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Most Property Settlement Agreements entered into between divorcing parties deal with the issue of emancipation of a child, which is the cut off date for a parent’s child support obligation. Intertwined with this issue is college or secondary education and each parent’s responsibility toward this obligation.

In New Jersey, there is no set age for emancipation. Many people seem to think that a child is emancipated when he/she reaches the age of majority which is 18, but in most cases this is not true.
The Superior Court of New Jersey has stated that “When a child moves beyond the sphere of influence and responsibility exercised by a parent and obtains an independent status on his or her own, generally he or she will be deemed emancipated.”

Since the issue of whether a child is emancipated is fact sensitive, it is essential that your Property Settlement Agreement have a definition of emancipation so there is no question when child support obligations stop. Property Settlement Agreements traditionally list the following as emancipation events:

1. Reaching the age of 18 years or the completion of post-secondary education (college), whichever occurs last.
2. Marriage of the child.
3. Permanent residence away from the parent’s residence, except that residence at boarding school, camp or college shall not be deemed a residence away from the parents.
4. Death of the child.
5. Entry of the child into the armed forces.
6. A child obtaining full time employment after attainment of the age of 18 years, except that a child engaging in full time employment during vacation or summer periods while attending high school, college or other post-secondary education on a full time basis, shall not be deemed full time employment.

Issues arise, even with a definition of emancipation such as this, when a child works full time and goes to school full time. In a recent case, a father filed a motion to emancipate his son and terminate his child support obligation. The mother opposed the motion and filed a cross-motion requesting that the father be required to contribute toward their son’s college education expenses. The parties’ Property Settlement Agreement provided that the father pay child support for the minor child until he was emancipated, which was defined by the parties as set forth above. The parties’ Property Settlement Agreement also stated that if the child was a full time matriculated student enrolled in a minimum of 10 credits per semester, the parties would proportionally share the educational costs after financial aid, scholarships and tuition assistance.

In this case, the son worked at an office full time during the day and went to college in the evening taking 12 credits per semester.  Although the Property Settlement Agreement did not address full time employment while going to school full time, the Lower Court continued child support and compelled the father to pay toward his son’s college education expenses.

On appeal, the Appellate Division agreed with many of the father’s arguments and found that he was entitled to (1) confirmation as to the number of credits his son was taking at college, as well as his future college plans, (2) disclosure and documentation of his son’s income and savings in order to ascertain whether his son contributed toward household expenses or paid his own expenses, (3) the financial status of both parents and (4) whether scholarships or other financial aid was available. The Appellate Division determined that a plenary hearing was necessary in order for the Lower Court to determine the issues of emancipation, child support obligations and each parent’s responsibility toward college expenses. It is clear from this case that even an attempt to define an emancipation event in a Property Settlement Agreement is not always successful and parties to a divorce action should pay particular attention to the wording of any agreement entered into in order to state with specificity the parties’ intent by covering all conceivable bases.

Issues which may come up in post-judgement divorce cases may be (1) the parents’ obligation to pay for graduate school (2) the parents’ obligation to continue child support and college education for a period of more than four years, (3) whether child support continues if a child takes a leave of absence or other break from school before resuming his/her studies and (4) whether child support continues if the child is ill (physically or emotionally), and therefore cannot attend college.

Dealing with these issues at the time a Property Settlement Agreement is entered may save an inordinate amount of time and money in the future.

Technorati Tags: New Jersey : Emancipation

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For individuals starting a business, the form their business takes is important and hinges on their desire to protect their investment (limited liability), enjoy flexibility in management and administration, and the ability to maximize profit by paying taxes on earnings directly, rather than at the entity level and again individually on distribution. Before 1994, New Jersey businesses wanting limited liability without double taxation used “S’ corporations. After 1994, business owners could chose primarily between “S” corporations and the limited liability company (“LLC”).

