Litigation Lawyer Martin Chitwood Talks About Business Risks and Rewards

starting a business

Imagine you’re an entrepreneur. This means you have a product or service to sell and need to create a company to bring it to market. In the simplest terms there are three options on how to accomplish this structure:

  • Sole Proprietorship—You “hang out your shingle” and open your doors
  • Partnership—You enter into an agreement with one or more other people and work together towards a common goal
  • Incorporation—You divide the ownership interest into small packets (i.e. shares of stocks) allowing people and/or legal entities to own variable portions of the company

Corporations

One of the first steps to establishing this type of company is to file Articles of Incorporation with whichever state you decide to set up in (assuming you’re incorporating in the U.S.). These will establish, among other things, the company name, the original officers and the number of shares and types of stock. Shares may or may not pay dividends or have voting rights.

Going Public

At the beginning, you or a small circle of people may control all the outstanding shares of stock, but there may come a time when it works better to decide to raise capital from outside investors by selling all or part of the unissued stocks. This is when the company sets up an Initial Public Offering (IPO) through one of the exchanges.

One of the most important aspects of bringing in outside people who now own a percentage of the company is the establishment of a fiduciary relationship. As an officer of that association, you agree to act in a fair and honest manner with your new shareholders. Whether regarding potential mergers or maintaining the value of the stocks, you agree to deal in an aboveboard manner.

It Happens

Every so often, through an honest mistake or a more nefarious occurrence, something untoward happens that significantly impacts the shareholders of the corporation. Those people are going to want to know what happened and to be compensated for monetary losses. They’re going to need an attorney.

Making a Wise Choice for a Lawyer

Now imagine you are a stockholder. The value of your investment has tanked, and you come to suspect not everything was on the up-and-up. You are going to need legal advice and if your suspicions pan out it’s likely you will end up as part of a class action lawsuit. There are many capable candidates out there, and one I will use as an example is the prominent Atlanta-based litigator Martin Chitwood. By outlining his credentials and experience I hope to paint a picture of the type of things you will want in your representative.

Motivation

What’s the difference between a dead skunk and a dead lawyer in the middle of the road? Skid marks around the skunk {a rimshot sounds}. There are many unflattering jokes like this floating around, suffice it to say the practice of law is not always a well-respected field of endeavor. By-and-large a person has to have developed a love for the law somewhere in their life because it is not exactly the easiest path to gaining employment. Consider:

Education—Four years of college to get a bachelor’s degree; another three to get a law degree (Juris Doctor or J.D.). Assuming a full time, continuous course of study.

Difficult exam—After obtaining the degree a prospective lawyer has to take the Bar Exam in order to actually become a practitioner. Passing this test is not a foregone conclusion, not by a long shot. In 2016, across all U.S. jurisdictions, only 58 percent passed the exam.

Long hours—It’s unlikely a lawyer works a 40-hour per week job. A minimum of 50 is more probable and it goes up from there.

Experience

When it comes right down to it, you’re going to ask yourself: “Do they win?” and “How much do they win?” Someone like Mr. Chitwood will have a proven track record of success. Among the cases you’ll find on his resumé:

In re BankAmerica Securities Litigation: In a multiple-jurisdiction case, attorneys for the plaintiffs achieved a $440 million settlement arising out of the bank merger between BankAmerica and NationsBank that resulted in what we now know as Bank of America.

In re Oxford Health Plans, Inc: In the United States District Court for the Southern District of New York the plaintiffs achieved a $300 million settlement in  an accounting fraud class action.

Passion

Mr. Chitwood also personifies dedication to his chosen field making it both a vocation and an avocation. Outside of the actual practice of law, he has written a scholarly book about common law. He has also written and co-produced a movie about the fight of Alabama State Attorney Richard Flowers against racism at the height of the Civil Rights Movement.

In Conclusion

It is critical for budding entrepreneurs to understand that corporate officers have important fiduciary duties to their shareholders, and that when they fail to uphold these duties, they expose themselves to class action litigation brought by formidable lawyers like Mr. Chitwood.  These cases play an important deterrent role against corporate fraud and serve to protect shareholders

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