M&A Nuggets
M&A Nugget: Licenses – A Potential Holdup
Many target companies own a license that is required to engage in business. To the buyer, the ability to use the license is therefore crucial. Some licenses can be transferred, but most licenses cannot, in which case the buyer is required to apply for a new license. This important part of getting a deal done is often mismanaged. The keys to assure that the license process does not unduly delay closing are preparation, timing, and smart use of resources. On the preparation end, a buyer needs to do its homework to review the applicable rules and regulations governing the license. These rules often change, and it therefore is important to make sure that the most recent rules are reviewed. As for timing, applications to transfer a license or obtain a new license must be reviewed by the applicable government agency, which is often understaffed and underfunded. The license application should be made early enough to allow the government agency more than enough time to review and approve the license. Last, in terms of smart use of resources, it is often wise to engage a local expert who deals with the particular kind of license on a regular basis. By taking the above steps, the buyer and seller can make sure that the required license is not the holdup to closing.
August 2, 2023
Family Law
Divorce in New Jersey: Trial
Originally posted on 3/15/2019, no content changes. If you and your spouse have been unable to settle your case between yourselves and none of the settlement alternatives described previously have been successful, it may be necessary to prepare and submit your case for trial before a Judge. The trial of a case has been described by some as being analogous to an iceberg. The tip (or, in this case, the trial itself) is a very, very small portion of the overall process. The remaining 90% is below the surface and is often not seen. A trial involves tedious and time-consuming preparation of witnesses, the preparation of exhibits, marking of evidence and Subpoenaing of witnesses. If your case is going to trial, be absolutely certain that you have reserved enough time from your personal and work schedule to meet with your attorney to prepare the case. Similarly, be certain that your attorney has scheduled adequate time to meet with you, prepare your testimony, be certain that you have all of the evidence and exhibits and that you have a full understanding of the trial process. Any documents which are not current must be updated. Any documents which are not official or certified copies must be replaced by official or certified documents which can be properly moved into evidence. Any witnesses who are going to be utilized must be interviewed and prepared. Any documents or evidence which they will rely upon in their testimony must be organized. Very often, it is extremely important to develop charts or graphs showing the flow of funds into or out of accounts, fluctuations in income, or even simply plotting the growth or loss in value of various assets. There is no such thing as over-preparing for trial. On the other hand, many trials are lost by a lack of preparation. Once the trial begins, there is an orderly, defined and rigid process which is followed. Each attorney will give their opening statements to the Court. In the opening statement, they will outline the case and outline for the Court what they intend to prove and how they intend to prove it. Each witness will then be called to the witness stand and subjected to a direct examination. Every point must be made by asking a question and getting a specific answer. It is a tedious and detailed process. No witness can simply give a long narrative to the Judge. That narrative must be broken down into specific questions with specific answers. At the conclusion of direct examination, every witness will be subject to cross-examination by the opposing attorney. Cross-examination is designed to show conflicts in the testimony, to show a bias or lack of credibility in the witness and to generally undermine the witness's testimony or credibility. Cross-examination is not a pleasant process, and you should be sure that your attorney has fully and adequately prepared you for a cross-examination by subjecting you to a mock cross examination prior to the trial. Remember that when submitting evidence to the Court, your attorney is bound by the Rules of Evidence. Things which are hearsay, which are not within the first-hand knowledge of witness or otherwise do not comply with the Rules of Evidence, are of no value at the time of trial. At the conclusion of the trial, your attorney will submit a lengthy and usually written closing argument and summation to the Court. This document will outline and summarize what has been presented into evidence, what conclusions we want the Court to draw from the evidence and citations to the law which support such conclusions. Following the Judge's decision, either you or your spouse will have the right to appeal. However, the appeal of the case is not simply a "second bite of the apple." There are very limited and narrow grounds for an appeal. You must show that the Judge's findings were not only in error but were "arbitrary and capricious" or that the Judge erred in the interpretation or application of the law. Trials are difficult and expensive and should be considered only when absolutely necessary. There are, however, cases in which the issues are so significant or complex that they can only be resolved by a trial. If that is your case, prepare, prepare, prepare and then prepare some more! For more information on this topic, please contact Megan Smith at msmith@offitkurman.com.
August 1, 2023
M&A Nuggets
M&A Nuggets: Fair Notice
This nugget covers one of the mundane but important procedural aspects of a purchase agreement, called “Notice”. Every purchase agreement should contain a paragraph describing the methods by which written notice of a matter must be given. There may be important matters that the buyer/seller needs to notify the other about. For example, notification of the buyer’s decision to extend the closing date or the buyer’s claim for indemnification after the closing. It is therefore important that the method for providing notice be reliable enough to assure that the notice will be received and that the receiver of the notice will have enough time to respond. Boilerplate notice paragraphs often allow notice to be given by several methods, including hand-delivery, overnight mail, certified mail, fax transmission and e-mail transmission. In my opinion, neither certified mail nor fax transmission should be used as a delivery method. Certified mail, even if restricted to delivery of a specified person, is often either not retrieved or signed for by someone other than the designated person. Fax communications are used much less often than before e-mail existed and are often directed to a general fax line that may not make its way to the intended recipient. My preference is to limit the modes of delivery of the written notice to hand-delivery or overnight mail sent by a national recognized courier, along with, and not in lieu of, e-mail transmission. By being particular in drafting the notice paragraph, neither the purchaser nor the seller will risk missing an important notification from the other.
July 31, 2023
Business
Over 50 Years of Law Practice Tips
Originally posted on 08/12/2020, content updated on 07/27/2023 Having been fortunate to serve clients on every continent other than Antarctica in transactions of every size and in every kind of business and having been privileged to have mentored many newer lawyers, over 50 years of experience as an international and domestic business lawyer has taught me many things. I have compiled a list of many of the lessons I have passed on to others over 50 years, and this article sets out the latest iteration of my tips for others to consider. If something does not make sense, it usually does not make sense for a reason. Finding that reason is not always easy. Ask questions and continue to ask questions, just like peeling back the layers of an onion. Make statements in the form of a question. Focus your thinking by diagraming the deal or what happened or was supposed to have happened. Understand the underlying economics of a particular matter. Learn financial statements and how each statement impacts the other statements. Do your own income tax return at least once to understand the schematic of the Internal Revenue Code. Research the income tax regulations on a specific matter at least once in your career. Framing a question properly will often suggest the answer or options. Ask if anyone in the firm has a file or precedent for your legal issue. Whatever you say in writing, whether in an email, fax, letter, or otherwise, can and will be used against you and will be distorted. Re-read calmly whatever you write before sending it and ask yourself if you really want to say whatever you wrote. Ask how it would look if whatever you write appears on the front page of your favorite newspaper. It may be best to use bcc’s and not cc’ s to clients on letters or emails to opposing lawyers, or better yet, forward what you send to avoid a bcc recipient from replying to people who do not know who was bcc’d and to preclude a waiver of the attorney-client privilege. No typo’s or typos — clients and adversaries will find them! Use spellcheck. Proofread all documents even after using spellcheck. Spellcheck is not a substitute for proofreading. Know the differences between:effect-affect principal-principle your- you’ re its-it’s lose-loose No split infinitives. Avoid the passive voice. The ultimate reader of your email, fax or document is a judge or arbitrator. Listen to the client or other side and ask questions. Hear and process what is said, and what is not said. Ask questions! It’s best if all questions have a purpose. Silence your cell phone and other devices before a meeting starts; preferably, put the device away and help cause everyone in the meeting to focus on the agenda. Have an agenda for each meeting and stick to it. Start meetings on time. Those who miss the start will learn not to do that again, especially if you bar them from attending the meeting if they are late. Do not multitask during a meeting or call. If you do, you cannot be listening, and you are being rude to the person you are talking to. Better to end the call or meeting or not have it. There is no such thing as ” boilerplate.” Pay attention to the so-called “boilerplate” provisions in contracts that generally appear in a “General” or “Miscellaneous” final section of a contract. The other side often (1) may consider those clauses to be “boilerplate” and in drafting or reading them often pay less attention to them and (2) may be tired or bored by the time they get to read those provisions if the other side reads a draft starting with page 1 straight through to its conclusion. The agreement you are using as a model is the end product of negotiation in another deal. Do not copy someone else’s mistakes. Start with the basics of legal principles and definitions, including looking at Black Law’s Dictionary or other sources of definitions because those precedents may give you words and concepts that will aid in your drafting or mark-up. Check to see if there is a statute on whatever the issue is, including statutes providing for statutory construction, definitions of terms, rules of construction for contracts, and other statutes that may use or define a particular term that can offer some guidance. Is there a Federal issue lurking somewhere, including any Constitutional question? Is there a public policy matter underlying the legal rule in issue, and are your facts distinguishable so that the public policy underlying the legal rule may or may not be violated depending on the result? Excluding Constitutional, criminal and tort cases, most reported court decisions usually result from (1) a client not seeking or getting good legal advice before the particular matter eventuated into a litigation, (2) a lawyer not giving particularly good legal advice either in the underlying matter or in the litigation itself, (3) the client did not use a lawyer and made a mistake, or (4) there was a serious miscommunication in the underlying matter. If a trial or intermediate appellate courts made no errors, the quantity of reported judicial decisions would be reduced materially. An appeal, therefore, and planning for that appeal, may be an appropriate part of litigation strategy because error at the trial court or intermediate appellate court level is very possible, either on a procedural or substantive matter. It may not make sense to rely solely on online research and not consult books. Check findlaw.com or cornell.edu for free legal research links before using Westlaw or Lexis. Consider not using the word “should” in communications with clients if its use could be deemed to create a standard of conduct for the client or for our firm. Have multiple original copies of a power of attorney signed and where appropriate, acknowledged, because you never know who will want to keep an original. Have only one original copy of a promissory note signed. Ask the client to obtain the original signed promissory note when it is paid off. Do not allow what you do to fall to or be viewed as the lowest common denominator. Shortcuts often result in mistakes or less than comprehensive documents. Document client instructions in confirmatory emails and do that in a nurturing and not accusatory way. Price and cost are two different things. Negotiating and bargaining are two different things. Generally, it takes 3 hours of preparation time for every 1 hour of a meeting or negotiation. Try to be elegant in whatever you do, for yourself, and for appearances with others. There are excuses, but there is no such thing as a good excuse. We recruit for skills. We hire for attitude. We promote for both. Under-promise and over-deliver. The best interests of our entire firm are paramount to the self-interest of any one person or group of persons in our firm. Understand the client’s goal and think as if you were the client and your money or business is involved, bringing to that thought process all your skills and experience as a trusted legal advisor. Document everything. Undocumented anything often results in ambiguity. Strategy and tactics are two different things. What is your unique selling proposition? As a glassblower-artist for 31 of those 47 years, sometimes the old tried and true ways are just as good or better than the new ways. No matter what you know, there is always more to learn, whether from others or from your own mistakes. The remaining number of years in your life may not include as many years as your current age may suggest. Hope is not a strategy. All business is personal. I welcome comments from others and am always happy to discuss the story behind each of these tips.
