Intellectual Property
Building a Patent Strategy that Actually Works for Your Business
If your business relies on bringing innovations to market that generate returns on investment, then a well-designed patent strategy is critical for realizing those returns. Patents help introduce new products to the market, secure investment, and establish your business’s competitive edge, all supporting and controlling the top and bottom lines. A thoughtful patent strategy simply helps turn innovation into long-term business value. However, achieving this long-term business value requires you to consider patents as part of the big picture of your business; business goals, market dynamics, and product roadmap are all important. Patents are not simply a check-the-box activity or even pure costs; they are investments in the future of your business. But how do you turn patents--powerful legal rights-- into business value? Start With the ‘Why’ Before jumping into the legal process, consider what patents could do for your business. Do you need to: Protect the core technology that drives your revenue? Create barriers to entry for competitors? Support a licensing model or open new revenue streams? Make your business more attractive to investors, acquirers or strategic partners? If the answer is yes to any of the above, a proactive patent strategy deserves a place in your broader business plan. Timing is Critical Patent law rewards those who act early in the innovation process. In fact, certain activities can result in the loss of patent rights. It is important to file for patent protection for an innovation before disclosing your invention publicly, whether through a sale, publication, presentation, or even a demonstration. But timing is a balancing act. Concepts that are too general or have not undergone some level of technical and market vetting may not be ready for patenting, but filing too late, after public disclosure can be catastrophic. Aim to file for patent protection when you can describe a clear use case and the market can identify key technical features important for that use case and market, ideally before you raise funds or launch publicly. Today, product development often requires engaging third parties early in the process. Two tactical steps can be used to bolster your strategy and provide some flexibility in timing: Use non-disclosure agreements with third parties you need to share your concept with to get help File provisional applications if you want to secure a filing date while continuing to refine the invention. Think Beyond One Patent Your strategy shouldn’t stop with one patent application or even one type of patent. Patents grant you the right to exclude others from making, using, or selling the invention as claimed. But patents often are not broad blocking patents. Patents are often focused on incremental innovations, and patent law generally limits one patent per invention. Often, several inventions are built into a product, and robust protection would therefore require multiple patents. You may need to: Protect multiple components or processes within a single product. File in international markets where you plan to sell or manufacture the product. Keep an eye on adjacent technologies and file follow-on continuation patents as your product and market evolve. At least considering these options allows you to manage your patent strategy to your product roadmap, keep an eye on competitive threats, and help manage your patent more proactively. Patents are Investments, Not Costs Filing a patent isn’t just a line item on your legal budget — it’s an investment in your business’s future. Like any other asset, patents have the potential to generate returns, whether through increased valuation, market exclusivity, licensing opportunities, or strategic advantage. What makes patents more of an investment than just a budget line item? First, delaying or forgoing patents gives your competitors a free pass to use innovations you developed for their own gain. Without patents, competitors will capitalize on what your business introduced to the market, leaving little recourse for you after the fact. Those competitors can then file patents that could hamper your ability to sell your products. This has a direct impact on the topline and undermines R&D investment. Proactive patent protection avoids this altogether and serves as a competitive deterrent. Second, patents can help add revenue through licensing. However, licensing revenue is nearly impossible without legal rights protecting the products. Patents are an effective tool to support licensing or acquisition opportunities. Third, patents attract and retain capital. Investors always ask if the technology has protection. The larger the investments you seek, the more scrutiny will be placed on your patent strategy and how it relates to the technology supporting your innovations. Investors often look for competitive advantages, and patents provide that. Patents are assets and can help support business valuations that facilitate investment. Related to direct investments, patents can also act as collateral to secured transactions, facilitating investment or debt for financing other parts of the business. Without patents protecting your technology, you are forgoing an effective tool that drives investor confidence, which, in turn, drives investment in your business. A well-timed, well-aligned patent strategy doesn’t just protect what you’ve built, it helps justify and maximize the investments you’re already making in innovation. Treat patents as part of your business assets and budget for them accordingly. Encourage Internal Innovation An intentional patent strategy doesn’t just protect innovation, it helps fuel it. When your innovators know there’s a process in place to capture and evaluate their ideas, they’re more likely to share them. Encouraging your team to share and disclose ideas that may be patentable unlocks potentially patentable concepts that can support your business goals. A great way to maximize patent value is to create an invention disclosure system that harvests innovations within your organization while rewarding disclosure among your team. This can form the basis for an engaged team oriented towards protection innovation. An excellent supplement, patent seminars can help educate your staff about the patent process and what it takes to be an inventor under U.S. law. The Bottom Line A strong patent strategy isn’t about legal red tape; it's about creating leverage, supporting your growth, and building real, lasting value. Treating patents as an investment—not a cost—unlocks their full potential as a driver of innovation, funding and long-term success.
May 23, 2025
Labor and Employment
Weddings, Honeymoons, and Milestones: Employer Guidance for Time Off Requests
For HR leaders and business owners alike, the question is not whether employees will request time off for major life events, but when and how your organization will respond. Weddings, honeymoons, and personal milestones do not fall under FMLA or mandatory leave laws, but how you handle these moments speaks volumes about your culture, legal risk tolerance, and ability to retain top talent. There’s No Legal Right — But There Are Legal Risks It’s true: U.S. employers have no legal obligation under federal or state law to offer “wedding leave.” These events are not protected by the Family and Medical Leave Act (FMLA), paid sick leave laws, or any other statutory entitlement. But do not mistake a lack of mandate for a lack of risk. Employers who approve or deny time-off requests inconsistently, particularly in ways that appear to impact employees based on gender, race, religion, or other protected characteristics, may face claims under Title VII or state anti-discrimination laws. The U.S. Department of Labor (DOL) continues to emphasize enforcement around leave and accommodation policies that have a disparate impact. While “wedding leave” is not protected, your process must still comply with anti-discrimination and fair treatment standards. FMLA and Paid Leave Interaction: Be Clear on What Applies While weddings and honeymoons typically fall outside the scope of the FMLA, some related events might trigger protected leave. For example: Destination wedding involving a serious health condition (e.g., pre-surgical travel): FMLA may apply. Caring for a seriously ill spouse during or after a wedding or travel abroad: FMLA may apply. Employee illness or complications resulting in an inability to return to work: also potentially protected under FMLA. Moreover, the DOL recently clarified that when employees receive state or local paid family or medical leave benefits, employers cannot require them to simultaneously use accrued paid time off (PTO). This rule limits an employer’s ability to control how leave is structured when overlapping benefits are involved. Employers must understand the interplay between federal FMLA rights and state/local paid leave programs. Suppose an employee receives paid benefits through a government program (e.g., California PFL, DC Paid Family Leave). In that case, employers must designate FMLA leave when appropriate but may only allow PTO to be used as a supplement if mutually agreed, not mandated. Build Goodwill Without Losing Control Your policies should reflect both empathy and operational discipline. A wedding is not a frivolous request — it is a once-in-a-lifetime event that deeply matters to your employee. When employers respond with humanity and structure, it creates loyalty. That does not mean granting every request or disrupting workflow. It means having a clear, written policy that: Requires advance notice (e.g., 30–60 days). Reserves approval based on business needs. Clarifies whether PTO or unpaid leave may be used. Avoids any ambiguity about the consequences of overstaying approved leave. Consider including a “personal leave” clause in your employee handbook to address non-medical, non-FMLA, and non-emergency time off. Your language can be simple and clear: personal leave may be granted at management’s discretion, subject to operational needs. Watch Out for International Travel If the honeymoon involves international travel, extra scrutiny is warranted. Confirm the return-to-work date in writing before the employee departs, and clearly communicate that unapproved extensions may be treated as unexcused absences. Lingering COVID-era entry restrictions, visa issues, or logistical complications can cause delays, but those are not excuses for avoiding your leave policies. Where possible, plan backup support and document expectations in writing to avoid any disputes upon return. Small Gestures, Big Impact From a culture-building perspective, do not underestimate the power of a simple “Congratulations!” A card, a team mention, or a verbal note from leadership can make an employee feel valued. Some employers go a step further — offering a “wedding day off” or an extra PTO day. These gestures are optional, but impactful. Policy Consistency Is Your Best Defense If your leave policies are outdated, vague, or silent on personal time off, now is the time to revise them. Review and align them with current DOL guidance, FMLA regulations, and your state’s paid leave laws. Train your managers, document every request and response, and apply the same standards to every employee, regardless of role, relationship, or circumstance. Bottom Line for Employers Personal milestones matter to your employees and your business. They can create resentment, attrition, or even litigation when handled poorly. When handled well, they can build trust and reinforce culture. Be fair. Be clear. Be compliant. Be human. And most importantly, be consistent.
May 21, 2025
Immigration Law
Top Mistakes That Jeopardize Your Green Card—and How to Avoid Them
As we are currently in a time of extensive scrutiny of immigration actions, individuals must understand their status, rights and obligations. Legal Permanent Residents possess many protections that nonimmigrants do not have, but must carefully maintain their status. One of the key aspects of maintaining a green card is maintaining an existing “intent” to permanently reside in the United States. This is an issue that comes up with green card holders who move abroad or spend significant time outside of the United States. If the Department of Homeland Security (DHS) has reason to believe an individual does not have the intention to reside in the United States, then they can bring proceedings against the individual to remove their green card. The law and policy are summarized by the U.S. Citizenship and Immigration Services (USCIS) as follows: Permanent Resident Cards become technically invalid for reentry into the United States if the holder is absent from the United States for 1 year or more. U.S. permanent residence status may be considered abandoned for absences shorter than 1 year if the green card holder takes up residence in another country. The first point is technical; if one is out of the country for a year or more, their green card is no longer valid for entry. Customs and Border Protection (CBP) will raise this issue at the Ports of Entry to the United States. It can be waived at entry, but the CBP rarely allow that. Instead, they follow a “hawkish” approach to individuals with absences of a year or longer. It should be noted that legal permanent resident status is protected by law and must be removed by legal proceedings. The second point is where individuals can potentially incur CBP scrutiny through a prolonged periods of absence from the United States. For example, if an individual comes into the U.S. twice a year for several years to maintain their green card, questions may arise about the individual’s intent to reside in the U.S., even though that they were technically compliant. Generally speaking, if a legal permanent resident thinks they will spend more than six months outside the United States, they should talk to an immigration attorney. On May 1, 2025, CBP updated its guidance to legal permanent residents returning to the United States. This policy document states that legal permanent residents who have been out of the country for longer than six months will be subject to new immigration inspection procedures. No further details of these new and increased inspections have been released. See Traveling outside U.S. - Documents needed for Lawful Permanent Residents (LPR)/Green Card holders Certain key actions can automatically raise a question of the green card holder’s intent if they leave the United States, specifically: Clearly manifesting an intent of permanently residing in another country (i.e., applying for long-term status in that country. Green card holders must file US taxes on their global income, and they must file taxes as residents for tax purposes; failure to file resident tax returns can be seen as an intentional abandonment of status. Making statements to CBP or DHS that do not support the green card holders’ assertions that their trips abroad are temporary. Accordingly, green card holders who move abroad temporarily must be diligent in maintaining ties to the United States and take proactive steps to protect their green card. They must realize they are jeopardizing their status by extended time abroad. Returning to the United States once a year will eventually draw the ire of the CBP, and the green card holder can expect to receive progressively more intrusive and sustained questioning upon entry to the United States. Steps that green card holders who live abroad could take to protect their status include the following: Travel with evidence of why your trip outside of the US is temporary – temporary job offer, extended care for a family member, explanations for delays, etc. Continue to file US Income taxes. Maintain a residence in the US. Be diligent in not spending 365 days outside of the United States. Registering with the Selective Service is required. Updating their home address with USCIS via Form AR-11. Obtain a Re-Entry Permit:Re-Entry Permits protects a green card holder’s status for two years upon approval. Although not a guarantee of entry, the Re-Entry Permit is excellent evidence to present to CBP that the individual’s absence abroad is temporary. Re-Entry Permits can be renewed depending on the circumstances that the individual faces. Re-Entry Permits must be applied for in person in the U.S.; Having the USCIS receipt notice as evidence of the application is good evidence to demonstrate to the USCIS. Been out of the country for a year or longer?The safest route is to apply for an SB-1 immigrant visa at your local U.S. Embassy to avoid issues entering the country. Lastly, should an individual face potentially denial of entry to the United States for circumstances beyond their control, they can apply for a returning resident special immigrant visa to ensure they can enter the U.S.
