The law does not require all business partners to place the interests of their jointly-owned company above their own. Unless, of course, you strike out Item Five.
New Jersey residential landlords have one more issue to consider when deciding whether to commence summary dispossession actions against their Tenants. On January 17, 2014, Gov. Chris Christie signed into law Assembly Bill 3851. Pursuant to this new law, every residential lease agreement executed on or after February 1, 2014, which affords a Landlord the right to recover its attorneys’ fees and costs incurred in any action against the tenant shall be construed to contain a reciprocal right in favor of the tenant regardless of the express terms of the lease. Luckily, this law does not apply to commercial lease agreement.
The primary reason for “incorporation” (in the case of a limited liability company or limited partnership, “formation”) is the insulation of shareholders/members/partners from obligations of the corporation/LLC/LP. Normally, limited liability will not be abrogated. However, the “corporate veil” which affords protection to the shareholders/members/limited partners may be “pierced” when the corporate form is used for wrongful purposes (such as fraud or to evade creditors). The doctrine of “piercing the corporate veil” was developed to prevent the corporate form from being utilized to defeat the ends of justice, perpetrate fraud, accomplish a crime, or otherwise evade the law. This doctrine also extends to situations involving multiple corporations which are often effectively managed as a single enterprise. When business is conducted through several corporate entities without distinguishing among them, there is a risk that a court will collapse some or all of the entities into one, imposing liability on the controlling individuals.
I Imagine waking up and reading the this headline: “Your City Bans Your Family/Small/Medium/Big Business.” This week, the citizens of San Francisco awoke to a unanimously enacted ban on the sale of bottled water on public property. Wow.
This is not an industry that you’d expect to be legislatively shut out of an entire market. But now more than ever, the law and legislation change rapidly and drastically. Information is immediately available. Analyses are deeper and more complete. Public opinion is swift and harsh. The fact that you’ve been doing business the same way for 30 years does not mean that things won’t change tomorrow.
So what do you do?
Contracts are about preparing for the worst. Define your obligations, then limit your liability. Disclaim warranties. Require notice and an opportunity to cure. Nobody wants to think about their relationships going bad when they begin, but NOBODY wants to be the person who didn’t do just that..
The “forum selection clause” provides important protection in the new-ish global economy. The forum selection clause is an agreement to an exclusive litigation locale. This can be a particular country, state or even municipality.
When disputes arise, litigation locale can be used as a way to harass or otherwise disadvantage the party being sued. Consider the buyer in New York who purchases goods from a company in San Francisco. If the buyer is not happy, where do you think it’s going to sue?
Imagine if Germany could have required Russia to fight on its home field in World War Two. The front on which wars are fought can be outcome determinative.
Absent of a forum selection clause, most courts follow the “first-filed” rule, meaning that the first-filed action is where the parties must litigate. Meaning, if you lose the race to the courthouse, you’d better start asking around for lawyers across the country, hope you have plenty of coverage at the office and buy a plane ticket. Several tickets, actually.. For small and medium sized business, the cost of litigating thousands of miles from home can be devastating.
An enforceable forum selection clause, however, can trump the first-filed rule. That’s exactly what happened in Ingres Corp. v. CA, Inc., 8 A.3d 1143, 1145 (Del. 2010). In Ingres, the parties had agreed to litigate disputes exclusively in Delaware or New York. One of the parties, a California company, sued in – you guessed it – California. The defendant then filed a second lawsuit in Delaware, the agreed-upon forum. The California Plaintiff sought to stay the Delaware action on the basis of the prior California case.
The court denied the stay request, holding that the parties “agreed in the [contract to] adjudicate all claims in … a specific forum. By enjoining the [California Plaintiff] from proceeding in a different forum, I simply hold it to the promises it made-promises that remain binding upon it.” The Delaware Supreme Court affirmed, concluding simply that lower court “carefully considered the parties’ contractual agreements and enforced the forum selection clause included therein.”
