The Justice Department Criminal Division recently released guidance on what it considers when deciding how a corporation’s compliance program factors into its investigation and the ultimate decision as to whether to bring charges, negotiate pleas or enter into other agreements with corporations under investigation. The Evaluation of Corporate Compliance Programs, released on April 30, 2019, is an expansion of the 2017 guidance document issued by the Criminal Division Fraud Section.

Prosecutors Must Ask Three Fundamental Questions

Prosecutors will ask three fundamental questions to determine if a corporation’s compliance program was effective at the time of the offense and at the time of charging:

1. Is the compliance program well-designed?
2. Is the compliance program being implemented effectively?
3. Does the compliance program work in practice?

Is Your Compliance Program Well-Designed?

An Effective Compliance Program Identifies Specific Risks

An effective compliance program will be tailored to the specific risks affecting the company under investigation. Prosecutors will ask if the company identified its own “high-risk” areas, as well as the degree to which the program dedicates resources to monitor these areas. Even a well designed program might not catch every event. Therefore, another important factor is when an event is uncovered, are the lessons learned incorporated into the compliance program going forward?

Train Your Employees

Prosecutors will analyze how thoroughly and effectively a company has trained its employees on its compliance program. Companies should use real-life experiential training scenarios and case studies during employee training. Employees must know when, where and how to report suspected misconduct. Then, once an incident is reported, how does the company identify which complaints merit further investigation? What access is given to the individual investigating the complaint? Is this an employee or an independent outside agency? A well-designed compliance program will also make it clear that no employee retaliation will be tolerated.

Third-Party Risk

Just as you should be monitoring your employees, it is just as (if not more) important to take your third-party vendors into consideration when assessing high-level risks. Your company should be mitigating these risks by using appropriate contracts and agreements for outside work, and doing regular due diligence and compliance training for third-party vendors.

Is Your Compliance Program Being Implemented Effectively?

Prosecutors will analyse if your compliance program is being implemented effectively. A company can spend countless hours developing a compliance program that looks and sounds great, but if, after the initial introduction to employees, it gets forgotten or completely ignored, then prosecutors will not look favorably on your company’s efforts. A successful compliance program must be woven into the fabric of the day-to-day culture from the top down.

Does Your Compliance Program Work in Practice?

The final question prosecutors will ask is whether the compliance program actually works in practice. Prosecutors will look into : (1) Was investigation into the misconduct conducted in a timely manner? (2) Has the company completed a root cause analysis? (3) Can the program be tested in order to improve? Again, evolution is key here. Does your program have to be perfect? No, no risk will ever be 100% mitigated. However, a program that works in practice needs to have the ability to be updated built into its core.

Take Away

As you can see, the DOJ has shared valuable insight into what prosecutors look for when evaluating compliance programs. This is extremely valuable and companies should take advantage of this intel and honestly self-assess whether its program measures up. Companies that have well-thought-out and designed plans that are capable of evolving will fare better before the Criminal Division than those who do not. If you have any questions regarding your program or compliance in general, or any other aspect of your business, please feel free to contact us at Danziger Shapiro, P.C.
This entry is presented for informational purposes only and is not intended to constitute legal advice.

Voice recordings violate the General Data Protection Regulation (GDPR) when companies fail to provide callers the ability to opt out according to a ruling earlier this month by the Denmark Data Protection Authority. Under the GDPR, voice recordings are considered personal data. Therefore, companies that communicate with EU residents need to understand what the GDPR requires from a compliance perspective to avoid unwanted violations.

This Call May Be Monitored …. Requires Affirmative Consent

We have all heard some form of the following phrase right before a live person answers the phone, “This call may be monitored for training purposes…” Well, in this instance the caller asked the Company NOT to monitor the call for training purposes. The Company representative replied there was no way to turn the recording off. Based upon these facts, the agency in Denmark held the inability to turn the recording off when requested violated the GDPR. The Company argued unsuccessfully that by continuing on the call, the customer consented to having the conversation recorded. The agency disagreed and stated consent needs to be more than just tacit approval but rather a clear, affirmative and unambiguous choice to have your personal data recorded. Affirmative consent was not available in the foregoing example.

Take Away

The take away here is that affirmative consent requires the ability to opt out. If there is no way to opt out, were you given a meaningful choice? Is tacit compliance enough? In Denmark, the answer was clearly no. Going forward, US companies that are subject to the GDPR should take notice of this ruling and pay careful attention to internal telephone practices. Click here for more information generally on the GDPR. If you have any questions regarding this or any other aspect of your business, please feel free to contact us at Danziger Shapiro, P.C.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

Last month the Department of Labor’s Wage and Hour Division officially rejected the 6-part test it had been using to determine if an employer who had an unpaid intern was violating the Fair Labor Standards Act (FLSA). Going forward the DOL will employ a “primary beneficiary” test which is designed to focus on the specific economic realities between the employer and intern. The new test affords the DOL more flexibility in its analysis with one factor not being any more or less important than another factor.

Primary Beneficiary Test

The primary beneficiary test requires the Courts and DOL to look at the following seven factors:

• The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
• The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
• The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
• The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
• The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
• The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
• The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Click here for an excellent summary of the new “Primary beneficiary Test” provided by the DOL.

Improperly Classified as Unpaid Employee

If the employer improperly classifies an intern as an unpaid employee, then the employee will be entitiled to minimum wage and overtime wages to the extent applicapble under the FLSA. An employer really needs to consider who is the primary beneficiary of the relationship and whether or not it is really just trying to get free labor. Attorneys will take these cases on a contingent basis because of the fee shifting provisions under the FLSA. If you are still not concerned consider this through a broader lens. What if this ocurrs in a large corporation that for years has been using unpaid interns but had improperly classified them as interns and not employees? On a class wide basis, combined with attorneys’ fees, the stakes are much larger.

What this means for Employers

As we have said in the past, Employers should every once in a while conduct a wage and hour audit and make sure that the audit applies to its “unpaid interns” as well. This means not only should an employer review its wage and hour policies, but also understand how it works in the actual workplace.

Douglas Leavitt is an attorney with Danziger Shapiro and focuses his practice on guiding businesses with their daily operational needs. Please feel free to contact him or any of the other attorneys at Danziger Shapiro to discuss a business compliance issue or other concerns you have that affects you and your business.

This entry is presented for informational purposes only and does not constitute legal advice.

This week I reviewed three Non-Disclosure Agreements and was surprised when two of the NDAs were silent regarding employee solicitation. Working with clients over the years I have found that in virtually every successful company, it is almost always the employees, along with the technology, that are among the most valuable assets that need protection. Yet in the deals my clients were exploring, these valuable assets were not protected, or at least would not have been protected had my clients not shared the NDA with me before signing. First however, I want to take a step back and discuss why the NDA (also called a Confidentiality Agreement) is used, and identify common NDA scenarios.

Protect Confidential Information

There are many situations where a business will need to share confidential information with employees, another business, potential investors or consultants. Confidential information frequently includes trade secrets, formulas, data, customer pricing and the like. However, when confidential information is shared, it must be also be protected. This means that confidential information is shared in a controlled manner such that the receiving party cannot use the information to its competitive advantage without the consent of the disclosing party. For Example, if a competitor is considering whether it wants to acquire your business or make an investment and in its review of the information you provide your competitor will gain insight into how you produce similar products cheaper. Without any protections in place, what would stop your competitor from using this information for its own competitive advantage? Your sources and methods must be protected. This is accomplished through a carefully drafted Non-Disclosure Agreement.

Common Non-Disclosure Agreement Situations

A Non-Disclosure Agreement is commonly used when:

• Sharing financial information, key vendors and other information to potential equity investors or prospective buyers of your business.
• Allowing employees access to confidential and proprietary information – Click here for a recent example of where a Teva employee violated the terms of her confidentiality agreement.
• Presentations of new products to potential customers.
• Your vendors have access to your sensitive information.
• Your clients may require the other businesses you engage (your subcontractors or professionals retained by you) with be bound by NDAs similar to the one between you and your client.

