VW’s Goodwill Package Sparks Fury From Owners

ownersVWVolkswagen announced a new, “we’re sorry” gift card to owners of its 2.0-liter diesel cars. While some customers seem okay with the program, others are clearly appalled and have begun insisting that Volkswagen buy back their “dirty” diesels.

The offer provides owners with two gift cards: one is a prepaid Visa card worth $500 that can be used anywhere, the other is a $500 gift card that can be used at “any participating Volkswagen dealership” (which implies that some dealerships have snubbed the program). Volkswagen is also offering three years of free roadside assistance.

That adds up to a value of around $1,200, though most will probably only cash in with the Visa card. Considering the sticker price of the vehicles affected by the scandal, $1,200 is a not a comforting amount for payback.

One Jetta TDI owner feels clearly betrayed: “I kept telling myself that the emissions and clean diesel and excellent miles per gallon made up for the rough ride and loud road noise.”

One Audi A3 TDI owner puts it more strongly: “They should HAVE to take my car back and return my money. It’s outrageous.”

So far, however, buy-backs don’t appear up for discussion. If all U.S. vehicle owners affected by the scandal were to accept Volkswagen’s gift cards, the company would shell out more than $570 million in cash, incentives and services. That’s not exactly chump change, even for an international corporation like Volkswagen.

But buying back those vehicles would push that sum well over $12 billion and that wouldn’t begin to cover the more than 10.5 billion Volkswagen models in other countries, or the recently red-flagged 3.0-liters.

Based on previous auto scandals, including last year’s Switchgate fiasco at General Motors and the ongoing Takata airbag recall affecting a dozen car companies in the U.S., it’s unlikely that Volkswagen will be required to buy back its flawed diesel vehicles. Repairing them won’t be cheap, easy, or quick and many owners will refuse due to it changing the performance and gas mileage of their car significantly. For the “green” drivers, they will end up losing these features they paid a premium for.

This is one reason why owners are joining VW class-action lawsuits. We doubt buy-backs will happen, but VW is going to have to cough up more than their goodwill package. That isn’t cutting it


Lawsuit from Phi Kappa Psi at University of Virginia Could Succeed

In November 2014, Rolling Stone published a story called “A Rape on Campus.” It described the gang rape of a woman (Jackie) at a party held at a Phi Kappa Psi fraternity house at University of Virginia. The article not only described the University’s failure to respond to the assault, but also discussed the school’s lax attitude toward other instances of alleged sexual assault.

However, the fraternity involved has raised a number of issues with the allegations. They state that a lot of the facts of the story simply cannot be correct. For example, the alleged victim stated that the incident occurred during a party, but the fraternity did not have a party on the date the victim stated. They also state that no member of the fraternity is employed by the university’s aquatic facilities, which was a major part of the alleged victim’s story. The article also suggested that the gang rape was part of an initiation process required by new pledges. However, Phi Kappa Psi stated that not only is there no initiation process in the fall, but they would never require “ritualized sexual assault” as part of the pledging or initiation process.

They even point out that while the article sited that it interviewed three witnesses, this never occurred. A statement issued by Phi Kappa Psi said that the article was “a sad example of the decline in journalistic standards,” explaining that the author did virtually no fact-checking before publishing the story. They expressed disappointment that the author did not apologize, but Rolling Stone did admit that their writer did engage in reckless behavior in developing and writing this story.

Potential for a Defamation Lawsuit
Phi Kappa Psi has stated that they plan to pursue every legal option available to them against the magazine for what they believe is a completely false story. The fraternity feels their reputation has been damaged, and they would like to hold the magazine responsible. Although they have not filed a claim yet, several experts agree that their likelihood of success on a defamation lawsuit would be high.

The standard for defamation varies depending on whether the defamed party is a public or private figure. Private figures have greater protection than public figures, because public figures presumably realize that negative things will be stated about them if they inject themselves into the public light. One expert stated that he expects the fraternity to be considered a private figure, which means that they would have to show that Rolling Stone’s publishing practices were negligent. If they are a public figure, however, they would have to prove not only negligence but also that that the statements were made with “actual malice,” which means that they published the information knowing that it was untrue or showed a reckless disregard for their truth. That standard is much harder to prove.

One of the major issues that the suit faces, however, is showing damages. They must prove damage to reputation. Showing things like a drop in recruiting, drop of donor income, or losses associated with punishment from the university would be indicative of damages. However, the monetary losses that they faced are likely small because the Rolling Stone has since retracted its article.

