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Before Congress enacted the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”), “many employers were withdrawing from multiemployer plans because they could avoid withdrawal liability if the plan survived for five years after the date of their withdrawal,” and Congress was concerned “ ‘that ERISA did not adequately protect multiemployer pension plans from the adverse consequences that result when individual employers terminate their participation or withdraw.’ ”
 

The MPPAA was therefore enacted and was “designed ‘(1) to protect the interests of participants and beneficiaries in financially distressed multiemployer plans, and (2) to encourage the growth and maintenance of multiemployer plans in order to ensure benefit security to plan participants.’ ”
 

To accomplish these goals, the MPPAA “requires that a withdrawing employer pay its share of the plan's unfunded liability,” which “insures that the financial burden will not be shifted to the remaining employers” in the fund. 
 

The pension fund determines whether withdrawal liability has occurred and in what amount.  A “complete withdrawal ... occurs when an employer-(1) permanently ceases to have an obligation to contribute under the plan, or (2) permanently ceases all covered operations under the plan.” The amount of an employer's withdrawal liability is the employer's proportionate share of the unfunded vested benefits existing at the end of the plan year preceding the plan year in which the employer withdraws.
 

A trustee is empowered to sue a withdrawing employer for its share of the unfunded liability of the plan. If, however, the trustee does not sue, a beneficiary may sue the trustee as well as the party or parties the trustee failed to sue. Consequently, should we discover that the trustees of the merged pension plan at issue failed to sue a withdrawing employer, we would have a cause of action against the trustees and the withdrawing party. 

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As we previously reported, the United States Judicial Panel on Multi-District Litigation (MDL) met on Wednesday, March 30, 2011, in San Diego, CA, to hear arguments regarding whether the Darvocet and Darvon federal cases should be given MDL treatment. One of the main sources of contention among the parties is where to centralize the cases.  The proposed locations include: the Eastern District of New York, the Northern District of Illinois, the Eastern District of Louisiana, the Western District of Louisiana, the Southern District of Ohio and the Eastern District of Kentucky.
 

On April 11, 2011, the Panel announced that it needed more time to consider the arguments for and against consolidating the federal cases.  A decision is now not expected until after a July 2011, hearing where additional arguments are expected to be made.  The Panel noted that plaintiff, Karen Esposito, who filed the initial motion for consolidation back in December 2010, alleged four actions against defendant, Xanodyne Pharmaceuticals.  However, since Esposito’s filing, there are an additional eighteen (18) alleged actions involving more than a dozen defendants.  These additional defendants have not had an opportunity to comment on whether the cases should be consolidated. 
 

Judge John G. Heyburn II, chairman of the Judicial Panel on Multi-District Litigation advised that, “Consideration of this Section 1407 motion so soon after a handful of actions were filed, where the contours of the litigation are in flux, leaves the Panel with less than ideal information to make the best possible decision. This is a potentially complex case. Our desire to make the most informed possible decision counsels further deliberation.”  In the interim, the Panel has advised that the cases can continue in the transferor courts.
 

If you feel you have experienced any side-effects from taking Darvocet, Darvon or generic propoxyphene 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 Darvocet or Darvon manufacturers.

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Jeffrey S. Posta, Shareholder in Stark & Stark Bankruptcy& Creditor’s Rights Group, authored the article, Ponzi Schemes-Will They Ever End?, for World Leasing News.

The article discusses the recent rise in “Ponzi” and “Pyramid” schemes and the differences between the different types of scams. Mr. Posta also discusses the more recent schemes perpetuated by Tom Petters, Allen Stanford and Bernard Madoff. Mr. Posta states, “These schemes actually differ somewhat in their design. Pyramid schemes promise investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods. They may purport to sell a product, but often simply use the product to hide their pyramid structure. Some tell-tale signs that a product is simply being used to disguise a pyramid scheme are inventory loading and a lack of retail sales.”

You can read the full article online here.

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Manufacturers, installers and advocates of renewable energy facilities received a gift from Congress under the Tax Relief Act. In particular, Section 707 provides for a one-year extension of the grant in lieu of the tax credit allowed for certain expenditures relating to energy property specified under Section 1603 of the American Recovery and Reinvestment Act of 2009 (“ARRA”). This grant in lieu incentive authorizes taxpayers to make application for a cash grant equal to 30% of the cost of certain “specified energy property,” including “qualified facilities,” “qualified fuel cell property,” “solar property” and “qualified small wind energy property,” as such terms are defined in Section 48 of the Internal Revenue Code (26 U.S.C. § 48) or a grant of 10% in the case of all other specified energy property.