Employees as a Protected Asset

Turning back to what surprised me, two of the NDAs I reviewed this week failed to treat employees as protected assets. Employees are perhaps one of, if not the, most valuable asset to any organization. “Your company is only as good as your employees”, is not an uncommon sentiment shared by many of the top organizations around the world. Why would you not protect them? How does this come into play you ask? Simply stated, the investor that is considering making a sizable investment into your tech company will want not only to review your work papers, but also discuss them with your key employees. How does this technology work? What are the hidden dangers? What are the challenges? How do you plan to overcome these challenges? What happens if the prospective investor decides that he doesn’t want to invest in your business but makes a job offer to your key employee? This can be disastrous. Thus, an NDA must protect your employees through an appropriate non-solicitation clause.

Other NDA Considerations

There are many other concepts that need to be considered before you sign an NDA as well. For example, the definition of “Confidential Information”, term limits, key contacts, prior knowledge, disclosures to authorities, injunctive relief and document destruction come to mind. These considerations are just as important as protecting your employees through non-solicitation clauses. If you have any questions regarding a NDA that has been placed before you, or want to develop an NDA for future use, or any other aspect of your business, please feel free to contact us at Danziger Shapiro, P.C.
This entry is presented for informational purposes only and is not intended to constitute legal advice.

Potential clients frequently ask me why they should not buy contract forms online or from an office supply store. Why pay for an attorney when I can buy a legal form for a nominal fee? I understand the inclination to go online because its entirely at your convenience and it is undoubtedly cheaper. However, this comes at a potentially high cost. Legals forms do not always comply with all legal requirements for a given industry and location (federal, state and local). The danger you expose yourself to by avoiding working with a lawyer is the unknown. It is the risks you don’t realize you are taking that frequently come back to bite you the hardest. I am writing this blog today as a cautionary tale why such forms should be avoided because of a recent conversation I had with a potential client.

The Form Office Lease

Last week a potential client came into my office with a complaint that a former tenant had recently filed against him. The tenant claimed damages against the landlord because the lease did not comply with the Philadelphia Lead Disclosure & Certification Law. This law applies to any dust, dirt/soil, paint, and as of March 1 pipes that drinking water may pass through. If the allegations set forth in the complaint are true, the landlord will have to refund all rents received during the rental period, pay for his tenant’s attorneys’ fees and other fines up to $2,000. The landlord in this case thought he followed all of the rules. He even showed me the lead based paint disclosure form that came with his form lease. Unfortunately, Philadelphia has very specific requirements concerning lead disclosures for buildings that were built prior to 1978. Moreover, not only are there requirements for what has to be disclosed; but the manner in which disclosures must be made are also regulated by code. In fact, this is such a prevalent problem in Philadelphia because it is such and old city that it has an excellent publication on this topic. Click here for Philadelphia Landlord’s Guide to Lead Disclosure. While, the form lease that was purchased at the chain office supply store might have complied with Pennsylvania state law, it did not satisfy the Philadelphia Code and this will be an unfortunate and expensive lesson for this landlord.

Advice From Lawyer Can Avoid Dangerous and Costly Business Practices

During the course of our meeting, I recognized this landlord had many other dangerous business practices that could have been avoided if he had simply met with a lawyer before he embarked on his career as a landlord. However, the landlord to be just did not know what he did not know. For example:

Philadelphia Facade Ordinance

• If your building is more than 6 stories tall and located in Philadelphia, your building’s facade is subject to an initial inspection and thereafter a follow up inspection every 5 years. This local ordinance applies not to facades but also to to all buildings six or more stories in height; all buildings with any appurtenance in excess of sixty feet in height; and any building, other than one or two-family dwellings, greater than two stories located in specific areas.
• This landlord’s three unit brownstone was covered by this ordinance but I could tell from our conversations that no effort to comply was made. This wasn’t because the landlord was trying to avoid his legal obligations. No, rather it was simply just not being aware of what his responsibilities under the law required. This time, it was once again a local ordinance, as opposed to a state or federal law that was being violated. There is no way any form legal agreement purchased at an office supply store or online can protect you from what you do not know because you don’t have the opportunity to ask questions to a living person and the lawyer who drafted the agreement you are purchasing is not involved in the process.

Employment Application Forms

Another form that business owners repeatedly get into trouble with is relying upon store bought employment applications. In today’s legal environment, these forms need to be updated regularly. Consider in Philadelphia alone you can no longer inquire on the application if your applicant has a criminal record (effective March 2016) or what they were being paid at their current job (will become effective April 2017) . A recent corporate client asked me to review its employment application and his store bought forms did not comply with either Philadelphia specific legal requirement. In reviewing his other store purchased form we told him the restrictive covenant in its employment agreement was also not enforceable because it was too broad and that the manner in which it was implemented with respect to current employees was also an issue that prevented enforcement.

The attorneys at Danziger Shapiro, P.C. are available to assist you in connection with preparing or reviewing your transaction documents. An ounce of prevention is a good investment to make sure the agreements you are using will actually work and accomplish what you want to achieve. Please call us for a consultation to discuss your concerns. We look forward to hearing from you.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

The American Rule

In the United States, each party is responsible for its own legal fees. This is known as the “American Rule.” In other countries, the U.K. for example, the loosing party is responsible for the winner’s legal fees. This critical difference in approach to the general legal framework explains why litigation in the United States runs amuck as compared to our British counterparts. New Jersey however has an oft forgotten procedural rule that when used properly turns the “American Rule” on its head and effectively makes the losing party pay for the winner’s attorney fees if certain conditions are met.

Attorney Fees in NJ

A Typical Situation

In NJ, litigants are responsible for their own attorney fees and costs associated with their own case. Therefore, every plaintiff has presumably made an economic analysis before filing his case that the costs (legal fees, costs of litigation ) associated with bringing the lawsuit are much less than the anticipated upside of winning his case. Similarly, the defendant has also made a determination that the cost of settling the case is too high when compared to the cost of prevailing on the merits of the case. In other words, it will be cheaper in the long run to pay my attorney and successfully defend the case than to just pay the plaintiff what he or she is asking. But what if each party had to consider paying the legal fees and costs of the other?

How the Offer of Judgment changes everything

In NJ if a litigant serves an Offer of Judgment on an opposing party for a specific monetary amount and the other party refuses, the refusing party may be responsible for all of the other party’s legal fees and costs incurred after the Offer of Judgment was made. Let’s take a closer look.

• Timing and Manner of Making and Accepting Offer — Any party may serve on the other party an Offer of Judgment so long as it is served at least 20 days before the actual trial date. The offer is not valid unless it is for a specific dollar amount. In addition, the issues set forth in the case must only be monetary in nature. If this is not the case, the Offer of Judgment rule does not apply. Acceptance of an Offer is made by filing an Notice of Acceptance with the court. This must be done on or before the 10th day before the actual trial date or another Offer is made. If a party makes another Offer, the previous Offer is deemed withdrawn. The making of a counter-offer by an adverse party does not make the initial Offer deemed withdrawn.
• Consequences of Not Accepting Claimant’s Offer — If the Offer of a claimant is not accepted and the claimant obtains a monetary judgment at trial that is 120% of the Offer that was NOT accepted, then the Claimant is entitled to, in addition to the monetary award he or she won at trial: all reasonable litigation expenses incurred after the offer was made plus interest at the rate of 8% per anum and all reasonable attorney’s fees incurred in connection with collecting on the judgment.
  • Example — Claimant makes an offer of $1,000 and the offer is rejected. If the plaintiff is awarded the sum of $1,200 or greater, the defendant will be responsible for the plaintiffs attorney fees, interest and costs of collection as set forth above.
• Consequences of Not Accepting Offer Made By Party Not a Claimant — If a party who is not a claimant makes an offer (the defendant for example) that is not accepted and is deemed to be “favorable” under the Offer of Judgment rules, then the party not a claimant is entitled to all of the remedies the claimant is entitled to as set forth above. A favorable outcome is defined as an amount that is 80% of the Offer or less.
  • Example — Defendant makes an offer of $1,000 and the offer is rejected. If the plaintiff only receives an award of $800 or less, the plaintiff , even though he may have “won” the case, will still be responsible for paying the plaintiff’s legal fees.

