M&A Nuggets
M&A Nugget: Acquihire
One of the busiest areas of merger activity is in the government contracting sector. A major subsector of merger activity within that sector is acquihires. An acquihire is the purchase of a company, often a technology company, for the skills and expertise of its people. Acquihires have their own challenges for sellers and buyers. Since the main asset being acquired is the skill and knowledge of the seller’s employees, retention of the employees is crucial. That is why buyers often insist on a substantial portion of the purchase price being earned over time, and why sellers often request that buyers include stay bonuses as a deal component. Creative compensation models for the acquired employees must be considered. Since the main asset being acquired is basically people, the role of non-competition agreements is even more important. The golden point here is that a team of employees with unique technology skills and knowledge is valuable and both seller and buyer must consider the best ways to motivate the employees in the overall structure of the transaction.
August 16, 2023
One Minute of Overtime
Permitted Overtime
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. Employers must pay employees for all hours the employee is suffered or permitted to work. This means that employers are obligated to pay employees for work even if it was not requested. Even though an employer must pay, the employee can still be disciplined.
August 16, 2023
Family Law
Divorce in New Jersey- Alimony
Originally posted on 2/26/2019, no content changes. Alimony is financial support paid by one spouse to the other. Alimony is in addition to child support and is not related to the needs of the child or the child's emancipation. It is support paid by one spouse to the other solely for the support of the recipient spouse regardless of the needs or status of the children. There are very important differences between alimony and child support, not only in terms of a person's initial entitlement but with regard to the duration, the ability to modify the amount, and the termination of the payments. However, one of the most important distinctions is that child support is not tax deductible by the person making the payments, nor is it considered taxable income to the person who is receiving the payments. Alimony, on the other hand, is tax deductible to the payor and is considered taxable income to the recipient. There are several types of alimony in New Jersey: Reimbursement Alimony is seldom used but is designed to reimburse one of the spouses for their "investment" in the other spouse's career or earning capacity. It is designed to address the situation in which one of the spouses contributed to the college or graduate school expenses of the other, and the marriage terminates before the financial benefits of the enhanced education can be realized. The intent is to repay the person for their contributions to the other party's education or career training. Rehabilitative Alimony is alimony that is designed to enable the recipient to "rehabilitate" their career. If, for example, one of the spouses has interrupted their career to be a stay-at-home parent and now needs additional education, recertification or licensing in order to return to their employment, rehabilitative alimony may be appropriate to sustain their living expenses or to cover their educational expenses until they are able to return to their prior career. Limited Duration Alimony is alimony which is paid for a defined period of time and applies to marriages of 20 years or less. In order to award Limited Duration Alimony, the Court must make a finding that permanent alimony is not warranted because of the length of the marriage, the parties' incomes, or other factors. After reaching the conclusion that Open Durational Alimony is not warranted, the Court may then award Limited Duration Alimony in a specific amount for a designated length of time. Once awarded, the length of the term itself may not be extended, although the amount may be modified. Open Durational Alimony is payable until the death of either party, the re-marriage of the recipient, the cohabitation of the recipient with an unrelated third party or a "substantial change of circumstances" which would warrant a modification of either the amount or a termination of payment entirely, such as good faith retirement at the appropriate age. Other instances of "substantial change of circumstances" may include a significant increase in a party's income, a significant decrease in a party's income, or a medical condition. In determining both the type and amount of alimony, the Court must consider specific factors, including: the needs of the recipient and/or payor; the ability of the payor to make the payments; the duration of the marriage; the parties' age; the parties' physical and emotional health; the standard of living established during the marriage; the earning capacity, the educational levels and employability of each of the parties; the length of absence from the job market of the recipient party; each party's parental responsibilities for the unemancipated children; the time and expense necessary to acquire sufficient training or education in order to return to the employment market; the history of financial or non-financial contributions to the marriage by each party; the amount of equitable distribution by either party and, specifically, the income which such equitable distribution may generate to each of the parties; an unearned or investment income; the tax consequences of the alimony. It is often said that both the recipient and the payor of the alimony should be able to enjoy the "standard of living which was established and maintained during the marriage." However, that concept is much more of a guidepost than an attainable reality in most cases. In all but an extraordinarily high income family, it is simply impossible for both parties to maintain the same standard of living that was enjoyed by them during the marriage. In the vast majority of cases, both parties will have to compromise their marital lifestyle. It is simply arithmetically impossible to divide the post-divorce income into two family units and have each of the units equal the prior single family unit lifestyle. There are very important principles of law which address the situation in which a payor's income increases after the divorce. The application of those principles requires an in depth review by a competent Divorce Attorney. However, the general concept is that the recipient of alimony is only entitled to enjoy the lifestyle and thus receive alimony based upon the payor's income during the marriage and at the time of the divorce. They are not entitled to share income increases, which occur after the dissolution of the marital partnership and without contribution or support from the recipient spouse. On the other hand, if the parties' financial circumstances at the time of the divorce do not enable the recipient spouse to be supported at the standard of living which was enjoyed during the marriage, and the payor's post-divorce income rises to a level that then enables a payment which would maintain the marital standard, a post-divorce increase in the amount of alimony may be warranted. For more information on this topic, please contact Megan Smith at msmith@offitkurman.com.
August 15, 2023
Estates and Trusts
Estate Planning
Are you one of the many Americans putting off preparing an estate plan? Do you have an estate plan that you have not updated in several years? The following are just three reasons that you should get your estate plan prepared or updated. CONTROL. By developing your own estate planning documents, including, but not limited to, a last will and testament, a power of attorney, and an advanced medical directive, you are the one deciding how things will be done, rather than the state. Absent estate planning documents, an individual cannot influence what happens after their death and must rely on a combination of the state and their family. Entities and/or individuals that may not know your wishes. INHERITANCE. Estate planning documents direct the disposition of an individual’s personal and real property, but when an individual dies without these documents in place, the state will make that determination for the individual. Real and personal property is divided up and given to individuals based upon the given state’s methodology of intestate succession—something that may look completely different to what an individual would have desired. An estate plan allows you to ensure that you are the one to direct who inherits what after you pass, rather than allowing the state to decide for you. BURIAL. The topic of death and burial can oftentimes be a difficult subject to discuss with our loved ones, but as a result, our loved ones may not always know how exactly we would like our burial to take place. Whether an individual wishes for their burial to be religious, a-religious, simple, elaborate, austere, celebrative, or something entirely different, these are important decisions that should be denoted in an individual’s estate plan to ensure that they are followed. Seek legal counsel to ensure that your interests are protected. If you have any questions about this or Estate Planning/Estate Litigation topics, please contact me at austin.hinel@offitkurman.com or (703) 745-1899.
August 15, 2023
Healthcare
HIPAA Compliance for Pharmacies Part One: HIPAA Rules and Best Practices
Pharmacies across the country need to understand and comply with the Health Insurance Portability and Accountability Act of 1966. According to the US Centers for Disease Control and Prevention (CDC), HIPAA is a federal law that provides national standards to protect sensitive patient information from being disclosed without their knowledge or consent. The US Department of Health and Human Services (HHS) issued a Privacy Rule and a Security Rule to implement the law’s requirements and to specifically protect a subset of the information (electronic patient information) that the Privacy Rule covers. HHS also has an Enforcement Rule to ensure compliance with HIPAA. The HIPAA Privacy Rule The HIPAA Privacy Rule applies to the use and disclosure of “protected health information” (PHI) by “covered entities.” The Privacy Rule also includes standards for how the PHI is used. The aim of the Privacy Rule is to ensure that there is a proper balance between protecting PHI and “allowing the flow of health information needed to provide and promote high-quality healthcare, and to protect the public’s health and well-being. FIVE STEPS TO MEET HIPAA OBLIGATIONS AND PRIVACY & SECURITY COMPLIANCE If you’re submitting claims electronically for reimbursement, you are under HIPAA. This subjects you to all the privacy and security obligations of HIPAA. Simply having an electronic medical record system that says, HIPAA Compliant, is not going to be enough. The HIPAA Security Rule The HIPAA Security Rule protects the confidentiality, integrity, and availability of electronic protected health information. Electronic refers to the subset of PHI that is digital. Covered Entities HIPAA’s Privacy and Security Rules apply to “covered entities.” Covered entities are defined as: Healthcare providers. “Every healthcare provider, regardless of size of practice, who electronically transmits health information in connection with certain transactions. These transactions include: Claims Benefit eligibility inquiries Referral authorization requests Other transactions for which HHS has established standards under the HIPAA Transactions Rule.” Health plans. Health plans include: Health, dental, vision, and prescription drug insurers Health maintenance organizations (HMOs) Medicare, Medicaid, Medicare+Choice, and Medicare supplement insurers Long-term care insurers (excluding nursing home fixed-indemnity policies) Employer-sponsored group health plans Government- and church-sponsored health plans Multi-employer health plans An exception may apply for smaller self-administered employer plans Healthcare clearinghouses. These are defined as “Entities that process nonstandard information they receive from another entity into a standard (i.e., standard format or data content), or vice versa. In most instances, healthcare clearinghouses will receive individually identifiable health information only when they are providing these processing services to a health plan or healthcare provider as a business associate.” HIPAA also applies to “business associates” who are people and organizations (with some exceptions) who use the PHI for claims processing, data analysis, utilization review, and billing. Business associates may be directly liable for HIPAA violations. Pharmacies and other healthcare practices may be liable for any HIPAA violations of their business associates. HIPAA compliance for pharmacies – The Rules According to the HIPAA Journal (which provides numerous articles on HIPAA compliance, HIPAA certification, HIPAA software, and many other HIPAA-related topics), most pharmacies do need to comply with HIPAA’s Privacy and Security Rules and, possibly, other even more stringent requirements. Pharmacy-related HIPAA topics include the following: How Do Pharmacies Qualify Under HIPAA While most pharmacies qualify as HIPAA Covered Entities, how they qualify is a little more problematic. HIPAA’s Administrative Simplification Regulations defines HIPAA Covered Entities as “a health plan, a health care clearinghouse, or a health care provider who transmits any health information in electronic form in connection with a transaction covered by this subchapter”. Most, but not all, pharmacies transmit health information electronically. Pharmacies are generally considered health care providers. The HIPAA Journal states that the complexity of whether a pharmacy is “covered” arises as follows: Health care providers are defined in 45 CFR §160.103 as: “A provider of services (as defined in 42 U.S.C. 1395x(u)), A provider of medical or health services (as defined in 42 U.S.C. 1395x(s)), and Any other person or organization who furnishes, bills, or is paid for health care in the normal course of business.” Most pharmacies do not qualify based on the first two criteria – 42 U.S.C. 1395(x) – either u or s. Most pharmacies do qualify based on the third category because health care is