BACKGROUND:I have just found out the company I formed with my lawyer/business partner is in forfeiture for the state of MD- THE ENTITY WAS FORFEITED FOR FAILURE TO FILE PROPERTY RETURN FOR 2008. The company was incorporated in 2008 and went into forfeiture in October 2009. I also discovered that he's listed me as the resident agent using what I believe is his home address, and forged my signature on the documents. We live in separate states and have built this business remotely as a distributed team with a great deal of success.This was discovered today between us over the percentage ownership ratio after a 2 year dispute. He is basically claiming that he should receive on going increases in the percentage of the company, because he failed to engage an outside investor. Partnership Agreement & Funding Details:Our original 50/50 partnership agreement penned in 2007. He agreed to finance the venture up to 50K and seek outside funding for future needs. He was not successful so offered to bring in up to 100K more in 50K increments in exchange for 3.5% more of the company, not to exceed 7%, of which I agreed to, lowering my percentage to 43%. When that plateau was reached and he still had not obtained more funding he declared himself the investor and continued to self-fund the project giving stating without any agreement on my behalf that he would receive 5% more of my share of the company for each additional 50K he invested. I argued that this was a conflict of interest, seeing he was in charge of producing an investor. I felt it was unjust enrichment in that he would be rewarding himself for failure. Since then he's moved oversight of the financials to his law office's accountant with the reasoning it was needed to file for taxes and such, which clearly was not the truth as we are in forfeiture for not filing said documents. He now refuses to share any expense records for the company, stating its his "personal income" records. He is now threatening to stop funding if I do not sign the most recent patent application with his name on it, and states he was on the original one that this was amending to as an inventor. This is not factual, as he in no way contributed to the inventing process except as a legal counsel for the company. He gave us less than 12 hours to sign it, and my name was missing on the document, replaced by a name of a person I was not familiar with. Obviously I could go on and on. I realize this is one of those situations that could have been avoided, but what can you do when you're partner anoints himself privileges and refuses to get a mediator involved and you are over a team of 14 people depending upon you to keep things going?As it stands now, our whole company is in jeopardy, due to the lack of taxes and I fear I will be held responsible because he's forged my signature as the resident agent - I've never even stepped foot in the state of MD. Questions: * My staff is asking if we can take the technology created under this partnership and start anew with the patent pending software we as a developed team, designed and implemented? * Are the NDA's they signed null and void under the forfeiture status?* The NDA was recently discover to have a conflicting statement to the non-compete clause, one line saying 5 years and the next saying 10. Does this deem it null and void? * Who owns the IP rights - both him and I? * With the company in forfeiture do the ip rights revert back to the contractor programmers since the company is not deemed a legal entity?* The company can't sue anyone, but the company can be sued by others. Does this mean he can't sue me personally as his partner if I take the team and find a more reputable investor, as most of the staff would like to do, and continue on with our business plan?Thank you for the time and I know I will deserve any "told ya so" comments. Really looking for solutions to save the jobs for these people. Their contract runs out in about 5.5 hours, if my current partner does what he is threatening to, and refuses to keep funding the business.
Country relating to Question: United States
State (if USA): Maryland
researched much of the general info but needs specific answers and advise on how best to handle this problem.
Before I answer, please clarify:1. Is your partner a lawyer?2. If yes, in which state jurisdiction(s) is he licensed to practice law?3. What is the exact legal character of the entity (C Corp; S Corp; LP; LLP; LLC, etc.)?Thanks in advance.
Yes, my partner is an IP, Trademark, Patent attorney out of Washington DC and living in Maryland. We are a LLC that was incorporated about a year after we decided to go into business together. No business ventures or monies were spent until then.
