Offit Kurman Blogs

Intellectual Property

Does the First Amendment Protect the Use of Parody for Commercial Purposes?

The US Supreme Court Will Decide On March 22, the US Supreme Court will hear arguments in Jack Daniel's Properties, Inc. v. VIP Products LLC. In a case that pits trademark rights against free speech claims, Jack Daniel's has sued VIP Products for trademark infringement due to VIP Products' sale of a dog chew toy in the shape of a Jack Daniel's bottle with a label replacing "Jack Daniel's" with "Bad Spaniels" and engaging in other parodying of the Jack Daniel's label in a manner referring to dog defecation. VIP Products takes the position that its parody should be protected under the First Amendment Freedom of Speech Clause. Jack Daniel's view is that a company selling a commercial product that makes humorous use of the Jack Daniel's brand should not be entitled to First Amendment protection. I discovered in a store in Colorado that "Bad Spaniels" is just one of a line of dog toys parodying liquor brands. Although it may be that Jack Daniel's is the only brand worked up enough about this to bring a lawsuit (and take it all the way to the Supreme Court), several third parties have filed briefs in support of Jack Daniel's position, including Campbell Soup Company, Nike, and several trade associations. The Supreme Court's decision will likely issue in June.

February 23, 2023

Business

Does Litigation Risk Loss of Potential Insurance for Environmental Harm? New Jersey Court Weighs In

Businesses risk losing potential insurance coverage for investigation and remediation of environmental contamination if they pursue claims against third parties without carefully considering and preserving available coverage. In fact, in recent ligation in New Jersey with implications nationwide, two insurance companies tried to avoid providing coverage for environmental expenses incurred by the owner of the contaminated property by arguing that the property owner’s claims were barred by New Jersey’s “entire controversy” doctrine as a result of prior litigation between the property owner and its former tenant and the tenant’s insurance company. See Industrial Corner Corp. v. Public Serv. Mut. Ins. Co., Docket No. 20-06677 (D.N.J. February 8, 2023). New Jersey’s “entire controversy” doctrine is a unique formulation of the more typical doctrine of “res judicata,” which generally bars claims that could have and should have been brought in prior litigation. However, based on the specific facts at issue, the New Jersey federal district court allowed the property owner to continue to pursue insurance coverage from the insurers despite the prior litigation. That is, the property owner has owned the New Jersey property at issue since 1971. From 1971 through 2008, the property owner leased the property to a tenant conducting manufacturing. The tenant discharged perchloroethylene (“PCE”), a solvent used to clean metal and dry-clean fabric, through its operations and thereby contaminated the property. After learning of the contamination, the property owner sued the tenant and the tenant’s insurance company in separate litigation for damages under the terms of the lease and the applicable insurance policies. The property owner successfully obtained compensation from these parties but was unable to recover all of its costs. As a result, following the conclusion of this litigation, the property owner sought coverage from its own insurance providers. As noted above, the providers responded by arguing that the property owner’s claims were barred by New Jersey’s “entire controversy” doctrine. In evaluating the applicability of the “entire controversy” doctrine, the court determined that two of the three elements of the doctrine weighed in favor of dismissing the property owner’s claims. However, the third and final element was not satisfied. In particular, the court determined that the “entire controversy” doctrine did not apply because the claims by the property owner and its insurance providers did not arise from the same transaction or occurrence as the prior litigation against the former tenant and the tenant’s insurer. The court weighed several factors and determined that, even though all of the claims arise from the PCE contamination, the claims differ in certain key regards. The court also found it dispositive that the property owner could not have brought all of the claims in the same action because they were not yet ripe, i.e., because its insurance providers had not yet refused to provide coverage. While this decision is helpful to insureds, it is easy to formulate a set of facts where the property owner’s insurers could have escaped liability based on the “entire controversy” doctrine or otherwise. As such, this decision provides a necessary warning to parties, whether located in New Jersey or beyond: carefully evaluate all potential recovery options, including private parties and insurance providers, before instituting litigation and take precautions to preserve and maintain all recovery options.

February 22, 2023

Labor and Employment

Is an Individual with a Workers’ Compensation Injury Protected Under the ADA?

Companies operating in the logistics industry, whether it be as contractors for DHL, FedEx, Amazon, or the like, are all too familiar with the challenges of having a workforce that relies primarily on physical ability and the challenges associated with employees who suffer from injuries on the job that impact their ability to perform their job duties and potentially create unsafe working conditions. With physically demanding jobs comes the increased chance for accommodation requests under the Americans with Disabilities Act (ADA). When an employee is injured on the job, contractors are often quick to ensure they follow proper protocols for any potential workers’ compensation claims. However, they often overlook the application of the Americans with Disabilities Act, which may cover the injured worker if the employee meets the definition of disability. The ADA applies to employers with 15 or more employees. It prohibits employers from discriminating against qualified disabled individuals and requires that such employers provide reasonable accommodations that allow them to perform the essential functions of their job or to enjoy benefits and privileges of employment equal to those without a disability. An individual has a disability and is subject to protection if they have a physical or mental impairment that substantially limits major life activities. Crucially, the ADA does not require a showing of long-term effects to qualify, and short-term impairments are covered if they are considerably limiting. Often, employers mistakenly believe that employees struggling with short-term impairments due to a workplace injury do not qualify for protection under the ADA and are too focused on the initial worker’s compensation assessment to realize they also need to consider the implications of the ADA. If an employee asks for accommodation after a workplace injury, the ADA may apply, and the company must perform an individualized assessment to determine whether the individual meets the ADA definition of disabled, and if they do, assess what reasonable accommodations to grant based to help the employee perform their job duties. An accommodation request in the logistics industry can take many forms, including: requests for light duty, including limiting hours worked and weight lifted; requests for periodic unpaid leave or an alternative work schedule to attend physical therapy appointments; increased breaks; and reassignment to a less physically demanding position. While an employer is not obligated to grant the exact accommodation an employee requests, it must assess the request and engage in the interactive process with the employee to determine the employee’s limitations and needs, whether the accommodation requested is appropriate, and what other accommodations are needed. Employers’ obligations under the ADA are complex and fact specific. So complicated, in fact, that the U.S. Equal Employment Opportunity Commission’s (EEOC) guidance is seventy-six pages long. Employers must have a clear and compliant ADA policy that includes instructions for employees on pursuing an accommodation request.