defined in the Administrative Simplification Regulations as including “[the] sale or dispensing of a drug, device, equipment, or other item in accordance with a prescription.” This means that any pharmacy that does qualify as a covered entity must comply with HIPAA’s Administrative Requirements which include the Privacy Rule, the Security Rule, and “if a breach of unsecured Protected Health Information occurs – the HIPAA Breach Notification Rule.” Pharmacies should already be familiar with these rules but periodic reviews can help eliminate mistakes and poor practices. The HIPAA Privacy Rule. This rule can be the hardest HIPAA rule to comply with for pharmacies because the rule may be hard for customers to ask questions and for pharmacists to answer questions – in retail environments – without being overheard and without disclosing PHI to the public. “It may also be difficult to comply discretely with requests for a permitted disclosure from (for example) law enforcement officers.” This means that employees of pharmacies need to be educated on what uses and disclosures of PHI are permissible and what standards must be met to protect the patient’s HIPAA rights. Pharmacy owners and managers also need to have policies in place to make sure each customer receives and acknowledges the receipt of the Notice of Privacy Practices. Each employee must also understand the contents of this Notice to “avoid unintentional violations of HIPAA.” The HIPAA Security Rule. This rule requires that covered entities implement safety measures to protect the “confidentiality, integrity, and availability” of electronic PHI. Pharmacy owners and managers (or a company compliance owner) must identify threats to the security and data that are likely to occur and “protect that data and the computer systems used to store that data – from unauthorized access, alteration, theft, or other impermissible uses and disclosures.” All pharmacy members should take security training – even if they do not access PHI. The members of the pharmacy staff should also be subject to the pharmacy´s HIPAA sanctions policy. The Breach Notification Rule. This HIPAA rule mandates which procedures pharmacies must use to protect unsecured PHI if the PHI is exposed to a third party – such as being overheard in a retail setting. Generally, pharmacies need to notify the individuals whose PHI was involved and the HHS Office for Civil Rights. The notification should identity the breach including what occurred, what information was not protected, and what steps the pharmacy is taking to mitigate any harm. The individual should be given advice about what steps they can take to mitigate any harm. Any use or disclosure (electronic, paper, or verbal) of PHI that is not authorized and not permitted is presumed to be a breach – unless the pharmacy can show that there is little likelihood that the Protected Health Information has been compromised. Best Pharmacy Practices for HIPAA Compliance While there is not one overall standard, each state has its own laws, and different pharmacies may operate differently. The HIPAA Journal recommends the following best practices for HIPAA compliance. We also recommend that you speak with our experienced healthcare compliance lawyers who will explain HIPAA’s provisions and the recommended ways for becoming compliant. The best practices include: The appointment of privacy and security officers. Pharmacies can choose any staff member to be a designated privacy and/or security officer. The responsibilities of this position include risk assessment, identification of confidentiality threats, and maintaining the integrity and availability of patient health information. The officer(s) should develop and implement HIPAA policies and procedures to reduce the risks to an appropriate level. Ensuring that PHI is not disclosed impermissibly. It’s not just the deliberate disclosure of PHI in violation of HIPAA’s Privacy Rule that is problematic. Pharmacies need to work to protect PHI information that is accidentally disclosed. Pharmacies need to create and implement policies and procedures to reduce the risk of all types of disclosures. “Care must also be taken not to disclose more than the ‘minimum necessary’ PHI.” Obtain authorizations when necessary. Pharmacies need to disclose PHI if requested by a patient or the HHS´ Office for Civil Rights. Pharmacies may use PHI for “treatment purposes, requesting or receiving payment, and pharmacy operations.” All other disclosures and uses must be authorized by the patient – in writing – and before the PHI is disclosed or used. Obtain business associate agreements. If a third party needs to access PHI to perform a service on the pharmacy’s behalf, that party is considered a “business associate.” “A business associate must provide reasonable assurances to the pharmacy, by means of a business associate agreement, that the requirements of HIPAA have been understood and that HIPAA Rules will be followed.” Inform patients of the pharmacy’s privacy practices. Pharmacies should place their privacy practices in writing and share those written policies with their patients. Patients should sign that they have received these policies. The policies should inform the patient how they can complain if they think their HIPAA privacy rights have been violated. Give patients copies of their PHI. Patients have the right to see their PHI (subject to some possible exceptions) on requests made to the pharmacy. Handle the disposal of PHI properly. Prescription labels and other documents should be disposed of so the PHI cannot be reconstructed or viewed. “Paperwork such as labels should be shredded, pulverized, pulped, or incinerated. ePHI on electronic devices must be permanently erased before disposal.” Educate the pharmacy staff. The staff and anyone who assists the pharmacy should be trained about HIPAA’s Privacy and Security Rules if they may come into contact with any patient health information. These workers and volunteers should also be trained about any federal or state PHI rules that may be stricter. Pharmacies generally qualify as “covered entities” under HIPAA and must therefore comply with HIPAA’s Privacy Rule regarding patient health information (PHI), Security Rule regarding electronic PHI, and the Breach Notification Rule in case protected information is improperly used or disclosed. Best practices include appointing HIPAA compliance officers, making sure patients have written copies of their rights, obtaining authorizations when necessary, and entering into business association agreements with outside companies. Pharmacies should contact Cohen Healthcare Law Group, PC to discuss their HIPAA compliance requirements. Our experienced healthcare attorneys advise pharmacies and healthcare practices about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
August 15, 2023
Estates and Trusts
What’s New in Estate Planning? Notable Local Law Changes
D.C. Adopts the Uniform Electronic Wills Act: Electronic Wills in D.C. – it’s the law! . . but should it be? As of March 10, 2023, the “Uniform Electronic Wills Amendment Act of 2022” (Law 24-296) became effective in the District of Columbia. With it, D.C.’s pandemic-inspired, emergency legislation allowing virtual will signings was formally replaced with a new Chapter 9 of Title 18, known officially as the “Uniform Electronic Wills Act” (D.C. Code § 18-901, et seq.). With its adoption of the Act and making permanent the previously interim measure, D.C. joins only six other states and the U.S. Virgin Islands[1] to have adopted the Act and made the leap legalizing will signing without ever putting pen to paper, or for that matter, without ever involving a pen or paper.[2]. In the District, to be legally enforceable, one’s will no longer needs to have been physically signed or reduced to paper. With the appropriate software and/or application, one can now finalize a will with a few keystrokes. Of course, there are some parameters, and one should not presume to have met all the criteria merely by tapping out a document on one’s laptop without consulting the Act . . . and a good lawyer! Nevertheless, the new law certainly makes it easier to make a testamentary disposition of one’s assets, i.e., direct who gets what when you die. I am left questioning the tradeoff; however, with the Pandora’s box of fraud schemes, this development undoubtedly unleashes. You can now create and sign your Will electronically in the District of Columbia . . . but should you? There has been no shortage of debate over the years as to steps minimally appropriate to make a legally enforceable will. While varying across jurisdictions and with only limited exceptions, certain minimum requirements regarding one’s “soundness of mind,” witnesses, notarization, signatures and related representations, for instance (see, e.g., DC Code § 18-102, et seq. and Va. Code § 64.2-403, et seq.), have universally been intended to assure both genuineness of a document and accuracy of one’s testamentary intentions on a document which only becomes legally operative after the testator is dead. With the advent and development of electronic communications (email, facsimile, text messaging, and the like) and, in recent years, the ever-improving ability to sign (or affix an equally individualized electronic mark), send, and store one’s electronically signed documents increasingly securely, the legal acceptability and enforceability of electronic signatures have become unexceptionally commonplace. Moreover, with the recent lessons of a global pandemic, including a new-found appreciation for conducting one’s affairs from a distance, the ability to “get one’s affairs in order” remotely became, for many, a life-preserving necessity. Time may reveal better the extent to which the inability to e-sign estate planning documents “forced” COVID-19 victims and countless others to die intestate, an argument I’ve heard posited in favor of easing and expediting signature requirements to this extent. In the District, emergency legislation made it possible, on a limited temporary basis, to execute wills without all of the “whistles and bells” otherwise required under the law. The primary argument for maintaining the physical signature requirement for wills, along with the physical presence of witnesses, generally centers on the significance of the finality of making testamentary disposition of one’s assets and not being around to assure that one’s intentions are carried out as we had intended. But with the general acceptance nowadays of e-signing in the context of so many acceptable alternatives to disposing of one’s assets without either invoking a will (trusts and contractual-based, third-party provider agreements such as life insurance and ERISA-qualified retirement plans, for instance) and/or the probate process pursuant to which one’s Will’s directions are administered and overseen, why should will-signing retain such an exceptionally high bar?. . or so the argument goes! With the advent of AI-generated, at times seemingly indifferentiable virtual “reality,” do we really need to ask “why?” Perhaps there will come a time when one’s “John Hancock” indelibly inscribed, notarially certified, and appropriately witnessed will no longer have any value at all. Perhaps. We’re not there yet, however, . . . at least not everywhere. Neither Virginia nor Maryland has yet to succumb to this latest modern trend towards allowing and trusting electronically signed will documents . . . although, it seems only fair to acknowledge in this regard that Virginia, for instance, has allowed exceptions to its strict signing/witnessing requirements in certain limited circumstances. [For more on “de facto wills” and the “Harmless Error Rule” in the Commonwealth, see my prior discussion regarding Virginia’s modified version of Section 2-503 of the Uniform Probate Code, Va. Code § 64.2-404.] Mind you, I am not suggesting that electronic evidence of a Will (including, for instance, a PDF copy of the purported Will itself) would not, per se, be devoid of probative value. By way of example, not too long ago, I found myself challenging whether an emailed copy of a document purporting to be a Will might itself be deemed a “de facto will” under Section 64.2-404 and the extent to which, if admitted into evidence, the electronic version of the document and the email transmitting it ought to be given weight by the judge when considering the decedent’s intended finality of the document at the time. Perhaps someday Virginia will fall lockstep into line in the march towards what may be an inevitably paperless, impersonal future. Maybe someday, sure, but I would take the “over” if anyone proposes a near-term adoption of such a risky proposition here in the Old Dominion. As of this writing, at least, D.C. stands alone in the “DMV” and with only a handful of other jurisdictions (in the mid- to Pacific West) formally allowing this dangerous practice. Over the years, I have counseled countless clients who have found themselves questioning the bona fides of a suspicious Will document or the circumstances and timing of the document’s creation. With what I perceive as the floodgates now opening, I suspect the next wave of litigation will involve many new variations on the theme requiring us to (dis)prove testamentary intent and whether certain 0’s and 1’s amount to an electronic signature of an improperly formatted, electronic document very loosely resembling what only some might consider a Will. You know where to find me! ___________________________________________________________________ [1] North Dakota and Washington enacted versions of the Act in 2021, and the U.S. Virgin Islands followed suit in 2022. D.C. joins Minnesota, Idaho, and Utah in enacting the Act in 2023, while Texas, Missouri, and New Jersey have introduced, but, as of this writing, have not enacted the Act. (Source: Uniform Law Commission, https://www.uniformlaws.org/committees/community-home?CommunityKey=a0a16f19-97a8-4f86-afc1-b1c0e051fc71, site visited on 8/8/2023) [2] Maryland has not adopted the Act but has adopted its own version of electronic will signing/witnessing. See Estates & Trusts §4-101, et seq. (Source: Maryland General Assembly, https://mgaleg.maryland.gov/mgawebsite/Laws/StatuteText?article=get§ion=4-101, site visited on 8/29/2023.) There may be other states that have gone this route as well.
