Offit Kurman Blogs

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

Construction

Pennsylvania State Design Professional Boards Adopt New Regulations and Rules for Digital Signatures & Seals

On October 20, 2022, The Pennsylvania State Architects Board, The State Registration Board for Professional Engineers, Land Surveyors and Geologists, and The State Board of Landscape Architects adopted new rules and regulations governing signatures and seals.  The final form of regulation approved by the Independent Regulatory Review Commission (IRRC) provides new guidelines and requirements applicable to licensed design professionals in Pennsylvania. Generally, state law governs the use and application of a design professional’s seal on work performed by the licensed design professional or under immediate supervision or responsible control.  The changes to the regulations are to protect public health, safety, and welfare.  The overall intent of the new regulation of Digital Signatures and Seals is to assure the public, including clients and authorities having jurisdiction, that work product (drawings, plans, and specifications) were prepared by or under the personal supervision of the Registered Architect, Professional Engineer, Professional Land Surveyor, or the Registered Landscape Architect. The regulations generally require mechanisms to allow the design professional, client, or code official to detect modifications by requiring standards for electronic authentication.  The desire is to decrease the incidence of forged or fraudulent sealed documents by unlicensed design professionals.  Because the regulation of licensed design professionals and the use of seals on technical drawings, plans, and specifications is regulated at the State rather than federal level Architects, Engineers, Professional Land Surveyors and Landscape Architects must carefully consult each State design professional Board in order to ensure compliance with the existing licensing laws and regulations. Impact for Architects, Engineers, Land Surveyors and Landscape Architects The new regulations in Pennsylvania generally recognize three separate mechanisms for affixing a signature and seal to final or complete technical drawings, plans, or specifications issued to a client or to a governmental agency for final review. The three methods are as follows: Physical placement of a seal and handwritten signature in permanent ink; Digital placement of a seal and a handwritten signature in permanent ink; and Digital placement of a seal and a digital signature; The second and third categories related to digital sealing with a manual signature and digital sealing with an electronic seal will now require some additional verification and authentication requirements.  To this end, if the licensed design professional is affixing a digital seal or digital seal and signature, the electronic document is required to have an electronic authentication process attached to the digital document.  Thus, under Pennsylvania law, if any data within the digital technical drawing, plan, or specification, which has a digital signature or seal affixed, the digital signature or seal will be invalidated and voided. The practical implication for licensed design professionals practicing in Pennsylvania is that if an Architect, Engineer, Professional Land Surveyor, or Registered Landscape Architect is affixing a digital signature or seal, they will be required to utilize software that will void or invalidate the signature or seal if an alteration is made to a technical drawing, plan, or specification. I have worked on the digital signature and seal regulations in connection with the various Licensure Boards since the summer of 2013.  The regulations will take effect upon publication in the Pennsylvania Bulletin, which is anticipated to occur within the next month.  If you have questions regarding the new Digital Signature and Seal regulations, please reach out at 717-980-3140 or apotter@offitkurman.com.

