Dick & Jane & The Threatening Letter

Justin cropped Super Lawyer

By Justin O’Dell

We left Dick and Jane with a discussion regarding a business opportunity for Dick.  For purposes of our continued character development, we will assume that Dick decided to go for the job and take the new position and ownership interest in the company.

As expected, a threatening letter arrived from the attorney for his old company.  The letter references the existing covenant not to compete and contains several threats about litigation.  Of course, the letter concludes with the very lawyerly “GOVERN YOURSELF ACCORDINGLY!” which always seems to be written in all caps.  Dick is nervous and wondering what to do.  Should he ignore it?  Should he respond?  Should he hire a lawyer to respond?

First and foremost, it is critical that Dick respond, particularly if something in the letter makes an accusation or otherwise requests a response.  Georgia law contains an evidentiary rule related to failure to answer a business letter.  O.C.G.A. § 24-14-23 states that “In the ordinary course of business, when good faith requires an answer, it is the duty of the party receiving a letter from another to answer within a reasonable time. Otherwise, the party shall be presumed to admit the propriety of the acts mentioned in the letter of the party’s correspondent and to adopt them.”  Thus, if Dick fails to respond he may make admissions as to actions and allegations which could be harmful down the road.

Second, Dick should not respond without a lawyer.  Many times, individuals believe that they are right and that if they can just explain it adequately to the other party, the other party will see things correctly and agree.  In reality, adversaries have most likely made up their minds about a situation by the time they have seen a lawyer.  Rarely, if ever, will a letter filled with admissions and explanations accomplish anything toward changing the mind of an adversary.  Instead, the letter might make certain admissions or provide other evidence that becomes critical to the case at a later date.  By speaking with a lawyer, it is likely that Dick can obtain help in narrowing down a proper response.

Finally, it is possible for Dick to consult with a lawyer about a response, but then draft the response himself.  Most jurisdictions place limitations on lawyers “ghostwriting” pleadings and other matters to be filed by litigants with the Court.  However, there would not be any ethical or other legal prohibition on a lawyer helping a person draft and send a legal response letter in the hopes of avoiding litigation.

For next month, we will see if Dick escapes a lawsuit. . .

Dick & Jane, Back to the Job Offer….

Justin cropped Super LawyerBy Justin O’Dell

In June, we left Dick and Jane with Dick contemplating a career change and the effects of a covenant not to compete.  The analysis of that situation was put on hold to discuss the landmark decisions of the United States Supreme Court related to same sex marriage.

Recall that Dick was being presented with a job opportunity.  The opportunity calls for Dick to take a position with a new company.  Dick would be offered a good compensation package and ownership interest in the enterprise.  The potential is well-worth considering.

However, Dick has an employment contract signed in 2005.  In June 2011, he was told to sign a new version of the contract.  Although his employment is labeled “at-will”, Dick has a clause labeled “COVENANT NOT TO COMPETE; NON-SOLICITATION.”  The paragraphs, in summary, prohibit Dick from:

–         Accepting any position with another engineering firm anywhere in the State of Georgia for a period of 2 years following his separation from his current employment; and

–         Soliciting any customer of his current employer with whom Dick has had contact in the 2 years prior to his separation from his current employment.

There is no doubt that the offer presented would be competitive.  As discussed previously, under Georgia law prior to 2010, the agreement would either be upheld or would be thrown out entirely.  Since 2011, the agreement could now be “blue-penciled” or edited down from unreasonable to more reasonable terms.

A covenant not to compete must be reasonable as to duration, scope and geography.  Under prior case law, a period of two years or less (as above) would likely be held permissible.  The new statutory scheme (much harder on the employee) provides that the agreement may be equal to the length of time of the duration of the parties business relationship.  Similarly, under prior case law, any agreement which was broader in geographic area than the territory worked by the employee would be unreasonable.  Under the new statutory scheme, no geographic limitation is required.  In fact, the agreement can include any location in which the company does business (whether or not the employee actually worked there) and the agreement contains a list of particular employers for whom the employee cannot take a position.  Finally, the old case law provided that the scope of the restriction should be limited to the business of the employee whereas the new statutory scheme allows restriction measured by the business of the employer.

