Labor and Employment
EEOC Investigates 20 Private Law Firms Questioning Their DEI-Related Employment Practices
On March 17, EEOC Acting Chair Andrea Lucas sent letters to 20 large law firms requesting information about their diversity, equity and inclusion (DEI) related employment practices. The letters express the EEOC’s suspicions that the firms’ employment practices, including those labeled or framed as DEI, are, in fact, discriminatory based on race, sex, or other protected characteristics, in violation of Title VII of the Civil Rights Act of 1964 (Title VII). The suggestion is that the firms are treating various groups in different ways regarding the terms, conditions, and privileges of employment, or that they may be limiting, segregating, and classifying employees according to a protected characteristic. Lucas wrote: “The EEOC is prepared to root out discrimination anywhere it may rear its head, including in our nation’s elite law firms.” Lucas continued, “No one is above the law—and certainly not the private bar.” You can read the letters here. Moreover, the EEOC has established an email where whistleblowers can submit information to the EEOC about potentially unlawful DEI practices at law firms: lawfirmDEI@eeoc.gov. Private employers should carefully re-examine their employment practices, including hiring practices, determining if they are allocating more resources to promote one group of employees, whether all employees are welcome to participate in all programming (for example, a women employees’ support group), and whether pay practices are consistently equal pay for equal work.
March 18, 2025
Construction
Future of Pennsylvania’s Construction Statute of Repose Hinges on Pennsylvania Supreme Court Ruling
The Pennsylvania Supreme Court will decide a pivotal case that could significantly impact the construction industry and the application of the state’s construction Statute of Repose. Aloia v. Diamant raises key questions about how the phrase “lawfully performing or furnishing” design or construction services should be interpreted within the statute. The ruling could have far-reaching consequences for architects, engineers, contractors, and property owners, potentially altering the way construction defect claims are litigated in Pennsylvania. In Aloia v. Diamant, the Superior Court of Pennsylvania upheld a trial court’s ruling that applied Pennsylvania’s Twelve-Year Statute of Repose to bar claims related to construction defects and deficiencies. The Pennsylvania Supreme Court has now accepted an appeal from the homeowners, seeking to clarify the statutory interpretation of the phrase “lawfully performing or furnishing” in the context of construction services under the Statute of Repose. Several prior appeals to the Pennsylvania Superior Court have challenged the application of the construction Statute of Repose, particularly in cases where plaintiffs allege that design or construction deficiencies violate the applicable building code. Notable cases include Johnson v. Toll Bros., 302 A.3d 1231 (Pa. Super. 2023), Tibbit v. Eagle Home Inspections, 305 A.3d 156 (Pa. Super. 2023) and Venema v. Moser Builders, 284 A.3d 208 (Pa. Super. 2023). The plaintiffs in Aloia argue that the Statute of Repose should not apply where there are allegations that the design or construction was not “lawfully performed” due to violations of the building code. This argument raises significant concerns for architects, engineers, and contractors, as it could allow plaintiffs to bypass the Statute of Repose merely by alleging a building code violation—potentially nullifying the statute’s protective function. Legislative Response: Senate Bill 336 Recognizing the ongoing disputes over the Statute of Repose, the legislative affairs committee of AIA-Pennsylvania introduced Senate Bill 336 on January 31, 2023. The bill sought to amend Pennsylvania’s construction Statute of Repose by reducing the period from twelve years to six years, bringing Pennsylvania in line with most states and providing a legislative definition for “lawfully.” However, the bill was not enacted, leaving Pennsylvania with one of the longest construction Statutes of Repose. Key Legal Issues in Aloia v. Diamant The plaintiffs contend that the trial and appellate courts erred in dismissing their claims based on the Statute of Repose before trial. The case facts reveal that building permits were issued for the home’s construction, and a certificate of occupancy was granted on March 30, 2006. Additional certificates of occupancy were issued on February 20, 2007, following the completion of an addition and basement improvements. The plaintiffs, who purchased the home in 2016, filed suit on March 5, 2021, alleging latent construction defects. The contractor invoked the twelve-year Statute of Repose as a defense. The Legal Implications of the Pennsylvania Supreme Court’s Decision Pennsylvania’s construction Statute of Repose provides an absolute bar to claims filed more than twelve years after the substantial completion of a construction project. Unlike a Statute of Limitations, which limits the timeframe in which a lawsuit may be filed but allows for exceptions under equitable doctrines (such as the repair doctrine or discovery rule for latent defects), the Statute of Repose is a strict cutoff for liability. The Pennsylvania Supreme Court’s decision in Aloia will have significant implications for the construction industry. If the court adopts the plaintiffs’ interpretation of “lawfully performed,” it could render the Statute of Repose ineffective by allowing plaintiffs to avoid its application through allegations of building code violations. Such a ruling could expose architects, engineers, and contractors to indefinite liability, fundamentally altering the legal landscape of construction defect claims in Pennsylvania. The outcome of Aloia v. Diamant is eagerly anticipated by construction professionals, developers and legal practitioners alike. A ruling in favor of the plaintiffs could reshape Pennsylvania’s construction litigation framework, potentially extending liability well beyond the current twelve-year period. Conversely, a decision upholding the Statute of Repose’s current interpretation would reinforce the finality intended by the statute, providing greater certainty for construction professionals. Until the Supreme Court renders its decision, the industry remains in a state of uncertainty regarding the long-term enforceability of Pennsylvania’s construction Statute of Repose.
March 17, 2025
Environmental and Sustainability
NYDEC Announces New Environmental Justice Requirements under SEQRA and UPA
Continuing its growing initiatives to protect environmental justice communities, the New York Department of Environmental Conservation (“NYDEC”) recently announced the release of proposed amendments to its State Environmental Quality Review Act (SEQRA) and Uniform Procedures Act (UPA) rules to incorporate provisions of the Environmental Justice Siting Law, which was signed by Governor Kathy Hochul in 2022. The draft regulations, which would impact various permits for projects across the state, seek to require consideration of potential existing burdens in “disadvantaged communities” (“DACs”) that already bear higher levels of pollution, effects of climate change and socioeconomic vulnerabilities. State Environmental Quality Review Act (SEQRA) The proposed rules would require all state agencies in New York to determine if any agency action “may cause or increase a disproportionate pollution burden on a disadvantaged community that is directly or significantly indirectly affected by such action” (6 NYCRR § 617.7(c)(1)(xiii)). Such agency actions include reviewing applications for permits, licenses, zoning changes, site plans, subdivisions, and funding grants by any local or state agency in New York.. Under the existing regulatory framework, government actions resulting in at least one significant adverse environmental impact warrant a determination of significance, triggering the preparation of an Environmental Impact Statement (EIS) on the proposed action. The proposed rules would now require state agencies to evaluate whether an agency action would result in an increased burden on DACs by considering “reasonably related long-term, short-term, direct, indirect, and cumulative impacts” (6 NYCRR § 617.7(c)(2)). To facilitate the implementation of cumulative impact assessments, DEC has introduced the Disadvantaged Community Assessment Tool (DACAT), intended to help permit applicants to identify areas that fall within the criteria of disadvantaged communities. The proposed rules also update DEC’s Environmental Assessment Forms (EAFs) to require permit applicants to analyze and disclose potential disproportionate pollution burdens on DACs (6 NYCRR § 617.2(l)). Thus, the question of what constitutes a “disproportionate burden” becomes a significant consideration for applicants seeking government funding or approvals subject to SEQRA. However, this rulemaking also amends actions that do not require further review under SEQRA to include certain multi-family housing with not more than 10,000 square feet of gross floor area. Uniform Procedures Act (UPA) The proposed rules would also amend DEC’s rules under the Uniform Procedures Act (UPA), which governs how DEC processes permit applications, to further incorporate environmental justice considerations into permitting reviews, including review of applications for projects affecting wetlands, wastewater discharge, solid waste and air facility permits. In effectuating the requirements of the EJ Siting Law, new permit applicants will be required to prepare an Existing Burden Report where the activity “may cause or contribute more than a de minimis amount of pollution to any disproportionate pollution burden on a disadvantaged community.” Permit renewal and modification applications are also required to prepare Existing Burden Reports. Yet NYDEC may provide exemptions if it determines that “the permit would serve an essential environmental, health, or safety need of the disadvantaged community for which there is no reasonable alternative.” NYDEC’s proposal would require project developers to create plans for meaningful community participation, ensuring that applicants demonstrate how they will engage with and involve affected communities. Should the proposed rules go into effect, applicants would now need to “provide opportunities for meaningful community engagement” and incorporate public feedback into project designs. Permit Application Strategy Considering NYDEC’s proposed amendments, permit applicants will likely face uncertainty regarding how the new requirements will impact the permitting process and their projects. To ensure a smooth and cost-effective permitting strategy, it is important that applicants consult with experienced professionals and legal counsel early in the process, as failure to meet these standards could result in permit denials and/or the assessment of penalties. The deadline to submit comments on the proposed SEQRA changes under the EJ Siting Law is May 7, 2025. To read more about the proposed changes to SEQRA under the EJ Siting Law or to comment on the proposal, you can visit NYDEC’s rulemaking page.
March 13, 2025
Estates and Trusts
Not Considering the Importance of Charitable Giving
This is Part 10 in a Series of the Top 10 Mistakes Made When Planning for Art and Other Collectibles: A Guide for Professionals and Their Clients. When a client’s family does not wish to inherit a collection or if its inclusion in the estate would create a significant tax burden, it is crucial to explore charitable giving options. Proper planning can help maximize the benefits of a donation while avoiding unintended legal and tax complications. Ensuring the Charity Will Accept the Gift While many clients may assume that institutions will welcome their generous donation, not every organization is willing or able to accept a collection. Before naming a charity as a beneficiary in estate planning documents or making a present gift, it is essential to confirm the charity’s willingness to accept the donation and any conditions the client wishes to impose on its use. Establishing this agreement in advance can prevent post-mortem disputes and ensure the estate qualifies for the intended tax deductions. Tax Benefits of Lifetime Charitable Giving Beyond philanthropy, charitable gifting can provide substantial tax benefits. Clients should be advised on the income tax advantages of donating all or part of their collection during their lifetime. A charitable income tax deduction is available for contributions of art and collectibles to a public charity, provided the property qualifies as capital gain property and meets the related-use rule (discussed below). If these conditions are met, the donor can deduct the full fair market value of the collection in the year of transfer, subject to a limit of 30% of their adjusted gross income (AGI). Any excess deduction may be carried forward for five years. Since the property must qualify as capital gain property, a lifetime charitable deduction for the donation of art or collectibles is only available to clients who qualify as collectors. As noted in Mistake #1 of this series, creators and dealers recognize ordinary income upon the sale of art and collectibles. Moreover, creators have little incentive to donate their work during their lifetime, as any charitable deduction would be limited to the cost of materials rather than the item’s fair market value. Under the related-use rule, the donee charity must use the donated property in a manner that aligns with its exempt purpose under Internal Revenue Code Section 501. If the charity’s use is unrelated to its mission, the donor’s deduction is limited to the property’s cost basis rather than its appreciated value. Additional limitations apply under the Pension Protection Act of 2006 if the charity sells the donated property within three years of receipt unless the organization certifies that the donation was used for its exempt purpose. For the creator and dealer, it usually makes more sense to consider selling the item and donating the proceeds to charity. Doing so avoids the related-use rule and the requirement that the item be capital gain property. In such a case, the charitable deduction may offset, most if not all of, the ordinary income realized on the sale. Public Charities vs. Private Foundations Clients should also understand the key differences between donating to a public charity versus a private foundation. Donations to public charities allow a deduction based on the collection's fair market value, provided the collection is capital gain property and the related-use rule is met. Donations to private foundations, however, only permit a deduction based on the donor’s cost basis, and the deduction is limited to 20% of AGI. Excess amounts may still be carried forward for five years. Fractional Gifts and Changes Under the Pension Protection Act One of the biggest challenges in lifetime charitable gifting is persuading clients to part with their collection while they are still alive to enjoy it. Before August 17, 2006, clients could donate a fractional interest in tangible personal property, allowing them to share ownership with a charity while retaining partial possession. However, the Pension Protection Act introduced stricter valuation, time, and use limitations that impact the deductibility of fractional gifts. Under IRC Section 170(o), the deduction for a fractional gift is now limited to the lesser of: The value used to determine the deduction for the initial fractional donation, or The fair market value at the time of subsequent contributions. Additionally, the donor must fully transfer their interest in the property within 10 years of the initial fractional gift or before their death—whichever comes first. The recipient charity must also take substantial physical possession of the item within one year of the initial gift (and within one year of any additional gifts) and satisfy the related-use rule. Failure to meet these conditions may result in the recapture of previous deductions, plus interest and an additional 10% penalty. Charitable Bequests and Estate Tax Benefits An outright donation of a collection upon death—whether to a public charity or a private foundation—qualifies for an estate tax charitable deduction based on the fair market value at the time of death. Importantly, bequests of tangible personal property generally do not trigger the related-use rule, making this a valuable option for clients seeking to preserve their collection’s full value for charitable purposes. However, clients planning to donate a collection upon their death should always consult with the intended recipient during life to confirm the organization’s willingness to accept the gift. A public charity’s acceptance of art and collectibles typically depends on whether the donation aligns with its mission and whether it has the necessary facilities and financial resources to store or display the collection.