February 22, 2023

Immigration Law

Policy U-Turn: US Visas to be Issued in DC

On February 9th Bloomberg Law reported on an interview they conducted with Julie Stufft, Deputy Assistant Secretary for Visa Services at the Bureau of Consular Affairs, in which Ms. Stufft outlined a Department of State (DOS) plan to restore stateside visa renewals. Which means that eligible nonimmigrants would be able to renew their visa stamps without leaving the country. This marks the turning point in the DOS policy on stateside visa renewals, which were largely discontinued in 2004 except for diplomats and international organization employees. It is great news for H and L visa holders who will be included in the trial program. Details are currently vague, but it will likely include a limited subset of those visa holders. The Covid-19 pandemic brought the policy into the forefront, with multiple organizations seeking assistance from the DOS in accepting stateside visa renewals. This was requested as the pandemic had led to the global closure of embassies and consulates worldwide, which in turn prevented thousands of individuals from traveling abroad with the fear they would not be able to return as there was no mechanism to renew their visa. Further, The Trump administration policies to ban certain visa issuances and strip the DOS of staff still have legacy impacts to the visa processing process. The many voices calling for stateside visa issuance fail to grasp the reality of implementing such a complex and massive undertaking. The DOS certainly has the capabilities to set up such a program, but the resources and procedures are vast, ranging from detailed security screening to secure document handling, possibly including online visa interviews with applicants and a myriad of additional complexities. Ms. Stufft alluded in her interview that the expansion of stateside visa processing would require setting up a new consular division in Washington, D.C. The main point of contention that ended the vast majority of stateside visa processing was the biometric requirements for visas required in 2004. How the DOS plans to address this is vague right now. Still, there are many national biometric screening centers operated by the United States Citizenship and Immigration Services (USCIS). We could see an expansion of use of these centers or the reliance on previously obtained biometrics – a policy implemented by the USCIS during the Covid-19 pandemic. Although the details provided are vague, this change in policy provides another level of protection for nonimmigrant visa holders and hopefully provide more certainty for international travel as visa wait times continue to suffer worldwide. The DOS has continued to highlight their programs to address worldwide visa backlogs, which have included expanded waivers for interviews, special programs to assist individuals affected by the trump administration policies and increased appointments. Further steps recommended to the DOS by a variety of groups include adding additional missions, allowing online visa appointments and streamlining the interview waiver process to cut wait times. If you’d like to discuss further, please reach out to Michael.Freestone@OffitKurman.com.

February 17, 2023

Litigation

Virginia’s 2023 Wage Hike – New Year, New Minimum!

Virginia is one of nine jurisdictions en route to a $15 minimum wage (or higher) by 2026.  As it is, Virginia is one of nearly 30 states to affect an increase this year.  The first of the year saw the Commonwealth’s previous minimum of $11 per hour -- which had only gone into effect at the beginning of 2022! -- bump up by another $1 to $12 per hour.  By comparison here in the “DMV,” Virginia continues to lag its neighboring jurisdictions, Maryland and D.C., with the first of the year, Maryland’s minimum jumped from $12.50 to $13.25 per hour (for companies of certain minimum size – i.e., 15 or more employees), while D.C.’s $16.10 hourly rate comes in higher than all fifty states, many of which still abide by the federal minimum of $7.25, which has remained unchanged since 2009. Virginia’s increase is the latest in a series of step-ups scheduled to take effect in the Commonwealth between now and 2026.  The minimum wage rate in Virginia recently climbed $1.50 per hour in 2021 and, after this year’s additional $1 per hour, is slated to increase again to $13.50 per hour in 2025 before reaching the targeted $15 per hour in 2026.  That is, of course, so long as the most recent changes to Virginia’s Minimum Wage Act are not repealed or otherwise limited by the now Republican-controlled General Assembly.  Keep a watchful eye out for attempted changes this legislative session to Code Section 40.1-28.10 as attempts are anticipated to try to walk back the increases or at least to “slow the roll.” Tipped employees, such as restaurant wait staff, continue to face a meager $2.13 per hour minimum but, with tips factored in, must meet the $12 per hour minimum rate.  If you are a small business owner with questions about the new laws and your obligations regarding them, Offit Kurman has the resources to help.  Not sure whether your workers are independent contractors or employees subject to the minimum wage requirements?  Choosing to do nothing is still making a choice – and the wrong one could prove very costly in this context.  If you’re uncertain whether and/or how this or any other new law (recreational cannabis, for instance?) might impact you or your business, let me get you connected with someone who can help.

February 15, 2023

One Minute of Overtime

Deductions from Salaries

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 employer is permitted to withhold a portion of an exempt employee’s salary in limited circumstances, such as when the employee is absent from work for one or more full days for personal reasons other than sickness or disability; for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.