Most importantly, the new statutory scheme contains a significant “savings” clause that provides that an agreement which contains nothing related to a limitation on duration, scope or geography can still be enforced as long as it “promotes or protects the purpose or subject matter of the agreement or relationship or deters any potential conflict of interest.”  Further, the only remedy for an unreasonable agreement is that the Court would edit the agreement down to something reasonable.

For the foregoing reasons, Dick would be able to take the opportunity under the old case law based analysis, but probably could not take the position under the new statutory scheme.  More importantly, he is not just stuck with missing this opportunity, he is most likely prohibited from accepting a position with another engineering firm in any capacity or role (whether as a project manager or not) since the scope the agreement is based on his employer’s services and not his actual job.

As a general rule, the effects of the revised Georgia law should have a severely depressing effect on job mobility and transferability.  The new laws should be very friendly toward large and mid-sized corporations wishing to lock up employees ranging from corporate officers down to mid-level managers and salesmen.

Dick & Jane, Jack & Bill

Justin cropped Super LawyerEffects of the Supreme Court Ruling on the Defense of Marriage Act (DOMA) and Proposition 8

By Justin O’Dell

Last month, we left Dick and Jane with Dick contemplating a career change and the effects of a covenant not to compete.  This month, the Supreme Court of the United States (SCOTUS) sent a ripple through the nation and has caused Dick to put his plans on hold for another month.  We will come back in August and look at the covenant not to compete issue.  For this month, a discussion of the landmark decision by SCOTUS presents a litany of issues.

In order to give the effects of the ruling practical understanding, let’s create a brother for Jane named Jack.  Jack is in a committed relationship with Bill.  Jack and Bill lived in Vermont and were lawfully married after Vermont began to allow for same-sex marriage.  However, Jack and Bill now live here in Georgia.  The Attorney General of Georgia has stated that the Georgia Constitutional ban on same-sex marriage, passed in 2004, remains valid and in effect.  That amendment states:

(a) This state shall recognize as marriage only the union of man and woman. Marriages between persons of the same sex are prohibited in this state.

(b) No union between persons of the same sex shall be recognized by this state as entitled to the benefits of marriage. This state shall not give effect to any public act, record, or judicial proceeding of any other state or jurisdiction respecting a relationship between persons of the same sex that is treated as a marriage under the laws of such other state or jurisdiction. The courts of this state shall have no jurisdiction to grant a divorce or separate maintenance with respect to any such relationship or otherwise to consider or rule on any of the parties’ respective rights arising as a result of or in connection with such relationship.

Last month, SCOTUS held that the Federal Defense of Marriage Act (DOMA) was unconstitutional and found a lack of standing on the part of the Appellants related to California Proposition 8.  Pages could be spent explaining and analyzing each ruling, but rather than reinvent the wheel, please read and consider this link for an excellent plain English explanation:  http://www.scotusblog.com/?p=166124.

So after the ruling in US v. Windsor, the following questions are immediately concerning to Jack and Bill.

(1)   Can Jack now carry Bill on his health insurance?

(2)  Can Jack and Bill file a joint tax return?

(3)  Can Jack and Bill get divorced in Georgia?

(4)  Are Jack and Bill treated as married if one of them dies?

(5)  Can Jack and Bill make spousal decisions associated with health care, banking, etc…?

Should SCOTUS eventually hold that individuals have a fundamental right to marriage and equal protection of marriages, that ruling would immediately apply to all States and render invalid any ban on same-sex marriage.  With that issue still up in the air, the overriding issue at the moment is the interplay between the rights of each State to enact its own laws and the Full Faith and Credit Clause of the U.S. Constitution.

The Full Faith and Credit Clause of the Constitution, found in Article IV, Section 1 provides that “Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state. And the Congress may by general laws prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof.”

The Clause is not unlimited and has been held that it does not require a state to uphold or enforce the laws of other states which are in direct contravention to the laws and policies of that state.  Pacific Employers Ins. Co. v. Industrial Accident Comm’n, 306 U.S. 493, 502 (1939).  This exception would seem to apply in the instance of marriage.  In fact, the Clause was never held to require states wherein interracial marriage was banned to recognize interracial marriages of other states.

