New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

In the After Hours section of the November 29 edition of the New Jersey Law Journal, Stark & Stark Associate Committee members Richard Linderman, Robyn Nolan Howlett, Thomas Onder, Stacey Cohen and Lara Lovett were recognized for their efforts in collecting toys for area families who cannot afford holiday gifts for their children.

The donated toys will be given to the Jewish Family & Children's Service of Greater Mercer County's LIGHTS Program, as well as Big Brothers and Big Sisters of Mercer County through the Mercer County Bar Association.

• Email This
• Print
• Comments
• Trackbacks

The November 22, 2004 edition of the National Law Journal published an article authored by Timothy Duggan, Chair of the Firm's Bankruptcy and Creditor's Rights Group.

The article titled Court Rules Against a Solvent Debtor discusses a recent 3rd Circuit decision which emphasized that a bankruptcy petition must be filed in good faith.

• Email This
• Print
• Comments (1)
• Trackbacks

Yesterday, Kevin Hart, Chair of the Firm's Corporate Investigation and White Collar Group, was interviewed by WNBC News New York regarding Acting New Jersey Governor Richard Codey's executive order creating the position of Inspector General for the State. The new Inspector General's mission will be to "ferret out fraud and wasteful spending at all levels of government".

An Associate Press article regarding the executive order can be read here.

• Email This
• Print
• Comments
• Trackbacks

Today's New York Times has an interesting article which discusses how matrimonial lawyers, bar associations and judges in the state are pushing to have the current divorce law changed. The article claims that by some measures, New York State has the most obstacles to divorce in the nation.

You can read the full article here. (NYT Registration Required)

• Email This
• Print
• Comments

The United States Supreme Court declined to hear an application entitled Largess v. Supreme Judicial Court of the State of Massachusetts, which challenged the constitutional propriety of the Massachusett's Supreme Court's decision to legalize gay marriages in that state. The challenge was brought by the Liberty Counsel, a conservative group, on behalf of Robert Largess, the vice president of the Catholic Action League, and 11 state lawmakers.

The Supreme Court's decision not to hear the challenge means that gay couples in Massachusetts can still be married. It also leaves open the possibility that similar laws may be enacted in other states, without the current threat of being overturned by the Federal Supreme Court.

This post was authored by Cary Kvitka, a member of the Firm's Divorce Group.

• Email This
• Print
• Comments (1)
• Trackbacks

For individuals or private businesses interested in redeveloping contaminated, dilapidated or outdated New Jersey properties there is a myriad of funding opportunities available through the New Jersey Economic Development Authority ("EDA").

One type of financial assistance that the EDA offers for prospective redevelopers is the Smart Growth Pre-development Guarantee ("Guarantee"). Under this program, the EDA will guarantee private conventional financing in an amount up to $1,000,000.00 for projects that are located in certain designated areas as defined under the New Jersey State Development and Redevelopment Plan ("State Plan"), have received municipal support and are part of a local redevelopment plan. Proceeds from guaranteed loans must be used to finance expenses related to pre-development site preparation, such as land assemblage, demolition, removal of materials and debris and engineering costs.

Another initiative is the Direct Loan Program, which includes, among others, the Smart Growth Pre-development Loan and the Brownfields Redevelopment Loan. The EDA is authorized to grant either or both of these loans directly to redevelopers, provided that the redeveloper making the application is unable to obtain conventional financing. Combined financing may yield as much as $1,000,000.00 and must be repaid over a maximum term of three years. As with the Guarantee, a redeveloper must use funds secured by a Smart Growth Pre-development Loan for pre-development site preparation costs on projects that are located in certain areas designated under the State Plan, have received municipal support and are part of a local redevelopment plan. Contrarily, proceeds received under a Brownfields Redevelopment loan must be applied to eligible remediation costs. Moreover, in order for a redeveloper to obtain a Brownfields Redevelopment loan the redeveloper must have entered into a remediation and redevelopment agreement for the project site with the New Jersey Department of Environmental Protection, the New Jersey Department of the Treasury and the New Jersey Commerce and Economic Growth Commission.

In addition to loan guarantees and direct loans, the EDA may issue grants to individuals and private businesses to facilitate redevelopment. For example, under the Hazardous Discharge Site Remediation Fund, which is a special revolving fund established in the EDA pursuant to the Brownfield and Contaminated Site Remediation Act, the EDA may award an "innocent party" conducting remediation activities at an "eligible project", as such terms are defined in EDA regulations, as much as $1,000,000.00 in grant money to cover up to 50% of the remediation costs. This grant program is particularly appealing in that innocent parties, among other classes of grant recipients, are exempt from having to show that they cannot establish a remediation funding source for all or part of the clean-up expenses.

The EDA dispenses other type of financial assistance under the Hazardous Discharge Site Remediation Fund, and administers a number of other funding ventures, such as the Downtown Beautification Program providing low-interest loans of up to $100,000.00 to owners and operators of retail and commercial businesses to upgrade properties in targeted urban areas.

Additional information on EDA funding for site remediation and redevelopment may be obtained by contacting the EDA's Brownfields Redevelopment Office at (609) 341-2723 or by visiting the EDA's website.

In conclusion, EDA funding initiatives have real potential to contribute to and bolster the financial wherewithal of individuals and private businesses intent upon transforming old or contaminated urban properties into economically viable sites. Indeed, this is truly an exciting time for those who are interested in redeveloping New Jersey's cities and older suburbs. However, given the complexities inherent in redevelopment financing (and numerous other potentially applicable laws, regulations and ordinances not discussed here) all owners and future purchasers of contaminated, dilapidated or outdated properties would be well advised to seek legal counsel before submitting an application for financial assistance in cleaning up or redeveloping a project site.

