In the January 3, 2019 edition of The Legal Intelligencer, Edward Kang, Managing Member of KHF wrote “Defending Officers and Directors From a Lawsuit by the Company.”
When a corporate director or officer is sued by a third party for alleged misconduct carried out in her capacity as director/officer, the company generally indemnifies the director/officer by defending her against the lawsuit. The company’s duty of indemnification arises from both the law and governing corporate documents (e.g., articles of incorporation, bylaws or employment agreement). While there are limited exceptions to the company’s duty of indemnification—e.g., the director/officer acted in her personal capacity or that she acted in bad faith against the interest of the company—the duty of indemnification is broad. The company must defend the director/officer, at least until the court determines otherwise. What protection does a corporate director/officer have, however, if the person suing her is the company itself?
A company sues its officer or director more frequently than many people think. The company could bring a direct lawsuit against an officer or director for a breach of fiduciary duty (e.g., alleged self-dealing). Sometimes, a shareholder could bring a derivative lawsuit under the company’s name against the officer or director. Continue reading →
In the November 29, 2018 edition of The Legal Intelligencer Edward Kang, Managing Member of KHF and Kandis Kovalsky, Associate of KHF, co-authored “Have the Courts Made Room for Inevitability Under the Defend Trade Secrets Act?”
The Defend Trade Secrets Act (DTSA), 18 U.S.C. Section 1836, et seq., which was enacted on May 11, 2016, after a Senate vote of 87-0, is the first federal law to protect trade secrets. The rare unanimous vote was unsurprising given the stunning report by the Commission on the Theft of American Intellectual Property that outlined how theft of intellectual property costs U.S. businesses more than $300 billion a year.
The DTSA highlighted Congress’ goal of aligning the federal law closely with the Uniform Trade Secrets Act (UTSA), which has been adopted in some form in almost every state. Just as the Lanham Act, which coexists with state trademark law, the DTSA coexists with state trade secret law. As such, it is important to understand this interplay and what it is likely to look like going forward. Continue reading →
In situations where employers also make their employees, or certain employees, agree to restrictive covenants, particularly noncompetes, companies expect the same uniformity and predictability regarding their enforceability as to each employee, regardless of where the employee works or lives. Employees, on the other hand, often expect (as we learned through a recent case) that even with another state’s choice of law provision, they will still be afforded the protection of the laws of their own state. This disconnect is no clearer than where non-California headquartered companies hire California residents as employees and require them to sign noncompetes governed by another state’s law. In California, noncompete agreements are generally unenforceable (with some limited exceptions). This is well-known, particularly by California residents. So, what happens in this situation if the California employee violates their noncompete? Continue reading →
In an opinion handed down on August 22nd of this year, the Pennsylvania Supreme Court held that, unlike other contracts formed under Pennsylvania law, limited partnership agreements formed under the pre-Act 170 version of the Pennsylvania Revised Uniform Limited Partnership Act, do not contain the implied covenant of good faith and fair dealing.
The Pennsylvania legislature amended the state’s Revised Uniform Limited Partnership Act in late 2016 as a provision of Act 170, which altered the formation and operation of corporations, limited liability companies, limited partnerships, and other business forms. As part of its revisions to the PRULPA, Act 170 provided that a limited partnership agreement could not change or do away with the contractual obligation of both limited and general partners to discharge their duties under the agreement in accordance with the contractual obligation of good faith and fair dealing.
The case, Hanaway v. The Parkesburg Group, LP, involved a dispute among members of a limited partnership (Parkesburg) that had been formed to invest in and develop several parcels of real estate. The plaintiffs, who were among Parkesburg’s limited partners, sued the corporation’s general partner, alleging that he sold Parkesburg’s assets to a new partnership he had formed, so that the new partnership could develop the real estate in question without the plaintiffs.