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

As the economy worsens, employers are facing an increasing number of lawsuits over employee references.  Whether the employer gives a good reference or a bad reference, there is an increase in lawsuits being filed against the employer.

In Georgia, a lawsuit is pending against a school district for giving a positive reference to a teacher who had been convicted of a sex crime and went on to teach in a district where he was later charged with raping a student.  In New Jersey a man is suing Best Buy Company, Inc. alleging that a human resources manager wrote a defamatory email about him to a prospective employer, thus costing him the job. 

Many employers believe that the potential liability in the employment arena ends when an employee terminates his or her employment with the company.  This clearly is not the case.  In fact, if an employee does not get a job, that employee will often times draw the conclusion that a negative reference was given by the former employer. 

As a result, many companies have adopted policies that specifically state to new hires that they will not give them any kind of reference when they leave.  Some employers will only give dates of employment, nothing else.  However, limiting reference information can also lead to trouble. Several lawsuits are currently pending against employers who said nothing when asked for an employee reference.  This creates a problem in that many employees do have issues that should be disclosed to the prospective employer.  For instance, does this employee have dangerous propensities?  Has this employee been charged with employment-related discrimination issues?  How this employee been dishonest?  If an employer hides behind a neutral-reference policy, that policy may reward the bad employee, and open the former employer up to liability.

Although many states have qualified immunity laws that allow employers to speak about employees’ job performance, the condition is that the statements must be made without malice.  Many plaintiffs will argue that there was malice, which will allow the employee to potentially move forward through the Court system.  Although there is no perfect answer for the employer, the typical rule of thumb is only to give “name, rank and serial number.”  By limiting the information given to dates of hire, salary and position, an objective reference is given, which should protect the employer as much as reasonably possible.  Although this may not completely protect the former employer from a potential lawsuit, it probably is the best and most protective policy to utilize.

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DurstNotes on Divorce Law is a nine part podcast series, and is part of the Divorce Law Podcast with Robert J. Durst, Shareholder and Chair of Stark & Stark's Divorce Law Group. DurstNotes on Divorce Law podcast series is designed to give you a brief overview of the several most common areas of divorce law, enabling you to better understand your divorce and the law.

This is the ninth and final installment of DurstNotes on Divorce Law, and will discuss counsel fees. This podcast will address the considerations that are taken into account when determining who will have to pay counsel fees.

You can download Installment #9 here. (4.3 MB)

Installment 9 Show Notes (PDF)

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Before sending any email, especially one associated with your role as a Board Member, answer this question: How would you feel if this email were projected onto a large screen in open court in the presence of a jury?  I suspect if more people asked themselves this simple question, the number of emails sent per day would decrease dramatically. 

   
With the proliferation of email as a preferred form of communication, Board Members are in a unique situation.  They become members of a Board of Trustees and their personal lives immediately become intermingled with the business of the Association.  They become fiduciaries to their neighbors and friends, all the while maintaining personal relationships with those people. Often times, the line is blurred between friendship and Association business and as a result communications that might not be professional in nature, or in line with their duties as Board Members, are sent to other Board Members or other persons in the Community.  Under current discovery rules, many, if not all, of those emails must be produced if litigation arises.  In our experience, there are numerous instances where Board Members have made harmful or derogatory statements about each other, the Developer, and/or other unit owners.  Those emails, while not directly harmful to the Association’s position, are likely to harm the credibility of the author Board Member and weaken the Association’s overall position.  An adversary may look to show a personal vendetta against their client, be it a fellow unit owner or maybe the Developer.  These emails give them the opportunity and evidence to prove that theory to the jury.  This presents a significant problem for those Board Members during their depositions and at trial should the litigation progress to that stage.

   
One way to prevent this from occurring is to completely segregate personal emails from those related to the Association.  Each Board Member could set up a free email account with a service such as Yahoo, Gmail or AOL.  Or the Association could develop its own website, which would provide each Board Member with an email address that is individualized to the Association.  That new account would be used solely for Association business and communications between Board Members related to Association issues.  Just like separate bank accounts prevent the commingling of funds, a new Board Member email account would prevent the blurring of the line between regular citizen and unit owner and a member of Board of Trustees.  It would also tend to save the Association money during litigation, as personal and irrelevant emails would be completely separate, and therefore, would not have to be sorted, copied, produced and/or reviewed by counsel for the Association.  The key would be a zero tolerance policy.  Any email related to Association business or related to the persons role as a member of the Board would have to come from the dedicated Association account.  Otherwise, the personal account may be fair game for discovery as well.

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Bill Singer, Shareholder and member of Stark & Stark's Securities group, was interviewed for the article Bear Stearns Collapse is Opportunity For One Caribbean Stock Exchange for Caribbean World News.com. The article discusses the March 16th collapse of Bear Stearns and the opportunities this could present to the One Caribbean Stock Exchange.

