Family Law
Have You Created Your Post-Divorce Budget?
Money is one of the most common reasons for divorce. It’s also frequently one of the greatest concerns after the divorce has been finalized. Depending on your situation, you may end your marriage with more or less in the bank than you had during the marriage. Perhaps you’ll be the one receiving alimony and/or child support, or the person on the other end writing checks. Maybe you secured more marital property than your ex-spouse—or were forced to give up significant assets such as a house or vehicle. Regardless of the details of your agreement, you’re almost certainly not better off financially now than you were before. Hardly anyone walks away from divorce a “winner.” To ensure your financial stability, you’ll need to carefully create a post-divorce budget and stick to it. This can be challenging for anyone, but especially people whose exes managed household expenses. Here are a few tips for getting started: Calculate your monthly income and expenses. Determine how much money comes in each month. Then, figure out how much you spend on recurring expenses such as housing (e.g. rent or mortgage payments), bills (electricity, phone, water, etc.), groceries, car payments, gas, and so on. Look for ways to save. If your expenses are higher than your income, you need to a) start saving and b) eliminate or reduce as many costs as possible. Transfer a percentage of your income into your savings account each month. Cut down on unnecessary shopping. Cancel subscriptions. Take fewer trips to the supermarket. Wait before making big purchases. There are hundreds of options when it comes to saving money, so pick the strategies that make the most sense to you and your family. Prioritize paying off debt. If you have credit card debt, outstanding student loans, or another form of debt, try to pay back what you owe sooner rather than later. Financial liabilities only compound with time. Track your progress. Once you’ve created a budget, you’ll need to follow it—every day, week, and month. Keep an eye on your income and expenses, and regularly review your plan. If you’re having trouble sticking with it, you may need to revise your budget or change your spending habits accordingly. Finally, don’t hesitate to ask for help. An experienced professional can assist you in developing your budget and keeping your expenses on track. An attorney like the ones at Offit Kurman can provide help or connect you with a financial advisor.
September 16, 2023
Family Law
In A Newly Released Documentary Pope Francis Endorses Same-Sex Unions
Originally posted on 11/03/2020, content updated on 09/15/2023 In the 2018 full-length documentary about the life of Pope Francis entitled Francesco, Pope Francis, for the first time, openly shares his belief that the LGBT community should not only be freely welcomed into the Church, but that the Church needs to embrace, accept and recognize civil unions for same-sex couples. The Pope is clear and unambiguous in his discourse: Homosexuals have a right to be a part of the family… They’re children of God and have a right to a family. Nobody should be thrown out, or be made miserable because of it. This was not the first time Pope Francis has addressed the issue of the gay community and its relationship with the Catholic Church. Francis is believed to be the first pope to use the word “gay” publicly. Soon after becoming Pontiff in 2013, he made headlines when questioned about reports of gay clergy in the Church. Francis answered: “If someone is gay and he searches for the Lord and has good will, who am I to judge?” Whether the Church’s hierarchical authorities will change the teachings of the Church to reflect the Pope’s views is yet to be seen. However, Pope Francis’s forthright support for the religious recognition of formal unions for same-sex couples may be the beginning of a cultural shift in the Church’s views regarding the gay community.
September 15, 2023
Family Law
Whose Case Is It Anyway? – The Risk Of Hiring An Overly Aggressive Divorce Attorney
“Go for the jugular.” “Show no mercy!” “Revenge is a dish best served cold.” Face it, divorce often doesn’t bring out the best in people…and this need for vengeance can cloud a client’s point of view when it comes time to hire an attorney. No client wants a wallflower representing them and there is nothing wrong with an aggressive attorney to work on your behalf. But if you hire a rabid out of control pit bill as your lawyer, someone who tells you they’re out for blood at any cost from the get-go, well that could come back to bite you on the you-know-where. So is there a middle ground where your attorney is “in it to win it” but not to the point where events could spiral out of control to your detriment? Yes, and the first big step is to not make an emotional decision on representation. Often clients come into an initial meeting so riled up, they let their anger get the best of them and some attorneys will seize on this to snag a client, feeding into what a client wants to hear. Instead, try to be rational. Understand that the merits of your case are based on facts and not emotions when you go in front of a judge or mediator. Make sure your attorney wants to take a deep dive into the facts of your case and that’s their sole focus in representing you. Have them come up with an aggressive way to get you a fair but also realistic settlement based on the facts of your case, not what you “feel” you’re entitled to. Also don’t be afraid to discuss your budget and the firm’s costs upfront, so that their strategy works within the confines of what you can afford to pay. And never buy these four words: “don’t worry about it.” Also be wary of an overly aggressive attorney who boasts about wasting the court’s time and the other side’s money in order to get you the biggest and best settlement possible. If they say they’ll “bully” your spouse’s lawyer into submission, think carefully about that as well. Your spouse most likely will have a lawyer who won’t back down to intimidation and this face-off of egos could lead to lengthy delays in the process, costing you valuable time and a considerable amount of money. Once the process begins, stay in communication with your attorney and make sure that you never feel marginalized. You do need to let your attorney do their job, however, that doesn’t mean it’s okay to feel like you’re being left in the dark or that they’re involved in tactics you don’t approve of. The last thing you want is to be a party to an attorney who gets held in contempt of court because you had no idea of what they were doing “on your behalf.” And if you ever feel your attorney is only paying you lip service on any issue, it may be time to kiss them goodbye at any point in the process, because from beginning to end this should always be about working together. The stakes are just too high for you not to be involved and to make sure your hard-working attorney is a good reflection on who you are. Experienced Offit-Kurman family attorneys Sandra Brooks (a member of The American Academy of Matrimonial Lawyers) and Cheryl Hepfer (listed in Best Lawyers in America) will be upfront with you at the beginning and beside you at the middle and at the end of your case. With constant communication, you can feel certain Sandra and Cheryl will never put your case in jeopardy or put their needs in front of yours.
September 15, 2023
Litigation
Buyer Beware: What Homebuyers Should Know About Latent Defects
With “home buying season” now firmly in the rearview mirror, first-time home buyers and repeat buyers alike are continuing to settle into their new homes. For first-time homebuyers, in particular, the task of purchasing a home can easily and understandably appear to be a daunting one—to say the least. Many first-time homebuyers have genuine fears about the home-buying process, and repeat home buyers may be increasingly untrustworthy after previous bad experiences. All of this, and more, can easily create a stressful endeavor. Yet the commonly known principle of “Buyer Beware” often casts a shadow of doubt over the entire home buying process. The principle of Caveat Emptor or “Buyer Beware,” as it is colloquially known, is often characterized and maligned as a black-and-white doctrine, yet this is not always the case. Buyers often rely heavily on an inspector to provide a “green light” and/or identify faults in the property—but this process will often fail to detect hidden defects. Inspectors can only do so much during an inspection, and all too often, the “smoking gun” may be hidden from view or easily overlooked. If an inspector does fail to identify a defect or fault in the property, “greenlighting” the buyer to purchase the home, latent or hidden defects often do not become apparent until after moving into the home. The concept of Buyer Beware would lead home buyers to believe that most, if not all, undiscovered defects in their new home is their sole responsibility and that a seller need not remediate any issues. However, that is not always the case. In the event of fraud, a buyer may recover from a seller when the seller actively hid defects in the property or performed deceptive acts that induced the buyer to purchase the home. False assurances and misleading statements regarding the condition of plumbing, electrical, or HVAC systems can amount to fraud in the inducement, leaving the seller open to liability from the buyer. Painting over wood rot, covering water damage and mold with new flooring, and other affirmative acts of concealment open a seller up to liability and provide a lifeline to buyers. When a buyer relies on false or misleading statements in the purchase of their home, they may still be able to recover despite a buyer beware principle. In addition to false or misleading statements, a seller who actively conceals material defects in the property in anticipation of sale will open the seller up to liability.