But not so fast…. marriages wherein the parties are first cousins (legal in some states, illegal in others) are not deemed invalid simply by moving across state lines based on the Full Faith and Credit Clause.  Similarly, common-law marriages which are no longer recognized in Georgia (after January 1, 1997) are valid and recognized in Georgia if properly created in a sister state.  Precedent would seem to be shifting in favor of mandating the recognition of lawful marriages of another state.

The Federal Circuit Courts have already split on this issue.  In Finstuen v. Crutcher, the 10th Circuit Court found that Oklahoma must recognize a same-sex marriage in the context of an adoption birth certificate.  In Adar v. Smith, the 5th Circuit ruled just the opposite.

So what to do with Jack and Bill?  In the short term, Jack and Bill would be well advised to act as if their union will not be recognized in Georgia.  They should utilize powers of attorney and other estate planning techniques to make sure that their estates and legal matters receive the maximum possible recognition currently available under Georgia law.

Dick & Jane – Covenant Not to Compete

Justin cropped Super LawyerBy Justin O’Dell

 

This month we switch gears from Probate Court to the business world.  Recall that Dick is a project manager with a mid-sized engineering firm.  Dick has been approached by a well-respected member of the industry about a business opportunity.  The opportunity calls for Dick to take a position with a new company.  Dick would be offered a good compensation package and ownership interest in the enterprise.  The potential is well-worth considering.

However, Dick has an employment contract signed in 2005.  In June 2011, he was told to sign a new version of the contract.  Although his employment is labeled “at-will”, Dick has a clause labeled “COVENANT NOT TO COMPETE; NON-SOLICITATION.”  The paragraphs, in summary, prohibit Dick from:

  •   –     Accepting any position with another engineering firm anywhere in the State of Georgia for a period of 2 years following his separation from his current employment; and
  •    –    Soliciting any customer of his current employer with whom Dick has had contact in the 2 years prior to his separation from his current employment.

The first question for Dick is whether the Covenant Not to Compete is enforceable and, if so, to what extent?

Part one of the legal analysis involves determining which body of law to apply.  In Georgia, the law for decades held that a contract containing a covenant not to compete was in the nature of a restraint on trade.  As a result, these covenants were enforceable if, and only if, they satisfied a three part “reasonableness test”; that is that the limitations were reasonable in duration, scope and geographic area.  Over dozens of years of case law and litigation, the area seemed settled that an agreement of 2 years or less, limiting the individual to a similar position to the one currently held and limiting the area to the current area of operations would be enforced.  Any agreement more restrictive would not generally be upheld, absent other evidence or facts justifying the restriction.  Thus, Dick could be bound to an agreement which prohibited him from working as a project manager in the Atlanta area for 2 years.  The key to the law was that an unreasonable agreement was thrown out entirely.  The theory of the result was that employers would be motivated to try and draft reasonable restrictions if they knew of such a negative potential consequence.

In 2010, thanks in part to a highly misleading Constitutional Amendment, this jurisprudence was replaced with the “blue-pencil” rule.   Rather than throw out an agreement entirely, the “blue-pencil” rule allows the Court the ability to edit the restrictive language downward to a less restrictive agreement.  As a result, employers now have no fear in drafting incredibly onerous and restrictive language knowing that the worst possible outcome is simply a rewrite downward to what should have been stated originally.   The new statute (O.C.G.A. §13-8-50, et seq.) does state that it only applies to agreements entered after May 2011 (the date it was signed into law).

Under this scenario, Dick has a problem.  His agreement was originally signed in 2005 and is covered by the old law.  However, his HR department circulated a new version (probably in response to the new law) in June of 2011.  In order for the new version to apply, his company would have to demonstrate that it was presented along with some new consideration (a promotion, a raise, etc…).  If the document was merely circulated and signed as a updated “contract” it is probably not valid.

In either event, the analysis and guidelines for reasonableness set forth in the statutes are incorporated from Georgia case law, the dramatic change is in the outcome of an unreasonable agreement.

Customer solicitation is another matter.  As a general rule, these provisions are enforceable provided they are reasonably written.  This is where the change in Georgia law is of manifest importance.  Under the old rule, if the covenant was unreasonable and the contract went out, the non-solicitation of customers went with it.  Under the new rule, the contract stays and is merely edited downward and the non-solicitation clause survives.

