Sports Authority, Inc. (“Sports Authority”) appears to likely be the next big tenant Chapter 11 bankruptcy filing. Recent reports are indicating that the sporting and apparel chain is preparing to file for Chapter 11 bankruptcy protection, as debt payments are due in 10 days, according news reports from Bloomberg Business and other outlets. Of its 450 stores,Bloomberg reports that Sports Authority plans to close as many as 200 locations within a bankruptcy proceeding.
Sports Authority was once the biggest sporting-goods chain in the U.S, but over the past few years has had difficulty competing with Dick’s Sporting Goods Inc., Lululemon Athletica Inc., Gap Inc.’s Athleta, and Amazon.com Inc.
If you are a landlord, it’s a good idea to review your accounting and call any defaults that may exist. Furthermore and operationally, you may want your property manager to speak with the store manager to obtain important security code, HVAC, and utility information, if you don’t already have it on hand. If a store is rejected or abandoned in a bankruptcy proceeding you don’t want to be scrabbling for that information after the fact.
If Sports Authority does file for file bankruptcy protection, some vital questions are: (1) Will they remain a tenant?; (2) When will rent be paid?; (3) Are there pre-petition claims that are owed?; (4) Is there Debtor in default of pre petition non-monetary obligations?; and (5) What other damages are owed (both pre- and post-petition)?
Trade Creditor Questions
Trade creditors, including suppliers, should also be asking important questions such as: (1) Have you been paid on time and does a reclamation claim (right to take back goods shipped, unpaid within 45 days) exist?; (2) Can an administrative claim be asserted?; and (3) Should a proof of claim be filed, and if so, how?
It’s a good idea for commercial landlords and trade creditors to speak with bankruptcy counsel now to formulate and execute a plan in the event of the likely bankruptcy filing. Stark & Stark’s Creditor’s Rights Group can help. Our bankruptcy attorneys regularly represent landlords throughout the country, including recently in the District of New Jersey, Southern District of New York, District of Delaware and Eastern District of Pennsylvania on a variety of issues. For more information the Sports Authority filing, and how Stark & Stark can assist you, please contact Thomas Onder, Shareholder at (609) 219-7458 or tonder@Stark-Stark.com. Mr. Onder writes regularly on commercial real estate issue and is a member of ICSC and Chair of the 2016 ICSC PA/NJ/DE Next Generation Committee.
As far as families are concerned, there is a long-standing legal principle which generally permits parents to raise their children as they see fit without governmental interference. While that typically remains true, our courts are also granted inherent “parens patrie” authority, by which they are charged to protect the welfare and best interests of minor children within their jurisdiction.
In Family Law, these principles do not always comfortably coexist, and will sometimes collide. For purposes of this discussion, I will focus on the interplay between both principles, in terms of a person other than a natural parent who is seeking custody. Such a person is often referred to as a “psychological parent.”
When natural parents compete for custody, our courts are instructed to apply a “best interests of the child” standard. In such cases, the parents initially stand in equipoise; however, when a person other than a natural parent seeks custody the court must initially determine whether “extraordinary circumstances” exist, in which case the court will then apply the “best interests” standard.
Once association counsel obtains a personal Judgment against a unit owner for failure to pay maintenance fees, late fees, attorneys’ fees and costs, and other charges, we look for ways to collect on the Judgment. One method of collecting on the Judgment is by levying a unit owner’s bank accounts.
The process starts by association counsel conducting a bank account search. If the search reveals that a unit owner has a bank account, it will also provide the balance of the bank account. If the balance on the account is worth pursuing, we file an Execution against Goods and Chattels. A judge will review and sign the Execution against Goods and Chattels, authorizing a Court officer to levy on the bank account of the unit owner in an amount up to the Judgment amount, plus Court officer commissions and other Court costs. Once the Order is signed, the case is assigned to a Court officer.
The Court officer will then serve the bank with the Execution against Goods and Chattels. At that point, the bank freezes the account in the amount set forth in the Execution, or in a lesser amount if there is only a lesser amount in the bank account. The Court officer will then notify association counsel that the funds have been levied. Association counsel then files a Motion to turn over funds that were levied. The Motion places the unit owner on notice that the funds in his/her bank account are about to be turned over to the association. Once the Order to turn over funds is entered, it is served upon the Court officer, who will then forward the monies to association counsel.
