Commercial Litigation Law Blog
Commercial Litigation
When the Chicken Does Come Before the Egg: The Taxpayer-Friendly Takeaways from George v. Commissioner, Plus a Few ‘Egg-cellent’ Judicial Puns
Some tax court opinions are dry. Others are dense. And then there are the rare decisions where the court clearly enjoyed the assignment. George v. Commissioner, T.C. Memo. 2026-10 falls squarely in the third category. From its opening pages, the court signals both the seriousness of the R&D credit issues at stake and its willingness to have a little fun along the way. As Judge Greaves famously framed the dispute: “Forget the proverbial chicken or the egg; today we are called to answer which came first, the research or the research credit?” Clever turn of phrase aside, the opinion delivers something far more important for taxpayers, particularly those in agriculture and other operationally complex industries: a roadmap for how real-world innovation can qualify for the R&D credit when done correctly. The Big Win: The Court Acknowledged That Agriculture Innovates. Full Stop. Before we get to the substance, it’s worth pausing on tone. Over the course of 80+ pages, the court peppers the opinion with references to “ruling the roost,” “sunny-side up,” and other poultry-themed flourishes. That levity is notable because it accompanies a very serious acknowledgment: modern agriculture is technologically sophisticated. The opinion’s humor is not accidental. By leaning into chicken metaphors, the court subtly reinforces its understanding of the industry it is judging. From a litigation perspective, that tone is telling. Courts don’t joke about industries they don’t take seriously. The takeaway? The court was engaged, informed, and analytical, not dismissive. That is good news for future taxpayers who bring better-structured R&D claims to the table. This is reinforced by the court repeatedly recognizing that poultry production involves: Complex biological systems Evolving disease pressures Feed chemistry and nutrient optimization Genetic performance tradeoffs Data-driven decision-making at massive scale Indeed, the court emphasizes that even “small changes having dramatic impacts on profitability” are central to the industry, noting that producers may earn “approximately one penny of profit per pound.” That framing matters. The court did not dismiss these activities as routine farming. Instead, it treated them as legitimate candidates for R&D analysis, rejecting the outdated notion that innovation only happens in laboratories. What the Taxpayer Got Right (and the Court Agreed) Despite ultimately limiting the credits claimed, the court credited the taxpayer with confronting real technological uncertainty, a foundational requirement under §41. The opinion details extensive efforts to address: Disease outbreaks with no clear industry solution Antibiotic-free production pressures Feed efficiency and nutrient absorption challenges Vaccine administration methods and dosage questions Genetic line performance under different conditions The court acknowledged that these efforts involved trial-and-error, failed approaches, and iterative refinement, classic hallmarks of experimentation. In fact, the court goes as far as rejecting the IRS’s argument that data collected by George was “routine” and thus excluded from consideration. Instead, the court rejected the ‘routine’ argument the IRS has been fighting hard to revive. Likewise, the court rejected IRS attempts to repurpose the adaptation exclusion, definitively stating that an improved business component is a different business component. That distinction leaves the door wide open for taxpayers who document their experimentation contemporaneously and intentionally, even when data used for testing is collected during standard production. Practical Lessons the Court Practically Hands to Taxpayers If you read the opinion with an eye toward future claims, the lessons are unmistakable: When possible, articulate uncertainty before acting. This helps avoid the IRS assertion that a company reverse-engineered the research narrative. Design experiments with intent, though they don’t have to look like laboratory work. Document while the feathers are flying. Production data is helpful, but technical reasoning is essential. Separate experimentation from execution. Rolling out a solution is not the same as proving it works. Assume IRS scrutiny and prepare accordingly. The IRS will ask whether the “research” existed before the credit study. Courts will too. These lessons don’t clip the wings of the R&D credit. They strengthen it. The Broader Takeaway: Courts Want Better R&D Claims, Not Fewer For all the poultry puns, George v. Commissioner delivers a serious, taxpayer-friendly message: Section 41 remains viable for real-world businesses that innovate intentionally and document rigorously. The court did not narrow the statute. It did not exclude agriculture. And it did not demand laboratory conditions. It simply required that the research come first—and the credit follow honestly. Final Thought If nothing else, George proves that even an R&D case about chickens can be meaty. Matthew Reddington served as counsel in this matter and played a primary role in securing the favorable outcome for the taxpayers.
February 12, 2026
Business
Starting a Business Made Simple: A Practical Toolkit
Starting a business is exciting — but it can also feel overwhelming when you’re faced with critical decisions and don’t know where to begin. This toolkit is a practical, step-by-step guide designed specifically for new entrepreneurs. From choosing the right business structure and securing permits to drafting essential agreements, this toolkit gives you the clarity and confidence to build a strong foundation for success. Ready to turn your vision into reality? Decide on the Best Business Structure Figure out which business structure is the best fit. Common choices are sole proprietorship, partnership, limited liability company (LLC), and corporation. This may mean consulting with an attorney and with an accountant about the different options, but each business structure has its pros and cons. It’s essential to understand the pros and cons, then weigh them before deciding how to structure the business. Make Sure the Business Entity is Set Up Correctly Be aware of the requirements for forming corporate entities to ensure the business is properly set up. In some states, there may be publication requirements. For instance, in New York, a limited liability company must publish a notice within 120 days of the initial articles of organization becoming effective, as follows: “published once in each week for six successive weeks, in two newspapers of the county in which the office of the limited liability company is located, one newspaper to be printed weekly and one newspaper to be printed daily.” These requirements may be burdensome, but it’s important to follow them. In New York, a court may pause a case if the company is not properly formed and therefore cannot bring its claims against the defendant. Research the Licenses or Permits Needed for the Business Licensing and permitting can be tricky. Fortunately, many cities and states have set up portals or guides to help you determine whether your business requires a permit or a license to operate in the city or state. If you are operating a business in a niche area, however, it may take additional research to find concrete answers to whether your business needs a license or permit. Research the Tax Obligations for the Business There may be federal, state, and local taxes that apply to the business. The United States Small Business Administration is an excellent resource for starting that process, but conferring with an accountant and tax attorney may help to provide a more comprehensive understanding of those tax requirements. Be Thoughtful When Anyone Else Begins Working for the Business If that person is an employee, there are wage and hour laws, anti-discrimination laws, and other laws that apply. If you don’t want that person to be an employee, you should have an agreement in place that clarifies the relationship (and make sure you know any other legal requirements such as whether the person is an independent contractor). Particularly when a small business is just getting started and the first people working there are friends or family members, having written agreements with them seems too formal and unnecessary. In the early stages, everyone may have a clear understanding of how they fit into the business, and there isn’t room for disagreements. But as the business grows, those understandings may change, and conflicts may arise. When there’s a conflict like that, the business may be vulnerable without a written agreement clarifying the terms of the person’s involvement. Put Written Contracts in Place with Everyone You Do Business With Many businesses initially rely on phone calls or face-to-face conversations to get things done. That informal way of doing business may seem acceptable since the business is just beginning, but such discussions can lead to problems, misunderstandings, and leave the business without any legal remedies. Whenever there is a relationship between your business and others, it is essential to have an agreement in writing—even if it’s just an email or text message exchange. Conclusion By laying a solid foundation — choosing the right structure, meeting legal requirements, understanding obligations, and putting clear agreements in place — new entrepreneurs can avoid early pitfalls and focus on building a strong, sustainable business.
January 22, 2026
Commercial Litigation
Enforcing Guaranties Quickly in New York Courts
New York law provides creditors with a powerful tool to pursue collection on a written guaranty on an expedited track. CPLR 3213 allows a creditor to serve a summons along with a motion for summary judgment — bypassing the requirement for a written complaint and asking the court to enter a judgment against the debtor. The creditor must be seeking to enforce an instrument that is “based upon an instrument for the payment of money only.” CPLR 3213. Courts have varied in interpreting that phrase in that a written guaranty may contain monetary and nonmonetary obligations. Still, if the instrument imposes nonmonetary obligations on the guarantor, a court may conclude that the instrument is not “for the payment of money only” and deny the motion on that basis. Therefore, it is important that creditors carefully craft their written guaranties. New York courts have held that a prototypical guaranty is “an unconditional promise to pay a sum certain, signed by the maker and due on demand or at a definite time.” Weissman v. Sinorm Deli, Inc., 88 N.Y.2d 437, 444 (1996). In 2021, the First Department Appellate Division held that a guaranty including “an unconditional obligation to pay all rent and additional rent owed under the sublease” qualified as “an instrument for the payment of money only” because “it required no additional performance” of an obligation other than the promise to pay. iPayment Inc. v. Silverman, 192 A.D.3d 586, 587 (1st Dept. 2021). In the creditor’s motion for summary judgment, it must show “the existence of the guaranty, the underlying debt, and the guarantor’s failure to perform under the guaranty.” Pearl River Campus, LLC v. Readyscrip, LLC, 240 A.D.3d 610, 611 (2d Dept. 2025). In that case, the Appellate Division held that the lower court properly denied the creditor’s motion for summary judgment because there was insufficient proof. Specifically, because the Supreme Court “would have been required to examine material outside the lease agreement and make calculations that were not shown by the [creditor]” in its supporting documents, the proof was insufficient to grant summary judgment. Id. In situations like that, when the creditor’s motion is denied, CPLR 3213 states that the papers filed in support of the motion and opposing the motion become the complaint and answer for the case. However, a court could order otherwise — such as requiring the parties to file a separate complaint and answer. Regardless, when the court denies the motion for summary judgment in lieu of a complaint, the creditor then can only proceed with the case and seek its judgment against the guarantor at a later stage of litigation. Creditors seeking to maximize collection in New York courts stand to benefit from reviewing and revising their guaranties to conform with the standard that CPLR 3213 imposes and to pursue motions for summary judgment in lieu of complaints when filing collection actions.
November 19, 2025
Commercial Litigation
From Onboarding to Offboarding: Building a Turnover Plan That Works
Generally, employees are free to resign at any time. This is the core of “at-will” employment: just as an employer can decide the employment relationship can come to an end, an employee can also make that decision. However, some employees have agreements in place that set the rules for their departure and the associated process. Often, those agreements also set the rules for after the employee has departed. Those rules can include barring the employee from: disclosing confidential information obtained during their employment soliciting the former employer’s clients or customers competing with the former employer If there is no employment agreement, then an employee can leave at any time, and with or without notice. In that situation, it is crucial for an employer to plan what the transition period would look like if an employee chooses to depart. It is a best practice for employers to plan out the offboarding process when the employee is being onboarded. Employers should also prepare for the risk of litigation brought by the former employee. A former employee may choose to file claims against the employer for allegedly violating wage and hour laws, the Americans with Disabilities Act, or federal, state, or local discrimination laws. The statutes of limitations periods for those claims vary, and it becomes crucial that employers focus on keeping records related to each employee. In the event that a former employee commences a lawsuit against a former employer, it becomes crucial to look to documents and records related to the employment relationship. It is a best practice for employers to have an active system for maintaining records related to employees beyond the statutes of limitations periods. Those records may include: Emails Formal reports or complaints Work product Performance reviews Management/operations notes Payroll documents (paystubs, W-2s, 1099s) In New York, courts have strict standards for admitting these types of records into evidence at a trial. The employer’s process for creating and maintaining records is critically important for increasing the chances for success, when faced with these types of claims. One approach that many employers implement is to have an agreement ready for when an employee departs. Often, those agreements include a waiver of claims which can also be customized to the employer’s business, including terms protecting proprietary materials, such as client or customer lists, barring the soon-to-be-former employee from disclosing confidential information obtained during the employment, soliciting the former employer’s clients or customers, or competing with the former employer.
October 16, 2025
Commercial Litigation
Shutting Down a Scam Lawsuit in Three Days
Imagine waking up to a bank notification that you just received money from a total stranger. That’s exactly what happened to a recent out-of-state client of mine. Eight months pregnant, no ties to Virginia, and without a clue as to who the mystery sender was. Suspecting an honest mistake, or at worst, fraud, she immediately contacted her bank and had the mysterious Zelle transaction reversed that same day. Problem solved, right? Not even close. From Push Notification to Pressure Campaign A few days after the reversal, my client began receiving text messages and phone calls from someone claiming to be the original sender. This individual insisted that she return the money, despite the bank having already reversed the transaction. The client calmly explained this and cut off contact. Then came the real twist. Weeks later, she was served with a Warrant in Debt in Virginia from someone she had never heard of. Panic set in. Not only was she facing a court hearing in a state where she didn’t reside, but she had less than a week to respond. That’s when she called me. Three Names, Zero Credibility When I reviewed the case, it quickly became clear: this wasn’t a legitimate debt collection, but rather a shakedown. The person who filed the lawsuit wasn’t the one who originally Zelle’d her the funds, nor was it the same individual who had been texting and calling her. In fact, three different names were tied to this single scam. Furthermore, the claim was riddled with procedural issues, including questionable service, jurisdictional overreach, and no coherent claim. It had all the hallmarks of a desperate (and sloppy) attempt to intimidate someone into paying money they didn’t owe. Courtroom Showdown — Or Not I appeared on her behalf at the hearing. When the would-be scammer saw I was there and prepared with a stack of papers, he looked stunned. Clearly, he didn’t expect anyone to show up, let alone with legal representation ready to pick apart the claim. I laid out the numerous procedural deficiencies and jurisdictional arguments. The plaintiff folded. The case was dismissed immediately. Why This Case Matters This case serves as a reminder of how scammers are evolving and how the legal system can be weaponized in new ways to harass and intimidate. It’s also a testament to how effective legal help can make a difference. With just a few days’ notice, we were able to respond, appear, and get the case thrown out. Allowing the client to put the ordeal behind her. If you’ve been blindsided by a suspicious lawsuit or served with something that just doesn’t feel right, trust your instincts and don’t wait. Getting a legal opinion early can be the difference between panic and peace of mind.
