Commercial Litigation
Five Things to Know About Hiring a Litigator
Did you get sued for the first time? Then you’ve got litigation on your hands. Litigation is just another word for a court case. Choosing an attorney to represent you in that litigation is tricky — and very important. Here are five things to know about hiring a litigator: 1. Hire Within Your Budget Most attorneys in the New York City area have higher billable rates. This is common across the country — legal services cost more in larger cities. But just because most attorneys have higher billable rates doesn’t mean you can’t afford high-quality representation. Make sure you know your attorney’s billable rate and ask about budgeting for your case. For example: What is your estimated budget for each stage of the case? What can we do to keep costs low in the case? Who will work on my case, and what is each person’s billable rate? 2. Experience vs. Titles Titles vary from firm to firm. What ultimately matters is the experience. An associate at a midsize firm might have more experience than someone who opened their own practice straight out of law school. On top of that, a midsize firm gives you the best of both worlds with experienced associates and significant resources at their disposal — but not at big law firm rates. 3. Seek a Clear Communicator Make sure your attorney tells you what the options are for your case — in detail and in language that you understand. Litigation is stressful, emotional, and expensive. If communication isn’t clear from the outset, it is likely to only add more stress, confusion, and frustration to your case — which may last for months or even years. Many attorneys have poor bedside manners. The term “legalese” exists for a reason. The law can be complex and dense — it’s your lawyer’s role to communicate to you clearly what’s happening. You shouldn’t feel talked down to. If your attorney is an effective communicator, you will receive updates about your case in clear and understandable language, confidently discuss each component of your case, and strategize together about how best to move forward. 4. Hire a Litigator, Not an Attorney Even though all attorneys are admitted to practice law, they’re not all the same. Litigation is a specialty. It requires being familiar with the court rules. More than that, it means having expertise in using the tools available to give you an edge in the case. Find a litigator who knows how to practice in the court your case is in. Even then, litigation is a wide-ranging area with many specialties. Make sure you ask about that attorney’s experience in your case’s area. For example: Have they worked on a case in this area before? What are some of the strategies that work well for this type of case? Do other attorneys in their firm have experience in this area? 5. Act Quickly As soon as a case starts, so do the deadlines. If you delay taking action for too long, the deadlines will pass, and your attorney will have to try to undo the damage by asking the court to give you another chance to make things right. All of this work is likely to result in additional costs and time. It is imperative to move quickly. Reach out to schedule a consultation right away so that you can best protect yourself.
April 2, 2024
Healthcare
How Much is a Medical Practice Worth?
Medical practices that want to purchase another medical practice need to understand the different ways of valuing a medical practice depending on whether the whole practice is being purchased or whether it will be merged with an existing practice. There are many factors that determine the value of any medical practice, including the value of the assets, the income the practice can yield, the liabilities of the medical practice, the type of care being provided, the reputation and experience of the medical practice being acquired, and many other factors. When two medical practices merge, many of the same factors that are used to value a medical practice should be reviewed by both practices to help determine if the merger is wise. Experienced healthcare lawyers help medical practices understand the factors that are used to determine the financial value of a medical practice, the ability to obtain financing, other factors that may affect the ability of the new medical practice to produce income, the ability to expand the medical services to more patients, and many other financial value issues. We also work with financial appraisers who are skilled at placing a value on a medical practice. LEGAL KEYS EVERY MEDICAL DOCTOR MUST KNOW BEFORE MERGING WITH OR ACQUIRING A MEDICAL PRACTICE If you plan to acquire a medical practice or any healthcare venture, consult a healthcare and FDA attorney who understands the specific legal and regulatory landscape Medical practice valuation methods include the following: Using a multiplier This method examines the general revenue of the business – the amount of yearly receipts for medical services – and then multiplies that amount by a “multiplier” which varies depending on the type of practice, the location, and many other factors. The fair market value (FMV) approach This financial appraisal method examines similar medical practices in the region where you practice. Whether a practice is similar must take into account the type of practice, the number of physicians, the services that are offered, how long the medical practice has been in office, and other factors. The FMV is commonly used in the buying and selling of a home or a building. The difference is that the sales of homes are generally of public record because the sale is recorded with the local county offices. Medical sales are generally not publicly recorded. Even if the sales of comparable medical practices are recorded, there often are not enough comparable sales to make a reliable analysis. The income approach This approach examines the cash flow of the practice – usually for the past few years – and the potential future income that the practice can expect to generate. The income approach analyzes the following: Analyzing the stream of income. This analysis normally examines prior tax returns and financial statements along with other documents to determine the “net” income of the business. The net figure considers the liabilities of the practice starting with the federal, state, and local tax returns. The analysis may differ depending on the type of medical practice, how the bills are submitted and paid, and other standards. Forecasting the future income flow. This analysis reviews market trends, the overall industry outlook for your type of practice, and any other information that can indicate how much income the medical practice will generate over the next 3-5 years. Growth and risk factors. This part of the income analysis examines the competition, how much the practice is regulated, the possibilities for providing additional services, and the growth potential of the medical practice. Applying a discount rate. An analysis of future income needs to be discounted to reflect the rate of return the practice would obtain if the practice just invested the funds in safe investments such as certificates of deposit. “The discount rate is typically based on industry benchmarks, market rates of return, and the specific risk profile of the practice.” The discount rate is then used to determine the current value of the medical practice. The termination value. This analysis estimates the value of the practice at the end of a specific term such as 3-5 years. Whether the income approach is the best way to value a medical practice is debatable. We’ll explain whether this approach is reliable – especially in light of other factors such as an aging population or any likely expenditures over and above normal overhead. The asset approach This method is more common for valuing a medical practice. The approach examines the tangible assets of the practice, the intangible assets, and the goodwill of the medical practice. This approach helps determine the value of each type of asset. The approach is useful for accounting and tax purposes. The asset approach generally uses the following analysis: The tangible assets. This portion of the value includes the physical items in the office including the medical equipment, fixtures, furniture, and filing cabinets. The value is what a willing buyer would pay for these items – not what the practice originally paid for the items or how much the seller thinks the assets are worth. A big expense for any medical practice is the cost of medical equipment such as diagnostic equipment, software and hardware, surgical tools, and other types of healthcare equipment. A key question is whether the new practice will buy these assets or rent them. The revenue of the medical practice. This figure represents the total receipts of the practice before considering the expenses. This sum is the gross income. For a medical practice, gross income generally means the accounts receivable and any income from lectures or other health services. The net income of the medical practice. This sum is the profit – the amount the medical practice receives (takes in) minus – the amount of the expenses and operating costs – such as the computer costs, salaries, and rental costs. Any add-backs. These items include such things as the benefits to the doctors such as healthcare, travel reimbursements, salary, and other items. Goodwill. This asset is essentially the medical practice’s reputation. Generally, the practice that is buying the business also wants to acquire the patients of the other practice (or keep those patients) if there is a merger. As we explained in our general discussion on acquiring or merging a medical practice, there are certain legal and ethical considerations to ensure that patients can make free decisions about which doctors the patients will use and their electronic health records. Goodwill is essentially a calculation as to whether the old patients will continue to see the doctors in the new medical practice. Goodwill also includes the location of the practice, how well the staff connects with patients, and other factors. Other factors include the expenses of the business and any intellectual property such as patents. Another issue is that the new practice may not assume some of the expenses of the old office. For example, the buyer may keep some of the staff but not all of the staff or some of the equipment but not all of the equipment. Additional valuation factors for a medical practice A few other notable factors that will affect the value of a medical practice include: The general state of the economy. The payment arrangement including whether there is a full payment or the sale of the practice is financed by having the seller accept payments over time as the new practice evolves. The payment terms may also have tax consequences. Tax considerations. The tax considerations do affect how much a buyer will be willing to pay for a medical practice and how much the seller will accept. The need for cash. A doctor who is retiring may be more in need of cash now than a younger doctor who is quitting to pursue other interests and has the time to accept a payout. Whether other medical practices are interested in the same practice that is being sold Generally, the more a medical business has been in existence and the better reputation that practice has, the higher the value of the medical practice will be. Many other factors may also affect the value of a medical practice. HEALTHCARE M&A: DO’S AND DON’TS OF BUYING OR SELLING A MEDICAL PRACTICE Buying and selling a medical practice is much different than selling a commercial business. Due diligence must address special healthcare legal compliance issues, licensing requirements, patient […] Other factors to consider regarding the cash flow of a business include: Income cash flow issues The cost of replacing office space or equipment that cannot be transferred to the new practice. The cost to hire new physicians and other medical care providers. Whether Stark Law or AKS affects these purchases and compensation needs. How likely the doctors in the practice that is being bought are to help the new practice during the transition period Legal costs The cost of any litigation if the business being acquired has any judgments, current lawsuits, or lawsuits that may be filed. Any outstanding contracts and other obligations that should be obtained through a due diligence review. According to Medical Economics, the appraisal of a medical practice should also examine where existing and new patients are coming from, and examine all the contracts with doctors and nonphysician providers. It’s very important to actually visit the medical office you’re acquiring. Some offers may be subject to negotiation. Other offers may be one-time offers. Aesthetics can add value to a medical practice. If the medical practice you’re acquiring has an MSO, that can add value by simplifying the need to separate the business side of the practice from the medical/clinical side of the practice. Medical practices can be valued in different ways – by using a multiplier, fair market value comparables, estimating net income, and the value of tangible and intangible assets including goodwill. Our seasoned healthcare lawyers work with medical appraisers who are skilled at placing value on a medical business. Our team is skilled at all the related issues such as legal and healthcare compliance, financing issues, agreements of sale, and other issues.
April 1, 2024
Healthcare
Can the MSO Management Fee be More Than 90% of the Revenue of the Medical Practice?
The anti-kickback laws require these fees to be fair market value and not take into consideration the referral of any patients that might come from the MSO to the medical practice. It so happens these days that a lot of MSOs will provide marketing services for the medical practice. And depending on your state law, it could open the door to interpretations that there are patient referrals and that part of that fee may be in consideration for the volume or value of the patient referrals. There’s no one answer, what is fair market value? 90%, just kind of my gut reaction to it, is that’s way too high for a management company to be charging. And I always tell clients, at the end of the day, put yourself in the position where you’re defending this fee, and if you’re in court and you see the person up there in the black robes and you’re trying to justify this fee, it might look a little strange that the lion’s share of the practice is going to a lay business, the management company. And so that would raise a number of alarm bells to most judges, to most enforcement agencies out there. Testimonials
March 23, 2024
One Minute of Overtime
Legal Test
Welcome to One Minute of Overtime, where I will share insights on Labor and Employment Law topics, mostly related to minimum wage and overtime compliance issues. Compliance in this area of law is nuanced and technical, so it is critical for employers to audit and adjust their practices to remain compliant, so stop by to stay up-to-date and in-the-know. Whether a worker is an employee, or an independent contractor is not a choice the employer gets to make. Instead, it is a legal conclusion reached based on the application of a legal test. In Maryland, the test focuses on the economic realities of the engagement.
March 20, 2024
Commercial Litigation
Protecting Your Business: Understanding ADA Website Accessibility Lawsuits in New York
Did you receive a complaint alleging that your company’s website violates New York’s equivalent of the Americans with Disabilities Act? Does the complaint allege the website violates New York State Human Rights Law and New York City Human Rights Law? By an individual claiming they tried to purchase goods on your website but could not do so due to accessibility issues? You are far from alone. Court dockets are ballooning in New York with these cases. With the right strategy, you can maximize your chances of greatly reducing the exposure you face and potentially securing the dismissal of the case without paying the other side a dime. Here are five things to know about your case: 1. Your Website Actually May Have Accessibility Issues There are many technical requirements for making your website accessible. It is important to work with a trusted vendor to bring your website into compliance, but that alone won’t cause the lawsuit to be dismissed. 2. Still, the Plaintiff Must Be Able to Prove the Impairment or Disability Even though your website may have been inaccessible to those with an impairment or disability, the plaintiff who sued you still must be able to prove that they are impaired or disabled. The phase of the lawsuit where you can dig into that proof is the discovery phase, and with the right strategy, you may be able to resolve the case during that phase and not have to proceed to trial. 3. A Fast-Paced, Active Approach Tends to Work Best The law firms that file these cases file a lot of them. Managing such a high volume of cases takes time and effort. With so many cases, their attorneys prefer to attack those cases where the other side is asleep at the wheel. Don’t show complacency. Instead, bring the fight to them and put them on their heels. 4. Don’t Expect Immediate Results Depending on which court your case is in, you may be facing a court with a lengthy process to bring your case to its close. The court may take its time to move your case along, and there are ways to nudge it to the next step. Maintaining that proactive approach is best, but be ready for the case to likely last a minimum of several months. 5. Be Ready to Negotiate Settlement talks can happen at any stage of the case. Don’t assume that the first offer you receive will be one you’re ready to take. Often, the attorneys for the other side are anxious to settle the case and will be open to significant negotiation. If you just received a complaint about your website, it is imperative that you act quickly. As soon as a lawsuit starts, so do the deadlines. You don’t want to miss a deadline—especially in this type of case where the other side is waiting for you to slip up.
March 15, 2024
Healthcare
The MSO/Physician Contract: Compliance with Stark Law’s personal service agreement and the fair market value compensation exceptions.
