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.

Selecting a Trademark: Trademark Strength

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Selecting a trademark is a creative and legally important process. There are many issues that must be factored into the trademark selection process. One of the most important factors is the strength of the trademark; this is significant because the protection of your trademark against future infringement will depend on how strong the courts will consider your trademark to be.

There are four general types of trademarks: fanciful/arbitrary, suggestive, descriptive, and generic (which are really not marks at all).

1. Fanciful or Arbitrary Marks

The most common definition of a “fanciful mark” is the mark or design that has been created for the sole purpose of functioning as a mark. These are basically words that are new or previously unknown to an average consumer. EXXON is an example of a fanciful mark.

An “arbitrary mark” is a normal word or design used in an uncommon way or context. For example, APPLE is an arbitrary mark for computer-maker.

Keep in mind that fanciful marks can also be designs, not only words. For example, the STAGECOACH design of Wells Fargo is fanciful design mark.

Fanciful and arbitrary marks are considered to be highly distinctive and strong. This means that the marks are highly protected by the U.S. laws against the infringement by competitors. In fact, this is the most protected category of trademarks.

2. Suggestive Marks

Suggestive marks are those marks which subtly suggest the qualities which are desirable in a product or service, but which do not literally describe attributes or qualities of the goods or services with which these marks are associated. For example, GREYHOUND suggest speed which is a desirable quality in bus transportation.

Suggestive marks is the second strongest category of trademarks after fanciful and arbitrary marks. It is still highly protected by U.S. law and can be a trademark as soon as it is used.

3. Descriptive Marks

Unlike suggestive marks, the descriptive marks describe (not merely suggest) the qualities of the products or services in connection with which they are used. A commonly-cited test for recognition of descriptive marks is whether the mark immediately conveys the idea, ingredients or characteristics of goods or services in connection with which the mark is used. For example, VISION CENTER for optical clinics or AUTO PAGE for automatic dialing service.

Descriptive marks constitute a much weaker category of trademarks. In fact, unless a descriptive mark acquires what is known as “secondary meaning” through some period of use, sales, or advertising, it may not be protectable at all.

4. Generic Marks

The generic mark is not really a mark, but merely a term which is or becomes the generic name for the product or service in connection with which it is used. It is basically a common name for a product (or service) produced (or offered) by many companies, such as: automobile or cat food. The courts also found that “urgent care” is a generic term for medical services and “cellophane” is a generic term for a clear plastic wrap.

Notice that some terms which were not originally generic may become so over some period of time. For example, “aspirin” became generic over time.

Conclusion

Generally, the more distinctive the mark is, the more protectable it is likely to be. Therefore, from a legal standpoint, the stronger marks are those that are original and unlikely to infringe the rights of others.

Sherayzen Law Office can help you select and research the trademark for your business, evaluate your mark’s strength and file trademark registration applications with the USPTO as well as relevant state authorities. Call (952) 500-8159 to discuss your trademark with an experienced trademark lawyer!

Voluntary Disclosure Program: Possible Renewal With Modifications

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On December 9, 2010, in his prepared remarks before the “23rd Annual Institute on Current Issues in International Taxation IRS” (in Washington, D.C.), Commissioner Doug Shulman hinted that the IRS is considering whether to renew the Voluntary Disclosure Program. The new Voluntary Disclosure Program would have tougher penalties that the original Program that ended in October of 2009, but it would still offer a way for U.S. taxpayers to comply with the U.S. tax laws while avoiding the worst consequences of tax noncompliance.

Here is a relevant excerpt from Commissioner Shuman’s speech:

“Given its success, we are seriously considering another special offshore Voluntary Disclosure program. However, there will be some fundamental differences. Taxpayers will not get the same deal as those who came in under the original program. To be fair to those who came in before the deadline, the penalty – and thus the financial cost to participate – will increase. Let me say too that we expect to make the terms of any new program available to those who have already come in after October 2009 when that program expired. Stay tuned for more details as they become available.”

Voluntary disclosure is usually the best way to bring your tax affair in full compliance with the U.S. tax laws. Moreover, voluntary disclosure process often reveals nonconformity with other U.S. tax compliance requirements, such as FBARs, Form 5471, Form 8865, Canadian RRSP disclosure, et cetera.

Sherayzen Law Office has helped the taxpayers throughout the United States to voluntarily disclose their income and assets, negotiate their tax obligations, and bring their tax affairs in full compliance with U.S. tax laws. At the same time, we have helped our clients to resolve such issues as delinquent FBARs, Form 5471/8865 filings, foreign trust income disclosure, Canadian RRSP reporting, and other relevant tax compliance issues. We will guide you every step of the way, draft the necessary documents and negotiate with the IRS.

Call NOW (952) 500-8159 to discuss your tax issues with an experienced tax attorney! Remember, your consultation is confidential and protected by the attorney-client privilege.

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”.