Contract Lawyers: Top Legal Fee Issues

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Legal fees usually constitute a top concern for potential clients who wish to retain a St. Paul contract attorney.  In this essay, I would like to point out the top three legal fee issues that are usually associated with retaining a contract lawyer in St. Paul, Minnesota.

1. Payment Structure

There are three main models of payment that St. Paul contract lawyers use: hourly fee, contingency fee, and flat fee. The most common payment structure is hourly fee. This arrangement occurs where a contract attorney is paid based on how much time he spends on a case. If you’re paying your St. Paul contract lawyer by the hour, the agreement should set out the hourly rates of the business attorney and anyone else in this attorney’s office who might work on the case.

The contingency fee is relatively rare in a contract litigation setting, and virtually non-existent in the contract drafting and negotiations. This payment structure is characterized by payment to a contract lawyer of a mutually-agreed percentage of recovery (or contract amount) at the end of a case.

In a flat-fee arrangement, you pay an agreed-upon amount of money for a project Flat-fee payment is often used by St. Paul contract lawyers only in certain contract drafting situations. Usually, these situations are characterized by predominance of one party over another (for example, in employment context) or there has been an established consensus among parties (for example, in partnership agreement context). Flat fee, however, is less used where contract negotiation is required, and this payment structure is almost non-existent in contract litigation context (unless, a very large retainer is involved). Generally, flat fees are disliked by St. Paul contract attorneys due to its inflexibility. On the other hands, I have seen how a combination of a flat fee payment structure with hourly fees appeals to many clients while it reduces the inflexibility inherent in a simple flat-fee context.

Finally, as I just hinted above, it is possible to merge various payment structures to create a fee arrangement most agreeable to the parties.

2. Timing of Payment

Where hourly-fee arrangement is used, St. Paul contract lawyers usually bill their clients on a monthly basis. In a flat-fee arrangement, a contract attorney would prefer to receive at least half of the payment before he begins to work on a project. In any case, a retainer is usually required by St. Paul contract attorneys.

3. Retainer Fee

Most contract lawyers in St. Paul require their client to pay a retainer. Retainer can mean two different fee arrangements. First, retainer may be the amount of money a client pays to guarantee a contract lawyer’s commitment to the case. Under this arrangement, the retainer is not a form of an advance payment for future work, but a non-refundable deposit to secure the lawyer’s availability. Second, a retainer is simply the amount of money a St. Paul contract attorney asks his client to pay in advance. In this scenario, the lawyer usually deposits the retainer in a client trust account and withdraws money from it for the work completed according to the fee agreement. The fee agreement should specify the amount of the retainer and when the lawyer can withdraw money form the client trust account (usually, on a monthly basis).

Conclusion

Obviously, the three issues discussed above do not cover all of the issues associated with legal fees when you are hiring St. Paul contract lawyers. These three issues, however, are likely to provide the necessary background for you to understand the basics of the legal fee arrangements with your St. Paul contract attorney.

One of the key areas of our practice at Sherayzen Law Office is contract law. We are highly experienced in the matters of contract drafting, negotiation, and litigation. We also regularly offer our contract review and consultation services to our clients throughout Minnesota.

Contact Sherayzen Law Office NOW to discuss your contract with an experienced contract lawyer!

Time Limitations on Bringing a Contract Lawsuit and How Laches May Apply

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In previous articles I have discussed a few broad methods for getting out of contract in Minnesota, as well as how an opposing party may be able to stop you from claiming a right under contract by invoking equitable estoppel. This article is closely related with those topics and deals with the timing of claiming a right under contract, and how unreasonable delay can bar an otherwise valid legal claim.