May 20, 2025
Business
Avoiding Common Contract Pitfalls: Legal Landmines in Agreements
Contracts are the backbone of every business relationship. Whether buying a business or entering into a new commercial agreement, many small to mid-sized businesses do not fully negotiate critical clauses within the document. Failing to fully negotiate certain language, relying on informal agreements, or failing to update commercial contracts with appropriate amendments as the relationship evolves can become a significant liability to a company. Informal arrangements may feel efficient in the short term but can create significant issues if a dispute arises. In this edition of Search Fund Operate, we break down the most commonly negotiated (and litigated) provisions in contracts. The below is an overview of how acquirers, operators, and business owners can proactively protect themselves from exposure. The Risk of Informal Agreements Many business relationships begin with trust — a handshake deal, an email exchange, or a PDF template someone downloaded online years ago. But when disputes arise, courts look for formal agreements. Informal or undocumented agreements often lack enforceable provisions around risk allocation, dispute resolution, and payment mechanics. Even worse, they often fail to outline each party’s actual responsibilities, deadlines, or remedies. Tip: If a dispute reaches litigation, and there is no signed agreement or only partial documentation, courts may rely on the parties' prior conduct or applicable statutory rules that might not reflect the parties’ original intentions. Inconsistencies can lead to conflicting testimony and unpredictable results. Without formal terms, operators risk operational confusion and disruptions, customer dissatisfaction, and expensive court battles. This risk grows exponentially when the business is being sold or scaled, as buyers expect to inherit clear, enforceable rights and obligations. Liability and Indemnification Indemnification Clauses Indemnity provisions shift the burden of financial responsibility for specific claims. These are some of the most heavily negotiated clauses. Poorly drafted clauses can: Leave you liable for the other party’s negligence or misconduct. Fail to include third-party claims (e.g., customer injuries from vendor products). Omit procedural requirements for notice and defense, leaving you without control of litigation that affects your reputation. Tip: Ensure that the indemnification clause is protective of your interests. Push for mutual indemnification, defense, and settlement rights, not just reimbursement. Also consider whether to limit indemnification to direct damages or extend it to consequential losses. Environmental Indemnity In certain industries — such as manufacturing, logistics, or commercial real estate — environmental risk requires special attention. Contracts should: Clearly allocate responsibility for environmental conditions, both known and unknown. Include representations about compliance with environmental laws and past environmental issues. Address remediation costs and third-party claims. Tip: Require the disclosing party to provide environmental reports and clarify who bears responsibility for pre-existing contamination. Liability Carve-Outs Clauses that attempt to shift risk should specify whether they cover negligence, gross negligence, or willful misconduct. The broader the language, the greater the protection. Sophisticated parties often negotiate carve-outs for fraud or breaches of confidentiality. Limitation of Liability: Know Your Exposure Exclusion of Damages Most contracts attempt to exclude certain categories of damages: Consequential damages (e.g., lost profits or reputational harm) Incidental damages (e.g., additional shipping or handling costs) Punitive damages (rare, but potentially significant in litigation) However, these clauses must be: Clearly drafted and conspicuously presented in the agreement Consistent with governing law and not prohibited by statute Tied to specific breaches or defined categories of claims Tip: Courts may strike down limitation clauses if they are hidden in boilerplate language or conflict with public policy (e.g., consumer harm or gross negligence). Careful drafting is necessary to ensure these clauses are enforceable. Caps on Damages Liability caps are common. These are often limited to: The total fees paid under the agreement over a certain period A multiple of the monthly or annual contract value These types of damages caps should be: Commercially reasonable Include carve outs for egregious conduct (e.g., fraud, IP infringement) Reviewed for enforceability in high-risk jurisdictions (such as California or New York) Tip: Combine caps on damages with tailored indemnification clauses and insurance requirements offer the most balanced protection. Right to Recover Damages Parties should not assume that silence on damages means full recovery. Contracts should affirmatively state: Whether consequential or incidental damages are recoverable Whether lost profits are compensable Whether the right to injunctive relief is preserved for breaches such as misuse of IP, confidential information, or violation of non-competes (if included and within a jurisdiction where enforceable) Tip: Courts can be reluctant to award damages not clearly contemplated in the contract language. Assignability and Change of Control An often overlooked provision is whether contracts can be assigned to another party — a crucial issue during a business sale or restructuring. If assignment is restricted, it may require: Written consent from the counterparty Disclosure of assignee's financial information Attorney fees associated with any legal review prior to consenting to the assignment Some contracts even treat a change of ownership or control as a default or termination trigger. Tip: Failing to secure assignability can delay or derail an acquisition, especially if key customer contracts are involved. Operators should inventory and review top agreements well before a contemplated sale. Payment Terms and Dispute Mechanics Clear Payment Language Contracts should specify: Invoice frequency and delivery method Payment deadlines, accepted payment methods Grace periods, late fees, and interest charges Whether payments are conditional on acceptance, delivery, or milestones Right to stop future delivery of services or products in the event of non-payment Vague or missing language around payment terms is a common source of cash flow disruption. Courts often apply standard practices or industry norms — which may not reflect your business model. Tip: Use net terms that clearly reflect the payment terms. Add provisions for disputed invoices and partial payments. Condition of Delivered Goods or Services Ensure the contract addresses: Acceptance criteria and inspection periods What constitutes a material defect Remedies for nonconforming or damaged goods Whether services must meet a defined performance standard Tip: If materials are delivered late or defective, and the contract is silent, the buyer may have limited options to reject or recover costs. Dispute Resolution Well-structured dispute resolution clauses can minimize litigation costs and clarify where and how conflicts are resolved. These clauses should address: Venue and jurisdiction Governing law (state of choice) Mediation or arbitration requirements before litigation Scope of issues subject to arbitration Tip: Choose arbitration only when you can afford and control it — not all arbitration is cheaper or faster than court. Choice of Law and Venue Failing to specify a governing law can create confusion and increase cost. Choose a state with predictable case law and commercial friendliness Clarify venue for both lawsuits and arbitration (county and state) Tip: Courts generally uphold these clauses, but ambiguity can invite satellite litigation over which rules apply. Recovery of Attorneys’ Fees By default, parties generally pay their own legal fees unless the contract provides otherwise. A prevailing party clause can: Deter frivolous lawsuits Improve recovery leverage for the aggrieved party Help offset enforcement costs in breach scenarios Tip: Ensure the clause clearly defines "prevailing party" and whether partial victories count. Other Heavily Litigated Provisions Force Majeure Since COVID-19, courts have closely scrutinized force majeure clauses. These should be specific and include: Pandemics, epidemics, and public health emergencies Cybersecurity incidents and data breaches Labor strikes, natural disasters, and government actions Tip: Clarify notice requirements and what obligations are suspended or excused. Termination Rights Contracts should clearly state: Whether either party may terminate for convenience Grounds for termination for cause (e.g., material breach, insolvency) Required notice periods Obligations upon termination (e.g., final payments, transition support) Tip: Courts often look to see if the termination provisions were exercised in good faith and consistent with the contract’s intent. Integration Clause A merger or integration clause ensures that only the written agreement governs the relationship. This is a critical protection against claims of oral promises or email side agreements that contradict the final document. Conclusion Contracts are not just formalities — they are critical risk allocation tools. Whether you are acquiring a business, managing a commercial relationship, or selling to customers, business owners should ensure that agreements are thorough, clear, and enforceable. This will reduce litigation risk and protect your enterprise value. For buyers and operators, reviewing all critical contracts pre- and post-close is an essential part of your diligence and compliance process. Don’t assume the existing agreements are sufficient — many are not. Where possible, standardize contract templates, build clear negotiation guardrails, and involve legal counsel to spot ambiguous or dangerous provisions before they become problems.
May 14, 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
Landlord Representation
New D.C. Law on Pet Fees & Policies – What to Know for October
The newly enacted Pets in Housing Amendment Act of 2024 D.C. law will impose significant new limits on pet-related fees and restrictions for rental housing providers. For leases starting on or after October 1, 2025: You may charge a refundable pet security deposit, but it must not exceed 15% of one month’s rent and must be kept separate from the standard security deposit. You may charge monthly pet rent, but only within strict limits:Up to 1% of the first full month’s rent per dog; and No more than 1% total for all other common household pets combined. You may not charge any fee, deposit, or rent related to a service or assistance animal, which is protected under federal and local disability laws. Reasonable pet policies (e.g., number limits) are still permitted, but must not be arbitrary or overly restrictive. For leases starting on or after October 1, 2026: You may not impose restrictions or charge fees based on a pet’s breed, size, or weight. Any pet-related charges or conditions must comply strictly with the limitations described above. These rules do not apply to leases that begin before October 1, 2025, but any lease renewed or newly executed on or after October 1, 2025, will be subject to the new requirements. We recommend reviewing your current lease templates, pet addenda, and fee schedules well in advance of these dates.
May 6, 2025
Construction
How Long Is Too Long? What Statutes of Repose Mean for Your Liability Exposure
How long are you on the hook for defects in a completed construction project? It’s a question that keeps many contractors and design professionals up at night—and for good reason. No project is flawless, and the duration of responsibility for construction or design defects depends on numerous factors, including the contract language, the type of harm or injury that is the subject of concern, and statutes of repose. Typically, construction and design work are performed under written contracts. As an initial starting point, if a design or construction defect arose and was identified during the project itself, most construction contracts have specific clauses that require the claims to be noticed, raised and submitted timely, often within a short time period of days or weeks. Thus, if an issue is discovered during the project itself, the accrual date might be immediately at that time, and, under the contract, prompt notice and submission of the claim are often required. For incidents that occur after the project is completed, the written contract may contain clauses that identify the “accrual” or starting point for claims that occur or are discovered after the project is completed. For example, some versions of AIA contracts identify Substantial Completion as the date when claims “accrue,” meaning that Substantial Completion is the triggering start date for when the clock on a statute of limitations (deadlines) begins to run. B143-2004, Section 3.6.3. Thus, for latent, unknown defects in construction or design, the contract might identify a specific milestone (e.g. Substantial Completion) as the accrual date, with a deadline that runs from there. The contractual clauses identified and discussed so far typically pertain to construction or design defects that are pursued as claims between the parties on the project, who typically have a contract where the cause of action would likely be a breach of contract or perhaps negligent design/construction. Statutes of Repose and Contractual Repose Additionally, if a contract clause does not govern the issue, deadlines for claims are typically found in statutes of limitation and statutes of repose. These are state specific statutes; thus, different states will likely have different rules, deadlines and interpretations. A statute of limitations is a deadline to file claims from the date the claim accrues, typically the date of the injury. Thus, under a statute of limitations, once the injury occurs, a claimant has a specific period of time (going forward) to file the lawsuit. It is a deadline that looks forward from the date of loss. Sometimes, the statute of limitations can be extended if the defect was unknown, or if the injury did not occur until a much later date. Depending on the circumstances, the deadline might be extended further than anticipated if the loss was hidden, concealed, or the injury is delayed. On the other hand, a statute of repose is a backward-looking deadline. Instead of looking from the date of injury, it pegs a milestone date and imposes a hard cutoff looking backwards. Once the repose period expires, no legal action can be brought, regardless of when the defect was discovered or the injury occurred. Statutes of repose create a deadline with an absolute bar on claims brought outside the set time limit. Repose periods vary by jurisdiction, and construction professionals working across state lines must be aware of those differences. Some notable examples in the Mid-Atlantic include: Pennsylvania: 12 years Maryland: 10 years Virginia: 5 years District of Columbia: 10 years Delaware: 6 years Thus, for example, in Virginia, five years after the date of performance of the work, no matter what the circumstances, all claims are barred. To be clear, the statute of limitations might run sooner than five years, depending on the type of claim, but with a statute of repose, there is no availability for an extension if the defect was concealed, latent, or unknown. Thus, it acts as a final cutoff, regardless of when the injury occurred, and regardless of who the claimant is. Understanding these timelines is essential when assessing long-term liability and risk on completed projects—especially during the negotiation and drafting of contract provisions. In some cases, parties may choose to establish a contractual clause of repose that is shorter than the statutory period provided under state law. These contract clauses should be drafted carefully to define clearly: The types of claims covered (e.g., contract, tort, breach of warranty, contribution, etc.) The event that triggers the limitations period (such as substantial completion or final payment) The duration of the contractual repose period (e.g., one year or longer duration). When drafted with precision, time limitation clauses can offer powerful protection by limiting claims to a shorter period. To further reduce exposure, contractors and design professionals should take proactive measures throughout the project, such as detailed recordkeeping to establish the scope of work performed and decisions on the project, along with establishment of the actual dates of substantial and final completion. Understanding statutes of repose and contractual clauses of repose is essential to limiting long-tail liability and thus protecting your business. These strategies won’t just help you sleep better at night—they’ll significantly strengthen your position against claims that arise long after you’ve completed a project. When drafting contract clauses and implementing risk management strategies, consulting with experienced construction lawyers, accountants, and insurance experts is best.
May 6, 2025
Business
Unexpected Tax Penalties in Talent Contracts: Could Your Motion Picture, Recording, or Sports Contract be Subject to IRC Section 409A?
Could your motion picture agreement, recording agreement, or sports contract be a non-qualified deferred compensation arrangement? You may think it unlikely, but a non-qualified deferred compensation arrangement refers to any agreement under which an employee or independent contractor—i.e., a “service provider”—may receive a payment in a taxable year later than the year in which the service provider had a legal right to the payment. There are specific rules governing non-qualified deferred compensation arrangements: Code Section 409A of the Internal Revenue Code of 1986, as amended. Failure to comply with the detailed requirements of Code Section 409A can trigger the immediate taxation of deferred income and impose an additional 20% penalty tax on that income. Any contract providing for the provision of services that provides that some payments may be made after the year that the contract was entered into may be a non-qualified deferred compensation arrangement. This is because the Internal Revenue Service takes the position that a service provider first has a legal right to payment when the contract is entered into, and this applies even if the contract requires the service provider to provide services and the services have not yet been provided. Entertainment Industry Examples: How Code Section 409A May Apply Motion picture contracts frequently provide top talent with a percentage of the box office as compensation for services. In recording contracts, a new artist is generally given an advance to deliver a master recording to a record company. The record company owns the master recording, but the agreement provides the artist receives a “royalty” equal to a certain percentage of sales that will be offset against the advance that the artist received. Since the artist does not have a property right in the master recording, the “royalties” are compensation and will be subject to Code Section 409A, unless an exception applies. Sports contracts often provide for deferred compensation in a colloquial sense. Since the payment to be received by the athlete is not a payment under a qualified retirement plan governed by ERISA, the deferred compensation will be subject to Code Section 409A unless an exception applies. One exception to Code Section 409A is the short-term deferral exception. A payment qualifies as a short-term deferral if the payment must be made by March 15 (for a calendar year service recipient) of the year following the year in which the payment becomes vested or is no longer “subject to a substantial risk of forfeiture.” In this case, this is a short-term deferral and Code Section 409A does not apply. Permissible Payment Events Under Code Section 409A If a payment constitutes non-qualified deferred compensation, then there are only certain events on which the payment can be made: An objectively determinable time or schedule set forth in the agreement (e.g., on January 1 of a certain year or the athlete’s 50th birthday) Death or disability Separation from service (with a very specific definition) Change of control (also a very special definition) Unforeseen emergency Once the payment terms are set forth in an agreement, the terms cannot change, except in very limited circumstances. The payment can never be accelerated by more than 30 days, and there are very strict rules regarding further deferral of the payment. One of those rules is that if a payment is deferred, it must be deferred by more than 5 years from the original payment date. Consequences of Violating Section 409A If Code Section 409A applies and is violated, the penalties are generally imposed on the service provider. These penalties include acceleration of recognition of income for all payments to be made under the agreement in the year in which the violation occurs. Additionally, the service provider is required to pay a 20% penalty tax, as well as ordinary income tax on these accelerated payments. Code Section 409A is complex and often overlooked in entertainment and sports agreements. But if your contract includes future payments tied to services performed now, it is worth asking whether these rules apply. Careful planning can help avoid unexpected taxes and penalties.