Before 1994, “S” corporations were preferred because of limited liability and flow-through taxation. For an “S” corporation to pay taxes through the shareholders directly, certain requirements are necessary. “S” corporations may only issue one class of common stock, other business entities and non-U.S. persons cannot be shareholders, and “S” corporations can have no more than 75 shareholders. Additionally, an “S” corporation is required to abide by sometimes rigid corporate practices to preserve limited liability, such as conducting meetings of shareholders and directors, maintaining minutes and making annual corporate filings. Also, shareholders of an “S” corporation can sell or transfer shares absent a shareholder agreement otherwise (subject to securities laws restrictions).

LLC’s combine the best features of a corporation (limited liability) with the best features of a partnership (flow-through taxation), while offering greater flexibility in management and ownership structure. An LLC is automatically taxed at the owner level without the need for corporate tax filings, unless the LLC elects to be taxed as a corporation. LLC’s may also have any number of members and those members may be other businesses or non-U.S. persons. The structure of the management of an LLC is more flexible, does not require duplication of paperwork and individuals playing multiple roles (shareholder and director), and is done with substantially less confusion.

Several LLC limitations have resulted in the continued viability of the “S” corporation. In an “S” corporation, a shareholder-employee pays self-employment tax on money received as compensation for services, but not on profits that pass through as a shareholder. Thus an owner can still be paid a salary, and only pay additional self-employment tax on the “reasonable compensation” portion of total distributions. The entire distribution drawn by an LLC’s member-employee is treated as a “guaranteed payment” meaning all payouts are subject to self-employment tax. The second factor is that if it is expected that the business will require institutional investment, most institutional investors will require that the business be a “C” corporation (versus an LLC or “S” corporation). An “S” corporation need only “unelect” their flow-through status to be treated as a “C” corporation to raise institutional investment, while an LLC would have to undergo a cumbersome conversion process.

Sorting through the characteristics of these business forms can be daunting for business owners, and making changes once a business is established can be difficult and costly. As such, individuals forming businesses should consult with legal counsel and accountants to review the characteristics of each entity important to their businesses.

Technorati Tags: New Jersey : Corporations

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To the relief of many and the consternation of a few, New Jersey law now includes "irreconcilable differences" as a ground for divorce. The bill, just signed into law by Governor Corzine, means that a Complaint for Divorce can assert the existence of irreconcilable differences which have caused a breakdown of the marriage for six or more months.

The legal impact is that persons may now file for divorce without having to allege marital fault against their spouse or await the expiration of eighteen months separation. The law will remove some but not all of the animosity in divorce since the great majority of cases are more vigorously contested with regard to such issues as custody, parenting time, alimony, child support and division of marital assets. Nonetheless, lawyers welcome the new law since we know that except in rare instances where egregious fault may be considered by the court, marital fault is not a factor in the financial aspects of divorce. Even in custody cases, the fact that one's spouse has committed marital fault is not determinative. That person may at the same time have no parental faults, although there are situations where underlying problems such as anger may be important.

Finally, the new law does not replace other grounds for divorce such as adultery, desertion or extreme cruelty which still have their rightful place. The important thing is that each case is fact-sensitive. As a matrimonial attorney for thirty years, my advice to anyone considering divorce is to learn not only your legal rights but responsibilities, retain a specialized lawyer, discount advice from family and friends no matter how well-intentioned and, once armed with knowledge and guidance, prioritize your issues.

Technorati Tags: New Jersey : Irreconcilable Differences

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This week's New Jersey Legal Update podcast will discuss the rules of civil procedure, in the state of New Jersey as well as on a federal level, relating to the issue of electronically stored information for the discovery process.

This week's New Jersey Legal Update is presented by Jason A. Storipan, member of Stark & Stark’s Employment Group.

You can download the New Jersey Legal Update Podcast # 58 here. (5.15 MB)

Technorati Tags: New Jersey : Podcast :  Litigation : Employment : Electronic Discovery

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Timothy Duggan, Chair of the Bankruptcy & Creditor's Rights Group, authored You Can't Always "Trust" an Annuity for the January 15, 2007 edition of the New Jersey Law Journal.  The article discussed a recent case where annunities that did not qualify as trusts were included in a bankruptcy estate.

You can read the article here.