Take Away

The take away here is that the Offer of Judgment Rule was designed to force litigants to take realistic looks at their cases and properly evaluate what they are worth. The failure to do this if an Offer is made can be disastrous when you factor in not only attorneys’ fees but the costs of experts as well. Judges have very limited, if any, discretion if this rule is invoked. If invoked, fees and costs must be awarded if made timely. The only discretion is that the attorney fees must be reasonable. Please feel free to call any of the attorneys with Danziger Shapiro, P.C. to discuss your case and other issues affecting you or your company.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

What is the Pennsylvania tax amnesty program?

Tax amnesty is a program where taxpayers (businesses and individuals) who owe outstanding taxes can settle with the Pennsylvania Department of Revenue (“Department”) by paying less than what is owed. Under the program, if the taxpayer pays the entire amount of the outstanding tax due, the Department will waive all penalties and one-half of the interest associated with the underlying tax. This is an incredible opportunity for taxpayers to settle with the Department and take advantage of the savings being offered.

When does the tax amnesty program take place?

From April 21, 2017 through June 19, 2017, the Department will offer tax amnesty to all eligible taxpayers and waive all penalties and one-half interest if the taxpayer is able to pay the underlying tax and the one-half interest that was assessed. This is a strictly enforced sixty (60) day window. There will be no extensions of time to file. All required returns must be filed by the last day of the deadline.

Who is eligible to participate in the program?

Any taxpayer may generally participate in the program so long as they are not:

• A participant in the 2010 Tax Amnesty Program;
• Under criminal investigation relating to the violation of any tax law;
• Prior to the amnesty period been named as a defendant in a criminal complaint alleging a violation of any law imposing a tax administered by the Department; and
• A defendant in a pending criminal action for an alleged violation of any law imposing an eligible tax.

What taxes are eligible?

While not an exhaustive list the following taxes are eligible for the program:

• personal income tax – for the tax period January 1, 2014-December 31, 2014 – Due April 15, 2015
• inheritance and estate tax – Death of decedent March 31, 2015 – Due December 31, 2015
• capital stock or foreign franchise tax – for the tax period January 1, 2014-December 31, 2014 – Due April 15, 2015
• corporate net income tax – for the tax period January 1, 2014-December 31, 2014 – Due April 15, 2015
• gross receipts tax – for the tax period January 1, 2014-December 31, 2014 – Due March 16, 2015
• employer withholding tax – Third Quarter 2015 – Due November 2, 2015
• realty transfer tax – December 31, 2015
• sales and use tax – varies depending on manner collected and when paid

For a complete list click here.

When are payments required to be paid?

All payments under the tax program are required to be paid electronically by the close of the sixty day window – June 19, 2017.

What should I do going forward?

The 2017 amnesty is an incredible opportunity for taxpayers to resolve outstanding debts with Pennsylvania. Going forward, if a taxpayer receives an assessment in the mail for the above tax periods and they are greater than what is being offered by the 2017 amnesty program – don’t settle. Negotiate a deal that is comparable to the program. This is an excellent time for taxpayers who might have not filed all of the required returns or perhaps may have under reported income to come to the table and settle up with the Commonwealth.

If you have any questions regarding the 2017 tax amnesty program or any other issue affecting your business, please feel free to call the attorneys at Danziger Shapiro, P.C. We are available to assist you with your business needs. We look forward to hearing from you.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

If you are reading this then one of two things have probably happened. You have a business relationship with another person or entity that is taking advantage of you and you need to change it immediately. You were just served with a complaint that provides a response deadline. In either scenario, you should hire a lawyer to protect your interests. But when do you this? How do you do this? Do you even know any lawyers? What if I choose the wrong lawyer? How do I hire the right lawyer? Lawyers are intimidating and jerks (so I have been told). These questions and statements are very common when I meet clients for the first time. Knowing this, I have always wanted to prepare a cheat sheet that clients can refer to help them navigate the very unfamiliar process of how to hire a lawyer.

Step 1. Be proactive – Start Your Search and Do Not Wait to Hire Your Lawyer

If you were served with a complaint and do not respond before the indicated deadline, the plaintiff (the person who filed the complaint) can ask the Court to enter a default judgment against you. Do not wait until the last day to reach out to hire an attorney. It is always a better strategy to meet with an attorney (or with several attorneys) as soon as possible so you can see if you can work together. The quicker you start your attorney search, the quicker you will hire an attorney. Do not wait. This only leaves you with less time to choose the best lawyer for you. So, where do you begin?

1. Do you know any attorneys in your family? If you do, ask them if they know anyone who you should hire for your specific situation.
2. Ask your friends for recommendations. Your friends are tremendous sources of credible information. They will tell you who they like and also just as important, who they did not like. Most of our clients in fact come from the recommendations of friends and family members, current clients, and believe it or not, the families of my children’s friends.
3. Google. There is nothing wrong with going online and doing your own research to see who you should hire. Even if you receive recommendations, go online and see if there are any reviews. Be sure to check both the firm’s website and its presence of Facebook. See if there any online reviews, positive or negative. Has the attorney written many articles? Check if there is a blog. In today’s online society, there is a tremendous amount of information that can be learned before you even meet face to face.

Step 2. The Initial Consultation

Now that you have selected the attorney you want to meet, you need to schedule a consultation. Chances are you will wind up talking to the attorney’s assistant. Pay close attention to how you are treated. At this point you are both learning about each other. While your lawyer and his/her staff should always be polite, it is a very bad sign if the person you are talking with is rude at the very beginning of the relationship. The initial meeting should also be free – while many attorneys charge for the initial meeting, in my humble opinion this is a mistake. This is an opportunity for both sides to meet each other and find out whether they can work together. In addition, I have found that if the initial meeting is not a billed event, my client’s relax and I find out more information. Understanding a client’s case from the outset is preferable and only possible if my clients are comfortable.

Documents

Please make sure to bring all the relevant documents with you to the meeting. While your lawyer’s assistant may not be able to give you answers to legal questions, ask him or her what documents you need to bring to the meeting. It is an even better sign if she asks you what documents you have – in addition to the complaint. This is a sign of an actively engaged staff that cares about everyone’s time. If you come to the meeting to discuss a complaint concerning a partnership dispute, the meeting will be more valuable to everyone involved if the complaint and partnership agreement was in front of everyone. Many times I have been in an initial client meeting but the potential client has forgotten the agreement. All is not lost in these situations but it is certainly a better use of everyone’s time if the right documents are brought to the initial meeting.

Confirm who will be handling your case and communication

Please remember that this is your case and your livelihood is at stake. Do not be shy. Specifically ask who will be handling your case? You do not want to meet with one attorney but have your case handled by a different attorney. Will the attorney who is handling your case be the same attorney who actually goes to court? Make sure the lawyer you retain is the lawyer who will be working on your case. The day to day prep work for a case involves a different skill set from a trial attorney. Trial attorneys regularly appear in court. Litigation attorneys prepare cases for the trial attorneys. Find out who you are working with and what skill set they have. Also, how will the attorney communicate with you. Email, phone calls? What documents will be sent to you? Will you be included on strategic decisions? Do not be a pacifist. This is your case. Be an active participant but don’t get in the way either. Listen to your lawyer and recognize that he or she has traveled this path before. Do not confuse your Google search for a law degree and actual experience!

