Articles Posted in Business & Corporate Law

The Indiana Court of Appeals recently reversed a trial court’s decision to grant judgment in favor of a purchaser of a business’s assets after that party brought suit against the business shareholders. The purchaser alleged it was entitled to collect certain assets as part of that sale, while the business filed counterclaims for conversion of personal property and disputed an award of attorney fees. In Whiskey Barrel Planters Co. v. American Gardenworks, Inc., 966 N.E.2d 711 (Ind. Ct. App. 2012), the business (“Whiskey Barrel”) manufactured and shipped planters and garden accessories from its Indiana facility and the sole shareholders were husband and wife.
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The Jumpstart Our Business Startups Act (“JOBS Act” or “the Act”) was a bill passed with bipartisan support by Congress in 2011 and signed into law by President Obama in April 2012. The goal of the law is to encourage funding for small businesses, or “emerging growth companies” in the words of the Act, to facilitate job creation and investment by easing various securities regulations. It enables a private company to sell up to $1 million of securities over a 12-month period to investors without needing to register the securities with the Securities and Exchange Commission (SEC). Sales of this type are what the Act describes as “crowdfunding:” the novel yet democratic process by which capital and other resources are aggregated from a traditionally smaller group of people for the purpose of funding a business venture, investment opportunity, or even a nonprofit.
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Indiana courts will not pierce the corporate veil absent a causal connection between the misuse of the corporate form and fraud or injustice. In CBR Event Decorators v. Gates, 962 N.E.2d 1276 (Ind. Ct. App. 2012), the court refused to pierce the corporate veil and hold the shareholders personally liable, as the plaintiff had failed to establish such causal connection. In Gates, defendants agreed to invest in a company that the plaintiff had loaned money to but had never been repaid. Prior to investing in the company, the defendants formed a limited liability company (LLC), to which the plaintiff was informed of the LLC formation. After investing in the company, the defendants entered into a purchase agreement with the plaintiff for the sale plaintiff’s business assets. After the purchase agreement was signed by both parties, the defendants learned of defects in their investment company. Upon learning of the company’s status, the investors requested to renegotiate the contract and stop-payment on the down payment submitted to plaintiff after signing the purchase agreement. Plaintiff rejected the proposed terms of a new purchase agreement and demanded the stop-payment not be placed on the check. The shareholders eventually placed a stop-payment on the check and the plaintiff sued, claiming the corporate veil should be pierced because of misrepresentation and fraud on the part of the shareholders.
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In Ziese & Sons Excavating, Inc. v. Boyer Const. Corp. and Boyer Construction Group Corp., 2012 WL 1066026 (Ind. Ct. App. 2012), the court stated that summary judgment was inappropriate after finding genuine issues of material fact as to both the questions of piercing the corporate veil and successor liability, addressing issues when a corporation is similar in name, operation, shareholders, owners, employees, and project ownership. In this case, Ziese had performed work for Boyer Construction Corporation (“Corporation”) on the Knode Creek Retail Development project (“Project”). After completing the Project, Corporation never paid Ziese. Two years later, Boyer Construction Group Corporation (“Group”) was formed, which performed the same business as Corporation. Further, Group purchased assets from Corporation, including two contracts and personal assets, and had the same individuals who owned, ran, or where employed by Corporation. Finally, Group used Corporation’s website, trademark and logo, and issued a check to Ziese for partial payment for its work on the Project. Pursuant to nonpayment and Group’s creation, Ziese sued both Corporation and Group for payment for services rendered.
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A recent Indiana Court of Appeals decisions held that both a borrower’s knowledge of a lender’s claim against him and service at the borrower’s parents’ house, when borrower did not reside at the residence, were insufficient to confer personal jurisdiction over the borrower. In Norris v. Personal Finance, 957 N.E. 2d, 1002 (Ind. Ct. App. 2011) the financial institution attempted to assert personal jurisdiction over the borrower by serving the borrower’s parents’ address, where such address was included in borrower’s application as his references’ address and was never listed as the borrower’s home address.
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During a corporate merger or acquisition, companies should inspect the I-9 Employment Eligibility Verification Form policies of the soon-to-be merged or acquired company, as failure to do so may expose the company to fines and penalties from Immigration and Customs Enforcement (ICE). Since November 6, 1986, employers have been required to use the I-9 form in order to verify that each employee hired is authorized to work in the United States.
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On October 4, 2010, the Occupational Safety and Health Administration (“OSHA”) issued an open letter to employers announcing an educational program encouraging employers to prevent work-related distracted driving and asking employers to review their policies and practices with respect to texting and driving. The OSHA letter further stated employers have a “legal obligation” to prevent hazards such as texting and driving.
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The health care reform package that went into law on Tuesday, March 23, 2010, most clearly will have substantial effects on the health care industry. However, the legislation will also have far reaching impact on employers. Although employers are not mandated under the health care reform package to provide insurance coverage to employees, the new legislation will penalize employers that do not offer coverage at all to the employees or do not offer coverage considered “good enough.” For example, employers with 50 or more full-time employees that do not offer insurance coverage will have to pay an assessment to the government to help offset the cost of health insurance if their employees are receiving help from the federal government to purchase their own insurance. Additionally, a tax will be assessed on employer sponsored, high-end “Cadillac” coverage, which is 40% of the “excess benefit” of plans that exceed the thresholds of $8,500 for individual coverage and $23,000 for family coverage under the original Senate bill. However, when the original Senate bill is combined with the reconciliation bill, the effective date of the tax provision will be changed from 2013 to 2018, and the original threshold will be raised to $10,200 for individual coverage and $27,500 for family coverage.
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How to Avoid the CBS Evening News

The next question is what can employers do to protect their employees or to avoid being in the headlines for the CBS Evening News? Employees should have zero tolerance policy towards workplace violence against or by employees, whether the violence originates inside or outside the workplace. Employers should establish a workplace violence prevention program and incorporate that into an accident prevention program, employee handbook, and/or standard operating procedures.

An employer should consider establishing and implementing a written workplace violence prevention program that includes and/or provides for the following:

§ Workplace Violence Policy Statement (statement should include that there is zero tolerance for work place violence and encourage reporting without retaliation)
§ Management commitment and employee involvement (involvement by all and system of accountability)1
§ Worksite analysis (identify existing hazards)
§ Hazard prevention and control (practice controls and procedures in the event of a violent incident)
§ Training and education for supervisors and employers § Incident reporting, investigation, follow up § Recordkeeping evaluation program (OSHA 300 log and analyze impact)
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Background

According to the Occupational Safety and Health Administration (“OSHA”), approximately 2 million American workers are victims of workplace violence each year. See www.osha.gov. In 2008, homicide was the third leading cause of fatal occupational injury in the U.S. and the second leading cause of death for females in the workplace. See Bureau of Labor Statistics, Census of Fatal Occupational Injuries Summary 2008, available at https://www.bls.gov/news.release/cfoi.nr0.htm.

The National Institute for Occupational Safety and Health (“NIOSH”) defines workplace violence as follows: “violence acts, including physical assaults and threats of assaults, directed towards a person at work or on duty.” See NIOSH, https://www.cdc.gov/niosh/about.html. OSHA expands the definition as follows: “Workplace violence is a physical assault, threatening behavior or verbal abuse occurring in the work setting. It includes, but is not limited to, beatings, stabbings, suicides, shootings, rapes, near suicides, psychological trauma, such as threats, obscene phone calls, and intimidating presence, harassment of any nature, such as being followed, sworn at or shouted at.” See OSHA, www.osha.gov.
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