The Doctrine of Election of Remedies in Utah

July 2019

One procedural issue parties occasionally face in civil litigation is the requirement to make an election of remedies. In its most basic terms, the election of remedies doctrine prevents double redress for a single wrong and avoids legally or factually inconsistent recoveries for the same wrong. There may be a claim alleged in your case that could lead to multiple, inconsistent remedies, and if so the party making that claim will need to make an election of remedies. One Utah case described it this way: “If a defendant wrongfully retains possession of a plaintiff’s cow, for example, the plaintiff may not recover both the cow and the reasonable value of the cow. The plaintiff must elect one of these two remedies.”

This issue often arises in business and commercial litigation where a plaintiff claims there was mutual mistake or some form of misrepresentation when a contract was entered. If so, the plaintiff may pursue the remedy of damages for breach of contract or may seek rescission of the contract. But ultimately, the plaintiff cannot be awarded both of these remedies.

One important question is when the election must be made. Utah’s modern pleading rules permit litigants to plead inconsistent theories of recovery in the alternative. Contrary to the harsh rule in older case law, current Utah law permits a party to pursue inconsistent remedies until the fact-finder and the judge have resolved all factual and legal disputes related to the inconsistent theories of liability. Thus, an election of remedies is not binding until one remedy is pursued to a determinative conclusion.

If your case involves a claim that supports multiple, inconsistent remedies, it is important to identify those potential remedies early on, evaluate the merits of all available remedies, and be mindful of the need, ultimately, to make an election between them.

Matthew Barneck is a shareholder at the Salt Lake City law firm of Richards Brandt Miller Nelson. He can be reached at Matthew-Barneck@rbmn.com, 801-531-2000.

 

Avoiding dissolution pitfalls and protecting against post-dissolution liability for company debts and claims

Steven H. Bergman
April 2019

Based on information contained in the Department of Commerce’s most recent annual report, there are currently more than 300,000 businesses operating in Utah, with approximately 60,000 new business filings each year. For the past decade, the most common form of new entity in Utah has been the limited liability company. The next most common is a DBA registration of a fictitious business name, followed by the corporation. Each of these new entities brings the promise of a new business venture, new ideas, new jobs, and potential success.

Although the overall number of businesses in Utah has been growing, the Department’s annual report suggests that on an annual basis, more 40,000 businesses either fail to file an annual report or dissolve. For the principals of these 40,000-plus businesses, the failure to file an annual report or the dissolution of the business triggers potential issues that if not managed properly can have adverse effects on the shareholders, members, directors, officers, and managers of these businesses.

Failing to file an annual report can eventually lead to administrative dissolution of a corporation or limited liability company. Once a corporation or limited liability company is administratively dissolved, any action taken by the directors, officers, or managers that is not related to the winding up of the entity can result in the personal liability of the acting director, officer, or manager.

Similarly, in those instances where the shareholders or members of a corporation or limited liability company elect to dissolve, or a court orders the dissolution of the entity, properly dissolving and winding up the entity can make the difference between the principals still enjoying some or all of the available liability protection after the entity is wound up and those same principals being exposed to personal liability for the debts of and claims against the entity. This is not a theoretical risk, as Utah Courts have found directors, officers, and managers of dissolved entities personally liable for actions taken after dissolution. In these instances, the director, officer, or manager who was found liable could have avoided that liability by complying with the annual reporting requirements under the Utah Revised Business Corporations Act or the Utah Revised Uniform Limited Liability Company Act or by following the dissolution and winding up procedures under those acts.

For example, when the dissolution and winding up process is in accordance with the provisions of the Utah Revised Business Corporations Act, officers are generally protected from post-dissolution liability, and shareholders can only be held liable for company debts and claims up to the amount they received in monetary distributions from the winding up process. Conversely, not following the procedures (for example, by distributing corporate property other than money), can expose the receiving shareholder to liability in excess of the limits set forth in the Utah Revised Business Corporations Act. Similar rules apply to limited liability companies wound up under the Utah Revised Uniform Limited Liability Company Act.

