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Category: Business Law

  • Why You Should Always Hire Counsel to Draft Your Contracts

    Why You Should Always Hire Counsel to Draft Your Contracts

    Leave the Contract Drafting to the Attorneys

    Nowhere is the old saw “an ounce of prevention is worth a pound of cure” truer than in the realm of contract drafting. As a commercial litigator, time and again I have seen companies spend millions on litigation because they failed to take the necessary steps years earlier to ensure that their contracts were properly drafted and sufficiently clear. And almost always the reason the contracts were not sufficiently clear and detailed is because the parties thought they could save some money doing things without a lawyer. These are just some of the common pitfalls I’ve seen.

    Failure to Set Forth Consideration

    A promise is made, and a promise is broken, certainly the courts will enforce that promise in the event you decide to sue, right? Not so fast. Unless the contract at issue sets forth obligations flowing both ways, i.e., a “promise for a promise,” the broken promise may not be legally enforceable. This is called “consideration,” and unless both parties’ consideration is set forth in the contract, it may not be a legally binding contract.

    Failure to Name the Parties

    More and more business organizations involve multiple entities. Corporations, limited liability companies, a manifold of partnership types—the world of business organizations is incredibly complex. Unless a contract specifically sets forth exactly what entities have what obligations, you may find yourself with an unenforceable contract, or just as bad, a defendant that may have no assets with which to satisfy any judgment you might obtain.

    Failure to Define Terms

    As a litigator, ambiguity is often my friend, but in a properly drafted agreement, there should not be much ambiguity for me to work with. Nailing down what each term means makes your contracts clear and strong and prevents clever lawyers from trying to find wiggle room on undefined terms when matters break down.

    Failure to Include the Boilerplate

    Many a business owner has sighed looking at the lengthy document prepared by their counsel. Surely, they think, the contract did not need to be this long. But all that boilerplate at the end serves very important purposes. Items like a merger clause, which confines the parties’ agreement to the language contained within the contract, a dispute resolution clause, which sets forth how and where disputes between the parties are to be resolved, a choice of law, which sets forth the set of laws to be used in interpreting a contract, are all likely to be overlooked by a non-lawyer drafting their own agreement but are vital to the outcome of any future disputes between the parties. And, although much of it can seem to be rote or obvious, that is exactly the point—to avoid surprises later.

    Failure to Consider the Contract from a Non-Party’s Point of View

    The drafters of an agreement have often discussed the subject of the agreement at length and may have understandings about the agreement that do not ultimately make it into the language of the agreement.  This can be a fatal error. Having someone who was not part of these discussions actually put pen to paper is helpful because those individuals will seek to describe the agreement in its entirety, making every aspect of the agreement explicit.

    Failure to Consider the Worst Case

    Experienced counsel will have seen all the ways contracts can eventually “go wrong” and will endeavor to create a contract that puts you in the best possible position in the event the parties end up in a dispute. Most parties think things will always be smooth sailing, that everyone will live up to their obligations, and that present conditions will simply continue. However, being well positioned in the event things do not go well is important. Experienced counsel will set terms so that when a dispute arises you are well-positioned in that dispute.

    Whenever you or your business find yourself negotiating a contract of importance, it is key to hire experienced counsel who can recognize the subtleties that can lead to unintended consequences down the road. The Law Offices of Andrew Dressel LLC is a sophisticated firm with the skills necessary to both avoid unfortunate surprises in your agreements, as well as to negotiate the most favorable terms possible for you and your business. Whether you are seeking counsel for a “one off” contract or to engage an outside general counsel on a regular basis, please contact us through our online form, or by calling us at (848) 202-9323.

  • Cannabis is Legal in New Jersey: Now What?

    Cannabis is Legal in New Jersey: Now What?

    A truly historic Election Day full of notable events included the passage of a referendum measure in New Jersey which amends the State Constitution to legalize the use and sale of cannabis beyond the current medical marijuana regime in New Jersey. The vital next step in the process of creating a legal general-use marijuana sales framework in New jersey is the passage of legislation regulating this industry. This legislation is currently being debated in the New Jersey State House. Here is detailed information on the legislation changes:

    More Grow Sites for Medical Marijuana License Holders

    Currently, medical marijuana license holders are permitted to operate up to three dispensaries, but only one grow site. It is anticipated this will be insufficient to meet the expected increase in demand for legal, adult-use cannabis, without crowding out current medical users. The proposed legislation will allow medical marijuana license holders to open two additional cultivation sites, in hopes of alleviating the expected initial crush of demand.

    Increased Number of Licenses

    The present medical marijuana legislation permits the New Jersey Cannabis Regulatory Commission to award only 12 licenses for medical marijuana operation. Again, this will not be enough to meet the increased demand when New Jersey goes from approximately 100,000 medical marijuana users to an anticipated 1,000,000+ recreational users. Therefore, the cap on the number of licenses the Commission can award is being eliminated. The number of licenses will be at the discretion of the Commission.

    Reservation of Licenses

    While the proposed legislation removes the cap on the number of licenses awarded, it also places other restrictions on the composition of licenses in New Jersey. It will be required that 15% of licenses be reserved for racial minorities, with another 15% being set aside for women and veterans. Another 35% of licenses will be reserved for conditional licenses, a shortened process whereby the applicant can receive an expedited license in exchange for certification that the license holder will make up the remaining requirements in an abbreviated time period in comparison to the normal licensure process. Finally, microbusinesses, defined in the legislation as entities with ten or fewer employees, will make up 25% of the license pool.

