Commercial Courts Established in Indiana

On June 1, 2016 the following courts began accepting specialized dockets of business cases.  Known as “commercial courts,” they are part of a pilot project in which business parties can agree to have their disputes resolved.

  • Allen Superior Civil Division Judge Craig Bobay;
  • Elkhart Superior 2 Judge Stephen Bowers;
  • Vanderburgh Superior Judge Richard D’Amour;
  • Floyd Superior 3 Judge Maria Granger;
  • Lake Superior Judge John Sedia; and
  • Marion Superior Civil Division 1 Judge Heather Welch

This pilot project, established by the Indiana Supreme Court, aims to (1) establish judicial  structures  that  will help  all court users  by  improving court efficiency;  (2)  allow  business and commercial  disputes  to  be  resolved  with expertise, technology, and  efficiency;  (3) enhance the  accuracy, consistency, and  predictability of decisions  in business and commercial cases; (4) enhance economic development  in  Indiana by furthering the efficient, predictable resolution of business and commercial law disputes; and (5) employ and encourage electronic information technologies, such  as  e-filing,  e-discovery, telephone/videoconferencing, and al employ early alternative dispute resolution interventions.

Commercial courts are relatively new, having first appeared in 1993.  They are available in about 20 states.

Ruh Roh: Indiana’s RFRA

In response to a number of inquiries over the past week or so, following is some background and context for business owners regarding the Indiana Religious Freedom Restoration Act.

Indiana’s RFRA aims to prevent governmental entities of the State of Indiana from discriminating against those who exercise their religious rights. It does not authorize or provide license in any way for businesses to discriminate against gay, lesbian, bisexual, transgender, or any other, Hoosiers.

Background. 

In 1993, then-President Bill Clinton signed the Federal Religious Freedom Restoration Act. Known as the “Federal RFRA,” it allowed the federal government to substantially burden a person’s exercise of religion only if it (1) demonstrates that application of the burden to the person is in furtherance of a compelling governmental interest; and (2) it demonstrates that the burden used is the least restrictive means of furthering that compelling governmental interest.

Constitutional law folks refer to this as “strict scrutiny,” one of a few different balancing tests used to determine the validity of a particular law. Law schools teach this to all first year law students, regardless of whether they intend to practice constitutional law or not. Simply put, constitutional balancing tests are conducted to make sure that the government doesn’t always win.

The Federal RFRA applies to all religions, but was enacted amidst concerns largely pertinent to the Native American community, which was experiencing points of conflict with the federal government over use of its lands—especially those parts involving religious ceremonies.

In 1997, in a case called City of Boerne v. Flores, the U.S. Supreme Court held that the Federal RFRA was unconstitutional as applied to laws passed by state and local governments. The conflict in City of Boerne was between the Catholic Archdiocese of San Antonio, which had plans to enlarge a church in Boerne, Texas and the City of Boerne, which had an ordinance that prevented the existing church building from being torn down because it was a historical landmark. After City of Boerne, the States could enact their own provisions regarding their own state laws on the point of religious freedom.

A number of states did. Some developed religious protections through state court decisions. Others, like Indiana, adopted specific laws. Courts that developed RFRA-like protections used the balancing test codified by both the federal and state laws.

Context.

One characteristic of Indiana, which seems to have touched off the vitriol both at and inside the state, has less to do with the language of the state’s RFRA than it does the fact that Indiana, both at the State and many local levels, does not recognize sexual orientation as a class protected from discrimination.

Indiana has a longstanding policy, codified in Ind. Code 22-91-12, against discriminating upon race, religion, color, sex, disability, national origin, ancestry or military service, as such is contrary to the principles of freedom and equality of opportunity and is a burden to the objectives of the public policy. It is also the policy of the state to protect employers, labor organizations, employment agencies, property owners, real estate brokers, builders, and lending institutions from unfounded charges of discrimination.

However, some other states that have RFRA laws, like Kansas, also protect sexual orientation from discrimination. The absence of a similar protection has led some to see the Indiana RFRA as creating a loophole to allow Hoosier business owners to discriminate against those in that class. This is the common “gay wedding photographer” and “cupcake” hypothetical.

