On March 21, 2005, The New Jersey Law Journal's Bankruptcy Law Supplement published an article authored by Timothy Duggan, Chair of the Firm's Bankruptcy & Creditor's Rights Group. The article (PDF) discusses the recent decision In re Loehwing issued by the U.S. Bankruptcy Court for the District of New Jersey.
In the 1991 case of JWP v. WW 255 NJS 1 (App Div 1991) the Court used the doctrine of estoppel to impose a child support obligation upon a step parent.
Last week the Appellate Division reaffirmed that concept in Christensen v. Chrsitensen in holding that a step father who acquiesced in the mother's efforts to keep the child from seeing the biological father and from seeking child support from the biological father was responsible for child support.
In an interesting side note, the Court stated that it was not ruling on the obligation of the biological father, and may well find, under appropriate circumstances, that both a biological and a step parent have concurrent child support obligations.
Following up on an earlier post, Rule 203(b) (3)-2, adopted by the SEC on October 26, 2004, requires most private fund advisers to register with the Commission. Advisers must consider the number of investors in their funds, rather than the number of funds, to determine whether they are eligible for the exemption from registration available to advisers with 14 or fewer clients. Advisers to private funds in which a registered fund invests (i.e. a fund of hedge funds) must go one step further and count the investors in the registered fund as clients. Advisers who are no longer eligible for the exemption will have to register with the SEC by February 1, 2006.
The new registration requirements will give the SEC jurisdiction over many more hedge fund advisers, allowing the SEC greater access to information on advisers' operations. All registered investment advisers ("RIAs") are subject to examinations by SEC staff and must comply with the provisions of the Investment Advisers Act ("the Act"). Following is a summary of major provisions of the rule:
Definition of a "private fund"
The rule defines "private fund" as (1) one that would be an investment company but for the exceptions in Section 3(c) (1) or 3(c) (7) of the Investment Company Act; (2) permits investors to redeem their interests within two years of purchase; and (3) is offered based on the investment advisory skills, ability or expertise of the investment adviser.
The definition specifically exempts advisers to offshore publicly offered funds that (1) have their principal office and place of business outside the U.S.; (2) make a public offering of their securities outside the U.S.; and (3) are regulated as a public investment company under the laws of a country other than the U.S.
The two-year redemption test applies to each interest in the private fund and can be applied on a first in first out, or FIFO, basis. However, this requirement does not apply to interests acquired with reinvested dividends or to private equity and venture capital funds that allow redemptions under extraordinary circumstances.
Effect on performance-based fees
RIAs to private funds may charge performance-based fees to new investors only if they meet the standards of rule 205-3, which allows performance-based fees only for "qualified clients" (investors with a net worth of at least $1.5 million or at least $750,000 of assets under management with the adviser). The rule allows existing investors that are not "qualified clients" to retain their interest in that private fund and to add to that account. However, it does not give them an exemption to open new accounts in that or other hedge funds.
Financial statements and required books and records
RIAs to funds of hedge funds will be able to satisfy their requirement to deliver audited financial statements within 180 days of their fiscal year end, instead of the requirement that they be delivered within 120 days of their fiscal year end.
Rule 204-2, which lists books and records requirements for all RIAs, will be amended to provide an exemption from the performance recordkeeping requirements for newly RIAs to private funds. Such RIAs will be required to retain whatever records they have that support the performance prior to their registration but will be excused from the recordkeeping rule to the extent that the records do not meet the requirements at the time of registration.
Applicability to offshore advisers to private funds
The rule does not require advisers to offshore funds that have U.S. investors to "look through" the fund for any purposes under the Act, other than (1) the anti-fraud provisions and (2) determining the availability of the private adviser exemption. The release included a reminder that U.S. advisers to private funds should not try to use the exception to evade the requirements of the Act by establishing a shell subsidiary in a foreign country to manage offshore hedge funds. Why? Because, under Section 208(d), advisers are prohibited from doing indirectly that which they cannot do directly.
For more information, please see IA Release No. 2333 (Dec. 2, 2004) available here.
Seven years ago the New Jersey Supreme Court used a 7.7% rate of return to impute unearned income to a party's assets for the purpose of determining their ability to pay alimony - Miller v. Miller 160 NJ 408 (1998).
Although the Court in Miller used then current market indexes to determine a fair and appropriate rate of return, there have been Judges and lawyers who have interpreted the Miller decision to require a 7.7% rate.