Another important part of the winding up process is the management of claims against the entity. Following the procedures under either act can lead to the early and final resolution of claims against the entity. Not following those procedures can result in claims against the entity. Furthermore, the former shareholders or members may also be exposed to liability for extended periods–up to seven years in the case of corporations and six years in the case of limited liability companies.

The attorneys in RBMN’s Business Transactions and Corporate Governance and Business and Commercial Litigation practice groups know and understand the statutes, rules, and regulations that apply to corporations and limited liability companies. If you have a corporate or company governance issue, or are in the process of or soon will be dissolving and winding up a corporation or limited liability company, contact one of the attorneys in RBMN’s Business Transactions and Corporate Governance or Business and Commercial Litigation practice groups.

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We work with early-stage start-ups, small businesses, and publicly traded companies on a variety of business-related issues. Our business law attorneys have experience in document and contract creation and litigation, organizational structure, mergers and acquisitions, and corporate litigation in Salt Lake City and across the US.

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The business law attorneys of Richards Brandt understand the legal complexities and pitfalls of business operations, and they know how to assess your unique objectives and help you structure your enterprise to suit your needs. Our lawyers’ business law and commercial litigation experience means they can advise new and growing businesses about strategies to prevent lawsuits down the road. Contact us to schedule a consultation.

Every business is likely to experience legal challenges at one time or another, and trusted counsel is always a sound investment. Our attorneys are prepared to guide both small and large businesses and help them assess their options and protect their interests.

Businesses and corporations in Utah and throughout the intermountain west look to Richards Brandt for customized, reliable legal services related to business and commercial litigation.



BUSINESS LAW REPRESENTATION YOU CAN TRUST



Every business has a life cycle. Some last longer and become stronger than others. But the general fundamentals of the formation, growth, and development cycles of a business are similar from one business to the next. However, analysis of the unique challenges and opportunities of any particular business is not a simple matter.

RBMN attorneys have broad experience in business and commercial litigation, including, but not limited to, the following areas:

  • Administrative Audits, Compliance and Proceedings
  • Antitrust Litigation and Investigations
  • Appeals
  • Arbitration and/or Mediation pursuant to Statute, Corporate By-Laws, Shareholder Agreements, LLC Operating Agreements, Partnership Agreements, or Commercial Contracts
  • Business Dissolution and Winding-Up
  • Business Torts, including Intentional Interference, Fraud, and Breach of Fiduciary Duties
  • Civil Investigative Demands
  • Commercial Litigation, including UCC Litigation and Enforcement of Remedies
  • Contract Litigation
  • Corporate Governance Disputes, including shareholder disputes, member disputes, minority shareholder/member oppression, partnership disputes, and business trust disputes
  • Derivative Lawsuits and Business Owner Litigation
  • Employment Litigation
  • Real Estate Litigation
  • State & Federal Agency Enforcement Actions
  • Trademark & Copyright Enforcement and Litigation
  • Trade Secret Litigation


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RECENT BUSINESS LAW UPDATES



Avoiding dissolution pitfalls and protecting against post-dissolution liability for company debts and claims



BUSINESS LAW AND CORPORATE ATTORNEYS AT RICHARDS BRANDT IN SALT LAKE CITY, UTAH



Lincoln Harris

Shareholder and Family Law and Construction Law Practice Chair

FREQUENTLY ASKED QUESTIONS (FAQS)



BUSINESS TRANSACTIONS & CORPORATE GOVERNANCE / FEATURED FAQS



Answered by:

Barry G. Scholl

Barry Scholl

Shareholder, Cybersecurity Section Chair and Business Practice Chair

A: To decide which entity is right for you, we look at: liability, taxation, and maintenance. Both corporations and LLC’s have limited personal liability—this means that owners are usually not responsible for business debts. However, corporations and LLC’s are taxed very differently—corporations are classified as a separate taxable entity, whereas LLC’s are typically taxed as a pass-through entity (unless you choose otherwise). And corporations and LLC’s have different levels of maintenance—LLC’s have fewer reporting requirements and can operate solely with members acting as the managers. Conversely, corporations are required to hold certain annual meetings, keep certain records, and appoint boards and officers to manage the company for the stockholders. Every situation is unique so we recommend that you consult with an attorney in making your decision. Contact our firm, Richards Brandt, if we can help you decide which entity is right for you.

