The Weatherhead 100 was crafted in 1987 when Bob Pavey, Managing Partner of Morganthaler Partners, first noted that Northeast Ohio needed a venue to properly acknowledge, support and praise companies that were the fastest growing in the region. Pavey suggested that Enterprise Development, Inc., the former not-for-profit subsidiary of Case Western Reserve University, not only identify, but bestow a genuine sense of honor upon the fastest growing companies in Northeast Ohio.
Since 2004, the Weatherhead 100 is compiled and managed by the Council of Smaller Enterprises (COSE). For more on the Weatherhead 100, visit Weatherhead100.org.
List of Weatherhead 100 Winners
4. SageQuest Inc.
5. DVUV Holdings LLC
6. E-merging Technologies Group
9. Wellington Technologies Inc.
11. Military Products Group Inc.
tie-14. 1Matrix Healthcare Management Solutions LLC
tie-14. Compass Packaging LLC
16. EverStaff LLC
17. Fidelity Voice and Data
19. Turning Technologies LLC
20. SpaceBound Inc.
21. PartsSource Inc.
22. Signature Health Inc.
23. DCT Telecom Group Inc.
24. Optiem LLC
25. Pyramyd Air Ltd.
27. Environmental Management Specialists Inc.
28. Cleveland Corporate Services Inc.
29. Perspectus Architecture
30. TechniGraphics Inc.
31. Amish Mills Inc.
32. Shaker Consulting Group Inc.
33. Dorman Farrell LLC
34. US Endoscopy
35. NineSigma Inc.
36. BrandMuscle Inc.
37. Home Team Marketing
38. Roscoe Medical Inc.
39. Ohio Realty Advisors LLC
40. TRAX Construction Co.
42. TMW Systems Inc.
44. HMT Associates Inc.
45. Weed Pro Ltd.
47. Jakprints Inc.
48. Etactics Inc.
49. Arrow Machine Company Ltd.
50. Perceptis LLC
53. Razorleaf Corp.
56. Corporate United
58. Swiger Coil Systems LLC
60. Priority Group Inc.
61. Predictive Service LLC
62. Ohio Technical College Inc.
65. Lake Management Inc.
67. SeniorTV-Stellar Private Cable Systems Inc.
69. Swift Filters Inc.
70. RNR Consulting
71. Lexi-Comp Inc.
74. State and Federal Communications Inc.
79. OEConnection LLC
80. Jarrett Logistics Systems Inc.
82. AtNetPlus Inc.
83. WhiteSpace Creative
85. Fire-Dex LLC
88. Small Hands Big Dreams Learning Centers LLC
89. Partners In Plastics LLC
90. Cohen & Co.
93. Fleet Response
94. Grace Consulting
95. Bella Capelli Sanctuario
96. Agility Inc.
97. Custom Products
100. North Coast Education Services
You work hard to protect your company. Your buildings are safe and secure and all your important data and business information are backed up and shielded from the outside.
But, what are you doing in-house? Are you monitoring your employees, keeping a close eye on how they’re utilizing the technologies you provide for them? If you’re not, your business could be at risk.
Most employers don’t want to think about it, but employees can and do steal confidential information, often taking it to a competitor or selling it to the highest bidder. Not only that, sometimes employees don’t even realize that the information they have access to is confidential. Then, all it takes is a simple slip of the tongue or a seemingly innocuous comment in an e-mail or on a social networking site and your confidential business information is out there in the public for all to see.
“Employers should be monitoring every type of electronic media that employees use, including computers, smartphones and even social networking sites like Facebook and Twitter,” says Jennifer Coon-Leeper, CSP, a major accounts manager for Ashton Staffing, Inc. “Identify what information needs to be protected and who has access to that information. From there, you can craft an effective employee monitoring policy and ensure that all your data are safe and secure.”
Smart Business spoke with Coon-Leeper about employee monitoring, what can and should be monitored and how a company can craft an effective employee monitoring policy.
Why should employers monitor employees’ online activity?
The No. 1 reason is to ensure that the employee is doing a good job and being productive. With the amount of access to the Internet, it is very easy for an employee to spend hours updating a Facebook page, shopping or exchanging personal e-mails. Employers monitor online activity to ensure that the employee getting paid to work is actually working in a timely and efficient manner.
Other reasons to monitor an employee’s online activity are to maintain confidentiality and limit employer liability for employee misconduct. Employers don’t want to worry about company information getting into the wrong hands or any lawsuit stemming from an inappropriate e-mail sent by an employee.
Many employers also monitor online activity to make sure their systems are being used according to policy and are not overloaded with viruses.
What should employers monitor, and do they have to inform the employee?
