Labor and Employment
Sports Betting in the Workplace: Ensuring the Super Bowl and March Madness Don't Cause Legal Madness and Super Problems
Dear Sarah, My employees want to do a fantasy football league. I don’t really care as long as it doesn’t mess with their work. Is there any reason I need to worry about this, or can I just let them go at it? – Janet "I’m Not the HR Police" from Accounting It’s the season for sports betting excitement, with the Super Bowl upon us and March Madness just around the corner. Your employees are likely buzzing with talk of squares, brackets, and maybe even some secret side bets. While these friendly competitions can boost morale and foster camaraderie (especially for remote or hybrid teams), there are some legal considerations to keep in mind. Because as much fun as a bracket challenge can be, sports betting could land you in a legal bind if you're not careful. Is Workplace Sports Betting Legal? Thirty-eight states and Washington D.C. have legalized sports betting in some form since the U.S. Supreme Court struck down the federal ban in 2018. But here’s the kicker: the regulations vary widely. Some states have specific exceptions that allow for “social gambling,” meaning office pools can be permissible if they meet certain conditions, like ensuring no one running the pool profits. The rules on what qualifies as a “social” game and what constitutes “illegal” gambling can be murky, and those rules are still evolving. For instance, New York introduced a bill in 2023 to specifically legalize Super Bowl squares. Gambling and unlicensed sports betting, including office pools, are prohibited in many states and under the Interstate Wire Act of 1961 (IWA) and the Uniform Internet Gambling Enforcement Act of 2006 (UIGEA). The IWA makes it illegal for anyone in the U.S. to place or receive wagers on any sporting event or contest that involves interstate or foreign commerce. The UIGEA criminalizes the act of accepting funds for unlawful internet gambling, specifically by those "engaged in the business of betting or wagering." With the rise of remote and hybrid work setups, there's an increased risk that office pools could cross state lines, triggering the laws of multiple states and federal gambling regulations., So while you might think it’s just a friendly office competition, the law might say otherwise in certain jurisdictions. Understanding Which State Laws Apply Modern companies are no longer limited to hiring people from the state in which they are based, and remote-first businesses often have employees spread across multiple states with differing legal stances on sports betting. In most cases, the laws that govern sports betting are determined by where employees are physically located. If an employee is based in a state where sports betting is illegal, they may be restricted from participating in sports betting activities, regardless of whether the company itself operates in a jurisdiction where betting is legal. Companies with large, distributed teams need to have systems in place to track the physical location of employees and assess legal requirements accordingly. This is where working with a payroll provider, human resources tools, or compliance experts can be incredibly valuable in staying informed about location-based regulations. The rise of fully remote and hybrid work models has made this issue even more complex. For companies with employees working remotely from different states, where the employee is physically working from at any given time becomes key. For example, if an employee works from a state where sports betting is illegal, they may not be permitted to place bets, even if they are working for a company based in a state where the activity is allowed. If a company is headquartered in a state where sports betting is legal, but some employees are working remotely from states where it’s banned, the company may need to consider how to handle internal policies and even provide guidance about prohibited activities. Consider Non-Monetary Alternatives: Prizes Don’t Have to Be Cash The risk of violating gambling laws can be reduced significantly when the pool doesn’t involve money. You could opt for fun, non-cash prizes like extra time off, a team lunch, or even just bragging rights. These types of prizes keep things light and engaging without the potential legal risks associated with monetary rewards Maintain Productivity Amidst the Madness Between filling out brackets and selecting squares, productivity could take a hit. If employees are sneaking off to check scores, make sure you set expectations about what’s acceptable during work hours. Some companies have implemented policies where pools and betting activities are restricted to non-work hours, or at least during designated breaks. This helps mitigate the negative impact on productivity and keeps employees engaged without the legal headaches. Mitigate Common Risks with Written Policies A well-drafted company policy on sports betting can help minimize legal risk and clarify the boundaries for employees. A “no betting” policy or a policy that outlines clear, specific rules for office pools is a great start. An effective company policy on sports betting should touch on: Participation: Restrict participation to employees in states where it’s legal and clarify eligibility criteria. Emphasize that participation should always be voluntary to respect those who choose to opt out for personal, religious, or addiction-related reasons. Profits and Prizes: To avoid crossing into illegal territory, ensure that the person running the pool isn’t taking a cut of the money. This is a common rule in states that allow office pools: the organizer must not profit in any way. Be sure to also comply with any local laws that limit or restrict prize money. If your pool will offer non-monetary prizes, outline them in your policy. Procedures and Expectations: Prohibit employees from using work devices or company time to organize or manage pools. Encourage participation during breaks or outside of work hours. You should also establish procedures to address any potential complaints or violations that may arise to ensure fairness and transparency. Takeaway Where legal, office sports betting pools can be a great way to build morale and camaraderie, but they require careful planning to comply with the law. With the proper planning and compliance with the relevant laws, you can foster a fun and compliant workplace environment that avoids unnecessary risks.
February 5, 2025
Immigration Law
What is an H1B and Who Should Know About It?
H1B – Specialty Occupation The H-1B nonimmigrant visa allows companies and other employers in the United States to temporarily employ foreign workers for up to six years in occupations that require the theoretical and practical application of a body of highly specialized knowledge and a bachelor’s degree or higher in the specific specialty, or its equivalent. H-1B specialty occupations may include fields such as architecture, engineering, mathematics, physical sciences, social sciences, medicine and health, education, business specialties, accounting, law, theology, and the arts. Who Needs to Know About H1B visas? The H1B is a very popular visa category as it can be very useful for a large number of potential applicants. So, who can benefit from this flexible employment-based visa? Students completing their studies in F1 status who are graduating with a bachelor’s or advanced degree are designed to be the typical H1B applicants. Specific provisions exist to assist the transition from OPT to H1B. Students who have multiple years of OPT ahead of them should also look carefully at the H1B visa as it is still a lottery, and they should maximize their attempts to make the lottery; Individuals with other nonimmigrant visas that don’t allow for employment (H4 dependents, etc.) or are running out of validity period (L1B, etc.). Professionals who are working in a status that ties them to a specific employer such as L1 visa holders or E visa holders. Professionals who are abroad – there is no geographic limit on H1B lottery submissions. Individuals who need a visa status that provides “dual intent” to allow them to easily pursue an employment-based green card in the United States. H1B Cap and the Lottery The number of new H1B Nonimmigrant visas is limited by law to 65,000 a year, and they must be submitted before April 1 for jobs that begin October 1 of that same year. In addition, there are an extra 20,000 H1B visas available for beneficiaries who hold a US master’s degree. When there is anticipated demand for more than the 85,000 available H1B visas, the USCIS is required to conduct a lottery for the selection of H1B visas. The current H1B lottery takes place in multiple stages. Initially a lottery for H1B applicants who hold US master’s degrees is conducted. Then, the remaining US master’s degree applicants are added to the larger applicant pool, and a lottery for the remaining 65,000 available visas is conducted. Finally, a lottery is conducted in the summer for any unused H1B visas. This process is conducted electronically, and selected applicants are informed very quickly if they have made the H1B Cap. Cap Exempt Employers H-1B workers who are petitioned for or employed at an institution of higher education or its affiliated or related nonprofit entities, a nonprofit research organization, or a government research organization are not subject to the H1B cap. These H1B petitions may be filed at any time and are not subject to the lottery rules. Key Aspects of H1B Petitions Employers should be informed about all the aspects of H1B nonimmigrant workers as regulations cover their placement, pay, and qualifications. As discussed, H1B workers must hold at least a bachelor’s degree, and they must also be employed in a position that at least requires the equivalent of a bachelor’s degree. The definition of specialty occupation is complex and requires careful review. Dependents of H1B visa holders can also obtain H4 status. However, H4 status does not by itself allow for work authorization. Only the spouses of H1B visa holders with an approved Immigrant Worker Petition that is subject to backlogs in obtaining permanent residence can apply for work authorization in H4 status. Fees H1B Petitions require filing fees to be paid to the Department of Homeland Security. The US immigration service is fee-based and relies entirely on these fees to provide its services. The fees for H1B petitions are complex and they can be significant. Below, please find the current breakdown of H1B petition filing fees; there is also an optional additional premium processing fee should that service be available for the H1B Cap. Below is a list of the current fees with a higher range provided for employers that have more than 25 employees: H1B Registration fee, to participate in the lottery: $210 Base Nonimmigrant petition filing fee: $460 - $780 Asylum program fee: $300 - $600 Fraud prevention and detection fee for all new H1B Petitions: $500 AICWA Fee (Imposed by the American Competitiveness and Workforce Improvement Act of 1998): $750 – for employers with 1 to 25 full-time employees $1500 – for employers with 26 or more full-time equivalent employees Public Law 114-113 Fee, only applicable for employers with 50 or more employees and more than 50% of employees are working under H1B or L1 status: $4,000 Premium Processing Fee, guarantees a response from USCIS on a petition in 15 days: $2,805 The Labor Condition Application H1B petitions must be accompanied by a certified Labor Condition Application from the Department of Labor. This application includes certain attestations, a violation of which can result in fines, bars on sponsoring nonimmigrant or immigrant petitions, and other sanctions to the employer. The application requires the employer to attest that it will comply with the following labor requirements: The employer/agent will pay the H-1B worker a wage that no less than the wage paid to similarly qualified workers or, if greater, the prevailing wage for the position in the geographic area in which the H-1B worker will be working. The employer/agent will provide working conditions that will not adversely affect other similarly employed workers. At the time of the labor condition application, there is no strike or lockout at the place of employment. Notice of the filing of the labor condition application with the DOL has been given to the union bargaining representative or has been posted at the place of employment. Prevailing Wages Pursuant to the Labor Condition Application, the H1B employer must offer to pay the actual wage or the prevailing wage level for the H1B occupational classification in the proposed area of employment, whichever is greater, based on the best information available. For example, a prevailing wage for a computer engineer could be a lower figure in a specific region, but if all similarly placed employees in the company are paid a higher figure that wage must be offered to the H1B worker. Accordingly, the prevailing wage must equal the average of the rate of wages paid to other workers similarly employed in the area of intended employment. Employers must be careful in identifying the specific wage ranges and areas of employment. Material Changes Matter US Citizenship and Immigration Services and Department of Labor regulations of H1B workers are strict and complex, with fines and penalties abound for the unwary. H1B employers must abide by the material terms of the H1B petition that they submit. Changes to job title, job duties, job location, salary, benefits, and any other material changes can have significant consequences. For example, H1B workers cannot be “benched,” and significant penalties can be incurred for violations. Compliance The H1B program has been subject to significant oversight in recent years, and that trend is only set to continue. Current regulations have increased the statutory authority for work site visits and compliance with the terms of H1B vias and the Labor Condition Application. Employers and H1B workers need to be aware that compliance is a key part of the H1B program and should be prepared for potential site visits.