Experience

Experience counts. Treat this as your time to interview the attorney. Don’t be shy. Has the attorney handled this type of case before. When was the last time they were in court? What is their typical litigation strategy? This is a trick question. There should not be a typical strategy. Beware of a scorched earth approach. While this sounds good up front, we are going to war etc…. the only certainty is increased legal costs. Of course there always is a time and place for everything and sometimes scorched earth tactics are necessary (for example injunctive relief) . However, just filing preliminary objections to a complaint because you can is often times a waste of money.

Billing, Costs and the Retainer

Make sure you find out the billing arrangements before you hire your attorney. How does the attorney bill? Hourly, contingency or flat fee? You will find most attorneys will not take a commercial litigation case on a contingency basis except in exceptional circumstances. Find out what the hourly rate is for each attorney who will be working on your case. How often will bills be sent? Monthly, every two months? What happens when two attorneys meet to talk about your case? In most cases, if two attorneys each bill $400 an hour you will be charged $800 if they talk for one hour. I take a different approach. I run my law firm as a small business where you are renting my time. If I need to meet with my colleague for an hour to discuss your case, you will pay for my time but not my colleagues. However, if we are both working on a part of your case in order to meet a deadline, then you will be billed for both of our time but merely having interoffice meetings -you will never be double billed.

Be sure to ask about costs. Will the attorney you hire pass along his costs? Typical costs that attorneys pass onto clients are copy and postage charges, overnight fed ex charges, computer assisted research charges. These are hidden profit centers for law firms. These extras can add up and you need to know how they are being handled before you hire your attorney. Along the lines discussed above, I run my firm like a small business and view this as my overhead. I keep my costs in house and do not pass them along to my clients. There are always exceptions (for example overnight mail to 5 locations) but for the most part if I have to do computer research or overnight something this will not be passed on to you. And when I take you to lunch, you will NEVER see the lunch as an expense on your bill!! Don’t laugh, this happens. Costs that are passed on are filing fees, services charges, depositions costs. Direct out of pocket charges directly related to your case.

You also need to understand what a retainer is and how it works. There is a distinction between the retainer agreement and the retainer amount. The retainer agreement is a written contract between you and the attorney you choose to hire. It usually takes the form of a letter that you sign at the bottom that you agree to be bound by the terms set forth in the letter. Occasionally the letter will incorporate other terms set forth in an enclosed form document titled “Terms and Conditions.” The retainer amount is how much money you agree to pay up front that the attorney will bill against at the end of the month. This money is held in a separate account from the attorney’s business operating account. If the agreed upon retainer is $5,000 and you were billed 2 hours at $500 per hour the attorney will take $1,000 from your retainer account and the going forward balance will be $4,000. It is also important to understand what happens to the retainer when it is exhausted or used up. Are you required to replenish it? Are you required to bring it back to the initial agreed upon amount at the beginning of every month? This is known as an evergreen retainer. Or does the attorney move away from the retainer and just go to monthly billing? This is the approach I like to take. It demonstrates trust and a willingness to work with the client. Of course if this path is chosen, do not be surprised if a retainer is reinstated if you fall behind. Also retainers are commonly reinstated right before trial and to cover deposition and transcript costs. If you would like to review a few sample retainer agreements from the PA Bar Association, please click here.

Closing Thoughts

I hope these thoughts are helpful and provide insight into the process of how to retain a lawyer. If I could just pick one closing thought to remember it would be, don’t be shy. If you think about it, this is your case and if you are not shy about it you will want certain information answered so you can make an informed decision. In a pinch however, you can always keep this folded in your pocket. If you have any questions regarding this post, or perhaps want to talk about your case, please feel free to call me, Douglas Leavitt. I am one of the attorneys at Danziger Shapiro, P.C. and I would be happy to discuss your case with you.

This entry is presented for informational purposes only and does not constitute legal advice.

A recent court decision from the Philadelphia Courts should cause anyone with a commercial lease to review their contracts. The issue in this case required the court to determine if a confession of judgment clause in a commercial lease was enforceable. The Court ruled the confession of judgment clause was not enforceable against the tenant because the landlord did not strictly follow the statute. As a result, the Court struck down the confessed judgment. While not ground breaking in and of itself, the opinion serves as a reminder that a court will closely scrutinize all confessions of judgment. You can read the court’s decision by clicking here. Before we look closer at the court’s decision, a basic understanding of what a confession of judgement is and why it is so powerful is required.

What is a confession of judgment?

A confession of judgment clause is usually found in most commercial lending transactions and commercial leases. In a nutshell, a confession of judgment clause flips our notion of due process on it head. A confession of judgment clause authorizes the attorney for the bank or landlord to appear for the borrower or tenant without any notice and enter a judgment for a specific amount of money (or for possession of the premises in a lease situation). Think about this for a second. The first pleading your lender serves is the paper that informs you a judgment was entered against you. Game over. Or is it?

Courts Disfavor Confessions of Judgment – Deprivation of Due Process

Courts generally disfavor confessions of judgment because they deprive defendants from their constitutional due process rights. More to the point, it takes away the right to have your day in court. There is no due process with a confessed judgment. As a result, a court strictly scrutinizes a confession of judgment clause to make sure sure all of the required steps are followed by the parties to the contract. However, if all of the rules are followed, two parties can contract away the right to notice and a hearing before the entry of a judgment.

Confession of Judgment Basic Requirements

Conspicuous Location Required

The confession of judgment is one of the most powerful clauses that exist in a commercial contract. As a result, courts routinely examine not only the words of the confession of judgment, but also location and font style of the confession text. To pass judicial scrutiny, a properly drafted confession of judgment must be in a conspicuous location. In other words, a confession of judgement cannot be buried among the terms of the contract. The clause must be set apart and stand out. Courts look for confession clauses that are in bold case, all caps, and have a prominently titled heading. Practice Point: Look carefully at your contract, whether you are just signing or it has been in effect for awhile. If the confession clause is “hidden” in any way, it may not be enforceable. Contact our firm or other legal counsel to take a look.

Information and Procedural Requirements

A complaint must contain the information set forth by Rule 2952 of the PA Rules of Civil Procedure. If your complaint does not contain this information, the court will not enforce your confessed judgment. At a minimum, the complaint must include the following information and follow the below procedural requirements :

• The name and last known address of all parties
• A copy of the document that authorizes the confession – also known as the warrant of attorney
• A statement that judgment has not been entered in another jurisdiction
• A statement that the judgment is not being entered against a person in a consumer credit transaction
• A statement that an event of default has occurred and demand has been made as required by warrant
• Itemization of amount due
• Required signatures and verification
• Comply with New Power of Attorney Act (discussed below)

While there are other requirement and procedural hurdles, this list gives you a flavor of what is involved.

Why the Court Struck Confessed Judgment

In this case, the Philadelphia judge struck the confessed judgment because it was not conspicuous. The Court found the confession to be buried, hidden and was written in small font. The amendment also failed to specifically set forth the confession clause itself. Rather, the amendment just referred to the terms set forth in the original lease. While this will successfully incorporate most terms, it will not incorporate a confession of judgment clause. This Court held that the lessee’s signature on the amendment did not bear a direct relation to the warrant of attorney. The warrant of attorney was in the original lease and not in the amendment. As a result, the confessed judgment was struck open. The Court’s logic makes sense. If the confession clause is not on the lease amendment itself, can it be a knowing waiver? If it was not a knowing waiver, it was hidden and not conspicuous.

New PA Power of Attorney Act

Earlier this year we pointed out that PA’s power of attorney law underwent significant changes. Click here to read the earlier post on this blog. It is important that the warrant of attorney contains the necessary agent disclaimer language so it does not violate Section 5601.3(b) of the new act. This section requires that an agent must take action only for the benefit of his/her principal. In the context of a warrant of attorney, we all can agree that entering a judgment against your principal is clearly not in the best interest of your principal.

