The $1.6 Million Mistake: Terms & Conditions Lessons from a Retail Giant

It started with a data breach.

In 2012, popular online retailer Zappos.com was hacked, exposing the names, phone numbers, and account details of millions of customers. Lawsuits followed swiftly, accusing the company of failing to safeguard user data.

But when Zappos tried to shield itself with a mandatory arbitration clause buried in its Terms of Use, the Nevada District Court said no.¹

Why? Because, the court found, customers never truly agreed to those terms in the first place. Zappos’s browsewrap² terms, hidden away at the bottom of the website and never clearly presented during account creation or checkout, didn’t form a valid contract. Worse, other clauses tucked inside the site’s terms were deemed unenforceable

The result: their best legal defense evaporated. Zappos settled for $1.6 million in court costs and discounts on future orders for affected customers. While the breach was damaging, it was the  terms and conditions that turned a security incident into something much more.

Protecting Your Business Online: The Importance of Terms & Conditions

The case against Zappos.com wasn’t a one-off occurrence. Big names like Ticketmaster, Dell Computers, and Barnes & Noble have found themselves under scrutiny for their digital terms & conditions.

In fact, technology has transformed how businesses operate, making websites a primary platform for public interaction. As this digital shift continues, the potential for liability and risk in online transactions only continues to grow, and this digital landscape introduces unique legal challenges that businesses must take seriously.

The case against Zappos establishes a clear precedent for businesses: if your legal policies aren’t clear, accessible, and properly structured, they might not protect you when it matters most.

What are Terms & Conditions?

At its core, a Terms & Conditions agreement (often referred to as “T&Cs”) are the rules and guidelines outlining how people can use your website, and they apply to anyone who visits, browses, or interacts with your site.

It can address things like:

• Who owns the website
• How the website’s content can be used
• Limitation of liability
• Intellectual property protection
• Dispute resolution procedures

In many cases, a privacy policy is also included within the T&Cs, which explain how personal information (like names, email addresses, or browsing habits) are collected and used.

Without enforceable terms, you may have no recourse against common business situations like payment chargebacks, customer disputes, or misuse of your website and its content. And, as we’ve seen in cases like Zappos.com, courts are growing increasingly skeptical of vague or hidden terms.

How Terms & Conditions Protect Your Business

T&Cs aren’t a “nice to have” feature, they’re a crucial step in protecting your business. Properly established terms and conditions serve as a legally binding agreement between your business and anyone who visits or uses your site.

One of the benefits of having well-established T&Cs is limiting liability as a business owner. For example, if a user misuses your website or suffers damages from relying on the information your site provides, your T&Cs can include disclaimers that help protect you from legal responsibility.

Terms and conditions also provide business owners greater control over their websites by establishing guidelines around acceptable behavior, such as prohibiting abuse, abusive conduct, or illegal activity, which can be especially important for interactive websites or e-commerce platforms. By including clauses regarding your website’s intellectual property, you can ensure your original content, branding, logos, and any other copyrighted materials are not copied or used without permission.

What Happens Without Terms & Conditions?

Terms & Conditions matter. As an example: in 2018, Machinio Corp. was alleged to have “scraped” sales listing data from a competitor for listing on their own site. The plaintiff, Alan Ross Machinery Corp., claimed this was (among other issues) a breach of contract, pointing to a clause in their Terms of Use page. However, just like the Zappos case, the court ruled the plaintiff’s use of a browsewrap agreement meant Machinio Corp. did not have proper notice, and therefore was not bound by the terms and conditions agreement.

Motion to dismiss, granted.³

When you’re running a business, creating a terms & conditions page full of legal jargon is probably the last thing on your mind. But even small and midsized businesses can face legal exposure when they haven’t properly protected themselves with a T&C agreement. It just takes one disgruntled customer, miscommunication, or security breach to trigger big consequences.