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In a case of first impression in New Jersey, the Appellate Division has determined that mediation – or Alternate Dispute Resolution (“ADR”) – is not a prerequisite to litigation and may be bypassed under compelling circumstances such as the immediate threat to the safety of others or an immediate and substantial threat to property. In addition, the Court agreed that the Association had a statutory right to bring an action for injunctive relief against Defendants, and that condominium tenants – as opposed to unit owners – are not covered by the plain language of the Condominium Act. The decision, approved for publication on January 23, 2007, was a victory for the Finderne Heights Condominium Association, which was represented by David J. Byrne and Jonathan H. Katz.

The facts are as follows. In order to prohibit a tenant from continuing a pattern of harassing and violent behavior towards her neighbors and Association employees, the Association sought, by way of Court Order, to compel this tenant to comply with the Association’s governing documents and to enjoin her from any further acts of harassment, trespassing or defacement of Association property. The Trial Court dismissed the Association’s Complaint, finding that the Association failed to comply with N.J.S.A. 46:8B-14(k) by first submitting the matter to either mediation or dispute resolution. The Association then appealed the Trial Court’s dismissal of its Complaint, arguing that the Association had a statutory right to bring an action for injunctive relief and further, under the circumstances presented here, that there the Association has no duty to first submit its claims to ADR.

The Appellate Division’s decision held that “so long as the unit owner and Association have a legitimate basis under the by-laws, the deed, or related covenants to file suit, same may be filed pursuant to N.J.S.A. 46:8B-16(b) without first resorting to alternative dispute resolution.” While still espousing the benefits of mediation, which may provide a quicker and perhaps more efficient method of resolution to disputes between unit owners rather than litigation, the Court upheld the Association’s right to bypass ADR, especially in the event – as was the case here – that there was a threat to the safety of others.

The Appellate Division’s decision in Finderne Heights Condominium Association v. Rabinowitz can be found here.

If you would like to discuss the Finderne opinion and how it affects condominium associations in more detail, please contact David J. Byrne or Jonathan H. Katz.

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Gary Forshner, a Shareholder in the Real Estate group, was quoted in Rite Aid Asked to Revise 'Fortress' - Township Seeks Attractive Design for Transit Village's First Building in the January 14 edition of the Trenton Times.

The story discusses the West Windsor zoning board's request for a design they feel is more suited to the plans they have for the township's redevelopment area.

You can read the article here.

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On January 8, 2007, in the matter of Grubbs v. Slothower, the Appellate Division extended to applications for development seeking approval for density variances (building more units on land than may be allowed pursuant to local ordinance), “the relaxed standard of review” established for deviations from conditional use requirements in Coventry Square, Inc. v. Westwood Bd. of Adjustment, 138 N.J. 285 (1994). When considering such applications, the Court advised zoning boards of adjustment that an applicant need not prove that the property to be developed is particularly suitable for a more intense use, but rather must “[f]ocus their attention on whether the applicant’s proofs demonstrate ‘that the site will accommodate the problems associated with a proposed use with [a greater density] than permitted by the ordinance.’” (internal citations omitted).

According to the Court, in order to meet the positive criteria required for the grant of variances under the Municipal Land Use Law, N.J.S.A. 40:55D-1, et seq.,

[a] successful applicant for a density variance therefore must show that despite the proposed increase in density above the zone’s restrictions, and, thus, the increased intensity in the use of the site, the project nonetheless served one or more of the purposes of zoning . . . [and] in addressing the so-called negative criteria, the applicant would need to demonstrate that the increase in density would not have a more detrimental affect [sic.] on the neighborhood than construction of the project in a manner consistent with the zone’s restrictions.

By this case, the courts have now expanded the “relaxed” standard of review to all “d” variances that do not establish or expand non-permitted uses/structures. Such use variances remain subject to a more stringent standard of review, and, in applications for commercial development, an enhanced quality of proof. The Appellate Division’s decision in Grubbs v. Slothower may be viewed on WestLaw at 2007 WL 35245 (N.J.Super. A.D.) and has been approved for publication.

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This week's New Jersey Legal Update podcast will address federal legislation impacting sub-contractors. This podcast will discuss what defines a sub-contractor and how federal legislation, such as the Miller Act, can impact the construction industry.