March 12, 2025
Family Law
Examining the US Supreme Court’s “Reverse Discrimination” Case: Fueling the DEI Fight
On February 26, 2025, the U.S. Supreme Court heard oral arguments in Ames v. Ohio Department of Youth Servicesi . This case that could significantly impact the standards for proving employment discrimination claims under Title VII of the Civil Rights Act of 1964. The central issue is whether plaintiffs from majority groups, such as heterosexual individuals, must meet a higher evidentiary standard, showing that the background circumstances of the alleged discrimination support the suspicion that the defendant is that unusual employer who discriminates against the majority (the “background circumstances test”), in order to establish a prima facie case of discrimination. Background Marlean Ames ("Ames"), a heterosexual woman, began working for the Ohio Department of Youth Services in 2004 ("DYS"). In 2019, she applied for a promotion to a newly created bureau chief position but was passed over in favor of a gay woman who had not applied for the role. Subsequently, Ames was demoted to her previous secretarial position, resulting in a significant pay cut, and her former role was filled by a gay man. Ames filed a lawsuit alleging that these employment decisions were based on her sexual orientation, constituting discrimination under Title VII. The district court granted summary judgmentii in favor of the DYS applying the “background circumstances test;” and finding that there was no evidence that the DYS is among the unusual employers who discriminate against the majority. The U.S. Court of Appeals for the Sixth Circuit affirmed this decision, concluding that Ames had not met this heightened evidentiary standard. The Supreme Court Agrees to Hear the Ames Case The Supreme Court agreed to hear Ames’ appeal to address the disparate application of the “background circumstances test” across various circuitsiii. During oral arguments, several justices expressed skepticism about the validity of imposing a higher standard on a majority group. Justice Neil Gorsuch noted the “radical agreement” between both parties that federal employment laws should impose the same requirements on all plaintiffs, regardless of their majority or minority status. Justice Amy Coney Barrett raised concerns that ruling in Ames’ favor could potentially open the door to more employment discrimination lawsuits by making it easier to bring reverse discrimination cases. However, Ames’ counsel argued that eliminating the “background circumstances” rule would not lead to a flood of new cases, citing the experience of circuits that do not apply this heightened standard. Repercussions of the Decision A ruling in favor of Ames could have significant implications for employment discrimination litigation. It would eliminate the additional evidentiary burden currently placed on majority-group plaintiffs in certain circuits, thereby standardizing the requirements for establishing a prima facie case under Title VII. This could lead to an increase in reverse discrimination claims, particularly in contexts involving diversity, equity, and inclusion initiatives. Conversely, if the Court upholds the “background circumstances” requirement, majority-group plaintiffs would continue to face a higher threshold in proving discrimination claims, potentially discouraging such lawsuits. The Supreme Court’s decision is expected by early Summer 2025, and once handed down, has the potential to equalize the legal framework for all discrimination claims under Title VII, ensuring that the statute’s protections are uniformly applied, irrespective of the plaintiff’s majority or minority status.
March 10, 2025
Estates and Trusts
Not Discussing Collections with Heirs
This is Part 9 in a Series of the Top 10 Mistakes Made When Planning for Art and Other Collectibles: A Guide for Professionals and Their Clients. A collection may hold deep personal significance for a client but may not carry the same sentimental or financial value for their heirs. It is essential to encourage clients to have open conversations with their heirs, as appropriate, to understand their intentions and expectations. In many cases, heirs may see a collection primarily as a financial asset rather than a legacy to preserve. Clients should consider alternative disposition strategies beyond an outright bequest if they intend to sell the collection. For instance, donating the collection to a museum, establishing a trust, or selling select pieces during their lifetime may better align with their goals. Even if heirs wish to keep the collection, clients should clarify whether they intend to retain it in its entirety or only select pieces. This distinction is crucial, as valuation discrepancies can arise when certain items are allocated to specific individuals, potentially impacting the overall fairness of asset distribution. Many clients express a desire to donate their collections to museums. However, before proceeding with such a gift, it is essential to confirm that the museum is willing to accept the items. Many museums already have extensive collections in storage and may not be interested in acquiring additional pieces. Additionally, if a museum does agree to accept a collection, it often requires a financial contribution to cover ongoing maintenance and preservation costs. Contacting the museum or other recipient organization before making the gift – especially if the donation is planned through a will or other testamentary document – is essential to ensure its acceptance. Most importantly, clients should consult with an expert in art succession planning. A knowledgeable advisor can help structure a well-organized, tax-efficient plan during life or at death and ensures a smooth transfer of the collection while honoring the client’s wishes.
March 7, 2025
Immigration Law
Trump’s $5 Million “Gold Card” Visa: What it Means for EB-5 Investors
President Donald Trump recently announced a proposed “Gold Card” visa, sparking speculation about its potential impact on the EB-5 Immigrant Investor Program. While details remain unclear, this proposal raises important questions for current and prospective EB-5 investors. Here’s what you need to know. What is the “Gold Card” Visa? The Gold Card visa would offer U.S. permanent residency to individuals investing $5 million in the country. The proposed program is modeled after similar international investor visa initiatives, such as Dubai’s Golden Visa. Key details include: Investment Requirement: The program would require a $5 million investment—substantially higher than the EB-5 program’s minimum of $800,000. Pathway to Citizenship: This visa would offer high-net-worth individuals a streamlined route to U.S. citizenship. Potential Economic Impact: The Trump administration aims to attract a million investors, potentially raising $5 trillion in revenue. Geopolitical Considerations: Given that over 60% of EB-5 investors come from China, some speculate this is a strategic response to U.S.-China tensions. Can the “Gold Card” Replace EB-5? Initial reports suggested that the Gold Card visa might replace EB-5. The Commerce Secretary even indicated this intention, while the president hinted that companies could use the Gold Card to purchase legal permanent residence for employees. However, eliminating the EB-5 program is easier said than done: Congressional Authorization: The EB-5 program is authorized by Congress through at least September 30, 2027. Any attempt to dismantle it would require congressional approval, which is unlikely given past legislative support. 2022 EB-5 Reform & Integrity Act: This act reinforced protections for investors, ensuring that those who file before September 30, 2026, will be grandfathered into the current system. Legislative Hurdles: Introducing a new visa category requires congressional approval. Lawmakers benefiting from EB-5 investments in their states may resist any changes that could reduce economic contributions to their regions. Key Challenges and Concerns While the Gold Card visa has captured attention, several uncertainties remain: Realistic Demand: Expecting one million investors to each contribute $5 million seems highly optimistic, given that the EB-5 program has attracted only about 70,000 applicants over the past 30 years. Tax Implications: There is speculation that Gold Card holders might avoid U.S. global taxation, which could raise legal and policy concerns. Coexistence with EB-5: Rather than replacing EB-5, the Gold Card visa is more likely to exist alongside it, targeting a different investor demographic. What This Means for EB-5 Investors The key takeaways for those currently navigating the EB-5 process is that EB-5 remains intact and legally protected. Current EB-5 Investors: Your investment remains secure, and your path to a green card is unchanged. Thanks to legislative safeguards, your petition will continue to be processed. Prospective Investors: If you’re considering EB-5, filing before September 30, 2026, ensures your investment is protected under the program’s grandfathering provisions. The Bottom Line While Trump’s Gold Card proposal has generated interest, its viability is uncertain. The EB-5 program remains a structured and legally protected pathway to U.S. permanent residency. Investors should stay informed but proceed with confidence in EB-5’s stability. For those looking to secure U.S. residency, now is the time to act before the 2026 grandfathering deadline.
March 5, 2025
Construction
An Update on Federal and Pennsylvania Corporate Reporting Requirements
Much confusion has surrounded the Federal Corporate Transparency Act and the new Pennsylvania annual reporting requirement. Many have asked: what is the status (and deadlines) for compliance? Federal Corporate Transparency Act The Federal Corporate Transparency Act (CTA) was enacted in 2021 with the purpose of combatting money laundering, terrorism financing, and other financial crimes. The gist of the CTA is a requirement to submit a Beneficial Ownership Information Report (BOI Report) that identifies the owner(s) of the business. The CTA is administered and enforced by the newly created Financial Crimes Enforcement Network (FinCEN), which is a bureau within the U.S. Department of Treasury. In December 2024 the U.S. District Court for the Eastern District of Texas issued an injunction that paused the CTA. On January 23, 2025, the U.S. Supreme Court removed the pause. There is still ongoing litigation as to the constitutionality of the CTA, however, while that litigation unfolds, the CTA will be enforced, which means that the BOI Reports must now be filed. On February 18, 2025, FinCEN issued a Notice that BOI Reports must be filed by March 21, 2025. For more information on filing BOI Reports, please see the Offit Kurman informational webpage. Pennsylvania Annual Reporting Requirement In Pennsylvania, starting January 1, 2025, an annual report must be filed with the Pennsylvania Department of State for all domestic and foreign filing associations conducting business in Pennsylvania. This requirement replaces the “ten-year filing” with a yearly filing specific to Pennsylvania. Filing of the federal BOI Report under the CTA to meet federal requirements is not sufficient to meet this Pennsylvania Commonwealth requirement. The Annual Report filing fee is $7 (this fee is waived for non-profit organizations). For each calendar year, corporations must file by June 30; LLCs must file by September 30; and LPs, LLPs, business trusts, and professional associations must file by December 31. There are exceptions to this requirement, including fictitious names, general partnerships that are not LLPs, financial institutions, trademarks and insignias. All other entities conducting business in Pennsylvania must submit this annual report. A failure to report will result in dissolution, termination, or cancellation and a loss of the protection of the entity’s name. If a domestic entity, LLP or electing partnership is administratively dissolved, it will have the opportunity to be reinstated by filing an annual report, paying a reinstatement fee and paying any back fees for delinquent annual reports. If a registered foreign association has been terminated for failure to report, it will be required to submit a new Foreign Registration Statement and will receive a new entity number from the Department of State. Additionally, because a failure to report will result in a loss of protection of the entity’s name, an entity that fails to report may have its name appropriated during its delinquency. The annual reports will include general identifying information including the business name, office address, names and titles of principal officers, and the entity number issued by the Department of State. This information will be publicly available on the Department of State’s website. While these reports may be submitted by mail, it is strongly recommended that they be filed through the Pennsylvania Department of State website. First, the online form will populate any details currently on file with the state to avoid mistakes and delays. Second, and most importantly, an Annual Report that has been submitted online will be automatically approved. For further information on the Annual Report requirements, visit the Pennsylvania Department of State website.
March 4, 2025
Mergers and Acquisitions
The Gray Tsunami: How Retiring Business Owners Can Prepare for a Successful Sale
There is a significant demographic shift headed our way known as the “gray tsunami,” as a very large portion of the American population will reach retirement age and eventually exit the workforce. In fact, we are at a peak time for retirement in America, known as Peak 65 where an average of 4.1 million Americans are projected to turn 65 each year between 2024 and 2027. To put it in perspective, that is about 11,000 people per day. This wave of older adults leaving the workplace stands to have a great impact across the business world as owners pivot to fill these roles left by retiring employees. But it will also have great implications for family-owned businesses as owners reach retirement age and must decide the best course for the future of their company when it is time to step down. A recent Wells Fargo Wealth & Investment Management survey indicates that 52% of business owners do not want their children to run and inherit their business. So, for many, this will mean considering the sale of the business as they look to exit on their own terms. By engaging in advanced planning, entrepreneurs can capitalize on this generational shift, creating a strategic opportunity to ensure their financial security and preserve their life’s work and legacy. Below, we look at some key considerations for baby boomer business owners as they plan for the next chapter in their lives and the potential sale of their family-owned enterprise. Finding the Right Buyer When you have spent your life building your business from the ground up, finding the right buyer when it is time to sell is critical. This means not only finding a buyer that will offer the right price to establish financial security in retirement, but also a buyer who will preserve the values and culture you have established. Finding this perfect buyer means having clearly defined goals for the future of the company. Outline the non-negotiable aspects of the company you want to preserve. This could be anything from retaining your employees to protecting customer relationships. Some owners wish to remain in an advisory capacity during the transition period to ensure continuity, others might want to make sure their business stays family owned. There are numerous types of buyers to consider, each with their own implications for the sale and future of the company. Again, the type of buyer you choose will correlate directly with the goals laid out from the beginning. For those focused more on maximizing value and less on legacy preservation, a strategic buyer such as a competitor could be the best fit. This could involve the integration of the business into a larger organization, so preservation of the company’s employees or culture could be at risk. A sale to a private equity (PE) firm is also an option, noting that the goal here is likely not to hold the business long-term but rather to sell again in 5-7 years. A sale to a family office would likely be a longer-term play. For those focused more on preserving the legacy of the company, selling to key employees or company leadership through a management buyout could be an option, or an Employee Stock Ownership Plan (ESOP) might be a consideration. As both would keep the business with current employees or leadership, maintaining the company culture and vision would be a priority. These are all important points to consider as they help to identify what you are really looking for in a buyer. Owners must work closely with trusted advisors to thoroughly vet potential buyers to ensure they align with those goals, and then carefully craft a deal structure that will best protect their legacy. Maximizing Business Value and Financial Security Maximizing the value of your business well before any exit event is key to establishing financial security for retiring business owners. This means engaging in careful planning, financial optimization, and strategic positioning very early in the process. It will be important to make sure every aspect of the business is streamlined and strengthened including financials, operations, employees, and suppliers. Conduct a comprehensive examination to determine if there are any areas that might need improvement to make the business the most attractive to potential buyers. Making necessary adjustments early on will help to create the best valuation and a smoother due diligence process. Setting the company up for future success by decreasing owner dependency and making sure there is strong leadership firmly in place is also important here. Determining what you will need for your own financial security post-sale must also be top of mind. This should involve working with advisors on significant tax planning to ensure the sale will be structured in the most beneficial way to minimize your tax liabilities as the seller. It will also be important to have a strategy for wealth management to ensure the proceeds of the sale will work for you. Legal Considerations As with any transaction, the sale of a family-owned business also comes with many legal considerations that can have a lasting impact and must be addressed alongside your legal counsel to minimize risk. These can include but are not limited to the following issues: Structuring the sale in the manner that best reduces tax implications and minimizes liabilities for the seller. Planning to avoid excessive capital gains and estate taxes. Conducting due diligence preparation to verify that all information Is accessible and in place and to resolve any outstanding issues. Ensuring liability protection and minimizing risks through avenues such as indemnification clauses and reps and warranties. Compliance with all regulatory and compliance requirements, which can become more complex based on some industries. Conclusion When a business owner makes the significant decision to sell, it will have long-lasting implications for the owner and the family overall. By working with advisors early on to carefully plan and prepare, baby boomers can enter retirement knowing they have not only maximized the value of their life’s work, but also preserved the legacy they have established.