Here’s what you could face without enforceable terms and conditions:

• You lose the right to control disputes on your terms
• You may be unable to defend against misuse of your content or services
• You could face regulatory penalties for noncompliance with privacy laws
• You damage your credibility with customers, partners, and investors

In short, you’re leaving yourself open to risk, expense, and serious legal headaches.

Your Shield Against Legal Trouble

If you’re launching a new site, updating your online store, or just realized while reading this that you can’t remember the last time your legal policies were reviewed, now is the time to act.

A well-crafted Terms & Conditions agreement (and a compliant Privacy Policy – look for a Danna McKitrick blog post about this topic soon) offers serious protection from legal exposure, and demonstrates professionalism, builds customer trust, and gives you and your customers a clear roadmap for handling problems.

And if you’re in a regulated industry, handle sensitive customer information, or have questions about data breach readiness, it’s smart to work with a law firm that understands both the business and the tech.

At Danna McKitrick, we help businesses proactively protect what they’ve built, from clear Terms & Conditions documents to cybersecurity policies and data breach response strategies. To ensure your T&Cs are legally sound, comprehensive, and compliant with relevant laws, it’s highly recommended that you consult a qualified legal professional.

[1] In re Zappos.com, Inc., Customer Data Security Breach Litigation, 893 F. Supp. 2d 1058 (D. Nev. 2012).
[2]  “Browsewrap” refers to license agreements in which a user agrees to terms simply by use of a product, rather than through an affirmative action like clicking on a button or pop-up. Often buried on a separate page accessible through a hyperlink or menu option.
[3] Alan Ross Mach. Corp. v. Machinio Corp., 17-CV-3569, 2019 WL 1317664 (N.D. Ill. Mar. 22, 2019).

Missouri’s Paid Sick Leave Law: Quickly Approaching Deadline on April 15, 2025

In November 2024, Missouri voters approved Proposition A, which provided increases to Missouri’s minimum wage and requires most private employers (even most small businesses!) to provide paid sick leave to employees (with very limited exceptions such as employees of businesses whose annual gross volume sales is less than $500,000, casual babysitters, and golf caddies), beginning on May 1, 2025. The law requires covered employers to pay employees sick leave which accrues at one hour per every 30 hours worked up to 40 hours per year if the employer has fewer than 15 employees or up to 56 hours per year if the employer has 15 or more employees.

There is a lawsuit challenging the constitutionality of the new law, which is still under review by Missouri Supreme Court. In addition, House Bill 567, which was passed by the Missouri House of Representatives, but is under review by the Senate, seeks to repeal the paid sick time altogether. However, the current bill does not contain an emergency clause, so if it passes as is, it will not go into effect until August 28, 2025, which is after the paid sick leave law goes into effect on May 1, 2025.

The deadline of April 15, 2025, when all Missouri employers subject to this new law must provide written notice to their employees about the paid sick leave benefits and display a poster about the same, is quickly approaching. Links to language for the written notice and the poster can be found here:

Notice: https://labor.mo.gov/media/pdf/earned-paid-sick-time-notice-ls-122
Poster: https://labor.mo.gov/media/pdf/earned-paid-sick-time-ls-121

What Should Employers Do?
Absent a ruling by the Missouri Supreme Court invalidating the new law, covered Missouri employers should give the required notice and post the required poster on April 15, 2025 (not before).

The written notice (language in the link above) must be provided to employees on a single piece of 8.5 x 11 paper in no less than 14-point font. Considering the requirement references that the notice must be given on a single piece of paper, it is recommended that each employee be provided with a physical copy of the notice, rather than electronic copy of the notice via e-mail.

The required poster (see link above) should be displayed in the same location that the employer’s other employment posters (workers’ compensation, minimum wage, employment discrimination, etc.) are located.

Between now and May 1, 2025, covered employers should plan with their internal teams and payroll providers as to how they will account for their employees’ accrued paid sick leave. They should also review their current PTO policies and work with an employment law attorney, such as the attorneys at Danna McKitrick, to discuss how the new law will affect their current policies if the new law does go into effect on May 1, 2025.