Many medical practices enter into contracts with a Managed Service Organization (MSO) to help separate the clinical and administrative sides of the medical practice. There are many federal and state laws that regulate both aspects of medical practice. State medical boards also regulate medical practices in various ways. Skilled healthcare professionals understand how MSOs can assist medical practitioners in focusing on practicing medicine while the MSOs concentrate on the medical business—complying with relevant Stark Law exceptions and other compliance requirements. Stark Law and the AKS The Stark Law, also known as the federal physician self-referral law, prohibits doctors from recommending that patients obtain designated health services (such as lab tests) that Medicare and Medicaid pay for from entities in which the doctor (or an immediate family member) has a financial interest—unless a Stark Law exception applies. The federal Anti-Kickback statute (AKS) authorizes criminal penalties when entities or individuals knowingly provide or receive any remuneration: In return for any service paid for by a federal healthcare program, including Medicare or Medicaid. In return for “purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal healthcare program.” (Source: Legal Information Institute) Remuneration includes cash payments, vacation, positions on medical boards, and many other improper benefits. An Anti-Kickback statute (AKS) violation may result in a prison sentence of up to 5 years, fines of up to $25,000 per occurrence, and exclusion from participating in federal healthcare reimbursement programs. Violations of the Stark Law and the AKS may also constitute a breach of the federal False Claims Act. Doctors, medical practices, and Managed Service Organizations (MSOs) also need to understand their state’s corporate practice of medicine laws, which regulate who can have an ownership interest in a medical practice. The benefits of an MSO An MSO helps medical practices do more than just manage the business side of a medical practice. It can assist medical practices in demonstrating that the business side is separate from the clinical side by specifically meeting the exceptions to the Stark Law and the safe harbors to the Anti-Kickback Statute (AKS) as defined in those statutes. An MSO can also help demonstrate that a medical practice is not violating the False Claims Act and is meeting the requirements of state and local medical boards. Additionally, an MSO can aid a medical practice in coming into compliance with corporate practice of medicine laws. WHEN USING A MANAGEMENT SERVICES ORGANIZATIONS (MSO) IS THE RIGHT CHOICE FOR YOUR MEDICAL PRACTICE Managed Services Organizations help physicians focus on practicing medicine by freeing doctors from many administrative tasks. Failure to consult with an MSO healthcare lawyer can cause civil and […] What tasks can MSOs perform? MSOs can undertake various administrative tasks and assist medical physicians/practices in complying with the Stark Law and the Anti-Kickback Statute (AKS) if specific requirements, such as the Stark Law’s personal service arrangement exception and fair market compensation exception, are met. Some of the general services that MSOs can perform, according to the Physicians Practice Group, include: Medical billing and collection Training of the medical staff Compliance with HIPAA (Health Insurance Portability and Accountability Act), the FMLA (Family and Medical Leave Act), and other laws Obtaining and verifying credentials IT needs Financial matters including marketing, payroll, procurement, and audits Risk management Scheduling Medical record transcription Public relations Disaster management Negotiating contracts Quality assurance Other administrative duties Stark Law, MSOs, and personal service arrangements The Stark Law provides for a personal service arrangement exception, allowing the medical practice and the Managed Service Organization (MSO) to enter into a contract where the MSO provides personal services to the medical practice, and the medical practice provides remuneration for the MSO. Generally, services from the physician/medical practice to the MSO need to comply with the personal services arrangement Stark Law exception. Services from the MSO to the physician/medical practice need to comply with the fair market value Stark Law exception described below. Compliance with the personal services arrangement exception requires the following: The personal services arrangement is set forth in writing; both the physician/medical practice and the MSO sign the contract, and the specific services that will be provided are detailed in the written contract. Unless the services satisfy another section (Section Z, involving the limited remuneration of a physician) of the Stark Law exceptions, the personal services arrangement should cover all the services that the physician (or an immediate family member of the physician) will provide to the MSO. This requirement is met if:All separate arrangements between the entity (MSO) and the physician and the entity (MSO) and any family members incorporate each other by reference or cross-reference a master list of contracts that is maintained and updated centrally and is available for review by the Secretary upon request. The master list must preserve the historical record of contracts, and a physician or family member may furnish services through employees they have hired for the purpose of performing the services, through a wholly-owned entity, or through locum tenens physicians. (Source: Legal Information Institute) The combined services that the personal services arrangement covers must not exceed the services that are reasonable and necessary for the legitimate business purposes of the arrangement(s). The personal services arrangement must last for one year or longer. To comply with this requirement, if the personal service arrangement is terminated, with or without cause, the parties may not enter into the same or substantially the same arrangement during the first year of the original arrangement. The compensation to be paid during the duration of each personal service arrangement should be:Set in advance Not exceed the fair market value Not consider the value or volume of any referrals or other business generated between the physician/medical practice and the MSO, unless there is a valid physician incentive plan. The personal service arrangement services should not involve the counseling or promotion of a business arrangement or other activity in violation of state or federal law. If the personal services arrangement ends after at least one year:A holdover arrangement immediately following the expiration of the arrangement [should] satisfy the requirements of paragraph (d) if additional requirements are met. If remuneration to the physician is conditioned on the physician’s referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4). Our skilled healthcare compliance lawyer can clarify whether the physician incentive plan exception applies to the relationship between the medical practice and the MSO. The specific terms of the incentive plan exception are outlined in the Stark Law exceptions. To gain a comprehensive understanding of how these exceptions may impact your situation, we invite you to schedule a Legal Strategy Session with our expert healthcare compliance attorney. Take proactive steps to ensure compliance and navigate the complexities of the Stark Law. Stark Law, MSOs, and the fair market value compensation exception The fair market value compensation exception to the Stark Law applies to compensation arrangements where the MSO provides services to the physician or medical (group) practice in exchange for remuneration from the physician/medical group. Compliance with the fair market value exception generally requires satisfaction of the following requirements: The arrangement between the physician/group practice and the MSO must be in writing, signed by the physician/medical practice and the MSO, and cover services specifically outlined in the written contract. The writing should specify the compensation under the arrangement’s terms and the timeframe for the arrangement. The arrangement, which includes services provided in return for fair market value compensation, can be for any period and include a termination clause. Renewal is allowed, one or more times, provided the terms and compensation remain consistent with the prior arrangement, though exceptions may apply. The compensation:Must be set in advance. Should be consistent with fair market value and “not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.” Compensation for the rental of office space or equipment may not be determined using certain formulas set forth in the Stark Law. The contract should be “commercially reasonable even if no referrals were made between the parties.” The contract should not violate the Anti-Kickback Statute (AKS) or involve counseling, business promotion, or other activities in violation of state or federal law. The arrangement satisfies the requirements of § 411.354(d)(4) (directed referral requirement) in the case of certain types of physician remuneration, group practice remuneration, or other Stark Law terms. Experienced healthcare lawyers understand how MSOs can be utilized to help medical professionals demonstrate compliance with the Stark Law, along with the conditions that must be met to fulfill those compliance requirements. Our healthcare lawyers can also provide insights into whether the contract between the MSO and the physician/medical practice might violate the Anti-Kickback Statute (AKS) and whether any AKS safe harbors apply. Many AKS safe harbors share similarities (though not identical) with the Stark Law exceptions. A Managed Service Organization (MSO) is a valuable method for assisting medical practices in focusing on practicing medicine while the MSO takes care of the administrative side of the practice. MSOs are also instrumental in demonstrating that a medical practice is in compliance with federal referral laws such as the Stark Law. The MSO contract itself must comply with the Stark Law and any other relevant laws. Achieving compliance often involves drafting MSO/physician practice contracts that meet the personal service arrangement and fair market value compensation exceptions of the Stark Law.
March 15, 2024
Family Law
Shareholder Agreements in Divorce: A Legal Perspective
Divorce proceedings can often involve complex financial negotiations, particularly when business interests are involved. When spouses who are shareholders in a company decide to part ways, it can raise a host of challenging issues regarding the disposition of shares, control of the business, and the future direction of the company. In such cases, understanding shareholder agreements becomes crucial, as they often dictate how shares can be transferred, sold, or retained in the event of a divorce. Shareholder agreements are legal documents that outline the rights and obligations of shareholders in a company. These agreements typically address a wide range of matters, including the transfer of shares, the appointment of directors, voting rights, and dispute resolution mechanisms. While shareholder agreements vary widely depending on the specific needs and circumstances of the shareholders and the company, they often contain provisions that address what happens in the event of a shareholder’s divorce. One common provision found in shareholder agreements is a buy-sell agreement, also known as a buyout agreement. A buy-sell agreement is a contractual arrangement between shareholders that governs the sale and purchase of shares under certain circumstances, such as death, disability, retirement, or divorce. In the context of divorce, a buy-sell agreement may specify that the shares owned by a divorcing shareholder must be sold to the remaining shareholders or to the company itself at a predetermined price or according to a specified valuation method. Another important consideration in the context of divorce is the issue of control and management of the business. In closely-held companies, where a small number of shareholders typically control the company, the transfer of shares as a result of divorce can have significant implications for corporate governance. Shareholder agreements often include provisions that address voting rights and the composition of the board of directors, which can become relevant in the event of a divorce. In some cases, spouses may be parties to a shareholder agreement together or may have entered into a separate agreement that governs their ownership interests in the company. In either scenario, the terms of the shareholder agreement will play a central role in determining how shares are treated in the divorce process. For example, if the shareholder agreement contains provisions restricting the transfer of shares or giving other shareholders a right of first refusal, those provisions will generally need to be respected in the divorce proceedings. However, it’s important to note that while shareholder agreements can provide valuable guidance and structure in the event of a divorce, they are not necessarily binding on the court. In some jurisdictions, the court does not have the authority to transfer title of shares from one spouse to another. However, if the parties enter into an agreement to transfer shares from one spouse to the other, the shareholder agreement becomes the governing instrument on effectuating the transfer. Ultimately, navigating shareholder agreements in the context of divorce requires careful attention to both the terms of the agreement itself and the applicable family law. Consulting with experienced legal counsel who can provide guidance on both corporate and family law issues can be essential in ensuring that the interests of all parties are protected and that the divorce process proceeds as smoothly as possible. By understanding the implications of shareholder agreements and how they intersect with divorce law, shareholders can better position themselves to protect their interests and preserve the value of their investments in the company.
March 14, 2024
Construction
A Primer on Preliminary Notice of Mechanics' Liens
Most contractors, subcontractors, and suppliers know that lien claims have strict deadlines, typically measured from the last date of work. But did you know that some states also require preliminary notice of lien rights upfront, at the first time of furnishing labor or materials? In 2017, Pennsylvania created an online registry known as the Construction Notices Directory that allows owners to register private projects that exceed $1.5 million. If a project is registered, all subcontractors and suppliers must file a Notice of Furnishing within 45 days of first providing labor or materials to the project; otherwise, the lien right will be lost. Recently, more owners have been registering projects. Thus, prompting the questions: Do other states have similar early notice requirements for preserving lien claims? And what steps should be taken in Pennsylvania when dealing with the Directory? Other States' Lien Claim Process and Notice Requirements Pennsylvania’s requirement for a preliminary notice at the start of work (only when a project is registered on the Directory) is atypical in the Mid-Atlantic. Neither Maryland, Delaware, the District of Columbia, nor New Jersey require any similar preliminary notice at the start of work. The only other Mid-Atlantic state with a similar requirement is Virginia, which requires a preliminary notice to be issued within 30 days of commencing work on a one- or two-family residential dwelling if the owner has identified a Mechanics’ Lien Agent in the building permit. Preliminary notices at the commencement of work are more prevalent in other regions of the country; for example, California requires a preliminary notice to be issued within 20 days of first furnishing labor or material to the project. The point is that while preliminary notice requirements are atypical in the Mid-Atlantic, they are required in other parts of the country. It has become more popular for owners to utilize the Pennsylvania Construction Notices Directory. Thus, it is best to stay current on preliminary notice requirements if working in multiple jurisdictions. Practical Tips for Handling Pennsylvania's Construction Notices Directory If a prime contractor works directly with the owner, recognize that it is ultimately the owner’s choice on whether to register the project. If the owner elects to register the project, a Notice of Commencement is filed on the Directory, and that document should become part of the Contract Documents. The best practice is to also identify in the special conditions of the contract the Directory listing. The Notice of Commencement must be posted at the project site. Additionally, statutorily mandated language must be included in all contracts that provide notice that a failure to file a Notice of Furnishing will result in a waiver of the lien claim. The notice of furnishing is only required to be filed by subcontractors and suppliers. For subcontractors, closely review the Contract Documents to identify any indication of the project being registered. It is also recommended to include in internal standard processes that the Directory be searched at the time of signing the subcontract and also at the time of commencing work. The Notice of Furnishing can be filed prior to starting work; thus, there is no need to wait or delay in properly filing the document. Properly noticing mechanics’ lien claims and preserving rights can be a complicated area of construction law. The best practice is to have sound internal protocols and trusted counsel for troubleshooting. Offit Kurman construction attorneys are available to advise and counsel contractors, construction managers, design-builders, design professionals, subcontractors, developers, and design professionals on construction contracts, risk, and project disputes.
March 14, 2024
Immigration Law
Unlocking Opportunities: Navigating National Interest Waivers (NIW) for STEM Professionals
As we explore the maze of U.S. immigration law, we come across a provision that makes it easier to bring exceptional professionals with special skills to the U.S. Through this provision, the National Interest Waiver (or NIW), individuals may be able to secure permanent more easily and faster than the traditional labor certification process for those in STEM fields (Science, Technology, Engineering, Mathematics), this provision may be the perfect fit. What is a National Interest Waiver? The National Interest Waiver is a unique provision within the U.S. employment-based immigration system, offering a streamlined route to permanent residency for individuals who can demonstrate their work's national importance. This waiver enables eligible applicants, including STEM degree holders, to bypass the labor certification process and job offer requirements. STEM Professionals and National Interest Waivers: Why should STEM degree-holders pursue the NIW? STEM degree holders are particularly well-positioned to benefit from the National Interest Waiver due to the inherent value of their contributions to the U.S. economy and society. Here's how STEM professionals can leverage the NIW: In-Demand Skills: STEM fields are consistently identified as high-priority areas by the U.S. government due to the demand for skills that drive technological innovation, research, and development. National Economic Growth: STEM professionals often contribute directly to economic growth by advancing cutting-edge research, developing new technologies, and fostering innovation, all of which align with the national interest. Job Flexibility: The NIW offers STEM professionals greater flexibility in their career choices, as it eliminates the need for a specific job offer from a U.S. employer. This flexibility allows individuals to pursue opportunities that align with their expertise and passion. Expedited Permanent Residency: With the NIW, STEM professionals can benefit from an expedited path to permanent residency, bypassing the lengthy labor certification process that is typically required for employment-based green cards. How to Qualify While the benefits are clear, it's essential for STEM professionals seeking a National Interest Waiver to meet specific criteria, including showcasing exceptional abilities or skills, demonstrating the potential to benefit the nation, and establishing the national interest in waiving the job offer and labor certification requirements. Applicants must hold a U.S. advanced degree (or foreign equivalent) followed by five years of professional experience. Those demonstrating exceptional ability must demonstrate that they have ten years of professional experience. Exploring the Specific Criteria for National Interest Waivers The National Interest Waiver (NIW) serves as a valuable pathway for individuals with exceptional abilities or skills, including STEM professionals, to obtain permanent residency in the United States. To qualify for an NIW, applicants must satisfy specific criteria established by the U.S. Citizenship and Immigration Services (USCIS). Let's dive into the details of these criteria: Exceptional Abilities or Skills: NIW applicants must demonstrate extraordinary abilities or skills in their respective fields. This can be evidenced through a combination of factors, including: Recognition and Awards: Receipt of major awards or prizes in the field. Publications: Authorship of scholarly articles, publications, or books in esteemed journals or platforms. Patents: Ownership or co-ownership of patents in the field. Significant Contributions: Evidence of significant contributions to the field, such as groundbreaking research or innovations. Critical Impact on the Field: Applicants must showcase the significance of their work and its impact on advancing the field. This can be demonstrated through:Citations and References: High citation counts and references to the applicant's work by peers and experts in the field. Research Collaborations: Participation in collaborative research projects with prominent institutions or researchers. Technical Contributions: Development of technologies, methodologies, or solutions that have had a substantial impact on the field. National Interest: The heart of the NIW application lies in demonstrating the national interest served by waiving the job offer and labor certification requirements. This involves:Economic Impact: Showing how the applicant's work directly contributes to economic growth, job creation, or competitiveness in critical sectors of the U.S. economy. Healthcare Advancements: Demonstrating contributions to healthcare innovations, treatments, or technologies that benefit the nation's public health. Environmental Sustainability: Highlighting efforts to address environmental challenges or promote sustainability practices that align with national priorities. National Security: Illustrating contributions to national security through research, technological advancements, or expertise in strategic areas. Comparative Assessment: Applicants must provide evidence that their contributions are unique and cannot be easily replicated by U.S. workers. This may include:Expert Testimonials: Letters of support from experts in the field affirming the applicant's exceptional abilities and the importance of their work, as well as documentation of at least ten years of full-time experience in the occupation. Market Demand: Demonstrating demand for the applicant's specialized skills or expertise in the U.S. job market. Navigating Education Requirements for National Interest Waivers In addition to showcasing exceptional abilities or skills and making significant contributions to their field, applicants for the National Interest Waiver (NIW) must meet specific education requirements as mandated by the U.S. Citizenship and Immigration Services (USCIS). Here's a detailed breakdown of the specific educational criteria for NIW eligibility: Advanced Degree or Equivalent: To qualify for an NIW, applicants are typically required to hold an advanced degree or its equivalent in a relevant field. This includes: Bachelor’s Degree or Master's Degree: Many NIW applicants possess a master's degree or higher in a field such as science, technology, engineering, mathematics (STEM), or a related discipline. A master's degree demonstrates a high level of expertise and specialization in the applicant's area of focus. Doctoral Degree (Ph.D.): Applicants with a doctoral degree, such as a Ph.D., are particularly well-suited for NIW eligibility due to the depth of knowledge and expertise gained through advanced research and academic study. Professional Degree: In some cases, applicants with professional degrees, such as a Doctor of Medicine (M.D.) or Doctor of Jurisprudence (J.D.), may also be eligible for an NIW if their work significantly benefits the nation and aligns with the national interest criteria. Field of Specialization: The applicant's advanced degree must be directly relevant to their area of expertise and the work they intend to pursue in the United States. USCIS evaluates whether the applicant's educational background aligns with the national interest served by waiving the job offer and labor certification requirements. Equivalency Evaluation (if applicable): For applicants educated outside the United States or with degrees from non-U.S. institutions, USCIS may require an equivalency evaluation to determine the degree's comparability to a U.S. degree. This evaluation ensures that the applicant's education meets the necessary standards for NIW eligibility and demonstrates the required level of academic achievement. Demonstrated Impact of Education: NIW applicants must provide evidence of how their advanced education and academic achievements have contributed to their exceptional abilities or skills and their potential to benefit the nation. This may include:Research and Publications: Highlighting academic research, publications, or thesis work that showcases the applicant's expertise and contributions to the field. Advanced Training or Specialization: Demonstrating advanced training, specialized coursework, or academic achievements that have enhanced the applicant's skills and knowledge in their area of specialization. Academic Awards or Honors: Providing evidence of academic awards, honors, or scholarships received in recognition of the applicant's educational achievements and contributions to the field. The National Interest Waiver (NIW) does not just expedite the immigration process of persons of extraordinary ability but also acknowledges that professionals in science, technology, engineering, and mathematics (STEM) are significant contributors to America’s future. In this era of innovation and technological advancement, the NIW becomes a means through which holders of STEM degrees can add value to the country while still being able to seek permanent residency. In an effort to influence their careers in the U.S. permanently, the National Interest Waiver (NIW) offers STEM professionals a chance to navigate through immigration intricacies with dexterity and intentionality.
