In The News

Opportunities Abound at PodCamp Nashville

PodCamp Nashville used to be a best-kept secret.  Not any more. If you're want to find your voice and find your audience, if you want to build your brand and link to potential customers throughout the world, if you want to speak your mind by creating online documentaries or podcasts, or if you want to meet other people interested in your world and your community, sign up.  PodCamp Nashville will be held downtown at Cadillac Ranch on Saturday, March 26.  And it's Free. People from all industries and skill-sets (and I mean All) will be there.  Over 400 have signed up to attend so far.There's no doubt that PodCamp is a chance to network.  I got introduced to PodCamp and its sister, BarCamp (held in the fall), through a friend at work. I've met some incredible Nashvillians in the music, entertainment, marketing, technology and digital fields; made some good friends; and developed some clients.

But more than that, it's a chance to learn from some of the best and brightest in our community.  Where else can you hear all these great luminaries under one roof?  Kate O'Neill will talk about how blogging made her a better leader; Courtenay Rogers will talk about "The Power of Digital Stalking," (she says we all do it); Jake Jorgovan will discuss "How to Effectively Utilize YouTube."  And I'm excited to hear Raj Menon talk about how to launch a podcast.

I can't wait to hear David Corrigan explain how to "Mak[e] your Mobile App idea a Reality."  I came up with about 20 ideas the other day on my drive into work (I'm sure 15 of them have already been invented), but I'm eager to hear what to do the next time creativity hits!

As one of the only lawyers speaking that day, I'll be leading a session with marketing guru Taylor Vick.  She and I are teaming up to talk about how businesses can accomplish their marketing goals through social media without running into trouble.  When clients come to me with a crisis involving online communications, it often takes a tag-team approach between legal solutions and SEO know-how.  Taylor and I will use some specific case-studies to frame our discussion, highlight the issues that can help businesses and bloggers avoid liability, and give some pointers along the way.  Quoting Shakespeare, we titled our session: "Kill All the Lawyers: The Legal & Marketing Aspects of Using Social Media."  We'd love to have you join us and add to the conversation.

Spread the word.  And sign up!

Third Circuit Addresses Hospital Contract with Hospital-Based Physician Group

Appeared in the July 2009 Physicians Organizations Practice Group Newsletter reprinted courtesy of the American Health Lawyers Association.

On January 21, 2009, in the case of United States ex rel. Kosenske v. Carlisle HMA, Inc.(1), the Third Circuit reversed the decision of the district court(2) which had dismissed an action under the False Claims Act(3) which alleged that an arrangement between an anesthesiology group and a for-profit hospital violated the Stark and Anti-Kickback Acts(4) (collectively, the Acts). The Third Circuit agreed with the district court that the arrangement implicated the Acts but disagreed with the lower court’s conclusion that a written agreement entered into in 1992 continued to meet all of the requirements of the personal service exception under the Stark Act. The Third Circuit applied the Stark Act broadly to the relationship between the hospital and physician group, but strictly construed the criteria necessary to qualify for an exception. The Third Circuit’s opinion provides useful guidance for hospitals and hospital-based physicians by clarifying that a hospital-based physician group’s relationship with the hospital must be documented by a written agreement that clearly sets forth the terms of an arrangement that currently meets the requirements of an exception under the Stark Act.


Background


In December 1992, Blue Mountain Anesthesia Associates PC, a group of four anesthesiologists (Group), entered into an agreement (1992 Agreement) with Carlisle Hospital and Health Systems, Inc. (CHHS) to provide anesthesia services to the hospital facility (Hospital). The 1992 Agreement provided that: (1) the Group would provide anesthesia coverage on a twenty-four-hours-a-day, seven-days-a-week basis; (2) the Hospital would provide the space, equipment and supplies reasonably needed by the Group to provide the services without charge; and (3) the arrangement would be an exclusive one for both the Hospital and the Group. The 1992 Agreement did not mention the services being provided outside the Hospital and, at the time they entered into the 1992 Agreement, no pain management services were provided by the Group.


A little more than a year after the 1992 Agreement was signed, Ted Kosenske, a member of the Group, began providing pain management services in space that the Hospital used for other purposes.  In 1998, CHHS built a new, stand-alone facility containing an ambulatory surgery center and a pain management clinic (Pain Clinic). The Group provided pain management services at the Pain Clinic and CHHS did not charge the Group for the space, equipment or personnel. The Group’s physicians providing pain management services at the Pain Clinic did not provide anesthesiology services at the Hospital. For both the anesthesia and pain management services, the Group submitted claims to Medicare for the professional services and CHHS submitted claims for the facility and technical components. In June 2001, Carlisle HMA Inc. (HMA) purchased the assets of the Hospital from CHHS. The 1992 Agreement was not assigned by any written document. However, both the Group and HMA continued the arrangement with each other as if the 1992 Agreement was assigned.