September 14, 2023
Estates and Trusts
Handwritten Wills and the Couch Cushions that Hide Them
No doubt, the basic scenario plays out every day across America. An elder loved one passes, and an adult child or children are left to deal with an estate and no plan in place — or at least no apparent plan. What to do with mom’s comfy chair? How much is that old couch worth? Should we just donate everything to charity? Who decides? The oldest? The one living closest? Do we all get a vote? Before anything gets decided about the couch (or any other furniture, for that matter), I suggest everyone take a breath and consider the recent case of Aretha Franklin‘s four kids… and definitely don’t rush to divvy up everything and especially do not just get rid of the old couch! Nearly five years after the Queen of Soul passed and, no doubt, many tens (more likely hundreds) of thousands in legal fees later, the fate of Aretha Franklin’s estate was decided by a Michigan jury, which determined that a four-page “holographic“ (i.e., handwritten) document in a notebook found stuffed under Aretha‘s couch cushion was her intended last Will. No matter that the four kids had already long since mutually consented and arranged to have an agreeable cousin serve as a third-party neutral to administer the estate. No matter that the lack of a will had meant all four would share everything equally and that they’d come to terms with that. No matter that one of the four separate potential final will documents was several times longer, more detailed, found in a locked cabinet, and notarized! The jury’s findings result in Clarence Franklin getting cut out completely and brother Kecalf, alone, receiving Ms. Franklin’s $1.1 million home and most of her “personality” (i.e., her physical stuff-including jewelry, furs, and numerous luxury cars). Impossible to know for sure what Aretha had intended. In fact, according to a New York Times report, the trial judge overseeing the trial has ruled that portions of one or more of the earlier signed documents might still end up being incorporated into what the jury determined to be the final document. (Note: This can happen in certain circumstances when one deals more completely / thoroughly with the disposition of all that one owns in one document before creating another, which inexplicably makes no specific reference to replacing or substituting for the former document). So, despite having endured nearly five years of legal wrangling and a jury trial publicly airing the family’s “dirty laundry” along with matters preferably kept private, the Franklin kids may yet be forced to endure additional delays as the lawyers face-off on potentially unresolved issues, and Clarence and the other siblings now receiving substantially less than the presumed 25%, are now forced to consider their potential appellate options, as well. Why leave such unnecessary heartache to your loved ones after you’re gone? Consult a legal professional, and have it done correctly—and the way you want it—the first time. And if you have recently lost a loved one – especially if you’ve been led to believe they had an estate plan in place (and doubly especially if the “plan” they told you about appears to differ substantially from the plan the decedent actually left behind (or the lack of a plan altogether), I would urge you again to consider the plight of the Franklins and rethink that couch donation . . . at least until someone’s had a chance to lift the cushions and run their hands through the frame. (Epilogue: True, not-totally-unrelated, anecdote . . . I discovered a $20 bill and a pair of Ray-Ban® sunglasses (sold on the spot for $75) in the back of an abandoned couch acquired during a brief stint co-owning/operating a used furniture/carpet going concern more than 30 years ago. I didn’t have to become an estate and trust litigator to appreciate the potential treasure trove those old cushions might unlock! “What’s a ‘treasure trove?’” you ask . . . and “How does one determine ownership of a treasure trove when discovered?” That’s a whole other topic for another day. For now, happy couch-surfing!)
September 14, 2023
Family Law
Skin-to-Skin Contact Recap
If there’s one worry every new parent shares, that worry might be sleep—or, rather, the lack of it. When the disturbances are unpredictable, the needs incommunicable, and the stress overwhelming, a baby’s crying drowns out everything else. Forget work, chores, quality time, or your own sleep schedule. Getting your baby to doze off can become a full-time job unto itself. Fortunately for anyone toiling away right now, one of the simplest sleep-inducing solutions is also one of the most effective. Plus, it’s an excellent bonding ritual with benefits for both the baby and parent. David G. Allan, editorial director of CNN Health, Wellness and Parenting, calls it the “100 strokes” method: count to 100 through “slow back-and-forth sways” while holding your baby close, or through “100 calm and steady rubs” of the baby’s back. According to Allan, the method not only frequently puts babies to sleep (well before 100), but also has a calming effect on the parent. He writes: “The number 100 became like breaths in meditation; I couldn’t hold complex thoughts on top of counting, so deeper emotions surfaced, specifically love and appreciation for the small person I was holding and touching. I was less likely to get pulled away by superfluous streams of thought and soon began to deeply enjoy these moments of seemingly forced mindful parenting.” When Allan dug deeper, he found out that science supports this method as well. Physical touch between baby and parent encourages the release of chemicals associated with happiness and relief: oxytocin, serotonin, and dopamine. This can confer all sorts of positive health outcomes: “In one study, daily massage therapy was associated with a 47% weight gain in preterm infants. In another, researchers measured the stress response in the brain when subjects anticipated an electric shock and how that response was tempered if their arm was being stroked by a loved one. There’s even some evidence that touch may reduce anxiety and depression among Alzheimer’s patients. By holding and rubbing our children, we are conveying safety and trust, relieving stress and activating our bodies’ vagus nerves, triggering a compassion response. This is what actual bonding with your child looks like.” Read “Give me some skin: A nighttime ritual to bond parent and child.” A lawyer probably can’t help you calm your baby, but if you’re losing sleep over a legal issue, the attorneys of Offit Kurman’s Family Law Practice Group can help. To learn more about our team the services we provide, click here.
September 14, 2023
Estates and Trusts
What’s a Healthcare Proxy and Why Should You Have One?
Originally posted on 12/10/2020, content updated on 09/13/2023 It is vital to have a proper health care directive in place in the event you become sick and cannot independently advise your health care providers of your wishes. In 1991, the New York Health Care Proxy Law established the right for an adult to nominate another person to make medical decisions for her in the event she is unable to effectively communicate her wishes independently. The goals of establishing this standard in New York was to avoid confusion when a medical decision needed to be made for someone who could not do it herself, to identify the person who could communicate those wishes, to ensure the wishes would be carried out, and most importantly, to withdraw treatment when the proxy decides that it would not be something that the patient would want or that continued care is not in the patient’s best interests. How the Health Care Proxy Works The Health Care Proxy document only goes into effect when you are unable to effectively communicate your wishes to your health care providers. The proxy allows for the appointment of two people, referred to in the document as “agents”, in the order in which they are named. The order of the proxies in the document determines the order in which medical personnel will consult with them about decisions that need to be made about your health. Agents are not permitted to act together in New York because joint action could lead to disagreement, which of course undermines the purpose of the document. The medical decisions that an agent might make on your behalf can range from the most basic like the dispensing of antibiotics to the suspension of artificial ventilation which might end your life. The Health Care Proxy also provides instruction regarding organ and tissue donation in the event of your brain death. How to Choose Your Agents Your agent must be 18 years of age and does not have to be someone related to you. While it is true that many choose a family member like a spouse or an adult child for the agent role, there is no requirement that your agent be related to you. In fact, some choose a close friend or trusted advisor to fill the role of an agent so that a family member’s emotion does not factor into a health decision, particularly a decision that could end your life. Others nominate their religious advisor so that treatment is based on their faith’s doctrine to guide the medical decision. Regardless of the individual you choose, it is imperative when considering someone for the role that you nominate a person who will speak for you regarding the type of care that you would choose for yourself, if you could articulate your own wishes: this person should not substitute thier wishes for your wishes. Instead, you should choose an agent who understands your wishes as they relate to any and all health care decisions, including life-saving measures, and who will articulate those wishes to your health care providers. This person should be someone who understands and respects your feelings about living and about dying, and fully comprehends the quality of life that you wish to live. In addition, the person should be comfortable advocating for you with health care providers and dissenting family members alike. How to Communicate Your Wishes The discussions that you have with your agent are so important because this is the information she will rely on to make decisions for you if the need arises in the future. These discussions with your agent often evolve over time. Your feelings about living and dying and the type of care that you may want are oftentimes influenced by age, a life-limiting diagnosis or even someone else’s health crisis that you have witnessed. Verbal discussions had with a proxy are legally sufficient for the agent to make a decision regarding any and all of your medical care, but many individuals take it a step further and also put a Living Will in place to illustrate certain wishes in writing. In short, Living Wills are documents that explain your thoughts about medical care and heroic measures. Often Living Wills go into detail about “heroic measures” to sustain your life including artificial nutrition, hydration, and ventilation. It is important to note that Living Wills are not substitutes for Health Care Proxies in New York and should only be used to supplement information provided to the agent. Who Should Have a Copy It is necessary that your agent not only know that she was appointed by you, but that she also has a copy of the document itself. With the prevalent use of cellphones, it is commonly recommended that your agent take a photo of the Health Care Proxy under which she is nominated so that it is readily accessible in any emergent medical situation. You should also provide copies of your Health Care Proxy to any of your treating physicians for their records, in addition. Finally, it should be noted that, even if after reading this article, you never get around to completing a Health Care Proxy, all is not lost. New York State passed the Family Health Care Decisions Act (“FHCDA”) in 2010 that gives guidance on what to do if someone does not have a Health Care Proxy in place. The FHCDA allows for family members to act as your “surrogate” and make health care decisions for you, including decisions to withdraw life-sustaining treatment. However, you are not able to choose which family member will speak for you, so it is not a sufficient substitute for a Health Care Proxy.