February 15, 2023

Business

Ninth Circuit Court of Appeals Submits Second Certified Question to California Supreme Court On COVID-19 Related Insurance Coverage

On February 7, 2023, the Ninth U.S. Circuit Court of Appeals (“9th Circuit”) sent a certified question to the California Supreme Court on an issue in a pending case relating to insurance coverage for COVID-19-related business shutdowns. This is the second time within the past 45 days that the 9th Circuit has done so, having submitted a different question to the California Supreme Court in another COVID-19 coverage case on December 28, 2022. The certified question sent on February 7, 2023, relating to a pending dispute between French Laundry Partners and its insurer, The Hartford, asks, “[i]s the virus exclusion in French Laundry’s insurance policy unenforceable because enforcing it would render illusory a limited virus coverage provision allowing for the possibility of coverage for business losses and extra expenses allegedly caused by the presence and impacts of COVID-19 at an insured’s properties, including the loss of business due to a civil authority closure order?” The certified question sent on December 28, 2022, relating to a pending dispute between concert organizer Another Planet Entertainment and its insurer Vigilant Insurance Co., asks “[c]an the actual or potential presence of the COVID-19 virus on an insured’s premises constitute ‘direct physical loss or damage to property’ for purposes of coverage under a commercial property insurance policy?” The topics of the two certified questions are not the main points here. Instead, it is the uncertainty that remains as COVID-19-related insurance cases make their way through Courts – in California and elsewhere – that is paramount. Indeed, in its February 7, 2023, submission to the California Supreme Court, the 9th Circuit stressed: Courts at both the state and federal levels are grappling with the application of California insurance contract interpretation law to coverage for losses from business shutdowns due to government closure orders in response to COVID-19. While both state and federal courts have published opinions providing some guidance, there remains much uncertainty as to how California law applies in many scenarios. The prevalence of and uncertainty surrounding COVID-19 insurance litigation is underscored by our certification to the Supreme Court of California on December 28, 2022, in another case asking whether the actual or potential presence of the COVID-19 virus can constitute ‘direct physical loss or damage to property’ for the purposes of coverage under an insurance policy. The stakes are high in COVID-19 coverage cases, which center on an insured’s loss of business due to government closure orders. After more than two years of litigation across the nation, uncertainty remains. The 9th Circuit’s sending of two certified questions to the California Supreme Court in the past 45 days is a manifestation of this and an effort to, in the words of the 9th Circuit, “gain some efficiencies through concurrent consideration of our certification in [the French Laundry] case.” Time will tell what the California Supreme Court decides to do in these two instances and whether more certified questions will come from Federal Courts to State Supreme Courts as courts seek clarity and consistency in handling COVID-19-related insurance coverage cases. If you are still grappling with claims associated with losses due to government closure orders in response to COVID-19 or other comprehensive general liability or property insurance coverage issues, please feel free to contact us for a consultation.

February 14, 2023

Family Law

DIY Divorces Recap

There’s a lot to be said for embracing a do-it-yourself (DIY) ethos. DIYers develop useful skills, sometimes discover new hobbies, and often save a great deal of money. But while plenty of DIY projects can reduce upfront costs and bring personal fulfillment, there are some things you should never, ever do yourself. Giving your house a fresh coat of paint? Go for it! Brewing beer in your garage? Sure—why not? Handling your own divorce proceedings? Not a great idea. Looking to handle a divorce or another family legal matter in the best way possible? Don’t rely on a simple document retrieval service. Offit Kurman’s Family Law attorneys are dedicated to resolving conflicts and protecting your and your family’s interests in a fast, straightforward, and cost-effective manner. See for yourself what we can do for you.

February 13, 2023

Labor and Employment

New Federal Workforce Mobility Act Would Further Limit Non-Compete Agreements

Last week, politicians reintroduced the federal Workforce Mobility Act, a bipartisan bill intended to limit the use of non-compete agreements with U.S. employees. As the bill states, “economists now estimate that 1 in 5 workers is covered by a non-compete agreement.” It further finds that non-compete agreements are “blunt instruments that crudely protect employer interests and place a drag on national productivity by forcing covered workers to wither idle for long periods of time or leave the industries in which the workers have honed their skills altogether… [they] also reduce wages, restrict worker mobility, impinge on the freedom of a worker to maximize labor market potential, and slow the pace of innovation in the United States.” TheWorkforce Mobility Act would: Limit the use of non-competes to business sales and dissolution of partnerships; Require most employers to post a notice of the law for employees; Allow the Federal Trade Commission to bring an action to enforce the act according to the Federal Trade Commission Act; Direct the Department of Labor to investigate violations – confidentially - and allow it and state attorneys general to bring legal action against the employer who uses a non-compete; and Provide that employees may sue their employers or former employers to enforce the act, recovering both actual damages and attorney’s fees and costs. If this act passes, it will expose employers to a minefield of liabilities and enforcement actions. At this point, given both the proposed FTC rule banning non-competes, discussed in my previous blog, companies need to meet with their attorneys regarding protecting information, assets, and business by means of other agreements. Prediction from this litigator/ agreement drafter: if this bill passes, a great deal of litigation is coming. This bill doesn’t allow employees to agree to arbitrate any of these disputes. Employees will have little disincentive to file because they will recover their attorney’s fees and costs if they win the lawsuit. Looking forward, it will be more important than ever to craft an up-to-date agreement with employees to protect a business and its trade secrets.

February 9, 2023

Labor and Employment

New Harvard Wage Study Shows Employers Are Inflating Titles to Illegally Dodge Overtime

I am constantly reminded of employers’ mistakes in determining that their workers are exempt from overtime payments under the Fair Labor Standards Act. I recently came across a report of a new study from researchers at Harvard Business School and the University of Texas at Dallas. This study, covering 2011 – 2018, examined “title inflation,” misclassification of employees to avoid paying overtime, and the risk of U.S. Department of Labor/ USDOL suits. The report states, in part, "Our evidence indicates that firms strategically use job titles to exploit regulatory thresholds to avoid paying for overtime work … We find that [this practice] is also strongly associated with the usage of fake managerial titles and … thus can be used as a timely indicator of potential FLSA violations." The law requires that in order to classify an employee as exempt from overtime, the employee must earn a certain amount of salary, as well as perform the job duties of a non-exempt worker (for instance, managing others, professional duties based on a higher degree, and computer programming.) During the study’s time period, there was a 485% increase in managerial titles and pay that barely bumped workers over the minimum salary required to classify workers as exempt. Inflated titles are used to justify salary: researchers saw a barber called a “grooming manager” and a front desk clerk labeled as a “director of first impressions.” Overtime — or lack thereof — is prevalent in issues of wage theft. Nearly two-thirds of wage theft violations that resulted in fines involved overtime issues, according to the study's analysis of U.S. Department of Labor data from 2010 to 2021. Of all back wage fines levied by the agency, over 80% were for overtime. The USDOL has recovered millions of dollars in back pay for unpaid overtime. If just one employee blows the whistle – it costs employers dearly. Review the employee’s primary duties and then classify them correctly. If concerns arise about retention, know that the employee can retain the title (and salary); but watch hours closely to ensure overtime isn’t owed and set a policy requiring management’s permission to work overtime. Consult an experienced attorney for help to determine classification.