February 5, 2025
Estates and Trusts
Not Hiring a Qualified Appraiser and Realizing the True Value of Art and Collectibles
This is Part 5 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 federal estate tax return. Similarly, failing to properly account for the value of tangible personal property transferred by inter vivos gift may result in the audit of a federal gift tax return. Despite the upfront cost, professional periodic appraisals should be obtained to identify the true value of art and collectible assets. Appraisals serve many functions, in addition to those relating to 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 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 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 identification 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. 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. 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 as part of an employee apprenticeship program or educational program as well as the education and experience in valuing the property type being appraised. If the appraisal or the appraiser does not meet all 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 the requirements of the Pension Protection 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 4, 2025
Labor and Employment
It Ends with Us, But Continues in Court: Blake Lively and Justin Baldoni's Legal Battle
The film “It Ends With Us” was a massive hit in 2024, grossing $350 million globally. Yet, the drama surrounding the film has shifted from the big screen to the courtroom, with a series of legal battles between its stars, Blake Lively and Justin Baldoni, that have captivated both the public and legal observers alike. In the ongoing legal battle between actors Blake Lively and Justin Baldoni, a federal judge has stepped in to try and quell the increasingly public war of words. At a hearing in Manhattan on February 3, 2025, Judge Lewis J. Liman ordered both legal teams to limit their out-of-court commentary, citing a New York rule (Rule 3.8) designed to prevent public statements that could prejudice legal proceedings. This intervention comes as the public has been parsing footage of a scene at issue in Lively’s lawsuit, recently released alongside a statement from Baldoni’s attorney. Baldoni’s team has also launched a website where users can access court documents related to the film's production. The lawsuits present conflicting accounts of events on the set of "It Ends With Us," an adaptation of a novel about domestic abuse, in which Lively plays the heroine and Baldoni her abusive partner. Lively’s suit accuses Baldoni and Wayfarer Studios CEO Jamey Heath of sexual harassment, including entering her trailer uninvited while she was undressed or breastfeeding, improvising unwanted kisses, and discussing his “previous pornography addiction.” She claims that after raising objections, Wayfarer launched a “retaliation campaign” against her. Baldoni’s suit denies these accusations, claiming all trailer entries were consensual, kissing scenes were not improvised, and the discussion of his past addiction was contextualized. He accuses Lively, her husband Ryan Reynolds, and her publicist of defamation and extortion, claiming she sought to “extract concessions and creative control” of the movie. He further alleges that he was the victim of her attempts to damage his reputation. The hearing was the first court appearance by the lawyers since Lively filed her initial complaint in California in December, followed by a New York Times report on her accusations. Baldoni has since sued the Times for libel, claiming the article omitted key information. The Times has stated they will vigorously defend their reporting. Judge Liman, acknowledging the extensive public record of the accusations, emphasized that the court proceedings, not public pronouncements, will ultimately determine the facts of the case. Neither Lively nor Baldoni was present at the hearing. Initial Allegations On December 20, 2024, Blake Lively filed a formal complaint with the California Civil Rights Department, accusing director and co-star Justin Baldoni, producer Jamey Heath, and Wayfarer Studios of sexual harassment and creating a toxic work environment. It seems that behind the movie magic was a not-so-glamorous reality. Lively’s complaint lays out a series of troubling incidents, including Baldoni allegedly ignoring intimacy protocols, improvising unapproved physical contact (like, biting Lively’s lower lip during a scene), and inserting controversial sexual content into the film without consent. Meanwhile, producer Heath is accused of showing Lively an unsolicited nude video of his wife giving birth. From a legal standpoint, these allegations—if proven true—could present serious violations under California’s Fair Employment and Housing Act (FEHA). FEHA protects workers from discrimination, harassment, and retaliation, and sexual harassment is a particularly serious violation that could expose the production company and individuals involved to significant liability. In Lively’s case, the allegations regarding unsolicited physical contact and the lack of consent for intimate scenes could amount to unlawful sexual harassment in the workplace. These types of cases are taken very seriously in California, where the state’s strict sexual harassment laws are designed to prevent such behavior and ensure that victims have legal recourse. The real complexity in these claims lies in proving the behavior was pervasive and unwelcome. Given that these events allegedly took place during production and involved multiple key players—director Baldoni and producer Heath—it will be important for Lively to provide evidence of the repeated and pervasive nature of the harassment to make her case. The New York Times published an article about the allegations the very next day, also hinting at deeper tensions, including a campaign allegedly aimed at destroying Lively’s reputation. Baldoni Fires Back with Defamation by Implication Claim Ten days later, Baldoni fired back and sued the New York Times for defamation on December 31, 2024[i]. Baldoni claims the publication’s story about the sexual harassment allegations against him was part of a broader “smear campaign” orchestrated to undermine him. This counters Lively’s claims; Baldoni accuses Lively of damaging his reputation through false reporting. Baldoni’s lawsuit presents an interesting legal angle, focusing on defamation by implication. According to his complaint, the New York Times article contained damaging content that painted him in a false light. While the article never directly accused him of sexual harassment, Baldoni contends that the context and tone of the reporting led readers to infer his guilt. Defamation by implication occurs when the publication or communication indirectly suggests false information that harms a person’s reputation. Baldoni argues that the story—by highlighting Lively’s allegations without providing his side—implicitly presented him as the perpetrator. Moreover, Baldoni also seeks to address the “damage to his career” caused by these articles, which is a standard claim in defamation suits (i.e., the plaintiff is claiming that the defamatory statements harmed their reputation and resulted in professional or financial loss). He’s not just asking for retraction or correction; he’s pursuing actual damages (compensation for the real losses suffered as a result of the defamation) and possibly punitive damages (additional financial penalties aimed at punishing the defendant if the reporting was done with reckless disregard for the truth or malicious intent). Baldoni has also claimed that Lively was actively working against him throughout production, asserting that she "berated" him on set and attempted to undermine his creative control. The lawsuit further alleges that Lively edited the film’s final cut without his approval and attempted to block him from attending the premiere. Baldoni claims that Lively’s actions amounted to a "pattern of vindictiveness" designed to ruin his professional standing. This part of Baldoni’s claim—focused on the editing of the film and his exclusion from the premiere—could potentially lead to a breach of contract or tortious interference claim. A breach of contract claim would suggest that terms agreed upon in a legal agreement were violated, while tortious interference occurs when someone intentionally disrupts the relationship or contractual agreement between parties, potentially leading to significant financial damages and reputational harm. Film directors often have the final say on creative decisions, so Lively’s interference could be viewed as overstepping and damaging to Baldoni’s reputation in the film industry. Additionally, Baldoni claims that Lively, along with her husband Ryan Reynolds, leveraged their Hollywood clout to push for his removal from the film's production, including allegedly pressuring William Morris Entertainment to drop him as a client. If true, this could form the basis for a tortious interference claim. In such a claim, one party would argue that another intentionally interfered with their contractual relationships or business dealings. This can be tricky to prove, as it requires showing that the interference was unjustified and intentional. Lively Escalates Her Complaint into a Federal Lawsuit On the same day as Baldoni filed his lawsuit against the New York Times in Los Angeles, Lively formalized her California Civil Rights Department complaint into a federal lawsuit[ii] in New York. According to Lively’s lawsuit, Baldoni, Heath, and a crisis PR expert named Melissa Nathan tried to bury Lively’s reputation by manipulating social media, planting negative stories, and leveraging crisis communications to protect Baldoni’s public image. Lively claims that this campaign included texts from Nathan and Baldoni discussing how to “bury” people and target women in the public eye. The lawsuit alleges that even the big money folks at Wayfarer Studios, including co-founder Steve Sarowitz, were involved in the plot. From a legal perspective, if Lively’s claims about the smear campaign are proven, this could be a strong case for defamation and tortious interference. Defamation requires showing that false statements were made about a person, which harmed their reputation. In this case, the alleged "burying" of Lively through negative media manipulation would likely involve defamatory statements, whether directly or indirectly implied. Tortious interference claims, on the other hand, focus on one party intentionally damaging another’s business or reputation by improper means. If Lively can demonstrate that Baldoni and his team used these tactics intentionally to damage her career, there could be significant legal repercussions for all involved. However, the challenge for Lively will be proving that these negative media tactics were both intentional and defamatory, rather than part of a broader public relations strategy designed to mitigate the fallout from the initial complaints. PR teams are often hired to clean up a reputation, but if they cross the line into deceptive practices or actively seek to harm someone's reputation, they may have legal exposure. The decision to file the lawsuit in New York—despite the initial complaint being lodged in California—appears to be a strategic move regarding forum selection. California might offer more protections under its state laws, but New York law allows for quicker and more direct access to the courts, enabling Lively and her legal team to bypass some procedural hurdles and go straight to litigation. Additionally, the New York venue may offer a broader legal framework by incorporating both federal and state claims, and it could potentially provide a more favorable jurisdiction for Lively's case, particularly considering that much of the case's events occurred in New York. Lively’s complaint included demands for a jury trial. Baldoni Also Sues Lively in the Southern District of New York Adding another layer to the legal battle, Baldoni and Wayfarer Studios filed a lawsuit[iii] against Lively, Reynolds, and publicist Leslie Sloane on January 16, 2025, seeking a staggering $400 million in damages. This suit, filed in the federal District Court for the Southern District of New York, expands upon the existing claims, alleging civil extortion, defamation, and a series of contract-related violations. This lawsuit reinforces the argument that the conflict originated from a creative struggle. It alleges that Lively gradually increased her influence, demanding creative control beyond the typical scope of an actor's role. This included taking over wardrobe decisions, rewriting scenes, creating her own film cut, and ultimately demanding Baldoni's exclusion from promotional activities. The lawsuit vehemently denies any sexual harassment or inappropriate behavior by Baldoni, Heath, or any member of the production team. Instead, it accuses Lively and Reynolds of engaging in "extortionate threats" to damage Baldoni's reputation. Baldoni amended his complaint on January 31, 2025, just days before the scheduled initial pretrial conference. In the amended filing, which now includes the New York Times as a defendant, Baldoni alleges that metadata on the New York Times' website reveals the paper had access to Lively's civil rights complaint at least 11 days prior to their bombshell December 21st report. That report, titled "'We Can Bury Anyone': Inside a Hollywood Smear Machine," accused Baldoni and his publicists of orchestrating a campaign to damage Lively's reputation, seemingly in retaliation for her complaints of sexual harassment on set. This new information regarding the Times' prior knowledge of the complaint raises questions about the timing and context of their reporting. Furthermore, the amended lawsuit includes new claims regarding Ryan Reynolds' portrayal of the character Nicepool in "Deadpool & Wolverine," with Baldoni accusing Reynolds of using the character to mock and bully him. The amended filing includes claims for civil extortion, defamation, false light invasion of privacy, breach of implied covenant of good faith and fair dealing, intentional interference with contractual relations, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, promissory fraud, and breach of implied-in-fact contract. Leaked Footage, Gag Order Request, and Website Launch On January 21, 2025, Justin Baldoni's legal team dropped a bombshell: a 10-minute video from the "It Ends With Us" set. This move, intended to counter Blake Lively's sexual harassment allegations, captures intimate moments, including a rehearsal of a romantic dance with Lively. While Baldoni claims the footage exonerates him, Lively's team argues it actually supports her claims, pointing to specific scenes as evidence of inappropriate behavior. In a dramatic escalation, Lively and Reynolds filed a motion for a gag order against Baldoni's lawyer, Bryan Freedman. They accuse Freedman of a relentless media campaign, including inflammatory statements and potential leaks, aimed at swaying public opinion and prejudicing the jury pool. This, they allege, is a continuation of the alleged retaliation orchestrated by Baldoni and his team since Lively first spoke out. Additionally, a day after amending his New York complaint on January 31, 2025, Baldoni’s legal team launched a website, featuring the amended complaint and a detailed timeline of events. Given the proximity of the launch to the pre-trial conference, this may have been a preemptive move by Baldoni to circumvent any potential gag order. By publishing the information online, Baldoni may be attempting to solidify his narrative in the public eye and potentially undermine the basis for a gag order. Case Consolidation and Trial Date Set In a major update from New York, federal judge Lewis J. Liman has scheduled a trial date for March 9, 2026, marking the next chapter in this high-profile legal battle. The trial, which will address the complex claims of sexual harassment, defamation, and contract violations, is now set to proceed after Liman moved the initial conference from mid-February to next week. The court is also preparing for discussions on pretrial publicity and attorney conduct, with both sides expected to present concerns over the impact of public statements and potential jury bias. This adjustment follows a filing by Lively’s legal team, which alleges that Baldoni’s attorney is attempting to influence potential jurors. Specifically, Lively’s lawyers claim that Baldoni’s legal team has been actively working to harm Lively’s career by launching a website that selectively releases documents and communications between the two stars. According to Lively’s legal representatives, the goal of this strategy is to sway public opinion and turn prospective jurors against her before the trial even begins. As the New York case gains momentum, another legal front has emerged in Texas. Lively has filed a request in a Texas court to depose a man she claims played a central role in turning online sentiment against her during the film’s release and promotion. This new legal move adds further complexity to the already tangled web of lawsuits, as Lively seeks to identify and address those responsible for the negative publicity she alleges was orchestrated to damage her public image during the film's promotional campaign. As the legal battle intensifies on both coasts, all eyes will be on the actions of the court and the legal strategies of both Lively and Baldoni as they prepare for what promises to be a protracted and high-profile trial. The Legal Implications Moving Forward Judge Liman's January 27th decision to consolidate the Lively and Baldoni cases in the Southern District of New York marks a new, and potentially decisive, phase in their legal battle. This procedural move streamlines the trial process, focusing the complex factual and legal issues into a single proceeding, while simultaneously raising the stakes considerably for both parties. Consolidation not only avoids duplicative litigation but also presents a unified narrative to the court, forcing both sides to confront the totality of the allegations and defenses. While it remains to be seen whether Judge Liman will also consolidate Baldoni's separate, and arguably related, suit against the New York Times, the fact that the Times is now a defendant in the consolidated case suggests this is highly probable. This joinder could significantly broaden the scope of discovery and potentially introduce thorny First Amendment issues regarding journalistic privilege and fair report. The outcome of these lawsuits carries significant implications for the entertainment industry, potentially shaping the landscape of workplace conduct and media scrutiny. If Lively's claims of sexual harassment and retaliation are substantiated, particularly given the high-profile nature of the case, it could establish a crucial precedent for worker protections in Hollywood, especially for women navigating the pervasive power imbalances. This could embolden others to come forward and trigger a wave of policy changes regarding reporting and investigating harassment claims. Conversely, Baldoni's claims of defamation and tortious interference, if successful, could raise important questions about the often blurry line between personal and professional conduct on set, potentially chilling the willingness of individuals to report misconduct for fear of legal reprisal. This aspect of the litigation touches upon the delicate balance between free speech and reputational harm, an area of law ripe for development in the context of the #MeToo era. As the litigation unfolds, the entertainment industry will be watching closely. It will be interesting to see how the courts navigate these complex issues of proof and credibility, particularly regarding allegations of harassment and retaliation, which often rely on circumstantial evidence. The case also presents a fascinating interplay between traditional defamation law and the evolving standards for media reporting on sensitive matters, particularly in the context of ongoing investigations and public accusations. Furthermore, the potential long-term effects on industry dynamics, including the power of public opinion and social media pressure, are significant. Regardless of the outcome, this litigation is likely to leave a lasting mark on Hollywood and beyond. [i] Wayfarer Studios LLC v. New York Times, 24STCV34662 (Ca. Sup. Ct. Dec. 31, 2024) [ii] Lively v. Wayfarer Studios LLC, 1:24-cv-10049, (S.D.N.Y.) [iii] Wayfarer Studios LLC v. Lively, 1:25-cv-00449, (S.D.N.Y.)