November 2, 2022

Labor and Employment

New York City’s Pay Transparency Law Takes Effect November 1, 2022

In what is becoming a growing trend among local and state legislative bodies – New York City passed the Pay Transparency Law (the “Law”), otherwise known as Local Law 32 of 2022. The Law was passed in an effort to improve wage transparency, balance the bargaining power between applicants and employers and narrow the wage gap. The Law requires covered employers to list minimum and maximum potential salary amounts in job postings. What You Need to Know: Effective Date:  The Law, which amended the NYC Human Rights Law and was enacted on January 15, 2022, was initially scheduled to take effect on May 15, 2022 – but was later amended to take effect on November 1, 2022. Required Information/Disclosures:  Employers must state the minimum and maximum salary range for the advertised position that the employer, “in good faith,” believes at the time of the posting it would pay for the position. Open-ended salary ranges (i.e., “a maximum of $50,000” or “15/hour and up”) are not acceptable. Salary ranges should be posted for each opportunity where advertisements cover multiple positions. “Salary” refers to base annual or hourly wage. It does NOT include:  (a) health, life or other insurance, (b) paid or unpaid time off, sick or vacation days or employer-funded pension plans, (c) severance pay, (d) overtime, (e) commissions, tips, bonuses, stock or the value of employer-provided meals or lodging. Covered Employers:  All employers with four (4) or more employees or at least one domestic worker. Not all employees must work at the same location, as long as at least one employee works in NYC. Owners and individual employers count toward the four (4) employee minimum, as do independent contractors, part-time employees, paid interns and domestic workers. Temporary employment agencies are exempted from the Law. The Commission defines temporary agencies as businesses that recruit and hire their own employees and assign those employees to perform work at or perform services for other organizations or businesses. Covered Postings:  Any advertisement for a job, promotion or transfer opportunity for a job that would be performed in NYC. An “advertisement” is any written description of an available job, promotion or transfer opportunity –regardless of how disseminated. Importantly, the Law applies not only to public advertisements but also to any internally advertised job, promotion and transfer opportunities. And the Law applies equally to temporary and part-time positions as it does to “permanent” and full-time positions. Employers are not required to post for a position they seek to fill. Geographic Scope:  Positions that can or will be performed, in whole or in part, in New York City, whether from an office, in the field, or remotely from the employee’s home. Violations and Enforcement:  Violation of the Law is considered an unlawful discriminatory practice. The NYC Commission on Human Rights has the authority to enforce the Law. There will be no penalty for first-time violations if the employer corrects the violation within 30 days. However, an employer’s submission of proof that the violation was corrected “shall be deemed an admission of liability for all purposes.” Future violations will subject an employer to monetary damages and civil penalties of up to $250,000. We Can Help: Should you have any questions regarding NYC’s Pay Transparency Law or any other employment matter – please feel free to reach out to Offit Kurman’s Employment Group.

November 1, 2022

Family Law

Dividing Stocks in Divorce

If your spouse has stocks, they will need to be identified as marital or non-marital, valued and divided or offset with another marital asset. Public stock is simple to value.  Once a valuation date is determined, the answer lies in the market’s figures.  Assuming the stock is all marital, and the parties agree to divide it equally, I recommend the parties work with an accountant or representative from the financial institution to ensure the division is as equal as possible considering the cost basis, so one party is not left with a major tax liability. Restricted stock units (RSU) can be a bit trickier because there is no market price to look up.  RSUs are a common incentive for employees in private companies.  They are granted to employees to incentivize them to grow with the business.  RSUs do not have a value when they are granted; instead, they have a vesting schedule.  Once they vest, they have value.   The vesting schedule is important in your divorce and your jurisdiction.  For instance, if the RSUs were granted before the marriage and vested after the marriage, there is some marital component, and you may need an expert to trace the amount.  What comes up more often is when the RSUs are granted during the marriage but do not vest until after the marriage.  Some states consider the unvested RSUs marital, and some do not.  RSUs are also taxed, so that will need to be considered when dividing or negotiating RSUs. There are several ways to divide stocks in a divorce.  The spouse who has the stock may keep them in exchange for another marital asset or offsetting the marital estate somehow.  The parties may decide to divide the public stock.  The parties may agree to equally divide the net value of the stock if, as and when it vests.  Some parties agree to sell and divide the stock prior to divorcing for tax purposes.  There are many other ways to slice the stock pie, but the best option will vary in different divorce cases.  Bottom line is that stocks can become complex, and you need an attorney who knows to ask the right questions, gather the right documents, and reach out to a competent accountant when necessary.

