As your company grows, legal needs stack up fast. One week it’s a last-minute employment contract, the next it’s a SAFE you’re drafting for a big investor meeting.

As many of startups’ legal needs fall under different domains, founders often end up working with a patchwork of legal specialists to stay compliant across the board. But founders should be building their companies, not managing a roster of outside lawyers.

That’s why is partnering with 91¶¶Ňő, a business and transactional law firm built for startups and emerging companies.

Introducing the Every + 91¶¶Ňő Partnership

The Every and 91¶¶Ňő partnership provides startups with the full back office and legal foundation they need to incorporate, operate, and scale. 

Every’s AI-native finance and HR platform offers tooling for everything from banking and payroll to benefits, taxes, and compliance—all under one roof. Built for founders and operators at high-growth companies, Every simplifies and automates key back-office workflows so that you can scale with confidence.

91¶¶Ňő is a Silicon Valley-based business law firm designed to support the legal requirements of growing companies. With nine attorneys, each with a legal specialty and deep technology-sector experience, Sutter can handle everything that a growing company needs, including employment law, financing, M&A, contract drafting & review, and IP. Supporting over 1,000 active clients, Sutter enables founders to get the legal guidance they need with transparency, clarity and simplicity, and without having to be referred out time and time again. 

Together, Every and Sutter provide founders with centralized solutions for their back office and legal needs. “Founders should be focused on building their companies, not chasing down a different firm for every legal question,” says , attorney and managing partner at 91¶¶Ňő. “Partnering with Every lets us do that from the very beginning, so companies have both their operational and legal foundation handled as they grow.”

Grow Confidently with Every + 91¶¶Ňő

Few things are more valuable to a startup than its founder’s time. Hours spent wrangling complex, disconnected processes across back office and legal are hours pulled away from fundraising, product strategy, and sales. Simplifying your operations with Every and 91¶¶Ňő means less time juggling vendors, fewer costly legal mistakes, and more headspace to build.

 and reach out to 91¶¶Ňő today for a free consultation.Ěý

The post Announcing Every + 91¶¶Ňő: Full-Service Legal for High-Growth Startups appeared first on 91¶¶Ňő Business Law Firm.

Artificial Intelligence has revolutionized how brands create, communicate, and market their products.

However, generative AI tools have also fundamentally altered the landscape for trademark owners.

While the core legal principles for trademark protection remain the same, the sheer speed and scale at which AI tools can create brand- related content demand a significantly more proactive strategy from businesses to protect their brands.

1- Generative AI tools can lead to trademark infringement.Ěý

Trademark infringement exists, when an unauthorized third party uses a trademark that is identical or confusingly similar to a registered or protected mark in connection with goods or services.

Today generative AI platforms can lead users to easily and invertedly create logos, slogans, color schemes, brand names, trade dress, and even entire marketing campaigns, replicating or confusingly similar to those of already existing brands.

This all can happen without the intention and knowledge of the human user of the AI platform. Irrespective of this fact, subsequent commercial use of that AI-generated content can expose the users to liability for trademark infringement.

2- AI generated content may cause trademark dilution

Another likely outcome from the use of generative AI to assist with generating brand related content, could be trademark dilution. Trademark dilution occurs when a third party harms the reputation of a famous mark by using a mark that is similar to the famous mark in a way that reduced the distinctiveness of the famous mark.

Unlike the infringement, it is not necessary to have consumer confusion for the harm to their identity to occur.

There are two main types of dilution: blurring (when a famous mark is being associated with completely unrelated goods and services) and tarnishment (when a famous mark is used in relation to goods and services that harm the famous brand’s reputation).

Without the knowledge and the intent of the human user, AI generated content resembling a famous mark and used in relation to a third-party’s goods and services may dilute the distinctiveness of an existing famous mark or tarnish it. 

This creates implications for both AI users and brand owners.

AI users should carefully review all AI generated content before using it and should subject it to the same level of scrutiny as human-created design.

All AI generated brand-related content must undergo a rigorous clearance process to ensure it does not infringe or dilute existing marks. Companies should educate their internal marketing and product development teams on the risks of using AI tools for branding or content development purposes.

Brand owners on the other side, should be more vigilant and proactive in the protection of their brands and should adopt continuous trademark monitoring so they can identify potential infringement or dilution at an early stage.

Brands can use AI to assist them with automated brand-monitoring services combining image-recognition and text-matching. They can also scan websites in real-time to identify potential infringements and misuse.

You need to protect your brand identity and also be sure you are not harming someone else’s! That is why we are here. Reach out to Sutter and let us handle your trademark in the era or AI.

The post Protecting your Trademark in the AI Era appeared first on 91¶¶Ňő Business Law Firm.

Whether you may use copyrighted works Generative AI Training is a complex and constantly evolving matter. There is no easy answer to this question, and the answer differs based on the jurisdiction and other factors related to the use of works.

In the United States, the central debate revolves around the doctrine of “fair use” and, in particular, whether using copyrighted works for generative AI training is fair use or not. 