September 13, 2023
Family Law
Understanding the Necessity of a Pre-Nup
Originally posted on 5/21/2018, no content changes In Pennsylvania, pre-nuptial agreements meeting the statutory requirements are generally enforceable and the best way to provide peace of mind prior to a marriage. The main reasons a pre-nuptial agreement may be necessary include: Protecting existing (pre-marital) assets; Protecting against potential future support obligations (spousal support, alimony pendente lite, and alimony); Protecting business interests, most often family or closely held businesses; Protecting assets for children of a prior relationship and Estate planning. Pre-Marital Assets: Under the Pennsylvania Divorce Code, assets that are owned prior to the marriage and are maintained in separate names, continue to belong to the individual owner in the event of divorce. However, if the value of such an asset were to increase during the course of the marriage, the increase in value would be included in the marital estate and subject to equitable distribution. Protecting against the passive increase in value of pre-marital assets becoming part of the marital estate is one of the main reasons pre-nuptial agreements are recommended. Pre-nuptial agreements can also protect against active increases in value, such as ongoing contributions to a pre-marital 401(k) or payment of a mortgage on a pre-marital home. Protecting against future support obligations: Consideration must be given to whether either party may have any support obligations in the future if the parties were to divorce. With the exception of support for children, parties can agree to contract specific provisions as to spousal support, alimony pendente lite, and alimony, or may choose to specifically negate any such obligation from arising by including certain provisions regarding same in a pre-nuptial agreement. Protecting Business Interests: The division of a business or interest in a business can be an extremely litigious and costly exercise that is often required in any divorce involving a closely held or family business. Business appraisals are almost always necessary, and the obligation of one party to buy out the other party’s interest can be onerous. In cases such as these, pre-nuptial agreements can be used to protect against this kind of litigation almost as an insurance policy as the business interest and many other aspects can be exempted from the marital estate. Protecting assets for children and Estate Planning: These two aspects often go hand-in-hand. Certain assets can be exempted from a marital estate and protected for children from a prior relationship under both a will and a pre-nuptial agreement, which provides additional protection for such assets. For more information on this topic, please contact Megan Smith at msmith@offitkurman.com.
September 12, 2023
Business
M&A Nugget: Dissenters’ Rights
In Maryland, and other states, a stockholder who does not believe that the purchase price to be paid by an acquirer is fair value has the right to object to the sale and receive payment for the fair value of the stock. The basic procedure for a stockholder to invoke that right is to object to the proposed transaction in writing, not vote in favor of the transaction and make a demand for payment of the stock. The target may then notify the stockholder of the price the target is willing to pay for the stock. If that price is not satisfactory to the owner, or the target does not notify the owner, then the owner may ask a court to obtain an appraisal to determine the fair value of the stock. If the court accepts the appraisal or, not accepting the appraisal, determines the fair value of the stock itself, the amount determined shall be entered as a judgment against the target. Although the use of these dissent and appraisal rights is rare, both parties to a sale transaction need to be aware of them, especially if the acquirer intends to purchase 100% of the target’s stock.
September 11, 2023
Estates and Trusts
Estate Planning for Professional Athletes: The Playbook for Success on and off the Field
Professional athletes are no strangers to the limelight, but beyond the enthusiastic cheers of the fans lies the need for careful planning that extends far beyond their playing days. Estate planning can easily be forgotten amid the hustle and bustle of a rigorous training schedule and a busy sports season. In this article, we will delve into the unique considerations that professional athletes should consider when crafting a comprehensive estate plan. The Play: Understand the Game of Estate Planning Estate planning involves more than just the drafting of a Last Will and Testament. A proper estate plan creates an overall strategy to manage the professional athlete’s hard-won assets during their lifetime. A well-drafted plan also ensures a smooth transition of assets to the athlete’s loved ones in the event of an injury or following one’s death. As a professional athlete, income streams, investments, intellectual property, and property ownership are customarily quite complex. Over the course of one’s career, an athlete may move frequently, acquiring assets in different jurisdictions with different laws along the way. They may also experience significant and volatile swings in their financial outlook that necessitate a review of an estate plan more often than most. In addition, due to the dynamic lifestyle of the professional athlete, close relationships may also change rapidly. It is vital that the professional athlete collaborates with tax professionals, financial advisors, and estate planners who have experience in handling the ever-changing and unique planning needs of athletes. The Starting Lineup: Wills and Trusts A Last Will and Testament is certainly one of the cornerstones of an estate plan. Most understand that Wills can assist in outlining how assets are distributed upon death. What many do not know is that Wills can also designate guardians for minor children and appoint a trusted advisor as the executor to carry the terms of a Will. Trusts are an even more powerful tool for athletes. Trusts provide much-needed privacy, minimize taxes, and allow for tailored distribution of assets to beneficiaries over time. The benefits of a Trust are often critical for an athlete, particularly if they have young children or heirs who require financial guidance. The MVPs: Powers of Attorney and Healthcare Directives One of the most challenging hurdles that athletes must face is injuries. More than any client, creating advanced directives is of the utmost importance for professional athletes who may face injury more regularly than others. Designating an agent under a power of attorney ensures that a trusted person nominated by the professional athlete can manage the likely complicated financial affairs in the event of injury or incapacity. Likewise, healthcare directives outline medical preferences and can empower a chosen individual to make medical decisions on behalf of the injured athlete if they cannot do so Game Strategy: Tax The substantial earnings of professional athletes are often subject to high tax rates. Those tax rates vary from state to state and from year to year. Implementing a tax-efficient estate plan can help minimize the tax burden on the professional athlete and their heirs. A properly created estate plan must include strategies like lifetime gifting, charitable giving, and utilizing trusts to preserve a professional athlete’s wealth and legacy. Protecting A Legacy: Intellectual Property Considerations An athlete’s brand, image rights, and related intellectual property assets continue to generate income long after the playing days are over. Including provisions in an athlete’s estate plan that address how these assets are managed and protected is essential. Harnessing this intellectual property involves setting up corporate structures to handle licensing and endorsement deals and ensuring a stream of income for the athlete’s beneficiaries – all of which must be appropriately allocated in an athlete’s estate plan. Team Collaboration: The Agent, the Manager, The Accountant, and the Lawyer Just as winning championships requires teamwork, a successful estate plan relies on effective and regular communication and collaboration between various trusted professionals. A professional athlete’s manager, agent, financial advisor, accountant, and estate planning attorney should work in tandem to ensure that all aspects of a professional athlete’s overall plan align with their goals and protect their interests and their family’s interests for years to come. Revise the Playbook: The Moving Target of an Estate Plan The life of an athlete is dynamic on nearly every level, and their estate plan is no different. Major life events, such as marriages, divorces, birth of children, disability, or even the death of a loved one, require the professional athlete to constantly assess their estate plan playbook. Changes in an athlete’s home state or playing career can immediately impact their financial circumstances, which will accordingly warrant adjustments to their estate plan. Professional athletes must regularly review and update their estate plans to reflect their current situation, location, and aspirations. Professional athletes spend their careers preparing for the “big game” — an estate plan is no different, but it requires a different kind of strategy. It is not just about preserving wealth, fame, and fortune; it’s about securing a legacy, providing for an athlete’s loved ones, and ensuring their hard-earned assets are properly managed. By assembling a winning team of experts and crafting a comprehensive estate plan, professional athletes can confidently stride into the future, both on and off the field. If you are a professional athlete, a loved one, or a sports agent, please contact me so that together, we can ensure that the professional athlete’s legacy and loved ones are secure for years to come.
