No Funny Lawyers

Only 10% Read Contract Before Signing; Remainder Aren’t Smarter Than a 7th Grader

jthomas@minorbrown.com (Jim Thomas) — Tue, 23 Feb 2010 12:49:00 +0000

My law practice is dominated by contracts—short, long, confusing, one-sided; micro-font printed and by-the-pound custom door-stoppers. Folks who sign before fully understanding, or sometimes even reading, a legal document never cease to amaze and keep armies of trial lawyers in business. While I’ve seen this in practice, I’ve never had any quantitative data on the extent of the problem, that is until now.

The 2010 Denver Metropolitan Regional Science & Engineering Fair is February 24 and 25. Hundreds of students, grades 6-12, will set up their projects, an amazing array of intellectual curiosity, in the Denver Museum of Nature and Science. My 7th grade daughter’s middle school held their science fair last week in preparation for Metro. In a room packed with displays, it was a study of contract-signing behavior that grabbed my attention.

This 7th grade scientist/lawyer had stationed herself in the Cherry Creek Mall with a clipboard and a bowl of chocolates. She asked shoppers to help her compare the relative sweetness of the chocolates, but of course, first, they needed to sign a one-page, printed release. If they read the release, however, the subjects would learn that what she really wanted was for them to flip the page and draw a happy face on the back.

Only two of her twenty subjects drew a circle with eyes and smile, and one of those two first apologized for having to read the consent form, because she is a lawyer. The click-to-accept contracts of the internet age and releases as justifiable paranoid responses to a litigious society apparently wore the rest into legal apathy. Maybe you, too.

Standardized contracts offered on a take-it-or-leave-it basis are, in legal circles, often referred to as “adhesion contracts.” There are legal theories and court cases on why adhesion contracts are unconscionable and thus unenforceable--sometimes.

Is there a better example of a take-it-or-leave-it contract than the terms of use for social media networking sites like Facebook? A recent attack on Facebook’s terms of service as an unenforceable adhesion contract, however, was rejected by a federal court. Law Professor Eric Goldman writes about the case in his Technology & Marketing Law Blog:

It's harder to trump properly formed online user agreements than most people wish, and this case is a small example of that. Facebook users who are unhappy with Facebook's user agreement can find recourse in a variety of ways, but assuming the contract is going to fail in court is one of the least preferred methods.

If legal issues arise under an unread or merely skimmed contract, resolving the issues by voiding the contract requires judicial action. That means long waits, legal fees, stress and hours of your time. Even if you succeed in defeating the contract—and that is hardly a given—think of what it has cost you.

So read before signing. If a contract is important, hire a lawyer to work with you. Even a take-it-or-leave-it deal gives you the choice of leaving it; if you do take it, take it knowing what is expected of you. Most likely it is more than a happy face.

Speaking of happy faces, the next time you are enjoying the spray of your morning shower in your face, consider the following photo from my daughter’s Metro project. She and a partner tested shower heads for mold and bacteria growing inside the shower head. So read your contracts and occasionally run your shower head through your dishwasher.

Lawyers, Guns and Money: Two Not Funny Updates.

jthomas@minorbrown.com (Jim Thomas) — Tue, 16 Feb 2010 14:05:00 +0000

Recent stories in the Denver Post prompted me to update a couple of my January posts.

In Joint Tenancy: Medical Marijuana Leases, I encouraged owners of commercial real estate to be careful when leasing to medical marijuana tenants, at least until the law--federal, state and local--becomes more settled. Last week's high-profile raid by the U.S. Drug Enforcement Agency (DEA) of a medical marijuana grower in the Denver area only intensifies the need for landlord caution.

Colorado’s medical marijuana rush began after an October 2009 memo from the United States Department of Justice directed law enforcement personnel to refrain from enforcing federal law (marijuana is still an illegal substance under federal law) against people in “clear and unambiguous compliance with existing state laws concerning medical marijuana.”

Why business people would rely on a memo that has no force of law, a memo that can be withdrawn, changed or simply ignored without notice, is beyond me, especially in Colorado where the memo must be punctuated with large question marks. What is Colorado law, beyond a vague voter-approved constitutional amendment, and what does clear and unambiguous compliance look like? DEA Special Agent Jeffery Sweetin, as quoted in the Post, gave Colorado his answers.

"Technically, every dispensary in the state is in blatant violation of federal law," he said. "The time is coming when we go into a dispensary, we find out what their profit is, we seize the building and we arrest everybody. They're violating federal law; they're at risk of arrest and imprisonment."

Agent Sweetin’s view is not the final word on the matter, of course, but Friday’s raid underscores the legal uncertainty surrounding medical marijuana and the risks involved. So until the smoke clears, be very, very careful before you lease to a tenant in that business.

In Willy Wonka and the Law Degree Factory, I expressed my concern that neither law schools nor prospective or current law students are paying enough attention to the ongoing upheaval in the legal economy. I’ve since heard real fear from a number of law students about their prospects after school.

While I stand by my position that folks who are passionate and realistic about being lawyers should not turn their back on their dreams, a Denver Post article by attorney and journalist Mark Greenbaum put some hard numbers to the matter. Mark’s research at the Bureau of Labor Statistics on the supply and demand for new lawyers proved the disconnect was even worse than I expected.

Taking into account retirements, deaths and that the bureau's data is pre-recession, the number of new positions is likely to be less than 30,000 per year, far fewer than what's needed to accommodate the 45,000 juris doctors graduating from U.S. law schools each year.

I strongly recommend Mark's article to everyone considering a legal education.

I Cannot Tell a Lie: There is No Presidents Day Holiday

jthomas@minorbrown.com (Jim Thomas) — Mon, 15 Feb 2010 12:37:00 +0000

George Washington’s Birthday, February 22, had been a popular, but unofficial, holiday long before it joined New Year’s Day, Independence Day, Thanksgiving Day, and Christmas Day as our country’s fifth legal holiday in 1879. A century later, the Monday Holiday Law shifted the observance to the third Monday of February, but no law changed the George Washington’s Birthday holiday to Presidents Day. Advertisers, interstate politics, and popular neglect did that.

Whatever happened to “first in war, first in peace and first in the heart of his countrymen?” The sentiment of Henry Lee’s eulogy of Washington didn’t survive the Monday Holiday Law. After all, if you aren’t celebrating Washington’s actual birthday, then it’s an easy step to lump in Abraham Lincoln, whose February 12th birthday was always close enough to Washington’s to confuse school kids anyway. From there it’s a slippery slope all the way to down to Millard Fillmore, James Buchanan, Andrew Johnson, Franklin Pierce, Warren Harding and your pick of a contemporary worst President.

Since there is no official Presidents Day federal holiday, it is impossible to tell if Presidents Day refers to Washington and Lincoln, or if it is meant to include all of our Presidents. While I greatly admire President Lincoln, we do ourselves a tremendous disservice when we forget why Washington deserved, and continues to deserve, his own holiday, even if he is no longer first (second, third or even fourth) in the hearts of his countrymen.

George Washington created our model, the world’s model, of a democratically-elected, republican chief executive. He had no precedent, no guide other than his character. Following his 1783 defeat of the British in the Revolutionary War, Washington could easily have become the king or dictator of America (all too often the result of revolutions, before and since Washington), but he did not.

Instead General Washington, following the principles he and his Continental Army had fought for, surrendered his sword, the sword in this photograph, to Congress, the elected representatives of the people.

Then, after becoming the first President under the Constitution adopted in 1789, Washington did it again. After serving two terms, Washington willingly relinquished his office when he could have been President for life. Our infant Constitution and the notion of republican representative democracy had taken root, and the model of the American Presidency was cast. No other President can make that claim and that is why today is, and should always be, not Presidents Day, but George Washington’s Birthday.

By George, I’ve done it: ten posts on our ten legal holidays. I started this mini-series quite inadvertently when my annoyance with popular indifference to the reasons for our legal holiday spurred posts on Memorial Day and Independence Day. When Labor Day came around, I realized I had to finish what I started; annoyance gave way to personal discovery. Huffington Post gave me a bigger platform for my words just before Columbus Day, and then came my holiday busy season: Veterans Day, Thanksgiving, Christmas, New Year’s, and Martin Luther King. It’s been an interesting journey, thanks for joining me on it.

artma: Heart and Art to Beat Cancer in Kids

jthomas@minorbrown.com (Jim Thomas) — Wed, 27 Jan 2010 22:18:00 +0000

Something from nothing I get. I see it regularly in my work as a business lawyer and in my efforts in the community. Turning your tragedy into someone else’s hope is another story altogether, especially when the nightmare involves your child.

Morgan Adams was five-years old when she was diagnosed with a glioblastoma multiforme brain tumor. The best, most aggressive, treatments The Children’s Hospital of Denver could offer were brought to bear on Morgan’s disease, but they were not enough. Eleven courageous months later she died peacefully at home.

Every year, about 12,400 children and teens under the age of 20 are diagnosed with cancer - that is one in every 330 children. The average age of diagnosis is 5.

