Free Enterprise - The FindLaw Small Business Law Blog

August 2010 Archives

Blockbuster Plans September Bankruptcy

Blockbuster, once the king of video rentals, is preparing to file for bankruptcy next month. Blockbuster hopes to use time in Chapter 11 to restructure their debt load. The company has nearly $1 billion in debts and hopes to escape leases on over 500 stores.

The Blockbuster bankruptcy comes largely as a result of the company's inability to shift gears into the digital age. Netflix and Redbox made renting movies online and from kiosks faster, easier and cheaper than going to a Blockbuster. Even as the company began offering services similar to Netflix, the Blockbuster bankruptcy became inventible as the company was sinking under its massive debt, reports The Los Angeles Times.

American Apparel Faces Shareholder Suits

American Apparel is struggling hard. The company is facing three shareholder suits, a complaint from the NYSE and immigration issues. How did a once successful company come to such a sorry state of affairs? Only CEO Dov Charney and the leaders of American Apparel know for sure and even that assumption might be in doubt.

Almost every area of American Apparel's business is under attack. According to BusinessWeek, the company is attempting to bring itself under compliance with a New York Stock Exchange letter telling the company it faces being de-listed if it does not file its second-quarter results in a timely fashion. During the week of August 16, American Apparel reported a preliminary second-quarter loss and said it had doubts about the company's ability to continue as a "going concern," which BusinessWeek translates as looking at a potential bankruptcy.

Cupcake Lady Truck Seized by Philly Inspectors

The City of Brotherly Love is not showing much to its small business community. At least that is the reputation that Philadelphia is gaining due to stories just like this one. On August 25, it was reported that Philly inspectors seized the truck belonging to a city favorite: The Cupcake Lady. According to city officials, the Cupcake Lady did not have the proper permit to be running her roving business in the University City neighborhood where she was currently parked.

The Cupcake Lady, also known as Kate Carrara, says she has tried quite hard to always apply for the proper business permit for any area she stops her tuck or to stay outside prohibited zones, according to a report by the Associated Press. Carrara says, "I've been trying to figure out where I can go and where I can't go." But the laws are just too confusing for her to figure out. Here is the punch line: before she sold cupcakes, Carrara was a lawyer.

Ansel Adams Trust Sues Owner of Negatives

Ansel Adams (1902-1984) is well known for his black and white photography, largely of landscapes of the American West including Yosemite National Park. He was also an environmentalist and co-developer of a Zone System, a method for determining the best exposure. Adams established The Ansel Adams Publishing Rights Trust in 1976 to preserve and protect his artistic legacy and work.

The trust has now filed suit in federal district court in San Francisco to prevent Rick Norsigian and PRS Media Partners from using Adams' name, likeness and trademark. Norsigian says he bought several Ansel Adams negatives at a garage sale in Fresno ten years ago for $45. Norsigian claims to have noticed that the negatives resembled Adams' Yosemite National Park photos. Norsigian has now created a website selling the prints from the alleged Ansel Adams negatives. He hired attorney Arnold Peter to assemble a team of experts to authenticate the negatives.

George Lucas Sues Over 'Jedi Mind' Headset

The Jedi could influence and control the minds of others by making use of the Jedi mind trick. Jedi Mind, Inc. claims their wireless headset uses brainwaves, both conscious and non-conscious to allow users to play games, run software and a host of other computer applications, powered by no more than the thoughts in their brain.

But hold the phone. What was the name of that company? Jedi Mind, Inc.? there anyone out there that might have a problem with such a name? Anyone? Anyone? Bueller?

When You Don't Have to Pay Minimum Wage

Small businesses are looking for ways to stretch the company budget these days. In these times where all companies are looking to run lean and mean, some employers may want to investigate whether or not they are required to pay employees the federal minimum wage. Some employers are not covered by this law. However, there are additional state laws regarding minimum wage that may apply. The following is a brief run-down of the general rules.

What is the federal minimum wage?

Under federal law, employers must pay a minimum hourly wage. The current federal minimum wage is set at $7.25 per hour. The main federal law that sets the minimum wage is the Fair Labor Standards Act (FLSA). Although the minimum wage is an hourly wage, the law does not require employees to be paid by the hour. Business owners may choose to pay a salary, commission, wages plus tips, or at a piece rate, as long as the total amount paid divided by the total number of hours worked is equal to at least the minimum wage.

Ok for Nail Salon to Charge $5 Overweight Fee?

