Untying a Legal Knot in the Utah Supreme Court

The law is a tool. As with any tool, you use it to fix what is broken or to maintain what is working (i.e., to secure justice). And as with any tool, the law can be used in the “wrong” way. A clever, unscrupulous party can apply the law in ways not intended, thereby doing harm to a business and the people behind it.

Fortunately, through business litigation, the law provides ways to remedy harm that laws themselves—when misused—may have helped to create.

A sweet deal turns sour for International Confections Company

International Confections Company (ICC) produced and sold candy throughout North America, and did so successfully, growing from nearly nothing to more than $40 million in revenues in a little over three years. Part of that company’s most recent success could be attributed to an exclusive licensing agreement with Mrs. Fields Franchising.

It was supposed to be a 17-year deal, but it didn’t last that long. Mrs. Fields hired a consultant who determined that a 17-year exclusive arrangement would render the company undesirable to potential buyers. As a result, Mrs. Fields manufactured default and informed ICC that the exclusive agreement was to be terminated. ICC’s protests were ignored, and by means of a legal loophole, Mrs. Fields was released from the agreement.

Losing the Mrs. Fields business was devastating for ICC. Things then got dramatically worse, thanks again to direct actions taken by Mrs. Fields Franchising.

Mrs. Fields Franchising acquires a devalued ICC

To fund its growth, ICC had negotiated a large line of credit which was conditional on its exclusive licensing agreement with Mrs. Fields. When the bank learned the licensing agreement had been terminated, it immediately put ICC into receivership (as per the terms of its line of credit), and then put ICC up for sale.

While ICC was negotiating to repay the outstanding portion of the line of credit, the auction to sell the company proceeded. An hour before the bidding closed, a new buyer swooped in with the winning bid. That bidder was Mrs. Fields Franchising.

Things only got worse for ICC when its attorney withdrew from the case without proper notification, even though such a notification was required by law. ICC wasn’t even informed about the final court hearing confirming the sale to Mrs. Field’s until January 2015, nearly a month later.

Mrs. Fields wriggled out of its licensing agreement with ICC, which in turn greatly devalued the company. Then, in the final moments of the auction to purchase ICC, Mrs. Fields took advantage of the low price and purchased ICC for $2 million (the company had been valued at $40 million prior to the termination of the licensing agreement).

Ohio business attorneys build a strong case

At that point, International Confections Company (which was headquartered both in Utah and Ohio) became our client. We immediately saw the inequity of the entire situation. The sale should never have gone through for two reasons:

  • First, when ICC settled its debt with the bank, the company should have been removed from receivership. At that time, the bank had no jurisdiction to continue the sale. Yet ICC’s attorney, for reasons that remain unexplained, waived the “no jurisdiction” issue and allowed the sale to continue.
  • Second, the hearing that confirmed the sale to Mrs. Fields was conducted without proper representation for ICC. Utah law allows a client 21 days to secure new legal representation when an attorney withdraws. Yet the hearing was held less than a week after the attorney notified the court (but not ICC) of his withdrawal. ICC did not even have an opportunity to appear pro se at the hearing.

We appealed the case to the Utah Supreme Court. And while getting the court to reverse a decision is always an uphill battle, this case had one other huge obstacle to overcome.

Overcoming ‘equitable mootness’ through business litigation

“Equitable mootness” is a doctrine that we believe is seriously flawed, though it has been followed by appellate courts for more than a quarter century. Essentially, it says that once a deal (particularly with regard to a bankruptcy) has been completed and a substantial period of time has passed, you can’t go in and undo it, even if some injustice had been done as part of that agreement. Unraveling a complicated deal at that point, so the thinking goes, would not be equitable to all the parties involved.

But what is equitable about allowing an injustice to stand? Where is the relief for a business that was the victim of such an injustice? That was essentially what we argued before the Utah Supreme Court on behalf of ICC.

If parties in this case were allowed to get away with wrongdoing for the sake of equitable mootness, what would prevent future parties from maliciously bending the law regarding jurisdiction and legal representation when they could cite this case as a precedent?

A decision from the Utah Supreme Court is pending. However, we are prepared to pursue justice through other avenues if the court doesn’t recognize how unfairly ICC has been treated.

The business of helping good people

A final note about ICC: It is “our kind of client.” Not just because it has a problem that calls for experienced Ohio business litigation attorneys. But because of the character of the people behind it.