Statute of Limitations and How the Doctrine of Laches Works

It is generally understood that a legal action (or the right to sue someone) is governed by a statute of limitations. For a civil case based on something such as breach of contract, a statute of limitations establishes a time limit for suing someone starting from the time when the right to assert a claim first arose (e.g. when the person harmed first discovered or could have discovered that they were harmed) . The applicable statute of limitations for breach of contract in Minnesota is Minn. Stat. Section 541.05, subd. 1(1) (2010). Section 541.05 provides for a six year statute of limitations for action upon a contract or other obligation, express or implied, unless another limitation is expressly prescribed.

This seems simple enough, but other laws, such as the State Uniform Commercial Code may modify this limit, and the doctrine of laches can confuse things further. Note also that the common law doctrine Quod nullum tempus occurrit regi (or “No time runs against the King) can exempt some government entities from statutes of limitations and/or the application of the doctrine of laches. That is why it is essential to retain an experienced Minnesota contract attorney as soon as possible after your contract issue arises.

As alluded to above, in addition to the statute of limitations, the doctrine of laches plays an important part in determining whether a civil lawsuit was brought in a timely fashion. Laches is an equitable doctrine intended to prevent a party who has not been diligent in asserting a known legal right from recovering at the expense of another party who has been prejudiced by the delay. An example of a situation where laches may apply is where a party waits for essential witnesses that could support an opposing party’s claims or defenses to die before asserting a legal right. However, for the doctrine of laches to be applied in such a case, the prejudice to the party claiming laches must be the result of unreasonable delay. If the essential witnesses died before there is unreasonable delay, the death of those witnesses alone, even if it greatly prejudiced a party, does not mean that laches is applicable.

It is also essential to understand that laches is not an available defense in a contract action where only strict legal rights are in controversy. In those types of cases, only the applicable statute of limitations will bar a claim. This means that if your case depends only upon application of law to the language of the contract, then laches is likely not applicable.

However, if there is more at issue than strict legal rights under a contract and you are seeking equitable relief in addition to laches, then Minnesota law provides that the doctrine of laches may bar the lawsuit, even if the statute of limitations would not! While it may seem strange that a lawsuit brought within the time allowed by the statute of limitations can be untimely, this makes sense if you keep in mind that a delay in asserting the known legal right can be so unreasonable and can so adversely affect a party that it would be inequitable to allow the lawsuit to proceed.

Nevertheless, a couple important issues should be kept in mind. First, claiming only laches will not likely be successful in a contract case. A party must assert that there are other events that occurred that give rise to equitable relief (e.g. estoppel, fraud, duress, etc.) or laches itself is likely to be of little help. Second, laches concerns the question of whether a party has been unreasonable in asserting a known legal right, a broader category than a mere legal claim. To illustrate this, imagine two parties enter a contract where Company A promises to pay Company B in multiple payments for work Company B has done for Company A. Company B also has the right to notify Company A in writing and request Company A to pay in full (i.e. “call the loan” or require Company A to “purchase the loan”). Company A sets up a payment process through a third party that fails, but through no fault of Company A. The third party notifies only Company B of the problem on two occasions. Company B does nothing and waits seven years before realizing during an audit that it has not been paid. Company B then notifies Company A and requests payment in full (including years of accumulated interest) and then sues when Company A refuses. Company A asserts laches (among other equitable claims) and Company B contends that it sued Company A immediately after the refusal to pay in full, thus there was no unreasonable delay in bringing the lawsuit and laches cannot apply. However, the legal right to which laches applies is not the lawsuit (or legal claim), but rather the contract right to require the Company A pay in full after written notice (the legal right). There is no question that Company B delayed in asking Company A to purchase the loan. A court may take this under consideration and allow Company A to use laches as a defense.

Finally, Minnesota courts consider the following factors when deciding whether the doctrine of laches applies to a particular case:
1) Availability of the defense as determined by the nature of the action;
2) Reasons for delay;
3) Prejudice; and
4) Policy considerations.

