Articles Posted in BUSINESS LITIGATION & DISPUTES

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Over the years I have handled many construction claims in my Atlanta, Georgia Construction Litigation Law Firm. Many intricacies to construction litigation are not understood by attorneys that do not normally litigate or arbitrate these types of cases. Two of the key concerns of plaintiffs in any Georgia construction dispute are to determine who is liable for Georgia commercial or residential construction defects, and who will pay for the damages that can be recovered. With possibly dozens of workers who touched the worksite, including architects, builders, contractors and independent sub-contractors, it can be difficult to sort out what exactly caused the issue and who the responsible party is.

Many people would automatically assume that the officers and employees of the construction company, when incorporated, would be protected from liability. But under Georgia law, there are ways to assign responsibility to construction company representatives, even when the company is incorporated. Having the construction litigation experience to address these issues effectively is critical. As a result, retaining legal counsel from an experienced Georgia construction litigation and arbitration lawyer is necessary to obtain a favorable outcome.

Besides providing representation for property owners with claims, construction litigation and arbitration attorneys can help construction companies and contractors in Georgia assess risk and organize defenses against potential claims. In today’s tough economic climate, builders and construction companies cannot afford to lose money on lawsuits that expend precious resources. Retaining the best possible Atlanta, Georgia construction legal counsel will save time and money for defendants.
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The focus of this Blog Article will be Self-Dealing and Breach of Fiduciary Duties in this scenario. However, it is important to note that that Self-Dealing is just one way a breach of fiduciary duty can occur.

There are numerous situations where breach of fiduciary duties can arise. There are also many types of fiduciary duties, which can arise. Some of the most commonly breached fiduciary duties are as follows:

• Self Dealing


• Misappropriation of Funds


• Neglect of Fiduciary Duty


• Usurping Business Opportunities for Personal Gain


• Abuse of Power


• Shareholder Oppression


• Shareholder Squeeze Out


• Shareholder Freeze Out


• Conversion of Funds


• Failure to Act When Fiduciary Duty Imposes Such A Requirement

There are also a number of relationships that give rise to fiduciary duties. Some are as follows:

• Directors and Officers in Corporations


• Partners in Business


• Real Estate Brokers


• Real Estate Agents


• Stockholders/Shareholders


• Financial Advisors


• Financial Brokers


• Executors of Estates


• Trustees of Trusts


• Administrators of Estates


• Personal Representatives of Estates


• Guardianships of Wards


• Conservatorshops of Wards


• Powers of Attorney


• Health Care Situations

These different types of breaches of fiduciary duties will be addressed throughout this Atlanta Business Lawyer Blog over the course of time. However, for the purpose of this Blog Article, we will concentrate on one of the most frequently breached fiduciary duties, the classic case of “Self Dealing“.

Self-dealing is often occurs between officers and directors of Georgia corporations have a fiduciary duty of care and loyalty to the shareholders of those organizations. As such, under Georgia law they are obligated to act in good faith and in the corporation’s best interests. When officers or directors put their own personal interests above those of the corporation and shareholders (i.e. by using corporate assets for their own benefit), this is considered self-dealing. Issues such as self-dealing are a growing issue and occurrence in corporations. The Atlanta Fiduciary Law Attorneys in my Atlanta, Georgia Business Firm have represented numerous clients who have made with claims concerning self-dealing against the “higher-ups” and/or other “shareholders” in the corporation.

When this type of allegation is brought forward, the plaintiff must provide proof that the officer or director derived personal benefit from the transaction. If this is shown, then the officer or director must defend their actions by demonstrating that the transaction was for the benefit of the Georgia Corporation, and any perceived self-dealing was just happenstance and circumstantial. Even when the director or officer does prove that the action was favorable to the corporation, and ultimately the shareholders, it still may be considered a breach of fiduciary duty.

