Halloween is a spooky season known for ghost stories and other terrifying tales. At first blush, recounting transactional law tales may not fit that bill, but this episode may just change your mind. While litigators witness their share of intense and stressful scenarios, what they see a year or two down the road when the dust settles may just frighten you.

The Terrifying Tale Of The Blue Sky Laws

Imagine this, you’ve prepared your case for months or even years, the exorbitant costs of litigation and discovery growing larger by the day, now you’re facing the grim reality that not only does your client owe 15 million dollars, the judge just tripled the damages… and ordered your client to pay the opposing party’s attorneys’ fees. Tell me that’s not enough to keep you up at night.

Jodie examines the heightened damages provisions of blue sky laws and how they can be used as leverage when threatening to negotiate a purchase price reduction after closing the deal. Blue sky laws are typically aimed at protecting individuals from fraudulent or overly speculative investments, however, in most states, the definition will be broad enough to cover an average stock purchase deal. Therefore, when considering a stock purchase, it’s imperative that you carefully contemplate the deal, the state you’re transacting the deal in, and whether a state securities or blue sky law is implicated.

Don’t Let A Monster Get Into Your Deal Document Definitions

Seasoned attorneys know that definitions in agreements are fodder for litigation. If a seller claims in the agreement that the company isn’t involved in any “proceedings,” but the buyer sues for breach of contract when they subsequently discover five pending workers’ compensation claims. Now attorneys on both sides may end up going to the mat over what specifically constitutes a “proceeding.” Chilling stuff.

The Hair-Raising Ordeal Of The Release Language

Typically, when you think about exiting an investment, you think about getting the broadest possible release. Think twice before you do that. There are times where, depending on which point and time you’re at, there are different people and entities that are associated with the corporate structure. And, if you broadly include affiliates in a release, you can end up in a terrifying situation where you’re later sued related to your participation in that potential investment. Worse, you may end up unable to defend yourself because you have unwittingly, through your release language, released the other side from any and all liability. Now, there you are alone in the boxing ring, hands tied behind your back, and your hulking opponent is closing in.

Take mind and take note, and do not let this happen to you. When you’re exiting a transaction, think carefully about what that release looks like and look at the different points in time about who was in the company ownership structure, who is a director, who is an officer, who is an affiliate, and think carefully through that language to make sure you have the proper parties on the right side of the release. Remember, things could go south, and they may try to drag you in. Be ready.

Listen to this episode for more unnerving anecdotes involving the employment eligibility of workers, including Form I-9s, and related PPP issues. Both Susan and Jodie always recommend having an eye for detail in these kinds of situations, check strict time frames, fill out forms properly, and use experienced deal counsel to help you avoid any scary situations.

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