May 5, 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
Mergers and Acquisitions
Younger Generations Looking to Sell: What Millennial and Gen X Business Owners Need to Know
I recently wrote about the “Gray Tsunami” and the mass numbers of Baby Boomers that will be retiring over the next few years. For Boomers, there are specific considerations that must be addressed if sale is their exit option. Similarly, there are age-oriented issues facing younger generations looking to sell their businesses. There are approximately 138 million Americans across the Millennial and Gen X generations as of the latest data. Millennials, born between 1981 and 1996, make up about 72.7 million Americans, and Gen X, born between 1965 and 1980, is not far behind at about 65.35 million. Data also shows that Millennials own 13% of small businesses, with Gen X owning 47%. As such, these two massive generations combined account for the majority of small business owners in the US. When looking at a transition at a much younger age, there are different issues to consider as opposed to those who sell later in life. Timing and Valuation A business owned by someone in their 30’s, 40’s, or 50’s will typically have a shorter life span than one owned by a Boomer. This means there might not be decades of financial performance to demonstrate stability to a buyer, and the business could be at a stage of high growth potential, but not maturity. While this is not always the case, buyers tend to prefer a strong history of stable cash flow and profitability. This is why timing is a critical factor. Younger generations should strategically plan their exit so that the timing works in their favor to maximize their valuation. Shifting market conditions and economic trends can impact valuations as well, so it is important to consider a variety of factors when determining the right timing that results in the greatest valuation. The retiring Boomer generation is also a major consideration in terms of timing. If a flood of Boomers are looking for buyers simultaneously, younger generations might look to delay their sales to reduce the competition for buyers. Conversely, this also presents a significant and unique opportunity to younger generations looking to buy. Planning for the Future Individuals in the Millennial or Gen X generations will likely have a great deal of life in front of them, so planning for the future is essential if they are going to sell their business. Consider the short and long-term goals of the sale. Do you want to be acquired to start a new business? Is your goal to retire early? Are you looking at other employment opportunities? Do you want to only sell a portion of the business to a strategic partner such as a PE firm, as opposed to a full exit? These are all important points to consider as they will help you to determine what kind of valuation will be required to meet your specific needs and how you need to structure the sale. These are different for everyone based on life goals, thus, looking at your future and what you need to make it happen is key. It is also important to work closely with your legal advisor to ensure the transaction is structured in a way to allow for the necessary financial and legal protections Selling to Start Again If your goal is to sell the company and start a new venture, then there are some very specific points that will need to be negotiated with the seller. For example, what kind of agreements does the buyer require? A non-compete agreement could prevent you from starting a similar business within a specific region or time frame, and a non-solicitation clause could restrict the hiring of former employees or soliciting clients. These are points that need to be front of mind if you are considering starting a similar business down the road, as they could seriously impact its success. Company Culture vs. Financial Gain Younger generations also tend to place a greater sense of value on company culture, employee retention, and customer loyalty. So, finding the buyer that will carry on the established company values and culture can play a larger role. Younger sellers must work to find the balance between carrying on the long-term vision for the company and maximizing the financial return from the sale. Selling your business at any age requires careful planning and preparation. But when selling earlier in life, there are complexities that exist due to the longer road that lies ahead. Having a clear long-term vision and understanding how the acquisition fits into your plan will help you to maximize the benefits and carry out your goals.
May 2, 2025
Bankruptcy
Director & Officer Duties: What Every Leader Should Know
Earlier this year, the FDIC, acting as receiver for Silicon Valley Bank (“SVB”), filed a breach of fiduciary duty lawsuit against six officers and eleven directors of the bank. The FDIC alleged that these individuals ignored internal risk warnings, prudent banking standards, and SVB’s own risk management policies in pursuit of short-term profits and a boost to the stock price of SVB Financial Group (SVBFG). According to the complaint, SVB’s downfall stemmed from critical errors, including an overreliance on long-term, unhedged, interest-rate-sensitive securities. This exposed the bank to significant risk amid a rising interest rate environment. Compounding the issue, executives allegedly manipulated internal risk models to conceal problems rather than address them. Between 2021 and mid-2022, SVB removed key interest rate hedges in an effort to inflate short-term earnings and SVBFG’s stock price, increasing its exposure to rate volatility. In late 2022, despite signs of financial distress, SVB paid a $294 million dividend to its parent company, further depleting its capital reserves. This filing serves as a timely reminder of the critical responsibilities that directors and officers (D&Os) hold—especially during periods of financial instability. The current environment of uncertainty, market volatility, and fear of recession heightens the risk of bankruptcies and the accompanying scrutiny of the actions of officers and directors. What should directors and officers consider when a company transitions from solvency to insolvency? D&O Duties Two fundamental fiduciary duties exist under Delaware law1: the duty of care and the duty of loyalty. Fulfilling the Duty of Care To satisfy the duty of care, directors and officers must make decisions based on a reasonably informed process. This means they must actively gather and consider all material information relevant to a decision. The standard for breaching this duty is gross negligence. Delaware law—specifically §102(b)(7) of the Delaware General Corporation Law—permits corporations to include charter provisions that exculpate directors from monetary liability for breaches of the duty of care. While this makes awarding money damages rare, breaches may still give rise to equitable remedies or support claims for aiding and abetting. Fulfilling the Duty of Loyalty The duty of loyalty requires directors and officers to act in good faith and in the best interest of the company, not in pursuit of personal benefit. This duty focuses on avoiding conflicts of interest. To fulfill the duty of loyalty, directors and officers must be disinterested, meaning having no personal financial stake in the matter, and independent, or in other words not being under the control or influence of someone with a personal financial interest. Who Are the Duties Owed To? Directors and officers must remember that fiduciary duties are owed to the corporation itself, with the goal of maximizing the value of the enterprise. When the company is solvent, fiduciary duties are effectively owed to shareholders, as they are the residual beneficiaries of the corporation’s success. Ordinarily, the board of directors owes fiduciary duties to both preferred and common stockholders. However, in the event of a conflict between their interests, the board is obligated to prioritize the interests of common stockholders over those of preferred stockholders When the company becomes insolvent, the focus shifts. Insolvency gives creditors standing to bring derivative claims for breaches of fiduciary duties since the value of the enterprise is now effectively for their benefit. A corporation is considered insolvent under two main tests: 1) balance sheet test – when liabilities exceed the fair market value of assets; and 2) cash flow test – when the corporation is unable to pay its debts as they come due. This evolving fiduciary landscape underscores the importance of responsible governance, especially when a company is under financial stress. Directors and officers must remain vigilant, informed, and unbiased to fulfill their legal and ethical obligations—and avoid the kind of fallout we saw with SVB. T A couple of other examples of director and officers’ actions that led to successful breach of fiduciary duty claims come from the case of TransCare Corporation and AMC. TransCare – Insider Transaction In TransCare, a Chapter 7 trustee brought claims against the sole director of TransCare. TransCare Corporation was a Delaware corporation headquartered in Brooklyn, New York. TransCare Corporation, by and through its subsidiaries, provided ambulance services to hospitals and municipalities for emergency and non-emergency patients and paratransit services to the New York Metropolitan Transit Authority (“MTA”) for individuals with disabilities. At all relevant times, Lynn Tilton served as the sole director of TransCare. The officers of TransCare did not have the authority to (a) approve an annual operating plan budget or any interim operating plan or budget; (b) negotiate the sale or disposition of any assets; (c) recapitalize or make other changes in the capital structure; (d) disclose any financial information to any third party; (e) enter into any contract or license agreement not contemplated by the approved Annual Plan (of which there was none); (f) enter into any financing or loan agreement; (g) dispose of any unusable asset or write off any receivable, or make a charitable contribution; (h) change auditors; (i) engage legal counsel; (j) settle or compromise any claim; (k) engage any consultant; or (l) conduct any reduction in force. Accordingly, Tilton made all decisions for TransCare and managed TransCare through her employees at related entities. TransCare encountered financial difficulties and Tilton decided to split it into OldCo and NewCo. First, OldCo would be wound down in one of two ways: (i) outside of bankruptcy over ninety days followed by Chapter 7 or (ii) through a Chapter 11. Second, Patriarch Partners Agency Services, LLC, an entity indirectly owned and controlled by Tilton and acting as an administrative agent for a term loan extended to TransCare, would foreclose on collateral and sell it to NewCo which would continue to operate as a going concern. The foreclosure and sale to NewCo became the problem. Lynn Tilton’s fundamental error was turning what should have been an arm’s-length sale into a one-sided, self-dealing foreclosure and sale to herself without any of the procedural safeguards that Delaware law requires for “entire fairness.” In particular, she: Controlled every step of the deal — conceived, negotiated, approved, and executed the strict foreclosure and subsequent sale through her own affiliates, with no independent board or special committee involvement. Fixed the price unilaterally — she set the $10 million “foreclosure credit” herself (and even miscalculated it, including receivables she never bought), rather than having a neutral advisor or market process test the value. Failed to explore alternatives — she never retained a financial advisor to solicit third-party offers, didn’t consider a Section 363 sale in bankruptcy, didn’t seek debtor-in-possession financing or reach out to known interested buyers, and simply decided that only she would lend to or buy the assets. By standing on both sides of the transaction and excluding any bargaining, oversight, or competitive bidding, she tainted both the process (“fair dealing”) and the price (“fair price”), breaching her fiduciary duties of loyalty and good faith. AMC – Interfering with Shareholder Vote In the case of AMC, its board was accused of using its power to issue new securities and structuring those securities’ voting rights to sideline ordinary shareholders, force through dilutive capital aising proposals, and secure a management-friendly outcome—even when the bona fide majority of investors opposed it. AMC’s board ran afoul of basic shareholder‐protection principles in several i ways. Despite retail investors rejecting two proposals (in Jan. and June 2021) to increase the number of authorized common shares, the board kept coming back, effectively trying to dilute holders who’d already rejected the proposal.” In July 2022, instead of going back to common holders, the board created a new class of units (APEs) that enjoyed special voting rules—unvoted APEs would be “tacked on” proportionally to the votes cast, magnifying the weight of any single APE vote. This design guaranteed that APE holders could override the common stockholders en masse, even if most common shares sat out the vote. After the unsuccessful public sale of APEs , AMC quietly sold $75 million worth of them to Antara Capital and swapped additional units for debt relief—on the explicit condition that Antara vote them in lockstep with management’s agenda. Leveraging those “committed” votes, the board pushed through both (a) an increase in authorized common shares (to enable APE conversion) and (b) a 1-for-10 reverse split—despite a clear lack of support (or even participation) from the ordinary shareholders. Because most common holders either voted “no” or didn’t vote, the Antara backed APE votes tipped the scales. The plain effect was to disenfranchise the broad base of retail investors—many of whom had amassed shares precisely to have a voice in corporate governance. By structuring the APE vote the way they did, the board effectively “hijacked” the voting process, turning what should have been a straightforward shareholder decision into an engineered outcome. Retail investors brought lawsuits alleging that the board had breached its duty of loyalty (by putting its own fundraising goals ahead of shareholders’ interests) and duty of care (by adopting convoluted voting schemes without proper disclosure or shareholder debate). The court’s preliminary block on converting APEs into common shares underscores that the directors have to exercise extreme caution when they use corporate power to intrude on shareholder rights. Key Takeaways for Leadership Stay Informed: Implement robust risk monitoring and reporting systems. Act Swiftly: Confront bad news Guard Capital: Resist dividend payments or share buybacks when liquidity or solvency is in question. Document Decisions: Keep minutes and expert analyses to demonstrate an informed process. Prevent Conflicts: Establish clear recusal policies and independence protocols. By anchoring decision making in these fiduciary principles—especially during times of financial stress—directors and officers can both protect the enterprise and shield themselves from liability. On March 25, 2025, Delaware adopted amendments to Section 144 of the DGCL that became effective immediately and among other things, establish statutory safe harbors in defense of breach of fiduciary duty actions related to controlling stockholder transactions and interested director and officer transactions.