Confession of Judgment

The practical take away is that a confession of judgment and your commercial lease in general may not be all that it seems. If your lease contains a confession of judgment, the landlord is required to follow rules regarding not only the specific wording of the clause, but also to the exact placement as well. Failure to take both aspects of the confession into account could make their confession clause vulnerable in litigation. Doug Leavitt and the attorneys at Danziger Shapiro, P.C. are available to assist you in connection with preparing or reviewing your transactions documents. Please call us for a consultation to discuss your concerns. We look forward to hearing from you.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

As a professional real estate developer or someone with an interest in purchasing real estate at a sheriff sale, you need to understand how the bankruptcy and foreclosure laws work together. Foreclosure is a process by which a private party (a bank for example) or a municipality bring a lawsuit to collect monies that are past due. This can be taxes or other fees owed. Once a judgment is entered, the sheriff will schedule a sale to satisfy the money owed at a public auction. This is known as a foreclosure or sheriff’s sale. Can a bankruptcy filing stop a foreclosure? The simple answer is yes. However, the investor that fails to perform simple due diligence can make a foreclosure sale purchase a very costly and time consuming proposition. Before turning to this, a little background on the bankruptcy laws.

Bankruptcy: The Automatic Stay.

The day a debtor files bankruptcy (Chapter 13, for example), is the petition date. On the petition date, a legal wall comes down known as the automatic stay. All creditors are now required by federal law to stop collection efforts for debts owed prior to the petition date. This includes all demand letters, lawsuits and sheriff sales. So long as the petition date is prior to the “gavel falling” at the sheriff sale, the real estate remains with its original owner. However, if bankruptcy is filed after foreclosure, even one day after, the real property passes to the successful bidder. The real property is then not part of the debtor’s bankruptcy estate.

Best Practice Tip: When Purchasing at Sheriff Sale, Do Your Own Bankruptcy Search.

Problems arise however when a real estate investor buys real property at a sheriff sale but is not aware that the owner filed bankruptcy before the sale. The law is very clear- if the owner filed bankruptcy before the hammer falls at the sheriff sale, it is as if the sale never happened. The bankruptcy term is void ab initio meaning “to be treated as invalid from the outset.” Knowing this, it is a best practice to determine on three separate occasions if the property owner filed bankruptcy.

Initial Search.

First, run a search to see if the property owner(s) has filed bankruptcy immediately upon identification of a potential property. If the sheriff sale is a non-starter, it’s best to know from the beginning. Why waste your time and money on the rest of your due diligence?

Research During The Process.

It’s important to search the day before the sheriff sale to make sure the property owner still has not filed. You will be doing a lot of research as a part of your due diligence during the process. It’s easy to miss this step- Don’t. Frequently a property owner files bankruptcy at the 11^th hour to save the property from sheriff sale. The sheriff may not be aware of a bankruptcy that was filed the day before the sale. If the sale is continued, another check before the continued date is recommended as well.

Final Check.

Check again right before you make the final payment to the sheriff. In Pennsylvania, a successful bidder needs to pay ten (10%) percent of its bid at the actual sale. The remaining balance is due thirty (30) days after the sale. I always recommend to my investor clients to check one final time before they tender the remaining ninety (90%) of their winning bid. Otherwise you may face an unfortunate situation where the sale is set aside. That will leave you the difficult task of trying to recover your bid from the sheriff. Worse yet, maybe you made improvements to the property? Who benefits from these improvements? If the debtor keeps the property, does he/she have any money to pay you for these? Remember, the debtor is in bankruptcy and has very limited funds.

If you still believe checking is not necessary, I leave you with one recent war story. A client I represented came into my office with a motion to set aside a sheriff sale filed by a municipality. The motion was filed 16 months after the sheriff’s sale. The investor just finished with renovations and was ready to rent the triplex to tenants. Before the town served the motion, my client was not aware the prior owners filed bankruptcy. Of course, while the sheriff is required to refund the amount paid to my client, nothing was mentioned concerning the $75,000 my client spent improving the triplex. The debtor certainly did not have money to repay the investor. As of the posting of this blog, negotiations are still ongoing regarding this issue.

Searching for a Bankruptcy Filing.

This could all have been avoided if my client performed its own bankruptcy due diligence prior to bidding at the sheriff sale or before it paid the remaining balance. To accomplish this, simply run a search through an online search program called PACER. It is important to conduct the PACER search in the correct bankruptcy court for each party identified on the deed. This means doing the search in the bankruptcy court where the property is located. If the debtors do not live at the property in question, then another search must be performed at the location they reside at as well. Another very useful website is the United States Courts’ website that provides a link to every bankruptcy court in the United States. To reach this website, click here.

If you have other questions regarding how to invest in real estate through the sheriff sale process, please feel free to call us at Danziger Shapiro, P.C. We look forward to hearing from you.

This entry is presented for informational purposes only and does not constitute legal advice.

Driving to work this morning I was thinking about my aging receivables and was becoming increasingly frustrated. Although I am a lawyer and work in a Philadelphia law firm, I am also, at my core, the owner of a small business. I provide services and expect or hope to get paid. My situation isn’t very different from any business or service provider. As I thought about what I could do better to insure that I got paid, I thought there are probably a lot of other business owners, chief financial officers and the like that would appreciate options they can consider implementing to increase their chances of being paid for services rendered, products delivered or items that were manufactured.

The starting point – your contract. Whenever a client or potential client calls me and wants to discuss how to structure a transaction to insure they are paid or at the very least minimize the risk they are not paid the starting point is always the same. Have you worked with this entity before and do you have any written agreements or standard terms and conditions that govern the contemplated transaction? Every contract starts with the assumption that each party will be responsible for paying its own legal fees? This concept is known as the American Rule. However, if your contract or standard terms and conditions state that the buyer will be responsible for all costs and expenses, including legal fees incurred in connection with your collection efforts – you have successfully shifted the American Rule on its head. Now, not only is the breaching company responsible for paying your outstanding receivable, but it is now responsible for your legal fees as well. Keep in mind that this does not necessarily guaranty payment but you not have another hammer in your negotiation arsenal to use against the defaulting party.

Cash is king. In my line of work the only way I can completely guarantee payment is with the retainer. Similarly the simplest way to guarantee payment is cash up front before services begin. This is why, for example, doctors require the co-payment before services are rendered and not on the way out. However, recognizing this is stating the obvious, other possibilities include timing the payments better. For example, if you are manufacturing a specific part for a customer or providing consulting services, develop a payment schedule that is tied to verifiable deliverables. If you meet a deliverable milestone and they don’t pay, you stop working. Other possibilities that can be explored is cash on delivery (COD). COD is a very basic but effective method to insure that you are paid when a physical product is involved.

The guaranty. When dealing with a financially troubled company it is always a good idea to explore the idea of another person or entity guaranty the payment. In this scenario there will always be push back from the company but it always comes down to negotiating power. Who needs whom more? While I always try to get a retainer, when I represent a company like Sprint or PNC Bank for example, they don’t give retainers. If I want to work with these entities, I have to work under their standard terms. If you are able to get guaranty from a third party, it is important to make sure the guaranty allows the collection process to start when there is a default and does not require that all options available have been taken against the debtor company first. In other words, an effective guaranty will allow simultaneous enforcement against both the guarantor and the debtor company.

The Letter of Credit. Related to the idea of a guaranty is the letter of credit. In this situation, your company has manufactured a product and if the vendor does not pay, you are able to draw against the letter of credit. In other words, the bank pays you what your vendor should have paid and then the bank will go against your vendor for payment.