Those who consider that using copyrighted works for Generative AI training is Fair Use, argue that using copyrighted works to train AI is “transformative” enough and therefore constitutes fair use. They contend that the goal is not to copy the work for the sake of the work itself, but to enable the AI to learn patterns, generate new, non-infringing content, and innovate. In fact , some U.S. courts have held that training AI on copyrighted material can be considered fair use because of this transformative purpose.

The copyright holders on the other side argue that the unauthorized reproduction of their works to train AI models constitutes copyright infringement. They emphasize on the fact that developers often copy entire works of authorship without permission and compensation, which threatens their creative livelihoods and potentially harms the market for their original works.

Currently there are numerous active lawsuits in the U.S. courts, where judges are analyzing whether training models on copyrighted works and material are protected by fair use. Rulings have been mixed, and judges have acknowledged that while some training-related uses might be fair use, others may not be, often depending on the specific facts of the case.

In May 2025, the U.S. Copyright Office released a pre-publication version of the third part of its report on Copyright and Artificial Intelligence, which offers the most comprehensive federal guidance to date on this issue. 

Key Points to Remember:

• Possible Infringement: The Copyright Office acknowledges that the training process—which often involves downloading, transferring, and copying massive datasets—implicates exclusive copyright rights, such as the right of reproduction and the right to create derivative works.
• Case-by-Case Analysis: There is no blanket rule. Courts must apply the four statutory fair use factors (listed below) to the specific circumstances of each case, including the nature of the works, how they are used, and the function of the AI system.
• Transformativeness is Variable: While general-purpose models may often be considered transformative, transformativeness is “a matter of degree.” Training AI to generate expressive content that competes directly with the original works is less likely to be deemed fair use than models deployed for non-commercial research or closed, non-substitutive tasks.
• Licensing over Legislation: The Copyright Office favors voluntary, industry-led licensing markets over new statutory or compulsory licensing interventions. The presence of accessible licensing options for specific types of content makes a fair use defense less appropriate for those works.
• Unlawful Access: The Copyright Office takes the view that knowingly using pirated or unlawfully accessed works weighs against a finding of fair use.

The Four Fair Use Factors that should be considered in the context of AI:

• Purpose and Character of the Use: For instance, highly transformative uses (such as research or functional tools) weigh in favor of fair use, while uses that aim to create content competing with the original works disfavor it.
• Nature of the Copyrighted Work: Using highly creative or unpublished works weighs against fair use, whereas using factual or functional material may favor it.
• Amount and Substantiality Used: This factor takes into account the amount of the original work that was used. Because training often requires the use of the entire works, this factor typically weighs against fair use, though the Office suggests courts should also consider whether the AI model effectively prevents the public output of that protected expression.
• The Effect on the Market of the Newly-created Work: This factor is significant; if an AI system disrupts the market for original works or undermines their potential licensing opportunities, it weighs against fair use.

Since this is an evolving matter, if you are considering using copyrighted works to train AI systems, it is essential to monitor developments in your specific jurisdiction and industry. In the meantime, you can consider whether authorization or licensing are a safer pathway for you than relying solely on fair use defenses. 

You can also consider implementing guardrails to prevent your AI models from reproducing copyrighted works verbatim, which can help mitigate infringement risks. If you are using third-party AI models or tools, make sure to conduct due diligence regarding their training data sources and copyright compliance practices.

Are you confused about whether your use of AI is copyright infringement? Do you love using AI but need reassurance that you will not be sued? Let us help you. Reach out to Sutter today for guidance. Let us worry about copyrights and you can focus on your business. 

The post Can I use Copyrighted Works for Generative AI Training? appeared first on 91¶¶Ňő Business Law Firm.

We’re excited to share that Eric Milliken, founder of 91¶¶Ňő, has been invited to speak at the Diablo Valley Tech Initiative’s monthly meeting this September.

If you’ve spent any time around Eric, you know this is right in his wheelhouse. He’s worked with a lot of tech startups across the Diablo region, and one thing keeps coming up: founders who are ready to raise money but haven’t quite gotten their business set up in a way that investors expect to see. Eric will be talking through what that actually looks like in practice — the entity structures, the agreements, the stuff that sounds boring until it’s the reason a term sheet stalls out.

It’s a good session for anyone thinking about a raise in the next year or so, even if it feels early. Honestly, that’s kind of the point — the founders who get this right are usually the ones who started thinking about it before they had to.

When: Tuesday, September 1, 3:00–4:00 PM PST Where: Online, hosted by DVTI

Join with Google Meet: Or call in: (US) +1 650-466-0210

If you’re part of the Diablo Valley tech scene, come hang out — we’d love to see you there.

The post Eric H.Milliken Is Speaking at DVTI’s September Meeting appeared first on 91¶¶Ňő Business Law Firm.

When a business relationship falls apart, a former executive or founder frequently discovers that their ownership in a company has been wiped out, canceled, or reallocated without their permission.

For Delaware LLC’s (Limited Liability Company), this scenario often triggers a high-stakes legal battle. If you are trying to recover your ownership interest, one possible legal claim is called conversion.