February 28, 2025
Business
Financing in the Independent Sponsor and Search Fund World: SBA vs. Conventional Lending
Financing is one of the most critical components of a successful search fund or independent sponsor acquisition, influencing not just deal structure and capital requirements but also long-term financial health and growth potential. Entrepreneurs and investors evaluating a business purchase must carefully weigh two primary financing options: Small Business Administration (SBA) loans and conventional bank loans. While both have their merits, the choice between SBA and conventional lending impacts everything from cash flow management and debt servicing to operational flexibility and future capital raises. Selecting the right option requires a clear understanding of short-term liquidity needs, financial reporting obligations, investor expectations, and the intended growth trajectory of the acquired company. SBA Loans: Flexible but Costly in Equity Terms The SBA 7(a) loan program is a widely used financing tool, particularly for first-time entrepreneurs and acquisitions of lower middle-market businesses. The program is designed to make small business ownership more accessible by offering low down payments, extended repayment terms, and fewer financial covenants compared to conventional loans. Key Advantages of SBA Loans: Lower Equity Requirements – SBA loans typically require only 10% equity, making them an attractive option for buyers with limited personal capital. In contrast, conventional loans often require 20-50% equity, significantly raising the cash burden. Longer Repayment Terms – The standard 10-year amortization schedule allows borrowers to maintain lower monthly payments, easing cash flow constraints. Limited Financial Covenants – Unlike conventional lenders, SBA-backed loans do not impose strict financial performance benchmarks, providing greater flexibility in early-stage business operations. Easier Qualification Process – Many first-time buyers may find it easier to secure an SBA loan compared to conventional financing due to the government-backed guarantee, reducing lender risk. Challenges of SBA Loans Despite their accessibility, SBA loans come with notable downsides, particularly for search funders and independent sponsors looking for long-term capital efficiency and equity retention: Personal Guarantee Requirements – SBA loans require personal liability from the borrower, meaning that if the business fails, personal assets may be at risk. Restrictions on Seller Notes & Subordinated Debt – The SBA often limits the use of seller financing and additional subordinate debt, making capital structuring more rigid. Prepayment Penalties & Financing Limitations – Borrowers looking to refinance into more favorable debt structures down the road may face prepayment penalties, increasing overall financing costs. Growth Limitations – The lack of institutional-style covenants can prevent businesses from building the structured financial discipline needed for future capital raises or attracting private equity investment. For sponsors and search fund entrepreneurs planning recapitalization, secondary financing rounds, or eventual exit strategies, the limitations associated with SBA loans should be carefully considered. Conventional Bank Lending: More Rigid, but (Maybe) a Stronger Long-Term Fit For experienced operators or businesses with strong existing cash flow, conventional loans can be a more sustainable long-term financing solution. These loans provide greater flexibility in structuring deals, but they also come with stricter requirements. Key Advantages of Conventional Loans: Higher Loan Amounts – Unlike SBA loans, which cap at $5 million, conventional banks can finance larger acquisitions, making them more suitable for companies with $5M+ in EBITDA. Stronger Banking Relationships – Working with a commercial bank can create opportunities for long-term financial partnerships, including credit facilities, treasury services, and strategic capital allocation. More Favorable Equity Retention Terms – Conventional lenders often allow higher levels of seller financing and preferred equity arrangements, giving the buyer greater control over the capital stack. Stricter Covenants: More Financial Controls and Reporting Unlike SBA loans, conventional financing requires detailed financial oversight, which, while adding complexity, can ultimately benefit long-term financial planning and investor confidence: Debt Service Coverage Ratios (DSCR) – Lenders typically mandate a minimum DSCR threshold, ensuring the business maintains healthy cash flow relative to debt obligations. Regular Financial Reporting – Borrowers must provide quarterly and annual financial statements, reinforcing financial discipline and operational transparency. Leverage & Liquidity Limits – Many conventional loans include leverage constraints, preventing businesses from taking on excessive debt that could jeopardize financial stability. While these restrictions may seem burdensome, they prepare companies for future institutional investment and create stronger exit opportunities by making businesses more attractive to private equity firms and strategic acquirers. Choosing the Right Financing for Sponsors and Search Funds The decision between SBA and conventional financing depends largely on the business model, investor profile, and long-term capital strategy of the acquirer. SBA Loans Are Best For: First-time search funders acquiring sub-$5 million EBITDA businesses Deals where seller financing is limited or unavailable Entrepreneurs seeking maximum leverage with minimal equity investment Buyers prioritizing cash flow flexibility over institutional financing constraints Conventional Loans Are Best For: Larger acquisitions requiring more flexible financing structures Search funders looking to build long-term banking relationships Companies planning to secure future private capital or institutional investment Acquisitions where financial discipline and structured reporting will be critical for growth and scalability Final Thoughts: Aligning Capital with Growth Strategy For independent sponsors and search fund entrepreneurs, financing is about more than just getting the deal done—it’s about positioning the business for long-term success. SBA loans can provide immediate access to capital, but conventional financing ensures long-term scalability and financial discipline. Navigating the complexities of acquisition financing requires strategic planning and expert guidance. Working with an experienced attorney and financial advisor can help independent sponsors and search funders structure deals properly, negotiate loan agreements, and ensure compliance with lender requirements, ultimately protecting long-term equity value.
February 28, 2025
Estates and Trusts
Essential Legal Documents Transpeople Must Update for Protection
Navigating life as a transgender individual involves critical steps toward ensuring that your identity is recognized legally and accurately, particularly in the current political climate. Updating your legal documents is an essential part of the process, especially in a world where current systems are not designed with gender diversity in mind. Updating these documents not only reflects your true identity but can also help you avoid potential challenges, whether it is at the doctor's office, in the workplace or when traveling. Below is a comprehensive list of essential legal documents that every trans person should consider immediately to ensure their identity is represented accurately: Legal Name Change One of the most important steps in affirming your gender identity is ensuring your government-issued identification reflects your gender and name. The process of a name change is different in every state. In New York, your local county Supreme Court provides an administrative form to request a name and gender marker change, which is the first step to ensure that all other government IDs can then be changed to align with your true identity. Once approved in New York, you will receive a court order to reflect your name and gender marker. A court order is not required in all states; many states have an administrative process to effectuate the change. Name Change: In New York, unless you are changing your name via marriage, adoption, divorce or citizenship, a court order is required. Once your name and gender marker are legally changed via court order, you may then update your driver’s license and begin the process of updating all other government IDs, including the reissuance of your birth certificate as discussed below. Gender Marker: In some states like New York, you can update the gender marker on your identification to reflect your gender identity. While the process and requirements vary by state, as discussed below, some states require proof of medical transition or a letter from your healthcare provider. Birth Certificate The birth certificate is a foundational legal document. The process of changing a birth certificate varies from state to state and will involve an administrative process or filing a court petition to obtain a court order or directive reflecting the change in name and gender marker. Name Change: Some states allow you to amend your name on the birth certificate without any additional steps or documentation, while others may require a court order. Gender Marker: New York allows you to amend the gender marker on your birth certificate. As of February 2025, Florida, Kansas, Montana, Oklahoma, Tennessee, and Texas are the only states that prohibit the changing of gender marker. Alabama, Arizona, Arkansas, Georgia, Guam, Kentucky, Louisiana, Michigan, Missouri, Nebraska, North Carolina, and Wisconsin all require medical proof of gender change. Certainly, many states make it challenging to amend the gender marker, but it is absolutely worth pursuing to ensure that your birth record aligns with your gender identity. Social Security Upon your legal name change you should update your records with the Social Security Administration (“SSA”). Updating your Social Security records ensures that your name aligns with your legal identity, especially for the purposes of employment, Social Security Disability or Retirement benefits, and taxes. In some states, failing to update your identity with the SSA could even result in the suspension or revocation of your state driver’s license. Name Change: You may update your name by submitting a legal name change document to the Social Security Administration, which is available online at www.ssa.gov. Gender Marker: As of the date of this publication, the Trump Administration has issued a directive to exclude the use of gender marker “X” and prevent the update of gender markers to reflect a transition. Passport Updating your United States Passport information is important for those who wish to travel outside of the country. Your passport must reflect your name and should reflect your gender to ensure ease of travel. A passport reflecting your true identity is necessary not only to leave the US but also to deal with border officials, obtain visas, and participate in immigration processes in other countries. It should be noted that an inconsistent gender marker does not automatically prohibit your travel, but it may cause complications within the United States when leaving or upon arrival in a different country. Name Change: To update your United States Passport, you will need to provide the court order or administrative ruling from your state reflecting your name and a copy of your newly issued birth certificate. Gender Change: The Trump administration has suspended issuing passports with X markers and passport renewals with differing gender markers. This directive is currently pending litigation and there has been no final determination of its legality. As of the date of the publication of this article, it is being widely recommended by trans-rights groups that until there is a legal determination and the policy is released, trans people who have a current, valid passport should refrain from attempting to renew or change it. Health Insurance and Medical Records Your health insurance and medical records should reflect your correct name and gender to prevent confusion and ensure that you are receiving the appropriate medical care. It goes without saying that doctors entrusted to provide medical care and treatment for their patients should be informed of your proper name and gender in the furtherance of health care. HIPAA requires that healthcare providers update a person’s gender identity or transition care and are prevented from sharing this information without your express consent. However, there are several legal battles brewing in states regarding the release of this information for minors and gender-affirming care. Health Insurance: You should contact your insurance provider to update your name and gender on all of your insurance records. In general, proof of a name change and gender markers are requested. Medical Records: Update your doctor, therapist, and other healthcare providers on your name and gender marker so that your medical records accurately reflect your identity. This will also help you avoid issues when seeking medical care, such as incorrect gender-specific treatments or tests. Employment Records Updating your name and gender with your employer ensures that your employer recognizes your identity at your company. Providing this updated information to your employer will avoid unnecessary confusion in official communication from your company, payroll, retirement benefits and health care benefit administration. Name Change: Once you have legally changed your name in your state, you must notify your employer so that your employer may update their records, including the name on your paychecks, your tax documents and your benefits enrollment. Gender Marker: Some employers offer the ability to update gender markers in their records, which can be important for workplace respect and to avoid misgendering. Many employers provide the opportunity for its employees to indicate their gender within office systems, such as email and signature blocks, to promote a culture of respect and affirmation. Estate Planning Transgender individuals should make sure their estate planning documents reflect their identity and desires. They should also ensure that their loved one’s estate planning documents naming them also reflect their name and gender marker changes. These documents may include: Executor, Trustee and Beneficiary Updates: Ensure that your name is properly reflected in your own estate planning documents such as your Last Will and Testament and Trust instruments. For others, ensure that the names of your chosen executors and beneficiaries in your documents are accurate and that their gender is respected in all related documents so that they can be easily identified in the probate or estate administration process. While many states, such as New York, have done away with gender terminology within official legal documents, it is important to note that others’ estate planning documents must also be changed if you were referred to in your parents’ documents as a daughter or a son and said identification no longer applies to you. Health Care Proxies and Powers of Attorney: Make sure that your health care proxies and health care appointment documentation have been updated with both your proper name and gender markers, as well as your agents’ proper names and gender markers. The same is true for Powers of Attorney, which are presented to financial institutions to gain access to your financial accounts. If an identity cannot be verified, often financial institutions will restrict access to prevent fraud and financial misdealing. Bank Accounts and Financial Documents Financial institutions require legal documentation to update your name on accounts, checks, and credit cards affiliated with the institutions. Name Change: You should provide your legal name change court order or administrative determination to your bank and financial institution to update the name on your accounts, credit cards, and other financial documents. You should also ensure that named beneficiaries on your financial accounts are updated when your loved ones have name changes. Gender Marker: While gender markers do not always need to be updated for financial documents, you may request that your gender be reflected accurately in your account details to avoid confusion. Academic Records Educational records held with universities and educational institutions must properly reflect one’s identity. Diplomas and other credentials should be updated to reflect your name and gender marker. Most private educational institutions allow you to change your records to match your name and gender identity; however state institutions will likely follow state law as it relates to name and gender markers. Name Change: You should contact the registrar at your educational institution or university to request that your name be updated on your academic records and diploma to reflect your identity. Gender Marker: Depending on the institution’s policies, you may be able to update your gender marker in school records. Updating official legal documents is a process that requires legal and administrative processes and often patience. However, it is an important step toward living authentically and without continued administrative hassle. Whether you are transitioning or you simply wish to align your documents with your identity, updating your legal records ensures that you are recognized for who you are.