 

As a result of the Tax Relief Act, this grant in lieu program will now be available to interested taxpayers who place their specified energy property in service during 2011, or even after 2011 provided that the taxpayer shall place such property in service before the credit termination date (which, in the case of specified energy property described in Section 48 of the IRC, is January 1, 2017), and shall have started construction during 2009, 2010 or 2011. Applicants will also have additional time to submit grant applications, being that the Tax Relief Act extended the applicable deadline by one year from October 1, 2011, to October 1, 2012. After that date, the Secretary of the U.S. Department of the Treasury shall not process or consider any grant application for payment.

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Timothy P. Duggan, Chair of Stark & Stark’s Real Estate Tax Appeals Group, was quoted in the April 24, 2011 Hudson Reporter article, Time will tell: Is now the best – or worst – time for a reval? The article discusses whether now is the best, or the worst, time for the city to conduct property revaluations.
 

Mr. Duggan states, “In reality, a reval can be done at any time, although the best time is when the [property] market is as stable as possible. You actually have the same problems in a rising market that you have in a falling market. That problem being that the comparable sales that you use [to determine the fair market value of each property] fluctuate quite a lot, and fluctuate quite a lot within a short period of time.”
 

You can read the full article online here.

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One of the most common questions clients or prospective clients ask when discussing alimony and child support obligations is whether those obligations can be modified in the future. Alimony obligations are indeed modifiable upon a substantial change in circumstances. It is the moving party’s burden to show that a substantial change in circumstances has occurred.

The Appellate Division in Cantelme (f/k/a) Archetti v. Archetti recently clarified that a prima facie case of a substantial change in circumstances can be shown in several ways. This includes showing a decrease in the financial resources or income of the supporting spouse, or combination of changes in the part of both parties which together have altered the status quo which existed at the time of the entry of the support order. The latter includes a situation where the supported spouse experiences an increase in income and the supporting spouse experiences a decrease in income.

In deciding whether a modification is proper, a Court must consider several factors including the dependent spouse’s needs, the dependent spouse’s ability to contribute to their own needs, and the supporting spouse’s ability to maintain the dependent spouse at the former standard.

Once the moving party has made a prima facie showing of substantial change in circumstances, the Court may then Order further discovery of both parties’ finances. The Court then determines whether the change in circumstances have “substantially impaired” the moving party’s ability to support themselves. The Court must then decide the ultimate issue of whether the moving party is entitled to relief, or whether the Court should conduct a plenary hearing. A plenary hearing is required only when there are genuine factual issues that are disputed by the parties. 

The standard for a modification of child support is altogether different. Where a modification of child support is sought, the guiding principle continues to be the “best interest of the child.”

If you believe that you may be entitled to a modification of an alimony or child support obligation, it is advisable to contact an attorney that specializes in family law to discuss your case.

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In a recent decision, our firm successfully defended an Association’s ability to collect post-petition assessments in a Chapter 7 bankruptcy case. The decision reaffirmed the 2005 amendments to the Bankruptcy Code. Following these Amendments, a debtor remains liable for post-petition assessments, so long as he or she holds “mere” legal title ownership.  
 

In In re Brown, Bankruptcy Judge Donald Steckroth held that a debtor remained liable for post-petition association assessments in a Chapter 7 proceeding. This liability remained, even after the unit was abandoned by the Trustee and the debtor did not live at the unit, so long as the debtor held legal title. 
 

The matter was brought before the Court on the debtor’s motion to compel the Association to release monies levied in a bank account, post-petition, after the bankruptcy case was closed. As background, the Association had received a state court judgment for only post-petition amounts, and subsequently levied on the debtor’s bank account. Prior to filing the motion, the debtor requested the bankruptcy case be reopened so that she could list the Association as a creditor, since she had failed to provide initial notice to the Association. After the bankruptcy case was reopened, the debtor then filed the motion against the Association, claiming that the subsequent levy was improper.

2005 Amendments to the Bankruptcy Code
After extensive oral argument, the Court found that the 2005 Amendments to the Bankruptcy Code clearly widened the scope of non-dischargeability under § 523(a)(16). The statute provides that a chapter 7 discharge:                       

“...does not discharge an individual debtor from any debt...for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor's interest in a unit that has condominium ownership...for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot...” (Emph. added).

As such, the Court ruled that the debtor remained liable for post-petition assessments.

