Category: PPK Legal News

Facebook's Mark Zuckerberg

Mark Zuckerberg abandons share plan

Facebook's Mark Zuckerberg
Mark Zuckerberg, facing the threat of a lawsuit, backs off plan to issue non-voting Facebook shares.

The richest and most powerful business people certainly aren’t immune to lawsuits, or to shifting their plans in the face of in the face of them. Just ask Facebook CEO Mark Zuckerberg.

The fifth-richest person in the world, facing the threat of a complex lawsuit from shareholders, has abandoned plans to issue a third class of Facebook shares.

Zuckerberg has total control over Facebook, thanks to his ownership of 60 percent of its shares. At the same time, he and wife Priscilla Chan have committed to giving away 99 percent of their wealth and most of that wealth is tied up in the shares that give him control over the company.

In order to fund the charitable Chan Zuckerberg Initiative while holding onto control of the company, Zuckerberg had planned for Facebook to offer Class C shares that would have the economic benefits of other shares, but not the voting rights. That way, he would have been able to sell a few billion dollars worth of shares without giving up power over the company he founded. As he wrote in a Facebook post:

At the time, I felt that this reclassification was the best way to do both of these things. In fact, I thought it was the only way. But I also knew it was going to be complicated and it wasn’t a perfect solution.

It was far from perfect, as a matter of fact, and resulted in the threat of a class action lawsuit on behalf of current shareholders.

The good news, though, is that the price of Facebook shares has appreciated so much that Zuckerberg will still be able to sell enough shares to fund the Chan Zuckerberg Initiative and hold onto control of the company, without issuing the new class of shares.

As Zuckerberg writes:

Over the past year and a half, Facebook’s business has performed well and the value of our stock has grown to the point that I can fully fund our philanthropy and retain voting control of Facebook for 20 years or more. As a result, I’ve asked our board to withdraw the proposal to reclassify our stock — and the board has agreed.

But the entire saga illustrates the kind of complex legal issues that businesses often face and that PPK specializes in.

trademark lawyers

Trademark Owners Policing the Internet for Counterfeit Goods

Businesses have understood the importance of trademarks and brand recognition for hundreds of years. In today’s internet and smartphone world, this is especially true given the billions of users shopping online via e-commerce marketplaces such as eBay, Amazon, Groupon, and the like. In fact, with over 80% of Americans using the internet daily, businesses worldwide continue to set unprecedented levels of investments in their brand imaging, and in filing trademark applications to protect their image. In large part, a brand’s reputation, when connected with quality in a consumer’s mind, provides online shoppers with a strong preference when making a quick purchase decision, thus removing the costs affiliated with closely inspecting the item.

A trademark is “any word, name, symbol, or device, or any combination thereof” that is used “to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods.” 15 U.S.C. § 1127 (2016). With trademark owners’ increased focus in servicing internet presence and demand, with this, come increased numbers of companies that facilitate in the sales transaction between an online buyers and sellers (e-commerce marketplaces, like eBay; online payment systems, like PayPal).

E-commerce marketplaces have unfortunately created plenty of opportunity for counterfeiters to unlawfully exploit trademark owners by selling knockoff goods to consumers online. Each year, in the United States alone, hundreds of billions of dollars in counterfeit goods flood the borders from foreign countries. For instance, during December 2016, the White House’s Office of the Intellectual Property Enforcement Coordinator (IPEC) issued the U.S. joint strategic plan on IP enforcement noting that in 2015, 52 percent of goods seized by U.S. Customs and Border Protection originated in China. Much less obvious are the millions of U.S. jobs supporting the intellectual property industry, as highlighted by IPEC’s joint strategic plan; counterfeit goods damage the job market and circumvent taxes creating a substantial and harmful ripple effect in the U.S. economy.

Counterfeiters located abroad rely on marketplace websites for the vast majority of their sales. As such, while trademark owners strive to build goodwill among their consumers, by ensuring that each item produced meets a specific quality threshold, at the same time, trademark owners must quickly locate and disable online counterfeiters to avoid affiliation with unsafe and poorly manufactured goods. Due to the internet’s anonymity, companies face very difficult challenges to police the internet and enforce their legal rights against counterfeit infringement. Accordingly, massive financial and employment losses have left trademark owners with many questions on how to hold the enablers––such as Internet Service Providers, Online Payment Systems (e.g., Paypal), marketplace websites, and domain name registrars––liable for the infringing activity occurring by their counterfeit users.