The Security Interest. When a bank lends money to a borrower who want to buy real estate (commercial or residential) it will always ask for a collateral. If the borrower is unable to pay, the bank makes sure that it can take back the property you purchased with the money the bank advanced. This is accomplished with a security agreement. In the case of real estate, this is the mortgage. If you fail to live up to the terms of the promissory note, the bank will enforce its rights under the mortgage and take back the real estate.

If you are a financing company, this scenario is accomplished through a security agreement and UCC financing statement. The security agreement will govern the terms and conditions you can take back the object financed if payment is not made. The UCC-1 financing statement is necessary to protect you so an unscrupulous debtor is unable to take the equipment that it financed with you and offer it as security for another line of credit. Without the UCC-1 you will be unprotected and a third party might be able to have a claim above you with respect to the very object your financing allowed the debtor to purchase. Think of the financing statement as a public notice system where you can look to see if the item you are consider as collateral is subject to claims by third parties. If you don’t look into this, the risk falls on you.

Consignment. Consignment is an arrangement where you retain title to the product until the seller is able to sell it to a third party. If this is done correctly, you get the product back if it is not sold. The danger here is that the product is not in your possession during the entire process so you lose control. Further complicating this is if the legal requirements are not strictly complied with, the seller’s bank might get priority over your consigned property.

The Setoff. This isn’t so much a way to structure a transaction as a concept to be included in your agreement. This is why it wasn’t placed in the “contract” section at the start of this post. As the provider of good and services, you want to retain the right to set-off while not allowing your customer this right. Consider this example. You deliver commercial lawn equipment to a commercial developer and it agrees to pay $100,000 for the equipment. Unfortunately the developer asserts that 5 machines are damages and as a result you owe him $20,000 for the value of the damaged machines. If the developer has not paid the $100,000 for the machines, you can find yourself in the untenable position of owing the developer $20,000 while the developer owes you $100,000 as opposed to the developer just owing you $80,000 thru an offset.

As set forth above, the purpose of this post was to make you think about what can I be doing to maximize the probability that I get paid for the services or products that I deliver. These are just a few of the basic ideas. There are other concepts, a stock pledge, for example, that can be used depending on the situation and the players and history involved. Every situation is uniquely different and needs to be carefully considered in the context of the business history between the parties. Should you wish to discuss any aspect of this post, please feel free to contact us at Danziger Shapiro, P.C.

This entry is presented for informational purposes only and does not constitute legal advice.

Under the law as it currently stands, there are overtime exemptions for employees who perform professional, executive, administrative, outside sales or computer functions. These exemptions are referred to as white collar exemptions. To be considered exempt, employees must meet certain minimum criteria related to their primary job function and must be paid on a salary basis of not less than a specific minimum amount set by the Code of Federal Regulations (CFR). Today that minimum amount under the CFR is not less than $23,660 annually which translates to a weekly salary of $455. Stated differently, your employees are not entitled to overtime pay if you pay them at least $455 a week and their primary duties fall under the “white collar” exemptions.

Effective on December 1, 2016, this changes drastically and modified white collar exemptions will be put in place. The minimum amount required to be paid on an annual basis will be increased to $47,476, which translates to $913 a week. If an employer pays its employee a salary of less than the $913 floor, the employee will now be entitled to overtime. In addition, the highly compensated exemption will be increased from $100,000 to $134,000. The new law also has automatic increases every 3 years tied to certain performance indices.

The new overtime rule goes into effect in approximately 6 months. Employers should be using this time to get ready for the new overtime law for salary employees. There is no one “best” way to prepare for all employers due to the various constraints that are unique to an individual employer. For example, an employer with 10 employees in one location will have different needs than an employer with 500 employees. Along this same line of thought, two corporations that both employ 500 employees will have different issues if one company conducts business out of one location while the other employer has 15 offices across the country.

At an absolute minimum we suggest that employers should start by conducting an audit of all salary employees who have an annual salary of between $23,660 and $47,476. This is a good time to review the job descriptions and duties of each of these salaried employees to determine if they fall within the exemptions. Special attention should be paid to determine if the employee’s actual duties match the job description and fall under the white collar exemptions.

Next, a plan needs to be put into place that addresses salaried employees that will be (or should have been) receiving overtime. If compensation and hours are to stay the same, it’s time to notify your employees that this new law will apply to them and notify them of any new procedures to track hours. Not only will a system have to be implemented to record time accurately, but also procedures need to be implemented to limit overtime. Perhaps it’s as simple as giving the employee a slight raise to bring him or her above the new threshold? Perhaps it is just a reduction in hours worked per week? Whatever strategy is chosen, this is not just a monetary compliance decision. This will impact employee morale and needs to be communicated carefully. Also, care needs to be given when bringing change to the workplace that you as the employer are not unintentionally favoring one class of people over another on the basis of sex, religion, age or other potentially discriminatory basis.

Finally, please recognize that the minimum wage under the FSLA is a floor and that while a state may not go below that floor, states are free to set their own minimum wages as they see fit. The current minimum wage in Pennsylvania at the time this article was posted is $7.25 per hour and in New Jersey it is $8.38 per hour.

Douglas Leavitt is an attorney with Danziger Shapiro and focuses his practice on guiding business with their daily operational needs. Please feel free to contact him or any of the other attorneys at Danziger Shapiro to discuss how this new change will affect your business or any other issue you may have that concerns you and your business.

This entry is presented for informational purposes only and does not constitute legal advice.

While there are other benefits of the DTSA, the most powerful arrow it adds to your quiver is a civil ex-parte seizure of property. In extraordinary circumstances, where you can show that an injunction alone will not be sufficient, you can actually petition the court to seize the property or trade secret you allege is in the control of the defendant. As expected, the threshold for this type of relief is extraordinarily high and requires you to describe with a high degree of specificity the location and description of the property to be seized. Once seized, a hearing will be held within seven (7) days of the seizure to determine if this was appropriate. As with injunctive relief, a bond must be placed with the court in case your allegations are ultimately not true.

This new law does not replace the various trade secret laws in each state, but rather provide a uniform approach at the federal level that is more in line with the protections for patents, copyrights and trademarks. Previously if a trade secret was stolen there may have been several states to choose from with regards to where a plaintiff might commence its lawsuits. Obviously, it would make sense to file in the state where the laws were the most favorable to the client. Now however, the newly enacted DTSA, being a federal law, will greatly curb against this type of abusive forum shopping.

When the case is over, the prevailing party will be entitled to loss due not only to the theft of the trade secret but also the unjust enrichment gained by the defendant. If the court finds the defendant’s conduct was willful, the court now has the authority to award double damages and attorney fees.

What this means going forward is, at a minimum, that employers should review their employment contracts and confidentiality and trade secret agreements. There are certain Notice provisions that must be given to employees for confidential disclosure of a trade secret to the government in a court filing. These protections for whistleblower type disclosures are required if you hope to recover attorney fees and exemplary damages. If you have any questions, please feel free to contact us at Danziger Shapiro, P.C.

This entry is presented for informational purposes only and does not constitute legal advice.

The core of any business succession plan is to spell out in writing how a change in control is going to impact the operation, and thus success, of your business. While there are lots of options, your choice will most likely be driven by your relationship to the person assuming control. For example, if the business is being left in the hands of a family member, or a trusted existing member of your business, you may want to consider having a stock buy-out that is funded by insurance or through a tax deferred account. This can be accomplished through a separate agreement or it may already even be in place if you have a well thought out shareholder or operating agreement. You can also structure the plan so the business assets can be leveraged for purchase financing, although this carries additional risk. Alternatively, if control is going to a new individual, or business for that matter, the insurance policy doesn’t work as well for obvious reasons. In those cases, we often see earn out agreements where retiring shareholders receive an up-front lump sum followed by a series of payments over time. Often these agreements require the departing owner to help transition clients to the new owner, gradually reducing their role in the company over time. For tax purposes, these deals may take the form of a “sweetheart” consulting agreement or just straight cash payments.

