Mayhall Fondren Blaize

Baton Rouge Business & Commercial Law Blog

Business litigation financing is a growing investment industry

A surprisingly vibrant industry in Louisiana and nationwide involves the activity of investing in commercial litigation lawsuits. Although it has been generally considered unethical for outside investors to have an ongoing financial stake in the profits and losses of law firms, that principle has given way to an exception that allows for the outside funding of highly costly business litigation suits. Because the suits are expected to obtain substantial monetary recoveries, it arguably makes sense to allow for outside interests to invest through companies that specialize in such transactions.

That is especially true because the phenomenal cost of experts, studies, tests, data analyses, reporting, investigative fees and the like in complex cases make it difficult for law firms and clients to foot the total bill for funding the suit. The funding resources often come from hedge funds, private investors, credit funds and other financial investment entities. Whereas in the past these efforts focused on one case at a time, it is now possible to invest in a portfolio of cases chosen by the investment firm.

Avoid business and commercial law problems in the startup phase

Louisiana is known for its posh culinary culture, which makes it a prime food business location. Many entrepreneurial opportunities do not need brick and mortar housing since online businesses can be launched from anyplace with internet connectivity. Launching a business (whether small, large, digital or in person) is definitely no small matter, and there are several things to keep in mind to increase the chances of success and to avoid business and commercial law problems.

Choosing a business that aligns with the goals, available resources and personality of a particular prospective business owner is a key factor toward success. A person can dream, but if he or she doesn't have what it takes to bring a specific dream to fruition things are bound to falter or perhaps never make it out of the starting gate at all. In short, it's not always enough to find a need and fill it, but to make sure that the person spearheading the idea is the one who actually can fill the need.

Business litigation riddles top officers, shareholders of Uber

Lawsuits involving the owners of large business entities comprise a distinct area of litigation in Louisiana and other states. Shareholders often join together to sue the corporate entity that they assert is not being run in a proper or legal manner. In some instances, this kind of business litigation can get quite personal, as when major shareholders sue the CEO personally for mismanaging the company and/or regarding any number of fraud or concealment claims.

That is the kind of dynamic that is currently playing out within the upper echelons of Uber, the privately held corporate entity that created history by joining the digital world to the private ride-hailing industry. Travis Kalanick founded Uber and served as its chief executive officer since its founding just eight years ago. Various internal conflicts led to Kalanick's ouster as CEO of the company in June.

Business litigation includes conflicts over trademark intrusions

Louisiana, like all other states, gets to host a variety of business litigation claims. The litigants may be companies of all sizes, from struggling startups to massive, established pillars of an industry. In one recent business litigation case in another state, the giant candy-maker, Mars Inc., is facing a drawn-out trademark dispute with a small chocolate maker consisting of one person.

Mars started by suing the small-batch chocolatier, Syovata Edari, in a federal court for violation of a Mars trademark for the name CocoaVia, which is used for its brand nutritional supplements. The court dismissed that case summarily for lack of jurisdiction due to the defendant having done no business in that state. Edari, knowing however that the dispute was just ratcheting up, brought her own lawsuit against Mars in another state, requesting a federal judge to declare that the small startup does not infringe on Mars' CocoaVia trademark for its brand nutritional supplements by using its name, CocoVaa.

Patent infringement is a source of business litigation cases

Patent infringement litigation is a continuing source of significant business litigation cases in Louisiana and nationwide. A jury award and a court's ruling in a case from another state is an example of how recoveries in patent infringement cases can be compelling for the winning party. A medical instrument company received a $248.7 million award from a federal judge who decided to triple the jury's award due to willful and egregious infringement by the defendant company in this business litigation case.

The plaintiff, Stryker Corp., makes medical instruments, and owns a patent for a motorized squirt gun and suction device that is used to rinse and vacuum surgical sites during surgery. A competitor, Zimmer Biomet, engaged in willful and egregious infringement, including the failure to turn over evidence during trial, according to the U.S. District Court judge who presided over the conflict. The judge tripled the jury's $70 million verdict due to his findings of egregious violations by Zimmer.

