The decision to quit a venture is never an easy one for an entrepreneur. When the decision is driven by financial reasons, as is often the case in a troubled economy, it can be tempting to simply walk away under the rationale that no new business means the business is dead. The excitement of new projects or the appeal of a fresh start under a new name can overshadow the headaches associated with a failing business. But as cases like Emily Lane Homeowners Association v. Colonial Development, LLC show, maintaining the shell of a company is an all-too-convenient move that leaves owners vulnerable to lawsuits and liability. The failure to properly wind up affairs may lead to a variety of repercussions.

After 20 years of employment, Rowena Cheung quit her job with Fada International, an importer of jewelry and precious stones. She not only left the company with trade experience, but also an extensive rolodex of client contacts which she used to launch her own jewelry business. However, Cheung had signed a non-disclosure agreement (NDA) before leaving the company, in which she had promised not to disclose the customer information. Her former employer, in an effort to maintain its position in the competitive jewelry import business, then filed a lawsuit against Cheung claiming that she had misappropriated customer information.

San Francisco-based marketing company Member Source Media wanted to drive consumers to its branded online promotions. Like its competitors, the company registered several domain names, paid for web advertising and launched a pro-active email marketing campaign. However, the company distinguished itself from other web marketers by relying on a single surefire method of drawing consumers: offering something for nothing. In ubiquitous banner ads and email solicitations, Member Source Media dangled the promise of free gifts, such as laptop computers and iPods, in exchange for taking the time to fill out a few online surveys. These offers ultimately proved to be too good to be true.

In 2007, a 23 year-old woman hailed a Greater Houston Transportation cab and asked the driver to take her home. He began to drive toward Kingwood, a suburb outside of Houston where she lived, but ignored her request to make the exit. When the woman threatened to call the police, the driver grabbed her phone and threatened to rape her. She escaped by jumping out of the moving cab. The driver was an ex-convict who had served several prison terms for a number of felonies, including assault. Although the woman survived, she claimed that she suffered from post-traumatic stress syndrome and filed a lawsuit against Yellow Cab, the regional taxi company that employed the driver.

Herbal tea manufacturer Traditional Medicinals wanted to market a trademarked laxative tea product called Smooth Move at the website SmoothMove.com. In 2008, the California-based company tried to register the domain but discovered that the domain had already been claimed by WorldWide Media, an entity which had “parked” the domain with a website showing ads to visitors. Rather than rebrand its product or register a different domain, Traditional Medicinals initiated an arbitration proceeding against WorldWide Media asserting that the domain had been registered in bad faith.

In 1996, a licensing manager for Taco Bell attended a trade show and came across a cartoon Chihuahua dog character called “Psycho Chihuahua.” The manager expressed an interest in using the character for its marketing campaigns, but after numerous focus groups and extensive discussions with the creators of the character, Taco Bell decided not to close a deal with the creators of the character.