• Email This
• Print
• Comments

New Jersey has one of the most liberal consumer protection statutes in the nation, the New Jersey Consumer Fraud Act. Notwithstanding the same, on Thursday, November 18, 2004, the Appellate Division found that a consumer may only be awarded attorney fees if he can demonstrate an "ascertainable loss" caused by the violation of the Consumer Fraud Act.

The case entitled, Pron v. Carlton Pools, Inc., involved a dispute relating to the construction of a swimming pool. According to the Plaintiff, defendant, Carlton Pools, Inc. misrepresented that it did not use any subcontractors for the construction of its pools. It was shown at trial that Carlton Pools subcontracted an electrician and plumber for the job. Notwithstanding, the alleged misrepresentation, the Plaintiff was unable to prove that he suffered any damages as a result of the defendant's statement that it did not subcontract. The alleged loss was not caused by subcontracting out the work. It related to a portion of the job which was not subcontracted. As a result of the same, the Appellate Division reserved the trial court's finding that the Consumer Fraud Act was violated. The Appellate Division held that attorneys' fees, tremble damages and costs may only be awarded if a consumer can demonstrate that it suffered an ascertainable loss which was caused by the misrepresentation.

The Pron decision is extremely important to both businesses and consumers because it limits damages unless a consumer can show a causal connection between the misrepresentation and the ascertainable loss.

• Email This
• Print
• Comments

The New Jersey Uniform Mediation Act was signed into law and became immediately effective November 22, 2004.

Since persons often attempt to resolve their divorce issues through voluntary or Court directed mediation, the Act is particularly important to divorce attorneys and litigants.

The highlights of the Act are:
1) with certain specific exceptions communications by the parties during mediation or by the mediator are confidential and can not later be disclosed or utilized

2) such communications can not be communicated to a Judge who may later hear the case if the mediation fails

3) the parties are entitled to have attorneys or other third parties participate in the mediation.

• Email This
• Print
• Comments

In Lawrence Raimo v. Robert Fischer, the Appellate Division recently discussed a contractor's duty of care for individuals who may come onto their construction site. In this case, the Court explained that a contractor's duty of care is governed by general negligence principals which require a contractor to exercise reasonable care to maintain the construction site in a safe condition for any persons the contractor may reasonably expect to come onto the site. This duty differs from the common law doctrine of premises liability under which a contractor's liability for injured parties was previously governed. In the past, a contractor's potential liability for individuals injured on their job site depended upon the injured parties classification as either a business invitee, licensee, or trespasser. Depending on the parties' classification, the liability that a contractor could be subjected to was grossly different.

The Court's ruling in Raimo v. Fischer adopted the general negligence principal in lieu of the common law doctrine of premises liability which provides that all parties should be treated in a similar fashion regardless of whether the person was a business invitee, licensee, or trespasser. This new standard requires a contractor to exercise reasonable care to maintain the site in a safe condition regardless of whether the person is a business invitee, licensee, and/or trespasser. By extending the general negligence principal to a trespasser, it is now possible that a contractor may be subject to greater liability for an individual who trespasses on the project site and is injured.

The effect of this change in the law is that contractors should be forewarned that all parties who enter on their job site will be treated the same by the Court, whether they be invited or uninvited. As such, it is advisable that a contractor take special care to render the job site safe and secure at the end of a work day so as to avoid potential liability from an uninvited trespasser. Moreover, it is suggested that the contractor require all subcontractors and/or vendors to be carefully advised of any potential dangers on the job site, such as a contractor would do for a business invitee who is visiting the project site.

• Email This
• Print
• Comments (2)
• Trackbacks

The parties were shareholders in the Pangram corporation formed for the purpose of selling auto parts. They executed a Shareholder Agreement on March 21, 2001, which contained a provision stating that the agreement would terminate if all the shares were held by one shareholder. The relationships between the parties subsequently deteriorated when they could not agree over the management of the business. In November of 2001, the parties held a shareholder meeting wherein the plaintiffs relinquished their shares to defendant Yuan leaving him the remaining sole shareholder and president of the company. Each of the four relinquishing shareholders signed a separate "First Amendment to the Shareholder Agreement" entitling them to a return of the value of their shares in the company. At some point thereafter, Yuan determined that he made a poor bargain and refused to honor the signed agreements.

Plaintiffs filed suit in the Law Division, Special Civil Part for the value of their stock. Defendant filed a counterclaim arguing that the plaintiffs violated the original agreement by failing to return office equipment and failing to submit the matter to arbitration. The trial court found that the amended agreements were valid contracts agreed to by all the parties. It also found that contrary to their title, the "Amended Agreements" were not intended as amendments to the original agreement, but rather constituted agreements to terminate the original agreement by placing all the shares in the hands of a sole shareholder. Since the original agreement terminated, the trial court found that an arbitration provision in the original agreement was inapplicable. The trial court dismissed Yuan's counterclaim finding that there was no evidence the plaintiffs failed to return corporate property.

The Appellate Division substantially affirmed the findings of the trial court holding that the primary purpose of the Amended Agreement was to terminate the original Agreement rather than to amend it. The Appellate Division found, however, that in one aspect the Amended Agreement did amend the original contract. The stated purchase price for shares was slightly higher in the Amended Agreement and it held that this anticipated the possibility that the shareholders might voluntarily sell their shares back to the corporation and set a purchase price. Finally, the Appellate Division held that the Agreement terminated when Yuan became the sole shareholder of the corporation and the arbitration provision in the original Agreement did not apply.

• Email This
• Print
• Comments
• Trackbacks

A large majority of Community Association litigation takes place in the Special Civil Part division of the Law Division often because the amounts in dispute are lower than the threshold monetary limit of $15,000. When bringing an action in the Special Civil Part, parties must consider the Court's Rules.

