How to fight for your investment in a small business

From time-to-time we answer questions related to business law -- and this one deals with lulling, equitable estoppel, breach of contract, and fraud. Right up our alley! The petitioner wrote:

I have an affidavit of trust signed with my employer for money that I gave him 100k cash. The Affidavit of trust states that I can ask for the money back only after 6 years after his business starts which would be in 2011. I have done that several times, but each time he comes up with the excuse that the business is not doing well etc... This time I am determined -- especially now that I heard he moved to Pennsylvania, sold his house in the area, and now he is not paying rent for the restaurant where I work (we received and eviction notice). Is he going to just declare bankruptcy? What are the ways for me to get my money back?

This is a great question! We just finished a multi-year LLC/corporate lawsuit covering just these questions last week -- a major jury victory in Washington, DC. There are actually three questions in what you wrote -- and so I'll cover each briefly.

First, you need address the problem of statute of limitations. You were a bit confusing in your time frames. Did you loan this fella money which was suppose to come due in 2011? If so, you need to move very quickly, as VA has stringent guidelines regarding statute of limitations. However, if you have been trying to collect from 2011, it is entirely likely you can win on a "lulling" -- a form of equitable estoppel that stops (or "tolls") the statute of limitation clock. You'll need to talk to us more about this, but the theory is alive and well, and we won a major law suit in 2014 based on lulling. This will also play-out in bankruptcy court (see below).

Second, you asked about the money. I'm not sure what you think you signed (an "affidavit of trust" sounds very squirrely), but if it was a contract of some kind, you can sue for breach. You may also be able to sue for material misrepresentation (fraud), and fraud in the inducement (also, well...fraud). We would need to see the contract, and determine how, if at all, you are constrained by the terms. This is a good time to kick yourself for not consulting with an attorney before entering a deal involving $100K. Always, always, always spend the couple of hundred it takes to make these deals work properly in the beginning. That's too much money to rely on the signer's "good faith."

Thirdly, as for bankruptcy, it depends on what type of experience he hires for a bankruptcy attorney (i.e. their understanding of the various form of exclusions/objections to discharge of debts). A mere breach of contract won't be excluded from discharge, however, equitable tolling and possibly fraud/misrepresentation certainly can, and should be argued (we've won those, too -- so I can assure you, it works!). Challenging his potential bankruptcy requires a fight in bankruptcy court - and that is different than a fight in state court (which you would also need to do for points 1 and 2 above). This are called "multi-dimensional cases" as they involve state law cases and strategies (state court) that then bleed into bankruptcy court (federal court).

A couple of important reminders here -- remember that you need to file -asap-. This is because (a) your time is running out under the statute of limitations (presumably), but more importantly, (b) your must have a state suit underway PRIOR to his filing bankruptcy or you are largely in trouble. Although you could technically do the entire state AND bankruptcy fight in bankruptcy court, this is not the preferred method, and you should not expect a very sympathetic bankruptcy judge.

If you need help with your state claim (breach of contract, and various forms of fraud), equitable estoppel (lulling), or the bankruptcy motions to object to this fellow's discharge, give us a ring at 703-402-2723 or email admin@hanoverlawpc.com. We'd be glad to help!

Hanover Law, PC
Offices in Fairfax, VA and Washington, DC
www.hanoverlawpc.com		Lili O'connell, Esq. Abby Archer, Esq.
888 16th St., NW Ste 800 Washington, DC 20006	2751 Prosperity Ave, Ste 150 Fairfax, VA 22031	Sean R. Hanover, Esq. Stephen Salwierak, Esq.
1-800-579-9864	admin@hanoverlawpc.com	Charles Hatley, Esq.

Jury Instructions -- key to victory at trial

A jury trial is comprised of multiple steps -- and one of the most critical is the formulation of jury instructions. Instructions are drafted, generally, at the pre-trial conference stage. Opposing parties exchange suggested jury instructions on each area of contested law. Now, if there are nbo novel concepts to consider, then the instructions can be taken from the "generic" jury instruction selection provided by each Courthouse. You can find these in the law library or online from a sevice such as Lexis. However, when specialized, or non-normative instructions are required, you will need to write them yourself.

A jury instruction is comprised of three components: (1) any statute or ordinance on point, (2) relevant case law, and (3) the instruction itself.

An example of a jury instruction on "equitable estoppel" (lulling) might be:

Governing Statute
None known.

Case Law
From JANKOVIC v. INTERNATIONAL CRISIS GROUP, 494 F.3d 1080 at 1086 (2010):

"Similar to equitable estoppel, the doctrine of lulling applies when the defendant “ha[s] done something that amounted to an affirmative inducement to plaintiffs to delay bringing action,” Bailey v. Greenberg, 516 A.2d 934, 937 (D.C. 1986) (quoting Hornblower v. George Wash. Univ., 31 App. D.C. 64, 75 (1908)), as when a defendant promises to settle a dispute outside of court.)

From Property 10-F, Inc. v. Pack & Process, Inc., 265 A.2d 290, 291 (D.C.1970):

Equitable estoppel (lulling) is appropriate where “[The defendant has] done anything that would tend to lull the plaintiff into inaction and thereby permit the statutory limitation to run against him."

Proposed Jury Instruction
Lulling occurs if one party has created an affirmative inducement to the other to prevent or delay them from bringing action on the case.

You must find lulling when a party to a contract has done something that would tend to lull the plaintiff into inaction and thereby permit the statutory limitation to run against him.

An "affirmative inducement" is some action, no matter how minor, taken by a party, designed to intentionally trigger a reaction or action in the other party. Inaction or "doing nothing" cannot be an affirmative inducement.

Once you draft your custom jury instruction, you must submit a copy to opposing counsel and a copy to the judge who will be involved with the case. The final written instructions, including your proposed jury instruction, will be made by the judge. He/She will consider both your proposed instruction, and the instruction of opposing counsel.

Do you need help with an upcoming jury trial? Give us a ring! We've been doing this for a while and would be glad to handle your case, or consult on the jury management process. Remember -- ~30% of the outcome of your case is decided in the proper selection of your jury. Another ~15% is decided by the proper instructions and verdict form. Do the math, folks. That is ~45% of your case decided before the trial starts. Be sure you have an attorney you can trust.

Sean R. Hanover, Esq
www.HanoverLawPc.com
Contact Us
703-402-2723