September 8, 2023
M&A Nuggets
M&A Nugget: Every Word Matters
This Nugget is for those English majors out there. In a purchase agreement, every word matters. The omission of a keyword or the incorrect use of a word can have an adverse impact on the purchaser’s or seller’s rights under the agreement. For example, in describing a list of assets to be acquired, using the word “including” after a delineated list, rather than “including, but not limited to” might have the effect of limiting the assets being acquired. Although logic tells us that “including” has the same meaning as “including, but not limited to,” some courts have held that “including” actually acts to limit the list of items to those listed after the word “including”. Therefore, the additional words “but not limited to” should always be used. As an example of keywords being omitted, consider the indemnification clause in a purchase agreement, by which the seller agrees to indemnify the purchaser for pre-closing operations and breaches of representations and warranties. An indemnification clause may state that the seller indemnifies the purchaser for any loss, damage and “cost and expenses” incurred. Can the purchaser recover its attorneys’ fees under such a clause? The answer is no. The indemnification clause must specifically include “attorneys’ fees and costs of the legal proceeding” as a recoverable item. Last, suppose a seller is asked to subordinate its right to receive payment to the purchaser’s lender. There are different kinds of subordination. Some lenders require “deep” subordination. The addition of the word deep drastically changes the extent to which a seller subordinates its right to payment. So, although the wordsmithing in the purchase agreement is the attorneys’ responsibility, it is important to keep in mind that every word matters.
September 8, 2023
Business
M & A Nuggets: The “KEIP”
The Key Employee Incentive Plan (“KEIP”), has become common as a way to incentivize key employees. The KEIP usually allows key employees to participate in an exit transaction through the grant of a percentage of the net proceeds from the sale of the business. Many transactions are structured with potential post-closing payments through earnouts or other mechanisms. Acquirers do not want or accept responsibility for KEIPs and, therefore, require that the seller maintain responsibility for the KEIP post-closing. During the negotiation process, a significant amount of time is devoted to the KEIP. Instead of leaving it to the acquirer to react to and dictate how the KEIP will be handled, owners of target companies should have a plan developed. The plan will have as its objective achieving the same end result that the acquirer will eventually insist on. Here are the two most common ways KEIPs are dealt with: Termination of the KEIP, with the only surviving provision being the payment of amounts that may be owed to the key employees in the future reducing the seller’s share of net proceeds, and The transfer of any future responsibility under the KEIP to the selling owners. When first developing a KEIP, it is important that the agreements that will memorialize the KEIP allow flexibility to achieve one of the results described above. By proactively dealing with the KEIP and having a plan in place, a target can lessen an acquirer’s concern about the KEIP and save both sides time and resources.
September 7, 2023
Family Law
GPS Surveillance Data in Civil Cases
They show us where we are, get us where we need to go, and prevent us from losing our way. It is hard to imagine modern life without Global Positioning System (GPS) devices. Indeed, many people not only have navigational systems installed in their cars but carry GPS around all day within their phones. As helpful and ubiquitous as the technology is, however, GPS raises complex uncertainties around privacy. Should GPS providers such as Apple and Google be allowed to retain user location data? If so, what kinds of data, and for how long? Can companies share that information? What about law enforcement—can agencies use GPS to track their suspects? Then there are concerns about individuals involved in separations, divorces, and other family law disputes. For instance: What rights does someone have to defend themselves against an ex-spouse using GPS to spy on their movements? Is information that device collects admissible in court? These were precisely the questions facing the United States Supreme Court in United States v. Jones, 565 U.S. 400 (2012), and Carpenter v. United States, 138 S. Ct. 2206 (2018). In the first case, the Supreme Court ruled that a GPS tracing device counts as a “search” under the Fourth Amendment, meaning that data must be collected under a search warrant to be admissible. In the second case, the Supreme Court clarified that the same rules apply to not just GPS data, but all phone data. To learn more, read “Admissibility of GPS Surveillance Data in Civil Cases” at the National Legal Research Group’s Family Law Research Blog. With the emergence of any new technology come new developments in all corners of the law. Family law is no exception. To stay ahead of any legal updates that may affect you and your family, be sure to subscribe to the Offit Kurman blog.
September 7, 2023
Family Law
Maryland Joins the ‘Irreconcilable Differences’ States
Maryland will become a no-fault grounds state for filing for divorce on October 1, 2023. Maryland will be adding irreconcilable differences and six (6) month separation to its rule books while also retaining the ground of mutual consent. This eliminates all fault grounds for divorce in Maryland. What does this mean? Well, back in the day, pre-October 1, 2023, one could file for divorce based on a fault ground like adultery, desertion, conviction of a felony, insanity, cruelty, or excessively vicious conduct. In the past, to obtain an absolute divorce, parties had to live separate and apart before they could even file for divorce. The change permits the court to grant an absolute divorce based on the grounds of a six-month separation for those living separately or together. This is in line with the law in many other states. Grounds for divorce that had to be proven in the past can still be considered when determining issues of custody and/or the division of marital assets. In the past, many residents of Maryland could not live separately from their spouses for the requested 12-month separation period due to limited finances. That is no longer a necessary requirement. This will certainly assist low-income families that could not afford to maintain two separate households while waiting to divide their marital assets. And folks no longer have to allege that the other spouse has been cruel or has committed adultery to get divorced. Beginning October 1, 2023, a Marylander may file for divorce on one of the following grounds: 1) irreconcilable difference, which has not been defined under the new statute, but one can presume it will include any reason the parties want to obtain a divorce; 2) mutual consent, which means the parties have reached and submitted to the court an agreement resolving all issues related to the marriage; or 3) six- month separation, which can be during the period with the parties residing in the same home. Maryland is also completely eliminating the ability to file for a limited divorce, where the parties may live apart but remain legally married on October 1, 2023. This change in the law will make it easier for Marylanders to obtain a divorce.
September 6, 2023
Family Law
What Does "No Fault" Divorce Mean?
Originally posted on 6/01/2019, no content changes. The Pennsylvania Divorce Code provides two no-fault grounds for divorce: Divorce by Mutual Consent and a Divorce based upon a One Year Separation. In the case of a divorce by mutual consent, the parties often are able to reach an agreement and memorialize the terms in a writing known as Marital Settlement Agreement, in advance or at the same time as the Divorce Complaint is filed. Other times, parties may reach an agreement and memorialize the terms after the Divorce Complaint is filed but before the expiration of the required one-year separation. In such cases, the parties can obtain a divorce decree by mutually consenting to the divorce by filing affidavits no less than ninety (90) days from the service of the Divorce Complaint. For all other cases, to avoid the necessity of requiring parties to meet the proof requirements of the fault-related grounds for divorce, a party can move a divorce matter to conclusion through court intervention following a one-year separation. Parties can be separated and still living in the same household. Proof of separation includes termination of an intimate relationship, separation of finances and representation to the community that the parties are separated. While the service of a Complaint for Divorce is a clear threshold for establishing a date of separation, a party can attempt to establish an earlier date of separation utilizing the applicable factors. The Pennsylvania Divorce Code provides for six (6) fault-related grounds for divorce: Desertion, Adultery, Cruel and Barbarous Treatment, Bigamy, Incarceration, and Indignities. Even if a divorce complaint is filed alleging one or more of the fault-related grounds for divorce, the no-fault grounds are almost always also included in the complaint. For more information on this topic please contact Megan Smith at msmith@offitkurman.com.
