Limiting Liability

Major Ambiguities Remain, but Health Care Vendors Should Focus on California Consumer Privacy Act Preparedness

Posted by on Jul 26, 2019 in Limiting Liability, Startup, Update!

Are you a health care vendor that does business in California? If so—and keep in mind that the concept of “doing business” in California may be broader than you expect—there are new, expansive data privacy requirements that might start keeping you awake at night. California created waves in the information privacy space with its enactment of the California Consumer Privacy Act of 2018 (the “Act”) last summer. The Act, which will be operative beginning January 1, 2020, was hurriedly enacted to prevent a proposed ballot initiative from going to voters in November 2018. That process created a number of significant ambiguities, which remain present in the Act. There are significant questions regarding what types of businesses will be subject to the broad-reaching obligations of the statute and forthcoming regulations. Businesses that have, thus far, managed to avoid the application of the similar EU General Data Protection Regulation (the “GDPR”) may nonetheless fall within the scope of the Act and confront new and expanded compliance obligations similar to those imposed by the GDPR. Based on the current wording of the statute, a “business” subject to the Act’s requirements includes a for-profit entity that (i) collects the personal information of California residents, (ii) determines the purposes and means of processing that information, (iii) does business in California and, among other potential triggers, (iv) has annual gross revenues in excess of an inflation-adjusted amount of $25 million. It remains to be seen whether the forthcoming regulations will define the scope of revenue (which, at present, does not appear to be limited to a business’s California revenue), the meaning of information “processing,” and other related concepts.    With respect to applicability, the statute also contains a carve-out for commercial conduct that takes place “wholly outside of California.The present definition of this concept contains somewhat contradictory language, and it is not yet clear what any amended or clarified language will look like.  Businesses potentially subject to the Act should also be wary of the way that the Act ambiguously defines “personal information.” The Act does not apply to medical information governed by HIPAA, which will provide some relief to many health care vendors. However, the Act does apply to other categories of personal information, including IP addresses and other information concerning consumers’ (including patients’) interaction with a business’s website. Even more significantly, the Act appears to apply to (i) employee personal information contained in employment records and (ii) the personal information of client officers and employees that a business gathers in providing services to, and interacting with, its clients (i.e., not traditional “consumer” interactions). Absent some clarification to the contrary in any further statutory amendments or in the forthcoming regulations, health care vendors should prepare to comply with the Act in connection with these particular categories of information.    Due to the current broad scope of the Act, the potential applicability to information collected or disclosed in 2019, and the fact that the Act has significant “teeth” from an enforcement standpoint, health care vendors should not wait for these concepts to be fully refined. Rather, they should prepare now to comply with the Act’s core requirements by taking the following actions, among others: Determine what personal information the business collects, how it collects it, where it stores it, and how it manages, uses, and discloses the information, as well as any service providers that collect or receive information on its behalf (including determining whether any disclosures of information could be deemed the “sale” of information under the Act) Provide appropriate mechanisms through which consumers can make permitted requests of the business Prepare to evaluate,...

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The Importance of Getting Your License Before You Start Your Own Construction Business

Posted by on Jul 24, 2019 in Governance, Limiting Liability, Practice Pointers, Startup, Your Entity

Are you thinking about starting your own construction business? If so, whether in the commercial or residential setting, it is imperative to find out if you are required to have a license. Keep in mind each state has its own requirements. If you’re in Tennessee, it’s highly likely you’ll need one. Under Tennessee’s Contractors Licensing Act, it is unlawful for any person or business to represent itself as a licensed contractor, or to act in the capacity of a “contractor” while not licensed. Now, you may be thinking “I am not a contractor. I am a designer, or a supplier, or a subcontractor, etc—so the contractors’ license requirement does not apply to me and my new business, right?” Well, not necessarily. The term “Contractor” is incredibly broad under the Licensing Act. “Contracting” includes, among other things, bidding, offering to engage, supervising, overseeing, scheduling, directing or in any manner assuming charge of construction, alteration, improvement, or negotiating a price for projects of $25,000 or more (including all labor, materials, and equipment). Electrical, mechanical, plumbing, HVAC, and roof contractors must also be licensed when working directly with any contractor to perform projects when the total cost of that portion on the project is over $25,000. Tennessee also regulates licenses for certain types of “home improvement” in most of the larger counties. For example, a home improvement contractor’s license is required for residential projects that range from $3,000 to $24,999 (i.e. projects designed for a residence or dwelling unit with no more than 4 units). Again, the term “home improvement” includes a vast array of construction-related work, all of which requires a license – such as repairs, replacement, remodeling, alterations, and more.  Obtaining the appropriate contractor’s license before you start working is extremely important from a risk management standpoint. In fact, contracting in Tennessee without the appropriate license can expose your new business and possibly you, personally to significant liability. For example, to represent yourself as a licensed contractor without the required license, or to act in the capacity of a contractor without the required license, constitutes an unfair and deceptive act under Tennessee’s consumer protection law. This is significant, particularly to a business in its infancy, as you could end up on the hook for a dissatisfied client’s attorneys’ fees and triple their actual damages.  While there are a variety of other matters that must be tackled before getting a new construction business off the ground, licensing is certainly an important box to check off the list. The guidance of an experienced construction attorney can help alleviate any worries you may have in navigating the laws that may apply to you. In addition, finding a well-versed construction attorney can assist a new business in a multitude of areas spanning from drafting of construction contracts, handling of construction defect claims, payment and lien disputes, and other related matters. If you have questions specifically related to construction or general startup matters, please contact me or a member of Chambliss Startup group. *This blog post is brought to you by Logan...

