Basic Contract Terms in Utah

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The Utah Court of Appeals recently provided a quick and dirty summary of basic contract terms in Lebrecht v. Deep Blue Pools, 2016 UT App 110. The case also provides a primer for creating an enforceable settlement agreement without an attorney. Let’s take a look.

Rules for Entering into a Contract

Here are the basics:

  • “Under the principles of basic contract law, ‘a contract is not formed unless there is a meeting of the minds.'” To determine whether there has been a ‘meeting of the minds,’ “the parties’ intentions are controlling.” This means that both parties must both understand and agree to the same terms to be enforceable.
  • “Two elements, among others, are necessary to form an enforceable contract: (1) an offer and (2) an acceptance.”
  • “An offer is a ‘manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to the bargain is invited and will conclude it.'” I highlight “manifestation” because this is the evidence that an offer has been made. It can be oral, written, or some action that constitutes an offer.
  • “For an offer to be one that would create a valid and binding contract, its terms must be definite and unambiguous.” This goes back to the ‘meeting of the minds;’ there cannot be a meeting of the minds on a term that remains indefinite or ambiguous.
    • Indefinite: “I will build your house before autumn.”
    • Ambiguous: “I will build you a craftsman style house.”
    • Definite and not ambiguous: “I will build your house according to the plans you gave me and have a certificate of occupancy issued no later than August 21, 2016.”
  • “An acceptance must unconditionally assent to all material terms presented in the offer, including price and method of performance, or it is a rejection of the offer.”
    • The point here is that if you attempt to accept an offer but add other terms, your purported ‘acceptance’ is in reality a counteroffer and no contract has been made: “Thus, a conditional acceptance or a proposal of different terms from those of the offer constitutes a counteroffer, and no contract arises.”
    • Whoever wants to enforce the contract has the burden to prove that the contract exists and the terms of that contract.

The Lebrecht case provides a nice application of these principles in the context of a settlement of a lawsuit.

Creating an Enforceable Settlement Agreement

Lebrecht is an attorney who sued Deep Blue Pools, the company that installed a swimming pool, barbeque pit, and other landscaping features. He did not represent himself in the litigation but had an attorney. Lebrecht and his wife and the owner of Deep Blue met without attorneys to try to settle the litigation. At the conclusion of their meeting, the parties signed a ‘term sheet’ that purported to establish the basic terms of their agreement.

After the meeting, Deep Blue consulted its attorney and disputed the settlement. Lebrecht tried to enforce it as written. Unbeknownst to Lebrecht, however, the settlement negotiations were recorded by Deep Blue. *Which is legal in Utah, by the way; as long as one person in the conversation consents to the recording, it is permitted.*

Deep Blue’s recording showed that the term sheet was not intended by the parties to be binding, only reflected an intention to enter into a written agreement in the future, and would be subject to input from the parties’ attorneys. The trial court sided with Lebrecht and found an enforceable contract. The Court of Appeals reversed based on the recording and the term sheet, holding that it was “merely preliminary negotiations” and not a meeting of the minds. Specifically, the term sheet was so sparse as to its content that it was ambiguous which party would pay the other, whether the amount on the sheet was a price, payment, or cost, or which one would pay an amount upon signing.

The Take-Away
The gist of the law is that a contract can be as simple as an offer and an acceptance as long as the terms are clear and unambiguous. We do it every day. The troubles arise when the terms get more complicated or are not communicated clearly. Be specific. If it is worth enforcing, put it in writing.
There are issues and nuances of contract law that are certainly not addressed here. If you have questions, you should get specific legal advice. If you would like more information about contracts or agreements of any kind, call me, Utah attorney Ken Reich, directly. I have represented both companies and individuals in business matters and disputes involving contracts of all kinds, including settlement agreements of all kinds. Using my many years of experience and backed by a firm of legal specialists in nearly every legal field, I can help you or your company evaluate your situation and help you make smart decisions about your business and your life that will best fit your circumstances.

How to Use a Liquidated Damages Clause in Utah Contracts

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Not your car. Not my car. Note the little sticker on the front bumper: don’t touch.

What happens when you suffer harm from a breach of contract that you cannot prove or would have a very difficult time proving? Such as for a delay? Often your damages will go unreimbursed.

One typical situation is for delay in contract performance– “Time Is Money,” right? The proof of damages under this axiom is often nearly impossible or at least impractical. For example, if a construction delay causes you to open your new business four weeks later than planned, how do you prove damages? You have no history of income and it would be claimed that any damages would be pure speculation. Enter liquidated damages.

When to Use a Liquidated Damages Clause

A liquidated damages clause sets a fixed amount to be paid upon the occurrence of a specified event.

Delay is a typical triggering event in construction contracts, supply contracts, employment contracts, or any other contract where “time is of the essence.” The phrase “time is of the essence” holds a legal meaning that puts the parties on notice that delay will result in a breach and will trigger damages. A liquidated damages provision protects the non-breaching party from delay by determining in advance the amount that the breaching party must pay for every minute/day/month (whatever the important time calculation) of delay.