August 29, 2025
Commercial Litigation
Three Key Tips for Drafting Strong Discovery Requests
The discovery phase of a case is critically important. Navigating a case appropriately through the discovery stage can lead to achieving favorable settlement terms, disposing of the case by summary judgment, or prevailing at trial. Thoughtfully crafting discovery requests is one of many tactics that maximize the chances for success. Keep these three points in mind when preparing discovery requests. Tailor the requests to the claims and defenses. Consider the elements for each claim and then the elements for each defense when drafting the requests. If the requests cover each element in an individualized manner, the door opens to potentially disposing of the case at the summary judgment stage. This approach leads to the parties exchanging relevant documents and information and allows them to digest each other’s theory of the case, minimizing the chances for a surprise at trial. Further, when both sides disclose documents and information, they also end up revealing the strengths and weaknesses of their respective claims or defenses. By identifying those strengths and weaknesses, the parties can more readily identify the components of the case, where they have leverage, and become more likely to come to a settlement (which saves the parties valuable time and resources). Pursue potential evidence to use to impeach witnesses’ credibility and to flesh out the theory of the case. Once you have your theory of the case, discovery is the time to further develop that theory by bringing out the context of the case. No case should take place in a vacuum. Typically, parties have ample evidence the other side can use (e.g., at trial) to illustrate the theory of the case. In a breach of contract case, for instance, it may be helpful to request documents or information about other contracts the party held at the time or the benefits that a party obtained when it breached the contract. In response to the request, you may receive a document that shows why the party breached the contract — a helpful piece of context that you can use at trial to better tell your client’s story and diminish the other party’s credibility. Although each case is factually distinct, there are always pieces of evidence that can be used for these purposes, which may make the difference in persuading a judge or jury. Include requests for information and documents where the adversary’s lack of a response is useful. Requesting documents and information from the other side that directly relate to the claims and defenses in the case is a great starting point. Adding requests with an eye toward the adversary not providing a response can also be very useful at trial. The lack of a response narrows the universe of evidence that the parties can present at trial, providing you with a more predictable trial and an ability to identify the weak points of your adversary’s case. It also provides the opportunity to flesh out the testimony you wish to elicit from the other side as to the lack of evidence. This can be particularly powerful when you cross-examine the other side’s witness and have that witness testify — in response to a string of questions from you — that they do not have evidence touching on a number of aspects pertaining to the case. Those moments during trial are not only good theater but also highly persuasive.
August 18, 2025
Commercial Litigation
Scandal in the Spotlight: When Leadership Fails the Company Code
In my years as a commercial litigator, I have seen several boardroom implosions, but few begin with a Coldplay concert and end with the resignation of the CEO. The now-infamous “kiss cam” moment at Gillette Stadium between Astronomer’s CEO, Andy Byron, and his Chief People Officer, Kristin Cabot, was more than just a passing moment of virality. It was an object lesson on how public conduct can trigger private consequences at the intersection of fiduciary duties, employment contracts, and corporate governance. On July 16, 2025, Byron and Cabot, were caught on camera in a moment of intimate embrace. It seems innocent enough except, they were both married to other people. Their instinctive panicked reaction, as their image was broadcast to more than 50,000 fans was a dead giveaway of illicit conduct and the catalyst for instant virality. One of the concert goers captured the moment and uploaded it to her TikTok account. Within hours, the post had gathered 125 million views. In the following days, Byron was placed on leave, Cabot followed, and Astronomer’s board launched a formal investigation. From a legal standpoint, this incident raises several red flags, including a potential breach of fiduciary duty. As the CEO, Byron is a fiduciary and obligated to always act in Astronomer’s best interest. If Byron’s relationship with Cabot influenced hiring decisions, compensation, or internal investigations, then shareholders have a good-faith basis to allege that Byron breached that fiduciary duty. Another apparent issue is a serious conflict of interest involving Cabot. At its core, a conflict of interest arises when an individual’s personal interest interferes or appears to interfere with their professional obligation. Cabot’s relationship with Byron triggers scrutiny across several areas of corporate risk. As the head of Human Resources, she may have had oversight over such policies on interoffice romantic relationships, a policy that she herself has violated. Additionally, as head of Human Resources, Cabot may have had influence over executive compensation, promotions, or performance evaluations, while engaged in a romantic relationship with an executive. Overall, her behavior does not look good, even if no policies were breached. Conflict of interest is about perception and accountability. Finally, Byron’s conduct raises serious concern about a breach of his employment contract. Many executive employment agreements contain “morality clauses” that allow termination for conduct that brings disrepute to the company. Morality clauses set behavioral expectations for executives who are seen as the face and embodiment of the company. Morality clauses often cover off-duty conduct that could reflect poorly on a company’s brand. A viral cheating scandal arguably qualifies as one. If Byron’s contract contains a morality clause, then the scandal will qualify as a breach event. The board’s swift action, by placing both parties on leave and appointing an interim CEO, suggests it is trying to mitigate reputational and legal exposure. Upon a formal internal investigation, on July 19, 2025, Byron resigned from his position as CEO. Astronomer’s actions following the scandal show a commitment to leader accountability and upholding the company’s best interests. As for Cabot, her continued employment, although on leave, has sparked debate. Terminating an employee in Cabot’s position for “ugly headlines” is not always legally sound. Internal investigations must be thorough, and any termination must be substantiated by documented violations, not just public embarrassment. Overall, this is an important lesson for executives: your personal conduct can have unintended consequences. Executives should be mindful that they represent the image of their companies. And for companies, this is a reminder to revisit employment agreements, update ethics policies, and ensure your crisis response plan does not rely on hope and a hip social media intern.
July 24, 2025
Commercial Litigation
Beyond the Verdict: The Essential Drive of Post-Judgment Discovery
You’ve navigated the complexities of litigation, meticulously built your case, and ultimately secured a judgment. The sense of victory is palpable, and you hold in your hand that seemingly definitive court order. However, it’s crucial to recognize that a judgment alone, in its initial form, is merely a declaration. The true measure of success lies not just in winning the legal battle but in realizing the fruits of that victory through effective execution. This is where the often-underestimated power of post-judgment discovery comes into play. Far too many mistakenly believe that obtaining a judgment marks the finish line. They may pause their efforts, only to discover their hard-won legal triumph remains unfulfilled. The reality is that the initial trial was just the foundational stage. Post-judgment discovery is the critical next phase—the strategic process that transforms a paper victory into tangible recovery. Think of it this way: the judgment establishes your right to a remedy. But to actually achieve that remedy, you need to understand the financial landscape of the judgment debtor—where are their assets located? What is their financial structure? Post-judgment discovery provides the essential intelligence to navigate this terrain effectively, and experienced litigators employ a variety of tools to uncover the necessary information. Among the most essential are interrogatories to the judgment debtor, which compel the debtor to provide sworn answers regarding income, assets, and liabilities. Requests for production of documents follow, demanding supporting financial records such as tax returns, real estate holdings, and bank statements. These are foundational methods for gaining a comprehensive view of the debtor’s financial footprint. If more detail is needed, litigators may conduct depositions of the judgment debtor, placing them under oath and on the record, particularly effective in uncovering inconsistencies or concealed assets. In parallel, subpoenas to third parties—such as banks, employers, or business partners—can provide critical third-party insights into financial matters the debtor may have failed to disclose. Beyond traditional discovery tools, enforcement mechanisms also play a key role. Liens on real and personal property help secure identified assets, while garnishment of wages and bank accounts allows for the direct collection of liquid funds. Turnover orders enable the creditor to obtain specific assets by court mandate, and supplemental proceedings or examinations under oath offer a court-supervised forum for investigating asset location and dissipation. Neglecting this phase is akin to stopping short of your goal after achieving a significant milestone. You possess the potential for a tangible outcome, yet you choose inaction. Don't let the opportunity to collect what you've rightfully earned slip away. While this phase might be perceived by some as less captivating than the courtroom proceedings, for those of us focused on achieving real results for our clients, post-judgment discovery is where the true work of recovery takes place. It's where we convert a theoretical win into a concrete one. So, you have the judgment in hand. But a judicial declaration, standing alone, is not self-executing. In the modern enforcement landscape, the litigant must act affirmatively—armed with both legal tools and strategic intent—to pursue the fruits of litigation. Post-judgment discovery is not a procedural afterthought; it is an indispensable function of modern civil practice. A disciplined, methodical approach—leveraging interrogatories, subpoenas, depositions, and court-sanctioned enforcement—can mean the difference between symbolic success and substantive recovery. The law offers the means; it is the diligent creditor who must bring them to bear.
July 16, 2025
Commercial Litigation
Three Things to Know About Notices to Admit in New York
In New York litigation, a well-timed notice to admit can sharpen the issues, trim trial time, and lock in key facts. But it’s a tool that must be used strategically. When used correctly, it can streamline document authentication, conclusively establish undisputed facts, and even support dispositive motions. Misused, however, it risks time-consuming objections or outright rejection. Below are three things every litigator should know about how (and how not) to use a notice to admit. A notice to admit can streamline the facts to be proven at trial. The notice to admit can serve as a device for proving a fact that would be readily admittable at trial. For instance, if the case centers on a vehicle, a notice to admit may be preferable for establishing the owner of the vehicle rather than requiring a party to present documents and facts at trial to establish that “readily admittable” fact. However, the notice to admit cannot serve as a device to require the other party to admit anything that resembles a legal conclusion. For instance, a notice to admit cannot ask a party to admit negligence, breach of a contract, or fraud. New York law prohibits a notice to admit being used “to cover ultimate conclusion, which can only be made after a full and complete trial.” Similarly, it cannot seek admission of facts that require an expert witness. A notice to admit can also be used to establish facts that are public knowledge or facts which the requesting party reasonably believes are not in dispute. Accordingly, a requesting party will overstep the bounds of a notice to admit when seeking admission of a fact that is in dispute. A notice to admit is effective for preparing documents to be admitted into evidence at trial. In a notice to admit, a party may seek another party to admit that a specific document is authentic, that a copy of a document is accurate to the original, establish that a document is a business record (and thus potentially admissible as an exception to the hearsay rule under CPLR 4518), and authenticate a signature on a document. These admissions can result in saving a substantial amount of resources at trial, as it obviates the need for a witness to testify as to each of those elements. Depending on the volume of documents that will be presented at trial, using a notice to admit rather than testimony could save numerous hours of trial testimony, making it a more economical approach but also keeping the trial concise and to the point. A well-considered notice to admit can also ask for admission of facts that serve as the foundation for establishing a chain of custody for evidence, that a document is a business record, or potentially authenticate a document altogether. From this standpoint, for documents where the provenance is established, the notice to admit should be a straightforward and uncontroversial component of the case. Admitted facts can be used not only at trial but at the motion to dismiss or motion for summary judgment stage of litigation. Facts admitted in response to a notice to admit (or admitted because no response was timely submitted to the notice to admit) can be used at several phases of litigation: trial, summary judgment, or motion to dismiss. This reinforces the fact that a notice to admit should be considered at every stage of litigation. Although the facts admitted may not, on their own, be enough to dispose of the case, the facts admitted may serve as a foundation for other arguments that support disposing of the case and should therefore be thoroughly considered. Furthermore, a fact admitted in the context of a notice to admit has a stronger effect than statements made during a deposition or in response to an interrogatory, as the admission is conclusive and precludes denial unless a court allows the admission to be amended or withdrawn. By contrast, deposition testimony or a response to an interrogatory may be rebutted with contrary proof at trial. Therefore, even if the admitted facts do not dispose of the case at the motion stage, the admitted facts still may have a significant impact on the trial. Conclusion Notices to admit are a powerful but often underutilized tool in New York litigation. When drafted thoughtfully and within proper bounds, they can simplify trials, reduce costs, and strengthen pretrial motions. By focusing on undisputed facts and avoiding legal conclusions, attorneys can use notices to admit to gain strategic advantages at every stage of a case.
July 7, 2025
Commercial Litigation
Big News for Virginia Litigation: Jurisdictional Limits in General District Court Increased to $50,000
As of March 21, 2025, the Virginia General Assembly and Governor have approved a significant change to Virginia’s civil and commercial court system. Every business owner, real estate professional, attorney, and claims adjuster should take note of the change. Under Senate Bill 1291, the jurisdictional limit for civil and commercial cases in Virginia’s General District Courts will increase from $25,000 to $50,000. The change will become effective July 1, 2025. This marks the first major adjustment to the jurisdictional limits in years and will have wide-ranging impacts on how civil and commercial disputes are litigated across Virginia. What This Means: More Cases in the General District Courts: Plaintiffs with monetary claims (such as debts or damages claims) up to $50,000 can now file in the General District Courts, which allows parties to benefit from faster dockets, less formal procedures, and lower litigation costs. Transfer Procedures Simplified: If a plaintiff later amends their claim to exceed $50,000, the law allows for a direct transfer to Circuit Court without the need for nonsuit or dismissal, preserving the statute of limitations. Attachment Cases Also Impacted: The $50,000 jurisdictional limit also applies to attachment cases (proceedings to seize property). Unlawful Detainers (Evictions), Interpleaders, FOIA Cases, and Property Owners Association Disputes Unaffected by change: The General District Court retains specific jurisdiction over these matters without being restricted by the $50,000 monetary cap. Why It Matters: This change is a major boost for access to justice. Litigants with mid-sized claims can pursue recovery in a court designed for efficiency without the high costs and extended timelines often seen in Circuit Court. This shift makes pursuing and defending civil and commercial claims more predictable and affordable for businesses, insurers, and individuals alike. At Offit Kurman, we are already preparing to help our clients navigate these changes strategically — whether it’s handling higher-value disputes in the General District Courts or advising on new litigation tactics made possible by the expanded jurisdiction. Reach out to Anders Sleight | Offit Kurman today to discuss your specific situation and how you may be able to take advantage of these changes. To prepare for the July 1 change, stakeholders should update litigation strategies, educate relevant staff on the new $50,000 limit and General District Court procedures, and reassess claims that may now qualify. Staying current on procedural updates will help businesses, insurers, and legal teams take full advantage of the court’s increased efficiency and lower costs.