Kosenske, a former member of the Group(5), brought a qui tam action under the False Claims Act against HMA and its parent company, Health Management Associates Inc., alleging that they submitted outpatient hospital claims to the Medicare program and other federal healthcare programs falsely certifying that such claims were in compliance with the Acts.


Analysis


The district court considered the issues raised in the claim in connection with the parties’ cross-motions for summary judgment and held that the arrangement between HMA and the Group implicated the Stark and the Anti-Kickback Acts. The district court noted that both of the Acts prohibit a health care provider from paying physicians any form of compensation to induce them to refer patients to the provider, and from holding a financial interest in a healthcare entity to which they refer patients. The district court also held that the relationship between HMA and the Group involved both referrals and compensation.


Under the arrangement, HMA provided the Group office space, supplies, equipment and personnel without charge, as well as other benefits. Under the 1992 Agreement, the Group was granted the exclusive right to provide anesthesiology and pain management services. The district court agreed with the claimant, Kosenske, that these benefits constituted remuneration under the Acts. Kosenske also argued that the right to receive payment from a third-party payor for services to patients referred to the Group by the Hospital was a benefit that constituted remuneration for the purposes of the Acts. The district court rejected this argument, stating: “The court need not decide whether payment from third party payors or the expectation of payment constitutes remuneration for the purposes of the Stark Act. However, the court would be remiss if it did not express its doubts as to the merits of this attenuated argument.(6)


However, the benefits to the Group under the 1992 Agreement resulted in a compensation arrangement and financial relationship between the Group and the Hospital. The district court determined that the Group ordered numerous pain management services, and that these orders constituted referrals. Therefore, because the Hospital submitted claims to Medicare for these services, the arrangement would violate the Stark Act unless it qualified for an exception. The district court noted that the Anti-Kickback Act requires the “knowing and willful” payment of remuneration to a provider for the referral of services covered by a federal health care program, but it concluded without any additional factual consideration that the Anti-Kickback Act was also violated.


Although the relationship between the Hospital and the Group fell within the ambit of the Stark and the Anti-Kickback Acts, the district court determined that the Hospital demonstrated it met the requirements of the exception for personal services under the Acts. On Appeal, the Third Circuit agreed with the district court that there was clearly a financial relationship between the Hospital and the Group, but rejected the district court’s holding that the relationship qualified for the personal services exception.


The Third Circuit held that HMA had failed to show that the requirements of the Stark personal service exception had been met. The Third Circuit found the arrangement between the Group and HMA failed to meet the criteria of the exception by failing to have a written agreement that covered all of the services to be provided by the Group and by not adequately demonstrating that the compensation under the agreement was at fair market value.


The personal services exception applies if:


(i) the arrangement is set out in writing, signed by the parties, and specifies the services covered by the arrangement,
(ii) the arrangement covers all of the services to be provided by the physician…to the entity,
(iii) the aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement,
(iv) the compensation to be paid over the term of the arrangement is set in advance, does not exceed fair market value, and… is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties, and
(v) the services to be performed under the arrangement do not involve the counseling or promotion or a business arrangement or other activity that violates any state or federal law(7).


The district court held that the 1992 Agreement continued to satisfy the requirement that the “arrangement be set forth in writing,” even though there was no written assignment of the 1992 Agreement when the assets of the Hospital were sold to HMA. The district court pointed out that the 1992 Agreement contained a provision stating that it would be binding on the parties’ successors and assigns. The district court applied Pennsylvania law and held that, because the actions of the parties after the sale of assets demonstrated their intent that HMA succeed to the position of CHHS under the 1992 Agreement, no specific assignment of the 1992 Agreement was necessary to satisfy the requirements of the exception(8).  The district court also determined that the 1992 Agreement satisfied the second requirement of the exception that the written agreement cover all services to be provided by the physician. When the 1992 Agreement was entered into, the Group was providing only anesthesia services to the Hospital, and it was not until 1998 that the Hospital opened the Pain Clinic. However, the 1992 Agreement included language granting the Group the right to provide physician services in the event the Hospital obtained, opened, or operated another facility or location at which anesthesiology or pain management services were required or offered. The district court held that this language in the 1992 Agreement adequately described the full range of services provided by the Group to the Hospital and met the Stark exception’s second requirement.


The Third Circuit disagreed with the district court’s analysis and stated:


In this case, the only written contract in existence between the parties is one that did not, and obviously was not intended to apply to services at a non-existent facility. It was negotiated in 1992, in a context wholly different from the one that existed six years later after the opening of the Pain Clinic. . . and the opening of the Pain Clinic represented a very substantial change(9).


The 1992 Agreement did not mention the provision of space, equipment and personnel without charge, and the Third Circuit appeared to find that broad language contemplating that the parties might provide each other additional services at a future date was not enough to support an argument that these services continued to be covered by a written agreement.


