Liability in Logistics Contracts

We have written in the past on the topic of the need for logistics and transport companies to utilize provisions of the UCC to limit their exposure to liability.    Follow this link to an article which demonstrates the type of disastrous liabilities that can hit a company that is improperly...

Non-Competes/Non-Solicitations: What is reasonable?

Courts in Indiana have uniformly held that covenants not to compete or not to solicit, while being in restraint of trade, can nevertheless be enforced if they are found to be “reasonable”.   Whenever a loaded term like “reasonable” is used, the meaning of such term is always in the eye of the beholder.   The “reasonableness” of the geographic region involved and time period during which the restriction applies have led to significant litigation and legal expenses.  However, the one thing that many attorneys overlook when analyzing these cases is that such covenants are only enforceable if there is a legitimate proprietary interest that is deserving of protection.   For instance, if the departing employee is going to work for a company which is not a competitor, or is going to perform a task different than what that employee performed for the now offended employer, it is possible to attack the enforceability on the grounds that there really is no proprietary interest worthy of protection.   Given the fact that the Indiana Supreme Court has said these types of covenants are “disfavored by the law”, counsel should always analyze first whether or not there is actually any proprietary interest substantiating the...

Wage Claims Under Indiana Law

Indiana has two statutes which function to provide a serious incentive to employers to ensure that an employee’s final paycheck is paid by the next regularly scheduled pay date.   One statute applies to an employee whose position is terminated (I.C. §22-2-9-2) while the other statute applies if the employee leaves voluntarily (I.C. §22-2-5-1).   The penalty provisions have been interpreted to be the same.   An employee is entitled to 10% of the amount owed accruing on a daily basis up to the point where an additional 200% of the owed wages has accrued.   This is effectively a treble damages award.   Additionally, the employee is entitled to the costs, including attorney’s fees, that the employee incurs in seeking collection of the unpaid wages.   This is a very valuable provision which gives attorneys the incentive to take on cases for relatively small amounts of wages which would otherwise be unprofitable to pursue.  All corporate clients should be advised that they need to pay the employee’s last paycheck, in full, with no deductions for any claimed expenses or other amounts allegedly owed to the employer, at the time of that last pay date.   Failure to do so not only results in the rapid accrual of additional monies, but often, the amount of attorney’s fees exceeds the amount of unpaid...

Enforceability of Non-Competition Agreements

We have written before about non-competition/non-solicitation covenants that are included in many employment contracts as well as purchase agreements involved in the sale or purchase of a business. We recently were involved in several situations which have again reminded us of the importance of understanding the types of terms and conditions that will be enforced under Indiana law in non-compete and non-solicitation covenants, and those which will not.   Non-competition agreements are not favored by courts. In our experience, judges will look for any way to find such agreements unenforceable so as to allow an employee to continue to work in his or her chosen profession. However, Indiana is a freedom of contract State, which means that the courts will enforce these non-competition provisions so long as they are reasonable in their scope. The reasonableness requirement and scope applies to the time, geographic area, and types of services that an individual is prohibited from engaging in following termination of employment with a company. In the event that there are terms that are either missing or so broad as to be deemed “unreasonable,” a court will refrain from rewriting the covenant for the benefit of either party, but instead will either strike any unreasonable terms or read the agreement exactly as written. The court will not add any terms that are not in the original agreement. After doing so, if it appears that the scope is still unreasonable in any respect, the court may not enforce that agreement.   A type of provision that may well be deemed unreasonable is one that contains no limitations on geographic restriction. For example,...

Consequences For Failure To Timely Record Mortgage Assignments

A recent Indiana Court of Appeals opinion, Wells Fargo Bank, N.A. v. Edward P. Dechert, Trustee of the Bankruptcy Estate of John E. Smith and Isley’s Plumbing, Inc., (Ind.App. June 18, 2014) (www.in.gov/judiciary/opinions/pdf/06181402lmb.pdf), emphasizes the importance of lenders timely recording mortgage assignments. In Wells Fargo, two mechanic’s lien holders foreclosed their liens and named Washington Mutual Bank, F.A. (“WaMu”), who held a prior recorded mortgage, as a defendant to the action. The mechanic’s lien holders properly served WaMu’s registered agent with a copy of the complaint, the second mechanic’s lien holder’s counterclaim, and other pleadings and filings. After the action had been pending for several months, each of the mechanic’s lien holders sought a default judgment against WaMu while again serving copies of such filings with WaMu’s registered agent. The trial court granted the default judgments requested. About nine months after the entry of such default judgments, Wells Fargo appeared in the action as WaMu’s successor in interest. WaMu was closed by the Comptroller of the Currency and most of its assets were sold to Wells Fargo, including the subject loan. Wells Fargo requested that the trial court set aside the default judgment entries, then filed a motion to reconsider when the motion to set aside was denied, then filed the appeal once the motion to reconsider was denied. In such motions and on appeal, Wells Fargo made a number of arguments in favor of setting aside the default judgments that are beyond the scope of this blog topic. The trial court and appellate court found each of Wells Fargo’s arguments unavailing while determining that the mechanic’s lien holders...

Receivers and the Equity of Redemption

In an Indiana commercial foreclosure action, there are numerous reasons for the lender to move the court for the appointment of a receiver, including securing the property, collecting rents, paying taxes, and dealing with tenant issues that arise during the foreclosure process. It is also often in the lender’s best interest for the receiver, who is typically a licensed real estate broker, to be able to market and sell the real estate. In almost all circumstances, allowing a receiver to solicit offers over a period of time will result in a better recovery for the lender than a standard sheriff’s sale. However, the ability of a receiver to sell real estate is limited by a 2010 Indiana Court of Appeals decision regarding the property owner’s “equity of redemption”.      Under Indiana Code § 32-29-7-7, the property owner of a foreclosed property has a right to “redeem” the property at any time prior to the sheriff’s sale by paying the amount owed pursuant to the judgment that ordered the sale of the real estate. Effectively, this statute provides a property owner a legal last chance to save their property up to the date of the sheriff’s sale.      This Code section was not given much attention in workouts and foreclosures in Indiana until the Indiana Court of Appeals’ 2010 decision, Wells Fargo Bank N.A. v. Tippecanoe Associates, LLC, 923 N.E.2d 423 (Ind.App. 2010). In Wells Fargo, the lender appealed the trial court’s refusal to grant the appointment of a receiver with the power to sell the subject real estate. While the Court of Appeals determined that the appointment of a...
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