May 28, 2025
Commercial Litigation
To Use or Not to Use? Fear Not! The Public Domain Beckons Thee
Ah, the public domain—where copyrights dare not tread, and content lives free from the litigious claws of infringement claims. Whether thou art a humble creator or a bold entrepreneur, rejoice! For in this blessed realm, you may pluck the ripest fruits of history without fear of lawyers whispering “cease and desist” in thine ear. As an experienced litigator who has spent years navigating the nuances of copyright and trademark disputes, I often receive inquiries from clients and creators alike asking whether using material in the public domain could still lead to legal liability. These questions are understandable—copyright law is notoriously complex, and the fear of receiving an infringement claim can chill even the most well-intentioned use of historical or creative works. However, the law is clear. Under the Copyright Act of 1976, 17 U.S.C. § 101 et seq., once a work has entered the public domain, it is no longer protected by copyright. That work may be used freely without permission or risk of infringement liability. This principle is further reinforced by judicial precedent and administrative interpretations issued by the U.S. Copyright Office. Below is a short—albeit Shakespearean—synopsis of the right-to-use works that have passed into the public domain. All the World's a Stage... and the Public Domain is Yours to Play Upon When a work enters the public domain, it is like King Lear abdicating his throne—no longer held by a single rights-holder but shared by all. You may quote, adapt, remix, or even set it to dubstep, should the spirits moves you. There is no need to “beware the Ides of Infringement,” for the legal ghosts have departed these works. A Rose by Any Other Name Would Still Be Royalty-Free From the Bard himself to silent films, early jazz, and vintage pulp novels, the public domain is a veritable treasure trove. If your heart desires to adapt Romeo and Juliet as a sci-fi space opera or turn Macbeth into a murder-mystery podcast, thou art free to do so. And should anyone protest, simply say: “The copyright hath shuffled off this mortal coil.” Much Ado About Nothing (To Pay) No fees, no permissions, no licensing headaches; using public domain content means your budget won’t suffer a tragic fate. You are free to profit, reimagine, or distribute at will without hearing the dreaded words: “Thou art summoned to court.” The Lady Doth Protest Too Much, Methinks! But Legally She Can’t If a work is truly in the public domain, no rights-holder can claim otherwise—not even an overzealous heir or a distant cousin twice removed who believes Great Uncle Will’s haikus should still be protected. Verily, if someone doth protest, remind them that the law is clear: once public, forever free. What Light Through Yonder Archive Breaks? More works enter the public domain each year, like clockwork, every January 1st. These cultural gems become part of the commons, waiting for creative minds to breathe new life into them. Whether thou art a playwright, podcaster, game designer, or meme-smith, this is your cue to take the stage. Parting is Such Sweet Sorrow (But You Can Keep the Content) So go forth, noble creator, and draw from the well of the public domain with confidence. For when it comes to these works, the law doth not bite its thumb at thee. “A Pox Upon Uncertainty: Better to Know Than to Be Woe” While the public domain offers a vast and invaluable reservoir of creative material, it is of paramount importance to confirm that a given work is, in fact, free of copyright protection before using it. Not all “old” content is automatically in the public domain; factors such as the date of publication, the country of origin, and whether proper formalities were observed can all impact a work’s legal status. Mistakenly using material that remains under copyright could expose a user to infringement claims, even if the misuse was unintentional. Therefore, before thou dost take up thy pen (or camera, or microphone), it is wise to consult with legal counsel. As with so many matters in the law, ’tis better to measure twice than to be sued once.
May 27, 2025
Commercial Litigation
AI Ain’t Atticus: Why Machine Learning Can’t Master Legal Reasoning (Yet)
An increasing number of litigators are relying on artificial intelligence to streamline their workflows and generate legal products, from research and memos to predictive insights. While the efficiency and capabilities of these tools are advancing rapidly, as a seasoned litigator in both federal and state courts in various arbitration fora such as AAA and FINRA, I would strongly caution practitioners—and the clients who hire them—to use AI as a supplement, not a substitute, for sound legal judgment. AI’s Role in Litigation AI-driven platforms are helping lawyers analyze vast amounts of data, uncover patterns, and even predict case outcomes based on historical decisions. Tools like e-discovery software can process and categorize thousands of documents in a fraction of the time it would take a human team. Firms also use chatbots and virtual assistants for preliminary client intake and communication, and some even use AI to recommend settlement strategies or assist in jury selection. These types of time saving techniques are obviously attractive to many practitioners, particularly smaller firms who are attempting to compete with much larger adversaries in complex litigation matters. Having practiced at both large firms and boutiques, I know that timing and resources are paramount considerations when taking on any new matter. But like anything in life, when it seems too easy, there may be a catch…. Key Considerations Bias and Fairness AI systems are only as reliable as the data they’re trained on. If historical data contains bias—such as racial, socioeconomic, or gender disparities—AI could unintentionally replicate or reinforce these inequities. Ensuring fairness and transparency in algorithms is essential. Accountability and Ethics Lawyers are held to ethical standards that no machine can shoulder. AI may support decision-making, but it cannot assume responsibility. Over-reliance on AI can lead to missteps; ultimately, the attorney who must answer for them. Accuracy of Legal Content Some AI programs have been found to generate case citations that are incomplete, misleading, or outright fictitious. Indeed, certain AI programs have produced case results for cases that do not exist. This undermines the credibility of the legal product and can raise serious concerns in the courtroom. If an attorney submits filings containing fabricated or incorrect citations, the consequences may include sanctions, reputational damage, or even adverse rulings. Moreover, this has broader equity implications—clients with fewer resources may disproportionately suffer from lower-quality work products that rely too heavily on unchecked AI output. Privacy and Confidentiality AI tools often require access to large datasets, including sensitive client information. Maintaining confidentiality and compliance with privacy regulations is paramount, especially as cyber threats and data breaches become more sophisticated. Explainability Many AI systems function as "black boxes," delivering results without a transparent explanation of how those results were reached. In a legal context, particularly when presenting arguments in court, being able to explain and defend reasoning is non-negotiable. Regulatory Compliance As AI’s presence in legal practice grows, regulators are beginning to set standards for its use. Law firms and their practitioners must remain vigilant, ensuring their use of AI adheres to both current and emerging legal ethics and professional conduct rules. Conclusion Many practitioners and pundits believe that AI holds great promise for litigation, from enhancing efficiency to revealing insights that might otherwise be missed. But its role should be that of an assistant, a tool or a resource (at most) — not a decision-maker nor a substitute for a seasoned, educated and skilled practitioner. Practitioners must therefore exercise judgment, skepticism, and caution, recognizing that the practice of law remains, at its core, a human endeavor.
May 12, 2025
Commercial Litigation
Serving Hard-to-Find Defendants – Motions for Alternate Service
Filing a complaint in a New York court can be easy. But after a plaintiff files that complaint, the plaintiff must serve the defendant with the summons and complaint. Failing to serve the defendant properly may lead the case to be dismissed. For many plaintiffs, attempting to serve the complaint on the defendant is as far as they get. Often, defendants know that if they can make it difficult for the plaintiff to serve the complaint, they have a chance to make the lawsuit go away. However, when plaintiffs have difficulty serving the defendant, they can take advantage of New York’s laws and creatively serve the complaint and move their case forward. In New York, CPLR 308 is the law that identifies the methods a plaintiff must use for completing personal service on a defendant. Ideally, a plaintiff can serve a defendant by personally delivering the summons to him or her. CPLR 308(1). But if not, a plaintiff may deliver the summons to a person “of suitable age and discretion” at the defendant’s “actual place of business” or “dwelling place or usual place of abode.” CPLR 308(2). Suppose plaintiff cannot serve the defendant by personal delivery or to a person of suitable age and discretion despite the plaintiff’s due diligence. In that case, the plaintiff may affix the summons to the door of the defendant’s “actual place of business, dwelling place or usual place of abode” and then mail a copy of the summons to the defendant’s “last known residence” or “actual place of business” in the specific manner called for in CPLR 308(4). For many plaintiffs, one of those three service methods will do the trick. But what if a plaintiff cannot track down the defendant’s actual place of business? Or does the defendant’s place of business have security that won’t permit access to the defendant’s office? Or the plaintiff cannot access the defendant’s home because it’s in a gated community? This is where CPLR 308(5) comes in: when serving a defendant is “impracticable,” a plaintiff may ask the court for permission to serve the defendant in any “such manner as the court . . . directs.” To request this from the court, a plaintiff can file a motion. Sometimes, these motions are called motions for substitute service or for alternate service. In that motion, the plaintiff must show the efforts undertaken and that serving the defendant is “impracticable”—not impossible. Then, the plaintiff may request the court to allow it to serve the defendant by some method other than CPLR 308 prescribes. In considering these types of motions, courts require that the defendant receive due process and that the service on the defendant is “reasonably calculated, under all circumstances, to apprise the defendant” of the lawsuit. Courts have wide latitude in fashioning the method of service and adapting that method to the particular facts of the case. In deciding these motions, some courts have prescribed plaintiffs to serve the summons and complaint on a defendant’s attorney, insurance company, or family member, and some have even allowed service by email. The circumstances for each situation are different. However, if a plaintiff is having difficulty serving a defendant—perhaps because the defendant is evading service—then that plaintiff might consider pursuing a motion under CPLR 308(5). This is particularly important because serving the summons and complaint must be completed within 120 days after commencing the lawsuit. CPLR 306-b. When a plaintiff prepares a motion under CPLR 308(5), it is crucial to include documentation of the plaintiff's efforts. Those efforts will not only tend to show that service on the defendant is “impracticable” but also that the proposed method of service that the plaintiff seeks to use is fair and will give the defendant due process.
May 8, 2025
Commercial Litigation
Virginia Court of Appeals Clarifies Impact of the CARES Act on Eviction Actions
In a recent decision, the Virginia Court of Appeals clarified the impact of the CARES Act on Virginia eviction proceedings. Read the full ruling here. The ruling is significant for Virginia landlords, property managers, and tenants, particularly those managing or residing in properties covered under the CARES Act. Background: The landlord filed an eviction action (unlawful detainer) against residential tenants after they allegedly failed to pay rent. Under Virginia law, the landlord issued a five-day notice to pay rent or vacate the premises. However, the notice also stated the tenants had 30 days to vacate pursuant to the CARES Act. The trial court dismissed the eviction action, ruling it violated the CARES Act’s 30-day notice requirement because the action was filed before the 30-day vacate period expired. On appeal, the Court of Appeals reversed the trial court’s decision. Key Implications of Ruling: Filing an Eviction Action Does Not Require a Tenant to Move Out: Filing an eviction action is only the first step in the legal eviction process, and it does not require the tenant to leave the property. Therefore, a landlord who files an eviction action within the 30 days allowed by the CARES Act does not violate the CARES Act. Difference Between Summons and Execution of a Writ: The CARES Act prohibits landlords from taking action that would require a tenant to vacate the premises before the 30-day notice period has expired. However, it does not prevent landlords from initiating an eviction action. Only a physical eviction of a tenant, performed by a Sheriff, would violate this provision if done within the 30-day timeframe. Practically speaking, a physical eviction cannot occur this quickly. Preemption of State Law by Federal Law: When there is a conflict between federal and state law, federal law preempts state law. Thus, the CARES Act’s requirements, if applicable, provide tenants in covered properties with 30 days before they must vacate, superseding any contrary provision of Virginia law. Impact on Virginia Landlords and Tenants: Proceed with Filing: Landlords can file eviction actions within the 30-day notice period without violating the CARES Act. Understand Tenant Protections: The ruling reinforces the requirement for landlords, subject to the CARES Act, to allow the full 30-day period before proceeding with any action that would physically remove tenants from the property. Any attempt to execute a writ of eviction within that period could lead to legal consequences. Clarity on Lease Termination: Even if a lease is terminated under Virginia law, the tenant still has the right to remain on the premises for 30 days after receiving notice, in accordance with the CARES Act. Conclusion The Court of Appeals’ ruling affirms that landlords may lawfully file eviction actions during the CARES Act’s 30-day notice period, while still upholding federal protections for tenants. Understanding the intersecting requirements of federal and state law is key to ensuring compliance and avoiding disputes. For those facing landlord-tenant issues, seeking qualified legal guidance remains an important step.