September 5, 2023
Family Law
Hotel Travel Tips
Have you ever wondered how you might be able to make the hotel experience more pleasant? Here are some things you may not have thought about. Some hotels send out pre-registration emails, asking for your preference as to pillows and the like. If given that opportunity, respond to the options they make available and others. They may or may not honor them, but it’s worth the effort. You may want to call your hotel to ask about some options that most do not take advantage of. If you want to be close to the elevator, have extra towels in your room, and perhaps even have an early check-in, this is the time to do it. The hotel may have more flexibility to honor your requests before you arrive. The one person who rarely gets a tip is the one checking you in. Interestingly, if you slide a $20 bill to them when you first arrive, you may receive a better room. If you’re staying a week, $20 is a small expense but may be a great incentive for some special treatment. Ask about a concierge floor. It may not be much of an additional expense, and the concierge floor often offers breakfast, afternoon snacks and evening desserts. Tip your maid every morning. If you have to turn down service in the late afternoon, leave a few dollars. The maids can take special care of you, leaving you extra water or shampoo, for example. If you wait to leave the tip until the day you leave, you have missed an opportunity. To avoid confusion, leave the tip on the pillow on a turned-down bed. That way, the maid knows it is there to take. Ask for your bill the night before you check out, so that you have an opportunity to review all of the charges before you are in a rush on the way out the door. Ask for a delayed checkout if that will help you. Generally, if you ask early enough in your stay, you can get a few more hours before you have to leave your room. If you have a late departure for the airport, schedule a spa day at your hotel or the best hotel in the city in advance and spend the afternoon at the spa. If you book just one session, you can spend the entire day in the sauna or steam room. Check carefully before you leave your room. It’s not a bad idea to have a written checklist that you keep in your suitcase so that you remember to check the outlets and the refrigerator before you leave. Ask for bottled water when you check in, when you leave the hotel, when you’re in the gym, and when you check out. Most hotels provide bottled water upon request.
September 5, 2023
M&A Nuggets
M&A Nugget: To Split or Not to Split (The Tax Years)
The sale of the stock of an S Corporation raises a tax issue. The S Corporation is a pass through entity, that is, its net income or loss is passed through to its owners and included on their individual tax returns. When the sale of an S Corporation occurs effective the last day of the tax year, there is no tax issue – the seller owned the business for the entire year prior to the sale and therefore reports all income from that year. A sale in the middle of a year, however, raises an issue. Absent an agreement, the income of the company is reported using the “per share per day” method. Under that method, a pro rata portion of the income for the entire year is allocated to the seller. The pro rata portion is the number of days the seller owned the company during the year divided by 365. However, the purchaser and seller can agree to use what is known as the “cutoff” or “specific accounting” method. Under this method, the tax year is split into two years, the first year starting on the first day of the year and ending on the day before the closing date and the second year beginning on the closing date and ending on the last day of the year. Under this method, the seller is allocated one hundred percent of the income attributable to the first tax year. These two methods of allocating income (or loss) can result in substantially different tax impacts on the seller and the purchaser. When an S Corporation is sold in the middle of the year, the decision of whether or not to split the tax years must be carefully considered.
September 4, 2023
Franchise Law
What’s a Biz Op?
What’s a business opportunity or, as we often say, a “biz op”? The Federal Trade Commission (FTC) regulates biz op sales under its authority to regulate unfair or deceptive trade practices. The FTC’s definition of a business opportunity differs from the definitions under the laws of the 26 states that regulate biz ops, and the states themselves have varying definitions. These laws impose anti-fraud obligations on the sellers of biz ops, and some require registration and disclosure. This post covers the FTC biz op rule (16 CFR Part 437). A separate post will address state biz op laws. The FTC began regulating the sale of biz ops throughout the U.S. in 1979 with the issuance of a trade regulation rule on franchising and business opportunities. In 1995, the FTC began a regulatory review of the 1979 rule. That review led to a new FTC franchise rule in 2007 and a separate new FTC business opportunity rule in 2012 in light of the significant differences between franchises and biz ops. The FTC staff report of November 8, 2010, noted that “franchises typically are expensive and involve complex contractual licensing relationships, while business opportunity sales are often less costly, involving simple purchase agreements that pose less of a financial risk to purchasers.” Accordingly, biz op offerings are subject to less imposing and costly compliance requirements. A “business opportunity” under the FTC rule means a commercial arrangement in which (i) the seller solicits a prospective purchaser to enter into a new business; (ii) the prospective purchaser makes a required payment; and (iii) the seller represents, expressly or by implication, orally or in writing, that the seller or its designee will do any one of the following: provide locations for the use or operation of equipment, displays, vending machines or similar devices owned, leased or paid for by the purchaser; or provide outlets, accounts or customers for the purchaser’s goods or services; or buy back the goods or services that the purchaser makes or provides. Unlike the FTC franchise rule, the required payment under the FTC biz op rule does not exclude purchases for less than $500. But like the franchise rule, payments for reasonable amounts of inventory at bona fide wholesale prices are not counted toward the required payment for a business opportunity. Franchises are exempted from the FTC’s biz op rule. The FTC business opportunity rule requires the biz op seller to provide to each prospective purchaser a one-page disclosure document at least seven calendar days before a prospective purchaser may sign any documents or pay any money to the seller. The disclosure document includes yes and no answers to the following questions: Has the seller or any of its affiliates or key personnel been the subject of a civil or criminal action involving misrepresentation, fraud, securities law violation or unfair or deceptive practices within the past 10 years? If yes, the seller must attach a list and brief descriptions of all such legal actions. Does the seller offer a cancellation or refund policy? If yes, the seller must attach a statement describing the policy. Has the seller or its salesperson discussed how much money a purchaser can earn or purchasers have earned? Have they stated or implied that purchasers can earn a specific level of sales, income or profit? If yes, the seller must attach an earning claims statement, as explained below. A biz op seller has the option to make an earnings claim or not. An earnings claim includes, among other things: “(1) any chart, table, or mathematical calculation that demonstrates possible results based upon a combination of variables; and (2) any statements from which a prospective purchaser can reasonably infer that he or she will earn a minimum level of income (e.g., “earn enough to buy a Porsche,” “earn a six-figure income,” or “earn your investment back within one year”).” (14 CFR §437.1(f).) The seller must have a reasonable basis for any earnings claim it makes, and the seller must have written materials that substantiate the claim at the time it is made. The seller must make the written substantiation available upon request to the prospective purchaser. The earnings claim itself must state the beginning and ending dates when the represented earnings were achieved and the number and percentage of all purchasers who achieved at least the stated level of earnings during the indicated period. The disclosure document must also include the names and telephone numbers of all people who have purchased the business opportunity within the last three years. If there are more than 10, the disclosure document may optionally include the 10 that are nearest to the prospective purchaser’s location. The purchaser signs and dates a duplicate copy of the disclosure document and sends it to the seller to evidence the disclosure. There is no federal filing requirement for biz ops, just as there is none for franchises.
September 4, 2023
M&A Nuggets
M&A Nugget: A Purchaser’s Representation and Warranties
The seller’s representations and warranties in the agreement for the purchase and sale of a business usually comprise many pages. For a seller, however, it is important to include several representations and warranties by the purchaser, including that: 1) the transaction has been properly authorized by the purchaser’s governing body; 2) the purchaser is not party to any litigation that could adversely impact the transaction; 3) the purchaser is in good standing under the laws of the State in which it is organized; and 4) the purchaser is not insolvent, or a party to a bankruptcy proceeding. So, even though the seller’s representations and warranties in an agreement far outnumber the purchaser’s, it is important to the seller that the warranties listed above be included. The failure of any one of those warranties could prevent the transaction from going forward or from being successful
September 1, 2023
Labor and Employment
U.S. Department of Labor Announces Proposed Rules Designating More Workers as Non-Exempt from Overtime
Today, the U.S. Department of Labor announced a proposal to “Define and Delimit the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees” that would “restore and extend overtime protections” to millions of salaried workers if finalized. The proposal is currently publicly available on its website: https://www.dol.gov/newsroom/releases/whd/whd20230830. The Department of Labor’s proposed rule would, among other things: Increase the FLSA regulations’ standard salary level from $684 per week ($35,568 per year) to $1,059 per week ($55,068 per year). Automatically update earnings thresholds every three years to keep pace with changes in worker salaries. Increase the total annual compensation requirement for highly compensated employees from $107,432 to $143,988 per year in order to designate such workers as exempt. Revising definitions of the executive, administrative, and professional exemptions from overtime. Restore overtime protections for workers in U.S. territories. After the proposed rule is published in the Federal Register, individuals will be able to submit comments for a period of time to be determined by the Department. Employers, if so inclined, should submit comments opposing the new rules to potentially avoid these coverage exemptions. However, in the meantime, it is critical that employers correctly classify workers as exempt or non-exempt. The DOL takes no prisoners and demands double payments of unpaid overtime to all misclassified workers for three years prior to a complaint and fines employers. I have recently identified many expensive mistakes by several sophisticated employers. As always, please reach out to me if you have any questions.