Why Small Firms Have The Future

Small firms are slowly becoming the answer to many of Big Law’s big problems. Many law graduates accept junior positions at prestigious law firms only to get themselves overworked doing menial tasks, day in and day out for years on end. It is ironic that for a profession that has its power in the written word, no one has thought to question this unwritten credo of the legal career: work hard and be a good boy (or girl) for 4 to 7 years and in the end you will find out if the men above have decided that you’re good enough for the big seat: law firm partnership.

In what was to become known as “Bloody Thursday”, in 2009 a majority of the big law firms had restructured or gone out of business, leaving a casualty count of 748 legal staff and lawyers who were laid off. Clients want more affordable legal services and better efficiency and old law firms are scrambling to fit their traditional ways (and prices) on this. Not all law firms will disappear, but many will be forced to change. The big ones will continue to thrive anytime a mega-corporation decides to merge with another mega-corporation – but for the rest of the fish, they will have to adapt.

Technology has allowed lawyers to deliver their services in a more cost-effective way. Repetitive, monotone tasks that were heaped on junior associates can now be automated for almost pennies on the dollar. Legal marketplaces and legal tech start-ups are coming up, connecting business owners with pre-approved lawyers at reasonable prices. Some have taken to the negotiator role, helping business men find legal counsel at transparent prices with services such as Priori, WireLawyer and Hire an Esquire. Other prominent start-ups in the legal space are: PlainLegal, Ebrevia, Diligence Engine, Ravel Law, Judicata and LawPal.

Lawyers who want to remain independent and value flexibility, know that the old pricing models are on the way out, client servicing now taking priority over the billable hour. To make it in this changing environment, being a lawyer is not enough. You have to also be an entrepreneur, driven by work and innovation, willing to compete with others. Those who adopt technology while it’s still in its infancy will thrive. Legal tech companies are becoming more and more the drivers of change, the ones that are innovating in a field, that decades ago seemed unchangeable. Those who don’t embrace technology, will continue to be undercut, their profits slowly diminishing, until they’re forced to restructure or go bust.

Suddenly, becoming a lawyer isn’t just the underachiever’s backup plan. The hierarchical, pyramid structure is eroding and the times put this structure on its head – the successful lawyer will have to don the entrepreneur hat if he wants to expand. For the rest, keep doing what you’re doing. Just don’t complain when clients stop calling you.

photo credit: Adrian Dreßler

How A Partnership Agreement Can Save Your Life

“That’s not what you said.”
“I didn’t mean that.”
“I never said it!”
We’ve all had these annoying exchanges, perhaps with your spouse or even a friend. Didn’t you ever wish that you had gone back in time and had the foresight to bring a recorder  – so that you could prove them wrong when the time came? These replies might be harmless in a casual setting, but if you’re talking about a business, a conversation like this can jeopardize the entire operation. Why pour your energy and financial resources into a project – only to lose it all over a predictable argument?
Luckily, there is a way to prevent this. Just like a prenup, you can record an agreement and make sure that every participating side sticks to it. Introducing the partnership agreement. A partnership agreement is essential for any partnership, regardless if it’s just someone whom you barely know and has the resources or if it’s your best friend that you know from childhood (especially!). Laying down an agreement doesn’t indicate a lack of trust, it simply sets legal boundaries to what is and what isn’t permissible. A partnership agreement covers four basic areas of a business:

  • Who contributes to the company, financially and administratively and who owns what. Who is bringing the initial capital? Does everyone get the same share? Whose house/office/garage are you operating from? Who gets to be CEO, CFO, CQO, CMO, COO and what does each role entail?
  • Who makes the big decisions? Can you stop your partner from selling 70% company shares for a paltry $10,000? Are there decisions that require 100% partner consensus in order to be made, regardless of the stake each partner has?
  • How will the profits be distributed? What are the salaries? Will you be able to take out money from a business? Will most of the money go back in for investment or do the founders keep the profits?
  • What happens if one of the partners gets himself in serious injury or dies? Anticipating everything in advance, regardless of the probability is what every good start-up does.
  • Buyout scheme. How can a partner withdraw from a partnership? The honeymoon period is seen not only with newly-weds. Excitement and action followed by sudden disinterest and departure happens in business as well – in fact, co-founders leaving is one of the major causes of business failure. “Till death do us apart” sounds romantic but statistics don’t lie – get yourself insured.

