Conventional wisdom has long advised against introducing politics into professional settings. For many years, that approach seemed sensible. People hold a range of viewpoints, and avoiding contentious topics generally helped build business relationships and productive workplaces.
At this moment in our history, I no longer find this tenable.
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In this post, we address “dispute resolution” provisions in contracts, an often neglected but crucial part of the boilerplate at the end of contracts. (You know, that legal mumbo-jumbo you have always ignored.)
No one wants to think too much about dispute resolution, because no one wants to think there will be disputes. And, anyway, who even knows what a dispute will be about? All true, but there are important choices to be made about how disputes are handled, and they can make a big difference when parties cannot resolve issues on their own.
The decision usually boils down to litigation, arbitration, or mediation.
People are generally familiar with the concept of litigation. You go to the courthouse, a building filled with judges (many of whom, in Illinois and some other states, are elected). A judge is randomly assigned to your case and may not be experienced in the subject matter of your dispute. Before the matter can even be decided, “discovery” typically occurs. Discovery is the pre-trial process in which the parties request piles of information from each other, question or “depose” each other and any witnesses or experts, and typically argue a lot in front of the judge. It can be a lengthy, expensive, and frustrating process.
By contrast, arbitration is a form of private dispute resolution, and the parties may agree in advance to the terms of the process (in that provision you’ve always ignored). This can be as simple as agreeing on which arbitration forum will oversee the matter and proceeding under its standard rules. Or, the parties can specify the terms of the process in detail: the number of arbitrators and their required expertise (instead of a judge, you could have an industry expert who doesn’t even have a law degree!), the place of the arbitration, optional limitations on that costly discovery process, and so on.
Litigation and arbitration differ in important ways. Many clients are not aware that unlike judges, who are constrained by the rules of evidence, arbitrators may consider any evidence that they deem relevant. Arbitrators can issue awards based on their perception of fairness, and not necessarily on the established law (though consideration of prior arbitration decisions is becoming more common). Some clients might find this concerning. To others, it is refreshing. Don’t forget to factor in the cost of paying arbitrators; their compensation depends on how much time they spend, or work they do, on the case.
Moreover, unlike trial court decisions, the opportunities to appeal arbitration awards are limited unless an appellate process is agreed to beforehand by the parties. An arbitration decision can be challenged in court, but these challenges are generally only granted in cases of evident bias, fraud, corruption, or serious misconduct, and are not granted to overrule questionable reasoning of arbitrators. Those valuing faster adjudication and finality might prefer this; those desiring the safety valve of review by a higher court, beware.
Consider, also, that committing to arbitration as the dispute resolution mechanism in contracts may be less attractive following the Supreme Court’s recent decision in Smith v. Spizzirri. If a party brings its claim to district court instead of arbitration as is contractually required, the court must stay (instead of dismissing) the case. After staying a case, a district court will likely require periodic status reports and/or conferences with the parties, and after the matter is resolved, the case will become part of the public record. What this means for defendants is an increased chance of inconvenience and expenses and less confidentiality. Whether these and other differences are advantageous depends on factors such as the client’s risk profile and industry, the parties’ relative economic positions, how the client assesses the likelihood of dispute, and whether the client is more likely to be a claimant or defendant.
An alternative to litigation and arbitration worth considering is mediation, a non-binding process where a neutral third party helps the disputing parties reach a voluntary agreement. Unlike arbitration or litigation, the mediator does not decide the outcome but facilitates discussion and negotiation. Mediation can be faster, less adversarial, and more cost-effective than litigation or arbitration—particularly useful when the parties have an interest in preserving their business relationship. To ensure that that the parties rely on mediation, you must state this in your contracts; typically, parties decide to utilize mediation not as the exclusive dispute resolution mechanism, but as a first resort before investing in more costly and lengthy options like litigation and arbitration. Contact us if you have questions or want legal advice for your business. We can ensure that you are properly advised on the risks and benefits of the available dispute resolution mechanisms.
This blog post was drafted with help from Harris Lencz.
Categorised as: Dispute Resolution
These words, uttered by former FBI Director James Comey last month in response to a baseless federal criminal indictment brought against him, simultaneously sent a chill down my spine — and stiffened it. Comey, with these words, defies our president — a petty, vindictive autocrat determined to exact revenge on those he perceives as political enemies — and calls on all citizens to resist his abuses of power and office.
(This article nicely summarizes the history of the Comey-Trump relationship.)
It doesn’t take a highly trained lawyer to see that this indictment — for making allegedly false statements to Congress — is, to use legal terminology, a pile of horseshit.
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The “One Big Beautiful Bill Act” (still trying to accept that this is really the name) just sweetened an already pretty sweet QSBS tax deal.
Until now, you had to hold qualified small business stock (QSBS) for five years to get the famous 100% capital gains exclusion under Section 1202. Sell earlier than that? No soup for you!
Now:
Read the rest of this entry »Categorised as: Fundraising, Seed Financing
The state has expanded the Illinois Angel Investment Tax Credit program, which we last wrote about in 2019. Securing this tax credit could be very important to potential investors, especially during this challenging fundraising period.
Illinois now offers investors a 35% credit to their Illinois income tax liability for investments between $10,000 and $2 million in Set-Aside Qualified New Business Ventures (SAQNBVs). An SAQNVB is a startup that meets all of these requirements:
Startups that meet only 1 through 7 of the above requirements are called Qualified New Business Ventures (QNBVs). Those who invest in QNBVs can receive a credit of 25% to their Illinois income tax liability for their investments.