February 26, 2025
Estates and Trusts
Not Properly Insuring a Collection
This is Part 8 in a Series of the Top 10 Mistakes Made When Planning for Art and Other Collectibles: A Guide for Professionals and Their Clients. Accidents happen—whether a piece of artwork or a collectible is damaged in shipping, affected by fire or water or even knocked over by Steve Wynn’s elbow. Having the right insurance in place can help mitigate financial losses and protect a client’s investment. Without proper coverage, even a minor incident could result in significant economic consequences. When insuring a collection, there are three primary options: Including it as part of a homeowner’s policy, Scheduling individual items separately, or Obtaining blanket coverage. For clients with valuable or extensive collections, we often recommend the additional effort and cost of scheduling items separately. This approach typically requires obtaining a qualified appraisal to establish fair market value at the time of coverage. To ensure continued protection, these appraisals should be updated regularly so that coverage reflects the collection’s current worth, rather than its purchase value. Total loss claims are rare. More often, insurers assess the damage to determine if an item is salvageable and provide funds for repairs or restoration. Unfortunately, this can lead to a loss in value that remains unquantifiable until the item is sold. To best protect collectible assets, clients should seek insurance from companies specializing in the relevant categories of items, even if it comes at a higher upfront cost. Additionally, different policies may be necessary if parts of a collection are housed in multiple locations. Are the items in a private residence, a storage facility or on loan to an institution? Are they owned directly by the collector or held within an entity or trust? Understanding these nuances ensures that each piece remains properly protected.
February 25, 2025
Estates and Trusts
Death Tax Repeal Act
On February 13, 2025, Republican lawmakers in Congress introduced the Death Tax Repeal Act, which aims to permanently eliminate the federal estate tax. Since 2015, various legislative efforts to repeal the estate, gift, and generation-skipping transfer (GST) taxes have been introduced in Congress but have failed to pass. Current Federal Transfer Tax Framework The Internal Revenue Code imposes a tax on an individual’s right to transfer property during life and at death. The federal gift tax applies to lifetime transfers at a rate of 40%, though individuals benefit from a "unified credit" that allows a certain value of transfers to be made tax-free during life and at death. In 2025, the unified credit stands at $13,990,000. Any combined transfers exceeding this amount are subject to the 40% tax rate. Additionally, the GST tax applies to transfers made to individuals who are two or more generations below the transferor or to certain trusts benefiting such individuals. The GST tax is also levied at 40%, with an exemption matching the unified credit amount of $13,990,000. Impact of the 2017 Tax Cuts and Jobs Act (TCJA) Under the 2017 Tax Cuts and Jobs Act (TCJA), enacted during the first Trump administration, the unified credit and GST exemption were temporarily doubled. However, since the TCJA was passed as a reconciliation measure, it is set to expire on December 31, 2025. Unless Congress takes further action, the unified credit and GST exemption will revert to their 2016 levels, adjusted for inflation, or approximately $7,000,000 each. Key Provisions of the Death Tax Repeal Act The Death Tax Repeal Act seeks to go beyond simply extending the TCJA provisions beyond December 31, 2025. If enacted, it would: Permanently repeal the federal estate and GST taxes, allowing individuals to transfer unlimited amounts of property at death free of transfer tax. Establish a permanent $10,000,000 lifetime exemption against the gift tax (indexed for inflation to $13,990,000 in 2025). Transfers exceeding this exemption would be subject to a 35% tax rate. Retain the current "step-up" in basis for capital assets at death, minimizing capital gains taxes for beneficiaries upon the sale of inherited assets. Implications for Estate Planning The passage of the Death Tax Repeal Act would significantly impact estate and wealth transfer planning. Estate planning documents that currently reference the federal unified credit or GST exemption amount would need to be reviewed to ensure they align with the proposed law and the client's intentions. Additionally, several states impose a separate estate or inheritance tax — Connecticut, District of Columbia, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nebraska (County inheritance tax only), New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Washington and Wisconsin — or have decoupled from federal estate tax provisions. If the Death Tax Repeal Act becomes law, many of these states will continue to impose their own estate and/or inheritance taxes. Clients residing in or owning property within these states may require substantial revisions to their estate planning documents to optimize state transfer tax savings. Next Steps Our team of estate and trust attorneys is closely monitoring the progression of the Death Tax Repeal Act in Congress. We are available to answer any questions and review your estate planning documents to ensure they accurately reflect your wishes under the proposed law.
February 25, 2025
Real Estate
NYDEC Expands its Jurisdiction over Wetlands
Expansive changes to New York’s Freshwater Wetlands Permitting Program took effect on January 1, 2025, increasing regulated freshwater wetlands. The changes came after the New York State Department of Environmental Conservation (NYDEC) enacted new regulations which amended its Freshwater Wetlands Jurisdiction and Classification rules. The updated rules are expected to protect an additional one million acres of wetlands by 2028. The changes come after New York’s legislature modified the Freshwater Wetlands Act (the “FWA”) in 2022 to make several changes to the way the Freshwater Wetlands Program is to be administered for those in need of Freshwater Permit prior to conducting certain activities in a protected wetland or adjacent area. Such activities include, but are not limited to, the excavation or grading of soil, the modification or construction of buildings, septic systems, bulkheads, dikes or dams, and the application of pesticides in wetlands. NYDEC announced that the changes provide increased protections for wetlands that will help the New York adapt to increased flooding risk associated with the changing climate and conserve critically important natural resources, including threatened and endangered species and the wetlands that they inhabit. These environmental benefits result from NYDEC expanding the areas that are subject to its regulations and the requirement to obtain jurisdictional determinations and/or Freshwater Wetland permits for projects located in such areas. The newly enacted regulations take effect in two stages. The first, which became active on January 1, 2025, expands the areas that fall within the definition of “Wetlands of Unusual Importance.” This includes wetlands in urban and flood-prone areas, wetlands inhabited by rare plants or animals, wetlands important to water quality, and vernal pools. The second stage begins on January 1, 2028, and reduces the size of wetland areas that trigger NYDEC’s jurisdiction from 12.4 acres to 7.4 acres. Individuals in New York can be assured that this expansion in jurisdiction will increase the number of permits needed under the FWA. Another significant change is that property owners must now apply to NYDEC for a jurisdictional determination to ascertain: whether their land contains either state-regulated freshwater wetlands or state-regulated adjacent areas (a “parcel jurisdictional determination”) and/or whether a proposed activity on a parcel subject to NYSDEC freshwater wetlands regulation requires a permit (a “project jurisdictional determination”). Simply, the new regulations not only require significantly more project developers to work with the DEC to determine if their project impacts freshwater wetlands but also require landowners who are planning activity on their property to obtain a determination from NYDEC as to whether freshwater wetlands are located on any portion of their property. In order to allow for a more just transition for permittees, certain projects are exempt from the new requirements until either January 1, 2027 or July 1, 2028, depending on the type of project. The revised regulations become applicable on January 1, 2027, for “minor” projects (as defined in 6 NYCRR § 621.4) or on July 1, 2028, for “major” projects, provided that such projects had achieved certain developmental thresholds before January 1, 2025. In addition to the finalized 2025 regulations, in order to ease the enhanced permitting burdens, DEC has published a statewide draft general permit for public comment (GP-0-25-003). This can be found on DEC’s Freshwater Wetlands General Permit website, for various activities in State-regulated freshwater wetlands (the “Permit”). The General Permit is proposed to be issued for the following: Repair, replacement, or removal of existing structures and facilities. Construction or modification of various residential, commercial, industrial, or public structures. Temporary installation of access roads and laydown areas. Cutting trees and vegetation. Drilling test wells. Routine beach maintenance and replenishment. The comment period runs until January 27, 2025. Considering these changes to the Freshwater Wetland Program, it is imperative that new or expanding project applicants work with experienced wetland permitting attorneys in order to avoid project delays and/or assessment penalties.
February 21, 2025
Business
Congress Extends Telehealth Waivers
On December 20, 2024, as part of its stopgap government funding legislation (the “Continuing Resolution”), Congress issued an important extension of telehealth waivers and flexibilities currently in place for the next two years through December 31, 2026. The Continuing Resolution also includes the following measures relevant to the telehealth market segment: Patients’ homes will continue to serve as eligible Originating Sites for all telehealth services. All Medicare-enrolled providers will continue to be eligible providers for the purpose of providing telehealth services. There will continue to be no geographic limitations on where the patient or the eligible provider is physically located within the United States during a telehealth service. Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs) will continue to serve as eligible Distant Sites for non-behavioral health telehealth services. Providers may continue to use audio-only technology to provide reimbursable telehealth services. Hospice providers may continue to use audio-visual telehealth technologies to conduct face-to-face encounters to recertify hospice care eligibility. Additionally, the Continuing Resolution further delays the requirement that Medicare beneficiaries have an in-person visit with their behavioral health provider within six months of their initial telehealth appointment. This CR is indicative of the continued evolution of telehealth services, the trajectory of which accelerated dramatically during the COVID-19 Public Health Emergency. It has become clear that legislators believe telehealth services to be an integral aspect of the U.S. healthcare delivery system. The challenge in the future will be figuring out which industry segments (i.e., behavioral health, rural health access, remote monitoring) will benefit the most from making these rules permanent.
February 20, 2025
Commercial Litigation
How Mediation and Arbitration Can Be Effective Alternatives to Traditional Litigation
Litigation can be a costly and resource-intensive endeavor, particularly when the disputes at hand are complex in nature. For clients who are new to the litigation process, it is not unusual to find the various stages and procedural intricacies daunting. From motions and deadlines to depositions, hearings, and beyond, the demands of litigation can quickly become overwhelming. However, it is important to recognize that there are viable alternatives available, such as Alternative Dispute Resolution (ADR), especially in the early stages of a dispute, that may offer more efficient and cost-effective solutions. These alternatives can help clients navigate the process with greater clarity and achieve favorable outcomes without the need for prolonged courtroom battles. ADR encompasses a range of techniques designed to resolve disputes outside of the formal courtroom setting. These methods can help parties avoid the time-consuming and expensive nature of court proceedings while maintaining greater control of the outcome. The two most utilized forms of ADR are mediation and arbitration. Each offers distinct advantages and procedures tailored to different types of disputes and the needs of the parties involved. Mediation Mediation is a structured process in which a neutral third party, known as the mediator, helps two or more parties resolve a dispute or conflict. The mediator does not make decisions or take sides but facilitates communication between the parties to help them understand each other’s perspectives, identify the underlying issues, and explore potential solutions. The goal of mediation is to reach a mutually agreeable solution that all parties are satisfied with, without the need for formal legal proceedings or a court trial. Mediation can be used in various contexts, such as trust and estate contests, contractual disagreements, corporate disputes, and more. Mediation is typically voluntary, confidential, and often less adversarial than litigation, making it a more flexible and collaborative way of resolving disputes. Arbitration Arbitration is a formal method of resolving disputes in which an impartial third party, known as the arbitrator, is appointed to hear the arguments and evidence from both sides and then make a binding decision. Unlike mediation, where the mediator helps the parties reach their own resolution, the arbitrator acts like a judge, making a final ruling on the matter. The arbitration process is typically less formal and more streamlined than a court trial, but it still involves procedures such as submitting evidence, presenting arguments, and sometimes conducting hearings. Arbitration can be used in various areas but is most often used in corporate disputes as many contracts include arbitration clauses requiring arbitration in lieu of traditional litigation. Arbitration is usually binding, meaning that the decision made by the arbitrator is legally enforceable and cannot be appealed, except in very limited circumstances. This makes arbitration faster and more predictable than litigation, but it also means that the parties have less control over the outcome. It is often chosen because it is typically faster, more cost-effective, and more private than going to court.