One consideration is venue. Rule 6:1-3(a) calls for venue to by laid in the county in which at least one defendant in the action resides. Parties bringing actions against associations frequently file those actions in the county of the association's managing agent. If an association is located in a county other than that of the managing agent, venue will then be improper.

Another consideration is the form of the Special Civil Part notice of motion. The "ten day" language must be in all notices of motion. Rule 6:3-3(c)(2) states that the notice of motion must include language indicating that the order sought will be entered in the court's discretion unless the party served submits an opposition in writing within ten days after the date of service of the motion. Again, failure to abide by this Special Civil Part rule, results in delay and expenses.

Finally, one must consider discovery deadlines in the Special Civil Part. The 40 and 60 day periods set forth in the regular Law Division are each reduced in Special Civil to 30 days. The deadlines associated with Requests of Admissions and Document Requests remain the same in the Special Civil Part.
The examples noted above are a few of the most glaring distinctions in practice between the Special Civil Part and the regular Law Division. The Community Associations Group of Stark & Stark regularly represents clients in the Special Civil Part and is adept at utilizing the New Jersey Court Rules to best advance its clients' position therein.

• Email This
• Print
• Comments (6)
• Trackbacks

The New Jersey Supreme Court in a recent decision in E. Dickerson & Son, Inc. v. Ernst & Young, LLP, 179NJ500 (2004), dealt a significant blow to third parties seeking damages from accounting firms for negligence. Dickerson provided the New Jersey Supreme Court with its first opportunity to interpret New Jersey's accountants liability statute, N.J.S.A. 2A:53A-25, which was enacted for the purpose of overruling the New Jersey Supreme Court decision in H. Rosenblum, Inc. v. Adler, 93 NJ 324 (1983). The Rosenblum decision greatly expanded the scope of accountant liability by adopting a "foreseeability" standard for cases involving accountant negligence. Rosenblum placed New Jersey law in direct conflict with the position taken by the New York Court of Appeals in the seminal case of Ultramares Corp. v. Touche Niven & Co. 255N.Y.170 (1931), which position was followed by the vast majority of other jurisdictions. The Uitramares decision rejected negligence claims brought by third parties due to the lack of privity of contract between the plaintiff and the accountants. The New York Rule has long stood for the proposition that a plaintiff's failure to allege privity or in the alternative a nexus between it and the accountant was fatal to any negligence claim against the accountant.

The New Jersey Supreme Court in Rosenblum rejected the New York Rule and allowed a recovery without a lack of privity, by finding that an independent auditor owes a duty to all parties who the auditor could reasonably foresee would be recipients of and rely upon from the financial statements prepared.

The Rosenblum decision has generally not been followed by other jurisdictions. Many of these jurisdictions have adopted a middle ground which is embodied in the Restatement (Second) of Torts 552, which limits accountant's liability for negligence for losses to (a) the person or one of a limited group of persons, for whose benefit and guidance the accountant intends to supply the information or knows that the client intends to supply it, and (b) through reliance on it in a transaction that the accountant intends the information to influence or knows the recipient so intends or in a substantially similar transaction.

In 1994 The New Jersey Legislature passed the accountants liability statute (N.J.S.A. 2A:53A-25 which limits accountants liability for negligence, and effectively overruled Rosenblum. The statute adopted the New York Rule and was for the most part based upon a model statute promoted by the American Institute of Certified Public Accountants.

The Dickerson case represented the New Jersey Supreme Court's first opportunity to interpret the New Jersey Accountants Liability Statute. The facts in Dickerson were that the plaintiffs were corporations who were owned and operated supermarkets that were members and shareholders of Twin County Grocers, Inc., a corporation functioning as a cooperative of supermarkets for marketing and purchasing purposes. Twin County filed a bankruptcy petition after it was discovered that its upper management had engaged in an ongoing scheme to misappropriate funds and defraud the Twin County members. The plaintiffs' claimed that Ernst and Young negligently performed several annual audits at Twin County, by failing to discover the ongoing fraud. The plaintiffs first sued Ernst and Young for negligence and other related claims. These claims were dismissed by the Trial Court and the Appellate Division affirmed that decision. Undaunted the plaintiffs applied for Certification to the New Jersey Supreme Court. Before the Supreme Court, the plaintiffs argued that the Court should construe the statute broadly so as to deem Twin County Grocers Ernst and Young's "clients."

This argument would have given the Court an opportunity to minimize the Statute's effect. However, the Court declined the invitation. The Court held that Twin County's cooperative purpose leant it no special status and consequently the plaintiffs were indistinguishable from any other shareholder of an accountant's corporate client. As such, they were required to satisfy requirements for third parties to bring a negligence claim, which the court held they did not do.

In denying the plaintiff's negligence claims, the Court did shed light on how a potential plaintiff might satisfy the statute's requirement. This may prove indispensable to potential claimants seeking to protect themselves from potential losses attributable to accountant negligence. The guidelines set forth in the Dickerson decision were as follows. First a non party to the contract must demonstrate that the auditor knew at the time of the engagement (1) that its report would be given to the claimant in connection with a specified transaction, and (2) that the claimant intended to rely upon the report. This follows the New York Rule and the New York Rule line of cases. The plaintiff must demonstrate that the accountant knew from the inception of the transaction that his or her services were rendered either wholly or in part for the benefit of another. In order to satisfy the second requirement it must be shown some "linkage" between the accountant and the third party claimant. The linkage requirement could be satisfied if the plaintiff secures an engagement letter or another understanding to that effect. This may create an obstacle to any such suit being brought as it is highly unlikely that an engagement letter would be provided to a third party. The only way to satisfy these requirements would be for the plaintiff to show that (1) the accountant knew that the results of the audit would be transmitted to the plaintiffs for use in a specific transaction and with that purpose known to it (2) the auditor conducted the audit.