FAQs About Missouri’s New Paid Sick Leave Law

Q1. What can earned paid sick time be used for under the new Missouri law?
A1. Earned Paid Sick Time can be used for:

Q2. How do employees earn paid sick leave?
A2. All covered employees accrue one hour of earned paid sick time for every 30 hours worked. The hours do not need to be consecutive or worked in a week. Part-time employees also accrue earned paid sick time, regardless of how limited the employee’s schedule is. Salaried-exempt employees are assumed to have worked 40 hours in each work week (unless their regularly-worked hours worked are less than 40 hours per week).

Q3. How much paid sick leave can an employee use per year?
A3. For employers with less than 15 employees, employees can use up to 40 hours of paid sick time per year. For employers with more than 15 employees, employees can use up to 56 hours of paid sick time per year. While there is a limit on how many hours of sick leave employees are entitled to use, the law does not limit how many hours employees are entitled to accrue.

Q4. We already offer a gratuitous PTO policy that provides employees with more leave than the new paid sick leave law requires. Does our PTO policy comply with the new sick leave law?
A4. Missouri’s new paid sick leave law provides that an employer with a paid leave policy who makes available an amount of paid leave sufficient to meet the accrual requirements and may be used for the same purposes and under the same conditions as earned paid sick time under the new law is not required to provide additional paid sick time under the new law. However, this is a high burden to reach. Answer these questions:
1) Does your PTO policy provide PTO for part-time employees?
2) Does your PTO policy allow for immediate accrual upon the first day of hire?
3) Does your PTO policy allow employees to use PTO for the numerous reasons set out in the new paid sick leave law (domestic violence, sexual assault, stalking, counseling, or any of the same for a family member, etc.)?
4) Does your PTO policy allow for roll over or pay out in lieu of roll over?
5) Does your PTO policy allow for employees to use PTO days without notice where the need is not foreseeable without discipline?

These are just a few issue-spotting questions and the answers for most employers are “no.” With that said, assuming the new paid sick leave law goes into effect on May 1, 2025, it is going to require most employers to revise their policies.

As mentioned above, it is important to review your business’ current employment policies and consult with counsel or contact a Danna McKitrick employment law attorney to determine how this new paid sick leave law may affect your company’s current policies.

Corporate Transparency Act: Do You Still Need to File?

What Is the CTA?
The Corporate Transparency Act was designed to combat money laundering and financial crime by requiring companies to disclose their beneficial owners, the individuals who ultimately own or control a business entity.

Unless a business met one of 23 CTA reporting exemptions, it was required to file a Beneficial Ownership Information Report (BOIR) with the Financial Crimes Enforcement Network (FinCEN). That report included personal details about each beneficial owner, such as name, birthdate, address, and a copy of an identification document.

The law went into effect January 1, 2024 (with enforcement set to begin on January 1, 2025), initiating a wave of confusion and urgency among small business owners.

Legal Challenges and a Moving Target
Throughout 2024, the CTA faced mounting legal challenges. In late 2024, a federal court in the Eastern District of Texas ruled that the reporting requirement was unconstitutional and issued a nationwide stay.

As the court battle played out, the enforcement timeline became unclear, and many businesses were left unsure about their next steps.

At every turn, our firm remained alert to changes, making sure our clients had accurate, up-to-date information about what was required and when.

What Changed in March 2025?
On March 2, 2025, the U.S. Department of the Treasury announced that it will not enforce any penalties or fines associated with the CTA’s beneficial ownership reporting rule under the current regulatory framework. That means no enforcement actions will be taken against:
• U.S. citizens
• Domestic reporting companies
• Their beneficial owners

Yesterday, on March 26, 2025, the Treasury issued an interim rule that significantly narrows the scope of the CTA. Under this update, only certain foreign entities doing business in the United States are currently required to file.

This rule is not yet final. The government has opened a 60-day public comment period, ending May 25, 2025, before finalizing the new version of the law. After reviewing those comments, the agency is expected to issue a final version of the rule that will define long-term compliance obligations.