The Third Circuit also disagreed with the district court’s holding that the compensation under the 1992 Agreement satisfied the “fair market value” requirement under the Stark exception. The district court held that there was a “mutuality of rights and responsibilities imposed by the 1992 agreement” and that this was evidence that the compensation to the parties was a fair market value exchange. The district court went on to conclude the following, “By definition, the terms of the contract reflect the fair market value of the benefits conferred on each party(10).”  Not surprisingly, the Third Circuit rejected this argument. The Third Circuit concluded that it is impossible for a contract entered into six years earlier to reflect current fair market rates and further dismissed the lower court’s interpretation of the definition. Instead, the Third Circuit corrected the district court and stated that “as a legal matter, a negotiated agreement between interested parties does not ‘by definition’ reflect fair market value.” The Third Circuit concluded that the arrangement between the Group and the Hospital was exactly the type of situation which the Stark Act recognizes as potentially abusive. The Hospital and the Group were in a position to generate business for each other; therefore, their negotiations were not arms’ length(11).


The Third Circuit and the district court agreed that the exclusive arrangement between a hospital and a hospital-based physician group implicated the Acts. Both Courts concluded that the reciprocal responsibilities are enough to create a financial relationship and referrals governed by the Acts. The Third Circuit specifically rejected HMA’s argument that there is no fair market value issue because the Hospital and the Group were being compensated for their services by a third-party payor. The Third Circuit also rejected HMA’s argument, based on 42 C.F.R. § 413.65(d)(2)(vi), that the arrangement did not include referrals, and that the Stark Act did not apply because the facility was provider-based and the patients treated by the Group were Hospital patients:


HMA reads this sub-section [42 C.F.R. § 413.65(d)(2)(vi)] as depriving physicians at the facility of any discretion in making referrals of their patients, i.e., as mandating referrals to the main provider. We believe HMA reads too much into this provision. While Pain Clinic patients clearly must have access to all services provided by the Hospital in order for it to be considered a part thereof, we are unpersuaded that BMAA physicians at the Clinic have been deprived of the right to refer their patients in accordance with their best medical judgment(12).


Conclusion


Even if the Third Circuit had upheld all of the district court’s holdings, the result in this case would have supported the position that arrangements between hospitals and hospital-based physicians fall within the ambit of the Acts and should be structured to qualify for an exception under the Stark Act and a safe harbor under the Anti- Kickback Act.


In addition, Kosenske makes it clear that the parties’ intent to extend an arrangement that might have originally fallen within an exception to the Acts will not necessarily continue to protect the parties from prosecution if there has been a significant change in circumstance. Compliance with the Acts requires that hospitals and physicians review and revise their contracts when an arrangement has developed into something more than the original services, or when enough time has passed that the compensation’s value may have changed. Finally, the Third Circuit decision once again reminds providers and their lawyers that a complete and well drafted paper trail is important to compliance under Stark and the Anti-Kickback Act.


_____________________________________________________________________________________
1. 554 F.3d 88, 98 (3d Cir. 2009), rev’g No. 1:05-CV-2184, 2007 WL 3490537 (M.D.Pa., Nov. 14, 2007).
2. 2007 WL 3490537
3. 31 U.S.C. §§ 3729-3733 (“False Claims Act”).
4. 42 U.S.C. § 1395nn (“Stark Act”); 42 U.S.C. § 1320a-7b (“Anti-Kickback Act”).
5. Kosenske left the Group in 2005 to establish an independent pain management practice.
6. 2007 WL 3490537 at *7, n.9.
7. 42 U.S.C. § 1395nn(e)(3)(A); see also 42 C.F.R. § 411.357(a)(1).
8. 2007 WL 3490537 at *8 & n.14 (citing Bogart v. Phase II Pasta Machines, Inc., 817 F.Supp 547, 548 (E.D.Pa. 1993) for the proposition that, under Pennsylvania law, acquiring corporations become successors if they expressly or impliedly agree to assume the liabilities of the seller or if they continue to operate the seller’s business).
9. 554 F.3d. at 96-97.
10. 2007 WL 3490537 AT *10.
11. 554 F.3d. at 97.
12. Id. at 98.


 

Stephen Zralek Speaks on “How to Protect Against a Lawsuit When Using Social Media”

Bone McAllester Norton attorney Stephen Zralek speaks to Indie Connect Magazine on issues every social media user needs to know to help protect against a lawsuit ranging from copyrights and trademarks to fair use, privacy and terms of use.


Click here for “’CYA – How to Protect Against a Lawsuit When Using Social Media’ with Stephen Zralek Esq.”


 

Video of Recent Presentation on Legal Issues in Social Media

In late January, Indie Connect asked me to speak with professionals in the music industry about the pressing legal issues in social media.  It was an honor being with them.  They were kind enough to capture a video of the presentation, which you can watch here.If you'd like me to come speak about Social Media Law with your business or group, email me at This email address is being protected from spambots. You need JavaScript enabled to view it..