An interesting question was raised whether or not shareholders of a corporation , who is the client, might recover by way of a derivative action brought on behalf of the client corporation. In the Dickerson case this was not available to the plaintiffs due to the fact that the bankruptcy proceeding had already occurred. However, it does appear that if shareholders of the corporate client were to bring such a derivative claim on behalf of a client that they would be able to bring such an action.

In closing, while the New Jersey Supreme Court in Dickerson has left the door open to some third party plaintiffs, it has closed the door to many other potential clients. As a result, going forward third party lawsuits against accountants for negligence may constitute the exception rather than the rule.

• Email This
• Print
• Comments

In the November 16, 2004 edition of the Princeton Business Journal, Thomas Lewis, Chair of the Firm's Employment Group provides his insight as to the trend of companies checking the background of new hires.

You can read the article here.

• Email This
• Print
• Comments
• Trackbacks

The U.S. Sentencing Commission has promulgated new guidelines for Chapter Eight of the Federal Sentencing Guidelines which deal with Organizations. The effect of the new guidelines is to substantially increase the level of responsibility of corporate Officers and Directors for criminal or unethical activity within the Company. The guidelines enhanced burden parallels the increased responsibilities imposed by the Sarbanes-Oxley Act of 2002 for Officers and Directors.

Under the new guidelines, Officers and Directors are required to be knowledgeable about the content and operation of company compliance and ethics programs. If a Corporation is convicted of a criminal offense, the scope and effectiveness of a compliance and or ethics program will have a bearing on the sentence to be imposed. This creates a requirement that Directors educate themselves about these programs.

The Organizational Sentencing Guidelines were first implemented in 1991 as a basis to impose penalties on corporations for criminal conduct committed by employees. Criminal liability can attach to a business when an employee commits an illegal act while performing duties within the scope of their employment. Under the old guidelines a company's high-level personnel were required to oversee compliance with all laws both State and Federal that govern corporate action. The compliance and ethical burdens have now been increased, and the criteria for Federal Judges to use in evaluating the effectiveness of compliance and ethical programs has been strengthened. The increased level of responsibility is consistent with recent legislative and regulatory focus on ethical corporate conduct.

In order to demonstrate that a Company has a compliance and ethics program, an organization must demonstrate that it exercised due diligence in fulfilling the requirements set forth in the Guidelines, and promoted in other ways a organizational culture that encourages ethical conduct and a commitment for compliance with all applicable laws. Arguably it is no longer sufficient to merely have a set of written compliance and ethical procedures. Corporations must now insure that their written programs are effective and be able to demonstrate their efficacy. The Overview to the Guidelines describes the criteria for a sound program as one that "embod{ies} broad principles that, taken together, describe a corporate "good citizenship" model".

The rewards for compliance can be significant in that a Corporation can potentially mitigate its responsibility for an employee's illegal acts in terms of fines by up to 95 percent, if it can demonstrate that it maintains an effective compliance and ethics program.

The message to all Directors is that they must actively insure that compliance is occurring rather than relying on representations of management. In short there is no more free lunch for Directors.

• Email This
• Print
• Comments

In today's New Jersey Star-Ledger, Kevin Hart, Chair of the Firm's Corporate Investigations and White Collar Group, is interviewed about the legal problems Merck is facing as a result of Vioxx litigation.

The interview can be read here.

• Email This
• Print
• Comments
• Trackbacks

Collaborative Divorce is relatively new and unproven alternative resolution to divorce. It essentially involves a "team" of professionals (accountants, appraisers, psychologists and attorneys) to "collaborate" on a divorce in an effort to bring it to a settled conclusion without litigation.

Both experts and attorneys are varied in their overall assessment of its effectiveness.

Nonetheless, two New Jersey Assembly persons have introduced a bill (A-3375)which would give Collaborative Divorce a boost over all other forms of alternative dispute resolution including mediation, arbitration and the current Early Settlement Panels.

The bill would require the parties attorneys to withdraw from the process and would put all Court deadlines on hold while the process is in use.

A recent (November 15, 2004) article in the New Jersey Family Lawyer quotes Robert J. Durst II, Esq., Stark & Stark, Lawrenceville as questioning why this form of alternative dispute would be given such priority and what effect staying the Court deadlines would have on the system in general.

• Email This
• Print
• Comments

Supporting the State of New Jersey's aggressive efforts to pursue the recovery of Medicaid benefits paid for a nursing home resident following the resident's death, the New Jersey Appellate Division concluded in a November 10, 2004 opinion, Estate of Michael DeMartino v. State of New Jersey, Division of Medical Assistance and Health Services, that the State could assert a lien against a testamentary trust created by Anne DeMartino upon her death for the benefit of her husband, Michael. Although Michael died less than one year later, Anne had given to the trustee authority to distribute the trust funds in limited circumstances for her husband's benefit. The balance remaining in trust after the husband's death was to be distributed to Anne's children. After Michael's death, the State sought to recover from the testamentary trust benefits which were paid by the State for the benefit of Michael - despite the fact that Anne had specifically disallowed the funds to be used in such a manner.

Federal law supports and encourages the states to recover Medicaid benefits paid following a recipient's death from property of the recipient at death, as well as property in which the recipient had a legal interest, specifically described as 'other arrangements' including joint accounts and living trusts. New Jersey has adopted the most aggressive definition of a decedent's estate for recovery purposes, and has expanded the reach of federal law by adopting regulations which permit recovery from third party trusts which contain property in which the recipient had an interest in the previous five years.