May 2, 2025
Commercial Litigation
Stop! … In the Name of Injunctions: The Benefits of Seeking Temporary Restraints and Injunctive Relief in Intellectual Property Disputes and Measures for Litigation Avoidance
As a commercial litigator with extensive experience in protecting clients' interests (through applications for temporary restraints and emergent relief, I’ve seen firsthand how quickly intellectual property (IP) disputes can escalate and the significant risks they pose to businesses. Whether dealing with IP infringement in the franchise industry or defending against claims related to employee misappropriation of proprietary information, securing immediate legal protection can often make the difference between a company maintaining its competitive edge or suffering irreparable harm. This article discusses the benefits of seeking relief through temporary restraints and injunctive relief, along with some effective measures businesses can take to avoid these disputes in the first place. The Need to Protect IP in a Fast -Paced Competitive Business Environment Intellectual property (IP) has become one of a company’s most valuable assets. Businesses rely on IP to maintain their competitive advantage, from patents and trademarks to trade secrets. However, when IP is infringed upon or misused—whether by competitors or employees—the damage can be swift and irreversible. In such cases, taking immediate action in state or federal court by seeking temporary restraints or injunctive relief can be critical. These legal remedies help businesses stop ongoing harm while the case is resolved. In addition, businesses can proactively take several steps to reduce the risk of IP disputes and avoid costly litigation altogether. Intellectual property is often the backbone of a company’s identity, growth, and success. Whether it’s a unique product design, a trademarked logo, or a trade secret that fuels innovation, IP represents a competitive edge that must be protected. Unfortunately, when IP is stolen, misused, or infringed upon, the consequences can be severe, ranging from lost revenue and market share to irreparable damage to the company’s reputation. Fortunately, businesses do not have to wait for a full trial to start protecting their rights. In cases of IP infringement or misuse, courts offer remedies like temporary restraints and injunctive relief. These legal tools can provide immediate relief by halting harmful activities and preserving the status quo until a final resolution can be reached. In this paper, we’ll take a look deeper at the benefits of these remedies and explore steps businesses can take to proactively avoid disputes. Legal Remedies for IP Infringement: Temporary Restraints and Injunctive Relief What are Temporary Restraints and Injunctive Relief? Most businesses are familiar with injunctive relief in the broad sense, but for the benefit of the uninitiated, temporary restraints (referred to as temporary restraining orders, or TROs) and injunctive relief are court-ordered remedies designed to prevent further harm in situations where a party’s actions pose a threat to another’s rights. In the context of IP disputes, these measures can be used to halt the unauthorized use or misappropriation of a business’s intellectual property before a full trial occurs. Benefits of Temporary Restraints and Injunctive Relief Immediate Protection for Your IP When a company’s intellectual property is under threat, time is of the essence. Temporary restraints or injunctive relief can stop the infringing party from continuing their harmful actions immediately, preventing further damage while the legal case is being decided. Preservation of the Status Quo These legal tools help preserve the status quo by halting the alleged infringement or misuse. This ensures that the business’s IP remains protected and that the defendant cannot profit from the unlawful actions during the ongoing litigation. Demonstrating Irreparable Harm Courts are more likely to grant temporary relief if the plaintiff can demonstrate that the irreparable harm—meaning that simply awarding monetary damages won’t fix the situation. IP disputes often meet this standard because of the unique and lasting damage that can result from the theft or misuse of proprietary information. Deterrence Injunctive relief provides immediate protection and sends a strong signal to the defendant—and potentially others—that the company is serious about enforcing its intellectual property rights. This can deter future misuse and reduce the likelihood of ongoing or further infringement. Strengthening Your Legal Position Successfully obtaining an injunction can improve your position in settlement talks. The threat of an injunction often nudges parties toward a quicker, more favorable resolution. Maintaining Competitive Advantage Intellectual property is often what sets a company apart from its competitors. Taking swift legal action to protect that IP ensures competitors can’t use the stolen or misappropriated information to gain an unfair advantage in the marketplace. Legal Framework for Temporary Restraints and Injunctive Relief Whether in federal or state court, the process for securing temporary restraints or injunctive relief follows a similar framework. Courts typically evaluate the following factors: Likelihood of Success on the Merits: Is there a strong case that the party seeking the injunction will ultimately prevail in the litigation? This is generally easiest to establish when presenting a contractual provision establishing rights to injunctive or other equitable relief if IP is compromised. Irreparable Harm: Will a party suffer harm that can’t be fixed by financial compensation alone? Balance of Equities: Does the harm to the plaintiff outweigh the harm that granting the injunction would cause to the defendant? Public Interest: Does the granting of the injunction serve the public interest? These criteria are used by courts to help ensure that injunctive relief is granted in appropriate circumstances and prevents the misuse of valuable intellectual property. Measures for Litigation Avoidance: Preventing Employee Infringement and Misuse of IP One of the most critical aspects of litigation is to counsel one’s clients in litigation avoidance. In other words, what actions or precautions can a business take to avoid having to file an expensive application in court? While seeking legal relief can be essential in some cases, businesses should ideally work to prevent IP disputes before they occur. Below are several practical measures companies can implement to minimize the risk of IP infringement or misuse by employees: Clear IP Agreements Ensure all employees, contractors, and collaborators sign comprehensive agreements that clarify IP ownership and include non-disclosure (NDA) and non-compete clauses. This establishes clear expectations and prevents unauthorized use or sharing of proprietary information. Regular Training on IP Protection Educate employees on the importance of intellectual property and the legal ramifications of misusing company assets. Training programs should cover what IP includes and how to safeguard it in day-to-day business operations. Implement Strong Access Controls Restrict access to sensitive IP based on job roles and responsibilities. Limiting exposure reduces the risk of accidental or intentional misuse of proprietary information. Exit Protocols and Ongoing Obligations When employees leave the company, conduct exit interviews to reinforce their post-employment obligations, including the return of proprietary information and compliance with any non-compete or non-disclosure agreements. Monitor IP Use Regularly Regular audits and monitoring of how employees use company IP can identify potential issues before they escalate. If unauthorized use is detected, immediate corrective action can be taken. Consistent Enforcement of IP Rights It’s crucial to enforce intellectual property rights consistently. If employees or third parties misuse or infringe upon your IP, taking swift and decisive action demonstrates that you’re serious about protecting your assets. Leverage Technology to Protect IP Implement digital security measures such as encryption, cloud storage protections, and access controls to safeguard sensitive IP from misappropriation. Consult Legal Counsel Regularly Work with legal counsel to ensure that your employment contracts, non-compete clauses, and NDAs are up-to-date and enforceable. A proactive legal review can prevent future disputes from arising. The Bond Requirement – Another Variable and Significant Cost While seeking temporary restraints or injunctive relief can offer swift protection against IP infringement, one important consideration is the possibility that a court may require the party seeking the injunction to post a bond. This requirement is often viewed as a safeguard to protect the defendant from potential harm if it turns out that the injunction was wrongfully granted. What is a Bond in the Context of Injunctive Relief? In many cases, when a plaintiff applies for a temporary restraining order (TRO) or preliminary injunction, the court may require them to post a bond. The bond is a financial assurance that the defendant will be compensated for any damages they suffer if the injunction is later determined to have been improperly granted. The bond amount can vary significantly depending on the court's assessment of the case, but it can often be substantial. Below, we outline some of the key risks and considerations involved with posting a bond in intellectual property disputes: Potential Risks of Posting a Bond Financial Burden The requirement to post a bond can create a significant financial burden, particularly for smaller businesses or startups. While the bond amount is intended to cover any damages the defendant may suffer from the injunction, it represents an upfront cost that could be difficult to manage, especially when seeking emergency relief. Bond May Be Higher Than Expected Courts have discretion over the amount of the bond. They may set the bond higher than the plaintiff anticipates in certain cases. This can be especially challenging for businesses that are already under financial strain from IP theft or infringement. The bond is typically required before the injunction is granted, meaning the plaintiff must have the resources available to post it in a timely manner. Risk of Financial Loss Suppose the court ultimately rules in favor of the defendant and determines that the injunction was wrongly granted. In that case, the bond posted by the plaintiff may be forfeited to the defendant as compensation for any damages suffered due to the injunction. This means that a business could lose a substantial amount of money, even if the injunction were necessary to protect its IP in the short term. No Guarantee of Full Recovery Even if the defendant does suffer damages due to a wrongly granted injunction, the bond amount may not fully cover the total financial losses. This leaves the defendant potentially under-compensated, creating a risk that they could pursue further legal action or claims for additional damages. Mitigating the Risk of Bond Requirements While posting a bond is common in many IP litigation cases, there are strategies businesses can employ to reduce the risk or financial burden associated with this requirement: Negotiate the Bond Amount: In some cases, it may be possible to negotiate the bond amount with the court, especially if the defendant is a competitor or party with limited financial resources. Courts sometimes allow for smaller bonds or even waive the requirement entirely if the plaintiff can show that the defendant is unlikely to suffer harm. Request a Lower Bond: When requesting an injunction, the plaintiff can present evidence showing that the bond amount should be minimal. For instance, if the financial damage to the defendant would likely be low or if the plaintiff’s IP is clearly valid, the plaintiff can argue for a lower bond amount. Seek a Limited or Conditional Injunction: Another potential strategy is to request a more limited or conditional injunction that would reduce the possible harm to the defendant and, in turn, lessen the court’s concerns about the bond amount. Prepare Financially: Businesses seeking injunctive relief should plan ahead and ensure they have the financial resources available to cover the bond, should the court require it. This proactive step can prevent delays in obtaining relief. In conclusion, intellectual property is one of the most important assets for any business, and its protection is crucial for maintaining a competitive edge. When IP is threatened by infringement or misuse by a current or former employee or competitor, seeking relief through temporary restraints and injunctive relief in state or federal court can provide immediate and effective protection. However, seeking injunctive relief through the courts can be costly, involving legal fees, expert witness costs, and the potential requirement to post a bond—each carrying its own financial burden and risk. As a business litigator with extensive experience in emergent applications (bringing and defending against them), litigation should not be the first line of defense. By implementing proactive measures—such as clear agreements, employee training, and robust monitoring systems—businesses can reduce the risk of IP disputes and avoid the need for costly legal battles. Access to capable attorneys with strong backgrounds in litigation and preventative strategies is essential.
April 29, 2025
Bankruptcy
AI Tidbits Watch; Regulatory Tracking
Currently, there is no comprehensive federal legislation or regulations in the US that govern the development of AI or restrict its use. There are state and local laws that will be highlighted here going forward. On May 17, 2024 Colorado Governor Polis signed into law Senate Bill 24-205 "Concerning Consumer Protections in Interactions with Artificial Intelligence Systems" (Colorado AI Act). This is the first comprehensive law targeting AI in the US. The Colorado AI Act is focused on high-risk AI systems, defined as AI that makes consequential decisions. Consequential decision in turn is defined as any decision that has a material or similar effect across a wide range of domains, including education and employment opportunities, financial and lending services, essential government services, health care services, housing, insurance and legal services. Developers and deployers of high-risk AI systems will have until February 1, 2026 to develop processes to comply with the law's requirements. both developers and deployers have a duty to use reasonable care to protect consumers from any known or reasonably foreseeable risks of algorithmic discrimination stemming from the intended uses of the AI system. While this duty is key to the law, it's also important to note that developers and deployers are entitled to a presumption that they used reasonable care if they satisfy some key obligations.
March 26, 2025
Bankruptcy
Not All (Protection) is Lost After Purdue: Non-Debtor Owner Shielded by Bankruptcy Stay for Duration of Reorganization of His Company
Third-party releases may no longer provide a shield to owners and directors of a reorganized company. Still, a New York bankruptcy court recently paved the way for another constructive solution for the individual owner of a bankrupt company. Judge Mastando III confirmed the reorganization plan of the company and allowed the individual owner and president to stay under the company’s automatic stay umbrella for the life of the 5-year reorganization plan, drawing on precedents that allow bankruptcy courts to issue temporary injunctions staying actions against non-debtors. In re Hal Luftig Co., Inc., No. 22-11617 (JPM), 2025 WL 586757, (Bankr. S.D.N.Y. Feb. 24, 2025). Judge Mastando III noted that “[n]otwithstanding the wealth of precedents extending the automatic stay to non-debtors pursuant to Bankruptcy Code §§ 105 & 362(a), it appears to be an issue of first impression as to whether a non-debtor stay extension should remain in place for the life of a plan.” Id. at *15 (Bankr. S.D.N.Y. Feb. 24, 2025). With respect to debtors, Bankruptcy Code § 362(c)(2) provides that the automatic stay under Code § 362(a) “continues until the earliest of — (A) the time the case is closed; (B) the time the case is dismissed; or (C) if a case is under … chapter 11 … of this title, the time a discharge is granted or denied[.]” 11 U.S.C. § 362(c)(2). When bankruptcy courts extend the automatic stay to non-debtor parties as preliminary injunctive relief, the durational limits of such stays are often not clear.” Id. at *16. The court held that extending the automatic stay to the non-debtor for five years supported the reorganization purposes, as most of the debtor’s business depended on the owner’s efforts, and his ability to manage the debtor’s business was critical to generating revenue. The court agreed that the extension was essential to prevent Mr. Luftig from being distracted by litigation and to allow the debtor to focus on reorganization. The court rejected objections that the extension was unfair or inequitable, as it did not discharge a creditor's claim against Mr. Luftig but temporarily suspended enforcement of the judgment for the duration of the debtor’s reorganization plan. Hal Luftig Company Inc. (HLC) was a notable Broadway production company. An arbitration award against the company and its owner forced it to seek bankruptcy protection in December 2022[1]. The arbitration had awarded investor Warren Trepp’s company FCP $2.6 million, in addition to $2.7 million previously received. In response, HLC filed for bankruptcy protection. The reorganization plan anticipated that Trepp would receive approximately $720,000 over five years, about 25% of the arbitration award. Additionally, the plan included a non-consensual release, effectively shielding Hal Luftig personally from further liability related to Trepp's claims. Judge John P. Mastando III had previously approved in 2023 Hal Luftig Company, Inc.'s Chapter 11 reorganization plan, which included a non-consensual release of claims against non-debtor and owner Hal Luftig in exchange for a one-time cash contribution of $500,000 (the “Initial Confirmation Opinion”). This release effectively shielded Luftig from the arbitration award. The Initial Confirmation Opinion included proposed findings of fact and conclusions of law, subject to approval by the District Court. FCP and the U.S. Trustee objected, and in a decision dated March 19, 2024, the District Court sustained the objections and rejected the findings of fact and conclusion of law in the Initial Confirmation Opinion. Then, in June 2024, the United States Supreme Court issued its ruling in Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024). HLC was forced to revise its plan. In November 2024, HAP filed its Third Amended Plan that proposed a stay extension, which would terminate upon the earliest of this Chapter 11 case’s closure, dismissal, or the grant or denial of discharge and clarified that the scope of the only applied to FCP. In confirming the new plan, the court relied on the Second Circuit’s Queenie, Ltd. decision and a recent decision out of the Delaware bankruptcy court. Queenie, Ltd. v. Nygard Int'l., 321 F.3d 282 (2d Cir. 2003); In re Parlement Techs., Inc., 661 B.R. 722, 724 (Bankr. D. Del. 2024) (“cases have long recognized that bankruptcy courts may enter a preliminary injunction that operates to stay actions against non-debtors.”). The Second Circuit extends the automatic stay to non-debtors when a claim against them would have a direct negative financial impact on the debtor's estate, particularly in cases where the debtor and non-debtor are so closely connected that the debtor is essentially the real party being sued. Other courts have also acknowledged this exception, recognizing that bankruptcy courts can issue preliminary injunctions to stay actions against non-debtors. Queenie, Ltd., 321 F.3d at 287–88 (quoting A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986). The courts that have ruled on non-debtor stay extensions post-Purdue Pharma have reviewed such stay extensions as temporary injunctive relief to facilitate negotiations among the parties. Parlement Techs., Inc., 661 B.R. at 724–25 (debtor sought to extend the automatic stay to its former officers as co-defendants in certain state court litigations while the bankruptcy case proceeded); see also Purdue Pharma L.P. v. Massachusetts, 2024 Bankr. LEXIS 2916, at *6–11 (granting a three-week non-debtor stay extension to allow the debtor and the interested parties to continue negotiations towards a global settlement). In conclusion, the recent decision in In re Hal Luftig Co., Inc. highlights a constructive approach to balance the interests of creditors, the debtor, and non-debtor parties, helping to maintain the stability and success of reorganization efforts in complex bankruptcy cases. By allowing the individual owner to remain under the company’s protective umbrella for the full duration of the plan, the court recognized the critical role that the owner played in the business’s recovery. This decision aligns with precedents permitting bankruptcy courts to grant temporary injunctive relief for non-debtors, ensuring that litigation does not derail the reorganization process. While third-party releases may no longer serve as a shield for owners and directors of reorganized companies, the court's approval of a stay extension for Hal Luftig emphasizes the importance of safeguarding the debtor's reorganization efforts. Ultimately, this ruling offers guidance for future cases where non-debtors are integral to the debtor’s ability to emerge from bankruptcy, establishing that the automatic stay can, in certain circumstances, be extended beyond traditional limits to support the reorganization process. [1] On the date the company sought bankruptcy protection, it also commenced an adversary proceeding (the “Adversary Proceeding”) seeking to extend the automatic stay to non-debtor Mr. Luftig and seeking a preliminary injunction enjoining FCP from executing on the Judgment against Mr. Luftig. See Hal Luftig Company, Inc. v. FCP Entertainment Partners, LLC, Case No. 22–01176. In support of its request for relief, the Debtor argued that there were unusual circumstances warranting an extension of the automatic stay to Mr. Luftig. Specifically, the Debtor argued that it derives profits from the shows produced by Mr. Luftig and that if Mr. Luftig was not protected by the stay, “he [would] be forced on a daily basis to deal with [FCP’s enforcement collection efforts,]” which will “irreparably harm the Debtor’s chance of a successful reorganization…”. Mem. L. Supporting the Luftig Stay at 18, AP Docket No. 3. Moreover, the Debtor argued that the requisite elements for a preliminary injunction against FCP’s efforts to enforce the Judgment were satisfied. Id. at *6. on January 23, 2023, the Court entered an order extending the automatic stay to Mr. Luftig (such stay, the “Luftig Stay”) pursuant to Bankruptcy Code §§ 105 & 362, over FCP’s objection (such order, the “Luftig Stay Order”). FCP did not appeal the Court’s Luftig Stay Order.