Inclusion of a clause forces the parties to stay on schedule and avoid the fixed damages. The following is a typical liquidated damages clause in a construction contact:

Time is of the essence of this Contract. If the Contractor shall neglect, fail, or refuse to complete the Work within the time specified for Substantial Completion in the Contract, then the Contractor does hereby agree, as a part consideration for the awarding of this Contract, to pay to the Owner, as liquidated damages and not as a penalty, the sum of $_______________ per day for each calendar day beyond the dates set forth in the Agreement that the Contractor fails to achieve Substantial Completion for the Project. The said amount is fixed and agreed on by and between the Contractor and the Owner because of the impracticability and extreme difficulty of fixing and ascertaining the true value of the damages which the Owner will sustain by failure of the Contractor to complete the Work on time, such as loss of revenue, service charges, interest charges, delays caused to other construction activities of Owner by failure to perform this Contract, and other damages, some of which are indefinite and not susceptible of easy proof, said amount is agreed to be a reasonable estimate of the amount of damages which the Owner will sustain and said amount shall be deducted from any monies due or that may become due to the Contractor, and if said monies are insufficient to cover said damages, then the Contractor shall pay the amount of the difference.

Utah Liquidated Damages Law

Utah courts have provided very clear guidance for the use of liquidated damages clauses. You may find in other jurisdictions or states, however, that such a clause is disfavored or possibly void as a penalty. Not so in Utah.

The Utah Supreme Court held as recently as 2012 in Commercial Real Estate Inv., LC v. Comcast of Utah II, 285 P.3d 1193, 2012 UT 49, that “liquidated damages clauses should be reviewed in the same manner as other contractual provisions” and not as a penalty. The only limitation on such a clause is the same limitation on any agreement: “A party may challenge the enforceability of a liquidated damages clause only by pursuing one of the general contractual remedies, such as mistake, fraud, duress, or unconscionability.”
Utah courts will not save you or the other party to your contract from a bad deal: “Persons dealing at arm’s length are entitled to contract on their own terms without the intervention of the courts for the purpose of relieving one side or the other from the effects of a bad bargain.”
“It is not our prerogative to step in and renegotiate the contract of the parties.”
The Comcast court found that courts “should invalidate liquidated damages clauses ‘only with great reluctance and when the facts clearly demonstrate that it would be unconscionable to decree enforcement of the terms of the contract.'”
Avoiding the Unconscionability Defense
In order to avoid a claim of unconscionability, make sure your contract terms are not substantively unconscionable. Utah’s model jury instruction on this issue is helpful:

Substantive unconscionability focuses on the terms of the contract. It requires you to examine the relative fairness of the contract at the time it was entered into. Even if a contract is unreasonable or more advantageous to one party, the contract, without more, is not unconscionable. Rather, in order to find that the contract [or contract terms] is substantively unconscionable, you must find that [name of party] proved the following by clear and convincing evidence:

(1) That the contract terms are so one-sided as to oppress or surprise an innocent party, or

(2) That the contract terms result in an overall imbalance in the parties’ obligations and rights that is inconsistent with accepted customs and business practices at the time and place the contract was made.

The Take-Away
The gist of the law is that liquidated damages provisions work well in negotiated, arms-length contracts but not so well in a consumer contract. It protects a party from delay or other breaches of the contract that might be difficult or unwieldy in proving. In the consumer arena, you could find yourself subject to the unconscionability defense above. There may be times when it would be appropriate and warranted in consumer contracts, but it should be highlighted or emphasized for the consumer and not buried in the fine print.
A cautionary note as to the amount of the liquidated damages: if you include the liquidated damages clause, a rule of thumb is that it should be reasonable. You have included the clause because it is often impractical and difficult to determine the extent of your damages. Do not take this as an invitation to exaggerate your damages. Keep it as closely tied to what you believe your actual damages would be and you should be fine. You do not want to give the judge a reason to find the clause unconscionable.
There are issues and nuances that cannot all be addressed here. If you have questions, you should get specific legal advice. If you would like more information about contracts or agreements of any kind, call me, Utah attorney Ken Reich, directly. I have represented both companies and individuals in business matters and disputes involving contracts of all kinds, including those with liquidated damages clauses. Using my many years of experience and backed by a firm of legal specialists in nearly every legal field, I can help you or your company evaluate your situation and help you make smart decisions about your business and your life that will best fit your circumstances.

The Open and Obvious Hazard Defense to Premises Liability Claims in Utah

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In Utah, claims against landowners, i.e., ‘premises liability’ claims, are subject to the ‘open and obvious hazard‘ defense. This defense is the assertion that the injured person failed to protect themselves from a risk that should have been apparent to them. Businesses and landowners who may have customers, clients, or patrons visit their property should beware, however, that this defense is not absolute and should take reasonable precautions.

Utah’s Open and Obvious Rule

The Utah Supreme Court clarified the open and obvious defense in Hale v. Beckstead, 2005 UT 24. The Hale court cited the Second Restatement of Torts Sections 343 and 343A as the source of Utah’s defense and not ‘common law’– prior Utah judge-made law. The Restatement states the responsibilities of both a landowner and a person who is present on the land. I will restrict this post to the those present on the land legally either by express or implied invitation, known as ‘invitees.’ Duties owed to trespassers and others is a subject for another day.

The Restatement version of the open and obvious danger rule also does not act as a complete bar to the recovery of a plaintiff injured as a result of another’s negligence. Hale ¶23.