For litigators representing an aggrieved individual in a civil arbitration under Delaware law, asserting a claim for the tort of conversion seems like a natural and powerful maneuver.

However, successfully pleading and sustaining a conversion claim involving intangible LLC membership units requires navigating a complex minefield where tort law, statutory definitions, and strict contractual principles collide.

The foundational definition of this tort remains firmly rooted in Delaware common law.

As codified in Chapter 12 of the Delaware Superior Court Civil Pattern Jury Instructions, conversion is defined as an act of dominion wrongfully exerted over the personal property of another, in denial of, or inconsistent with, his or her ownership rights.

While historically confined to tangible property, Delaware courts have long extended this protection to intangible corporate securities.

Under the landmark ruling Drug, Inc. v. Hunt, 168 A. 87, 93 (Del. 1933), the judiciary made it clear that an exercise of wrongful dominion over shares of stock, including a refusal to register a transfer or a wrongful cancellation, constitutes actionable conversion.

The critical threshold question is whether this protective corporate framework applies when the defendant entity is not a corporation, but an LLC.

The short answer is yes, but the statutory and strategic mechanics shift drastically. To establish the first element of conversion – proving a valid property right – practitioners must look to the Delaware Limited Liability Company Act.

Under 6 Del. C. § 18-701, the statute mandates that a limited liability company interest is personal property. Because the legislature has categorized these units as personal property, they are fully subject to conversion claims, even if they are completely intangible or exist merely as a line item on an uncertificated ledger.

Even if you have a valid claim, you’ll likely run into an important legal hurdle called the “Bootstrapping Rule,” also recognized under the economic loss or economic substance doctrine. In Delaware, most rights involving LLC ownership are governed by the company’s operating agreement.

Because Delaware LLC law prioritizes maximum flexibility of contract, virtually every right regarding your membership units – including how they vest, how they are valued, and how they can be forfeited – is dictated by the LLC’s operating agreement.

The company will likely argue that your dispute is only about the operating agreement. If that’s true, Delaware courts usually treat it as a breach of contract rather than a conversion claim  Consequently, the defense counsel in an arbitration proceeding will aggressively argue that your right to your membership units is purely defined by that agreement, meaning the dispute is entirely a contract claim and the tort of conversion must be dismissed as an impermissible attempt to “bootstrap” a breach of contract.

As the Court of Chancery warned in Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872 at 889-890 (Del. Ch. 2009), a plaintiff may not append a claim for conversion to a breach of contract claim unless the conversion claim arises from a breach of an independent legal duty that exists separate and apart from the contractual obligations.

Defeating the bootstrapping defense in an arbitration environment requires a precise strategic pivot.

Counsel cannot just point to a contract breach, such as an unjust termination that improperly triggered a unit forfeiture clause. Instead, you must demonstrate that the LLC management went entirely beyond a technical contractual failure and committed an independent, overt common-law tort after the contractual relationship fractured.

For example, if the entity merely fails to issue units required by a contract, that is a standard breach of contract. However, if the management team actively falsifies corporate ledgers, alters company books, or fraudulently files a certificate of amendment with the state to completely erase your name from the entity’s records without a legitimate vote, they have committed an independent, tortious exercise of wrongful dominion.

The strategic goal in your arbitration brief is to frame the injury not as a failure to perform under the contract, but as an independent, post-termination destruction of contractually vested personal property rights.

This distinction becomes even more critical when dealing with major entity maneuvers like unauthorized mergers, recapitalizations, or forced cash-outs.

In traditional corporate litigation, a plaintiff seeking to establish that a wrongful corporate action constitutes a conversion of their stock must look past Arnold v. Society for Savings Bancorp, Inc., 678 A.2d 533, 536 (Del. 1996)—which actually rejected a conversion claim arising from a merger—and relied instead on the foundational rule from Drug, Inc. v. Hunt, 168 A. 87, 93 (Del. 1933). Drug, Inc. establishes that a conversion of stock occurs when an entity wrongfully exerts dominion over a holder’s shares in denial of, or inconsistent with, their ownership rights.

While this core common-law tort theory theoretically applies to alternative entity units, citing corporate merger cases like Arnold in an LLC dispute is a tactical misstep. Because Delaware courts fiercely protect the boundaries between rigid corporate statutes and contract-based alternative entities, the defense will use any corporate law citation to argue that corporate-centric doctrines do not apply to an LLC governed by an operating agreement.

To successfully argue that an unauthorized LLC merger or cash-out constitutes a conversion of your units, counsel must anchor the argument to the operating agreement’s voting and consent provisions.

When an LLC management team executes an invalid merger or cash-out in direct violation of the entity’s governing agreement, the transaction itself is legally void or voidable.

Therefore, treating the member’s contractually vested units as “canceled” or “wiped out” under an invalid transaction transforms the corporate action into a common-law tort.

By combining the statutory baseline of 6 Del. C. § 18-701 with the modern tort framework of Kuroda, you can powerfully demonstrate to the arbitrator that the unauthorized destruction of LLC membership units is an independent, actionable conversion demanding full compensatory relief.

That is where Sutter comes in. Avoid costly legal battles between founders and shareholders.

