Arthur R. Lehman, L.L.C.

New York Business Litigation Blog

Your non-compete agreement must hold up to challenges

With your business up and running, you were likely ecstatic about its success and the capital you invested in it. However, you have reached your goals, and your business is becoming profitable. In fact, you and your partner may be discussing expanding your staff. This introduces new cause for anxiety.

Trusting others with the operations of your business will not be easy, but by systematizing proper training and oversight, many business owners have grown their companies with the help of solid and trustworthy employees. Now think long-term: What happens when one of those trusted employees quits?

Tomato sauce maker abandons product name but learns to prosper

This blog has previously noted the steps that a trademark owner will take to protect the mark. But, what happens to the business that is forced to abandon a successful product name? A tomato sauce maker was recently compelled by a New York restaurant to pick another tradename for its products, but it has found a way to recover from this setback and continue to prosper.

The sauce manufacturer began making tomato sauces in 2010, basing their formulae on old family recipes. The owner of the company chose the name "Nello's" for its sauces because that was his personal nickname. The sauces became very popular, and the company was on the verge of financial success. Unfortunately, an upscale New York Italian restaurant had already registered its name, Nello, and its attorneys sent a letter to the tomato sauce maker demanding that he abandon the use of the name.

What causes most business partnership disputes?

When you are going into business, you may decide that pooling resources and talent with someone else or multiple other people is the best route. This may also feel less risky as you are not jumping into the venture by yourself.

In the excitement of starting the business venture, you may not consider what could happen if an internal dispute arises. Thinking about what could go wrong may be one of the best time investments you make in starting your own business and before you form that partnership.

Partner sues NYC doctor misuse of company funds

Doctors may be brilliant when practicing their medical specialties, but they can also be difficult business partners. A lawsuit filed this week in Manhattan Supreme Court accuses a prominent urologist of using funds belonging to a magazine that he and the plaintiff founded in 1996 for personal expenses. The lawsuit provides an example of how business partners, regardless of their professions, can engage in bitter business litigation.

The two physicians were life-long friends who, in 1996, founded a medical journal called MedReviews. The journal is headquartered in New York City. The complaint alleges that in 2005 one of the founders, who has his professional office in New York, began using the company's funds for personal expenses after he took over accounting duties from the wife of the other partners. The alleged misspending was discovered when the New York-based partner tried to buy out the 20% interest of the partner who lived in Seattle.

Trial involving "Rebecca" producers and publicist begins in NYC

Fans of Alfred Hitchcock are drawn to his complex plots and fascinating characters. Now one of his best known movies, "Rebecca," has ended up in court in New York City, as the producers of a musical based on the movie are suing the show's form publicist for a number of business torts, including tortious interference with contract and defamation.

In the mid-2000s, two New York theatrical producers acquired the rights to the story with the intention of producing a musical based on the mystery. The play was originally supposed to open in London in 2012. Unfortunately, the producers did not raise enough money to stage the musical, and it was canceled. The producers next announced that they had arranged $4.5 million in financing from the estate of a multimillionaire named Paul Abrams. Plans for the production then hit another barrier: Paul Abrams did not exist. An intermediary had persuaded the producers that Mr. Abrams' money would be forthcoming, but instead, the intermediary was convicted of fraud and is now serving a three-year sentence.

Ex-Macy's employee challenges non-compete agreement

Non-compete agreements have become increasingly common in almost all types of business. They are used to protect the employer's intellectual property and also to prevent former employees from sharing customer lists and similar information with competitors. Occasionally, the former employee will attempt to have a non-compete agreement declared unenforceable. One such case is unfolding in the Federal District Court in New York.

When a regional executive vice president resigned from the Macy's department store chain and then accepted a job with Burlington, another large clothing retailer, Macy's sued her, claiming that she signed a non-compete agreement that prevented her from accepting employment with a competitor for a period of two years. The employee has responded by asking the federal judge in charge of the case to dismiss Macy's lawsuit on the ground that the non-compete is too broad and unreasonable in its scope and therefore unenforceable. The non-compete agreement apparently has no geographic limits that might reduce its scope. The employee is also arguing that the contract is unreasonable because it seeks to impose a blanket limitation on working in a "vast and varied industry."

KFC sues New York businessman over famous slogan

Perhaps one of the world's most famous advertising slogans is the three word phrase used by Kentucky Fried Chicken to promote its fast food products: "finger lickin' good." Now, the chain has filed a petition with the United States Patent and Trademark Office to block a New York state businessman from using phrases that are similar to its trademarked phrases but which appear have nothing to do with fried chicken or any other kind of food product.

The business owner, who is headquartered in Pittsford, received permission from the Patent Office in late 2016 to use two phrases, "Finger Lakin' Good" and "Finger Laking Good" to promote his real estate, farm and brewery enterprises. According to the Pittsford owner, he chose the phrases as a reference to the nearby Finger Lakes, a region dominated by long, narrow lakes that were so named by 19th century mapmakers. The business owner claims that he is not infringing on KFC's product or name because his businesses have nothing to do with a fast food chain or fried chicken. Also, the logos used by the Pittsford businesses bear no resemblance to KFC's logos.

Proactive business owners can minimize risk of lawsuits

When people decide to open their own business, they are taking a major risk because many of the circumstances surrounding the formation of business are out of a potential owner's control. Natural disasters could visit the business and cause a significant amount of property damage. The market could suffer a downturn for reasons that are completely out of the control of the business owners and leadership.

For this reason, it is even more important for businesses to minimize the risk of lawsuits and the damages that they could ultimately cause. When so many unexpected challenges can plague businesses, it is important to prevent what challenges you can.

Restaurant owners settle trademark dispute over names

Few businesses depend upon their names to the same extent as restaurants. A restaurant's name can signify the kind of dining experience the restaurant provides and can become a key element of word-of-mouth marketing. A trademark infringement lawsuit involving similar restaurant names was recently avoided when the owners of two New York City restaurants found a creative solution to their dispute.

One of the city's most famous restaurants, the Four Seasons, closed in April 2016 after the owners of its home, the Seagram Building, declined to renew the restaurant's lease. The new lessee of the Four Seasons space, The Major Food Group, recently announced plans to call the remodeled space The Landmark Rooms. Unfortunately, the owner of a restaurant chain in the city known as Landmarc bistros, which operates restaurants under that name in Tribeca and the Time Warner Center, felt that the new name was deceptively similar to that of his own restaurants. As his lawyer alleged in the complaint, the two names are pronounced exactly the same, thus creating a high risk of confusion about which restaurant is which.

Supreme Court to hear appeal in investor fraud lawsuit

A lengthy and complex lawsuit involving a troubled New York City payroll contract is now headed to the United States Supreme Court. The Court has agreed to review a decision by the United States Court of Appeals for the Second Circuit that revived the plaintiff shareholders' securities fraud claims against Leidos, Inc., a large government contractor.

The complex business dispute arose out of a contract between Leidos and New York City over billing for Leidos' payroll system CityTime. New York City launched an investigation into whether Leidos overbilled for CityTime usage. Investigators found that two Leidos employees had set up an illegal kickback scheme. One pleaded guilty and one was convicted at trial. Leidos was able to settle the case by agreeing to pay more than $500 million in fines.