July 27, 2023
Family Law
D.C. Court May Consider Pets’ Best Interest in Awarding Ownership in Divorce Proceedings
Many pet owners treat their pets like children. Now the Superior Court of the District of Columbia may do so as well in divorce or legal separation proceedings, pursuant to a law that recently took effect. The Animal Care and Control Omnibus Amendment Act, which became effective on April 21, 2023, gives the Superior Court for the District of Columbia the discretion to consider the “best interest” of “pet animals” in deciding which party should have the pet after the divorce or legal separation proceedings have ended. The Court may also decide which party should have the pet during the divorce or legal separation proceedings. Until the enactment of the new law, pets were treated solely as personal property in divorce and legal separation proceedings, and there was no provision in the District of Columbia Code permitting the court to consider the pets’ best interest. The “best interest” standard until now has been applied solely to child custody cases. While the statutory provisions pertaining to child custody provide specific factors the Court must consider in child custody cases, the new law does not provide any factors the Court must consider and does not define “best interest,” thereby giving the Court broad discretion to determine how that phrase should be interpreted and applied. The Court might consider a wide array of facts in determining a pet’s best interest, including who cared for the pet and who was most closely bonded with the pet. The Court might also consider evidence that one party mistreated the pet. The new law gives the Court authority to assign ownership of the pet to one of the parties, or the Court may award “joint ownership” of the pet to both parties. The new code provision does not define “joint ownership,” leaving the Court to interpret and apply that phrase. It is possible that the Court will order the parties to share the pet according to an equal time-sharing arrangement or that one party should have more time with the pet than the other party. The statute does not provide any guidance regarding whether a history of domestic violence between the parties should be considered by the Court in determining whether joint ownership should be awarded. Arguably, to protect victims from further harm, the Court should avoid awarding joint ownership in cases involving domestic violence. The phrase “pet animal” is defined as “any animal that is community property and kept as a household pet.” The phrase “community property” is not defined anywhere in the District of Columbia Code. The Superior Court for the District of Columbia and the Court of Appeals have historically referred to property acquired during the marriage or domestic partnership as “marital property.” Perhaps the phrase “community property” is intended to also mean property that was acquired during the marriage or domestic partnership. In disputes regarding ownership of pets between parties who are not married or in a domestic partnership, the “best interest” standard set forth in the new law would not apply. As between nonmarried persons, the Court would view the pets solely as property and must determine who owns the pet by considering who purchased the pet or adopted the pet without giving consideration to who cared for the pet or any other facts that might pertain to the pet’s best interest. Anyone who wants the Court to consider the best interest of a pet must affirmatively request that relief as part of the divorce or legal proceeding. The new code provisions described above are set forth in D.C. Code §16-910(3).
July 26, 2023
One Minute of Overtime
Highly-Compensated Worker Exemption
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. An employee qualifies for this exemption if they earn total annual compensation of $107,432 or more (including satisfying the salary basis or fee test), the employee’s primary duty includes performing office or non-manual work, and the employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee.
July 26, 2023
Litigation
Creative Lawyering – Property Settlement Agreement as Written Assignment (a Supreme update)
A beneficiary’s interest in a life insurance policy is only as protected as the written assignment securing the interest with the policy issuer. In the right circumstances, a Property Settlement Agreement (PSA) – or other similar agreement! – can double as any number of other useful legal documents. I’ve previously written of trial court successes where PSAs have doubled as a real property deed and, in a more recent case, as an “assignment” (serving to transfer an interest in life insurance policy proceeds). Over the pandemic, I left readers hanging by failing to share the appellate outcome on the “assignment” issue. The Virginia Supreme Court took up a case of mine involving a divorcee whose deceased ex-spouse failed to honor a consensually court-ordered life insurance commitment. Essentially, the divorcing husband had promised to maintain life insurance for the benefit of his soon-to-be ex-wife and later reneged by changing the policy beneficiary designation (a not uncommon occurrence, unfortunately) shortly before committing suicide. The trial court had ruled favorably for the surviving ex-spouse (our client) but had done so on questionable legal grounds – relying on a definition of “creditor,” which I had not even argued to the Court (with good reasons, it turns out!). Suffice it to say, the circumstances in the case required a “written assignment” for the proceeds of the life insurance policy to be rightfully owed to the surviving ex-spouse. The assignment requirement stemmed not from the former couple’s divorce documentation but rather from the contractual arrangement with the life insurance company issuing the policy. Additional details of the case aren’t nearly as significant as the rule of law on which the Supreme Court chose to uphold the trial court’s decision and the impact it ought to have on anyone expecting to benefit from the life insurance policy of another. It turns out the Supreme Court agreed that the language of the couple’s PSA satisfied all the requirements of an assignment sufficient to have effected a transfer of the policyholder’s interest in the proceeds of the policy to his ex-spouse. The appellate victory was sweet – not going to lie. Our client’s win, however, proved a cautionary tale for all future would-be policy beneficiaries (not to mention their divorce attorneys, financial planners, and estate planning counsel!) facing similar circumstances. Our client had lucked out inasmuch as her vengeful ex-spouse hadn’t compounded his in-your-face beneficiary re-designation by pledging or otherwise re-assigning the policy to another in exchange for a financial interest of some kind. According to the Supreme Court, had he done so, he would have successfully cut his ex-spouse out of a substantial portion of the financial consideration negotiated for during the parties’ divorce. Because the PSA/assignment document was not provided to and accepted as an assignment by the insurance company (in lieu of the company’s own form assignment document) prior to the policy owner’s death, any subsequent assignment properly documented with the insurance company would have superseded the PSA’s operative language. In essence, the reach of a PSA’s operative assignment impact only extends as far as the parties to the agreement unless and until either the policy issuer becomes a party to the agreement or the policy owner opts to reassign some or all the same interest in the proceeds. The rationale of the Court’s decision might easily be extended beyond the divorce context to anyone with an expectancy in policy proceeds. I’m speaking especially in this context to anyone who might consider extending credit with the promise of repayment to be backed by policy proceeds. Failing to insist on a written assignment on the insurer’s form and confirmation of the insurer’s acceptance of the assignment unnecessarily affords an unscrupulous borrower the ability to leave you completely unprotected. I welcome opportunities to provide guidance prior to leaving oneself or one’s client unnecessarily exposed and/or counsel when looking to extricate from unanticipated consequences after having failed to protect against them beforehand.
July 25, 2023
Family Law
Postnuptial Agreements Post COVID-19
Originally posted on 05/15/2020, content updated on 07/24/2023 Hope is not a financial plan.[i] The COVID-19 pandemic and the lifestyle slowdown that came with it provided many married couples the opportunity to reassess their marriages. For some, the crisis made their bond stronger. For others, prolonged separation and/or prolonged closeness revealed considerable cracks in their relationship. If you and your spouse fell into this category, with the realization that your marriage may be ending, divorce, in and of itself, is not the only option. The better choice, rather than the immediate finality of divorce, is the creation of a document known as a Postnuptial Agreement. In its simplest terms, a Postnuptial Agreement is a contract signed by the couple at any time after their marriage which resolves all or at least a portion of the financial issues between them. A Postnuptial Agreement survives whether the marriage lives or dies. It can be a simple framework or a detailed road map, limited or expansive in scope, enforceable[ii] regardless of the state of the marriage when entered into. It can and often does provide a cooling off period for the couple; an opportunity to work on their marriage. If the marriage fails, a Postnuptial Agreement will ease and expedite the divorce process; and save the couple legal fees, inasmuch as they previously resolved the financial aspects of the marriage. Why have a Postnuptial Agreement? Oft times a couple does not like the idea of a prenuptial agreement (an agreement prior to the marriage). For some, a prenuptial agreement creates the sense that the marriage is starting off on the wrong foot, or doomed for failure; for others, the romantic ideal that the parties share is shattered by the thought of negotiating marital financial matters before they have even said “I do.” Others just simply refuse because they have no interest in obtaining a prenuptial agreement. With a Postnuptial Agreement the couple can eliminate expensive and acrimonious divorce battles. The spouses, through counsel, contractually delineate their monetary future, and if the marriage succeeds until a death, a postnuptial can prevent inheritance disputes between a person’s surviving spouse and his/her heirs. What Can be Included in a Postnuptial Agreement? Creating a Postnuptial Agreement requires the couple to agree on terms relating to the issues faced in their marriage. Provisions commonly included address: marital debts, credit card debt, or mortgage loans; property and asset division; spousal support amounts (if any) and the length of those payments; family budgets/spending habits; and the manner in which assets will be handled should one spouse pass away (estate planning)[iii]. Other, more unique provisions address: the manner in which the couple would respond to a sudden, dramatic change in their financial situation; transfers of separate property into marital property, and vice versa; protecting retirement assets in the event of divorce, which could lead to a decrease in retirement funds; non-disclosure and privacy provisions, limits on the personal and marital information either spouse may share with third parties; and even, limits to what is shared or discussed on social media. Children and issues concerning the Children, such as custody, visitation, or child support will need to be resolved at the time of the divorce action, either through a settlement agreement or court involvement. Child-related issues cannot be resolved by way of a Postnuptial Agreement, and even if the Postnuptial Agreement contain clauses relating to such, they will not be enforceable. How Can I Assure That My Postnuptial Agreement Is Valid? The validity of a Postnuptial Agreement does not require or mandate an eventual divorce. However, if the decision has been made that a Postnuptial Agreement is the right choice, then proper steps must be taken to ensure its validity. Primary among these steps is the full and fair disclosure of the entirety of each of the spouses separate assets, debts, and income and all of the marital assets, debts and income. Complete disclosure is imperative for enforceability. If one spouse is dishonest and the agreement is designed around information that is either false, inaccurate or incomplete, the Postnuptial Agreement will be considered invalid. The agreement must be signed by both spouses and the execution of the agreement must be completely voluntary. If there are any indications that one spouse was coerced, threatened, or made to sign a Postnuptial Agreement against their will, the agreement will be null. Equally, the Postnuptial Agreement cannot be flagrantly unfair and biased to one spouse. A Postnuptial Agreement that is clearly unjust to a spouse, and could potentially leave them with little to no assets or wealth, will need to be further evaluated to determine if the spouse truly did enter into the agreement voluntarily and knowingly. If this remains in question, the Postnuptial may not be enforceable. Conclusion It is important to address and resolve the financial details of the marriage. It is better to plan when there is peace in a relationship than when there is anger. [i] Many financial commentators and writers take credit for this quote. [ii] Assuming all other requirements of a valid agreement are met. [iii] A Postnuptial Agreement will not take the place of a will, but they can work together, dovetail, to ensure the decedent’s wishes are carried out.
July 24, 2023
Franchise Law
Franchising for the Greater Good
Nonprofit organizations and franchised businesses operate in separate worlds. But sometimes those worlds meet in a way that can be mutually beneficial. When the franchise benefits the mission of the nonprofit, the organization might consider forming a separate entity that will become a franchisee. The arrangement is sometimes referred to as “social franchising”. Starting any new business is a risk. Even a franchise business. Not every nonprofit organization will be willing to expose a portion of its assets to business risk. But in some cases, and with proper legal advice, the arrangement can work. Here’s how it’s done: The nonprofit should form and contribute the initial financing to a new for-profit entity, typically a limited liability company, that will sign the franchise agreement and become the franchisee. The separate entity protects the nonprofit from the liabilities of the franchised business. It also protects the organization’s nonprofit status. Because the franchisee is wholly-owned by the nonprofit, the net profits go to the nonprofit to further its mission. The franchise entity’s business income is taxed as such. In fact, its local tax payments help support the community. The nonprofit need not be expert in the franchisor’s line of business. The franchisor will provide a business system in a package with training and support. But the nonprofit should find an experienced and ambitious manager to operate the business. Having the right management will benefit both the nonprofit and the franchisor. The franchisor will likely benefit from the positive publicity that comes with its association with a good cause. Customers will appreciate the fact that their dollars will benefit a social mission. The franchisor may also benefit by finding a franchisee with deep community ties and an excellent reputation, which can help build the franchisee’s business and help the franchisor move into a new market. The franchisor can discount or waive its initial franchise fee for entities owned by nonprofits, similar to the way many franchisors give discounts to veterans. But the franchisor should not lower its standards in awarding the franchise. The franchisee prospect should meet the same qualifications that the franchisor requires of for-profit franchisee candidates. The franchisee’s management should have the requisite experience, aptitude, ambition and team compatibility, and the entity must be adequately financed. In addition, the franchisor should be satisfied the nonprofit is committed to taking the risk of starting the new business. Beyond that, the mission and culture of the nonprofit organization should be one that the franchisor is proud to support. Here are some examples of franchising to nonprofits taken from articles in the QSR Magazine, New York Times, Entrepreneur Magazine, NonProfit Times, Wall Street Journal, Franchise World, and Franchise Times: Ben & Jerry’s was the trail blazer when it began working with select nonprofits in its “PartnerShops” program for youth-development and job training nonprofit organizations in 1987. Subway began working with nonprofits in 1996, opening franchises in school cafeterias and hospitals, some of which are owned by the institutions. The YWCA of Greater Pittsburgh opened a Nathan’s Famous restaurant within its facility in 2010. Affordable Homes of South Texas, which constructs homes for low-income families, opened a Blimpie shop in Weslaco, Texas, in 2013. The Dale Rogers Training Center owns a Papa Murphy’s franchise in Oklahoma City to train and employ people with disabilities. CMARC, a nonprofit in Woburn, Massachusetts, that provides job opportunities for disabled people in its community, bought a Money Mailer franchise in 2008. Money Mailer is a direct mail marketing company. It helps the local businesses market, which creates more job openings. And the fact that CMARC was already working with the local businesses made it easy to introduce the Money Mailer program to those businesses. Beaver County Rehabilitation Center (BCRC) Inc., in New Brighton, Pennsylvania, owns a Candy Bouquet franchise to “teach work with work”. Washington Vocational Services bought an Auntie Anne’s pretzel franchise in an outlet mall near Seattle in 2005. Share Our Strength, a charity based in Washington, D.C., that fights childhood hunger around the world, opened a Wine Styles shop in Washington, D.C., in 2007. The wine connection enabled the organization and its for-profit subsidiary to host fund raising events together featuring great wines, thereby appealing to the nonprofit’s donors.