February 4, 2025
Franchise Law
Virginia Bill That Would Ban Franchise Non-Competes Advances in State Senate
Virginia Senate Bill 798, introduced by former in-home senior care franchisee Sen. Chris Head, was passed unanimously by the Virginia Senate on January 17, 2025. The bill would amend Virginia's Retail Franchising Law to require franchise agreements for a Virginia location to be governed by the laws of Virginia. It would make it illegal to offer or enter into such a franchise agreement “that restricts the right of a franchisee to engage in the business of offering, selling, or distributing goods or services at retail after termination or expiration of the franchise agreement.” It will be heard in a Virginia House of Delegates Labor & Commerce Committee, likely sometime during February 2025. Why it Matters: Covenants not to compete are hallmarks of franchising. Some argue that they are necessary to protect a franchisor’s confidential and proprietary information from misuse by former franchisees to the detriment of both the franchisor and its remaining franchisees. Many franchisees think such provisions restrict their ability to hold a franchisor accountable, since the non-compete traps franchisees in the relationship with little recourse to advocate for their benefit. Very few states have outlawed post-termination or expiration covenants not to compete in franchise agreements. California is well-known for its law that makes non-competes unlawful in most contracts, including employment and franchise agreements, unless the covenant is given in the context of selling a business as a going concern. Illinois restricts the ability of a franchisor to enforce a non-compete following the expiration of a franchise agreement unless the franchisor has offered the franchisee the right to renew. Indiana restricts the duration and scope of acceptable post-relationship non-competes. But to this author’s knowledge, no state’s law, even California’s, is as far-reaching in restricting post-relationship competitive restrictions in franchise relationships as the Virginia bill. What to Do if the Bill Passes: If a franchisee seeks to break away from the franchisor during the term of the franchise agreement, the franchisor did not violate applicable franchise sales law, that the franchisee has the option to rescind the franchise, and the franchisor fulfilled its material obligations under the franchise agreement, then the franchisor should have a claim for lost future profits for the franchisee abandoning the franchise without cause. If Virginia passes this bill into law, it will be important for franchisors selling in Virginia to ensure that their standard franchise agreement clearly states that the franchisor has the right to collect such damages. As to the expiration of the franchise, traditionally, most franchisees have had the option to continue the franchise relationship at expiration if they sign the franchisor’s “then-current form of franchise agreement.” The problem has been that franchise agreements have often become more one-sided for the franchisor, particularly as a system matures, and if there is a non-compete applicable upon non-renewal then the franchisee has little ability to negotiate more favorable terms at “renewal.” The bill, if enacted, would dramatically change that dynamic at expiration. One provision that franchisors might consider adding to their agreements is an option for the franchisor to purchase the business as a going concern at expiration, if the franchisee does not accept the franchisor’s offer of a new agreement at least 90 days prior to expiration. The provision would require the franchisor to pay the fair market value of the franchised business, including goodwill attributable to local use of the trademarks, and also require the franchisee to agree to provisions that are customary in a business purchase and sale agreement. Covenants not to compete, after sale of a business for value, are customary and should be enforceable following such an arms-length sale, notwithstanding the language of the Virginia bill. Another approach that may be helpful to franchisors is to define all customer information collected or obtained by the Franchisee during the franchise relationship as proprietary to the franchise system and forbid the use of that information subsequent to the end of the franchise relationship. Such a provision should state that the Franchisee has a license to use the customer data during the relationship, and that license (and the local goodwill with those customers) is an asset that the Franchised Business that the Franchisee may sell to a new franchisee as part of an approved transfer. Such a provision, particularly with franchisees who are new to the system and the industry, may enable the franchisor to stop a former franchisee from using the customer data under trade secret laws, notwithstanding the bill discussed above. Such a restriction would make it less attractive for the franchisee to leave the system. However, such a provision could also have negative ramifications for the franchisor if it is sued by a franchisee’s customer. The details of each such provision, and others to protect truly proprietary and unique assets of a franchise system, require careful consideration and customized drafting. However, if Virginia enacts this bill into law, then it would join a select group of states that have tilted the playing field in favor of veteran franchisees, and franchisors will need to consult with experienced counsel who understands the ramifications of contract provisions.
January 31, 2025
Estates and Trusts
The Impact of Transgender Executive Order on New York Residents
On January 20th, President Trump issued an executive order entitled “Defending Women from Gender Ideology Extremism and Restoring Biological Trust to the Federal Government.” The executive order included provisions for the limitation of two gender markers – male and female -- on United States passports. The passport gender marker limitation is not retroactive but will only apply to issuing new passports and renewing existing passports. The order would force changes to federal documents, including new and renewed passports, visas, and Global Entry cards, and would require trans inmates to be removed from areas in federal prisons that align with their gender identity. It also rescinds the Biden-era executive order that allowed trans individuals to serve in the military. Almost immediately after the announcement, transgender advocacy organizations began receiving frantic calls from members of the transgender community, fearing that the executive order could lead to the inability to change identification documents to conform to one’s gender identity, as well as fears of physical harm. New York is one of several states that have enshrined the protection of gender identity in its constitution. Substantial pushback on the executive order is anticipated at the federal and state levels. If you are a member of the trans community and were born in New York City and/or the State of New York, you should still be able to change your name and state-issued identity documents to properly align with your gender identity. If you have not already done so, you should start the process of changing your legal name and state-issued identification documents. Various organizations, including A4TE and Lambda Legal, offer assistance with these processes. Along with your state-issued identification documents, you should make sure that your estate planning documents, including wills, trusts, powers of attorney, health care proxies, and designations of agents for the disposition of your remains, are in order and properly reflect your gender identification. Selecting the proper agents who will fulfill your wishes with respect to your health care and bodily remains is equally important.
January 30, 2025
Immigration Law
What to Do if ICE Shows Up at Your Workplace
ICE Enforcement Actions The Trump administration has immediately followed through on campaign priorities of aggressive immigration enforcement. The agency in charge of immigration enforcement is the U.S. Immigration and Customs Enforcement agency, otherwise known as ICE. We have seen an expansion of federal deportation actions and the removal of protections for areas previously considered safe spaces from agency actions. ICE enforcement actions can now occur in places of worship, schools, and courthouses. ICE agents can and will detain large numbers of individuals in a single action to determine their immigration status. Finally, the passage of the Laken Rily Act means that convictions of relatively minor crimes, such as shoplifting, could lead to indefinite detention for immigrants. ICE Actions and Deportation Warrants All people living in the United States, including individuals here without status, have certain specific rights protected by the Constitution. Key considerations of ICE enforcement actions are as follows: An ICE deportation warrant is not the same as a search warrant. If the ICE warrant is the only document ICE can show to justify their presence, they cannot legally enter a premises without agreement. You can and should ask for a search warrant signed by a judge and review it outside the premises. Warrants must be facially correct, including the individual’s correct name and address, as well as the Judge’s full name. Worksite Enforcement Given the current increase in ICE enforcement actions, it is clear that there will be additional forms of worksite actions specifically related to legal immigration compliance. These actions may be conducted by U.S. Citizenship and Immigration agents from the Fraud Detection and National Security Directorate, Department of Homeland Security (DHS) Homeland Security Investigators, and/or ICE agents. These actions are described as “worksite enforcement” and cover enforcement of various immigration laws, including but not limited to I-9 compliance, immigration fraud, and compliance under the H1B and L1 visa programs. Typically, these actions are large-scale enforcement actions with warrants, but they can also consist of a smaller team of agents following up on a business that sponsored a single individual. Paperwork compliance is critical for employers, and ensuring I-9 compliance is recommended for all employers. A heavily recommended first step is to conduct I-9 audits. One key consideration is that worksite enforcement actions are in person, and accordingly, it is critical that employers brief team members about how to interact with agents. Finally, these actions are not necessarily entirely immigration-related, and compliance with employment laws generally will be reviewed as well. So, what are the best practices moving forward in another age of enhanced compliance by the DHS? Our five tips would be: Standardize processes for hiring and verification, including immigration compliance, to have a robust compliance program for all hires moving forward. Review I-9 compliance, potentially including an audit of I-9s. Consider moving to E-Verify for compliance purposes. Have a plan in place for federal agents showing up. Designate a point of contact and ensure they are familiar with organizational rights and obligations. Keep informed. Keeping up to date on changes in immigration and enforcement policies is key. We have seen changes to passport issuance for transgender U.S. citizens, as well as the threat of travel bans and further disruption and delay for immigration processes. Courthouse Enforcement Regarding the courthouse memorandum, ICE has been told to generally avoid non-criminal courts for enforcement. Still, such guidance is not binding, and heightened vigilance at all courthouses is recommended for clients. This action is similar to the prior Trump administration’s enforcement priorities. Detainee Locator After apprehension by ICE, it is often exceedingly difficult for employers or loved ones to find an individual detained by ICE. Sometimes detainees may be sent to the side of state or to a different state entirely for processing. ICE does have a robust detainee locator system that can assist in finding individuals caught up in enforcement actions: https://locator.ice.gov/odls/#/search. Resources Please find attached a quick guide produced by the American Immigration Lawyers Association for individuals questioned or detained by ICE. Additional Resources: Protecting The American People Against Invasion – The White House Interim Guidance: Civil Immigration Enforcement Actions in or near Courthouses Misguided Laken Riley Act Does Nothing to Fix the Problems That Plague Our Immigration System | American Immigration Council DOJ threatens to prosecute local officials over immigration: NPR
January 30, 2025
Business
Startup Success Starts with Governance Documents and Clear Ownership Rules
If you are launching a new business without proper governance documents, you’re risking financial loss and business owner disputes. Every business owner needs properly drafted governance documents. This cannot be overstated. It’s exciting to launch a new business, but failing to properly document the business relationship between owners is a major pitfall. It is not uncommon for attorneys to have witnessed this firsthand, numerous times, and it almost always results in financial loss or dispute. An episode on Acquiring Minds podcast provides a powerful example of the troubles you can face without these governance documents (jump to the 51-minute mark to hear why). Learn how to safeguard your venture from the outset. Assuming a business is structured as an LLC, an operating agreement sets the governance foundation and prevents many avoidable disputes. Key Provisions to Consider Equity Vesting Schedule: For startups and emerging companies, it’s critical to protect the company from premature departures. Implementing a vesting schedule keeps everyone incentivized for the long haul, ensuring commitment and stability. Dispute Resolution: Conflict is inevitable. Whether it’s a disagreement over strategy or management style, a clear dispute resolution mechanism (such as mediation or arbitration) can help resolve disputes without causing a full breakdown of the business. In the Acquiring Minds podcast example, a "shotgun clause" would have been helpful. This is a buyout mechanism that also doubles as a form of dispute resolution. These tools work together to protect the business during critical decision-making moments. Equity Buyout Terms: Define how ownership interests can be bought or sold to ensure fairness while protecting the business from being forced into unwelcome arrangements. Important terms include shotgun clauses, puts, and call options. Decision-Making Processes: Specify how major business decisions will be made. This includes setting voting thresholds and identifying areas that require unanimous consent. It’s also important to establish early on whether someone will hold a majority stake in the company. Even a 1–2% difference in ownership can make a significant impact. Exit Strategies: Plan for the future by outlining provisions for dissolution, sale, or succession. For instance, drag-along rights protect majority shareholders in a sale, while tag-along rights safeguard minority interests. These provisions ensure smooth transitions and clarity for all parties. Don’t Rely on A Handshake A handshake may start a partnership, but only a well-drafted operating agreement can protect it. Having robust governance documents isn’t just a best-practice, it’s essential for protecting your venture and ensuring long-term success. Don’t overlook the importance of partnering with experienced legal professionals to get it right.
January 29, 2025
Estates and Trusts
Not Maintaining an Up-to-Date Inventory of Art and Collectibles for Estate Planning
This is Part 4 in a Series of the Top 10 Mistakes Made When Planning for Art and Other Collectibles: A Guide for Professionals and Their Clients. A well-organized inventory is essential for effectively managing and planning the distribution of collectibles, including art. Clients may struggle to track their assets without an inventory, making future distribution and estate planning significantly more challenging. Maintaining an inventory can be as simple as using a basic spreadsheet or, for larger collections, leveraging specialized inventory management software. Regardless of the method, a comprehensive inventory should include: Size, materials, and description of items, as well as photographs of each individual item. A system for recording purchases and sales, including transaction dates and parties involved. Documentation of loans and gifts, specifying recipients and terms, as well as the location of items. Records of appraisals and insurance coverage. Logs of damages and losses. Keeping an up-to-date inventory also helps track each item's provenance, which is critical for authentication and valuation, particularly in the event of a sale. Maintaining an inventory of copyrights is just as important for clients who are also artists or creators. These intellectual property rights may have been licensed for specific periods or may require a distinct distribution plan separate from the original works upon the artist’s passing. Ensuring these details are well-documented can prevent legal complications and preserve the creator’s legacy.
