Lawsuits Archives

Las Vegas Revolver Saloon Sues Scottsdale’s Revolver Lounge for Trademark Infringement

Arizona Republic: “The suit, filed Thursday [July 7, 2011] in U.S. District Court, names Arizona-based Revolver, LLC, as a defendant. Court documents say that Scottsdale’s Revolver Lounge is infringing on trademark rights of Revolver Saloon.”

The plaintiff is NP Opco, LLC, a Nevada limited liability company, holder of a federally registered service mark for the word mark “Revolver Saloon,” in the goods and services classes IC 041 and US 100, 101 and 107 for night clubs. The trademark registration 3862054 was granted on April 27, 2010. The mark was first used in commerce on February 5, 2010.

Business owners can learn several lessons from this trademark infringement lawsuit:

Trademark law exists

Ignorance of trademark law or failing to consider trademark law can be harmful to your company’s economic health

Before adopting a trademark or a service mark, conduct a search to determine if somebody else holds trademark rights that your mark might infringe

Consult with an experienced trademark lawyer. Trademark law is not an area of law for do-it-yourselfers.

If your company has one or more trademarks or service marks that is uses in interstate commerce, it should register the mark(s) with the U.S. Patent & Trademark office.

Richard Keyt2018-10-07T10:33:12-07:00July 10th, 2011|Lawsuits, Why People Need an LLC|0 Comments

LLCs Must be Represented in Court by an Attorney

A State of Washington appellate court ruled that a single member LLC must be represented in a court proceeding by a lawyer rather than the sole member of the LLC. The court said:

A limited liability company (LLC) must be represented by a lawyer in order to litigate. This is simply an application of the general rule prohibiting laypersons from representing other persons or entities in court proceedings. Because a layperson does not have a lawyer’s professional skills or ethical responsibilities, such representation imposes undue burdens on opposing parties and the courts. These considerations are just as important when the LLC has only one owner. We affirm an order requiring the appellant LLC to obtain legal representation in order to pursue its claim”

Arizona LLCs, corporations and partnerships must also be represented in court by a licensed Arizona attorney.

The case is Dutch Village Mall vs. Raymond J. Pelletti, Washington Court of Appeal, Division One, July 5, 2011.

Richard Keyt2016-11-16T08:23:55-07:00July 6th, 2011|Lawsuits|5 Comments

Real Estate Owners Sued – a Too Common Nightmare for Property Owners

Thousands of times I have said and written that if you own an Arizona business or have investment real estate in Arizona, you must protect your life savings from things that can go wrong with the business by having an Arizona limited liability company own the business or real estate. Here are the facts of life every business owner and investment property owner must understand:

There are an infinite number of ways that something can go wrong and harm or damage people or property.

If you are the owner of the business or the real estate, you are 100% liable for anything and everything that goes wrong and ALL of your LIFE SAVINGS is at risk!

You must insert a shield called a limited liability company between things that can go wrong with the business or the real estate and you, your family and your life savings by creating an Arizona limited liability company to own the business or real estate. The general rule of Arizona law is that the owners (called members) of an Arizona LLC are not liable for the debts or obligations of the company. This means that when something goes wrong the defendant in the lawsuit will be the LLC, not you (unless you caused the harm).

Insurance is always your first line of defense. You should not operate a business or own investment real estate without adequate insurance coverage. However, the LLC is your second line of defense in case the plaintiff wins a judgement greater than your insurance coverage.

Here are two real life examples of how lawsuits can arise and why you want the defendant to be your LLC instead of you:

Rental property owner sued by a tenant who lived in an older home the tenant claimed had lead paint.

Older couple used savings to buy a duplex and rented it. An accident occurred and a person died. The estate of the victim sued the couple for millions, an amount that exceeded the couple’s insurance coverage. Some of the claims were not covered by the insurance policy.

A man with a net worth of $2 million owned a piece of raw land worth $150,000, but he did not have it insured. A boy climbed a tree on the land and was injured when he fell. The boy’s parents sued asking for more than the man was worth.

In each of the above situations the people involved could have saved themselves a lot of worry, stress, time and money if they have placed the real estate in a limited liability company.

Don’t allow your life savings to be at risk. Protect yourself and your family now by hiring me, the Arizona llc attorney, to form your Arizona LLC.

