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Tampa Business & Commercial Law Blog

Business litigation over virtual reality headset to continue

Many Florida residents enjoy the technological advances in the gaming industry, including the use of virtual reality headsets. Two companies whose businesses create, manufacture and distribute these devices recently made headlines due to business litigation. Total Recall Technologies is accusing Paul Luckey, the founder of Oculus, of breach of the contract allegedly signed by the parties when Luckey worked for Total Recall.

In 2011, Luckey was hired by Total Recall to design a virtual reality headset. The company claims that Luckey gave it exclusive rights to his design if they decided to manufacture the headset. Luckey allegedly agreed to these terms. A prototype was developed, and Total Recall provided feedback on the design.

Litigation is not uncommon during a Chapter 11 bankruptcy

When a Florida company files for bankruptcy, it might already be involved in a dispute with another company. Even though the company is in Chapter 11, that does not mean that it will not be drawn into -- or file -- other litigation. Any number of issues could be the subject of litigation during the bankruptcy that relate to the proceedings.

As part of many Chapter 11 proceedings, businesses and their assets need to be valued. If a creditor or the company disagree with the value, litigation could commence. In some cases, avoidance actions are filed. The company or trustee might believe that payments made to a specific creditor should be repaid, and a preference action could be filed against the creditor. Further, a claim could be filed if there is reason to believe that property was fraudulently transferred.

Yahoo's corporate reorganization is in a state of flux

Few people could have predicted the exponential growth of mobile and social networking. Yahoo, Inc. was not one of them, and it has paid the price over the years. The company never enjoyed the same growth and success again. Even now, like many Florida companies in similar positions, Yahoo's corporate reorganization remains in a state of flux.

So far, none of the plans made by Yahoo have come to fruition or been successful. For instance, at one time, the company was contemplating spinning off its Internet business. However, as its business plan continues to change, it is now contemplating selling that portion of the company.

Chapter 11 bankruptcy filed by Florida shoe retailer

Goodman and Dominguez Inc. operates under many businesses, including Traffic Shoes, which opened its first store in southern Florida back in 1989. The shoe store grew to 83 stores and an online business that caters to teenagers. Recently, however, the company found itself in financial distress and filed for Chapter 11 bankruptcy in order to reorganize its operational costs and close some of its stores.

In the company's bankruptcy filings, it cites an increase in online shopping as part of the reason for the company's current financial situation. Today's teenagers are growing up with the technology that enables them to avoid having to go to a mall to do their shopping. Therefore, brick and mortar retail stores have taken a significant hit in recent years.

Information acquiring companies in mergers will request

When a company wants to purchase a Florida business, an inquiry is generally conducted by the purchaser. There are numerous documents that acquiring companies in mergers will request. The categories of information include organization documents, financial documents, employee information and more.

Organizational documents will be reviewed to ensure they are in compliance with state and federal laws and that the company is in good standing. Information regarding the company's assets, liabilities and other financial documents are gathered in order to determine the company's current net worth and potential earnings in the future. Assets include a variety of items including physical property, real estate and intellectual property.

What happens to a company's stock in Chapter 11?

When a public Florida company finds itself in financial distress, one of its options is to file bankruptcy in order to reorganize and emerge in a better financial position or wind down and dissolve the business. One of the issues that many company owners may wonder about is what happens to its stock during a Chapter 11 proceeding. The value of the stock will most likely decline when the bankruptcy is filed, but that is not the end of the story.

Since the company may no longer meet listing standards, it will most likely not be traded on major markets. The stock may continue to be traded during the bankruptcy, but not by exchanges such as NYSE or NASDAQ. The way the stock is handled, however, changes during the proceedings.

Lockheed files business litigation against U.S. government

In Florida and elsewhere, defense contracts are big business. Billions of dollars are often at stake when a company bids for a contract to provide the federal government with goods and services. To illustrate the importance many companies place on receiving these contracts, the federal government's largest -- and number one -- defense contractor, Lockheed Martin Corp., has decided to file business litigation against the U.S. government because it awarded a sizable contract to another company.

The contract, worth approximately $6.75 billion, seeks to replace the Army's current combat vehicle, the Humvee. The government awarded the contract to Oshkosh Corp., which was ranked number 99 last year. The initial order under the contract is for approximately 17,000 vehicles that are to be more armored than the current combat vehicle. Ultimately, 55,000 of these new vehicles are designated for the Army and the Marine Corps. The total cost is estimated to be around $30 billion.

Chapter 11 filed by casual dining restaurant owner

Some Florida readers might recognize the name of the casual dining restaurant chain Black-Eyed Pea. The recession caused many businesses to have financial issues, and some of them never quite recovered. After years of serving hungry patrons in the Lone Star State, the owner of several locations of the restaurant chain recently filed for Chapter 11 bankruptcy protection.

Restaurant Acquisitions I, LLC owns 13 Black-Eyed Pea locations and one other restaurant called Dixie House. Court filings indicate that the company has been unable to find new sources of capital to keep the business afloat. Furthermore, the company has experienced shortfalls in its revenue stream.

Employer files business litigation against former employee

Not all lawsuits filed between employers and employees are filed by workers. There are cases where a Florida employer will file business litigation against someone who has left the company because of a violation of the employment contract between the parties. Often, these lawsuits are filed because the employee has breached the non-compete clauses of the contract.

For example, an out-of-state wealth management firm filed a lawsuit against a former employee because she took a job with one of the firm's competitors when she left. The woman was hired in 2002 and signed an employment contract and non-compete agreement. She advanced through the ranks of the company. While she was employed, she gained intimate knowledge of the firm's operations and was responsible for providing services to several clients. She was trusted and valued during her time with the company.

A business can be involuntarily put into Chapter 11 bankruptcy

A bankruptcy can be filed either voluntarily or involuntarily. In some cases, one or more of a business's creditors might force a Florida business into Chapter 11 or Chapter 7 bankruptcy. A creditor may file a bankruptcy petition for a company that is unable to pay its debts when the creditor believes that the company could pay its debts but for some reason chooses not to do so.

In some situations, however, a creditor may put a business into Chapter 11 in order to prevent another creditor from taking the assets of the company. For example, Patriarch Partners LLC recently filed a Chapter 11 petition putting a debt fund called Zohar 1 into bankruptcy. Patriarch is not only the creator of the fund, but it is also its largest creditor.

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