Self-dealing and other breaches of fiduciary duty can financially destroy a corporation. Thus, it is essential to have an operating agreement that clearly defines the obligations of all members and interested parties to a corporation. An experienced Atlanta, Georgia Fiduciary Law Attorney can put a stop to the self-dealing and adequately assist in imposing remedies in equity and at law upon the self-dealing party. Nevertheless, to dispense with arguments that self-dealing did or did not occur; it is wise to have an Georgia operating agreement that defines the responsibilities among members of the company, both for shareholders, directors and officers, and employees. A comprehensive operating agreement should be part of the beginning and day to day operation of any corporation.
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As an Atlanta, Georgia Business Litigation Attorney, I have seen a change in the way business is conducted since the economy started to decline a few years ago. The change is most evident in heavily populated urban areas like Atlanta, but can also be seen across Georgia. The level of trepidation is palpable and Georgia business deals are heavily scrutinized. This means your Georgia business lawyer should conduct intense due diligence prior to letting their client enter into any Georgia business agreement.

The shift can be attributed to the struggle that most businesses are engaged in due to the poor global economic situation. The economic climate has influenced the business community to become more ruthless. Many companies are enforcing contractual agreements strictly and not allowing for any leeway in interpretation or timing. The ability of a customer to pick up the phone, and with a short phone call, gain one-time forgiveness for a particular contractual term, like a payment deadline, is limited. Most companies are tightening their belts and putting profits before customer service and long-standing relationships.

Unfortunately, the state of the economy has encouraged a more serious and illegal type of behavior. Some business people are resorting to fraudulent activities in their business dealings. These activities include, but are not limited to, false advertising, product misrepresentation, and substandard quality resulting in known product defects. As the incidence of business failure increases, more business are resorting to these desperate measures. Because of this, Georgia business dealings between close friends, relatives, and long-time business partners are being scrutinized more closely.

The overall result is a climate of general apprehension. When faced with any contractual issue, it is imperative to seek the legal counsel of a competent Atlanta, Georgia Business Litigation Law Firm. An experienced Georgia business litigation attorney can assist in protecting you during contract negotiations when setting up a business deal and help you later on if disputes arise. As a consumer being represented by an Atlanta business lawyer will let you know your rights up front. As a business owner working with an Atlanta business attorney will give you knowledge of your level of risk and responsibility in any business arrangement.
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While each state has its own laws regarding operating agreements, Georgia business law does not specifically require LLCs to have a Georgia operating agreement. However, it is wise to draft one, since the operating agreement is arguably the one document that provides significant legal protection to members of any partnership or corporation. In my Atlanta, Georgia Business Law firm, I have seen many clients come to me with serious issues stemming from a failure to draft this agreement, especially in family run businesses. Neglecting to draft this document before or upon creating a partnership or corporation often results in costly and time-consuming litigation.

The Georgia operating agreement allows you to define the LLC’s financial structure and working relationships between members. Key items to be addressed and defined by the agreement are percent ownership of each member, duties and rights of each member, voting power of the members, allocation of profits and losses, the management model and rules for meetings and voting. Additionally, the operating agreement will include provisions that outline not only what will occur if the business is sold, but also what will happen if a member dies, becomes incapable of performing the stated duties, or wants to sell their share of the business.

Although an operating agreement in Georgia can be oral (for multi-party LLCs only), it is always best to prepare it as a formal written document. In Georgia, the preparation of a written operating agreement should not be overlooked for several important reasons. It will help limit misunderstandings between members, ensure that the business is run by the rules established by the owners (not by the default rules of Georgia statute) and it will protect the company’s limited liability status (by preventing “piercing the corporate veil“). Protecting the company’s limited liability status is especially important if one person owns the LLC. With a properly drafted operating agreement, the one-person LLC can easily defend its status as an LLC in court proceedings, and the owner can avoid personal liability issues.
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The majority of the businesses in the United States are close corporations. Georgia close corporations are classified as having a maximum of fifty shareholders, no publicly traded stock and active management by shareholders. Because close corporations usually employ the shareholders, these companies generally have a more relaxed management style. The downside is that this management model puts the minority shareholders in a situation where they quickly can be faced with “squeeze out” or “freeze out” tactics, that typically result in termination of employment with the company.