Despite the fact that New Jersey laws can be no more restrictive than federal law, the Appellate Court in this case stretched to find that the testamentary trust created by Anne fell into the category of 'other arrangements' which entitled the State to make recovery from it. The judges deemed the testamentary trust to be an arrangement intended to pass assets to Anne's children and avoid estate recovery, focusing on Anne's perceived intent and not on specific laws and regulations.

Three months ago, the New Jersey Supreme Court overturned a similarly reasoned decision of the Appellate Division relating to Medicaid planning, In Re Keri, recognizing that individuals can work within the framework of existing laws and regulations to undertake Medicaid and estate planning. It is expected that the DeMartino decision will be appealed.

• Email This
• Print
• Comments (1)
• Trackbacks

The New Jersey Prevention of Domestic Violence Act gives the Court jurisdiction to fix an appropriate amount of temporary support at the time of entry of a restraining order.

The Court has granted such authority in order to give a victim temporary support when he/she has been required to vacate the residence or the financial provider has been ordered to vacate the residence.

In a factually interesting case, a New Jersey Court accepted jurisdiction under the Prevention of Domestic Violence Act to enter a restraining order, but refused to accept jurisdiction to enter a support order.

Under the unique facts of the case, the abuser had no contacts with New Jersey, lived in Illinois and had instituted an action for divorce in Illinois at the about the same time as the Domestic Violence action was initiated in New Jersey.

The case seems to be a very logical interpretation of the domestic violence statues, and will prevent abuses of the statue by persons attempting to circumvent the jurisdiction of a sister state by using the emergent provisions of the Prevention of Domestic Violence Act.

Shah v. Shah, Appellate Division, approved for publication November 9, 2004.

• Email This
• Print
• Comments (9)

A recent article in the Wall Street Journal (Nov. 9, 2004, Jennifer Saranow) highlights a little noticed May, 2003 change to the federal Employee Retirement Security Act (ERISA) regarding a charges for the review of a Qualified Domestic Relations Order (QDRO)in a divorce.

A QDRO is the order which divides a parties pension, retirement benefits or 401K accounts at the time of a divorce. The order is customarily prepared by one of the parties attorneys or a pension consultant and submitted to the Plan Administrator for review, approval and implementation.

Prior to May, 2003, the federal regulations precluded plan administrators from charging individual accounts for the review, approval and implementation of QDRO's.

As of May, 2003 the federal regulations were changed to permit administrators or employers to charge the employee for this service.
The article reports that it has taken a year or so for the change to be implemented, but that plans and employers are now regularly deducting the costs related to the QDRO from the plan.

Attorneys for divorce litigants should be aware of this change and bargain for the allocation of these costs just as they do the allocation of the costs of preparing the QDRO. Otherwise, the plan owner may have the full cost assessed against them.

• Email This
• Print
• Comments (4)

The New Jersey Administrative Office of the Courts has issued a directive to all New Jersey state court judges to refrain from filling out the reputational survey for the U.S. News & World Report law school rankings.

You can read more about the directive here.

• Email This
• Print
• Comments
• Trackbacks

If you own a business, you'll need a law firm to protect your interests. What do you look for? The key to finding a good legal match is to know what your company's needs are now and likely to be in the future. As a business grows, its needs change. A start up software publisher may only need an intellectual property lawyer and someone to handle its incorporation. As a business grows, takes on additional employees and moves into its own building the owners will have to deal with real estate and employment law issues.

"The first thing is to decide if the business needs a headline grabbing national firm, mid-sized firm, small firm or solo practitioner," says Lewis J. Pepperman, co-managing director of Stark & Stark, a 96 attorney law firm headquartered in Lawrenceville, NJ with offices in Cherry Hill, NJ and Philadelphia. "The law has become so specialized that most solo practitioners or small firms may not be able to handle many of the issues facing a growing business. Entrepreneurs have better things to do than look for a new attorney every time a different legal issue comes up."

While the national firms with legions of lawyers and offices seemingly everywhere have the resources, they come at a price. Giant firms mean giant overhead, which a client pays for. For many businesses it's overkill. "The client ends up paying for resources they'll never use. If your business basically operates in New Jersey and Pennsylvania, it's irrelevant if the law firm has offices in Beverly Hills and Atlanta." Many mid-size firms have national capabilities, without having an office in every state.

For many businesses, a mid-sized law firms with 75 -100 attorneys makes the most sense from an economic and talent perspective. "Firms this size usually have been together a number of years and have built up a reputation. They have the depth and practice groups to provide representation in just about every area of law," said Pepperman. "Firms such as Stark & Stark can do the same quality work as the national firms but at lower rates. The client pays for what they need."

Pepperman advises business owners to thoroughly cross-examine their law firm candidates:

Are you familiar with my industry?
The first consideration should be the attorney's legal skills and general experience. Is the person a quick study? Does the firm represent any of your competitors?

Who will be doing the day-to-day work on my business?
The senior partner may make the initial pitch for the business, but will have little if any involvement after that. Ask to meet the person who will actually be working on your business.

How will my business be billed?
Lawyers have become more flexible in negotiating fees. Don't be afraid to ask for a flat fee or contingent fee on certain matters. What expenses are included in the fees and what is billed separately?

What can I do to keep my legal bills down?
Communication is the key. Don't be afraid to ask hard questions. If it is helpful to you to receive statements twice a month, ask for it. Understanding what your lawyer is doing helps both you and your lawyer.

Will I be able to approve staffing on my business?
Make sure the experience and cost of the attorney is appropriate in relation to the value of the work being done. There are times when more than one attorney will be needed to work on a matter. Does that second attorney need to be a senior partner billing at top dollar or would an associate with a moderate level of experience fit the bill? Would you be better off with just one attorney assigned to the matter, rather than having layers of lawyers reviewing each other's work? How many attorneys attend a deposition?