Mr. Singer comments on the opportunity for the Caribbean markets to consolidate in the wake of the Bear Stearns collapse, and discusses the negative impacts the long delays in consolidating could mean for the Caribbean in relation to global markets.

You can read the full story online here, or download a PDF of the article here.

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 The Honorable Gerald C. Escala of the Superior Court of New Jersey, Chancery Division, Bergan County issued an interesting decision which provides additional guidance on the legal issue of minority oppression along with the calculation of “fair value” of the minority owners stock. In Venturini v. Steve’s Steak House, 2006 WL 445059, two nephews who collectively owned fifty percent of Steve’s Steak House filed a complaint against their aunt, Marie Damiani (“aunt” or “Marie”) alleging that they were oppressed minority shareholders.

The nephews, Steve Venturini, III (“Steve III”) and Gregg Venturini (“Gregg”) collectively obtained fifty percent ownership in the corporation when their father, Steve Venturini, II, died in or about 2001. Around the time of their father’s death, Marie offered to purchase Steve III and Gregg’s interest in Steve’s Steak House, Inc. (“the corporation” or “Steve’s Steak House”). Growing up, Steve III and Gregg rarely worked for the corporation. On occasion they would open up or close the restaurant of perform odd jobs for the corporation. Despite the same, for a significant period of time, even after the litigation was commenced by them in the Superior Court of New Jersey, Chancery Division, Bergan County, they received approximately $750.00, per week from the corporation. Marie and her child, Blaise were full time employees of the corporation for a majority of their lives.

 

Moreover, the court found that Gregg had several physical altercations with his cousin, Blaise. During the course of one altercation, Gregg threatened and did return with his firearm. The local police were called and Gregg was eventually ordered to surrender all of this firearms.

 

Eventually, Marie terminated Gregg’s and Steve III’s employment and “locked them out” of the business property. As a result of those actions, Gregg and Steve III, commenced this case. In their complaint they sought an accounting, dissolution of the corporation, damages, fees, and costs, and “any and all further relief that this court deems equitable and just.”

 

The first issue the Venturini Court needed to address was whether or not Gregg and Steve III, were oppressed minority shareholders. The Court held they were not. The Court found that Gregg and Steve, III, were not actively involved in the corporation. As stated above, they were not regularly employed by the corporation. The Court found that their involvement was “passive” and held that “equity does not aid one whose indifference contributes materially to the” complained of injuries. Harrington v. Heder, 109 N.J. Eq. 528, 534 (E & A 1934). Moreover, the Court found that “mere disagreement or discord between the shareholders is not sufficient to prove a violation of the [minority oppression] statute.” Citing, Brenner v. Berkowitz, 134 N.J. 488, 505 (1993).

 

The second issue the Court had to address was whether or not the corporation should be dissolved. It found that Steve’s Steakhouse should not be dissolved. The Court in making that determination followed well-established precedents which state that dissolution “is not appropriate” where the corporation is a viable entitle. Steve’s Steakhouse was a thriving business. To dissolve it would be inequitable and contrary to the law and public policy. The Court found that the appropriate remedy in this case was the Court Ordered sale of Steve III’s and Gregg’s stock because it found that “there has been an irretrievable breakdown in the relationship of the shareholders.” Citing, Musto v. Vidas, 281 N.J. Super. 548 (App. Div. 1995); Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474 (1974); see also N.J.S.A. 14A:12-7(8).   The Venturini Court found despite the fact that it did not find that Steve III and Gregg were oppressed, courts of equity have the power “to mandate the buyout.” Citing, N.J.S.A. 14A:12-7. As a result of the same, it considered the testimony of various expert witnesses, so that it could opine as to the “fair value” of Steve III’s and Gregg’s interest in Steve’s Steakhouse.

 

With regard to the valuation, the Court followed well-established legal precedent and decided that the date of valuation should be the date Steve III and Gregg filed their complaint. In order to determine the fair value of the corporation, the Court considered the valuation of two experts for each side who were charged with providing an opinions of the fair value of the earnings of the corporation along with its principal asset, the building which housed the restaurant.

 

Finally, the Court decided not to award pre-judgment interest and counsel fees to Steve III or Gregg. The reason it refused to award pre-judgment interest is because it found that the $750 a week pay the brothers received both pre- and during the pendency of the litigation was probably far more than they should have received because they did not provide services for the corporation. Moreover, the Court decided not to award counsel fees to either party because it opined that neither side truly prevailed.

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While property taxes always seem to be rising, there are some property owners who are entitled to reductions in their real property taxes due to deductions which are authorized by State law.

   
Senior citizens who are residents of the State and are of the age of 65 or more years and meet certain income requirements are entitled to a deduction of $250.00 (N.J.S.A. 54:4-8.41).