Our  team of experienced Attorneys are here to cross your t’s and dot your i’s so that you do not face equity conversion claim lawsuits or become a victim of one.

Let us protect your company, so that you can focus on what you do best: growing your startup.

The post Navigating Equity Conversion Claims in Delaware LLC Arbitrations: The “Bootstrapping” Trap and Beyond appeared first on 91¶¶Ňő Business Law Firm.

When corporate misconduct occurs, shareholders often feel the impact directly.

However, from a legal standpoint, not all losses are created equal. If you are considering legal action, the first hurdle is determining whether your claim is direct or derivative.

In California, the distinction is critical because these are mutually exclusive legal claims—you generally must bring either a direct action or a derivative action, not both. 

The Two Paths of Litigation

In California, shareholders are generally limited to two specific types of legal actions:

Shareholders may bring two types of actions, “a direct action filed by the shareholder individually (or on behalf of a class of shareholders to which he or she belongs) for injury to his or her interest as a shareholder,” or a “derivative action filed on behalf of the corporation for injury to the corporation for which it has failed or refused to sue.” (Friedman, Cal. Practice Guide: Corporations (The Rutter Group 2004) ¶ 6:598, p. 6-127.)

It is important to note that you cannot simply choose whichever sounds more convenient. As Friedman notes, “The two actions are mutually exclusive: i.e., the right of action and recovery belongs either to the shareholders (direct action) or to the corporation (derivative action).” (Ibid.)

Who Actually Receives the Recovery?

One of the most surprising aspects of a derivative suit for many shareholders is that they aren’t the primary beneficiaries of a court victory. When the claim is derivative:

The “shareholder is merely a nominal plaintiff . . . . Even though the corporation is joined as a nominal defendant . . . , it is the real party in interest to which any recovery usually belongs.” (Friedman, supra, ¶ 6:602, pp. 6-128.1 to 6-128.2.)

Why Can’t I Sue for My Stock Value Dropping?

A common grievance is the loss of stock value due to management’s poor decisions. However, under California law, you generally cannot sue management directly for this.

“A shareholder cannot bring a direct action for damages against management on the theory their alleged wrongdoing decreased the value of his or her stock (e.g., by reducing corporate assets and net worth). The corporation itself must bring such an action, or a derivative suit may be brought on the corporation’s behalf.” (Schuster v. Gardner (2005) 127 Cal.App.4th 305, 312, citing Friedman, Cal. Practice Guide: Corporations, supra, ¶ 6:601.1, p. 6-128.1, citing Sutter v. General Petroleum Corp. (1946) 28 Cal.2d 525, 529–530, O’Hare v. Marine Electric Co. (1964) 229 Cal. App. 2d 33, 36–37.)

The reasoning behind this is practical. Allowing every shareholder to sue individually for a drop in stock price would “authorize multitudinous litigation and ignore the corporate entity.” (Sutter v. General Petroleum Corp., supra, at p. 530.)

Determining the “Gravamen” of the Complaint

Courts look at the “gravamen” (the essence) of the harm to decide which category a case falls into.

As established in Jones v. H. F. Ahmanson & Co., an action is derivative if  “The gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets.” (Jones v. H. F. Ahmanson & Co., supra, 1 Cal.3d at 106.)

Examples of Direct Actions

If the damage is unique to the shareholder’s rights rather than the company’s bottom line, a direct action may be appropriate. Examples of direct shareholder actions include:

• Suits to compel the declaration of a dividend.
• Payment of lawfully declared or mandatory dividends.
• Enjoining a threatened ultra vires act (actions beyond the company’s legal power).
• Enforcing shareholder voting rights.

The General Rule and Its Consequences: The Paclink Case

To further solidify how California courts view these disputes, we can look to the decision in Paclink Communications Internatl., Inc. v. Superior Court (2001) 90 Cal.App.4th 958. This case serves as a cautionary tale for shareholders who attempt to bypass the derivative process.

In Paclink, the Court of Appeal reaffirmed the general rule that an “individual stockholder may not maintain an action in his own right for destruction of or diminution in the value of the stock.” (PacLink, supra, 90 Cal.App.4th at 965 [internal quotation and alteration omitted].)

The Corporate Shield

The legal system treats the corporation as a distinct entity. Therefore, if the corporation is the party that suffered the harm, it is the corporation that must seek a remedy. If the corporation fails to file suit itself, a “suit may be filed by a stockholder acting derivatively on behalf of the corporation.” (Ibid. [internal quotation omitted].)

The Risk of Improper Pleading

Choosing the wrong “label” for your lawsuit isn’t just a minor technicality—it can lead to your case being dismissed entirely before it even reaches a jury.

For example, in Paclink, the plaintiffs tried to sue for personal damages rather than on behalf of the company. Consequently, if plaintiffs’ causes of action are pled against defendants as personal causes of action, rather than as derivative causes of action, the trial court will sustain the demurrer, because the claims were derivative in nature, not direct claims. (Ibid. at 965-66.)