Business litigation asserts fiduciary breach in stock selections

The Employee Retirement Income Security Act (ERISA) is a complex federal law that governs employee retirement plans nationwide, including in Louisiana. Oil and energy companies have the same potential as companies in other industries to be drawn into ERISA lawsuits, which can cover a wide array of business litigation issues. For example, an employee of the Marathon Petroleum Co. recently filed a class action lawsuit against the employer for putting the stock of Marathon Oil Corp. in its workers' retirement plan.

The plaintiff claims that the stock choice was "reckless" under any common sense view of a wise investment strategy. The requirement that stock choices for retirement plans be prudently selected is a mandate of ERISA. The lawsuit claims that the stock substantially underperformed the market, and that tens of millions of losses to the retirement plan were suffered. It is alleged that while stocks tracked on the Standard and Poor's 500 Index increased by about 80 percent in the past six years, Marathon Oil Corp. stock fell by 40 percent.

Litigation against patent trolls intersects with oil & gas law

Louisiana has had its share of litigation in the federal courts involving so-called patent trolls. Such companies collect patents and sue other companies for violating the patents that they hold. This has been a lucrative business but one that has been criticized by many industries and by the courts. A recent case has reached the U.S. Supreme Court that intersects the patent troll issue with oil & gas law.

A controversial procedure called "inter partes reviews" allows the U.S. Patent and Trademark Office to reconsider whether its original granting of a certain patent was correct. If the Patent Office takes up the petition and decides against the patent or patents, it is a relatively inexpensive way for large companies to stop the patent troll company from its aggressive attacks on various business entities. The IPR process was authorized by the America Invents Act passed in 2011.

Business disputes may be resolved prior to business litigation

Louisiana has plenty of business litigation disputes between oil and gas companies. Because business litigation is usually a drain on a company's resources and valuable time, early resolution of such disputes will often be a goal for both the disputing businesses and their attorneys. This may be even more important where the parties have an ongoing business relationship.

Settlement discussions and negotiations are of course key to moving the parties toward a resolution of their dispute. When entering such discussions, it is important that the parties stipulate that the discussions are confidential and that no party shall be bound to any statements or representations. It must be understood that all evidence revealed during negotiations is inadmissible in a later trial of the matter, should it go to trial.

Oil & gas law dominates federal litigation on methane emissions

Legal disputes between state and federal governments, and between private businesses and government bodies, can be triggered or exacerbated when the executive branch changes hands. That dynamic has brought oil & gas law to the forefront of the business litigation stage since the recent switch in occupancy from one party to the other in the White House. Under the prior administration, tough emission regulations regarding the discharge of methane were passed. Louisiana and other oil and gas producing states challenged the strict emissions rules in litigation that was still active and pending when the new administration took office.

After taking office, the new administration issued an order asking the Environment Protection Agency to review the emissions rule. The EPA asked the U.S. Court of Appeals for the District of Columbia to suspend any final decision on the case brought by Louisiana and 13 other states. The states had complained that the strict emission rules imposed burdensome restrictions on their economies.

Business Litigation is spawned by loosening of federal rules

When oil and gas disputes turn into court cases, such matters may be categorized under the broad generic subject called business litigation. Such disputes are on the rise nationwide and in Louisiana. That may be due at least partially to the loosening of regulations by the federal administration and the response by environmental groups to counter with increased business litigation.

A recent dispute in another state illustrates one kind of lawsuit that is emerging as the oil and gas interests proceed with the construction projects in many communities nationwide. In the case, the mayor of a midwestern city and the city council have decided to challenge a new proposed high-pressure natural gas pipeline that will run roughly eight miles of pipelines through this town of middle-class residents. The mayor says that he'll do all that is possible to stop the project.