March 26, 2025
Commercial Litigation
Creative Ways to Avoid Litigation
When disputes arise, parties very often go straight to filing a lawsuit. Sometimes, that tactic can be effective. However, it may not be so effective for those individuals or small businesses seeking to minimize costs. Costs can quickly pile up in litigation, and many of those costs can’t be avoided. There are creative—and effective—ways to avoid litigation, however. Many lawsuits center on contracts being breached and money being owed. When a party to a contract considering filing such a lawsuit, it is important to put in perspective how far away that party may be from getting repaid after winning the lawsuit. It may be months or, more likely, years of work by attorneys before getting paid back anything, assuming the breaching party will still be in operation by then. An often-overlooked option is to approach the party who breached and start a conversation about resolving it without a lawsuit. Lawsuits are public records; avoiding being named in a lawsuit may be valuable and add leverage to negotiate an agreement. This may be enough for some individuals and small businesses to bring them to the bargaining table. Many people opt to hire an attorney to send a letter to the breaching party to see if that starts a dialogue for resolving the dispute. Often, an informal email can have the same effect and elicit a more amiable response from the breaching party—which may be a segue into cooperating to resolve the dispute or even entering into a new agreement to resolve that dispute. If the other party is open to entering into a new agreement, that agreement becomes critically important. It’s an opportunity to add more favorable terms than were in the underlying contract. Those new terms may include that the other party starts making monthly payments, has to pay attorneys’ fees and costs of any lawsuit that comes from the contract, and agrees to a particular court or arbitration forum—all of which may be favorable to the other party. Additionally, this juncture might be the time for the non-breaching party to demand that someone associated with the breaching party sign a personal and unconditional guaranty. That type of guaranty helps reassure the non-breaching party that can be repaid—whether from the breaching party itself or the guarantor. Pursuing these options to avoid litigation may be helpful for individuals or small businesses who don’t want to wait to start being repaid or even would like to give a second chance to the breaching party while strengthening their own hand. It is a cost-effective tactic, and in some situations, it may be just as effective as filing a lawsuit, but without all the associated expenses from taking that more drastic step.
March 18, 2025
Commercial Litigation
How Mediation and Arbitration Can Be Effective Alternatives to Traditional Litigation
Litigation can be a costly and resource-intensive endeavor, particularly when the disputes at hand are complex in nature. For clients who are new to the litigation process, it is not unusual to find the various stages and procedural intricacies daunting. From motions and deadlines to depositions, hearings, and beyond, the demands of litigation can quickly become overwhelming. However, it is important to recognize that there are viable alternatives available, such as Alternative Dispute Resolution (ADR), especially in the early stages of a dispute, that may offer more efficient and cost-effective solutions. These alternatives can help clients navigate the process with greater clarity and achieve favorable outcomes without the need for prolonged courtroom battles. ADR encompasses a range of techniques designed to resolve disputes outside of the formal courtroom setting. These methods can help parties avoid the time-consuming and expensive nature of court proceedings while maintaining greater control of the outcome. The two most utilized forms of ADR are mediation and arbitration. Each offers distinct advantages and procedures tailored to different types of disputes and the needs of the parties involved. Mediation Mediation is a structured process in which a neutral third party, known as the mediator, helps two or more parties resolve a dispute or conflict. The mediator does not make decisions or take sides but facilitates communication between the parties to help them understand each other’s perspectives, identify the underlying issues, and explore potential solutions. The goal of mediation is to reach a mutually agreeable solution that all parties are satisfied with, without the need for formal legal proceedings or a court trial. Mediation can be used in various contexts, such as trust and estate contests, contractual disagreements, corporate disputes, and more. Mediation is typically voluntary, confidential, and often less adversarial than litigation, making it a more flexible and collaborative way of resolving disputes. Arbitration Arbitration is a formal method of resolving disputes in which an impartial third party, known as the arbitrator, is appointed to hear the arguments and evidence from both sides and then make a binding decision. Unlike mediation, where the mediator helps the parties reach their own resolution, the arbitrator acts like a judge, making a final ruling on the matter. The arbitration process is typically less formal and more streamlined than a court trial, but it still involves procedures such as submitting evidence, presenting arguments, and sometimes conducting hearings. Arbitration can be used in various areas but is most often used in corporate disputes as many contracts include arbitration clauses requiring arbitration in lieu of traditional litigation. Arbitration is usually binding, meaning that the decision made by the arbitrator is legally enforceable and cannot be appealed, except in very limited circumstances. This makes arbitration faster and more predictable than litigation, but it also means that the parties have less control over the outcome. It is often chosen because it is typically faster, more cost-effective, and more private than going to court.
February 19, 2025
Commercial Litigation
Lenders Must Act Fast to Recover Funds in Fraudulent Loan Schemes
Lenders get into a groove with originating loans with existing and new borrowers. So often, the closing comes and goes, and the monthly payments commence without any trouble. But then a borrower comes along who seeks to defraud the lender. If the closing goes through, with the lender transferring out the funds and the funds making their way into the borrower’s account, the lender then faces significant challenges in getting that money back. The timing of the lender’s discovery of the fraud usually determines the odds of the lender clawing back the funds. With any luck, the lender will discover the fraud when it goes to record the documents with the local property records office and finds that the borrower had misrepresented that they would provide the lender with the first priority lien on the property and, in fact, had already obtained mortgages securing the property. Regardless of how quickly the lender learns of the fraud, it is crucial that the lender take immediate action. In New York and New Jersey, the lender may consider filing a complaint and order to show cause seeking to stop the borrower from transferring the funds out of their possession. These types of lawsuits require moving fast and detailing the fraud to the extent that the lender can. Keeping complete and accurate records for each loan is crucial. For instance, when it comes time to go before a judge and show where the fraud occurred, central to that are the loan documents in which the borrower made the misrepresentations to the lender. Without proof of those misrepresentations, it becomes very difficult to convince a court that fraud has occurred and unlikely that a court would effectively freeze the borrower’s assets. Occasionally, the title insurance company may extend coverage to these types of incidents, but there is no guarantee of coverage. Also, the title insurance company’s decision on whether coverage exists may take some time. That time can be very valuable for the lender to go after the borrower and may be the difference between recovering the funds or the borrower moving the funds out of the lender’s reach. A lender acting quickly in these situations is also important because if the borrower has defrauded this lender, the borrower has probably defrauded other lenders—and those other lenders may already be chasing down their funds. That borrower may have already transferred the funds out to hard-to-reach accounts, spent the money, or even thrown a wrench in the process by filing bankruptcy. Lenders that learn of the fraud hire counsel and act within hours, rather than days or weeks, maximize their chances for success.
February 13, 2025
Commercial Litigation
Virginia Sees Surge in Civil Lawsuits in 2024: How to Avoid Collection and Eviction Litigation
Civil lawsuit filings in Virginia's General District Courts increased more than 6% in 2024. The biggest increase? Warrants in debt (collection lawsuits) increased by 27%. A warrant in debt is a civil lawsuit to pursue recovery of money damages, usually due to unpaid debts and accounts receivable. Except for personal injury or wrongful death claims, Warrants in Debt are limited to a maximum recovery of $25,000. By contrast, unlawful detainer filings decreased by 8%. An unlawful detainer is an eviction lawsuit to pursue and obtain possession of real property (real estate) and unpaid rental charges, if applicable. There is no limit to the rental charges that can be pursued in an unlawful detainer filing. Virginia’s Circuit Court civil filings increased modestly by 4% compared to 2023. Virginia Circuit Courts generally hear civil and commercial claims involving controversies of more than $25,000, along with family law, probate and estate claims, and real estate title claims, among other matters. Full data on 2024 legal filings from the Supreme Court of Virginia can be found here: 2024 Virginia General District Court filing data & 2024 Virginia Circuit Court filing data. Landlords, tenants, property managers, lenders, creditors, and consumers in Virginia can take proactive steps to prevent costly litigation. Understanding your rights and obligations can minimize financial risks and avoid lawsuits related to unpaid debts or evictions. Establish Clear Agreements For landlords and creditors, well-drafted lease and loan agreements help prevent disputes. These should clearly define: Payment terms, due dates, and penalties for nonpayment. Responsibilities for property maintenance (landlords) and interest rates (creditors). Legal remedies in case of default. Tenants and consumers should carefully review contracts before signing and seek clarification on any unclear terms. Maintain Open Communication Early communication can prevent minor issues from escalating. If you are a tenant, customer, or consumer behind on payments, consider: Informing landlords or creditors of financial difficulties. Requesting a payment plan, forbearance, or temporary extension. Keep records of all communications and agreements. Landlords and creditors should consider offering reasonable repayment options where feasible, as these are more efficient than litigation. Follow Legal Collection and Eviction Procedures Virginia law requires strict compliance with applicable eviction and collection procedures before pursuing eviction or debt collection lawsuits: Landlords must issue a proper notice of lease violation to tenants depending on the grounds sought for eviction. Creditors generally should send a formal demand letter before pursuing legal action. Utilize Mediation and Alternative Solutions Mediation can be a cost-effective way to resolve disputes without court involvement. Courts often encourage, but normally do not mandate, negotiations between parties to explore mutually beneficial solutions. Understand the Legal Process and Consequences If legal action becomes necessary: Landlords must file an Unlawful Detainer for eviction, attend a court hearing, and obtain a Writ of Eviction if a judgment is granted. Creditors must file a warrant in debt or other applicable lawsuits and obtain a court judgment before pursuing wage garnishment or other collection means. Tenants and consumers should respond promptly to court notices to avoid default judgments. Seek Legal Guidance When Needed Landlords, tenants, creditors, and debtors facing complex legal issues should consult an attorney to ensure compliance with Virginia law and protect their rights. By taking these proactive steps, all parties can reduce the risk of eviction and collection lawsuits, fostering more stable financial and housing relationships.
February 7, 2025
Commercial Litigation
Five Things to Take into Consideration When Negotiating and Settling a Case
Settling a case is hard. Negotiating the terms and coming to an agreement can take weeks or months. But once the parties agree to the general terms of a settlement (e.g., the amount of money changing hands and the timing of the settlement payment), there are a number of other considerations for putting the settlement agreement in writing. Here are five things to know when you are negotiating to settle your case: You Can Protect Your Privacy Even though the documents filed in the lawsuit will remain public, the settlement details don’t have to be public. One effective tactic is to separate the settlement agreement from the “stipulation of discontinuance.” This allows the terms in the settlement agreement to remain private, with the only document being filed with the court simply stating that the parties have agreed to discontinue the case. You Can Set the Rules for After the Lawsuit A settlement agreement can also be useful for clarifying what the parties can and cannot do after the lawsuit. Often, parties agree to include a provision in the settlement agreement requiring the parties to keep the settlement terms confidential and not to disclose those terms to anyone. Some parties may even agree to a non-disparagement provision, requiring them to refrain from saying anything negative about each other. Although these are provisions that often can be overlooked when negotiating a settlement, they can help to permanently put the dispute to rest and assist the parties with moving past the lawsuit. Plan for What Happens if Someone Breaches the Agreement You may be feeling optimistic that you are finally settling your case. Not so fast. Contemplate what may happen if something still goes wrong: what if the settlement payment doesn’t come through? Or what if someone breaches some other part of the agreement? The settlement agreement should provide a roadmap for what happens next. You may want to include whether the breach of the agreement goes back to the court you were in or whether the dispute goes to arbitration. You also may want to have a provision stating that if the other side breaches the agreement, you are entitled to additional damages and that the other side has to compensate you for your attorneys’ fees. Including these terms in the agreement can save you resources and avoid the frustration of going back to court if the other side breaches. Don’t Overcomplicate It Lawsuits are stressful. Don’t add to that stress by making the settlement more complicated than it needs to be. Include the terms you need to wrap up the case and exclude those other terms that often don’t apply to your case or that you don’t need. Prioritize being clear with the terms you include, as sometimes a settlement agreement can go on for dozens of pages when just a fraction of that can suffice. Once You Sign, the Settlement is Final Before you sign a settlement agreement, make sure you understand each piece of the agreement. If you don’t understand some portion of the agreement, you may be taking on obligations you don’t know about or waiving rights that leave you worse off. Settling a case requires careful attention to detail, and drafting a settlement agreement that clearly reflects the parties’ intentions is critical to avoiding future disputes. By addressing these key considerations in your negotiations, you can ensure the settlement process is effective and that your interests are protected.
