Mr. Lewis states that these types of cases are typically settled quickly and the firm who poached the advisors will often agree to pay a portion of the revenue generated by any of the accounts that the advisors’ transferred over for a period of 12 months to their prior firm.

You can read the full article online here.

The article discusses the fact that the minority oppression statute, which prohibits majority shareholders in closely held corporations from oppressing minority shareholders, was not specifically incorporated in the statutes governing limited liability corporations. Mr. Unger states that the business section of the New Jersey State Bar Association is considering recommending changes to statutes governing limited liability corporations, one major change would be to specifically state that minority members in an limited liability corporation may sue if they are oppressed. Mr. Unger goes on to discuss the importance of the incorporation of those protections and believes that Court's of Equity should utilize and apply the minority oppression statute to limited liability companies.
 

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

Mr. Lewis states that there is a good chance that the court will dismiss the complaint, and goes on to say, “realistically it’s an issue that’s subject to FINRA’s jurisdiction. The plaintiffs tried to get out of the FINRA arbitration by getting class action status for the case. But courts are reluctant to get involved if there is FINRA jurisdiction.”

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

The contract further provided that should the general contractor not receive payment from the owner that the general contractor would not be obligated to pay the subcontractor for the work performed.  In validating the enforceability of the “paid when paid” provision, the Court explained that where the condition precedent to payment was clear and unambiguous, there is no room for interpretation and the Court must strictly construe the terms of the contract . 

The Court distinguished this decision from other opinions by stating that the condition precedent language within the present “paid when paid” clause rendered the clause wholly enforceable in nature and did not require payment until corresponding payment is received by the general contractor.  For these reasons, the Court ruled that the “paid when paid” clause and the conditioned precedent language was enforceable, and therefore, no payment was due to the subcontractor until and unless payment is received by the general contractor from the project owner.

The article discusses a recent trend in New Jersey in which builders and homeowners are left without insurance coverage for property damage caused by substandard work performed by subcontractors. Due to the recent rise in bankruptcies and business failures, denying homeowners insurance coverage would leave homeowners without any avenue of recourse.
 

You can read the full article online here.
 

Retrofitness franchises have been steadily increasing in number over the last few years.  Back in November 2005, Retrofitness entered into a license agreement with Model A’s owners for the development of a facility in Boonton, but Model A alleges in its Complaint filed in New Jersey Superior Court that Retrofitness’ principal, Eric Casaburi, enticed them into the license agreement through a series of false promises and misrepresentations, and then attempted to coerce them into signing a franchise agreement on far less favorable terms for the owners.  When the owners refused, Retrofitness terminated the license agreement and, according to the Complaint, opened a new location up the street which unfairly competed with Model A. 

The case is being watched because it raises significant issues under the Franchise Practices Act, and also because it will test the applicability of New Jersey’s Consumer Fraud Act generally to franchises.  The Complaint filed in New Jersey Superior Court can be viewed online here.

In addition to the act of getting estate planning done, many other factors play into the fact that so many probate estates end up in litigation.  As families grow away from each other, natural suspicions arise.  Did someone influence the preparation of the Will?  Was the maker of the Will competent?  How were the assets divided?  How long was the marriage?  The questions are virtually endless.

In a recent case decided in the United States District Court for the District of New Jersey, the Federal District had to decide whether there was appropriate subject matter jurisdiction for the Federal District Court to hear probate matters.  In the matter of Berman v. Berman, 2009 WL 1617758 (D. N.J.) the case involved allegations of undue influence and lack of testamentary capacity to execute a Will, among other claims.   The plaintiff filed the case in the New Jersey State Court, Probate Division and the defendant removed the case to the Federal District Court.  The central issue for consideration was whether the Federal District Court could hear the dispute between the parties, which included probate issues.

The Federal District Judge noted that the United States Supreme Court had recognized a "probate exception" to otherwise proper federal jurisdiction.  Accordingly, when a case may otherwise qualify to be heard in Federal Court, the Federal Court would not have jurisdiction where the matter involved (1) the probate or annulment of a will; (2) administration of a decedent's estate; or (3) the assumption of jurisdiction of over property that was in the custody of the probate court.

Since the case in Berman involved questions of the validity of a Will, the Court determined that the "probate exception" applied and that the case had to be heard in the State Court.   The case was therefore remanded to the Superior Court of New Jersey, Chancery Division.

Unfortunately, unlike publicly traded companies which have disclosure and reporting requirements pursuant to federal securities laws, shareholders in a closely held corporation do not have such broad disclosure requirements. Nevertheless, state courts have recognized that a person who owns shares in a closely held company is a part owner of that company who is entitled for participation of their interest, to information about the company.  The problem is Courts differ on what shareholders are entitled to receive under their state’s laws and what obligations corporate managers have affirmatively to supply information.
 