In fact, Indiana’s RFRA statute is nearly the same as Federal RFRA. As of July 1, 2015, an Indiana governmental entity may substantially burden a person’s exercise of religion if it demonstrates that the burden to the person: (1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.

Last Friday, lawmakers amended the law to clarify that Indiana’s RFRA does not: (1) authorize a provider to refuse to offer or provide services, facilities, use of public accommodations, goods, employment, or housing to any member or members of the general public on the basis of race, color, religion, ancestry, age, national origin, disability, sex, sexual orientation, gender identity or United States military services; or (2) establish a defense to a civil action or criminal prosecution for refusal by a provider to offer or provide services, facilities, use of public accommodations, goods, employment, or housing to any member or members of the general public on the basis of race, color, religion, ancestry, age, national origin, disability, sex, sexual orientation, gender identity, or United States military Service.

The clarification adds a couple classes to the others mentioned at the outset.

 

The RFRA is being touted as good for business by larger corporate stakeholders and the convention and sports industry.  While the RFRA looks to some like a niche issue involving the Amish, bakers and wedding photographers, its yet to be seen what happens when the discussion moves to pharmacies, doctors, and real estate, to name a few.  While the law on its face applies only to dealings between governmental entities and businesses, and does not create wholesale causes of actions or defenses, its well to note that it was modified at warp speed in the midst of the Final Four, amidst great pressure and a threatened mass corporate exodus. Some uncertainty can be anticipated, so business owners concerned about the potential impact of a decision about with whom they will do business are best to get some guidance before implementing a particular plan.

Definitions of what a small business is vary according to industry type, sales, growth, employees, ownership, gross income, net income, and profitability.  It varies by who is doing the defining (bank, SBA, VC, etc), and the list goes on.

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But while they fail at an alarming rate (80% don’t’ reach their 18 month birthday), small businesses drive the economy.  Their number has increased significantly since 1982 and small businesses have been creating more than half of all jobs in the United States since the seventies.  In fact, since 1990, corporate America eliminated 4 million jobs; small businesses added double that many to the economy. 

Paul Fouts, dean of the Ageno School of Business at San Francisco’s Ageno Golden Gate University accurately summed it up when he noted “[s]uccessful small businesses are the unsung heroes, because small business is the driving force in the economic community.” 

At first blush it seems hard to reconcile the alarmingly high failure rate with the job contribution.  But if we ask a different question, e.g. “what makes a successful small business,” the answer is clearer. 

Every day in my practice I deal with small businesses owners in a range of industries.  They are men, women, young and not so young, and ethnic backgrounds vary.  Indeed, any number of criteria can be used to differentiate them. 

But the one common denominator, uniquely and somewhat intangibly tied to success, is purpose.  One fellow expressed it in terms of being a good dad.  Another described it as his desire to inspire others to change the world.  I define my as helping others’ advancement and achievement.  Some small businesses aim to be big, others to put food on the table.  Still yet, some to provide for employees.  

What these folks do and what their companies look like may change over time.  How they do what they do may change, too.  But in the end, those who understand their purpose are best equipped to navigate the myriad variables that can grab and tear at our enterprises.  

Thanks for the photo Julia!

https://chrismcgrathlaw.com/627/

Revisiting the Three Laws of Performance

I’m a huge fan of the Three Laws of Performance, by Dave Logan and Steve Zaffron. It deals with what it takes to create sustainable change, and has lessons that apply to both individuals and institutions.