This week's New Jersey Legal Update is presented by Paul W. Norris, member of Stark & Stark’s Litigation Group.

You can download the New Jersey Legal Update Podcast # 57 here. (6.9 MB)

Technorati Tags:  New Jersey : Podcast :  Litigation : Construction : Miller Act

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Bill Singer, a shareholder in the Securities Practice group, was quoted in Regulatory Union: A Joint NYSE/NASD Effort Could Increase Efficiency in Investment Dealers Digest (paid registration required).

Singer commented on the the NASD and New York Stock Exchange regulatory divisions consolidation plan.

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Jason Storipan, a member of the Employment Law group, authored Mapping the Minefield of Electronic Discovery for the January 2007 issue of Mercer Business Magazine.

The article discusses how electronically stored materials can be used in lawsuits.  You can read the story here.

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On December 22, 2006, the Honorable Neil H. Shuster, Chancery Division, Mercer County Superior Court, rendered a decision in the case of Washington Mutual Home Loans, Inc. v. Rodrigo S. Lima, et al. This decision marks the first time that a New Jersey court has addressed the issue of distributing surplus funds resulting from a foreclosure sale on an “affordable housing unit” where a township or municipality was the successful bidder.

In this case Hopewell Township claimed entitlement to all surplus funds above the mortgaged amount arguing that under current New Jersey Law the owner of the affordable unit would be “personally obligated to pay the administrative entity responsible for assuring affordability any surplus funds,” should the property be foreclosed upon. However, the Brandon Farms Condominium Association argued that the New Jersey Condominium Act, which provides homeowner associations the right to collect on any liens, takes priority over the statute cited by Hopewell Township. Brandon Farms also argued that it would be impractical to expect an association to provide a myriad of services to its members if it has no means of collecting assessments to fund the costs of services.

Despite the Township’s claim to the entire surplus, Judge Shuster found that Brandon Farms was entitled to have their liens satisfied using surplus funds, and that only after the Association collected on their liens would any remaining monies go to the Township.

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On January 4, 2007, the Appellate Division affirmed a case which awarded $2 million in relocation asistance for a hot dog manufacturer forced to move its business as a result of a condemnation case.

In New Jersey, a business operator (owner or tenant) is entitled to relocation assistance if the business is required to be moved as a result of an eminent domain case. However, under New Jersey law, the mandated relocation benefits are skimpy at best and are presently under review as part of the pending legislation seeking eminent domain reform. As evidenced by a recent Appellate Division decision, business owners must be very diligent in order to maximize their potential recovery of relocation benefits. Jersey City School District v. Marathon Enterprises, docket no. A-6188-03T5, Jan. 4, 2007).

Marathon Enterprises owned a building which was acquired by the Jersey City School District to build a school. After a trial, the jury awarded Marathon $5.2 million as just compensation for the building. Marathon also sought relocation benefits arising from the relocation of machinery and equipment to its new facility. After a three day trial before an administrative law judge, the court awarded Marathon $2,039,265 in relocation benefits. The New Jersey Department of Community Affairs adopted the decision and the Appellate Division affirmed. Why did Marathon receive so much money for relocation benefits? The answer is:

1.  The business involved a meat processing operation (Sabrett hot dogs) which was subject to strict regulation by the United States Department of Agriculture (USDA). The USDA regulations require raw and cook meat to be kept separate, the plant must be cleaned and sanitized daily, and the floors must have drains and be slanted to allow for proper water flow . The administrative law judge’s opinion will tell you everything you always wanted to know (or not know) about hot dogs! As a result of the unique operation, it was not a simple move. 

2.  Neither the school district nor property owner could find a suitable place to relocate the business in the surrounding towns. Marathon decided to buy a building adjacent to its operation in the Bronx, New York, and renovate the building to make it USDA-compliant and accommodate the equipment being relocated from Jersey City. The total cost of the land acquisition and renovations to the building was $11 million. 