March 13, 2024
Healthcare
What Can a Nursing Corporation in California be Used For?
I just want to make extra clear that in California, the Medical Board has issued a number of different opinions that the medical spa must be a medical corporation, not a nursing corporation. I can’t tell you how many times people have formed a nursing corporation, and then we have to unwind everything and fix it, and it gets expensive to do that. So to the extent any of you are on the verge of forming an entity, it would be a medical corporation in California, not a nursing. Testimonials
March 9, 2024
Healthcare
HIPAA Compliance for Pharmacies – Violations and FAQs
This is our second article about what pharmacies should know about complying with HIPAA. In the first part, we discussed which HIPAA rules apply to pharmacies, as well as the best practices for pharmacies to demonstrate HIPAA compliance. This article provides examples of HIPAA violations and the potential consequences of violations. This article also answers FAQs about pharmacies and HIPAA compliance. GOT HIPAA? GET HIPAA? JOYCE EXPLAINS WHY AND HOW Interview with an expert in healthcare privacy and security, both on the federal side with HIPAA, and the state side, especially California law. What conduct by a pharmacy is considered a violation of HIPAA? A few examples of HIPAA privacy violations include disposing of Patient Health Information (PHI) in the trash instead of shredding it, leaving prescription information in areas that can be accessed by the public, and disclosing any prescription information to third parties without patient’s consent. HIPAA violations include the following: Unauthorized access. This includes intentionally or accidentally accessing patient health information – without patient authorization or a legitimate need – thus violating the patient’s privacy rights. Improper disposal. Pharmacies may be cited for HIPAA violations if they improperly or incompletely dispose of patient records, medication information, or prescription labels that potentially expose sensitive data to people who are not authorized to see the information. Inadequate Physical Security. This type of violation includes the failure of the pharmacy to develop and implement physical safeguards to protect Patient Health Information. Improper handling of prescriptions. Pharmacies may violate HIPAA if they disclose patient’s prescription information to a third party without the patient’s consent or failing to follow specific verification procedures, thus compromising the patient’s confidentiality. Failing to train the staff and volunteers. Pharmacies need to educate and train their workers and volunteers about HIPAA’s privacy, security, and breach notification rules. What are the consequences for pharmacies that violate HIPAA’s requirements? According to the HIPAA Journal, when the Health and Human Services (HHS) Office for Civil Rights (OCR) receives a complaint or a notice of a breach, the office will conduct a review to determine if an enforcement action is required. If OCR believes a violation has been committed, the agency has the right to impose a civil penalty. Often, the Health and Human Services Office for Civil Rights will provide technical help to prevent future violations from occurring or require that the pharmacy implement a corrective action plan if the violation is attributable to an underlying culture of non-compliance. In a small minority of cases the Health and Human Services Office for Civil Rights will impose a civil penalty. Depending on the severity (tier) of the penalty and the level of culpability, the HIPAA Journal states that the following penalties can be imposed (subject to any HHS changes): Tier 1 – Reasonable Efforts. The penalties range from $127 – $63,973. The maximum yearly penalty for each violation is $1,919,173. Tier 2 – Lack of Oversight. The penalties range from $1,280 – $63,973. The maximum yearly penalty for each violation is $1,919,173. Tier 3 – Neglect – Rectified within 30 days. The penalties range from $12,794 – $63,973. The maximum yearly penalty for each violation is $1,919,173. Tier 4 – Neglect – Not Rectified within 30 days. The penalties range from $63,973 – $1,919,173. The maximum yearly penalty for each violation is $1,919,173. The Attorney Generals for the different states also have the authority to impose civil penalties for each violation. If a pharmacy’s violations involves criminal activity, the violation may be referred to the US Department of Justice. A few examples of violations and penalties, according to the HIPAA Journal, include the following: In 2009, CVS Pharmacy settled potential HIPAA violations with OCR for $2.25 million after it was discovered that prescription bottles and receipts had been disposed of improperly. In 2010, Rite Aid Corp settled with OCR for $1 million to resolve violations of HIPAA relating to the improper disposal of PHI. In 2014, Walgreens was fined $1.4 million for the impermissible disclosure of a patient’s PHI. A pharmacist shared a patient’s PHI with her husband and at least three other people. In 2015, Cornell Pharmacy, a small pharmacy in Denver, was fined $125,000 for the improper disposal of PHI. Even if there is no civil fine, the costs of technical help and corrective action plans can be expensive. To minimize the risk of HIPAA violations and to help address all other compliance issues, pharmacies should speak with experienced healthcare lawyers. HIPAA COMPLIANCE IS NOT THE END OF LIABILITY FOR COMPROMISING PATIENT PRIVACY You think you’ve got HIPAA compliance handled, in order to try to stay ahead of steep federal penalties, and then learn that is just the beginning of the story. HIPAA compliance itself is thorny. […] FAQs about Pharmacies and HIPAA Compliance When could a pharmacy not be considered a HIPAA-covered entity? While pharmacies generally are considered “Covered Entities” and must thus comply with HIPAA’s Privacy and Security Rules – some exceptions do apply: A pharmacy doesn’t transmit health information. This may occur for example for campus pharmacies where a student’s medical records may be considered part of the student’s educational records under FEPRA – the Family Educational Rights and Privacy Act. A pharmacy doesn’t send or receive health information electronically. Paper and phone conversations that are not digital are not considered electronic communications under HIPAA. A pharmacy exclusively sells or dispenses drugs, devices, or equipment for which no prescription is required. If just one transaction involves a prescription, then “every operation becomes covered by HIPAA.” How does individually identifiable health information differ from Protected Health Information? Individually identifiable health information is health information that alone or with other common identifiers could be used to identify an individual. When common identifiers such as an individual´s name, date of birth, or address are stored in a designated record set with health information, the common identifiers and the health information become Protected Health Information. When can a pharmacy be able to disclose PHI to law enforcement officers? PHI generally includes a patient’s name. The PHI could include their physical description. Pharmacies (and staff members) may be permitted (but generally are not required) to disclose PHI to law enforcement officers in the following six instances: There is a court order, court-ordered warrant, or subpoena that requires disclosure. To help identify a suspect, a missing person, a witness, or a fugitive. An official request by a law enforcement official about a victim or someone suspected of being a victim of a crime. To inform law enforcement that someone has died – if the pharmacist thinks that the death is due to criminal conduct. When the manager of a pharmacy believes that protected health information is evidence of a crime that occurred on the premises. When essential to inform law enforcement about the commission and nature of a crime not occurring on the premises, the location of the crime or crime victims, and the perpetrator of the crime. Permitted disclosures of PHI to federal and state law enforcement officers are subject to the Minimum Information Necessary Standard. What is the Minimum Information Necessary Standard? The Minimum Information Necessary Standard requires that pharmacies (and pharmacy staff) should only use, disclose, or request the minimum amount of PHI necessary to achieve the objective of the use, disclosure, or request. A pharmacist, for example, doesn’t normally need to send a patient’s entire medical history to an insurance company to check if the patient is eligible for any prescriptions. Which laws may be even more strict than HIPAA? Most states have their own privacy and licensing laws that were enacted to protect patients. Many of these laws require even more stringent protections than HIPAA. For example, some laws also protect a patient’s genetic or biometric data. Generally, the HIPAA requirements must be followed but state laws may need to be followed – if stricter protections are required. Pharmacies should review with experienced healthcare lawyers any other federal compliance laws regarding patient privacy and any state compliance laws. For example, pharmacies may need to consider “the confidentiality of substance abuse disorder patient records (42 CFR Part 2) and privacy requirements within the Combat Methamphetamine Epidemic Act, Food and Drug Administration Amendments Act, and Patient Protection and Affordable Care Act.” Why should all people who work for a pharmacy undergo HIPAA security and privacy training? In today’s world, even employees who do not regularly access patient health information may be affected indirectly by a phishing email or malware which could provide an outsider with the credentials needed to access the pharmacy’s computer system – including any PHI in that system. HIPAA violations include unauthorized access to patient health information, the improper disposal of PHI, a lack of security, improper handling of prescriptions, and failing to train staff about HIPAA compliance. Fines may be imposed by the US Department of Health and Human Services and the local states for violating patient’s healthcare privacy rights. A few commonly asked questions include when might a pharmacy not be considered a covered entity, when can a pharmacy disclose PHI to law enforcement, and what is the minimum information necessary standard?
March 8, 2024
Business
Is a Trust Better Protection Than a Prenup?
Business owners and families of wealth should know that a properly structured trust can be a very effective alternative to a pre-nuptial agreement. The Legal Intelligencer By Joe Armstrong Preparing for your child’s wedding should be a joyful experience, so it should come as no surprise when a family business owner avoids bringing up a prenuptial agreement. Business owners and families of wealth should know that a properly structured trust can be a very effective alternative to a prenuptial agreement. When one or more generations of a family have worked hard in business to accumulate substantial wealth, they will frequently ask their children to enter into prenuptial agreements to protect the family business and other assets in the event of a future divorce. For a first marriage of relatively young persons, the concept of a prenuptial agreement is frequently considered offensive and a topic to be avoided. Even the discussion between parent and child can be stressful and considered by the child to be undue pressure ahead of what they believe will be the happiest day of their lives. When met with these circumstances, counsel can help alleviate the family strife by suggesting the use of trusts to protect assets in the event of a divorce at least as effectively as an actual prenuptial agreement signed by those about to be married. This article discusses some of the many ways that a trust can be a very effective alternative to a prenuptial agreement. Each state has its own laws and customs regarding the division of property between divorcing spouses. These state laws can vary significantly (e.g., equitable distribution v. community property states), but they all will look at the extent to which a spouse owns or controls an asset and the right to receive income from that asset. It is the ownership or control of an asset by a spouse that will bring the asset within reach of a divorce court. This core concept of ownership or control is what allows a trust to be such an effective alternative to a prenuptial agreement. As a general proposition, if a divorcing spouse does not own or control a particular asset or the right to income from that asset, a divorce court will not attempt to award that asset to the other spouse. Just because a trust is established for someone’s benefit does not mean that the beneficiary automatically has ownership or control of the assets in the trust, or even the right to income generated by those assets. The key is structuring the trust in a way that does not give the spouse ownership or control over the assets in the trust while still giving the trustee broad discretion in how to utilize the assets for the benefit of the spouse. Revocable Living Trusts One of the most commonly used trusts is a revocable living trust or “RLT.” As suggested by its name, an RLT is fully revocable by the settlor and is typically used in conjunction with a simple will that leaves the assets of the testator to the RLT. Since an RLT does not provide savings on death taxes that can be achieved with a more complicated irrevocable trust, those without exposure to the federal estate tax often prefer an RLT as a cost-effective method to minimize the burden of the probate process and provide asset protection to the heirs. An RLT does not complete a transfer of assets during the lifetime of the settlor since by nature an RLT may be revoked at any time. An RLT can work well for the generation owning the family business or otherwise having substantial wealth with the intent to hold on to their assets until death. Irrevocable Trusts An RLT immediately becomes an irrevocable trust upon the death of the settlor since the trust can no longer be revoked. An irrevocable trust upon formation transfers assets of the settlor to the trust during the lifetime of the settlor (an inter vivos transfer). The use of an irrevocable trust allows for more complex tax planning to minimize the burden of estate, gift and generation skipping taxes on the beneficiaries and future generations. For those fortunate enough to have wealth beyond the amount of the lifetime federal estate and gift tax exemption ($13.61 million for an individual and $27.22 million for a married couple in 2024), an irrevocable trust with tax planning provisions will be the preferred form of trust to use in lieu of a prenuptial agreement. So How Does It Work? Whether using an RLT or one of the many varieties of irrevocable trusts, it all comes down to making sure the language of the trust document cannot be fairly construed to give the spouse, as beneficiary, ownership or control of the assets in the trust. The following are some of the key points to address when drafting a trust to have the same impact as a prenuptial agreement but without the angst that goes along with putting one in place. A Trustee You Can Trust Selecting a trustee that you can readily trust (for lack of a better word) to act in the best interest of the spouse as the beneficiary is critical. The more independent the trustee is from influence by the beneficiary, the better for protecting the assets from a divorcing spouse. A corporate trust company will be viewed as highly independent while a sibling of the beneficiary spouse may be considered more susceptible to influence by the beneficiary. Identifying the trustee is often the most challenging task for the family. When in doubt, select a corporate fiduciary with a long history of serving as a trustee for multiple generations of families of substantial wealth. No Absolute Right to Income or Principal Distributions Clients are often tempted to provide terms in their trust that will give their child as a beneficiary the right to withdraw some or all of the principal in the trust at certain ages or other milestones. Providing beneficiaries with the absolute right to income from the trust or the ability to withdraw principle from the trust can significantly weaken the asset protection characteristics of the trust and its effectiveness as a substitute for a prenuptial agreement. Giving withdrawal rights or the absolute right to income to beneficiaries of a trust indirectly gives them a degree of ownership or control over the assets of the trust that springs into existence when the stated age or milestone is reached. In a divorce court setting, one can expect a special master or judge to consider a spouse to own or control some or all of the assets in the trust. Once ownership or control is established, one must assume that the divorce court will look to find a way to include the value of the assets in the trust as being subject to some form of distribution to the other spouse in the divorce. In the end, a carefully crafted trust can be even better than a prenuptial agreement when seeking to protect assets in the event of a divorce. Reprinted with permission from the February 15, 2024, edition of The Legal Intelligencer © 2024 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.