How these deals are structured, and financed depend on multiple factors unique to each business, but they all have some of the same considerations at the planning stage. Does it make sense to have your CPA do regular valuations of your business in case a shareholder wants to leave at some point in time? Should there be limitations on when a departing shareholder can cash out in order to protect the financial condition of the company? Are there key people who should be covered by non-compete agreements as part of any sale? These and other considerations are best discussed with your business attorney long before the succession plan actually needs to be used.

Switching gears to the non-legal considerations, it really should not be a surprise that not all of these reasons can be reduced to open communication. People do not like change. It places people out of their comfort zone, out of their normal routine and makes people unhappy and irritable. You should expect nothing different if you don’t both have a well thought out business succession plan and ensure it’s been communicated to all of the key players. If people know what will be expected of them going forward (increase or decrease in responsibilities), including salary, and it is communicated to them before it happens by the outgoing shareholder at an appropriate time, the odds of your business surviving the change of control increase. If expectations are not managed in advance you will frequently face resentment, which undermines morale and erodes the brand. Of course these non-legal considerations have significant legal impact and ultimately they too have to be documented. For example, perhaps a key shareholder will not agree to work under a new group dynamic? Then we are back to the primary legal concerns of some sort of buy-out and perhaps a non-compete that is structured appropriately in both geographic and temporal restrictions.

If you don’t take the time to at least think about these issues you may find yourself facing challenges at a time when you and your family are least prepared to deal with them. It’s a lot easier and cheaper to come to an amicable agreement that deals with these issues up front than it is to litigate them later. If you have any questions about business succession planning or shareholder litigation, please feel free to call us at Danziger Shapiro to discuss this or any issue affecting your business.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

So why then do you want to have continuity succession planning in place? There are many considerations to take into account and in no particular order they are: mortality, tax planning, life changes or events to just name a few.

Mortality. The only certainty in this world is that no one is getting out of here alive. What will happen to your business when you are gone? This can be a very emotional question and likely the biggest reason why people do not have estate plans. People don’t like to talk or even think about their own death. However, if you don’t deal with it, your survivors under the laws of intestate succession will be the ones running your business. Think about how much effort you placed into getting your business going. How hard you worked to create that brand and what it stands for. Do you want your brothers and sisters or children running the show? What about your business partners? The people with whom you share your personal and professional life may not be suited or capable of successfully working together and picking up the pieces after you did not plan carefully enough. Truth be told, if you have partners (fellow shareholders), then they are also partly to blame here. While they are not responsible for your estate plan, they are equally responsible for not having a business succession agreement in place. More on this agreement later.

Life Events. While there are many possible scenarios, the most common one is marriage. What happens when your business partner gets married? Worse yet, what will happen when your married business partner dies and his wife inherits his shares in the business under the will? Without proper business succession planning, you now have a new business partner! Another common scenario is the family business. It is a common saying that the first generation makes the business while the 2^nd generation works just a little bit less and the third generation destroys the business. A business succession agreement or plan addresses these issues.

Taxes. Simply stated, a business succession plan will drastically reduce the taxes levied upon your death. You spend your entire life creating your business and providing for your family, why wouldn’t you want a system in place to reduce the burden? Taxes when you pass at the highest marginal rate currently sit at 40%.

Business Succession Agreement. The best argument to be made on why you need a business succession agreement is to maintain control over the outcome. If all stakeholders are involved in the process and understand what their roles are and will be, the process can hopefully be smoother than it would be without a plan in place. The continued success of the business is the ultimate goal and a good succession plan will meet the objectives of not only the business owner but all other stakeholders as well. For it to work, communication is key and everyone has to understand their assigned roles in the transition process. Without communication and understanding, chaos ensues. Ultimately the business suffers and the result is a war between various shareholder factions.

Shareholder Divorce. Imagine this scenario. Without a succession plan, the next generation of shareholders believes their contribution to the company is worth “X” but their sibling believes it is worth “Y”. Worse yet is when one brother or sister has been working at the company business for years and then his or her sister comes in and immediately wants to implement changes but has never worked a day at the company in his or her life. Now imagine the siblings are related through a blended family situation, perhaps half or step siblings? Even the best relationships have the possibility to breed hatred after a death in the struggle for money and family identity. All of this can lead to rash decisions and expensive litigation where accusations of “stealing”, “wasting” or “fraud” are lobbed back and forth.

This is all to say that a business succession agreement lets everyone know what is expected of them and what they are entitled to if everyone does their job properly. It allows your business and your family to move on as peacefully as possible after your passing. If Prince truly does not have a will like his sister reports, there will be rough waters ahead as people jockey for control of his music empire and his brand will suffer. This is deeply troubling as his brand is part of his legacy.

Next week, we’ll talk about the various forms a business succession plan can take. From a few paragraphs in a shareholder agreement to a more elaborate approach, there is no one size fits all answer.

If you have any questions about business succession planning or shareholder litigation, please feel free to call us at Danziger Shapiro to discuss this affecting your business.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

In practice however, the episode shows an entirely different contractor who is not licensed in North Carolina. A scaled down and subpar version of the original plans was completed.

The homeowners have since filed a lawsuit in Durham County Superior Court asserting claims for breach of contract and deceptive trade practices. The lawsuit contends that the work completed was shoddy and left the home “irreparably damaged”, with holes in the floor, low grade supplies, windows painted shut and more. It also questions why payments were not distributed as agreed to in the original contract as well as Big Coat TV’s use of unlicensed professionals. Instead of the couple paying for their renovation with a licensed contractor and having it filmed for a television program, they essentially paid for a set to be built that benefits the show and its advertisers that leaves this family with a potentially uninhabitable home.

Pennsylvania has similar laws in place to protect the owners of real estate from poor construction. When the quality of the workmanship differs from what was promised under the contract to such an extent as alleged in complaint against the Love It or List It show on HGTV, you have in addition to claims for breach of contract a claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law – also known as UDAP. What is great about UDAP from a plaintiff’s point of view is that if you are successful, a judge, in his or her discretion, may award up to three times the amount of damages sustained plus reasonable attorneys’ fees. This last part is a great hammer to use in negotiations.

While at first glance you may ask yourself what does this have to do with me because I am not on a TV show or I am a commercial landlord. The answer to both is plenty. First, whether you are a residential or commercial land owner, make sure your contractor is properly licensed to do business in your state. Second, make sure the construction agreement is clear on what is to be done and by whom. Stated differently, make sure your contractor is either not using subcontractors or if it is, make sure you know what subcontractors it is using. Third, never get ahead in payments. Be wary of the contractor that asks for money upfront to buy the materials for your project. If the contractor does not have sufficient funds available, you might find yourself funding the costs associated with the contractors’ prior project. Sounds crazy but this is a very common occurrence. And finally, be present and observe what is happening during the project. Once the walls go up and the studs are covered, you no longer know what has or has not been done. While this may not be practical for you due to either time, location or cost of the project, perhaps it might make sense to consider retaining a construction manager to oversee the project and make sure it is completed timely, on budget and according to the specifications set forth in the plan.

The attorneys at Danziger Shapiro, P.C. are available to assist you in connection with your residential or commercial real estate project. Whether it is in reviewing or creating transaction documents that will enable you to acquire, develop or improve real estate or bring a lawsuit against your contractors for faulty construction, Danziger Shapiro has done this before and can help you today.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

Prior case holdings allowed the government to restrict a defendant’s access to “untainted” or “innocent” assets in an amount sufficient to offset against what the government agency alleged it could expect to obtain after conviction and forfeiture proceedings. Stated differently, at the inception of a case the government would deprive a defendant from using his “clean” or “untainted” money which resulted in a defendant not being able to hire a skilled defense team of his choosing. Before a defendant’s case even began, he was placed in a position of defeat. This forced defendants to borrow money from family to defend them or otherwise be defended by an over-worked Federal Defender.