The New Jersey legislature granted shareholders a statutory right to inspect the corporation’s books and financial records. N.J.S.A. 14A:5-28.  It is well settled law in New Jersey that a shareholder has the right to inspect the books and records of the corporation if “he is acting in good faith and for some purpose germane to his status or interest as a shareholder.”  Pilat v. Broach Systems, 108 N.J. Super. 88, 94 (Law Div. 1969).   Hence, unless bad faith is shown, New Jersey Courts will order the production of financial records.

Mr. Lewis states that applying to the New Jersey Consumer Fraud Act to cases such as this could be harmful to banks and brokerage houses, as the ramifications of applying the statute to such sales could be mind-boggling because of the treble damages and court costs provisions. You can read the full article online

. (PDF)

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

• Assessing both the benefits and risks of litigation
• Pursuing insurance coverage
• Determining when and whether to seek a negotiated resolution to litigation
• Developing strategies for less expensive dispute resolution alternatives including mediation and arbitration
• Managing and planning the cost of litigation
• Taking necessary steps to protect your business' interests

The seminar is free, however, registration is required. Please contact Kelly at (609) 791-7030, or by email: Kelly@stark-stark.com to register.

In the State of New Jersey, there are essentially two ways in which an individual may challenge a Will.  The first way is to allege that the decedent lacked the requisite capacity the date the Will was executed.  This is a fairly low standard to meet, as the decedent need only be aware that he/she possesses assets, and in addition, that he/she wishes to transfer these assets to certain other individuals.  In levying a challenge in this regard, the Court may review medical records and other information concerning the decedent’s physical and mental health in order to determine if this individual possessed the requisite mental capacity on the day the Will was executed.  The medical records are relevant as they may demonstrate physical or mental conditions which could suggest that the decedent may have lacked the capacity to execute a Will on the date the Will was executed.  This often involves the need for expert witnesses to review medical records, and thereafter, to render their opinion as to the capacity of the decedent on the date the Will was executed. 
 

The other way in which an individual may challenge a Will concerns an allegation of undue influence.  Simply put, undue influence means that the Will does not reflect the true intentions of the decedent, but instead, reflects the wishes of an individual who asserted their influence over the Testator, thereby rendering the Will inconsistent with the Testator’s true wishes.  In order to prove a claim of undue influence, the contestant must first establish that there existed a confidential relationship between the decedent and the party which is alleged to have unduly influenced the Testator.  A confidential relationship exists when the Testator and another individual shared a relationship where trust or confidence is naturally reposed by the decedent with this individual.  Another instance under which a confidential relationship arises is in an attorney/client relationship where there is a fiduciary relationship between the parties. 
 

Once the contestant of the Will has established the existence of  a confidential relationship, he/she must establish suspicious circumstances with regard to the creation and execution of the Will.  Once this has been achieved, the Court can shift the burden of proof upon the proponent of the Will to demonstrate the validity of this document. 
 

After a lawsuit has been commenced, the Court will often recommend that the parties consider mediation in an attempt to resolve the matter without the need for additional litigation.  Often, the parties are able to resolve the litigation through Mediation without the parties incurring additional expenses.  If a case cannot be resolved through mediation, the case will move forward through discovery, and thereafter, to Trial.  Once an Estate litigation matter is scheduled for Trial, the parties should be aware that the Trial will not be heard before a jury, but rather is decided by a Chancery Judge that hears probate matters.  Once the Judge renders his/her decision, either side may make an application for fees to the Estate. 
 

If the party prevails in contesting the Will, the Will could revert to a previous Will, if said document still exists, or the individual could be deemed as having died without a Will.  Thereafter, the Court may appoint an independent Executor if the named Executor is disqualified.  If the Will is not invalidated by the Court, then it will be probated in the manner which had been sought to be probated by the Executor originally.  Thereafter, the Estate litigation will conclude.