March 7, 2024
Intellectual Property
Lights, Camera, Trademark: The Unsung Heroes of the Oscars
Oscar night is the most glamorous night in Hollywood. The red carpet. The gold statuettes. The gowns. The tuxedos. The stars. The trademarks. That’s right, the trademarks. They are essential to the movie industry, and when we celebrate the best in the movies, we should also celebrate the unforgettable trademarks that go along with the motion picture industry. The equipment used to make and show movies are all emblazoned with trademarks. We’ve all seen PANAFLEX or PANAVISION cameras in behind-the-scenes documentaries. Most of us have seen movies in IMAX, and we have heard movies in DOLBY SURROUND SOUND, DOLBY ATMOS, or DTS. Or maybe we’ve even seen a movie in CINEMASCOPE (Disney’s 20,000 Leagues Under the Seas, for example). We’ve probably watched movies with special effects from ILM, DIGITAL DOMAIN, and WETA. Almost all of us have seen a movie in an AMC or REGAL CINEMAS theater, or maybe we have seen where the stars have signed their names and left their handprints outside of GRAUMAN’S CHINESE THEATER in Los Angeles. That theater is so well-known that the look of the building is registered as a trademark. The studio and production company names that appear at the beginning of films are great examples of trademarks, indicating the source of the movie that viewers are watching. PARAMOUNT, PIXAR, WARNER BROTHERS, RKO, UNIVERSAL, SONY, COLUMBIA PICTURES, A24, ORION PICTURES, FOCUS FEATURES, BAD ROBOT, and AMBLIN are all trademarks. So are the roaring lion that introduces MGM films, the Twentieth Century Fox Fanfare, and Netflix’s “Tudum” sound. The water tower on the Warner Brothers lot is also a trademark. That brings us to the movies themselves. The U.S. Trademark Office will not register the title of a single work (this is true for books, too); rather, it will only register the title of a series (meaning two or more movies). While none of this year’s Best Picture nominees are part of a series, plenty of movie series titles are registered trademarks: BACK TO THE FUTURE, JURASSIC PARK, STAR WARS, MISSION: IMPOSSIBLE, DUNE, THE GODFATHER, BARBERSHOP, MADEA, and GODZILLA to name a few. Even some characters and props are the subjects of trademark registrations. Mickey Mouse, for one, is a registered trademark (trademark protection for characters is not always available). There are trademark registrations for multiple lightsaber hilts, as well as the X-Wing Fighter. In Europe, the owner of James Bond has a number of trademark registrations, including one for the well-known gun barrel sequence, and one for one the famous spy’s iconic poses. At least some movie brands have received legal advice and sought trademark protection. Thus, there are registrations for STAY PUFT (for marshmallows), STARK INDUSTRIES (for clothing), THE DAILY PLANET (also for clothing), WILLY WONKA (for candy), BUBBA GUMP (for restaurants), THE MIGHTY DUCKS (for hockey). Of course, we should not forget that Mattel has a trademark registration for the shade of pink associated with BARBIE. And yes, the golden statuette itself is a trademark, so all those who took one home took home a trademark. It’s the most glamorous night in Hollywood, and the trademarks have the best seats.
March 7, 2024
Estates and Trusts
Four Reasons Your Power of Attorney May be Out of Date
A financial Power of Attorney is an essential document in any estate plan. It enables you to appoint someone you trust to manage your finances and other legal matters in case you become unable to do so yourself. The person you name, called your “attorney in fact,” generally has broad powers to handle things like paying your bills, filing your taxes, accessing your safe deposit box, managing your investments, and even selling or mortgaging your house. A “Durable” Power of Attorney remains in effect even if you become incompetent, which is when the document is most likely to be needed. Because it may be years before your Power of Attorney is used, you should review it periodically to make sure it remains current. Here are four reasons to consider having your Power of Attorney revised: It is more than five years old. Unless the document states otherwise, a Power of Attorney technically remains valid indefinitely. Still, banks and other financial institutions may be skeptical if the document is more than five years old. Their skepticism may stem from a legitimate concern that the Power of Attorney has been revoked or perhaps superseded by a newer version of the document. It names the wrong people. Longtime partners and married couples often name each other as their attorneys, in fact, and another individual to act as a backup in case the partner or spouse isn’t able to do the job. If your marital status has changed since you had your Power of Attorney prepared, or if your backup attorney, in fact, has fallen out of favor, it’s time to rethink who should be in charge of your finances if you can’t be. It’s Not the Maryland Statutory Form. In October 2023, the Maryland Legislature adopted a new Statutory Power of Attorney. Under state law, Maryland’s banks, insurance companies, and brokerage firms are legally obligated to accept this statutory form. Anyone who refuses to honor the Statutory Power of Attorney can be forced to pay the attorney’s fees spent getting a court to require that they accept the document. Although other Power of Attorney forms are still valid in Maryland, having the statutory form will help to ensure that the document is honored without delay. It doesn’t include provisions for your digital assets. Digital assets include things like the electronic data stored on your computer or smartphone, your Internet accounts like LinkedIn and Gmail, and your online pictures and documents. Without explicit authorization, called “lawful consent,” no one can legally manage these assets for you if you become incapacitated. Some of these assets, like your PayPal or Amazon accounts, may have monetary value. Others, like your email account or personal blog page, could be of great sentimental importance. Even your voicemail account may be valuable if it includes messages from potential clients or expressions of support from loved ones during an illness. Only a newer Power of Attorney will include provisions for your digital assets, and it may be wise to have yours updated for this reason alone. It is also important to make a list of your passwords and login information. This should be kept in a safe place so your attorney, in fact, can find it when the need arises. Do you really need a Power of Attorney? Without one, it could be necessary for the court to appoint someone to become your legal guardian. A guardianship proceeding is an arduous and expensive process. In addition, the guardian would need to file annual accountings with the court to verify how your assets had been spent. Taking the time to have a Power of Attorney prepared—and to keep it current—is well worth the small effort required. Lee Carpenter is a Principal at the law firm of Offit Kurman, P.A., and can be reached at (410) 209-6426 or lee.carpenter@offitkurman.com. This article is intended to provide general information and should not be construed as legal advice.
March 4, 2024
Healthcare
Should the MSO be an S-Corp and the Medical Practice be a C-Corp or Vice Versa?
The S-Corp C-Corp distinction is a tax distinction. Under the IRS, you have the ability to do an S election or remain a C-Corp, and C-Corp is double taxation on the corporate level, and the individual S-Corp is on the individual only. It’s a pass-through. We always recommend getting a CPA involved to help determine what tax election you should make and so that would be the answer to that one. It really depends on revenue projections and things like that. Testimonials
March 2, 2024
Intellectual Property
Trademark Use in the U.S.
Demystifying What Constitutes an Acceptable Specimen of Use Evidence of use is, in most circumstances, essential to securing and maintaining a U.S. trademark registration. Subject to certain limited exceptions involving foreign trademarks, the U.S. Trademark Office will not issue a U.S. trademark registration without appropriate proof of use. Similarly, to maintain a U.S. trademark registration, a registrant must submit adequate proof of use to the Trademark Office. While this sounds straightforward, in practice, it can sometimes be very difficult to find evidence of use that the Trademark Office will accept. According to the Trademark Manual of Examining Procedure, § 904, specimens “are required because they show the manner in which the mark is seen by the public.” Acceptable specimens can be labels and tags affixed to goods or the containers for goods (but not mockups), stampings on products, commercial packaging, screenshots from a computer program or a frame of a movie or video, a website from which software can be downloaded, point of sale displays, catalogs with ordering information, websites from which products can be ordered, and manuals. TMEP §§ 904.03 (a) through 904.03 (k). On the other hand, printer’s proofs, mockups, renderings, and advertising materials are generally not acceptable as evidence of use. TMEP §§ 904.03 (a) through 904.03 (k). Once evidence of use is submitted, the Trademark Office will examine it carefully. If it is not accepted, an Office Action will be issued, after which one will have the ability to submit a substitute specimen that was in use as of the pertinent date (usually the date on which the original specimen was submitted). TMEP § 904.05. Obtaining an acceptable specimen is often one of the most difficult parts of preparing a trademark application or a maintenance filing. This is in part because the Trademark Office examines them so carefully but also partly because there is a desire to avoid the expense of repeated filings with the Trademark Office. Indeed, failure to submit an acceptable specimen can lead to the refusal of an application, as demonstrated by a recent case. Hi-Tech Pharmaceuticals, Inc. sought to register EXPERIMENTAL AND APPLIED SCIENCES as a trademark for use in connection with dietary and nutritional supplements. As evidence of use, it submitted an original specimen and a substitute specimen. The original specimen was five pages long, consisting of a screen capture of a web page showing five different products. The proposed mark did not appear on the first page, but it did appear on close-ups of two supplement bottles that were part of the specimen. The close-ups showed the proposed mark on the lower back portion of the label, on one line of a four-line group. All four lines were the same color, appeared in the same font size and style, and had the same justification. The proposed mark appeared at the end of the following sentence: “Developed and exclusively manufactured by Experimental And Applied Sciences”; because of its positioning, the proposed mark was on the second line. The next line had the applicant’s address, and the following line had the applicant’s phone number and website address. The Examining Attorney refused registration of the mark, taking the position that the evidence of use showed the proposed mark being used as a trade name, not as a trademark (the submitted evidence did not show the proposed mark anywhere else on the bottle). The Trademark Trial and Appeal Board affirmed on appeal, agreeing with the Examining Attorney that the “applicant would be hard-put to present the term in a less prominent manner.” (emphasis in original). The TTAB explained that the proposed mark appeared as part of a visual unit and that, as a result, the impression was that the proposed mark should be read in the context of the lines around it. Therefore, registration was refused. An acceptable specimen would have led to a different result. While the Hi-Tech Pharmaceuticals case was in the context of seeking registration of a mark, it applies with equal force to maintenance filings—an improper specimen can lead to the cancellation of a registration mark. Thus, in either context, it is important to work with experienced counsel to make sure that a mark is being used in a manner that demonstrates trademark use and that will be accepted by the Trademark Office. If there is any doubt about whether the Trademark Office will accept use, please contact me (preferably well in advance of any deadlines).
February 29, 2024
One Minute of Overtime
Primary Duty
Welcome to One Minute of Overtime, where I will share insights on Labor and Employment Law topics, mostly related to minimum wage and overtime compliance issues. Compliance in this area of law is nuanced and technical, so it is critical for employers to audit and adjust their practices to remain compliant, so stop by to stay up-to-date and in-the-know. Most exemptions under the FLSA focus on the employee’s primary duty. This means that even where an employee may do a variety of work, the exemption analysis will focus on the principal, main, major or most important duty that the employee performs.
February 28, 2024
Labor and Employment
Employment Law Update: Delaware Supreme Court Takes a Stand on Restrictive Covenants
In Cantor Fitzgerald, L.P. v. Ainslie, C.A. No. 9436 (Del. Jan. 29, 2024), the Delaware Supreme Court signaled to its lower courts that many well-drafted restrictive covenants remain valid and enforceable. The Cantor Court unanimously reversed the Delaware Chancery Court’s ruling, which had rejected as unenforceable a financial services company’s limited partnership agreement clause under which a limited partner’s equity is forfeited if the partner violates non-competition provisions. The decision is noteworthy because the Court of Chancery has increasingly demonstrated a willingness to strike down overly broad non-compete agreements, accompanied by a growing reluctance to revise (or “blue pencil”) agreements by narrowing their terms. The Court of Chancery held that the non-compete and non-solicitation provisions contained in the limited partnership agreement, which had a worldwide geographic scope, were geographically overbroad and unenforceable. Additionally, the Court of Chancery found the definition of “Competitive Activity” overbroad due to its inclusion of “any Affiliated Entity,” reasoning that “it is highly possible that a partner could unknowingly engage in a Competitive Activity.” 2023 WL 106924, at *18. Notably, the court declined to “blue pencil” the provisions to make them more reasonable. The Court of Chancery then focused on the forfeiture-for-competition provision triggered by “Competitive Activity.” The Court of Chancery considered whether it should evaluate the forfeiture-for-competition provision (which it called a “Conditioned Payment Device”) for reasonableness or apply contractual deference under the “employee choice” doctrine. The court determined that “forfeitures do not enjoy this Court’s contractarian deference” and conducted a reasonableness analysis. Id. at *24. Although the court applied a “lenient” reasonableness test, it nonetheless determined that the Conditioned Payment Device was unreasonable and invalid, given the broad definition of “Competitive Activity,” the lack of an established legitimate business interest for the broad restrictions, and the four-year temporal scope, which extended beyond the temporal scope of the contractual non-competition and non-solicitation provisions. Id. at *26. The Supreme Court disagreed, highlighting the distinction between non-competition clauses for former employees and those for former partners. It ruled that partnership agreements could include consequences not typical in standard contracts, like penalties and forfeitures. While the Delaware Supreme Court’s decision was specific to limited partnership agreements, employers should still take note. Put another way: while employment-based non-compete clauses are still subject to a reasonableness standard, the tides in Delaware may be shifting back towards the employer-friendly interpretation of restrictive covenants, at least for now (and until there is more clarity surrounding the FTC’s final rule). Moreover, such provisions may not be enforceable in specific industries, such as law firm partnership agreements where ethics rules may be implicated due to a chilling effect on a client’s right to select counsel. Furthermore, following the Cantor ruling, the Delaware Supreme Court accepted an interlocutory appeal regarding a Chancery Court ruling in Sunder Energy, LLC, v. Jackson, C.A. No. 455, 2023 (Del. Jan. 25, 2024). This case concerns the denial of a preliminary injunction to enforce a non-compete provision in a limited liability company agreement and a refusal to engage in blue-penciling. The Delaware Supreme Court’s stance on the matter remains to be determined. Given the current state of Delaware jurisprudence on restrictive covenants, employers must carefully consider any restraints on employee mobility. They should also give similar consideration to the choice of law and forum selection provisions contained in employment agreements. Thank you for reading our legal update- please get in touch with us if you have any questions or require any assistance. Sarah Goodman can be reached at sarah.goodman@offitkurman.com or 267-338-1319, and Charles McCauley can be reached at cmccauley@offitkurman.com or 484-531-1712.