Richard Keyt2016-11-16T08:23:55-07:00June 22nd, 2011|Asset Protection, Lawsuits, Why People Need an LLC|0 Comments

Arizona Damage Awards in Premises Liability Cases

Owners of residential and commercial buildings face potential liability for accidents which occur on the property’s premises. Two premises liability cases found their way into the top ten civil damage awards in Arizona during 2010. In LeClair v. Lumberman’s Building Center, the jury awarded $3,900,000 to a truck driver who slipped and fell on black ice. The accident occurred at the Lumberman’s Building Center and caused the truck driver to lose his leg. In Kerege v. Viscount Hotel Suite, an elderly woman fell down carpeted stairs in a hotel atrium, ultimately, caused her death. The jury awarded the plaintiff $3,000,000.

These two cases illustrate the need to form an Arizona Limited Liability Company (LLC) to protect the personal assets of the owner. Imagine you just purchased a small strip mall in Phoenix. You depend on this strip mall as one of the assets to help fund your retirement. However, when you purchased the strip mall, you did not have title to the strip mall held in an LLC. Rather, you personally held title to the mall believing an insurance policy covering the strip mall sufficiently fully protected you against any lawsuits and judgments arising from the real estate.

The insurance policy on the strip mall covered the first $2,000,000 of damages occurring to any person on the property. During a rainy monsoon day, a prospective plaintiff slips on the sidewalk of the strip mall and injures themselves badly. The upset plaintiff sues the owner of the real estate, i.e., YOU, and the jury awards the plaintiff $3,000,000 in damages. Your insurance company pays the policy limits of $2,000,000, but you now have a $1,000,000 problem, which is the unpaid amount of the judgment. Guess where the plaintiff will collect the additional $1,000,000. If you said from your life savings you are correct. Unfortunately, the plaintiff will be able to collect the unpaid amount of the judgment from your personal assets. The strip mall you depended on to help fund your retirement has caused you to expend other personal assets you depended on for retirement to satisfy a judgment on a lawsuit.

This disaster could have been avoided if the property owner had formed an Arizona LLC to hold title to the real estate. The general rule regarding property held or a business operated through an Arizona LLC is that the owner(s) of the LLC are not liable for the debts or obligations of the company. People form LLCs to protect their assets from things that go wrong with investment real estate and businesses. Thus, in the above example the property owner could have protected the owner’s life savings by forming an Arizona LLC and transferring title to the strip mall to the LLC.

Important Lesson for Business Owners & Investment Real Estate Owners: Insurance is always your first line of defense, but your second line of defense is the LLC.

Richard C. Keyt2016-11-16T08:23:55-07:00May 25th, 2011|Asset Protection, Lawsuits, Real Estate Issues, Why People Need an LLC|0 Comments

Scottsdale’s Fleming’s Restaurant to Pay $250,000 in Sex-harassment Suit

Arizona Republic: “Fleming’s Prime Steakhouse & Wine Bar at DC Ranch in Scottsdale will pay nearly a quarter-million dollars and furnish other relief to settle a same-sex sexual-harassment lawsuit filed by the U.S. Equal Employment Opportunity Commission, the agency announced.”

If you operate your business as a sole proprietorship or a general partnership, this story illustrates why a person should always operate a business through an LLC, corporation or limited partnership. How would you like to owe the EEOC $750,000 for something your employee did?

On the Net2016-11-16T08:23:56-07:00December 8th, 2010|Asset Protection, Lawsuits, Why People Need an LLC|0 Comments

Arizona Corporation Commission Orders Restitution for Real Estate Investors Defrauded by a Scottsdale Businessman

ARIZONA CORPORATION COMMISSION
FOR IMMEDIATE RELEASE: December 6, 2010
CONTACT: Rebecca Wilder (602) 542-0844

Commission Orders Restitution for Real Estate Investors Defrauded by a Scottsdale Businessman
Sanctions Others for Securities Fraud

PHOENIX, AZ—The Arizona Corporation Commission today issued a default order against a Scottsdale businessman and his company for defrauding investors in a million-dollar, real estate investment program. In other cases, the Commission ordered two individuals and their affiliated companies to pay restitution and penalties for defrauding investors in an investment program involving music concerts. In total, the Commission ordered over $3.44 million in restitution for investors and $85,000 in administrative penalties.