Morgan’s parents, Joan and Steven, were ordinary folk, an accountant and a photographer, doing what ordinary folks do--raising children, paying the mortgage, helping at school—before Morgan became ill. After she was taken from them, they became extraordinary. They knew that too many children were dying from pediatric cancer; they knew that the survivors often suffered devastating side-effects from their treatment; they knew that little attention and few dollars were dedicated to changing the situation.

Cancer remains the number one disease killer of children; more than genetic anomalies, cystic fibrosis, and AIDS combined.

They knew that they had to do something, and that is how in 2001, artma was born.

artma is a unique biennial art auction featuring over 200 pieces of art which are donated by local, regional and national artists. This funky, offbeat event brings fresh, new art out to play and is an evening that is highly-anticipated and much loved by everyone who attends. The art is outstanding, the crowd is fun and the night is dedicated to raising money for children fighting cancer and to fund a cure.

The passion and success of that first artma led to more events, including a summertime celebration of rare autos and airplanes—Concours d’Elegance, and formation of the Morgan Adams Foundation. Within 7 years of deciding to continue Morgan’s fight on behalf of other kids, Joan and Steven reached their first million dollar moment in funding pediatric cancer research. It’s been my honor to have been part of that first million.

This year, the employees of my law firm, Minor & Brown, decided that giving money was not enough; they wanted to join in with their hearts and have some fun, too. I’m very proud to say that over half of our firm volunteered to help at artma 2010. The event is February 6, but we’ve already started having fun and being humbled.

Kids being treated for cancer in the Cancer Center in the new Children’s Hospital have made art that will be sold at artma along side of the work of professional artists. Minor & Brown employees had the honor of assisting them in that process.

Feathers, sequins, googly eyes and hot glue guns--very hot glue guns—aren’t typical lawyer tools, but I think our helping these “clients” is some of our best work ever.

Come to artma to see it and experience for yourself how much joy can be had in fighting cancer in kids.

artma

February 6, 2010; 6– 10 PM

Denver Studio Complex

241 South Cherokee St.
Denver, Colorado
Tickets $50 per person in advance, $65 at the door

Hear from some of the families of the Morgan Adams Foundation why your support matters.

Update, February 5, 2010: Minor & Brown has been busy setting up artma this week. The firm is becoming even more passionate about our connection with this cause. A wonderful post from the mother of a child who was Morgan's kindergarten classmate appeared today and reduced me to tears. I am looking forward to a wonderful and successful event tomorrow night.

Thank you to artma contributing photographer Gifford Ewing for his photos of M&B at The Children's Hospital.

Willy Wonka and the Law Degree Factory

jthomas@minorbrown.com (Jim Thomas) — Thu, 21 Jan 2010 00:11:00 +0000

The melt-down of Big Law and the implications for young people holding expensive law degrees are the subject of No Longer Their Golden Ticket by Alex Williams of the New York Times:

Lawyers who entered the field as recently as a few years ago could reasonably expect a life of comfort, security and social esteem. Many are now faced with a different landscape. Firms shed more than 4,600 lawyers last year, according to a blog that tracks the legal industry, Law Shucks. Bonuses for those who survive are shriveling, and an increasing number of firms now compensate associates based on grades for performance — shades of law school — rather than automatically advancing them on the salary scale.

Because I’m a big fan of the 1971 movie based on Roald Dahl’s novel Charlie and the Chocolate Factory, I’ll continue the Golden Ticket metaphor. Those twenty-somethings lamenting the demise of $160,000 starting salaries and complaining about pay-for-performance are our equivalent of greedy Augustus Gloop and bratty Veruca Salt.

But the terrible children in Wonka’s factory weren’t entirely to blame, were they? The attitudes of the parents fostered the excesses of the children. Six-figure salaries for first-year lawyers who don’t know a Schonzwanger from a Vermicious Knid -- what were those Big Law partners thinking? (Which more and more of their clients have been asking.)

Law professors, with their Socratic riddles and cryptic comments, are our Oompah Loompas (which is a hell of a lot better than “dead fetuses in the womb of Justice” as trial lawyer Gerry Spence once called them when he spoke at my law school.).

Oompah Loompa, Doompa-dee-do, I’ve got a perfect puzzle for you: In 2010, how is it that record numbers are taking the LSAT and applying to law school while at the very same time the American Bar Association is lobbying Washington to provide student loan relief to recent law graduates who couldn’t get a job if they were dipped in chocolate?

The Law Degree Factory, our nation’s law schools, has a huge vested interest in the allure of the Golden Ticket, but the Factory is silent and unchanging, just as it looked to Charlie from behind its gates. Law schools need to be open with their students about the cost and reward of a legal education. Certainly, the Law Degree Factory, like other factories, needs to modernize and streamline factory processes in response to the changing need for, and value of, their product.

Law school was a life-changing experience for me. I wouldn’t discourage anyone who is passionate and realistic about being a lawyer from attending. Think hard about why you want to go to law school; if the best answer is to get rich, then think again. Law seems to be turning back toward its roots as a profession after a try at being a high-profit business, and that’s a good thing.

As long as there is business in America, there will be a need for business lawyers who are willing to do good work for reasonable compensation. Being a lawyer to human-owned businesses is a rewarding career for me. My income would be scoffed at in Big Law, but it’s been good for me and my family. Plus, I get to work with some of the most interesting and necessary people in our country: people who build businesses and create jobs.

But until the Law Degree Factory changes, before you walk through its gates, turn your best analytical thinking to an estimate of the debt you will incur and the time it will take you to repay that debt in an evolving market place for legal services. If law school still seems logical, then allow yourself to be illogical for a moment. Start law school, like me and many before you, with the starry-eyed dream of changing the world; that’s the real Golden Ticket.

If you want to view paradise
Simply look around and view it
Anything you want to, do it
Want to change the world, there's nothing to it

The Content of Our Character: Martin Luther King, Jr.’s Birthday

jthomas@minorbrown.com (Jim Thomas) — Mon, 18 Jan 2010 14:47:00 +0000

More than any of the other legal holidays, this one challenges us. First, we were challenged to establish the holiday. Now, holiday in place, we return to a more fundamental challenge: Are we who we say we are? The Martin Luther King Jr. holiday is a national mirror that dares us to recognize our failings and still strive to live up to our ideals.

Public Domain: Library of Congress, Prints & Photographs Division,

U.S. News & World Report Magazine Collection, LC-DIG-ppmsc-01269

The third Monday in January is the federal holiday honoring the life and achievements of the Rev. Dr. Martin Luther King, Jr. The tumultuous story of its establishment begins only four days after Dr. King’s assassination on April 4, 1968 and continues for 15 years at the federal level, even longer in some states, to culminate on November 2, 1983 with the adoption of a new legal holiday beginning in 1986. In between, we see America in its full humanity, struggling with its failings, but ultimately transcendent.

Fortunately for a post on “legal” holidays, Dr. King’s I Have a Dream speech begins with very legalistic metaphors: the ideals of our Constitution and Declaration of Independence are a promissory note issued to the people of our country, yet payments on that note to people of color are being returned for insufficient funds. Dr. King, however, refuses to believe the bank of justice is bankrupt, and without asking for or accepting excuses, demands an appropriate cure; he calls on our nation to “rise up and live out the true meaning of its creed: ‘We hold these truths to be self-evident: that all men are created equal.’”

We have made progress toward Dr. King’s dream; the first non-white-male President of the United States is one clear indication. I see another indicator in my family. As a high school freshman, I was bused under court order to integrate a traditionally-black inner-city school in Virginia to overcome decades of Plessy v. Ferguson’s separate-but-equal failings. Today, my daughter is a freshman in an inner-city, racially-diverse high school in Denver by choice. Yet, lingering achievement gaps among racial and economic groups in her school and Colorado schools generally remind us that we have more work to do.

Today, Denver holds a “Marade,” one of the largest King Day celebrations in the country. A Marade, a term coined by Wilma Webb, former State Representative, former First Lady of Denver, and founder of the King Holiday in Colorado, is both march and parade, both demonstration and celebration, her way of reminding us that in civil rights, human rights, no matter our accomplishments, ongoing attention is required.

Striving is central to the content of our American character. I am reminded of the remarks of one of Dr. King’s predecessors in the civil rights movement concerning an even earlier figure in America’s struggles to live out its creed. From W.E.B. Du Bois, one of the founders of the NAACP, writing about President Abraham Lincoln: “I love him not because he was perfect, but because he was not and yet triumphed.”

Joint Tenancy: Medical Marijuana Leases

jthomas@minorbrown.com (Jim Thomas) — Mon, 04 Jan 2010 20:30:00 +0000

Real estate is one of the law’s most confusing areas,* but add in the buzz over medical marijuana and what’s a landlord to do when considering leasing to a marijuana dispensary? Talk to your lawyer for starters.

The possession and use of medical marijuana is legal in Colorado, but state and local officials are scrambling to fill-in huge gaps in the authorizing law, including, for purposes of this post, where that medical marijuana can be grown, distributed and used. Add the simple fact that marijuana is still an illegal drug under federal law, and a property owner will have many more questions about potential legal liability for leasing to a dispensary than there are currently answers.