August 14, 2023
Family Law
Collaborative Divorce: The Time is Now
Originally posted on 04/28/2020, content updated on 08/14/2023 “Divorce: a resumption of diplomatic relations and rectification of boundaries.” [i] We were in uncharted waters — living life in lockdown — many, for the very first time, spent prolonged periods together with spouses and children. The stress of extended family confinement and forced comradery has taken its toll on many marriages. Some marriages were already in the midst of breaking apart and others became ripe for divorce. Initially, Courts were closed for all but emergency matters; divorce not being one of them. Recently, the Courts began to expand their repertoire of cases[ii], but the existing ban on the filing of, or hearings on, new “non-essential” matters, translation – contested divorces — remained in effect. So, what can be done now to move forward with a divorce? Since many Courts are refusing to permit the filing of new contested divorce cases, and are courteously abstaining[iii] from moving divorce matters along, the choice of either commencing a divorce in a Collaborative setting or moving an active case from litigation to Collaboration makes eminent sense. Moreover, it all can be undertaken in “cyber-space.” Consultations, negotiations, and group meetings — all aspects of the Collaborative process in divorce can be done from the safety of your home via Skype, Microsoft Teams, Zoom[iv] or any other online meeting platform. What is Collaborative Divorce? Why collaborate? The answer is simple: control, cost, and speed. If you and your spouse: (i) do not want to wait for the Courts to re-open to start or continue a divorce, and are seeking a somewhat kinder/gentler resolution of your marital issues; (ii) wish to keep costs down; and (iii) desire a speedier conclusion to marital problems than traditional divorce litigation, then Collaborative divorce should be of considerable interest to you. A Collaborative divorce most closely resembles mediation; but it is not mediation (as will be discussed below). It is a divorce where the parties side-step combative litigation and instead commit to resolve their issues in a manner that is mutually beneficial. The Collaborative process proceeds in much the same manner as a traditional litigated divorce. The issues are the same: from custody and visitation of the parties’ children, to asset division and support.[v] The parties and their attorneys learn about the issues before proceeding with resolution. Where it differs from litigation is that the parties and their attorneys work together to resolve the case.[vi] The attorneys then prepare a proposed settlement agreement and the parties sign. The divorce is essentially all done on paper. Rarely will a Court appearance (other than an uncontested divorce hearing) be necessary.[vii] Unlike mediation, Collaborative lawyers work both on behalf of their clients and together, as they negotiate and enable resolution. In mediation a mediator facilitates negotiation but is neutral. In Collaborative practice the parties agree to cooperate and actively accomplish a settlement. In mediation, the parties need not retain counsel and do not commit to achieve anything. Thus, absent counsel and a commitment to a non-litigated conclusion, there is a latent risk to a party in mediation, in terms of duress, over-reaching, and lack of informed consent. Proceeding with a Collaborative divorce requires that each party hire a lawyer who engages in Collaborative practice.[viii] Once selected, the parties and their respective counsel will sign an agreement by which both parties commit to the Collaborative process, i.e., transparency of relevant information, mutual problem solving and a mutually beneficial resolution; a win-win if you will. The attorneys and their clients will meet separately, and speak together on as many occasions as is necessary, and then meet jointly (both attorneys, both clients) as often as needed to resolve the divorce. Rather than engage in costly legal battles, attorneys in the Collaborative process guide their clients through dispute resolution, working together with the parties to gather information and generate options for settlement. The attorneys enable and promote problem solving; they can neither promote nor threaten adversarial engagement. A crucial element of a Collaborative agreement is that the parties agree that they will not seek Court intervention for a dispute. If either does, the attorneys must withdraw. Collaborative counsel cannot represent their respective clients in contested hearings in Court. Another essential element of the Collaborative process is transparency, that each party agrees to disclose voluntarily all relevant information. One of the biggest drivers of legal fees in a litigated case is discovery disputes: the effort of one spouse to obtain information that is not forthcoming from the other spouse. In the Collaborative process, both spouses make a commitment to turning over all relevant information; each spouse pledges that he or she will not take advantage of a misunderstanding of the other party, but instead will seek affirmatively to correct any misunderstanding by the other spouse. Collaborative divorce being more transparent, straightforward, and effectual, is usually more cost-efficient. By working together to generate, prioritize and implement alternatives for a solution—instead of provoking anger, enabling blame, and airing long held grievances—there is ample opportunity to strive for quicker results that can satisfy more of both parties’ respective goals. Complete disclosure and facilitated communications with all eyes focused on problem-solving, enable the parties to address and deal with all issues without wasting time on destructive battles. Since the matter is settled out of Court, there is no need for the numerous Court appearances and scheduling dates necessary with litigation. Experience shows that Collaborative divorce cases generally take less time than litigated ones. Finally, last, but not least, Collaborative divorce need not originate as a Collaborative matter. These writers have personally represented individuals in the Collaborative process who chose to leave their litigated divorce actions behind, and decided to reach agreement with their spouse in a much faster manner and with less sturm and drang. Conclusion Particularly in our then-current climate, spouses needed to consider alternatives to the Courts to resolve their differences. Parties wishing to divorce or proceed with their divorce actions were locked out of our adversarial judicial system, and no one knew how long it would take until the Courts returned to normal operations (or a new normal). Some may have wished to wait and prepare for a divorce while in captivity.[ix]But for others the time is now to take their first steps toward resolving their marital problems or, at least, take a turn onto a better route. Times being what they were, the Collaborative divorce process was more appealing than ever before and should have been a strong consideration for many as they maneuvered through the treacherous waters of a post-COVID world. [i] The Unabridged Devil’s Dictionary, Ambrose Bierce[ii] During the past week, judges have been reviewing their non-essential case inventories, looking for ways to move these pending matters forward. These “pending matters” can, in a Judge’s discretion, include some matrimonial cases.[iii]From 1776 , the musical with music and lyrics by Sherman Edwards and a book by Peter Stone. [iv] Be advised that Zoom has been having problems with security; and is not a recommended format. [v]There is full disclosure of all assets, debts, and income without formal proceedings. [vi]The parties can and do often jointly retain other professionals to aid in the process, such as property appraisers or financial consultants. [vii] Some states may require a Court appearance to finalize the divorce. [viii]An attorney specially trained in collaborative practice. [ix] But that is a discussion for another day.
August 14, 2023
Business
Expanding Your Business To The U.S.: Should You Form A U.S. Legal Entity?
Originally posted on 01/23/2020, content updated on 08/11/2023 In my practice as a corporate lawyer in New York, I represent many European and other foreign companies and entrepreneurs who are doing business in the U.S. If you are a foreign company and want to expand your business to the U.S., or an advisor to such a company, you will need to consider several important legal issues. Some of those issues include questions like should I form a separate legal entity in the U.S.? If so, what should the legal form of the U.S. entity be? Where in the U.S. should the legal entity be incorporated? Do I need to appoint U.S. managers to run the U.S. entity? What types of taxes will I need to deal with? How can I protect my intellectual property? What do I need to consider when hiring employees or consultants in the U.S.? Do I need general terms and conditions which are different from the ones I use for my foreign company? What can I do to minimize the risk of litigation in the U.S.? What issues should I consider when entering into a joint venture or buying a company in the U.S.? In this article, I will address the question of whether you should form a U.S. entity. As a foreign company, you are not required to form a separate legal entity in the U.S. in order to sell products or provide services in the U.S. There are, however, several disadvantages to doing business in the U.S. as a foreign company. If you conduct business in the U.S. as a foreign company, your foreign company will become liable for contractual obligations with U.S. customers or clients. Your company could get sued in the U.S., especially if your contract with the U.S. customer or client includes a clause for dispute resolution in a court in the U.S. Your foreign company could become subject to income and sales taxes in the US. In addition, you may be required to register your foreign company with the Secretary of State of a state depending on the level of business you are conducting in that state. The Secretary of State is the government agency of a state with which companies that are incorporated in that state or are doing business in that state on a regular basis need to register. Although not much company information needs to be disclosed (unlike in some other countries), your foreign company may need to provide a good standing certificate from the country in which it is incorporated and a notarized translation of its corporate organizational documents (which can be expensive and time-consuming). Setting up a separate U.S. legal entity could reduce your foreign company’s exposure to lawsuits in the U.S. and income and sales tax liabilities. The U.S. entity could be owned by your foreign company so that it is a 100% subsidiary of your foreign company. Your foreign parent company (“FC”) is generally not liable for the obligations of the U.S. subsidiary (“USC”). Under certain circumstances, however, a creditor of USC may try to “pierce the corporate veil” and hold FC liable for the obligations of USC. The creditor will need to prove that: (i) FC completely dominated and controlled USC disregarding its separate identity, and (ii) an injustice or other wrong to the plaintiff-creditor will likely result if the corporate veil is not pierced. Courts look at many factors, none of which alone is sufficient to pierce the corporate veil, including, but not limited to: (i) USC’s corporate formalities are disregarded by FC, (ii) USC is inadequately capitalized, (iii) USC shares offices, employees, bank accounts, and telephone numbers with FC, (iv) the FC uses USC’ property as its own; (v) the agreements and other arrangements (such as sharing administrative services, employees, or insurance coverage) between FC and USC are not arm’s-length transactions; or (vi) USC makes undocumented “loans” to the FC or extends credit to the FC on other than market terms. FC could also be held liable in the U.S. for product liability if it is a manufacturer or distributor of a product which caused personal injury to a consumer in the U.S. If USC is a corporation, USC instead of FC will become subject to income and sales taxes in the US. FC generally will only become subject to U.S. income tax if USC distributes any profits to FC, subject to any reductions under any US income tax treaty with the country in which FC is incorporated. If, however, USC is a limited liability company (LLC), and does not elect to be taxed as a corporation, FC will become subject to U.S. income tax on USC’s net income. Doing business in the U.S. as a USC also offers an advantage from a marketing perspective. Having a U.S. presence in the form of a legal entity shows commitment to the US market and accessibility. US customers (whether businesses or consumers) usually prefer to deal with a vendor in the U.S. instead of an overseas company. Finally, forming a USC may make it easier for FC to obtain insurance in the US. For an FC without a USC, it is often difficult and expensive to obtain insurance for FC’s activities in the U.S. If you are a foreign business owner or entrepreneur and want to expand your business to the U.S., you should consider forming a U.S. legal entity. If you have any questions or would like to discuss any of these issues, please contact me at 212-545-1900 or mbloemsma@offitkurman.com.