February 19, 2025
Business
Search Funds Are Changing the Small Business M&A Landscape
In recent years, search funds have seen increased usage in small business acquisitions, offering a structured yet flexible approach to acquiring and growing companies. The "origin story" is often credited as arising out of Stanford Business School in the 1980s, and has gained traction among entrepreneurs, investors, and family offices since then. It provides a new path to ownership and long-term value creation. So, why are search funds transforming the small business M&A landscape? The answer starts first with the structure of these search funds, how they differ from traditional private equity, and the legal and financial considerations investors and entrepreneurs need to understand. They share many similarities with independent sponsor deals but also have a number of stark differences. What Is a Search Fund? A search fund is a structured investment vehicle designed to help an entrepreneur find, acquire, and operate a small business. It typically follows a two-stage process: Search Phase Investors provide initial capital to support a qualified entrepreneur as they search for a business to acquire. The timeline for this search can typically take 12–24 months and is often dictated by the terms of the investment documents. This initial capital is used to cover due diligence expenses, professional fees, and provide some form of compensation to the searcher (although this last point can turn off some investors). Searchers typically target businesses that fit a particular investment thesis, such as those with strong recurring revenue, low customer concentration, and proven stability. The process requires extensive outreach, negotiation, and due diligence, making it both intensive and time-consuming. Acquisition & Operation Phase Once a suitable business is identified during the search phase, the entrepreneur leads the acquisition, often bringing in additional investor capital and financing for the purchase. SBA loans are often utilized as a financing option unless it is an asset-heavy target, in which case a traditional lender may be willing to finance the deal. Post-acquisition, the entrepreneur operates and scales the business, creating value for investors over a 5- to 10-year horizon. This differs from independent sponsor deals where the independent sponsor may prefer a "hands-off" approach rather than taking on the "operating partner" role. The target size for these acquisitions is typically small businesses with $1M–$5M in EBITDA, focusing on stable, profitable companies where an operational leader can add significant value. Some might be willing to acquire a business with less stable footing if there are clear deficiencies that can be quickly remedied. An example of these remedies can include digital transformation, improved sales or operational processes, faster accounts receivable cycles, or vendor/supplier issues that can be addressed with fresh capital. Why Are Search Funds Growing in Popularity? Aging Business Owners & Succession Gaps Many Baby Boomer-owned businesses are coming up for sale, but they lack internal succession plans. We've all heard about the upcoming "transfer of wealth." This is largely what is being discussed. There are huge amounts of capital locked up in small business ownership. Search funds provide a structured solution, offering business owners an exit while ensuring continuity under capable leadership. Alternative to Private Equity & Traditional M&A Private equity (PE) firms often seek larger, high-growth businesses or require substantial restructuring post-acquisition. Search funds focus on stable, cash-flow-positive businesses, often without excessive debt financing. These search funds also offer emerging managers a platform to showcase their skills and set up future (larger) deals. Strong Investor Interest in Small Business Buyouts Many family offices, high-net-worth individuals, and independent investors are attracted to the long-term, hands-on nature of search fund investments, and the chance to mentor emerging entrepreneurs. Unlike traditional PE, investors partner directly with an operator, aligning interests toward sustainable growth rather than quick flips. Proven Success & Institutional Recognition Studies show that successful search funds yield attractive returns. Stanford’s research indicates an average IRR of 30–35% for successful search fund investments. Business schools and institutional investors are increasingly supporting search funds as a legitimate investment class, with many schools creating "entrepreneurship through acquisition" workshops or curriculums. Key Legal & Financial Considerations While search funds present compelling opportunities, structuring the deal properly is critical to long-term success. Here are key legal and financial considerations investors and entrepreneurs should keep in mind: Legal Considerations: Fund Formation & Investor Agreements: Search fund structures vary—some use traditional LP/GP models, while others form LLCs with pro-rata investor rights. Well-drafted legal agreements define profit splits, investor rights, and operational control. Due Diligence & M&A Structuring: Business acquisitions involve legal, tax, and regulatory complexities. Asset vs. stock purchases have different tax implications and liability considerations. Governance & Founder-Investor Alignment: Search funds operate with investor oversight, often with board seats or advisory committees. Proper corporate governance structures protect both investors and the entrepreneur. Financial Considerations: Equity vs. Debt Financing: Search funds typically rely on equity-heavy funding rather than high levels of debt. However, some deals incorporate SBA 7(a) loans or seller financing to optimize capital efficiency. Profitability & Valuation Metrics: Investors focus on stable EBITDA margins, typically in the 15–25% range. Many search-acquired companies operate in low-tech, recession-resistant industries (e.g., B2B services, healthcare, niche manufacturing). Exit Strategies: Search fund exits typically occur via private equity acquisition, strategic buyer sale, or investor buyout. Holding periods range from 5–10 years, aligning with long-term wealth creation. Should You Invest in or Launch a Search Fund? For investors, search funds offer a compelling alternative to traditional private equity, allowing for: Higher potential returns in undercapitalized small business sectors. More direct involvement and operational influence in acquired businesses. Alignment with long-term value creation, rather than short-term financial engineering. For entrepreneurs, search funds provide: A structured pathway to business ownership with investor-backed support. Access to capital and advisory networks without needing personal funds upfront. A leadership role with strong financial upside. Final Thoughts: The Search Fund Model Is Likely to Continue Trending Upwards As small business ownership transitions accelerate, search funds will continue to play a growing role in the M&A ecosystem. For investors, they provide an opportunity to back talented entrepreneurs in acquiring and scaling high-quality businesses. For "searchers" or buyers, search funds offer a viable and structured alternative to a startup.
February 19, 2025
Estates and Trusts
Not Keeping Records of Your Purchases and Sales, Location, and Authentication Documents – Implications of Restrictions and Patrimony
This is Part 7 in a Series of the Top 10 Mistakes Made When Planning for Art and Other Collectibles: A Guide for Professionals and Their Clients. The provenance of any item is essential to determining its value. Proper documentation of an item’s history and proof of chain of title help establish authenticity, ensuring the highest fair market value at the time of sale. It also prevents clients from wasting money on items later found to be inauthentic. A complete record of an item’s history and chain of title should include the item’s current location and any restrictions on selling or moving the item. This is particularly important when the asset holds historical significance, and the client plans to transfer items between jurisdictions with high taxes on the sale or use of art and collectibles. Understanding the limitations of an item’s sale or transfer can be crucial. Limitations on the use of artwork, as well as patrimony claims often affect the value of an item. For example, in the Estate of Ileana Sonnabend case, Ms. Sonnabend, an art dealer, owned Robert Rauschenberg’s Canyon, a collage featuring a stuffed bald eagle. Federal laws prohibit the possession or trafficking of bald eagles, dead or alive, making the artwork unsellable – although Ms. Sonnabend’s gallery had received a permit allowing the work to be loaned and exhibited during her lifetime. On the federal estate tax return filed for the estate, Canyon’s value was reported as zero. The IRS Art Advisory Panel challenged the valuation, asserting a $65 million fair market value under the assumption that it could be sold on the illicit market to "a recluse billionaire in China." After litigation, the estate resolved the issue by making a long-term loan of Canyon to MoMA in New York City, receiving a full charitable deduction for its full value. Many nations and communities advocate for the return of artworks that hold historical, spiritual, or national significance, arguing that these pieces were taken under coercive or unethical conditions. Patrimony claims often center on the rightful ownership and cultural heritage of works that have been displaced, looted, or unlawfully acquired. Museums and private collectors frequently face both legal and ethical dilemmas when addressing repatriation demands. The most high-profile case involves the Elgin Marbles—renowned Greek sculptures removed from the Parthenon in Athens and currently housed in the British Museum. A UK parliamentary inquiry in 1816 concluded that Britain had legally acquired the Marbles. However, in 2000, the Greek government, in anticipation of the opening of the new Acropolis Museum in Athens, formally requested their return. In 2013, Greece sought UNESCO’s mediation between the Greek and UK authorities regarding the Marbles’ return, but both the UK government and the British Museum rejected UNESCO's offer to intervene. In 2021, UNESCO asserted that the UK had an obligation to return the Marbles and called on the UK government to begin negotiations with Greece. Despite these developments, the controversy remains unresolved. At the Parthenon Museum in Athens, a portion of the original Marbles are on display with white casts held in place of the Marbles, which are still currently on display at the British Museum. While not every client owns artwork as unique as Canyon or the Elgin Marbles, understanding the nuances of a client’s collection is essential for proper representation and estate planning. Every client should keep clear and accurate records that include the acquisition date of each item, its location, and any restrictions on its use.
February 18, 2025
Family Law
Tracing Offshore Accounts in Divorce: How to Uncover Hidden Assets
Offshore accounts are appealing to those trying to hide money because they offer banking secrecy in certain jurisdictions, lax reporting requirements compared to domestic accounts, and complex structures involving shell companies, trusts, or cryptocurrency transactions. However, financial secrecy laws have weakened in recent years due to international regulations, making it harder for individuals to conceal offshore accounts completely. Hiding money offshore often leaves clues. Be alert if your spouse suddenly becomes secretive about finances, transfers large sums to foreign entities, owns international businesses or trusts, reports significantly lower income than expected, and/or has foreign tax filings or receives mail from offshore banks. If any of these signs are present, it’s time to take action. Start with Financial Records Carefully review all available documents, including: Tax Returns: Look at Schedule B (foreign accounts), Schedule D (capital gains from international investments), and FBAR (Foreign Bank Account Report) filings. Bank & Credit Card Statements: Identify unexplained wire transfers to foreign banks or unknown entities. Loan Applications: These often list all assets more honestly than tax returns. Work with a Forensic Accountant Forensic accountants specialize in uncovering hidden assets by analyzing financial patterns, tracing wire transfers, and identifying discrepancies that may indicate offshore holdings. They use advanced financial tracking methods to follow money trails. Leverage Legal Discovery Tools Your attorney can use various legal means to force disclosure of offshore accounts, including requiring your spouse to answer written questions under oath, demanding financial documents related to foreign assets, questioning your spouse under oath about offshore holdings, and/or issuing subpoenas to compel banks, accountants, and business partners to provide financial records. Utilize International Regulations & Reporting Laws Many offshore jurisdictions are now subject to financial disclosure agreements including: FATCA (Foreign Account Tax Compliance Act): Requires foreign banks to report U.S. account holders to the IRS. Common Reporting Standard (CRS): Facilitates global exchange of financial data between governments. Bank Treaties & International Agreements: The U.S. has information-sharing treaties with various countries that can help uncover hidden accounts. Hire an International Asset Tracing Expert If your spouse has business dealings or financial ties in a specific country, an international investigator with expertise in that jurisdiction’s banking laws can be invaluable in identifying hidden assets. Seek Court Orders & Legal Action If your spouse refuses to disclose offshore accounts, your attorney may request contempt of court orders for non-compliance, injunctions to freeze assets before they are moved, and/or orders to compel disclosure of offshore financial records. Don’t Overlook Cryptocurrency & Digital Assets Many individuals hide wealth in cryptocurrency wallets, offshore digital banks, or decentralized finance (DeFi) platforms. Forensic accountants can analyze blockchain transactions to uncover hidden crypto holdings. Tracing offshore accounts in a divorce is complex, but not impossible. With the right combination of forensic accounting, legal tools, and international regulations, hidden assets can be uncovered. If you suspect offshore accounts in your divorce case, consult an experienced attorney and financial expert to ensure a fair and transparent division of assets.