The court may: find that your case involves a special situation where the doctrine of laches specifically does not apply; accept that there were legitimate reasons for delay; determine that the resulting prejudice was not severe enough support claiming laches; and/or take into account broad policy considerations that may suggest that laches is not appropriate in your case. Additionally, laches is an affirmative defense to a legal claim by another party. This means that the party claiming laches will bear the burden of showing facts and arguments that fulfill the elements of equitable estoppel in that particular jurisdiction. Contract litigation in Minnesota can be complex and you should retain a contract lawyer as soon as possible.

Conclusion

As always, issues such as complicated contract litigation and asserting laches as a defense to another party’s claim involve important legal considerations. It is also important that the consequences of particular actions should be evaluated appropriately. These issues should be analyzed by a skilled contract attorney who will be able to conduct proper legal analysis based on the particular facts of your case. Sherayzen Law Office can help you analyze your case, evaluate your options, and provide specialized advice on how to proceed with your contract litigation.

Call the professional tax law firm of Sherayzen Law Office, Ltd. at (952) 500-8159 to discuss your case with our contract litigation attorney!

Contract Litigation Lawyers Minneapolis: Equitable Estoppel in Contract Lawsuits

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As noted in a previous article, I occasionally have clients who are looking for a way to get out of their contractual obligations. I mentioned five broad methods for getting out of contract: 1) exit provisions in the contract; 2) validity of the contract; 3) contract construction; 4) excuse for non-performance; and 5) breach. If your contract dispute cannot be resolved and proceeds to litigation, irrespective of whether you are the plaintiff or the defendant, the opposing party may attempt to stop you from claiming a right under the contract. They may in fact attempt to claim that your argument under one of the five methods above is not relevant, even if true. One way they can argue this is through equitable estoppel.

What is Equitable Estoppel?

Very generally, estoppel can prevent a claimant from asserting a legal claim against someone else if the claim contradicts what that person has said or done previously. Equitable estoppel is generally used as a defense in contract actions and prevents one party from using false language or conduct (a misrepresentation) to induce another party to act in a certain way that ends up hurting that person. Essentially, equitable estoppel prevents gaining an unfair advantage through dishonest conduct. It is very important to note that equitable estoppel is an affirmative defense to a legal claim by another party. This means that the party raising the issue of equitable estoppel will bear the burden of showing facts and arguments that fulfill the elements of equitable estoppel in that particular jurisdiction. This and other complexities of contract litigation are why it is crucial to retain a Minnesota contract lawyer as soon as possible.

Equitable Estoppel in Minnesota

In Minnesota, the prevailing law requires that a party claiming the affirmative defense of equitable estoppel must prove the following elements: 1) there must be conduct, acts, language, or silence amounting to a representation or a concealment of material facts; 2) these facts must be known to the party estopped (i.e. the party accused of unfair conduct) at the time of the conduct, or at least the circumstances must be such that knowledge of them is necessarily imputed to him; 3) the truth concerning these facts must be unknown to the other party claiming the benefit of the estoppel, at the time when such conduct was done, and at the time when it was acted upon by him; 4) the conduct must be done with the intention, or at least with the expectation, that it will be acted upon by the other party, or under such circumstances that it is both natural and probable that it will be so acted upon; 5) the conduct must be relied upon by the other party, and in reliance he must be led to act upon it; and 6) he must in fact act upon it in such a manner as to change his position for the worse – in other words, he must suffer a loss if he were compelled to surrender or forego or alter what he has done by reason of the first party being permitted to repudiate his conduct and to assert rights inconsistent with it. Lunning v. Land O’Lakes, 303 N.W.2d 452, 457 (Minn. 1980). Different jurisdictions may vary in the elements they require to show that equitable estoppel is warranted.

It is also vital for clients and attorneys to understand that estoppel depends heavily on the unique details of each case and therefore is ordinarily a fact question for a jury to decide. This means that if one party claims equitable estoppel, the other party usually may not be able to resolve the lawsuit by asking the judge for summary judgment in their favor.