A five dollar surcharge is costing a salon owner in DeKalb County, Georgia a big headache. Reported on national news outlets, owner of the Natural Nails nail salon, Kim Tran, charged customer Michelle Fonville an extra $5.00. When Fonville asked why, she was told it was due to her weight. According to the salon owner, the pedicure chairs the salon uses are made to hold only up to 200 lbs and can cost up to $2,400 to fix, thus the overweight fee. But Fonville is calling it discrimination.

The reports that Fonville says she was humiliated by the experience. While Fonville's extra $5.00 was in the end, refunded, the Natural Nails owner told Fonville to take her business elsewhere in the future. For her part, Fonville will and is hoping others will do likewise.

Bloggers Must Purchase Business License in Philly

The city of Philadelphia is going micro. The cash-strapped city has decided one way to increase revenues will be to require all bloggers to acquire a business license. All blogs with profit making potential via ads or other means must apply for the $50 a year ($300 for lifetime) licenses, no matter how micro the profits from the blog are.

The Philadelphia City Paper cites the example of blogger Marilyn Bess who writes a blog on green living. According to the report, Bess makes a profit of about $50 a year on the work she considers a hobby. But the city would like its share. Any Philadelphia blogger who reports their earnings (no matter how meager) has been asked by the city to pay the $300 for what the city calls a "privilege license" plus taxes.

BP Fund, Gulf Coast Claims Facility, Now Open

The new $20 billion BP fund opened today, and many potential claimants are scrambling for information to get started. The new BP fund, which is being paid in addition to the $368 million already paid, is being managed by the new Gulf Coast Claims Facility (GCCF) headed up by Washington attorney Ken Feinberg. Feinberg is known for handling the 9/11 victims fund as well as setting the executive pay for companies bailed out by the government. The Obama administration and BP worked to establish the GCCF to assist claimants in filing claims for damages and economic losses incurred from the April 20 BP oil spill.

Feinberg spoke before Congress last week and was adamant that claimants will be better off going through Gulf Coast Claims Facility than going through the courts. "I don't want people going to court," Feinberg told the House Committee on Small Business, The Associated Foreign Press reports. "I want people coming to the fund. Why should a claimant spend five years in court ... and owe money to a lawyer rather than come into the Gulf Coast claims facility," and get a payment settled quickly and relatively easily, he said.

Campaign Contributions Fallout for Target, Gilt

All that glitters today is not Gilt. The online designer discount retailer Gilt Groupe is getting pushback from customers for their wildly popular partnership with Target to do a pre-sell on the Target designer collaboration lines designed by Tucker and Mulberry. The lines sold out in just minutes, but the fallout remains. Target is under fire for campaign contributions to a very conservative candidate in Minnesota, home to Target corporate headquarters. That association has now rubbed off on Gilt.

According to NBC NY, Target's campaign contributions totaling $150,000 to support Minnesota gubernatorial candidate Tom Emmer has riled Gilt shoppers who support the LGBT community. Emmer does not, being opposed to gay marriage. Gilt's CEO Susan Lynne responded to the company's critics saying that Gilt was not in any way involved with the corporate campaign donation decisions made at Target. As Elle blogs noted, there was an unusual and direct exchange of opinion between the everyday consumer and the CEO of a company.

Restaurant Fined for Toad Licking Chef Video

Do you know what your employees are up to? If you don't chances are someone else will, and you might face legal trouble because of it. A restaurant owner in Iowa is being fined, thanks to the toad loving antics of his chef. The Scott County Health Department officials also very much appreciated the fact that the chef's actions violating the health code were captured on video, making their job that much easier.

According to the Associated Press, owner of the Osaka Restaurant, Yidi When, will be charged $335 in fines thanks to the toad licking that went on in the kitchen of his restaurant. Chef Christopher Turla was captured on video kissing, licking and finally stuffing toads into his mouth, all filmed and thoughtfully posted on Youtube by his brother.

How to Fire Employees Legally

The corner office with a view, the premier parking spot, the bigger paycheck ... being a boss is the life. Except when it comes to firing employees. The inevitably uncomfortable conversation is an often dreaded aspect of being in a position of power, and one that almost every employer is confronted with at one time or another.

More than coming up with the right words to say, there are some major considerations every employer should also familiarize themselves with to ensure that they are firing or laying off employees legally. Here are some tips for keeping things legal....

SBA 504 Loan Interest Rate Drops Below 5%

Small Business owners rejoice! The interest rate on SBA 504 loans, aimed at providing long-term, fixed rate financial assistance for the purchase of commercial real estate, has dropped below 5%. The interest rate for a SBA 504 loan is now at 4.93% to be exact -- one of the lowest since the program began in 1968. Over the past 24 years, SBA 504 loans have funded $60 billion in small business loans.