April 30, 2025
Labor and Employment
Under-Performing Pregnant or Disabled Employees: Balancing Performance Management with the ADA, FMLA, and Pregnant Workers Fairness Act
Performance conversations can quickly become legal minefields when an employee is pregnant, has a disability, or has requested protected leave. Too often, well-meaning employers delay intervention, mishandle documentation, or apply policies inconsistently, opening the door to claims under laws like the Americans with Disabilities Act (ADA), the Pregnant Workers Fairness Act (PWFA), and the Family and Medical Leave Act (FMLA). Employers navigating sensitive performance management matters should understand the laws at play and focus on the fundamentals: document thoroughly, communicate clearly, and take decisive action. Know the Landscape: ADA, PWFA, and FMLA in the Performance Context Americans with Disabilities Act (ADA) The ADA prohibits discrimination against qualified individuals with disabilities. It requires employers to provide reasonable accommodations that enable those individuals to perform the essential functions of their jobs—unless doing so would cause an undue hardship. Importantly, employees with disabilities must still meet legitimate performance and conduct standards. But before disciplining or terminating such an employee, an employer must consider whether: The performance issue is related to the disability. A reasonable accommodation could help the employee meet expectations. The employee was given a meaningful opportunity to improve. Pregnant Workers Fairness Act (PWFA) Effective June 27, 2023, the PWFA expands protections for pregnant workers by requiring employers to offer reasonable accommodations for known limitations related to pregnancy, childbirth, or related medical conditions—similar to the ADA framework. Key differences between the PWFA and ADA include: The PWFA applies even to temporary or moderate limitations (e.g., lifting restrictions, more frequent breaks, and part-time schedules). Employers cannot require a pregnant employee to take leave if another accommodation is available. The statute prohibits retaliation for requesting or using a pregnancy-related accommodation. Performance issues that arise in the context of pregnancy or a related condition should be handled carefully—especially if the employee has requested (or is entitled to) accommodation under the PWFA. Family and Medical Leave Act (FMLA) The FMLA entitles eligible employees to up to 12 weeks of unpaid, job-protected leave for serious health conditions (including pregnancy), family caregiving, and bonding with a new child. Employers must tread carefully if an employee is underperforming while on FMLA leave or shortly after returning. Disciplining or terminating an employee for conduct related to a protected leave period can easily be construed as interference or retaliation—even if the employer’s intent was neutral. Common Pitfalls When Performance and Protected Status Intersect Ignoring the Role of Accommodation Employers must explore accommodations under both the ADA and PWFA before taking adverse action. If an employee’s performance is suffering due to a medical condition or pregnancy-related limitation, your first step is not discipline—it’s engagement. Legal obligation: Initiate the interactive process to determine if a reasonable accommodation would enable the employee to meet expectations. Failing to engage in this process is a leading cause of liability under both laws. Accommodations may include modified duties, schedule changes, ergonomic supports, remote work or temporary reassignment. Inconsistent Application of Performance Standards If an employer holds a pregnant or disabled employee to a higher (or lower) standard than others, the result is rarely good. Legal risk: Disparate treatment claims under Title VII, the ADA, the PWFA, or state human rights laws. Ensure your expectations, metrics, and disciplinary procedures are applied consistently—particularly regarding attendance, deadlines, and work quality. Poor or Biased Documentation Vague or emotionally charged performance documentation (“She’s not committed anymore since becoming pregnant”) is both unhelpful and legally risky. Best practice: Stick to objective, quantifiable facts. Instead of “seems distracted,” document details, like: “missed three deadlines in March; quality of reports has declined, with five factual errors noted.” Good documentation provides a legitimate, non-discriminatory basis for action—and will support your decision if it’s challenged later. Disciplining During or After FMLA Leave Without a Clear Basis Courts closely scrutinize adverse actions taken during or shortly after FMLA leave. Even if you have valid concerns, timing matters. Tip: If an employee’s performance issues predate the leave, ensure you have clear records to show that the concerns existed—and were addressed—before the leave began. Avoid the appearance of retaliation by proceeding only when the documentation supports your decision. Practical Steps for Employers: How to Manage Performance Issues Lawfully and Effectively Train Managers to Spot Accommodation Triggers. Supervisors should loop in HR or legal before acting whenever an employee references a medical condition, pregnancy limitation, or medical leave. Engage Early and Document Diligently. Don’t delay performance conversations out of fear—address issues early, but do so thoughtfully. Document any meetings, expectations, improvement plans, and accommodations discussed or offered. Apply Policies Uniformly. Consistency is key, whether it’s an attendance policy, quality standard or progressive discipline process. Explore Accommodations Before Discipline. Particularly where medical or pregnancy-related limitations are at play, you must first assess whether the employee can meet expectations with reasonable support. Avoid “Gotcha” Terminations. Avoid abrupt disciplinary action if performance concerns haven’t been clearly documented and communicated. Courts frown on surprise terminations, especially after protected leave or accommodation requests. Consult Counsel Before Termination. Before terminating a pregnant or disabled employee—or one who recently returned from leave—have a legal review of the facts, documentation, and process. A brief consultation can prevent months of costly litigation. Pregnancy and disability do not shield employees from accountability, but they do change how employers must approach performance management. With the passage of the Pregnant Workers Fairness Act and the continued complexity of ADA and FMLA compliance, employers must proceed with care, compassion, and a clear understanding of their legal duties. Performance issues don’t go away on their own, but mishandling them can create far bigger problems. The key is to act early, engage meaningfully, and document everything.
April 30, 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
Immigration Law
Heightened Scrutiny at U.S. Borders: What Travelers Need to Know
There has been a significant increase in media coverage of travelers subjected to increased scrutiny at ports of entry to the United States. In some cases, individuals have been refused entry and detained until sent back home. Furthermore, U.S. Customs and Border Protection have increased their searches of travelers’ electronic devices upon entry to the United States. Is it considered safe for nonimmigrants and legal permanent residents to travel? Increased scrutiny at ports of entry We are now seeing the impact of the implementation of President Trump’s Executive Action: “Protecting the United States from Foreign Terrorists and other National Security and Public Safety Threats”1. There have been media reports of individuals from NATO Allied countries being detained at border crossings and, in some cases, subjected to expedited removal. Aside from the news, we have seen advanced vetting and security screenings reported at the US border. This vetting has included legal permanent residents and non-immigrants. This vetting is likely to continue and may be introduced at U.S. Consulates in the coming months and in the processing of matters with the U.S. Citizenship and Immigration Service. Is it safe to travel on my green card? Legal permanent residents (LPRs) are provided significant protections and rights similar to those of United States citizens regarding international travel. In the last few months, we have seen an increased scrutiny of LPR travel. Certain fact patterns have come to light, including increased interviews of LPRs with active (even if minor) criminal matters or a history of certain immigration violations. In addition, LPRs who spend significant time outside of the United States and who, in previous years, would be let back without issue if they visited every six months are now subject to harsher scrutiny of their ties to the country. Finally, LPRs from countries floated as soon to be subjected to a travel ban have also faced issues coming into the United States. (See Draft List for New Travel Ban Proposes Trump Target 43 Countries - The New York Times.) In light of the above – is it safe to travel on my green card? The answer is generally yes; however, if you fit into one of the above situations we advise consulting with an immigration attorney immediately. Furthermore, your status may be at risk if you have been outside the United States for longer than six months or even a whole year. Lastly, legal permanent residence may only be taken by a legal process initiated in the immigration court system. Travelers should be exceptionally wary of signing any document that purports to surrender their legal permanent residence at a port of entry. Is it safe to travel on my nonimmigrant visa? Non-immigrant visa holders report increased vetting at ports of entry, and US Customs and Border Protection agents possess the power to deny entry to visa holders. Most nonimmigrant travelers should be prepared for additional questions regarding their status and should carry evidence regarding their status. This could include USCIS petition approval notices, evidence of continued employment, and itineraries for travel. Employment-based non-immigrants should inform their HR of international travel if specific immigration advice is needed. We advise all nonimmigrants who are not confident regarding travel to consult an immigration attorney for guidance. Certain nonimmigrants should be especially vigilant now; this includes J1 and F1 scholars and students. Both visa holders should consult with their school Designated School Official (DSO) regarding their ability to travel and travel with up-to-date evidence regarding their status. Student and Exchange Visitor Information System (SEVIS) termination of student status with little to no warning or evidence has been reported, and affected students should contact their DSO and an immigration attorney immediately. Electronic device searches – what you need to know The United States Customs and Border Protection (CBP) has significant powers of search and seizure at ports of entry to the United States. These powers are part of the “border exemption” to the Constitution's Fourth Amendment and have been upheld by the Supreme Court. (See United States v. Ramsey, 431 U.S. 606 (1977)). This power can be used regardless of the nationality of the traveler. Further, this search power has been used by CBP to search the electronic devices of travelers, which can include their social media. Travelers are advised to be exceedingly careful regarding social media usage and content on their mobile devices. By way of example of this vetting, current administration priorities include extreme vetting of individuals supporting designated terrorist organizations, which includes Hamas and the conflict in Palestine. The only exception to this search power that the courts have upheld is attorney-client privilege. Be calm, be courteous, be contrite The process of additional scrutiny at border crossings can be intimidating and stressful. It is important to remain calm during the process. Traveling with evidence of your status and activities in the United States is a good idea to support your statements to upon entry.
April 25, 2025
Business
How Buy-Sell Agreements Can Help Prevent a Messy Business Divorce
Just like any kind of relationship, not all business partnerships are built to stand the test of time. They can sour just as easily as a romantic partnership or friendship as vision and long-term goals diverge, financial stress comes into play, or personal issues enter the business relationship. When these kinds of factors arise, it can often result in a “business divorce.” A business divorce has the potential to be just as messy, emotionally charged, and costly as a marital divorce, particularly when there is no established plan in place to outline how the two parties will separate. This is why buy-sell agreements can be critical, helping to ensure a smooth and fair process in the case of a business divorce. It is always best to agree on buyout terms in advance while everyone is getting along and not leave it to the expense and risk of legal proceedings before an arbitrator or judge who does not understand your business. What is a Business Divorce? A business divorce occurs when two or more parties decide to end a business partnership, and it is estimated that anywhere from 50-70% of business partnerships will fail. There can be numerous contributing factors that lead to the dissolution of the partnership. As stated earlier, there are typically differing visions for the company’s future, the strategies used to achieve long-term goals, financial disagreements, or even personal issues that begin to impact the partnership. However, there can also be actions taken by a partner that reflect negatively on the company or even an illness or death that would require the partnership to dissolve. No matter the root cause of the divorce, there are several avenues that can be taken when the partners make the decision to split. This could be one partner buying out the other, fully dissolving the business, or some kind of restructuring that occurs. It is at this stage of deciding which path to take where emotions can start to come into play, and lawsuits and other disputes can arise if there is not an agreed-upon method to end the partnership. This is where buy-sell agreements can be a game changer. Why Buy-Sell Agreements are Critical Think of a buy-sell agreement as a prenuptial agreement for business owners. When a married couple has a prenup in place, it provides a roadmap for how to divide the assets if they divorce. Buy-sell agreements provide the same kind of roadmap for a partnership, outlining a course of action should one partner want or need to leave. As with a prenup, these are typically negotiated when the partnership is established; however, it is never too late to negotiate this in a partnership if one does not already exist. These agreements allow for a smoother process and minimize conflict, as they provide an established business valuation methodology as well as liquidity and exit plans, including the terms of the payout to the departing partner, which could be over several years so as not to impair the business cash flow. They can also prevent a spouse or heirs from attempting to assume a partnership role in the case of a partner’s death or disabling illness, and they can help stabilize the business during what can be a chaotic time. When considering structures for a buy-sell agreement, there are several options. These can include one or more owners buying out a departing owner’s stake, the actual business buying the departing partner’s stake, or some of combination of the two. In the case of death, the buy-sell can provide for the purchase of life insurance on the deceased partner. The structure of a buy-sell agreement is specific to the individual business and partnership and must be agreed upon by all parties involved. At the end of the day, a buy-sell agreement can save a great deal of heartache and expense if you find yourself in the middle of a business divorce. A little bit of additional planning on the front end could be the key to an amicable split that allows for the continuity of the business and avoids a legal mess.