Know Your Collection Rights in a Bankruptcy Case
Unit owners often feel that once they file a chapter 7 bankruptcy case and vacate the unit that they are free from the duty to pay their assessments to the Association. This decision validates and supports an Association’s efforts to ensure owner payment of these assessments.

Associations should not “give up” when bankruptcy is filed. When an Association knows its rights, and has counsel experienced in representing Associations vis-à-vis bankrupt owners, it can successfully navigate an owner’s bankruptcy and recover unpaid assessments.

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Thomas B. Lewis, Chair of Stark & Stark's Employment Group, and Mark F. Kowal, Associate in Stark & Stark's Employment Group, authored the article, Garden Leave Provisions: A growing trend in employment agreements, for the New Jersey Law Journal's April 18, 2011 Employment & Immigration Law Supplement.

The article reviews the history of the garden leave and its advantages and disadvantages to New Jersey employers in determining whether a garden leave provision should be used in employment contracts. Historically, New Jersey courts have had scant experience interpreting garden leave provisions in employment contracts. A garden leave provision requires an employee to give advance notice of a defined length of time before terminating the employee’s employment.

You can read the full article online here.
 

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Inspection of a closely held company’s books and records is typically extremely important to a minority shareholder to make sure that the company is being operated properly and fairly. Thankfully, subject to reasonable limitations, both members and shareholders are generally able to obtain and review financial and other important corporate documents.

Shareholders in a closely held New Jersey corporation are generally permitted to inspect the books and records of the corporation. Upon the written request of any shareholder, the corporation is required to mail to the requesting shareholder its balance sheet at the end of the preceding fiscal year along with its profit and loss and surplus statement for such fiscal year. N.J.S.A. 14A:5-28(2).  Additional documentation may be requested provided the requesting shareholder has a “proper purpose” in examining the same. N.J.S.A. 14A:5-28(4) gives the Court great discretion in prescribing limitations or conditions relating to the inspection of additional corporate records.

Members in a New Jersey Limited Liability Company (“LLC”) are also afforded the right, subject to reasonable standards as may be set forth in an operating agreement or established by the manager to obtain from the LLC from time to time to receive or review:

1. information regarding the status and financial condition of the LLC;
2. the LLC’s state, federal and local income tax returns;
3. a list of the name and last known addresses of each member;
4. a copy of the governing operating agreement (along with any amendments); and
5. information regarding the amount of cash and a description and statement of the agreed to value of any other property or services contributed by each member and what each member promised to contribute in the future. N.J.S.A. 42:2B-25(a)(1)-(5). 

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Thomas B. Lewis, Chair of Stark & Stark’s Employment Group, was quoted in the April 14, 2011 International Business Times’ article, Wells wins sliver of amount sought in Stifel raiding claim. The article discusses the recent decision by an arbitration panel which ordered Stifel, Nicolaus & Co to pay Well Fargo Advisors $167,000 for improperty recruiting former AG Edwards financial advisors. 

Mr. Lewis states, “The basis of such a defense is that the advisers were planning to leave the firm anyway and Stifel was simply offering them a home.”

You can read the full article online here.

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As we have previously reported, DePuy Orthopedic, Inc., a subdivision of Johnson & Johnson, Inc., issued a recall in August 2010, for the ASR XL Acetabular System and the ASR Hip Resurfacing System after data suggested that about one out of every eight may fail within only five years. Specifically, the recall targeted individuals who received the implants after July 2003.

Now, with the legal pressure continuing to mount, David Floyd, CEO of DePuy Orthopaedics since 2007, has announced his resignation.  A spokeswoman for DePuy advised that Floyd “made a personal decision to pursue interests outside of DePuy.” 

Johnson & Johnson began selling the metal-on-metal devices outside the U.S. in 2003.  The ASR XL was then introduced in the U.S. market in 2005.  However, DePuy did not seek FDA approval for the ASR Resurfacing System until June 2007.  Instead, DePuy relied on a grandfathering process, which did not require clinical trials as long as DePuy was able to demonstrate that the ASR XL was “substantially similar” to the company’s other metal-on-metal devices.

According to a recent article in Bloomberg Businessweek (April 4- April 10, 2011), following its introduction to the U.S. market, the FDA received 87 reports of adverse incidents in 2007, which subsequently rose to 239 reports in 2008 and to 426 reports in 2009.  Not until August 2010, did DePuy finally recall the allegedly defective devices.  In March 2011, the British Orthopaedic Association and the British Hip Society reported that preliminary research showed the ASR XL’s failure rate in the U.K. as high as 49% after 6 years.