Final Thoughts: Navigating the Complexities of Shareholder Rights

Understanding the boundary between a direct and a derivative action is more than just a legal exercise—it is the foundation of a successful recovery. As the California courts have consistently ruled, misidentifying the nature of your claim can lead to a swift dismissal. Whether you are dealing with a breach of fiduciary duty that has devalued the entire company or a specific infringement on your rights to vote or receive dividends, the path you choose matters.

The legal landscape of corporate governance is intricate, and the stakes are often high. You don’t have to navigate these definitions alone.

Need Assistance Evaluating Your Potential Lawsuit?

If you are a shareholder concerned about corporate misconduct or a decline in the value of your shares, it is vital to have an experienced legal perspective on your side. Identifying the “gravamen” of your injury early can save you months of costly litigation errors.

Contact 91¶¶Ňő today. Our team can assist you in evaluating your potential lawsuit to determine if your claims are direct or derivative. Beyond litigation, we specialize in seeking to negotiate an informal resolution of the dispute, helping you protect your interests without the necessity of a prolonged courtroom battle.

The Two Paths of Litigation

In California, shareholders are generally limited to two specific types of legal actions:

Shareholders may bring two types of actions, “a direct action filed by the shareholder individually (or on behalf of a class of shareholders to which he or she belongs) for injury to his or her interest as a shareholder,” or a “derivative action filed on behalf of the corporation for injury to the corporation for which it has failed or refused to sue.” (Friedman, Cal. Practice Guide: Corporations (The Rutter Group 2004) ¶ 6:598, p. 6-127.)

It is important to note that you cannot simply choose whichever sounds more convenient. As Friedman notes, “The two actions are mutually exclusive: i.e., the right of action and recovery belongs either to the shareholders (direct action) or to the corporation (derivative action).” (Ibid.)

Who Actually Receives the Recovery?

One of the most surprising aspects of a derivative suit for many shareholders is that they aren’t the primary beneficiaries of a court victory. When the claim is derivative:

The “shareholder is merely a nominal plaintiff . . . . Even though the corporation is joined as a nominal defendant . . . , it is the real party in interest to which any recovery usually belongs.” (Friedman, supra, ¶ 6:602, pp. 6-128.1 to 6-128.2.)

Why Can’t I Sue for My Stock Value Dropping?

A common grievance is the loss of stock value due to management’s poor decisions. However, under California law, you generally cannot sue management directly for this.

“A shareholder cannot bring a direct action for damages against management on the theory their alleged wrongdoing decreased the value of his or her stock (e.g., by reducing corporate assets and net worth). The corporation itself must bring such an action, or a derivative suit may be brought on the corporation’s behalf.” (Schuster v. Gardner (2005) 127 Cal.App.4th 305, 312, citing Friedman, Cal. Practice Guide: Corporations, supra, ¶ 6:601.1, p. 6-128.1, citing Sutter v. General Petroleum Corp. (1946) 28 Cal.2d 525, 529–530, O’Hare v. Marine Electric Co. (1964) 229 Cal. App. 2d 33, 36–37.)

The reasoning behind this is practical. Allowing every shareholder to sue individually for a drop in stock price would “authorize multitudinous litigation and ignore the corporate entity.” (Sutter v. General Petroleum Corp., supra, at p. 530.)

Determining the “Gravamen” of the Complaint

Courts look at the “gravamen” (the essence) of the harm to decide which category a case falls into.

As established in Jones v. H. F. Ahmanson & Co., an action is derivative if  “The gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets.” (Jones v. H. F. Ahmanson & Co., supra, 1 Cal.3d at 106.)

Examples of Direct Actions

If the damage is unique to the shareholder’s rights rather than the company’s bottom line, a direct action may be appropriate. Examples of direct shareholder actions include:

• Suits to compel the declaration of a dividend.
• Payment of lawfully declared or mandatory dividends.
• Enjoining a threatened ultra vires act (actions beyond the company’s legal power).
• Enforcing shareholder voting rights.

The General Rule and Its Consequences: The Paclink Case

To further solidify how California courts view these disputes, we can look to the decision in Paclink Communications Internatl., Inc. v. Superior Court (2001) 90 Cal.App.4th 958. This case serves as a cautionary tale for shareholders who attempt to bypass the derivative process.

In Paclink, the Court of Appeal reaffirmed the general rule that an “individual stockholder may not maintain an action in his own right for destruction of or diminution in the value of the stock.” (PacLink, supra, 90 Cal.App.4th at 965 [internal quotation and alteration omitted].)

The Corporate Shield

The legal system treats the corporation as a distinct entity. Therefore, if the corporation is the party that suffered the harm, it is the corporation that must seek a remedy. If the corporation fails to file suit itself, a “suit may be filed by a stockholder acting derivatively on behalf of the corporation.” (Ibid. [internal quotation omitted].)

The Risk of Improper Pleading

Choosing the wrong “label” for your lawsuit isn’t just a minor technicality—it can lead to your case being dismissed entirely before it even reaches a jury.