April 18, 2025
Family Law
Navigating the Unique Challenges of LGBTQ Divorces in a Changing Legal Landscape
The legalization of same-sex marriage in the United States in 2015 with the landmark Obergefell v. Hodges decision marked a monumental step toward equality. However, the journey does not end with marriage; LGBTQ couples face unique challenges when it comes to divorce. While the process may seem similar to that of heterosexual couples on the surface, the reality reveals nuanced differences rooted in evolving laws, social norms, and disparities in legal protections. Understanding these distinctions is crucial for navigating the complexities of LGBTQ divorces and protecting one’s rights in a constantly shifting legal world. Key Differences Between LGBTQ and Heterosexual Divorces Legal Recognition and the Length of Marriage: Problem For many LGBTQ couples, legal recognition of their relationships began far later than their commitment to one another. States only began recognizing same-sex marriages at different times, leaving couples who were together for decades without a legal timeline for their unions. When it comes to divorce, courts often calculate marital property division, spousal support, and other factors based on the duration of the legally recognized marriage, not the entirety of the relationship. This discrepancy can lead to inequitable outcomes. For example, an LGBTQ couple that was together for 20 years but legally married for only five years may see their financial obligations and property rights evaluated based on the shorter timeline. Custody and Parental Rights Child custody is one of the most contentious areas in divorce, and LGBTQ couples face unique hurdles. Many LGBTQ families rely on alternative reproductive methods, including Artificial Reproductive Technology (ART), surrogacy, adoption, or donor insemination. If only one partner is the biological or legal parent, the non-biological parent’s parental rights may not be automatically recognized, even if they were actively involved in raising the child. This can lead to complex custody battles where courts may prioritize biological connections over emotional bonds. Discrimination in Court While legal protections for LGBTQ individuals have improved, implicit biases still exist within the court system. Some LGBTQ individuals may encounter judges or attorneys who lack experience with or understanding of same-sex family dynamics. This can result in decisions that do not fully account for the nuances of LGBTQ divorces. Division of Assets and Property In LGBTQ divorces, asset division may be complicated by how property and financial arrangements were managed before same-sex marriage became legal. Property acquired before legal recognition of the relationship may be deemed separate property rather than marital property, creating challenges when dividing assets equitably. How to Protect Yourself in an LGBTQ Divorce Preparing and understanding your rights are essential to safeguarding your interests in this evolving legal world. Here are key steps LGBTQ individuals can take to protect themselves: Legal Protections Before Marriage For those entering a marriage, creating a prenuptial agreement is one of the most effective ways to protect assets and clarify financial arrangements. A prenuptial agreement can specify how property will be divided and how spousal support will be managed in the event of a divorce. For those already married, a postnuptial agreement can serve a similar purpose. Address Parental Rights Proactively LGBTQ couples with children should ensure both parents’ legal rights are established, even before a divorce becomes a possibility. For non-biological parents, this may involve formal adoption or obtaining a court order recognizing their parental status. By securing legal parentage, non-biological parents can strengthen their custody and visitation claims in the event of a divorce. Keep Comprehensive Records In cases where the length of the relationship predates legal marriage, maintaining records of financial contributions, shared property and joint decision-making can be invaluable. These records can help demonstrate the extent of the partnership and support equitable asset division during a divorce. Consult an Experienced LGBTQ Divorce Attorney Given the unique legal and social dynamics of LGBTQ divorces, working with an attorney who has specific experience in LGBTQ family law is crucial. Such attorneys understand the complexities of same-sex relationships and can advocate effectively for your rights. Stay Informed About Changing Laws The legal landscape for LGBTQ individuals continues to evolve. Court rulings, legislation, and shifting political climates can impact rights related to marriage, divorce, custody, and more. Staying informed about changes in the law can help you anticipate challenges and adjust your approach as needed. The Ever-Changing Legal Landscape for LGBTQ Divorces While the right to marry was a monumental victory, LGBTQ couples still face challenges that heterosexual couples typically do not. For example, the potential for the Supreme Court to revisit Obergefell v. Hodges or other related rulings creates uncertainty about the durability of marriage rights. Additionally, state laws governing issues such as parental rights, property division, and spousal support vary widely, leading to disparities in how LGBTQ divorces are handled across the country. Recent challenges to protections for LGBTQ individuals, including attempts to narrow the interpretation of anti-discrimination laws and redefine parental rights, underscore the need for vigilance. Advocating for continued progress and awareness ensures equality in the family law system. Conclusion LGBTQ divorces, while sharing similarities with heterosexual divorces, present unique challenges rooted in legal history and societal biases. By understanding these differences and taking proactive steps to protect their rights, LGBTQ individuals can navigate the complexities of divorce with confidence. In an ever-changing legal world, preparation, advocacy, and informed decision-making are the keys to achieving equitable outcomes and safeguarding hard-won rights.
April 17, 2025
Mergers and Acquisitions
Every M&A Transaction Is a “Big Deal”
M&A over the last number of years has been “hot.” Despite slower-than-expected first quarter, we are anticipating another strong year for sell-side M&A. With stories of success, however, certain assumptions tend to follow. Business owners looking to buy or sell sometimes mistakenly believe Offit Kurman is too busy or expensive for their needs. A common objection typically sounds like: “My deal is probably too small for you.” I’ve been hearing from sellers with businesses worth $5 million or less lately. In any other context, it would be a bizarre thing to say. One million dollars is not “small.” For most of us, a check of that size would be a life-changing amount of money. However, the marketplace has a way of skewing perceptions. M&A advisors and investment bankers typically chase transactions in the eight and nine-figure range, and many refuse to go after anything worth less than $10 million. The same holds true for many law firms. As a result, owners of closely held businesses become jaded and self-select out of the market. Other business owners, meanwhile, believe the opposite: that our firm is exclusively focused on small or mid-market transactions, and we do not have the capability to handle large, multimillion-dollar deals. As someone who has seen hundreds of transactions through to completion, I can provide some perspective: every M&A transaction is a big deal. Especially if you’re a seller, we’re talking about what may be the single largest transaction in your lifetime. Moreover, at Offit Kurman, we are enterprise value agnostic. That means we are happy to provide representation and guidance to any business owner regardless of the potential size of a transaction. Here are a few more reasons why deal size should not limit your ability to work with a qualified M&A attorney: The size of the deal has no bearing on your legal fees. At Offit Kurman, we do deals at $1 million, $10 million, $100 million, and above (and below) because the purchase price has no financial impact on our billing structure. Our job is to zealously represent and protect every client. In contrast to investment bankers, who usually get paid a percentage of the deal, our attorneys bill at an hourly rate. That means time — not size — is what counts. Factors such as the condition of your business and the complexity of the deal determine how much work your attorneys must do. M&A demand is market-driven. Buyers and sellers control the M&A market. You could have a massive, multinational business — with advisors lining up to help you sell it — but if there’s no demand for the company, there’s no deal. Similarly, a small, well-positioned firm could be a hot commodity in its niche. A five-person government security contractor, for instance, might be able to leverage its relationships and intellectual property to create competition among multiple potential buyers. You don’t need to pay big money for expertise. Be wary of working with advisors who only take on enterprise M&A — there’s a good chance they’re overcharging and under-experienced. At Offit Kurman, we have successfully negotiated complex deals of various sizes, industries, and geographies. We bring this experience to every client matter. We can scale our representation to the size and character of the business, as well as the personality of the owner, at a price point and workflow that meets the client’s needs. Ultimately, M&A transaction size is relative to one’s frame of mind. As a seller, you may not be able to quickly change the value of your business, but you can control the value of the experience in shaping your future. Instead of worrying about how your purchase price compares to another business, focus on your own goals. Retiring wealthy? Now that’s a big deal.
April 17, 2025
Estates and Trusts
Estate Planning: Peace of Mind for Uncertain Times
In the late 19th century, death was almost fashionable. Funerals were well attended and even rivaled weddings in their splendor and expense. Department stores offered an array of luxury clothing for grieving mothers and widows. Black fabrics were reserved for those in deep mourning. Then shades of gray and mauve were mixed in as one felt able to rejoin society. If death wasn’t celebrated, it was at least taken very seriously. But then, our Victorian cousins were closer to death than we are today. The average person didn’t live to see his 50th birthday, and more than three-quarters of all deaths occurred in children under the age of five. Today, people are living longer than ever, and as a consequence, death is considerably less in vogue. Improvements in medical care, diet, and occupational safety have prolonged life. Still, they have done little to combat the new threats to our existence. The terrors of shootings and random acts of violence, the perils of hurricanes and other natural disasters, and the specter of civil unrest and even all-out war are reason enough to worry about what might lie ahead. In times like these, peace of mind comes controlling the things you can and being prepared for the unexpected, which means setting aside money for an emergency, having health and life insurance, and even safeguarding against your own disability or death. This last item can be the most challenging to consider. It includes thinking about what would happen if you couldn’t manage your own finances or health care. Someone should be put in charge of these essential responsibilities under a durable power of attorney and an advance medical directive. Armed with these documents, your spouse, partner, or someone else you trust can look out for your best interests if you ever become incapacitated. Without a power of attorney, it could be necessary for a loved one to become your legal guardian through a court proceeding. Guardianships usually require letters of certification from two healthcare professionals who have examined you, as well as an attorney to represent both you and the person seeking to become your guardian. The process is expensive and time-consuming, but it can be avoided altogether with a durable power of attorney. Failing to prepare an Advance Health Care Directive can also lead to unfortunate results. Responsibility for medical decision-making would probably fall to your next of kin, regardless of who that might be. It could be a spouse, but for a single person, an estranged family member could suddenly be responsible for making life-and-death decisions on your behalf. Without an advance medical directive, it’s not uncommon for multiple people to have this authority. For example, if your next of kin were a group of siblings, they might argue among themselves as to what sort of medical care you should receive. Some could remember you as a fighter who would want to try every possible treatment before giving up, while others might feel that you should be kept comfortable and not be allowed to suffer. An even worse outcome can occur when someone fails to prepare a will. It’s tempting to think that the “right people” will inherit when someone dies without a will. However, the rules of inheritance may provide only a portion of the estate to a surviving spouse and nothing at all to an unregistered domestic partner. In these times of uncertainty, take control of the things you can. Speak with an Estates & Trusts attorney about preparing a will and other planning documents to protect yourself and the people you care about. Then, enjoy the peace of mind that comes from knowing that you are prepared for some of life’s uncertainties.
April 16, 2025
Labor and Employment
Does Your Dress Code Discriminate? What Employers Need to Know
In the ever-evolving landscape of workplace discrimination laws, savvy employers are reexamining longstanding policies—including those that may not seem controversial at first glance. One of the most commonly overlooked (yet frequently litigated) areas? The company dress code. What was once a straightforward requirement—“business casual” or “jeans on Fridays”—has become a complex legal issue, especially as courts and administrative agencies scrutinize how dress and grooming policies intersect with anti-discrimination laws. From hairstyle protections to gender identity accommodations, the modern workplace dress code carries more legal weight than many employers realize. Here’s what you need to know to ensure your company’s dress code reflects both current legal standards and best practices. The Legal Foundation: Employers May Set Reasonable Standards As a general matter, employers are permitted to impose reasonable restrictions on workplace appearance. Courts have long recognized a company’s legitimate interest in maintaining a professional image—especially for employees who interact with clients, vendors, or the public—or in enforcing safety-based attire requirements depending on the nature of the work. However, dress codes must be implemented in a way that does not discriminate directly or indirectly. Your workplace dress code should not: Impose unequal burdens on certain groups Reinforce outdated gender stereotypes Fail to provide religious or medical accommodations Be applied inconsistently or selectively Gender-Specific Policies: Proceed with Caution Historically, some courts have permitted different grooming or dress requirements for male and female employees—as long as the policy is applied evenly and doesn’t impose a greater burden on one gender. However, employers relying on these traditional standards may be exposing themselves to risk. Courts have increasingly accepted Title VII claims based on gender stereotyping, where policies require employees to present in ways that conform to traditional gender roles—for instance, requiring women to wear skirts or prohibiting men from growing long hair. These requirements can give rise to claims when they compel employees to dress in a manner inconsistent with their gender identity or personal expression. Several states and municipalities have taken a more explicit approach. In California, for example, it is unlawful to require women to wear skirts. In Washington, DC, the law prohibits discrimination based on appearance, which includes dress and grooming. Employers operating in multiple jurisdictions should review policies with a careful eye toward state and local requirements, which may be more protective than federal law. Gender Identity and Expression: Aligning with Bostock and Beyond In the wake of the U.S. Supreme Court’s 2020 decision in Bostock v. Clayton County, employers must recognize that Title VII prohibits discrimination based on gender identity and sexual orientation. As a result, enforcing gender-specific dress codes or grooming policies that conflict with an employee’s gender identity may constitute unlawful discrimination. Many jurisdictions have adopted laws that go even further, requiring employers to affirmatively allow employees to dress in accordance with their gender identity or expression. Employers should carefully assess whether their appearance standards respect these legal obligations and provide sufficient flexibility. The Rise of Hairstyle Discrimination Laws A growing number of states have passed legislation recognizing that grooming policies can serve as proxies for racial discrimination. Laws in Maryland, Virginia, California, New York, and others prohibit workplace restrictions that ban natural hairstyles or protective styles such as afros, braids, locks, and twists. These laws are often framed as extensions of race discrimination protections under Title VII. Employers should avoid policies that prohibit or limit hairstyles unless there is a demonstrable, legitimate business justification—such as a safety concern in an industrial setting—and even then, the policy must be narrowly tailored. Accommodations for Religious Beliefs and Medical Conditions Under Title VII, employers must reasonably accommodate sincerely held religious beliefs, including those that conflict with dress or grooming policies. This may include permitting head coverings, religious jewelry, or exceptions to attire norms due to modesty practices. Similarly, under the Americans with Disabilities Act, employers must accommodate qualified employees with disabilities. For instance, a blanket ban on facial hair may need to yield to an employee with a medical condition that makes shaving painful or harmful. Failure to consider these accommodations not only exposes employers to liability—it also undermines inclusivity and employee morale. Union Activity and Protected Expression Dress codes must also respect employees’ rights under the National Labor Relations Act (NLRA), which protects their ability to engage in concerted activity, including the right to wear union insignia or clothing expressing workplace concerns. A policy that broadly bans “derogatory” or “inappropriate” attire without a clear connection to legitimate business interests—like safety or security—may be deemed unlawfully overbroad by the National Labor Relations Board. Best Practices for Employers To ensure that dress codes meet legal standards and reflect modern workplace norms, employers should consider the following: Use Neutral Language: Policies should be gender-neutral, avoiding references to attire “expected” of men or women. Avoid Over-Specification: Instead of listing every acceptable or unacceptable item of clothing, opt for broader, flexible guidelines (e.g., “employees must present a clean and professional appearance appropriate to their role”). Be Consistent: Apply the policy uniformly across departments and roles, unless a legitimate business reason supports a distinction. Build in Flexibility: Include language acknowledging the need to accommodate religious practices, cultural expression, or medical conditions. Review Regularly: Revisit your dress code periodically in light of new legal developments and cultural trends. Final Thoughts While office dress codes may seem like a minor issue, they often sit at the intersection of major employment law concerns. A policy that is too rigid—or worse, discriminatory in application—can lead to reputational harm and costly litigation. The good news is that most companies can maintain professionalism without micromanaging wardrobe choices. A thoughtful, updated policy can reinforce your company’s values while keeping you compliant with the law. If you have questions about your company’s dress code or need assistance revising your policies, consult employment counsel familiar with the latest developments in federal, state, and local law. A well-drafted dress code can do more than keep the office looking sharp—it can help your company avoid some very real legal pitfalls.