If you have had a hip replacement, which used one of the recalled DePuy devices, you can contact Stark & Stark and speak to one of the Mass Tort attorneys, free of charge, who can help assess any claims that you might have against the DePuy manufacturers.

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As we have previously reported, in November, 2010, the FDA finally announced that it was pulling off the U.S. market the prescription painkillers, Darvon and Darvocet, which combines Darvon with the aspirin substitute acetaminophen, because of scientific evidence the drugs can damage the heart, even at recommended doses, or cause fatal cardiac abnormalities.  Studies have shown that the ingredients contained in Darvocet and Darvon have been linked to various forms of severe side-effects.  Reportedly, these side-effects include: heart arrhythmia, heart attack, suicide, overdose and even death.

As we have also previously reported, the United States Judicial Panel on Multi-District Litigation (MDL) met on Wednesday, March 30, 2011, in San Diego, CA, to hear arguments regarding whether the Darvocet and Darvon cases should be given MDL treatment. Granting MDL treatment will consolidate all federal lawsuits filed across the U.S. into one centralized district.  This consolidation will streamline the pretrial discovery process, allowing the parties to avoid duplicative discovery and inconsistent rulings from different judges.  The seven-judge panel, headed by the Honorable John G. Heyburn II of the Western District of Kentucky, has yet to issue a ruling.  However, a decision is expected shortly. 

If you feel you have experienced any side-effects from taking Darvocet, Darvon or generic propoxyphene 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 Darvocet or Darvon manufacturers.

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Assembly bill (A2528) introduced last year, aims to amend and supplement the Electric Discount and Energy Competition Act. The part of this bill that is noteworthy for the business community is Section 3, which grants to corporations a credit against liability for the societal benefits charge imposed pursuant to N.J.S.A. 48:3-60 in an amount up to “that portion of the costs incurred by the corporation during the preceding calendar year for the purchase and installation of products or services that are intended for energy efficiency or renewable energy purposes[.]”
 

We note that under Section 3 of Assembly bill A2528, as proposed, only costs that would otherwise be eligible for incentives under programs funded by the societal benefits charge qualify for the credit.  Moreover, the credit against the societal benefits charge provided in this bill cannot exceed 100% of the amount that would otherwise be payable by the corporation during the calendar year when the credit may first be applied.  Fortunately, the proposed legislation also provides that should a corporation not be permitted to use the entire amount of the credit all at once, the excess may be carried over each year after the year in which the credit is first applied for a maximum of ten calendar years.
 

On December 13, 2010, the New Jersey State Assembly passed Assembly bill A2528 by a vote of 66-7-1 and, on the same date, the Senate received and referred the matter to the Senate Environment and Energy Committee.  It will be interesting to see how far this legislative proposal gets in the Senate.  If ultimately enacted and approved by Governor Christie, businesses will have an easier time of obtaining government subsidies earmarked for energy efficient improvements and infrastructure for renewable energy facilities.

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ERISA section 1054(g)(1), provides in relevant part: “The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan ….” The anti-cutback rule is a “crucial” aspect of ERISA's protection of pension benefits. In light of the importance of the anti-cutback rule and in order to avoid work-arounds that curtail accrued benefits by means other than formal plan amendments, courts have deemed actions to be violative of the anti-cutback rule even when there had not been a formal amendment of a pension plan. 
 

Treasury regulations implementing the anti-cutback rule make the point explicitly: a pension plan may not deny a protected benefit “directly or indirectly, through the exercise of discretion ....”  Moreover, plan participants are entitled to notice whenever a plan amendment is seriously considered or enacted. 
 

Sometimes a violation of the anti-cutback provision will give rise to a breach of fiduciary duty claim.  According to the Second Circuit, amendments to multi-employer plans which “affect the allocation of a finite asset pool to which each participating employer has contributed” could properly be treated as fiduciary functions.  However, the Third Circuit does not agree and does not make a distinction between single-employer or multi-employer pension plans.
 

Thus, the Third Circuit has adopted the view that ERISA's fiduciary duty provision does not apply to amendment of multiemployer plans. Therefore, absent some other culpable conduct, a violation of ERISA’s anti-cutback provision will not, by itself, support a breach of fiduciary claim in New Jersey.

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Pursuant to Regulatory Notice 11-10, firms must electronically file specified events and quarterly customer complaint information pursuant to Rules 3070 and NYSE Rule 351 through a new process which becomes effective on July 1, 2011. Compliance Officers should cross reference Regulatory Notice 11-06, as well as become familiar with the automated application disclosure events and conflicts sections which are new.