While controversial, employers, with good cause and under certain limitations, can monitor e-mail, Internet, social networks, etc., without the employees’ knowledge or consent. Although some employees feel that monitoring invades privacy, most federal laws do not support these concerns.
With that in mind, it is recommended for employers to check their state laws, as they may vary. Employers should also create a written agreement for employees to sign when they are hired. This agreement is used to inform employees that all online activity will be monitored.
Do employees have any expectation of privacy when using employer-provided devices?
Most employees understand the need for a monitoring policy. However, many do not want their every move micromanaged and tracked. When using an employer-provided device, it is important for the employee to understand that the device is the property of the company and is and should be used for business only. Anything that is not business-related should be handled after business hours on their own personal devices.
How should an employee-monitoring policy be crafted?
Employers looking to craft a monitoring policy should keep in mind that the policy should be reasonable. Restricting all online activity is unrealistic and practically impossible to enforce. The most effective policy would involve monitoring online activity but would also allow employees the freedom to work without feeling ‘Big Brother’ is watching over them.
Any policy that is created by the employer should:
- Explain the business-related reason for the monitoring.
- Discuss what is considered to be permissible work-related activity and what is considered prohibited, inappropriate activity.
- Address the consequences of violating the policy, up to and including termination.
Finally, all employees must sign the policy. Acknowledging and signing the policy will help to prevent future issues.
What legal rights do employers have when it comes to monitoring their employees?
Most courts have ruled in favor of the employer when it comes to monitoring employee online activity. Whether they have a written policy or not, employers typically have the right as long as they have a business-related reason to do so. That said, employers should always make sure they are up to date on their state’s regulations and laws.
Jennifer Coon-Leeper, CSP, is a major accounts manager for Ashton Staffing, Inc. Reach her at firstname.lastname@example.org or (770) 419-1776.
As technology advances at lightning speed, the amount of data that businesses create and store is growing exponentially. Companies are not always on top of how and where that data is being stored, and information can get lost in the confusion.
Maybe you’re just throwing everything on your server, or having your employees use external hard drives or backup as needed. If you’re relying on physical servers or devices to store your data, your information isn’t as protected as it should be. Computers crash, which could lead to disaster if that’s the only place your data exist. Data is critical for a business to survive, so what are you doing to protect that vital asset?
“These days, data is everything,” says Alina Montano, senior director of product management for Time Warner Cable Business Class. “Regardless of size, every company has important information that must be protected. Data protection is critical for the success and growth of any business.”
Smart Business spoke with Montano about data protection and how a cloud-based storage service can protect your company’s data in any situation.
How can a company’s data be compromised or lost?
Statistics show that approximately 12,000 laptops are lost in U.S. airports every week, and two-thirds of those are never returned to their owners.
In addition, 20 to 30 percent of PCs suffer a major crash every year. Portable data storage devices such as USB sticks often get lost and, quite frankly, storing all your data on your computer is no longer an option.
The question isn’t how data can be compromised; it’s what you’re doing to prevent data from being compromised because, in all honesty, it’s a given that eventually every computer, hard drive and server will be compromised in one way or another.
What measures can companies take to protect their data?
All back-up measures are centered on replicating your company’s data and storing it in a remote location. That location can be as simple as a USB stick or a physical server room at a remote location. But, again, USB devices can get lost, and servers and computers can crash.
To truly protect your data, you need to implement a cloud-based storage service. A cloud-based service allows businesses to automatically back up computer files to a secure and remote data center as a protection against data loss; the service is centrally managed and configured with a Web-based administrative console.
What is the return on investment for cloud-based solutions?
Cloud services can be very cost-effective — you only pay for the data you use and/or store. This could range from as low as $5 or $6 per month, depending on the amount of storage used, type of service, or features you choose.
Think of the monthly fees like an insurance policy for your data. The cost is relatively low, and the peace of mind you get is priceless. In addition, you can take advantage of economies of scale, which means the cost-per-user is less.
Also, you don’t have any hardware to buy or install and you don’t need any resources to manage your IT. In the cloud, the vendor takes responsibility for maintaining the software and servers. In an on-premise environment, you would pay for the hardware, storage space and IT personnel to maintain the system, in addition to the software.
In a cloud environment, the vendor pays those costs, so a larger percentage of the total cost of ownership by you shifts away from hardware and people and toward the service.
What qualities should a company look for in its technology partner?
Choose a technology partner that can bundle services — phone, TV and Internet all interconnected. But at the same time, you want a vendor that is providing solutions for your business based on its needs, not just selling you products.
You also have to look at the technology partner’s data network. Does it have the speed and capability to keep up with your business? If you have a lot of data to back up, it could take a lot longer than it should if your business is on a slow network.