3.  Among some of the big ticket items in the renovations of the building were (a) lowering the floor several feet, (b) new electrical service necessary for the equipment being moved, and (c) modifying the building to keep the raw meat process separate from the cooked meat process. The attached decision goes into detail on what was done to the building. Since the USDA has onerous requirements for meat processing operations, the cost of the new facility was exorbitant.

 4.  Most important, Marathon had outstanding documentation to prove its case. During the trial, Marathon was able to separately identify which expenses were directly related to machinery and equipment being moved to the new location. For example, invoices for electrical work were broken down by area of the plant which enable Marathon’s witnesses to relate the invoice to specific equipment (ie. machine being relocated or a new piece of machinery).

This case is important to both condemning authorities and property owners. Condemning authorities must understand the nature of a business to be relocated and investigate any unique needs of the business. The time to do this is before the Workable Relocation Assistance Plan (WRAP) is completed. Properties owners must prepare their case while renovations are being made and ask their contractors to provide detailed invoices for work which may be recoverable under New Jersey law.

Read the decision here.

Technorati Tags: New Jersey : Redevelopment : Condemnation

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Bill Singer, a shareholder in the Securities Practice group, was quoted in Eliot Spitzer's Rise to Gov. May Mark End of Wall St. Era in the January 8 Investor's Business Daily.

Spitzer, formerly attorney general of New York, has now been elected governor.  He became well-known for working aggressively to reform Wall Street.  Singer commented that "the SEC and the self-regulators hired by stock exchanges are breathing 'a deep sigh of relief' that Spitzer isn't looking over their shoulders anymore."

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Bill Singer, a shareholder in the Securities Practice group, was quoted in The Selling of the NASD/NYSE Regulatory Merger in the January 5 Traders Magazine. 

Singer commented on the plan for the NASD and New York Stock Exchange to merge their regulatory divisions.

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This week's New Jersey Legal Update podcast will discuss the landmark case of Washington Mutual Home Loans, Inc. v. Rodrigo S. Lima, et al. This podcast will give a brief summary of the case, as well as a discussion of the implications of this decision and the impact it will have on Condominium Associations.

This week's New Jersey Legal Update is presented by A. Christopher Florio, Co-Chair of Stark & Stark’s Community Associations Group.

You can download the New Jersey Legal Update Podcast # 56 here. (5.6 MB)

Technorati Tags: New Jersey : Podcast :  Community Associations : Brandon Farms : Condo : Surplus Funds

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In recent years, the word “redevelopment” has become synonymous with “controversy.” This is attributable in great part to the public’s perception of the overuse and abuse of the eminent domain power, often at the behest of developers perceived as profiteers. Certainly, there have been abuses in this regard. However, redevelopment can be a very useful tool in revitalizing old, economically depressed or underutilized neighborhoods if its implementation is preceded by thoughtful planning that permits active involvement by all those with a direct stake in the outcome.

Redevelopment planning is a multifaceted task, approached in any number of ways depending upon the circumstances. First, before conceptualizing a redevelopment project, a builder should find a geographic area that elected municipal officials are interested in revitalizing. As an initial step, a developer should research government records to see whether any neighborhoods within a given municipality have already been designated as redevelopment areas. Certainly, municipal officials may be more receptive to a proposed redevelopment project for an existing redevelopment zone than one that will require the municipality to designate a brand new area, which, in turn, might necessitate the expenditure of public resources. In any event, the builder should be satisfied that the location it is interested in pursuing, whether it be within an established redevelopment zone or a non-designated area that needs to be studied and approved, actually satisfies the statutory criteria for redevelopment.

Under the Local Redevelopment and Housing Law (“LRHL”), a municipality shall not declare an area to be in need of redevelopment unless the municipal governing body concludes after investigation, notice to the public and the conduct of a public hearing, that the properties within the delineated area satisfy any one of the statutory criteria or are otherwise determined to be necessary for the effective redevelopment of the said area. Due to these legal requirements, it would be a mistake for a builder to spend time and money formulating a redevelopment proposal without first conducting some due diligence into the validity of an existing or proposed redevelopment area, which could include, for example, hiring a professional planner to evaluate the eligibility of properties within the subject area for redevelopment or, if the builder is considering an existing redevelopment zone, hiring an attorney to examine whether there is substantial, credible evidence in the record to support the determination and whether the municipality complied with all procedures required by the LRHL.