The Commission issued a default order against Nathan Nordstrom of Scottsdale and his affiliated company, Norstreet Portfolio, LLC, requiring them to pay $1,076,000 in restitution and a $50,000 administrative penalty for defrauding six investors in a real estate investment program. The Commission found that, while not registered to offer or sell securities in Arizona, Nordstrom and his company offered and sold limited liability company memberships, telling investors that their money would fund the completion of two residential developments in Hawaii and Washington, D.C. The Commission found that Nordstrom told investors their funds would be secured by the real estate when, in fact, Nordstrom lacked free-and-clear title to the properties and was unable to execute a deed of trust on behalf of the investors. Additionally, the Commission found that Nordstrom failed to disclose to the investors that some of their money would be used for outstanding, mortgage interest payments owed on the real estate properties.

In a separate case, the Commission ordered Bobby G. Goodson of Chandler to pay $2,298,236 in restitution and a $25,000 administrative penalty for committing securities fraud. The Commission found that Goodson, along with Malika S. Smith, formed CAA General Partnership and opened bank accounts solely for the purpose of handling banking transactions related to the so-called concert production activity of Goodson’s former son-in-law, Miko D. Wady. The Commission found that Goodson and CAA not only received $2,298,236 of investor funds and transferred nearly $1 million dollars to Wady, but also failed to disclose that CAA was not the internationally known talent agency, Creative Artists Agency. In April 2010, the Commission issued a default order against Wady for masterminding a multimillion-dollar investment scam related to the production of music concerts. In November 2010, Smith and CAA were ordered to pay restitution and penalties in connection with their violations of the Arizona Securities Act. In settling this matter, Goodson admitted to the Commission’s findings and agreed to the entry of the consent order.

In a related case, the Commission ordered Thurston Smith of Chandler and his affiliated company, B.Y.B. Entertainment, LLC, to pay $74,000 in restitution and a $10,000 administrative penalty for defrauding investors. The Commission found that, as the manager of B.Y.B. Entertainment, LLC and the sole signer of its bank accounts, Smith handled banking transactions related to what he believed was the concert production activity of Miko D. Wady. The Commission found that instead of funding music concerts, Smith transferred investor money received by B.Y.B. Entertainment, LLC to either Wady or to banks accounts controlled by Wady. In settling this matter, Smith admitted to the Commission’s findings and agreed to the entry of the consent order.

More caution for investors:

Even when investing with someone they know, investors should verify the registration of sellers and investment opportunities and investigate disciplinary histories by contacting the Arizona Corporation Commission’s Securities Division at 602-542-4242 or toll free in Arizona at 1-866-VERIFY-9. The Division’s investor education web site also has helpful information at www.azinvestor.gov.

On the Net2016-11-16T08:23:56-07:00December 7th, 2010|Lawsuits, LLCs & Securities Laws|0 Comments

$3 Million Jury Verdict Arising From a Collision between an Employee Driving a Truck & a Bicyclist

Kenneth Davis was driving a truck for BCI Coca-Cola Bottling Company of Los Angeles. He stopped at a red light in Gilbert, Arizona. Davis looked both ways, but when he didn’t see anything he turned right. Unfortunately Davis did not see Henry Esparza, Jr., who was riding his bike on the right side of the truck in a bike path. Esparza collided with the truck and was severely injured, including permanent neurological damage. The jury found that Esparza suffered damages of $3,000,000 for which Davis and the Coke bottling company were liable for 40 percent.

The case is Henry Esparza Jr. v. BCI Coca-Cola Bottling Company of Los Angeles and Kenneth Davis, Maricopa County Superior Court Case Number 2007-091884.

Richard Keyt2011-07-04T20:27:51-07:00July 4th, 2010|Lawsuits, Why People Need an LLC|0 Comments

Driver Liable for $5 Million after Being Rear-ended by Motorcyclist with Meth & Marijuana in His Blood

Two Arizona Superior Court cases tied for 9th place in the list of the top 10 largest Arizona court judgments of 2009. The other case is Herman Martinez and Romelia Martinez vs. Desert Sky Esplanade, LLC, and Michael Manzutto.