January 28, 2025
Los Angeles Wildfire Legal Resource Center
Supporting Wildfire Victims: Isabel Conrath's Dedication to Community Recovery
When disaster strikes, the strength and resilience of a community often shine through the actions of those determined to help. Isabel Conrath, an associate in Offit Kurman’s Estates and Trusts West Practice Group, has exemplified this spirit by stepping forward to assist victims of the devastating Palisades and Eaton fires. Isabel, a graduate of Pepperdine University Caruso School of Law, was deeply involved in the school’s Clinical Education Program. Her ongoing commitment to serving others drove her to volunteer with Pepperdine’s Disaster Relief Clinic in Malibu, supporting wildfire victims with the legal challenges they face in the wake of such tragedy. “When the devastating Palisades and Eaton fires broke out earlier this month, I knew that I wanted to use my role as an attorney to help those impacted in any way possible,” Isabel shared. “This work included listening to their stories and helping them navigate insurance claims and secure disaster relief benefits.” Her efforts have provided more than just legal assistance; they have also offered hope and comfort to individuals facing unimaginable losses. For Isabel, the most rewarding aspect of this work has been witnessing the resilience of the wildfire victims and the strength of the community coming together in times of need. “Seeing the difference a small piece of my time can make—hopefully restoring some small sense of hope—is exactly why I chose to become an attorney,” Isabel reflected. While the work has been fulfilling, it is not without its challenges. Isabel admits that witnessing the emotional and financial toll on members of her community has been heartbreaking. “This is especially difficult to witness knowing that I am unable to alleviate many of the concerns they have in that moment,” she said. To those affected by the wildfires, Isabel offers a heartfelt message of compassion and solidarity: “I want to express my deepest sympathy for the hardships caused by the recent wildfires. The physical and emotional toll of losing so much, so quickly, is unimaginable. Please know that your community is here for you, and Los Angeles County will rebuild!”
January 24, 2025
Real Estate
Will 2025 Bring Greater Equity Investment and Debt Financing in NJ? NJ Aspire 3.0 aspires to do just that.
On January 23, 2025, Governor Phil Murphy enacted significant amendments to the New Jersey Aspire Program by signing Senate Bill 1323/Assembly Bill 2076 into law. The amendments, collectively referred to as “NJ Aspire 3.0” are designed to enhance the program’s effectiveness in stimulating redevelopment projects across New Jersey. The key revisions in NJ Aspire 3.0 concern project award amounts, eligibility periods, tax credits, eligible project expenses, and occupancy requirements. Increased Project Award Amounts: Award amounts for eligible projects have been increased to bridge financing gaps more effectively, aiming to attract greater equity investments and facilitate debt financing for redevelopment projects. Reduced Eligibility Periods: The maximum eligibility period for most projects has been reduced from 15 years to 10 years. For projects located in Government Restricted Municipalities (“GRMs”), this period is further reduced to five years. Under the prior law, only Trenton, Atlantic City, and Paterson were considered GRMs. NJ Aspire 3.0 adds Camden, East Orange, and New Brunswick to the list of GRMs. The adjusted eligibility periods aim to encourage more timely project completion and quicker utilization of the program benefits. Carry Forward Tax Credits: Purchasers of tax credits can now carry forward unused credits for up to five years, providing greater flexibility in tax planning. State Buyback of Unused Tax Credits: The state will now buy back unused tax credits and tax credit transfer certificates at 85% of their value, providing a safety net for developers who are unable to utilize or sell their credits. This is an increase from the 75% floor provided by the previous law. Proration of Tax Credits: The obligation to prorate tax credit awards has been eliminated, a change that applies retroactively to the inception of the New Jersey Aspire Program. Eligible Project Expenses: Projects in GRMs are now permitted to include land acquisition costs as eligible project expenses, capped at 20% of the total eligible project costs. Occupancy Requirements: The previous mandate for a 60% occupancy rate has been removed for residential developers and commences in the 4th year of the eligibility period for commercial developers. This eases the compliance burden for residential developers and provides commercial developers with additional time to achieve necessary occupancy levels. These legislative updates are anticipated to make the New Jersey Aspire Program a more robust tool for closing financing gaps in redevelopment projects, thereby attracting greater equity investments and facilitating debt financing. NJ Aspire 3.0 has the potential to significantly enhance opportunities for real estate developers and investors by incentivizing economic growth and community revitalization across New Jersey. By offering targeted incentives for real estate development projects, the program aims to attract private investment, support the creation of mixed-use, commercial, and residential spaces, and stimulate job creation, particularly in underserved or high-priority areas. By doing so, NJ Aspire 3.0 aims to enhance the state’s economic competitiveness and foster equitable and sustainable growth. Understanding the legal nuances of eligibility and compliance is critical, ensuring developers and investors maximize the program’s advantages while adhering to its requirements. Developers and investors in New Jersey’s redevelopment sector should review these changes carefully to understand the new opportunities and requirements.
January 24, 2025
Estates and Trusts
Equal Shares, Unequal Outcomes: Estate Planning Strategies for Parents and their Qualified Retirement Accounts
Typically, a parent wishes to treat their children equally in their estate plan and presumes they will achieve this goal by dividing all their assets into equal shares upon their death. Accordingly, they will designate their children as equal beneficiaries of their qualified retirement accounts, such as traditional IRAs and Roth IRAs. However, doing so without considering the individual circumstances of their children may be less tax efficient and may ultimately result in one child receiving more assets after the payment of taxes than their siblings. Traditional IRAs vs. Roth IRAs: Key Differences A traditional IRA is funded on a pre-tax basis, with the income taxes on any appreciation deferred until assets are withdrawn from the account. Traditional IRAs are subject to requirement minimum distributions (RMDs) when the account holder attains the age of 73. A RMD is the minimum amount that must be withdrawn from the IRA each year. Contributions to a Roth IRA, on the other hand, are made with after-tax dollars, and the distributions are withdrawn tax-free. In addition, there is no RMD requirement for a Roth IRA during the lifetime of the account holder. The Ten-Year Rule When the account holder dies, most beneficiaries must take distributions pursuant to the “ten-year rule,” which requires that the beneficiary withdraw the account assets in full within ten years from the date of death of the original account holder. During this withdrawal period, the beneficiary must take RMDs in each year that the inherited account is open. As these withdrawals are made, the beneficiary must pay the deferred taxes based on their individual income tax bracket. Notably, withdrawals from a Roth IRA account remain income-tax free to the beneficiary, and are not subject to the RMD requirement. Tax Benefits for Eligible Designated Beneficiaries (EDBs) A beneficiary that is deemed an “eligible designated beneficiary” (“EDB”) is not subject to the ten-year rule and may take distributions from the inherited account over their lifetime. Thus, the account assets may continue to appreciate tax deferred over a significantly longer period of time. EDBs include beneficiaries that are not more than ten years younger than the original account holder, surviving spouses, beneficiaries that are deemed disabled or chronically ill, and minor beneficiaries.[1]. It will be inherently more tax efficient for a parent to name an EDB as a beneficiary of their qualified account because of the extended withdrawal period the beneficiary will have to take distributions from the account. Therefore, if a parent has two or more children, one of whom is deemed an EDB, and names each of them as an equal beneficiary of their IRA account, the child who is an EDB will ultimately receive significantly more assets than their siblings because the assets in the account will have significantly more time to appreciate tax-deferred. In addition, because of the extended withdrawal period, the beneficiary has more flexibility in choosing when to take distributions from the account to avoid getting bumped into a higher marginal income tax bracket. Accordingly, if the parent wishes that each of their children receive as nearly equal shares of their assets as possible, and one or more of their children are deemed EDBs, it may be better to provide a greater share of their qualified accounts to the EDB beneficiaries, and the non-EDB beneficiaries with a greater share of their other estate assets. Case Study: Tax Efficiency and Equalizing Shares What if the account holder does not have any beneficiaries who will be deemed an EDB? Even then, the account holder should still consider their children's individual income tax circumstances. Suppose the account holder is single with a Roth IRA with $1,000,000 in assets and a traditional IRA with $2,000,000 in assets. The account holder has two children: Alex, who is a stockbroker, and Jamie, who is a public school teacher. We can presume that Alex has more taxable income than Jamie and that Alex has a higher earning potential in their career. If Alex and Jamie were named equal beneficiaries of the traditional IRA, it is likely that the distributions from the account would bump Jamie into a higher income tax bracket in the years that they are received, thus generating more income tax liability. Alex’s distributions are almost certain to be taxed at a higher marginal rate than Jamie's. If Alex and Jamie are named equal designated beneficiaries of the Roth IRA, the distributions would be tax-free in the year that they are received, leaving their respective income tax brackets unaffected. Therefore, naming Jamie as a primary beneficiary of the traditional IRA, where distributions will be taxed at a lower tax bracket, and designating Alex as the primary beneficiary of the Roth IRA is likely more tax efficient and most likely to ultimately result in each child receiving equal shares of the assets after payment of income taxes. As this example illustrates, naming each child as an equal beneficiary of a qualified account may not result in equal distributions after the payment of taxes, frustrating the intentions of a well-meaning parent. Therefore, careful consideration must always be given to the individual circumstances of an account holder’s intended beneficiaries. [1] Minor beneficiaries become subject to the ten-year rule once they attain the age of 18.
January 23, 2025
Commercial Litigation
Five Things to Take into Consideration When Negotiating and Settling a Case
Settling a case is hard. Negotiating the terms and coming to an agreement can take weeks or months. But once the parties agree to the general terms of a settlement (e.g., the amount of money changing hands and the timing of the settlement payment), there are a number of other considerations for putting the settlement agreement in writing. Here are five things to know when you are negotiating to settle your case: You Can Protect Your Privacy Even though the documents filed in the lawsuit will remain public, the settlement details don’t have to be public. One effective tactic is to separate the settlement agreement from the “stipulation of discontinuance.” This allows the terms in the settlement agreement to remain private, with the only document being filed with the court simply stating that the parties have agreed to discontinue the case. You Can Set the Rules for After the Lawsuit A settlement agreement can also be useful for clarifying what the parties can and cannot do after the lawsuit. Often, parties agree to include a provision in the settlement agreement requiring the parties to keep the settlement terms confidential and not to disclose those terms to anyone. Some parties may even agree to a non-disparagement provision, requiring them to refrain from saying anything negative about each other. Although these are provisions that often can be overlooked when negotiating a settlement, they can help to permanently put the dispute to rest and assist the parties with moving past the lawsuit. Plan for What Happens if Someone Breaches the Agreement You may be feeling optimistic that you are finally settling your case. Not so fast. Contemplate what may happen if something still goes wrong: what if the settlement payment doesn’t come through? Or what if someone breaches some other part of the agreement? The settlement agreement should provide a roadmap for what happens next. You may want to include whether the breach of the agreement goes back to the court you were in or whether the dispute goes to arbitration. You also may want to have a provision stating that if the other side breaches the agreement, you are entitled to additional damages and that the other side has to compensate you for your attorneys’ fees. Including these terms in the agreement can save you resources and avoid the frustration of going back to court if the other side breaches. Don’t Overcomplicate It Lawsuits are stressful. Don’t add to that stress by making the settlement more complicated than it needs to be. Include the terms you need to wrap up the case and exclude those other terms that often don’t apply to your case or that you don’t need. Prioritize being clear with the terms you include, as sometimes a settlement agreement can go on for dozens of pages when just a fraction of that can suffice. Once You Sign, the Settlement is Final Before you sign a settlement agreement, make sure you understand each piece of the agreement. If you don’t understand some portion of the agreement, you may be taking on obligations you don’t know about or waiving rights that leave you worse off. Settling a case requires careful attention to detail, and drafting a settlement agreement that clearly reflects the parties’ intentions is critical to avoiding future disputes. By addressing these key considerations in your negotiations, you can ensure the settlement process is effective and that your interests are protected.
January 22, 2025
Estates and Trusts
The Hidden Cost of Failing to Plan
The Top 10 Mistakes Made When Planning for Art and Other Collectibles: A Guide for Professionals and Their Clients Mistake #3: The Hidden Cost of Failing to Plan Art and collectibles, while beautiful and culturally significant, can pose significant estate planning challenges. At the time of death, these assets are subject to estate taxes based on their fair market value. Without proper planning, federal and state estate taxes—combined with the costs of selling the assets—could erode over 50% of a collection’s value. Art, as an alternative investment, began emerging in the 1970’s and has only boomed as a result of digitalization. Art as a profitable investment now consistently outperforms other asset classes such as the FTSE 100 and S&P 100. According to 12 Wall Street Journal article, "The Art of Passing Along Art," highlights an unexpected problem faced by many collectors, particularly those who acquired their art in the 1950s and 1960s. These octogenarian collectors are discovering that their art collections have appreciated significantly more than their liquid assets. As a result, their estates often lack sufficient liquidity to cover estate tax obligations. For example, consider a New York estate with $40 million in liquid assets and $100 million in art. That New York estate will potentially incur a $63.5 million tax bill, forcing the executor to sell some or all of the art within nine months to satisfy the obligation. Such rushed sales often lead to undervalued transactions, significantly reducing the collection's realized value. In extreme cases, the entire collection might be sold for a fraction of its worth simply to meet the estate's federal and state tax liabilities. Strategic Solutions for Collectors Fortunately, there are various strategies to reduce the estate tax burden on art and collectibles. These include: Charitable Contributions: Using art to fulfill philanthropic goals can provide both estate tax relief and personal fulfillment. Lifetime Gifting: Strategic gifting of art during the collector's lifetime can shift value outside the taxable estate. Estate-Freezing Techniques: These methods help move highly appreciated (or soon-to-appreciate) assets out of the taxable estate. Moving the Collection out of state: Using limited liability companies and other entities can eliminate the potential for state estate taxes by changing the location of the assets. When considering these options, it’s essential to evaluate whether the collection holds more value as a cohesive whole or as individual pieces. Each strategy should be tailored to the collector's goals, ensuring that both financial and sentimental value are preserved for future generations. Make sure you speak with a trusted estate planner who specializes in planning for large collections of art and other intangible assets.