Next month we will dive into the analysis and see whether or not Dick can take the position.  If so, what level of contact with existing customers will be permitted?

Blog Sidebar

Prior to the passage of the above-mentioned Constitutional Amendment, Justin O’Dell wrote a letter to the Editor at the Marietta Daily Journal on the proposed amendment which was published October 12, 2012. Read Justin’s letter in it’s entirety:  http://www.odelloneal.com/wp-content/uploads/2013/01/2010.10.12.The-Marietta-Daily-Journal-Passage-of-Amendment-1-would-hurt-little-guy.pdf

 

Dick & Jane – Dealing With an Aging Relative

Justin cropped Super LawyerBy Justin O’Dell

Last month, we came to the conclusion that Dick and Jane could be facing the situation of dealing with the filing of a Guardianship and Conservatorship over Dick’s Mother.   The process sounds intimidating and costly.  If a fight breaks out within Dick’s family, it can prove to be emotional and expensive.  However, if the family stays on the same page and works together, the Probate Court is designed to facilitate the situation while protecting the interests of the Mother.

Before we proceed, we must establish a few definitions:

1)  Ward – The Ward is the person who is declared incapacitated.

2)  Guardianship – A Guardian is appointed to make decisions about the health and welfare of a Ward.  These decisions may touch on financial considerations, but a Guardian does not have control of a Ward’s assets or finances.  Some decisions are allowed without Court approval and others require permission of the Court.

3)  Conservatorship – The Conservator has control of the Ward’s finances and assets and makes decisions about the Ward’s estate.  The Conservator submits an annual budget called an “Asset Management Plan” along with an Inventory of the Estate and a Return of Receipts and Disbursements.

There are two ways to file for Guardianship and Conservatorship.  The processes are the same, but it is not required that an individual file for both.  Circumstances and the individual situation may warrant seeking one without the other.

The first type of Petition requires the signature of a related family member and a physician or medical doctor who has recently examined the Ward.  The second type of Petition may be brought by two family members.  In either instance, all of the Petitioners are required to swear that the Ward lacks sufficient capacity to make or communicate significant responsible decisions concerning his/her health or safety (Guardianship) and lacks sufficient capacity to make or communicate significant,  responsible decisions concerning management of his/her property (Conservatorship).

Once filed, an evaluator will be appointed to make a brief medical evaluation of the Ward to determine whether or not the allegations of the Petition have merit.  The Ward will also be appointed an independent attorney and, sometimes, a Guardian ad Litem to look after the interests of the Ward.

The spouse and all of the children of a Ward are given notice and the right to participate in the proceedings.  If minor children are involved, an attorney or guardian ad litem will be appointed to represent their interests.

If the matter is contested, either as to the issue of capacity or as to the issue of which person should be Guardian and/or Conservator, a full evidentiary hearing will be held.  If all parties, including those appointed for the Ward, consent that the action is prudent and necessary, then the hearing is much more truncated.

If granted, the Probate Judge has the power and authority to grant the Guardian and Conservator any number of rights and powers and to take any number of rights and powers away from the Ward.  These decisions are driven by the facts and circumstances of the case and based on a desire to preserve the independence and rights of the Ward, but also to protect the welfare and estate of the Ward.  Even if the Conservator is granted all of the available powers and the Ward is deprived of the same, some transactions, such as selling property of the Ward always require the permission and approval of the Probate Court.

The Guardianship and Conservatorship can be terminated if the individual regains capacity.  Any interested person, including the Ward him or herself, can initiate a Petition for Restoration of Rights.

Guardians and Conservators can be compensated for the service.  Guardian’s compensation is determined by the Court and Conservator’s compensation is based on a percentage of the assets and receipts and disbursements involved.

Guardians and Conservators become “fiduciaries” of the Ward.  Under Georgia Law, a fiduciary is bound by the highest standards of loyalty, honesty and fair dealing to their beneficiary.  If a Guardian or Conservator breaches a fiduciary duty, they are liable to the Ward and can be order to appear before a Probate Judge to account for their actions.  Other agencies, such as the Internal Revenue Service, also have provisions whereby a Guardian or Conservator can become liable for failure to property act on behalf of another.