August 11, 2023
Tax
IRS Proposes to Make Monetized Installment Sales a List Transaction
I know. I know. Your reaction is probably, “Huh? Do what? I don’t even know what a monetized installment sale is, why should I care.” As my partnership tax professor, Theodore Seto always says, “To understand the rule, you have to know the game that is being played.” The Problem and the Game: Here’s what a monetized installment sale is and how it works. Peggy Sue has a low basis, high-value asset. For our example, we assume a tax basis of $10,000 and a sales price of $1,010,000 so she has a taxable gain of $1,000,000. If Peggy Sue sells it straight up, unless she has other offsetting losses elsewhere, will have a lot of gain she must recognize and for which she must pay tax. Let’s say instead of selling it for a lump sum, she sells it in an installment sale payable in ten equal annual installments. Under IRC 453 she would allocate and pay tax on the pro rata portion of the gain each payment represents, so she would pay tax on 100k of gain each year over the ten-year period ($1,000,000 gain ÷ 10 years = 100k gain per year). If Peggy Sue has no other income, spreading the gain over 10 years will prevent a bracket run and result in less of a tax bite. The interest component of each payment will be taxable as ordinary income in the year of Peggy Sue’s receipt of each payment. Now here comes the game (greatly simplified for brevity): What if Peggy Sue sells to Elvis and takes back a 30-year, interest-only balloon note? Well, the interest is ordinary income, but Peggy Sue won’t recognize any gain until the balloon payment. This defers gain, but Peggy Sue still doesn’t have her money, only the interest payments. But what if Peggy Sue can find a lender who will lend Peggy Sue say 95% of the sale amount (and coincidentally, the payment terms and interest Peggy Sue pays the lender is the same rate as Elvis’s note to her). In other words, the interest received and interest paid cancel out each other. And because a loan ordinarily is not a taxable event, Peggy now gets 95% of the sales price to invest and grow for 30 years. When Elvis pays her the balloon payment in 30 years she pays the lender. Money for nothing and checks for free. Sweet deal, isn’t it? The Rule (Proposed): Too sweet, actually. So, the IRS has proposed making this and its variants a listed transaction. Being a “listed transaction” means you have to tell the IRS you are doing it, i.e. flag it on your return, so they can decide if it is legit or not (for a very narrow class of assets-farm land-it actually might work, but even then there are limits and restrictions). Also, if the proposed regulation goes into effect anyone who engaged in a monetized installment in a prior year for which the period of assessment is still open (generally three years from the latter of the due date or the date the return was filed) must send the IRS a disclosure of the transaction. Failure to list (“disclose”) the transaction can result in a penalty equal **TO** 75% of the tax savings the transaction produced, together with understatement penalties and interest. And it gets better. If you were required to disclose a listed transaction but didn’t, the period for assessment is extended until one year after the date of disclosure. Now, until the proposed regulation becomes final, this is all somewhat speculative. But if I were a betting man, I would look for a final version of the regulation this fall. Forewarned is forearmed. Scott Tippett is a principal at Offit Kurman PA where he concentrates his practice on tax planning, tax mitigation, and tax controversy in corporate, partnership, executive compensation, and employee benefit matters. He is a member of the firm’s Business Law Transactions and Intellectual Property groups. Offit Kurman PA is a national law firm providing clients with guidance in intellectual property, business, and tax matters. The views expressed herein are solely those of the author, are not intended as, and do not constitute legal or tax advice.
August 11, 2023
Family Law
Divorce in New Jersey - Pretrial Motions and Applications
Originally posted on 2/26/2019, no content changes. Only one to two percent of all divorces go to trial and will ultimately be decided by a Judge. The other ninety-eight percent will be resolved by agreement of the parties as a result of some pretrial procedure or by mediation, arbitration or settled as the trial is about to begin. Therefore, more attention should be directed to pretrial proceedings and much less to the unlikely eventuality of a trial. Pretrial applications to the Court are extremely important and useful. We are often asked what can be submitted and determined by the Court on a pretrial application. The easy (and generally very accurate) answer is virtually anything. Common subjects which are submitted to the Court on pretrial applications are: A temporary support or alimony arrangement. A temporary custody or parenting plan arrangement. The allocation and payment of marital bills and expenses. An advance of counsel fees or litigation expenses. The maintenance of insurance coverage. In addition to this practical scope of pretrial applications, there are a number of applications which your attorney may want to make. For example: To obtain additional documents or information which your spouse is not voluntarily producing. To gain access to real estate or a business for the purpose of appraising it. For the appointment of an independent appraiser. For the production of medical or hospital records when appropriate and relevant. For custody or parenting evaluations As your case continues, there may be more sophisticated, evidential or technical reasons for pretrial applications. For example, your attorney may want to make an application to: Bar your spouse's testimony or production of evidence on matters for which they have not produced discovery. To limit or eliminate certain issues, such as whether or not pre-owned or inherited assets should be included or excluded from equitable distribution. To predetermine evidential issues which may be important to either your side or the other side's presentation of the case. For tactical reasons, your attorney may also want to file a pretrial application to begin to "set the tone" for the case. If your spouse has been uncooperative in discovery and necessitated an unnecessary expenditure of attorney or accountant's fees, your attorney may want to begin to relay that to the Court in support of an ultimate application for an advance of attorney's fees. If, by way of further example, your spouse is interfering with or failing to appear for parenting time, your attorney may want to call that to the attention of the Court because of the impact it will have on the ultimate custody determination. In summary, more time and effort should be expended by you and your attorney on pretrial matters and much less time on trial strategy or preparation if you are interested in an expedient and successful resolution of your case. For more information on this topic, please contact Megan Smith at msmith@offitkurman.com.
August 10, 2023
M&A Nuggets
M&A Nuggets: The Drag-Along
In a sale structured as a stock purchase, most acquirors want to purchase one hundred percent of the ownership interests in the seller. That is why, if a seller has any minority owners, it is important to include a drag-along clause in the agreement among the owners of the seller. A drag-along clause basically states that if owners holding a certain percentage of the ownership agree to a sale, the owners can require the remaining owners to participate in the sale. The use of the drag-along clause prevents a minority owner from in effect vetoing a sale by not agreeing to sell. Several details need to be included in the drag-along clause, including the percentage needed to approve the sale and to drag-along the non-approving owners, whether the non-approving owners have the right of first refusal to purchase the company on the same terms offered by the third party and whether the drag-along right applies initially or at some future date. The big picture here is that the simple step of including drag-along rights in the ownership agreement helps to ensure the sale of one hundred percent of a company.
August 10, 2023
Family Law
“I Want My Day in Court! – But Are You Sure About That?”
It’s become part of our vocabulary…a phrase said by those demanding justice, vindication and validation: “I want my day in court!” However, when it comes to divorce, should that really be the case? Is having your day in court really worth the time, the money, the risk, and the emotional rollercoaster it could send you and your loved ones on? While there’s no “one fits all” answer, there are a few things you should consider before you find yourself raising your right hand while you’re being asked, “Do you swear to tell the truth, the whole truth, and nothing but the truth?” Right off, it’s important to know that most divorce cases never even make it into a courtroom. The most recent figures state just 5% to 10% of divorces ever get that far. Knowing that, the odds are in your favor that with sound legal advice and often a good mediator, a fair settlement can be achieved without an often long and expensive court battle. That said, what could potentially make you part of that exclusive “5% to 10% crowd?” Well first are there any issues that you just can’t compromise on with your former spouse no matter how many back and forth rounds of negotiations have gone on with your attorneys? Is your spouse so obstinate and difficult that for every one step forward you take, they take ten steps back? Are there extenuating circumstances regarding the custody of your children that you strongly believe will cause dire harm to them or your relationship with them? Are you fairly certain that your spouse is hiding certain finances from you that you haven’t been able to get to and don’t feel you can unless they are forced to reveal them under oath? These are all valid reasons, but that doesn’t mean there aren’t as many reasons not to go to court. There are the costs involved. Court fees add up very quickly, lawyers have to often put in countless hours and trials can go on much longer than anticipated. In the end even if the court does rule in your favor, once these costs are figured in, will you even be in the black? You don’t want to end up financially worse than where you started had you settled and that doesn’t even figure in the “emotional costs” associated with an often nasty trial that you and your family will have to endure. Also the vast majority of judges and juries remain impartial. Their decisions are based on the facts, not on emotion. So while you may be confident that you are much more sympathetic than your spouse, that may hold weight in “the court of public opinion” but not in an actual courtroom when the verdict is read. Getting married shouldn’t be a snap decision and getting divorced shouldn’t be an instantaneous one either. But once you are headed down this path carefully weigh the options of a fair settlement versus the risk/reward of going to court. Sandy and Chery at Offit Kurman know each case is unique and present their own sets of challenges. They will be by your side the entire time, making sure whatever decision is eventually made, will be done so together and only after very careful consideration.
August 9, 2023
Franchise Law
Some Multi-Unit Franchisees are Public Companies
While most of the private equity and public offering activity of franchise companies focuses on franchise brands and systems, every now and then a large, multi-unit franchisee will go public or seek private equity financing. Public company franchisees may trade at lower multiples than those of franchisors because the franchisees do not control the brand. But publicly-traded multi-unit franchisees can nevertheless be significant companies in their own right. Publicly-traded franchisees include the following companies: Carrols Restaurant Group trades on Nasdaq. It owns and operates approximately 675 Burger King franchises. Burger King, the franchisor, has an ownership interest of approximately 28% in the company. Diversified Restaurant Holdings is a Nasdaq company.It owns and operates Buffalo Wild Wings franchises as well as its own brand, Bagger Dave’s Burger Tavern restaurants. Arcos Dorados Holdings trades on the NYSE. It is an Argentina company that owns and operates more than 1,800 McDonald’s restaurants in 20 Latin American countries. Meritage Hospitality Group trades over-the-counter.It owns and operates more than 120 Wendy’s and Twisted Rooster restaurants. HMS Host operates franchises and affiliate-owned brands in airports and highway rest stops.It is owned by Autogril SpA, a public company in Italy, with worldwide operations. Private equity firms also have multi-unit franchisee holdings, including the following: Sun Capital owns Heartland Automotive Services, Inc., the largest Jiffy Lube franchisee Sentinel Capital owns Border Foods, a Taco Bell franchisee; Sterling Investment Partners owns Southern California Pizza Company, a Pizza Hut franchisee with more than 220 locations. Other notable large multi-unit franchisees are privately held: NPC International operates more than 1,250 Pizza Hut franchises and 140 Wendy’s franchises. NPC was acquired by an entity controlled by Olympus Growth Fund V, L.P. and certain affiliates in December 2011. At the time of the acquisition, NPC obtained debt financing that is registered with the SEC. Morgan’s Foods Inc., the owner of 68 KFC, Taco Bell and Pizza Hut Express franchises, was a public company until it was acquired in May 2014 by Apex Restaurant Management Inc. for roughly $20 million.Apex is one of the largest franchisees of Yum! Brands (KFC, Pizza Hut and Taco Bell) and Long John Silver’s restaurants. Falcon Holdings, LLC operates approximately 100 Church’s Chicken restaurants.It is privately held.
August 9, 2023
Family Law
Divorce in New Jersey – ESP, Mediation and Arbitration
Originally posted on 3/15/2019, no content changes Alternative dispute procedures can be very effective in settling your case before trial, which should be every divorce litigant's goal. Trials take a very long time to be scheduled, are often not completed in consecutive days, usually require several days of testimony over several months, are typically extremely expensive, and are almost always used to further polarize the parties. Given that only two percent of all divorce cases are actually decided by trial, every litigant must ask themselves why their case is so different from the rest that it should be included within the two percent of cases that go to trial. There are a variety of alternatives that can be utilized to aid in settlement negotiations or pretrial settlement of a case. In New Jersey, the court mandates the attendance of the Matrimonial Early Settlement Panel (MESP). Matrimonial Early Settlement Panels exist in every County and are free to the litigants. The panels are staffed by two experienced divorce attorneys who volunteer their time for this purpose. The parties, through their attorneys, provide written submissions to the panelists, who then make recommendations as to the proper disposition of the case. If a case does not settle after going to MESP, several counties in New Jersey have Mandatory Economic Meditation, where you must meet with a court-approved mediator to further attempt to settle your case. In addition to the court-mandated Matrimonial Early Settlement Panel proceedings and Mandatory Economic Mediation, the parties themselves always have the right to access private mediation or arbitration. In private mediation, the parties and their attorneys will mutually agree upon an experienced mediator, who then meets with them in an effort to mediate a settlement of the issues which are in dispute. The mediator does not make a decision and, in most instances, does not even render a recommendation. The mediator's function is, generally, to stimulate discussion between the parties and to assist them in coming to a mutually agreed upon settlement. Arbitration, on the other hand, is a decision-making and binding proceeding. There are a number of experienced divorce attorneys and retired Judges who are willing to serve as arbitrators. The parties and their attorneys generally enter into an Arbitration Agreement, which will define the nature and scope of the arbitration. The parties may agree that the arbitration will be conducted on a very formal, Court-like basis or in a very informal proceeding. With very limited exceptions, the arbitrator's decision is then binding. In every case, you, as the client, should understand these alternatives and should review and discuss them with your attorney. Depending upon the facts and issues in your case, one or the other of these alternatives may be a very desirable alternative. For more information on this topic, please contact Megan Smith at msmith@offitkurman.com.