February 27, 2024
Healthcare
Why Posting Patient Photographs on Social Media Accounts May Violate HIPAA and FTC Advertising Regulations
Many doctors seek to use patient photos as testimonials for their medical practices. The photos are often before and after pictures to show how a patient looked before the medical care was provided and after the treatments were provided. Photos can also be used along with text to state that the patient recommends a doctor due to the care that was provided. Medical practices and organizations also may want to use patient photos to announce when certain services are available, to promote healthy lifestyles, and to discuss current health issues – and for many other reasons. Doctors and medical practices that provide plastic surgery, beauty, or anti-aging services are among the practices most likely to want to post patient pictures – but almost any medical practice could promote its practice through patient photos. Healthcare providers need to understand the ethical requirements and federal and state laws that govern the use of patient photos. For starters, the posting of patient photos must comply with the Health Insurance Portability and Accountability Act (HIPAA) of 1996 and with the Federal Trade Commission’s (FTC’s) social media rules. The HIPAA Journal states that medical practices and healthcare organizations do need to comply with HIPAA even though HIPAA was enacted before most social media platforms came into existence. These practices and organizations also need to comply with the FTC rules on advertising. GOT HIPAA? GET HIPAA? JOYCE EXPLAINS WHY AND HOW Interview with an expert in healthcare privacy and security, both on the federal side with HIPAA, and the state side, especially California law. FTC ENFORCES FALSE ADVERTISING RULES AGAINST ‘CELL REPAIR’ PRODUCTS In today’s video, we discuss the dangers of marketing products without proper legal review—in this case, not just FDA enforcement, but even more significantly, FTC (Federal Trade Commission) […] The FTC rules on social media The Federal Trade Commission Act applies to all types of advertising and marketing including social media. The FTC has the authority to review online and offline advertising. The agency can file warning letters and seek injunctive relief to stop any improper advertising. In addition, the FTC can seek civil penalties. Advertising and marketing are considered deceptive if: “A representation, omission, or practice misleads or is likely to mislead the consumer; A consumer’s interpretation of the representation, omission, or practice is considered reasonable under the circumstances; and The misleading representation, omission, or practice is material.” FTC REGULATIONS YOU MUST KNOW FOR HEALTHCARE ADVERTISING Lots of physicians and healthcare companies have had us reviewed their marketing materials, and inevitably, we’ve quickly spotted gaping holes where they’ve left themselves vulnerable to […] The HIPAA Social Media Rules? Covered entities and business associates can use social media to promote their practices and products – provided the HIPAA and FTC requirements are met. Covered entities are: “Healthcare providers, like doctors, dentists, and pharmacies. Health plans, like HMOs and employer health plans. Healthcare clearinghouses, which process health information.” Business associates are partners of the covered entities that need access to health information to perform certain services. HIPAA applies to Protected Health Information (PHI) by “covered entities and business associates.” The PHI must comply with HIPAA’s privacy and security rules. “Protected health information (PHI) is individually identifiable health information transmitted or maintained in any form or medium by a Covered Entity or its Business Associate. Individually identifiable health information is information, including demographic data that relates to an individual’s physical or mental health or the provision of or payment of health care, which identifies the individual.” Patient authorization and HIPAA (HIPAA’s privacy rules) Any PHI that is disclosed requires the individual consent of the patient. The HIPAA authorization rules can be found in §164.508 of the HIPAA Privacy Rule. Valid authorizations must include the following core elements: “A meaningful description of the information to be used or disclosed A meaningful description of the purpose of the use or disclosure An explanation that the information may be further disclosed The individual’s right to revoke the authorization An expiration date for the authorization” The patient should be informed that the social media post with their PHA may be widely shared, published, and republished. This means that even if the patient does request a revocation of the authorization, the medical practice/organization may not be able to comply because the PHI has already moved quickly across the various social media platforms. What steps can medical practices and organizations take to comply with HIPAA? The consequences for violation of HIPAA’s privacy rule can include large fines and even possible imprisonment. Medical practices and medical organizations that use social media should consult with experienced healthcare providers to understand the do’s and don’ts of posting medical information (including patient) photos online. The practice/organization should establish social media policies, train the staff on permissible and impermissible uses, enforce policy violations, and create safeguards to protect against inadvertent disclosures. Access to social media accounts within the medical office should be limited to specific staff members. A few FAQs about social media postings and HIPAA The HIPAA Journal provides a few commonly asked questions about social media and HIPAA. What is one reason that social media increases the risk for HIPAA violations? Photographs are a large driver of social media content. The staff in medical offices can take someone’s picture and load the picture to the Internet almost immediately. The posting of the photograph will likely violate HIPAA unless the medical practice has the patient’s consent. Is the posting of a photograph of a patient a HIPAA violation if the patient’s name is not provided? Generally, the posting of the photograph will be a violation if the patient’s identity can be determined from the image. Medical practices should expect that patients can identify themselves in a social media photo. The medical practice should obtain the patient’s permission before posting a photograph online. Do the HIPAA social media rules apply to all accounts or just corporate accounts? HIPAA applies to business and personal social media accounts. In fact, posting a patient’s photo from a corporate account onto a private account will likely violate both HIPAA’s privacy rule and security rule. Practical suggestions for medical practices regarding social media Medical practices should train their staff about HIPAA’s privacy and security requirements, what information constitutes patient health information, and what the consequences will be for violating these requirements. The medical practice should also establish protocols, with the help of experienced healthcare lawyers, for obtaining permission from patients to use their patient health information. The patients should understand what information is being disclosed, where it’s being disclosed, why it’s being disclosed, who may see the information, and the other consequences for seeing their photo on social media accounts. The written consent form should be drafted to address the patient’s legal rights and ethical concerns. American Medical Association Guidelines for social media posts The American Medical Association (AMA) reviewed a case study of a woman who consented to having her images posted on social media. She broke down in tears when she discovered that images of her breast (the doctor performed breast reduction surgery) were posted online. While the doctor emphasized that the images were for educational purposes, the woman complained that the images were not respectful. The AMA analysis stated that informed consent may not be enough to protect a doctor in the age of social media. The AMA recommended that the plastic surgeon change “his social media practices for future patients,” and share his specific plans for change so the patient could feel “like she is making a difference and thus ease the tension.” The AMA stated that there must be: (1) Fully informed consent (2) A commitment to professional content (3) Avoidance of abusing the patient-physician power differential. The AMA summarized the basic principles for using patient images on social media as follows: “Complying with the Health Insurance Portability and Accountability Act (HIPAA) Maintenance of separate private and personal social media accounts Minimal online interactions with patients Familiarity with hospital policies on social media. Patient confidentiality must be protected at all times, as HIPAA’s security rule protecting identifiable health information that a provider creates, receives, maintains, or transmits electronically applies to social media as well.” This means that the images should be “deidentified” – though some images cannot be completely deidentified. Online communications between the doctor and patient should not be a substitute for the patient-physician relationship. Doctors, such as plastic surgeons, should understand any hospital policies or medical practice policies in addition to the applicable social media laws. The AMA states that some entities, like the Social Media Task Force of the American Society of Plastic Surgeons (ASPS) are still in the process of developing applicable policies. Both the physician and the patient should understand that many social media viewers are under 25 years of age. A practical suggestion is to show the patient the pictures that are going to be posted BEFORE the pictures are posted. HIPAA Violations – Civil and Criminal Penalties HIPAA violations are classified as follows: Tier 1: A violation that the covered entity was unaware of and could not have realistically avoided, had a reasonable amount of care had been taken to abide by HIPAA Rules Tier 2: A violation that the covered entity should have been aware of but could not have avoided even with a reasonable amount of care. (but falling short of willful neglect of HIPAA Rules) Tier 3: A violation suffered as a direct result of “willful neglect” of HIPAA Rules, in cases where an attempt has been made to correct the violation Tier 4: A violation of HIPAA Rules constituting willful neglect, where no attempt has been made to correct the violation within 30 days. The penalties for HIPAA violations, by tier, are as follows: Tier 1: Minimum fine of $100 per violation up to $50,000 Tier 2: Minimum fine of $1,000 per violation up to $50,000 Tier 3: Minimum fine of $10,000 per violation up to $50,000 Tier 4: Minimum fine of $50,000 per violation The penalties increase based on an inflationary index. “If healthcare professionals knowingly obtain or use protected health information for reasons that are not permitted by the HIPAA Privacy Rule, they may be found to be criminally liable for the HIPAA violation under the criminal enforcement provision of the Social Security Act.” [Emphasis added]. Doctors and medical practices also need to understand that obtaining consent near the time of the actual procedure is problematic since the patient is focused primarily on their health – patients may not dissent because patients don’t want to upset their doctor when he/she is about to perform a medical procedure. Another concern raised by the AMA is that posting images online may be detrimental to the medical practice in addition to the patient because photos that seem inappropriate may suggest that the plastic surgeon or other type of physician does not respect the physician-patient relationship. Doctors and medical practices need to understand how HIPAA, the FTC social media rules, and state and local ethics rules govern the posting of photographs on corporate and personal social media sites. At a minimum, health professionals and practices should obtain a proper written consent to post photographs online for marketing purposes, education, and other reasons. The consequences for violating HIPAA, the FTC rules, and doctor-patient confidentiality can be quite severe.
February 22, 2024
Family Law
Navigating High-Asset Divorce Cases
High-asset divorces typically involve couples with substantial wealth, including real estate, investments, business interests, and other valuable assets. These cases require a meticulous approach to ensure a fair and equitable distribution of assets, spousal support, and child custody arrangements. Determining the value of complex assets such as businesses, stock options, and intellectual property can be challenging. Valuation experts may be required to assess the worth of these assets accurately. In some cases, spouses may attempt to conceal assets to reduce the amount subject to division. Uncovering hidden assets demands thorough financial investigations, and forensic accounting may be possible. The tax consequences of asset distribution need careful consideration. Dividing assets without a comprehensive understanding of tax implications can lead to unexpected financial burdens. When one or both spouses own a business, the division or buy-out of business assets becomes a critical issue. This involves assessing the business's value and determining the most equitable way to distribute ownership interests. High-asset divorces often involve substantial spousal support considerations. Calculating the appropriate amount requires a detailed analysis of each spouse's financial situation and needs. Your divorce attorney will help you engage the necessary financial experts, such as forensic accountants and valuation professionals. Comprehensive documentation of all assets, liabilities, and financial transactions is essential in determining the marital estate. Given the complexity of high-asset divorces, negotiation and mediation can be effective methods for reaching agreements outside the courtroom. This allows the parties more control over the outcome. Having a well-drafted prenuptial or postnuptial agreement can simplify the divorce process by establishing clear guidelines for asset division and financial arrangements. If you have such an agreement, you should provide a copy to your attorney. Each spouse should seek experienced legal representation with experience in high-asset divorces. Attorneys with expertise in this area can navigate the legal complexities and advocate for their client's best interests.
February 15, 2024
Healthcare
Physician Recruitment Compliance Issues, Stark Law Exceptions, and MSOs
When hospitals and medical practices hire new doctors, they must consider various balances — the need for doctors capable of providing essential medical care to patients, the doctor’s capacity to attract new patients, and the imperative to comply with federal and state laws governing physician recruitment. The fundamental requirement of these laws is that patient care must always take precedence. Our experienced healthcare lawyers are prepared to elucidate how these balances operate. We strive to assist hospitals, medical practices, and doctors in delivering high-quality medical care, fostering business growth, all while adhering to legal requirements. Two key legal issues we help healthcare professionals address are compliance with Stark Law and the Anti-Kickback Statute (AKS). We excel in negotiating and drafting contracts that not only demonstrate compliance with Stark, the AKS, and other legal obligations but also ensure that all parties prioritize patient care and financial success. Additionally, we can explain how a Managed Service Organization (MSO) can assist medical practices in managing the business side of their practice once a new physician is hired. Stark Law generally provides exceptions that aid hospitals and medical practices in hiring qualified physicians. Violations of Stark Law and the AKS can lead to civil and criminal actions, potentially resulting in the loss of a medical license. While MSOs can offer administrative support, such as credential verification, it’s important to note that they cannot provide recruitment support, as MSOs are not authorized to practice medicine. As we’ve previously discussed, hospitals and medical practices regularly find the need to hire physicians who fulfill specific specialty requirements and engage in research. Newly graduated talent from medical school requires training, while experienced professionals often undergo an adjustment period and address practical issues, such as the new doctor’s preference to practice in a specific geographical area. Often, hospitals, which grant the right to practice within their facilities, collaborate with medical practices to recruit new physicians. Ideally, from the hospital’s perspective, the physician will “refer” patients to the hospital for surgeries and specialized care, with such referrals needing to comply with Stark Law, the Anti-Kickback Statute (AKS), and state laws. From the medical practice’s standpoint, the goal is for the practice to receive fees for the services the doctor provides both at the hospital and within the practice, while the physician also refers patients to the medical practice. The ideal scenario involves the doctor earning a base fee until their medical practice can be expanded. Each of the three participants—the hospital, the medical practice, and the doctor—has their own set of concerns during the physician recruitment process. These concerns include: The geographical area where the doctor will practice, including the potential need for relocation. The amount of compensation. The duties of the physician. The length of the employment contract. The loan – “The agreement by the hospital to pay the salary or part of the salary is considered a loan.” Covenants not to compete – where legally applicable. It’s important to note that covenants not to compete are generally not enforceable in California. Other contract terms. Useful Stark Law exceptions for physician recruitment Hospitals and medical practices offering inducements to attract doctors to work within their facilities must ascertain whether such inducements or the working relationship violate anti-referral laws, namely Stark Law and the Anti-Kickback Statute (AKS). Generally, recruitment arrangements that meet specific criteria may be deemed valid under the following Stark Law exceptions: Bona Fide Employment Exception: Applicable to medical practices, organizations, and hospitals hiring physicians. The physician has a bona fide employment relationship if: The employment services are clearly identified. The remuneration paid to the physicians is consistent with the fair market value of the services. Unless an exception applies, the remuneration is not based on the volume or value of any referrals by the referring physician (the newly hired physician). The remuneration is provided under an arrangement that would be commercially reasonable even if no referrals were made to the employer. Productivity bonuses based on services personally performed by the physician (or an immediate family member of the physician) may be permissible. If the physician’s remuneration is conditioned on referrals to a particular provider, practitioner, or supplier, the referral arrangement must meet other Stark Law exceptions. Hiring the Physician as an Independent Contractor: The contract or services should be in writing, identify all the services the physician will perform, be for specific time periods, contain a termination clause, specify the terms of payment in advance, and be consistent with the fair market value of the services. The arrangement should not factor in the volume or value of any referrals or business generation. The arrangement should be commercially reasonable (even if there were no referrals) and further the legitimate business purposes of the employer and the contractor-physicians. Physician Recruitment Exception: Remuneration provided by a hospital to recruit a physician that is paid directly to the physician may meet this Stark Law exception if certain conditions are met: The agreement is placed in writing and signed by the hospital, the physician, and the medical practice if all three are involved. The agreement is not conditioned on the referral of patients by the physician to the hospital. The amount of remuneration under the arrangement is not determined in any manner that takes into account the volume or value of actual or anticipated referrals by the physician or other business generated between the parties. The physician is allowed to establish staff privileges at any other hospital(s) and to refer business to any other entities (some exceptions may apply). The terms of the employment contract generally can’t be altered once the contract is signed. The medical practice must also sign the agreement if the doctor is going to work for the medical practice and not full-time at the hospital. Other conditions may apply depending on the terms of the agreement. As previously mentioned, our healthcare lawyers elucidate the additional conditions that must be met (to comply with a Stark Law exception) for a medical practice (without using a hospital) to be able to hire a doctor as an employee or as an independent contractor. Generally, payment should be based on fair market value and not on the amount or worth of any referrals. The AKS may provide safe harbors for certain physician employment relationships and recruitment efforts if specific conditions are met. Notably, the AKS uses the term “practitioner recruitment” instead of “physician recruitment.” Physician recruitment agreements must also adhere to any IRS 501(c)(3) requirements. In addition to hiring physicians, hospitals, and medical practices must understand whether Stark Law, the AKS, and other federal or state laws regulate the hiring of non-physician healthcare providers. Our experienced lawyers represent one of the three participants in physician recruitment, with the signer we represent varying depending on our client. We work diligently to address all other relevant legal, business, and medical issues. PHYSICIAN RECRUITMENT AGREEMENTS OBLIGATE THE HOSPITAL, MEDICAL PRACTICE AND THE PHYSICIAN – MAKE SURE YOU KNOW WHAT YOUR OBLIGATIONS ARE Physician recruitment agreements involve the rights and duties of three parties. Experienced healthcare lawyers craft the proper exceptions to the Anti-Kickback Statute and Stark Law What is a managed service organization (MSO)? An MSO is often utilized to manage the administrative and marketing aspects of a medical practice. In California, physicians typically own the medical corporation, while ownership interest in an MSO is open to anyone. An agreement outlining the duties and obligations of each party to the agreement should be established between the medical corporation and the MSO. Beyond addressing a state’s corporate practice of medicine (CPM) laws, MSOs are employed to demonstrate the medical practice’s compliance with Stark Law and the Anti-Kickback Statute (AKS). The medical practice’s primary focus should be on providing healthcare, with the MSO supporting the business side of the medical practice. Our healthcare lawyers comprehend how MSOs can benefit a medical practice and identify tasks exclusive to the medical practice. Generally, the MSO cannot participate in the recruitment of physicians, as decisions regarding physician employment pertain to the physician’s ability to provide healthcare to patients. The MSO may be able to assist with several issues when a medical practice is considering hiring (or has hired) new physicians or other medical staff who must be under the supervision of appropriate medical personnel, such as nurses, physician assistants, medical assistants, and other healthcare staff requiring supervision. These issues include: Scheduling appointments Leasing office space or equipment to the medical practice Billing and collection on behalf of the medical practice Checking the credentials of the physician, such as their medical licenses and their status Educating and training medical staff on topics such as compliance training, various diseases, office software systems, and other non-medical issues. MSOs can also perform additional tasks, including: Educating and training medical staff on compliance and various diseases Medical coding Regulatory compliance with federal and state laws, such as HIPAA (Health Insurance Portability and Accountability Act), OSHA (Occupational Safety and Health Administration) regulations, FMLA (Family and Medical Leave Act), CLIA (Clinical Laboratory Improvement Amendments of 1988), and state laws Credentialing staff and hiring clinical and administrative staff, credentialing health plans, and managing enrollment Public relations Disaster management Hospitals and medical practices require physicians and other healthcare providers to attend to their patients, especially when expanding to other locations or offering additional services. In the process of recruiting or hiring physicians, hospitals, medical practices, and the physicians involved must seek guidance from experienced healthcare lawyers. This consultation is essential for understanding employment incentives, conditions, and duties that align with Stark Law, the Anti-Kickback Statute (AKS), and other pertinent federal and state laws. Utilizing Stark Law exceptions during the drafting of employment contracts can be beneficial. Employing an MSO is an effective method for ensuring that a newly hired physician can concentrate on practicing medicine while leaving the administrative side to the MSO. Ensure Legal Compliance in Physician Recruitment
February 15, 2024
Healthcare
Can a Dentist be a Medical Director?
