Prevailing over Toyota Tsusho in Court Battle

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In a classic David versus Goliath story, TroyGould attorneys Russell Glazer and Arvin Tseng, representing  Scott Vollero, prevailed in two arbitrations and a related federal court case brought against Mr. Vollero by Toyota Tsusho America and ELVCR (an internal division of Toyota Tsusho America).

In 2011, Mr. Vollero sold the assets of his company, Autocats Inc., to ELVCR, an entity established by Toyota Tsusho America for the purpose of a joint venture between Toyota Tsusho America and Mr. Vollero.  At the outset, ELVCR began suffering significant financial losses.

In 2013, Toyota Tsusho America brought a lawsuit in federal court against Mr. Vollero, contending that he made misrepresentations and omissions to Toyota Tsusho America and was responsible for the losses ELVCR sustained.  ELVCR brought an arbitration against Scott Vollero based on the same allegations.  Mr. Vollero responded that Toyota Tsusho America’s management was using him as a scapegoat for ELVCR’s business problems that were, in fact, the result of managerial ineptness on the part of ELVCR’s Toyota Tsusho America-installed managers.

Over Toyota Tsusho America and ELVCR’s objections, the cases were referred to a consolidated arbitration, with Toyota Tsusho America’s claims against Mr. Vollero to be heard first by a panel of three arbitrators.  The arbitration panel agreed with Scott Vollero.  It ruled that Toyota Tsusho America, even though ably represented by three separate law firms and private investigators, and given two years of discovery efforts, failed to produce any evidence that Mr. Vollero caused any damage to either Toyota Tsusho America or ELVCR.  The panel ruled that ELVCR’s losses were NOT the result of actions by Mr. Vollero, but the result of actions attributable to Toyota Tsusho America managers in charge of ELVCR.

The panel’s ruling, which was adopted by the federal court, rejected all of Toyota Tsusho America’s claims against Mr. Vollero.  In light of the ruling in favor of Mr. Vollero, ELVCR dismissed its arbitration against Mr. Vollero and his company.  For the legal team at TroyGould and Scott Vollero, these rulings were a resounding victory.

Any questions or comments regarding this matter can be directed to Russell Glazer at  rglazer@troygould.com  or Arvin Tseng at atseng@troygould.com

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Setting Out on Your Own? Don’t Neglect These 7 New Business Basics

Setting out in business for yourself? Good luck!

Just kidding… well, sort of. Starting a business is hard work, and it’s critical for established business people (and folks who have successfully exited and now enjoy the good life) to serve as mentors, role models and fonts of advice for those who come after them.

Happily, you don’t have to have a seasoned entrepreneur at your beck and call to learn from the best. If you’re hoping to learn all about new business basics, check out The New York Times’ helpful tips for new businesses and their intrepid owners. The most important to keep in mind include:

  1. Identify Your Customers

Every company needs customers. Clearly identifying your company’s customer base doesn’t necessarily guarantee success, but it’s a critical first step — and can be an early warning sign that things might not work out.

There are many ways to identify a customer base. If you’re entering a crowded market, simply look at the folks your competitors are targeting. If you’re playing in a more specialized niche, define and develop your product, determine the value it provides, and lay out the types of people (buyer personas) who’d be willing to pay for that value.

  1. Estimate Your Entry Costs

Business entry costs turn on numerous factors, many of them industry-specific. But you need to create as accurate an accounting of those costs as possible, or else you’ll find yourself short of cash right as you’re making your final push to market. Consider:

  • The cost of designing and prototyping your product or service
  • The cost of manufacturing or sourcing your initial inventory/SKUs, if applicable
  • The cost of hiring and training employees, if applicable
  • The cost of advertising, promotion and market-building
  • Buildout costs, if applicable
  • Overhead, such as rent and utilities
  • Logistical costs, including third-party fulfillment and transportation

Additionally, estimate your total time to revenue and profit. These timeframes are critical for determining the amount of cash you’ll need to have on hand and are essential if and when you look for startup financing.

  1. Analyze Your Competitors

Before you go into business, you need to know who’s already there. Conduct a competitive analysis of direct and indirect competitors — firms that offer similar or identical products and service in markets or verticals identical to or adjacent to yours. Learn as much as you can about their revenue and profit models, determining their strengths and weaknesses to the extent possible. And determine whether your competitors adequately serve their/your markets, or if there’s room for you to enter — either by acquiring their customers, growing the market’s overall customer pool, or creating a new market altogether.

  1. Make Sure Your Product or Idea Is Marketable

Will people actually buy what you’re selling? For entrepreneurs who’ve spent months or years working on an idea, this is the ultimate test. Hire a third-party firm to test your market or go the budget-friendly route and do your own research. Adjust your price points, change your approach, or scrap the whole thing as necessary.

  1. Create an Advantageous Legal Structure

Your business needs some sort of legal structure that keeps its assets separate from your personal possessions — a corporate veil, in industry parlance. Your personal situation, the nature of your business and the presence of other owners will determine the structure that works best for you. Common options include:

  • S-corporation: Also known as “pass-through” organizations, S-corps have some tax advantages and theoretically provide a liability shield for their owners. However, it’s critical for S-corp owners to strictly separate their personal and business finances or face grave liability risks.
  • Sole proprietorship and partnerships: These are cheap and easy to set up, but they come with a substantial liability downside that could hamper profitability.
  • Limited liability corporation: LLCs cost a bit more to set up, but they provide critical liability protection — which buyers may demand.
  1. Secure All Business-Critical Intellectual Property

Depending on the nature of your business, it’s possible that most or all of its practical value could be bound up in proprietary processes or technologies. To ensure that your intellectual property can’t be compromised by unscrupulous prospects or patent trolls, file patents for all of the technologies and processes you’ve acquired or developed in-house before selling anything.

  1. Explore Your Options for Raising Capital

Even if you’re not operating a particularly capital-intensive business, you’ll probably need to raise capital at some point, whether to get your firm off the ground, develop a new product, or expand into new markets. Traditional banks are usually cool to the idea of lending to unproven startups, so you’ll need to get creative. Common capital-raising options include:

  • SBA loans, though you’ll need to ensure that you meet occasionally byzantine eligibility requirements
  • “Friends and family” fundraising rounds, which come with strict rules on how you can offer shares
  • Crowdfunding, or offering non-equity consideration for small (usually online) donations from supporters
  • Equity crowdfunding, a relatively recent innovation that allows you to publicly offer shares to accredited and possibly non-accredited investors through regulated online platforms

Remember to Take a Breath

Many veteran business owners are quick to give another bit of advice that’s not so popular in rah-rah entrepreneurial circles: Don’t forget to take care of yourself as you take care of your business. Put another way, don’t forget to stop and smell the roses.

Running a business is hard work, but business owners who work themselves too hard risk burning out or getting caught in a self-defeating spiral of worry, doubt and fear. Working too hard can be bad for one’s physical health, too. You can’t run your business if you’re stuck in bed or laid up in the sick bay.

Ultimately, choosing to start a business is a personal decision with life-changing ramifications. If you’re worried that you’re not at the point in your life where you can handle the challenges and demands, don’t feel as if you’ve let yourself down. As the kids say these days, you’ve got to “do you.”