Finally, you want to find a technology partner that’s a serious player in the field, that will be around 10 years from now. It’s very difficult to move from one vendor to another because of the initial setup, so you want to choose wisely so that you’re not jumping from vendor to vendor every year.
Alina Montano is senior director of product management for Time Warner Cable Business Class. Contact a Time Warner Cable Business Class account consultant at (877) 612-7474 to discuss your communications needs.
Last year, the landscape of privacy law changed on several different fronts, and if companies aren’t aware of those changes, they could find themselves at severe risk.
First, in terms of workplace privacy, the Supreme Court ruled in City of Ontario v. Quon that the Ontario, California Police Department did not violate the Fourth Amendment rights of a SWAT team member by reviewing personal text messages he sent and received on a department-issued pager. Significantly, the court declined to rule on the broader issue of whether employees have a reasonable expectation of privacy when using employer-provided equipment for personal communications. The court did provide a bit of guidance for employers by noting that “employer policies concerning communications will of course shape the reasonable expectations of their employees, especially to the extent that such policies are clearly communicated.”
Also, the FTC had a significant up-tick in its focus on privacy issues, including a very significant settlement with the social networking site Twitter and release of a proposed framework that would provide considerable clarification and guidance on issues of consumer data privacy.
“The third notable thing that occurred with privacy law in 2010 was the increased presence of plaintiff lawyers in the fray,” says Kit Winter, a member with Dykema Gossett PLLC. “We’re seeing more and more businesses being sued for violating consumer privacy rights.”
Smart Business spoke with Winter about these changes to privacy law and what companies can do to ensure they’re covered.
What are the primary areas of privacy law that businesses should be most concerned with?
Protection of consumer data is another area of potential risk. There have been laws in effect at the state level for more than a decade that say businesses need to use reasonable measures to keep consumer electronic data private. In 2010 the FTC raised the bar on the understanding of ‘reasonable measures’ by bringing an action against Twitter alleging that it permitted users to select easily guessed passwords. Twitter settled the FTC action by, among other things, agreeing to permit the FTC to audit its privacy protection practices for the next 20 years. The FTC’s action against Twitter is a clear message that robust privacy measures are required to pass FTC muster.
How can companies protect themselves against privacy litigation?
The FTC’s proposed privacy framework provides some welcome guidance. In order to reduce the burden on consumers resulting from long, legalistic privacy policies and ensure basic privacy protections, the FTC recommends that ‘companies should adopt a “privacy by design” approach by building privacy protections into their everyday business practices.’ Companies can protect themselves by providing reasonable security for consumer data, limiting and monitoring collection and retention of such data, and implementing reasonable procedures to promote data accuracy. In order to accomplish these goals, companies should consider assigning personnel to oversee privacy issues and training employees in privacy practices, among other things. The FTC is also encouraging companies to broadly disclose their privacy policies and to honor consumer requests to opt out of information gathering procedures like click tracking.
The big picture is that it is increasingly imperative that companies accurately describe what information they collect and what they do with that information in a manner that can be easily understood by consumers. Companies cannot store consumer data in an unencrypted manner and they must implement vigorous security protection for all consumer data and information that they collect and store.
Going forward, what should businesses in particular be aware of?
The trend in the future is for increased regulation of privacy and businesses’ use of consumer data. For example, the FTC is proposing a universal opt-out provision akin to the Do Not Call Registry that would allow Internet users to opt out of being tracked by companies and advertisers. The FTC has also made clear that when a company makes representations about how it treats consumers’ personal information, it has to live up to those promises or face FTC action.
The landscape of privacy regulation is rapidly changing and companies need to carefully examine what consumer data they collect and how they use it in order to avoid potential liability.
Kit Winter is a member with Dykema Gossett PLLC. Reach him at (213) 457-1736 or email@example.com.
For small to mid-sized businesses, there are three problems that seem to occur over and over again: not documenting the ownership interest of the company; not properly documenting the protection of the company’s trade secrets such as customer lists, business plans, and pricing information; and not properly documenting the ownership of the company’s intellectual property, such as source codes, formulas, inventions and patents.
“In a small to mid-sized business, it’s often important that things move quickly, so everyone is in a hurry to get things done, which means that some items get overlooked,” says Brian Colao, a member of Dykema Gossett PLLC. “But, in order to get solid advice on these issues, a company does not need to spend a lot of time or money — it just has to understand these issues and why they’re so important.”
Ignoring these issues could be catastrophic, says Colao, so a business would be well advised to make sure they have all their bases covered.
Smart Business spoke with Colao, about these three issues, the mistakes companies often make with them, and how to avoid making those mistakes in the first place.