   
Citizens and residents of the State who are less than 65 years of age and are permanently and totally disabled, and meet certain income limitations are also entitled to a reduction of $250.00 in their real estate taxes.  (N.J.S.A. 54:4-8.41).

   
The surviving spouse/civil union partner of a deceased citizen and resident of this State who had been entitled to a deduction as a senior citizen or due to a permanent and total disability shall also receive the real property tax deduction so long as he or she shall remain unmarried (or has not entered into another civil union) and reside in the same dwelling for which the deduction had been granted, upon the same conditions.  This is so even if the spouse/civil union partner is under the age of 65 and not permanently and totally disabled, provided, however, the surviving spouse/civil union partner is 55 years of age or older at the time of death of his/her originally qualifying spouse/civil union partner.  (N.J.S.A. 54:4-841a).

   
Citizens and residents granted a deduction as a senior citizen, or for being permanently and totally disabled, as referred to above, are entitled to receive any homestead rebate or credit if they meet the compliance requirements.

 
In order to obtain the deductions referred to above, a qualifying resident must file a written application requesting the deductions. (N.J.S.A. 54:4-8.42).  Forms for this may be obtained from the local tax assessor.  Once obtained, the person who has been allowed a deduction is required to file an annual statement of his/her income on forms obtainable from their local tax assessor.

   
Citizens and residents of this State who are honorably discharged as war veterans, and their surviving spouses/civil union partners, (provided they have not remarried or entered into another civil union) are also entitled to a $250.00 deduction in their real property taxes. (N.J.S.A. 54:4-8.11).  This deduction does not have any income limitation requirements.  Written application must be submitted on forms provided by the local tax assessor to obtain this deduction.  Once a claim has been filed with and allowed by the tax assessor, the deduction shall continue in force from year to year without the need to file any further claim forms unless so required by the tax assessor.  (N.J.S.A. 54:4-8.16).  In certain cases, New Jersey state law provides for a total exemption from real property taxation for honorably discharged veterans suffering certain disabilities and their qualifying spouses/civil union partners. (N.J.S.A. 54:4-3.30).

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DurstNotes on Divorce Law is a nine part podcast series, and is part of the Divorce Law Podcast with Robert J. Durst, Shareholder and Chair of Stark & Stark's Divorce Law Group. DurstNotes on Divorce Law podcast series is designed to give you a brief overview of the several most common areas of divorce law, enabling you to better understand your divorce and the law.

This is the eighth installment of DurstNotes on Divorce Law, and will discuss medical and life insurance coverage. The podcast will address how to change the beneficiary of your life or medical insurance, as well as how to maintain your insurance after the divorce settlement is finalized.

You can download installment #8 here. (4.2 MB)

Installment 8 Show Notes (PDF)

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Thomas B. Lewis, Shareholder and Chair of Stark & Stark's Employment Litigation group, and Michael J. Brittan, member of Stark & Stark's Employment Litigation group, have authored the article, Court Limits Damages in Restrictive Covenant Cases, for the March 17, 2008 edition of the New Jersey Law Journal.

The article discusses a decision in the New Jersey Supreme Court Case of Totaro, Duffy, Cannova and Company, L.L.C. v. Lane, Middletown & Company, which established new factors in assessing breaches of nonsolitication agreements.

You can read the full article here.

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Timothy P. Duggan, Shareholder and Chair of Stark & Stark's Bankruptcy & Creditor's Rights Group will present at this year's 10th Annual William H. Gindin Bankruptcy Bench Bar Conference and will discuss the sale of assets in bankruptcy cases.

The conference will take place Friday May 2, 2008 at the Bunswick Hilton, in New Brunswick, New Jersey. Additional information, registration forms and CLE credit information can be found here.

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DurstNotes on Divorce Law is a nine part podcast series, and is part of the Divorce Law Podcast with Robert J. Durst, Shareholder and Chair of Stark & Stark's Divorce Law Group. DurstNotes on Divorce Law podcast series is designed to give you a brief overview of the several most common areas of divorce law, enabling you to better understand your divorce and the law.

This is the seventh installment of DurstNotes on Divorce Law, and will discuss social security and pension benefits. This podcast will include a discussion on the differences between social security and pension benefits, and what you can expect to incur when facing these issues during the determination of your divorce agreement.

You can download installment #7 here (4 MB)

Installment 7 Show Notes (PDF)

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This week's Franchise Law podcast is an interview with the Vice President of Franchisee Development for Huntington Learning Center, Tom Spadea. The interview took place at February's 2008 International Franchise Association's Annual Convention in Orlando, Florida and discusses franchise development and recruitment strategies, the new Franchise Disclosure Document, and a discussion on how to train your employees on policy and procedure updates.

This week's Franchise Law Podcast is presented by  Adam J. Siegelheim of Stark & Stark's Franchise group.

