Atlanta Business Attorney Blog

Many people establish corporations in Georgia and other states to reduce their personal liability. With all of the benefits afforded to corporations, there are also some burdens, especially in the legal realm. One such burden is the requirement that an attorney represent a corporation in court. This constraint is discussed and explained in the 1997 Georgia Supreme Court case Eckles d/b/a Atlanta Technology Group v. Atlanta Technology Group, Inc., 267 Ga. 801 (1997). (The Court does specify that this principle does not apply to all non-corporate business owners.) In the Eckles case, a corporation was represented in the lawsuit by one if its corporate officers who was not licensed to practice law.

A corporation, though considered to be a person under Georgia law, can only act through its agents, while a natural person can represent himself in court. A person representing a corporation in a Georgia court is clearly acting in a representative legal capacity, which worried the Georgia Supreme Court: “The qualifications of the individual "representing a corporation ... in court is one of vital judicial concern. Such person is clearly engaged in the practice of law in a representative capacity. Thus, it is clear that permitting a corporation to be represented by a layman in a court of record would constitute a major exception to the requirement that a legal representative be a licensed attorney who is subject to the authority of the courts of which he or she is an officer. Indeed, there appears to be no reason why the prohibition against legal representation by a layman in a court of record should not apply when the party represented is a corporation rather than a natural person.”

The Court also remained aware of its role as the governing body for the practice of law in Georgia, and rejected creating an exception to its rule that only a lawyer could represent another person in a court proceeding. This is because the practice law is a privilege and not an absolute right, which results in the responsibilities lawyers owe not only their clients, but also the courts. “To allow a corporation to maintain litigation and appear in court represented by corporate officers or agents only would lay open the gates to the practice of law for entry to those corporate officers or agents who have not been qualified to practice law and who are not amenable to the general discipline of the court.”

It is not uncommon for Georgia employers to include non-compete provisions, also known as covenants not to compete, in employment agreements dealing with such specialized industries as medicine, dentistry, software, engineering and advertising. Non-compete provisions act to restrict an employee’s work upon the termination of employment. Two competing interests must be balanced in considering the reasonableness of non-compete agreements: “first, the employee’s right to earn a living and his ability to determine with certainty the prohibited territory; second, the employer’s interest in customer relationships created or furthered by its former employee on its behalf and its right to protect itself from the former employee’s possible unfair appropriation of contacts developed while working for the employer.” Sysco Food Svcs. v. Chupp, 225 Ga. App. 584, 586 (1) (1997).

Courts looks to three principles when deciding whether a non-compete restriction is reasonable:

1) time duration;
2) territorial coverage; and
3) scope of activity.

There are no hard and fast rules for the three principles, so the validity of a non-compete provision will always comes down to a determination on the facts of each individual case. Courts are generally concerned with how broadly the non-compete provision restricts the employee’s actions. Below are some illustrations of when courts have chosen to enforce and to strike down covenants not to compete.

Reasonable and upheld by court: a non-compete provision where a 13-year shareholder of an accounting company was not allowed to perform “accounting services” in any capacity for two years in seven metro-Atlanta counties: Fulton, DeKalb, Clayton, Gwinnett, Cobb, Fayette and Douglas. (Habif, Arogeti & Wynne, P.C., 231 Ga. App. 289).

Unreasonable and struck down by court: covenant where a software maintenance and support technician was not allowed to provide software services for any product supplied by his former employer anywhere in the United States. (Am. Software United States v. Moore, 264 Ga. 480). In that case, the territorial limitation was found to be too restrictive.

Reasonable and upheld by court: covenant not to compete which restricted a surgeon from practicing medicine or surgery for 2 years in ten counties: Coweta, Fayette, Fulton, Heard, Merriwether, Carroll, Clayton, Spalding, Troup and Pike. However, the surgeon was allowed to continue treating patients from his time with the restrictive employer so long as treatment was not done in the ten specified counties. (McAlpin v. Coweta Fayette Surgical Assocs. P.C., 217 Ga. App. 669).

Keep in mind that the courts in these cases upheld or struck down a covenant not to compete based on the specific facts of the case presented. For a detailed assessment of the enforceability of your restrictive covenant, be sure to meet with an experienced business lawyer.

Disputes inevitably arise in the course of business relationships, which sometimes result in lawsuits being filed. We routinely receive calls from Georgia businesses looking for guidance on what actions to take once they have been served with a lawsuit that was filed by an opposing party, who is typically called a Plaintiff. Below are some general tips and guidelines that all such businesses should consider:

1) Deadlines are extremely important: The party that has been sued, commonly referred to as the Defendant, will be served with a Complaint which contains the facts and allegations that form the basis of the lawsuit. Once a Georgia business has been served with a lawsuit, it is important to keep timeframes in mind. Generally, the Defendant has 30 days to file an Answer to the Complaint from the date when the Defendant actually received the Complaint. This deadline can be shorter depending on the court involved or the type of lawsuit that was filed. The Complaint will be accompanied by a Summons form, which should directly specify the number of days that the Defendant has to file an Answer. Though the Answer is typically the first deadline that a Defendant should be concerned about, there are also additional deadlines in the legal process.

2) Consult an attorney: Even if you plan to represent your Georgia corporation in a lawsuit, it is advisable to at least have an initial meeting with an attorney to discuss procedural issues and how to best represent your business. Also you need to determine if you can even legally represent your business as some courts in Georgia require a business to be represented by legal counsel. If your business falls into this category and you do not seek representation, the Plaintiff can seek immediate judgment against your business, which the court will likely grant.