To begin understanding some of the questions, even as the law evolves, consider two pretty basic pieces of paper: your mortgage and your insurance policy. In each, there may be implicit and even explicit requirements that a lease to dispensary could violate, especially as the regulatory structure develops. Thus, potentially, the lease could default your loan or cause your insurance to be cancelled or limited, so be sure to review them first. Your other tenants and neighbors may have their own legal concerns with your new tenant, so best be prepared for that, too.

Even without the legal issues, consider the other practical matters that you should examine before every lease, such as creditworthiness and sustainability of the tenant. The Denver Post reports that Denver has issued more sales tax licenses for marijuana dispensaries than for “liquor stores or Starbucks Coffee.” While that fact might please a Wild West yearning in some, it hardly makes for good business. Certainly many of those dispensaries will be eliminated by the market, while others will be regulated out of existence.

Your goal as a landlord is make sure your tenant's problems don’t become your problems. Since these are the goals of owners of commercial real estate generally, the due diligence procedures and well-drafted lease you would use for any tenant are great starting points for a marijuana dispensary tenant, but until the law, and the market, are settled, get your lawyer involved, too.

*Joint tenancy, to clear any confusion my attempt at humor may create, has nothing to do with marijuana leases and everything to do with estate planning and probate. Joint tenancy is a way for two or more people (often spouses) to take title to property so that title passes directly, outside of a will, on the death of a joint owner.

New Year’s Day: a Legal Dud With Resolutions for Change

jthomas@minorbrown.com (Jim Thomas) — Fri, 01 Jan 2010 18:28:00 +0000

There are ten federal holidays in the U.S. and this one is the dud. New Year’s Day has no story or compelling national interest behind its status as a legal holiday. New Year’s Day, like the Christmas federal holiday, recognizes the “cultural” significance of the day, but, unlike Christmas, it lacks constitutional tension for interest. There is no separation of football and State, despite its religious fervor. The practice of making, but not keeping, resolutions may be punishing, but it is not cruel and unusual. Prohibition was repealed in 1933.

The need to celebrate a new trip around the sun is a compelling, ancient human tradition, with the only disagreements being which calendar and where a circle begins. My tradition of blogging our legal holidays, for one year at least, is no less compelling to me. So, in the spirit of the culture honored by the legal holiday, I am proposing two resolutions, one for each of my main audiences: human-owned businesses and folks who care about Colorado; only one resolution per group because I’m hoping for some progress on both fronts.

For anyone who owns a business, the internet overflows with suggestions for improving it, but in my law practice there is one idea that resonates with virtually all our clients. In 2010, resolve to make yourself less important to your business. “Entrepreneurs” who brag about how hard they work, how little vacation they take, and how they carry the weight of the business on their backs have created nothing more than high-paying jobs; they certainly aren’t building businesses.

Not only are these people risking their health, marriages, families, etc., they are missing the opportunity to create more personal wealth by building a sustainable business with the potential to spin-off more income to them while they own it, and much, much more value in purchase price when it is eventually sold or passed on to new owners.

Resolving to be less important to your business requires you to develop key people and systems to do the company’s critical work. Your development work could be challenging and frustrating, but the pay-off, a business doesn’t rise or fall, live or die with you, is huge, huge to you, your family, your employees, and, I think, your state.

For Colorado, there are many things we to do better in 2010. I’m still very concerned about our state’s budgeting issues and the report of the Metro Denver Economic Development Corporation on our declining competitiveness, but there too many moving parts and too many chances to disagree to make for a good resolution that could garner broad support.

There is one opportunity for improvement, however, that demands our collective attention, even if we differ on its causes or solutions. Childhood poverty in Colorado increased by at least 72% from 2000 to 2008, the worst rate change, by a large margin, in the nation. The Denver Post’s recent series on childhood poverty contains anecdotes and a map that vividly illustrates this fact. The reports of the Colorado Children’s Campaign, which dig deeper into the data of childhood poverty, put the figure at an even more sobering 85% increase, and that number predates the worst of the current economic crisis.

Regardless of political stripe, I think everyone can find at least one long-term consequences of that trend, whether in human suffering, crime, health care, work force development, or impact on our state budget, that is unacceptable. So, can we resolve, as a state, to not just diminish the rate at which poverty increases, but to actually turn the rate around and start bringing our children out of poverty?

The Post article connects concerned readers to a partial listing of agencies that aid children in poverty, but our resolution is bigger. To treat the causes of poverty and not merely alleviate the symptoms, however, we need to do more than provide aid, we need jobs and education, but jobs must come first. More and better paying jobs will provide both tax base to tackle education and paths out of poverty.

Colorado is a small business state. The jobs needed to turn around our rate of childhood poverty will come, for the most part, from small businesses. More and more successful small businesses are therefore part of the answer and where my two resolutions merge. If our government and business development leadership can do more to grow small business in 2010, then New Year’s won’t have been such a dud after all.

Isn’t There Anyone Who Knows What the Christmas Legal Holiday is All About?

jthomas@minorbrown.com (Jim Thomas) — Thu, 24 Dec 2009 14:14:00 +0000

I started blogging about our country’s “legal” holidays out of concern that, for many, these days were just another day off; that perhaps some reflection on the reasons for our national holidays was in order. Well, it turns out that the Christmas federal holiday is, in fact, just another day off, legally at least.

While the Christmas religious observance is centuries old, a federal Christmas holiday was not recognized until 1870. More surprising, the constitutionality of the legal holiday was not challenged until 1999. In her decision in Ganulin v. United States (ultimately supported by the U.S. Court of Appeals and the Supreme Court), District Court Judge Susan J. Dlott concludes that a Christmas federal holiday does not violate the First Amendment of our Constitution: “By giving federal employees a paid vacation day on Christmas, the government is doing no more than recognizing the cultural significance of the holiday.”

Judge Dlott’s appreciation of the cultural significance of Christmas is most clearly illustrated, not by her formal decision, but by her Dr. Seuss-inspired poem:

The court will address
Plaintiff's seasonal confusion
Erroneously believing Christmas
Merely a religious intrusion.

Whatever the reason
Constitutional or other
Christmas is not
An act of Big Brother!

Christmas is about joy
And giving and sharing
It is about the child within us
It is mostly about caring!

One is never jailed
For not having a tree
For not going to church
For not spreading glee!

The court will uphold
Seemingly contradictory clauses
Decreeing "The Establishment" and "Santa"
Both worthwhile "Claus(es)"!

We are all better for Santa
The Easter Bunny too
And maybe the Great Pumpkin
To name just a few!

An extra day off
Is hardly high treason
It may be spent as you wish
Regardless of reason.

The court having read
The lessons of Lynch
Refuses to play
The role of the Grinch!

There is room in this country
And in all our hearts too
For different convictions
And a day off too!

The ditty actually lays out the judge’s legal reasoning. Employment lawyer Philip Miles’s post “Christmas and the Constitution” walks through those legal principles, if you want to read more.

On Christmas night, 1776, General George Washington crossed an ice-clogged Delaware River to take the fight to the British and thus reinvigorated a flagging war for independence. As bold as his move was, it pales in comparison to the idea that we could create the world’s first nation-sized, secular republic. Before America, nations existed by virtue of coercive political authority and common religious convictions. Now, mutual respect for individual religious and cultural traditions is part of the glue that we, “the people,” use to hold our country together.

So in the United States, on December 25th you can celebrate the birth of Christ, the visit of a jolly old elf, or a day not spent at work. It’s up to you, and no matter your faith or absence of faith, that is a blessing. So to paraphrase Linus, from A Charlie Brown Christmas another of our Christmas culture classics: That’s what the legal Christmas holiday is all about, America.

The Sanity Clause

jthomas@minorbrown.com (Jim Thomas) — Wed, 23 Dec 2009 16:24:00 +0000

I’ve been trying to write my Christmas “legal” holiday post. In the process, I recalled the classic scene from The Marx Brothers’ “A Night at the Opera,” in which Groucho and Chico are negotiating the contract for Driftwood (Groucho) to hire an opera star he thinks is managed by Forelo (Chico).

The contract’s fine print, legalese, and a first party that doesn’t end until four in the morning are no match for their fine legal minds, until they get to the last clause.

Forelo: Hey, wait—wait! What does this say here? This thing here?

Driftwood: Oh, that? Oh, that’s the usual clause. That’s in every contract. That just says—uh—it says—uh—if any of the parties participating in this contract is shown not to be in their right mind, the entire agreement is automatically nullified.

Forelo: Well, I don’t know.

Driftwood: It’s all right. That’s—that’s in every contract. That’s—that’s what they call a sanity clause.

Forelo: Oh, no. You can’t fool me. There ain’t no Sanity Clause!

I draft contracts, lots of contracts, but not one has ever included a Sanity Clause. Not because I don’t believe in Sanity Clause. I do believe in Sanity Clause, though after trying to keep up with blogging, social media, and my law practice on top of my family’s Thanksgiving to Christmas schedule, one would have to question my own.

I’m making my first New Year’s resolution early this year, to negotiate contracts the Marx Brothers way:

“Why should we quarrel about a thing like this? We’ll take it right out.” Ripppppp.

