Legal Translation of LLC Agreements

Translation Services Critical to Understanding of Intellectual Property in LLC Agreement in Bankruptcy Case

We’ve shared blogs about legal translation services and intellectual property issues. Intellectual property issues can be technical and detailed. The success or failure of a business agreement between two parties can turn on the clarity of a single word or phrase. Even a court’s opinion in a case can be influenced by unclear testimony from a witness for whom English is not his or her first language.

That is precisely what happened in 2018, in the case of In re Imam, which was tried in the United States Bankruptcy Court for the Northern District of Texas. The case is a perfect example of how important legal translation services during a contract negotiation, deposition, or court testimony can be. In In re Imam, the outcome of a bankruptcy case, which involved intellectual property rights that two business partners (and their attorneys) negotiated in an LLC agreement, rested on the parties’ understanding of the phrase “come out.” As the case clearly demonstrates, employing effective legal translation services from the outset of your case can help you avoid complications and misunderstandings with the court.

Two Friends Form a Business Plan

In this case, Plaintiff is a limited liability company owned by Mackenzie Brittingham. Defendant is Nardos Imam, who immigrated from Northeast Africa and became a premier fashion designer in Dallas, Texas. Imam and Brittingham met in 2011, when Imam designed Brittingham’s wedding gown, and the two became friends.

In 2012, Brittingham and Iman agreed to form a bridal boutique business together, specializing in custom wedding gowns. Brittingham, an accountant, was to contribute financially to the venture, and Imam was to design and make the gowns. The parties began operating the business in October 2012, while they negotiated the terms of their LLC Agreement.

Drafting, Negotiating, and Signing the LLC Agreement

Although the business ran successfully for a short time, negotiating the terms of the LLC Agreement proved more difficult. The parties exchanged drafts of the LLC Agreement for an entire year, before executing the contract in October 2013. During that year, however, the parties (and their respective attorneys) had very different understandings of the intellectual property that Imam was to contribute to the business.

Prior to execution, the actual terms of the assignment were recorded in an Appendix to the LLC Agreement. During the negotiations, Imam informed her attorney and Brittingham that she wanted to “take out” the intellectual property. Imam later testified that what she had requested was for the intellectual property to “come out.” Brittingham testified that she understood this to mean that Imam still intended to assign her intellectual property but wanted the terms of the IP Assignment to be recorded in a document that was separate from the LLC Agreement.

When the parties executed the LLC Agreement, it included a provision that the IP Assignment also would be executed. However, the parties never executed the IP Assignment document. Imam claimed that it was not signed because, as she requested, it was physically “taken out” of the LLC Agreement at signing. Brittingham claimed that the document was excluded from the LLC Agreement at signing by mistake, but that the parties always intended and agreed to include it in the LLC Agreement but simply to execute it as a separate document.

With the IP Assignment not executed, Brittingham claimed that Imam fraudulently induced her to contribute funds to the company based upon representations that she would assign her intellectual property to the business, which she did not do. Thus, the issue for the court was what the parties intended in their negotiations with respect to the assignment of Imam’s intellectual property.

Inability to Communicate Effectively

In its opinion, the court noted that there were several factors that made it very difficult for the court to understand the business relationship between the parties, the terms of their LLC Agreement, and exactly what each party had communicated to each other throughout the negotiations. The factor that caused the greatest difficulty was the language barrier presented by the Defendant, Imam. The court stated:

[T]here were some language issues. English does not appear to be the Defendant’s first language. The Court observed during trial that while the Defendant is conversational in English, her word choice was not always precise or consistent. This language difficulty was compounded by the fact that even though Ms. Brittingham and the Defendant are both well-educated, neither had a complete grasp of legal terms that were being used during negotiations.

The court added that “communications between the parties over the course of this extended period of time are difficult to follow” and that “[t]he manner in which the parties communicated . . . left something to be desired. . . . During trial, the parties often spoke generally about intellectual property, but it was not always clear what was meant when the term was used by the parties, the attorneys, and in the documents.”

The Effect on the Credibility of the Witnesses

The issue in the case would be decided on the credibility of the witnesses as to what they intended to be done with the IP Assignment. To that end, the court expressly stated that the Defendant’s language barrier affected her credibility. The court stated that the Defendant:

appeared to be trying to answer questions truthfully to the best of her recollection, but it was not always clear that she understood the questions. . . . [B]ecause . . . of [the] language barrier, her answers were somewhat difficult to pin down. The Court is inclined to believe that some of the issues that made it difficult to get clear and precise answers from the Defendant may have existed during the negotiations themselves.

The Need for Legal Translation Services

Despite the language difficulties, the court held for the Defendant, Imam, finding that Plaintiff, Brittingham, was unable to prove that Imam committed actual fraud by knowingly making a representation that she knew to be false or with the intent or purpose to deceive Brittingham. What is important to note, however, is that the court’s holding was influenced by the language barrier presented by the parties, which the court concluded also affected the entire negotiation process between the parties. For both parties, legal translation services could have helped to avoid the issues that brought them to court. Also, during the court testimony, legal translation services could have assisted the court in understanding those issues more clearly.

When representing clients in intellectual property or other contractual negotiations, don’t jeopardize your client’s case by ignoring the impact of even a slight language barrier. Let a professional certified interpreter ensure clarity and understanding for you and the court. We welcome you to call us at All Language Alliance, Inc. Our number is 303-470-9555. You can also email us from our website www.languagealliance.com to request certified translation services from English to Arabic, German, Swedish, French, Portuguese, Spanish, other languages, and from any language to English.

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