July 21, 2023
Intellectual Property
Trade Dress at a Glance: Protecting the Look and Feel of a Product
When safeguarding their consumer reputation, most companies recognize the value in their brand names, logos, slogans, and their associated goodwill and the importance of protecting those assets. However, many neglect to protect their trade dress: the look and feel of a company’s product, packaging, or services. Trade dress can be a powerful source-identifying tool: rather than protecting a specific name or logo, trade dress is about the “overall design and appearance” of a product. It can include elements that may not be protectable on their own. Nora Beverages, Inc. v. Perrier Group of Am., Inc., 269 F.3d 114, 118 (2d Cir. 2001). Trade dress can come in many forms, and courts have upheld trade dress protection in colors, store layouts, and website designs. The U.S. Supreme Court recently referenced trade dress as part of its discussion on whether elements of a dog squeaky toy infringed on several Jack Daniel’s trademarks — including their styled white filigree and distinctive square bottle. More on that decision and its implications on First Amendment protections can be found in our previous client alert here. This article focuses instead on how companies can incorporate trade dress protections into their intellectual property portfolio. The Elements of Trade Dress To qualify as a protectable trade dress, the product packaging or design must meet two main criteria: it must be inherently distinctive (or have acquired a secondary meaning that makes it source-identifying) and be nonfunctional. “Distinctiveness” can be a nebulous term, and courts consider the distinctiveness of product design and packaging differently. The Supreme Court has held that a product’s design is not inherently distinctive without acquiring secondary meaning that ties it to a brand. Wal-Mart Stores, Inc. v. Samara Bros., 529 U.S. 205, 212 (2000). A product’s packaging, however, or the overall design elements of a restaurant or retail store (which the Court viewed as being more akin to packaging than product), can be inherently distinctive. In instances where an element of package design is particularly unique or fanciful or when several commonplace elements are taken together to make a whole, trade dress may lead a consumer to associate it with a particular company or brand. Some packaging design elements are distinctive enough to qualify as protectable trade dress in their own right. One of the most famous examples is the design of a glass bottle of Coca-Cola; without any additional labeling or context, the average consumer can immediately identify the brand behind it and the product contained within it. Some characteristics, like specific colors, may not be inherently distinctive at their outset but can acquire a secondary meaning through their use — such as Tiffany & Co.’s distinct blue box. Trade dress looks at the entirety of a design. Even commonplace elements without a solid secondary meaning, such as the examples above, can be part of a distinctive trade dress. Grouped together, such elements can form a unique whole, and the more elements used to establish the overall look and feel, the more likely a trade dress is to be protected. For example: in 2013, Apple was able to secure protection for its retail locations’ overall look and feel. Taking the elements of their store design as a whole, Apple conveyed an overall image that was distinct and identified their brand. In some cases, a trademark registered and protected in its own right gained more robust protection through its incorporation into trade dress. In Gucci Am., Inc. v. Guess?, Inc., 868 F. Supp. 2d 207, 248 (S.D.N.Y. 2012), Guess was found not to have infringed on one of Gucci’s trademarked logos with their similar mark, but the Court found that when the logos were both used in a similar brown-on-beige product design, it was a step too far. Non-functionality is the other essential element of trade dress. Functionality, in this case, covers elements necessary for product use and those that affect cost or quality. When the features that make the product useable and the aesthetic elements that allow a customer to identify the source are one and the same, courts are reluctant to classify those features as trade dress. Visually distinct components that are also protected by a utility patent, for example, are generally not protected as trade dress. TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 29 (2001). However, the inclusion of functional elements in a trade dress does not necessarily render it unprotected. The hands and dial of a watch are undoubtedly useful, but their aesthetic qualities are trade dress. Cartier, Inc. v. Sardell Jewelry, Inc., 294 F. App’x 615 (2d Cir. 2008). A functional aspect that incidentally creates a distinctive feature (such as a decorative embossment made by a patented process) can also be protected trade dress. McAirlaids, Inc. v. Kimberly-Clark Corp., 756 F.3d 307, 312 (4th Cir. 2014). Taking Appropriate Action Trade dress is protected by federal law, and companies concerned that a competing product is imitating the look and feel of their trade dress can sue under the Lanham Act. Although it is possible to protect trade dress without registering it with the U.S. Patent and Trademark Office first, an ounce of prevention is worth a pound of cure. Taking the proactive step of registering a trade dress makes it easier for companies to enforce their rights: for example, 15 U.S.C.A. § 1125(a)(3) states that a person who seeks to protect an unregistered trade dress has the burden of proving the elements they wish to protect are nonfunctional. Registering their trade dress on the principal register can save a company that burden. Companies, particularly the design and marketing departments, should consult with their trademark attorneys early in product development to avoid unintended infringement pitfalls in their products and packaging and to determine if registering their trade dress is practical and serves their specific needs. This summary of legal issues is published for informational purposes only. It does not dispense legal advice or create an attorney-client relationship with those who read it. Readers should obtain professional legal advice before taking any legal action.
July 20, 2023
Family Law
New Maryland Law Will Remove Long-Existing Barriers to Divorce
Commencing a divorce case will soon be easier in Maryland. As of October 1, 2023, a spouse will be able to file for divorce based on “irreconcilable differences.” This is a monumental change in the law that removes significant impediments to divorce. It has long been the law in Maryland that a party seeking a divorce could not obtain a divorce unless the parties had been living in separate residences for at least 12 months or a party could prove a fault-based ground for divorce such as adultery, desertion, insanity, or cruelty. The new law eliminates those fault-based grounds and removes the requirement that parties reside in separate residences. Parties may still seek a divorce based on a separation, but the time frame has been shortened to six months and the parties may be deemed separated even if they are residing in the same residence, as long as they have been pursuing separate lives. These changes to the law are important because proving a fault-based ground for divorce in many instances could be difficult or impossible and being required to reside in separate homes to establish a 12-month separation was not economically feasible for many couples. Parties who have already filed for divorce and have a case pending in a Maryland court have the option of amending their pleadings after the new law takes effect on October 1, 2023. In addition to obtaining a divorce based on irreconcilable differences or having pursued separate lives for at least six months, parties may also seek a divorce based on “mutual consent” if they execute and submit to the court a written settlement agreement that resolves all issues arising out of the marriage, including alimony, distribution of property, and the care, custody, access, and support of the parties’ children.
July 19, 2023
Family Law
Divorce Economics in the Time of COVID-19
Originally posted on 04/01/2020, content updated on 07/17/2023 “Nothing is more dangerous to [men or women] than a sudden change of fortune.” – Quintilian [i] Nostradamus could not have foreseen a darker economy and—we are told—the worst is yet to come. In the fist week of April 2020, an excess of 3.3 million people have filed for unemployment benefits—a precipitous rise compared to the 832,000 filings of the week before.[ii] A national survey showed one in five households in the United States had their income cut or stopped altogether. [iii] At that point, more than 1,000 deaths in the United States had been attributed to the coronavirus, also known as COVID-19, and the numbers grew in the hundreds each day. Another economic crash was upon us. The economy was going down; but divorce rates were exploding. As the economy faltered, divorce rates rose as self-imposed “sheltering-in-place” put additional stress on marriages already wavering on the edge of the divorce abyss. Couples who already could not bear another day together were confined in the same space 24/7. In New York City, that space can be inordinately small, yet extraordinarily expensive. In short, it is a “pressure cooker” about to explode. This author has already seen a rise in inquiries from couples who cannot bear to be together another moment. But what of those couples who have already jumped into the quagmire of divorce, and now after months—even years—find themselves in their next and last stage—the financial battle? What is to be done where barely one month ago there was a sizeable marital pot to carve up—and now all that exits are bare bones? The financial hardship and instability that were caused by the pandemic and continued as a result thereof bore witness to incomes, assets and property values that had fallen and undoubtedly continued to drop dangerously. Those previously enjoying high levels of income suffered drastic pay reductions, and the prospects of new employment for those unemployed or about to be unemployed vanished. Retirement expectations once buoyed by investment and retirement accounts in the seven figures have dropped in some cases by fifty percent or more.[iv] Support expectations that could not reach the heights of pre-pandemic earnings and spending patterns were not only depressing but difficult for many to comprehend. Splitting debt rather than assets became the reality in many divorces.Trying economic times demand innovative solutions for the unique problems confronting divorcing couples. Two houses demand more to maintain than one. Incurring considerable credit card debt or dipping into retirement funds early leads to inevitable havoc in both parties’ current and long-term financial situations. The matrimonial practitioner is no longer merely the butcher responsible for carving up the fiscal carcass of the marriage; but now he/she must also be a new age philosopher enabling the client’s adjustment from what is expected to what is achievable at least in the foreseeable future. Once the Courts re-opened, they undoubtedly and inevitably found themselves in a myriad of “cases of first impression” when it came to the determination of what was an equitable distribution of marital assets that less than one month prior were flying high, but had reached an all-time low. REAL PROPERTY Divorce almost always means valuing, selling and buying houses or apartments. Historically, divorcing couples wrangled over the post-divorce ownership of the marital residence, the weekend home, or the Pied-a-Terre. Now they battle over who gets stuck with the current expenses of the asset as well as the future debt.[v] The strong U.S. housing market plummeted from the pandemic, financing was questionable and selling and buying a house became much more difficult. [vi] Even if able to sell the family home, the value will likely be below expectations, or what was originally paid and put into the property. For spouses who have been unemployed for a significant period of time, getting financing for a new home will be more challenging than ever. In the past, the most common solution with respect to the marital home was for one spouse to buy the other out. Typically, there were more than the necessary amounts of other assets so as to offset the purchase of the residence by one spouse with an allotting credit to the other vis-a-vie the reallocation of distributive awards or like/kind transfers. Often, where there was lacking in marital offset funds, or liquidity, it was not unheard of for a wealthy relative (a mother or father of one of the parties) to step forward and provide a low interest loan, or provide additional credit by co-signing or offering funds not obtainable from a bank or other lending institution. Those days are gone. Now, the most common solution for the divorcing couple is to retain the house, permitting one or the other to remain in the residence until the market improves, fixing the financial responsibilities of one to the other in retaining the residence, agreeing to postpone final division of the asset until a time in the fixed future, tied often to a child’s attainment of a certain age or emancipation status, or making the sale subject to a triggering event, exercisable by either party (with notice), with a guaranteed base return for the departing resident. Often, and especially at the present time, refinancing the current mortgage, without incurring additional debt, so as to reduce the monthly financial “nut,” is strongly advised, i.e., is a “no-brainer.” In situations where the residence is preserved for a future sale, there is often a two-level structure of support in place — one amount before and another amount after the house is sold. Renting the house to a third party, though often more of a headache than it is worth, may be a viable option for some in the hopes that the near future will bode well for the real estate market. An income can be derived from such a step that will, at a minimum, help offset monthly housing payments. Turning over the costs of utilities to the renter will also relieve some of the financial pressure on the parties. Those who determine to take such a step would be wise to engage a property manager or an accountant to oversee the day to day dealings incumbent upon a landlord. Where minor children are still living at home, some couples may prefer what has become referred to as “nesting.” The parties retain ownership of the home, and either rent or purchase another nearby (smaller than the marital home). Each parent alternates living in the marital residence with the children and in the other residence alone. This not only preserves the residence for sale in an upturned market, but provides an added degree of stability for children thrown into the divorce maelstrom. Short sale, Foreclosure, or Bankruptcy Short sale, foreclosure or bankruptcy are more drastic solutions – and should be considered sparingly as such steps often negatively affect both parties’ financial futures. However, in the long run beggars cannot be choosers. A short sale is the sale of real estate in which the proceeds fall short of the debt owed on the property. It occurs when a borrower cannot or chooses not to pay the mortgage obligation, and the lender decides that a sale at a modest loss is the best option. Both debtor and creditor must agree to the short sale procedure inasmuch as it allows foreclosure to be avoided (foreclosure will involve hefty fees for the bank/lender and poor credit report results for the debtors.) The lender’s agreement to the short sale, however, does not automatically release the borrower from the obligation to pay the remaining balance of the debt, known as the “deficiency.” [vii] In the short sale scenario neither side is “doing the other a favor;” it is simply the most cost-effective resolution of the debt. The lender reduces its exposure to a greater financial loss than would result from foreclosure or continued default. The debtors are able to lessen damage to their credit histories, and to a limited degree control the debt. The short sale is often faster and less expensive than a foreclosure. The lenders acceptance of the short sale does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of the offer.