    Municipal Taxes

    Under the proposed legislation, municipalities would be able to enact their own 2% tax, which could be applied to growers, processors, wholesalers, retailers, and even customers.  Note that the constitutional amend which made way for legalized cannabis caps retail taxes on cannabis sales at 6.625%, the present state sales tax.

    Despite the overwhelming support in New Jersey for the ballot initiative, the nuts and bolts of cannabis legalization in New Jersey is still a legal area in a high state of flux. Negotiations are ongoing in the state legislature and there is a great deal of dispute over tax revenues and how those revenues will be distributed – especially the portion of the revenues which will be re-invested in minority communities. That fight will likely delay legalization legislation for a bit, but the voters have spoken. It is expected that a legalization regime will be in place early next year.

    The attorneys at The Law Offices of Andrew Dressel LLC are monitoring the progress of legalization legislation and stand prepared to advise our clients on the final outcome of the legislative process. If you are interested in starting a business in the New Jersey cannabis industry please reach out to our attorneys by either calling at 848.202.9323 or contacting us through email at andrew@dressellaw.com. We look forward to helping you with whatever inquiries you may have.

  • A Circuit Split Emerges on the Application of Arbitration Clauses to Affiliated Companies

    A Circuit Split Emerges on the Application of Arbitration Clauses to Affiliated Companies

    Spam phone calls have become an unfortunate part of everyday life, even if you have put yourself on a “no call” list. But would you expect that your cell service contract can prevent you from taking the spam callers to court? Well, depending on who your carrier is, who is calling, and what part of the country you are living in, that may very well be the case.

    In a somewhat unique turn of events, two federal courts of appeal, considering virtually the same fact pattern, came to completely opposite conclusions about the reach of an arbitration provision in a cell service contract, about a month apart from each other. The arbitration provision is found in an AT&T wireless agreement and requires customers to arbitrate “all disputes and claims” between the customer and any of AT&T’s “subsidiaries, affiliates, agents, employees, predecessors in interest, successors, and assigns.” The dispute at issue, however, involved purported spam phone calls from DirectTV, a subsidiary of AT&T, and claims under the Telephone Consumer Protection Act. Are such claims arbitrable? Apparently, this now rests on which circuit you happen to be filing suit in.

    The Fourth Circuit’s View-Mey v. DirectTV LLC

    In an August 2020 decision, the Fourth Circuit Court of Appeals held that these claims were in fact subject to arbitration. Noting the broad rule that federal courts are directed, under the Federal Arbitration Act, to construe arbitration clauses in a way that favors arbitration, the court held in its decision in Mey v. DirectTV LLC, that DirectTV clearly was a subsidiary of AT&T, that the parties had clearly agreed to a very broad arbitration provision that would include “all disputes and claims,” and that therefore the claims had to be arbitrated. The fact that the average consumer would not have contemplated that a cell service contract would be applied to a television provider or would know the byzantine corporate history that made DirectTV a subsidiary of AT&T was of no consequence. Indeed, as the court noted, the arbitration provision also applied to successors and assigns, two groups that could not possibly be known at the time of contracting. The parties agreed to a broad arbitration provision, one that could include disputes wholly unrelated to the contract containing the arbitration provision, and therefore the arbitration clause should be read to encompass the TCPA suit.

    The Ninth Circuit’s View-Revitch v. DirectTV LLC

    However, confronted with the exact same fact pattern, the Ninth Circuit Court of Appeals took a completely different tack. In Revitch v. DirectTV LLC, the Ninth Circuit court held that the TCPA suit was not encompassed by the arbitration provision. The Ninth Circuit court held that because DirectTV was not affiliated with AT&T at the time the cell service contract was entered into, the customer could not reasonably have anticipated that he would be agreeing to arbitrate disputes with DirectTV. Per the Ninth Circuit, it would be an absurd interpretation of the word affiliate to include companies not affiliated, or anticipated to be affiliated, with AT&T at the time the contract was entered into. My own view is that the Fourth Circuit likely has the better of this particular argument. As the Fourth Circuit court correctly pointed out, successors and assigns are per se unknown at the time a contract is consummated, but it is not absurd to say they fall within the ambit of an arbitration provision.

    The better argument may be the one adopted in a concurrence written by Judge O’Scannlain in concurrence with the majority opinion (also written by Judge O’Scannlain). In his concurring opinion, Judge O’Scannlain writes that the DirectTV suit is simply outside the scope of the arbitration provision because it does not “aris[e] out of” the cell service contract, as required by the Federal Arbitration Act. The lawsuit regarding DirectTV’s purported spam phone calls has no relation to a contract for cell service. This seems to me to be a much better way of squaring the broad arbitration provision agreed to and the intuitive sense most people have that a cell service contract should not create an agreement to arbitrate disputes with what was, at the time of formation, an unrelated company.

    These cases highlight the importance of careful drafting when putting together and negotiating a contract, particularly with regard to dispute resolution clauses. Whenever you or your business find yourself negotiating a contract of importance, it is key to hire experienced counsel who can recognize the subtleties that can lead to unintended consequences down the road. The Law Offices of Andrew Dressel LLC is a sophisticated firm with the skills necessary to both avoid unfortunate surprises in your agreements, as well as to negotiate the most favorable terms possible for you and your business. Whether you are seeking counsel for a “one off” contract or to engage an outside general counsel on a regular basis, please contact us through our online form, or by calling us at (848) 202-9323.