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A Basic Primer on Damages Terms in Contracts

Posted by on Mar 12, 2018 in Draft Your Contract, Limiting Liability

When entering into arrangements with clients or engaging vendors, startup companies may be faced with a confusing array of contractual terms, including terms that reference various types of damages. Such terms are worthy of attention due to their potential financial implications. For example, an agreement might include a limitation of liability clause that reads something like this: IN NO EVENT WILL LICENSOR BE LIABLE UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER UNDER ANY LEGAL OR EQUITABLE THEORY, INCLUDING BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, AND OTHERWISE, FOR ANY…CONSEQUENTIAL, INCIDENTAL, INDIRECT, EXEMPLARY, SPECIAL, OR PUNITIVE DAMAGES … You may understand that this provision purports to eliminate the software vendor’s (licensor’s) liability for these types of damages if there is a problem with the product in question. But what, for example, are consequential damages? Obtaining an attorney’s advice when signing contracts is advisable—particularly when they contain terms such as these. However, having a very basic understanding of these types of damages concepts is also helpful. Following is a very general, limited overview of damages concepts. Keep in mind that the meaning of these terms and the applicable categories can vary from jurisdiction to jurisdiction and based on the type of contract in question (e.g., a services contract versus a contract involving commercial goods, such as software). Measures of Damages There are a variety of theories and approaches to measuring damages used by courts in different contexts. The most common approach in situations involving the breach of a contract is to attempt to define the aggrieved party’s “expectation interest” and put them in the same position they would have been in had the contract not been breached. For example, Startup Company signs a contract with Slipshod Software, under which it pays Slipshod $100,000 for a software license. However, the software does not function. As a result, Startup Company incurs $10,000 in personnel costs finding and vetting alternative software with comparable features for its business, which it licenses for the best available price of $115,000. Due to the delay in securing the software, which Startup Company needed for its business, Startup Company loses two clients, which would have yielded $50,000 in profit. Startup Company/Slipshod Example $100,000 licensing cost for nonfunctioning software $10,000 additional expense in personnel costs $15,000 above $100,000 for licensing new functioning software $50,000 profit loss from clients who leave = $175,000 expectation damages Startup Company can argue that its expectation damages total $175,000, including the $100,000 it had paid Slipshod Software, the $10,000 in personnel costs in finding comparable alternative software, the extra $15,000 for the alternative software, and the $50,000 in lost profits.  Awarding these expectation damages approximates the position Startup Company would have been in if Slipshod Software’s product had functioned properly. Direct Damages  In the previous example, Startup Company can argue that it suffered $115,000 in direct damages (the $100,000 original licensing fee and the extra $15,000 it had to spend to obtain comparable alternative software). Direct damages, also called “general damages” in some contexts, are damages that naturally result from a breach of contract (i.e., the damages any party would usually incur in this situation). Here, any company that requires this type of software for its business would need to recoup its licensing fee from Slipshod Software and would need to obtain comparable alternative software at the best available price. Indirect Damages On the other hand, Startup Company’s other damages—personnel costs and lost profits—depend on other intervening factors that may not be typical or usual for other companies in this situation. Different companies’ exact personnel costs and lost profits may...