[viii] The short sale typically remains on a credit report for seven years. A few last comments concerning short sales: (i) always negotiate the waiver of the deficiency; (ii) leave plenty of time, as the approval process can be long and arduous; (iii) if approved and the deficiency waived, the forgiven debt may have tax consequences.[ix] Foreclosure is the process by which the lender obtains a court ordered termination of the borrower’s right of redemption. The lender traditionally obtains a security interest in the property in issue from the borrower who pledges the asset to secure the debt. Upon default the lender is typically desirous of repossessing the property. Courts of equity however, can grant the borrower the right of redemption if the debt is then repaid. While this right exists, the lender cannot be sure that it can successfully repossess the property, thus the lender seeks to “foreclose” the equitable right of redemption.[x] Other lien holders can also foreclose the owner’s right of redemption for other debts, such as for overdue taxes, unpaid contractors’ bills or overdue homeowners’ association dues or assessments.”[xi] A foreclosure generally appears on a credit report for seven to ten years, usually as a settlement, settlement for less than owed or pre-foreclosed redemption.[xii] A foreclosure will have a greater negative impact on a party’s credit than a short sale. Bankruptcy For those with significant liabilities and little or no foreseeable means out of the debt incurred, bankruptcy may be the only option. The parties may choose to declare bankruptcy and file for Chapter 7 or Chapter 13, depending on their financial predicament.[xiii] Where the problem is late mortgage payments, and the parties are desirous of keeping the marital residence out of foreclosure, then a Chapter 13 bankruptcy is the best choice. In a Chapter 13 bankruptcy case, the Court will supervise and restructure the debt, and schedule a payment plan which will typically involve a three to five-year repayment period. [xiv] Once repayments of the debts have been made in accordance with the Court’s repayment plan, then any debt still remaining will be forgiven. A bankruptcy will typically remain on a parties’ credit report for ten years. [xv] A Chapter 7 bankruptcy filing, known as a straight bankruptcy, involves liquidation of all assets that are not exempt. It is the best selection where the parties do not have the income to commit to a repayment plan. In a Chapter 7 bankruptcy filing the Court assigns a Trustee to collect the debtor’s assets in order to satisfy some or all of the debt. Fortunately, most debtors have only what is considered “exempt property” which is defined to include, the family home, family car, household items and clothing. After the non-exempt assets have been sold to pay off as many of the debts as possible the debts remaining are forgiven. The discharge of debts through Chapter 7 may be done only once every six years. FAMILY BUSINESSES When a couple owns a business together, decisions must be carefully made to insure an equitable outcome. It goes without saying that every business and business segment is unique. One universally convenient truth, however, is that the implosion of the U.S. and world financial markets has affected and will continue to affect for the foreseeable future most U.S. businesses. This has caused a whole new series of problems for valuing business for the purpose of divorce quantification and division. Revenue Ruling 59-60, issued in 1959, has long been the golden rule for business valuations, and has stood the test of time when it comes to the fundamental principles of valuing a family business, for divorce or any other purpose. Traditionally, business valuations have used methods based on the then realistic presumption that the historical performance of the business was a legitimate gauge of its future course. Implicit in the mathematical models was the tacit understanding of incremental improvement over a period of time. Most often, the evaluators view the last five years of the endeavor to ascertain its current value. Even if the present year evidenced a lower profit than years before, it is factored in with the prior four. However, this result may be a valuation that is nowhere near the realities of what the recession has done to future revenue forecasts. In the daily changing fiscal environment it was necessary to find ways to fashion an equitable distribution of the business taking into account the uncertainty of the business environment. On the one hand care must be taken so as not to value the business too high thus forcing the person running the business to pay out to the other a large amount that is inconsistent with the current economic conditions, and possible future of the business. Alternatively, the business could be in seriously negative territory at the time of the divorce, yet rebound considerably in years to come. The future, as always, remains a mystery. Thus more complex solutions must be approached than those traditionally utilized when there is a simple buy out of one of the owners at the then determined fair market value of the business – these solutions include: earn-out options; corporate co-existence, and estate planning opportunities. Buy Out, With Earn Out Options Optimally planned, a buy out with earn out options, i.e., where part of the total payment for a business is deferred, may be the best route. In this way, the “seller spouse” receives partial payment of an agreed base value of the business at the time of divorce and a further payment or payments after an agreed period or periods based on future business performance. The buy out/earn out therefore represents a results-based value of the company and may be considered by both parties as the fairest means of valuation and subsequent distribution. The amount of the future payments is based on agreed performance criteria and typically calculated as a multiplier with reference to historical profits although it may be based on turnover or other financial criteria[xvi]. The earn-out period may run from months to years and may include payments at different stages during the period. Typically, the “buyer spouse” will receive a cash sum, or an initial issue of securities, plus the earn-out. Corporate Co-Existence Often the only thing the parties can agree on is that the family business should not be sold or divided at the time of the divorce. This often occurs where the spouses desire to retain their positions in the company, where neither party is willing or able to buy the other out, or where the parties’ children are actively engaged in the business. Of course, each of these reasons requires the parties to be emotionally and mentally capable of co-existing in the business. In order to continue the ongoing business relationship, it is imperative that certain rules be established between the parties, and enforced going forward. These “rules,” would include: (i) the entering into of management agreements to set out specific duties of each spouse in the business, and classify those specific issues that would require the vote or agreement of both spouses, such as any future sale of the business, salary increases, personnel decisions, borrowing, and the like[xvii]; (ii) preparation of employment agreements to address benefits, termination, resignation, and covenants not to compete; (iii) preparation of buy-sell agreements to particularly address the future transferability of stock, and purchase of rights upon the death of one of the spouses, among other items; and (iv) the manner in which to address any shareholder disagreements.[xviii] Estate Planning Prospects Where the parties own all or the majority of their business, they may have available to them a unique estate planning opportunity, especially where the parties’ children participate in the business. The parties, with the help of knowledgeable corporate, and estate planning counsel, create a succession plan for the benefit of their children, that may reduce or eliminate the uncertainty of the manner in which the company will be distributed upon one party’s death, and also take advantage of valuation discounts by putting each of the spouses in a minority position.[xix] This may all be undertaken by the parties while they still maintain joint control over the business. This will also ensure that the parties’ children will have an opportunity to acquire an interest in the business upon the death of either or both parents. RETIREMENT AND DEFERRED COMPENSATION The pandemic has also wreaked havoc on most retirement or deferred compensation benefits, in particular plans such as a 401(k), SEP, or IRA. The “cut off” date for the classification and quantification (without considering the active or passive nature of the increases or decreases in account values) of marital property is the date on which the action is commenced[xx]. The valuation dates for such assets can however, range from the commencement date through the trial date. Over the years, certain standards have developed in determining which valuation date should be applied to particular classes of assets such as retirement and deferred compensation accounts. Now, the existence of an increase in the value of such plans post-commencement will be a rarity. Despite this state of affairs, the Court will still look to such considerations as the active management of the account by one spouse; pre and post-commencement withdrawals and payback amounts and obligations; the selection of the assets in the account; and the risk of the assets decreasing during the action.[xxi] It is important that neither party force the liquidation of retirement assets while values are low. Loses on paper can be tolerated; actual loses realized by sale or withdrawal from retirement accounts, plus the accompanying tax liabilities and penalties, should not be. CONCLUSION Difficult times produce new opportunities; new opportunities give rise to industrious solutions. Now more than ever, divorcing spouses (with knowledgeable counsel), need to exercise patience in the process, clarity in thinking and sound fiscal judgment. [i] Marcus Fabius Quintilian, Roman educator, author of the Institutes of Oratory, published circa AD 95.[ii] “Unemployment Claims Soared to 3.3 million Last Week, Most in History,” Tappe, Anneken, CNN Business, 3/26/20. Cnn.com/2020/03/26/economy/unemployment-benefits-coronavirus. [iii] “Exclusive: Goldman Injects $1 Billion Into Own Money-Market Funds After Heavy Withdrawals,” McLaughlin, Tim. 3/21/20.r euters.com/article/us-health-coronavirus-goldman-mny-mkt-ex. [iv] “How to Protect Your 401(k) From the Coronavirus,” Hartmen, Rachel. 3.12.20. money.usnews.com/money/retirement/401ks/articles/how-to-protect-your-401-k-from-the-coronavirus. [v] Negotiating for and receiving in the divorce an asset at a significantly reduced value can be a benefit for some. When the market recovers the asset could be a boon to the receiver. [vi] The New York Times, “Is Now a Good or Terrible Time to Buy a Home?” nytimes.com/2020/03/21/realestate/coronavirus-pandemic. [vii] Tedeschi, Bob, “Short Sales, A Long Process,” The New York Times, Mortgages, 12/13/2009. [viii] Olick, Diana, “Big Banks Accused of Short Sale Fraud,” CNBC, 1/15/2010; “Mortgage Applications Drop 29% for Week Amid CoronaVirus Crisis.” 3/25/20. www.cnbc.com>real-estate. Olick, Diana. [ix] See IRS Publication 4681. The lender must send the borrower Form 1099-C, Cancellation of Debt, to indicate the amount of debt forgiven. [x] Merriam-Webster’s Dictionary of Law ©2020, Merriam-Webster, Incorporated [xi] Rhodes, Trevor. American Foreclosure: Everything U Need to Know… about Preventing & Buying. McGraw-Hill, April, 2008. [xii] Foreclosure Prevention Resource Center, MortgageBankers Association, 2008. [xiii] “How to Divide the Family Business in a Divorce,” Schnaubelt, Catherine. 3/15/19. forbes.com/sites/catherineschnaubelt/2019/03/15; Cornell, Mark and Ovitt Puc, Kelly, “Debts, Divorce and Bankruptcy, Representing Family Law Clients in a Down Economy,” New Hampshire Bar Journal, Fall 2009. [xiv] 11 U.S.C. Sections 1321 and 1322. [xv] Building a Better Credit Report, Federal Trade Commission Bureau of Consumer Protection, Office of Consumer and Business Education, May 2005. [xvi] “How to Divide the Family Business in a Divorce,” Schnaubelt, Catherine. 3/15/19. forbes.com/sites/catherineschnaubelt/2019/03/15; Sissel, Scott A., “Divorce and the Family Business – What Are the Options?, Business Entities, March/April 2007. [xvii] Id. [xviii] Id. [xix] Id. [xx] DRL Section 236(B) [xxi] Michaelessi v. Michaelessi, 59 A.D.3d 688, 874 N.Y.S.2d 207 (2d Dept. 2009); Pickard v. Pickard, 33 A.D.3d 202, 820 N.Y.S.2d 547 (1st Dept. 2006).