February 18, 2025
Intellectual Property
Navigating the USPTO’s New Trademark Fees
It’s finally here. After months of warnings, announcements, and uneasiness about their application, the U.S. Patent and Trademark Office implemented a number of trademark-related fee changes in January 2025. These fees changes, though, are more than just fee increases. Many of the new fee changes will require new filing practices and strategies to keep Trademark Office fees to a minimum, especially for filings by foreign applicants. Make Sure Your Application Has All Required Information In the past, it was possible to file an application without all of the required information. For example, an application could be filed without a signature and the signature submitted later. While this is still possible, applications filed without the required information will now be subject to an “insufficient information fee” of $100 per class. In some instances, these fees will be incurred at the time of filing (the electronic filing form is supposed to indicate what omissions will incur this fee), and in some instances, they will be incurred during the examination. For example, if an application is for the name of a living individual and is filed without written consent, or if the application is for a mark that is a foreign word and is filed without a translation, the application will incur an insufficient information fee during prosecution. Further, the insufficient information fee will be charged to new classes that are added to an application during prosecution if the application was filed with insufficient information. The Trademark Office does permit pre-examination amendments. The Trademark Office has advised, however, that using a pre-examination amendment to supplement an application with information omitted from the application at filing will wind up incurring the insufficient information fee during prosecution, eliminating a tool that was often used when an application needed to be filed in a hurry. These changes will put a premium on evaluating an application before it is filed to make sure that some effort is made to address all necessary requirements (e.g., a description of the mark, a transliteration, a color claim, applicant’s name, address, and domicile; etc.) Use the ID Manual Applications with listings of goods and services taken from the Trademark Office’s ID Manual (available here: https://idm-tmng.uspto.gov/id-master-list-public.html) are now charged a lower filing fee ($350) than those with listings not taken from the ID Manual ($550). Thus, using the ID Manual where possible is beneficial. In order to be entitled to the lower fee, each item in the listing for a particular class must be taken from the ID Manual. If one item in the listing is not from the ID Manual, then the higher fee will be charged. Further, the Trademark Office has explained that if any text is entered in what it calls the “free-form text” box in an application, the higher fee will be charged, even if some or all of the listings are taken from the ID Manual. Using descriptions from the ID Manual is not necessarily a guarantee that an applicant will be able to avoid the higher filing fee. Some descriptions in the ID Manual require applicants to fill in certain information. Guidance from the Trademark Office indicates that if a good faith attempt to fill in that information is made, the applicant will not be charged the additional fee during examination (use of a description such as “Printed educational materials in the field of specify subject matter” would not be considered a good faith attempt). In those situations, it will be up to the examining attorneys to determine if a good-faith attempt has been made. That will be a subjective determination, and it seems fair to expect the Trademark Office to take its familiar position that one examining attorney is not bound by the acts of another when determining what constitutes good faith. The Trademark Office has also indicated that if a party uses, in good faith, descriptions from the ID Manual and then is required to amend those descriptions, the additional fee will not be charged. Moreover, if an applicant files an application with a description from the ID Manual and then amends to a specification that is not in the ID Manual, the application will not incur the additional charge. One issue with the ID Manual is that it does not list every good or service (this can be a particular issue with new products, technology, etc.). One option for resolving this issue is to ask that a particular description be added to the ID Manual. This can be done by sending an email to tmidsuggest@uspto.gov with the following information: the name of the party submitting the proposed identification; an email address for correspondence relating to the proposed identification; and the proposed identification, which should be concise and no more than 25 words. Depending on how long it takes the Trademark Office to add descriptions to the ID Manual, that may not be a practical option (the Trademark Office’s website suggests that reviews will take 1 to 2 business days, and that accepted updates will be made in the next weekly update, but whether that time frame is accurate remains to be seen). Trademark Office guidance indicates that the insufficient information fee will not apply to issues with descriptions of goods or services. Keep Specifications Short One goal of the Trademark Office is to cut down on lengthy descriptions of goods and services. Thus, the Trademark Office has implemented a new fee of $200 per class where a specification entered as free-form text is in excess of 1,000 characters (the fee does not apply to specifications derived entirely from the ID Manual). The fee applies for each group of characters over 1,000, so a specification over 1,000 characters would incur a fee of $200 and a specification over 2,000 characters would incur a fee of $400. According to the Trademark Office, this fee will only be applied at the time an application is filed and will not be assessed during examination. Consider Filing Multiple Applications Instead of Multiclass Applications While a multiclass application may seem like it would be less expensive, under the Trademark Office’s new rules, it could actually be more expensive. For example, any insufficient information fees will be assessed against each class in an application. Further, if an application has two classes, and the description of goods or services for one is taken from the ID Manual and the other is entered as free-form text, both classes will be charged the additional fee due to the use of the free-form text feature. Additionally, if an application is filed using the free-form text option and a new class is added during examination, the fee for that class will be the higher fee, even if the description of the goods or services in that class is taken from the ID Manual. While it can be difficult to predict whether additional classes will have to be added during prosecution, filing a single class application rather than a multiclass application can reduce the likelihood that the higher fee will be incurred. File Through the Madrid Protocol, If You Can Applications filed through the Madrid Protocol are not subject to the new fees discussed above, making that an attractive means of filing in the United States. Use of the Madrid Protocol already had benefits not afforded to direct filings in the U.S.; applicants who file through the Madrid Protocol have six months in which to respond to any Office Actions that may be issued, rather than the three-month response period for applicants who file directly in the U.S., and this will continue to be the case. Applications filed directly in the U.S. will be subject to the Trademark Office’s new fees, even if those applications are filed based on foreign applications or registrations or claim priority to a foreign application or registration. Anyone considering filing directly in the U.S. based on a foreign application or registration would be well served to match the goods or services description in their home filing to those in the Trademark Office’s ID Manual, if possible, in order to avoid additional fees. If the application is based on a foreign application or registration that has already been filed, consider paring down lengthy specifications to avoid surcharges. A Note on Pending Applications Applications filed before January 18, 2025, will not be subject to any of the new fees if filed as TEAS Standard applications. Applications filed before January 18 as TEAS Plus applications (at the lower filing fee) may incur the insufficient information fee, if appropriate. Conclusion The Trademark Office’s fee changes have ushered in a brave new world of trademark practice in the United States. Only time will tell if these changes will accomplish the Trademark Office’s goals. At this point there are some means of avoiding the imposition of the Trademark Office’s new fees (particularly with some planning), and it is likely that the new fees will cause filers from outside of the U.S. to increase their use of the Madrid Protocol. In the end, though, the new fees and procedures reinforce the importance of working with skilled counsel to secure registration of a mark in as efficient a manner as possible.
February 17, 2025
Family Law
Co-Parenting a Child with Medical Issues Post-Divorce
Divorce is challenging under any circumstances, but when a child has medical issues, teamwork is key. Effective co-parenting is crucial to ensure your child’s health and emotional well-being while navigating medical appointments, treatments, and daily care. Some pointers for successfully co-parenting a child with medical needs after divorce are outlined below. Regardless of past disagreements, both parents must put their child's well-being first. This means setting aside personal conflicts and making joint decisions that prioritize the child’s medical care. Keep communication focused on the child’s needs rather than lingering relationship issues. A structured medical plan should be a key part of your co-parenting agreement. This plan may include: Primary care responsibilities: Who will take the child to doctor’s appointments and therapy sessions? Emergency protocols: What steps should be followed in a medical emergency? Medication and treatment schedules: Clear documentation of medication dosages, therapy sessions, and specialist appointments. Ensure both parents have access to medical records and communicate any changes in treatment. Clear and consistent communication is essential. Use tools like co-parenting apps (e.g., OurFamilyWizard, TalkingParents) to share medical updates, upcoming appointments, and concerns. If face-to-face communication is difficult, rely on written communication to keep emotions in check and ensure accuracy. Medical expenses can be significant, so both parents should agree on how to handle costs. Discuss things like who provides health insurance, how out-of-pocket expenses will be divided, and how unexpected medical expenses will be paid. A written agreement can prevent future disputes. Children with medical conditions often thrive on routine. Ensure both homes follow a consistent schedule for medication, therapy, diet, and rest. Disruptions in care can negatively impact their health, so cooperation is key. Medical conditions can be unpredictable, requiring last-minute schedule changes or adjustments to custody arrangements. Both parents should remain flexible and willing to accommodate each other when emergencies arise. If communication becomes strained, consider involving a mediator, family therapist, or parenting coordinator. These professionals can help facilitate discussions and create solutions that serve the child’s best interests. Divorce can be emotionally challenging for any child, but those with medical issues may feel additional stress. Encourage open conversations about their feelings, reassure them of both parents' love, and work together to create a stable environment. Conflicting medical opinions can create tension. Work together to make informed decisions, consulting with doctors, specialists, or medical advisors when needed. If disagreements persist, mediation or legal counsel may be necessary. Caring for a child with medical needs is demanding, and co-parenting adds another layer of complexity. Ensure you’re also taking care of your own mental and physical well-being so that you can be the best parent possible. Co-parenting a child with medical issues after divorce requires teamwork, patience, and mutual respect. By prioritizing your child’s health, maintaining open communication, and working together, both parents can provide the stability and care their child needs to thrive.
February 17, 2025
Franchise Law
Maryland Franchise Reform Act Introduced
On January 31, 2025, Delegate Marc Korman of Montgomery County introduced Maryland House of Delegates Bill 992, entitled the Franchise Reform Act, which would make the first significant changes to the Maryland Franchise Registration & Disclosure Law (the “Maryland Franchise Law”) since its enactment in 1981. Delegate Korman told me that he introduced the bill because several of his constituents had raised concerns about the franchising process in Maryland. He told me that, in preparing the bill over the past year, he did a deep dive into this law, consulting with the franchise regulators in the Maryland Attorney General’s Office, with me and with others who are familiar with this law. The Maryland Franchise Law is designed to protect people considering the purchase of a franchise from being misled or under-informed when deciding whether to buy. The law requires franchisors to prepare a prospectus (called a “Franchise Disclosure Document” or an “FDD”) detailing a wide variety of information and submit it to the Securities Commissioner, who is an officer with the Maryland Office of the Attorney General (the “OAG”) and obtain that agency’s approval to sell franchises in Maryland. That approval, called registration, must be renewed each year in which the franchisor continues to sell franchises to Maryland residents or for operation of the franchised business in Maryland (collectively, “Maryland Franchises”). The current law mostly addresses the franchise sales process rather than the ongoing relationship between the franchisor and the franchisee. The bill would do the following: For the Benefit of Franchisors Generally: The bill would establish a pilot program, to be run by the Securities Commissioner, that is intended to expedite franchise registration renewals. Maryland registration renewal delays have frustrated many franchisors from throughout the United States. For the Benefit of Maryland Franchisors: Based on the author’s communications with Delegate Korman since the bill’s introduction, he will submit an amendment to the bill that will limit the private parties who can sue a franchisor for violation of the Maryland Franchise Law solely to Maryland Franchisees. This will eliminate the ability of out-of-state franchisees to use the statute as a weapon in disputes with franchisors that are or were headquartered in Maryland – which was a deterrent to franchising from Maryland as compared to nearby states. This expected amendment is a key to making this a balanced and fair bill. For the Benefit of Franchisees: Given the Maryland Franchise Law’s purpose, parts of the bill will benefit franchisees. Specifically: For the first time, the Maryland Franchise Law will address the imbalance of power between franchisees and franchisors within the ongoing relationship, by prohibiting a franchisor from restricting or inhibiting Maryland Franchisees from associating with other franchisees within their brand for the franchisees’ common benefit “for any lawful purpose” – which could include collectively raising grievances with the franchisor for the franchisees’ mutual benefit. Maryland Franchisees will have a right to sue for injunctive relief and damages, in Maryland, if the franchisor violates this prohibition. This provision is similar to “free association” laws passed in several other states, including California and Illinois. The time period in which a franchisee may bring a private claim for violation of the law will be extended until the later of five years from buying the franchise rights or two years after the date of the initial commencement of operations of the franchise. This is a significant relaxation of the time restriction, which had been three years from the date the franchise rights were purchased (regardless of when the franchised business opened). This seems to be an overaggressive change for private rights of action, as we would prefer to see the time period be the later of three years from buying the franchise rights or three years after commencing operations. The Securities Commissioner will be directed to increase the dollar amount of the exemption from full registration review that exists for franchisors with significant “net equity” to account for inflation since that exemption was established in the 1990s. This will allow the Securities Commissioner to substantively review many more FDDs, which may increase compliance by medium-sized franchisors with the disclosure requirements. The time period for the Securities Commissioner to bring claims for violation of the Maryland Franchise Law also will be extended to five years from a violation, giving that office greater ability to protect franchisees who were misled into buying a franchise. (Of note, the amendments concerning private rights of action will not inhibit the Securities Commissioner’s enforcement ability, including the potential that it could sue a Maryland-based franchisor whose misrepresentations harm a substantial number of franchisees outside of Maryland.) The bill will be heard by the House of Delegates Economic Matters Committee in Annapolis on the afternoon of February 19, 2025, and the author has been invited to testify on the bill and plans to do so favorably, with the amendments discussed above. We plan to keep a close watch on the activity surrounding the bill and provide additional information.