Answered by:

Barry G. Scholl

Barry Scholl

Shareholder, Cybersecurity Section Chair and Business Practice Chair

A: To decide which entity is right for you, we look at: liability, taxation, and maintenance. Both corporations and LLC’s have limited personal liability—this means that owners are usually not responsible for business debts. However, corporations and LLC’s are taxed very differently—corporations are classified as a separate taxable entity, whereas LLC’s are typically taxed as a pass-through entity (unless you choose otherwise). And corporations and LLC’s have different levels of maintenance—LLC’s have fewer reporting requirements and can operate solely with members acting as the managers. Conversely, corporations are required to hold certain annual meetings, keep certain records, and appoint boards and officers to manage the company for the stockholders. Every situation is unique so we recommend that you consult with an attorney in making your decision. Contact our firm, Richards Brandt, if we can help you decide which entity is right for you.

Answered by:

Barry G. Scholl

Barry Scholl

Shareholder, Cybersecurity Section Chair and Business Practice Chair

A: To decide which entity is right for you, we look at: liability, taxation, and maintenance. Both corporations and LLC’s have limited personal liability—this means that owners are usually not responsible for business debts. However, corporations and LLC’s are taxed very differently—corporations are classified as a separate taxable entity, whereas LLC’s are typically taxed as a pass-through entity (unless you choose otherwise). And corporations and LLC’s have different levels of maintenance—LLC’s have fewer reporting requirements and can operate solely with members acting as the managers. Conversely, corporations are required to hold certain annual meetings, keep certain records, and appoint boards and officers to manage the company for the stockholders. Every situation is unique so we recommend that you consult with an attorney in making your decision. Contact our firm, Richards Brandt, if we can help you decide which entity is right for you.



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An Epic Battle of Blockbuster Proportions: Part II What is Genericide in Trademark Law and How Do I Avoid It?

Barry Scholl
February 2018

In our last action-packed blog posting, we discussed the trademark battle between San Diego’s Comic-Con and Salt Lake City’s Comic Con. The two parties had traded (symbolic) powerhouse blows in a California federal court over whether Salt Lake City’s use of the term “Comic Con” (without a hyphen) infringed on San Diego’s registered trademark for “Comic-Con” (with a hyphen). Organizers of the San Diego event argued that Salt Lake City is free-riding on the term in order to confuse the public into thinking the two events are related. The organizers of the Salt Lake City event argued that the term had become genercized over time due to widespread use by other similar conventions and petitioned the United States Patent and Trademark Office to cancel the San Diego group’s trademark.

With that preliminary explanation out of the way (those of you who are interested in reading more about the dispute can go here for our prior blog entry, we now turn to this week’s topic and the question of how to further define genericide and, finally, the important issue of avoiding genericide in your trademarks.

Avoiding Genericide

In the words of the United States Patent and Trademark Office, “Generic terms are terms that the relevant purchasing public understanding as the common or class names for the goods or services.” Generic terms (e.g., “detergent”) can never serve as registered trademarks because they do not identify the source of the product or service, which is a key requirement of trademark registration.

What Aspirin, Escalators and Cellophane Have in Common

A number of common terms started out as registered trademarks but became generic over time. Examples include aspirin, escalator, Hoagie (as in sandwiches), and shredded wheat (as in breakfast cereal). If you do not carefully monitor the use of your mark and allow it to be used to describe a particular type of product (for example, cellophane), rather than to designate you as the origin, you run a very real risk of that term becoming generic and losing your rights.

Protect Your Intellectual Property.

There are a number of actions a trademark owner can and should take to safeguard its trademark. We’ve included a couple below, but there are others that you should adopt to protect your trademark rights.

  • If you have a registered mark, always use the ® symbol when using the trademark to give the public notice that this is a registered trademark. If you’re the wordy type, you can also use the phrase “Registered in U.S. Patent and Trademark Office.”
  • Always capitalize the trademark to designate its status as a trademark. For example, don’t write “Nine out of ten dishwashers prefer acme detergent.” Instead, write “Nine out of 10 doctors prefer Acme® detergent.”