You can download the New Jersey Legal Update podcast #73 here (8.6 MB)

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On March 5, 2008, the Department of Housing and Urban Development (“HUD”), in conjunction with the Department of Justice, issued a Joint Statement, which reinforced the rights of persons with disabilities to make “reasonable modifications” to their dwellings or, in some cases, to common areas of a building or complex, so that they can fully enjoy the premises.  This Joint Statement is both designed to assist housing providers and community associations to better understand their obligations as well as to encourage persons with disabilities to better understand their rights regarding the “reasonable modifications” provision of the Fair Housing Act (“FHA”).  You can read the Joint Statement here.

Among other prohibitions, the FHA prohibits discrimination in housing based on disability.  One type of action specifically prohibited by the FHA is the refusal of housing providers or community associations to permit reasonable modifications – i.e., a structural alteration – of an existing premises, occupied or to be occupied by a person with a disability, when the modification may be necessary to afford the person with full enjoyment of the premises.  The Joint Statement explains who qualifies as a person with disabilities under the FHA and what information may be requested regarding a disability.  The Joint Statement also discusses the difference between a “reasonable modification” and a “reasonable accommodation” and gives specific examples of what constitutes a “reasonable modification”, which include widening doorways to allow for wheelchair accessibility, installing grab bars in bathrooms or installing a ramp to provide access to a public or common area, such as a clubhouse.  Further, although housing providers or associations are required by the FHA to permit these modifications upon notice and a proper request, in most circumstances, the person requesting a modification is responsible for payment of any costs involved.

If you would like to discuss this legislation or how it affects your community association in more detail, please contact Jonathan H. Katz at (609) 219-7448 or via e-mail at jkatz@stark-stark.com

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Common charges are essential to the operation of a condominium association. Such charges pay for the care and maintenance of the buildings and grounds, on-site staff, upkeep of recreational facilities, etc. If owners falls behind in common charge payments, the building may face difficulties paying for operating expenses. When owners default on their obligation to pay common charges, the shortfall is borne by the other unit owners by way of increases in common charges or assessments.


Most governing documents, whether it be the master deed or the by-laws include a provision that provides that every unit owner, by acceptance of a deed or other conveyance agree to pay the condominium association all common expense assessments contemplated in the governing documents. No unit owner may waive or otherwise avoid liability for common charges by non-use of the common elements or for any other reason. If a unit owner falls into arrears, the board of managers (the “Board”), on behalf of the unit owners, shall have a lien on each unit for the unpaid common charges together with interest. The Board may institute foreclosure proceedings. Foreclosure proceedings are most effective in cases where there is no default in the first mortgage as the first mortgage takes priority over a condominium lien. In such cases, when the owner’s equity in the unit is substantial, there is little reason for pause, since the legal fees and costs are recoverable if the foreclosure sale brings in sufficient cash.


Another way to collect unpaid common charges is to sue the delinquent owner for breach of contract due to his or her failure to pay the common charges and obtain a money judgment. Enforcement of the money judgment requires the marshal or sheriff to levy on the judgment. This is effectuated by taking the debtor’s personal property, freezing bank accounts and garnishing wages. Enforcing a money judgment depends on whether personal property exists and/or can be located. It also depends on whether or not the debtor is employed. Utilizing this legal method should be considered on a case by case basis.


Pursuant to the New York Condominium Act, Article 9-B, Real Property Law (the “Condominium Act”), Section 339-kk, the Board may collect rent payments from any tenants occupying a unit. The Condominium Act requires that notice be sent to the tenants advising them to make monthly rental payments to the Association rather than the landlord. If the tenant fails to make such payments, the association can pursue legal action against the tenant and the unit owner.


Regardless of which action the Board decides to take to collect unpaid common charges, it is critical that action be taken promptly. It is important that the Board institute a strict policy regarding collections and strictly adhere to same. Often times, upon receiving notice of the default, owners will negotiate a settlement and/or payoff plan to satisfy the default. In the end, the Board must consider its needs and make the best decision possible to ensure that common charges are collected and the operation of the association is not affected by delinquencies.

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Organized and thorough records could encourage a contractor or developer to settle a dispute with an association short of trial or even prior to initiating litigation.

It is imperative that a specific procedure be put into place and followed with respect to construction issues that arise at an association during transition or when an association is involved with or anticipates litigation with its developer and/or subcontractors. Evidence of complaints, including phone logs, correspondence or electronic communications from home owners, estimates, work orders and proposals should be well documented and maintained in an organized fashion so that all such evidence can be presented when and if necessary.

In the event repairs are necessary, consideration must be given to preserving developer and contractor warranties. No work should be initiated without notifying all potential defendants of the anticipated work, and when applicable, confirming with your attorney that completing the work will not compromise the Association’s position in any pending or future litigation. When work is done without taking proper steps to ensure that all potential legal claims are protected, the potential value of a case could be significantly diminished.

