Stark & Stark Shareholder Comments on US Attorney's Attempt to Stop Insider Trading on Wall Street

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Kevin M. Hart, Shareholder in Stark & Stark’s Litigation Group, was quoted in the November 24, 2010 New York Post article, Fed’s Insider Fight. The article discusses Manhattan US Attorney Preet Bharara’s recent initiative to stop insider trading on Wall Street. Many find Bharara’s attempt risky and somewhat controversial, as cases in the past have demonstrated that prosecuting these types of cases are increasingly difficult.

Mr. Hart states, “Technically, insider information is what you come in possession of by virtue of your position in a company.” The controversy over what constitutes insider trading is growing now that Bharara and other enforcement officials are cracking down on a number of hedge funds, bankers and consultants in what is shaping up to be an historic insider-trading investigation.

You can read the full article online here.

YAZ® Lawsuit Update: Bellwether Trials in the Federal MDL Scheduled

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A large number of YAZ® lawsuits were designated as Mass Tort or Multidistrict Litigation (MDL) cases over the past several months. Just recently, the three initial bellwether trials in the federal MDL were scheduled. Courts utilize a bellwether approach when there are a large numbers of plaintiffs proceeding on the same theory or claim, such as in the Yaz ® cases. Typically, a group of plaintiffs are chosen to represent all the plaintiffs with the same alleged ailment. The purpose is that common issues, such as causation and liability, are settled among all the plaintiffs without having to go to trial repeatedly. These representative plaintiffs proceed through a normal trial, including discovery and pretrial motions. Following the trial, the results act as the bellwether for the other plaintiffs’ trials. The verdicts from these bellwether trials are extrapolated to the remaining plaintiffs’ cases.


In the Yaz lawsuits, the Court designated the initial groupings as follows: pulmonary embolism cases; gallbladder cases and thromboembolic cases.  The remaining ailments, such as stroke and heart attack, will be considered subsequently.  At the time of the Court’s decision in October 2010, there were in excess of 3,700 filed cases in the federal MDL.  In an effort to move the litigation forward, the Court has set the following dates: 

  • The first trial is set September 12, 2011. This will be a pulmonary embolism (PE) case.
  • The second trial is set January 9, 2012. This will be a gallbladder (GB) case.
  • The third trial is set April 2, 2012. This will be an additional thromboembolic (VTE) case.

If you feel you have experienced any side-effects from taking YAZ® or Yasmin® (or the generic brand, Ocella®), you can contact Stark & Stark and speak to one of the Mass Tort/Pharmaceutical Litigation attorneys, free of charge, who can help assess any claims that you might have against the YAZ®, Yasmin® or Ocella® manufacturers.

Update:Valuation of environmentally contaminated property in a tax appeal case

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New Jersey property with environmental contamination still has value but under what circumstances may an appraiser take into account that contamination when preparing an appraisal to be used in a New Jersey tax appeal? The New Jersey Supreme Court answered this question in 1988 in the seminal case of Inmar Associates v. Carlstadt, 112 NJ 592 (1988),.  The Inmar court held that when a property is in use, “normal assessment techniques will remain an appropriate tool in the appraisal process” (ie. no reduction). However, when a property is no longer in use, the cost to cure the contamination may be taken into account by an appraiser, but not by a dollar-for-dollar deduction.


Recently, the Appellate Division of the Superior Court of New Jersey had an opportunity to define “in use” in the context of a tax appeal case.   Pan Chemical Corp. v. Hawthorne Borough, 404 N.J.Super. 401 (App.Div. 2009).  In Pan Chemical, the property owner moved its business to a new location, but kept a small crew on site to avoid triggering environmental clean-up obligations under the Industrial Site Remediation Act (“ISRA”).  The property owner argued that despite the fact that it did not trigger ISRA, it was still entitled to take into account the contamination when valuing the property.  The Appellate Division disagreed.


The Pan Chemical court concluded that a bright line test was necessary for determining when a property was “in use” for purposes of applying the Inmar standard in a tax appeal case. After reviewing various case law and statutes, the court adopted the definition of closing of an operation under ISRA which is “the cessation of operations resulting in at least a 90 percent reduction in the total value of the production output . .  or, for industrial establishments for which the product output is undefined, a 90 percent reduction in the number of employees.”  See N.J.S.A. 13:1K-8(1)).  Since the property owner was still operating at about a 15 percent level, it was not entitled to any reduction in the assessment based upon the contamination.