July 17, 2023
Family Law
Family Law Recap: Taking a Break from Your Divorce
Happy summer! Right now, millions of Americans are on vacation, packing for an upcoming trip, or just returning to work. If you’re not currently away yourself, you’ve no doubt encountered a couple (or a couple dozen) out-of-office autoresponder messages in the past few weeks. Clearly, it’s time to take a break. Wouldn’t it be great if you could take a break from your divorce as well? Actually, you can—and you probably should. Even in the best cases, divorce proceedings take a long time. As the days, weeks, and months drag on, the constant stress enacts a heavy toll on all people involved. That doesn’t mean the divorce must necessarily take precedence over everything else in your life. In fact, sometimes it’s best to consciously decide to take a break. Sometimes, when you’re feeling buried in and burnt out by your divorce, the only thing you should do is nothing at all. Of course, doing nothing rarely comes easily these days. People lead busy lives. Many of us are overbooked and underslept. When we do have downtime, we often spend it in front of screens. This near-constant stream of activity and stimulation inhibits one’s ability to rest. It’s also important to recognize that for some people, chronic busy-ness is a coping mechanism—and an unhealthy one. In her book Daring Greatly, renowned vulnerability researcher Brené Brown describes being “crazy-busy” as “one of the most universal numbing strategies.” The idea is that if you don’t have time to process uncomfortable emotions, maybe they’ll go away on their own. The truth is almost always the opposite: those neglected emotions persist and grow stronger. If you’re in the middle of a divorce—or any difficult moment in your life—it’s time to prioritize your first obligation: your obligation to your own well-being. Add rest and relaxation to the top of your to-do list. A little “me time” is good for you in the long run. You’ll come back feeling happier, recharged, poised, and better equipped for the journey ahead. Whatever your future holds, know that you don’t need to go it alone. When you call on an experienced Family Law attorney, such as those at Offit Kurman, you gain a valuable advisor, partner, and advocate. Summer won’t last forever, so take a break—your attorney will continue doing the work for you.
July 14, 2023
Contractor's Corner
The Crucial Importance of Shareholder Agreements
When expanding your current FedEx business or embarking on a new business venture, individuals often join together to share resources instead of going at it alone. When forming a corporation that involves more than one shareholder or adding a shareholder to a single-shareholder entity, it is crucial to establish a shareholder agreement between all parties involved. Below are some reasons why creating a shareholder agreement is so important and why it’s especially essential when adding shareholders. Clarifying Roles and Responsibilities A shareholder agreement clarifies each shareholder’s roles, responsibilities, and expectations. It outlines the rights and obligations of each party, including how decisions will be made and how the company will be managed. Shareholder agreements also safeguard minority shareholders from being outvoted by the majority. Dispute Resolution Shareholder agreements make it easier to resolve potential disputes between shareholders. The agreement can establish a dispute resolution process, such as mediation or arbitration. The process will help ensure that any disagreements do not escalate into legal battles that could jeopardize the business. Protection for Minority Shareholders Minority shareholders need to protect themselves from being disadvantaged compared to the majority shareholders. Shareholder agreements can assist with this by establishing clear rules and outlining the rights of minority stakeholders. For example, it might ensure that no major decisions or changes can be made without the approval of all shareholders. Preparing for the Future Shareholder agreements can help prepare for the future. It can establish processes for adding new shareholders and outline the terms and conditions of any future sale of the company. Being prepared for future possibilities can provide a sense of control and stability that benefits everyone involved with the company. Compliance with State Laws In many states, shareholder agreements are legally required. But even in cases where it’s not required by law, it’s vital to have one in place. In some cases, not having a shareholder agreement could lead to significant disputes that could seriously impact the business. Conclusion: Shareholder agreements are intended to establish clear expectations, ensure fair treatment of minority shareholders, provide a roadmap for dispute resolution, and prepare for future possibilities. It is essential for business owners to create a well-thought-out shareholder agreement that is comprehensive, detailed, and legally binding. By doing so, business owners can protect their investments, minimize the risk of disputes, and help guarantee the company’s long-term health.
July 12, 2023
Family Law
Adult Guardianships – Protecting Your Loved One
When a family member loses the capacity to effectively manage his or her affairs, it may become necessary to ask the court to appoint a guardian to protect that person’s interests. In Maryland, there are two different types of adult guardianships: (a) guardianship of the person, and (b) guardianship of the property. In many instances, both forms of guardianship are necessary. The court will appoint a guardian of the person when it finds that: A person lacks sufficient understanding or capacity to make or communicate responsible personal decisions, including provisions for health care, food, clothing, or shelter, because of any mental disability, disease, habitual drunkenness, or addiction to drugs; and No less restrictive form of intervention is available that is consistent with the person’s welfare and safety. The court will appoint a guardian of the property if it determines that: The person is unable to manage effectively the person’s property and affairs because of physical or mental disability, disease, habitual drunkenness, addiction to drugs, imprisonment, compulsory hospitalization, detention by a foreign power, or disappearance; and The person has or may be entitled to property or benefits which require proper management. Failure to seek appointment of a guardian for a family member who lacks the capacity to manage his or her affairs can have serious, irreversible ramifications for a person’s finances and health. For example, persons who lack the capacity to manage their finances can easily fall prey to scams seeking to take advantage of the elderly. Persons who lack capacity can also mismanage money to the point that all their assets are depleted. A loved one who lacks capacity might also neglect to seek necessary medical care or attend to the day-to-day tasks necessary to ensure that they are safe and healthy. To ensure that a loved one is not put in harm’s way, family members should act with urgency in seeking the appointment of a guardian. The process of seeking appointment of a guardian can be complicated and emotional, but an experienced guardianship attorney can explain the process, prepare all the pleadings that must be filed, and represent you during the trial in which the court determines whether a guardian should be appointed.
July 12, 2023
Family Law
I did not want to get too much “in the weeds…”
I did not want to get too much “in the weeds…” As of July 1st, Maryland became the 21st state where recreational cannabis sales are legal. Anyone over 21 can purchase dried flower, pre-rolled joints, and vape cartridges containing THC and edibles. All it takes is a government-issued ID and a trip to a licensed dispensary. There are about 100 dispensaries across the state open for recreational sales. More are coming. Authorities are a bit concerned about safety on the road, and police have been trained to determine if a driver is under the influence of marijuana. And remember that Federal rules still apply! While marijuana has been a factor in family law cases for decades, the legalization in states like Maryland will take away a parent’s argument that the using parent is criminal. However, the courts may still consider a parent’s use and possession of marijuana in custody cases. This would be similar to the court’s consideration of a parent’s use of alcohol. The court may look at things like the purpose a parent is using marijuana, the amount the parent is using, and the impact of the parent’s use on the children.
July 10, 2023
Family Law
Who Will Pay for Private School After We are Divorced?
The answer is… it depends. Isn’t that a lawyer’s answer to everything? In an ideal world, the parties agree on where their child will go to school, and they have endless funds to cover the child’s educational expenses, so there is no need for lawyers and courts. If that is not the case, the next best thing is to try and reach an agreement regarding the child’s education. In many states, the court may order a parent to contribute to all or a portion of their child’s private school tuition. In deciding on education, the court is to consider what is best for the child. Factors to be considered and weighed by the court may include, but not be limited to, the child’s educational history, the child’s educational needs, the school’s resources, the parent’s ability to pay, the parent’s decision regarding the child’s education while married, and the child’s educational performance history. Absent the court’s interference, the parties may come to an agreement on which school they want their child to attend and how it is to be paid. In some instances, the child is so young the parties may come to a written agreement on a process for determining which school their child should attend. Whether via court or an agreement, finances are typically a large factor. How was tuition paid during the marriage? Are there enough funds to support two households and private schools? Are third parties, like grandparents, contributing to private school expenses? And the list of questions to be considered goes on and on depending on the facts of each family. With the help of a lawyer who understands your child’s needs and your educational goals, ideally, you can come to an agreement on terms that are best for your child. Sometimes, the controversy is so high between the parents that a resolution outside of court is not tenable, and you will want an attorney who is prepared to address the factors to the court to most benefit your child’s educational needs.
July 10, 2023
Family Law
You Want to Get A Divorce? Here’s What You Need to Know
Originally posted 7/6/2020, no content changes. Does anyone go into a marriage thinking about getting a divorce? Doubtful. According to the Centers for Disease Control and Prevention’s National Marriage and Divorce Rate Trends, the rate of divorce in the United States in 2018 was 2.9 divorces per 1,000 people. As with anything, doing your due diligence and finding a great lawyer is going to be step one. What are some ways to find a “great” lawyer? When interviewing your lawyer, don’t be afraid to ask as many questions as necessary to ensure you are comfortable. It is important for you to make sure your lawyer practices family law regularly. Your lawyer should take a reasonable amount of time to listen to your issues and thoroughly discuss your options and the process with you. After going through your options, and you’ve decided to proceed with a divorce, the next step is for you to retain that attorney. Then, your attorney will begin gathering additional information and documentation from you. You should expect your attorney to request that you provide documents reflecting your and your spouse’s income, assets, expenses related to your family, tax returns, pay stubs, appraisals, business records, and more. Don’t worry if you do not have all of this information. Your attorney will help you obtain the information and documents needed. Following the information and documentation gathering stage, your lawyer may discuss the options of settlement, mediation or filing with the court. Should you decide to file with the court, your lawyer will create a Complaint outlining the issues to be determined by the court (ex. custody, access, child support, alimony, division of marital property and attorneys’ fees) and your request as to what you’d like the court to award you. Your Complaint will likely have to be filed with a Financial Statement. The Financial Statement is a detailed document required by the Court, which your attorney should assist you with completing. Even after filing with the court, settlement is always possible and strongly encouraged through discussions between counsel or mediation. With thorough preparation, mediation can be successful, even if not with just one session. Should you be able to settle your matter through counsel or mediation, you will have a brief, uncontested divorce hearing. Should you be unable to settle before trial, you will proceed with a trial, wherein your attorney will present your case to the court for a judge to make a ruling. It should be noted that most cases settle. For instance, we settle over 90% of our cases. The lawyer you choose will help drive the direction of your case, and it’s important to find a lawyer who doesn’t just tell you what you want to hear. You need a lawyer who will explain your options and make a recommendation so you can make an informed decision.
July 6, 2023
Contractor's Corner
Legalized Marijuana and DOT Regulations: What Contractors Need to Know
The legal status of marijuana in the United States has been changing rapidly over the last decade. This quick evolution has led to various questions and concerns for business owners, especially those who operate fleets of commercial trucks and employ truck drivers. Nowadays, marijuana is legalized for medical or recreational use in many states across the United States, which raises concerns about how this will impact the transportation industry. The legalization of marijuana for medical and recreational use in many states creates a bit of uncertainty for those that operate fleets of commercial trucks and employ truck drivers. The Department of Transportation (DOT) requires that drivers undergo regular drug testing, and marijuana use can cause a failed test, disqualification of a commercial driver’s license (CDL), and possible termination. Employers need to know the legal ramifications of marijuana use for commercial motor vehicle employees. It’s a good idea to review your company’s drug and alcohol policy to ensure that your policy is compliant with the DOT’s drug and alcohol testing regulations. If an employee tests positive for drug use, including marijuana, while on duty, the law stipulates that the employer must immediately remove the driver from duty. In this case, the DOT requires drivers to complete a Return-to-Duty process, including treatment plans and drug testing. After an employee meets all requirements, the DOT may allow the employee to return to work. When an employer is well informed regarding what is required under the law, they can act quickly to comply, which is crucial for safe operation and complying with timing requirements under the DOT, especially after an on-duty accident. It’s important to recognize and outline restrictions over the use of marijuana so that employees know their obligations. Employees cannot use marijuana on the job and must understand that using marijuana or CBD products is strictly prohibited under federal law for truck drivers. It’s critical to educate employees regarding the importance of abstaining from marijuana use while on duty and the potential consequences of failing a drug test. Often, employees operate under false assumptions about marijuana usage based on headlines around legalization and employee protections. While several states protect employees’ off-duty marijuana usage, they all have exemptions for federally mandated drug testing and sometimes for safety-sensitive positions. Although marijuana is legal in many states, it remains illegal under federal law, which could impact a driver’s ability to cross state lines with marijuana products. Ultimately, drug testing falls under the jurisdiction of the DOT and supersedes state laws on marijuana legalization. Therefore, business owners must follow DOT drug and alcohol testing regulations to avoid non-compliance issues and maintain a safe workplace. Conclusion: Contractors should prioritize compliance with DOT drug and alcohol testing regulations to maintain a safe workplace and avoid non-compliance issues. By ensuring your employees understand the importance of abstaining from marijuana use and educating them on the Return-to-Duty process, you can streamline your policies and minimize your legal exposure. Working with legal counsel and keeping abreast of the regulations will go a long way toward creating a safer, more informed workplace and preventing attrition based on misinformation.