Utah law, relying on the Restatement, sets up a number of situations that defeat an open and obvious danger defense. Each is based on the general proposition that a landowner owes a duty to “protect invitees against dangers of which [the invitee] are unaware, may forget, or may reasonably encounter despite the obviousness of the danger.” Hale at ¶27. A landowner is potential liable to an invitee if the landowner:

  1. knows or by the exercise of reasonable care would discover the condition, and should realize that it involves an unreasonable risk of harm to such invitees, and
  2. should expect that an invitee will not discover or realize the danger, or will fail to protect themselves against it, and
  3. fails to exercise reasonable care to protect an invitee against the danger.

In essence, if a landowner “should expect that [an invitee] will . . . fail to protect [himself] against [a dangerous condition],” the landowner must exercise reasonable care to protect him.

A typical situation might be a balcony without a railing. The danger, although obvious, involves an unreasonable risk of harm and could be encountered by children who may not recognize the danger or fail to protect themselves.

Just because a dangerous condition on your property is ‘open and obvious’ does not end the analysis. Landowners whose property is open to the public or to any invitee must exercise reasonable care. If you have any question about what you are required to do, ask your attorney or insurer.

Apportionment of Fault

The Hale court made it clear that the open and obvious defense fits nicely into Utah’s comparative fault scheme. The defense formerly was a complete bar to an invitee’s claim against a landowner. Under Utah’s prior scheme, “a person who bore any portion of fault, no matter how slight, for his own injuries was barred from recovering against the primary tortfeasor.” Hale at ¶19. No longer. Long ago (1973!) Utah adopted comparative fault. This means that the fault of each party is compared and percentages of fault assigned. The defense simply establishes a higher bar for an injured invitee before the invitee can establish liability and get cash. Still, an injured invitee’s fault must be less than the fault apportioned to the landowner in order to prevail at all. (If you are curious and want to drill down on this issue, see U.C.A. § 78-27-38, et seq.).

The Hale court made it clear that if there is no duty to warn an invitee of a danger then the comparison of fault never takes place. An invitee must first prove a duty existed and then prove that the landowner failed to meet that duty before any comparison of fault is ever performed.

Hale also made it clear that landowners are free to maintain an obvious danger on their property. The duty inform or protect arises when invitees are present:

This duty does not require that landowners fully remedy potentially unsafe conditions, only that landowners adequately warn invitees about such dangers. Where the danger is so obvious such that no warning is necessary to alert an invitee, the possessor of land is not required to give the warning anyway unless other circumstances, discussed above, warrant. Hale at ¶30.


If you own property, you are responsible to either keep it free of unsafe conditions or warn anyone coming onto your land of the unsafe condition. The Hale court defined in simple terms the requirements and how a landowner’s duties are applied and the hurdles an invitee must overcome when injured by an open and obvious condition on land.

An example comes to mind. Just the other day, my son had a friend over to play. We had built a platform on a hillside that was supposed to be the floor of a playhouse. Well, the playhouse was never built and the platform has been through at least two winters and is getting ‘weathered.’ I suspected but never confirmed that the boards had rotted and were unstable. My son’s friend confirmed my suspicion and fell through the boards and down the hill. Fortunately he was not hurt and considers his scratches a badge of honor and proof of a great story. (The platform you must understand is on a very steep hillside and the fall was substantial for a 10 year-old).

If my son’s friend had been injured, I would likely face liability for failing to ‘exercise reasonable care to discover’ the dangerous condition and either prevent the injury or warn of the dangerous condition. I do not recommend following my example. Be careful out there!

If you have questions, you should ask them- contact me, Utah attorney Ken Reich. I regularly represent companies and the individuals and families that own them. My job is to know and understand my clients and their goals. Together with the right legal experts, I can help you get the result you want.

New Utah Law Governing Non-Competition Agreements

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20150823_175608The Utah Legislature recently passed and Governor Herbert signed a new law limiting non-competition agreements. When the law initially started through the Legislature, it seriously limited non-competition covenants. The end result was much tamer.

Here are the highlights of the new non-competition statute:

  • Post-employment restrictive covenants, i.e., non-competition agreements, are limited to one year from the date of separation;
  • The statute does not apply to clauses concerning non-solicitation, non-disclosure, or confidentiality;
  • Exceptions to the one-year time limitation include the following:
    • Severance agreements that are reasonable and mutually and freely agreed upon in good faith after separation; and
    • Agreements in conjunction with the sale of a business.

The statute defines non-competition agreements as any agreement in which an employee or former employee agrees they “will not compete with the employer in providing products, processes, or services that are similar to the employer’s products, processes, or services.”

Effective Date: The law affects any agreement entered on or after May 10, 2016. The statute is not expressly retroactive.

Bad-Actor Employers Warned: Lastly, the statute imposes damages against an employer who seeks to enforce non-competition provisions that are found to violate the statute. The damages available to an employee include any costs of an arbitration, attorney fees and court costs, and actual damages.

Take-Away: Employers should reevaluate their severance agreements and employment agreements to ensure that such agreements are consistent with this new law. For many employers, the non-competition provisions are part of the employment contract signed when the employee is hired. Its effect is not felt until (hopefully) many months or years later when the employee leaves. It is important, then, that employers review their employment contracts now since later is too late.