Although a bright line test is easy to apply, the result does not seem fair to a property owner whose property is being assessed significantly above its true value merely because ISRA has not been triggered.  However, this appears to be the law since the New Jersey Supreme Court refused to accept the case for review.  In addition, the New Jersey legislature is reviewing a new bill which may further complicate matters for property owners.

HUD Releases Details on Proposed PowerSaver Pilot Program

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On November 9, 2010, the U.S. Department of Housing and Urban Development (HUD) issued a press release unveiling its proposal to oversee a new loan insurance pilot program intended to support homeowner financing of energy efficient improvements. Under the Consolidated Appropriations Act, 2010 (P.L. 111-117, 123 Stat. 3034), approved on December 16, 2009, HUD is required to administer an Energy Efficient Mortgage Innovation pilot program directed at the single family housing market.  In response to this mandate, HUD has proposed to supplement and work through the Federal Housing Administration’s Property Improvement Loan Insurance Program (“Title I Program”) governed by Title I of the National Housing Act (12 U.S.C. § 1703).  This new initiative - the FHA Home Energy Retrofit Loan Pilot Program - will be known for short as the FHA PowerSaver.

The FHA PowerSaver pilot program, as proposed, is designed for persons who are interested in installing energy conservation measures that improve home energy performance or facilitate such results.  In this regard, HUD will insure “single family property improvement loans,” as such term is defined in the Title I Program regulations (24 C.F.R. § 201.2), through FHA-approved lenders that are originated during a two-year period to eligible borrowers.


Eligible borrowers must either hold fee simple title to the property they are seeking to improve or hold a contractual interest therein evidenced by a properly recorded land installment contract.  In either case, the property (i) must be a single family, detached home, (ii) must be the borrower’s principal residence and (iii) must be within one of the geographic areas identified by HUD as being optimal for this pilot program.


Loan terms will likely be limited to 15 years, so that the repayment term will closely match the useful life of most energy conservation measures.  However, according to the HUD notice published in the Federal Register on November 10, 2010, a 20-year loan term may be approved for improvements that have a longer useful life, such as renewable energy facilities or geothermal systems.


In addition to guaranteeing home improvement loans, HUD will have at its disposal $25 million, which Congress allocated for the Energy Efficient Mortgage Innovation pilot program through the Consolidated Appropriations Act, 2010.  According to the November 10th Federal Register notice, “HUD will utilize those funds primarily to provide incentive payments with grant funds to participating lenders to support approved activities that deliver bona fide benefits to borrowers, with remaining funds available to support the evaluation of the [PowerSaver] Pilot Program.”


HUD will be accepting comments on the proposed PowerSaver pilot program until December 27, 2010.  Instructions on how to submit comments are included in the November 10th Federal Register notice.  HUD is expected to announce formally the establishment of and final details for the FHA PowerSaver through the issuance of another notice in the Federal Register following its review of public comments.

Shareholder Oppression: Mergers As Oppression

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Majority or controlling shareholders sometimes use a statutory merger as a method for squeezing out or altering minority shareholder’s rights and preferences. New Jersey law provides a statutory procedure by which two or more corporations can be combined into a single corporation even if all of the shareholders do not agree with the merger. N.J.S.A. 14A:10-3.  Under New Jersey law, the directors of the combining companies adopt a plan for merger, which sets forth the terms and conditions of the merger including the manner in which the shares of each of the constituent corporations are to be converted into shares, obligations, cash or other securities of the surviving corporation.  N.J.S.A. 14A:10-2.  The boards of directors then submits the plan to the shareholders of each constituent corporation. N.J.S.A. 14A:10-3.  New Jersey law requires that the board of directors provide at least twenty (20) but no more than sixty (60) days notice to the shareholders before a shareholders’ meeting is scheduled to vote on the proposed merger. N.J.S.A. 14A:10-3(1).  The notices to the shareholders must include: (1) a copy or summary of the plan of merger or consolidation; and (2) a statement informing the shareholders who do not agree with the merger or consolidation that they have the right to dissent and have their shares purchased by the corporation for “fair value.”  N.J.S.A. 14A:10-3(1)(a)-(b).