The owner of the company is a stand-up person who built a business from scratch only to have it ripped away through business and legal shenanigans, and through a legal process that faltered rather than adhered to the law. He’s concerned about what happens to the ICC employees who invested their own time and energy in helping to build the business. Legally he could have walked away from ICC and discharged its remaining debts, but he wants his creditors paid in full. He wants justice, from the Utah court and from Mrs. Fields Franchising, even though that’s not the easiest path.

That kind of client deserves business litigation attorneys who will go to Utah—or as far as it takes—to win the justice he deserves.

If you find yourself in a similar situation, don’t hesitate to reach out to the Ohio business litigation attorneys at Cooper & Elliott for legal assistance. We’re here to help.

The outcome of any client’s case will depend on the particular legal and factual circumstances of the case.

 

10,000 Ohioans Recoup Settlement Funds from Class Action Lawsuit Against Transunion Credit Bureau

There are three main credit agencies in the United States. One of them is TransUnion. Nearly every American adult has their credit information recorded and tracked by TransUnion. What happens when the agency you trust to protect your credit rating begins to share your confidential information with other companies—for a price? It’s not something we like to think would happen, but it did. And that’s just the tip of the iceberg.

Major credit-reporting agency breaks consumers’ trust

TransUnion is a big name many Americans may recognize. It is one of three huge credit-reporting agencies in the United States. If you’ve applied for a loan to buy a home or car, chances are your credit rating has been accessed via TransUnion.

When the news broke that TransUnion had violated the federal Fair Credit Reporting Act by selling lists of credit information of hard-working consumers nationwide to marketers, a class action lawsuit was filed. TransUnion’s behavior had potentially affected two hundred million Americans across the country. TransUnion settled the lawsuit, and agreed to offer free credit reporting for one year and other benefits. Because of the difficulty involved in notifying 200 million Americans about the opportunity to register online for settlement benefits, TransUnion also created a $75 million settlement fund that could be used to pay consumers who didn’t learn about the settlement and therefore didn’t register for settlement benefits in time. If a consumer learned about the settlement after the online registration period expired but within two years after the settlement, he or she could lodge a “post-settlement” claim against the $75 million fund.  Sounds fair, right?

Unfortunately, the class action settlement did not require TransUnion to give notice to every affected consumer. The consumers who were supposed to receive benefits, including money from the settlement fund, had virtually no way of knowing the benefits even existed.

Also, even if some consumers learned about the settlement within the two-year “post settlement period,” the terms of the class action settlement made it difficult for them to make a claim. Under the Fair Credit Reporting Act, each consumer’s claim against TransUnion would likely be limited to somewhere between $100 and $1000, and the class action settlement said that consumers could not join together and pursue their “post-settlement” claims. Where would an individual consumer be able to find a lawyer willing to take on their claim, when the claim would be worth at most $1000?

Clearly, it was time for us to get involved on behalf of Ohioans.

Recovering cash for 10,553 Ohioans

We knew we wanted to take this on, but it presented some serious challenges. The settlement language stated we couldn’t file a claim on behalf of more than one person at a time. We had to figure out a way to let people know they had a right to make a claim against the $75 million settlement fund, but we also had to be ready to represent each person individually against TransUnion.

This was in late 2009, and people were hurting from the recession that was in full swing. We knew we wanted to focus on a targeted population in Ohio, and after a great deal of thought, we decided to reach out to the unions in the northern part of the state. We let union leaders know about the TransUnion class action settlement, and when they asked if we would be willing to represent their members we agreed to work hand-in-hand with them to notify individual union members and their families of their potential claims. We hired programmers to build a database of information about our clients—specifically, 10,553 Ohioans that needed in the worst possible way any money we could obtain for them from the settlement fund.

Ohio business attorneys working hard for Ohio families

This case resulted in a tremendous amount of work—but it turned out to be unbelievably satisfying for us. Logistically, there was a lot to be organized. We reached out to tens of thousands of union members, and ended up representing 10,553 individual Ohioans who were suffering from the recession.

The case required numerous trips to Chicago where we went head to head with TransUnion’s attorneys. We prepared and submitted 10,553 separate claims, and we made clear to TransUnion that we were prepared to litigate each and every claim to the very end. We ended up in a stare down with TransUnion, and in the end, TransUnion blinked.