The New Jersey legislature has responded to the concerns of New Jersey minority shareholders by enacting the “Oppressed Minority Shareholder Statute” (N.J.S.A.14A:12-7). The Oppressed Minority Shareholder Statute was enacted to protect minority shareholders against shareholders, directors and officers of closely held corporations that have (i) acted fraudulently or illegally, (ii) mismanaged the corporation, (iii) abused their authority as directors or officers, or (iv) acted oppressively or unfairly toward one or more minority shareholders. The statute, coupled with a series of cases decided by New Jersey courts over the course of the past twenty-five years interpreting the “Oppressed Minority Shareholder” statute, have afforded minority shareholders in closely held corporations, with twenty-five or fewer shareholders, substantial protection against oppressive conduct. Interestingly enough, the percentage of stock that a shareholder owns does not necessarily determine whether or not a shareholder is considered a minority shareholder. In one decision, the court found that the plaintiff (a 98% shareholder of the subject corporation) was an oppressed minority shareholder. In that case, the stock was held in a voting trust which was controlled by the owner’s father and the shareholder had no control over the stock. Since that decision, courts  have interpreted the meaning of “minority shareholder” loosely, allowing any shareholder to claim protection under the statute if the shareholder can prove, irrespective of the percentage of stock he/she owns, that he/she lacks sufficient control over the affairs of the corporation and is being oppressed by those shareholders in control.

If a minority shareholder has concerns of oppression, said shareholder has recourse by commencing litigation against the majority shareholders under N.J.S.A.14A:12-7. In the event that litigation is initiated, a court will fashion a remedy that it deems most appropriate, given the facts of the case. If oppression is found to exist, one of the most common remedies is to appoint a custodian or provisional director to run the corporation’s daily affairs until the shareholder disputes are resolved, ordering a sale of the corporation’s stock, or entering judgment to dissolve the corporation. A judgment dissolving a corporation is a very drastic remedy and will only be ordered by the court if the court finds that the corporation has been irreparably harmed. Another common remedy that a court will utilize in resolving shareholder oppression claims is to order a buy out of the stock of one or more of the shareholders involved. The usual scenario is for the court to order the majority shareholders to buy out the minority shareholder’s stock interest in the corporation. However, in special circumstances, courts have ordered the minority shareholder to buy out the majority shareholders’ stock interest.

In the instance of a buy out, a critical element of the court’s decision will be the value of the selling shareholder’s interest.  In such cases, a shareholder agreement may establish the value or a court may determine the value of the interest. It is important to understand that there are various ways of valuing an interest in a corporation. In some instances the court may apply a “fair value” standard. “Fair value” is intended to fairly compensate the shareholder and may differ from a stock’s “fair market value,” as consideration is given to the fact that an impartial buyer may not be willing to buy a small stake in a closely held corporation. In appropriate circumstances, a court may also apply “marketability” and/or “minority interest” discounts to the valuation of the stock. Marketability discounts are applied to reflect the fact that there is only a small pool of potential buyers, if any, for the stock held by the minority shareholder and finding a market for the sale of the stock to an outside buyer would be difficult. Minority interest discounts may be applied when it is determined that any outside purchaser will also lack control over the corporation, so the “minority interest discount” will reflect a downward adjustment to the value of the minority shares.

A shareholder in a closely held corporation would be wise to remember that if “frozen out” of corporate decisions, shareholders may have significant rights under New Jersey law. A shareholder should continuously document the acts of the majority shareholders that he/she disapproves of, because acquiescence in inappropriate corporate acts can be used as a defense by the majority shareholders should litigation ensue. Furthermore, if a shareholder feels that the majority shareholders are mismanaging the corporation, he/she should exercise his or her statutory right to access the records of the corporation to determine if the majority shareholders are mismanaging the corporation and wasting corporate assets. In the event that a review of the corporate records proves that the majority shareholders have mismanaged the corporation, subjecting the minority shareholder to oppression and a resulting loss of stock value, he/she should seek legal counsel and protection under the “Oppressed Minority Shareholder” statute.

1. the employee’s qualifications and abilities;
2. the qualities and quantity of services rendered for the benefit of the corporation;
3. the amount of time the employee devotes to the corporation;
4. the difficulties involved and responsibilities assumed;
5. the successes achieved by the individual;
6. the profits resulting to the corporation from the employee’s direct and indirect contributions;
7. the size and complexity of the business;
8. the number of people the employee is charged with training, mentoring and/or supervising;
9. the corporation’s financial conditions;
10. the prevailing economic conditions;
11. the compensation over the past few years (also considering factors which could have effected previous year’s compensation);
12. a comparison the compensation of other company employees; and
13. a comparison to others who work in similar companies.

 There are a number of remedies available to the Court if it were find that the compensation is excessive. One available remedy is requiring the repayment of what the Court determines to be excessive. Another remedy is the issuance of an injunction preventing future siphoning off of corporate funds and resources. A third available remedy is the appointment of a receiver or corporate director charged with running the day to day affairs of the company. The most often employed Court remedy is a Court Ordered buy-out of the minority interests. Of course, Court will often factor the additional value of the corporation had the majority shareholder taken reasonable compensation.