What are the consequences of these kinds of errors?
For one, if you don’t properly document the ownership interest of the company, you could lose your ownership interest. Even if you’re the majority owner and think you’re protected, without proper documentation, your ownership stake is at risk. Also, I’ve seen situations where companies basically lost the right to protect their customer and pricing information, even though it had clearly been stolen, because they didn’t properly document it. And finally, I’ve seen instances where companies lost their IP rights, trademarks, patents and copyright information because they weren’t properly documented.
How can companies avoid these errors?
First and foremost, the company owners and leaders need to sit down with a lawyer they’re comfortable with and get a complete understanding of what their rights are and what needs to be documented. The cost to sit down with an attorney early on in the process is very modest, but if you just plow forward and ignore these things, the cost of trying to fix things after the fact can be huge. In many cases it’s the difference between a few hundred dollars up front to spending hundreds of thousands of dollars after a mistake is made.
What should a company look for in a lawyer?
You want someone who understands small and mid-market businesses and you want someone who can sit down with you in a non-judgmental way and take inventory of the entire situation — from an ownership standpoint, from an IP standpoint and from a customer and employee standpoint. Bottom line, you need a lawyer who can efficiently and effectively evaluate exactly what needs to happen to properly protect the rights of the company, its owners and all parties involved.
What are the smartest ‘recoveries’ that businesses can make?
If a business is operating right now and hasn’t properly documented everything, it’s never too late to go back and do that. In fact, it’s better to do that now and have those discussions before there’s a disaster. Get everyone together and document what the rights are for each and every party involved. Once a dispute happens, it’s almost impossible to do that. If you try to go and fix one of these issues after the fact, you’re going to spend a lot of time and money. And, in many cases, you won’t even be able to recover.
Again, the key is, if you have any doubts in your mind, sit down with a lawyer early in the process. Many lawyers will do an initial consultation for free, and the right lawyer can make a proper evaluation of your rights and save you a lot of trouble on the back end.
Are there any warning signs or things in particular companies should watch out for?
Never do business with partners or employees on a handshake. Things may seem great and they may indeed be fine for a certain period of time, but it is a recipe for disaster just to do business with shareholders, partners or employees on a handshake. If you are currently in a situation such as that, you need to evaluate and document everything.
Brian Colao is a member of Dykema Gossett PLLC. Reach him at (214) 462-6409 or firstname.lastname@example.org.
Taxes are a significant cost for any profitable organization. When business professionals discuss managing the risks associated with taxes, they are frequently referring to the tax implications of unfavorable audit opinions, improper recording of tax assets and liabilities on a firm’s balance sheet, or noncompliance with tax laws. Tax Risk Management (TaxRM), however, is much more than the sum of these elements.
TaxRM is an enterprisewide process that is affected by a company’s board of directors, management and/or other personnel, and is designed to minimize tax liabilities and maximize compliance, each within the guidelines of tax laws. TaxRM processes enumerate, analyze and mitigate tax-related risks associated with an organization’s strategy, operations and processes, says Walter M. McGrail, JD, CPA, a senior manager at Cendrowski Corporate Advisors LLC.
“Effective TaxRM can help an organization minimize its overall risk exposure, and it should be integrated into an organization’s enterprise risk management process,” says McGrail. “It is necessary for nonprofit and for-profit organizations.”
Three stakeholders can claim rights to the cash flow of any organization: debt holders, equity holders and the government. Besides minimizing risk exposure, TaxRM maximizes the amount of cash flow available to debt and equity holders.
Smart Business spoke with McGrail about TaxRM and how it can benefit organizations.
Who should be responsible for TaxRM?
Senior level tax managers, CFOs, audit committees, chief risk officers and heads of internal audit functions should manage TaxRM. As such, TaxRM processes holistically manage tax-related risks throughout the organization. These risks pertain not only to financial reporting and tax law compliance but also to the methods by which the organization generates profits for stakeholders. Wherever there are profits, there are most likely taxes, or at least compliance reporting requirements.
What are the foundational elements of an effective TaxRM process?
TaxRM is most effective when it is treated as a component of the organization’s overall enterprise risk management (ERM) process. Many ERM processes focus on the risk exposure associated with a company’s core services and operations. TaxRM, however, is infrequently integrated into an ERM process, in spite of the fact that the government can receive a significant portion of a company’s profits — in some cases upward of 40 percent of profits. Integration of TaxRM into an ERM process begins with the integration of the tax function in the organization as a whole. In many companies, the tax function is treated as an area of specialized expertise whose primary focus is tax compliance; day-to-day accounting and reporting functions are often carried out by personnel before being ‘thrown over the wall’ to the tax department.