Putting the settlement fund to good use

In the end, TransUnion agreed to pay our clients $300 each. It doesn’t sound like much, but the extra money really meant a lot to them during that tough economic period.

Yes, it was a lot of work for our firm. But you know what? We still remember all the amazing cards, letters and calls we got from our clients, saying how grateful they were for the unexpected money. We still share these stories because it illustrates exactly why we do this work. We helped a population that was struggling, and then went toe-to-toe with one of the country’s largest credit reporting services—a company that was hiding from its responsibility.

But even more satisfying than TransUnion crying, “Uncle,” were those cards, letters and phone calls from Ohioans who were so grateful for extra cash they wouldn’t have even known they were entitled to.

That’s why we do this work.

*Names in this article have been changed to protect our client’s privacy.

The outcomes of any client’s case will depend upon the particular legal and factual circumstances of the case.

Real Estate Developers Battle Industry Tycoon with Help from Ohio Business Attorneys

An imposing land tycoon

Usually when we tell you about cases, the names are changed to protect the parties involved. This case is a bit different. It involves Austin Eldon Knowlton, the eccentric millionaire better known as Dutch. Dutch was a wealthy architect, businessman, and part owner of the Cincinnati Reds. He was also a shrewd real estate investor and industry tycoon.

Bad business practices

Our client, an Ohio real estate development company, was interested in growing its business and developing the community. So when they found a large property ideal for commercial development in the outer belt of Columbus, they contacted the owner, Dutch Knowlton. They made him a fair offer, which he readily accepted.

The agreement was contingent on the results of engineering and soil studies, which our client would pay for, to make sure the land could be developed commercially. Our client paid Knowlton an earnest money deposit of $250,000 to secure the agreement, and then proceeded with the studies. The studies went well, and our client was ready to close the deal and start their new real estate endeavor.

But Knowlton had sold the property to another buyer.

Before coming to us, our client sought assistance from another law firm in town. They hoped the other Ohio business attorneys could seek an injunction and help them recoup their losses. They were quickly disappointed. The developers were told all they could hope to recover was their earnest money, and that the legal fees to do so would likely be as much as the deposit. Knowlton’s deep pockets would allow him to drag the case out to ensure the developers would walk away with nothing but frustration and lost time.

Contingency-fee-based litigation

Thinking they had run out of options, the developers came to us because they heard we handled business litigation on a contingency-fee basis. This way they could afford to go after someone as rich and intimidating as Knowlton and still hope to recover a portion of their deposit. They were even more elated when we explained they could seek the lost earnest money as well as the amount of profits they would have earned had the commercial property been sold to them as initially agreed.

We set out to firmly establish the costs of real estate development and the potential profits our client would have made from the purchase. Using the records they supplied on previously-developed properties, we decisively proved that their profits would have been substantial.

Not seeing eye-to-eye

Usually parties involved in lawsuits see their sides very differently, but often as the case develops some middle ground is established and a settlement can be reached. Not Here. Knowlton’s legal team insisted we were barking up the wrong tree. They said our client wasn’t entitled to recover the profits or even the deposit.

Eventually they invited us to meet for lunch to discuss a settlement. Thinking they had finally come to see our point of view, we met with them. We sat down and things were very cordial. After some small talk, they finally presented their offer:

Knowlton was willing to pay for the lunch plus one dollar!

At that point, it was quite clear that Knowlton wasn’t ready to see eye-to-eye with our client.

Righting a deal gone wrong

The case went to trial. We were concerned about how the jury would react to Knowlton, because he had proven to be quite charming when we had taken his deposition. To our surprise, however, Knowlton didn’t bother to show—he had opted to go sailing instead.

We proceeded to present the facts to the jury and argued that in this instance, Ohio law entitled the real estate developers to receive lost profits in addition to their earnest money. The jury agreed and a substantial judgement was returned in favor of our client.

Not only did our client feel a sense of relief, but they were able recover the profits lost on a deal gone bad. They were able to use that money to grow their company and make future deals that improved the area. Without the ability to use affordable, contingency-fee-based litigation, they never would have been able to take down their wealthy, imposing opponent and right a business deal gone very wrong.

If you find yourself in a similar situation, don’t hesitate to reach out to the Ohio business attorneys at Cooper & Elliott for legal assistance. We’re here to help.

 

The outcome of any client’s case will depend on the particular legal and factual circumstances of the case.