April 16, 2025
Family Law
Why You Need to Update Your Estate Planning After a Divorce
Divorce is a major life change that affects far more than just your relationship status. One crucial—but often overlooked—aspect that needs immediate attention after a divorce is your estate plan. Failing to update your estate planning documents can lead to unintended consequences that may not align with your new reality or wishes. Here’s why updating your estate plan after a divorce is essential: Your Ex-Spouse May Still Be in Control Many people name their spouse as the executor of their will, trustee of a trust, or as a power of attorney for healthcare and finances. If you don’t change these designations after a divorce, your former spouse could still be legally empowered to make life-altering decisions on your behalf or manage your assets if something happens to you. What to update: Will and trust documents Powers of attorney (medical and financial) Health care directives Your Beneficiaries Might Not Reflect Your Current Intentions A divorce doesn’t automatically remove your ex-spouse as a beneficiary from all accounts and policies. Life insurance, retirement accounts (like IRAs or 401(k)s), and transfer-on-death designations often bypass your will—meaning your ex could still inherit these assets unless you update them. What to review: Life insurance policies Retirement accounts and pensions Payable-on-death or transfer-on-death accounts Investment accounts and bank accounts Guardianship of Minor Children If you have minor children, your estate plan likely includes a guardian designation. While the surviving parent (your ex) is usually the default guardian, you might want to designate a backup guardian if your ex becomes unable or unwilling to care for the children. What to consider: Updating guardian nominations in your will Including provisions for minor children in trusts Your Financial Picture Has Changed Divorce usually involves the division of assets and liabilities, which can dramatically alter your financial situation. Your estate plan should reflect your current assets, liabilities, and goals—whether that means protecting your children’s inheritance, funding a trust, or planning for long-term care. What to update: Asset and debt inventory Trust funding and asset titling New financial goals and obligations You Might Want to Name New Trusted Individuals Whether it's a sibling, adult child, new partner, or trusted friend, you’ll likely want to name new individuals to serve in key roles within your estate plan—such as executor, trustee, or power of attorney—now that your former spouse is no longer in the picture. Divorce is emotionally and logistically complex, and it’s easy to overlook your estate plan in the process. But making these updates is vital to protect your assets, your wishes, and your loved ones. Consulting with an experienced estate planning attorney can help ensure everything is properly revised and legally sound. Remember: an outdated estate plan can be just as risky as not having one at all.
April 14, 2025
Family Law
How to Divide Retirement Accounts During Divorce Amid Market Fluctuations
Dividing retirement accounts during a divorce is already complex, but the process becomes even more complicated when you factor in market volatility.. Stock market fluctuations can dramatically change the value of retirement accounts, which makes equitable distribution a moving target. Understanding the impact of these fluctuations—and planning accordingly—can help divorcing couples avoid unnecessary losses and ensure a fair outcome. Understanding the Basics: Types of Retirement Accounts Before discussing market impact, it’s important to recognize the common types of retirement accounts: Defined Contribution Plans (e.g., 401(k), 403(b), IRAs): These fluctuate based on the performance of the investments within them. Defined Benefit Plans (pensions): These are typically based on years of service and salary, with less direct impact from market swings. Roth vs. Traditional Accounts: Roth accounts are funded with after-tax dollars; traditional accounts grow tax-deferred and are taxed upon distribution. Each account type has different rules for division and tax implications, which need to be considered in light of market performance. The Challenge: Market Volatility Retirement accounts tied to stocks, mutual funds, or exchange-traded funds (ETFs) can experience wide swings in value. If assets are divided based on a snapshot in time—say, the date of separation or a particular court hearing—the actual value distributed could be significantly different by the time the account is divided. Example: If a 401(k) is worth $200,000 on the separation date but drops to $180,000 before it’s divided, the spouse receiving their share may end up with less than intended unless safeguards are in place. Options for Dividing Accounts Amid Fluctuations Use Percentage-Based Division Instead of awarding a fixed dollar amount, divide the account by a percentage. For instance, awarding one spouse 50% of a 401(k) ensures they receive half of the value at the time of division, regardless of market changes. Use Qualified Domestic Relations Orders (QDROs) Wisely For employer-sponsored plans like 401(k)s and pensions, a QDRO is necessary. This legal document outlines how the plan should be divided and allows for the transfer without taxes or penalties. The QDRO must specify division as a percentage, not a flat dollar amount, especially in volatile markets. Consider Timing Carefully If markets are highly unstable, it may be worth pausing division until some stability returns. Alternatively, couples can agree to an average value over a specific period (e.g., last 30 days) to avoid basing the division on a market peak or trough. Account for Investment Type Some investments within retirement accounts may be riskier than others. If one spouse receives mostly equities while the other gets more stable bond funds, it could create an imbalance in future value—even if the division looks fair on paper at the time. A financial advisor can help rebalance the allocations for fairness. Tax Consequences Matter Traditional accounts will be taxed upon distribution. If both spouses receive different account types (e.g., one gets Roth, the other gets Traditional), the net value could be very different. These tax effects should be a factor in negotiations. Post-Division Market Movement Once retirement assets are divided, each party is typically responsible for gains or losses moving forward. It’s essential to clarify the “cut-off” date for shared responsibility in the divorce agreement. Dividing retirement accounts in a fluctuating market is as much about strategy as it is about fairness. Consulting a divorce financial planner or an attorney with experience in high-asset divorces can help ensure the division is equitable, tax-efficient, and insulated from unnecessary market risk. In the end, clear communication, well-drafted legal documents, and smart timing can all help protect your financial future during an emotionally charged and financially complex time.
April 11, 2025
Labor and Employment
Key Trends in PAGA Arbitration Decisions: Insights for Employers and Legal Counsel
The proliferation of wage and hour litigation in California and recent significant changes to the law have created uncertainty for employers and their lawyers alike. Both recent PAGA (Private Attorneys General Act of 2004) reform legislation and critical court decisionsi have changed the landscape for employers seeking to prevent and defend these wage and hour claims. Generally speaking, PAGA allows employees who have suffered Labor Code violations (such as the failure to provide minimum wage, overtime, accurate wage statements, and proper meal and rest breaks) to sue their employers on behalf of the state for Labor Code violations—even for violations that affect other employees. In essence, the California Attorney General has deputized employees to pursue Labor Code violations on their behalf in an effort to enforce wage and hour laws. While most employers are familiar with the risk associated with wage and hour class actions, the companion PAGA claims are on the rise and being pursued by employees at a rapidly increasing rate. While recent PAGA reform law has arguably helped to limit aspects of the law, including requiring employees to suffer violations and have standing to do so, before bringing lawsuits, reducing certain repetitive damages, and allowing for the potential early cure or resolution of claims in some instances, ultimately the reforms have not slowed the momentum of these lawsuits against employers. More precisely, the reform has provided additional tools and defenses to employers to address the lawsuits. With this in mind, it becomes even more apparent that the goal of every employer should be to take steps to prevent or minimize the chances of large representative wage and hour lawsuits against their business. The drafting and implementing arbitration clauses and class action/PAGA waivers can accomplish this. Many employers seek to use arbitration agreements to keep these kinds of claims out of court. However, recent legal decisions threaten to make it much more difficult to use these measures to avoid legal claims unless the agreements are carefully drafted. More recently, California courts have been active in issuing decisions that clarify the effectiveness of arbitration provisions in subsequent lawsuits to force employees into less dangerous and less expensive individual arbitrations versus full-blown representative actions. Three very recent decisions issued in 2025 from California’s Second District Court of Appeal underscore the importance of well-crafted arbitration and class action and PAGA waivers.ii Key Legal Decisions Shaping Arbitration Agreements Ballesteros v. FormFactor, Inciii In a clear example of courts nitpicking imprecise arbitration clause language to allow employee representative claims to proceed to court, the Court of Appeal in Ballesteros interpreted the employer arbitration agreement, to exclude all PAGA claims from the scope of the arbitration agreement. The court based its decision on some imprecisely drafted language in an arbitration clause that failed to accurately list PAGA claims as claims pursued on behalf of the state of California. As a result, rather than the arbitration agreement being interpreted to send claims to arbitration, the Court found that the arbitration agreement specifically allowed representative PAGA claims to be pursued in court.iv The Court determined that the arbitration agreement excluded from arbitration PAGA “representative actions” without distinguishing between claims brought on an individual or nonindividual basis. This decision is instructive because the Court chose a very favorable interpretation of the arbitration clause for the employee and went to great lengths to justify its position. The decision serves as a warning that arbitration clauses must be regularly updated to avoid these types of consequences. Cusimano v. Brilliant Earth, LLCv In the Cusimano decision, the Court of Appeal ruled that the entire arbitration agreement was unenforceable because the agreement to arbitrate contained an unenforceable waiver of nonindividual PAGA claims. Initially, the Court concluded that the arbitration agreement was flawed because it improperly barred employees from bringing representative actions against their employers. The Court found that the arbitration agreement contained a nonseverability clause that tied the validity of the agreement as a whole to the validity of the defective waiver of nonindividual PAGA claims and found the full agreement to be invalid, directing the entire matter for resolution in court.vi Much of the Court’s decision was premised on the flawed and unenforceable draft language in the employer documents. The Court was even more assertive in Cusimano in declaring that imprecise drafting and defects will result in employers being forced to litigate class action and PAGA claims in court. Cusimano reinforces the trend of courts strictly scrutinizing employer-drafted arbitration clauses, allowing costly representative litigation to proceed for employees against their employers. Arzate v. ACE American Insurance Companyvii In Arzate, a costly appeal was won, at least in part due to effective (while imperfect) drafting of their arbitration language. The Court of Appeal’s analysis in Arzate centered on the interpretation of arbitration agreements and which party was required to initiate arbitration. The arbitration language at issue required that any party who sought to initiate arbitration must do so within thirty days. The Court determined that the only party who would seek to initiate a claim would be a party seeking relief or, in other words, an employee. As a result, the Court of Appeal found that the employer was not required to initiate arbitration and, as a result, did not breach the arbitration agreements or waive its right to arbitrate. Tellingly, the Court made clear that while the employer “arguably could have used different language in the arbitration rules and procedures to underscore this point, [] the document appear[ed] to be written with a minimal amount of legalese for the benefit of employees without legal training. Read in the context of the entire agreement, the colloquial language shows that the plaintiffs were the party that “want[ed] ... [a]rbitration,” and that they were required to file a demand to initiate the process given their agreement that they would “submit” their employment-related claims to arbitration.” While, ultimately, this decision favored the employer, the trend is clear: Employers must seek regular guidance from their attorneys who monitor these decisions and can provide cutting-edge advice to avoid these types of legal issues. Implications for Employers These cases illustrate a trend in Second District jurisprudence regarding the importance of precision in drafting arbitration provision language. While the law has an underlying strong public policy favoring arbitration, these decisions establish a recurring pattern of the refusal to enforce unclear arbitration provisions in a variety of contexts. Poorly drafted provisions can result in significant litigation, which likely would have been avoided if carefully considered language was utilized. These problems are clearly demonstrated through the various interpretations of the arbitration clauses invalidity and the Court’s unwillingness to enforce them in various scenarios. A carefully crafted arbitration provision and class action/PAGA waiver should be clearly worded, voluntary in nature, fair, and mutual, and include adequate notice to the employee. The provisions should also take into consideration recent decisions which, provide more specific guidance as to pitfalls that must be avoided. These recent decisions serve as a warning: employers who fail to seek regular review may find themselves embroiled in costly and unnecessary litigation without defenses that were otherwise available to them. Action Plan: Steps Employers Should Take Every employer should take this opportunity to seek a review of existing forms provided to their employees or put in place new forms that will ensure adequate protection and insulate them from costly wage and hour litigation in the future.