July 6, 2023
Business
Top Ten Things Every Property Manager Should Know
Here are ten things I believe every property manager should know. These ten things will help you make your job easier and ensure that you are in compliance with the applicable laws. Keep Complete and Accurate Records. I cannot stress the importance of this enough. Keeping complete and accurate records is not only good business practices but it is necessary for evidentiary purposes. Property managers and staff should document conversations and other interactions they may have with tenants, complete incident reports, when necessary, keep track of invoices and work tickets or maintenance requests. Doing these things can help you defend and defeat potential claims that may arise throughout the course of litigation and at trial. This one goes hand in hand with keeping complete and accurate records. It is important that management and staff have regularly scheduled meetings to keep everyone apprised of what is going on in the apartment community and address any outstanding issues. This is important to ensure that everyone is on the same page. Keeping complete and accurate records aids in ensuring that everyone is on the same page, and nothing is overlooked or missing. Be familiar with the terms of the lease. It is important to familiarize yourself with the terms of the lease. Although North Carolina General Statutes (NCGS) Chapter 42, the Residential Rental Agreements Act, governs residential agreements such as leases, some of the provisions in it are default provisions that are only applicable in the absence of an express lease provision. For example, NCGS §42-3 outlines the notice requirements for issuing a notice for nonpayment of rent; however, leases may contain forfeiture clauses that waive this notice requirement. So, if there is ever a question about notice or whether something is permissible, the first thing you should look at is the lease. Does the lease waive notice? Is this conduct prohibited by the lease? Nail down the facts. Generally, cases in which a complaint in summary ejectment are filed are fact specific. Did the tenant tender rent according to the terms of the lease? Did the tenant engage in activity which is prohibited by the lease? What evidence do you have to support what is being alleged in the complaint? Cases like these, specifically summary ejectment actions, turn on the occurrence of specific events. It is important that you are aware of everything that happened and any communication with the tenant (another reason why keeping complete and accurate record is important). For example, was some time of agreement entered given the tenant additional time to pay, are there any pending maintenance requests, did the tenant make any formal complaints, etc. You want to ensure that in the event you go to court, there are no surprises. Be organized. I recommend having a system in place to eliminate any confusion about who should be doing what and what course of action should be taken if certain events occur. Having a clear plan in place, outlining the steps management should take when looking to file a complaint, in summary, ejectment makes the process a lot smoother. You should always have a signed copy of each tenant’s lease on file and a current ledger so you and your attorney can easily determine what type of notice should be issued, if any, and the amount of past due rent owed. These two things should always be readily accessible. Always Follow Up and Follow Through. You should always follow any phone conversation or conversation you have in person with a tenant with an email summarizing what you discussed and what action will be taken if any is necessary. Always ensure that tenants execute all the necessary documents, such as signing the lease, completing a move-out receipt, and signing a release if applicable. Pay Attention to Detail. Because summary ejectment actions are fact specific, it is important that you pay close attention to the details. Please ensure that any notice you issued complies with the terms outlined in your lease, list the correct address, and names all leaseholders. For example, does your lease require that all notices be signed? Does it require that all notices are sent via email, US mail, or some other carrier? Does the lease require that any notices to be sent to address other than the address of the leased premises? For summary ejectment actions, sometimes, the devil can be in the details. If in doubt, ask questions and seek advice. There may come a time when a tenant asks you a question or a situation arise where you don’t have the answer or don’t know what you should do. That’s ok! If you are unsure, tell the tenant that you will have to get back to them and reach out to someone in a supervisory role or to an attorney to get some guidance. Be consistent. Be consistent in enforcing the rules and regulations. This will make your job a lot easier and help curb any discrimination claims and fair housing issues. Are you prepared to offer what you offered one tenant to every tenant who asks? Stay informed. Things are constantly changing; legislation is being passed, new case law is being introduced. It is important that you stay informed of any changes and how they can affect the processes if you have in place.
June 29, 2023
Estates and Trusts
Trusts and Estate Planning Tips for the LGBTQ+ Community
Pride Month is an important time for celebrating the LGBTQIA+ community and promoting equality, acceptance, and visibility. Estate planning is a crucial aspect of personal financial planning for individuals and families, regardless of their sexual orientation or gender identity. Here are six trusts and estate planning tips for the LGBTQ+ community that may be particularly relevant during Pride Month: Wills and Trusts: Creating a will or a trust is essential for ensuring that your assets are distributed according to your wishes after your passing. Without a valid will or trust, your estate will be subject to intestacy laws, meaning New York State will determine who will inherit from you and in what proportion. The rules of intestacy may not align with your intentions or benefit your chosen beneficiaries. By creating an estate plan, you have the opportunity to specify how you want your assets to be distributed, including to your chosen family, friends, or organizations. Beneficiary Designations: Review and update your beneficiary designations on all of your financial accounts, including retirement accounts, life insurance policies, and other financial accounts. Ensure that the named beneficiaries reflect your current wishes. If you are in a relationship that is not legally recognized, it’s imperative that your loved one is designated as a beneficiary. Healthcare Directives: Consider creating advance healthcare directives such as a healthcare proxy and a living will. These documents allow you to appoint someone to make medical decisions on your behalf and outline your preferences regarding medical treatments and end-of-life care. Selecting a trusted person who will respect your wishes, including your chosen family or partner, is crucial to ensure your healthcare wishes are honored. If you do not have these documents in place, many states, like New York, allow your next of kin to make end-of-life decisions for you. Guardianship for Your Children: If you have children or dependents, it is vital to establish guardianship arrangements in case something happens to you. Ensure that your estate plan specifies who you want to care for your children and provide for their well-being. This is especially important for couples who are not legally married or who may face additional legal complexities in some jurisdictions due to the lack of protection or recognition of LGBTQ relationships. Your Local LGBTQ+ Laws: Understanding the laws and regulations regarding LGBTQ+ estate planning in your jurisdiction is so important. Laws can vary by country, state, or even local jurisdiction, and they may impact your ability to protect your chosen family, distribute assets, or claim inheritance rights. Consulting with an estate planning attorney who has experience in LGBT estate planning is imperative. Nondiscrimination Language: When drafting estate planning documents, you should consider including non-discriminatory language to ensure that your wishes are carried out without prejudice or discrimination based on sexual orientation or gender identity. This will help protect your loved ones from potential challenges to your estate plan based on discriminatory interpretations or actions. Please feel free to contact me to navigate the legal complexities of LGBTQ+ estate planning and to ensure that your estate plan aligns with your goals and values.
June 27, 2023
Intellectual Property
Supreme Court Limits First Amendment Protection in Trademark Parody Case
Decision Jack Daniel’s Properties, Inc. v. VIP Products LLC, No. 22-148 (U.S. 2023). This month, the Supreme Court clarified the interplay between the First Amendment’s protection of freedom of expression and the Lanham Act’s protection against trademark infringement in a case that dealt with a manufacturer of dog toys modeled off of famous liquor bottles. In Jack Daniel's Properties, Inc. v. V.I.P. Products L.L.C., No. 22-148 (U.S. 2023), the Supreme Court ultimately held that when analyzing the propriety of the use of another's trademark, the critical question is whether the trademark is being used for "source identification"—i.e., to communicate the maker, manufacturer, or creator of the work in question. If so, then there is no threshold First Amendment inquiry and an infringement claim can proceed as usual, regardless of whether the use of the trademark had been intended as a parody. Background of Case Jack Daniel's is a case about "dog toys and whiskey," Justice Kagan writes in the very first sentence of the Court's opinion. The dispute began when V.I.P. Products began manufacturing a dog toy primarily modeled after the famous Jack Daniel's Whiskey bottle called "Bad Spaniels." Although the toy largely borrowed the trappings of the iconic Jack Daniel's bottle and label, it altered the words "Jack Daniel's" to "Bad Spaniels," "40% ALC. BY VOL" to "43 percent poo," and "Old No. 7 Brand Tennessee Sour Mash Whiskey" to "Old No. 2 On Your Tennessee Carpet." The toy also disclaimed that it was "not affiliated with Jack Daniel's Distillery." Shortly after the Bad Spaniels chew toy hit the market, Jack Daniels demanded V.I.P. cease its sale. Rather than comply, V.I.P. sought a declaratory judgment in the District Court of Arizona, asserting: (a) it was protected from an infringement claim under the First Amendment according to the test set out for artistic works in Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989) (adopting a two-pronged threshold test for the Lanham Act to apply: (1) determining whether use has "artistic relevance"; and (2) if so, whether the use is "explicitly misleading" as to the source or content of the work); and (b) it was protected from a dilution claim because the toy was a parody and qualified as fair use under 15 U.S.C. § 1125(c)(3)(A). Jack Daniel's countersued, asserting trademark infringement (based on consumer confusion) and dilution. Lower Court Decisions At first, the District Court rejected V.I.P.'s arguments. It held that because the use of Jack Daniel's trademark identified the alleged source of V.I.P.'s product, First Amendment protections did not apply. The district court also refused the parody defense to dilution for essentially the same reason—i.e., the exclusion did not apply when the use of the mark identified the source of the alleged diluter's product. After a bench trial, the district court found “consumers were likely to be confused about the source of the Bad Spaniels toy and that the toy’s negative associations with dog excrement (e.g., “The Old No. 2”) would harm Jack Daniel’s reputation.” The Ninth Circuit reversed. The appellate Court determined the threshold First Amendment Rogers test did apply "because Bad Spaniels is an expressive work" and "communicates a humorous message." In addition to remanding the case on the infringement claim, the Court of Appeals also rejected the dilution claim, reasoning that since the work "parodies and comments humorously on Jack Daniel's," it was protected under the "exclusion for noncommercial use" per 15 U.S.C. § 1125(c)(3)(C). On remand, the District Court applied the Ninth Circuit’s analysis and granted summary judgment in favor of V.I.P. on the infringement claim. After the Ninth Circuit affirmed the second judgment, the Supreme Court accepted Jack Daniel's appeal on the infringement and dilution claims. The Supreme Court’s Decision Reversing and remanding, the Supreme Court largely agreed with the District Court's original analysis. Generally, it held that the threshold First Amendment Rogers test does not apply when someone uses a trademark as a trademark—that is, to identify the source of a product. In so doing, the Court provided several examples to help explain when trademark use is source-identifying versus when it is used to convey another expressive function. For example, the band Aqua's use of Mattel's trademark "Barbie” in the song "Barbie Girl" did not speak to the song's origin but was used to promote a message of positive body image. Another example is the use of "Louis Vuitton" in the film The Hangover: Part II, where a character uses the mark to describe his luggage but mispronounces the name. The use was to convey something about the character – he wants to be seen with the luxury brand but doesn't know how to pronounce its name. These marks were not used to identify the source of the goods but to perform another expressive function, and the Rogers test would apply. On the other hand, when the use "at least in part [is] for source identification," as here where V.I.P. has used trademarks and trade dress derived from Jack Daniel's registrations as a designation of the source to promote its products, then the First Amendment Rogers does not apply because the "defendant may be trading on the goodwill of the trademark owner." For similar reasons, the Court also rejected the Ninth Circuit's decision about the noncommercial exclusion to dilution for "parody" and "fair use." Ultimately, the Court held that neither the First Amendment nor the “noncommercial exclusion” exception to liability applied. Thus, the lawsuit was remanded for further proceedings. Key Takeaways Brand owners have kept a close watch on Jack Daniels, as many were concerned that the Court would significantly expand the immunizing power of parody and humor in trademark infringement cases, allowing a potential infringer to dodge litigation by invoking Rogers. The Court's decision quells those fears. By drawing a clear line under the applicability of the Rogers test in disputes involving trademarks that contain expressive elements, the Court upheld the central ten-ant of trademark law: those using a mark that is similar to or evokes another's trademark as a source identifier to promote its goods or services will be subject to the likelihood of confusion inquiry under the Lanham Act, even if the use is in parody or overtly humorous. The First Amendment considerations do not create a safe harbor for those who trade on the goodwill of another's trademark to gain an advantage. To be clear, the Court's holding does not eviscerate the role of parody. Jack Daniel's only makes the Rogers test unavailable as an escape hatch to achieve a summary dismissal of the infringement action. Satire remains a viable defense in the context of a standard likelihood of confusion inquiry. As the Court noted, "a parody is not often likely to create confusion. Self-deprecation is one thing; self-mockery, far less ordinary." In sum, Jack Daniels refocuses the inquiry on the likelihood of consumer confusion. Companies are encouraged to consider these considerations as they evaluate new trademarks or trade dress during product and brand development. This summary of legal issues is published for informational purposes only. It does not dispense legal advice or create an attorney-client relationship with those who read it. Readers should obtain professional legal advice before taking any legal action.