Thanksgiving Day: a Perspective for Gratitude.

jthomas@minorbrown.com (Jim Thomas) — Thu, 26 Nov 2009 12:58:00 +0000

America comes to table today, tables, for the most part, laden with individual expressions of a common menu, a metaphor for the nation itself. America pauses today, if but for a moment, in collective recognition that despite our differences and our problems, we have many reasons to be grateful. Law, thankfully, has little to do with Thanksgiving. A shared day of Thanksgiving is one of our oldest national traditions, but the federal Thanksgiving Day holiday was not established until 1941.
It’s been my own tradition (for one year anyway) to examine our national legal holidays. A rich tradition of suggestions that we be grateful, suggestions contained in years of presidential Thanksgiving Proclamations, gives perspective to our mandated Thanksgiving legal holiday.

George Washington issued the first Thanksgiving Proclamation in 1789. His message was not about a settlement at established by religious separatists at Plymouth; instead Washington recommended the nation be thankful for the end of war and the establishment of our new government and Constitution. The idea of Thanksgiving, he states, started with a request from Congress:

Whereas it is the duty of all Nations to acknowledge the providence of Almighty God, to obey his will, to be grateful for his benefits, and humbly to implore his protection and favor--and whereas both Houses of Congress have by their joint Committee requested me "to recommend to the People of the United States a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many signal favors of Almighty God especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness."

Congress was not unanimous in that request, however. Thanksgiving is heavy with tradition, and tension between the authority of the federal government and that of the states is one of those traditions. Thomas Tudor Tucker, Representative from South Carolina, after questioning whether our new Constitution would earn the people’s gratitude, concluded: "If a day of thanksgiving must take place, let it be done by the authority of the several States."

The modern Thanksgiving observance, and an unbroken string of 147 consecutive presidential proclamations, begins with Abraham Lincoln. Lincoln, not the pilgrims, established the tradition of the last Thursday of November as day of thanksgiving and praise “with one heart and one voice by the whole American people.” Prior to Lincoln, Thanksgiving bounced around the calendar with observances from November to January to April. Lincoln’s Thanksgiving was less about harvest and more about perseverance and healing.

Prefacing his 1863 invitation to observe a day of thanksgiving, Lincoln proclaims:

In the midst of a civil war of unequaled magnitude and severity, which has sometimes seemed to foreign states to invite and to provoke their aggression, peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere, except in the theater of military conflict, while that theater has been greatly contracted by the advancing armies and navies of the Union. Needful diversions of wealth and of strength from the fields of peaceful industry to the national defense have not arrested the plow, the shuttle, or the ship; the ax has enlarged the borders of our settlements, and the mines, as well of iron and coal as of the precious metals, have yielded even more abundantly than heretofore. Population has steadily increased notwithstanding the waste that has been made in the camp, the siege, and the battlefield, and the country, rejoicing in the consciousness of augmented strength and vigor, is permitted to expect continuance of years with large increase of freedom.

Thanksgiving takes place in the context of our national life: Washington and the new government, Lincoln and the Civil War, Franklin Roosevelt and the Great Depression. The tradition that the Christmas shopping season, so important to retailers to this day, begins with Thanksgiving (well, it used to) confronted the calendar in 1939. In that year, the last Thursday of November, Lincoln’s date, was in fact the fifth Thursday, November 30th. In a controversial move designed to help struggling retailers, Roosevelt moved his Thanksgiving Proclamation up a week to the second-to-last Thursday in November.

In keeping with Representative Tucker’s response to Washington, several states responded to Roosevelt by deciding there should be a Thanksgiving and it should be on the last Thursday in November. Lincoln’s one heart, one voice was lost.

Perspective returned in 1941. On December 26, 1941, the Thanksgiving Day federal holiday was created, with a compromise that it be the fourth, not last, Thursday of November. Only days after America’s entry in to World War II, it seems we got it. We have our differences and our problems, but America has many reasons to be grateful.

Colorado’s Declining Competitiveness

jthomas@minorbrown.com (Jim Thomas) — Sun, 22 Nov 2009 23:00:00 +0000

Lean and mean. The well-worn aphorism is wearing thinner in this economy, but I admit it’s what came to mind when I read “Toward a More Competitive Colorado,” the 5th annual study by the Metro Denver Economic Development Corporation (MDEDC) of our economy relative to the other 49 states. Lean and mean seems to put us in a better relative position in the current crisis, but after reading the report, I fear we are lean, mean and stupid.

Tom Clark, MDEDC executive vice president, and his organization don’t pull punches. The second paragraph of the executive summary sets the stage:

After five years of compiling data for this report, we have reached some firm conclusions. While Colorado’s short-term future remains bright, our long-term vision of our state will have to change.

The full report runs 314 pages, but don’t let that deter you. Tables and graphs, both skimmable and occasionally shocking, on 186 indicators of economic vitality make up the majority of it. Bookending the data are the executive summary and the compelling “Stories Behind the Graphs” to put five years of analysis into perspective:

Our citizens are becoming poorer, less educated, and less productive; our long-term economic prospects are certainly dimming.

But we really are lean. Colorado has the lowest obesity rates in the country, and we are also lean in the business sense, too. Our tax burden on business is the 4th lowest in the nation. Overall state taxes and state expenditures are likewise low, but local taxes are relatively high, resulting in a dumbbell-shaped tax structure putting us 24th for total tax burden.

Mean, in the sense of the cliché, equates to aggressive, and there is data to support our achievements there. Colorado ranks 3rd in both venture capital investments relative to GDP and the federal government’s Small Business Innovation Research Grants, 4th in initial public offerings, and 7th in overall entrepreneurial activity.

Mean, in the unkind sense, is also apparent. Instead of taking pride in our rankings for the most college-educated adults (2nd), ACT and SAT scores for above average students (1st), and advance placement exams for high school juniors and seniors (8th), we need to come to grips with the incongruity of relatively poor rankings for adults with high school diplomas (17th), 9th graders with the greatest chance for college (23rd), high school graduation rates (29th), and state and local per-student support of higher education (48th).

This is the Colorado Paradox: many residents value college for themselves, but we import most of our university degrees and are unwilling to tax ourselves for higher education for the state’s children. Business leaders in Colorado disagree on whether the Paradox is a problem. Dan Pilcher, senior vice president and chief operating officer of the Colorado Association of Commerce and Industry, quoted in last week’s Denver Business Journal is unconcerned: “People migrate into Colorado with the education and skills that we need.” John Brackney, president of the South Metro Denver Chamber of Commerce, wants to be practical. Quoted in the Denver Post, Brackney says:

Let's worry first about outcomes and what we're able to accomplish, and if we're able to accomplish it for less money but the outcomes are superior, that's actually a great business model.

Clark, of the MDEDC, in both newspapers cautions against complacency and warns of Colorado’s “soft underbelly,” and through the report asks:

If we are striving to build an economy based on intelligence, can we sustain ourselves by relying on other states to send us smart parents with smart kids while we continue to increase the price of obtaining the training needed to compete in an intelligence-based economy?

I’ll take it a step further, assuming the influx of the college-educated continues. Smart parents with smart kids will likely find a way to get their kids to college, but what about the rest of Colorado’s children? What does their future look like? How can they hope to better their situations when college is quickly growing out of reach? Ranked by the percentage of family income needed to pay for public college, we fell from 15th to 33rd in only four years.

High school graduation rates that are poor statewide become abysmal in Denver. The Donnell-Kay Foundation’s October 2009 report, A Call to Action, leads with the statement that over half of Denver’s 9th graders will not finish high school in four years. Solving our K-12 problems won’t be enough, however, if there are few jobs for those lacking post-secondary education and diminishing hope for affording that education. From the MDEDC report:

Poorly prepared students in the education pipeline continue to drop out of school, relegating themselves to a life of low income and dependency on state support.

Colorado’s ranking for gross domestic product is down three years in a row. Our per capita personal income relative to other states is down three years in a row. If we don’t have the political will to turn these negative trends around, then surely we are lean, mean and stupid.

I wrote this post for a general Colorado audience in the Huffington Post, but it has particular relevance to our state’s human-owned business. A declining Colorado will strike us particularly hard. You and I, unlike larger regional or national businesses, live here and have limited abilities to mitigate the impacts the downturn will have on our companies. We have more riding on the success or failure of our state than most citizens. That is why you should know read and then act on the MDEDC study.

Live, from the Angel Capital Summit

jthomas@minorbrown.com (Jim Thomas) — Tue, 17 Nov 2009 13:44:00 +0000

The Setup. Wouldn't it be great to have a rich friend or two who wanted to invest in your business? Not a handout, but a real investment expecting real returns. Why would they do this? Because they believe in you and your business. That's the idea behind so called "angel investors," wealthy individuals or groups of wealthy individuals investing their own money in entrepreneurial companies. You can distinguish them from venture capitalists and private equity funds, which use other people's money under professional management.

Today I am attending the third annual Angel Capital Summit in Denver, and, in complete disregard of my fears of typos and nerdiness, I am live blogging it from my iPhone. (Okay, my kids tell me I disregarded my fear of nerdiness years ago.)

7:30. "I see what you mean." The big blue bear outside the Colorado Convention Center is especially blue in the morning chill.