It is important to work with contractors that are experienced with transition/litigation cases and capable of documenting evidence that may be necessary to present at trial. Such contractors will submit detailed estimates or proposals prior to completing work, take photographs and otherwise document what observations are made, and what work is done and submit detailed invoices after completing work. It is also important for the contractor to possess qualifications sufficient for him/her to testify at trial on the Association’s behalf, if necessary.

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In recent months, articles in numerous publications – including Time, The Wall Street Journal and The New York Times – have examined a growing environmental movement that has been dubbed “The Right to Dry”, namely, the right to utilize clotheslines and air-drying in community associations. Individuals and advocacy groups are taking sides – lining up over clotheslines, if you will – regarding the rights of residents to use clotheslines to dry clothes versus the rights of associations to ban or restrict such conduct.


On one side are the pro-clothesline advocates who assert that using clotheslines is energy efficient and environmentally friendly. According to the recent Residential Energy Consumption Survey by the federal Energy Information Administration, clothes dryers consume as much as six percent of total residential household energy usage in America, third behind refrigerators and lighting. In addition, the study found that dryers can emit up to a ton of carbon dioxide per household every year. Opponents of such air-drying rights argue against clotheslines on aesthetic grounds and claim that allowing the unfettered use of clotheslines would adversely affect property values. Some claim design issues in that there is nowhere to place a clothesline without being an eyesore, evoking urban blight, and taking up space in the backyard or encroaching on common elements.


In previous years, those adverse to allowing clotheslines have been successful in persuading community associations across the country to ban outdoor clotheslines. It is estimated that most private condominium and homeowners associations restrict the ability of residents to hang laundry outside; however, those numbers may soon be changing in light of the environmental concerns, proposed legislation and the ability to compromise regarding such restrictions. “Right to Dry” advocates are currently proposing legislation in many states that would limit the ability of associations to restrict the use of clotheslines. While as many as ten states currently have legislation allowing energy-saving devices such as solar panels, only three states – Florida, Utah and Hawaii – currently have laws that specifically protect homeowners’ rights to use clotheslines. Lawmakers in North Carolina, Vermont and New Hampshire are also proposing similar legislation as part of energy conservation measures. In addition, not all clothesline advocates are necessarily advocating doing away with clothesline rules. Some proponents of clotheslines and community associations have found a happy medium in relaxing such restrictions to allow air drying during certain hours – such as weekdays between 10 AM and 4 PM – and/or allowing either retractable or removable clotheslines to eschew neighbors’ aesthetic concerns.

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Very often communities and their boards believe that the benefits and/or protections afforded by what is commonly known as "Title 39", and the protections of New Jersey's Municipal Services Act, are available to communities only to the extent those communities' roads are public (i.e., dedicated to the municipality). While often it may be beneficial for a community to have public, as opposed to private, roads, the benefits and/or protections referenced above are not conditioned on that community having public roads. Briefly, N.J.S.A. 39:5A-1 allows a community to ask its local municipality to apply New Jersey's motor vehicle laws to the private roads and streets located within that community. Additionally, New Jersey's Municipal Services Act, N.J.S.A. 40:67-23.2 to -23.8, obligates every municipality to either provide certain services to a community located in that municipality, or reimburse that community for these services. The "services" include snow and/or ice removal, collection of trash, collection of recyclables and street lighting.


The application of Title 39 to a community's roads does not make those roads public. Quite to the contrary. The entire purpose of N.J.S.A. 39:5A-1 is to allow for the application of motor vehicle laws to the interior of a community, even though the roads therein remain private. Once Title 39 is applied, local police can issue parking tickets, speeding tickets, careless driving tickets, etc., and enforce them via the local municipal courts. The community, through its board, management or rules, no longer need to carry that burden. In fact, according to current law, a community, once Title 39 is applied is prohibited from enforcing any rules and regulations in place that relate to parking, speeding, manner of driving, etc. Throughout all of this effort and time, the roads and streets though remain private.


Similarly, private communities are entitled to either the services or reimbursements noted above even though the roads and streets of that community are private. This is self-evident when once remembers the purpose of the municipal services act - eliminate the double taxation of community association residents. In Briarglen II Condo. Ass’n, Inc. v. Township of Freehold, 330 N.J. Super. 345, 353 (App. Div. 2000), the court further articulated that the legislative intent of the Act was to “help eliminate double payment for some services which the residents of qualified private communities now pay through property taxes and fees to their association.” Importantly, this law specifically provides for and allows a municipality to provide these services (operate garbage trucks, snowplows, etc.) on roads and streets that remain private.


In the end, it is important that communities, their boards and management note that New Jersey's motor vehicle laws and those benefits afforded by New Jersey's Municipal Services Act are applicable to communities and their private roads and streets.