There are issues and nuances that cannot all be addressed here. If you have questions, you should get specific legal advice. If you would like more information about employment, non-competition, non-solicitation, confidentiality, or non-disclosure agreements, call me, Utah attorney Ken Reich, directly. I have represented both companies and individuals in business matters and disputes involving employment agreements and related matters, including non-competition issues. Using my many years of experience and backed by a firm of legal specialists in nearly every legal field, I can help you or your company evaluate your situation and help you make smart decisions about your business and your life that will best fit your circumstances.

Do You Need Help with Affordable Care Act Reporting?

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Canyoneering in Southern Utah

Reporting on offers of health insurance coverage by Utah employers under section 6056 of the Affordable Care Act (ACA) is first required in early 2016 with respect to calendar year 2015. If you find yourself in this situation, my partner, Chris Droubay, has experience and expertise in this area. I am confident he can provide valuable assistance to you. Feel free to call him and tell him I sent you.

If you want to research it yourself and take a shot at getting it right on your own, the IRS has some online guidance, for whatever it’s worth, for completing the Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, at the Employer Information Reporting FAQs for Forms 1094-C and 1095-C on If you are a large employer per IRS guidelines, the IRS has information available on its large employers page. Good luck!

ACA reporting is one of those areas that I simply have no expertise. Fortunately, I have partners who have the expertise. As with all legal issues, if you have questions, you should get specific legal advice. If you would like to talk to me about this or any legal matter, contact me, Utah attorney Ken Reich directly. I will likely ultimately involve a partner in the matter but I would love the opportunity to help out where I can. I have represented both companies and individuals in numerous business matters and disputes since 1999. Using my many years of experience and backed by a firm of legal specialists in nearly every legal field, I can help you evaluate your situation and help you make smart decisions about your business and your life that will best fit your circumstances. Cheers!

Do Your Contract or Settlement Negotiations Amount to Fraud?

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IMG_1215Your initial response to the title question should certainly be ‘No’. In light of a recent case pending in the U.S. Court of Appeals, however, you may want to reevaluate your representations made in contract or settlement negotiations. A bank VP was convicted of fraud based on representations he made in a deal he made with his bank employer, even when the bank acknowledged and waived the obvious conflict of interest. Makes me think any amount of ‘puffing’ in contract or settlement negotiations could turn to a fraud indictment.

Set Up

Let me set up the facts. Be patient, the complex setup is worth the payoff pitch:

In the U.S. v. Weimert case, Weimert was convicted of wire fraud in a negotiated transaction. Weimert was a bank senior vice president and president of a bank subsidiary, IDI. IDI was a 50% minority owner in CCLP, LLC. The majority owner of CCLP, Burkes, held a right of first refusal on IDI’s shares in CCLP. As the real estate market was crashing in 2008, the bank accepted Troubled Asset Relief Program (TARP) funds from the US government.

In order to gain liquidity and avoid bankruptcy, the bank told Weimert to sell assets to make interest payments. Weimert found a legitimate buyer, Kalka, to make a ‘stalking horse’ offer on the CCLP shares held by IDI. Kalka’s letter of intent included a provision that gave Weimert, personally, a commission on the deal and a buy-in interest of 4 7/8%  in CCLP. Weimert took that LOI to Burkes, as he was required to do, and convinced Burkes to match the offer. Burkes matched it (almost, but that’s not an issue in the case).

Weimert then took Burkes’ offer to the bank board of directors. Weimert represented to the board that the buyer would not purchase the asset unless Weimert received the commission and the stake in CCLP. This was factually not true; the buyer made no such requirements to consummate the deal. Weimert’s conflict of interest was acknowledged and signed off by the bank’s attorneys. The bank waived the conflict and approved the sale but was ignorant of Weimert’s misrepresentation about the buyer’s alleged stipulation that he obtain a commission and interest in CCLP.

TARP inspectors investigated the transaction and brought wire fraud claims against Weimert since his negotiations on the deal were communicated across state lines. A jury convicted him on 5 of 6 fraud counts. The jury found that Weimert defrauded the bank by inserting himself in the transaction based on the misrepresentation that the buyer would only buy the CCLP shares if he obtained a commission and interest in it.

Weimert’s case is now on appeal. At oral argument, the judges raised issues of prosecutorial judgment and whether this claim should have ever been brought.

One judge commented: “I’m very troubled by the application of federal wire fraud to statements about parties’ negotiating positions. That is, what terms are important in this deal to whom.” He also noted, “I have not found any case law treating those sorts of representations by anybody under any circumstances as material for purposes of federal fraud statutes.”

Apparently, the judge questioned whether Weimert’s representations about the deal were anything but ‘puffing’ or negotiation tactics. This position appears to make the assumption that the bank could no longer rely on Weimert’s impartiality when it waived the known conflict that Weimert was now personally interested in the deal and whether the reason for his personal interest was because the buyer required it or because he wanted a slice of the pie does not give rise to a claim under the wire fraud statutes.

He’s bluffing, sure. This happens in deals. These are capitalist acts among consenting adults.

The same judge then questioned the prosecutor about his concern that this was just negotiation rhetoric and not fraud. The prosecutor countered with an argument that there was a conflict of interest. The judge responded that “[Weimert] has disclosed the conflict of interest. It is out there for everybody to see. The board brings in its lawyer and says, in essence, eyes wide open. We need to do this deal.” The judge clarified: “Let me be very frank about what concerns me about this … it seems to me that … this case comes very close to making negotiations subject to federal criminal prosecutions at the discretion of the U.S. attorney and the grand jury.”