And returning to our original subject, what about the battle between Comic-Con and Comic Con? In early January, Salt Lake’s Comic Con filed a motion for a new trial, arguing that the widespread use of the term “Comic Con,” by almost 100 events across the country had made the “Comic-Con” trademark generic.

And so the epic battle over genericide continues. We’ll keep you apprised of any further developments.

Barry Scholl is a shareholder at the law firm of Richards Brandt Miller Nelson, whose practice specializes in business, including trademark, copyright, trade secret protection, contract negotiation and drafting, nonprofit law, and real property. He can be reached at 801-531-2000.

Tread Carefully – An Ethics Reminder

Zack (Zachary) Peterson
January 2018

In State v. Ellis, 2018 UT 02, Justice Himonas wrote a separate, concurring opinion that provides a reminder of an attorney’s ethical obligations as an officer of the Court and of candor to the tribunal. Before the district court, the prosecutor requested to use a preliminary hearing transcript at trial because a witness was unavailable to testify at trial. The prosecutor made representations to the district court that the witness was a “key witness” and the State could not proceed without the testimony. The district court allowed the use of the preliminary hearing transcript at trial. Mr. Ellis was convicted at trial.

On appeal, the Utah Supreme Court reversed the district court’s decision to allow the use of a preliminary hearing transcript, finding it did not meet the hearsay exception in Rule 804. In the briefing, the State took the position that the admission of the preliminary hearing transcript was harmless error, and therefore, the conviction should be affirmed.

Justice Himonas wrote a separate, concurring opinion to point out the inconsistency in the two positions the State had taken in the course of the proceedings. At the district court, the witness was a key witness who was vital to the prosecution of the case. On appeal, the witness’ testimony was insignificant and its admission was harmless error. Justice Himonas noted that the State’s conduct in the case was beyond reproach, and he acknowledged that perceptions about evidence change before trial as compared to on appeal. Nevertheless, he stated: “But when a prosecutor has stated their belief that evidence is important, I’d tread carefully before finding any error in admitting it to be harmless.”

This concurring opinion serves as a reminder to be cautious in the positions that are taken with the Court. A position which appears reasonable one day may appear less so as the case proceeds down the long, winding road.

Zachary Peterson is a shareholder at the Salt Lake City law firm of Richards Brandt Miller Nelson. He can be reached at Zachary-Peterson@rbmn.com.

 

 

An Epic Battle of Blockbuster Proportions Underscores the Importance of Protecting your Trademarks from Genericide, Part I

January 2018

In December 2017, the epic trademark infringement battle pitting San Diego’s long-running “Comic-Con” versus Salt Lake City’s upstart “Comic Con,” reached what appeared to have been at least a temporary lull when a federal jury in California found that contrary to Salt Lake Comic Con’s claims, the San Diego group’s trademark is valid. The jury awarded $20,000 in damages to San Diego Comic-Convention, much less than the $12 million being sought by the San Diego event, because the jury didn’t find Salt Lake City group’s infringement to be willful.

The dispute involved differing interpretations of the term “comic con” (with and without the hyphen). San Diego Comic Convention has a registered trademark for “Comic-Con” and argued that Salt Lake City’s “Comic Con” capitalized on the good will of San Diego’s Comic-Con’s mark in order to confuse attendees into believing the two events are related. It sought an injunction to prevent the Salt Lake City event from using the term “comic con” for any event, logo, trademark or website.

Salt Lake City’s Comic Con countered that more than 100 events across the country have long used the term “comic con” to describe events celebrating popular culture, superheroes, fantasy, science fiction, etc. Consequently, Salt Lake Comic Con argued, the trademark has become genericized, and it petitioned the United States Patent and Trademark Office to cancel the San Diego group’s trademark.

In a pre-trial order, U.S. District Court Judge Anthony Battaglia appeared to agree (at least in part) with both litigants, writing, “After a careful review of the parties’ moving papers, the applicable law, and the evidence on the record, the Court finds that Defendants have satisfied their burden of demonstrating a genuine issue of material fact as to genericide.”

