the law requires parties to a contract to understand what they’re signing before they sign. That obligation is especially high when the contract parties are both equally strong and sophisticated commercial entities. If you are a corporation, trust, LLC, or any other sophisticated business entity, you need to be especially sure that the contract you sign is the agreement you negotiated and wanted. To facilitate that goal, make sure that you have skillful Georgia contract attorneys handling your representation.

An example of this played out in the federal courts earlier this year. The origins of what would become the case began with a contract between a Swiss trust and a U.S. bank headquartered in Ohio. The agreement called for the bank to take possession of bonds worth $428 million (U.S.), hold the bonds for safekeeping, and provide the trust with some additional services. In exchange, the trust agreed to pay the bank $90,000.

A problem arose, and the bank sent the bonds back to the original issuer. The bank notified the trust, but the trust initially took no action. Two years and two months after that took place, the trust sued the bank for breach of contract in federal court in Florida. The bank was in breach because it didn’t maintain possession as promised, and it didn’t safeguard the bonds as promised.

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There are several essential things that go into pursuing or defending a commercial lawsuit. As a plaintiff, you want to bring your case in your preferred location, but you want to take care to be certain that the law will permit you to sue that defendant in that place, lest you lose your case on jurisdictional grounds. As a defendant, it may be necessary to challenge jurisdiction in order to avoid litigation in some faraway place with which you have little to no ties. Regardless of which side you’re on, Georgia business counsel can help you deal with the jurisdictional questions in your commercial case.

A recent federal breach of contract case is an example of how the process can work. The dispute that ended up in federal court was a breach of contract case that pitted a firearms manufacturer against a sales representative. The representative brought his case in state court in Florida, but the manufacturer successfully persuaded the court that the case should be moved to federal court. There are several reasons why a case might be tried in federal court. One is if there’s an allegation of a violation of federal law, which is called “federal question” jurisdiction. Another is if the opposing parties are citizens of different states, and the amount in question exceeds $75,000, which is called “diversity jurisdiction.”

Regardless of whether a case proceeds in federal court or in state court, the court that ultimately handles the case has to have what’s called “personal jurisdiction” over the parties, which means that the parties must either have a certain degree of contact with that state or else voluntarily consent to the case proceeding in that court.

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Sometimes, getting the compensation your business deserves for a breach of a contract simply involves filing legal action and then presenting a persuasive argument and getting a judgment in your favor. In other circumstances, this step is the first in a multi-faceted process. Whether your needs are related to commercial litigation or judgment collection, you need to make sure that you have the sort of experienced Georgia business counsel that your case demands.

A matter recently decided by the Court of Appeals is an example of how elaborate such disputes can be, and how very minute errors can have major consequences. The first legal case was a contractor firm’s commercial litigation action in California. The contractor won that lawsuit and obtained a judgment that included a $1 million damages award. Of course, getting the compensation you’re owed sometimes involves more than winning your case. This is particularly true if you believe that the entity that owes you damages is engaging in improper conduct, such as making fraudulent conveyances, to evade paying the judgment. When that happens, you may need to litigate in multiple different jurisdictions to get the benefit of your damages award.

This contractor firm allegedly found itself in that type of situation. The defendant in the California case had, according to the contractor firm, provided another entity with the funds needed to acquire a piece of real estate in Roswell. Allegedly, this was all a part of a scheme to shelter the California defendant’s assets from the judgment creditor.

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As a creditor, your objective is to pursue any legal means allowable to obtain payment on the debt owed to you. Sometimes, those involved in the entity that owes you a debt may engage in improper activities to try to hide money or avoid paying you. As a judgment creditor, you need skilled and determined Georgia debt collection counsel on your side fighting for what’s duly owed to you.

A recent example of a judgment creditor that had to take multiple steps came from a dispute over an insolvent company’s large transfer of LLC funds. The insolvent LLC was an Atlanta area-based real estate business. The LLC’s managing member was also the individual who handled the LLC’s daily operations. In 2012, the insolvent LLC faced foreclosure on all of its assets. According to the judgment creditor, despite the LLC’s problematic financial condition, the managing member nevertheless authorized the company to make a $239,000 preferential payment…to the managing member. That transfer was a repayment of an unsecured loan that the managing member had previously made to the LLC.

In 2013, the LLC stopped making lease payments to the plaintiff, although the lease was not yet complete. This led the plaintiff to obtain a judgment against the LLC. Unable to collect from the insolvent LLC, the plaintiff took this additional step and went after the managing member for the payment he made to himself in 2012. The plaintiff’s argument was that, by making the preferential payment to himself while the LLC was insolvent, the managing member breached its fiduciary duty to it.