August 8, 2023
Healthcare
Are Anti-Aging Claims Drug Claims or Cosmetics Claims?
In today’s video, we focus on anti-aging products to determine whether FDA will likely regard your product as a drug instead of a cosmetic, which where you wanted to be. Hi, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. It’s a sunny day, it’s really me, and the glasses are photogray. We’ve helped lots of clients just like you, navigate the health and wellness industry through the legal requirements. Let’s talk about the Intended Use Doctrine. FDA determines that the intended use of a product could make it a drug, it looks to the labeling. And “labeling,” under the federal Food, Drug & Cosmetic Act (FDCA) will mean “all labels and other written, printed, or graphic matter (1) on any article or any of its containers or wrappers, or (2) accompanying such article.” In other words, “labeling” includes everything on the website, such as the blog, the product name, all the marketing. Everything is “labeling.” Worse (for you), this “intended use” doctrine gives FDA broad enforcement discretion. FDA can look at everything you’ve put out about the product and say, hey, this sounds like a drug to us. That’s the intended use, gleaned from the totality of the contents. Next, FDA gives particular scrutiny to some kinds of products, for example, Weight loss. The market is flooded with weight loss products whose claims go too far, and if you get to the end of this video, I guarantee you’ll lose two inches off your waist! That is, if you simultaneously engage in caloric restriction, read the fine print please. Okay, weight loss products, big problems for the FDA and the FTC. Now, you can’t look to what other companies are doing as evidence that they are successfully beyond enforcement scrutiny. Lots of people out there, not everyone gets caught. People are doing things, sometimes it takes years, but it can happen and it does happen. So, enough about weight, let’s talk about wrinkles. And there are some fine lines here, pardon the pun. If a product is intended to make lines and wrinkles less noticeable, simply by moisturizing the skin, the FDA will likely regard the product as a cosmetic. Similarly, makeup or “primers” intended to make the signs of aging less noticeable just by hiding them, are also considered, cosmetics. But products intended to affect the structure or function of the body, such as skin, are regulated as drugs. Note, if they’re not applied topically to the skin, and are machines, they might be considered medical devices. So, for example, if a product is intended to remove wrinkles or increase the skin’s production of collagen, it’s likely a drug or a medical device. Put another way, FDA emphasizes that products that are merely “intended to make people more attractive” generally are cosmetics. FDA states that its concern is with claims “that involve supposed effects on the structure of function of the skin.” Sound familiar? That’s part of the definition. Remember that drugs and medical devices are much more expensive to bring to market, and the regulatory burden is much higher, so it’s better if you can tame your claims to keep your product in the regulatory bucket of a cosmetic—assuming you can do this without sacrificing too much marketing power. And that’s where legal strategy comes in, as FDA lawyers we enjoy working with language, our goal is to help you choose marketing claims that won’t likely make the FDA bull charge at you, yet will also waive the flag sufficiently for marketing so that you’ll gain market share. Along these lines, we’d like to refer you to other materials on our Healthcare & FDA blog that talk about ten ways you can unwittingly end up making an implied disease claim for your product. Thanks for watching. Please contact us with your questions, comments. We have helped hundreds, thousands of healthcare companies just like you, market their products, navigate the legal and regulatory boundaries. We look forward to working with you on the journey to your success! Testimonials
August 8, 2023
Family Law
Protecting your Home with a Pre-Nuptial Agreement
It is increasingly more common for at least one person in a couple to have purchased his or her home prior to the parties’ marriage. Often, such a purchase occurs years in advance of the parties even meeting each other. In cases such as these, a pre-nuptial agreement is necessary to preserve that person’s home in the event of a divorce. Assuming the parties move into the pre-marital home of one of them, many issues, including the payment of bills, payment of the mortgage, increase in the value of the home and exclusion of a party in the event of separation or divorce, should all be considerations in a discussion of protecting this asset. Under the Pennsylvania Divorce Code, passive and active increases in the value of pre-marital assets, such as a pre-maritally owned residence, become part of the marital estate. Passive increases mean increases in value due to the passage of time such that the fair market value of the home has risen through the course of a marriage. Active increases include payments to a mortgage or home improvements. Active and/or passive increases can be discussed and potentially exempted from the marital estate through the use of a pre-marital agreement, thus protecting them from equitable distribution or claims of the other party in the event of a divorce. Likewise, in the event of a divorce in Pennsylvania, a pre-nuptial agreement can define a date certain by which a party must vacate a residence, thereby providing the other exclusive possession. Without such a provision or current agreement otherwise, parties are left to make an application for such relief from the Court, and there is no guarantee such a request will be granted during the pendency of the divorce process, which often may take more than a year. Bill payment and maintenance of the household is another issue that can be addressed by a pre-nuptial agreement (and if the parties are not contemplating marriage in the near future, a cohabitation agreement). For more information on this topic, please contact Megan Smith at msmith@offitkurman.com.
August 7, 2023
M&A Nuggets
M&A Nugget: The Best Fit
Most business transitions are accomplished by a sale to a third party. The merger and acquisition is, however, one of several ways that an owner can transition a business. The question is – what is the best fit for the owner? There are other alternatives that should be considered, if applicable. Does the owner have family who has worked in the business? If so, the owner could accomplish both business planning and estate planning objectives by transferring ownership to the family member. Are there key management personnel who are ready now or will be ready in the near future to take the helm of the business? If so, an exit plan can be implemented by which the ownership is transitioned to management over time. A sale to a third party might mean a greater purchase price and/or more secure source of funding for a purchase price to be paid over time. On the other hand, a sale to a third party might also result in a shorter term of continuing employment and therefore a stream of income over a shorter period of time than one of the other alternatives discussed above. There are many other factors to consider. In any event, when deciding how to exit your business, just as with a work suit, the question is which alternative is the best fit.
August 7, 2023
Family Law
Divorce in New Jersey - Child Support
Originally posted on 8/11/2019, no content changes. Child support is primarily dependent upon the levels of the parent's income. In those cases in which the parents' combined income is less than $187,200 per year (net of taxes), the Child Support Guidelines will be the baseline determination of the amount of child support. A determination must first be made as to which of the parents is the Parent of Primary Residence and which parent is the Parent of Alternate Residence. The parent with the most overnight time with the child is the Parent of Primary Residence and, thus, the parent to whom the child support is paid. Then, if the parents' combined after-tax income is less than $187,200, the amount of child support to be paid is presumptively defined by the New Jersey Child Support Guidelines and is subject to basically only three variables : The number of overnights per week which the child spends in each parent's home; The total income of the parties; Each party's respective share of the total income. The computer programs which apply the Guidelines automatically take these variables into account. Although the amount calculated under the Guidelines is only presumptive as to the appropriate amount of child support, that presumption will be accepted in the vast majority of cases. In addition to the basic child support, there are certain "extraordinary" expenses most often allocated between the parents in the ratio of their incomes. Typically, such "extraordinary" expenses include, but are not limited to, medical expenses or work-related daycare expenses. In addition to medical and daycare expenses, individual cases and a child's particular needs or interests may justify additional payments. For example, does the child have a learning disability or other educational deficit which may require specialized schooling or tutoring? Does a child have specific musical, athletic or other talents which have been nurtured or supported by the parents through individual lessons, training, coaching or camps? In those cases in which the parents' combined income exceeds $240,000 per year net of taxes, the Court must consider specific factors in order to determine the amount of child support. The factors include: needs of the child; the standard of living and economic circumstances of each parent; all sources of income for each parent; the assets of each parent, or the earning ability of each parent; the child's need and capacity for further education, including higher education; the age and health of the child; the age and health of each parent, and the income or assets of the child, and the responsibility of either parent for other Court ordered support; the reasonable debts of either party. The determination of the child support for such "above guidelines" cases is complicated and somewhat subjective. "Above Guideline" child support requires a complete analysis of the child's needs and the standard of living during the marriage. It should only be done with the advice of a competent attorney. In every case, the parties should also attempt to define when the child will be "emancipated" (meaning that the child support will terminate) and if either party will be required to contribute to the child's college or other educational expenses. For more information on this topic, please contact Megan Smith at msmith@offitkurman.com.
August 4, 2023
Family Law
Is My Inheritance Marital Property?
It depends. Isn’t that a lawyer’s answer to just about everything? In Maryland, property acquired by inheritance or gift from a third party or that was owned prior to the marriage is non-marital property. It will not be divided between the parties upon divorce. However, if the inheritance is commingled, it becomes marital. Understandably, this is a very difficult concept to understand. Many lawyers and even judges have a difficult time “tracing” non-marital assets that may have become commingled. Sometimes, it helps to see some examples. Here are a few: If the wife inherits $200,000 from her uncle’s estate during the marriage, and she then deposits all of those funds into a separate account in her sole name, and the funds remain in that account until the date of divorce, those funds and any growth on those funds have remained wife’s non-marital property. That’s the clearest example of non-marital funds remaining non-marital or separate property. In real life, however, things are usually not that clear. For example, if the wife deposits the funds into a bank account in her sole name, and then uses the funds to pay expenses for the family over the years for vacations, children’s schooling, etc., those funds are no longer in existence, and she will not receive credit for having used her non-marital funds for family use. Any funds that remain in the separate account would be non-marital and would continue to be her separate property. Where this gets complicated and requires “tracing” is when some of the non-marital funds are commingled with marital funds. That can happen if funds acquired during the marriage are deposited into the wife’s separate account. The normal growth of the funds, including interest earned on the non-marital funds in the separate account, remains non-marital. However, if any marital funds are deposited into the account, the account loses its non-marital designation, and the entire account may be subject to division as a marital asset. The visual story goes as follows: if you have a swimming pool that is filled 90% with blue water, and a water truck comes in with green water and puts that into the pool, filling it to the brim, everyone knows that it is 90% blue and 10% green, but the water is now aqua, and the blue cannot be separated from the green. The same is true with cash in a bank account. Therefore, if one receives a gift or an inheritance during the marriage or has significant funds prior to marriage and wishes to keep them as non-marital or separate property, those funds should be kept separate, and no marital funds, including income, should be deposited into that non-marital account. Should you have any doubt as to whether or not your inheritance is marital or non-marital, your attorney will be able to help you.