7:50. Ben Franklin was many things in life, including successful businessman. Here he is speaking to students from the Denver Venture School about the responsibility of business owners to society.

9:00. After a disappointing key note speaker, I'm off to hear from "presenting" companies; not sponsors, but organizations seeking funding.

9:15 Shonaquip, develops wheelchairs and educates users to increase quality of life; too bad their pitch is hampered by computer foul-ups.

9:45 eTelesis, an L3C company. More on this new form of business in a later post, L3C is a hybrid profit-nonprofit designed to earn profits to pay returns on capital and of capital to investors. This company builds solar energy farms in developing or remote areas; this pitch is for investors for a project in Chile.

10:15. Rocky Mountain MicroFinance. One of 4 nonprofits in the 39 presenters. I've mentioned these folks as a source of funding for startups. Their mission is to help businesses create jobs, build wealth, and pay taxes to increase our tax base.

11:00. Adventure Sports Products. In business for 10 years and touting a 100% annual increase in sales and profits, they are looking for investor to build national distributor/dealer network and expand product line. A similar story to some of my clients.

Lunch break. Discussing sustainable business practices with New Belgium Brewing. The R in ROI isn't always money. How a company defines its mission should determine what return(s) you want/need on your investment. Great statement on leadership: "Being a business role model is what gets us out of bed in the morning."

1:30. CO2Nexus uses liquid carbon dioxide as cleaning solvent to replace problematic dry cleaning chemicals. Compelling presentation on opportunities to make money being green.

2:00. Rivertop Renewables. About half of presenters are green companies reflecting investor interest in such businesses. Pitch that new technologies overcome old limitations in producing multi-purpose glucaric acid is too dry. Attracting investors to move to pilot plant stage will require more compelling reasons.

2:30. Current Motors makes electric scooters. Good balance of professionalism and passion that has been missing in some presentations.

3:00 Optibike. President rides in on his very high-end electric bike to begin talk about changing lives, but "confidential" legend on slide show is silly. His passion helps engage the crowd.

4:00. Closing remarks from Ben Franklin (you know, the guy on the $100 bill). Curiosity, practicality, and a desire to do good are traits that made him successful, first as businessman, then as statesman. Humor, too, and the ability to relax are important for business.

Two more ideas, fitting to close this post, from Ben Franklin:

To effect the greatest good, one must work in association with others.

Who will lead your country out of its economic woes? You, the entrepreneur, will.

Good night, Bear.

Veterans Day: How Many Days are Enough?

jthomas@minorbrown.com (Jim Thomas) — Wed, 11 Nov 2009 12:48:00 +0000

Part 5 in a series on “legal” holidays

This one strikes closest to home. More so even than the debt the nation owes our veterans, I owe two vets, my parents, for my existence and for inspiring my accomplishments. Veterans Day, thankfully, is generally well-observed, with many personal and societal ceremonies and tributes, even if it is not a day-off for many. That military service is a sacrifice borne by few for the benefit of many is all too clear this year. So, as legal holidays go, we seem to do right by Veterans Day; I’m more concerned about the other 364 days, but first the legal history.

Originally Armistice Day, the 11th day of the 11th month commemorated the 1918 Treaty of Versailles and the end of the Great War, the “war to end all wars” (was there ever a slogan you more wanted to be true?), and honored those who served in it. After World War II, which forced us to drop the slogan and recognize the Great War as World War I, and then the Korean “Conflict” (legal semantics for political purposes), Congress, in 1954, seeing the need to honor all who serve, gave the holiday its present name, Veterans Day.

Congress did a major disservice to Veterans Day when, in 1971, it separated the holiday from its roots by moving the observance to the 4th Monday in October. The American people tolerated that for only a few years and the original date was restored in 1978. But if “we must keep our covenant with them” as President Obama proclaims, then Veterans Day must be a year-long commitment.

I mentioned my parents both served. They enlisted, as many Americans do, as recent high school graduates. I am particularly indebted to an unknown designer of recruiting posters. My mother marched into the recruiting office fully intending to join the Navy, but an Air Force poster showing young people at the Eiffel Tower changed her mind. The poster was prophetic. My parents would have their first date in Paris, France.

So it was that I and my three siblings would grow-up on and around Air Force bases. So it also was that we would see our parents each earn a Bachelor’s and then a Master’s Degree as beneficiaries of the GI Bill. “The Servicemen’s Readjustment Act of 1944,” otherwise known at the GI Bill or the GI Bill of Rights, not only carried out the covenant between this nation and its defenders, it transformed my family as it transformed the nation. Homeownership and college lay beyond the grasp, both economically and psychologically, of much America before the GI Bill; after, everything changed.

On a recent walk around Denver’s Fort Logan National Cemetery, I am struck, not by the lives cut short by war, a tragic consequence of military service, but by the long lives of many who served and the great blessings they brought to us. I imagine them, like my parents, young people who leveraged their country’s investment in them to transform America. Veterans raise expectations, not just for themselves, but for their children and their children’s children, and, in the process, for us all. I imagine the Fort Logan vets as entrepreneurs, teachers, police, firefighters, doctors, nurses, builders, engineers, and even lawyers. I imagine them as mothers and fathers. I see the life you and I live as defended and enabled by their ideals.

Our covenant with our vets, like all agreements, needs to be kept current. The GI Bill has been updated a few times and as recently as 2008, but still we struggle. For example, one-third of America’s homeless men are veterans. The economy facing discharged servicemen and women today is all too similar to that facing the World War I veterans whose political and literal battles with our government inspired that first GI Bill. If our investment in that “bonus army” gave birth to a transformed America, we should expect that doing our best for our modern heroes will prove more essential to our current economic reformations than any business bailout. Besides, it is the right thing to do.

I want to close this post with another, more personal, photo of a standard government tombstone. This one is not in a national cemetery, but in a small graveyard near the northwestern shore of Lake Buchanan in the Texas Hill Country. Uniformity connects in death as in life; even the casual observer will know that an American hero is buried here. I am honored to call this hero Dad and I miss him very much.

This is post is part of an accidental series on "legal" holidays, accidental in that I had no intention of writing a series, but after the first two had spilled out, I knew I was had to finish it. Previous posts include Memorial Day, Independence Day, Labor Day and Columbus Day.

25 Years of Law for Human-Owned Business

jthomas@minorbrown.com (Jim Thomas) — Fri, 06 Nov 2009 18:05:00 +0000

I began my journey as a lawyer for human-owned businesses twenty-five years ago. The year before, my first year in law, was focused on very large corporations. I learned many valuable lessons in that first year, including how unhappy I was in my work.

Despite the many changes of the last 25 years, one fact remains unfortunately true. Bright young lawyers coming out of school are told, directly and indirectly, that big law firms and big business are the just rewards of their academic achievements. Generally, the top graduates of a top law school did not, and still do not, see value in working for the men and women who own the small and middle-market companies that are the backbone of our economy and the source of most jobs and innovations.

I made the mistake of equating starting salaries and “prestige” with value, so it is hard to fault those who still make the same mistake. Of course, “Big Law” is not a mistake for some. (I would say “more power to them,” but the power Big Law and Big Business have amassed is frightening. Human-owned businesses keep our democracy from sliding into the oligarchy abyss, another overlooked value.) But to business lawyers and law students who wonder “is this all there is,” I say absolutely not. There is interesting work to be done for great small to medium-sized businesses, and they need your help, now more than ever.

Perspective is a gift that comes with 25 years in any job. No doubt this is the most challenging time I have seen for my firm and my clients, but the human spirit and the yearning to improve our communities and build a future for our children’s children ensure that human-owned businesses will bounce back and more. A hand, however, from more good business lawyers couldn’t hurt.

I want to end by thanking my many friends at Minor & Brown over the last 25 years. I’m proud of all we have accomplished for our clients, but prouder still that we did it with grace (sometimes), humor (most of the time) and respect for the dignity of our clients and ourselves (all of the time). Thank you, Ned Minor, for seeing the potential in a disillusioned young lawyer. Thank you, Candace, for your love and support.

How to Fund a New Business

jthomas@minorbrown.com (Jim Thomas) — Sun, 18 Oct 2009 14:01:00 +0000

Installment 3 of The Plunge

Start-up businesses are as varied as the people behind them (“founders”), but their funding follows a pattern. Business funding comes in two flavors: equity and debt (but like soft-serve ice cream you can get a swirl that combines elements of both). Equity is money invested in your company and debt is money borrowed by your company. Many founders, however, will also rely on personal credit to borrow (from credit cards, second mortgages, etc.) to put money into their new companies.

Before you put a penny of your money in the company (and certainly before you take other people’s money), invest your time, intellect and passion in writing a business plan. Do not buy a business plan. If there’s a study comparing success and failure in businesses with individually-developed versus canned plans, I would love to hear about it. Until I’ve seen that study, I have to go with my gut, and my gut tells me a plan you write is more likely to succeed because it will be more exciting, accurate and believable, and not just to your potential investors, but to you too.

Make sure your business plan is more accurate than this.