For example, in Paclink, the plaintiffs tried to sue for personal damages rather than on behalf of the company. Because the plaintiffs asserted personal claims instead of derivative claims, the court held that their complaint was subject to demurrer. The decision illustrates that correctly identifying the nature of the claim is essential before filing suit. (Ibid. at 965-66.)

Final Thoughts: Navigating the Complexities of Shareholder Rights

Understanding the boundary between a direct and a derivative action is more than just a legal exercise—it is the foundation of a successful recovery. As the California courts have consistently ruled, misidentifying the nature of your claim can lead to a swift dismissal. Whether you are dealing with a breach of fiduciary duty that has devalued the entire company or a specific infringement on your rights to vote or receive dividends, the path you choose matters.

The legal landscape of corporate governance is intricate, and the stakes are often high. You don’t have to navigate these definitions alone.

Need Assistance Evaluating Your Potential Lawsuit?

If you are a shareholder concerned about corporate misconduct or a diminution in the value of your interests, it is vital to have an experienced legal perspective on your side. Identifying the “gravamen” of your injury early can save you months of costly litigation errors.

Contact 91¶¶Ňő today. Our team can assist you in evaluating your potential lawsuit to determine if your claims are direct or derivative. We also work to resolve shareholder disputes through negotiation whenever possible, helping clients protect their interests without the cost and uncertainty of a prolonged courtroom battle.

The post Direct vs. Derivative: Understanding Shareholder Litigation in California appeared first on 91¶¶Ňő Business Law Firm.

In the high-stakes world of startups, equity is more than just compensation; it is the realization of a founder’s vision and years of sweat equity.

However, a troubling trend has emerged where boards of directors use for-cause terminations as a predatory tool to strip departing founders of their vested interests, often leading to a high-stakes founder dispute.

How Startup Equity Repurchase Rights Work

Most founder common stock purchase agreements (commonly referred to as “CSPAs”) include a repurchase option, allowing the company to buy back the shares upon an individual’s departure.

While this is standard for unvested shares, for-cause terminations are often leveraged to try to force the forfeiture of vested shares for a nominal sum, sometimes as low as a fraction of a penny per share.

For example, one might see a co-founder who dedicated years to building an enterprise from the ground up, only to find their significant block of vested shares targeted for repurchase by the company at a total price of just a few dollars.

This can occur even when the company’s most recent valuation cap suggests those same shares are worth hundreds of thousands, or even millions, of dollars. Such a gross disparity between market reality and a nominal buy-back price is almost always the catalyst for a complex equity dispute.

Imagine spending five years building a company, only to be told your fully vested shares—potentially worth hundreds of thousands or even millions of dollars based on the company’s latest financing round—will be bought back for only a few dollars.

Disputes like these can quickly become high-stakes founder equity lawsuits.Ěý

When “For Cause” Becomes an Equity Clawback

A “for cause” termination generally requires serious misconduct, such as fraud, theft, or a material violation of company policy. However, founders sometimes allege that boards use “cause” as a pretext to remove a founder while reclaiming valuable equity. 

To justify such a massive clawback of value, boards may orchestrate a for-cause exit without providing documented justification or evidence of misconduct.

Under California law, terminating a fellow director or officer specifically to facilitate the forfeiture of vested equity is considered an act of bad faith and a breach of fiduciary duty.

Fiduciary Duties and the Board’s Overreach

In  California, directors of a corporation owe a fiduciary duty of loyalty and good faith to all stockholders. When a board acts to consolidate control or minimize the ownership of a stakeholder through a forced buyout, they are transforming a simple separation into a legal founder dispute.

When managing a founder dispute, it is critical to understand that boards must act with intrinsic fairness whenever they deal with the vested interests of stockholders.

This duty of good faith is significantly heightened when the board is dealing with minority shareholders in close corporations, where the potential for a lopsided equity dispute is greatest. In some circumstances, directors who knowingly participate in bad-faith conduct may face personal liability rather than relying solely on the company’s corporate protections.Ěý

Warning Signs of a Potentially Unfair Equity Dispute

While every case is different, founders should pay close attention if:

• The company provides little or no documentation supporting a “for cause” termination.
• The proposed repurchase price is only a nominal amount despite a recent company valuation.
• Board members or investors stand to benefit financially from reducing your ownership.
• The company pressures you to sign a separation agreement immediately.
• You are denied access to company records explaining the board’s decision.

These facts do not necessarily mean the termination was unlawful, but they may warrant closer legal review.

Navigating an Equity Dispute

For founders and early employees facing a potential founder dispute, the lessons are clear: you must rigorously scrutinize your repurchase rights to understand exactly what happens to your vested shares if the company claims “cause.” If a company moves toward termination, you should demand formal documentation, as the board must provide clear evidence to back up their claims; without it, their position in a dispute remains legally vulnerable.

Finally, it is vital to recognize the true value of your contributions and never accept a nominal settlement that fails to reflect the fair market value of your holdings, especially when recent financing rounds have established a clear valuation cap that defines the stakes of your equity dispute.

Equity represents the foundation of what you’ve built.

Don’t let a for-cause pretext strip you of your hard-earned rights in a lopsided dispute.