Last week I spoke on social media legal issues to the Tennessee Bar Association.  Yesterday, the Nashville Business Journal selected me to be one of four panelists at an upcoming presentation on social media to the business community.  And in late March, I'll be co-presenting with Taylor Vick of Point3 Media on the collaboration needed in social media between legal and marketing; we'll be at PodCamp in Nashville.  Our title is "Kill All the Lawyers: Marketing through Social Media the Legal Way."  Sign up to attend -- it's free, and there will be incredible sessions on social media all day long.

Video of Recent Presentation on Legal Issues in Social Media

In late January, Indie Connect asked me to speak with professionals in the music industry about the pressing legal issues in social media.  It was an honor being with them.  They were kind enough to capture a video of the presentation, which you can watch here.If you'd like me to come speak about Social Media Law with your business or group, email me at This email address is being protected from spambots. You need JavaScript enabled to view it..

Last week I spoke on social media legal issues to the Tennessee Bar Association.  Yesterday, the Nashville Business Journal selected me to be one of four panelists at an upcoming presentation on social media to the business community.  And in late March, I'll be co-presenting with Taylor Vick of Point3 Media on the collaboration needed in social media between legal and marketing; we'll be at PodCamp in Nashville.  Our title is "Kill All the Lawyers: Marketing through Social Media the Legal Way."  Sign up to attend -- it's free, and there will be incredible sessions on social media all day long.

Best Practices for Businesses: Tip #1: Adopt a Social Media Policy

According to a February 14, 2011 article on Mashable.com "social media is predicted to see one of the biggest increases in online marketing spending this year."  With that in mind, businesses need to adopt and implement a social media policy.  In fact, they should implement two policies: one for all employees, and another for those employees responsible for official social media communications on behalf of the business. Some businesses may say that there's no need to have a social media policy because they aren't officially engaged in social media.  Even if a business doesn't officially participate in social media, you can bet its employees are on Facebook or Twitter.  They're definitely using social media after work, but probably using it during working hours, too.  Their unofficial use of social media makes it important for businesses to set some guidelines.Businesses should consider adopting two separate policies:1.  A social media policy for ALL employees.  Businesses should provide all employees general guidelines on certain matters, for example: keeping business matters confidential, affirming that employees should have no expectation of privacy for anything posted on a publicly-accessible site, and reminding employees that they should clarify that any opinion expressed is made in their individual capacity, not on behalf of their employer.  In light of a recent NLRB settlement with a Connecticut ambulance company who disciplined an employee for making negative comments about her employer on Facebook, businesses should be very reluctant to limit employees' right to discuss the terms of their employment (like wages and conditions).  Businesses should adopt this policy even if they do not officially engage in social media as a company.2.  A policy for employees responsible for official social media communications of the business.  Those employees responsible for communicating on behalf of the company through social media need guidelines.  They need to know what is acceptable language, how to respond to negative reviews of the business, and their responsibilities when inviting user generated content.  There are laws governing marketing to minors and regulations requiring disclosure of any material connection between a blogger and a business.  These are just a few of the items a business should consider when crafting its social media policy.

Best Practices for Businesses: Tip #1: Adopt a Social Media Policy

According to a February 14, 2011 article on Mashable.com "social media is predicted to see one of the biggest increases in online marketing spending this year."  With that in mind, businesses need to adopt and implement a social media policy.  In fact, they should implement two policies: one for all employees, and another for those employees responsible for official social media communications on behalf of the business. Some businesses may say that there's no need to have a social media policy because they aren't officially engaged in social media.  Even if a business doesn't officially participate in social media, you can bet its employees are on Facebook or Twitter.  They're definitely using social media after work, but probably using it during working hours, too.  Their unofficial use of social media makes it important for businesses to set some guidelines.Businesses should consider adopting two separate policies:1.  A social media policy for ALL employees.  Businesses should provide all employees general guidelines on certain matters, for example: keeping business matters confidential, affirming that employees should have no expectation of privacy for anything posted on a publicly-accessible site, and reminding employees that they should clarify that any opinion expressed is made in their individual capacity, not on behalf of their employer.  In light of a recent NLRB settlement with a Connecticut ambulance company who disciplined an employee for making negative comments about her employer on Facebook, businesses should be very reluctant to limit employees' right to discuss the terms of their employment (like wages and conditions).  Businesses should adopt this policy even if they do not officially engage in social media as a company.2.  A policy for employees responsible for official social media communications of the business.  Those employees responsible for communicating on behalf of the company through social media need guidelines.  They need to know what is acceptable language, how to respond to negative reviews of the business, and their responsibilities when inviting user generated content.  There are laws governing marketing to minors and regulations requiring disclosure of any material connection between a blogger and a business.  These are just a few of the items a business should consider when crafting its social media policy.