Summary judgment is a form of asking the judge to resolve the case at the beginning of the litigation. Summary judgment may be granted by a judge, prior to trial, when the judge can determine that there are no genuine issues of material fact and one party deserves to prevail without proceeding to the jury. Summary judgment is usually not appropriate in cases where one party is claiming the benefit of equitable estoppel because as explained above, it depends heavily on questions of fact such as: what unfair acts or misrepresentation allegedly happened; whether either party had knowledge of the truth regarding the misrepresentation; whether the party accused of acting unfairly meant for the misrepresentation to be relied upon; whether the party claiming equitable estoppel actually relied on the conduct; et cetera.

The reality that equitable estoppel claims are generally not resolved through summary judgments may or may not be beneficial to your particular case. It is crucial that you have a knowledgeable contract litigation attorney who can analyze the legal issues and determine whether there are any valid issues of equitable estoppel in your case.

Conclusion

Issues of claiming any affirmative defense in contract litigation, especially equitable estoppel, are complicated. Whether you wish to use equitable estoppel as a defense, or you suspect that the other party may wish to assert the defense against you, there are important legal considerations to be made and consequences to be assessed. These issues should be analyzed by a skilled Minnesota contract litigation attorney who will be able to conduct proper legal analysis based on the particular facts of your case. Sherayzen Law Office can help you analyze your case, evaluate your options for moving forward, and can provide specialized advise on how to proceed with your contract litigation.

Contract Lawyer Minneapolis |Minnesota LLC Formation IV: Bylaws or Operating Agreement

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In the first part of this series, I mentioned that LLC Bylaws or Operating Agreement (as Bylaws were called in the original version of the Minnesota Limited Liability Company Act) is one of the essential documents and an integral part of LLC formation in Minnesota.

Bylaws may be adopted by the organizers or the first Board of Governors. Remember, though, that the power of the Board in this respect is usually subject to the power of the LLC members to adopt, amend or repeal any Bylaws.

An LLC may adopt Bylaws provisions to establish the management of the LLC, including the regulation of the internal affairs. Bylaws provisions, however, should not be inconsistent with Minnesota law or the Articles of Organization.

The Bylaws typically regulate such matters as: the election and compensation of the governors, Member meetings, Board meetings, notice procedures, voting rights and procedures, election and authority of the managers, removal of the managers, compensation issues, recordkeeping, establishment of the fiscal year, and other management-related issues. A buy-sell agreement may be included in the Bylaws, but this agreement needs to be written in conformity with the rest of the Bylaws.

Thus, the Bylaws cover a broad range of issues and are indispensable to proper management of the business. It is important to remember, however, that, where the LLC is expected to be governed and managed by its members, the members should consider executing a Member Control Agreement. The Member Control Agreement is much broader than the Bylaws and may provide a much greater degree of flexibility necessary in many member-managed LLCs.

Sherayzen Law Office has developed a great degree of concentration and experience in drafting business governance documents. We have consulted start-up and already established clients in Minnesota and throughout the United States with respect to governance documents. We have wide-ranging experience in drafting Bylaws, Member Control Agreements, as well as combination of these two documents known as “Member Control and Operating Agreement”.

Preparing for Business Contract Litigation in Minnesota: Recordkeeping Techniques

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Since most of the business-to-business relationships are organized on the basis of written business contracts, it is inevitable that contract disputes would arise between businesses. Frequently, these disputes are serious enough to lead to business contract litigation between the relevant parties

Therefore, it is important for any business to prepare for such a possibility ahead of the actual commencement of the contract litigation. One of the most crucial (to the success of such litigation) tasks of a business owner is to maintain good records. Proper recordkeeping is essential to successful contract litigation, and, hence, this article lists the following five techniques for the business owners on what type of business records should be kept and how to best organize them.