Let’s put this in context.  The three laws are set against the backdrop of what the authors refer to as our “default future,” the product of a complex set of variables inside us, or inside our organizations.  Examining that default is valuable, as it identifies opportunities for change or (better) improvement.  Application of the three laws helps us figure out how to get there.
The first law:  how people perform correlates to how situations occur to them.  It answers questions about “why people do what they do.”  Reflection on this alone can be transformative, considering research on our ability to “rewire” our own brains.
The second law:  how situations occur to people arises in language (verbal and non verbal).  It offers us insight as to “how we improve.”
The third law:  Language that is future-based, or “generative,” transforms how situations occur to people.  When we use generative language, we transform and shape the future, as opposed to simply describing what is occurring or has occurred in the past and predicting the future.
Three Laws has excellent examples to illustrate its theory and some hard acquired research to support it.  Here at the law factory, we’re using the Three Laws to build a law practice that authentically supports the advancement and achievement of our clients.  Just making that statement changes how we approach new clients, and how we counsel them.  Staying true to that sometimes requires us to make some tough choices, such as not taking on matters that are not within the firm’s four core offerings of business counsel, commercial litigation, mediation and family law.  Or adding people who share the essential value of supporting the advancement and achievement of others.
Putting the three laws on your radar seems transformative in and of itself; people thereafter tend toward trying to use generative language.  But there are deeper questions there that challenge leaders to first look inward.
How do the Three Laws play out for you?  Is it the same in all environments?

Tips for Hiring the Right Business Attorney

There is a venn diagram on the back of my door.  One circle has “what lawyers put in their biographies.”  The other has “what clients look for in lawyer biographies.”  In the intersecting area are only two things:  email address and phone number.

Below are some considerations for hiring an attorney for your business, based on my experience as an entrepreneur and attorney.

1. Just the Facts.  There are a lot of “slam dunk” situations.  Most of them appear as such in the initial interview.  Meaning sometimes solutions are positioned as a “slam dunk” and sometimes the facts indicate the matter is a “slam dunk.”  Accurately portray your situation and carefully consider solutions that are unqualified.  Simple transactions can become complicated; hard cases can resolve easily.

2. Specializations & Scope.  Sometimes hiring an attorney with a specialization in a particular area is preferred or necessary.  On the other hand, a generalist (in my practice I call it “outsourced general counsel”) that understands your business and whom you trust can help you with everyday matters and to spot issues that require specialized engagement.  With more complex matters, however, that generalist should help you select specialized counsel, direct their services and manage the engagement to an efficient end.

Some owners need attorneys that help them do legally what they want to do.  Others want advice and help setting that course.  Your attorney can help in non-legal areas too, applying business experience, helping source capital, and making introductions to CPA’s and other advisors a successful enterprise needs, among other things.

3. Rates, Retainers and Second Opinions. No attorneys I know are afraid to discuss their rates, but some are apprehensive being the first one to raise the topic.  You should not be afraid to ask what they charge, whether (and if so) what payment terms are available, or if your matter is suitable for an alternative fee arrangement.  Some engagements do not require a retainer, in others, some payment photo copyup front is necessary.  Ask about the basis for the retainer, how it is paid in, and how it will be paid out.

Don’t be afraid to seek a second opinion.  If you’re going to get one be sure to include all the facts.  When I provide them in my practice, we often simply provide peace of mind to the client.  Sometimes a second opinion can offer an additional tactic, deal structure, or strategy.  Regardless, retainers should be in line with the complexity or time involved with the work.  And we recommend that all fee agreements be in writing.

4. Don’t Hire A Jerk.  Unless you Want to.  Ebert & Friss point out that “professional chemistry” is important.  Think about how you make decisions.  Do you build consensus?  Do you want a counterpoint?  Are you searching for better solutions?  Are you outgoing, or reserved?  Who are you negotiating with, or up against?  Your attorney should compliment or match your style.

 5.  When to Hire.  Sometimes that issue we try to handle on our own gets out of control and we need to call someone that spends a lot of time in that area.  Other times we can handle it just as well on our own.  There is little risk in seeking counsel early as its usually more expensive to engage counsel later in the game, when facts have matured, evidence lost, or positions galvanized.  In some situations, you can obtain legal advice behind the scenes, and manage the situation and interaction on your own.  In others, like litigated matters, direct involvement is necessary from the outset.  Early consultation, even if you keep them inactive, is preferred.

 6.  Don’t Count BigLaw Out.  Experienced, well trained lawyers at big firms with (generally) more expensive rates can solve problems efficiently given firm resources and can be appropriate depending on the complexity of the transaction, parties involved, what is at stake, etc.  They can also become expensive quickly where multiple resources are deployed to address singular issues.  Defining the scope of work, setting economic parameters, and managing the process are important.

