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Category Archives: Agreement

Even After a Business Divorce, You Could Be Liable for a Partner’s Fraud

Author By Todd McMurtryPosted on

A business divorce can be a long, painful process. Breaking off from fellow shareholders or partners could have significant legal, financial and emotional consequences. There might be moments where you consider walking away without finalizing an agreement to protect your interests. However, the failure to tie up loose ends with the assistance of an experienced attorney could come back to haunt you even after everyone has gone their separate ways.

The U.S. Supreme Court in Bartenwerfer v. Buckley was faced with a case involving a husband-and-wife partnership. David and Kate Bartenwerfer formed a legal entity to purchase, renovate and sell a house in San Francisco. From the outset, David handled the project, including the hiring of contractors, while Kate remained on the sidelines. Eventually, the Bartenwerfer partnership sold the home to Kieran Buckley.

Once Buckley purchased the residence, he found numerous significant defects that had not been disclosed to him. Subsequently, he won a verdict exceeding $200,000 in a lawsuit against the Bartenwerfers. This result, along with other debts, led the couple to file for Chapter 7 bankruptcy. Buckley sued, alleging that the debt to him should not be discharged, Section 523(a)(2)(A) of the Bankruptcy Code bars the discharge of “any debt… for money… to the extent obtained by… false pretenses, a false representation, or actual fraud.”

Kate Bartenwerfer argued that because she lacked knowledge of her partner’s misrepresentations, she should be not responsible for the debt to Buckley. However, in a unanimous decision authored by Justice Amy Coney Barrett, the Supreme Court held that a debtor cannot discharge a debt arising from a partner’s fraud—even if the debtor personally lacked knowledge or culpability.

Given this precedent, partners in the midst of a business divorce need to be aware of the possibility that they could face liability for acts that that they did not know about. You and your attorney might want to investigate your partner’s conduct and allocate responsibility in case a subsequent claim does arise.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

New Kentucky Law Safeguards Rights of Construction Contractors to Sue

Author By Todd McMurtryPosted on

Disagreements over the nonpayment of construction contracts occur frequently. Contractors who have finished a job based on the expectation that they will receive full payment on completion often find themselves forced to chase property owners for the designated funds. In some cases, the hiring individual or entity will formulate some excuse as to why the agreed-upon amount is not being provided. Other times, no explanation is given for the nonpayment. 

Though some legal protections were in place for construction contractors, a new Kentucky law bolsters their ability to secure the compensation they’ve earned. Under Senate Bill 76, when a contract with a private party is valued at $2 million or more, any portion of the payment that the owner retains subject to project completion must be held in an escrow account. Once the job is done in a satisfactory manner, the owner must provide a release that triggers transfer of the escrow funds to the contractor. Parties to construction contracts are no longer permitted to negotiate away this escrow requirement. 

Likewise, the law bars contract provisions that purport to eliminate or undermine a contractor’s right to seek relief in court or waive other essential rights conferred under Kentucky law. By barring enforcement of these terms, the bill safeguards contractors from being coerced into unfavorable language that could put them at an unfair legal disadvantage. However, the bill does note that binding arbitration can be utilized as alternative dispute resolution method.

Among the law’s most important elements is its protection against clauses that unjustly prevent contractors from recovering costs or damages due to delays—especially when such delays stem from factors within the control of the contracting entity. Many construction law conflicts stem from situations where a project cannot be completed on time. There are numerous reasons why an unforeseen delay could occur, such as weather, regulatory hurdles or bureaucratic inefficiencies. By prohibiting clauses that put the entire economic burden of any delay on the contractor, this provision fosters a more equitable distribution of risk and responsibility.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.