Legal Question in Business Law in California

I need to stop an x-friend, x-business partner (S-Corp) from using my Intellectual Property (software) and possibly sue him for fraud. I want him to stop using my IP (software and other computer tools; including a 25 year long database) and possibly force a full accounting of income (for 20 years!); I've recently become aware that he has been lying to me about corporate income for at least 10 years. Because he was a 20-year friend of mine and my family (I thought), I trusted him and his advice. He lied and tricked me into resigning "in order to save (us) a lot of tax money", and becoming an "employee" of the corporation; of course, also promising to share everything with me (implying as a "permanent" employee). Then, after 6 months he fired me and took possession and control of my IP and everything else. All of this, of course, was verbal. He also owes me money for work that we did together recently which he is holding "ransom" to force me to lie for him (in order to avoid employer tax penalties and breach of contract with our customer). I've been told by attorneys I've talked to that having them pursue this can be very expensive (tens of thousands of dollars). I don't have that kind of money--perhaps if a full accounting and equal division of all income were achieved, the cost of my lawyer would be recovered. Since the x-partner has everything in his possession and control, I can't perceive that he'd be interested in mediation. How can I pursue this? or am I just SOL? The business has Personal Injury Insurance and Professional Liability Insurance, but I don't think those apply to me or this situation. Unless I can sue for 'negligent infliction of emotional distress'? while an 'employee'? and since...

Asked on 5/30/13, 3:36 pm

2 Answers from Attorneys

Keith E. Cooper Keith E. Cooper, Esq.

My first question would be: when did you resign? i.e., are you still within the statute of limitations to pursue a fraud claim. Deceiving someone into changing their position to their detriment is one of the definitions of fraud, and you might be able to start there, and ask to have your ownership position restored. You might be able to sue for an accounting and various other related causes of action, depending upon the facts in your situation. There are nuances to intellectual property ownership that may work in your favor (or work against you), so you really should sit down with an attorney who handles IP litigation to go over everything.

If an attorney looks at all the facts you can prove, and believes you have a strong case, he or she may work on a contingent fee basis, especially if there is a large amount of money involved. It also depends upon whether the person being sued has the cash to actually pay a judgment against them.

If you don't have leads, you should contact your local county bar association for a referral, and tell them you want an attorney who will work on contingency. In most counties, there is a nominal charge for the referral which includes an initial consultation, and they have a database of qualified, pre-screened attorneys.

CAVEAT: This response is for information only and should not be construed as legal advice. I do not handle litigation matters in my current practice.

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Answered on 5/30/13, 7:45 pm

Charles Perry Law Offices of Charles R. Perry

When a lawyer evaluates a contingency case, he or she asks whether (a) there is a strong case of liability; (b) clear evidence of damages; (c) an obvious source of funds to pay a settlement or judgment; (d) whether the work involved is likely worth the money ultimately received; and (e) whether the case can be financed in terms of third-party costs. The lawyer will refuse the case if any one of these factors is missing.

Some lawyers may take this on a "blended rate" basis. That means you pay a smaller hourly fee, and a smaller contingency percentage at the end. The more legwork on the case you are willing to do, moreover, the lower your fees will be. I handle some business litigation cases on this basis, but it requires a certain type of case and I cannot tell you know if your case meets that criteria. Even then, you are looking at a substantial investment in your case.

Note that contingency cases are interesting only if the predominant interest of the client is to recover money. If it is to restore ownership in the company, then there is no fund to pay the lawyer, and there is the real possibility of a dispute over the value of what is restored. I can't imagine in this case, however, that you seriously want to go back to work with your former partner.

I also do not recommend taking on a complicated case like this in pro per.

The best you can do is to continue looking for lawyers who will consider taking this on an alternative fee arrangement. You may also have to pay for a detailed investigation of the case to determine whether it's worth pursuing -- the typical "free consultation" does not include that type of work.

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Answered on 5/30/13, 11:50 pm

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