The medical director, and again, just because a doctor has to own 51% of the medical practice doesn’t mean that doctor has to act as the medical director. The vast majority of times, yes, they do because they don’t have to do a whole lot and it beats finding someone and paying them separately, but you don’t have to be the medical director if you’re the owner, but you do have to be an MD to own a medical practice. If you get a doctor who’s a 51% owner or a doctor who is the full-owner, say in the state of New York, or if it’s a corporate practice at medicine state, that allows anybody to own it, and you just go and hire a medical director, the medical director has to be trained in the procedures that are being performed. You just have to make sure that the medical director has at least enough training in the particular procedures that the nurse will be performing in the clinic. Testimonials
February 15, 2024
Intellectual Property
Upcycling, Customization, and Trademark Infringement
With its potential environmental and sustainability benefits, upcycling is a popular trend. Likewise, product customization, allowing consumers to express their own style, is also popular. As illustrated by two cases involving watches, both can give rise to claims of trademark infringement and counterfeiting. Rolex Watch USA, Inc. v. BecekerTime, L.L.C. BeckerTime is a seller of decades-old preowned watches containing Rolex parts. BeckerTime identifies such watches as “Genuine Rolex,” but they include both Rolex and non-Rolex parts. Before taking action, Rolex purchased two watches from BeckerTime. BeckerTime added diamonds as hour markers to the refinished watch dials by drilling holes in the dials and inserting aftermarket diamonds or other stones and settings in the holes. As part of the refurbishment process, BeckerTime strips the dial down to bare metal, and once the refurbishment is complete, it reapplies Rolex’s trademarks. When selling the modified watches, BeckerTime lists a retail price with a comparison price labeled as “New MSRP (if all factory)”— even though Rolex does not and has never sold a similar watch. Additionally, BeckerTime adds various non-Rolex parts (such as bezels with added diamonds, bands, or straps). BeckerTime issues an “Authenticity Guarantee” for each watch it sells and has held itself out as a “Certified PreOwned Watch Dealer” with a “Rolex Certified Master Watchmaker” even though Rolex has not certified BeckerTime or its watchmaker. Moreover, the parts added by BeckerTime are integral to the function of the watches and do not bear any markings indicating that BeckerTime is the source of the watches. To be sure, BeckerTime did indicate on its website that the replacement parts were not genuine Rolex parts, that the alterations it makes would void any Rolex warranty, and that BeckerTime is not affiliated with Rolex. That was not enough to stave off legal action. Rolex sued BeckerTime for trademark counterfeiting and trademark infringement in September 2020. After a bench trial, the court found that BeckerTime infringed Rolex’s trademark by counterfeiting Rolex watches and issued an injunction precluding BeckerTime from using Rolex’s trademark in specific ways. Both parties appealed, and the court of appeals largely upheld the injunction. The court of appeals explained that “BeckerTime does more than recondition or repair vintage Rolex watches.” According to the court of appeals, BeckerTime sold watches that were materially different from those sold by Rolex; the watches could not be called genuine Rolex watches. The court of appeals also pointed out that customers were confused as to whether the watches were entirely genuine Rolex and that BeckerTime had received complaints about the quality of the watches. As a result, the court of appeals affirmed the injunction, although it did instruct the lower court to clarify one point. Hamilton Intern. Ltd. v. Vortic LLC Like the BeckerTime case, this case also involved watches. The outcome was very different. Robert Thomas Custer founded Vortic and endeavored to make a watch that would be entirely made in America. After learning that no active company in the U.S. made watch movements, Vortic began salvaging and restoring parts from antique American-made pocket watches manufactured in the late 1800s and early 1900s. The parts, which included antique parts from watches bearing Hamilton’s trademark, were then encased in new wristwatches. One of the watches Vortic made was named “The Lancaster,” after the city where the Hamilton Watch Company was originally based. The Lancaster features restored antique pocket watch movements and front dials made by Hamilton. The front dial bears the HAMILTON trademark. The watch strap, case, and various internal parts were either manufactured by Vortic or came from modern U.S. sources. The back of the watch has a glass cover through which the watch parts, some of which bear the HAMILTON trademark, can be seen. The cover is surrounded by a metal ring with Vortic’s name and serial number for the watch, as well as the watch’s name. Buyers received the watch in a wooden box with Vortic’s name and a booklet that displayed the Vortic logo and explained its manufacture and restoration process. The box also included an authentication card with Vortic’s name and serial number, which was signed by the watchmaker. Vortic’s advertisements emphasized the antique and authentic nature of the watch’s parts. In July 2017, Hamilton sued for trademark infringement and counterfeiting. After a bench trial, the court ruled in favor of Vortic, finding that there was no likelihood of customer confusion. Hamilton appealed, and the court of appeals affirmed the lower court’s ruling. The court of appeals pointed out that Vortic took genuine parts from Hamilton watches, refurbished and repaired them, and modified them into a wristwatch and that consumers would view the watch as an antique pocket watch modified into a wristwatch rather than as an entirely new product. Further, the court of appeals explained that Vortic took many steps to disclose that it was not affiliated with Hamilton and that its watch used refurbished original parts. This could be seen in advertisements, the marks on the watch itself, and the fact that the watches themselves are presented to consumers as restored antique pocket watch parts modified into a wristwatch. The court of appeals contrasted this with other cases (including cases brought by Rolex) where there was no disclosure of the changes made to the watch and pointed out that there was no evidence of consumer confusion in the record. So, What Is Permitted? Anyone seeking to reuse a previously manufactured product or parts from a previously manufactured product should make sure to disclose to consumers exactly what has been done. Further, it is important to make clear that there is no affiliation between the upcycler/customizer and the original manufacturer. These seem to be the key differences between the Rolex decision and the Vortic decision. However, strict compliance with those requirements does not mean that reusing a previously manufactured product cannot give rise to a claim for trademark infringement. One thing that does seem settled is that customization of a product purchased by a consumer is permitted so long as the customized product is intended for the consumer’s own use and not for resale (in the BeckerTime case, it appears that BeckerTime was customizing watches for sale, rather than in response to consumer requests). If you are contemplating reusing someone else’s products or are concerned that a third party reusing your products will result in consumer confusion, please feel free to contact me.
February 14, 2024
Healthcare
Key Considerations When Merging or Acquiring A Medical Practice – Part Two
In part one of our discussion of the legal issues involving buying a new medical practice or merging your practice, we discussed many of the practice issues such as cultural compatibility issues, how to determine if the merger is working, and why one medical practice decides to acquire another medical practice or merge with an existing medical practice. In this article, we discuss some of the many legal and healthcare compliance issues such as Stark Law, the Anti-Kickback Statute (AKS), and HIPAA. We also discuss the corporate practice of medicine, due diligence, healthcare compliance issues such as the need to keep patients informed, and the agreement of sale or merger agreement. In subsequent articles, we’ll discuss the different ways to place a financial value on a medical practice, the use of an MSO to manage the new medical practice, Stark Law exceptions and AKS safe harbors, and other specific legal issues. When Using a Management Services Organizations (MSO) Is the Right Choice for Your Medical Practice Managed Services Organizations help physicians focus on practicing medicine by freeing doctors from many administrative tasks. Failure to consult with an MSO healthcare lawyer can cause civil and […] Legal compliance issues when merging or acquiring a medical practice The Corporate Practice of Medicine California law requires that medical practices must be owned by a medical corporation. As we’ve discussed earlier in our article on buying and selling a medical practice: The Moscone-Knox Professional Corporation Act regulates “who can invest in and own the professional medical corporation and the limits that apply to non-medical practitioners.” The bottom line is that the clinical/medical operation of the business must be separate from the administrative side of the business. The medical side generally must be owned by physicians while the administrative side can be owned by the doctors and by “investors, managed service organizations, and other non-professional managers.” California medical corporations must also comply with “The Medical Practice Act, Business and Professions Code section 2052, which provides that the unauthorized practice of medicine is illegal.” “The California Business and Professions Code section 2400 which prohibits corporations and “other artificial entities: from having “professional rights, privileges, or powers.” Other laws including federal and state privacy laws The state and medical regulations for each type of medical practice Other states have their own specific medical practice requirements. Stark and AKS When one medical practice buys out or merges with another, these anti-referral laws need to be reviewed to ensure compliance with how the bills are submitted and paid, whether the fee arrangements violate any of the terms of these laws, whether the manner of payment of the physicians violates these laws, whether the purchase or leasing of the office space or equipment violates any of these laws, and other possible Stark or AKS violations. Our skilled healthcare lawyers will also review whether any exceptions or safe harbors may apply and how to implement those exceptions or safe harbors. Experienced healthcare lawyers also review how a managed service organization (MSO) can be used to address any possible Stark or AKS violations. We’ll explain what payment arrangements may be permissible and what documentation and evidence is necessary to confirm those arrangements are legal. Healthcare M&A: Do’s and Don’ts of Buying or Selling a Medical Practice Buying and selling a medical practice is much different than selling a commercial business. Due diligence must address special healthcare legal compliance issues, licensing requirements, patient […] Financing Buyers and sellers may have different thoughts and due diligence requirements with regard to financing. If a buyer is willing to pay a lump sum at the time of settlement, that removes the financing issues. Since many medical practices have substantial value, a buyer may ask the seller to be allowed to pay the sales price in installments. The seller may also extend credit – by allowing the buyer to pay in installments based on the funds received from patients and insurance companies during the length of the new medical business operation. A seller may require a security interest in the new medical practice in return for accepting a payout. A buyer may not want to pay a lump sum in order to have time to complete any necessary conditions such as repairs or obtaining consent from patients. There are many different possibilities that we’ll review with you. Due Diligence In part one we discussed the need to conduct due diligence reviews about the legal, financial, and operational aspects of the medical practice you’re buying or merging with. Due diligence includes reviewing any existing or likely new legal, financial, or regulatory claims or complaints such as legal actions, judgments, or security interests. Other due diligence issues include: Any current MSO agreements Any corporate practice of medicine issues All open contracts with vendors, suppliers, third parties and administrators Any open litigation Any open rental or lease agreements All open contracts with contractors and employees Any other open contracts of any nature Our skilled lawyers will review whether these contracts can be assigned to the new practice and all related legal issues. The Agreement of Sale/Merger Agreement Perhaps the most critical part of the purchase, sale, or merger of a medical practice is the agreement of the sale or the merger agreement. The agreement of sale/merger establishes the price of the sale, the legal and business structures of the medical practice, the terms and conditions of the sale, the remedies of each practice for any breaches, the handling of the legal compliance issues, the handling of the medical compliance issues, the rights of each medical practice and the physicians in each practice, and many other legal, medical, financial, and practical issues. In our prior discussion of the sale of business, we reviewed the following issues – most or all of which apply to merging medical practices (though many additional terms will likely need to be addressed). Identifying what items are being sold and what is not being sold. The “professional and personal obligations of each party to the sale” “The terms of the sale. This includes the consideration and purchase price. It includes the time for the buyer to obtain financing or the terms of any payments if the seller is giving the buyer time to pay for the medical practice. The agreement of sale should make clear what happens if the buyer can’t get the necessary financing or defaults on any payments.” The remedies on default including the right to demand arbitration Identifying any representations of either medical practice The licenses, credentials, education, and qualifications of each physician That there “are no current complaints pending or disciplinary action with the state and local medical boards” The terms of the integration topics we reviewed in our general article on this topic – integration planning, stakeholder communication, cultural compatibility, integration planning, human resources integration, and performance management. The healthcare M&A lawyers should also review the following topics with their clients: Drug Enforcement Agency (DEA) requirements. “Normally, the DEA will not allow controlled substances to be sold with the practice. The seller should understand its duties regarding drugs in its possession when the practice is sold. The buyer normally needs to make new arrangements regarding the acquisition of new controlled medications.” Insurance issues. The agreement of insurance should determine which insurance coverage applies, from which medical practice, for medical malpractice claims, general liability claims, workers’ compensation claims, and other claims that may be filed after the date of sale. New insurance policies may be required. Liabilities and warranties. The buyers in acquisition and sales and both buyers in mergers will normally want representations as to any liabilities and warranties as to their status. Non-compete clauses. Physicians who buy new practices generally do not want the selling physicians to compete with them. Non-compete clauses should be in writing and definite as to their terms. California specifically forbids non-compete clauses. The legality of these clauses in other states will vary. Additional legal compliance issues Experienced healthcare lawyers also help medical practices that are obtaining, selling, or merging medical practices with: Determining the value of a medical practice. We will discuss this issue in a separate article. Any open contracts Employee and staff retention and relations Patient list and patient rights requirements Many other legal issues With proper planning and analysis, “Sellers can get the right price for their practice, satisfy their legal requirements to their patients, and feel confident that the sale won’t have any after-shocks. Buyers, with the use of skilled lawyers, will be able to focus on their new medical practice while understanding their medical and legal obligations.” Healthcare compliance issues involved with the purchase, sale, and merger of medical practices Medical practices that buy other practices or merge with other practices need to work with lawyers who understand the healthcare compliance issues for medical practices. Some of these issues our healthcare lawyers will review include: Healthcare compliance laws. In addition to Stark Law and the AKS, medical practices need to understand all other federal and state laws that regulate medical care and their specific types of practice. One important law that needs to be reviewed is the Health Insurance Portability and Accountability Act (HIPAA) which requires that medical practitioners comply with privacy and security requirements for electronic health records. There are also state privacy laws that must be reviewed. Additional healthcare compliance issues include how to bill public healthcare programs and private insurers, the False Claims Act, FTC compliance issues, FDA compliance issues, and many other compliance requirements. Patient notification. Patients have the right to know about any sales or mergers that involve their doctors. Patients should be informed of their HIPAA rights. Our lawyers will review the need to obtain authorizations from the patients to transfer medical records from one medical practice to another. Patients should also be informed about the new medical practice so the patients can decide whether they want to be treated by the new medical practice or be treated by a different medical practice. We’ll help draft these medical letters so the practices don’t put undue pressure on a patient. Medical records. The agreement of sale should make clear who owns the medical records after the sale and the requirements for keeping those records. Billing and coding. The medical practices need to review their billing codes and how bills are submitted so that the codes comply with the False Claims Act or any state false claims acts. Insurance carriers and medical programs. The Agreement of Sale should “also review which insurance carriers and medical programs the medical practice works with, how quickly and how much of the bills those insurance carriers and programs pay and any issues that have been raised in the past or currently regarding payment.” The insurance carriers, Medicare, Medicaid, and other payors should be notified about the new medical practice arrangement so the payors know who can submit bills and to whom payments should be made. License requirements. The medical licenses and qualifications of each doctor should be analyzed. Financial records and tax records. Due diligence requires reviewing these records for at least the prior three years. There should also be a review of “any withholding taxes that may be due, unpaid vacation pay, the status of any worker’s compensation and unemployment compensation accounts, business and medical insurance, and many other financial issues.” The medical practices should also review their relationships with their nurses, technicians, and other medical and non-medical staff so these personnel understand their roles in the new practice and so that the practices can keep the staff the practices need on their payroll. Contractors and vendors should also be informed about the new medical practice. When leaving a medical practice, can you take patient records? When leaving a medical practice, can you take patient records? Experienced legal counsel helps medical practices review the federal and state laws that regulate the practice of medicine along with the various requirements to keep patients informed. When a doctor or medical practice is considering buying or merging with another practice, our skilled healthcare lawyers will review your goals, the legal and healthcare compliance requirements, and the rights and remedies of the medical practices after the sale or merger is completed. We’ll help negotiate the proper legal documents and with the preparation of compliance plans.