January 25, 2023

Elder Law and Advocacy

Significant Increase in New York Medicaid Income and Resource Limits to Protect Individuals 65 and Over and Disabled Adults

In the past, Medicaid recipients who received MAGI Medicaid benefits (individuals under the age of 65) could lose their Medicaid benefits when they reached age 65. Once an individual reached 65, he had to reapply for non-MAGI Medicaid benefits with strict income and resource limits. In 2022, Medicaid’s monthly income limit was $934 for an individual and $1,367 for a couple; the resource limit was $16,800 for an individual and $28,133 for a couple. As a result, an individual with a monthly income of $1,500 and assets totaling $25,000 would lose his Medicaid benefits when he turned 65 because he was over the income and resource limits. While his income and resource had no significant increase, he has suffered a significant loss of benefit. Governor Hochul recently expanded coverage for older New Yorkers and disabled adults by increasing the income limits to match the income limits of MAGI Medicaid recipients under the Affordable Care Act, which takes effect this year. As a result of this expansion, the same individual with a monthly income of $1,500 and savings of $25,000 would not lose his benefits once he turned 65.  Starting January 1, 2023, the monthly income limit for a single individual is $1,563 (a significant increase from $934), and for a couple, $2,106 (from $1,367 in 2022). The 2023 resource limit for an individual is $28,133 (up from $16,800 in 2022), and for a couple, $37,902 (up from $28,133 in 2022). For those already receiving Medicaid benefits and utilizing pooled income trusts to protect their excess income, they may continue with their current spend-down plan until Recertification. The increased income limits will apply upon the Medicaid recipients’ renewal. Those Medicaid recipients who prefer not to await rebudgeting upon Recertification may request a rebudgeting of income with the local Department of Social Services or, in New York City, Human Resources Administration. It is important to note that this expansion not only protects those who are currently receiving Medicaid benefits but also allows low-income New Yorkers who have been unable to qualify for non-MAGI Medicaid benefits in the past due to the strict income and resource limits to apply now and qualify for the benefits they need. If you or your loved ones have questions about how these recent significant changes may impact you, please feel free to contact me with any questions and to discuss your options.

January 20, 2023

Labor and Employment

The FTC Has Issued a Proposed Rule Making Non-Competes Unlawful

On January 5th, the FTC issued a proposed rule prohibiting businesses from entering into or maintaining non-compete agreements with workers (employees or independent contractors). While non-disclosure agreements and non-solicitation (of customer and employee) agreements are generally, permitted under the proposed rule, the FTC intends to take a functional approach to enforcement. So, even restrictions that are not denominated as non-competes but effectively restrict an employee’s ability to seek or accept employment will be prohibited. Significantly, the new rule would require employers to rescind existing non-competes and actively inform workers that they are no longer in effect. The only exception contained in the proposed rule is for persons selling a business or their entire interest in a business or persons owning at least 25% of a business as to which all or substantially all of the assets are being sold. The FTC has solicited comments on the proposed rule – which may be filed through March 10th, 2023. Please reach out to me or my colleagues at Offit Kurman regarding questions about the proposed rule or any other employment matter.

January 19, 2023

Labor and Employment

Federal Trade Commission Proposes Rule Banning Non-compete Agreements Between Employers and Workers

As I mentioned in a 2022 post, the Federal Trade Commission (FTC) has been considering a rule banning non-competes for a while now; President Biden has publicly voiced his support for the ban. The current proposal is based on the FTC’s belief that non-competes violate anti-competition laws. The rule would supersede all state, local, and federal laws on this subject. The rule has a sweeping definition of a non-compete: “a contractual term … that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment.” The rule outlaws other provisions which are not labeled “non-competes,” too: if an agreement not to solicit the employer’s customers or not to disclose the employer’s information functions as a non-compete, it is illegal. The FTC rule also intends to forbid employee promises such as repayment of the employer’s training costs if the employee worked for less than a certain period of time, where the repayment is not “reasonably related” to the employer’s actual training costs. The proposed rule would become final 60 days after it’s published in the Federal Register. Employers would have 180 days after publication to comply. The rule states that employers would have until that time to rescind any existing non-competes (including those applicable to ex-employees). This rule would upend centuries of state common law. Many of my clients have agreements that would disappear or change drastically. Drafting agreements to protect business and confidential information would become a whole different game. If you are in Delaware and would like to attend an in-person roundtable at which I’ll speak about this topic, please reply to this email, and I will send you an invitation. If you can’t attend, I am planning to record it; contact me for a copy of my remarks.

January 18, 2023

One Minute of Overtime

Professional 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 is exempt pursuant to the administrative exemption, and not subject to the minimum wage and overtime requirements, if the employee is paid consistent with the salary basis test (or, in some cases, a sufficient hourly rate) and their primary duty is the performance of work requiring advanced knowledge (predominantly intellectual in character) and which includes work requiring the consistent exercise of discretion and judgment where the advanced knowledge is in a field of science or learning and the advanced knowledge is customarily acquired by a prolonged course of specialized intellectual instruction.