January 22, 2025
Bankruptcy
2024: Year in Review: Third-Party Releases After Purdue Pharma
"Lately I’ve been, I’ve been losing sleep Dreaming about the things that we could be" - Counting Starts, One Republic The most notable decision in the bankruptcy world in 2024 was the Supreme Court’s decision in Purdue Pharma. Harrington v. Purdue Pharma, L.P., 144 S. Ct. 2071 (2024). At the heart of the fight in Purdue Pharma were nonconsensual third-party releases where Purdue’s chapter 11 plan released all opioid crisis-related claims against the Sackler family[1]. Why are third-party releases important? A third-party release is a provision in a chapter 11 plan that can eliminate future liability for pre-bankruptcy conduct of non debtors like affiliates and officers and directors of the company that sought bankruptcy protection. For many years, debtors have used third-party releases as an important restructuring tool in chapter 11 cases. Bankruptcy lawyers and judges have been losing sleep over strategies to preserve this tool Circuit courts were divided on whether bankruptcy courts had the authority to grant nonconsensual third-party releases. The Second and Seventh Circuits permitted nonconsensual third-party releases when the particular release is essential and integral to the reorganization itself. Third Circuit permitted nonconsensual third-party releases in limited circumstances when the releases were fair and necessary to the reorganization. The Fourth, Sixth, and Eleventh Circuits approved third-party releases and applied a multifactor test[2] to decide the merits of third-party releases. The Fifth, Ninth and Tenth Circuits, however, held that nonconsensual third-party releases were not permitted by the Bankruptcy Code. The Bankruptcy Code does not include any explicit language that would permit third-party releases in most cases, but courts would approve them under §1123(b)(6) of the Bankruptcy Code, which allows bankruptcy courts to approve any “appropriate” provision in a chapter 11 plan that is “not inconsistent with the applicable provisions of this title.” Some courts also relied on §105(a) of the Bankruptcy Code which allows the bankruptcy court to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. The Supreme Court’s Purdue Pharma decision eliminated nonconsensual third-party releases. However, Purdue Pharma did not dispose of consensual third-party release and left open the question what would be considered consensual releases and what is going to be the fate of efforts to stay litigation against non debtor parties. In Purdue Pharma, the majority of the creditors voted for the final iteration of the plan which provided for a release of all opioid-related claims against the Sacklers in exchange for a several billion-dollar contribution to the bankruptcy estate. Under the terms of the plan, Purdue would reorganize as a benefit corporation with the purpose of ameliorating the opioid crisis. The United States Trustee objected to the third-party releases arguing that the Bankruptcy Code does not permit the nonconsensual release of claims against non debtors and raising concerns about the victims’ due process rights. In a five-to-four majority opinion written by Justice Neil Gorsuch, the court held that the Code did not permit nonconsensual third-party releases. The Court reasoning was premised on the text of Sections 1123(b) and 524 of the Bankruptcy Code. Section 1123(b)(6) specifically states that a debtor may include in its plan “any other appropriate provision not inconsistent with the applicable provisions of this title.” The Court reasoned that because “[p]aragraph (6) is a catchall phrase at the end of a long and detailed list of specific directions,” it must be interpreted within the context of the rest of the subsection. Thus, because paragraph (6) follows a list of provisions relating to the rights, relationships, and responsibilities of the debtor to its creditors, the majority interpreted § 1123(b)(6) to only permit the bankruptcy court to grant orders concerning the relationships between the debtor and its creditors, and not any relationships between non debtors and the creditors. In addition, the Supreme Court reasoned that the discharge provisions under § 524 limited discharge to the debtor and did not permit the discharge of third parties. The Court noted that § 524(g) already provides an exception to the discharge provisions by authorizing nonconsensual releases of third-party claims under limited circumstances in asbestos-related cases. Accordingly, if Congress intended to broadly authorize nonconsensual third-party releases, it could have included language to that effect. The full impact of Purdue remains to be seen but several bankruptcy courts grappled with what constitutes a consensual release. In the first opinion on the topic since the Supreme Court’s Purdue decision in late June, Bankruptcy Judge Christopher M. Lopez of Houston confirmed an opt-out chapter 11 plan with non debtor, third-party releases. The U.S. Trustee objected to the opt-out plan and argued that the releases were coercive and that the releases should be given only by creditors who opt in. Any creditor who voted in favor of the plan could not opt out, and creditors who did not vote would be bound by the releases. In addition, creditors who opted out could not sue unless the bankruptcy court were to determine that the claims were colorable. Judge Lopez started his analysis by emphasizing that Purdue explicitly dealt with non-consensual third – party releases only and did not change the law in Fifth Circuit. What constituted consent, including opt-out features and deemed consent for not opting out, had long been settled in this District and hundreds of chapter 11 cases have been confirmed with consensual third-party releases with an opt-out. The debtor gave extensive notice about the opt-out provisions in the plan. About 100 creditors opted out, Judge Lopez said in his opinion. Judge Lopez overruled the U.S. Trustee’s objection and confirmed the plan because “the third-party releases are consensual and narrowly tailored.” A New York judge in the Bankruptcy Court for the Western District of New York, Chief Bankruptcy Judge Carl L. Bucki of Buffalo, N.Y. denied confirmation of an opt out plan in a case where the corporate debtor offered $300,000 for distribution among creditors with more than $282 million in unsecured claims. The proposed plan called for releasing not only the debtor but also the debtor’s officers, directors, shareholders and agents. Non debtor releases were also earmarked for the debtor’s and the committee’s professionals, among others. Unless a creditor affirmatively opted out, they would be deemed releasing claims. In re Tonawanda Coke Corp., ___ B.R. ___,. No. BK 18-12156 CLB, 2024 WL 4024385, at *2 (Bankr. W.D.N.Y. Aug. 27, 2024.) Unlike Purdue, the released non debtors were not making financial contributions toward the payment of creditors’ claims. Applying section 5-1103 of the New York General Obligations Law, Judge Bogucki held that an opt out plan does not satisfy the requirements for consent under New York law because an agreement to “discharge” an “obligation” had to be in writing and signed by the party against whom it would be enforced. Judge Craig T. Goldblatt of Delaware held that an opt-out provision is permissible only if the creditor was on notice that it would be subject to a third-party release and the creditor took an affirmative act, such as voting on the plan, but failed to exercise the opt-out right. A review of cases even pre-dating Purdue on what constitutes a consensual release shows that there is a case to support every view. Some cases apply state law contract principles (usually to deny approval of opt-out releases), and others apply federal bankruptcy principles (usually to approve them). “[C]ourts are markedly split on the issue, with some categorically finding that a release cannot be consensual absent an affirmative act to opt in, and others finding that opt-out mechanisms that (as is the case here) provide adequate notice and a simple opt-out process can result in a consensual release. In re: LAVIE CARE CENTERS, LLC, et al., Debtors., No. 24-55507- PMB, 2024 WL 4988600, at *12 (Bankr. N.D. Ga. Dec. 5, 2024). The consensual third-party releases will continue to be the main focus next year and the issue will continue to percolate in the bankruptcy and higher courts. [1] The Sackler family owned and controlled Purdue Pharma, the maker of oxycontin, which contributed to the opioid crisis. Empire of Pain, written by investigative journalist Patrick Keefe recounts the story of Purdue and the investigations and legal proceedings into the marketing practices of oxycontin. There are numerous criminal and civil proceedings initiated by the federal and state governments, foreign authorities and individual victims. Hulu’s Dopesick and Netflic’s Painkiller illustrate the impact of oxy in a more easily digestible format. [2] The Courts in these circuits take into consideration the following factors: (1) There is an identity of interests between the debtor and the third party, usually an indemnity relationship, such that a suit against the non debtor is, in essence, a suit against the debtor or will deplete the assets of the estate; (2) the non debtor has contributed substantial assets to the reorganization; (3) the injunction is essential to reorganization, namely, the reorganization hinges on the debtor being free from indirect suits against parties who would have indemnity or contribution claims against the debtor; (4) the impacted class, or classes, has overwhelmingly voted to accept the plan; (5)the plan provides a mechanism to pay for all, or substantially all, of the class or classes affected by the injunction; (6)the plan provides an opportunity for those claimants who choose not to settle to recover in full ;and (7) the bankruptcy court made a record of specific factual findings that support its conclusions.
December 18, 2024
Commercial Litigation
Why Is Estate Planning So Important?
‘Tis the season! It’s that time when we look back on everything we accomplished or failed to accomplish over the past year and, at least for some of us, resolve to do better. Lose weight, get in shape, declutter, get organized, and plan for our own death or loss of sufficient mental or physical capacity to make decisions or care for ourselves. Admittedly, this last one, “estate planning,” as some lawyers no doubt euphemistically dubbed this general category, is a perennial dark horse in the “most likely to top the list of year-end resolutions” category. Excuses range from “I don’t have enough to need an estate plan” to “I’m never gonna die” to “I’ll be dead, so it won’t be my problem.” Not much, if anything, can be done for the ones with delusions of infallibility or those truly relishing the idea of looking back from beyond the grave, eating popcorn and enjoying the misery left in their wake. Undecided? Unconvinced? You’ve got questions, and I have some answers… Q: Why should I care about estate planning? A: Estate planning is essential for ensuring that your assets and personal wishes are properly carried out after you’re gone. Creating and regularly updating a personalized plan unique to your life circumstances is not just about redistributing wealth after you pass away—it’s about protecting your family, minimizing tax burdens (!), and avoiding legal confusion. Without a clear plan, the state decides what happens to your property, which often results in costly, but otherwise avoidable, legal disputes, delays, and unintended results. Q: What’s the biggest mistake people make with estate planning? A: The biggest mistake is simply not planning at all. Last year, I shared my list of the top five estate planning mistakes that I see in my litigation practice (when my clients are routinely forced to dispute and/or litigate over an unintended and unforeseen aftermath). The number one takeaway remains as obvious today as it was last year (and the year before that!) -- failing to plan is the most costly mistake you can make. Failing to plan (or to update an existing plan) leaves your family and loved ones vulnerable and can complicate things emotionally and financially during an already difficult time. Q: Do I really need an estate plan if I’m young and healthy? A: Absolutely! Estate planning isn’t just for the elderly or those with significant wealth—it’s for anyone who wants to make sure their wishes are carried out after they’re gone. We may want to believe we’re infallible and will live forever. Unfortunately, life is unpredictable, and having a plan in place provides peace of mind, ensuring that your family is taken care of no matter what happens. My first boss after college taught me to plan for tomorrow as if the person upon which you are depending tragically gets hit by a bus tonight. It was admittedly a dark life lesson (thank his lifetime of military service!), but he wasn’t wrong to suggest we never know what “bus” might be looming around the next corner. Q: Is estate planning a one-time thing? A: Estate planning should be an ongoing process. Life changes—marriage, having kids, career changes, etc.—are all good reasons to review and update your estate plan regularly. A plan that’s right for you now may be completely unsuitable for you when life changes happen . . . and they do happen! So it’s important to revisit your plan regularly as your life evolves. Q: How does one get started with estate planning? A: Start by consulting with an experienced estate planning attorney who can guide you through the process. I’m not an estate planner myself, but I am fortunate to work with some incredibly talented individuals (in whom my wife and I have entrusted our own planning needs!). I’ll be happy to provide a threshold assessment and introduce you to a colleague with whom I believe you’d be a good match. From there, you will work to outline your goals, create a will, set up a trust, and/or designate “attorneys in fact” to protect your interests and exercise authority as you deem appropriate under powers of attorney. Proper estate planning benefits your loved ones and you both now and after your gone. The key is not to wait—resolve to take action today to protect your future and your loved ones. I have a client who travels a fair amount, and for years now has joked how I’m the last person he thinks of as his plane is about to takeoff as he is again reminded that he hasn’t done his estate plan. Trust me when I say the money you spend (and don’t short-shrift the old adage “you get what you pay for!”) will repay itself multiple times over for your family when the time comes. Do yourself and your loved ones a favor. Give yourself and them some added peace of mind. Don’t just resolve to plan…just do it.
December 10, 2024
Commercial Litigation
Virginia Court of Appeals Clarifies Impact of the CARES Act on Eviction Actions
In a recent decision, the Virginia Court of Appeals clarified the impact of the CARES Act on Virginia eviction proceedings. Read the full ruling here. The ruling is significant for Virginia landlords, property managers, and tenants, particularly those managing or residing in properties covered under the CARES Act. Background: The landlord filed an eviction action (unlawful detainer) against residential tenants after they allegedly failed to pay rent. Under Virginia law, the Landlord issued a five-day notice to pay rent or vacate the premises. However, the notice also stated the tenants had 30 days to vacate pursuant to the CARES Act. The trial court dismissed the eviction action, ruling it violated the CARES Act’s 30-day notice requirement because the action was filed before the 30-day vacate period expired. On appeal, the Court of Appeals reversed the trial court’s decision. Key Implications of Ruling: Filing an Eviction Action Does Not Require a Tenant to Move Out: Filing an eviction action is only the first step in the legal eviction process, and it does not require the tenant to leave the property. Therefore, a landlord who files an eviction action within the 30 days allowed by the CARES Act does not violate the CARES Act. Difference Between Summons and Execution of a Writ: The CARES Act prohibits landlords from taking action that would require a tenant to vacate the premises before the 30-day notice period has expired. However, it does not prevent landlords from initiating an eviction action. Only a physical eviction of a tenant, performed by a Sheriff, would violate this provision if done within the 30-day timeframe. Practically speaking, a physical eviction cannot occur this quickly. Preemption of State Law by Federal Law: When there is a conflict between federal and state law, federal law preempts state law. Thus, the CARES Act’s requirements, if applicable, provide tenants in covered properties with 30 days before they must vacate, superseding any contrary provision of Virginia law. Impact on Virginia Landlords and Tenants: Proceed with Filing: Landlords can file eviction actions within the 30-day notice period without violating the CARES Act. Understand Tenant Protections: The ruling reinforces the requirement for landlords, subject to the CARES Act, to allow the full 30-day period before proceeding with any action that would physically remove tenants from the property. Any attempt to execute a writ of eviction within that period could lead to legal consequences. Clarity on Lease Termination: Even if a lease is terminated under Virginia law, the tenant still has the right to remain on the premises for 30 days after receiving notice, in accordance with the CARES Act. Conclusion In sum, the Court of Appeals’ ruling balances the rights of landlords to initiate legal eviction actions while ensuring tenants receive protections guaranteed under the CARES Act, if applicable. The CARES Act and the Virginia Residential Landlord Tenant Act impose significant obligations on landlords and tenants regarding rental properties. Understanding applicable legal requirements and responsibilities is essential for fostering a harmonious landlord-tenant relationship and protecting the interests of both parties. Consulting with a trusted attorney in your area is critical if you or your organization have a landlord-tenant related claim. While outcomes cannot be guaranteed and past performance cannot assure future success, Offit Kurman real estate litigator Anders Sleight | Offit Kurman is available to evaluate your situation.
November 4, 2024
Commercial Litigation
Does Neurodiversity Matter?
Is your organization “neurodiverse?” Do you care? Should you? I recently caught a podcast promoting "neurodiversity" and “neurodivergence” - terms with which I was not previously familiar. If you, like me, are new to the concepts, I commend you to the following vocabulary lesson: Neurodivergent & Neurodiversity: Meanings & Examples (exceptionalindividuals.com). Seems my ADHD affliction casts me unexpectedly among an often-marginalized minority group of "exceptional individuals." Trust me, the dual entendre is not lost on me. I've not yet fully looked into the naming decision. However, I am confident the dual meaning of "exceptional" was purposefully adopted. As a newly self-aware neurodivergent and one serving on our law firm’s DEI Steering Committee, I now find myself questioning the measures and manners of diversification we choose to promote (and how many more we consciously choose or unknowingly fail), both individually and collectively, to recognize. How narrowly or broadly should we be promoting diversification of our firm’s workforce? Much like the LGBT community itself has struggled and still struggles today to determine and agree upon who to welcome under the tent, to be true to its name, ought, perhaps, those promoting DEI initiatives take a moment to appreciate and address the reality that the pillars of the movement, focusing for the moment only on diversity and inclusion, might be more narrowly or broadly defined. How many cynics and skeptics pre-disposed to reject DEI initiatives as inappropriate race, sexual preference, and/or gender-based proxies might soften their opposition if the storyline were recast so as to avoid altogether a "we-they" lens and be contextualized instead by the guiding concept that a heterogeneous workforce benefits everyone? President John F. Kennedy self-deprecatingly credited his success to having surrounded himself with a diversity of opinions, believing that a cabinet of like-minded “yes-men” would be self-defeating (and mostly redundant). Leaving for another day a more thoughtful look at the inequities sought to be addressed by the “E” in our collective DEI efforts (and noting in this context as well, the separate quest of some to expand such initiatives and their overarching acronym to recognize a “B” for Belonging, where everyone is not only invited to have a seat at the table but also is made to feel welcome to do so), encouraging and promoting diversity and inclusion ought, fundamentally, be founded upon a conscious effort to achieve a sum greater than its parts by bringing together those of differing perspectives. As another exceptional individual shared with me on this point, it’s not a “zero-sum” situation where one group’s loss is another’s gain. Everyone benefits! So, I ask again . . . is your organization neurodiverse? Should you care? Hopefully, we can all agree, at least, that knowing and appreciating what neurodivergence means is a good first step in answering the question. Understanding the potential value of incorporating neurodivergent individuals in professional work environments and, in turn, harnessing such potential virtually assures “group-think” avoidance. What naturally flows from this recognition is an appreciation that diversity, in general, is a favorable objective. Striving to achieve a more diverse and inclusive work environment is important because, just as a rising tide lifts all boats, diversity, by definition, brings a broader depth of experiences, perspectives, and ways of looking at problems, everyday situations, and, yes, even legal issues and arguments. Whether to consider and promote diversity -- neurodiversity or otherwise! -- is not simply an objective (or subjective!) question of doing the right or wrong thing. Nor, I suggest, is promoting a DEI agenda necessarily a matter of identifying and overcoming biases or prejudices (although these certainly play an unfortunate and unacceptable role in environments developed absent DEI considerations). Rather, I believe caring about issues such as neurodiversity and diversity more generally leads to avoiding tendencies towards like-mindedness and “group-think,” and, speaking apolitically, I believe that President Kennedy had it right when he made a point of assuring that a diversity of opinions informed his ultimate decision-making. Should you care if your organization is neurodiverse? Of course you should.