James Crumlin Interviewed in Article “Checking Candidates’ Credit: Good Idea?”

Borrowman Baker, LLC, BV Staffing + Consulting recently featured Bone McAllester Norton attorney James Crumlin in an article addressing the usefulness of credit checks when hiring new staff.


“Is the information you will receive through the credit check essential to the job you're trying to fill? If it's not absolutely clear that it is, you're better off using other forms of background checks” states James.


Click here to read “Checking Candidates’ Credit: Good Idea?”


 

Olive and Sinclair's Experience: Secrets to Success for Any Business

On January 31, 2011, I sat down to talk with Scott Witherow, owner of Olive and Sinclair Chocolate Co. , which makes the South's best chocolate.
 
Olive & Sinclair’s Exclusive with Williams-SonomaOlive & Sinclair’s Exclusive with Williams-Sonoma
Later that night, he hosted WaterCooler, a monthly networking event for young entrepreneurs that some friends and I co-founded in August 2009.  We had a jam-packed crowd of over 40 people.  Everyone, it seems, wants to learn more about this company.  (For another great write-up on the tasting, check out the recent post on Nashville Foodies' blog, or see Gwyneth Paltrow's blog "Goop," which highlighted O&S.)

Begun just 13 months ago in September 2009, Olive and Sinclair’s growth has been as viral as a posting on Facebook or Twitter.  O&S has already gained an exclusive contract with Williams-Sonoma for some of its products, and the demand for its chocolate grows every day.

We met after work at the office of O&S, which doubles as factory, research and design center, marketing headquarters, and nerve-center for all things chocolate in Nashville.  Before everyone from WaterCooler arrived, Scott offered me a sneak-preview sample of an upcoming chocolate he plans to launch in the coming weeks, something he’s collaborating on with Benton’s Smoky Mountain Country Hams.  To top it off, he offered me the perfect pairing of a  Terrapin Moo-Hoo Chocolate Milk Stout, which also has O&S chocolate in it.  Talk about a rich combination.  This was better than any of the after-school snacks I ate as a kid!

Here’s my take-away from talking with Scott, and what I think are some of the biggest secrets of his success. To be honest, I think these are some of the best keys to any modern business’s prosperity:

1. Authenticity: Olive & Sinclair offers an authentic story and product.

2. Collaboration: O&S collaborates with Terrapin, Drew’s Brews, Williams Sonoma, Bongo Java, and even non-profits like Saddle Up.

3. Embracing Social Media: Scott told me they couldn’t have had this massive growth and success without using social media. Only a 13 month old company, O&S has already grown to over 500 retail and wholesale customers.
 
O&S Red Hot Hearts for Valentine’s DayO&S Red Hot Hearts for Valentine’s Day
 
Here’s the best parts of my conversation with Scott:
Zralek: Thank you for the Terrapin Moo Hoo Chocolate Milk Stout…awesome! You were saying that social media has without questions helped your business…tell me how.

Witherow: Obviously it allows us to communicate with anybody out there that’s interested in Oliver & Sinclair. But because we’ve also been blessed with some pretty ridiculous—in a good way—articles. It’s allowed for people to actually kind of let us have a face. We were doing a lot more on Facebook and blogging before we ever even had a website. So that was a big part of it.

ZRALEK: Part of what I find in my work representing businesses as a lawyer is that, when people who are older than us (both in our 30s) are running companies, they often question the value of social media.

WITHEROW: Yeah.

ZRALEK: And to me, companies like yours are a prime example of how social media can help fuel the explosive growth you’ve experienced.

WITHEROW: I think for me and the company, I think that we all just believe in this product. We’re not…we don’t necessarily get into chocolate as like a monetary thing, you know, to make like a bazillion dollars. So it started off with just kind of loving the idea of being able to make chocolate. And then for me it was—I want to make chocolate personable and…I don’t know what this sounds like. But I think that we were successful in making it approachable and, again I don’t mean it arrogantly, but I think we do make a good product, and I think that social media is hugely important as long as you have a good product.

ZRALEK: I agree.

WITHEROW: But I think…

ZRALEK: If you’ve got nothing behind it, it doesn’t matter.

WITHEROW: Yeah, if it’s all this kind of chutes and ladders then you’re only going to go so far with it. But I think that—it’s been great even getting feedback, good and bad. I mean there have been people that have shot me a message on Facebook saying something was up or they noticed something and, like we had one customer who got a chocolate bar that wasn’t up to their standards of what they thought O&S was. And so she Facebooked me and, with the a batch number that we include on every bar, we found out where she bought it. It was poor product placement and it was such an old bar…I mean such an old bar that it shouldn’t have been on the shelf. So we had to go in and make sure that they were off the shelf and that our batch numbers are—they’re done for a reason. So that’s a great part to me.

ZRALEK: So this beer that you’re letting me taste, what’s the best chocolate that goes with it?