* My staff is asking if we can take the technology created under this partnership and start anew with the patent pending software we as a developed team, designed and implemented? A: A pending patent actually has no force of law. It only serves to notify third parties of the possibility that their exploitation of the technology may be barred at a later date, which could result in a lot of wasted money. If you are the joint inventor, then you can use the IP without the other inventor's permission, but you would have to share the profits. * Are the NDA's they signed null and void under the forfeiture status?A: No. The fact that a legal entity is suspended merely means that it can't enter into contracts or sue in its own name. However, it could be revived and then sue to protect its interests. * The NDA was recently discover to have a conflicting statement to the non-compete clause, one line saying 5 years and the next saying 10. Does this deem it null and void? A: No. An NDA is not the same as a noncompete. Having different dates is not fatal to the contract provisions in any way. However, an noncompete of more than three years will generally be refused enforcement by a court, because it effectively prevents the employee from earning a living. * Who owns the IP rights - both him and I? A: The legal entity does. It just can't enforce them until it's revived. * With the company in forfeiture do the ip rights revert back to the contractor programmers since the company is not deemed a legal entity?A: No. * The company can't sue anyone, but the company can be sued by others. Does this mean he can't sue me personally as his partner if I take the team and find a more reputable investor, as most of the staff would like to do, and continue on with our business plan?A: You can be sued personally for actions taken against the LLC's interests, and you can be sued by another LLC member, based on the damage that flows through to that member. Thank you for the time and I know I will deserve any "told ya so" comments. Really looking for solutions to save the jobs for these people. Their contract runs out in about 5.5 hours, if my current partner does what he is threatening to, and refuses to keep funding the business.A: Okay, here's an idea. If you can prove that the attorney forged a signature on a document that was submitted to a governmental authority (i.e., notice to the state of the registered agent for service of property), then that is what is known in the "biz" as an "act of moral turpitude." Such an act, if proved to the disciplinary agency in any jurisdiction where the offending attorney is licensed, is generally sufficient to order disbarment. So, you could literally put your co-owner out of the legal business forever, assuming you can prove this forgery claim. He could also be prosecuted for the crime by the district attorney. So, you could report this matter both to law enforcement and to the attorney disciplinary agency in every state where the attorney is licensed. Of course if you were to mention this possibility to your co-owner, then that would probably cause him to come to the bargaining table in a hurry. On the other hand, if you are caught threatening to report him unless he relinquishes his rights to the business -- or similar, then that threat is felony criminal extortion. So, be real careful about how you utilize this info, because, as the ancient chinese proverb says, "When seeking revenge, first dig two graves." Anyway, I think that ought to get the wheels turning for you. Hope this helps. NOTICE: My goal here is to entertain while educating the public about the law. I hope my answer is useful and informative to you. During our conversation, the website may ask you to rate my answer. If you rate my answer lower than the middle rating, then the website retains your entire payment, and I receive nothing. It is entirely your choice as to how you rate my answer. However, because your payment to me is in the nature of a donation/gift, rather than as compensation for any services rendered, you are entitled to know how your rating affects the final distribution of your donation. If you need to contact me again, please put my user id at the beginning of your question ("To Socrateaser"), and the system will send me an alert. Please Click the following link for IMPORTANT LEGAL INFORMATION. Thanks and best wishes!
Thank you for responding. It was a big help. I have one clarification on the NDA's that I would like to make and get a response as to if it changes anything in that regard.
"The fact that a legal entity is suspended merely means that it can't enter into contracts or sue in its own name. However, it could be revived and then sue to protect its interests."1. Are the NDA- NON Compete documents deemed entering into considered a contract?A: Yes. 2. If so, does that mean any executed from the date of forfeiture to present are null and void.A: NJ law provides that contracts entered into by a suspended/forfeited corporation/legal entity are unenforceable, unless and until the entity is reinstated -- after which the reinstatement is retroactive and all contracts are enforceable.3. Can a revival of the forfeiture put these NDA's in force again even if, when they were entered into the company wasn't legally able to enter into any contractual agreements?A: Yes. See J.B. Wolfe, Inc. v. Salkind, 3 N.J. 312 (1949) I am deeply concerned about this, as we have done well over 100 NDA/Non-Compete documents signed. I ask because there are no other legal documents or contracts to bind our programmers to the company. He never required our contractor/programmers to sign a actual statement of work for the projects they did for us. He said the NDA/Non-Compete docs were good enough. Does that mean these NDA's have been executed illegally or at the very least be unenforceable or null and void?A: The contracts are unenforceable by the entity, unless and until it is legally reinstated.After reading your response about the felony extortion and looking it up I realized he maybe have committed this action too. All this patent stuff came to a head when in the last minute, as we were preparing to do a demo of our most recent tool he acted surprised and insisted he had to do a patent on it. It had been in development for over 8 weeks with the team commenting on the groundbreaking system this would be so we didn't understand why he'd not prepared for this much