The $5 million case of Randolph Groom v. Roger Clyne and Susan Clyne arose from an accident between a vehicle with a cattle trailer driven by Roger Clyne and a motorcycle driven by Randolph Groom in 2005. Groom was behind the Roger Clyne’s trailer when it turned left and Groom ran into the side of the trailer. There was evidence that the trailer’s lights were not on and neither was the headlight of the motorcycle. Groom’s blood tested positive for the presence of marijuana and methamphetamine.

Randolph was not wearing a helmet. He suffered severe brain damage and multiple orthopedic injuries. The jury found that Groom sustained damages equal to $5 million, but Roger Clyne was liable only for 75% of that amount because Groom was responsible for 25% of the harm he suffered.

The plaintiff argued that Susan Clyne should be liable, but the jury found that she was not liable because her son Roger was operating the vehicle for his personal business. If Susan Clyne was named as a defendant because she was the owner of the vehicle she got lucky. When a car is owned by Person A and Person B is driving the car and causes and accident that kills or injures one or more people and/or destroys or damages property, most of the time Person A (the vehicle owner) is named as a defendant in the lawsuit along with Person B (the driver). This is why people who own vehicles that are driven by other people should form an Arizona LLC and transfer title to the vehicle to the LLC.

For more on using a vehicle LLC for asset protection, see my article called “When to Use a Vehicle LLC for Asset Protection.”

The case is Randolph Groom v. Roger Clyne and Susan Clyne, Santa Cruz County Superior Court Case Number 2006-0051.

Richard Keyt2016-11-16T08:23:56-07:00July 2nd, 2010|Asset Protection, Lawsuits, Why People Need an LLC|0 Comments

Family of 16 Year Old Wins $5 Million Lawsuit Against Driver & Property Owner

Two Arizona Superior Court cases tied for 9th place in the list of the top 10 largest Arizona court judgments of 2009. The other case is Randolph Groom v. Roger Clyne and Susan Clyne.

The 9th largest civil judgment in Arizona during 2009 involved the death of a 16 year old young woman who was a passenger in a car driving on mall property when it crashed into a tree. The accident occurred on a private road owned by Desert Sky Esplanade, LLC, when the driver of the car, Michael Mansutto, hit a speed bump and lost control of the vehicle. The parents sued the driver and the owner of the land on which the road was located.

The parents claimed that the speed bump failed to satisfy city and federal requirements and that the property owner should have placed a warning sign before the speed bump. Despite the fact the girl was not wearing a seat belt, which might have prevented serious injury, the judge instructed the jury not to attribute any fault to the victim. Desert Sky Esplanade defended by saying the private road was not subject to federal or city rules and that the driver was speeding.

The jury awarded the parents $5,000,000 for their damages arising from the death of their sixteen year old daughter. Each defendant was liable for $2,500,000.

This case illustrates two important asset protection concepts.

1. Because the real estate was owned by an LLC rather than outright by the owner(s) of the LLC, the loss of the owner(s) of the LLC, if any, after payment of any insurance proceeds, was limited to the equity in the LLC.

2. If the driver of the car was not the owner of the car, the owner(s) of the car would have been named as co-defendants and potentially be liable for the $2,500,000 judgment awarded against the driver. If you have children or third parties driving your vehicles, protect yourself from liability arising from an accident caused by the driver by creating an an LLC that owns the LLC that owns the vehicle. With this structure, the LLC will be named as a defendant in the lawsuit. The general rule of Arizona LLC law is that the owner(s) of an Arizona LLC are not liable for its debts. For more on using a vehicle LLC for asset protection, see my article called “When to Use a Vehicle LLC for Asset Protection.”

The case is Herman Martinez and Romelia Martinez vs. Desert Sky Esplanade, LLC, and Michael Manzutto, Maricopa County Superior Court Case Number CV-2006-014888

Richard Keyt2011-07-02T13:51:19-07:00July 2nd, 2010|Asset Protection, Lawsuits, Why People Need an LLC|0 Comments

Olmstead vs. Federal Trade Commission

This Florida Supreme Court case involved the attempt by the Federal Trade Commission to enforce collection of a $10 million judgment it got against Shaun Olmstead and Julie Connell for their involvement with entities that operated an advance-fee credit card scam. The issue before the court was:

“Whether, pursuant to Fla. Stat. § 608.433(4), a court may order a judgment-debtor to surrender all, ‘right, title, and interest’ in the debtor‘s single-member limited liability company to satisfy an outstanding judgment.”