October 7, 2024
Commercial Litigation
Does Maryland’s Anti-SLAPP Statute Achieve Its Intended Purpose?
"Originally published in the Maryland Bar Journal, Vol. 6, Issue 2, Summer 2024." An anti-SLAPP law is designed to prevent strategic litigation against public participation (SLAPP), which is litigation that, in its essence, seeks to chill protected speech. Thirty-three states and the District of Columbia have anti-SLAPP laws. Maryland, which promulgated its anti-SLAPP Statute in 2004, is included in this group, but despite being in effect for 20 years, the Statute has only been successfully invoked twice. Courtney Fix is one of those who found relief under this Statute. When Courtney Fix posted “be careful of the tequila in Baltimore, only drink from who you know personally” to her 16,000 Instagram followers in early April 2021, she had no idea that the events that would follow would dramatically change her life. This post, which was vague to many, had a specific meaning - a friend confided in her that she was sexually assaulted by a then-emerging Baltimore restaurateur who gave her a “special” tequila. Courtney did not anticipate the number of women that would contact her directly asking if that post was about the very same restauranteur. As those direct messages came in, Courtney felt the need to do something, and so she confronted the restauranteur directly. He denied any wrongdoing, but nevertheless, Courtney, who believed the women that contacted her, posted a warning to women on her Instagram to avoid associating with this individual. After Courtney’s “warning” post, she began receiving hundreds of direct messages from women detailing incidents of sexual violence, abuse and misconduct committed by various men who primarily worked in the restaurant and hospitality industry in the Baltimore area. While Courtney did not know the women who were messaging her, she felt a responsibility to listen and help. A common thread amongst these messages were requests for Courtney to share their stories as well and to disclose other men who committed wrongful acts. Wanting to help the women messaging her, Courtney decided to honor their requests and share their stories to her 16,000 followers. She posted screenshots of the direct messages, while withholding the identity of those who contacted her. Notably, Courtney only shared survivors’ stories if she received multiple messages from different people that showed a similar pattern of behavior committed by any alleged perpetrator. While Courtney did not actually author any content that detailed allegations of criminal or other sexual misconduct, she posted content that included her own commentary and opinions of the individuals identified by her posts. Courtney’s posts were met with intense reactions. On the one hand, many people applauded and celebrated her efforts for giving a voice to victims and for outing the men responsible for causing harm. On the other hand, there were people who dismissed her as being “crazy”, “reckless”, or “neurotic.” Included in this camp were people who targeted her small business, Full Circle Doughnuts, which was located in Baltimore’s Hampden neighborhood. Others submitted complaints to Instagram regarding her posts, which caused Courtney’s account to be disabled. Unfazed, Courtney created another Instagram account and resumed posting until that account was also disabled. Then she started posting to her business’s Instagram page, which was disabled as well. There were also the reactions of the individuals that were named in Courtney’s posts, which led to three defamation lawsuits being filed against Courtney and her business in June 2021. Because her business was named as a Defendant, Courtney was provided with defense coverage pursuant to her business insurance policy, but by the time the carrier responded to the lawsuits, all three cases were in vastly different procedural posture – one matter had a pending motion for default judgment and sanctions; another had other pending discovery issues; and the third, Joshua Harris v. Courtney Fix, et al., had not been served. By November 2021, the Harris lawsuit was at a standstill despite there already having been two motions for temporary restraining orders, which were heard and denied by the Circuit Court for Baltimore City. Joshua, a former candidate for multiple elected offices, including the 2018 Maryland House of Delegates District 40 election and the 2016 Baltimore mayoral election, labeled him as a “psychopath womanizer”, “scammer”, “narcissist and manipulator”, “abuser”, “sexual predator”, and “classic fuck boy.”[1] In response to these allegations, Courtney moved to dismiss the Harris complaint. Courtney’s motion argued that pursuant to Section 230(c)(1) of the Communications Decency Act of 1996, she could not be treated as a publisher or speaker of the screenshots she posted, and that any commentary that she authored was opinion speech protected by the First Amendment. Additionally, Courtney’s motion argued that the Harris suit was a “SLAPP suit” requiring dismissal under Maryland’s Anti-SLAPP Statute. Beginning with the Section 230 argument, “Section 230 was enacted, in part, to maintain the robust nature of Internet communication and, accordingly, to keep government interference in the medium to a minimum. In specific statutory findings, Congress recognized the Internet and interactive computer services as offering a forum for a true diversity of political discourse, unique opportunities for cultural development, and myriad avenues for intellectual activity.”[2] As a result, Section 230 creates immunity from defamation, when the defendant is 1) the provider or user of an “interactive computer service”; 2) the asserted claims treat the defendant as a publisher or speaker of that information; and 3) the challenged communication must be “information provided by another information content provider.” See 47 U.S.C. § 230(c)(1). The screenshot posts of direct messages met these criteria. It was without dispute that Courtney was a “user” of an “interactive computer service” (i.e., Instagram), and that the Harris lawsuit treated her as the publisher of the posts. Through affidavit, Courtney affirmed that the content was indeed screenshots of direct messages from other users. As such, pursuant to Section 230, Courtney could not be the publisher of these statements. As for Courtney’s own commentary, which did include labeling Harris as a “womanizer” and “sexual predator”, Courtney’s motion argued that these statements were not actionable because she was expressing loose, figurative or hyperbolic speech rather than objectively verifiable facts.[3] Of all the appellations Courtney used herself, “sexual predator” was perhaps the most salacious. While Maryland courts have not addressed this term specifically, sister-state courts have explained that this is “opinion and thus not actionable.”[4] As for the Anti-SLAPP argument, Maryland’s Anti-SLAPP statute provides that the court must dismiss lawsuits that are “1) brought in bad faith, 2) brought against a party who has made protected communications to a government body or the public on a matter within the authority of government body or on an issue of public concern, 3) materially related to the protected communications, and 4) intended to inhibit or to have inhibited the making of those protected communications. If all four criteria are satisfied, then the defendant is entitled to civil immunity if he or she acted ‘without constitutional malice’ when making the protected communications.”[5] Courtney argued that bad faith was evidenced by the relief that Harris sought: a request to chill Courtney’s speech about him entirely such that she could never speak about him again, whether in public or private, other than a forced apology; a demand for compensatory damages in excess of $75,000 and punitive damages in the amount of $1 million; and a request requiring Courtney to submit to a mental health examination in a motion for a temporary restraining order. Additionally, continued delays in service despite Courtney’s counsel offering to accept service was also argued to be an act of bad faith. Courtney argued further that all of her posts – whether third-party content (i.e., screenshots of direct messages) or her commentary on that content – were protected communications. Specifically, as already stated, Courtney’s commentary was opinion speech protected by the First Amendment. Similarly, Courtney also argued that the First Amendment protects her right to exercise editorial control over her platform and distribute others’ speech concerning issues of public concern. The Supreme Court has explained that “speech on public issues occupies the highest rung of the hierarchy of First Amendment value, and it is entitled to special protection”[6], and this rule is not “restricted to the press, being enjoyed by business corporations generally and by ordinary people engaged in unsophisticated expression as well as by professional publishers.”[7] The issues of “public concern”[8] relative to Courtney’s posts about Harris were twofold. First, Harris was a candidate for multiple elected offices, and it was argued that Courtney’s posts about him concerned his character and suitability for those offices. Second, Courtney’s speech was inextricably linked to ongoing public discussions concerning sex, consent, morality and power (e.g., the “Me Too” movement). It was clear and uncontested that Harris’ lawsuit was materially related to Courtney’s speech. The complaint also did not include a single allegation that Courtney made any statements with actual knowledge of their falsity, which could not be tested in any event.[9] The Honorable Jeffrey M. Geller heard arguments on March 30, 2022, and ruling from the bench, he granted Courtney’s motion on every basis that was raised.[10] It is believed that this is just the second time a party has prevailed under Maryland’s Anti-SLAPP Statute.[11] Joshua appealed this ruling, but his appeal was ultimately dismissed. This was a great outcome for Courtney, but it is easy to imagine that Maryland’s appellate courts would have appreciated the opportunity to address this matter. While Courtney prevailed, it was a Pyrrhic victory. The fact of the matter is that once the lawsuits were filed, her speech was chilled entirely. Courtney did make a few posts about the litigation once it was filed, but as soon as some litigants started incorporating that into their filings, she stopped altogether. There was also the damage caused by the allegations against her that painted her as a liar. She never really had an opportunity to defend against these allegations either, and even if she did have that chance, it is unclear if it would have mattered or if the court of public opinion had already judged her. Critically, Courtney’s business also suffered. She closed Full Circle Doughnuts in November 2021, just four years after it opened. Shortly after that, Courtney moved away from Baltimore. There is no doubt that the burden of the litigation was a critical factor in her decision to close her business and move. Courtney’s reality begs the question of whether Maryland’s Anti-SLAPP Statute is a paper tiger. For example, the Statute does not include an attorneys’ fee provision. The practical effect of this is that even a party eligible for relief under this Statute will still be burdened by the commencement of a SLAPP Suit. For Courtney, because her company was a co-defendant, she had no choice but to hire counsel. Additionally, the requirement to show “bad faith” does not necessarily distinguish the Statute from Rule 1-341 – Bad Faith – Unjustified Proceeding. No matter the damage the litigation caused Courtney, her strength and resolve will carry her through. She will tell her story one day, and it will be an incredible one. Until that day, the hope is that her case sets a precedent that will protect others that are as courageous as she was. [1] Mr. Harris also alleged that Courtney was responsible for posts concerning him that appeared on a website known as “outyourabusers” despite having nothing more than speculation that she was behind that content. These allegations were addressed through an affidavit from Courtney where she affirmed that she was not responsible for the website. This affidavit was not countered. [2] See Zeran v. Am. Online, Inc., 129 F.3d 327, 330 (4th Cir. 1997) (internal quotations and citations omitted). [3] See Thacker v. City of Hyattsville, 135 Md. App. 268, 313 (2000), cert. denied, 363 Md. 206 (2001) (explaining that if a statement is not provable as false or is not reasonably interpretable as stating facts, then it cannot form the basis of a defamation suit) (quoting Milkovich v. Lorain Journal Co., 497 U.S. 1, 18, 110 S.Ct. 2695, 2705 (1990)). [4] See Mogged v. Lindamood, No. 02-18-00126-CV, 2020 WL 7074390, at *16 (Tex. App. Dec. 3, 2020), review denied (June 11, 2021) (holding that the label “sexual predator” is “mere opinion”); see also Rosado v. Daily News, L.P., No. 157674/13, 2014 WL 883648, at *3 (N.Y. Sup. Ct. Jan. 31, 2014) (holding that being labeled a “sex predator” is not actionable). See also Burgoon v Delahunt, 2000 WL 1780285 (Minn. App) (reasonable person could apply “sexual predator” to inappropriate touching and offensive sexual comments); Terry v Davis Community Church. 131 Cal App 4th 1534, 1555 (2005) (inappropriate relationship with minor) [5] See MCB Woodberry Developer, LLC v. Council of Owners of Millrace Condominium, Inc., 253 Md. App. 279, 297 (2021). [6] See Snyder v. Phelps, 562 U.S. 443, 452, 131 S. Ct. 1207, 1215, 170 L.Ed. 2d 172 (2011) [7] See Hurley v. Irish-Am. Gay, Lesbian & Bisexual Grp. of Bos., 515 U.S. 557, 574, 115 S. Ct. 2338, 2347, 132 L. Ed. 2d 487 (1995). [8] In Woodberry, the Appellate Court of Maryland explained that “First Amendment jurisprudence in the context of actions for defamation … establish that a matter of ‘public concern’ means ‘fairly considered as relating to any matter of political, social, or other concern to the community’.” See 253 Md. App at 304. [9] See Batson v. Shiflett, 325 Md. 684, 728 (1992) (explaining that constitutional malice “is established by clear and convincing evidence that a statement was made ‘with knowledge that it was false or with reckless disregard of whether it was false or not.’”) (quoting New York Times Co. v. Sullivan, 376 U.S. 254, 279-80, 84 S. Ct. 710, 11 L.Ed.2d 686 (1964)). [10] The motion also argued that the complaint failed to state a claim upon which relief could be granted. [11] Shortly after this ruling, the other lawsuits pending against Courtney were resolved.