June 23, 2023
One Minute of Overtime
Home Healthcare
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. With limited exception for companionship services, most individuals hired to provide home health care services are likely to be considered non-exempt employees. Home health care providers should take care to ensure proper classification of their workforce.
June 21, 2023
Business
Foreign-Owned U.S. Entities Have Until June 30, 2023 To File Form BE-12 With The Bureau of Economic Analysis
This year, the Bureau of Economic Analysis (“BEA”) of the U.S. Department of Commerce is conducting a mandatory five-year survey on foreign investments in the United States for fiscal years ending in 2022. The survey covers financial and operating data of U.S. affiliates of foreign multinational enterprises. The survey is used to produce statistics on the scale and effects of foreign-owned business activities in the United States. Reporting on BEA’s direct investment surveys is mandatory under the International Investment and Trade in Services Survey Act (P.L. 94–472, 90 Stat. 2059, 22 U.S.C. 3101–3108, as amended). The act protects the confidentiality of the data that companies report. BEA is prohibited from granting another agency access to the data for tax, investigative, or regulatory purposes. A BE-12 report is required for each U.S. affiliate, i.e., for each U.S. business enterprise (including real estate held for non-personal use) in which a foreign person or entity owned or controlled, directly or indirectly, 10 % or more of the voting securities or equivalent interest of a U.S. business enterprise, at the end of the business enterprise's fiscal year that ended in the calendar year 2022. Certain private funds may be exempt from filing. Which BE-12 report to file depends on the size of the U.S. entity. See the chart on the BEA website. U.S. entities that were at least 10% owned by a non-U.S. entity in 2022 and whose total assets, sales, or gross operating revenues or net income did not exceed $60 million in 2022 must file BE-12C. Larger foreign-owned U.S. entities may need to file BE-12A or BE-12B. The forms are available online on the BEA website. Companies that did not file a hard copy of the BE-12 by May 31, 2023, can still file an electronic copy online via the BEA website by June 30, 2023. Failure to provide the required information may result in fines ranging from $5,580 to $55,808 and possible criminal penalties, including imprisonment. If you have any questions or need assistance with filing BE-12, please contact me at 212-545-1900 or mbloemsma@offitkurman.com. DISCLAIMER: The information contained in this blog alert is intended for informational purposes only; and should not be relied upon or construed as legal advice.
June 20, 2023
Immigration Law
Form I-9 Requirement Flexibility to End on July 31, 2023
The U. S. Immigration and Customs Enforcement (ICE) recently announced the end of COVID-19 temporary flexibilities for Form I-9, Employment Eligibility Verification.[1] Starting July 31, 2023, employers must complete in-person physical document inspections for employees whose documents were inspected remotely during the temporary flexibilities. Employers who have been using the COVID-19 flexibilities have until August 30, 2023, to complete the physical inspection of identity documents. The change does not impact the ability of employers to use 3rd party authorized agents to conduct the required in-person inspections.[2] The flexibility provisions allowed employers that are operating remotely to complete Form I-9 Section 2 document review remotely (e.g., electronically over video link, fax, or email) within three business days of hire. The flexibility provisions are for employees who are working remotely due to COVID-19 precautions “until they undertake non-remote employment on a regular, consistent, or predictable basis, or the extension of the flexibilities related to such requirements is terminated, whichever is earlier.” Employers who conducted remote Form I-9 document review are advised to begin implementing the in-person verification of identity and employment eligibility documentation for employees who were hired on or after March 20, 2020, and who presented such documents for remote inspection in reliance on the flexibilities first announced in March 2020. After documents have been physically inspected, the employer should add “COVID-19” and “documents physically examined” with the date of inspection to the Section 2 additional information field on the Form I-9, or to Section 3 as appropriate. A large number of employees now work remotely and are not in proximity to the employer. An authorized representative may be used for completing Section 2 of the Form I-9. Anyone other than the employee may serve as an authorized representative, subject to state law. Once the authorized representative completed Section 2, the employer must ensure that the form appears to be free of errors. The employer has liability for any paperwork deficiencies in the Form I-9 completed by the authorized representative. Immigration laws and regulations may change over time, so it's important to consult with an immigration attorney or refer to the official sources, such as the U.S. Citizenship and Immigration Services (USCIS) website, for the most up-to-date information. The I-9 form is used to verify the identity and employment authorization of individuals hired for employment in the United States. Previously, due to COVID-19 restrictions, the U.S. government temporarily allowed employers to inspect Section 2 documents remotely (e.g., via video conference) when completing the I-9 verification process. Since the remote inspection option will no longer be available, employers will need to resume in-person verification procedures as outlined in the I-9 instructions. Many third-party services are available to employers wishing to conduct inspections outside their geographic reach, employers may also use their law firms to do this.[3] Furthermore, Employers are required to conduct a physical inspection of original documents related to previous remote I-9s. Here are some key points to consider: In-person verification: Employees should present their original, unexpired documents in person to their employers or an authorized representative. The employer or representative must physically examine the documents to determine their authenticity. Timing: Section 2 of the I-9 form must be completed within three business days of the employee's first day of work. During this time, the employer must review and record the information from the employee's documents on the I-9 form. Acceptable documents: The employee must present acceptable documents that establish their identity and employment authorization. The USCIS provides a list of acceptable documents on the back of the I-9 form, which includes items such as a U.S. passport, driver's license, Social Security card, and permanent resident card (green card). Completing the form: The employer or authorized representative should complete Section 2 of the I-9 form, including recording the document title, issuing authority, document number, and expiration date (if applicable). The employer must sign and date the certification section. Annotation of compliance for prior remote I-9s: For prior completed I-9s under the remote rules Employers should annotate forms I-9 to verify the physical inspection.[4] The reverification should be added to the Additional Information field in Section 2. Best practice is to include the date and full name and title of the individual who completed verification. Review of information: Employers should establish a review process of all I-9s to make sure all forms are valid, and information is entered correctly. Errors happen and can be costly for employers, a simple review process can head off a lot of issues early on. Retaining and storing forms: Employers are required to retain I-9 forms for each employee and make them available for inspection by authorized government officials if requested. The forms should be stored securely and maintained for three years after the initial date of hire of the employee, or one year after the date employment ends, whichever is later. Consult the USCIS guidelines for details on retention and storage requirements. It’s important for employers to stay informed about any changes or updates to the I-9 verification process. Checking the USCIS website or consulting with an immigration attorney will help ensure compliance with the latest requirements. [1] https://www.ice.gov/news/releases/ice-updates-form-i-9-requirement-flexibility-grant-employers-more-time-comply [2] https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/complying-with-i9-and-everify-requirements-in-the-united-states.aspx [3] Many services have sprung up in this space that act as authorized agents for physical inspections - there are many like this out there: https://workforce.equifax.com/solutions/i-9-anywhere?utm_source=google&utm_medium=cpc&utm_campaign=https://workforce.equifax.com/solutions/i-9-anywhere?utm_source=google&utm_medium=cpc&utm_campaign=EWS_ES_I-9-Anywhere_2023&utm_term=&utm_content=&utm_term=&utm_content=&gad=1&gclid=CjwKCAjw04yjBhApEiwAJcvNoXj_RnOCaE4EaXxp9hrUXzgZSubb5HxDKKQypMMQL9nOFRrzZ3TQeBoCXFAQAvD_BwE&gclsrc=aw.ds https://dcmobilenotary.com/i-9. [4] Form I-9 Examples Related to Temporary COVID-19 Policies | USCIS
June 20, 2023
Intellectual Property
Chew on This – SCOTUS Rules that Dog Toy Parodying Jack Daniel’s Can’t Hide Behind First Amendment
On June 8, the US Supreme Court ruled unanimously in favor of Jack Daniel’s in Jack Daniel’s Properties, Inc. v. VIP Products LLC, overturning the decision of the 9th Circuit Court of Appeals. Justice Elena Kagan wrote the opinion, holding that VIP Products’ sale of a dog chew toy in the shape of a Jack Daniel’s bottle, which also has a label replacing “Jack Daniel’s” with “Bad Spaniels” and other parodying of the Jack Daniel’s label in a manner referring to dog defecation, was not sufficiently protected under the First Amendment to avoid liability for trademark infringement or dilution. The SCOTUS decision was not a complete victory for Jack Daniel’s. Having held that the “Bad Spaniel’s” chew toy was not protected from claims of trademark infringement and dilution, Justice Kagan sent the case back down to the US District Court for a determination of whether there is a likelihood of confusion and whether “Bad Spaniels” dilutes Jack Daniel’s trademarks. VIP Products’ position was that its “Bad Spaniels” chew toy was an expressive work that conveyed a humorous message and that, therefore, the First Amendment protects the use from a claim of trademark infringement. However, VIP Products had also claimed that “Bad Spaniels” and other parodying elements were trademarks owned by VIP Products. This contributed to VIP Products’ downfall: because VIP Products was using “a trademark to designate the source of its own goods—in other words, … used a trademark as a trademark,” as Justice Kagan put it, VIP Products was not entitled to special First Amendment protection. In making this ruling, Justice Kagan made a point of saying more than once that the parody aspect of the “Bad Spaniels” toy could factor into an analysis of the likelihood of confusion. In other words, where such content is a parody, consumers are less likely to be confused into thinking that the parodic products come from the same source as the product being parodied. SCOTUS also knocked down the 9th Circuit’s holding that there was no trademark dilution. Under federal trademark dilution law, owners of famous trademarks can sue users of identical and very similar trademarks even where there is no likelihood of confusion. The 9th Circuit said VIP Products’ use was “noncommercial” because it was a parody and conveyed a humorous message. Justice Kagan disagreed, finding that the 9th Circuit’s view was too expansive and noting that there are limitations in the dilution law where the parodying content is used as a source identifier of the accused product. What can we take away from this decision? This is by no means an absolute bar on selling items that may constitute a parody of a brand, even a famous one. However, creators of such products would do well to avoid treating the parodying elements as trademarks and avoid any content or action that could mislead the public into thinking there is a source connection between the parodied product and the parodying one.