Hence, mergers or consolidation can be used to eliminate minority shareholders. Fortunately, Courts have been willing to intervene to prevent fraudulent transactions. As discussed in previous blog postings, majority shareholders owe minority shareholders and the corporation certain fiduciary duties. Fortunately, New Jersey Courts have closely scrutinized mergers in which the majority shareholder’s conflict of interest produces benefits for the majority at the expense of the minority and the purpose of the merger was to get rid of the minority. Berkowitz v. Power/Mater Corp., 135 N.J. Super. 36 (Ch. Div. 1975); Outwater v. Public Service Corp. of New Jersey, 103 N.J. Eq. 461 (Ch. 1928), aff’d, 104 N.J. Eq. 490 (E & A 1929). The central factor Courts consider when determining whether or not to set aside a merger is: does the proposed merger have a valid business purpose?  If it does, it will probably be upheld. If the Court finds that the merger did not have a valid business purpose it is subject to being disallowed.

New York Resident and Corporation Sue U.S. Green Building Council over Allegations of Unfair Business Practices and Deceptive Marketing

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On or about October 8, 2010, Henry Gifford and Gifford Fuel Savings, Inc. (collectively, “Gifford”), filed a lawsuit in the Southern District of New York against the U.S. Green Building Council (“USGBC”), individually and on behalf of all other similarly situated persons alleging, among other things, that USGBC’s Leadership in Energy and Environmental Design (LEED) rating systems are not based on objective criteria and that USGBC has mislead the public as to the efficacy of these protocols in achieving energy efficient buildings to their detriment.  In this regard, the Gifford complaint contains five separate counts, including causes of actions arising under three federal statutes, namely, the Sherman Anti-Trust Act, the Lanham Act and the Racketeer Influenced Corrupt Organizations Act, causes of action arising under the New York State General Business Law and one common law cause of action arising under the doctrine of unjust enrichment.  A complete copy of the Gifford complaint may be found on Westlaw at 2010 WL 4087620.

The Class Action Decision in Iliadis v. Wal-Mart Reconfirmed by New Jersey Supreme Court in Lee v. Carter-Reed Co.

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In a decision released on September 30, 2010, the New Jersey Supreme Court reaffirmed the holding of its previous decision in Iliadis v. Wal-Mart, where the Court emphasized that, where common issues predominate in the litigation, individual factual differences among the class members will not stand in the way of class certification.


Given the significantly more conservative treatment of class action certification by the Third Circuit, this new case clearly confirms the New Jersey Supreme Court’s determination in class action certification applications that all inferences regarding the class action test should be determined in favor of the Plaintiff.  The new decision in Lee should resolve any questions as to whether the New Jersey Courts will take a more conservative line after Iliadis, since it is now more than evident that the New Jersey Supreme Court plans to stand firm on its holding in Iliadias.


Copyright and the Internet: Protecting The Content of Your Website

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In this day, virtually every successful business has a presence on the internet.  The importance of a website to a company’s marketing strategies, its product sales and its overall image cannot be understated.  Yet, many businesses often neglect to take steps to protect the content on their website.  They seem to forget that as easy as it is to place content online, it is even easier to copy it without permission.  Digital technology has made it enormously simple for one individual to instantly become a large publisher of information.  All it takes is a laptop computer and a broadband connection, and one person can disseminate copyrighted, or copyrightable, material across the boundless landscape of the Internet.  This makes policing infringers a very difficult and expensive task.  For large corporations like Microsoft, that cost is a necessary part of doing business in this day and age.  For small businesses, however, that cost is prohibitive.  This makes it even more important for copyright owners to develop (and execute) a plan to protect their websites before any publication or disclosure.       

What are the copyright issues raised?  First, who owns the copyright in the web site?  If you hire an outside consultant to develop the site, you may run into troublesome issues over ownership if you don't plan ahead.  The web site developer may claim an interest in the work as a compilation or in the underlying content itself.  Remember, the owner of the work under copyright law is the creator of the work, and not necessarily the person who paid for the work.  If one of your employees develops the web site at your direction, it will almost surely be considered a work-for-hire and you will own it.  However, someone outside your business will likely be considered an independent contractor, and therefore you should have a signed agreement designating the web site as a work made for hire.  That agreement should also contain an assignment of all copyright interests in the web site (in case a court disagrees that the work is done for hire). 