Indeed, the aforesaid due diligence inquiry is crucial if a builder’s proposal contemplates the acquisition of private property by eminent domain. Although the issue has not been determined definitively by the courts, there are several unpublished decisions that have permitted a property owner to challenge a condemning authority’s power to acquire property under a redevelopment plan by eminent domain as an affirmative defense. Therefore, irrespective of the enthusiasm that municipal officials might have about a particular redevelopment proposal, it would be unwise for a builder to pursue the matter further unless it were clear that the existing or proposed delineation, as applicable, would likely withstand a legal challenge.

Once a builder has found a geographic area that is acceptable to municipal officials and qualifies for redevelopment, the next step is to prepare a concept plan for the redevelopment project. How this is accomplished will depend to some degree upon whether the property that the builder seeks to redevelop lies within an existing redevelopment area and, if it does, whether a redevelopment plan for such area is in place.

If the builder is developing a concept plan for property that has not yet been delineated or a concept plan for property that has been delineated, but is not yet governed by a redevelopment plan, the builder initially will have to work closely with municipal officials in developing an overall vision for the proposed or existing redevelopment area, which will serve as the basis for the redevelopment plan. Only after this task has been accomplished should the builder do any significant work on formulating a proposal for the redevelopment of all or any portion of the proposed or existing redevelopment area. The easier, less time-consuming road is to focus effort on redeveloping an existing redevelopment zone for which the governing body has already prepared and approved a redevelopment plan. In this instance, a builder may proceed directly to the preparation a concept, which should as closely as possible conforms to the design, dimensional, density and use requirements contained in the redevelopment plan. Of course, the developer will still have to meet with municipal officials to refine the concept into a proposal that may be presented to the planning board for approval. In the event that an existing redevelopment plan is outdated or otherwise inadequate, the builder must seek to have the municipal governing body amend the redevelopment plan to accommodate a particular proposal.

In addition to working with municipal officials to develop concepts for a redevelopment project, the builder would be well advised to contact and meet with all owners of property and tenants, both commercial and residential, who may be impacted by the proposal. Certainly, there is some risk in reaching out to residents and businesses within a project area. However, by informing and being open to comments and suggestions from the public, a builder may actually enlist allies for, or at least neutralize potential opposition to, a redevelopment project. Moreover, interaction with persons who have lived and/or worked within the project area may result in the acquisition of valuable insight about the project area and surrounding neighborhoods, which could be used by the builder to refine the proposed redevelopment project in ways that address the concerns of all interested parties.

The process of achieving redevelopment by consensus-building is a formidable task, which entails many nuances and potential pitfalls that are beyond the scope of this article. However, builders should not shy away from this challenge. On the contrary, it is critical for builders to become adept at working with municipal officials and the communities they are seeking to reshape if they are to compete in the redevelopment arena.

Technorati Tags: New Jersey : Redevelopment : Eminent Domain

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Stark & Stark's Investment Adviser Regulation group is pleased to announce that the latest Investment Adviser Compliance Update has been published and is available for download.

The Winter 2007 edition covers topics including:
New Hedge Fund Rules Proposed by the SEC
Privacy and Identity Theft
States Impose Compliance Manual Requirement

You can download a copy of the latest Investment Adviser Compliance Upate here (PDF).

Technorati Tags: New Jersey : Securities : Compliance

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Adam Siegelheim, a member of the Franchise group, was quoted in One Chain's Groundwork for Growth in the January 8 Philadelphia Inquirer, which discussed the expansion of the New Jersey-based Saladworks franchise.

You can read the story here.

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Recently, the Superior Court of New Jersey, Appellate Division issued an opinion which gives greater insight as to which transactions are covered and not covered by the New Jersey Consumer Fraud Act.

The central issue the Court addressed in Papergraphics International, Inc. v. Juan “J.J” Correa, Jr., et. al., was whether or not the New Jersey Consumer Fraud Act applied to the wholesale purchase of ink cartridges which were later discovered to be counterfeits.