June 13, 2023
Franchise Law
COVID-19 and State Franchise Renewals
Originally posted on June 12, 2020, content updated on June 12, 2023. This blog post may contain information that was accurate at the time of publication but could become outdated over time. We strive to provide relevant and timely content, but circumstances, facts, and data can change. Users are encouraged to verify the current status of any information presented and seek updated guidance where necessary. The COVID-19 pandemic disrupted the work of state franchise regulators as well as the franchisors they regulate and the franchise buyers who benefit from state regulation. The pandemic also affected accounting firms, sometimes delaying the completion of audited financials, resulting in late renewal filings. Several states took positive steps to ease their filing rules as a result of COVID-19. It’s worthwhile to reflect on these changes so that we can do even better in the face of future calamities, whether that means a recurrence of the pandemic before a vaccine is available or the outbreak of a different pandemic. Extended deadlines Some states extended their franchise renewal filing deadlines. As a result, franchisors that missed their renewal deadlines were not required to submit new initial applications for franchise registration. This would have increased their filing fees. At the time, the fee for an initial registration in New York, for example, was $750, while the renewal fee was $150. In the State of Washington, the initial fee was $600, while the renewal fee was $100. Of course, these extensions did not allow franchisors to sell franchises during the period in which the franchise registration had lapsed. California On March 22, 2020, the California Commissioner of Business Oversight issued a notice stating that, through June 30, 2020, the Department of Business Oversight would waive the additional $225 filing fee for franchise renewals that are filed after the registration has lapsed. At the time, the initial registration fee in California was $675, and the renewal fee was $450. Hawaii The Hawaii Department of Commerce and Consumer Affairs, which normally requires renewal filings within three months after the end of each year, at that time extended the deadline from March 31, 2020, to April 30, 2020. Illinois At that time, the Illinois Attorney General’s Office issued a notice stating that a franchisor whose registration was due to expire between April 1, 2020, and June 1, 2020, was automatically granted an extension of 60 days from its anniversary date to file a franchise renewal application without penalty. Indiana The Indiana Securities Commissioner announced on April 7, 2020, that “any franchise registration that was set to expire between March 16, 2020, and May 31, 2020, was automatically extended to June 30, 2020.” Maryland The Securities Commissioner of Maryland issued an order on March 17, 2020, stating that a franchisor whose registration was due to expire during the Coronavirus State of Emergency was granted an extension of that registration “for a period of time equal to 30 days after the date the Governor of Maryland declared the end of the Coronavirus State of Emergency.” Minnesota The Minnesota Commerce Department issued a Guidance notice on March 30, 2020, stating that the deadline for franchisors whose annual reports were due by April 30, 2020, was extended to June 30, 2020. New York New York law normally requires franchisors to file updated Franchise Disclosure Documents (FDDs) no later than four months after the end of each fiscal year. In a notice dated March 24, 2020, as revised on May 12, 2020, the Office of the Attorney General granted a filing deadline extension. Any registration renewal or amendment that was due between March 1, 2020, and June 6, 2020 (the “Relief Period”) was extended for 90 days from the end of the Relief Period. Virginia On March 17, 2020, the Virginia State Corporation Commission extended the renewal deadline for franchises whose registration was due to expire while the Judicial Emergency Declaration by the Supreme Court of Virginia remained in effect. The initial 21-day extension was extended on April 2, 2020, “to remain in effect during the pendency of the Judicial Emergency Declaration or any similar subsequent declaration, declaration extension or order of the Supreme Court of Virginia or such other time period as may be subsequently ordered by the Commission.” Washington The Washington Department of Financial Institutions issued a notice on April 8, 2020, stating that “applicants may pay the renewal fee of $100 to complete an application for franchise registration … for any offering that was previously registered and that expired, or that will expire, between March 1, 2020, through June 30, 2020, until further notice.” Electronic filings Paper and CD ROM filings can be a challenge when filers work from their homes. Online filings are usually the easiest and always the fastest way to file. For some states, franchise filings continue to be accepted electronically. Minnesota, Rhode Island and Wisconsin, for example, offer electronic filing. Indiana required franchise applications to be made electronically since January 1, 2020. California’s DocQNet self-service portal existed long before the pandemic, but in its notice of March 22, 2020, the California Commissioner of Business Oversight stated that “the Department is strongly urging” that all franchise filings be submitted electronically during the COVID-19 pandemic. In its notice of April 8, 2020, the Washington Department of Financial Institutions reminded filers that all franchise filings are now required to be submitted online through the Department’s electronic filing system. Hawaii also encouraged franchisors to file online using the state’s securities portal. New York never offered electronic franchise filings until New York City became the epicenter of the COVID-19 pandemic. But while New York’s COVID-19 notice required that all franchise filings “be submitted by email in addition to the required paper and/or CD filings,” the email submission must also contain a copy of the check that must still be mailed to the Department of Law. Remote Notarization and E-Signatures A few states required the franchisor’s certification to be signed by an officer of the franchisor before a notary public. It may have been impossible during a pandemic to find a notary or an officer willing to sign before a notary when almost everyone was sheltered in place. For this reason, Washington waived notary requirements “while social distancing directives remain in effect.” New York and Hawaii temporarily suspended the requirement that the notary be physically present at the signing. In other words, audio-visual technology was adequate. Of course, this worked only when the signing officer and the notary were present in the same state. California went a step further by announcing that it would accept documents “filed on DocQNet that are signed electronically using e-signature software, such as DocuSign, in which case notarization of signatures will not be required.” Final Thoughts Extending deadlines is a useful tool when special circumstances affect large numbers of filers. But electronic filings and e-signatures are helpful to everyone with or without a pandemic. We can hope that states that do not offer online filings may now see the need to move quickly and institute online alternatives to paper and CD-ROM requirements, and that more states allow e-signatures as an alternative to in-person notarization requirements.
June 12, 2023
Business
Paycheck Protection Program (PPP) Loan Forgiveness Primer
This blog post may contain information that was accurate at the time of publication but could become outdated over time. We strive to provide relevant and timely content, but circumstances, facts, and data can change. Users are encouraged to verify the current status of any information presented and seek updated guidance where necessary. Originally posted on 6/9/2020, no content changes. You applied for and obtained a Paycheck Protection Program loan. Now it is time to ask for the loan to be forgiven. Listen and watch here for a 30 minute presentation from the Offit Kurman CV-19 Business Response Team on the what, when and how to that apply to the loan forgiveness process, along with keen insights into that process. This presentation was recorded on June 5, 2020. For any updates to the loan forgiveness rules since then, please contact us.
June 9, 2023
Family Law
There is More Than One Way to Get Divorced
One of the most important decisions that a couple makes after they have made the difficult decision to separate and divorce is choosing which process to use to make the significant decisions about the terms of their separation. Many separating parties do not even realize this is a choice that can be made; instead, by default, they fall into a process without making an educated decision concerning their process options. There are five main process options that everyone going through a separation should be educated about: “Kitchen Table” Negotiation: “Kitchen Table” negotiation is characterized by two spouses having conversations and negotiating the terms of their separation directly with one another. One or both spouses may have an attorney in the background, with whom they may consult as needed and who may draft a written agreement. But the spouses primarily engage with one another in the negotiation process. Some spouses are able to negotiate some topics via this method, but not others. For example, spouses may be able to resolve how they are dividing their furniture and furnishings using the “Kitchen Table” method but then need to use another process option to resolve the remaining issues. Mediation: In Mediation, the two spouses work with a neutral mediator whose job is to help the spouses discuss the issues and reach an agreement. The mediator does not represent either spouse and cannot offer advice to either spouse. Either spouse may have their own attorney who they can consult with before and after mediation sessions. If the spouses agree, they may bring their attorneys to the mediation sessions. There are mental health professionals who specialize in mediating parenting issues. Some couples choose to work with a mental health professional-mediator to mediate their parenting plan and then use an attorney-mediator (or another process entirely) to facilitate the negotiation of financial issues. The Mediation process is often used in conjunction with other process options. The Collaborative Process: The Collaborative Process is an out-of-court dispute resolution process in which both spouses have their own Collaboratively trained attorney who represents them and advises them throughout the process. The spouses and their attorneys meet together to discuss the various issues and work together to brainstorm and agree on options that work for both spouses. At the start of the Collaborative Process, the spouses and the attorneys sign an agreement committing that they will only work together in settlement negotiations and that these attorneys will not represent the parties in a contested court litigation. This helps to ensure that both spouses and both attorneys are focused on and properly incentivized to reach an agreement. In the Collaborative Process, spouses commit to disclose all relevant information and documents that are necessary so that both spouses can make informed decisions. In addition, the spouses commit to maintain the status quo until they reach an agreement otherwise. This means that neither spouse can make any significant unilateral changes while in the Collaborative Process. The spouses can choose to retain mental health professionals and financial professionals to be part of the Collaborative team. In these cases, the mental health professionals typically take the lead on parenting issues and address emotional issues that are impeding a settlement. The financial professionals help the spouses gather their financial documents and then prepare cash flow projections and schedules of assets and liabilities to help inform the negotiations. Attorney-Led Negotiations: This is the most loosely defined “process” and can vary considerably, depending on the attorneys involved. In essence, each spouse retains an attorney to represent them in the negotiation. The attorneys communicate directly with one another, and any formal settlement negotiations are exchanged between the attorneys. Often, the attorneys facilitate an informal exchange of documents that both sides have the information they need to engage in informed settlement discussions. The spouses speak with their attorneys to create and respond to settlement proposals. Proposals are exchanged until an agreement is reached, and the attorneys draft a written agreement for the spouses to sign. This process is often used in conjunction with mediation or litigation. The process timeline can vary considerably. Litigation: The Court Process involves filing appropriate paperwork with the Court and asking that a Judge make decisions for you. In litigation, the parties are giving up control over the outcome. But, for parties whose settlement positions are so far apart that reaching an agreement will not be possible or practical, then it may be necessary to have a judge render a decision so that the parties can obtain a final resolution. Litigation is also the only process where you can force an unwilling party to engage; or, if they still won’t engage, then can obtain relief in the absence of their participation after fulfilling certain requirements. The Court process can be very difficult to navigate without legal representation. The financial cost associated with litigation often makes it the most expensive process. There is no one “right” process. In making a process choice, it’s important to consider your individual circumstances to determine which process(es) are most likely to be successful for you. Factors to consider in making this process decision include, but are not limited to, the dynamic between you and your spouse; the needs of your children; the emotional support you and your spouse will need; the technical complexity of the issues; and your financial resources/constraints. In any initial consultation with an attorney, you should be ready to inquire about these process options and engage in an individual conversation about which process(es) may work for you.
June 1, 2023
Family Law
The Current Approach to Adoption Records and Further Need for Change
New Jersey’s Current Policy New Jersey allows an adoptee access to only certain specific records and restricts who can view these records and what kinds of information may be redacted. In May 2014, the New Jersey State Legislature passed a law permitting individuals born and/or adopted in the State of New Jersey, who are at least 18 years of age, to be able to access their original birth certificate beginning in January 2017. In addition to the adoptee, a direct descendant or spouse of the adoptee, an adoptive parent or legal guardian, and/or an agency of the state or federal government may also access the original birth certificate. As the law was passed in May 2014 but not effective until January 2017, birth parents were permitted to submit a request to redact their name or other identifying information before December 31, 2016. Under this law, birth parents MAY submit a contact preference form to the State Registrar, which allows a birth parent to indicate whether or not they would like to, or prefer not to, be contacted by an adoptee. If a birth parent files a contact preference with the Registrar, they must simultaneously complete and submit a family history form. The form includes medical, cultural, and social history information regarding the birth parent. Any birth parent who requests no contact is asked for, but not required, to update their family history information every ten years until age 40 and every five years after that. The Problem With New Jersey’s Current Approach So – what’s the problem with this approach? First and foremost, a birth parent is not required to submit a contact preference form with the State Registrar, and if they choose not to, they have no requirement imposed upon them to complete and submit a family history form. This leaves all of the information and decision-making in the hands of the birth parent and may potentially deprive the adoptee of necessary and essential background information. Notably, a birth parent is not required to update their family history information. This means that if a birth parent submits a form and then in future years either learns of essential biographical or ancestral information or has a major change in health information, they have no duty to report this information. Additionally, an adoptee is not permitted to obtain their birth certificate until reaching age 18. Should any health concerns arise before said age, the adoptee has no opportunity to obtain necessary biological information. Although this legislative change demonstrates a shift in favor of unsealing at least some information, this approach still fails to provide an adoptee with information. It also fails to impose any duty on the birth parent to provide said information. A birth parent does not need to send said information to anyone directly. Still, a duty to file this information with the Registrar would at least allow an adoptee to access this information. New York’s Current Policy On November 14, 2019, Governor Andrew M. Cuomo signed a new bill which was memorialized in Public Health Law 4138 and went into effect on January 15, 2020. This law provides unrestricted access to original birth certificates for all adult-adopted persons. It also allows access to copies of original birth certificates for direct line descendants or legal representatives. The Problem With New York’s Current Approach While this law permits an adoptee access to their original birth certificate, there is no procedure in place or information provided regarding the use of contact registries or access to the background, biological, and medical information. In addition to the lack of awareness surrounding contact registries, this law creates no obligation on behalf of the birth parent to provide updated background information. Other states have made similar amendments to their respective laws in recent years, but the general, larger issue of access to information remains. Without requirements that birth parents file a detailed background and history with their State Registrar and have a continuing obligation to amend and update same, adoptees will lack essential information for their own lives and future generations.
May 31, 2023
Page 26 of 36
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