Phony Invoices Led To $4 Million Breach of Fiduciary Duty

Companies often utilize contractors to help complete jobs and fill gaps in their workforce. While this creates a mutually beneficial relationship, some individuals will abuse it. This was the case for an investment company that discovered one of its contractors was creating phony invoices totaling $4 million.

Forest Investment Associates filed a lawsuit against a couple the company alleges defrauded them by creating phony invoices. The couple worked at Kingwood Forestry Services, which was frequently retained by Forest Investments. The wife worked as an administrator and her husband worked as a contractor. The couple would submit invoices for work that was never performed, which would in turn be paid by Forest Investments and its clients. Because the wife worked in administration, she kept an eye on all of the false invoices and made sure the amounts were not too suspicious so as to raise eyebrows. The scheme, which began in 2011, totaled $4 million worth of false invoices. Forest Investments has filed a lawsuit against the company for breach of fiduciary duty.

Protecting Your Business

No business exists in a vacuum. Businesses rely on other companies and individuals to operate. These relationships need to be carefully and thoroughly defined by contracts to help prevent disputes. When a dispute or outright fraud does arise, business owners have the right to seek compensation for economic damages. While many types of fraud bring about criminal charges, the criminal prosecution will not provide any financial compensation for wrongdoing to the victims.

Businesses that are victims of fraud can seek compensation directly related to the fraud and can pursue damages for harm done to their reputation. Because these matters can be extremely complicated, it’s important that only experienced business fraud attorneys handle them.

Texas Business Fraud Attorneys

At Feldman & Feldman, our Texas business fraud attorneys fight aggressively for our clients. We understand how business fraud can impact your company, so we work to get your legal issues resolved quickly. To learn more about your legal options, contact us today to schedule an appointment with one our lawyers.

High-Speed Rail Facing New Legal Challenges

Texans have long hoped for a high-speed rail to make travel easier and quicker. High-speed rail projects have faced significant legal hurdles in past years, but one unique hurdle is halting the high-speed rail project to connect Dallas and Houston.

One of the biggest hurdles for high-speed rails across the country is they cannot run on the type of train tracks already present. This means new tracks have to be laid for high-speed rails, which led to the first legal hurdle. In order for new tracks to be laid, land on which to lay the tracks has to be acquired. While the government can use its eminent domain authority to take land, many landowners put up a fight. This is not uncommon for projects of this type, but landowners are trying a new argument that could stop the project in its tracks.

A judge in Leon County, Texas recently ruled that the company trying to build the high-speed rail is not railroad company, and therefore it cannot force landowners to sell their land to make way for its tracks. The company does not operate any railroads or own any trains, leading the judge to determine it does not have eminent domain authority. This is where the dispute becomes complicated. Companies depend upon eminent domain in order to develop tracks necessary not only for operation, but also to help them meet the legal definition of being a railroad company. However, eminent domain is not granted unless a company is already legally a railroad company.

What To Do When Legal Challenges Arise

The high-speed rail isn’t the only project facing nuanced legal challenges. Everyday business owners find themselves embroiled in legal disputes that hinge on hyper-technical legal definitions and court rulings. When these legal challenges arise, it takes an experienced business attorney to successfully navigate and resolve the dispute.

Texas Business Attorneys

At Feldman & Feldman, we’ve successfully handled many complex commercial litigation issues. We utilize our experience to find strategic solutions that work best for our clients. Whether we are representing clients in court or around the negotiating table, we aggressively fight to protect their interests. If you would like to schedule a consultation with one of the Texas business attorneys at Feldman & Feldman, contact us today.

Was There A Breach In Fiduciary Duty In The Taco Cabana Empire?

When Felix Stehling opened the first Taco Cabana restaurants in 1979, he likely didn’t anticipate how quickly the restaurant would grow. While Stehling had a number of successful restaurants and businesses before Taco Cabana, the little taco shack would be the one that cemented him in the culinary history books. Sadly, the current status of the Taco Cabana empire is nowhere near what it used to be, and Stehling’s stepson alleges that’s due to a breach of fiduciary duty.