Sometimes we are fortunate that a bank account has a balance high enough to satisfy the Judgment, however, more often than not, the balance at a particular time is not high enough to satisfy Judgment, so the bank account must be levied several times. We find that levying bank accounts is an effective way to collect on Judgments.
Stark & Stark Associate Kevin A. Falkenstein, member of the Family Law Group, attended the Burlington, Camden & Gloucester County Big Brothers Big Sisters Appreciation Dinner, where the South Jersey Young Professionals Association (SJYPA) was presented with the Community Leadership Award. Mr. Falkenstein is a board member of the SJYPA.
The organization was presented with the Community Leadership Award for the last year’s fundraising efforts on behalf of Big Brothers Big Sisters. In 2015, the SJYPA organized two separate fundraising events to benefit the nonprofit in July and October.
The SJYPA is considered South Jersey’s largest organization of young professionals, all dedicated to making a positive impact in their community. The Big Brothers Big Sisters Appreciation Dinner was held at the Salvation Army Kroc Center in Camden, NJ. Previously, the Kroc Center was the first major recipient of the SJYPA’s fundraising efforts, all told donating over $240,000.
For more information about the SJYPA, you can click here, and for more information about the Burlington, Camden & Gloucester Big Brothers Big Sisters, you can click here.
A recent Tax Court case highlights some of the issues faced by estates that own valuable artwork and the need to account for artwork as part of estate planning and estate administration. Artwork is an important aspect of estate planning and administration because artwork can affect the estate’s overall value, and can result in substantial estate or inheritance taxes. Artwork is a non-revenue producing asset that can make financing taxes more challenging, particularly when there is no advanced planning. Valuable artwork is subject to substantial changes in value, depending on market conditions.
This case involved a dispute over the value of fine artwork owned by a sophisticated art collector. The Estate owned three exquisite and valuable paintings: (1) “Tĕte de Femme (Jacqueline)” by Pablo Picasso; (2) an untitled piece by Robert Motherwell; and (3) “Elément Bleu XV” by Jean Dubuffet. The Picasso was by far the most valuable, selling at auction in 2010 for $12.9 million. On the Federal Estate Tax Return, the Estate reported the following values for each painting: (1) $5.0 million for the Picasso; (2) $800,000 for the Motherwell; and (3) $500,000 for the Dubuffet.
The IRS contested the Estate’s reported valuations and commissioned its own experts to value the paintings. The IRS’ experts determined the paintings had substantially higher values than those reported by the Estate: (1) $10.0 million for the Picasso; (2) $1.5 million for the Motherwell; and (3) $900,000 for the Dubuffet. Using these higher values, the IRS issued the Estate a Notice of Deficiency, and the dispute found its way into the U.S. Tax Court.
In the recent Appellate Division case of In Re Sogliuzzo, the Appellate Court awarded counsel fees to the Estate to be paid by Defendant. This was due to the Defendant’s unlawful misappropriation of funds from his elderly mother, which he accomplished by exerting undue influence over her in order to facilitate the transfer of the funds. This case is the inverse of a typical challenge to a Will, wherein counsel fees are paid by the Estate to the contestant.
In this particular matter, which is much less common, the Estate was awarded counsel fees for prosecuting an undue influence action against the wrongdoer pursuant to which it was forced to incur counsel fees and costs in prosecuting the action. The Appellate Court found that Defendant’s exertion of undue influence over his mother, pursuant to which he obtained a substantial financial benefit for himself, met the rationale for an award of counsel fees.
Thus, Defendant was ordered to pay counsel fees to the Estate for the costs it incurred in bringing this action. The Court rationalized that this was the only way to make the estate whole due Defendant’s defalcation.
In the recent Appellate Division decision of In the Matter of the Estate of Michael Fisher, the Appellate Court reviewed whether the Appellant and father of the Decedent, Michael Fisher, would be entitled to an intestate share of his deceased son’s estate. The main issue before the Court was whether or not the Appellant had forsaken or abandoned his son, and as a result, he would not be entitled to an intestate share of his estate under N.J.S.A. 3B:5-14.1.
This statute provides in relevant part that if a parent refused to acknowledge and/or abandoned the Decedent when he/she was a minor by willfully forsaking the child, then the aforementioned parent would not be entitled to an intestate share of the Decedent’s estate. The Appellate Division explained that the application of this statute is factually sensitive.