Does the firm explain legal matters in plain English?
Make sure that your law firm is willing to translate at no extra cost. If you receive a legal brief or memo, insist on a short summary... in plain English.

Looking for a lawyer is like seeking out any other business service. Do some research and don't be afraid to ask questions. Know what you really need.

• Email This
• Print
• Comments

The New Jersey Supreme Court will consider the issue of whether a restrictive covenant in a physician's employment agreement is enforceable. In 1978, the New Jersey Supreme Court in the case of Karlin vs. Weinberg, 77 N.J. 408 (1978) held that a restrictive covenant in an employment agreement between physicians is enforceable if it meets certain conditions including the protection of a legitimate interest of the employer, imposes no undue hardship on the employee and is not injurious to the public. At the time, the American Medical Association had no ethical concerns against a reasonable agreement to not practice within a certain area for a certain time if it was knowingly made and understood. However, the American Medical Association has since taken the position that non-competition agreements among physicians is not in the public interest and may very well raise ethical concerns.

The New Jersey Supreme Court will now consider whether the Karlin decision from 1978 needs to be addressed and potentially overturned. At issue is whether a covenant that barred a physician from practicing medicine for a period of two years within 12 miles of his employer is enforceable. Also, for consideration is whether restrictions preventing physicians from practicing at a specific hospital and relinquishing hospital privileges is enforceable.

In the case of Dwyer vs. Jung, 133 N.J. Super. 343, the Court held that a restrictive covenant in an attorney partnership agreement is void as against public policy. The question for the New Jersey Supreme Court to now decide is whether restrictive covenants in physicians' agreements are unenforceable as against public policy.

• Email This
• Print
• Comments (1)

This is a case which involved a redevelopment plan in downtown Princeton, New Jersey. Princeton Township decided to construct a library, parking garage, and residential housing. In order to do so, Princeton was required to adopt a redevelopment plan. Numerous neighbors opposed the plan arguing that Princeton Township, as an affluent community is not the type of area in need of redevelopment.

The trial court reviewed New Jersey law and determined that in order to have a redevelopment plan passed, the plan must meet one of the requirements under New Jersey Redevelopment Law.

(A) The generality of buildings are substandard, unsafe, unsanitary, dilapidated, or obsolescent, or possess any of such characteristics, or are so lacking in light, air, or space, as to be conducive to unwholesome living or working conditions;

(B) The discontinuance of the use of buildings previously used for commercial, manufacturing, or industrial purposes; the abandonment of such buildings; or the same being allowed to fall into so great a state of disrepair as to be untenable;

(C) (1) Land that is owned by the municipality, the county, a local housing authority, redevelopment agency or redevelopment entity, or (2) unimproved vacant land that has remained so for a period of ten years prior to adoption of the resolution, and that by reason of its location, remoteness, lack of means of access to developed sections or portions of the municipality, or topography, or nature of the soil, is not likely to be developed through the instrumentality of private capital.
Privately owned vacant land (i) vacant land for 10 years, (ii) not likely to be developed by private capital.

Publically owned and some aspect that it is not likely to be developed privately.

(D) Areas with buildings or improvements which, by reason of dilapidation, obsolescence, overcrowding, faulty arrangement or design, lack of ventilation, light and sanitary facilities, excessive land coverage, deleterious land use or obsolete layout, or any combination of these or other factors, are detrimental to the safety, health, morals, or welfare of the community;

(E) A growing lack or total lack of proper utilization of areas caused by the condition of the title, diverse ownership of the real property therein or other conditions, resulting in a stagnant or not fully productive condition of land potentially useful and valuable for contributing to and serving the public health, safety and welfare;

(F) Areas, in excess of five contiguous acres, whereon buildings or improvements have been destroyed, consumed by fire, demolished or altered by the action of storm, fire, cyclone, tornado, earthquake or other casualty in such a way that the aggregate assessed value of te area has been materially depreciated;

(G) "... this execution of the actions...for the adoption... of the ... plan for the area of the enterprise zone shall be considered sufficient for the determination that the area is in need of redevelopment . . . for the purpose of granting tax exemptions within the enterprise zone..."

The trial court found the plan met the requests of public law. New Jersey Appellate Division affirmed the decision.

This is a very important case since New Jersey Supreme refused to review the decision. As a result, as an Appellate Division case, the court's decision is binding upon trial courts and clearly supports a redevelopment plan in an affluent area.

• Email This
• Print
• Comments (2)

This is an important case which involved a victory for land owners and a reversal of a 1981 case cited by many states in adopting redevelopment plans. The Michigan Supreme Court reversed the 1981 case of Poletown Neighborhood Council v. Detroit case which permitted the taking of property to expand a General Motors plant.

This case involved a redevelopment project for the construction of a large business and technology park with a conference center, hotel accommodations, and a recreational facility. The Wayne County Development Authority had acquired much of the property through voluntary sales, but could not acquire all of the properties necessary for the project. Some home owners simply would not sell. To complete the project, the City adopted a resolution authorizing the condemnation of various properties(approximately 46 properties) distributed in a checkerboard fashion throughout the project area. The homeowners alleged that although there would be some benefit to the public in general, the benefits to the private parties (i.e., the developers) clearly out weighed any benefit to the public, As the City failed to meet the public use for benefit prong.

The Michigan Supreme Court performed a review of numerous cases to determine whether the condemnation of the properties was consistent with the common understanding of "public use" during 1963 (the year the Michigan Constitution was adopted). The court found that the takings would be appropriate in one of three scenarios: (1) where public necessity of the extreme sort requires collective action; (2) the property remains subject to public over-sight after transfer to a public entity; and (3) the property is selected because of facts of independent public significance, rather than the interest of the private entity which the property is eventually transferred.

The Michigan Supreme Court found that the project did not meet any of these requirements and there is no public use. As a result, the redevelopment plan was stricken.