January 18, 2023

Litigation

The Virginia Consumer Data Protection Act: Is your Business Ready?

Following California’s lead, Virginia became the second state to enact a data privacy statute.  VA Senate Bill 1392.  The Virginia Consumer Data Protection Act (VCDPA) went into effect on January 1, 2023.  Here’s what you need to know. Personal Consumer Data Rights Each individual Virginia resident may exercise the following data privacy rights: Confirmation: The right to confirm whether or not an entity or individual is processing your personal information and to access such personal data; Correction: The right to correct inaccuracies in your consumer personal data, taking into account the nature of the personal data and the purposes of the processing of your consumer personal data; Deletion: The right to delete personal data provided by or obtained about you; Copies: The right to obtain a copy of your consumer personal data that you previously provided to a Data Processor in a portable and readily usable format; and Opt-out: The right to opt out of any processing of personal data for (i) targeted advertising, (ii) the sale of personal data, or (iii) profiling in furtherance of decisions that produce legal or similarly significant effects concerning you. Who is Subject to the VCDPA? Controllers: a person or entity that determines the purpose and means of processing personal data Processors: a person or entity that processes personal data on behalf of a controller Data Controller Obligations: Limitations: Must limit collection of personal data to that which is adequate, relevant and reasonably necessary; Disclosure: Cannot collect personal data for purposes inconsistent with the disclosed purposes for which data is collected; Data Security: Must establish and maintain reasonable data security practices Anti-Discrimination: Prohibited from discriminating against consumers in processing data, including a consumer’s exercise of rights under the VDCPA Consent: Obtain consumer consent before processing sensitive data Privacy Policy: must be reasonably accessibly and inform consumers of their rights, among other requirements Online Submission: must establish a system for consumers to submit data rights requests. Appeals: consumers have the right to appeal decisions regarding consumer data rights requests if action is not taken in response to a request. Controllers need to establish a system to determine appeals. How is the VCDPA Enforced? Exclusive enforcement by the Attorney General of Virginia Enforcement actions authorized; damages of up to $7,500.00 per violation No private right of action. Individuals and entities cannot sue under the VCDPA. Exceptions and Exemptions A controller or processor is not subject to the VDCPA unless itControls or processes personal data of at least 100,000 Virginia residents; or Controls or processes personal data of at least 25,000 Virginia residents and derives over 50 percent of gross revenue from the sale of personal. Financial institutions regulated by the Gramm Leach Bliley Act are exempt. These are just a few of the requirements of the VDCPA, which could change as Virginia begins its 2023 legislative season.  If you or your organization may be subject to the VCDPA, reach out to Anders Sleight | Offit Kurman today to discuss your obligations and compliance management.

January 16, 2023

Family Law

What is Dissipation and How Does the Court Handle It?

Under Maryland Law, and in most jurisdictions, dissipation is the expenditure of marital assets for the principal purpose of reducing the funds available for equitable distribution. It usually occurs when one spouse uses marital property for their own benefit for a purpose unrelated to the marriage at a time when the marriage is undergoing an "irreconcilable breakdown."' The Courts generally do not find dissipation when marital funds are used to pay attorneys' fees. Usually, dissipation is found when one party uses marital funds for things like: a prostitute, gifts for a paramour, or extravagance far more than what would be normal family expenses. The burden of proof in most jurisdictions, both expenditures themselves, as well as the persuasion that the funds were used in a manner that deprived the other spouse in such a way that the court may make that determination, lies with the party making the allegation of dissipation. Generally, the court has great discretion in making that determination.

January 13, 2023

Family Law

My Spouse is an Alcoholic. How Will This Impact My Custody Case?

The goal is to keep the children safe while still maintaining a relationship with their alcoholic parent.  Ideally, both parents and their attorneys are on the same page with implementing safety precautions for the sake of the children.  These may include the alcoholic parent enrolling into a sobriety program and maintaining a treatment plan for sobriety through therapy, support groups, etc.  Subscribing to a live-time breathalyzer like Soberlink to ensure they are sober while the children are in their care is another helpful tool.  Some parents have interlock devices on their vehicles to avoid driving while intoxicated.  The age of the child(ren) is also a factor.  As children get older, they can call 911 should they need help, but younger children are at more risk with an alcoholic parent because they can’t simply call for help. If the alcoholic is in denial, things get more complex, and you will need to strategize with your lawyer how to best protect the child(ren). The goal is not to punish the alcoholic but to keep the children physically and emotionally safe.

January 11, 2023

Bankruptcy

Foreign Proceedings: When is Chapter 15 Out of Reach for Foreign Liquidators?