September 16, 2024
Commercial Litigation
Gut Punch...No Regrets
Sometimes a “win” feels like, well, . . . not a win. Sometimes a “win” comes at such a significant cost that the diminished value of the victory forces one to question whether it was a win at all. The Battle of Bunker Hill is a notorious “pyrrhic victory” during which the British troops occupying Boston eventually overran the vastly outnumbered rag-tag assemblage of defending militiamen but not without suffering substantially greater casualties than expected. The battle, nominally a British victory, proved to be an encounter the British would much rather forget than tout as a win. Similarly, a prize fighter’s successful defense of his boxing title by technical knockout leaving him perceptively weak and vulnerable to challengers, perhaps even severely injured, might leave him questioning whether, in hindsight, the public beating taken in the ring was truly a “win” for which it was worth fighting. I recently experienced an unqualified “win” for a client followed by a sucker punch I didn’t see coming . . . a “gut punch” unexpectedly bringing me to my knees and requiring the equivalent of a “standing 8-count” to shake off and get my head right. While it didn’t come with bloodshed or a championship belt, it did come with loss of life and a serious cause for pause. The Set-Up I’d been contacted and engaged by a non-familial attorney-in-fact on behalf of a lovely 90-year-old, bed-ridden, “stage 4” diagnosed, short-timer. For these purposes, I’ll call her “Joy” -- because she certainly was! Joy was a pistol. Although end-stage, unable to leave her bed, and receiving hospice care when I met her, Joy was feisty. I certainly had no doubts about her mental capacity. She knew what she wanted and had no issue telling you! What she didn’t want was a guardian or conservator appointed for her – least of all her 30-year estranged family member (“Pat”) who, from thousands of miles away, had only begrudgingly made the trip to see Joy and, even then, chose to disrespect her by removing and requisitioning Joy’s dining room chandelier before bothering to say “hello!” Soon thereafter Pat had returned home and engaged local Virginia counsel to assist Pat in securing complete control over Joy as both guardian and conservator. Suit was filed and a Guardian ad litem (GAL) already appointed by the time I got the initial call. Joy was having none of it and was non-plussed. For her part, Joy, with the help of her attorney-in-fact, had engaged reputable counsel to redo her estate plan writing Pat (and Pat’s equally estranged sibling, who couldn’t be bothered to pay respects) completely out of her will. I know what you’re thinking at this point – was the non-family member taking advantage of Joy and now the object of all of her bounty? Nope. Joy kept it in the family but skipped a generation leaving everything she owned to the grandchildren she’d never been allowed to know. In what turned out to be her final days, Joy wanted nothing more to connect with and meet the now adult grandkids she’d never met, but my requests through counsel on her behalf went unanswered. The “Win” Having personally met with and preliminarily concluded Pat needed no guarding or conservation, I was easily able to convince Pat’s counsel that there was no need to rush to judgment and coordinate a cooperative approach to allowing an independent assessment by the court-appointed GAL – who, by the way, was equally easily convinced of Pat’s mental acuity and just as willing to minimize her involvement so as to avoid unnecessarily running up legal fees. I convinced Joy to allow me to share her new estate plan documents so Pat’s counsel could see and share with Pat that mom was not giving it all away to who knows who and clearly had a plan – a plan reflective of the non-existent relationship Joy had had with her children . . . a plan without Pat. With no basis for denying Joy her freedoms of choice, Pat’s counsel pursued a voluntary dismissal. With everyone doing the “right thing,” a lot of money and heartache was spared and I had successfully defended Joy’s interests without so much as having filed a single pleading or attended a single hearing. No formal discovery was needed; judicial economy was maximized. Joy was happy. Joy’s attorney-in-fact was happy. I was happy. Joy was at peace. Joy passed several days later. The “Gut Punch” With Joy’s passing, there was still work to be done, of course. In keeping with Joy’s wishes, Joy’s attorney-in-fact, now Executor under Joy’s will, made arrangements for the final disposition of Joy’s remains with no public service or ceremony. I reviewed the published eulogy with interest and a strange deference, considering I’d only twice met Joy in person and only known Joy for a few weeks. Count this one as a “win,” I thought. Hold this out as a case study on how every case should go, I concluded. I’d even begun composing the article in my head. That’s when I got the call. Joy’s other long-lost offspring had been given my number. It seems there’d been no love lost between Joy and himself over the years and he’d deferred to Pat to address mom’s final illness. With news of Joy’s death still fresh, he was calling to let me know that Pat had just taken her own life. There it was – his own self-described “1-2 punch combination” which had apparently left him feeling weak in the knees, was the punch to the gut I didn’t see coming. I sat dazed and speechless as he shared the unsolicited gruesome reality of Pat’s disposition as his story morphed into the impact on Pat’s situation on the grandkids – remember the grandkids? He transitioned effortlessly again to talk of wanting to be “fair to the kids” (appearing now to be indirectly referencing Joy’s estate and believing, based on apparently nothing in particular, that Pat’s kids would somehow be short-shrifted with Pat’s untimely demise). In that moment, I caught my breath and lifted myself off the mat with the revelation that he had been written out of the will and the grandkids were to receive everything. “So that’s it, then, huh.” “Yes.” Conversation over. After an awkward silence, he hung up. The Aftermath I’m not sure which had hit harder, news of Pat having taken her own life or the impact of her doing so on the sibling and children she’d left behind. I suppose that in my line of work I ought to be grateful I’ve not faced more such situations. Quite candidly, I’ll concede I’m not sure this would still be my line of work! There was no championship belt for my performance, nor was one deserved. Still, a win’s a win, right? I take solace in knowing that I served my client’s interests cost-effectively, efficiently, and professionally. I successfully protected her legal rights and helped her die with dignity and at peace. The tragic aftermath left in her wake was not of my doing, but rather the apparent consequences of lifetimes of regret about which I know little more than hinted at here and with which I had no involvement. I think it’s important to recognize that our wins and losses as litigators are life-altering events for our clients and their “adversaries” (aka family members, in my specific line of work). I think the struggle comes from the juxtaposed need to be independent-thinking, dispassionate, third-party trained professionals and the inherent value in appreciating the emotional toll and impact the circumstances have on not only our clients but also those caught up in outwardly expanding ripples left in litigation’s wake. My takeaways? If nothing else, I learned I could take a punch. I still what I do . . . for now, at least. Personally, I suggest calling your mom; hug your kids before it’s too late. Professionally, in a personal services context, caring still matters. It’s important to remember that people generally don’t care what you know unless they know that you care, but if they don’t care that you care, you don’t need them.
August 30, 2024
Commercial Litigation
A Divorce Checklist – Death and Bankruptcy Considerations
A substantial portion of estate and trust litigation and post-divorce enforcement litigation (“contempt proceedings”) is rooted in failures or shortcomings in negotiations or drafting during the divorce process itself. Here is a recommended “best practices” checklist of questions developed based on my nearly three decades of bankruptcy, creditors’ rights, collection and enforcement, and estate and trust litigation. This “best practices” checklist for family law (aka matrimonial law) attorneys, divorce lawyers, those contemplating divorce, and those, perhaps, already in the throes of post-divorce contempt proceedings tracks with my recently published List of “Top 5 Divorce-related Financial Protection Failures”. It incorporates lessons learned “the hard way” from potentially avoidable situations occasioned or worsened when the questions compiled here had not been considered or, if asked, ineffectively taken into account by the drafting attorneys involved in the first instance. This checklist is a practical, check-the-box application of the “Top 5 List” broken down into specific questions to be asked and answered by all involved in the divorce process. The checklist can and should be relied upon and applied (in whole or in part, depending on the circumstances) during multiple phases of a divorce proceeding. The checklist should help guide drafting considerations during negotiations of a Property Settlement Agreement when trying to avoid or limit costly equitable distribution litigation to determine how much each spouse is equitably to receive; otherwise to be measured by what portion of which assets the judge determines most appropriate after costly hearings. The checklist similarly serves to guide drafting considerations of the final divorce decree itself. Furthermore, although the checklist is intended to reduce costs and delays associated with post-divorce litigation used to hold a non-compliant spouse accountable when not adhering to one or more financial terms of the divorce, it can be equally effective during these contempt proceedings at aiding decision-making and providing both cost-saving guidance and time-saving benefits for the user. If routinely followed and effectively applied, the checklist should serve to help avoid unintended negative financial consequences while reducing future litigation and related legal fees, costs, and delays. THE CHECKLIST Insurance Notice to Provider - Has the insurance company (and/or benefits provider) been notified and / or asked about relevant policies and procedures for irrevocably assigning policy proceeds (and precluding unilateral re-designation of beneficiaries by the insured)? Beneficiary Re-designation - Have policy beneficiaries been irrevocably re-designated to identify ex-spouse (and/or child, children, or trust) expressly by name? Account Access – Has perpetual real-time account access to policy information (including, most importantly, payment status and continuing coverage) been irrevocably established? Employment Coverage - If relying upon employer-provided insurance coverage, have conditions or contingencies been established for the continuance of coverage upon termination, or if work-related coverage benefits ceases to be provided for any reason? Premium Payments - What specific protections (e.g., Irrevocable Life Insurance Trust (ILIT) or escrow) have been established to assure continuity of premium payments if the debtor-spouse refuses or is unable to pay for any reason? Real Estate Clean Title - Have you verified that there are no mechanics liens, judgment liens, or other title impediments? Premature Death - Have you analyzed and provided sufficiently for the possibility and potential impact of the premature death of either spouse? HELOC - Have you protected against additional credit extensions in addition to making appropriate arrangements for payoff or paydown? “Robbing Peter” - If an asset is to be liquidated and paid over in whole or in part, have you established consequences, contingencies, and otherwise protected against proceeds of the asset(s) being improperly disposed of, including in satisfaction of a separate financial obligation? Retitling/Disposition – Have you documented that “time is of the essence” and maximized protection of “reciprocal rights” against bankruptcy and/or failed pre-condition(s) to relinquishing, re-titling, or otherwise disposing of assets, especially real property assets? Retirement Accounts/Benefits Notice to Providers - Have all benefits managers/providers of relevant retirement accounts and benefits been given sufficient notice of all changes? Beneficiary Re-Designations - As with insurance coverages, have all beneficiaries been appropriately and irrevocably re-designated? Claim Deadlines – If in a jurisdiction with time limits on claims against a decedent’s estate (e.g., MD – 6 months), have adequate disclosures been made to assure timely action after death? Spousal Payout Elections – If applicable, have appropriate elections been irrevocably made to assure manner and means of payout after death (e.g., continuing spousal payments v. payments terminating at death)? Borrowing Restrictions – Have any outstanding loans against any retirement assets been factored in for valuation purposes and future borrowing against such assets been appropriately and irrevocably restricted? Bankruptcy Jurisdiction - Do you know what, if any, continuing jurisdiction the “divorce court” has if a bankruptcy is filed? Different Chapters - What difference, if any, would the filing of a Chapter 7, 11, 13, or “Subchapter V” bankruptcy have on your situation? “DSO’s” - Have you negotiated financial obligations regarding future PSA payments concerning whether they are subject to characterization under bankruptcy law as “domestic support obligations?” “The Automatic Stay” - Are you prepared to seek relief from the automatic stay and or pursue enforcement in bankruptcy court if a filing is forthcoming? Corporate Assets - If division and/or control of corporate assets by or between one or both of the spouses is/are to be factored, has a potential bankruptcy filing been accounted for with relevant valuation and enforcement considerations? Collectability Limitations Contempt Jurisdiction - Have you sufficiently familiarized yourself with binding local precedent regarding the scope of continuing contempt jurisdiction of the “divorce court” in the event of a bankruptcy filing? Bankruptcy Clawback/Discharge - Have you evaluated whether, and/or the likelihood of, future financial obligations might be subject to clawback or discharge in bankruptcy (and/or how the outcome/impact might differ depending on which bankruptcy chapter or sub-chapter is pursued)? Third-Party Requirements - For known assets held or controlled by third parties, has/have any specifically needed language been incorporated into the PSA, divorce decree, or contempt order to avoid later having to seek additional judicial relief as a pre-condition to third-party cooperation? Escrows/POA’s - Presuming future ex-spouse noncompliance, what, if any, limited power of attorney language and/or separate writings might be included, created, and/or escrowed to avoid, potentially altogether, future ex-spouse involvement? “Double-Duty” PSA - As a potential failsafe, have you incorporated language of present intent and otherwise satisfied necessary elements for the PSA itself to serve if/as needed as a deed, written assignment, or other ownership conveyance? (See [TWR’s “PSA as Deed”] and [TWR’s “PSA as Equitable Assignment”]
July 11, 2024
Commercial Litigation
Property Management Obligations under the Virginia Residential Landlord Tenant Act
The relationship between landlords and tenants in Virginia is governed by the lease agreement and the Virginia Residential Landlord Tenant Act (VRLTA). Under the VRLTA, landlords and property managers must maintain rental properties fit and habitable. The Virginia Court of Appeals defined ‘fit and habitable’ as “the premises must be livable, free from serious defects to health and safety, and have necessary qualities for habitability.” Parrish v. Vance, 80 Va. App. 426, 438, 898 S.E.2d 407, 412 (2024). Accordingly, landlords and property managers must ensure properties maintain the following standards: Warranty of Habitability: Landlords must maintain rental properties in a fit and habitable condition throughout the tenancy. This includes ensuring that the premises are structurally sound, free from significant defects, and comply with applicable building and housing codes. See § 55.1-1220. Landlord to maintain fit premises (virginia.gov). The warranty of habitability obligates landlords to address issues such as plumbing and electrical problems, pest infestations, heating and cooling systems, and other essential amenities necessary for safe and comfortable living conditions. This warranty cannot be waived or disclaimed, even if the lease states the warranty is disclaimed. Parrish v. Vance, 80 Va. App. at 440. Repairs and Maintenance: Landlords are responsible for making necessary repairs to ensure the rental property remains habitable. This includes repairing or replacing faulty appliances, addressing water leaks, fixing broken windows or doors, and maintaining common areas such as stairwells and hallways. Landlords must respond promptly to maintenance requests from tenants and take reasonable steps to address issues within a reasonable timeframe. Failure to do so may constitute a breach of the implied warranty of habitability. In the Parrish v. Vance case, the Court of Appeals of Virginia affirmed a Circuit Court’s decision to terminate a lease and award damages to a tenant where a landlord failed to remediate a flea infestation in a rental property timely. Parrish v. Vance, 80 Va. App. at 438. Common Areas and Facilities: Landlords are also responsible for maintaining common areas and facilities provided for tenants’ use. This includes parking lots, sidewalks, laundry rooms, and recreational facilities. Common areas must be kept clean, well-lit, and free from hazards to ensure the safety and security of tenants. Landlords should regularly inspect and maintain these areas to prevent accidents and injuries. The Virginia Residential Landlord Tenant Act imposes significant obligations on landlords regarding the maintenance and upkeep of rental properties. Landlords must fulfill their duty to maintain habitable living conditions, address repair requests promptly, and ensure the safety of tenants. Understanding these rights and responsibilities is essential for fostering a harmonious landlord-tenant relationship and protecting the interests of both parties. If you or your organization have a landlord-tenant related claim, consulting with a trusted attorney in your area is critical. While outcomes cannot be guaranteed and past performance cannot assure future success, Offit Kurman real estate litigator Anders Sleight | Offit Kurman is available to evaluate your specific situation.
June 20, 2024