WITHEROW: [Handing me a sample of an upcoming release where O&S is collaborating with Benton’s Hams.] It will be a little while before it’s out.

ZRALEK: So what is that that I just tasted?

WITHEROW: It’s a smoked nib.

ZRALEK: From Benton’s Farm…they’re teaming with you?

WITHEROW: Yeah, we’re kind of teaming up for a little project. Hopefully we’ll see it through.

ZRALEK: And what’s that made of…it’s so good. Is there some bacon in there?

WITHEROW: No, [it’s just] nibs [that] are smoked by Alan down in Madisonville.

ZRALEK: So it’s more of the smoked flavor than the bacon.

WITHEROW: Yeah, there is no bacon in there really because it’s just…it’s Alan good quality smoked [flavor]…

ZRALEK: Wow it tastes good. . . .
 
Tasting of Various O&S ChocolateTasting of Various O&S Chocolate
ZRALEK: [W]hen did you decide to start this [company]?

WITHEROW: That was somewhere 2008 sometime, I think.

ZRALEK: What were you doing before Oliver & Sinclair?

WITHEROW: Just working in kitchens here in town. At the time I was a pastry chef at F. Scott’s.

ZRALEK: I didn’t know that.

WITHEROW: Yeah, I was there for about three years

ZRALEK: Did you go to culinary school somewhere?

WITHEROW: Yeah I went to Le Cordon Bleu.

ZRALEK: So you don’t recommend just anybody deciding to start their own chocolate shop? Having a little training comes in handy?

WITHEROW: Yeah but I didn’t learn how to make chocolate in culinary school. They didn’t guarantee me that. It’s more of working with chocolate. And I always try telling people it’s kind of like people that really like craft beers tend to start home brewing at some point. And I worked a lot with chocolate so I learned how to make my own chocolate. And I just started doing it.

ZRALEK: Where did you sell to first? Who was your first buyer?

WITHEROW: Mitchell’s Deli.  [Mitchell’s, the best deli in Nashville, is literally upstairs from Olive and Sinclair.]

ZRALEK: Are you selling primarily in Middle Tennessee?

WITHEROW: No, we’re nationwide and in Canada.

ZRALEK: So you started in ’08, it’s now January 2011…

WITHEROW: Well, I say we started in ’08. I started experimenting in ’08 and making test batches.

ZRALEK: So when was your first sale?

WITHEROW: September of 2009.

ZRALEK: Wow. You’re a young company.

WITHEROW: Yeah. We’re a year and three months.

ZRALEK: That’s great. . . .

ZRALEK: [O]bviously you wear a lot of hats. I assume that you [serve as] creative director, HR director, CEO, chief culinary designer and are you also making house calls to these places or do you send somebody else out there for you?

WITHEROW: We don’t call on anybody. We don’t approach someone in hopes that they’ll sell our chocolate. Maybe the first two months some of that went on, maybe three, probably two. But we really tried to slow down after that. We did some here and there during brief interims where we kind of thought it was getting quiet and you start to get kind of nervous as a new company or whatever. And you think well we need to pick up the phone and start cold-calling. But I think that we’ve all really found that just holding tight and just getting the product out there and in other ways. Yeah, that’s kind of how we do it.

ZRALEK: Let me ask you who you’ve teamed up with in terms of making chocolate. So you’ve teamed up with Benton’s Hams.

WITHEROW: Yeah, with Alan. And that’s a new something.

ZRALEK: So that’s on its way. Who else have you teamed up with if anybody?

WITHEROW: Well we teamed up with Terrapin, you know, for the Moo Hoo. And we look at all the local guys. I called the Yazoo boys [Linus Hall and his team] and made sure that [they didn’t mind] cause they’re the home team, so…
ZRALEK: Have you done anything with a coffee company yet?

WITHEROW: Yeah, we do stuff with Bob Bernstein [at Bongo Java]  in our normal coffee line. And then we do a line that’s exclusively at Williams-Sonoma [and one] that we do with my buddy Drew [of Drew’s Brew’s].  And it’s a totally different chocolate and a totally different roasted coffee. So it’s kind of a new interpretation of that.

ZRALEK: Okay, one last question…

WITHEROW: Yazoo as well. I gotta say we have teamed up with Yazoo…

ZRALEK: …and you’re drinking Yazoo as we’re talking.

WITHEROW: Yeah.

ZRALEK: So a good loyal follower.

WITHEROW: Yeah, I’m a big fan.

ZRALEK: Who do you see as your main competitor and who do you see—that’s probably a bad term—but who do you see as…is there any other chocolatier in the US that you think does a really good job like you do?

WITHEROW: I don’t want to look at them as competition. I guess in a way I kind of have to. But…

ZRALEK: Who else is a local chocolatier that you like?

WITHEROW: Well, just to…we’re not really chocolatiers. We don’t make truffles, we don’t…

ZRALEK: Chocolate company…what’s the right word?