This article provides an update on trends in the case law recognition of foreign insolvency proceedings under Bankruptcy law. Global Cord Blood Corp. (the “Company”) is a company registered in the Cayman Islands with headquarters in Hong Kong and primary operations in the People’s Republic of China (“PRC”). The Company is in the business of collecting and storing umbilical cord blood for the stem cells. Two major shareholders had differences about a transaction the Company entered.  One of these shareholders challenged the transaction, which purported to transfer millions of new shares of stock and over $600 million in corporate funds to two other companies. The objecting shareholder commenced a proceeding before the Grand Court of the Cayman Islands to challenge the transaction. The Grand Court appointed Joint Provisional Liquidators (“JPLs”) as fiduciaries to investigate and, if appropriate, seek to recover misappropriated funds. Among other things, the petition to the Grand Court asked that the Company be wound up pursuant to section 92(e) of the Companies Act if winding up was  “just and equitable.” The order appointing the JPLs authorized them to take any action as may be necessary to obtain recognition of their appointment in the PRC and in any other relevant jurisdiction and to make applications to the courts of such jurisdictions for that purpose or for the purpose of obtaining information to assist them in their investigations. While the proceeding before the Grand Court was pending, the shareholder that petitioned the Cayman Island Court filed an application with the United States District Court for the Southern District of Texas seeking judicial assistance pursuant to 28 U.S.C. § 1782.[1] The Texas Court granted the application, but the transferee of the Company’s funds and shares moved to vacate the order. Shortly thereafter, the JPLs petitioned the Bankruptcy Court for the Southern District of New York for recognition of the proceeding pending in the Grand Court of the Cayman Islands as a foreign main proceeding. The JPLs also sought related relief, including authorization to conduct discovery in the United States in connection with assertedly fraudulent misconduct, including what the JPLs assert was a possible misappropriation of more than $600 million in corporate funds. Judge Jones answered this question in a 2022 opinion in the In this case of Global Blood Cord Corporation; Judge Jones of the Southern District of New York denied recognition of the foreign proceeding under Chapter 15 [2] because he found that the proceeding in the Cayman Islands at that stage fell outside the range of types of proceedings that had been found eligible for assistance under Chapter 15 and outside the meaning of applicable provisions of the Bankruptcy Code. In re Glob. Cord Blood Corp., No. 22-11347 (DSJ), 2022 WL 17478530, at *1 (Bankr. S.D.N.Y. Dec. 5, 2022). At the time of the petition, the JPLs had not taken any steps to wind up the company and no steps related to classification, adjustment, or resolution of specific debts. Accordingly, Judge Jones held that the Cayman Islands proceeding lacked two essential characteristics of a “foreign proceeding” pursuant to Section 101(23). It was not a collective proceeding, and it was not a proceeding for fixing or adjusting debts or creditors rights. The JPLs were not seeking to identify creditors, quantify and classify Global Cord Blood Corp.’s debts, or determine a scheme of distribution to creditors on account of those debts. The creditor body had not even received formal notice of the Cayman Proceeding, and no claim submission or review process was in place. Considering the nature of their appointment, i.e., the investigation of officers and directors conduct in connection with the transaction subject to attack, it appears that pursuing 1782 discovery would be the only avenue for the JPLs at this stage of the Cayman Island Proceedings. For more information about seeking recognition of foreign insolvency proceedings in the U.S. or seeking to collect evidence in the U.S., please contact a member of Offit Kurman’s Creditors’ Rights, Reorganization and Bankruptcy Group. For further information, please feel free to reach out to Albena Petrakov. ___________________________________________ [1] Section 1782 provides foreign parties litigating outside of the U.S. unique access to U.S.-style discovery. Under 28 U.S.C. section 1782 (section 1782), an “interested person” may request that a district court authorize discovery in the United States “for use in” foreign litigation even without the foreign tribunal’s knowledge or involvement. A district court has power to order section 1782 discovery where “(1) the person from whom discovery is sought reside[s] (or [is] found) in the district of the district court to which the application is made, (2) the discovery [is] for use in a proceeding before a foreign tribunal, and (3) the application [is] made by a foreign or international tribunal or ‘any interested person.”’ [2]  Chapter 15, enacted pursuant to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), incorporates the Model Law on Cross-Border Insolvency promulgated by the United Nations Commission on International Trade Law (UNCITRAL). 11 U.S.C. § 1501 (a) sets forth the objectives of chapter 15, i.e., cooperation between U.S. courts/authorities and those of foreign countries involved in cross-border insolvency cases, greater legal certainty for trade and investment, fair and efficient administration of cross-border insolvencies that protects the interests of all creditors, and other interested entities, including the debtor; protection and maximization of the value of the debtor’s assets and (5) facilitation of the rescue of financially troubled businesses, thereby protecting investment and preserving employment.

December 30, 2022

Labor and Employment

HUD Clarifies Dual Employment Limits

In Mortgagee Letter 2022-22, dated December 15, 2022, FHA Commissioner Julia Gordon has clarified FHA’s position on what dual employment and compensation is permitted for employees of FHA-approved lenders. The Mortgagee Letter outlines changes to the Handbook, which will now permit loan originators to have dual employment, including working as a real estate sales agent. Prior to the Mortgagee Letter, the Handbook provided that the Mortgagee’s employees had to work exclusively for the lender unless the company determined that the outside employment did not create conflict of interest. Further, employees were prohibited from having multiple roles or multiple sources of compensation from a single FHA transaction. Most FHA lenders concluded that this prohibited their loan officers from acting as an agent or receiving compensation as a real estate agent in an FHA transaction. Further, there was ambiguity as to whether the loan originator could act as a sales agent when even originating a conventional Fannie/Freddie loan. The prior Handbook, 4060.1, REV-2, Section 2-9(G), had clearly prohibited other outside employment in the mortgage lending, real estate or a related field. The Mortgagee Letter now provides that “[p]articipants that have a direct impact on the mortgage approval decision” are prohibited from having multiple roles or sources of compensation. These participants include underwriters, appraisers, inspectors and engineers. Participants that do not have a direct impact on the mortgage approval process are now permitted to have multiple roles and sources of compensation for services actually performed. Of course, a sales agent also acting as a loan originator will need to be properly licensed or registered to perform both activities. Further, the lender should ensure that dual employment is permitted by state law. Finally, any such employment must be treated consistent with RESPA requirements. The Mortgagee Letter is effective immediately for case numbers assigned after the date of the Mortgagee Letter. For more information about this topic, contact Wayne Watkinson.

December 27, 2022

Family Law

New D.C. Law Will Remove Divorce Waiting Requirements

The Council of the District of Columbia has passed a law that will eliminate the requirement that spouses live separate and apart without cohabitation before filing for divorce. On December 3, 2023, the Council passed D.C. Act 25-322, which deletes from the D.C. Code the requirement that spouses either be separated for six months if the separation is mutual and voluntary or for one year if the separation is not mutual and voluntary. The bill is awaiting congressional review and should be approved in early 2024. After the bill is approved by Congress, parties seeking divorce need only establish that they no longer wish to remain married. The new legislation is significant because it will allow parties to seek court intervention immediately rather than having to wait six months or a year before filing for divorce. D.C. Act 25-322 is also significant because it adds a new requirement that the Court take into consideration the history of physical, emotional, and financial abuse by one party against the other in awarding alimony and distributing marital property and debt. Finally, the legislation adds a provision to the D.C. Code that gives the court discretion to award exclusive use of the family home or any other dwelling unit available for use as a residence while the divorce case is pending. A copy of D.C. Act 25-322 is available online at B25-0042 – Grounds for Divorce, Legal Separation, and Annulment Amendment Act of 2023 (dccouncil.gov).