Often times, income from employment is the most valuable stake that these minority shareholders have as shareholders. Shares held have no value on the open market. That, coupled with the fact that majority shareholders are unlikely to buy the minority’s shares at a fair price, leaves the minority shareholder with little or nothing upon being terminated. Georgia business law statutes provide protection for minority shareholders faced with this situation. Just as in ordinary corporations, all shareholders in close corporations have the right to inspect the documents pertaining to the company, including, but not limited to, bylaws, shareholder meeting minutes, documentation of actions taken outside of meetings and resolutions related to share classification. In the case of wrongdoing, documents discovered during inspection can provide the required evidence to file a lawsuit against the company.

Additionally, Georgia law states that the majority shareholders have a fiduciary duty to the minority, allowing for minority shareholders to sue for dissolution of the close corporation when these duties are not fulfilled. These suits can be filed if the majority shareholders have acted, are acting or are expected to act in an illegal, fraudulent, oppressive or unfair fashion toward the minority. Minority shareholders also can sue for fair valuation of their shares. Whatever the circumstance, it is critical to seek the counsel of an experienced Atlanta, Georgia Business litigation attorney to resolve shareholder complaints. Having a properly drafted operational agreement can prevent these types of disputes from developing, but if conflicts do arise, a qualified lawyer will ensure that all possible legal avenues are pursued to help the minority shareholder receive fair treatment and compensation under Georgia law.
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The Atlanta business lawyers at The Libby Law Firm have noticed that in these tough economic times when everyone is trying to save money, a lot of consumer offers seem to good to pass up. When we complete a purchase, sometimes we come to the realization that we have been mislead or a contract has been breached, and by this time it is often too late to return the product or we are left with what seems to be no recourse. So what can an ordinary consumer do when faced with a deceptive business practice? It is common to feel powerless, but fortunately Georgia has a law to help consumers fight back.

The law is called the Georgia Fair Business Practices Act and it protects Georgia consumers against many types of unfair and unscrupulous practices related to transactions made on personal, family and household products. The protection that this law gives to the consumer is broad, including, but not limited to, provisions on health spa and gym memberships, credit reports, insurance, telemarketing, multilevel marketing opportunities, “going out of business” sales and specific types of promotional activities, such as vacation prize offerings, contests and giveaways.

The Georgia act (O.C.G.A. Sections 10-1-390 et seq.) is enforced by the Governor’s Office of Consumer Affairs and specifically prohibits the following:

1) Misrepresenting who the actual manufacturer is of the good or service
2) Claiming that goods come from a geographical location, when they actually come from a different location
3) Representing used goods as new

4) Falsely stating the quality, grade or model of goods and services
5) Making false or misleading statements about a business or its product or service
6) Advertising goods or services with the intent of not honoring the advertising claim
7) Advertising goods or services without enough product on hand to satisfy consumer demand, except when the advertisement states that quantities are limited
8) Making untrue statements about sale prices

If you feel that you have purchased a product or service that is not living up to the claims stated by the seller, contact a qualified Atlanta, Georgia Business Attorney. Your attorney will work with you to recover damages and fight to stop the offending seller from continuing the unfair or deceptive practice.
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Atlanta business law firms that practice in the area of fraud litigation have seen a dramatic rise in the number of cases. The fraud lawyers at my firm believe the increase in the number of fraud cases is due to the troubled economic times that persons and businesses in the Atlanta, Georgia, area are experiencing. In this troubled economy, we believe otherwise honest people have turned to fraudulent activities to make ends meet.

In a well-known case, ReMax North Atlanta v. Clark, 244 Ga. App. 890 (2000), the Georgia Court of Appeals elaborated on the tort of fraud, which has five essential elements. They are as follows:

1. A false representation or omission of a material fact;

2. Scienter – or knowledge;

3. Intention to induce the party claiming fraud to act or refrain from acting;

4. Justifiable reliance; and,

5. Damages

Fraud can take place in many areas of business. Presently, our Atlanta fraud lawyers are seeing the largest number of fraud cases in the areas of real estate transactions, the construction and building of homes, and the accounting and managing of monies or assets.
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As an Atlanta foreclosure lawyer, it is apparent to me that in today’s economy, many people are having problems with their mortgage payments and their mortgage companies. Many people have suffered a loss of income that has affected their ability to make their monthly mortgage payment. Others have found themselves stuck in homes that are worth far less than what is owed on the mortgage. Should you have any trouble making your mortgage payments, you likely are going to have to deal with a mortgage company in order to retain your home and move on with your life. Unfortunately, this is easier said than done.