You can submit a comment or read the proposed rule at:
https://www.federalregister.gov/documents/2025/03/26/2025-05199/beneficial-ownership-information-reporting-requirement-revision-and-deadline-extension#open-comment

What Does This Mean for Your Business?
As of now, most domestic entities (including corporations and LLCs) are no longer required to file BOIRs under the CTA. However, this pause in enforcement may be temporary. Once the final rule is published, the requirements could change again.

Here’s the current status:
• Domestic companies: Not required to file at this time.
• Foreign entities doing business in the U.S.: Still subject to reporting.
• All businesses: Encouraged to stay alert and be ready to respond once the final rule is issued.

Count on Us to Keep You Informed
The Corporate Transparency Act has proven to be a complex compliance issue. At Danna McKitrick, we remain committed to helping our clients navigate these shifting requirements with clarity and confidence.

We will continue to monitor developments and provide guidance as new rules take shape. If you have questions about how the CTA may affect your business, or whether you qualify for an exemption, we’re here to help.

Frequently Asked Questions

Is this the final FINAL rule removing the filing requirement?
While the future of any legislation can be uncertain, as the U.S. Department of the Treasury has announced it will not enforce penalties or fines associated with the reporting rule at any time for domestic entities, filing is on a voluntary-only basis and the requirement is not and will not be enforced for domestic corporations, limited liability companies and similar related entities.

Is anyone still required to file?
Companies formed outside the U.S. (“foreign reporting companies”) who do business domestically will still need to submit a report. The exception is that the information of any U.S. person who is a beneficial owner of the foreign entity need not be included in its report.

What happens to my information if I have already filed a report?
If Danna McKitrick has previously filed a report on your behalf, we will retain a copy should it be needed in the future, but no further updates will be required. All information submitted was uploaded into the Financial Crimes Enforcement Network database, the Beneficial Ownership Secure System (‘BOSS’), which is a secure nonpublic database which utilizes information security methods and techniques that are appropriate to protect non-classified information security systems at the highest level, as per FinCEN.

I keep getting e-mails from third parties asking to help me file my beneficial ownership information report. Is it ok to ignore them?
Unfortunately, many third-party filing agencies are still sending out e-mail blasts encouraging business owners to let them assist in filing the report. As mentioned above, the U.S. Treasury will not be enforcing the requirement for domestic companies.

What is an “interim” final rule? When will the rule be final?
FinCEN will be issuing the final rule this year. Following the March 26, 2025, issuance of the interim final rule, FinCEN is accepting comments for a period of 60 days, with a deadline of May 25, 2025. Given the timeline, late Summer or Early Fall 2025 should see the issuance of the final rule. Comments are accepted via the Federal Register at:
https://www.federalregister.gov/documents/2025/03/26/2025-05199/beneficial-ownership-information-reporting-requirement-revision-and-deadline-extension

Time for Lease Review or Renewal- Don’t Forget your Lease!

Fall is a good time to review business operations and start the planning process for the upcoming year. For many small businesses, outside of their work force, the most important asset is their lease.

This is especially true for businesses that depend on their building facilities for their success. Think restaurant, entertainment venues, retail and so forth. Leases should be reviewed annually to be sure all lease terms are being followed and to be aware of the end date of the term of the lease. Many leases have options to renew that must be exercised many months prior to the end of the lease date. If you do not exercise your lease renewal within the time period set out in the Lease and in the manner specified in the Lease, you can lose your right to renew your lease.

If you want to renew but want a different rent or other terms, you need to approach your landlord well in advance of the renewal notice time period to see if the lease can be renegotiated. For example, if the lease end date is December 31 and renewal requires notice in writing to the landlord six months prior (June 30), then you should be approaching your landlord in January of that year to have enough time to see if you can renegotiate by the renewal date and if you cannot, you at least have the ability to renew the lease as is.