December 18, 2022

Family Law

Kim Kardashian and Kanye West settlement: is $200,000 a Month in Child Support Reasonable?

Child support is an obligation established by the Court to ensure that both parents, regardless of their relationship with each other, financially support their children to the best of their ability. Alternatively, as did Kim and Ye, the parties are permitted to agree to a number so long as it comports with the State specific guidelines. Depending on the State in which the children reside, the Court will use State specific guidelines and formulas to calculate a parent’s basic child support obligation. While the guidelines provide a presumptive amount of child support for parties with a combined net income that falls within the guidelines, most States provide exceptions for parents with extreme income (high or low). High net worth child support cases are more complicated and involve consideration of all expenses of the child(ren) in light of the parents’ extreme income (i.e., high incomes exceeding the guidelines). In New Jersey, the parties’ respective incomes are subject to a formulaic calculation and consideration of the factors set forth in N.J.S.A. 2A:34-23(a). The New Jersey Rules of Court Appendix IX-A, Considerations in the Use of Child Support Guidelines defines extreme parental income as a combined after-tax income in excess of $187,200 annually. In such circumstances, the Court is obligated to supplement the basic child support amount after consideration of the aforementioned factors. In New York, the parties’ respective incomes are subject to a formulaic calculation pursuant to the Child Support Standards Act [DRL §240, FCA §413] to determine the presumptively correct child support obligation. The C.S.S.A. applies up to the applicable combined income cap. Effective March 1, 2022, the income cap for child support calculations was set at a combined income of $163,000 (not adjusted for Federal or State income taxes). This income cap is subject to an adjustment every two years. In New York, the Court may choose to apply the formulaic percentage to the income in excess of the cap, or it may choose to specifically supplement support based upon the above-capped income pursuant to the enumerated factors. While there is no way to know whether or not the agreed-upon monthly child support in the Kardashian matter is reasonable, in New Jersey, the Court would engage in a fact-intensive analysis of the children’s needs and lifestyle to supplement the basic child support. That is, “where the parties have the financial wherewithal to provide for their children, the children are entitled to the benefit of financial advantages available to them.” Isaacson v. Isaacson, 348 N.J.Super. 560, 579 (App.Div. 2008). In fact, “children are entitled to not only bare necessities, but a supporting parent has the obligation to share with his children the benefit of his financial achievement.” Id. at 580. However, as the Court held in Isaacson, “no child, no matter how wealthy the parents, needs to be provided [with] more than three ponies.” Id. at 584. Calculating and determining a child support obligation can be a complicated process with long-term consequences, affecting your finances for years to come. Our firm is well-equipped to handle all divorce and family law matters, no matter your circumstances. You can contact Emily to discuss your child support matter in New York or New Jersey by email at Emily.Ingall@offitkurman.com or by phone at 929-476-0046.

December 8, 2022

Executive Playbook: How to Find Time as a Business Owner

On this month’s episode of the Executive Playbook, Mike Cammarata and Russell Berger discuss one of the most persistent challenges facing business owners and professionals: finding time.  As the floodgates have opened and we are all stretched to our limits, it is important to have a plan, to have sufficient support, and to be thoughtful about managing where you spend your time.  Mike and Russell share their personal strategies for dealing with the fact that there are only 24 hours in a day.  Listen in to learn more.

December 7, 2022

International

The New European Supply Chain Regulations

In February 2022, the European Commission issued a new proposed Directive to all 26 EU countries setting forth a new legal framework to govern human rights and environmental concerns and issues in vertical supply chains. The European Parliament and the Council of the EU must still adopt this proposed Directive. Adoption is expected within about one year (2023), and each EU member state will have two years to implement the final Directive into its national legislation. The Directive will set minimum but not maximum standards for national legislation. Some countries in the EU have already passed initial supply chain legislation. Most so far are of limited scope, but a new extensive German statute becomes effective January 1, 2023. While the German law will have to be modified to meet the standards outlined in the final EU Directive, we can assume the remaining EU countries will pass legislation similar to the German law since it is already so extensive and detailed. Attached is a comparison of the various legislative schemes as currently established. Since compliance with the existing German statute, if applicable, and the future EU Directive criteria, when implemented, will be so demanding, we have prepared an initial guide to serve as a starting point for companies that expect to comply. This guide should provide a reasonable basis for developing a compliance program. Click HERE to read the guide. For more information, contact Steven Thal.

December 1, 2022

Bankruptcy

Wrinkles in Bankruptcy Court’s Jurisdiction: Assumption of Executory Contracts in A Foreign Company’s Chapter 11