Fortunately, plenty of help is available for folks writing business plans. Here is my post with links to business resources in Colorado, including business plan help. Your plan must contain a budget covering the early stages of the business; how else will you know how much money you need to raise? This is not the time to skimp. Start-ups don’t fail because they are over-funded, but the opposite constantly happens. Some telling advice from the trenches: double your best estimate and then double it again.

Equity

A new business does not get off the ground without invested funds. First dollars come from the founders, from funds saved or borrowed. The depth of their pockets and the ambitions of the business plan determine when additional investors are needed, if ever. After founders, equity typically comes from family and friends, then from a wider circle of friends-of-friends in “private” offerings, followed by professional investors—angel investors and venture capitalists, and finally, from a public offering. Start-up investments from beyond your inner circle are going to be hard to find in today’s market.

Good for lawyers, bad for you, each stage of equity is loaded with legal issues. The private offering exemptions that will keep you out of the public company morass are complex. Even if you fit an exemption, every investor still presents twin risks of investment fraud claims and plain-vanilla business disputes with your “partners.” So, if you are going to skimp on legal fees, do it in another area of your business. Always talk to a lawyer before adding owners to your human-owned business.

While all companies require investors, most will rely on lenders, too. Founders often divide their support into investments and loans for income tax planning reasons. This step can backfire and create tax and personal liability problems if not done properly, so check with your advisors first. Lenders other than founders are your next funding source.

Borrowing

The trouble with borrowing by start-ups used to be finding terms acceptable to the founders. In the current environment, many start-ups and even established companies can’t find loans under any terms. Start-ups that do find loans often get them from lenders other than banks (banks want collateral that start-ups and their founders often lack) and end up paying very high interest rates. Interest rates reflect the lender’s risk of getting repaid. You accept your start-up’s risk because it’s a dream you believe in. The lender sees a potential nightmare and wants to be paid accordingly.

Start hunting for a business loan where you conduct your personal banking. Established relationships and trust may not seem as valuable as they once were, but when order returns to the credit markets I think they will be more important than ever. If you don’t find what you want or can afford there, expand your search to lenders specializing in loans to emerging businesses. (Some non-bank lenders in Colorado are listed in an earlier post.)

Small loans based on a compelling business plan (and a personal guarantee) can be found, but larger or longer-term loans typically require results not projections. With faith in your business plan, founder’s capital invested, and maybe a small loan, you might have to launch the business to prove your dream.

If the current crisis proved anything, it proved that attention to details counts. If you are going to borrow for your new business, you will make sure you have thoroughly read and understand the loan documents before you sign them, won’t you? A lawyer can help here, too; not to negotiate, but to make sure you understand what you are signing and to make sure the documents reflect your deal.

The Post before the Money Post

jthomas@minorbrown.com (Jim Thomas) — Fri, 16 Oct 2009 21:24:00 +0000

My planned how-to-finance-your-new-business post has been hard to write. My first attempt ran into so much negative data on the state of small business financing that how-to became op-ed. My opinion? Small businesses can’t access capital and deserve much more help than the meager 0.3% of the stimulus they received.

The news since has been no better. So if you are bitter from the irony of Wall Street bonuses and small business money woes simultaneously growing to record levels, then maybe you can laugh at the black humor of Kiva.org, the microlender known for funding entrepreneurs in developing countries, loaning money to U.S. small businesses.

Fortunately, troubles in the small business sector seem to be getting greater attention. I hope soon there are positive developments to highlight. The start-up financing post drops this weekend, but the troubled credit markets make it more hypothetical and vague than your usual lawyer blog post. When things settle down, I hope most of what I say is still true; otherwise I will be looking for a new career as human-owned businesses will be an endangered species.

To give you some concrete help, I updated my previous listing of funding resources to include, along with the non-profits, some of the for-profits that might not be as readily apparent as commercial banks.

I’m Working on Columbus Day, but is Columbus Day Working for Us?

jthomas@minorbrown.com (Jim Thomas) — Mon, 12 Oct 2009 14:32:00 +0000

On this day in 1492, the Niña, the Pinta, and the Santa Maria landed at the confluence of the South Platte River and Cherry Creek. No? The intensity of positive and negative feelings in Colorado about Columbus Day would make you think that the seminal event had occurred here. Well, in a way, it did.

The New World was “discovered” 1900 miles to our southeast, but the legal holiday commemorating it happened here. Colorado was the first state to make Columbus Day a legal holiday in 1907; the feds didn’t follow suit until 1971. Denver has the oldest and largest Columbus Day parade in the country. Even if Saturday’s weather chilled this year’s event, Denver’s parade has long been a magnet for pride, protest, and even dirty tricks, like this year’s hoax email that fooled some news outlets to report the parade cancelled for funding issues.

I started writing about “legal” holidays earlier this year. So far I’ve covered Memorial Day, Independence Day and Labor Day. Columbus Day would have been easy to miss as virtually no private employers, and increasingly fewer state and local governments, recognize it. The Columbus Day Monday holiday usually doesn’t register with me until I have to figure out why there is no mail.

So if the legal holiday is a throw- away that risks going away, Denver’s Saturday parade pits culture against culture because of its Columbus focus. Columbus’s voyage was a business venture that took advantage of increasing competition and imperialistic attitudes among European nations. If this Italian had not opened the door to Europe’s colonization of the Americas, another European would have. Exploitation, slavery and disease would have followed just the same. We can’t change how cultures collided 500 years ago, but we don’t have to accept continuing collisions.

Americans of Italian descent should be able to celebrate their heritage. St. Patrick’s Day, Cinco de Mayo, and Juneteenth are popular in Denver with folks outside of the focal ethnic group joining in, not protesting, the celebrations; and they don’t need a legal holiday to do it. American Indians can and should honor their history outside of a European frame of reference.

Changing the paradigm requires the Italian community to rename its celebration and for our state (and federal for that matter) government to decide if we need and can continue to afford a mid-October legal holiday. Tradition and pride are obstacles to changing the name, but Italian culture is among the richest in the world, surely another rallying theme can be found.

If a legal holiday is kept, it too should be re-conceived as a celebration that honors the peoples, not the conquest, of the Americas. An Americas day, plural not possessive, can honor the original peoples of the hemisphere as it reminds us, its current peoples, that we share more than a land mass, we share a future.

Casimiro Barela is an iconic figure in Colorado history. Central in the creation of the State of Colorado, he also championed that first Columbus Day holiday. In the early twentieth century, Barela, a Hispanic, saw Columbus as unifying force for Coloradans of Italian, Portuguese and Spanish heritage. Now in the early twenty-first century, can Colorado see fit to celebrate both our disparate roots and our collective future?

Taking a Stand for Small Business

jthomas@minorbrown.com (Jim Thomas) — Wed, 07 Oct 2009 11:32:00 +0000

I started getting worked-up as I researched the third installment of The Plunge--a post about finding money for a start-up or emerging company. I was collecting data about Colorado small business and the lack of financing available to new and small companies in this state. That data substantiated and amplified stories I hear almost daily from clients and prospective clients about their inability to borrow money. Most concering are the stories, not from new companies, but from established, profitable companies. These small businesses are ready to take on opportunities, hire folks, and drive this economy out of the recession’s muck, but they can’t get anyone to give them a push.

That is how a planned post on how small businesses find money became an op-ed piece on why it is critical that they do. Then I decided that message deserved a bigger stage than this blog and I became a blogger for the Huffington Post. The following article was first posted there under the title Colorado’s Recovery Requires More Lending to Small Businesses. Now to get back on track and finish that finding money post for the The Plunge.

------------

Look to the east from Lookout Mountain and Colorado is flat. Turn the other way and Colorado soars. Small businesses in Colorado are eager to recover from the recession; they are looking west, but the trails are headed the wrong way. President Obama is correct that health insurance costs are a challenge in small businesses (mine included), but we don't need to resolve a complex national debate on health care to help small companies. There is a quick and relatively simple fix available. Easier access to cash is what will enable small and emerging companies to start hiring and our Colorado economy to start climbing.

Colorado is a land of small business. Over 98% of Colorado companies fit the Small Business Administration definition of small business, under 500 employees, and the vast majority of those are truly small, under 20 employees. Of course, the large employers clustered in the Fort-Collins-Boulder-Denver-almost-to-Colorado-Springs string city of the Front Range employ numbers disproportionate to their 2% status, but still it is small businesses that sustain our economy and feed our sense of Western individualism.

The SBA's Office of Advocacy reports that small businesses historically account for 64% of net new employment nationally. While that’s a noteworthy figure, in Colorado the “small” end of the business sector created a stunning 99.7% of the net new jobs in our state in 2004-2005. The Denver and Colorado Springs metropolitan areas together lost almost 70,000 jobs in the last 12 months; when similar data for the whole state becomes available it won’t be any brighter. How will Colorado replace those jobs? Small business.

Last week’s news of increasing unemployment rates -- chronic unemployment at 17% with the average job hunt at a record 26.2 weeks -- is disappointing but not surprising to us who work with small business. Big business economists report the problem is that firms aren’t yet willing to hire. For many small businesses “willing” is not the problem. Money is. Small companies typically lead us out of recessions because their owners are quick to recognize and act on opportunities. This time, however, small firms have depleted their cash and can’t borrow what’s needed to follow-up on emerging prospects.