The judge drilled down on what makes this case fraud when other deal negotiations are dismissed as puffing and rhetoric. The prosecutor responded that this case is different because Weimert “induce[d] [the board] to waive the conflict of interest by misrepresentation” and “inserted [him]self in the deal” by representing to the board that Burkes required it. The judge’s response: “He’s bluffing, sure. This happens in deals. These are capitalist acts among consenting adults” and commented that “[t]his case seems to me to break very new ground.”

If you are really interested, you can search the Seventh Circuit’s oral arguments here.

The Take-Away

Negotiating is an art. Parties constantly make representations based on their position and outcome goals. There are fine lines between ‘puffing’ and fraud. Weimert crossed over. Let me see if I can help clarify some of the gray areas.

In negotiations, you will find yourself in differing situations. For example, Weimert was in a position of trust as an employee and senior vice president. Even though his personal interest was disclosed to his employer, the bank, he was not free to lie about the essential facts underlying the transaction. He was still the only person reporting or presenting the deal to the board. Certainly there is still some ‘shame on you’ to be shared with the board. Under the circumstances, if the board had any concerns, it should have assigned another employee to oversee the transaction since Weimert was clearly conflicted.

You need to examine your position in the deal. Do you owe any duty to the other side in the deal? Are you related by blood, employment, or contract? Is the other party relying on your opinion, investigation, or valuation that is not otherwise disclaimed in the written agreement? Are you in a position of trust in relation to the other party? Do you exert control over the other party?

Likewise, the amount of scrutiny a deal will receive is a function of the amount at stake and the parties involved. The bigger the numbers, the more scrutiny, usually. If government funds are involved, such as the TARP funds involved in Weimert, you can expect a certain amount of additional oversight. The IRS also likes to look at big deals to make sure they get their cut. If you are crafting a deal to avoid taxes and your express negotiations are key to entitlement to a preferred tax treatment, be careful. Likewise for family transactions. You may find a sweet deal from your elderly uncle but you have to know that your cousins and siblings are going to look at it very closely and blame you if it goes south or you took advantage. Also, with elderly people, you need to make sure that competency is not an issue. Appearance of fraud is sometimes as powerful as actual fraud. Think about how it would look in front of a jury. Put it in writing and disclose anything you think might make a difference to someone in an armchair quarterback role a year from now.

Another note: you should not rely on your attorney to sanitize your misrepresentations. Attorneys are your agent and you are bound by what they say or agree to on your behalf. Also, take a look at the lawyer rules about representations:

Rule 4.1 of the Utah Rules of Professional Conduct provides:
In the course of representing a client a lawyer shall
not knowingly:
(a) Make a false statement of material fact or
law to a third person; or
(b) Fail to disclose a material fact, when disclosure
is necessary to avoid assisting a criminal or
fraudulent act by a client, unless disclosure is
prohibited by Rule 1.6.

The comments to this rule help clarify some of the question about representations in negotiations:

Whether a particular statement should be regarded as one of fact can depend on the circumstances. Under generally accepted conventions in negotiation, certain types of statements ordinarily are not taken as statements of material fact. Estimates of price or value placed on the subject of a transaction and a party’s intentions as to an acceptable settlement of a claim are ordinarily in this category

(Emphasis added). My partner, Keith Call, recently addressed the subject in the Utah Bar Journal article “Is it Ethical to Be Dishonest in Negotiations?” (see page 40). His article is addressed specifically to lawyers but you may find it interesting.

There are issues and nuances for negotiations that certainly cannot all be addressed here. If you have questions, you should get specific legal advice. If you would like more information about negotiations or how to stay out of trouble, contact me, Utah attorney Ken Reich directly. I have represented both companies and individuals in numerous business matters and disputes since 1999. Using my many years of experience and backed by a firm of legal specialists in nearly every legal field, I can help you evaluate your situation and help you make smart decisions about your business and your life that will best fit your circumstances.

When Your Employee Manual May Hurt More than It Helps- a Fresh Utah Example

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IMG_4161You have carefully crafted your employee handbook to expressly and explicitly disclaim any contractual relationship with your employees and keep them at-will and then- BOOM. You got cute with the fine print. You kept your important language buried in the minutia of the handbook while keeping all the employee-friendly terms front and center. This may have been good enough in the past but it is no longer. Let’s look at Reynolds v. Gentry Finance Corporation, 2016 UT App 35, a recent case from the Utah Court of Appeals on this issue.

“[A]n employee handbook distributed to an at-will employee may modify the at-will employment relationship.”

A company’s employee manual is a great opportunity to define its employment relationship with its employees. In fact, employers often expect and hope that employees refer to the employment manual to understand the terms of their employment– not every employee warrants an employment agreement. Here’s where the Gentry company went a bit awry.

Gentry wanted to keep the bundle of at-will employee ‘privileges’ intact while at the same time make the broad statement that “NO EMPLOYEE WILL BE TERMINATED OR HAVE ANY ADVERSE ACTION TAKEN AGAINST THEM FOR BRINGING A COMPLAINT TO THE ATTENTION OF THE HOME OFFICE.” (Capitalization, boldface, and italics in Gentry’s handbook).