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More than a year has passed since New Jersey enacted its Smoke-Free Air Act (the “Act”) banning smoking in most public places. The smoking ban impacts community association owners because clubhouses fall under the “indoor public place” and “workplace” categories. The Act requires associations to place no-smoking signs at clubhouse entrances, which clearly notice fines for violators. Persons found smoking in non-smoking designated areas are subject to a $250.00 fine for the first offense; a $500.00 fine for the second offense and a $1,000.00 for subsequent offenses. These steep penalties are clearly meant to deter offenders.

In addition, there has been some interest and action to enforce a “25 foot rule”, which would prohibit smokers from coming within 25 feet of an establishment before lighting up. This proposal, however, was not made part of the April 15, 2006 smoking ban and will be left up to local businesses and entities to place such rules and restrictions in their establishments.

Since New Jersey enacted its limited ban on smoking, there has been a nationwide trend toward banning smoking in associations altogether. However, this trend is being met with some resistance. Many condominium boards and managers are hesitant to get tough on smoking homeowners for fear of trying to dictate how people live in their own homes. Some attorneys have argued that association boards have a fiduciary duty to enact and enforce rules to prohibit smoking in their communities to protect the health and well being of non-smokers.

In Golden, Colorado, a judge ordered that an association can prohibit smoking in its four unit building after a suit was filed against one set of smoking homeowners. The judge ruled that the smell of smoke constitutes a “nuisance”, which violates the association’s declaration. The statewide trend in California to ban smoking in many establishments is slowly trickling down to condominium and homeowners associations. We may soon see litigation in New Jersey supporting this idea.

This leads us to the question of whether an association can ban smoking in all areas of the community. The answer and law are unclear at this point. Regardless of your position on smoking however, you may be faced with a smoking dispute in your association, which may require board intervention. To stay ahead of this threat, the first step may be to thoroughly review your governing documents and consider polling residents to assess interest on amending the governing documents, if necessary. In your review of governing documents, look for language such as “noxious and/or offensive conduct”, which may provide legal justification to withstand a court challenge.

We will continue to monitor this law and provide updates as necessary.

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In most New Jersey Community Associations it is difficult to find qualified and interested persons to serve on the Board of Trustees.  Volunteer Board Members must put in long hours for no pay and sometimes little appreciation.  Now, consider for a moment if members of Boards were exposed to personal judgments for their actions while serving as a member of a Board.  It is obvious that it would be nearly impossible to find anyone who would serve on a Board if they could be liable personally for reasonable decisions they make as a member of the Board.  In order to protect Board Members, and to encourage people to volunteer their time, New Jersey has created a system in which Board Members are protected during their service on the Board.  However, it is a common misconception that Board Members are immune from lawsuits in connection with their duties as members of a Board.  There is no such statute in New Jersey that renders a Board Member completely immune to suit for his or her actions.  It is a fact that a Board Member can be sued personally at any time for virtually any claim including a breach of their fiduciary duty.
 
   
This does not mean that Board Members are left without protection from lawsuits related to Association activities.  Generally as an agent of the Association, Board members are indemnified by the Association for their actions, or failures to act, while on the Board.  There is significant difference between immunity and indemnification and unfortunately most Board Members are not acquainted with the distinction.  In short, immunity eliminates a lawsuit entirely.  It prohibits a lawsuit from being filed or continuing against a certain individual.  The person does not have to endure months or years of litigation or worry about their personal assets being at risk should the Judge or a jury find in favor of the Plaintiff. 

  
 Indemnification, however, allows a lawsuit against a Board Member to continue, and at the end of the case, if a judgment is entered against the individual Board Member, the Association generally pays it.  Pursuant to New Jersey statutes, as well as most Association By-laws, the Association has the ability to indemnify an agent of the Association when the agent acts in good faith, and does not make decisions that are adverse to the interests of the Association.  Like anything else there are exceptions, and in New Jersey, the Association is not required to indemnify the Board Member in the event that the Board Member committed fraud, engaged in self-dealing, willful misconduct or in some instances acted grossly negligent.  If the Board Member satisfies this standard and is found to have acted in good faith and in the best interests of the Association, the Association will generally pay the Board Member’s legal bills and pay any money necessary to satisfy any judgment entered against that Board Member.  Typically, Plaintiffs sue both the Association and the individual Board Members.  Often times they will all be represented by the same attorney, the cost of which is borne by the Association.  This is preferable given that the Association and the Board usually have the same interests and is advisable in order to mount a successful joint defense to protect the interests and assets of the Association.  Further, in some instances, a defense will be provided by an insurance carrier for both the Association and the individual board members.

   
Prospective Board Members should know and understand the difference between immunity and indemnification long before they throw their hat into the ring.  Inevitably, legal issues arise in the course of governing a community and it is best to understand your duties and responsibilities before getting involved.