April 8, 2025
Estates and Trusts
Building Adaptive Trusts: Ensuring Tax Efficiency in an Evolving Tax Landscape
The lifetime estate tax exemption amount is as high as ever. The estate tax exemption amount rose from $1,000,000 in 2002 to $5,000,000 in 2011. Then, Congress doubled the amount of the estate tax exemption in 2018. As of this writing, the current lifetime exemption amount is nearly $14,000,000 per individual. With such high exemption amounts, there are few estates subject to federal estate tax. The focus of estate planning has, therefore, shifted from removing assets from a decedent’s estate to minimize or eliminate estate taxes, to ensuring that assets remain in the estate for estate tax purposes so that the assets receive a step-up in capital tax basis at the time of death. The “step-up” in the capital tax basis of assets means that for capital gains tax purposes, assets in a decedent’s estate will reset to the fair market value of these assets at the time of their death. By way of illustration, if a stock were bought for $100 and appreciated to $1,000 at the time of the account holder’s death, the beneficiary would only pay capital taxes on any further appreciation above $1,000. If the beneficiary sold the stock for exactly $1,000, no taxes would be owed. On the other hand, assets gifted during lifetime or held in an irrevocable trust do not receive a step up in capital tax basis. With the ever-shifting tax landscape, the estate planner must carefully balance the likelihood that their client will have a taxable estate at the time of their death with the desire to include appreciated assets (especially assets with a low capital tax basis) in the Decedent’s estate so that they will enjoy the step-up. But what happens if that calculation seems imprudent or unwise based on facts and circumstances in the future? For example, suppose Peter wishes to provide all his assets to his wife, Mary. Peter’s assets, when combined with Mary’s assets, will be close to or exceed the lifetime estate tax exclusion amount. When Peter passes away, assets received by Mary will not generate any estate tax liability because spouses enjoy an unlimited marital tax deduction. However, it is possible that Mary may now have a taxable estate upon her death, especially if her assets continue to appreciate over her lifetime. Thus, the beneficiaries of Mary’s estate will pay estate taxes on the assets they receive in excess of the lifetime exemption amount in effect at the time of Mary’s death. There are several ways to address these concerns and minimize or eliminate any estate taxes that may be owed in the future. Peter could remove some of his assets from his estate by establishing an irrevocable trust. This trust could be established either during his lifetime or via the use of testamentary trusts (i.e., a trust established at the time of Peter’s death). However, Peter may want to avoid the costs and inconvenience of trust administration if it is possible that he and Mary will never have estate tax issues. Another option is the “wait and see” approach using a “disclaimer trust” that may or may not be funded after Peter’s death. Peter could direct in his will or revocable trust that his assets will pass outright to Mary. Mary may then make a qualified disclaimer, effectively refusing to accept some or all of Peter’s assets. Any disclaimed assets will bypass Mary’s estate and go into the disclaimer trust, which can be used to support Mary for the remainder of her lifetime. The assets that pass to the disclaimer trust, and any subsequent appreciation in these assets, will remain outside of Mary’s estate and will pass estate tax-free to her future beneficiaries. Suppose after funding the disclaimer trust that Mary’s assets are significantly spent down and exhausted during her lifetime. Perhaps a future Congress will increase the estate tax exclusion amount further or completely eliminate the estate tax. In any of these scenarios, the disclaimer trust will serve no tax purpose for Mary. Worse, the assets in the disclaimer trust will not receive the “step-up” in the capital tax basis at the time of Mary’s death. Is there a way to unwind the disclaimer trust and ensure that these assets are includable in Mary’s estate at the time of her death? With careful planning, the answer is “yes”. One powerful technique to resolve this issue is by appointing a trust protector for the disclaimer trust. A “trust protector” is a disinterested party with specific enumerated powers. The trust protector could be given the power to confer upon Mary a general power of appointment to choose any beneficiary she wishes to receive her estate assets, even her own estate. Pursuant to IRC § 2041, assets subject to a general power of appointment are includable in the power holder’s estate for estate tax purposes. Now, whether Mary exercises her general power of appointment or not, the assets will be included in her taxable estate and receive a step-up in capital tax basis. While this planning technique can provide significant tax benefits, it is not always the right choice in every situation. For instance, if Mary were to face creditor issues, granting her a general power of appointment would subject the entire disclaimer trust’s assets to creditor claims. However, when implemented thoughtfully, incorporating a trust protector with the ability to grant a general power of appointment adds valuable flexibility, allowing the estate plan to adapt to the ever-evolving tax laws and optimize tax outcomes.
April 3, 2025
Estates and Trusts
Trustee's Standing in Estate Distribution: A Legal Analysis of Estate of Barry Tarlow
In a groundbreaking decision that could reshape the landscape of California estate law, the Court of Appeal in the Second District Division Four has ruled in favor of trustee David Henry Simon, affirming his right to seek a judicial determination of trust assets under Probate Code section 11700. The court's ruling clarifies the legal framework under which trustees can seek judicial determination of their rights to trust assets, emphasizing the application of Probate Code section 11700. This pivotal ruling is a must-read for estate law practitioners, trustees, and beneficiaries as it navigates the complexities of estate administration with unprecedented clarity and precision. Factual Background Barry Tarlow, a prominent criminal law attorney, executed a will in 2005, with minor modifications in 2006, which held terms for a testamentary trust. The will divided his estate between his siblings, Barbara and Gerald. Gerald was to receive his share outright, while Barbara's share was to be placed in the "Barbara Tarlow Trust," with David Henry Simon named as trustee. Following Barry's death in April 2021, Barbara and Gerald became executors of the estate, and Simon retained his role as trustee. The Barbara Tarlow Trust was a spendthrift trust, which provided that upon Barbara’s passing, the residue would go entirely to Gerald, if living, or otherwise, to a donor-advised fund at Fidelity Charitable Gift Fund. The estate administration process revealed that Barbara's share, intended for the trust, was valued at over $20 million. Barbara disagreed with the use of the spendthrift trust and purchased from the contingent remaining beneficiary, donor-advised fund at Fidelity Charitable Gift Fund, the interest that might go to them to have a power of appointment. Further, to gain control over the trust assets, Barbara and Gerald filed an ex parte petition to replace Simon as trustee and modify the trust terms. After a denial of the ex parte petition, Barbara then disclaimed her entire interest in testamentary trust and Gerlad disclaimed his interest in the estate's personal property. As the joint executors, Barbara and Gerald filed a petition for final distribution, which would remove any distribution to the testamentary trust based on the disclaimers. This led to a series of legal disputes over the final distribution of the estate, including Simon filing a petition to determine beneficiaries of the estate under Probate Code section 11700. Legal Issues and Court's Analysis The central legal issue was whether Simon, as the named trustee, had standing to file a petition under Probate Code section 11700. This section allows any person claiming to be entitled to a share of the estate to seek a court determination of their rights. Simon argued that his role as trustee entitled him to such standing, while Barbara held that her disclaimer prevented such an interest to Simon as there was, therefore, no testamentary trust for him to administer. The court first analyzed the language of the code section as far as standing, providing that "any person claiming to be a beneficiary or otherwise entitled to distribution." In rendering their ruling, the court stated that this phrase, as included by the legislature, was broad and inclusive, allowing a wide range of individuals to file a petition for court determination. As such, it encompasses not only direct beneficiaries but also trustees and others who may have a claim to the estate assets. The Court of Appeals held that trustees are indeed "persons claiming to be entitled to distribution of a share of the estate" under Probate Code section 11700, reasoning that trustees are "persons entitled to distribution" because they are responsible for managing and distributing trust assets according to the terms of the will. This decision underscores the trustee's legal title to trust property, which vests as of the decedent's death, giving them a legitimate claim to the estate's distribution. The court's interpretation of section 11700 provides a clear precedent for future cases involving trustee standing in probate matters. Although Barbara argued that her disclaimer presumptive prevented Simon’s standing, the court highlighted that the presumption of the validity of disclaimers is not conclusive and can be challenged, which was contrary to the trial court’s assumption in these proceedings. This aspect of the ruling emphasized the need for a thorough judicial review of disclaimers and other estate-related documents. Ultimately, the Court of Appeals remanded the case for further proceedings to determine the validity of Simon's claims and Barbara's disclaimer, indicating that factual disputes should be resolved through evidentiary hearings. Conclusion and Implications The Estate of Barry Tarlow marks a pivotal moment in estate law, reinforcing the vital role of trustees and the necessity of procedural rigor in probate proceedings. By affirming the trustee's standing and emphasizing the importance of judicial review, this ruling ensures that the administration of estates is conducted with fairness and transparency. Legal practitioners, trustees, and beneficiaries can look to this case as a guiding beacon, illuminating the path to equitable and just estate distribution. This ruling has significant implications for drafting attorneys, trustees and beneficiaries alike. For drafting attorneys, the decision underscores the need for precise and detailed trust provisions to account for potential court involvement, which could complicate the estate planning process and necessitate more extensive legal advice. Trustees gain enhanced authority to manage and distribute trust assets, but they must be vigilant against potential misuse of their standing and be prepared for increased litigation risks. Beneficiaries benefit from greater protection, as trustees can now more confidently seek court intervention to safeguard their interests. However, this ruling may also lead to more frequent challenges to trustee actions, potentially straining relationships and increasing disputes. Overall, while the ruling strengthens the legal framework for trustees, it introduces complexities that all parties must navigate carefully. As the legal community absorbs the implications of this landmark decision, it is clear that the principles established here will resonate through future probate and trust law cases, shaping the landscape of estate administration for years to come.
April 2, 2025
Intellectual Property
Trademark Registration Misconceptions: What Brand Owners Should Know
Many business owners view trademark registration as a smart investment—and they’re right. A federal registration gives you valuable legal advantages, including nationwide priority, a presumption of ownership, and stronger tools to protect your brand. But registering a trademark doesn’t give you absolute control. Whether you can prevent someone else from using a similar name or logo often depends on a few key questions: Who used the trademark first? If another party has prior rights, their use may be protected. Are they using it for the same or related goods/services? If you're operating in unrelated industries, another party’s use may not be infringing. Understanding these factors can help you protect your brand more effectively and avoid common trademark misconceptions. Trademark Protection Is Limited to Specific Goods and Services A trademark registration does not prevent others from using a similar or identical name, logo, or slogan in unrelated industries. Trademark law is designed to prevent consumer confusion—not to grant brand owners exclusive control over a word or phrase in all contexts. Your trademark rights are fundamentally tied to the goods and services that you sell under your brand name, logo, or other source indicator (i.e., trademark). You can register a trademark to use in connection with the sale of specific goods and services, not for everything. A perfect, real-world example of this can be found at the corner of Broadway and W 68th Street in New York City, where for several years, a LOWE’S® hardware store sat directly across from a LOEWS® movie theater. Despite the nearly identical pronunciation and similar spelling, both brands coexisted peacefully—and legally—because they operate in entirely different industries. Even though the names are similar, consumers are not likely to confuse a home improvement store with a movie theater or think that there is any shared ownership. The goods and services they offer are so different that consumers would not likely assume the two businesses are affiliated. (The Lowe’s eventually closed, but it was likely due to the lack of need for a big-box home improvement store in the heart of Manhattan rather than any trademark conflict.) If two businesses operate in distinct industries with different audiences and purposes, similar names can often legally coexist. “I Had It First”: Why First Use Still Matters When two companies are trading in related commercial spaces (i.e., selling similar goods or services to one another) under the same or similar trademarks, U.S. trademark law will generally favor the party that was using it first. That’s why, before applying for federal registration, your trademark attorney will typically conduct a search to identify existing registrations, pending applications for registration, and unregistered (or “common law”) uses of the mark. The term "common law" refers to trademark rights that arise through the actual use of the mark in commerce, even without formal registration. Suppose you're opening a bakery in North Carolina called “Maple & Bean.” A common law search reveals a small café in Vermont that has used that name locally for years but never registered it. If you and your trademark attorney agree that the reward outweighs the risk and there are no other conflicts, the USPTO may grant you a trademark registration. But even with that registration, the Vermont café would retain the right to use the name in its existing geographic area because it used it first. Your registration would, however, generally allow you to prevent others from using the same or a confusingly similar name for related goods or services going forward. However, it wouldn’t give you the right to stop someone from using “Bean & Maple” for products in unrelated industries, like glassblowing tools or HVAC systems. In short, trademark protection is both industry-specific and use-based. Registration strengthens your rights but doesn’t erase earlier uses—or give you absolute authority over all uses. Conclusion A federal trademark registration is a valuable asset, but its scope is not unlimited. Trademark rights are determined by both first use and the specific goods and services involved, making enforcement a fact-specific analysis. Understanding these nuances can help businesses manage their trademark rights effectively and avoid common misconceptions about registration.
April 2, 2025
Mergers and Acquisitions
Tariffs and DOGE: The Impact on Mergers and Acquisitions in 2025
While many felt that 2025 might finally be the year of the rebound for mergers and acquisitions (M&A), the M&A landscape has hit turbulence as we take off into the new year. In just the first few months, the new administration has imposed 25% tariffs on Mexican and Canadian imports, with a limit of 10% on Canadian energy, as well as a 20% tariff on products from China. These countries have already announced retaliatory efforts, including 15% tariffs from China on a variety of US farm exports and an announcement from Canada that they would “plaster tariffs” on more than $100 billion of American products over 21 days. There has also been a flurry of activity from the Department of Government Efficiency (DOGE), cutting funding and staffing across a variety of government agencies. According to a recent article in M&A Alerts, “The department’s influence could significantly impact industries reliant on government contracts, regulatory approvals, and cross-border investments, raising critical concerns for dealmakers in this evolving economic and political environment.” These efforts also raise regulatory concerns and are already running into legal challenges. Needless to say, the combination of tariffs and actions by DOGE has and will continue to have an impact on M&A activity this year. In fact, PitchBook is reporting that Morningstar DBRS stated they do not anticipate the substantial rise in M&A that was expected to arrive this year. So, why are these efforts poised to have such an impact on the M&A market? A lot of it has to do with uncertainty. Bloomberg points out that “the worst enemy of a booming market for mergers and acquisitions has always been uncertainty.” Their data shows that just over $470 billion in global transactions have been announced so far in 2025. That number is down 17% from the same period last year. If history proves to repeat itself, that is not a good sign for an M&A rebound in 2025, as Bloomberg also notes that “not once in the past two decades has dealmaking rebounded from a negative first quarter to beat the previous year’s tally.” In addition to uncertainty, tariffs have a real impact on businesses who import or export goods and can negatively impact profitability and valuations. Supply chains can also be subject to tariff-related risks, which makes the due diligence process in transactions more complicated. Additionally, tariffs have implications for deal structure and timing, and some deals that were in the works might have to be restructured to account for the impact of new tariffs. However, there could be some silver lining in all the doom and gloom. M&A Alerts also notes that DOGE’s efforts could have positive impacts on the business community, and “the push for efficiency and deregulation may accelerate approvals and boost deal flow.” So, while there is very real concern about the market volatility all of this is creating, there could be some pro-business efforts taking place that will have long-term benefits. No matter your opinion on the tariffs or the work DOGE is doing, these are very important areas to monitor for dealmakers as they will no doubt impact deal structure, target selection, valuations, supply chain issues, regulatory compliance, and a host of other factors at least for the foreseeable future. Legal advisors will be working to find ways to mitigate the impact and risks amid this period of uncertainty.