This is a very important case because it starts a trend back towards the protection of public property rights. The Poletown decision was cited by at least 10 states in adopting redevelopment laws. The Poletown decision clearly started the erosion of private property rights. The Michigan Supreme Court, realizing the potential abuse of such a broad decision, reversed itself and sided with private property owners. The rationale of this case will be reviewed by the United States Supreme Court in the City of New London case.

• Email This
• Print
• Comments (2)

In a case arising in Connecticut, several homeowners challenged a redevelopment plan that involved 115 land parcels located on approximately 90 acres near the Thames River in New London, Connecticut. The redevelopment plan intended to divide the property into 7 separate parcels which would be developed by private companies. The plan involved the construction of new homes, a hotel and a conference center. The City of New London argued that the redevelopment was a public benefit since it would generate significant tax revenue, create both temporary and permanent jobs through construction, and revitalize the distressed city.

Property owners challenged the plan since they did not believe that the development plan constituted a "public purpose" as required by the state and U.S. Constitution. The Connecticut courts disagreed and permitted the taking of the properties.

The United States Supreme Court agreed to review the decision to determine whether the economic development plan meets the requirements of the United States Constitution. In short, the primary issue is what are the limits under the "public use" requirement of the United States Constitution when the government takes land for private economic development.

It appears that most people are not opposed to redevelopment plans for inner-city projects that will seek to improve blighted areas. In addition, projects that involve a direct public use (i.e., new schools and road widenings) also appear to be favored by most people. However, the type of plan that causes the most concern are those that seek to expend the tax base and new create jobs. Under this scenario, the line between public use and private benefit becomes blurred.

The case is very important to New Jersey property owners filing redevelopment plans for several reasons. First, there are many redevelopment plans on the drawing board which seeks to increase the tax base just as in New London. Second, New Jersey mayors are under tremendous pressure to lower property taxes and are consistently chasing "ratables" high valued properties which provide the income to local government. As a result, many of the redevelopment plans seek to create new ratables. Finally, increased open space purchases reduce the available land for developers. As a result, many developers will look to redevelopment projects as a means to remain in business.

• Email This
• Print
• Comments (3)

The American Jobs Creation Act of 2004 will allow certain relief to taxpayers who receive settlements or court awards in employment discrimination cases. This legislation is meant to deal with an issue which has been the subject of differing decisions in the Federal Appeals Courts.

Prior to this legislation, successful litigants were required to pay taxes on money which they didn't get to keep. They were required to pay taxes on an entire award or settlement, even though part of the money received went directly to their attorney to pay legal fees, and without regard to the fact that the attorney also paid taxes on this part of the award. A bill to fix the problems, the Civil Rights Tax Relief Act, has languished in Congress for nearly five years without success until this provision was added to the Jobs Creation Act.

Congress has created a special deduction in these cases for attorneys' fees and court costs. This will be an above the line deduction which will appear on the Federal Income Tax Returns for adjusted gross income. Accordingly, this deduction can be claimed without regard to whether or not a tax payer files an itemized return.

The law will not be retroactive and will be effective only for fees and costs relating to any judgment or settlement that occurs after the effective date of the legislation.

The Internal Revenue Service has favored this double taxation for years and its policy is presently the subject of two cases set for argument in the United States Supreme Court in November. In these cases, Commission of Internal Revenue v. Banks and Commission of Internal Revenue v. Banaites, the tax payers both won awards in employment disputes and challenged the fact that they were taxed on the entire amount. This new legislation which overturns the disputed policy has created great uncertainty in these cases. This new legislation was supported by various groups including the National Employment Lawyers' Association, AARP, National Whistle Blower Center, US Chamber of Commerce, Lawyers' Committee for Civil Rights Under Law, the Bazelon Center for Mental Health Law and the NAACP.

• Email This
• Print
• Comments

Have you ever thought of buying an old, historic property, but decided not to because of the high cost of rehabilitation? Well, it is certainly true that the preservation of an historic structure is not an endeavor for the financially fainthearted. However, for those of you who currently own or who may have your eyes set on investment properties in need of some tender love and care, the federal rehabilitation tax credit program may be just the tool you need to "preserve" both the building and the bottom line.

Under the Internal Revenue Code ("IRC") a taxpayer who rehabilitates any certified historic structure may receive a credit for 20% of the qualified rehabilitation expenditures used in performing this task. A certified historic structure is defined under the IRC as "any building" that "is listed in the National Register [of Historic Places], or is located in a registered historic district and is certified as being of historic significance to the historic district by the Secretary of the Interior." In order to qualify for the 20% tax credit, an interested taxpayer must first obtain approval for the proposed rehabilitation project and, if the site being rehabilitated is within a registered historic district (but not individually listed on the National Register) a certificate of historic significance. The State Historic Preservation Office within the Department of Environmental Protection is charged with conducting an initial review of all such applications. However, the National Park Service ("NPS") makes final determinations on proposed rehabilitation projects and requests for certificates of historic significance.

Once a rehabilitation project has been approved, the taxpayer must actually undertake to do the work, which, at a minimum, must be in accordance with the Secretary of the Interior's Standards for Rehabilitation published in the Code of Federal Regulations. The taxpayer may then proceed to obtain a certification of completed work from the NPS. Upon satisfactory completion of the rehabilitation project and a determination by the NPS that such work is consistent with the historic character of the certified historic structure (or the district in which such structure is located), the NPS will certify the rehabilitation. A copy of this written determination, also known as a "certified rehabilitation" must be included with the taxpayer's federal income tax return at the time the taxpayer seeks to claim the 20% rehabilitation tax credit.