For example, many companies make investment decisions using a net present value (NPV) based criterion: A project is accepted if its NPV is greater than zero when the company’s hurdle rate is employed. In calculating the NPV of a project, however, a flat, marginal tax rate of about 40 percent is often used. This rate may be significantly different from both the company’s effective tax rate and from the tax department’s best estimates regarding the net tax rate for the project, and could lead to suboptimal decision-making by organizational managers. A culture of tax awareness is also a necessary, foundational element of an effective TaxRM process. Cultures are not ‘implemented,’ per se; they are affected by the actions of an organization’s board of directors and senior management. A culture of tax awareness, then, is an element that must be fostered by these high-level individuals through their actions and through an emphasis on tax analysis. In the absence of a tax-focused culture, a TaxRM process will achieve suboptimal results.
Aside from a tax-focused culture, what are other foundational elements of a TaxRM process?
Another foundational element of a TaxRM process is a documented tax philosophy for the organization. This philosophy articulates the manner in which the organization will manage tax liabilities through acquisitions and dispositions, operations, accounting policies and financial reporting. There is a great deal of risk exposure surrounding each of these issues and, hence, a large amount of tax uncertainty. TaxRM processes are, therefore, focused on managing the variables associated with these issues and the requisite tax liabilities they generate.
A tax philosophy is more than an articulated statement, which relates that the organization will seek to minimize its tax liabilities. In fact, in properly structured environments, taxes can help companies minimize risks associated with their investments. For example, if a company experiences losses, it may receive refundable tax credits associated with this loss. These credits serve to minimize the firm’s risk exposure as the government has now borne a portion of the firm’s risk by providing for refunds of taxes previously paid or serve as credits against future tax liabilities.
Once a tax philosophy has been established, an organization can begin to implement working elements of a formal TaxRM process.
How can nonprofits also benefit from TaxRM?
Although nonprofits do not pay taxes on their core operations, a portion of their operations may be subject to unrelated business income tax (UBIT). For instance, although a hospital is a nonprofit organization, hospitals may pay UBIT on income earned in their gift shops if effective TaxRM processes are not in place. In this manner, an effective TaxRM process can help nonprofits minimize UBIT through careful and deliberate planning, affording the organization greater after-tax cash flow to fund its core operations and further its mission. As such, TaxRM should be a key element of ERM processes in nonprofits as well as for-profit corporations.
Walter M. McGrail, JD, CPA, is a senior manager at Cendrowski Corporate Advisors. Reach him at (866) 717-1607 or email@example.com or visit www.cca-advisors.com.
Understandably, the company mindset is always to be looking forward. So, when a company hits a milestone with a product it has had in the development pipeline for a lengthy period of time, the natural inclination is to pause (briefly) to celebrate the accomplishment, before turning attention to the next product. This pattern of constantly looking to the next and the newest challenge is essential to continued growth and innovation, but it is also the source of major problems when, after several years have passed since approval, a product becomes the focus of litigation that has the potential to sprawl into hundreds, even thousands, of cases.
This puts the company into “panic mode” as it is confronted with the need to make critical strategic decisions in a highly compressed period of time based on an overwhelming amount of fragmented and incomplete information — often with no reliable guide to explain the company mindset during the approval process and to shed light on why certain actions were taken while others were not. Litigation “time capsules” are a proactive step intended to help address this problem.
“Litigation time capsules are designed to capture relevant information and key documents, and to identify and clarify the mindset of decision-makers at the point when product milestones were achieved,” says Kevin M. Zielke, a member and the practice group leader for the Pharmaceutical and Medical Device Litigation practice group at Dykema Gossett PLLC. “All of this information would be captured while memories are fresh and documents are close at hand, and then would be stored away such that, if the product faced litigation down the line, the company would have ready access to it. Armed with this information, the company is in a much better position to make the important strategic decisions necessary so that it has the best prospects for litigation success.”
Smart Business spoke with Zielke about litigation time capsules and how they can help a company minimize litigation risk.
Why are litigation time capsules so useful and why don’t more companies utilize them?
The problem is that when something good happens — a new product has made it through the development pipeline to approval, for example — no one wants to spoil the party by raising the possibility of future litigation. That, however, is precisely the time when undertaking this effort is imperative. The ounce of prevention that a company gains by taking the additional time and effort necessary to work with its attorneys to develop these time capsules has the potential to provide pounds of cure when, in the event of litigation, the company can avoid being caught flat-footed by the informational disadvantage that often exists at the outset of litigation.