August 4, 2023
Family Law
Top 10 Divorce Mistakes to Avoid
Divorce can be an unpleasant and stressful process. Parties who have not educated themselves or who proceed without the guidance of an experienced divorce attorney often make mistakes that can last a lifetime and are typically more expensive in the long run. Don’t be one of them. Here are 10 of the most common mistakes to avoid during a divorce: 1) Involving the kids in the process If your case involves a custody or parenting time dispute, nothing will anger a judge more than involving the children in the dispute. One rule is straightforward: leave the kids out of it. Do not talk to the kids about your case. Do not use them as pawns in your “battle” against your spouse. Do not put your spouse down in front of the children. Do not “coach” your children as to what they should say if they have to meet with a custody evaluator, a doctor, a therapist, or a judge. By doing so, you are not only harming your case; you are harming your children. Even after the divorce is over (and it will be over), the children will still have (and need) both of their parents — always place the children first. 2) Taking advice from friends, family, or the internet Everyone always hears about a friend’s cousin who took the other spouse “for everything they had” and advises that you should demand nothing less. This free advice is worth exactly what you paid for it – nothing. Each case will be resolved based on the unique facts and circumstances of that case. What one person is awarded is often very different from what another person has been awarded. While friends and family are a great source of emotional support, they are not legal professionals. 3) Letting your emotions get the best of you Frustration, despair, and sadness are just a few of the many intense emotions that can be at play during the divorce process. Seeing things clearly can often be hard when such heavy emotions cloud your judgment. Take a moment to do what is necessary to regain a logical, calm, and clear perspective. Take the time to acknowledge your feelings and practice self-care to regulate your emotions. Don’t make hasty decisions based on heightened emotions. Having the assistance of an experienced divorce attorney is critical to ensure you are acting with your head, not just your heart. A skilled therapist can be hugely helpful as well. 4) Hiding or failing to produce documents You have an absolute right to see your spouse’s financial documentation. Your spouse has a fundamental right to see your financial documentation. The court will order you both to produce your financial documentation to each other. If you fail to do so promptly, it will only cost you more money and time down the road. More importantly, if you fail to disclose certain accounts or statements, any agreement you reach could become void, and it is highly likely that a court will impose extreme sanctions on the offending party. A full and complete disclosure will ensure that you are aware of the assets and liabilities subject to distribution and that you are receiving a fair division of same in your divorce. 5) Lying to your attorney Your attorney is there to help you. They are there to fight for you and ensure you get the best possible resolution of your case. Your communications with them are privileged – meaning they cannot (with a few exceptions) disclose what you tell them without your permission. The more your attorney knows, the more (and the better) your attorney can help you. No matter how embarrassing, outrageous, or ugly, an experienced divorce attorney has likely heard it all before. You need to keep your attorney fully informed and prepared to confront and manage any issues that arise in your matter. 6) Failing to identify separate property While most of the assets you and your spouse acquired during your marriage are subject to distribution in your divorce, most of the assets you acquired before your marriage are not. Under New Jersey State law, generally speaking, “separate property” is defined as property acquired by an individual prior to marriage, and “marital property,” in the absence of a prenuptial agreement, is defined as property acquired by one or both spouses during the marriage, irrespective of whose name the asset is in. It is important that you identify to your attorney any assets you acquired before the marriage and any potential commingling of that asset into a marital asset so that your attorney can protect your separate assets for equitable distribution. 7) Making oral agreements Even if you and your spouse continue to have an amicable relationship after separation and throughout the divorce process, do not make the mistake of entering into side oral agreements with your spouse concerning issues in your divorce. Memorializing all agreements in your written settlement agreement is essential to protect your interests. It is often very difficult, if not impossible, to enforce oral side agreements, especially if your written agreement purports to incorporate the entire agreement. 8) Failing to consider post-divorce finances Once you separate, the economic realities of having two separate households can be stressful. Not only are there two sets of expenses for two different households, but you are also transitioning from a two-income household to a one-income household. After separating, you should prepare a financial plan or budget for your new financial circumstances. It would be best to refrain from creating new or additional debts. Finally, do not assume that debts from your marriage are paid. If you and your spouse jointly accumulated debts during the marriage, ensure that you advise your attorney of those debts and have an agreement in writing as to which party is responsible for the payments of these debts during the pendency of the divorce. Upon finalization of your divorce, ensure that your settlement agreement explicitly sets out who is responsible for paying back that debt and remove your name from any liabilities that you are not responsible for, such as mortgages or credit cards. This will ensure that you are not held liable for debts you do not incur or are unaware of. 9) Being your own attorney Many couples believe it is unnecessary to hire attorneys to aid them in the divorce process, or they believe one attorney can represent the interest of both parties. However, an attorney (unless you go through the mediation process) only represents one individual and is there to protect only that individual’s interest. Both parties should retain their own independent counsel to represent their respective interests. Failing to hire an attorney may lead you to enter into a disadvantageous agreement. Note that a mediator cannot represent either party and can be hired as a neutral to assist you and your spouse negotiate an agreement. 10) Having unrealistic expectations In order to reach an equitable agreement and resolution of your matter, both parties must often modify their expectations. Most divorces require some give and take, and your attorney will work with you to create a strategy to obtain the things most important to you. Going through each of the issues in your divorce and deciding which ones are worth the time, energy, and expense of litigation and/or negotiations is the best way to utilize your resources and save money on your divorce.
August 4, 2023
Estates and Trusts
Unmarried Couples Win New Inheritance Rights
For more than a decade, the freedom to marry has been available to Maryland’s same-sex couples. Those who have approached the altar, the chuppah, or the courthouse and tied the knot enjoy legal benefits that were denied them as domestic partners. These include the right to receive an inheritance if one partner dies without a will, and to avoid Maryland’s hefty inheritance tax. Under the new legislation, these rights are now available to Maryland’s unmarried couples as well. By registering as domestic partners, unmarried couples can ensure that if one partner dies without a will, the survivor will be entitled to an inheritance equivalent to what a surviving spouse would receive. This could be as much as the entire estate or a lesser amount for couples who have children from a prior relationship. The surviving partner also has the right to serve as personal representative, or executor, of the deceased partner’s estate. Whether a partner dies with or without a will, this new law exempts the surviving partner from Maryland’s 10% inheritance tax on any property received from the deceased partner. The tax normally applies to any bequest left to someone who is not a spouse or close family member. By way of example, a registered couple would save some $30,000.00 in inheritance taxes if one partner died with $300,000.00 in assets, compared with an unmarried couple who had not registered. The law will also recognize children born to registered domestic partners as the legal descendants of both parents. Registration Requirements Beginning October 1, 2023, a couple can register as domestic partners by completing an affidavit with their names and address. Each partner must be at least 18 years old, unmarried, and in no other domestic partnership. The signed and notarized form must then be submitted to the Register of Wills in their county of residence with a $25.00 payment either in person or by mail. A registry is available to same-sex and opposite-sex couples alike. Once their application is approved, the couple will receive a certificate of domestic partnership. The Registers will all be able to access the records of the other registers, so a couple will be able to move to a different Maryland county without having to re-register. An unmarried couple who have registered with the state can terminate their partnership in four ways—by the mutual agreement of the partners, by one partner who has been abandoned by the other partner for at least six months, or upon the death or marriage of either partner. Not a Substitute for Estate Planning Couples who register should consider taking additional steps to ensure that they are prepared for the unexpected, including the death or disability of a partner. Have an attorney draw up your estate-planning documents, including a will, financial power of attorney, and advance medical directive. Your partner may be your primary beneficiary under your will, but you might want to include gifts to your children, nieces and nephews, or charitable organizations as well. A well-thought-out will also says who inherits and who settles the estate if you and your partner are both deceased. If your beneficiaries include children, your will could include a trust for their benefit. Placing a child’s inheritance into a trust will help ensure that the assets go toward worthwhile purposes, such as college, medical care, or maybe the down payment on a house. A will can also name guardians to look after any children who may be under the age of 18 when both parents are gone. If you or your partner becomes unable to manage your own finances or medical care, having a power of attorney and advance directive will help ensure that someone you trust is authorized to make these decisions on your behalf. At a time when fewer people than ever are getting married, and even fewer prepare a will before they die, having the right to register as domestic partners is a huge win for Maryland’s unmarried couples. If you and your partner decide to register, be sure to finish the job by having an estate plan prepared to help you navigate some of life’s biggest uncertainties. Lee Carpenter is an Estates & Trusts attorney at the law firm of Offit Kurman, P.A., and can be reached at (410) 209-6426 or Lee.Carpenter@OffitKurman.com. This article is intended to provide general information about legal topics and should not be construed as legal advice.
August 3, 2023
Family Law
My Spouse has an Income, so Why Would I have to Pay Alimony?
Known Indefinite Alimony Awards in Reported Maryland Cases. The purpose of alimony is not to provide a lifetime pension. Rather, alimony is designed to provide the recipient spouse an opportunity to become self-supporting. Nonetheless, in cases where it is either impractical for the dependent spouse to become self-supporting or in cases where the dependent spouse will be self-supporting but still a gross inequity will exist, a court may award alimony for an indefinite period of time. A court may award indefinite alimony if it finds that: (1) due to age, illness, infirmity, or disability, the party seeking alimony cannot reasonably be expected to make substantial progress toward becoming self-supporting; or (2) even after the party seeking alimony will have made as much progress toward becoming self-supporting as can reasonably be expected, the respective standards of living of the parties will be unconscionably disparate. Although a significant mathematical disparity in income is not necessarily a sufficient condition to justify an award of indefinite alimony, it is nonetheless a necessary condition. But mathematical disparity is only the starting point of an unconscionability analysis. The court must look to the factors of Maryland Code Ann., Fam. Law § 11-106(b), which provides guidance in determining an appropriate award. Of course, the greater the income disparity, the more likely that it will be found unconscionable, all other factors remaining equal. The court has discretion in determining the length of alimony. In Maryland, it is interesting to note the following cases in which the mathematical disparities of each party’s income were considered in the court’s award of indefinite alimony. In Tracey v. Tracey, 328 Md. 380 (1992), an indefinite alimony award was upheld where the Wife’s post-divorce income was 28% of the Husband’s; in Caldwell v. Caldwell, 103 Md. App. 452 (1995), an indefinite alimony award was upheld where the Wife’s post-divorce income was 43% of the Husband’s; in Blaine v. Blaine, 97 Md. App. 689 (1993), an indefinite alimony award was upheld where the Wife’s post-divorce income was 23% of the Husband’s; in Rock v. Rock, 86 Md. App. 598 (1991), an indefinite alimony award upheld where Wife’s post-divorce income was 20-30% of Husband’s; in Broseus v. Broseus, 82 Md. App. 183 (1990), an indefinite alimony award upheld where Wife’s post-divorce income was 46% of the Husband’s; Bricker v. Bricker, 78 Md. App. 570 (1989), an indefinite alimony award upheld where the Wife’s post-divorce income was 35% of the Husband’s; in Benkin v. Benkin, 71 Md. App. 191 (1987), an indefinite alimony award upheld where the Wife’s post-divorce income was 16% of the Husband’s; in Zorich v. Zorich, 63 Md. App. 710 (1985), an indefinite alimony award was upheld where the Wife’s post-divorce income was 20% of the Husband’s; in Kennedy v. Kennedy, 55 Md. App. 299 (1983), an indefinite alimony award was upheld where the Wife’s post-divorce income was 33% of the Husband’s. Disparity in income is one of the many factors in determining the amount and length of an alimony aw d. Whether you are the dependent or earning spouse, competent counsel should be sought to do a complete alimony analysis in preparing for the resolution of this issue related to a divorce.