Significantly, however, the Court didn’t close the door entirely on San Diego’s argument, noting that Salt Lake City’s Comic Con might be free-riding on the reputation of the well-established San Diego Comic-Con, because consumers could believe the two events are hosted by the same source:

“Here, both of the services at issue are indeed complementary of each other,” “Battaglia wrote, pointing out that each of the events involved three-day fan conventions celebrating comic books, comic art, science fiction, fantasy films, and similar entertainment.

In early January, several media sources reported (either erroneously or prematurely, as it turns out) that Salt Lake’s Comic Con had agreed to change its name. However, only a few days after these reports appeared, lawyers for Salt Lake’s Comic Con filed a motion for a new trial, arguing, in part, that use of the term “comic con” by other third parties could make the term generic.

What is Genericide?

In his pre-trial ruling, Judge Battaglia explained that “a mark is the victim of genericide when the ‘majority of the relevant public appropriates a trademark term as the name of a product (or service) . . .’”

Citing the formerly trademarked terms “aspirin,” “escalator,” and “cellophane,” Judge Battaglia said that each of these examples “only identified the brand or producer during the period of its initial use, however after the passage of time, they were appropriated by the public and soon became the generic name of the product.”

Avoiding Genericide

Next week, in Part II, we’ll review the elements of genericide and what you can do to protect your valuable trademarks from the fate that befell “aspirin,” “escalator,” and “cellophane” (not to mention “thermos,” “teleprompter,” and “trampoline”).

Barry Scholl is a shareholder at the Salt Lake City law firm of Richards Brandt Miller Nelson. He can be reached at Barry-Scholl@RBMN.com.

Tips for Effectively Using Your Business Lawyer

March 2017

Savvy business people understand that lawyers play an indispensable role in the successful execution of a business plan. Here are seven keys to get the most from lawyers for your business.

1. Call sooner rather than later. Problems are more expensive to solve than avoid. Call your lawyers before you get served with a lawsuit. Call them before you sign a lease or a loan or any other contract vitally important to your business. An hour or two of your lawyer’s time to review a document could save multiple hours down the road trying to unwind or modify a bad deal.

2. Understand the fees upfront. When hiring a lawyer, you should ask for a document (sometimes called an engagement letter or retainer agreement) to describe how your lawyer will charge for their work. Not all projects need be billed by the hour. If you are looking for more certainty as to cost, ask for an alternative, such as a cap on fees or a hard quote on the total cost. Alternative fee structures don’t automatically lower total legal fees. Getting certainty in your fees may come at a cost.

3. Be prepared and do your homework. Prior to meeting with your lawyer in person or on the phone, spend time getting prepared. Read in advance any documents or contracts you would like the lawyer to review and have specific questions. Spend time to get a clear understanding of the deal you want to do and the goals you hope to accomplish. In short, use your lawyer’s time as efficiently as possible.

4. Keep your lawyer in the loop. As your business plan unfolds and new developments arise, touch base with your lawyer through a quick email or phone call to apprise them of what’s going on. They may see issues that you haven’t thought about, and it could end up saving you thousands of dollars in legal fees down the road.

5. Don’t hide the ball. Be totally honest with your lawyer. Your discussions will be protected by the attorney-client privilege and kept in strict confidence (assuming you don’t plan to commit a crime). Legal issues are driven by facts, and the more detail you provide your lawyer, the better they will be able to serve you.

6. Get the right lawyer. Don’t ask a patent lawyer to review a loan agreement. The legal system is complicated. Like most professions, law has become incredibly specialized in the last few decades. Before your hire a lawyer, make sure they have experience handling your type of project. The lawyers at RBMN have deep expertise in business litigation and all aspects of business transactions.

7. Treat your lawyer like a business partner. Unlike the caricatures in lawyer jokes, most lawyers are dedicated professionals with the knowledge and experience to safely guide you through the legal risks of running a business. Treat them as you would a business partner. You’ll find the value they add to your business far exceeds the cost.

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