Illinois currently offers a total credit pool of $15 million per year to investors of QNBVs and SAQNBVs. Credits are allocated quarterly and distributed on a first-come, first-serve basis. Investors who invest earlier in the year have a higher chance of receiving the credit. If an investor invests late in a quarter and credit allocations have already been used up for that quarter, the investor’s application (even if an investment otherwise qualifies) might be rolled into the next quarter. In years with high demand, rollover credits have exhausted the total credit pool well before the year-end. To help investors secure their credit, businesses should encourage them to invest as soon as possible.
Contact us if you have additional questions or want legal advice for your business. We can help guide your business through the process of becoming a QNBV or SAQNBV.
Harris Lencz, an intern and rising 4th-year student at the University of Chicago, provided substantial assistance researching, drafting, and editing this blog post
Categorised as: Fundraising
As businesses integrate artificial intelligence in their operations (including goodcounsel, which we’ve written about here), state legislatures are taking steps to regulate its use, particularly when there are civil rights and consumer protection implications. Much of the early focus has been on preventing algorithmic discrimination in areas such as hiring, housing, and lending. These regulations aim to ensure that automated systems do not produce biased outcomes that disproportionately affect protected groups.
Recent statutes are focused on the risks when generative AI tools interact directly with consumers. For example, Utah’s Artificial Intelligence Policy Act (as amended) requires companies to program AI chatbots to disclose to users that they are interacting with artificial intelligence (rather than a human) at the outset of an interaction, if the interaction involves (1) the collection of “sensitive personal information” such as financial, health or biometric data, and (2) the provision of personalized recommendations or advice “that could reasonably be relied upon to make significant personal decisions,” including the provision of financial, legal, medical or mental health advice. There is no private cause of action under the statute, but Utah’s Division of Consumer Protection may impose administrative fines of $2,500 per violation, in addition to injunctions, disgorgement, and other relief. California and Colorado have their own statutes addressing AI disclosures and disclaimers in consumer interactions.
This year, Alabama, Hawaii, Illinois, Maine, and Massachusetts introduced bills that would make failing to provide the required AI notification an “unfair or deceptive act or practice” (UDAP) violation under The Federal Trade Commission Act. These bills, when passed, would expose companies that use AI in consumer communications to investigation or enforcement by Attorneys General and, potentially, private actions.
Please contact us if you need help knowing which states’ AI laws apply to your business, and how to comply with them.
Categorised as: Artificial Intelligence, Regulatory alert
Five years ago, we wrote a blog post about how Illinois was a pioneer in passing a comprehensive statute protecting biometric information, and how other states were following suit. Illinois’ Biometric Information Privacy Act (BIPA), enacted in 2008, protects these biometric identifiers: fingerprints, retina scans, iris scans, hand geometry scans, voiceprints, and face geometry scans.
Illinois still distinguishes itself in that it is the only state that grants consumers the right to sue for monetary damages when their biometric data rights are violated. Other states, such as Texas and Washington, do not provide a private right of action; enforcement is typically reserved for the state attorney general.
Last August, Illinois amended BIPA so that an individual whose rights were violated under BIPA is entitled to only one recovery ($1,000 for a negligent violation and $5,000 for an intentional or reckless violation, along with reasonable attorneys’ fees and injunctive relief), regardless of the number of times the company disclosed, redisclosed, or otherwise disseminated the same biometric identifier or biometric information of the same person to the same recipient. Before the amendment, individuals could seek $1,000 for each negligent violation and $5,000 for each intentional or reckless violation.
This amendment comes as a big relief to companies that collect biometric information from Illinois residents. Perhaps you remember hearing about what at the time was the largest privacy-related cash recovery in the U.S.: in January 2020, Illinois class action plaintiffs succeeded in getting Facebook to establish a $650 million fund for users whose BIPA rights were violated by “Tag Suggestions,” Facebook’s facial recognition feature. (Since then, Meta, Facebook’s parent company, has agreed to even larger data privacy settlements.)
Reach out to us if your business collects biometric information. We can help ensure that you are complying with applicable state law.
Categorised as: Biometrics non-compliance
I am fortunate to be in Europe for a couple of weeks. It’s always striking to see the quality of public infrastructure here. The Paris Metro is a marvel—beautiful, fast, and extensive. (Why the Metro operates so much better than the NYC Subway, given its smaller operating budget, is a story for another time.)
This morning, I took the Metro to one of Paris’s several grand train stations, Gare du Nord, and boarded the Eurostar train to Antwerp via Brussels, where I am sitting right now. Even in second class, the train car was comfortable, quiet, and very well-maintained. Traveling at speeds as high as 185 mph (a speed that American trains only dream about), we completed the 164-mile segment to Brussels in about an hour and 20 minutes.
Why can’t we have this in US?
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As is often the case with President Trump, the corruption is out in the open. As a lawyer, it sickens me that the president continues to get away with this. Are people okay with this?
CEO Makes Shocking Admission About Why He’s Buying Trump’s Meme Coin (Yahoo! News)
A crypto mogul who invested millions into Trump coins is getting a reprieve on civil fraud charges (CNN)
Trump’s controversial meme coin ‘contest’ proves predictably profitable for the president (MSNBC)
Categorised as: Current events, News and Views
I noted this in my longer blog post this evening, but to post quickly here: two opinion pieces I wrote have now been published: one in the Chicago Tribune and the other, co-written with my wife, in the Philadelphia Inquirer. (These pieces may be paywalled, but I will post PDFs here in the coming days.) I hope you find them interesting.
Categorised as: Current events, News and Views