In any event, you should apply for a registration for your web site.  You should do it immediately (or at least within a month or so of the introduction of the site on the web) to protect your ability to seek enhanced damages and attorneys' fees in the event of infringement.  If it is possible, a single registration is recommended for all of the elements of the web site.  What happens if you continually update your site?  The U.S. Copyright Office offers what are called "group registrations" that may give web site owners a less expensive and less cumbersome alternative to separate registrations. The three applicable group registrations available are for updates to automated databases, serial publications (defined as works which are intended to be issued in successive parts bearing numerical or chronological designations, such as the January issue of a trade publication), and daily newsletters (which requires that publication occur at least twice a week).  The Copyright Office has deposit and timing rules for using the different group registration methods, so those rules should carefully be consulted to choose the right one for your needs.


In addition to taking the steps necessary to protect your original website content, you should be aware of other issues raised by the publication of material on the internet. Many web sites are going to be compilations of data or other information which may itself be copyrightable.  By definition, a database is a compilation.  Those of you who place content online should know that to the extent it is a compilation, anyone else is free to use the material contained in that compilation as long as the new work does not feature the old material in the same selection and arrangement.  Copyright protection of compilations is thin under current law.

Moreover, there may be separate authors of the contributions to a collective work (for example, the different chapters to a trade publication on the internet). Usually, the publisher of a collective work has the right to use the components of the collective work only as part of the collective work.  The rights to use the individual chapters stay with the author.  Freelance writers have challenged the distribution of their articles over the internet despite old agreements which give publishers broad distribution rights.  You should get appropriate warranties from anyone providing you with the work of other authors and take other steps (such as securing promises of indemnification) before publishing the works of others on your website.  With the global reach of your website, the financial consequences of not doing so can be devastating.  

Finally, one of the important "exclusive" rights of the copyright owner is the right to prepare derivative works, for example, the television program based on the book, or the sculpture based on the photograph.   In the world of the web, the derivative work may be the software program that is modified to perform an additional function, or a graphic image that incorporates a preexisting image.  The advent of new digital technologies makes it stunningly easy to modify original works of authorship, through the simple process of downloading and uploading information.  Your web site should include specific warnings to people who visit the site that the material is not only copyrighted, but that you maintain the right to make derivative works based on the preexisting material at the site.

Importance of Getting the Name Right In New Jersey Tax Appeals

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UPDATE:  In January 2013 the New Jersey Supreme Court reversed in part the decision outlined below.  You can read the updated version here.

It is getting to that time of the year where properties owners are thinking about appealing their property tax assessments for 2011.  A recent Tax Court decision (Prime Accounting Dept. v. Township of Carney) which hopefully will be reversed on appeal, stresses the importance of making certain that the person appealing their tax assessment is either the property owner or someone responsible for paying the taxes.

In Prime Accounting, the tax bill identified the owner of the property as “Prime Accounting Dept.”, which was a department of a prior tenant, “Prime Management Company”.  Most likely, the former tenant asked the tax assessor for their tax bills to be directed to the company’s accounting department. When the tax bill was changed naming the “owner” as Prime Management’s accounting department, no one thought there would be any problems. However, when an appeal of the property’s tax assessment was filed in 2009, Prime Management no longer was a tenant, yet it appears the tax bill for the property was never updated, which resulted in “Prime Accounting Dept.” being named as the plaintiff in the tax appeal. Standard practice for most tax appeal attorneys is to use the most recent tax bill as the source of the information to complete a County Tax Board Petition or Case Information Statement (for Tax Court cases).


When the issue was raised by the Tax Court, the plaintiff filed a motion seeking leave of court to amend the complaint to name the current tenant as the plaintiff (ie. change the plaintiff from Prime Accounting Dept. to Bocceli, LLC.).  The Tax Court denied the motion and dismissed the tax appeal.  The Tax Court held that it did not have jurisdiction since the original plaintiff was not a taxpayer and the amendment of the complaint could not correct this problem.  The decision has been appealed to the Appellate Division of the Superior Court of New Jersey.