Olmstead argued that the issue should be answered in the negative because the only remedy available to a creditor who has a judgment against a member of a Florida single-member LLC is a charging order. The court said:

“we rephrase the certified question as follows: ―Whether Florida law permits a court to order a judgment debtor to surrender all right, title, and interest in the debtor‘s single-member limited liability company to satisfy an outstanding judgment. We answer the rephrased question in the affirmative.”

The reason the court allowed the creditor to get to the assets of the single member Florida LLCs is because the court ruled:

“that there is no reasonable basis for inferring that the provision authorizing the use of charging orders under section 608.433(4) establishes the sole remedy for a judgment creditor against a judgment debtor‘s interest in single-member LLC.

Arizona LLC law is different from Florida’s LLC law. Arizona’s LLC member charging order protection is contained in Arizona Revised Statutes Section 29-655 which states:

“A. On application to a court of competent jurisdiction by any judgment creditor of a member, the court may charge the member’s interest in the limited liability company with payment of the unsatisfied amount of the judgment plus interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the member’s interest.

B. This chapter does not deprive any member of the benefit of any exemption laws applicable to his interest in the limited liability company.

C. This section provides the exclusive remedy by which a judgment creditor of a member may satisfy a judgment out of the judgment debtor’s interest in the limited liability company.”

Because of this statute, an Arizona court should not reach the result of the Florida Supreme Court in Olmstead vs. FTC. See “Olmstead Decision Does Not Make All Single Member LLCs Useless.”

Richard Keyt2016-11-16T08:23:56-07:00June 24th, 2010|Asset Protection, Charging Orders, Lawsuits|0 Comments

Lifelock to Pay Federal Trade Commission $12 Million

Phoenix Business Journal: “LifeLock Inc. has settled a lawsuit brought against it by the Federal Trade Commission and 35 states for $12 million, ending a lingering legal battle about what the company promised in its advertising versus what it could deliver in regards to preventing identity theft.”

If you operate your business as a sole proprietorship or a general partnership, this story illustrates why a person should always operate a business through an LLC, limited partnership or corporation. How would you like to owe the FTC $12 million for something your employees did?

On the Net2016-11-16T08:23:57-07:00March 9th, 2010|Lawsuits, Why People Need an LLC|0 Comments

Arizona Court of Appeals Finds Officers & Directors of Arizona Corporation Personally Liable for Corporation’s Debt

Arizona Republic: “Corporate officers can be held personally liable in some situations when their defunct firms don’t pay suppliers, the Arizona Court of Appeals has ruled. The judges maintained that lawsuits against a corporation for failing to pay a debt are valid only against the corporate entity. And when the corporation goes away, the creditors generally cannot go after the individual shareholders or directors.” The case is Arizona Tile, LLC, vs. Howard Steven Berger, Cynthia Berger and John McCarthy.

The general rule of Arizona law is that the shareholders, officers and directors of an Arizona corporation and the members and managers of an Arizona limited liability company are not liable for the debts and obligations of the company. There are, however, many exceptions to this general rule. This case illustrates one of those exceptions. Arizona Revised Statutes Section 33-1005 requires contractors who receive payments intended for subcontractors and materialmen to hold the money in trust for the intended payee. This statute is the basis for imposing liability on the corporation’s officers and directors beca1use they had a duty to see that the money was paid to the proper payee, but instead they paid other corporate debts that the officers and directors had personally guaranteed. In short they used money intended for Peter to pay the corporation’s debt to Paul because if Paul did not get paid, Paul could collect the debt owed by the officers and directors under their guaranties.

On the Net2016-11-16T08:23:57-07:00February 12th, 2010|Asset Protection, Lawsuits, LLCs & Corporations|0 Comments

Lawsuits

ARIZONA CORPORATION COMMISSION FOR IMMEDIATE RELEASE: December 6, 2010 CONTACT: Rebecca Wilder (602) 542-0844

ARIZONA CORPORATION COMMISSION
FOR IMMEDIATE RELEASE: December 6, 2010
CONTACT: Rebecca Wilder (602) 542-0844