In this matter, the Court concluded that a parent may lose his or her right to intestate succession if this parent abandoned the Decedent when he or she was a minor by: (1) willfully forsaking the Decedent; (2) failing to care for and keep control and custody of the Decedent so that the child was exposed to physical and/or moral risk without proper and sufficient protection; or (3) by failing to care for and keep the control and custody of the Decedent which resulted with the child being left in the care and custody and control of the State at the time of death.
What would you do if you won the lottery? That is the big question we ask ourselves as the anticipation builds for the $1.5 billion Powerball drawing. After all, there’s nothing wrong with imagining what we would do if we held a winning lottery ticket or hit the jackpot in a casino.
But for the winners, there are some real concerns. Most importantly is how to protect your asset – the winning ticket. The jackpot will be paid to the person who carries the ticket into the State Lottery Commission office. If you are the lucky owner of the winning ticket, keep it in a safe place. Take time-stamped pictures of the ticket to document your ownership. It is often recommended that you sign the back of the ticket to prevent anyone else from redeeming it. Unfortunately, signing the ticket may limit your other planning options, but it may be the best protection from theft.
Before redeeming the ticket, you also need to decide whether to choose a lump sum or annuity payout. That decision isn’t as simple as it sounds. A $1.5 billion lottery jackpot is really the sum of $50 million annual payments over the next 29 years. The lump sum payout is $930 million – 62% of the advertised jackpot. Neither option is bad, but you must consult with tax and investment professionals to analyze the options. In simple terms, the annuity payout only yields around 2.2% annually, but the annuity allows you to pay the income tax liability over 29 years, instead of paying it all up front.
Stark & Stark Associate Max L. Schatzow, member of the Securities Group, authored the article The Startup Lifecycle: Friends and Family Round, which was published in the New Jersey Law Journal on December 1, 2015.
This is the third part of an ongoing series detailing all the minutia of a business’ startup lifecycle. In this article, Mr. Schatzow continues with the hypothetical business as it begins to raise funds. More specifically, this means its founder will need to conduct the offering under Rule 506 of Regulation D.
Further, Rule 506 requires “an issuer to make a subjective determination that, at the time of acquisition of the investment, each nonaccredited purchaser is sophisticated or has a sophisticated ‘purchaser representative.’” Meanwhile, under Regulation D “any purchaser that is not an ‘accredited investor’ must receive prior to the sale, at a minimum: i) the issuer’s balance sheet and potentially audited financial statements, and ii) nonfinancial information that is typically found in a prospectus.”
However, prior to conducting the offering, the founder would need to meet with his attorney to discuss all the information that will need to be disclosed in a private placement memorandum. This includes a description of the business, disclosing the use of proceeds, indentifying the directors and executive officers, list of principle shareholders, and other risk factors. As Mr. Schatzow explains, business owners are encouraged to provide this information to “all investors for fear of the antifraud provisions of the securities laws, where even an omission can create liability for the company.”
To read the full article, please click here.
With the upcoming Powerball jackpot being the largest in history ($1.5 billion), the issue of whether a lottery prize is subject to equitable distribution is certainly relevant, and may be a very real issue for some lucky winner(s). The answer to that inquiry is “it depends.” It depends on when the Complaint for Divorce is filed-before or after the big win.
It is a well-settled law that all assets and liabilities acquired during a marriage are subject to equitable distribution. The marriage lasts from the date of the marriage to the date the Complaint for Divorce is filed. Once the Complaint for Divorce is filed, any asset or liability acquired thereafter will not be subject to equitable distribution. In other words, the Complaint for Divorce sets the cut-off date for purposes of determining what assets are subject to equitable distribution.
If the Complaint for Divorce was filed prior to the lottery winner’s big win, the spouse of the lottery winner would be not so lucky, insofar as they would not be entitled to the winnings since it was won after the cut-off date.
If, however, the Complaint for Divorce is filed after the big lottery win, that prize is subject to equitable distribution. It is important to note that equitable distribution does not always mean that an asset is split equally—the Court must consider sixteen different factors in determining how a particular asset is divided.
Finally, the Family Court is a Court of equity, and in the event that the lottery prize is not subject to equitable distribution, there are equitable arguments that one could make for an unequal distribution of the rest of the marital assets, as well as other issues such as child support, alimony, etc. in light of the lottery winner’s prize.