It is important to make certain that the person or entity filing the appeal meets the definition of an aggrieved taxpayer (ie. owner, tenant paying taxes under a lease, etc.)  Although it may be more convenient and effective to have a tax bill sent to a particular person (ie. management company or department within a larger company), you need to make certain that the entity named in the petition or complaint is a “taxpayer”.

What to do When the Bank Comes Knocking at Your Door

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Timothy P. Duggan, Shareholder and Chair of Stark & Stark's Bankruptcy & Creditor's Rights Group, authored the article What to do When the Bank Comes Knocking at Your Door for the October issue of the New Jersey Lawyer.

The article discusses the various options available when dealing with defaulted loans and provides an overview of the more important issues and challenges attorneys face when negotiating a commercial workout or loan modification with a lender.

You can read the full article online here. (PDF)

Minority Oppression: Dilution of the minority shareholder's interest.

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Often majority shareholders will reduce the minority shareholder’s proportionate voting rights, distributions and voting rights by causing the issuance of additional stock and controlling who receives the newly issued shares.  Typically, the oppressor will issue the new stock at less than its fair value.


The issuance of new shares is frequently done to maintain control over the closely held company. Those in control may wish to issue the new shares in order to maintain control after the end of a voting trust; to head off creation of a new majority amongst the shareholders; or to obtain the necessary votes for approval of a fundamental corporate change such as a merger.


Sometimes shareholders in closely held companies hold certain “preemptive rights.”  A preemptive right gives each shareholder an option to subscribe to a new allotment of shares in proportion to their existing shares before new shares are offered. Typically, preemptive rights do not attach to nonvoting stock. At one time most states provided for preemptive rights, either as mandatory or the default rule. That has changed over the course of time. For example, in New Jersey, any corporation organized after January 1, 1969, does not have preemptive rights unless the certificate of incorporation provides otherwise. N.J.S.A. 14A:5-29. Any New Jersey corporation formed before January 1, 1969, may alter or abolish preemptive rights by amendment to its certification of incorporation. N.J.S.A. 14A:5-29. 


Even if preemptive rights are not provided, the specific issuance of additional shares as a means of oppressing the minority shareholder could be challenged by the assertion of litigation alleging breach of fiduciary duty. If a minority shareholder was to assert the same, the Court would ultimately have to decide whether or not the issuance of additional shares is within the sound discretion of the majority (i.e. the “business judgment rule”) or “self-dealing.”  See, Maul v. Kirkman, 270 N.J. Super. 596, 614 (App. Div. 1994) (the business judgment rule “is rebuttable presumption , and the burden shifts to the defendant to show the intrinsic fairness of the transaction in question upon the showing of ‘self-dealing’ or ‘other disabling factor’”).


Often, New Jersey Chancery Courts asked to adjudicate this issue will need to determine whether or not the majority shareholder issued the new shares in an effort to interfere with the reasonable expectations of the minority.  If the new shares are offered for grossly inadequate consideration; or the primary purpose of the issuance was to squeeze-out the minority, there is a greater chance that the Court could rule that the issuance of said shares was oppressive as opposed for a legitimate business purpose.  Of course, rarely does a defendant admit that they issued shares to themselves or those close to them for less than they are worth or to oppress the minority. As such, when I am asked to represent a minority shareholder confronted with this form of oppression it is important that I rely upon my along with the experiences of well-trained experts to present evidence to the Court which demonstrates that the issuance of new shares was to oppress rather than for a legitimate business purpose.

Federal Trade Commission Approves New Regulations for Labels on Light Bulb Packaging

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On Monday, July 19, 2010, the Federal Trade Commission published in the Federal Register final amendments to its Appliance Labeling Rule (codified at 16 C.F.R. Part 305) pursuant to Section 321 of the Energy Independence and Security Act of 2007 (codified at 42 U.S.C. § 6294).  Under EISA, the FTC is required to consider the effectiveness of current labeling requirements for lamps and to evaluate alternative approaches.  The purpose of the FTC’s update was to assist consumers in choosing between three types of common household light bulbs on the market, including general service incandescent light bulbs, compact fluorescent (CFL) light bulbs and general service light-emitting diode (LED) light bulbs.