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Bill Singer, Shareholder and member of Stark & Stark's Securities group, was interviewed for Bloomberg TV addressing the recent charges against New York Governor Eliot Spitzer. Mr. Singer comments on the allegations of Mr. Spitzer's involvement with Emperors Club prostitutes, and what these charges could mean for Wall Street, and the state of New York.

You can view the full interview with Mr. Singer here.

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The custody arrangement for minor children is often the most important issue in a divorce. There are, of course, cases in which one of the parents has abandoned their parental responsibilities,  suffers from various addictions, suffers from a significant mental or emotional condition or are otherwise unfit to assume either physical or legal custody.   In such cases, the specific facts must be carefully analyzed, and it may be that one party should have limited parental rights, supervised visitation or that the circumstances may even require a Parenting Coordinator.
   

Supervised visitation means that a person cannot be in the presence of their child without appropriate adult supervision.
   

A Parenting Coordinator is utilized to facilitate decision making when the parents are incapable of doing so themselves. 
   

These alternatives should be used only when absolutely necessary and only as solutions of last resort. 
   

Absent such extenuating circumstances, New Jersey law regarding custody of children can be summarized in the simple principle that the parenting arrangement must be in “the best interest of the child.”   Notice that the operative words are “in the best interest of the child”; not necessarily the best interest of either or both parents. 
   

Whatever the parenting arrangement, it must address two basic areas of responsibility:  physical and legal custody. 
   

Physical custody determines where the child will reside, how many days with each parent and at what times: weekdays, weekends, holidays and vacation periods.
   

Legal custody involves decision making regarding the child.  Decisions such as elective medical care, religious training, schooling decisions and extra curricular activities are the typical  discretionary decisions which are a part of legal custody.
   

In order to determine what parenting arrangement is “in the best interest of the children,” the Court must apply specific statutory criteria. Those criteria include:
     (a) a parent’s ability to agree, communicate and cooperate in matters relating to the child;
     (b) a parent’s willingness to accept custody of the child;
     (c) any unwillingness on the part of either party to allow visitation or contact with the child with
     the other parent;
     (d) the relationship of the child with the parent;
     (e) any history of domestic violence;
     (f) the safety of the child;
     (g) the preference of the child, when the child is of sufficient age so as to form an intelligent
     decision;
     (h) the needs of the child;
     (i) the stability of the home environments of the respective parents;
     (j) the quality and continuity of the child’s education;
     (k) the fitness of the parent;
     (l) the geographic proximity of the parents’ home;
     (m) the extent and quality of time that each parent spent with the child either prior to or
     subsequent to this separation of the parties;
     (n) each parent’s employment responsibilities;
     (o) the age and number of children.
   

In most cases, the Courts make every effort to maintain a continuing relationship between each parent and the child.  The Court will attempt to craft a physical custody arrangement whereby each of the parents will enjoy meaningful parenting time with the child at regular intervals and a legal custody which allows both of them to participate in the decision making responsibility for the child.     

There are many books discussing the impact of divorce upon children and the theories espoused in such books are as numerous as the books themselves.  However, there is one common theme in almost all of the reliable literature:  the greater the conflict between the parents, the more the negative the impact of the divorce will be upon the child.
   

Psychological studies show that there are certain types of parental behavior which almost always adversely affect children.  Such behavior should be recognized by both parents and each should avoid falling into such behavioral patterns regardless of their reason for doing so. Such behavior includes:   
    •    Denigrating or criticizing of your spouse in the presence of your children;
    •    Seeking to make your child your ally or confidant;
    •    Involving your child in any decision making regarding your divorce;
    •    Engaging in verbal or physical confrontation with your spouse in the presence of your children;
    •    Using your child as messenger between you and your spouse.
   

It is very often extremely difficult to fully remove the children from the emotions, hard feelings and, sometimes, the animosity which develop between the parents during a divorce.  Short sighted parents often take misguided comfort in the fact that their children are maintaining a better relationship with them than with their estranged spouse.
  

 It is, to some degree, understandable that a parent who is experiencing the loss of their spouse and the end of their marriage, takes some solace in the allegiance of their children.  Expert after expert, text after text and experience after experience, however, have shown that the involvement of the children in the emotional aspects of their parent’s divorce seldom inures to the long term benefit of the children or their relationship with either parent.  The children, no matter what their age, should be assured that the divorce is not their fault and should be told, by actions and example, that they are free to maintain a relationship with both parents.  They should not be made to feel that showing love or loyalty to one parent is a betrayal of the other and they should not be made to feel that the showing of love to the parent is necessarily an endorsement of that parent’s behavior or a condemnation of the other parent’s behavior.
   