Litigating far from home is not always avoidable. It will be anything but a comedy the night before you have to fly to wherever on the eve of trial. But including litigation locale among your usual negotiation points can eliminate the funny business associated with forum selection. At the very least, you can better assess the risks associated with and value of doing business with foreign companies if you know where disputes will be litigated. And once you do that, you can raise a glass and toast the new relationship that isn’t ever going to sour. Cheers!
Beware of the checks your on-line privacy and security policies write. If your you-know-whats can’t cash them, plaintiffs might.
Increasingly, plaintiffs are filing lawsuits after “hackers” access their personal information through undersecured websites or electronic databases. Almost every company holds some type of customer information in electronic form. As companies enhance their web presences, many have posted security and privacy policies. If you’re a business owner, you likely have one (if you don’t, you should). And if you’ve ever used the internet (if you haven’t, you’re not reading this article), you’ve seen links to these at the bottom of web pages, and you’ve probably ignored them. I certainly have.
Here’s the problem for businesses – hackers are hard to find and are usually judgment proof. If your data security is breached, and if your customers want to sue somebody, they are going to sue you.
Most of these high profile lawsuits have been premised on traditional negligence principles, but courts have come to varied conclusions about a business’s duty to protect its customer information from hacking. This initial resistance to the imposition of traditional tort liability has led to two things: (1) some states have created statutory duties in this context; and (2) plaintiffs’ lawyers have gotten pretty creative, with some success.
In Baidu, Inc. v. Register.com, Inc., a search-engine operator, Baidu, Inc., sued Register.com, its traffic-routing services provider, after a hacker gained access to Baidu’s account and directed its web traffic elsewhere. Imagine the business next door diverting all of your phone calls to it. Baidu sued.
Baidu asserted breach of contract, negligence and gross negligence claims. Register.com moved to dismiss, arguing that its security policy contained a broad limitation of liability provision. And it did. But it also contained statements about how Register.com protected its customers’ information and employed security measures to guard against data breaches.
Baidu argued that Register.com’s failure to follow its own policies constituted a breach of contract and gross negligence. The Southern Distinct of New York agreed. The court held that the limitation of liability provision barred an ordinary negligence claim, but not the breach of contract and gross negligence claims. The court stated that if Baidu proved what it had alleged, “then Register failed to follow its own security protocols and essentially handed over control of Baidu’s account to an unauthorized intruder, who engaged in cyber vandalism. On these facts, a jury surely could find that Register acted in a grossly negligent or reckless manner.”
A few months later, the case settled for an undisclosed sum.
While we’re well settled into the internet age, the age of data security litigation is in its infancy. One way to protect your company is to give considerable thought to your security and privacy policies, and then to abide by them. You can’t guarantee elimination of all data breach exposure, but you can put your company in a position to refute the simple, but powerful argument that carried the day in Baidu – that you didn’t do what you said you were going to do.
Just as when you’re writing actual checks, you’ve made certain there is money in the bank (I hope), ensure that your operations are consistent with your security and privacy policies. Or you might need more money in the bank.
A company that wants to lower corporate risks and boost the overall value of a company by nearly 10 percent, that’s who.
A recently published article on Law.com discusses a relatively “new” trend among companies regarding lawyers serving on boards of directors, as well as lawyers holding executive positions. In fact, the number of lawyers serving on boards nearly doubled over a ten-year span.
“A lawyer-director increases firm value by 9.5 percent, and when the lawyer is also a company executive, the increase in firm value rises to 10.2 percent,” according to the Cornell Law School research paper, Lawyers and Fools: Lawyer-Directors in Public Corporations.
Having a lawyer on the board typically results in a change of management style – one that focuses on taking less risks – reducing the risk of litigation involving the company. The company becomes more financially stable thus increasing its value.
So, it seems, what you get by having a lawyer/director or lawyer/executive is better judgment and management of the company. More often than not, better judgment results in lower risks and higher company valuation.
For further information or assistance, please contact Matthew Azoulay, Esquire: 856.675.1957; email@example.com.
The NJ Governor’s announced the upcoming deadlines for homeowners, renters, and businesses looking to apply for FEMA assistance and SBA loans in the wake of Superstorm Sandy have been extended to April 1, 2013. Those seeking for FEMA individual assistance or SBA physical damage disaster assistance should act quickly. The deadline for application to the SBA’s economic injury disaster loan program remains July 31, 2013.