“Utah law allows employers to disclaim any contractual relationship that might otherwise arise from employee manuals.” To do this, however, the employer must include in the employee handbook “a clear and conspicuous disclaimer of contractual liability.” This is where it gets sticky and you need to step carefully because 1) “[t]he prominence of the text, [2)]the placement of the disclaimer, and [3)] the language of the disclaimer are all relevant factors in determining whether a disclaimer is clear and conspicuous.”

What does this mean? Well, for example, in a Utah Supreme Court case, a disclaimer that was conspicuously located at the top of a employee handbook and prominently bolded and SET APART by a text box was good enough or “sufficiently prominent” to put employees on notice of its terms. Use your imagination. Look at the ALLCAPS, italicized, and bolded statement from Gentry’s handbook. It stands out. And, if it stands out to you, it is likely to stand out to your employees. If you have questions, talk to a lawyer. I’m getting ahead of myself. Let’s get back to Gentry.

Gentry got sideways with its employee handbook even though it had four separate disclaimers in it. Unlike the disclaimer case example above and Gentry’s statement that an employee would not be terminated or had adverse action taken against them, Gentry’s disclaimer was nearly invisible. The court found that the disclaimer had not been placed at the top of the relevant policy, was “not prominent, not bolded, and not set apart by a text box. It [was], in a word, inconspicuous.”

So what? Well, for Gentry it meant that its employee could avoid having its case dismissed and a jury would get to hear her case. Juries are a mixed bag. If your employee handbook is clean and clear and meets all the right requirements to keep your at-will rights intact, you punch your ticket out of the case early and cheaply. Gentry, however, now gets to pitch its story to a jury who may be sympathetic to an employee that the jury may feel has been wronged.

The takeaway from Reynolds: don’t get cute with your employee manual. Don’t put the important stuff in the fine print or make it inconspicuous. Bold it. Put it in ALLCAPS and italicize it. Make it a black box label that cannot be ignored.

There are issues and nuances for employee handbooks that certainly cannot all be addressed here. If you have questions, you should get specific legal advice. If you would like more information about employee manuals, employment agreements, protecting your rights, or rectifying wrongs committed against you, contact Utah attorney Ken Reich directly. Mr. Reich has represented both companies and individuals in business matters and disputes. Using his many years of experience and backed by a firm of legal specialists in nearly every legal field, Mr. Reich can help you evaluate your situation and help you make smart decisions about your business and your life that will best fit your circumstances.

Utah Property Law- What to Do About Annoying Neighbors

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IMG_4011Do you have a neighbor whose conduct is reducing or barring you from enjoying your own property? A nuisance claim may be the answer to your problem.

Nuisance law is alive and well in Utah and modern courts. The problem, however, is its relative complexity.

“There is perhaps no more impenetrable jungle in the entire law than that which surrounds the word ‘nuisance.’ ” W. Page Keeton et al., Prosser and Keeton on the Law of Torts (Prosser on Torts ) § 86, at 616 (5th ed.1984).

There are two kinds of nuisance, public (see Utah Code Ann. § 76–10–803) and private (see Utah Code Ann. § 78B-6-1101). Bear with me for a moment while I give you the gist of these claims. I am not trying to provide a treatise on nuisance but to give you enough information to determine whether you should look into it further if you believe it applies to your circumstances. Once you see the elements of the claims, I will show you the claims in action.

Public Nuisance

“A public nuisance is a crime against the order and economy of the state….” Utah Code Ann. § 76–10–803. Here are the four elements to prove a public nuisance:

  1. “Unlawfully doing any act or omitting to perform any duty,”
  2. The “act or omission … in any way render[ed] three or more persons insecure in life or the use of property,”
  3. You “suffered damages different from those of society at large,”
  4. Your neighbor caused or is responsible for the nuisance complained of; and
  5. Your neighbor’s conduct was unreasonable.

Note: ‘your neighbor’ could be a person, business, or government entity.

Private Nuisance

“The essence of a private nuisance is an interference with [an individual’s] use and enjoyment of land.” W. Page Keeton et al., Prosser on Torts § 87, at 619 (5th ed.1984). (On a side-note, if you are at all interested in wrongs or torts, find a copy of Prosser on Torts. It’s the bible of torts). Here are your three elements to prove a private nuisance claim:

  1. A substantial invasion in the private use and enjoyment of land
  2. caused by your neighbor or for which your neighbor is responsible, and
  3. the invasion is either (a) intentional and unreasonable, or (b) unintentional and otherwise actionable.”

Simply, a private nuisance focuses on whether you have suffered an ‘unreasonable injury.’ Meaning, is your injury of the kind that a person would not be reasonably expected to endure (making it ‘otherwise actionable’)?

Nuisance Applied

A few early cases provide great examples of how nuisance can be used to curtail problematic neighbors:

Right to clean air: Walter v. Selfe (1851), 29 L.J.R. (20 N.S.) 433 (Ch.) Selfe manufactured bricks on his property in the English countryside. His neighbor, sued to stop the brick manufacture and objected to the smoke, vapor, and “floating substances.”

The judge found that the brick burning was a legal nuisance. He enjoined further brick burning, finding that the neighbor was entitled to “unpolluted and untainted air” which he described as “air not rendered to an important degree less compatible, or at least not rendered incompatible, with the physical comfort of human existence – a phrase to be understood of course with reference to the climate and habits of England.”