Renewal options often have a number of different ways to calculate rent for the new lease for the renewal term. Many leases simply have a specific per square foot increase in the lease. For example, if the lease rate was $12 per square foot, the renewal rate might be $13 or some other specific amount. Alternatively, the rate can be increased by the increase in the cost of living, the CPI index, from the beginning of the lease term to the end. This, in the past, has been a fairly standard way of handling lease renewal rents, but with the surge in inflation following the pandemic, this method leads to an exorbitant increase in the rent for the renewal term.  The final alternative to a renewal rent is called “market rent,” which simply means that your rent will increase to what the market rent is for similar facilities.  If this is the case, you get a proposed rent increase from the landlord and have the ability to disagree on the amount and, depending on the terms of the lease, submit to a form of arbitration or mediation to determine what the market rate is. In some cases, the lease terms will simply state that if you disagree with the market rent, then you do not have the opportunity to renew.

If you decide you do not want to renew and would rather find a new facility to lease you also need to start this process well in advance of the end date of your lease. I suggest at least one year in advance of the end date. In this case, you should consider engaging a commercial real estate broker and attorney that is experienced in real estate. The broker will know the market and what facilities are available and the attorney will be able to review the proposed lease when you do find a facility and be certain that the terms are protective of your interests. Lease terms are very complicated, and one word can make a major difference.  Moreover, leases are usually prepared by landlords and their attorneys, and the terms are almost universally favorable to landlords.  You need experienced professionals to even the odds and protect your interests.

There are several different types of leases. Some leases are considered “triple net” in which the tenant pays a basic rent and then pays all taxes, insurance, and maintenance costs of the facility, either by direct payment or by reimbursing the landlord for those costs. Another type of lease is a “full-service lease” in which the landlord provides all of the services, and the tenant pays base rent and then an additional rent to cover all of those services which can increase each year based on the increase in the cost of providing those services. These provisions are quite complicated, and you need to watch carefully as to what is included in the services and be sure that you have a right to audit the landlord’s expense statement and be able to verify that the costs are accurate and appropriate. There are many hybrid leases that have a portion of both of the terms in which the landlord provides some services, but the tenant is required to provide others. In these types of leases often the tenant is required to pay for all maintenance to the interior of the premises and the landlord is responsible for exterior maintenance and major repairs.

As you can see, the complexities of leases are apparent and daunting.  This most important asset of your business must be carefully monitored and preserved so that your business success is not derailed by loss of facilities or inappropriate or excessive rent and other lease terms. Have you reviewed your lease recently?

Michael J. McKitrick

Posted by Attorney Michael J. McKitrick. With over 40 years of hands-on commercial litigation and transactional law experience, McKitrick’s practice encompasses business and transactional advice, commercial real estate matters, and regulatory and practice management guidance for health care professionals. Most of his clients are in the medical, financial services, and manufacturing sectors. https://www.dannamckitrick.com/michael-j-mckitrick/

Article posted in October 2024 edition of Small Business Monthly

Pitfalls of Generative AI*

The use of artificial intelligence (AI) has quickly become mainstream for businesses of all sizes. AI assists businesses and their owners in communicating with customers and the public, promoting goods and services online, and streamlining internal processes by aggregating company data.  It’s no surprise that the technology has yet to be perfected, and the pitfalls go beyond AI images of six- and seven-fingered hands.  Here are some basic considerations for your commercial use of the technology.

Accuracy Matters

AI will certainly provide you with a product, but it may not be correct. A generator will pull information and data from many sources, and perhaps none from your own business. More than just proofreading, you should ensure that the end result is an accurate representation of the product or service that you offer. If customers are enticed by features that AI imputes to your product or service but do not exist, you risk claims of misrepresentation. It is also imperative to check that AI is not describing warranties or guarantees that you don’t offer customers.

Protect Your Data

If you use a platform that either pulls information from your business or has access to it, you may compromise that data. Many businesses go to great lengths to protect trade secrets and other information that become valuable business assets. To the extent that your business maintains secret or confidential information related to products, methods, pricing, market research or customers, the legal benefits of that confidentiality may be lost if it is made available to third parties, like an AI provider. Research the efforts (if any) used by the provider to protect your information and evaluate with your counsel whether you lose the benefits of trade secrets or confidential information by making it available.