WITHEROW: We’re chocolate makers. We import beans [then roast them and temper them].

ZRALEK: So who else does it like you do?

WITHEROW: Nobody in Tennessee.
 
Imported Cocoa Beans at O&SImported Cocoa Beans at O&S 

Copyright Stephen J. Zralek 2011 ©. All Rights Reserved.

Olive and Sinclair's Experience: Secrets to Success for Any Business

On January 31, 2011, I sat down to talk with Scott Witherow, owner of Olive and Sinclair Chocolate Co. , which makes the South's best chocolate.









Olive & Sinclair's Exclusive with Williams-Sonoma

Later that night, he hosted WaterCooler, a monthly networking event for young entrepreneurs that some friends and I co-founded in August 2009.  We had a jam-packed crowd of over 40 people.  Everyone, it seems, wants to learn more about this company.  (For another great write-up on the tasting, check out the recent post on Nashville Foodies' blog, or see Gwyneth Paltrow's blog "Goop," which highlighted O&S.)

Begun just 13 months ago in September 2009, Olive and Sinclair’s growth has been as viral as a posting on Facebook or Twitter.  O&S has already gained an exclusive contract with Williams-Sonoma for some of its products, and the demand for its chocolate grows every day.

We met after work at the office of O&S, which doubles as factory, research and design center, marketing headquarters, and nerve-center for all things chocolate in Nashville.  Before everyone from WaterCooler arrived, Scott offered me a sneak-preview sample of an upcoming chocolate he plans to launch in the coming weeks, something he’s collaborating on with Benton’s Smoky Mountain Country Hams.  To top it off, he offered me the perfect pairing of a  Terrapin Moo-Hoo Chocolate Milk Stout, which also has O&S chocolate in it.  Talk about a rich combination.  This was better than any of the after-school snacks I ate as a kid!

Here’s my take-away from talking with Scott, and what I think are some of the biggest secrets of his success. To be honest, I think these are some of the best keys to any modern business’s prosperity:

1. Authenticity: Olive & Sinclair offers an authentic story and product.

2. Collaboration: O&S collaborates with Terrapin, Drew’s Brews, Williams Sonoma, Bongo Java, and even non-profits like Saddle Up.

3. Embracing Social Media: Scott told me they couldn’t have had this massive growth and success without using social media. Only a 13 month old company, O&S has already grown to over 500 retail and wholesale customers.










O&S Red Hot Hearts for Valentine's Day

Here’s the best parts of my conversation with Scott:
Zralek: Thank you for the Terrapin Moo Hoo Chocolate Milk Stout…awesome! You were saying that social media has without questions helped your business…tell me how.

Witherow: Obviously it allows us to communicate with anybody out there that’s interested in Oliver & Sinclair. But because we’ve also been blessed with some pretty ridiculous—in a good way—articles. It’s allowed for people to actually kind of let us have a face. We were doing a lot more on Facebook and blogging before we ever even had a website. So that was a big part of it.

ZRALEK: Part of what I find in my work representing businesses as a lawyer is that, when people who are older than us (both in our 30s) are running companies, they often question the value of social media.

WITHEROW: Yeah.

ZRALEK: And to me, companies like yours are a prime example of how social media can help fuel the explosive growth you’ve experienced.

WITHEROW: I think for me and the company, I think that we all just believe in this product. We’re not…we don’t necessarily get into chocolate as like a monetary thing, you know, to make like a bazillion dollars. So it started off with just kind of loving the idea of being able to make chocolate. And then for me it was—I want to make chocolate personable and…I don’t know what this sounds like. But I think that we were successful in making it approachable and, again I don’t mean it arrogantly, but I think we do make a good product, and I think that social media is hugely important as long as you have a good product.

ZRALEK: I agree.

WITHEROW: But I think…

ZRALEK: If you’ve got nothing behind it, it doesn’t matter.

WITHEROW: Yeah, if it’s all this kind of chutes and ladders then you’re only going to go so far with it. But I think that—it’s been great even getting feedback, good and bad. I mean there have been people that have shot me a message on Facebook saying something was up or they noticed something and, like we had one customer who got a chocolate bar that wasn’t up to their standards of what they thought O&S was. And so she Facebooked me and, with the a batch number that we include on every bar, we found out where she bought it. It was poor product placement and it was such an old bar…I mean such an old bar that it shouldn’t have been on the shelf. So we had to go in and make sure that they were off the shelf and that our batch numbers are—they’re done for a reason. So that’s a great part to me.

ZRALEK: So this beer that you’re letting me taste, what’s the best chocolate that goes with it?

WITHEROW: [Handing me a sample of an upcoming release where O&S is collaborating with Benton’s Hams.] It will be a little while before it’s out.

ZRALEK: So what is that that I just tasted?

WITHEROW: It’s a smoked nib.

ZRALEK: From Benton’s Farm…they’re teaming with you?