Under United States federal law, the Lanham Act provides trademark owners enforcement methods to protect their trademark against the likelihood of confusion, often arising when another infringes or counterfeits a good that bears a protected trademark. See e.g., Rosetta Stone Ltd. v. Google, Inc., 676 F.3d 144, 152 (4th Cir. 2012). Remedies for trademark infringement may include: lost profits, compensation for harm or damage sustained, the costs of the lawsuit, attorneys’ fees, statutory damages, and/or injunctive relief. See 15 U.S.C. § 1114. For questions regarding your trademark or suspect unlawful sales of fake and counterfeit goods, the attorneys at Pollack, Pollack & Kogan LLC may further assist your concerns. This article is for informational purposes only and not intended as legal advice.

Author: Justin Maya, Esq. – Florida licensed attorney at Pollack, Pollack & Kogan, LLC, a business, commercial litigation, and probate litigation law firm.

Overcoming Discharge of Judgement in Bankruptcy – A Success Story

One of the toughest legal battles for judgment creditors is a debtor that files for bankruptcy. Although we at Pollack, Pollack & Kogan do not represent debtors in bankruptcy, we do practice debt collection, and, as a result, sometimes appear in Bankruptcy Court to protect our clients’ judgments from being discharged in bankruptcy.

When a judgment debtor files a Suggestion of Bankruptcy, all collection efforts must cease, and the ability to collect from the judgment debtor will be determined by the Bankruptcy Judge. Normally, aside from filing a Proof of Claim in the Bankruptcy case, there is little that a judgment creditor can do. Although certain debt is not dischargeable in bankruptcy, a money judgment is generally considered an “unsecured debt” and will be discharged a majority of the time. However, depending on how the underlying debt was incurred, judgment creditors may have some protections from discharge in Bankruptcy Court.

Most recently, we represented a public adjuster in Bankruptcy Court, and successfully protected his money judgment from being discharged in a bankruptcy case filed by the homeowner/judgment debtor. The underlying debt was incurred when the homeowner breached her contract with the public adjuster by refusing to pay the assigned percentage of insurance proceeds recovered on a property damage claim. After we obtained a judgment against the homeowner, but before we could recover the money owed, the homeowner filed for bankruptcy. We had arranged for the disputed funds to be held by the insurance company pending resolution of the dispute. When we sought the release of the funds in bankruptcy court, the homeowner argued that our judgment should be discharged because it was merely a money judgment, and was thereby an unsecured debt. Although this argument is successful a majority of the time, it was not sufficient to defeat our client’s claim. The contract between our client and the homeowner contained an assignment of insurance proceeds. The assignment came due and owing –vested – when the proceeds were paid by the insurance company. More importantly, the assignment vested more than 3 months prior to the homeowner’s bankruptcy. As a result, those funds no longer belonged to the homeowner, but were the property of our client, the public adjuster. In other words, the assigned funds, which vested prior to the filing of bankruptcy, were not part of the bankruptcy estate and were therefore ordered to be released.

Does this happen often? No, and it didn’t happen in our case without a great amount of hard work. There were various factors which contributed to our success in this case. First, the contract contained a transfer of rights (an assignment), rather than a promise to pay through a contingency agreement. Had the contract been a mere promise to pay a fee, the judgment would most likely have been discharged as an unsecured debt. Although the homeowner’s attorney argued that the assignment merged into the judgment and therefore became a dischargeable debt, the law supports the proposition that a money judgment which arises out of an assignment does not extinguish the effect of an assignment, i.e. the transfer of rights. Another factor which contributed to the successful collection in this case was the availability of funds. In light of the contract executed between the homeowner and the public adjuster, the insurance company named both parties on the proceeds check, and due to our court filings, held the disputed money in trust pending the outcome of the litigation and bankruptcy. This was very fortunate because one of the barriers of collecting a judgment is an insolvent debtor with no assets. Although the debtor in this case claimed to be insolvent, there were funds available which we could argue were not part of the bankruptcy estate. This argument would have been difficult to pursue (and improbable to result in collection) if no funds existed.

So the moral of the story is this: Obtaining a judgment is only half the battle; the other half is collecting. Most judgment debtors are not willing to voluntarily pay up, regardless of whether a judgment has been entered against them. However, we at Pollack, Pollack & Kogan work hard to use all available legal methods to protect and collect our client’s judgments.