Theft On Your Behalf

As stated above, AI pulls information from many sources.  Some of these sources may be protected by copyright or may otherwise be protected by law. Chances are you will never know whether the material generated for your business was stolen from a protected source.  But that source might, even through simple web searches, and that exposes you to liability for use of someone else’s intellectual property. If you are paying for your business’s AI services, be sure that your provider agrees to indemnify you for any legal action or threatened action against you for using someone else’s data.

Regardless of whether you are paying for AI services or not, consult your legal counsel and your insurance professionals to discuss your legal exposure and possible coverage for a loss.

* No artificial intelligence was used in the creation of this article.

Jeffrey R. Schmitt

Posted by Attorney Jeffrey R. Schmitt. Schmitt represents businesses and individuals in commercial litigation matters including banking and finance, real estate, condo and homeowners’ associations, professional liability defense, title disputes, transportation, and pension and retirement plans. https://www.dannamckitrick.com/jeffrey-r-schmitt/

Updated Information on the FTC Non-Compete Ban

A federal court has issued a final order declaring the FTC’s ban of non-compete agreements invalid.  The federal district court in Texas held in its final order that the rule was “arbitrary and capricious” and exceeded the FTC’s statutory authority. As a result, the FTC cannot enforce the rule against any employer, anywhere in the country, and there is no longer a nationwide ban of non-compete agreements.  While there is no nationwide ban of non-compete agreements, it is important to keep in mind that several states have fully banned non-compete provisions (California, Colorado, Oklahoma, North Dakota, and Minnesota), and many other states have banned non-compete provisions in certain circumstances.  Just as one example, in Illinois, non-compete agreements cannot be enforced against employees unless they earn at least $75,000, and there are specific statutes restricting enforcement in certain industries, such as construction, healthcare, and broadcasting.

The FTC may appeal this judge’s decision and it is always possible that there will be future attempts to ban non-compete agreements by rule or law. Therefore, we highly recommend considering other strategies for protecting your company’s proprietary information, such as non-solicitation agreements, confidentiality agreements, and trade secret enforcement. Feel free to contact us if you have any questions or would like to discuss more.

Learn more about this update by viewing the video FTC Ban on Non-Competes Blocked by Federal Court in Texas.

For details on the FTC ban on non-competes, go to Navigating the FTC’s Non-Compete Ban: Strategies for Protecting Proprietary Information. You may also view the video here: FTC’s Ban of Non-Compete Agreements. Continue reading »

Understanding the FLSA’s New Salary Test

The Fair Labor Standards Act (FLSA) sets minimum wage and overtime requirements for employees. The overtime requirement requires employers to pay at least one-and-one-half times the hourly rate of the employee for each hour the employee works over 40 hours in a regular work week.

However, certain employees may be exempt from the overtime requirements if they qualify as meeting three tests:

1. Job Duties Test;
2. Salary Level Threshold Test, and
3. Salary Basis Test.

The FLSA does not define those tests. Instead, the U.S. Department of Labor (DOL) is directed to define the exemptions and modify criteria from time to time with regulations.

The Job Duties Test specifies certain duties that the employee must perform if the employee is to be classified as an executive, administrative, professional, outside salesperson, or a computer-related occupation. Additionally, highly compensated employees are also eligible if they fit within a specific job duty test. These employees must all meet the Salary Level Threshold Test and be paid a predetermined and fixed salary that is not subject to reduction (Salary Basis Test). Continue reading »

It’s Now Easier to Prove Discrimination With Job Transfer or Other Change in Terms or Conditions of Employment

Jaytona Muldrow was a plainclothes sergeant in the St. Louis City Police Department’s specialized Intelligence Division. In connection with her duties in the Intelligence Division, Muldrow was deputized as a Task Force Officer with the FBI and was granted FBI credentials and an unmarked take home car. When a new captain was assigned to supervise the Intelligence Division, the Police Department transferred Muldrow from the Intelligence Division (at the new captain’s suggestion) to a uniformed position in the City’s 5^th District, supervising the day-to-day activities of neighborhood patrol officers. While Muldrow’s rank and pay remained the same, her responsibilities, perks and schedule did not. She no longer worked with high-ranking officials in the police department, lost her FBI credentials and the take-home car, and had to work weekends (while in the Intelligence Division she worked Monday through Friday).