earlier. This was just about 14 hours before the presentation was to happen. During the preparation for the patent he also asked me three times if i had to be on the patent. I insisted I should be, as i should be on all the others i contributed to. When i got the document it was within 3 hours before the event. I almost signed it without checking and the other coder did sign it and email it back, not even thinking to check it. I pointed out that it had someone else's name in the last spot at the bottom. When i questioned it he had another one sent with a blank spot replacing the other name and was very abrupt saying I was gong to cost the company over $1,000 if i did not sign right then.A: Criminal extortion requires forbearance from a threat of physical injury or reputation injury, in exchange for money or property. I don't see extortion in the above-described fact pattern.IS THERE AN IMPORTANCE OF WHAT ORDER THE INVENTORS ARE LISTED?? A: No. We lost our internet, which gave us some much needed time to talk over his behaviors. When me and the coder got with him in text in Skype he stone walled saying he didn't have time and to talk to someone in his office via email and threatened to not pay the team and myself unless we signed it.A: Oh. That could be extortion. But, you would have to prove the threat took place. And it must be a genuine threat, unequivocal -- not a "if you don't sign this, i may not be able to make payroll."I know this isn't very nice or professional on his part, but honestly he's always been a pain at times to work with, but never did i think he'd break laws or be unethical. Was this extortion - hold the payroll of the myself and the contract team over our heads if we didn't sign? Now he's saying that unless i agree to his outrageous demands on our partnership agreement he's going to cut off all funding for the project. He said this in Skype chat in text in front of the other coder.A: Could be, but it doesn't seem like it. Cutting off funding unless a particular agreement is made is not extortionate. There is no threat being made in exchange for a transfer of money from you or the other employees. I will be taking your advise and making a document that details the many questionable behaviors that have transpired over the last 5 years, building a case to ask him to step down as the CEO and limit his percentage to less than 25% without voting rights, as he's proven he can't be trusted to behave in an ethical or professional manner in running the our firm. This will give me 68% and allow us to go for a Woman's SBA loan for at least 250K. If he agrees to this and we get approved half will go directly to him to pay of debt owned and the rest will be paid off through profit revenues, giving him 50% of all off the top. He'll cry foul for lack of interest, but i'll remind that his name stays on all the pending patents and he'll share in all the profits of licensing them out as long as any sales or licensing are made with the approval of an advisor board of share holders. I'll also require him to submit copies of all patents executed to ensure that all the interested parties are listed on the right patents. A: Okay.I've got an idea to help prevent this from happening again and would like your impressions. Can we create a advisory board made of up the key team members and stock holders to create a Confidence Voting panel, deciding yah or nah on any corporate, accounting or management issues .... anything that could effect the stability and financial backbone of the company. If an agreement on yes or no or can't be achieved i want that to force the issue into arbitration through virtualcourthouse.com, a partnership we have to handle disputes through our social media community and other legally sticky situations like this. A: You cannot do anything without a majority vote of the shareholders/owners of the business. I'm thinking of presenting this to his legal firm business partner in hopes that he can convince my co-owner to accept the deal I'm offering. It woudl greatly harm the credibility of their office I think if any of this came into public light, and I feel he has a right to be a part of this decisions as he's done a lot of the legal paperwork of the patents and other documents.A: That would seem to be a dangerous path, in my opinion. Lawyers know when others are violating the law (well, competent lawyers do, at least). You could find yourself creating more problems for yourself than you eliminate.I'm hoping I can make it clear that regardless of any negotiations, the forgery situation from the resident agent and company forfeiture situation will have to be resolved within 30 days. I'm thinking that if I let them know that inaction on this matter would probably leave me with no other choice but to protect myself from legal persecution for not executing the duties as the resident agent by informing them that I had just become aware that i was listed as the resident agent, and that I'd never lived or even been in the state of Maryland and that the signature on file is not mine, but resembles the handwriting of my business partner even though my name is XXXXX XXXXX the agent on file. If the state of MD suggests or requires me to report these questionable behaviors to the attorney general and local legal bar association concerning these matters I will most likely follow those suggestions or requirements in an effort to ensure I am not held responsible for this and any other questionable actions that might be discovered in the process of any inquiries on these matters.Do you feel this is a prudent and responsible way to handle this situation? Any further advice or concerns you'd like to enlighten me with? Just trying to make sure the 14 people we have on staff aren't out of jobs and that the company can survive this terrible set of circumstances. I feel so responsible, because obviously I placed my trust in someone who wasn't trustworthy and my coders followed suit because they trusted me. I need to make these lemons into lemonade to the best of my ability.A: If it were me, I would be talking to my business partner only, in circumstance where only the two of us can hear the conversation. I can't tell you what to say, because it could be construed as encouraging the commission of a crime or fraud. All I can say is that you need to be careful about how you characterize things. Example:
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