DIRECTIONS: You, Junior Associate, have been asked by me, the Senior Partner at the law firm of Dewey, Cheatham & Howe LLP (DC&H), to respond to the following research request in preparation for our upcoming client meeting. Type your response in legal memorandum format (see previous page for overview) and upload before December 13
TO: Junior Associate (You)
FROM: Senior Partner Willet (Me)
RE: Clients; Ashton Cheval and Zara Cheval (Owners), Bodega Bog Creamery
DATE DUE: December 13
You are being asked to draft a legal memorandum addressing key business law issues so that we are prepared for the upcoming meeting on Dec 13 with our new clients, Ashton and Zara Cheval, owners of the Bodega Bog Creamery. We have some preliminary information that was compiled by our legal admin, Noah, outlining 5 main areas of concern which need your immediate attention. We look forward to reviewing your keen legal research by the hasty deadline.
Facts: Our new clients, business partners Ashton Cheval and Zara Cheval (AC & ZC), are a brother and sister cheese making duo that started a company called the Bodega Bog Creamery (BBC). Both studied biochemistry at UC Davis and then, on a whim and a flip of a coin (heads for cheese or tails for beer), took a mozzarella and camembert cheese making class for fun at College of Marin. Inspired and looking for a new product line, the entrepreneurial siblings started the Bodega Bog Creamery – a trendy artisan cheese business in 2015.
The siblings come from a family of Sonoma County dairy producers and are 6th generation owners of the 200 acre Cheval Ranch near Bodega Bay. The Cheval family pride themselves on using sound husbandry and sustainable farming methods to reduce their environmental footprint.. The siblings have adapted traditional, ancestral methods to produce high quality unpasteurized cheeses and have recently started to win some gourmet awards. Their cheese operation scaled up fairly quickly and they now sell their artisan products to stores, restaurants and farmers markets in the North Bay area. In spite of the pandemic, they have found that their business has not suffered too much since pivoting and shifting revenue streams from their lost restaurant business to direct online customer sales.
(1) Business Entity Formation:
Ashton and Zara began their cheese business 5 years ago as a loosely formed partnership with no written agreement. They recently met with their accountant who mentioned that it may be time to change to a different type of business entity formation; for example, a limited liability company (LLC) or corporation (C corporation or S corporation). They have also considered the new “B” corporation or “B” Certification, as they believe this may appeal to more customers with a “green” conscious, and both like the thought of promoting the image of being employee friendly as well as eco-sensitive to consumers. Since their business currently operates as a partnership, they are increasingly concerned with tax issues, personal liability and/or exposure to lawsuits. They are following up with our firm for advice as to what business entity form makes the most sense for their operation? Does it make any difference if they plan to become a public company at some point in the future? Should we cross-check with their CPA, Cal Goldenbleu – as we have worked successfully with him in the past?
(2) Torts Issues:
Weekend tours at the Cheval Ranch are used to market the Bodega Bog brand and sell product. Families escaping the city (and quarantine) flock to the rural countryside for some fresh air and respite. The farm goats are YouTube and TikTok sensations, especially in the spring when the kids are born. Their star power creates immeasurable “good will” and sells a lot of cheese. In the past, the siblings used to serve as tour guides, but have since offloaded this part of the business to a good friend, Deep, who started an agri-tourism company that guides guests along the California Cheese Trail. The last tour group Deep took to the Cheval Ranch included a San Mateo family with 2 small children. The children entered the goat pen while the adults were distracted, and young Alejandro slipped and broke his left arm, while Natalie was allegedly nipped by a playful billy goat and is now haunted by recurrent nightmares of horned demons. She is under the care of a noted UCSF child psychologist. Although AC and ZC have not been served with a complaint, they are worried that one will be coming soon. What might the plaintiff parents of the injured toddlers assert for their cause(s) of action and what are AC’s & ZC’s best defenses? Is it likely that tour guide Deep will also be named as a defendant in the tort case? Do AC and ZC need to think about business insurance or write up some sort of an agreement with Deep? What actions should AC and ZC take to protect their business from future lawsuits and liability? How can we turn this unfortunate accident into a helpful learning experience and enhance our new clients’ business acumen?
(3) Intellectual Property Issues:
(a) Mateo, one of Ashton and Zara’s UC Davis classmates, as well as former business partner, left BBC last year suddenly and apparently stole the recipe for Cayenne Infused Once in a Blue Moon Cheese. He is now selling a similar brand of cheese with almost the same name at the San Francisco Farmers Market at the Ferry Building. This has hurt business tremendously. The siblings are concerned that this may happen again and would like some way to prevent any more stolen recipes. They want to learn how to protect trade secrets and what they need to do to safeguard certain recipes. They may also want information on Non-Disclosure Agreements.
(b) AC & ZC plan to expand their business outside of California in the next few years and increase distribution. They also intend to publish a series of cheese making books and have a contract for a short DIY series on the Food Network. What do they need to file with the USPTO and US Copyright offices in order to protect their brand? Will this protect their BBC brand if they sell their cheeses globally, for example in European cheese markets such as France or Switzerland, where there may be some artisan aficionados?
(c) Do Ashton and Zara have any recourse regarding Ellie Colla’s recent Tweets and Yelp rantings where Ellie claims to have found mouse excrement when unwrapping a wedge and biting into BBC’s award-winning Very Foggy Bottom Chevre? Ellie threatens to dress as a mouse and hold a boycott at the Cheval Ranch during the summer season while tourists are cheese shopping. AC & ZC insist that Ellie is an attention seeker who relishes the notoriety of trash-talking the California Cheese Trail scene. They want the postings deleted from cyberspace and to file a lawsuit for defamation (including compensatory and punitive damages) as well as garner equitable relief in the form of a TRO (Temporary Restraining Order) and an injunction for Ellie’s picketing plans. AC & ZC want to know if Yelp and/or Twitter can be added as defendants to the complaint?
(4) Consumer & Government Regulation Issues:
AC & ZC are worried that they have been innocently mislabeling their cheeses, including their Great Green Goddess Camembert, as entirely eco-friendly (emphasis added). They recently received several letters from complaining consumers about how resource-intensive dairy and cheese manufacturing is and that these “eco-greenwash” claims constitute fraud. AC & ZC know that raising milk-bearing animals puts out a significant amount of greenhouse gases, in large part due to the methane that ruminants emit. Feed production also contributes to global warming and animal waste has implications for both water and air quality. In any event, some cursory research may be warranted regarding proper labeling of cheese products. What are the basics for food labeling requirements and which government agencies regulate this?
(5) Corporate Social Responsibility (CSR):
AC and ZC state that most cheese makers use a product called “rennet” to separate the cheese curds from the whey. The most common form of rennet comes from the stomach lining of a calf. The calves are “especially born” for milk-production and then slaughtered. Even if there was no demand for rennet, these calves would (allegedly) be killed. According to AC and ZC, they continue to use animal rennet as they have not found a satisfactory non-animal substitute having unsuccessfully tried fungal-microbes, lemon juice and vegan methods. That said, AC & ZC are concerned that some animal rights activists will not support the use of calf rennet. This, along with the aforementioned environmental issues is problematic for the BBC brand and their dream of possibly becoming a “B” Corp or “B” certified. What should we recommend as far as helping AC & ZC with their CSR and triple bottom line (People, Planet and Profit)? Do we have the bandwidth to work with them on these types of issues or should we respectfully decline to counsel them about such matters that may be considered outside of our legal scope?