According to the FTC’s press release on the matter, the new Appliance Labeling Rule, for the first time, will require the label on the front of a light bulb package to “emphasize the bulbs’ brightness as measured in lumens,” rather than watts.  Watts measure energy use, not brightness, and without information on brightness the task of comparing light bulbs can be more difficult.  The example used by the FTC in its press release in stressing this point is instructive; that is “A compact fluorescent bulb may be able to produce the same amount of brightness as a traditional incandescent bulb, while using significantly less energy, or watts.”     As such, this change is meaningful and should improve a consumer’s ability to compare light bulbs.  The label on the front of a light bulb package must also contain the light bulb’s estimated annual energy cost, “expressed as ‘Estimated Energy Cost’ in dollars and based on usage of 3 hours per day and 11 cents ($0.11) per kWh.” 16 C.F.R. § 305.15(b)(1)(ii).


In addition to the regulatory changes for the front label on light bulb packages, the FTC’s new Appliance Labeling Rule, among other things, mandates the placement of a new “Lighting Facts” label either on the “side or rear display panel of the product package” that includes information about a light bulb’s output, estimated annual energy cost, life expectancy, correlated color temperature (i.e. whether the bulb produces warm or cool light), wattage, design voltage if other than 120 volts and a notice regarding mercury if the bulb contains mercury. 16 C.F.R. § 305.15(b)(3).  The Lighting Facts label may also contain an Energy Star logo for qualified products provided that the manufacturer shall have signed a Memorandum of Understanding with the U.S. Department of Energy or the Environmental Protection Agency that covers such products.  According to the FTC, this new Lighting Facts label was modeled after the “Nutrition Facts” label used on food packages.


The provisions of the new Appliance Labeling Rule discussed above shall become effective on July 19, 2011.

A SAFE HARBOR FOR EMPLOYMENT CLAIMS: Employment Policies Offer Protection

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When discrimination occurs in the workplace, the aggrieved employee should bring the inappropriate behavior to the attention of the employer, who, ideally, would then investigate the allegation and take prompt, appropriate remedial action.  What happens, though, when, after an employer conducts an investigation and then reprimands or terminates the offending employee, the aggrieved employee continues to pursue legal action against his or her employer?  Can the employer still be held liable even though the employer took prompt, remedial action?


Most courts – at both the state and federal level in New York, New Jersey, and Pennsylvania – hold that employers may often times avert legal exposure, thus creating a safe harbor, if an objective investigation was conducted and prompt, remedial action occurred.  For example, the Appellate Division of the New Jersey Superior Court, in Barnes v. the State of New Jersey reaffirmed the general rule that when employers have in place policies aimed to address workplace discrimination and take remedial action in response to a complaint of discrimination, the employer may have protections from vicarious liability for the discriminatory actions of its employees. 


The Appellate Division in Barnes stressed that the State promptly engaged in an investigation of the charges and ultimately disciplined the offending employee.  Then, citing the New Jersey Supreme Court’s decision in Cavuoti v. New Jersey Transit Corp., the Appellate Division stated that:

A company that develops policies reflecting a lack of tolerance for harassment will have less concern about hostile work environment or punitive damages claims if its good-faith attempts include periodic publication to workers of the employer’s anti-harassment policy; an effective and practical grievance process; and training sessions for workers, supervisors, and managers about how to recognize and eradicate unlawful harassment.


Again citing the Cavuoti decision, the Appellate Division held that “a form of safe haven [exists] for employers who promulgate and support an active[] anti-harassment policy.”  These conclusions are not at all unique – both the United States Court of Appeals for the Second Circuit and the United States Court of Appeals for the Third Circuit follow this line of reasoning, as exhibited in cases such as Curtis v. Citibank, N.A and Andreoli v. Gates. 


From the standpoint of employers who work to implement aggressive anti-harassment policies, and who take prompt objective action in response to complaints of workplace discrimination, the safe harbor protections make sense.  Employers who make a concerted effort to eliminate discrimination and harassment in the workplace should not be punished for their efforts, particularly when prompt, remedial action is taken by the employer and the inappropriate behavior ceases. 