Guardianships and Conservatorships are an important function in dealing with the aging process.  Even the most carefully planned estate with Powers of Attorney and Health Care Directives in place can fall short.  Most notably, these documents merely extend rights to a third party, but do not cut off the rights of the Ward.  For situations in which a family needs to protect a loved one from themselves or from predators and scammers preying on the elderly, a Guardianship and Conservatorship is the only possible route.  Finally, Guardianships and Conservatorships are also necessary in order to deal with a disabled child who is turning 18 or when tragedy strikes and a loved one is suddenly injured in a sudden event like a motor vehicle accident or contracts a disabling medical illness.

To learn more about this area, the Probate Court Council of Georgia has published a very helpful guidebook which provides a more expanded discussion.  You can find the handbook here: http://www.sji.gov/PDF/GA_Handbook_for_Guardians.pdf.

Dick and Jane – Dealing with an Aging Relative

why-us1By Justin O’Dell

Last month, we learned that Dick’s sister called, informing him that Mom is starting to decline in health.  As a result, Dick’s sister is going to be “added” to all of Mom’s bank accounts just in case she needs to pay her bills.  Sound familiar?  What could go wrong?

Unless Mom is very, very careful or has an overly diligent banker, an awful lot can go wrong.  When someone walks into a bank and asks that a person be added to an account, banks generally operate on the assumption that the person is going to be added as a joint owner of the account.  By default, a bank will generally select that the account is “Joint With a Right of Survivorship” or “JTWROS”.  Even if they do not expressly make that designation, Georgia law holds that the account is presumed to be with a right of survivorship, unless a contrary intention is indicated.

The problem occurs when Mom ultimately passes.  By operation of Georgia law, the account belongs 100% to the joint owner at the moment of death and passes regardless of the contents or provisions of Mom’s will.  The ownership transfer is only overcome by clear and convincing evidence of a contrary intention.

So, if Dick’s sister is added to the account and over time Mom begins pulling all of her money and property into that account (say for example she sells her home and moves into a care facility), Dick’s sister would effectively receive all of those funds to the detriment of Dick’s Father or the other children.

I have seen this fact pattern play out dozens of times.  It is plainly obvious to everyone that the parent never intended to leave all the money to one child.  In the majority of cases, the one sibling does the right and honorable thing and returns the money to the estate or distributes it equally.  However, there are many instances where the sibling takes the position that the money is his or hers, just as Mom would have wanted.

The unfortunate fact is that the remedies to the situation are so simple.  First and foremost, make sure you know your banker and know what they are having you sign.  Ask questions and get answers.  Second, if you need to add someone onto an account, designate them as having “signature rights only” so that they can conduct banking transactions, but have no ownership interest.  Thirdly, if more rights and authority are needed, use a General or Financial Power of Attorney to act on behalf of Mom.  Lastly, if Mom is in need and cannot care for herself or for her property, a Petition for Conservatorship or Guardianship can be filed in the Probate Court without a lot of time, trouble and expense.

Next month, we will look at the Probate Court process for dealing with an incapacitated adult and obtaining guardianship and conservatorship.  What is required to file?  What responsibilities are incurred?

Dick and Jane – Simple Wills

why-us1By Justin O’Dell

As introduced last month, Dick and Jane are a young, married couple with three children.  Dick and Jane have never been able to find the time to sit down and prepare their Wills.  They are now asking friends and family about getting it done.  Some of the common myths they are hearing are as follows:

1)      “Don’t hire a lawyer, just do it online.  Lawyers charge too much.”

2)      “You need to avoid probate and set up living trusts.”

3)      “You cannot name out-of-state people as Executor or Guardian.”

Drafting a Will is one of the most important legal exercises for a young couple.  Along with a Will, couples should consider completing the Georgia Advance Directives Form.  This Form will dictate decision making authority and end of life decisions in the event of a tragic situation whereby D ick or Jane cannot make a decision for his or her self.