October 31, 2022

Bankruptcy

Bankruptcy 101 for Mortgage Lenders

In the summer of 2022, First Guarantee Mortgage Company filed for bankruptcy in the District of Delaware. Mortgage market analysts forecast a string of mortgage companies to file for bankruptcy in the months or years ahead. Hence, this is an excellent time to remind mortgage lenders and those that might be impacted by their bankruptcy proceedings of the limitations that the Bankruptcy Code places on sales of consumer credit transactions and the cloud hanging over the mortgage lenders’ metaphorical heads after the decision denying confirmation of the Second Amended Joint Chapter 11 Plan of Ditech Holding Corporation and its Affiliated Debtors (the “Second Amended Plan”) In re Ditech Holding Corp., 606 B.R. 544 (S.D.N.Y. 2019). The vast majority of Chapter 11 cases involve early sales of all assets to a strategic or financial buyer free and clear of liens, encumbrances and interests under Section 363 of the Bankruptcy Code. With a 363 sale, a distressed company can expeditiously and effectively separate the debtor’s past troubles from its future success without going through the process of proposing a Chapter 11 plan and meeting all prerequisites to confirm a plan. The benefit for a potential buyer is that a 363 sale can “cleanse” the assets and eliminate or, at least, minimize successor liability claims. In the context of a mortgage lender bankruptcy, this benefit is somewhat limited. In 2005, Congress added Section 363(o) to the provisions governing asset sales outside of a Chapter 11 plan. Under that section, (a) if a person purchases (i) any interest in a consumer credit transaction that is subject to the Truth in Lending Act or (ii) any interest in a consumer credit contract (as defined in section 433.1 of title 16 of the Code of Federal Regulations (January 1, 2004), as amended from time to time), and (b) if that interest is purchased through a sale under section 363 of the Bankruptcy Code, then, notwithstanding the “free and clear” language in section 363(f), such person remains subject to all claims and defenses assertible by the consumer that is related to such consumer credit contracts and transactions to the same extent as such person would be subject to such claims and defenses had the person acquired the interest pursuant to a sale not under section 363. The reasoning behind the amendment is illustrated with a statement by Sen. Chuck Schumer (NY-D). We have a new problem with these predatory lenders . . . In recent months, several large subprime lenders have obtained orders from bankruptcy courts, providing for the sale of their loans or the servicing rights associated with them under section 363 of the bankruptcy code. Consumers who have attempted to challenge these loans or their servicing obligations based on violations of fair lending laws have been told by the purchasers of these loans they were sold free and clear of any consumer claims and defenses. The fact that innocent borrowers can be left in the lurch is flat-out wrong. 147 CONG. REC. 2018, at *2032 (March 8, 2001). Accordingly, the buyer of a mortgage lender business would inherit consumer claims and defenses to the same extent it would under applicable non-bankruptcy law. Then one may ask, “could a mortgage lender accomplish a free and clear sale through a full-blown confirmation process by incorporating the sale in the Chapter 11 plan?”  Judge Garrity said, “maybe” with some caveats when Ditech Holding Corp. and its affiliated debtors (“Ditech”) were pursuing such a sale. Ditech operated as an independent servicer and originator of mortgage loans and servicer of reverse mortgage loans. Accordingly, the bulk of the assets to be transferred were consumer credit transactions. Ditech offered a variety of residential mortgage loans to consumers for its own portfolio and for government-sponsored enterprises, government agencies, third-party securitization trusts, and other credit owners. Ditech was comprised of three primary segments: (i) forward mortgage originations through Ditech Financial LLC (“DFL”); (ii) forward mortgage servicing through DFL; and (iii) reverse mortgage servicing through Reverse Mortgage Solutions, Inc. The Consumer Creditors Committee appointed by the U.S. Trustee in the Ditech case objected to the confirmation of the Second Amended Plan because it did not comply with Section 363(o). Ditech countered that it was free to sell the consumer credit contracts free and clear of consumer claims and interests not expressly assumed by the buyers pursuant to Sections 1123(b)(4) and 1141(c) of the Bankruptcy Code. While the Court agreed that Section 1123 and Section 1141(c) provide an independent basis to accomplish free and clear sale, the plan did not meet the best interest test under Section 1129(a)(7). Judge Garrity held: To satisfy the best interest test, the Debtors must prove that the holders of Class 6 claims will “receive or retain property having a present value, as of the effective date of the plan, not less than the amount such holder would receive or retain if the debtor were liquidated under Chapter 7.” In re Drexel Burnham Lambert Grp., Inc., 138 B.R. at 761. It is undisputed that if the Debtors were liquidated under chapter 7, sections 363(f) and (o) would apply to a sale of the Consumer Creditor Agreements. The Court must apply those provisions in determining whether the Debtors have met their burden under section 1129(a)(7), notwithstanding that the Court has determined that sections 363(f) and (o) are not applicable to the Plan Sale Transactions, and nothing in the Code says otherwise. In a liquidation under Chapter 7, the liquidation analysis has to take into account the consumer claims because these claims: (i) fit the definition of “property,” (ii) have “value,” and (iii) although they are unliquidated, they are “neither speculative nor incapable of estimation.” Ditech’s liquidation analysis failed to do so. The takeaway is that mortgage lenders and buyers of mortgage lenders want to keep in mind that a free and clear sale might be attainable through a planned sale if the liquidation analysis factors in the limitations of Section 363(o). For further information, please feel free to reach out to Albena Petrakov.