February 8, 2024
Intellectual Property
Laughing in the Face of Copyright: The Unsettling Case of AI-Generated Comedy and Digital Immortality
George Carlin had quite the career. His seven dirty words routine was the centerpiece of litigation about the government’s power to censor indecent material on the airwaves that went up to the Supreme Court. He won awards for his comedy specials and albums (full disclosure: Jammin’ in New York is a personal favorite). He appeared in movies like The Prince of Tides, Bill & Ted’s Excellent Adventure, Cars (where he voiced Fillmore), and was the conductor on Shining Time Station. Carlin passed away in 2008, and he is now at the center of a new lawsuit raising questions about whether AI should be used to “resurrect” deceased artists, who controls the legacy of deceased artists, and who can profit from their “resurrection.” On January 9, 2024, Dudesy LLC (“Dudesy”) released an hour-long video entitled “George Carlin: I’m Glad I’m Dead (2024). The introductory voiceover explained that Dudesy, using some type of AI, fed George Carlin’s standup routines into the training database for the AI; the AI was then used to create the video. The introductory voice further stated, “I listened to all of George Carlin’s material and did my best to imitate his voice, cadence, and attitude, as well as the subject matter I think would have interested him today.” The video quickly made the rounds on social media. By January 25, Carlin’s estate, which had nothing to do with the video, filed suit against Dudesy and the individuals associated with the making of the video. The lawsuit, filed in federal district court in Los Angeles, asserts three claims: violation of the common law right of publicity, violation of the statutory right of publicity, and copyright infringement. The first two claims are based on the unauthorized use of Carlin’s name, voice, and likeness in the video. The third claim is based on the copying allegedly occurring when Carlin’s standup routines were fed into the AI to create the video. The lawsuit claims that Dudesy saw the video as a profit center, not just a way to make people laugh. Dudesy promoted the video with social media posts providing links to its online store and Patreon page from which subscribers can purchase monthly subscriptions. And a YouTube channel associated with Dudesy that posted videos relating to the hour-long special with the same hyperlinks and advertisements. Further, in anticipation of a likely claim that the video was a “fair use,” the lawsuit alleges that the video “has no comedic or creative value absent its self-proclaimed connection with George Carlin. It does not, for example, satirize Carlin as a performer or offer an independent critique of society.” In the wake of the filing of the lawsuit, Dudesy now claims that the video was not written by AI but instead by Chad Kultgen. Mr. Kultgen, together with Will Sasso, hosts the Dudesy podcast—a podcast that was used to promote the video. If it is true that a human wrote the script for the video, that might negate the copyright infringement claim insofar as it relates to the use of AI, but it still leaves Dudesy facing the California right of publicity claims for their efforts to “resurrect” George Carlin. The question of who, if anyone, has the right to “resurrect” a performer or personality depends on state law; slightly less than half of the states recognize a post-mortem right of publicity. The case neatly crystallizes the issues surrounding AI as it impacts the legacies of performers and other celebrities and touches on similar issues that were at the core of last year’s Hollywood strikes. Thirty years after it came out, the movie Jurassic Park remains prescient. And Dr. Malcom’s indictment of John Hammond and InGen applies with equal force to the burgeoning use of AI: “your scientists were so preoccupied with whether or not they could that they didn’t stop to think if they should.” If you need to talk with someone about whether or not you should, contact me or one of my intellectual property colleagues at Offit Kurman.
February 7, 2024
Construction
Avoiding Preconstruction Pitfalls (from the Contractor's Point of View)
It has become increasingly popular for private commercial construction projects to engage the contractor during preconstruction design early in the project. By doing so, the owner’s team and design professionals are able to work collaboratively and receive valuable feedback on key project details, such as constructability, schedule, early cost estimates, projected budgets, long lead items, and value engineering. This is true for any project delivery system that uses design assistance, delegated design, is a true design-build, is a CM at risk or CM as an advisor, or is a version of an integrated project delivery. But what happens if the owner tries to call an audible at the line of scrimmage and seeks to replace the contractor right before the construction phase begins? And what other pitfalls should a contractor be wary of if involved in preconstruction services? Precon, Not Freecon Some owners ask that preconstruction services be offered for free as a value-added customer service. Each project should be considered on a case-by-case basis. There might be projects and business reasons why that makes sense. Typically, however, it is best to avoid giving “freecon.” The preconstruction work is a valuable service, and there can be risk associated with it. Proper business relations should clearly define the scope, rights, and obligations regarding the preconstruction services and have an associated fee, typically done on an hourly or stipulated sum basis. Land Development, Design Assist, Delegated Design, or Design Build? The role, responsibilities, and scope of preconstruction services should be clearly identified in a contract so that there is no confusion about the exact services and risks being undertaken. Sometimes (but rarely), the contractor will assist the owner with land development, acquisition, usage, and zoning. Usually, however, the contractor is not involved in land development activities but instead will only provide services in relation to the preconstruction itself. If the contractor is only assisting and commenting on the design (design assist), that limited scope should be clearly stated. If any scope is delegated design, where the contractor will be responsible for furnishing the actual sealed/stamped design, or perhaps the contractor is responsible for a performance specification, it should be clearly stated. Furnishing of design should always be done by properly licensed professionals per any statutory laws. Intellectual Property Ownership of the Design One of the best approaches to protect the contractor from unpleasant surprises when furnishing any design is for the contractor to expressly remain the owner of the design intellectual property. If the intellectual property rights to the design will be assigned, it should be later in the project or at the end of the project. This ensures that the owner cannot receive a discounted design, remove the contractor, and then continue with the project, still using the original contractor’s design work. Similarly, whether furnishing the design or merely assisting, termination for convenience and “buyout” clauses help to protect the contractor from being unceremoniously removed from the project. Lastly, if furnishing the design, the final seal/stamp on the design should be the last thing and done very close in time with the submission of the design to the AHJ and the buyout/procurement phase. Unintentionally having a sealed/stamped design floating around without any future involvement in the project tends to lead to issues down the road. Clarifying the Guaranteed Maximum Price If using a GMP, it should be clearly defined in regards to evolving, unfinished design development. Also, it should be clear whether certain work or potential work is included in the GMP. Issues can arise when owners believe that the GMP includes the reasonably inferable, developing design (e.g., incomplete lighting package, which is often developed at the end of design), but the contractor believes that the incomplete design was not included in the GMP. For developing design, any placeholders, assumptions, budgets, qualifications, and exclusions should be clearly noted, and it should be clear how they relate to the GMP. Similarly, if using a GMP, there should always be a contingency. The contingency should be clearly defined both in terms of use and process, so that everyone is in agreement as to the type of work, issues, scope, and snafus that allow for application of the contingency. It is further recommended that the savings on the contingency be split in an agreed upon percentage ratio. By allowing the contractor to participate in the savings, it incentivizes the project to come in on budget and schedule. Assessing the risks and properly contracting for preconstruction services can be a complicated area of construction law. Best practice is to engage trusted counsel, insurance consultants, and other professionals. Offit Kurman construction attorneys are available to advise and counsel contractors, design-builders, CMs, design professionals, developers, and specialty trades on contract matters and project disputes.
February 7, 2024
Intellectual Property
Recipes, Trademarks and Décor
Feasting on the Lessons of Il Mulino’s Intellectual Property Battle When thinking about restaurants, most people think of a savory meal in a pleasant setting. I think about that, too, but more often than not, my thoughts turn to a restaurant’s intellectual property and what can be protected (a danger of the trade, I suppose). Restaurant names can be protected as trademarks, recipes as trade secrets, and the plating of an entrée may be protected by a design patent. A recent case involving the well-known Italian restaurant Il Mulino touches on many of these aspects of protection. Still, perhaps most interestingly, that case found that the look of the restaurant’s interior, its trade dress, is protectable. According to the court, this case is the latest in a long-running dispute over intellectual property relating to the Il Mulino restaurants. Defendants had been involved in opening and operating Il Mulino restaurants, an enterprise that involved various entities; one entity owned the intellectual property and licensed it to various locations. In 2020, some of the Il Mulino entities filed for bankruptcy. As a result of the bankruptcy, plaintiffs acquired those entities, including the entity that owned the intellectual property. The defendants opened Il Mulino Tribeca in 2018, and the location closed in September 2023. On September 15, 2023, the defendants opened a new Italian restaurant in the same space as Il Mulino Tribeca. The lawsuit was filed in November, with plaintiffs seeking to preliminarily enjoin the defendants from using proprietary recipes, certain restaurant names, the trade dress of Il Mulino Tribeca, a former Il Mulino location, and certain property from Il Mulino Tribeca in their new restaurant. Each claim warrants review, particularly the trade dress claim. The Trade Dress of Il Mulino Tribeca The court explained that the Plaintiffs defined the trade dress of Il Mulino Tribeca as consisting of the following elements: an art collection of black and white photographs arranged in a perfectly symmetrical design, covering almost one entire interior wall of the restaurant; custom artwork commissioned for Il Mulino Tribeca’s back wall that evokes the restaurant’s Tribeca home by referring to its location “Below Canal St[reet]”; (3) white-washed brick and high ceilings painted matte black; and unique, hand-blown glass pendants hanging near the entrance of the restaurant. All of the above appear in the Defendants’ new restaurant. The court found that the above definition was sufficiently precise and that the claimed trade dress was not functional. According to the court, “Il Mulino Tribeca’s décor plainly does not affect a customer’s “use or purpose” of the restaurant nor the cost or quality thereof. A customer could just as easily enjoy veal parmigiana in the absence of glass pendants or white-washed brick.” The court also pointed out that the trade dress analysis focuses on the trade dress as a whole, not particular elements that may be used by competitors. Finding that the trade dress was also inherently distinctive since it did not convey any information about the restaurant’s services or cuisine, the court concluded that the claimed trade dress was entitled to protection. Since the trade dress was entitled to protection, the court next determined whether there was a likelihood of consumer confusion. The court found that there was a likelihood of confusion even though the claimed trade dress was weak because there was little evidence that consumers associated the trade dress with Il Mulino. In reaching its finding, the court pointed out that the trade dress in the two restaurants was very similar (not surprising since the new restaurant opened in the exact location as the old restaurant and since social media posts for the new restaurant used images that seemed to draw on social media posts for Il Mulino Tribeca); that both restaurants were Italian; and that defendants seemed to be trying to capitalize on the reputation of Il Mulino. On that basis, the court found a likelihood of consumer confusion and preliminarily enjoined the defendants’ use of the claimed trade dress. Infringement of the IL MULINO Trademark The plaintiffs did not fare so well on their other claims. They claimed that the new restaurant’s name, Il Giglio, infringed on the IL MULINO trademark. Apparently, a prior restaurant affiliated with Il Mulino had operated under the name Il Giglio, but the court did not think consumers would associate the new Il Giglio with the old one. Likewise, the court pointed out that Il Mulino and the new Il Giglio used different fonts for their names and that “Mulino” and “Giglio” sound different and have different meanings. Proprietary Recipes The court seemed prepared to protect any of the plaintiffs’ proprietary recipes that the defendants might be using. However, in the court’s eyes, plaintiffs did not present sufficient evidence that the defendants were doing so—the claims were based mostly on the review of a menu and photos of similar-looking preparations of entrees. The court pointed out that neither party presented witnesses at the preliminary injunction hearing, and the plaintiffs did not seek expedited discovery before moving for a preliminary injunction. As a result, the evidence relating to the improper use of the plaintiffs’ proprietary recipes was insufficient. Interestingly, the court raised the possibility of a confusion-based theory as to the plating of dishes (particularly Il Mulino’s branzino) but did not pursue it since plaintiffs failed to develop it. Personal Property Finally, the court declined to enjoin the defendants’ use of certain personal property allegedly belonging to plaintiffs, such as tableware and tens of thousands of dollars of alcohol. According to the court, this personal property was not part of the trade dress, and plaintiffs could be compensated for the use of this property if its use was not enjoined. The court’s decision is a good example of the many different types of intellectual property a restaurant may have and how willing a court will be to protect that intellectual property. If you have questions about protecting your restaurant’s intellectual property or about someone who might be using your restaurant’s intellectual property without authorization, contact me or one of my intellectual property colleagues at Offit Kurman.