The first myth is a common situation perpetuated online.  While it is true that legal forms are available for limited amounts of money on line, the insight and knowledge to make sure that the forms are drafted and executed correctly is not readily available.  I have had numerous instances where people have spent more money trying to deal with the issues created by poorly drafted or executed Wills online than they would have spent hiring a lawyer to do it correctly in the first place.  Think of it this way – you can also go online and learn to rewire your electrical panel, replumb your bathroom or even do knee surgery, but is that the best idea???  O’Dell & O’Neal charges $600 as a flat fee for this work which includes the consultation, preparation of the Will and execution of the Will and Advance Directives Form.  By contrast, the hourly rates of most lawyers would easily surpass that total in fixing a mistake.

The second myth is perpetuated by individuals seeking to overcharge clients for estate services.  The reality is that no one should avoid probate and even the “probate avoiding” documents still require admitting a Will to probate.  What the process is referring to really involves keeping assets out of probate, not avoiding probate court.  There are states and situations where keeping assets out of probate makes sense.  Some states still charge fees based on the size of the estate. Some individuals have extremely high net worth or unique family situations where living trusts provide value.  For Dick and Jane, simple wills are more than adequate.  Furthermore, many of the “probate avoiding” techniques establish living trusts to hold assets.  In order to accomplish their purpose, these living trusts must hold all of the parties’ assets and must have a separate tax ID number and file a separate tax return each year.  For individuals like Dick and Jane this only complicates their already hectic lives.

The final myth is commonly circulated based on old memories of law long ago.  It is true that at one time, restrictions existed regarding the appointment of out of state Executors, Trustees and Guardians.  Most of these restrictions are gone.  Executors and Trustees may freely serve without any additional requirements or costs and frequently do so.  The use of e-mail and Fed-ex makes dealing with local attorneys and the probate court as easy (if not easier) as dealing with someone on the other side of Atlanta.  As for guardianship, the paramount concern of the Court is the desire of the parents and the best interests and welfare of the children.

Next time, we will continue the Probate law theme and discuss some issues with Dick and Jane’s parents and aging.  Dick’s sister has called and informed that because Mom is in poor health, she is going to have Mom add her to all of her bank accounts.  Good idea????

Meet Dick and Jane

why-us1by Justin O’Dell

For our first post, I thought that the best idea would be to introduce Dick and Jane and start things off on a happy note.  As I mentioned, this portion of the blog will take Dick and Jane through a variety of life events.  It will be impossible to keep the story chronological and linear, so I am not going to try.  Do not be surprised if Dick and Jane’s lives have more twists and turns than a soap opera.

First, the family:  Dick is a successful  graduate of the University of Florida who works as a project development manager for a mid-sized engineering firm.  Dick has a salary of $120,000.00 per year and also receives project bonuses when his projects come in on time and/or under budget.  In a good year, Dick can receive $40,000 in bonus compensation.  His company provides a 401k program to which he actively contributes a portion of his salary.  He also is able to provide health insurance for the entire family through his employer at a modest cost.

Jane is a graduate of the University of Georgia.  After graduation, Jane worked in marketing for a Fortune 500 company.  She stopped working after six years when she had her first child, which also coincided with a major promotion for Dick.  Jane has kept a small, home based marketing business going while raising the children, but does not earn a substantial sum of money doing so.

Dick and Jane met at a Georgia –Florida football game in their senior years of college.  They began dating after the game and married two years later.  Their first child was a son named Jackson, born after four years of marriage.  The second child, a daughter named Lindsay was born after 6 years of marriage.  The third child, a son named Tim was born after 10 years of marriage.  All three children are healthy and active in a variety of activities.  Jackson is somewhat rebellious, wild and can find trouble.  He struggles a bit in school and requires some tutoring and additional resources.  Lindsay is a runner, competing in cross-country and other events.  Tim is also athletic, but is very involved in church life and children’s activities at the church.

One of the first concerns for Dick and Jane is the fact that they have never done a Will.  They have several friends and colleagues in their ears saying things like:

“Just download it online and do it yourself”

“You need to avoid probate and set up living trusts”

“You cannot name anyone out of state to be guardian of the children”

In our first look at the ways in which O’Dell & O’Neal can help, we will examine the simple will process for couples like Dick and Jane and try and clear up some of the common probate myths and misinformation.  Stay tuned. . .