Undoubtedly there will be extensive litigation over the interpretation over what a “reasonable fee for the assistance of counsel” means as that term was used by the Supreme Court. Also, it is important to remember that “untainted” means that a defendant will not be able to use the money he has from selling cocaine or from liquidating his “burglar tools”. This too will undoubtedly be subject to great litigation going forward as well. However, being able to cite to a Supreme Court case that relies upon the Sixth Amendment is a great strategic arrow to have in a defense attorney’s quiver when we now make our emergency motions to set aside government restraining orders that froze our clients’ assets. Previously we were making these arguments but did not have the power of a Supreme Court case directly on point.

If you find yourself on the wrong end of a government investigation, please feel free to call one of the attorneys with Danziger Shapiro, P.C. to discuss this and other issues affecting you or your company.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

The Act starts off by identifying five distinct circumstances when personal property remaining on leased premises may be deemed abandoned.

(1) The tenant has vacated the unit following the termination of a written lease.

(2) An eviction order or order for possession in favor of the landlord has been entered and the tenant has vacated the unit and removed substantially all personal property.

(3) An eviction order or order for possession in favor of the landlord has been executed.

(4) The tenant has provided the landlord with written notice of a forwarding address and has vacated the unit and removed substantially all personal property.

(5) The tenant has vacated the unit without communicating an intent to return, the rent is more than fifteen days past due and, subsequent to those events, the landlord has posted notice of the tenant’s rights regarding the property.

If any of the five (5) situations described above applies, the property will be deemed abandoned. Before a landlord may remove or dispose of abandoned property, the landlord must provide written notice of the tenant’s rights regarding the property. The written notice will look very similar to this:

“Personal property remaining at [address] is now considered to have been abandoned. Within 10 days of the postmark date of this notice, you must retrieve any items you wish to keep or contact [name of landlord] at [telephone number and address] to request that the property be retained or stored. If you request that we store your abandoned property, we will do so for up to 30 days from the postmark date of this notice at a place of our choosing, and you will be responsible for costs of storage.”

Under the Act, the landlord is required to exercise ordinary care in handling and securing the tenant’s property. In addition, the Act requires that landlords provide tenants with reasonable access to retrieve their property.

These are the basic rules of the game. If a landlord violates these rules, the Act provides that the tenant is entitled to treble damages and attorneys’ fees. Additionally, to the extent there is an inconsistency between the Act and the terms of a written lease, the terms of the written lease control. With any law, there are always exceptions and this Act is no different. For example, there is a different notice period if a protection from abuse order is in effect. If the tenant has died the Act does not apply at all and disposition of the personal property owned by the decedent will be governed by the laws and jurisdiction of the Orphans’ Court.

The take away here if you are a landlord is really quite simple. If you don’t like any of the definitions of abandoned property or the manner in which you are required to store it and how costs will be allocated-change it. The Act gives you this right so modify your lease to set forth how you want to deal with this issue. If you have any questions regarding this or any other aspect affecting your real estate portfolio, please feel free to contact us at Danziger Shapiro.

This entry is presented for informational purposes only and does not constitute legal advice.

From an officer or director’s point of view in light of the Yates Memo, they need to take a critical review of the indemnity provisions that are currently in place. By this I mean, what is their employer’s obligations to them if the officers, directors or even high level employees are accused of corporate wrongdoing by either an outside entity like the Justice Department, a disgruntled shareholder in the form of a derivative lawsuit, or perhaps even an internal company investigation? Hiring an independent lawyer to protect your interest in any of these situations is expensive so it is better if the company will pay your legal expenses and even better if your company will advance your legal expenses. Click here for a blog entry I wrote two months ago that explains why it is important to have your own lawyer represent you during these investigations.

To determine what your company will or will not indemnify requires a review of the company’s by-laws. Additional places indemnity provisions can be found are in an employment agreement and not surprisingly, an indemnity agreement. The best protection for an officer or director is actually to have a separate indemnity agreement. Too often I see my clients come to me with their problems but say, “I am not worried, I have indemnification. Look at the by-laws I brought.” Don’t get me wrong, this is a good start, but that is all it is. Do the by-laws require indemnification or is it permissive and require a vote of the board of directors? Even if it is required, are legal fees advanced or only paid after you are found not to have violated your fiduciary duties? Even if the by-laws state it is required and legal fees are to be advanced, what is the process for advancing legal fees? Will the company and its insurance carrier be able to hide behind a convoluted process to delay payments? Does the employer have the ability to restrict your choice of counsel? As you can see there are a myriad of issues even when it seems clear. Even if you have D&O Insurance, keep in mind that the carrier’s policy has exclusions. For example, a typical D&O policy will not cover attorneys’ fee in an internal corporate investigation. Also, D&O policies change year to year as companies are always shopping for better prices so what coverage you have in year one may not be what you have in year two and beyond. However, a well drafted indemnity agreement will require the company to cover all expenses, including legal, incurred in connection with your position as an officer or director of the company to the fullest extent permitted by law and will not change in scope from year to year. These are big differences.

The takeaway – As an employee or an employer review your by-laws, employment agreements and D&O policies and indemnity agreements if you have them. Perhaps it is time to change your by-laws to make what once was permissive indemnification to mandatory? Alternatively, perhaps you only want to offer mandatory indemnification to certain individuals so indemnification agreements are the better approach? If you are an employee, you may want to negotiate for additional protections when the opportunity arises. Whatever course of action you decide, please feel free to call one of the attorneys with Danziger Shapiro, P.C. to discuss this and other governance issue affecting you or your company.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

Beginning next March 2016, employers will no longer be able to inquire into an applicant’s prior criminal history until a conditional job offer has been made to the prospective employee. Employers are precluded from categorically denying an applicant an offer of employment based upon a criminal conviction without first making an individualized assessment that analyzes whether the criminal record serves as a legitimate basis for withdrawing the conditional employment offer. The employer should consider the following 6 factors when making this individualized assessment:

1. The nature of the offense.
2. The time that has passed since the offense.
3. The applicant’s employment history before and after the offense and any period of incarceration.
4. The particular duties of the job.
5. Any character or employment references provided by the applicant.
6. Any evidence of the applicant’s rehabilitation since the conviction.

If the employer elects to withdraw the conditional offer, the employer must reasonably conclude that after applying the above 6 factors that the applicant presents an unacceptable risk to the operation of the business or to co-workers or customers, and that exclusion of the applicant is compelled by business necessity. In any event, the amended Ordinance prevents employers from considering convictions more than seven years prior to the date of the inquiry, excluding any periods of incarceration. If another law or regulation requires employers to ask certain applicants about criminal convictions, a separate application should be developed strictly tailored for such applicants.

Notification to Applicant. If the employer rejects a potential applicant based upon his or her criminal record, the employer is now required to notify the applicant in writing and prove the applicant with a copy of the criminal report. The applicant then has a ten (10) day period to provide evidence if the report is not accurate or provide additional information to the employer to consider.

Employers must change application process. There are other important compliance aspects to the new ordnance such as posting requirements, private rights of action after exhaustion of administrative remedies and the like but they are beyond the scope of this entry. Going forward however, employers must take immediate steps to remove any reference to a criminal record or willingness to submit to background checks from their initial application until such time that their application can be revised to insure compliance with the amended ordinance. In addition, employers should make sure that all individuals associated with the hiring process are familiar with the new amendment and its impact upon applicants and criminal inquiries in general.

For Employers with a New Jersey location. Please click here for an entry I wrote last year about New Jersey’s “Ban the Box” law.

If you have any questions, please feel free to call one of the attorneys with Danziger Shapiro, P.C. to discuss this and other employment issue affecting your company.

This entry is presented for informational purposes only and is not intended to constitute legal advice.