Muldrow filed suit against the City of St. Louis under Title VII of the federal Civil Rights Act in the federal District Court for the Eastern District of Missouri, claiming she was transferred because she was a woman. The District Court granted summary judgment in favor of the City, holding that Muldrow’s transfer did not cause her a materially significant disadvantage, as it did not result in a diminution of her title, salary or benefits and had caused only a minor change in her working conditions. The Eighth Circuit Court of Appeals affirmed the decision of the District Court.

In Muldrow v. City of St. Louis, issued April 16, 2024, the U.S. Supreme Court reversed the decision, holding that it was not necessary to show that an injury resulting from an action taken by an employer because of an employee’s protected status (e.g., sex, race, religion, or national origin) resulted in significant injury. Instead, Justice Kagan, writing for a six-member majority of the Court, stated that “an employee must (only) show some harm from a forced transfer to prevail in a Title VII suit…” (emphasis added). This same standard of “some harm” will also apply to any other change in the terms and conditions of employment made as a result of the employee’s protected status. The other three justices each wrote opinions concurring in the result. Continue reading »

Contracts: The Importance of “Boilerplate” Clauses

In business, the word “boilerplate” is often a negative term. However, common contractual clauses, or “boilerplate” clauses, are often significant and helpful. They should not be overlooked or dismissed.

Attorneys’ Fees and Expenses

One common boilerplate clause relates to an aggrieved party’s ability to recover attorneys’ fees and expenses that they have incurred as the result of the other party’s breach of contract. Generally, U.S. courts follow the “American Rule,” which means that each party to a lawsuit will bear their own attorneys’ fees and costs, regardless of the outcome of the case. A common boilerplate clause allows for such an aggrieved party to recover the attorneys’ fees and costs that they have incurred because of the other party’s breach of contract.

Notably, the presence of such an attorneys’ fees clause can be particularly helpful even in cases of lesser value. For example, one party to a contract owes the other party $10,000 and refuses to pay. Employing an attorney to file suit to recover that $10,000 will be very expensive relative to the amount that might be recovered. In fact, if there is any complexity to the case, then hiring an attorney can quickly become prohibitively expensive – without an “attorneys’ fees” clause.

Providing Notice

Clauses relating to the methods for providing “notice” to the parties can also be helpful and significant.  They can determine to whom notice must be given, how the notice must be given, or when the notice is deemed given.

State Law Applied/State for Litigation

Often transactions or agreements will span multiple states. In such cases, helpful clauses include determining which state’s law will apply or in which state the dispute will be litigated. Continue reading »

Changes in Missouri Law Regarding Restrictive Covenants in Business Sales

Authored by Ruth Binger with assistance from Kristina M. Stevenson, contributor

Recent changes in Missouri law have impacted the enforceability of restrictive covenants in the sale of businesses, particularly those involving business entities and owners. These modifications, detailed in Revised Statutes of Missouri (RSMo) 431.204, arguably reduce protections extended to business purchasers.

Effective August 28, 2023, a covenant prohibiting solicitation of employees between a business entity and an owner cannot extend beyond a two-year period following the termination of the owner’s affiliation with the entity. Essentially, this means that after two years from the sale of their business, an owner is permitted to solicit employees previously associated with the entity.

Moreover, the revisions have introduced more stringent conditions for covenants prohibiting the solicitation of customers. These non-solicitation covenants must now be limited to customers with whom the owner had prior dealings and cannot extend beyond five years after the owner’s termination of business ties with the entity. This adjustment opens the door for sellers to solicit customers they had not previously interacted with. Continue reading »