Also known as an operating agreement or bylaw, a partnership agreement can be obtained through hiring the services of a corporate lawyer.
But are all partnership agreements good? This depends on the actual terms that are laid down. Here are the most common pitfalls you should avoid:

  1. Partnering with someone because you can’t hire them.
    A proven partnership killer, right from the get-go. Jack has a business idea and John has the business skills. Because Jack can’t afford to hire John as an employee, he decides to partnership with him. But a partnership is not only starting capital – it’s duties, expenses and profits. After a while Jack and John have diverging interests and Jack finds himself liable for John’s obligations (financial and contractual) under the initial agreement. Don’t give away more than you have to. If it’s money you lack, find someone else who has the skill and hire him or work out an independent contractor agreement.
  2. Sharing capital.
    If you’re sharing capital instead of expenses, you’re giving away your enterprise ability. Regardless if you’re sharing money, property, information or other resources, it’s always better to draft up an agreement where expenses, rather than capital, are shared. Not everyone has the same intentions as you do and it’s best to prevent something rather than put your trust in someone. Because when something goes wrong – it will be easier to walk away.
  3. Assumption of partner liability
    This assumption is present in almost every partnership agreement, but it doesn’t have to be that way. An attorney experienced in corporate law can write a limited partnership agreement which makes the limited partner free of the obligations and actions of the general partner.
  4. 50/50 partnership
    All’s fair in love and war, but every business needs a boss. A 60/40 or 70/30 split ensures that someone is held accountable and oversees day-to-day operations. Don’t forget to make your buyout or exit strategy known (and in your favor) – this will save you headache later on.

As you can see a partnership agreement can benefit you by making clear the details and obligations of everyone involved. A written, legal agreement drafted by a mutually-agreed-upon lawyer is worth more than a handshake and a promise. When the time ever comes, this document (or lack of) will prove who said what and what was meant exactly by it. Remember – it’s not a matter of “if” but “when”. Statistics don’t lie and failing to plan is planning to fail.
photo credit: ? Georgie R

How Your Business Is Putting You at Risk for Lawsuits

If own a catering business, manufacture a nutritional supplement or run a body-shop that specializes in custom paint jobs, then the thought of liability issues has probably crossed your mind. But what happens when you’re in a profession that isn’t that risky? Do freelance writers, social media experts and UI designers have to worry as well?

Let’s look at how running a business and keeping liabilities in check works. We don’t mean to put you off from taking charge of your life – only to inform what this charge means exactly. Let’s face it – no business is immune to litigation these days. The better prepared you are, the more you will be able to face whatever life throws at you.

Worst case scenario

The chance to get sued or run into legal trouble is minimal but let’s not forget that we live a litigious society so it’s good to have your bases covered, regardless of the industry and profession you’re in.

What happens if you’re a freelance writer and accidentally reproduce in whole or in part an article that you read some time ago? What if one of your clients stops paying and avoids you? What if a client takes you to court on breach of contract? What happens if the FedEx employee gets into an accident while delivering a package on your property?

These are worst-case scenarios that aren’t likely to come up everyday. However, if you know how to respond, you’ll be less liable to panic and do something stupid that puts you in personal and financial distress later on.

Sole proprietorship and general partnerships are personally liable.

If you’re a sole proprietor or run a general partnership, there is no line that separates the business from the individual. If there’s no official business structure, when your business gets sued, you get sued as well. This means that personal assets can get included in the settlement. Look into separating your business from your personal assets by creating a LLC or a corporation. Even if you don’t have anything worth losing today, think about the future. Creditor judgements can have you on the hook for a long time, in some cases even up to 20 years.

You Have To Keep ‘Em Separated

Separating your personal assets from you business means more than having a separate business bank account. You should hire the services of a legal expert to help you open a limited liability company (LLC) or corporation. Both entities will protect the owner’s personal assets from the liability of the company.

Once a company is incorporated or formed as an LLC, the company exists as a business entity. This means that any debts and liabilities belong to the business rather than the business-owner. Also called a “corporate veil” or “corporate shield”, for as the name suggests, it shields the owner’s assets from the liability of the company.

The decision between an LLC or a corporation will depend on the size of your operation and financial factors. Those who are looking for VC investors or are considering an IPO down the line will want to look at incorporating. Corporations should also be considered if the bulk of the profits will go right back into the company as investment.

LLCs are the way to go for smaller businesses as the process and paperwork required to get one is simpler. An LLC is also more affordable. LLCs, along with the S Corporation, can have certain tax benefits, since the “double taxation” of the C Corporation is avoided. For more information it’s best to consult a tax adviser.

You’re formalized – now what?

Don’t think that if you formed an LLC or got incorporated that you’re free from any personal liability. Actions that put someone to harm, or are considered crimes, can still result in personal litigation. Failure to keep your LLC or corporation in compliance with the law can also lead to personal liability.

However, when this first, and most important, step is done – you can officially consider that you’re running a business. For more information on liability you will have to look at the specific literature on liabilities associated with your industry and line of work and there’s no better person who knows this than a specialized attorney.

photo credit: StockMonkeys.com