The facts of the case are simple. Papergraphics purchased what it believed to be Epson Inkjet cartridges from the defendants. First, the Plaintiff purchased 5,000 ink cartridges from the defendant. Later, the Plaintiff purchased an additional 4,714 cartridges from the defendants. Sometime after receiving the ink cartridges the Plaintiff learned that they were not “Epson Inkjet” cartridges as was represented. Rather, they were counterfeits. The Plaintiff commenced litigation against the defendant alleging breach of contract, breach of Uniform Commercial Code warranties, unjust enrichment, fraud, conversation and violations of the New Jersey Consumer Fraud Act.

The Trial Court found that the defendant violated the New Jersey Consumer Fraud Act. The defendants appealed that decision. In support of their appeal, the defendants argued that the Plaintiff did not have standing to assert a Consumer Fraud Claim as a matter of law because commercial transactions are not a covered “consumer transaction.”

There has been significant case law regarding whether or not a business can be a “consumer” under the New Jersey Consumer Fraud Act. A review of those cases reveals that the New Jersey Consumer Fraud Act does not cover every sale in the market place. The earlier cases hinge on the nature of the transaction which requires a case by case analysis.

The Papergraphics Court found that the Plaintiff was not a consumer. The Court gave additional guidance as to what transactions are covered by the New Jersey Consumer Fraud Act. The Court considered the following elements when it decided that the Plaintiff was not a consumer under the Act:

     • the quantity of the purchase;

     • the intended use of the purchased goods (use versus resale); and

     • the sophistication of the complaining party;

The Papergraphics decision is extremely important because it provides additional guidance as to the applicability of the New Jersey Consumer Fraud Act. Recently, the Superior Court of New Jersey, Appellate Division issued an opinion which gives greater insight as to which transactions are covered and not covered by the New Jersey Consumer Fraud Act.

Technorati Tags: New Jersey : Consumer Fraud Act

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On Thursday, January 4, 2007, the New Jersey Supreme Court heard oral argument on the matter of Committee for a Better Twin Rivers v. Twin Rivers Homeowners’ Association. The Supreme Court’s forthcoming opinion – which is not expected for several months – may prove to be the one of the most influential decisions involving community associations in over a decade.

At issue in Twin Rivers is the question of whether the New Jersey Constitution’s speech and assembly clauses should be applied to limit the authority of homeowners’ associations and, if so, under what circumstances. In the decision on appeal, Committee for a Better Twin Rivers v. Twin Rivers Homeowners’ Association, 383 N.J. Super. 22 (App. Div. 2006), which was authored by Judge Kestin, the Appellate Division found that community associations have supplanted certain responsibilities once undertaken by towns and municipalities and that state constitutional rights to free speech outweigh certain restrictions imposed by homeowners associations, even though such property is private rather than public.

The argument before the Justices of the Supreme Court was both fascinating and even heated at times, sprinkled with moments of levity. The Twin Rivers Homeowners’ Association argued that the Appellate Division’s decision to apply a constitutional standard was too expansive and advocated instead the use of the “business judgment rule”, which was utilized by the Trial Court in its original decision. The Association asserted that Judge Kestin “blurred the distinction” between a public entity, such as a township or municipality, and a private entity, such as a homeowners’ association, arguing that the state Constitution can only apply to public entities. Committee for a Better Twin Rivers – the group of residents who challenged the Association’s rules and regulations – argued that the Court should embrace the Appellate Division’s decision, stating that here the Association effectively stifled the residents’ freedoms of speech and assembly and created a “bubble of no-speech zones”.

During the argument, Chief Justice James R. Zazzali went so far as to call the Appellate Division’s decision “creative,” and focused on whether the Association should be considered the functional equivalent of a town or municipality. Justice Barry T. Albin commented that the Appellate Division’s decision appeared to require submission of even the most trivial issues – such as the posting of political signs or access to a community newsletter or meeting room – to be heard by a Superior Court Judge, which would open the floodgates for increased amounts of litigation. But perhaps the most vocal advocate for the Association’s position was Justice Roberto A. Rivera-Soto, who called the Committee’s various challenges of the Association’s rules “petty, not consitutional.”