Our Georgia loan modification lawyers realize Mortgage Companies and Banks were not prepared for the economic changes that have occurred in the housing market. Over 3.3 million homes have gone into foreclosure since January of 2008. The Banks simply do not have the employees, time or resources to adequately deal with the number of foreclosures and loan defaults that are occurring. This means long delays in modification deals, never speaking to the same person at the bank twice and general confusion that can lead to losing your home in foreclosure, even if you think that you are negotiating a modification or that you have an agreement concerning you arrearage in place with your lender.

Complicating the situation even further is the fact that most mortgages in Georgia provide that any foreclosure are “non-judicial”. This means that the lender does not have to use the court system to foreclose on your property and sell your house. Instead, they are allowed to send you a notice that they intend to sell your house on the courthouse steps on the first Tuesday of the next month. They also publish this notice in the local paper. Then when four weeks have passed, they auction the house at a sheriff’s sale to the highest bidder.

Fortunately, legal options are available those are facing foreclosure. In Georgia, mortgagors are required to use the utmost good faith in their dealings with you.

Specifically, O.C.G.A. § 23-2-114 provides:

Powers of sale in deeds of trust, mortgages, and other instruments shall be strictly construed and shall be fairly exercised. In the absence of stipulations to the contrary in the instrument, the time, place, and manner of sale shall be that pointed out for public sales. Unless the instrument creating the power specifically provides to the contrary, a personal representative, heir, heirs, legatee, devisee, or successor of the grantee in a mortgage, deed of trust, deed to secure debt, bill of sale to secure debt, or other like instrument, or an assignee thereof, or his personal representative, heir, heirs, legatee, devisee, or successor may exercise any power therein contained; and such powers may so be exercised regardless of whether or not the transfer specifically includes the powers or conveys title to the property described. A power of sale not revocable by death of the grantor or donor may be exercised after his death in the same manner and to the same extent as though the grantor or donor were in life; and it shall not be necessary in the exercise of the power to advertise or sell as the property of the estate of the deceased nor to make any mention of or reference to the death.

The Supreme Court of Georgia has interpreted this statute to mean that a mortgagor must deal with a mortgagee in the utmost good faith, and if they do not, then the mortgagee may have a cause of action against the mortgagor for not acting in good faith. This includes lenders and banks failing to negotiate in good faith with the homeowner regarding payment and when lenders fail to provide the proper notices in foreclosure. If a court determines a foreclosure to have been in violation of these duties, then the foreclosure may be rescinded or the homeowner may be awarded monetary damages.
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As a business lawyer, I have had a number of business persons ask me, “do corporations in Georgia need to be represented by an attorney?” The answer is a resounding “Yes”.

First, in Georgia business litigation matters, corporations must be represented by a licensed Georgia attorney in “courts of record.” Eckles v. Atlanta Tech Group, 267 Ga. 801, 485 S.E.2d 22 (1997). The Georgia Supreme Court found that although a corporation may be considered to be a “person” under Georgia law, when the corporation is facing litigation, it must hire an attorney to be represented in court. The Court reasoned that because a corporation can only act through its agent, when that agent represents a corporation in court, he or she is acting as a legal representative and must be a licensed attorney. Thus, a corporation cannot represent itself in court and must hire a business attorney.

Although not required by law, several other essential reasons exist for having an experienced Georgia business attorney involved in your company’s non-litigation matters. Having a knowledgeable attorney represent your business from the outset can save your corporation substantial monies, unnecessary trouble and expense, and protect your business from costly disputes and litigation. Areas in which an attorney can be extremely beneficial include, but are not limited to, ensuring proper corporate entity formation, employment contracts and hiring or firing decisions, entering into third party contracts, and avoidance of disputes and litigation.