Using the Three Laws of Performance to Transform the Future

I’m a huge fan of the Three Laws of Performance, by Dave Logan and Steve Zaffron. It deals with what it takes to create sustainable change, and has lessons that apply to both individuals and institutions.

The context is important.  The three laws are set against the backdrop of what the authors refer to as our “default future,” the product of a complex set of variables inside us, or inside our organizations.
The first law:  how people perform correlates to how situations occur to them.  It answers questions about “why people do what they do.”
The second law:  how situations occur to people arises in language (verbal and non verbal, e.g. all communication).  It offers insight as to “how we improve.”
The third law:  Language that is future-based, or “generative,” transforms how situations occur to people.  When we use generative language, we transform and shape the future, as opposed to simply describing what is occurring or has occurred in the past and predicting the future.
Practical application of the three laws gives us the opportunity to help others see the world differently, and bring about change.
Three Laws has excellent examples to illustrate the theory and some hard acquired research to support it.  Here at the law factory, we’re using the Three Laws to build a law practice that authentically supports the advancement and achievement of our clients.  To us, just making that statement transforms how we approach new clients, counsel those who’ve engaged us, and how we solve problems.
How do you use the Three Laws?

Help for New Year’s Resolutions…

Here are “10 Signs You Won’t Reach Your Resolutions This Year” by Ellen Goldman.  I expected that it would be a list,which would be a downer to this would be optimist, but to my surprise the article includes some good tips to turn the signs around.  For example if you don’t have a tracking system, she recommends getting a journal or some other means of tracking your results.  She also makes recommendations for what to do if you lack support or if you make the same resolution every year.

Here is my by no means certified take, that I picked up on through Tune Consulting, which is owned by my pal, Chip McLean.  He has a lot of great tools on the site for planning and tracking goals, but they simply scratches the surface.  Since our beliefs drive our behaviors, in order to meet our resolutions (that is, to change) we need to examine the beliefs that drive our behaviors.  This can be challenging, time consuming, yet worthwhile stuff, like the success those Biggest Loser contestants experience after Jillian yells at them and they cry.
If you see signs of your resolutions failing, as 85% of us do, then you may consider moving beyond the action and behaviors, and trying to discover potentially hidden assumptions about your beliefs that impact how you see the world, and yourself in it.  This burns new paths in the brain, and takes change or resolutions to a deeper level.  And change, from the inside out, is the key to success.
What is your resolution?  Are you on track?  If not, do you know why?
Enjoy the rest of your week.
Chris

Maximize Your Business Sale Price: Gathering These Documents In Advance…

You’ve decided to sell your business and you’re (hopefully) going to speak with your attorney and accountant about it. The following, non-exhaustive list sets forth the documents that you should review with your accountant and attorney before the selling process (e.g. before you start looking for a buyer) starts.  And if you’re buying a business, these are must have’s for any buyer’s due diligence.

paperwork

  1. Financial Statements.  Balance sheets, profit and loss statements, pro formas and cash flow projections.  These help your advisory team help you prepare the business for sale.  They will also help in affixing a value and preparing for your next move.
  2. Tax Returns.  Along with all schedules, tax returns for the preceding three years, along with copies of any audit issues.
  3. Organization Chart.  Hopefully, you have had the opportunity to plan some succession.  An organization chart lists all your employees and their positions, and facilitates discussions about possible purchasers, and those who may remain after a sale…and those who may not.
  4. Real Estate Owned or Leased.  A list of all property owned, leased or controlled by your company, along with a copy of any leases or essential mortgage data.
  5. Members/Partners/Shareholders.  A list of all individuals with ownership in the business.
  6. Governing Ownership Agreements.   Businesses are typically governed by an agreement of some sort (partnership agreement, operating agreement, By-Laws, Shareholder Agreements, etc.).  Often, they will control the method and process to approve your sale.  In their absence, state law will control.
  7. Corporate Documents.  These include annual meeting minutes, formation filings, special meeting minutes and your share or membership interest transfer ledger.  This shows who owns how much of your company.
  8. Asset List.
  9. List of all Liabilities, By Creditor.  This includes copies of all equipment and/or vehicle leases, notes and/or UCC Financing Statements, and any owner personal guarantees.
  10. Accounts and Signatories.  A list of the  accounts your company maintains, and a list of the people who can draw on them.
  11. Permits and Registrations.  
  12. Other Agreements & Documents.
      • Licenses, Patents and Trade or Service Marks
      • Key Vendor or Customer Contracts
      • Employee Agreements
      • Insurance Policies.  This includes any life insurance on essential personnel or owner
      • List of Pending Lawsuits
      • Any Other Current Agreements