While these time capsules can prove enormously helpful in the products liability context, where the company faces the prospect of many lawsuits being brought relating to a particular issue, they can also be used when significant corporate transactions or real estate deals are concluded. Essentially, they provide a snapshot of the then-existing facts, circumstances, key players and driving forces at the time the product was approved or the deal was done.
Why are litigation time capsules so important for businesses to have now?
Today, the need for ready access to key information years after the milestone has been achieved is made all the more critical by two fairly recent developments. First, the ready availability of inexpensive and potentially limitless electronic storage means that those tasked with responding when litigation has been brought are confronted with a veritable ocean of potentially relevant materials that may be stored on hard drives, servers, backup discs, external drives, flash drives, cloud storage and the like. Second, the increasingly rootless nature of company personnel frequently means that those who were responsible for key decisions or who possess information necessary to effectively respond to the litigation are no longer with the company and not readily available to discuss these issues. As a result, capturing the most relevant materials and having immediate insight into the thinking at the time are essential.
What are the consequences of not appreciating these risks?
Now, perhaps more than ever, successful companies have to confront the fact that the litigation target is on their backs at all times, and have to build this sensibility into their culture by making it part of standard operating procedure. The failure to do so means the company will find itself forced to make key strategic decisions based on whatever information those charged with formulating the response were able to cobble together in the often highly compressed time frames found in the litigation context — after that the company will be largely locked into those early strategic decisions. That’s why litigation time capsules work so well: you can wrap your head around lawsuits and respond to them as quickly and efficiently as possible.
Kevin M. Zielke is a member and the practice group leader for the Pharmaceutical and Medical Device Litigation practice group at Dykema Gossett PLLC. Reach him at (313) 568-6908 or firstname.lastname@example.org.
A company’s reputation is critical to its prosperity. In developing this reputation through advertising, businesses need to be mindful of the complex and ever-changing body of laws that regulate advertising in myriad forms of media.
From traditional print ads to social media postings, advertising is pervasive and important to every business. How you protect yourself and your business from running afoul of the laws and protect yourself from attacks by your competitors can get tricky, says John Greenberg, chair of the Intellectual Property and Advertising Law practices at The Stolar Partnership LLP.
Smart Business spoke with Greenberg about how to promote your business, comply with the law and protect your brand.
What is advertising law?
Advertising law is an umbrella term that is often used to refer to legal issues relating to the trillion-dollar industry that consists of advertising, promotions and marketing.
It covers a multitude of important areas of the law: traditional advertising and trade disparagement; more cutting-edge advertising such as behavioral or targeted advertising, interactive advertising and advertising over the Internet; social media marketing; sweepstakes, contests and promotions; and even the use of gift cards, coupons, rebates and other incentives.
Why should businesses care about advertising law?
There has been a significant increase in the number and seriousness of lawsuits in this area over the past several years. The Federal Trade Commission has been active in challenging advertising campaigns that the FTC perceives to be a problem for consumers.
Plaintiffs’ lawyers have become increasingly aggressive in bringing class-action lawsuits. Businesses have also come to recognize that litigation, or at least the threat of litigation, is a powerful weapon to use against competitors whose advertising campaigns impugn their brands or otherwise make false or overly aggressive claims.
How can a business work with a partner to avoid litigation?
Businesses should work with their legal counsel in the early stages of the development of their campaigns so that they can avoid litigation later. By involving a law firm at this early stage of the process, businesses can have an attorney run an ad clearance early and provide preventive advice before the costs and stakes get higher — whether that means having the piece of mind that the campaign is on the right track legally or becoming aware of areas in which the campaign may run afoul of the law in some respect.
What types of issues should a business’s legal partner be looking for when running an ad clearance?
The attorney should look at a wide range of issues which, of course, vary from campaign to campaign. The attorney should consider whether there is factual support for the material ‘claims’ that are being made at the heart of the ad, and whether the claims and other elements of the campaign will violate the rights of others in terms of intellectual property rights, publicity or privacy rights, or third-party contract rights.
The attorney should also consider whether the claims and other elements violate applicable law on a federal, state, county and/or local level. This is of particular importance in some specific industries. The food and restaurant industry, for example, is highly regulated at a number of levels of the government.
The attorney also should look at whether a whole host of ancillary, but still very important, issues are in play, such as whether the campaign is likely to be distributed through proprietary social media sites, or is to be directed at children, or involves endorsements or testimonials, or affects privacy rights or data security.
These kinds of issues are particularly tricky under current law.
You also mentioned that companies are using advertising law as a weapon against competitors. How so?
When we discuss an ad clearance, we are talking defense. Yet, litigation in this area is increasingly being viewed as an offensive weapon, as well. Companies today are more sensitive to the value of their intellectual property and the potential to exploit it to their advantage against their competitors.