WITHEROW: Yeah, we’re kind of teaming up for a little project. Hopefully we’ll see it through.

ZRALEK: And what’s that made of…it’s so good. Is there some bacon in there?

WITHEROW: No, [it’s just] nibs [that] are smoked by Alan down in Madisonville.

ZRALEK: So it’s more of the smoked flavor than the bacon.

WITHEROW: Yeah, there is no bacon in there really because it’s just…it’s Alan good quality smoked [flavor]…

ZRALEK: Wow it tastes good. . . .










Tasting of Various O&S Chocolate

ZRALEK: [W]hen did you decide to start this [company]?

WITHEROW: That was somewhere 2008 sometime, I think.

ZRALEK: What were you doing before Oliver & Sinclair?

WITHEROW: Just working in kitchens here in town. At the time I was a pastry chef at F. Scott’s.

ZRALEK: I didn’t know that.

WITHEROW: Yeah, I was there for about three years

ZRALEK: Did you go to culinary school somewhere?

WITHEROW: Yeah I went to Le Cordon Bleu.

ZRALEK: So you don’t recommend just anybody deciding to start their own chocolate shop? Having a little training comes in handy?

WITHEROW: Yeah but I didn’t learn how to make chocolate in culinary school. They didn’t guarantee me that. It’s more of working with chocolate. And I always try telling people it’s kind of like people that really like craft beers tend to start home brewing at some point. And I worked a lot with chocolate so I learned how to make my own chocolate. And I just started doing it.

ZRALEK: Where did you sell to first? Who was your first buyer?

WITHEROW: Mitchell’s Deli.  [Mitchell’s, the best deli in Nashville, is literally upstairs from Olive and Sinclair.]

ZRALEK: Are you selling primarily in Middle Tennessee?

WITHEROW: No, we’re nationwide and in Canada.

ZRALEK: So you started in ’08, it’s now January 2011…

WITHEROW: Well, I say we started in ’08. I started experimenting in ’08 and making test batches.

ZRALEK: So when was your first sale?

WITHEROW: September of 2009.

ZRALEK: Wow. You’re a young company.

WITHEROW: Yeah. We’re a year and three months.

ZRALEK: That’s great. . . .

ZRALEK: [O]bviously you wear a lot of hats. I assume that you [serve as] creative director, HR director, CEO, chief culinary designer and are you also making house calls to these places or do you send somebody else out there for you?

WITHEROW: We don’t call on anybody. We don’t approach someone in hopes that they’ll sell our chocolate. Maybe the first two months some of that went on, maybe three, probably two. But we really tried to slow down after that. We did some here and there during brief interims where we kind of thought it was getting quiet and you start to get kind of nervous as a new company or whatever. And you think well we need to pick up the phone and start cold-calling. But I think that we’ve all really found that just holding tight and just getting the product out there and in other ways. Yeah, that’s kind of how we do it.

ZRALEK: Let me ask you who you’ve teamed up with in terms of making chocolate. So you’ve teamed up with Benton’s Hams.

WITHEROW: Yeah, with Alan. And that’s a new something.

ZRALEK: So that’s on its way. Who else have you teamed up with if anybody?

WITHEROW: Well we teamed up with Terrapin, you know, for the Moo Hoo. And we look at all the local guys. I called the Yazoo boys [Linus Hall and his team] and made sure that [they didn’t mind] cause they’re the home team, so…
ZRALEK: Have you done anything with a coffee company yet?

WITHEROW: Yeah, we do stuff with Bob Bernstein [at Bongo Java]  in our normal coffee line. And then we do a line that’s exclusively at Williams-Sonoma [and one] that we do with my buddy Drew [of Drew’s Brew’s].  And it’s a totally different chocolate and a totally different roasted coffee. So it’s kind of a new interpretation of that.

ZRALEK: Okay, one last question…

WITHEROW: Yazoo as well. I gotta say we have teamed up with Yazoo…

ZRALEK: …and you’re drinking Yazoo as we’re talking.

WITHEROW: Yeah.

ZRALEK: So a good loyal follower.

WITHEROW: Yeah, I’m a big fan.

ZRALEK: Who do you see as your main competitor and who do you see—that’s probably a bad term—but who do you see as…is there any other chocolatier in the US that you think does a really good job like you do?

WITHEROW: I don’t want to look at them as competition. I guess in a way I kind of have to. But…

ZRALEK: Who else is a local chocolatier that you like?

WITHEROW: Well, just to…we’re not really chocolatiers. We don’t make truffles, we don’t…

ZRALEK: Chocolate company…what’s the right word?

WITHEROW: We’re chocolate makers. We import beans [then roast them and temper them].

ZRALEK: So who else does it like you do?

WITHEROW: Nobody in Tennessee.










Imported Cocoa Beans at O&S

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Copyright Stephen J. Zralek 2011 ©. All Rights Reserved.