Stehling passed away in December 2012. At the time of his death, his assets were valued at approximately $20 million. Fast forward seven years, and there is little left. Stehling’s stepson and heir has filed a lawsuit against Stehling’s longtime investment advisor claiming the fortune was squandered by over-leveraging the assets to generate cash.

While the investment advisor has been accused of fraud and self dealing, he has pointed to other causes for empire’s decline. The planner blames the trouble on the 2008 financial crisis and poor investment decisions made by Stehling in the years leading up to his death. However, what makes this fiduciary liability case particularly interesting is an arbitration agreement over twenty years old.

When Stehling hired the investment advisor in the 1990s, he signed an arbitration agreement. The financial advisor has asked a judge overseeing the case to dismiss the claim stating all disputes must be resolved through arbitration as agreed to in the original contract. For his part, Stehling’s stepson has fought against arbitration proceedings because the agreement was only between the investment advisor and his stepfather. He never agreed to such an agreement.

Fiduciary Duty With Financial Advisors

Fiduciary duty has a broad and complicated legal definition. Because of this, disputes between financial advisors and their clients can be come complicated. Matters can be complicated further if the parties agree to arbitration agreements like the one used by Stehling.

If you believe your financial advisor has breached his or her fiduciary duty, do not wait to call Feldman & Feldman today. Our fiduciary duty attorneys are experienced trial lawyers and litigators that can help you hold fiduciaries accountable for financial losses they cause. Contact us today to schedule an appointment.

Monster Jam Launching Monster Lawsuit Against Toy Giant Mattel

When companies work together for years or even decades, a variety of issues can arise out of the agreements made and deals struck. When one company or business decides to part ways by ending the relationship, the resulting split has the potential to turn into a legal nightmare for both parties. In one such recent business divorce, the resulting lawsuit involves a myriad of commercial litigation issues.

The Battle of the Monster Trucks

A recent case between the company that owns MONSTER JAM® and toy manufacturer Mattel undoes a 20-year partnership between the two companies. In July 2018, Feld Motor Sports – the parent company of MONSTER JAM® – alerted Mattel it planned to end their long-standing relationship. While the details of the decision to dissolve the partnership are unknown, Feld Motor Sports had licensed the Monster Jam name and logo to Mattel since 1999, with Mattel serving as the sole producer of official MONSTER JAM® toy trucks and other merchandise.

In a lawsuit filed late December 2018 (Feld Motor Sports, Inc. v. Mattel, Inc.), Feld claims Mattel infringed on its trademark by producing its own line of toy monster trucks with remarkably similar styles, names, and colors, alleging they are “virtually identical in shape and construction.” The lawsuit even claims Mattel repurposed the molds it created and used for decades manufacturing the MONSTER JAM® trucks in a gross violation of trademark laws. Additionally, Mattel announced in November it planned to hold its own event, titled “Hot Wheels Monster Trucks Live,” which is a near perfect copy of Feld Motor Sports’ MONSTER JAM® event.

In addition to trademark infringement, Feld alleges Mattel chose not to complete the remainder of the licensing agreement in good faith by failing to supply retailers with their requested supplies of MONSTER JAM® products, resulting in a significant decline in sales for Feld Motor Sports in the third quarter of 2018 versus the same quarter in 2017. Feld claims Mattel “secretly and deliberately undersupplied MONSTER JAM® products” while still remaining the exclusive licensee, and therefore unlawfully blocked market access to the products.

Because of the long history between the two companies, litigation over these issues is sure to prove contentious, with claims ranging from trademark infringement to licensing issues to breach of contract. The issues involved can affect a wide-range of businesses, and the case merits close attention as it continues to unfold.

Commercial Litigation Attorneys in Houston

The commercial litigation lawyers at Feldman & Feldman have successfully litigated business disputes for over 40 years, and one of our founding partners, Cris Feldman, has significant experience in commercial litigation. If your business is facing issues with a partner or vendor, find out how we can help resolve those issues either in or out of the courtroom. Contact us today for a consultation.