Whereas in the past, litigation was typically filed over only egregious conduct — an outright lie about another’s product — now there are an increasing number of lawsuits over more nuanced issues, such as whether implied claims about the superiority of another product’s performance are overreaching, or even whether too much of another’s trademark is used.
Underlying these lawsuits is the notion that the plaintiff company sees litigation as a worthwhile avenue for improving its competitive positions over competitors. Turning back to the issue of defense, the prospect of such litigation obviously brings into better focus the importance of conducting a thorough ad clearance up front.
John Greenberg is chair of the Intellectual Property and Advertising Law practices at The Stolar Partnership LLP. Reach him at (314) 641-5199 or email@example.com.
Most lawsuits never actually go trial, nor are they resolved by motion. Instead, they are resolved by settlements negotiated by the parties’ attorneys. Unfortunately, many attorneys are not as familiar with the rules of settlement as they are with the rules of evidence.
“Written settlement agreements should reflect the parties’ agreement and intent,” says Timothy J. Miller, a partner at Novack and Macey LLP. “But written settlement agreements also should protect against unintended consequences.”
There are significant pitfalls associated with settlement agreements, so business owners would be well served to understand what they potentially face when settling a lawsuit.
Smart Business spoke with Miller about settlement agreements and what owners should know when entering into them.
What is one of the biggest concerns that a business owner should have when entering into a settlement agreement?
In most cases, a business owner enters into a settlement agreement thinking that a dispute is being fully and finally resolved and that he or she is ‘buying peace.’ Thus, any business owner contemplating a settlement should be certain that the settlement will actually end the dispute.
What is one way in which a ‘settled’ case can come back to life?
In settlement negotiations, parties may say or write things that they hope will lead to an agreement. A business owner who wants to make certain that a case is really over should take steps to make sure that statements made during negotiations cannot resurrect the dispute. Some negotiators lie. Sometimes they exaggerate to induce the other party to settle. Other times, a negotiator may mistakenly say something that is not true. Even when no lies are told, parties can have different memories of statements made during negotiations. Those statements can provide fertile grounds for resurrecting disputes that a business owner thinks have been resolved.
How can you avoid having statements made during settlement discussions hurt you?
Your lawyer should make certain that everybody agrees going into the negotiations that the case has not been settled until a written settlement agreement is signed by all parties. Then, the written settlement agreement drafted to reflect the agreement should contain strong nonreliance and integration clauses.
A nonreliance clause is a provision that says that the parties are not relying on any statements made, or writings exchanged, during negotiations unless they are specifically included in the written agreement. Such a clause should also provide that the parties are relying on their own judgment and investigation and have had the advice of independent counsel. It helps to stop later claims that a business owner lied during negotiations and that the opponent relied on such alleged lies.
An integration clause says that the written agreement is the entire agreement of the parties. This clause will stop somebody from claiming that some part of the agreement is not contained in the written agreement. For example, in an employment dispute, a business owner may pay a former employee to dismiss a claim. An integration clause may protect the owner from claims that the owner also agreed to give the employee the job back.
What if a business owner is relying on statements made in the settlement negotiations?
Nonreliance and integration clauses mean that statements and promises not contained in the written agreement probably will not be considered by a court. But this applies to the business owner, too. If an owner is relying on a statement made in negotiations, that should be included in the agreement.
Are there potential problems with releases in settlement agreements?
Usually, the purpose of a settlement is for both sides to give up, or ‘release’ their claims against each other. Sometimes, however, releasing claims against one party may have the unintended effect of releasing claims against other unnamed parties. There is an old rule that the release of one wrongdoer releases everybody liable for the same harm. Many lawyers believe this rule has been abrogated by statute, but this is only partially correct.
Illinois has abrogated the rule that a release of one joint tortfeasor releases all tortfeasors. What many lawyers do not recognize is that this applies only to tortfeasors. As a result, the common-law rule that an unqualified release of one who caused a monetary loss precludes a claim against other parties who caused the loss continues to apply to, for example, co-obligors on a contract and claims for joint breaches of fiduciary duty. If there are other parties that a business owner does not want to release, an attorney can address this issue.
Will a release bring total peace?
Not always. A general release might not be deemed to release claims that one party claims it did not know about when it signed the release. A business may be able to protect itself by providing in the written document that the parties are aware they may have claims against each other they do not know about, and the release is intended to bring total peace and release even unknown claims.
Are there other issues to be aware of?
Certainly. If a party with whom a business owner has settled sues again on that settled claim, in blatant violation of a settlement agreement, the owner could still have to pay lawyers to defend the suit. A provision in a settlement agreement providing for attorneys’ fees to be awarded to the prevailing party in a dispute wherein the settlement agreement is raised as a defense may help protect against such problems.