January 21, 2025
Estates and Trusts
Ethical Wills: The Heart of Your Estate Plan
When most people think of estate planning, Trusts and Last Wills and Testaments usually come to mind. I have spent my career espousing the essential tools for ensuring an efficient transfer of assets from one generation to the next, planning for taxes and incapacity, and outlining health care desires. However, the standard estate plan does not capture something equally valuable: the values, lessons, and hopes that many wish to document for their loved ones. That is where an ethical will comes in. Ethical wills, also known as “Letters of Intent, or “Legacy Letters” are non-legal documents that convey the intangibles like morals, beliefs, and reflections on your life - both the highs and the lows. What is an Ethical Will? A traditional Last Will and Testament or a trust directs how your tangible assets will be distributed upon your death. An ethical will instead can serve as heartfelt advice and guidance to your loved ones and future generations. While it is not legally binding, an ethical will can be deeply personal and meaningful. Ethical wills are not new. In fact, there is mention of an ethical will in the Book of Genesis in the Bible and they were traditionally recited orally to family members. It was not until the Middle Ages when they were recorded in writing with the hope that the message would be preserved and shared with future generations. Do you need an Ethical Will? The short answer is no. But considering the fact that in creating a traditional estate plan, most put significant time, thought, and energy into who should inherit and in what proportion, it likely would be appreciated and helpful to share your reasoning behind how you came to those decisions, or what you hope the beneficiary might consider when living their lives and using what you left to them. Content of an Ethical Will: Values: Leaving your worldly goods, your home, and other financial assets to the next generation is certainly important, but your ethical will might explain to your beneficiaries the values that you lived by that enabled you to acquire those assets. It can provide a platform for you to share with your beneficiaries your principles, your beliefs, and the lessons learned in doing so. Strengthening Family Connections: The event or ceremony of sharing your ethical will together can be a truly powerful experience for a family. A document containing stories, anecdotes, and your successes and failures can help family members feel connected to your story and to each other during your life or long after your death. Clarifying Intentions: Sadly, the decisions and bequests made in a traditional will or trust can be misunderstood and lead to conflict within a family – having the opposite effect that you intended. An ethical will provides you with the opportunity to explain your reasoning behind the content of your legal estate planning documents, reducing the likelihood of misunderstandings or hurt feelings. Providing Comfort and Guidance: An ethical will should be a sort of love letter to your family in which you provide words of encouragement, share the joy you felt with your loved ones, and impart wisdom and advice for their future reference. For those with religious beliefs, many choose to share how faith served as a touchstone if a parent or loved one is no longer here. Ethical wills can also provide a great source of comfort and strength during times of grief. Get started: The best part of an ethical will is that you don’t need to hire a lawyer to start. Reflect on Your Life. Consider the experiences that shaped you over the course of your life. What life lessons do you think are worth sharing with your loved ones for years to come? Tell them to “take that risk” because it served you well. Do you have hopes for your loved ones for their lives? Now is the time to share those hopes for their higher education, or creating a family in the future. Is there something specific that you want to be remembered for? If so, convey what that is and why it’s important to you. Be Honest and Authentic. This is not a formal legal document; you should write in your own voice. The whole point of an ethical will is to be heartfelt and a reflection of you. Get personal and write it as though you are having the most heartfelt conversation with your loved ones. Do not be concerned with form, grammar, or the legality of it all. It’s ok to be vulnerable and share your failures and your regrets. Nothing is Forever. Let’s face it, things change and because of that, you can always revise and update your ethical will. Just as I tell clients that legal wills and estate plans should be updated, your ethical will should also be updated. Relationships, net worth, health, values, and perspective are not permanent. Do not be afraid to reconsider and revise. Sharing is Caring. In most cases the ‘reading of a will’ is only something made for TV. With an ethical will, the choice is yours: you may decide that you want your ethical will read prior to revealing the contents of your legal will to set the stage for how your assets are to be distributed, or choose to share your ethical will during your life. Whether it is something left behind to be read after your death, or if you prefer gathering your family together to foster a discussion about legacy and lessons, there are no rules how you share. Combining an Ethical Will with Traditional Estate Planning. While an ethical will is not a substitute for a legal will or trust, it certainly can complement your estate plan by adding an emotional, encouraging, loving, and sometimes spiritual dimension. Work with your estate planning attorney to ensure your proper legal documents are updated and in place and consider crafting an ethical will to share with your lawyer so that they can better understand what is important to you and how to help you accomplish your goals. Creating an estate planning does not just have to be about the legality of moving assets from one generation to the next, it can be much more. Including an ethical will in your plan may ensure that your lessons, love, and legacy are preserved for future generations.
January 21, 2025
Labor and Employment
Better Call Sarah: Political Speech in the Workplace
Dear Sarah, Help! After this last election, it seems everyone at the office has something to say about politics, and I’m caught between my mission to keep the peace and the very real risk of stifling free speech. Is there a way I can manage these heated political discussions without turning our office into a debate club or accidentally infringing on anyone's rights? Sincerely, Politically Puzzled in HR Dear Politically Puzzled in HR, Political discussions at work intersect with various labor and employment laws, including anti-discrimination regulations, the National Labor Relations Act (NLRA), state laws on mandatory meetings[1], and voting leave policies. Political conversations can also give rise to claims of discrimination, harassment, or retaliation under federal, state, and local anti-discrimination laws. By being mindful of both your right as an employer to set boundaries on political expression and employees’ rights in this area, you can comply with the law and maintain a positive workplace culture. Misconceptions About Free Speech in Private Workplaces Many people assume that the First Amendment guarantees unlimited free speech rights in all workplaces, but it actually applies mainly to government regulation, not to private employers. This means that, generally, private companies have broad discretion to manage political speech at work. However, federal laws like the National Labor Relations Act (NLRA) and anti-discrimination statutes create important limits on this authority. Protected Activities Under the National Labor Relations Act (NLRA) The NLRA, for instance, protects employees—even in non-union settings—when they engage in “concerted activities” related to workplace conditions, such as discussions about pay or safety. If political discussions are directly related to these issues, they may also fall under protected activity. Employers should take care in addressing such conversations, especially as recent guidance from the National Labor Relations Board (NLRB) suggests that protected discussions may now include social justice or other political topics related to employee rights. Risks of Political Speech Leading to Discrimination Claims Even though political views themselves are generally not protected under anti-discrimination laws, discussions that touch on protected characteristics (e.g., race, gender, national origin) may lead to complaints of harassment or discrimination. For example, political debates on topics like immigration or reproductive rights could be seen as targeting certain groups, creating a hostile work environment. Employers should handle any related issues consistently and fairly to prevent claims of biased or discriminatory treatment. State and Local Laws Offering Additional Protections Additionally, some states have laws that prevent employers from disciplining or restricting employees based on their political affiliations, views, or party associations. In some cases, state protections extend beyond traditional political speech to cover social justice advocacy and other issues. Employers must also be aware that state and local laws often provide greater protections for employees than federal laws. For example, some states offer protections similar to First Amendment rights for private employees. Employers should also be familiar with the differences between federal EEO laws and state-level EEO regulations to ensure compliance. Developing Clear and Inclusive Policies Employers should develop clear, effective policies that align with legitimate business interests while minimizing ambiguity around what political activities and expressions are allowed. The policy must consider activities and communications protected under the NLRA as well as relevant state and local laws. To reduce the risk of discrimination, harassment, or bullying claims, employers may want to discourage supervisors from engaging in political discussions with subordinates, as supervisors are not protected by the NLRA. However, these policies must also be carefully crafted to comply with state-specific laws. Additionally, employers should consider implementing a social media policy to set clear expectations for online behavior. Political statements—especially on social media or in public spaces—can have a direct impact on your company’s reputation. Public backlash can arise if an employee, visibly linked to the organization, expresses controversial views. In today’s digital landscape, social media posts are just as influential as in-person comments, so it’s essential to handle online expression carefully. Many states protect employees’ privacy, meaning employers generally cannot demand access to personal social media accounts. If disciplinary action is needed, verify that any content was publicly accessible and relevant to workplace conduct to avoid legal risks. A policy on social media use, drafted in line with state and federal regulations, can help clarify expectations for how employees express their views online. Managing Off-Duty Conduct Employers should be mindful of employees’ rights to engage in political expression outside of work. In California, Colorado, New York, and North Dakota, laws protect employees from adverse actions based on lawful political activities conducted outside of work hours. Employers should exercise caution when considering disciplinary actions for off-duty conduct to avoid violating state-specific protections. Fostering a Respectful and Inclusive Workplace Culture Addressing political speech in the workplace requires a careful balance. A comprehensive, consistently applied policy that values respect and inclusivity can help maintain a positive work environment while respecting employees’ rights. By fostering a respectful culture, employers can reduce potential conflicts and support a productive, harmonious workplace. In the current polarized climate, taking proactive steps to handle political speech thoughtfully can strengthen workplace morale and protect the company from legal risks, ensuring a fair, respectful environment for all. [1]Mandatory employer-sponsored or so-called “captive audience” meetings are those an employer convenes during working hours to educate employees on certain topics, particularly the employer’s views on unionization. Although the NLRB has yet to issue a formal ruling on this issue, it is anticipated that the agency may take a strong stance against these types of meetings.
January 17, 2025
Estates and Trusts
Maryland’s 2025 Budget Proposal: Changes to Estate Taxes and What They Mean for Estate Planning
Recent Maryland proposed budget cause for close estate planning review before the sunset of the federal Tax Cuts and Jobs Act. This week, Maryland Governor Wes Moore released his proposed 2025 budget to the public and submitted House Bill 352 to the Maryland Assembly for review and approval. The proposed changes in the budget have a significant impact on estate planning, especially as it relates to Maryland’s death taxes. Maryland is the sole state in the union that assesses both an estate and inheritance tax against the estates of resident decedents. The governor’s budget proposed abolishing Maryland’s Collateral Inheritance Tax on probate and non-probate transfers and inter vivos gifts made within two years of the date of death. The proposed budget does not abolish Maryland’s Estate Tax, but significantly reduces the exemption amount. Maryland’s current estate tax exemption is $5,000,000 per individual and $10,000,000 per married couple. The newly proposed budget would reduce the estate tax exemption by more than half to $2,000,000 per individual and $4,000,000 per married couple. Under the terms of the budget, the changes to Maryland’s Estate Tax exemption will go into effect in July 2025. Should the proposed budget and changes go into effect, many Marylanders will need to take a renewed look at their estate planning to mitigate the impacts of the changes to the new state estate tax threshold.
January 17, 2025
Adopting the Moving Van Approach
The Top 10 Mistakes Made When Planning for Art and Other Collectibles: A Guide for Professionals and Their Clients Mistake #2: Adopting the Moving Van Approach When it comes to estate taxes, the Internal Revenue Service (IRS) expects all tangible personal property to be properly reported on Schedule F of Form 706. This includes any valuable assets such as art collections, antiques, or other collectibles owned by the decedent. Failing to report or undervaluing these items is a common audit trigger and can turn what might have been a clean estate tax return into a costly investigation. But what happens when a client suggests they intend to "make their valuable art collection disappear" to avoid estate tax inclusion? A Word of Caution No Statute of Limitations on Tax Fraud Tax fraud—including estate tax fraud—is not bound by a statute of limitations. If an art collection or other personal property goes unreported on Form 706, the IRS retains the authority to pursue unpaid taxes, interest, and penalties indefinitely. Moreover, these liabilities can extend to the decedent’s heirs, potentially creating financial and legal challenges for the next generation. Impact on Provenance and Marketability Beyond tax considerations, failing to accurately value and report an art collection can undermine its provenance. Provenance—the documented history of ownership—is critical for determining an item's authenticity and value in the marketplace. Without proper documentation, including accurate estate tax filings, selling items at their fair market value can become difficult, if not impossible. Practical Advice It's essential to educate clients on the long-term consequences of attempting to sidestep estate tax obligations. Transparency and compliance not only minimize audit risks but also preserve the integrity and marketability of valuable collections for future transactions. By taking a proactive and informed approach, you can guide clients toward strategies that align with both their financial goals and legal responsibilities.
January 15, 2025
Construction
How Should Construction Contracts Approach Potential Tariffs?