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The Georgia Court of Appeals recently upheld a trial court ruling in the case of Wilks v. Overall Constr. Inc. that the 6 year statute of limitations from O.C.G.A. §9-3-24 applies for lawsuits to be filed in simple construction contract cases. This case makes two extremely important points: (1) people must abide by the time limits contained in the Official Code of Georgia if they want to ensure that their disputes will be heard; and (2) if you suspect something was constructed incorrectly, do NOT wait until you notice problems to have it inspected.

In this case, a homeowner hired a contractor to perform some construction on his home. This work was governed by a written contract signed by the parties. The work was completed on or about July 23, 1999, at which time the homeowner paid the contractor. Within a year, the homeowner began noticing problems, and over the course of the next 5 years, the contractor returned to perform repair work. Even after all of the repairs, the homeowner still noticed construction problems, and finally hired an engineer to inspect the construction in June 2007. The inspection revealed that there were deficiencies in the construction and the materials used, which prompted the homeowner to file suit in July 2007 for breach of contract – almost 8 years after the work was initially completed! Unfortunately for the home owner, he had waited too long to bring suit under the applicable statute of limitations, which resulted in dismissal of his lawsuit.

The important lesson to take from this case is that if you file suit for breach of a simple construction contract, you MUST make sure to do so within 6 years after work was substantially completed. Do NOT simply allow a contractor to make repairs, as the statute of limitations will not be adjusted to run from the most recent repair date. If only the homeowner in the Wilks case had ordered the inspection earlier, he could have filed suit prior to July 2005, thus ensuring that his case was heard.

It is not uncommon for parties to a business dispute to completely disregard the mediation process and advance full steam ahead with litigation. Experienced business lawyers will tell you that this can be a costly mistake as sometimes all it takes to settle a dispute is a third party perform a reality check on the situation. Mediation allows parties to a business dispute to try to work out settlement terms that they can all live with, unlike a lawsuit, where a judge has the final decision.

In mediation, the parties employ a mediator, who is a third party neutral, to help them confidentially and cooperatively work toward a settlement. Typically, the parties will begin the process in the same room, where the mediator will explain how he or she operates. Then, the parties will each separately meet with the mediator and lay out their points of view and any possible resolutions. The mediator effectively guides the parties through the process and may assess each party’s position and point out how the dispute would likely play out in a court of law. During mediation, the parties can have as much or as little direct contact as they desire, which is sometimes to key to resolving disputes where there is bad blood between the parties.

The Georgia court system recognizes that mediation is a valuable tool in alternative dispute resolution, and many counties provide mediation and alternative dispute resolution information and resources on their court websites:

Superior Court Mediation in Cobb County, Georgia
Superior Court Dispute Resolution Center in DeKalb County, Georgia
Office of Alternative Dispute Resolution in Fulton County, Georgia
Alternative Dispute Resolution in Forsyth County, Georgia
Mediation and Alternative Dispute Resolution in Gwinnett County, Georgia

If you have questions about the mediation process or other methods of alternative dispute resolution, make sure to contact an experienced attorney.

Recently, we received an official looking letter in an official looking envelope sent to our client, a Georgia corporation. This letter instructed the Georgia corporation to fill out the included annual minutes requirement statement, and return the form along with a check for $125 to the address listed. The only indication that this letter came from a business was small type on the outer envelope, which stated “this is not a government document.” This letter is misleading as Georgia corporations DO NOT need to pay anyone to maintain corporate records, as it is perfectly acceptable for Georgia corporations to keep their own records. One of the only accurate assertions in the letter is that Georgia corporations may need to hold annual meetings and record minutes. For more information on records that should be kept by Georgia corporations, please refer to the Georgia Code or your corporation’s operating agreement.

It is important to note that some Georgia corporations do not need to keep corporate records. In order to avoid recordkeeping, Georgia corporations must identify themselves as statutorily close corporations by claiming the appropriate code section (O.C.G.A. §14-2-902) on the articles of incorporation filed with the Georgia Secretary of State. Corporations that are eligible for this election typically include small, family-owned corporations and ‘mom and pop’ businesses. However, prior to making the election, please contact an experienced Georgia business attorney to ensure that your business qualifies and that you properly make the election.

When it comes time for a person to file a lawsuit in Georgia, there are many different courts to choose from. It is often confusing for a non-lawyer to determine which court is the proper one for his dispute. This blog will hopefully shed some light on the appropriate trial court in which to pursue disputes. However, this is by no means a comprehensive list. Make sure to contact an experienced business attorney for further guidance on choice of forum.

Superior Court: This court has exclusive jurisdiction to hear all civil business disputes concerning any amount of money between citizens of Georgia (1) where the party filing suit wants to force another party to act (affirmative equitable relief) and (2) where parties seek a determination as to ownership of land. Aside from these cases, superior courts can hear almost any other civil case, except those with certain specialized subject matter.

State Court: This court can hear almost all civil business cases between citizens of Georgia with the exception of cases where the superior court has exclusive jurisdiction or cases concerning specialized subject matter.

Magistrate Court: This court can hear any case between citizens of Georgia that State Courts can hear so long as the dispute is for less than $15,000.

Continue reading " Courts in Georgia: Magistrate Court, State Court, Superior Court, Court of Appeals, Supreme Court, Federal District Court, Federal Appeals Court " »