August 2, 2023
M&A Nuggets
M&A Nugget: Licenses – A Potential Holdup
Many target companies own a license that is required to engage in business. To the buyer, the ability to use the license is therefore crucial. Some licenses can be transferred, but most licenses cannot, in which case the buyer is required to apply for a new license. This important part of getting a deal done is often mismanaged. The keys to assure that the license process does not unduly delay closing are preparation, timing, and smart use of resources. On the preparation end, a buyer needs to do its homework to review the applicable rules and regulations governing the license. These rules often change, and it therefore is important to make sure that the most recent rules are reviewed. As for timing, applications to transfer a license or obtain a new license must be reviewed by the applicable government agency, which is often understaffed and underfunded. The license application should be made early enough to allow the government agency more than enough time to review and approve the license. Last, in terms of smart use of resources, it is often wise to engage a local expert who deals with the particular kind of license on a regular basis. By taking the above steps, the buyer and seller can make sure that the required license is not the holdup to closing.
August 2, 2023
Family Law
Divorce in New Jersey: Trial
Originally posted on 3/15/2019, no content changes. If you and your spouse have been unable to settle your case between yourselves and none of the settlement alternatives described previously have been successful, it may be necessary to prepare and submit your case for trial before a Judge. The trial of a case has been described by some as being analogous to an iceberg. The tip (or, in this case, the trial itself) is a very, very small portion of the overall process. The remaining 90% is below the surface and is often not seen. A trial involves tedious and time-consuming preparation of witnesses, the preparation of exhibits, marking of evidence and Subpoenaing of witnesses. If your case is going to trial, be absolutely certain that you have reserved enough time from your personal and work schedule to meet with your attorney to prepare the case. Similarly, be certain that your attorney has scheduled adequate time to meet with you, prepare your testimony, be certain that you have all of the evidence and exhibits and that you have a full understanding of the trial process. Any documents which are not current must be updated. Any documents which are not official or certified copies must be replaced by official or certified documents which can be properly moved into evidence. Any witnesses who are going to be utilized must be interviewed and prepared. Any documents or evidence which they will rely upon in their testimony must be organized. Very often, it is extremely important to develop charts or graphs showing the flow of funds into or out of accounts, fluctuations in income, or even simply plotting the growth or loss in value of various assets. There is no such thing as over-preparing for trial. On the other hand, many trials are lost by a lack of preparation. Once the trial begins, there is an orderly, defined and rigid process which is followed. Each attorney will give their opening statements to the Court. In the opening statement, they will outline the case and outline for the Court what they intend to prove and how they intend to prove it. Each witness will then be called to the witness stand and subjected to a direct examination. Every point must be made by asking a question and getting a specific answer. It is a tedious and detailed process. No witness can simply give a long narrative to the Judge. That narrative must be broken down into specific questions with specific answers. At the conclusion of direct examination, every witness will be subject to cross-examination by the opposing attorney. Cross-examination is designed to show conflicts in the testimony, to show a bias or lack of credibility in the witness and to generally undermine the witness's testimony or credibility. Cross-examination is not a pleasant process, and you should be sure that your attorney has fully and adequately prepared you for a cross-examination by subjecting you to a mock cross examination prior to the trial. Remember that when submitting evidence to the Court, your attorney is bound by the Rules of Evidence. Things which are hearsay, which are not within the first-hand knowledge of witness or otherwise do not comply with the Rules of Evidence, are of no value at the time of trial. At the conclusion of the trial, your attorney will submit a lengthy and usually written closing argument and summation to the Court. This document will outline and summarize what has been presented into evidence, what conclusions we want the Court to draw from the evidence and citations to the law which support such conclusions. Following the Judge's decision, either you or your spouse will have the right to appeal. However, the appeal of the case is not simply a "second bite of the apple." There are very limited and narrow grounds for an appeal. You must show that the Judge's findings were not only in error but were "arbitrary and capricious" or that the Judge erred in the interpretation or application of the law. Trials are difficult and expensive and should be considered only when absolutely necessary. There are, however, cases in which the issues are so significant or complex that they can only be resolved by a trial. If that is your case, prepare, prepare, prepare and then prepare some more! For more information on this topic, please contact Megan Smith at msmith@offitkurman.com.
August 1, 2023
M&A Nuggets
M&A Nuggets: Fair Notice
This nugget covers one of the mundane but important procedural aspects of a purchase agreement, called “Notice”. Every purchase agreement should contain a paragraph describing the methods by which written notice of a matter must be given. There may be important matters that the buyer/seller needs to notify the other about. For example, notification of the buyer’s decision to extend the closing date or the buyer’s claim for indemnification after the closing. It is therefore important that the method for providing notice be reliable enough to assure that the notice will be received and that the receiver of the notice will have enough time to respond. Boilerplate notice paragraphs often allow notice to be given by several methods, including hand-delivery, overnight mail, certified mail, fax transmission and e-mail transmission. In my opinion, neither certified mail nor fax transmission should be used as a delivery method. Certified mail, even if restricted to delivery of a specified person, is often either not retrieved or signed for by someone other than the designated person. Fax communications are used much less often than before e-mail existed and are often directed to a general fax line that may not make its way to the intended recipient. My preference is to limit the modes of delivery of the written notice to hand-delivery or overnight mail sent by a national recognized courier, along with, and not in lieu of, e-mail transmission. By being particular in drafting the notice paragraph, neither the purchaser nor the seller will risk missing an important notification from the other.
July 31, 2023
Business
Over 50 Years of Law Practice Tips
Originally posted on 08/12/2020, content updated on 07/27/2023 Having been fortunate to serve clients on every continent other than Antarctica in transactions of every size and in every kind of business and having been privileged to have mentored many newer lawyers, over 50 years of experience as an international and domestic business lawyer has taught me many things. I have compiled a list of many of the lessons I have passed on to others over 50 years, and this article sets out the latest iteration of my tips for others to consider. If something does not make sense, it usually does not make sense for a reason. Finding that reason is not always easy. Ask questions and continue to ask questions, just like peeling back the layers of an onion. Make statements in the form of a question. Focus your thinking by diagraming the deal or what happened or was supposed to have happened. Understand the underlying economics of a particular matter. Learn financial statements and how each statement impacts the other statements. Do your own income tax return at least once to understand the schematic of the Internal Revenue Code. Research the income tax regulations on a specific matter at least once in your career. Framing a question properly will often suggest the answer or options. Ask if anyone in the firm has a file or precedent for your legal issue. Whatever you say in writing, whether in an email, fax, letter, or otherwise, can and will be used against you and will be distorted. Re-read calmly whatever you write before sending it and ask yourself if you really want to say whatever you wrote. Ask how it would look if whatever you write appears on the front page of your favorite newspaper. It may be best to use bcc’s and not cc’ s to clients on letters or emails to opposing lawyers, or better yet, forward what you send to avoid a bcc recipient from replying to people who do not know who was bcc’d and to preclude a waiver of the attorney-client privilege. No typo’s or typos — clients and adversaries will find them! Use spellcheck. Proofread all documents even after using spellcheck. Spellcheck is not a substitute for proofreading. Know the differences between:effect-affect principal-principle your- you’ re its-it’s lose-loose No split infinitives. Avoid the passive voice. The ultimate reader of your email, fax or document is a judge or arbitrator. Listen to the client or other side and ask questions. Hear and process what is said, and what is not said. Ask questions! It’s best if all questions have a purpose. Silence your cell phone and other devices before a meeting starts; preferably, put the device away and help cause everyone in the meeting to focus on the agenda. Have an agenda for each meeting and stick to it. Start meetings on time. Those who miss the start will learn not to do that again, especially if you bar them from attending the meeting if they are late. Do not multitask during a meeting or call. If you do, you cannot be listening, and you are being rude to the person you are talking to. Better to end the call or meeting or not have it. There is no such thing as ” boilerplate.” Pay attention to the so-called “boilerplate” provisions in contracts that generally appear in a “General” or “Miscellaneous” final section of a contract. The other side often (1) may consider those clauses to be “boilerplate” and in drafting or reading them often pay less attention to them and (2) may be tired or bored by the time they get to read those provisions if the other side reads a draft starting with page 1 straight through to its conclusion. The agreement you are using as a model is the end product of negotiation in another deal. Do not copy someone else’s mistakes. Start with the basics of legal principles and definitions, including looking at Black Law’s Dictionary or other sources of definitions because those precedents may give you words and concepts that will aid in your drafting or mark-up. Check to see if there is a statute on whatever the issue is, including statutes providing for statutory construction, definitions of terms, rules of construction for contracts, and other statutes that may use or define a particular term that can offer some guidance. Is there a Federal issue lurking somewhere, including any Constitutional question? Is there a public policy matter underlying the legal rule in issue, and are your facts distinguishable so that the public policy underlying the legal rule may or may not be violated depending on the result? Excluding Constitutional, criminal and tort cases, most reported court decisions usually result from (1) a client not seeking or getting good legal advice before the particular matter eventuated into a litigation, (2) a lawyer not giving particularly good legal advice either in the underlying matter or in the litigation itself, (3) the client did not use a lawyer and made a mistake, or (4) there was a serious miscommunication in the underlying matter. If a trial or intermediate appellate courts made no errors, the quantity of reported judicial decisions would be reduced materially. An appeal, therefore, and planning for that appeal, may be an appropriate part of litigation strategy because error at the trial court or intermediate appellate court level is very possible, either on a procedural or substantive matter. It may not make sense to rely solely on online research and not consult books. Check findlaw.com or cornell.edu for free legal research links before using Westlaw or Lexis. Consider not using the word “should” in communications with clients if its use could be deemed to create a standard of conduct for the client or for our firm. Have multiple original copies of a power of attorney signed and where appropriate, acknowledged, because you never know who will want to keep an original. Have only one original copy of a promissory note signed. Ask the client to obtain the original signed promissory note when it is paid off. Do not allow what you do to fall to or be viewed as the lowest common denominator. Shortcuts often result in mistakes or less than comprehensive documents. Document client instructions in confirmatory emails and do that in a nurturing and not accusatory way. Price and cost are two different things. Negotiating and bargaining are two different things. Generally, it takes 3 hours of preparation time for every 1 hour of a meeting or negotiation. Try to be elegant in whatever you do, for yourself, and for appearances with others. There are excuses, but there is no such thing as a good excuse. We recruit for skills. We hire for attitude. We promote for both. Under-promise and over-deliver. The best interests of our entire firm are paramount to the self-interest of any one person or group of persons in our firm. Understand the client’s goal and think as if you were the client and your money or business is involved, bringing to that thought process all your skills and experience as a trusted legal advisor. Document everything. Undocumented anything often results in ambiguity. Strategy and tactics are two different things. What is your unique selling proposition? As a glassblower-artist for 31 of those 47 years, sometimes the old tried and true ways are just as good or better than the new ways. No matter what you know, there is always more to learn, whether from others or from your own mistakes. The remaining number of years in your life may not include as many years as your current age may suggest. Hope is not a strategy. All business is personal. I welcome comments from others and am always happy to discuss the story behind each of these tips.
