Business Law Updates

Recent Decision Concerning the Purchase of a Business

In Sunbelt Business Brokers v. James, 2009 Ark. 659, the Arkansas Court of Appeals ruled that the purchaser of a business was not defrauded due to information produced by the business broker and allegedly relied upon by the purchaser to her detriment.  The purchaser had acquired two Subway franchises pursuant to a transaction brokered through Sunbelt Business Brokers.  When the businesses ended up not being as profitable as she hoped, she sued under the theory that the cash-flow form furnished by the broker was erroneous.  The Court ultimately ruled that the purchaser did not “justifiably rely” upon the information, to her detriment, as required for a finding of fraud.  Of specific note was the fact that the purchaser was a financial-services advisor with extensive accounting experience, and that her husband was a Certified Public Accountant. 

Under Arkansas law, to prove fraud, a Plaintiff must show:  (1) a false representation of a material fact; (2) knowledge by the Defendant that the representation is false; (3) intent by the Defendant to induce action by the Plaintiff; (4) justifiable reliance by the Plaintiff, and (5) damages. 

Update on Small Claims Court Jurisdiction

In Arkansas, any dispute involving an amount of under $5,000.00 may be brought in Small Claims Court, more properly known as District Court.  In Small Claims/District Court, the filing fees are significantly less, and attorney involvement is rare.  The Arkansas Court of Appeals recently clarified that if attorneys’ fees are sought in the action, the amount of attorneys’ fees requested, when added to the amount of claim, must not exceed $5,000.00.   Piper v. Potlatch Federal Credit Union, 2009 Ark. App. 701.  Under Arkansas Law, you do not have to include interest when calculating the amount for jurisdictional purposes, however the Piper decision clarified that attorney’s fees must be included in the calculation.

Please visit the Business Law Page for more helpful information pertaining to Arkansas businesses.