If you are involved in a founder or an equity dispute and believe you need legal assistance navigating through, please contact 91¶¶Ňő.

The post Vesting and Vengeance: Can a Startup Take Back Your Vested Equity After a “For Cause” Termination?  appeared first on 91¶¶Ňő Business Law Firm.

From the telegraph to the telephone, to the internet, to remote employment and beyond, developing technology allows businesses to expand their operations into almost any state or territory.

This growth can be exciting and profitable. But it also may subject companies to new laws, regulations, and obligations – including a requirement to register as a foreign entity conducting business within the new state or territory.

Because each state has its own statutory requirements, deadlines, and procedures for foreign business registrations, researching the process before starting the registration can save time, money, and lots of frustration. Our attorneys at Sutter are here to support you.

A quick review of the registration application form(s) can reveal specific and uncommon information a state may require for the registration process.

For example, Louisiana requires a notarized signature for both the Registered Agent and the Company Officer who is filing the application.

Wisconsin requires a comprehensive calculation of the company’s total and local revenue earnings and capital proportions. New York requires consent from the state’s Tax Commission, and Rhode Island requires a complete itemization of all authorized company stock.

These are just a few examples of atypical filing requirements.

However, while registration processes vary significantly from state to state, there are some fundamental items a company will need to file as a foreign entity in almost any state. 

• Business Name
• Local Registered Agent
• Certificate of Good Standing/Certificate of Existence
• Domestic Registration Details (ID number, incorporation date, EIN)
• Governance Information
• Miscellaneous Information

Business Name

First, the company should make sure its name is available for the foreign business registration. In most cases, the Secretary of State’s Office governs foreign registrations and the business name availability.

If another entity is actively registered with the foreign company’s name, the foreign company will have to select a fictitious business name for its registration.

Checking the name availability before starting the registration process allows a company to identify if it will need to include a fictitious business name DBA (Doing Business As), or assumed name, depending on the state’s laws.

Checking name availability before starting the foreign qualification process helps avoid delays and ensures the registration application is complete.

Local Registered Agent

Every state requires a foreign company to have a registered agent who is physically located within the state.

If a company does not have an individual physically located in the state who is authorized to serve as the registered agent, the company will have to hire a professional registered agent service provider.

The company will need the registered agent’s name (business name), physical address (not a PO Box), and a notice provided by the agent confirming it has agreed to serve as the company’s registered agent.

Certificate of Good Standing/Certificate of Existence

Almost every state requires a Certificate of Good Standing or a Certificate of Existence issued by the company’s domestic (home) Secretary of State.

The company will have to order the certificate from its domestic Secretary of State before processing its foreign qualification application. Some states, such as Washington, issue the certificate electronically and it is available immediately.

Other states, such as Delaware, deliver hardcopy certificates and can take several weeks to acquire without paying substantial expedition costs.

Additionally, the certificate must be submitted to the foreign state within a restricted period of time from when the certificate was issued. The time frame varies by state, ranging from 30 to 180 days.

Domestic Registration Details

When completing a foreign entity registration, companies are generally required to provide information from their home-state registration, including: 

• The company’s registration number (such as a UBI, file number, or state ID number)
• The company’s physical business address
• The company’s mailing address if different 
• The date the company was incorporated in its home state
• The company’s Employer Identification Number (EIN)

Governance Information

States often require the following governance information for foreign qualification application, including::

• Complete names and addresses for each Director or Manager
• Complete names and addresses for each Officer, specifically CEO, President, Treasurer, and Secretary

Miscellaneous Information

States often require the following miscellaneous information for foreign business registration process, including::

• The first date the company started conducting business in the foreign state
• An email address for the company
• A telephone number for the company

Don’t find yourself lost in the confusion of registering your business Our team of experienced attorneys are here to support you. Let 91¶¶Ňő take care of the details so you can focus on  what you do best: building your company! 

The post Registering a Company as a Foreign Business is Not for the Faint of Heart appeared first on 91¶¶Ňő Business Law Firm.

The recent USPS postmark rule changes may impact legal deadlines, contract acceptance, bill payments, and other time-sensitive mailed documents for businesses and individuals alike. 

On December 24, 2025, the U.S. Postal Service revised its franking and USPS postmark rules.

The updates are intended to modernize mail delivery systems with new technologies and redesigned post office retail spaces. The redesign includes centralizing certain sorting and processing functions at regional hub centers, rather than processing all initial mail activities at the local post office where the mail starts its journey.

But how might these updates affect your legal rights, responsibilities, and expectations for mail you send and receive?

First, these changes affect mail you drop in a mailbox or post office box (blue canister). Before the changes were made, mail collected from these drop locations was transported to a local post office and postmarks were applied with the date the mail was collected.

Now, collected mail is transferred from local post office collection points to a regional sorting facility. Postmarks (franking) are not applied until the mail reaches and is processed through the regional center.

This means your mail probably will not be postmarked on the day you drop it in a mailbox. Early reports indicate franking may happen between 1-4 days after mail is initially deposited.Ěý

General Mail Payment Rules

In most situations, mail generally is recognized as being sent as of the postmark date. This applies to bill payments, tax payments, ballots, final paycheck delivery, and similar date-dependent activities.