February 2, 2024
Healthcare
Key Considerations When Merging or Acquiring A Medical Practice – Part One
Merging or buying a healthcare practice or clinic is complicated. You need to understand the legal compliance issues, the medical compliance issues, the financial concerns, and many practical issues. Experienced healthcare lawyers can help you understand these requirements. Healthcare lawyers can explain the pros and cons of the various issues and help you anticipate all the things that may go wrong as well as the things that should go right. Skilled healthcare lawyers will prepare and negotiate the contracts that are necessary to specify the terms of the merger or buyout. In this article, we will begin the discussion of the overall concerns that doctors need to address. In subsequent articles, we will focus on some of the more complex issues such as how to value a business, Stark and Anti-Kickback requirements, and other legal compliance issues. We’ll also discuss how a management services organization (MSO) can help provide the new medical practice the business services it needs so the practice can focus on providing medical services to their patients. Practical considerations in merging or buying a medical practice Some of the issues that affect a merger or acquisition of a medical practice are: What type of medicine are your physicians authorized to practice? What states can you practice in? Are you buying a practice or merging the practice with your current practice? Do you have a letter of intent? What part of the practice is being sold? Is the whole practice being sold? Are just the assets being sold? Who will be responsible for the liabilities of the business? What will be the role of each of the physicians from the current practices in the new practice? Who has the responsibility for preparing the agreement of sale or the terms of the merger? What will be the payment terms? Will there be a lump sum payment or a buyout? Strategic planning issues when merging or acquiring medical practices Before considering the buyout or merger, physician practices need to review many different issues with their healthcare lawyer. Some of these issues include the following: Why do you want to buy, merge, or sell your medical practice? Possible purposes include expanding the medical services you can provide, increasing marketing share, expanding the territory where you practice, and other reasons. What regulatory and compliance issues do you need to review? Some of these issues include complying with federal and state anti-referral laws, licensing, accreditation, privacy laws, and laws requiring notice to patients about the new business arrangement. There are also laws that need to be reviewed about the corporate practice of medicine, the type of supervision required of the medical staff, and many other factors. Why do you need a legal and financial due diligence review? Medical practices that wish to acquire a medical practice or merge their medical practice need to conduct due diligence reviews about the legal, financial, and operational aspects of both organizations. These reviews can inform your practice of any current or likely future claims or issues that you may be assuming if you buy or acquire another medical practice. The review should also disclose any legal, financial, or regulatory challenges that need to be addressed. Experienced healthcare counsel can explain how to conduct due diligence, what issues should be reviewed, and how to handle or negotiate any issues that arise. Another key consideration is which is the bigger practice. The bigger practice will normally want to control the terms of any merger. HEALTHCARE M&A: DO’S AND DON’TS OF BUYING OR SELLING A MEDICAL PRACTICE Buying and selling a medical practice is much different than selling a commercial business. Due diligence must address special healthcare legal compliance issues, licensing requirements, patient […] Integration Planning Each medical practice must have a detailed integration plan that outlines the timeline, tasks, and responsibilities for each phase of the merger or acquisition. The integration plan should identify key leadership roles and responsibilities for the integrated organization – including medical roles and business roles. Stakeholder Communication The parties to the merger or acquisition should develop a comprehensive communication plan for employees, patients, vendors, and other stakeholders. These communications should address such issues as the reasons behind the merger, the benefits, and the potential changes in services. There are laws that require that patients be notified of their rights to keep the same doctors or choose other physicians outside of the new medical practice – and their rights to take possession of their medical records. Cultural Compatibility A key factor that helps determine whether the new practice (whether obtained by purchase or a merger) is culturally compatible. Some of the issues that should be reviewed are the work cultures of each medical practice, the financial values of the practices, and how the work cultures may affect the integration process. Information technology (IT) and Data Integration Virtually every medical practice has hardware and software to manage their business. The practices should have electronic health records (EHRs) and data management systems. There are technical concerns that should be addressed to make the integration of the IT systems, including access to patient records, as seamless as possible. There will also be HIPAA and possibly other privacy issues that need to be reviewed in order to properly integrate the EHRs. Human Resources Integration The buyout or merger of medical practices requires reviewing the credentials and skills of the healthcare providers and healthcare staff. Some of the issues that should be reviewed on a personnel level include staffing redundancies, compensation, benefits, and cultural integration. The new medical practice will want to retain key talent and manage any necessary staff transitions after the merger or buyout. Performance Measurements The new practice should create metrics to track the success of the merger or acquisition. The metrics should monitor the financial, operational, and clinical performance of the new venture to ensure that objectives are being met. The metrics and evaluation should be ongoing. Adjustments should be made as needed. The strategies should be refined when necessary. The status of the facilities and the equipment of both practices should be reviewed. Some facilities and equipment may need to be sold. Some can be combined. The Stark and AKS laws need to be reviewed to help ensure there are no violations of these anti-referral laws. Resources should be consolidated or optimized when necessary. A critical performance measurement involves the quality and continuity of patient care. During the transition to the new practice, patient care should not be disrupted. Ideally, patients will be happy with the new medical practice. A major goal of the buyout or merger is aligning the clinical practices, treatment protocols, and patient care standards. These practices, protocols, and standards need to be assessed. It’s a good idea – before the acquisition or merger, to obtain input from all of the medical staff members. THE NEW STARK AND AKS LAWS Physicians and medical practices should review their MSO and referral arrangements to help comply with the new Stark Law and AKS changes. Why do medical practices consider buying, selling, or merging with a medical practice? The reasons for wanting to acquire or merge a medical practice include the following: Increased leverage with paying patients Sharing overhead costs and other operational costs Merging the brand image of the practices The potential for growth Diversifying a practice within the limits of the original practice areas The senior leadership of each medical practice should have a clear vision of why the leadership wants to buy, sell, or merge a medical practice. The practices need to ask – “Why do we want to change our medical practice?” When conducting due diligence, the medical practices should understand on a daily basis what bills will be due, should look for any conflicts of interest, and should examine the online reputation of each medical practice. The North Carolina Medical Society recommends that medical practices consider the following when buying, selling, or merging their medical practice. Consider that much of the revenue of a medical practice comes from the doctor’s knowledge, skills, personality, and reputation. These features are generally not transferrable. The patient list generally should be valuable. Doctors may consider buying, selling, or merging their medical practice to obtain better professional support, more stability, the prospect of internal referrals from within the new organization, and a better work-life balance. The doctors should recognize that the other physicians in the practice may have different interests. While one doctor may want to retire, the other doctors may want to continue practicing. Generally, the buyers of medical practices are: New physicians who want to purchase a seller’s medical practice A small medical practice that wants to grow – in the same or a related specialty A larger medical practice that wants to acquire new patients, decrease overhead expenses, or move into a new geographic location A large specialty group entering a new market, for example; kidney dialysis, radiation oncology, or anesthesia A hospital or healthcare system A physician wants to relocate due to personal or professional reasons The types of medical practices that may be sold include: Private practices Group practices Emergency practices A broad range of specialty practices Direct family care practices Hospital-based practices HMOs Urgent care centers There are many pros and cons to acquiring a new medical practice or merging with an existing practice. Once a practice has decided to buy or merge with another practice, both practices should speak with experienced healthcare counsel who can explain the legal and healthcare compliance issues along with many financial, medical, and practical considerations. The more legal, medical, business, compatibility, and performance issues that are reviewed at the start, the more likely the new practice is likely to be successful.
February 1, 2024
Elder Law and Advocacy
Aging in Place: NYFSC’s Home Sharing Program Offers a Unique Housing Solution for NYC’s Aging Population
The housing crunch in New York City is real. Exorbitant rents and climbing interest rates have led many further into debt, all but ruled out homeownership for most, and forced countless seniors to reconsider their plan to “age in place” in the space they have called home for decades. New York City’s Foundation for Senior Citizens (“NYFSC”) may have a solution in its established “Home Sharing Program.” What Is It?: NYFSC’s free Home Sharing Program has been in existence for the last 30 years. Its mission is to help link senior or adult “hosts” with unused private spaces in their homes or apartments with appropriate adult “guests.” The hosts and guests share their abode and the related expenses and perhaps forge a friendship along the way. The only age requirement is that both must be over the age of 18, and either the guest or host must be 60 or older. How Does It Work?: The NYC program (and similar programs in other cities) has a comprehensive screening process to match hosts with the right guests. Social workers provide a formal intake to screen applicants to consider lifestyle, work schedule, and collective needs for socialization. The host and the guest must have three solid professional recommendations and endorsements to ensure they are suitable candidates. The housing coordinators also assist with negotiating home-sharing and financial specifics to ensure the arrangement works for both parties. What are the Benefits?: Home or apartment sharing can provide homeowners and tenants additional income by renting out spare rooms and space. This is particularly helpful in expensive cities like NYC with high housing costs. The cost of long-term care is multiplying each year. Likewise, the guest’s contribution can ensure that a senior who no longer can afford to reside in their home can remain now that the guest is sharing the carrying charges of the home or apartment. Similarly, guests who find themselves out of options due to unaffordable rents might be able to find the perfect housing arrangement in a neighborhood that they thought was out of their reach. In addition to the obvious financial benefits, coordinated housing can foster a sense of community by connecting people who may not have otherwise interacted. When they work well, such arrangements can lead to the formation of relationships and mutual support between hosts and guests. This is particularly useful for seniors who tend to become more isolated as they age. Beyond companionship, there is a real opportunity, particularly in NYC, for cultural exchange and a richer understanding of different lifestyles and backgrounds, which can, in turn, contribute to a more diverse and interconnected community. In addition to building community and an exchange of cultures, an intergenerational arrangement may provide both parties the opportunity to give and receive advice from someone who is further on in life. Learn More: Certainly, this option is not for everyone, but perhaps it is an option that might work for those who wish to age in place as they age. For more information about this program or similar programs in your town or city, contact your local county office on Aging.
January 31, 2024
Estates and Trusts
Five Biggest Mistakes of Estate Planning
#5 - Inequity The fifth biggest mistake of estate planning is presuming to treat everyone equally, equaled only by the error of presuming to treat your loved ones differently because you don’t think they need anything or, in the other extreme, that they don’t deserve anything. Perhaps you’ve given more to one in life and intend to balance things in death. Unless you intend to include a detailed accounting (and even then?), I urge you to reconsider in this regard. Similarly, choosing who is to serve in what role (attorney-in-fact under a power of attorney, executor, or trustee, for instance) based on perceived fairness or not wanting to seem inequitable is a mistake. Have a reason, trust your judgment, and choose someone based on your sound judgment (for instance, she’s the oldest; he’s a lawyer; she’s the only one who hasn’t done time… these are all good reasons). Worse, appointing two co-fiduciaries (i.e., co-attorneys-in-fact, co-executors, or co-trustees, might be the biggest mistake of all - especially if you refuse to provide the two co-equals with a means of breaking a deadlock. If there are two empowered to make decisions and they don’t agree on something, if you’ve not authorized a coin flip or other means to break the tie (rock, paper, scissors, perhaps?!), their only recourse is to the courts. Don’t do it…don’t name two co-equal decision-makers to manage your affairs when you die. If you simply can’t help yourself, at least give them a fighting chance and tell them what to do when they disagree (if considering a coin flip, I suggest making it at least two out of three!). #4 – Sentimentality The fourth biggest mistake of estate planning is presuming one or more of your loved ones “wouldn’t want” something of yours, or alternatively, planning based on presumed values ascribed to the “objects of your bounty.” It is difficult to nearly impossible to know accurately what one of your kids might value over another, and you should take no offense by loved ones’ avoiding the subject altogether or making statements to the effect that they don’t want anything of yours. Everyone deals with death and the loss or thoughts of loss of a loved one in one’s own way. That said, it may, of course, be true that they don’t want your stuff; your style and tastes may be embarrassingly outdated. It may also be true that they don’t need anything, have the space for things they might want, or might not want to be perceived as thoughtless or greedy by asking for something of yours, for instance, before you are even in the ground! Rather than take offense or think, “How dare they!” consider over-sharing and discussing more with them, not less. Force them to face truths none of us generally care to acknowledge — first and foremost of which, you are going to die! Hate to be the one to burst that bubble for you, but it happens to all of us eventually. Too often, I see families left squabbling over misperceived intentions and failing/refusing to face these avoidable issues head-on, which brings us to the third biggest estate planning mistake. #3 – Communication The third biggest mistake of estate planning is failing to involve your beneficiaries in the planning. You need not give them a say in your plans necessarily or even seek their input per se, at least not everyone’s!, but that doesn’t mean you shouldn’t involve them at all, even if only to communicate that you’ve made a plan and where/how it can be found. Those who intend to play a role later should be consulted. The executor (or “personal representative”), who will oversee the administration of your probate estate; the trustee, who you will count on to manage assets you’ve opted to have held/protected from creditors and managed for the benefit of those you may not completely trust to manage them effectively for themselves (either because of their immaturity, addictions, or other special needs); and especially guardians of any minor children you might leave behind…these should all be consulted and confirmed before being named and saddled with such responsibilities. After all, they may not want or be able to handle the responsibility and/or their own life circumstances may not be fully known to you and may not make them the best choice. To minimize the risk of mistaken choices in this regard, don’t compound the mistake by failing to name a backup and a backup to the backup and also setting forth a means of picking the person you would want to be next in line should all else fail. #2 – Indecision The second biggest mistake of estate planning is changing your plans. This one comprises a whole series of mistakes. Changing one’s mind is ok, of course. The timing of a revised estate plan is one of the primary factors when litigation is later considered. Doing so after declining mental health, shortly before or after major life events, just prior to death (on one’s deathbed!), and/or with the involvement or input of less than all of one’s beneficiaries virtually assures legal wrangling after you’re gone, or, at the very least, likely breeds ill will among your loved ones in ways you can’t possibly fully anticipate. Compounding this mistake with less than full and open communication about your planning efforts (refer back to #3!) frequently sparks resentment and even hostility when you yourself have set different and differing expectations among those to whom you intend to benefit. If you opt to share your planning documents, do so with all of your beneficiaries. If you opt to make a change, be sure to communicate any changes to everyone, preferably with very specifically communicated reasons why. Oftentimes, in addition to breeding resentment for each other, change, especially uncommunicated changes to one’s estate plan, leaves your loved ones resenting you, even when they are the ones benefiting from the change! #1 – Inertia The number one biggest mistake of estate planning is not to plan. A favorite lyric from a group I’ve enjoyed since the 80s goes as follows: “If you choose not to decide, you still have made a choice.” Not planning, i.e., not creating a will or other document directing the disposition of assets upon your death, is the equivalent of deciding you want your loved ones to experience the costly, time-consuming, living hell that can often be the result of doing nothing. Don’t let inertia be your guide. Have a plan… execute the plan. Do it now; tomorrow may never come. Carpe diem!
January 29, 2024
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