February 14, 2025
Labor and Employment
Office Romance: Navigating Workplace Relationships and Managing Legal Risks
Dear Sarah, Two of my employees have started dating, and I’m worried it might affect their work or lead to complaints from others. Should we have a formal policy on workplace relationships? Are we even allowed to have such a policy? Yours in keeping it professional this Valentine’s Day (and beyond), The HR Cupid The HR Cupid, I can understand your concern. Office relationships, while not uncommon, can quickly become a tricky issue for employers to manage. Whether it's gossip, a drop in productivity, or potential legal claims, workplace romances can create significant risks for both employees and the company. The good news is, with a clear policy and proactive approach, you can mitigate these risks while still allowing employees to navigate their personal lives in a professional manner. Can You Have a Policy on Workplace Relationships? Yes, you absolutely can have a policy on workplace romances. In fact, it’s strongly recommended that employers do so. While outright banning office relationships is typically unreasonable (and likely unenforceable), a policy that establishes clear expectations for conduct can help mitigate potential risks. The reality is that office romances can open the door to several issues, including sexual harassment, retaliation, favoritism, and even workplace violence in extreme cases. These risks can lead to significant legal liabilities if not managed carefully. A thoughtful, well-drafted policy can go a long way in helping you prevent problems before they arise. What Are the Risks of Office Relationships? There are a number of risks to consider when office romance enters the picture: Sexual Harassment Claims: One of the most common legal risks of office romances is sexual harassment. These claims often arise when one employee feels their personal space or boundaries are violated by a romantic advance, particularly in relationships between supervisors and subordinates. Even consensual relationships can lead to claims if other employees perceive favoritism or if the relationship sours. Public displays of affection, or a sudden shift in the dynamics between employees, can also create uncomfortable work environments and lead to hostile work environment claims. Retaliation: If an employee rebuffs unwanted advances or ends a relationship, retaliation can become a concern. For example, an employee might claim that they were treated unfairly or passed over for promotions as a result of rejecting or ending a romantic relationship. Retaliation claims are often rooted in employees feeling that they were punished for not engaging in or maintaining a relationship. Favoritism and Conflicts of Interest: Relationships between supervisors and subordinates carry the risk of favoritism claims. Employees may feel that the romantic couple is receiving special treatment, whether in terms of assignments, promotions, or performance reviews. Even if favoritism is not actually occurring, the perception of bias can cause significant issues with morale and productivity. Workplace Violence: While rare, workplace violence stemming from a failed romance or unrequited affection is a very real possibility. Employers are responsible for maintaining a safe work environment, and if a situation involving a breakup or unreturned advances escalates into violence, the company could be held liable if they failed to manage the risks. How Can Employers Minimize Risk? There are several steps employers can take to reduce the risks associated with office relationships: Bar Romance Between Supervisors and Subordinates: Relationships between supervisors and subordinates are among the riskiest for sexual harassment claims and can lead to serious conflicts of interest. Many employers choose to prohibit these types of relationships or require the employee in the supervisory role to disclose the relationship so that any necessary adjustments can be made. A direct reporting relationship between a supervisor and their partner could create significant problems, and it’s often best to ensure that there is no overlap in their work responsibilities. Implement a “Love Contract”: A “love contract” is an agreement between two employees in a romantic relationship that affirms their relationship is consensual and not a form of sexual harassment. It can also include a reminder that the employees are expected to maintain a professional demeanor while at work. While not a guaranteed shield against legal action, it can provide a level of transparency and reduce the risk of future claims. Ensure Access to Sexual Harassment Training and Reporting Channels: One of the most effective ways to minimize the risk of sexual harassment claims is to provide ongoing sexual harassment training for all employees. This training should clearly define inappropriate behaviors, outline reporting procedures, and reassure employees that complaints will be taken seriously. Additionally, offering multiple, accessible reporting channels (such as anonymous hotlines or online forms) can help ensure that employees feel safe reporting any issues before they escalate. Communication and Monitoring Policies: In today’s digital age, communication often takes place via email, company chat systems, or even social media. Employers should make it clear that digital communications within the workplace are monitored and that harassment can take place through these channels as well. Having a policy that outlines acceptable use of company technology can act as a deterrent and ensure employees understand the expectations for professional conduct online. What Should Employers Do When Things Go Wrong? If a workplace romance goes sour, the situation can quickly escalate. The best defense for an employer is to ensure that all preventative measures—policies, training, and monitoring—are in place and adhered to. Courts will look at whether an employer has taken reasonable steps to address potential issues and mitigate risks. If a claim is filed, employers who have documented their policies, communicated expectations clearly, and enforced those policies will be in a better position to defend themselves. Additionally, any documentation related to the relationship (such as the disclosure of the relationship or a signed love contract) can be useful in protecting the company’s interests. Final Thoughts: Office Romance, Yes—But With Caution While you can’t stop love from blooming in the workplace, you can take steps to ensure that it doesn’t create legal or professional problems. By implementing a clear policy on workplace relationships, providing sexual harassment training, and setting expectations around professional behavior, you can manage the risks and allow your employees to balance their personal and professional lives effectively.
February 14, 2025
Commercial Litigation
Lenders Must Act Fast to Recover Funds in Fraudulent Loan Schemes
Lenders get into a groove with originating loans with existing and new borrowers. So often, the closing comes and goes, and the monthly payments commence without any trouble. But then a borrower comes along who seeks to defraud the lender. If the closing goes through, with the lender transferring out the funds and the funds making their way into the borrower’s account, the lender then faces significant challenges in getting that money back. The timing of the lender’s discovery of the fraud usually determines the odds of the lender clawing back the funds. With any luck, the lender will discover the fraud when it goes to record the documents with the local property records office and finds that the borrower had misrepresented that they would provide the lender with the first priority lien on the property and, in fact, had already obtained mortgages securing the property. Regardless of how quickly the lender learns of the fraud, it is crucial that the lender take immediate action. In New York and New Jersey, the lender may consider filing a complaint and order to show cause seeking to stop the borrower from transferring the funds out of their possession. These types of lawsuits require moving fast and detailing the fraud to the extent that the lender can. Keeping complete and accurate records for each loan is crucial. For instance, when it comes time to go before a judge and show where the fraud occurred, central to that are the loan documents in which the borrower made the misrepresentations to the lender. Without proof of those misrepresentations, it becomes very difficult to convince a court that fraud has occurred and unlikely that a court would effectively freeze the borrower’s assets. Occasionally, the title insurance company may extend coverage to these types of incidents, but there is no guarantee of coverage. Also, the title insurance company’s decision on whether coverage exists may take some time. That time can be very valuable for the lender to go after the borrower and may be the difference between recovering the funds or the borrower moving the funds out of the lender’s reach. A lender acting quickly in these situations is also important because if the borrower has defrauded this lender, the borrower has probably defrauded other lenders—and those other lenders may already be chasing down their funds. That borrower may have already transferred the funds out to hard-to-reach accounts, spent the money, or even thrown a wrench in the process by filing bankruptcy. Lenders that learn of the fraud hire counsel and act within hours, rather than days or weeks, maximize their chances for success.
February 13, 2025
Family Law
New York Takes a Progressive Step with Uncontested Joint Divorce
On January 31, 2025, the Chief Administrative Judge of the State of New York announced an inventive pilot program designed to change how the court system processes divorces, introducing the concept of "uncontested joint divorce" to simplify the divorce process for New Yorkers. While uncontested divorces have been available to New Yorkers since 2010, this new route to divorce allows eligible couples to file and sign their divorce papers together, neither party taking the role of “plaintiff” or “defendant.” It is targeted at reducing the emotional and financial burdens often associated with traditional divorce proceedings. Unlike the traditional divorce process, where one spouse typically initiates the proceedings by alleging one or more of the statutory reasons for ending the marriage, joint divorce recognizes that couples can maturely agree to end their marriage without assigning blame, consenting to a joint divorce on the uncontested divorce basis of the “irretrievable breakdown” in the marital relationship for a period of at least six months (otherwise known as a “no-fault” divorce). To qualify for a joint divorce, both spouses must mutually consent to the divorce and agree on all terms relevant to their particular marital elements, including property division, child custody, parenting time, and support arrangements. Couples can submit a single petition outlining their settlement, which can lead to quicker resolution times compared to traditional divorces and forestall needless tension as they navigate and acclimate themselves (and their family) to their new status as a divorced couple. This program presents various advantages for couples seeking to dissolve their marriages amicably. Not only does it hope to foster a positive environment for negotiation, but it also acknowledges the emotional strain of divorce and seeks to aid in promoting healing over conflict. For couples with children, the joint divorce framework can pave the way for healthier co-parenting arrangements by encouraging collaboration and mutual respect. By prioritizing the well-being of children, parents can establish a supportive foundation for their post-divorce relationship. To provide fairness and promote healthy communication, the program encourages couples to engage in mediation or counseling services before finalizing their joint petition. This step aims to ensure that both parties fully understand the implications of their decisions and maintain a constructive dialogue. By eliminating contentious litigation, joint divorce aims to reduce legal fees for couples. Since the need for prolonged court battles is minimized, couples can save money and allocate resources more effectively. And though the joint divorce process is designed to be cooperative, the court’s ultimate involvement will not be diminished inasmuch as the courts will still examine every submitted agreement for compliance with state laws and to ensure that agreements are fair, reasonable, not overreaching, and in the best interests of any children involved. The courts can and will reject agreements that do not comply with the legal and equitable requirements of New York’s laws. This new program represents a significant positive shift in New York's approach to processing divorces. It reflects changing societal attitudes toward marriage, divorce, and conflict resolution. As more couples prioritize cooperation and transparency, this reform may lead to a cultural shift in how divorce is perceived and managed. As couples embrace this new paradigm, it is essential for those considering divorce to stay informed about their rights and options under this law. Consulting with experienced family law attorneys can help ensure that all agreements are legally sound and that the best interests of all parties involved, particularly children, are upheld.
February 12, 2025
Estates and Trusts
Not Realizing the True Value of “Stuff”
This is Part 6 in a Series of the Top 10 Mistakes Made When Planning for Art and Other Collectibles: A Guide for Professionals and Their Clients. For federal estate and gift tax purposes, transfers are valued at the “fair market value” of the asset on the date of transfer. One of the more common estate tax audit issues is the failure to properly report the value of items of tangible personal property on a decedent’s Form 706. Similarly, failing to properly account for the value of tangible personal property transferred by inter vivos gift may result in the audit of a client’s Form 709. Despite their upfront cost, in order to identify the true value of art and collectible assets, clients should obtain professional periodic appraisals. Appraisals serve many functions, including estate and gift tax reporting, such as establishing value for insurance purposes, establishing bidding parameters for assets at auction, obtaining loans with tangible personal property serving as collateral, and planning for future gifts. For tax purposes, fair market value is defined as “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of the relevant facts.” Although the most persuasive indication of fair market value is an actual contemporaneous sale of the property in question, in the absence of such a sale, an appraisal is typically required to establish the taxable value of the asset subject to transfer. Under current regulations, a reported gift of tangible personal property that exceeds $5000 in value must be substantiated by a qualified appraisal conducted by a qualified appraiser. The Pension Protection Act of 2006 (the “Pension Act”) established new requirements for what it means to have a “qualified appraisal” for tax reporting purposes. A qualified appraisal must contain a declaration that the appraiser (i) understands that a substantial or gross valuation misstatement resulting from an appraisal of the value of the property that the appraiser knows, or reasonably should have known, would be used in connection with a return or claim for refund, may subject the appraiser to a civil penalty, and (ii) understands that an intentionally false or fraudulent overstatement of the value of the appraised property may subject the appraiser to civil penalty for aiding and abetting an understatement of tax liability. A qualified appraisal of tangible personal property must contain the following: a detailed description of the property; the physical condition of the property; the date or expected date of the contribution; the terms of any agreement or understanding entered into or expected to be , entered into by or on behalf of the client that relates to the use, sale or other disposition of the property, including any restrictions on the use or disposition or reservations of rights conferred on anyone other than the donee and any earmarks for particular use; the name, address and taxpayer id number of the appraiser; a detailed description of the appraiser’s educational background and qualifications; the date on which the property was valued; the appraised fair market value of the property; the method of valuation used to determine the fair market value; the specific basis for the valuation; and a description of the fee arrangement between the client and the appraiser. A qualified appraisal is prepared by a qualified appraiser defined as an individual who: has earned an appraisal designation from a recognized professional appraiser organization or has otherwise met minimum education and experience requirements set forth in the regulations; regularly performs appraisals for pay; and meets other requirements that the IRS has prescribed in the regulations. An individual cannot be a qualified appraiser with respect to any specific appraisal unless she: demonstrates verifiable and passing professional or college level education and experience or earned a recognized appraiser designation from a generally recognized professional trade or appraiser organization or as part of an employee apprenticeship program or educational program; and the education and experience is in valuing the property type being appraised. In addition, the appraiser must make the following declaration: “I understand that my appraisal will be used in connection with a return or claim for a refund. I also understand that, if there is a substantial or gross valuation misstatement of the value of the property claimed on the return or claim for refund that is based on my appraisal, I may be subject to a penalty under section 6695A of the Internal Revenue Code, as well as other applicable penalties. I affirm that I have not been at any time in the three-year period ending on the date of the appraisal barred from presenting evidence or testimony before the Department of the Treasury or the Internal Revenue Service pursuant to 31 U.S.C. 330(c).” If the appraisal or the appraiser does not meet all of the above requirements, the resulting valuation report will not be considered as any evidence of value, and the IRS will conduct its own appraisal to determine the fair market value of the asset subject to transfer. In certain instances, providing the IRS with an appraisal that adheres to all of the requirements of the Pension Act may not help with avoiding an estate or gift tax audit, but provides a powerful bargaining tool. For example, regardless of the asset composition of the remainder of the estate, if a decedent dies owning artwork that has a claimed value of $50,000 or more, the appraisal will be subjected to consideration by the IRS Art Advisory Panel, comprised of a body of art industry experts who review and evaluate the acceptability of artwork appraisals submitted by taxpayers in support of claimed fair market value. When a qualified appraisal is submitted, you and your client may find that the IRS is more willing to compromise on valuation issues.