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In a fast-paced practice with budget-conscious clients, attorneys typically talk, make agreements and then move on. In most cases, the agreements are upheld, and the parties abide by them. For some, however, one side fails to uphold the commitment and may even dispute the terms of the agreement. The resulting dispute can arise from a myriad of reasons – running the gamut from a simple miscommunication to lack of integrity. And the problem is, you never know which agreements will be upheld and which will later become the subject of dispute.

The confirmation letter has become a lost art. In a carefully drafted confirmation letter, a prudent attorney takes the time to set out the precise terms of the agreement that just occurred, and sends it to the other participants for their confirmation, adjustment, and (most often) silence. These writings typically represent the best evidence of the parties’ intent at the time and afford the parties an opportunity to immediately clarify any miscommunication. While silence in the face of a confirmation email does not equal assent, it is, however, sound evidence for a finder of fact that there was no disagreement to the terms of the agreement.

So in this lightning fast business environment of wheeling and dealing, take the time to put pen to paper (or email) on any agreement that you would later want to enforce. Those few minutes that you invest now can save precious time and resources in resolving conflict down the road.

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Credit unions must always be on guard against the possibility of internal fraud. A Baltimore credit union recently discovered that its CEO and her husband were embezzling money. She did so by falsifying records and issuing checks to herself under the guise of paying for bank expenses. Investigators also found irregularities in loans that the credit union and other financial institutions had made to the CEO.

Weak internal controls create an environment where fraud can fester and losses can quickly

mount. Credit unions have a variety of tools at their disposal to detect and prevent fraud. However, there are risks credit unions must bear in mind. Credit unions should first implement a robust fraud policy, which it updates, distributes, and requires all employees to sign on an annual basis. Fraud policies need to be carefully crafted to list specific violations and proper procedures for investigating possible violations. Credit unions should include language that obligates employees to report suspected fraud internally while protecting them from retaliation for reporting violations.

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Cybersecurity is the new frontier of fraud prevention. As more information ends up on the internet, retailers and financial institutions are learning it the hard way. The data breach of Target demonstrates that even when financial institutions are not the victim, they can still suffer losses. In 2013, over a three-week period, hackers gained access to Target’s point-of-sale system and obtained credit card data of 40 million customers. Credit unions incurred significant costs when customers learned of the breach and asked for their cards to be replaced. On September 15, 2015, a federal judge granted class-action status to financial institutions suing Target, but the loss of consumer confidence will be hard to replace.

Credit unions must learn from the Target data breach because hackers have begun to target financial institutions themselves. Just weeks ago, a Hawaiian credit union discovered that it had been the victim of hacking and is still trying to determine what information was taken. The Hawaiian credit union appears to be the victim of a common tactic of sending emails with legitimate appearing attachments that contain malicious software. All it takes is a single employee to open the attachment and then hackers can slowly infiltrate the credit union’s other computer systems by installing surveillance and key logging software. Hackers are then able to watch as employees perform routine functions, such as funds transfers, and then repeat the functions themselves at their convenience.

In determining the proper way to protect sensitive information, credit unions need to map out business processes to determine which transactions support which products and services. Such a review should include examining the roles that employees and third parties play in carrying out those processes. From there, a credit union can develop a proper plan to protect member information.

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Recently, a federal court de­clared Georgia’s garnishment stat­ute unconstitutional leaving the short-term future of garnishments uncertain. While the decision tech­nically affects only the Clerk of Gwinnett County, other clerks in Georgia have already taken action to halt garnishments. Likewise, at­torneys and creditors have now lost the defense of complying in good faith with existing law after the publication of this decision. Finally, credit unions could also be liable for complying with garnishments.

THE CASE

The decision in Strickland v. Alexan­der held that Georgia’s garnishment statute is unconstitutional for three reasons: (1) it fails to require no­tice to debtors of certain state and federal exemptions to garnishment (like Social Security exemptions); (2) it fails to provide notice of a proce­dure to claim an exemption; and (3) it fails to require a timely hearing to decide exemption claims. The court enjoined Gwinnett County’s State Court Clerk from issuing summons of garnishment using current forms and procedures that were ruled uncon­stitutional. The facts of the case cre­ate a compelling story for the debtor.

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3562 Habersham at Northlake Building J
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Tucker, GA 30084
Phone: 404-373-4008 Fax: 888-709-5723
We serve clients throughout Georgia including those in the following localities: Fulton County including Atlanta; DeKalb County including Decatur; Bibb County including Macon; Cherokee County including Canton; Clayton County including Jonesboro; Cobb County including Marietta; Douglas County including Douglasville; Forsyth County including Cumming; Gwinnett County including Lawrenceville; Henry County including McDonough; and Rockdale County including Conyers.
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