The country’s primary support for small business comes in the form of government-guaranteed loans. This critical SBA program, however, made 36% fewer loans in its fiscal year ended Sept. 30 than in FY2008. Though the guarantee makes these low-risk loans, Main Street cannot convince Wall Street that small business is creditworthy. Even the nation’s emergency loan program for small business, America’s Recovery Capital (ARC), has been slow to take hold in the face of bank indifference and government red-tape.

If the lack of new jobs is hindering our recovery, then why don’t we do more to stimulate the proven engine of job creation? The resources dedicated to struggling small businesses are grossly low given the vital importance of this sector. Chuck Blakeman of Denver’s TeamNimbusWest did the math for us:

The stimulus was $787 billion dollars. This ARC program is $255 million, or three-tenths of one percent of the entire bailout. Small business is 50% of the gross domestic product but gets three-tenths of the bailout? The big businesses were given hundreds of billions of dollars in just a few weeks when not a single one of them would have been able to qualify for the $35,000 ARC loan.

I regularly meet Coloradans who own or want to own a business. Those preparing to start a new company are stymied. Sure start-ups have always been cash-challenged, but the current environment is brutal. More alarming still are the established companies with demonstrated profitability that can’t get a loan. Businesses that are ready to hire new employees are as “shovel-ready” as any big transportation and infrastructure project. We know that small businesses create jobs and do so quickly. An emphasis by politicians and banks on the nation’s small businesses that is commensurate with their large importance will create jobs in every state. Then small business-blessed Colorado, from Holly climbing to Leadville, will soar again.

The Chicken, the Egg and the Colonel: Three Approaches to Going into Business

jthomas@minorbrown.com (Jim Thomas) — Fri, 25 Sep 2009 11:47:00 +0000

Installment 2 of The Plunge.

The first decision a prospective business owner makes is whether to start a business from scratch, buy a franchise, or buy an existing company. This is not a legal question, though there are legal issues that may influence you. Ultimately the question is about fit. Which approach best fits your circumstances and your goals as a business owner?

The Chicken.

Helping people buy or sell existing businesses is a substantial part of my practice, but in truth few first-time business owners buy existing companies. Buying a turn-key operation is a turn-off for some entrepreneurs and too expensive for most of the rest. Buying a company is still attractive as a straight-forward way to get into business, that plus the certainty of most buyers that they will do a better job than the current owners.

Buying a company is actually a complex straight-forward way into business when done right and a straight-forward road to bankruptcy when done wrong. Each step of the way--choosing the right target, conducting due diligence, negotiating, documenting and closing a deal, transitioning between owners, and finally implementing your plan for the business—presents opportunities to stumble.

Assuming I successfully manage this one, another series on the buying and selling of companies is in order. Until then, keep “asset purchase” in mind. From a legal perspective, structure is everything when buying a business. As a general rule, buyers should avoid buying the stock of an existing company. Buying a company’s stock puts you in the legal shoes of the past owner and straddles you with every liability and skeleton-in-the-closet since inception. A stock purchase also puts the buyer at a disadvantage in income tax planning.

The Colonel.

(You get the joke, right? I’m not pushing KFC, but once I thought of chicken and egg I couldn’t resist.) Buying into one of America’s 1100 plus franchise systems, representing over 850,000 franchised operations, is a popular route into business. Some disparagingly say buying a franchise is buying a job, but as Small Business Trends recently observed: what would be so wrong with buying a job today? Certainly a number of successful companies started by buying a single franchise; growing it from a job to a business of many franchises requires the right mix of passion and diligence.

Would-be entrepreneurs should not allow the relative ease of getting into business by franchise (that’s why they exist) to prevent them from being thoughtful and thorough in the process. The franchise agreement and other agreements with the franchisor need to be carefully discussed with competent advisors. Moreover, buying an existing operation from another franchisee should be handled as the purchase of a business and a franchise.

If a franchise is a serious consideration, there are several good resources available, such as the guide to evaluating franchise opportunities, at business.gov.

The Egg.

Start-ups are the well-spring of American entrepreneurship. Building a business from scratch to significance is the dream of many, the reality of few. The first step, of course, is taking the plunge. The rate of new business formation had been trending up for several years before the recession knocked it down in 2008; I suspect (hope, pray) the rate takes a big jump in 2009 and 2010. The concepts in this series will be useful to those who choose the chicken or the Colonel route into business, but the eggs are in my heart as I write.

Survival rates in small business aren’t great. In a normal year, businesses opening their doors outnumber those shuttered or in bankruptcy by only a few percent. While seven of ten new businesses will survive two years (determination/pig-headedness is pretty typical in this crowd), by five years the rate drops to half. Legal problems are typically not the reason new businesses fail. Failure in a start-up usually stems from management, marketing and funding problems, hence my earlier post I Don’t Want Your Money. But attention to the legal issues early on will pay-off in two important ways.

First, if your first or even fifth attempt (I’ve heard of more) at starting a company fails, your attention to legal details helps keep the liabilities of a failing business from becoming your personal liabilities. Second, assuming your business succeeds beautifully, attention to the legal details positions you to avoid issues (the more you succeed, the more you have at risk) and increases your chances of a financially rewarding exit (more on that in the now-promised series on selling a business).

This is the first substantive post of "The Plunge,"and already I’m changing my outline. I’m pushing business plans and budgets into an article about finding the money (capitalizing in legalese), where they probably belonged all along.

Introducing “The Plunge,” A Series of 8 (or so) Posts on Starting a Human-Owned Business

jthomas@minorbrown.com (Jim Thomas) — Fri, 18 Sep 2009 20:44:00 +0000

Installment 1.

You can decide whether starting a business in a recession is brave, smart, stupid or nuts, but the fact is that folks are doing it, and it’s a good thing too. Two different surveys this spring confirmed that Americans put their trust in small businesses and entrepreneurs to lead this country forward; much more trust than they have in big business, government or even lawyers.

In the spirit of supporting the small business renaissance that will lead Colorado and the country, I am going beyond my earlier listing of the many free or low cost resources available for new companies. In a series of posts over the next few months, I will summarize the discussion I as a business lawyer would typically have with a client considering starting a human-owned business, otherwise known as “The Plunge.”

My rough outline of future installments for The Plunge, just in case you want to check back:

1. Fundamentals. Buying an existing business or a franchise or building one from ground up? Regardless, don’t skimp on a business plan and a budget.

2. Show Me the Money. Start-up capital is a huge concern for most new companies.

3. The Right Papers: Why use a business entity and how to pick the right kind. Trademarks and name protections. Business licenses.

4. Pre-nuptials. Assuming the business will have more than one owner, how will control, expenses and profits be shared? What happens when an owner leaves or the owners want to split-up?

5. Contracts 101. The contracts new companies need vary with the nature of the business, but virtually all business need to pay attention to contracts that impact their ability to get paid and not get sued.

6. People Power. Simultaneously the biggest headache and most important asset for most human-owned businesses. The best indicator of business success: owners who are redundant, or even better, irrelevant in the day-to-day workings of the company.

7. Insurance. A variety of different flavors, but pay careful attention to the ingredients.

8. The Road. What vision do the owners of the business have for themselves and the company?

My father was a navigator in the U.S. Air Force in the days before modern navigation tools. He guided planes across the Pacific by day using the sun and at night using the stars. If he missed Guam, a mere speck in the Pacific, the plane would run out of fuel and have to ditch in the ocean. He never missed. This series is intended only to point potential human-owned business owners in the right direction, not to get you to Guam. If you are serious about taking the plunge yourself make sure to work with a good business lawyer and accountant. They should be your guiding stars.

Happy Labor Day: Change Will Do You Good.

jthomas@minorbrown.com (Jim Thomas) — Mon, 07 Sep 2009 16:33:00 +0000

At summer’s start, I found myself posting on Memorial Day and the idea that a little reflection on the meaning of our “legal” holidays was somehow important. Then came Independence Day: easy to appreciate, though many Americans still wasted the opportunity.

Out of the major national holidays Labor Day gets the prize for muddled meaning. Maybe our wistful good-byes to summer get in the way, but not many folks will pause to consider why we have a national day-off to celebrate labor. Too many of the few that do think about it will fall into two camps that generally despise each other.

The U.S. Department of Labor tells us that Labor Day “is dedicated to the social and economic achievements of American workers. It constitutes a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.” The DOL doesn’t tell us that Labor Day was rushed through Congress by President Grover Cleveland to appease America’s labor movement a mere six days after his controversial use of federal troops forcibly ended the bloody Pullman strike that paralyzed rail traffic, and thus the country, during the summer of 1894.

Cleveland’s gesture didn’t work for him—his Democratic party was slaughtered in the 1894 midterm election—or help the labor movement that much either. Many needed reforms, such as reasonable working hours and safe working conditions, now taken for granted would not be enacted for decades--decades that would include the infamous Triangle Factory fire and Colorado’s own Ludlow Massacre.

So maybe a lesson in working for change is among Labor Day’s messages to modern America. Change is slow and uneven, so take a long view. We seem to need a crisis, or even crises, to move change along, so don’t waste an opportunity when it presents itself. Change is ongoing process, so don’t be disheartened when we don’t get it right.