Texas Liquor Giant Fighting The Texas Alcoholic Beverage Commission

If you happen to live in Texas and are over the age of 21, you’re likely familiar with the liquor chain Spec’s. While Spec’s carries a plethora of options for wine, beer and spirits, you can also go there to get other necessary items for a get together or holiday party, including food and paper goods. What you may not know about Spec’s is their ongoing legal troubles with the Texas Alcoholic Beverage Commission (TABC) and how they feel they have been wronged by the organization as a whole.

Spec’s Wine, Spirits and Finer Foods, Texas’ largest liquor chain recently announced it would be suing the Texas Alcoholic Beverage Commission (TABC) for abusive regulatory overreach. This comes after a two year long enforcement action that led to administrative proceedings in 2017, according to court documents.

The federal lawsuit alleges TABC “wrongfully and maliciously” attempted to extort money from Spec’s. According to the liquor giant, this was done by threatening to effectively shut Spec’s down or by making the business pay more than $700 million in civil penalties.

Last year during a rebuke of TABC, administrative law judges said the agency failed to prove dozens of allegations and chastised TABC for failing to disclose evidence to their own witness and the court. The judges also stated the agency was “stacking” charges, a tactic commonly used to pressure defendants into settlement. In the end, the judges determined no fines should be assessed against the liquor chain.

Currently, Spec’s is seeking an unspecified amount of monetary damages, including lost profits, more than $1 million in attorneys fees, and harm to its reputation. The lawsuit also alleges TABC provided false testimony during the spring proceedings.

Complex Litigation Attorneys

For the dedicated complex litigation attorneys at Feldman & Feldman, there is no adversary too big. Our legal team passionately pursues each case with skill and tenacity, but without the overhead of a large law firm. For the legal team at Feldman & Feldman, each case is unique and there is no one-size-fits-all solution. If you are facing any type of complex business dispute or commercial litigation, call Feldman & Feldman today to schedule a consultation to discuss your case.

How Title Insurance Works

If you want to buy a house, you’re going to need title insurance, but very few homeowners know what title insurance is or how it works. This is a shame because while title insurance is very rarely needed, it can protect homeowners from huge financial losses.

What Is Title Insurance?

Anytime an individual decides to buy or refinance a house, they will have to get title insurance. Title insurance is a type of insurance that protects buyers and lenders from financial loss if ownership of the property or title is challenged. Title insurance was created over one hundred years ago when dishonest individuals would sell property they didn’t actually own. With the rise of the Internet, determining whether or not a seller actually holds the title to the property is much easier, but unfortunately, not foolproof. Although every homeowner will purchase title insurance, very few are actually aware of their rights if they need to submit a claim.

The Rising Cost Of Title Insurance and Bad Faith Claims

You would think that because technology has made searching for information about property titles easier that title insurance would become less expensive. However, prices for title insurance are actually increasing. One of the largest title insurance companies, First American, has actually doubled its prices over the past decade. This is easy for title insurance companies to do, because most states have laws in place preventing other insurance companies from offering title insurance. This means the title insurance market is small and faces little competition. In total, title insurance is an $18 billion industry.

Not only are the costs of title insurance rising, but many policyholders are also discovering the hard way that title insurance companies often use bad faith tactics to avoid paying out on claims. Like any other type of insurance, a title insurance company’s first objective is to make money, and some companies take this objective too far by wrongfully denying valid claims. Unfortunately, many policyholders are completely unaware of their rights and accept the claim denial at face value.

Get Help With You Title Insurance Claim

Buying any type of property is a huge investment, so before you sign on the dotted line, it’s important to make sure all related contracts are fair. At Feldman & Feldman, we can review title insurance policies to make sure they provide proper coverage. If property has already been purchased, we can help with any title insurance disputes. Call us today to schedule an appointment to learn how we can help.

Duties Business Partners Have To Each Other

Starting a business is incredibly exciting, but many first time business owners don’t anticipate the many responsibilities involved with running a business. When partners form a business, they must fulfill certain duties to each other. When one or more partners fail to fulfill these duties, partnership disputes arise and can jeopardize the whole business.