July 27, 2023
Family Law
D.C. Court May Consider Pets’ Best Interest in Awarding Ownership in Divorce Proceedings
Many pet owners treat their pets like children. Now the Superior Court of the District of Columbia may do so as well in divorce or legal separation proceedings, pursuant to a law that recently took effect. The Animal Care and Control Omnibus Amendment Act, which became effective on April 21, 2023, gives the Superior Court for the District of Columbia the discretion to consider the “best interest” of “pet animals” in deciding which party should have the pet after the divorce or legal separation proceedings have ended. The Court may also decide which party should have the pet during the divorce or legal separation proceedings. Until the enactment of the new law, pets were treated solely as personal property in divorce and legal separation proceedings, and there was no provision in the District of Columbia Code permitting the court to consider the pets’ best interest. The “best interest” standard until now has been applied solely to child custody cases. While the statutory provisions pertaining to child custody provide specific factors the Court must consider in child custody cases, the new law does not provide any factors the Court must consider and does not define “best interest,” thereby giving the Court broad discretion to determine how that phrase should be interpreted and applied. The Court might consider a wide array of facts in determining a pet’s best interest, including who cared for the pet and who was most closely bonded with the pet. The Court might also consider evidence that one party mistreated the pet. The new law gives the Court authority to assign ownership of the pet to one of the parties, or the Court may award “joint ownership” of the pet to both parties. The new code provision does not define “joint ownership,” leaving the Court to interpret and apply that phrase. It is possible that the Court will order the parties to share the pet according to an equal time-sharing arrangement or that one party should have more time with the pet than the other party. The statute does not provide any guidance regarding whether a history of domestic violence between the parties should be considered by the Court in determining whether joint ownership should be awarded. Arguably, to protect victims from further harm, the Court should avoid awarding joint ownership in cases involving domestic violence. The phrase “pet animal” is defined as “any animal that is community property and kept as a household pet.” The phrase “community property” is not defined anywhere in the District of Columbia Code. The Superior Court for the District of Columbia and the Court of Appeals have historically referred to property acquired during the marriage or domestic partnership as “marital property.” Perhaps the phrase “community property” is intended to also mean property that was acquired during the marriage or domestic partnership. In disputes regarding ownership of pets between parties who are not married or in a domestic partnership, the “best interest” standard set forth in the new law would not apply. As between nonmarried persons, the Court would view the pets solely as property and must determine who owns the pet by considering who purchased the pet or adopted the pet without giving consideration to who cared for the pet or any other facts that might pertain to the pet’s best interest. Anyone who wants the Court to consider the best interest of a pet must affirmatively request that relief as part of the divorce or legal proceeding. The new code provisions described above are set forth in D.C. Code §16-910(3).
July 26, 2023
One Minute of Overtime
Highly-Compensated Worker Exemption
Welcome to One Minute of Overtime, where I will share insights on Labor and Employment Law topics, mostly related to minimum wage and overtime compliance issues. Compliance in this area of law is nuanced and technical, so it is critical for employers to audit and adjust their practices to remain compliant, so stop by to stay up-to-date and in-the-know. An employee qualifies for this exemption if they earn total annual compensation of $107,432 or more (including satisfying the salary basis or fee test), the employee’s primary duty includes performing office or non-manual work, and the employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee.
July 26, 2023
Litigation
Creative Lawyering – Property Settlement Agreement as Written Assignment (a Supreme update)
A beneficiary’s interest in a life insurance policy is only as protected as the written assignment securing the interest with the policy issuer. In the right circumstances, a Property Settlement Agreement (PSA) – or other similar agreement! – can double as any number of other useful legal documents. I’ve previously written of trial court successes where PSAs have doubled as a real property deed and, in a more recent case, as an “assignment” (serving to transfer an interest in life insurance policy proceeds). Over the pandemic, I left readers hanging by failing to share the appellate outcome on the “assignment” issue. The Virginia Supreme Court took up a case of mine involving a divorcee whose deceased ex-spouse failed to honor a consensually court-ordered life insurance commitment. Essentially, the divorcing husband had promised to maintain life insurance for the benefit of his soon-to-be ex-wife and later reneged by changing the policy beneficiary designation (a not uncommon occurrence, unfortunately) shortly before committing suicide. The trial court had ruled favorably for the surviving ex-spouse (our client) but had done so on questionable legal grounds – relying on a definition of “creditor,” which I had not even argued to the Court (with good reasons, it turns out!). Suffice it to say, the circumstances in the case required a “written assignment” for the proceeds of the life insurance policy to be rightfully owed to the surviving ex-spouse. The assignment requirement stemmed not from the former couple’s divorce documentation but rather from the contractual arrangement with the life insurance company issuing the policy. Additional details of the case aren’t nearly as significant as the rule of law on which the Supreme Court chose to uphold the trial court’s decision and the impact it ought to have on anyone expecting to benefit from the life insurance policy of another. It turns out the Supreme Court agreed that the language of the couple’s PSA satisfied all the requirements of an assignment sufficient to have effected a transfer of the policyholder’s interest in the proceeds of the policy to his ex-spouse. The appellate victory was sweet – not going to lie. Our client’s win, however, proved a cautionary tale for all future would-be policy beneficiaries (not to mention their divorce attorneys, financial planners, and estate planning counsel!) facing similar circumstances. Our client had lucked out inasmuch as her vengeful ex-spouse hadn’t compounded his in-your-face beneficiary re-designation by pledging or otherwise re-assigning the policy to another in exchange for a financial interest of some kind. According to the Supreme Court, had he done so, he would have successfully cut his ex-spouse out of a substantial portion of the financial consideration negotiated for during the parties’ divorce. Because the PSA/assignment document was not provided to and accepted as an assignment by the insurance company (in lieu of the company’s own form assignment document) prior to the policy owner’s death, any subsequent assignment properly documented with the insurance company would have superseded the PSA’s operative language. In essence, the reach of a PSA’s operative assignment impact only extends as far as the parties to the agreement unless and until either the policy issuer becomes a party to the agreement or the policy owner opts to reassign some or all the same interest in the proceeds. The rationale of the Court’s decision might easily be extended beyond the divorce context to anyone with an expectancy in policy proceeds. I’m speaking especially in this context to anyone who might consider extending credit with the promise of repayment to be backed by policy proceeds. Failing to insist on a written assignment on the insurer’s form and confirmation of the insurer’s acceptance of the assignment unnecessarily affords an unscrupulous borrower the ability to leave you completely unprotected. I welcome opportunities to provide guidance prior to leaving oneself or one’s client unnecessarily exposed and/or counsel when looking to extricate from unanticipated consequences after having failed to protect against them beforehand.
July 25, 2023
Family Law
Postnuptial Agreements Post COVID-19
Originally posted on 05/15/2020, content updated on 07/24/2023 Hope is not a financial plan.[i] The COVID-19 pandemic and the lifestyle slowdown that came with it provided many married couples the opportunity to reassess their marriages. For some, the crisis made their bond stronger. For others, prolonged separation and/or prolonged closeness revealed considerable cracks in their relationship. If you and your spouse fell into this category, with the realization that your marriage may be ending, divorce, in and of itself, is not the only option. The better choice, rather than the immediate finality of divorce, is the creation of a document known as a Postnuptial Agreement. In its simplest terms, a Postnuptial Agreement is a contract signed by the couple at any time after their marriage which resolves all or at least a portion of the financial issues between them. A Postnuptial Agreement survives whether the marriage lives or dies. It can be a simple framework or a detailed road map, limited or expansive in scope, enforceable[ii] regardless of the state of the marriage when entered into. It can and often does provide a cooling off period for the couple; an opportunity to work on their marriage. If the marriage fails, a Postnuptial Agreement will ease and expedite the divorce process; and save the couple legal fees, inasmuch as they previously resolved the financial aspects of the marriage. Why have a Postnuptial Agreement? Oft times a couple does not like the idea of a prenuptial agreement (an agreement prior to the marriage). For some, a prenuptial agreement creates the sense that the marriage is starting off on the wrong foot, or doomed for failure; for others, the romantic ideal that the parties share is shattered by the thought of negotiating marital financial matters before they have even said “I do.” Others just simply refuse because they have no interest in obtaining a prenuptial agreement. With a Postnuptial Agreement the couple can eliminate expensive and acrimonious divorce battles. The spouses, through counsel, contractually delineate their monetary future, and if the marriage succeeds until a death, a postnuptial can prevent inheritance disputes between a person’s surviving spouse and his/her heirs. What Can be Included in a Postnuptial Agreement? Creating a Postnuptial Agreement requires the couple to agree on terms relating to the issues faced in their marriage. Provisions commonly included address: marital debts, credit card debt, or mortgage loans; property and asset division; spousal support amounts (if any) and the length of those payments; family budgets/spending habits; and the manner in which assets will be handled should one spouse pass away (estate planning)[iii]. Other, more unique provisions address: the manner in which the couple would respond to a sudden, dramatic change in their financial situation; transfers of separate property into marital property, and vice versa; protecting retirement assets in the event of divorce, which could lead to a decrease in retirement funds; non-disclosure and privacy provisions, limits on the personal and marital information either spouse may share with third parties; and even, limits to what is shared or discussed on social media. Children and issues concerning the Children, such as custody, visitation, or child support will need to be resolved at the time of the divorce action, either through a settlement agreement or court involvement. Child-related issues cannot be resolved by way of a Postnuptial Agreement, and even if the Postnuptial Agreement contain clauses relating to such, they will not be enforceable. How Can I Assure That My Postnuptial Agreement Is Valid? The validity of a Postnuptial Agreement does not require or mandate an eventual divorce. However, if the decision has been made that a Postnuptial Agreement is the right choice, then proper steps must be taken to ensure its validity. Primary among these steps is the full and fair disclosure of the entirety of each of the spouses separate assets, debts, and income and all of the marital assets, debts and income. Complete disclosure is imperative for enforceability. If one spouse is dishonest and the agreement is designed around information that is either false, inaccurate or incomplete, the Postnuptial Agreement will be considered invalid. The agreement must be signed by both spouses and the execution of the agreement must be completely voluntary. If there are any indications that one spouse was coerced, threatened, or made to sign a Postnuptial Agreement against their will, the agreement will be null. Equally, the Postnuptial Agreement cannot be flagrantly unfair and biased to one spouse. A Postnuptial Agreement that is clearly unjust to a spouse, and could potentially leave them with little to no assets or wealth, will need to be further evaluated to determine if the spouse truly did enter into the agreement voluntarily and knowingly. If this remains in question, the Postnuptial may not be enforceable. Conclusion It is important to address and resolve the financial details of the marriage. It is better to plan when there is peace in a relationship than when there is anger. [i] Many financial commentators and writers take credit for this quote. [ii] Assuming all other requirements of a valid agreement are met. [iii] A Postnuptial Agreement will not take the place of a will, but they can work together, dovetail, to ensure the decedent’s wishes are carried out.
July 24, 2023
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