No matter what financial results the divorce may be or no matter how indignant one or the other of the party’s feeling are regarding the divorce, the best interests of the children will be better served by maintaining as good a parent child relationship as is possible.

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DurstNotes on Divorce Law is a nine part podcast series, and is part of the Divorce Law Podcast with Robert J. Durst, Shareholder and Chair of Stark & Stark's Divorce Law Group. DurstNotes on Divorce Law podcast series is designed to give you a brief overview of the several most common areas of divorce law, enabling you to better understand your divorce and the law.

This is the sixth installment of DurstNotes on Divorce Law, and will discuss equitable distribution. This podcast will address how equitable is determined through a discussion of marital assets and liabilities at the time of your divorce. This podcast will also give you an outline of the procedures used to create an equitable distribution format.

You can download installment #6 here. (8.3 MB)

Installment 6 Show Notes (PDF)

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Thomas D. Giachetti, Chair and Shareholder of Stark & Stark's Securities Practice group, will present at the 2008 InvestmentNews What you Need to Know About Going Independent workshop series for advisers.

The series will help you understand the pro's and con's of becoming a Registered Investment Adviser (RIA), and will will provide you with the opportunity to discuss your options with others in your field, educate yourself on the process of going independent, and learn from industry experts what it really takes to make this move.

Mr. Giachetti is scheduled to present at the series as well as offer a free one-on-one consultation to advisers to discuss an individual's specific legal requirements when going independent. You can access additional information on the workshop, as well as registration information, here.

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We all want to enjoy tax benefits and increase the value of our homes.  Well, New York City co-ops were formally restricted in that respect pursuant to Section 216 of the Internal Revenue Service (“IRS”) code.   This federal tax rule (also known as the “80/20 Rule”) required residential co-ops to get at least 80 percent of their gross income from their tenant-shareholders and no more than 20 percent form other sources like commercial rents.  The rule was created in the early 1940's when Congress sought to give co-op shareholders tax deductions yet wanted to keep commercial corporations from taking advantage of tax benefits (these benefits include deductions for property taxes and mortgage interest, and the shielding of up to $500,000 from capital-gains taxes when the co-op is sold).  Under the 80/20 rule, New York City co-ops routinely rented commercial space at bargain rents and charged the shareholders higher maintenance charges in order to fall within the proper percentage to receive tax benefits.  If a building did not qualify under the 80/20 rule it would lose its legal status as a co-op and shareholders would lose the tax benefits granted to homeowners. 

The Mortgage Forgiveness Debt Relief Act of 2007, signed by President Bush in December 2007, relieved co-ops from having to give up money in rental income or risk losing their status as a housing cooperative under federal tax laws.  The new law requires a co-op to pass one of three tests to enable the shareholders to qualify for tax benefits.  The first test is the original 80/20 rule.  The second test requires 80 percent or more of the total square footage of the corporation’s property is used or available for use by the tenant for residential purposes.  The third test requires at least 90 percent of the income be for the benefit of the shareholders (including but not limited to maintenance, management or care of the property).   This new law makes it easier for co-ops to qualify for the tax benefits.  It increases the co-ops’ ability to charge market-rate rents for commercial space, keep maintenance charges lower for shareholders and still receive the same tax benefits of an owner of a condominium or single family residence.  This new law will ultimately increase the value of the co-ops and will make many shareholders of co-ops very happy.

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The attorneys of Stark & Stark are pleased to announce the opening of the firm’s Newtown, Pennsylvania office. Located at 777 Township Line Road, the firm’s Newtown office will provide a full range of legal services to those living and doing business in Bucks County.

The Newtown office will be managed by Shareholders Edward Shensky and Henry Van Blunk. Shensky and Van Blunk both joined Stark & Stark in July 2007 as a result of the firm’s merger with Marston & Shensky of Doylestown and Liederbach, Hahn, Foy & Van Blunk of Richboro. Also joining the Newtown office are John Cordisco and Kevin Bradway of Bristol’s Cordisco & Bradway.

Stark & Stark’s Newtown office is comprised of 11 attorneys whose practice focus include Business & Corporate, Accident & Personal Injury, Real Estate, Zoning & Land Use, Workers’ Compensation, Divorce and Trusts & Estates. A complete list of the services provided by Stark & Stark in Bucks County is available at www.bucks-law.com.

For 75 years, Stark & Stark has developed innovative solutions to meet each client’s needs. More than 100 attorneys, 27 practice areas, and a philosophy of putting the law to work for our clients is the basis from which we build and maintain our relationships.

Stark & Stark is a regional law firm with a national client base, with offices in Princeton, Philadelphia, Marlton, New York and Newtown.

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Jonathan H. Katz, member of Stark & Stark's Community Associations group, authored the article Municipal Services: Is your Community Association Paying Twice?  for the Winter 2008 edition of the Community Association's Community Assets.

You can read the full article here (PDF).

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