• Incorporation: Deciding whether to form a corporation or a limited liability corporation (LLC) can have significant personal liability and tax consequences. Further, many specific legal formalities must be followed in order to incorporate or form an LLC, including the execution of many legal documents. Thus, it’s essential to have a knowledgeable corporate attorney advise you on the type of business entity that is best suited for your company. If you are unsure what steps your business should take, investing in even an hour of an attorney’s time can lead to a huge return on investment. Simple mistakes in incorporating can lead to serious financial and legal issues at a later time.

• Employment Contracts: Many employee disputes and lawsuits could be avoided by having an attorney involved at the outset. Claims may arise because of confusion over job duties, payment of wages, and the failure to sign important documents such as non-disclosure of company secrets or non-competition agreements. Having an attorney ensure proper employment agreements and documents are in place at the beginning of an employment relationship can save your company from unnecessary trouble and expense down the road arising from employee disputes and litigation.

• Hiring and Firing: Our Atlanta business lawyers are well versed in the employment law. We know and understand there are legally correct methods to hire, fire, and lay off employees. The business employment lawyers at our firm understand the importance properly hiring new employees and setting expectations of them, executing the proper employment contracts, legally documenting these matters, as well as engaging in an appropriate amount of other protective measures for your business. Likewise, our Atlanta business employment lawyers understand the necessary steps and measures and document employee performance, adherence to business standards, and the proper way to fire or lay off employees should the need arise. The procedures and actions we take can be crucial in case a disgruntled employee decides to file a lawsuit or an action with a governmental entity such as the EEOC.

• Third Party Contracts: It is extremely important to have your own Georgia business lawyers draft contracts and agreements in a manner favorable and protective of your business interests. Likewise, contracts offered by third party vendors, leases, and distribution agreements are often one-sided in favor of another party. As such, it is important to have a knowledgeable business attorney review all documents and contracts in order to ensure your company’s best interests are protected. Oftentimes, this includes negotiations concerning essential and material terms of any contract.

• Avoiding Disputes and Litigation: The experienced Georgia business law firm immediately.


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As Atlanta, Georgia, real estate fraud lawyers, we have seen a rise in the “house flipping” trend over the last several years. House flipping is the process of buying a home, renovating the home, and then selling it for a substantial profit within the course of a very short time. Often, an investor is able to make money from flipping a house by fixing less costly cosmetic issues – such as carpeting, painting, and appliances – and then selling the house at a significantly higher price.

If you are an investor interested in house flipping, you should contact a knowledgeable real estate attorney who can help with all aspects of your real estate transaction. Recently, several house flipping schemes aimed at potential real estate investors have come to light, exposing housing management investment companies and banks working together to defraud potential investors.

In one scheme, a Georgia Bank came under fire after the revelation that one of its co-founders and a chief executive was heavily involved in making fraudulent loans. Through the Bank, chief executive made short-term loans to inner-city investors interested in flipping house in low-income neighborhoods. Because the investors often did not have easy access to loans from traditional banks, the company charged hefty fees and exorbitant interest rates.

Another scheme in involved a European man who enticed flippers – for a substantial fee – with cheap properties and access to expert renovators. He then sent his investors to the Georgia Bank to obtain loans to buy his properties. Allegedly, kickbacks were paid to the loan officers at Georgia Bank who approved the funding. The European man is now in federal custody on charges of fraud. The European Man and the unnamed loan officer made money, but many of the properties were never renovated and the investors lost their money.

These flipping schemes have created additional problems in some of Atlanta’s most needy neighborhoods – with newly flipped homes sitting vacant and attracting criminals and squatters. Although many flipping schemes have come to light over the last several months, The Wall St. Journal reports that home flipping is making a comeback with investors buying up foreclosed properties. These flippers need “cold cash, lots of local-market knowledge and strong nerves.”

The best advice for real estate investors interested in getting involved in the flipping market is to do your homework, be wary of schemes, and be willing to take some risks. Contact a dedicated Georgia real estate fraud attorney who can help you determine if the property you are interested in is suitable for flipping. However, if you believe, you have been a victim of house flipping fraud; please contact The Libby Law Firm immediately to discuss your case.
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