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Saturday, 30 April 2016

I'm Not A Lawyer

I'm not a lawyer. I don't even play one on TV or in the movies as the above Kevin Spacey and Matthew McConaughey have. My legal expertise is having watched a few episodes of CSI and Law & Order and we all know how that turned out for the guys in Horrible Bosses. In saying that, though, I do read. I can read quite well, in fact, and I like to seek out information. With the impending lawsuit hanging over the NWHL and CEO Dani Rylan from former employee/volunteer Mike Moran, I thought it might be time to look at the document filed before the court by Mr. Moran.

I want to be very clear in that there will be no dissemination of the information presented nor will I be editorializing on any of what I point out. Instead, I will point out key points of the lawsuit that you should know so you have all the facts. I've also researched some of the precedent cases that were cited in Mr. Moran's document, and I'll chat a little about those. This will be, in all senses of the word, objective.

Here is the link to the entire complaint itself if you want to read the brief in full, but let's get into the meat of this lawsuit.

The amount of money and the conditions in which the defendants operate and/or live in another state allows this case to be heard by a Federal Court. It appears, however, that the complaint was filed in Massachusetts District Court, and there could be several reasons for this. They include how convenient the court is, who the judge is, how quickly the court can hear the case, and/or how complicated a court's process is as examples. Mr. Moran's attorneys chose Massachusetts as the venue due to Miss Rylan conducting business in and around Massachusetts as well as the NWHL conducting business in the state thanks to the Boston Pride (sections 8 and 9 of complaint).

The facts are laid out as per Mr. Moran's memory prior to the above statement, but operating without contracts in business could be a sticking point for the repayment of the money and the terms set out for the partnership. Verbal agreements can be interpreted differently between two or more parties, and this statement will need to be judged for Mr. Moran to be repaid the money he is seeking.

The burden of proof is on Mr. Moran in these statements, and he'll need to provide evidence of these agreements. Because this is a trial judgment, Mr. Moran can present these as evidential exhibits to the court if he has the paperwork. If they are personal documents such as bank statements or emails, he is within his right not to include them on the complaint exhibits filed with the court. They will be presented in court if they do exist, and they will be examined by both the prosecution and defence prior to their presentation to the court.

The four aspects of what constitutes a contract as per Massachusetts law was defined in the precedence of the case file quoted; that is, "SITUATION MANAGEMENT SYSTEMS, INC. VS. MALOUF INC.". In that case, the jury found:
"While it is true that the parties' intention to execute a final written agreement "justifies a strong inference that the parties do not intend to be bound" until the agreement is executed, it is also true that if 'all the material terms... have been agreed upon, it may be inferred that the writing to be drafted and delivered is a mere memorial of the contract.' Rosenfield v. United States Trust Co., supra at 216. See Kilham v. O'Connell, 315 Mass. 721 , 724-725 (1944) (where jury could find sufficient evidence that oral contract existed, parties' intention to memorialize contract in writing did not defeat existence of contract)."
In other words, a verbal agreement that includes the material terms to which both parties have agreed can be considered a valid contract. As you can see from the quotation, there are other cases that has set a precedent for verbal agreements as well, so there are multiple examples that show that Mr. Moran's and Miss Rylan's friendly verbal agreement is, in fact, a valid and binding contract. Any objection to this would have to show that this agreement never once was agreed to by either party. I'm not sure that the NWHL or Miss Rylan can do that after she and the NWHL accepted Mr. Moran's monetary support.

Another precedent quoted for clarity's sake, and this one appears to be pretty ironclad. There are a number of conditions that the court found that needed to be fulfilled for a partnership to be valid based on the case entitled "SHAIN INVESTMENT COMPANY, INC. & others vs. HERMAN B. COHEN". While the court attempted to define a joint venture,
"... the following pragmatic check list suggests considerations which, if present or absent, may bear upon the recognition of one: (1) an agreement by the parties manifesting their intention to associate for joint profit not amounting to a partnership or a corporation; (2) a contribution of money, property, effort, knowledge, skill, or other assets to a common undertaking; (3) a joint property interest in all or parts of the subject matter of the venture; (4) a right to participate in the control or management of the enterprise; (5) an expectation of profit; (6) a right to share in profits; (7) an express or implied duty to share in losses; and (8) a limitation to a single undertaking (or possibly a small number of enterprises)."
Since Miss Rylan and Mr. Moran had entered into a valid contract - as defined above - whereby he provided the necessary capital to fund the NWHL while Miss Rylan controlled how it was spent, this would fulfill items 1, 2, 4, 5, 6, and 7 at minimum. Therefore, this would be a joint venture by the definitions contained within the list. Mr. Cohen, the defendant in the case quoted above, contended that "participants in a joint venture are subject to the same fiduciary duties imposed upon members of a partnership" and jury sided with him. Therefore, if the same facts hold true in this case and can be proved, then the precedent holds true and Mr. Moran's investment in the NWHL would, in fact, make the agreement between Miss Rylan and Mr. Moran a partnership. However...

... if, for some reason, the court decides that there was no contract and, in turn, no partnership, Mr. Moran contends that his capital funds should entitle him to a 40% ownership stake in the NWHL. Whether or not that percentage is proportional to the amount of money he invested is something for the court to decide, but it appears Mr. Moran believes that a 40% share is appropriate based on his capital investment and the agreement he had with Miss Rylan.