Foreign companies frequently choose to reorganize in the United States under Chapter 11 of the Bankruptcy Code. Examples include various airlines that were forced into bankruptcy because of the pandemic’s effects on the industry, including LATAM Airlines, AeroMexico, and Scandinavian Airlines. Among the often-cited reasons why the U.S. is the jurisdiction of choice for foreign companies are: 1) it has the most well-developed law of any insolvency regime in the world for helping troubled companies restructure their affairs; 2) it allows management control of the restructuring; 3) it provides for approval of prepackaged workouts; 4) U.S. bankruptcy courts can handle corporate groups, and 5) debtors can confirm a reorganization plan with less than unanimous stakeholder support. Another essential feature of the U.S. insolvency regime is the debtor’s right to assume or reject executory contracts and leases with binding effect on the counterparties. The U.S. bankruptcy court’s jurisdictional reach in connection with a motion to assume a contract between a foreign debtor and its foreign counterparty was questioned in early 2022 in the Alto Maipo case. The Court agreed with the counterparty that it did not have personal jurisdiction to approve the assumption of an agreement between Alto Maipo and its counterparty. Alto Maipo SpA and Alto Maipo Delaware L.L.C. sought bankruptcy protection in Delaware to carry out a prepackaged restructuring plan. Alto Maipo SpA is a Chilean company involved in developing, constructing, and operating a run-of-river hydroelectric project in Chile. The counterparty that challenged the Court’s authority to approve the assumption of its executory contract with Alto Maipo SpA, Minera Los Pelambres (“Minera”), is a Chilean company that runs a copper mine. It had a long-term power-purchase agreement with Alto Maipo signed back in 2013. Alto Maipo claimed that the power-purchase agreement was central to the debtors’ reorganization efforts and was the core of their business plan because Minera was obligated to purchase power from the debtors’ hydroelectric project on favorable, predictable, and long-standing terms. The agreement was governed by Chilean law, was written in Spanish, and required Chilean arbitration. Minera had no presence or business activities in the U.S. and was not subject to general or special jurisdiction in the U.S. In response to the Debtor’s Motion for Entry of an Order Pursuant to Sections 363 and 365 of the Bankruptcy Code Approving Assumption of Agreement with Minera (the “Motion”), Minera asserted that the Court could not grant the requested relief without finding and exercising in personam jurisdiction because Alto Maipo had defaulted. The Debtors’ position, supported by the senior secured lender, equity owner of Alto Maipo, the parties to a restructuring support agreement and the unsecured creditor’s committee, was that the requested relief was in rem because (i) the Court had statutory in rem jurisdiction over all property of the Debtors’ estates, wherever located, under 28 U.S.C. § 1334(e)(1), and (ii) separately, it had statutory authority to determine questions of contract-breach under Section 365(b) of the Bankruptcy Code. Minera challenged the position that the Court had the power to address contract breach questions under Section 365(b) exclusively as in rem matter or concerning anyone, including a non-debtor that is not subject to personal jurisdiction in the United States. The Court agreed with Minera because the Debtors sought findings that, among other things, there were no existing defaults and, thus, no required cure under the agreement to comply with Section 365(b). Therefore, the action was not traditionally in rem. “Making the requesting findings regarding default and cure required a determination of the party’s contractual rights and responsibilities in the agreement and would constitute an in personam action. A breach of contract action is a common example of an in personam action and, effectively, the findings sought here would require the same determination whether a breach of contract occurred and the appropriate remedy, if any.” April 26, 2022, Hr’g Tr. at 59, E.C.F. No. 548. This ruling raises the question of whether a bankruptcy court should make an individualized determination on personal jurisdiction for each contract that a foreign debtor is trying to assume and a counterparty raises breach of contract issues, and if it would deter foreign debtor filings in the U.S. For further information, please feel free to reach out to Albena Petrakov.

November 30, 2022

Labor and Employment

New Federal Contractor Rule

The question of who’s an employee with protections and benefits under labor law and who is a contractor not covered by those laws has always been important for many reasons. New trends favoring more flexibility to classify workers as contractors have highlighted the issue even more. The Department of Labor has now proposed a new rule designed to favor the classification of workers as employees. Secretary of Labor Marty Walsh said, “misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.” There is a comment period (make your organization’s position known); then, the DOL reviews them and prepares to finalize the rule. The new proposal from the Department of Labor would change the current test to determine worker status, which had been greatly simplified and had the effect of permitting more workers to be classified as contractors. This proposed rule uses a six-factor test to determine the working relationship. The test is consistent with the analysis federal courts use in making the decision. The proposed DOL test considers the nature and degree of the worker’s control over the work; the worker’s opportunity for profit or loss; investments by the worker and the employer; the degree of permanence of the working relationship; the extent to which the work performed is an integral part of the employer’s business; and the degree of skill and initiative exhibited by the worker. What are the problems if workers are falsely designated as independent contractors? Businesses have to face multiple types of potential claims, including failure to pay employment taxes, failure to provide unemployment and workers’ compensation insurance, Obamacare issues, and the biggie: failure to pay overtime and provide breaks if the worker would have been entitled to overtime and break laws.  So this is worth some serious consideration.

November 10, 2022

Labor and Employment

Delaware Non-Compete Update

As you may know, I provide employment law advice to our teams here at Offit Kurman, assisting our clients in company sales. In that capacity, and because I also draft restrictive covenants for businesses, I try to update my business clients on the latest news regarding non-competition clauses. The Delaware Court of Chancery recently gave us some good information regarding limits that buyers may place on sellers in terms of competing with the sold business. Many deals across the United States are written in accordance with Delaware law, so it has a wide-ranging impact. Recently the Court of Chancery clarified that non-competes which try to prevent a seller from competing with a buyer’s pre-existing business are not enforceable. Kodiak Building Partners, LLC v. Adams, C.A. No. 2022-0311 (Del. Ch. Oct. 6, 2022). Such promises are only enforceable to the extent that they protect the buyer’s interest in the assets or company purchased in the deal. Even more interesting because of its larger potential effect on employment agreement non-competes is the Court’s holding that a seller’s promise in a purchase agreement not to challenge the reasonableness of a restrictive covenant means nothing. It is up to the Court to determine the reasonableness of the terms according to Delaware law. If your company wants a binding agreement, it is worthless to have a party promise that the non-compete is reasonable. I’d argue that this decision extends to employment agreement non-competes because the Court made the ruling based on public policy, which applies to all areas of law. Consult a Delaware lawyer with up-to-date non-compete knowledge to draft your sales and employment agreements. The Court continues to move in favor of allowing free competition.

November 4, 2022