As an initial primer: tariffs typically work as a tax, charged on goods purchased and imported to the United States from a foreign country. The tariff is charged as a percentage on the price paid for the foreign good. Tariffs are collected at the ports where the goods enter the country. Typically, the tax is paid by the importer directly to the US Customs and Border Protection Service. And, typically, the tax is required to be paid to release the good from the port, although there are some methods to slightly adjust that timing by satisfying certain conditions. A tariff on construction materials would likely result in additional costs for the project. Intuitively, a tax on the imported materials simply causes the goods to cost more. Also, tariffs on imported goods might cause increased demand for specific alternatively sourced materials (whether that be domestic or non-tariffed foreign sources), which then leads to increased costs for those alternative sources. As a general rule of thumb, and reflected in most standard construction contracts, the contractor is responsible for providing the labor and materials for the construction project at the agreed upon contracted price, and the contractor is not entitled to any adjustment to the price on the basis of changes in taxes or laws, unless there is a contract clause specifically affording such relief. For example, the AIA A201-2017 section 3.6 General Conditions provides that the contractor is responsible for all taxes on the work. In most standard contracts, there is no specific clause that affords the contractor relief or adjustments in the event of changes in taxes, laws, or tariffs. Depending on the specific contract, perhaps one could argue that a tariff is an unforeseeable event beyond the control of the contractor; however, most contract clauses would afford limited or no relief, typically an extension of time at best, but not compensation. An example of this difficulty is the force majeure clause that might exist in a contract. Under most contracts, tariffs are not specifically identified in the force majeure clause, and most force majeure clauses provide an extension of time as the remedy and do not afford additional compensation to cover the costs. Some contractors might be tempted to argue that relief should be afforded under the doctrine of commercial impracticability. That too, is a difficult path. Commercial impracticability sometimes affords relief to a contractor when circumstances on a project have changed so drastically that the performance of the contract is commercially impractical. Theoretically, if a tariff increased the costs so astronomically to make the job financially impossible, there could be an argument under the doctrine. But these circumstances are relatively rare, and courts are rather critical of this argument. On public federal projects, an argument could be made that a contractor is entitled to equitable relief and an adjustment to the contract price under FAR 52-229.3, which provides for an equitable adjustment for new taxes that arise during a project. It is unclear, however, whether this argument would succeed, because it is uncertain whether a tariff constitutes a new tax under FAR 52-229.3. There is a dearth of decisional law on this point, and a 2022 Armed Services Board of Contract Appeals decision rejected this argument. Thus, a tariff on construction materials is likely to increase the costs, and there is no obvious straightforward right to relief in most default contracts. A contractor should consider negotiating a specific clause to address the cost item. A list of potential approaches, including specific negotiated clauses, including the following: Price escalator clauses for either tariffs or specified categories of materials; Contingencies or allowances for materials of concern or tariff costs; Greater flexibility for substitutes or alternatives to allow for sourcing of differing materials; Segregated pricing by agreement for time-and-material budgets for carved-out scope packages that might be more volatile; Prompt procurement, buy-out administration, and warehousing of goods in advance to avoid potential volatility on specified goods; Value-engineering during the preconstruction phase to identify different materials; Increased buffers in the contract price to account for the risk of potential tariff impositions. When negotiating and drafting custom contract clauses to address risk on projects, or if litigating claims for equitable adjustments or change orders, best practice is to consult with trusted, experienced counsel that is knowledgeable on the intricacies of construction law. Offit Kurman construction attorneys are available to advise and counsel contractors, owners and developers, construction managers, design-builders, design professionals, subcontractors, and suppliers on construction contracts, risk, and project disputes.
January 14, 2025
Family Law
Why Divorce Lawyers Are Busy After the Holidays
The holiday season, with its emphasis on family gatherings, goodwill, and celebration, might seem like an unlikely time to consider divorce. However, for many couples, the stress and emotional intensity of the holidays often bring underlying marital issues to the forefront. As a result, divorce lawyers frequently see a surge in inquiries and new cases at the start of the new year, making January a peak season for divorce consultations and filings. The "New Year, New Start" Mentality For some individuals, the beginning of a new year represents a fresh start. This "New Year, New You" mindset often leads people to reevaluate their lives, including their relationships. Couples who have been struggling may view January as an opportunity to break free from an unhappy marriage and start anew. Holiday Stress Magnifies Marital Strains The holiday season is a time of high expectations. Families aim to create perfect celebrations, but the financial pressures, packed schedules, and family dynamics can amplify tensions in already strained relationships. Disagreements over money, parenting, or extended family obligations may come to a head, leaving one or both partners feeling that divorce is the only solution. Staying Together "For the Kids" Many parents delay divorce proceedings until after the holidays to avoid disrupting their children’s celebrations. They prioritize giving their kids one last holiday season as a united family, even if the marriage is irreparably broken. Once the holiday decorations are packed away, these couples often proceed with reaching out to divorce attorneys. The Role of Social Media and Comparison During the holidays, social media feeds are flooded with images of seemingly happy families enjoying picture-perfect moments. For individuals in struggling marriages, these posts can deepen feelings of dissatisfaction and loneliness. The stark contrast between their reality and the idealized versions of others’ lives may push them toward seeking a divorce. Preparing for the Surge Divorce lawyers and family law firms are well aware of the post-holiday uptick in divorce cases. Many firms use December to prepare for the influx, ensuring that their teams are ready to handle consultations, paperwork, and court filings. Some even offer informational sessions or promotional campaigns in January to assist potential clients during this challenging time. Moving Forward For those considering divorce after the holidays, it’s important to approach the process thoughtfully. Consulting with an experienced divorce lawyer is a critical first step in understanding your rights and options. Additionally, seeking support from therapists or counselors can help individuals and families navigate the emotional complexities of divorce. While the start of a new year can be a difficult time for couples ending their marriage, it also represents an opportunity for growth and a chance to create a more fulfilling future. Divorce, while challenging, can ultimately lead to a healthier and happier life for all involved.
January 13, 2025
Estates and Trusts
Prudent Investing in Uncertain Economic Conditions
The Prudent Investor Rule is a legal principal that requires fiduciaries to act in the best interests of a beneficiary and exercise reasonable care, skill, and caution when making investment decisions, which was codified in Maryland in 1994 by Md. Estates & Trusts §15-114. The Rule applies to fiduciaries, including trust companies, investment managers or advisors, and individual trustees who make a valid §15-114(g) election to be governed by the statutory standards for investing and includes fiduciary assets under management, including trusts, guardianships, and custodians. Under the Rule, a fiduciary must consider the best interests of the beneficiary in diversifying investments and investing and managing assets as part of an overall investment strategy. In doing so, the fiduciary may take into consideration the general economic conditions at the time. Any regime change in government brings a degree of economic uncertainty to market conditions. Currently, the market is experiencing uncertainty due to the US presidential election, a number of rising geopolitical tensions, natural disasters, and uncertainty surrounding economic policy and regulatory framework that could impact investment and spending decisions. Under the Prudent Investor Rule, a fiduciary is authorized to invest and manage assets to incorporate both risk and return objectives and to pursue an investment strategy that considers both the production of income and the safety of capital, utilizing a portfolio theory of investing. The directive to fiduciaries to diversify investments is intended to mitigate risk to the beneficiary of investment decisions made by the fiduciary. For Trustees and other fiduciaries, reliance on the advice and guidance of knowledgeable, experienced, and informed advisors is never more important than in the face of uncertain economic conditions.
January 13, 2025
Intellectual Property
Branding the Produce Aisle: Appealing to Consumer Tastes
Brands are taking over the produce aisle at the grocery store. They have already conquered the cereal aisle, the soda aisle, the chips aisle, and the cookie aisle (my favorite). While there have always been produce brands (Chiquita ® bananas or Dole pineapple), branded fruits and vegetables are proliferating. Newly branded fruits include the Elefante Green Gold pineapple, the Pink Elephant mango, and Cotton Candy grapes. The question is, why is there such a push to put stickers with a brand name on fruits and vegetables? Product Recognition and Differentiation From a legal point of view, product recognition and differentiation is the main reason to adopt a brand name. A brand name helps consumers identify a product, and helps that product stand out from other similar products. Which item are you more likely to remember—an apple or a Jazz apple? A banana or a Chiquita banana? It is possible for branding to be so successful that the brand name loses its ability to differentiate products. This is what happened to brands like aspirin and escalator, and it is something that brands like Xerox and Google fight against. Avoiding consumer confusion—or making sure that a brand name differentiates one party’s goods or services from another’s —is the whole point of trademark law. If consumers can distinguish one party’s brand from another’s, then there is no trademark infringement. If consumers think that the brands are related or associated with each other, then there is infringement. This is why the infringement analysis generally looks beyond the marks being used and the goods or services they are used on to other factors, such as price point, where the goods or services are being sold, and whether there was an intent to confuse consumers. Brand Loyalty Strong, dependable brands can encourage brand loyalty (repeat business). If you buy Cotton Candy grapes and love the way they taste, you are more likely to purchase them again with the expectation that you will be able to experience that great taste again. A negative experience, though, can cause a consumer to search for another brand of product. Brand loyalty can be a powerful driver of business. Think about it. How many times have you gone to the store and purchased something because you (or someone you know) used it before and it worked well? Sometimes brand loyalty is the result of an emotional connection to a brand. Perhaps you remember a brand from your childhood, or interacted with that brand when you were a child. Maybe you had a certain brand of drink with lunch in elementary school, or you remember your grandfather giving you a particular type of candy when you would visit. It could even be that you remember liking the advertising for a product when you were younger. This is one of the reasons why people often try to “revive” defunct brands, a practice that raises all sorts of questions about the ownership of the brand and the goodwill associated with it. Branded Items Seem More Exclusive The fashion industry has long since learned that branding can make a product seem more exclusive. One reason is that branded items can command a higher price. The store brand is almost always less expensive than the branded equivalent, whether in the grocery store or the department store. In some cases, the fruits are considered luxury items. This can be because they are genetically engineered, like Del Monte’s Pinkglow pineapple, which has white flesh, an edible core and low acidity, or the Cotton Candy grape, which is sweeter than a usual grape and tastes like cotton candy. In other cases, it is because small quantities are grown. To protect the names of these new fruits, growers seek trademark protection. After spending years to develop the fruits themselves (intentionally bred varieties of fruit trees and nut trees can be protected by a plant patent in the U.S., and genes, traits, methods, and plant parts can be protected by a U.S. utility patent), there is little reason not to protect the brand name, especially since that is what customers will ask for at the grocery store. Currently there are issued registrations or pending trademark applications for the following: COTTON CANDY, for grapes (Reg. No. 4109691) ELEFANTE GREEN GOLD, for pineapples (Reg. No. 7492189) PINKGLOW, for pineapples (Reg. No. 6330579) RUBYGLOW, for pineapples (Reg. No. 7507675) , for melons (Reg. No. 7154543) Branding is Everywhere It shouldn’t really be much of a surprise that brands are coming to the produce aisle. Branded items have been coming home with us from stores for a long time, and various factors drive the success and longevity of a brand. Without protection, though, a brand’s prospects for longevity are diminished and the brand is subject to appropriation or misuse by others. Trademark protection can help ensure the continued vitality of any brand, whether that brand appears on the most fashionable catwalks, in movie theaters, in a stadium, or in the grocery store.
January 8, 2025
Estates and Trusts
Not Knowing the Tax Implications of How Your Client is Classified
The Top 10 Mistakes Made When Planning for Art and Other Collectibles: A Guide for Professionals and Their Clients Mistake #1: Not knowing the tax implications of how your client is classified Navigating the tax landscape for art dealers, investors, and collectors can be a complex endeavor, but proper classification is key to maximizing tax savings and avoiding pitfalls. Professionals working with clients in the art world must understand how classifications affect income tax treatment, as well as practical steps to ensure clients benefit from the most favorable outcomes. This guide outlines the critical distinctions, tax implications, and actionable strategies to support clients. Understanding the Classifications The IRS recognizes three primary classifications for individuals engaged in art-related activities: dealers, investors, and collectors. Each carries distinct tax implications: Dealers: These individuals are in the trade or business of buying and selling art for profit. To be classified as a dealer under Internal Revenue Code Section 1221(a)(1), a client must demonstrate continuity and regularity in their activities and a primary purpose of generating income or profit. For example, an artist selling their own creations may qualify as a dealer. Investors: Clients who buy and sell art primarily for investment purposes fall under this category. Unlike dealers, investors do not actively market art as part of a trade or business but instead hold it as a capital asset Collectors: This classification applies to those who acquire art for personal enjoyment or aesthetic purposes. Collectors are not considered engaged in a business or investment activity and face the most restrictive tax treatment. Tax Implications The tax treatment of gains, losses, and deductions varies significantly depending on classification: Dealers: Gains are treated as ordinary income, taxed at rates up to 37%. Losses are ordinary losses, fully deductible against other income. Expenses incurred in the trade or business, such as storage or marketing, are deductible as ordinary and necessary business expenses on Form 1040. Note: For artists classified as dealers, the basis of their artwork is typically limited to the costs of their materials, often resulting in significant gains upon sale. Investors:Gains on the sale of collectibles are taxed as capital gains, subject to a maximum rate of 28%. Losses are capital losses, deductible against capital gains, with a $3,000 annual limit for net losses against ordinary income. Ordinary and necessary expenses for holding the art for income production are deductible. Collectors:Gains are taxed at the same 28% capital gains rate as investors. Losses are considered personal and cannot offset other income. Expenses related to collecting activities are generally nondeductible unless the client can demonstrate an investment intent. Practical Steps for Professionals Helping clients achieve the most advantageous classification involves careful analysis and documentation. Here are actionable strategies: Identify the Appropriate Classification: Evaluate the client’s level of activity, intent, and historical practices. Consider whether the client’s actions align with IRS criteria for a trade or business (e.g., continuity, regularity, and profit motive). Document Investment Intent:For collectors seeking reclassification as investors, gather evidence such as:Businesslike records of transactions. Consultation with art experts or advisors. Efforts to publicly display the collection. A history of profitable investments in similar areas. Educate Clients on Tax Treatment:Explain the impact of classification on their tax liabilities, including applicable rates and deduction limits. Highlight the importance of meeting the profit presumption test (three profitable years out of five) for activities presumed to be for profit. Leverage Deductible Expenses:For dealers and investors, ensure all ordinary and necessary expenses, such as insurance, storage, and advisory fees, are properly documented and claimed. For collectors, explore opportunities to demonstrate investment intent for potential reclassification. Monitor Changes in Activity:Reassess clients’ classifications periodically as their circumstances and activities evolve. A client who begins as a collector may transition to an investor or dealer over time with proper adjustments to their approach. Conclusion Proper classification of collectible and art-related activities can have a significant impact on a client’s tax liabilities, deductions, and overall financial outcomes. Professionals who understand these distinctions and proactively guide clients can unlock substantial tax savings and help avoid costly errors. By identifying the appropriate classification, documenting intent, and leveraging allowable deductions, you can ensure your clients are well-positioned to navigate the complex intersection of art and taxation. For tailored advice and support, consult a tax professional experienced in the unique considerations of art-related activities.
