Success Stories
The Log Home Company
We represented a log home company that had bought the assets of another log home builder. As part of the deal, our client obtained a covenant not to compete from the seller to ensure that he would not simply go back into the industry once the deal was closed.
A few months later, a friend spotted the seller on the roof of a log home being built on the other side of the county. Investigation turned up a building permit issued to the seller.
In the ensuing litigation, the old owner took the position that he did not violate the non-compete, since the homes he had been building were a new "half-log" style, where a typical "stick-built" frame is covered on both the interior and exterior by a log ripped in half. To the eye, half-log homes are, indeed, log homes and a review of the many log home magazines or a trip to a log home show will indicate that most of the modern log home industry is devoted to half-log construction, due to various structural and insulation benefits presented by a frame structure.
After trial, the Court awarded the client the entirety of the seller's profit on the homes he had built. Before getting its day in court, however, the seller, who held the note on the business, went onto the business' premises under cover of darkness, and repossessed the business's assets, since the client refused to pay any more installments on the note, due to the seller's competition. We informed the client of Colorado's restrictions on the ability of a lender to exercise repossession, and told the client that the seizure might in the end be a good thing, since a lender's improper use of repossessed assets may give rise to a number of remedies for the borrower, including potential invalidation of the debt itself. We suggested the client buy some disposable cameras to give to friends, in case any of the client's assets were spotted. A friend soon brought them photos of the client's crane, showing that the seller was using it.
Arckey & Reha got the judge's permission to keep the case going after trial on the additional issues presented by the seizure. In a deposition, confronted with the photos, the seller admitted use of the crane. Shortly thereafter, the seller settled on favorable terms, and the success of the client was assured.
The Farmer, the Lawyer and the "Priest."
We were approached by a farmer from a neighboring state whose life savings had been taken by the fraudulent conduct of an investment promoter who held himself out as a Roman Catholic priest. He had been ordained by a rogue denomination which called itself "catholic," that had very few members, and he eventually ordained himself a bishop of such denomination. The promoter presented himself to the farmer, who had recently sold much of his farm to eventually begin a cattle feeding operation, as an ordained Roman Catholic priest who commonly traveled to Europe managing investment programs for high net worth individuals, with substantial involvement with the Vatican Bank. The farmer had invested with another investment program and was having difficulty obtaining his funds. He was contacted by the "priest", who indicated that he would obtain the farmer's funds, and that he hoped to assist the farmer in further investments once the funds were recovered. The "priest" introduced the farmer to his lawyers, who proceeded to represent the farmer without fully disclosing the level of knowledge they had as to the "priest", his past, and his proclivity for fraud.
Without notifying the farmer, the promoter managed to arrange a refund of the farmer's funds from the first investment advisor via a wire transfer into the lawyer's trust account. Without notifying the farmer, the promoter instructed the attorney to write a check on the trust account for the vast majority of the farmer's funds, and further instructed the lawyer to write his law firm a check for the remaining funds in the trust account to pay the lawyer's bill. The checks were cut, the lawyer satisfied his bill, and the promoter immediately wired the proceeds of the check written to him to an account in Europe. From there, the "priest" disbursed the funds through a number of offshore accounts which he had established to hide money. The funds were never found again.
The farmer came to us. He had been turned down by a number of attorneys who would not take his case. We determined that he needed justice, however, and we took his case, asserting claims against the lawyers for allowing funds to be removed from the trust account without notice to the farmer, the owner of the funds. After a lengthy jury trial, the jury awarded the farmer a sizeable judgment. Further, the FBI and US Attorney's office were able to build a conviction of the "priest" for securities fraud based primarily on admissions we obtained from the "priest" in trial testimony (after the trial judge read the priest his "Miranda" rights against self-incrimination). The "priest" went to prison.
The Head of the Kitchen and Mandatory Overtime.
We represented a woman who was the head of food service for a medium-sized managed care facility. She was on salary, but routinely worked 60 to 70 hour weeks, never receiving overtime. This was her work reality for years. New management was hired for the facility and she and the new manager eventually had a falling out. She was singled out for discipline and eventually her employment was terminated. Management's position was that certain food service functions were not being performed adequately. Her position was that she did not have adequate staff to fulfill management's demands. As all other food service employees were hourly, they were entitled to mandatory overtime under the Federal Fair Labor Standards Act (the "FLSA"). Accordingly, management, wanting to avoid paying overtime, put much of the staff duties on our client, since the facility deemed her management and therefore exempt from mandatory overtime (i.e. she could be forced to work as many hours as management desired, for no additional pay).
After her employment was terminated, she was referred to us. We pursued an FLSA claim against the facility. The facility defended on grounds that she was management and therefore exempt from mandatory overtime. We argued that when the duties of her job were broken down, she spent the vast majority of her time performing non-management functions, such as cooking, cleaning and washing dishes. Under the FLSA, an employee is classified as non-exempt or exempt from mandatory overtime requirements. An important factor for determining eligibility for mandatory overtime is what the employee spends the majority of his or her time doing. If the majority of the employee's job is really spent on non-management jobs, the employee is not really a manager for purposes of the FLSA, and that employee is entitled to mandatory overtime.
We filed a claim on her behalf. It was fought vigorously on both sides. We were insistent that the client was exempt from mandatory overtime, and presented a number of witnesses to corroborate that fact.
The matter was eventually settled on favorable terms to our client.
Client Protection in the Sale of a Business.
We represented a couple who owned an electronics company. The husband was diagnosed with a serious medical condition and his doctor informed him that the stress of running the company was very dangerous to his health. The doctor strongly advised our clients to sell. Due to health issues, the clients did not enjoy the usual amount of time required to find and pre-qualify a buyer. The buyer that did come forward had adequate funds for the down payment, but we were leery of the buyer's ability to pay the loan our clients were advancing to finance the purchase. "Owner-carry" financing, whereby the seller acts as a lender for all or part of the purchase price, is a common method of financing sale of business transactions. A problem can arise, however, if the owner-carry loan goes into default, as the seller, who upon closing of the sale becomes a banker for all intents and purposes, typically only has the right to pursue the remedies of a secured creditor. When a business is teetering on failure, lenders often don't have the ability to respond in a sufficiently rapid manner to stave off failure. If this happens, there typically is nothing left to foreclose upon other than the business' equipment, which in today's knowledge and information driven economy is often not very valuable, since intangibles such as customer relationships, good will and the like are where the real value is (value that can't be foreclosed upon since it's not tangible).
We were worried that the clients would lose much of their hard-earned equity in the business if they did not have a means to come into the company in the event of default of the loan to rescue the business and preserve its worth. Accordingly, we advised the client to adopt as additional security a little-used tool called a stock pledge. Under a stock pledge, the owner of the company (i.e. the buyer after closing of the sale) delivers the certificates to the stock he or she owns in the business to the old owner, with a "stock power" (a form of power of attorney) which provides that in the event of default or imminent default the old owner as the holder of the power of attorney has the right to vote the stock to remove the buyer from management.
About two years after the sale closed, the buyer announced to the staff that the business would be closing immediately. The staff contacted the client, the client contacted us, and we notified the buyer that a special meeting of the shareholders of the buyer's company (those stockholders being our clients under the stock pledge) would be held within hours. The meeting was held, the buyer was terminated, and the client, with the help of staff, was able to keep the company running until a second buyer could be found. A subsequent buyer was located and we still insisted on the same protections as the first time around, the second sale closed, and the clients' retirement funding was secure. The company still successfully operates today, a number of years later.