September 1, 2023
Family Law
I Don't Have Many Assets...Do I Need A Pre-Nup In Pennsylvania?
Originally posted on 10/11/2019, no content changes. Regardless of a person’s current assets, a pre-nup is always prudent prior to entering into a marriage because a it can offer so many things other than just protecting the assets you have before your marriage: Pre-Marital Assets:Assets accrued prior to a marriage are largely protected from an equitable distribution (division of assets) incident to a divorce in Pennsylvania. However, the growth of those assets (i.e., increase in value) that occurs during the marriage will be considered part of the marital estate and subject to equitable distribution. Not only can a pre-nup protect the growth on the pre-marital assets during the marriage and ensure this increased value remains separate property (does not get divided incident to a divorce), but it can also take the case law and statutory protections that currently exist and extend those protections. For example, a pre-nup can extend protection in the event that a pre-marital asset is co-mingled or otherwise used for a joint purpose during the marriage. Without a pre-nup, co-mingling of a pre-marital asset often may be considered a gift to the marriage, and the pre-marital status may be lost. Assets Accrued During the Marriage: In Pennsylvania, assets and income accrued/earned during the marriage are largely considered “marital” property and thus subject to equitable distribution (division of assets incident to the divorce). A pre-nuptial agreement is able to exempt assets that may be accrued during the marriage as a party’s separate property, thereby avoiding distribution in the event of a divorce. Real Estate: Whether real estate is acquired before or during the marriage, if there is a mortgage or other maintenance/capital contributions to a home during the course of a marriage, same may give rise to a claim for equitable distribution of this asset. A pre-nup can clearly define what, if any, of a pre-marital residence or a residence purchased using pre-marital funds is or is not subject to division between parties incident to a divorce (example: pre-marital savings used for the down payment on the marital home). A pre-nup can go even further and provide one party the option to purchase the other party’s interest in real estate in the event of a divorce as well as a clause for vacatur of a home following a specified event (i.e., notice of wish for divorce or receipt of the filed Divorce Complaint). A pre-nup can even go so far as to address how bills will be paid and each party’s obligation to contribute, including addressing issues of unemployment, staying home with children, among other possibilities. Retirement Assets: Due to the fact that retirement assets are subject to equitable distribution, this is yet another reason for a pre-nup. If you are a saver and your significant other is not, do you want to give him/her half of your retirement savings in ten (10) years if your marriage ends? Whether retirement savings are accrued before or during a marriage, a pre-nup can address how such assets should be divided, as well as the growth on those accounts during the marriage. Gifts and Inheritances: Similar to pre-marital assets, gifts and inheritances by one party/spouse are largely protected from equitable distribution, however, a pre-nup can provide additional protections, including protection in the event of passive growth and co-mingling. Protections in the Event of Death: A pre-nup can provide protection of assets and elective share rights in the event of death. This allows you to leave your assets to whomever you wish (children, other family members, etc.) and prevents your spouse from taking against your estate under intestacy or elective share unless you specifically leave asset(s) to him/her under a will. For more information on this topic, please contact Megan Smith atmsmith@offitkurman.com.
August 31, 2023
Bankruptcy
Demystifying the Bankruptcy Process – Part Three
Originally posted on 09/15/2020, content updated on 08/31/2023 The COVID-19 pandemic created a lot of turmoil in every industry and every company. From March to September 2020, more than 200 companies in the energy, transportation, entertainment, health & personal care, retail, travel, lodging, and leisure industries cited COVID-19 as a factor in their decision to file for bankruptcy. The risk of dealing with a company in financial distress was at an all-time high. Understanding the bankruptcy tools available to a company that is on the path to or already in a court-supervised reorganization (known as a Chapter 11 proceeding) can help you manage and reduce this risk. Chapter 11 filers choose to opt for bankruptcy relief for various reasons: to stop debt collection action, to revise the unworkable capital structure, to address overwhelming litigation, to facilitate the sale of major assets to a prospective buyer, and to reject burdensome contracts, to name a few. Chapter 11 brings all stakeholders to one forum and facilitates the global resolution of claims and liabilities. It may have a different impact on the different stakeholders and this mini-series will cover the impact of a bankruptcy proceeding on trade creditors, distressed asset buyers, landlords, and the art world. The final summary is intended to help small business owners better understand how valuable a tool Chapter 11 can be during a time of crisis by availing themselves of the new restructuring mechanism for businesses (and individuals with business debt) with undisputed liabilities that do not exceed $7.5 million. What If You Are Interested in Buying Assets From A Company In Bankruptcy/Financial Distress The 2020 market conditions presented opportunities to acquire businesses at relatively good prices. Section 363 of the Bankruptcy Code provides a Chapter 11 debtor the opportunity to sell its assets free and clear of claims, liens, encumbrances, competing ownership interests, and other liabilities that may prevent a sale outside of Chapter 11. As a result, buyers are incentivized by the unique opportunity to purchase distressed assets inside of bankruptcy, especially because the bankruptcy court order approving the sale often expressly forecloses “successor liability” claims against the purchaser. With a growing number of cases where courts allow a traditional asset buyer (purchasing assets out-of-court) to become liable for the seller’s liabilities, a court-approved sale of all or part of the seller’s assets brings distinct advantages. Another benefit is the ability to cherry-pick favorable contracts and leases, including the ability to take over contracts even if they contain anti-assignment clauses. The bankruptcy court approval of a 363 Sale takes place in two stages. The first stage entails obtaining court approval of the bidding protection procedures. These procedures are described in a motion filed with the court. The second stage is the hearing on the sale of the assets itself when the bankruptcy court hears and rules on any objections to the 363 Sale. Standards for Approving 363 Sale The standard that the bankruptcy courts generally apply is whether a sound business reason supports the sale. The factors considered in this process include 1) the proportionate value of the assets to the estate as a whole, 2) whether the sale price is fair and reasonable under the circumstances, 3) the amount of time elapsed since the filing, 4) the effect of the proposed distribution on future plans of reorganization, 5) the proceeds to be obtained from the disposition compared to appraisals of the assets, 6) whether the asset is increasing or decreasing in value. When navigating that process, a company exploring options for buying assets from a bankruptcy estate should consult with bankruptcy counsel to evaluate available tools and establish a strategy. In case you missed it, read part one, two, four, and five here. If you have a question on this topic, please contact Albena Petrakov at apetrakov@offitkurman.com or 212.380.4106
August 31, 2023
Family Law
Domestic Violence: Now an Enumerated Factor in Determining Equitable Distribution
Originally posted on 12/11/2020, content updated on 08/30/2023 While New York was justifiably preoccupied with the COVID pandemic, its Governor at the time quietly signed into law a groundbreaking amendment to that portion of the state’s divorce law governing the distribution of marital property, directing that the Court, in determining the equitable distribution of property, to consider “whether either party has committed an act or acts of domestic violence … against the other party and the nature, extent, duration, and impact of such act or acts.” (2020 NY Senate-Assembly Bill S-7505-B, A-9505-B; New York Domestic Relations Law §236B(5)(d)(14), (as amended)).In New York, marital property is not automatically divided equally. Rather, the division of property is undertaken so as to ensure that there is an “equitable distribution,” based on an enumerated set of factors.[i] In New York, marital property is not automatically divided equally. Rather, the division of property is undertaken so as to ensure that there is an “equitable distribution,” based on an enumerated set of factors.[i] Equal at times may be equitable, and equitable at times may be equal. But they do not mean the same thing. “Equitable” is a model fixed in fair-mindedness. What is fair in the apportionment of assets fluctuates depending on the circumstances. A Court has great flexibility in fashioning an equitable distribution of marital assets subject to the fourteen (now fifteen) enumerated factors set forth in DRL § 236 (B)(5)(d)[ii], which include the: income and property of each party; length of the marriage; age and health of the parties; (any) support award; contributions, whether good or bad, to the acquisition of marital property; future financial circumstances of each party; and the wasteful dissipation of assets. Prior to the law’s amendment, the 14th and final factor was the universal legal catchall of “any other factor which the Court shall expressly find to be just and proper.” This 14th factor was rarely used by the Courts to include domestic violence in the consideration of the division of marital property. Courts have long been wary, indeed at times dismissive of the existence of domestic violence as a factor to be considered in influencing equitable distribution. This has been especially true since 2010, the year New York became a “No Fault” state – no longer requiring that one of six grounds of fault be proven before a divorce would be granted. As a result of no-fault divorce, the use of the one enumerated ground for divorce which permitted a party to interpose allegations of domestic violence, coercive control, physical and emotional cruelty in all forms, collectively referred to as “cruel and inhuman treatment” [iii] — has virtually vanished.[iv] Cases speaking to and utilizing noneconomic marital fault as a consideration in the division of marital property i.e., cruel and inhuman treatment — have been generally held to a standard wherein the Court determined that the abusive behavior was shocking to the conscience of the Court, i.e., “egregious or outrageous” — though those terms were never defined with any specificity.[v] Essentially, if the act or acts of domestic violence proffered to a Court did not rise to that particular Judge’s individual interpretation of egregious or outrageous conduct, then the act or acts were not considered in the context of DRL §236B. Now, however, with the amendment of Domestic Relations Law §236B(5)(d)(14), judges must include in their determinations of the equitable distribution of marital property all acts of domestic violence, in all of their iterations. Domestic violence as a consideration is no longer “left to the fates.” Rather, its existence is a specific factor that the Courts are required to confront, address and measure in their apportionment of marital assets. [i] K. v B., 13 AD3d 12, 17 (1st Dept 2004). [ii] G.R. v K.R., 2020 NY Slip Op 50976(U). August 21, 2020. Sup.Ct., New York County, Cooper, J. [iii] DRL 170(1): Cruel and inhuman treatment such that the conduct of the defendant so endangers the physical or mental wellbeing of the plaintiff as renders it unsafe or improper to cohabit with the defendant. [iv] Though it remains a viable ground for divorce, as do the other previously existing grounds for divorce. [v] Blickstein v. Blickstein, 99 A.D.2d 287 (2nd Dept. 1984),