In conclusion, should an employer wish to ensure minimal liability from discrimination claims, the employer should follow the procedure described by the New Jersey Supreme Court in Cavuoti, as reinforced by the Appellate Division in Barnes, and in line with case law from most other jurisdictions, including New York and Pennsylvania:

  1. an employer should have in place well-publicized anti-discrimination and anti-harassment policies;
  2. an employer should implement grievance procedures in order to address claims of discrimination made against its employees;
  3. when an employee utilizes the grievance procedures, the employer should conduct a full and thorough investigation; and
  4. if an employer determines that an employee has violated the law or the company’s anti-discrimination or anti-harassment policies, the employer should take prompt, appropriate remedial action.  Following the above guidelines, a safe harbor may exist for the employer.


Can Common Interest Community Associations Ban Religious Symbols and/or Flags From Their Association?

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The Supreme Court of New Jersey addressed the topic of restricting religious symbols and/or flags from Associations in A Committee For A Better Twin Rivers, v. Twin Rivers Homeowners' Association.  In the Supreme Court's decision, authored by Justice John E. Wallace, Jr., the Court determined that even in light of New Jersey's broad interpretation of its constitutional free speech provisions, the "nature, purposes, and primary use of Twin River's property was for private purposes and did not favor a finding that the Association's rules and regulations violated plaintiffs' constitutional rights."  The Court found that "plaintiffs' expressional activities were not unreasonably restricted" by the Association's rules and regulations.  Finally, the Court held that "the minor restrictions on plaintiffs' expressional activities were not unreasonable or oppressive, and the Association was not acting as a municipality."

The Twin Rivers Court found that "the Association permits expressional activities to take place on plaintiffs' property but with some minor restrictions".  The Association must weigh the owner's right to free speech with the Association's right to private property within the common interest community and the right to promulgate reasonable rules and regulations.  Any restrictions on religious signs, however, must be reasonable as to time, place and manner.  For example, if the Association’s board wants to restrict any religious signs and/or symbols, the Board needs to determine rules which will apply to all religious sects across the board.  We would not suggest banning a mezuzah or a cross, but could suggest a size restriction with regard to any and all religious signs and/or symbols.  In addition, we would suggest the banning of any derogatory or hate sign which would be seen as discriminatory or racial.  A swastika would certainly be seen as such and should be banned.  With regard to any common element, the Board can make reasonable restrictions.  

There is a prohibition in the New Jersey Planned Real Estate Development Full Disclosure Act (“PREDFDA”), found at N.J.S.A. 45:22A-48.1 that restricts associations from prohibiting the display of the American Flag, yellow ribbons and/or signs in support of troops.  If the display of any of the above threatens public safety, restricts necessary maintenance activities, interferes with the property rights of another or is conducted in a manner inconsistent with the rules and customs deemed the “proper” manner to display the flag, the association may restrict the expressional activity.  


Stark & Stark Shareholder to Present COAH Update in Conjunction with New Jersey Institute for Continuing Legal Education

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Gary S. Forshner, Shareholder in Stark & Stark’s Real Estate, Zoning & Land Use Group, will present a webinar in conjunction with the New Jersey Institute for Continuing Legal Education entitled, COAH UPDATE: In the Matter of the Adoption of N.J.A.C. 5:96 and 5:97 by the New Jersey Council on Affordable Housing - Webinar. The webinar will take place Tuesday, November 09, 2010 from 9:30 AM to 11:30 AM EST.

The webinar will discuss COAH’s Third Round rules under the Fair Housing Act which were initially proposed as a new methodology to calculate municipal affordable housing obligations. In In the Matter of the Adoption of N.J.A.C. 5:96 and 5:97 by the New Jersey Council on Affordable Housing, the court held that the revised Third Round rules are invalid, because they allowed municipalities to skirt their obligations for satisfying the prospective need for affordable housing by adopting land use regulations that discourage growth. Since the Third Round rules have been found deficient as the method for determining municipal housing obligations, COAH has been sent back to the drawing board yet again. The court directed COAH to prepare a new set of rules within five months, using the previously approved methodologies of Rounds One and Two to calculate affordable housing obligations. The Court also invalidated parts of the revised Third Round rules that did not provide sufficient incentives for developers to construct inclusionary developments.