However, this general rule can be replaced with unique deadline terms for specific situations, such as invoice payments, transaction closing terms, certain debt payments, and contractual offer and acceptance transactions.

One such rule that affects whether a contract is legally binding is the Mailbox Rule.

What is the Mailbox Rule?

Under contract law, a legally binding contract must have four basic elements: 

1. Mutual assent (offer and acceptance)
2. Consideration (something of value is exchanged)
3. Capacity (contracting parties are old enough to form a contract, of sound mind, and have the authority to enter into the contract)
4. Legality (the contract is made for a lawful purpose).

In most states, the mailbox rule determines when an offer is accepted – establishing the first required contractual element. According to the mailbox rule, an offeree accepts an offer from the offeror the moment the offeree mails its acceptance, not when the offeror receives the acceptance.

Further, the mailbox rule applies to other forms of communication, such as a fax, telegram, or email, if it is irrevocable once it is sent.

Are There Mailbox Rule Variations?

Yes! First, the type of contract is a variance. In most states, the Mailbox Rule in contract law applies only to bilateral contract – agreements in which both parties have an obligation to perform under the contract.

Some states have limited the Mailbox Rule to also apply to option contracts – agreements that give one of the parties the right to take a future action, but not the obligation to take the action.

The Mailbox Rule also can be superseded by terms included in contracts, term sheets, memorandums of understanding, and similar deal-management documents.

These terms can establish automatic expiration or revocation circumstances, as well as require specific types of mailing (certified or return receipt delivery), address delivery locations, and third parties who also must receive copies of the mail.Ěý

Ultimately, it is important not to presume that mail, and written communications in general, follow a single delivery rule.

But they do not! Do not get stuck confused about local Mailbox Laws. Let 91¶¶Ňő guide you in your legal mail deadlines, what delivery methods to use, and prevent costly disputes before they even arise.

The post Did You Mail It On Time? USPS postmark rule appeared first on 91¶¶Ňő Business Law Firm.

In the high-stakes world of startups, equity is more than just compensation; it is the realization of a founder’s vision and years of sweat equity.

However, a troubling trend has emerged where boards of directors use for-cause terminations as a predatory tool to strip departing founders of their vested interests, often leading to a high-stakes founder dispute.

The Mechanics of the Equity Dispute

Most founder common stock purchase agreements (commonly referred to as “CSPAs”) include a repurchase option, allowing the company to buy back the shares upon an individual’s departure.

While this is standard for unvested shares, for-cause terminations are often leveraged to try to force the forfeiture of vested shares for a nominal sum, sometimes as low as a fraction of a penny per share.

For example, one might see a co-founder who dedicated years to building an enterprise from the ground up, only to find their significant block of vested shares targeted for repurchase by the company at a total price of just a few dollars.

This can occur even when the company’s most recent valuation cap suggests those same shares are worth hundreds of thousands, or even millions, of dollars.

Such a gross disparity between market reality and a nominal buy-back price is almost always the catalyst for a complex equity dispute.

The Pretext of Cause in a Founder Dispute

To justify such a massive clawback of value, boards may orchestrate a for-cause exit without providing documented justification or evidence of misconduct.

Under California law, terminating a fellow director or officer specifically to facilitate the forfeiture of vested equity is considered an act of bad faith and a breach of fiduciary duty.

Fiduciary Duties and the Board’s Overreach

Directors of a corporation owe a fiduciary duty of loyalty and good faith to all stockholders. When a board acts to consolidate control or minimize the ownership of a stakeholder through a forced buyout, they are transforming a simple separation into a legal founder dispute.

When managing a founder dispute, it is critical to understand that boards must act with intrinsic fairness whenever they deal with the vested interests of stockholders.

In California, this duty of good faith is significantly heightened when the board is dealing with minority shareholders in close corporations, where the potential for a lopsided equity dispute is greatest.

Furthermore, directors should be acutely aware that orchestrating or causing such violations can lead to significant personal liability for the individual officers and directors involved, as the corporate veil does not always protect those who act in bad faith.

Navigating an Equity Dispute

For founders and early employees facing a potential founder dispute, the lessons are clear: you must rigorously scrutinize your repurchase rights to understand exactly what happens to your vested shares if the company claims “cause.” If a company moves toward termination, you should demand formal documentation, as the board must provide clear evidence to back up their claims; without it, their position in a dispute remains legally vulnerable.

Finally, it is vital to recognize the true value of your contributions and never accept a nominal settlement that fails to reflect the fair market value of your holdings, especially when recent financing rounds have established a clear valuation cap that defines the stakes of your equity dispute.

Equity represents the foundation of what you’ve built. Don’t let a for-cause pretext strip you of your hard-earned rights in a lopsided dispute.

If you are involved in a founder or an equity dispute and believe you need legal assistance navigating through, please contact 91¶¶Ňő.

The post Vesting and Vengeance: How “For Cause” Terminations are Used to Claw Back Equity appeared first on 91¶¶Ňő Business Law Firm.