January 7, 2025
Labor and Employment
New Employment Laws Become Effective on January 1, 2025
The following is a summary of new employment laws which become effective on January 1, 2025. All States Minimum Wage Increases Employers should check their state statutes and local ordinances to determine whether the minimum wage has been increased. Failure to do so could lead in underpayment to employees and potential fines and penalties. State minimum wage increases, effective January 1, 2025: California: $16.50/hour Delaware: $15/hour New Jersey: $14.53–$15.49/hour$15.49 (employers with six or more employees) $14.53 (seasonal employers and employers with fewer than six employees) New York: $15.50–$16.50/hour$16.50 per hour (New York City, Long Island and Westchester County) $15.50 per hour (rest of the state) Also, in some states, like California, the salary test for exempt employees is dependent on the state’s minimum wage. Failure to increase an exempt employee’s salary would result in breaking the exemption and entitling exempt employees to overtime and other requirements for non-exempt employees. California Seven new employment laws in California took effect on January 1, 2025. Changes to the Fair Employment and Housing Act The Fair Employment and Housing Act was amended as follows: Government Codes § 12920 was amended to state that employers may not discriminate against employees based upon any combination of characteristics protected under the Fair Employment and Housing Act. Government Code § 12926 is amended to define “race” as including traits associated with race (rather than historically associated with race), such as hair texture and protective hairstyles. Any city, city and county, county, or other political subdivision of the state will be able to enforce local law prohibiting discrimination in employment against classes of persons covered by the Fair Employment and Housing Act if certain requirements are met, including a requirement that local enforcement is pursuant to a local law that is at least as protective as the act. The Civil Rights Department will promulgate regulations governing local enforcement pursuant to those provisions. Changes to Leave Laws There are two amendments to statutes related to employee leaves of absence: Paid Sick Leave – Employers must provide sick leave to agricultural employees to avoid smoke, heat or flooding conditions created by a state of local emergency. Paid Family Leave – Employers can no longer require that employees take up to two weeks of earned vacation leave prior to using paid family leave. California Worker Freedom from Employer Intimidation Act The California Worker Freedom from Employer Intimidation Act prohibits employers from retaliating against employees who decline to attend employer sponsored meetings or to listen to employer communications that have the purpose of communicating the employer’s religious or political opinions. Workplace Violence Law Employers may seek a temporary restraining order against an individual who has harassed employees or engaged in workplace violence or threats of violence against employees. Worker’s Compensation Notices Employers will be required to include the following in the notice to employees: The employee has the right to consult with an attorney The attorney’s fees will be paid in most cases This is a good reminder to update your employment posters effective January 1st of every year. Prohibition on Requiring Employees to Provide Driver’s License Employers cannot require applicants to have a driver’s license unless the employer reasonably expects driving to be one of the job functions and an alternative form of transportation would not be comparable in travel time or cost to the employer. Freelance Worker Protection Act This Act requires the following for contracts with a freelance worker, defined as a person, that is hired or retained as a bona fide independent contractor by a hiring party to provide professional services in exchange for an amount equal to or greater than $250: Contracts between a hiring party and a freelance worker be in writing and the new law requires a hiring party to retain the contract for no less than 4 years. A hiring party to pay a freelance worker the compensation specified by a contract for professional services on or before the date specified by the contract or, if the contract does not specify a date, no later than 30 days after completion of the freelance worker’s services. The law prohibits a hiring party from discriminating or taking adverse action against a freelance worker for taking specified actions relating to the enforcement of these provisions. The law authorizes an aggrieved freelance worker or a public prosecutor to bring a civil action to enforce these provisions. Delaware Healthy Delaware Families Act The Healthy Delaware Families Act requires that employers with ten or more employees must enroll in the paid leave program and begin paying the following contributions: The contribution rate for medical leave benefits as a percentage of wages is 0.4%. The 2025 contribution rate for family caregiving benefits as a percentage of wages is 0.08%. The contribution rate for parental leave benefits as a percentage of wages is 0.32%. Employers may deduct up to 50% of premiums from employees’ wages. New York Equal Protection The New York Constitution, and specifically Article 1, § 11 (the equal protection law) is amended to also prohibit discrimination based upon: Ethnicity National origin Age Disability Sex, including:Sexual orientation Gender identity Gender expression Pregnancy Pregnancy outcomes Reproductive healthcare and autonomy Paid Prenatal Leave Private sector employers must provide pregnant employees with twenty (20) hours of paid prenatal leave per year. The twenty hours must be made available upon hire. Pregnant employees can use this leave for healthcare services received by the employee during the employee’s pregnancy or related to such pregnancy, including physical examinations, medical procedures, monitoring and testing, and discussing with the employee’s health care provider related to the employee’s pregnancy. Prenatal leave may be taken in one-hour increments. Prenatal leave is not paid out when an employee leaves their employment. Pennsylvania Fair Contracting for Health Care Practitioners Act The Fair Contracting for Health Care Practitioners Act prohibits non-compete agreements exceeding one year for doctors, Certified Registered Nurse Anesthetists (CRNAs), Certified Registered Nurse Practitioners (CRNPs), and Physician Assistants (PAs). Disclaimer: This list is not intended to provide a comprehensive overview of all employment laws effective January 1, 2025, across the United States. Instead, it highlights significant employment law updates in jurisdictions where Offit Kurman serves clients. This content is for informational purposes only and does not constitute legal advice. For personalized guidance, please consult with an attorney.
December 31, 2024
M&A Nuggets
M&A Nugget: Letter of Intents should be neither a Gimme nor an Obstacle
The letter of intent is the first significant document signed by the target and potential acquiror in a merger transaction. Many times over the years, clients have first contacted me after signing a letter of intent to sell or purchase a business. That is usually a mistake. The letter of intent should set forth the parties’ expectations of the business deal and the most core legal issues. Accomplishing that, while not allowing the letter of intent to bog down the progress of the deal, is a fine balance and takes professionals who have been through the process many years. Some clients hurry through a letter of intent because they are under a misconception that the letter of intent is non-binding. However, the letter of intent is in fact a legally binding document in part. Although most letters of intent do not create a legal obligation to close the transaction, letters of intent do typically contain clauses that bind the seller and the purchaser, including, a) a no-shop clause prohibiting the seller from seeking or negotiating with other buyers; b) a confidentiality provision; c) a statement that from the signing of the letter of intent through the termination of the letter of intent, the seller will operate in the ordinary course of business; d) the date the letter of intent expires; and e) a statement of which State’s law governs the letter of intent. The primary purposes of these binding clauses are 1) to ensure the buyer who will be expending time, money and resources investigating the seller, that the seller will operate ordinarily and not seek to negotiate against the buyer, and 2) to give the seller with comfort that its willingness to sell its business will remain confidential and that there will be a date to move on if the parties agree on the terms of a definitive agreement. Since the letter of intent sets the parties’ expectation of the business terms, a rushed letter of intent can miss the boat on key business terms that, if thought of later, are difficult to incorporate into the deal. While the letter of intent must be dealt with expeditiously to move on to the next steps as quickly as possible, one side will be very unhappy later if a key business term is missed.
December 18, 2024
Bankruptcy
2024: Year in Review: Third-Party Releases After Purdue Pharma
"Lately I’ve been, I’ve been losing sleep Dreaming about the things that we could be" - Counting Starts, One Republic The most notable decision in the bankruptcy world in 2024 was the Supreme Court’s decision in Purdue Pharma. Harrington v. Purdue Pharma, L.P., 144 S. Ct. 2071 (2024). At the heart of the fight in Purdue Pharma were nonconsensual third-party releases where Purdue’s chapter 11 plan released all opioid crisis-related claims against the Sackler family[1]. Why are third-party releases important? A third-party release is a provision in a chapter 11 plan that can eliminate future liability for pre-bankruptcy conduct of non debtors like affiliates and officers and directors of the company that sought bankruptcy protection. For many years, debtors have used third-party releases as an important restructuring tool in chapter 11 cases. Bankruptcy lawyers and judges have been losing sleep over strategies to preserve this tool Circuit courts were divided on whether bankruptcy courts had the authority to grant nonconsensual third-party releases. The Second and Seventh Circuits permitted nonconsensual third-party releases when the particular release is essential and integral to the reorganization itself. Third Circuit permitted nonconsensual third-party releases in limited circumstances when the releases were fair and necessary to the reorganization. The Fourth, Sixth, and Eleventh Circuits approved third-party releases and applied a multifactor test[2] to decide the merits of third-party releases. The Fifth, Ninth and Tenth Circuits, however, held that nonconsensual third-party releases were not permitted by the Bankruptcy Code. The Bankruptcy Code does not include any explicit language that would permit third-party releases in most cases, but courts would approve them under §1123(b)(6) of the Bankruptcy Code, which allows bankruptcy courts to approve any “appropriate” provision in a chapter 11 plan that is “not inconsistent with the applicable provisions of this title.” Some courts also relied on §105(a) of the Bankruptcy Code which allows the bankruptcy court to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. The Supreme Court’s Purdue Pharma decision eliminated nonconsensual third-party releases. However, Purdue Pharma did not dispose of consensual third-party release and left open the question what would be considered consensual releases and what is going to be the fate of efforts to stay litigation against non debtor parties. In Purdue Pharma, the majority of the creditors voted for the final iteration of the plan which provided for a release of all opioid-related claims against the Sacklers in exchange for a several billion-dollar contribution to the bankruptcy estate. Under the terms of the plan, Purdue would reorganize as a benefit corporation with the purpose of ameliorating the opioid crisis. The United States Trustee objected to the third-party releases arguing that the Bankruptcy Code does not permit the nonconsensual release of claims against non debtors and raising concerns about the victims’ due process rights. In a five-to-four majority opinion written by Justice Neil Gorsuch, the court held that the Code did not permit nonconsensual third-party releases. The Court reasoning was premised on the text of Sections 1123(b) and 524 of the Bankruptcy Code. Section 1123(b)(6) specifically states that a debtor may include in its plan “any other appropriate provision not inconsistent with the applicable provisions of this title.” The Court reasoned that because “[p]aragraph (6) is a catchall phrase at the end of a long and detailed list of specific directions,” it must be interpreted within the context of the rest of the subsection. Thus, because paragraph (6) follows a list of provisions relating to the rights, relationships, and responsibilities of the debtor to its creditors, the majority interpreted § 1123(b)(6) to only permit the bankruptcy court to grant orders concerning the relationships between the debtor and its creditors, and not any relationships between non debtors and the creditors. In addition, the Supreme Court reasoned that the discharge provisions under § 524 limited discharge to the debtor and did not permit the discharge of third parties. The Court noted that § 524(g) already provides an exception to the discharge provisions by authorizing nonconsensual releases of third-party claims under limited circumstances in asbestos-related cases. Accordingly, if Congress intended to broadly authorize nonconsensual third-party releases, it could have included language to that effect. The full impact of Purdue remains to be seen but several bankruptcy courts grappled with what constitutes a consensual release. In the first opinion on the topic since the Supreme Court’s Purdue decision in late June, Bankruptcy Judge Christopher M. Lopez of Houston confirmed an opt-out chapter 11 plan with non debtor, third-party releases. The U.S. Trustee objected to the opt-out plan and argued that the releases were coercive and that the releases should be given only by creditors who opt in. Any creditor who voted in favor of the plan could not opt out, and creditors who did not vote would be bound by the releases. In addition, creditors who opted out could not sue unless the bankruptcy court were to determine that the claims were colorable. Judge Lopez started his analysis by emphasizing that Purdue explicitly dealt with non-consensual third – party releases only and did not change the law in Fifth Circuit. What constituted consent, including opt-out features and deemed consent for not opting out, had long been settled in this District and hundreds of chapter 11 cases have been confirmed with consensual third-party releases with an opt-out. The debtor gave extensive notice about the opt-out provisions in the plan. About 100 creditors opted out, Judge Lopez said in his opinion. Judge Lopez overruled the U.S. Trustee’s objection and confirmed the plan because “the third-party releases are consensual and narrowly tailored.” A New York judge in the Bankruptcy Court for the Western District of New York, Chief Bankruptcy Judge Carl L. Bucki of Buffalo, N.Y. denied confirmation of an opt out plan in a case where the corporate debtor offered $300,000 for distribution among creditors with more than $282 million in unsecured claims. The proposed plan called for releasing not only the debtor but also the debtor’s officers, directors, shareholders and agents. Non debtor releases were also earmarked for the debtor’s and the committee’s professionals, among others. Unless a creditor affirmatively opted out, they would be deemed releasing claims. In re Tonawanda Coke Corp., ___ B.R. ___,. No. BK 18-12156 CLB, 2024 WL 4024385, at *2 (Bankr. W.D.N.Y. Aug. 27, 2024.) Unlike Purdue, the released non debtors were not making financial contributions toward the payment of creditors’ claims. Applying section 5-1103 of the New York General Obligations Law, Judge Bogucki held that an opt out plan does not satisfy the requirements for consent under New York law because an agreement to “discharge” an “obligation” had to be in writing and signed by the party against whom it would be enforced. Judge Craig T. Goldblatt of Delaware held that an opt-out provision is permissible only if the creditor was on notice that it would be subject to a third-party release and the creditor took an affirmative act, such as voting on the plan, but failed to exercise the opt-out right. A review of cases even pre-dating Purdue on what constitutes a consensual release shows that there is a case to support every view. Some cases apply state law contract principles (usually to deny approval of opt-out releases), and others apply federal bankruptcy principles (usually to approve them). “[C]ourts are markedly split on the issue, with some categorically finding that a release cannot be consensual absent an affirmative act to opt in, and others finding that opt-out mechanisms that (as is the case here) provide adequate notice and a simple opt-out process can result in a consensual release. In re: LAVIE CARE CENTERS, LLC, et al., Debtors., No. 24-55507- PMB, 2024 WL 4988600, at *12 (Bankr. N.D. Ga. Dec. 5, 2024). The consensual third-party releases will continue to be the main focus next year and the issue will continue to percolate in the bankruptcy and higher courts. [1] The Sackler family owned and controlled Purdue Pharma, the maker of oxycontin, which contributed to the opioid crisis. Empire of Pain, written by investigative journalist Patrick Keefe recounts the story of Purdue and the investigations and legal proceedings into the marketing practices of oxycontin. There are numerous criminal and civil proceedings initiated by the federal and state governments, foreign authorities and individual victims. Hulu’s Dopesick and Netflic’s Painkiller illustrate the impact of oxy in a more easily digestible format. [2] The Courts in these circuits take into consideration the following factors: (1) There is an identity of interests between the debtor and the third party, usually an indemnity relationship, such that a suit against the non debtor is, in essence, a suit against the debtor or will deplete the assets of the estate; (2) the non debtor has contributed substantial assets to the reorganization; (3) the injunction is essential to reorganization, namely, the reorganization hinges on the debtor being free from indirect suits against parties who would have indemnity or contribution claims against the debtor; (4) the impacted class, or classes, has overwhelmingly voted to accept the plan; (5)the plan provides a mechanism to pay for all, or substantially all, of the class or classes affected by the injunction; (6)the plan provides an opportunity for those claimants who choose not to settle to recover in full ;and (7) the bankruptcy court made a record of specific factual findings that support its conclusions.