People or businesses with storm losses can register online at www.disasterassistance.gov.
For further information or assistance, please contact Matthew Azoulay, Esquire: 856.675.1957; firstname.lastname@example.org.
It wasn’t an excuse. Employees throughout the Northeast missed work due to Hurricane Sandy. Some missed work because they could not get there. Others had no choice, with employers closing their doors. In either case, many employers and employees wondered, ‘who gets paid, how much and who doesn’t?’ It depends.
The Fair Labor Standards Act, the statute setting forth minimum wage (29 U.S.C. § 206), maximum hours and overtime compensation (29 U.S.C. § 207) and a multitude of other important labor standards, separates employees into two categories, exempt and non-exempt. Exempt employees are identified in 29 U.S.C. § 213. If an employee does not fall within one of the categories in Section 213, he or she is non-exempt.
Compensation rules are different depending on an employee’s classification as exempt or non-exempt. Most importantly, exempt employees are not subject to the standards set forth in Sections 206 and 207, meaning that the rules regarding minimum wage, maximum hours and overtime pay, among others, do not generally apply to them.
This distinction also has ramifications in the wake of Sandy. While it would be impossible to cover every variation in which the FLSA was implicated by the Hurricane, here are five important points to consider in evaluating post-Sandy compensation decisions:
1. If an employer was closed for only one day, it likely has to pay its exempt employees but not its non-exempt employees.
2. If an employer was closed for a whole week, exempt and non-exempt employees need not be paid.
3. Employers must pay both exempt and non-exempt employees who worked from home during the storm.
4. While exempt employees working from home should be paid regardless of the hours they spent working (so long as it was more than de minimis), non-exempt employees must track their time and should be paid for time worked.
5. The overtime rules still apply even if Hurricane Sandy caused the need for overtime hours.
Keep in mind that the FLSA is not the only set of rules impacting post-Sandy compensation. Employer-specific policies and procedures or state laws may also affect compensation requirements. Be sure to refer to these other bodies of rules. No excuses.
In the aftermath of Superstorm Sandy, the State of New Jersey recently adopted amendments to New Jersey’s Flood Hazard Area Control Act rules that set minimum elevation standards for the reconstruction of houses and buildings in areas that are in danger of flooding.
Application of the Rule: The rule applies to new construction and properties which were substantially damaged – i.e., those structures for which the cost of repair/restoration equals or exceeds 50% of the market value of the structures prior to the damage.
Effect of the Rule: The rule requires new and reconstructed buildings to be elevated in accordance with the best available flood mapping. Additionally, a new permit-by-rule was adopted so that those reconstructing and elevating buildings under the state’s elevation standard will not need to secure a permit from the Department of Environmental Protection (DEP), nor pay the fee typically charged for a Flood Hazard Area permit. Recognizing the cost of construction will increase as a result of the new standards, one can expect significantly lower flood insurance premiums. In theory, time and money will be saved – but we shall see . . .
Specific Standards: The new rule is now based on the Advisory Base Flood Elevation maps prepared by the Federal Emergency Management Agency. Property owners who are rebuilding because their property was substantially damaged must build (in most cases) in accordance with the ABFE elevation level and, additionally, Flood Hazard Area Act rules, in effect since 2007, require the lowest floor of each building in flood hazard areas to be constructed at least one foot (1′) above this elevation. Further, the rule now allows “wet floodproofing” for non-residential buildings, allowing a building to flood as long as it structurally withstands the water, but prohibits certain building foundations with only three (3) walls.
Financial Assistance Available: FEMA may provide up to $30,000 to cover the “Increased Cost of Compliance” with federal, state and local regulations if you have federal flood insurance. In addition, the Christie Administration intends to provide grants to homeowners with substantially damaged homes to help them offset some of the costs of elevation, mitigation and renovation, and intends to announce in the Spring the mechanism for such grants. It is important to carefully document any repair or reconstruction project to ensure you have a record of all reconstruction activities. Doing so will help document the history of the project should you need to do so for FEMA assistance or insurance reimbursement.