FINRA has modernized its systems of self-reporting misconduct by mandating that electronic filings be made within 30 days of the determination that the Firm or an Associated Person committed a reportable violation. Member firms are required to self report violations. This process, however, allows FINRA and, uncertain circumstances the public, earlier access to such information. The new methodology creates consistency and clarity in the filing process. 

What:  There is a menu in the FINRA automated application system, containing new dropdown items for reporting of events corresponding with Rule 4530 information. The numeric codes previously used will be eliminated.  (See footnotes 8 and 9 of Regulatory Notice 11-10) Batch submissions are possible via a file transfer protocol. There is also a new hyperlink for access.

When:  Reporting must be accomplished within 30 calendar days after the Firm has made its conclusion, based upon the “reasonable person” standard, that either the Firm or one of its Associated Persons has committed a reportable violation.

Why:  A Broker-Dealer or Associated Person is required to self report violation of the securities, commodities, financial, investment related law, rule, regulation or SRO standard of conduct.

How to Report:  (1) Firm designates an individual to make an internal investigation and complete a report. The designated firm individual would then access the system and utilize the dropdown menu to make the report. (2) An update of the firm’s written supervisory procedures to reflect the compliance process concerning Regulatory Notice 11-10 should also be considered.

Who:  Firms’ internal decision making for self reporting must be done by an experienced and trained individual. The “reasonable person” standard is applied to the conclusion that a violation occurred. The internal decision maker must review the conduct and consider its impact, including potential, actual, and widespread impact to the firm, its customers and brokers.  Conduct that must also be considered when making a report:

• any material failures of the firms’ policies and procedures; and
• whether or not the specific violation has involved numerous clients, material errors, significant dollar amounts and/or patterns or series of events that are related

In order to support the firms’ good faith reasonable determination, the firms’ decision making individual must be able to support the conclusions reached as to whether the event requires disclosures with relevant documentation for each filing or the decision that no filing is required. The Firm should assure that Associated Persons understand that they are required to promptly inform the proper individual at the Firm of any reportable event. Rule 4530 includes findings of financial, business, or professional misconduct which may result in civil litigation, arbitration proceedings or regulatory matters. Note that non-securities insurance products are covered.

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Adam J. Siegelheim, member of Stark & Stark’s Franchise Group, will present a seminar in conjunction with the New Jersey Institute of Continuing Legal Education entitled, The Legal Aspects of Franchising. The seminar will take place Thursday, June 09, 2011 from 9:00 AM to 1:00 PM at the Wilshire Grand Hotel, in West Orange, New Jersey.

The seminar will discuss franchise issues which continue to affect countless industries from automotive services to real estate agencies, from sports and recreation facilities to food chains. Mr. Siegelheim will discuss key issues you are likely to encounter as a franchise and distribution law practitioner. The seminar will also feature a discussion on recent developments and cases.

For additional information, or to register, please visit the NJICLE’s website online here.
 

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In November 2010, U.S. District Judge David Herndon, who is overseeing the federal Yaz lawsuits, ordered three executives from Bayer to fly to the United States for their depositions. Joachim Marr, Hartmut Blode and Ilka Schellschmidt, who work at Bayer’s headquarters in Germany, were selected to represent the company regarding the pre-clinical and clinical development processes.

The location of the depositions had been a source of contention between the parties. Because German law does not provide for American-style depositions, the defendants had suggested the depositions be held in Belgium. However, plaintiffs objected to the Belgium location, arguing that the cost of flying up to a dozen attorneys to Belgium would be cost prohibitive. Subsequently, defendants moved for a protective order, claiming that the executives would be away from their duties too long if forced to travel to the U.S. After considering arguments on both sides, Judge Herndon concluded that, "equities favor[ed] the depositions being held in the United States."

However, it appears that cooperation between the parties has broken down over the last couple months.

On January 20, 2011, Judge Herndon advised that all depositions were being halted until he could write a new protocol and submit them to the state judges in California, Pennsylvania and New Jersey. During a hearing on an unrelated matter, Judge Herndon opined that the, “depositions ha[d] been anything but efficient.” Judge Herndon further stated that the depositions had wasted time and were uncooperative. However, Judge Herndon continued to express his intentions to include the state judges in his decisions.
 

If you, or someone you know, has been injured by YAZ® or Yasmin® (or the generic brand, Ocella®), contact one of the Stark & Stark Mass Tort/Pharmaceutical Litigation attorneys today, free of charge, who can help assess any claims that you might have against the YAZ®, Yasmin® or Ocella® manufacturers.

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