February 11, 2025
Estates and Trusts
Protecting Your Family and Future: Essential Estate Planning for the LGBTQ+ Family
Estate planning is a critical part of securing the future for any family, and for LGBTQ+ individuals, it is particularly important given the legal complexities and challenges that may arise in the current political climate. There have been several legal shifts that affect LGBTQ+ families’ rights and protections, which makes it even more essential for LGBTQ+ families to ensure their estates are properly considered, planned, and protected. Below is a simple checklist of estate planning documents that LGBTQ+ families must consider to safeguard their interests, particularly during a time of legal uncertainty and inequitable policies: Last Will and Testament When one thinks of an estate plan, a will is what likely comes to mind: it is considered a fundamental estate planning document. A will directs how a person's property, whether real or personal, should be distributed after death. For LGBTQ+ individuals, a will is especially important because, without one, state laws dictate who inherits your estate and in what proportion. With only limited exceptions, state laws do not recognize non-biological family members, such as a partner or even a registered domestic partner: close friends who are more like family are not recognized in any state. A will provides clarity to ensure that your relationships and wishes are honored, regardless of your family makeup. Why a will matters for LGBTQ+ individuals: If you have a partner but are not legally married, or if you want to leave property or assets to a close friend or chosen family member, a will ensures that these individuals are recognized as your beneficiaries. It also allows you to name the person you choose to oversee the distribution of your assets. While many states require that your biological family is informed of your death and provided a copy of your will, most courts are fiercely protective of directives in a will. As a result, documenting those wishes is imperative to ensure your wishes are carried out in the way that you desire. Without a properly executed will, most states simply distribute assets to your biological family members. Healthcare Directives Advanced healthcare directives such as a healthcare proxy and living will specify both the person you wish to speak for you in a healthcare setting and the type of care you would want (or refuse) in the event you cannot articulate those wishes. The health care proxy appoints an agent who knows you, understands your wishes, will communicate those wishes, and advocate for your rights in a health care setting. The living will outlines the type of care you want including memorializing your preferences for medical treatment or discontinuance of treatment. A living will sets forth whether you want life-sustaining treatment and how you would like to be treated in end-of-life scenarios. Why healthcare directives matter for LGBTQ+ families and individuals: In the event of incapacitation, biological family members may not always know or respect your wishes, particularly if your biological family does not support your identity, lifestyle, or relationships. Naming a healthcare proxy and having a living will in place ensures that your healthcare decisions are in line with your desires, even if your family disagrees or is uninvolved in your life. Without a healthcare proxy, a family member (who may not understand or accept your relationships) may gain control over your medical decisions. Without documentation, most states allow your next of kin to make these decisions, potentially preventing your partner from being involved in your care. Nominating your partner or chosen friend provides them with the legal authority to make decisions consistent with your wishes. Durable Power of Attorney A durable power of attorney (POA) allows you to designate someone, referred to as an agent, to manage your financial matters upon your incapacity. A POA can be tailored to the specific powers you wish to bestow upon your agent. For example, your agent can access your bank accounts, pay your bills, apply for public benefits, and manage investments on your behalf. Why a durable power of attorney matters for LGBTQ+ individuals: LGBTQ+ couples are not recognized as legal next of kin unless they are legally married and, therefore, will face complications if their relationship is not legally formalized, as most financial institutions are unable to speak with others without authority. This is especially essential if partners financially depend on one another but have separate financial accounts; without a POA in place, your partner cannot access your finances in the event of your incapacity. Having a POA ensures that your partner, rather than a biological family member who may not be involved in your life or support your relationship, has the authority to handle your finances, if necessary. Trust A trust is a key estate planning tool that allows you to manage your assets efficiently during your life and distribute your assets after your death without the necessity of probate (which is required with a Last Will and Testament). A trust also allows you to appoint a successor trustee, a person in charge of your trust assets if you can no longer manage your own trust assets. There are different types of trusts that can accomplish many goals within an estate plan, but the common theme is that assets funded in a trust avoid probate, a lengthy and expensive court process. In addition to avoiding probate, trusts do not have to be authenticated by a court or shared with your biological family members, as is the case with a Last Will and Testament. Why a trust matters for LGBTQ+ individuals: A trust can ensure that assets are passed on according to your wishes, even in cases where state inheritance laws might not recognize your partner or chosen family. Trusts can also be structured to provide for specific needs, such as the care of a dependent partner or a loved one, long after you die. Importantly, trusts are much more difficult to contest than wills, thus ensuring that estranged biological family members will not be able to easily upend your carefully constructed estate plan if they do not agree with your choices or your relationships. A trust is also a private document that others cannot access in the same way as a Last Will and Testament, which is a public document that is published in court. Beneficiary Designations Beneficiary designations ensure that your assets pass directly to your loved ones without going through probate. A beneficiary designation can be made on bank accounts, brokerage accounts, insurance policies, and retirement accounts. Relationships can change over time, and therefore, beneficiary designations should be reviewed and updated regularly to reflect your current wishes. Why beneficiary designations matter for LGBTQ+ individuals: If you have a domestic partner or chosen family members, it is crucial to ensure that your beneficiary designations align with your intentions. In most cases, financial institutions will not recognize a domestic partner or non-biological family members unless you have explicitly named them as beneficiaries on your financial accounts and policies. Beneficiary designations are also private and financial institutions are not at liberty to disclose those named as beneficiaries on your accounts after your death. Letter of Intent While not legally binding, a letter of intent can provide your loved ones with important details and intentions regarding why you constructed your estate plan the way that you did. For example, if you decide to disinherit a biological family member from an estate distribution, the reason for the exclusion can be articulated in the letter in a way that cannot be explained in the estate planning document itself. Why a letter of intent matters for LGBTQ+ individuals: If your estate plan is one that leaves out next of kin or biological family members, a letter of intent can provide further proof of your wishes related to your estate distribution. Letters of intent can also ensure that your funeral or memorial service reflects the way you wish to be remembered, celebrating your identity and your values. Letters of intent can also be entered into a court proceeding as evidence in an estate contest to further outline your rationale for the disinheritance of estranged family members. Guardianship Documents for Children It is vital for any parent to document guardianship of their minor child in the event of the parent’s death. Documenting a guardianship designation ensures that upon your passing, your children will be cared for by the person or the people you designate, not the person that a court may choose. Why guardianship documents for children matter for LGBTQ+ individuals: If you are an LGBTQ+ parent, establishing guardianship is incredibly important, especially if you are not biologically related to your child. In some cases, your biological family members may challenge your partner's ability to care for your children upon your death, particularly if you are in a non-married partnership. Establishing guardianship and memorializing your choice of guardian for your minor children provides clarity, protects your partner’s rights to care for your children, and safeguards the sanctity of your family structure. Estate planning is a crucial step for every individual, but it takes on an added level of importance for LGBTQ+ individuals, especially during times of legal uncertainty and political turmoil. With the right documents in place, you can be confident that your wishes will be respected and that your loved ones are protected, regardless of legal challenges or changes in administration. Estate planning empowers you to take control and secure the rights of your partner, your children, and your chosen family.
February 11, 2025
Immigration Law
What to Expect in the 2025 H-1B Season
The 2025 H-1B Cap Season is upon us, along with a new administration. There will likely be numerous changes at United States Citizenship and Immigration Services (USCIS) regarding policy and regulation, but in the immediate term, let’s take a look at the upcoming H-1B lottery and what we can expect. Increased Application Fee The filing fee for H-1B lottery applications has increased significantly for this cap season, jumping to $215 per application. USCIS increased fees across the board last year and has provided a fee calculator to assist petitioners and applicants: Calculate Your Fees | USCIS. Site Visits and Increased Compliance Recent rule changes at USCIS have expanded compliance requirements for H-1B employers. While site visits have long been a part of the H-1B program, the increase in third-party worksites and remote work has prompted USCIS to adjust enforcement accordingly. Additionally, worksite inspections and stricter enforcement of immigration rules are expected to increase under the new administration. Don’t Forget the H-1B for Entrepreneurs Individuals who own more than 50% of the sponsoring H-1B business can now qualify for H-1B status. These new petitions are limited to an initial 18-month validity period but represent a significant opportunity for entrepreneurs who previously would have missed out on the H-1B lottery. Revisions to H-1B Specialty Occupations Regulatory updates to the definition of “specialty occupation” have been implemented by USCIS, tightening key qualification areas related to the proposed position and the employee’s education. Specifically: Positions requiring a general or nonspecific degree will no longer qualify for H-1B purposes. Individuals with a general degree must demonstrate how their coursework directly relates to their proposed position. Employers must justify how each accepted degree is directly related to the role when multiple degree fields are listed as acceptable qualifications. These changes add complexity to certain occupations and underscore the importance of seeking legal advice early in the H-1B lottery process. Expect the Unexpected With a new administration taking the reins, significant changes to legal immigration policies are likely in the coming months and years. While there may not be enough time to implement major changes before this year’s H-1B lottery, we could see slowdowns in USCIS processing and potential disruptions in visa issuance.
February 10, 2025
Commercial Litigation
Virginia Sees Surge in Civil Lawsuits in 2024: How to Avoid Collection and Eviction Litigation
Civil lawsuit filings in Virginia's General District Courts increased more than 6% in 2024. The biggest increase? Warrants in debt (collection lawsuits) increased by 27%. A warrant in debt is a civil lawsuit to pursue recovery of money damages, usually due to unpaid debts and accounts receivable. Except for personal injury or wrongful death claims, Warrants in Debt are limited to a maximum recovery of $25,000. By contrast, unlawful detainer filings decreased by 8%. An unlawful detainer is an eviction lawsuit to pursue and obtain possession of real property (real estate) and unpaid rental charges, if applicable. There is no limit to the rental charges that can be pursued in an unlawful detainer filing. Virginia’s Circuit Court civil filings increased modestly by 4% compared to 2023. Virginia Circuit Courts generally hear civil and commercial claims involving controversies of more than $25,000, along with family law, probate and estate claims, and real estate title claims, among other matters. Full data on 2024 legal filings from the Supreme Court of Virginia can be found here: 2024 Virginia General District Court filing data & 2024 Virginia Circuit Court filing data. Landlords, tenants, property managers, lenders, creditors, and consumers in Virginia can take proactive steps to prevent costly litigation. Understanding your rights and obligations can minimize financial risks and avoid lawsuits related to unpaid debts or evictions. Establish Clear Agreements For landlords and creditors, well-drafted lease and loan agreements help prevent disputes. These should clearly define: Payment terms, due dates, and penalties for nonpayment. Responsibilities for property maintenance (landlords) and interest rates (creditors). Legal remedies in case of default. Tenants and consumers should carefully review contracts before signing and seek clarification on any unclear terms. Maintain Open Communication Early communication can prevent minor issues from escalating. If you are a tenant, customer, or consumer behind on payments, consider: Informing landlords or creditors of financial difficulties. Requesting a payment plan, forbearance, or temporary extension. Keep records of all communications and agreements. Landlords and creditors should consider offering reasonable repayment options where feasible, as these are more efficient than litigation. Follow Legal Collection and Eviction Procedures Virginia law requires strict compliance with applicable eviction and collection procedures before pursuing eviction or debt collection lawsuits: Landlords must issue a proper notice of lease violation to tenants depending on the grounds sought for eviction. Creditors generally should send a formal demand letter before pursuing legal action. Utilize Mediation and Alternative Solutions Mediation can be a cost-effective way to resolve disputes without court involvement. Courts often encourage, but normally do not mandate, negotiations between parties to explore mutually beneficial solutions. Understand the Legal Process and Consequences If legal action becomes necessary: Landlords must file an Unlawful Detainer for eviction, attend a court hearing, and obtain a Writ of Eviction if a judgment is granted. Creditors must file a warrant in debt or other applicable lawsuits and obtain a court judgment before pursuing wage garnishment or other collection means. Tenants and consumers should respond promptly to court notices to avoid default judgments. Seek Legal Guidance When Needed Landlords, tenants, creditors, and debtors facing complex legal issues should consult an attorney to ensure compliance with Virginia law and protect their rights. By taking these proactive steps, all parties can reduce the risk of eviction and collection lawsuits, fostering more stable financial and housing relationships.
February 7, 2025
Family Law
Defending Women from Gender Ideology an Individual’s Sex Is Not a Simple Matter
On January 20, 2025, President Donald Trump issued the executive order titled “Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government.” This directive mandates that all federal agencies recognize only two biological sexes -- male and female -- defined at conception. It requires the replacement of the term “gender” with “sex” in official documents and policies and prohibits the use of gender-affirming language and practices within federal operations. Additionally, the order restricts the use of federal funds for gender-affirming care and disallows self-selection of gender on government-issued identification, such as passports and visas. The executive order’s strict binary definition of sex may conflict with existing anti-discrimination laws that have been interpreted to protect individuals based on gender identity. Notably, the Supreme Court’s decision in Bostock v. Clayton County (2020) held that discrimination based on gender identity or sexual orientation constitutes sex discrimination under Title VII of the Civil Rights Act of 1964. By mandating a binary understanding of sex, the order could undermine these protections, leading to potential legal challenges. The order rescinds previous directives that promoted diversity, equity, and inclusion (DEI) within federal agencies and among federal contractors. This includes the revocation of Executive Order 11246, which had prohibited discrimination by federal contractors and required affirmative action to ensure equal employment opportunities. The removal of these protections may lead to increased discrimination claims and legal disputes concerning employment practices. By prohibiting self-selection of gender on federal identification documents, the order may create conflicts with state policies that recognize non-binary or transgender identities. This inconsistency could lead to legal challenges regarding the recognition of gender identity across different jurisdictions and the potential violation of individual rights to privacy and equal protection under the law. The prohibition of federal funding for gender-affirming care, including within federal prisons, raises legal concerns related to the Eighth Amendment’s prohibition against cruel and unusual punishment. Denying necessary medical care to transgender individuals in federal custody could result in litigation alleging deliberate indifference to serious medical needs. Civil rights organizations, including the American Civil Liberties Union (ACLU), have signaled intentions to challenge the executive order in court. Legal arguments are likely to focus on conflicts with established anti-discrimination laws, constitutional protections under the Equal Protection Clause, and precedents set by the Supreme Court affirming the rights of transgender individuals. President Trump’s executive order represents a significant shift in federal policy regarding the recognition of sex and gender. Its implementation is poised to have far-reaching legal implications, particularly concerning anti-discrimination protections, federal employment practices, identification policies, and access to medical care. As legal challenges emerge, courts will play a crucial role in determining the order’s alignment with existing laws and constitutional principles.
February 6, 2025
Page 13 of 36
About the Blog
Receive timely content, newsletters and event information delivered to your inbox.