August 30, 2023
Business
M&A Nugget: Licenses – Odds and Ends
When acquiring a business, it is important to understand the licenses needed to operate that business. Some licenses, such as professional and contractor’s licenses, are obvious. There are many business activities that do not shout out as requiring a license, but for which the license is integral to operate the business. Here are a few examples: Locksmithing License Well Drillers License Salvage Yard Permit Bottled Water License Fire Sprinkler Contractors License Taxidermy License Licenses are either required to be held in the company’s name, a designated individual’s name, or both. There may be different levels for a particular license, such as master, associate or apprentice. Usually, even with a license in the company’s name, an individual who has gone through training and licensing, must be listed. For the purchaser entering into a new business, it can take weeks or even months to obtain the necessary licenses. It is therefore often crucial that the licensed individual agrees to allow the purchaser to continue to use the license and to provide services to the purchaser post-closing. The bottom line is that the purchaser and seller must plan for the purchaser to be able to operate with the requisite licenses on the closing date.
August 30, 2023
Family Law
Divorce in New Jersey - Gathering Data
Originally posted on 2/21/2019, no content changes. Information is power. In order to be in a position to deal with issues in your divorce case, you must have information concerning assets, debts, income and expenses. No agreement or settlement can be considered fair unless you have full knowledge of the marital finances. Toward that end, you should begin gathering information on income, expenses, an itemization of all accounts, pension information, employment benefits, insurance information and all other financially relevant information at the outset of your case. Do not assume that you know the answers. Do not trust your spouse's verbal representations. Do not be overly suspicious or distrustful. In virtually every case, the basic information which you should begin gathering are copies of: The past three years' personal tax returns. The current year's bank statements. The current year's brokerage account statements. The current year's credit card statements. Any quicken or a similar computer software program itemizing your expenses. The last three years' year-end employment benefit statements for you and your spouse including 401(k) plans, pension, deferred stock, stock options or deferred compensation. Copies of any life insurance policies. Policy numbers, insurance company names and coverage limits for health, auto and homeowners insurance policies. In any case in which one of the spouses is self-employed, owns a small business or is a shareholder in a closely held corporation, you should also try to obtain copies of: The past three years' tax returns for the business. The past three years' financial statements for the business. Any loan applications with supporting financial statements submitted to a lender by the business. Any Buy-Sell Agreements. As you and your attorney begin to see the financial records, you should discuss with your attorney whether you need to employ a forensic accountant. If there are assets which cannot be located or easily defined, if there appears to be unreported or cash income or if there is a professional practice or business to be evaluated you will almost certainly need to engage an accountant. In some cases, we do encounter a spouse who will deliberately attempt to conceal the records, and if that happens in your case, you and your attorney must take a much more aggressive and proactive approach. For example: If you know there is cash in your home, you should take it into your possession and immediately inform your attorney. If you know there is a second set of books or business records, you should copy them, seal the copies in an envelope and mail them to your attorney. The postmark will identify the date in which you obtained and mailed the records, the integrity of them can then be protected by your attorney's office. If you begin to see mail or financial statements that are not familiar to you, make copies. If you have access to your spouse's cell phone records, make copies. Make copies of any credit card statements whether they are your accounts, your spouse's accounts or joint accounts. The more information you can gather, the better informed you and your attorney will be as you begin the formal discovery process discussed later. For more information on this topic, please contact Megan Smith at msmith@offitkurman.com.
August 29, 2023
Bankruptcy
Demystifying the Bankruptcy Process – Part Two
The COVID-19 pandemic created a lot of turmoil in every industry and every company. From March to September 2020, more than 200 companies in the energy, transportation, entertainment, health & personal care, retail, travel, lodging, and leisure industries cited COVID-19 as a factor in their decision to file for bankruptcy. The risk of dealing with a company in financial distress was at an all-time high. Understanding the bankruptcy tools available to a company that is on the path to or already in a court-supervised reorganization (known as a Chapter 11 proceeding) can help you to manage and reduce this risk. Chapter 11 filers choose to opt for bankruptcy relief for various reasons: to stop debt collection action, to revise unworkable capital structure, to address overwhelming litigation, to facilitate the sale of major assets to a prospective buyer, and to reject burdensome contracts, to name a few. Chapter 11 brings all stakeholders to one forum and facilitates global resolution of claims and liabilities. It may have different impacts on the different stakeholders, and these mini-series will cover the impact of a bankruptcy proceeding on trade creditors, distressed asset buyers, landlords, and the art world. The final summary is intended to help small business owners better understand how valuable a tool Chapter 11 can be during a time of crisis by availing themselves of the new restructuring mechanism for businesses (and individuals with business debt) with undisputed liabilities that do not exceed $7.5 million. Post-petition services and goods – What if you are a supplier of goods and services faced with the decision to continue working with a company in a Chapter 11 proceeding? A business may find itself in a difficult position if prebankruptcy payment default remains outstanding and the debtor still seeks performance post-petition. In general, a Chapter 11 debtor may assume, assign, or reject an unexpired contract or lease at any time prior to confirmation of a plan. The confirmation of the plan may occur six months and (typically) more after the commencement of the case, which creates a lot of uncertainty for the non-debtor party to the contract. In such a case, a trade creditor remains obligated to perform under the nonterminated contract so long as the debtor complies with its terms. Although the Bankruptcy Code mitigates further exposure by giving the administrative expense priority over even secured claims, payment is not guaranteed. What is an administrative expense priority? When a company is operating during the restructuring process, post-petition business transactions undertaken at the debtor’s discretion – such as the supply of goods and services necessary for the debtor’s operations — can receive administrative priority if transacted in the ordinary course of business. Section 507(a)(2) of the Bankruptcy Code provides that each of these kinds of administrative claims is entitled to priority of payment over, among other things, the general unsecured pre-petition claims of creditors. Under the appropriate set of facts, a contract counterparty may move the bankruptcy court to shorten the long waiting period the debtor company has for assumption and rejection of contracts. Bankruptcy courts have developed a multi-factor balancing test that weighs the harm to the party seeking such relief against the harm to the bankruptcy estate. Courts look at the interests of the creditors collectively and the bankruptcy estate as a whole against the position of one creditor out of many. Counterparties face significant hurdles in prevailing on such motions, but it is not impossible. Trade creditors in this situation should closely monitor the debtor’s post-bankruptcy performance and seek relief from the bankruptcy court if necessary. In case you missed it, read part one, three, four, and five here. If you have a question on this topic, please contact Albena Petrakov at apetrakov@offitkurman.com or 212.380.4106
August 28, 2023
Business
M&A Nugget: Related Party Transactions
It is important that the purchaser investigate related party transactions when conducting due diligence. A related party transaction is a transaction or a contract between the target and another company controlled by, or related to, the owners of the target. An example of a related party transaction that is often encountered is a real estate lease between the owner of the target and the target. Another example is a key supplier agreement between the target and a relative of the target’s owner. Related party transactions must be examined to determine whether they are priced at fair market value. Often these arrangements are priced at higher than fair market value to benefit the related party. Another factor to consider is whether the related party will continue doing business with the purchaser post-closing, especially if the related party is a key supplier of goods or even a sole source provider. I have encountered situations where the key supplier was the target owner’s relative, and while more than happy to do business with the target on generous terms, would not commit to continuing those terms with the purchaser. So, as part of the purchaser’s due diligence, related party arrangements must be asked about and investigated.