The webinar will offer:

  • A general overview of the decision, outlining the major issues of the case and holdings of the Court
  • A planner’s perspective in projections of the housing obligations both from the 2000-2010 period and 2010-2018, and the likely impacts associated with the return to the Round 2 methodology
  • The municipal planning perspective as to the preparation of housing elements and fair share plans, and the issues of 100% affordable housing sites and requirements for feasibility, as well as planning for the future obligations
  • The New Jersey Home Builders’ response to the Third Round decision and those issues in the decision regarding compensation for set asides and cost generative obligations in light of the decision
  • The perspective of the low- and moderate-income households, the implications of this decision on creation of affordable housing opportunities
  • Defending litigation from a municipal perspective as well as the impact of this decision on existing lawsuits
  • The implications of the Third Round decision on builders’ remedy litigation and claims against municipalities
  • Non-residential development fees, costs and exactions, as well as the particular issues in the pending legislation regarding development fees
  • The status of pending legislation, including S1 and A3447, with a summary of the bills and their status, and the status of the legislation and what the “crystal ball” says about the future of the Fair Housing Act

For additional information, including registration information, please visit the NJICLE's website.

Stark & Stark Shareholder Comments on EMI Fraud Case

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Scott I. Unger, Shareholder in Stark & Stark’s Litigation Group, was quoted in the November 5, 2010 New York Post article, Hands down loser: Jurors rule in favor of Citi in sloppy EMI case. The article discusses the three-week-long trial in lower Manhattan federal court in which Guy Hand charged Citigroup with fraud in regards to his 2007 purchase of record label EMI. A jury voted unanimously that Citigroup was not liable in the $6.7 billion buyout after Hands accused Citigroup banker David Wormsley of duping him into overpaying for EMI.

You can read the full article online here.

Green Marketing Claims Require Thorough Product Knowledge, Holistic Evaluation of Life Cycle Impacts and Careful Planning

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It is no secret that the development of products and services having environmental attributes has proliferated in recent years.  In disseminating these “green” goods and services to consumers far and wide, advertisers have barraged the public with a plethora of marketing claims.  However, it is becoming more and more apparent that much of the advertising used by the manufacturers, producers and suppliers of these products is false or misleading in one way or another.

Indeed, in 2007, 2009 and again in 2010, the firm TerraChoice Environmental Marketing, Inc., conducted studies of green marketing claims in the economy.  In its 2007 report, TerraChoice found that “[o]f the 1,018 products examined, all but one made claims that are demonstrably false or that risk misleading intended audiences[,]” and in 2009, TerraChoice reported that “more than 98% of ‘green’ products” had engaged in at least one of its advertising no-nos dubbed the “seven sins of greenwashing” showing only a small improvement over this two-year period. 
According to TerraChoice’s 2010 report, the level of deceptive advertising declined even further between 2009 and 2010, to about 95.5%.  This improvement is not immaterial, especially in light of TerraChoice’s finding that among the 24 stores visited “greener” products also grew by 73%.  However, it goes without saying that “greenwashing is still a significant problem.”

The apparent widespread failure on the part of advertisers to communicate accurate and useful information to consumers about the green attributes of a given product or service has the capacity to undermine the credibility of the entire green products industry and, possibly, open the door to greater regulation of commercial speech.  In order to avoid turning off consumers (and turning up government oversight), advertisers must understand fully the environmental benefits of what they are trying to sell and the impacts upon the environment they will have during the course of their life cycle and carefully plan how best to communicate this information on product labels, brochures or other promotional items.

Additionally, advertisers of green goods and services should consult with an attorney, who is knowledgeable in the areas of green law and advertising regulation, regarding the legality of their marketing plans.  Indeed, good legal counsel is an essential ingredient in formulating a productive and “sustainable” advertising strategy, especially given the resources that consumers, competitors and government agencies have at their disposal to challenge representations that are deceptive, misleading or unfair.

As discussed in Part 1 of our two-part series on the legal risks in green marketing, the Federal Trade Commission has stepped up enforcement of federal law prohibiting unfair or deceptive advertising in the green marketplace.  In all likelihood, the FTC’s diligence in this regard will only increase in the coming months once the FTC adopts its amended and supplemented Guide for the Use of Environmental Marketing Claims (“Green Guides”), which the FTC released for public review and comment on October 6, 2010.  Therefore, the time is now for businesses with green product lines to work with legal counsel to avoid advertising claims that, for example, contain ambiguous definitions or alleged benefits that either cannot be substantiated or are irrelevant to a consumer’s interest in helping the environment or promoting energy efficiency.