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When Disasters Plague Your Contract

Posted by on Jan 6, 2014 in Draft Your Contract, Limiting Liability

Part of the contract drafting process entails a bit of forward thinking: trying to identify and minimize ahead of time those things that could go wrong. If you’re new to the business world, or you’ve just entered into a new sector or started a new business, it can often be difficult to predict the downfalls your business may face– or the downfalls the other contracting party may face. There are some risks that every business must face which are more predictable than others. For example, every business at some point can expect to have an invoice dispute with a supplier, customer or independent contractor. On the other hand, there are those risks which are completely unpredictable and therefore less controllable. In the world of contracts, these risks are often called “force majeure events,” and well-drafted contracts usually contain a Force Majeure provision dealing with how such events will affect the parties’ respective obligations during the course of the contract. Force Majeure refers to acts of God and other events which are wholly outside of the control or influence of the party. Typical force majeure events include things like floods, fires, tornadoes, hurricanes, tsunamis, earthquakes, riots, etc. While these events are pretty intuitive and it is hard to contest their occurrence being completely outside the control of the contracting party, there are some events, such as supplier bankruptcy and currency and market fluctuations which are less clear and which are often heavily negotiated. Force majeure provisions list the events which will constitute force majeure and set forth the parties’ respective obligations or release from obligations if the force majeure event occurs. For example, a force majeure provision may excuse a supplier from complying with a deadline or delivery date. As a startup company or entrepreneur, be cautious when you see a provision dealing with force majeure and, if you’re drafting an agreement, ask yourself how your contractual relationship may benefit from including a provision to help manage uncertainties. If you are interested in learning how to protect against risk, including force majeure risk, please contact an attorney or have an attorney review your agreement before you sign...

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App Development: Privacy Issues to Consider

Posted by on Dec 13, 2013 in Intellectual Property, Limiting Liability

If your company is developing an app, or having an app developed for it, there are key issues concerning privacy that your company should keep in mind. Apps can often require or facilitate access to personal information about end users which is typically regarded as private and subject to protective laws or regulations. Some apps gradually collect personal information about the end user as the end user navigates the app. Such information can include: financial account information health information location data personally identifiable information (e.g. name and address) There has been greater focus of the Federal Trade Commission (FTC) on privacy issues in mobile devices and apps. Therefore, to help avoid liability or harm to your company’s reputation as a result of privacy breaches, at the initial stages of the app development process and throughout your operations, your company should understand the types of personal information would be shared or accessed as a result of an end user navigating your company’s app. It’s never too early to consider privacy issues–especially if your app facilitates or requires access to information which is highly regulated, (e.g. financial, health or children information). If your company is developing and app or having an app developed, please contact an attorney who can help you minimize risk with respect to privacy...

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Your Liability Can Have Limits #3

Posted by on Aug 22, 2013 in Draft Your Contract, Limiting Liability, Practice Pointers

We’ve talked about 2 ways people limit liability in a contract (waiver of consequential damages and limitation of liability provisions). Another way you or someone you’re negotiating against can limit contractual liability is by including a provision that limits the time in which a party can bring a claim under the contract—i.e. shortening the statute of limitations that otherwise would apply. I know that sounds great, but: “what’s a statute of limitations”? A statute of limitations is essentially a law which establishes the maximum time after an event has occurred within which a party may commence legal proceedings. That is to say, a statute of limitations is a law that basically tells people how long they have to file suit. Statutes of limitations can vary depending on the type of claim or issue at hand. For example, in the State of Tennessee, the default statute of limitations for breach of contract claims is 6 years, meaning if 6 years has passed since the other party breached your contract, you probably can’t sue him or her for breach of contract (unless your contract says otherwise). The Tennessee Code sets forth statutes of limitations for many types of actions, including defamation, injury to personal property, products liability, medical malpractice, and the list goes on. Not only is it important to know the statute of limitation which may apply to your potential legal claims in any given situation, you should remember that you can often limit these statutory limitations contractually. It is common for contracts to include a provision that shortens the default statute of limitations to 3 years, 2 years or even 1 year. I’ve even seen a contract that attempted to limit the period to 3 months (!). Statute of limitation provisions are often placed at the back of the contract in a “governing law,” “dispute resolution” or “miscellaneous” section. A shorter statute of limitations can really take you for surprise if you dilly-dally or delay your decision concerning whether to file a claim. Obviously, if you are providing the good or service, you’d probably want the period to be shorter, and if you’re the one buying the good or service, you’d probably want the period to be longer. If your contract doesn’t say anything about it, don’t worry: the statutory default of 6 years would kick in. Don’t be afraid of these limitations, though, because, if used correctly, they can really help both parties understand and manage their respective risks under the contract. While there may be a way to argue around the statute of limitations provision in your contract, this is one reason why you should always read the fine print carefully (*or have an attorney review your contract and advise you concerning liability matters). If possible, you want to avoid having to hire an attorney to argue why your contract provisions should be...

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