Partnership Duties

Partners must always put the interests of the business ahead of their own personal interests. This non-delegable duty can be broken down into several specific duties:

  • Duty of Good Faith and Fair Dealing – Partners must always act honestly and fairly regarding the business. Deception or misrepresentation violates these duties, and partners can be held responsible for their actions.
  • Duty of Loyalty – Partners owe a loyalty to the business. This means partners cannot engage in self-dealing and must avoid conflicts of interest. If there is a conflict of interest, the affected partners must immediately inform the other partners.
  • Duty of Care – Partners will make many business decisions, some on a daily basis. When making decisions, partners are expected to act reasonably and with care.
  • Duty of Full Disclosure – Every partner has a right to certain information regarding the business and the other partners. Partners must disclose to other partners information such as potential business opportunities, contracts entered into, finances, and operations.

Resolving Partnership Disputes

Partnership disputes are very delicate legal matters. If not resolved quickly and efficiently, these disputes can snowball out of control and destroy a business. The best way to preserve a business at the heart of a partnership dispute is to work with an experienced business attorney. A partnership dispute lawyer will be able to assess the situation and devise a strategy for resolution that protects the hard work partners have put into the business.

Houston Partnership Dispute Lawyers

If you are facing any type of internal conflict, don’t wait to get the help of a Houston partnership dispute lawyer. The sooner you involve an attorney, the better you can protect your business. At Feldman & Feldman, our business minded lawyers understand each dispute is unique. Not all partnership disputes are destined for the courtroom. We create unique action plans to resolve business disputes. Contact us today to schedule an appointment with one of our Houston partnership dispute lawyers.

What Type Of Business Should I Form?

Starting a business is incredibly exciting, but few people understand how the type of entity they form can affect them later on. Deciding what entity to form can have beneficial or catastrophic consequences for not only your business, but for your own personal finances. While there are many types of business entities, the business lawyers at Feldman & Feldman see the following most often:

Limited Liability Company (LLC)

Limited Liability Companies or LLCs do just that – limit liability. When you form an LLC, your business assets and debts are separate from your personal finances and assets. This means the assets of the business are exempt from the owners’ creditors. LLCs allow creative allocation of the profits and losses incurred by the business among the owners. LLCs also have flow-through income taxation, meaning the income generated by the business is filed as part of the owner’s personal income, preventing the profits from being taxed separately.

Sole Proprietorship

Sole Proprietorships are relatively easy to form and operate and do not require state filings; however, the owner remains personally liable for any lawsuits or debts against the company. Many people opt for sole proprietorships when they are starting their businesses because they are less expensive to form, but this could leave business owners vulnerable to more costly situations in the long run. People considering a sole proprietorship need to really consider whether the risks make this entity choice worthwhile.

C Corporations

Similar to LLCs, C Corporations can limit the individual liability of directors, officers, shareholders, and employees. Owners also have the ability to sell stock, which can help attract investors. One big downside of a C Corp is the possibility of double taxation, where business profits are subject to taxes and the dividends paid to the shareholders are subject to taxes. C Corporations are subject to lots of regulations and complicated tax filings, so many will require the help of a skilled business accountant to file taxes.

S Corporations

S Corporations provide the same limits to liability and investment opportunities as C Corporations, but without the double taxation. Owners of S Corporations report their share of profits and losses on their personal tax returns and the income is only taxed once. Not every business qualifies to be an S Corporation, as only legal U.S. citizens or permanent residents can own them. Additionally, S Corporations also limit the number of shareholders to 100, which can limit growth potential.

Partnerships

Partnerships are a popular entity choice for small businesses because they are easy to form and operate; however, partners remain personally liable for company liabilities and business debts, even those incurred by another partner. Partners can help protect themselves by adopting a partnership agreement, but many business owners rush into formation before creating one.

Speak With A Business Lawyer

Before forming a business, it is crucial that you speak to an experienced business lawyer at Feldman & Feldman. The implications for each entity are incredibly complex, and only a lawyer will be able to evaluate your situation and advise you on the best type of entity to meet your needs. We can also assist with filing the necessary paperwork for formation, drafting partnership agreements, and advising on any business law matters. Schedule an appointment today to speak with one of our attorneys.