Other regulatory requirements associated with the 20% rehabilitation tax credit include satisfaction of the IRS' substantial rehabilitation test, which should not be confused with the NPS' certification of completed work. A certified historic structure will be treated as "substantially rehabilitated" under the IRC and applicable IRS regulations only if the qualified rehabilitation expenditures incurred during a 24-month period selected by the taxpayer (or 60 months if rehabilitation is completed in phases) exceed the adjusted basis of the structure and its structural components or $5,000.00, whichever is greater. A qualified rehabilitation expenditure is a cost or expense made in connection with rehabilitation, which is "properly chargeable to capital account" for certain classes of depreciable real estate, such as rental housing. Expenditures for improvements to the structural components of a certified historic structure will ordinarily be construed as qualified rehabilitation expenditures. Similarly, amounts incurred for architectural and engineering fees, site survey fees, legal expenses, insurance premiums, development fees and other construction-related costs will also qualify for the 20% rehabilitation tax credit if they are added to the basis of the property for which the credit is being sought. Examples of expenses that would not be counted as qualified rehabilitation expenditures include building acquisition costs and outlays for the installation of parking, sidewalks, landscaping and other similar improvements, which are not related to the rehabilitation of the certified historic structure.

To be eligible for the 20% rehabilitation tax credit, certified historic properties must also have been placed in service (i.e. available for occupancy) prior to the commencement of rehabilitation work.

The right to claim a rehabilitation tax credit originates when the taxpayer who owns a certified historic structure incurs qualified rehabilitation expenditures. This tax credit may be transferred to a purchaser of the certified historic structure provided that: (1) the transferor did not place the structure in service after rehabilitation and prior to the date of acquisition; and (2) no person or entity other than the taxpayer purchasing the certified historic structure has claimed a credit for any qualified rehabilitation expenditures made in connection with the rehabilitation of the structure. A taxpayer/owner may also elect to transfer rehabilitation tax credits to tenants, so long as the transferor is not a tax-exempt entity.

A taxpayer may begin claiming the rehabilitation tax credit for qualified rehabilitation expenditures when the certified historic structure is put back in service, provided that all of the above-referenced conditions have been fully satisfied. A certified historic structure will be construed as having been put back in service on the project completion date irrespective of whether the taxpayer continues to occupy the certified historic structure during the rehabilitation or takes it out of service during such period. The qualified rehabilitation expenditures that a taxpayer may claim a credit for are limited to those incurred before and during (but not after) the taxable year in which the certified historic building (or portion thereof) was placed in service. Significantly, if a taxpayer cannot utilize the entire rehabilitation tax credit in a single taxable year, the excess may be carried back one year and/or carried forward for up to 20 years.

Hopefully, the foregoing brief summary of available federal historic preservation tax incentives has piqued your interest in preserving an historic property. However, given the complexities inherent in federal tax law (and numerous other potentially applicable laws, regulations and ordinances not discussed here) all owners and future purchasers of historic properties would be well advised to seek legal counsel before pursuing their dream of rehabilitating an historic property.

• Email This
• Print
• Comments (2)

This is an update to an earlier issued CEPA client alert.

The New Jersey Senate has passed a bill last week (S-1886) that enhances the rights and remedies of employees who disclose or refuse to participate in fraudulent employer practices pursuant to the Conscientious Employee Protection Act (CEPA), New Jersey's "whistleblower" statute. Although the bill is awaiting action from the Assembly, a similar bill has been approved there in the previous legislative session.

The bill removes CEPA from New Jersey's Punitive Damages Act, which previously imposed a cap on punitive damages. In CEPA actions, the cap was calculated as the greater of $350,000 or five times compensatory damages. If the bill is passed in its present form, there is no statutory limit on punitive damages for CEPA actions pursuant to state law.

Furthermore, the bill now allows judges or juries to consider (in addition to compensatory damages) "the amount of damages caused to shareholders, investors, clients, patients, customers, employees, former employees, retirees or pensioners of the employer, or to the public or any governmental entity, by activities, policies or practices of the employer which the employee disclosed, threatened to disclose, provided testimony regarding, objected to, or refused to participate in."

The bill directs judges to order the following relief "where appropriate and to the fullest extent possible": (1) an injunction restraining employers against any violation of the act; (2) the reinstatement of the employee to the "same position held before the retaliatory action, or to an equivalent position"; (3) reinstatement of full fringe benefits and seniority rights; (4) compensation for "all" lost wages, benefits and other remuneration; and (5) reasonable costs and attorney's fees.

The bill allows judges or juries to assess greater civil fines against employers, up to $10,000 for the first violation and up to $20,000 for each subsequent violation, payable to the State Treasurer.

According to the New Jersey's Office of Administrative Courts, "whistleblower" suits had more than doubled since 2001. From June 30, 2003 through June 30, 2004, 275 CEPA claims have been filed which is a 102% increase from 2001. By contrast, Civil Part filings have increased only 24% over the same period. Stark & Stark attorneys can help your Company to develop notices that satisfy CEPA's new requirements.

• Email This
• Print
• Comments

On October 26, 2004, the Securities and Exchange Commission (SEC) voted to pass a new final rule which will require hedge fund managers who have 15 or more investors (i.e., investors in any hedge funds which the manager advises) to register with the SEC as an investment adviser under the Investment Advisers Act. However, if the hedge fund manager has less than $30 million in assets under management (e.g., a hedge fund in which investor commitments equal less than $30 million), such manager would generally be exempt from SEC registration (although the manager may be subject to state registration requirements). In addition, there are certain other requirements, exemptions and "grand-fathering" type provisions in the new rule. Compliance with the new rule will be required by February 2006. As soon as the final rule is published by the SEC, we will submit a full review of the new rule, its probable consequences and our advice on planning strategies.

• Email This
• Print
• Comments
• Trackbacks