Crisis and change are on many minds now. Enjoy your day off.

I’ll close with my own farewell to summer: some favorite photographs from the last 3 months.

Sometimes Dividing the Pie Makes it Bigger: Why Use Multiple Business Entities.

jthomas@minorbrown.com (Jim Thomas) — Mon, 31 Aug 2009 22:02:00 +0000

I’ve been trying to find a catchy description for the adverse legal implications of the too common practice of mixing different lines of business and types of risks in a single business entity. “Negative synergy,” the whole being less than the sum of the parts, doesn’t quite get it. “Dumb” is unkind because the human-owned businesses that make this particular mistake almost certainly had a business advisor that didn’t stop them.

Mixtures of disparate assets and risks occur as successful businesses evolve. It’s easy to imagine the scenarios: “Instead of paying these rents, why not buy our own building?” “Let’s lease a few trucks; we can transport our widgets better and cheaper than our current hauler.” “I really love ice cream. Why not make this a combination law firm/ice cream parlor?” (Ok, maybe “dumb” is sometimes appropriate.)

But a business that evolves without attention to structure can create significant consequences in matters such as wealth preservation, taxes and financing/capitalization, critical concepts for any business owner. These consequences are almost always discovered when a fix is too late or costly. To illustrate, consider the common situation of a building that is bought inside an operating business; that owner:
· could see a single mistake in the operating business wipe out years of equity in the property, or vice versa,
· may end up paying significant sums in otherwise avoidable income and estate taxes, and
· might find plans to finance further growth, whether through selling stock or borrowing money, thwarted.

Asset protection is the most common reason for incorporating a business. Folks, this does not need to be a one-time phenomenon. As you create value in your business, it is just as important to insulate that value from unrelated liabilities as it is to protect your home and savings from problems in the business.

Multiple legal entities can be used to segregate various aspects of a business. In my example, the building could be bought in a newly formed LLC that then leases the building to the operating business. The problems of the building stay in the building, the problems of the business stay in the business. It will also be easier and cheaper to finance and insure the building. And two or more distinct entities open up a number business and estate planning opportunities not available in a single combined company.

This divided-pie approach is not without its own set of issues. It costs a bit more for starters, but the few crumbs lost on legal and accounting fees will be completely eclipsed by the long term benefits to you. Inside the company can be problematic, too. You and your management team will have to work to avoid silo mentalities that could keep various entities, especially when there are multiple business units, from creating collaborative value.

And then there is “corporate veil.” Whether you have one corporation or ten, if you don’t treat each as a distinct legal entity then why should a judge? A family of related companies must be properly administered or else a creditor of one will get to the assets of another. Protecting the insulating veil is a bit of work, but the result is a more valuable and sustainable business.

A Law School Story of Love and Laughter

jthomas@minorbrown.com (Jim Thomas) — Sat, 22 Aug 2009 17:27:00 +0000

Back-to-school time and the law blogs are full of stories from the greatest back-to-school sale of all time (the entire inaugural class at the new UC Irvine law school has a three-year free ride through a program that looks to balance thinking with doing) to whether a bright 19-year-old should be going to law school (her statement “I don’t consider my academic situation to be a defining point of my life” tells me she has more emotional intelligence than many folks she will encounter in law school).

This is a good time to drop in a post about the beginning of my law journey at the University of Texas School of Law. The most important thing you need to know my time at UT Law is that I fell in love with the blonde who sat in the row behind me throughout our rigidly structured first year. I was a T, she was a W.

You can see her picture here. There is no hyperlink--I really mean here. Look at the top the page. That’s Candace. We married a week after graduating law school and four days later we moved to Colorado. Candace is my partner in everything other than the practice of law and in that she is my ground. She helps me keep it all in perspective. I love you CW.

Eyebeam is another fact of my legal education I would like to share with you.

Decades before suffering law students would use the internet for sharing anxieties and anger, the highs, lows and lowers of my law school experience were played out daily in four black and white newsprint panels. Candace and I were classmates with Sam Hurt. Sam, as an undergrad, created the cartoon Eyebeam and The Daily Texan, the UT newspaper, published it. When Sam was admitted to the law school, Eyebeam went with him.

Several years would pass before I would fully understand the great gift of having a comic chronicler in our midst. Seeing our angst, our foibles, our parties through Eyebeam's lens gave us reason to laugh at ourselves, an invaluable lesson for lawyers-to-be.

So for my guest contributor Red, for 19-year-old Kate McLaughlin, and for everyone starting law school, here are some of my favorite Eyebeams from 1980-1983--click on the strips to enlarge them. They are as relevant today as they were then. Good luck in law school. Just remember to laugh.

Thank you, Sam, for the laughter--the greatest death-ray of them all. You can learn more about Sam Hurt here and see more new and old Eyebeams on this site and in the weekly Austin Chronicle.

And thank you, Candace, for everything.

I Don’t Want Your Money: Free Help for Colorado’s New Human-Owned Business

jthomas@minorbrown.com (Jim Thomas) — Thu, 13 Aug 2009 22:30:00 +0000

Like a forest after a fire, new businesses are starting to green-up the aftermath (I sure hope we can call this the aftermath) of the economic crisis. That’s great news for a business lawyer like me; these new companies will need a good lawyer…someday.

Unfortunately for me, that someday is still a ways off for many of them. A new business must be strategic in its expenditures. So before spending scarce cash on me (or my sisters and brothers of the Bar), new entrepreneurs should first be taking full advantage of the enormous amount of free or low cost business resources available in Colorado that I am listing below.

Money spent on attorney’s fees before the homework is done is frustrating to clients and reputable attorneys. Believe it or not, a good lawyer cares about your success. Making a few bucks from advice to folks who are ill-prepared to start a company is not a good business plan for a lawyer. I would much rather trade that for the opportunity to represent you when you are ready for me to help you start making hay. That way I create a long-term relationship with you and your human-owned business.

But before I get to my resource list, a couple of readers have popped the question (no not that question), so others must be wondering, too: What do I mean by “human-owned business?”

Whether it is also called closely-held, entrepreneurial, private, family- or employee-owned, a human-owned business is a special kind of client for a business lawyer. These companies are the opposite of public, they are personal. The owners of these businesses deserve (and appreciate) legal advice from a lawyer who appreciates just how personal it is to them. But while a new human-owned business may be small, having a limited number of human owners does not equate to a small company. The companies on Forbes 2008 list of the largest private companies, admittedly not all human-owned, employ thousands and make billions. So do your homework, but dream big.

Here is my list of resources for new and emerging Colorado companies. If you have a link to suggest, I would love to have it.

State and City Resources

State of Colorado’s Small Business Development Centers This should be one of your first stops. Centers are located around the state; the one for Denver Metro has its own site.

Colorado Business Resource Guide

City of Denver, Office of Economic Development For new, growing and relocating businesses of all sizes.

Denver’s Business Toolbox

Denver Public Library’s Business & Company Resource Center, but you’ll need a library card.

Colorado Business Express A pretty cool tool from the State of Colorado official site.

Minority and Woman-Owned Business The State office.

Federal Resources

SBA’s Colorado district office

SBA’s FAQs

SBA’s assessment tool to tell if you ready to start a small business, but it helps only if you are honest with yourself. Luckily, I don’t need to be honest with you, so I won’t tell you how I scored.

SCORE Business counseling nonprofit affiliated with SBA.

University Programs (credit and noncredit programs)
University of Colorado’s Bard Center for Entrepreneurship (including a Small Business Incubator)

Executive Education at the University of Denver’s Daniel School of Business

Center for Innovation at Metropolitan State College of Denver

Chambers of Commerce
There are many chambers, these are just a few where I am connected.

Denver Metro
South Metro
Fort Collins

Finance Help

Here are some non-profits that educate emerging companies about money matters. They also provide direct help through loans, investments, or connections to funding resources.

Accion

Colorado Enterprise Fund

Kiva

Rockies Venture Club

Rocky Mountain MicroFinance Institute

Rutt Bridges Venture Capital Fund at the Bard Center

Funding Businesses

Since money is the biggest single challenge for emerging business, I beefed-up my original short list of non-profit aid groups with a more expansive, though still partial, listing of Denver-area businesses that provide equity and/or debt capital, or will help you find it. I excluded commerical banks as those are easy for you to find. The folowing investment banking & private equity firms focus on a variety of industries and company sizes. Explore the list, but don't infer anything from my inclusion or exclusion of any group. Remember these are business, not free or low cost services, and contary to the rest of this post, if you are ready to work with one of these firms, you are ready to hire a good business lawyer to help you.

Altira Group  

Appian Ventures

CAPEX

Centenniel Ventures

CHB Capital

Crawley Ventures

Green Spark Ventures

Hexagon Investments

Iron Gate Capital

JD Ford & Company

KRG Capital Partners

Meritage Funds

Midas Financial/Venture Associates

Platte River Ventures

Pronet Capital Limited

Quest Capital Partnership

SDR Ventures

Silver Creek Ventures

Stolberg Equity Partners

Vestar Capital Partners Inc

Village Ventures