Timothy J. Miller is a partner at Novack and Macey LLP. Reach him at (312) 419-6900 or firstname.lastname@example.org.
In last month’s article, the concept of Tax Risk Management (TaxRM) was introduced. TaxRM is an enterprisewide process that is affected by a company’s board of directors, management and/or other personnel, and is designed to minimize tax liabilities and maximize compliance, each within the guidelines of tax laws.
Having provided a definition of TaxRM, this article focuses on elements of TaxRM processes and how they can identify opportunities associated with an organization’s strategy, operations and processes.
“TaxRM is most effective when it is treated as a component of the organization’s overall enterprise risk management (ERM) process,” says Walter M. McGrail, JD, CPA, a senior manager at Cendrowski Corporate Advisors. “TaxRM should be a key element of every business’s ERM process.”
Smart Business spoke with McGrail about the types of tax risks that exist and how TaxRM processes can help mitigate those risks.
What is the function of TaxRM processes?
When professionals think about tax risks, they generally think of audits and financial reporting issues. TaxRM is about much more than these elements. Among other things, a TaxRM process should quantify the impact and likelihood of tax risks, manage tax risks to a level commensurate with the organization’s stated TaxRM strategy and quantify the benefits associated with proper tax strategy implementation. The last point is a central element of TaxRM: Proper tax strategy implementation can assist an organization in maximizing its after-tax earnings available to shareholders.
What types of tax risks exist?
Profitable organizations pay numerous taxes, including corporate income, sales, excise, payroll and withholding taxes. These taxes arise from decisions made in accordance with an organization’s strategy, operations and processes.
Tax risks are present within each of these elements due to uncertainty in the decision-making process and tax law changes. Among other things, tax risks might pertain to uncertainties in the application of tax law to numerous areas of the business; financial reporting decisions; acquisitions and divestitures; and asset purchases and sales.
Nearly every decision made by a for-profit corporation involves tax implications, and hence, tax risk. With some corporations paying upward of 40 percent of their profits in income taxes, the ramifications of tax risks can be highly significant and can negatively affect a business’s after-tax cash flow.
However, mitigation of tax risks can present numerous benefits to businesses while maximizing tax compliance.
Can you give specific examples of how TaxRM processes can identify opportunities associated with an organization’s strategy, operations and processes?
Let’s suppose an organization has a documented strategy stating that it wants to become a market leader in its industry. In order to achieve this goal, the organization must grow organically or acquire outside firms to increase its market share.
In some instances, the purchase of an external firm may provide significant tax benefits. For instance, if the acquisition is optimally structured from a tax standpoint, the target’s existing tax loss carry forwards may be preserved within the entity post acquisition. TaxRM processes can also help guide organizational managers in their operational and process-level decision-making. For example, if an organization requires new machinery for manufacturing processes, leasing equipment may provide significant tax benefits when compared with capital expenditures associated with the purchase of a machine. However, the lease versus buy decision will hinge on numerous business-specific factors; it is not always optimal to lease equipment.
What are some prevalent risks that TaxRM processes can mitigate?
Business transactions, including asset acquisitions and divestitures, often present significant tax risks and opportunities for businesses. Involvement of the tax function or an external tax adviser in examining these transactions can yield significant benefits to the organization and potentially improve its profitability. This involvement might also save the business significant costs by ensuring a transaction is structured optimally from a tax standpoint.
For example, in some instances, business owners may desire to change the classification of their organization. If an organization that is taxable as a corporation elects to be classified as a partnership, this election will generally be treated as a full liquidation of the existing corporation and a subsequent formation of a new partnership. This classification change could thus cause the organization to realize harmful tax consequences, both immediately and in the future.
Involvement of the tax function or an external tax adviser in such decision-making can help managers make decisions in the best interests of the organization and maximize the after-tax cash flows of the business.
How can an organization achieve maximum benefits from a TaxRM process?
Again, in order to be most effective, a TaxRM process should be integrated into an organization’s ERM process. In this manner, tax risks can be evaluated simultaneously with other business risks, and the tax benefits and costs of an organization’s strategy, operations and processes can be regularly evaluated. Integrating TaxRM into the organization’s ERM process also signals to employees the importance the organization has placed on TaxRM. If employees can tangibly discern the organization’s emphasis on TaxRM, it is likely that they themselves will place greater emphasis on examining tax risks in their decision-making processes.
Walter M. McGrail, JD, CPA, is a senior manager at Cendrowski Corporate Advisors. Reach him at (866) 717-1607 or email@example.com or visit www.cca-advisors.com.