October 31, 2022

Family Law

Can My Spouse Take My Business?

The law may differ slightly from jurisdiction to jurisdiction. Generally, businesses started during the marriage will be determined to be marital property to be divided upon divorce. If the business is a partnership or a corporation, ownership by title will be determined. Suppose a spouse owns 100% of the business because of the stock ownership or the partnership interest or because of other evidence of ownership. In that case, the Court will generally require that the business be valued, and then a determination will be made as to whether the spouse who does not have an interest in the business will receive a buyout or an offset from other assets. Business valuations are performed by experts. Often the parties will agree to use one business valuation expert as a neutral. However, in the spouses cannot agree on one valuation expert, there may be substantial variance in the opinions of the experts representing the interest of the parties. Those situations require the assistance of an attorney who has specific knowledge regarding business valuations and who has the ability to work with experts in the field. Often there is a determination of personal goodwill. In those cases, an expert may opine that the value of the business is, in whole or in part, attributable to the owner of the business. In that case, the personal goodwill will not be divided upon divorce. This determination can be hotly contested in a divorce situation. If the spouses each own an interest in a business, it is often partitioned in some way by a transfer of ownership between the spouses, with an offset for other assets or a buyout. When dealing with businesses that began prior to the marriage, the entire business is not necessarily marital. Once again, a business valuation may be hired to determine the value of the business at the time of the marriage and the current value of the business. The spouse who does not own an interest in the business may argue that the increase in value is marital and should be divided equitably or equally between the parties, depending upon the applicable statutes and case law.

October 28, 2022

Business

Executive Playbook: The Challenges of Hiring and Recruiting

On this month’s episode of the Executive Playbook, Mike Cammarata and Russell Berger discuss the practical challenges of making strategic hires and recruiting.  Mike and Russell focus on the different leading indicators that should prompt business owners to move forward with a hire and then, once that decision is made, where to recruit and how best to interview.  Listen in to learn more.

October 27, 2022

Intellectual Property

USPTO Shortens Time for Response to Office Actions

On December 3, 2022, the US Patent and Trademark Office (USPTO) is making a big change to the requirements to respond to rejections or requirements for further information. Background: When a business files an application for trademark registration in the US, it is (eventually) examined, and the examining attorney will either approve the application or issue an Office Action. The Office Action is a letter that will either refuse to accept the application (because of a prior similar registration or other ground for refusal) or require amendments to a part of the application (such as the description of goods) before the application can be accepted. Throughout recorded history, the USPTO has given the applicant six months to respond to the Office Action. Big Change: For Office Actions issued on or after December 3, the USPTO will require a response within three months of the date of issue of the Office Action. It is possible to extend this time for an additional three months with payment of a fee. The fee will need to be paid before the 3-month deadline; it will not be automatic and cannot be paid after the fact. What this means for applicants:  Your attorney handling the application will notify you when an Office Action issues and will let you know the deadline to respond or request the extension. It will be important to review the issues with your attorney and make a plan for responding without delay. Additional considerations: For now, this change only applies to Office Actions issued in pending applications. For Office Actions that might issue in response to a post-registration renewal or declaration of use, the same change will take effect on October 7, 2023. For more information about this rule change or any issues related to trademark protection or registration, please contact Laura Winston.

October 17, 2022

Estates and Trusts

Case Study on Estate Tax Reduction Strategies: Business and Investment

In the following case study for business owners, Offit Kurman attorneys Herbert Fineburg and Charles “Max” McCauley illustrate an estate and gift planning strategy for removing your business from your taxable federal estate. This tax planning also works for your stock portfolio. The presentation was delivered at the Philadelphia chapter of The Exit Planning Exchange’s monthly conference.

October 14, 2022