December 18, 2024
Family Law
Dividing Christmas Ornaments and Other Personal Property in a Divorce Case
Divorce is a challenging process, and dividing personal property often adds emotional complexity. While big-ticket items like homes and retirement accounts might take center stage, sentimental belongings—such as Christmas ornaments, family heirlooms, and collectibles—can be just as contentious. Understanding the legal framework and adopting practical strategies can help ensure a fair and amicable resolution. Legal Considerations Marital vs. Separate Property: Generally, items acquired during the marriage are considered marital property and subject to division. Property inherited by or gifted to one spouse during the marriage typically remains separate property, as long as it has not been commingled with marital assets. If Christmas ornaments were acquired before the marriage or gifted individually, they might be classified as separate property. State Laws on Property Division:Community Property States: In these states, marital property is divided equally. Equitable Distribution States: Property is divided based on fairness, which may not always result in a 50/50 split. Sentimental vs. Monetary Value:Courts may not assign monetary value to sentimental items, but they may recognize their importance to both parties. If the parties cannot agree, a judge may make the final decision. Practical Strategies for Dividing Sentimental Items Create an Inventory: Begin by making a detailed list of all personal property, including Christmas ornaments, holiday décor, and other sentimental items. Include photographs or descriptions to avoid disputes over the condition or identity of specific items. Identify High-Priority Items:Each spouse should separately identify items that hold the most sentimental value to them. This process can help pinpoint areas of potential compromise. Negotiate and Trade:Consider trading items of comparable value. For example, one spouse might take the Christmas ornaments while the other keeps another collection of sentimental value, such as photo albums. Use larger assets, like furniture or electronics, to balance out inequities in sentimental property division. Collaborate During the Holidays:If children are involved, consider creating a shared holiday tradition, such as alternating who uses certain ornaments or decorations each year. Split ornaments into meaningful categories (e.g., “childhood,” “collected during marriage”) to ensure an equitable distribution. Use a Neutral Mediator:Mediation can be a helpful tool for resolving disputes over sentimental items. A neutral third party can provide guidance and help diffuse emotionally charged discussions. Tips for Minimizing Conflict Focus on the Big Picture: Remember that sentimental items, while important, are part of a larger process. Keeping the focus on achieving a fair overall settlement can reduce tension. Consider Duplication:In some cases, items like photographs or digital holiday keepsakes can be duplicated, allowing both parties to retain a copy. Consult an Attorney:An experienced family law attorney can provide insight into how local courts handle personal property disputes and guide negotiations. Conclusion Dividing Christmas ornaments and other personal property in a divorce requires a balance of legal knowledge, emotional intelligence, and practicality. While these items may not have significant monetary value, their emotional worth can be immense. By approaching the process with fairness, flexibility, and empathy, divorcing spouses can navigate this delicate aspect of property division with dignity and respect.
December 18, 2024
Family Law
Hanukkah and Parenting Time: Balancing Tradition and Family Dynamics
Hanukkah, also known as the Festival of Lights, celebrates the miracle of the oil that lasted for eight days in the Holy Temple in Jerusalem. During Hanukkah, many families gather to light the menorah, exchange gifts and enjoy latkes and sufganiyot. For divorced families, Hanukkah can present unique challenges when it comes to parenting time and holiday schedules. Balancing the celebration with the needs and expectations of all parties involved requires thoughtful planning, flexibility, and understanding. Some elements to consider include: Open Communication, Flexibility and Compromise: Open and clear communication between parents is essential for planning a holiday schedule that addresses where the children will stay, which traditions will be celebrated and ensures everyone feels included. Flexibility ensures both parents can share in the festivities, allowing children to connect with both sides of the family. Creating New Traditions: If one parent cannot be present for certain nights of Hanukkah, it’s a great opportunity to start new family traditions that blend the needs of both households. This could include pre-recorded video calls to participate in the menorah lighting or sending gifts in advance to ensure children feel that both parents are present, even if physically apart. Respecting Religious and Cultural Sensitivities: In families where different parents or stepparents come from various religious backgrounds, it’s important to be sensitive to any religious observances or practices. Finding ways to include both religious and secular elements in the celebrations may provide a path toward mutual respect and understanding. Children’s Needs: The needs and emotions of the children are central to any co-parenting plan. For younger children, maintaining familiar rituals is important for security and consistency. If children are older, their involvement and input in holiday arrangements may play a significant role in the decision-making process, particularly if they have developed strong connections to specific traditions or people. Holiday Gift Giving: The exchange of gifts is common during Hanukkah and ensuring that both parents can contribute to the gift-giving experience is important. Some families opt to give all gifts on one particular night, while others may stagger the presents over the course of the eight days. In a co-parenting situation, planning gift-giving ahead of time avoids overlap or competition while ensuring the children feel equally valued. Consider the Impact on Extended Family: Hanukkah often brings extended family together, including grandparents, aunts, uncles, and cousins. Making special arrangements to include one side of the family while ensuring the other is not left out may require flexibility, understanding, and some negotiation. Amidst the logistical challenges of co-parenting during Hanukkah, it’s important to focus on creating a positive and meaningful experience for the children. While the children may not fully understand the complexities of the co-parenting arrangement, they will remember the joy of celebrating the holiday with their loved ones. Ultimately, Hanukkah offers an opportunity for families to come together and reflect on the values of light, joy, and resilience—values that can be celebrated by all, regardless of the circumstances.
December 17, 2024
Labor and Employment
Better Call Sarah: Inappropriate Behavior at Office Parties - What You Need to Know
Mistletoe and Missteps: Ensuring a Safe and Fun Holiday Party Dear Sarah, I’m looking to keep our company’s annual holiday party lighthearted and fun and make sure it doesn't turn into a legal disaster (nobody wants a sexual harassment lawsuit under the mistletoe, right?). So, what's the best way to ensure our holiday festivities stay friendly and fun, without crossing any lines? And, just in case things do get out of hand, how should we handle any complaints or potential allegations of misconduct that may arise after the party? Cheers to no awkward lawsuits, The Mistletoe Monitor Inappropriate Behavior at Office Parties: What You Need to Know Dear Mistletoe Monitor, As much as the holiday party is a time for celebration, it's also a time when employer liability can become a concern. When alcohol is involved, workplace boundaries can become blurred, increasing the risk of inappropriate behavior—whether under the mistletoe or at the office party in general—which could lead to serious legal consequences. So, what should you do if something goes awry? Here are a few steps to mitigate liability and protect your business if an issue arises. 1. Respond Promptly to the Complainant. If an employee comes forward with a complaint, act quickly. Start by talking to the employee and assuring them that the complaint will be investigated thoroughly. Document all conversations and begin your investigation right away. This demonstrates that you take such matters seriously and are committed to creating a safe workplace. 2. Consider Having an Attorney Direct the Investigation. One option is to bring in legal counsel—either in-house or external—to guide the investigation. Having an attorney involved ensures that the process is handled appropriately and can help protect communications under attorney-client privilege. This is particularly important when dealing with sensitive situations that could lead to legal exposure. If you're unsure about the process or legal ramifications, consulting with an attorney early on is always a good idea. 3. Consider Protective Measures Pending the Investigation. Depending on the nature of the complaint and the circumstances, you may need to take interim actions. This could include modifying work assignments, adjusting schedules, or even placing the alleged harasser on leave. The goal is to maintain a safe environment while the investigation is ongoing. For example, if the situation involves two employees from different departments, you could temporarily change their work assignments to prevent further interaction until the investigation is completed. 4. Tailor the Response to the Situation. Remember that each case is unique, and your response should be proportional to the situation at hand. For serious allegations, you may need to take more immediate action, including suspensions or temporary leave for the accused party. Always consult with legal counsel to determine the most appropriate course of action based on the facts. 5. Keep the Event Safe and Enjoyable. Of course, the goal is to prevent these situations from occurring in the first place. You can minimize the risk of harassment claims by being proactive, setting clear expectations, and monitoring the party. Have policies in place to promote respectful behavior and remind employees that although they are at a social event, they still represent the company. If someone gets out of hand, don't hesitate to step in to prevent further issues. Your office holiday party should be a time for celebration, but it’s important to be prepared in case something goes wrong. By following these best practices, setting clear expectations, and consulting legal counsel, when necessary, you can reduce the chances of a party mishap turning into a legal nightmare. Happy holidays (with boundaries!).
December 17, 2024
Estates and Trusts
The Impact of California Assembly Bill 2016 (AB2016) on the Probate Process
In April 2025, California bill AB2016 will take effect, significantly impacting the state’s probate process. Currently, probate is required if a decedent’s property exceeds a certain value, and AB2016 will raise this threshold considerably. AB2016 amends six sections of California’s Probate Code and repeals one. Starting on April 1, 2025, and lasting through March 31, 2028, the threshold for a real property to qualify for disposition without a full probate administration will increase to $750,000. As a result, more estates will be subject to probate, and the obligation to notify all heirs and devisees could lead to a rise in estate disputes. In the wake of AB 2016, it's crucial to understand the California probate process and consider planning strategies to avoid it. All too often the reasons provided to clients are probate avoidance or circumventing the Medi-CAL recovery. With the imposition of the new law set to take effect on April 1, 2025, the value for probate avoidance for real properties per Probate Code section 13151 will rise to $750,000 for a primary residence and then the additional small estate of personal property at $166,250. Of note, the law provides that the “primary residence” is not limited to the decedent’s residence at the time of their death. This provides a total exclusion anticipated for April 1, 2025, to be $916,250. However, Probate Code section 13100 is set to be adjusted for inflation every three years and based on the date of the enactment of this law, it is likely that the value will need to be adjusted upward with planners estimating a value of one million ($1,000,000.00) can be excluded aside from jointly held assets or payable on death accounts. This is a significant change in the basis previously required court involvement. Now, if not otherwise designated in an estate planning instrument, the assets below the threshold in the Probate Code can go through a shorter form procedure with the Probate Court in the determination of a real property of small value. Although this will still expose family assets to the public, it prevents many of the expensive aspects of probate. For starters, the statutory fees associated with probate will no longer apply. This means that neither a personal representative nor any counsel would receive compensation based on the values of the statutory estate. Instead, the work performed could be calculated at an hourly rate or other agreed upon compensation. While the law is meant to extend the notice to all potential heirs and beneficiaries, it does not address the notice requirements to governmental agencies such as the Department of Victims Compensation Board, the Franchise Tax Board, and the Department of Healthcare Services. or instance, under the Welfare and Institutions Code section 14009.5, the Department of Healthcare Services is only notified for a Medi-CAL recovery claim when there is a decedent’s estate as set forth in Title 42 of the United States Code. Pursuant to Section 1396p(b)(4)(A) of Title 42 of the United States Code, estate “shall include all real and personal property and other assets included within the individual’s estate, as defined for purposes of State probate law[.]” These techniques, as set forth in the Probate Code, provide an exclusion for the formal Probate Estate Administration procedures in California. This will eliminate a large sector from the reporting requirements for Medi-CAL recovery claims. While AB 2016 brings about significant changes to estate planning and probate law that could affect how estates are managed in California, the fundamental reasons for estate planning remain unchanged. Instead, it is a stark reminder of why practitioners advise in planning early. While AB 2016 provides a partial fix for transference of wealth after passing, it does not eliminate the concerns during a client’s lifetime. A properly executed estate plan can mitigate the need for court involvement during any period of incapacity. Further, it can provide for a mitigation of risk for abuse by others taking advantage of you as an elder with a truster contact named as a successor representative.
December 13, 2024
Page 14 of 36
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