The precedent named in this section of the complaint is pretty straightforward. If one party changes the terms of the partnership without the other party's consent, this is a breach of the established partnership. In the case of "JAMES F. MEEHAN & another vs. MAURICE F. SHAUGHNESSY & others; CYNTHIA J. COHEN & others, third-party defendants", the judge ruled that
"... a partner does not forfeit his or her right to the accrued profits of a partnership by simply breaching the partnership agreement. Fisher v. Fisher, 349 Mass. 675 , 677 (1965). Walsh v. Atlantic Assocs., 321 Mass. 57 , 64 (1947). The same rule applies to a partner's capital contributions. These amounts are not a form of liquidated damages to which partners can resort in the event of a breach. We conclude, therefore, that Parker Coulter is not entitled to recover these amounts. The judge correctly found that Meehan and Boyle are entitled to return of their capital contributions (their interest, as determined by the judge, in the partners' reserve account and the partners' capital account), and to the receipt of a portion of the old firm's profits (their interest in the income earned but not distributed account)."
In other words, Miss Rylan and the NWHL cannot withhold the capital investment made by Mr. Moran, any interest accrued, and any profits seen by the league if it is found that the partnership was breached by Miss Rylan and/or the NWHL. If the judge finds that there was a valid partnership, this precedent will give Mr. Moran recourse to collect the monies he seeks.

I'll call this move colloquially as the "Zuckerberg". Let me take you back to The Social Network for a reminder. When one owns shares in a business, all shares of the business would have be diluted if more shares are issued to allow new investors in. In Mr. Moran's case, he states in his complaint that he has in his possession an email that shows his 40% share was reduced to 2% as more investors came onboard. This happened in The Social Network as shown in the clip below, and is a perfect example of what Mr. Saverin calls "an ambush".
In the email held by Mr. Moran, he too can claim to have been ambushed as his share went from 40% to 2% of the NWHL partnership. Miss Rylan's ownership, as she remained in charge of the NWHL, was not diluted nearly as much, assuming her ownership stake of 60% was diluted at all. In fact, Mark Zuckerberg's dilution of Eduardo Saverin's stock allowed Zuckerberg to end his partnership with Saverin altogether, albeit in one of the most unethical ways possible. Reduce the ownership share, and then simply get rid of the once-prominent partner.

Sound familiar? Zuckerberg's lawyer wrote,
"As Eduardo is the only shareholder being diluted by the grants issuances there is substantial risk that he may claim the issuances, especially the ones to Dustin and Mark, but also to Sean, are a breach of fiduciary duty later on if not now."
A breach in fiduciary duty was mentioned in Section 54 of the complaint made by Mr. Moran, so what may come of this? I'm not going to say that Mr. Moran will get the same payout that Mr. Saverin did where his initial $15,000 investment became worth more than $4 billion. However, Mr. Moran does want the money owed to him from his capital investment and his time and expertise in marketing. I'm pretty sure that's reasonable after the terms of the partnership changed dramatically without his knowledge.

The precedent that Mr. Moran cites in "JAMES F. MADIGAN vs. MARK J. MCCANN, SR., & others" states that
"... the plaintiff paid for an interest in a partnership business and made further substantial contributions to the business in justifiable reliance on false representations, deliberately made by the defendants acting in concert and with intent to deceive the plaintiff, as to ownership by one of them of the interest supposedly purchased by the plaintiff, which in fact was owned by another person, and as to the accounts receivable and payable, the inventory, and profits of the business, supported a decree ordering the defendants jointly and severally to repay to the plaintiff the amounts of the purchase price paid and other contributions made by him, with interest."
In other words, there is a Massachusetts precedence for Mr. Moran to be paid the money he seeks if Miss Rylan and the NWHL conducted business under false representations. Based on the case cited as precedence, there's a good chance that Mr. Moran has an argument.

Mr. Moran's complaint quotes directly from the case cited as precedence, so I won't go into this complaint in depth. Basically, as long as Mr. Moran can show that he was employed and wasn't paid by the NWHL, he should be awarded $50,000 - salary he feels he's owed - for his work in web marketing for the league. The burden of proof is on Mr. Moran in this case.

Mr. Moran has once again quoted the case cited as precedence in this section, so I won't go deep into it either. However, the gist of this section is that Mr. Moran is making a case for his investment to be returned due to the fact that the partnership that Mr. Moran and Miss Rylan one had was changed without Mr. Moran's knowledge. Therefore, he is making the case via precedence to have his investment returned because of this false representation.

The above is the argument being made by Mr. Moran to the District Court of Massachusetts regarding his involvement with, his investment in, his termination from, and his claim for restitution from the NWHL. I hope that makes things a little clearer in trying to translate this document for you, the reader.

With regards to the treble damages that some have already awarded Mr. Moran, the court itself will have to determine whether there are any damages above and beyond the monies he seeks. However, had the author of the linked report simply gone looking for real applications of the law, treble damages are normally awarded when compensatory damages occur when a defendant willfully and knowingly did something illegal.

Mr. Moran will need to have clear-cut proof that Miss Rylan's actions were done knowing full well that reducing his share in the partnership, not paying him, and eventually terminating his role in the NWHL were all done illegally. Based on what has been submitted right now as exhibits, I'm not sure that treble damages would be awarded.

In looking at Mr. Moran's complaint, I'd say he does have a legitimate complaint. Again, I'm no lawyer, but the complaints and cited precedent cases make sense based on what has been revealed about Mr. Moran's situation with the NWHL, and he lays out exactly why he feels that Miss Rylan and the NWHL owe him some sort of compensation.

In saying that, if hindsight is 20/20, clear vision may now cost the NWHL some $250,000 as opposed to $180,000. Perhaps that settlement was worth the money after all.

Until next time, keep your sticks on the ice!

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