In Overbay v. Overbay (decided 3/18/2005) the Appellate Division unequivocally held that the Miller Rate of 7.7% was not intended by the Supreme Court to be a universal rule replicated in every case. The Appellate Division, instead, directs the Trial Courts to review each case in the context of the parties existing investment strategies and the current market conditions.
On March 22, 2005, the Appellate Division rendered an important decision that will effect the way the New Jersey Consumer Fraud Act is applied. That case, Cole v. Laugherty Funeral Home involved an allegation that a funeral home violated the Consumer Fraud Act when it followed the instructions of part of the decedent's family not to permit certain members of the family to attend the viewing.
The case involved a feuding family whose relatives were murdered. The decedent's children from a later marriage planned the decedents entire funeral. Pursuant to their instructions, the children excluded certain family members of the previous marriage from the viewing. Despite that fact, the obituary for the decedents set forth that there would be a public viewing. Those family members were excluded from the viewing when they came to pay their respects to the decedents. The excluded family members claimed that the misrepresentation (the public viewing) was a violation of the Consumer Fraud Act. The Appellate Court disagreed.
The Appellate Court affirmed the dismissal of the Consumer Fraud Claim because the Plaintiffs could not show that the funeral home made a misrepresentation to induce the buyer to make a purchase. The Plaintiffs did not purchase any goods or services from the funeral home.
Finally, the Cole Court held that "emotional damages" cannot be recovered under the New Jersey Consumer Fraud Act. The Cole Court reasoned that under that statute a damaged party could only recover "ascertainable losses" - not emotional damages.
At a recent meeting of the Conference of Civil Presiding Judges in New Jersey ("Conference"), the question was raised as to whether non-attorneys could appear on behalf of a business entity at a Court ordered mediation. This question was referred by the Conference to the New Jersey Unauthorized Practice of Law Committee ("Committee"). The Committee determined that such appearances are not permissible under the applicable New Jersey Rules of Court and Professional Responsibility.
At the same meeting, the Conference also addressed the issue as to whether an attorney, not admitted in New Jersey, may represent a party at a New Jersey Court ordered mediation without first being admitted pro hac vice. The Conference concluded that such representation may only take place in specific, limited circumstances. The Conference defined such circumstances as where "the lawyer engages in representation of a party to a dispute by participating in arbitration, mediation or other alternate or complimentary dispute resolution program on behalf of an existing client in a jurisdiction in which the lawyer is admitted to practice and the dispute originates in or is otherwise related to a jurisdiction in which the lawyer is admitted to practice."
Mediation in New Jersey has become mandatory in most cases and usually takes place in the early stages of litigation. Mediators are appointed by the Court from a State appointed list, but the litigants have the option of choosing their own mediator.
In South Plainfield Properties, L.P. v. Middlesex County Planning Board, 372 N.J.Super. 410 (2004) the Appellate Division affirmed the opinion of the Law Division awarding automatic approval for failure of the county planning board to act within the statutory time frame required under the County Planning Act, N.J.S.A. 40:27-1, et. seq.
Under the County Planning Act, a county planning board must report its decision on a proposed subdivision or a proposed site plan, as applicable, to the municipal entity having authority to approve the application for development. If the county planning board shall fail to act within the requisite time period such subdivision or site plan, as appropriate, "shall be deemed to have been approved by the county planning board." N.J.S.A. 40:27-6.3; N.J.S.A. 40:27-6.7. This 30-day time period may be extended by an additional 30 days upon the mutual agreement of the county planning board, the municipal authority and the applicant.
In South Plainfield Properties, the county planning board over the objections of the developer-applicant adopted a resolution extending the aforesaid 30-day time period by six months. The county planning board made this decision after the developer-applicant had already consented to postpone action on its application for development. In analyzing the circumstances of this case, the Appellate Division distinguished between government inaction that is unintentional, inadvertent or technical in nature and government inaction that is deliberate and purposeful. According to the court in South Plainfield Properties, the former does not justify granting an automatic approval, but the later, which was evident in the instant case, most certainly does. "The . . . [r]esolution provides 'a clear showing of purposeful delay,' precisely the conduct that the automatic approval provision was designed to prevent." Id. at 419 (quoting Eastampton Ctr., LLC v. Planning Bd. of Tp. of Eastampton, 354 N.J.Super. 171, 193-94 (App. Div. 2002)).
The county planning board took the position that by passing a resolution extending the time to act by six months it had sufficiently acted on the developer-applicant's request for relief to satisfy the requirements of the County Planning Act. The Appellate Division flatly rejected this argument saying "[w]e cannot countenance such an end-run around the statute." Id. at 417.