If you are a for-profit small business with a tangible net worth of less than $7.5 million, and have an after-tax income of less than $2.5 million for the past two years then you will likely qualify for this loan. An SBA 504 loan is a great option to help fund fixed asset projects such as: purchasing land, improving current property, and purchasing new long-term machinery and equipment, according to PR Newswire.

Suit Seeks to Block MO Adult Entertainment Law

This week a coalition of owners, trade groups and even a dancer or two from Missouri's adult entertainment industry filed a lawsuit challenging the law set to heavily restrict their businesses. Senate Bills 586 and 617 were signed into law in June by Governor Jay Nixon and introduce strict new regulations on adult bookstores, video galleries, strip clubs and cabarets, throughout the state of Missouri.

According to the Kansas City Star, owners of Missouri businesses fear the new adult entertainment law will force them out of business, cut tax revenues and throw people out of work during the biggest downturn since the Depression. The law specifically includes zoning restrictions, hours restrictions, a prohibition on the sale of alcohol, no longer permits "semi-nude" dancers to touch patrons, or dancers to perform nude. These restrictions on the adult entertainment industry are being challenged on constitutional grounds and for a violation of the Missouri state Constitution when the request for a hearing on the financial impact of the legislation was disregarded.

Godzilla vs. the Grill: IP Dispute in Maine

This is one more legal battle staring the big monster v. the underdog or in this case, the underlizard. Lawyers representing the holders of the trademark rights to everyone's favorite atomic lizard, Godzilla, are stopping through Damariscotta, Maine and breathing out cease and desist letters at their target, Grill Zilla BBQ.

According to an incredibly comprehensive report by the Kennebec Journal, Grill Zilla is owned and operated out of an old Frito-Lay truck by Sarah Burnham and her husband, Jay Swett. The diner's tagline? "So good, it's scary." Swett and Burnham may see their mascot as a combination of a dragon, a dinosaur and a lizard, but attorneys for Toho Co., the company that owns the rights to Godzilla, see it as unlicensed infringement.

No Debt Indicators from the IRS as of 2011

The IRS is announcing that beginning in 2011, a new practice may make it more difficult for income tax preparation companies to provide tax refund loans to their customers. In the past, the IRS had supplied lenders and tax preparers with a "debt indicator" for each taxpayer. This digital indicator would allow lenders to discover if a taxpayer's refund was going to be held by the government for payments on debts such as back taxes, child support, or delinquent student loans.

According to Money Talks News, the IRS debt indicator was never intended to be used for purposes of confirming the availability of the refund to the lender, but simply to inform the taxpayer. In practice however, the agency was essentially pre-screening potential loan customers for tax preparation services.

Cartier Sues HauteLook for Alleged False Claims

Purveyor of exquisite jewels and luxury timepieces Cartier is going a bit downmarket these days, or at least that is the implication they are concerned about. Cartier is suing designer discount site for false claims regarding advertising and trademark infringement over the website's sale of Cartier watches. Cartier is not suing HauteLook for selling fake watches, but for selling real watches and doing it incorrectly.

According to the Complaint filed by Cartier and provided by, the company spends time, money and effort in building and maintaining its luxury brand and image in the marketplace. Indeed, if your product is worth thousands of dollars for the simplest design, you should ensure your client is getting everything they dream of, and more. This effort includes the product branding, packaging, warranties and even repair -- if necessary, Cartier is careful to say. The company claims that HauteLook falsely claims they have "partnered" with Cartier to bring the luxury goods to customers at a great savings, something Cartier maintains never happened. The Complaint also says the packaging and warranties are inconsistent with the Cartier trademarks. In fact, the company claims that they purchased a Cartier watch from HauteLook and it arrived in a Baume & Mercier box. Quelle horreur!

New FTC Rules for Debt Settlement Companies

The scales have tipped in favor of debtors as new rules for debt settlement are putting a tighter rein on debt settlement companies. Many businesses that are involved in the debt settlement process are upset over the recent changes enacted by the Federal Trade Commission, set to go into effect September 27, 2010. Here's why: the new regulations essentially eliminate the ability of debt settlement companies to charge up-front fees for their services until some actual results are realized for their client.

This blow to many debt settlement companys' business model means that most companies in the industry will need a complete overhaul of their payment structure, which will cause an initial cash flow strain, reports PRWeb. Most companies will likely be forced to switch from a fee-based model to a performance-based model. Other noteworthy aspects of the new FTC rules include informing debtors of how long it will take to get results and how much the settlement process will cost, allowing the debtor to withdraw his or her funds at any time, and alerting the consumer to any negative consequences that could arise from the debt settlement process.