Inappropriate residential use: William Drysdale v. C.A. Dugas (1896), 26 S.C.R. 20: In Montreal, Drysdale constructed a livery stable 25 feet away from Dugas’s home. Of course, the stable stank and its 30 noisy horses disturbed Dugas. Dugas’s nuisance action prevailed and proved damages for discomfort and reductions in tenant rents.

Trees may or may not be a nuisance: Cannon v. Neuberger, 268 P.2d 425, 427 (Utah 1954). Cannon sued Neuberger, his neighbor, to require him to remove trees to “control their growth as to keep their branches from overspreading, or the roots from permeating, or the leaves, twigs and branches from falling or being blown upon his lot…” Neuberger was ordered to cut 20 feet off the top and remove dead wood from his trees to reduce the risk of wind-blown and broken branches. Cannon wanted more and the Utah Supreme Court denied further relief stating:

To hold trees to be nuisances . . . merely because leaves or twigs or even branches in the ordinary course of affairs may be blown from them onto neighbors’ lots, would be to condemn to abolition all shade trees in communities sufficiently settled to have perils of such experiences. Cannon.

So, trees are a question mark. They are desirable and somewhat protected but also must be reasonably controlled.

Appropriate use of property: Hatch v. W.S. Hatch Co., 283 P.2d 217 (Utah 1955). Hatch sued his brother and neighbor W.S. Hatch for using his property as base of operations for his road-building business, vehicle garage, and maintenance facility. This was held not a nuisance because the ‘neighborhood’ was more like an industrial park that included: the main line of the Union Pacific Railroad (42 trains passing 195 feet from Hatch’s house every 24 hours) with flashing lights and signals; a petroleum plant, refinery, and a catalyst cracker; two racks for loading tank trucks with oils; and two other semi-truck service garages. Not a nuisance because his use fit the neighborhood- even though it was loud, dirty, and obnoxious.

A nuisance claim may be your friend if your neighbor is making your life difficult. Take a look at the elements of a nuisance claim and the examples above. Nuisance claims can require a complex bit of legal wrangling. I do not recommend attempting it on your own. If you have questions, you should ask them- contact me, Utah attorney Ken Reich. I regularly represent companies and the individuals and families that own them. My job is to know and understand my clients and their goals. Together with the right legal experts, I can help you get the result you want.

Does Your Business Need Insurance? Tips from a Utah lawyer

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20160119_103832Insurance covers whatever has a value. I do not sell insurance but I am a consumer of it: in business, at home, and as a source of income. It is a monster topic with many issues. Let me share some bits that you may not have considered.

Why should your startup or new business consider insurance? If this question is a revelation to you, here’s the gist: the more you have to lose, the more diverse insurance products you should consider.

What does insurance do for you? It protects against loss. If you have nothing to lose personally or in business, then I suspect you may be running thin on insurance and keeping only the state-required minimums. (Hopefully you are not going without). If this is where you are, keep the following in mind: legal costs and interruption of your business.

If you or your business is sued on a covered claim and you have insurance, your policy will pay for a legal defense. In business disputes, legal fees mount very quickly. Quite. Legal fees can quickly be the tail that wags the dog.

Insurance allows you to continue to focus on your core business and less on the lawsuit threatening it. Insurance covers both the ultimate liability and the cost to defend the claim.

As an attorney, I consider it my duty to assume the burden of my client’s lawsuit so my client can focus his/her attention on business.

Consider this: A solo startup that is well-protected in its business organization (i.e., LLC or Inc.) could potentially risk running short on insurance when there is little to lose. As the business fills out, however, and assets are obtained (such as equipment, real property, intellectual property, copyright, patents, trademarks, etc.), or employees are hired, so should the insurance. Insurance is a hedge against unknown losses.

Some basic insurance individuals cannot go without include:

  • Auto insurance. If you own a car, it’s required by law.

The minimum amount of Utah auto insurance coverage is $25,000/$65,000/$15,000. This means limits for bodily injury are $25,000 per person, with a total maximum of $65,000 per incident, and up to $15,000 for damage to another person’s property.

  • Property insurance: If you own a home or any real property, it is presumably an asset that you do not want to lose. There is no sense owning property if you do not protect it from loss.

Some basic insurance a Utah business should consider:

  • Auto. If your business owns a vehicle, it must insure it. If employees are required to use a car for business purposes, the business must provide insurance. Typical personal policies do not cover the business use of vehicles. Talk to your insurance agent if your business requires the use of a vehicle.
  • General Liability. Every business is different and you should evaluate your risk. General liability insurance typically covers libel, slander, property damage to others, and personal injury to others.
  • Business Property Insurance. This includes both real property insurance for property you own as well as renter’s insurance. Think of it as homeowner’s insurance for commercial property. It will protect your products (widgets or whatever you manufacture or inventory) and your assets (equipment, furnishings, etc.) from fire, flood, or whatever your policy covers.
  • Worker’s Compensation. If you have one or more employees in Utah, you will definitely want to read the Utah Labor Commission’s Employer’s Guide. A good start from the Guide: “Businesses with no employees may not be required to carry workers’ compensation coverage. For example, sole proprietorships, partnerships and limited liability companies in which the owners perform all the work and have no employees and may not be required to have workers’ compensation coverage. Refer to Utah statute 34A-2-104.”
  • Professional Liability. Some professions (doctors!) are required under Utah state law to carry malpractice insurance. If not required, you really (really) should have it. It is your livelihood at risk.