Tips for Baby Boomers Selling Their Businesses

I’m sure you know know that Baby Boomers are those folks born between 1946-1964.  You may not that they currently own some 12 million small businesses.

Or that they will put about 368,000 businesses on what is already termed a “buyers market” for businesses.  That is because only about 40% will be sold to a family member.

Historically, baby boomers sold their businesses because of “tax reasons.”  Now, research shows that they would like to sell in order retire.  Proper planning and a good team are essential to meet that goal.  Here are four considerations for baby boomers considering selling their business:

1.  Start now.  Tidy up the physical plant.  Identify key employees.  Understand the metrics that drive your industry.

2.  Build your team.  Depending on your business and goals, you should consult with a wealth manager, tax specialist and an attorney.  A good outsourced CFO can also help you streamline processes and ready the business for market.  Others include merger and acquisition professionals, appraisers, bankers, auditors, IT professionals, and key employees.  Above all, this is true “exit planning” for boomers; so wealth and tax advisors are key.

3.  Identify potential buyers.  According to Jeff Farren, of B2BCFO, Indianapolis, potential targets include competitors, entrepreneurs seeking a business or financial opportunity, management, family, employee stock ownership plans, private equity and even “going public.”

4.  Use a process.  Your advisory team can manage the process; which allows you to focus on building the value of the business.

Baby boomer owned companies have deeply and meaningfully contributed to the fabric of this nation.  With proper planning and execution, those businesses can continue to thrive, leaving lasting legacies to their founders and positive impact on their communities.

The law factory turns one tomorrow.  Thanks to all of you who’ve supported us this year!

Be Courageous and Strong in 2014.  

Best–

Chris

Holiday Giving and Wishes

PrintAs I was driving to a hearing recently I learned some stunning facts that changed the Firm’s approach to greeting cards this Christmas.  Following is a summary and what we’re doing as a result.

Some children walk for hours each day to get water. They get up in darkness and can be subject to dangers along the way.  I never had considered that this survival robbed kids of their childhood.  Elsewhere today, a family will battle dogs, pigs, rodents and vultures for food in a dump. I never considered that this robs them of their humanity.

According to Angel Aloma, Executive Director of Food for the Poor, it takes six cents per day to feed a child in the third world.  $50 will feed a family for a month.  Water wells can be built in or near parched villages for less than $5,500.   These wells will bring water, but are also building blocks of dignity, childhood and humanity.

I attended the court conference with about 2 dozen other attorneys dealing with alleged defects in a very nice home–real problems in our area.  In her book, “7,” author Jen Hatmaker contrasted this with “the rest of the world [begging] for intervention with their faces pressed to the window, watching us drink our coffee, unruffled by their suffering.”

That image is as applicable across the world as it is across town.

Gus Lloyd, the show’s host, had a creative take on raising funds.  He totaled up costs of chicks, pigs, goats, fruit trees, and split up the cost of the well into its different components.  The sustainable component registered with me.  It turns out you can buy quite a bit for a dollar a day.  So we did and donated to Food for the Poor.

Lloyd backed up his far flung help efforts with a local component.  We did that too, and donated to the St. Maria Goretti HELP program, which just fed, clothed and provided presents for 175 families in Hamilton County and Indianapolis last weekend.

Hopefully Santa brings you everything you need and some of what you want.  To the extent that included a greeting card from me, let me know (I bet it didn’t).

From the law factory we wish you MERRY CHRISTMAS AND PEACE IN THE NEW YEAR.