The Appellate Division also repudiated the county planning board's alternative theory, which alleged that the developer was required, but failed, "to exhaust an administrative remedy, specifically, the provision of N.J.S.A. 40:27-6.9 that permits an applicant to appeal from a county planning board action to the County Board of Freeholders." The court, which had already dismissed the premise that the county planning board's resolution was sufficient to constitute an "action" under the N.J.S.A. 40:27-6.7, concluded that the said resolution was "equally" insufficient to be construed as an "action for purposes of sub-section 6.9[,]" leaving for another day "the question whether exhaustion of that procedure is a prerequisite to a Superior Court action to enforce the statutory approval provided by N.J.S.A. 40:27-6.7."
The South Plainfield Properties case is important for two reasons. First, the decision clearly reinforces existing case precedent on the nature and extent of government inactivity that warrants the issuance of an automatic approval. The South Plainfield Properties case also sends a strong message to counties and municipalities that, given the right circumstances, the courts will enforce the automatic approval provisions contained in State land use legislation.
Timothy Duggan, Chair of the Firm's Bankruptcy and Creditor's Rights Group, was quoted in The Trentonian on March 14, 2005 regarding the U.S. Senate's passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. You can read the article here.
Pennsylvania employers must be represented by an attorney at Unemployment Compensation hearings. On February 3, 2005, the Pennsylvania Commonwealth Court in Harkness v. Unemployment Compensation Board of Review, held that employers cannot have non-lawyers representing them at Unemployment Compensation proceedings. See 2005Pa. Commw. LEXIS 48 (Feb. 3, 2005). At the hearing, the employer was represented by a third-party company that provides "representation" to employers at Unemployment Compensation hearings.
This representative was a tax consultant rather than an attorney. At the hearing, the representative cross-examined the former employee, offered exhibits into evidence and gave a closing statement. The Commonwealth Court, however, found that this tax consultant improperly engaged in the practice of law. The Court rejected the argument that since an individual claimant may be represented by a non-attorney pursuant to the Pennsylvania Code, the employer should be afforded those same privileges.
The Pennsylvania Department of Labor and Industry announced that it was appealing the Harkness decision to the Pennsylvania Supreme Court.
In the meantime, employers cannot use non-lawyers to represent them in unemployment compensation hearings. As a result, employers must change its practices relating to such hearings and determine whether it makes financial sense to dispute unemployment claims.
Stark & Stark attorneys can advise and represent your Company regarding Pennsylvania unemployment issues. If you would like to obtain more information on this recent ruling, please contact Thomas Lewis, Chair of the Firm's Employment Group.
On Friday, April 1, 2005, Stark & Stark will participate in the Seventh Annual Bankruptcy Bench-Bar Conference, hosted by the New Jersey Institute for Continuing Legal Education.
Thomas Onder, a member of the Firm's Bankruptcy and Creditor's Rights Group, will serve as a panelist for the program's breakout session focused on Pre-Packs & Mass Torts.
The conference will be held at the East Brunswick Hilton from 9:00 AM to 3:15 PM. You can register for the Bankruptcy Bench-Bar Conference here.
A turf war seems to have erupted between United States Attorney Christopher Christie and State law enforcement officials such as Attorney General Peter Harvey and Monmouth County Prosecutor John Kaye. One has to ask if the strife between these powerful officials is hindering the effective prosecution of corrupt public officials, or is it just another "black eye" for New Jersey.
To some degree tension has always existed between the various offices. However this tension was usually relieved by the relationships that existed between the U.S. Attorney and various State officials. There was also an unwritten rule governing the prosecution of different types of Criminal activity. As a result, a cordial relationship between these offices existed for many years which was kept alive by the movement of career law enforcement officials between the Federal and State agencies. Yet today we see that the era of civility is officially over, its end marked when new leaders with political connections, and more importantly political aspirations, assumed control of the two offices.
Christopher Christie had plenty of political connections and very limited law enforcement credentials when he was appointed. He quickly realized that to further his political ambitions he needed to be noticed, and no type of case generates publicity like political corruption. Christie sent a clear message to his office to develop corruption cases. Meanwhile on the State's side, beginning with the appointment of Peter Veniero as Attorney General and continued with the appointment of Peter Harvey, the State Attorney General has been more concerned with protecting the Governor's reputation than eliminating corruption.