Here’s the list of optional insurance you may want to consider:

  • Umbrella.  This is excess insurance. Typically if your underlying policy (auto, homeowners, general) covers a claim but the claim exceeds the coverage limit, the umbrella kicks in to cover the loss up to its limit on the claim. Note: policies vary; it is up to you to read the fine print or have your agent explain it to you. I personally have an umbrella policy. It gives me a cushion if my teenager happens to cause a catastrophic accident that my basic auto insurance may fail to cover. It usually comes in increments of one million with the lowest available being $1m.
  • Health and Life. Goes without saying. These topics are too big to address here.
  • Data Breach. If you obtain or collect private, sensitive, or financial information from your clients, you are at risk of having it stolen by a hacker or virus. Data breach insurance covers this risk.
  • Business Interruption. This is often a sub-set of a property policy. It covers your business operations and earnings in the event of a covered event (fire, flood, etc.).
  • Employment Practices Liability Insurance. When you have employees, this insurance covers your management of them.  It covers wrongful acts arising from the employment process. The most frequent claims include wrongful termination, discrimination, sexual harassment, and retaliation. In addition, the policies cover claims from a variety of other types of inappropriate workplace conduct such as employment-related defamation, invasion of privacy, failure to promote, deprivation of a career opportunity, and negligent evaluation. The policies cover directors and officers, management personnel, and employees as insureds.
  • Directors and Officers. This insurance covers claims made against officers and directors for acts in the course and scope of their employment. You can get D&O insurance to cover nearly any business enterprise. It will cover claims arising from managerial decisions that have adverse financial consequences.
  • Errors and Omissions. This is more of a subset of a policy rather than the policy itself. E&O insurance protects you against liability for committing an error or omission in performance of a professional duty. It will cover financial rather than bodily injury or property damage.
  • Miscellaneous. Depending on your business or profession, there may be specialized or niche insurance to cover you.  Some examples include commercial general liability (CGL) policies (often for construction businesses), lender-placed and REO insurance for financial institutions, event insurance, terrorism insurance, and travel insurance.

Insurance is very broad topic but one that you really need to look at closely for yourself and your business. If you have questions, you should ask them. There are many insurance agents, brokers, and options. I can provide some local references if you would like. If you would like more information about insurance and its intersection with the law and how it affects your business, contact me, Utah attorney Ken Reich. I regularly represent companies and the individuals and families that own them. My job is to know and understand my clients and their goals. Together with the right legal and insurance experts, I can help you get the result you want.

Posting Bail in Utah: a Free Tip from the Royal Consulate of the Kingdom of Saudi Arabia

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cash saudiThis is a cautionary tale for those who lend money for bail in Utah. You have to know that your money is at risk if you lend money to bail someone out of jail. It is apparently a profitable business but you should probably leave it to the professionals. So, when your buddy or brother-in-law calls you from jail and begs you to post his bail, remember the mistakes made by the Saudi Consulate and decline.

In a recent case from the Utah Supreme Court, Saudi Arabia v. Pullan, our good Judge Pullan got it right. A Saudi Arabian citizen, Al Shammari, was arrested in Orem on rape charges. The Royal Consulate of the Kingdom of Saudi Arabia posted his $100,000 bail in cash. Shammari immediately high-tailed it to the Tijuana border and tried to cross over to Mexico where he was arrested by the Customs and Border Patrol. When Shammari failed to appear at his next hearing, the bail was declared forfeit without providing notice to the Consulate.

The mistakes by the Consulate were to post the bail on its own, post it in cash, and not bother to read the Utah Code. Bail bonding companies make money because they do everything they can to keep their money. They know the rules and follow them. If the Consulate had followed the rules it would have been entitled to notice before forfeiture.  Or, if it had posted bail through a bail bond company, the bonding company would have done it right and protected the $100,000.

In this appeal, the Consulate claimed it was a “surety” for purposes of the Utah Code and was entitled to notice before the bail was forfeited. Unfortunately for the Consulate, it did not meet any of the requirements to demonstrate it was a surety.

Bail in Utah can be made in one of two ways:  (1) filing with the court an undertaking tendered by an individual or entity that ordinarily will be accompanied by the posting of a bond (i.e., agreement to pay money supported by evidence of ability to pay); or (2) depositing into the court a bail by cash or an equivalent form of payment. The first method requires the court give notice to the person posting the bond and the second does not.

The Consulate argued that it should have been given notice because it loaned Shammari the cash bail money, making it like a bond. The Supreme Court clarified that the source of the funds is not relevant and does not make a deposit into a bond without following the Utah Code:

“The statutory scheme for bail does not concern itself with the manner in which the defendant obtains the funds for cash bail or the nature of the relationship between the defendant and another provider, if any, of the funds. The person posting the cash bail may be merely functioning as a courier for the defendant’s own funds, may be providing the funds out of friendship or familial loyalty, or may have extracted some agreement that may or may not be legally enforceable as a private contract.”

Be careful with your money- you worked hard to get it. If you have questions, ask them. If you would like more information about criminal law or bail bonds, contact me, Utah attorney Ken Reich. I am no expert on bail bonds or criminal law, but I have partners, friends, and colleagues who are. I would be happy to answer whatever questions you have and send you to people I trust for ones I cannot.

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