March 31, 2025
Labor and Employment
The Future of DEI in the Private Sector: Navigating a Changing Legal Landscape
The private sector's Diversity, Equity, and Inclusion (DEI) landscape is undergoing significant transformation in response to evolving federal policies and legal challenges. Two executive orders from President Donald Trump in early 2025—Executive Order 14151, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” and Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”—mark a clear shift in the federal government’s stance on DEI initiatives. These orders eliminate DEI programs within federal agencies, revoke affirmative action requirements for federal contractors, and impose new compliance obligations. As a result, private employers—especially federal contractors and grant recipients—should reassess their DEI strategies, considering increased scrutiny and potential legal risks. Executive Orders and Policy Shifts The Trump administration has ramped up its scrutiny of DEI initiatives across both the federal government and the private sector, treating employment practices that take protected characteristics into account as potentially unlawful. While the Administration has not explicitly defined "illegal DEI," public statements suggest that policies tying compensation to diversity targets, factoring protected characteristics into hiring, or requiring diverse interview slates are high-risk. However, initiatives such as open employee resource groups and broader candidate pools may face less scrutiny. Companies should align internal policies with disclosures and prepare for potential government investigations. Executive Order 14151, issued on January 20, 2025, mandates the termination of all federal DEI-related offices, grants, and programs, asserting that such initiatives violate civil rights laws. The following day, Executive Order 14173 rescinded affirmative action requirements for federal contractors, directing the Office of Federal Contract Compliance Program to halt diversity-related enforcement. Contractors must now certify compliance with anti-discrimination laws, with noncompliance potentially leading to False Claims Act liability. On February 5, 2025, the Department of Justice (DOJ) Civil Rights Division announced plans to investigate and penalize illegal DEI mandates in the private sector and federally funded institutions. Simultaneously, the Office of Personnel Management (OPM) instructed federal agencies to remove unlawful diversity requirements from hiring and selection processes, reinforcing a shift toward merit-based employment policies. Expanded Enforcement Landscape: What Employers Must Do Now—and Why Private businesses must take immediate and deliberate steps to evaluate their DEI policies and practices and craft a strategic response. That response may involve revising existing policies, reaffirming a commitment to DEI (whether amended or intact), or preparing to pause, pivot, or defend current practices. In today’s fast-moving and high-stakes enforcement environment, inaction is not a neutral stance. It is a strategic decision—one that could expose an organization to government scrutiny, private litigation, reputational backlash, internal tension, or all of the above. Executive Order 14173 signals a dramatic expansion in the federal government’s oversight of diversity-related initiatives, extending well beyond public institutions and federal contractors. The order explicitly instructs all agencies to investigate what it terms “illegal” DEI preferences in the private sector and to issue formal enforcement recommendations within 120 days. These directives apply not only to publicly traded corporations but also to large nonprofits, philanthropic foundations, professional associations, and major universities—broadening the scope of potential enforcement targets across virtually every major sector of the economy. The Equal Employment Opportunity Commission (EEOC) is taking active steps to implement the administration’s vision. EEOC Chair Andrea R. Lucas has publicly committed to rooting out what she describes as unlawful DEI-driven discrimination, particularly those policies based on race or sex. The agency has removed language related to gender identity from its internal and public-facing platforms and has emphasized a shift toward a strictly merit-based framework in alignment with the administration’s priorities. In parallel, other federal agencies have been tasked with developing litigation strategies and potential regulatory actions to deter identity-based preferences, creating an increasingly complex legal landscape for employers. What makes this moment particularly challenging is the legal ambiguity that now surrounds many DEI practices. Although Executive Order 14173 stops short of banning all DEI initiatives, it targets those that include quotas, demographic set-asides, or explicit preferences based on protected characteristics—practices the administration has signaled are incompatible with federal civil rights law. These categories of DEI programming now carry heightened legal risk, even if they were once considered industry best practices. This presents a difficult paradox for private employers. Continuing with DEI programs may trigger reverse discrimination lawsuits, internal employee complaints, or direct federal investigation. At the same time, rolling back or eliminating those programs altogether may lead to claims of disparate impact, undermine employee morale, damage recruitment and retention efforts, and erode hard-won reputational goodwill. In short, the stakes are high, and the risks exist on both sides of the equation. Employers cannot afford to take a passive or reactive posture. Whether your organization has a well-established DEI framework or is in the early stages of building one, now is the time to conduct a thorough review, understand your exposure, and make intentional decisions that balance legal compliance with business goals and organizational values. The key is to act—not out of fear but with clarity, strategy, and purpose. Judicial Challenges and the Ongoing Legal Debate These actions have triggered a wave of litigation, contributing to a rapidly evolving and uncertain legal landscape for private employers and institutions navigating DEI compliance. On February 3, 2025, several advocacy and academic organizations—including the National Association of Diversity Officers in Higher Education and the American Association of University Professors—filed suit in the U.S. District Court for the District of Maryland, seeking to block key provisions of Executive Orders 14151 and 14173. In National Association of Diversity Officers in Higher Education et al. v. Trump et al., the plaintiffs argued that the orders violated the First and Fifth Amendments by imposing vague and overbroad restrictions on speech and association, and by chilling lawful DEI-related activities. On February 21, 2025, Judge Adam B. Abelson issued a nationwide preliminary injunction enjoining federal agencies from enforcing the Termination, Certification, and Enforcement Threat Provisions of the executive orders. However, the court allowed federal investigations into alleged “illegal DEI discrimination” to proceed, emphasizing that while certain aspects of the orders could be constitutionally enforced, others lacked clarity and posed significant risks to protected constitutional rights. Judge Abelson denied the Trump administration’s motion for a stay of the injunction on March 3, 2025, finding that the plaintiffs had demonstrated a likelihood of irreparable harm and that the challenged provisions raised serious constitutional concerns. The court also declined to limit the relief to the named plaintiffs, citing the broad implications of the orders across multiple sectors and jurisdictions. On March 10, 2025, the court reaffirmed that the preliminary injunction applied nationwide to all federal executive agencies, departments, and officials—excluding only the President—underscoring that executive authority must still operate within constitutional boundaries. However, on March 14, 2025, the U.S. Court of Appeals for the Fourth Circuit granted the government’s motion to stay the preliminary injunction, effectively restoring full enforcement of Executive Orders 14151 and 14173 pending appeal. The unanimous ruling by a three-judge panel was issued shortly after the district court addressed plaintiffs’ concerns that the Department of Justice had failed to comply with the earlier injunction. In a rare move, each judge on the Fourth Circuit panel issued a separate concurring opinion. Chief Judge Albert Diaz acknowledged the controversy surrounding DEI and expressed support for those working to advance such initiatives, while also noting that neither executive order defined the term “DEI” or its components. Judge Pamela Harris concurred in the stay based on the limited scope of the executive orders but cautioned that overbroad enforcement could still raise significant First Amendment and Due Process concerns. Judge Allison Jones Rushing, in her concurrence, questioned the breadth of the district court’s injunction and emphasized judicial impartiality, pushing back on the normative statements in support of DEI expressed by her colleagues. On March 17, 2025, the Fourth Circuit requested the parties to respond to a proposed briefing schedule by March 24, which could extend the briefing into late May. While the stay allows the executive orders to remain in effect during the appeal, the ultimate legality of the orders remains unresolved and may ultimately be determined by the U.S. Supreme Court. For now, private employers and institutions should stay closely attuned to these legal developments as the balance between regulatory enforcement and constitutional protections continues to shift. The evolving litigation landscape may significantly impact compliance obligations, enforcement risks, and the future of DEI-related initiatives nationwide. Business Consideration and Strategic Adjustments for Employers Despite increased federal scrutiny, businesses must carefully balance compliance with broader DEI objectives, ensuring alignment with legal requirements and inclusivity goals. Actions to consider include: Conducting a Comprehensive Legal and Risk Assessment - Employers should evaluate their DEI programs for compliance with federal anti-discrimination laws. Initiatives involving quotas or preferential treatment based on protected characteristics should be reviewed and, if necessary, modified. Refining DEI Messaging and Training Programs - Businesses should reassess their public statements and training programs to emphasize equal opportunity principles while avoiding language that could be construed as endorsing unlawful preferences. Monitoring Legislative and Judicial Developments - Employers should stay informed about regulatory changes that may impact DEI initiatives. Consulting with legal counsel and industry groups can help businesses navigate this uncertain environment. Adapting DEI Strategies to Align with Legal and Business Goals - Companies should continue fostering inclusive workplaces through legally compliant initiatives, such as mentorship programs, leadership development efforts, and workplace culture assessments. Businesses can maintain their DEI commitments while minimizing legal by focusing on equity and opportunity rather than preferential treatment. Conclusion The private sector must navigate a complex and evolving DEI landscape shaped by federal policies, legal challenges and shifting public expectations. While government-mandated DEI programs face heightened scrutiny, corporate diversity initiatives remain a key business strategy. However, evolving executive actions introduce ambiguity in compliance obligations, requiring companies to balance federal court interpretations of Title VII, state and local anti-discrimination laws, and international regulations. By proactively adapting to these changes, businesses can continue to promote inclusivity while ensuring compliance and mitigating legal risks.
March 28, 2025
Landlord Representation
Navigating ICE and Law Enforcement: A Guide for Landlords and Property Managers
As immigration enforcement efforts evolve, landlords and property managers must prepare to respond appropriately when interacting with Immigration and Customs Enforcement (ICE) or other law enforcement agencies. Understanding legal obligations, protecting tenant privacy, and establishing clear policies are important to ensuring compliance while minimizing legal and operational risks. Establishing Policies and Procedures One of the most important steps property managers can take is to develop a written policy outlining how to respond to law enforcement during interactions. Having a clear plan in place ensures that all staff members—whether property managers, leasing professionals, or maintenance teams—understand their role in these situations. A well-documented policy helps: Protect tenant privacy and confidentiality. Ensure legal compliance with federal, state and local laws. Maintain consistency in responses to law enforcement inquiries. Because property management staff frequently changes, a written policy ensures continuity in handling these situations, reducing the likelihood of errors or inconsistencies. Understanding Law Enforcement Agencies and Documentation When law enforcement officers arrive at a property, they may be from different agencies, including ICE, the Department of Homeland Security (DHS) or the Department of Justice (DOJ). Each agency may present different types of legal documents, and it is critical to understand the distinctions: Criminal Warrants – Issued by a judge, these warrants may grant law enforcement the right to access a property or obtain specific information. Civil (Administrative) Warrants – Issued by immigration officers rather than a judge, these do not automatically grant access to private property. I-9 Audits – Requests for employment eligibility documentation; typically, businesses have three days to respond. It is essential not to assume that any document presented requires immediate action. Instead, property managers should take the time to review the warrant, confirm its validity and consult legal counsel as needed. Protecting Tenant Confidentiality and Managing Risk Tenant privacy must be safeguarded during interactions with law enforcement. Property managers should follow these steps when responding to a request for information or access: Request a Copy of the Warrant – Always obtain a physical or digital copy before taking any action. Verify the Warrant’s Scope – Determine whether it is a criminal or administrative warrant and whether it grants law enforcement the right to enter the property. Follow Internal Protocols – Staff should notify the designated corporate or legal contact before responding to the request. Minimize the Disclosure of Information – Only provide what is legally required. Avoid Immediate Compliance – Taking a moment to review the request and consult legal counsel can prevent unnecessary disclosures. Centralizing Decision-Making A key part of risk management is ensuring that decisions regarding law enforcement interactions are made at a corporate or senior management level rather than on-site. Best practices include: Designating a specific contact within corporate or ownership to handle law enforcement inquiries. Training staff to refer all law enforcement requests to the designated corporate/legal contact. Establishing a clear chain of command so that no one makes a rushed or uninformed decision under pressure. Fair Housing Considerations In some jurisdictions, immigration or citizenship status is a protected class under fair housing laws. Locations such as Washington, D.C., Montgomery County, MD, and Prince George’s County, MD, have legal protections prohibiting landlords from inquiring about a tenant’s immigration status during the leasing process. Property managers should be mindful of these laws when handling law enforcement requests related to immigration enforcement. What to Tell Tenants Property managers should be cautious about providing legal advice to tenants. If tenants ask what to do in the event of an ICE visit, the best response is to direct them to legal aid organizations or immigration attorneys. Providing legal guidance could lead to liability if tenants misinterpret the information. Key Takeaways A clear, written policy helps your team respond consistently and appropriately when law enforcement arrives. Centralizing decision-making ensures that requests are escalated to the correct legal or corporate representative, reducing the risk of rushed or uninformed decisions. It’s also important to distinguish between different types of warrants—criminal warrants typically require immediate action, while administrative ones do not. Taking time to verify documents can help prevent legal missteps. Property managers should also be mindful of fair housing laws, which may prohibit asking tenants about their immigration status. And instead of offering legal advice, direct tenants to reputable legal resources. With immigration enforcement policies constantly evolving, staying proactive is key. Property managers can comply with the law by setting clear guidelines, training staff, and consulting legal counsel when necessary while protecting their businesses and tenants.
March 27, 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
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