August 28, 2023
Family Law
Divorce in New Jersey - Discovery
Originally posted on 3/12/2019, no content changes. Discovery is a variety of processes which are designed to accomplish exactly what the word implies: to discover additional information or factual data. The scope of discovery is very broad. Simply stated, the rule is that you can ask for everything which is relevant “or may lead to relevant information.” There are various types of discovery. Some of the most common are: Interrogatories - Interrogatories are written questions which you submit to your spouse, which must be answered in writing and under oath. There is a tendency to ask broad, all-encompassing questions in order to avoid the risk that something may be overlooked. However, many times, such an approach to discovery is ineffective and unproductive. On the contrary, carefully phrased, very specific questions are more likely to produce specific responses which will be helpful to you and your attorney. Notice to Produce Documents - Notice to Produce Documents requires your spouse to produce any documents which are relevant to the case and which are either in their possession or subject to their control, such as employment records, bank or brokerage accounts which are in their name, or pension and IRA account statements. Oral Depositions - In some states, this proceeding is called an Examination Before Trial. That is exactly what it is. It is your attorney’s opportunity to examine or to take testimony from your spouse or any other witness before trial. They are placed under oath so that all of their answers are “sworn testimony.” The proceeding is in the presence of a Court Reporter who records the questions and answers verbatim. The questions and answers of your spouse are evidential and can be submitted directly into evidence at the time of trial. For other witnesses, they can be very valuable tools to confront and contradict statements made at the time of trial. Appraisals - Appraisals are regularly conducted to determine or verify the value of a specific asset for the purpose of dividing the same incident to equitable distribution. Experts are retained and utilized for this purpose. Assets that are often subject to appraisal incident to a divorce include real estate, businesses, pensions, jewelry, artwork, and vehicles. Very often, clients are concerned that their spouse will not respond to interrogatories or notices to produce and/or will stall, delay or refuse to appear for an oral deposition. Those are understandable but not reasonable concerns. The Court will enforce reasonable discovery requests and will be very impatient with a party who has frustrated or unreasonably delayed discovery. The Court may: Limit or bar a person’s trial testimony if they have not cooperated with discovery; Assess counsel fees against the offending party; or In some instances, impose monetary sanctions and penalties against the offending party. Remember, on the other hand, that Discovery is a “two-way street.” While you have every right to require your spouse to participate in Discovery, you, correspondingly, have the obligation to respond to reasonable requests from your spouse. If properly conducted, Discovery will provide both parties with an information base to allow them to negotiate fairly and enter into a Settlement Agreement. For more information on this topic, please contact Megan Smith at msmith@offitkurman.com.
August 25, 2023
Immigration Law
Checklist for Marriage Based Immigration Petitions For U.S. Citizens wishing to Sponsor Foreign National Spouses
Below is a list of documents required to file for a spouse-based I-130 immigrant petition: I-130 Spouse Petition Document Requirements I-130 by U.S. citizen (USC) G-28 for USC I-130A for foreign spouse G-28 for foreign spouse USCIS filing fees* ($535 as of 11/15/18) One passport photo of U.S. citizen One passport photo of foreign spouse Proof of U.S. citizenship: copy of U.S. passport, Certificate of Naturalization Copy of marriage certificate Copy of any divorce decrees Copy of any name change documents Copy of joint bank account, utility bill, health insurance, lease agreement, auto insurance, or other documents showing that you and your spouse have combined financial resources Birth certificates of children born to you and your spouse together Written statements of support (affidavits) by third parties having personal knowledge of the marriage Any other documents to show that there is an ongoing marital union *NOTE: Filing fees are subject to frequent revisions, as are the forms and requirements. For the current fee amounts please check the USCIS website I-130 page. This has the most current instructions, I-130 and I-130A forms and information on where to file.[1] If the Beneficiary (foreign spouse) is in the U.S. they will also file for the Adjustment of Status. Below is a list of documents needed: I-485 Adjustment of Status I-485 Form by foreign spouse Forms G-28s from USC and foreign spouse Two passport photos of foreign spouse USCIS filing fees* ( $750 to $1,225 depending on age, as of 11/15/2018. No fee for those admitted to the U.S. as a refugee) Foreign birth certificate [copy] with English translation Copy of passport page with visa stamp for foreign spouse – for all U.S. visas issued to them within, copies of OPT/EAD card etc. if applicable Copy of any criminal records Form I-864 signed by USC and spouse Tax return, pay stub, offer letter [copy] Passport of foreign spouse [copy]/ passport of USC Form I-864A signed by foreign spouse and USC [if applicable] *NOTE: Filing fees are subject to frequent revisions, as are the forms and requirements. For the current fee amounts please check the USCIS website I-485 page. This has the most current instructions, I-485, I-864, and I-864A forms, and information on where to file.[2] I-765 Application for Employment Authorization I-765 by foreign spouse Two passport size photos of foreign spouse Form G-28 by foreign spouse No separate filing fees are required if filed with a marriage based adjustment application NOTE: For the I-765 please visit the USCIS website I-765 page for the most current I-765 form and instructions. [3] I-131 Application for Travel Document I-131 by foreign spouse Two passport photos of foreign spouse Form G-28 by foreign spouse No separate filing fees are required if filed with a marriage based adjustment application NOTE: For the I-131 please visit the USCIS website I-131 page for the most current I-131 form and instructions.[4] Additional Notes About All Forms: Any foreign language document will also need an English translation Original ink signatures will be needed for all forms and all affidavits [1] https://www.uscis.gov/i-130 [2] https://www.uscis.gov/i-485 [3] https://www.uscis.gov/i-765 [4] https://www.uscis.gov/i-131
August 24, 2023
Business
M&A Nugget: Cyber Insurance – The Tail
As data breaches have become larger (think Equifax, Target, and Yahoo) and more frequent, buyers and sellers should pay more attention to cyber insurance. Cyber insurance provides coverage for risks that arise out of the use of devices that maintain data, including computers and mobile phones. The insurance has existed for years, and generally covers losses incurred by the insured and claims of third parties seeking to be compensated for a data breach. One issue that arises with cyber insurance is that it is usually issued on a “claims-made” basis, which means that, for a loss to be covered, the claim must occur while the insurance policy was in place or within a specified period after the policy lapses. The problem with this is that cyber incidents may not be uncovered until well after the coverage period lapses. This is where tail insurance comes in. The inclusion of a tail provision extends the time during which a claim can be reported and therefore covered. Another way for a buyer to close the gap in coverage that exists with claims-made policies is to purchase cyber insurance with a retroactive coverage date, that will cover cyber incidents that occur before closing. The bottom line here is that with the increase in cyber security breaches, the buyer and seller need to ensure seamless coverage for incidents that occur before closing.
August 24, 2023
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