Christie does have an advantage over the State Attorney General in that he does not have a Governor to protect, and can therefore commence corruption investigations without alienating people to whom his boss owes favors. Attorney General Harvey on the other hand has had to stand by and watch the numerous faus paux of his former boss, Jim McGreevey.
Christie has won the corruption fight hands down. He has brought case after case against public officials both enhancing his name recognition among Republican partisans and embarrassing the Democratic public officials who he has primarily targeted. The turf war has now escalated with the recent Indictments by Christie of what seems 50% of the public officials in Monmouth County. In doing so Christie has now stepped on the toes of a more formidable opponent Monmouth county Prosecutor John Kaye.
Kaye, the longest tenured county Prosecutor has long had a reputation as a hardliner on things such as drug prosecutions. In fact Kaye has developed a reputation that there is much less crime in his county because of his ruthless prosecution of one and all. Imagine his displeasure when he found out that Christie had imported from Florida an out of control cooperating witness who seemed to offer bribes to every public official he could find. The prospect of this occurring in Kaye's County, much less without his approval caused the two principles to engage in a very public dispute. Christie claims that Kaye sabotaged the federal investigation by calling in some of the targets for questioning. Kaye claims that Christie refused to advise his office of the investigation of public officials within his county. Christie has now subpoenaed Kaye, and Kaye not only threatening to subpoena Christie, but is attempting to go over his head by appealing directly to the Justice Department with his complaints.
The bad blood between Christie and Kaye has now reached a fever pitch. Last week, The Star Ledger reported that Kaye's support is quickly eroding. Senator John Adler, chairman of the Judiciary Committee, along with Senators Tom Kean and Ellen Karcher, are all calling for Kaye's immediate removal. Even acting Governor Richard Codey has said that he will not reappoint Kaye when his term expires in four months, and he may demand Kaye's resignation sooner. Christie's corruption prosecutions have scored him points with the power elite while Kaye's twenty-two year history of writing his own rules regarding law enforcement in Monmouth County has left him isolated and targeted for removal from office.
When all is said and done, the drama playing out in New Jersey is all about politics, and the loser once again are the citizens of New Jersey.
Stark & Stark was recently named as one of the Best Places to Work in New Jersey.
This is the inaugural year for the program, which is presented by NJBIZ, New Jersey's only weekly business publication, and The Best Companies Group. The Best Places to Work in New Jersey is sponsored by J.H. Cohn and North Fork Bank, in partnership with the New Jersey State Chamber of Commerce and the New Jersey chapter of the Society of Human Resource Managers.
This survey and award program was designed to identify, recognize and honor the best places of employment in New Jersey, benefiting the state's economy, its workforce and businesses. The Best Places to Work in New Jersey program is made up of 50 companies split into two groups: 25 medium-sized companies (25 - 199 employees) and 25 large-sized companies (more than 200 employees). Stark & Stark has been named one of the Best Places to Work in New Jersey in the large-sized company category.
To be considered for participation, companies had to fulfill the following eligibility requirements:
- Be a for-profit or not-for-profit business;
- Be a publicly or privately-held business;
- Have a facility in New Jersey;
- Have at least 25 employees in New Jersey.
Participating companies were entered into the two-part process of determining the 50 Best Places to Work in New Jersey. The first part consisted of evaluating each nominated company's workplace policies, practices, philosophy, systems and demographics. The second part involved an employee survey addressing behavioral tendencies rather than company systems. The results were analyzed and categorized according to three specific viewpoints, their impact on six specific relationships, and the level of the organization which they most directly impact. The Best Company Group then sorted and interpreted the data and determined the top companies.
Stark & Stark will be recognized and honored at the Best Places to Work in New Jersey evening awards ceremony on Thursday, April 28, 2005 at the Sheraton at Woodbridge Place in Iselin, during which the rankings will be revealed.
For more information on the Best Places to Work in New Jersey program, click here.
In what has been described as "a novel ruling" a New Jersey Appellate Court has held that, under appropriate circumstances, an attorney may be required to return a previously paid and even fully earned retainer to a client upon withdrawal as his/her counsel.
The New Jersey State Bar Association, in an amicus brief, argued that the Court had no jurisdiction over fee disputes between an attorney and his/her client. Conceding that the Court has the ability to set fees payable by one party to the other, the Bar argued that such authority does not extend to fees between the attorney and her/his own client.
The Appellate Court disagreed, finding that "under unusual and extraordinary" circumstances, the Court's jurisdiction over fees does extend to such matters.
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