The Supreme Court will now be left to determine whether the Appellate Division’s decision ultimately went too far and was too expansive, leaving community associations without clear and defined parameters as to the ability to enforce their rules and regulations, as well as to uphold the rights and responsibilities of their members.

The webcast of the argument before the Supreme Court can be found here.

Stark & Stark will continue to monitor this significant case and provide timely updates. If you would like to discuss the Twin Rivers opinion and how it affects condominium associations in more detail, please contact one of the attorneys in Stark & Stark’s Community Associations Group.

Technorati Tags: New Jersey : Condo : Community Association

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This week's New Jersey Legal Update podcast will discuss the use of objective standards in hiring practices. This podcast will also discuss the impact objective standards can have on a sexual discrimination case.

This week's New Jersey Legal Update is presented by Jason Storipan, member of Stark & Stark’s Employment Group.

You can download the New Jersey Legal Update Podcast # 55 here. (4.75 MB)

Technorati Tags: New Jersey : Podcast :  Employment

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Bill Singer, a Shareholder in the Securities Practice group, was quoted in Single Regulator Slated for Industry in the January 2007 issue of On Wall Street magazine.  The story dicusses the proposed merger between the New York Stock Exchange and the National Association of Securities Dealers.

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The SEC has proposed rules that raise the hurdle investors must meet in order to enter the world of hedge funds. The proposed rules also seek to create a new anti-fraud provision under the Investment Advisers Act of 1940, which would apply to managers/investment advisers to pooled investment vehicles. These proposed rules were presented by the SEC during an Open Meeting which took place on Wednesday, December 14,2006.

The presentation of these new proposed hedge fund rules has been eagerly anticipated, and expected, after the D.C. Circuit Court Decision, Goldstein v. SEC, struck down a rule earlier this year which would have required most hedge fund managers to register with the SEC.

In the wake of the Goldstein decision, it was widely believed that the SEC would not move to appeal this decision. Rather, it was expected that the SEC would move quickly to develop new proposed rules to address certain concerns about the hedge fund industry. Specifically, subsequent to the Goldstein decision SEC Chairman Cox warned that hedge funds were too risky for “mom and pop” type investors and commented that the increasing use of hedge funds by so-called retail investors carried with it the potential for retail exposure to hedge fund risk.

The two (2) new proposed hedge fund rules the SEC has presented for comment are as follows: 

An anti-fraud provision under the Advisers Act of 1940 which would make it a fraudulent, deceptive or manipulative act, practice or course of business for an investment adviser to a pooled investment vehicle to make false or misleading statements or to otherwise defraud investors or prospective investors in that pool. The rule would apply to all investment advisers to pooled investment vehicles, regardless of whether the adviser is registered under the Act. Under the proposed rule, a pooled investment vehicle would include any investment company and any company that would be an investment company but for the exclusions in section 3c-1 or 3c-7 of the Investment Company Act of 1940.

Commentary during the SEC Open Meeting confirmed that this proposed anti-fraud rule will not give rise to private right of action

The proposed rule does not seek to impose any specific disclosure obligations upon investment advisers to pooled investment vehicles.

The second proposed rule involves amendments to private offering rules under the Securities Act of 1933 which would define a new category of accredited investor that would apply to offers and sales of securities issued by hedge funds and other private investment pools to natural persons, but would not apply to venture capital funds. The proposed definition would include any natural person who meets either the net worth test or income test specified in Rule 501(A) or rule 215 (i.e., the current Accredited Investor test) AND owns at least $2.5 million in investable assets, as to be defined in the proposed rules. 

How will this proposed rule affect those investors who are already invested in hedge funds and will there be a “grandfather clause” provision? Based upon commentary provided during the SEC Open Meeting, the new test is meant to apply at the time an investor makes an investment in a pooled investment vehicle. Accordingly, investors who are already invested in private/hedge funds will not necessarily be affected, but may be affected to the extent they wish to make additional contributions to their existing hedge funds or any others. Thus, there appears to be a somewhat limited “grandfather clause” in the new proposed rule.   

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