1. Keep an original copy of your contract

Keeping your original copy is the most basic step in preparation for a contract litigation. Yet, it is shocking how many business owners ignore this. By “original copy” of a contract, I mean one of the counterparts of the contract which bears the original signatures of all parties. Where only one copy of a contract is signed, then you should keep this original. If, for some reason, the decision is made that the other party would keep a copy of a contract, you should request a copy of the contract for your records. This situation is especially common in joint ventures and inter-corporate agreements, but it is very unusual in business-to-business dealings.

The contract should be kept in a separate folder in a safe place. However, do not file your contract in a place that you would not remember. If your business has designated an officer of your company to keep business records, you should make sure that you know the filing system adopted by that officer and where the most important files are.

2. File “negotiation” notes and documents

In addition to the contract itself, you should file all notes, documents, and printed copies of e-mails that were produced in connection with the negotiation of a contract. “All” means “all” – any of these documents may be important to resolve an ambiguity in the contract later as well as to demonstrate a party’s intent.

There are two types of “negotiation” materials: exchanged and internal. The exchanged materials are the notes and documents that were shared with the other parties to the contract during the negotiation process. Generally, in a business-to-business setting, these types of documents are not covered by the attorney-client privileged. Absent a non-disclosure agreement stating to the contrary, it is likely that these documents would not even be considered as proprietary.

The internal materials are the notes and documents that were produced in connection with the negotiation process but were never shared with anyone outside of the company (with the exception of the company’s business lawyer). Examples could include: internal profit-loss assessments, corporate documents (such as board memorandums), assessment of risk, and so on. These documents should be marked as “proprietary information” and filed in a separate folder also marked as “proprietary information.”

Moreover, the internal documents produced by the company’s lawyer should be marked as “attorney-client privileged”; such documents should be filed in a separate folder also marked as “attorney-client privileged”.

All folders of exchanged and internal materials, including the folder containing attorney-client privileged information, should be kept together with the contact. Such organization of documents will be very useful for discovery purposes during the litigation and can save you thousands of dollars in attorney and accounting fees.

3. File Contract-Modification Materials

Documents discussing and potentially modifying the already executed contract should also be filed in a separate folder and kept together with the rest of the documents described above. While some of these documents may be obvious (such as a letter entitled “Request for Contract Modification), others may be much more difficult to classify, especially if the potentially modifying circumstances are not explicitly discussed in the contract.

Therefore, in order to take full advantage of this advanced recordkeeping technique, the business owner should consult his lawyer. An experienced legal professional with deep understanding of contact law and the facts of a specific case is in the best position to determine which documentary materials may be construed as contract modification.

4. Document Contract Performance

This is another sophisticated recordkeeping technique that requires understanding of the term “usage of trade”. Armed with this knowledge, your business lawyer will be able to determine how to document the parties’ contract performance and whether this performance is modifying or has modified the contract.

5. Record Your Company’s Intent and Understanding

This is probably the most flexible advanced recordkeeping technique aimed specifically at the possible future contract dispute. Basically, this is a technique that uses the management structure of the company to create business records regarding the intention and interpretation of a contract. As business records, this evidence of intent and understanding will most likely be admissible in court. The most common example of this technique are corporate board minutes (in the corporate context) or Board of Governors resolutions (for the LLCs).

Again, due to the level of sophistication and legal knowledge required to accurately record a company’s intent and understanding of a contract, it highly advisable that you hire a business lawyer to draft the relevant documents.

Conclusion

Good recordkeeping is crucial to successful business contract litigation. The techniques listed above do not constitute an exhaustive list of recordkeeping suggestions, but they should provide the minimal necessary structure that is likely to be cost-effective and highly efficient in a contract litigation context. Not all of the techniques cited in this article can be implemented by a business owner. Therefore, it is crucial to retain the services of a business contract attorney to fully protect from and prepare your business for the possible contract litigation in the future.

Sherayzen Law Office can help you create and implement a recordkeeping system appropriate for your industry and compatible with your business model.

Call NOW to discuss your case with an experienced business contract lawyer!